9 July 2014
Mwana Africa PLC
("Mwana" or the "Company" or the "Group")
Audited Results for the Year to 31 March 2014
Mwana Africa PLC is pleased to announce its audited financial results for the
year to 31 March 2014.
Financial highlights
Group revenue up 30.5% to $142.5m (2013: $109.2m)
Group EBITDA up 40.4% to $25.0m (2013: $17.8m)
Group net profit for the year of $50.6m after a $28.0m reversal of impairment
on BNC (2013: loss of $43.5m after a $43.7m impairment charge on BNC)
Attributable Group net profit for the year of $36.6m (2013: net loss of $28.6m)
which equated to a basic earnings per share for the year of 2.89 US cents (1.82
GB pence). Prior year 2013: loss per share of 2.62 US cents (1.66 GB pence).
Corporate costs cut from 7.8% to 4.5% of revenue.
Group net cash from operating activities up 60.5% to $6.1m (2013: $3.8m)
Exploration spend decreased by 65.4% to $5.3m (2013: $15.3m)
Operational highlights
Freda Rebecca gold sales of 58,704 ounces for the year (2013: 65,350 ounces)
Freda Rebecca cash costs (C1) $959/oz (2013: $897/oz), all-in sustaining costs
(C3) $1,186/oz (2013: $1,115/oz)
Freda Rebecca gold recoveries up to 82% (2013: 81%)
BNC first concentrate shipped April 2013 and new mining plan adopted July 2013
BNC production resumed profitably with nickel sales of 7,129 tonnes for the
year
BNC cash costs (C1) $11,567/t, all-in sustaining cost (C3) $12,462/t
Chinese partner initiated Katanga copper buy-in by funding $7m exploration
Post period highlights
Freda Rebecca investigates viability of gold recovery from tailings
BNC Smelter restart plan in place, subject to funding, to produce nickel alloy
by calendar 2015.
Transfer of Zani Kodo mining licenses into Mizako SARL (Mwana Africa PLC is 80%
shareholder) from SOKIMO SARL.
Klipspringer investigates viability of underground mining
Kalaa Mpinga, Chief Executive Officer of Mwana commented today: "Despite some
temporary setbacks at the beginning of the year, Mwana has made substantial
progress in the past financial year - progress that has continued since the
year's end - and that has resulted in a significant strengthening of the
Company's financial structure.
Our principal success came with the resumption of sales of nickel in
concentrates by BNC's Trojan nickel mine in terms of an off-take agreement with
Glencore. The significant cash-flow improvement that stemmed from higher nickel
prices was complemented by solid production outcomes following the shift to
mining the ore body's higher-grade massives. Nickel prices have improved in
response to Indonesia's decision to restrict exports of nickel in ore, and
while I am certain that the price will be volatile in the near term, we are
expecting it to have strengthened by 2017. At the start of the past financial
year we were contemplating having to ask shareholders for additional funding,
but we took an early decision to change direction. The improved cash flow from
BNC enabled us to reverse $28m of the previous year's $43.7m BNC assets
impairment. Operationally, we undertook a fundamental restructuring to cut
corporate costs.
Since the financial year's end we have embarked on the project to restart BNC's
smelter (subject to securing funding) with the aim of starting production of
nickel alloy in the first quarter of calendar 2015. Not only will this take the
company up the value chain as better prices will more than offset the smelter's
operating costs, but we will have the benefit of the significantly lower cost
of transporting nickel metal rather than concentrate to our export harbour.
Our strategy now is to reward shareholders for their unstinting financial
support as we continue to build Mwana into a diversified, multi-national mining
company. Our financial strategy is to be self-financing or, where appropriate,
to take in other partners or funding for specific projects. The success of this
strategy has been shown in our Katangese copper partnership with the Chinese
copper-products manufacturer, Zheijiang Hailiang Company Limited.
The Freda Rebecca gold mine suffered some production set-backs in the past
financial year - temporarily lower mining grades and production interruptions
with the failure of a leach tank. The problems had been resolved by the end of
the financial year. We are now in a position to evaluate the viability of
adding gold production from the reprocessing of old residues.
In South Africa we are currently evaluating the viability of resuming
underground mining at the Klipspringer diamond mine as well as of the
possibility of recovering small diamonds from the mine's coarse-tailings
residues. During the past financial year recovery of micro diamonds from
residue slimes contributed to covering the property's care-and-maintenance
costs.
The current financial year is confidently expected to result in Mwana's further
financial strengthening and in that of our ability to advance the development
of new projects. And, as the share price has advanced since the start of 2014,
I am confident that further improvements will flow from our proving our ability
to develop and operate our assets profitably."
About Mwana Africa PLC
Mwana Africa PLC is a pan-African, multi-commodity mining and development
company. Mwana's principal operations and exploration activities involve gold,
nickel, copper and diamonds in Zimbabwe, the Democratic Republic of the Congo
(DRC), South Africa, Angola and Botswana.
In Zimbabwe, Mwana Africa's interests are the Trojan and Shangani nickel mines,
and the Freda Rebecca gold mine. Mwana's nickel and gold projects include
Hunter's Road and Maligreen, with the Makaha deposit being a gold exploration
prospect.
* The Freda Rebecca gold mine in Zimbabwe restarted operations in 2009 and in
the 12 months ending March 2014, produced 58,704 oz of gold.
* The Trojan nickel mine is owned by Mwana's Zimbabwe subsidiary, Bindura
Nickel Corporation (BNC). After a four year period of being under care and
maintenance, in 2012 BNC carried out a US$23m restructuring and
recapitalisation programme which allowed it to restart the Trojan mine. The
first sale of concentrate to Glencore took place in April 2013.
* In the DRC, Mwana Africa has exploration programmes in Zani-Kodo (gold),
Katanga (copper) and a 20% stake in Société Minière de Bakwanga (MIBA) -
(diamonds).
* Copper in the Katanga Province - Mwana has a Joint Venture Agreement with
Zhejiang Hailiang Company Limited to jointly explore some of these licensed
areas. The Katanga concessions are otherwise known as SEMHKAT (Société
d'exploration Minière du Haut Katanga).
* The joint venture Zani-Kodo project has a gold mineral resource of 2.97moz.
* Klipspringer diamond mine is Mwana's South African interest. Mwana holds a
69.77% interest in Klipspringer, which is currently on care and maintenance
but involved in a tailings retreatment project and investigating the
viability of underground mining.
Chairman's letter
The past year has probably been one of the most significant in our company's
history, both strategically and operationally.
Strategically, we affirmed our position and goal to be a multi-commodity,
multi-country Pan-African mining group. After several years of building our
asset portfolio with shareholder funding to achieve a position where we are
capable of achieving income self-sufficiency, our business model has moved into
its next logical phase of generating future growth organically, seeking funding
and, if appropriate, partners, on a specific project by project basis rather
than by general capital raising. Our focus is firmly set on rewarding
shareholders through growth in asset value.
Operationally, we undertook a fundamental restructuring, founded on the premise
that, in mining, the lowest-cost producer wins the day. This was motivated by
falling prices for the commodities we produce (gold, nickel and diamonds); by
the understanding that raising further development capital could be difficult
without offering increased foreseeable value and by the imperative of matching
our projects to our capacity. In laying the groundwork for this, during the 12
months under review, we:
• Trimmed our head count from board level down;
• Reduced the scale of our London office;
• Reduced salaries voluntarily;
• Reduced our reliance on professional services;
• Cut operating costs; and
• Improved operating efficiencies.
Our activities are being directed towards the consolidation of our
diversification strategy, reducing overheads, derisking technical mining and
exploration issues, increasing our operational cash generation capabilities
such that, of our five major projects, two - Bindura Nickel and Freda Rebecca
Gold Mine - are income generating; two - copper and diamonds - have reduced
their burn rates; and one, the Zani-Kodo gold project in the eastern DRC, is
advancing at limited cost to Mwana. As regards corporate costs, we are on track
to achieve our target in annual savings, after allowing for once-off
retrenchment and other costs of reduction or closure.
We have the assets in our portfolio capable of delivering on our evolving
strategic objectives. At BNC, the operational plan allows earlier mining access
and the blending of higher grade massives with disseminated ore to ensure a
sustainable improved feed grade through the Trojan life of mine plan. We have
restarted the deepening project and organic growth will centre on reopening the
smelter, subject to funding, to add value through beneficiation. Most of the
legacy labour liabilities at BNC should be discharged by December 2014 and the
other liabilities by December 2015, freeing cash flows to be applied to
investment and operational purposes. At Freda Rebecca, we will complement our
underground production, by concentrating on improving the performance of our
plant and complete our testing programme of the recently commissioned tailings
retreatment plant. At SEMHKAT, the labour force has been substantially cut and
our Chinese partner, Hailiang, has assumed responsibility for exploration
expenditure. At Klipspringer Diamonds, the joint venture to treat residue
material is generating income while the restart of the mine is being evaluated.
At Zani Kodo, we are assessing the prospects of feasibility studies and a small
pilot plant for gold production.
Our emphasis upon becoming a multi-commodity company is bearing fruit through
the reduction of risks associated with being dependant on a single metal. We
have already enjoyed some benefits from this commodity diversification, with
Bindura Nickel production having supported the group and Freda Rebecca
pre-2009, while Freda Rebecca production supported the group and Bindura Nickel
post-2009. I am confident of the sound long-term prospects of our two principal
metals, though the immediate future is likely to exhibit price volatility. The
nickel price has been bolstered by Indonesia's ban on exports of nickel ore,
whilst the gold price has been lower as investors anticipate interest rate
increases that raise the cost of holding bullion as an investment.
As the past year's results have shown, we have demonstrated an ability to
contain costs to acceptable levels. We are fortunate that the majority of both
our revenues and costs are denominated in US dollars as this relieves us of
some of the distraction of managing exchange rate fluctuations. Our strategy is
to mine profitably. We will not pursue new ventures unless they display clear
prospects of sound returns on investment.
Careful cash-flow management is central to our business plan and we will direct
investment to those projects and operations that offer the best prospects of
returns. This applies as much to our exploration initiatives in the DRC as to
our developed mines in Zimbabwe, and this is dealt with more fully by my
colleague and CEO, Kalaa Mpinga, in his CEO's report.
In Zimbabwe - the central point of our mining and processing operations - the
outcome of the general election in July 2013 lifted much of the political
uncertainty that preceded it. Like the governments of many other countries
dependent on primary products, Zimbabwe is aware of the need to foster mining
and investment, at the same time being mindful of its responsibility to ensure
that the local populace should share fairly in the fruits of their country's
own resources. It is pleasing that we are in a position to resume smelting at
BNC as it represents cooperation with the Zimbabwean government and its
beneficiation objectives. We believe that this, too, can contribute to the
indigenisation policy by creating more jobs for local people, by increasing
purchases from local suppliers and through generating higher taxable revenues.
I have been Interim Chairman since only February 2014, but have always
appreciated the skills and expertise that my board colleagues and executives
bring to the management of our company. During the year my long-serving
predecessor Oliver Baring retired, along with John Anderson and Etienne Denis
and I thank them for the direction they gave during their tenure on the Board.
Oliver was succeeded, albeit briefly, by Mark Wellesley-Wood who we would also
like to thank for his contribution. I would also like to thank Donald McAlister
who left in September, for his contribution during his time on the Board and to
welcome our new Finance Director Yim Kwan to the Board. These departures mean
that we are seeking to appoint a permanent Chairman, as well as improving the
balance of our Board, and that search will be completed as expeditiously as
possible. I would like to express my sincere thanks to my colleagues on the
board, our senior executives and all of our staff in many countries for their
support during the past challenging year. I also express my gratitude to our
shareholders and stakeholders for their continued support, which has
contributed the successes already mentioned above.
Safety is our priority, and it is with deep regret that I record the
unfortunate deaths of two of our colleagues, Lovemore Nyanusanu and Shepherd
Muradzi, in accidents at Freda Rebecca and Trojan. My condolences go to the
families, friends and colleagues of the both men. I assure all of our employees
that our efforts to ensure safety are a priority and remain unremitting.
I make no forecast of our group's near-term performance, particularly given the
current uncertainties over commodity prices. There remains some distance to
travel before we are generating positive cash flows at all of our projects. But
while we will be patient in achieving this, we remain mindful of our commitment
to deliver wealth to our shareholders. We shall build on our assets that are
generating positive cash flows and carefully develop those that are still in
their infancy or are being maintained in anticipation of profitable
development. Stakeholders may rest assured that we will work hard to implement
our strategy and focus on the sound development of our assets.
Stuart Morris
Chairman
Chief Executive's review
The performance of Mwana's people during the past financial year underscores
our capacity to position our company as a leading emerging miner on the African
continent. It was a performance that overcame difficulties and set-backs while
taking new projects forward. This demonstrated our ability to contain costs and
to optimise our return on assets.
But the past year was also one which delivered personal tragedies. At the Freda
Rebecca gold mine, excavator operator Lovemore Nyanusanu (32) died on 13
October 2013 in a mud rush. At the Trojan nickel mine, Shepherd Muradzi (35), a
support rig assistant, lost his life in an underground tramming accident on 16
March 2014. I join with all of my colleagues in sending my most profound
condolences to the families of Lovemore and Shepherd and to their friends and
colleagues.
Apart from these two unfortunate losses, our overall safety record measured in
the Lost Time Injury Frequency Rates (LTIFRs) improved at the two producing
mines. Safety comes second to nothing at our operations. We ensure that our
employees and contractors are equipped and trained to work safely and to ensure
the safety of their colleagues.
As the past year started, members of the technical staff at Freda Rebecca were
engaged on replacing a leach tank that had failed in the previous year. The
replacement was finished in the year's second quarter and complemented by a
second leach tank. Simultaneously the team completed the pilot treatment plant
for retreating tailings. Despite some difficulties with the tailings pilot
plant's capital equipment, commissioning was nearing completion as the
financial year ended. At the time of writing, commissioning had been completed
which will allow thorough testing of the project.
An important part of our emphasis at Freda Rebecca has been and continues to be
on containing costs. While cash costs per ounce of gold remained comfortably
below gold prices for the entire year, by the fourth quarter all-in sustaining
costs (C3) were close to the gold price, due to the operation not achieving its
volume targets. I am, however, confident that by maximising gold production and
with careful cost controls the mine will continue to operate profitably. Our
policy is to mine profitable ore - we are not in the business of producing at
any cost.
While Freda Rebecca was being brought up to steady-state, profitable
operations, production at BNC's newly re-opened Trojan mine was being ramped up
to full capacity. The year under review was the first operating period since
operations were placed on a care-and-maintenance basis in 2008. As the
financial year began, we were faced with having to re-evaluate our operating
strategy in the light of sharply declining nickel prices.
We had hoped to raise additional capital to build operations, but this proved
to be impractical as investors shied away from nickel as the metal's price fell
sharply. Our response was to introduce a modified mining sequence, based on the
results from drilling carried out during care and maintenance. This mining
method was evaluated thoroughly by our consultants, SRK, who confirmed it as
safe, feasible and not impacting on the life of mine (LoM). This strategy has
proved its worth as nickel prices rose towards the year's end in response to
Indonesia's restrictions on exports of nickel ore. Our confidence in the
sustainability of nickel's price advance and the successful restart of Trojan
has allowed us to reverse a substantial part of the previous year's impairment
of BNC's assets.
While this reversal has a significant positive effect on the year's reported
headline earning, it is, perhaps, best to remember that this has no effect on
the group's cash flow. For the foreseeable future BNC will be conserving cash
to fund the Trojan mine's deepening and capacity development from internal
resources. Cash flow will continue to be directed at clearing BNC's legacy
liabilities or debt, strengthening the balance sheet and laying the foundation
for the first profits to be reported since 2008.
Once that is completed, and adding to the benefits of the mining developments,
we are embarking on the current project to restart the BNC smelter, to move our
nickel operations up the value chain.
Preliminary planning started in the year under review and, based on the restart
plan reviewed by consultant Hatch Goba, we estimate that the project can come
on stream in the first half of 2015 with a capacity to process an annual
160,000 tonnes of concentrate, of which approximately one-third will be drawn
from other local nickel miners. The capital cost is estimated at $26.5m of
which half will be debt and the remainder will come from BNC's improved cash
resources and cash flow. The project is expected to generate financial benefits
on two important fronts - an increase in profit from selling nickel leach alloy
rather than concentrate and a reduction in transport costs as we ship leach
alloy rather than concentrate.
In South Africa, the management of our diamond interests reflects our careful
approach to operations. Following extensive damage caused by the flooding of
underground workings in 2010 and 2011, the Klipspringer mine was placed on care
and maintenance, where it remains pending our securing funding to re-establish
underground mining.
We remain, however, confident of the longer-term potential of Klipspringer's
diamondiferous kimberlite fissure deposits and will retain the asset. In
October 2013 we entered into an agreement with Greenhurst Mining & Exploration
to recover diamonds from the old Marsfontein slimes dumps. Greenhurst brought
in a new process for recovering micro-diamonds, a process that has proved its
worth at the slimes recovery operation. During the second half of the year
under review 28,600 carats of small diamonds were recovered and sold at an
average price of $21 per carat. Revenue from this recovery operation is
directed at covering the property's care-and-maintenance costs.
Continuing care and maintenance has ensured that underground workings could be
restored to initial production within four months followed, three months later,
by the preliminary sales of diamonds. In round figures, we estimate that the
capital investment required will be approximately $4m and the pay-back on the
project will be 28 months. Discussions are taking place with a number of
off-takers to source funding.
Full details are contained elsewhere in this report, but at our Zani-Kodo gold
prospect in the Ituri district of the north-eastern DRC where we are partnered
by the state-owned mining company Société des Mines d'Or de Kilomoto (SOKIMO),
drilling allowed us to increase the size of our gold resource to 2.97m ounces.
Metallurgical testing was largely completed in the year under review and we
have entered the current year examining various plant-design options to be
built into a project feasibility study based, initially, on the Kodo Main
property. The area is a highly-prospective zone of gold-bearing greenstone
deposits with other major gold companies actively drilling and exploring near
our permit areas.
Our other interests in diamonds are limited to minority stakes in prospects in
the DRC, Angola and Botswana. Though they are comparatively small interests at
present, they do not involve Mwana investing in exploration and development and
we look upon them as long-term projects to be undertaken with our partners at
some point in the future.
While our understanding of our Zimbabwean and South African resources is well
developed, we also see opportunities in prospective ventures under exploration
in the Katanga and Orientale provinces of the DRC. Again, we are adopting a
cautious approach, steadily adding to the value of our properties' resources
while not wanting to over-extend our finances on exploration.
I believe it bears repeating that our strategy is to contain costs and, when
appropriate, to partner with others with whom we can share them. This is
particularly the case with our copper/cobalt prospect in the DRC's Katanga
province where we are partnered in a joint venture between SEMHKAT and Zhejiang
Hailiang Company Limited, the Shanghai listed copper tubes fabricator. In terms
of the agreement, Hailiang will finance the costs of exploring and drilling 28
of our 34 copper permit areas at a total cost of $25m over four years, thereby
buying into an interest in the venture. In the year under review, Hailiang
spent $7m on exploration, which is subject to audit and verification. Targets
have been selected based on data collected from the year's field prospecting
season. Drilling and further regional prospecting has just begun.
From a personal standpoint, I have again found working with my colleagues to be
stimulating and I thank them sincerely for their contributions to the
development of Mwana Africa in a year which has seen the company and our future
potential and prospects change dramatically. Their contributions have been made
at a sometimes substantial individual personal cost. The board and staff
members have voluntarily made salary sacrifices which have helped us mitigate
falling commodity prices. I express my sincere thanks to each of the
individuals who have made these sacrifices and contributed to the company's
continued progress during the year.
There have been difficulties, but they have been overcome with confidence and
dedication and the company is now on a sound footing from which to develop
further.
Kalaa Mpinga
Chief Executive Officer
Review of operationsand exploration
Gold
Freda Rebecca gold mine- Zimbabwe
The Freda Rebecca gold mine (Freda Rebecca) is situated near the town of
Bindura, some 90km north-east of Harare.
Total gold production for the year ending 31 March 2014 was 58,704oz, 7.3% down
on the previous year's production of 63,350oz. A significant contributor to the
variance was a leach tank failure in the last quarter of FY2013, which affected
recovery during the first quarter of FY2014. The failed leach tank was replaced
during the past year and a new, additional leach tank has also been
commissioned. Recoveries have now been restored. Closure for the environmental
clean-up was successful, with additional lined spill containment ponds being
completed in the year.
Average quarterly production for the financial period was 14,676ozs of gold,
and the highest level of quarterly gold production was 17,536ozs, achieved in
the second quarter.
Tailings retreatment project
The mine, which has been in production since 1988, has accumulated some 13
million tonnes of gold-bearing tailings in three main storage facilities within
the mine lease area. During FY13, the economic potential of recovering gold
from Freda Rebecca's tailings dumps was evaluated and the construction of a
pilot recovery plant initiated. The plant was completed and commissioning began
in the year ended 31 March 2014.
The objective of the pilot scale test plant is to prove that gold can be
recovered economically from the tailings with little reprocessing and low
mining and handling costs. An augering programme over the dumps is expected to
result in a JORC-compliant mineral resource that has the potential to add
significantly to Freda Rebecca's gold production.
Freda Rebecca continues to focus on mining and processing efficiencies,
particularly on increasing plant throughput and recovery improvement.
Freda Rebecca production results:
Year ended March 2014 Year ended March 2013
('FY14') ('FY13')
Tonnes mined (t)
Tonnes milled (t) 1,098,244 1,043,764
Head grade (g/t) 1,060,561 958,568
Recovery (%) 2.10 2.64
Gold sales (oz) 82 81
Average gold price ($/oz) 58,704 65,350
received
($/oz) 1,319 1,654
Cash cost (C1)
($/ 959 897
All-in sustaining cost oz)
(C3) 1,186 1,115
Freda Rebecca resources:
Classification Cut-off (g Tonnes Grade Au (g Gold
/t) ('000t) /t) ('000oz)
Indicated 1.5 21,043 2.48 1,675
Inferred 1.5 8,746 2.28 640
Total 1.5 29,789 2.42 2,315
The effective date for the Freda Rebecca resource estimate is April 2011
Zani-Kodo project - Democratic Republic of Congo(DRC)
The Zani-Kodo gold exploration project in the Ituri district of the DRCcovers
gold mining rights over 1,605 square kilometres in the Orientale Province.
Mwana is in a joint venture with the state-owned Office des Mines d'Or de
Kilomoto (SOKIMO) which holds a 20% free-carry interest. The licence areas
contain a series of greenstone belts of Kibalian age which have the potential
to host world-class gold deposits. Zani-Kodo is situated between the Kibali
(formerly Moto Mines) Project (RandgoldResources/AngloGold Ashanti joint
venture) and the Mongbwalu Project (AngloGold Ashanti).
The Zani-Kodo project total combined JORC-compliant gold resource now stands at
2.97Moz at 2.43g/t(based on a cut-off grade of 0.5 g/t). This is an increase of
13% on the February 2013 resource statement, which was itself a 30% increase on
the February 2012 resource statement.
