RLD.L Regulatory News (RLD)

29 Sep 2006 07:01

Tanzanite One Limited29 September 2006 29 September 2006 TANZANITE ONE LIMITED INCORPORATED AND REGISTERED IN BERMUDA EXEMPT COMPANY NUMBER EC33385 INTERIM RESULTS FOR THE HALF YEAR ENDED 30 JUNE 2006 HIGHLIGHTS • Net loss of US$153,198, after $2.8 million provision following the decision to withdraw from the wholesale jewellery business.• Improvement in mining capabilities has increased grade, 75 carats per tonne up from 47 carats per tonne in the comparable period.• Ongoing exploration efforts continue to deliver encouraging results.• Cash profit US$2.65 million.• US$16.3 million revenue, down due to lower proportion of gem quality tanzanite recovered.• Interim dividend of US 2 cents per share.• Decision to focus on mining and cease wholesale jewellery manufacture. Key statistics: Half year ended Half year ended Movement 30 June 2006 30 June 2005 Tonnes processed 7,605 tonnes 12,161 tonnes (37%) Carats recovered 570,405 cts 576,933 cts (1%)Carats per tonne 75 ct/ton 47 ct/ton 60%On mine cash cost per carat US$2.32 US$2.00 16%Average price per carat(rough tanzanite) $9.63 $13.00 (26%)Revenue US$16.3 million US$22.4 million (27%)Gross margin 31% 66% (53%) Commenting on the half year results, Ian Harebottle, Tanzanite One Limited's Chief Executive said, "Whilst I cannot say that I am pleased to report the US$153,198 net loss for the six months ended 30 June 2006; a reduction caused by the proportion of gem quality tanzanite recovered remaining at historical lows; reduced cut and polished sales, as well as a US$2.8 million write down on account of our decision to divest the jewellery segment of our business, I am encouraged by the results achieved in our core mining business. Grades of 75 carats per tonne have been achieved over the period and our ongoing exploration projects continue to deliver encouraging results. Our management team has designed a business model focused on delivering increasingly sustainable results from our mining operations". Tanzanite One announces a net loss for the half year to 30 June 2006 ofUS$153,198 (0.25 cents per share). The net loss for the half year is after anon-cash provision of US$2.8 million for the closure of the Company's wholesalejewellery business. Cash earnings (before depreciation, amortisation and writedowns) for the period were $2.65 million. The Directors have declared an interim dividend of 2 US cents per share (2005: 1US cent per share) payable on 10 November 2006 to shareholders registered on 20October 2006. The dividend payment (US$1.4 million) will be funded from currentcash reserves. Following a review of its principal business activities, the Board has decidedto divest the Group's wholesale jewellery business to focus the Company'sresources fully on the mining of and exploration for tanzanite in Tanzania forsale to the jewellery market. The Company has had a difficult twelve months. The quality of recoveredtanzanite has remained unusually low and mining operations have been restrictedby un-anticipated national power cuts. These problems are being addressed.First, by development of mining techniques through a better understanding of thegeology at the mine, and second, by the installation of an independent powersupply. The key drivers behind group profitability are the grade and quality oftanzanite recovered. During the period, the mine recovered 570,405 carats (2005:576,933 carats) of tanzanite from 7,605 tonnes (2005: 12,161 tonnes) ofprocessed ore, resulting in a grade of 75 carats per tonne (2005: 47 carats pertonne), a 60% increase. The increased grade however did not translate intoadditional profits because of a significant drop in the proportion of gemquality tanzanite ("A" quality material) recovered during the period. Gemquality tanzanite represented 0.4% of production, down from historical levels of1.5%, a 73% decrease. The reduced amount of "A" quality tanzanite recovered wasthe major reason for the lower profits recorded in the period under review. As a result of the overall lower quality of produced material, revenue for theperiod under review was US$16.3 million (2005: US$22.4 million), down 27%.Although grades continue to remain high and production is trending towardshigher quality tanzanite, the proportion of "A" quality tanzanite remains belowhistorical levels. On mine costs at US$2.32 per