Interim Results

Attention Business/Financial Editors:

SouthernEra Releases Second Quarter Results

          

Company Reports a Net Profit of $1.6M (2 cents per share)

          

Shares Issued and Outstanding: 61,674,459

TSX: SUF

AIM: SRE

          

TORONTO, Aug. 18 /CNW/ - The Board of SouthernEra Resources Limited

announced the following highlights from the second quarter of 2003:

      

-  Messina Platinum achieved 40,000 tonnes per month production target

-  Mark Rosslee appointed Senior Vice President and CFO

-  Mining license issued for Messina's Phase 2 (Doornvlei Section)

-  Prospecting permit issued for Messina's Phase 3 (Dwaalkop Section)

-  Drilling commenced at Messina's Phase 4 (Zebediela Section) as part  

   of pre-feasibility study

      

Subsequent to June 30:

      

-  Messina Platinum announced the terms of the rights issue

-  Drilling commenced at Messina's Phase 3 as part of feasibility study

-  Millennium Platinum resource upgraded by 250 percent to 3.7 million

   ounces

-  Klipspringer concluded a new wage agreement

-  Stan Westcott retired from Messina Platinum Mines

      

The Company realized a net profit for the three months to June 30 of

$1.6•million (2 cents per share) compared to a net loss of $2.2 million

(5•cents per share) in the second quarter of 2002. In the current quarter, the
Company incurred an operating loss of $1.3 million on revenue of $0.6 million
versus an operating loss of $0.7 million on revenue of $0.7 million in the
comparable quarter of 2002. The operating loss was negated by the recognition
of a $3.8 million foreign exchange gain. Cash flow used in operations for the
quarter was $8.9 million (15 cents per share), compared to a source of

$0.4•million (0 cents per share) in the second quarter of 2002.

      

Operations Update

      

Progress continued at Messina Platinum's Phase 1 Mine (Voorspoed

Section), which remains under development. During the second quarter,

Messina's now fully commissioned Main Shaft hoisted 171,049 tonnes, of which
75,744 were development waste tonnes and 95,305 were reef tonnes from both
production and development levels. Production during the quarter came
principally from the 150 and 200-metre levels. During the quarter high levels
of development continued on the 275 and 350-metre levels to support the
production build up. Production from these levels has now commenced.

 

Although still under development, Messina produced 8,777 ounces of 3PGE's plus
gold, 77.4 tonnes of nickel and 60.4 tonnes of copper during the quarter.
Reflecting the high levels of development during the quarter, the average fully
diluted head grade was 3.25 grams per tonne. The average head grade for the
first six months of the year was 3.66 grams per tonne and is expected to
continue improving as the mine builds up to steady state production. Costs at
Messina continue to be capitalised during this development period.

 

Messina's excellent safety record continued through the second quarter

with 500,000 fatality-free shifts being recorded in June.

 

Production at the Company's 50 percent-owned Klipspringer Diamond Mine

was affected during the quarter by a labour strike. The strike was resolved on
July 21 with the conclusion of a new wage agreement and a commitment by the
National Union of Mineworkers to support continuous operations. In the second
quarter, tonnage throughput was 38,900 tonnes. Average grade in the quarter was
35 carats per hundred tonnes, yielding 13,700 carats.

 

The Company's operations at Messina and Klipspringer continued to be

impacted by the strength of the South African Rand. During the first six months
of the year the Rand appreciated by approximately 27 percent relative to the US
Dollar compared to the same period last year. With the bulk of the Company's
capital and operating expenses in Rand, this has resulted in increased costs in
US Dollar terms. The strength of the Rand may be attributed both to Dollar
weakness and high real interest rates in South Africa. The South African
Reserve Bank has reduced interest rates by 2.5 percent in recent months as
inflation has continued to drop. Further rate cuts are expected during the
second half of the year. This is expected to contribute to a softening of the
Rand, which should bring costs close to budgeted projections for the second
half of the year.

