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ARI
ARIM
ARI - African Rainbow Minerals - Interim results for the six months ended
31 December 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")
Interim results for the six months ended 31 December 2008
Highlights
- Strong headline earnings increase of 201% from R741 million to R2 232
million
- or 1 055 cents per share
- Profit from operations before exceptional items increases 120% from
- R1.5 billion to R3.3 billion
- Increased sales volumes of PGMs, iron ore and domestic thermal coal
- Increased sales prices for coal, ferrous commodities and alloys
- Strong balance sheet: cash balance of R3.66 billion reflects an increase
of R2.5 billion
- Significant benefits from diversification of mining activities
- ARM transaction with Vale on African exploration nearing closing
Group operational review
ARM`s Board of Directors ("the board") announces good results for the six
months to 31 December 2008, with significant increases in earnings
contributions from ARM Ferrous and ARM Coal despite the global economy
experiencing a sharp downturn in the latter part of this period. Headline
earnings increased by 201% to R2 232 million (1H F2008: R741 million), or
1 055 cents per share, driven mainly by the strong performance from ARM
Ferrous, which delivered a 390% increase in attributable headline earnings.
The ARM balance sheet remains strong at 31 December 2008 with net cash,
before partner loans, of R1.1 billion, an improvement of R0.9 billion from
the 30 June 2008 results. In the current economic climate ARM has focused on
right-sizing its operations, deferring some of the capital expenditure and
optimising its cash resources through working capital and cost management.
These interim results for the period ended 31 December 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 6 months ended 31 December
R million 2008 2007 % change
Platinum group metals (293) 206 (242)
Nkomati nickel and chrome 24 150 (84)
Ferrous metals 2 812 574 390
Coal 176 6 >500
Exploration investment: TEAL (454) (121) (275)
Corporate: finance costs (53) (45) (18)
Corporate: other 20 (29) 169
ARM headline earnings 2 232 741 201
These results have been achieved in conjunction with ARM`s partners at the
various operations, namely Anglo Platinum, Assore, Impala Platinum, Norilsk
Nickel and Xstrata Coal.
The global slowdown has weakened demand for all commodities. However, iron
ore, thermal coal and PGMs reflected improved sales volumes despite these
challenges. Key operational contributors for the period under review include
(100% basis, except for PGM production):
- 5% increase in iron ore sales to 3.5 million tonnes
- 10% reduction in manganese ore external sales to 1.3 million tonnes
- 8% increase in domestic thermal coal sales (excluding discard dumps) to
5.65 million tonnes
- 14% increase in attributable PGM production to 153 157 ounces
- 43% reduction in manganese alloys and charge chrome sales volumes
As part of ARM`s strategy to ensure the efficiency and cost competitiveness
of all its operations, ARM is targeting to have its operations within the
50th percentile on the global unit cost curve by 2012. Mining costs for this
period increased above the inflation rate, but some easing to these cost
increases is expected. ARM has been able to control and manage unit cost
increases by increasing production volumes (where possible) and operational
efficiencies.
The transaction with Companhia Vale do Rio Doce (Vale) has been approved by
the requisite majorities of TEAL Exploration & Mining (TEAL) shareholders and
is nearing closing. This will result in TEAL becoming a 50:50 joint venture
with Vale. For the period under review, in terms of accounting conventions,
ARM continued to consolidate 100% of TEAL`s results thereby decreasing
headline earnings by R159 million.
ARM remains satisfied with the progress of its projects at Khumani Iron Ore,
Goedgevonden Coal and Nkomati Nickel. New challenges have emerged over the
last few months, including significantly lower US dollar commodity prices and
delays with the provision of additional railway line capacity. ARM is
continuing to assess qualitative growth opportunities.
Financial commentary
Sales have increased 61% to R6.4 billion compared to the six months ended 31
December 2007 (1H F2008) mainly as a result of increased commodity prices and
increased volumes. In addition, the average Rand/US Dollar exchange rate was
28% weaker at R8.88/$ (1H F2008: R6.94/$).
Despite the pressures of cost increases the gross profit margin has increased
to 50.8% in this period from 41.9% in 1H F2008. ARM`s earnings before
interest, tax, depreciation and amortisation (EBITDA) excluding exceptional
items and income from associates was R3.7 billion, which represents an
increase of R1.9 billion over 1H F2008.
Headline earnings for the reporting period increased significantly by R1.5
billion or 201% to R2.3 billion (1H F2008: R741 million).
ARM Ferrous and ARM Coal showed significantly improved contributions to ARM
resulting from continued strong demand and high commodity prices, during the
first four months of the financial period. ARM Platinum`s contribution to ARM
was negative for the period mainly as a result of a significant fall in PGM
and Nickel prices which also resulted in a realised mark-to-market loss of
R547 million to the 30 June 2008 debtors value.
The significant increase in other operating income is largely as a result of
foreign exchange gains at ARM Ferrous, while other operating expenses
increased owing to increased expenditure at TEAL and increased fixed costs
incurred during smelter shutdown at ARM Ferrous. Income from investments
increased by R153 million due to higher average cash balances, particularly
at ARM Ferrous.
ARM`s balance sheet at 31 December 2008 reflects growth in both total assets
to R28.3 billion (31 December 2007: R18.0 billion) and total shareholders
equity to R17 billion (31 December 2007: R10.4 billion). This growth has been
achieved while maintaining a conservative approach to debt in ARM. The net
cash position of ARM, before partner loans, is a cash positive amount of R1.1
billion. Cash and cash equivalents have increased by R1.0 billion since 30
June 2008, while gross borrowings have only increased by R242 million. On 31
December 2008 the project loans owed by ARM Mining Consortium for the
development of Modikwa Platinum Mine were repaid in full; thus ARM currently
has no project funding debt at its platinum operations.
Cash generated from operations of R4.6 billion is R3.0 billion higher than 1H
F2008 and only R0.6 billion less than the full year to 30 June 2008. This
improvement in 2008 is largely due to the increased contribution by ARM
Ferrous as well as a decrease of R845 million in working capital. Notably,
despite the negative cash operating margin for the platinum division, it
contributed 22.5% or R629 million to the cash generated from operations.
Similarly, all operations have positive cash on balances at 31 December 2008
as indicated below:
PGM basket
price at Reported
18 February 2009 PGM cash
R/kg cost R/kg
Contribution
ARM Company
ARM Ferrous
ARM Coal
Modikwa and ARM Mining
Consortium 223 502 169 695
Two Rivers 222 893 139 771
Nkomati
TEAL Exploration
Other
Group total
Cash flow from Cash and cash
operations equivalents
R million R million
Contribution
ARM Company 709 643
ARM Ferrous 2 871 2 144
ARM Coal 227 7
Modikwa and ARM Mining
Consortium 274 450
Two Rivers 355 38
Nkomati 177 68
TEAL Exploration 397 7
Other 303
Group total 2 798 3 660
Capital expenditure for the period amounted to R1.8 billion (1H F2008: R1.4
billion), mainly expended on the growth projects at Nkomati Nickel,
Goedgevonden Coal and Khumani Iron Ore mines. Over the next three years to
F2011, through delays and revisions of capital, we have reduced planned
capital expenditure in excess of 25%.
During the reporting period ARM received dividends of R1.15 billion from ARM
Ferrous.
The effective tax rate at 40% is high owing especially to the non-
deductibility of the large TEAL costs and the increase in Secondary Tax on
Companies (STC) and State Share of Profits (SSOP) at ARM Ferrous.
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.
Safety
Serious accidents/fatalities
Regrettably, two fatalities occurred during the period under review.
ARM extends its condolences to the families of the deceased.
On 20 July 2008 a fatal accident occurred at Assmang`s Khumani Iron Ore Mine.
A contracted security guard, Mr Simon Nyelele, made a fire in a drum and took
it into his mobile guard room. The windows and the door of the guard room
were closed thus creating a confined space and he was overcome by carbon
monoxide gas.
On 23 September 2008, a fatal accident occurred at Nkomati Mine. The
suspected base failure and subsequent side failure of a stockpile, inundated
a contractor employee, Mr Wessel Borotho who was driving a 2-ton diesel
refueling vehicle, causing fatal injuries.
