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MVL
MVL
MVL - Mvelaphanda Resources Limited - Reviewed Interim Results for
the six months ended 31 December 2006
MVELAPHANDA RESOURCES LIMITED
Registration number: 1980/001395/06
Incorporated in the Republic of South Africa
Share code: MVL
ISIN number: ZAE000050266
HIGHLIGHTS
- Operating profit more than doubles to R105 million from R50
million.
- Gold Fields SA investment increases to R6.1 billion from R5.3
billion at 31 December 2005.
- Improved cash position to accelerate growth
- Good progress made on:
*Afripalm
*Booysendal Project
GROUP NET ASSET VALUE*
Asset Percentage Value Value Percentage
Owned Rm R/share of total
Gold Fields
Total1 8.2% 4,431 26.50 45.5%
Northam Total 21.8% 2,654 15.87 27.3%
Trans Hex Total2 21.3% 234 1.40 2.4%
Total listed
assets 7,319 3.77 75.2%
Booysendal Total3 1,946 11.64 20.0%
Unlisted assets 254 1.52 2.6%
Cash and
cash
equivalents 4 217 1.30 2.2%
TOTAL 9,736 58.23 100.0%
Premium/(discount)
to NAV (33%)
MVL share price 39.00
MVL shares in issue 167,214,243
* Market value of listed assets and management valuation of
unlisted assets at 31 December 2006. The contents of this table
have not been reviewed by the group`s auditors.
1. Assumes 15% of GFI-SA exchanged for 49.6 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 R27 million.
3. Assumes sale to Northam: 20.4 million NHM shares, 18 million
deferred shares and cash of R90 million,
although this is subject to re-negotiation.
4. Excludes R127 million Northam dividend to be received on 26
February 2007.
GROUP BALANCE SHEET
As at Reviewed Reviewed Audited
R`000 Notes 31 December 31 December 30 June
2006 2005 2006
ASSETS
Non-current
assets
Investment
in associate
companies 838,402 778,621 785,959
- Northam
Platinum
Limited 779,062 697,056 725,016
- Trans Hex
Group
Limited 59,340 81,565 60,943
GFI-SA loan 2 6,100,000 5,318,000 7,400,000
Trans Hex
Group
Limited
forward
purchased
shares 3 166,599 191,675 140,614
Non-strategic
listed
investments 4 469 2,861 3,518
Goodwill 75,869 75,869 75,869
Property,
plant and
equipment 855 683 927
Total
non-current
assets 7,182,194 6,367,709 8,406,887
Current assets
Cash and
cash
equivalents 217,180 148,782 174,628
Accounts
receivable and
prepayments 3,880 2,394 7,231
Inventories 255 1,821 255
Total
current
assets 221,315 152,997 182,114
Non-current
assets
classified
as held for
sale
Booysendal
Platinum project 315,892 315,892 315,892
TOTAL ASSETS 7,719,401 6,836,598 8,904,893
EQUITY AND
LIABILITIES
Share capital
and reserves 5,189,245 4,368,599 6,142,705
Total share
capital and
reserves 5,189,245 4,368,599 6,142,705
Non-current
liabilities
Senior bank
loan 384,894 674,179 532,424
Mezzanine
finance 5 1,500,865 1,267,575 1,414,343
Deferred
taxation 6 267,349 197,218 460,451
Total
non-current
liabilities 2,153,108 2,138,972 2,407,218
Current
liabilities
Accounts
payable and
accruals 17,475 10,328 13,187
Provision
for employee
long-term
incentive
costs 69,816 13,751 43,934
Short-term
portion of
Senior bank
loan 289,284 265,825 277,201
Current
taxation
payable 473 19,123 648
Total
current
liabilities 377,048 309,027 334,970
Liabilities
directly
associated
with
non-current
assets
classified
as held for
sale
Booysendal
Platinum
project
accrual - 20,000 20,000
TOTAL
EQUITY AND
LIABILITIES 7,719,401 6,836,598 8,904,893
GROUP INCOME STATEMENT
R`000 Notes Reviewed Reviewed Audited
6 months to 6 months to 12 months to
31 December 31 December 30 June
2006 2005 2006
INCOME
Earnings
from associate
companies 136,727 51,166 134,853
- Northam
Platinum
Limited 138,438 58,896 145,653
- Trans
Hex Group
Limited (1,711) (7,730) (10,800)
Interest
earned on
GFI-SA loan 218,703 218,703 437,405
Interest
earned on
cash and
cash
equivalents 8,310 5,244 10,952
Other income 649 11 1,702
Total income 364,389 275,124 584,912
OPERATING
EXPENSES
Exploration
and project
development
costs 7 (46,993) (43,580) (86,967)
Corporate
expenses (19,302) (12,218) (25,129)
Share-based
incentive
costs 7 (32,785) (8,236) (54,382)
Finance costs
