Interim Results
Attention Business/Financial Editors:
SouthernEra Releases Second Quarter Results
Company Reports a Net Profit of $1.6M (2 cents per share)
Shares Issued and Outstanding: 61,674,459
TSX: SUF
AIM: SRE
TORONTO, Aug. 18 /CNW/ - The Board of SouthernEra Resources Limited
announced the following highlights from the second quarter of 2003:
- Messina Platinum achieved 40,000 tonnes per month production target
- Mark Rosslee appointed Senior Vice President and CFO
- Mining license issued for Messina's Phase 2 (Doornvlei Section)
- Prospecting permit issued for Messina's Phase 3 (Dwaalkop Section)
- Drilling commenced at Messina's Phase 4 (Zebediela Section) as part
of pre-feasibility study
Subsequent to June 30:
- Messina Platinum announced the terms of the rights issue
- Drilling commenced at Messina's Phase 3 as part of feasibility study
- Millennium Platinum resource upgraded by 250 percent to 3.7 million
ounces
- Klipspringer concluded a new wage agreement
- Stan Westcott retired from Messina Platinum Mines
The Company realized a net profit for the three months to June 30 of
$1.6•million (2 cents per share) compared to a net loss of $2.2 million
(5•cents per share) in the second quarter of 2002. In the current quarter, the
Company incurred an operating loss of $1.3 million on revenue of $0.6 million
versus an operating loss of $0.7 million on revenue of $0.7 million in the
comparable quarter of 2002. The operating loss was negated by the recognition
of a $3.8 million foreign exchange gain. Cash flow used in operations for the
quarter was $8.9 million (15 cents per share), compared to a source of
$0.4•million (0 cents per share) in the second quarter of 2002.
Operations Update
Progress continued at Messina Platinum's Phase 1 Mine (Voorspoed
Section), which remains under development. During the second quarter,
Messina's now fully commissioned Main Shaft hoisted 171,049 tonnes, of which
75,744 were development waste tonnes and 95,305 were reef tonnes from both
production and development levels. Production during the quarter came
principally from the 150 and 200-metre levels. During the quarter high levels
of development continued on the 275 and 350-metre levels to support the
production build up. Production from these levels has now commenced.
Although still under development, Messina produced 8,777 ounces of 3PGE's plus
gold, 77.4 tonnes of nickel and 60.4 tonnes of copper during the quarter.
Reflecting the high levels of development during the quarter, the average fully
diluted head grade was 3.25 grams per tonne. The average head grade for the
first six months of the year was 3.66 grams per tonne and is expected to
continue improving as the mine builds up to steady state production. Costs at
Messina continue to be capitalised during this development period.
Messina's excellent safety record continued through the second quarter
with 500,000 fatality-free shifts being recorded in June.
Production at the Company's 50 percent-owned Klipspringer Diamond Mine
was affected during the quarter by a labour strike. The strike was resolved on
July 21 with the conclusion of a new wage agreement and a commitment by the
National Union of Mineworkers to support continuous operations. In the second
quarter, tonnage throughput was 38,900 tonnes. Average grade in the quarter was
35 carats per hundred tonnes, yielding 13,700 carats.
The Company's operations at Messina and Klipspringer continued to be
impacted by the strength of the South African Rand. During the first six months
of the year the Rand appreciated by approximately 27 percent relative to the US
Dollar compared to the same period last year. With the bulk of the Company's
capital and operating expenses in Rand, this has resulted in increased costs in
US Dollar terms. The strength of the Rand may be attributed both to Dollar
weakness and high real interest rates in South Africa. The South African
Reserve Bank has reduced interest rates by 2.5 percent in recent months as
inflation has continued to drop. Further rate cuts are expected during the
second half of the year. This is expected to contribute to a softening of the
Rand, which should bring costs close to budgeted projections for the second
half of the year.
During the quarter, exploration activities continued at the Company's
platinum and diamond exploration projects. Following conclusion of the second
phase drilling program at the Millennium Platinum Project in South Africa the
Company reported a 250 percent increase in the Millennium Platinum resource to
3.7 million ounces. Drilling also commenced at the Company's diamond projects
in South Africa.
