| Tue 12 Dec 2006, 16:27 | | AFG - Afgem - Consolidated Interim Results six mon |
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AFG
AFG
AFG - Afgem - Consolidated Interim Results six months ended 30 September 2006
Afgem Limited
(Incorporated in the Republic of South Africa)
(Registration number 1998/007292/06)
JSE code: AFG & ISIN: ZAE000067757
("Afgem" or "the Company")
Consolidated interim results for the six months ended 30 September 2006
INCOME STATEMENTS
for the period ended 30 September 2006
Reviewed
6 months 6 months
ended ended Audited
30 September 30 September year ended
2006 2005 31 March
R`000 R`000 2006
R`000
Revenue 695 2,461 7,081
Cost of sales (6,332) (10,119) (14,456)
Gross loss (5,637) (7,658) (7,375)
Management fees received - 3,000 3,000
Other (loss)/income (1,675) 17,340 992
Operating expenses (3,632) (18,546) (13,009)
Operating loss (10,944) (5,864) (16,392)
Net financing income 25 299 412
Loss before tax (10,919) (5,565) (15,980)
Taxation - (806) 7,135
Loss for the period/year (10,919) (6,371) (8,845)
Loss attributable to ordinary (10,919) (6,371) (8,845)
shareholders
Weighted average number of 233,968 187,178 210,992
shares in issue (`000)
Basic loss per share (cents) (4.67) (3.40) (4.19)
Diluted loss per share (cents) (3.57) (2.85) (3.29)
Headline (loss)/earnings per (4.67) 4.15 (7.38)
share (cents)
BALANCE SHEET
at 30 September 2006
Reviewed
6 months 6 months
ended ended
30 September 30 September Audited
2006 2005 31 March
R`000 R`000 2006
R`000
Assets
Non-current assets
Property, plant and equipment 34,374 41,184 39,920
Intangible assets 50,574 77,494 50,573
Long-term loans receivable - 601 -
Total non-current assets 84,948 119,279 90,493
Current assets
Inventories - 246 230
Short-term loans receivable 6,160 8,910 7,242
Trade and other receivables 1,677 2,352 1,878
Cash and cash equivalents 4,079 4,929 1,179
Total current assets 11,916 16,437 10,529
Total assets 96,864 135,716 101,022
Equity
Ordinary share capital 2 2 2
Preference share capital 1 1 1
Share premium 43,414 37,953 37,737
Share options outstanding 83 - 83
Retained earnings 7,466 20,859 18,385
Total equity 50,966 58,815 56,208
Non-current liabilities
Interest-bearing borrowings 656 1,176 966
Provision for environmental 15,699 15,699 15,699
rehabilitation
Provision for purchase of 17,975 32,500 17,975
investment
Total non-current liabilities 34,330 49,375 34,640
Current liabilities
Interest-bearing borrowings 503 - 492
Short-term loans payable 28 533 26
Current income tax liabilities - 6,634 -
Trade and other payables 8,537 20,359 8,856
Provision for NUM claim 2,500 - 800
Total current liabilities 11,568 27,526 10,174
Total equity and liabilities 96,864 135,716 101,022
Number of ordinary shares in 257,622 233,968 233,968
issue (`000)
Net asset value per share 19.78 25.14 24.02
(cents)
CASH FLOW STATEMENTS
for the period ended 30 September 2006
Reviewed
6 months 6 months Audited
ended ended year ended
30 September 30 September 31 March
2006 2005 2006
R`000 R`000 R`000
Cash (utilised in)/generated by (5,412) 14,471 (7,957)
operations
Net financing income 25 299 412
Taxation (paid)/refunded - (79) 1,229
Net cash (utilised in)/generated (5,387) 14,691 (6,316)
by operations
Investment in subsidiary company - (59,718) -
Group loans acquired - (43,636) -
Proceeds on disposal of 2,000 - -
property, plant and equipment
Acquisition of property, plant (176) (69) (1,766)
and equipment
Net cash from investing 1,824 (103,423) (1,766)
activities
(Repayment of)/increase in (299) (758) 354
interest-bearing borrowings
Proceeds from the issue of share 5,677 36,332 11,116
capital
Increase in royalties payable - 32,500 -
Loans granted - (601) -
Increase in/(repayment of) short- 1,085 23,084 (5,706)
term loans
Increase in environmental - (10) (10)
rehabilitation fund
Net cash from financing 6,463 90,547 5,754
activities