Achievements
Modikwa Platinum Mine achieved 4 000 000 Fatality Free Shifts on 26 August
2008
Beeshoek Iron Ore mine achieved 6 000 Fatality Free Shifts on 3 September in
the Northern Cape DME safety competition
In the 1 000 Fatality Free Production Shift competition of the DME,
Dwarsrivier Chrome Mine achieved a total of 4 098 Fatality Free Production
shifts until the end of December 2008
In the 250 000 Fatality Free Shift category, Dwarsrivier Mine recorded a
total of 916 285 Fatality Free Shifts worked up to the end of the December
2008
Safety statistics
54 reportable accidents occurred during the period under review (1H F2008: 55
reportable accidents)
104 Lost-Time-Injuries (LTI) occurred during the period under review (1H
F2008: 127 LTI`s)
Statistics for Goedgevonden are not included in this report.
ARM Ferrous
Assmang reported an increase of 144% in turnover for this reporting period to
R10.93 billion (1H F2008: R4.48 billion). Headline earnings increased
substantially by 391% to R5 628 billion (1H F2008: R1 146 billion). This was
mainly due to the weaker Rand/US Dollar exchange rate and higher sales prices
for all ferrous products.
The major portion of the capital expenditure, of R1 503 million (1H F2008: R1
584 million), was spent on the ongoing infrastructural development of the new
Khumani Iron Ore Mine amounting to R664 million. In addition R126 million was
spent on housing projects, R87 million was spent on the rebuilding of furnace
6 at the Cato Ridge Works ferromanganese smelter and R64 million was spent on
generator equipment.
Cost increased in excess of the average inflation for the period were due to
very high electricity, reductant and additional contractor costs. During the
earlier months of the reporting period, contractors were employed to load and
haul manganese to Richards Bay port and iron ore to Beeshoek. This
expenditure generated additional revenue at very high margins.
During the period under review Assmang repaid R500 million plus interest on
its term loan facility. At 31 December 2008, no further drawdowns had taken
place and Assmang had R4.3 billion in cash on hand. Since the end of the
reporting period, Assmang paid a dividend of R2 billion to shareholders on 12
February 2009.
Logistics
Transnet experienced some operational and technical problems from July 2008
to October 2008 and this impacted negatively on the total iron ore export
channel. The long term 14 Mtpa iron ore export agreement through Saldanha Bay
is currently being finalised with Transnet. Transnet and Industry role
players are currently evaluating and negotiating the next possible phase of
expansion, either to 78 Mtpa, 93 Mtpa or 103 Mtpa through Saldanha Bay.
For the first three months of the period under review strong manganese ore
export sales were achieved. The current capacity of the Port Elizabeth
manganese export channel is 4.4 Mtpa. Transnet, together with KPMG, has
engaged with all existing and potential manganese ore exporters to establish
future demand for manganese ore export out of South Africa over the short,
medium and long term. As from 1 November 2009 all prospective customers have
to follow a formal and legal process to apply for manganese ore export
capacity allocation. The envisaged plan over the short and medium term is to
expand the Port Elizabeth Harbour to 6 Mtpa, with two other ports being used
to increase future export capacity.
The ARM Ferrous operations, held through its 50% investment in Assmang,
consist of three divisions: iron ore, manganese and chrome. Assore Limited,
ARM`s partner in Assmang, owns the remaining 50%.
Assmang headline earnings contribution
100% basis 6 months ended 31 December
R million 2008 2007 % change
Iron ore division 1 532 264 480
Manganese division 3 642 776 369
Chrome division 454 106 328
Total 5 628 1 146 391
Headline earnings attributable to ARM (50%) 2 812 574 390
Assmang product sales
100% basis 6 months ended 31 December
Thousand tonnes 2008 2007 % change
Iron ore 3 455 3 286 5
Manganese ore* 1 291 1 434 (10)
Manganese alloys* 70 122 (43)
Charge chrome 65 115 (43)
Chrome ore* 80 116 (31)
*Excluding intra-group sales
Percentage
cost increases
Rand per EBITDA
Commodity group tonne margin
Iron ore 9.9% 79.2%
Manganese ore 34.4% 87.5%
Manganese alloys 56.2% 69.3%
Charge chrome 41.3% 43.9%
Assmang capital expenditure
100% basis 6 months ended 31 December
R million 2008 2007
Iron ore 875 1 366
Manganese 409 163
Chrome 219 55
Total 1 503 1 584
Khumani Iron Ore Mine
The second phase of the 10 Mtpa expansion project has been completed on
schedule and within budget. The commissioning of the off-grade circuit has
commenced to allow flexibility in respect of ore blending.
The board has approved start-up capital of R1.2 billion for the expansion of
Khumani Mine to 16 Mtpa. The feasibility study to expand production capacity
to 16 Mtpa will be completed before F2009 year end.
ARM Platinum
ARM Platinum has performed well operationally. Attributable PGM production
(including Nkomati) increased by 14% to 153 157 (1H F2008: 133 836) ounces in
concentrate. The large downturn in world metal markets during the six months
under review has had a significant financial effect on ARM Platinum`s
operations. Operating losses were recorded by both Modikwa and Two Rivers,
while Nkomati generated a profit. The significant fall in commodity prices
and mark-to-market adjustments made during the reporting period resulted in a
decline in ARM Platinum`s attributable headline earnings from R356 million in
1H F2008 to a loss of R269 million in 1H F2009. These adjustments were
cushioned to some extent by a weaker Rand/US Dollar exchange rate. The table
below sets out the relevant pricing information:
6 months to 6 months to
Average metal prices December 2008 December 2007
Platinum US$/oz 840 1 203
Palladium US$/oz 176 261
Rhodium US$/oz 1 015 4 069
Nickel US$/t 9 682 14 896
Exchange Rate R/US$ 9.93 8.88
12 months to June
2008
Platinum US$/oz 2 039
Palladium US$/oz 449
Rhodium US$/oz 9 535
Nickel US$/t 22 539
Exchange Rate R/US$ 7.91
ARM Platinum`s operations account for revenue (and debtors) on a provisional
pricing basis and apply mark-to-market adjustments to account for the lag
between delivery and realisation dates of metals sold. At 30 June 2008, ARM
Platinum had metal debtors of R1.78 billion, valued at the June 2008 average
metal prices (refer to the analysis on page 190 of the 2008 Annual Report).
The decline in rand metal prices resulted in final receipts from these
debtors of R1.24 billion, a realised mark-to-market loss of R547 million. The
table below illustrates the effect these adjustments had on ARM Platinum`s
cash operating profit for the six months to 31 December 2008:
Cash operating profit analysis
Total Modikwa
50%
Gross revenue R`000 1 362 044 380 538
Cash cost R`000 1 177 109 416 959
Cash operating profit before mark-
to-market R`000 184 935 (36 421)
Mark-to-market loss on 30 June
2008 debtors R`000 (547 284) (137 412)
Cash operating (loss)/profit
after mark-to-market loss R`000 (362 349) (173 833)
Cash operating profit margin
before mark-to-market loss 14% -10%
Cash operating profit analysis
Two Rivers Nkomati
100% 50%
Gross revenue R`000 634 551 346 955
Cash cost R`000 554 411 205 739
Cash operating profit before mark-
to-market R`000 80 140 141 216
Mark-to-market loss on 30 June
2008 debtors R`000 (312 372) (97 500)
Cash operating (loss)/profit
after mark-to-market loss R`000 (232 232) 43 716
Cash operating profit margin
before mark-to-market loss 13% 41%
To manage the impact of the global economic crisis and to ensure ARM
Platinum`s operations remain sustainable, management has embarked on a number
of strategies to establish optimum operating levels. Management is in the
process of implementing changes in working shifts, optimising labour
strength, adjusting production levels, reducing capital expenditure and
pursuing cost containment initiatives. Cost increases were mainly as a result
of an increase in the cost of labour, fuel and lubricants, steel,
electricity, explosives and maintenance of the underground mining fleets.
Measures have been put in place to preserve cash, and as at 31 December 2008
ARM Platinum had no project debt, with the outstanding debt at ARM Mining
Consortium being settled in full, 18 months ahead of schedule.
Modikwa`s tonnes milled increased by 6%, resulting in a similar increase in
PGM ounces in concentrate. Owing to the current economic conditions, Merensky
mining has been stopped, and the deepening of the current declines postponed.
The feasibility study for the phase two UG2 replacement project is complete,
but approval of this project has been delayed in an effort to curtail capital
expenditure. On 31 December 2008, immediately available ore reserves at
Modikwa stood at 17.6 months.