(GFI-SA) (160,753) (160,611) (320,389)
- Senior
bank loan (42,668) (56,097) (104,809)
- Mezzanine
finance (118,085) (104,514) (215,580)
Total
operating
expenses (259,833) (224,645) (486,867)
PROFIT
BEFORE
OTHER
EXPENSES 104,556 50,479 98,045
OTHER EXPENSES
Impairment
write-downs - (99,344) (114,564)
Gain/(loss)
on revaluation
of financial
instruments (1,274,015) 1,190,344 3,155,282
- GFI-SA loan (1,300,000) 1,332,000 3,414,000
- Mezzanine
finance - (122,000) (188,000)
- Trans Hex
Group Limited
forward
purchased
shares 25,985 (19,656) (70,718)
Other expenses (7,025) (2,056) (1,628)
Total other
income/
(expenses) (1,281,040) 1,088,944 3,039,090
PROFIT/(LOSS)
BEFORE
TAXATION (1,176,484) 1,139,423 3,137,135
TAXATION 176,274 (204,379) (484,585)
- Normal (16,828) (17,233) (34,207)
- Deferred 6 193,102 (187,146) (450,378)
ATTRIBUTABLE
INCOME/
(LOSS) (1,000,210) 935,044 2,652,550
EARNINGS/
(LOSS)
PER SHARE
(cents)
- Basic
earnings
/(loss) per
ordinary
share (598) 562 1,594
- Headline
earnings
/(loss) per
ordinary share 8 (598) 622 1,663
- Diluted
earnings/
(loss) per
ordinary share (598) 561 1,586
- Adjusted
headline
earnings per
ordinary share 8 57 20 46
ABRIDGED GROUP SEGMENTAL RESULTS
R`000 Reviewed Reviewed Audited
6 months to 6 months to 12 months to
31 December 31 December 30 June
2006 2005 2006
Net profit
/(loss)
after
taxation
- Gold (1,110,150) 1,027,376 2,763,668
- Platinum 135,374 55,585 141,376
- Diamonds 16,362 (124,745) (192,786)
- Other (41,796) (23,172) (59,708)
ATTRIBUTABLE
INCOME/(LOSS) (1,000,210) 935,044 2,652,550
A detailed segmental income statement is available on the company`s
website: www.mvelares.co.za
GROUP STATEMENT OF CHANGES IN EQUITY
R`000 Total
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 of associates 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
Balance at 30 June 2005 3,402,357
Attributable profit for the year 2,652,550
Equity compensation reserve 73,910
Proceeds on share issue 13,361
Equity accounted portion of share-based
payments of associates 1,407
Equity accounted portion of foreign currency
translation reserve 73
Equity accounted portion of fair value
adjustment on available-for-sale financial
assets (379)
Unrealised profit on revaluation of listed
investments 510
Other equity accounted movements (1,084)
Balance at 30 June 2006 6,142,705
Attributable loss for the period (1,000,210)
Equity compensation reserve 43,566
Equity accounted portion of share-based
payments of associates 996
Equity accounted portion of foreign currency
translation reserve 1,572
Equity accounted portion of fair value
adjustment on available-for-sale financial
assets (71)
Unrealised gain on revaluation of listed
investments 448
Equity accounted cash flow hedges of
associates (1,138)
Unclaimed dividends forfeited 1,377
Balance at 31 December 2006 ,189,245
ABRIDGED GROUP CASH FLOW STATEMENT
R`000 Reviewed Reviewed Audited
6 months to 6 months to 12 months to
31 December 31 December 30 June
2006 2005 2006
Net cash
generated
by operating
activities 109,285 88,056 171,047
Net cash
generated
by investing
activities 68,713 24,131 84,004
Net cash
utilised in
financing
activities (135,446) (124,428) (241,446)
Net increase
/(decrease)
in cash and
cash
equivalents 42,552 (12,241) 13,605
Cash and
cash
equivalents
at beginning
of the period 174,628 161,023 161,023
CASH AND
CASH
EQUIVALENTS
AT END OF
THE PERIOD 217,180 148,782 174,628
* A detailed cash flow statement is available on the company`s
website: www.mvelares.co.za
NOTES
1. Basis of preparation
These condensed consolidated financial statements have been
prepared on the historical cost basis, except for financial
instruments that are fairly valued, in accordance with the group`s
accounting policies which are consistent with those adopted in the
financial year ended 30 June 2006 and which are compliant with
International Financial Reporting Standards ("IFRS") and in
accordance with IAS 34: "Interim Financial Reporting", the South
African Companies Act, 1973, as amended, and the JSE Listings
Requirements.
