| Mon 1 Sep 2008, 7:04 | | ARI - African Rainbow Minerals Limited - Provisional results for the financial |
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ARI
ARIM
ARI - African Rainbow Minerals Limited - Provisional results for the financial
year ended 30 June 2008
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 financial year ended 30 June 2008
Highlights
Record headline earnings increase of 232% from R1.2 billion to
R4.0 billion or 1 906 cents per share
Profit from operations before exceptional items increase of 169% from R2.5
billion to R6.7 billion
Dividend increases 167% to 400) cents per share
Record sales volumes in manganese ore, chrome ore, PGMs and thermal coal
Cash balances increase by R1.6 billion to R2.6 billion
Market capitalisation increases 85% from R26 billion at F2007 year end to
R48 billion at 25 August 2008
Khumani Iron Ore mine and plant substantially commissioned on time and within
budget
Two Rivers repays bank debt well ahead of schedule
Commentary
Group operational review
The Board of Directors of ARM announces exceptional results for the year ended
30 June 2008 as the Company delivers on its 2 x 2010 volume growth strategy,
which coincides with record commodity prices. There have been significant
increases in earnings contributions from ARM Platinum, ARM Coal and notably
from ARM Ferrous. Headline earnings have increased by 232% to R4.0 billion
(F2007: R1.2 billion), or 1 906 cents (F2007: (580) cents) per share. The ARM
Ferrous contribution to headline earnings attributable to ARM increased to R2.8
billion and comprises 69% (F2007: 55%) of ARM`s headline earnings.
The ARM Ferrous results do not include any possible recoveries from the
insurance claim against insurers for asset damage and business interruption
losses at the Cato Ridge operations, more fully described later.
Operational highlights for the year include (100% basis, except for PGM
production):
96% increase in Nkomati chrome ore sales to 1.2 million tonnes
60% increase in manganese ore external sales to 3.7 million tonnes
47% increase in domestic thermal coal sales to 13.2 million tonnes
8% increase in attributable PGM production to 281 337 ounces.
These provisional results for the financial year ended 30 June 2008 have been
prepared in accordance with International Financial Reporting Standards
("IFRS") and the disclosures are in accordance with IAS 34: Interim Financial
Reporting.
Contribution to headline earnings
Commodity group 12 months ended 30 June
Reviewed Audited
R million 2008 2007 % change
Platinum Group Metals 915 461 98
Nkomati nickel and chrome 432 337 28
Ferrous metals 2 775 665 317
Coal 175 1 >500
Exploration investment: TEAL (211) (126) (67)
Corporate: finance costs (84) (81) (4)
Corporate: other 11 (50) n/a
ARM headline earnings 4 013 1 207 232
These excellent results have been delivered in conjunction with our partners at
the various operations, namely Anglo Platinum, Assore, Impala Platinum, Norilsk
Nickel and Xstrata Coal.
The production and sales volume increases are especially significant this year,
given the cutbacks and load shedding the operations have experienced from
electricity utility Eskom. In the event that electricity cutbacks continue, ARM
operations have put various mitigating and contingency plans in place at all
operations to ensure minimal impact on volume production and sales.
Part of ARM`s strategy is to ensure the efficiency and cost competitiveness of
all its operations. ARM is aiming to maintain and target its production costs to
be positioned at the bottom 50th percentile on the global unit cost curves by
2012. Mining costs for the last year have been substantially above inflation and
all operations have experienced high cost pressures, in particular relating to
diesel, power, explosives, reductants, and labour. ARM has been able to temper
unit cost increases by production volume increases and operational efficiencies.
With the exception of iron ore, which is mainly due to transport costs, ARM`s
operations have managed to maintain unit cost increases at less than 10%
above inflation. Despite these cost increases, ARM`s EBITDA margins have
improved to 57%.
ARM is particularly satisfied with the progress of its projects, all of which
remain on schedule and within budget. This is being achieved despite the
challenges presented by cost pressures, electricity constraints and skills
shortages.
Financial commentary
Sales have doubled to R12.6 billion from the level reported for F2007 mainly as
a result of increased commodity prices and sales volumes. The average Rand/US
Dollar exchange rate remained fairly constant for the year at R7.30/$ (F2007:
R7.20/$), although the rate fluctuated considerably during the year.
Despite the pressures of cost increases the gross profit margin has increased
to 56% in F2008 from 46% in F2007. ARM`s earnings before interest, tax,
depreciation and amortisation excluding exceptional items and income from
associate (EBITDA) was R7.2 billion which represents an increase of R4.3 billion
over F2007.
The effective tax rate decreased to 30% in F2008, from 36% in the previous
financial year, largely due to income from associate and exceptional items
included in earnings not attracting tax charges. In addition, the corporate tax
rate was reduced this year by 1% to 28% effective 1 July 2007. This resulted in
a once-off gain of R34 million in F2008 arising from the revision of the closing
balance of the deferred tax liability at 30 June 2007.
Basic earnings for the financial year are R4.5 billion (F2007: R1.2 billion) and
include a R135 million gain from the receipt of the final tranche payment on
the 2005 sale of 50% of Nkomati Nickel to Norilsk Nickel. It also includes an
exceptional credit relating to TEAL (R34 million net gains on asset sales less
impairments) and ARM Coal (R317 million profit on the asset swap involving the
Douglas Tavistock Joint Venture (DTJV)).
The ARM Coal results include provisional purchase price allocations and thus
the fair value of the net assets acquired is still provisional at 30 June 2008
and are only expected to be finalised during the last quarter of 2008.
When these calculations are finalised they may result in changes to the ARM
Coal results including the exceptional profit on the asset swap transaction of
R317 million reflected in the current results. Any such changes will be
included in the June 2009 results.
The smelter accident at Cato Ridge in February 2008 has resulted in reduced
production of ferromanganese alloys. To date the insurers are still busy with
their investigation and no accounting for possible recoveries is made. Any
insurance claim that may become receivable could significantly impact the
headline earnings of ARM and an announcement will be made when certainty around
the issue is achieved. Included in the ARM Ferrous results is an attributable
asset impairment of R9 million for the write down of the carrying value of the
No. 6 furnace as well as a R37 million expense for fixed costs incurred during
the furnace downtimes.
The TEAL results were fully absorbed by ARM in this period with no allocation
to minorities. The total expense incurred by TEAL amounted to R211 million for
F2008. Since the year end ARM has extended its guarantee to TEAL by $35 million
to support a total loan facility of $85 million and in addition has agreed to
Provide TEAL with ongoing financial support to 30 September 2009 amounting to
R385 million. During the year TEAL has published good drilling results at
all project areas. TEAL is refocusing exploration on the copper projects in
Zambia and the DRC . This will require significantly more drilling for
definition of the ore bodies and the preparation of feasibility studies.
The ARM balance sheet remains robust with cash and cash equivalents increasing
by R1.6 billion to R2.6 billion while gross borrowings have remained constant.
The net debt to equity ratio is 8% (F2007: 27%). Included in borrowings are
loans from partners amounting to R1.5 billion (Xstrata loans to ARM Coal: R847
million; Implats loan to Two Rivers: R635 million) which, if disregarded,
results in ARM having a net cash position of R174 million at 30 June 2008 as
compared to a net debt position the previous year of R1.9 billion. The Two
Rivers project loan of R650 million at F2007 year-end has been repaid well
ahead of schedule, 20 months after the commencement of commercial production,
due to strong operating cash flow exceeding capital expenditure at the
operation.
