|
MVL
MVL
Mvelaphanda Resources Limited - Reviewed interim results
MVELAPHANDA RESOURCES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1980/001395/06)
Share code: MVL
ISIN: ZAE000050266
HIGHLIGHTS
* Headline earnings per share rise to 622 cents from a 217
cents loss.
* R1.3 billion increase in fair value of investment in Gold
Fields since June 2005.
* Significant increase in attributable cash flow from
Northam. Cash position improved for growth.
* Proposed change in major empowerment shareholder in Mvela
Resources.
* Finalisation of terms of the Ndowana 2 Joint Venture,
allowing prospecting activity to accelerate.
GROUP NET ASSET VALUE*
Asset Percentage Value Value Percentage
Owned Rm cps of total
Gold Fields Total 1 8.4% 3,248 19.52 58%
Northam Total 22.3% 983 5.91 17%
Trans Hex Total 2 22% 273 1.64 5%
Total listed assets 4,504 27.07 80%
Booysendal Total 3 725 4.36 13%
Unlisted assets 256 1.54 5%
Cash and cash
equivalents 149 0.90 3%
TOTAL 5,634 33.87
Premium/(discount) to NAV -32%
MVL share price 23.00
MVL shares in issue 166.4 million
* Market value of listed assets and management valuation
of unlisted assets at 31 December 2005. The contents of
this table have not been reviewed by the group"s
auditors.
1. Assumes 15% of GFI-SA exchanged for 45 million shares,
adjusted for PV of mezzanine debt and management
estimate of dividends foregone until March 2009.
2. Assumes conversion of forward purchased shares, adjusted
for contingent liability of R44 million.
3. Assumes sale to Northam: 20.4 million NHM shares, 18
million deferred shares and cash of R90 million less R20
million owing to Khumama consortium.
GROUP BALANCE SHEET
Reviewed Restated Restated
As at 31 December 31 December 30 June
R"000 Notes 2005 2004 2005
ASSETS
Non-current
assets
Investment in
associate
companies 778,621 768,141 780,201
- Northam Platinum
Limited 697,056 639,383 660,803
- Trans Hex Group
Limited 6 81,565 128,758 119,398
GFI-SA loan
3 5,318,000 3,176,000 3,986,000
Derivative
financial
instruments 4 191,675 228,501 211,332
Tirisano Mine
project 6 - 11,174 26,131
Non-strategic
listed
investments 2,861 2,329 3,008
Goodwill 6 75,869 120,869 120,869
Property, plant
and equipment 683 866 794
Total non-current
assets 6,367,709 4,307,880 5,128,335
Current assets
Cash and
cash equivalents 148,782 189,816 161,023
Booysendal
Platinum project 315,892 315,892 315,892
Accounts
receivable
and prepayments 2,394 4,486 7,422
Inventories 1,821 - 3,234
Total current
assets 468,889 510,194 487,571
TOTAL ASSETS 6,836,598 4,818,074 5,615,906
EQUITY AND
LIABILITIES
Share capital
and reserves 4,368,599 2,870,843 3,402,357
Total share
capital and
reserves 4,368,599 2,870,843 3,402,357
Non-current
liabilities
Senior Bank
Loan 674,179 940,004 809,625
Mezzanine
finance 5 1,267,575 671,216 1,070,180
Deferred
taxation 197,218 13,960 10,072
Total non-current
liabilities 2,138,972 1,625,180 1,889,877
Current liabilities
Accounts payable
and accruals 10,328 14,633 9,095
Provision for
employee long-term
incentive costs 13,751 - 2,699
Short-term portion
of Senior Bank Loan 265,825 244,431 254,807
Booysendal Platinum
Project accrual 20,000 38,000 20,000
Tirisano Mine
Project accrual - 11,174 5,207
Current taxation
payable 19,123 13,813 31,864
Total current
liabilities 329,027 322,051 323,672
TOTAL EQUITY
AND LIABILITIES 6,836,598 4,818,074 5,615,906
GROUP INCOME STATEMENT