During the period under review, Two Rivers operated with both declines at
full production capacity, increasing tonnes milled by 20% and PGM ounces in
concentrate by 28%. At 31 December 2008 the surface ore stockpile stood at
243 017 tonnes. The stockpile will be processed over the next few months to
partially substitute underground tonnes as part of a cost reduction
initiative. The concentrator plant optimisation, which will improve
recoveries by an expected 3% to 5%, is on track and scheduled for completion
by September 2009. Nkomati`s tonnes milled increased by 47% while nickel
production increased to 2 495 (1H F2008: 2 367) tonnes. The chrome washing
plant was commissioned during September 2008 and chrome concentrate is
currently being stockpiled.
Total capital expenditure in the division amounts to R1.17 billion (R727
million attributable). This is mainly ascribed to the Nkomati Large Scale
Expansion Project. Two Rivers continues to invest capital on its concentrator
plant optimisation, while Modikwa invested capital to deepen its current
declines.
Drilling results at Kalahari Platinum Exploration Project (Kalplats) continue
to indicate favourable results and a bankable feasibility study is expected
by December 2009.
For more information please refer to Platinum Australia`s (PLA) website:
www.platinumaus.com.au
The ARM Platinum division comprises three operating mines, Modikwa Platinum
Mine, Two Rivers Platinum Mine and Nkomati Mine. It has an effective interest
of 41.5% in Modikwa where local communities hold an 8.5% effective interest.
The remaining 50% is held by Anglo Platinum. Two Rivers is a joint venture
with Impala Platinum, with ARM holding 55% and Impala 45%. Nkomati is a 50:50
partnership with Norilsk Nickel Africa. ARM Platinum also has an interest in
Kalplats and comprises two joint ventures with PLA. ARM Platinum`s current
interest in Kalpats is 90% and PLA can earn-in up to 49% ownership of the
project by completing a bankable feasibility study.
ARM Platinum capital expenditure
100% Basis 6 months ended 31 December
R million 2008 2007 % change
Modikwa 273 164 (66)
Two Rivers 139 185 25
Nkomati 904 206 (339)
Total 1 316 555 (137)
Modikwa operational statistics
6 months ended 31 December
100% Basis 2008 2007 % change
Cash operating (loss) /
profit R million (348) 495 (170)
Tonnes milled Mt 1.30 1.23 6
Head grade (4E) g/t 4.41 4.45 (1)
PGMs in concentrate Ounces 156 335 148 039 6
Average basket price (4E) R/kg 301 885 303 113 (0)
Cash operating margin % (71)* 44 (261)
Cash cost (4E) R/kg 169 645 138 517 (22)
Cash cost R/tonne 635 522 (22)
Cash cost R/Pt oz 11 593 9 554 (21)
Cash cost R/PGM oz 5 277 4 314 (22)
Capex R million 273 164 (66)
Headline earnings
attributable to ARM (41.5%) R million (111) 108 (203)
* The cash operating margin, excluding mark-to-market adjustment to debtors,
is (10%).
Two Rivers operational statistics
6 months ended 31 December
100% Basis 2008 2007 % change
Cash operating (loss) /
profit R million (232) 401 (158)
Tonnes milled Mt 1.32 1.10 20
Head grade (6E) g/t, 6E 4.22 3.73 13
PGMs in concentrate Ounces 121 678 95 355 28
Average basket price R/kg 287 602 293 412 (2)
Cash operating margin % (73)* 52 (239)
Cash cost R/kg 139 771 122 500 (14)
Cash cost R/tonne 402 330 (22)
Cash cost R/Pt oz 9 073 7 989 (14)
Cash cost R/PGM oz 4 347 3 810 (14)
Capex R million 139 185 25
Headline earnings
attributable to ARM (55%) R million (182) 98 (286)
* The cash operating margin, excluding mark-to-market adjustment to debtors,
is 13%.
Nkomati operational statistics
6 months ended 31 December
100% Basis 2008 2007 % change
Cash operating profit R million 87 446 (80)
Cash operating profit -
Nickel Mine R million (279) 247 (213)
Cash operating profit -
Chrome Mine R million 366 199 84
Cash operating margin % 18* 55 (68)
Tonnes milled Thousand 678 460 47
Head grade % nickel 0.54 0.82 (34)
Nickel on-mine cash cost per
tonne milled R/tonne 351 321 (9)
Chrome on-mine cash cost per
tonne mined R/tonne 72 66 (9)
Cash cost net of by-products US$/lb (2.42) (1.67) 45
Contained metal
Nickel Tonnes 2 495 2 367 5
PGMs Ounces 16 134 14 742 9
Copper Tonnes 1 401 1 313 7
Cobalt Tonnes 143 123 16
Chrome ore sold Tonnes 346 823 537 002 (35)
Headline earnings
attributable to ARM (50%) R million 24 150 (84)
* The cash operating margin, excluding mark-to-market adjustment to debtors,
is 41%.
Nkomati Large Scale Expansion Project
The expansion project is progressing well within the approved budget and
timelines. A total of R2.1 billion (64%) of the approved capital budget of
R3.34 billion was committed by 31 December 2008. All aspects of the project
are on schedule to commission the 375 ktpm MMZ concentrator plant, which is
60% complete, from September 2009. All infrastructure requirements, including
tailings disposal facilities, Eskom power supply, waste rock dumps and water
and power supply, are on schedule. The conversion of the 100 ktpm plant to
the 250 ktpm PCMZ plant has not been formally released, but long-lead items
have been committed in order to support the scheduled November 2010
commissioning date. Nkomati raised a R300 million bridge finance facility in
December and is currently in negotiations with a financial institution to
roll this facility into a Project Finance Facility of up to R1.5 billion.
ARM Coal
Headline earnings contribution from ARM Coal increased significantly to R176
million for the reporting period (1H F2008: R6 million). Operating margins
have increased to 47% (1H F2008: 25%), driven by strong domestic and export
thermal coal prices.
Total saleable production attributable to ARM Coal decreased by 9%, compared
to the previous review period. Domestic production and sales for 1H F2008
included a substantial volume of discard. If the comparative figures are
adjusted for the discard, attributable domestic saleable production and sales
volumes increased by 5% and 8% respectively.
Export sales volumes attributable to ARM decreased by 19% compared to 1H
F2008, mainly as a result of logistical problems experienced with railing the
coal to Richards Bay Coal Terminal (RBCT). For the period under review,
approximately 51% of ARM Coal`s production was exported. Unit cost increases
were mainly due to lower production volumes and higher consumable costs.
Total figures reflected below relate to 100% of the Xstrata Coal South Africa
(XCSA) Operations plus Goedgevonden. Attributable figures relate to ARM`s
effective 20.2% of XCSA`s Operations (also referred to as the Participating
Coal Business - PCB) and 26% of Goedgevonden.
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, and
- additional amortisation at the ARM level provided as a result of the IFRS
purchase price allocation rules.
ARM`s economic interest in XCSA / (PCB) ? as at 31 December 2008 remains at
20.2%. ARM Coal holds a 20% participating interest in XCSA`s Operations,
which consists of 12 mines all situated in Mpumalanga as well as a 51%
interest in the Goedgevonden (GGV) Thermal Coal Project situated near Ogies
in Mpumalanga. ARM holds 51% of ARM Coal as well as a 10% direct investment
in XCSA`s Operations.
ARM Coal operational statistics
6 months ended 31 December
100% basis 2008 2007 % change
Total production sales
Saleable production Mt 12.14 13.57 (10)
Export thermal coal sales Mt 6.14 7.62 (19)
Domestic thermal coal sales Mt 5.65 7.09 (20)
Attributable production and
sales
Saleable production Mt 2.54 2.78 (9)
Export thermal coal sales Mt 1.26 1.56 (19)
Domestic thermal coal sales Mt 1.21 1.49 (19)
Average received coal price
Export (FOB) US$/tonne 77.81 51.44 51
Domestic (FOR) R/tonne 145.56 76.17 91
On mine saleable cost R/tonne 184.26 144.23 (28)
Cash operating profit
Total R million 2 342 834 181
Attributable R million 485 170 186
Headline earnings attributable
to ARM 176 6 >500
6 months ended 31 December
Reconciliation 2008 2007
ARM attributable headline earnings reported 176 6
Add: additional amortisation 4 15
Imputed interest on Xstrata R4 billion debt
facilitation 17 15
Less: Taxation (6) (8)
ARM attributable headline earnings excluding
IFRS adjustment 191 28
Add: normal interest 50 40
normal amortisation 170 90
taxation 74 12
ARM`s attributable operating profit 485 170
Goedgevonden Thermal Coal Project
The Goedgevonden Project is progressing well and as at 31 December 2008 about
70% of the total project costs had been committed. The project is expected to
be commissioned before F2009 year end. Work at the Richards Bay Coal Terminal
phase V expansion, in which ARM Coal has an entitlement of 3.2 Mtpa,
commenced during the 2008 calendar year and is expected to be completed
during the first half of the 2009 calendar year. Negotiations with Eskom on
the pricing terms for a 3.5 Mtpa local sales contract are close to
finalisation.
