| Thu 21 Feb 2008, 7:00 | | MTX - Metorex - Consolidated Unaudited Interim Results For The Period |
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MTX
MEMTX
MTX - Metorex - Consolidated Unaudited Interim Results For The Period
Ended 31 December 2007
METOREX LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1934/005478/06)
JSE code: MTX
ISIN: ZAE000022745
Issuer code: MEMTX
("Metorex")
Consolidated unaudited interim results for the period ended 31 December 2007
- Mining profits increase by 39%
- Copper production increases by 47%
- Musonoi drilling yielding significant results
- Ruashi Phase II copper production first quarter 2008
e-mail: ir@metorexgroup.com
www.metorexgroup.com
"I`m very pleased with our financial performance, which continued strongly in
the first half of our financial year. Most notably, with the increases in
revenues, up 30% and mining profit up 39% over the last period. Operationally,
we saw a significant increase in copper production, up 47% and overall improved
margins most notably from the Base Metals Division. While some challenges
remain ahead I am confident we will have a productive outcome and we can look
forward to a robust performance over the second half of the year."
Commentary
FINANCIAL PERFORMANCE FOR THE SIX MONTHS ENDED 31 DECEMBER
Financial 2007 2006 2005 2004
performance
Gross revenue (R`000) 1 039 263 790 929 435 523 316 223
Cash mining profit (R`000) 386 828 279 489 91 460 41 109
EBITDA (R`000) 537 918 317 091 136 300 62 019
Cash mining profit (%) 37 35 21 13
margin
EPS (cents) 83,3 51,0 21,2 3,6
HEPS (cents) 53,8 51,4 13,4 6,5
Market (R`000) 7 767 304 4 824 846 2 071 166 498 460
capitalisation
Shares in issue (`000) 355 483 297 830 287 662 188 098
Share price (cents) 2 185 1 620 720 265
COMMODITY SALES
STATITICS
Commodity Unit 2007 2006 2005 2004
Copper (t) 10 964 7 473 3 462 2 383
Cobalt (t) 162 - - -
Antimony (mtu) 163 038 191 800 326 041 239 429
Fluorspar (all (dmt) 91 188 86 765 72 442 56 502
grades)
Gold (kg) 1 712 1 702 2 018 1 942
Average prices achieved
Unit 2007 2006 2005 2004
Copper ($/t) 7 392 7 093 4 135 2 893
Cobalt ($/lb) 11 - - -
Antimony ($/mtu) 55,0 53,4 37,3 29,7
Fluorspar (all ($/t) 174 173 149 135
grades)
Gold ($/oz) 721 567 464 412
ZAR/US$ rate - (R/$) 6,94 7,22 6,53 6,24
Average
ZAR/US$ rate - (R/$) 6,86 6,99 6,31 5,67
Closing
SAFETY AND TRAINING
The Group`s excellent safety record was marred by two fatal accidents involving
a contract worker at Barberton Mines (Pty) Ltd, and an employee at Chibuluma
Mines plc. Sincere condolences are extended to the families of the deceased.
The Group continues to improve its safety procedures and stringently conducts
its activities with due regard to the safety and health of its employees.
OPERATING PERFORMANCE AND FINANCIAL REVIEW
The Group produced most satisfactory results and cashflows driven by significant
volume growth from its Base Metal division and improved operating margins
notwithstanding commodity prices, with the exception of gold, having remained
flat in Rand terms from that of the comparable period.
Gross revenues increased by 31% to R1 billion, which translated into a 37%
increase in cash mining profits to R387 million. Group operating costs increased
by 24% to R541 million following volume increases at Chibuluma and Ruashi. The
Group`s EBITDA of R538 million included a profit of R158 million on the reversal
of Barberton Mines into Pan African Resources Plc ("PAR") for a 55% shareholding
in the combined entity. Excluding non-operating profit EBITDA increased by 36%
to R380 million from the comparable period.
Headline earnings per share increased by 5% to 54 cents, which was affected by
an increase of 14% in the weighted average number of shares in issue, due to the
acquisition of further interests in Ruashi Phase II and Copper Resources
Corporation ("CRC") both of which will contribute to earnings in the future.