Reviewed Restated Restated
6 months 6 months 12 months
to to to
31 December 31 December 30 June
R"000 Notes 2005 2004 2005
INCOME
Earnings
from
associated
companies 51,166 8,798 42,763
- Northam
Platinum
Limited 58,896 5,321 38,913
- Trans Hex
Group
Limited (7,730) 3,477 3,850
Interest
earned on
GFI-SA
loan
advanced 218,703 218,703 437,405
Interest
earned on
cash and
cash
equivalents 5,244 7,809 13,624
Dividends
received
from
non-strategic
investments 2 2 8
Other income 9 - 241
Total income 275,124 235,312 494,041
OPERATING EXPENSES
Exploration
and project
development
costs 43,580 11,343 29,016
Corporate
expenses 12,218 9,045 21,732
Employee
long-term
incentive
costs 8,236 912 2,654
Finance costs 160,611 173,342 331,792
- Senior bank
loan
(GFI-SA) 56,097 68,449 129,836
- Mezzanine
finance
(GFI-SA) 104,514 95,105 191,764
- Standard
Corporate
Merchant
Bank - 1,946 1,946
- Transaction
costs - 7,662 8,016
- Other - 180 230
Total operating
expenses 224,645 194,642 385,194
PROFIT BEFORE
OTHER
(INCOME)/
EXPENSES 50,479 40,670 108,847
OTHER (INCOME)/
EXPENSES
Impairment
write-downs 6 99,344 - 8,000
(Gain)/Loss on
revaluation of
financial
instruments (1,190,344) 388,801 (73,029)
- GFI-SA loan
advanced (1,332,000) 231,000 (578,999)
- Mezzanine
finance 122,000 145,000 476,000
- Trans Hex
Group Limited
forward
purchased
shares 19,656 12,801 29,970
Other expenses 2,056 - 3,584
Total other
(income)/
expenses (1,088,944) 388,801 (61,445)
PROFIT/(LOSS)
BEFORE
TAXATION 1,139,423 (348,131) 170,292
TAXATION (204,379) (12,677) (26,849)
- Normal (17,233) (15,940) (31,374)
- Deferred (187,146) 3,263 4,525
ATTRIBUTABLE
INCOME/
(LOSS) 935,044 (360,808) 143,443
EARNINGS
PER SHARE
(cents)
- Basic earnings
/(loss)
per ordinary
share 562 (217) 86
- Headline
earnings/
(loss)
per ordinary
share 7(a) 622 (217) 91
- Diluted earnings
/(loss)
per ordinary
share 561 (217) 86
- Adjusted
headline
earnings/
(loss) per
ordinary
share 7(b) 20 16 46
GROUP SEGMENTAL RESULTS
Reviewed Restated Restated
6 months to 6 months to 12 months to
31 December 31 December 30 June
R"000 2005 2004 2005Net profit/(loss)
after taxation
- Gold 1,027,376 (348,755) 155,844
- Platinum 55,585 2,302 35,140
- Diamonds (124,745) (9,909) (33,171)
- Other (23,172) (4,446) (14,370)
ATTRIBUTABLE INCOME/
(LOSS) 935,044 (360,808) 143,443
GROUP STATEMENT OF CHANGES IN EQUITY
R"000 Total
Balance at 30 June 2004(restated) 2,970,258
IFRS 3 adjustment - negative goodwill
written back 262,810
Attributable profit for the period (360,808)
Share buy back (10,904)
Equity compensation reserve 8,677
Equity accounted portion of share based payments 433
Equity accounted portion of foreign currency
translation reserve 225
Equity accounted portion of fair value adjustment
on available-for-sale financial assets (27)
Unrealised gain on revaluation of listed
investments 179
Balance at 31 December 2004 2,870,843
Balance at 30 June 2004(restated) 2,970,258
IFRS 3 adjustment - negative goodwill
written back 262,810
Attributable profit for the year 143,443
Equity compensation reserve 23,250
Equity accounted portion of share
based payments 1,295
Equity accounted portion of foreign
currency translation reserve (432)
Equity accounted portion of fair value
adjustment on available-for-sale financial
assets (94)
Unrealised gain on revaluation of listed
investments 857
Profit on disposal of treasury shares 970
Balance at 30 June 2005 3,402,357