Zani-Kodo resources as at August 2013:
Sub area Category Tonnes (t) Grade (g/t) Au (oz)
Kodo Main Indicated 4,799,487 3.63 560,197
Inferred 10,330,969 3.52 1,169,293
Lelumodi Indicated 1,118,644 2.06 74,097
Inferred 8,154,092 1.81 474,563
Lelumodi North Inferred 1,150,062 2.34 86,532
Badolite Inferred 2,806,940 2.34 211,197
Zani Central Inferred 9,683,455 1.28 398,547
TOTAL 38,043,649 2.43 2,974,426
In response to lower commodity prices and in line with the company's strategy
of cutting costs, Mwana suspended exploration drilling at Zani-Kodo during Q2
of FY14. Prior to the cessation of drilling, 42 diamond core drill holes for a
total of 11,268m were completed. Results include 9m @ 6.46g/t Au and 4m @ 8.33g
/t.
Test work carried out on samples taken from the Kodo Main orebody found the ore
to be non-refractory and showed higher than 90% gold extraction across all the
recovery methods tested.
As part of feasibility work underway at Kodo Main, a resource-conversion
drilling programme was completed in 2014. This will be followed by a
geotechnical drilling programme and regional field investigations will continue
during FY2015.
Nickel
Bindura Nickel Corporation (BNC) -Zimbabwe
BNC has been listed on the Zimbabwe Stock Exchange since 1971. Located near the
Freda Rebecca gold mine close to the town of Bindura, north-east of Harare, BNC
is Africa's only integrated nickel mining, smelting and refining operation.
Historically, ore from the company's Shangani and Trojan mines, with a combined
hoisting capacity in excess of two million tonnes of ore per year, was
concentrated and fed, along with concentrate from third parties, to BNC's
smelter and refinery.
BNC's mines, smelter and refinery were placed on care and maintenance in 2008
and remained so until the conclusion of BNC's rights issue and restructuring in
September 2012when mining restarted at the Trojan nickel mine.
The restart involved the refurbishment of the handling facilities for the
surface milling flotation, tailings and concentrate. The cold commissioning of
the electrical and mechanical circuits of thefeed conveyors, mills, flotation
circuits, concentrate handling and tailings handling was completed in January
2013 by passing water through the processing plant circuits. The hot
commissioning, with the introduction of ore into the milling circuit, commenced
shortly afterwards.
Progress on surface was matched by a successful ramp up of underground
operations. In April 2013, BNC sold its first shipment of nickel concentrate
since the restart to Glencore, BNC's offtake partner.
As a result of depressed nickel prices, additional financing to fund full ramp
up was not secured. BNC began reviewing options to resolve this cash shortfall
including considering alternative mine plans at Trojan and seeking bridging
finance.
During Q1 of FY14, the Trojan mine plan was revised to target the higher-grade
zones of the orebody, known as 'massives', with the aim of reducing the cost
per tonne of nickel produced. The impact of this was already being seen in the
first six months, with a drop in cash costs from $19,251/t in Q1 to $9,689/t in
Q2. In October 2013, a competent person's review of BNC's business plan for
Trojan's operations concluded that the plan was realistic and achievable. This
enabled BNC to update its ore reserves statement to total proven and probable
reserves of 3.168Mt at an average grade of 1.04% for 32,975 tonnes of contained
nickel. This denotes a 28% increase on the previously reported Trojan reserves
of 25,810 tonnes of contained nickel.
Work has commenced on the Trojan shaft re-deepening project which had been
suspended while the mine was on care and maintenance. The re-deepening will
extend the operating horizon of Trojan from 35 level to 45 level and secure the
life of mine of the Trojan asset.
Trojan mine is making continued progress towards steady-state processing of
195,000t per quarter and the increase in tonnes milled indicates more
consistent, efficient operation of the mills.
BNC Trojan mine production results for FY14:
Total Q4 Q3 Q2 Q1
Tonnes mined (t) 595,656 161,964 159,600 158,694 115,398
Tonnes milled (t) 589,637 153,451 133,221 154,552 148,413
Nickel head grade % 1.382 1.621 1.730 1.597 0.652
Recovery (%) 86.2 88.8 87.5 88.6 70.7
Ni in concentrate (t) 7,026 2,207 2,016 2,117 686
Nickel sales (t) 7,129 2,250 2,651 1,505 723
Average nickel price ($/t) 14,298 14,075 13,870 13,787 15,460
Cash cost (C1) ($/t) 11,567 11,333 11,181 9,689 19,251
All-in sustaining cost (C3) ($/t) 12,462 12,220 11,819 10,390 21,521
BNC reserves:
Tonnes Grade Nickel
Classification of
reserves ('000t) (%) (t)
Proved
Trojan 1,908 0.707 13,485
Shangani - - -
Hunter's Road - - -
Probable
Trojan 1,002 1.37 13,721
Shangani - - -
Hunter's Road - - -
Total 2,910 0.93 27,206
BNC resources
Tonnes Grade Nickel
Classification of
resources ('000t) (%) (t)
Measured
Trojan 2,358 1.07 25,185
Shangani 1,840 0.58 10,750
Hunter's Road - - -
Total 4,198 0.85 35,935
Indicated
Trojan 1,507 1.41 21,883
Shangani 480 0.59 2,840
Hunter's Road 36,437 0.55 200,404
Total 38,424 0.58 225,127
Inferred
Trojan 3,755 1.69 63,407
Shangani 9,710 0.56 54,280
Hunter's Road - - -
Total 13,465 0.87 117,687
Note: SRK completed a competent person's report on the Trojan resource in March
2013 and this resource is based on that report, less the depletion from mining
(April 2013 to 31 March 2014) based on mining shapes from stoping and
development.
The effective date for the Trojan resource statement is 31 March2014, and, the
effective date for the Shangani resource statement is August 2008.
The effective date for the Hunter's Road resource estimate is May 2006. The
JORC-compliant Hunter's Road resource of 36,437kt is found in the West Ore body
of Hunter's Road and includes 2,377kt of resource which forms part of a 30m cap
of oxide ore mineralisation. In addition, in 1993, an Anglo American MinRED
estimate showed 11,000kt grading 0.43% Ni approximately 600m east of the West
Ore body of Hunter's Road which is not included in the resource shown above.
Copper
SEMHKAT - Katanga, DRC
The Mwana Group holds a 100% interest in 33 exploration concessions covering
4,845 square kilometres in the south-east of the DRC. The Katanga concessions
are otherwise known as SEMHKAT (Société d'Exploration Minière du Haut Katanga).
Exploration is focusing on sediment-hosted stratiform copper-cobalt,
iron-oxide-copper-gold (IOCG) occurrences as well as on showings of lead and
zinc.
The Hailiang Joint Venture, signed in February 2013, covers 27licence areas,
with a commitment by Hailiang to spend US$25m over a four-year period. In terms
of the joint venture agreement, the licences will be transferred into a
development company in which Mwana will hold a 38% non-dilutable stake. Also
underthe joint venture agreement, Hailiang had a six-month option over the
Kibolwe licence, which has expired.
Kibolwe is the most advanced of the SEMHKAT concessions and is located
approximately 150 kilometres north-west of Lubumbashi and 86 kilometres
south-west of the town of Likasi. Kibolwe is a near surface secondary enriched
sediment-hosted stratiform copper deposit. The dominant oxide mineral is
malachite with minor amounts of cuprite and tenorite, occurring within
weathered argillaceous limestones. The drilling programmes have outlined
near-surface, flat-lying mineralised units up to 40m thick, extending over a
strike of 1,500m.
The exploration programme to date includes:
* a high-resolution aeromagnetic and radiometric survey flown over the bulk
of the area (54,000 line km)
* 12,000m of drilling at the advanced Kibolwe surface deposit
* 5,700m drilling on extensions of Kibolwe
* 7,000m drilling at satellite targets within 10km of Kibolwe
* soil geochemical sampling of an area of approximately 1,500km2
* geophysical and geological mapping surveys
Following completion of the Phase 1 programme, which resulted in the statutory
shedding of 50% of ground holdings, Phase 2 work programme commenced in July
2013. The programme has been executed by three Hailiang sub-contractors
(Huakuan, Inner Mongolian and SinoMine) and the SEMHKAT technical team.
A target generation exercise was conducted and defined high-priority targets
for follow-up exploration during 2014. Eight targets were delineated at Lunsano
and reverse circulation drilling started. Other important targets were
delineated at Kitemena East, Kawesitu North, Lutobwe, Kifita and Lukosombi.
SEMHKAT commenced an exploration programme on Lutobwe, Lombe, Kapande and
Mifumbi.
Our joint venture partner will mobilise for the second year's exploration
programme. This includes six targets, with geochemistry and geophysics,
followed by drilling.
Diamonds
Klipspringer - South Africa
The Project consists of several en echelon (staggered or overlapping)
kimberlite fissures and blows trending in a northeast orientation, and includes
the Leopard Fissure, the Sugarbird Fissure, the Sugarbird Blow, the Kudu
Fissure, and the Kudu Blow, amongst others.
As a result of severe weather incidents in December 2010 and January 2011,
which flooded the shaft bottom and lower (7) level of the Leopard fissure, the
mine was placed on care and maintenance. Ultimate funding from Mwana has
continued to maintain the asset in a ready state and at the same time the
interest in the joint venture has increased to almost 70% due to non-investment
by the BEE partner in the working capital requirements of Klipspringer.
Care and maintenance will continue until a source of finance is secured to
restart the mine and has ensured that the mine will be in a position to take
advantage of favourable market conditions. The evaluation of options to re-open
the underground operation along the Leopard fissure will continue.
Klipspringer resource - Leopard fissure
Gross Net attributable
Gross Contained Contained
Tonnes grade diamonds Tonnes Grade diamonds
(millions) (cpht) (Mcts) (millions) (cpht) (Mcts)
Measured 0.211 51.57 0.109 0.148 51.57 0.076
Indicated 0.433 51.57 0.223 0.303 51.57 0.156
Inferred 1.565 83.00 1.299 1.095 83.00 0.909
Total 2.209 73.83 1.631 1.546 73.83 1.141
Notes: 211,000 tonnes of proven reserves at a grade of 51.57cpht have been
transferred to measured resources while the mine is on care and maintenance;
433,000 tonnes of probable reserves at a grade of 51.57cpht have been
transferred to indicated resources while the mine is on care and maintenance.
Slimes retreatment project
In October 2012 an agreement was signed with Greenhurst Mining and Exploration
to re-treat fine-residue tailings at Klipspringer on a profit sharing basis.
Construction and commissioning of the processing plant with a capacity of 50
tonnes per hour was completed by the end of September 2013. At steady state,
the plant is projected to produce from 15,000 to 20,000 carats per month from
the old Marsfontein fine residue tailings deposit.
In November 2013, Klipspringer sold its first parcel of diamonds (1,512cts)
under the Greenhurst agreement. During FY14, production of diamonds more than
doubled, quarter on quarter, as a result of the treatment of 16,000t of
fine-residue tailings, at an average grade of 88.5cts/100t. An average selling
price of $21/ct was achieved. Following process changes in the plant, including
screening improvements and a DMS surge bin, a substantial increase in
throughput is expected and thus a significant contribution to Klipspringer's
monthly care-and-maintenance costs should follow in FY15.
Year ended - March
2014
Tonnes treated 23,019
Carats
recovered 20,386
Grade (cpht) 88.60
Revenue $334,972
Carats -
unsold 4,444
Carats per hundredtonnes
The project will also be exploring other revenue-generating opportunities such
as diamond recovery from the tailings dump and the sale of washed aggregate
material for the building industry.
Other interests- Angola, DRC, Botswana
Angola - Camafuca Project
Five kimberlitic pipes intrude a valley and outcrop in the Chicapa River bed
and both sides of the river. Contained diamond content for the 5 pipes, a total
surface area of 167ha, quoted down to a depth of 145 metres is 23million
carats.
In 2005, the government approved the formation of the operating company,
Sociedade Mineira do Camafuca Lda., which was issued the mining license for the
Camafuca project. In terms of the shareholders agreement, Mwana will provide
the technical skills and manage the project implementation.
Mwana Africa has no further financial commitments to the development of
Camafuca and retains a free carried interest of 18% in the Camafuca project
through SoutherEra Diamonds.
DRC - Mbuyi Maya (MIBA)
The Mbuji Maya cluster in Kasai-Oriental Province of the DRC was recognised in
1946, 28 years after diamonds were recovered in the surrounding rivers. The
cluster consists of 11 elliptical kimberlites totalling in excess of 39 ha,
with associated elluvial and alluvial deposits.
Mwana holds a minority interest of 20% in this project through the Société
Minière de Bakwanga (MIBA). The company is in discussions with the DRC
government about the recapilization and restructuring of MIBA.
Botswana - BK16
In June 2008, Firestone Diamonds entered into an agreement with Mwana under
which it can acquire an 87.5% interest in the BK16 kimberlite in return for
carrying all costs to completion of bankable feasibility.
At present Mwana holds 55% of the shares in this project through a Botswana
registered company, Kenrod Engineering.
Financial review
Income Statement
Other Mwana
Freda Rebecca BNC Africa Group Total Group
$ million 2014 2013 2014 2013 2014 2013 2014 2013
Revenue 77.5 108.1 65.0 1.0 - - 142.5 109.1
Cost of sales (54.2) (57.9) (29.7) (0.6) - (0.4) (83.9) (58.9)
Gross profit/(loss) 23.3 50.2 35.3 0.4 - (0.4) 58.6 50.2
Other income 0.2 0.1 0.3 0.3 0.1 - 0.6 0.4
Freight and Insurance (0.4) - (11.7) (0.5) - - (12.1) (0.5)
expenses
General and (6.9) (7.5) (3.3) (3.0) (1.0) (1.1) (11.2) (11.6)
administrative expenses
Care and maintenance - - (1.3) (12.1) (0.6) (0.9) (1.9) (13.0)
expenses
Corporate costs - - - - (6.4) (8.5) (6.4) (8.5)
Operating profit 16.2 42.8 19.3 (14.9) (7.9) (10.9) 27.6 17.0
Retrenchment and - - (2.0) - (2.0) -
restructuring expenses
- -
Dividends received - 0.1 - - - 0.1
(Loss)/profit on sale (0.5) 0.1 - 0.2 (1.1) - (1.6) 0.3
of assets
Fair value adjustment - - - - - (0.4) - (0.4)
Foreign exchange gain - - 0.1 0.5 0.9 0.3 1.0 0.8
EBITDA (1) 15.7 42.9 19.4 (14.1) (10.1) (11.0) 25.0 17.8
Impairment loss - (0.3) - (43.7) (0.7) - (0.7) (44.0)
Impairment reversal - - 28.0 - - - 28.0 -
Depreciation (6.7) (5.5) (0.9) - (0.1) (0.2) (7.7) (5.7)
Finance income 0.1 - 0.2 0.3 - 0.3 0.3 0.6
Finance expense (0.5) (0.7) (0.5) (0.1) - - (1.0) (0.8)
Profit/(loss) before 8.6 36.4 46.2 (57.6) (10.9) (10.9) 43.9 (32.1)
income tax
Income tax credit/ (3.9) (9.6) 10.9 - (0.3) (1.8) 6.7 (11.4)
(expense)
Net profit/(loss) for 4.7 26.8 57.1 (57.6) (11.2) (12.7) 50.6 (43.5)
the year
Non-controlling (0.5) (0.8) (13.5) 15.7 - - (14.0) 14.9
interest
Net profit/(loss)
attributable to owners 4.2 26.0 43.6 (41.9) (11.2) (12.7) 36.6 (28.6)
of the parent
(1) Earnings before interest, impairments, tax, depreciation and amortisation.
The group reported revenue for the year of $142.5m (2013: $109.1m) and an
EBITDA (before impairments) for the year of $25.0m (2013: $17.8m). The net
profit for the year is $50.6m (2013: loss of $43.5m).
Freda Rebecca
During the year, Freda Rebecca sold 58,704 ounces of gold (2013: 65,350 ounces)
at an average price of $1,319 per ounce (2013: $1,654 per ounce) as well as
by-products, generating revenue of $77.5m (2013: $108.1m). Operating costs
during the period totalled $61.3m (2013: $65.3m) for the year. Profit before
tax for the year was $8.6m (2013: $36.4m).
Bindura Nickel Corporation
Revenue of $65.0m (2013: $1.0m) was generated through the sale of nickel in
concentrate (2013: sale of in-process inventories). Operating costs were $45.7m
(2013: $15.9m) increased from the previous year due to the restart of the
Trojan mine. BNC reported EBITDA (before impairments) of $19.4m (2013: loss of
$14.1m).
In the prior year 100% of BNC's non-current assets have been impaired in the
Group Financial Statements which resulted in an impairment loss of $43.7m.
During the current financial year, $28m of the impairment relating to the
Trojan mine was reversed. During the current year it became probable that BNC
would make taxable profits in the future and that deferred tax should be
recognised in their accounts. A net deferred taxation credit of $3.6m was
included in profit during the financial year in respect of impairments. See
note 35 which provides background and financial impact of this impairment and
reversal.
Other Mwana Africa group
The group, excluding BNC and Freda Rebecca, incurred operating costs of $7.9m
(2013: $10.9m).
Cash flow statement
Freda BNC Other Mwana Total Group
Rebecca Africa Group
$ million 2014 2013 2014 2013 2014 2013 2014 2013
Opening cash at 3.4 2.4 5.5 0.4 6.3 3.9 15.2 6.7
1 April 2013
Financing (6.1) (23.2) (1.5) 37.8 12.9 22.1 5.3 36.7
Equity issues - - - - 6.6 32.8 6.6 32.8
Loan finance
(net) (1.9) (1.7) - 4.7 - - (1.9) 3.0
Cash
transferred
(to)/from Group (4.0) (20.0) (2.3) 31.1 6.3 (11.1) - -
Sale of equity
investments - - - - - 0.4 - 0.4
Share issuance
to NCI - - 0.8 2.0 - - 0.8 2.0
Dividends paid
to NCI (0.2) (1.5) - - - - (0.2) (1.5)
Operations 4.8 24.2 0.2 (32.7) (16.4) (19.7) (11.4) (28.2)
Operating cash
flow 14.6 42.8 12.8 (15.8) (12.9) (10.7) 14.5 16.3
Change in
working capital (0.1) (1.9) (5.7) (7.5) 2.2 8.4 (3.6) (1.0)
Capital
expenditure (5.7) (8.6) (6.9) (9.4) - (0.4) (12.6) (18.4)
Capitalised
exploration - - - - (5.3) (15.3) (5.3) (15.3)
Taxation (4.0) (8.1) - - (0.4) (1.7) (4.4) (9.8)
Closing cash at 2.1 3.4 4.2 5.5 2.8 6.3 9.1 15.2
31 March 2014
Freda Rebecca
Positive cashflow of $14.6m(2013: $42.8m) was generated by operations during
the year. $0.1m(2013: $1.9m) was invested in additional working capital.
$5.7m(2013: $8.6m) was invested in capital expenditure.
Bindura Nickel Corporation
Positive cash of $12.8m was generated from operations compared to a negative
$15.8m utilised in the previous year. Capital expenditure was $5.7m (2013:
$7.5m). An additional $0.8m was generated by a share issue to the NCI
shareholder (2013: $2m from the rights issue).
Other Mwana Africa group
Mwana Africa (excluding BNC and Freda) saw operating cash outflow of $12.9m
(2013: $10.7moutflow). During the year, Mwana Africa invested $5.3m(2013:
$15.3m) on its portfolio of exploration prospects, $1.5min SEMHKAT (2013:
$3.8m) and $3.8min Zani (2013: $11.5m).
Balance sheet
Freda Rebecca BNC Other Mwana Total Group
Africa
Group
$ million 2014 2013 2014 2013 2014 2013 2014 2013
Non-current
assets 49.4 49.3 52.5 0.5 64.8 61.5 166.7 111.3
Current assets
(excl. cash) 17.3 13.7 13.1 9.0 1.4 1.4 31.8 24.1
Cash 2.1 3.4 4.2 5.5 2.8 6.3 9.1 15.2
Non-current
liabilities (18.8) (19.4) (18.9) (21.2) (1.5) (1.6) (39.2) (42.2)
Current
liabilities (11.3) (8.4) (24.3) (22.8) (3.3) (5.3) (38.9) (36.5)
Total equity 38.7 38.6 26.6 (29.0) 64.2 62.3 129.5 71.9
Non-controlling
interest (3.0) (2.6) (0.9) 13.4 - - (3.9) 10.8
Equity
attributable to 35.7 36.0 (25.7) (15.6) 64.2 62.3 125.6 82.7
owners of the
parent
At 31 March 2014, the group had cash balances of $9.1m (2013: $15.2m),
comprising $4.2m (2013: $5.5m) held by BNC and $4.9m (2013: $9.7m) held by
Freda Rebecca and other Mwana Africa group entities. The book value of
shareholders' equity for the group at the year-end was $125.6m (2013: $82.8m),
whereas for the company it was $175.5m (2013:$139.1m). The reason for company
equity being more than group equity is because of equity deficits for certain
subsidiaries included in the consolidated figure.
Freda Rebecca
Non-current assets of $49.4m were in line with the prior year (2013: increase
of $3.7m to $49.3m). Current assets increased by $3.6m (2013: $1.7m decrease)
to $17.3m (2013: $13.7m). This amount includes an increase in trade debtors of
$3.7m (2013: $3.3m decrease), a decrease in spares and inventory of $0.1m
(2013: $1.9m increase) and no change in other debtors (2013: $0.3m decrease).
The movement in non-current liabilities to $18.8m (2013: $19.4m) is contributed
to the interest on the IDC loan, the continued repayment of the IDC loan
facility as well as the increase in the environmental provision.
Bindura Nickel Corporation
The value of current assets increased by $4.1m (2013: $1.7m increase) to $13.1m
(2013: $9.0m) still being the result of the restart programme which
necessitates increased inventory. In the prior year, non-current assets
(excluding investments of $0.5m) of BNC wasimpaired and the non-current assets
of Trojan impaired in 2013 was reversed in the current financial year, as
described in note 35.
Other Mwana Africa group
The value of non-current assets increased to $64.8m (2013: $61.5m). Additional
exploration expenditure was capitalised during the year in accordance with the
group's policy.
GROUP LIQUIDITY
At 31 March 2014 the group held cash of $9.1m (2013: $15.2m). Included in the
group cash balance is $1.8m (2013: $1.7m) reserved for loan repayments in
relation to the IDC loan facility in Freda Rebecca. At 30 June 2014, the group
held cash of $7.3m (30 June 2013: $5.2m).
IDC FACILITY
Freda Rebecca Gold Mine has drawn down the full $10m of the IDC project loan
facility.
IDC Project
Loan
$ million 2014 2013
Opening
balance 6.1 7.9
Interest 0.4 0.6
Draw down - -
Repayments (2.2) (2.4)
Closing 4.3 6.1
balance
The facility is repayable in 10 equal instalments over a five-year period and
attracts an interest rate of US$LIBOR plus 5% with final repayment in 2016.
GOING CONCERN
The directors, after making enquiries and considering the uncertainties
described further in note 3: Basis of preparation to the financial statements
'going concern', believe that the company and the group will be able to access
the financial resources to continue in operational existence for the
foreseeable future. Accordingly they continue to adopt the going concern basis
in preparing the Annual Report and financial statements and these financial
statements do not include any adjustments that would result from the going
concern basis of preparation being inappropriate.
Overview of social and environmental responsibility
Mwana Africa's social and environmental responsibility is driven by its
passionfor creating a synergy between sustainable investments, sustainable
mining and sustainable communities. Mwana has consistently encouraged this
synergy by creating safe working environmentsfor staff, by positively
affectingthe communities in which it operates, and by minimising the
environmental impact of its activities. The company's major contribution to
surrounding communities and social partners is through a multi-faceted approach
of driving job creation, technical support of local businesses, the
empowermentof local contractors, and the purchase of goods and services from
local suppliers.
