Wits Gold - Unaudited financial results for the six months ended 31 August 2011
Witwatersrand Consolidated Gold Resources Limited
Incorporated in the Republic of South Africa
(Registration number 2002/031365/06)
JSE Share Code: WGR ISIN: ZAE000079703
TSX Share Code: WGR CUSIP Number: S98297104
('Wits Gold' or 'the Company')
Unaudited financial results
for the six months ended 31 August 2011
The financial results have been prepared by Mr DM Urquhart CA (SA),
the Company's financial director and are presented in South African
Rand (R).
The exchange rates, based on the Bank of Canada noon rate, were as
follows:
31 August 2010 CAD $1.00 = R6.93
31 August 2011 CAD $1.00 = R7.57
28 February 2011 CAD $1.00 = R7.14
14 October 2011 CAD $1.00 = R7.72
Highlights
-- Philip Kotze appointed CEO of Wits Gold
-- Wits Gold completes a positive scoping study on the DBM Project
-- Pre-feasibility study underway at DBM
JOHANNESBURG, Oct. 18, 2011 /CNW/ -
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 August 2011
Six monthsended Year ended
31 August 31 August 28 February
2011 2010 2011
(Unaudited) (Unaudited) (Audited)
R R R
Revenue - - -
Results from operating (13 101 725) (10 465 732) (20 215 329)
activities
Net finance income 3 869 247 2 443 438 5 326 307
Loss for the period before (9 232 478) (8 022 294) (14 889 022)
income tax
Income tax expense - (5 283) -
Loss for the period (9 232 478) (8 027 577) (14 889 022)
attributable to owners
Other comprehensive income - - 75 468
net of income tax
Total comprehensive loss (9 232 478) (8 027 577) (14 813 554)
attributable to owners of
the Company
Loss per share
Weighted average number of 34 391 359 27 742 028 29 713 768
shares in issue
Basic and headline loss (26,85) (28,94) (50,11)
per share (cents)
Headline loss per share (26,88) (28,94) (50,11)
(cents)
Diluted weighted average 34 391 359 27 867 028 29 713 768
shares in issue
Diluted basic loss per (26,85) (40,35) (50,11)
share (cents)
Diluted headline loss per (26,88) (40,35) (50,11)
share (cents)
Headline loss per share is
calculated from
Basic loss (9 232 478) (8 027 577) (14 813 554)
Add back profit on (10 919) - -
disposal of fixed assets
Headline loss (9 243 397) (8 027 577) (14 813 554)
CONDENSED STATEMENT OF FINANCIAL POSITION
as at 31 August 2011
Asat As at
31 August 31 August 28 February
2011 2010 2011
(Unaudited) (Unaudited) (Audited)
R R R
Assets
Non-current assets 440 221 929 122 907 484 423 062 154
Current assets 131 656 469 65 286 186 147 667 283
Total assets 571 878 398 188 193 670 570 729 437
Equity and liabilities
Capital and reserves 557 939 021 182 548 564 565 729 742
Current liabilities 13 939 377 5 645 106 4 999 695
Total equity and 571 878 398 188 193 670 570 729 437
liabilities
CONDENSED STATEMENT OF CASH FLOWS
for the six months ended 31 August 2011
Sixmonths ended Year ended
31 August 31 August 28 February
2011 2010 2011
(Unaudited) (Unaudited) (Audited)
R R R
Cash flows from
operating activities
Cash utilised in (5 741 819) (6 234 723) (13 928 826)
operating activities
Taxation paid (refunded) 2 085 337 (1 991 507) (1 991 507)
Net finance income 3 869 247 2 443 438 5 326 307
Net cash generated 212 765 (5 782 792) (10 594 026)
(utilised) by operating
activities
Cash flows from
financing activities
Cash flows from (16 691) - 112 305 988
financing activities
Cash flows from
investing activities
Net cash utilised in (17 336 605) (15 932 954) (41 212 686)
investing activities
(Decrease)/increase in (17 140 531) (21 715 746) 60 499 276
cash and cash
equivalents
Cash and cash 146 178 604 85 679 328 85 679 328
equivalents at beginning
of period
Cash and cash 129 038 073 63 963 582 146 178 604
equivalents at end of
period
CONDENSED STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 August 2011
Equity-settled
Ordinary share-based
share Share payment Revaluation Accumulated
