1 / 35

Presentation of the Annual Report for the year ended 31 March 2011

This presentation provides an overview of the annual report for the year ended March 31, 2011, highlighting key achievements, financial performance, corporate governance, and future outlook. Topics covered include the Chairman's report, CEO's report, corporate governance, audit and risk committee statement, and financial statements.

lkeisha
Download Presentation

Presentation of the Annual Report for the year ended 31 March 2011

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Presentation of the Annual Report for the year ended 31 March 2011

  2. Contents • Chairman’s report • CEO’s report • Corporate Governance • Reporting on Predetermined Objectives • Statement of the Audit & Risk Committee • Auditor’s report • Directors’ report • Annual Financial Statements

  3. Chairman’s report • Key Objectives • Conclude Transfer of Land Mining Rights • Complete Township Development and Transfer to RVC • Establish PSJV • Commence exploration under PSJV • Financial Performance • 1st operating profit in 5 years • Going Concern • Sufficient cash resources to March 2012 • Funding required thereafter

  4. Chairman’s report (continued) • Reporting and Corporate Governance • Improved compliance with PFMA and Treasury Regulations • Adoption of King 3 • Future Outlook • New strategic intent • Alexkor now a ‘new business’ • Acquisition of greenfield and brownfields opportunities • PSJV with RMC established.

  5. CEO’s report - Year under review Alexkor posted a net profit of R84.2 million, and an operating profit of R11.3 million - our first operating profit since 2006. Production rose by 20% ( this should be seen in the context of curtailed land mining as a result of the anticipated pooling and sharing joint venture (PSJV) with the Richtersveld community. The increased production, coupled with better diamond prices, helped Alexkor achieve a gross revenue of R195.9 million from diamond sales, compared to R163.9 million for 2010. The average rand-dollar exchange rate for the 2011 financial year was R7.18, and Alexkor’s own cash reserves increased by R12.0 million.

  6. CEO’s report - Deed of Settlement with the Richtersveld Community • All the suspensive conditions of the Pooling and Sharing Joint Venture (PSJV) were met. • The Deed of Settlement (DoS) signed between Alexkor, the state and the Richtersveld community in 2007 envisaged the establishment of the PSJV with the community, in which the land mining rights were to be ceded to the community, while Alexkor would continue to hold the marine mining rights.

  7. CEO’s report - Deed of Settlement with the Richtersveld Community (continued) • The DoS required the conversion of old order land and marine mining rights. On 28 January 2010 the application for conversion of old order land mining rights was granted and subsequently executed on 19 May 2010. • The conversion of the marine mining rights was also granted and executed on 2 July 2010. • Land mining rights were ceded to the community on 28 March 2011 and registered on 6 April 2011. • The PSJV with the Rictersveld community was established on 7 April 2011.

  8. CEO’s report - Achievements (Township upgrade) • Phase one of the township upgrade project, consisting of a water network, sewerage network, storm water control network, solid waste disposal and road works was 75% complete by the financial year end. • The tender for Phase Two, the electrical reticulation upgrade project, was awarded in December 2010, with the contractor establishing the site in March 2011. • The phase three tender for the mechanical and electrical pumping equipment was awarded in February 2011. • Phase four, the waste water treatment works, was at the environmental impact assessment (EIA) stage at financial year end, with some delays due to intersecting of bedrock. • The final estimated completion date for the entire project is 30 June 2012. • The total project expenditure at project completion is estimated at R110 million.

  9. CEO’s report - Extended operations • To boost production in December 2009, and following consultations with the Richtersveld community, Alexkor decided to invite suitable, interested parties to express interest as contractors in mining the deep-sea, middle-sea, shallow-water, beach and the curtailed areas of land mining. • This was done through a rigorous tender process. See the Report on Predetermined Objectives for the contracts awarded.

  10. CEO’s report - Health and Safety • Health and safety is a major issue for any mining operation. • Given the extreme importance Alexkor focused on implementing the reviewed health, safety and environmental (HSE) management plan, while continuing HSE-related training. • Alexkor closed the year under review at 1 885 fatality-free production shifts (FFPS), with the objective to achieve the next milestone of 2 000 FFPS. This was reached subsequently.

  11. CEO’s report - Land Rehabilitation • Alexkor is committed to its rehabilitation obligations, especially the rehabilitation done at the Boegoeberg site. • Some 75 kilometers of netting was installed on the south-east side of Boegoeberg during the year under review, as compared to 54 kilometers in the previous year.

  12. CEO’s report - Strategic objectives • Alexkor’s board of directors defined the company’s strategic objectives around the impact of the 9 October 2007 court order on its continuing business operations. • Key in this regard was to return the mine’s operations to profitability, whilst giving effect to the DoS between the Richtersveld community, the government and Alexkor. • In terms of Alexkor’s corporate plan the company would exit non-core business, maintain production capacity and convert old order mining rights. • The rights would be transferred to the Richtersveld Mining Company (RMC) with which Alexkor would form the Joint Venture.