Due to increased management fees received from Assmang, corporate expenditure,
excluding finance costs, is a positive contribution to headline earnings of R11
million from a negative R50 million in F2007. Since the year end ARM has
received a substantial final dividend of R750 million from Assmang.
Safety and health
As a responsible South African corporate citizen, the health and safety of
ARM`s employees are of paramount importance. Our performance in this area over
the reporting period has been mixed: we have made some progress in certain
areas but there is still room for improvement in other areas.
Regrettably, nine fatalities occurred during the last financial year (one
person at Two Rivers Platinum Mine, one person at the Goedgevonden Coal Project
and seven people at Cato Ridge Ferromanganese Works. This compares to one
fatality recorded during the previous financial year. The Company extends its
sincere condolences to the families, friends and colleagues of the deceased.
The number of ARM employees (including contractors) has increased from 13 632
to 17 936 over the last year. One hundred and eleven reportable accidents were
recorded in ARM during the year compared to seventy four recorded during the
previous financial year. An average of 40.6 million man hours were worked at an
average of 9.5 hours per shift, totalling 4.3 million shifts worked during the
year. The number of lost-time injuries (LTIs) increased from 157 in the previous
financial year to 247 in the financial year ended June 2008. The number of lost
days increased from 2 395 to 3 230 in the period reported. The increase in lost
time injuries as well as fatalities is a concern. There has been an increase in
activities due to projects and expansions resulting in the total number of
persons (both employees and contractors) employed at ARM operations increasing
by 62% over three years. Accordingly we have restructured our Safety,
Health and Environment (SHEQ) department at ARM corporate level.
Among the most significant safety achievements in ARM are that three of ARM`s
operations have achieved more than One Million Fatality Free Shifts. On 25
August 2007, Black Rock Manganese Mines achieved the milestone of completing
Two Million Fatality Free Shifts. On 14 February 2008, Modikwa Platinum Mine
achieved Three Million consecutive Fatality Free Shifts, accumulated over a 22
month period. On 23 May 2008 Machadodorp Works achieved One Million Fatality
Free Shifts.
All the Assmang operations conduct medical surveillance of employees in
accordance with relevant legislation. At Cato Ridge Works the medical
surveillance programme has been reviewed with the assistance of medical experts
to ensure the correct procedures are used to diagnose manganism. The Department
of Labour is conducting an inquiry into the possible incidence of manganism
which is currently in progress and a final outcome is expected in the near
future.
ARM Ferrous
The ARM Ferrous operations, which are held through ARM`s 50% investment in
Assmang Limited (Assmang) consist of three divisions: iron ore, manganese and
chrome.
F2008 has been a successful year for the Ferrous Division as evidenced by the
exceptional increase in headline earnings of 317% to R2 775 million
attributable to ARM. Assmang achieved record revenue due to higher US Dollar
prices in all commodities as well as increased sales volumes. Of particular
significance was the substantial increase in the US Dollar manganese ore and
alloy prices, which materially exceeded 80% year on year.
Assmang headline earnings contribution
100% basis 12 months ended 30 June
R million 2008 2007 % change
Iron ore division 780 679 15
Manganese division 4 087 576 610
Chrome division 683 76 799
Total 5 550 1 331 317
Headline earnings attributable to ARM (50%) 2 775 665 317
The manganese operations, both ore and alloys, performed exceptionally due to
the significant increase in prices. The manganese headline earnings were split
between manganese ore and manganese alloy which contributed 75% and 25%
respectively in 2008
The manganese ore operations were able to further leverage off high manganese
ore prices by increasing volumes (60%). Due to the implementation of innovative
ideas, the manganese mines sold 1.4 million tonnes more than guaranteed
logistic allocations, of which 760 thousand tonnes were road hauled to the
Richards Bay port (>1 000 km). Assmang is dependent on rail and port logistic
capacity to sell its product locally and globally.
The performance of the Ferrous Division was however marred by the unfortunate
Cato Ridge Works accident which disrupted production. This was mainly
attributable to the explosion at the No. 6 Furnace which took place on 24
February 2008 and the subsequent closure of the other furnaces. Five of the six
furnaces were recommissioned by the year end while the No. 6 Furnace is in the
process of being rebuilt and is planned to be commissioned in November 2008.
Stock was sold to achieve contractual sales where possible. The impact of the
production losses is expected to continue into F2009 until the No. 6 Furnace is
fully operational.
The majority of the increased profitability in the chrome division was from the
Machadodorp charge chrome operations, which was able to increase production by
19%. It was able to operate at 100% electricity consumption while Cato Ridge
was operating at below 90% electricity consumption. Machadodorp has also
benefited from previously invested capital to improve the efficiency of the
smelting operations.
Assmang product sales
100% basis 12 months ended 30 June
Thousand tonnes 2008 2007 % change
Iron ore 6 581 6 855 (4)
Manganese ore* 3 711 2 327 59
Manganese alloys* 247 251 (2)
Charge chrome 275 232 19
Chrome ore* 304 172 77
*Excluding intra-group sales
Most ferrous operations controlled costs well within plan in an environment
which experienced cost escalations well above inflation. The iron ore division
was the only exception due to road hauling of ore from Khumani to Beeshoek to
ensure timely delivery in terms of quality of product and quantity to
customers. Teething problems at Khumani Iron Ore Mine during the first eight
weeks of plant ramp-up also necessitated transporting more ore to Beeshoek. The
increased cost of reductants, specifically coke, had a significant impact on
smelting costs, with coking coal prices expected to increase further by
approximately 300%. The table below illustrates the percentage increase in
unit costs for the division over the last financial year, with the divisional
EBITDA margins.
Cost increases EBITDA
Commodity group Rand per tonne margin
Iron ore 65% 48%
Manganese ore 19% 73%
Manganese alloys 20% 54%
Charge chrome 18% 42%
Most of the capital was spent on the construction of the Khumani Iron Ore Mine
(R2.1 billion). Capital spent rebuilding and upgrading the furnaces at Cato
Ridge Works amounted to R102 million. Capital was also spent at all operations
on the replacement of equipment, the construction of housing facilities and
environmental related upgrades. The table below sets out the capital
expenditure at Assmang for the year.
Assmang capital expenditure
100% basis 12 months ended 30 June
R million 2008 2007
Iron ore 2 231 1 735
Manganese 511 297
Chrome 158 199
Total 2 900 2 231
Khumani Iron Ore Mine
ARM Ferrous completed the Khumani mine and plant construction on schedule to
reach full production by 2010 and within budget. The plant, having been
substantially commissioned in June 2008, is on track. The completion of the
construction of the 10 million tonne per annum Khumani Iron Ore Mine is expected
during the first quarter of 2009. This year the focus is on the ramp-up of the
new mine and the reduction of volumes at Beeshoek. Transnet is also ramping up
the total iron ore railway line capacity. A pre-feasibility study for the
expansion to the 16 and 20 Mtpa mine has been completed. The results from this
pre-feasibility study indicate a very viable project. The feasibility study will
be completed during the second quarter of 2009.
