22nd Sep 2006 09:18
GVM Metals Ltd22 September 2006 GVM METALS LIMITED Preliminary Final Results for the Year Ended 30 June 2006 GVM Metals Limited ("GVM" or "the Company") is pleased to announce itspreliminary final results for the year ended 30 June 2006. A full copy of thefinancial report is available at the Company's website, www.gvm.com.au. Highlights • Revenue for 2006 was $32,340,604 (2005: $31,000,529) largely from the NiMag business. At current exchange rates and nickel prices, NiMag is expected to generate substantially higher operational cash flows over the 2006/07 financial year. • Net cash generated from operating activities was $398,234 (2005: $2,360,481). • Earnings before interest, tax and depreciation was $1,245,403 (2005: $2,774,567). The earnings before interest tax and depreciation, adjusted for the AIM listing and share based payments was $2,200,938. • Following the acquisition of a 49% interest in the Holfontein coal project, GVM conditionally acquired a 74% interest in the Limpopo coal project during the period under review. In August 2006, the company announced the conditional merger of its coal interests with those of Motjoli Ltd, its Holfontein J.V. partner. This transaction will result in GVM holding 100% of the Holfontein project, 74% of the Limpopo Coal Project and a 50% share in the Baobab coal project, which is located some 50kms south of the Limpopo project. • The Company is in an advanced stage of negotiation to acquire a further coal interest in the Limpopo province of South Africa. "GVM's strategic direction is firmly set towards becoming a major South Africancoal producer over the next five years whilst continuing to develop its existingand profitable metal processing business and seeking other mining opportunities"said Managing Director Simon Farrell today. "The primary focus for theforthcoming two years is to bring Holfontein into production and completefeasibility studies for at least one of the Limpopo/Baobab coal projects andposition GVM as a major player in the re-awakening of the coal industry in SouthAfrica." For more information contact: Simon Farrell, Managing Director - GVM - +61 417 985 383 or +61 8 9322 6776 Leesa Peters - Conduit PR - +44(0) 20 7429 6606 / + 44 (0)781 215 9885 Olly Cairns - Corporate Synergy Plc - +44(0) 20 7448 4400 Directors' Report Principal Activities Whilst the principal trading activity of the Company and it controlled entities("Consolidated Entity") is the manufacture and distribution of Nickel andMagnesium alloys, the Company's primary focus is to expand its coal interests inSouth Africa. Following the acquisition of a 49% interest in the Holfontein coalproject, GVM conditionally acquired a 74% interest in the Limpopo coal projectduring the year. In August 2006, the company announced the conditional mergerof its coal interests with those of Motjoli Ltd, its Holfontein J.V. partner.This transaction will result in GVM holding 100% of the Holfontein project, 74%of the Limpopo Coal Project and a 50% share in the Baobab coal project, which islocated some 50kms south of the Limpopo project. The Company is in an advancedstage of negotiation to acquire a further coal interest in the Limpopo provinceof South Africa. Results Revenue for 2006 was $32,340,604 (2005: $31,000,529) and net cash generated fromoperating activities was $398,234 (2005: $2,360,481). Earnings before interest($669,044), tax ($566,732) and depreciation ($242,768) was $1,245,403 (2005:$2,774,567). The 2006 results include a share based payment charge of $551,200relating to share options issued to the company's directors on 28 June 2006 aswell as $404,335 in listing and marketing expenses relating to the Company'ssuccessful listing on the Alternative Investment Market (AIM) in London duringthe year. The earnings before interest tax and depreciation, adjusted for AIMlisting and share based payments is $2,200,938. Nimag reported earnings before interest ($669,044), tax ($566,732) anddepreciation ($226,725) of $2,823,541. The loss of the Consolidated Entity for the 2006 financial year after income taxand minority interests was $587,011 (2005: Profit of $793,338). Dividends The Directors do not recommend payment of a dividend in respect of the financialyear ended 30 June 2006. Review of Operations During the year the operations of the Consolidated Entity included: NiMag (Proprietary) Limited - manufacturing and distribution of nickel andmagnesium alloys; Master Alloy Traders Limited - trading of