RNS Number:1264P
Thistle Mining Inc.
28 August 2003
Second Quarter Report
2003
Second Quarter Report to 30 June 2003
Toronto, 28 August 2003 - THISTLE MINING INC. (TSX: THT and AIM: TMG) wishes to
announce the second quarter and half-year results for the period ended 30 June
2003.
Highlights of the quarter
* Production of gold was 46,747 ounces at the President
Steyn mine in South Africa, which was slightly higher than the same quarter last
year. As a result of an underground fire at Number 1 shaft an estimated 31
kilos of gold or 1,000 ounces were not produced in the quarter
* Continuation of the strategy to expand physical production
as a means of lowering unit operating costs
* Record production of 7,328 ounces in Kazakhstan
* Further restructuring of hedge programme to realise a net
cash surplus of US$ 14.4 million before tax, following the US$ 7.0 million
realised in the first quarter
* Agreement to repay remaining balance of term loan of US$
14.4 million as soon as exchange control formalities are concluded
* Initial steps taken towards creating a mutual fund for the
benefit of all employees at the minesite as part of the Black Economic
Empowerment process; continuing commitment to a broadly based BEE scheme
* Initial equipping of the Massives project, accessed from
Number 3 shaft, completed at the end of the quarter
Significant achievements since the end of the quarter
* Completion of US$24 million 10% convertible loan note
issue 16 July 2003
* Agreement to a one year settlement, in line with industry
averages, with the Trades Union movement which includes the adoption of improved
working practices at the Steyn Mine complex and a commitment to increasing
production
All references to dollars in this quarterly report are United States dollars.
As at 27 August 2003, the South African Rand exchange rate was Rand 7.37 to the
US dollar.
Achievements during the quarter
Production of gold at President Steyn in South Africa was 46,747 ounces, which
was slightly higher than the same quarter last year. On 24 June an underground
fire broke out at Number 1 shaft. As a result, an estimated 31 kilos of gold or
1,000 ounces were not produced in the quarter. The workers employed in the
affected areas were deployed elsewhere in the mine site as the fire was
contained. The redeployment took effect at the end of July 2003. An
estimated 100 kilograms of planned gold production, equivalent to 3,500 ounces,
were not produced in the first month of the third quarter.
At the end of the second quarter, the initial equipping of the Massives project,
which is accessed from Number 3 shaft, was completed. Production from this
operation began on 1st July and should increase steadily to over twenty thousand
tonnes per day.
In Kazakhstan, record production of 7,328 ounces of gold and year to date sales
of 10,335 ounces were achieved by the Eurasia Gold operations. The mild weather
during the first quarter of 2003 enabled earthworks to pre-strip the pits to be
mined during the summer field season.
On the financing front further restructuring of the hedge programme realised a
net cash surplus of US$ 14.4 million before tax following the US$ 7.0 million
realised during the first quarter. In accordance with UK accounting principles
the Group will continue to account for the revenue over the period of the
original hedge contract and not as a one off benefit in the current year,
although the Group has the full economic benefit of the cash in the quarter. Tax
will be assessable on the full receipt, in the normal manner, as part of the
taxable profits for 2003.
The Company has begun the initial steps of creating a mutual fund for the
benefit of all employees at the minesite as part of the Black Economic
Empowerment process. Discussions are continuing with several groups to identify
a suitable Black Empowerment Partner to co-invest with the workforce. Thistle
remains committed to a broadly based BEE scheme for the benefit of the
workforce.
Significant achievements since the end of the quarter
On 16 July 2003, Thistle completed the issue of US $24 million 10% convertible
loan notes. The issue was placed by Canaccord Capital Corporation and Griffiths
McBurney. These loan notes are repayable in July 2008 and are convertible, at
the holder's option, into common shares of Thistle at a conversion price
equivalent to Cdn$ 0.65 per share The notes were listed on the Toronto Stock
Exchange on 18 August 2003 and Thistle is intending to list the loan notes on
the Alternative Investment Market of the London Stock Exchange.
Securing this financing was a very significant step in the process of
strengthening the financial structure of the Group. In particular, it will
allow the development of the Northern Section of the President Steyn complex,
which should lead to lower unit operating costs, together with the completion of
the full Bankable Feasibility Study on the Masbate project in the Philippines.
The Group will raise further funds as appropriate to finance the expansion of
its activities.
As discussed in the liquidity and capital resources section, a combination of
the funds from the hedge restructuring and part of the loan note issue proceeds
will result in the Group repaying approximately $21.9 million of debt in the
third quarter.
In August the Group secured a wage settlement with the Union movement which
includes the adoption of improved working practices at the Steyn Mine complex.
The drilling programme has been re-started at the Masbate project in the
Philippines.
