SouthernEra First Quarter Results

 

    Company Reports a Net Profit of $0.4m (1c per share)

    Shares Issued and Outstanding: 61,593,793

    TSX: SUF

    AIM: SRE

 

    TORONTO, May 20 /CNW/ - The Board of SouthernEra Resources Limited

announced the following highlights from the first quarter of 2003:

 

    -  SouthernEra secures C$69.75 million in equity financing

    -  SouthernEra announces support for Messina Limited debt restructuring

    -  Messina upgrades Phase 1 probable mineral reserve

    -  SouthernEra appoints Williams de Broe as UK Nominated Advisor and

       Broker

 

    Subsequent to March 31:

 

    -  SouthernEra appoints Senior Vice President and CFO

    -  SouthernEra releases Messina Platinum first quarter development report

 

    The Company realized a net profit for the three months to March 31 of

$0.4 million (1 cent per share) on revenue of $1.1 million, compared to a loss

of $1.4 million (4 cents per share) on revenue of $0.6 million in the first

quarter of 2002. Cash flow used in operations for the quarter was $5.7 million

(10 cents per share), compared to a use of $1.5 million (4 cents per share) in

the first quarter of 2002.

 

    Operations Update

 

    At the Company's 50 percent-owned Klipspringer Diamond Mine, fissure

development and mining is now the focus of activity. In the first quarter,

tonnage throughput was 78,800 tonnes. Average grade in the quarter was 37

carats per hundred tonnes, yielding 29,400 carats.

    The Company's subsidiary Messina Platinum continued to make good progress

in developing the Phase 1 Mine. During the first quarter of 2003, Messina's

now fully commissioned Main Shaft hoisted 156,000 tonnes, of which 81,549 were

development waste tonnes and 74,454 were reef tonnes from both production and

development levels. Production during the quarter came from the 150 and 200

metre levels. Development is currently focused on the 275 and 350 metre

levels. Based on progress to date, the Company believes Messina is on track to

meet the previously published 2003 production build-up targets of 40,000

tonnes per month by the end of June and 80,000 tonnes per month by the end of

September.

    During the quarter, exploration activities continued at the Company's

platinum and diamond exploration projects. Following continued drilling at the

Millennium Platinum Project in South Africa the Company is on track to report

an expanded resource prior to the end of June. Drilling also continues at the

Company's Canadian diamond exploration projects. Results from this program are

expected in the months ahead. Following the conclusion of an airborne survey

at the Company's diamond and precious metals projects in Gabon, a drilling

program is set to commence. Drilling is also expected to commence at the

Company's diamond projects in South Africa and Australia.

 

    SouthernEra secures C$69.75 million equity financing

 

    The Board of Directors accepted a bought deal equity proposal to issue 9

million common shares at C$7.75/share for gross proceeds of $69.75 million to

a syndicate led by Griffith's McBurney & Partners. The proceeds of the

financing are being used to support remaining development at Messina Platinum

and future expansions, debt restructuring at Messina Limited, working capital

requirements and general corporate purposes.

 

    SouthernEra supports Messina Limited debt restructuring

 

    The Board of Directors announced that it has resolved to support its

subsidiary, Messina Limited, in its endeavours to restructure its balance

sheet with a view to the reduction of Messina's debt. SouthernEra will support

and underwrite a Messina rights offer. Support is subject to agreement with

Messina on the terms of a rights offer as well as the associated regulatory

process in South Africa.

 

    Probable Mineral Reserve Upgraded at Messina Platinum's Phase 1 Mine

 

    The Company announced an upgraded Probable Mineral Reserve for Messina

Platinum's Phase 1 (Voorspoed Section) of 24.5 million tonnes at 4.98 grams

per tonne 5PGE plus gold.

 

    Williams de Broe appointed as Company's UK nominated advisor and broker

    in UK

 

    The Board of Directors announced that Williams de Broe Plc has been

appointed to act as nominated advisor and broker to SouthernEra Resources

Limited in respect of the Company's listing on the London Stock Exchange's

AIM.

    SouthernEra Resources is an independent producer of platinum group metals

and diamonds. The company also has an extensive PGM and diamond exploration

program. The common shares are listed on the Toronto Stock Exchange and the

London Stock Exchange's AIM market.

