Home
About Us
Company Info
Investor Relations
Announcements
Media
Contact Us
 


Randgold & Exploration Company Limited
(Incorporated in the Republic of South Africa)
(Registration number 1992/005642/06)
Share Code: RNG & ISIN: ZAE000008819

(“R&E” or “the company”)

 

Reviewed results for the six months ended 30 June 2010

Commentary to Condensed Consolidated Interim Financial Statements for the six months ended 30 June 2010

General
The board of Randgold & Exploration Company Limited is pleased to announce the interim results for the six months ended 30 June 2010. The company has now fully implemented the JCI settlement as anticipated. Eligible shareholders will be aware of the distribution of Gold Fields Limited (GFI) and JCI Limited (JCI) shares made by the company on 5 July 2010.

Income
The majority of the income recognised in the period under review was a result of two recoveries of R783,5 million and R25,2 million which flowed from the settlement with JCI and the litigation settlement agreement, respectively.

Financial position
Excluding the effects of the settlement, R&E is liquid with no interest-bearing debt. R&E’s total assets consist primarily of cash and an investment in GFI shares. After the settlement distribution and unbundling of the company’s holding of JCI shares R&E has a net asset value per share of R7,01.

Cashflow
R&E started the period under review with a cash balance of R295 million. Operating activities (excluding the JCI settlement) generated cash inflow of R15,8 million, primarily as a result of cash collected from outstanding settlement receivables.

Investing activities yielded cash inflows of R85,5 million primarily as a result of dividends received, proceeds from the disposal of recovered assets and the repayment of loans receivable from JCI.

Dividends paid by Free State Investment and Development Corporation Limited (FSD) to its non-controlling shareholder (JCI group) resulted in a cash outflow from financing activities.

R&E remains in a strong cash position at 30 June 2010 with R323 million in cash and cash equivalents.

Outlook
Given R&E’s liquid financial position and position in the resources industry, management will focus on seeking out new opportunities, where appropriate, for the benefit of R&E and its shareholders. As in the past, a pragmatic commercial approach will be adopted in dealing with the outstanding legal claims.

DC Kovarsky         Marais Steyn
Chairman            Chief Executive Officer

Johannesburg
30 July 2010

Condensed Consolidated Interim Statement of Comprehensive Income

 

 

For the six months ended

 

 

30 June 2010

30 June 2009

 

 

Reviewed

Un-reviewed

 

Notes

R’000

R’000

Revenue

 

12 048

9 890

Recoveries – JCI

6

783 549

           – Other

 

25 205

14 207

Other income

 

10 353

211

Other operating expenses

 

(38 592)

(24 857)

Results from operating activities

 

792 563

(549)

Finance income

 

1 320

17 489

Profit before taxation

 

793 883

16 940

Taxation

 

(1 052)

(5 839)

Profit for the period

 

792 831

11 101

Other comprehensive income

 

 

 

Net change in fair value of available-for-sale investments

7

11 618

3 234

Total comprehensive income

 

804 449

14 335

 

 

 

 

Profit or loss attributable to:

 

 

 

Non-controlling interest

 

628

10 167

Owners of the company

 

792 203

934

Profit for the period

 

792 831

11 101

 

 

 

 

Total comprehensive income attributable to:

 

 

 

Non-controlling interest

 

628

10 167

Owners of the company

 

803 821

4 168

Total comprehensive income

 

804 449

14 335

 

 

 

 

Basic and diluted earnings per share (cents)

9

1 103

1

Condensed Consolidated Interim Statement of Financial Position

 

 

As at

 

 

30 June 2010

31 December 2009

 

 

Reviewed

Audited

 

Notes

R’000

R’000

Assets

 

 

 

Non-current assets

 

211 409

247 032

Plant and equipment

 

357

108

Intangible assets

 

474

474

Investments in equity securities

7

210 578

246 450

Current assets

 

1 151 066

549 096

Loans receivable

 

207 543

Trade and other receivables

 

4 946

46 747

Financial asset – settlement receivable

6

791 416

Investments held for distribution

7

32 026

Cash and cash equivalents

 

322 678

294 806

Total assets

 

1 362 475

796 128

 

 

 

 

Equity and liabilities

 

 

 

Shareholders’ equity

 

503 633

484 152

Issued capital

 

748

748

Share premium

 

162 612

986 054

Reserves

 

