| Mon 3 Sep 2007, 8:00 | | ARI - ARM - Provisional Results for the year ended |
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ARI
ARIM
ARI - ARM - Provisional Results for the year ended 30 June 2007
African Rainbow Minerals Limited
(Incorporated in the Republic of South Africa)
(Registration Number 1933/004580/06)
JSE Share code: ARI
ISIN: ZAE000054045
("ARM" or "the Company")
Provisional Results for the year ended 30 June 2007
Highlights
* Record headline earnings, increasing 161% to R1 207 million
* First dividend declared of 150 cents per share (R315 million) since 2004
merger transaction
* Record product sales achieved by Platinum Group Metals (PGMs), iron ore,
manganese ore and chrome ore operations
* Nkomati Nickel Expansion to
100 000 tonnes per month (tpm) completed ahead of schedule and within budget
* Khumani Iron Ore Mine upscaled to 10 million tonnes per annum (mtpa) with
construction on schedule and within budget
* Goedgevonden Coal Project release announced with 3.2 mtpa Richards Bay Coal
Terminal (RBCT) allocation achieved
Commentary
The Board of Directors of ARM are delighted to announce the company`s record
results delivering on our stated strategies of organically and efficiently
growing ARM into a globally competitive diversified mining company. Headline
earnings per share have increased significantly by 158% to 580 cents per share
(2006: 225 cents per share).
These provisional results for the financial year ended 30 June 2007 have been
prepared in accordance with International Financial Reporting Standards (IFRS).
The 2007 financial year has been characterised by strong commodity prices,
increased volumes, especially ferrous metals and PGMs, and a 12.5% weaker
Rand/US Dollar exchange rate.
Contribution to headline earnings
Commodity group 12 months ended 30 June
R`million 2007 2006 % change
Platinum 461 42 998
Nkomati nickel and chrome 337 185 82
Ferrous metals 665 338 97
Coal 1 - -
Exploration investment (126) (47) (168)
Corporate: finance costs (81) (32) (153)
Corporate: other (50) (24) (108)
ARM headline earnings 1 207 462 161
Operational highlights for the year include:
* a 53% increase in attributable PGM production to 264 400 ounces;
* contribution of Two Rivers Platinum Mine to earnings;
* increase of 38% in manganese ore external sales to 2.3 million tonnes;
* a 16% increase in iron ore sales to 6.9 million tonnes; and
* chrome ore sales from Nkomati Mine`s chrome project which was released in July
2006 reached 584 000 tonnes. During the last four months sales have averaged 80
000 tpm.
ARM has built strategic relationships with our partners across the divisions as
indicated below:
Division Partner
Platinum Anglo Platinum and Impala Platinum
Nickel Norilsk Nickel
Ferrous metals Assore
Thermal coal Xstrata
In line with the ARM strategy of increasing operational efficiencies to ensure
competitiveness of its operations, management continues to focus on operational
costs. Below are highlighted some below inflation cost increases (all based on
nominal unit costs):
Unit cost % change
(decrease)/increase
Commodity group metric (2007 vs 2006)
Platinum R/t (milled) (15)
Nickel $/lb (cash cost, net of (100+)
by-products)
Manganese ore R/t 3
Manganese alloys R/t 1
Charge chrome R/t 5
Coal R/t (on mine, saleable) (17)
Volume increases together with ARM`s organic growth projects, are in line with
the company`s strategy of growth to double production from 2005 levels by 2010
in key commodities with high margin operations. ARM`s organic growth projects
with its partners remain on schedule and within budget, having spent R2.0
billion (attributable to ARM) on capital expenditure over the period:
* Khumani Iron Ore Mine has increased to 10 mtpa, with first export sales by
2008. The rail contract has been signed with Transnet for the full tonnage. The
first blast at Khumani occurred in May, exposing 600 000 tonnes of ore.
* The ARM Coal Goedgevonden Project has been released and ARM Coal has secured a
3.2 mtpa allocation at RBCT for the project.
* The Nkomati Nickel Interim Expansion Project to 100 000 tpm is completed. The
Large Scale Expansion bankable feasibility study has been completed for the
expansion to 20 500 tonnes nickel per annum on average over the life of the
mine.
Net debt (excluding partner loans) has increased from R1.3 billion in 2006 to
R1.9 billion in 2007, with net gearing at a reasonable level of 17%, given the
achieved EBITDA (excluding exceptional items) increase of 87% to R2.9 billion.
The increase in finance charges is largely due to debt incurred to finance the
investment in Xstrata Coal and completion of Two Rivers Platinum Mine. The
impact on earnings of additional finance costs is a reduction of 59 cents per
share. The ARM EBITDA margin has expanded from 34% for the 2006 financial year
to 47% for this financial year.
ARM continues to invest aggressively in building its future growth platform in
Africa. As a result, ARM`s exploration expenditure through TEAL has increased to
R126 million. During the financial year, ARM provided a US Dollar 20 million
bank guarantee to assist in securing exploration and development funding for
TEAL. In support of TEAL`s growth strategy over the next year, and subsequent to
the financial year-end, ARM has agreed to increase this guarantee to US Dollar
50 million, subject to South African Reserve Bank approval.
Harmony
ARM`s interest in the gold sector is held through a 16% stake in Harmony.
Harmony reported earnings for the year ended June 2007 of 43 cents per share
(2006: loss of 269 cents per share) and an increase in cash operating profit of
75% to R2 554 million (2006: R1 459 million). Gold production for the period was
2% lower at 72 602 kilograms (2006: 74 242 kilograms), with cash costs for the
period 27% higher at R112 407/kg (2006: R88 629/kg). After the year end, the
Chief Executive Officer and the Chief Financial Officer resigned. Graham Biggs,
previously managing director of Harmony Australasia operations has been
appointed as acting CEO and Frank Abbott has been appointed as interim Financial
Director. Andre Wilkens, the CEO of ARM, has been appointed as a non-executive
director to the Harmony board. Andre has significant gold mining experience and
was previously Chief Operating Officer of Harmony.