The Group`s balance sheet further strengthened with equity attributable to its
shareholders increasing by R1 billion to R3 billion following significant
earnings generation as well as share issues mainly related to the CRC
acquisition. The net asset value increased by 42% and the Group`s current ratio
improved to a healthy 1,76. Following project finance drawdowns for the
development of the Ruashi Phase II project, the Group`s debt to equity gearing
increased to 30% and is expected to peak at 35% by June 2008.
The Group`s cash generated by operations increased by 34% to R300 million for
the period. Cash spent on capital expenditure, the acquisition of Phoenix
Platinum Limited ("Phoenix"), CRC and a further interest in Ruashi amounted to
R1,086 billion. This was funded by the Wakefield sale proceeds of R338 million,
external financing of R605 million and internal cash generation.
CAPITAL EXPENDITURE AND COMMITMENTS
Group capital expenditure totalled R795 million (2006: R200 million), mainly
related to the Ruashi Phase II project. In addition to the abovementioned
capital expenditure, the acquisitions of Phoenix and PAR accounted for a R763
million increase in mineral rights, gross of the effects of deferred tax raised
in terms of IAS 12: Income Taxes.
Contracted capital commitments at 31 December 2007 amount to R458 million (2006:
R57,5 million), whilst uncontracted commitments amount to R36,8 million (2006:
R1 260 million).
Operating lease commitments, which fall due within the next year, amount to R7,3
million (2006: R20,5 million), whilst commitments of R13,3 million (2006: R17,7
million) fall due during the next four years.
CORPORATE ACTIVITY
The Group finalised the acquisition of PAR on 24 July 2007, whereby 74% of
Barberton Mines was reversed into PAR for a 55% interest in the combined entity.
This transaction provided the Group with a controlling stake in a separately
listed gold vehicle with significant exploration assets supported by strong
cashflow generation from Barberton Mines.The amount of PAR`s loss since
acquisition together with the effect on the Group`s revenue and results, had the
acquisition been effective 1 July 2007, is immaterial.
As previously announced, the Group unconditionally contracted to acquire a 45,6%
interest in CRC together with a 5% direct shareholding in CRC`s 75% subsidiary,
Miniere de Mushoshi et Kinsenda SARL ("MMK"), for a total consideration of 28
million new Metorex shares and GBP6,75 million cash. The acquisition is
accounted for as an investment on the Group`s balance sheet.
On 7 December 2007, Metorex announced the acquisition of 100% of Phoenix for a
consideration of R110 million, to be settled by way of a cash payment of R55
million and 2,3 million new Metorex shares issued at R24/share.
SHARES ISSUED
July 2007 - December 2007: 1,6 million shares at an average R2,73/share - share
options implemented;
: 29,4 million shares at R24/share - issued for acquisitions.
HEDGEBOOK STATUS
Maturity Volume Price
Gold 6 months 200 kg R110/g
12 months 280 kg R111/g
Copper: Ruashi I 6 months 1 200 t $3 511/t
Ruashi II 12 months (Jul 08 - Jun 09) 2 000 tpm $7 071/t
Ruashi II 6 months (Jul 09 - Dec 09) 1 125 tpm Put $4 435
Ruashi II 6 months (Jan 10 - Jun 10) 900 tpm Put $4 062
Base metal division - six months ended 31 December
Copper
Chibuluma Mines Plc 2007 2006 2005 2004
Tons milled (t) 266 440 256 310 156 127 -
Headgrade (%) 3,0 2,5 2,8 -
Overall recovery (%) 90 84 79 -
Copper produced (t) 7 146 5 274 3 380 -
Copper sold (t) 7 052 5 288 3 462 -
Total cash cost/ton sold ($/t) 2 504 2 817 2 728 -
EBITDA (R`000) 224 925 154 302 31 396 -
Depreciation (R`000) 22 916 15 826 7 965 -
Tons milled increased by 4% partially representing the affect of the expansion
to a level of 50 000 tons per month milled. The full effect of this expansion is
expected during the second half of the financial year. The copper headgrades
improved significantly with depth and bodes well for the future. Copper
production increased by 35% to 7 146 tons for the period. Lower treatment and
refining charges proposed for 2008 together with the full benefit of the plant
expansion should have a positive effect on the operating cash cost per ton
produced.
