| Wed 7 Dec 2005, 16:56 | | Yomhlaba Resources Limited - Abridged Audited Cons |
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Yomhlaba Resources Limited - Abridged Audited Consolidated Annual Financial
Statements For The Year Ended 30 June 2005
YOMHLABA RESOURCES LIMITED
(formerly Zenith Concessions Limited)
(Incorporated in the Republic of South Africa)
(Registration number 1994/009012/06
Share code: YBA ISIN: ZAE000060281
("YBA" or "the Company" or "the Group")
ABRIDGED AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 30
JUNE 2005
AUDITED GROUP BALANCE SHEETS as at 30 June
2005 2004
(R"000) (R"000)
ASSETS
Non-current assets 21 904 0
Property, plant and equipment 21 904 -
Intangible assets 0 0
Current assets 14 456 539
Trade and other receivables 1 384 500
Cash and cash equivalents 13 072 39
Total assets 36 360 539
EQUITY AND LIABILITIES
Capital and reserves (12 346) (221)
Issued capital 18 562 8 262
Accumulated loss (30 908) (8 483)
Non-current liabilities 45 368 760
Shareholder"s loans 18 872 760
Long-term liabilities 26 496 -
Current liabilities 3 338 -
Trade and other payables 2 900 -
Current portion of borrowings 428 -
Bank overdraft 10 -
Total equity and liabilities 36 360 539
Net asset value per share (2.1) (0.1)
(cents)
Net tangible asset value per (2.1) (0.1)
share (cents)
Closing number of shares in 600 000 265 552
issue (`000)
AUDITED GROUP INCOME STATEMENTS for the years ended 30 June
2005 2004
(R"000) (R"000)
Other income 1 311 2 357
Operating costs (5 037) (1 189)
Operating profit/(loss) (3 726) 1 168
Interest received 1 062 2
Finance costs (811) -
(Loss)/profit from continuing (3 475) 1 170
operations
(Loss)/profit from discontinued (18 951) -
operations
Net (loss)/profit (22 425) 1 170
Reconciliation between earnings and headline earnings
(cents per share)
(Loss)/earnings from continuing (0.6) 0.4
operations
(Loss)/earnings from (3.1) -
discontinued operations
(Loss)/earnings attributable to (3.7) 0.4
shareholders
- Loss/(profit) with sale of 0 (0.1)
fixed assets
- Assets written off - (0.1)
- Loans written off (0.1) (0.8)
- Impairment of assets 1.9 -
Headline loss/(earnings) (1.9) (0.6)
Weighted average number of 600 000 265 552
shares in issue (`000)
AUDITED GROUP CASH FLOW STATEMENTS for the years ended 30 June
2005 2004
(R"000) (R"000)
Cash flows from operating (7 180) (947)
activities
Cash flows from investing 22 186 1 562
activities
Cash flows from financing (1 983) (607)
activities
Net movement in cash and cash 13 023 8
equivalents
Cash and cash equivalents at 39 31
beginning of year
Cash and cash equivalents at 13 062 39
end of year
AUDITED GROUP STATEMENTS OF CHANGES IN EQUITY for the years ended 30 June
Share Share Accumulated Total
Capital Premium Loss
(R"000) (R"000) (R"000) (R"000)
Balance at 1 2 656 5 607 (9 653) (1 391)
July 2003
Net profit for - - 1 170 1 170
the year
Balance at 1 2 656 5 607 (8 483) (221)
July 2004
Net loss for the - - (22 425) (22 425)
period
Issue of share 5 400 5 400 - 10 800
capital
Repurchase of (250) (250) - (500)
shares
Par value (1 806) 1 806 - -
reduction effect
Balance at 30 6 000 12 562 (30 908) (12 346)
June 2005
COMMENTARY
Introduction
The 2005 financial results incorporate the implementation of the acquisition of
Jigmining (Pty) Ltd and shareholders should therefore take care when making
comparison with prior year results.
The maiden year results were adversely influenced by various events that have
left the Company and its subsidiaries in a position that none of the directors
expected when the Company listed on 29 November 2004. At the time of listing,
plans were being considered to role out various new processing plants and buy
coal deposits or coal discard dumps to ensure the continued growth of the
Group"s beneficiation activities. The Group is not the holder of any mining or
prospecting license over any mineral resources or reserves.
