21 Sep 2009 07:00
21st September 2009
Tanzanite One Limited ("TanzaniteOne" or the "Company" ) (AIM:TNZ) today announces its Interim results for the Half Year ended 30 June 2009.
Highlights
Financial
Net loss for the period of $0.58 million
Cash and cash equivalents of $5 million
Gross margin of 40% achieved on $4.9 million revenue
Enhanced margins achieved through prudent cost management
$5.3 million raised through private placement
$440,000 in revenue from "The Tanzanite Experience" retail outlet
$5.2 million in inventory
48 carats per tonne average grade
Operational
Mine operations undergoing significant enhancement and optimization
867,381 carats of tanzanite recovered during the period
18,087 tonnes mineralised material processed
Opening of the new Dubai marketing office
July 2009 sight hosted at Dubai office
Corporate
Acquisition of the Tsavorite Project completed in March 2009
Diversification into new coloured gemstone
Approximately $1 million allocated to bulk sampling and scoping study
Resumption of the purchasing activity of the Arusha Trading operation expected to stabilise the market
Ongoing focus on innovative ways to market and sell tanzanite
Restructuring of the Tanzanite Foundation and closure of South African office
After the period
$2.01 million sales from the second sight of 2009 (July)
18.7% increase in average comparative per carat price since previous sight (22 April 2009)
Average price of $ 38 per carat achieved
Key statistics
| | 1H 2009 | 1H 2008 | FY2008 |
| Net (loss)/profit | ($0.5) million | $3.5 million | ($9.5) million |
| Revenue | $4.9m | $20.9m | $26.9m |
| Gross margin | 40% | 49% | 36% |
| Tonnes processed | 18,087 | 20,380 | 42,318 |
| Carats recovered | 867,381 cts | 1,101,898 cts | 2,203,162 cts |
| Carats per tonne | 48 | 54 | 52 |
| On mine cash cost per carat | $3.99 ct | $3.38 ct | $4.59 ct |
Commenting on the results, Managing Director of Tanzanite One, Zane Swanepoel said: "Our results for the first half of 2009 are very encouraging and reflect an increase in demand for tanzanite stones. After the very difficult conditions at the end of last year we are now seeing a significant upswing in prices for Tanzanite. In addition to selling stones mined during the period we are gradually releasing the stockpile of high value stones which we chose to build up at the worst period for the tanzanite market. Increases in price at our traditional sight sales have also been augmented by a number of new sales strategies with $ 2.23 million in revenue being achieved through new sales channels such as our own retail outlets in Tanzania and through direct sales to jewellers.
We expect to exceed our targeted production for the year of 1.7 million carats. Considering constantly improving demand and tanzanite prices, evidenced by the $2.01million sale at the recent July sight post the reporting period end, we expect a significant improvement in our results for the second half of this year. The Company will be holding two further sights during the second half of the year, through the Dubai marketing office, the results of which will be announced to shareholders in due course."
Financial Performance
TanzaniteOne incurred a consolidated loss for the half year ended 30 June 2009 of $0.58 million (US 0.58 cents per share), down from the previous corresponding period during which a profit of $3.5 million (US 4.73 cents per share) was recorded. Revenues from ordinary activities for the period decreased by 77% to $4.9 million from $20.9 million in the 1H2008. It should however be noted that the second sight of 2009, normally held within the first half of the year only took place in July, due to the closure of the South African office and the opening of the new Dubai office. These sales will therefore be reported in the H2 results. The results were further impacted by the global economic downturn. However, we are experiencing encouraging improvements in the volume and price of tanzanite sold.
Significant cost cutting measures were introduced during the period including:
Streamlining of mining operations
Suspension of non-core capital projects
Restructuring of the Tanzanite Foundation
Reduction in both expatriate and Tanzanian staff
Closure of the South African office
These cost reduction measure resulted in a significant reduction in the Company's operating costs thereby reducing losses for the period despite the significant drop in revenue. The directors have not declared an interim dividend. The Board has a strong history of rewarding shareholders with dividends but feel it prudent to defer further dividends until market conditions strengthen.
The Group achieved a gross margin for the year of 40% compared to 50% in 1H2008. The reduced gross margin was a reflection of lower tanzanite prices.
Cash costs for the period increased 18% to $3.99/ct from $3.38/ct in H1 2008, but decreased 45% from $5.80/ct experienced in H2 2008. The increase reflected local inflationary pressures, lower volumes of carats recovered and an average 4% increase in local wages awarded during the year.
Inventory levels of rough and polished tanzanite gemstones and consumable stores remained fairly constant, reflecting the effects of the current global financial crisis. Capital expenditure for the year of $0.8 million included the purchase of mining equipment, development and exploration expenditure.
The cash position of the Company, at $5.0 million, has benefited significantly from the $5.3 million private placement in June 2009 and the sight sale held during the period.
