| Tue 14 Nov 2006, 7:00 | | Trans Hex - Reviewed interim results for the six m |
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TSX
TSX
Trans Hex - Reviewed interim results for the six months ended 30 September
2006
Trans Hex Group Limited
Incorporated in the Republic of South Africa
Registration number: 1963/007579/06
ISIN: ZAE000018552
JSE share code: TSX & NSX share code: THX
("Trans Hex" or "the Company")
Reviewed Interim Results for the six months ended 30 September 2006
ABRIDGED CONSOLIDATED INCOME STATEMENT
Six months ended Year ended
30/09/06 30/09/05 31/03/06
Restated Restated
Reviewed Reviewed Audited
R"000 R"000 R"000
Sales 479 103 611 649 1 087 897
Cost of goods sold 441 904 485 124 928 912
Depreciation of mining assets 55 927 73 822 132 942
Royalties: Namaqualand Diamond 16 064 19 240 33 034
Fund Trust
Other costs 369 913 392 062 762 936
Mining income 37 199 126 525 158 985
Net financial income (Note 1) 7 382 2 599 (4 581)
Exploration costs (23 211) (39 079) (63 651)
Impairment of assets (Note 7) - (215 609) (218 792)
Share of results of associated (9) (3) (6)
companies
Profit/(loss) before income tax 21 361 (125 567) (128 045)
Income tax 18 585 (27 855) (9 117)
Profit/(loss) for the period 2 776 (97 712) (118 928)
Earnings per share (cents)
Basic 2,6 (92,6) (112,7)
Diluted 2,6 (92,6) (112,7)
Headline 7,5 46,9 29,9
Dividend per share (cents) 5,0 20,0 30,0
Total number of shares in issue 89 872 89 413 89 847
("000)
Weighted average issued shares 105 872 105 255 105 470
("000)
Average US$ exchange rate 6,79 6,44 6,38
ABRIDGED CONSOLIDATED BALANCE SHEET
Six months ended Year ended
30/09/06 30/09/05 31/03/06
Restated Restated
Reviewed Reviewed Audited
R"000 R"000 R"000
Assets
Property, plant and equipment 682 922 745 305 659 027
Goodwill 37 096 37 096 37 096
Investments and loans 248 025 235 648 200 637
Deferred taxation 7 787 11 945 10 166
Current assets 374 076 367 735 368 718
Inventory 117 486 105 846 119 488
Accounts receivable 117 881 92 763 65 431
Cash resources and equivalents 138 709 169 126 183 799
Non-current assets classified 72 845 - 82 854
as held for sale
1 422 751 1 397 729 1 358 498
Equity and liabilities
Total shareholders" interest 961 559 1 001 995 961 373
Long-term liabilities 9 324 26 852 18 649
Deferred taxation 159 613 130 437 120 960
Provisions 39 301 26 093 39 096
Current liabilities 248 266 212 352 213 732
Short-term borrowings 17 528 15 419 16 406
Bank overdraft 46 359 13 046 24 414
Other 184 379 183 887 172 912
Liabilities directly
associated with
non-current assets classified 4 688 - 4 688
as held for sale
1 422 751 1 397 729 1 358 498
Net asset value per share 1 070 1 121 1 070
(cents)
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended Year ended
30/09/06 30/09/05 31/03/06
Restated Restated
Reviewed Reviewed Audited
R"000 R"000 R"000
Balance at 1 April (Audited) 961 373 1 113 883 1 113 883
Change in IAS 19 - (170) (170)
961 373 1 113 713 1 113 713
Net profit/(loss) for the 2 776 (97 712) (118 928)
period (Restated)
Dividends paid (8 998) (17 868) (35 822)
Translation differences
on foreign
subsidiaries 25 582 4 840 1 179
Fair value adjustment on
available-for-sale (1 147) (4 315) (6 157)
financial assets
Share-based payments 317 616 1 090
Cash flow hedges (18 504) - -
Issue of share capital 160 2 721 6 298
Balance at end of period 961 559 1 001 995 961 373
ABRIDGED CONSOLIDATED CASH FLOW STATEMENT
Six months ended Year ended
30/09/06 30/09/05 31/03/06
Restated Restated
Reviewed Reviewed Audited
R"000 R"000 R"000
Cash available from operating 80 674 162 965 232 338
activities
Movements in working capital (10 033) 44 613 54 436
Taxation paid (68 655) (80 031) (83 975)
Dividend paid (8 998) (17 868) (35 822)
Cash (utilised)/retained from (7 012) 109 679 166 977
operating activities
Cash employed (60 023) (61 474) (115 466)
