Final Results

RNS Number : 5415O

Sylvania Platinum Limited

12 October 2012

 



SYLVANIA PLATINUM LIMITED

("Sylvania Platinum", "Sylvania" or the "Company")

(AIM: SLP)

Final Results

Audited Final Results for the year ended 30 June 2012

Sylvania Platinum, the low cost Platinum Group Metal ("PGM") processor and developer, today announces its audited final results for the year ended 30 June 2012.  Unless otherwise stated, the financial information is presented in US Dollars. The annual report and accounts for the year ended 30 June 2012 are available at the Company's website at www.sylvaniaplatinum.com and will be posted to shareholders in the coming weeks.

 

Financial snapshot

·     Production of ounces increased 8% to 45,735 ounces (42,232 in FY2011) (including CTRP)

·     Cost of production decreased 5% from $601/oz to $568/oz 

·     Basket price decreased 25% from $1,166 to $876/oz

·     Revenue decreased by 14% to $40,078,158 ($46,872,232 in FY2011)

·     Group EBITDA of $3,723,744 , down 70% from FY2011 ($12,340,998)

·     Net loss after tax of $3,971,803 (a net profit after tax of $1,608,126 in FY2011)

·     $14,288,485 net operating cash inflow ($7,708,176 in FY2011)

·     Considerable cash generating ability, with $15,696,899  in cash at the end of FY2012 (excluding assets held for sale)

Operating highlights

·     Continued optimisation of the tailings business through increased operational efficiency, improved recoveries and technical excellence

·     Year-on-year production growth of 8%

·     ROM plant and new tailings storage facility ("TSF") commissioned at Mooinooi at a cost of $5,450,311  and $1,257,563  respectively

·     Construction of the seventh plant at Tweefontein near completion

·     Successful completion of magnetite iron ore transaction for approximately £13.7 million ($22 million) and Ironveld plc shares distributed to Sylvania shareholders as a dividend in specie

·     21 holes drilled on exploration sites between September 2011 and February 2012

CONTACT DETAILS

For further information please contact: 

South Africa Terence McConnachie (Managing Director) Sylvania Platinum Limited [phone] Louis Carroll (Director/Assistant Company Secretary) Sylvania Platinum Limited [phone]	Australia Richard Rossiter (Chairman) Sylvania Platinum Limited [phone] Grant Button (Director/Assistant Company Secretary) Sylvania Platinum Limited [phone]
United Kingdom Nominated Adviser RFC Ambrian Limited Samantha Harrison [phone] Broker RBC Europe Limited Martin Eales/James Kelly [phone] Sylvania Website: www.sylvaniaplatinum.com	Communications Graham Herring/ Beth Harris/Josh Royston Newgate Threadneedle [phone]

CHAIRMAN'S LETTER

Fellow shareholders

Our 2012 annual report is published during a period of great turmoil and uncertainty in the South African PGMs sector. Labour disputes and violence, combined with political posturing, have created a pall across this sector, as global markets continue to languish. While the platinum price has been relatively slow to react to inevitable production shortfalls and cut-backs in South Africa, its recent surge and volatility was at odds with the steady decline during the financial year under review. We anticipate improved pricing in the year ahead as threatened supply cuts become a reality, although the threat of substitution and strong stock positions are likely to constrain the upside.

The prolonged period of lethargy in the PGMs market, weighed down by a long-term global surplus and demand fundamentals overexposed to the continuing recession in Europe, prompted a strategic review of our operations and growth plans by the Board of Directors during September 2012. Following this review, it was deemed prudent to concentrate our immediate efforts and available cash reserves towards maximising the profitability of the Sylvania Dump Operations ("SDO"), scale back our Northern Limb exploration,and work at the Volspruit and Everest North development projects. We see this as the best way of safeguarding shareholders' interests for the time being, shielding ourselves from knock-on risks and protecting the success we have built up thus far. I deal with our strategy in greater detail below. 

CEO, Terry McConnachie, and Deputy CEO, Nigel Trevarthen, report on operational performance in their report that follows. I would like to note, however, that the strength of the Sylvania model is clearly evident in the company's:

·      Increase in total production including CTRP for the year to 45,735 ounces of PGMs (FY2011: 42,232 ounces);

·      Positive Group EBITDA of $3,723,744 for the year (excluding non-cash items), versus $12,340,998 for 2011, and despite a 25% decrease in our basket price to $876 per ounce;

·      Considerable cash generating ability. Cash on hand was $15,696,899 at the end of the period, and this following capital expenditure of $19,973,410, all of which the company funded internally.

Flexibility in the implementation of our strategy and the adaptation of our business to suit the prevailing market conditions is an unlikely blessing in an industry like ours. Our management team, and our partners, are thus to be congratulated for this performance.

Our strategy

I refer above to our strategy, which essentially remains unchanged, although in the short to medium term the Company will focus greater attention on improving cash generation from our core tailings and dump retreatment business and curtailing capital expenditure in its longer term, more capital intensive near surface mining opportunities. It is a question of balance.

