Bisichi Regulatory News (BISI)

1 Mar 2005 08:00

1st March 2005 BISICHI MINING PLC Preliminary Results to 31st December 2004 ANOTHER RECORD YEAR FOR GROWTH 2004 2003 Group and share of joint venture turnover up 46% ‚£13,267,000 ‚£9,090,000 Profit before tax up 34% ‚£1,976,000 ‚£1,475,000 EPS up 23% 11.79 p 9.56 p EPS diluted up 21% 11.48 p 9.45 p Dividend per share up 11% 2.00 p 1.80 p ‚· 72 percent increase on profit before tax compared to the first half ofthe year‚· Profit growth accelerated in second half of the year as a result ofincreased production and a 50% increase in Black Wattle's average selling pricefor coal over the equivalent period in 2003‚· Continuous miner acquired, installed & now fully operational resultingin increased coal production to 105,000 tons per month‚· Export prices fixed for 3 years and domestic prices for supply to theferrochrome industry fixed for 12 months‚· Increased export allocation at Richards Bay Coal Terminal for 2005/6‚· Shareholders funds increased by 30% to ‚£14.5 million Commenting on the results, Bisichi Mining PLC's chairman, Michael Heller, said: "The next challenge for Bisichi is to leverage our successful position in SouthAfrica in order to generate sustainable growth in our core markets and todevelop opportunities in related markets. I believe that 2005 is going to beanother year of opportunity for Bisichi and, with a proven management andbusiness structure, that it will be another very successful year". END For further information, please call: Andrew HellerRobert Corry, Bisichi Mining PLC 020 7415 5000Christopher Joll,John Evans, MJ2 Ltd 020 7491 7776 CHAIRMAN'S STATEMENT1st March 2005 I am pleased to be able to inform shareholders that 2004 has been anothersuccessful year for Bisichi Mining PLC, with group profits on ordinaryactivities before taxation increasing by 34% to ‚£1,976,000 (2003: ‚£1,475,000). In particular, I would like to draw shareholders' attention to the performanceof the company in the second half of 2004 in which we achieved a 72 percentincrease on our profit before tax compared to the first half of the year. Thissignificant acceleration of profit growth is attributable to actions taken byBisichi Mining's management over the past 18 months to fix the export price ofour coal, to increase coal production, to secure premium domestic and exportmarkets, to strengthen our operational capabilities at the mine and to areduction in the depreciation charge as the result of some assets being fullydepreciated. Coal mining continues to be our core activity and, during 2004, we achieved anumber of important commercial and operational milestones that are nowbeginning to have a significant impact on the business. These include: * February 2004 - Endulwini Resources, our South African partner, was awarded an initial export capacity at the Richards Bay Coal Terminal ("RBCT") of 272,000 metric tonnes per annum for a multi-year period. This export capacity has since been increased to 317,000 metric tonnes per year commencing 1 April 2005. * April 2004 - we entered into a three-year coal supply agreement with a leading international trading company to export Black Wattle's coal through RBCT on a US$ FOB basis. * June 2004 - we fixed our export coal price through to 31 March 2007. In that same month, we also took the opportunity to fix our domestic coal supply contract to the ferrochrome industry for 12 months. * July 2004 - we signed a ZAR 25 million facility with ABSA Bank in South Africa to finance the purchase of a Voest Alpine continuous miner and related equipment. The continuous miner commenced operation in October, and, after a start-up period, is now operating at near to anticipated production levels. The net result of these important commercial decisions has meant an increase of50 per cent in Black Wattle's average selling price for the last six monthswhen compared with the same period in the previous year. At the time ofwriting this statement, Black Wattle had shipped over 230,000 metric tonnes ofRBCT export steam coal from the mine's recently constructed railway siding atUitkyk. More details about our direct mining activities are contained in theMining Review which follows. Finally, in November 2004, Bisichi Miningappointed Evolution Securities Limited as its brokers and advisers. Your company's next challenge is to leverage its successful position in SouthAfrica in order to generate sustainable growth in our core markets and todevelop opportunities in related markets. A number of issues will affect the speed of growth in our core markets, all ofwhich we are currently addressing. In the short term, we will continue toincrease coal production at Black Wattle by improving production methods and bycommencing the open cast mining of some of our reserves. In the longer term, wewill acquire additional reserves at other locations within South Africa; inthis regard the Mineral and Petroleum Resources Development Act ("MPRDA")promulgated in May 2004, with its "use it or lose it" provisions, isparticularly well-timed for us. With our successful mining track record, ourfinancial reputation, our proven