Operations
SOUTH AFRICA
Thistle took ownership of the President Steyn operations and management
immediately following the completion of the acquisition on 15 February 2002.
The principal operating companies in South Africa are President Steyn Gold Mines
(Free State) (Pty) Ltd (PSGM) and TMTI (Pty) Ltd., which operate the mines and
training college attached to the mine site respectively.
Health and Safety
The Group remains committed to providing a healthy working environment and has
adopted a zero tolerance approach towards unsafe acts and conditions.
The Group also believes in an extended safety, health and environment protection
principle which encompasses the broader community.
South African Production
As shareholders will be aware, the Group, in common with every South African
mining business, has suffered from the continued strengthening of the Rand. It
was considered prudent to restructure part of its hedge book in the second
quarter of 2003. This realised a cash surplus of approximately US$ 21.4 million,
which will be used primarily to repay debt. The Group currently has some
currency protection in place at ZAR 8.54 until the end of 2003.
2nd Quarter 3rd Quarter 4th Quarter 1st Quarter 2nd Quarter
2002 2002 2002 2003 2003
Tonnes Hoisted 281,283 347,691 294,664 325,564 299,413
Hoisted grade 5.24 4.61 5.22 4.03 4.70
Tonnes milled 311,070 320,070 310,647 332,024 364,066
Recovered grade 4.66 4.80 4.80 3.98 3.99
Plant recovery % 95.71 95.91 96.00 95.76 94.5
Ounces Sold 45,865 48,362 51,387 37,983 45,930
US$ realised 313 314 323 352 346
Hedge book 15 17 31 16 21
US$ received 328 331 354 368 367
Cash costs 199 248 290 341 399
Royalty 8 8 8 8 0
Margin 121 75 56 19 (32)
Ave gold price US$ 313 US$ 314 US$ 323 US$ 352 US$346
Ave exch rate ZAR 10.69 ZAR 10.41 ZAR 9.64 ZAR 8.34 ZAR7.72
Financial
During the second quarter of 2003, the South African operations recorded a
received price of US$ 367 per ounce of gold sold (US$ 367 per ounce for the
first six months of 2003) compared to the average market price over the same
period last year of US$ 328. The price received includes the premium from hedge
transactions undertaken at the time of the acquisition of President Steyn. The
impact of the hedge is to manage the exposure of the Company to a strengthening
South African Rand. The Group continues its strategy of implementing prudent
protection against currency and gold risks as it considers appropriate.
Cash operating costs for the second quarter were US$ 399 per ounce of
production, compared with US$341 for the first quarter, an increase of 17%. The
continued strengthening of the Rand accounted for approximately half of this
movement. The Group continues to pursue a strategy of expanding physical
production as a means of lowering unit operating costs. Other notable cost
increases in the period included:
* US$ 0.9 million spent on two environmental rehabilitation
projects, the first being the start of the grassing of the slimes dam and the
second, a screening project on an old rock dump footprint which both cleaned up
a problem area and allowed us to beneficiate ore so that it was profitable to
treat.
* Equipping of the 'Massives Project' (US$ 0.3 million) with
production increases to come through in the third quarter.
* As is normal, June was the first month of the higher
winter electricity tariffs ( US$ 0.3 million).
* There was a requirement to switch to liquid cyanide to be
used in the plant ( US$ 0.3 million).
On 24 June a fire broke out underground in the Southern Section which initially
resulted in the closure of all three shafts in this section for a short period,
although two shafts reopened soon thereafter. In August the 1A-vent shaft
remains closed and although smoke readings are indicating that the fire is
dying, this area will only be accessed in September to confirm the status. The
impact on production in the second quarter was marginal although the negative
effect will be felt in the third quarter with production down 108 kgs from plan
in July. By the end of August new areas will have been accessed and although
there will still be areas closed due to the fire we are forecasting that
production will be back to plan levels.
The South African government has recently proposed the introduction of a 3%
royalty to be payable on gold produced. It is recognised that most countries
charge some form of royalty on extractive industries, so South Africa is no
different in this regard. Thistle has recently bought back the royalty from PS
Gold, which was 3% of our revenue at the time of its creation, and so has
already been meeting costs equivalent to the proposed royalty. The proposed
royalty will clearly be a factor in future investment decisions. It is hoped
that the South African government will give consideration to a long-term phasing
in of the royalty and will recognise the impact on availability of funds,
including those allocated towards improving conditions in the community.
Human Resources
Satisfactory agreements have been reached with both the Mineworkers Union and
the National Union of Mineworkers ("NUM") in South Africa. The Company has
achieved an agreement with the NUM, in line with settlements of other mining
companies. Part of the agreement includes improvements in working practices to
ensure improved productivity at the mine site.