capital premium reserve reserve loss Total
R R R R R R
Balance at 28
February 2010 278 909 185 971 19 604 280 1 253 981 (20 063 187
(Audited) 589 117) 045
642
Total - - - - (8 027 576) (8
comprehensive 027
loss for the 576)
period
Deferred - - - 5 283 - 5 283
taxation on
revaluation
Equity-settled - - 3 525 215 - - 3 525
share-based 215
payments
Balance at 31
August 2010 278 909 185 971 23 129 495 1 259 264 (28 090 182
(Unaudited) 589 693) 548
564
Balance at 28
February 2011 344 903 573 211 7 119 295 1 329 449 (16 275 565
(Audited) 583 488) 729
742
Total - - - - (9 232 478) (9
comprehensive 232
loss for the 478)
period
Costs related
to prior
transactions
with owners
recorded
directly in (16 (16
equity - 691) - - - 691)
Equity-settled - - 1 458 448 - - 1 458
share-based 448
payments
Balance at 31 557
August 2011 573 194 (25 507 939
(Unaudited) 344 903 892 8 577 743 1 329 449 966) 021
Overview
The Company is involved in the mineral exploration industry and does not generate any operating income. Mineral exploration is highly speculative due to a number of significant risks, including the possible failure to discover mineral deposits, sufficient in quantity and quality to justify the establishment of a mine. Wits Gold has completed a pre-feasibility study over its Bloemhoek Project and has initiated a similar study over its DBM Project which is due for completion by May 2012. Additional work will be undertaken before a decision is made to initiate any Definitive Feasibility Studies over either of these projects. Despite the historic exploration work on the Company's remaining Prospecting Rights, no other known economic deposits have been determined. Further work will be required in order to determine if any economic deposits occur on these properties.
The Company has previously been able to raise sufficient capital from its shareholders to fund its operating and exploration requirements. If the Company's current exploration programmes are successful, additional financing will be required to complete further feasibility studies as well as to develop any mineral properties identified in order to bring them into commercial production. The longer-term exploration of the Company's Prospecting Rights is also dependent upon the Company's ability to obtain additional financing through the joint venturing of projects, debt financing, equity financing or other means. During the six month period under review, Wits Gold did not issue any additional shares.
Directorate
The Wits Gold Annual General Meeting was held in Johannesburg on 29 July 2011. Two directors, Mrs GM Wilson and Mr DM Urquhart, were re-appointed by the shareholders, following their retirement by rotation.
Dr MB Watchorn resigned as Chief Executive Officer with effect from 1 August 2011 and Mr P Kotze was appointed in his stead. Mr P Kotze's appointment to the board of directors of the Company will be ratified at the next general meeting of shareholders.
Basis of preparation
The interim condensed financial statements for the six months ended 31 August 2011 are unaudited and have not been reviewed by our auditors. They have been prepared in accordance with IAS 34 - Interim Financial Reporting, as well as the AC 500 standards as issued by the Accounting Practices Board and in compliance with the South African Companies Act, 2008 and the Listing Requirements of the JSE Limited.
The financial information has been prepared on the basis of the recognition and measurement requirements of International Financial Reporting Standards (IFRS). The accounting policies of the Company are consistent with those of the previous financial statements and have been consistently applied. These results should be read in conjunction with the annual report for the year ended 28 February 2011.
The Company identified only one business segment, being exploration within South Africa.
