SouthernEra Releases Third Quarter Results
Shares Issued and Outstanding: 74,166,193
TSX: SUF
AIM: SRE
TORONTO, Nov. 26 /CNW/ - The Board of SouthernEra Resources Limited
announced the following highlights from the third quarter of 2003:
- Issuance of a mining license for the Phase 2 (Doornvlei Section) at
the Greater Messina;
- Issuance of a prospecting permit for the Phase 3 (Dwaalkop Section) at
the Greater Messina;
- Settlement of the wage strike at the Klipspringer Diamond Mine;
- Commencement of drilling at Messina's Phase 3 as part of the Phase 2/3
feasibility study;
- Announcement of the terms of a rights offer at the Company's
subsidiary Messina Limited;
- Declaration of an indicated resource of 3.7 million ounces at the
Millennium Platinum Project.
Subsequent to September 30, SouthernEra announced:
- The discovery of an extensive gold anomaly in Gabon, West Africa;
- The successful conclusion of the rights offer at the Company's
subsidiary Messina Limited;
- The successful conclusion of a C$77.12 million bought deal equity
financing.
The Company realized a net loss for the three months to September 30 of
$4.2 million (7 cents per share) compared to a net loss of $0.7 million
(1 cents per share) in the third quarter of 2002. In the current quarter, the
Company incurred an operating loss of $2.3 million on revenue of $0.7 million
versus an operating loss of $0.7 million on revenue of $0.9 million in the
comparable quarter of 2002. Cash flow provided by operations for the quarter
was $5.5 million (9 cents per share), compared to a use of $3.0 million
(6 cents per share) in the third quarter of 2002.
Operations Update
Progress continued with the development of Messina Platinum's Phase 1
Mine. During the third quarter, Messina's Main Shaft hoisted 142,381 tonnes
comprised of both development and reef tonnes. Production during the quarter
came from the 150, 200, 275 and 350-meter levels.
Messina produced approximately 14,000 ounces of 3PGEs plus gold,
145.5 tonnes of nickel and 106.1 tonnes of copper during the quarter. The
average head grade for the quarter was 3.572 grams per tonne (3PGE's) and is
expected to continue improving as the mine approaches steady-state production
in 2004. Recoveries during the quarter averaged 85.6 percent.
Construction of the decline ramp from the 350-meter to the 430-meter
level has commenced and is progressing satisfactorily. This will support the
production build-up from the 80,000 to 120,000 tonnes per month during the
first half of 2004.
Production at the Company's 50 percent-owned Klipspringer Diamond Mine
was affected during the quarter by a labour strike, which subsequently was
resolved on July 21 with the conclusion of a new wage agreement and a
commitment by the National Union of Mineworkers to support continuous
operations. Tonnage throughput in the third quarter was 40,583 tonnes. Average
grade in the quarter was 39.65 carats per hundred tonnes, yielding 16,082
carats.
The Company's operations at both Messina and Klipspringer continue to be
impacted by the unusual strength of the South African Rand. During the third
quarter the Rand appreciated by a further 4.7 percent relative to the
US Dollar.
During the quarter the Company's subsidiary Messina Platinum was awarded
a mining license for the 6.3 million-ounce Phase 2 (Doornvlei Section). In
addition, the SouthernEra/Mvelaphanda Joint Venture was awarded a prospecting
permit for the 7.86 million-ounce Phase 3 (Dwaalkop Section). Drilling in
support of the Phase 2/3 feasibility study commenced during the quarter. The
first phase of the drill program, consisting of 12 drill holes to a depth of
500 meters has been completed over a strike-length of 6 kilometers. Designed
in conjunction with SRK Consulting, this program will enable an indicated
resource to 500 meters to be established. The Company is pleased to report
that the initial results from the drill program are encouraging. The final
assay results are expected during December.
Drilling over the 1.7 million-ounce Voorspoed East Section, which forms
part of the Phase 2/3 development of the Greater Messina, is in progress. The
Phase 2/3 feasibility study is scheduled for completion during the first half
of 2004. Based on the Phase 2/3 scoping study undertaken by SRK Consulting
during 2002, it is anticipated that a 240,000 tonne per month mine will be
built to access the combined 15.86 million ounce resource at Phases 2 and 3.
This should support annual production in excess of 340,000 ounces of 5PGEs
plus gold for a period of approximately 30 years. The drilling program over
the Phase 4 (Zebediela Section) is progressing satisfactorily and will be
completed during the first quarter of 2004.