Attributable profit for the period 935,044
Equity compensation reserve 30,638
Equity accounted portion of share based
payments 676
Equity accounted portion of foreign
currency translation reserve 295
Equity accounted portion of fair
value adjustment on available-for-sale
financial assets (263)
Unrealised loss on revaluation of
listed investments (148)
Balance at 31 December 2005 4,368,599
GROUP CASH FLOW STATEMENT
Reviewed Restated Restated
6 months 6 months 12 months
to to to
31 December 31 December 30 June
R"000 2005 2004 2005
CASH FLOWS FROM
OPERATING ACTIVITIES
Cash utilised
in operations (20,701) (13,991) (29,516)
Interest received 223,947 226,512 451,029
Interest paid (85,216) (97,564) (188,050)
Taxation paid (29,974) (2,669) (2,678)
NET CASH GENERATED
BY OPERATING
ACTIVITIES 88,056 112,288 230,785
CASH FLOWS FROM
INVESTING ACTIVITIES
Dividends received
from associated
companies 24,388 32,149 46,190
- Northam Platinum
Limited 23,282 31,043 43,978
- Trans Hex Group
Limited 1,106 1,106 2,212
Capital repayment
by associate
companies - 10,348 10,348
Payment in respect
of projects - (12,000) (56,131)
Dividends received
from non-strategic
investments 2 2 8
Acquisition of
furniture, fittings
and office equipment (259) (658) (758)
NET CASH GENERATED BY/
(UTILISED IN)
INVESTING ACTIVITIES 24,131 29,841 (343)
CASH FLOWS FROM
FINANCING ACTIVITIES
Loans repaid - (46,649) (47,069)
Capital repayment
in respect of
Senior Bank Loan (124,428) (114,372) (234,374)
Proceeds on disposal
of treasury shares - - 11,874
Purchase of treasury
shares - (10,008) (10,904)
Transaction costs
(GFI-SA) - - (7,662)
NET CASH UTILISED
IN FINANCING
ACTIVITIES (124,428) (171,029) (288,135)
Net decrease in
cash and cash
equivalents (12,241) (28,900) (57,693)
Cash and cash
equivalents at
beginning of the
period 161,023 218,716 218,716
CASH AND CASH
EQUIVALENTS AT
END OF THE PERIOD 148,782 189,816 161,023
NOTES
1. Basis of preparation
With effect from 1 July 2005 the group adopted International Financial Reporting
Standards ("IFRS") using certain exemptions allowed under IFRS 1 "First-time
Adoption of IFRS". These condensed consolidated interim financial statements
have been prepared in accordance with the group"s accounting policies compliant
with IFRS, and in accordance with IAS 34: "Interim Financial Reporting", the
South African Companies Act, 1973, as amended, and the JSE Listing Requirements.
The December 2004 interim financial statements and the 30 June 2005 year-end
financial statements have, where applicable, been restated accordingly. The
IFRS standards are subject to ongoing review and interpretation by the
International Accounting Standards Board (IASB). Consequently, IFRS information
at year-end may differ from the information contained herein.
2. International Financial Reporting Standards
In order to comply with IFRS, the group has adopted the following accounting
policies:
(a) IFRS 2 ("Share-based payments"):
- Share based payments granted to employees after
7 November 2002, and that had not vested by
1 January 2005, were valued using a binomial valuation
model and this value is charged to the income statement
over the vesting period of the option.
- Share options granted to parties other than employees
after 7 November 2002, and that had not vested by
1 January 2005, were valued using the fair value of the
goods or services received.
