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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”)

 

Abridged audited results for the year ended 31 December 2011

Commentary to condensed consolidated financial statements for year ended 31 December 2011

General
After significant distributions to shareholders in January 2011 arising from the recoupment of value from third parties, the board consolidated the affairs of the company during the year under review. Management continued building shareholder value by investing in the outstanding legal claims against third parties and by investigating various investment opportunities. More importantly, the operational activities during the 2011 financial year had a minimal effect on the net asset value of the company.

As previously stated, the R&E board of directors remains firmly committed to the further recovery of the company’s assets, which were lost as a result of the misappropriations during the Kebble era, while always retaining a commercially pragmatic approach. No recoveries were made during the year under review but considerable effort went into the pursuit of various substantial claims.

The company’s strong asset base, comprising primarily cash reserves, facilitates the bold and effective pursuit of claims while preserving sufficient critical mass to take advantage of investment opportunities as they arise.

The company’s prospecting rights portfolio, which has not materially changed from the prior year, has not shown any potential to accommodate an independent and economically viable mining operation. However, management was able to dispose of certain selected rights, and is in the process of finalising these transactions. Disposal agreements of prospecting rights amounting to approximately R22 million were entered into, of which R10 million was concluded during the year under review and the balance scheduled for conclusion in 2012. Certain other rights are now the subject of joint-venture agreements, in terms of which the operational and funding requirements are the responsibility of our partners.

Statement of comprehensive income
The group results for the 2011 year were positive, showing total profit of R47.7 million (2010: R 741.5 million).This is mainly as a result of profit realised on the distribution of investments to shareholders, the sale of prospecting rights, and interest earned on cash invested. Continued expenditure on consulting, forensic, legal, audit fees and tax advisors was necessary to achieve the desired outcomes.

Statement of financial position
The major assets of the R&E group as at 31 December 2011 consisted of cash and prospecting rights. The board has adopted a minimum risk approach to protect the group’s cash investments, which are monitored daily in conjunction with a specialist treasury firm to maintain optimal returns with minimal associated risks. The group’s prospecting rights are stated at cost less impairments as we do not have sufficient geological information to allow us to declare the resources or reserves as stated in previously published competent person’s reports. The group intends to retain its prospecting rights unless it is commercially sound to dispose thereof and negotiations in this regard are ongoing. Planned prospecting expenditure on all rights currently held is R20.8 million over the course of the next four years. R&E will progressively review the exploration programme to ensure efficient application of the company’s resources.

The post-retirement medical benefit obligation is unfunded and the group continues to fulfil its obligations. However, in managing the liability, we have successfully offered some members of the medical aid scheme a discounted cash amount in exchange for the renunciation of their benefits under the scheme, an alternative that is proving to be beneficial for both parties.

The R&E group has calculated tax losses as at 31 December 2011, but no deferred tax assets were raised as it is not probable that there will be future taxable profits against which to offset the tax losses. Certain tax matters dating back to 1998 that were part of the Kebble legacy have now been laid to rest with the South African Revenue Service.

Statement of cash flows
The group’s primary cash inflows were as a result of investing activities, interest earned on cash and the disposal of prospecting rights. The group utilised this cash to fund its operations during the year.

Outlook
The outlook for 2012 is similar to that for the previous year. Expenditure on litigation and operations is expected to be at a similar level, which is likely to prevail until all claims have been finalised.

DC Kovarsky         Marais Steyn                  Van Zyl Botha
Chairman            Chief Executive Officer       Financial Director

Johannesburg
6 March 2012

Condensed consolidated statement of comprehensive income

 

 

For the year ended

 

 

31 December 2011

31 December 2010

 

 

 

 

 

Notes

R’000

R’000

Revenue

 

1 826

20 408

Recoveries – JCI

 

783 549

           – Other

 

25 204

Profit on disposal of investments/distribution

6

52 474

2 165

Profit on disposal of prospecting rights

7

9 963

Other income

 

2 688

7 640

Other operating expenses

 

(29 081)

(80 826)

Results from operating activities

 

37 870

758 140

Finance income

 

8 832

1 519

Profit before taxation

 

46 702

759 659

Taxation

 

949

(18 200)

Profit for the year

 

47 651

741 459

Other comprehensive income

 

 

 

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

6

(9 537)

49 874

Realised gain reclassified to profit or loss

 

(52 474)

Total comprehensive income

 

(14 630)

791 333

 

 

 

 

Profit or loss attributable to:

 

 

 

Non-controlling interest

 

54

Owners of the company

 

47 651

741 405

Profit for the year

 

47 651

741 459

 

 

 

 

Total comprehensive income attributable to:

 

 

 

Non-controlling interest

 

54

Owners of the company

 

(14 630)

791 279

Total comprehensive income

 

(14 630)

791 333

 

 

 

 

Basic and diluted earnings per share (cents)