ARM Platinum
ARM Platinum consists of interests in three operating mines, Modikwa Platinum
Mine, Two Rivers Platinum Mine and Nkomati Mine. ARM has an effective 41.5%
interest in Modikwa Platinum Mine while the local communities hold an 8.5%
effective interest. The remaining 50% is held by Anglo Platinum. Two Rivers
Platinum Mine is owned 55% by ARM and its Joint Venture partner, Impala
Platinum, owns 45%. Nkomati Mine is a 50:50 partnership with Norilsk Nickel.
ARM Platinum`s operations performed exceptionally well in the year under review
with continued profitability growth at all three operations. ARM Platinum`s
headline earnings increased by 69% to R1 347 million driven by production
growth and strong PGM and chrome prices. At ARM Platinum`s PGM operations,
tonnes milled increased 11% to 4.8 million (F2007: 4.3 million) resulting in a
9.5% increase in attributable PGM production to 260 930 ounces in concentrate.
The Nkomati chrome ore sales have increased 96% to 1.1 million tonnes.
Modikwa improved mining flexibility by converting to a strike mining layout. In
particular UG2 production volumes have improved steadily and the Merensky trial
mining project is ramping up to 15 000 tpm. During F2008, 140 000 tonnes of
Merensky ore at an average grade of 2.37 g/t was milled on a trial basis.
Merensky mining is expected to continue at 15 000 tpm for F2009. The steady
improvement in production experienced in F2008 is expected to continue in F2009
and it is anticipated that a pre-feasibility study, which may lead to the
expansion of the operations, will be completed in F2009.
Two Rivers continued to ramp up during the year at its Main Decline, reaching
full underground production capacity (185 000 tpm) during March 2008. The North
Decline achieved steady state production (40 000 tpm) in January 2008, six
months ahead of target. Unit costs increased 38% to R340 (F2007: R246) per
tonne milled. The F2007 unit cost has been adjusted for stockpile capitalisation
costs to be comparable with the F2008 unit cost. During some months more than
260 000 tonnes were produced from underground. The plant throughput has exceeded
design capacity since April 2008. At year-end the surface stockpile of ore was
at 189 767 tonnes.
Current output will be sustained and process optimisation will continue with an
expected 3-5% recovery improvement toward the end of F2009.
At Nkomati, the US Dollar nickel price was 25% lower than in the previous
financial year, negatively impacting profitability. Due to a revenue recognition
timing difference, the actual received nickel price was significantly lower than
spot prices. The mine is now virtually transformed from an underground mine to
an opencast mine. This also results in a significant grade reduction since the
MSB is depleted and the MMZ orebody is currently being mined. There was a
Significant increase in both volumes and price for chrome ore which contributed
57% to the operating profits of Nkomati. This has resulted in an improved
C1 cash cost of $(4.45)/lb.
At Nkomati, since start-up, the metal recoveries on the 100 ktpm plant were
lower than expected, mainly due to the following contributors:
High variability feed to the concentrator
Higher than anticipated levels of alteration of sulphide ore in one of the pits
Mill running time compromised by mill liners and associated breakdowns.
The key to enhance recoveries is to improve the upfront knowledge of the ore
before it is processed. Capabilities to perform floatability tests and
evaluations are being established.
ARM Platinum`s attributable PGM production (including Nkomati) for F2008
increased by 7.6% to 281 337 ounces of PGMs.
ARM Platinum experienced above inflation cost increases in F2008 from
consumables (diesel, electricity, steel and explosives) and labour (including
contractors) which contributed approximately 83% to total mine operating costs.
Total capital expenditure in the division amounted to R1.3 billion (R668
million attributable), for the expansion of all the operations.
The increase in capital expenditure at Modikwa is mainly attributable to
the deepening and equipping of North Shaft to Level 6 and the acquisition of
new mechanised mining fleet. The capital expenditure at Two Rivers is for the
completion of the mine and the North Decline. At Nkomati, capital expenditure
was spent mainly on the expansion project, firstly for the 100 000 tpm interim
plant and then for the 375 000 tpm MMZ plant, and will continue to increase as
building of the project continues.
ARM Platinum capital expenditure
100% basis 12 months ended 30 June
R million 2008 2007
Modikwa 379 204
Two Rivers 357 464
Nkomati 565 398
Total 1 301 1 066
Modikwa operational statistics
12 months ended 30 June
100% basis 2008 2007 % change
Cash operating profit R million 1 837 923 99
Tonnes milled Mt 2.46 2.32 6
Head grade (4E) g/t 4.44 4.37 2
PGMs in concentrate Ounces 294 721 274 174 7
Average basket price (4E) R/kg 382 377 277 701 38
Cash operating margin % 58 47 24
Cash cost (4E) R/kg 144 334 126 632 (14)
Cash cost R/tonne 538 476 (13)
Cash cost R/Pt oz 9 882 8 917 (11)
Cash cost R/PGM oz 4 489 4 037 (11)
Headline earnings
attributable to ARM R million 480 181 165
Two Rivers operational statistics
12 months ended 30 June
100% basis 2008 2007 % change
Cash operating profit R million 1 485 945 57
Tonnes milled Mt 2.37 2.04 16
Head grade (6E) g/t 4.00 4.24 (6)
PGMs in concentrate Ounces 206 491 184 099 12
Average basket price R/kg 362 935 268 928* (35)
Cash operating margin % 63 69 (9)
Cash cost (6E) R/kg 125 319 87 906 (43)
Cash cost R/tonne 340 246** (38)
Cash cost R/Pt oz 8 161 5 724** (43)
Cash cost R/PGM oz 3 898 2 734** (43)
Headline earnings
attributable
to ARM (55%) R million 435 280 55
* Amended basket price for 2007, previously published number was 4E, now 6E.
** Adjustment for stockpile tonnages; previously quoted figures excluded
capitalised cost of treated stockpile tonnages to the value of +- R110 million.
Nkomati operational statistics
12 months ended 30 June
100% basis 2008 2007 % change
Cash operating profit R million 1 192 1 011 18
Cash operating profit -
Nickel Mine R million 518 934 (45)
Cash operating profit -
Chrome Mine R million 674 77 774
Cash operating margin % 60 71 (16)
Tonnes milled Thousand 1 070 318 237
Head grade % nickel 0.70 1.57 (56)
Stockpile tonnes - MMZ Thousand 17 137 (88)
Stockpile tonnes -
Chrome Fines Thousand 2 320 670 246
Nickel on-mine cash cost
per tonne treated R/tonne 339 503 33
Chrome on-mine cash cost
per tonne produced R/tonne 351 368 5
C1 cash cost net of
by-products US$/lb (4.45) (1.10) 304
Contained metal
Nickel Tonnes 5 136 4 418 16
PGMs Ounces 40 813 46 101 (11)
Copper Tonnes 2 605 2 788 (7)
Cobalt Tonnes 276 208 33
Chrome ore sold Thousand tonnes 1 146 584 96
Headline earnings
attributable
to ARM (50%) R million 432 337 28
Nkomati Nickel Large Scale Expansion Project
The Nkomati Large Scale Expansion Project is progressing on schedule and within
budget. Total funds committed on the Large Scale Expansion Project amount to
R1.8 billion or 55% of the R3.2 billion capex.
The chrome concentrator plant to treat the chips and fines is scheduled to be
commissioned in September 2008.
