27 March 2007
BISICHI MINING PLC
Preliminary Results for the year ended 31 December 2006
2006 2005
Revenue £13,239,000 £13,485,000
Profit before interest, tax and £3,737,000 £5,471,000
depreciation
Profit before tax £2,614,000 £4,206,000
Diluted earnings per share 19.68p 30.19p
Dividend per share up 11.1% 2.50p 2.25p
Commenting, Michael Heller, chairman of Bisichi Mining PLC said:
‘2006 has been both a challenging and a successful year for Bisichi Mining and,
with the many opportunities now arising in the South Africa, we look forward to
the coming year with confidence’.
END
For further information, please call:
Andrew Heller
Robert Corry, Bisichi Mining PLC 020 7415 5030
Christopher Joll MJ2 Ltd 020 7491 7776
CHAIRMAN’S STATEMENT
I am pleased to report to shareholders that a very strong performance in the
second half has resulted in a profitable year for Bisichi Mining PLC
(‘Bisichi’) with Group profit on ordinary activities before interest, taxation
and depreciation at £3,737,000 (2005: £5,471,000). As already reported, the
first six months of 2006 were severely impacted by the consequences of the
fatality that occurred in late 2005 at Black Wattle Colliery. However, 2006
clearly demonstrated the strength of the management team and its ability to
deal swiftly and effectively with unforeseen problems in our mining operations.
The second half of the year has been the most profitable in the company’s
history.
One of the most exciting aspects of the past year in South Africa has been the
sharp increase in the availability of mineral rights for development by
empowered mining companies such as ourselves. This has arisen because many
reserves have been returned to the State as a result of the ‘use it or lose it’
provisions of the Mineral and Petroleum Resources Development Act 2004
(‘MPRDA’). With Black Wattle’s Black Economic Empowerment (‘BEE’) status and
successful track record we are well placed to take advantage of these
newly-available coal reserves.
During the past year, we have forged relationships with new BEE partners which
will allow us to take the operations in South Africa onto the next level. In
this regard, I am pleased to announce the appointment of David Nkosi as a
Director of Black Wattle Colliery. David is a graduate of the Department of
Minerals and Energy (‘DME’) training programme and has been involved in the
mining sector for several years. We look forward to his active involvement
as a Director of Black Wattle identifying new reserves and helping to grow our
South African business.
Shareholders should be aware that, as a result of certain difficulties that
have emerged in our relationship with the minority shareholder at Black Wattle
Colliery, we have had to remove Sipho Dube and Duku Mogoai (his associate at
Endulwini Resources) as directors of the Black Wattle Colliery. In addition we
have cancelled the Agreement by which the Mhlaba Dube Memorial Trust held 37.5%
shareholding in Black Wattle and we have initiated court proceedings in South
Africa to obtain a declaration that the Trust is no longer a shareholder. This
legal action does not affect the operation of Black Wattle Colliery nor its
mineral rights granted under the MPRDA. Once this matter has been resolved, we
will invite a new BEE partner to join us as a shareholder in Black Wattle.
Black Wattle was one of the first coal mines in South Africa to achieve BEE
status in 1999 and Bisichi remains committed to maintaining its leadership in
this regard.
As shareholders have already been informed, Ezimbokodweni Mining (Pty) Limited
is the joint venture company formed to own and develop the Pegasus Reserve.
This company is owned as to 49% by Bisichi and 51% by Endulwini Resources.
Although the DME has converted the prospecting rights, Ezimbokodweni has not
yet provided the 100% financial guarantee required by the vendor, Ingwe, in
accordance with its obligation under the original Purchase and Sale Agreement.
We have already indicated to Ingwe that Bisichi is willing to put up a
guarantee for its 49 % of the project and we are actively pursuing the
resolution of this issue with all parties concerned.
If the development of Pegasus does not proceed as planned the current
availability of other high quality coal reserves referred to earlier in this
report provides us with numerous opportunities to develop our mining activities
in South Africa independent of Pegasus. To that end, we are in the process of
purchasing a drill rig and have set up a dedicated team in a satellite office
to work full time on reserve acquisitions.
I am delighted to report that Bisichi’s UK retail property portfolio, managed
by London & Associated Properties PLC has contributed most satisfactorily to
this year’s profits and has underpinned our mining activities. The portfolio,
including our share of Dragon Retail Properties, is virtually fully let, and
was valued at 31 December 2006 by independent chartered surveyors at £19.3
million, an increase of 10%.
To underline our confidence in the future of Bisichi, your directors are
recommending a dividend of 2.50p, compared to 2.25p per share in the previous
year, an increase of 11.1% This will be paid on 13 August 2007 to shareholders
on the register as of 20 July 2007.
