Final Results
1st March 2005
BISICHI MINING PLC
Preliminary Results to 31st December 2004
ANOTHER RECORD YEAR FOR GROWTH
2004 2003
Group and share of joint venture turnover up 46% £13,267,000 £9,090,000
Profit before tax up 34% £1,976,000 £1,475,000
EPS up 23% 11.79 p 9.56 p
EPS diluted up 21% 11.48 p 9.45 p
Dividend per share up 11% 2.00 p 1.80 p
· 72 percent increase on profit before tax compared to the first half of
the year
· Profit growth accelerated in second half of the year as a result of
increased production and a 50% increase in Black Wattle's average selling price
for coal over the equivalent period in 2003
· Continuous miner acquired, installed & now fully operational resulting
in increased coal production to 105,000 tons per month
· Export prices fixed for 3 years and domestic prices for supply to the
ferrochrome industry fixed for 12 months
· Increased export allocation at Richards Bay Coal Terminal for 2005/6
· Shareholders funds increased by 30% to £14.5 million
Commenting on the results, Bisichi Mining PLC's chairman, Michael Heller, said:
'The next challenge for Bisichi is to leverage our successful position in South
Africa in order to generate sustainable growth in our core markets and to
develop opportunities in related markets. I believe that 2005 is going to be
another year of opportunity for Bisichi and, with a proven management and
business structure, that it will be another very successful year'.
END
For further information, please call:
Andrew Heller
Robert Corry, Bisichi Mining PLC 020 7415 5000
Christopher Joll,
John Evans, MJ2 Ltd 020 7491 7776
CHAIRMAN'S STATEMENT
1st March 2005
I am pleased to be able to inform shareholders that 2004 has been another
successful year for Bisichi Mining PLC, with group profits on ordinary
activities before taxation increasing by 34% to £1,976,000 (2003: £1,475,000).
In particular, I would like to draw shareholders' attention to the performance
of the company in the second half of 2004 in which we achieved a 72 percent
increase on our profit before tax compared to the first half of the year. This
significant acceleration of profit growth is attributable to actions taken by
Bisichi Mining's management over the past 18 months to fix the export price of
our coal, to increase coal production, to secure premium domestic and export
markets, to strengthen our operational capabilities at the mine and to a
reduction in the depreciation charge as the result of some assets being fully
depreciated.
Coal mining continues to be our core activity and, during 2004, we achieved a
number of important commercial and operational milestones that are now
beginning to have a significant impact on the business. These include:
* February 2004 - Endulwini Resources, our South African partner, was awarded
an initial export capacity at the Richards Bay Coal Terminal ('RBCT') of
272,000 metric tonnes per annum for a multi-year period. This export
capacity has since been increased to 317,000 metric tonnes per year
commencing 1 April 2005.
* April 2004 - we entered into a three-year coal supply agreement with a
leading international trading company to export Black Wattle's coal through
RBCT on a US$ FOB basis.
* June 2004 - we fixed our export coal price through to 31 March 2007. In
that same month, we also took the opportunity to fix our domestic coal
supply contract to the ferrochrome industry for 12 months.
* July 2004 - we signed a ZAR 25 million facility with ABSA Bank in South
Africa to finance the purchase of a Voest Alpine continuous miner and
related equipment. The continuous miner commenced operation in October,
and, after a start-up period, is now operating at near to anticipated
production levels.
The net result of these important commercial decisions has meant an increase of
50 per cent in Black Wattle's average selling price for the last six months
when compared with the same period in the previous year. At the time of
writing this statement, Black Wattle had shipped over 230,000 metric tonnes of
RBCT export steam coal from the mine's recently constructed railway siding at
Uitkyk. More details about our direct mining activities are contained in the
Mining Review which follows. Finally, in November 2004, Bisichi Mining
appointed Evolution Securities Limited as its brokers and advisers.
Your company's next challenge is to leverage its successful position in South
Africa in order to generate sustainable growth in our core markets and to
develop opportunities in related markets.
A number of issues will affect the speed of growth in our core markets, all of
which we are currently addressing. In the short term, we will continue to
increase coal production at Black Wattle by improving production methods and by
commencing the open cast mining of some of our reserves. In the longer term, we
will acquire additional reserves at other locations within South Africa; in
this regard the Mineral and Petroleum Resources Development Act ('MPRDA')
promulgated in May 2004, with its 'use it or lose it' provisions, is
particularly well-timed for us. With our successful mining track record, our
financial reputation, our proven management skills, our empowerment
credentials, and the strong long-term relationship with our local business
partner, we are confident that we will be well placed to acquire such new
reserves within the framework set out in the MPRDA; we are already aware of a
growing number of such opportunities.
