Last checked at 27 Mar 2007 07:00
27 March 2007 BISICHI MINING PLC Preliminary Results for the year ended 31 December 2006 2006 2005 Revenue ‚£13,239,000 ‚£13,485,000 Profit before interest, tax and ‚£3,737,000 ‚£5,471,000depreciation Profit before tax ‚£2,614,000 ‚£4,206,000 Diluted earnings per share 19.68p 30.19p Dividend per share up 11.1% 2.50p 2.25p
Commenting, Michael Heller, chairman of Bisichi Mining PLC said:
"2006 has been both a challenging and a successful year for Bisichi Mining and,with the many opportunities now arising in the South Africa, we look forward tothe coming year with confidence".
END
For further information, please call:
Andrew HellerRobert Corry, Bisichi Mining PLC 020 7415 5030Christopher Joll MJ2 Ltd 020 7491 7776
CHAIRMAN'S STATEMENT
I am pleased to report to shareholders that a very strong performance in thesecond half has resulted in a profitable year for Bisichi Mining PLC("Bisichi") with Group profit on ordinary activities before interest, taxationand depreciation at ‚£3,737,000 (2005: ‚£5,471,000). As already reported, thefirst six months of 2006 were severely impacted by the consequences of thefatality that occurred in late 2005 at Black Wattle Colliery. However, 2006clearly demonstrated the strength of the management team and its ability todeal swiftly and effectively with unforeseen problems in our mining operations.The second half of the year has been the most profitable in the company'shistory.One of the most exciting aspects of the past year in South Africa has been thesharp increase in the availability of mineral rights for development byempowered mining companies such as ourselves. This has arisen because manyreserves have been returned to the State as a result of the "use it or lose it"provisions of the Mineral and Petroleum Resources Development Act 2004("MPRDA"). With Black Wattle's Black Economic Empowerment ("BEE") status andsuccessful track record we are well placed to take advantage of thesenewly-available coal reserves.During the past year, we have forged relationships with new BEE partners whichwill allow us to take the operations in South Africa onto the next level. Inthis regard, I am pleased to announce the appointment of David Nkosi as aDirector of Black Wattle Colliery. David is a graduate of the Department ofMinerals and Energy ("DME") training programme and has been involved in themining sector for several years. We look forward to his active involvementas a Director of Black Wattle identifying new reserves and helping to grow ourSouth African business. Shareholders should be aware that, as a result of certain difficulties thathave emerged in our relationship with the minority shareholder at Black WattleColliery, we have had to remove Sipho Dube and Duku Mogoai (his associate atEndulwini Resources) as directors of the Black Wattle Colliery. In addition wehave cancelled the Agreement by which the Mhlaba Dube Memorial Trust held 37.5%shareholding in Black Wattle and we have initiated court proceedings in SouthAfrica to obtain a declaration that the Trust is no longer a shareholder. Thislegal action does not affect the operation of Black Wattle Colliery nor itsmineral rights granted under the MPRDA. Once this matter has been resolved, wewill invite a new BEE partner to join us as a shareholder in Black Wattle.Black Wattle was one of the first coal mines in South Africa to achieve BEEstatus in 1999 and Bisichi remains committed to maintaining its leadership inthis regard.As shareholders have already been informed, Ezimbokodweni Mining (Pty) Limitedis the joint venture company formed to own and develop the Pegasus Reserve.This company is owned as to 49% by Bisichi and 51% by Endulwini Resources.Although the DME has converted the prospecting rights, Ezimbokodweni has notyet provided the 100% financial guarantee required by the vendor, Ingwe, inaccordance with its obligation under the original Purchase and Sale Agreement.We have already indicated to Ingwe that Bisichi is willing to put up aguarantee for its 49 % of the project and we are actively pursuing theresolution of this issue with all parties concerned.If the development of Pegasus does not proceed as planned the currentavailability of other high quality coal reserves referred to earlier in thisreport provides us with numerous opportunities to develop our mining activitiesin South Africa independent of Pegasus. To that end, we are in the process ofpurchasing a drill rig and have set up a dedicated team in a satellite officeto work full time on reserve acquisitions. I am delighted to report that Bisichi's UK retail property portfolio, managedby London & Associated Properties PLC has contributed most satisfactorily tothis year's profits and has underpinned our mining activities. The portfolio,including our share of Dragon Retail Properties, is virtually fully let, andwas valued at 31 December 2006 by independent chartered surveyors at ‚£19.3million, an increase of 10%.To underline our confidence in the future of Bisichi, your directors arerecommending a dividend of 2.50p, compared to 2.25p per share in the previousyear, an increase of 11.1% This will be paid on 13 August 2007 to shareholderson the register as of 20 July 2007. 