Energem third quarter financial results to September 30, 2008
TSX/AIM: ENM
VANCOUVER, Nov. 18 /CNW/ - Energem Resources Inc ("Energem" or "the
Company") today released its financial results for its third quarter ended
September 30th, 2008.
Highlights:
- Trading results showed reduced turnover and profitability due to the
reduced (30%) interest in the Nigerian fuel distribution and storage
facility ("Nigerian Facility"), but remain improved on a year to date
basis over the same period in 2007.
- Subsequent to September 30, 2008, the Company disposed of its
remaining 30% interest in the Nigerian Facility for a gross cash
consideration of US$47.2 million and increased its interest in its
Mozambiquan jatropha based bio-diesel project from 70% to 100%. The
profit earned on this disposal is indicative of the value the Company
has been able to add to assets which it has developed over the past
few years.
- Net earnings for the nine months to September 30, 2008 are US$23.7
million; this is expected to double in the fourth quarter as a result
of the sale of the interest in the Nigerian Facility. This is
considerably improved over the net loss of (US$31.7) million for the
same period in 2007.
- The Company has a strong financial position following the sales of
the interests in the Nigerian Facility, with net cash balances in
excess of its current market capitalisation.
- The Company has continued with the development of its now 100% owned
jatropha based agricultural development activities in Mozambique and
is actively pursuing the acquisition of further suitable land for
future development in Mozambique and a number of other African
countries.
Results for the quarter are summarised as follows and, together with the
Company's MD&A, are set out in full in the Appendix:
(Unaudited, in thousands of US Dollars
except share and per share information)
Quarters ended Nine months ended
September 30 September 30
2008 2007 2008 2007
$'000 $'000 $'000 $'000
----- ----- ----- -----
-------------------------------------------------------------------------
Revenue - sales 8,356 18,450 41,044 45,049
-------------------------------------------------------------------------
(Loss)/profit before other
income (1,381) 6,233 4,706 3,424
-------------------------------------------------------------------------
Other (expenses)/income (560) (16,890) 26,270 (25,528)
-------------------------------------------------------------------------
Net (loss)/earnings for the
period (2,036) (16,724) 23,685 (31,735)
-------------------------------------------------------------------------
(Loss)/earnings per share
- basic $ (0.01) $ (0.10) $ 0.14 $ (0.19)
- diluted $ (0.01) $ (0.10) $ 0.11 $ (0.19)
Based on weighted average
number of shares in issue.
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Shares in issue ('000) 175,288 174,883
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Jimmy Kanakakis, CEO said: "We are pleased with the developments in the
quarter and believe that the cash realised from the recent disposal of
Energem's remaining interest in its Nigerian fuel distribution and storage
facility, together with the increase of its interest in its Mozambiquan
jatropha based bio-diesel project from 70% to 100% puts Energem in a strong
position to pursue its aim of becoming a leading African alternative energy
company."
Interim consolidated financial statements and management's discussion and
analysis for the quarter ended September 30th, 2008 are available on SEDAR at
www.sedar.com under the Company symbol "ENM" and on the Company's website,
www.energem.com.
This news release contains forward-looking statements which address
future events and conditions which are subject to various risks and
uncertainties. The actual results could differ materially from those
anticipated in such forward-looking statements as a result of numerous
factors, some of which may be beyond the Company's control. These factors
include: the availability of funds; the costs and availability of product;
fluctuations in fuel product sale prices; currency fluctuations; changes in
production costs; fluctuation in shipping costs; availability of shipping;
general market and industry conditions; political and regulatory instability
and risks associated with rights to title and ownership of assets.
Forward-looking statements are based on the expectations and opinions of
the Company's management on the date the statements are made. The assumptions
used in the preparation of such statements, although considered reasonable at
the time of preparation, may prove to be imprecise and, as such, undue
reliance should not be placed on forward-looking statements.
About Energem:
Energem Resources Inc (TSX/AIM:ENM) is an Africa focussed company listed
on the Toronto Stock Exchange and on the London Stock Exchange's AIM market
and the holding company of a group of companies engaged in, mainly, several
African countries in the bio-fuels, oil and related sectors including
logistics and supply to the mining industry in South and Central Africa and
development of an up-stream oil exploration asset. The Company has offices
and/or logistics and support infrastructure in Johannesburg, London and a
number of African countries.
APPENDIX:
November 17, 2008
ENERGEM RESOURCES Inc.
----------------------
Management Discussion and Analysis of Financial Condition and Results of
Operations for the Quarter and Nine Months Ended September 30, 2008
($ refers to US dollars unless otherwise stated)
1. Nature of Business and RECENT DEVELOPMENTS
------------------------------------------
Energem Resources Inc ("Energem", "the Company" or "the Group") is listed
on the Toronto Stock Exchange and on the London Stock Exchange's Alternate
Investment Market ("AIM") and is the holding company of a group of companies
engaged in, mainly, several African countries in the renewable energy, mid-
and up-stream oil industries and operates off an integrated logistics, trading
and manufacturing platform.
In the previous financial year the Company embarked upon a strategic
realignment and divested itself of a number of assets not considered core to
this realignment, including all its mining assets. The Company now focuses on
renewable and alternate energy, related infrastructure and on the acquisition
and development of niche high margin related project opportunities.
The Group's activities are organized into divisions within the Company,
reporting through its subsidiaries to a central executive providing overall
strategic direction. The Company is now primarily engaged in the renewable and
clean energy sector with a particular emphasis on:
- Bio-fuels - ethanol and potable alcohol production from the Kenyan
Kisumu ethanol plant and continuing development of the jatropha based
bio-diesel project in Mozambique and elsewhere in Africa;
- Progressing with the updating of a bankable feasibility study for the
potential Stiegler's Gorge 900mw hydro-electricity project in
Tanzania; and the pursuit of similar related projects elsewhere in
Africa;
- Mid-stream oil - refined oil product distribution, sales and storage
in Malawi; the Company having successfully and profitably sold its
interest in its Nigerian mid stream asset in the fourth quarter 2008;
- Logistics - sub-Saharan Africa focused manufactured and procured
supply and logistics services and product to the Group and, mainly,
the mining industry;
- The continued pursuit and evaluation of other Africa based resource
and energy related projects of long term revenue or capital profit
potential, excluding mining projects;
- Up-stream oil - exploration and development of an oil and gas field
in Chad.
This management discussion and analysis (MD&A) should be read in
conjunction with the MD&A and annual financial statements for the year
ended December 31, 2007 filed on SEDAR on April 8, 2008 and interim
financial statements and MD&A for the first quarter 2008 filed on SEDAR
on May 15, 2008 and its second quarter filed on SEDAR on August 14, 2008.
2. ACTIVITIES IN THE THIRD QUARTER
-------------------------------
The Company in 2008 is focussed on improving business unit profitability
and expanding its operating divisions and on the further development of its
bio-fuels and hydro-electric projects and with the pursuit of new projects
following the disposal of other assets in the past two years.
Disposal of interest in Nigerian mid-stream asset
-------------------------------------------------
The Company sold a 20% interest in its hitherto 50% held Nigerian refined
fuel storage and distribution facility ("the Facility") during the second
quarter for a gross cash consideration of US$32.3 million. In the fourth
quarter 2008, the Company sold its remaining 30% interest in the Facility for
a gross cash consideration of US$42.7 million.
A net profit, after de-consolidating the historic results of the
investment in the Facility, of $27.2 million was earned on this transaction in
the second quarter and an estimated profit of US$34 million will likely be
recorded on the disposal of the remaining 30% interest in the fourth quarter.
Also in the fourth quarter 2008, the Company acquired from minority
stakeholders a further 30% interest in its Mozambiquan jatropha based
bio-diesel project for US$500,000, increasing the Company's interest in this
project from 70% to 100%.
3. RESULTS OF OPERATIONS, KEY FINANCIAL DATA, QUARTERLY INFORMATION,
-----------------------------------------------------------------
COMPARATIVE FIGURES AND SHARE INFORMATION
-----------------------------------------
(Expressed in thousands of US Dollars
except share and per share information)
Quarters ended Nine months ended
------------------------------------
Earnings Sept. Sept. Sept. Sept.
-------- 2008 2007 2008 2007
------------------------------------
$'000 $'000
Revenue - sales 8,357 18,450 41,044 45,049
Gross profit 2,670 10,001 21,903 24,212
Depreciation and amortization (437) (1,281) 2,976 (4,253)
General and administrative costs (5,083) (7,875) (16,924) (21,922)
Share of associated company income 1,623 - 3,167 -
Insurance proceeds -
business interruption - 5,388 - 5,388
Interest income 186 373 1,496 1,589
Gain/(loss) on disposal of investment - - 27,244 (4,218)
Net foreign exchange (loss)/gain (668) 387 (691) 334
Settlement loss on contract revision - - (1,013) -
Asset write offs and impairments - - - (18,169)
Recovery of amounts previously
written off 125 - 361 -
Interest and financing costs (201) (1,597) (1,126) (5,064)
Taxation (15) (1,780) (3,582) (3,051)
Non controlling interests (79) (4,288) (3,709) (6,580)
Net (loss)/earnings attributable
to shareholders (2,037) (16,725) 23,685 (31,735)
Cash flow
---------
Cash (used by) operations (5,901) (9,221) (12,177) (27,524)
Cash from investing activities 4,354 14,992 25,944 24,235
Cash from (to) financing activities 686 (10,217) (6,841) 1,767
-------------------------------------------------------------------------
NET CASH (OUTFLOW) / INFLOW (861) (4,446) 6,926 (1,522)
-------------------------------------------------------------------------
Cash and cash equivalents -
end of period 15,932 14,576
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Shares in issue ('000) 175,288 174,883
Quarterly Data
--------------
($M (equal sign)
U.S. Dollar millions)
-----------------------------------------------
2008 2007
-----------------------------------------------
Q3 Q2 Q1 Q4 Q3 Q2 Q1
-----------------------------------------------
Revenue $M 8.4 11.9 20.8 16.5 16.1 11.9 14.2
Gross profit $M 2.7 5.4 13.9 10.2 10 5.0 9.2
-------------------------------------------------------------------------
Net (loss)/
earnings $M (2.0) 24.7 1.0 (4.2) (14.5) (7.3) (10.5)
-------------------------------------------------------------------------
Cash provided/
(used) by
operations $M (5.9) (11.7) 5.4 102.4 (9.2) (5.4) (10.2)
-------------------------------------------------------------------------
(Loss)/Income
per share :
- Basic $ (0.01) 0.14 (0.01) (0.01) (0.08) (0.04) (0.07)
- Diluted $ (0.01) 0.11 0.01 0.01 (0.08) (0.04) (0.07)
-------------------------------------------------------------------------
---------------------------
2006
---------------------------
Q4 Q3 Q2 Q1
---------------------------
Revenue $M 206.2 232.0 226.0 118.9
Gross profit $M 7.5 5.1 5.2 2.9
----------------------------------------------------
Net (loss)/
earnings $M 0.8 11.3 (3.9) (4.4)
----------------------------------------------------
Cash provided/
(used) by
operations $M (27.6) 18.8 (11.8) (19.8)
----------------------------------------------------
(Loss)/Income
per share :
- Basic $ 0.00 0.07 (0.02) (0.03)
- Diluted $ 0.00 0.07 (0.02) (0.03)
----------------------------------------------------
(The basic and diluted income/(loss) per share is determined separately
for each quarter based on the weighted number of shares outstanding in
the quarter. Consequently, the sum of the quarterly amounts may differ
from the year to date amount disclosed in interim consolidated financial
statements as interim calculations use interim averages.)
