RLD.L Regulatory News (RLD)

12 Apr 2005 07:00

Tanzanite One Limited12 April 2005 Tanzanite One Limited("TanzaniteOne" or the "Group")AIM: TNZ 12th April 2005 PRELIMINARY RESULTS FOR THE SEVEN MONTHS TO 31 DECEMBER 2004 Net profit US$4.4 million (first seven months of operations) Maiden dividend declared: 1 US cent per share TanzaniteOne announces consolidated net earnings of US$4.4 million (US8.6 centsper share), earnings (before depreciation and amortisation) of US$5.4 millionand the declaration of a maiden dividend of 1 US cent per share. Highlights for the period: •Net profit after tax attributable to TanzaniteOne of US$4.4 million (US8.6 cents per share); achieved for the seven months following acquisition of its tanzanite business in May 2004 •Strong gross margin of 55% achieved on US$16.2 million revenue €1 US cent per share maiden dividend declared, payable on 29 July 2005 •Strong financial position with US$22 million of net current assets •Outlook for 2005 positive with key developments planned in all businesses Commenting on these results, Mike Nunn, Group Chief Executive, said: "We are pleased to be able to deliver this first set of results comfortably inline with management's expectations and the declaration of a maiden dividend istestament to this. Our understanding of tanzanite mining operations andmarketing strategies has been consolidated over the last seven months. We lookforward to applying this knowledge to growing all our businesses in line withthe core strategic objectives identified for each stage of the tanzanite valuechain". TanzaniteOne acquired its tanzanite assets with effect from 1 June 2004;accordingly these financial statements include the consolidated results of theGroup's tanzanite operations for the seven month period ended 31 December 2004.No comparative figures are provided as TanzaniteOne is a newly incorporatedentity which has not operated prior to the acquisition of its tanzanite businessin May 2004. Gross profit was strong at 55% of total revenue of US$16.2 million. Revenuecomprised rough tanzanite sales of US$12.2 million and polished tanzanite andjewellery sales of US$3.9 million. Cost of sales, which consists of mining costsin Tanzania and purchases of rough tanzanite by our outside buying company,amounted to US$7.3 million. Mining costs for the period were well managed with acash cost per carat of US$1.84 against a selling price per carat of US$8.27giving a 78% on mine gross margin. Further savings are expected from increasedeconomies of scale and improved extraction techniques. Operating expensesamounted to US$4.4 million of which the major components were salaries and wagesof US$1.5 million, net foreign exchange and translation differences of US$0.8million, depreciation and amortisation of US$1.0 million and TanzanianGovernment royalties of US$0.4 million. The disposal of surplus assetssubsequent to period end for their carrying values and non-recurring operatingexpenditure will result in savings of US$0.9 million in the 2005 financial year. Inventory on hand at 31 December 2004 was US$12.6 million. This level isconsidered to be adequate for current business activity. Interest bearing debtat 31 December 2004 was US$2.6 million. This was repaid subsequent to the periodend following the disposal of assets surplus to the Group, resulting inTanzaniteOne being almost debt free. TanzaniteOne's low level of gearing iscurrently under consideration by the Board. Market dynamics, as identified in the diamond and jewellery industries, indicatea solid improvement in demand during 2004, most noticeably in top end jewellersand the Japanese market, which showed some signs of recovery, whilst the UnitedStates remained tanzanite's primary market. This demand was driven in part byincreased advertising across the board. With demand continuing to outstripsupply, tanzanite outperformed the overall jewellery sector slightly, supportingan approximate 25% price rise across most tanzanite qualities during 2004. It is anticipated that the contribution of rough tanzanite sales will increaseas a percentage of total revenue over the medium term due to increased demandand the implementation of our Preferred Supply Strategy which was announced tothe market in February 2005. Sales in the United Kingdom represented 13% oftotal polished tanzanite sales; an encouraging contribution from a market thathas only recently been introduced to tanzanite. The year ahead will see TanzaniteOne build on the successes of this seven monthperiod. Initial indications both in the broader luxury goods market and in thetanzanite market for 2005 are encouraging and the Board believes that thegeneral outlook for tanzanite sales is therefore positive. INCOME STATEMENT for the period ended 31 December 2004 GROUP US$ Revenue 16,168,657Cost of sales 7,273,173 ---------Gross profit 8,895,484 Operating expenses 4,373,601 ---------Operating profit before net financing income 4,521,883 Net financing income 115,611 ---------Profit before tax 4,637,494 Income tax expense 220,212 ---------Profit for the period 4,417,282 ========= Attributable to:Common shareholders 4,411,147Minority interest 6,135 ---------Profit for the period 4,417,282 ========= Basic earnings per common share (US cents/share) 8.59 Diluted earnings per common share (US