Harmony Gold Mining Company Limited (Harmony)
Harmony reported total headline earnings for the period under review of 109
cents per share (1H F2008: loss of 83 cents per share), and an increase in
cash operating profit of >100% to R1 921million (1H F2008: R725 million).
Gold production for the year was 8% lower at 25 334 kilograms (1H F2008: 25
635 kilograms), with cash costs for the year 19% higher at R162 550/kg.
The rand gold price has been a strong contributor to Harmony`s improved
earnings performance. In addition, Harmony`s focus on back to basics, asset
sales and balance sheet strengthening has been key to extracting value for
all shareholders. Harmony has consistently delivered on the company`s stated
operational plans, while having improved its cash balance and reducing debt.
The R979 million capital raising, where Harmony sold shares for cash, reduced
net debt to R1.1 billion, with the receipt of the payment for the sale of
Randfontein expected to further reduce debt levels.
The ARM balance sheet at 31 December 2008 reflects a marked-to-market
investment in Harmony of R6 217 million, which is based on a Harmony share
price of R97.70. 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 approximately 26% of ARM`s market capitalisation of
R23.5 billion at 31 December 2008, compared to 10% at 30 June 2008.
Harmony`s results for the quarter and six months ended 31 December 2008 can
be viewed on Harmony`s website at www.harmony.co.za
TEAL Exploration & Mining Incorporated
For the period under review, ARM`s investment in exploration of R454 million
(1H F2008: R121 million), reflects 100% of TEAL`s results. This increase in
investment compared to the previous period reflects escalation in exploration
costs, accounting for mining contracts, and impairment of stockpiles.
ARM`s investment in TEAL at its market value represents 5% of ARM`s market
capitalisation of R23.5 billion at 31 December 2008, compared to 2% at 30
June 2008.
On the southern section of the Konkola North property in Zambia, four
exploration drill holes were completed on Area `A` for a total of 2 428
metres over the last three months:
- Borehole KN 44: 16.26m from 1 246 m depth for 7.38% TCu, 1.26% ASCu and
0.034% TCo
- Borehole KN 46: 12.99m from 1 060 m depth for 3.95% TCu, 0.6%ASCu and
0.04% TCo
- Borehole KN 50: 3.42m from 1 028 m depth for 2.19% TCu, 1.76% ASCu and
0.026% TCo
- Borehole KN 51: awaiting assay results
At Kalumines in the DRC, 198 boreholes were drilled over the last three
months for a total of 11 895 metres. Phase two drilling at the Lupoto Copper
Project is now underway and 88 boreholes for 15,280 m have been drilled since
June 2008 to verify both strike and down-dip extensions (to 150 m vertical
depth). TEAL`s small-scale mining operation at Lupoto continues at the
reduced mining rate of 50 000m3 a month.
TEAL`s latest results can be viewed at www.tealmining.com.
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 owns 65% of TEAL
and is in the process of establishing a 50:50 JV with Vale in respect of
TEAL`s assets. Please refer to the Corporate Action section for more details.
Corporate action
On 17 December 2008, ARM announced the proposed transaction to acquire the
shares held by minority shareholders in TEAL Exploration & Mining
Incorporated (TEAL) and to simultaneously introduce Companhia Vale do Rio
Doce (Vale) as a 50% strategic joint venture partner. TEAL will then be
delisted from the Toronto Stock Exchange (TSX) and the JSE Limited. This will
have the net effect of reducing ARM`s shareholding in TEAL to 50%. The cash
offer price to TEAL shareholders and the price ARM will receive for the sale
of its 15% stake in TEAL is C$3.00 per share. On 13 February 2009, TEAL
shareholders approved the transaction with the pre-requisite majority votes
by minority shareholders.
TEAL remains key to ARM`s long term diversification plans, as it is ARM`s
chosen vehicle for expanding its copper interests in Africa. This joint
venture partnership with Vale in respect of TEAL will ensure that risk
exposure, capital allocation, funding and copper mining expertise will be
optimised for the development of a successful copper business in Africa.
The cash purchase price received by minority shareholders and ARM will be
funded by way of an equity investment by Vale in TEAL. This will result in
ARM and Vale forming a 50:50 joint venture for the future development and
operation of TEAL`s assets. Vale will also share in 50% of the bank debt
responsibilities of R850 million, which to date has been solely guaranteed by
ARM.
Completion of the transaction is subject to various conditions, including
receipt of certain regulatory approvals.
ARM Broad-based Black Economic Empowerment Trust
On 5 December 2008 the ARM BBEE Trust, which holds about 10% of the share
capital of African Rainbow Minerals Limited (ARM), made its second cash
distribution of approximately R25 million to its beneficiaries. Therefore,
over the past two years, the total distribution to beneficiaries amounts to
R32 million. The cash distribution will be used to build schools,
laboratories, creches, clinics, hospitals and to fund other community
upliftment projects. This second cash distribution is particularly
significant, given the turbulent global financial markets and weak commodity
prices.
The beneficiaries of the ARM BBEE Trust are the five ARM Provincial Rural
Upliftment Trusts benefiting the poor and the rural communities in the seven
provinces in South Africa, the ARM Women`s Upliftment Trust, various church
trusts, two trade union companies representing approximately 500 000 workers,
as well as entrepreneurs, community leaders, women and youth-owned SMMEs.
Outlook
ARM is well positioned to face the challenging global market conditions.
Despite being in a growth phase, ARM has applied a fairly conservative
approach to the gearing of its balance sheet. Cash has increased to R3.7
billion at 31 December 2008 from R1.2 billion reported a year ago. Gross
borrowings, excluding partner loans, have decreased by R672 million.
The outlook for commodity demand in calendar year 2009 remains weak amidst a
significant downturn in the global economy. ARM is in a good position to
effect any changes that may be necessitated by the demand and prices of the
commodities which we produce. ARM will continue to pursue positive operating
cash flows at all operations focusing on cost control and working capital
management. ARM aims to have its operations to be within the 50th percentile
on the global unit cost curves by 2012.
The announcement in the Budget presentation of a one year delay in the
implementation of the Minerals Royalty Bill is welcomed and will contribute
to the profitability of operations.
ARM`s 2 x 2010 growth strategy remains on track and its long-life assets are
geared to long term which will benefit the Company when the global economy
improves.