management skills, our empowermentcredentials, and the strong long-term relationship with our local businesspartner, we are confident that we will be well placed to acquire such newreserves within the framework set out in the MPRDA; we are already aware of agrowing number of such opportunities.In the meantime, our UK property assets managed by London & AssociatedProperties PLC and our equity portfolio held by our 100% owned subsidiary,Mineral Products Ltd, continue to grow, providing us with a firm asset base anda reserve of cash. Shareholder funds now stand at ‚£14.5 million, compared to ‚£11.2 million last year, an increase of 30 per cent.As a reflection of the strong performance achieved by Bisichi Mining in 2004,your directors are recommending a dividend of 2.0p, compared to 1.8p per sharein the previous year. This will be paid on 15 August 2005 to shareholders onthe register as of 20 May 2005.In closing, I would like to thank the staff of Bisichi Mining, its subsidiariesboth in the United Kingdom and the Republic of South Africa and our associatesin South Africa, for their contribution and continued commitment to yourcompany and its prospects for growth. I believe that 2005 is going to beanother year of opportunity for your company and, with a proven management andbusiness structure, that it will be another very successful year.MICHAEL HELLERChairman1 March 2005 MINING REVIEW1st March 2005As can be seen in the Chairman's statement, 2004 was another year of recordprofitability at our principal direct mining operation, the Black WattleColliery. More importantly, in 2004 we achieved a number of significantimprovements in mining methods and took advantage of positive changes inoverall market conditions. The benefits of these achievements will have apositive effect on the business for many years to come.ProductionIn the 2004 interim results statement, shareholders were informed that BlackWattle had successfully financed and installed a continuous mining section. Asa result of this, our conventional sections were reduced from three to two andthe continuous mining section began to operate fully in October of this year.This has led to an immediate increase in production. Inevitably, such a complexmachine and new mining method require a start-up period to allow for changes toworking methods and for fine tuning the machine's operation. I am pleased toreport that, on a shift-by-shift basis, the machine is now starting to cut nearto its expected potential. During the start-up period, we made a number ofimprovements to the continuous miner including changing the cutting head andlowering the height of the boom by 800mm. We are currently planning to improvethe travelling roads to the section and put in place underground stores tosupport the operation of the machine. The continuous mining section, combinedwith the two conventional sections, is currently producing around 105,000tonnes per month, but we are confident that the three sections combined willproduce significantly more tonnage in the near future.Mining operating profits in the second half of the year increased by 112 percent to ‚£1,258,000. However, shareholders will note that there was also asubstantial increase in our mining costs. This increase is directlyattributable to our decision to mine as much coal as possible, including coalthat under other circumstances we would have left in the ground, in order totake the fullest possible advantage of prevailing market conditions. Forexample, two of the three sections depleted the areas that they were in but, aswe were able to continue to mine these areas profitably, we decided not to pullout and sterilise any of the coal which would otherwise have been left behind.Once the reserves in these sections were fully exploited, they were relocated.As part of that relocation process, at times the sections were mining in areasof very low yields. We are now out of those low yields and it is an indicationof the strength of the management on the mine that we have been able to achievesuch increases in profitability in the second half of 2004 whilst dealing withthese issues.Black Wattle has additional reserves that can be mined by opencast methods. Thesurface rights to many of these reserves are owned by Middelburg Town Council("the Town Council"). We are pleased to report to shareholders that, at the endof 2004, the Town Council gave us permission to mine these reserves by opencastmethods and we will shortly be applying to the Mines Department for permissionto mine these reserves. This process can take some time to complete and we willkeep shareholders informed of our progress. Opencast mining in these reserveswill be a substantially cheaper production method than underground mining andwill enable us to increase overall production at even higher margins.MarketingOne of the key drivers of Black Wattle's sustained earnings growth is thequality of the markets into which we sell our coal. Black Wattle's revenue isprimarily derived from two very different markets - a US$ based income fromlong term export sales via Richards Bay Coal Terminal ("RBCT") and a ZAR-basedincome