(b) IAS 39 ("Financial instruments: Recognition and
Measurement"):
Transaction costs relating to financial assets and
financial liabilities that are carried at fair value
through profit and loss are expensed as incurred. Such
costs had previously been capitalised and were
amortised over the life of the assets/liabilities.
(c) Certain balance sheet classifications have been changed
to comply with IFRS classifications.
All comparative information has been adjusted to comply with these new
accounting policies.
IFRS 1 allows a number of exemptions to retrospective application of IFRS and
the group has adopted the following transitional arrangements on a consistent
basis:
(a) IFRS 2: Share-based Payments has not been applied to
equity instruments that were granted on or before
7 November 2002.
(b) IFRS 2: Share-based Payments has not been applied to
equity instruments that were granted after
7 November 2002 and that vested before 1 January 2005.
There have been no material adjustments to the cash flow statement in respect of
cash flows from operating activities, cash flows from investing activities and
cash flows from financing activities.
The after-tax effect resulting from the adoption of IFRS on the comparative
reporting period is set out below:
IFRS reconciliation of attributable earnings
R"000
12 months 6 months 9 months
to to to
30 June 31 December 30 June
2005 2004 2004
Attributable earnings
previously reported 172,376 (345,254)* (97,264)
IFRS 2: Share based
Payments (26,926) (9,110) (5,073)
IAS 39: Transaction
costs amortised (2,345) (6,762) (15,946)
Other** 338 318 320
Restated attributable
earnings 143,443 (360,808) (117,963)
* Adjusted for the adoption of IFRS 3/(AC 140) on 1 July
2004.
** Attributable portion of amounts relating to the adoption
of IAS 16: ("Property, plant and equipment") by an
associated company.
IFRS reconciliation of assets, liabilities and equity
R"000 Reviewed Restated Restated
30 June 31 December 1 July
2005 2004 2004
ASSETS
SA GAAP reported 5,615,285 4,817,436* 4,850,960
IFRS 2: Shared
based payments - - -
IAS 39: Transaction
costs previously
capitalized (354) - -
Other** 975 638 320
IFRS reported 5,615,906 4,818,074 4,851,280
LIABILITIES
SA GAAP reported 2,192,914 1,924,522 1,865,076
IFRS 2: Shared
based payments 2,699 - -IAS 39: Transaction
costs previously
capitalized 17,936 22,709 15,946
Other** - - -IFRS reported
2,213,549 1,947,231 1,881,022
EQUITY
SA GAAP reported 3,422,371 2,892,913 2,985,884
IFRS 2: Shared
based payments (2,699) - -IAS 39: Transaction
costs previously
capitalized (18,290) (22,708) (15,946)
Other** 975 638 320
IFRS reported 3,402,357 2,870,843 2,970,258
* Adjusted for the adoption of IFRS 3/(AC 140) on 1 July
2004.
** Attributable portion of amounts relating to the adoption
of IAS 16:("Property, plant and equipment") by an
associated company.
3. Loan to GFI-SA
R"000 Reviewed Restated Restated
31 December 31 December 30 June
2005 2004 2005
Loan advanced to
GFI-SA 4,139,000 4,139,000 4,139,000
Unrealised fair value
adjustment at end of
the period 1,179,000 (963,000) (153,000)
GFI-SA loan at fair
value 5,318,000 3,176,000 3,986,000
The value of this investment is sensitive to the following key drivers:
- Rand/dollar exchange rate;
- US dollar gold price; and
- Gold Fields" share price
The fair valuation of this investment takes into account the change in the value
of the Gold Fields investment according to the formula and impacted by the above
drivers and, the difference between the present value of the future interest
payments from GFI-SA until the end of March 2009 and the present value of the
estimated future dividends foregone over the same period.
The significant unrealised fair value gain during the period under review
results primarily from the increase in the Gold Fields share price.
4. Derivative financial instruments
This represents the fair value of 16 million Trans Hex Group Limited forward
purchased shares for delivery on 28 February 2008. The fair value is based on
the market price of Trans Hex Group Limited shares as at 31 December 2005 and
the contingent liability of R44,3 million (2004:R59,5 million) relating to the
debenture coupon.