Interim operations
The operating loss for the six months under review increased by R2,6 million when compared to the first six months of the prior year. The increase in operating loss incorporates the severance package of R4,0 million awarded to Dr Watchorn and an increase in investor relations costs of R0,2 million. These increases were partially offset by reductions of R2 million in the share based-payment expense for employees and advisors together with R0,1 million in employee costs.
The loss before taxation increased by R1,3 million due mainly to the factors mentioned above mitigated by an increase in interest received amounting to R1,4 million. The increase in interest income results from the additional funds available for investing arising from the R120 million capital raised in November 2010.
The Company invested R17,3 million (2010 - R15,9 million) in intangible exploration assets during the six months under review.
Dividend
No dividend has been declared for the period under review (2010 - Nil).
Commitments
The Company's commitments amount to R77,1 million (2010: R23,9 million), of which R20,9 million (2010: R18,3 million) is in respect of exploration activities. The net increase in commitments results primarily from the acquisition of exploration properties (R55 million) and approval of four Prospecting Right renewals (R11,6 million).
Events subsequent to the review period
There have been no material events that have occurred between 31 August 2011 and the date of this report. Wits Gold's board of directors is of the opinion that the Company has sufficient funds to finance its planned exploration programme, including the estimated costs relating to the completion of the Definitive Feasibility Study on the DBM Project, for approximately the next 18 months.
Mineral Resources
Wits Gold maintains legal title to 14 Prospecting Rights in the southern Free State, Potchefstroom and Klerksdorp goldfields and there has been no change in the locality of these Rights. None of these assets are currently in production and the directors are not aware of any legal proceedings or any other material conditions that may impact on the Company's abilities to continue its exploration activities. The contained Mineral Resources are currently reflected as being fully attributable to Wits Gold. However, over certain properties in the Potchefstroom and Klerksdorp areas, Gold Fields and AngloGold Ashanti have options to acquire up to 40% interest in any future mines following the completion of Definitive Feasibility Studies. In addition, should any of these properties be sold, the abovementioned companies would be entitled to receive 50% of the proceeds of the sale after deducting three times the exploration costs incurred by Wits Gold. There are no legal proceedings involving the Company that will have an impact on its ability to continue exploration activities.
As part of the Environmental Management Plan (EMP), the Company has lodged bank guarantees totalling R320 000 with the Department of Mineral Resources (DMR). This amount has been accepted for the work programmes proposed over the 14 Prospecting Rights held by Wits Gold. EMP compliance is monitored on an ongoing basis for the duration of each Prospecting Right.
Following the acquisition of the Merriespruit South area from the Harmony Group and its consolidation with the De Bron Project to form the De Bron-Merriespruit Project (DBM Project), the Company completed a drilling programme of five diamond boreholes in January 2011. Subsequently, an Indicated Resource of 34,5Mt at 5,3g/t Au (5,9Moz) and an Inferred Resource of 25,0Mt at 5,2g/t Au (4,2Moz) have been defined at depths between 500 metres and 1 200 metres. This Resource Estimate for DBM is presented in a NI43-101 and SAMREC-compliant Independent Technical Report by Snowden Mining Industry Consultants (Limited) (Snowden) dated 6 April 2011 which can be viewed on www.sedar.com and the Company's website, www.witsgold.com. These resources were estimated using all the available borehole data and using sample widths corrected for dip. Analysis of the borehole core was undertaken at three accredited laboratories: Anglo Research, ALS Chemex South Africa (Pty) Limited and SGS South Africa (Pty) Limited, during which the Company's standard QA/QC procedures were followed.