 

During the quarter, exploration activities continued at the Company's

platinum and diamond exploration projects. Following conclusion of the second
phase drilling program at the Millennium Platinum Project in South Africa the
Company reported a 250 percent increase in the Millennium Platinum resource to
3.7 million ounces. Drilling also commenced at the Company's diamond projects
in South Africa.

 

Drilling also continued at the Company's Canadian diamond exploration

projects. Results from this program are expected in the months ahead.

Following the conclusion of an airborne survey at the Company's diamond and
precious metals projects in Gabon, a drilling program commenced during the
quarter. Incorporation of the operating company for Project Camafuca continued
to be impeded by delays in regulatory approval required from the Angolan
government.

 

SouthernEra Resources is an independent producer of platinum group metals and
diamonds. The company also has an extensive PGM and diamond exploration
program. The common shares are listed on the Toronto Stock Exchange and the
London Stock Exchange's AIM market.

 

The full, unaudited financial statements are available at

www.southernera.com

      

      

      

          

 SouthernEra Resources Limited

 

 Consolidated balance sheets

 

 (in thousands of United States dollars)

                                                     June 30,   December 31,

                                                      2003           2002

 -------------------------------------------------------------------------

 Assets                                         (unaudited)

   Current assets:

   Cash and equivalents                        $    16,574    $     2,870

   Restricted cash                                  12,518         11,055

   Accounts receivable                               8,820          7,359

 -------------------------------------------------------------------------

                                                    37,912         21,284

  Property, plant and equipment                       6,568          7,110

  Exploration projects                               12,609          8,994

  Mining and development projects                   157,751        121,260

  Future income taxes                                 2,994          2,794

 -------------------------------------------------------------------------

                                               $   217,834    $   161,442

 -------------------------------------------------------------------------

 Liabilities and shareholders' equity

 Current liabilities:

   Accounts payable and accrued liabilities    $     9,585    $    12,671

   Income taxes payable                             10,042          8,086

   Camafuca loan                                     2,523          2,448

   Messinaloans                                     11,793          5,729

 -------------------------------------------------------------------------

                                                    33,943         28,934

Long-term liabilities:

   Messinaloans                                     49,070         46,926

   Future income taxes                               2,302          2,429

   Non-controlling interests                         8,659          7,813

   Environmental rehabilitation provision              804            740

 -------------------------------------------------------------------------

                                                    94,778         86,842

 -------------------------------------------------------------------------

 Shareholders' equity:

   Common shares                                   174,404        130,628

   Contributed surplus                               1,635          1,635

   Deficit                                         (55,886)       (57,869)

   Cumulative translation adjustments                2,903            206

 -------------------------------------------------------------------------

                                                   123,056         74,600

 -------------------------------------------------------------------------

                                               $   217,834    $   161,442

 -------------------------------------------------------------------------

 -------------------------------------------------------------------------

 

 The accompanying notes form an integral part of, and should be read in

 conjunction with, these consolidated financial statements.

      

      

      

 SouthernEra Resources Limited

      

 Consolidated statements of operations

      

 For the Periods Ended June 30

 (in thousands of United States dollars,

  except income (loss) per share amounts)

  (unaudited)

                                  Three Months Ended     Six Months Ended

                                        June 30               June 30

                                    2003       2002       2003       2002

 -------------------------------------------------------------------------

 Diamond sales revenue          $    564   $    742   $  1,650   $  1,320

 Direct costs:

   Mining operations              (1,521)    (1,022)    (3,372)    (1,797)

   Amortization                     (348)      (366)      (693)      (713)

 -------------------------------------------------------------------------

                                  (1,869)    (1,388)    (4,065)    (2,510)

 -------------------------------------------------------------------------

 Loss from mining operations      (1,305)      (646)    (2,415)    (1,190)

 General and administration

  expenses                        (1,303)      (727)    (2,227)    (1,130)