2. Loan to GFI-SA
R`000 Reviewed Restated Restated
31 December 31 December 30 June
2006 2005 2006
Loan advanced
to GFI-SA 4,139,000 4,139,000 4,139,000
Unrealised
fair value
gain at end
of the period 1,961,000 1,179,000 3,261,000
GFI-SA loan
at fair value 6,100,000 5,318,000 7,400,000
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-mentioned
drivers, and the difference between the present
value of the future interest payments from GFI-SA until March 2009
and the present value of the estimated future
dividends foregone over the same period. The increase in the value
of the GFI-SA loan to R6.1 billion from R5.3 billion (31 December
2005) is primarily attributable to the increase in the Gold Fields
share price from R111.80 (as at 31 December 2005) to R132.75 (as at
31 December 2006). The number of Gold Fields shares attributable to
the group was calculated at 49.6 million (31 December 2005: 43.4
million adjusted for the "floor" to 45.0 million).
3. Trans Hex Group Limited forward purchased shares
This represents the fair value of 16 million Trans Hex Group
Limited forward purchased shares for delivery on
5 March 2008. The fair value is based on the market price of Trans
Hex Group Limited shares as at 31 December
2006 and the contingent liability at that date, of R27 million (31
December 2005: R44.3 million) relating to the
debenture coupon.
4. Non-strategic listed investments
A non-strategic investment, comprising 12,067 B shares in Royal
Dutch Shell, was sold in August 2006 for a
consideration of R3 million.
5. Mezzanine finance
R`000 Reviewed Reviewed Audited
31 December 31 December 30 June
2006 2005 2006
Loan advanced to
Mvela Gold 1,086,000 1,086,000 1,086,000
Net interest
capitalised at
beginning of the
period 328,343 172,180 172,180
Net interest
capitalised
during the
period 86,522 75,395 156,163
1,500,865 1,333,575 1,414,343
Unrealised fair
value adjustment
at end of the
period - (66,000) -
Mezzanine
finance at
fair value 1,500,865 1,267,575 1,414,343
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).
6. Deferred tax
The deferred tax provision mainly relates to the fair value
adjustment on the GFI-SA loan and the provision for employee long-
term incentive costs.
7. Share-based costs
The group recognises the cost of the Gold Fields warrants, non
executive directors` share options and share appreciation rights
(collectively referred to as share-based costs) in terms of IFRS2:
("Share-based payments"). Equity-settled share options are valued
at grant date, and the cost is spread equally over the vesting
period of the options. The resulting credit is accounted for in
shareholders` equity. Cash-settled share appreciation rights are
valued at the fair value of the rights at each balance sheet date,
with any changes in fair value recognized in profit and loss over
the vesting period of the rights. Included in exploration and
project development costs is the cost of the Gold Fields` warrants,
amounting to R40 million (31 December 2005: R33.6 million) (30 June
2006: R73 million).
8. Earnings/(loss) per ordinary share are calculated as follows:
Reviewed Reviewed Audited
31 December 31 December 30 June
2006 2005 2006
(a)Headline
earnings/ (loss) per
ordinary share (cents) (598) 622 1,663
R`000 Attributable
earnings/ (loss) (1,000,210) 935,044 2,652,550
Impairment write-downs - 99,344 114,564
Headline earnings/(loss) (1,000,210) 1,034,388 2,767,114
Weighted average number
of shares in issue 167,214,243 166,403,140 166,407,584
(a) Adjusted headline earnings
per ordinary share (cents) 57 20 46
R`000 Attributable earnings/
(loss) (1,000,210) 935,044 2,652,550
"Other (income)/ expenses"
per income statement 1,281,040 (1,088,944) (3,039,090)
Taxation relating to
"other (income) /expenses" (185,093) 187,146 462,616
Adjusted headline
earnings 95,737 33,246 76,076
Weighted
average number of shares in
issue 167,214,243 166,403,140 166,407,584
9. Post balance sheet events Northam Platinum
Limited declared an interim dividend of 245 cents per share to be
paid on 26 February 2007.
This will represent a cash inflow of R126.7 million for the Mvela
Resources Group.
10. Audit Review opinion
These financial results have been reviewed by the group`s auditors,
PricewaterhouseCoopers Inc., and their
unqualified review opinion is available for inspection at the
company`s registered office.
