RLD.L Regulatory News (RLD)

6 Apr 2006 07:01

Tanzanite One Limited06 April 2006 TANZANITE ONE LIMITED ("TANZANITEONE", "THE GROUP" OR "THE COMPANY") RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 "Net profit of US$9.8 million Dividend of 5 US cents per share to be declared" HIGHLIGHTS Financial - Net profit after tax US$9.8 million- EBITDA of US$14.3 million- Gross margin of 61% achieved on US$41.1 million revenue- Income tax paid US$3.1 million- Basic earnings per common share of 13.89 US cents- US 5 cents per share final dividend declared on 5 April 2006, payable on 26 May 2006 taking the total for the year to US 6 cents- Cash and cash equivalents of US$8.3 million Operational - 1.4 million carats recovered during the year with significant production increase in second half- Grade up 12% to 55 carats per tonne- New optical sorting equipment installed: positively impacting on recoveries and processing efficiencies- Security at mine site enhanced with the introduction of an X-ray body scanner- Encouraging drilling results indicate the presence of mineralisation at extensively greater depths Strategic - Ian Harebottle, former COO, appointed CEO effective 1 May 2006- Be Born to TanzaniteTM marketing strategy developed and launched internationally- SightHolder Preferred Supplier strategy fully functional with six initial SightHolders appointed- Inclusion in the FTSE AIM 100 index, effective March 2006 For more information please contact: Tanzanite One Limited Conduit PRWilli Boehm Leesa Peters/ Angus Prentice+61 40 996 9955 +44 (0) 20 7429 6600/ 0781 215 9885 Tanzanite One Limited Tanzanite One (SA) LimitedIan Harebottle Mark Summers CFO+255 744 600 991 +27 83 253 5539 www.tanzaniteone.com Key indicators: 12 months to 7 months to 31 Dec 2005 31 Dec 2004Revenue US$41.1m US$16.2mGross profit margin 61% 55%Gross profit US$24.9m US$8.9mAdmin/operating costs US$12.0m US$4.4mNet profit after tax and minority interest US$9.8m US$4.4mFully diluted EPS US13.00 cents US 8.34 cents Note:Figures for the period ended 31 December 2004 reflect seven months' operationsas the Group only commenced operations in May 2004 following the acquisition ofits tanzanite assets. Direct comparisons with the previous period are thus notappropriate. TanzaniteOne announces consolidated net earnings of US$9.8 million (US13.89cents per share) and cash earnings (before depreciation and amortisation) of US$11.3 million in the 12 months ended 31 December 2005. Revenue increased in line with expectations to US$41.1 million for the year with rough tanzanite sales (US$33.6 million) contributing 82%. The Directors have, on 5 April 2006, declared a final dividend of US 5 cents(2004: US 1 cent) per share payable on 26 May 2006 to shareholders registered asof 5 May 2006. This brings the total dividend payable for the year ended 31December 2005 to US 6 cents, an increase of 500% over last year. Revenue from tanzanite sales was strong in the first half of the year (US$22.4million) due to a high proportion of larger, high quality tanzanite recoveredduring this period. Conversely, the lower sales (US$18.7 million) achieved inthe second half of the financial year can be accorded to a decrease in thepercentage of high quality tanzanite recovered. As a consequence, the Sightscheduled for August 2005 was deferred to October 2005. A final successful Sightwas held in December 2005. Five Sights were thus held during the year underreview instead of the planned six. This variance in the quality of tanzanite produced also impacted on the grossmargin achieved during the year which was 66% higher in the first six months,decreasing to 54% in the second half of the year. For the entire period however, prices achieved for mined rough tanzanite ofUS$11 per carat (2004: US$9 per carat) reflected an overall improvement in thequality and grade of tanzanite produced from mining operations compared to theseven months ended 31 December 2004. This underpinning an improved gross marginof 61% for the group, up from 55% in the period ended 31 December 2004. Production for the year was 1.4 million carats of tanzanite. On-mine cash costsper carat were well controlled, down 50% to US$1 per carat (2004: US$2 percarat). Overall grade achieved increased by 12% to 55 carats per tonne (2004: 49carats per tonne) reflecting improved mining controls. Operating expenses of US$12.0 million include royalties paid to the Governmentof Tanzania on export of rough tanzanite (US$1.4 million), sales and othercommissions (US$0.9 million), salaries, wages and consulting fees (US$4.0million), depreciation and amortisation (US$1.5 million) and advertising andpromotional expenses (US$1.1 million). Royalties, advertising and promotionalexpenses are anticipated to