8

66

1 032

 

Condensed consolidated statement of financial position

 

 

As at

 

 

31 December 2011

31 December 2010

 

 

 

 

 

Notes

R’000

R’000

Assets

 

 

 

Non-current assets

 

734

782

Plant and equipment

 

260

308

Intangible assets

 

474

474

Current assets

 

213 258

568 291

 

 

 

 

Trade and other receivables

 

1 788

2 649

Investments held for distribution

6

-

273 845

Cash and cash equivalents

 

211 470

291 797

Total assets

 

213 992

569 073

 

 

 

 

Equity and liabilities

 

 

 

Shareholders’ equity

 

169 026

174 455

Issued capital

 

746

748

Reserves

 

-

62 011

Retained earnings/(accumulated loss)

 

168 280

111 696 

 

 

 

 

Liabilities

 

 

 

Non-current liabilities

 

 

 

Post-retirement medical benefit obligation

 

39 142

36 429

 

 

 

 

Current liabilities

 

5 824

358 189

Tax payable

 

-

11 220

Shareholders for dividend

6

-

338 477

Trade and other payables

 

5 824

8 492

 

 

 

 

Total equity and liabilities

 

213 992

569 073

 

 

 

 

 

Condensed consolidated statement of changes in equity

 

 

For the year ended

 

 

31 December 2011

31 December 2010

 

 

 

 

 

Notes

R’000

R’000

Share capital

 

746

748

Balance at the beginning and end of the year

 

748

748

Shares repurchased

 

(2)

-

 

 

 

 

Share premium

 

-

Balance at the beginning of the year

 

-

986 054

Settlement distribution

 

-

(803 804)

GFI and cash distribution

 

-

(182 250)

 

 

 

 

Investment fair value reserve

 

-

62 011

Balance at the beginning of the year

 

62 011

12 137

Realised gain reclassified to profit of loss

 

(52 474)

-

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

 

(9 537)

49 874

 

 

 

 

Retained earnings/(Accumulated loss)

 

168 280

111 696

Balance at the beginning of the year

 

111 696 

(514 787)

Change in fair value of shareholders for dividend

6

9 537

-

Transaction with non-controlling shareholders

 

-

9 074

Profit for the year

 

47 651

741 405

Shares repurchased

 

(604)

-

Settlement distribution

 

32 231

GFI and cash distribution

 

(156 227)

 

 

 

 

Non-controlling interest

 

-

-

Balance at the beginning of the year

 

250 378

Transaction with non-controlling shareholders

8

(171 051)

Dividends paid to non-controlling shareholders

 

(79 381)

Profit for the year

 

-

54

 

 

 

 

Dividend per share (cents)

8

1 546

 

 

 

 

 

 

 

 

 

Condensed consolidated statement of cash flows

 

For the year ended

 

31 December 2011

31 December 2010

 

 

 

 

R’000

R’000

Profit before taxation

46 702

759 659

Adjusted for:

 

 

  Profit on sale of Mineral Rights

(9 963)

-

  Recoveries not settled in cash

(808 754)

  Other non-cash items

(49 685)

26 420

  Finance income

(8 832)

(1 519)

  Dividends received

(1 826)

(20 408)

  Working capital changes

(1 775)

41 146

Cash untilised in operations

(25 379)

(3 456)

Finance income

8 832

635

Taxation paid

(10 455)

(22 559)

Cash flows from operating activities

(27 002)

(25 380)

Cash flows from investing activities

11 762

101 752

Dividends received

1 826

20 408

Proceeds from disposal of recovered assets

-

27 344

Proceeds on disposal of investment in equity securities

-

7 859

Proceeds on disposal of property, plant and equipment

11

-

Proceeds on disposal of mineral rights

9 963

-

Acquisition of plant and equipment

(38)

(285)

Loan payments received

-

46 426

Cash flow from financing activities

(65 087)

(79 381)

Dividends paid to non-controlling shareholders

-

(79 381)

Dividends paid

(64 481)

-

Shares repurchased

(606)

-

Net decrease in cash and cash equivalents

(80 327)

(3 009)

Cash and cash equivalents at the beginning of the year

291 797

294 806

Cash and cash equivalents at the end of the year

211 470

291 797

 

Notes to the condensed consolidated interim financial statements for the year ended 31 December 2011

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 year ended 31 December 2011 include the company and its subsidiaries (together referred to as “the group”).

2. Statement of compliance
The condensed consolidated interim financial statements for the year ended 31 December 2011 have been prepared in compliance with the Listings Requirements of the JSE Limited, International Financial Reporting Standards (IFRS) (in particular International Accounting Standard 34 Interim Financial Reporting), the AC 500 Standards as issued by the Accounting Practices Board or its successor and the Companies Act of South Africa.

These consolidated annual financial statements were approved by the board of directors on 06 March 2012.