Operational review
The Company listed with a business focused on producing coal on a toll treatment
basis for Ingwe Collieries ("Ingwe"), a subsidiary of BHP Billiton PLC ("BHP"),
and had just commissioned a new plant at the Douglas Colliery. In February
2005, the management of the subsidiaries received a letter from Ingwe stating
that Ingwe was cancelling the contracts with the Company"s subsidiaries and made
allegations of fraud and theft having been committed. The board met on an
urgent basis and all efforts were made to identify the reasons for and sources
of the allegations.
The board interviewed management collectively and individually and was satisfied
that management was in no way involved in any fraud or dishonesty involving
Ingwe or its operations. Despite various formal and informal attempts, Ingwe
refused to provide any details of the alleged fraud. The board was informed
that a criminal case would be laid against a subsidiary of the Company. The
board instructed management to investigate the matter and to report back on an
urgent basis on the alleged events.
Management interviewed both existing and former staff members of the Group and
obtained affidavits from them. These affidavits state that the individuals were
called to the Blinkpan hostel and instructed by union representatives, as well
as by representatives of Ingwe, to make statements pertaining to adjusting the
belt scales and producing samples of artificial quality.
In terms of the supply agreement signed with Ingwe, the responsibility for
quality control (samples) and quantity control (weight) was that of Ingwe and
never the responsibility of the Company or its subsidiaries.
After carefully considering all the available information, the board concluded
that Ingwe had no right to cancel the contract with the Company"s subsidiaries.
The majority of the board resolved to institute legal action against Ingwe for
the unilateral cancellation of the contract.
Even though the board took a formal decision to take legal action against Ingwe,
certain directors felt that they could influence a negotiated settlement with
Ingwe. Certain directors pursued independent negotiations with members of
Ingwe"s management, informing the board afterwards that the issues could be
resolved if a restructuring of the Company took place. In an attempt to reach a
negotiated settlement, legal action was delayed though no agreement has been
reached with Ingwe to date.
Legal action against Ingwe was further delayed after the board was informed that
the New Africa Mining Fund ("NAMF"), a major shareholder of the Company, and BHP
had agreed to jointly commission a forensic report into the events surrounding
the cancellation of the contract. Management"s co-operation was requested on
the events that occurred. The board initially had reservations about
participating in the investigation, as there were no formal criminal charges
against the Company and as no further explanation about the cancellation of the
contract had been forthcoming. Nonetheless, in their determination to absolve
themselves, management agreed to co-operate with the investigation on condition
that the Company would have insight into the draft report of the forensic
auditors and would be entitled to a copy of the final report. Upon completion
of the forensic report, the Company called for a copy of the report, only to be
informed that the report would not be made available as it was considered the
property of BHP and NAMF. During this entire process, two directors, including
the chairman of the board, resigned due to a perceived conflict of interest
between the said directors and the Company.
The board operated under very difficult circumstances. In its pursuit of
obtaining a negotiated settlement to the benefit of all parties concerned,
certain directors led the board to believe that such a settlement could be
reached. However, since no agreement has been reached to date, the restructured
board is forced to review the situation regarding the Ingwe issue.
The events described above severely hampered the Group"s ability to meet its
listing forecasts, and led to a complete termination of the Group"s
beneficiation operations at Ingwe"s Koornfontein and Douglas coal mines in March
2005. The termination of operations occurred shortly after the Group had
commissioned its largest plant to date.
Financial review
Since there exists no reasonable expectation of reinstating the operations of
the subsidiaries at the collieries in question and since these operations
represent the only income generating activities of the Group, the financial
results for the year to 30 June 2005 reflect all revenue under discontinued
operations. The net loss from discontinued operations of R18.95 million, shown
in the income statement, was generated on beneficiation revenue of R21.58
million and includes impairment losses on assets in the amount of R11.38
million.
The balance sheet and cash flow statement reflect the combination of the
implementation of the Jigmining acquisition and the net results of the Group"s
operations for the period under review. The exceptional increase in borrowings
during the period under review was solely as a result of the implementation of
the Jigmining acquisition, the terms, conditions and pro forma financial effects
of which were detailed in a circular to shareholders dated 25 October 2004.