CORPORATE ACTIVITY
Investment by Afripalm Resources in Mvela Resources
On 7 December 2006, Mvela Resources announced the proposed
acquisition of a 31% voting stake in the company by Afripalm
Resources, a broad based BEE company led by Lazarus Zim. On
successful completion of the transaction, Mvela Resources will be
Afripalm Resources` exclusive vehicle for the development of mining
and mineral opportunities world wide. The acquisition will bring
significant benefits for Mvela Resources, including:
* Enhanced financial flexibility, with cash resources of close to
R1.5 billion available for growth;
* A broad based, representative shareholder base and access to
previously unavailable growth opportunities;
* Accelerates Mvela Resources` strategic goal of becoming a
diversified, operating mining company;
* New growth opportunities in the platinum sector including the
ability to deliver on Mvela Resources` stated consolidation
strategy;
* Value accretive commodity and geographical diversifi cation.
A circular providing greater detail on the proposed transaction was
posted to shareholders on 1 February 2007 and the shareholder
meeting to approve the transaction has been scheduled for 10:00am
on Friday 23 February 2007.
Successful acquisition of South Deep gold mine by Gold Fields On 11
September 2006 Gold Fields, Mvela Resources` partner in GFI-SA,
announced that it had agreed to acquire Barrick`s 50% interest in
the South Deep gold mine for a combination of shares and cash. At
the same time it made an equity offer to shareholders of Western
Areas, the owner of the other 50% of South Deep. The Barrick
transaction was concluded on 1 December 2006 and Gold Fields is in
the process of compulsorily acquiring the outstanding shares in
Western Areas, which will give it full ownership of the 67 million
ounce South Deep gold mine. The aforementioned assets will be
vended into GFI-SA, in which Mvela Resources has a right to acquire
a 15% stake in March 2009. This will require no upfront capital
commitment by Mvela Resources, instead 15% of the net present value
(NPV) of the assets, less the acquisition cost will accrue to Mvela
Resources on subscription for its interest in GFI-SA. Mvela
Resources will benefit through the application of the exchange
formula if it exercises its right to exchange the GFI-SA interest
for Gold Fields shares, thereby receiving more shares on
conversion.
FINANCIAL COMMENTARY
Balance Sheet
The group has shown a marked improvement in the strength of its
balance sheet at 31 December 2006 compared with 31 December 2005,
with equity and reserves having increased from R4.4 billion to R5.2
billion. This is largely a result of the gain in value of the
investment in GFI-SA (reflected as the GFI-SA loan) from R5.3
billion at 31 December 2005 to R6.1 billion, due primarily to an
approximate 19% increase in the Gold Fields` share price from
R111.80/share at 31 December 2005 to R132.75/share at 31 December
2006. According to the exchange formula, the number of Gold Fields
shares which would accrue to Mvela Resources at 31 December 2006 is
49.6 million shares, a 3% increase on the 48.2 million shares at 30
June 2006 and a substantial increase from the 43.4 million shares
prevailing at 31 December 2005 (although the "floor" meant that the
effective number of shares Mvela Resources would receive in this
instance would be 45.0 million shares). The group`s cash reserves
rose by R68 million year-on-year to R217 million at 31 December
2006 and will be boosted further by an interim dividend of R127
million from Northam Platinum, which will be received on 26
February 2007. Included in the cash flow statement for the six
months ended 31 December 2006 are dividends received from Northam
(R85.4 million) and Trans Hex (R277,000). The total dividend
attributable
to Mvela Resources declared by Northam for the year ended 30 June
2006 was R145 million, illustrating the inherent gearing in the
company and the potential contribution to Mvela Resources cash
flow, should rand PGM prices remain at current levels. The 12%
increase in the balance sheet value of the investment in Northam,
to R779 million, also reflects the strong financial performance of
Northam during the period. The year-on-year increase in the equity
value of the 21.8% stake Mvela Resources owns in Northam was
significantly larger however, rising from R983 million
(R19.00/share) at 31 December 2005 to R2,654 million (R51.29/share)
at 31 December 2006.
With capitalised interest, the Mezzanine finance liability rose 18%
year-on-year to R1.5 billion, and the senior bank loan was reduced
by R135 million to R385 million (long-term portion). During the
period under review the company disposed of its non-strategic
investment in Royal Dutch Shell for R3 million. The R20 million
that was still unpaid in respect of the Booysendal Platinum project
was paid to Mvela Holdings pursuant to Mvela Holdings`acquisition
of the 9,274,527 Mvela Resources` shares from the Khumama
consortium.