The proposed changes to the Zambian mining tax regime are being assessed and
negotiations with Government have commenced. It is noted that Chibuluma is
protected for a period of 15 years by a taxation stabilisation clause in the
Development Agreement signed in 1997 under the Zambian Mining Industry
Privatisation Process, governed by English law and established in conjunction
with the World Bank.
Copper/cobalt
Ruashi/Sable 2007 2006 2005 2004
Tons milled (t) 292 996 223 092 - -
Headgrade - Copper (%) 3,24 2,53 - -
- Cobalt (%) 0,46 0,49 - -
Recovery - Copper (%) 53,00 39,83 - -
- Cobalt (%) 22,93 10,72 - -
Copper produced (t) 5 031 2 217 - -
Copper sold (t) 3 912 2 185 - -
Cobalt produced (t) 312 53 - -
Cobalt sold (t) 162 - - -
Total cash cost/ton of copper ($/t) 4 170 5 567 - -
sold, net of Cobalt
EBITDA (R`000) 63 814 26 801 - -
Depreciation (R`000) 15 334 7 729 - -
Copper and cobalt production increased significantly from the previous period
following improved concentrator recoveries and a higher average copper
headgrade. Approximately 4 000 tons of concentrate containing 470 tons of
recoverable copper and 25 tons of recoverable cobalt were transferred to the
Ruashi Phase II plant in order to charge the leach tanks for commissioning.
The total cash cost of copper sold includes export taxes and haulage costs to
Sable approximating $1 700/ton. On-mine costs at Ruashi and processing costs at
Sable amounted to $2 470/ton of copper sold.
Cobalt sales were affected by product lock-up in the Sable plant. However,
recoveries are improving. The cobalt off-take agreement has been renegotiated
effective 1 January 2008. The cobalt terms are 50% of production at the spot
price and the balance priced as to $26/lb plus a 50% price participation above
that level.
DRC - COPPER/COBALT
Ruashi Phase II Project
The construction of the Ruashi Phase II SX/EW plant continued during the period
under review, which at design capacity and full production level is planned to
produce 45 000 tons of copper cathode and 3 500 tons of contained cobalt per
annum.
The production of first copper is expected in late February or early March. To
be ramped up over the following six months, which results in three months
earnings delay. Delays have been brought about by general logistical delays but
more specifically a delay in the delivery of transformers, imported from India,
for the electrowinning circuit. The Solvent Extraction plant, cobalt circuit and
Acid Plant will be commissioned on a phased basis.
The ongoing operation of the Phase I plant will continue, which will require
incremental crushing and milling capacity, and will increase the plant capital
expenditure to approximately US$210 million. Production from the first open pit
has commenced and is providing feed for the Phase I plant, which is more
consistent in quality and grade than the stockpiles, which were erratic.
CRC
The acquisition of and minority offer for the shareholding in CRC is complete.
Metorex has a 45,6% direct interest in CRC and a 5% direct interest in its 75%
subsidiary, MMK.
A business and development plan has been prepared with the view to re-
establishing the Kinsenda mine, erection of a copper concentrator, commencement
of an on-site drilling programme on the Lubembe deposit and increasing the
cobalt production from the Mushoshi mine. Financing options for this project are
currently being assessed.
DRC - Musonoi/Sokoroshe Exploration
The Musonoi drilling programme has yielded extremely positive results. Drilling
has been conducted over a strike length of 600 metres with intersections
averaging 43 metres in width. Assay grades average 4,17% copper and 1,15% cobalt
at an average depth of 150 metres.
Additional drilling is being conducted to establish both the extent of the
strike and depth of the orebody. At current commodity prices this translates to
$1 500 per in situ ton of ore.
The Group has commenced preliminary exploration activities on Sokoroshe I.
ZAMBIA - COPPER AND ZINC
Chifupu
The Chifupu feasibility study is complete, the results of which have indicated
that with the application of new oxide ore treatment technology this project is
economically viable. Discussions regarding the technology are continuing.
Kasempa
The exploration programme is complete and the final evaluation report is being
compiled.
Zinc plant in Kabwe
The zinc plant constructed in Kabwe is complete and commissioning has commenced.