The Company's total Mineral Reserve and Resource Estimates are tabulated below, and have not changed during the period under review. Mineral Resources that are not Mineral Reserves do not have demonstrated economic viability. These estimates are compliant with the Canadian National Instrument NI43-101 (NI43-101) and SAMREC reporting codes. The stated Indicated Mineral Resources are inclusive of the Company's Mineral Reserves. Information concerning the geology, mineral occurrences, nature of mineralisation, geological controls, rock types, historical work, the application of quality assurance and quality control measures, sampling and analytical procedures, the names of analytical laboratories and the key assumptions, parameters and methods used to estimate the Mineral Resources at the Company's various projects are communicated in NI43-101 reports dated November 2007, May 2009, June 2009, October 2009, April 2011 and August 2011, which can be viewed at www.sedar.com and on the Company's website.
Mr D Muntingh, the Company's Competent Person and Exploration Manager, is responsible for the technical material in this release. Mr Muntingh (MSc Geology) is a registered Professional Natural Scientist ('Pr.Sci.Nat.') with the South African Council for Natural Scientific Professionals ('SACNASP') and has 19 years of experience in gold exploration. The technical content of this release has been compiled by Mr Muntingh who has issued a written statement that the information disclosed is both SAMREC- and NI43-101-compliant.
Mineral Reserves*
Based on a gold price of US$975/oz and an exchange rate of R8,00/US$ (R250 000/kg)
Bloemhoek Project (SOFS Goldfield) Mt Grade (g/t) Moz
Probable Reserves 31,6 5,3 5,4
Mineral Resource*
(at a cut-off grade of 3 g/t Au)
Key Projects (SOFS Goldfield)
Indicated Gold IndicatedUranium Inferred Gold InferredUranium
Resources Resources Resources Resources
Grade Grade Grade Grade
Mt (g/t) Moz Mt (Kg/t) Mlbs Mt (g/t) Moz Mt (Kg/t) Mlbs
DBM 34,5 5,3 5,9 17,0 0,16 6,1 25,0 5,2 4,2 11,9 0,14 3,7
Project
Bloemhoek 47,8 6,9 10,6 - - - 15,3 6,9 3,4 63,1 0,15 20,9
Project
Total Mineral Resources*
Indicated Gold IndicatedUranium InferredGold InferredUranium
Goldfield Resources Resources Resources Resources
Grade Grade Grade Grade
Mt (g/t) Moz Mt (Kg/t) Mlbs Mt (g/t) Moz Mt (Kg/t) Mlbs
SOFS 114,6 6,0 21,9 17,0 0,16 6,1 127,2 4,7 19,1 194,2 0,23 98,7
Potchefstroom - - - - - - 333,6 7,1 75,8 250,0 0,30 163,6
Klerksdorp - - - - - - 85,1 14,5 39,5 - - -
Total 114,6 6,0 21,9 17,0 0,16 6,1 545,9 7,7 134,5 444,2 0,27 262,3
* Mineral Resource and Reserve Estimates are compliant with the NI43-101 and SAMREC reporting codes.
The stated Indicated Resources are inclusive of the Company's Mineral Reserves.
These Resource Estimates are dependent on geological interpretation and statistical inference drawn from drilling and sampling that may prove to be unreliable. The Probable Reserves as well as the Inferred and Indicated Resources outlined in the Company's properties have been calculated from widely spaced borehole data. No assurance can be given that future exploration will be successful in the improvement of the confidence levels or that any particular level of recovery of minerals will in fact be realised. It is uncertain whether the identified Mineral Resources will ever qualify as viable orebodies that can be legally and economically exploited. In addition, the grade and tonnages of any orebody that is ultimately mined may differ from the Mineral Resources currently estimated and such differences could be material.
Exploration activities
During the six months under review, the Company incurred direct exploration expenditure of R17,3 million. These exploration efforts were predominantly focused within the DBM Project in the southern Free State.