Income Statement
Operating profit more than doubled to R105 million in the six
months to 31 December 2006, from R50 million in the comparative six
months to 31 December 2005, due to the stellar performance of Mvela
Resources` strategic investment in Northam Platinum, whose
attributable earnings more than doubled in the six months to 31
December 2006 to R661 million compared with R303 million in the
comparative six months to 31 December 2005. This resulted in total
equity accounted earnings increasing to R137 million in the current
six months from R51 million in the comparative six months.
Consequently, adjusted earnings per share, which exclude other
expenses, rose to 57 cents from 20 cents in the comparative period.
Gold Fields` share price fell approximately 18% during the six
month period from 30 June 2006 to 31 December 2006, from
R162.00/share to R132.75/share leading to an unrealized loss of
R1.3 billion on fair valuation of the group`s investment in Gold
Fields SA (GFI-SA). As a result, a headline loss of 598 cents per
share was reported for the six months to 31 December 2006 compared
with headline earnings of 622 cents per share for the six months to
31 December 2005. This unrealised fair value loss has no impact on
the group`s cash flows. Fixed semi-annual interest of R219 million
that the group receives from the GFI-SA loan will continue to be
applied towards the capital and interest repayments of the senior
bank loan until March 2009. An increase in the group`s exploration
activities saw expenditure rise marginally from R44 million in the
comparative six months to R47 million in the current period. A
substantial portion thereof (R40 million) (31 December 2005: R33.6
million), mainly relates to the group`s share of the exploration
work being undertaken by Gold Fields in Africa. A major portion of
the costs relates to the Essakane project in Burkina Faso. The
commercial and operating agreements relating to the project are
being resolved, the resource estimate has just been completed, and
a feasibility team has also been commissioned. This exploration
expenditure will be settled through the issue of warrants to Gold
Fields in exchange for Mvela Resources` portion of the
participation right in the exploration project.
Corporate expenses of R19.3 million include ad-hoc sponsorships of
R3 million given by the group and R4 million in management fees
paid to Mvela Holdings. The management contract will be cancelled
at a cost of R20 million as part of the proposed Afripalm
transaction. Share-based incentive costs have increased by R25
million year-on-year, mainly due to a 70% increase in Mvela
Resources` share price from R23.00/share on 31 December 2005 to
R39.00/share on 31 December 2006.
Prospects
The outlook for the remainder of the financial year is very
positive. High dollar gold and PGM prices and a looming supply
deficit in the diamond sector, coupled with a weaker rand bode well
for the leveraged companies Mvela Resources has invested in.
Northam has already nearly matched the full FY2006 dividend and
should continue to contribute significantly to Mvela Resources`
cash flow through the remainder of the financial year. Trans Hex
too, should deliver improving financial results as its operations
settle and reaches the end of its currency hedge. Gold Fields`
share price has been negatively impacted by market sentiment and
speculation relating to the South Deep transactions, but now that
dilution issues have been dealt with and with the current gold
price outlook, it should again reflect positively in Mvela
Resources` valuation. Should the Afripalm Transaction be approved
by shareholders, Mvela Resources` balance sheet will be boosted by
over R1.1 billion cash, positioning it well to pursue further
planned acquisitions and accelerate its consolidation strategy. The
association with Afripalm and Lazarus Zim brings new opportunities
that were previously not available to Mvela Resources and should
facilitate its intentions of becoming an operating mining company
through growth in the PGM sector and further alignment of its
strategy with Northam.
for and on behalf of the board
TMG Sexwale PC Pienaar
Chairman Chief Executive Officer
Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Ltd
15 February 2007
Johannesburg
Registered Office
1A Albury Park
Dunkeld West, 2196
Magalieszicht Avenue
P O Box 413420, Craighall, 2024
Transfer Secretaries
Computershare Investor Services
2004 (Pty) Limited
70 Marshall Street
P O Box 61051, Marshalltown, 2107
Directors
TMG Sexwale (Chairman) PC Pienaar*(CEO) NS Ntsaluba* (FD)
KB Mosehla* BR van Rooyen* ME Beckett (British)
NE Mtshotshisa MP Ncholo MJ Willcox MSMM Xayiya
(* Executive Directors)
Contact Details
James Wellsted
Investor Relations Officer
Tel: +27 (11) 325 5323
Fax: +27 (11) 325 5324
email: james@mvelares.co.za
Full details of our results are available at: www.mvelares.co.za
Date: 15/02/2007 08:00:37 Produced by the JSE SENS Department.
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