🕐07.05.12 - 08:54 Uhr
VILLAGE ANNOUNCES REPORT FOR QUARTER ENDED 31 MARCH 2012
Village Main Reef press announcement
Report for the quarter ended 31 March 2012
[Please note conference call details below for 3pm CAT time today ]
Key Features
- Earnings per share of 7.19 cents for Q3 compared to 16.57 cents for
Q2
- Net cash flow from operations of R73.2m, a 58.2% from R175.1
million in Q2
- Realised average gold price R419 810/kg in Q3 down from R 435
677/kg in Q2
- Gold production of 1 237kg, down from 1 388kg Q2
- Cash costs per kg reduced by 5.4% to R236,734/kg at Tau
- Antimony production of 909 tons achieved in Q3, up 8.6% from Q2
- A good quarter from a safety perspective with overall improvements
- Filed all required Competition Commission documentation in relation
to the potential acquisition of Blyvooruitzicht Gold Mining Company from DRD
- Current CFO Marius Saaiman appointed as joint CEO and appointment
of new CFO
- Received a R85m conditional offer for Weltevreden project.
CEO, Bernard Swanepoel comments: The Groups continued focus during this
seasonally weak production quarter was on reducing costs whilst creating ore
body flexibility at our operations.
This we did by investing in development
and opening up pay areas.
These initiatives will assist us to build
sustainable mines and mitigate some of the risks associated in a commodity
price downturn.
Looking ahead, we are confident that combined with our
investment in the business optimisation process, we should see higher
volumes from all our operations for the rest of the year.
I am personally very proud of and pleased with the appointment of Marius
Saaiman as joint CEO and also with the appointment of Sandeep Ghandi as CFO.
Both of these individuals strengthen our board and management team with
appropriate skill and experience.
- excludes gold credits
Q3 vs Q2 operational profit variance analysis
Prospects
Production volumes are traditionally higher during the June quarter than
those achieved during the March quarter, and we expect all our operations to
follow this trend.
Together with our continued investment into our mines our
expectations are that production volumes for June will be more in line with
volumes achieved during the December 2011 quarter.
Costs during the June
quarter are usually higher than those achieved during the summer quarters as
a result of the increased electricity tariffs during the winter months.
That
being said, we anticipate that unit costs at Tau will remain at current
levels.
Management is pleased that the Blyvoor acquisition is still on track for
Part A completion during Q4.
As indicated above, the competition submission
was filed at the end of March 2012.
Both Village and DRD agreed to waive all
remaining conditions to the transaction on 4 May 2012, resulting in
certainty of deal completion subject to receiving Competition approval on
terms acceptable to both parties.
First Uranium Corporation (FIU) has indicated that the shareholders
meeting in relation to the proposed disposal by FIU of its Ezulwini
operations to GoldOne Limited and its Mine Waste Solutions (Pty) Ltd (MWS)
operations to AngloGold Ashanti is set for 13 June 2012.
Should FIU
shareholders approve the proposed transactions, Village will receive some
R393 million in lieu of its investment in Mine Waste Solutions Rand
Denominated Secured Convertible Notes, as well as approximately R20m for its
remaining 5.7% equity interest in FIU.
Village has consistently indicated
that the bulk of these funds will be returned to its shareholders.
Village has consulted with its legal advisors who have confirmed that the
MWS Rand Notes are well secured over the assets of FIU in case shareholders
block the proposed transactions.
Village received an unsolicited binding offer for its Tau operations, from
the Tannous Investment Group to the value of R1 billion (R1 000 000 000).
Village is in the process of appointing an independent financial advisor to
evaluate the offer.
Based on the financial performance of Tau since
acquisition, the view of the Village Board is that the amount offered for
Tau is well short of the Company own valuation of Tau .
Village also received a non binding offer of R85 million (R85 000 000) for
its Weltevreden assets.
This offer remains subject to the completion of a
due diligence and other conditions customary to transactions of this nature.
The board has previously indicated its support for the disposal of this
project.
Appointment of joint Chief Executive Officer, Chief Financial Officer and
Company Secretary
Village is pleased to announce that in line with its statements to all
stakeholders since the acquisition of the Simmers assets in June 2011, the
Board has confirmed the appointment of Mr Marius Saaiman as joint CEO, with
Mr Bernard Swanepoel.
Mr Saaiman resigned as Chief Financial Officer with
effect from 4 May 2012 and Mr Sandeep Gandhi, a qualified chartered
accountant, was appointed CFO, effective the same day.
Mr Gandhi joined
Village from Johnson Matthey in March 2012.
Mr Saaiman will focus on the strategic issues like acquisitions and
disposals, shareholder relations as well as all other corporate matters,
enabling Mr Swanepoel to apply his extensive operational skills on the
integration of our recently acquired operations.
In addition, Ms Charlene Venter was appointed to the position of Company
Secretary..
Ms Venter was previously with AngloGold Ashanti and prior to
that with Harmony.
