2011 FINANCIAL RESULTS

In this commentary, results are compared with the twelve months of the 2009/2010 financial year (in brackets).

A significant turnaround from the South African operations was achieved during the second six months of the reporting year. Profit before tax of R116,0 million was generated compared to a loss before tax of R101,4 million in the first six months.

Strong diamond prices during the second six months of the year offset grade under-performance at the South African operations. The continued strength of the Rand against the US dollar however continued to have a negative effect.

Good progress has been made in Angola, where production capacity at Somiluana is being steadily increased and six successful sales have been held during the year.

South African production during the reporting period amounted to 69,508 carats (2010: 92,904 carats). Whilst total gravels treated increased by 17% over the corresponding reporting period in 2010 and the unit cost of production was reduced by 8%, the average grade achieved decreased from 2,07 carats/100m3 to 1,27 carats/100m3. The year on year reduction in grade was also due to the decision to temporarily suspend stripping at the Baken operations given current exchange rates.

Total sales attributable to the South African operations marginally decreased to US$90,6 million (2010: US$91,2 million), at an average price of US$1,162 per carat (2010: US$957). The average price per carat increased despite fewer carats sold originating from the Richtersveld Operations which achieved a significantly higher price per carat than those from other operating areas. The average price per carat achieved during the second six months of the reporting year was US$1,394 per carat. In Rand terms, revenue was down by 7,9% to R658,0 million (2010: R714,3 million).

The loss from Angolan operations, mainly attributable to the Luarica and Fucauma projects that are under care and maintenance, amounted to R51,2 million.

As a result, the Group reports an after-tax loss for the period of R45,1 million (2010: profit of R21,6 million).

Cash and cash equivalents at the end of the reporting period increased to R267,5 million (2010: R245,6 million).

Prospects in Angola have improved significantly. Somiluana (in which Trans Hex has a 33% stake) had sales amounting to US$19,3 million (2010: US$0,0 million), of which US$3,5 million was repaid to Trans Hex against the outstanding investment loan amount.

Financial headlines

• Sales revenue down to R658,0 million (2010: R715,7 million) primarily as a result of grade under-performance and the decision to temporarily suspend stripping at the Baken operations, but also affected by stronger diamond prices in the second half and a strong Rand.
• South African operations generated a profit before tax of R116,0 million during the second six months compared to a loss before tax of R101,4 million in the first six months resulting in profit before tax for the year of R14,6 million.
• Group loss after tax of R45,1 million, against a profit of R21,6 million in 2010 financial year.
• Net cash generated during the reporting period was R21,9 million (2010: R40,2 million generated) resulting in the Group’s net cash position being R267,5 million (2010: R245,6 million).
• Headline loss per share amounted to 45,6 cents compared to earnings per share of 19,5 cents in 2010.
• Somiluana sales of US$19,3 million (2010: US$0,0 million), of which US$3,5 million repaid to Trans Hex.

Operating performance



Note: Fucauma and Luarica were under care and maintenance during the period

South Africa

South African production decreased from 92 904 carats in the 2010 financial year to 69 508 carats as a result of lower grades.

A 17% increase in total gravels treated was achieved, together with an 8% reduction in the unit cost of production.

Total sales attributable to the South African operations amounted to US$90,6 million at an average price of US$1,162 per carat (2010: US$957). The average price per carat increased despite fewer carats sold originating from the Richtersveld Operations, which fetch a significantly higher price per carat than those from other operating areas. The average price per carat achieved during the second six months of the reporting year was US$1,394 per carat.

Angola

Somiluana commenced production build-up in June 2010, directly after the signing of the mining contract. By the end of March, a total of 27 662 carats at an average stone size of 0,46 carats per stone had been produced.

Total sales attributable to the project during the period amounted to US$19,3 million at an average price of US$351 per carat. US$3,5 million was repaid to Trans Hex against the outstanding investment amount.

Expansion of production capacity is being funded through cash generated from operations and the earthmoving fleet in particular has seen the addition of a number of key production units.

Projects Luarica and Fucauma remain under care and maintenance.

Namibia

The last remaining vessel was sold during the reporting period and all operations in Namibia have terminated.

Outlook

As reported at the interim results, it was decided to suspend stripping operations at Baken given current exchange rates. The mine is now concentrating on lowering total costs and generating an acceptable margin by processing existing low grade stockpiles at increased throughput levels.

South African production for the 2012 financial year is now expected to be 86,000 carats.

In Angola, the forecast for Somiluana for the coming year is to produce 42 000 carats. As of 1 October 2010 the operations are running on a continuous shift basis.

Trans Hex is continuing discussions with its Angolan partners over the future of the Luarica and Fucauma projects.

Tight controls over cash and costs will continue to be exercised in all areas.

Demand for rough diamonds remained strong throughout the financial period which saw a continued strengthening of prices. Prices for Trans Hex production currently stand at all time highs, buoyed by restocking of the diamond pipeline and good demand for polished diamonds, most notably from China and India.

The strength in the market seems likely to continue given demand levels, but pricing levels are anticipated to show greater stability in the longer-term after a sustained period of increases.

In respect of new business opportunities, an agreement with De Beers Consolidated Mines Limited (“DBCM”) was signed on 6 May 2011 in terms of which, and subject to certain conditions precedent, Trans Hex’s 50% held associate, Emerald Panther Investments 78 (Pty) Limited will acquire assets and liabilities relating to Namaqualand Mines, a division of DBCM.

Exploration activities are continuing in Southern Africa and potential new ventures are being evaluated on an ongoing basis.

Changes in Directorship

At the board meeting held on 27 May 2010, Mr Bernard van Rooyen was confirmed as chairman of the board for a further period of one year.

Mr Ian Hestermann was appointed Financial Director with effect from 27 May 2010 after serving as acting director from 1 February 2010.

Mr Greg van Heerden was appointed as company secretary with effect from 27 May 2010.

Dr E de la H Hertzog, Adv Theo van Wyk and Mr Jan Dreyer resigned as directors of the company effective 26 October 2010 pursuant to Remgro Limited unbundling its shareholding in Trans Hex.

Mr Mervyn Carstens resigned as executive director for SA land operations effective 5 April 2011 pursuant to his secondment on a full-time basis as managing director of Trans Hex’s new joint venture agricultural company.

Dividend

In order to maintain cash resources, the directors deem it prudent not to declare a final dividend.