The large 375 000 tpm MMZ is scheduled to be commissioned in Q4 F2009. The
existing 100 000 tpm plant will then be upgraded to 250 000 tpm for PCMZ
treatment plant with a chrome recovery plant on the tailings section for
commissioning in 2011.
Eskom has approved the electrical power requirements for the expansion project
at the end of June 2008 and a Budget Proposal was presented to the Nkomati JV
for approval. However, notice was given of a delay in supplying this power and
various contingencies have been evaluated as stand-by supply for 12 to 18
months.
Kalplats Joint Venture
The Kalplats projects are located in the North West Province, 330 kilometres
west of Johannesburg comprising two joint ventures with Platinum Australia
(PLA). ARM Platinum`s current interest in the "Kalplats Platinum Project" is
90% and PLA can earn up to 49% in the project by completing a bankable
feasibility study.
During the year, PLA completed a total of 48 390 metres of drilling. Geological
modelling and the updating of the mineral resources for the individual deposits
has been ongoing in preparation for pit optimisation and mine design.
Metallurgical test work, engineering and process plant design are also being
carried out as part of the bankable feasibility study, which is expected to be
completed during F2009. Latest results at 11 August 2008 indicate further wide
zones of target grade mineralisation including 22 metres at 6.58g/t 3E PGM at
the Crux deposit.
At the Kalplats "extended area project", the first phase of exploration work
comprising a detailed aeromagnetic survey over the entire strike length of the
extended area was completed in August 2007. The second phase, which involves
extensive soil geochemical sampling, was completed during F2008. This will be
followed by drilling of targets identified during the initial phases of work.
Please refer to company website for further details www.platinumaus.com.au.
ARM Coal
ARM`s economic interest in Xstrata Coal South Africa (XCSA) as at 30 June 2008
is 20,2%. ARM Coal holds a 20% participating interest in Xstrata`s South
African Coal Operations which consists of 12 mines all situated in Mpumalanga,
as well as a 51% interest in the Goedgevonden Coal (GGV) project situated near
Ogies in Mpumalanga. ARM holds 51% of ARM Coal as well as a 10% direct
investment in Xstrata`s South African Coal Operations.
Headline earnings contribution from ARM Coal increased from R1 million to R175
million in F2008. Operating margins have increased to 37% (F2007: 27%) driven
by strong local and international prices.
Total saleable production attributable to ARM Coal increased by 16% for the
year under review. Sales volume from Goedgevonden increased due to additional
sales to Eskom. The coal operations did not experience any load shedding from
Eskom as it requires the coal from our operations to fuel power stations.
During the 2008 financial year approximately 51% of ARM Coal`s production was
exported. Despite substantial increases in diesel and consumables the coal
operation managed to contain the increase in on-mine cost per tonne to 1%.
XCSA owned a 16% share in the Douglas Tavistock Joint Venture which was managed
by Billiton Energy Coal South Africa (BECSA). An agreement was structured from
January 2008 for a separation effected by the transfer to XCSA of a discrete
portion of the resources and equipment reflecting a 16% share of the DTJV,
allowing Xstrata to separately and independently manage the resources. This will
result in BECSA and XCSA operating discrete coal mining areas for their own
account. The resources that are proposed will be adjacent to the existing ATCOM
operations. XCSA plans to mine these resources using conventional open cut means
(dragline and truck/shovel), upgrade the under utilised ATCOM plants to process
the additional production and utilise the existing ATCOM train loading
facilities. This is expected to result in significant optimisation and synergy
benefits for XCSA.
ARM Coal operational statistics
12 months ended 30 June
100% basis 2008 2007 % change
Total production and sales
Saleable production Million tonnes 25.3 23.1 9
Export thermal coal sales Million tonnes 13.7 13.6 1
Domestic thermal coal sales Million tonnes 13.2 9.0 47
Attributable production and
sales
Saleable production Million tonnes 5.2 4.5 16
Export thermal coal sales Million tonnes 2.8 3.0 (7)
Domestic thermal coal sales Million tonnes 2.8 1.7 65
Average received coal price
Export (FOB) US$/tonne 58.5 44.5 31
Domestic (FOR) R/tonne 104.3 70.0 49
On mine saleable cost R/tonne 148.4 147.9 (1)
Cash operating profit
Total R million 2 620 1 387 89
Attributable R million 540 268 101
Headline earnings
attributable to ARM 175 1 >500
Earnings from the coal division attributable to ARM are negatively impacted by
a number of accounting issues:
- the IFRS accounting requirement related to imputed interest on the Xstrata
debt facilitation
- additional amortisation at the ARM level provided as a result of the IFRS
purchase price allocation rules
Headline earnings reconciliation to operating profit - attributable to ARM
12 months ended 30 June
2008 2007
ARM attributable headline earnings reported 175 1
Add: additional amortisation 21 37
Imputed interest on Xstrata R4 billion debt facilitation 30 27
Less: Taxation (15) (19)
ARM attributable headline earnings excluding IFRS adjustment 211 46
Add: Normal interest 82 70
Normal amortisation 190 132
Taxation 57 20
ARM`s attributable operating profit 540 268
ARM`s share of distributable cashflow 155* 21
*Subject to ARM Coal board approval
Goedgevonden Thermal Coal Project
The Goedgevonden Project is progressing well and as at 30 June 2008 about 72%
of the total project costs had been committed. Commissioning of the Coal
Handling Preparation Plant (CHPP) is expected to commence during the first half
of F2009. Work at the Richards Bay Coal Terminal (RBCT) phase V expansion
commenced during the financial year under review and is expected to be completed
during the first half of the 2009 calendar year. Negotiations with Eskom on the
pricing terms for 3.5 Mtpa local sales contract are in progress.
The Goedgevonden Project remains on schedule and within budget, for ramp-up to
full production to 6.7 mtpa thermal coal sales by 2011. The 3.2 Mtpa RBCT
entitlement has been secured for the export sales.
The new order mining rights over the Goedgevonden property were granted and
notarially executed during the year under review.
Harmony Gold Mining Company Limited (Harmony)
In its 2007 notice to shareholders, Harmony set out a number of interventions
to address the various operational challenges faced by the group. At its
results announcement on 15 August 2008, the company announced that this process
had delivered moderately successful results, characterised by restructuring of
the Harmony asset portfolio, and restoring the operations to profitability. The
process is a long-term one, and management will continue to keep a watchful eye
on its investment, as the company repositions itself as a globally competitive
company.
Harmony reported total headline earnings for the year ended 30 June 2008 of 127
cents per share (30 June 2007: earnings of 53 cents per share), and an increase
in cash operating profit of 26% from continuing operations to R2 537 million
(30 June 2007: R2 016 million). Gold production from continuing operations for
the year was 11% lower at 48 227 kilograms (30 June 2007: 54 340 kilograms),
with cash costs for the year 25% higher at R138 319/kg.
The ARM balance sheet at 30 June 2008 reflects a marked-to-market investment in
Harmony of R6 045 million which is based on a Harmony share price of R95
(F2007: R100). Changes in the value of the investment in Harmony are accounted
for by ARM through the statement of changes in equity net of deferred capital
gains tax.
The investment reflected at market value in the balance sheet represents 10% of
ARM`s market capitalisation of R59 billion at 30 June 2008.