 -------------------------------------------------------------------------

 Loss before the undernoted       (2,608)    (1,373)    (4,642)    (2,320)

 Foreign exchange gain (loss)      3,806       (624)     5,827     (1,244)

 Interest income                     371        129        651        222

 -------------------------------------------------------------------------

 Income (loss) before income

  taxes                            1,569     (1,868)     1,836     (3,342)

 Income taxes:

   Current                             -        (11)         -          -

   Future recovery (expense)          13       (315)       130       (236)

 -------------------------------------------------------------------------

 Income (loss) after income

  taxes                            1,582     (2,172)     1,966     (3,578)

 Non-controlling interests            15        (26)        17        (50)

 -------------------------------------------------------------------------

 Net income (loss) for the

  period                        $  1,597   $ (2,198)  $  1,983   $ (3,628)

 -------------------------------------------------------------------------

 Basic and diluted net income

  (loss) per common share       $   0.02   $  (0.05)  $   0.03   $  (0.09)

 -------------------------------------------------------------------------

      

      

      

 Consolidated statements of deficit, contributed surplus

 and cumulative translation adjustments

      

 For the Six Months Ended June 30

 (in thousands of United States dollars)

 (unaudited)

      

                                       2003                          2002

 -------------------------------------------------------------------------

                        CONTRI-  CUMULATIVE           CONTRI-  CUMULATIVE

                         -BUTED TRANSLATION            -BUTED TRANSLATION

               DEFICIT  SURPLUS ADJUSTMENTS  DEFICIT  SURPLUS ADJUSTMENTS

 -------------------------------------------------------------------------

 Beginning

  of period   $(57,869)  $1,635        $206 $(48,910)  $1,044     $(4,529)

 Conversion

  rights             -                    -        -      591           -

 Translation

  gains (losses)

  net for

  the period         -        -       2,697        -        -       2,361

 Net income

  (loss) for

  the period     1,983        -           -   (3,628)       -           -

 -------------------------------------------------------------------------

 End of

  period      $(55,886)  $1,635      $2,903 $(52,538)  $1,635     $(2,168)

 -------------------------------------------------------------------------

   The accompanying notes form an integral part of, and should be read in

 conjunction with, these consolidated financial statements.

      

 

 Consolidated statements of cash flows

      

 For the Periods Ended June 30

 (in thousands of United States dollars)

 (unaudited)

                                 Three Months Ended      Six Months Ended

                                            June 30               June 30

                                    2003       2002       2003       2002

 -------------------------------------------------------------------------

 Net income (loss) for the

  period                       $  1,597    $ (2,198)  $  1,983   $ (3,628)

 Adjustments for non-cash items:

   Amortization                     347         366        693        713

   Future income taxes              (13)        315       (130)       236

   Gain on sale of fixed assets     (12)        624        (26)     1,244

   Foreign currency translation

    loss (gain)                  (3,806)         26     (5,827)        50

   Non-controlling interest         (15)          -        (17)         -

 -------------------------------------------------------------------------

                                 (1,902)       (867)    (3,324)    (1,385)

 Change in non-cash working

  capital balances               (7,021)      1,240     (9,539)       276

 -------------------------------------------------------------------------

 Cash provided by (used in)

  operations                     (8,923)        373    (12,863)    (1,109)

 -------------------------------------------------------------------------

 Financing activities:

   Messinaloans                      -       8,832          -     17,603

   Issue of common shares

    for cash                          -      34,895     43,707     39,351

 -------------------------------------------------------------------------

 Cash provided by financing

  activities                          -      43,727     43,707     56,954

 -------------------------------------------------------------------------

 Investing activities:

   (Increase) decrease in

    restricted cash                (728)         96     (1,463)       241

   Exploration and development

    projects                     (2,152)     (1,795)    (3,636)    (2,618)

   Messinaplatinum project       (9,433)    (13,776)   (18,131)   (23,073)