Fixed assets
Replacement (9 383) (11 010) (24 880)
Additional (36 626) (43 381) (69 671)
Long-term liabilities (8 203) (7 216) (14 432)
Investments, loans and issue of (5 811) 133 (6 483)
capital
Net cash flow for the period (67 035) 48 205 51 511
NOTES
Six months ended Year ended
30/09/06 30/09/05 31/03/06
Restated Restated
Reviewed Reviewed Audited
R"000 R"000 R"000
1. Net financial income
Net financial income consists
mainly of
the following principal
categories:
Interest received 4 208 4 875 4 744
Interest paid (3 964) (3 902) (8 730)
Net foreign exchange profit 7 138 1 111 162
Rehabilitation provision - - 515 (757)
unwinding of discount
7 382 2 599 (4 581)
2. Reconciliation of headline
earnings
Profit/(loss) for the period 2 776 (97 712) (118 928)
Loss on sale of assets 5 156 347 543
Impairment of assets - 146 766 149 949
Headline earnings 7 932 49 401 31 564
3. Capital commitments
(including amounts authorised,
but not yet contracted) 235 745 18 833 44 421
These commitments, through to
2009, will be
funded out of own resources or
borrowed funds.
4. Segment information
Sales
South Africa (Land and Shallow 404 243 544 989 958 978
Water)
Namibia (Marine Vessels) 21 800 23 455 41 327
Angola 53 060 43 205 87 592
Mining income before depreciation
South Africa (Land and Shallow 111 536 215 755 324 191
Water)
Namibia (Marine Vessels) (10 751) (6 431) (20 479)
Angola (7 659) (8 977) (11 785)
5. The Accounting Policies are consistent with the annual report and the
corresponding prior year period in accordance with International Financial
Reporting Standards, except for the changes described in Note 6 below. These
abridged financial statements comply with IAS34. Income does not accrue
evenly throughout the year and the income for the six months, therefore,
does not necessarily represent half of a full financial year"s income.
6. Change in accounting policies
IAS 14 - Segment Reporting
During the period the Group refined the definition of the segments to
represent the geographic area from which the diamonds are recovered. The
comparative figures have been restated.
IAS 19 - Employee benefits
During the period the Group changed the accounting treatment of actuarial
gains and losses arising from experience adjustments and changes in
actuarial assumptions. In previous periods, these changes were charged to
income in the period during which they occurred. Under the new treatment
changes in excess of the greater of 10% of the value of plan assets or 10%
of the defined benefit obligation are charged or credited to income over the
employees" expected average remaining working lives.
The impact of this change to the profit/(loss) for the period is a charge of
R0,041 million (30 September 2005: credit of R0,908 million; 31 March 2006:
credit of R1,816 million; 31 March 2005: cumulative charge of R0,170
million).
7. Impairment of assets
During the previous financial year, the Group reviewed the value of its
investments in Matikara Limitada, the Tirisano Diamond Mine and the Middle
Orange operations. This review indicated impairment to the value of these
investments and in accordance with the provisions of IAS 36, the value of
these investments was reduced.
Six months ended Year ended
30/09/06 30/09/05 31/03/06
Reviewed Reviewed Audited
R"000 R"000 R"000
Details of net assets impaired are
as follows:
Mining plant and equipment - 22 418 22 418
Mining rights - 190 205 190 205
Deferred taxation - (68 843) (68 843)
Net current assets - 2 986 6 169
Net assets impaired - 146 766 149 949
8. Review by independent auditors
PricewaterhouseCoopers Inc. has reviewed the interim results. A copy of
their unqualified review report is available for inspection at the company"s
registered office.
COMMENTS
In this commentary, results are compared with the first six months of the
2005/06 financial year (in brackets).