increase going forward. On an annualised basisadministration and other operating expenses are up 4% compared to 2004,royalties are up in line with sales increases. Depreciation and amortisation areup in line with increased production. Foreign exchange losses and profits ariseon the revaluation of net monetary assets and are dependent on movements invarious exchange rates the Group is exposed to. No significant change, otherthan the potential of further foreign exchange profits or losses, is expected intotal operating expenses as cost-cutting initiatives and economies of scale comein to play. The effective tax rate of the Group for the year under review was 23.8% (2004:12.8%). The increase is due to the utilisation of all assessed losses in theGroup's subsidiary companies; accordingly the Group is now in a full tax payingposition. Total inventory levels increased to US$14.5 million (2004: US$12.6 million);with rough tanzanite accounting for 46% (2004: 38%) and polished tanzanite 51%(2004: 57%). As at 31 December 2005, TanzaniteOne had trade and otherreceivables of US$10.9 million. Cash and cash equivalent balances were US$8.3 million (2004: US$6.9 million).Interest bearing borrowings reduced from US$2.6 million to US$0.8 million at 31December 2005. The interest-bearing borrowings are in respect of certain plantand machinery acquired in Tanzania. The Group's total capital expenditure during the year amounted to US$2.6million, the major components being mine development expenditure of US$1.0million, optical sorting equipment of US$0.6 million, mining equipment of US$0.3million, earthmoving equipment of US$0.2 million, buildings and infrastructureof US$0.2 million and body scanning equipment of US$0.2 million. Operational review Mining Growth and development of skills in key areas continues to pay off as does afocus on increasing efficiency across all levels of operations. This hasresulted is an improved grade and an increased rate of underground development,while managing to contain costs within budgeted targets. Revenue, productionvolume and underground development all increased in line with targets, withopportunities to increase the current scale of operations without anysignificant additional capital expenditure. Various technological developments implemented over the past year have supportedimproved recoveries. These include the MicroSort optical sorting unit, a Worldfirst in this sector and X-Scann, an x-ray body scanning unit which can identifydown to 0.25 of a carat of tanzanite on or inside the human body. Exploration programme The results of the recent exploration and drilling programme indicates that thelower horizon, which hosts the economic mineralisation, has been intersected atdepths twice those previously known. This suggests that the mineralised zone andtherefore the life of the mine at current production rates may be significantlyincreased. Plans are well advanced to expand the necessary infrastructure to facilitatefuture mining to new depths in excess of 800m below surface on true dip.Additional exploration work on TanzaniteOne's surrounding prospecting areas ison going. Outside buying TanzaniteOne Trading, the Group's 75% owned, Arusha based rough tanzanite buyingoperation has seen increased buying activity as it established itself as areputable trading business in a very competitive market. This success isprimarily due to the strengthening of relationships with miners, gem brokers anddealers. The demand for good quality tanzanite remained high throughout the year whileproduction from TanzaniteOne's neighbours in Blocks B and D, remained steady. Rough tanzanite sales TanzaniteOne Marketing received a positive response to its Preferred SupplierStrategy which was introduced to the market in February 2005 with theappointment of five SightHolders from outside the Group. The Preferred SupplierStrategy seeks to grow the global market for tanzanite through collaborativerelationships with selected rough tanzanite customers (SightHolders). TheseSightHolders exclusively attend viewings of rough tanzanite parcels, which areplanned to occur six times per annum. Tanzanite sales at all major gem shows increased and the industry outlook ispositive with strong demand for most qualities. Total rough tanzanite salesamounted to US$33.6 million. Additional SightHolders may be appointed in duecourse on account of the high level of interest shown in the Preferred SupplierStrategy and an anticipated increase in production. Polished tanzanite sales The Tanzanite Company enjoyed increased sales in South Africa and the U.K.during 2005 with polished and set tanzanite contributing US$7.5 million inrevenue. Demand for tanzanite in the U.K. has grown as product awarenessincreased as a result