minerals from South Africa; SA Mineral Resources Corporation Limited - investment in mineral processing inSouth Africa; and Holfontein Coal Project - JV coal project based in South Africa. Nimag (Proprietary) Limited ("NiMag") NiMag began producing alloys in 1962. Ductile iron (also called spheroidal graphite iron or nodular cast iron) wasdiscovered in the 1940s. The introduction of magnesium into the melt results innodular rather than flaky graphite in the resultant cast iron, giving the castiron properties approaching those of steel, while maintaining the advantages ofthe casting process. The magnesium is usually added as a nickel alloy, makingit easier to add and contribute to product quality. NiMag still primarilysupplies the ductile iron market as a specialist supplier with a world marketshare of about 35% in its core product line. 95% of sales are exported through35 distributors world wide. Demand for NiMag's alloys is proportional withworld demand for ductile iron, principally for automotive parts and industrialmachinery. Demand for NiMag products has grown gradually to meet currentcapacity of 400 tonnes per month (all products). Potential for expansion of thecore nickel-magnesium alloy product is presently limited by the size of endmarkets. NiMag is increasing the penetration of a variety of other productsdeveloped for alternative markets. NiMag produces approximately 500 tonnes ofcast and slit fibres which are used in reinforced concrete by domestic miningand tunneling operations. NiMag's competitive advantages include low electricity and labour costs. Themain input cost is locally sourced nickel raw material, which is matched withsales to minimize nickel price exposure. GVM acquired 74% of NiMag from a management group in January 2004. Theconsideration was R37 Million ($A8 million) comprising R7.5 million in cash upfront, R20 million borrowed against the business and R9.5 million in vendorfinance. GVM retained the right to buy the balance of NiMag for R13 millionpayable in GVM shares issued at $A0.40 each. It is intended that these shareswill be issued immediately on GVM's listing on the Johannesburg Stock Exchange(JSE), which is expected to occur in the last quarter of 2006. When theseshares are issued, GVM will own 100% of NiMag. Since GVM acquired the business, NiMag has broadly met or exceeded productionand sales budgets. However the strength of the Rand through the period hasinflated costs relative to the US dollar denominated sales. Despite thedifficult trading conditions imposed by the Rand's strength in 2005 and 2006,NiMag traded profitably, contributing about $4,575,000 in surplus funds torepayment of its acquisition costs. At the end of June 2006, GVM's remainingacquisition loans comprised $2,342,000 in bank debt and $1,876,700 to the NiMagvendors. The NiMag vendor loans will be repaid at the end of 2006. Depreciation of the Rand and strengthening of Nickel prices since January 2006has widened NiMag's profit margins. At current exchange rates and Nickelprices, NiMag is expected to generate substantially higher operational cashflows over the 2006/07 financial year. Metal Alloy Traders Limited ("MATS") MATS is incorporated in Jersey in the Channel Islands and it trades variousmetals purchased from Nimag in South Africa. SA Mineral Resources Corporation Limited ("Samroc") Samroc is a Johannesburg Stock Exchange listed company which produces manganesesulphate chemicals. During the latter half of 2005 GVM stated its intention todispose of its entire investment in Samroc and sold 15,000,000 shares in Samrocat two South African cents per share during May 2006. As a result of its intended disposal, the Samroc investment has beenreclassified as a Non-current Investment Held for Sale. Holfontein Coal Project Early in the second quarter of 2005, a 49% interest in the coal mining project "Holfontein" was acquired with a Black Economic Empowerment ("BEE") partner,Motjoli Resources (Pty) Ltd. The acquisition is subject to a number ofconditions, principally related to the size of the economically recoverabletonnes as determined by independent experts. The Old Order Prospecting Rights relating to the project were successfullyconverted to New Order Prospecting Rights during the year (as required by theSouth African Department of Minerals and Energy) and a drilling program iscurrently underway to determine the economics of the project. The feasibilitystudy is expected to be completed by the end of the 2006 calendar