DBM Project
Between March and June 2011 the Company conducted a preliminary economic assessment of the financial benefit of establishing a mine at DBM. The study was undertaken by Turgis Consultants (Pty) Limited with mine scheduling input provided by Snowden, and was completed under the guidelines of NI43-101. The detailed results of this study are discussed in a NI43-101 and SAMREC-compliant report dated August 2011. This scoping level study, based only on the Indicated Resources, showed there was significant probability that it is both technically and economically viable to establish a mine at DBM. At this preliminary stage it has been established that the optimum financial returns may be achieved by establishing a 700 metre vertical shaft for men and material movement served by a 12˚ conveyer decline from which the reefs are accessed via footwall declines and haulages and crosscuts at 150 metre intervals. The scoping study has been based on a monthly production rate of 80 000 tonnes derived mainly from the Kalkoenkrans and Leader Reefs. First gold production is scheduled at 32 months after the commencement of the project, with an average annual gold production of 150 000oz for 10 years after achieving full production. The peak capital required will be R1,59 billion (US$227 million) whilst operating costs are estimated at R559/tonne and cash costs at US$569/oz. In assuming an exchange rate of R7/US$ and a gold price of R325 000/kg the project has a pre-tax IRR of 35,2% and an NPV(10%) of US$506 million, with payback of five years. The preliminary economic assessment highlighted the added financial benefit that may be derived from converting shallow high-grade Inferred Resources to the Indicated category. Certain of the above-mentioned characteristics of a proposed mine are likely to change once additional options are tested in the pre-feasibility study which is currently being undertaken. The Company immediately embarked on a drilling programme of 11 boreholes targeting shallow areas (700 metre depth), along the subcrop of the reefs against the Karoo Sequence, as well as determining the exact location of the De Bron fault, which bounds the deposit in the west. This programme, consisting of some 12 000 metres and costing approximately R15 million, has been completed and the assay results are expected at the end of October 2011.
Results from this drilling programme will be used to update the Resource Estimate for DBM during the last quarter of 2011. This revised resource will be incorporated in to the prefeasibility study expected to be completed during the first half of 2012.
Potchefstroom goldfield
The Company's current focus in the Potchefstroom goldfield is on the Boskop Project area. A comprehensive desktop investigation highlighted the potential for high-grade Carbon Leader Reef to occur between 1 650 metres and 2 200 metres within the Boskop area. This project is situated along the structurally highly deformed, western margin of the Central Rand Group rocks where substantial fault-loss areas can be expected. A 3D wireframe model of the project area is currently being constructed in order to optimally position two exploration boreholes planned for early 2012.
Klerksdorp goldfield
Attention in this area is concentrated on the Groenfontein Project, where a regional review of the geology is currently being undertaken. Early indications are that the most prospective ground may represent sizable reef blocks preserved within the northeast-southwest trending Jersey Fault Zone.
For and on behalf of the board
Philip Kotze Derek Urquhart
Chief Executive Officer Financial Director
Johannesburg
18 October 2011
Business and Registered Office
12th Floor, 70 Fox Street, Johannesburg 2001
PO Box 61147, Marshalltown 2107
Tel: (011) 832 1749 Fax: (011) 838 3208
Directors
Mr Adam Fleming (Chairman)*, Prof Taole Mokoena (Deputy Chairman)*, Dr Humphrey Mathe (Director)*, Mrs Gayle Wilson (Director)*, Mr P Kotze (Chief Executive Officer), Mr Derek Urquhart (Chief Financial Officer)
*Non-executive
Company Secretary
Mr Brian Dowden
7 Pam Road, Morningside Ext 5, Sandton, Johannesburg 2057
PO Box 651129, Benmore 2010, South Africa
Sponsor
PricewaterhouseCoopers Corporate Finance (Pty) Limited
2 Eglin Rd, Sunninghill 2157
Private Bag X37, Sunninghill 2157, South Africa
Transfer Secretaries
JSE: Link Market Services SA (Pty) Limited
TSX: CIBC Mellon Trust Company
Wits Gold
CONTACT:
Mr. Philip Kotze Mr. Hethen Hira
Chief Executive Officer Investor Relations Manager
philip@witsgold.comhethenh@witsgold.com
Tel: 27 11 832 1749
www.witsgold.com