   Property, plant and

    equipment                       (20)       (834)      (444)      (894)

 -------------------------------------------------------------------------

 Cash used in investing

  activities                    (12,333)    (16,309)   (23,674)   (26,344)

 -------------------------------------------------------------------------

 Increase (decrease) in cash    (21,256)     27,791      7,170     29,501

 Foreign exchange gain (loss)

  on cash held

  in foreign currency             5,736        (120)     6,534          -

 Cash and equivalents -

  beginning of period            32,094       8,343      2,870      6,513

 -------------------------------------------------------------------------

 Cash and equivalents -

  end of period                $ 16,574      36,014   $ 16,574     36,014

 -------------------------------------------------------------------------

 -------------------------------------------------------------------------

 Cash and cash equivalents

  comprise:

   Cash                        $    359       2,014   $    359      2,014

   Short-term investments        16,215      34,000     16,215     34,000

 -------------------------------------------------------------------------

                               $ 16,574      36,014   $ 16,574     36,014

 -------------------------------------------------------------------------

 -------------------------------------------------------------------------

   The accompanying notes form an integral part of, and should be read in

 conjunction with, these consolidated financial statements.

      

      

              Notes to consolidated financial statements

 

 In the opinion of management, the unaudited consolidated financial

statements present fairly the Company's financial position as at June 30, 2003

and the results of its operations and its cash flows for the six months ended

June 30, 2003. The results of operations and cash flows are not necessarily

indicative of the future results of operations or cash flows.

      

      

1.     ACCOUNTING POLICIES

 

 The accounting policies followed by the Company are set out in Note 2 to

 the audited consolidated financial statements included in the Company's

 2002 Annual Report and have been consistently followed in the preparation

 of these interim financial statements.

      

      

 2. PROPERTY, PLANT AND EQUIPMENT

                                                                December 31,

                                           ACCUMULATED  June 30      2002

                                   COST   AMORTIZATION     2003       NET

 -------------------------------------------------------------------------

 South Africa - Buildings, plant

  and equipment                    $ 13,454  $ (6,940) $  6,514  $  7,064

 Toronto- Fixtures and fittings         333      (279)       54        46

 -------------------------------------------------------------------------

                                   $ 13,787  $ (7,219) $  6,568  $  7,110

 -------------------------------------------------------------------------

 -------------------------------------------------------------------------

 

 3. EXPLORATION PROJECTS

                                                         Accumulated

                                                       Carrying Value

 -------------------------------------------------------------------------

                                                    June 30,  December 31,

                                                       2003          2002

 -------------------------------------------------------------------------

 Canada

 Yamba Lake - NWT                                $    3,101    $    2,855

 Back Lake - NWT                                        754           557

 Superior- Ontario                                    1,816         1,115

 Other                                                  539           365

 -------------------------------------------------------------------------

                                                      6,210         4,892

 -------------------------------------------------------------------------

 Foreign

 South Africa                                         2,472         1,458

 Gabon                                                3,225         2,048

 Australia                                              702           596

 -------------------------------------------------------------------------

                                                      6,399         4,102

 -------------------------------------------------------------------------

                                                 $   12,609    $    8,994

 -------------------------------------------------------------------------

 -------------------------------------------------------------------------

 

      

 4. MINING AND DEVELOPMENT PROJECTS

      

 -------------------------------------------------------------------------

                                                         Accumulated

                                                       Carrying Value

 -------------------------------------------------------------------------

                                                    June 30,  December 31,

                                                       2003          2002

 -------------------------------------------------------------------------

 Messinaplatinum project                         $  142,437    $  106,312

 Camafuca project                                    15,314        14,948

 -------------------------------------------------------------------------

                                                 $  157,751    $  121,260

 -------------------------------------------------------------------------

 -------------------------------------------------------------------------

      

 

