Mwana Africa PLC Half Yearly Report (0474T)

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RNS Number : 0474T

Mwana Africa PLC

10 December 2012

Mwana Africa PLC

("Mwana", the "Group" or the "Company")

Unaudited results for the six months to 30 September 2012

Mwana Africa PLC is pleased to announce its unaudited interim financial results for the six months to 30 September 2012.

Financial Highlights

   --      Consolidated Group revenues up 61% to $60.7m (H1 2011: $37.6m) 
   --      Profit before tax of $10.1m (H1 2011: $0.7m loss)

-- Share subscription and placing of 383.0m shares in April 2012 raised approximately $32.8m net of expenses

Operational and Corporate Highlights

-- Freda Rebecca production increased by 66% to 36,335 oz of gold in the six months to September 2012 (H1 2011: 21,893 oz).

   --      New strategic shareholder in China International Mining Group Corporation (CIMGC)

-- Recapitalisation and restructuring of Bindura Nickel Corporation, enabling the restart of the Trojan nickel mine. First sale of concentrate expected Q2 2013.

   --      Positive drilling results at Zani Kodo with 34 holes drilled for a total of 11,047 m.

-- Cooperation and Development Agreement worth up to US$40m signed with Hailiang to jointly explore and develop 28 of SEMHKAT's licenses in the Katanga province of the DRC. Parties currently finalising joint venture agreement which will govern the joint venture relationship.

Oliver Baring, Chairman, commented today:

"The Mwana Group has achieved some major milestones during the past six months including a return to profitability.

Production at the Freda Rebecca Gold Mine continues to progress and positive drilling results from Zani Kodo, and Trojan Nickel Mine gives us confidence that we can increase significantly our resource base. The restart of the Trojan Nickel Mine at BNC as a result of the successful recapitalising and restructuring of the company bodes well for the future.

The current financial period has started well and we look forward to updating our shareholders on further progress during the balance of the financial year end."

For more information, please visit www.mwanaafrica.com or contact:

Mwana Africa PLC

Donald McAlister / Lorenz Werndle

Tel: +44 (0)20 7654 5580

Nominated Adviser and Broker

Liberum Capital Limited

Michael Rawlinson / Tom Fyson / Christopher Kololian

Tel: +44 (0)20 3100 2000

Public & Investor Relations

Tavistock Communications

Ed Portman / Mike Bartlett / Simon Hudson

Tel: +44 (0)20 7920 3150

About Mwana Africa PLC

Mwana Africa PLC is a pan-African, multi-commodity resources company. Mwana's principal operations and exploration activities cover gold, nickel, copper and diamonds in Zimbabwe, DRC and South Africa. Mwana was the first African owned and managed mining business to be listed on London's AIM market.

Mwana's Freda Rebecca gold mine in Zimbabwe restarted operations in 2009. In the year to March 2012, Freda Rebecca produced 47,770 oz of gold.

In February 2012, Mwana announced a gold mineral resource of 2.01 million oz at its Zani Kodo project in Democratic Republic of Congo.

In August 2012, Mwana announced it had entered into a Cooperation and Development Agreement with Zhejiang Hailiang Company Limited to jointly explore some of its copper licences in the Katanga Province of the DRC.

In September 2012, Mwana's subsidiary, Bindura Nickel Corporation, implemented a restructuring and recapitalisation which has allowed it to restart operations at its Trojan nickel mine. First sale of concentrate is expected in Q2 2013.

Further information on the Company can be found at www.mwanaafrica.com.

Six Month Review and Outlook

The six months to the end of September have seen us achieve considerable progress on all of our main projects. The Company achieved the best quarterly gold production at our Freda Rebecca mine since its restart in 2009. Significant headway has been made throughout the period at Bindura Nickel Corporation ("BNC"), concluding at the end of September with the successful recapitalisation and restructuring of BNC, which provides the necessary funding and conditions to restart operations at the Trojan Mine. Another significant development has been the signing of a Cooperation and Development Agreement with Zhejiang Hailiang Company Limited - a major Chinese copper producer. The joint venture agreement will accelerate exploration and development programmes at SEMHKAT, a large and prospective licence area near the Democratic Republic of Congo ("DRC") copper belt, with the potential to retain an interest of up to 40% in mining operations that might be developed. The exploration programme at Zani Kodo has continued apace at three separate targets, with further positive drill results achieved. The Company remains focused on providing shareholders with a resource update at Zani Kodo in the first quarter of 2013.