Looking forward, Harmony is focusing on a back to basics approach and has
undertaken to reverse the downward trend of gold production and the
unsatisfactory upward trend of operating unit costs through restructuring the
company to meet new targets and performance levels. Harmony has also initiated
plans to rebuild its management team and employee incentives and bonuses have
been aligned to focus on the bottom line profits. Immediate targets include
reducing unit operating costs materially by cutting overheads and other
unnecessary expenses, and improving grades and volumes.
Planned capital expenditure is being reviewed, whilst retaining the focus on
existing growth projects. Various funding options are being investigated
including raising debt and disposal of certain assets. Financial information
systems will be stabilised and reassessed to ensure that proper business
decision making can take place.
Harmony owns excellent orebodies and has good growth projects and a high-
calibre management. With a clear focus on future improvements in production and
costs, management believes significant value can be unlocked in Harmony.
The ARM balance sheet at 30 June 2007 reflects a marked-to-market investment in
Harmony of R6 380 million, based on Harmony`s share price of R100 per share at
that date. On Thursday, 30 August 2007, the Harmony share price closed at R65
per share, being 35% lower, resulting in the total investment in Harmony
decreasing to R4 134 million. Changes in the value of the investment in Harmony
are accounted for by ARM through the statement of changes in equity, and the
investment is reflected at market value in the balance sheet.
Broad-based Economic Empowerment Trust
The ARM Broad-based Economic Empowerment Trust, created in April 2005 and fully
funded, has now completed a rigorous process of allocating 20.8 million shares -
equivalent to 10% of ARM`s issued share capital to various trust beneficiaries.
The beneficiaries include various church groups, union representatives, seven
broad based provincial upliftment trusts, several community, business and
traditional leaders and a broad based women upliftment trust.
Operational Review
ARM Ferrous
The ARM Ferrous operations, which comprises a 50% investment in Assmang Limited
(Assmang) and consists of three divisions, namely: iron ore, manganese and
chrome. Assore Limited, our partner in Assmang, owns the remaining 50%.
Assmang reported record turnover for this financial year, increasing by 41% to
R6 127 million (2006: R4 358 million). Headline earnings attributable to ARM
increased significantly by 97% to R665 million (2006: R338 million).
Assmang headline earnings contribution
100% basis 12 months ended 30 June
R million 2007 2006 % change
Iron ore division 679 399 70
Manganese division 576 326 77
Chrome division 76 (64) 219
Total 1 331 661 101
Headline earnings 665 338 97
attributable to ARM (50%)
The increase in headline earnings is primarily attributed to higher US Dollar
commodity prices (for all ferrous commodities), record volumes and a 12.5%
weaker Rand/US Dollar exchange rate. Sales volumes for iron ore, manganese ore
and charge chrome were higher than the previous year, driven by a strong demand
in the steel industry during the period under review. Charge chrome production
and prices also improved, further supporting the strong performance by ARM
Ferrous.
Assmang product sales
100% basis 12 months ended 30 June
Thousand tonnes 2007 2006 % change
Iron ore 6 855 5 926 16
Manganese ore* 2 327 1 678 39
Manganese alloys* 251 260 (3)
Charge chrome 232 210 10
Chrome ore* 172 178 (3)
* Excluding intra-group sales
The iron ore cost per tonne at Beeshoek and Khumani has increased by 33% due to
additional, higher cost contractors being employed at Beeshoek to maximise
capacity utilisation. In addition Khumani detrital ore is being transported to
Beeshoek by road for processing while the Khumani plant is under construction.
This interim measure has resulted in higher transport costs. As Khumani starts
processing ore from the first quarter in 2008, the cost of production will
reduce significantly, with projected mining costs at steady state expected to be
approximately 25% lower than currently experienced.
Manganese ore and alloys, as well as charge chrome operations controlled cost
increases within inflationary parameters, despite the inflation cost pressures
which the entire resources industry is experiencing globally.
Assmang capital expenditure amounted to R2 231 million (2006: R705 million)
during the period under review. Of this R1 673 million comprising 42% of the
total project capital was spent on the construction of the first phase of the
new Khumani Iron Ore Mine. At Cato Ridge Works R110 million was spent on dust,
fume control and upgrading furnaces.
Assmang capital expenditure
100% basis 12 months ended 30 June
R million 2007 2006
Iron ore 1 735 346
Manganese 297 239
Chrome 199 120
Total 2 231 705
Construction of the 10 mtpa Khumani export Iron Ore Mine at a capital cost of R4
billion is on schedule to produce first tonnage for export in the second quarter
of 2008. Total capital committed amounted to R2.4 billion, with all the critical
imported capital equipment already in South Africa. The project will be funded
from operating cash flows and debt facilities at the Assmang level. Further
expansion of the export channel is currently being evaluated by Transnet and the
iron ore producers.
ARM Platinum
ARM Platinum consists of the three operating mines.
The first is Modikwa Platinum Mine, where ARM Platinum has an effective 41.5%
economic interest and the local communities effectively have a 8.5% economic
interest. The remaining 50% is held by Anglo Platinum. Two Rivers Platinum Mine
is the second mine and ARM owns 55%. Its partner is Impala Platinum which owns
45%. The third mine is Nkomati Mine which is a 50:50 partnership with Norilsk
Nickel.
ARM Platinum`s individual operations performed well in the year under review,
with the continuing ramp-up at the PGM operations delivering into an exceptional
PGM market, complemented by continuing strength in base metal prices, notably
copper and nickel.
A highlight of the year was the successful start-up of production at Two Rivers
Platinum Mine one month ahead of schedule and R187 million (12%) under budget.
At Nkomati ARM has already established a good relationship with its new partner
Norilsk Nickel after their acquisition of LionOre. This promises to be an
excellent partnership and fits with ARM`s strategy of linking with major players
in the various commodities which we have in the portfolio. With the successful
commissioning of the 100 000 tpm Main Mineralised Zone (MMZ) concentrator ahead
of schedule, management`s focus at Nkomati will be on transforming the operation
to a low-grade high volume MMZ operation, through the large scale expansion
project.
ARM Platinum capital expenditure across all operations amounted to R1 066
million for the year as detailed below (based on 100% of all operations).