carat were up 16% compared to the previouscorresponding period and reflect the impact of local inflation and increases infuel associated primarily with the need for an increased reliance on selfgeneration of power. Operating expenses are expected to decline with the closureof the wholesale jewellery business in South Africa and an increased emphasis onpure mining activity. Inventory was US$5 million lower at US$9.4 million (2005: US$14.4 million)reflecting in part the impact of closure of the wholesale jewellery business. Cash and cash equivalents at 30 June were US$6.6 million (2005: US$5.1 million).The Group's operations generated net cash of $4.2 million during the period. Interest income for the period was US$421,736. Finance charges of $20,608 were incurred for the period on the draw down of US$1million on an existing NBC Bank facility. The bank facility was put in place tofund, among other requirements, the development of the Company's new powergeneration facility at the mine. The Company is increasing its presence in Tanzania, the home of tanzanite. Theincreased focus on Tanzania demonstrates its commitment to the tanzaniteindustry and to providing opportunities to local Tanzanians. Tanzanite One Limited Consolidated Income Statement For the Half Year ended 30 June 2006 Half year ended Half year ended Full year ended 30-Jun-06 30-Jun-05 31-Dec-05 US$ US$ US$Revenue 16, 309,477 22,369,114 41,090,161Cost of sales* 11,326,829 7,570,293 16,206,041 --------- -------- --------Gross profit 4,982,648 14,798,821 24,884,120Operating expenses 5,791,174 5,818,969 11,999,401 --------- -------- --------Operating (loss) /profit before net financing (income)/cost (808,526) 8,979,852 12,884,719Net financing (income) /cost (123,933) 1,474 (39,442) --------- -------- --------(Loss) / profit before tax (684,593) 8,978,378 12,924,161Income tax (income) /expense (531,395) 1,735,297 3,077,558 --------- -------- --------(Loss) / profit for theperiod / year (153,198) 7,243,081 9,846,603 --------- -------- --------Attributable to:Common shareholders (187,105) 7,201,085 9,773,102Minority interest 33,907 41,996 73,501 --------- -------- --------(Loss) / profit for theperiod / year (153,198) 7,243,081 9,846,603 --------- -------- -------- Weighted average numberof ordinary shares in issue 71,967,290 70,156,562 70,373,129Earnings per share (cents) (0.26) 10.26 13.89 Weighted average numberof diluted shares inissue 76,209,311 75,066,083 74,993,225Earnings per share (US cents) (0.25) 9.59 13.03 * Cost of sales includes a US$ 2.8 million write down following the decision towithdraw from the wholesale jewellery business Tanzanite One Limited Consolidated Cash Flow Statement Half year ended 30 June 2006 6 months ended 6 months ended 12 months ended 30-Jun-06 30-Jun-05 31-Dec-05 US$ US$ US$ Cash flows from operating activitiesCash generated by /(utilised in) operations 4,183,558 (1,139,491) 6,171,747Net financing income /(cost) 123,933 (1,474) 39,442Taxation (paid) / credit (1,050,523) 386,764 (1,903,541)----------------------- -------- -------- --------Net cash generated by /(utilised in) operations 3,256,968 (754,201) 4,307,648 Cash flows from investing activitiesAcquisition of property,plant and equipment (2,260,681) (871,670) (2,671,335)Proceeds on disposal ofproperty, plant and equipment 3,148 1,794,479 1,809,000----------------------- -------- -------- --------Net cash from investing activities (2,257,533) 922,809 (862,335) Cash flows from financing activitiesNet proceeds from the issue of share capital 798,099 211,323 1,208,810Share based payments 134,623 331,987 -A class share capital purchased (178) (102) (167)(Decrease) / repayment of long-term loans (28,225) 76,187 161,568Increase in / (repayment of) interest-bearing borrowings - current 181,199 (442,121) (351,543)Repayment of interest-bearingborrowings - non-current (1,785) (2,109,960) (1,479,650)Dividends paid (3,736,190) (80,567) (1,531,007)----------------------- -------- -------- --------Net cash from financing activities (2,652,457) (2,013,253) (1,991,989) Net increase/(decrease)for the period/year (1,653,022) (1,844,645) 1,453,324Translation difference in opening cash balances - - (64,103)Opening cash balance 8,298,229 6,909,008 6,909,008----------------------- -------- -------- --------Closing cash balance 6,645,207 5,064,363 8,298,229----------------------- -------- -------- -------- Tanzanite