Reviewed Condensed Consolidated Provisional Financial Results For the year ended 31 December 2011
02 April 2012
- Conclusion of the transaction with China-Africa Jinchuan Investment Limited and Micawber 809 (Pty) Ltd resulting in the subscription of 829 884 460 new ordinary shares for an amount of US$227 million (R1 565,6 million).
- Development of the Bakubung Platinum Mine (previously known as the Frischgewaagd-Ledig project) officially launched.
- Development of the Maseve Platinum Mine on track to commence production by 2014.
After the equity injection and associated funding commitment secured in May 2011, the Company officially launched the Bakubung Platinum Mine in July 2011 and settled its equalisation liability related to its minority shareholding in Maseve Investments 11 (Pty) Ltd (“Maseve”). As a result of these milestones the Company has made the full transformation from its original focus on exploration to becoming a significant mid tier mining company.
Bakubung Platinum Mine project
Production is planned to commence by 2018 with designed annual production of 4E (3PGM + Au) averaging 350 000 ounces expected from 2023 onwards. The Bakubung Platinum Mine ore body remains one of the best un-mined PGM deposits in South Africa, with aboveaverage grades. The planned mining operation will be at an average depth of 850 metres and a very competitive operating cost is envisaged over the 35 year life-of-mine.
The project was reviewed in detail to validate the mine design, capital budget estimates and life of mine financial projections. The current capital budget estimate of R7,9 billion is only marginally higher than the previous inflation adjusted estimate and ongoing improvement is likely to be derived from the redesign and continuous process improvement on the concepts. The current year expenditure on this project related predominantly to the Engineering, procurement and Construction Management (“EPCM”) and other consultants costs relating to early works, cost of this validation, tender processes and the required site establishment, earth and civil works in preparation to commence with shaft sinking. Capital commitments relating to mine development amounted to R305 million at year end. The provision of bulk supplies (power and water) is on schedule and the necessary supporting guarantees have been provided. The owner’s team and the EPCM contractor were secured and appointed. The successful sinking contractor Aveng Grinaker-LTA was announced on 28 March 2012 with the order to be placed on Thursday 5 April 2012 to commence work on site as soon as possible. The Company’s management is continuing to evaluate potential infrastructure synergies with the mine’s neighbours and will focus on achieving continuous improvement.
Maseve Platinum Mine project
The project being developed by Maseve, under the management of the majority shareholder, Platinum Group Metals (RSA) (Pty) Ltd (“PTM”), is expected to commence production by 2014 and reach full production of 275 000 ounces per annum of 4E (3PGM + Au) by 2019.
The Company received an equity injection of US$227 million (R1 565,6 million) by means of allotting 732 522 177 ordinary shares to China-Africa Jinchuan Investment Limited (“China-Africa Jinchuan”) and 97 362 283 ordinary shares to Micawber 809 (Pty) Ltd (“Micawber”) for a subscription price of US$200 368 295 and US$26 631 705 respectively. This transaction also resulted in a share-based payment expense and a related exchange rate gain that is reflected in the financial reports. China-Africa Jinchuan is the nominated shareholder of the Chinese Consortium comprising the Jinchuan Group Limited (“Jinchuan” or “JNMC”) and China-Africa Development Fund (“CADFund”) and are the parties to the subscription agreement in terms of which the shares were issued and in terms of which the Chinese Consortium undertakes to provide the additional funding that may be required in order to achieve operational completion of the Bakubung Platinum Mine project. As such, the current Wesizwe shareholders will not be called upon to provide further funding or be subject to dilution. This funding will be provided either by JNMC and CADFund directly or through the provision of third party funding on terms similar to those of the funding to be provided by the China Development Bank. To this end a facility of US$650 million with China Development Bank is in the process of being set up with reference to the relevant term sheets. The Company is committed to a fee of 1% on the additional funding when it is actually received in cash.
PTM exercised its option, in terms of the shareholders’ agreement, to subscribe for additional shares in Maseve and caused Wesizwe’s effective share in Maseve to be diluted from 45,25% down to 26% and resulted in the recognition of a loss on dilution in Maseve (equity accounted investee) of R9,2 million. In terms of the shareholders’ agreement Wesizwe will not be required to make further cash contributions towards the project until PTM has contributed a total of R1,57 billion in cash for the development of the project. Any remaining balance of funding required will have to be provided by shareholders proportionally to shareholding but it is currently envisaged that this funding will be secured as loan funding from financial institutions.
The Group recorded a loss before tax amounting to R372 million (2010 – profit of R304 million). These results takes account of operational cost amounting to R69 million (2010 – R87 million) and net financial income amounting to R45 million (2010 – R394 million) and the cost related to equity financing amounting to R347 million (2010 – R3 million) as presented in more detail in the condensed group statement of comprehensive income.
Challenges continue to be present in the Community largely due to a long standing leadership vacuum. Despite this, Wesizwe continues to be committed to sustainable community development and empowerment. Our strategic intent is to restore community confidence in Wesizwe as a business partner and have made significant contributions to the Community and the resolution and formalisation of the communities’ affairs. The Company acknowledges the Community as one of its important stakeholders and strives to have a healthy relationship with the Community. To this end, Wesizwe conducted a community stakeholder perception survey to probe perceptions of the Ledig community on the mine project being developed in Ledig. The feedback received is used to formulate future interaction and plans.
Directorate and changes to the board
There were a number of significant changes to the Wesizwe board during the course of 2011. In accordance with the terms and conditions of the transaction between Jinchuan, CADFund, Micawber and China-Africa Jinchuan, Mr Dexin Chen, Mr Jianke Gao, Mr Jikang Li, Mr Wenliang (Michael) Ma, Mr Lincoln (James) Ngculu, Mr Liliang Teng and Mr Qiyin (James) Zhang were appointed to the board on 4 May 2011. To facilitate these board changes, Prof Peter Gaylard and Mr Jacques de Wet resigned as directors of the company at the same meeting. Mr Rob Rainey, Mr Mike Solomon and Mr Julian Williams stepped down from the board during the course of the year.
Mr Arthur Mashiatshidi resigned as chief executive officer in May 2011 but stayed on as Joint Chief Executive Officer with Mr Qiyin (James) Zhang until Mr Jianke Gao officially assumed the position on 2 August 2011. Mr Wenliang (Michael) Ma’s appointment as finance director was confirmed on 23 August 2011. Mr Mlibo Mgudlwa resigned from his position as corporate affairs executive director, and remains on the board as a non-executive director. Mr Arthur Mashiatshidi resigned as a non-executive director of the company with effect from 19 September 2011. Prof Wiseman Nkuhlu and Prof Robert Garnett were appointed as independent nonexecutive directors of the Company with effect from 17 October.
2011. Sadly, Mr Arthur Mashiatshidi passed away in February 2012. The board expresses its sincere condolences to his family and friends. Condensed consolidated provisional statement of financial position at 31 December 2011