Drilling also continued at the Company's Canadian diamond exploration
projects. Results from this program are expected in the months ahead.
Following the conclusion of an airborne survey at the Company's diamond and
precious metals projects in Gabon, a drilling program commenced during the
quarter. Incorporation of the operating company for Project Camafuca continued
to be impeded by delays in regulatory approval required from the Angolan
government.
SouthernEra Resources is an independent producer of platinum group metals and
diamonds. The company also has an extensive PGM and diamond exploration
program. The common shares are listed on the Toronto Stock Exchange and the
London Stock Exchange's AIM market.
The full, unaudited financial statements are available at
www.southernera.com
SouthernEra Resources Limited
Consolidated balance sheets
(in thousands of United States dollars)
June 30, December 31,
2003 2002
-------------------------------------------------------------------------
Assets (unaudited)
Current assets:
Cash and equivalents $ 16,574 $ 2,870
Restricted cash 12,518 11,055
Accounts receivable 8,820 7,359
-------------------------------------------------------------------------
37,912 21,284
Property, plant and equipment 6,568 7,110
Exploration projects 12,609 8,994
Mining and development projects 157,751 121,260
Future income taxes 2,994 2,794
-------------------------------------------------------------------------
$ 217,834 $ 161,442
-------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 9,585 $ 12,671
Income taxes payable 10,042 8,086
Camafuca loan 2,523 2,448
Messinaloans 11,793 5,729
-------------------------------------------------------------------------
33,943 28,934
Long-term liabilities:
Messinaloans 49,070 46,926
Future income taxes 2,302 2,429
Non-controlling interests 8,659 7,813
Environmental rehabilitation provision 804 740
-------------------------------------------------------------------------
94,778 86,842
-------------------------------------------------------------------------
Shareholders' equity:
Common shares 174,404 130,628
Contributed surplus 1,635 1,635
Deficit (55,886) (57,869)
Cumulative translation adjustments 2,903 206
-------------------------------------------------------------------------
123,056 74,600
-------------------------------------------------------------------------
$ 217,834 $ 161,442
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes form an integral part of, and should be read in
conjunction with, these consolidated financial statements.
SouthernEra Resources Limited
Consolidated statements of operations
For the Periods Ended June 30
(in thousands of United States dollars,
except income (loss) per share amounts)
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
2003 2002 2003 2002
-------------------------------------------------------------------------
Diamond sales revenue $ 564 $ 742 $ 1,650 $ 1,320
Direct costs:
Mining operations (1,521) (1,022) (3,372) (1,797)
Amortization (348) (366) (693) (713)
-------------------------------------------------------------------------
(1,869) (1,388) (4,065) (2,510)
-------------------------------------------------------------------------
Loss from mining operations (1,305) (646) (2,415) (1,190)
General and administration
expenses (1,303) (727) (2,227) (1,130)
-------------------------------------------------------------------------
Loss before the undernoted (2,608) (1,373) (4,642) (2,320)
Foreign exchange gain (loss) 3,806 (624) 5,827 (1,244)
Interest income 371 129 651 222
-------------------------------------------------------------------------
Income (loss) before income
taxes 1,569 (1,868) 1,836 (3,342)
Income taxes:
Current - (11) - -
Future recovery (expense) 13 (315) 130 (236)
-------------------------------------------------------------------------
Income (loss) after income
taxes 1,582 (2,172) 1,966 (3,578)
Non-controlling interests 15 (26) 17 (50)
-------------------------------------------------------------------------
Net income (loss) for the
period $ 1,597 $ (2,198) $ 1,983 $ (3,628)
-------------------------------------------------------------------------
Basic and diluted net income
(loss) per common share $ 0.02 $ (0.05) $ 0.03 $ (0.09)
-------------------------------------------------------------------------
Consolidated statements of deficit, contributed surplus
and cumulative translation adjustments
For the Six Months Ended June 30
(in thousands of United States dollars)
(unaudited)
2003 2002
-------------------------------------------------------------------------
CONTRI- CUMULATIVE CONTRI- CUMULATIVE
-BUTED TRANSLATION -BUTED TRANSLATION
DEFICIT SURPLUS ADJUSTMENTS DEFICIT SURPLUS ADJUSTMENTS
-------------------------------------------------------------------------
Beginning
of period $(57,869) $1,635 $206 $(48,910) $1,044 $(4,529)
Conversion
rights - - - 591 -
Translation
gains (losses)
net for
the period - - 2,697 - - 2,361
Net income
(loss) for
the period 1,983 - - (3,628) - -
-------------------------------------------------------------------------
End of
period $(55,886) $1,635 $2,903 $(52,538) $1,635 $(2,168)
-------------------------------------------------------------------------
The accompanying notes form an integral part of, and should be read in
conjunction with, these consolidated financial statements.