Although the Group is technically insolvent in the amount of R12.35 million, the
shareholder"s loan of R18.87 million has been subordinated to the benefit of
other creditors for as long as the Group"s liabilities exceed its assets, which
effectively renders the Group commercially solvent.
Legal action
The Company has instituted legal proceedings against BHP and its subsidiaries to
claim for loss of income from production. The claim has been submitted for the
period December 2004 to February 2005 and amounts to R18.87 million. The claim
has not been provided for in the financial statements.
Subsequent events
Following the cancellation of the Ingwe contract, various negotiations by
management to secure access to alternative coal resources collapsed.
After year-end, the Company entered into an agreement with Risk Reduction
International Limited for the acquisition of Ilanga Coal Mine (Pty) Ltd
("Ilanga") ("the Ilanga acquisition"). Agreements were also reached by the
Company with main shareholders NAMF and Rotocompactors to write off part of
their claims and to sell part of their claims against the subsidiaries to the
Company, subject to the approval of the Ilanga acquisition. This will result in
a complete restructure of the Group"s balance sheet and will effectively return
the Group to solvency, laying the platform for the successful implementation of
the Ilanga acquisition.
For further information on the Ilanga acquisition and related matters,
shareholders are referred to a detailed terms announcement that is being
released simultaneously with this results announcement.
Prospects
The board is confident that the proposed Ilanga acquisition and related balance
sheet restructure events, concluded after the financial year-end, will return
the Company to prosperity.
Lifting of suspension in Yomhlaba shares
The JSE has declined to lift the suspension in trading of Yomhlaba shares at
this time. The JSE has ruled that it will agree to lift the suspension once the
Competent Person"s Report ("CPR") on the Ilanga acquisition has been approved by
the South African Mineral Resources Committee ("SAMREC") in terms of the
Listings Requirements. Specialist mining consultants, Steffen Robertson and
Kirsten ("SRK"), have already commenced with the process of drafting the CPR,
which is expected to be ready for its first submission to the JSE and SAMREC
within a week.
Accounting policies
The accounting policies of the Company comply in all material respects with
South African Statements of Generally Accepted Accounting Practice and methods
of measurement and the Companies Act of 1973. The accounting policies and
methods of measurement and recognition are consistent with those applied in the
previous financial period.
Audit opinion
Without qualifying their opinion, the auditors of the Company, Compendium
(Pretoria) Incorporated, drew attention to the existence of a material
uncertainty, namely that the Company"s going concern status is entirely
dependent on the successful conclusion of the proposed transaction for the
acquisition of Ilanga, which is yet to be accepted by shareholders. The audit
report is available for inspection at the registered offices of the Company.
Dividends
No dividends were recommended or declared for the financial period.
For and on behalf of the board
KJ Gribnitz
Chairman
Pretoria, 7 December 2005
Directors:
KJ Gribnitz (Chairman*), NC van Huyssteen, JH Jonck, DB Steyn, TV Mokgatlha*
(*Non-executive)
Designated Advisor:
Sasfin Capital
(a division of Sasfin Bank Ltd)
Transfer secretaries:
Computershare Investor Services 2004 (Pty) Ltd
Registered address:
Mirkwood Estate, Klipkop JR 396, Gauteng
Warning: The listing of the ordinary shares in the Company is on the
Alternative Exchange ("AltX"). Investors are advised of the risks of investing
in a Company listed on AltX and that the JSE Limited ("JSE") does not guarantee
the viability or success of a Company listed on AltX. In terms of the JSE
Listings Requirements ("LR"), the Company is obliged to appoint and retain a
Designated Advisor ("DA"). The DA is required to, inter alia, attend all board
meetings held by the company, ensure that all the LR and applicable regulations
are complied with, approve the financial director of the Company and guide the
Company in a competent, professional and impartial manner. If the Company fails
to retain a DA, it must make arrangements to appoint a new DA within ten
business days, failing which the Company faces suspension of trading in its
securities. If a DA is not appointed within 30 days of its suspension, the
Company faces the termination of its listing without the prospect of an
appropriate offer to minority shareholders.
Date: 07/12/2005 04:56:41 PM Produced by the JSE SENS Department