Harmony`s results for the quarter and financial year ended 30 June 2008 can be
viewed on the company`s website at www.harmony.co.za
TEAL Exploration & Mining Incorporated
TEAL is a Toronto Stock Exchange listed mineral development and exploration
company with development projects and exploration areas in the Democratic
Republic of Congo (DRC), Zambia, Namibia and Mozambique.
ARM`s investment in TEAL at its market value represents 2% of ARM`s market
capitalisation of R59 billion at 30 June 2008.
The Konkola North Copper Project in Zambia comprises a large section of the
mining licence area referred to as Area "A" as well as the South and East Limb
areas, that are located on the northern portion of the property.
On Area "A" TEAL has published an increased resource estimation, which defined
a total inferred resource of 219 500 million tonnes at 2.64% total copper. TEAL
is further evaluating the resources in Area "A" and seven boreholes of an 18
000 metre exploration drilling programme on Area "A" have been completed.
The feasibility study, which is based on an operation to exploit the South and
East Limb, is being revised to include the upgraded resource base, which totals
51 million tonnes at a grade of 2.35% copper. This resource will now be used
for mine planning and scheduling and the updated feasibility study will also
include a review of capital and operating costs and the effects of the recently
promulgated Zambian mining tax legislation. The finalisation of the revised
feasibility study is expected by early next year.
TEAL has announced a first phase resource estimation for the Lupoto Copper
Project, which forms part of TEAL`s 60% owned Kalumines mining licence area in
the DRC , which is as follows:
Indicated Resources: 15.09 mt @ 2.32% TCu,1.83% ASCu,0.15% Co, and
Inferred Resources: 9.13 mt @ 2.09% TCu, 1.73% ASCu.
For the financial year ended 30 June 2008, 46 404 tonnes of copper concentrates
were produced and realised at the small scale open pit mine, at Lupoto. From
this mine approximately 800 000 tonnes of material including 455 955 tonnes
grading between 4% and 6% copper, has been stockpiled.
TEAL has also announced an increase in the indicated gold resource of the
Otjikoto Gold Project in Namibia, from 460 000 ounces to 1.05 million ounces of
gold, equating to 23.3 million tonnes grading 1.40 g/t. An additional 877 000
ounces is contained in the inferred category at a grade of 1.41 g/t. The total
resource is approximately 1.9 million ounces.
TEAL`s detailed results, which were released on 29 August 2008, can be viewed at
www.tealmining.com.
Dividend
The accelerated growth in ARM`s operational cash flows during F2008 has
resulted in a marked improvement in its net debt position.
Accordingly, the Board of Directors has decided to declare an increased
dividend of 400 cents per share which represents a 167% increase over the
maiden dividend in F2007. This dividend is covered 4.77 times by headline
earnings. This dividend is especially significant given the Company`s continued
capital investment programme, having invested R2.8 billion in capital projects
over the period, with a further R11 billion planned over the next three years,
signalling ARM`s healthy growth profile across commodity groups.
The last day to trade in ARM shares to participate in this dividend
(cum-dividend) will be Thursday, 18 September 2008 and ARM shares will trade
ex-dividend from Friday, 19 September 2008. The record date will be Friday, 26
September 2008 with payment of the dividend occurring on Monday, 29 September
2008.
No dematerialisation or rematerialisation of share certificates may occur
between Friday, 19 September and Friday, 26 September 2008, both days
inclusive.
Outlook
The recent slowdown in global economic growth does not in our opinion imply the
cessation of growth. The massive industrialisation of China is expected to
continue albeit at a slightly slower rate. Nevertheless, commodities have come
under pressure underlining the importance for high margin operations.
As ARM starts the new financial year, we remain confident that the company will
continue to be well positioned in terms of our commodity mix, our excellent
long-life low-cost operations, our future projects and expansion prospects, as
well as access to resources in a region of the world which is renowned for its
dominance in a number of these commodities.
Review by independent auditors
The financial information has been reviewed by Ernst & Young Incorporated whose
unqualified review opinion is available for inspection at the Company`s
registered office.
The annual report containing a detailed review of the operations of the company
together with the audited financial statements will be posted to shareholders
toward the end of October 2008.
Signed on behalf of the board:
PT Motsepe AJ Wilkens
Executive Chairman Chief Executive Officer
Johannesburg
1 September 2008
Financial Statements
Contents
Group Balance Sheet
Group Income Statement
Statement of Changes in Equity
Group Cash Flow Statement
Notes to the Financial Statements
Additional information
Group Balance Sheet
As at 30 June 2008
Reviewed Audited
2008 2007
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 9 024 6 892
Investment property 12 12
Intangible assets 215 217
Deferred tax assets 20 -
Inventories 178 -
Investment in associates 1 298 857
Other investments 6 055 6 391
16 802 14 369
Current assets
Inventories 1 231 853
Trade and other receivables 4 150 1 859
Taxation 14 -
Held for sale assets 21 -
Cash and cash equivalents 5 2 660 1 063
8 076 3 775
Total assets 24 878 18 144
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 11 10
Share premium 3 733 3 667
Other reserves 1 366 1 604
Retained earnings 9 766 5 597
Shareholders` interest in capital and reserves 14 876 10 878
Minority interest 800 340
Total shareholders` interest 15 676 11 218
Non-current liabilities
Long-term borrowings - interest bearing 6 2 254 2 741
Deferred tax liabilities 2 154 1 410
Long-term provisions 324 178
4 732 4 329
Current liabilities
Trade and other payables 1 515 999
Short-term provisions 184 97
Taxation 1 047 198
Overdrafts and short-term borrowings - interest
bearing 7 1 724 1 303
4 470 2 597
Total equity and liabilities 24 878 18 144
Group Income Statement
for the year ended 30 June 2008
Reviewed Audited
2008 2007
Rm Rm
Revenue 12 919 6 308
Sales 12 590 6 152
Cost of sales (5 516) (3 341)
Gross profit 7 074 2 811
Other operating income 460 222
Other operating expenses (856) (552)
Profit from operations before exceptional items 6 678 2 481
Income from investments 168 51
Finance costs (438) (370)
Income from associate 461 16
Profit before taxation and exceptional items 6 869 2 178
Exceptional items 3 162 14
Profit before taxation 7 031 2 192
Taxation (2 084) (781)
Profit for the period 4 947 1 411
Attributable to:
Minority interest 460 191
Equity holders of ARM 4 487 1 220
4 947 1 411
Additional information:
Headline earnings (R million) 4 4 013 1 207
Headline earnings per share (cents) 1 906 580
Basic earnings per share (cents) 2 093 586
Diluted basic earnings per share (cents) 1 872 577
Diluted headline earnings per share (cents) 1 874 571
Number of shares in issue at end of year
(thousands) 211 556 209 730
Weighted average number of shares in issue
(thousands) 210 580 208 115
Weighted average number of shares used in
calculating
diluted earnings per share (thousands) 214 347 211 523
EBITDA (R million) 7 229 2 887
Dividend declared after year end (cents per
share) 400 150
Statement of Changes in Equity
for the year ended 30 June 2008
Revalua-
Share tion of
capital listed
and invest- Retained
premium ments Other* earnings
Group Rm Rm Rm Rm
Balance at
30 June 2006 (Audited) 3 567 2 219 88 4 376
Revaluation of listed
investments - (880) - -
Deferred tax on revaluation
of listed investment - 128 - -
Net impact of revaluation
of listed investment - (752) - -
Profit for the period - - - 1 220
Share based payments - - 48 -
Share options exercised 110 - - -
Realignment of currency - - 1 -
Other - - - 1
Balance at
30 June 2007 (Audited) 3 677 1 467 137 5 597
Revaluation of listed
investments - (335) - -
Deferred tax on revaluation
of listed investment - 58 - -
Net impact of revaluation
of listed investment - (277) - -
Profit for the period - - - 4 487
Share based payments - - 74 -
Share options exercised 67 - - -
Realignment of currency - - (6) -
Minorities bought out in
Copperbelt venture - - (29) -
Dividend paid - - - (315)
Other - - - (3)
Balance at
30 June 2008 (Reviewed) 3 744 1 190 176 9 766
Total
share-
holders Total
of minority
ARM interest Total
Group Rm Rm Rm
Balance at
30 June 2006 (Audited) 10 250 143 10 393
Revaluation of listed investments (880) - (880)
Deferred tax on revaluation
of listed investment 128 - 128
Net impact of revaluation
of listed investment (752) - (752)
Profit for the period 1 220 191 1 411
Share based payments 48 6 54
Share options exercised 110 - 110
Realignment of currency 1 - 1
Other 1 - 1
Balance at
30 June 2007 (Audited) 10 878 340 11 218
Revaluation of listed investments (335) - (335)
Deferred tax on revaluation
of listed investment 58 - 58
Net impact of revaluation
of listed investment (277) - (277)
Profit for the period 4 487 460 4 947
Share based payments 74 - 74
Share options exercised 67 - 67
Realignment of currency (6) - (6)
Minorities bought out in
Copperbelt venture (29) - (29)
Dividend paid (315) - (315)
Other (3) - (3)
Balance at
30 June 2008 (Reviewed) 14 876 800 15 676
* Other reserves consist of an insurance contingency of R8 million (2007: R8
million; 2006: R8 million), general reserve of R32 million (2007: R32 million;
2006: R32 million), share based payments of R167 million (2007: R93 million;
2006: R45 million); foreign currency translation reserve of R-2 million
(2007: R4 million; 2006: R3 million), minorities bought out in Copperbelt
venture R-29 million (2007: R nil ; 2006: R nil).