Production
A summary of production per shaft comparing the second quarter of 2003 with the
corresponding period in 2002 is as follows:
Quarter 2 2003 Quarter 2 2002
Steyn 1 Shaft
Tonnes milled tonnes 94,181 92,078
Recovered grade g/t 3.68 3.61
Gold recovered Kg 347.31 332.39
Gold recovered ounces 11,166 10,687
Steyn 2 Shaft
Tonnes milled tonnes 58,907 60,281
Recovered grade g/t 5.48 5.77
Gold recovered Kg 322.82 347.98
Gold recovered ounces 10,379 11,188
Steyn 3 Shaft
Tonnes milled tonnes 80,223 79,691
Recovered grade g/t 5.70 5.36
Gold recovered Kg 457.78 427.39
Gold recovered ounces 14,718 13,741
Steyn 7 Shaft
Tonnes milled tonnes 31,922 34,871
Recovered grade g/t 3.89 4.47
Gold recovered Kg 124.28 155.70
Gold recovered ounces 3,996 5,006
Steyn 9 Shaft
Tonnes milled tonnes 34,182 33,685
Recovered grade g/t 4.55 4.56
Gold recovered Kg 155.46 153.44
Gold recovered ounces 4,998 4,993
Summary of Results
Total shafts
Tonnes milled tonnes 299,415 300,606
Recovered grade g/t 4.70 4.71
Gold recovered Kg 1,407.64 1,416.89
Gold recovered ounces 45,257 45,615
Including Surface Ore
Total mine
Tonnes milled tonnes 364,066 311,070
Recovered grade g/t 3.99 4.66
Gold recovered Kg 1,453.98 1,448.08
Gold recovered ounces 46,747 46,557
It is the Group's policy to recognise sales when the gold is delivered to the
refinery. Accordingly, delivery cut-off arising at the end of the quarter has
resulted in lower ounces being recorded in the financial results than were
actually produced in the period. Gold sales for the quarter amounted to 45,930
ounces.
Improvements in efficiency have increased centares broken in the Northern
Section by nearly 30%, from a monthly average in quarter one of 25,215 m(2), to
32,308m(2) in quarter 2.
Grades
The gold grade recovered has remained low in the second quarter at an average of
3.99 g/t. This is due to the processing of low-grade surface material as part
of the screening project referred to under the Financial Commentary.
Black Empowerment
During its negotiations to acquire the President Steyn operations, Thistle
recognised that "Black Empowerment" would become a key factor in the future
development of its business interests in South Africa.
The publication of the Minerals Bill and the Mining Charter has focused the
attention of international investors on the position of mineworkers in the
community. The Charter calls for broadly based worker participation of 15% over
the next five years and a further 11% within ten years, with such transactions
to be at fair market value. It is Thistle's intention to introduce a scheme
which will ensure compliance within the five year time horizon.
The Group has embraced the concept of workforce participation and the attempt to
eradicate poverty within the country. It will be important to attract the
support of a suitable Black Empowerment group as a cornerstone investor to any
scheme. The Group has already undertaken exploratory discussions with several
interested parties. The most important Black Empowerment group to the future
success of the Group is its own workforce. The final scheme brought forward will
be available to the entire workforce following detailed negotiations with the
unions involved.
Through its ownership of the TMTI training college in Welkom and the provision
of school facilities for the community at the mine site, Thistle has
demonstrated its commitment to realising the vision of the Charter.
Development
A total of 2,304 metres were developed during the three months ended 30 June
2003, compared to an average of 2,290 metres per quarter in 2002. The goal for
the remainder of the year is to improve development broken by a minimum of 20%,
using some of the funds available from the US$ 24 million loan note issue.
The focus of development is to open up the potential of the "Golden Triangle", a
new mining area with the substantial resource identified to date of 4.4 million
ounces. This area is located between Steyn 3, 7 & 9 Shafts.
In the medium term, the challenge is to develop sufficient working areas to
allow the monthly tonnage hoisted from 3 shaft to increase to 135,000 tonnes
from the present 50,000 tonnes hoisted from all the shafts in the Northern
Section. The capital expenditure to achieve this level of production is
estimated at US$ 7 million.
Management is also examining the cost of constructing a new milling plant and
gold processing plant at the Northern Section. This investment has been
provisionally estimated by management at US$ 15 million. There is the
flexibility to transport the ore to the Southern Section rather than expend
capital in the Northern Section. However, preliminary studies suggest that the
cost of a process plant would be recovered from the cost-saving of transporting
the ore between the mine sites, within two and a half years.
Exploration
The Company has identified a new exploration target to be accessed from the
Steyn 3 shaft at the 50 level, known as the Eldorado Massives.
Commercial production commenced in June 2003 in areas containing 7 to 8 grams
per tonne in situ material.