    The full, unaudited financial statements are available at

www.southernera.com

 

 

    SouthernEra Resources Limited

    Consolidated balance sheets

    (in thousands of United States dollars)

 

 

                                                 March 31,      December 31,

                                                      2003              2002

    -------------------------------------------------------------------------

    Assets                                     (unaudited)

    Current assets:

      Cash and equivalents                     $    32,094          $  2,870

      Restricted cash                               11,790            11,055

      Accounts receivable                            7,760             7,359

    -------------------------------------------------------------------------

                                                    51,644            21,284

    Property, plant and equipment                    6,879             7,110

    Exploration projects                            10,284             8,994

    Mining and development projects                138,973           121,260

    Future income taxes                              2,994             2,794

    -------------------------------------------------------------------------

                                                $  210,774        $  161,442

    -------------------------------------------------------------------------

    Liabilities and shareholders' equity

    Current liabilities:

      Accounts payable and accrued liabilities  $    9,638        $   12,671

      Income taxes payable                           8,982             8,086

      Camafuca loan                                  2,493             2,448

      Messinaloans                                 11,216             5,729

    -------------------------------------------------------------------------

                                                    32,329            28,934

    Long-term liabilities:

      Messinaloans                                 46,327            46,926

      Future income taxes                            2,312             2,429

      Non-controlling interests                      8,538             7,813

      Environmental rehabilitation provision           776               740

    -------------------------------------------------------------------------

                                                    90,282            86,842

    -------------------------------------------------------------------------

    Shareholders' equity:

      Common shares                                174,335           130,628

      Contributed surplus                            1,635             1,635

      Deficit                                      (57,483)          (57,869)

      Cumulative translation adjustments              2005               206

    -------------------------------------------------------------------------

                                                   120,492            74,600

    -------------------------------------------------------------------------

                                                $  210,774        $  161,442

    -------------------------------------------------------------------------

 

    The accompanying notes form an integral part of, and should be read in

    conjunction with, these consolidated financial statements.

 

 

 

    SouthernEra Resources Limited

    Consolidated statements of operations

    (in thousands of United States dollars, except income

    (loss) per share amounts)

    (unaudited)

 

    FOR THE THREE MONTHS ENDED MARCH 31               2003              2002

    -------------------------------------------------------------------------

    Diamond sales revenue                         $  1,086          $    578

    Direct costs:

    Mining operations                               (1,851)             (775)

    Amortization                                      (345)             (347)

    -------------------------------------------------------------------------

                                                    (2,196)           (1,122)

    -------------------------------------------------------------------------

    Loss from mining operations                     (1,110)             (544)

    General and administration expenses               (924)             (403)

    -------------------------------------------------------------------------

    Loss before the undernoted                      (2,034)             (947)

    Foreign exchange gain (loss)                     2,021              (620)

    Interest income                                    280                93

    -------------------------------------------------------------------------

    Income (loss) before income taxes                  267            (1,474)

    Income taxes:

      Current                                            -               (11)

      Future recovery                                  117                79

    -------------------------------------------------------------------------

    Income (loss) after income taxes                   384            (1,406)

    Non-controlling interests                            2                24

    -------------------------------------------------------------------------

    Net income (loss) for the period              $    386          $ (1,430)

    -------------------------------------------------------------------------

    Basic and diluted net income (loss)

     per common share                             $   0.01          $  (0.04)

    -------------------------------------------------------------------------

 

 

    Consolidated statements of deficit, contributed surplus

    and cumulative translation adjustments

    (in thousands of United States dollars)

    (unaudited)

 

    FOR THE THREE MONTHS ENDED MARCH 31   2003                           2002

    -------------------------------------------------------------------------

                                    CUMULATIVE                     CUMULATIVE

                      CONTRIBUTED  TRANSLATION       CONTRIBUTED  TRANSLATION

                DEFICIT   SURPLUS  ADJUSTMENTS DEFICIT   SURPLUS  ADJUSTMENTS

    -------------------------------------------------------------------------

    Beginning

     of period  $(57,869)  $1,635      $206   $(48,910)   $1,044     $(4,529)

    Conversion

     rights            -                  -          -       591           -

    Translation

     gains (losses)

     net for

     the period        -        -     1,799          -         -        (152)

    Net income

     (loss) for

     the period      386        -         -     (1,430)        -           -

    -------------------------------------------------------------------------

    End of

     period     $(57,483)  $1,635    $2,005   $(50,340)   $1,635     $(4,681)

    -------------------------------------------------------------------------

    -------------------------------------------------------------------------

 

    The accompanying notes form an integral part of, and should be read in

    conjunction with, these consolidated financial statements.