 5. MESSINALOANS

                                                    June 30,  December 31,

                                                       2003          2002

 -------------------------------------------------------------------------

 Senior Debt                                     $   57,662    $   45,643

 Loans from a South African public company            3,201         4,252

 Rio Tinto API underwriting guarantee advance             -         2,465

 Other                                                    -           295

 -------------------------------------------------------------------------

                                                     60,863        52,655

 Less current portion of loans                      (11,793)       (5,729)

 -------------------------------------------------------------------------

                                                 $   49,070    $   46,926

 -------------------------------------------------------------------------

 -------------------------------------------------------------------------

 

 Senior Debt

 The Senior Debt provided by a South African banking consortium ranks

 above all other debt in Messina. It is secured in favour of the banks by

 all the assets of Messina. Repayment of capital and/or interest to any

 other lender to Messina, whether a lender in terms of the loan

 arrangements noted above or for any other reason including any trade or

 other credit granted, may only be settled by Messina with the banks'

 consent while any amounts due to the banks, including interest, remain

 outstanding.

      

 While the Senior Debt is outstanding, Messina may not incur additional

 debt, acquire or dispose of assets or engage in activities outside the

 parameters of the establishment of the Messina Platinum Project, or

 deviate from the planned development of the project, without the consent

 of the banks.

      

 The Senior Debt comprises two, South African Rand (R) denominated,

 tranches making up a total of R345 million ($43 million), Tranche A of

 R270 million ($34 million) and Tranche B of R75 million ($9 million).

 Both tranches were drawn upon simultaneously and, other than for interest

 determination, can be regarded as a single loan.

 

 Drawdown commenced on September 18, 2001, and monthly drawdowns continued

 until the final drawdown on September 30, 2002.

 

 Interest accrues on the loan and is capitalized to the loan balance

 outstanding. The repayment schedule includes an element of principal and

 interest in each repayment instalment with the first instalment scheduled

 for February 29, 2004 and with semi-annual payments thereafter until the

 final instalment on August 31, 2008.

      

 The interest rate in respect of Tranche A is fixed at 14.51% and in

 respect of Tranche B, fluctuates with the average of a basket of

 long-term South African money market rates (19% at June 30, 2003).

 

 Loans from a South African public company

 This loan of $3.6M is denominated in Rand and is unsecured and

 subordinate to the Senior Debt provided by the banking consortium. The

 loan bears interest at South African market-related rates (19% at

 June 30, 2003) and interest is payable monthly in arrears. Capital

 repayments commenced in January 2002 and, under renegotiated terms, are

 repayable in monthly instalments of not less than R2.5 million

 ($0.3 million) per month from February 2003. The banking consortium has

 consented to this repayment schedule subject to continued satisfactory

 progress of the Messina Platinum Project and such financial support as

 might be necessary from SouthernEra.

      

 Accelerated Production Initiative API and API guarantee

 This loan and accrued interest was fully repaid in the current quarter.

      

      

 6. INCOME (LOSS) PER SHARE AND PRO FORMA INCOME (LOSS) PER SHARE

      

 Basic and diluted income (loss) per share is calculated using the income

 for the year of $2.0 million (2002 - $3.6 million loss) and the income

 for the quarter of $1.6 million (2002 - $2.2 million loss) with the

 weighted average number of common shares outstanding during the period of

 59,021,682 shares (2002 - 42,521,130) and 61,573,459 (2002 - 44,733,044)

 respectively.

      

 The exercise of stock options would dilute earnings per share in the

 current period. The effect of the potential dilution does not reduce

 earnings per share in the current quarter and would be anti-dilutive in

 the comparable period of 2002.

      

 The fair value assigned to the portion of 275,000 stock options granted

 and vesting in the current quarter was $0.5 million and the fair value

 assigned to the portion of 100,000 options granted in the second quarter

 of 2002 was $0.1 million. Had these values been charged to earnings in

 the current quarter, income per share would remain at $0.02. The year to

 date effect of charging current and previous years fair values of options

 granted would decrease earning per share for the six months ended

 June 30, 2003 to $0.02.