Operations at Freda Rebecca Gold Mine have performed well throughout the period, with the current annualised rate of gold production now standing at circa 72,000 oz. This makes Freda Rebecca the largest producing gold mine in Zimbabwe. The results of several efficiency programmes at the mine have been increases in milled tonnage, head grade and recoveries. A reduction in C1[1] costs to below US$800 per ounce has also been achieved, resulting in improved margins and revenue of US$59.6m during the period (H1 2011: US$36.0m). At these production levels, the current 2.3Moz gold resource will support a mine life in excess of 10 years.

Exploration work at the Company's gold and base metals projects in the DRC has been very encouraging. At Zani Kodo, drilling has continued at the Kodo, Gombiri and Lelumodi target areas with positive drill intersections at Kodo. The year 2013 is expected to be a landmark year for the DRC gold mining industry with Randgold's Kibali project, which is in close proximity to Zani Kodo, scheduled to commence production in the second half of next year. In Q1 2013, Mwana plans to update its current 2Moz JORC resource with revised figures from this year's drilling campaign. Management remains confident that Zani Kodo has the potential to host a multi-million ounce mineable resource.

Great strides were made during the period to begin to unlock value at the Company's assets in the Katanga copper belt in the DRC. In August, agreement was reached with Hailiang, China's largest copper tube exporter and a leading manufacturer of copper products in China, to provide up to US$40m of investment into the SEMHKAT exploration area. The Katanga region of the DRC has recently become a key focus of global sector players as they compete to secure high quality assets.

In April, the Company raised US$32.8m in a share issue backed by CIMGC and supported by our institutional shareholders. This enabled the Company to invest US$21m into BNC through a rights issue. Agreeing terms with legacy BNC creditors and agreeing a retrenchment package with BNC staff were pre-requisites to the restart of BNC's Trojan mine. The restructuring and recapitalisation of BNC was successfully concluded in September and work is now focussed on restarting the Trojan mine with the sale of first nickel concentrate expected in Q2 2013. Further funding will be required by BNC to take BNC through to being cashflow positive. Post-period, Mwana reported that the resource drilling programme at Trojan had yielded a number of significant intersections of high grade nickel mineralisation. Whilst the immediate focus is on the Trojan restart, the longer term intention remains bringing Hunters Road into production and restarting the Bindura Smelter and Refinery.

Review of Operations and Exploration

Freda Rebecca Gold Mine - Zimbabwe

Freda Rebecca has continued to ramp up production. The mine produced 36,335oz of gold in the six months to September 2012, an increase of 66% from the same period last year (H1 2011 21,893oz). Average monthly production for the period was 6,055oz of gold, and the highest level of gold production achieved in a single month was in August 2012, when 7,242oz of gold was produced. Recoveries improved to 82% (H1 2011 74%)

The increase in gold produced for the six months was attributable to an increase in milled tonnage, increase in grade and improved recoveries.

 
 Operational          6 months     6 months ending   Difference 
                       ending 30    30 Sept 2011 
                       Sept 2012 
===================  ===========  ================  =========== 
 Tonnes mined (t)      542,929         433,334          25% 
===================  ===========  ================  =========== 
 Tonnes milled (t)     507,812         426,318          19% 
===================  ===========  ================  =========== 
 Head grade (g/t)        2.78           2.26            23% 
===================  ===========  ================  =========== 
 Recovery (%)            82%             74%            11% 
===================  ===========  ================  =========== 
 Gold sales (oz.)       36,335         21,893           66% 
===================  ===========  ================  ===========

Table 1: Freda Rebecca production results for the six month periods to 30 September 2011 and 30 September 2012[2]