2006 has been both a challenging and a successful year for Bisichi and, withthe many opportunities now arising in the South Africa, we look forward to thecoming year with confidence. MICHAEL HELLERChairman27 March 2007MINING REVIEWMining ReportAs the Chairman has reported, the first six months of 2006 were greatlyaffected by the aftermath of the first underground fatality in Black Wattle'shistory which took place in late 2005. The closure of the Continuous Minersection immediately reduced production which had a negative impact onprofitability. In the wake of the accident, your management took a number ofdecisive actions in order to turn the situation around. The Continuous Minerwas overhauled and lowered during this down time period which facilitated itsreturn to reliable operation earlier than was originally anticipated as itcould start to mine in areas of lower seam height. We obtained acceleratedpermission from the DME to mine under a major highway, which allowed us accessto a substantial untouched portion of our reserves. We also took over ownershipof the Black Wattle's washing plant, which has allowed us to upgrade thefacility, improve yields and increase overall productivity. Moreover, wesuccessfully achieved substantial increases in price for each of our majorproducts. Finally, we have entered into a long term contract with a BEE companyfor the sale of our discard material to Eskom, the South African electricityutility. This contract both generates substantial revenue and will greatlyreduce our rehabilitation liability when we eventually cease mining.Furthermore, it has already reduced our handling and stockpiling expenses onthe mine. As a result of these actions by your management, Black Wattledelivered its most profitable half year in its history in the second half of2006.
Production: Black Wattle Colliery
The two bord and pillar and continuous miner sections performed well in thesecond half of 2006. Taking the setbacks of late 2005 and the first half of2006 into account, we are very pleased to have achieved a run-of-mineproduction figure for the year of 1.199 million tonnes, just 7.5% less than2005. The three sections should continue to mine at acceptable levels in 2007.We will increase production when we receive opencast permission, which hasrecently been applied for from the DME. In this regard, we have had thenecessary meetings with all interested and affected parties and are awaitingDME approval to commence opencast mining.
Marketing: Black Wattle Colliery
2006 was a very successful year, both in terms of export-based sales and theprices we are achieving in a very strong domestic market. In April 2006, weachieved a price increase of 18.6% for our sales to local suppliers of steamcoal, followed by another increase of 14.3% in November 2006. In July 2006, weachieved an 11% increase in our prices for the local ferrochrome market.Although the mine's fixed price export contract came to a conclusion in thesecond half of 2006, strong prices in the international market have meant thatexport-based sales are still highly profitable, especially with the recentdepreciation of the South African rand. The general tightness of supply both inthe international and domestic markets has effectively put in place a pricefloor at much higher than historical levels. For the first time in recentmemory, the prices for domestic steam coal Free on Mine are higher than theprice which we receive from Richards Bay Coal Terminal, taking in to accountthe additional transportation costs. We fully intend to exploit thesefavourable market conditions by locking in prices where sensible and takingadvantage of new sales opportunities as they arise.
Human Resources: Black Wattle Colliery
In order to strengthen our human resource management activities, Andrew Mandlazi was recently appointed Head of Human Resources at the Black Wattle Colliery. He has joined us at a critical time when we are implementing a number of important policies, key among these include:
Worker Training: Black Wattle is sending a number of its employees to varioustraining programs throughout the Mpumalanga and Gauteng Regions, including theColliery Training College in Witbank, Witwatersrand University, andPotchefstroom University.Adult Basic Education Training (ABET): The workforce has been assessed for ABETtraining and a computer-based ABET training facility is being established atthe mine to facilitate participation in this program.
HIV/AIDS Peer Education: Six employees have been sent to be trained as HIV/AIDS Peer Educators to assist in putting into place Black Wattle's HIV/AIDS education program.
Employment Equity: Quarterly Employment Equity meetings are taking place to ensure that the Black Wattle Colliery is complying with all aspects of national legislation related to Employment Equity.
Social Development
We are participating in the Integrated Development Program of the Steve Tshwete(Middelburg) Municipality through the provision of assistance to the EvergreenPrimary School and the nearby community. Key activities completed in the recentyear include painting of all classrooms, completion of the schooladministration buildings, and final construction of the school kitchen.
Procurement
Black Wattle has implemented a BEE-focussed procurement policy which stronglyencourages our suppliers to have and maintain strong BEE credentials. Weconstantly monitor our monthly BEE spend and encourage potential BEE suppliersto compete for equipment and service contracts at the Black Wattle Colliery. Wealso are actively engaged in sale of our products to BEE enterprises, as shownby our 5 year sales agreement with a BEE company for the purchase of ourdiscard for supply to Eskom.