cents/share) 8.34 Dividends per common share declared after31 December 2004 (US cents/share) 1.00 BALANCE SHEET at 31 December 2004 GROUP US$ Assets Non-current assets Property, plant and equipment 20,288,065 Intangible assets 2,000,000 Long-term loans 163,992 Deferred tax assets 274,148 -------- Total non-current assets 22,726,205 Current assets Inventories 12,621,534 Income tax receivable 662,915 Trade and other receivables 4,383,946 Cash and cash equivalents 6,909,008 -------- Total current assets 24,577,403 -------- Total assets 47,303,608 ======== Equity Issued capital 22,112 Share premium 35,674,622 Retained earnings 4,411,147 -------- Total equity attributable to common shareholders 40,107,881 Minority interest 197,859 -------- Total equity 40,305,740 -------- Non-current liabilities Interest-bearing borrowings 2,149,489 Provisions 81,850 Deferred tax liabilities 2,157,592 -------- Total non-current liabilities 4,388,931 Current liabilities Interest-bearing borrowings 458,589 Income tax payable 272,899 Trade and other payables 1,877,449 -------- Total current liabilities 2,608,937 -------- Total equity and liabilities 47,303,608 ======== Common shares in issue 70,149,113 Net asset value per common share (US cents/share) 57.46 CASH FLOW STATEMENT for the period ended 31 December 2004 GROUP US$ Cash flows from operating activities Cash utilised in operations (1,552,558) Net financing income 115,611 Taxation paid (146,437) --------- Net cash utilised in operations (1,583,384) Cash flows from investing activities Acquisition of subsidiaries, net of cash acquired 4,634,529 Acquisition of property, plant and equipment (3,118,862) Proceeds on disposals of property, plant and equipment 6,971 --------- Net cash from investing activities 1,522,638 Cash flows from financing activities Net proceeds from the issue of share capital 12,296,018 Repayment of loans (5,368,471) Repayment of long-term loans (163,992) Increase in interest-bearing borrowings - current 458,589 Repayment of interest-bearing borrowings - non-current (252,390) --------- Net cash from financing activities 6,969,754 --------- Cash and cash equivalents at 31 December 2004 6,909,008 ========= Notes: 1. The financial information set out above does not constitute the Company's statutory accounts for the period ended 31 December 2004 but is derived from those accounts. The auditors have reported on those accounts; their reports were unqualified. 2. The proposed final dividend of 1 US cent per Common share is payable on 29 July 2005 to shareholders on the register on 8 July 2005. 3. The basic earnings per ordinary share of 8.59 US cents is based on the profit for the financial period of US$4,417,282 and 51,335,308 Common shares, being the average number of shares in issue for the period. 4. Copies of the full accounts will be posted to all shareholders in April 2005. Further copies will be available from the Group's website. OPERATIONAL REVIEW Mining and Exploration TanzaniteOne's mining operations are situated in Northern Tanzania, where theGroup holds a special mining licence over a substantial portion of the world'sknown tanzanite resources, as well as various exploration rights. Production over the period was approximately in line with management'sexpectations, as was grade, which whilst characteristically variable, averagedat 49 carats per tonne. This grade is lower than is expected going forward as aresult of waste dilution from shaft development. Firm demand and pricing forrough tanzanite resulted in the mine being able to reach its targets relativelycomfortably. Capital raised through the AIM flotation process allowed for various majorprojects to be initiated, including: • increased exploration and geological research, including a fluid inclusion study in tanzanite-rich vs. tanzanite-poor mineralized areas. This should greatly enhance our ability to target high yield areas; • the opening of two additional exploration shafts; • upgrades to an existing exploration shaft, which delivered good production during the period and is expected to be fully commissioned in late 2005; • upgrades to existing shafts to access the ore body at significantly greater depths; • installation of appropriate support infrastructures; and • the testing of new technologies aimed at reducing security risk in productive areas and improved final recovery methods. The Group's mine plans remain dynamic, with focus continuing to be placed onimproving efficiencies and effectiveness. Mine management is currently focusedon increasing exposure to production at various levels across the length ofstrike. During the seven months under review further methods of mechanising theore handling facilities were investigated. The most promising option for partialmechanisation is vacumation. Security remains a key challenge; from both an internal and externalperspective. In 2005, measures to manage this will include the introduction ofan X-Scann unit (a low-level x-ray unit) which will detect tanzanite within thehuman body. Further co-operation of the Department of Minerals and Energy andimproved relations with neighbouring mines, as well as pre-emptive measures tolimit underground access and reduce the security risk associated with illegalunder-mining and surface intrusions, are in place. The ore