 
 Financial ($'000)         6 months    6 months ending 
                           ending 30     30 Sept 2011 
                           Sept 2012 
=======================  ===========  ================ 
 Revenue                    59,674         36,009 
=======================  ===========  ================ 
 Cost of sales             (27,373)       (20,104) 
=======================  ===========  ================ 
 Gross profit               32,301         15,905 
=======================  ===========  ================ 
 Selling, distribution 
  and other expenses       (7,991)         (4,632) 
=======================  ===========  ================ 
 (Loss)/Profit before 
  tax                       24,310         11,273 
=======================  ===========  ================

Table 2: Freda Rebecca key financial performance indicators for the six month periods to 30 September 2011 and 30 September 2012

In June, Mwana announced that Freda Rebecca had been awarded ISO 14001 and OHAS 18001 certification, the internationally recognised standards for sustainable environmental management and occupational health & safety management systems. Freda Rebecca maintains an excellent safety record with no fatalities and only three lost time injuries in the past 6 months of operation. Two minor environmental incidents resulted from tailings line failures. Conceptual plans for lining the tailings storage facility were approved by the Environmental Management Agency (EMA). Freda Rebecca was awarded first place in the Association of Mine Managers of Zimbabwe, Safety Health and Environment competitions for the Mashonaland region.

Bindura Nickel Corporation - Zimbabwe

On 7 June 2012, BNC announced, by way of an EGM notice to its shareholders, the commencement of a rights issue process. On 29 June 2012, BNC shareholders approved the various resolutions required to implement the recapitalisation and restructuring at BNC. On 21 September, Mwana announced that BNC had completed a rights issue and placing required to restructure and recapitalise BNC and to recommence operations. Satisfactory terms for the settlement of creditors and of liabilities relating to employee retrenchment and back pay were reached by BNC and the respective stakeholders.

New funds invested into BNC by way of the transaction totalled US$23m, including US$21m from Mwana Africa. The proceeds were sufficient to restart the Trojan Mine, although further funding will be required by BNC to provide sufficient working capital to take BNC through to positive cash flow. Various financing options are currently being considered by Mwana Africa and BNC.

Following the success of the rights issue, work commenced on the restart programme at Trojan Nickel Mine which focused on the mobilisation of the workforce, the commencement of underground operations and the refurbishment of certain components of the milling, flotation and concentrate handling facilities

BNC is planning to ramp up to a production rate of 7,000 tonnes per annum of nickel in concentrate, with first concentrate expected in Q2 2013. Nickel concentrate will be sold to Glencore International.

At Trojan a resource drilling programme is underway with the aim of confirming the down dip extension of the massive sulphide zone within the main ore body and to update the resource at Trojan. A number of significant intersections of high grade nickel were reported by Mwana on the 8(th) of October 2012 and 28(th) of November 2012.

Zani-Kodo - Democratic Republic of Congo

During the six months to 30 September 2012, exploration drilling continued with three diamond core drill rigs at three target areas with 34 holes completed for a total of 11,047 m:

-- Kodo down dip extension

-- Gombiri

-- Lelumodi

For Figure 1 map (Zani-Kodo project area showing current resources and active drill targets, Q3 2012), please click on, or paste the following link in to your web browser, to view the PDF file:

http://www.rns-pdf.londonstockexchange.com/rns/0474T_-2012-12-7.pdf

Kodo Downdip Extension

Drilling continues to target the downdip extension of the Kodo mineralised zone. During the period a total of 15 diamond holes for 5,944 m were drilled. Drilling has continued to intersect excellent widths of visible sulphide mineralisation in both quartz veins/breccias and deformed Banded Iron Formations ("BIFs").

Selected results received for the period are summarised in Table 3 below.