3.1 REVENUE, INCOME AND COSTS - SEPTEMBER 30, 2008
Mid
Quarter ended Group Corporate BioFuel Stream Trading
September 30, 2008 $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
REVENUE 8,356 373 2,078 2,376 3,529
COST OF SALES (5,686) 0 (951) (2,343) (2,393)
-------------------------------------------------------------------------
GROSS PROFIT 2,670 373 1,128 33 1,136
Depletion, depreciation
and amortization (437) (22) (144) (52) (219)
Share of associated
company income 1,623 0 0 1,623 0
Operating lease expenses (155) (155) 0 0 0
General and
administrative expenses (5,084) (2,991) (759) (720) (615)
-------------------------------------------------------------------------
(LOSS)/PROFIT BEFORE
OTHER INCOME/EXPENSES (1,382) (2,795) 225 885 303
OTHER (EXPENSES)/INCOME (559) (364) (251) 81 (24)
-------------------------------------------------------------------------
Other income
Interest income 185 (2) 61 102 23
Gain on disposal of
long-term investment 0 0 0 0 0
Recovery of amounts
written off previously 124 166 0 0 (42)
Other expenses 0 0 0 0
Settlement loss on
contract revision 0 0 0 0 0
Foreign exchange gain/
(loss) (667) (362) (303) (3) 2
Interest and financing
costs 0 0 0 0
- long term debt 0 0 0 0 0
- short-term debt (201) (167) (9) (19) (6)
-------------------------------------------------------------------------
PPOFIT/(LOSS) BEFORE
INCOME TAXES AND NON
CONTROLLING INTERESTS (1,941) (3,158) (26) 965 279
TAXATION (15) 0 0 (0) (15)
-------------------------------------------------------------------------
EARNINGS/(LOSS)
BEFORE NON-CONTROLLING
INTERESTS (1,956) (3,158) (26) 965 264
NON-CONTROLLING INTERESTS (80) 0 35 (0) (114)
-------------------------------------------------------------------------
ATTRIBUTABLE TO
SHAREHOLDERS (2,036) (3,159) 10 965 149
-------------------------------------------------------------------------
Capital expenditure
for the period 2,587 31 2,867 (364) 53
Total Assets -
September 30, 2008 146,250 82,914 24,266 18,751 20,319
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Mid
Nine months ended Group Corporate BioFuel Stream Trading
September 30, 2008 Mid $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
REVENUE 41,044 621 6,510 20,899 13,014
COST OF SALES (19,141) 0 (3,011) (6,664) (9,467)
-------------------------------------------------------------------------
GROSS PROFIT 21,903 621 3,500 14,235 3,547
Depletion, depreciation
and amortization (2,976) (66) (559) (1,705) (646)
Share of associated
company income 3,167 0 0 3,167 0
Operating lease expenses (465) (465) 0 0 0
General and
administrative expenses (16,924) (9,192) (1,852) (4,049) (1,832)
-------------------------------------------------------------------------
(LOSS)/PROFIT BEFORE
OTHER INCOME/EXPENSES 4,706 (9,102) 1,089 11,649 1,070
OTHER (EXPENSES)/INCOME 26,270 27,126 (268) (850) 263
-------------------------------------------------------------------------
Other income
Interest income 1,495 1,143 (3) 266 88
Gain on disposal of
long-term investment 27,244 27,244 0 0 0
Recovery of amounts
written off previously 361 0 0 0 361
Other expenses
Settlement loss on
contract revision (1,013) (1,013)
Foreign exchange
gain/(loss) (691) 206 (256) (461) (179)
Interest and financing
costs
- long term debt (598) 0 0 (598) 0
- short-term debt (528) (455) (9) (58) (6)
-------------------------------------------------------------------------
PPOFIT/(LOSS) BEFORE
INCOME TAXES AND NON
CONTROLLING INTERESTS 30,976 18,025 821 10,798 1,333
TAXATION (3,582) 0 0 (3,155) (427)
-------------------------------------------------------------------------
EARNINGS/(LOSS) BEFORE
NON-CONTROLLING
INTERESTS 27,393 18,025 820 7,642 906
NON-CONTROLLING INTERESTS (3,709) 0 (425) (3,101) (182)
-------------------------------------------------------------------------
ATTRIBUTABLE TO
SHAREHOLDERS 23,684 18,024 396 4,541 723
-------------------------------------------------------------------------
Capital expenditure
for the period 5,479 59 4,722 606 92
Total assets -
September 30, 2008 146,250 82,914 24,266 18,751 20,319
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Mid
Nine months ended Group Corporate BioFuel Stream Trading
September 30, 2008 $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
REVENUE 45,049 6,120 25,353 13,576
COST OF SALES (20,837) (2,686) (7,857) (10,294)
-------------------------------------------------------------------------
GROSS PROFIT 24,212 0 3,434 17,496 3,282
Depletion, depreciation
and amortization (4,253) (44) (406) (3,215) (588)
Insurance proceeds for
business interruption 5,388 5,388
General and administrative
expenses (21,922) (14,491) (1,885) (4,404) (1,142)
-------------------------------------------------------------------------
(LOSS)/PROFIT BEFORE
OTHER INCOME/EXPENSES 3,425 (14,535) 1,143 15,265 1,552
-------------------------------------------------------------------------
OTHER (EXPENSES)/INCOME (25,529) (23,893) 86 (1,777) 55
-------------------------------------------------------------------------
Other income
Interest income 1,589 1,318 51 151 69
Other expenses
Mining exploration
interest written off (15,313) (15,313)
Loss on disposal of
long-term investment (4,218) (4,218)
Impairment of project
development costs (2,856) (2,856)
Foreign exchange
gain/(loss) 334 285 49
Interest and financing
costs
- long term debt (5,037) (3,109) (1,928)
- short-term debt (28) (14) (14)
-------------------------------------------------------------------------
PPOFIT/(LOSS) BEFORE
INCOME TAXES AND NON
CONTROLLING INTERESTS (22,104) (38,428) 1,229 13,488 1,607
TAXATION (3,051) 668 0 (3,199) (521)
-------------------------------------------------------------------------
EARNINGS/(LOSS) BEFORE
NON-CONTROLLING
INTERESTS (25,155) (37,760) 1,229 10,289 1,086
NON-CONTROLLING
INTERESTS (6,580) 0 (695) (5,551) (334)
-------------------------------------------------------------------------
ATTRIBUTABLE TO
SHAREHOLDERS (31,735) (37,760) 534 4,738 752
-------------------------------------------------------------------------
Capital expenditure
for the period 4,668 2,066 220 2,382 0
Total assets -
September 30, 2007 166,168 61,413 15,314 70,205 19,236
-------------------------------------------------------------------------
-------------------------------------------------------------------------
3.2 OVERALL PERFORMANCE
-------------------
The disposal of almost half of the Company's interest in its Nigerian
fuel storage and distribution facility during the second quarter, allowing
inclusion thereafter of 30% of that facility's earnings on an equity basis as
opposed to consolidating a previous 50% interest, has led to a drop in gross
and net income in the third quarter 2008 compared to the second quarter and
the comparable period for 2007. The Company reported a loss of $2 million for
the quarter compared to profits in the prior quarters in 2008 at operating
level before other income and expenses.
Results for the nine month period, exclusive of capital gains in 2008 and
capital losses in 2007, remain positive and improved in 2008 over 2007.
With effect from May 1, 2008, the financial results of the Nigerian fuel
storage and distribution facility have been accounted for using the equity
method of accounting. Turnover and costs for this operation were therefore
included on a gross basis with appropriate adjustments made for outside
shareholders interest up to end April. With effect from May, the net earnings
attributable to Energem (30%) from this operation are included as a single
line item as the Company's share of associated company income.
Interest and finance charges continue to decline in comparable terms as
debt is reduced and the long term debt in respect of the Nigerian Facility is
no longer consolidated into group results. General and administrative costs
have been reduced, not only because of non-consolidation of the Nigerian
Facility, but due to other structured and on-going attention to cost reduction
measures and despite costs being incurred in the pursuit and development of
new assets.
The profit on disposal of part of the Company's interest in its Nigerian
asset of $27.2 million, is included under other income and expenses in the
second quarter and nine months to September 2008 as a gain on disposal of
investment. This compares to a loss on disposal of investments and other asset
impairments of ($20.2 million) in the same period in 2007.
Net earnings for the nine months have therefore amounted to $23.7 million
inclusive of capital gains compared to a net loss of ($31.7 million) for the
same period last year.