The Katanga concessions or SEMHKAT, which has 27 of its 33 exploration licences
in a joint venture with the Hailiang Group, is actively involved with the daily
management of the joint venture to ensure that standard operating procedures
are implemented.
The three main pillars of Mwana Africa's corporate social responsibility (CSR)
continue to be education, health, and support of small and medium enterprises
(SMEs) to help empower local business enterprises. This resonates with
government policies of requiring every investor to play a role in the
development of disadvantaged communities.
Stakeholder engagement
Stakeholder engagement with investors, employees, customers, community partners
and regulators and others is actively pursued. This is done through a variety
of formal and informal engagements, briefings, surveys, and feedback sessions
on issues raised.
Workplace safety
Mwana Africa recognises that exploration and mining have inherent levels of
risk. We regret deeply the loss of two workers this year - excavator operator
Lovemore Nyanusanu (32) at Freda Rebecca mine and support rig assistant
Shepherd Muradzi (35) at the Trojan nickel mine. We extend our sincere
condolences to their families, colleagues and friends.
At Freda Rebecca gold mine the implementation of proactive safety management
programmes resulted in a lost-time injury frequency rate (LTIFR) of 0.53 in our
2014 financial year, compared with 0.91 in 2013.
BNC achieved an LTIFR of 2.52. The company had progressed well until March 2014
when the fatality took place which resulted in 6,000 lost shifts as we moved to
assessed safety issues. The LTISR increased from 26 to 455.53. Some 600
managerial and non-managerial employees were trained on Behaviour Based Safety
and the system is currently in the implementation phase.
All our mines and exploration operations achieved extended periods in which no
lost-time injuries were reported. No exploration related incidents or accidents
were reported during FY14.
Freda Rebecca mine maintained OHSAS 18001 health and safety certification. The
Trojan mine is in the process of achieving similar accreditation in the very
near future.
Operations at Klipspringer remained on care and maintenance. At the mine's
slimes retreatment project, no safety, health or environment issues were
recorded during FY14. The mine recorded zero lost time injuries during the same
period.
Employee and community health
The principal health issues faced in the regions where Mwana Africa operates
are malaria, HIV/AIDS and waterborne diseases such as typhoid and cholera. The
company provides medicines, education and training for the prevention and
treatment of these diseases, as well as associated infections such as
tuberculosis. During FY14 there were two reports of malaria in SEMHKAT's
Lunsano camp. The contractors concerned were treated timeously and returned to
work within a week.
Freda Rebecca gold mine acts in partnership with the local Bindura municipality
to provide technical support for water reticulation. The mine also complements
municipal efforts in the provision of clean water programmes for outlying
communities to ensure access to safe water supplies. To date, 10 boreholes with
manual pumps have been donated to local communities. BNC runs its own water
treatment plant and has oxidation ponds for handling sewage.
Mwana's mine operations have all implemented community-wide HIV/AIDS management
strategies linked to the concept of overall wellness. They include awareness
and education campaigns, voluntary counselling and testing (VCT), and
health-care training.
At BNC and at Freda Rebecca, Mwana Africa staffs and funds the running of
clinics for employees and their families. Freda Rebecca and Trojan mine clinics
are certified Opportunistic Infections Clinics. Shangani mine has also applied
for this status and is being monitored. Trojan and Freda Rebecca are also
certified as Anti-Retroviral Therapy (ART) clinics and dispense anti-retroviral
(ARVs) medication supplied by the government to affected employees and their
dependents, as well as to members of the local community. Both Freda Rebecca
and BNC receive assistance from the Zimbabwean Business Council on AIDS (ZBCA).
BNC also runs anHIV/AIDS assistance project coordinated by the Swedish
Workplace HIV and AIDS Programme (SWHAP). The first phase of cooperation
involves the review and implementation of HIV/AIDS and wellness policies and
practices.
At BNC, a wellness programme is scheduled to be launched in the second quarter
of the new financial year. This intervention is expected to result in a
significant reduction in AIDS-related psycho-social problems faced by employees
and their families, and also in problems ensuing from the period of care and
maintenance. Safety, health, environment and quality (SHEQ) management systems
certification is planned for December 2015.
UNICEF donates primary health-care drugs to Freda Rebecca gold mine, which
passes on the unused portions to the local provincial hospital. Mine teams
assist where required with ambulance services for critical health emergencies.
All SEMHKAT personnel have access to one of two hospitals - the Panda Hospital
in Likasi and CMC in Lubumbashi.
Klipspringer does not have any employee and community health programmes running
at present, due to the underground mining operation not being in production.
At the Zani-Kodo gold project, a fresh-water borehole source has resulted in a
dramatic decrease in water-borne disease in Zani village. Mosquito nets have
been distributed to all employees and their families. We give monthly financial
support to the two local clinics and give Mwana staff free access to medication
from the hospital.
Employment and labour relations
At the year's end, Mwana Africa employed 1,605 people (2013: 1,560).
* Diversity
Preference during recruitment is given to members of the local community,
especially for unskilled and semi-skilled positions. At the Freda Rebecca mine
in Zimbabwe, 60% of the workforce is from the local town of Bindura. One third
of all staff members at BNC are drawn from the surrounding communities. With
the exception of some of the senior expatriate management, all employees in our
exploration operations come from the surrounding communities. All casual
employees at SEMHKAT are recruited locally. At the end of FY14, Klipspringer
mine employed 70 people, both employees and contractors, more than 80% of whom
are from local communities. A formal relationship with local leaders helps
ensure that local community members benefit from preferential recruitment
opportunities.
Male % Female %
Directors 6 100.0 - 0.0
Senior managers 165 88.2 22 11.8
Employees 1,368 96.9 44 3.1
* Labour relations
In all operations, joint consultative forums with employee leaders and unions
are conducted regularly and this has the effect of creating healthy labour
relations. The areas of mutual interest are generally wages, conditions of
employment, occupational health and safety and serious diseases such as HIV/
AIDS. No work stoppages were reported due to industrial action across the
group.
The Hailiang joint venture is actively assisted and encouraged to respect
relevant DRC law in connection with employees, contractors and local casual
workers. Regular meetings and inspections take place to monitor employment
processes.
BNC has an active workers' committee at the Trojan nickel mine and the workers
are free to join the trade union.
Community development
* Education
Freda Rebecca mine has continued to enhance its CSR footprint in the area of
education. This is being done in partnership with other stakeholders such as
the NGO Terre des Hommes (TdH). TdH provides school fees for some 100 children
at the Batanai Early Childhood Development Centre. Freda Rebecca mine is also
sponsoring five students working towards their degrees at the Zimbabwe School
of Mines, and offers scholarships on a case-by-case basis to
academically-gifted students from the local community.
BNC provides on-site primary school education, funds secondary schooling and
grants a number of scholarships to higher education institutions for employees'
children. The company also provides training opportunities for undergraduates
from different learning institutions, with Bindura University being given the
first priority.
The exploration project at Zani-Kodo in the DRC has constructed several
classrooms for schools in the vicinity and has refurbished the dormitory at the
adjacent secondary school. In addition, the project has also commissioned a
local carpenter to construct desks for local primary and secondary schools. The
project has also been involved in donating stationery to local schools and has
refurbished numerous community offices. Staff training in computer literacy
takes place on a continual basis.
Klipspringer does not provide any assistance in this regard due to its being
under care and maintenance. Detailed programmes are included in our social and
labour plan and will be implemented once the mine returns to steady state
production.
In Katanga, two local workers were provided with opportunities for part-time
study in English and management during 2013. This programme will continue and
be extended to benefit more local workers.
* Enterprise development
The exploration projects continue to reach out to surrounding communities in
the areas of routine road upgrades and the construction of access bridges. BNC
donates material such as waste rock to the local authority and other
institutions for road construction and building.
Freda Rebecca mine has consistently maintained the proportion of its local
procurement, with about 60% of total procurement sourced from local suppliers.
A considerable number of small business enterprises continue to be assisted by
Freda Rebecca mine in providing services to the mine and mine villages. The
mine also encourages and supports local entrepreneurial ventures.
BNC similarly sourced 76% of its total procurement locally. The remoteness of
Mwana's operations in Zani-Kodo necessitates that many supplies have to be
imported from Uganda, though fuel and some foodstuffs are sourced locally when
they are available.
The operations in Katanga source 15% of goods and services from local villages,
with the remaining 85% split between the towns of Likasi and Lubumbashi.
Villagers provide guard services for the camps, house and office.
Despite the limited nature of operations at Klipspringer, the mine strives to
ensure that goods and services are sourced from local suppliers. We estimate
that between 65 % and 75% of procurement spend was sourced from local
suppliers.
In 2012 (year), Bindura Estates (a wholly-owned subsidiary of Freda Rebecca
mine) began establishing a commercial farm on the arable portions of the mine's
lease areas. Bindura Estates successfully completed its first farming season in
FY14 and the results are encouraging in the areas of potato, soya bean and
maize farming, enhancing the local economy of Bindura and improving food
security. So far this venture has provided employment for more than 300 women
who have been engaged on a seasonal labour basis.
The limited income derived from diamond sales at Klipspringer does not allow
the mine to invest in infrastructure support or small business enterprises at
present. Klipspringer mine personnel and equipment are on stand-by during the
dry winter months to assist neighbouring land owners in combating the threat of
runaway veld fires that may damage property or lives, including wildlife.
Since the year-end, Mwana's Freda Rebecca gold mine and BNC have embarked on
further empowerment plans in the areas of education and mining, in
collaboration with Zimbabwe's Ministry of Youth, Indigenisation and Economic
Empowerment. The two companies have offered to adopt and partner with Bindura
Vocational College, providing $200,000 sponsorship for the college's
refurbishment over a period of five years. In the area of mining, Freda Rebecca
will be assisting young people by making available on a tribute basis its
special grant claim on areas adjacent to the mining lease. The mine will also
consider purchasing a stamp mill for the site for use by the beneficiaries and
offering initial set-up technical training.
Artisanal and small-scale mining
Where operations interact with artisanal gold miners, the company has
undertaken studies to better understand the issues of and challenges faced by
these populations. This is a prelude to formulating a strategy aimed at
improving these miners' working conditions. At Zani-Kodo in the DRC, PACT, an
American NGO, is assisting Mwana with this process.
Mwana Africa has also made progress with granting claims on a tributary basis
to more than 200 applicants on its ground holdings near Kwe Kwe, Zimbabwe. This
exercise is being conducted in conjunction with traditional leaders and the
relevant regulatory authorities. The potential exists to assist small-scale
miners with the viable exploitation of mineral resources and, in turn, provide
employment and improve the local economy.
Environmental impacts and mitigation
Mwana Africa limits the impact of its operations on the environment through
responsible waste disposal and prevention of pollution, and by optimising the
use of resources such as water, fuel and electricity. Proactivemeasures are
taken to conserve local biodiversity, and to re-establish habitats disrupted by
vehicle movement, waste-rock dumps and tailings dams.
In all but one of our operations, internal and external environmental audits
were completed. No significant non-compliances were found by Zimbabwe's
Environmental Management Authority. Freda Rebecca Mine has maintained its
ISO14001 certification for environmental practices. Continued air-quality
monitoring shows that the dust generated by mining activities is not at a level
that impacts negatively on employees' or community health.
BNC and the Zimbabwean Environmental Management Authority continue to monitor
discharges from the permitted sources of effluent. The restart at BNC
operations involved the re-establishment of sound environmental practices,
including programmes to reduce impacts, and the Trojan mine aims to obtain ISO
and OHSAS certification by December 2015.
Klipspringer continued during the year with external audits being conducted on
our environmental impacts, including water abstraction and water disposal. No
significant areas of non-compliance were recorded.
Regular inspections by SEMHKAT have been set up to monitor the environmental
impact of the joint venture's operations, followed by minuted meetings.
Mwana Africa recognises its obligation to rehabilitate the sites where it has
operated. The company has put financial provisions in place for costs
associated with the closure of the company's operations in Zimbabwe and South
Africa, as prescribed by local laws. These provisions are audited and reviewed
annually by independent consultants as prescribed by regulations.
Anti-corruption measures
The UK Bribery Act of 2010 updated and enhanced existing UK law on bribery and
ensured conformity with the requirements of the 1997 OECD anti-bribery
Convention. It is now among the strictest laws governing international
bribery, prohibiting actively bribing entities or persons in the context of
international business transactions and imposing heightened liability for
companies, directors and individuals. Mwana Africa PLC, as a company
incorporated/doing business in the UK, supports the law and has implemented
procedures to ensure compliance with the Act's requirements for strong,
effective anti-bribery policies and systems. Mwana Africa's proactive measures
protect it from strict liability that the Act would otherwise impute to a
company in the event of an unacceptable bribery attempt by any of its
individual officials. All of Mwana's executives have signed personal
commitments to respect the provisions and the intent of the UK Bribery Act of
2010 and best practices.
Supply chain management
Mwana Africa has also been an active participant in and contributor to the
ICGLR-OECD UN GoE Joint Forum on Responsible Mineral Supply Chains from
Conflicted-Affected and High-Risk Areas process which started with the first
consultation meeting with the mining sector on December 8, 2009 in Paris. The
Forum's Gold Supplement provides specific recommendations for gold producers,
refiners and exporters to establish controls and transparency in their supply
systems to ensure identifiable chain of custody. The recommendations vary
depending on the company's activity within the chain (refining mined gold,
original recycled/scrap gold, consolidated recycled/scrap gold, melted recycled
/scrap gold and/or mixed gold) because the risks of leakage are related to the
specific activities involved. Mwana Africa has regularly reviewed its
procedures to ensure its ongoing compliance with these recommendations and best
practices
Directors' report
The directors present their report and financial statements for the year ended
31 March 2014.
Principal activities
The group's main activities are exploration, development and production of
gold, nickel, copper and diamonds. Further information concerning the
activities of the group and its future prospects are contained in the
Chairman's letter on page 5 and the Review of operations and exploration on
pages 10to 17.
Business review
The Group profit before tax was $43.9m(2013: $32.1mloss). The profitfor the
year attributable to shareholders of the parent company was $36.6m(2013:
$28.6mloss). The directors do not recommend the payment of a dividend on
ordinary shares. As required by the Companies Act 2006, the company must
provide a fair review of the development and performance of the group during
the year ended 31 March 2014, its financial position at the end of the year and
likely future developments in the group's business. The information which
satisfies these requirements is to be found in the Chairman's letter on page 5,
the Chief Executive's review on pages 7 to 9, the Review of operations and
exploration on pages 10to 17, and the Financial review on pages 18 to 20.
Principal risks and uncertainties
The principal risks and uncertainties to which the Group is exposed relate to
changes in the market prices of gold, nickel and diamonds, resource and
reserves risk, processing risk, environmental risk, mining and operating risk,
financing risk and political risk.
Financing Risk
Mining is a capital intensive business and there is a risk that if finance is
not available for the development or further exploration of a project then the
value of the project may not be realised. Mwana's financing risk is linked to
the availability of funding in the capital and debt market which are impacted
by their perception of commodity and country risk. Mwana seeks to mitigate its
financing risk by diversifying its sources of finance for the development of
its projects.
Political Risk
There are political risks impacting the Group's operations in Africa, including
indigenisation regulations in Zimbabwe. Details of this risk and the actions
undertaken to mitigate it are detailed on page 30 of the Directors' Report
regarding Zimbabwean indigenisation.
Metal Price Risk
Fluctuations in metal prices can clearly affect the profitability of mining
operations. The Group seeks to protect itself from adverse fluctuations by
investing in projects which can operate economically in lower metal price
environments and by controlling operating costs. The Group uses no financial
instruments or hedging products to fix metal prices.
The impact of the metal prices on the performance of the period is assessed in
note 34.
Resource and Reserve Risk
There is a risk that estimates of Mineral Resources and Reserves overstate
their economic potential. This uncertainty could give rise to a situation where
a mine is, or becomes, commercially unviable.
The Group manages risk by ensuring that all Mineral Resource and Reserve
estimates are calculated by reference to internationally accepted standards (in
this case The Australian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves; "JORC").
In addition all Mineral Resource estimates published by the Group are signed
off by an independent qualified person.
Information about the resources and reserves is included in the review of
operations and exploration.
Processing Risk
There is a risk that the processing of ore to recover metal fails to deliver
recoveries expected and this may have the effect of reducing projected
profitability. All of the Group's existing mining operations have a long
history of economic production and the processing techniques used are well
understood. When the Group invests in new projects the metallurgical processes
are thoroughly tested and reviewed by independent consultants before any
investment is made.
Environmental Risk
Exploration and development of a project can be adversely affected by
environmental legislation and the unforeseen results of environmental studies
carried out during evaluation of a project. Once a project is in production
unforeseen events can give rise to environmental liabilities and or temporary
closure of mining operations.
The Group takes every care to comply with environmental legislation in the
countries in which it operates and designs its training and procedures to
minimise the environmental impact of operations.
The impact of the existing environmental obligations on the financial
statements is disclosed in note 29. The details of the mitigating actions
undertaken by the Group during the period are disclosed in the section
'Environmental Impact' of the Overview of Social and Environmental
Responsibility.
Mining and Operating Risk
Mining is an inherently risky activity and can involve ground instability,
failure of machinery and human error. The Group makes every effort to ensure
that these risks are minimised by ensuring that mining operations are
professional, that a high level of workforce training and education is
maintained and by prompt reporting of incidents to management.
Information about the Health and Safety framework at Freda Rebecca and BNC is
included in the section 'Workplace Health and Safety' of the Overview of Social
and Environmental Responsibility.
ZIMBABWEAN INDIGENISATION
In 2007, the Zimbabwean Government published the Indigenisation and Economic
Empowerment Act which made provision for the indigenisation of up to 51% of all
foreign owned businesses operating in Zimbabwe. Regulations in support of the
Indigenisation Act were published in February 2010 in preparation for the
implementation of the Act.
On 25 March 2011 the Minister of Youth Development, Indigenisation and
Empowerment published a notice in the government gazette promulgating the
Indigenisation and Economic Empowerment (General) Regulations in statutory
instrument 21 of 2010. The document sets out the requirements for the
implementation of the Indigenisation Act and its supporting regulations as they
pertain to the mining sector. These regulations include the requirement to
sell a minimum of 51% or a controlling interest to indigenous Zimbabweans.
During the year ended 31 March 2013, Mwana had disposed of 15% of Freda Rebecca
to an Indigenous Zimbabwean.
A community trust has been established in the year ended 31 March 2013 and
discussions are underway with this trust about a disposal of some shareholding
in Freda Rebecca to this trust. Furthermore, discussions remain on-going with
the Zimbabwean Government to determine any further impact on Mwana's
shareholding in its Zimbabwean assets.
The Board has considered the impact of the uncertainties stemming from
indigenisation risk on the financial statements as disclosed in note 3
regarding the basis of preparation of the financial statements and in the note
22 regarding investments.
KEY PERFORMANCE INDICATORS
Management monitors the group's liquidity requirement on a weekly basis.
Financial and operational performance is measured regularly and operational
updates are published quarterly.
Key performance indicators are specific to each area of the business:
Freda Rebecca
Key performance indicators include tonnes mined and processed, grade of
material delivered to plant, gold recovery, operating costs per ounce produced,
ounces of gold produced, financial performance and management of assets,
health, safety and environmental incidents including lost time events due to
injury. Refer to page 10 in the review of operations and exploration.
Bindura Nickel
Key performance indicators in respect of the Trojan Mine includes tonnes mined
and processed, grade of nickel delivered to the plant, nickel recovery,
operating costs per lb., tonnes of nickel in concentrate within specifications,
both in %MgO and moisture content. Other measures considered are financial
performance and management of assets, health, safety and environmental
incidents including lost time events due to injury. The remainder of the BNC
operations remain on care and maintenance, and the key performance areas
include maintenance and the operating integrity of all the assets and the
financial performance against the care and maintenance budget. Refer to page 12
in the review of operations and exploration.
Exploration projects
Key performance indicators include the addition of resource ounces in the case
of Zani and the identification of drill targets at SEMHKAT. Refer to pages 11
and 14 in the review of operations and exploration.
CHANGES IN SHARE CAPITAL
Details of changes in the share capital during the year are set out in note 27
to the financial statements.
CREDITOR PAYMENT POLICY
Each operating company in the group is responsible for agreeing the terms of
transactions, including payment terms, with suppliers and, provided that
suppliers perform in accordance with the agreed terms, it is the group's policy
that payment is made accordingly. Trade creditors of the group at 31 March 2014
represented 76 days (2013: 65 days) of annual purchases, including capital
expenditure.
Subsequent events
The post balance sheet events are described in note 36 to the financial
statements.
Directors
The current directors of the company are as follows:
Executive directors
KK Mpinga Chief Executive Officer
YC Kwan Finance Director - appointed 1 October 2013
Non-executive directors
SG Morris Interim Chairman (appointed as interim Chairman 24 February 2014)
YH Ning
YC Hu
JL Botha
The directors who left during the year were as follows:
OAG Baring Resigned 1 September 2013
JA Anderson Retired 27 September 2013
E Denis Retired 27 September 2013
DAR McAlister Resigned 30 September 2013
M Wellesley-Wood was appointed a director on 3 September 2013 and left on 24
February 2014.
Mr JL Botha and Mr SG Morris are retiring by rotation and being eligible, offer
themselves for re-election.
Mr YC Kwan was appointed as a director after the last annual general meeting
and in accordance with the Articles & Association retires at the forthcoming
annual general meeting. Being eligible, Mr Kwan offers himself for re-election.
The interests of the directors and their remuneration are described in the
Directors' remuneration report which is on pages 33 to 39.
Majorshareholdings
The share register records that the following shareholders held 3% or more of
the issued share capital of the company at 5 May 2014:
Shareholder Number of shares % interest
China International Mining Group Corporation 299,424,282 21.4
HSBC Client Holdings Nominee (UK) Limited 126,665,392 9.1
Yat Hoi Ning 106,709,262 7.6
Lynchwood Nominees Limited 49,381,326 3.5
Barclayshare Nominees Limited 44,241,658 3.2
Smart Landscape Holdings Limited 43,980,796 3.2
International financial reporting standards
The group has prepared its consolidated accounts for the year ended 31 March
2014 in accordance with International Financial Reporting Standards as endorsed
by the European Union ("IFRSs").
Directors' and officers' liability insurance
The company has purchased Directors' and officers' liability insurance which
remains in place at the date of this report.
Political contributions and charitable donations
Total contributions of $113,512 (2013: $799,205) were made during the year,
$58,914 (2013: $237,162) as political contributions and $54,599 (2013:
$562,043) as charitable donations.
Disclosure of information to auditors
The directors who held office at the date of approval of this Directors' report
confirm that, so far as they are each aware, there is no relevant audit
information of which the company's auditors are unaware; and each director has
taken all the steps that he ought to have taken as a director to make himself
aware of any relevant audit information and to establish that the company's
auditors are aware of that information.
Auditors
In accordance with Section 418 of the Companies Act 2006, a resolution to
appoint KPMG LLP as auditors of the company is to be proposed at the
forthcoming annual general meeting.
By order of the Board:
S Gilbert
Company Secretary
8 July 2014
Directors' remuneration report
Remuneration Committee
The Remuneration Committee comprising non-executive directors JL Botha
(Chairman) and SG Morris, reviews the performance of the executive directors
and sets and reviews the scale, structure and basis of their remuneration and
the terms of their service agreements, paying due regard to the interests of
shareholders as a whole and the performance of the company.