5. Mezzanine finance
R"000
Reviewed Restated Restated
31 December 31 December 30 June
2005 2004 2005
Loan advanced to Mvela
Gold 1,086,000 1,086,000 1,086,000
Net interest
capitalised at
beginning of the
period 172,180 36,100 36,100
Net interest
capitalised during the
period 75,395 68,116 136,080
1,333,575 1,190,216 1,258,180
Unrealised fair value
adjustment at end of
the period (66,000) (519,000) (188,000)
Mezzanine finance at
fair value 1,267,575 671,216 1,070,180
The mezzanine finance was advanced to Mvela Gold by a special purpose vehicle
company (SPV), on a back-to-back arrangement (the same arrangements which are
applicable to the SPV are applicable to Mvela Gold). The SPV on-charges all of
its costs to Mvela Gold, who treats these collective charges as finance costs
for the mezzanine finance. Mvela Resources pledged its shares in Mvela Gold as
security for the mezzanine finance. The mezzanine finance, as well as the
security with limited recourse against the Mvela Resources group, is treated as
a financial instrument and is carried in the balance sheet at fair value. The
fair value is determined through the use of option pricing methodologies.
6. Impairment write-downs
The carrying values of the group"s assets and investments have been reviewed for
impairment in terms of the guidance in IAS 36: "Impairment of assets". In terms
of IAS 36, goodwill carried on the balance sheet was allocated across the
various cash generating units within the group for the purposes of impairment
testing. The impairment write-downs during the period under review result from a
revision of management"s long-term views on future economic benefits to be
derived from its diamond investments/projects.
Reviewed Restated Restated
6 months 6 months 12 months
to to to
31 December 31 December 30 June
2005 2004 2005
7. Earnings per share
are calculated as
follows:
(a) Headline earnings
/(loss) per share
(cents) 622 (217) 91
R"000
Attributable earnings/
(loss) 935,044 (360,808) 143,443
Impairment write-downs 99,344 - 8,000
Headline earnings/
(loss) 1,034,388 (360,808) 151,443
Weighted average
number of shares in
issue 166,403,140 166,339,637 166,403,140
(b) Adjusted headline
earnings /(loss) per
share (cents) 20 16 46
R"000
Attributable earnings/
(loss) 935,044 (360,808) 143,443
"Other expenses"
per income
statement (1,088,944) 388,801 (61,445)
Taxation relating
to other (income)/
expenses 187,146 (1,920) (5,518)
Adjusted headline
earnings 33,246 26,073 76,480
Weighted average
number of shares
in issue 166,403,140 166,339,637 166,403,140
8. Post balance sheet events
Northam Platinum Limited declared an interim dividend of 115 cents per share to
be paid on 27 February 2006.
This represents a dividend payment of R60 million to Mvela Resources.
9. Review by the independent auditors
The current interim financial results have been reviewed by our auditors,
PricewaterhouseCoopers Inc., who have performed their review in accordance with
the International Standard on Review Engagement 2400: "Engagements to review
financial statements". The scope of the review was to enable the auditors to
report that nothing came to their attention that caused them to believe that the
accompanying interim financial information is not fairly presented, in all
material respects, in accordance with IFRS applicable to Interim Financial
Reporting and the South African Companies Act. A copy of their unqualified
review report is available for inspection at the registered office of the
Company.
Without qualifying the opinion, the review report contains an emphasis of matter
paragraph, drawing the users" attention to the fact that the restatements
published may change at year-end due to possible amendments to the interpretive
guidance issued by the IASB.
COMMENTARY
Introduction
Despite sustained strength in the rand, rampant metal prices have resulted in
Gold Fields and Northam reporting significantly higher profits year-on-year.