Despite the fall in profits in the third quarter, operations remained
cash generative at operating level inclusive of payments from the associated
company and before working capital adjustments and exclusive of capital gains
in the nine months to September 2008.
4. OVERVIEW OF ACTIVITIES BY DIVISION
----------------------------------
4.1 Bio-Fuels
4.1.1 Jatropha cultivation as a feedstock for bio-diesel production
The Company has continued with the development of its now 100% owned
jatropha based agricultural development activities in Mozambique and is
actively pursuing the acquisition of further suitable land for future
development in Mozambique and a number of other African countries. The
jatropha plant produces seeds from which is extracted oil suitable for
blending with diesel as a substitute for diesel oil extracted from fossil
fuels.
The Company is focusing on the cultivation of jatropha curcas L, which
does not compete with food crop production, has limited direct environmental
impact and is efficient in reducing carbon emissions when used as a feedstock
for the production of bio-diesel fuel. The Company has been granted rights to
60,000 hectares of land in Gaza Province, Mozambique and is pursuing a
programme of land surveying to register those lands within the 60,000 hectares
best suited for the cultivation of jatropha.
The Company had aimed to have cleared and planted approximately 2,000
hectares of land with jatropha by the end of 2008. Based on progress in the
third quarter, slightly less than the 2,000 hectares is likely to be planted
by end 2008. Seedlings for these initial operations are provided by in-house
nurseries and the plantations are supporting ongoing research and development
into best practice for the cultivation of jatropha. The Company aims to expand
from this original footprint into an aggressive growth phase from 2009 with a
view to producing substantial volumes of jatropha oil as a feedstock for the
production of bio-diesel. It is anticipated that in the early years, this oil
will be destined primarily for export markets.
The Company has recruited suitably qualified management and research
staff to supplement its existing management and skills base. Research
facilities are being established on the central farms in Mozambique and on
leasehold land being acquired in Malawi to optimise agricultural methods and
yield performance for jatropha.
The Company is establishing "Centres of Excellence" at various key points
on its agricultural holdings to promote best practice and to provide training
to staff and potential affiliated contract out-growers involved in jatropha
farming.
A number of key independent consultants have been engaged to assist in
the process of evaluation and business planning and in the formulation of
project plans for the roll out of the clearing, planting and harvesting
processes for long term economic and sustainable commercial operations.
Certain of these evaluations will likely be concluded in the fourth quarter
2008.
Activities in the third quarter continued mainly on the development of
these programmes and with the gathering and evaluation of scientific data from
current experimentation with existing growing crops of jatropha.
4.1.2 Kisumu Ethanol Plant (Kenya - 55% owned) and overall divisional
results.
Operating performance of the Kisumu ethanol plant in Kenya continued to
improve in the third quarter following a slow start in the first half of 2008
when Kenya was experiencing political unrest. The plant contributes profit
towards the bio-fuels division which has recorded net income of $396,000 for
the nine months to September 30, 2008 and a loss of $26,000 in the quarter.
The division's loss in the quarter results from increased uncapitalised bio-
fuels costs written off and negative currency performance in operational
currencies versus the US Dollar, resulting in significant foreign exchange
losses in the division.
The Kisumu plant in the third quarter operated at higher capacity than
the second quarter, with this trend continuing into the fourth quarter with
October being its best sales month since commissioning. Experimentation with
sweet sorghum as a supplement to main plant molasses feedstock continued
satisfactorily. The plant currently produces predominantly potable and
industrial alcohol. Plans to upgrade plant capacity with the intention of
producing product for bio-diesel blending remain the intended long term
objective for this plant and awaits enabling legislation in Kenya before
implementation.
4.2 MIDSTREAM OIL
4.2.1 Nigerian Oil Storage and Distribution facility, Apapa, Nigeria
(30% equity interest at September 30, 2008)
The Company sold portion of its interest in this asset in May, 2008,
reducing its interest from 50% to 30% and its final 30% interest in November
2008 for a combined gross cash consideration of US$75 million. With effect
from May 1, 2008 the results for the operation were accounted for on the
equity basis of accounting which will continue to date of effective disposal
of the final 30% interest on November 6th, 2008.
4.2.2 Malawi Oil Storage and Distribution facilities (100% owned) and
overall divisional performance
The mid-stream division has continued with its plan of expanding its
wholesale and retail refined fuel distribution operations in Malawi. Results
for the first nine months of 2008, whilst improved over the same period last
year, have been restrained by shortages of the refined fuel in the Central
African region. Third quarter results are marginally improved over the second
quarter.
The mid-stream division continued as the Company's major income earner up
to September 30, 2008 and operating cash flow generator as is evident from the
divisional results set out above where the division has recorded net income of
$4.7 million in the nine months to September 2008 and $2.9 million in the
quarter. This matches 2007 performance in the same 2007 period, despite
reduced participation in the Nigerian facility.
4.3 TRADING
The trading division continued to develop its manufacturing and logistics
business as well as its mining spares and equipment business. The division has
reported net income of $723,000 for the nine months to September 30, 2008 and
$149,000 in the quarter. Contraction in the mining industry following the fall
in commodity prices is now, however, beginning to negatively impact on this
division's results but it retains important strategic price advantages versus
its competitors.
4.4 UPSTREAM OIL ASSET
The Company has incurred minor expenditure on this asset this year. The
implementation of a planned in fill 2D seismic programme in the current year
has not commenced and it is likely that this will be further delayed. The
delay in the implementation of the exploration and development programme as
required in terms of the licensing arrangements is understood by the
Government of Chad and has not had impact upon title to the asset.
4.5 CORPORATE
The Corporate "division" includes those central activities which do not
logically fall under another division and includes all central group indirect
overhead and certain investment and corporate activity.
Corporate encompasses the activities of wholly owned subsidiary Anglo
African Finance Ltd. ("AAF"), a company set up in 2005 to pursue African
venture capital, insurance and project finance opportunities and which was
instrumental in the creation of McCroft Tobacco Holdings Limited ("McCroft"),
now named Westhouse Tobacco Limited, in which entity the Company continues to
hold an investment interest.
Certain uncapitalised costs associated with limited activities at the
Chad up-stream oil exploration asset are included under Corporate expenses as
are all costs associated with pursuit of new projects. Costs associated with
the Company's interest in the Tanzanian Stiegler's Gorge hydro-electric
project amounted to $1.248 million to end September 2008 have been capitalised
and are included under long term investments per balance sheet.
Indirect costs incurred at corporate level in respect of the management
of divisional activities are not re-charged to divisional cost centres.
The level of general and administration expenses across the group has
reduced versus the same period in 2007 and is reduced on the second quarter
2008 from US$6.3 million in the second quarter to US$5.1 million in the third
quarter. These indirect costs of $5.1 million in the third quarter 2008
compare to $7.9 million in the same period last year. (YTD - $16.9m vs. $21.9m
for 2007).
5. BALANCE SHEET, CASH FLOW, FINANCING AND COMMITMENTS
5.1 BALANCE SHEET CHANGES
The Company balance sheet reflects an increase in net assets from $102.8
million at December 31, 2007 to $126.5 million at September 30, 2008, slightly
down from the $128.5 million at June 30, 2008 due to net losses in the third
quarter. This increase in the nine months is a reflection of profit earned in
the period which comprises, in the main, the net gain made on the partial
disposal of the Company's interest in its Nigerian asset.
The profit earned on this disposal is indicative of the value the Company
has been able to add to assets which it has developed over the past few years.
Other changes in the balance sheet, the reduction in property, plant and
equipment, concomitant increase in long term investments and significant
reduction in short and long term liabilities is mainly as a result of the de-
consolidation of the Company's interest in its Nigerian asset which now
reflects as a long term investment equity interest in the asset.
5.2 LIQUIDITY AND CAPITAL RESOURCES
5.2.1 Cash Balances and cash flows
Nine months Year ended
to Sept. 30, December 31,
2008 2007
$'000 $'000
--------------------------------
Net cash provided by (used in)
Operating activities (12,177) (34,860)
Investing activities (11,850) 21,414
Asset disposal 29,206 -
Associate company receipts 8,588 -
Financing activities - debt
settlement - net (6,841) 6,354
--------------------------------
Increase/(decrease) in cash
and cash equivalents 6,926 (7,092)
Cash balances at beginning of period 9,006 16,098
--------------------------------
Cash balances at end of period 15,932 9,006
--------------------------------
--------------------------------
Cash flow in the quarter reflects operating outflows of ($5.9 million).
However, accounting convention treats payments received from associated
companies as investment inflows. Payments from an associated company, which is
the Nigerian tank farm and distribution facility, totalled $7.1 million ($8.6m
- YTD) and this facility remained part of the Company operating activities in
the second quarter. On the basis of including this inflow, operations were
cash flow positive.
On a year to date basis, operations, before working capital outflows of
$14.8 million, were cash generative to the extent of $2.6 million and $11.3
million if one includes the payments from the associate.
Working capital outflows persisted at high levels due to continued
reductions in accounts payable levels and outflows to accounts receivable,
mainly related parties, on a year to date basis. Related party receivables are
covered by a bank guarantee.
Capital expenditure in the quarter, mainly on the bio-fuels development
programme, totalled $2.6 million ($5.5m YTD) on property, plant and equipment
and $197,000 ($1.2m YTD) on the Stiegler's Gorge feasibility study. For the
same period in 2007, $4.7 million capital expenditure had been incurred.
5.2.2 Financing Activities
Other than in respect of an aircraft acquisition approved by shareholders
in November 2008, no other significant finance raising activities have taken
place in 2008. Debt of $6.8 million was settled in the nine months to
September 2008 and a note payable of $6.9 million was settled in the fourth
quarter. The acquisition of the aircraft for US$8 million will be financed
over 5 years by a South African bank and will reflect in the fourth quarter.
In the main, the Company has reduced debt and current liabilities from
available cash flows from operations and the disposal proceeds on the Nigerian
asset sale. Other than in respect of the $8 million for the aircraft raised in
the fourth quarter, the Company has no other debt in the fourth quarter.