In the meantime, our UK property assets managed by London & Associated
Properties PLC and our equity portfolio held by our 100% owned subsidiary,
Mineral Products Ltd, continue to grow, providing us with a firm asset base and
a reserve of cash. Shareholder funds now stand at £14.5 million, compared to £
11.2 million last year, an increase of 30 per cent.
As a reflection of the strong performance achieved by Bisichi Mining in 2004,
your directors are recommending a dividend of 2.0p, compared to 1.8p per share
in the previous year. This will be paid on 15 August 2005 to shareholders on
the register as of 20 May 2005.
In closing, I would like to thank the staff of Bisichi Mining, its subsidiaries
both in the United Kingdom and the Republic of South Africa and our associates
in South Africa, for their contribution and continued commitment to your
company and its prospects for growth. I believe that 2005 is going to be
another year of opportunity for your company and, with a proven management and
business structure, that it will be another very successful year.
MICHAEL HELLER
Chairman
1 March 2005
MINING REVIEW
1st March 2005
As can be seen in the Chairman's statement, 2004 was another year of record
profitability at our principal direct mining operation, the Black Wattle
Colliery. More importantly, in 2004 we achieved a number of significant
improvements in mining methods and took advantage of positive changes in
overall market conditions. The benefits of these achievements will have a
positive effect on the business for many years to come.
Production
In the 2004 interim results statement, shareholders were informed that Black
Wattle had successfully financed and installed a continuous mining section. As
a result of this, our conventional sections were reduced from three to two and
the continuous mining section began to operate fully in October of this year.
This has led to an immediate increase in production. Inevitably, such a complex
machine and new mining method require a start-up period to allow for changes to
working methods and for fine tuning the machine's operation. I am pleased to
report that, on a shift-by-shift basis, the machine is now starting to cut near
to its expected potential. During the start-up period, we made a number of
improvements to the continuous miner including changing the cutting head and
lowering the height of the boom by 800mm. We are currently planning to improve
the travelling roads to the section and put in place underground stores to
support the operation of the machine. The continuous mining section, combined
with the two conventional sections, is currently producing around 105,000
tonnes per month, but we are confident that the three sections combined will
produce significantly more tonnage in the near future.
Mining operating profits in the second half of the year increased by 112 per
cent to £1,258,000. However, shareholders will note that there was also a
substantial increase in our mining costs. This increase is directly
attributable to our decision to mine as much coal as possible, including coal
that under other circumstances we would have left in the ground, in order to
take the fullest possible advantage of prevailing market conditions. For
example, two of the three sections depleted the areas that they were in but, as
we were able to continue to mine these areas profitably, we decided not to pull
out and sterilise any of the coal which would otherwise have been left behind.
Once the reserves in these sections were fully exploited, they were relocated.
As part of that relocation process, at times the sections were mining in areas
of very low yields. We are now out of those low yields and it is an indication
of the strength of the management on the mine that we have been able to achieve
such increases in profitability in the second half of 2004 whilst dealing with
these issues.
Black Wattle has additional reserves that can be mined by opencast methods. The
surface rights to many of these reserves are owned by Middelburg Town Council
('the Town Council'). We are pleased to report to shareholders that, at the end
of 2004, the Town Council gave us permission to mine these reserves by opencast
methods and we will shortly be applying to the Mines Department for permission
to mine these reserves. This process can take some time to complete and we will
keep shareholders informed of our progress. Opencast mining in these reserves
will be a substantially cheaper production method than underground mining and
will enable us to increase overall production at even higher margins.
Marketing
One of the key drivers of Black Wattle's sustained earnings growth is the
quality of the markets into which we sell our coal. Black Wattle's revenue is
primarily derived from two very different markets - a US$ based income from
long term export sales via Richards Bay Coal Terminal ('RBCT') and a ZAR-based
income from long term contracts to supply low phosphorous coal to the domestic
ferrochrome market. Although unrelated, both markets have witnessed
significant growth in 2004, resulting in record profitability for the mine.
Our presence in both the export market and the low phosphorous market is the
result of a deliberate strategy to improve consistently our coal production and
processing capabilities. We are now able to change our supply balance between
those markets when it is commercially sensible to do so. This ability
differentiates us from most South African export-oriented mines where sales
revenues are in US$ and costs are in ZAR. Because our revenue is received in
both currencies, we are less affected by sharp movements in the US$/ZAR
exchange rate.
As our exports have grown, we now sell very little steam coal into the domestic
market and the table below demonstrates the significant changes we have made to
our coal sales profile between 2003 and 2004.