from long term contracts to supply low phosphorous coal to the domesticferrochrome market. Although unrelated, both markets have witnessedsignificant growth in 2004, resulting in record profitability for the mine. Our presence in both the export market and the low phosphorous market is theresult of a deliberate strategy to improve consistently our coal production andprocessing capabilities. We are now able to change our supply balance betweenthose markets when it is commercially sensible to do so. This abilitydifferentiates us from most South African export-oriented mines where salesrevenues are in US$ and costs are in ZAR. Because our revenue is received inboth currencies, we are less affected by sharp movements in the US$/ZARexchange rate. As our exports have grown, we now sell very little steam coal into the domesticmarket and the table below demonstrates the significant changes we have made toour coal sales profile between 2003 and 2004. Sales Split by Product 2003 2004 Export 0.83% 29.71% Low Phosphorous 30.31% 36.39% Other 68.86% 33.90% Coal which was previously sold at a discount as raw duff is now washed andexported via RBCT. At the time of writing this report, we have completed 85%of our first year's allocation at RBCT. As we advised shareholders at the timeof the interim results, our partner Endulwini Resources was awarded 272,000tonnes of export allocation at RBCT for Black Wattle coal in the year ended31st March 2005, as part of the tonnage made available to Black EconomicEmpowerment companies. We are very pleased to report that Endulwini Resourceshas recently been awarded a 16.5 percent increase in its RBCT export allocationfor the period 1 April 2005 - 31 March 2006, an increase of some 45,000 tonnes.A significant proportion of our RBCT export off-take has been fixed for threeyears at a US$ price.Low phosphorous coal remains in short supply in South Africa and Black Wattleis one of the largest single producers of this key input into the ferrochromeproduction process. In July 2004, we negotiated a substantial increase in theprice of our low phosphorous coal and we are confident that prices will remainstrong throughout 2005.As a result of all of these changes our average selling price for the last sixmonths of 2004 was 50 percent higher than the last six months of 2003.Ore reservesThe total in situ ore reserve at Black Wattle currently stands at aconservative 14 million tonnes. As the Chairman has reported, we are activelylooking to acquire substantial additional reserves at other locations withinthe Middelburg and Witbank area. The passing of the new Minerals Act gives usevery confidence that we, as a black empowered mining operation, will be ableto acquire the reserves that we require in the coming years.AwardsIn 2004 Black Wattle received an Environmental Award from Spoornet, the SouthAfrican national railway company, for the "Most Improved Coal Loading Site" forits Uitkyk Rail SidingIn addition, Black Wattle was once again named one of the "Impumalelo 300: South Africa's Leading Empowerment Companies" for the year.PeopleWe are very pleased to report three new senior appointments at the mine.Nokuhle Madolo, an internationally-educated resource legal specialist whoserves as a director of Endulwini Resources, advises us on all mattersconcerning the new MPRDA and related issues. Noel Mkazi has recently beenappointed Human Resources Manager at Black Wattle, and will be responsible forimplementing the legislated equity and social development policies at themine. Finally, Tom Kearney, Commercial Director of Bisichi, has also beenappointed a director of Black Wattle.ProspectsLooking back over the past ten years of our operations at Black Wattle, theprospects for 2005 have never looked so full of promise. Our fixed exportcoal price, coupled with a strong market for low phosphorous coal, will ensurethat we will have a very high average selling price throughout the year. Thecontinuous miner is a substantial factor in our projected production and we areconfident that we will reach our optimal production targets. The strong workingrelationship that we have with Endulwini Resources in South Africa - and inparticular, with Mr. Sipho Dube, Ms. Duku Mogoai, and Ms. Nokuhle Madolo -continues to open up opportunities in the mining sector. When we add to all ofthis the skills of our General Manager at Black Wattle, Mr. Robert Grobler, wehave good reason to view the coming year with considerable confidence.ANDREW HELLERManaging Director1 March 2005 Bisichi Mining PLC Preliminary Consolidated Profits Statement Year Ended 31 December 2004 2004 2003 Notes ‚£000 ‚£000 Group and share of joint ventures turnover 13,267 9,090 Less: joint ventures (1,719) (309) Turnover 11,548 8,781 Operating costs (9,164) (6,896) Operating profit 2,384 1,885 Share of operating (loss) / profit in joint venture (34) 10 Interest receivable 25 9 Interest payable (399) (429) Profit on ordinary activities before taxation 1,976 1,475 Taxation on profit on ordinary activities 1 (307) (436) Profit after taxation 1,669 1,039 Minority interest (437) (40) Profit for the financial year 