5.2.3 Liquidity Going Forward
The Company intends to fund its on-going operations in the short-term
from cash flows from on-going operations and cash on hand following the
disposal of its Nigerian assets.
The long-term capital development of the Company's up-stream oil asset in
Chad is dependent upon the Company finding a suitable farm in partner to fund
its commitments or on other finance raising. Some limited initial development
will be possible from available cash resources. The uncommitted but intended
medium term expansion and development of the bio-fuels division is dependent
for its fully intended expansion upon funds being raised via debt or equity
but initial development will be possible from available cash resources.
The pace of development will be matched to available funding.
The Company has sufficient cash resources to meet the shorter term
immediate funding of its ongoing activities and projects.
The Company is engaged in a number of discussions and negotiations for
the potential future funding of its expansion and development activities.
These matters in some instances are well advanced. There appears, from this,
that there is a promising likelihood that substantial funding can be secured
on reasonable terms for these funding needs, despite the current negative
capital market sentiment and worldwide economic concerns.
Other than in respect of the Chad exploration license, the Company has no
significant unfunded contractual liability in respect of capital commitments.
A summary of approved and committed capital expenditures and other debt is
approximately as follows at end September 2008:
-------------------------------------------------------------------------
Payments due by period
--------------------------------------------------
Less
Contractual Obligations than 1 After 5
(US$'000) Total year 1-3 years 4-5 years years
-------------------------------------------------------------------------
Operating leases 1,343 583 760 - -
Work programme - Chad 27,262 15,881 11,381 - -
Aircraft purchase 8,000 8,000
Bio-diesel project 500 500 - - -
-------------------------------------------------------------------------
37,105 24,964 12,141 - -
Other debt:
Short-term note -
payable on demand 6,915 6,915 - - -
-------------------------------------------------------------------------
Total debt and
commitments 44,020 31,879 12,141 - -
-------------------------------------------------------------------------
--------------------------------------------------
The Company intends expending in excess of the $0.5 million commitment in
respect of its bio-fuels development which $500,000 commitment was expended in
the fourth quarter for the acquisition of the remaining 30% interest in the
Mozambiquan asset. The expenditure on bio-fuels development is accelerating in
the latter part of 2008 but it is unlikely that any requirement in 2008 cannot
be funded from available cash resources. The amount as may be expended from
2009 onward will depend upon the terms and ability to conclude satisfactory
funding arrangements. The purchase of an aircraft for $8 million in the
fourth quarter 2008 will be fully financed by bank debt.
The Company is unlikely to expend the $15.9 amount committed by licence
arrangements in respect of the Chad work programme commitment in 2008 and
remains comfortable that the delays in expenditure on this asset has not
prejudiced the Company's rights in respect of the asset.
The operating lease commitments are in respect of two property leases for
provision of offices.
The work programme commitments relating to the Chad up-stream production
sharing agreement commitments are likely to be moved out into later years.
The Company settled the $6.9 million short term note in November 2008.
5.3 OFF BALANCE SHEET ARRANGEMENTS
The Company has no significant off balance sheet assets or liabilities.
5.4 RELATED PARTY TRANSACTIONS
The Company conducts business with companies in which shareholders and
/or directors of the Company have a significant interest, namely A1 Holdings
Limited, Lyndhurst Racing Limited and Diamond Air Charters (Proprietary)
Limited. Other than in respect of fees charged by Energem which included an
element of profit, these transactions are undertaken at cost by and between
the parties. Interest is charged annually, at market rates, on late payments.
The Company has right of off-set for amounts due to/from related parties. The
Company has taken covering security in the form of an assignment of the cash
receivable benefits of certain material revenue generating agreements between
a related party and it's customers that will, on demand, accrue directly to
the Company in the event of the related party's failure to pay the amounts due
to the Company.
Nine Months Ended Year Ended
At September 30, December 31,
2008 2007
$'000 $'000
------------------------------------
Due by related parties
at beginning of period 17,047 129
Charges 4,164 24,630
Refund due resulting from pre-payment
for BioFuel promotion cancelled 6,000 -
Secured deposit on transaction -
concluding November 2008 4,700 -
Funds received from related parties (426) (7,712)
------------------------------------
Due by related parties at end of period 31,485 17,047
------------------------------------
------------------------------------
Fee income and charges levied from and to the company in respect of
services included in the amounts noted above amounted to:
Nine Months Ended Year Ended
September 30, December 31,
2008 2007
$'000 $'000
------------------------------------
Income
Aircraft costs recovered from
A1 Holdings 2,250 3,000
Expenses
Aircraft exclusive use rental paid
to Diamond Air Charter (357) (2,441)
------------------------------------
1,893 559
------------------------------------
------------------------------------
6. FINANCIAL INSTRUMENTS
6.1 CURRENCY RISKS
The Company is exposed to currency fluctuation risk in respect of certain
monetary assets which arises in the normal course of the Company's business.
The Company does not mitigate these risks through the use of derivative
instruments as it is generally not possible to do so for these specific risks.
The Group is exposed to foreign currency risk on certain sales,
purchases, assets and liabilities that are denominated in a currency other
than the functional currency of the Group, the US Dollar. The currencies
giving rise to this risk are primarily Pounds Sterling, the South African
Rand, the Kenyan Shilling and a number of other African currencies.
The US Dollar equivalent of cash and receivables balances held in foreign
currencies at Sept. 30, 2008 amounted to $16.6 million.
6.2 INTEREST RATE RISK
The Company is exposed to interest rate risk on its overdrafts and notes
payable. The Company does not mitigate these risks through the use of
derivative instruments as, generally, it is not possible to do so for these
specific risks.
The Group's variable-rate borrowings are exposed to a risk of change in
cash flows due to changes in interest rates.
Investments in equity securities and short-term receivables and payables
are not exposed to interest rate risk.
Balances exposed to interest rate risk comprise:
September 30,
--------------------
2008 2007
$'000 $'000
--------------------
Short-term borrowings - rate 12%
(2007 - 6% to 12%) 6,915 23,367
Bank overdraft - Malawi - rate 25% 855 918
Long-term debt - rate 9% - 7,162
--------------------
7,770 31,447
--------------------
--------------------
6.3 CREDIT RISK
The Company is exposed to credit risk on sales made in respect of its
logistics and manufacturing activities and sales of ethanol manufactured and
in respect of certain other significant receivables noted in its balance
sheet.
Management has a credit policy in place and the exposure to credit risk
is monitored on an ongoing basis. Credit evaluations are performed on all
customers requiring credit over a certain amount. The Group does not normally
require collateral in respect of financial assets, but in the case of any
purchaser which the Company regards as high risk, payment is required on
delivery or in advance of delivery of product or service, or other collateral
is required.
Investments are allowed in liquid securities and only with counterparties
that have a credit rating equal to or better than the Group. Management does
not expect any counterparty to fail to meet its obligations.
The maximum exposure to credit risk is represented by the carrying amount
of each financial asset.
6.4 DERIVATIVES
The fair values of the Company's financial instruments at December 31,
2007 and September 30, 2008, which comprise cash and cash equivalents,
accounts receivable, overdrafts and short - term borrowings, accounts payable
and notes payable are estimated to approximate their carrying values.
7. SHARE CAPITAL
-------------
7.1 COMMON SHARES
The authorised share capital of the Company consists of an unlimited
number of common shares. A summary of common share transactions is as follows:
Common shares in issue comprise:
Number Amount
of Shares $'000
-------------------------------
Balance, November 30, 2005 154,883,220 142,883
Issued for cash:
Broker warrants exercised 705,818 862
Share options exercised 100,000 70
Share purchase warrants exercised 5,000 5
Non-cash issues:
Staff bonus shares issued 254,997 328
Shares issued - debt settlement 245,368 300
-------------------------------
Balance - December 31, 2006 156,194,403 144,448
Private placement - issue for cash 18,793,600 12,047
Valuation of private placement
of warrants issued - (4016)
Staff bonus shares issued 300,000 108
-------------------------------
Balance - September 30, 2008 and
December 31, 2007 175,288,003 152,587
-------------------------------
The Company's common shares are listed on both the Toronto Stock Exchange
("TSX") and the London Stock Exchange Alternative Investment Market ("AIM").
The shares trade in Canadian Dollars (Cad.$) on the TSX and Pounds Sterling (pnds stlg ) on AIM. (Refer Note 8 below).
No issues of shares took place between December 31, 2007 and the date of
this report.
8. TORONTO STOCK EXCHANGE (TSX) REMEDIAL REVIEW
The Company is currently listed on the mining sector list of the TSX and
was advised by the TSX in December 2007 that it no longer meets the mining
issuer listing maintenance requirements due to the substantial change in the
nature of its activities. The TSX has placed Energem under a remedial review
process during which period of review Energem is required to demonstrate to
the TSX that it continues to qualify for listing under the original listing
requirements for an industrial issuer, for which purpose the Company has
delivered a number of submissions to the TSX.
In May 2008 the Company was advised that the TSX had extended the
continued listing review, initially set to be complete by April 1, 2008, to
March 31, 2009 - subject to certain interim conditions of deferral being met.
The TSX had granted an initial deferral period until August 21, 2008 and upon
satisfaction of conditions of deferral for the initial deferral period, the
TSX will extend the review an additional 120 days for each deferral period
until March 31, 2009.
However, in light of the recent disposal of the Nigerian asset in the
main, the Company was advised on November 4, 2008 that the review had been
extended by a period of only a further 30 days and any further extension would
be subject to a hearing to be conducted in early December 2008.
In the event that the outcome of this hearing is negative, the Company
intends to apply for alternate listing on the Toronto Venture Exchange.
The listing of the Company's shares on the London Stock Exchanges AIM is
unaffected by this development.