ARM Platinum capital expenditure
100% basis 12 months ended 30 June
R million 2007 2006
Modikwa 204 128
Two Rivers 464 946
Nkomati 398 78
Total 1 066 1 152
Modikwa Platinum Mine
During the past year Modikwa treated 2.32 million tonnes and produced 274 174
PGM ounces (2006: 293 313 ounces PGMs) at R476 per tonne milled. A satisfactory
level of development (15 months mineable ore reserves) and mining flexibility
has been established due to the change in mining method, setting the platform
for improved performance at Modikwa Platinum Mine.
Modikwa operational statistics
12 months ended 30 June
100% basis 2007 2006 % change
Cash operating R million 923 360 156
profits
Tonnes milled Million tonnes 2.32 2.51 (8)
Head grade (4E) g/t 4.37 4.28 2
PGMs-in- Ounces 274 174 293 313 (7)
concentrate
Average basket R/kg 277 701 183 537 51
price
Cash cost R/tonne 476 398 (20)
Cash cost R/Pt oz 8 917 7 551 (18)
Cash cost R/PGM oz 4 037 3 394 (19)
Capex R million 204 128 (45)
Headline 181 42 331
earnings
attributable to
ARM (41.5%)
The lower output is largely attributable to industrial action in the third
quarter of the financial year, resulting in 24 days` production losses in
January and February of this year and interrupting the steady build-up of
production in the second half of the financial year. After lengthy negotiations
both the NUM and UASA signed off a working conditions agreement in May and
continuous operations (including Sunday work) were resumed shortly thereafter.
This industrial action was effectively responsible for production shortfalls
from February through to June 2007. In turn, owing to the lower output, unit
cash costs were negatively affected, rising from R398 per tonne for the 2006
financial year to R476 per tonne in 2007. In spite of the production shortfalls,
revenues increased by 32% year-on-year, largely a function of favourable metal
prices and exchange rates.
Capital has been provided for the deepening of the North and South Shafts to
sustain production at 240 000 tpm in the medium term. A scoping study has been
initiated which will investigate a modular production increase. Merensky reef
trial mining is scheduled to continue at 10 000 tpm in FY2008.
Two Rivers Platinum Mine
The past financial year saw the start-up of production at Two Rivers in August
2006 ahead of schedule. A total of 2.04 million tonnes were milled with a mill
head grade (6E) of 4.24 g/t during the year yielding 184 099 ounces of PGM
concentrate. These costs were positively impacted by the utilisation of the
lower cost start-up stockpile of 1.1 million tonnes at the 2006 financial year
end. By the end of June 2007 the stockpile had reduced to 162 000 tonnes of
lower grade ore. Total cash costs at R392 million were well controlled in
relation to production volumes and translated into cost of R192 per tonne
milled. The cash cost excluding stockpiled tonnages is R306 per tonne.
Two Rivers operational statistics
12 months ended 30 June
100% basis 2007 2006
Cash operating profits R million 945 -
(9 months)
Tonnes milled Million tonnes 2.04 -
Head grade (6E) g/t 4.24 -
PGMs-in-concentrate Ounces 184 099 -
Average basket price R/kg 316 260 -
Cash cost R/tonne 192 -
Cash cost R/Pt oz 4 458 -
Cash cost R/PGM oz 2 129 -
Capex R million 464 -
Headline earnings 280
attributable to ARM
(55%)
Production from the Main Decline is scheduled to reach 185 000 tpm by the end of
the year and the new North Decline is expected to produce 40 000 tpm in the
first half of calendar year 2008. The North Decline has intersected reef and is
slightly ahead of schedule.
After commissioning of the concentrator plant in August 2006, the plant is
operating at its design capacity of 225 000 tpm, while further optimisation at
the plant could possibly see throughput increasing.
Nkomati Mine
During the 2007 financial year Nkomati processed 318 thousand tonnes of ore
translating into 4 418 tonnes of nickel and 46 101 PGM ounces at a negative cash
cost, after by-product credits, of US Dollar 1.10 per pound. The lower nickel
production is largely due to the lower grades and the tailing off of production
from the Massive Sulphide Body (MSB), which is now almost entirely mined out.
Revenues increased 57% to R1.4 billion for the year, with chrome contributing
R214 million to revenues. The unit mining cost increase to R503 per tonne milled
was caused by the impact of scattered mining used to extract the last remaining
remnants of the MSB. The US Dollar per pound nickel cash cost produced an
increased credit to $1.10/lb as the negative impact of the on mine cost increase
was more than offset by strong PGM and copper prices. Stockpiles at year-end of
chrome fines was 673 thousand tonnes.
Nkomati operational statistics
12 months ended 30 June
100% basis 2007 2006 % change
Cash operating R million 1 011 547 85
profit
Tonnes milled Thousand 318 373 (15)
Head grade % nickel 1.57 1.89 (17)
On-mine cash cost R/tonne 503 392 (28)
per tonne treated
Cash cost (net of US$/lb (1.10) (0.36) 206
by-products)
Contained metal
Nickel Tonnes 4 418 5 616 (21)
PGMs Ounces 46 101 49 437 (7)
Copper Tonnes 2 788 3 398 (18)
Cobalt Tonnes 208 257 (19)
Chrome ore sold Tonnes 584 177 - -
Headline earnings 337 185 82
attributable to ARM
(50%)
Nkomati Nickel Large Scale Expansion Project
The Large Scale Expansion bankable feasibility report is completed and submitted
for consideration to the respective shareholders` boards. The proposed expansion
transforms Nkomati from a high grade - low volume MSB mine to a low grade - high
volume MMZ operation. The mine is expected to mill 625 000 tpm from two separate
plants. At steady state, the mine is expected to produce 20 500 tonnes of nickel
and 110 000 ounces of PGMs for 20 years, with 1 million tonnes of chrome per
annum for approximately four years. A more detailed announcement is expected to
be released upon full approval of the project. Additional exploration work
continues on ARM`s prospecting rights adjacent to Nkomati Mine.
Kalplats
During the year we completed geological drilling of 26 000 metres of our planned
45 000 metres and we are on schedule to complete by the calendar year-end. We
have two diamond drill rigs and a reverse circulation rig on site. The company
is also involved in a pre-feasibility study and expects to complete it by
beginning of calendar year 2008.
ARM Coal
ARM`s effective economic interest in Xstrata Coal South Africa as at 30 June
2007 is 20.2% for an attributable thermal coal production of 4.5 mtpa.