Sylvania continues to be a trail blazer in the production of low cost platinum from tailings and near surface platinum deposits. Limited capital, cash generation, lower risk, and our ability to bring projects quickly to market have become trademarks. While our platinum mining peers are having to seek deeper, more costly resources, we aim to stay as close to the surface as possible.

We seek to optimise our tailings business - in essence, getting more from what we have - through increased operational efficiency, improved recoveries, technical excellence in the process of recovering platinum from oxidised material and current arisings.

At the same time, we continue to seek additional sources of tailings and dumps to grow our core cash generation business. In addition, we have been able to achieve greater integration within the host mine structure in a symbiotic way, thereby increasing throughput and PGM production capacity.

We continue to seek to further our surface mining opportunities and add value to our core projects in anticipation of a recovery in the PGMs market in the fullness of time. Our plans for Volspruit and the Northern Limb have been reined in somewhat, and restricted to the Environmental Impact Assessment ("EIA") and the necessary minimum spend to retain compliance with the prospecting and mining rights' requirements. A decision has also been taken by the Board to consider a sale or joint venture agreement for the development of Harriet's Wish, which has shown some promising deeper targets.

We continue to pursue vertical integration within our value chain by improving the technology for smelting low grade concentrates.  This ability has been absent from an industry that is essentially dominated by the majors, which effectively sterilise orebodies that yield a low grade concentrate. Nowhere is this more evident than in the untapped low grade nickel, copper, palladium-rich Northern Limb assets.

Lastly, we continue to identify opportunities within a market of consolidation, mergers and acquisitions. The industry remains fragmented.  Leadership and cooperation between the major players could unlock greater value.

The market

Sylvania's fortunes rest on two market pillars: the PGMs sector for the off-take of our metals and the ferrochrome sector as a major source of our input material.

The PGMs market remains in over-supply, with a substantial build-up of inventory and the continued delays in forecast recovery of demand. While the major producers were initially very slow to react and reduce supply, this has changed following the widely publicised strike at Lonmin's Marikana operations and the strikes at Anglo Platinum which followed.  Analysts have started to foresee small supply deficits going forward, while some price improvements have been realised, alongside increased volatility.

Global commodity markets remain subdued and, in tandem, the demand for steel and stainless steel has also come off.  China's growth rate is less than expected, but still good at 6%, and is a strong determinant of demand for ferrochrome.

Doing business in South Africa

The spectre of nationalisation raised in our report in 2011 remains, but is clearly less of a real threat than what would be imagined by spectators. Its impact is likely to be greater in that it undermines investor confidence, rather than this being a real threat to the business. The main issues affecting South Africa's mining industry at the moment remain the threat of disruptions due to labour unrest and the impact of this on an already rising cost base, of which labour makes up more than half. To some degree we are shielded from this. But intimidation and threats to employees by striking workers at our feeder mines, and consequent disruptions, mean that we are not completely immune. Furthermore, we identify ourselves firmly as platinum producers and as such, neither are we removed from the pervasive negative sentiment that currently enshrouds the industry. 

Corporate developments

The rationalisation of our corporate structure, shareholding and listing domains, and the concomitant cost reductions, were another collective area of focus during the year. Historically, around 90% of our shareholders have been in Australia, but with 90% of the value held in the United Kingdom.  The fruits of our restructuring process have enhanced our ability to engage in corporate transactions. 

In addition, Sylvania identified an undervalued, non-core iron ore deposit within its tenements, and disposed of it to Mercury Recycling Group Plc (renamed Ironveld plc) for 203,022,285 shares, which were later returned to Sylvania shareholders as a dividend in specie.

Sustainability

Much is expected of companies in recent years in respect of sustainability reporting. For Sylvania, our contribution is simple: we turn to account resources that would otherwise remain fallow, at a much-reduced energy, water and resource intensity. Further, by 'cleaning up' waste dumps and tailings dams, through smarter and environmentally progressive deposition and rehabilitation, we address the significant legacy of surface dumps that pockmark the landscape of the platinum belt. In essence, waste becomes our resource.

Mitigating risk

A critical concern of investors in these troubled times is the way in which the company mitigates risk.  Our strategy avoids the risks embedded in the traditional operations within the PGMs sector. Our operations are exposed to much fewer safety-related risks; we avoid complex metallurgical and processing risks by out-sourcing our smelting and refining; our near surface operations ensure capital and cost efficiency; as we avoid most of the electricity and water security and cost issues, as we are integrated within existing infrastructure.

We recognised the need to align our fortunes with those of our largest supplier.  The major shareholder of the host mines, which now holds 20.7% in the Company, actively seeks to add value to our operations and grow the business for mutual benefit. Outside of this relationship, we are developing alternative sources of income. 

