Goliath Gold Mining Ltd HY 2013 results

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Goliath Gold Mining Ltd HY 2013 results

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Goliath Gold Mining Ltd HY 2013 results

  1. 1. Goliath Gold Mining Limited Incorporated in the Republic of South Africa (Registration number: 1933/004523/06) Share code: GGM ISIN: ZAE000154753 (“Goliath Gold” or “the Company” or “the Group”) REVIEWED CONDENSED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2013 CONDENSED CONSOLIDATED COMPREHENSIVE INCOME Other income General and administrative expenses Fair value adjustments Impairment of assets Exploration and prefeasibility expenditure BEE transactions Employee share options Loss on sale of financial assets Operating loss Finance income Finance costs Loss before taxation Taxation Total comprehensive income for the period Attributable to: Equity holders of the Group Total number of ordinary shares in issue Weighted average number of ordinary shares in issue Basic and diluted loss per share (cents) Basic and diluted headline loss per share (cents) STATEMENT OF PROFIT OR LOSS AND OTHER Change % 100 Reviewed six months 30 June 2013 R’000 1 500 Reviewed restated six months 30 June 2012 R’000 - 54 (42) (100) (8 168) (682) - (5 306) (1 178) (93) (39) (100) 100 (8 820) (2 197) (14 411) (23 770) - (100) (18 367) 315 (813) (18 865) 22 (1 105) (45 863) 1 484 (550) (44 929) (602) (18 843) (45 531) (18 843) (45 531) 147 354 905 147 354 905 147 354 905 129 023 901 (13) (35) (12) (34) (79) 48 (104) (59)
  2. 2. RECONCILIATION OF HEADLINE LOSS Loss for the period Adjustments for: Loss on disposal of assets Impairment of assets Fair value adjustments Headline loss Reviewed six months 30 June 2013 R’000 (18 843) Reviewed restated six months 30 June 2012 R’000 (45 531) 682 (18 161) 1 105 93 (44 333) CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION Reviewed 30 June 2013 R’000 ASSETS Non-current assets Intangibles 75 290 Property, plant and equipment 73 245 Investment property 3 143 151 678 Current assets Restricted cash Receivables Cash and cash equivalents 1 2 7 11 648 686 079 413 Audited 31 December 2012 R’000 75 73 3 152 282 417 825 524 1 1 12 16 648 865 514 027 Total assets 163 091 EQUITY AND LIABILITIES Share capital Reserves (Accumulated loss)/ Retained earnings Equity attributable to equity holders of the Group Non-current liabilities Provisions Current liabilities Loans from related parties Accruals Trade and other payables Total liabilities Total equity and liabilities 168 551 169 860 26 256 169 860 24 059 (63 163) (44 320) 132 953 149 599 1 335 1 335 25 240 165 3 398 28 803 30 138 163 091 15 223 81 2 313 17 617 18 952 168 551
  3. 3. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Reviewed six months 30 June 2013 R’000 Cash receipts from customers Cash paid to suppliers and employees Cash used in operations Finance income Finance costs Cash utilised in operating activities Purchase of property, plant and equipment Proceeds from sale of financial assets Acquisition of business net of cash acquired Net cash effect of investing activities Invested equity Loans advanced by related parties Net cash effect of financing activities Net cash change for the period Cash at the beginning of the period Net cash at the end of the period Reviewed six months 30 June 2012 R’000 - - (14 734) (14 734) 315 (451) (19 414) (19 414) 1 484 (478) (14 870) (18 408) (220) - - 15 148 - 35 309 (220) 50 457 - 5 970 9 655 6 947 9 655 12 917 (5 435) 44 966 12 514 1 100 7 079 46 066
  4. 4. CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Reviewed Balance at 1 January 2012 Restated loss for the period Invested equity Issue of shares equity Restated BEE transaction Restated balance as at 30 June 2012 Reviewed Balance at 1 January 2013 Loss for the period Equity settled employee share option expense Balance at 30 June 2013 Share capital R’000 - Reserves R’000 1 415 - Accumulated loss/Retained earnings R’000 Total equity R’000 40 128 41 453 - - (45 531) 5 970 (45 531) 5 970 169 860 - - 169 860 - 23 770 - 23 770 169 860 25 185 567 195 612 169 860 - 24 059 - (44 320) (18 843) 149 599 (18 843) - 2 197 - 2 197 169 860 26 256 (63 163) 132 953 COMMENTARY 1. BASIS OF PREPARATION The condensed consolidated interim financial statements are prepared and presented in accordance with International Financial Reporting Standards (“IFRS”), which include International Accounting Standard (“IAS”) 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the requirements of the Companies Act of South Africa 2008 (Act 71 of 2008), as amended (“Companies Act”) and the Listings Requirements of the JSE Limited (“JSE”). The accounting policies have been consistently applied with those applied in the most recently audited financial statements, which are supported by reasonable and prudent judgements and estimates. The condensed consolidated interim financial statements do not include all the information required for a full Annual Report in terms of IFRS and should be read in conjunction with the Annual Report of the Group as at 31 December 2012 and any public announcements made in terms of the JSE Listings Requirements. However, selected explanatory notes are