The highlights of the verification and the exploration work completed to date
are as follows:
* Several reef packages have been identified on all levels
between 48 Level and 58 Level which are easily accessible for existing
development
* Drilling was suspended temporarily after the drilling
contractor went into liquidation. A new contractor was appointed and drilling
restarted on 12 May 2003
* Several thousand old borehole results have also been
obtained and are being evaluated in order to predict specific pay shoots within
the different reef packages. This will provide us with valuable historical
information to enable the optimisation of the resource to be mined.
* Mobilisation of pilot-scale production teams has begun.
Deposits will be exploited using semi-trackless mining methods with larger scale
production expected during the third quarter of this year.
PHILIPPINES
Philippine Gold Ltd, a wholly owned subsidiary of Thistle Mining Inc, operates
in the Philippines through a local subsidiary, Filminera Resources Corporation
("Filminera"). The principal assets of Filminera are the gold deposits of the
Masbate Project, located to the South-East of Manila on the island of Masbate.
The rise in the US$ gold price has significantly altered the Masbate Project
economics and we are now commencing the next phase in the development of the
project.
During the latter part of 2002, the Company undertook exploration and
development drilling in the proposed Colorado, Grand View and Montana resource
areas, which may be exploited by low-cost open-pit mining. The results of this
drilling identified an overall 10% increase in the amount of contained gold as
well as locating at least one additional ore zone within the Colorado resource
area. No new drilling was carried out on the Project during the quarter.
Following the successful US$ 24 million loan note issued in July 2003,
mobilisation of the drilling companies has been started to complete a further
5,700 metres, predominantly on the Main Vein and Holy Moses/Basalt resource
areas. It is estimated that this drilling will be completed towards the end of
November 2003. During this period, a bankable feasibility study will be
initiated and run concurrently with the drilling programme. Included within the
drilling programme is 1,800 metres of drilling to allow for resource
definition-related requirements of the feasibility study, such as geo-technical,
geological and pit optimisation work. The Bankable Feasibility Study is
expected to be completed in mid 2004.
The Board may consider a partial flotation of Philippine Gold Ltd following
completion of the drilling programme, subject to market conditions, to secure
the working capital required to further develop the inherent value of the
Project. In particular, the ability to develop the project using equity rather
than debt would allow the mine to operate on an un-hedged basis.
EURASIA GOLD CORP. ("EURASIA")
Thistle Mining owns 52.9 % of the equity of Eurasia Gold Corp. and has not
traded in their shares during the period.
Operations Report
The Company continued its strategy of only conducting mining operations during
the winter months when the weather conditions were favourable. Gold
precipitation was maintained at both mine sites during the winter months even
during low recovery periods, which prevented the leach pads from freezing. This
strategy proved to be extremely successful as the company's gold production in
2002 was the highest recorded since commercial operations began.
In 2003, the amount of gold precipitated during the 2nd quarter was 7,328 ounces
compared to 2,774 ounces in the 1st quarter. In comparison, the production
during the 2nd quarter of last year was 7,796 ounces.
354,670 tonnes of ore were placed on the leach pads in the 2nd quarter of this
year, compared to 110,988 tonnes in the 1st quarter of 2003 and 338,486 tonnes
in the 2nd quarter of 2002.
Inventory of gold at June 30, 2003 and at the end of 2002 is as follows:
Inventory items June 30, 2003 December 31, 2002
Recoverable gold to pad ounces 9,370 7,671
Gold on resin ounces 2,100 2,126
Gold at resin plant ounces 35 770
Gold at refinery (for sale) ounces 1,814 1,247
Total inventory ounces 13,319 11,814
It is important to recognize that the estimated amount of gold on inventory can
be subject to a significant margin of error.
Andas-Altyn LLP mine quarterly production for the combined mine sites:
Monthly Operating Indices 2003 2nd quarter 1st quarter 6months
Waste tonnes 1,326,903 668,891 1,995,794
Ore to pad tonnes 354,670 110,988 465,658
Gold grade in ore to pad Av. g/t 1.32 1.31 1.31
Gold in ore to pad ounces 15,002 4,665 19,667
Recoverable gold to pad ounces 9,001 2,801 11,802
Gold precipitated ounces 7,328 2,774 10,102
Andas-Altyn LLP is the 100% owned company carrying out operations on behalf of
Eurasia Gold Corp. in Kazakhstan.
Gold Sales
Gold sales for the first 6 months of 2003 amounted to 10,335 ounces
Management's Discussion and Analysis
For the six months ended 30 June 2003
This Management's Discussion and Analysis ("MD&A") updates the 2002 Annual
Report MD&A in terms of any significant changes in Thistle Mining's business and
analyses the results of its operations for the six months ended 30 June 2003.
All references are to United States dollars except where otherwise indicated.