2006 has been both a challenging and a successful year for Bisichi and, with
the many opportunities now arising in the South Africa, we look forward to the
coming year with confidence.
MICHAEL HELLER
Chairman
27 March 2007
MINING REVIEW
Mining Report
As the Chairman has reported, the first six months of 2006 were greatly
affected by the aftermath of the first underground fatality in Black Wattle’s
history which took place in late 2005. The closure of the Continuous Miner
section immediately reduced production which had a negative impact on
profitability. In the wake of the accident, your management took a number of
decisive actions in order to turn the situation around. The Continuous Miner
was overhauled and lowered during this down time period which facilitated its
return to reliable operation earlier than was originally anticipated as it
could start to mine in areas of lower seam height. We obtained accelerated
permission from the DME to mine under a major highway, which allowed us access
to a substantial untouched portion of our reserves. We also took over ownership
of the Black Wattle’s washing plant, which has allowed us to upgrade the
facility, improve yields and increase overall productivity. Moreover, we
successfully achieved substantial increases in price for each of our major
products. Finally, we have entered into a long term contract with a BEE company
for the sale of our discard material to Eskom, the South African electricity
utility. This contract both generates substantial revenue and will greatly
reduce our rehabilitation liability when we eventually cease mining.
Furthermore, it has already reduced our handling and stockpiling expenses on
the mine. As a result of these actions by your management, Black Wattle
delivered its most profitable half year in its history in the second half of
2006.
Production: Black Wattle Colliery
The two bord and pillar and continuous miner sections performed well in the
second half of 2006. Taking the setbacks of late 2005 and the first half of
2006 into account, we are very pleased to have achieved a run-of-mine
production figure for the year of 1.199 million tonnes, just 7.5% less than
2005. The three sections should continue to mine at acceptable levels in 2007.
We will increase production when we receive opencast permission, which has
recently been applied for from the DME. In this regard, we have had the
necessary meetings with all interested and affected parties and are awaiting
DME approval to commence opencast mining.
Marketing: Black Wattle Colliery
2006 was a very successful year, both in terms of export-based sales and the
prices we are achieving in a very strong domestic market. In April 2006, we
achieved a price increase of 18.6% for our sales to local suppliers of steam
coal, followed by another increase of 14.3% in November 2006. In July 2006, we
achieved an 11% increase in our prices for the local ferrochrome market.
Although the mine’s fixed price export contract came to a conclusion in the
second half of 2006, strong prices in the international market have meant that
export-based sales are still highly profitable, especially with the recent
depreciation of the South African rand. The general tightness of supply both in
the international and domestic markets has effectively put in place a price
floor at much higher than historical levels. For the first time in recent
memory, the prices for domestic steam coal Free on Mine are higher than the
price which we receive from Richards Bay Coal Terminal, taking in to account
the additional transportation costs. We fully intend to exploit these
favourable market conditions by locking in prices where sensible and taking
advantage of new sales opportunities as they arise.
Human Resources: Black Wattle Colliery
In order to strengthen our human resource management activities, Andrew
Mandlazi was recently appointed Head of Human Resources at the Black Wattle
Colliery. He has joined us at a critical time when we are implementing a number
of important policies, key among these include:
Worker Training: Black Wattle is sending a number of its employees to various
training programs throughout the Mpumalanga and Gauteng Regions, including the
Colliery Training College in Witbank, Witwatersrand University, and
Potchefstroom University.
Adult Basic Education Training (ABET): The workforce has been assessed for ABET
training and a computer-based ABET training facility is being established at
the mine to facilitate participation in this program.
HIV/AIDS Peer Education: Six employees have been sent to be trained as HIV/AIDS
Peer Educators to assist in putting into place Black Wattle’s HIV/AIDS
education program.
Employment Equity: Quarterly Employment Equity meetings are taking place to
ensure that the Black Wattle Colliery is complying with all aspects of national
legislation related to Employment Equity.
Social Development
We are participating in the Integrated Development Program of the Steve Tshwete
(Middelburg) Municipality through the provision of assistance to the Evergreen
Primary School and the nearby community. Key activities completed in the recent
year include painting of all classrooms, completion of the school
administration buildings, and final construction of the school kitchen.
Procurement
Black Wattle has implemented a BEE-focussed procurement policy which strongly
encourages our suppliers to have and maintain strong BEE credentials. We
constantly monitor our monthly BEE spend and encourage potential BEE suppliers
to compete for equipment and service contracts at the Black Wattle Colliery. We
also are actively engaged in sale of our products to BEE enterprises, as shown
by our 5 year sales agreement with a BEE company for the purchase of our
discard for supply to Eskom.
Health and Safety
Supervisors have received training in hazard identification and risk assessment
in their work areas. All levels of employees will have received this training
by the end of 2007. A medical surveillance system is in place which provides
management with information used in determining measures to eliminate, control
and minimise employee health risks and hazards.