9. CRITICAL ACCOUNTING POLICIES, USE OF ESTIMATES AND ASSUMPTIONS &
----------------------------------------------------------------
CHANGES IN ACCOUNTING POLICIES AND ADOPTION OF ACCOUNTING POLICIES
------------------------------------------------------------------
9.1 NEW ACCOUNTING STANDARDS ADOPTED
As disclosed in the year end MD&A, the Company adopted the Canadian
Institute of Chartered Accountants ("CICA") Handbook Section 3031
"Inventories", Section 3863 "Financial Instruments- Presentation", Section
3862 "Financial Instruments - Disclosures" and Section 1535 "Capital
Disclosures" on January 1, 2008. The adoption of these standards has had no
material impact on the Company's Net earnings or Cash Flows.
9.2 RECENT ACCOUNTING PRONOUNCEMENTS
As of January 1, 2009 Energem will be required to adopt the CICA Handbook
Section 3064, "Goodwill and Intangible Assets" which will replace the existing
Goodwill and Intangible Assets standard. The new standard revises the
requirement for recognition, measurement, presentation and disclosure of
intangible assets. The adoption of this standard should not have a material
impact on Energem's Consolidated Financial Statements.
In January 2006, the CICA Accounting Standards Board ("AcSB") adopted a
strategic plan for the direction of accounting standards in Canada. As part of
that plan, the AcSB confirmed in February 2008 that International Financial
Reporting Standards ("IFRS") will replace Canadian GAAP in 2011 for profit-
oriented Canadian publicly accountable enterprises.
9.3 USE OF ESTIMATES
In arriving at certain values contained in its financial statements the
Company relies upon use of certain estimates and assumptions. Actual results
upon ultimate realisation of value may differ.
10. SUBSEQUENT EVENTS AND PROPOSED TRANSACTIONS
Following receipt of shareholder approval on November 6th, 2008, Energem
has:
- disposed of its remaining 30% interest in its Nigerian refined fuel
product storage and distribution facility for gross cash proceeds of
US$42.7 million;
- acquired the remaining 30% minority interest in its Mozambiquan bio-
fuels project for $500,000, increasing ownership in this project to
100%;
- acquired a used commercial jet aircraft for a consideration of US$8
million, the aircraft acquisition being fully funded by bank finance
repayable over five years;
- settled short term debt included in the balance sheet under current
liabilities of $6.9 million (note 7) at September 30, 2008.
- advanced to Westhouse Tabacco International Limited, for their
working capital purposes, an interest bearing amount of $3.6million
that is repayable on demand.
Other than these transactions concluded post September 30, 2008, there
are no other material proposed transactions. However, the Company is engaged
in discussions and negotiations which could lead to significant transactions
in relation to:
- acquisition of new assets;
- expansion to existing business;
- third party participation in and/or financing of existing assets
development.
11. OUTLOOK
The Company in 2007 undertook a major strategic re-alignment, since
disposing of a number of its assets and re-focussing itself on renewable
energy, including bio-fuels.
The Company's principal future thrust is into its re-focus on renewable
energy and related projects where the established Kenyan ethanol plant and
Mozambiquan bio-diesel project have provided a strategic edge. This will not
preclude the Company from considering other opportunities it may identify.
Development of clean and renewable energy is receiving considerable
attention internationally and the projects Energem has secured have potential
to become considerable in both size and momentum and because they are
inherently eco-friendly and do not compete with food crops, they are
sustainable in the long-term.
The Company will seek to continue to develop its bio-fuel operations in
Kenya and Mozambique and profitably operate and expand its other operating
assets and seek to acquire new projects.
12. RISK FACTORS
Asset management, ownership and development risks in Africa may be
markedly more significant than in non-African jurisdictions for similar
activities, which risks include higher business and political risks. Trading
and manufacturing and the marketability of commodities acquired, discovered,
grown or manufactured by Energem may be affected by numerous factors which are
beyond the control of Energem and which cannot be accurately predicted, such
as market fluctuations, agricultural conditions and risks, the proximity and
capacity of logistical facilities, markets, processing equipment, and such
other factors as government regulations, including regulations relating to
allowable production, importing and exporting limitations and environmental
protection issues, the combination of which factors may result in Energem not
receiving an adequate return on invested capital. Other risks specific to the
operations of Energem would include political and regulatory instability in
developing countries, protection of Energem's assets in areas of instability
and risks associated with rights to title of Energem's properties, assets,
project investments and trading licences and arrangements.
The Company's exposure to financial risks, including currency, credit and
interest rate risk and how it mitigates this risk is disclosed above under
Financial Instruments. In addition, the Company addresses operational risks by
maintaining a comprehensive insurance programme which is subject to regular
review.
As a result of the continuing growth and need to fund trade and capital
requirements, the Company will likely continue to require support from trade
and project financiers, possible equity raisings and participating partner
farm in joint venture or partner contributions. Liquidity and funding issues
will remain a constraint and risk to the Company in its development and growth
for the foreseeable future.
13. ADVISORY /CAUTION
This report contains forward-looking statements that include risks and
uncertainties. The factors that could cause actual results to differ
materially from those indicated in such forward-looking statements include
political and security-related concerns adversely impacting the Company's
ability to safely conduct its operations in certain developing countries,
changes in the prevailing prices for the products the Company farms,
manufactures, extracts or trades, variations in the yields and recoverability
of product produced, market conditions, competitive, changing environmental
criteria and political intervention.
All statements other than statements of historical facts included in this
document, including (without limitation) those regarding the Group's financial
position, business strategy, plans and objectives of management for future
operations or statements relating to expectation in relation to dividends,
returns and/or any statements preceded by, followed by or that include the
words "targets", "believes", "expects", "aims", "intends", "plans", "will",
"may", "anticipates", "would", "could" or similar expression or their
negative, are forward-looking statements. Those and all other forward-looking
statements involve known and unknown risks, uncertainties and other important
factors beyond the Group's control that could cause the actual results,
performance, achievement or dividends paid by the Company to be materially
different from any future results, performance or achievements or dividend
payments expressed or implied by such forward-looking statements. Forward-
looking statements are based on numerous assumptions regarding the Group's
present and future business strategies and the environment in which the Group
will operate in the future. Forward-looking statements speak only as of the
date of this document. The Company expressly disclaims any obligation or
undertaking to disseminate any updates or revisions to any forward-looking
statements contained in this document or to reflect any change in the
Company's expectations with regard to these, any new information or any change
in events, or any conditions or circumstances on which any such statements are
based, unless required to do so by a stock exchange on which the Company's
shares are listed or by any regulations to which the Company is subject.
ENERGEM RESOURCES Inc
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
QUARTER AND NINE MONTHS ENDED
SEPTEMBER 30, 2008
CONSOLIDATED BALANCE SHEET
--------------------------
At At
September December
30, 31,
2008 2007
Unaudited Audited
-------------------------------------------------------------------------
(In thousands of U.S. Dollars) $'000 $'000
-------------------------------------------------------------------------
ASSETS
------
CURRENT ASSETS
Cash 15,931 9,006
Accounts receivable - third parties 18,083 31,622
Accounts receivable - related parties (Note 11) 31,485 17,047
Inventories 2,112 1,348
Prepayments 1,407 1,811
-------------------
69,018 60,834
-------------------
NON-CURRENT ASSETS
Long-term investments (Note 6) 22,113 6,512
Exploration property - oil and gas 24,069 24,069
Property, plant and equipment 30,174 77,671
Goodwill 876 876
-------------------
77,232 109,128
-------------------------------------------------------------------------
TOTAL ASSETS 146,250 169,962
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Bank overdrafts 854 981
Accounts payable and accrued liabilities 10,119 24,015
Short-term debt (Note 7) 6,915 23,304
-------------------
17,888 48,300
-------------------
NON-CURRENT LIABILITIES
Long-term debt (Note 8) - 7,162
Future income tax liabilities - long-term 635 5,484
Non-controlling interest 1,232 6,206
-------------------
1,867 18,852
-------------------------------------------------------------------------
TOTAL LIABILITIES 19,755 67,152
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Share capital (Note 9) 152,587 152,587
Contributed surplus 7,850 7,850
Share warrants reserve 4,016 4,016
Deficit (37,958) (61,643)
-------------------------------------------------------------------------
SHAREHOLDERS' EQUITY 126,495 102,810
-------------------------------------------------------------------------
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY 146,250 169,962
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SUBSEQUENT EVENTS - NOTE 15
The accompanying notes form an integral part of these consolidated
financial statements.
UNAUDITED CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
-----------------------------------------------------------------------
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2008 and 2007
----------------------------------------------------------------------
Nine Nine
Quarter Quarter Months Months
Ended Ended Ended Ended
September September September September
30, 30, 30, 30,
2008 2007 2008 2007
-------------------------------------------------------------------------
(In thousands of U.S. Dollars -
except per share information) $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
REVENUE- SALES 8,356 18,450 41,044 45,049
COST OF SALES (5,686) (8,449) (19,141) (20,836)
-------------------------------------------------------------------------
GROSS PROFIT 2,670 10,001 21,903 24,213
Depletion, depreciation and
amortization (437) (1,281) (2,976) (4,253)
Share of Associated Company Income 1,623 - 3,167 -
Operating lease expenses (154) - (465) -
Insurance proceeds for business
interruption - 5,388 - 5,388
General and administrative
expenses (5,082) (7,875) (16,923) (21,923)
-------------------------------------------------------------------------
(LOSS) / PROFIT BEFORE OTHER
INCOME AND EXPENSES (1,380) 6,233 4,706 3,425
NET OTHER (EXPENSES) / INCOME (560) (16,889) 26,270 (25,528)
-------------------------------------------------------------------------
Other income:
Interest income 185 373 1,495 1,589
Gain on disposal of investment
(Note 4) - - 27,244 -
Recovery of amounts written off
previously 124 - 361 -
Other expenses:
Mining exploration interests
written off - (15,313) - (15,313)
Loss on disposal of long-term
investment - - - (4,218)
Impairment of long term investment - - - (676)
Settlement loss on contract
revision (Note 13) - - (1,013) -
Impairment of project development
costs - (740) - (2,180)
Foreign exchange (loss) / gain (668) 387 (691) 334
Interest and financing costs
- long-term debt - (1,590) (598) (5,036)
- short-term debt (201) (6) (528) (28)
-------------------------------------------------------------------------
(LOSS) / PROFIT BEFORE INCOME TAXES
AND NON CONTROLLING INTERESTS (1,940) (10,656) 30,976 (22,103)
TAXATION (15) (1,780) (3,582) (3,051)
-------------------------------------------------------------------------
(LOSS) / EARNINGS BEFORE
NON-CONTROLLING INTERESTS (1,955) (12,436) 27,394 (25,154)
NON-CONTROLLING INTERESTS (80) (4,288) (3,709) (6,580)
-------------------------------------------------------------------------
ATTRIBUTABLE TO SHAREHOLDERS (2,035) (16,724) 23,685 (31,734)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(LOSS) / EARNINGS PER SHARE (Note 12)
-Basic ($0.01) ($0.10) $0.14 ($0.19)
-Diluted ($0.01) ($0.10) $0.11 ($0.19)
The accompanying notes form an integral part of these consolidated
financial statements.