 
  Hole ID     From (m)   To (m)   Width (m)   Grade (g/t) 
-----------  ---------  -------  ----------  ------------ 
  KDODD072      410       434        24          10.08 
-----------  ---------  -------  ----------  ------------ 
 Including      414       426        12          17.21 
-----------  ---------  -------  ----------  ------------ 
 Including      415       421         6          21.64 
-----------  ---------  -------  ----------  ------------ 
                501      506.2       5.2         2.22 
-----------  ---------  -------  ----------  ------------ 
 
  KDODD069     218.5     219.7       1.2         3.20 
-----------  ---------  -------  ----------  ------------ 
 
  KDODD076     402.2      411        8.8         3.17 
-----------  ---------  -------  ----------  ------------ 
 Including     402.2     407.6       5.4         4.47 
-----------  ---------  -------  ----------  ------------ 
                415      427.9      12.9         6.50 
-----------  ---------  -------  ----------  ------------ 
 
  KDODD071      170      170.7       0.7         8.00 
-----------  ---------  -------  ----------  ------------ 
                346      350.15     4.15         0.96 
-----------  ---------  -------  ----------  ------------ 
 
  KDODD074      200       203         3          1.15 
-----------  ---------  -------  ----------  ------------ 
 
  KDODD073     444.85     478       33.15        3.67 
-----------  ---------  -------  ----------  ------------ 
 Including      452       462        10          7.26 
-----------  ---------  -------  ----------  ------------ 
               503.3     504.25     0.95         4.30 
-----------  ---------  -------  ----------  ------------ 
 
  KDODD081      359      362.5       3.5         1.39 
-----------  ---------  -------  ----------  ------------ 
               365.5      387       21.5         4.46 
-----------  ---------  -------  ----------  ------------ 
                399      400.9       1.9         3.88 
-----------  ---------  -------  ----------  ------------ 
 
  KDODD079     413.2      422        8.8         2.14 
-----------  ---------  -------  ----------  ------------ 
 
  KDODD082      390       396         6          4.36 
-----------  ---------  -------  ----------  ------------ 
 
  KDODD080      421       435        14          5.98 
-----------  ---------  -------  ----------  ------------ 
 
  KDODD078     268.75    269.55      0.8         5.98 
-----------  ---------  -------  ----------  ------------ 
 
  KDODD083     258.8      260        1.2         0.53 
-----------  ---------  -------  ----------  ------------ 
               324.3     324.7       0.4         3.40 
-----------  ---------  -------  ----------  ------------

Table 3: Selected results received, Kodo area, April-September 2012[3]

Excellent widths of mineralised BIF continued to be intersected, indicating good downdip continuity of the Kodo Main zone. The best width occurs in hole KDODD072 with 24m at 10.08g/t. The high grade zone narrows out to the north but remains completely open at depth. A significant addition to the current resource is anticipated in this area with a revised resource statement expected in Q1 2013.

Lelumodi

This target area is located to the east of the southerly extension of the Zani-Kodo trend (Figure 1) and is interpreted to be associated with a series of hanging wall splays. A substantial NW-SE trending gold in soil anomaly is present in this area.

Drilling initially focused on completing a full cross section of the area, with heel to toe diamond holes. Current drilling is being carried out on a 50m x 50m grid with a view to defining a resource over a strike length of 400m in the Lelumodi area. 19 holes for 5,103m were completed during the six month period. Results for the first 8 holes in this area were received:

 
 Hole ID      From (m)            Width 
                         To (m)    (m)    Grade (g/t) 
-----------  ---------  -------  ------  ------------ 
 ZNSDD022     11.0       18.0     7.0     0.79 
-----------  ---------  -------  ------  ------------ 
              112.0      116.7    4.7     1.56 
-----------  ---------  -------  ------  ------------ 
 Including    112.0      115.0    3.0     2.20 
-----------  ---------  -------  ------  ------------ 
              152.0      160.0    8.0     1.34 
-----------  ---------  -------  ------  ------------ 
              206.8      210.5    3.7     5.11 
-----------  ---------  -------  ------  ------------ 
              278.55     282      3.45    0.83 
-----------  ---------  -------  ------  ------------ 
 