 

 

 

    Consolidated statements of cash flows

    (in thousands of United States dollars)

    (unaudited)

 

    FOR THE THREE MONTHS ENDED MARCH 31               2003              2002

    -------------------------------------------------------------------------

    Net income (loss) for the period             $     386         $  (1,430)

    Adjustments for non-cash items:

      Amortization                                     346               347

      Future income taxes                             (117)              (79)

      Gain on sale of fixed assets                     (12)

    Foreign currency translation loss (gain)        (2,021)              620

      Non-controlling interest                           2                24

    -------------------------------------------------------------------------

                                                    (1,417)             (518)

    Change in non-cash working capital balances     (4,281)             (964)

    -------------------------------------------------------------------------

    Cash used in operations                         (5,698)           (1,482)

    -------------------------------------------------------------------------

    Financing activities:

      Messinaloans                                  1,758             8,771

      Issue of common shares for cash               43,707             4,456

    -------------------------------------------------------------------------

    Cash provided by financing activities           45,465            13,227

    -------------------------------------------------------------------------

    Investing activities:

      (Increase) decrease in restricted cash          (735)              145

      Exploration and development projects          (1,484)             (823)

      Messina platinum project                      (8,698)           (9,297)

      Property, plant and equipment                   (424)              (60)

    -------------------------------------------------------------------------

    Cash used in investing activities              (11,341)          (10,035)

    -------------------------------------------------------------------------

    Increase in cash                                28,426             1,710

    Foreign exchange gain on cash held in

     foreign currency                                  798               120

    Cash and equivalents - beginning of period       2,870             6,513

    -------------------------------------------------------------------------

    Cash and equivalents - end of period         $  32,094         $   8,343

    -------------------------------------------------------------------------

    Cash and cash equivalents comprise:

      Cash                                       $     694         $   1,543

      Short-term investments                        31,400             6,800

    -------------------------------------------------------------------------

                                                 $  32,094         $   8,343

    -------------------------------------------------------------------------

    Supplementary information:

      Interest paid                              $      20         $      68

    -------------------------------------------------------------------------

 

    The accompanying notes form an integral part of, and should be read in

    conjunction with, these consolidated financial statements.

 

 

                 Notes to consolidated financial statements

 

    In the opinion of management, the unaudited consolidated financial

statements present fairly the Company's financial position as at March 31,

2003 and the results of its operations and its cash flows for the three months

ended March 31, 2003. The results of operations and cash flows are not

necessarily indicative of the future results of operations or cash flows.

 

 

    1.  ACCOUNTING POLICIES

 

    The accounting policies followed by the Company are set out in Note 2 to

the audited consolidated financial statements included in the Company's 2002

Annual Report and have been consistently followed in the preparation of these

interim financial statements.

 

 

    2.  PROPERTY, PLANT AND EQUIPMENT

                                            ACCUMULATED          December 31

                                              AMORTI-    March 31       2002

                                       COST   ZATION         2003        NET

    -------------------------------------------------------------------------

    South Africa - Buildings,

     plant and equipment          $  13,078  $  (6,255) $   6,823  $   7,064

    Toronto - Fixtures and

     fittings                           327       (271)        56         46

    -------------------------------------------------------------------------

                                  $  13,405  $  (6,526) $   6,879  $   7,110

    -------------------------------------------------------------------------

 

 

    3.  EXPLORATION PROJECTS

 

                                                          Accumulated

                                                         Carrying Value

    -------------------------------------------------------------------------

                                                     March 31,   December 31,

                                                         2003           2002

    -------------------------------------------------------------------------

    Canada

    Yamba Lake - NWT                                $   2,930      $   2,855

    Back Lake - NWT                                       615            557

    Superior - Ontario                                  1,218          1,115

    Other                                                 473            365

    -------------------------------------------------------------------------

                                                        5,236          4,892

    -------------------------------------------------------------------------

    Foreign

    South Africa                                        1,793          1,458

    Gabon                                               2,646          2,048

    Australia                                             609            596

    -------------------------------------------------------------------------

                                                        5,048          4,102

    -------------------------------------------------------------------------

                                                    $  10,284      $   8,994

    -------------------------------------------------------------------------

 

 

    4.  MINING AND DEVELOPMENT PROJECTS

    -------------------------------------------------------------------------

                                                          Accumulated

                                                         Carrying Value

    -------------------------------------------------------------------------

                                                     March 31,   December 31,

                                                         2003           2002

    -------------------------------------------------------------------------

    Messina platinum project                        $ 123,830      $ 106,312

    Camafuca project                                   15,143         14,948

    -------------------------------------------------------------------------

                                                    $ 138,973      $ 121,260

    -------------------------------------------------------------------------

 

 

    5.  MESSINA LOANS

                                                     March 31,   December 31,

                                                         2003           2002

    -------------------------------------------------------------------------

    Senior Debt                                     $  51,516      $  45,643

    Loans from a South African public company           3,562          4,252

    Rio Tinto API underwriting guarantee advance        2,465          2,465

    Other                                                   -            295

    -------------------------------------------------------------------------

                                                       57,543         52,655

    Less current portion of loans                     (11,216)        (5,729)