Signed on behalf of the board:
P T Motsepe A J Wilkens
Executive Chairman Chief Executive Officer
Johannesburg
23 February 2009
GROUP FINANCIAL BALANCE SHEETS
for the six months ended
31 December 2008 as at 31 December 2008
Unaudited
Six months ended
31 December
2008
Note Rm
ASSETS
Non-current assets
Property, plant and equipment 10 485
Investment property 14
Intangible assets 214
Deferred tax assets 23
Loans and long term receivable 4
Inventories 222
Investment in associate 1 394
Other investments 2 6 298
Current assets 18 654
Inventories 1 927
Trade and other receivables 4 026
Taxation 10
Cash and cash equivalents 3 3 660
9 623
Held for sale assets -
Total assets 28 277
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 11
Share premium 3 737
Other reserves 1 487
Retained earnings 11 152
Equity attributable to equity holders of ARM 16 387
Minority interest 635
Total equity 17 022
Non-current liabilities
Long-term borrowings - interest bearing 4 1 228
Deferred tax liabilities 2 223
Long-term provisions 377
Current liabilities 3 828
Trade and other payables 2 985
Short - term provisions 131
Taxation 1 319
Overdrafts and short-term borrowings - interest bearing 4 2 992
7 427
Total equity and liabilities 28 277
Unaudited Audited
Six months ended Year ended
30 June
2007 2008
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 7 983 9 024
Investment property 14 12
Intangible assets 217 215
Deferred tax assets - 20
Loans and long term receivable - -
Inventories - 178
Investment in associate 846 1 298
Other investments 4 495 6 055
Current assets 13 555 16 802
Inventories 1 069 1 231
Trade and other receivables 2 146 4 150
Taxation - 14
Cash and cash equivalents 1 185 2 660
4 400 8 055
Held for sale assets - 21
Total assets 17 955 24 878
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 11 11
Share premium 3 704 3 733
Other reserves 18 1 366
Retained earnings 6 151 9 766
Equity attributable to equity holders of ARM 9 884 14 876
Minority interest 468 800
Total equity 10 352 15 676
Non-current liabilities
Long-term borrowings - interest bearing 2 904 2 254
Deferred tax liabilities 1 282 2 154
Long-term provisions 201 324
Current liabilities 4 387 4 732
Trade and other payables 1 127 1 515
Short - term provisions 68 184
Taxation 414 1 047
Overdrafts and short-term borrowings - interest
bearing 1 607 1 724
3 216 4 470
Total equity and liabilities 17 955 24 878
GROUP INCOME STATEMENTS
for the six months ended 31 December 2008
Unaudited
Six months ended
31 December
2008
Note Rm
Revenue 6 710
Sales 6 416
Cost of sales (3 158)
Gross profit 3 258
Other operating income 630
Other operating expenses (575)
Profit from operations before exceptional items 3 313
Income from investments 205
Finance costs (224)
Income from associate * 180
Profit before taxation and exceptional items 3 474
Exceptional items 5 (33)
Profit before taxation 3 441
Taxation 7 (1 375)
Profit for the period 2 066
Attributable to:
Minority interest (165)
Equity holders of ARM 2 231
Additional information 2 066
Headline earnings (R million) 6 2 232
Headline earnings per share (cents) 1 055
Basic earnings per share (cents) 1 054
Fully diluted basic earnings per share (cents) 1 037
Fully diluted headline earnings per share (cents) 1 037
Number of shares in issue at end of period (thousand) 211 631
Weighted average number of shares in issue (thousand) 211 611
Weighted average number of shares used in calculating
fully diluted earnings per share (thousand) 215 187
Net asset value per share (cents) 7 743
EBITDA before exceptional items (R million) 3 675
* Exceptional items included in income from
associate (R million) 27
Dividend declared after year end (cents) -
Unaudited Audited
Six months ended Year ended
30 June
2007 2008
Rm Rm
Revenue 4 119 12 919
Sales 3 991 12 590
Cost of sales (2 319) (5 516)
Gross profit 1 672 7 074
Other operating income 142 460
Other operating expenses (308) (856)
Profit from operations before exceptional items 1 506 6 678
Income from investments 52 168
Finance costs (209) (438)
Income from associate * 9 461
Profit before taxation and exceptional items 1 358 6 869
Exceptional items 135 162
Profit before taxation 1 493 7 031
Taxation (526) (2 084)
Profit for the period 967 4 947
Attributable to:
Minority interest 97 460
Equity holders of ARM 870 4 487
Additional information 967 4 947
Headline earnings (R million) 741 4 013
Headline earnings per share (cents) 353 1 906
Basic earnings per share (cents) 414 2 131
Fully diluted basic earnings per share (cents) 408 2 093
Fully diluted headline earnings per share (cents) 347 1 872
Number of shares in issue at end of period
(thousand) 210 642 211 556
Weighted average number of shares in issue
(thousand) 210 013 210 580
Weighted average number of shares used in
calculating
fully diluted earnings per share (thousand) 213 434 214 347
Net asset value per share (cents) 4 692 7 032
EBITDA before exceptional items (R million) 1 740 7 229
* Exceptional items included in income from
associate (R million) - 317
Dividend declared after year end (cents) - 400
STATEMENT OF CHANGE IN EQUITY
for the six months ended 31 December 2008
Share Revaluation
capital and of listed
premium investments
Rm Rm
Six months ended 31 December 2008 (Unaudited)
Balance at 30 June 2008 3 744 1 190
Profit for the period - -
Net impact of revaluation of listed investment - 148
Revaluation of listed investment - 172
Deferred tax on revaluation of listed investment - (24)
Share based payments - -
Share options exercised 4 -
Realignment of currency - -
Dividend paid - -
Other - -
Balance at 31 December 2008 3 748 1 338
Six months ended 31 December 2007 (Unaudited)
Balance at 30 June 2007 3 677 1 467
Profit for the period - -
Net impact of revaluation of listed investment - (1 621)
Revaluation of listed investment - (1 896)
Deferred tax on revaluation of listed investment - 275
Share based payments - -
Share options exercised 38 -
Sale of share in investment - -
Dividends paid - -
Other - -
Balance at 31 December 2007 3 715 (154)
Year ended 30 June 2007 (Audited)
Balance at 30 June 2007 3 677 1 467
Profit for the year - -
Net impact of revaluation of listed investment - (277)
Revaluation of listed investment - (335)
Deferred tax on revaluation of listed investment - 58
Share based payments - -
Share options exercised 67 -
Realignment of currency - -
Minorities bought out in copperbelt venture - -
Dividends paid - -
Other - -
Balance at 30 June 2008 3 744 1 190
Retained
Other earnings
Rm Rm
Six months ended 31 December 2008 (Unaudited)
Balance at 30 June 2008 176 9 766
Profit for the period - 2 231
Net impact of revaluation of listed investment - -
Revaluation of listed investment - -
Deferred tax on revaluation of listed investment - -
Share based payments 36 -
Share options exercised - -
Realignment of currency (61) -
Dividend paid - (847)
Other (2) 2
Balance at 31 December 2008 149 11 152
Six months ended 31 December 2007 (Unaudited)
Balance at 30 June 2007 137 5 597
Profit for the period - 870
Net impact of revaluation of listed investment - -
Revaluation of listed investment - -
Deferred tax on revaluation of listed investment - -
Share based payments 35 -
Share options exercised - -
Sale of share in investment - -
Dividends paid - (315)
Other - (1)
Balance at 31 December 2007 172 6 151
Year ended 30 June 2007 (Audited)
Balance at 30 June 2007 137 5 597
Profit for the year - 4 487
Net impact of revaluation of listed investment - -
Revaluation of listed investment - -
Deferred tax on revaluation of listed investment - -
Share based payments 74 -
Share options exercised - -
Realignment of currency (6) -
Minorities bought out in copperbelt venture (29) -
Dividends paid - (315)
Other - (3)
Balance at 30 June 2008 176 9 766
Total
shareholders Minority
of ARM Interest
Rm Rm
Six months ended 31 December 2008 (Unaudited)
Balance at 30 June 2008 14 876 800
Profit for the period 2 231 (165)
Net impact of revaluation of listed investment 148 -
Revaluation of listed investment 172 -
Deferred tax on revaluation of listed investment (24) -
Share based payments 36 -
Share options exercised 4 -
Realignment of currency (61) -
Dividend paid (847) -
Other - -
Balance at 31 December 2008 16 387 635
Six months ended 31 December 2007 (Unaudited)
Balance at 30 June 2007 10 878 340
Profit for the period 870 97
Net impact of revaluation of listed investment (1 621) -