of market building efforts. Outlook At the end of its first full year of operations the Group is positioned forgrowth, with a solid foundation in place and a clear strategy forward. The Board of TanzaniteOne is focused on building on the results achieved to dateand on continuing to grow the business. In the year ahead, TanzaniteOne willlook to exploit the opportunities available at the mine to increase production.The drilling results announced on 7 February 2006 support a favourableproduction outlook, which, coupled with the additional exploration work beingcarried out on the Company's prospecting areas and the continued strengtheningof relationships with small scale miners, should see a continued increase in thelevels of tanzanite produced. These will be supported through the innovativemarketing strategies developed by the Tanzanite Foundation, which aims toposition tanzanite as "The Birthstone", thereby encouraging sustainableincreases in demand. Appointment of Ian Harebottle as Chief Executive Officer Mike Nunn, the founder and Chief Executive Officer ("CEO") of TanzaniteOne,today announced his succession by Ian Harebottle, the former Chief OperatingOfficer ("COO"). Ian will assume full responsibility as of 1 May 2006. Ianjoined TanzaniteOne in 2001 and has been instrumental in progressing thedevelopment of the Merelani mine to its current levels of production andefficiency. Ian's appointment receives the full support of the board and thestaff. Mike Nunn will remain a consultant to the business. Commenting on the results and on Ian's appointment, Mike Nunn, outgoing CEO ofTanzaniteOne said: "TanzaniteOne is now firmly on track for continued growth andsolid performance. Its development path is set, as confirmed by this first setof full year results since our admission to AIM, which is a credit to themanagement team that has evolved within the business. Ian is skilled andmotivated to build the business and take it to a new level. I am confident hewill take up the challenge and succeed beyond expectations." Incoming CEO Ian Harebottle added: "On behalf of the staff and the board of TanzaniteOne, I would like to expressour gratitude to Mike for his unwavering dedication and commitment toTanzaniteOne since its formation. We have a unique product, with possibly moretanzanite than we first thought. Our 'Be Born To Tanzanite' marketing strategyis developing nicely and prices are steadily increasing - a nice platform fromwhich to growth the business." Basis of preparation The accounting policies adopted for the purposes of these results comply withInternational Financial Reporting Standards, as well as with applicablelegislation. The accounting policies are consistent with the accounting policiesas applied in the previous year, except for the adoption of IAS21 (Revised) thatresulted in a restatement of the 2004 results. The condensed consolidated accounts include the reviewed accounts of TanzaniteOne Limited and each of its subsidiaries and has been prepared using accounting policies consistent with those to be adopted for preparing the audited Annual Financial Statements. They are stated in US Dollars which is the reporting currency of the Group. The condensed consolidated accounts of TanzaniteOne Limited and its subsidiarycompanies as set out below have been reviewed by KPMG Inc. Their unmodifiedreview opinion is available at the Company's registered office. Tanzanite One Limited Condensed Consolidated Income Statement Year ended 31 December 2005 US$'000 Reviewed Audited For the year 7 months ended ended 31 Dec 05 31 Dec 04 Revenue 41,090 16,168Cost of sales (16,206) (7,273) Gross profit 24,884 8,895 Administration and other operating costs (8,553) (4,803)Royalties (1,435) (442)Depreciation and amortisation (1,456) (986)Foreign exchange (loss)/profit (557) 1,857Net financing income 39 116 Profit before tax 12,922 4,637Income tax expense (3,077) (220) Profit after tax 9,845 4,417Minority interest (73) (6) Net profit 9,772 4,411EPS (basic - US cents) 13.89 8.59EPS (diluted - US cents) 13.00 8.34 Tanzanite One Limited Condensed Consolidated Cash Flow Statement Year ended 31 December 2005 US$'000 Reviewed Audited For the year 7 months ended ended 31 Dec 05 31 Dec 04 Cash flows from operating activitiesCash generated by/(utilised in)operations 5,638 (1,553)Net financing income 39 116Taxation paid (2,062) (146)Dividends paid (1,531) - -------- ---------Net cash from operating activities 2,084 (1,583) Cash flows from investing activitiesAcquisition of subsidiaries, net of cash acquired - 4,634Acquisitions of property, plant and equipment (2,578) (3,119)Proceeds on disposal of property, plantand equipment 1,841 7 -------- ---------Net cash from investing activities (737) 1,522 Cash