1st Oct 2007 08:47
GVM Metals Ltd01 October 2007 GVM METALS LIMITED Annual Report and Accounts for the year ended 30 June 2007 GVM Metals Limited ("GVM" or "the Company") is pleased to announce itsoperational report together with the consolidated financial report for the yearended 30 June 2007. A full copy of this report is available at the Company'swebsite, www.gvm.com.au. Highlights • Acquisition of a 74% interest in the Limpopo (Thuli) coal project in November 2006. • Acquisition of 50% of the Baobab coal project, some 50km's south of the Limpopo coal project. • Completion of the merger of the GVM and Motjoli Resources (Pty) Ltd coal projects. Motjoli are GVM's Black Economic Empowerment partner in South Africa. The merger increased the Company's interest in the Holfontein coal project from 49% to 100% and in the Baobab coal project from 50% to 100%. Discussion of the Results Nimag Group ("NiMag") GVM Metals Limited acquired a controlling interest in the Nimag Group ofCompanies (Nimag Group) in December 2003, and acquired the remaining 26% inDecember 2006. Nimag Group is engaged principally in the manufacture and distribution of nickelmagnesium alloys, ferro silicon magnesium alloys and metal fibres and beganproducing alloys in 1962 and currently manufactures specialised master alloys ofnickel and magnesium for the specialised foundry industry including aerospace,aeronautical, motor, steel mill roll and associated industries. 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 supplies the ductileiron market as a specialist supplier with a world market share of about 35% inits core product line. 95% of sales are exported through 35 distributors worldwide. Demand for NiMag's alloys is proportional with world demand for ductileiron, principally for automotive parts and industrial machinery. Demand forNiMag products has grown gradually to meet current capacity of 287 tonnes permonth (all products). Potential for expansion of the core nickel-magnesiumalloy product is presently limited by the size of end markets. NiMag isincreasing the penetration of a variety of other products developed foralternative markets. NiMag produces approximately 300 tonnes of cast and slitfibres which are used in reinforced concrete by domestic mining and tunnellingoperations. NiMag's competitive advantages include low electricity and labour costs. Themain input cost is locally sourced nickel raw material, which is matched withsales to minimise nickel price exposure. GVM acquired 74% of NiMag from a management group in January 2004. Theconsideration was R37 Million (A$8 million) comprising ZAR7.5 million in cash upfront, R20 million borrowed against the business and R9.5 million in vendorfinance. On GVM's listing on the JSE, the Company exercised its option toacquire the balance of NiMag for 4,620,557 GVM shares. Depreciation of the Rand and strengthening of Nickel prices widened NiMag'sprofit margins resulting in NiMag generating substantially higher operationalcash flows over the 2006/07 financial year. NiMag traded profitably,contributing approximately A$4,6m in surplus funds and repaying the remainingbank financed acquisition costs. At the end of June 2007, GVM's acquisitionloans comprised $506,278 to the NiMag vendors. Magberg Manufacturing A specialised producer of ferro silicon magnesium alloys used to manufactureDuctile Iron. Capacity is limited and the production is split equally betweenlocal and export markets. This is a commodity product and almost all costs areRand denominated. Metalloy Fibres (Pty) Ltd The only specialised cast fibre reinforcing manufacturer in Africa. A weakeningof the Rand and the "go ahead" of the Gautrain rail project and the generalincrease in construction expenditure promises to substantially improve thisbusiness both in terms of volumes and margins. Metal Alloy Traders Limited ("MATS") MATS is incorporated in Jersey in the Channel Islands and it trades variousmetals purchased from Nimag in South Africa. SA Mineral Resources Corporation Limited ("Samroc") Samroc is a Johannesburg Stock Exchange listed company which produces manganesesulphate chemicals. During the latter half of 2005 GVM stated its intention todispose of its entire investment in Samroc. As a result of its intended disposal, the Samroc investment has beenreclassified as a