Group Cash Flow Statement
for the year ended 30 June 2008
Reviewed Audited
2008 2007
Rm Rm
CASH FLOW FROM OPERATING ACTIVITIES
Cash receipts from customers 10 876 5 672
Cash paid to suppliers and employees (5 701) (3 135)
Cash generated from operations 5 175 2 537
Interest received 166 49
Interest paid (412) (295)
Dividend received 21 -
Dividend paid (315) -
Taxation paid (466) (317)
Net cash inflow from operating activities 4 169 1 974
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property, plant and equipment to
maintain operations (1 194) (913)
Additions to property, plant and equipment
to expand operations (1 465) (946)
Proceeds on disposal of property, plant and equipment 28 7
Investment in associate - (841)
Proceeds on disposal of 50% of Nkomati - final tranche
payment 135 2
Proceeds on sale of interest in Otjikoto 32 -
Proceeds on sale of interest in Zambian properties 37 -
Net cash outflow from investing activities (2 427) (2 691)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds on exercise of share options 66 110
Long-term borrowings raised 558 1 453
Long-term borrowings repaid (804) (73)
Increase/(decrease) in short-term borrowings 5 72
Net cash inflow/(outflow) from financing activities (175) 1 562
Net increase in cash and cash equivalents 1 567 845
Cash and cash equivalents at beginning of year 1 039 193
Foreign currency translation on cash balance (12) 1
Cash and cash equivalents at end of year 2 594 1 039
Notes to the Financial Statements
for the year ended 30 June 2008
1 BASIS OF PREPARATION
The consolidated provisional results have been prepared on an 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.
The financial information for the year ended 30 June 2008 has been prepared
adopting the same accounting policies used in the most recent annual financial
statements and which comply with International Financial Reporting Standards
and comply with the disclosure requirements of IAS 34: Interim Financial
Reporting.
The following new and revised accounting standards were adopted by ARM but have
had no impact on the provisional financial statements.
IAS 1: Amendment on capital disclosure
IFRS 7: Financial instruments: disclosure
IFRIC 10: Interim reporting and impairment
IFRIC 11: Amendment to IFRS 2: Group and treasury share transactions.
2 SEGMENTAL INFORMATION
Primary segmental information
Business segments
For management purposes, the group is organised into four major operating
divisions. The operating divisions are ARM Platinum (which includes platinum
and nickel), ARM Ferrous, ARM Coal and ARM Exploration.
ARM has a strategic holding in Harmony (gold).
Platinum comprises Two Rivers Platinum Mine as a 55 percent subsidiary and ARM
Mining Consortium Limited through which ARM holds an effective 41.5 percent
interest in the Modikwa Platinum Mine.
Nickel comprises Nkomati Mine as a 50 percent joint venture for both its nickel
and chrome operations.
ARM Ferrous comprises Assmang as a 50 percent joint venture. Assmang comprises
iron ore, manganese ore, ferromanganese, ferrochrome and
chrome ore operations.
ARM Coal, a 51 percent joint venture for accounting purposes, consists of a
10.2 percent participating investment in the existing coal operations of XCSA
and a 26 percent joint venture interest in the Goedgevonden mine. In addition
ARM has a direct 10 percent participating investment in the coal operations of
XCSA.
ARM Exploration comprises TEAL as a 64.9 percent subsidiary.
The commodity groupings predominantly reflect the risks and rewards of trading
and the operating divisions are therefore identified as the primary reporting
segments.