The year ahead

Going forward, the Board feels that it is most prudent and in the best interests of all shareholders to focus attention and resources on the cash generating assets in these troubled times. We will leverage our expertise in dumps and tailings retreatment, we will maximise our cash flow through either operational efficiency or further acquisitions and growth, we will slow our progress on our near surface open pit mining strategy and prepare the assets for times when the markets improve.

Our ability to generate cash from the tailings from chrome mining continues, and we will continue to use those low risk cash receipts from the dump retreatment business to expand into shallow near surface and lower risk platinum ore bodies.

Acknowledgment

This will be my final report as Chairman and on behalf of the Sylvania Board, I want to express gratitude to my fellow Board members and pay tribute to the Sylvania executive management team and all employees for their contributions to the performance of our Company in what has been a difficult year. The existing board has acknowledged the need to evolve from a smaller more entrepreneurial company to a larger more production orientated company. It is the Board's intention to seek to reconstitute the Board of Directors by increasing the number of independent Non-executive Directors and reducing the number of Executive Directors on the Board. This process commenced during the past financial year with the appointment of the Company's first Independent Non-executive Director, Roger Williams.

Finally, I would also like to thank our shareholders for their continuing support as we develop the potential this Company has for significant, low cost, PGM recovery operations.

Richard Rossiter

Non-executive chairman

CEO AND DEPUTY CEO'S REVIEW

Overview

Given the current challenges which face the platinum industry, we believe it is appropriate to begin this year's review with a summary of the success that the Sylvania business strategy has had over the last five years. While 2012 has been a difficult year, sticking to that strategy has meant that the Company has weathered the storm better than most, and is well placed to continue maximising value for its shareholders as we navigate these uncertain times.

Sylvania's growth since 2007

In 2007 Sylvania had three operating dump retreatment plants and one UG2 prospecting target at Everest North. The challenge at that time was how to create the best possible returns for shareholders with that portfolio. The board decided to expand the dump operations and progress towards including the development of near surface shallow deposits. These objectives have remained the constant cornerstones of the Sylvania business model.

In making this decision however, the Board examined the sustainability of the Company's dump operations and faced the following dilemma. The dumps associated with the existing plants all had finite lives, as the first pass treatment process is typically completed after three years of operation. Recoveries associated with the second pass are generally lower and once the second pass is completed, the plant would then only have the current arisings to treat. This fact is illustrated by the black line in the attached graphic http://www.rns-pdf.londonstockexchange.com/rns/5415O_-2012-10-11.pdf being the production forecast presented in October 2010:

It was felt that the Company could get more value than this out of the dump operations so with the aim of improving the long-term business case, several strategic steps were undertaken, the planned impact being represented by the coloured sections of the graph above, presented in early 2010 and implementation commenced during 2010.

These improvements were applied at all of the operating plants. In addition, the additional production capacity had to be constructed on time, which  included the building of larger tailings dams and the designing and erection of additional run-of-mine ("ROM")  plants at Mooinooi and Tweefontein. This work has continued all the way into the year under review and in June 2012 a revised production outlook was published, which has vindicated the Board's steadfast commitment to the original strategy. The forecast, attached http://www.rns-pdf.londonstockexchange.com/rns/5415O_1-2012-10-11.pdfdepicts, a far more stable outlook, with peak performance of 60,000 ounces annually over an extended period of approximately 10 years, followed by reduced steady state production of an estimated 50,000 ounces per year.

Organic growth has been a big part of the underlying dump retreatment strategy, with the Lannex, Doornbosch, Mooinooi and most recently, Tweefontein plants added to the stable in the last three years, as planned. A ROM plant to augment operations at Mooinooi was also commissioned recently to broaden our sphere of low-cost PGM reclamation activities, and it is a significant achievement that all of these capital investments have come from internally generated funds and placements.

As costs continue to rise in the South African platinum industry, amid increasingly difficult and unpredictable market conditions, the advantages of a low-cost and low-risk business model such as ours, which consistently supports healthy cash margins, cannot be underestimated.

Shallow low-cost mining

During this period, Sylvania has simultaneously advanced the second aspect of its strategy, that of growing its resources via near-surface mining operations. The completion of a drilling programme at Everest North in 2008 was a significant step in this direction. Progress on this front gained further momentum in July 2009, when the Company acquired Great Australian Resources Limited ("GAU", subsequently converted to a Proprietary Limited company), SA Metals Limited ("SAM", subsequently converted to a Proprietary Limited company) as well as the New Order Prospecting Rights for the Aurora and Harriet's Wish properties on the far Northern Limb.

Further drilling has since been completed on these as well as the Volspruit project, and the Company has been able to announce several significant updates to the mineral resource bases of these increasingly valuable projects. More details on these resources are given below in the Harriet's Wish and Volspruit sections respectively.

Sylvania has raised a total of $76 million (approximately R550 million) in three events through the company's AIM listing between 2006 and December 2009, which was the last time the Company needed to raise any funds from shareholders. In all cases, these funds were prudently invested to enhance the Company's revenue generating projects. The investments made thus far are as follows:

•        plant infrastructure of $81.1 million;

•        acquisition of GAU and SAM: A$51 million ($42 million) (all share transaction) and subsequent exploration expenditure of $6.8 million;

•        sundry assets of $4.3 million.