As from 1 January 2007 Xstrata Coal South Africa owns 100% of the ATCOM & ATC
Collieries, having acquired Total Coal South Africa`s previously held 50%
interest in December 2006. The ARM investments have also increased
proportionally as a result of this transaction.
Construction of the Goedgevonden Project commenced during the first quarter of
2007 and is expected to be completed at a cost of R2.9 billion. The project is
expected to produce 6.7 mtpa thermal coal, of which 3.2 mtpa will be exported
and the balance sold to the domestic energy generation market. Commissioning of
the new mine is expected in the first half of 2009, with full production
anticipated from 2011. ARM Coal`s application for 3.2 million tonnes of export
allocation in the RBCT phase V expansion was successful.
Cash operating profit attributable to ARM`s coal investment amounted to R268
million for the financial year. The domestic prices received are lower due to a
portion of dump material having been sold at R32 per tonne.
Earnings from the Coal division attributable to ARM are negatively impacted by a
number of accounting issues: (i) the IFRS accounting requirement to account for
imputed interest on the debt facilitation provided by Xstrata; and (ii)
additional amortisation at the ARM level provided as a result of the IFRS
purchase price allocation rules.
ARM Coal operational statistics
12 months ended 30 June
2007 2006* % change
Consolidated Million 23.1 17.9 29
saleable tonnes
production
Export thermal Million 13.6 13.0 5
coal sales tonnes
Domestic thermal Million 9.0 6.2 45
coal sales tonnes
Attributable Million 4.5 3.5 29
saleable tonnes
production
Export thermal Million 3.0 2.5 20
coal sales tonnes
Domestic thermal Million 1.7 1.2 42
coal sales tonnes
Average received
coal price
Export (FOB) US$/tonne 44.5 42.4 5
Domestic (FOR) R/tonne 70.0 82.2 (15)
On mine saleable R/tonne 147.9 178.5 17
cost
Cash operating
profit
Consolidated R million 1 387 908 53
Attributable R million 268
Headline earnings 1 - -
attributable to
ARM
* For comparison purposes only, transaction effective 1 July 2006
Consolidated production and sales tonnes as disclosed above relate to 100% of
the Xstrata Coal South Africa operations. Attributable production and sales
relate to the ARM Coal share, being 20% of Xstrata Coal South Africa and 51% of
Goedgevonden, and ARM`s direct 10% of Xstrata Coal South Africa.
TEAL Exploration & Mining Inc.
In the DRC, a major area of focus in the year under review was the Kalumines
Copper-Cobalt Project where a rapid build up in copper mining is underway.
Exploration drilling has progressed well with the objective of supporting a
major mine development in that country. The smelter is in the process of being
commissioned and initial opencast mining on the Lupoto deposit has commenced.
The mine and smelter will produce approximately 10 000 tpa of contained copper.
Total capital expenditure for the smelter and mine is expected to be in the
region of US Dollar 8 million. TEAL has also concluded an assessment study based
on a larger mine: the exploration drilling results to verify and upgrade the
resource will be included in this study to ascertain the eventual size of the
operation.
In Zambia, at the Konkola North Copper Project, a technical study into the
establishment of an operation to mine the South and East Limb area of the
orebody was completed. The Konkola North Copper Project is expected to build
production to 25 000 tpa of contained copper.
The Otjikoto Gold Project in Namibia has manifested in a 1.76 million ounces
inferred mineral resource and the exploration programme is ongoing. A pre-
feasibility study is planned for completion during the first half of calendar
year 2008.
ARM is satisfied with the progress achieved by TEAL and with the potential of
the above projects. ARM has assisted its subsidiary by providing a guarantee of
US Dollar 20 million to support bank bridging facilities. ARM has agreed after
the year end to increase the guarantee to US Dollar 50 million, subject to South
African Reserve Bank approval, to ensure that bridging facilities will be in
place until beyond the end of the current financial year or until long-term
funding is arranged. The funds are being directed mainly towards work supporting
studies on TEAL`s major projects thereby creating sufficient flexibility for the
company to maximize value from its existing portfolio, specifically the Konkola
North copper mine and Kalumines mine and smelter copper projects, as well as the
Otjikoto Gold Project. Appropriate funding to refinance the bridging facilities
and fund the developmental expenditure at Konkola North, Kalumines and Otjikoto
will be arranged by TEAL after the completion of the final feasibility studies.
Safety and Health
The company is proud to report that all the divisions in ARM have reported an
improvement in their safety statistics for the past financial year.
It is with regret that management reports the occurrence of two fatalities. On 9
February, Mr Wycliff Malusi was fatally injured as a result of a truck collision
at the Khumani Iron Ore Mine. On 30 March 2007, a fatal accident occurred at Two
Rivers in which Mr Michael Thosa, a rock drill operator, lost his life in a fall
of ground accident. The company extends its sincere condolences to the bereaved
families and friends of the deceased.
Modikwa Platinum Mine achieved two million fatality free shifts during the year
which is a great achievement for a new ramp-up mine.
Beeshoek achieved one million fatality free shifts on 8 February 2007.
Nkomati Mine was declared the winner of the "Excellence in Safety" competition
for the 2007 financial year with a 66% improvement in its LTIFR to 0.85.
Assmang and the Department of Labour are investigating possible manganism cases
at Cato Ridge Works. A comprehensive improved medical surveillance and employee
support programme has been introduced and developed to suit current and future
needs.
Outlook
ARM`s strategy of competitiveness, growth and diversification remains on track.
The group owns large-scale, good quality assets which are being developed. ARM
will continue to look at appropriate acquisitive value adding opportunities
which are fairly priced. The group is also well positioned as partner of choice
in South Africa and Africa and management is confident that we will meet our
growth strategies.
Dividends
ARM continues its programme of organic growth projects and is seeing the
benefits flowing through in its attributable earnings and cash flow. Although
substantial capital will be expended for ongoing growth, the board believes that
ARM`s net debt position is at an appropriate level, as sufficient cash flow and
facilities exist to fund developing projects.
Accordingly, the Board of Directors has chosen to declare a dividend of 150
cents per share (R315 million) in respect of the year ending 30 June 2007. The
dividend is declared in the currency of the Republic of South Africa.
