| Mon 9 Jan 2006, 17:05 | | Matodzi Resources Limited - Unaudited Interim Repo |
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MTZ
MTZ
Matodzi Resources Limited - Unaudited Interim Report For The Six Months Ended 30
September 2005 And Renewal Of Cautionary Announcement
MATODZI RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1933/004523/06)
Share Code : MTZ ISIN : ZAE000042412
("Matodzi" or "the Company" or "the Group")
HIGHLIGHTS
- Letseng Diamonds (Pty) Limited ("Letseng Diamonds") diamond revenue increased
from R141-million to R214-million;
- Letseng Investment Holdings (Pty) Limited ("Letseng") operating profit
increased from R46 million to R82 million;
- Matodzi"s net profit increased from R13 million to R47million; and
- Headline loss per share decreased from 34 cents to 18 cents.
ABRIDGED CONSOLIDATED INCOME STATEMENTS
Unaudited Restated unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
2005 2004 2005
Notes R"000 R"000 R"000
Letseng - Revenue 214 446 141 257 279 451
Letseng - Total production costs (132 073) (95 024) (191 297)
Production costs (113 874) (82 016) (167 675)
Amortisation of mining assets (14 000) (13 008) (23 621)
Other non cash (4 199) - (1)
Letseng - Operating profit 82 373 46 233 88 154
Finance costs 2 (30 140) (25 345) (61 999)
General and administrative expenses (5 541) (7 438) (8 460)
Net profit for the period 3 46 692 13 450 17 695
Fair value adjustments 4 (16 820) (63 050) (81 945)
Net profit/(loss) before taxation 29 872 (49 600) (64 250)
Taxation 5 (30 262) (86) (35 748)
Net profit/(loss) after taxation (391) (49 686) (99 998)
Profit attributable to outside shareholders
6 (26 571) (458) (12 870)
Loss attributable to equity holders (26 961) (50 144) (112 868)
Loss per share - (cents) 7
headline loss (18) (34) (87)
attributable loss (18) (34) (76)
CONSOLIDATED BALANCE SHEETS (ABRIDGED)
Unaudited Restated unaudited Audited
30 September 30 September 31 March
2005 2004 2005
Notes R"000 R"000 R"000
ASSETS
Non-current assets
Property, plant and equipment 193 599 228 629 201 370
Goodwill 8 81 618 77 778 81 618
Investments and loans receivable
9 147 979 75 155 56 261
423 195 381 562 339 249
Current assets
Inventory 20 789 - 21 082
Accounts receivable 16 964 46 438 20 850
Cash and cash equivalents
10 60 374 56 595 58 566
Total assets 521 322 484 595 439 747
EQUITY AND LIABILITIES
Capital and reserves
Shareholders" interest 11 (288 840) (182 728) (262 259)
Outside shareholders 48 930 9 489 22 359
Deferred taxation 65 903 - 35 641
Interest-bearing borrowings
12 625 498 625 053 569 975
451 490 451 814 365 716
Current liabilities
Interest bearing 42 455 7 784 33 991
Non-interest bearing 27 378 24 997 40 040
69 832 32 781 74 031
Total equity and liabilities 521 322 484 595 439 747
Number of shares in issue
- ordinary shares of 25 cents each
156 722 157 149 262 157 149 262 157
- "B" preference shares of 1 cent each
200 000 000 200 000 000 200 000 000
During the period under review, 550 267 of 7 460 000 ordinary shares authorised
were placed to specifically fund the expenses of Matodzi.
CASH FLOW STATEMENTS (ABRIDGED)
Unaudited Restated unaudited Audited
six months six months year
ended ended ended
30 September 30 September 31 March
2005 2004 2005
Notes R"000 R"000 R"000
Cash flows from operating activities
52 254 48 606 66 897
Cash flows from investing activities
(114 811) (26 323) (21 388)
Cash flows from financing activities
64 366 16 654 3 110
Net movement in cash and cash equivalents
1 808 38 937 48 619
Cash and cash equivalents
at beginning of period 58 566 97 97
cash of subsidiary acquired 1 April 2004
- 9 850 9 850
Cash and cash equivalents at end of period
60 373 48 884 58 566
STATEMENT OF CHANGES IN EQUITY
Share Treasury Accumulated
Share Capital Premium Shares Loss Total
Group R"000 R"000 R"000 R"000 R"000
Balance 31 March 2004 (restated)
37 315 42 010 (228 716) (149 391)
Net profit for the year (112 868) (112 868)
Balance 31 March 2005 37 315 42 010 (341 584) (262 259)
Issue of shares 1 865 3 628 (5 113) 380
Net loss for the period ended on 30 September 2005
- - (26 961) (26 961)
Balance on 30 September 2005
39 180 45 638 (5 113) (368 545) (288 840)
NOTES TO THE FINANCIAL INTERIM REPORT
1. BASIS OF ACCOUNTING
The group has adopted International Financial Reporting Standards ("IFRS")
with a transition date of 1 April 2004. The consolidated interim report for
the six months ended 30 September 2005 have been prepared using accounting
policies that comply with IFRS and are prepared in accordance with IAS 34,
Interim Financial reporting with the comparatives restated accordingly.