FINANCIAL SUMMARY
Profit amounted to R3 million compared to a loss of R98 million for the
comparative period. The Group"s earnings per share was 2,6 cents (loss per
share 92,6 cents) whilst headline earnings per share amounted to 7,5 cents
(46,9 cents). Compared with the second half of the 2006 financial year, the
profit of R3 million was an improvement on the loss of R21 million, with
headline earnings per share being 7,5 cents against a headline loss per
share of 17,0 cents for the six months to 31 March 2006.
Diamond sales decreased by 22% to R479 million (R612 million) and was 23%
lower in dollar terms at US$71,6 million (US$92,8 million). Average rough
diamond prices were 8% lower compared to the corresponding period. In
addition severe regional flooding caused the loss of one month"s production
at the Lower Orange operations.
The exchange rate applicable to the South African sales was R6,65/US$
compared to the average spot rate during the period of R6,79/US$. During
the period of the strengthening rand at the beginning of the financial year,
the Group deemed it prudent to implement a currency cash flow hedge on
approximately 40% of this year"s South African sales proceeds in order to
protect the viability of marginal operations. US$20 million of the total
hedge of US$54 million remained unutilised at the end of the reporting
period. The average Rand/US$ rate implicit in the remainder of hedge is
R6,49/US$. Assuming an average exchange rate of R7,25/US$ for the remainder
of the financial year, the combined average exchange rate achieved would be
in the order of R7,00/US$.
Cost of sales decreased by 9% to R442 million (R485 million) as a result of
lower depreciation relating to the Middle Orange River operations and the
sell off of stock in the comparative period. Other costs remained unchanged.
Cash available from operating activities remains positive. The Group has
commenced a R200 million three year earth moving equipment replacement cycle
at the Lower Orange River operations. These capital commitments will be
funded out of own resources or borrowed funds. Due to the long lead times of
this equipment, the bulk of this funding will take place during the 2008 and
2009 financial years.
OPERATIONS
South Africa
Production from the Land operations was 21% lower at 51 200 carats (64 470
carats).
Severe regional flooding caused 29 days of production loss at the Lower
Orange River operations. The upgraded PK plant has improved gravel
throughput by 20% over the corresponding reporting period, contributing to a
unit cost reduction of 8%.
At Reuning the semi-mobile Nxodap mining and processing plant system was
successfully commissioned during September 2006 and the Suidhek plant
continued to be fed with dump and remnant material from the central areas at
an average grade of 2,21 carats/100m3.
Negotiations continue with potential purchasers of the Middle Orange River
operations, which include the Saxendrift and Niewejaarskraal operations. The
sale is anticipated to be concluded prior to the financial year end.
Angola
Production at Luarica was 45 100 carats (Attributable 15 785 carats),
compared to 51 100 carats (Attributable 17 885 carats) in the comparable
period, with an average grade achieved of 13 carats/100m3. The newly
installed larger washing plant was successfully commissioned. Almost two
weeks of production time was lost due to labour unrest during August. The
project"s average cash cost was US$267 per carat. Measures are being
implemented to ensure that the availability of mobile equipment is increased
to acceptable levels. On this basis, the project should, by financial year
end achieved its target production rate of 12 000 carats per month.
The Fucauma project achieved 28 900 carats (Attributable 9 248 carats),
compared to 37 300 carats (Attributable 11 936 carats) in the comparable
period. US$9,4 million of capital investment, through third party financing,
has been allocated for the installation of additional productive capacity.
The successful implementation of this capacity is expected to take Fucauma
to an economic level of production by financial year end.
Luarica sales remain in the US$300 per carat range, with Fucauma averaging
US$190 per carat.
Namibia
The Mv Ivan Prinsep and Mv Namakwa were utilised for mining and prospecting
in the NAMDEB Mid-Shelve Concession Areas of Namibia, as per joint-venture
agreement with the Namibian empowerment group, EPIA Minerals (Pty) Ltd. The
average mining grades declined resulting in 16 900 carats (19 400 carats)
being produced.