This collective investment has enabled Sylvania's retreatment capacity to grow to 600,000 profitable ounces recoverable over the next ten years, and has facilitated the enhancement of  the Group attributable resource base^* by 8.1 million ounces of PGMs, approximately 373 million pounds of nickel and 211 million pounds of copper. The Company has also managed to cement its relationship with its tailings dump landlords and Africa Asia Capital Limited (who then acquired a 19.5% stake in Sylvania in December 2010). This transaction effectively increased Sylvania's holdings in the dump operations from 74% to 100%.

In summary, the capacity and the resource base of the Company have grown dramatically from what was originally sold to shareholders as a collection of fairly small PGM projects.

What sets Sylvania apart from its competitors must surely be the innovative way in which it continues to extract value from the resources it has available, generating cash streams that ensure the Company's buoyancy.

2012 financial performance

Group earnings before interest, taxes, depreciation and amortisation ("EBITDA") were down 70% from $12,340,998 in 2011 to $3,723,744 in 2012. The fall was influenced both by lower than planned production and a lower net basket price for PGMs which fell from $1,166 per ounce to $876 per ounce. Sylvania was able to achieve gross cash margins of 36% and, as a result of these fairly healthy margins, SDO internally funded $15 million of capital expenditure. At the end of the 2012 financial year, Sylvania had $15,696,899 in cash on hand. 

2012 operational performance

Sylvania SDO produced a total of 44,509 ounces (3E+Au) at a cash cost of $568 per ounce during the financial year 2012.  CTRP produced 1,226 ounces at an average cash cost of $1,083 per ounce.

The year was one of the most challenging in the Company's history and could absolutely be characterised as a year of two halves. Over the first six months the operations were on track for an outstanding year in terms of production but unfortunately, a combination of external factors that lay outside of managements control impacted negatively on the Company during the second half of the year. These factors included:

•       a significant fall in the platinum basket price;

•       unseasonal heavy rainfall;

•       production stoppages as a result of an industry wide programme of safety stoppages imposed by the Department of Mineral Resources; and

•       serious strikes at the adjoining mines. 

Whilst the fourth quarter saw a recovery in production, the Company did not achieve its target of 60,000 ounces. This was disappointing, particularly following the stellar performances of some of the Company's plants in the first half of the year. However it is noteworthy that Sylvania was still able to record year-on-year growth of approximately 8% and more importantly, that it remained profitable at an operational level.

^•                      The attributable resource bases referred to were reported on in the Northern Limb update in April 2011 and the Volspruit update in the quarterly announcement in September 2012.

Employee health and safety

Safety is, of course, less of a risk at our plants than it is for our neighbouring underground platinum or chrome mines; however we remain vigilant in our efforts to keep lost time injuries ("LTIs") at zero.

These efforts remained focused upon educating our employees about safety and risk awareness, constantly improving our own safety procedures and ensuring that we work to the highest possible standards.

9 May 2012 marked a full year free of LTIs across the group. Shortly before the end of June 2012 however, we recorded one LTI which ended a thirteen month long period injury free for all operations.

Environmental compliance

As a contracted service provider to our host mines, we are required to comply with their environmental management plans, licence conditions and commitments, and we ensure that our practices are aligned with all required legislation.  This is achieved through annual performance assessments which are done in terms of the latest Environmental Management Programme Report for each plant and the requirements of the Mineral and Petroleum Resources Development Act ("MPRDA").  The impact of any changes or improvements to the plants is all considered in terms of the National Environmental Management Act of 2008.

The water usage on the Sylvania plants is included in the overall Water Use Licence Application of the host mine.

Sylvania Dump Operations

The SDO now comprise seven operating chrome and platinum tailings retreatment plants. During the year, the ROM plant was commissioned at Mooinooi which now joins the Mooinooi Tailings, Millsell, Lannex, Doornbosch and Steelpoort operations. The construction of the seventh plant at Tweefontein started during the calendar year and first ounces were produced in September 2012. All plants saw a similar pattern in production during the year with major disruptions impacting during the second half of the year. 

Millsell

The Millsell operation produced 6,924 PGM ounces during the year, at a cash cost of  $544 per ounce.

The processing of the first pass treatment of the primary dump was completed, with production remaining fairly steady until the impact of the industrial action in February 2012. The plant is currently treating material from the Waterkloof tailings dump which is situated nearby. Production is expected to drop off marginally in mid-2013 due to the lower recoveries anticipated with the second pass treatment programme. This is expected to take more than three years to complete. Current arisings from the Millsell mine will still continue to be fed through the plant for the foreseeable future.