This is the Group"s first IFRS interim financial information, in respect of
which the annual financial statements for the year ending 31 March 2006 will
be prepared in terms of IFRS.
The accounting policies adopted are consistent with those of the previous
financial period, except for those described in note 1.1
1.1 FINANCIAL INSTRUMENTS (IAS 39)
In accordance with the requirements of IAS 39, the Group has adopted the
subsequent measurement of available for sale assets. This requires
recognition of gains and losses on remeasurement of available for sale
assets directly in equity whereas previously under SA GAAP the Group
accounted for these changes in fair values through the income statement.
Under IAS 39 a significant or prolonged decline in the fair value of
assets held for resale below its cost will be considered objective
evidence of impairment and an impairment loss will be recognised in the
income statement.
Unaudited Audited Transition date
30 September 31 March 1 April
2004 2005 2004
R"000 R"000 R"000
1.2 Reconciliation of SA GAAP to IFRS
Shareholders" interest
As previously reported
in terms of GAAP
(182 728) (262 259) (149 391)
Effect of IAS 39 - - -
As restated in terms of IFRS (182 728) (262 259) (149 391)
Income statement
As previously reported in terms of GAAP
(50 144) (112 868)
Effect of IAS 39 - -
As restated in terms of IFRS (50 144) (112 868)
Unaudited Restated unaudited Audited
30 September 30 September 31 March
2005 2004 2005
R"000 R"000 R"000
2. Finance costs for the period includes the following
- Interest received 980 363 2 439
- Preference shares - "B" prefs (9 458) (10 236) (20 472)
- Preference shares - Witnigel (9 337) (9 226) (18 452)
- Interest on loans (11 345) (5 883) (23 075)
(30 140) (25 345) (61 999)
3. Profit/(loss) for the period is stated after taking into
account the following:
- Amortisation (14 045) (13 048) (23 704)
- Retrenchment costs (223) - -
- Impairment of mineral rights and mining assets
- - (24 207)
- Profit on restructuring of debt - Preference shares
- - 40 732
4. Fair value adjustments
- Investments (16 820) (63 050) (81 945)
210 255 713 JCI ordinary shares @ R0.16
(March 2005 - 210 255 713 JCI ordinary shares @ R0.25)
5. Taxation
- current year - (86) (127)
Deferred tax
- current year (30 262) - (35 621)
(30 262) (86) (35 748)
6. Profit attributable to outside shareholders
- Letseng Diamonds (11 042) (489) (4 141)
- Letseng Investment Holdings (15 529) - (8 729)
(26 571) (489) (12 870)
7. Loss per share are calculated as follows:
- Attributable loss for year (26 961) (50 144) (112 868)
- Weighted number of ordinary
shares in issue
149 812 424 149 262 157 149 262 157
Reconciliation between attributable
loss and headline loss
- Attributable loss (26 961) (50 144) (112 868)
- Impairment of mineral rights and
mining assets
- - 24 207
- Profit on restructuring of
debt - Preference shares
- - (40 732)
Headline loss (26 961) (50 144) (129 393)
8. Goodwill
- Letseng 81 618 77 778 81 618
The carrying value of the investment is R148 925 000, the directors are of the
opinion that the investment has a significantly higher value than the carrying
value and hence no adjustment for impairment of goodwill has been made.
9. Investments
- Listed investments - at fair value 33 641 69 355 50 461
- Unlisted investments 1 000 1 000 1 000
- Loans receivable 113 338 4 800 4 800
Directors" valuation of unlisted investments
1 000 1 000 1 000
The directors are satisfied the loans are recoverable
10. Cash and cash equivalents
- Letseng 60 098 56 340 58 351
- Other 276 255 215
60 374 56 595 58 566
11. Shareholder"s interest
During the period under review, the Company"s authorised share capital remained
unchanged at 250 000 000 ordinary shares of 25 cents each. Preference shares
previously reflected as part of shareholders equity have been reclassified and
are accounted for in the financial statements as debt. As a result of the
reclassification, the comparable interim period for the prior year was restated
in accordance with the March 2005 Annual Financial Statements. The effect of
this restatement on net profit/loss is an increase in finance costs of
R19 462 000.