Statement by Chief Executive Officer
Villages operating performance over the third quarter of FY2012 was
marginally lower than we anticipated, largely as a result of lower
production at our Buffels and Cons Murch operations.
Notwithstanding this,
we have delivered an operating profit of R65 million, which equates to 7.19
cent per share and cash of R73.2 million from operations, in what is
historically a challenging quarter for the gold mining industry, due to the
down time in production over Christmas and New Year.
We produced 1 169kg (37 583oz) of gold in Q3 from our two gold operations,
Buffels and Tau which was 11% lower than the previous quarter.
The combined
effect of a slow start up after the Christmas break and the hoisting
problems experienced at the high grade 2 shaft at Buffels contributed to the
lower volumes during the quarter and also resulted in an overall reduction
in gold yield.
The hoisting problems have been addressed and we should see
volumes at 2 shaft, as well as overall gold yield at Buffels improve.
At Tau we have benefited from cost control initiatives with a cash cost per
kg reduction of 5.4% quarter on quarter.
Overall performance at Tau was in
line with our forecast.
The business improvement programme implemented at
Tau should also see the current gold per kilogram cash costs sustained.
Gold
revenue was lower due to a more subdued gold price with the realised gold
price during the March quarter reducing by some R15 867/kg compared to the
record highs from the previous quarter.
At Cons Murch, production of antimony was 8.6% higher at 909 tons in Q3
compared to 837 tons in Q2.
Production was however affected by a winder
breakdown at our high grade Athens shaft and mine wide safety stoppages
midway through the quarter.
Our shaft deepening development activities at
both the Monarch and Athens shafts have intersected the antimony reefs which
will result in improved volumes and mine flexibility.
Our new surface
decline project (Gravelotte decline) will give us access to a shallow
antimony-rich ore body.
Site establishment and Geotechnical drilling is
completed and the box cut excavation is in progress.
We expect Gravelotte to
contribute to production by December 2012.
Gold, a by-product from the
antimony production was stable quarter on quarter at 69kg (2 218oz).
At our Lesego platinum project, the definitive feasibility study is
progressing well.
We are awaiting final assay results from the shallow and
confirmative drilling program and expect to provide the market with an
updated resource statement by end of May 2012.
Safety remains a key focus of management and we are very pleased to report
an improved safety performance over the March quarter.
We remain confident that our communicated strategy of creating self
sustainable operations in a socially responsible manner through the
acquisition of higher cost assets and positively impacting on the cost base
of these operations will create significant value for all our stakeholders.
We continue to focus on creating ore body flexibility, mining only
profitable ounces from all our operations and to engage pro-actively with
all our stakeholders.
Financial review
The table below sets out the unaudited results of the operations for the
quarter ended 31 March 2012
Group revenue for the quarter was R543 million, whilst group cash costs were
R399 million.
After capital expenditure amounting to R37.5 million in Q3 the
group generated net cash flow from operations of R73.2 million which is
58.2% lower than the December quarters net cash flow from operations of
R175.1 million.
Cash generated from operations reduced in Q3 due to lower
gold revenue and volumes as compared to Q2.
Significant cash payments made
in Q3 comprised of R36 million in respect of the Deutsche Bank gold loan,
payment in relation to the Tau improvement project of R28 million as well as
working capital movements amounting to R21 million.
Operational review
Tau
Total gold produced at Tau was 865kg (27 809oz) in Q3, which was 30kg
(965oz) lower than the 895kg (31 668oz) produced during Q2.
The decrease is
attributable to a decline in overall gold yield to 3.27 g/t in Q3 from 3.54
g/t achieved during Q2.
This was mainly due to a significant portion of
mining being moved on a temporary basis for rock engineering requirements to
an area where a drop in grade was expected.
The effect of the slow startup
after the Christmas break also impacted negatively on production volumes.
Taus gold revenue decreased by 7% to R364 million in Q3 from R390 million
in Q2.
The decrease is attributed to the lower realised gold price achieved
during the quarter, of R419,810/kg compared to R435,677/kg during Q2.
The
lower realised gold price accounted for R13 million of the lower revenue
while lower gold production volumes also accounted for R13 million.
Pleasingly, the management team succeeded in reducing the total cash costs
quarter on quarter to R205m in Q3 from R224m in Q2.
The cash cost per kg
costs were also decreased to R236,734/kg in Q3 from R250,347/kg in Q2.
The
reduction in unit costs at Tau is mainly due to stringent cost control
measures and positive results from the initiatives implemented as part of
the business improvement programme at Tau.
The team are confident that the
reductions in costs achieved are sustainable.
Cash operating profit at Tau was 4% lower quarter on quarter at R158.6
million in Q3 compared to R165.8m in Q2.
Tau remains a substantial contributor to the company and continues to
receive intensive management focus from the executive team, with various
on-going productivity improvement initiatives underway.
Buffels
Total gold production from Buffels was 303kg (9 741oz) in Q3 which was lower
than the 424kg (13 632oz) produced during Q2.
The overall gold production
was affected by both volume and grade issues experienced during the quarter.