Financial Review
Financial Highlights
(in thousands of US dollars) Six months Six months
2003 2002
Turnover 34,825 23,488
Gross (loss)/ profit (2,083) 5,702
Operating (loss)/profit (5,359) 3,385
Retained loss (8,145) (512)
Cash flow from operating activities (11,581) 3,134
Net assets 22,412 25,673
The Group recorded a gross loss of $2.1 million during the six months compared
to a gross profit of $5.7 million in the corresponding period of 2002. After
accounting for general and administrative expenses and other operating expenses,
the Group reported an operating loss of $5.4 million compared to a profit of
$3.4 million in the previous year. The total retained loss for the first half of
the year was $8.1 million, or 4 cents per share, compared to $0.5 million, or 0
cents per share in 2002. As discussed earlier in this Report, the Rand continued
to strengthen in the second quarter of 2003 and this has had a significant
impact on the financial results of the Group.
South African Operations
The Group acquired the President Steyn complex ("PSGM") on 15 February 2002 and
the contribution to the Group results from the South African operations
commenced on that date.
The South African sub-group cash EBITDA (i.e. earnings before interest, taxes,
depreciation and amortisation and foreign exchange losses on translation) in the
first six months of 2003 was an outflow of $0.3 million, of which $1.2 million
occurred in the second quarter of the year. After depreciation and amortisation
of $2.4 million and foreign exchange losses on translation of $1.0 million, an
operating loss of $3.7 million was recorded for the half year.
Included in turnover for the six months is $0.9 million profit derived from the
Group's hedge contracts up to the dates they were restructured. As announced on
1 April and 7 May 2003, the Group restructured its hedge programme in two stages
to realise a total cash surplus of $21.4 million before tax. In accordance with
UK accounting principles, this amount is being treated as deferred income to be
released to the income statement over the time period covered by the original
hedge contracts. Approximately $0.7 million of this deferred income has been
recognized in the income statement in the half year results.
Cost of sales for the first half of the year includes $0.3 million in respect of
a royalty of $8 per ounce of gold produced payable to the vendors of PSGM from
the date of acquisition until January 2007. On 1 April 2003, the Group acquired
the company owning the royalty and this acquisition has been included in the
results of the Group with effect from that date. Accordingly, this royalty
ceased to be a cost to the Group.
Administrative and Other Operating Expenses
Administration costs decreased by $0.2 million from the comparative period to
$2.1 million for the six months, reflecting the reduced reliance the Group now
has on consultants and other professional advisors.
Other operating expenses include advisory fees of $0.1 million towards
developing a suitable Black Empowerment scheme and unrealised foreign exchange
losses of $1.0 million
Interest Payable and Similar Charges
The increase in interest and other financial charges of $1.3 million, compared
to the first half of 2002, includes an increase in interest expense of $0.3
million which reflects the level of borrowing raised for the PSGM acquisition.
It also includes a foreign exchange loss of $0.9 million arising from cash flow
management operations in a strengthening currency and an increase of $0.1
million in amortisation of deferred financing costs incurred in establishing the
Group's banking facilities.
Taxation
There is a current tax charge of $7.8 million in the first six months, almost
entirely arising from the Rand denominated profit of the PSGM mining operations
which, for tax purposes, has to include the full amount of the hedge close out
proceeds of $21.4 million. As explained above, the Group is classifying this
profit as deferred income and releasing it to income over the period of the
original hedge contracts. Therefore, a corresponding deferred tax asset
representing the full tax charge attributable to the $21.4 million hedge
receipts has been established, resulting in a deferred tax credit of $7.8
million for the half year. This asset will be released to income over the same
period as the deferred income, thereby matching the tax charge arising from the
revenue credits.
Net Assets
The increase in the Group net assets of $1.6 million between 31 December 2002
and 30 June 2003 reflects the retained loss incurred over the period and the
acquisition of PS Gold. The large decrease in provisions for liabilities and
charges arises from the deferred tax asset discussed above.
Cash Flows
There was a Group cash outflow from operating activities (cash operating profit,
adjusted for movements in current assets and liabilities) of $11.6 million for
the six month period against a cash inflow of $3.1 million for the same period
in 2002. $2.2 million of cash flow was invested in capital expenditure at the
mines and the Group completed the PS Gold acquisition for $10.7 million cash.
The most significant financing activity was the issue of $8.3 million of shares
for cash.
Liquidity and Capital Resources
At 30 June 2003 the Group's net debt was just over $31 million, analysed as
follows:
$ million
Cash and cash equivalents 2.7
Debt due within one year
Term loan to be repaid in third quarter (14.4)
Revolving loan repaid in July (7.5)
Other debt (3.7)
Debt due after one year (9.5)
Debt issue cost 1.2
TOTAL (31.2)
The Group has approximately $1.8 million of undrawn bank facilities as at 30
June 2003.