In determining the remuneration of executive directors, the Remuneration
Committee seeks to enable the company to attract and retain executives of the
highest calibre. The Remuneration Committee also makes recommendations to the
Board concerning the allocation of share options to employees. No director is
permitted to participate in discussions or decisions concerning his own
remuneration.
Remuneration policy
The policy on directors' remuneration is that the overall remuneration package
should be sufficiently competitive to attract and retain individuals of a
quality capable of achieving the group's objectives.
The remuneration policy is designed such that individuals are remunerated on a
basis that is appropriate to their position, experience and value to the
company.
The Remuneration Committee determines the contract terms, basic salary and
other remuneration for each of the executive directors, including performance
related share options, bonuses, pension rights and any compensation payments.
Executive remuneration package
The details of individual components of the remuneration package and service
and employment contracts are discussed below.
Basic salary and benefits
The policy is to review salary and benefits annually against competitive market
data and analysis, and adjust accordingly.
Bonus scheme
There is no formal bonus scheme in place. Bonus awards in respect of the year
ended 31 March 2014 are set out in the directors' remuneration report.
Share options
The company has outstanding options under an unapproved Share Option Scheme
adopted in 1997 (1997 Scheme) and a new scheme which was approved by
shareholders at the company's annual general meeting on 31 July 2007 (2007
Scheme). Details of option awards made under these schemes are detailed in note
33.
1997 Scheme
Under the 1997 Scheme unapproved share options were granted to directors and
employees by the Board. The company's policy on the granting of share options
is to make such awards that are necessary to recruit and retain executives.
The company has operated this scheme since 1997 where options were granted to
any employee, officer or director of the company or any subsidiary of the
company. The limit for options granted under this scheme was not to exceed 15%
of the number of issued ordinary shares from time to time.
The Board granted options at its discretion. The subscription price was fixed
by the Board at the price per share on the dealing day preceding the date of
grant.
These options vest immediately and may be exercised at any time within a
seven-year period from the date of the grant, unless the Board determines
otherwise. The options lapse if not exercised by the seventh anniversary of the
grant. It was the Board's policy to spread the vesting period for options
granted to employees over two to three years.
Unless the Board agrees otherwise, the right to exercise an option terminates
on the holder ceasing to be a participant, subject to certain exceptions, which
broadly apply in the event of death of the option holder or where the option
holder ceases to be a participant due to retirement, ill health, accident or
redundancy. In such a case, the option may be exercised within six months of
such event provided such exercise will take place within seven years of the
original date of grant.
2007 Scheme
The 2007 Scheme allows for awards of both tax approved options (approved
options) to be made to employees resident in the United Kingdom and unapproved
options (unapproved options), to be made to both resident and non-resident
employees. The company's policy on the granting of share options is to make
such awards that are necessary to recruit and retain executives. Details of
option awards made under this scheme are detailed in note 33.
The company has operated this scheme since December 2007 where options may be
granted to full-time employees and directors of the company or any subsidiary
of the company. The overall limit for options granted under this scheme and any
other employees' share scheme adopted by the company is, in any rolling 10-year
period, 10% of the issued ordinary share capital (including treasury shares) of
the company for the time being plus 8,100,000 ordinary shares. There is an
individual limit of a maximum of ordinary shares to the value of £30,000 in
respect of approved options.
Options may be granted when the Remuneration Committee determines, within 42
days of the announcement by the company of its full or interim results. Options
may be granted outside the 42-day period if the Remuneration Committee
considers there to be exceptional circumstances. Options must be granted
subject to performance conditions being satisfied. The performance conditions
must be objective and, save where the Remuneration Committee determines there
to be exceptional circumstances, the performance conditions must relate to the
overall financial performance of the company or the market value of ordinary
shares over a period of at least three years. The performance conditions can be
waived or amended by the Remuneration Committee if it determines that a change
of circumstances means that the performance conditions cannot reasonably be
met. No consideration is payable on the grant of an option and no option may be
granted after 31 July 2017.
The Remuneration Committee determines the exercise price before the options are
granted which cannot be less than the market value of the shares on the date of
grant.
The options can be exercised only on or after the third anniversary of the date
of grant provided the performance conditions have been satisfied or waived by
the Remuneration Committee. The options lapse if not exercised by the 10th
anniversary of the grant.
These options lapse when the option holder ceases to be an eligible employee.
In the case of death, a participant's personal representatives may exercise his
/her options within 12 months after the date of death. Where an option holder
ceases to be an employee by reason of injury, disability, redundancy, the
company that employs the option holder ceasing to be a subsidiary of the
company, retirement, pregnancy or in any other circumstances determined by the
Remuneration Committee, the options may be exercised within six months of the
termination of employment or such longer period as may be determined by the
Remuneration Committee.
Share incentives
The Share Incentive Scheme was approved by shareholders at the company's annual
general meeting on 31 July 2007. The Share Incentive Scheme is designed to
complement the Share Option Scheme to facilitate awards to selected executives
and managers. The Share Incentive Scheme permits the award of any one or a
combination of the following incentives:
the sale of ordinary shares on deferred payment terms;
share awards as part of a bonus scheme by way of nil cost options in
consideration of cash bonuses forgone on terms that would be determined by the
Remuneration Committee of the company; and
the issue of share appreciation rights either by the company or EBT (as defined
below).
The company has also adopted an Employees' Benefit Trust (EBT) which will
operate in conjunction with the Share Option Scheme and Share Incentive Scheme.
The EBT has not yet been utilised for this purpose and there have been no
awards under the Share Incentive Scheme since it was approved by shareholders.
Pensions
The company does not operate a pension scheme for executive directors but does,
according to the director's preference, contribute to the personal pension plan
of each executive director, or pays cash in lieu of such contributions up to a
specified maximum of 12.5% of salary. No pension contributions are made in
respect of non-executive directors.
Fees
The fees for non-executive directors are determined by the Board, having taken
independent expert advice on appropriate levels, and are reviewed on an annual
basis.
Service contracts
The service and employment contracts of the executive directors are not of a
fixed duration and therefore have no unexpired terms, but continuation in
office as a director is subject to re-election by shareholders as required
under the company's Articles of Association. The company's policy is for
executive directors to have service and employment contracts with provision for
termination of no longer than 12 months' notice.
The non-executive directors do not have service contracts. Letters of
appointment provide for termination of the appointment with up to three months'
notice by either party.
Details of the current directors' contracts or appointment dates are as
follows:
Executive directors Employer Date of contract
KK Mpinga Mwana Africa Holdings Limited 16 December 2009
YC Kwan Mwana Africa Holdings Limited 30 September 2013
Non-executive directors Employer Date of appointment
SG Morris Mwana Africa PLC 6 December 2005
JL Botha Mwana Africa PLC 4 January 2013
YH Ning Mwana Africa PLC 7 June 2013
YC Hu Mwana Africa PLC 4 July 2013
Directors' remuneration
The remuneration of the directors who held office during the year is as
follows:
Salary/ Annual Benefits Share-based 2014 2013
Director fee(1,2) bonus in kind payments
(5) (6) Total Total
$ $ $ $ $ $
KK Mpinga 480,189 - 82,954 149,454 712,597 1,269,686
YC Kwan (8) 119,104 - - 4,163 123,267 -
SG Morris (3) 49,627 - - - 49,627 158,028
JL Botha (3) 27,354 - - - 27,354 79,014
(10)
YH Ning (3) 24,813 - - - 24,813 72,429
YC Hu (3) 24,813 - - - 24,813 69,137
OAG Baring (4) 14,999 - 43,781 13,265 72,045 312,885
(11)
DAR McAlister 729,304 - 36,417 63,496 829,217 943,088
(11) (12)
JA Anderson (3) 22,332 - - - 22,332 118,520
(11)
E Denis (3) (7) 14,888 - - - 14,888 79,014
(11)
M 81,467 - - - 81,467 -
Wellesley-Wood
(9) (10) (12)
Total 1,588,890 - 163,152 230,378 1,982,420 3,101,801
1. Salaries for Mr Mpinga and Mr McAlister were increased with effect from 1 April
2013.
2. Salary for Mr Mpinga was reduced by 25% with effect from 1 September
2013.
3. The fees payable to Mr Morris, Mr Anderson, Mr Denis, Mr Botha, Mr Ning and Mr
Hu were decreased by 50% with effect from 1 July 2013.
4. Mr Baring was in receipt of a fee until June 2013 and benefits in kind in
respect of his role as Non-Executive Chairman until 31 August 2013.
5. No bonuses were awarded to any directors in respect of the year ended 31 March
2014. In August 2013 Mr Mpinga waived his bonus award of £330,000 ($541,492) in
respect of the year to 31 March 2013.
6. Benefits in kind relate to life and medical insurance and pension contributions
for Mr McAlister until 30 September 2013, to life and medical insurance for Mr
Baring until 31 August 2013 and to pension contributions and security services
for Mr Mpinga.
7. The fee is paid to Sapiensa Sprl, a company in which Mr Denis has an
interest.
8. Mr Y Kwan was appointed a director on 1 October 2013.
9. Mr M Wellesley-Wood was appointed Non-Executive Chairman on 3 September 2013
and left the board on 24 February 2014.
10. Mr Botha and Mr Wellesley-Wood were paid additional fees of £800 for attendance
at each board committee meeting since the beginning of December 2013, when
these payments were approved by the board.
11. Mr Baring resigned from the board on 1 September 2013, Mr Anderson and Mr Denis
retired from the board on 27 September 2013 and Mr McAlister resigned from the
board on 30 September 2013.
12. Basic salary includes ex gratia payments to Mr McAlister of £322,743 in
September 2013 and to Mr Wellesley-Wood of £15,000 in March 2014
Contributions in lieu of director's pensions were as follows:
2014 2013
Director $'000 $'000
KK Mpinga 60 65
YC Kwan - -
SG Morris - -
JL Botha - -
YH Ning - -
YC Hu - -
JA Anderson - -
E Denis - -
OAG Baring - 21
DAR McAlister 25 49
M Wellesley-Wood - -
Total 85 135
All contributions were either made to personal pension schemes of directors or
accrued for future payment to personal pension schemes.
Directors and directors' share interests
The directors during the year and their beneficial interests at the year-end
were as follows:
Ordinary shares of 1p each at 31 Ordinary shares of 1p each at
March 2014 31 March 2013
Number % Number %
Palanka Trust
(1) 16,227,260 1.16 16,227,260 1.45
Katema
Mukubayi Trust
(2) 19,981,415 1.43 19,981,415 1.78
KK Mpinga(3) 3,000,000 0.21 3,000,000 0.27
YC Kwan - 0.00 - 0.00
SG Morris 2,409,090 0.17 2,409,090 0.22
JL Botha 954,545 0.07 954,545 0.09
YH Ning(4) 406,133,544 29.10 242,878,827 21.70
YC Hu 454,545 0.03 454,545 0.04
OAG Baring(5)
(7) 2,652,976 0.18 3,080,879 0.28
DAR McAlister
(7) 1,000,000 0.07 1,000,000 0.09
JA Anderson(7) 1,190,909 0.09 1,190,909 0.11
E Denis (6)
(7) 1,454,545 0.10 1,454,545 0.13
M
Wellesley-Wood - 0.00 - 0.00
(1) Mr KK Mpinga controls the voting rights in Palanka Trust.
(2) Related to Mr KK Mpinga.
(3) In addition to the shares in Mwana Africa PLC, KK Mpinga also holds 666,667
shares in BNC. This equates to 0.06% in BNC.
(4) Includes 299,424,282 shares held by China International Mining Group
Corporation, a company in which Mr Ning has an interest.
(5) Held through Mr OAG Baring's personal pension fund.
(6) Includes 454,545 shares held by Sapiensa Sprl, a company in which Mr Denis
has an interest.
(7)Presented to the date of ceasing to be a director.
Directors' share options
Aggregate emoluments disclosed above do not include any amounts for the value
of options to acquire ordinary shares in the company granted to or held by the
directors. Details of directors' interests in shares held under option are
shown below:
Options
Options lapsed/ Options
Options granted cancelled exercised Options Latest
held at 31 during during during held at 31 Exercise expiry
Officer March 2013 the year the year the year March 2014 price(1) date
Unapproved Options - 1997 Scheme
1,000,000 - - - 1,000,000 79p 12/07/
KK Mpinga 2014
YC Kwan(2) - - - - - - -
SG Morris - - - - - - -
JL Botha - - - - - - -
YH Ning - - - - - - -
YC Hu - - - - - - -
OAG Baring(3) - - - - - - -
DAR McAlister - - - - - - -
(3)
JA Anderson(3) - - - - - - -
E Denis(3) - - - - - - -
M
Wellesley-Wood - - - - - - -
(3)
Unapproved Options - 2007 Scheme
20,000,000 - - - 20,000,000 10p 10/12/
KK Mpinga 2022
YC Kwan(2) - 3,000,000 - - 3,000,000 1.6p 03/10/
2023
SG Morris - - - - - - -
JL Botha - - - - - - -
YH Ning - - - - - - -
YC Hu - - - - - - -
OAG Baring(3) 2,800,000 - - - 2,800,000 9p 30/09/
2014
DAR McAlister 7,679,684 - - - 7,679,684 7p 10/12/
(3) 2022
JA Anderson(3) - - - - - - -
E Denis(3) - - - - - - -
M
Wellesley-Wood - 8,000,000 8,000,000 - - - -
(3)
Approved Options - 2007 Scheme
- - - - - - -
KK Mpinga
YC Kwan(2) - - - - - - -
SG Morris - - - - - - -
JL Botha - - - - - - -
YH Ning - - - - - - -
YC Hu - - - - - - -
OAG Baring(3) - - - - - - -
DAR McAlister 574,861 - - - 574,861 9p 10/12/
(3) 2022
JA Anderson(3) - - - - - - -
E Denis(3) - - - - - - -
M
Wellesley-Wood - - - - - - -
(3)
Exercise price is the weighted average of all share options held based on the
price at the grant date.
Presented from the date of appointment as a director.
Presented to the date of ceasing to be a director. The options are still held
by these previous directors where shown as held above.
No share options were exercised during the current or prior year.
The intrinsic values of all options which have vested during the year were nil
(2013: Nil).
No options have been awarded to directors between the year-end and the signing
of these accounts.
The market price of the company's shares on 31 March 2014 was 1.5 pence per
ordinary share and the highest and lowest share prices during the year were
4.65 pence and 1.1 pence respectively.
The agreements covering directors' options are available for inspection at the
company's registered office: Premier House, 10 Greycoat Place, London, SW1P
1SB. The company's register of directors' interests (which is also open to
inspection) contains full details of the directors' shareholdings and options
to subscribe.
Statement of corporate governance
The directors support the principles of good corporate governance. While not
mandatory for an AIM company, the directors have implemented, where practical
for a company of this size and nature, certain provisions of the principles of
good governance and code of best practices set out in the UK Corporate
Governance Code. The disclosures presented herein are limited and are not
intended to constitute a corporate governance statement as prescribed by the
Disclosures and Transparency Rules or the Companies Act.
The Board has also considered the guidance published by the Financial Reporting
Council concerning the internal control requirements of the UK Corporate
Governance Code, in line with the Turnbull Report. The Board regularly reviews
key business risks, via a number of properly constituted committees, in
addition to the financial risks facing the group in the operations of the
business.
The Board
The Board meets at least quarterly throughout the year. The Board is
responsible for formulating, reviewing and approving the group's strategy,
planning, budgets, acquisitions, risk, and environmental management.
The non-executive directors SG Morris and JL Botha are considered by the Board
to be independent of management and free from any business or other
relationship which could materially affect the exercise of their independent
judgement. Mr YH Ning and YC Hu have an interest in the Group's largest
shareholder China International Mining Group Corporation.
Directors have the facility to take external independent advice in furtherance
of their duties at the group's expense and have access to the services of the
Company Secretary.
The Board delegates certain of its responsibilities to the Audit, Remuneration
and Nomination Committees under clearly defined terms of reference.
Audit Committee
The Audit Committee meets at least twice during the year and is responsible for
ensuring that the financial performance of the company is properly reported on
and monitored, and for meeting the auditors and reviewing the auditors' reports
relating to the accounts. The committee also recommends the appointment of, and
reviews the fees of, the external auditors. It meets once a year with the
auditors without executive Board members present. The Audit Committee comprises
at least three members, two of whom shall be non-executive. The current
membership of the committee is Mr SG Morris (Chairman) and Mr JL Botha, both of
whom are non-executive, and Mr YC Kwan.
Remuneration Committee
The Remuneration Committee meets at least twice per year. It reviews the
performance of the executive directors and sets and reviews the scale,
structure and basis of their remuneration and the terms of their service
agreements paying due regard to the interest of shareholders as a whole and the
performance of the company. The Remuneration Committee comprises two
non-executive directors, Mr JL Botha (Chairman) and Mr SG Morris. The
directors' remuneration report appears on pages 33 to 39.
Nomination Committee
The role of the Nomination Committee is to recommend any new appointment of
directors to the board, based on the merits of the candidates and the relevance
of their background and experience. It periodically reviews the structure, size
and composition of the Board.
The committee comprises at least three members, two of whom shall be
non-executive directors. The committee is chaired by the Chairman of the Board,
Mr SG Morris. Mr JL Botha is the other non-executive member and Mr KK Mpinga is
also a member of the committee.
The nomination committee met twice during the year. The appointments of Mr YC
Kwan as Finance Director and Mr M Wellesley-Wood as non-executive Chairman were
considered and approved by the full Board.
Internal controls
The directors have overall responsibility for the group's internal control
effectiveness in safeguarding the assets of the group. Internal control systems
are designed to identify and mitigate the particular type of business,
operational and safety risks to which the group is exposed. Internal controls
can only provide a reasonable, but not absolute assurance against material
misstatements or loss.
The Board reviews the effectiveness of the internal controls through the Audit
Committee and through executive management reporting to the Board. Business
plans, budgets and authorisation limits for the approval of significant
expenditure, including investments are appraised and approved by the Board. The
Board also seeks to ensure that there is a proper organisational and management
structure with clear responsibilities and accountability.
It is the Board's policy to ensure that the management structure and the
quality and integrity of the personnel are compatible with the requirements of
the group.
The company complies with rule 21 of the AIM Rules for Companies regarding
dealings in the company's shares and has adopted a share dealing code to ensure
compliance by the directors and applicable employees.
Shareholder Relationships
During the year the executive directors met frequently with shareholders and
the investment community. This included formal road shows and presentations,
one-to-one meetings, analysts meetings and press interviews. The chief
executive officer and finance director regularly brief the Board on these
contacts and relay the views expressed.
Anti-Bribery and Corruption
Following introduction of the UK Anti-Bribery & Corruption Act, the Board
introduced a group policy in relation thereto. The Board takes a zero tolerance
approach to bribery and corruption and will uphold all laws relevant to
countering bribery and corruption in all jurisdictions in which the group
operates. The Board expect the highest standard of personal and professional
behaviour from all employees within the group and from external contractors and
third parties working or performing services on behalf of the group. The Board
will not tolerate any incidence of bribery and will take action against anyone
employed within the group, or associated with the group, who commits bribery.
The group's policy on bribery and corruption has been communicated to all
employees and contractors.
The Board has delegated oversight of the policy to the Audit Committee and has
appointed the finance director to act as the group's anti-bribery compliance
officer.
The group regularly monitors and investigates all allegations of fraud and
bribery and corruption and reports on all issues arising to the Board.
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF MWANA AFRICA PLC
We have audited the financial statements of Mwana Africa PLC for the year ended
31 March 2014 set out below. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the EU and, as regards the parent
company financial statements, as applied in accordance with the provisions of
the Companies Act 2006.
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we are
required to state to them in an auditor's report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company's members, as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities Statement set out on
page 40, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit, and express an opinion on, the financial statements
in accordance with applicable law and International Standards on Auditing (UK
and Ireland). Those standards require us to comply with the Auditing Practices
Board's Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on
the Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate
.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair view of the state of the group's
and of the parent company's affairs as at 31 March 2014 and of the group's
profit for the year then ended;
the group financial statements have been properly prepared in accordance with
IFRSs as adopted by the EU;
the parent company financial statements have been properly prepared in
accordance with IFRSs as adopted by the EU and as applied in accordance with
the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements
of the Companies Act 2006.
Emphasis of matter - carrying value of company investments
In forming our opinion on the financial statements, which is not modified, we
have considered the adequacy of the disclosures made in note 22 to the
financial statements concerning the carrying value of investments held by the
Company in the Zimbabwean operation of $96.5m (2013: $74.6m). As disclosed in
note 22, there are uncertainties linked to the implementation of the
Indigenisation Law in Zimbabwe. The possible impact of this law is uncertain
and causes doubt over the carrying value of the investments held by the
Company. The financial statements do not include the adjustments that would
result from the impact of the Zimbabwe indigenisation legislation on the
carrying value of the investment held by the company.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors'
Report for the financial year for which the financial statements are prepared
is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the
Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept by the parent company, or
returns adequate for our audit have not been received from branches not visited
by us; or
the parent company financial statements are not in agreement with the
accounting records and returns; or
certain disclosures of directors' remuneration specified by law are not made;
or
we have not received all the information and explanations we require for our
audit.
J Lowes (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
15, Canada Square, Canary Wharf
8 July 2014
Consolidated statement of profit and loss for the year ended 31 March 2014
2014 2013
Note $'000 $'000
Revenue 8 142,460 109,159
Cost of sales 10 (83,850) (59,051)
Gross profit 58,610 50,108
Other income 620 393
Freight and insurance expenses (12,098) (514)
General and administrative expenses (11,240) (11,594)
Care and maintenance expenses (1,890) (12,956)
Corporate expenses (6,442) (8,504)
Operating profit 10 27,560 16,933
Retrenchment and restructuring expenses (1) (2,004) -
Dividends received - 83
(Loss)/profit on sale of assets 11 (1,636) 257
Fair value adjustment (6) (388)
Foreign exchange gain 1,055 790
EBITDA (2) 24,969 17,675
Impairment loss 35 (671) (43,949)
Impairment reversal 35 27,987 -
Depreciation (7,631) (5,651)
Finance income 15 319 645
Finance expense 15 (1,033) (784)
Net profit/(loss) before income tax 43,940 (32,064)
Income tax credit/(expense) 16 6,655 (11,397)
Net profit/(loss) for the year 50,595 (43,461)
Net profit/(loss) attributable to:
Owners of the Parent 36,605 (28,641)
Non-controlling interest 13,990 (14,820)
Net profit/(loss) for the year 50,595 (43,461)
Earnings/(loss) per share
Basic earnings/(loss) per share (US cents) 19 2.89 (2.62)
Diluted earnings/(loss) per share (US cents) 19 2.89 (2.62)
The notes on pages 54 to 87 are an integral part of these consolidated
financial statements.
(1) Following a decision to reduce corporate costs, certain staff retrenchment
and once-off costs in respect of restructuring costs were incurred during the
year in respect of London, Johannesburg and DRC (SEMHKAT).
(2) Earnings before interest, impairments, tax, depreciation and amortisation.