Prospects
At Black Wattle Colliery higher prices are being achieved across the range of
all of our markets– from our premium low phosphorous nuts to our discard sales
to the power industry. The opportunity to commence opencast mining in the next
few months is now a real possibility, and the increased performance of the
washing plant has improved both yield and coal quality.
The prospects for acquiring additional reserves have never looked so good.
I am confident that 2007 will be a successful year for our South African
operations.
ANDREW HELLER
Managing Director
27 March 2007
Bisichi Mining Plc
Consolidated income statement
for the year ended 31 December 2006
Notes Year Year
ended Ended
31 Dec 31 Dec
2006 2005
£’000 £`000
Group revenue 1 13,239 13,485
Operating costs (12,346) (12,037)
__________ __________
Operating profit before adjustments 1 893 1,448
Gains on held for trading investments 81 177
Increase in value of investment 1,643 2,393
property
Exceptional items 2 12 124
Share of profit in joint ventures 175 522
__________ __________
Operating profit 1 2,804 4,664
Interest receivable 232 76
Interest payable (422) (534)
__________ __________
Profit before tax 2,614 4,206
Taxation 3 (489) (687)
__________ __________
Profit for the period 2,125 3,519
__________ __________
Profit attributable to equity 2,125 3,256
shareholders
Profit attributable to minority – 263
interest
__________ __________
2,125 3,519
__________ __________
Earnings per share 5 20.33p 31.15p
__________ __________
Diluted earnings per share 5 19.68p 30.19p
__________ __________
Bisichi Mining Plc
Consolidated balance sheet
As at 31 December 2006
2006 2005
£’000 £’000
Assets
Non-current assets
Value of investment properties 17,270 15,625
attributable to group
Fair value of head lease 146 153
Property 17,416 15,778
Reserves, plant and equipment 5,415 5,604
Investments in Joint Ventures 2,637 2,519
Other Investments 391 424
Deferred tax assets 234 241
Total non-current assets 26,093 24,566
Current assets
Inventories 56 124
Trade and other receivables 2,056 4,578
Held for trading investments 700 629
Interest derivative 53 36
Cash and cash equivalents 3,275 488
6,140 5,855
Total assets 32,233 30,421
Liabilities
Current liabilities
Borrowings (3,302) (2,382)
Trade and other payables (5,887) (4,432)
Current tax liabilities (33) (91)
(9,222) (6,905)
Non-current liabilities
Borrowings (3,402) (4,368)
Finance lease liabilities (146) (153)
Deferred tax liabilities (2,974) (2,582)
(6,522) (7,103)
(15,744) (14,008)
Net assets 16,489 16,413
Equity
Share capital 1,045 1,045
Translation reserve (1,241) 56
Other reserves 189 114
Retained earnings 16,496 14,606
16,489 15,821
– 592
Total equity 16,489 16,413
Bisichi Mining Plc
Consolidated CASH FLOW STATEMENT
For the year ended 31 December 2006
Year Year
ended ended
31 December 31 December
2006 2005
£’000 £’000
Cash flows from operating activities
Operating profit 2,804 4,664
Depreciation 933 807
Share based payment expense 75 23
Unrealised gain on investment held for (81) (177)
trading
Unrealised gain on investment properties (1,643) (2,393)
Share of profit of joint ventures (175) (522)
Hedging – 82
___ ___
Cash flow before working capital 1,913 2,484
Change in inventories 57 (89)
Change in trade and other receivables 1,780 (753)
Change in trade and other payables (382) 750
Change in provisions 38 (136)
Acquisitions of held for trading – (24)
investments
Proceeds from held for trading investments 10 99
___ ___
Cash generated from operations 3,416 2,331
Interest received 232 76
Interest paid (422) (534)
Income tax paid 28 (331)
___ ___
Cash flow from operating activities 3,254 1,542
___ ___
Acquisition of reserves, plant and (1,893) (1,348)
equipment
Proceeds from sale of investment 19 482
properties, reserves, plant and equipment
Acquisitions of investments (10) (41)
___ ___
Cash flow from investing activities (1,884) (907)
___ ___
Cash flow from financing activities
Borrowings drawn 1,380 23
Borrowings repaid (498) (1,927)
Equity dividends paid (235) (209)
___ ___
Cash flow from financing activities 647 (2,113)
___ ___
Net increase (decrease) in cash and cash 2,017 (1,478)
equivalents
___ ___
Cash and cash equivalents at 1 January (969) 507
Exchange adjustment (70) 2
___ ___
Cash and cash equivalents at 31 December 978 (969)
___ ___
Bisichi Mining Plc
Consolidated STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
For the year ended 31 December 2006
Share Translation Other Retained Total Minority Total equity
reserve earnings interest
capital reserves