During the half year the marketing strategy was to develop new markets in the Middle and Far East whilst concentrating on the distribution and realisation of higher prices for smaller, lighter material, which represents approximately 70% of production. This strategy has been aided by the opening of the new marketing office in Dubai.
Production for the period totalled 867,381 carats of tanzanite, from 18,087 tonnes processed at an average recovery of 48 carats per tonne. This is in-line with the current production target of 1.7 million carats for the year.
The acquisition of the Lemshuku-Shamberai Tsavorite Project (the "Tsavorite Project", the "Acquisition") through its 75% owned Tanzanian subsidiary; TsavoriteOne Mining Limited ("TsavoriteOne") has been completed. The project:
comprises 12 prospecting licenses covering 100 square kilometres.
is located approximately 20 kilometres to the southwest of TanzaniteOne's existing tanzanite operations. The directors believe that the Tsavorite Project could potentially represent the largest known single-source of tsavorite.
Tsavorite currently has a quality-for-quality market-price per carat of approximately two to four times that of tanzanite. The Company has allocated approximately $1 million over the next 12 months to the bulk sampling and scoping of the project.
The Tanzanite Experience (TTE), a "museum" and retail outlet in Arusha that showcases the history of tanzanite through a series of visual and interactive exhibitions, has achieved a net revenue of $440,000 from cut tanzanite sales for the period. The TTE continues to grow its market share in the tourism market and is planning to open further outlets to compliment its present presence in Arusha.
Financial Statements
TanzaniteOne Limited
Condensed Consolidated Income Statement
Half Year ended 30 June 2009
($'000)
| | Notes | 1H 2009 | 1H 2008 | FY 2008 |
| | | | | |
| Revenue | | 4,913 | 20,890 | 26,895 |
| Cost of sales | | (2,962) | (10,661) | (17,321) |
| Gross profit | (i) | 1,951 | 10,229 | 9,574 |
| Gross margin % | | 40% | 49% | 36% |
| | | | | |
| Corporate Administration and other operating costs | (ii) | (1,185) | (1,769) | (3,363) |
| Defence costs | (iii) | - | - | (1,703) |
| Mine Administration | (iv) | (896) | (941) | (3,399) |
| Selling and distribution costs | (v) | (808) | (1,778) | (4,241) |
| Royalties | | (104) | (840) | (1,226) |
| Depreciation and amortisation | (vi) | (1,132) | (845) | (2,217) |
| Finance income | | 2 | 144 | 72 |
| Foreign exchange(losses)/gains | (vii) | 906 | (235) | (1,826) |
| Finance cost | | (66) | (65) | (75) |
| (Loss)/Profit before tax | | (1,332) | 3,900 | (8,404) |
| | | | | |
| Income tax credit/ (expense) | (viii) | 752 | (371) | (1,057) |
| (Loss)/Profit after tax | | (580) | 3,529 | (9,461) |
| Minority interest | (ix) | 34 | 5 | 52 |
| (Loss)/Profit attributable to equity holders of parent | | (546) | 3,524 | (9,409) |
| EPS (basic – cents) | | (0.58) | 4.73 | (12.63) |
Notes Income Statement
TanzaniteOne Limited Condensed Consolidated Balance Sheet As at 30 June 2009 $'000
| | Notes | 1H 2009 | 1H 2008 | FY2008 |
| Non-current assets | | | | |
| Property, plant and equipment | (i) | 25,134 | 22,654 | 23,412 |
| Inventories | (ii) | 508 | 484 | 327 |
| Deferred tax assets | (iii) | - | 2,951 | 193 |
| Total non-current assets | | 25,642 | 26,089 | 23,932 |
| Current assets | | | | |
| Inventories | (iv) | 4,681 | 4,708 | 4,756 |
| Income tax receivable | (v) | 2,151 | 1,039 | 1,916 |
| Trade and other receivables | (vi) | 1,722 | 13,700 | 2,647 |
| Cash and cash equivalents | | 5,006 | 3,198 | 794 |
| Total current assets | | 13,559 | 22,645 | 10,113 |
| Total assets | | 39,201 | 48,734 | 34,045 |
| Equity | | | | |
| Issued share capital | | 32 | 22 | 22 |
| Share premium | | 45,721 | 38,709 | 38,709 |
| Share options outstanding | | 706 | 706 | 706 |
| Foreign currency translation reserve | | (530) | (418) | (20) |
| Retained earnings | | (11,401) | 4,483 | (10,855) |
| Total equity attributable to parent equity holders | | 34,528 | 43,502 | 28,562 |
| Minority interest | | (30) | 101 | 4 |
| Total equity | | 34,498 | 43,603 | 28,566 |
| Non-current liabilities | | | | |