 ZNSDD026     9.0        13.0     4.0     3.61 
-----------  ---------  -------  ------  ------------ 
              27.0       28.0     1.0     1.58 
-----------  ---------  -------  ------  ------------ 
              31.5       34.5     3.0     1.16 
-----------  ---------  -------  ------  ------------ 
              185.0      191.0    6.0     1.00 
-----------  ---------  -------  ------  ------------ 
 Including    185.0      186.0    1.0     2.19 
-----------  ---------  -------  ------  ------------ 
 And          190.0      191.0    1.0     3.50 
-----------  ---------  -------  ------  ------------ 
              200.6      202.8    2.2     1.46 
-----------  ---------  -------  ------  ------------ 
              209.0      220.0    11.0    1.61 
-----------  ---------  -------  ------  ------------ 
 Including    211.0      212.2    1.2     3.10 
-----------  ---------  -------  ------  ------------ 
 
 ZNSDD019     373.0      377.0    4.0     2.93 
-----------  ---------  -------  ------  ------------ 
 
 ZNSDD021     29         35       6.0     0.63 
-----------  ---------  -------  ------  ------------ 
              65         67       2.0     0.62 
-----------  ---------  -------  ------  ------------ 
              89         95       6.0     0.82 
-----------  ---------  -------  ------  ------------ 
              103.5      108.5    5.0     1.97 
-----------  ---------  -------  ------  ------------ 
 
 ZNSDD027     18         22       4.0     1.01 
-----------  ---------  -------  ------  ------------ 
              28         30       2.0     1.02 
-----------  ---------  -------  ------  ------------ 
              57         61       4.0     2.35 
-----------  ---------  -------  ------  ------------ 
              140        141.2    1.2     2.31 
-----------  ---------  -------  ------  ------------ 
              232        234      2.0     0.71 
-----------  ---------  -------  ------  ------------ 
              252        254.1    2.1     0.62 
-----------  ---------  -------  ------  ------------ 
              318        327.5    9.5     0.75 
-----------  ---------  -------  ------  ------------ 
 
  ZNSDD025    152        160      8.0     1.34 
-----------  ---------  -------  ------  ------------ 
 
 ZNSDD049     30         31       1.0     1.10 
-----------  ---------  -------  ------  ------------ 
              73.2       75       1.8     3.82 
-----------  ---------  -------  ------  ------------ 
              101.45     123.13   21.7    0.66 
-----------  ---------  -------  ------  ------------ 
 Including    101.45     107      5.6     0.90 
-----------  ---------  -------  ------  ------------ 
 And          118        123.15   5.2     0.79 
-----------  ---------  -------  ------  ------------ 
              154        156      2.0     0.97 
-----------  ---------  -------  ------  ------------ 
 
 ZNSDD045     2          9        7.0     0.88 
-----------  ---------  -------  ------  ------------ 
              34.5       37       2.5     0.57 
-----------  ---------  -------  ------  ------------ 
              92.5       93       0.5     9.80 
-----------  ---------  -------  ------  ------------ 
              173        175      2.0     1.01 
-----------  ---------  -------  ------  ------------ 
              207.1      209.1    2.0     2.12 
-----------  ---------  -------  ------  ------------

Table 4: Selected results received, Lelumodi area, July-September 2012[4]

The results indicate the presence of multiple zones of mineralisation up to 21m in width. These zones occur in either sheared felsic tuff or BIF within a sequence dominated by metabasalts and dolerite intrusions. The zones are all close to surface and represent potential open pit material.

The presence of significant near surface mineralisation at Lelumodi has shown that soil geochemistry is an effective exploration tool and implies that further mineralisation will be present along the complete 4,000m strike length of the soil anomaly. This will be tested during 2013.

Gombiri

This target area is situated immediately south of the Zani Central area (Figure 1). Drilling was completed at the Gombiri target which is situated immediately south of Zani Central. Results were disappointing but have resulted in a re-interpretation of the Zani-Kodo trend, with mineralisation occurring in a related parallel fault zone to the East. This corresponds to the NW strike extension of the Lelumodi mineralised zone and will be targeted for drilling in 2013.

Katanga Base Metals (SEMHKAT) - Democratic Republic of Congo

On 21 August Mwana announced that it had entered into a Cooperation and Development Agreement covering 28 licences within its 100% owned SEMHKAT copper exploration area with Zhejiang Hailiang Company Limited ("Hailiang"). The parties are currently finalising a joint venture agreement which will govern the joint venture relationship.