3. Significant accounting policies
The accounting policies applied by the group in these condensed consolidated financial statements are the same as those applied by the group in its consolidated financial statements for the year ended 31 December 2010, except for the following standards and interpretations adopted on 1 January 2011:

  • Revised IAS 24 – Related Party Disclosures
  • IFRIC 14 amendment – Prepayments of minimum funding requirements; and
  • Various improvements to IFRSs 2010 – excluding amendments to IFRS 3 Business Combinations and IAS 27 Consolidated and Separate Financial Statements.

 

There was no significant impact on these condensed consolidated financial statements as a result of adopting these standards and interpretations.

4. Independent review by the auditor
The condensed consolidated financial statements were extracted from the audited annual consolidated financial statements of R&E for the year ended 31 December 2011. The annual consolidated financial statements of R&E were audited by the group’s auditor, CH Basson of KPMG Inc. The unmodified audit report is available for inspection at the company’s registered office.

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

6. Distribution of 2 270 687 GFI shares and special cash dividend of 90 cents per R&E share

On 30 November 2010, R&E shareholders approved the distribution of R&E’s remaining listed investment in GFI (amounting to 3.16193 GFI shares per 100 R&E shares held), as well as a cash dividend of 90 cents per share. These distributions were effected on 17 January 2011. STC was paid on the portion of the distribution not made out of share premium.

As a result of this distribution, the investment fair value reserve at 17 January 2011 of R52.4 million was reclassified to profit or loss.

 

R’000

Investment held for distribution – 1 January 2011

273 845

Value of GFI shares at distribution date – 17 January 2011

(264 308)

Decrease in fair value of investment held for distribution recognised in other comprehensive income

9 537

Investment fair value reserve – 1 January 2011

(62 011)

Realised gain reclassified to profit or loss

52 474

 

R’000

Shareholders for dividend – 1 January 2011

338 477

Remeasurement – 17 January 2011

(9 537)

Distribution

328 940

GFI Shares

264 307

Cash

64 633

7. Profit on sale of prospecting rights
During the year under review, R&E disposed of certain of its prospecting rights which had a nil carrying value to a third party for R10 million (refer to note 10).

8. Earnings per share and dividend per share

 

For the year ended

 

31 December 2011

31 December 2010

Basic earnings and diluted earnings per ordinary share

 

 

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

47 651

741 405

Weighted average number of ordinary shares in issue

71 756 219

71 813 128

Earnings per share (cents)

66

1 032

Headline and diluted headline earnings per ordinary share

 

 

 

 

 

Headline and diluted headline (loss) / earnings for the year (R’000)

(14 786)

754 893

Weighted average number of ordinary shares in issue

71 756 219

71 813 182

Headline (loss) / earnings per share (cents)

(21)

1 051

 

 

 

Reconciliation between basic and headline earnings for the year

R’000

R’000

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

47 651

741 405

Adjusted for:

 

 

Profit on disposal of available-for-sale investments

(52 474)

(2 165)

Profit on disposal of prospecting rights

(9 963)

Impairment of investment held for distribution

– 

15 653

 

(14 786)

754 893

Tax effect of adjustments

Headline (loss) / earnings for the year attributable to equity holders of the company

(14 786)

754 893

Dividend per share

 

 

Total dividend declared (R’000)

1 110 050

Eligible shares in issue

71 756 219

71 813 128

Dividend per share (cents)

1 546

Total dividend payable from R&E’s share premium (R’000)

803 804

Dividend payable to group entities recognised in retained earnings (R’000)

(32 231)

Shareholders for dividend per statement of financial position (R’000)

338 477

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

 

31 Dec 2011 Audited

31 Dec 2010 Audited

Net asset value (R’000)

169 026

174 455

Ordinary shares outstanding

71 585 172

71 813 235

Net asset value per share (cents)

236

243

Net tangible asset value per share (cents)

235

242

The number of shares outstanding at 31 December 2010 and 31 December 2011 has been adjusted for the 3 million treasury shares held.

10. 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, however, two prospecting rights over various farms (collectively known as the Jeanette Prospecting Right and Weltevreden Prospecting Right) were disposed of during the reporting period (refer to note 7).

11. Related party transactions
There were no related party transactions during the period under review.

12. Events after reporting date
There were no significant events between the reporting date and the approval date of these results.

Directors: DC Kovarsky (Chairman)**, M Steyn (CEO)*, V Botha*, MB Madumise**#, JH Scholes** (*Executive, **Independent non-executive)
(#MB Madumise resigned from the board with effect from 23 March 2012)

Secretary and Registered office: Van Zyl Botha, 3rd Floor Sandton Office Towers, 158 5th Street, Sandhurst, Sandton, 2196
Transfer secretaries: Computershare Investor Services (Pty) Ltd (Registration number 2004/003647/07) 70 Marshall Street, Johannesburg, 2001
Sponsor: PSG Capital