| Interest-bearing borrowings | (vii) | 850 | - | 378 |
| Provisions | (viii) | 100 | 94 | 100 |
| Deferred tax | (ix) | 2,453 | 4,124 | 3,196 |
| Total non-current liabilities | | 3,403 | 4,218 | 3,674 |
| Current liabilities | | | | |
| Interest-bearing borrowings | | 3 | 11 | 6 |
| Income tax payable | | 33 | 388 | 28 |
| Trade and other payables | (x) | 1,264 | 514 | 1,771 |
| Total current liabilities | | 1,300 | 913 | 1,805 |
| Total liabilities | | 4,704 | 5,131 | 5,479 |
| Total equity and liabilities | | 39,201 | 48,734 | 34,045 |
| | | | | |
| Number of shares in issue (million) | | 105.2 | 74,5 | 74.5 |
| Net asset value per share (US cents) | | 32.79 | 58.55 | 38.36 |
Notes to Balance Sheet
TanzaniteOne Limited Condensed Consolidated Cash Flow Statement For the Half Year Ended 30 June 2009 $'000
| | | | | |
| | Notes | 1H 2009 | 1H 2008 | FY 2008 |
| Cash flows from operating activities | | | | |
| Cash generated from operations | (i) | (686) | (277) | 1,828 |
| Finance income | | 2 | 144 | 72 |
| Financing cost | (ii) | (66) | (65) | (75) |
| Taxation paid | (iii) | (27) | (1,497) | (1,666) |
| Net cash from operating activities | | (777) | (1,695) | 159 |
| Cash flows from investing activities | | | | |
| Acquisitions of property, plant and equipment | (iv) | (822) | (1,945) | (4,175) |
| Proceeds on disposal of property, plant and equipment | (iv) | - | - | 103 |
| | | | | |
| Net cash from investing activities | | (822) | (1,945) | (4,072) |
| Cash flows from financing activities | | | | |
| Proceeds from issue of share capital | (v) | 5,341 | - | - |
| Increase/(decrease) in interest-bearing borrowings | (vi) | 470 | (900) | (526) |
| Dividends paid | | - | (5,197) | (7,733) |
| Net cash (to)/from financing activities | | 5,811 | (6,097) | (8,259) |
| Net increase/(decrease) in cash and cash equivalents | | 4,212 | (9,737) | (12,172) |
| Translation difference in opening balance | | | | 31 |
| Cash and cash equivalents at the beginning of the year | | 794 | 12,935 | 12,935 |
| Cash and cash equivalents at the end of the year/period | | 5,006 | 3,198 | 794 |
Notes to Cash Flow Statement
TanzaniteOne LimitedIncorporated in BermudaExempt company number EC33385
Quoted on the London Alternative Investment Market: TNZ.LCompany ISIN: BMG8672E1021Company SEDOL: B01RP04Number of shares in issue at 30 June 2009: 105,197,160Number of unlisted options at 30 June 2009: 657,500
Board of DirectorsAmi Mpungwe: Executive ChairmanEd Nealon: Non-executive Deputy ChairmanZane Swanepoel: Managing DirectorBernard Olivier: Executive Director: Head of Development Nicholas Sibley: Non-executive Director
Audit/Risk Committee Nicholas Sibley (Chairman)Ami MpungweEd Nealon
Remuneration/Succession Planning CommitteeAmi Mpungwe (Chairman)Ed Nealon
Mining and Geology CommitteeEdward Nealon (Chairman)Zane SwanepoelBernard Olivier
Nominations CommitteeThe Nominations Committee comprises the Full Board
Company SecretaryWilli Boehm
ManagementZane Swanepoel: Managing DirectorFarai Manyemba: Chief Finance OfficerNick Hughes: TanzaniteOne Mining, General Manager
Nominated Advisor & Broker (AIM)Evolution Securities LtdSimon Edwards/Neil ElliotTelephone: +44 (0)20 7071 4300
Joint Broker (AIM)Ambrian Partners LimitedRichard ChaseTelephone: +44 (0)20 7776 6400
For more information please contact:
| Willi Boehm, Company Secretary | Public RelationsLaurence Read/Beth Harris |
| +61 8 9367 5211 | Threadneedle Communications |
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| Bernard Olivier, Executive Director | +44 (0)7979 955923 |
| +61 408948182 |
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| Nominated Advisor and Joint Broker Evolution Securities | Joint BrokerAmbrian Partners |
| Simon Edwards or Neil Elliot | Richard Chase |
| +44 (0)20 7071 4300 | +44 (0)20 7634 4700 |
www.tanzaniteone.com
Glossary
ct carat
dollar or $ United States Dollar
g/t Grammes per tonne, measurement unit of grade (1g/t = 1 part per m)
JORC code Australasian code for reporting of Mineral Resources and Ore Reserves
On-mine cash costs On-mine cash costs include mine operating costs, mine administration costs and royalty charges incurred at Merelani mine.
tonne 1 Metric tonne (1,000kg).