12. Interest-bearing borrowings
- Preference shares 356 012 342 136 337 216
- Loans payable 311 940 290 701 266 750
667 952 632 837 603 966
- Current portion of interest bearing borrowings
42 455 7 784 33 991
625 498 625 053 569 975
Letseng Investment Holdings repaid the loan to the Industrial Development
Corporation from the proceeds of a new facility granted by Investec Bank which
is secured by the shares held in Letseng Diamonds. The current balance of this
loan is R270 412 703.
COMMENTARY ON RESULTS
Letseng diamond revenue for the period of R214 million was 51per cent up from
that of the previous interim period (R141 million), and on track to exceed the
revenue of R279 million for the 2005 financial year. The demand for rough and
polished diamonds remained strong, although the strengthening of the Rand
against the US Dollar partially impacted on diamond revenues. As the ramp-up
in production at Letseng continued, the operating profit margins improved and
are expected to improve further as the mine reaches continuous full production.
Pending restructuring of the "B" Preference shares and the Wits Nigel Preference
shares as discussed in the 2005 annual financial statements, the finance charges
still remain high. Post restructuring of these preference shares, some
R18 million of non-cash finance charges per six months would be eliminated
from the results of Matodzi.
The further decline in the share price of JCI Limited to R0.16/share from
R0.25/share in March 2005 accounts for the R17 million fair value adjustment.
At the 2006 Annual General Meeting, a proposal will be put to shareholders to
consider distributing this investment to shareholders and move further towards
making Matodzi a focused diamond company.
The loss attributable to ordinary shareholders decreased from R50 million to
R27 million, and headline loss per share decreasing from 34 cents per share to
18 cents per share respectively for the six months ended September 2004 and the
six months ended September 2005. The comparable loss attributable to ordinary
shareholders for the six months ended March 2005 was R63 million and the
headline loss per share was 53 cents per share.
The interim results have not been reviewed by the Company"s auditors, KPMG Inc.
Letseng
The key aspects relevant to the mine are as follows:
- Letseng is unique in that it is a kimberlite type deposit that exhibits
characteristics that are similar to alluvial deposits, namely low diamond grade
with high diamond values;
- the presence of large stones in the Satellite Pipe and Stockpile has been
reaffirmed by recent production;
- the occurrence of the large (+10ct) diamonds can be predicted and the
cumulative size frequency distribution curves dating back from inception
of the mine, up until now reflected the same percentage occurrence of large
diamonds;
- the diamond market outlook for Letseng is positive as there are no known
mines scheduled to come into production in the medium term which would
produce similar stones to Letseng, i.e. 5cts and larger and, in particular,
stones of 10cts upwards of top colour and top quality;
- global jewellery demand is expected to rise in excess of 5% per annum for
the next five years and global diamond production is predicted to remain
constant over the same period leading to a squeeze in supply; and
- prices for both rough and polished diamonds are expected to rise at an
average annual rate in excess of 5% and better quality top range jewellery
with Letseng-type diamonds are expected to perform particularly well.
Six months Six months Year
ended ended ended
30 September 30 Sept. 30 March
Letseng Diamonds 2005 2005 2005
Ore treated Tonnes (000) 1152 801 1732
Diamond yield Carats/100tonne 1.71 2.26 2.14
Diamonds recovered Carats 19658 18066 37049
Average revenue R/tonne 186 176 161
Average revenue R/carat 10909 7819 7543
Average revenue $/carat 1708 1227 1245
Cash costs R/tonne 99 102 97
Cash costs R/carat 5793 4540 4226
Total production costs R/carat 6719 5260 51632
Average exchange ZAR/USD 6.388 6.372 6.06
rate achieved
Capital expenditure R 000"s 6274 14122 38546
The ore treated increased 33% to 192 037 tonnes per month for the six months
ended 30 September 2005 from an average of 144 323 tonnes per month for the year
ended 31 March 2005. Cash costs per ounce increased marginally by 2% to R99 per
tonne from March 2005 and reduced by 5.7% from R97 per tonne for September 2004.
Capital expenditure relates to ongoing projects to further improve operational
performance. Letseng is showing it"s potential and the strong performance was
reflected in the cash generation of R94 million for the six month period ended
September 2005.
115 million tons of kimberlite were mined and processed for the recovery of
19,658 carats at a grade of 1,7 carats per hundred tons. 72% of the kimberlite
was derived from the satellite pipe pit and 28% from the main stockpile.
Further exploration work is currently in progress to quantify additional mineral
reserves and resources as a precursor to doing a full feasibility study to
increase production at Letseng to approximately double the current rate at an
estimated capital cost of less than R200 million. A final decision in this
regard will be made later this year upon completion of the exploration work,
and is expected to be funded from internally generated funds.
A core drilling programme to explore both pipes was initiated in July.