One Limited Consolidated Balance Sheet At 30 June 2006 30-Jun-06 31-Dec-05 30-Jun-05 US$ US$ US$ Non-current assets 25,062,116 22,964,097 21,478,734Property, plant and equipment 21,500,449 19,911,851 18,785,250Intangible assets 1,768,519 1, 824,074 2,000,000Long-term loans 30,649 2,424 87,805Deferred tax assets 1,762,499 1,225,748 605,679 Current assets 28,148,482 33,906,995 30,985,128Inventories 9,536,438 14,469,556 14,418,036Income tax receivable 1,130,282 278,007 -Trade and other receivables 10,836,555 10,861,203 11,502,729Cash and cash equivalents 6,645,207 8,298,229 5,064,363 ---------- --------- ----------Total assets 53,210,598 56,871,092 52,463,862 ---------- --------- ---------- Equity and liabilitiesIssued capital 22,611 22,402 22,079Share premium 37,815,311 36,882,975 35,885,876Share options 532,763 503,578 331,987Foreign currency translationreserve 137,494 647,649 259,116Retained earnings 7,325,073 11,248,368 10,115,986 ---------- --------- ----------Total equity attributable tocommon shareholders 45,833,252 49,304,972 46,615,044Minority interest 216,000 182,092 159,288 Non-current liabilities 4,772,926 4,895,265 2,896,731Interest-bearing borrowings 851,038 669,839 39,530Provisions 81,850 81,850 81,850Deferred tax liabilities 3,840,038 4,143,576 2,775,351 Current liabilities 2,388,420 2,488,763 2,792,799Interest-bearing borrowings 105,261 107,046 16,468Income tax payable 326,547 167,450 1,582,944Trade and other payables 1 956,612 2, 214,267 1,193,387 ---------- --------- ----------Total equity and liabilities 53,210,598 56,871,092 52,463,862 ---------- --------- ---------- Number of shares in issue 72,712,653 71,588,397 70,373,811Net asset value per share (US cents) 63.33 69.13 66.47 Mining Due to the pocket nature of tanzanite mineralisation, mine development iscurrently being measured in developed metres as opposed to tonnes mined. Refinedmining methods have allowed for an improved planning process, where tanzanitebearing boudins are exposed more efficiently than in the past and higher yieldsare being achieved without a significant increase in the workforce.Investigative work is now under way to better understand the geology so thatmining efforts may be concentrated more productively. With costs contained, andsignificant excess capacity in the plant, these efforts may see a reduction inthe current grade (derived as a result of the current "high grading" miningmethods employed), but should see an overall increase in production andsmoothing out of monthly production figures. Tanzania produces some 60% of its electricity through hydroelectric powergeneration. The devastating drought that hit the region in the early part of theyear motivated the government to initiate a power shedding programme, with powersupply cut by as much as 50% in most parts of the country resulting incontinuous interruptions. While every effort was made by the mining team tomitigate the effects of the power rationalisation, development targets wereimpacted by up to 25%. After careful investigation, and extensive talks withsenior management in Tanesco (the national power utility) and the Ministry ofEnergy and Minerals, a decision was taken to install a back up facility.Currently, the mine requires 800 kilowatt to operate. The new plant can provideup to two megawatt, or enough power to cover the mine's total needs. No. 2 Shaft has been converted into a training centre aimed at ensuringworkforce competence and improving mining efficiencies. The programme affordsopportunities to employees to develop their career paths, whilst providing forthe mine's succession needs. Though limited, mining activity here supports animproved understanding of the geology of the 'upper horizon' which remainsoutside current resource estimates. A Safety Management programme introduced during the period has reducedsignificantly the incidence of accidents. The benefits of the safety andtraining drive have translated into sustainable improvements in operationalefficiencies and a reduction in down time. Exploration Exploration has focused mainly on long-hole core drilling and geophysics of theCompany's existing licence area (SML 8/92) so as to determine the extent ofmineralisation at greater depths and thus any increase in the potential resourceof the mine. Favourable results from the first two drill holes, LHD 15 and 