  5. 5. included to explain events and transactions that are significant to an understanding of the changes in the Group's financial position and performance since the last Annual Report for the year ended 31 December 2012. The condensed consolidated interim financial statements are presented in South African Rands and rounded to the nearest thousand. These condensed consolidated interim financial authorised for issue by Goliath Gold's Board 26 September 2013. statements were of Directors on The condensed consolidated interim financial statements have been prepared under the supervision of Mr Phillip Spencer (CA) SA, Vice President: Finance. On 5 July 2013, the Company appointed KPMG Inc., auditors of Goliath Gold’s parent company, Gold One International Limited (“Gold One”), as its external auditors, replacing PWC. KPMG Inc.’s designated partner responsible for Goliath Gold is Mr Jacques Erasmus. The condensed consolidated interim financial statements of Goliath Gold for the six months ended 30 June 2013 have been reviewed by the Company’s auditor, KPMG Inc., on which an unmodified review conclusion was expressed. A copy of the report is available for inspection at the Company’s registered office. The audit report does not necessarily report on all of the information contained in this financial report. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s engagement, they should obtain a copy of the auditor’s report together with the accompanying financial information from the Company’s registered office. 2. NATURE OF THE BUSINESS Goliath Gold is a South African incorporated mining, exploration and development company that holds prospecting rights over several contiguous areas in the East Rand Basin of South Africa’s Witwatersrand Basin in the Gauteng Province, as well as prospecting rights for heavy minerals on the West Coast of South Africa. The Company has a primary listing on the JSE, issuer code: GGM. 3. FINANCIAL AND OPERATIONAL PERFORMANCE The Group continues to fund exploration expenses on the areas over which it holds prospecting rights. Accordingly, the Group has incurred a loss of R 18.8 million for the six months ended 30 June 2013 (restated six months ended 30 June 2012: R 45.5 million).
  6. 6. 4. PROSPECTS AND FUTURE PERFORMANCE Goliath Gold is focused on creating value by exploring and developing the Company’s exploration portfolio. During 2013, the Company’s primary focus has been on further developing the substantial mineral resource base at its Megamine Project in the East Rand, completing the desktop modelling of the heavy mineral sands distribution at its Project Elephant (“Project Elephant”) on the Western Cape Coast and finalising the acquisition agreement with the joint provisional liquidators acting on behalf of Pamodzi Gold East Rand Proprietary Limited (“Pamodzi”). At the end of 2012, Goliath Gold declared an estimated mineral resource of 12.19 million ounces of gold at its Megamine Project, which for the first time included the Wit Nigel prospecting area. The total mineral resource included indicated mineral resources of 3.64 million ounces (25.62 million tonnes grading at 4.42 grams per tonne) and inferred mineral resources of 8.56 million ounces (56.45 million tonnes grading at 4.72 grams per tonne). Approximately 3.6 million ounces of the total estimated mineral resource occur at depths shallower than 1,000 metres below surface. Since the estimation of these mineral resources there have been no material changes that would impact on the mineral resource estimates. Further details relating to Goliath Gold’s mineral resources can be found on the Company’s website, www.goliathgold.com, and in the 2012 Annual Report. Three target areas were selected to be further progressed and advanced during 2013. The three target areas were prioritised based on their relatively shallow depth below surface, good grade potential, size and accessibility. These areas include the Houtpoort Channel, Seven and Nine Shaft Spaarwater extension and the Vlakfontein Black Reef, which forms part of the Mapleton Basin. At Houtpoort, five surface exploration