Following the conclusion of a second phase drill program at the Company's
Millennium Platinum Project during the quarter an indicated resource of
30.6 million tonnes, grading 3.76 grams per tonne, containing 3.7 million
ounces of 5PGEs plus gold was declared.
Subsequent to the quarter, SouthernEra increased its interest in its
subsidiary, Messina Limited to 73 percent following the successful conclusion
of the Messina Limited rights offer on October 14, 2003. Messina's minority
shareholders subscribed for an aggregate of 1,048,297 shares and contributed
approximately US$8.5 million to Messina Limited.
Also subsequent to the quarter, the Company announced the discovery of an
extensive gold anomaly in Gabon, West Africa. The Koumba Gold Project is
located approximately 160 kilometers southeast of the capital city Libreville
and covers an area of 625 square kilometers. The Company has commenced a drill
program and has completed the first two of twenty planned drill holes. Cores
will be split and sent to Canada for assaying.
Finally, SouthernEra successfully concluded a C$77.12 million equity
financing subsequent to the quarter. The financing consisted of 12.05 million
Units at C$6.40 per unit. Each unit consists of one common share and one-half
of one share purchase warrant. Each full warrant entitles the holder to
acquire one common share at a price of C$10.00 at any time up to 5 years
following the closing date.
SouthernEra Resources is an independent producer of platinum group metals
(PGMs) and diamonds. The Company also has an extensive PGM, gold and diamond
exploration program. The common shares are listed on the Toronto Stock
Exchange and the London Stock Exchange's AIM.
The full, unaudited financial statements and management's discussion and
analysis for the quarter ended September 30, 2003 are available at
www.southernera.com.
SouthernEra Resources Limited
Consolidated balance sheets
(in thousands of United States dollars)
September 30 December 31
2003 2002
-------------------------------------------------------------------------
Assets (unaudited)
Current assets:
Cash and equivalents $ 16,381 $ 13,925
Accounts receivable 12,059 7,359
-------------------------------------------------------------------------
28,440 21,284
Property, plant and equipment 6,288 7,110
Exploration projects 14,163 8,994
Mining and development projects 175,212 121,260
Future income taxes 3,255 2,794
-------------------------------------------------------------------------
$ 227,358 $ 161,442
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities and shareholders' equity
Current liabilities:
Accounts payable and accrued
liabilities $ 15,605 $ 12,671
Income taxes payable 10,785 8,086
Camafuca loan 2,552 2,448
Messina loans 7,888 5,729
-------------------------------------------------------------------------
36,830 28,934
Long-term liabilities:
Messina loans 57,208 46,926
Future income taxes 2,070 2,429
Non-controlling interests 9,180 7,813
Environmental rehabilitation
provision 815 740
-------------------------------------------------------------------------
106,103 86,842
-------------------------------------------------------------------------
Shareholders' equity:
Common shares 175,199 130,628
Contributed surplus 1,635 1,635
Deficit (60,131) (57,869)
Cumulative translation adjustments 4,552 206
-------------------------------------------------------------------------
121,255 74,600
-------------------------------------------------------------------------
$ 227,358 $ 161,442
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes form an integral part of, and should be read in
conjunction with, these consolidated financial statements.
SouthernEra Resources Limited
Consolidated statements of operations
For the Periods Ended September 30
(in thousands of United States dollars, except income (loss) per share
amounts)
(unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2003 2002 2003 2002
-------------------------------------------------------------------------
Diamond sales revenue $ 648 $ 887 $ 2,298 $ 2,207
Direct costs:
Mining operations (2,557) (1,262) (5,929) (3,059)
Amortization (355) (349) (1,048) (1,062)
-------------------------------------------------------------------------
(2,912) (1,611) (6,977) (4,121)
-------------------------------------------------------------------------
Loss from mining
operations (2,264) (724) (4,679) (1,914)
General and
administration expenses (1,226) (1,024) (3,453) (2,154)
-------------------------------------------------------------------------
Loss before the
undernoted (3,490) (1,748) (8,132) (4,068)
Foreign exchange gain
(loss) (1,270) 812 4,557 (432)
Interest income 281 227 932 449
-------------------------------------------------------------------------
(989) 1,039 5,489 17
-------------------------------------------------------------------------
Loss before income taxes (4,479) (709) (2,643) (4,051)
Income tax:
Future recovery (expense) 232 54 362 (182)
-------------------------------------------------------------------------
Loss after income taxes (4,247) (655) (2,281) (4,233)
Non-controlling interests
recovery (expense) 2 (11) 19 (61)
-------------------------------------------------------------------------
Net loss for the period $ (4,245) $ (666) $ (2,262) $ (4,294)
-------------------------------------------------------------------------
Basic and diluted net loss
per common share $ (0.07) $ (0.01) $ (0.04) $ (0.09)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated statements of deficit, contributed surplus
and cumulative translation adjustments
For the Nine Months Ended September 30
(in thousands of United States dollars)
(unaudited)
2003 2002
-------------------------------------------------------------------------
CUMULATIVE CUMULATIVE
CONT- TRANSLAT- CONT- TRANSLAT-
RIBUTED ION ADJ- RIBUTED ION ADJ-
DEFICIT SURPLUS USTMENTS DEFICIT SURPLUS USTMENTS
-------------------------------------------------------------------------
Beginning of
period $(57,869) $ 1,635 $ 206 $(48,910) $ 1,044 $ (4,529)
Conversion
rights - - - - 591 -
Translation
gains (losses)
net for
the period - - 4,346 - - 184
Net income
(loss) for
the period (2,262) - - (4,294) - -
-------------------------------------------------------------------------
End of
period $(60,131) $ 1,635 $ 4,552 $(53,204) $ 1,635 $ (4,345)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes form an integral part of, and should be read in
conjunction with, these consolidated financial statements.
