Tue, 30 Jan 2007
 
 

Llewellyn Delport, managing director, Trans Hex
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» Fur flies at Trans Hex
» Scepticism hangs over Trans Hex
» Trans Hex grapples with Angola mines
» Lower grades, impairment weigh on Trans Hex, says Llewellyn Delport

» JSE:TRANS HEX GROUP LIMITED:
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The struggle continues for Trans Hex
Brendan Ryan
Posted: Tue, 14 Nov 2006

[miningmx.com] -- TRANS HEX MD Llewellyn Delport is sticking to his prediction made earlier this year that the group's operations in Angola will turn profitable by the end of calendar 2007.

The group's interim results for the six months to end-September show a loss on mining income before depreciation of R8m in Angola (previous comparable six months loss of R9m) despite a 23% rise in revenues from the Angolan operations to R53m from R43m previously.

Overall, Trans Hex reported a profit of R2.8m compared with a loss of R97.7m for the six months to September 2005 during which it took a R215.6m impairment of assets charge against its Angolan operations and the Tirisano mine near Ventersdorp, which is now mothballed.

The group's board and management have been severely criticised in an anonymous circular to minority shareholders which, amongst other points, specifically highlighted the "poor financial and operating terms of the Angolan joint venture agreements"

These allegations have been rejected by Trans Hex deputy chairman Bernard Van Rooyen but comments by Delport on the latest Angolan venture - Luana - show it is being developed very differently to the earlier Luarica and Fucauma projects.

Delport said Luana would be developed in a "more measured" way and prospecting work would prove the deposit contained one million carats before Trans Hex moved to the "next phase of development." He indicated this prospecting work would take most of 2007.

By contrast, in June last year, Delport revealed Trans Hex had been "forced" to develop Fucauma even though management knew Fucauma would be "at best a marginal proposition."

According to Delport, Trans Hex had to develop Fucauma because it was part of a total package of rights and the group risked getting nothing if it had rejected Fucauma.
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It must be pointed out Trans Hex's move into Angola did not take place on Delport's watch. It was driven by former MD Calyvn Gardner who went "gung ho" into the country following up on initiatives provided by Trans Hex chairman Tokyo Sexwale through his political contacts in Angola.

Gardner lasted two years and quit abruptly in 2003 after which Delport was appointed.

Asked what was different with Luana, Delport replied the contract negotiated with Trans Hex's Angolan partners over Luana was far more detailed and specific than the prior contracts.

He declined to go into details but indicated problems had arisen from the loose terms of the previous JV contracts which would not have arisen from similar contracts struck for JV operations in a South African context.

Other diamond companies have highlighted the onerous operating conditions in Angola where, typically, the foreign company is only allowed to own a 33% stake in the project with the rest of the equity split between the State and a private Angolan partner.

Despite this, the foreign company is required to take all the commercial risk by putting up all the capital expenditure required. The foreign company is allowed to recover its capex outlay first from profits generated before these are split between the partners in accordance with their shareholdings.

Trans Hex has now been able to renegotiate the terms of the Fucauma development in its favour to some extent. Production at Fucauma has to be increased above the initial planned level to ensure its economic viability but that extra capex is going to be split between the partners.

The $9,4m needed is being arranged through "third party financing." Delport says that loan was raised by the partners in proportion to their shareholdings and amounts to "joint financing" of the capital expenditure programme.