Underground gold grade at 3.32 g/t in Q3 was lower than the 3.85 g/t
achieved during Q2.
The gold grade was negatively impacted due to hoisting
problems experienced at the high grade Buffels 2 shaft, which resulted in 2
shaft contributing lower volumes than planned for.
The hoisting issue at 2
shaft has been addressed.
Production volumes were further impacted by grade
related stoppages at some of the panels at 7 shaft.
Management have
subsequently taken the necessary steps to address these challenges with
attention and focus being given to development and opening up pay areas to
improve mining flexibility.
Gold revenue decreased by 31% to R127 million in Q3 compared to R185 million
in Q2.
The decrease in revenue is mostly attributed to lower production,
which accounted for R 54 million with the reduction in gold price accounting
for R4 million of the decrease.
Total cash costs were reduced quarter on quarter by 7% to R139 million in Q3
from R149 million in Q2.
Despite this, unit cash cost increased to
R459,585/kg in Q3 from R331,834/kg in Q2.
Subsequently, Buffels reported a
cash operating loss of R12 million in Q3, compared to a cash operating
profit of R36 million during Q2.
These challenges are being addressed by the management team and we expect
some improvement in the next quarter.
South Plant (Buffels plant)
Recoveries at South Plant decreased slightly during the quarter to an
average of 93% in Q3 from 94% in Q2.
This was attributed to a feed of low
grade surface material during the Christmas break.
South plant continues to
operate well and some initiatives are underway to further reduce operating
unit costs.
Cons Murch
Antimony production quarter on quarter was 8.6% higher at 909 tons in Q3
compared to 837 tons in Q2.
Cons Murch produces gold as a by-product.
Gold
production for the quarter remained stable at 69kg (2 218oz) for Q3.
Antimony production was negatively impacted by lower volumes from the high
grade antimony shaft (Athens shafts) due to a winder breakdown at that
shaft.
This was exacerbated by some mine-wide safety stoppages mid-way
through the quarter.
All of the issues have been addressed and we believe
that antimony production will stabilise during Q4.
We are pleased to report that the on-going shaft deepening and secondary
development activities at both Monarch and Athens shafts have intersected
reef, which should positively impact on volumes and assist to create the
mining flexibility which has always been a key focus at Cons Murch.
In
addition, a new underground dump truck and an additional remote controlled
loader were commissioned at Cons Murch which will improve mined volumes from
underground.
We remain excited about our new Gravelotte surface decline
project which is targeting a shallow antimony-rich ore body.
We completed a
number of key activities, including site establishment, geotechnical
drilling and support design and excavation of the box cut during the
quarter.
The first blast of the portal for the Gravelotte is planned for the
June 2012 quarter.
Lesego
Q3 saw the near completion of the final phase of drilling related the Lesego
Feasibility Study, as well as the incorporation of the results from the
shallow drilling programme into the resource.
The Shallow Drilling programme
resulted in numerous Merensky Reef and UG2 Chromitite intersections at
shallower depths than previously stated allowing for the definition of a
resource between the depths of 350 m and 700 m.
Additional drilling has
resulted in 24% of the resource classified in Measured, 43% in Indicated and
33% in Inferred Resource Category.
This resource includes the improvement on
the previous declaration from a depth of 700 m to 2,300 m.
The definitive feasibility study is progressing well and is scheduled for
completion in early 2013.
Sufficient information has been garnered to allow for the submission of a
Mining Right Application during this quarter, along with Lesegos Social and
Labour Plan.
An initiative to assist schools in the area is underway.
The
renovation of Gwaragwara School using local labour and resources, in
Nkotokwane, which will in all likelihood be the mines nearest neighbour, is
complete.
In Q3 2012 a total of R11.3 million was spent on feasibility activities
compared to R16.5 million during the previous quarter.
These costs continue to be capitalised to the project.
ENDS
Contacts
Village CEO : Bernard Swanepoel;
; 082 303 9922
Media and Investor Relations; Louise Brugman ;
; 083 504 1186
North American Media and Investor Relations;
; +1 (231) 421-8441
CEO Tele-conference call
7 May 2012
15h00 [GMT+1]
Live Call Access Numbers
South Africa - Johannesburg 011 535 3600
UK (Toll-Free) 0 800
917 7042
South Africa Johannesburg alternate 010 201 6616
South Africa - Cape Town 021 819 0900
South Africa (Toll-Free) 0 800 200 648
Other Countries (Intl Toll) +27 11 535 3600
USA 1
800 860 2442
Playback Access Numbers code 20532#
South Africa 011 305
2030
Other countries + 27 11 305
2030
UK (Toll Free) 0 808 234
6771
Canada and US
1-412-317-0088
Please note that a recording on the conference call will also be made
available on www.villagemainreef.co.za after the call.
Logo_sharper02
media & investor relations
louise brugman
managing director
Tel: +27 (0) 11 787 3015
Cell: +27 (0) 83 504 1186
skype louise.brugman
Email:
Web: www.vestor.co.za