The last day to trade in ARM shares to participate in this dividend (cum-
dividend) will be Thursday, 20 September and ARM shares will trade ex-dividend
from Friday, 21 September 2007. The record date will be Friday, 28 September
2007 with payment of the dividend occurring on Monday, 1 October 2007.
No dematerialisation or rematerialisation of share certificates may occur
between Friday, 21 September and Friday, 28 September 2007, both days inclusive.
Review by independent auditors
The provisional financial information has been reviewed by Ernst & Young Inc.
whose unqualified review opinion is available for inspection at the company`s
registered office.
Signed on behalf of the Board:
PT Motsepe AJ Wilkens
Executive Chairman Chief Executive Officer
Johannesburg
3 September 2007
Balance Sheets
at 30 June 2007
Group Group
2007 2006
Rm Rm
Reviewed Audited
ASSETS
Non-current assets
Property, plant and equipment 6 892 4 992
Investment property 12 12
Intangible assets 217 2
Deferred tax assets - 23
Investment in associates 857 -
Other investments 6 391 7 276
14 369 12 305
Current assets
Inventories 853 707
Trade and other receivables 1 859 1 160
Cash and cash equivalents 1 063 439
3 775 2 306
Total assets 18 144 14 611
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 10 10
Share premium 3 667 3 557
Other reserves 1 604 2 307
Retained earnings 5 597 4 376
Shareholders` interest in capital and 10 878 10 250
reserves
Minority interest 340 143
Total shareholders` interest 11 218 10 393
Non-current liabilities
Long-term borrowings - interest bearing 2 741 1 449
Deferred tax liabilities 1 410 1 001
Long-term provisions 178 156
4 329 2 606
Current liabilities
Trade and other payables 999 627
Short-term provisions 97 47
Taxation 198 135
Overdrafts and short-term borrowings - 1 303 803
interest bearing
2 597 1 612
Total equity and liabilities 18 144 14 611
Income Statements
for the year ended 30 June 2007
Group Group
2007 2006
Rm Rm
Reviewed Audited
Revenue 6 308 4 686
Sales 6 152 4 622
Cost of sales (3 341) (3 304)
Gross profit 2 811 1 318
Other operating income 222 167
Other operating expenses (552) (373)
Profit from operations before exceptional 2 481 1 112
items
Income from investments 51 24
Finance costs (370) (134)
Income from associate 16 -
Profit before taxation and exceptional items 2 178 1 002
Exceptional items 14 139
Profit before taxation 2 192 1 141
Taxation (781) (377)
Profit for the period 1 411 764
Attributable to:
Minority interest 191 163
Equity holders of the parent 1 220 601
1 411 764
Additional information:
Headline earnings (R million) 1 207 462
Headline earnings per share (cents) 580 225
Basic earnings per share (cents) 586 293
Fully diluted basic earnings per share 577 291
(cents)
Fully diluted headline earnings per share 571 223
(cents)
Number of shares in issue at end of year 209 730 206 367
(thousands)
Weighted average number of shares in issue 208 115 205 072
(thousands)
Weighted average number of shares used in
calculating
fully diluted earnings per share (thousands) 211 523 206 780
Net asset value per share (cents) 5 187 4 967
Statement of Changes in Equity
for the year ended 30 June 2007
Revalua-
Share tion of
capital listed
and invest- Retained
premium ments Other* earnings
Group Rm Rm Rm Rm
Balance at
30 June 2005 (Audited) 3 507 (821) 49 3 776
TEAL minorities at listing - - - -
Realignment of currency - - 3 -
Other - - 2 (1)
Revaluation of listed - 3 556 - -
investment
Deferred tax on - (516) - -
revaluation of listed
investment
Transfer out of minority - - - -
interest, Assmang, now
accounted for as a joint
venture
Basic earnings - - - 601
Dividends paid to - - - -
minorities
Share based payments 34
Share options exercised 60 - - -
Balance at
30 June 2006 (Audited) 3 567 2 219 88 4 376
Basic earnings - - - 1 220
Revaluation of listed - (880) - -
investment
Deferred tax on - 128 - -
revaluation of listed
investment
Realignment of currency - - 1 -
Share based payments - - 48 -
Share options exercised 110 - - -
Other - - - 1
Balance at
30 June 2007 (Reviewed) 3 677 1 467 137 5 597
Share-
holders
of Minority
ARM interest Total
Group Rm Rm Rm
Balance at
30 June 2005 (Audited) 6 511 1 461 7 972
TEAL minorities at listing - 83 83
Realignment of currency 3 - 3
Other 1 - 1
Revaluation of listed 3 556 - 3 556
investment
Deferred tax on (516) - (516)
revaluation of listed
investment
Transfer out of minority (1 504) (1 504)
interest, Assmang, now
accounted for as a joint
venture
Basic earnings 601 163 764
Dividends paid to - (60) (60)
minorities
Share based payments 34 34
Share options exercised 60 - 60
Balance at
30 June 2006 (Audited) 10 250 143 10 393
Basic earnings 1 220 191 1 411
Revaluation of listed (880) - (880)
investment
Deferred tax on 128 - 128
revaluation of listed
investment
Realignment of currency 1 - 1
Share based payments 48 6 54
Share options exercised 110 - 110
Other 1 - 1
Balance at
30 June 2007 (Reviewed) 10 878 340 11 218
* Other reserves consist of insurance contingency R8 million (2006: R8 million;
2005: R6 million), general reserve of R32 million (2006: R32 million; 2005: R 32
million), share based payments R93 million (2006: R45 million; 2005: R11
million); foreign currency translation reserve R4 million (2006: R3 million;
2005: R Nil).