ARM Platinum ARM
Platinum Nickel Ferrous
Rm Rm Rm
2.1 Year to 30 June 2008
(Reviewed)
Total sales 3 943 998 7 418
Intergroup sales
to ARM Ferrous - 12 -
Sales 3 943 986 7 418
Cost of sales (1 785) (419) (3 193)
Other operating
income 6 46 217
Other operating
expenses (31) (11) (350)
Segment result 2 133 602 4 092
Income from
investments 93 6 36
Finance cost (311) (1) (14)
Income from
associate - - -
Exceptional items - (7) -
Taxation (540) (173) (1 346)
Minority interest (460) - -
Contribution to
basic earnings 915 427 2 768
Contribution to
headline earnings 915 432 2 775
Other information
Segment and
consolidated assets 6 513 1 081 7 771
Segment liabilities 1 563 112 1 196
Unallocated
liabilities
(tax and deferred tax)
Consolidated total
liabilities
Cash in/(out) flow
from operating
activities 1 369 518 3 005
Cash in/(out) flow
from investing
activities (508) (292) (1 360)
Cash in/(out) flow
from financing
activities (776) - (51)
Capital expenditure 547 292 1 394
Amortisation and
depreciation 241 20 264
EBITDA 2 374 622 4 366
ARM Corporate
ARM Explora- and
Coal tion other*
Rm Rm Rm
2.1 Year to 30 June 2008
(Reviewed)
Total sales 96 147 -
Intergroup sales
to ARM Ferrous - - -
Sales 96 147 -
Cost of sales (51) (72) 4
Other operating
income - - 191
Other operating
expenses - (271) (193)
Segment result 45 (196) 2
Income from
investments - 2 31
Finance cost (13) (15) (84)
Income from
associate 461 - -
Exceptional items - 34 135
Taxation (1) (2) (22)
Minority interest - - -
Contribution to
basic earnings 492 (177) 62
Contribution to
headline earnings 175 (211) (73)
Other information
Segment and
consolidated assets 2 392 413 663
Segment liabilities 930 608 1 592
Unallocated
liabilities
(tax and deferred tax)
Consolidated total
liabilities
Cash in/(out) flow
from operating
activities 103 (344) (482)
Cash in/(out) flow
from investing
activities (361) (41) 135
Cash in/(out) flow
from financing
activities 274 353 25
Capital expenditure 414 130 2
Amortisation and
depreciation 6 10 -
EBITDA 51 (186) 2
Gold Total
Rm Rm
2.1 Year to 30 June 2008
(Reviewed)
Total sales - 12 602
Intergroup sales
to ARM Ferrous - 12
Sales - 12 590
Cost of sales - (5 516)
Other operating
income - 460
Other operating
expenses - (856)
Segment result - 6 678
Income from
investments - 168
Finance cost - (438)
Income from
associate - 461
Exceptional items - 162
Taxation - (2 084)
Minority interest - (460)
Contribution to
basic earnings - 4 487
Contribution to
headline earnings - 4 013
Other information
Segment and
consolidated assets 6 045 24 878
Segment liabilities - 6 001
Unallocated
liabilities
(tax and deferred tax) 3 201
Consolidated total
liabilities 9 202
Cash in/(out) flow
from operating
activities - 4 169
Cash in/(out) flow
from investing
activities - (2 427)
Cash in/(out) flow
from financing
activities - (175)
Capital expenditure - 2 779
Amortisation and
depreciation - 541
EBITDA - 7 229
* Corporate, other companies and consolidation adjustments
Primary segmental information
ARM Platinum ARM
Platinum Nickel Ferrous
Rm Rm Rm
2.2 Year to 30 June 2007
(Audited)
Total sales 2 352 707 3 064
Intergroup sales to
ARM Ferrous - 5 -
Sales 2 352 702 3 064
Cost of sales (1 083) (209) (2 021)
Other operating
income 1 14 78
Other operating
expenses (12) (36) (133)
Segment result 1 258 471 988
Income from
investments 17 3 6
Finance cost (255) - (8)
Income from
associate - - -
Exceptional items - - -
Taxation (300) (137) (320)
Minority interest (259) - -
Contribution to
basic earnings 461 337 666
Contribution to
headline earnings 461 337 665
Other information
Segment and
consolidated assets 5 314 584 3 842
Segment liabilities 2 194 64 849
Unallocated
liabilities
(tax and deferred tax)
Consolidated total
liabilities
Cash in/(out) flow
from operating
activities 770 568 979
Cash in/(out) flow
from investing
activities (521) (199) (1 030)
Cash in/(out) flow
from financing
activities 212 - 244
Capital expenditure 566 199 1 070
Amortisation and
depreciation 165 35 203
EBITDA 1 423 506 1 191
ARM Corporate
ARM Explora- and
Coal tion other*
Rm Rm Rm
2.2 Year to 30 June 2007
(Audited)
Total sales 34 - -
Intergroup sales to
ARM Ferrous - - -
Sales 34 - -
Cost of sales (28) - -
Other operating
income - 1 128
Other operating
expenses - (198) (173)
Segment result 6 (197) (45)
Income from
investments - 4 21
Finance cost (26) - (81)
Income from
associate 16 - -
Exceptional items - - 14
Taxation 5 (1) (28)
Minority interest - 68 -
Contribution to
basic earnings 1 (126) (119)
Contribution to
headline earnings 1 (126) (131)
Other information
Segment and
consolidated assets 1 519 97 408
Segment liabilities 519 97 1 595
Unallocated
liabilities
(tax and deferred tax)
Consolidated total
liabilities
Cash in/(out) flow
from operating
activities (11) (169) (163)
Cash in/(out) flow
from investing
activities (892) (51) 2
Cash in/(out) flow
from financing
activities 71 66 969
Capital expenditure 74 51 1
Amortisation and
depreciation 1 1 1
EBITDA 7 (196) (44)
Gold Total
Rm Rm
2.2 Year to 30 June 2007
(Audited)
Total sales - 6 157
Intergroup sales to
ARM Ferrous - 5
Sales - 6 152
Cost of sales - (3 341)
Other operating
income - 222
Other operating
expenses - (552)
Segment result - 2 481
Income from
investments - 51
Finance cost - (370)
Income from
associate - 16
Exceptional items - 14
Taxation - (781)
Minority interest - (191)
Contribution to
basic earnings - 1 220
Contribution to
headline earnings - 1 207
Other information
Segment and
consolidated assets 6 380 18 144
Segment liabilities - 5 318
Unallocated
liabilities
(tax and deferred tax) 1 608
Consolidated total
liabilities 6 926
Cash in/(out) flow
from operating
activities - 1 974
Cash in/(out) flow
from investing
activities - (2 691)
Cash in/(out) flow
from financing
activities - 1 562
Capital expenditure - 1 961
Amortisation and
depreciation - 406
EBITDA - 2 887
* Corporate, other companies and consolidation adjustments
Primary segmental information
The ARM platinum segment is analysed further into Two Rivers Platinum Mine and
ARM Mining Consortium, which includes Modikwa Platinum Mine.