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY AT
----------------------------------------------------------------------
SEPTEMBER 30, 2008.
-------------------
Equity
Share Share Contributed portion Deficit Share-
capital warrants surplus of holders'
reserve debentures Equity
payable
-------------------------------------------------------------------------
(In thousands
of U.S. Dollars) $'000 $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
Balance at
December 31,
2006 144,448 4,811 73 2,684 (25,190) 126,826
Shares issued -
private
placement 12,155 - - - - 12,155
Valuation of
warrants
issued -
private
placement (4,016) 4,016 - - - -
Equity portion
of settled
convertible
debentures - - 2,684 (2,684) - -
Share option
cost - - 282 - - 282
Expiring of
warrants - (4,811) 4,811 - - -
Loss for the year - - - - (36,453) (36,453)
-------------------------------------------------------------------------
Balance at
December 31,
2007 152,587 4,016 7,850 - (61,643) 102,810
Profit for the
nine months - - - - 23,685 23,685
-------------------------------------------------------------------------
Balance at
September 30,
2008 152,587 4,016 7,850 - (37,958) 126,495
-------------------------------------------------------------------------
-------------------------------------------------------------------------
The accompanying notes form an integral part of these consolidated
financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THREE AND SIX MONTHS ENDED JUNE 30, 2008 and JUNE 30, 2007
--------------------------------------------------------------
UNAUDITED
---------
Nine Nine
Quarter Quarter Months Months
Ended Ended Ended Ended
September September September September
30, 30, 30, 30,
2008 2007 2008 2007
(In thousands of U.S. Dollars) $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
CASH FLOWS USED IN OPERATING
ACTIVITIES
Net (loss) / profit attributable
to shareholders (2,035) (16,724) 23,685 (31,734)
Depletion, depreciation and
amortisation 437 1,281 2,976 4,253
Share of associated company
income (1,623) - (3,167) -
Increase in non-controlling
interests 80 4,288 3,709 6,580
Loss on disposal of
subsidiary - - - 4,218
Impairment of long-term
investment - 740 - 2,856
Mining exploration assets
written off - 15,313 - 15,313
(Gain) / loss on sale of
long-term investment - - (27,244) -
Increase in provision for
future income tax (26) 1,780 1,544 2,203
Foreign exchange / loss 668 - 691 -
Non-cash interest expense 166 - 454 -
Insurance proceeds - business
interruption - (5,388) - (5,388)
Changes in operating assets
and liabilities (3,568) (10,511) (14,826) (25,825)
-------------------------------------------------------------------------
(5,901) (9,221) (12,178) (27,524)
-------------------------------------------------------------------------
CASH FLOWS FROM IN INVESTING
ACTIVITIES
Net cash disposal from sale of
subsidiary interest - - (4,211) (5,695)
Net proceeds on disposal of
investments - 16,682 29,206 34,912
Investment - Stieglers Gorge (197) - (1,248) -
Investment - McCroft Tobacco - (314) (912) (314)
Payments received from
associated company 7,137 - 8,588 -
Additions to oil and gas
exploration interests - (916) - (2,066)
Additions to property, plant
and equipment (2,585) (460) (5,478) (2,602)
-------------------------------------------------------------------------
4,355 14,992 25,945 24,235
-------------------------------------------------------------------------
CASH FLOWS (USED IN) / FROM
FINANCING ACTIVITIES
Increase / (Reduction) in bank
overdrafts and short-term borrowings 685 62 162 (147)
Repayment of notes and loans - (10,279) (7,004) (10,330)
Common shares issued - - - 12,244
-------------------------------------------------------------------------
685 (10,217) (6,842) 1,767
-------------------------------------------------------------------------
(DECREASE) / INCREASE IN CASH (861) (4,446) 6,925 (1,522)
CASH AT BEGINNING OF PERIOD 16,792 19,022 9,006 16,098
-------------------------------------------------------------------------
CASH AT END OF PERIOD 15,931 14,576 15,931 14,576
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Supplementary information
Non-cash investing and financing
activities - - - -
Cash interest paid (369) - (469) 1,520
-------------------------------------------------------------------------
The accompanying notes form an integral part of these consolidated
financial statements.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
------------------------------------------------------
1. Basis of presentation, estimates and assumptions
(i) The Interim Consolidated Financial Statements include the accounts of
Energem Resources Inc. and its subsidiaries ("Energem" or "the Company"),
and are presented in accordance with Canadian generally accepted
accounting principles.
The Interim Consolidated Financial Statements have been prepared
following the same accounting policies and methods of computation as the
annual audited Consolidated Financial Statements for the year ended
December 31, 2007, except as noted below. These unaudited Consolidated
Financial Statements do not include all of the disclosures required by
generally accepted accounting principles for annual financial statements
and accordingly should be read in conjunction with the annual audited
Consolidated Financial Statements and the notes thereto for the year
ended December 31, 2007.
(ii) The preparation of financial statements requires that management
make estimates and use assumptions that affect the reported amounts and
other disclosures in these consolidated interim financial statements.
Actual results may ultimately differ from those reported and disclosed in
these interim financial statements.
2. Changes in accounting policies and practices
--------------------------------------------
As disclosed in the December 31, 2007 annual audited Consolidated
Financial Statements, on January 1, 2008, the Company adopted the
following Canadian Institute of Chartered Accountants' ("CICA") Handbook
Sections:
- "Inventories", Section 3031. The new standard replaces the previous
inventories standard and requires inventory to be valued on a first-
in, first-out or weighted average basis, which is consistent with
Energem's former accounting policy. The new standard allows the
reversal of previous write-downs to net realizable value when there
is a subsequent increase in the value of inventories. The adoption of
this standard has had no material impact on Energem's Consolidated
Financial Statements.
- "Financial Instruments - Presentation", Section 3863 and "Financial
Instruments - Disclosures", Section 3862. The new disclosure standard
increases Energem's disclosure regarding the nature and extent of the
risks associated with financial instruments and how those risks are
managed. The Company's position in this regard is set out in Note 22
to the annual financial statements at December 31, 2007. The new
presentation standard carries forward the former presentation
requirements and no material additional information is therefore
included herein.
- "Capital Disclosures", Section 1535. The new standard requires
Energem to disclose its objectives, policies and processes for
managing its capital structure (See Note 5).
3. Recent accounting pronouncements
--------------------------------
As of January 1, 2009, the Company will be required to adopt the CICA
Handbook Section 3064, "Goodwill and Intangible Assets", which will
replace the existing Goodwill and Intangible Assets standard. The new
standard revises the requirement for recognition, measurement,
presentation and disclosure of intangible assets. The adoption of this
standard should not have a material impact on Energem's Consolidated
Financial Statements.
In January 2006, the CICA Accounting Standards Board ("AcSB") adopted a
strategic plan for the direction of accounting standards in Canada. As
part of that plan, the AcSB confirmed in February 2008 that International
Financial Reporting Standards ("IFRS") will replace Canadian GAAP in 2011
for profit-oriented Canadian publicly accountable enterprises. As Energem
will be required to report its results in accordance with IFRS starting
in 2011, the Company is assessing the potential impacts of this
changeover and developing its plan accordingly.
4. Partial sale of Nigerian asset in second quarter 2008
-----------------------------------------------------
On May 1st, 2008 Glencore Finance (Bermuda) Limited ("Glencore Finance"),
a wholly owned subsidiary of privately held Glencore International AG
("Glencore"), acquired from the Company a 20% interest in its 50%
indirectly held Nigerian refined fuel storage and distribution facility
("the Facility"). During November 2008, the Company also sold its
remaining 30% interest in this facility - refer subsequent events note
15.
The cash consideration, paid in full, for this 20% stake amounted to
US$32.3 million. The price was calculated on the basis of a debt free
enterprise value for the Facility of US$200 million, adjusted for the
Facility's outstanding indebtedness of US$ 38.5 million at the effective
date of concluding the sale agreement. Included in this indebtedness was
a loan due to the Company of US$16 million ($5.7m at September 30, 2008 -
Note 6) which will continue to be repaid from the Facility's free cash
flow and it will be fully settled before profit distributions are made to
shareholders. Since September 30, 2008 a further repayment of the loan
account amounting to $1m has been received.
Further, the Company had granted Glencore Finance an option to acquire
from the Company, within a period of one year, a further 10% stake in the
Facility at a price to be calculated on the same pricing basis as the
initial 20% stake - i.e. US$20 million for 10% adjusted for such
outstanding indebtedness of the Facility as might exist on the date of
exercise of the option. This option has lapsed following the November
2008 disposal (note 15).
As a result of the reduction in shareholding, the Company no longer
consolidates the results of the facility and since May 1, 2008 to date of
disposal of its remaining 30% interest in November 2008 accounted for its
remaining investment under long-term investments, including at September
30, 2008, using the equity basis of accounting (Note 6).