    -------------------------------------------------------------------------

                                                    $  46,327      $  46,926

    -------------------------------------------------------------------------

 

    Senior Debt

    The Senior Debt provided by a South African banking consortium ranks

above all other debt in Messina. It is secured in favour of the banks by all

the assets of Messina. Repayment of capital and/or interest to any other

lender to Messina, whether a lender in terms of the loan arrangements noted

above or for any other reason including any trade or other credit granted, may

only be settled by Messina with the banks' consent while any amounts due to

the banks, including interest, remain outstanding.

    While the Senior Debt is outstanding, Messina may not incur additional

debt, acquire or dispose of assets or engage in activities outside the

parameters of the establishment of the Messina Platinum Project, or deviate

from the planned development of the project, without the consent of the banks.

    The Senior Debt comprises two, South African Rand (R) denominated,

tranches making up a total of R345 million ($43 million), Tranche A of

R270 million ($34 million) and Tranche B of R75 million ($9 million). Both

tranches were drawn upon simultaneously and, other than for interest

determination, can be regarded as a single loan.

    Drawdown commenced on September 18, 2001, and monthly drawdowns continued

until the final drawdown on September 30, 2002.

    Interest accrues on the loan and is capitalized to the loan balance

outstanding. The repayment schedule includes an element of principal and

interest in each repayment instalment with the first instalment scheduled for

February 29, 2004 and with semi-annual payments thereafter until the final

instalment on August 31, 2008.

    The interest rate in respect of Tranche A is fixed at 14.51% and in

respect of Tranche B, fluctuates with the average of a basket of long-term

South African money market rates (19% at March 31, 2003).

 

    Loans from a South African public company

    This loan of $3.6M is denominated in Rand and is unsecured and

subordinate to the Senior Debt provided by the banking consortium. The loan

bears interest at South African market-related rates (19% at March 31, 2003)

and interest is payable monthly in arrears. Capital repayments commenced in

January 2002 and, under renegotiated terms, are repayable in monthly

instalments of not less than R2.5 million ($0.3 million) per month from

February 2003. The banking consortium has consented to this repayment schedule

subject to continued satisfactory progress of the Messina Platinum Project and

such financial support as might be necessary from SouthernEra.

 

    Accelerated Production Initiative (API) and API guarantee

    As part of the overall Messina Platinum Project funding, an API,

comprised of a small concentrator plant and early stage trial mining, was

developed. The API was designed to conduct trial mining and make a financial

contribution to the overall project. The construction and commissioning of the

API plant was completed in August 2001 and trial mining commenced in the last

quarter of 2001 and continued into the third quarter of 2002. The API plant

and initial underground development costs of approximately R63 million were

funded by the South African public company loan and cash in Messina.

    The API contribution is specifically defined as the net cash proceeds

received, measured on a quarterly basis commencing December 31, 2001, from

sales of PGM concentrate produced by the API, less certain defined marginal

costs of operating the API plant.

    In addition, the funding arrangements with the banking consortium provide

that the contribution of R121 million to be made by the API be fully

underwritten. Rio Tinto PLC and Rand Merchant Bank (RMB) provided such

underwriting guarantees to the extent of R58 million and R63 million

respectively. The guarantees were provided for the period September 2001 to

September 30, 2002, being the required period of API contribution. The Rio

Tinto guarantee ranked first in the event of underwriting claim and was to be

fully drawn before the RMB guarantee became effective.

    In January 2002, $2.4 million (R27.8 million) was drawn against Rio Tinto

under their guarantee. The advance so provided became a United States dollar

denominated liability of the Company which, in turn, advanced these funds to

Messina by way of inter group loan account. The loan was fully repaid in

April 2003.

 

 

    6.  INCOME (LOSS) PER SHARE AND PRO FORMA INCOME (LOSS) PER SHARE

 

    Basic and diluted income (loss) per share is calculated using the income

(loss) for the quarter of $0.4 million (2002 - ($1.4) million) with the

weighted average number of common shares outstanding during the period of

56,395,726 shares (2002 - 40,302,147). The exercise of stock options would

dilute earnings per share in the current and possibly future periods. The

effect of the potential dilution does not reduce earnings per share in the

current quarter and would be anti-dilutive in the comparable period of 2002.

    The fair value assigned to the portion of 550,000 stock options vesting

in the current quarter but granted to employees in the first quarter of 2002

was $0.1 million. Had this value been charged to earnings in the current

quarter, income per share would be nil.