Health and Safety
Supervisors have received training in hazard identification and risk assessmentin their work areas. All levels of employees will have received this trainingby the end of 2007. A medical surveillance system is in place which providesmanagement with information used in determining measures to eliminate, controland minimise employee health risks and hazards.
Prospects
At Black Wattle Colliery higher prices are being achieved across the range ofall of our markets-- from our premium low phosphorous nuts to our discard salesto the power industry. The opportunity to commence opencast mining in the nextfew months is now a real possibility, and the increased performance of thewashing plant has improved both yield and coal quality.The prospects for acquiring additional reserves have never looked so good.
I am confident that 2007 will be a successful year for our South African operations.
ANDREW HELLERManaging Director27 March 2007Bisichi Mining PlcConsolidated income statementfor the year ended 31 December 2006 Notes Year Year ended Ended 31 Dec 31 Dec 2006 2005 ‚£'000 ‚£`000 Group revenue 1 13,239 13,485 Operating costs (12,346) (12,037) __________ __________
Operating profit before adjustments 1 893
1,448
Gains on held for trading investments 81
177
Increase in value of investment 1,643
2,393property Exceptional items 2 12 124
Share of profit in joint ventures 175
522 __________ __________ Operating profit 1 2,804 4,664 Interest receivable 232 76 Interest payable (422) (534) __________ __________ Profit before tax 2,614 4,206 Taxation 3 (489) (687) __________ __________ Profit for the period 2,125 3,519 __________ __________ Profit attributable to equity 2,125 3,256shareholders
Profit attributable to minority -
263interest __________ __________ 2,125 3,519 __________ __________ Earnings per share 5 20.33p 31.15p __________ __________ Diluted earnings per share 5 19.68p 30.19p __________ __________Bisichi Mining PlcConsolidated balance sheetAs at 31 December 2006 2006 2005 ‚£'000 ‚£'000 Assets Non-current assets Value of investment properties 17,270 15,625attributable to group Fair value of head lease 146 153 Property 17,416 15,778 Reserves, plant and equipment 5,415
5,604
Investments in Joint Ventures 2,637 2,519 Other Investments 391 424 Deferred tax assets 234 241 Total non-current assets 26,093 24,566 Current assets Inventories 56 124 Trade and other receivables 2,056
4,578
Held for trading investments 700
629 Interest derivative 53 36 Cash and cash equivalents 3,275 488 6,140 5,855 Total assets 32,233 30,421 Liabilities Current liabilities Borrowings (3,302) (2,382) Trade and other payables (5,887) (4,432) Current tax liabilities (33) (91) (9,222) (6,905) Non-current liabilities Borrowings (3,402) (4,368) Finance lease liabilities (146) (153) Deferred tax liabilities (2,974) (2,582) (6,522) (7,103) (15,744) (14,008) Net assets 16,489 16,413 Equity Share capital 1,045 1,045 Translation reserve (1,241) 56 Other reserves 189 114 Retained earnings 16,496 14,606 16,489 15,821 - 592 Total equity 16,489 16,413 Bisichi Mining PlcConsolidated CASH FLOW STATEMENTFor the year ended 31 December 2006 Year Year ended ended 31 December 31 December 2006 2005 ‚£'000 ‚£'000
Cash flows from operating activities
Operating profit 2,804 4,664 Depreciation 933 807 Share based payment expense 75 23 Unrealised gain on investment held for (81) (177)trading Unrealised gain on investment properties (1,643)
(2,393)
Share of profit of joint ventures (175) (522) Hedging - 82 ___ ___ Cash flow before working capital 1,913 2,484 Change in inventories 57 (89) Change in trade and other receivables 1,780
(753)
Change in trade and other payables (382)
750 Change in provisions 38 (136) Acquisitions of held for trading - (24)investments
Proceeds from held for trading investments 10
99 ___ ___ Cash generated from operations 3,416 2,331 Interest received 232 76 Interest paid (422) (534) Income tax paid 28 (331) ___ ___ Cash flow from operating activities 3,254 1,542 ___ ___ Acquisition of reserves, plant and (1,893) (1,348)equipment
Proceeds from sale of investment 19
482
properties, reserves, plant and equipment
Acquisitions of investments (10) (41) ___ ___ Cash flow from investing activities (1,884) (907) ___ ___
Cash flow from financing activities
Borrowings drawn 1,380 23 Borrowings repaid (498) (1,927) Equity dividends paid (235) (209) ___ ___ Cash flow from financing activities 647 (2,113) ___ ___ Net increase (decrease) in cash and cash 2,017 (1,478)equivalents ___ ___
Cash and cash equivalents at 1 January (969)
507 Exchange adjustment (70) 2 ___ ___ Cash and cash equivalents at 31 December 978 (969) ___ ___ Bisichi Mining Plc