Mooinooi

The most significant development at Mooinooi was the commissioning of the new ROM plant at a cost of $5,450,311, and the construction of the TSF, which was completed at a cost of $1,257,563 at the end of FY2012 Q2 and FY2103 Q1 respectively. Construction on the ROM plant was completed concurrent to normal operations at the first tailings plant site. Production ramp up was impeded initially by the host mine strike action and safety stoppages. PGM production at the original Mooinooi plant has been subsequently improving and getting back to the peak performances achieved before the construction of the new ROM and float plant started.

Regrettably the old plant was negatively affected during the construction of the new plant. Both plants were under achieving on production targets and costs and it was a struggle to get the two plants to operate as a unit.

As a result, it was decided to split the combined operation into two standalone units from 1 July 2012, each with its own dedicated operational team. Several management changes were implemented. These changes were promptly rewarded and production has rapidly begun to improve. Costs have also since come down to more acceptable levels, but there remains a lot of work to be done on these two plants in order for them to reach design capacity.

Mooinooi delivered 5,403 PGM ounces in 2012 at a cash cost of $1,506 per ounce. Costs remained high at this operation as a result of general teething problems during commisioning of the second plant, host mine strike action and reduced metal prices.  This was the only loss making unit but we are pleased to report that post year-end production has improved and the plant is expected to reach full capacity soon.

Steelpoort

Steelpoort was a steady performer for most of 2012 producing 12,357 PGM ounces during the year at a cash cost of $348 per ounce.

Dump feed was supplemented with tailings from the Montrose dump throughout the year and current arisings from the Steelpoort mine were also processed through the plant. The treatment of final primary pass material in the Steelpoort Dam 1 commenced in the fourth quarter of FY2012, with the second pass on the large 1Mt-plus primary dump planned for the first quarter of FY2013. This operation is expected to run for a further three years after the first pass is completed.

Lannex

The continuous improvement programme in place at Lannex extended into FY2012. However the plant suffered from a series of mechanical breakdowns during the second quarter, which led to a 17% quarter-on-quarter decrease in production. A revised mill drive system has since been designed and will be fully installed on both mills by October 2012.

Lannex produced 8,449 PGM ounces in 2012 at a cash cost of $544 per ounce.

Doornbosch

Considering that the third quarter combination of the strike and bad weather hit Doornbosch particularly hard, the plant still performed well in 2012, delivering 10,171 PGM ounces in total at a cost of $368 per ounce. An increase in current arisings received from the host mine assisted in boosting production, supported by treatment of the nearby Montrose/Onverwagt tailings dams. We also had minimal equipment breakdowns and Doornbosch remained our best plant recovery wise.

Tweefontein

Construction at Tweefontein started in January 2012 and developments have remained on track with first ounces being produced in September 2012 as planned. The plant has been constructed around the existing chrome washing and spiral plant, with the float plant similar in size to that at Doornbosch. The plant has a capital construction budget of $11,900,000 for Phase 1 and it is expected that this budget will be achieved. This new plant is expected to ramp up quickly to achieve a targeted 800 ounces per month before progressing to 1,300 ounces per month if Phase 2 is approved. The detailed designs are underway for a ROM section at Tweefontein which, if feasible, would extend the life of this operation for many years to come. The entire construction cost of the Tweefontein plant has been paid for with internal cash resources.

Chrome Tailings Retreatment Project (25% Sylvania)

The Chrome Tailings Retreatment Project ("CTRP") joint venture ("JV"), which is operated by Aquarius Platinum (South Africa) (Pty) Ltd ("AQPSA") and in which Sylvania has a 25% interest, demonstrated disappointing production results in the year, delivering a total of 1,226 ounces in 2012 (2011: 1,219 ounces). The plant has been placed on care and maintenance whilst studies are finalised about the approach to be taken to realise value from the ten years of resource associated with the plant. These options will be debated by the Board during the 2013 financial year. 

Far Northern Limb Operations

While growth in our tailings retreatment business is tethered to our host mines on the Western and Eastern limbs of the Bushveld Complex, our strategic move into shallow and opencast PGM mining is concentrated on the Northern Limb, with our Volspruit Project on the southern tip of the region, and four exploration "hotspots" at the northern end of the region. During the year some very exciting interceptions were made, but due to the current market, our short-term strategy has re-focused on building up the dump operations, minimising expenditure on the Northern Limb for the timebeing. We will consider further investment once the New Order Mining Rights ("NOMRs")  are granted and the current platinum surplus has diminished.

Volspruit

Development of the Volspruit project is envisaged in two distinct parts: an opencast mine and a concentrator, and a smelter and refinery complex on the mine site. The Volspruit Mining Company (Pty) Ltd a wholly owned Sylvania subsidiary has secured a broad based and excellent group of entrepreneurs, local communities, and a workers' trust as black economic empowerment ("BEE") partners.

Studies for the Volspruit EIA progressed well during the year with the majority of the necessary specialist reports at or near completion, and a NOMR application has been submitted to the DMR. The pre-feasibility study for the smelter and refinery commenced in January 2012, and was completed during the fourth quarter of FY2012.