Consolidated statement of comprehensive income for the year ended 31 March 2014
2014 2013
$'000 $'000
Profit/(loss) for the year 50,595 (43,461)
Other comprehensive loss
Items that are or may be reclassified subsequently to
profit or loss:
(884) (1,277)
Foreign currency translation differences
Other comprehensive loss for the year, net of income tax (884) (1,277)
Total comprehensive profit/(loss) for the year 49,711 (44,738)
Total comprehensive profit/(loss) attributable to:
Owners of the Parent 35,721 (29,918)
Non-controlling interest 13,990 (14,820)
Total comprehensive profit/(loss) for the year 49,711 (44,738)
These financial statements were approved by the Board of directors on 8 July
2014 and were signed on its behalf by:
SG Morris YC Kwan
Chairman Finance Director
Consolidated statement of financial position as at 31 March 2014
2014 2013
Note $'000 $'000
ASSETS
Non-current assets
Property, plant and equipment 20 81,355 49,283
Intangible assets 21 62,986 58,262
Investments 22 615 1,354
Deferred tax assets 17 19,406 1,186
Non-current receivables 23 2,288 1,268
Total non-current assets 166,650 111,353
Current assets
Inventories 24 12,994 11,206
Trade and other receivables 25 18,832 12,911
Cash and cash equivalents 26 9,089 15,194
Total current assets 40,915 39,311
Total assets 207,565 150,664
EQUITY
Issued share capital 27 99,572 95,162
Share premium 69,536 69,088
Reserves 97,157 96,526
Retained earnings (140,628) (177,949)
Total equity attributable to equity holders of the 125,637 82,827
parent
Non-controlling interest 3,284 (10,793)
Total equity 128,921 72,034
LIABILITIES
Non-current liabilities
Loan payable 28 2,446 4,273
Rehabilitation provisions 29 17,847 18,893
Other payables - 8,537
Deferred tax liabilities 17 18,878 10,506
Total non-current liabilities 39,171 42,209
Current liabilities
Trade payables 15,300 10,825
Accruals and other payables 30 21,568 16,481
Provisions 31 2,605 9,115
Total current liabilities 39,473 36,421
Total liabilities 78,644 78,630
Total equity and liabilities 207,565 150,664
The notes on pages 54 to 87 are an integral part of these financial statements.
These financial statements were approved by the Board of directors on 8 July
2014 and were signed on its behalf by:
SG Morris YC Kwan
Chairman Finance Director
Company statement of financial position as at 31 March 2014
2014 2013
Note $'000 $'000
ASSETS
Non-current assets
Property, plant and equipment 20 34 399
Investments 22 97,505 76,823
Total non-current assets 97,539 77,222
Current assets
Trade and other receivables 25 80,902 , 63,598
Cash and cash equivalents 26 1,420 1,585
Total current assets 82,322 65,183
Total assets 179,861 142,405
EQUITY
Issued share capital 27 99,572 95,162
Share premium 69,536 69,088
Reserves 2,933 1,418
Retained earnings 3,416 (26,607)
Total equity attributable to equity holders of 175,457 139,061
the company
LIABILITIES
Current liabilities
Accruals and other payables 30 4,404 3,344
Total liabilities 4,404 3,344
Total equity and liabilities 179,861 142,405
These financial statements were approved by the Board of directors on 8 July
2014 and were signed on its behalf by:
SG Morris YC Kwan
Chairman Finance Director
Consolidated statement of cash flows for the year ended 31 March 2014
2014 2013
Note $'000 $'000
Cash flows from operating activities
Profit/(loss) before income tax 43,940 (32,064)
Adjustments for:
Foreign exchange movements (1,055) (349)
Depreciation 7,631 5,943
Fair value adjustments 6 413
Charge in relation to share-based payments 512 342
(Decrease)/increase in rehabilitation provisions (1,046) 210
Decrease in other provisions (9,947) (1,743)
Increase in environmental assets - (96)
Impairment loss 671 43,949
Impairment reversal (27,987) -
Loss/(profit) on sale of non-current assets 1,636 (257)
Finance income (319) (1,435)
Finance costs 1,033 784
15,075 15,697
Increase in inventories (1,788) (3,153)
(Increase)/decrease in trade and other receivables (10,813) 2,766
Increase/(decrease) in trade and other payables 9,074 (980)
11,548 14,330
Finance costs (1,033) (743)
Income tax paid (4,421) (9,784)
Net cash from operating activities 6,094 3,803
Cash flows from investing activities
Additions to property, plant and equipment (12,770) (18,389)
Investment in intangible exploration assets (5,235) (15,331)
Proceeds from sale of property, plant and equipment 49 340
Proceeds on sale of investments - 412
Finance income 319 1,435
Net cash used in investing activities (17,637) (31,533)
Cash flows from financing activities
Proceeds from issue of share capital 6,990 33,845
Share issue expenses (413) (1,054)
Dividends paid to non-controlling interests (150) (1,462)
Share issuance to NCI 837 2,015
Loans advanced - 4,708
Loans repaid (1,827) (1,734)
Net cash from financing activities 5,437 36,318
Net (decrease)/increase in cash and cash equivalents (6,106) 8,588
Cash and cash equivalents at beginning of the year 15,194 6,696
Exchange rate movement on cash and cash equivalents
at beginning of year 1 (90)
Cash and cash equivalents at end of the year 26 9,089 15,194
Company statement of cash flows for the year ended 31 March 2014
2014 2013
Note $'000 $'000
Cash flows from operating activities
Profit/(loss) before income tax 29,307 (39,872)
Adjustments for:
Depreciation 88 74
Fair value adjustments 395 -
Foreign exchange movements (2,234) (314)
Loss on sale of non-current assets 1,080 4
Charge in relation to share-based payments 512 225
Impairment loss - 35,107
Impairment reversal (35,044) -
Finance income (776) (715)
(6,672) (5,491)
Increase in trade and other receivables (972) (5,348)
Increase in trade and other payables 63 1,204
Net cash used in operating activities (7,581) (9,635)
Cash flows from investing activities
Additions to property, plant and equipment (10) (412)
Acquisition of investments - (24,982)
Proceeds from sale of non-current assets 17 4
Finance income 776 715
Net cash generated by/(used in) investing activities 783 (24,675)
Cash flows from financing activities
Proceeds from issue of share capital 6,990 33,845
Share issue expenses (413) (1,054)
Net cash from financing activities 6,577 32,791
Net decrease in cash and cash equivalents (221) (1,519)
Cash and cash equivalents at beginning of the year 1,585 3,104
Exchange rate movement on cash at beginning of year 56 -
Cash and cash equivalents at end of the year 26 1,420 1,585
Consolidated statement of changes in equity for the year ended 31 March 2014
Share Share Translation Treasury Share based
capital premium reserve stock(1) payments
$'000 $'000 $'000 $'000 $'000
88,817 42,641 96,385 (1,719) 5,177
Balance as at
31 March 2012
Loss for the - - - - -
year
Foreign
currency - - (1,277) - -
translation
differences
Total
comprehensive - - (1,277) - -
loss for the
year
Contributions
by and
distributions
to owners
Issue of
ordinary 6,345 27,501 - - -
shares
Share issue - (1,054) - - -
expenses
Sale of
interest in - - - - -
subsidiary
Participation
in subsidiary - - - - -
rights issue
Dividends paid - - - - -
by subsidiary
Share-based
payment - - - - 342
transactions
Share-based
payment - - - - (2,382)
reversals
Total
contributions
by and 6,345 26,447 - - (2,040)
distributions
to owners
Balance as at 95,162 69,088 95,108 (1,719) 3,137
31 March 2013
Total equity
attributable
to equity
Total Retained holders of Non-con-trolling Total
reserves earnings the parent interest equity
$'000 $'000 $'000 $'000 $'000
Balance as 231,301 (149,810) 81,491 (3,527) 77,964
at 31 March
2012
Loss for the - (28,641) (28,641) (14,820) (43,461)
year
Foreign
currency (1,277) - (1,277) - (1,277)
translation
differences
Total
comprehensive (1,277) (28,641) (29,918) (14,820) (44,738)
loss for the
year
Contributions
by and
distributions
to owners
Issue of
ordinary 33,846 - 33,846 - 33,846
shares
Share issue (1,054) - (1,054) - (1,054)
expenses
Sale of
interest in - (2,849) (2,849) 3,254 405
subsidiary
Participation
in subsidiary - 969 969 5,764 6,733
rights issue
Dividends
paid by - - - (1,464) (1,464)
subsidiary
Share-based
payment 342 - 342 - 342
transactions
Share-based
payment (2,382) 2,382 - - -
reversals
Total
contributions
by and 30,752 502 31,254 7,554 38,808
distributions
to owners
Balance as at 260,776 (177,949) 82,827 (10,793) 72,034
31 March 2013
The treasury stock reserve represents the market value of Mwana Africa PLC
shares which were purchased, but not cancelled. This is held at the value on
the date of purchase.
Consolidated statement of changes in equity for the year ended 31 March 2014
(continued)
Share Share Translation Treasury Share based
capital premium reserve stock(2) payments
$'000 $'000 $'000 $'000 $'000
95,162 69,088 95,108 (1,719) 3,137
Balance as at
31 March 2013
Profit for the - - - - -
year
Foreign
currency - - (884) - -
translation
differences
Total
comprehensive - - (884) - -
income for the
year
Contributions
by and
distributions
to owners
Issue of 4,410 - - [DEL:-:DEL] -
ordinary shares
Dividends - - - - -
Premium on
share issue - 2,101 - - -
less expenses
Disposal of - (1,653) - 1,719 -
treasury stock
Share-based
payment - - - - 512
transactions
Share-based
payment - - - - (716)
reversals
Total
contributions
by and 4,410 448 - 1,719 (204)
distributions
to owners
Balance as at 99,572 69,536 94,224 - 2,933
31 March 2014
Total equity
attributable
to equity
Total Retained holders of Non-con-trolling Total
reserves earnings the parent interest equity
$'000 $'000 $'000 $'000 $'000
Balance as 260,776 (177,949) 82,827 (10,793) 72,034
at 31 March
2013
Profit for - 36,605 36,605 13,990 50,595
the year
Foreign
currency (884) - (884) - (884)
translation
differences
Total
comprehensive (884) 36,605 35,721 13,990 49,711
income for
the year
Contributions
by and
distributions
to owners
Issue of
ordinary 4,410 - 4,410 837 5,247
shares
Dividends - - - (750) (750)
Premium on
share issue 2,101 - 2,101 - 2,101
less expenses
Disposal of
treasury 66 - 66 - 66
stock
Share-based
payment 512 - 512 - 512
transactions
Share-based
payment (716) 716 - - -
reversals
Total
contributions
by and 6,373 716 7,089 87 7,176
distributions
to owners
Balance as at 266,265 (140,628) 125,637 3,284 128,921
31 March 2014
(2) All of the treasury shares were sold by the Company pursuant to the 20
September 2013 placing.
Company statement of changes in equity for the year ended 31 March 2014
Share
based
Share Share Treasury payments Retained Total
capital premium stock(1) (2) earnings equity
$'000 $'000 $'000 $'000 $'000 $'000
Balance as at 31 88,817 42,641 (1,719) 5,177 10,883 145,799
March 2012
Loss for the year - - - - (39,872) (39,872)
Total
comprehensive - - - - (39,872) (39,872)
loss for the year
Contributions by
and distributions
to owners
Issue of ordinary 6,345 - - - - 6,345
shares
Premium on share
issue less - 26,447 - - - 26,447
expenses
Share-based
payment - - - 342 - 342
transactions
Share-based - - - (2,382) 2,382 -
payment reversals
Total
contributions by 6,345 26,447 - (2,040) 2,382 33,134
and distributions
to owners
Balance as at 31 95,162 69,088 (1,719) 3,137 (26,607) 139,061
March 2013
Profit for the - - - - 29,307 29,307
year
Total
comprehensive - - - - 29,307 29,307
profit for the
year
Contributions by
and distributions
to owners
Issue of ordinary 4,410 - - - - 4,410
shares
Premium on share
issue less - 2,101 - - - 2,101
expenses
Disposal of (1,653) 1,719 - - 66
treasury stock
Share-based
payment - - - 512 - 512
transactions
Share-based - - - (716) 716 -
payment reversals
Total
contributions by 4,410 448 1,719 (204) 716 7,089
and distributions
to owners
Balance as at 31 99,572 69,536 - 2,933 3,416 175,457
March 2014
(1) The treasury stock reserve represents the market value of Mwana Africa PLC
shares which were purchased, but not cancelled. This is held at the value on
the date of purchase. All of the treasury shares were sold by the Company
pursuant to the 20 September 2013 placing.
(2) The share-based payments reserve represents the accrued employee
entitlements to share awards that have been charged to the income statement, as
well as accrued group employee entitlements that have been debited to
investments in subsidiaries.
Notes to the annual financial statement for the year ended 31 March 2014
1. Reporting entity
Mwana Africa PLC ("the company") is a company domiciled in the UK. The address
of the company's registered office is Premier House, 10 Greycoat Place, London,
SW1P 1SB. The consolidated financial statements of the company as at and for
the year ended 31 March 2014 comprise the Company and its subsidiaries
(together referred to as "the Group" and individually as "Group entities") and
the Group's interest in jointly controlled entities. The Group primarily is
involved in the mining of gold and nickel.
2. Adoption of International Financial Reporting Standards as endorsed by the
European Union
The consolidated financial statements of the parent company (the Company) and
its subsidiaries (together, the group) and the financial statements of the
company have been prepared in accordance with International Financial Reporting
Standards (IFRS) as endorsed by the European Union (EU).
3. Basis of Preparation
Basis of preparation
With the exception of certain items noted below, which are carried at fair
value, the financial statements have been prepared under the historical cost
convention.
The company and consolidated financial statements have been prepared in
accordance with applicable law and International Financial Reporting Standards
as adopted by the EU ("IFRSs") and, as regards the company financial
statements, as applied in accordance with the provisions of the Companies Act
2006. Under section 408 of the Companies Act 2006, the company has elected not
to present its own income statement.
Going Concern
The Directors, having considered the Group's and the Company's current trading
activities, funding position and the Zimbabwean environment for the period of
at least twelve months from the date of approval of these Financial Statements
consider it appropriate to adopt the Going Concern basis in preparing the
Financial Statements for the year ended 31st March 2014.
The Group's activities, together with the factors likely to affect its future
development, performance and position are set out in the Business Review on
page 29. The financial position of the Group, its cashflows and liquidity
position are as set out in the Financial Review on pages 18 to 20.
During the year to 31 March 2014 operations at BNC have re-started successfully
and the operating cash inflows from BNC together with significant cost cutting
measures achieved during the year have significantly improved the Group's cash
position and outlook.
The directors' cashflow forecasts assume:
an average nickel price of $18,500 per tonne and average gold price of $1,250
per ounce;
settlement in full of the legacy creditors at BNC in line with agreements
concluded last financial year. Staff creditors will be settled by December 2014
and trade creditors in December 2015;
all planned capital expenditure to maintain existing operations, with any
additional capital expenditure to be funded from external sources. The
directors also plan to restart the smelter at BNC and expand the milling
capacity at Freda Rebecca if debt funding is obtained from external sources.
These projects would impact positively the cashflow forecast if achieved during
the period considered for the going concern analysis;
the group's other activities are assumed to be funded from internally generated
cash resources, however, in line with other mining companies the Group retains
a high degree of flexibility over its expenditure and will continue to pursue
alternative funding options for its main exploration projects from time to time
including potential farm-out or joint venture arrangements where appropriate.
These forecasts indicate that the Group will have sufficient cash available to
continue in operation for at least a year from the date of approval of these
financial statements.
The Directors are aware that various uncertainties outside the Group's control
might impact the validity of their forecasts. These uncertainties include
future gold and nickel prices, mining and processing risks, resource and
reserve risks and customer risks in addition to the political and
indigenisation risks in Zimbabwe which may constrain the ability of the Company
to control the movement of cash between entities or receive dividends. Nickel
prices in particular have been historically volatile, however absent a
structural change in the market (such as a decision by Indonesia to reverse the
export ban) forecasts are considered to be achievable. Reasonably expected
variations in nickel price would not cause the going concern assumption to be
inappropriate.
The Directors consider that they have a number of actions available to them in
the event of any of these uncertainties eventuating including constraining cash
expenditure at operations, curtailing exploration expenditure and arranging
additional debt financing.
The directors, after making enquiries and considering the uncertainties
described above, believe that the company and the group have adequate resources
to continue in operational existence for the foreseeable future. Accordingly
they continue to adopt the going concern basis in preparing the Annual Report
and financial statements and these financial statements do not include any
adjustments that would result from the going concern basis of preparation being
inappropriate.
Basis of consolidation
Subsidiaries
Subsidiaries are those entities over whose financial and operating policies the
Group has the ability to exercise control. The Group financial statements
incorporate the assets, liabilities and results of operations of the company
and its subsidiaries. The acquisition method of accounting has been adopted.
Under this method, the results of subsidiaries acquired or disposed of during
the year are included in the consolidated income statement from the date of
acquisition or up to the date of disposal.
Non-controlling Interests
Non-controlling interests exist in less than wholly-owned subsidiaries of the
Company and represent the outside interest's share of the carrying values of
the subsidiaries. Non-controlling interests are recorded at their proportionate
share of the identifiable net assets acquired as at the date of acquisition and
are presented immediately after the shareholder's equity section of the
Consolidated Balance Sheet. When the subsidiary company issues its own shares
to outside interests, a dilution gain or loss arises as a result of the
difference between the Company's share of the proceeds and the carrying value
of the underlying equity. If the change in ownership does not result in loss of
control, it is accounted for as an equity transaction.
Jointly controlled entities
A joint venture is an entity in which the Group holds a long term interest and
in which the Group has the ability to exercise joint control in terms of a
contractual arrangement. The Group's interest in a jointly controlled entity is
accounted for by proportionate consolidation. In terms of this method, the
Group includes its share of the income and expenses, assets and liabilities,
and cash flows on a line by line basis with similar items in the Group's
financial statements.
Transactions eliminated on consolidation
Intergroup balances and transactions and any unrealised income and expenses
arising from intergroup transactions are eliminated in the consolidated
financial statements.
Companies with different year-ends than the parent company
The following DRC subsidiaries of Mwana Africa PLC have 31 December year ends
as required by DRC legislation:
* Mwana Africa Congo Gold SPRL (Zani Kodo)
* SEMHKAT SPRL
4. Significant estimates and judgements
The preparation of financial statements in conformity with IFRSs requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and reported amounts of assets, liabilities,
income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
Derivation of assumptions used in the estimation of the recoverable values of
assets requires a significant amount of judgement. The assumptions underlying
the estimated recoverable values include, amongst others, the technical
performance, revenue, operating costs and discount rate (for discounted cash
flow based valuations), and are based on management's best judgements at the
date of signing the accounts.
The life of mine periods used for the purpose of calculating estimated
recoverable values are based on resources and reserves. These judgements used
by management correspond to realistic scenarios taking into account the
information available. The impairment note discloses a sensitivity analysis
with regard to the assumptions which the board deems most susceptible to
variances against forecast.
In particular, information about significant areas of estimation uncertainty
and critical judgements in applying accounting policies that have the most
significant effect on the amounts recognised in the financial statements is
included in the following notes:
Property, Plant and Equipment (Note 20) including:
Assets' useful lives and depreciation rates for Property, Plant and Equipment
and Mineral Interests
Depreciation, depletion and amortisation rates are calculated on a
straight-line basis based on the estimated assets' useful lives.
Should the asset's useful life differ from the initial estimate, an adjustment
would be made. The assets' useful lives are estimated based on the shorter of
the life of the mine and the useful life of the specific component of the
asset.
Commencement of Commercial/Operating level production
As a mine is developed and until it reaches an operating level that is
consistent with the use intended by management, costs incurred are capitalised
as property, plant and equipment. The Company exercises judgement to determine
the commencement of commercial production that is defined as the date when a
mine achieves a sustainable level of production that provides a basis for a
reasonable expectation of profitability along with various qualitative factors
including but not limited to the achievement of mechanical completion, whether
production levels are sufficient to be at least capable of generating
sustainable positive cash flow, and whether the product is of sufficient
quantity to be sold.
Deferred Tax (Note 17)
In assessing the probability of realising deferred income tax assets management
makes estimates related to expectations of future taxable income, expected
timing of reversals of existing temporary differences and the likelihood that
tax positions taken will be sustained upon examination by applicable tax
authorities. Where applicable tax laws and regulations are either unclear or
subject to ongoing varying interpretations, it is reasonably possible that
changes in these estimates can occur that materially affect the amounts of
income tax assets recognised. Also, future changes in tax laws could limit the
Company from realising the tax benefits from the deferred tax assets. The
Company reassesses unrecognised deferred income tax assets at each reporting
period.
Inventories (Note 24)
The assumptions used in the valuation of work-in-progress and finished goods
inventories include estimates of gold contained in the leach tanks, the amount
of gold in the mill circuits, recovery percentage and the estimation of the
gold price expected to be realised when the gold is recovered.
Rehabilitation provisions (Note 29)
The cost estimates are updated annually during the life of a mine to reflect
known developments, (e.g. revisions to cost estimates and to the estimated
lives of operations), and are subject to review at regular intervals.
Rehabilitation liabilities are estimated based on the Company's interpretation
of current regulatory requirements, constructive obligations and are measured
at fair value. Fair value is determined based on the net present value of
estimated future cash expenditures for the settlement of decommissioning,
restoration or similar liabilities that may occur upon rehabilitation of the
mine site. Such estimates are subject to change based on changes in laws and
regulations, technology and negotiations with regulatory authorities.
Provisions (Note 31)
The use of estimates regarding the probability of the outflow of economic
benefits as well as whether the Company has an obligation which needs to be
settled.
Share-based payments (Note 33)
The use of valuation models to fair value share-based payments require
assumptions regarding the estimated term of the option, share price volatility
and expected dividend yield.
5. Accounting policies
The accounting policies set out below have been applied consistently to all
periods presented in these consolidated financial statements.
Foreign currencies
(a) Functional and presentation currency
The individual financial statements of each Group entity are prepared in its
functional currency, which is the currency of the primary economic environment
in which that entity operates. For the purpose of the consolidated financial
statements, the results and financial position of each entity are translated
into US dollars, which is the presentational currency of the Group.
(b) Reporting foreign currency transactions in functional currency
Transactions in currencies other than the entity's functional currency (foreign
currencies) are initially recorded at the rates of exchange prevailing on the
dates of the transactions. At each subsequent balance sheet date:
foreign currency monetary items are re-translated at the rates prevailing at
the balance sheet date. Exchange differences arising on the settlement or
re-translation of monetary items are recognised in the income statement;
non-monetary items measured at historical cost in a foreign currency are not
re-translated; and
exchange differences arising on the re-translation of non-monetary items
carried at fair value are included in the income statement except for
differences arising on the re-translation of non-monetary items in respect of
which gains and losses are recognised in the other comprehensive income, in
which case any exchange component of that gain or loss is also recognised
directly in equity.
The directors have prepared the financial statements on the basis of their
judgement that the functional currency under IAS 21 of the Group's Zimbabwean
subsidiaries is the US dollar. The directors judge that the functional currency
of these subsidiaries is the US dollar, based on revenue, capital expenditure
and the majority of costs being denominated in US dollars.
(c) Translation from functional currency to presentational currency
When the functional currency of a Group entity is different from the Group's
presentational currency (US dollars), its results, financial position and cash
flows are translated into the presentational currency as follows:
assets and liabilities are translated using exchange rates prevailing at the
balance sheet date;
income and expense items are translated at average exchange rates for the year,
except where the use of such an average rate does not approximate the exchange
rate at the date of the transaction, in which case the transaction rate is
used; and
all resulting exchange differences are recognised in translation reserves as a
separate component of equity and are recognised in the income statement in the
period in which the foreign operation is disposed of.