Cash Flow Statements
for the year ended 30 June 2007
Group Group
2007 2006
Rm Rm
Reviewed Audited
CASH FLOW FROM OPERATING ACTIVITIES
Cash receipts from customers 5 672 4 856
Cash paid to suppliers and employees (3 135) (3 613)
Cash generated from operations 2 537 1 243
Interest received 49 24
Interest paid (295) (137)
Dividends received - 1
Dividends paid to minorities - (60)
Taxation paid (317) (384)
Net cash inflow from operating activities 1 974 687
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (913) (636)
to maintain operations
Additions to property, plant and equipment (946) (859)
to expand operations
Proceeds on disposal of property, plant and 7 45
equipment
Investment in associate (841) -
Proceeds on disposal of investments 2 -
Net cash effects of disposal of 0.35 per - 18
cent of Assmang
Investment acquired - (12)
Net cash outflow from investing activities (2 691) (1 444)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds on exercise of share options 110 60
Funding received from minority shareholders - 226
at TEAL Listing
Long-term borrowings raised 1 453 881
Long-term borrowings repaid (73) (183)
Increase/(decrease) in short-term 72 (91)
borrowings
Net cash inflow from financing activities 1 562 893
Net increase in cash and cash equivalents 845 136
Cash and cash equivalents at beginning of 193 47
year
Foreign currency translation on cash 1 10
balance
Cash and cash equivalents at end of year 1 039 193
Cash generated from operations per share 1 219 606
(cents)
Notes to the Financial Statements
for the year ended 30 June 2007
1 Basis of preparation
The consolidated provisional results have been prepared on a historical cost
convention, as modified by the revaluation of available-for-sale financial
assets, and financial assets and financial liabilities (including derivative
instruments) at fair value through the income statement or the statement of
changes in equity.
This provisional financial information has been prepared using accounting
policies that comply with International Financial Reporting Standards, and
comply with the disclosure requirements of IAS 34: Interim Financial Reporting.
The financial information for the year ended 30 June 2007 has been prepared
adopting the same accounting policies used in the most recent annual financial
statements, except for the change in accounting policy below and the adoption of
various new and revised IFRS standards.
2 Change in accounting policies
IFRS 6: Exploration for and evaluation of a mineral resource - Effective 1 July
2006
Management has revised their policy in accordance with the guidelines of IFRS 6
establishing more stringent rules for the capitalisation of exploration costs.
In accordance with the transitional provisions of IFRS 6 the standard has been
applied retrospectively. No prior year impact results from the changed policy.
IFRIC 4: Determining whether an arrangement contains a lease. - Effective 1 July
2006
IFRIC 4 provides guidance for determining whether an arrangement, that does not
take the legal form of a lease but conveys a right to use an asset is, or
contains, a lease that should be accounted for in accordance with IAS 17:
Leases.
For the 2007 financial year the application of this new interpretation has
resulted in the recognition of a financial lease liability and a related asset
amounting to R52 million.
There have been a number of other new and revised accounting standards adopted
by ARM but this had no impact on the financial statements.
3 SEGMENTAL INFORMATION
Primary segmental information
Business segments
For management purposes, the Group is organised into five major operating
divisions. These are ARM Platinum (which includes platinum and nickel), ARM
Ferrous, ARM Coal, ARM Exploration and Gold.
Platinum comprises Two Rivers as a 55 percent subsidiary and Modikwa where ARM
holds an effective 41.5 percent interest in the Modikwa mine.
Nickel comprises Nkomati nickel mine as a 50 percent joint venture for both its
nickel and chrome operations.
ARM Ferrous comprises Assmang as a subsidiary up to 28 February 2006 and as a 50
per cent joint venture proportionately consolidated thereafter. Assmang
comprises all iron ore, manganese,ferro manganese, ferro chrome and chrome ore
operations.
ARM Coal, a 51 percent joint venture, consists of a 20 percent participating
investment in the existing coal operations of Xstrata Coal and a 51 percent
joint venture interest in the Goedgevonden mine. In addition ARM has a direct 10
percent participating investment in the existing coal operations of Xstrata
Coal.
ARM exploration comprises TEAL as a 64.9 percent subsidiary.
The gold segment comprises Harmony as an investment.
The group`s products predominantly reflect the risks and rewards of trading and
the operating divisions are therefore identified as the primary reporting
segments.
ARM Platinum ARM ARM
Platinum Nickel Ferrous Coal
Reviewed Rm Rm Rm Rm
3.1 Year to 30 June 2007
Sales
External sales 2 352 702 3 064 34
Cost of sales (1 083) (209) (2 021) (28)
Other operating income per 1 14 78 -
income statement
Other operating expenses (12) (36) (133) -
per income statement
Segment result 1 258 471 988 6
Income from investments 17 3 6 -
Finance cost (255) - (8) (26)
Income from associate - - - 16
Exceptional items - - - -
Taxation (300) (137) (320) 5
Minority interest (259) - - -
Contribution to basic 461 337 666 1
earnings
Contribution to headline 461 337 665 1
earnings
Other information
Segment assets 5 314 584 3 842 1 519
Segment liabilities 2 194 64 849 519
Unallocated liabilities
(tax and deferred tax)
Consolidated total
liabilities
Cash in/(out) flow from 770 568 979 (11)
operating activities
Cash in/(out) flow from (521) (199) (1 030) (892)
investing activities
Cash in/(out) flow from 212 - 244 71
financing activities
Capital expenditure 566 199 1 070 74
Amortisation and 165 35 203 1
depreciation
EBITDA (before exceptional 1 423 506 1 191 23
items)
Corporate
ARM and other
Explora- com-
tion panies Gold Total
Reviewed Rm Rm Rm Rm
3.1 Year to 30 June 2007
Sales
External sales - - - 6 152
