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Namaqualand Mines acquisition to become effective end-Oct

Trans Hex CEO Llewellyn Delport discusses the company's future plans. Camerawork & editing: Nicholas Boyd. Recorded: 04/06/2014.

4th June 2014

By: Leandi Kolver

Creamer Media Deputy Editor

  

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JOHANNESBURG (miningweekly.com) – The acquisition of De Beers Consolidated Mines’ (DBCM’s) Namaqualand Mines by JSE-listed Trans Hex’s 40%-owned subsidiary Emerald Panther Investments (EPI), was expected to become effective on October 31, Trans Hex CEO Llewellyn Delport said on Wednesday.

Following the presentation of the company’s financial results for the year ended March 31, Delport told Mining Weekly Online that Trans Hex was currently working with DBCM to conclude an amendment to the sale agreement detailing the housing of the State’s 20% interest in Namaqualand Mines in a special purpose vehicle (SPV).

It was envisaged that once the transaction had been concluded, the SPV would hold the State’s 20% interest in the mines and would also be a 20% shareholder in EPI.

Trans Hex would also have a management and marketing agreement with EPI and receive fees totalling 5.5% of sales, thus increasing its effective interest in Namaqualand Mines to 52%, Delport added.

He further explained that the transaction’s previously approved R189-million funding from the Industrial Development Corporation (IDC), would have to be reapplied for to provide for changes in the sale agreement between DBCM and EPI.

He noted that the company would relodge its application with the IDC over the next few weeks and was optimistic that it would again be approved.

Pending the IDC’s reapproval, the diamond miner’s own direct financial commitment to the transaction would amount to about R55-million.

Delport also pointed out that EPI had secured a Department of Mineral Resources-approved guarantee facility to the value of R166-million from an insurance company for the rehabilitation liability associated with Namaqualand Mines.

“Trans Hex expects to receive cash flows of R653-million over the life of the project,” Delport noted, adding that Namaqualand Mines had a resource of between 1.6-million carats and 1.9-million carats that could be economically mined over a mine life of about 14 years.

Once the transaction became effective, Trans Hex would focus its attention, over the next 12 to 18 months, on developing the project.

Trans Hex executive director for finance Ian Hestermann added that the company expected to have the first diamond sales from the project about one year after the transaction’s effective date.

SOUTH AFRICAN OPERATIONS
During the year ended March 2014, Trans Hex’s South African operations swung to a pretax loss of R8.9-million, from a profit of R88.2-million in 2013.

The operation’s output decreased to 52 081 ct, from 67 115 ct in 2013, owing to a 14.9% decrease in volume treated as a result of the termination of joint venture contractors, a 12.4% decline in grade and a 21-day strike over pay increases by members of the National Union of Mineworkers (NUM).

Delport said the company acknowledged that its South African operations were not sustainable in their current form and, therefore, would either have to close or be transformed.

He explained that the company had tested, at the Nxodap operating facility, located in the Reuning project area, on the Orange River, what Trans Hex saw as the future of its Baken mine.

This new facility model was smaller, much more fit-for-purpose with a smaller overhead, making it more productive, Deport explained.

“The plan is now to move the bigger Baken operation to similar fit-for-purpose operations going forward,” he said.

He also pointed out that the company was now moving the Nxodap plant to the Jakkalsberg area, about 10 km from Nxodap, adding that Trans Hex was also applying this operating model at its Bloeddrif operation, with indications that it would be successful.

The diamond miner expected its total South African production for the 2015 financial year to reach 55 000 ct.

Delport added that the company did not foresee similar labour challenges at its South African operations over the coming year as the company had already concluded negotiations with the NUM for the period.

Owing to the underperformance of the group’s South African operations, Trans Hex
posted earnings per share (EPS) and headline earnings per share (HEPS) of 20.7c and 9.8c respectively during the 12 months to March, a fall on the reported EPS of 79.9c and HEPS of 69.9c in the prior year.

The group’s profit declined from R85.4-million in the 2013 financial year to R22.7-million during the year under review, with a loss after tax from continuing operations of R5.1-million – a decline from a profit of R65-million the year before.

Trans Hex sold 15.7% fewer carats at 55 083 ct during the year ended March 31, securing revenue of R695-million – a 7.4% decline on the R751-million from the 65 339 ct sold during the year ended March 2013.

In Angola, production at its Somiluana operation increased from 41 313 ct in 2013, to 72 041 ct as the volumes treated increased 20.9% and the grade rose 44.2%.

Somiluana generated net profit of $10.5-million during the 12 months to March, up from a loss of $3-million last year, with sales reaching $32.4-million, compared with sales of $14.9-million the year before.

Delport noted that Somiluana was expected to continue performing well over the next financial year.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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