Consolidated statements of cash flows
For the Periods Ended June 30
(in thousands of United States dollars)
(unaudited)
Three Months Ended Six Months Ended
June 30 June 30
2003 2002 2003 2002
-------------------------------------------------------------------------
Net income (loss) for the
period $ 1,597 $ (2,198) $ 1,983 $ (3,628)
Adjustments for non-cash items:
Amortization 347 366 693 713
Future income taxes (13) 315 (130) 236
Gain on sale of fixed assets (12) 624 (26) 1,244
Foreign currency translation
loss (gain) (3,806) 26 (5,827) 50
Non-controlling interest (15) - (17) -
-------------------------------------------------------------------------
(1,902) (867) (3,324) (1,385)
Change in non-cash working
capital balances (7,021) 1,240 (9,539) 276
-------------------------------------------------------------------------
Cash provided by (used in)
operations (8,923) 373 (12,863) (1,109)
-------------------------------------------------------------------------
Financing activities:
Messinaloans - 8,832 - 17,603
Issue of common shares
for cash - 34,895 43,707 39,351
-------------------------------------------------------------------------
Cash provided by financing
activities - 43,727 43,707 56,954
-------------------------------------------------------------------------
Investing activities:
(Increase) decrease in
restricted cash (728) 96 (1,463) 241
Exploration and development
projects (2,152) (1,795) (3,636) (2,618)
Messinaplatinum project (9,433) (13,776) (18,131) (23,073)
Property, plant and
equipment (20) (834) (444) (894)
-------------------------------------------------------------------------
Cash used in investing
activities (12,333) (16,309) (23,674) (26,344)
-------------------------------------------------------------------------
Increase (decrease) in cash (21,256) 27,791 7,170 29,501
Foreign exchange gain (loss)
on cash held
in foreign currency 5,736 (120) 6,534 -
Cash and equivalents -
beginning of period 32,094 8,343 2,870 6,513
-------------------------------------------------------------------------
Cash and equivalents -
end of period $ 16,574 36,014 $ 16,574 36,014
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash and cash equivalents
comprise:
Cash $ 359 2,014 $ 359 2,014
Short-term investments 16,215 34,000 16,215 34,000
-------------------------------------------------------------------------
$ 16,574 36,014 $ 16,574 36,014
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes form an integral part of, and should be read in
conjunction with, these consolidated financial statements.
Notes to consolidated financial statements
In the opinion of management, the unaudited consolidated financial
statements present fairly the Company's financial position as at June 30, 2003
and the results of its operations and its cash flows for the six months ended
June 30, 2003. The results of operations and cash flows are not necessarily
indicative of the future results of operations or cash flows.
1. ACCOUNTING POLICIES
The accounting policies followed by the Company are set out in Note 2 to
the audited consolidated financial statements included in the Company's
2002 Annual Report and have been consistently followed in the preparation
of these interim financial statements.