The $14.4 million proceeds received from the second part of the hedge
restructure (which has been recorded within debtors on the 30 June balance
sheet) will be used, once exchange control approval from the South African
authorities has been received, to repay the remaining balance of $14.4 million
on the secured term loan.
The liquidity position of the Group was improved significantly by the issue, on
16 July 2003, of $24 million 10% convertible loan notes, repayable in July 2008.
$7.5 million of these funds was used to repay bank indebtedness.
Accordingly, a total of approximately $21.9 million of the 30 June debt due
within one year will be repaid in the third quarter of 2003.
The Company issued shares for a total consideration of $10.0 million during the
first six months of 2003 which were applied for the following purposes:
$ million
Issued for cash 8.3
Debt conversion 1.7
TOTAL 10.0
The principal issue of shares in the period was through the completion, on 13
January 2003, of a private placement of 19.2 million shares in the Company for
gross proceeds of $7.4 million (Cdn$ 11.5 million), net US$ 6.7 million.
The Company had 231,634,646 shares issued and outstanding as at 25 August 2003.
Hedging Programme
As a part of its facilities with Standard Bank, the Company entered into a hedge
programme to protect its South African revenue stream. The Company does not
speculate on the gold price using its hedge position. It is designed to reduce
the risks to the Company's revenues and operating profits and the Board monitors
the position on a regular basis. All hedging facilities have been undertaken
without any need to provide margin.
None of the gold available from the Philippines deposit is committed to a
hedging programme and Eurasia Gold Corp. is a completely un-hedged producer.
Details of the hedge programme in place as at 30 June 2003, are as follows:
2003 2004 2005 2006 2007 Total
USD Gold put options
Forward sales contracts 7 12 12 12 - 43
Total ounces 15,806 10,065 5,592 18,666 - 50,129
Average price (US$ / oz) $290 $290 $290 $290 - $290
Contingent forward gold sales
Forward sales contracts - - - - 8 8
Total ounces - - - - 101,520 101,520
Average price (US$ / oz) - - - - $315 $315
Forward gold sales
Forward sales contracts 6 12 12 12 - 42
Total ounces 67,164 142,362 151,944 152,400 - 513,870
Average price (US$ / oz) $330 $330 $310 $310 - $318
Forward Rand purchases
Forward sales contracts 6 - - - - 6
Total USD (000's) 22,358 - - - - 22,358
Average price (Rand / US$) R 8.54 - - - - R 8.54
The Group's efforts are now focused on increasing overall production so that the
amount of gold committed to the forward sales programme becomes a lesser part of
the total revenue.
Consolidated Balance Sheet
Thousands of US dollars, unaudited 30 June 2003 31 December 2002
Fixed assets
Tangible assets $ 75,479 $ 68,261
Investments 2,652 2,483
78,131 70,744
Current assets
Stocks 8,051 4,708
Debtors 20,595 3,979
Investments 45 45
Cash at bank and in hand 2,668 2,106
31,359 10,838
Creditors: Amounts falling due within one year (61,635) (28,718)
Net current liabilities (30,276) (17,880)
Total assets less current liabilities 47,855 52,864
Creditors: Amounts falling due after more than one year
(including convertible debt) (24,209) (22,875)
Provisions for liabilities and charges (1,234) (9,351)
Net assets 22,412 20,638
Capital and reserves
Share capital 85,743 75,715
Profit and (loss) account (64,460) (56,333)
Equity shareholders' funds 21,283 19,382
Minority interests 1,129 1,256
$ 22,412 $ 20,638
Consolidated Profit And Loss Account
Three months ended Six months ended
Thousands of US dollars, unaudited 30 June 30 June
2003 2002 2003 2002
Turnover 19,277 16,334 34,825 23,488
Cost of sales (21,476) (12,025) (36,908) (17,786)
Gross (loss)/ profit (2,199) 4,309 (2,083) 5,702
General and administrative expenses (920) (1,348) (2,094) (2,317)
Other operating expenses (1,122) - (1,182) -
Total operating (loss)/ profit (4,241) 2,961 (5,359) 3,385
Interest receivable and similar income 69 20 164 103
Interest payable and similar charges (748) (1,359) (3,095) (1,762)
(Loss)/profit on ordinary activities before taxation (4,920) 1,622 (8,290) 1,726
Tax on ordinary activities 520 (1,638) 18 (2,411)
Loss on ordinary activities after taxation (4,400) (16) (8,272) (685)
Equity minority interests 49 129 127 173
Retained (loss)/profit for the period (4,351) 113 (8,145) (512)
Loss per common share for the period (0.02) 0.00 (0.04) (0.00)
Consolidated Cash Flow Statement
Three months ended Six months ended
30 June 30 June
(Thousands of US dollars, unaudited) 2003 2002 2003 2002
Cash flow from operating activities (15,520) 2,595 (11,581) 3,134
Returns on investments and servicing of finance (617) (840) (1,357) (1,160)