Non-current Investment Held for Sale. Holfontein Coal Project GVM acquired Motjoli Resources' 51% stake in the Holfontein coal project throughthe issue of 14,868,283 GVM shares and paid ZAR 21 million (A$ 3.5 million) forthe initial 49% acquisition. Holfontein is situated in the traditional coal mining area south and west ofWitbank where coal mining has taken place for over a hundred years. It is onthe main road between Kinross and Trichard in Mpumalanga, South Africa, and amain line railway siding is situated on the property at Leven which can beupgraded for export purposes. Currently the resources are in the inferred category and stand at 55 milliontonnes. It is planned to produce 400,000 tpa of soft coking coal from the 5seam and 800,000 tpa of thermal coal from the 4 seam. The Holfonteinexploration program undertaken at the end of 2006 to confirm the structure,tonnage and quality of the Holfontein coal resource was completed during the2007. An additional 37 boreholes were completed constituting 5,557 metresdrilled and yielding 150 samples for analysis. The geological model based onthese results is currently being updated with Mine feasibility planning doneonce the laboratory results have been received. There are now 67 boreholes inthe Holfontein resource area resulting in a drilling density of just less than14 boreholes per hectare for the 5 seam resource and 12 boreholes per hectarefor the 4 seam resource. Once modelling is completed, this will bring theHolfontein property into a measured resource category. Geotechnical tests were conducted on the diamond drill cores to establish thecompetence of the roof and floor conditions of both the 5 Seam and 4 Seamresources. Initial perusal of the results has confirmed the low phosphorusmetallurgical qualities of the 5 Seam with no change in expected yields. The 4Seam resources still need to be modelled analytically but the indications arethat the coal is suitable for SASOL or Eskom feedstock. Composite samples ofthe 5 Seam are to be reconstituted to test for certain metallurgical properties.Similarly, 4 Seam samples are to be reconstituted to test for the suitabilityof the coal for Eskom. Baobab Coal Project The acquisition of Petmin Ltd's 50% interest in the Baobab Coal Project wascompleted during 2007 through the issue of 8,333,333 GVM shares to raise therequired purchase price of GBP2.5 million (A$ 6.2 million). During June, GVMacquired the remaining 50% of the Joint Venture held by Motjoli Resources withthe issue of 20,000,000 GVM shares. Consultants have been mandated to assess railway and related transportinfrastructure from GVM's Baobab and Thuli coal projects to the Richards Bay andMaputo coal terminals. Management envisage this project will be completed laterin 2007. Drilling on the Baobab coal project is expected to commence early in2008 financial year. Thuli Coal Project (Limpopo) GVM acquired its 74% interest in the project by the issue of 20,812,500 sharesin December 2006. Potential drilling contractors have performed siteinspections, and drilling on the Thuli Coal Project started in August. Datacollected in the terrain model completed earlier in the year will be used in theidentification of drilling targets. Preliminary discussions with various infra-structure participants are underwayto ascertain the export capacity of the coal mined. Management have receivedvaluations from independent third parties mandated to assess the value of thesurface rights comprising the Thuli Coal Project. Preliminary consultationswith the current surface rights owners on GVM's potential acquisition of theserights have been undertaken. GVM will continue these discussions together withthe Thuli Coal Project drilling program during the first quarter of the 2008financial year. Mooiplaats Coal Project 70% on Completion of the CoAL Acquisition The major drilling programme continued at Mooiplaats during the fourth quarterof the 2007 financial year and 23,867 metres (164 holes) were drilled. Seventhousand of the total twenty-three thousand hectares have now been drilled on'inferred' spacing densities and during the period infill drilling commenced on'measured' and 'indicated' spacings. The goal of the programme is to bring aminimum of 60 million tonnes of the resource into measured and indicatedcategories. The tonnage