Cash flows are translated using average exchange rates during the period and
the effect of exchange rate changes on the balances of cash and cash
equivalents is presented as part of the reconciliation of movements therein.
Intangible assets - exploration and evaluation expenditure
All expenditure directly related to mineral exploration is capitalised on a
project-by-project basis, pending the determination of the feasibility of the
project. Exploration costs include certain administration and salary costs. If
a project is ultimately deemed commercially and technically viable, the related
exploration costs remain capitalised and are reclassified to tangible assets
whilst the asset is developed, and are then written off over the life of the
estimated ore reserve on a unit-of-production basis. If it is determined that a
project is not expected to be successful, whether relinquished, abandoned or
uncommercial, the related exploration costs are written off.
Once a decision is made to develop then the related exploration and evaluation
costs are transferred from intangible to tangible assets.
Depreciation of property, plant and equipment used in exploration activities is
capitalised to intangible exploration and evaluation assets.
For the purpose of impairment assessment, capitalised exploration and
evaluation expenditures are allocated to the cash generating units on the basis
of the exploration field in which the costs have been incurred.
Property, plant and equipment
Items of property, plant and equipment is measured at cost less accumulated
depreciation and any accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition or
development of the asset.
Capitalised mine development costs include expenditure incurred to develop new
ore bodies, to define further mineralisation in existing ore bodies and, to
build or expand the capacity of a mine or to enhance its future economic
benefits.
Development projects are stated at cost, net of depreciation and any provision
for impairment. The costs capitalised under development projects will include
an allocation of salary costs, materials and any other costs directly
attributable to the project. This does not include administration and general
expenses which would have been incurred irrespective of whether the project was
taking place.
Any sales taking place within the development project period would be shown as
revenue with corresponding costs allocated to cost of sales.
When significant parts of an item of property, plant and equipment have
different useful lives, they are accounted for as separate items (major
components) of property, plant and equipment.
Items of property, plant and equipment are depreciated from the date they are
available for use or, in respect of capitalised cost, from the date that
commercial production is reached.
Depreciation is calculated to write off the cost of items of property, plant
and equipment less their estimated residual values using the straight-line
basis over their estimated useful lives, as set out below:
Mining assets: mining assets consists of plant and equipment used in mining
operations and is depreciated at varying rates on a straight-line basis over
the expected useful lives (defined by reference to the life of mine), which
range from three to 17 years. It also includes capitalised mine development
costs and development projects:
The Group's policy is to depreciate the cost in equal instalments over the
estimated economic life of the project. These costs are depreciated from the
date on which commercial production begins.
Smelter and refinery assets: smelter and refinery assets are depreciated at
varying rates on a straight-line basis over the expected useful lives, which
range from 5 to 40 years.
Plant and equipment and motor vehicles: plant and equipment and motor vehicles
are depreciated on a straight line basis over their estimated useful lives at
the annual rate of 10% and 20% respectively.
Buildings: buildings are depreciated on a straight-line basis over the expected
useful lives, currently 40 years.
Depreciation is generally recognised in profit and loss, unless the amount is
included in the carrying amount of another asset.
Land is not depreciated
Depreciation methods, useful lives and residual values are reviewed at each
reporting date and adjusted if appropriate.
Subsequent expenditure is capitalised only when it is probable that future
economic benefits associated with the expenditure will flow to the Group.
Ongoing repairs and maintenance are expensed as incurred.
Impairment
(i) Non-financial assets
The carrying amounts of the Group's assets are reviewed at each balance sheet
date to determine whether there is any indication of impairment. If any such
indication exists, the asset's recoverable amount is estimated.
Exploration and evaluation assets are also assessed for impairment when facts
and circumstances suggest that the carrying amount of an asset may exceed its
recoverable amount.
An impairment loss is recognised to the extent that the carrying amount of an
asset or cash-generating unit ("CGU") exceeds its recoverable amount. The
recoverable amount of an asset or CGU is the higher of i) its fair value less
costs to sell and ii) its value in use, which is the present value of the
future cash flows expected to be derived from the asset or CGU, discounted
using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks associated with the asset or CGU. Impairment
losses are recognised in the income statement.
Impairment losses recognised in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to
cash-generating units and then to reduce the carrying amount of the other
assets in the unit. A cash generating unit is the smallest identifiable group
of assets that generates cash inflows that are largely independent of the cash
inflows from other assets or groups of assets. It usually corresponds to the
exploration field or the production unit.
In respect of other assets, an impairment loss is reversed when there is an
indication that the impairment loss may no longer exist and there has been a
change in the estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset's carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment loss had been recognised. Reversals of
impairment relating to other assets are recognised in the income statement.
(ii) Non-derivative financial assets
When a decline in the fair value of an available-for-sale financial asset has
been recognised directly in equity and there is objective evidence that the
asset is impaired, the cumulative loss that had been recognised directly in
equity is recognised in profit or loss even though the financial asset has not
been de-recognised. The amount of the cumulative loss that is recognised in the
income statement is the difference between the acquisition cost and current
fair value, less any impairment loss on that financial asset previously
recognised in the income statement.
The Company assesses for impairment the value of its investments in and loans
to its subsidiaries when there are indicators of impairment.
An impairment loss in respect of an investment in an equity instrument
classified as available-for-sale is not reversed through the income statement.
If the fair value of a debt instrument classified as available-for-sale
increases and the increase can be objectively related to an event occurring
after the impairment loss was recognised in the income statement, the
impairment loss is reversed through the income statement. An impairment loss
in respect of goodwill is not reversed.
Financial instruments
(a) Non-derivative financial assets
The Group initially recognises loans and receivables on the date that they are
originated. All other financial assets (including assets designated at fair
value through profit and loss) are recognised initially on trade date, which is
the date that the Group becomes a party to the contractual provisions of the
instrument.
The Group derecognises a financial asset when the contractual rights to the
cash flows from the asset expire, or it transfers the rights to receive the
contractual cash flows in a transaction in which substantially all the risks
and rewards of ownership of the financial asset are transferred.
Financial assets and liabilities are offset and the net amount presented in the
statement of financial position when, and only when, the Group has a legal
right to offset the amounts and intends either to settle them on a net basis or
to realise the asset and settle the liability simultaneously.
The Group classifies non-derivative financial assets into the following
categories: financial assets at fair value through profit and loss,
held-to-maturity financial assets, loans and receivables and available-for-sale
financial assets.
(i) Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments
that are not quoted in an active market. Such assets are recognised initially
at fair value plus any directly attributable transaction costs. Subsequent to
initial recognition, loans and receivables are measured at amortised cost using
the effective interest rate method, less any impairment losses.
Loans and receivables comprise cash and cash equivalents, and trade and other
receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with
maturities of three months or less from acquisition date that are subject to an
insignificant risk of changes in their fair value, and are used by the Group in
the management of its short-term commitments.
(b) Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated
liabilities on the date that they are originated. All other financial
liabilities are recognised initially on the trade date that the Group becomes a
party to the contractual provisions of the instrument.
The Group derecognises a financial liability when its contractual obligations
are discharged, cancelled or expire.
The Group classifies non-derivative financial liabilities into the other
financial liabilities category. Such financial liabilities are recognised
initially at fair value less any directly attributable transaction costs.
Subsequent to initial recognition, these financial liabilities are measured at
amortised cost using the effective interest rate method.
Other financial liabilities comprise loans and borrowings, bank overdrafts, and
trade and other payables.
Investments
Joint ventures
The Group holds a 69.77% interest in the Klipspringer Diamond Mine joint
venture, the assets, liabilities, income and expenses of which are consolidated
on a proportional basis.
Investments in subsidiaries
The company has investments in its various subsidiaries. These are accounted
for at cost less impairment. All inter-group loans are repayable on demand or
at arm's length basis.
Inventories
Inventories are measured at the lower of cost and net realisable value.
In determining the cost of raw materials, consumables and goods purchased for
resale, the weighted average purchase price is used.
For finished goods and work-in-progress which includes quantities of gold in
process, cost includes an appropriate share of production overheads based on
normal capacity.
Net realisable value is calculated based on market prices prevailing as at the
year-end less costs to sell.
Rehabilitation provision
A provision is recognised when the Group has a present legal or constructive
obligation as a result of past events, and when it is probable that an outflow
of resources embodying economic benefits will be required to settle the
obligation, and a reliable estimate of the amount of the obligation can be
made.
Estimated long-term environmental obligations, comprising pollution control,
rehabilitation and mine closure, are based on the Group's environmental
management plans in compliance with current technology, environmental and
regulatory requirements.
On initial recognition, the net present value of estimated future
decommissioning costs are capitalised to property, plant and equipment and the
concomitant provisions are raised. These estimates are reviewed annually and
discounted using a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the liability. The unwinding of
the discount is recognised as finance cost. Any increases in such revised
estimates are capitalised to property, plant and equipment while decreases in
estimates are recognised as an impairment of the asset in the period in which
they are incurred.
Revenue recognition
Revenue from the sale of goods in the course of ordinary activities is measured
at the fair value of the consideration received or receivable, net of returns,
trade discounts and volume rebates.
Revenue represents the sale of gold, nickel and diamonds net of discounts and
taxes. Revenue also includes toll refining and processing of material on behalf
of, or purchased from, non-group companies.
Revenue is recognised when significant risks and rewards of ownership have been
transferred to the customer, recovery of the consideration is probable, the
associated costs and possible return of goods can be estimated reliably, there
is no continuing management involvement with the goods, and the amount of
revenue can be measured reliably. If it is probable that discounts will be
granted and the amount can be measured reliably, then the discount is
recognised as a reduction of revenue as the sales are recognised.
The timing of the transfer of risks and rewards and measurement varies
depending on the item sold, which occurs as follows:
* Revenue from the sale of gold is based on the spot price on the date of
delivery, which is also the point at which the company recognises the
revenue for gold sales
* Revenue from the sale of nickel is recognised on delivery and the
measurement based on the international market price of nickel.
* Diamond revenue is based on negotiated prices and recognised on delivery.
Leases
Leases where the lessor retains the risks and rewards of ownership of the
underlying asset are classified as operating leases. Operating lease rentals
are charged to the income statement on a straight-line basis over the period of
the lease.
The Group has not entered into any finance lease arrangements.
Employee benefits
(a) Defined contribution pension scheme
Certain companies in the Group operate defined contribution pension schemes.
The assets of the schemes are held separately from those of the Group in
independently administered funds.
Obligations for contributions to defined contribution plans are expensed as the
related service is provided. Prepaid contributions are recognised as an asset
to the extent that a cash refund is available or a reduction in future payments
is available.
(b) Share-based payments
The share option programmes allow employees to acquire shares of the company.
The grant-date fair value of the share-based payment award is recognised as
employee expenses, with a corresponding increase in equity, over the period
that the employees become unconditionally entitled to the awards. The fair
value of the options granted is measured using an option- pricing model, taking
into account the terms and conditions upon which the options were granted. The
amount recognised as an expense is adjusted to reflect the actual number of
share options that vest except where variations are due only to share prices
not achieving the threshold for vesting.
Taxation
The tax expense represents the sum of the current tax (including withholding
tax) and deferred tax.
(a) Current tax
Current tax payable is based on taxable profit for the year. Taxable profit
differs from profit before tax as reported in the income statement because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates and laws that
have been enacted, or substantively enacted, by the balance sheet date. Current
tax also includes any tax liability arising from withholding tax on dividends.
(b) Deferred tax
Deferred tax is measured on temporary differences between the carrying amounts
of assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and are accounted for using
the balance sheet liability method. Deferred tax liabilities are generally
recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be
available against which deductible temporary differences can be utilised. Such
assets and liabilities are not recognised if the temporary difference arises
from goodwill or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction that affects
neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences
arising on investments in subsidiaries and interests in joint ventures, except
where the Group is able to control the reversal of the temporary difference and
it is probable that the temporary difference will not reverse in the
foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised, based on tax
rates and laws that have been enacted, or substantively enacted, by the balance
sheet date. Deferred tax is charged or credited to the income statement, except
when it relates to items charged or credited directly to equity, in which case
the associated deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset only when there is a legally
enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Group intends to settle its current tax assets and liabilities on a net
basis.
6. Revised and Amended Standards and Interpretations
The following revised and amended standards, which have been endorsed by the
EU, have been adopted by the Group in these consolidated financial statements;
the adoption has had no material impact on the Group's net cash flows,
financial position, total comprehensive income or earnings per share.
* Amendments to IFRS 7 - 'Offsetting Financial Assets and Financial
Liabilities', issued December 2011 and endorsed by the EU December 2012.
Additional disclosures for financial assets and liabilities within the
scope of the common disclosures.
* Amendments to IAS 19 - 'Employee Benefits', issued in June 2011, endorsed
by the EU in June 2012. The amendments include clarification of
miscellaneous issues and enhanced disclosure.
* IFRS 13 'Fair Value Measurement', issued in May 2011 and endorsed by the EU
in December 2012, is a new standard that aims to improve consistency and
reduce complexity of fair value measurement techniques adopted in financial
statements.
* IFRIC 20 'Stripping Costs in the Production Phase of a Surface Mine',
issued in October 2011 and endorsed by the EU in December 2012, is
effective for the accounting period beginning on 1 January 2013. This
interpretation applies to the treatment of waste removal (stripping) costs
incurred in surface mining activity during the production phase of a mine.
*
Amendments to IAS 1 - 'Presentation of Items of Other Comprehensive Income',
issued May 2012 and endorsed by the EU in June 2012. The amendment deals with
the clarification of the requirements for comparative information.
Standards, Amendments and Interpretations that are not yet effective
The following new, revised and amended standards and interpretations have been
issued and endorsed by the EU unless otherwise stipulated, but are not yet
effective and have not been adopted by the Group in these consolidated
financial statements.
* IFRS 9 'Financial Instruments (Hedge accounting and Amendments to IFRS 9,
IFRS 7 and IAS 39)' issued in November 2013, but not yet endorsed by the
EU, the standard is IASB effective for periods beginning on or after 1
January 2018. The standard introduces a new hedge accounting chapter and
makes improvements to the reporting of changes in the fair value of an
entity's own debt. The Group is yet to assess IFRS 9's full impact on its
financial position or performance.
* IFRS 11 'Joint Arrangements', issued in May 2011, replaces IAS 31
'Interests in joint ventures'. The standard establishes accounting
principles based on the rights and obligations of the joint arrangement
rather than its legal form. The standard introduces two types of joint
arrangement - joint operations and joint ventures - and eliminates
proportionate consolidation for any form of joint arrangement. The standard
has been endorsed by the EU and is effective for the accounting period
beginning on 1 January 2014. The Group is yet to assess IFRS 11's full
impact on its financial position or performance;
* IFRS 12 'Disclosure of Interests in Other Entities', issued in May 2011, is
a new standard that establishes the disclosure requirements for all
entities that a Group has an interest in, including subsidiaries, joint
arrangements, associates, special purpose vehicles and other off-balance
sheet vehicles. The standard has been endorsed by the EU and is effective
for the accounting period beginning on 1 January 2014. The Group is yet to
assess IFRS 12's full impact on its financial position or performance;
* IFRS 15 'Revenue from Contracts with Customers'issued in May 2014, IASB
effective for periods beginning on or after 1 January 2017 but not yet
endorsed by the EU. The standard introduces a new revenue recognition model
that recognises revenue either at a point in time or over time. The Group
is yet to assess IFRS 15's full impact on its financial position or
performance.
* IAS 27 (2011) 'Separate Financial Statements', issued in May 2011 and
endorsed by the EU in December 2012. Consolidation requirements previously
forming part of IAS 27 (2008) have been revised and are now contained in
IFRS 10 'Consolidated Financial Statements'.
* Improvements to IFRSs. There are a number of amendments to certain
standards following the 2011 annual improvements project of which some have
been endorsed by the EU and others not. The impact of any consequential
changes to the consolidated financial statements is not likely to be
significant. The following amendments have been endorsed by the EU:
* Amendments to IAS 28 (2008) Investments in Associates and Joint Ventures
* Amendments to IAS 32 - Offsetting Financial Assets and Financial
Liabilities
* Amendments to IAS 36 - Recoverable disclosures for non-financial assets
* Investment Entities (Amendments to IFRS 10, IFRS 12 and IAS 27)
* Transition Guidance (Amendments to IFRS 10, IFRS 11 and IFRS 12)
IFRS 10 'Consolidated Financial Statements', issued in May 2011, replaces the
consolidation requirements in SIC-12 'Consolidation - Special Purpose Entities'
and IAS 27 'Consolidated and Separate Financial Statements'. This standard
builds on existing principles by identifying the concept of control as the
determining factor in whether an entity should be included within the
consolidated financial statements of the parent company. The standard provides
additional guidance to assist in the determination of control where this is
difficult to assess. The standard has been endorsed by the EU and is effective
for the accounting period beginning on 1 January 2014. The Group is yet to
assess IFRS 10's full impact on its financial position or performance;
7. Financial risk management
Overview
The Group has exposure to the following risks in relation to its operating and
financial activities:
credit risk,
liquidity risk,
market risk, and
currency risk.
This note presents information about the Group's exposure to each of the above
risks, the Group's objectives, policies and processes for measuring and
managing risk, and the Group's management of capital. Further quantitative
disclosures are included within note 34.
The Board of Directors has overall responsibility for the establishment and
oversight of the Group's risk management framework. The subsidiaries report
regularly to the Board of Directors on their activities and their risk
management procedures.
The Group Audit Committee oversees how management monitors compliance with the
Group's risk management policies and procedures and reviews the adequacy of the
risk management framework in relation to the risks faced by the Group.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group's receivables from
customers.
The Company's cash balances are held in investments and with institutions
considered by the directors to have a low risk of default. The Group's policy
on credit risk is to seek, to the extent possible, to deal with customers with
a strong financial position, and to ensure that appropriate measures are taken
to reduce the level of counterparty credit risk. Such measures may include
limiting shipments of material while balances are outstanding, requesting the
use of bank and/or corporate guarantees, and, where appropriate, retention of
amounts owed by the Group to its counterparties by way of offset against
amounts owed to the Group. At year-end, the Group's principal customers are
Fidelity Printers and Refineries who purchases gold production from Freda
Rebecca, as well as Glencore who purchases nickel production from BNC.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due and is measured by reference to cash
levels and forecasted cash flows. The Group's approach to managing liquidity is
to seek to ensure, as far as possible, that it will have sufficient liquidity
to meet its liabilities when due, under both normal and stressed conditions,
without incurring unacceptable losses or risking damage to the Group's
reputation. The Group monitors its current and forecasted cash and cash
equivalents positions to ensure that it will be able to meet its financial
commitments.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange
rates and commodity prices will affect the Group's income. The Group's earnings
are exposed to movements in the prices of gold, nickel, and diamonds that it
produces. The Group is also exposed to movements in interest rates on cash and
cash equivalents as well as the risk related to market price of the investments
held. The objective of market risk management is to manage and control market
risk exposures within acceptable parameters, while optimising the return. The
Group's policy is not to hedge commodity price risk. Consequently, as at 31
March 2014 and during the year, the Group did not have any long term commodity
price hedges in place.
Currency risk
The Group operates internationally and is exposed to foreign exchange risk
arising from transactions and investments that are denominated in currencies
other than the US dollar, including pound sterling and the South African rand.
Such risks include the effect of movements in exchange rates on the Group's
forecasts of capital and operating expenditure, and on the Group's forecasts of
revenue. The Group's policy is not to hedge currency risk. Consequently, as at
31 March 2014 and during the year, the Group did not have any currency hedges
in place.
Capital management
The Group considers its capital to be equal to the sum of its total equity.
The Board is committed to maintaining a capital base that maintains creditors'
confidence in Mwana's ability to meet its commitments.
The company's primary objectives when managing its capital are:
to ensure that the Company is able to operate as a going concern;
to have available both the necessary financial resources and the appropriate
equity to allow the Company to make investments including, where necessary,
further investment in existing subsidiaries, that will deliver acceptable
future returns to the Company's shareholders; and
to maintain sufficient financial resources to mitigate against risks and
unforeseen events.
There were no changes in the Company's approach to capital management in the
year. Neither the Company nor any of its subsidiaries are subject to
externally imposed capital requirements.
8. Segmental information
The Group has four reportable segments, as described below, which are the
Group's strategic business units.
The strategic business units offer different products and services, and are
managed separately because they require different technology and marketing
strategies. The CEO reviews internal management reports for each of the
strategic business units. The following summary describes the operations in
each of the Group's reportable segments:
Gold: Gold mining and prospecting activities
Nickel: Nickel mining, smelting and refining activities partially on care and
maintenance
Diamonds: Diamond mining activities currently on care and maintenance
Exploration: Gold and base metal exploration activities
Information about reportable segments - Operations
Gold Nickel Diamonds Exploration
Total for
(Freda (Bindura Nickel (Klipspringer Reportable
Rebecca) Corporation) diamond mine) segments
2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
External 77,449 108,116 65,011 1,026 - 17 - - 142,460 109,159
revenue
EBITDA 15,684 42,904 19,398 (14,188) (880) (1,536) (1,372) (845) 32,830 26,335
Impairment
reversal/ - (280) 27,987 (43,669) (118) - (553) - 27,316 (43,949)
(loss)
Reportable
segment
profit/ 8,577 36,436 46,196 (57,552) (1,027) (1,581) (1,925) (844) 51,821 (23,541)
(loss)
before
income tax
Reportable
segment 68,873 66,486 69,844 14,966 1,224 1,528 65,263 59,201 205,204 142,181
assets
Reportable
additions
to 5,723 8,586 7,030 9,365 - 1 7 13 12,760 17,965
property,
plant and
equipment
Reportable
additions
to - - - - - - 5,278 15,331 5,278 15,331
intangible
assets
Reconciliation of reportable segments information
Corporate
Total for (not a Total per
Reportable reportable Financial
segments segment) Statements
2014 2013 2014 2013 2014 2013
$'000 $'000 $'000 $'000 $'000 $'000
External 142,460 109,159 - - 142,460 109,159
revenue
EBITDA 32,830 26,335 (7,861) (8,660) 24,969 17,675
Impairment
reversal/ 27,316 (43,949) - - 27,316 (43,949)
(loss)
Reportable
segment
profit/ 51,821 (23,541) (7,881) (8,523) 43,940 (32,064)
(loss)
before
income tax
Reportable
segment 205,204 142,181 2,361 8,483 207,565 150,664
assets
Reportable
additions
to 12,760 17,965 10 424 12,770 18,389
property,
plant and
equipment
Reportable
additions
to 5,278 15,331 - - 5,278 15,331
intangible
assets
Information about reportable segments - Geographical
Democratic
South Africa and Republic of
Zimbabwe the Congo Ghana United Kingdom Total
2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
External
revenue 142,460 109,159 - - - - - - 142,460 109,159
EBITDA 31,264 24,483 (1,372) (844) 33 (25) (4,956) (5,939) 24,969 17,675
Reportable
segment
profit/
(loss)
before
income tax 50,866 (25,231) (1,925) (844) 33 (25) (5,034) (5,964) 43,940 (32,064)
Reportable
non-current
segment
assets 101,973 51,393 63,500 58,816 5 14 36 1,130 165,514 111,353
Reportable
segment
assets 140,272 87,825 65,263 59,201 16 14 2,014 3,624 207,565 150,664
Reportable
additions
to
property,
plant and
equipment 12,753 17,964 7 13 - - 10 412 12,770 18,389
Reportable
additions
to
intangible
assets - - 5,278 15,331 - - - - 5,278 15,331
The main products sold at Freda Rebecca and BNC during the year were gold and
nickel respectively and the major customers were well-established commodities
traders.