boreholes were completed during the first half of 2013, coupled with extensive surface and underground mapping as well as the completion of a conceptual economic study. For the remainder of 2013, a further four boreholes are planned to be completed and the conceptual study is to be continued to a pre-feasibility study level. A single surface exploration drill hole was completed at the Seven and Nine Shaft target. While this drilling was deemed to be successful, due to the deeper nature of this target (approximately 1,000 metres to 1,500 metres below surface), further drilling during 2013 has been delayed. Surface mapping and trenching was undertaken on the Black Reef target with drilling planned for the second half of 2013. Further information and exploration results are available on the Company’s website, www.goliathgold.com. The geological and exploration target modelling at Project Elephant has been largely completed utilising historical information. Future planned activities include an aerial geophysical survey to identify and refine priority drilling targets. The optimal time to undertake such a survey is during the summer months and, as such, the survey has been planned for either the last quarter of 2013 or the first quarter of 2014. On 17 April 2012, Gold One and Goliath Gold announced that they had entered into an R 70.0 million Acquisition Agreement with the joint provisional liquidators representing Pamodzi and its subsidiaries to acquire the Grootvlei Proprietary Mines Limited (“Grootvlei”) treatment plant, selected Grootvlei surface assets (including primarily the
  7. 7. Grootvlei office complex), historical geological data, and the right to apply for three prospecting rights. Gold One was to acquire the treatment plant and surface assets together with the right to apply for a prospecting right over the down-dip extensions to Gold One’s Modder East Operations for R 65.0 million. Goliath Gold was to obtain the remaining two prospecting rights and acquire historical mining and geological data from Consolidated Modderfontein Mines 1979 Limited, Consolidated Modderfontein Mines Limited, Nigel Gold Mining Company Proprietary Limited and Grootvlei for R 5.0 million. On 7 August 2013, Gold One and Goliath Gold announced that two of three prospecting applications had been granted and that the acquisition of selected surface assets by Gold One and underground mining and geological information by Goliath Gold had been made unconditional. The third and final prospecting right was granted on 12 September 2013. The granting of these prospecting rights provides Goliath Gold with a contiguous prospecting area in extent of 64,481 hectares in the East Rand Basin; one of the most prolific historic gold producing regions in South Africa. The contiguous prospecting area comprises the existing Megamine Project and the recently awarded prospecting rights over selected portions of the historic Pamodzi mining areas. In December 2012, the Company applied for an exclusive prospecting licence in Namibia. The prospecting licence submitted relates to the Etendeka Project, a greenfield project situated in northern Namibia, where potential gold, copper and phosphate mineralisation has been identified. The Company is awaiting the successful granting of the licence, which is anticipated during the last quarter of 2013. The future exploration activities of Goliath Gold will remain focused on enhancing the value of the Megamine mineral resources through the appropriate application of economic studies to identify potential future mineral reserves. The Company will also commence with regional geological modelling and associated exploration activities in the newly awarded historic Pamodzi mining areas. The combination of the existing models at the Megamine Project and the extensive historic Pamodzi information will be utilised to facilitate the identification of priority exploration targets and fast-track target development. At Project Elephant, the aerial geophysical survey is planned to be completed during the fourth quarter of 2013 or first quarter of 2014. 5. GOING CONCERN The condensed consolidated interim financial statements have been prepared on the going concern basis using appropriate accounting policies, supported by reasonable judgements and estimated. The going concern basis implies that the Group will have adequate resources to continue as a going concern for the foreseeable future. It is noted that at 30 June 2013, the Group’s total assets exceed it liabilities by R 133.0 million. The Group’s current liabilities, however, exceed its current assets by R 17.4 million, which results in a short term liquidity constraint.