The profit from the transaction of $27.2m comprises:
$'000
Gross cash proceeds 32,278
Direct selling cost including commissions (3,072)
---------
Net proceeds on disposal 29,206
Portion of investment sold (Note i) (1,962)
---------
Gain on partial disposal of Nigerian asset 27,244
---------
(i) Portion of investment sold comprises:
Net asset value of investment sold (Note ii) 15,211
Minority interest in net asset value (8,686)
---------
Net asset value after minorities 6,525
Investment retained at proportional net asset value- 30%
(Note 6) (4,563)
---------
Portion of investment sold 1,962
---------
(ii) Net asset value on date of disposal comprises:
Property plant and equipment 50,000
Trade & other receivables 7,699
Prepayments 1,293
Liquid funds 4,211
Loans - third parties - Prudent Bank Plc (13,304)
Loans - Other shareholder (3,696)
Loans - Energem Group (14,317)
Trade & other payables (10,281)
Deferred tax liability (6,394)
---------
15,211
---------
No provision for taxation on this profit is required as the seller of the
shares is operating from a jurisdiction where no tax is levied on capital
gains and the profit also does not constitute a taxable gain in Canada.
5. Capital disclosure
------------------
The Company's objectives when managing capital are to:
(i) safeguard the entity's ability to continue as a going concern so
that it may provide returns in the future to shareholders and
current and future benefits for other stakeholders, and
(ii) provide an adequate return to shareholders by pricing products and
services commensurately with the level of risk.
The Group sets the amount of capital in proportion to risk. The Group
manages the capital structure and makes adjustments to it in the light of
changes in economic conditions and the risk characteristics of the
underlying assets. In order to maintain or adjust the capital structure,
the Group may issue new shares or sell assets to reduce debt.
Further to the requirements of CICA Handbook - Section 1535 - Capital
Disclosure, the Company now monitors capital on the basis of the net
debt-to adjusted capital ratio. This ratio is calculated as net debt,
divided by adjusted capital. Net debt is calculated as total debt (long
term debt and current liabilities) less current assets. Adjusted capital
comprises all components of shareholders' equity.
The Company's current assets exceeded its liabilities at both September
30, 2008 and at December 31, 2007 as follows:
At At
September December
30, 31,
2008 2007
$'000 $'000
--------------------
Total debt 17,888 55,462
--------------------
- Long term debt - 7,162
- Current liabilities 17,888 48,300
--------------------
Current assets (69,018) (60,834)
--------------------
Net (assets)/debt (51,130) (5,372)
Shareholders equity 126,495 102,810
--------------------
Total capitalization 75,365 97,438
--------------------
--------------------
6. Long-term investments
At At
September December
30, 31,
2008 2007
$'000 $'000
--------------------
Associated company - equity accounted :
Energem Nigeria Limited - Apapa Tank Farm (Note i) 13,441 -
Other investments - at cost
Stieglers Gorge Hydro Electrical Project (Note ii) 1,248 -
Westhouse Tabacco Limited (formerly McCroft Tobacco
Holdings Limited) (Note iii) 7,424 6,512
--------------------
Total long term investments 22,113 6,512
--------------------
--------------------
(i) Energem Nigeria Limited - equity accounted
carry value
Investment at proportional net asset value (Note 4). 4,563 -
Advances receivable 5,711 -
Equity portion of undistributed profit 3,167 -
--------------------
Balance at end of period 13,441 -
--------------------
--------------------
Subsequent to September 30, 2008 this remaining investment in Energem
Nigeria Limited was sold - refer note 4 and 15.
At At
September December
30, 31,
2008 2007
$'000 $'000
--------------------
(ii) Stieglers Gorge Hydro Electrical Project
Balance at beginning of period - -
Advances 1,248 -
--------------------
Balance at end of period 1,248 -
--------------------
--------------------
(iii) Westhouse Tobacco Limited
Balance at beginning of period 6,512 6,062
Shares acquired from third party 500 450
Rights issue taken up 412 -
--------------------
Balance at end of period 7,424 6,512
--------------------
--------------------
7. Short-term debt
At At
September December
30, 31,
2008 2007
$'000 $'000
--------------------
Short-term portion of long-term debt (Note 8) - 9,549
Minority shareholder - 7,296
Short term note - payable on demand 6,915 6,459
--------------------
6,915 23,304
--------------------
--------------------
The short-term note was settled by the Company in November 2008.
8. Long-term debt
At At
September December
30, 31,
2008 2007
$'000 $'000
--------------------
Notes payable - Prudent Bank plc - 16,711
Less short-term portion (Note 7) - 9,549
--------------------
Total - 7,162
--------------------
--------------------
The note payable at December 31, 2007, to Prudent Bank plc consisted of a
term loan for financing the completion of the Apapa Tank Farm in Lagos
State, Nigeria, secured over the facility then included under property,
plant and equipment at a value of $52.9 million. Following the de-
consolidation of the Company's interest in the Apapa Tank Farm (Note 4
and 6) this liability is no longer included in the consolidated balance
sheet.
9. Share capital
Authorized share capital consists of an unlimited number of common
shares.
Number of Amount
Common shares in issue comprise: shares $'000
-----------------------
At September 30, 2008 and December 31, 2007 175,288,003 152,587
-----------------------
-----------------------
No share options or warrants were issued during the period.
10. Segmented information
10.1. Statement of operations per segment
Mid
Nine months ended Group Corporate BioFuel Stream Trading
September 30, 2008 $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
REVENUE 41,044 621 6,510 20,899 13,014
COST OF SALES (19,141) - (3,010) (6,664) (9,467)
-------------------------------------------------------------------------
GROSS PROFIT 21,903 621 3,500 14,235 3,547
Depletion, depreciation
and amortization (2,976) (66) (559) (1,705) (646)
Share of associated
company income 3,167 - - 3,167 -
Operating lease expenses (465) (465) - - -
General and
administrative
expenses (16,923) (9,192) (1,852) (4,048) (1,831)
-------------------------------------------------------------------------
PROFIT/(LOSS) BEFORE
OTHER INCOME/EXPENSES 4,706 (9,102) 1,089 11,649 1,070
OTHER INCOME/(EXPENSES) 26,270 27,126 (268) (851) 263
-------------------------------------------------------------------------
Other income
Interest income 1,495 1,144 (3) 265 89
Gain on disposal of
long-term investment 27,244 27,244 - - -
Recovery of amounts
written off previously 361 - - - 361
Other expenses
Settlement loss on
contract revision (1,013) (1,013) - - -
Foreign exchange
(loss)/gain (691) 206 (256) (460) (181)
Interest and
financing costs
- long term debt (598) - - (598) -
- short-term debt (528) (455) (9) (58) (6)
-------------------------------------------------------------------------
PPOFIT/(LOSS) BEFORE
INCOME TAXES AND NON
CONTROLLING INTERESTS 30,976 18,024 821 10,798 1,333
TAXATION (3,582) - - (3,155) (427)
-------------------------------------------------------------------------
EARNINGS BEFORE
NON-CONTROLLING
INTERESTS 27,394 18,024 821 7,643 906
NON-CONTROLLING
INTERESTS (3,709) - (424) (3,102) (183)
-------------------------------------------------------------------------
ATTRIBUTABLE TO
SHAREHOLDERS 23,685 18,024 397 4,541 723
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital expenditure
for the period 5,478 59 4,721 606 92
Total assets -
September 30, 2008 146,250 82,914 24,266 18,751 20,319
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Mid
Quarter ended Group Corporate BioFuel Stream Trading
September 30, 2008 $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
REVENUE 8,356 373 2,078 2,376 3,529
COST OF SALES (5,686) 0 (951) (2,343) (2,392)
-------------------------------------------------------------------------
GROSS PROFIT 2,670 373 1,127 33 1,137
Depletion, depreciation
and amortization (437) (22) (144) (52) (219)
Share of associated
company income 1,623 - - 1,623 -
Operating lease expenses (154) (154) - - -
General and
administrative
expenses (5,082) (2,990) (757) (720) (615)
-------------------------------------------------------------------------
(LOSS)/PROFIT BEFORE
OTHER INCOME/EXPENSES (1,380) (2,793) 226 884 303
OTHER (EXPENSES)/INCOME (560) (365) (251) 79 (23)
-------------------------------------------------------------------------
Other income
Interest income 185 (1) 61 102 23
Gain on disposal of
long-term investment - - - - -
Recovery of amounts
written off previously 124 166 - - (42)
Other expenses
Settlement loss on
contract revision
Foreign exchange
(loss)/gain (668) (363) (303) (4) 2
Interest and
financing costs
- long term debt - - - - -
- short-term debt (201) (167) (9) (19) (6)
-------------------------------------------------------------------------
(LOSS)/PROFIT BEFORE
INCOME TAXES AND NON
CONTROLLING INTERESTS (1,940) (3,158) (25) 963 280
TAXATION (15) - - - (15)
-------------------------------------------------------------------------
(LOSS)/EARNINGS BEFORE
NON-CONTROLLING
INTERESTS (1,955) (3,158) (25) 963 265
NON-CONTROLLING
INTERESTS (80) - 35 - (115)
-------------------------------------------------------------------------
ATTRIBUTABLE TO
SHAREHOLDERS (2,035) (3,158) 10 963 150
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital expenditure
for the period 2,586 31 2,866 (364) 53
Total Assets -
September 30, 2008 146,250 82,914 24,266 18,751 20,319
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Mid
Nine month ended Group Corporate BioFuel Stream Trading
September 30, 2007 $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
REVENUE 45,049 - 6,120 25,353 13,576
COST OF SALES (20,836) - (2,686) (7,857) (10,293)
-------------------------------------------------------------------------
GROSS PROFIT 24,213 - 3,434 17,496 3,283
Depletion, depreciation
and amortization (4,253) (44) (406) (3,215) (588)
Insurance proceeds for
business interruption 5,388 - - 5,388 -
General and
administrative
expenses (21,923) (14,491) (1,885) (4,404) (1,143)
-------------------------------------------------------------------------
PROFIT (LOSS) BEFORE
OTHER INCOME/EXPENSES 3,425 (14,535) 1,143 15,265 1,552
OTHER (EXPENSES)/INCOME (25,528) (23,893) 86 (1,776) 55
-------------------------------------------------------------------------