23 755

12 137

Retained earnings/(Accumulated loss)

 

316 518

(514 787)

Non-controlling interest

 

9 396

250 378

 

 

 

 

Liabilities

 

 

 

Non-current liabilities

 

 

 

Post-retirement medical benefit obligation

 

34 355

34 575

 

 

 

 

Current liabilities

 

815 091

27 023

Tax liabilities

 

16 302

15 579

Shareholders for dividend

9

790 419

Trade and other payables

 

8 370

11 444

Total equity and liabilities

 

1 362 475

796 128

Consolidated Interim Statement of Changes in Equity

 

 

For the six months ended

 

 

30 June 2010

30 June 2009

 

 

Reviewed

Un-reviewed

 

Notes

R’000

R’000

Share capital

 

 

 

Balance at the beginning and end of the period

 

748

748

Share premium

 

162 612

986 054

Balance at the beginning of the period

 

986 054

986 054

Distribution dividend

8

(823 442)

 

 

 

 

Foreign currency translation reserve

 

Balance at the beginning of the period

 

(19)

Movement for the period

 

19

 

 

 

 

Investment fair value reserve

 

23 755

3 234

Balance at the beginning of the period

 

12 137

Net change in fair value of available-for-sale investments

 

11 618

3 234

 

 

 

 

Retained earnings/(Accumulated loss)

 

316 518

(548 596)

Balance at the beginning of the period

 

(514 787)

(549 530)

Transaction with non-controlling shareholders

8

6 079

Profit for the period

 

792 203

934

Distribution dividend

 

33 023

 

 

 

 

Non-controlling interest

 

9 396

242 930

Balance at the beginning of the period

 

250 378

232 763

Transaction with non-controlling shareholders

 

(168 034)

Dividends paid to non-controlling shareholders

 

(73 576)

Profit for the period

 

628

10 167

 

 

 

 

Dividend per share

9

1 101

Group Condensed Statement of Cash Flows

 

For the six months ended

 

30 June 2010

30 June 2009

 

Reviewed

Un–reviewed

 

R’000

R’000

Profit before taxation

793 883

16 940

Adjusted for:

 

 

  Recoveries not settled in cash

(808 754)

  Other non-cash items

5 277

(42)

  Interest received

(1 320)

(17 489)

  Dividends received

(12 048)

(9 890)

  Working capital changes

38 727

(2 301)

Cash flows from operations

15 765

(12 781)

Interest received

478

940

Taxation paid

(329)

(5 756)

Cash flows from operating activities

15 914

(17 597)

Cash flows from investing activities

85 534

(55 407)

Dividends received

12 048

9 890

Proceeds from disposal of recovered assets

27 344

Acquisition of investment in equity securities

(5 129)

Acquisition of plant and equipment

(288)

Loan payments received/(advanced)

46 430

(60 168)

Cash flow from financing activities

 

Dividends paid to non-controlling shareholders

(73 576)

Translation effect on foreign cash and cash equivalents

19

Net increase/(decrease) in cash and cash equivalents

27 872

(72 985)

Cash and cash equivalents at the beginning
of the period

294 806

275 725

Cash and cash equivalents at the end of the period

322 678

202 740

Notes to the Condensed Consolidated Interim Financial Statements for the six months ended 30 June 2010

1. Reporting entity
R&E is a company domiciled and incorporated in the Republic of South Africa. The condensed consolidated interim financial statements of the company for the six months ended 30 June 2010 include the company and its subsidiaries (together referred to as the “group”).

2. Statement of compliance
These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting. They do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the group as at and for the year ended 31 December 2009.

These condensed consolidated interim financial statements were approved by the board of directors on 30 July 2010.

3. Significant accounting policies
The accounting policies applied by the group in these condensed consolidated interim financial statements are the same as those applied by the group in its consolidated financial statements as at and for the year ended 31 December 2009, except for the following standards and interpretations adopted on 1 January 2010:

  IAS 27 Amendment Consolidated and Separate Financial Statements
15 Amendments    Improvements to International Financial Reporting Standards 2009
IFRS 3           Business Combinations
IFRIC 17         Distribution of Non-cash Assets to Owners (IFRIC 17)

There was no significant impact on these condensed consolidated interim financial statements as a result of adopting these standards and interpretations, except for IFRIC 17.