Sales Split by Product
2003 2004
Export 0.83% 29.71%
Low Phosphorous 30.31% 36.39%
Other 68.86% 33.90%
Coal which was previously sold at a discount as raw duff is now washed and
exported via RBCT. At the time of writing this report, we have completed 85%
of our first year's allocation at RBCT. As we advised shareholders at the time
of the interim results, our partner Endulwini Resources was awarded 272,000
tonnes of export allocation at RBCT for Black Wattle coal in the year ended
31st March 2005, as part of the tonnage made available to Black Economic
Empowerment companies. We are very pleased to report that Endulwini Resources
has recently been awarded a 16.5 percent increase in its RBCT export allocation
for the period 1 April 2005 - 31 March 2006, an increase of some 45,000 tonnes.
A significant proportion of our RBCT export off-take has been fixed for three
years at a US$ price.
Low phosphorous coal remains in short supply in South Africa and Black Wattle
is one of the largest single producers of this key input into the ferrochrome
production process. In July 2004, we negotiated a substantial increase in the
price of our low phosphorous coal and we are confident that prices will remain
strong throughout 2005.
As a result of all of these changes our average selling price for the last six
months of 2004 was 50 percent higher than the last six months of 2003.
Ore reserves
The total in situ ore reserve at Black Wattle currently stands at a
conservative 14 million tonnes. As the Chairman has reported, we are actively
looking to acquire substantial additional reserves at other locations within
the Middelburg and Witbank area. The passing of the new Minerals Act gives us
every confidence that we, as a black empowered mining operation, will be able
to acquire the reserves that we require in the coming years.
Awards
In 2004 Black Wattle received an Environmental Award from Spoornet, the South
African national railway company, for the 'Most Improved Coal Loading Site' for
its Uitkyk Rail Siding
In addition, Black Wattle was once again named one of the 'Impumalelo 300:
South Africa's Leading Empowerment Companies' for the year.
People
We are very pleased to report three new senior appointments at the mine.
Nokuhle Madolo, an internationally-educated resource legal specialist who
serves as a director of Endulwini Resources, advises us on all matters
concerning the new MPRDA and related issues. Noel Mkazi has recently been
appointed Human Resources Manager at Black Wattle, and will be responsible for
implementing the legislated equity and social development policies at the
mine. Finally, Tom Kearney, Commercial Director of Bisichi, has also been
appointed a director of Black Wattle.
Prospects
Looking back over the past ten years of our operations at Black Wattle, the
prospects for 2005 have never looked so full of promise. Our fixed export
coal price, coupled with a strong market for low phosphorous coal, will ensure
that we will have a very high average selling price throughout the year. The
continuous miner is a substantial factor in our projected production and we are
confident that we will reach our optimal production targets. The strong working
relationship that we have with Endulwini Resources in South Africa - and in
particular, with Mr. Sipho Dube, Ms. Duku Mogoai, and Ms. Nokuhle Madolo -
continues to open up opportunities in the mining sector. When we add to all of
this the skills of our General Manager at Black Wattle, Mr. Robert Grobler, we
have good reason to view the coming year with considerable confidence.
ANDREW HELLER
Managing Director
1 March 2005
Bisichi Mining PLC
Preliminary Consolidated Profits Statement
Year Ended 31 December 2004
2004 2003
Notes £000 £000
Group and share of joint ventures turnover 13,267 9,090
Less: joint ventures (1,719) (309)
Turnover 11,548 8,781
Operating costs (9,164) (6,896)
Operating profit 2,384 1,885
Share of operating (loss) / profit in joint venture (34) 10
Interest receivable 25 9
Interest payable (399) (429)
Profit on ordinary activities before taxation 1,976 1,475
Taxation on profit on ordinary activities 1 (307) (436)
Profit after taxation 1,669 1,039
Minority interest (437) (40)
Profit for the financial year 1,232 999
Dividend (209) (188)
Retained profit for the financial year 1,023 811
Earnings per share - basic 2 11.79 p 9.56 p
Earnings per share - diluted 2 11.48 p 9.45 p
Dividend per share 3 2.00 p 1.80 p
Turnover and operating profit for the year derive from continuing operations,
which are made
up as follows:
Turnover Operating profit
2004 2003 2004 2003
£000 £000 £000 £000
Mining 10,317 7,571 1,851 1,353
Goodwill amortised - - (47) (85)
10,317 7,571 1,804 1,268