£’000 £’000 £’000 £’000 £’000 £’000 £’000
Balance as at 1 January 1,045 141 91 11,559 12,836 334 13,170
2005
Revaluation of – – – 2,393 2,393 – 2,393
investment properties
Movement on fair value – – – (58) (58) – (58)
of derivatives
Other income statement – – – 921 921 263 1,184
movements
Profit for the year – – – 3,256 3,256 263 3,519
Exchange adjustment – (85) – – (85) (5) (90)
_____________ _____________ ____________ ____________ ____________ ____________ ____________
Total recognised income – (85) – 3,256 3,171 258 3,429
and expense for the
period
Dividend – – – (209) (209) – (209)
Equity share options – – 23 – 23 – 23
_____________ _____________ ____________ ____________ ____________ ____________ ____________
Balance at 31 December 1,045 56 114 14,606 15,821 592 16,413
2005
Revaluation of – – – 1,643 1,643 – 1,643
investment properties
Movement on fair value – – – 17 17 – 17
of derivatives
Other income statement – – – 465 465 – 465
movements
Profit for the year – – – 2,125 2,125 – 2,125
Exchange adjustment – (1,297) – – (1,297) – (1,297)
_____________ _____________ ____________ ____________ ____________ ____________ ____________
Total recognised income – (1,297) – 2,125 828 – 828
and expense for the
period
Dividend – – – (235) (235) – (235)
Removal of minority – – – – – (592) (592)
interest
Equity share options – – 75 – 75 – 75
_____________ _____________ ____________ ____________ ____________ ____________ ____________
Balance at 31 December 1,045 (1,241) 189 16,496 16,489 – 16,489
2005
_____________ _____________ ____________ ____________ ____________ ____________ ____________
Bisichi Mining Plc
ACOUNTING POLICIES aND NOTES TO ACCOUNTS
Basis of accounting
The results for the year ended 31 December 2006 have been prepared in
accordance with International Financial Reporting Standards (IFRS) as adopted
by the European Union. The principal accounting policies applied are the same
as those set out in the Financial Statements for the year ended 31 December
2005.
1 SEGMENTAL ANALYSIS 31 December 31 December
2006 2005
£’000 £’000
Revenue
Mining 12,138 12,278
Property 1,064 1,086
Other 37 121
_______ _______
13,239 13,485
_______ _______
Operating profit before
adjustments
Mining 534 1,008
Property 350 436
Other 9 4
_______ _______
893 1,448
_______ _______
Operating profit
Mining 516 1,066
Property 2,198 3,417
Other 90 181
_______ _______
2,804 4,664
_______ _______
2 EXCEPTIONAL ITEMS 31 December 31 December
2006 2005
£’000 £’000
Gain on sale of investment 12 412
properties
Costs in relation to suspended – (288)
fund raising
_______ _______
12 124
_______ _______
3 TAXATION 31 December 31 December
2006 2005
£’000 £’000
Based on the results for the year:
Corporation tax at 30% (2005: 30%) (46) 154
Adjustment in respect of prior 143 (1)
years – UK
_______ _______
97 153
Deferred tax 392 534
_______ _______
489 687
_______ _______
* DIVIDEND
A final dividend in respect of 2006 of 2.5p (2005: 2.25p) per share amounting
to a total of £261,000 (2005: £235,000) is proposed by the board. The dividend
proposed is not accounted for until it has been approved at the Annual General
Meeting. The amount will be accounted for as an appropriation of revenue
reserves in the year ending 31 December 2007.
* EARNING PER SHARES
Both the basic and diluted earnings per share calculations are based on a
profit of £2,125,000 (2005: £3,256,000). The basic earnings per share have been
calculated on 10,451,506 (2005: 10,451,506) ordinary shares being in issue
during the period. The diluted earnings per share have been calculated on the
number of shares in issue of 10,451,506 (2005: 10,451,506) plus the dilutive
potential ordinary shares arising from share options of 347,466 (2005: 334,746)
totalling 10,798,972 (2005: 10,786,252).
* FINANCIAL INFORMATION
The above financial information does not constitute statutory accounts within
the meaning of section 240 of the Companies Act 1985. The financial information
has been extracted from the group’s annual report and accounts for the year
ended 31 December 2006 on which the auditors have not yet expressed an opinion,
but for which an unqualified report is expected. Statutory accounts for the
year ended 31 December 2005 which were prepared under IFRS, have been delivered
to the Registrar of Companies; the report of the auditors on those accounts was
unqualified and did not contain a statement under Section 237(2) or (3) of the
Companies Act 1985.
* Board approval
These preliminary results were approved by the Board of Bisichi Mining PLC on
27 March 2007.
END