represents ten years consumption at the adjacent CamdenPower Station. SRK Consultants are overseeing the drilling programme and a resource statementwill be released during the first quarter of the 07/08 financial year. Theresults of the drilling program to date are in line with managementexpectations. Simon Farrell Managing Director 28 September 2007 For more information contact: Simon Farrell, Managing Director, GVM +61 417 985 383 or +61 8 9322 6776 Nonkqubela Mazwai, Deputy Managing Director, GVM +27 83 690 9079 Petronella Gorrie, The Event Shop +27 82 827 8815 Jos Simson/Leesa Peters, Conduit PR +44(0) 20 7429 6603/ +44 (0) 7899 870 450 Olly Cairns/Romil Patel, Blue Oar Securities Plc +44(0) 20 7448 4400 www.gvm.com.au Group profit and loss account for the year ended 30 June 2007 Consolidated Entity Parent Entity 2007 2006 2007 2006 $ $ $ $ REVENUE 62,595,362 32,340,604 1,105,766 380,250 Changes in inventories of finished goodsand work in progress - (367,491) - -Raw materials and consumables used (48,078,842) (23,529,689) - -Consulting expenses (328,744) (400,187) (328,744) (342,066)Employee expenses (6,410,948) (3,516,128) (4,026,233) (970,187)Borrowing costs (800,799) (669,044) - -Depreciation expenses (175,532) (242,768) (12,923) (16,043)Office rental , outgoings and parking (425,164) (204,865) (5,380) (60,385)Decrease/(increase) diminution in value of (1,666,792) (4,325)investments (1,666,792) (4,325)Loss on investments disposed of (40,197) - (40,197)Bad debt expense (306,066) (1,159) - (1,159)Provision for non-recoverability of loans/ (664,067) - (375,000) -debtorsDiminution in value of control entities (6,488) - (6,488) -Other expenses from ordinary activities (5,062,962) (2,932,530) (1,162,894) (658,856)Share of net profit/(losses) of associate - (98,630)accounted for using the equity method - -Profit/(Loss) before income tax (expense)/ (1,331,042) 333,591benefit (6,478,688) (1,712,968) Income tax (expense) / benefit (2,216,264) (566,732) - -Profit/(Loss) after tax (3,547,306) (233,141) (6,478,688) (1,712,968) Outside equity interest (478,742) (353,870) - -Net profit/(loss) attributable to members (6,478,688) (1,712,968)of the parent entity (4,026,048) (587,011) Basic earnings/(loss) per share (in cents) (4.72) (2.04)Headline earnings/(loss) per share (in (1.96) (1.54)cents) Group balance sheet as at 30 June 2007 Consolidated Entity Parent Entity 2007 2006 2007 2006 $ $ $ $ CURRENT ASSETS Cash assets 61,530,490 985,333 52,909,170 78,191Receivables 8,984,168 6,374,684 4,809,348 722,916 Inventory 5,519,744 3,245,656 - - TOTAL CURRENT ASSETS 76,034,402 10,605,673 57,718,518 801,107 NON CURRENT ASSETSReceivables - - 12,097,685 4,522,652Assets held for sale 94,596 94,596 - -Intangibles 3,964,042 7,441,280 - -Other financial assets 12,928,598 699,992 82,942,434 4,465,409Property, plant and equipment 1,648,834 1,803,312 29,134 27,845Deferred tax assets 239,686 36,669 - -Mining assets 67,852,973 - - -Exploration expenditure 1,123,850 - - - TOTAL NON CURRENT ASSETS 87,852,579 10,075,849 95,069,253 9,015,906 TOTAL ASSETS 163,886,981 20,681,522 152,787,771 9,817,013 CURRENT LIABILITIESPayables 9,319,361 5,940,126 218,856 328,915Interest bearing liabilities - 2,451,628 - -Provisions 95,355 125,790 232 212Current tax liability 1,711,840 459,586 (7,776) - TOTAL CURRENT LIABILITIES 11,126,555 8,977,130 211,312 329,127 NON CURRENT LIABILITIESPayables 1,375,608 1,340,777 7,046,990 6,601,208Interest bearing liabilities 506,261 2,702,261 - - TOTAL NON CURRENT LIABILITIES 1,881,869 4,043,038 7,046,990 6,601,208 TOTAL LIABILITIES 13,008,424 13,020,168 7,258,302 6,930,335 NET ASSETS 150,878,557 7,661,354 145,529,468 2,886,678 EQUITYContributed equity 177,189,359 35,396,353 177,189,359 35,396,353Reserves 5,310,652 426,521 8,016,118 687,645Accumulated losses (34,692,704) (30,666,656) (39,676,009) (33,197,320) TOTAL PARENT EQUITY INTEREST 147,807,306 5,156,218 145,529,468 2,886,678 OUTSIDE EQUITY INTEREST 3,071,250 2,505,136 - - TOTAL EQUITY 150,878,557 7,661,354 145,529,468 2,886,678 Cash Flow Statements for the year ended 30 June 2007 Consolidated Entity Parent Entity 2007 2006 2007 2006 $ $ $ $ Cash flows from operating activities Interest received 555,353 84,578 474,576 30,280Cash receipts in the course of operations 59,382,997 31,482,520 241,337 312,266Interest