9. Loss from joint venture
Included in the group income statement are the following amounts relating to
the Klipspringer diamond mine joint venture:
2014 2013
$'000 $'000
Revenue - -
Cost of sales - -
Gross loss - -
Other income 67 48
Care and maintenance expenses (630) (1,355)
Selling and distribution expenses - (1)
Impairment loss (118) -
General and administrative expenses (346) (273)
Loss before tax (1,027) (1,581)
The group holds a 69.77% interest (2013: 68.93%) in the Klipspringer diamond
mine joint venture. The group does not have control over the joint venture as
the decision making is still shared between the joint venture partners. The
mine, which is situated in South Africa's Limpopo Province, was placed on care
and maintenance in February 2011 following a number of severe weather incidents
which occurred in December 2010 and January 2011, flooding the shaft bottom
lower (7) level. Mwana Africa is currently the sole funder of the operation and
the joint venture partners' interest is being diluted in accordance with the
contractual agreement.
10. Operating profit
Profit from operating activities is stated after charging:
2014 2013
$'000 $'000
Cost of goods sold 64,623 50,439
Provision for closure costs (598) 226
Selling and distribution expenses (1) 19,825 8,386
Cost of sales 83,850 59,051
Other income items 631 418
Loss on sale of available-for-sale financial assets (11) (25)
Other income 620 393
Operations (technical) 10,837 10,827
Exploration 403 767
General and administrative expenses 11,240 11,594
(1)Selling and distribution costs are not comparable as in FY2013 BNC was not
operational.
In the current year, some expenses were reclassified to show what management
believes to be a more accurate reflection of the expenses incurred. Prior year
figures have been reclassified to be comparable to the current year. The effect
is not significant and does not affect the profit/(loss) incurred by the group.
11. (Loss)/Profit on sale of assets
The loss on sale of assets for the current year includes a loss of $810k on the
disposal of shares held in Mantle Diamonds Ltd., that were disposed of during
the year in return for shares in Kimberley Diamonds Ltd with no cash effect.
The current year loss also includes losses on disposal of Property, Plant and
Equipment to the value of $824k mostly relating to Freda Rebecca.
In the prior year, the profit on sale of assets ($257k) related to Property,
Plant and Equipment disposed of in BNC and Freda Rebecca.
12. Amounts payable to KPMG
2014 2013
$'000 $'000
Audit of these financial statements 144 205
Audit of financial statements of subsidiaries pursuant to 152 172
legislation
Other services relating to taxation - 30
Services relating to corporate finance transactions - 49
All other services 7 23
Total Auditors' remuneration 303 479
13. Remuneration of key management personnel
Key management personnel are people responsible for the direction of the
business, and comprise the executive and non-executive directors of Mwana
Africa PLC. The remuneration of key management personnel is set out below in
aggregate for each of the categories as specified in IAS 24.9.
2014
Director Salary/ Annual Benefits in Share-based Total
fee bonus(1) kind payments
$'000 $'000 $'000 $'000 $'000
KK Mpinga 480 - 83 149 712
Y Kwan 119 - - 4 123
SG Morris 50 - - - 50
JL Botha 27 - - - 27
YH Ning 25 - - - 25
YC Hu 25 - - - 25
OAG Baring(2) 15 - 44 13 72
DAR McAlister(2) 730 - 36 64 830
(4)
JA Anderson(2) 22 - - - 22
E Denis(2) 15 - - - 15
M Wellesley-Wood 81 - - - 81
(3)(4)
Total 1,589 - 163 230 1,982
No bonuses were awarded to any directors in respect of the year ended 31 March
2014. In August 2013 Mr Mpinga waived his bonus award of £330,000 ($541,492) in
respect of the year to 31 March 2013.
Mr Baring resigned from the board on 1 September 2013, Mr Anderson and Mr Denis
retired from the board on 27 September 2013 and Mr McAlister resigned from the
board on 30 September 2013.
Mr M Wellesley-Wood was appointed Non-Executive Chairman on 3 September 2013
and left the board on 24 February 2014.
Basic salary includes ex gratia payments to Mr McAlister of £322,743 in
September 2013 and to Mr Wellesley-Wood of £15,000 in March 2014.
2013
Director Salary/ Annual bonus Benefits in Share-based Total
fee (1) kind payments
$'000 $'000 $'000 $'000 $'000
KK Mpinga 521 541 94 112 1,268
SG Morris 79 79 - - 158
JL Botha 39 40 - - 79
YH Ning 33 40 - - 73
YC Hu 30 40 - - 70
OAG Baring 33 134 113 33 313
DAR 411 411 66 55 943
McAlister
JA Anderson 59 59 - - 118
E Denis 40 40 - - 80
Total 1,245 1,384 273 200 3,102
In August 2013 Mr Mpinga waived his bonus award of £330,000 ($541,492) in
respect of the year to 31 March 2013..
14. Employee benefits expense
Group Company
2014 2013 2014 2013
$'000 $'000 $'000 $'000
Wages and salaries 21,456 20,146 865 1,797
Decrease in labour accrual(1) - (5,365) - -
Equity-settled share-based payment 512 342 276 225
transactions (see note 33)
Compulsory social security 438 566 220 219
contributions
Contributions to defined contribution 1,350 671 158 176
plans
Total employee benefits expense 23,756 16,360 1,519 2,417
Staff numbers
Number of employees
Group
2014 2013
Management and administration 193 184
Operatives 1,412 1,376
Total 1,605 1,560
The employee benefits expense includes remuneration of key management personnel
as disclosed in note 13.
(1) In the prior year, the release of the labour accrual was due to the
settlement agreement as part of the Trojan Mine restart in September 2013
15. Net finance income and costs
Group Company
2014 2013 2014 2013
$'000 $'000 $'000 $'000
Interest income on bank deposits 319 645 10 -
Loans - - 766 715
Finance income 319 645 776 715
Interest costs (1,033) (784) - -
Finance costs (1,033) (784) - -
Finance income of the company was received from BNC. $2,000,000 of a $10
million loan facility to BNC was repaid during the year (2013: $4,707,969 drawn
down). Refer to note 25 Trade and other receivables for details of the loan
balances outstanding at year-end.
16. Income tax (credit)/expense
2014 2013
$'000 $'000
Current tax expense
Current year tax 3,195 11,105
Prior periods tax (2) (48)
Deferred tax expense
Origination and reversal of temporary differences 12,107 340
Recognition of previously unrecognised tax losses (21,955) -
Total income tax (credit)/expense (6,655) 11,397
Reconciliation of effective tax rate
Profit/(Loss) before income tax 43,940 (32,064)
Income tax using the company's domestic tax rate (10,107) 7,695
-23% (2013: 24%)
Effect of tax rates in foreign jurisdictions (1,843) (1,563)
Non-deductible expenses (2,149) (5,330)
Prior year current tax 2 48
Prior year deferred tax (previously not recognised) 20,955 -
Utilised tax losses brought forward 418 2,814
Current year losses for which no deferred tax asset (324) (6,029)
was recognised
Impairment reversals non-taxable/(losses 449 (10,510)
non-deductible)
Other temporary differences not recognised (746) 1,478
Total tax credit/(expense) as per consolidated 6,655 (11,397)
income statement
Deferred taxation impacts are described more fully in note 17.
Reductions in the UK corporation tax rate from 26% to 24% (effective from 1
April 2012) and to 23% (effective 1 April 2013) were substantively enacted on
26 March 2012 and 3 July 2012 respectively. Further reductions to 21%
(effective from 1 April 2014) and 20% (effective from 1 April 2015) were
substantively enacted on 2 July 2013. Changes to the company's domestic tax
rate are unlikely to have a significant impact on the Group's current tax
charge as the majority of taxable income is incurred in foreign jurisdictions.
Significant factors affecting the tax charge relate to the taxation regimes for
the mining sector in the UK, Zimbabwe, South Africa and the DRC. Changes in
any of these areas could, adversely or positively impact the Group's tax charge
in the future.
17. Deferred tax assets and liabilities
2014 2013
$'000 $'000
Net deferred tax liability at beginning of year 9,320 8,980
Charge to the income statement (9,848) 340
Exchange rate adjustment - -
Net deferred tax (asset)/liability at end of the year (528) 9,320
Deferred tax assets (19,406) (1,186)
Deferred tax liabilities 18,878 10,506
The elements of deferred taxation are as follows:
Difference between accumulated depreciation and amortisation 18,734 10,496
and capital allowances
Unutilised losses (19,213) -
Other timing differences (49) (1,176)
(528) 9,320
The deferred tax liability represents the difference between the carrying
amount of property, plant and equipment and the corresponding tax bases on
those assets. The deferred tax asset principally relates to unutilised tax
losses at Bindura Nickel Corporation. The full taxation loss has been fully
recognised in the current year since the restart of the Trojan mine, as
management is now of the opinion that the full tax loss will be utilised
against future taxable generated by the operation.
Unrecognised deferred taxes
2014 2013
$'000 $'000
Deferred taxes have not been recognised in respect of the
following items:
Difference between accumulated depreciation and amortisation 981 1,105
and capital allowances
Intangible asset 6,743 6,577
Tax losses 11,722 39,514
Other timing differences 1,174 4,063
20,620 51,259
Deferred tax assets have not been recognised in respect of these items because
it is not probable that future taxable profit will be available against which
the group can utilise the benefits.
Recognised deferred tax assets and liabilities
Group deferred tax assets and liabilities are attributable to the following:
Asset Liability Net
2014 2013 2014 2013 2014 2013
$'000 $'000 $'000 $'000 $'000 $'000
Property, - - (18,734) (10,496) (18,734) (10,496)
plant and
equipment
Mine 1,186 - - - 1,186
rehabilitation -
provision
Tax loss 19,213 - - - 19,213 -
Others 193 - (144) (10) 49 (10)
Total 19,406 1,186 (18,878) (10,506) 528 (9,320)
18. Dividends
No dividends were declared during the 2014 financial year (2013: Nil).
19. Earnings per share
Basic earnings per share (EPS) is computed by dividing the profit or loss after
taxation for the year attributable to ordinary shareholders by the sum of the
weighted average number of ordinary shares in issue ranking for dividend during
the year.
Diluted earnings per share is computed by dividing the profit or loss after
taxation for the year attributable to ordinary shareholders by the sum of the
weighted average number of ordinary shares in issue, adjusted for the effect of
all dilutive potential ordinary shares that were outstanding during the year.
2014 2013
$'000 $'000
Earnings
Profit/(Loss) attributable to ordinary 36,605 (28,641)
shareholders
Number Number
Weighted average number of shares
Issued ordinary shares at the beginning of the 1,119,727,051 720,567,308
year
Effect of shares issued 146,596,861 373,104,337
Weighted average shares at the end of the year 1,266,323,912 1,093,671,645
for basic and diluted EPS
Basic earnings/(loss) per share 2.89c (2.62c)
Diluted earnings/(loss) per share 2.89c (2.62c)
The effect of shares issued reflects the number of shares in issue during the
year, weighted for the number of days that the shares were in issue for the
financial year. Share placements were made on 12 September 2013 (130,254,717
shares), 17 September 2013 (109,913,459 shares) and on 23 October 2013
(37,885,448 shares).
No dilutive effect was recognised for the 2014 financial year as the exercise
price of all potentially dilutive instruments at year-end were higher than the
average share price for the portion of the year that these instruments were in
issue.
No dilutive effect was recognised for the 2013 financial year as the dilutive
potential ordinary shares would have reduced the loss per share.
20. Property, plant and equipment
Smelter
and
refinery Building
Mining plant and Plant and Exploration & Motor
assets equipment equipment assets leasehold vehicles Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000
Cost or
deemed cost
Balance at 1 121,843 33,991 3,241 4,217 31,645 14,010 208,947
April 2012
Additions 17,288 - 929 13 - 159 18,389
Additions of
environmental 839 - - - - - 839
assets
Disposals (375) (340) (92) - - (29) (836)
Effect of
movements in - - (158) - - - (158)
exchange
rates
Balance at 31 139,595 33,651 3,920 4,230 31,645 14,140 227,181
March 2013
Additions 7,433 - 5,002 - - 335 12,770
Disposals (1) - (2,458) - - (125) (2,584)
Impairment - - - - - - -
reversal
Effect of
movements in - - (99) - - - (99)
exchange
rates
Balance at 31 147,027 33,651 6,365 4,230 31,645 14,350 237,268
March 2014
Depreciation
and
impairment
losses
Balance at 1 (60,869) (20,099) (2,941) (4,014) (27,128) (13,826) (128,877)
April 2012
Depreciation (5,466) - (312) - - (82) (5,860)
for the year
Depreciation
capitalised - - - (83) - - (83)
to intangible
assets
Disposals 95 295 68 - - 16 474
Impairment (25,570) (13,847) - - (4,097) (155) (43,669)
Loss
Effect of
movements in - - 117 - - - 117
exchange
rates
Balance at 31 (91,810) (33,651) (3,068) (4,097) (31,225) (14,047) (177,898)
March 2013
Depreciation (3,119) - (4,446) - - (66) (7,631)
for the year
Depreciation
capitalised - - - (43) - - (43)
to intangible
assets
Disposals - - 1,636 - - 71 1,707
Impairment - - (112) - - - (112)
Loss
Impairment 24,221 - - - 3,766 - 27,987
Reversal
Effect of
movements in - - 77 - - - 77
exchange
rates
Balance at 31 (70,708) (33,651) (5,913) (4,140) (27,459) (14,042) (155,913)
March 2014
Carrying
amounts
At 31 March 13,892 300 203 4,517 184 80,070
2012 60,974
At 31 March - 852 133 420 93 49,283
2013 47,785
At 31 March - 452 90 4,186 308 81,355
2014 76,319
Property, plant and equipment includes rehabilitation assets of $3.7 million
for Freda Rebecca.
In the previous financial year an impairment loss to the value of $43,7m was
recognised on all Property, Plant and Equipment held by BNC. In the current
year, $28.0m of the impairment relating to the assets of the Trojan mine was
reversed as disclosed in note 35.
The net book value of the company's property, plant and equipment as at 31
March 2014 amounted to $34,137 (2013: $398,817). Depreciation charged to the
income statement of the company during the year amounted to $87,602 (2013:
$73,829) and capital expenditure for the year to $10,157 (2013: $411,939).
Mining Assets are a separate category of PPE defined in note 5.
21. Intangible assets
Exploration and
evaluation
assets Total
$'000 $'000
Cost or deemed cost
Balance at 1 April 2012 71,437 71,437
Capitalised exploration costs 15,248 15,248
Capitalised depreciation 82 82
Impairment losses transferred
from amortisation and - -
impairment losses
Effect of movements in exchange - -
rates
Balance at 31 March 2013 86,767 86,767
Capitalised exploration costs 5,235 5,235
Capitalised depreciation 43 43
Effect of movements in exchange - -
rates
Balance at 31 March 2014 92,045 92,045
Amortisationand impairment
losses
Balance at 1 April 2012 (28,505) (28,505)
Impairment losses transferred - -
to cost
Effect of movements in exchange - -
rates
Balance at 31 March 2013 (28,505) (28,505)
Impairment loss (refer to note (554) (554)
35)
Effect of movements in exchange - -
rates
Balance at 31 March 2014 (29,059) (29,059)
Carrying amounts
At 31 March 2012 42,932 42,932
At 31 March 2013 58,262 58,262
At 31 March 2014 62,986 62,986
The carrying amount of the intangible assets relates to capitalised exploration
on the SEMHKAT and Zani-Kodo exploration projects.
22. Investments
Group
2014 2013
Ownership % $'000 $'000
Mantle Diamonds Ltd Nil (2013: 3.73) - 780
Kimberley Diamonds Ltd 0.04 (2013: Nil) 50 -
Other 565 574
Total Investments 615 1,354
The group has certain investments which include a 20% interest in Société
Miniére de Bakwanga (MIBA) in the DRC, an 18% interest in the Camafuca project
in Angola, and a 12.5%(1) interest in the BK16 project in Botswana. These
investments are carried at nil value (2013: Nil)
(1) The group currently holds 55% of BK16 and has entered into an agreement
with Firestone Diamonds whereby Firestone can earn up to 87.5% of BK16 for
financing and carrying out all work up to the completion of a bankable
feasibility study. Firestone Diamonds have sole management authority over the
project.
The directors consider that the group does not have significant influence over
the entities classified as investments, as it cannot influence the operating
policy of these entities.
The group's exposure to credit, currency and interest rate risks related to
other investments is disclosed in note 34.
Company
Shares in non-group Shares in group
undertakings undertakings Total
$'000 $'000 $'000
Cost
At beginning of year 780 219,697 220,477
Cumulative impairments - (143,654) (143,654)
Net book value at 780 76,043 76,823
beginning of the year
Fair value adjustment1 80 (475) (395)
Reversal of impairment2 - 21,887 21,887
Disposal of share (853) - (853)
investment3
Additional Investments 43 - 43
At end of year 50 97,455 97,505
Net book value
At 31 March 2012 1,228 72,835 74,063
At 31 March 2013 780 76,043 76,823
At 31 March 2014 50 97,455 97,505
1 The fair value adjustment was in relation the investment in Mantle Diamonds
Ltd and Kimberley Diamonds Ltd
2 The impairment reversal was in relation to all investments held in BNC. Refer
to note 35: Impairments
3 The disposal of share investment related to all the shares held in Mantle
Diamonds Ltd on 24 February 2014.
The recoverable value of the investments in the Zimbabwean operation exceeds
its carrying value but developments in the Zimbabwe indigenisation legislation,
which are explained in more detail in the Director's report on page 30, may
have an impact on the recoverable value of the investments.
The impact cannot be reliably measured as there are uncertainties regarding the
implementation of this legislation which the directors consider may impact the
carrying value, amounting to $96.5m (2013: $74.6m), of the investments relating
to Zimbabwean subsidiaries consolidated in the Group financial statements.
These financial statements do not include any adjustments that would result
from the impact of the Zimbabwe indigenisation legislation on the carrying
value of the investment held by the company and on the entities that are
included by consolidation in the Group financial statements.
In addition to the company's investments in shares in group undertakings, loans
to group undertakings totalling $77,708,300 (2013: $62,698,297) are included in
trade and other receivables within note 25 below. The major subsidiaries in
which the group's interest at the year-end is more than 20% are as follows:
Percentage of
shares held by
group
Subsidiary undertakings Country Activity %
SEMHKAT SPRL1 DRC Base metal 100
exploration
Bindura Nickel Corporation Zimbabwe Holding company 75
Limited3
Trojan Nickel Mine Limited3 Zimbabwe Nickel mining 75
Freda Rebecca Gold Mine Zimbabwe Gold mining 85
Limited2
Mwana Africa Holdings Mauritius Holding company 100
Limited
Mwana Africa Holdings (Pty) South Holding company 100
Ltd * Africa
Basilik Trading (Pty) Ltd South Management services 100
Africa
Sibeka SA * Belgium Holding company 100
Mwana Africa Congo Gold DRC Exploration of gold 100
SPRL1
SouthernEra Diamonds Inc. Canada Diamond exploration 100
SouthernEra International Cayman Holding company 100
Limited Islands
SouthernEra Management South Management services 100
Services South Africa (Pty) Africa and diamond
Ltd exploration
Zimnick Mauritius Holding Company 100
Congo Copper Ltd Mauritius Holding Company 100
Mwana Africa Congo Limited Mauritius Exploration of gold 100
* Companies in which Mwana Africa PLC has a direct holding.
1The year-end of these subsidiaries is 31 December as required by DRC
legislation and appropriate adjustments were made to recognise movements to 31
March, to bring the reporting date of these entities in line with the group's
financial year-end.
The group holds a 69.77% interest (2013: 68.93%) in the Klipspringer diamond
mine joint venture situated in South Africa's Limpopo Province. Information
regarding the group loss from the joint venture has been disclosed in
accordance with IAS31 Interests in Joint Ventures and can be found in note 9.
The group had no other material interest in an associate or joint venture.
As at 31 March 2014 27 exploration licences within SEMHKAT formed part of an
unincorporated joint venture agreement entered into with Hailiang Mining
(Congo) SPR. The Group retained a 100% interest in these licences at year-end
and its interest may dilute based on the venture partner's investment.
Additionally the joint venture partner can require the Group to transfer these
licenses into a Development Company that will be held at 38% by the Group.
23. Non-current receivables
Group Company
2014 2013 2014 2013
$'000 $'000 $'000 $'000
Loan to Community Trust (1) 1,136 - - -
Loans and other receivables 2 5 - -
Environmental investment 1,150 1,263 - -
2,288 1,268 - -
The environmental investment relates to the Klipspringer diamond mine which has
placed funds into an investment account for the purpose of funding
rehabilitation costs upon closure of the mine.
(1) Previously the loan to Community Trust was included in current receivables.
24. Inventories
Group
2014 2013
$'000 $'000
Raw materials and consumables 11,355 10,370
Work-in-progress 1,054 821
Finished goods 585 15
12,994 11,206
During the year, raw materials, consumables and changes in finished goods and
work-in-progress recognised as cost of sales amounted to $19,752,694 (2013:
$18,144,471). No raw materials were written down to net realisable values
during the year (2013: Nil).
25. Trade and other receivables
Group Company
2014 2013 2014 2013
$'000 $'000 $'000 $'000
Trade receivables 10,765 3,133 - -
Receivables from group undertakings - - 80,248 62,699
Loans and other receivables 6,589 8,940 516 639
Pre-payments 600 838 138 260
Tax receivable 878 - - -
18,832 12,911 80,902 63,598
All current trade and other receivables are due within 12 months of the
financial year-end. At 31 March 2014, no trade receivables were outstanding
past their due repayment date. Receivables from group undertakings are due and
payable on demand.
The group's exposure to credit and currency risks and impairment losses related
to trade and other receivables is disclosed further in note 34.
26. Cash and cash equivalents
Group Company
2014 2013 2014 2013
$'000 $'000 $'000 $'000
Cash and cash equivalents 9,089 15,194 1,420 1,585
Net cash and cash equivalents were represented by the following major
currencies:
Group Company
2014 2013 2014 2013
$'000 $'000 $'000 $'000
British pound 292 607 292 607
Euro 7 7 - -
South African rand 211 527 3 7
United States dollar 8,579 14,053 1,125 971
Net cash and cash equivalents 9,089 15,194 1,420 1,585
Included in the group's cash and cash equivalents is an amount of $1,796,277
(2013: $1,746,683) which represents restricted cash, of which $39,510 (2013:
$15,103) is being held by banking institutions as guarantees, and $1,756,277
(2013: $1,731,579) is reserved for loan repayments.
The group's exposure to interest rate risks and sensitivity analysis for
financial assets and liabilities is disclosed in note 34.