16,warranted the drilling of an additional two holes, LHD 17 and 18. The graphitichost rock or JW-zone was intersected in all four drill holes. These results predict the average extrapolated down-dip extent of the ore-zonemay be significantly extended from its previously known depth of c. 400m beyondeven the 800m announced in February this year. The mineralised zones intersected in LHD 16 and 17 are exceptionally thick (10.2and 10.7 metres, respectively) and contain significant tanzanite-associatedmineralisation. Approximately 100 core samples are currently undergoing geochemical analysis with the results expected in Q4, 2006. Preparation for further exploration activities has also included grid clearingthe Company's nearby prospecting licences for geophysics and shallow depthsurface drilling. Outside buying Trading levels for the Company's trading arm, TanzaniteOne Trading were lowerduring the period in line with the limited quantities of high grade tanzanitethat were coming on to the market. The subsidiary's growing reputation foroffering consistent prices to traders supported trading levels during theperiod. Rough tanzanite sales Rough tanzanite sales, conducted through two sales held, amounted to US$12.1million. Collaborative marketing relationships established with the fiveexternal beneficiation partners ensure sustained interest from the jewellerymanufacturing industry and the buying public, as well as a steady growth invaluation and price. Sustainability report TanzaniteOne continues to support the Tanzanite Foundation, the industryrepresentative, non-profit organisation charged with the global promotion ofthe tanzanite market. The year started off with the launch of the 'BE BORN TO TANZANITE' marketingcampaign which promotes tanzanite as the appropriate gift given on the birth ofa child. A representative office has been opened in New York's gemstone districtto carry out promotional work in mainland America and the Caribbean, extendingthe reach of its European and African operations. Marketing activities included educating gemmological laboratories about themerits of signing a licensing agreement to grade and certify tanzaniteaccording to the Tanzanite Foundation's system. Formalisation of the industrybuilds confidence among manufacturing members, the jewellery trade andconsumers in creating a stable, sustainable environment and achievingconsistency in pricing. Outlook The Board is focused on developing the mine optimally, adding to its prospectingarea, and growing new markets. Occasionally, opportunities arise to acquireadditional prospecting licences, which management has been pursuing. With demand for prime stones frequently outstripping supply, market development andthe appointment of additional beneficiation partners presupposes a reciprocalrise in output. With an expanding market, the objective therefore remains toincrease production. Tanzanite One Limited Incorporated in BermudaExempt company number EC33385 Board of Directors Michael Adams Non-executive ChairmanAmi Mpungwe Non-executive Deputy ChairmanMike Nunn Chief Executive Officer (resigned 1 May 2006)Ian Harebottle Chief Executive OfficerMark Summers Chief Financial OfficerEdward Nealon Non-executive directorNicholas Sibley Non-executive directorGustav Stenbolt Non-executive directorPhilipp LiebundGut Alternate director to Gustav Stenbolt Audit/Risk Committee Nicholas Sibley (Chairman)Michael AdamsGustav Stenbolt Remuneration/Succession Planning Committee Michael Adams (Chairman)Ami MpungweEdward Nealon Mining and Geology Committee Edward Nealon (Chairman)Ian Harebottle Nominations Committee The Nominations Committee comprises the Full Board Company Secretary Willi Boehm Management Ian Harebottle Chief Executive OfficerMark Summers Chief Financial OfficerZane Swanepoel TanzaniteOne Mining, General ManagerAdrian Banks TanzaniteOne Trading, Managing Director Candice Nunn TanzaniteOne Marketing, Managing Director Nominated Advisor & Broker (AIM) Evolution Securities Ltd100 Wood StreetLondon EC2V 7AN Telephone: +44 (0)20 7071 4330Facsimile: +44 (0)20 7071 4451 Joint Broker (AIM)Ambrian Partners LimitedHillgate House26 Old BaileyLondon EC4M 7HW Telephone: +44 (0)20 7776 6400Facsimile: +44 (0)20 7776 6420 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 This information is provided by RNS The company news service from the London Stock Exchange