paid (800,799) (669,044) - -Payments to suppliers and employees (56,475,498) (30,499,820) (1,717,433) (1,327,010) Net cash generated by /(used in) 2,662,053 398,234 (1,001,520) (984,464)operating activities Cash flows from investing activities Payments for property, plant and (198,163) (148,489) (14,212) -equipmentProceeds from the sale of property, plant 3,350 - - -and equipmentMineral assets acquired (10,516,450) - - -Proceeds from sale of equity investments - 226,511 - 226,511Payments for equity investments - (47,576) (10,516,450) (47,576)Loans (made to)/from other entities - - - 34,084Net cash received/ (paid) on acquisition (75,000)of subsidiary - - -Exploration costs (477,667) - - - Net cash generated by / (used in) (11,263,930)investing activities 30,446 (10,530,662) 213,019 Cash flows from financing activities Loans from controlled entities - - - 175,391Proceeds from issue of shares 78,334,038 543,750 78,334,038 543,750Transaction costs from issue of shares (2,778,509) (57,707) (2,778,509) (57,707)Loans to controlled entities - - (10,563,335) -Loans repaid to other entities (4,647,628) (1,892,452) - -Loans from other entities 34,831 - - - Net cash generated by financing 70,942,732 64,992,194activities (1,406,409) 661,434 Net increase/(decrease) in cash held 62,340,855 (977,729) 53,460,012 (110,011)Effect of exchange rates of cash holdingsin foreign currencies (820,129) - (629,033) -Cash at beginning of financial year 49,764 1,027,493 78,191 188,202 Cash at end of financial year 61,530,490 49,764 52,909,170 78,191 Statement of changes in equity as at 30 June 2007 Ordinary Capital Foreign Share Accumulated Total Outside share capital profits currency options losses Equity reserve translation reserve interests reserve $ $ $ $ $ $ $ Consolidated entity Balance at 1 July 2006 35,396,353 136,445 (261,124) 551,200 (30,666,656) 5,156,218 2,505,136 Shares issued during the year 144,571,514 - - - - 144,571,514 - Capital raising costs (2,778,509) - - - - (2,778,509) -incurred Adjustments from - - (2,444,342) - - (2,444,342) -translation of foreigncontrolled entities Share based payments - - - 7,328,473 - 7,328,473 - Loss attributable to - - - - (4,026,048) (4,026,048) -members of parent entity Profit attributable tominority shareholders - - - - - - 478,742Minority interest in - - - - - - (31,133)reserves100% acquisition of a - - - - - - (2,952,745)controlled entityMinority interest in a - - - - - - 3,071,251controlled entityBalance at 30 June 2007 177,189,359 136,445 (2,705,466) 7,879,673 (34,692,704) 147,807,306 3,071,251 Parent entity Balance at 1 July 2006 35,396,353 136,445 (33,197,320) 2,886,678 - - 551,200Shares issued during the year 144,571,514 - - - - 144,571,514 - Transaction costs (2,778,509) - - - - (2,778,509) -Share based payments - - - 7,328,473 - 7,328,473 -Loss attributable to - - - - (6,478,688) (6,478,688) -members of parent entityBalance at 30 June 2007 177,189,359 136,445 - 7,879,673 (39,676,008) 145,529,468 - Ordinary Capital Foreign Accumulated Total Outside share capital profits currency losses Equity reserve translation interests reserve Share options $ $ $ $ $ $ $ Balance at 1 July 2005 34,500,935 136,445 1,108,117 - (30,079,645) 5,665,852 3,306,117 Shares issued during the year 953,125 - - - - 953,125 - Capital raising costs (57,707) - - - - (57,707) -incurred Adjustments from - - (1,369,241) - - (1,369,241) -translation of foreigncontrolled entities Share based payments - - - 551,200 - 551,200 - Loss attributable to - - - (587,011) (587,011) -members of parent entity Loss attributable to - - - - - - (353,870)minority shareholders Minority interest in - - - - - - - 221,480reserves Preference shares - - - - - - (668,591)acquired by parent entity Balance at 30 June 2006 35,396,353 136,445 (261,124) 551,200 (30,666,656) 5,156,218 2,505,136 Parent entity Balance at 1 July 2005 34,500,935 136,445 - - (31,484,352) 3,153,028 - Shares issued during the 953,125 - - - - 953,125 -year Transaction costs (57,707) - - - - (57,707) - Share based payments - - - 551,200 - 551,200 - Loss attributable to - - - - (1,712,968) (1,712,968) -members of parent entity Balance at 30 June 2006 35,396,353 136,445 - 551,200 (33,197,320) 2,886,678 - This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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