treatment plant is fully commissioned and operational, with a singleshift capacity of10, 000tph. Our expected ramp up in production will therefore be comfortablyaccommodated. Outside Buying TanzaniteOne Trading Ltd the Group's 75% owned subsidiary manages theArusha-based rough tanzanite buying operation. The remaining 25% is held by theGroup's Tanzanian partners who play an integral role in the managing of thisbusiness. In the seven months to December 2004, TanzaniteOne Trading successfullyestablished itself as one of Tanzania's leading tanzanite trading operations andcomfortably achieved its internal targets. The latter half of 2004 wassuccessful in terms of developing relationships with tanzanite miners, brokersand dealers - all of which remain critical to building a powerful tradingoperation over the long term. Our trading business plays a strategic role in our broader business as itprovides us with an up-to-date perspective on market dynamics and a completeunderstanding of real time pricing in the rough tanzanite market. Furthermore itintroduces a key element of stability to the value chain across which weoperate. Rough Tanzanite Marketing Demand for rough tanzanite from TanzaniteOne's traditional customer baseremained strong. However, a recognition of the flaws inherent in the auctionsystem led to the introduction of our Preferred Supply Strategy; announced inFebruary 2005. This strategy involves the adoption of a system of roughtanzanite sales similar to that used in the diamond industry. Pre-qualifiedcustomers, sightholders, will enter into offtake agreements for 18 parcels ofrough tanzanite over three years, at market prices based on supply and demanddynamics. The system is expected to further facilitate supply continuity andprice stability, whilst enhancing confidence in the growth potential andlong-term sustainability of the tanzanite industry. Polished Sales The Tanzanite Company, a sightholder of TanzaniteOne's rough marketing business,markets and sells certified and polished loose tanzanite and branded, settanzanite jewellery. Sales over the period were in line with management'sexpectations, with 56% of total polished sales comprising loose polishedtanzanite and the remainder in tanzanite jewellery. Margins expanded over theperiod due to price increases, more emphasis on value added services, tightercontrol over recoveries during beneficiation and most importantly increasedbranding on jewellery lines. Expansion of our sales function into the United Kingdom in the latter half of2004 proved very rewarding. Revenue contributions were achieved from a lowinfrastructure base and marketing cost and further expansion plans are in placefor 2005. A move into continental Europe is underway and on schedule for 2005.Recent initiatives are expected to result in a break through to the MiddleEastern market later this year. Tanzanite One LimitedIncorporated in BermudaExempt company number 33385 Board of DirectorsMichael Adams Non-executive ChairmanAmi Mpungwe Non-executive Deputy ChairmanMichael Nunn Chief Executive OfficerIan Harebottle Chief Operating OfficerMark Summers Chief Finance OfficerEdward Nealon Non-executive directorNicholas Sibley Non-executive directorBruce Sutherland Non-executive directorGeorg von Opel Non-executive directorGustav Stenbolt Alternate to Georg von Opel Audit/Risk CommitteeNicholas Sibley (Chairman)Michael AdamsGustav Stenbolt Remuneration/Succession Planning CommitteeMichael Adams(Chairman)Ami MpungweEdward Nealon Mining and Geology CommitteeBruce Sutherland (Chairman)Ian HarebottleEdward Nealon Nominations CommitteeThe Nomination Committee comprises the Full Board Company SecretaryWilli Boehm Issued CapitalAt 31 December 2004, the Company had in issue:70,149,113 fully paid common shares4,559,611 unlisted Tanzanite One SA A class share options Substantial Shareholders No. of Shares Percentageat 31 December 2004Rembrandt Nominees Limited 23,204,945 33.08 %Wilbro Nominees Limited 17,118,567 24.40 %Pictet & Cie Banquiers 7,549,221 10.76 %Tomori Enterprises Limited 3,288,007 4.69 %Bonefide Nominees 3,155,003 4.50 %Ruffer Investment Management 2,630,952 3.75 %Cayenne Asset Management 2,580,867 3.68 % NOMINATED ADVISOR (AIM)Williams de Broe Plc6 BroadgateLondon EC2M 2RPTelephone: +44 207 588 7511Facsimile: +44 207 588 8860 Tanzanite One (SA) Limited(Incorporated in the Republic of South Africa)Registration Number: 2001/003177/0610 Melrose BoulevardMelrose Arch2196Johannesburg South AfricaTelephone: +27 11 214 1000Facsimile: +27 11 214 1010Email: info@tanzaniteonesa.com ManagementMike Nunn Chief ExecutiveIan Harebottle Chief Operating OfficerMark Summers Chief Financial OfficerJoe Kimble TanzaniteOne Mining Ltd, General ManagerAdrian Banks TanzaniteOne Trading Ltd, Managing DirectorCandice Nunn TanzaniteOne Marketing Ltd, Managing DirectorJason Krause The Tanzanite Company, Managing Director For further information regarding these results, please contact: In South Africa:Tanzanite One (SA) LimitedMark Summers, Chief Financial OfficerAngela Parr Corporate AffairsTanzanite One SA Ltd+27 11 214 1000 In United Kingdom:Conduit PRLeesa Peters/ Amanda Harris+44 20 7618 8708/ 0781 215 9885 or visit: www.tanzaniteone.com This information is provided by RNS The company news service from the London Stock Exchange