Net increase/(decrease) in cash
and cash equivalents 2,900 1,815 (2,328)
Cash and cash equivalents at 1,179 3,114 3,114
beginning of period/year
Cash and cash equivalents - - 392
acquired
Cash and cash equivalents at end 4,079 4,929 1,179
of period/year
Statement of changes in equity
for the period ended 30 September 2006
Ordinary Preference Share Retained
share share premium earnings / Total equity
capital capital Share (accumu- attributable
options lated to equity
out- loss) holders
standing
R`000 R`000 R`000 R`000 R`000 R`000
Balance at 1
April 2005 1 1,623 27,230 28,854
Shares issued 1 1 36,114 36,116
Share based 83 83
payments
Loss for the (8,845) (8,845)
year
Balance at 31
March 2006 2 1 37,737 83 18,385 56,208
Shares issued 5,677 5,677
Loss for the (10,919) (10,919)
period
Balance at 30
September 2006 2 1 43,414 83 7,466 50,966
Reviewed
6 months 6 months Audited
ended ended year ended
30 September 30 September 31 March
2006 2005 2006
R`000 R`000 R`000
Reconciliation of earnings to
headline earnings
Loss attributable to ordinary (11,596) (6,371) (8,845)
shareholders
Impairment of Rex Mining loan - 11,620 -
Amortisation of mining right - 2,525 405
Reversal of taxation charge from
previous years - - (1,316)
Taxation effect on profit on
sale of tanzanite business - - (5,819)
Headline (loss)/earnings (11,596) 7,774 (15,575)
Statement of compliance and basis of preparation
The consolidated interim financial statements have been prepared in accordance
with International Financial Reporting Standards and its interpretations adopted
by the International Accounting Standards Board. These results have not been
reviewed or audited by the Company`s auditors.
Operational Developments
Underground mining ceased at the end of March 2006 and most of the employees
were locked out while limited mining concentrated on opening up the No 2 shaft
area. This entailed installing additional power on 1600 level, completing a
pumping and settling dam system to enable the mine to pump out the water at the
bottom of the sub-vertical shaft below 1600 level. This will enable 1500 and
1600 levels to be cleaned and re-equipped for mining and tramming. This should
be completed by the end of the current calendar year. Following the closure of
the shaft in August 2005 and the flood in January 2006, substantial quantities
of mud have accumulated at the bottom of the shaft, resulting in a slow and
dangerous process to clean the lowest level of the mine.
Upgrading the safety aspects of the mine also received much attention. The
skips on No 1 shaft were replaced as were the bridles which were found to be
damaged. All ropes and humble hooks were tested and found to be in satisfactory
condition. Several water column pipes in the same shaft were also replaced.
While underground mining ceased at the end of March 2006, it was decided in May
that the plant should continue to operate on a single-shift-per-day basis
treating the coarse tailings produced since October 2005. The tailings
contained a high proportion of coarse material due to the fact that the mobile
plant does not have a tertiary crusher.
The results were as follows:
Tons Carats Grade
Treated (cpht)
April-06 - - -
May-06 - - -
June-06 147 19.65 13.37
July-06 1,718 127.09 7.40
August-06 1,840 89.04 4.84
September-06 2,559 192.46 7.52
TOTAL/AVE 6,264 428.24 6.84
The National Union of Mineworkers ("NUM") dispute
NUM has lodged a claim in respect of certain of its members that were placed on
"short time" in 1 January 2004 by the previous management. Afgem management has
had numerous discussions with NUM over the past two years in an attempt to try
and resolve the dispute, but to no avail. This has resulted in a R17m claim
being lodged in the Labour Court of South Africa. The case commenced on 13
November 2006 but after intense discussions and further negotiations, the case
was deferred until early 2007.