The delay in commissioning was due to the suppliers of a horizontal belt filter
and the transformer failing to meet their delivery schedule. Commissioning at
50% of planned production capacity is in progress.
Transformer failure on commissioning has resulted in the installation of a
temporary transformer, which is capable of electrowinning zinc at 50% of final
design capacity. This transformer will be replaced by the original once
repaired.
Industrial minerals division - six months ended 31 December
Fluorspar
Vergenoeg 2007 2006 2005 2004
Tons milled (t) 290 429 288 048 229 023 213 118
CaF2 grade (%) 40 43 44 42
CaF2 recovery (%) 77 70 73 71
Acidspar produced (dmt) 90 936 88 858 66 240 64 034
Acidspar sold (dmt) 87 119 81 094 68 610 50 905
Total cash (R/t) 882 825 765 750
cost/ton sold
EBITDA (R`000) 35 894 43 867 14 808 10 750
Depreciation (R`000) 5 476 4 653 3 847 3 530
Acidspar production remained steady at the current plant capacity of 180 000
tons per year. Operating costs increased by 7%, mainly inflation related. The
acidspar market is expanding and Vergenoeg has initiated a further 20% - 25%
plant expansion. Acidspar off-take contracts for the 2008 calendar year have
been finalised at improved prices.Fluospar sales are subjected to the R/$
exchange rate, which has together with the cost increases affected the
profitability.
A further Vergenoeg expansion of 70 000 tons Acidspar will commence once the
proposed hydrofluoric acid plant has had approval.
Antimony
Cons Murch 2007 2006 2005 2004
Tons milled (t) 152 098 213 260 225 733 223 129
Produced: Sb (mtu) 158 995 201 132 341 289 245 543
Au (kg) 223 278 372 379
Sold: Sb (mtu) 163 038 191 800 326 041 239 429
Au (kg) 235 279 370 381
Total cash cost/mtu sold
(R/mtu) 421 333 174 204
EBITDA (R`000) (5 610) 10 857 24 216 (3 850)
Depreciation (R`000) 3 000 2 400 1 980 1 620
Net of gold revenue.
Production at Consolidated Murchison was hampered by prolonged strike action
initiated in July 2007, which resulted in tons milled being 29% down on the
previous period. Production has subsequently recovered to normalised levels,
which within the current pricing environment bodes well for the second half of
the financial year.
An underground exploration drilling programme is underway with the intention of
expanding the ore resources in the lower levels of the mines.
Gold division - six months ended 31 December
Pan African Resources 2007 2006 2005 2004
Tons milled (t) 161 466 166 377 157 452 161 980
Headgrade (g/t) 9,05 9,24 11,44 10,27
Overall recovery (%) 92 92 92 91
Produced: Underground (kg) 1 342 1 410 1 660 1 510
Calcine dump (kg) 112 - - -
Sold (kg) 1 477 1 423 1 648 1 561
Total cash cost/kg sold (R/kg) 114 640 104 371 82 671 87 042
EBITDA (R`000) 68 060 41 897 24 890 13 264
Depreciation (R`000) 16 020 14 800 12 046 11 589
Barberton Mines (Pty) Ltd, a 74% subsidiary of Pan African Resources,
experienced a 5% decline in underground gold production. This was mainly due to
reduced tons milled following a crusher breakdown at Fairview Mine. Production
from the Calcine dump commenced during October 2007, which should contribute
approximately 40kg gold per month. The life of this dump is approximately
18 months.
MANICA GOLD PROJECT - MOZAMBIQUE
Geological work for the period has focused on the Fair Bride prospect where the
company is currently completing a pre-feasibility study for what could become
Mozambique`s first commercial gold mine. Drilling results for the period under
review have exceeded the company`s expectations in terms of both grade and size
of the mineralised zone. Additional target areas have been followed up with
drilling at the Guy Fawkes and Dots Luck prospects. A Resource upgrade is
currently in progress to update the drill intersections reported during the
review period.
Bogoin and Dekoa Gold Projects - Central African Republic
Drilling at the Bogoin project has firmed up on delineated targets. Two
additional drill rigs will be operational before the end of Q2 of 2008 to
accelerate exploration activity in the area. At the Dekoa project, stream
sediment sampling and subsequent soil sampling have delineated several major
target areas which will be followed up by drilling during Q3 and Q4 of 2008.