A 39-hole drilling programme was also conducted during the year which focused on firming up the resource model of the southern part of the ore body, and a South African Code for Reporting of Exploration Results, Mineral Resources and Mineral Reserves (SAMREC)-compliant Resource statement update was issued. The resource base at Volspruit now comprises 3.1 million PGM ounces, 74 million pounds of copper and 272 million pounds of nickel.

http://www.rns-pdf.londonstockexchange.com/rns/5415O_2-2012-10-11.pdf 

The project is now awaiting the determination on the Mining Right application and requires no further work other than that which is required by the application. Once approved, the development strategy will be assessed by the Board, but like other longer-term development projects, any more work at Volspruit will be on hold until more appropriate market conditions return.

Harriet's Wish

In June 2012, we were particularly excited to announce that our exploration efforts at Harriet's Wish had intercepted world-class PGM mineralisation, with the best grades recovered at a depth of just 350m. Grades were as high as 8.22g/t over the drill width of 3.31m on the property, which is located at the far north of our prospecting area.  It is known, however, that the northern parts of Harriet's Wish are covered by young Waterberg sediments and indications suggest that exploitation of these intercepts may require an underground mining project, which would fall outside the scope of the Sylvania strategy.

Drilling had previously been focused on an area further south, on the farms Nonnenwerth and Kransplaats over a strike length of approximately 20km of near surface mineralisation. This region has already yielded a resource of 4.99 million ounces (2E) as announced previously. Following the high-grade interceptions further north, it was decided to move the rigs back down to the southern portion in order to see if we can uncover similar mineralisation much closer to surface.

We are looking at a potential sale or joint venture agreement for Harriet's Wish as the best vehicle to deliver this value back to shareholders.

Everest North

Shareholders will be aware that we have had to review the prospects for the Everest North JV with AQPSA following AQPSA's announcement in June 2012, that the Everest South mine and metallurgical plant would be placed on care and maintenance due to poor ground conditions on the mine, on-going disruptive industrial relations and the prevailing low PGM price environment.

Prior to this announcement, we had reviewed a study conducted by DRA on the economic viability of Everest North together with AQPSA, which successfully demonstrated the economic viability of the Everest North project. A Mining Right application was then submitted to the DMR and the project was registered with the Mpumalanga Department of Economic Development, Environment and Tourism.

Clearly, the viability of the project depends on the operation of the processing plant at Everest South, but we remain optimistic about the potential of the JV and have committed to continuing with the EIA over the next nine to twelve months, as we await approval of the NOMRA. We are firmly confident that we can still determine a profitable project solution with APQSA but as we announced in September 2012 and mentioned above, we believe that the most prudent course of action during current market circumstances is to scale back these larger development plans for the moment and conserve shareholder value.

Corporate activity

It was an active year for us and our shareholders in terms of corporate activity. Our removal from the official list of companies trading on the Australian Securities Exchange ("ASX") was completed on 27 April 2012, with a three month trading platform maintained until 27 July 2012.

As Richard Rossiter explains in his Chairman's letter, the delisting was motivated primarily by an opportunity, as identified by the Board after due consideration, to streamline the Company's compliance and listing costs. We had recently seen low volumes of our shares traded on the ASX in comparison with the depository interests ("DI") traded on the Alternative Investment Market ("AIM") of the London Stock Exchange, and a consistently small fraction of the overall share value held in Australia.

Magnetite iron ore assets

We were pleased to successfully negotiate an agreement with the AIM-listed Mercury Recycling Group plc. ("Mercury", now renamed Ironveld plc) for the magnetite iron ore assets for approximately £13.7 million ($22 million) through the issue of 203,022,285 fully paid up ordinary Mercury shares.

These Mercury shares were distributed to the Sylvania shareholders in the form of a dividend in specie of 0.675 of an ordinary share in Mercury for each Sylvania share held in August 2012.

The assets are located on the Northern Limb of the Bushveld Complex, just north of the town of Mokopane in Limpopo, South Africa. The rights were acquired through Pan Palladium South Africa (Pty) Ltd, a subsidiary of SA Metals Pty Ltd.  Sylvania completed positive exploration work on the properties acquired during the year, with a total of 21 holes (1,526m) drilled between September 2011 and February 2012.  An independent scoping study and a Joint Ore Reserves Committee (JORC)-compliant mineral resource statement were also completed.

These assets were never part of Sylvania's core business and by separating them from our Northern Limb platinum assets, we are in a better position to achieve consistent growth while remaining profitable and focused on PGMs.  We do however believe that these are valuable assets and we wish Ironveld plc well as it develops them further.

Changes to our board and management team

In January 2012, Jaco Prinsloo joined our team as Executive Officer: Operations from his most recent position as a principal metallurgist at Anglo American. Jaco holds a degree in metallurgy and an MBA and brings with him a proven record of success. He is assured of our support as he embarks on what we hope will be a fulfilling and rewarding experience for him in unfolding our growth strategy.