2. PROPERTY, PLANT AND EQUIPMENT
December 31,
ACCUMULATED June 30 2002
COST AMORTIZATION 2003 NET
-------------------------------------------------------------------------
South Africa - Buildings, plant
and equipment $ 13,454 $ (6,940) $ 6,514 $ 7,064
Toronto- Fixtures and fittings 333 (279) 54 46
-------------------------------------------------------------------------
$ 13,787 $ (7,219) $ 6,568 $ 7,110
-------------------------------------------------------------------------
-------------------------------------------------------------------------
3. EXPLORATION PROJECTS
Accumulated
Carrying Value
-------------------------------------------------------------------------
June 30, December 31,
2003 2002
-------------------------------------------------------------------------
Canada
Yamba Lake - NWT $ 3,101 $ 2,855
Back Lake - NWT 754 557
Superior- Ontario 1,816 1,115
Other 539 365
-------------------------------------------------------------------------
6,210 4,892
-------------------------------------------------------------------------
Foreign
South Africa 2,472 1,458
Gabon 3,225 2,048
Australia 702 596
-------------------------------------------------------------------------
6,399 4,102
-------------------------------------------------------------------------
$ 12,609 $ 8,994
-------------------------------------------------------------------------
-------------------------------------------------------------------------
4. MINING AND DEVELOPMENT PROJECTS
-------------------------------------------------------------------------
Accumulated
Carrying Value
-------------------------------------------------------------------------
June 30, December 31,
2003 2002
-------------------------------------------------------------------------
Messinaplatinum project $ 142,437 $ 106,312
Camafuca project 15,314 14,948
-------------------------------------------------------------------------
$ 157,751 $ 121,260
-------------------------------------------------------------------------
-------------------------------------------------------------------------
5. MESSINALOANS
June 30, December 31,
2003 2002
-------------------------------------------------------------------------
Senior Debt $ 57,662 $ 45,643
Loans from a South African public company 3,201 4,252
Rio Tinto API underwriting guarantee advance - 2,465
Other - 295
-------------------------------------------------------------------------
60,863 52,655
Less current portion of loans (11,793) (5,729)
-------------------------------------------------------------------------
$ 49,070 $ 46,926
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Senior Debt
The Senior Debt provided by a South African banking consortium ranks
above all other debt in Messina. It is secured in favour of the banks by
all the assets of Messina. Repayment of capital and/or interest to any
other lender to Messina, whether a lender in terms of the loan
arrangements noted above or for any other reason including any trade or
other credit granted, may only be settled by Messina with the banks'
consent while any amounts due to the banks, including interest, remain
outstanding.
While the Senior Debt is outstanding, Messina may not incur additional
debt, acquire or dispose of assets or engage in activities outside the
parameters of the establishment of the Messina Platinum Project, or
deviate from the planned development of the project, without the consent
of the banks.
The Senior Debt comprises two, South African Rand (R) denominated,
tranches making up a total of R345 million ($43 million), Tranche A of
R270 million ($34 million) and Tranche B of R75 million ($9 million).
Both tranches were drawn upon simultaneously and, other than for interest
determination, can be regarded as a single loan.
Drawdown commenced on September 18, 2001, and monthly drawdowns continued
until the final drawdown on September 30, 2002.
Interest accrues on the loan and is capitalized to the loan balance
outstanding. The repayment schedule includes an element of principal and
interest in each repayment instalment with the first instalment scheduled
for February 29, 2004 and with semi-annual payments thereafter until the
final instalment on August 31, 2008.
The interest rate in respect of Tranche A is fixed at 14.51% and in
respect of Tranche B, fluctuates with the average of a basket of
long-term South African money market rates (19% at June 30, 2003).
Loans from a South African public company
This loan of $3.6M is denominated in Rand and is unsecured and
subordinate to the Senior Debt provided by the banking consortium. The
loan bears interest at South African market-related rates (19% at
June 30, 2003) and interest is payable monthly in arrears. Capital
repayments commenced in January 2002 and, under renegotiated terms, are
repayable in monthly instalments of not less than R2.5 million
($0.3 million) per month from February 2003. The banking consortium has
consented to this repayment schedule subject to continued satisfactory
progress of the Messina Platinum Project and such financial support as
might be necessary from SouthernEra.
Accelerated Production Initiative API and API guarantee
This loan and accrued interest was fully repaid in the current quarter.
6. INCOME (LOSS) PER SHARE AND PRO FORMA INCOME (LOSS) PER SHARE
Basic and diluted income (loss) per share is calculated using the income
for the year of $2.0 million (2002 - $3.6 million loss) and the income
for the quarter of $1.6 million (2002 - $2.2 million loss) with the
weighted average number of common shares outstanding during the period of
59,021,682 shares (2002 - 42,521,130) and 61,573,459 (2002 - 44,733,044)
respectively.