Under the Agreement, Hailiang will invest US$25 million over a minimum period of four years to earn a 62% voting interest in the Exploration Joint Venture. Hailiang has the right at any time to transfer a licence into a development company ("DC"). Once in a DC, exploration and development of the selected licence area will be progressed further and a JORC resource report and feasibility study will be produced, and, inter alia, assuming a positive result from the feasibility study, a mine will be developed. Mwana's 38% shareholding in any DC will be non-dilutable. Hailiang has a further six month option over the Kibolwe prospect. Should they exercise this option, Kibolwe will be transferred to its own DC, in which Mwana will have a 40% non-dilutable shareholding, and, Hailiang has committed a further US$15m to Kibolwe within 12 months after the transfer of the license.

Over the six months to 30 September exploration work concentrated on Lunsano, as the major focus remains the generation of drilling targets for 2013. The Lunsano area is located 25km due south of Likasi and overlies the Roan Group of rocks with known potential for Cu-Co mineralisation. The Southern copper anomaly (6km by 1km), Northern copper anomaly (6km by 500m) and the Eastern copper anomaly (3km by 300m) all form part of the broader Lunsano geochemical anomaly.

Geological mapping in conjunction with trenching and pitting was carried out on the Northern, Southern and Eastern geochemical anomalies, with a focus on distinguishing the erosional regimes of the Lunsano terrain in order to delineate in-situ copper. Re-mapping of Mine Series Units to the SW of the Southern copper geochemical anomaly was also completed.

Detailed geological mapping of priority areas in the southern anomaly continued. The geology of the two areas was updated on plan. Mapping revealed a shaly sandstone sandwiched between the Grand Conglomerat and shale units. A strong association of high soil, trench and pit copper values with brecciated zones have been recognised, and are related to NW-SE trending structures. Visible sulphide and oxide mineralisation was encountered in some trenches.

A total of 401 pits yielding 1,208 samples were assayed by Niton hand-held XRF. The pit geology and results were updated on plan. The pit and soil sample results support each other. Some areas gave peak average copper values of 794.1ppm (P246), 600.6ppm (P448), 481.3ppm (P320A) and 154.6ppm (P389) respectively. The high copper values coincide with brecciated zones. The pit results of the northern anomaly warrant further investigation.

A total of 8,304 trench samples were assayed by Niton over this period.

AMBASE-SEMHKAT Joint Venture

Field work commenced in April. Infill soil sampling was completed on the Kasolo, Komeshia, Kabransuki, Sase, Mlalaninga, Dilungu, Gunji, Katenge, Diseba, Kikunka, Kabibangao and Kimani. A total of 3,019 samples were collected over the period.

Approximately 50% of ground geophysical surveys at Kasolo were completed. Further mag, IP, and MLEM surveys over the main target areas were scheduled for Q4.

The Katenge target combines a soil geochem anomaly with coinciding SPECTREM EM, as well as a vegetation anomaly (possible Cu clearing). At least one of the holes intersected visible Cu mineralisation in form of malachite in carbonaceous and partially pyritic shale on the base of the Grand Conglomerat. NITON analysis of the holes is pending.

Positive results from infill soil sampling and shallow RC drilling during Q3 has prompted the establishment of further drill access tracks (8.2km completed) at the Katenge, Kikunka and Kabibangao targets.

A reverse circulation ("RC") drilling rig was mobilised to Maina Camp and commenced drilling in May. A second multi-purpose RC/DD rig was mobilised in June.

A total of 302 holes both RAB and RC, yielding 10,551m were completed in Q3.

The majority of these holes were drilled as shallow RC scout holes over soil geochemistry anomalies or as deeper follow-up holes, either directly testing targets from earlier shallow RC or drilled as pre-collars for later diamond drill extensions.