year. The Holfontein Coal Project is currently the subject of further negotiations asdiscussed under Future Developments, Prospects and Business Strategies in thisreport. GMA Resources plc ("GMA") The Company disposed of its entire investment in GMA during the year. Review of Financial Position Liquidity and funding The net assets of the Consolidated Entity have decreased from $8,971,969 as at30 June 2005 to $7,661,354 in 2006. This was mainly due to a negative exchangemovement of $1,369,241 in the translation of opening equity balances ofsubsidiaries charged directly to equity. The Group also incurred $404,335 inexpenses related to its listing on the AIM and recorded a loss of $98,630representing its share of Samroc's loss during the first half of the year, whichwould not recur in future years. The Group raised approximately $895,000 duringthe year from the issue of shares and repaid some $1,892,500 of debt. The Groupalso raised £3,200,000 through the placing of shares during July 2006. The Consolidated Entity's net working capital at year end was $1,628,543 whilstinterest bearing liabilities were $5,153,889. Impact of legislation and other external requirements From 1 July 2005 the Consolidated Entity is required to comply with Australianequivalents to International Financial Reporting Standards (AIFRS) issued by theAustralian Accounting Standards Board. The impact of the resulting changes inaccounting policies are disclosed in Note 28 of the financial report. There were no changes in environmental or other legislative requirements duringthe year that have significantly impacted the results or operations of theConsolidated Entity. Future Developments, Prospects and Business Strategies Proposed JSE listing The Company successfully listed on AIM in December 2005 and completed a GBP 3.2million (A$7.9 million) capital raising in July 2006. Under current SouthAfrican Reserve Bank requirements, it is difficult to acquire South Africanassets from South African residents with shares if those shares are not listedon the Johannesburg Stock Exchange (JSE). Following the conditional acquisitionof the Limpopo Coal project by the issuance of GVM shares and the subsequentMotjoli transaction, it became necessary for GVM to seek a listing on the JSE,which it hopes to obtain by the end of October 2006. GVM believes that a JSE listing will assist the company to further expand itsmining interest in South Africa by allowing the Company to acquire assets bymeans of share issue. Conditional merger with the coal assets of Motjoli Resources In August 2006, the company advised that it had conditionally acquired Motjoli's51% interest in the Holfontein Coal Project, Motjoli's 50% interest in theBaobab J.V. Coal Project and its 100% interest in three Limpopo prospectingpermits adjacent to those held by the Baobab J.V. The Baobab J.V. is some 50/60km south of GVM's 74% owned Limpopo Coal Project. GVM will hold - post closure of the Limpopo and Motjoli transactions - a verysubstantial holding in what is widely regarded as South Africa's new coalprovince. Strategic direction GVM's strategic direction is firmly set towards becoming a major South Africancoal producer over the next five years whilst continuing to develop its existingmetal processing business and seeking other mining opportunities. The primary focus for the forthcoming two years is to bring Holfontein intoproduction and complete feasibility studies for at least one of the Limpopo/Baobab coal projects. The combined Limpopo and Baobab Coal Projects comprise 23 prospecting leasestotalling 32,000 Hectares. After 20 years of dormancy, the future for coal is very bright in South Africa.GVM is determined to become a major player in the re-awakening of the coalindustry in South Africa Changes in State of Affairs Significant changes in the state of affairs of the Consolidated Entity duringthe financial year were as follows: • On 13 October 2005, the company consolidated its share capital in the ratio of 1 share for every 10 shares previously held. • On 31 October 2005, the Company issued 200,000 shares at an issue price of 25 cents per share to settle certain creditor balances; • During February and March 2006 the company placed a total of 1,400,000 shares at an issue price of 25 cents per share, to raise total gross proceeds of $350,000; and • On 8 March 2006, the Company issued a total of 2,212,500 shares at an issue price of 25 cents per share to settle certain creditor balances as well as to acquire