Approximately 16 holes will be drilled in order to confirm the pipe dimensions
to depths of 500 metres and to determine the relative distributions of the
various kimberlite types at depth. To date the drilling programme has confirmed
the geological predictions on which the life of mine plans are based.
LETSENG DIAMOND RESERVE STATEMENT AT 30 SEPTEMBER 2005
SOURCE Satellite Pipe Main Pipe Stockpile TOTAL/AVERAGE
DEPTH FROM (m) 0 0 N/A
DEPTH TO (m) 176 190 N/A
RESERVE TYPE Probable Probable Probable
VOLUME (m3) 3,639,892 19,027,216 1,872,157 24,539,265
SG (kg/m3) 2.49 2.64 2.03 2.57
TONNAGE 9,063,000 50,136,000 3,794,000 62,993,000
RECOV. GRADE(cpht) 1.72 1.51 1.35 1.53
CTS 155,884 757,054 51,219 964,156
VALUE (USS/ct) 1,174 974 974 1,005
MIN CUT-OFF (mm) 2.00 2.00 2.00 1.53
LETSENG DIAMOND RESOURCE STATEMENT AT 30 SEPTEMBER 2005
(INCLUSIVE OF RESERVES)
SOURCE Satellite Pipe Main Pipe
DEPTH FROM (m) 0 176 0 190
DEPTH TO (m) 176 439 190 434
RESERVE TYPE Indicated Inferred Indicated Inferred
VOLUME (m3) 3,639,892 9,163,383 19,027,216 14,883,075
SG (kg/m3) 2.49 2.49 2.64 2.64
TONNAGE 9,063,000 22,816,000 50,136,000 39,216,000
RECOV. GRADE(cpht) 2.28 2.28 2.07 2.07
CTS 206,000 519,000 1,036,000 810,000
VALUE (USS/ct) 1,174 1,174 974 974
MIN CUT-OFF (mm) 2.00 2.00 2.00 2.00
SOURCE Stockpile TOTAL/AVERAGE
DEPTH FROM (m) N/A
DEPTH TO (m) N/A
RESERVE TYPE Indicated
VOLUME (m3) 1,872,157 48,585,723
SG (kg/m3) 2.03 2.57
TONNAGE 3,794,000 125,025,000
RECOV. GRADE(cpht) 1.91 2.11
CTS 72,000 2,643,000
VALUE (USS/ct) 974 1,029
MIN CUT-OFF (mm) 2.00 2.00
RENEWAL OF CAUTIONARY ANNOUNCEMENT
With reference to the cautionary announcements published on 12 April 2005,
9 June 2005, 28 July 2005, 30 September 2005 and 14 November 2005
respectively, shareholders are advised that discussions are continuing,
and consequently shareholders are advised to exercise caution when dealing
in their Matodzi shares until such time as a further announcement in this
regard is made.
MATODZI RESTRUCTURING
As a consequence of the reclassification of the Matodzi "B" Preference
shares and the Wits Nigel Preference shares as borrowings in the 2005
annual financial statements, the interest bearing borrowings of Matodzi
was increased by R356 million and R337 million in September 2005 and
March 2005 respectively. As set-out in the 2005 annual report, the
restructuring of the two sets of preference shares is in progress in terms
of all of the relevant statutory and regulatory requirements. Shareholders
will be kept in formed as and when these transactions are completed.
CORPORATE AFFAIRS
Board appointments and resignations as was previously announced on SENS.
The following directors were appointed to the board during the interim period:
Hage Gottfried Geingob - Independent Non-Executive
Peter Henry Gray - Non-Executive
Linda Makatini (Ms.) - Independent Non-Executive Officer
John Chris Lamprecht - Alternate (to Peter Gray)
Roger Brett Kebble, Hendrik Christoffel Buitendag, Khangale Makhado and
Hage Gottfried Geingob have since resigned from the board.
APPOINTMENT OF SPONSORS
On 1 November 2005, Sasfin Capital (a division of Sasfin Bank Limited)
were appointed as Matodzi"s sponsors.
APPOINTMENT OF AUDITORS
On 1 November 2005, KPMG Inc. were appointed as Matodzi"s auditors.
For and on behalf of the board
ANDREW MLANGENI SELLO RASETHABA
CHAIRMAN CHIEF EXECUTIVE OFFICER
JOHANNESBURG
9 JANUARY 2006
Sponsor
Sasfin Capital
(A division of Sasfin Bank Limited)
REGISTERED OFFICE
28 Harrison Street, Johannesburg, 2001.
PO Box 6966, Johannesburg, 2000.
http://www.matodzi.co.za/
Date: 09/01/2006 05:05:11 PM Produced by the JSE SENS Department