IFRIC 17 addresses the accounting treatment for non-cash distributions made to owners. In terms of IFRIC 17 a liability is recognised at the fair value of the asset to be distributed when the distribution is authorised. The asset to be distributed is reclassified as held for distribution and measured in accordance with IFRS 5. Re-measurement of the liability at fair value of the asset to be distributed will be recognised in equity. When the distribution is made, the liability and the asset will be derecognised. IFRIC 17 has been applied prospectively.

The distribution of the JCI settlement assets, as discussed in note 6 and the unbundling of R&E’s existing holding of 305 million JCI shares, as discussed in note 7, have been accounted for in terms of IFRIC 17.

4. Independent review by the auditor
The condensed consolidated interim financial statements of R&E were reviewed by the group’s auditor, CH Basson of KPMG Inc. The unmodified review report is available for inspection at the company’s registered office.

The comparative financial information presented in these interim financial statements has not been reviewed by the group’s auditor as the group did not publish interim financial statements for the six months ended 30 June 2009. The company obtained dispensation from the Registrar of Companies and the JSE Limited not to lodge interim financial statements for the six months ended 30 June 2009.

5. Segment reporting
The group operates in a single operating segment as an investment holding company with assets in the mining industry.

6. Settlement with JCI Limited and distribution of shares
On 28 May 2010, the shareholders of R&E approved the settlement agreement with JCI as well as the distribution of the shares received as part of the settlement to R&E shareholders. The JCI shareholders also approved the settlement with R&E on 4 June 2010.

The settlement circular, containing full details of the settlement, was distributed to shareholders on 12 May 2010. As a result of the settlement, the JCI group transferred the following assets to the R&E group on 4 July 2010:

  – 6 051 632 GFI shares; and
– 1 555 710 220 JCI shares (a fresh issue).

On 5 July 2010 R&E distributed the above shares to its shareholders.

No tax liability is expected to arise from the settlement transaction as all the affected entities within the group have sufficient income tax and capital gains tax losses to absorb the recovery. There are also no tax consequences as a result of the distribution, as it is made partially out of share premium and partially as an unbundling in terms of section 46 of the Income Tax Act.

A recovery and a financial asset were recognised in profit or loss and in the statement of financial position, respectively, on 23 June 2010 (the date on which the last suspensive condition contained in the settlement agreement was met) at fair value of the shares receivable. A corresponding liability to shareholders was raised on the same day with the charge being taken directly to equity (distribution dividend) for the shares to be distributed to the ordinary shareholders of R&E.

At the reporting date, the financial asset was revalued with reference to the value of the underlying securities, with the fair value movement being recognised in profit or loss. The liability to shareholders was revalued on the same criteria with the change in fair value recognised directly in equity (distribution dividend).

 

Financial asset – settlement receivable

Number
of shares

Price
(ZAR/cents)

Value (R’000)

At 23 June 2010 – settlement date

 

 

 

Recovery

 

 

783 549

  GFI

6 051 632

10 250

620 293

  JCI

1 555 710 220

10,5

163 256

Movement to profit or loss (included in ‘Other income’)

 

 

7 867

At 30 June 2010

 

 

791 416

  GFI

6 051 632

10 380

628 160

  JCI

1 555 710 220

10,5

163 256

JCI was suspended from trading on the JSE at a price of R0,16 per share on 1 August 2005. Having regard to the JCI group net asset value (NAV) statement at 31 December 2009, as published on 9 February 2010, adjusted for the settlement and other known variables, i.e. fair value movements in assets and liabilities and based on information available to the directors of R&E, the directors have calculated JCI group’s NAV at R0,15 per share at 30 June 2010. After applying a discount factor of 30% to the calculated NAV per share due to the illiquidity of JCI’s shares and nature of its assets, a fair value of R0,105 was arrived at. The directors of R&E believe that R0,105 represents their best estimate of JCI’s fair value based on currently available information.

7. Investments in equity securities and investments held for distribution
As part of the settlement transaction mentioned above, R&E also unbundled its current holding of 305 million JCI shares (the unbundling shares) on 5 July 2010. These shares were re-valued at R0,105 per share (refer note 6 for basis of valuation) and were re-classified as ‘investments held for distribution’ in accordance with IFRIC 17 at 30 June 2010. The revaluation of the shares resulted in a R15,6 million impairment being recognised in profit or loss. A liability at fair value of this asset to be distributed to shareholders was also recognised in equity (distribution dividend).