preference shares in Nimag (Pty) Limited. Likely Developments The Consolidated Entity will continue to expand its coal interests in SouthAfrica and is targeting the establishment of its first operating coal minewithin the next 18 to 24 months. It will also continue to pursue investmentopportunities both in the mining and metal processing industries in theforthcoming year. Events Subsequent to Balance Date In July 2006, the Company successfully completed a share placement of 24,615,384new ordinary shares which raised £3,200,000. These shares commenced trading onthe Alternative Investment Market of the London Stock Exchange ("AIM") on 13July 2006. On 22 August 2006 GVM announced that it has executed binding Heads of Agreementwith Motjoli Resources (Pty) Ltd (Motjoli) to acquire Motjoli's 51% interest inthe Holfontein Coal project, taking GVM's interest to 100%. Further, the Headsof Agreement includes the acquisition of Motjoli's 50% interest in the BoababJ.V. coal project and its 100% interest in three Limpopo prospecting licensesadjacent to those held by the Boabab J.V. The consideration payable for the Holfontein and Boabab J.V. interests is34,863,226 ordinary shares plus a further 3,417,964 ordinary shares to be issuedon the grant of an export allocation to GVM at the Richards Bay Coal Terminal,for a minimum of 100,000 metric tones of coal per annum. Income Statements For the Year Ended 30 June 2006 Consolidated Entity Parent Entity 2006 2005 2006 2005 $ $ $ $ REVENUE 32,340,604 31,000,529 380,250 1,080,233 Changes in inventories of finished goodsand work in progress (367,491) 66,834 - - Raw materials and consumables used (23,529,689) (22,480,207) - - Consulting expenses (400,187) (413,652) (342,066) (306,257) Employee expenses (3,516,128) (2,865,537) (970,187) (400,081) Borrowing costs (669,044) (904,206) - (765) Depreciation expenses (242,768) (366,226) (16,043) (19,013) Office rental , outgoings and parking (204,865) (324,941) (60,385) (62,503) Decrease/(increase) diminution in value (4,325) (442,265) (4,325) (419,035)of investments Loss on investments disposed of (40,197) - (40,197) - Bad debt expense (1,159) - (1,159) - Provision for non-recoverability of - (137,866) - (136,660)loansOther expenses from ordinary activities (2,932,530) (1,651,558) (658,856) (254,070)Share of net profit/(losses) of associate accounted for using the equitymethod (98,630) 23,230 - -Profit/(Loss) before income tax 333,591 1,504,135 (1,712,968) (518,151)(expense)/benefitIncome tax expense / benefit (566,732) (323,535) - 400Profit/(Loss) after tax (233,141) 1,180,600 (1,712,968) (517,751) Outside equity interest (353,870) (387,262) - -Net profit/(loss) attributable to members of the parent entity (587,011) 793,338 (1,712,968) (517,751) Basic earnings/(loss) per share (in (2.04) 3.22cents) Balance Sheets as at 30 June 2006 Consolidated Entity Parent Entity 2006 2005 2006 2005 $ $ $ $CURRENT ASSETS Cash assets 985,333 1,806,353 78,191 188,202Receivables 6,374,684 5,714,592 722,916 680,652Inventory 3,245,656 3,363,679 - - TOTAL CURRENT ASSETS 10,605,673 10,884,624 801,107 868,854 NON CURRENT ASSETSReceivables - - 4,522,652 4,556,736Assets held for sale 94,596 222,806 - -Intangibles 7,441,280 9,206,288 - -Other financial assets 699,992 925,645 4,465,409 4,279,492Property, plant and equipment 1,803,312 2,434,245 27,845 43,887Deferred tax assets 36,669 26,886 - - TOTAL NON CURRENT ASSETS 10,075,849 12,815,870 9,015,906 8,880,115 TOTAL ASSETS 20,681,522 23,700,494 9,817,013 9,748,969 CURRENT LIABILITIESPayables 5,940,126 6,178,289 328,915 168,870Interest bearing liabilities 2,451,628 2,016,220 - -Provisions 125,790 99,986 212 1,254Current tax liability 459,586 116,810 - - TOTAL CURRENT LIABILITIES 8,977,130 8,411,305 329,127 170,124 NON CURRENT LIABILITIESPayables 1,340,777 1,580,489 6,601,208 6,425,817Interest bearing liabilities 2,702,261 4,736,731 - - TOTAL NON CURRENT LIABILITIES 4,043,038 6,317,220 6,601,208 6,425,817 TOTAL LIABILITIES 13,020,168 14,728,525 6,930,335 6,595,941 NET ASSETS 7,661,354 8,971,969 2,886,678 3,153,028 EQUITYContributed equity 35,396,353 34,500,935 35,396,353 34,500,935Reserves 426,521 1,244,562 687,645 136,445Accumulated losses (30,666,656) (30,079,645) (33,197,320) (31,484,352) TOTAL PARENT EQUITY INTEREST 5,156,218 5,665,852 2,886,678 3,153,028 OUTSIDE EQUITY INTEREST 2,505,136 3,306,117 - - TOTAL EQUITY 7,661,354 8,971,969 2,886,678 3,153,028 Cash Flow Statements For the year ended 30 June 2006 Consolidated Entity