Other income
Interest income 1,589 1,318 51 151 69
Other expenses
Mining exploration
interest written off (15,313) (15,313) - - -
Loss on disposal of
long-term investment (4,218) (4,218) - - -
Impairment of project
development costs (2,856) (2,856) - - -
Foreign exchange
gain/(loss) 334 285 49 - -
Interest and
financing costs
- long term debt (5,036) (3,109) - (1,927) -
- short-term debt (28) - (14) - (14)
-------------------------------------------------------------------------
(LOSS)/PROFIT BEFORE
INCOME TAXES AND NON
CONTROLLING INTERESTS (22,103) (38,428) 1,229 13,489 1,607
TAXATION (3,051) 668 - (3,198) (521)
-------------------------------------------------------------------------
(LOSS)/EARNINGS BEFORE
NON-CONTROLLING
INTERESTS (25,154) (37,760) 1,229 10,291 1,086
NON-CONTROLLING
INTERESTS (6,580) - (695) (5,551) (334)
-------------------------------------------------------------------------
ATTRIBUTABLE TO
SHAREHOLDERS (31,734) (37,760) 534 4,740 752
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital expenditure
for the period 4,668 2,066 220 2,382 -
Total assets -
September 30, 2007 166,168 61,413 15,314 70,205 19,236
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Mid
Quarter ended Group Corporate BioFuel Stream Trading
September 30, 2007 $'000 $'000 $'000 $'000 $'000
-------------------------------------------------------------------------
REVENUE 18,450 - 2,020 11,259 5,171
COST OF SALES (8,449) - (955) (4,067) (3,427)
-------------------------------------------------------------------------
GROSS PROFIT 10,001 - 1,065 7,192 1,744
Depletion, depreciation
and amortization (1,281) (68) (138) (880) (195)
Insurance proceeds for
business interruption 5,388 - - 5,388 -
General and
administrative
expenses (7,875) (4,274) (869) (1,861) (871)
-------------------------------------------------------------------------
PROFIT/(LOSS) BEFORE
OTHER INCOME/EXPENSES 6,233 (4,342) 58 9,839 678
OTHER (EXPENSES)/INCOME (16,889) (16,469) 137 (570) 13
-------------------------------------------------------------------------
Other income
Interest income 373 285 27 45 16
Other expenses
Mining exploration
interest written off (15,313) (15,313) - - -
Loss on disposal of
long-term investment - - - - -
Impairment of project
development costs (740) (740) - - -
Foreign exchange gain 387 274 113 - -
Interest and
financing costs - - - - -
- long term debt (1,590) (975) - (615) -
- short-term debt (6) - (3) - (3)
-------------------------------------------------------------------------
(LOSS)/PROFIT BEFORE
INCOME TAXES AND NON
CONTROLLING INTERESTS (10,656) (20,811) 195 9,269 691
TAXATION (1,780) - - (1,566) (214)
-------------------------------------------------------------------------
(LOSS)/EARNINGS BEFORE
NON-CONTROLLING
INTERESTS (12,436) (20,811) 195 7,703 477
NON-CONTROLLING
INTERESTS (4,288) - (213) (3,914) (161)
-------------------------------------------------------------------------
ATTRIBUTABLE TO
SHAREHOLDERS (16,724) (20,811) (18) 3,789 316
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Capital expenditure
for the period 1,376 916 - 460 -
Total Assets -
September 30, 2007 166,168 61,413 15,314 70,205 19,236
-------------------------------------------------------------------------
-------------------------------------------------------------------------
10.2 Geographic segmented information is as follows:
Quarter Quarter Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2008 2007 2008 2007
$000 $000 $000 $000
-------------------------------------------------------
Revenue
Kenya 890 2,225 6,322 5,432
Malawi 2,373 1,172 5,234 2,861
DRC 832 614 2,332 1,500
Nigeria - 11,323 15,646 27,646
South Africa 933 1,071 3,549 2,616
United Kingdom 598 1,394 4,002 3,404
Zambia 2,303 483 3,482 1,179
Other 427 168 477 411
-------------------------------------------------------
8,356 18,450 41,044 45,049
-------------------------------------------------------
-------------------------------------------------------
At At
September 30, December 31,
2008 2007
$000 $000
-------------------------------
Capital assets
Chad 24,069 24,069
Central African Republic - -
Kenya 20,982 21,635
Mozambique 6,466 2,828
Nigeria - 50,370
Zambia 513 663
Malawi 2,148 2,126
Other 65 49
-------------------------------
54,243 101,740
-------------------------------
-------------------------------
11. Related party transactions
The Company conducts business with companies in which shareholders and/or
directors of the Company have a significant interest, namely A1 Holdings
Limited, Lyndhurst Racing Limited and Diamond Air Charters (Proprietary)
Limited. Other than in respect of fees charged by Energem which included
an element of profit, these transactions are undertaken at cost by and
between the parties. Interest is charged annually, at market rates, on
late payments. The Company has right of off-set for amounts due to/from
related parties. The Company has taken covering security in the form of
an assignment of the cash receivable benefits of certain material revenue
generating agreements between a related party and it's customers that
will, on demand, accrue directly to the Company in the event of the
related party's failure to pay the amounts due to the Company.
Nine Months
Ended Year Ended
At September 30, December 31,
2008 2007
$'000 $'000
-------------------------------
Due by related parties at
beginning of period 17,047 129
Charges 4,164 24,630
Refund due resulting from pre-payment
for BioFuel promotion cancelled 6,000 -
Secured deposit on transaction
- concluding November 2008 4,700 -
Funds received from related parties (426) (7,712)
-------------------------------
Due by related parties at end of period 31,485 17,047
-------------------------------
-------------------------------
Fee income and charges levied from and to the company in respect of
services included in the amounts noted above amounted to:
Nine Months
Ended Year Ended
September 30, December 31,
2008 2007
$'000 $'000
-------------------------------
Income
Aircraft costs recovered from A1 Holdings 2,250 3,000
Expenses
Aircraft exclusive use rental paid to
Diamond Air Charter (357) (2,441)
-------------------------------
1,893 559
-------------------------------
-------------------------------
Nine Months
Ended Year Ended
At September 30, December 31,
2008 2007
$'000 $'000
-------------------------------
Due by related parties at
beginning of period 17,047 129
Charges 4,164 24,630
Refund due resulting from pre-payment
for BioFuel promotion cancelled 6,000 -
Secured deposit on transaction
- concluding November 2008 4,700 -
Funds received from related parties (426) (7,712)
-------------------------------
Due by related parties at end of period 31,485 17,047
-------------------------------
-------------------------------
Fee income and charges levied from and to the company in respect of
services included in the amounts noted above amounted to:
Nine Months
Ended Year Ended
September 30, December 31,
2008 2007
$'000 $'000
-------------------------------
Income
Aircraft costs recovered from A1 Holdings 2,250 3,000
Expenses
Aircraft exclusive use rental paid to
Diamond Air Charter (357) (2,441)
-------------------------------
1,893 559
-------------------------------
-------------------------------
12. (Loss)/Earnings per share
The computations for basic and diluted earnings per share are as follows:
Quarter Quarter Nine Months Nine Months
ended ended Ended Ended
September 30, September 30, September 30, September 30,
2008 2007 2008 2007
-------------------------------------------------------
Net (loss)/
earnings - ($'000) (2,035) (16,724) 23,685 (31,734)
Average number of
common shares
outstanding
Basic ('000) 175,288 174,883 175,288 168,618
Diluted ('000) 219,061 174,883 219,061 168,618
Net (loss) earnings
per share
Basic ($0.01) ($0.10) $0.14 ($0.19)
Diluted ($0.01) ($0.10) $0.11 ($0.19)
Equity instruments excluded from the computation of diluted
(loss)/earnings per share which could be dilutive in the future were as
follows:
Quarter Quarter Nine Months Nine Months
ended ended Ended Ended
September 30, September 30, September 30, September 30,
2008 2007 2008 2007
-------------------------------------------------------
(Number of
options and
warrants)
Share options 11,630,000 12,980,000 11,630,000 12,980,000
Warrants 18,793,600 30,793,600 18,793,600 30,793,600
-------------------------------------------------------
30,423,600 43,773,600 30,423,600 43,773,600
-------------------------------------------------------
13. Settlement loss on contract revision
A loss of $1.013 million arose on the revision to terms of a contract
retroactively applied.
14. Comparative figures
Certain comparative figures have been reclassified to conform to the
classifications used in the current period. The comparative statement of
operations and comprehensive income as well as the segmented information
for the nine months and quarter ended September 30, 2008 has been
adjusted to take into account the year end adjustments pertaining to
share warrant and option cost. Consequently the "net recovery of share
option and warrant issue cost" that were recognized for the quarter and
nine months ended September 30, 2007, respectively amounting to $2,2m and
$4.5m, was excluded from the above mentioned reports and information.
15. Subsequent events
Following receipt of shareholder approval on November 6th, 2008, Energem
has:
- disposed of its remaining 30% interest in its Nigerian refined fuel
product storage and distribution facility for gross cash proceeds of
US$42.7 million;
- acquired the remaining 30% minority interest in its Mozambiquan bio-
fuels project for $500,000, increasing ownership in this project to
100%;
- acquired a used commercial jet aircraft for a consideration of
US$8 million, the aircraft acquisition being fully funded by bank
finance repayable over five years;
- settled short term debt included in the balance sheet under current
liabilities of $6.9 million (note 7) at September 30, 2008.
- advanced to Westhouse Tabacco International Limited, for their
working capital purposes, an interest bearing amount of $3.6 million
that is repayable on demand.
For further information: Rob Rainey: +44 (0)20 7 201-9620; Fax: +44 (0)20
7201 9641, or email: info(at)energem.com; Refer to our website:
www.energem.com; Canaccord Adams Limited - Robert Finlay, Andrew Chubb, +44
207 050 6500; Smithfield - Reg Hoare, Will Henderson, +44 207 360 4900
(ENM)
END
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