The exercise of stock options would dilute earnings per share in the
current period. The effect of the potential dilution does not reduce
earnings per share in the current quarter and would be anti-dilutive in
the comparable period of 2002.
The fair value assigned to the portion of 275,000 stock options granted
and vesting in the current quarter was $0.5 million and the fair value
assigned to the portion of 100,000 options granted in the second quarter
of 2002 was $0.1 million. Had these values been charged to earnings in
the current quarter, income per share would remain at $0.02. The year to
date effect of charging current and previous years fair values of options
granted would decrease earning per share for the six months ended
June 30, 2003 to $0.02.
7. SEGMENTED INFORMATION
The Company operates in the diamond and PGM industries. The operations of
the Company are managed and grouped, by industry, on a geographic basis.
The Company's reportable operating segments comprise the diamond mining
and exploration activities at Klipspringer in South Africa, as well as in
Angolaand Canada, and the Messina Platinum Project in South Africa. The
Canadian segment includes the head office operation and associated
administration costs.
SEGMENTED INFORMATION
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
-------------------------------------------------------------------------
Revenue from diamond sales:
Klipspringer 564 742 1,650 1,320
-------------------------------------------------------------------------
Interest income
Klipspringer 6 (1) 10 2
Messina 10 92 27 172
Canada 355 38 614 48
-------------------------------------------------------------------------
371 129 651 222
-------------------------------------------------------------------------
Amortization
Klipspringer 344 354 685 690
Canada 4 12 8 23
-------------------------------------------------------------------------
348 366 693 713
-------------------------------------------------------------------------
Segment income (loss)
Klipspringer (3,916) (1,249) (6,058) (2,781)
Messina (53) (224) (63) (144)
Canada 5,722 (501) 8,338 (677)
Other (184) 106 (381) 260
-------------------------------------------------------------------------
Reported enterprise income
(loss) before income taxes 1,569 (1,868) 1,836 (3,342)
-------------------------------------------------------------------------
Segment expenditure
Messina 9,102 13,776 18,131 23,073
Klipspringer 314 1,062 589 1,149
Angola 72 13 223 264
Canada 1,005 444 1,522 756
Other 1,112 1,014 1,746 1,102
-------------------------------------------------------------------------
11,605 16,309 22,211 26,344
-------------------------------------------------------------------------
June 30, 2003 December 31 2002
Identifiable assets
Messina $ 139,791 $ 103,088
Klipspringer 9,511 9,498
Angola 15,314 14,948
Canada 48,811 31,171
Other 4,407 2,737
-------------------------------------------------------------------------
Total reported enterprise assets $ 217,834 $ 161,442
-------------------------------------------------------------------------
8. DIFFERENCES BETWEEN CANADIAN GAAP AND IFRS
The Company prepares its financial statements in accordance with Canadian
GAAP, which generally conform to International Financial Reporting
Standards (IFRS) except for the following significant differences:
a) Under Canadian GAAP, pre-development incidental revenue and associated
costs are deferred and amortized over the life of the mine. Under IFRS
incidental revenue and associated costs are recognized in the statement
of operations. As a result of this difference, the Company would have
recognized additional revenue derived from PGM sales at Messina Phase I.
Mining costs approximated the income earned and, therefore, there would
be no material effect on net income or earnings per share.
b) Under Canadian GAAP, a provision for reclamation costs is expensed
over the life of the mine on a unit of production basis when an estimate
of costs is reasonably determinable. Under IFRS, a reclamation provision
is accrued when the liability is incurred with a corresponding debit to
the related asset. The impact of preparing the financial statements in
accordance with IFRS would be an increase in mining and development
projects of $1.1 million with a corresponding increase in the
environmental rehabilitation provision.
For further information: SouthernEra Resources Limited, Dr. Sally
Eyre, Vice President, Corporate Affairs, Telephone:
(416) 359-9282, Fax: (416) 359-9141, E-mail: inbox@southernera.com
SRE SUF.
Latest directors dealings
- 9 minutes ago HSBC Holdings
- 10 minutes ago Bank of Ireland Group (CDI)
- 15 minutes ago Prudential
- 52 minutes ago Brickability Group
- 1 hour ago Cobra Resources