  8. 8. As at 26 September 2013, the Group held cash and cash equivalents of approximately R 5.6 million. As the Group is a gold exploration company and does not currently have cash generating assets, the continued exploration programme is funded from available cash on hand and debt from the ultimate parent company, Gold One. Gold One has confirmed its financial support of Goliath Gold as and when additional funding is required to execute the exploration programme. In turn Gold One has received financial support from its ultimate holding company. 6. SEGMENTAL REPORTING Management has determined the operating segments based on the reports reviewed by the Executive Committee that are used to make strategic decisions. The Executive Committee considers the business from a functional perspective and has identified only one reportable segment, namely, exploration. The Group currently operates in one geographical location, being Southern Africa, and performs exploration activities. Business Segment Information Exploration Reviewed six months 30 June 2013 R'000 Reviewed restated six months 30 June 2012 R'000 - - (18 843) (45 531) Reviewed 30 June 2013 Audited 31 December 2012 Assets Exploration 163 091 168 551 Liabilities Exploration (30 138) (18 952) Segment revenue Exploration Loss for period Exploration the
  9. 9. 7. CONTINGENCIES, LEGAL PROCEEDINGS AND GUARANTEES Bank guarantees to the value of R 1.6 million (2012: R 1.6 million) have been issued by a financial institution in favour of the Department of Mineral Resources in order to secure the Group's rehabilitation obligations in respect of its various prospecting rights. Goliath Gold has identified a risk of potential long-term Acid Mine Drainage ("AMD") on certain of its operations. AMD relates to the acidification and contamination of naturally occurring water resources by pyrite-bearing ore contained in underground mines and in rock dumps, tailings dams and pits on the surface. Goliath Gold has not been able to reliably determine the financial impact that AMD may have on the Group. The Group has taken certain preventative actions as well as remedial actions in an attempt to minimise the Group’s exposure to environmental contamination. 8. EVENTS AFTER THE REPORTING PERIOD On 17 April 2012, Goliath Gold announced that Goliath Gold and Gold One had jointly entered into a R 70.0 million Acquisition Agreement with the joint provisional liquidators representing Pamodzi and its subsidiaries (“the Sellers”) to acquire the Grootvlei treatment plant, selected Grootvlei surface assets (including primarily the Grootvlei office complex), historical geological data, and the right to apply for three prospecting rights. Gold One was to acquire the treatment plant and surface assets together with the right to apply for a prospecting right over the down-dip extensions to Gold One’s Modder East Operations for R 65.0 million. Goliath Gold was to obtain prospecting rights and acquire historical mining and geological data from Consolidated Modderfontein Mines 1979 Limited, Consolidated Modderfontein Mines Limited, Nigel Gold Mining Company Proprietary Limited and Grootvlei for R 5.0 million. On 7 August 2013, Gold One and Goliath Gold announced that two of three prospecting applications had been granted (one of which pertained to Gold One and the other to Goliath Gold) and that, in addition, the acquisition of selected surface assets by Gold One and underground mining and geological information by Goliath Gold had been made unconditional. The third and final prospecting right was granted to Goliath Gold on 12 September 2013. 9. PRIOR PERIOD ERROR The Group reported a Black Economic Empowerment ("BEE") share based payment expense of R 31.9 million in the condensed consolidated interim financial statements for the six months ended 30 June 2012. The valuation of this charge was based on the number of options granted to the BEE partners in order to meet the South African Mining Charter requirements of 26% black ownership by 2014. These share option arrangements will be settled by obtaining an equity interest of the Group's mining operations.
  10. 10. At 31 December 2012, an error was identified in certain assumptions applied in the calculation of the BEE charge. This amount was correctly stated in the 31 December 2012 Annual Report as R 23.8 million. This amendment results in a restatement of the BEE charge recognised in the 30 June 2012 comparative figures. There was no impact on the opening statement of financial position. No third statement of financial position is therefore presented. It is important to note that IFRS allowed for the correction of the error for the 31 December 2012 financial year end without having to report a prior period error as it occurred during the same financial year. For purposes of the condensed consolidated interim financial statements for the six months ended 30 June 2013, the 30 June 2012 comparative period was required to be restated. The correction of the error results in an adjustment as follows: Reviewed 30 June 2013 Profit or Loss Black Economic Empowerment transactions 10. Previously reported R’000 Adjustment R’000 Restated R’000 31 897 (8 127) 23 770 DIVIDENDS No dividends or distributions were declared or paid to shareholders (30 June 2012 – R nil). 11. ASSET VALUE PER SHARE Reviewed 30 June 2013 R’000 Net asset value per share (cents) Net tangible asset value per (cents) Audited 31 December 2012 R’000 90 102 39 50 share The net asset value and the net tangible asset value per share at 30 June 2013 is based on the total number of shares in issue of 147 354 905 (2012: 147 354 905). 12. COMPETENT PERSON’S STATEMENT There have been no material changes to the Company’s estimated mineral resources as declared at December 2012. On-going exploration results are continuously monitored and will be utilised to update the existing mineral resources upon successful completion of the planned exploration activities.