Diamond prices have been less buoyant and Trans Hex has struggled with narrow
margins. The net impact on Mvela Resources has been extremely positive, not only
due to a sharp increase in attributable cash flow from Northam, but through
substantial increases in the share prices of Gold Fields and Northam and hence
to the intrinsic value of Mvela Resources. The increase in Gold Fields" share
price in particular, has substantially increased the value of Mvela Resources"
investment in Gold Fields and this has been reflected in the 103% gain in Mvela
Resources" share price since 30 June 2005.
CORPORATE ACTIVITY
Possible change in major empowerment shareholding in Mvela Resources
On 20 December 2005, Mvela Group and Mvela Resources announced the proposed sale
of Mvela Group"s 23% holding in Mvela Resources to Incwala Resources. Incwala
Resources is a broad based, unlisted empowerment company, which has an 18%
interest in Lonplats.
The transaction remains subject to the fulfilment inter alia, of the following
conditions:
- the consent and approval, including waivers of any pre-emptive rights, by all
relevant parties to Mvela Resources" material underlying investments;
- the approval of all relevant regulatory authorities; and
- the approval by Mvela Resources" Board of the cession of the Management
Agreement dated 16 May 2002 to Incwala Resources, and the cession by Mvela Group
and Mvela Holdings of the management rights and obligations to Incwala
Resources.
- Furthermore, Mvela Holdings" existing obligations to offer all new resources
opportunities at cost to Mvela Resources, remains in force.
All parties" efforts are being directed towards fulfilling the relevant
conditions.
Finalisation of the terms of Ndowana 2 Joint Venture
Mvela Resources and its partner, De Beers, announced the finalisation of the
terms of Ndowana 2 Joint Venture, which provides for equity participation of 51%
for Mvela Resources in respect of specific applications for certain mineral
rights on areas previously owned by the State. The initial Ndowana agreement, in
respect of mineral rights outside of these areas, remains the same, namely a 33%
equity participation for Mvela Resources and 67% for De Beers. In terms of the
new agreement, on taking a project to bankable feasibility, the partners will
negotiate, in good faith, the process for the marketing of production. The joint
venture partners have budgeted R20 million for exploration in this highly
prospective area in FY2006.
Burk Mining manganese opportunity
On 6 December 2005, Mvela Resources announced that it would not continue with
the proposed acquisition of Burk Mining (Pty) Ltd as announced on 2 September
2005. A condition of the transaction was the confirmation of a manganese
resource of between one and three million tons and one million tons of iron ore.
However, the minimum resource was not confirmed. Mvela Resources believes that
the manganese sector offers attractive growth potential and will continue to
pursue such opportunities.
FINANCIAL REVIEW
Mvelaphanda Resources" financial performance for the six-month period ended 31
December 2005 has been very pleasing. A sharp increase in the value of its
investment in Gold Fields, has been underpinned by a solid operating performance
from Northam, another key asset, and future focus for growth in the platinum
sector. Trans Hex, in the face of a strong rand and flattening rough diamond
prices, could not match the superb performance of the gold and platinum
investments, yet was operationally sound. Following a planned restructuring,
Trans Hex will be well positioned for further growth.
Balance Sheet
The balance sheet remains robust with cash of R149 million on 31 December 2005
which will be bolstered by the R60 million attributable dividend from Northam on
27 February 2006. Non-current liabilities include R1,268 million of mezzanine
finance and R674 million of senior bank loan. The recourse to Mvela Resources on
these loans is limited to R200 million, with the senior bank loan in particular
fully guaranteed by Gold Fields. The differential between the present value of
future interest payments from Gold Fields until March 2009, which offsets the
senior bank loan and the present value of future dividends foregone until the
end of March 2009, is included on the balance sheet under "GFI-SA loan",
resulting in a net asset value of R5,318 million.
Income Statement
Headline earnings per share increased substantially from a restated 217 cents
loss in the previous corresponding period to 31 December 2004, to 622 cents,
with basic earnings per share rising from a restated 217 cents loss to 562
cents, primarily due to a net unrealised gain resulting from the fair value
adjustment of the Gold Fields investment. This investment is fair valued at each
reporting date, and its value is determined by the following key factors; the US
dollar gold price and the rand/US dollar exchange rate - which determine the
value of the South African operations relative to the value of the entire Gold
Fields" Group according to the agreed upon Exchange formula - and Gold Fields"
share price.