SouthernEra Resources Limited
Consolidated statements of cash flows
For the Periods Ended September 30
(in thousands of United States dollars)
(unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2003 2002 2003 2002
-------------------------------------------------------------------------
Net income (loss) for
the period $ (4,245) $ (666) $ (2,262) $ (4,294)
Adjustments for non-cash
items:
Amortization 355 349 1,048 1,062
Future income taxes (232) (54) (362) 182
Foreign currency
translation loss (gain) 1,270 (812) (4,557) 432
Non-controlling interest (2) 11 (19) 61
-------------------------------------------------------------------------
(2,854) (1,172) (6,152) (2,557)
Change in non-cash
working capital balances 8,353 (1,855) (1,212) (1,579)
-------------------------------------------------------------------------
Cash provided by (used
in) operations 5,499 (3,027) (7,364) (4,136)
-------------------------------------------------------------------------
Financing activities:
Messina loans - 4,932 - 22,535
Camafuca Loan - 50 - 50
Issue of common shares
for cash 864 194 44,571 39,545
-------------------------------------------------------------------------
Cash provided by
financing activities 864 5,176 44,571 62,130
-------------------------------------------------------------------------
Investing activities:
Exploration and
development projects (1,705) (1,432) (5,341) (4,050)
Messina platinum project (12,088) (14,584) (30,219) (37,657)
Property, plant and
equipment (820) (381) (1,264) (1,275)
-------------------------------------------------------------------------
Cash used in investing
activities (14,613) (16,397) (36,824) (42,982)
-------------------------------------------------------------------------
Increase (decrease) in
cash (8,250) (14,248) 383 15,012
Foreign exchange gain
(loss) on cash held
in foreign currency (4,461) (1,070) 2,073 (1,070)
Cash and equivalents
- beginning of period 29,092 36,014 13,925 6,754
-------------------------------------------------------------------------
Cash and equivalents
- end of period $ 16,381 $ 20,696 $ 16,381 $ 20,696
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Cash and cash
equivalents comprise:
Cash $ 115 $ 704 $ 115 $ 704
Short-term investments 16,266 19,992 16,266 19,992
-------------------------------------------------------------------------
$ 16,381 $ 20,696 $ 16,381 $ 20,696
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes form an integral part of, and should be read in
conjunction with, these consolidated financial statements.
Notes to consolidated financial statements
In the opinion of management, the unaudited consolidated financial
statements present fairly the Company's financial position as at September 30,
2003 and the results of its operations and its cash flows for the nine months
ended September 30, 2003. The results of operations and cash flows are not
necessarily indicative of the future results of operations or cash flows.
1. ACCOUNTING POLICIES
The accounting policies followed by the Company are set out in Note 2 to
the audited consolidated financial statements included in the Company's
2002 Annual Report and have been consistently followed in the preparation
of these interim financial statements.
2. CASH AND EQUIVALENTS
Cash and equivalents includes restricted cash as at September 30, 2003 of
$17 million (Cdn$ 23 million) fully funding a Canadian guarantee that
supports a $14.8 million (106 million South African Rand) credit facility
in South Africa. This credit facility has been offset against the
restricted cash balance. As at December 31, 2002, the restricted cash
balance amounted to $11.1 million acting as a guarantee for the same
credit facility.