EXPLORATION
South Africa
The first phase of a regional kimberlite exploration program utilising
airborne gradiometer technology has proven effective in identifying existing
kimberlites and defining new prospective targets in previously problematic
kimberlite exploration terrains. Prospecting rights over a number of
properties have been issued by the Department of Minerals and Energy and
ground follow-up and drilling work has commenced.
Angola
Dredge sampling of a five kilometre stretch of the river at Luarica to
delineate reserves will commence in November 2006 and will be completed
before financial year end.
The Luana project concession prospecting contract was signed during May
2006. Initial sampling results indicate an extensive gravel deposit with
encouraging potential. Bulk sampling, to prove a minimum of one million
carats, is scheduled to be completed by the end of the 2007 calendar year.
Based on disappointing results, a decision was taken to end involvement in
the Gango project. Demobilisation of all equipment was completed by the end
of October.
Liberia
Core drilling of six kimberlite pipes at the Kpo project in joint venture
with Mano River Resources, has been completed. Kimberlite indicator mineral
chemistry indicates high diamond preservation potential. Bulk sampling to
establish a macro diamond grade is set to commence by early 2007. A sample
plant is currently being shipped to Liberia for the treatment of bulk
samples.
THE ROUGH DIAMOND MARKET
Pricing levels for the first-half have remained stable across the production
with the exception of the plus 10 carats where demand has been strong due to
the shortage of good quality large sizes of polished in the market. Two
stones in excess of 50 carats and one Lower Orange River stone in excess of
100 carats were sold.
DIAMOND RELATED LEGISLATION
In October the National Treasury released the Draft Diamond Export Levy Bill
together with the Mineral and Petroleum Resources Royalty Bill. The
proposed export duty on exports of rough diamonds in terms of the Export
Levy Bill is set at 5%, with provision now having been made for various
exemptions. Consultations with key stakeholders continue and developments
are being closely monitored in respect of the Export Levy Bill and the
Royalty Bill.
PROSPECTS
The upgraded PK plant, commissioning of the Nxodap semi-mobile plant and the
extension of the maximised shift system to the Suidhek and Gariep joint-
venture operations is anticipated to enhance South African land production.
In Angola, at Luarica the third river diversion and improved equipment
efficiencies should improve production levels.
Trans Hex still believes that Luarica and Fucauma are world-class alluvial
diamond mining properties and that towards the end of calendar 2007 they
will be profitable.
Liquidity and profitability issues in the downstream diamond industry
continue to cause concerns and may continue to negatively affect diamond
prices. This will be countered to some extent, should the rand remain at
current weaker levels.
DIVIDEND DECLARATION
In light of the continued positive cash headline earnings per share, the
directors of Trans Hex have resolved to declare dividend number 52 of 5,0
cents per share for the interim period ended 30 September 2006.
Last day to trade (cum dividend) Friday, 8 December 2006
First date of trading (ex dividend) Monday, 11 December 2006
Record date Friday, 15 December 2006
Payment date Monday, 18 December 2006
Share certificates may not be dematerialised or rematerialised between
Monday 11 December 2006 and Friday 15 December 2006, both days inclusive.
By order of the Board
T M G Sexwale L Delport
Chairman Managing Director
Parow
14 November 2006
REGISTERED OFFICE
405 Voortrekker Road, Parow 7500, PO Box 723, Parow 7499
JSE share code: TSX NSX share code: THX
ISIN ZAE000018552 Registration number: 1963/007579/06
Incorporated in the Republic of South Africa
TRANSFER SECRETARIES
South Africa:
Computershare Investor Services 2004 (Pty) Limited,
PO Box 61051, Marshalltown 2107
Namibia:
Transfer Secretaries (Pty) Ltd, PO Box 2401, Windhoek
DIRECTORATE
TMG Sexwale (Chairman), BR van Rooyen (Deputy Chairman),
L Delport (Managing Director), MS Loubser (Financial Director),
DM Falck, E de la H Hertzog, DM Hoogenhout, AR Martin, MJ Willcox,
PC Pienaar (Alternate Director), CG Johnson (Alternate Director)
GJ Zacharias (Company Secretary)
www.transhex.co.za
Date: 14/11/2006 07:00:35 AM Produced by the JSE SENS Department