 

 

    7.  SEGMENTED INFORMATION

 

    The Company operates in the diamond and PGM industries. The operations of

the Company are managed and grouped, by industry, on a geographic basis. The

Company's reportable operating segments comprise the diamond mining and

exploration activities at Klipspringer in South Africa, as well as in Angola

and Canada, and the Messina Platinum Project in South Africa. The Canadian

segment includes the head office operation and associated administration

costs.

 

    SEGMENTED INFORMATION

                                                     March 31,      March 31,

                                                         2003           2002

    -------------------------------------------------------------------------

    Revenue from diamond sales:

    Klipspringer                                    $   1,086      $     578

    -------------------------------------------------------------------------

    Interest income

    Klipspringer                                    $       4      $       2

    Messina                                                17             81

    Canada                                                259             10

    -------------------------------------------------------------------------

                                                    $     280      $      93

    -------------------------------------------------------------------------

    Amortization

    Klipspringer                                    $     341      $     336

    Canada                                                  4             11

    -------------------------------------------------------------------------

                                                    $     345      $     347

    -------------------------------------------------------------------------

    Segment loss (income)

    Klipspringer                                    $   2,142      $   1,532

    Messina                                                10            (80)

    Canada                                             (2,616)           176

    Other                                                 197            154

    -------------------------------------------------------------------------

    Reported enterprise income loss

     before income taxes                            $     267      $  (1,474)

    -------------------------------------------------------------------------

    Segment capital expenditure

    Messina                                         $   9,029      $   9,297

    Klipspringer                                          275             87

    Angola                                                151            251

    Canada                                                517            312

    Other                                                 634             88

    -------------------------------------------------------------------------

                                                    $  10,606      $  10,035

    -------------------------------------------------------------------------

 

                                                     March 31,   December 31,

                                                         2003           2002

    Identifiable assets

    Messina                                         $ 120,620      $ 103,088

    Klipspringer                                        9,617          9,498

    Angola                                             15,143         14,948

    Canada                                             62,088         31,171

    Other                                               3,306          2,737

    -------------------------------------------------------------------------

    Total reported enterprise assets                $ 210,774      $ 161,442

    -------------------------------------------------------------------------

 

 

    8.  DIFFERENCES BETWEEN CANADIAN GAAP AND IFRS

 

    The Company prepares its financial statements in accordance with Canadian

GAAP, which generally conform to International Financial Reporting Standards

(IFRS) except for the following significant differences:

 

    a) Under Canadian GAAP pre-development incidental revenue and associated

costs are deferred and amortized over the life of the mine. Under IFRS

incidental revenue and associated costs are recognized in the statement of

operations. As a result of this difference, the Company would have recognized

additional revenue derived from PGM sales at Messina Phase I. Mining costs

approximated the income earned and, therefore, there would be no material

effect on net income or earnings per share.

 

    b) Under Canadian GAAP a provision for reclamation costs is expensed over

the life of the mine on a unit of production basis when an estimate of costs

is reasonably determinable. Under IFRS, a reclamation provision is accrued

when the liability is incurred with a corresponding debit to the related

asset. As a result of this difference the Company's unaudited, condensed

consolidated balance sheet under IFRS would be presented as follows:

 

                                                     March 31,   December 31,

                                                         2003           2002

    -------------------------------------------------------------------------

    Assets

    Current assets                                  $  51,644      $  21,284

    Property, plant and equipment                       6,879          7,110

    Exploration projects                               10,284          8,994

    Mining and development projects                   140,026        122,235

    Future income taxes                                 2,994          2,794

    -------------------------------------------------------------------------

                                                    $ 211,827      $ 162,417

    -------------------------------------------------------------------------

    Liabilities and shareholders' equity

    Current liabilities                             $  32,329      $  28,934

    Long-term liabilities

      Messina loans                                    46,327         46,926

      Future income taxes                               2,312          2,429

      Non-controlling interests                         8,538          7,813

      Environmental rehabilitation provision            1,829          1,715

    -------------------------------------------------------------------------

                                                       91,335         87,817

    -------------------------------------------------------------------------

    Shareholders' equity                              120,492         74,600

    -------------------------------------------------------------------------

                                                    $ 211,827      $ 162,417

    -------------------------------------------------------------------------

 

    For further information: SouthernEra Resources Limited: Patrick C.

Evans, President and CEO; or Dr. Sally Eyre, Vice President, Corporate

Affairs, Telephone: (416) 359-9282, Fax: (416) 359-9141, E-mail:

inbox(at)southernera.com

    (SUF.)

 



END