3. PROPERTY, PLANT AND EQUIPMENT
December
ACCUMULATED September 31,
AMORT- 30, 2002
COST IZATION 2003 NET
-------------------------------------------------------------------------
South Africa - Buildings,
plant and equipment $ 13,471 $ (7,289) $ 6,182 $ 7,064
Toronto - Fixtures and
fittings 393 (287) 106 46
-------------------------------------------------------------------------
$ 13,864 $ (7,576) $ 6,288 $ 7,110
-------------------------------------------------------------------------
4. EXPLORATION PROJECTS
Accumulated
Carrying Value
-------------------------------------------------------------------------
September 30, December 31,
2003 2002
-------------------------------------------------------------------------
Canada
Yamba Lake - NWT $ 3,166 $ 2,855
Back Lake - NWT 813 557
Superior - Ontario 2,175 1,115
Other 747 365
-------------------------------------------------------------------------
6,901 4,892
-------------------------------------------------------------------------
Foreign
South Africa 2,403 1,458
Gabon 3,750 2,048
Australia 1,109 596
-------------------------------------------------------------------------
7,262 4,102
-------------------------------------------------------------------------
$ 14,163 $ 8,994
-------------------------------------------------------------------------
5. MINING AND DEVELOPMENT PROJECTS
Accumulated
Carrying Value
-------------------------------------------------------------------------
September 30, December 31,
2003 2002
-------------------------------------------------------------------------
Messina platinum project $ 159,747 $ 106,312
Camafuca project 15,465 14,948
-------------------------------------------------------------------------
$ 175,212 $ 121,260
-------------------------------------------------------------------------
-------------------------------------------------------------------------
6. MESSINA LOANS September 30, December 31,
2003 2002
-------------------------------------------------------------------------
Senior Debt $ 61,902 $ 45,643
Loans from a South African public
company 2,671 4,252
Rio Tinto API underwriting
guarantee advance - 2,465
Other 523 295
-------------------------------------------------------------------------
65,096 52,655
Less current portion of loans (7,888) (5,729)
-------------------------------------------------------------------------
$ 57,208 $ 46,926
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Senior Debt
The Senior Debt provided by a South African banking consortium ranks
above all other debt in Messina. It is secured in favour of the banks by
all the assets of Messina. Repayment of capital and/or interest to any
other lender to Messina, whether a lender in terms of the loan
arrangements noted above or for any other reason including any trade or
other credit granted, may only be settled by Messina with the banks'
consent while any amounts due to the banks, including interest, remain
outstanding.
While the Senior Debt is outstanding, Messina may not incur additional
debt, acquire or dispose of assets or engage in activities outside the
parameters of the establishment of the Messina Platinum Project, or
deviate from the planned development of the project, without the consent
of the banks.
The Senior Debt comprises two, South African Rand (R) denominated,
tranches making up a total of R345 million ($48 million), Tranche A of
R270 million ($38 million) and Tranche B of R75 million ($10 million).
Both tranches were drawn upon simultaneously and, other than for interest
determination, can be regarded as a single loan.
Drawdown commenced on September 18, 2001, and monthly drawdowns continued
until the final drawdown on September 30, 2002.
Interest accrues on the loan and is capitalized to the loan balance
outstanding. The repayment schedule includes an element of principal and
interest in each repayment instalment with the first instalment scheduled
for February 29, 2004 and with semi-annual payments thereafter until the
final instalment on August 31, 2008.
The interest rate in respect of Tranche A is fixed at 14.51% and in
respect of Tranche B, fluctuates with the average of a basket of long-
term South African money market rates (15.5% at September 30, 2003).
Loans from a South African public company
The original balance of this loan of $3.6M is denominated in Rand and is
unsecured and subordinate to the Senior Debt provided by the banking
consortium. The loan bears interest at South African market-related rates
(15.5% at September 30, 2003) and interest is payable monthly in arrears.
Capital repayments commenced in January 2002 and, under renegotiated
terms, are repayable in monthly instalments of not less than R2.5 million
($0.3 million) per month from February 2003. The banking consortium has
consented to this repayment schedule subject to continued satisfactory
progress of the Messina Platinum Project and such financial support as
might be necessary from SouthernEra.
Accelerated Production Initiative API and API guarantee
This loan and accrued interest was fully repaid in the second quarter of
2003.
7. LOSS PER SHARE AND PRO FORMA LOSS PER SHARE
Basic and diluted loss per share is calculated using the loss for the
year of $2.3 million (2002 - $4.3 million) and the loss for the quarter
of $4.2 million (2002 - $0.7 million) with the weighted average number of
common shares outstanding during the period of 59,962,179 shares (2002 -
45,549,282) and 61,812,504 (2002 - 51,539,757) respectively.