Parent Entity 2006 2005 2006 2005 $ $ $ $ Cash flows from operating activities Interest received 84,578 157,513 30,280 108,429 Cash receipts in the course of 31,482,520 30,072,218 312,266 929,224operations Interest paid (669,044) (904,206) - (765) Payments to suppliers and employees (30,499,820) (26,965,044) (1,327,010) (1,075,284) Net cash generated by /(used in) 398,234 2,360,481 (984,464) (38,396)operating activities Cash flows from investing activities Payments for property, plant and (148,489) (245,253) - (9,443)equipment Proceeds from the sale of property, - 54,354 - 13,455plant and equipment Proceeds from sale of equity 226,511 849,480 226,511 849,480investments Payments for equity investments (47,576) (655,980) (47,576) (2,683,772) Loans (made to)/from other entities - (594,050) 34,084 (712,813) Net cash received on acquisition ofsubsidiary - 257,743 - - Net cash generated by / (used in)investing activities 30,446 (333,706) 213,019 (2,543,093) Cash flows from financing activities Loans from controlled entities - - 175,391 - Proceeds from issue of shares 543,750 1,050,950 543,750 1,031,684 Transaction costs from issue of shares (57,707) (19,265) (57,707) - Loans from other entities - - - 1,618,587 Loans repaid to other entities (1,892,452) (2,798,037) - - Net cash generated by financingactivities (1,406,409) (1,766,352) 661,434 2,650,271 Net increase/(decrease) in cash held (977,729) 260,423 (110,011) 68,782 Cash at beginning of financial year 1,027,493 767,070 188,202 119,420 Cash at end of financial year 49,764 1,027,493 78,191 188,202 Statements of Changes in Equity as at 30 June 2006 Ordinary Capital Foreign Share Accumulated Total Outside share profits currency options losses Equity capital reserve translation interests reserve $ $ $ $ $ $ $ Consolidated entity Balance at 1July 2005 34,500,935 136,445 1,108,117 - (30,079,645) 5,665,852 3,306,117 Shares issuedduring theyear 953,125 - - - - 953,125 - Capitalraising costsincurred (57,707) - - - - (57,707) - Adjustmentsfromtranslation offoreigncontrolledentities - - (1,369,241) - - (1,369,241) - Share basedpayments - - - 551,200 - 551,200 - Lossattributableto members ofparent entity - - - - (587,011) (587,011) - Lossattributableto minorityshareholders - - - - - - (353,870) Minorityinterest inreserves - - - - - - 221,480 Preferencesharesacquired byparent entity - - - - - - (668,591) --------- -------- --------- -------- --------- --------- --------Balance at 30June 2006 35,396,353 136,445 (261,124) 551,200 (30,666,656) 5,156,218 2,505,136 --------- -------- --------- -------- --------- --------- -------- Parent entity Balance at 1July 2005 34,500,935 136,445 - - (31,484,352) 3,153,028 - Shares issuedduring theyear 953,125 - - - - 953,125 - Transactioncosts (57,707) - - - - (57,707) - Share basedpayments - - - 551,200 - 551,200 - Lossattributableto members ofparent entity - - - - (1,712,968) (1,712,968) - Balance at 30June 2006 35,396,353 136,445 - 551,200 (33,197,320) 2,886,678 - Ordinary Capital Foreign Accumulated Total Outside share capital profits currency losses Equity reserve translation interests reserve $ $ $ $ $ $ Consolidated entity Balance at 1July 2004 33,469,250 136,445 599,872 (30,872,984) 3,332,583 2,690,827 Sharesissuedduring the 1,050,950 - - - 1,050,950 -year Capitalraisingcosts (19,265) - - - (19,265) -incurred Adjustmentsfromtranslationofforeigncontrolled - - 508,245 - 508,245 -entities Profitattributableto membersof - - - 793,339 793,339 -parententity Profitattributableto minorityshareholders - - - - - 387,262 Minorityinterest inreserves - - - - - 228,028 Balance at30 34,500,935 136,445 1,108,117 (30,079,645) 5,665,852 3,306,117June 2005 Parent entity Balance at 1July 2004 33,469,250 136,445 - (30,966,601) 2,639,094 - Sharesissuedduring the 1,050,950 - - - 1,050,950 -year Transactioncosts (19,265) - - - (19,265) - Lossattributableto membersof - - - (517,751) (517,751) -parent entity Balance at30 34,500,935 136,445 - (31,484,352) 3,153,028 -June 2005 Key notes to and forming part of the Financial Statements for the year ended 30June 2006 1. STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES The financial statements are a general purpose financial report that has been prepared in accordance with AustralianAccounting Standards, Urgent Issues Group Interpretations, other authoritative pronouncements of the AustralianAccounting Standards Board and the Corporations Act 2001. The financial report covers the economic entity of GVM Metals Limited