Most of the targets drill-tested over Q3 have been abandoned due to low grades returned. In most cases the Cu (and sometimes Ni) is associated only with a Fe-rich weathering zone just above the fresh rock, where Cu typically reaches concentrations of up to 0.3% Cu, and then rapidly drops off as drilling intersect fresh rock.

Gunji delivered the best results so far with an 18m showing visible malachite and NITON assays of 0.6% Cu (maximum of 1.1% Cu over 2m).

Diamond drilling is on-going and so far, 11 DD holes totalling 1001m have been drilled.

The DD holes at Kasolo intersected mainly altered limestone, dolomite, and tectonic talcose breccias. Minor chalcocite was observed in the breccias with malachite and native Cu occupying limestone fractures. Assays are still to be done.

DD holes at Gunji were drilled in order to complement the existing deeper RC holes. These holes appear to confirm the inferred moderate south-westerly dip of the strata. Both holes intersected brecciated saprolite before grading into fresh dolomite and dolomitic shale at depth.

No significant Cu mineralisation could be recorded in fresh rock, confirming earlier observations in RC holes, which indicate Cu predominantly being concentrated in the deeper weathering zone near the interface to the fresh rock.

Klipspringer Diamond Mine - South Africa

Management continue to review options for the Klipspringer mine which remained on care and maintenance for the period.

Diamonds - other interests

Mwana Africa has minority stakes in a number of other diamond projects including a 20% interest in Societe Miniere de Bakwanga (MIBA) in the DRC, an 18% interest in the Camafuca project in Angola and 55% interest in the BK16 project in Botswana.[5]

Financial Review

Income Statement

The Group reported revenue of $60.7m for the period (H1 2011: $37.6m). Freda Rebecca generated $59.7m (H1 2011: $36.0m) from the sale of 36,335oz. (H1 2011: 21,893oz) of gold.

The Group generated a gross profit of $33.1m for the period (H1 2011: $17.2m), $32.3m at Freda Rebecca and $0.8m at BNC which continued to dispose of inventory items.

Operating costs of $49.6m (H1 2011: $39.0m) increased from the previous year due to increased activity at Freda Rebecca with the introduction of the second milling circuit where costs for the period rose to $34.9m (H1 2011: $24.5m).

No impairment nor reversal of impairment of assets was recorded in the period. The Group reported a profit before tax of $10.1m (H1 2011: Loss of $0.7m).

Cashflow

During the period the Company raised $32.4m through an equity issue. This was achieved through the placing of and subscription for 383,042,447 new ordinary shares in April.

Cashflow from operations of $19.8m was generated by the Group during the period. $29.7m of operational cash generated by Freda Rebecca was offset by $6.4m spent on the continued care and maintenance program at BNC, $1m on care and maintenance at Klipspringer diamond mine, and $2.6m on other corporate costs. $3.1m was absorbed by working capital, resulting mainly from the repayment of creditors outstanding at the year-end as well as payments received from debtors. Financing costs were $0.2m, and income tax charges of $5.6m mainly on the profits of Freda Rebecca resulting in net cash generated from operations of $10.8m.

Capital investment comprised $4m (H1 2011: $4.6m) on property, plant and equipment, principally at Freda Rebecca, and a further $6.6m (H1 2011: $4.6m) on exploration assets.

Capital commitments at the end of the period comprised of $775k at BNC and $1,246k at Freda Rebecca. The Group plans to spend an additional $14,910k by the end of this financial year on the restart program at the Trojan Mine.

At 30(th) September 2012, the Group, held cash balances of $39.9m (H1 2011: $15.3m).

Restructuring and re-financing of the Trojan Mine restart.

BNC completed a rights issue and a placing on 17th September 2012. New funds invested into BNC by way of the transaction totalled US$23m, including US$21m from Mwana Africa. In addition as part of the placing, external creditors amounting to $4.7 million and labour settlement of $1.1 million were converted into BNC shares. The rights issue resulted in an increase in BNC's share capital of $31.4million.