Cost of sales - - - (3 341)
Other operating income per 1 128 - 222
income statement
Other operating expenses (198) (173) - (552)
per income statement
Segment result (197) (45) - 2 481
Income from investments 4 21 - 51
Finance cost - (81) - (370)
Income from associate - - - 16
Exceptional items - 14 - 14
Taxation (1) (28) - (781)
Minority interest 68 - - (191)
Contribution to basic (126) (119) - 1 220
earnings
Contribution to headline (126) (131) - 1 207
earnings
Other information
Segment assets 97 408 6 380 18 144
Segment liabilities 97 1 595 - 5 318
Unallocated liabilities 1 608
(tax and deferred tax)
Consolidated total 6 926
liabilities
Cash in/(out) flow from (169) (163) - 1 974
operating activities
Cash in/(out) flow from (51) 2 - (2 691)
investing activities
Cash in/(out) flow from 66 969 - 1 562
financing activities
Capital expenditure 51 1 - 1 961
Amortisation and 1 1 - 406
depreciation
EBITDA (before exceptional (196) (44) - 2 903
items)
Primary segmental information
ARM Platinum ARM ARM
Platinum Nickel Ferrous Coal
Audited Rm Rm Rm Rm
3.2 Year to 30 June
2006
Sales
External sales 767 444 3 411 -
Cost of sales (608) (191) (2 505) -
Other operating income - 25 78 -
Other operating (6) (16) (179) -
expenses
Segment result 153 262 805 -
Income from investments 4 1 4 -
Finance cost (87) - (15) -
Exceptional items - - - -
Taxation (20) (78) (277) -
Minority interest (8) - (176) -
Contribution to basic 42 185 341 -
earnings
Contribution to 42 185 338 -
headline earnings
Other information
Segment assets 3 710 396 2 731 -
Deferred tax - - - -
Consolidated total 3 710 396 2 731 -
assets
Segment liabilities 1 810 29 367 -
Unallocated liabilities
(tax and deferred tax)
Consolidated total
liabilities
Cash in/(out) flow from (45) 224 723 -
operating activities
Cash in/(out) flow from (878) (41) (526) -
investing activities
Cash in/(out) flow from 507 - (117) -
financing activities
Capital expenditure 1 064 50 554 -
Amortisation and 121 31 288 -
depreciation
EBITDA (before 274 293 1 093 -
exceptional items)
Corporate
ARM and other
Explora- com-
tion panies Gold Total
Audited Rm Rm Rm Rm
3.2 Year to 30 June
2006
Sales
External sales - - - 4 622
Cost of sales - - - (3 304)
Other operating income 2 62 - 167
Other operating (74) (98) - (373)
expenses
Segment result (72) (36) - 1 112
Income from 4 11 - 24
investments
Finance cost - (32) - (134)
Exceptional items - 139 - 139
Taxation - (2) - (377)
Minority interest 21 - - (163)
Contribution to basic (47) 80 - 601
earnings
Contribution to (47) (56) - 462
headline earnings
Other information
Segment assets 195 296 7 261 14 589
Deferred tax - 22 - 22
Consolidated total 195 318 7 261 14 611
assets
Segment liabilities 18 858 - 3 082
Unallocated 1 136
liabilities (tax and
deferred tax)
Consolidated total 4 218
liabilities
Cash in/(out) flow (44) (171) - 687
from operating
activities
Cash in/(out) flow (2) 3 - (1 444)
from investing
activities
Cash in/(out) flow 226 277 - 893
from financing
activities
Capital expenditure 2 1 - 1 671
Amortisation and - - - 440
depreciation
EBITDA (before (72) (36) - 1 552
exceptional items)
The ARM Platinum segment is analysed further into Two Rivers Platinum (Pty)
Limited and ARM Platinum (Pty) Limited that includes Modikwa platinum mine.
ARM Platinum
Two Rivers Modikwa Total
Reviewed Rm Rm Rm
3.3 Year to 30 June 2007
Sales
External sales 1 337 1 015 2 352
Cost of sales (451) (632) (1 083)
Other operating income per income 1 - 1
statement
Other operating expenses per income (3) (9) (12)
statement
Segment result 884 374 1 258
Income from investments 9 8 17
Finance cost (186)* (69) (255)
Taxation (205) (95) (300)
Minority interest (222) (37) (259)
Contribution to basic earnings 280 181 461
Contribution to headline earnings 280 181 461
Other information
Segment assets 3 026 2 288 5 314
Consolidated total assets 3 026 2 288 5 314
Segment liabilities 1 714 484 2 198
Unallocated liabilities (tax and 321
deferred tax)
Consolidated total liabilities 2 519
Cash in/(out) flow from operating 409 361 770
activities
Cash in/(out) flow from investing (419) (102) (521)
activities
Cash in/(out) flow from financing 369 (157) 212
activities
Capital expenditure 464 102 566
Amortisation and depreciation 75 90 165
EBITDA (before exceptional items) 959 464 1 423
* Includes interest of R128 million on shareholders` loans.
ARM Platinum
Two Rivers Modikwa Total
Audited Rm Rm Rm
Primary segmental information
3.4 Year to 30 June 2006
Sales
External sales - 767 767
Cost of sales - (608) (608)
Other operating income - - -
Other operating expenses - (6) (6)
Segment result - 153 153
Income from investments 2 2 4
Finance cost (2) (85) (87)
Exceptional items - - -
Taxation - (20) (20)
Minority interest - (8) (8)
Contribution to basic earnings - 42 42
Contribution to headline - 42 42
earnings
Other information
Segment assets 1 638 2 072 3 710
Consolidated total assets 1 638 2 072 3 710
Segment liabilities 1 180 630 1 810
Unallocated liabilities (tax 30
and deferred tax)
Consolidated total liabilities 1 840
Cash in/(out) flow from (83) 38 (45)
operating activities
Cash in/(out) flow from (772) (106) (878)
investing activities
Cash in/(out) flow from 631 (124) 507
financing activities
Capital expenditure 957 107 1 064
Amortisation and depreciation 13 108 121
EBITDA (before exceptional 13 261 274
items)
Pro forma analysis of the Ferrous segment on a 100 percent basis
Iron ore Manganese Chrome
division division division Total
Reviewed Rm Rm Rm Rm
3.5 Year to 30 June
2007
Sales 2 163 2 691 1 273 6 127
Other operating income 30 99 51 180
Other operating expense 64 123 102 289
Operating profit 962 895 119 1 976
Contribution to 679 576 76 1 332
earnings
Contribution to 679 570 82 1 331
headline earnings
Other information
Consolidated total 3 275 2 842 1 680 7 797
assets
Consolidated total 1 464 255 1 162 2 881
liabilities
Capital expenditure 1 735 297 199 2 231
Amortisation and 160 150 95 405
depreciation
Cash in/(out) flow from 994 451 284 1 729
operating activities
Cash in/(out) flow from (1 709) (297) (145) (2 151)
investing activities