Revaluation of listed investment (1 896) -
Deferred tax on revaluation of listed investment 275 -
Share based payments 35 -
Share options exercised 38 -
Sale of share in investment - 31
Dividends paid (315) -
Other (1) -
Balance at 31 December 2007 9 884 468
Year ended 30 June 2007 (Audited)
Balance at 30 June 2007 10 878 340
Profit for the year 4 487 460
Net impact of revaluation of listed investment (277) -
Revaluation of listed investment (335) -
Deferred tax on revaluation of listed investment 58 -
Share based payments 74 -
Share options exercised 67 -
Realignment of currency (6) -
Minorities bought out in copperbelt venture (29) -
Dividends paid (315) -
Other (3) -
Balance at 30 June 2008 14 876 800
Total
Rm
Six months ended 31 December 2008 (Unaudited)
Balance at 30 June 2008 15 676
Profit for the period 2 066
Net impact of revaluation of listed investment 148
Revaluation of listed investment 172
Deferred tax on revaluation of listed investment (24)
Share based payments 36
Share options exercised 4
Realignment of currency (61)
Dividend paid (847)
Other -
Balance at 31 December 2008 17 022
Six months ended 31 December 2007 (Unaudited)
Balance at 30 June 2007 11 218
Profit for the period 967
Net impact of revaluation of listed investment (1 621)
Revaluation of listed investment (1 896)
Deferred tax on revaluation of listed investment 275
Share based payments 35
Share options exercised 38
Sale of share in investment 31
Dividends paid (315)
Other (1)
Balance at 31 December 2007 10 352
Year ended 30 June 2007 (Audited)
Balance at 30 June 2007 11 218
Profit for the year 4 947
Net impact of revaluation of listed investment (277)
Revaluation of listed investment (335)
Deferred tax on revaluation of listed investment 58
Share based payments 74
Share options exercised 67
Realignment of currency (6)
Minorities bought out in copperbelt venture (29)
Dividends paid (315)
Other (3)
Balance at 30 June 2008 15 676
GROUP CASH FLOW STATEMENTS
for the six months ended 31 December 2008
Unaudited Unaudited Audited
Six months ended Year ended
31 December 30 June
2008 2007 2008
Rm Rm Rm
CASH FLOW FROM OPERATING
ACTIVITIES
Cash receipts from customers 7 017 3 870 10 876
Cash paid to suppliers and
employees (2 464) (2 305) (5 701)
Cash generated from operations 4 553 1 565 5 175
Interest received 204 52 166
Interest paid (140) (140) (412)
Dividends received 85 - 21
Dividends paid to ARM
shareholders (847) (315) (315)
Taxation paid (1 057) (164) (466)
Net cash inflow from
operating activities 2 798 998 4 169
CASH FLOW FROM INVESTING
ACTIVITIES
Additions to property, plant
and equipment to maintain operations (745) (583) (1 194)
Additions to property, plant
and equipment to expand operations (1 031) (778) (1 465)
Proceeds on disposal of
property, plant and equipment 6 27 28
Proceeds on disposal of 50 %
of Nkomati - final tranche payment - - 135
Proceeds on sale of interest
in Otjikoto - - 32
Proceeds on sale of interest
in Zambian properties - - 37
Received from minorities on
sale of investment - 31 -
Dividend received from
investment in associate - 20 -
Net cash outflow from
investing activities (1 770) (1 283) (2 427)
CASH FLOW FROM FINANCING
ACTIVITIES
Proceeds on exercise of share options 4 38 66
Long-term borrowings raised 225 194 558
Long-term borrowings repaid (81) (80) (804)
(Decrease) / increase in
short-term borrowings (211) 257 5
Net cash (outflow) inflow
from financing activities (63) 409 (175)
Net increase in cash and cash
equivalents 965 124 1 567
Cash and cash equivalents at
beginning of period 2 594 1 039 1 039
Foreign currency translation
on cash balances (11) (1) (12)
Cash and cash equivalents at
end of period 3 548 1 162 2 594
Cash generated from
operations per share (cents) 2 152 745 2 457
NOTE TO THE FINANCIAL STATEMENTS
for the six months ended 31 December 2008
1. Basis of preparation
The results for the half-year have been prepared in accordance with the
International Financial Reporting Standards (IFRS) 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.
These consolidated financial statements are prepared in accordance with IAS
34 - interim financial reporting.
The financial information for the half-year ended 31 December 2008 has been
prepared adopting the same accounting policies used in the most recent annual
financial statements.
The group has adopted all the new and revised standards and interpretations
issued by the International Financial Reporting Interpretation Committee
(IFRIC) of the IASB that are effective 1 July 2008. There were no financial
effects as a result of these.
Unaudited Unaudited Audited
Six months ended Year ended
31 December 30 June
2008 2007 2008
Rm Rm Rm
2. INVESTMENTS
Listed
Opening balance 6 055 6 391 6 391
Unrealised revaluation gain /
(loss) for the period 172 (1 896) (335)
Other 71 - (1)
Total carrying amount of investments 6 298 4 495 6 055
3. CASH AND CASH EQUIVALENTS
- African Rainbow Minerals Limited 643 31 326
- Assmang Limited 2 144 72 1 424
- ARM Coal (Proprietary) Limited 7 1 7
- ARM Platinum (Proprietary) Limited 450 231 509
- Kingfisher Insurance Co Limited 127 100 94
- Mannequin Insurance PPC
Limited (cell AVL 18) 176 16 17
- Nkomati 68 31 159
- Two Rivers Platinum
(Proprietary) Limited 38 660 109
- Teal Exploration & Mining Inc 7 43 15
Cash and cash equivalents per
balance sheet 3 660 1 185 2 660
Less overdrafts - included in
overdrafts and short term borrowings 112 23 66
Cash and cash equivalents per cashflow 3 548 1 162 2 594
Unaudited Unaudited Audited
Six months ended Year ended
31 December 30 June
2008 2007 2008
Rm Rm Rm
4. BORROWINGS
Long-term borrowings are held as follows
- African Rainbow Minerals Limited - 1 258 1 217
- Assmang Limited 9 114 14
- ARM Coal (Proprietary)
Limited (partner loan) 1 069 617 847
- ARM Platinum (Proprietary) Limited 3 184 1
- Two Rivers Platinum
(Proprietary) Limited 147 731 161
- Teal Exploration & Mining Inc - - 14
1 228 2 904 2 254
Overdrafts and short-term
borrowings are held as follows:
- African Rainbow Minerals Limited 1 344 18 69
- Assmang Limited 7 398 256
- ARM Platinum (Proprietary) Limited 35 112 255
- ARM Coal (Proprietary) Limited
(partner loan) - - 10
- Nkomati 97 - -
- Teal Exploration & Mining Inc 850 244 436
- Two Rivers Platinum
(Proprietary) Limited - Short
- term borrowings 73 178 63
- Two Rivers Platinum
(Proprietary) Limited -
Implats shareholders loan
(partner loan) 586 657 635
2 992 1 607 1 724
Total borrowings 4 220 4 511 3 978
Interest of R71 Million was
capitalised for the half
-year ended 31 December 2008
(31 December 2007: R 22
Million, 30 June 2008: R89 Million).
5. EXCEPTIONAL ITEMS
Impairment of property,
plant and equipment (30) - (51)
Profit on sale of interest in Otjikoto - - 32
Profit on sale of interest in
Zambian properties - - 46
Surplus on disposal of 50 per
cent of Nkomati mine; final
tranche payment - 135 135
Other (3) - -
Exceptional items per income
statement (33) 135 162
Impairment of assets - (6) -
Profit / (loss) on disposal
of property, plant and equipment 5 - (10)
Profit on asset swap in DTJV
- ARM Coal 27 - 317
Taxation - - 5
Net exceptional items (1) 129 474
6. HEADLINE EARNINGS
Basic earnings per income statement 2 231 870 4 487
Impairment of assets 30 6 51
(Profit) / loss on sale of
property, plant and equipment (5) - 10
Profit on asset swap in DTJV
- ARM Coal (27) - (317)
Profit on sale of interest in
Otjikoto - - (32)
Profit on sale of interest in
Zambian properties - - (46)
Surplus on disposal of 50 per
cent of Nkomati mine - (135) (135)
Other 3 - -
2 232 741 4 018
Taxation - - (5)
Headline earnings 2 232 741 4 013
7. TAXATION
South African normal tax - current year 973 317 1 019
State share of profits 245 36 238
Deferred tax - current year 41 147 819
- rate adjustment - - (36)
Secondary Tax on Companies 116 26 44
1 375 526 2 084
8 COMMITMENTS AND CONTINGENT LIABILITIES
Commitments in respect of future capital expenditure which will be funded
from operating cash flows and by utilising debt facilities at entity and
corporate levels, are summarised below :
Approved by directors
- contracted for 1 498 1 416 1 469
- not contracted for 1 715 2 243 1 331
Total commitments 3 213 3 659 2 800
Contingent liabilities
Shareholders are advised that there have been no significant changes to the
contingent liabilities of the group as disclosed in the June 2008 annual
report.