  13. CEO’s report - New diamond opportunities • As part of the new strategic intent approved by the shareholder, Alexkor has been granted amandate to pursue other diamond mining and related opportunities outside of the Alexander Bay area in order to expand its mining operations. • These new business development opportunities are being investigated and decisions to proceed will be based on the viability and sustainability of any promising ventures. • The Board of Directors believes that new business development and expansion are in the best interests of Alexkor’s future sustainability. • Alexkor is also exploring downstream beneficiation of some of its diamonds with the aim of establishing a cutting and polishing facility in the Northern Cape at a later stage.

  14. CEO’s report - In Conclusion • Alexkor’s priority for the year ahead is to continue to support the conditions in terms of the DoS, and to return operations to profitability through increased production levels and improved cost control measures. • At the same time and in line with a new strategic direction, Alexkor will evaluate opportunities to procure new diamond assets as long-term revenue streams and to ensure its future growth and sustainability.

  15. Corporate Governance • The board comprised of five non-executive directors and the chief executive officer who was an executive director for the year under review. • The board established the following sub-committees: - Audit and Risk Committee (Chairman: Ms S Ngoma) - Tender Committee (Chairman: Mr C Towell - Remuneration Committee (Chairman: Dr V Makin) - Rehabilitation Committee (Chairman: Dr R Paul) - PSJV Board (Acting Chairman: R Muzariri)

  16. Reporting on predetermined Objectives • The following objectives, targets and achievements were reported on in the 2011 financial year:

  17. Reporting on predetermined Objectives (continued)

  18. Reporting on predetermined Objectives (continued)

  19. Statement from the Audit and Risk Committee • The Committee performed its functions in accordance with section 270A (1) of the Companies Act and the provisions of the Public Finance Management Act. • The Committee has adopted appropriate formal terms of reference as its Charter and has regulated its affairs in compliance with this Charter. • In the opinion of the Committee, the internal controls of the company are considered appropriate to meet the business objectives of the company, ensure the company’s assets are safeguarded and ensure that transactions undertaken are in the company’s accounting records.

  20. Statement from the Audit and Risk Committee (continued) • The Committee acknowledges that Alexkor has made significant progress in addressing the control weaknesses identified previously and looks forward to the future control environment, which will provide a sound basis for Alexkor to meet its obligations to its stakeholders. • The Audit and Risk Committee therefore recommended the adoption of the annual financial statements by the Board of Directors.

  21. Auditor’s report • PricewaterhouseCoopers (PwC) presented an unqualified audit opinion for the 2011 financial year. • An emphasis of matter was reported with regards to Alexkor’s going concern principle as there is significant doubt on whether the company can continue in the longer term without the commencement of sustainable mining activities. • Non-compliance issues were also raised with regards to the corporate plan, shareholders compact and performance information.

  22. Directors’ report Background Land mining activities – Care and Maintenance Deed of Settlement Farming operations transferred in 2008 PSJV established 7 April 2011 Board of Directors 5 non-executive CEO ex-officio (Exec Director) We require 3 more non-execs Process to appoint CFO has commenced

  23. Directors’ report (continued) Strategic Objectives Completion of Township Establishment Target date 31 March 2012 More likely 30 June 2012 Conversion and cession of mining rights Completed 6 April 2011 Budgeted carats New Business Opportunities 3 new opportunities Beneficiation study Shareholder Compact In process – None signed for 2011

  24. Directors’ report (continued) Litigation Statement Ruslyn Nabera Compensation Claim Environmental Rehabilitation Liability R256.6 million Unchanged from prior year Cash in trust R36.9 million Unfunded portion R219.7 million Unfunded portion guaranteed by DPE R17 million escalating to be spent on Rehab work Increasing cash held in trust

  25. Directors’ report (continued) Going Concern Cash on hand R108m as at 31 March 2011 Estimated to support Alexkor for the next 18 – 24 months Post Retirement Medical Aid Liability Balance R58.4 million Expected outflow in 2012 R54 million Timing of new opportunities uncertain Funding commitment critical for 2013 and beyond PFMA, Predetermined Objectives Covered elsewhere

  26. ANNUAL FINANCIAL STATEMENTS General • The annual financial statements were approved by the Board of Alexkor for the financial year 31 March 2011. • An unqualified audit opinion was issued by PwC. • The signed annual financial statements were submitted to National Treasury and the Department of Public Enterprises before 31 July 2011, as required by the Public Finance Management Act (PFMA).