While the 5% strengthening of the rand and the 17% increase in the dollar gold
price during the period have reduced the value of Gold Fields" South African
operations relative to the international operations, resulting in the floor
level of 45 million Gold Fields shares being attributable to Mvela Resources,
the approximate 45% increase in the Gold Fields share price in the six-month
reporting period, and hence the value of those shares for Mvela Resources, has
more than offset this. These factors have resulted in a fair value adjustment of
R1.3 billion, thereby increasing the fair value of the Gold Fields investment on
the balance sheet from R4 billion (as at 30 June 2005) to R5.3 billion (as at 31
December 2005). Deferred taxation of R190 million has accordingly been provided
against this unrealised profit.
In line with IAS 36 the group has allocated its goodwill to its underlying cash
generating units for purposes of impairment testing. Based on management"s
current projection of future earnings from the diamond industry, the goodwill
relating to this sector was impaired and, accordingly, an amount of R45 million
was written off. Further amounts written off relate to the investment in Trans
Hex (R29 million) and the Tirisano Mine (R25 million).
Earnings from associate companies were boosted by Northam"s impressive financial
performance, which saw its earnings increase to R303 million in the six months
to 31 December 2005 (R59 million attributable to Mvela Resources) from R61
million in the six months to 31 December 2004 (R5 million attributable to Mvela
Resources). Trans Hex, on the other hand, recorded a decrease in income (before
impairments) of 44% from R85 million in the six-month period ending 30 September
2004 to R48 million in the six-month period ending 30 September 2005, as rough
diamond prices eased and the rand strengthened. Adjusted headline earnings per
share, which exclude marked-to-market movements in the value of financial
instruments and other non-cash costs, reflect this more clearly, rose 25% from
16 cents to 20 cents.
Cash Flow Statement
Cash flow for the period was largely dominated by cash flows related to the Gold
Fields transaction. Interest income of R218 million was offset by R85 million
cash finance costs on the senior and mezzanine loans, a capital repayment of
R124 million on the senior debt and a full year tax payment of R30 million by
Mvela Gold. Dividends from associates during the period were R8 million lower
than the previous corresponding period at R24 million. However, an interim
dividend of 115 cents per share was declared by Northam after 31 December 2005.
Mvela Resources will receive its attributable share thereof, amounting to a
further R60 million cash, on 27 February 2006.
OPERATIONAL REVIEW
GFI-SA
An intensified focus at the operational level during and following the failed
Harmony bid is evident in the solid cost and production results released by GFI-
SA in the six-month period to 31 December 2005.
The planned elimination of loss making production and the replacement of low
grade surface material with higher grade underground production, resulted in
throughput falling 16% compared with the six-months to 31 December FY2005. This
was however accompanied by a 9% increase in grade to 6.1g/t, which resulted in a
9% decline in gold produced to 1.34 million oz. Cost reduction initiatives meant
that total production cost increases were well contained, rising just
6% year-on-year to R85,903/kg (US$410/oz). This, together with an average rand
gold price that was 16% higher than the previous comparable period at R96,526/kg
(US$460/oz), resulted in net profit from Gold Fields" South African operations
rising 41% to R213 million. Capital expenditure for the six-month period was
R302 million compared with R310 million in FY2005, and a greater focus has been
placed on capital development to improve ore reserve flexibility.
Mvela Resources receives fixed interest payments from GFI-SA until subscription
for 15% of the company, with a right to exchange this holding into Gold Fields
shares. While the improvement in reported earnings from GFI-SA does not directly
manifest itself in Mvela Resources" financial statements until then, the sharp
increase in Gold Fields share price is reflected in the substantial gain in the
value of the investment as discussed in the financial review above.