We also welcomed Roger Williams who was appointed to the Board as a Non-executive Director on 29 December 2011. Roger is a chartered accountant with over 20 years' international experience in mining finance. Roger joins the Board as an independent director and has taken up the role of chairman of both the audit and remuneration committees.

Outlook

Without doubt, the platinum industry is going to remain a challenging business environment as we move into the coming year. The unprecedented tragedy that unfolded post year-end at Lonmin's Marikana operations is likely to impact the sector significantly in the short term while the long-term changes that it may engender remain unknown for the moment. Whilst we are shielded to some extent from such high levels of labour relations volatility, our ability to maintain consistent production remains indirectly exposed to these risks on our host chrome mines. As we saw in the third quarter, we cannot be complacent about the potential associated risks. We treat the spectre of escalating costs in PGMs mining with similar caution. While our business model excludes us somewhat from this risk, we are part of the platinum industry and vigilant cost controls are as important for us as any of our peers.

However, while these risks are ever-present, our resilience during this year inspires real confidence that steady production into the next year is achievable.  Our immediate focus will be on full ramp up during the first two quarters.

Thanks

All that remains is for us to extend our heartfelt thanks to our employees, management teams, business partners and colleagues for the team effort and dedication shown during this challenging year.

Terry McConnachie                                                                       

Chief Executive Officer                                                                                  

Nigel Trevarthen

Deputy Chief Executive Officer

12 October 2012

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the year ended 30 June 2012

		2012	2011
		$	$
Revenue		40,078,158	46,872,232
Cost of sales		(33,651,912)	(27,571,641)
Gross profit		6,426,246	19,300,591
Other income		71,157	465,604
(Losses)/gains on sale of property, plant and equipment		(8,669)	1,489
Foreign exchange loss		(25,359)	(8,358)
Loss on financial assets at fair value through profit and loss		(24,770)	(39,556)
Impairment of available for sale financial assets		(368,797)	-
Share of loss of jointly controlled entities		(475,413)	(76,900)
General and administrative costs		(9,226,614)	(14,825,581)
Operating (loss)/profit before finance costs and tax expense		(3,632,219)	4,817,289
Finance revenue		1,274,892	1,123,612
Finance costs		(145,648)	(114,477)
(Loss)/profit before income tax expense		(2,502,975)	5,826,424
Income tax expense		(1,468,828)	(4,218,298)
Net (loss)/profit for the year		(3,971,803)	1,608,126
Other comprehensive income
Impairment of available for sale investments transferred to profit and loss		195,114	-
Losses on available for sale investments		-	(48,484)
Foreign currency translation		(17,211,584)	21,209,407
Total comprehensive (loss)/income for the year		(20,988,273)	22,769,049
(Loss)/profit attributable to:
Owners of the parent		(3,971,803)	1,094,260
Non-controlling interest		-	513,866
		(3,971,803)	1,608,126
Total comprehensive (loss)/income attributable to:
Owners of the parent		(20,988,273)	22,769,049
Non-controlling interest		-	-
		(20,988,273)	22,769,049
		Cents	Cents
(Loss)/profit per share for loss attributable to the ordinary equity holders of the Company:
Basic (loss)/earnings per share		(1.32)	0.39
Diluted (loss)/earnings per share		(1.32)	0.39

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 30 June 2012

		2012	2011
		$	$
Assets
Non-current assets
Equity accounted investments in joint ventures		2,048,635	2,814,813
Other financial assets		93,235	500,548
Exploration and evaluation assets		75,602,341	76,123,444
Property, plant and equipment		68,492,697	72,843,970
Total non-current assets		146,236,908	152,282,775
Current assets
Cash and cash equivalents		15,696,899	23,497,092
Trade and other receivables		12,942,343	20,141,830
Inventories		596,719	628,065
Current tax asset		403,527	2,591,580
Assets held for sale		1,343,889	-
Total current assets		30,983,377	46,858,567
Total assets		177,220,285	199,141,342
Equity and liabilities
Shareholders' equity
Issued capital		29,557,290	29,639,275
Reserves		98,204,246	114,602,077
Retained profit		16,478,657	20,450,460
Equity attributable to the owners of the parent		144,240,193	164,691,812
Non-controlling interest		-	-
Total equity		144,240,193	164,691,812
Non-current liabilities
Interest bearing loans and borrowings		256,063	298,156
Provisions		1,257,235	974,832
Deferred tax liability		23,623,156	27,448,194
Total non-current liabilities		25,136,454	28,721,182
Current liabilities
Trade and other payables		7,623,192	5,550,646
Interest bearing loans and borrowings		174,654	166,522
Current tax liability		9,317	11,180
Liabilities directly associated with the assets classified as held for sale		36,475	-
Total current liabilities		7,843,638	5,728,348
Total liabilities		32,980,092	34,449,530
Total liabilities and shareholders' equity		177,220,285	199,141,342