Capital expenditure and financial investment (1,009) (1,058) (2,166) (2,480)
Acquisitions (10,673) - (10,673) (34,293)
Pre-acquisition dividend paid - (2,529) - (2,529)
Cash inflow/(outflow) before financing (27,819) (1,832) (25,777) (37,328)
Financing 14,660 1,059 25,391 38,866
Increase/(decrease) in cash in the period (13,159) (773) (386) 1,538
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash in the period (13,159) (773) (386) 1,538
Cash inflow from increased debt (2,455) 635 (2,715) (31,324)
Cash outflow to short term investments - 342 - 342
Conversion of debt to common shares 52 1,250 1,764 2,500
Cash acquired with subsidiaries 948 - 948 -
Translation differences (372) (8) (940) (3)
Other non-cash movements (313) - (632) 3,043
Movement in net debt in the period (15,299) 1,446 (1,961) (23,904)
Net debt at the start of the period (15,915) (33,845) (29,253) (8,495)
Net debt at the end of the period (31,214) (32,399) (31,214) (32,399)
Notes
(Forming part of the financial statements)
(In thousands of US dollars unless specified, unaudited)
1 Significant accounting policies
The Company prepares its financial statements in accordance with United Kingdom
generally accepted accounting principles ("UK GAAP") and under historical cost
accounting rules.
These unaudited interim consolidated financial statements ("the statements")
include the financial statements of the Company and its subsidiary undertakings.
These statements do not include all disclosures required for annual financial
statements, and accordingly, should be read in conjunction with the Company's
most recent annual consolidated financial statements. These statements follow
the same accounting policies and methods of application used in the Company's
audited consolidated financial statements as at the year ended 31 December 2002.
2 Share capital
a) Authorised
Unlimited common shares without par value
Unlimited Class "A" preference shares
b) Issued
Common shares
Number of shares Amount
1 January 2003 199,275,987 75,715
Private placement 19,166,667 6,735
Exercise of warrants 2,630,872 650
Conversions of loans 1,068,093 270
Retirement of debt 3,761,183 1,452
Exercise of employee options 50,000 12
Balance 31 March 2003 225,952,802 84,834
Exercise of warrants 4,875,000 857
Conversions of loans 293,080 52
Balance 30 June 30 2003 231,120,882 85,743
On 13 January 2003, the Company issued 19.17 million units consisting of one
share and 1/2 share purchase warrant, under a private placement for gross cash
consideration of $7.4 million (Cdn $11.5 million), net $6,735,000. Each full
warrant entitles the holder to purchase one share at the price of Cdn $0.70
until 9 January 2004.
On various dates in the first quarter of 2003, 2,630,872 warrants were exercised
for 2,630,872 shares of the Company for a net cash consideration of $650,000.
On various dates in the first quarter of 2003, holders of loan notes converted
the outstanding amount of $270,000 for 1,068,093 shares of the Company.
On 28 February 2003, Standard Bank converted the amount and interest owing under
the overdraft facility of $1,452,000 into 3,761,183 shares of the Company.
On 27 March 2003, a holder of employee options converted 50,000 options into
50,000 shares of the Company for a recorded value of $12,000.
On various dates in the second quarter of 2003, 4,875,000 warrants were
exercised for 4,125,000 shares of the Company for a net cash consideration of
$857,000.
On various dates in the second quarter of 2003, holders of loan notes converted
the outstanding amount of $52,000 for 293,080 shares of the Company.
3 Reconciliation to Canadian GAAP
Under Canadian GAAP, the 1999 acquisition of CIDEM was accounted for as a
reverse takeover in accordance with EIC10. As a result, a purchase price
discrepancy of $2.0 million arising on the reverse takeover was allocated to the
Kazakhstan gold properties..
Under Canadian GAAP, the purchase price discrepancy of $21.5 million arising on
the 2002 acquisition of PSGM and the $2.0 million arising on the purchase of the
Kazakhstan gold properties, as noted above, are regarded as temporary
differences under EIC99 and tax effected. These amounts, net of respective tax
effects are being amortised over the life of the assets to which they relate.
In 2002, the Company issued convertible loan notes. Under HB 3860, Canadian GAAP
requires that the issuer of a convertible loan note should classify the value
into its component parts as to a liability and equity portion in accordance with
the substance of the contractual arrangement.
In addition, in 2002 the Company entered into a number of transactions to hedge
its exposure to the price of gold and the South African Rand. Certain of these
transactions do not qualify as hedges under Canadian GAAP and have been marked
to market as at 30 June 2003.