A prerequisite to the rights issue was satisfactory agreement on labour liabilities and retrenchment provisions and payables. Movements in labour provisions are summarised in the table below:

 
                           Additional   Amounts settled 
                 Opening   provisions     during the      Provisions                                            Closing 
                 balance     raised         period         reversed      Transfers      Adjust-ments             balance 
                  1 Apr 
                   '12                  Cash    Shares 
                  $'000      $'000      $'000    $'000      $'000          $'000           $'000                 $'000 
--------------  --------  -----------  ------  --------  -----------  ---------------  -------------  --------------------------- 
 Litigation        3 728           28     -65      -462       -2 148             -299              -                          782 
 Back Pay         11 386        2 417     -42      -153       -5 365            3 264              -                       11 507 
 Leave & 
  Bonus            4 326        1 051       -         -            -           -4 205              -                        1 172 
 Retrenchment          -        7 058    -148      -444            -            1 963      -1 128[6]                        7 301 
 Other Costs           -          741     -18         -            -             -723              -                            0 
 
                                                                                                                               20 
                  19 440        11295    -273    -1 059       -7 513                -         -1 128                          762 
                ========  ===========  ======  ========  ===========  ===============  =============  ===========================

$3.4 million was paid after the period end being the first payment to retrenchees and $8.5 million has been deferred to December 2014, to be settled in cash of $6.5 million and mining houses for $2.0million. This amount is classified as non-current liabilities.

Condensed Group balance sheet

As at 30 September 2012

(Unaudited)

 
                                         30.09.2012   30.09.2011   31.03.2012 
                                          Unaudited    Unaudited      Audited 
                                  Note        $'000        $'000        $'000 
 ASSETS 
 Non-current assets 
 Property, plant and equipment       6       81,532       78,016       80,070 
 Intangible assets                   7       49,597       37,169       42,932 
 Investments                         8        1,819        2,301        1,825 
 Deferred tax assets                            895          832        1,018 
 Non-current receivables                      1,312        1,300        1,421 
                                        -----------  -----------  ----------- 
 Total non-current assets                   135,155      119,618      127,266 
                                        -----------  -----------  ----------- 
 
 Current assets 
 Inventories                                  8,504        7,752        8,072 
 Trade and other receivables                 15,567       14,020       16,997 
 Tax receivable                                 162          743            - 
 Available-for-sale financial 
  assets                                          -            -            - 
 Assets held for sale                             -            -            - 
 Cash and cash equivalents           9       39,885       15,283        6,696 
                                        -----------  -----------  ----------- 
 Total current assets                        64,118       37,798       31,765 
                                        -----------  -----------  ----------- 
 
 Total assets                               199,273      157,416      159,031 
                                        ===========  ===========  =========== 
 
 EQUITY 
 Issued share capital               10       95,098       88,817       88,817 
 Share premium                               68,804       42,641       42,641 
 Reserves                                    99,476       99,455       99,843 
 Retained earnings                        (139,800)    (150,670)    (149,810) 
                                        -----------  -----------  ----------- 
 Total equity attributable 
  to equity holders of the 
  parent                                    123,578       80,243       81,491 
 Non-controlling interest                   (1,992)        (232)      (3,527) 
                                        -----------  -----------  ----------- 
 Total equity                               121,586       80,011       77,964 
                                        -----------  -----------  ----------- 
 
 LIABILITIES 
 Non-current liabilities 
 Loan payable                                 5,201        6,966        5,927 
 Rehabilitation provisions          11       17,991       17,842       18,064 
 Provisions and other payables                8,537            -            - 
 Deferred tax liabilities                     9,872        8,652        9,998 
                                        -----------  -----------  ----------- 
 Total non-current liabilities               41,601       33,460       33,989 
                                        -----------  -----------  ----------- 
 
 Current liabilities 
 Trade payables                               7,812       11,983       11,939 
 Provisions and other payables               28,274       31,962       35,139 
 Taxation payable                                 -            -            - 
 Total current liabilities                   36,086       43,945       47,078 
                                        -----------  -----------  ----------- 
 Total liabilities                           77,687       77,405       81,067 
                                        -----------  -----------  ----------- 
 
 Total equity and liabilities               199,273      157,416      159,031 
                                        ===========  ===========  ===========

Condensed Group income statement