The exercise of stock options could potentially dilute earnings per share
in the future but has not been reflected in diluted loss per share,
because to do so would be anti-dilutive.
The fair value assigned to the portion of 603,500 stock options granted
and vesting in the third quarter of 2002 was $0.8 million. No share
options were granted in the current quarter. Had the valuation of the
2002 grant been charged to earnings in the third quarter of 2002, loss
per share for the three months ended September 30, 2002 would have been
$0.03. The year to date effect of charging current and previous years
fair values of options granted and vesting would increase loss per share
for the nine months ended September 30, 2003 from $0.04 to $0.05.
8. SUBSEQUENT EVENTS
On October 14, 2003, non-controlling shareholders of Messina Limited,
through a completed offering of rights, subscribed for 1,048,297 shares
of Messina Limited at a price of 60 South African Rand per share for
total proceeds of approximately $8.5 million.
On November 17, 2003, the Company issued 12,050,000 units, consisting of
one common share and one-half of one common share purchase warrant, on a
bought deal basis, at a purchase consideration of C$6.40 per unit.
Consideration received net of costs amounted to $55.7 million and, in the
fourth quarter, will be allocated to common shares and the value assigned
to warrants.
9. SEGMENTED INFORMATION
The Company operates in the diamond and PGM industries. The operations of
the Company are managed and grouped, by industry, on a geographic basis.
The Company's reportable operating segments comprise the diamond mining
and exploration activities at Klipspringer in South Africa, as well as in
Angola and Canada, and the Messina Platinum Project in South Africa. The
Canadian segment includes the head office operation and associated
administration costs.
SEGMENTED INFORMATION
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
-------------------------------------------------------------------------
Revenue from diamond sales:
Klipspringer 648 887 2,298 2,207
-------------------------------------------------------------------------
Interest income
Klipspringer 5 2 15 3
Messina 24 40 51 213
Canada 252 185 866 233
-------------------------------------------------------------------------
281 227 932 449
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Amortization
Klipspringer 350 341 1,035 1,031
Canada 5 8 13 31
-------------------------------------------------------------------------
355 349 1,048 1,062
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Segment income (loss)
Klipspringer (3,420) (735) (9,478) (2,879)
Messina (3) 343 (66) 199
Canada (872) (133) 7,466 (810)
Other (184) (184) (564) (561)
-------------------------------------------------------------------------
Reported enterprise
income (loss) before
income taxes (4,479) (709) (2,642) (4,051)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Segment expenditure
on capital assets
Messina 12,088 14,584 30,219 37,657
Klipspringer 675 126 1,264 1,275
Angola 151 126 374 390
Canada 1,347 624 2,869 1,380
Other 352 937 2,098 2,280
-------------------------------------------------------------------------
14,613 16,397 36,824 42,982
-------------------------------------------------------------------------
-------------------------------------------------------------------------
September 30, 2003 December 31, 2002
Identifiable assets
Messina $ 157,352 $ 103,088
Klipspringer 8,298 9,498
Angola 15,465 14,948
Canada 41,394 31,171
Other 4,849 2,737
-------------------------------------------------------------------------
Total reported enterprise assets $ 227,358 $ 161,442
-------------------------------------------------------------------------
-------------------------------------------------------------------------
10. DIFFERENCES BETWEEN CANADIAN GAAP AND IFRS
The Company prepares its financial statements in accordance with Canadian
GAAP, which conform to International Financial Reporting Standards (IFRS)
except for the following significant differences:
a) Under Canadian GAAP, pre-development incidental revenue and associated
costs are deferred and amortized over the life of the mine. Under IFRS
incidental revenue and associated costs are recognized in the statement
of operations. As a result of this difference, the Company would have
recognized additional revenue derived from PGM sales at Messina Phase I.
Mining costs approximated the income earned and, therefore, there would
be no material effect on net income or earnings per share.
b) Under Canadian GAAP, a provision for reclamation costs is expensed
over the life of the mine on a unit of production basis when an estimate
of costs is reasonably determinable. Under IFRS, a reclamation provision
is accrued when the liability is incurred with a corresponding debit to
the related asset. The impact of preparing the financial statements in
accordance with IFRS would be an increase in mining and development
projects of $1.2 million with a corresponding increase in the
environmental rehabilitation provision.
For further information: SouthernEra Resources Limited, Dr. Sally Eyre,
Vice President Corporate Affairs, Telephone: (416) 359-9282,
Fax: (416) 359-9141, E-mail: inbox(at)southernera.com
(SUF. SRE)
END