and controlled entities, and GVM Metals Limited asan individual parent entity. GVM Metals Limited is a listed public company, incorporated and domiciled in Australia. The financial report of GVM Metals Limited and controlled entities, and GVM Metals Limited as an individual parententity comply with all Australian equivalents to International Financial Reporting Standards (AIFRS) in their entirety. Consolidated Entity Parent Entity 2006 2005 2006 2005 $ $ $ $2. REVENUE Revenue from operating activitiesSale of goods 31,324,714 29,402,751 - -Interest income 84,578 157,513 30,280 108,429Other revenue 931,312 1,056,280 349,970 592,021 Revenue from outside operating activitiesProfit from sale of equity investments - 366,328 - 366,328Profit from sale of property, plant and equipment - 17,657 - 13,455 Total revenue from ordinary activities 32,340,604 31,000,529 380,250 1,080,233 3. Profit (LOSS) FROM ORDINARY ACTIVITIES (a) Profit/(Loss) from ordinary activities before tax has been arrived at after charging/(crediting) the following items: Depreciation of:- office furniture, fittings & 27,839 38,169 10,823 9,593 equipment- leasehold improvements 5,220 9,420 5,220 9,420- buildings 11,655 14,743 - -- motor vehicle 37,469 48,019 - -- plant & equipment 160,585 255,875 - - 242,768 366,226 16,043 19,013 Profit/(loss) on sale of property - 17,658 - 13,455plant and equipment Net foreign exchange gain/(loss) 539,096 221,491 - - Amount set aside to/(reversed from)provisions for: - employee entitlements 25,804 (198,065) (1,041) 292 Borrowing costs - other 455,770 639,909 - 765 - related 213,274 264,297 - - partiesOperating lease expenses 114,862 362,546 - - Consolidated Entity Parent Entity 2006 2005 2006 2005 $ $ $ $ (b) Individually significant items included in profit/(loss) from ordinary activities before income tax Profit/(loss) ondisposal of equityinvestments (40,197) 366,328 (40,197) 366,328 Provision fordiminution invalueof (4,325) (442,265) (4,325) (419,035)Investments Share-basedpayments toDirectors (551,200) - (551,200) - Provision fornon-recoverabilityof loans - (137,866) - (136,660) AIM Listing Costs (404,335) - (404,335) - 4. INCOME TAX EXPENSE AND DEFERRED TAX a) Income tax expense Current tax 581,107 400,514 - (400) Deferred tax (14,375) (76,979) - - Over provision in prior year - - Aggregate income tax expense 566,732 323,535 - (400) b) Numerical reconciliation of income tax expense to prima facie tax payable Profit /(loss) before income tax 333,591 1,504,135 (1,712,968) (518,151) expense Tax at the Australian rate of 30% (2005: 30%) 100,077 451,240 (513,890) (155,325) Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Net loss / (gain) on sale of shares 12,059 (109,898) 12,059 (109,898) Provision for diminution in value 1,298 132,680 1,298 125,711 Provision for non-recovery of loans - 41,360 - 40,998 Share based payments 165,360 - 165,360 - Sundry items - 53,836 5,933 Other temporary differences not brought to account 287,938 (245,683) 335,173 92,181 Income tax expense 566,732 323,535 - (400) c) Amounts recognised directly in equity Aggregate current and deferred tax arising in the reporting period and not recognised in net profit or loss but directly debited or credited to equity Net deferred tax - debited/ (credited) directly to equity - - - - - - - - Deferred tax assets The balance comprises temporary differences attributable to: Amounts recognised in profit or loss Employee benefits 36,669 26,886 - - Amounts recognised directly in equity - - - - Net deferred tax assets 36,669 26,886 - - Movements Opening balance at 1 July 26,886 (50,093) - - Charged to the income statement 14,375 76,979 - - Exchange rate movement (4,592) - - - Closing balance at 30 June 36,669 26,886 - - The Company has approximately $11 million and $4.9 million in revenue andcapital losses respectively not brought to account as deferred tax benefitsbecause the directors do not believe it is appropriate to regard the utilisationof the tax benefits as probable. Consolidated Entity 2006 2005 $ $5. (LOSS) / EARNINGS PER SHARE Basic (loss) / profit per share(cents per share) (2.04) 3.22 Weighted average number of ordinary shares used as the 28,795,026 24,607,956denominator As at 30 June 2006, there were 8,075,000 (2005: 57,210,000) options outstandingover unissued capital exercisable at amounts ranging between $0.500 and $1.923(2005: $0.923 and $1.923). Diluted EPS was not calculated for 2006 as thecompany incurred a loss per share. During 2005 there was no