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2012

	Issued capital	Share premium reserve	Retained profits/(Acc-umulated losses)	Net unrealised gains reserve	Share based payment reserve	Foreign currency translation reserve	Non-controlling interest reserve	Equity reserve	Owners of the parent	Non-controlling interest	Total equity
	$	$	$	$	$	$	$	$	$	$	$
Balance as at 1 July 2010	147,266,101	-	(20,061,009)	(146,630)	7,501,962	1,880,566	2,140,442	-	138,581,432	-	138,581,432
Profit for the year	-	-	1,094,260	-	-	-	-	-	1,094,260	513,866	1,608,126
Other comprehensive income	-	-	-	(48,484)	-	21,723,273	-	-	21,674,789	(513,866)	21,160,923
Total comprehensive income for the year	-	-	1,094,260	(48,484)	-	21,723,273	-	-	22,769,049	-	22,769,049
Share transactions
-     Shares issued	42,085,151	-	-	-	-	-	-	-	42,085,151	-	42,085,151
-      Share buy    back	(71,000)	(354,461)	-	-	-	-	-	-	(425,461)	-	(425,461)
-      Capital raising costs	(305,151)	-	-	-	-	-	-	-	(305,151)	-	(305,151)
-     Share based payments	-	-	-	-	1,395,488	-	-	-	1,395,488	-	1,395,488
-     Minex share issue	2,511,039	-	-	-	-	-	-	-	2,511,039	-	2,511,039
Acquisition of non-controlling interest	-	-	-	-	-	-	(41,919,735)	-	(41,919,735)	-	(41,919,735)
Restructure of the Group with the establishment of new parent entity	(161,846,865)	160,398,686	39,417,209	-	(8,227,817)	-	-	(29,741,213)	-	-	-
Balance at 30 June 2011	29,639,275	160,044,225	20,450,460	(195,114)	669,633	23,603,839	(39,779,293)	(29,741,213)	164,691,812	-	164,691,812

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the year ended 30 June 2012

	Issued capital	Share Premium Reserve	Retained profits	Net unrealised gains reserve	Share based payment reserve	Foreign currency translation reserve	Non-controlling interest reserve	Equity reserve	Owners of the parent	Non-controlling interest	Total equity
	$	$	$	$	$	$	$	$	$	$	$
Balance as at 1 July 2011	29,639,275	160,044,225	20,450,460	(195,114)	669,633	23,603,839	(39,779,293)	(29,741,213)	164,691,812	-	164,691,812
Loss for the year	-	-	(3,971,803)	-	-	-	-	-	(3,971,803)	-	(3,971,803)
Other comprehensive income	-	-	-	195,114	-	(17,211,584))	-	-	(17,016,470)	-	(17,016,470)
Total comprehensive income for the year	-	-	(3,971,803)	195,114	-	(17,211,584)	-	-	(20,988,273)	-	(20,988,273)
Shares transactions											-
-  Shares issued	-	-	-	-	-	-	-	-	-	-	-
-  Share buy back	(48,690)	(105,842)	-	-	-	-	-	-	(154,532)	-	(154,532)
-  Capital raising costs	(33,295)	-	-	-	-	-	-	-	(33,295)	-	(33,295)
-  Share based payments	-	-	-	-	724,481	-	-	-	724,481	-	724,481
Balance at 30 June 2012	29,557,290	159,938,383	16,478,657	-	1,394,114	6,392,255	(39,779,293)	(29,741,213)	144,240,193	-	144,240,193

CONSOLIDATED STATEMENT OF CASH FLOWS

For the year ended 30 June 2012

		2012	2011
		$	$
Cash flows from operating activities
Receipts from customers		44,399,216	39,711,612
Payments to suppliers and employees		(32,554,455)	(32,799,122)
Finance income		1,282,317	1,169,044
Realised foreign exchange loss		(25,359)	-
Exploration expenditure		(23,411)	(41,064)
Finance costs		(145,649)	(114,477)
Taxation received/(paid)		1,355,826	(217,817)
Net cash inflow from operating activities		14,288,485	7,708,176
Investing activities
Purchase of plant and equipment		(15,102,282)	(6,641,194)
Payments for exploration and evaluation		(4,871,128)	(986,365)
Proceeds from equity accounted investments		-	724,942
Payments for equity accounted investments		(161,000)	-
Proceeds from sale of plant and equipment		-	4,275
Net cash outflow from investing activities		(20,134,410)	(6,898,342)
Financing activities
Repayment of borrowings		(170,434)	(249,848)
Repayment of loans from related parties		-	(153,675)
Proceeds from loans from related parties		6,765	3,105
Payment for share buy back		(154,532)	(425,382)
Capital transaction costs		(33,295)	(305,151)
Net cash outflow from financing activities		(351,496)	(1,130,951)
Net decrease in cash and cash equivalents		(6,197,421)	(321,117)
Effect of exchange fluctuations on cash held		(1,582,991)	3,710,379
Cash and cash equivalents beginning of period		23,497,092	20,107,830
Cash and cash equivalents, end of period		15,716,680	23,497,092

 

END

 

 

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