for the six months ended 31 December 2008
ARM Platinum Division
Platinum Nickel
Rm Rm
9. SEGMENTAL INFORMATION
Primary segmental information
Six months ended 31 December 2008 (Unaudited)
Sales
External sales 563 250
Cost of sales (1 144) (225)
Other operating income 4 36
Other operating expenses 5 (29)
Segment result (572) 32
Income from investments 52 5
Finance cost (46) (1)
Finance cost Implats : Shareholders loan Two Rivers (36) -
Finance cost ARM : Shareholders loan Two Rivers (44) -
Income from associate - -
Exceptional items - (1)
Taxation 188 (12)
Minority interest 165 -
Contribution to earnings (293) 23
Contribution to headline earnings (293) 24
Other information
Segment assets excluding investment in associate 5 508 1 330
Investment in associate
Segment liabilities 1 287 247
Taxation
Consolidated total liabilities
Cash in / (out) flow from operating activities 629 177
Cash in / (out) flow from investing activities (290) (449)
Cash in / (out) flow from financing activities (368) 97
Capital expenditure 275 452
Amortisation and depreciation 166 12
EBITDA (before exceptional items) (406) 44
Six months ended 31 December 2007 (Unaudited)
Sales
External sales 1 338 398
Cost of sales (782) (195)
Other operating income 2 14
Other operating expenses (8) (18)
Segment result 550 199
Income from investments 33 2
Finance cost (77) -
Finance cost Implats : Shareholders loan Two Rivers (32) -
Finance cost ARM : Shareholders loan Two Rivers (39) -
Income from associate - -
Exceptional items - -
Taxation (132) (57)
Minority interest (97) -
Contribution to earnings 206 144
Contribution to headline earnings 206 150
Other information
Segment assets excluding investment in associate 5 773 654
Investment on associate
Segment liabilities 2 179 60
Taxation - -
Consolidated total liabilities
Cash in / (out) flow from operating activities 632 165
Cash in / (out) flow from investing activities (267) (103)
Cash in / (out) flow from financing activities (80) -
Capital expenditure 267 103
Amortisation and depreciation 98 10
EBITDA (before exceptional items) 648 209
Ferrous
metals Coal
Rm Rm
9. SEGMENTAL INFORMATION
Primary segmental information
Six months ended 31 December 2008 (Unaudited)
Sales
External sales 5 464 88
Cost of sales (1 562) (47)
Other operating income 478 -
Other operating expenses (168) -
Segment result 4 212 41
Income from investments 105 -
Finance cost (14) (9)
Finance cost Implats : Shareholders loan Two Rivers - -
Finance cost ARM : Shareholders loan Two Rivers - -
Income from associate - 180
Exceptional items - -
Taxation (1 486) (9)
Minority interest - -
Contribution to earnings 2 817 203
Contribution to headline earnings 2 812 176
Other information
Segment assets excluding investment in associate 9 726 1 762
Investment in associate 1 394
Segment liabilities 1 042 1 563
Taxation
Consolidated total liabilities
Cash in / (out) flow from operating activities 2 871 227
Cash in / (out) flow from investing activities (746) (276)
Cash in / (out) flow from financing activities (253) 142
Capital expenditure 729 347
Amortisation and depreciation 166 12
EBITDA (before exceptional items) 4 373 53
Six months ended 31 December 2007 (Unaudited)
Sales
External sales 2 192 35
Cost of sales (1 287) (31)
Other operating income 40 -
Other operating expenses (81) -
Segment result 864 4
Income from investments 4 -
Finance cost (3) (8)
Finance cost Implats : Shareholders loan Two Rivers - -
Finance cost ARM : Shareholders loan Two Rivers - -
Income from associate - 9
Exceptional items - -
Taxation (291) 1
Minority interest - -
Contribution to earnings 574 6
Contribution to headline earnings 574 6
Other information
Segment assets excluding investment in associate 3 969 1 658
Investment on associate 846
Segment liabilities 1 131 686
Taxation - -
Consolidated total liabilities
Cash in / (out) flow from operating activities 640 52
Cash in / (out) flow from investing activities (764) (116)
Cash in / (out) flow from financing activities 189 85
Capital expenditure 761 160
Amortisation and depreciation 113 1
EBITDA (before exceptional items) 977 14
Exploration Corporate
and Other
Rm Rm
9. SEGMENTAL INFORMATION
Primary segmental information
Six months ended 31 December 2008 (Unaudited)
Sales
External sales 51 -
Cost of sales (188) 8
Other operating income 2 110
Other operating expenses (296) (87)
Segment result (431) 31
Income from investments 2 41
Finance cost (21) (53)
Finance cost Implats : Shareholders loan Two
Rivers - -
Finance cost ARM : Shareholders loan Two Rivers - -
Income from associate - -
Exceptional items (30) (2)
Taxation (4) (52)
Minority interest - -
Contribution to earnings (484) (35)
Contribution to headline earnings (454) (33)
Other information
Segment assets excluding investment in associate 434 1 906
Investment in associate
Segment liabilities 1 043 2 531
Taxation
Consolidated total liabilities
Cash in / (out) flow from operating activities (397) (709)
Cash in / (out) flow from investing activities (8) (1)
Cash in / (out) flow from financing activities 311 8
Capital expenditure 9 -
Amortisation and depreciation 11 -
EBITDA (before exceptional items) (420) 31
Six months ended 31 December 2007 (Unaudited)
Sales
External sales 28 -
Cost of sales (24) -
Other operating income - 86
Other operating expenses (120) (81)
Segment result (116) 5
Income from investments 1 12
Finance cost (5) (45)
Finance cost Implats : Shareholders loan Two
Rivers - -
Finance cost ARM : Shareholders loan Two Rivers - -
Income from associate - -
Exceptional items - 135
Taxation (1) (46)
Minority interest - -
Contribution to earnings (121) 61
Contribution to headline earnings (121) (74)
Other information
Segment assets excluding investment in associate 214 357
Investment on associate
Segment liabilities 310 1 541
Taxation - -
Consolidated total liabilities
Cash in / (out) flow from operating activities (141) (350)
Cash in / (out) flow from investing activities (33) -
Cash in / (out) flow from financing activities 175 40
Capital expenditure 63 1
Amortisation and depreciation 2 1
EBITDA (before exceptional items) (114) 6
Gold
Rm Total
9. SEGMENTAL INFORMATION
Primary segmental information
Six months ended 31 December 2008 (Unaudited)
Sales
External sales - 6 416
Cost of sales - (3 158)
Other operating income - 630
Other operating expenses - (575)
Segment result - 3 313
Income from investments - 205
Finance cost - (144)
Finance cost Implats : Shareholders loan Two Rivers - (36)
Finance cost ARM : Shareholders loan Two Rivers - (44)
Income from associate - 180
Exceptional items - (33)
Taxation - (1 375)
Minority interest - 165
Contribution to earnings - 2 231
Contribution to headline earnings - 2 232
Other information
Segment assets excluding investment in associate 6 217 26 883
Investment in associate 1 394
Segment liabilities - 7 713
Taxation 3 542
Consolidated total liabilities 11 255
Cash in / (out) flow from operating activities - 2 798
Cash in / (out) flow from investing activities - (1 770)
Cash in / (out) flow from financing activities - (63)
Capital expenditure - 1 812
Amortisation and depreciation - 367
EBITDA (before exceptional items) 3 675
Six months ended 31 December 2007 (Unaudited)
Sales
External sales - 3 991
Cost of sales - (2 319)
Other operating income - 142
Other operating expenses - (308)
Segment result - 1 506
Income from investments - 52
Finance cost - (138)
Finance cost Implats : Shareholders loan Two Rivers - (32)
Finance cost ARM : Shareholders loan Two Rivers - (39)
Income from associate - 9
Exceptional items - 135
Taxation - (526)
Minority interest - (97)
Contribution to earnings - 870
Contribution to headline earnings - 741
Other information
Segment assets excluding investment in associate 4 484 17 109
Investment on associate 846
Segment liabilities - 5 907
Taxation - 1 696
Consolidated total liabilities 7 603
Cash in / (out) flow from operating activities - 998
Cash in / (out) flow from investing activities - (1 283)
Cash in / (out) flow from financing activities - 409
Capital expenditure - 1 355
Amortisation and depreciation - 225
EBITDA (before exceptional items) - 1 740
ARM Platinum Division
Platinum Nickel
Rm Rm
9 SEGMENTAL INFORMATION (continued)
Year ended 30 June 2008 (Audited)
Total Sales 3 943 998
Inter - group sales to ARM ferrous - 12
Sales 3 943 986
Cost of sales (1 785) (419)
Other operating income 6 46
Other operating expenses (31) (11)
Segment result 2 133 602
Income from investments 93 6
Finance cost (311) (1)
Income from associate - -
Exceptional items - (7)
Taxation (540) (173)
Minority interest (460) -
Contribution to earnings 915 427