The application of Canadian GAAP would result in a (decrease) increase in
shareholders funds of $(19,705) at 30 June 2003 (2002 -$1,311) attributable to
tangible assets $21,855 (2002 - $24,006), increase in liabilities of $21,816
(2002 - nil) and deferred tax liability of $19,744 (2002 - $22,695).
The application of Canadian GAAP would have impacted the Company's reported
results for 2nd quarter ended 30 June 2003 and 2002 as follows:
Three months ended Six months ended
30 June 30 June
(in thousands of US dollars, Unaudited) 2003 2002 2003 2002
Net income/(loss) under UK GAAP (4,351) 113 (8,145) (512)
Impact on net loss of Canadian GAAP adjustments:
Depreciation and write-down of assets (555) (657) (1,111) (977)
Incremental interest charge re convertible loan notes (206) - (278) -
Mark to market on gold contracts not regarded as hedges 1,190 (889) 11,246 (889)
Tax effect on above 2,194 568 1,238 797
Net profit/(loss) under Canadian GAAP (1,728) (865) 2,950 (1,581)
Net profit/(loss) per share based on Canadian GAAP, for the
period (0.01) (0.01) 0.01 (0.01)
Corporate Information
Head Office President & CEO Officers Legal Counsel
Richmond Adelaide Center William McLucas William McLucas Fogler Rubinoff
120 Adelaide Street West Edinburgh, Scotland President & C.E.O. Toronto, Ontario
Suite 2215
Toronto, ON Canada Group Finance Director Graham Bevan Dickson Minto
M5H 1T1 John Brown Vice-President Technical Edinburgh, Scotland
Tel: +1 416 594 3293 Edinburgh, Scotland & Mining Operations
Fax: +1 416 594 6462 Werksmans
Manaf Alhajeri John Brown Johannesburg, South Africa
UK Branch Office Kuwait City, Kuwait Group Finance Director
10 Dundas Street Auditors
Edinburgh, Scotland David Beatty, O.B.E. Harvey McKenzie KPMG Audit Plc
EH3 6HZ Toronto, Canada Chief Financial Officer London, United Kingdom
Tel: +44 131 557 6222
Fax: +44 131 557 6333 Simon Ingall Grant Sawiak Nominated Advisors
Castle Douglas, Corporate Secretary Grant Thornton Corporate
Scotland Finance
Corporate Structure London, United Kingdom
and Management Abeer Nasser Listing
Al-Shubaiki
Kuwait City, Kuwait Toronto Stock Exchange Bankers
Directors Symbol THT Royal Bank of Canada
Chairman of the Board Adrian Sykes Alternative Investment Toronto, Ontario
Market
The Right Honourable Colchester, England London, Symbol TMG
Lord Lang of Monkton Standard Bank London Ltd
Ayrshire, Scotland Steven Sharpe Registrar & Transfer Agent London, United Kingdom
London, England CIBC Mellon Trust Company
Deputy Chairman Toronto, Ontario Standard Corporate and Merchant
Dr. Adnan Al-Sultan Bank, Johannesburg, South Africa
Kuwait City, Kuwait CIBC Mellon Trust Company
London, United Kingdom
Financial Information
Attached are Thistle Mining Inc.'s unaudited Consolidated Financial Statements
for the six months ended 30 June 2003. The statements are presented in
accordance with UK GAAP.
For further information, please contact:
Harvey McKenzie
Chief Financial Officer
120 Adelaide Street West, Suite 2215
Toronto, Ontario M5H 1T1
Tel: +1 416 594 3293
Fax: +1 416 594 6462
Email: Harvey.mckenzie@thistlemining.com
Willie McLucas Tim Brebner
President & CEO Financial Director - South Africa.
Tel: + 44 131 557 6222 Tel: + 27 57 391 9026
Fax: + 44 131 557 6333 Fax: + 27 57 391 9118
Email William.mclucas@thistlemining.com Email tbrebner@disselgroup.com
Cautionary Note
Some of the statements contained in this Quarterly Report are forward-looking
statements, such as estimates that describe the Company's future plans,
objectives or goals, including words to the effect that the Company or
management expects a stated condition or result to occur. Since forward-looking
statements address future events and conditions, by their very nature they
involve inherent risks and uncertainties. Actual results relating to, among
other things, reserves, resources, results of exploration, capital costs and
mine production costs could differ materially from those currently anticipated
in such statements by reason of factors such as the productivity of the
Company's mining properties, changes in general economic conditions in the
financial markets, changes in demand and prices for the minerals the Company
produces, litigation, legislative, environmental and other judicial, regulatory,
political and competitive developments in domestic and foreign areas in which
the Company operates, technological and operational difficulties encountered in
connection with the Company's mining activities, labour relations matters and
costs, and matters discussed under "Management's Discussion and Analysis".
Throughout this report, all amounts are in United States currency unless
specified.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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