Northam
In contrast to the six-month period ending 31 December 2004, which was impacted
by the underground fire, there was a significant improvement in Northam"s
performance for the six-month period to 31 December 2005. Metal production
increased 25% to 186,704oz, which contributed to a 13% decline in unit cash
costs to R104,508/kg. Strong US dollar metal prices offset a marginally weaker
rand, resulting in the average rand basket price received rising 26% to
R167,079/kg and net income increasing substantially from R61 million (26.3cps)
in the six-month period ending 31 December 2005 to R303 million (130.4cps) in
the six-month period to 31 December 2005.
Northam declared an interim dividend of 115cps (FY2005 interim dividend: 25cps),
resulting in attributable dividends to Mvela Resources rising sharply from R13
million to R60 million year-on-year. This amount is payable to Mvela Resources
on 27 February 2006.
Trans Hex
Rough diamond prices have eased since September 2005 and as a result, the strong
rand has directly impacted on profitability at Trans Hex. Operationally, the
performance has been satisfactory, with diamond sales in the six-month period
ending 30 September 2005 up 15% on the previous corresponding period to R612
million. Higher costs however, largely related to fuel prices, start up costs at
Fucauma and the implementation of the maximised shift system, resulted in
attributable income before impairments, falling 44% to R48 million. In
accordance with IAS 36, Trans Hex recorded impairments of R147 million on its
investments in Matikara Limitada, Tirisano Mine and a partial write down of the
value of the Middle Orange River assets which caused a swing from attributable
income of R85 million in the six-month period ending 30 September 2004 to an
attributable loss of R99 million in the six-month period ending
30 September 2005.
Trans Hex declared an interim dividend of 20cps (interim 2004: 20cps), resulting
in attributable cash flow for Mvela Resources of R1.1 million.
DIVIDENDS
Further acquisitive and organic growth opportunities are likely to arise for
Mvela Resources in the coming periods. As such, the Directors have elected not
to pay an interim dividend for the six-month period ending 31 December 2005.
PROSPECTS
Mvela Resources" associated companies have in the past few years, in a tough
operating environment caused by the strong rand, restructured their operations -
the results of which have generally been reflected in solid operating results
recently. These quality mining companies are well positioned to benefit from
continued strength in global commodity prices and, what appears to be, a more
stable rand. For Mvela Resources, this should continue to be manifested in
higher dividend cash flow from associates as well as continued gains in the
value of its core investments. All of which adds to the robustness of the
Company and improves the outlook for further organic and acquisitive growth.
For the company, in the short term, the strategic intent remains clear.
Management will strive to deliver on Mvela Resources" stated strategy in a
vastly more accommodating environment, thereby continuing to add value for
stakeholders.
For and on behalf of the board
TMG Sexwale PC Pienaar
Chairman Chief Executive Officer
Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
23 February 2006
Johannesburg
www.mvelares.co.za
Directors
TMG Sexwale (Chairman); PC Pienaar* (CEO); NS Ntsaluba* (FD); CG Johnson*; KB
Mosehla*; BR van Rooyen*; ME Beckett (British); OA Mabandla; E Molobi; NE
Mtshotshisa; MP Ncholo; MR Ramaite; MJ Willcox; MSMM Xayiya
(* Executive Directors)
Transfer Secretaries
Computershare Investor
Services 2004 (Pty) Limited
70 Marshall Street
P O Box 61051,
Marshalltown, 2107
Johannesburg, 2001
Registered Office
1A Albury Park
Dunkeld West, 2196
Magalieszicht Avenue
P O Box 413420,
Craighall, 2024
Date: 23/02/2006 08:00:51 AM Produced by the JSE SENS Department
| Profile Group (Pty) Ltd. has taken care in preparing all information on this website, but does not accept any liability for errors or out-of-date information. | |||||||||||||
| Other Profile Group sites: FundsData Online (unit trust data) | Profile Group corporate site | |||||||||||||
| [ Terms of Use | Privacy Policy | PAIA manual | FAQs/Help | Site Map | © Copyright Reserved 2026 ] | |||||||||||||
|
|||||||||||||