Cash in/(out) flow from 626 - (138) 488
financing activities
EBITDA (before 1 122 1 045 214 2 381
exceptional items)
Year to 30 June 2006
(Audited)
Sales 1 411 2 008 939 4 358
Other operating income 46 134 35 215
Other operating expense 44 125 109 278
Operating profit 554 511 (32) 1 033
Contribution to 399 327 (59) 667
earnings
Contribution to 399 326 (64) 661
headline earnings
Other information
Consolidated total 1 410 2 413 1 662 5 485
assets
Consolidated total 278 162 1 231 1 671
liabilities
Capital expenditure 346 239 120 705
Amortisation and 121 127 112 360
depreciation
Cash in/(out) flow from 526 124 89 739
operating activities
Cash in/(out) flow from (338) (236) (86) (660)
investing activities
Cash in/(out) flow from (27) (24) (22) (73)
financing activities
EBITDA (before 675 638 80 1 393
exceptional items)
Group Group
2007 2006
Rm Rm
Reviewed Audited
4 EXCEPTIONAL ITEMS
Profit on dilution in TEAL - 132
Profit on disposal of 0.35 percent of - 25
Assmang (subsidiary to joint venture)
Impairment of property, plant and - (10)
equipment
Loss on disposal of 50 percent of Nkomati - (6)
Settlement of Chambishi disposal 14 -
Other - (2)
Exceptional items per income statement 14 139
Taxation (2) (3)
Profit on disposal of property, plant and 1 3
equipment
Net exceptional items 13 139
5 HEADLINE EARNINGS
Basic earnings per income statement 1 220 601
- Profit on dilution in TEAL - (132)
- Impairment of property, plant and - 10
equipment
- Profit on disposal of 0.35 percent in - (25)
Assmang (subsidiary to joint venture)
- (Profit)/loss on disposal of property, (1) (3)
plant and equipment
- Loss on disposal of 50 percent in - 6
Nkomati
- Settlement of Chambishi disposal (14) -
- Other - 2
1 205 459
- Taxation 2 3
Headline earnings 1 207 462
6 Borrowings
Long-term borrowings are held as follows:
- African Rainbow Minerals Limited 1 253 65
- Assmang Limited 19 4
- ARM Mining Consortium Limited (Modikwa) 236 351
- Two Rivers Platinum (Proprietary) Limited 732 523
- Bank loans
- Impala Platinum - 506
- ARM Coal (Proprietary) Limited - Xstrata 501 -
2 741 1 449
Overdrafts and short-term borrowings are held
as follows:
- African Rainbow Minerals Limited 20 549
- Assmang Limited 303 46
- ARM Mining Consortium Limited (Modikwa) 116 186
- TEAL Exploration and Mining Inc. 71 -
- Two Rivers Platinum (Proprietary) Limited 168 22
- Bank loans
-Impala Platinum 625 -
1 303 803
Total borrowings 4 044 2 252
7 COMMITMENTS AND CONTINGENT LIABILITIES
Commitments in respect of future capital expenditure, which will be funded from
operating cash flows and by utilising available borrowing resources, are
summarised below:
Commitments
Commitments in respect of capital expenditure:
Approved by directors
- contracted for 2 290 673
- not contracted for 831 1 641
Total commitments 3 121 2 314
8 CONTINGENT LIABILITIES
There have been no significant changes in the contingent liabilities of the
group as disclosed in the 30 June 2006 annual report.
Shareholder information
Issued share capital as at 30 June 2007 209 730
Market capitalisation as at 30 June 2007 R25.9 billion
Share price as at 30 June 2007 R123.49
Daily average volume traded 216 127
Primary listing JSE Limited
Ticker symbol `ARI`
Forward looking statements
Certain statements in this presentation constitute "forward looking statements"
within the meaning of Section 27A of the US Securities Act of 1933 and Section
21E of the US Securities Exchange Act of 1934.
Such forward looking statements involve known and unknown risks, uncertainties
and other important factors that could cause the actual results, performance or
achievements of the company to be materially different from the future results,
performance or achievements expressed or implied by such forward looking
statements. Such risks, uncertainties and other important factors include among
others: economic, business and political conditions in South Africa; decreases
in the market price of commodities; hazards associated with underground and
surface mining; labour disruptions; changes in government regulations,
particularly environmental regulations; changes in exchange rates; currency
devaluations; inflation and other macro-economic factors; and the impact of the
AIDS crisis in South Africa. These forward looking statements speak only as of
the date of publication of these pages.
The company undertakes no obligation to update publicly or release any revisions
to these forward looking statements to reflect events or circumstances after the
date of publication of these pages or to reflect the occurrence of unanticipated
events.
Contact details and administration
Registered office
ARM House
29 Impala Road
Chislehurston
Sandton 2196
PO Box 786136
Sandton
2146
Telephone: +27 11 779 1300
Telefax: +27 11 779 1312
E-mail: ir.admin@arm.co.za
Website: http://www.arm.co.za
Investor relations
Pieter Rorich
Executive Director: Investor Relations and
New Business Development
Telephone: +27 11 779 1476
E-mail: pieter.rorich@arm.co.za
Monique Swartz
Corporate Development
Telephone: +27 11 779 1507
E-mail: monique.swartz@arm.co.za
Corne Bobbert
Corporate Development
Telephone: +27 11 779 1478
E-mail: corne.bobbert@arm.co.za
Company Secretary
Pat Smit
Telephone: +27 11 779 1480
E-mail:patricia.smit@arm.co.za
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
Ground Floor, 70 Marshall Street
Johannesburg 2001
PO Box 61051
Marshalltown
2107
Telephone: +27 11 370 5000
Telefax: +27 11 688 5222
E-mail: web.queries@computershare.co.za
Website: http://www.computershare.co.za
Directors
PT Motsepe (Executive Chairman)
RP Menell (Deputy Chairman)*
AJ Wilkens (Chief Executive Officer)
F Abbott
Dr MMM Bakane-Tuoane**
JA Chissano (Mozambican)**
WM Gule
MW King**
AK Maditsi**
KS Mashalane
JR McAlpine**
PC Rorich
Dr RV Simelane**
MV Sisulu**
JC Steenkamp
ZB Swanepoel*
*Non-executive
**Independent non-executive
Sandton
3 September 2007
Sponsor to ARM:
Deutsche Securities (SA) (Proprietary) Limited
Date: 03/09/2007 08:00:01 Produced by the JSE SENS Department.
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