The company signed a mining convention for the Bogoin Gold Project providing
additional comfort with political unrest in bordering countries. A similar
convention is expected for the Dekoa project in Q2 of 2008.
Akkrokeri and Kyeroboso Gold Projects - Ghana
The company completed two licence acquisitions just prior to the reporting
period and post balance sheet activities will see the commencement of data
collection.
FUTURE PROSPECTS
The Group remains committed to its strategy of being a leading mid-tier multi-
commodity mining group, focused on high-grade, long-life ore bodies in sub-
Saharan Africa.
Whilst commissioning and earnings deferrals have occurred at Ruashi II and at
the Sable Zinc project, a significant pipeline of new projects is in place
including the CRC Kinsenda project, the Phase II Ruashi project, PAR`s
exploration projects, the Vergenoeg expansion and Phoenix which should
significantly increase the Group`s earnings over the next two years.
ACCOUNTING POLICIES
The unaudited interim results have been prepared and presented in accordance
with IAS 34, Interim Financial Reporting Standards ("IFRS"). The accounting
policies and methods of computations are consistent with those adopted in
the financial year ended 30 June 2007.
By order of the Board
A S Malone C D S Needham
Chairman Managing Director
20 February 2008
Consolidated income statement
R`000 Six months Six months %
ended ended change
31 December 31 December
2007 2006
(Unaudited) (Unaudited)
Revenue:
Mineral sales
Copper 562 518 382 620 47
Cobalt 26 401 - -
Fluorspar 112 250 110 454 2
Gold 275 449 223 877 23
Antimony 62 645 73 978 (15)
Gross revenue 1 039 263 790 929 31
Realisation costs 136 356 98 230 39
On-mine revenue 902 907 692 699 30
Cost of production 540 996 436 257 24
Stock movement (26 934) (23 047) 17
Depreciation 62 806 45 458 38
Mining profit 326 039 234 031 39
Other expenses (4 517) (1 105) (309)
Held for sale and discontinued (4 405) 13 203 133
operations
Reverse acquisition of PAR 157 995 - -
Operating income before finance costs 475 112 246 129 93
Finance income 2 995 1 906 57
Finance costs (3 609) (3 920) 8
Profit before taxation 474 498 244 115 94
Taxation 143 353 54 428 163
Profit for the period 331 145 189 687 75
Attributable to:
Equity holders of the parent 279 283 150 442 86
Minority interest 51 862 39 245 32
331 145 189 687 75
From continuing and discontinued
operations:
Earnings per share (cents) 83,32 51,03 63
Diluted earnings per share (cents) 80,76 49,35 64
From continuing operations:
Earnings per share (cents) 83,32 47,90 74
Diluted earnings per share (cents) 80,76 46,33 74
Headline earnings per share is
calculated using the following:
Income attributable to ordinary 279 283 150 442 86
shareholders
Reverse acquisition of PAR after (103 335) - -
taxation
Discontinued operations - O`Okiep 4 405 1 198 268
Headline earnings (R`000) 180 353 151 640 19
Headline earnings per share(cents) 53,81 51,44 5
Diluted headline earnings per share 52,15 49,74 5
(cents)
Weighted average number of shares in 335 196 294 796 14
issue (`000)
Diluted number of shares in issue 345 826 304 822 13
(`000)
Condensed consolidated balance sheet
R`000 31 December 30 June
2007 2007
(Unaudited) (Audited)
ASSETS
Non-current assets
Property, plant and equipment 2 104 139 1 389 668
Mineral rights 1 926 917 1 160 751
Goodwill 11 514 11 514
Investments 741 540 929
Rehabilitation trust funds 35 421 35 340
Deferred tax asset - 1 887
4 819 531 2 600 089
Current assets
Inventories 131 745 81 118
Trade and other receivables 435 537 729 229
Derivative instruments 51 882 897
Taxation prepaid 3 536 3 536
Bank balances and cash 151 135 54 558
Asset classified as held for sale 11 973 12 423
785 808 881 761
Total assets 5 605 339 3 481 850