      

      

 7. SEGMENTED INFORMATION

 

 The Company operates in the diamond and PGM industries. The operations of

 the Company are managed and grouped, by industry, on a geographic basis.

 The Company's reportable operating segments comprise the diamond mining

 and exploration activities at Klipspringer in South Africa, as well as in

 Angolaand Canada, and the Messina Platinum Project in South Africa. The

 Canadian segment includes the head office operation and associated

 administration costs.

      

      

 SEGMENTED INFORMATION

                               Three Months Ended        Six Months Ended

                                          June 30,                June 30,

                                 2003        2002        2003        2002

 -------------------------------------------------------------------------

 Revenue from diamond sales:

 Klipspringer                     564         742       1,650       1,320

 -------------------------------------------------------------------------

 Interest income

 Klipspringer                       6          (1)         10           2

 Messina                           10          92          27         172

 Canada                           355          38         614          48

 -------------------------------------------------------------------------

                                  371         129         651         222

 -------------------------------------------------------------------------

 Amortization

 Klipspringer                     344         354         685         690

 Canada                             4          12           8          23

 -------------------------------------------------------------------------

                                  348         366         693         713

 -------------------------------------------------------------------------

 Segment income (loss)

 Klipspringer                  (3,916)     (1,249)     (6,058)     (2,781)

 Messina                          (53)       (224)        (63)       (144)

 Canada                         5,722        (501)      8,338        (677)

 Other                           (184)        106        (381)        260

 -------------------------------------------------------------------------

 Reported enterprise income

  (loss) before income taxes    1,569      (1,868)      1,836      (3,342)

 -------------------------------------------------------------------------

 Segment expenditure

 Messina                        9,102      13,776      18,131      23,073

 Klipspringer                     314       1,062         589       1,149

 Angola                            72          13         223         264

 Canada                         1,005         444       1,522         756

 Other                          1,112       1,014       1,746       1,102

 -------------------------------------------------------------------------

                               11,605      16,309      22,211      26,344

 -------------------------------------------------------------------------

                                    June 30, 2003        December 31 2002

 Identifiable assets

 Messina                               $  139,791              $  103,088

 Klipspringer                               9,511                   9,498

 Angola                                    15,314                  14,948

 Canada                                    48,811                  31,171

 Other                                      4,407                   2,737

 -------------------------------------------------------------------------

 Total reported enterprise assets      $  217,834              $  161,442

 -------------------------------------------------------------------------

      

      

 8. DIFFERENCES BETWEEN CANADIAN GAAP AND IFRS

      

 The Company prepares its financial statements in accordance with Canadian

 GAAP, which generally conform to International Financial Reporting

 Standards (IFRS) except for the following significant differences:

 

 a) Under Canadian GAAP, pre-development incidental revenue and associated

 costs are deferred and amortized over the life of the mine. Under IFRS

 incidental revenue and associated costs are recognized in the statement

 of operations. As a result of this difference, the Company would have

 recognized additional revenue derived from PGM sales at Messina Phase I.

 Mining costs approximated the income earned and, therefore, there would

 be no material effect on net income or earnings per share.

      

 b) Under Canadian GAAP, a provision for reclamation costs is expensed

over the life of the mine on a unit of production basis when an estimate

of costs is reasonably determinable. Under IFRS, a reclamation provision

is accrued when the liability is incurred with a corresponding debit to

the related asset. The impact of preparing the financial statements in

accordance with IFRS would be an increase in mining and development

projects of $1.1 million with a corresponding increase in the

environmental rehabilitation provision.

          

           For further information: SouthernEra Resources Limited, Dr. Sally
Eyre, Vice President, Corporate Affairs, Telephone:

[phone], Fax: [phone], E-mail: [e-mail]

           SRE SUF.