Property 1,054 1,092 485 587
Share dealing 163 105 83 20
Other investments 14 13 12 10
Group 11,548 8,781 2,384 1,885
Bisichi Mining PLC
Consolidated Balance Sheet
At 31 December 2004
2004 2003
£000 £000
Fixed assets
Intangible assets - 47
Tangible assets 20,036 16,255
Investment in joint venture 1,536 1,408
Other investment 384 336
21,956 18,046
Current assets
Stocks - goods for resale 36 50
Debtors 2,776 1,977
Investments (Market value £526,000 (2003 - £518,000)) 403 419
Bank balances 950 126
4,165 2,572
Creditors - amounts falling due within one year (5,643) (5,058)
Net current liabilities (1,478) (2,486)
Total assets less current liabilities 20,478 15,560
Creditors - amounts falling due after one year (5,580) (4,452)
Provisions for liabilities and charges (58) (57)
Net Assets 14,840 11,051
Capital and reserves
Called up share capital 1,045 1,045
Revaluation reserve 9,663 7,729
Other reserve 86 86
Retained earnings 3,712 2,307
Shareholders' funds 14,506 11,167
Minority interests 334 (116)
14,840 11,051
Statement of total recognised gains and losses
The company 364 6
Subsidiaries and associated undertaking 868 993
Profit for the year 1,232 999
Revaluation of investment properties - company 1,868 1,619
- joint venture 192 360
Exchange adjustments 278 209
Tax on disposal of investment properties in joint venture (22) (28)
Total gains recognised in the year 3,548 3,159
Bisichi Mining PLC
Consolidated Cash Flow Statement
At 31 December 2004
2004 2003
£000 £000
Net cash inflow from operating activities 3,643 2,174
Dividend from joint venture - 42
Returns on investments and servicing of finance
Interest received 25 9
Interest paid (399) (429)
(374) (420)
Taxation
Corporation tax paid (466) (178)
Capital investment and financial investment
Payments to acquire fixed assets (2,250) (1,921)
Payments to acquire current asset investments (49) -
Receipts from sale of fixed assets - 9
Receipts from sale of current asset investments 148 88
(2,151) (1,824)
Equity dividends paid (188) (157)
Cash inflow (outflow) before financing 464 (363)
Financing
Loans drawn (repaid) 1,191 (126)
Increase (decrease) in cash in the year 1,655 (489)
Reconciliation of net cash flow to movement in net debt
Increase (decrease) in cash in the year 1,655 (489)
Net cash flow from changes in debt (1,191) 126
Movement in net debt in the year 464 (363)
Net debt at 1 January 2004 (6,584) (6,221)
Net debt at 31 December 2004 (6,120) (6,584)
Reconciliation of operating profit to net cash inflow from operating
activities:
Operating profit 2,384 1,885
Depreciation charges 644 857
Goodwill amortised 47 85
Provision against current asset investment 6 19
Profit on sale of current asset investments (89) (35)
Decrease in stocks 18 3
Increase in debtors (567) (732)
Increase in creditors 1,200 92
3,643 2,174
Bisichi Mining PLC
Analysis of changes in net debt
At 1 January Exchange At 31 December
2004 Cash flows adjustment 2004
£000 £000 £000 £000
Bank balances 126 790 34 950
Overdrafts (1,305) 865 (3) 443)
(1,179) 1,655 31 507
Debt due within one year (953) (83) (11) 1,047)
Debt due in after one year (4,452) (1,108) (20) 5,580)
(6,584) 464 - (6,120)
NOTES: 2004 2003
£000 £000
1. Taxation
Based on the results for the year:
Corporation tax at 30% (2000 : 30%) 272 463
Prior year adjustment - UK 26 (15)
Joint venture 7 1
305 449
Deferred taxation 2 (13)
307 436
2. Earnings per share
Both the basic and diluted earnings per share calculations are based on a
profit of £1,232,000 (2003: £999,000). The basic earnings per share has been calculated
on 10,451,506 (2003: 10,451,506) ordinary shares being in issue during the year.
The diluted earnings per share has been calculated on the number of shares in issue
of 10,451,506 (2003: 10,451,506) plus the dilutive potential ordinary shares
arising from share options of 280,664 (2003: 118,626) totalling 10,732,170 (2003:
10,570,132).
3. Dividend
The proposed final dividend of 2.00p will be paid on 15 August 2005 to
shareholders registered at the close of business on 20 May 2005 .
4. The figures for the year ended 31 December 2003 are based on the audited
accounts for that year, which have been delivered to the Registrar of Companies and on
which the Auditors gave an unqualified report. The statutory accounts for the year ended
31 December 2004, which have been prepared using the same accounting policies as
in 2003, have been completed and an unqualified audit opinion will be issued. The
figures in the preliminary announcement are an extract and do not constitute statutory
accounts within the meaning of the Companies Act 1985. The board approved this
preliminary statement on 1 March 2005.
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