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 2 027 003 1 326 187
Hedging and translation reserve (31 873) (115 130)
Retained income 1 113 820 834 537
Share option equity 12 840 10 340
Equity reserve (121 922) (121 922)
Equity attributable to equity holders of 2 999 868 1 934 012
parent
Minority interest 382 042 69 691
Total equity 3 381 910 2 003 703
Non-current liabilities
Long-term liabilities - interest bearing 987 448 379 250
Long-term provisions 92 260 93 461
Deferred tax liabilities 697 511 416 050
1 777 219 888 761
Current liabilities
Trade and other payables 265 200 393 214
Short-term borrowings - interest bearing 22 959 22 228
Short-term provisions 24 862 29 122
Derivative instruments 35 418 91 764
Taxation 97 771 53 058
446 210 589 386
Total equity and liabilities 5 605 339 3 481 850
Net asset value per share (cents) 844 596
Net tangible asset value per share (cents) 841 592
Condensed consolidated cash flow statement
R`000 Six months Six months
ended ended
31 December 31 December
2007 2006
(Unaudited) (Unaudited)
Cash generated by operations 299 898 223 451
Minorities distributions (20 733) (51 734)
Taxation paid (47 277) (3 923)
Finance costs, net (614) (2 014)
Cash inflows from operating activities 231 274 165 780
Cash outflows from investing activities (738 896) (199 928)
Cash inflows/(outflows) from financing 604 772 (1 071)
activities
Net increase/(decrease) in cash and cash 97 150 (35 219)
equivalents
Cash at beginning of period 54 558 75 531
Effect of foreign exchange rate changes (573) (1 330)
Cash at end of period 151 135 38 983
Condensed statement of changes in equity
R`000 Six months Six months
ended ended
31 December 31 December
2007 2006
(Unaudited) (Unaudited)
Shareholders` equity at start of period 2 003 703 968 568
Ordinary shares issued 700 816 87 194
Hedging and translation reserve 83 257 10 632
Net income for the period 279 283 150 442
Share option equity 2 500 3 000
Minority interest 312 351 72 824
Total equity 3 381 910 1 292 660
Contact details for Metorex Limited and Corporate Advisers
Postal: PO Box 2814, Saxonwold 2132, South Africa
Telephone: (+27 11) 880-3155
Facsimile: (+27 11) 880-3322
Website: www.metorexgroup.com
E-mail: ir@metorexgroup.com
Directors: AS Malone (Chairman), CS Needham (Managing), EW Legg, KC Spencer
Non-executive directors: A Barrenechea*, AJ Laughland **, RG Still
*Spanish **British
Investor relations
College Hill
PO Box 413187, Craighall 2024, South Africa
Telephone: (+27 11) 447-3030
Breakstone Group
82 Wall Street, Suite 805, New York, NY 10005, USA
Telephone: (+1 646) 452-2334
St James Corporate Services Limited
6 St James`s Place, London, SW1A 1NP, England
Telephone: (+44 207) 499-3916
Registrars: South Africa and United Kingdom
Link Market Services (Pty) Limited
PO Box 4844, Johannesburg 2000, South Africa
Telephone: (+27 11) 834-2266
The Capita Group PLC
The Registry, 34 Beckenham Road,
Beckenham, Kent, BR34TU, England
Telephone: (+44 208) 639-2157
Company secretaries
Moore Stephens MWM
PO Box 1574, Houghton 2041, South Africa
Telephone: (+27 11) 728-7240
Sponsor
Barnard Jacobs Mellet Corporate Finance (Pty) Ltd
PO Box 62200, Marshalltown 2107, South Africa
Telephone: (+27 11) 283-0300
Auditors
Deloitte & Touche, Private Bag X6
Gallo Manor 2052, South Africa
Telephone: (+27 11) 806-5000
ADR Programme - North America and Canada
The Bank of New York, 101 Barclay Street
New York, NY 10286, USA
Telephone: (+1 212) 815-3326
Registration number 1934/005478/06 / Incorporated in the Republic of South
JSE Code: MTX ISIN Code: ZAE000022745 Issue code MEMTX
Listed on the JSE Limited and London Stock Exchange
Date: 21/02/2008 07:00:25 Produced by the JSE SENS Department.
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