flows from financing activitiesNet proceeds from issue of share capital 1,198 12,296Share based payments 513 -Repayment of loans from Afgem Limited - (5,368)Decrease/(repayment) of long-term loans 162 (164)(Repayment)/increase in interest-bearingborrowings - current (352) 458Repayment of interest bearing borrowings- non-current (1,479) (252) -------- ---------Net cash from financing activities 42 6,970 -------- ---------Net increase for the year/period 1,389 6,909At beginning of the year/period 6,909 - -------- ---------At end of the year/period 8,298 6,909 -------- --------- Tanzanite One Limited Condensed Consolidated Balance Sheet At 31 December 2005 US$'000 Reviewed Audited 31 Dec 05 31 Dec 04 Non-current assetsProperty, plant and equipment 18,912 20,288Intangible assets 1,824 2,000Non-current inventory 205 -Long-term loans 2 164Deferred tax 577 274 -------- --------Total non-current assets 21,520 22,726 -------- -------- Current assetsInventory 14,260 12,621Income tax receivable 111 663Trade and other receivables 10,861 4,384Cash and cash equivalents 8,298 6,909 -------- --------Total current assets 33,530 24,577 -------- --------Total assets 55,050 47,303 -------- -------- Non-current liabilitiesInterest-bearing borrowings 670 2,149Provisions 82 82Deferred tax 2,507 2,158 -------- --------Total non-current liabilities 3,259 4,389 -------- -------- Current liabilitiesInterest-bearing borrowings 107 459Income tax payable - 273Trade and other payables 2,213 1,877 -------- --------Total current liabilities 2,320 2,609 -------- --------Total liabilities 5,579 6,998 -------- -------- -------- --------Net assets 49,471 40,305 -------- -------- EquityShareholders' equity 49,289 40,107Minority interest 182 198 -------- --------Total equity 49,471 40,305 -------- -------- Number of shares in issue 71,6 million 70,1 millionNet asset value per share 69.11 cents 57.46 cents Tanzanite One Limited Condensed Consolidated Statement of Changes in Equity Year ended 31 December 2005 Common A Total Share Retained Share Foreign Total Minority Total share class share premium earnings options currency interest equity capital share capital translation capital reserve US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 Balance at 31 21 1 22 35,674 4,411 - - 40,107 198 40,305 December 2004 Share based - - - - (139) 139 - - - - payments - prior year adjustment Reclassification - - - - (5) - - (5) - (5) of mineral right Restatement - - - - (1,357) - 1,357 - - - due to adoption of IAS 21 (Revised) Issue of - - -* 911 - - - 911 - 911 common share capital Issue of A - - -* 287 - - - 287 - 287 class share capital Profit for the - - - - 9,772 - - 9,772 73 9,845 year Share based - - -* 10 - 365 - 375 - 375 payments Foreign - - - - - - (716) (716) - (716) currency translation reserve Dividends paid - - - - (1,442) - - (1,442) (89) (1,531) ---------------------------------------------------------------------------------------------------- Balance at 31 21 1 22 36,882 11,240 504 641 49,289 182 49,471 December 2005 ---------------------------------------------------------------------------------------------------- * Amount less than US$ 1,000 Tanzanite One LimitedIncorporated in BermudaExempt company number EC33385 Board of DirectorsMichael Adams Non-executive ChairmanAmi Mpungwe Non-executive Deputy ChairmanMike Nunn Chief Executive OfficerIan Harebottle Chief Operating OfficerMark Summers Chief Financial OfficerEdward Nealon Non-executive directorGeorg von Opel Non-executive director (resigned 7 December 2005)Nicholas Sibley Non-executive directorGustav Stenbolt Non-executive director (appointed 7 December 2005)Philipp LiebundGut Alternate to Gustav Stenbolt (appointed 7 December 2005) Audit/Risk CommitteeNicholas Sibley (Chairman)Michael AdamsGustav Stenbolt Remuneration/Succession Planning CommitteeMichael Adams (Chairman)Ami MpungweEdward Nealon Mining and Geology CommitteeEdward Nealon (Chairman)Ian Harebottle Nominations CommitteeThe Nominations Committee comprises the Full Board Company SecretaryWilli Boehm Management Mike Nunn Chief Executive OfficerIan Harebottle Chief Operating OfficerMark Summers Chief Financial OfficerZane Swanepoel TanzaniteOne Mining, General ManagerAdrian Banks TanzaniteOne Trading, Managing DirectorCandice Nunn TanzaniteOne Marketing, Managing DirectorJason Krause The Tanzanite Company, Managing Director Issued Capital At 31 December 2005, the Company had in issue:71,588,397 fully paid common shares4,013,985 unlisted Tanzanite One SA A class share options Nominated Advisor (AIM) Williams de Broe Plc, 6 BroadgateLondon EC2M 2RPTelephone: +44 207 588 7511Facsimile: +44 207 588 8860 This information is provided by RNS The company news service from the London Stock Exchange