27. Issued share capital
Nominal value of
Number of shares shares
2014 2013 2014 2013
$'000 $'000
Allotted, called up and
fully paid
Opening balance 1,119,727,051 720,567,308 17,943 11,598
Split to deferred shares - - - -
Issued during the year 278,053,624 399,159,743 4,410 6,345
Closing balance 1,397,780,675 1,119,727,051 22,353 17,943
Deferred shares
Opening balance 535,141,760 535,141,760 77,219 77,219
Split from ordinary shares - - - -
Closing balance 535,141,760 535,141,760 77,219 77,219
Total 1,932,922,435 1,654,868,811 99,572 95,162
On 12 September 2013, 130,254,717 ordinary shares were issued to new and
existing investors by the company and were admitted to the AIM market of the
London Stock Exchange at a subscription price of 1.57 pence per share, raising
a total of £2,044,999. On 20 September 2013, 109,913,459 ordinary shares were
issued to new and existing investors by the company and were admitted to the
AIM market of the London Stock Exchange at a subscription price of 1.57 pence
per share, raising a total of £1,725,611.
On 23 October 2013 the company implemented previously accrued bonus
arrangements in respect of the year ended 31 March 2013, pursuant to which
37,885,448 ordinary shares were admitted to the AIM market of the London Stock
Exchange and were issued at a price of 1.57 pence per share in lieu of cash
bonuses, none of which were issued to directors of the company.
The deferred shares have no voting rights, no rights to dividends and only very
limited rights to a return on capital, whereas ordinary shares have these
rights.
No shares were issued but not fully paid as at 31 March 2014 (2013: Nil).
Warrants
Warrants were granted to Liberum Capital Ltd under the terms of a warrant
agreement dated 20 April 2012. The warrants provide the warrant holder with the
right to subscribe for 5,624,727 ordinary shares at an exercise price of 6
pence per share at any time up to 3 years from 20 April 2012.
28. Loan payable
2014 2013
$'000 $'000
Total liability 4,269 6,066
Current portion (included in note 30) (1,823) (1,793)
Long term portion 2,446 4,273
The loan is secured by a mortgage bond registered over moveable and immovable
assets of Freda Rebecca Gold Mine.
The following table illustrates the contractual maturities of financial
liabilities, including estimated interest payments:
2014 2013
$'000 $'000
Cashflow profile:
Within one year 2,121 2,250
Two to five years 2,577 4,717
Over five years - -
Contracted 4,698 6,967
29. Rehabilitation provisions
2014 2013
$'000 $'000
Balance at beginning of year 18,893 18,064
Exchange rate adjustments (189) (224)
Provisions made during the year 46 1,014
Provisions reversed during the year (949) -
Unwinding of discount 46 39
Balance at end of the year 17,847 18,893
The rehabilitation provision relates principally to the estimated closure and
rehabilitation costs of the business operations of BNC, Freda Rebecca, and the
Klipspringer diamond mine joint venture. Settlement of this provision will
occur at the end of life of each mining operation.
30. Accruals and other payables
2014 2013
$'000 $'000
Accrued expenses and other payables 19,745 14,338
Tax payable - 350
Current portion of loan payable 1,823 1,793
Balance at end of the year 21,568 16,481
The company's other payables and accrued expenses as at 31 March 2014 amounted
to $4,404,213 (2013: $3,344,145).
31. Provisions
Provisions Effect of Additional Amounts Provisions Provisions
at movements provisions settled reversed at end of
2014 beginning in during during the year
of year exchange the year
rates year
$'000 $'000 $'000 $'000 $'000 $'000
Legal1 1,387 - 264 (153) (247) 1,251
RBZ
Surrender
provision2 5,065 - - - (5,065) -
Other3 2,663 (20) 2,375 (3,004) (660) 1,354
Total 9,115 (20) 2,639 (3,157) (5,972) 2,605
Provisions Effect of Additional Amounts Provisions Provisions
at movements provisions settled reversed at end of
2013 beginning in during during the year
of year exchange the year
rates year
$'000 $'000 $'000 $'000 $'000 $'000
Legal 3,727 - 693 (596) (2,437) 1,387
RBZ 5,065 - - - - 5,065
Surrender
provision2
Other 1,887 (29) 2,280 (1,233) (242) 2,663
Total 10,679 (29) 2,973 (1,829) (2,679) 9,115
(1) Contingent liabilities are disclosed in note 38 relating to these legal
provisions
(2) The RBZ Surrender provision was presented as a contra against a
corresponding receivable during the current financial year.
(3) The provisions relate to various claims raised against the group's
Zimbabwean subsidiaries.
32. Pension scheme
Group
Certain of the group's Zimbabwean subsidiaries contribute towards defined
contribution plans, details of which are provided below.
Mining Industry Pension Fund
The Mining Industry Pension Fund is a defined contribution plan. The group's
obligations under the scheme are limited to 5% of pensionable emoluments for
lower grade employees and 10% for higher grade employees.
Others
The group contributes towards personal pension schemes of certain of its
employees.
The pension charge for the year represents contributions payable by the group
to the various schemes and amounted to $1,349,912 (2013: $670,814)
There were no un-accrued or pre-paid contributions at either the beginning or
end of the financial year.
Company
The company does not operate any pension schemes, but does make contributions
towards personal pension schemes of its employees, including certain directors.
The pension charge for the year represents contributions payable by the company
to the personal pension schemes and amounted to $158,338 (2013: $175,543).
There were no un-accrued or pre-paid contributions at either the beginning or
end of the financial year.
33. Share-based payments
Share options - employees
The company has outstanding options under an unapproved share option scheme
adopted in 1997 which expired in September 2007 (the 1997 Scheme) and a new
scheme which was approved by shareholders at the company's annual general
meeting on 31 July 2007 (the 2007 Scheme).
1997 Scheme
The company has operated this scheme since 1997 where options were granted to
any employee, officer or director of the company or any subsidiary of the
company. The limit for options granted under this scheme was not to exceed 15%
of the number of issued ordinary shares from time to time.
The Board granted options at its discretion. The subscription price was fixed
by the Board at the price per share on the dealing day preceding the date of
grant.
For the directors, these options vest immediately and may be exercised at any
time within a seven-year period from the date of the grant, unless the Board
determines otherwise. The options lapse if not exercised by the seventh
anniversary of the grant.
For the employees, there is a vesting period of one to three years from the
date of grant. Once vested, the options may be exercised at any time within a
seven-year period from date of grant, unless the Board determines otherwise.
The options lapse if not exercised by the seventh anniversary of the grant.
The right to exercise an option terminates on the holder ceasing to be a
participant, subject to certain exceptions, which broadly apply in the event of
death of the option holder or where the option holder ceases to be a
participant due to retirement, ill health, accident or redundancy. In such a
case, the option may be exercised within six months of such event provided such
exercise will take place within seven years of the original date of grant.
2007 Scheme
The 2007 Scheme allows for both tax approved options (approved options) to be
made to employees resident in the United Kingdom and unapproved options
(unapproved options), which can be made to both resident and non-resident
employees.
The company has operated this scheme since December 2007 where options may be
granted to full-time employees and directors of the company or any subsidiary
of the company. The overall limit for options granted under this scheme and any
other employees' share scheme adopted by the company is, in any rolling
ten-year period, 10% of the issued ordinary share capital (including treasury
shares) of the company for the time being plus 8,100,000 ordinary shares. There
is an individual limit of ordinary shares to a maximum of £30,000 in value in
respect of approved options.
Options may be granted when the Remuneration Committee determines, within 42
days of the announcement by the company of its full or interim results. Options
may be granted outside the 42-day period if the Remuneration Committee
considers there to be exceptional circumstances. Options must be granted
subject to performance conditions being satisfied. The performance conditions
must be objective and, save where the Remuneration Committee determines there
to be exceptional circumstances, the performance conditions must relate to the
overall financial performance of the company or the market value of ordinary
shares over a period of at least three years. The performance conditions can be
waived or amended by the Remuneration Committee if it determines that a change
of circumstances means that the performance conditions cannot reasonably be
met. The current performance condition in relation to these options is that the
market value of the Company's shares must increase above the exercise price by
not less than 10% per annum on a compound basis. No consideration is payable on
the grant of an option and no option may be granted after 31 July 2017.
The Remuneration Committee determines the exercise price before the options are
granted and cannot be less than the market value of the shares on the date of
grant.
The options can only be exercised on or after the third anniversary of the date
of grant provided the performance conditions have been satisfied or waived by
the Remuneration Committee. The options lapse if not exercised by the tenth
anniversary of the grant.
These options lapse when the option holder ceases to be an eligible employee.
In the case of death, a participant's personal representatives may exercise his
/her options within 12 months after the date of death. Where an option holder
ceases to be an employee by reason of injury, disability, redundancy, the
company that employs the option holder ceasing to be a subsidiary of the
company, retirement, pregnancy or in any other circumstances determined by the
Remuneration Committee, the options may be exercised within six months of the
termination of employment or such longer period as may be determined by the
Remuneration Committee.
Share incentives
The share incentive scheme was approved by shareholders at the company's annual
general meeting on 31 July 2007 (the Share Incentive Scheme). The Share
Incentive Scheme is designed to complement the Share Option Scheme to
facilitate awards to selected executives and managers. The Share Incentive
Scheme permits the award of any one or a combination of the following
incentives:
the sale of ordinary shares on deferred payment terms;
share awards as part of a bonus scheme by way of nil cost options in
consideration of cash bonuses forgone on terms that would be determined by the
Remuneration Committee of the company; and
the issue of share appreciation rights either by the company or EBT (as defined
below).
The company has also adopted an Employees' Benefit Trust (EBT) which will
operate in conjunction with the Share Option Scheme and Share Incentive Scheme.
The EBT has not yet been utilised for this purpose and there have been no
awards under the Share Incentive Scheme since it was approved by shareholders.
The share options have been valued using a Black Scholes model.
2014 2013
Weighted Weighted
average Number of average Number of
exercise price options exercise price options
Unapproved Options
- 1997 Scheme
Outstanding at the 55p 5,900,000 54p 19,090,000
beginning of the
year
Granted during the - - - -
year
Exercised during - - - -
the year
Lapsed/cancelled 42.6p (3,900,000) 52p (13,190,000)
during the year
Outstanding at the 79p 2,000,000 55p 5,900,000
end of the year
Exercisable at the 79p 2,000,000 55p 5,900,000
end of the year
Unapproved Options
- 2007 Scheme
Outstanding at the 8p 62,813,094 15p 33,652,144
beginning of the
year
Granted during the 1.6p 11,125,000 5.5p 34,135,950
year
Exercised during - - - -
the year
Lapsed/cancelled 1.8p (8,434,000) 38p (4,975,000)
during the year
Outstanding at the 8p 65,504,094 8p 62,813,094
end of the year
Exercisable at the 22p 11,690,715 41p 11,690,715
end of the year
Approved Options -
2007 Scheme
Outstanding at the 9p 2,442,374 17p 936,702
beginning of the
year
Granted during the 1.6p 1,875,000 5.5p 1,627,595
year
Exercised during - - - -
the year
Lapsed/cancelled - - 36p (121,923)
during the year
Outstanding at the 5.6p 4,317,374 9p 2,442,374
end of the year
Exercisable at the 22p 351,208 41p 351,208
end of the year
The total expenses recognised for the year arising from share-based payments
related to share options is $511,566 (2013: $342,224).
No options were exercised during current or previous year.
The options outstanding at the year-end have a range of exercise prices of 1.6p
to 79p (2013: 5p to 79p) and a weighted average contractual life of 7.6 years
(2013: 8.0years).
The following assumptions have been used in valuing the share options:
2014 2013
Weighted average fair value at measurement date 0.01 0.02
Weighted average share price 0.02 0.06
Weighted average exercise price 0.02 0.06
Expected volatility 35% 35%
Expected option life 4.5 years 4.5 years
Expected dividends - -
Risk-free interest rate 3.0% 3.0%
The expected volatility is primarily based on the historic volatility.
Since the year-end, no share options have been awarded, exercised or have
lapsed.
34. Financial instruments
The directors determine, as required, the degree to which it is appropriate to
use financial instruments, commodity contracts, other financial instruments or
techniques to mitigate risks. The principal risks for which such instruments
may be appropriate are interest rate risk, liquidity risk, foreign currency
risk and commodity price risk. The most significant of these is foreign
currency risk which comprises transactional exposure on operating activities.
Some translation exposure also exists in respect of the investments in overseas
operations, since these have functional currencies other than the group's
reporting currency. The group is also exposed to commodity price risk since
its sales are dependent on the price of gold, nickel and diamonds.
The group has not currently engaged in any instruments to mitigate or hedge any
such risks, although the directors keep this regularly under review.
Exposure to currency risk
The group's exposure to currency risk was as follows based on notional amounts:
2014 2013
ZAR GBP Other Total ZAR GBP Other Total
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Receivables 68 558 - 626 436 899 - 1,335
Net cash and 211 292 7 510 526 607 7 1,140
cash
equivalents
Payables (337) (1,733) - (2,070) (866) (3,210) - (4,076)
Gross
balance (58) (883) 7 (934) 96 (1,704) 7 (1,601)
sheet
exposure
The following significant exchange rates applied against the US dollar during
the year:
Average rate Balance sheet rate
2014 2013 2014 2013
EUR 0.7464 0.7768 0.7271 0.7799
GBP 0.6297 0.6328 0.6009 0.6575
ZAR 10.1238 8.4948 10.5833 9.2451
Sensitivity analysis
A 10% weakening of the US dollar against the following currencies at 31 March
and the average rate for the year ended 31 March would have increased/
(decreased) equity and results before non-controlling interest by the amounts
shown below. This analysis assumes that all other variables, in particular
interest rates, remain constant. The analysis is performed on the same basis
for 2013.
Equity Results
2014 2013 2014 2013
$'000 $'000 $'000 $'000
EUR (2) (2) - 1
GBP 1 - 1 31
ZAR (495) (744) 207 74
A 10% strengthening of the US dollar against the above currencies would have
had a similar but opposite effect to the amounts shown above, on the basis that
all other variables remain constant.
Credit risk
The company's maximum exposure to credit risk is the value of its trade
receivables, and loans and other receivables which are reflected in note 25.
In Freda Rebecca, trade receivables of $4,513,938 (2013: $2,927,307) were due
by Fidelity Printers and Refineries (2013: Zimbabwe Chamber of Mines), none of
which was outstanding past its due date.
In BNC, trade receivables of $6,024,342 (2013: Nil) were due by Glencore, which
were due within normal terms of agreement.
There is a concentration of risk in respect of trade receivables from Fidelity
Printers and Refineries as well as Glencore, being the two major customers of
the respective subsidiaries.
Based on historical default rates, the group believes that no impairment
allowance is necessary in respect of trade receivables as explained in note 7.
Commodity price risk
For the 2014 financial year, the group's earnings were mainly exposed to
changes in the prices of gold and nickel. A 10% increase and decrease in these
prices would have increased/(decreased) equity and results by the amounts shown
below. This analysis assumes that all other variables, in particular interest
rates, remain constant. The analysis is performed on the same basis for 2013.
Equity Results
2014 2013 2014 2013
$'000 $'000 $'000 $'000
10% increase in nickel price 6,501 103 6,501 103
10% decrease in nickel price (6,501) (103) (6,501) (103)
10% increase in gold price 7,729 10,780 7,729 10,780
10% decrease in gold price (7,729) (10,780) (7,729) (10,780)
Liquidity risk
The group analysis of the liquidity risk is based on an 18-month term cash flow
projection. This is disclosed in detail in note 3, along with the risks and
uncertainties included within the forecasts.
Financial risk management
Fair Values
Fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Wherever possible, fair value is
calculated by reference to quoted prices in active markets for identical
instruments. Where no such quoted prices are available, other observable inputs
are used and if there are no observable inputs then fair values are calculated
by discounting projected future cash flows at prevailing rates translated at
year-end exchange rates.
Fair values for financial assets and liabilities recognised at cost in the
group balance sheet:
Book value Fair value
2014 2013 2014 2013
$'000 $'000 $'000 $'000
Financial assets
Investments held at fair value through profit or
loss
Investments 615 1,354 615 1,354
Loans and receivables
Non-current receivables 2,288 1,267 2,288 1,267
Trade and other receivables 18,832 12,911 18,832 12,911
Cash and cash equivalents 9,089 15,194 9,089 15,194
30,209 29,372 30,209 29,372
Financial liabilities
Loan payable(1) 2,446 4,273 2,446 4,273
Trade payables 15,300 10,825 15,300 10,825
Accruals and other payables 21,568 16,481 21,568 16,481
39,314 31,579 39,314 31,579
(1) Management is of the opinion that the expected recoverable amount is equal
to the book value
Fair value hierarchy
The table below analyses financial instruments measured at fair value, into a
fair value hierarchy based on the valuation technique used to determine fair
value.
Level 1: quoted prices (unadjusted) in active markets for identical assets or
liabilities
Level 2: inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices)
Level 3: inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
2014 2013
Level Level Level Total Level Level Level Total
1 2 3 1 2 3
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Mantle Diamonds - - - - - - 779 779
Ltd
Kimberley Diamonds 50 - - 50 - - - -
Ltd
Others 6 - 559 565 16 - 559
575
Total investments 56 - 559 615 16 - 1,338 1,354
Total loans and - - 30,209 30,209 - - 29,372 29,372
receivables
Total financial - - 39,314 39,314 - - 31,579 31,579
liabilities
During the financial year there were no transfers between Levels. In order to
determine the fair value of investments, management used a valuation technique
in which all significant inputs were based on observable market data for Level
1 including quoted share prices.
The group's only financial asset held at fair value through profit or loss is
its investment in Kimberley Diamonds Ltd which is categorised as Level 1.
Reconciliation of Level 3 fair value measurements of investments for the group
is as follows:
2014 2013
$'000 $'000
Opening balance 1,338 1,785
Fair value adjustment recognised in profit or loss - (387)
Disposal of financial assets (853) -
Foreign exchange adjustments 74 (60)
Closing balance 559 1,338
35. Impairment
Group
An impairment indicator was identified for Freda Rebecca, being the low gold
price. Management calculated the value-in-use for the cash-generating unit of
Freda Rebecca Gold Mine by applying a discounted cashflow model to the future
expected cashflows expected to arise from the operation. The key assumptions of
the discounted cashflow model were a gold price of $1,250/oz at an average
yearly production of around 62,000oz p.a. for another 7 years of the mine still
being in production. A pre-tax discount rate ranging between 20% and 25% was
used and was calculated as a discounting rate for similar mining operations in
developing countries, adjusted for the specific risks of the Freda Rebecca Gold
Mine. Management was satisfied that the value-in-use exceeded the carrying
amount of the assets despite the lower current gold price and no impairment of
Freda Rebecca's assets was deemed necessary.
In the prior year all of BNC's non-current assets were impaired after the
falling nickel price was deemed a trigger event for impairment testing and a
discounted cash flow model was applied to the Trojan life of mine model. In the
current year nickel prices have steadily been increasing and with the Trojan
mine becoming fully operational, another discounted cash-flow model was applied
to the updated Trojan life of mine plan. The key assumptions for the model was
a long-term nickel price of $18,500 for the remaining life of mine of an
estimated 8 years, a pre-tax discount rate ranging between 20% and 25% which
was calculated as a discounting rate for similar mining operations in
developing countries, adjusted for the specific risks of BNC. The Trojan mine
operates independently and is regarded as a separate Cash Generating Unit
("CGU") from other BNC assets. This resulted in a reversal of the impairment of
the non-current assets of Trojan mine recorded in the prior year to the amount
of $28.0m (before tax). This value represents the fair value less costs of
disposal for the CGU. The BSR smelter and Shangani mine are still under care
and maintenance and no impairment reversal was deemed appropriate.
During the year, SEMHKAT exploration licenses for ASMA, PACHALU and Kinkombe
sites expired, were not renewed and no future plans to explore these areas are
expected. This was a trigger event for impairment testing. These licenses were
for specific geographical areas and are regarded as separate CGUs. Management
is of the opinion that no future benefits or cashflows will come from the past
costs capitalised to these projects, and the full value of these intangible
assets were fully impaired to the amount of $553,824.
The Klipspringer Diamond Mine is currently on care and maintenance andthis, in
conjunction with current issues regarding the renewal of the diamond license,
was deemed a trigger event for impairment testing. Adecision was made to impair
the full value of the non-current assets to the value of $117,514.
Company
During the year, the company reversed impairments relating to loans and
investments of BNC (directly and indirectly) after management was satisfied
that BNC will be able to repay these loans and the full value of the investment
is expected to be recovered from future cash flows.
The effect of the impairment reversal/(losses) on the balance sheet is as
follow:
Group Company
2014 2013 2014 2013
$'000 $'000 $'000 $'000
Property, plant and equipment 27,870 (43,949) - -
(1)
Intangible assets (554) - - -
Investments - - 21,887 (21,887)
Trade and other receivables - - 13,157 (13,157)
Net Assets 27,316 (43,949) 35,044 (35,044)
Retained earnings 20,269 (33,709) 35,044 (35,044)
Non-controlling interest 7,047 (10,240) - -
Net Equity and Liabilities 27,316 (43,949) 35,044 (35,044)
(1) The current year impairment for Property, Plant and Equipment includes an
impairment charge of $118k shown as net of an impairment reversal of $27,987k,
which amounts to a total impairment charge for the year of $671k and a total
impairment reversal for the year of $27,987k.
36. Events after the reporting period
Subsequent to the end of the reporting period, the Zani Kodo mining licenses
have been transferred into Mizako SARL (Mwana Africa PLC is 80% shareholder)
from SOKIMO SARL.
This is a non-adjusting balance sheet event, which therefore does not impact
the financial statements as at 31 March 2014.
37. Related party disclosures
Group
Transactions between group subsidiaries, which are related parties, have been
eliminated on consolidation and are not disclosed in this note. Remuneration of
key management personnel are disclosed in note 13.
Company
The company provided funding to subsidiary companies which are disclosed as
current receivables in note 25. Investments in subsidiaries are disclosed in
note 22.
Related party transactions during the year:
Management fees (paid)/received were in relation to management time spent on/
(by) these companies during the year.
2014
$'000
Management fees received
Mwana Africa Holdings (Pty) Ltd 32
Basilik Trading (Pty) Ltd 28
Management fees paid
Mwana Africa Holdings (Pty) Ltd (202)
Interest received
Bindura Nickel Corporation Ltd 767
Transactions with key management personnel and director transactions are
disclosed in note 13.
38. Commitments and contingent liabilities
Commitments
Capital commitments at the end of the financial year relating principally to
property, plant and equipment for BNC and Freda Rebecca, for which no provision
has been made, are as follows:
Group Company
2014 2013 2014 2013
$'000 $'000 $'000 $'000
Contracted 1,220 1,253 - -
The group and company have the following total minimum lease payments under
non-cancellable operating leases:
Group Company
2014 2013 2014 2013
$'000 $'000 $'000 $'000
Operating leases which expire:
Within one year 281 168 178 96
Two to five years 615 842 448 572
Over five years - - - -
Contracted 896 1,010 626 668
Contingent liabilities
The group and company monitor contingent liabilities, including, inter alia,
those relating to taxation in the various jurisdictions in which the company's
operate, environmental, closure and other contingent liabilities, on an ongoing
basis. Provision for such liabilities is raised in the financial statements
when the necessary recognition criteria have been satisfied.
The following contingencies exist at the year-end:
Group
- There are a number of legal claims which have been brought against BNC and
Freda Rebecca. These have been provided for when the obligation relating to
these liabilities met the criteria for recognition under IAS 37 and are
disclosed in note 31.
Company
- The company has committed to a death in service benefit of five times
executive annual salary for Mr. KK Mpinga. Twice the annual salary is covered
by an insurance policy leaving the company with a remaining exposure of three
years.
- The company has issued a guarantee to the Industrial Development Corporation
of South Africa for the loan given to Freda Rebecca.