There are no tax consequences as a result of the unbundling, as it is in terms of section 46 of the Income Tax Act.

 

R’000

Investment in equity securities – 1 January 2010

246 450

Increase in fair value of available-for-sale GFI shares to other comprehensive income

11 618

Decrease in fair value of JCI shares taken to profit or loss (included in ‘Other operating expenses’)

(15 653)

Increase in fair value of GFI shares held for trading taken to profit or loss

189

Transfer of investment JCI shares to ‘Investments held for distribution’

(32 026)

Investment in equity securities – 30 June 2010

210 578

The remaining investment in equity securities of R210,6 million represents an investment in GFI of 2 028 684 shares.

8. Excussion of FSD shares from JCI
At 30 December 2009, R&E had a loan receivable from the JCI group of R207,5 million. This loan was secured by a pledge of shares in FSD. On 14 January 2010 (the agreed settlement date), JCI was unable to make a full repayment of the loan. As a result, R&E exercised its security and became the beneficial owner of a further 6 690 610 FSD shares at an agreed value of R161,9 million, increasing its shareholding in FSD by 30,10% to 85,21%.

In terms of R&E’s accounting policies, the acquisition of a non-controlling interest is accounted for as a transaction with equity holders in their capacity as equity holders.

9. Earnings per share and dividend per share

 

For the six months ended

 

30 June 2010

30 June 2009

Basic earnings and diluted earnings per ordinary share

Reviewed

Un-reviewed

Basic and diluted earnings for the period (R’000)

792 203

934

Weighted average number of ordinary shares
in issue

71 813 128

74 313 128

Earnings per share (cents)

1 103

1

Headline and diluted headline earnings per ordinary share

 

 

 

 

 

Headline and diluted headline earnings for the period (R’000)

805 717

934

Weighted average number of ordinary shares
in issue

71 813 128

74 313 128

Headline earnings per share (cents)

1 122

1

 

 

 

Reconciliation between basic and headline earnings for the period

R’000

R’000

Profit for the period attributable to the equity holders of the company

792 203

934

Adjusted for:

 

 

Profit on disposal of available-for-sale investments

(2 139)

Impairment of investment held for distribution

15 653

 

805 717

934

Tax effect of adjustments

Portion attributable to non-controlling interest

Headline earnings for the period attributable to equity holders of the company

805 717

934

Dividend per share

 

 

Total dividend declared

790 419

Eligible shares in issue

71 813 128

 

1 101

The distribution dividend payable to ordinary shareholders of the company, as approved on 28 May 2010, of R790,4 million comprises of the JCI settlement assets amounting to R791,4 million and the unbundling shares of R32,0 million adjusted for the portion which will be returned to the company by virtue of its 3 million treasury shares.

Total dividend payable from R&E’s share premium

823 442

Dividend payable to group entities recognised in retained earnings

(33 023)

Shareholders for dividend per statement of
financial position

790 419

10. Net asset and tangible net asset value and per share
The net asset value per share is calculated using the following variables:

 

30 June 2010
Reviewed

31 December 2009
Audited

Net asset value (R’000)

503 633

484 152

Ordinary shares outstanding

71 813 128

71 813 128

Net asset value per share (cents)

701

674

Net tangible asset value per share (cents)

701

674

The number of shares outstanding at 31 December 2009 and 30 June 2010 has been adjusted for the 3 million treasury shares held.

11. Material changes
There have been no material changes to the information contained in the independent mineral asset valuation reports that were disclosed to shareholders in the settlement circular.

12. Related-party transactions
Refer notes 6 and 8 for transactions with JCI, a related party.

13. Events after reporting date
Refer notes 6 and 7 for significant events occurring after 30 June 2010.

 

Directors:
DC Kovarsky (Chairman)**, M Steyn (CEO)*, V Botha*, MB Madumise**,
JH Scholes**
(* Executive, ** Independent non-executive)

Secretary and Registered office:
RP Pearcey FCIS, 7th Floor Fredman Towers, Fredman Drive, Sandown, 2196

Transfer secretaries:
Computershare Investor Services (Pty) Ltd

(Registration number 2004/003647/07) 70 Marshall Street, Johannesburg 2001

 

04 August 2010
Sponsor
PSG Capital (Pty) Limited