ARM Platinum
Two Rivers Modikwa Total
Rm Rm Rm
2.3 Year to 30 June 2008 (Reviewed)
Sales
External sales 2 363 1 580 3 943
Cost of sales (1 031) (754) (1 785)
Other operating income per
income statement 6 - 6
Other operating expenses per
income statement (6) (25) (31)
Segment result 1 332 801 2 133
Income from investments 64 29 93
Finance cost (268) (43) (311)
Taxation (332) (208) (540)
Minority interest (361) (99) (460)
Contribution to basic earnings 435 480 915
Contribution to headline earnings 435 480 915
Other information
Segment and consolidated assets 3 487 3 026 6 513
Segment liabilities 1 126 437 1 563
Unallocated liabilities
(tax and deferred tax) 831
Consolidated total liabilities 2 394
Cash in/(out) flow from operating
activities 777 592 1 369
Cash in/(out) flow from investing
activities (355) (153) (508)
Cash in/(out) flow from financing
activities (677) (99) (776)
Capital expenditure 390 157 547
Amortisation and depreciation 154 87 241
EBITDA 1 486 888 2 374
Primary segmental information
ARM Platinum
Two Rivers Modikwa Total
Rm Rm Rm
2.4 Year to 30 June 2007 (Audited)
Sales
External sales 1 337 1 015 2 352
Cost of sales (451) (632) (1 083)
Other operating income 1 - 1
Other operating expenses (3) (9) (12)
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 and consolidated assets 3 026 2 288 5 314
Segment liabilities 1 714 480 2 194
Unallocated liabilities
(tax and deferred tax) 327
Consolidated total liabilities 2 521
Cash in/(out) flow from operating
activities 409 361 770
Cash in/(out) flow from investing
activities (419) (102) (521)
Cash in/(out) flow from financing
activities 369 (157) 212
Capital expenditure 464 102 566
Amortisation and depreciation 75 90 165
EBITDA 959 464 1 423
Additional information
Pro forma analysis of the Ferrous segment on a 100 percent basis
Iron ore Manganese Chrome
division division division
Rm Rm Rm
2.5 Year to 30 June 2008 (Reviewed)
Sales 2 776 9 552 2 507
Other operating income 51 320 99
Other operating expense 136 489 111
Operating profit 1 079 6 160 946
Contribution to earnings 779 4 075 681
Contribution to headline earnings 780 4 087 683
Other information
Consolidated total assets 4 324 9 419 2 015
Consolidated total liabilities 1 735 3 226 826
Capital expenditure 2 231 511 158
Amortisation and depreciation 241 184 110
Cash in/(out) flow from
operating activities 710 4 175 646
Cash in/(out) flow from
investing activities (2 080) (488) (151)
Cash in/(out) flow from
financing activities 281 - (384)
EBITDA 1 320 6 344 1 056
2.6 Year to 30 June 2007 (Audited)
Sales 2 163 2 691 1 273
Other operating income 30 99 51
Other operating expense 64 123 102
Operating profit 962 895 119
Contribution to earnings 679 579 74
Contribution to headline earnings 679 576 76
Other information
Consolidated total assets 3 275 2 842 1 680
Consolidated total liabilities 1 464 255 1 162
Capital expenditure 1 735 297 199
Amortisation and depreciation 160 150 95
Cash in/(out) flow from
operating activities 994 451 284
Cash in/(out) flow from
investing activities (1 709) (297) (145)
Cash in/(out) flow from
financing activities 626 - (138)
EBITDA 1 122 1 045 214
Attributable
Total to ARM
Rm Rm
2.5 Year to 30 June 2008 (Reviewed)
Sales 14 835 7 418
Other operating income 470 217
Other operating expense 736 350
Operating profit 8 185 4 092
Contribution to earnings 5 535 2 768
Contribution to headline earnings 5 550 2 775
Other information
Consolidated total assets 15 758 7 771
Consolidated total liabilities 5 787 1 196
Capital expenditure 2 900 1 394
Amortisation and depreciation 535 264
Cash in/(out) flow from
operating activities 5 531 3 005
Cash in/(out) flow from
investing activities (2 719) (1 360)
Cash in/(out) flow from
financing activities (103) (51)
EBITDA 8 720 4 366
2.6 Year to 30 June 2007 (Audited)
Sales 6 127 3 064
Other operating income 180 78
Other operating expense 289 133
Operating profit 1 976 988
Contribution to earnings 1 332 666
Contribution to headline earnings 1 331 665
Other information
Consolidated total assets 7 797 3 842
Consolidated total liabilities 2 881 849
Capital expenditure 2 231 1 070
Amortisation and depreciation 405 203
Cash in/(out) flow from
operating activities 1 729 979
Cash in/(out) flow from
investing activities (2 151) (1 030)
Cash in/(out) flow from
financing activities 488 244
EBITDA 2 381 1 191
Reviewed Audited
2008 2007
Rm Rm
3 EXCEPTIONAL ITEMS
Surplus on disposal of 50% of Nkomati mine;
final tranche payment 135 -
Profit on sale of interest in Otjikoto 32 -
Profit on sale of interest in Zambian properties 46 -
Impairments of property, plant and equipment (51) -
Settlement of Chambishi disposal - 14
Exceptional items per income statement 162 14
Taxation 5 (2)
Profit on asset swap in the DTJV - ARM Coal* 317 -
(Loss)/profit on disposal of property,
plant and equipment (10) 1
Total exceptional items 474 13
* Included in income from associate. The purchase price
allocations for this transaction have been
provisionally
determined in accordance with IFRS 3 (initial business
combination accounting)
4 HEADLINE EARNINGS
Basic earnings per income statement 4 487 1 220
- Surplus on disposal of 50% of Nkomati mine;
final tranche payment (135) -
- Impairments of property, plant and equipment 51 -
- Profit on sale of interest in Zambian properties (46) -
- Profit on sale of interest in Otjikoto (32) -
- Loss/(profit) on disposal of property, plant and
equipment 10 (1)
- Profit on asset swap in the DTJV - ARM Coal (317) -
- Profit on disposal of Chambishi - (14)
4 018 1 205
- Taxation (5) 2
Headline earnings 4 013 1 207
5 CASH AND CASH EQUIVALENTS
- African Rainbow Minerals 326 136
- Assmang 1 422 69
- ARM Mining Consortium 509 160
- ARM Coal 7 1
- Nkomati 159 85
- Two Rivers Platinum 109 442
- TEAL 15 42
- Other 113 128
Total as per balance sheet 2 660 1 063
Less: Overdrafts 66 24
Total as per cash flow statement 2 594 1 039
Reviewed Audited
2008 2007
Rm Rm
6 LONG-TERM BORROWINGS
- African Rainbow Minerals 1 217 1 253
- Assmang 14 19
- ARM Mining Consortium 1 236
- ARM Coal 847 501
- Two Rivers Platinum 161 732
- TEAL 14 -
2 254 2 741
7 OVERDRAFTS AND SHORT-TERM BORROWINGS
- African Rainbow Minerals 69 20
- Assmang 256 303
- ARM Mining Consortium 255 116
- ARM Coal 10 -
- TEAL 436 71
- Two Rivers Platinum 63 168
- Two Rivers Platinum - Impala Platinum 635 625
1 724 1 303
8 COMMITMENTS
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 1 380 2 290
- not contracted for 1 325 831
Total commitments 2 705 3 121
9 CONTINGENT LIABILITIES
There have been no significant changes in the contingent liabilities of the
group as disclosed in the 30 June 2007 annual report.
10 EVENTS AFTER BALANCE SHEET
Since the financial year end Harmony share price has declined to R67.00 which
is R1 781 million lower, before deferred capital gains tax, than the
closing market value at the balance sheet date.
The price of PGMs and nickel have dropped since year end. A 10% drop in
US Dollar PGM and nickel prices equates to a negative impact of R106 million
on earnings due to a reduction in the realisation of accounts receivable at
the platinum and Nkomati operations.
These events are both non-adjusting post balance sheet events.
Provisional Results
for the financial year ended
30 June 2008
Shareholder information
Issued share capital as at 30 June 2008 211 556
Market capitalisation as at 30 June 2008 R59.2 billion
Share price as at 30 June 2008 R280.00
Daily average volume traded 329 084
Primary listing JSE Limited
Forward looking statements
Certain statements in this report constitute forward looking statements that
are neither reported financial results nor other historical information,
include but are not limited to statements that are predictions of or indicate
future earnings, savings, synergies, events, trends, plans or objectives. 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.
Investor Relations
Monique Swartz
Corporate Development and Head of Investor Relations
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
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
Monique Swartz
Corporate Development and Head of Investor
Relations
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 (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)
AJ Wilkens (Chief Executive Officer)
F Abbott
Dr MMM Bakane-Tuoane**
JA Chissano (Mozambican)**
WM Gule
MW King**
AK Maditsi**
KS Mashalane
JR McAlpine**
RP Menell
LA Shiels
Dr RV Simelane**
MV Sisulu**
JC Steenkamp
ZB Swanepoel*
*Non-executive
**Independent non-executive
Sandton
1 September 2008
Sponsor to ARM:
Deutsche Securities (SA) (Proprietary) Limited
Date: 01/09/2008 07:04:02 Produced by the JSE SENS Department.
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employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
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