dilutive potentialas the exercisable range of the options was substantially above market price. Consolidated Entity Parent Entity 2006 2005 2006 2005 $ $ $ $6. RECEIVABLES CURRENT Receivable - associates 620,311 594,051 620,311 594,051Provision for doubtful receivables - associate (38,804) (38,804) (38,804) (38,804)Trade debtors 3,342,813 3,182,755 - -Other debtors 3,128,224 2,654,450 819,269 803,265Provision for doubtful receivables - other (677,860) (677,860) (677,860) (677,860) 6,374,684 5,714,592 722,916 680,652 NON CURRENT Amounts receivable from controlled - - 5,121,200 5,155,284 entities Provision for doubtful receivables - - (598,548) (598,548) - - 4,522,652 4,556,736 Amounts receivable from controlled entities are interest free, unsecured andwith no fixed term for repayment. 7. ASSETS HELD FOR SALE (INVESTMENT IN ASSOCIATE) Carrying value of investments at beginning of year 222,806 525,270 - -Disposal of shares during the year (29,580) - - -Diminution in value of investment - (325,694) - -Share of associate's net (loss) / profit (98,630) 23,230 - -Carrying value at end of year 94,596 222,806 - - The Company has a 26.18% interest in SA Mineral Resources Corporation Ltd ("SAMROC"), a resource company whose particular focus is the manufacture ofmanganese chemicals. It owns the rights to a manganese deposit near Graskop,Mpumalanga, South Africa and operates the Greenhills manganese chemical plant,which is located adjacent to the mineral deposit. SAMROC is listed on JSE Securities Exchange South Africa ("JSE"). The closingprice of SAMROC on JSE as at balance date was Rand 0.01, or $0.002. Theinvestment was previously disclosed as an Investment in Associate. GVM hasannounced its intention to dispose of the investment and, therefore, theinvestment has been reclassified as Assets Held for Sale. The share ofassociate's net loss represents GVM's interest in the loss incurred by Samrocfrom 1 July 2005 to 31 December 2005 on which date the investment wasreclassified. 8. OTHER FINANCIAL ASSETS Available for Sale Financial Assets: Investments: Shares in other corporations listed onStock exchange at cost 89,151 429,660 1,694,703 2,280,960Provision for diminution in value (69,688) (168,744) (1,482,014) (1,797,238)At fair value 19,463 260,916 212,689 483,722 Shares in controlled entities at cost - - 11,864,731 11,423,582Provision for diminution in value - - (8,292,540) (8,292,540) - - 3,572,191 3,131,042 Shares in other corporations - at cost (1) 680,529 664,729 680,529 664,728 699,992 925,645 4,465,409 4,279,492 Market value of above investments listed on a 19,463 260,916 212,689 483,722stock exchange as at 30 June 2006 (1) Shares in other corporations represent an initial payment of South African Rand 3 million ($646,183)plus certain capitalised expenses for a 49% interest in the Holfontein Coal Project. The remainder of thepurchase consideration is payable as per note 21. The initial payment will be refunded in the event of theproject not proceeding to completion. Shares in controlled entities are carried at cost. Refer to Note 24(a) The fair value of unlisted available for sale financial assets cannot be reliably measured as variability in therange of reasonable fair value estimates is significant. As a result, all unlisted investments are reflected atcost. Consolidated Entity Parent Entity 2006 2005 2006 2005 9. INTEREST BEARING LIABILITES CURRENT LIABILITIES Bank Overdraft 935,569 778,860 - -Secured Loans 764,364 715,146 - -Unsecured Loans 751,695 522,214 - - 2,451,628 2,016,220 - - NON-CURRENT LIABILITIESSecured Loans 1,577,292 2,440,174 - -Unsecured Loans 1,124,969 2,296,557 - - 2,702,261 4,736,731 - - Financial arrangementsThe Consolidated Entity has the access to thefollowing lines of credit: General banking facility/bank overdraft 1,318,764 1,374,100 - -Term loan facility 3,767,897 3,926,000 - -Forward exchange contract facility 3,767,897 3,926,000 - - 8,854,558 9,226,100 - - Facilities utilised at reporting date Bank Overdraft 935,569 778,860 - -Secured Loans 2,341,656 3,155,320 - - 3,277,225 3,934,180 - - Facilities not utilised at reporting dateBank overdraft 383,195 595,240 - -Forward exchange contract facility 3,767,897 3,926,000 - -Term loan facility 1,426,241 770,680 - - 5,577,333 5,291,920 - - Bank overdrafts, term facility and forward exchange contract facility The various facilities described above are secured by: - Unlimited cession of debtors; - Registration of a first continuing covering mortgage bond over