1,232 999 Dividend (209) (188) Retained profit for the financial year 1,023 811 Earnings per share - basic 2 11.79 p 9.56 p Earnings per share - diluted 2 11.48 p 9.45 p Dividend per share 3 2.00 p 1.80 p Turnover and operating profit for the year derive from continuing operations, which are made up as follows: Turnover Operating profit 2004 2003 2004 2003 ‚£000 ‚£000 ‚£000 ‚£000 Mining 10,317 7,571 1,851 1,353 Goodwill amortised - - (47) (85) 10,317 7,571 1,804 1,268 Property 1,054 1,092 485 587 Share dealing 163 105 83 20 Other investments 14 13 12 10 Group 11,548 8,781 2,384 1,885 Bisichi Mining PLC Consolidated Balance Sheet At 31 December 2004 2004 2003 ‚£000 ‚£000 Fixed assets Intangible assets - 47 Tangible assets 20,036 16,255 Investment in joint venture 1,536 1,408 Other investment 384 336 21,956 18,046 Current assets Stocks - goods for resale 36 50 Debtors 2,776 1,977 Investments (Market value ‚£526,000 (2003 - ‚£518,000)) 403 419 Bank balances 950 126 4,165 2,572 Creditors - amounts falling due within one year (5,643) (5,058) Net current liabilities (1,478) (2,486) Total assets less current liabilities 20,478 15,560 Creditors - amounts falling due after one year (5,580) (4,452) Provisions for liabilities and charges (58) (57) Net Assets 14,840 11,051 Capital and reserves Called up share capital 1,045 1,045 Revaluation reserve 9,663 7,729 Other reserve 86 86 Retained earnings 3,712 2,307 Shareholders' funds 14,506 11,167 Minority interests 334 (116) 14,840 11,051 Statement of total recognised gains and losses The company 364 6 Subsidiaries and associated undertaking 868 993 Profit for the year 1,232 999 Revaluation of investment properties - company 1,868 1,619 - joint venture 192 360 Exchange adjustments 278 209 Tax on disposal of investment properties in joint venture (22) (28) Total gains recognised in the year 3,548 3,159 Bisichi Mining PLC Consolidated Cash Flow Statement At 31 December 2004 2004 2003 ‚£000 ‚£000 Net cash inflow from operating activities 3,643 2,174 Dividend from joint venture - 42 Returns on investments and servicing of finance Interest received 25 9 Interest paid (399) (429) (374) (420) Taxation Corporation tax paid (466) (178) Capital investment and financial investment Payments to acquire fixed assets (2,250) (1,921) Payments to acquire current asset investments (49) - Receipts from sale of fixed assets - 9 Receipts from sale of current asset investments 148 88 (2,151) (1,824) Equity dividends paid (188) (157) Cash inflow (outflow) before financing 464 (363) Financing Loans drawn (repaid) 1,191 (126) Increase (decrease) in cash in the year 1,655 (489) Reconciliation of net cash flow to movement in net debt Increase (decrease) in cash in the year 1,655 (489) Net cash flow from changes in debt (1,191) 126 Movement in net debt in the year 464 (363) Net debt at 1 January 2004 (6,584) (6,221) Net debt at 31 December 2004 (6,120) (6,584) Reconciliation of operating profit to net cash inflow from operating activities: Operating profit 2,384 1,885 Depreciation charges 644 857 Goodwill amortised 47 85 Provision against current asset investment 6 19 Profit on sale of current asset investments (89) (35) Decrease in stocks 18 3 Increase in debtors (567) (732) Increase in creditors 1,200 92 3,643 2,174 Bisichi Mining PLC Analysis of changes in net debt At 1 January Exchange At 31 December 2004 Cash flows adjustment 2004 ‚£000 ‚£000 ‚£000 ‚£000 Bank balances 126 790 34 950 Overdrafts (1,305) 865 (3) 443) (1,179) 1,655 31 507 Debt due within one year (953) (83) (11) 1,047) Debt due in after one year (4,452) (1,108) (20) 5,580) (6,584) 464 - (6,120) NOTES: 2004 2003 ‚£000 ‚£000 1. Taxation Based on the results for the year: Corporation tax at 30% (2000 : 30%) 272 463 Prior year adjustment - UK 26 (15) Joint venture 7 1 305 449 Deferred taxation 2 (13) 307 436 2. Earnings per share Both the basic and diluted earnings per share calculations are based on a profit of ‚£1,232,000 (2003: ‚£999,000). The basic earnings per share has been calculated on 10,451,506 (2003: 10,451,506) ordinary shares being in issue during the year. The diluted earnings per share has been calculated on the number of shares in issue of 10,451,506 (2003: 10,451,506) plus the dilutive potential ordinary shares arising from share options of 280,664 (2003: 118,626) totalling 10,732,170 (2003: 10,570,132). 3. Dividend The proposed final dividend of 2.00p will be paid on 15 August 2005 to shareholders registered at the close of business on 20 May 2005 . 4. The figures for the year ended 31 December 2003 are based on the audited accounts for that year, which have been delivered to the Registrar of Companies and on which the Auditors gave an unqualified report. The statutory accounts for the year ended 31 December 2004, which have been prepared using the same accounting policies as in 2003, have been completed and an unqualified audit opinion will be issued. The figures in the preliminary announcement are an extract and do not constitute statutory accounts within the meaning of the Companies Act 1985. The board approved this preliminary statement on 1 March 2005. END