  27. Financial position Non-current and current assets • PPE increased from R22.9m (2010) to R26.7m (2011) during the year. Capex to the value of R5.6m was purchased. Depreciation amounted R2.0m for the year. • Cash held in the Rehabilitation Trust increased to a total of R36.9m. The cash is held to address the historical environmental liability. • Inventory included diamonds to the value of R25.2m and was the main reason for the material increase. The balance represented consumables that were held in stock. • Cash increased by R19.5m. This was due to government grants received to the value of R36.0m (Township Establishment) and cash generated through operations of R12.0m. The difference was mainly because of GFR funds that were utilised against their respective projects.

  28. Financial position (continued) Non-current assets classified as held for sale • These are the assets that will be transferred over to the community upon completion of the Township Establishment in accordance with the Deed of Settlement • It is expected that these assets will be transferred during the 2012 financial year. Alexkor will receive compensation for these items as stipulated in the Deed of Settlement.

  29. Financial position (continued) Non-current and current liabilities • The Post Retirement Medical Aid Liability (“PRMAL”) reduced from R90.1m (2010) to R58.4m (2011). The first of five settlement payments was done in December to the value of R17.4m. The balance represented the actuarial gain due to the new fixed terms of the PRMA settlement with Momentum. • The Environmental Rehabilitation Liability remained unchanged at R256.6m. This amount equals the present value of the estimated costs to rehabilitate the existing environmental disturbances at year-end. • Trade and other payables consist mainly of Government Grants (R319.1m), VAT (R10.8m) and operational trade payables (R35.1m). • Trade and other payables increased from R11.3m (2010) to R35.1m (2011). The reason for this material increase was due to the provision for split contractors with regards to the large amount of diamond stock on hand on 31 March 2011.

  30. Financial performance of Alexkor for the year - Gross operating profit • Diamond sales for the year equalled R195.9m (2010: R163.9m). The increase of 19.5%, was due to the increase in carat production of 37 794 carats, compared to a budgeted production of 31 425 carats. • Positive production results along with well managed operational costs resulted in an operating profit of R11.3m (R10.0m loss). This is the first time since 2006 that Alexkor managed to produce an operating profit.

  31. Financial performance of Alexkor for the year - Net operating profit • The net operating profit improved significantly from R26.9m in 2010, to a profit of R76.8m in 2011. • The improvement was mainly because of non-cash movements in the Statement of Comprehensive Income relating to the recognition of compensation received from the Department of Land Affairs for the transfer of the mineral rights to the RMC (R41.2m) and the adjustment to the Post Retirement Medical Aid Liability (“PRMAL”) of R13.9m (2010: R45.1m).

  32. Financial performance of Alexkor for the year - Profit for the year (after tax and interest) • The profit for the year increased significantly to R84.2m (2010: R36.1m). The main reasons being the turnaround in operating profits (R11.3m) and non-cash adjustments (R55.1m). • Alexkor managed to accumulate interest on the cash it invested with recognised banking institutions of R7.5m (2010: R8.9m) for its own account. Interest received on the Government Funded Reserves “GFR” does not reflect as these cash items are restricted to specified projects within Alexkor and is not part of Alexkor’s unrestricted cash balance. A decrease in interest rates during the financial year resulted in lower returns on funds invested. • The discontinued operations of Alexkor incurred a small loss of R0.15m (2010: R0.16m profit) for the year. These operations include the guesthouse, town maintenance, fuel station, the airport and the hospital. Only the operations of the guesthouse and fuel station are continuing in the 2012 financial year under the control of the PSJV.

  33. Statement of cash flows • Cash flow from operating activities resulted in an inflow of cash of R19.2m (2010: R13.9m). This is mainly due to increased production of diamonds which resulted in increased sales. Strict cost cutting strategies also assisted with this turnaround. • Cash flow from investing activities reflected an outflow of R5.6m (2010: R4.5m) because of capital expenditure incurred. No capital items were sold during the 2011 financial year. • Alexkor received R36m (Township Establishment) in GFR funding during the financial year. Interest of R19.3m was earned on these funds and R45.4 million utilised towards its respective projects. GFR funds are disclosed as restricted cash. Alexkor’s own cash reserves increased during the year with an inflow of R12.0m for the year, compared to a outflow of cash for the previous year of R1.1m. The improvement was because of the fact that more cash was generated through diamonds sales and better management of costs.

  34. Conclusion on the financials Positive disclosures from the 2011 financial year • Revenue up by 20% • Gross operating profit of R11.3m • Profit for the year up by 133% • Net asset value (equity) of Alexkor solvent – R16.9m • Alexkor’s own operational cash reserves increased with R12.0m • Capital expenditure increased by 24% • Cash and cash equivalents increased by 5%

  35. Thank You

More Related