the farmSteenkoppies Magaliesburg for an amount of $1,130,369 (R6,000,000) supported bya cession of fire and Sasria policy; - Registration of a general and special notarial bond over stock, plantand equipment for an amount of $2,825,923 (R15,000,000) supported by a cessionof fire and Sasria policy; - Unlimited suretyship by GVM Metals Ltd; and - Limited suretyship by other shareholders to the amount of $542,954(R2,882,000). Secured Loans (ABSA Limited) The loan is repayable in annual instalments which comprise capital and interestof $1,016,961 (R5,398,029) with a final payment in March 2009. The loan bearsinterest at 1% above the South African prime interest rate. Unsecured Loans (Loans from minority interests in controlled entity) The loans are unsecured and bore interest at a rate of 8.5% during the yearunder review. $751,696 (R 3,990,000) is repayable on 13 December 2006 and thebalance will be repaid when funds are available and can be delayed to a maximumof 5 years. 10. CONTRIBUTED EQUITY (a) Issued and paid up capital31,311,019 ordinary fullypaid shares (2005:27,498,519ordinary fully paid shares -adjusted forshare consolidation) 35,396,353 34,500,935 35,396,353 34,500,935 35,396,353 34,500,935 35,396,353 34,500,935 2006 2006 2005 Number 2005 Number $ $ (b) Movements in contributed equity Opening Balance 274,985,189 34,500,935 239,120,188 33,469,250Capital raisingfor workingcapital at 2.5cents per share - - 5,000,000 125,000Capital raisingfor investmentcapital at 3.0cents per share - - 30,865,001 925,95010:1 Shareconsolidation (247,486,802) - - - Revised balancepostconsolidation 27,498,387 - -Capital raisingfor workingcapital at 25cents per share 3,812,500 953,125 - -Capital raisingcosts incurred (57,707) (19,265) 31,310,887 35,396,353 274,985,189 34,500,935 The Company has entered into an Option Agreement whereby GVM has a call optiongranting it the right to acquire the remaining 26% of Nimag, for the totalconsideration of 6.5 million shares in GVM @ 40 cents per share. Similarly, theshareholders of the remaining 26% of Nimag have a put option granting them theright to dispose of their holding in Nimag to GVM, for the consideration of 6.5million shares in GVM @ 40 cents per share. The Option Agreement is subject tocertain terms and conditions. The option agreement was amended during the yearto take cognisance of the 10:1 share consolidation in GVM. The issuing of theGVM shares is also subject to shareholder approval. Consolidated Entity Parent Entity 2006 2005 2006 2005 $ $ $ $11. NOTES TO THE STATEMENT OF CASHFLOWS (a) Reconciliation of cash For the purposes of the statements of cash flows, cash includes cash on hand and at bank and short termdeposits at call, net of outstanding bank overdrafts. Cash as at the end of the financial year as shown inthe statements of cash flows is reconciled to the related items in the statement of financial position. Cash at Bank 985,333 1,806,353 78,191 188,202Bank Overdraft (935,569) (778,860) - - 49,764 1,027,493 78,191 188,202 (b) Reconciliation of loss from ordinary activities after income tax to net cash used in operating activities Profit/(Loss) from ordinary activities afterincome tax (233,141) 1,180,600 (1,712,968) (517,751) Add/(less) non- cash items:Amounts set aside (reversed from) provisions (112,735) (184,960) (1,042) 292 Depreciation/amortisation of property, plant 242,768 366,226 16,043 19,013and equipment (Profit)/loss on disposal of property, plant - (17,658) - (13,455)and equipment (Profit)/loss on disposal of equity 40,197 (366,328) 40,197 (366,328)investments Diminution in value of investments 4,325 442,265 4,325 419,035 Provision for non-recoverability of loans - 137,866 - 136,660 Share of associates (profit) / loss 98,630 (23,230) - - Share based payments 551,200 - 551,200 - Change in assets and liabilities:(Increase) in trade debtors (773,506) (386,313) (37,704) 200,543and other receivables (Increase)/Decrease in inventory 118,023 66,834 - - Increase/(Decrease) in creditors 129,480 1,453,152 160,045 83,595Increase/(Decrease) in Tax Payable, FITB,PDIT 332,993 (307,973) (4,560) - Net cash provided by / (used in) operating 398,234 2,360,481 (984,464) (38,396)activities (c) Non-cash investing and financing activities The Parent entity acquired certain "B" Preference shares in Nimag from minorityshareholders during the year for a consideration of $441,151 of which $409,375was settled by means of a share issue. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
MCM.L