In the meantime, negotiations are continuing out of Court in an attempt to reach
a settlement. It is imperative that a settlement be reached, as several
companies have approached Afgem with a view to possibly acquire the Simolotse
and Bokang mines, but subject to the dispute being resolved. Afgem has increased
its provision for the potential NUM claim to R2.5 million, compared to the R800
000 that was provided for at 31 March 2006.
Loan agreement
In August 2004, Afgem entered into an agreement with Rex Mining Corporation
("Rex Mining") to lend that company R5 million. To date R3.5 million of this
loan has been repaid to Afgem. The loan was interest free and repayable on five
days notice after 2 August 2005. Rex Mining was placed on terms to repay the
outstanding balance of the loan on 24 November 2005 and from that date interest
has accrued on the loan.
Rex Mining, by not repaying the loan on demand on 29 November 2005, was in
breach of the said loan agreement. Afgem has secured a judgment against Rex
Mining in the High Court of South Africa (Witwatersrand local division) for the
amount of R1.5 million plus interest from 24 November 2005. In addition, costs
of the suit were also awarded to Afgem. Rex Mining has appealed against the
judgment and steps are currently being taken for the recovery of the said
amounts from Rex Mining.
Financial results
Sales of 800 carats of diamonds took place throughout the reporting period and
the average price received was US$130 per carat at an average exchange rate of
R6.66:US$. A decline in prices was noticed in March and a further decline,
especially in diamonds below a carat in size, in August 2006. Prices appear to
have stabilised and in some instances, improved. The sales included 542 carats
of stockpiled material extracted from normal underground fissure material.
Afgem sold its unutilised 50 ton-an-hour Dense Media Separation ("DMS") plant
for R2 million, resulting in a loss on the disposal of R1.8 million. The loss is
included in "Other (loss)/income". A study of the plant indicated that the cost
of rectifying certain design problems on the DMS plant, constructed by the
previous management, would have cost more than the salable value of the plant.
As a result of this it was decided to dispose of the plant. Afgem is currently
utilising its mobile DMS plant to treat material, as it has been doing for the
last two years.
Short term loans receivable on the balance sheet reflect, inter alia, the R1.5
million plus interest, owed by Rex Mining as indicated above, and a further R5
million owed by Rex Mining to Afgem in respect of the Section 311 Scheme of
arrangement concluded by Afgem upon acquisition of the mining assets from Rex
Mining. Legal proceedings have been instituted against Rex Mining for the
recovery of all monies due to Afgem, arising from the acquisition of the mines
from Rex Mining in 2005.
On 12 September 2006, 23,654,166 ordinary shares were placed at an issue price
of 24 cents per share, resulting in a cash injection of R5.7 million.
Trade and other payables of R8.5 million relate predominantly to R2.7 million of
creditors arising from the Scheme of Arrangement entered into with the creditors
of Rex Mining in 2005, salary provisions of R3 million and ordinary trade
payables of R2 million.
Way forward
Afgem management is exploring various ways of funding the completion of the re-
opening of No 2 Shaft at Simolotse and the initial evaluation of the Bokang
Mine. Costs have been reduced to a minimum, coarse discard material is being
treated to provide interim cash flow and the sale of non-core assets has been
undertaken. Management is actively pursuing the recovery of the monies owed by
Rex Mining and hopes to secure a repayment of these funds imminently.
Further to the cautionary announcement dated 15 November 2006, shareholders are
advised that negotiations are continuing as to the settlement of the NUM dispute
and shareholders will be advised once further information becomes available.
Shareholders are accordingly advised to exercise caution in dealing in the
shares of the Company until a further announcement is made.
For and on behalf of the board
RS Yaldwyn MR Summers
Chief Executive Officer Group Financial Director
Melrose Arch
12 December 2006
Sponsor
Absa Capital
Date: 12/12/2006 16:03:57 Produced by the JSE SENS Department.