  11. 11. The overall competent person for Goliath Gold is Mr Quartus Meyer. The information in these condensed consolidated interim financial statements that relates to exploration results is based on information compiled by Mr Meyer for the purposes of the South African Code for Reporting of Exploration Results, Mineral Resources and Mineral Reserves (“SAMREC Code”). The information in these condensed consolidated interim financial statements that relates to mineral resources is based on information compiled by Dr Carina Lemmer. The Competent Person for Goliath Gold’s exploration results is Mr Meyer, who has a master’s degree in science (geology) and who is a professional natural scientist registered with the South African Council for Natural Scientific Professions (“SACNASP”) membership number 400063/88, and resides at 27 Mynhardt van Graan Street, Hennenman, 9445. Mr Meyer is Vice President: Exploration and is a fulltime employee of Gold One, which has entered into a management agreement with Goliath Gold. Mr Meyer has 26 years’ experience relevant to the style of mineralisation and type of deposit under consideration, and to the activity which he is undertaking, to qualify as a Competent Person for the purposes of the SAMREC Code. The Competent Person for Goliath Gold’s mineral resources is Dr Lemmer, who has a doctorate in applied earth sciences (geostatistics) and who is a professional natural scientist registered with SACNASP, membership number 400021/03, and resides at 15 Chiselhurst Drive, Rossmore, 2092. Dr Lemmer is an independent consultant to Goliath Gold, and has been an independent consultant to the South African mining industry for the past 23 years. Dr Lemmer has 35 years’ experience in resource estimation relevant to the style of mineralisation and type of deposit under consideration, and to the activity which she is undertaking, to qualify as a Competent Person for the purposes of the SAMREC Code. Mr Meyer and Dr Lemmer consent to the inclusion in these condensed consolidated interim financial statements of the matters based on information compiled by themselves in the form and context in which they appear. 13. DIRECTORATE During the reporting period, acting Chief Executive Officer, Dr Richard Stewart, was appointed as Chief Executive Officer with effect from 1 January 2013. Mr Mark Wheatley resigned as a Chairman and nonexecutive director with effect from 30 April 2013 and Mr Piet Nel was appointed as the independent non-executive Chairman with effect from 30 April 2013. On 21 August 2013, Goliath Gold’s majority shareholder, Gold One, announced that it had entered into an agreement with Sibanye Gold Limited (“Sibanye Gold”) to merge its 74% shareholding in and claims against Newshelf 1114 Proprietary Limited, which holds a 100% shareholding in Rand Uranium Proprietary Limited – being the Cooke 1-3 Underground Operations and Randfontein Surface Operations – and, which will also hold 100% of Ezulwini Mining Company Proprietary Limited after an internal restructuring – being the Cooke 4 Underground Operation – in exchange for a 17% interest in the fully diluted share capital of Sibanye Gold through the issue of new ordinary shares.
  12. 12. Conclusion of the transaction is not yet certain and remains subject to, inter alia, Chinese regulatory approvals, Sibanye Gold shareholder approval, Competition Commission approval and Section 11 approval from the Minister of Mineral Resources. Should the transaction be approved and completed, Goliath Gold Chief Executive Officer, Richard Stewart, who is also Executive Vice President: Technical Services for Gold One, is expected to become a fulltime employee of Sibanye Gold and will therefore resign from his position as Chief Executive Officer of Goliath Gold. The Goliath Gold Board is proactively considering potential candidates to serve as Chief Executive Officer pending the outcome of the abovementioned transaction and a further announcement will be made in this regard. Approved on behalf of the Board Richard Stewart Chief Executive Officer Christopher Chadwick Chief Financial Officer Johannesburg 27 September 2013 Directors: P Nel*(Chairman), R Stewart (Chief Executive Officer), C Chadwick (Chief Financial Officer), K Rayner*, J Vilakazi*, *Independent Non-executive REGISTERED OFFICE Constantia Office Park, Bridgeview House, Ground Floor Corner 14th Avenue and Hendrik Potgieter Street, Weltevreden Park, 1709. South Africa COMPANY SECRETARY Pierre Kruger Constantia Office Park, Bridgeview House, Ground Floor Corner 14th Avenue and Hendrik Potgieter Street, Weltevreden Park, 1709. South Africa SPONSOR Merchantec Capital AUDITORS KPMG Inc.

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