Consolidated STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY For the year ended 31 December 2006
Share Translation Other Retained Total Minority Total equity reserve earnings interest capital reserves ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Balance as at 1 January 1,045 141 91 11,559 12,836 334 13,1702005 Revaluation of - - - 2,393 2,393 - 2,393
investment properties Movement on fair value - - - (58) (58) - (58)of derivatives Other income statement - - - 921 921 263 1,184movements Profit for the year - - - 3,256 3,256 263 3,519 Exchange adjustment - (85) - - (85) (5) (90) _____________ _____________ ____________
____________ ____________ ____________ ____________
Total recognised income - (85) - 3,256 3,171 258 3,429and expense for the period Dividend - - - (209) (209) - (209) Equity share options - - 23 - 23 - 23 _____________ _____________ ____________
____________ ____________ ____________ ____________
Balance at 31 December 1,045 56 114 14,606 15,821 592 16,4132005 Revaluation of - - - 1,643 1,643 - 1,643investment properties Movement on fair value - - - 17 17 - 17of derivatives Other income statement - - - 465 465 - 465movements Profit for the year - - - 2,125 2,125 - 2,125 Exchange adjustment - (1,297) - - (1,297) - (1,297) _____________ _____________ ____________
____________ ____________ ____________ ____________
Total recognised income - (1,297) - 2,125 828 - 828and expense for the period Dividend - - - (235) (235) - (235) Removal of minority - - - - - (592) (592)interest Equity share options - - 75 - 75 - 75 _____________ _____________ ____________
____________ ____________ ____________ ____________
Balance at 31 December 1,045 (1,241) 189 16,496 16,489 - 16,4892005 _____________ _____________ ____________
____________ ____________ ____________ ____________
Bisichi Mining Plc
ACOUNTING POLICIES aND NOTES TO ACCOUNTS
Basis of accounting
The results for the year ended 31 December 2006 have been prepared inaccordance with International Financial Reporting Standards (IFRS) as adoptedby the European Union. The principal accounting policies applied are the sameas those set out in the Financial Statements for the year ended 31 December
2005. 1 SEGMENTAL ANALYSIS 31 December 31 December 2006 2005 ‚£'000 ‚£'000 Revenue Mining 12,138 12,278 Property 1,064 1,086 Other 37 121 _______ _______ 13,239 13,485 _______ _______ Operating profit before adjustments Mining 534 1,008 Property 350 436 Other 9 4 _______ _______ 893 1,448 _______ _______ Operating profit Mining 516 1,066 Property 2,198 3,417 Other 90 181 _______ _______ 2,804 4,664 _______ _______ 2 EXCEPTIONAL ITEMS 31 December 31 December 2006 2005 ‚£'000 ‚£'000 Gain on sale of investment 12 412 properties Costs in relation to suspended - (288) fund raising _______ _______ 12 124 _______ _______ 3 TAXATION 31 December 31 December 2006 2005 ‚£'000 ‚£'000 Based on the results for the year: Corporation tax at 30% (2005: 30%) (46)
154
Adjustment in respect of prior 143 (1) years - UK _______ _______ 97 153 Deferred tax 392 534 _______ _______ 489 687 _______ _______ * DIVIDEND A final dividend in respect of 2006 of 2.5p (2005: 2.25p) per share amountingto a total of ‚£261,000 (2005: ‚£235,000) is proposed by the board. The dividendproposed is not accounted for until it has been approved at the Annual GeneralMeeting. The amount will be accounted for as an appropriation of revenuereserves in the year ending 31 December 2007.
* EARNING PER SHARES
Both the basic and diluted earnings per share calculations are based on aprofit of ‚£2,125,000 (2005: ‚£3,256,000). The basic earnings per share have beencalculated on 10,451,506 (2005: 10,451,506) ordinary shares being in issueduring the period. The diluted earnings per share have been calculated on thenumber of shares in issue of 10,451,506 (2005: 10,451,506) plus the dilutivepotential ordinary shares arising from share options of 347,466 (2005: 334,746)totalling 10,798,972 (2005: 10,786,252).
* FINANCIAL INFORMATION
The above financial information does not constitute statutory accounts withinthe meaning of section 240 of the Companies Act 1985. The financial informationhas been extracted from the group's annual report and accounts for the yearended 31 December 2006 on which the auditors have not yet expressed an opinion,but for which an unqualified report is expected. Statutory accounts for theyear ended 31 December 2005 which were prepared under IFRS, have been deliveredto the Registrar of Companies; the report of the auditors on those accounts wasunqualified and did not contain a statement under Section 237(2) or (3) of
theCompanies Act 1985. * Board approval
These preliminary results were approved by the Board of Bisichi Mining PLC on 27 March 2007.
BISICHI MINING