Contribution to headline earnings 915 432
Other information
Segment assets excluding investment in associate 6 513 1 081
Investment in associate
Segment liabilities 1 563 112
Unallocated - Deferred taxation and taxation
Consolidated total liabilities
Cash in / (out) flow from operating activities 1 369 518
Cash in / (out) flow from investing activities (508) (292)
Cash in / (out) flow from financing activities (776) -
Capital expenditure 547 292
Amortisation and depreciation 241 20
EBITDA (before exceptional items) 2 374 622
Ferrous
metals Coal
Rm Rm
9 SEGMENTAL INFORMATION (continued)
Year ended 30 June 2008 (Audited)
Total Sales 7 418 96
Inter - group sales to ARM ferrous - -
Sales 7 418 96
Cost of sales (3 193) (51)
Other operating income 217 -
Other operating expenses (350) -
Segment result 4 092 45
Income from investments 36 -
Finance cost (14) (13)
Income from associate - 461
Exceptional items - -
Taxation (1 346) (1)
Minority interest - -
Contribution to earnings 2 768 492
Contribution to headline earnings 2 775 175
Other information
Segment assets excluding investment in associate 7 771 1 094
Investment in associate 1 298
Segment liabilities 1 196 930
Unallocated - Deferred taxation and taxation
Consolidated total liabilities
Cash in / (out) flow from operating activities 3 005 103
Cash in / (out) flow from investing activities (1 360) (361)
Cash in / (out) flow from financing activities (51) 274
Capital expenditure 1 394 414
Amortisation and depreciation 264 6
EBITDA (before exceptional items) 4 366 51
Exploration Corporate
and Other
Rm Rm
9 SEGMENTAL INFORMATION (continued)
Year ended 30 June 2008 (Audited)
Total Sales 147 -
Inter - group sales to ARM ferrous - -
Sales 147 -
Cost of sales (72) 4
Other operating income - 191
Other operating expenses (271) (193)
Segment result (196) 2
Income from investments 2 31
Finance cost (15) (84)
Income from associate - -
Exceptional items 34 135
Taxation (2) (22)
Minority interest - -
Contribution to earnings (177) 62
Contribution to headline earnings (211) (73)
Other information
Segment assets excluding investment in associate 413 663
Investment in associate
Segment liabilities 608 1 592
Unallocated - Deferred taxation and taxation
Consolidated total liabilities
Cash in / (out) flow from operating activities (344) (482)
Cash in / (out) flow from investing activities (41) 135
Cash in / (out) flow from financing activities 353 25
Capital expenditure 130 2
Amortisation and depreciation 10 -
EBITDA (before exceptional items) (186) 2
Gold
Rm Total
9 SEGMENTAL INFORMATION (continued)
Year ended 30 June 2008 (Audited)
Total Sales - 12 602
Inter - group 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 earnings - 4 487
Contribution to headline earnings - 4 013
Other information
Segment assets excluding investment in associate 6 045 23 580
Investment in associate 1 298
Segment liabilities - 6 001
Unallocated - Deferred taxation and taxation 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 (before exceptional items) - 7 229
Additional information
The ARM platinum segment is analysed further into Two Rivers Platinum (Pty)
Limited and ARM Platinum (Pty) Limited which includes Modikwa platinum mine.
Two rivers Modikwa Platinum
Rm Rm Rm
Platinum
SEGMENTAL INFORMATION
Six months ended 31 December 2008
(Unaudited)
Sales
External sales 320 243 563
Cost of sales (695) (449) (1 144)
Other operating income 4 - 4
Other operating expenses (5) 10 5
Segment result (376) (196) (572)
Income from investments 16 36 52
Finance cost (18) (28) (46)
Finance cost Implats : Shareholders
loan Two Rivers (36) - (36)
Finance cost ARM : Shareholders loan
Two Rivers (44) - (44)
Taxation 133 55 188
Minority interest 143 22 165
Contribution to earnings (182) (111) (293)
Contribution to headline earnings (182) (111) (293)
Other information
Segment assets 2 822 2 686 5 508
Segment liabilities 1 002 285 1 287
Cash in / (out) flow from operating
activities 355 274 629
Cash in / (out) flow from investing
activities (154) (136) (290)
Cash in / (out) flow from financing
activities (157) (211) (368)
Capital expenditure 139 136 275
Amortisation and depreciation 133 33 166
EBITDA (before exceptional items) (243) (163) (406)
Six months ended 31 December 2007
(Unaudited)
Sales
External sales 768 570 1 338
Cost of sales (423) (359) (782)
Other operating expenses 2 - 2
Other operating expenses (2) (6) (8)
Segment result 345 205 550
Income from investments 26 7 33
Finance cost (53) (24) (77)
Finance cost Implats : Shareholders
loan Two Rivers (32) - (32)
Finance cost ARM : Shareholders loan
Two Rivers (39) - (39)
Taxation (74) (58) (132)
Minority interest (75) (22) (97)
Contribution to earnings 98 108 206
Contribution to headline earnings 98 108 206
Other information
Segment assets 3 341 2 432 5 773
Segment liabilities 1 744 435 2 179
Cash in / (out) flow from operating
activities 426 206 632
Cash in / (out) flow from investing
activities (185) (82) (267)
Cash in / (out) flow from financing
activities (24) (56) (80)
Capital expenditure 185 82 267
Amortisation and depreciation 56 42 98
EBITDA (before exceptional items) 401 247 648
Iron ore Manganese Chrome
division division division
Rm Rm Rm
Proforma analysis of the Ferrous
segment on a 100% basis
SEGMENTAL INFORMATION
Six months ended 31 December 2008
(Unaudited)
Sales
External sales 2 920 6 884 1 123
Other operating income 360 582 139
Other operating expenses (98) (243) (118)
Operating profit 2 171 5 618 637
Contribution to earnings 1 542 3 641 454
Contribution to headline earnings 1 532 3 642 454
Other information
Segment assets 5 706 11 669 2 339
Segment liabilities 1 880 1 688 468
Taxation (306) 2 463 227
Cash in / (out) flow from operating
activities 1 443 1 688 309
Cash in / (out) flow from investing
activities (863) (409) (219)
Cash in / (out) flow from financing
activities (368) - (139)
Capital expenditure 875 409 219
Amortisation and depreciation 159 112 62
EBITDA (before exceptional items) 2 330 5 730 699
Six months ended 31 December 2007
(Unaudited)
Sales
External sales 1 149 2 459 776
Other operating income 10 62 19
Other operating expenses (54) (77) (42)
Operating profit 368 1 204 155
Contribution to earnings 264 776 106
Contribution to headline earnings 264 776 106
Other information
Segment assets 4 584 3 288 1 934
Segment liabilities 2 077 (815) 1 062
Taxation 429 856 260
Cash in / (out) flow from operating
activities 387 774 (6)
Cash in / (out) flow from investing
activities (1 312) (163) (52)
Cash in / (out) flow from operating
activities 870 (577) 75
Capital expenditure 1 366 163 55
Amortisation and depreciation 85 91 50
EBITDA (before exceptional items) 453 1 295 205
Ferrous Attributable
Total to ARM
Rm Rm
Proforma analysis of the Ferrous
segment on a 100% basis
SEGMENTAL INFORMATION
Six months ended 31 December 2008 (Unaudited)
Sales
External sales 10 927 5 464
Other operating income 1 081 478
Other operating expenses (459) (168)
Operating profit 8 426 4 212
Contribution to earnings 5 637 2 817
Contribution to headline earnings 5 628 2 812
Other information
Segment assets 19 714 9 726
Segment liabilities 4 036 1 042
Taxation 2 384 -
Cash in / (out) flow from operating activities 3 440 2 871
Cash in / (out) flow from investing activities (1 491) (746)
Cash in / (out) flow from financing activities (507) (253)
Capital expenditure 1 503 729
Amortisation and depreciation 333 166
EBITDA (before exceptional items) 8 759 4 373
Six months ended 31 December 2007 (Unaudited)
Sales
External sales 4 384 2 192
Other operating income 91 40
Other operating expenses (173) (81)
Operating profit 1 727 864
Contribution to earnings 1 146 574
Contribution to headline earnings 1,146 574
Other information
Segment assets 9 806 3 969
Segment liabilities 2 324 1 131
Taxation 1 545 -
Cash in / (out) flow from operating activities 1 155 640
Cash in / (out) flow from investing activities (1 527) (764)
Cash in / (out) flow from operating activities 368 189
Capital expenditure 1 584 761
Amortisation and depreciation 226 113
EBITDA (before exceptional items) 1 953 977
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
Acting Company Secretary
Marilyn Taylor
Telephone: +27 11 779 1402
E-mail: marilyn.taylor@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**
LA Shiels
Dr RV Simelane**
MV Sisulu**
JC Steenkamp
ZB Swanepoel*
*Non-executive
**Independent non-executive
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.
Sandton
23 February 2009
Sponsor to ARM:
Deutsche Securities (SA) (Proprietary) Limited
Date: 23/02/2009 07:05:11 Produced by the JSE SENS Department.
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