Chairman's statement
I am pleased to report to
shareholders that a strong performance by Black Wattle, our South African coal
mining subsidiary, in the second half of the year has resulted in the group
recouping most of the losses incurred in the first half. Although the group
reported a small trading loss before exchange losses and tax of £235,000 for the
year, it generated a trading profi t of £1.5million in the second half of the
year.
A number of important events have taken place in the second half which have
accelerated the turnaround at Black Wattle. Key among these were the opening of
a third opencast pit early in the second half and selling some of our coal into
markets that require a lower quality product.
As a result of the opening of the third opencast pit, the mine’s monthly
production in the second half of the year increased to an average of 135,000
metric tonnes. This compares favourably with the average monthly production of
110,000 metric tonnes achieved in the fi rst half of the year. A further
increase in the mine’s monthly production is scheduled to impact in 2012.
The selling of some of our coal into markets that require lower quality product
has contributed signifi cantly to Black Wattles profi tability. Although the
prices are lower in these markets, the higher yield that can be achieved through
the washing plant to attain these lower qualities more than offsets the price
reduction.
On the marketing side, although export prices have remained relatively stable
over the year, prices have increased signifi cantly in our domestic markets to
catch up with the higher export prices - since June last year to date we have
seen an average increase in the domestic price of over 30% free on mine. Demand
for our product in both markets remains strong, helped by the substantial
improvement in the performance of Transnet, the State rail provider.
As previously announced, we are pleased to report that Black Wattle has been
granted use of an annual allocation of 87,500 tonnes of export tonnage at
Richards Bay Coal Terminal. This gives Black Wattle direct access to the coal
export market and I would like to thank Vunani Ltd, our co-shareholder in Black
Wattle, for all its hard work in helping Black Wattle obtain this allocation.
On health and safety, I am very pleased to report that Black Wattle had another
very good year. For further information on this please refer to the Mining
Review in this report.
As announced on 26 January 2012, the Company has entered into an agreement to
dispose of its 49% shareholding in Ezimbokodweni Mining (Pty) Ltd. Consideration
for the sale is ZAR 54.2million in cash, which is a substantial premium to the
cost of our investment. Ezimbokodweni was established in 2005 with Endulwini
Coal Limited to acquire the Pegasus Reserve, a shallow coal deposit located in
the Witbank coalfi eld of Mpumalanga. Since then, Ezimbokodweni has been
negotiating with the owner of the reserve, BHP Billiton Energy Coal South Africa
Limited and the South African Department of Mineral Resources (“DMR”) to fi
nalise the acquisition and prepare for opencast mining.
In early 2011, following the intervention of the DMR, the Company agreed to
dispose of its stake in Ezimbokodweni. The agreement made on 26 January 2012 was
conditional on the satisfaction by 15 May 2012 of conditions precedent, the last
of which is the consent of the DMR, which is awaited. A further announcement
will take place as soon as possible and, assuming completion takes place, the
proceeds will be used for the further development of the group.
The company’s UK retail property portfolio continues to generate signifi cant
revenue. During the year it acquired a 12.5% interest in a shopping centre in
Eastbourne for just under £1million cash; the net initial yield is 8% and there
is development potential. London and Associated Properties PLC manage this and
the Company’s other properties and voids across the portfolio were at the very
low level of 2.7%.
The Board paid an interim cash dividend of 1p during the year. The Directors now
recommend the declaration of a fi nal dividend of 3p (2010: 3p) payable in cash
on 6 August 2012 to shareholders registered at the close of business on 6 July
2012.
On behalf of the Board I would like to thank all of our staff for their hard work
during the course of the year.
In 2012 to date the group has continued to benefit from the higher production and
prices being achieved at Black Wattle and we therefore look forward to the
coming year with confidence.