| Wed 9 Sep 2009, 7:38 | | MTX - Metorex - Quarterly And Reviewed Financial Year End Results For 30 June |
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MTX
MEMTX
MTX - Metorex - Quarterly And Reviewed Financial Year End Results For 30 June
2009 And Further Cautionary Announcement
METOREX LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1934/005478/06)
Share code: MTX
ISIN: ZAE000022745
Issuer code: MEMTX
("Metorex" or "the Company" or "the Group")
A NEW FOCUS FOR THE FUTURE
- Quarterly and reviewed financial year end results for 30 June 2009
and further cautionary announcement
- Pan African shareholding sold for R386 million with effect 1 July 2009
- Vergenoeg BEE transaction announced for R109 million
- Quarterly production improved at Ruashi, Chibuluma, Sable and Consolidated
Murchison
- Output reduced at Vergenoeg as a result of tight market conditions
- Initial Resource and Reserve review at Ruashi completed
Consolidated income statement
R`000 Year ended Year ended
30 June 2008 30 June 2009
(Restated)* (Reviewed)
Mineral sales
Copper 1 247 710 866 407
Fluorspar 255 643 304 637
Cobalt 111 436 70 677
Gross revenue 1 614 789 1 241 721
Realisation costs 268 715 204 894
On-mine revenue 1 346 074 1 036 827
Cost of production 597 135 748 813
Stock movement (50 306) 24 824
Mining profit before depreciation 799 245 263 190
Depreciation 95 648 122 234
Mining profit 703 597 140 956
Other (expenditure) income (22 425) 147 623
Impairments - (2 273 429)
Income (loss) before finance costs 681 172 (1 984 850)
Finance income 7 764 7 871
Finance costs (9 287) (7 621)
Income (loss) before taxation 679 649 (1 984 600)
Taxation 219 786 (380 785)
Income (loss) after taxation 459 863 (1 603 815)
Asset held for sale, net of taxation 245 090 63 809
Discontinued operations (8 859) (438)
Income (loss) for the year 696 094 (1 540 444)
Attributable to:
Equity holders of the parent 554 552 (1 507 218)
Minority interest 141 542 (33 226)
696 094 (1 540 444)
Earnings per share (cents) 159,40 (272,38)
Diluted earnings per share (cents) 156,50 (272,38)
Headline earnings per share is calculated
using the following:
Income attributable to ordinary 554 552 (1 507 218)
shareholders
Profit on the reverse acquisition of PAR (105 220) -
Impairments - 2 273 429
Tax on impairments - (474 642)
Minorities on impairments - (159 230)
Loss/(profit) on the sale of fixed assets 31 (431)
Discontinued operations 8 859 438
Headline earnings (R`000) 458 222 132 346
Headline earnings per share (cents) 131,70 23,92
Diluted headline earnings per share 129,3 23,92
(cents)
Weighted average shares in issue (`000) 347 797 553 349
Shares in issue (`000) 369 173 742 538
* Restated for assets held for sale
Condensed consolidated balance sheet
R`000 Year ended Year ended
30 June 2008 30 June 2009
(Restated)* (Reviewed)
ASSETS
Non-current assets
Property, plant, equipment, mineral 5 525 383 4 898 487
rights and other
Goodwill 11 514 11 514
Investments 3 443 16 648
Rehabilitation trust funds 6 450 779
Derivative instrument 189 94 942
Deferred tax asset 1 354 -
5 548 333 5 022 370
Current assets 300 143 264 051
Inventories 572 101 447 638
Trade and other receivables 13 900 6 194
Prepaid taxation 119 066 73 553
Bank balances and cash 1 005 210 791 436
1 058 139 712 088
Assets held for sale, net 7 611 682 6 525 894
Total assets
EQUITY AND LIABILITIES
Equity attributable to equity holders 3 450 104 2 399 459
of the parent
Minority interest 683 570 457 208
Total equity 4 133 674 2 856 667
Non-current liabilities
Long-term liabilities - interest bearing 1 342 935 1 415 563
Long-term provisions 172 637 181 310
Deferred tax liabilities 848 631 469 292
2 364 203 2 066 165
Current liabilities
Trade and other payables 512 638 557 831
Short-term borrowings - interest bearing 175 296 695 604
Short-term provisions 25 059 35 065
Derivative instruments 273 888 230 240
Taxation 109 189 29 999
Bank overdraft 17 735 54 323
1 113 805 1 603 062
Total equity and liabilities 7 611 682 6 525 894
Net asset value per share (cents) 935 323
Net tangible asset value per share 931 322
(cents)
* Restated for assets held for sale
Condensed consolidated cash flow statement
R`000 Year ended Year ended
30 June 30 June
2008 2009
(Audited) (Reviewed)
Cash inflows (outflows) from operating activities 784 956 121 602
Cash outflows from investing activities (1 849 615) (1 393 693)
Cash inflows from financing activities 1 137 289 1 191 426
Net increase/(decrease) in cash and cash 72 630 (80 665)
equivalents
Cash at beginning of year 54 558 101 331*
Effect of foreign exchange rate changes 2 516 (1 436)
Cash at end of year 129 704 19 230
Acquisition of CRC 53 867 -
Cash at end of year - continuing operations 183 571 19 230
Cash at end of year - discontinuing operations - 23 191
Cash at end of year - continuing and 183 571 42 421
discontinuing operations
*Adjusted for assets held for sale
Condensed statement of changes in equity
R`000 Year ended Year ended
30 June 30 June
2008 2009
(Audited) (Reviewed)
Shareholders` equity at start of year 2 003 703 4 133 674
Ordinary shares issued 1 003 476 723 727
Hedging, translation reserve and equity reserves (53 393) (292 943)
Profit (loss) for the year 554 552 (1 507 218)
Share option equity 11 457 25 789
Minority interests 613 879 (226 362)
Total equity 4 133 674 2 856 667
Commentary
Johannesburg: 9 September 2009: Metorex Limited today announced Group headline
earnings per share reduced significantly to 24 cents per share for the year
ended 30 June 2009. This excludes the effect of impairment charges of R2,3
billion (R1,6 billion after taxation and minorities). Earnings for the year
amounted to a loss of 272 cents per share. The Group liquidity situation
continues to improve through sales of non-core assets and increased production
out of the new Ruashi mining project. The Group is still trading under
cautionary as it is involved in negotiations with the objective of reducing and
restructuring the Ruashi debt and removing liquidity constraints.
Terence Goodlace, CEO of Metorex said, "I am really pleased with the operational
focus of our teams. All of our mines, other than Vergenoeg, delivered improved
production in these tough times. The Ruashi mine exceeded our June 2009
quarterly copper production target of 4 500 tons by producing 5 245 tons. Cobalt
production also exceeded the 450 tons forecast with 571 tons of cobalt being
produced. The Resource and Reserve infill drilling programme at Ruashi has been
completed and the Reserve numbers confirm this asset to be a significant
deposit. The liquidity situation in the Group has been improved through
increased production, higher commodity prices and the sales of Pan African,
Phoenix Platinum and a 15% stake in the Vergenoeg mine. Further strategies
designed to restore the balance sheet by December 2009 are being vigorously
progressed and management is confident of a successful outcome."
Financial performance June 2008 June 2009
Gross revenue (R`000) 1 614 789 1 241 721
Mining profit before depreciation (R`000) 799 245 263 190
Cash mining profit margin (%) 50 21
EPS (cents) 159,4 (272,4)
HEPS (cents) 131,7 23,9
Market capitalisation (R`000) 8 856 460 2 227 614
Shares in issue (`000) 369 173 742 538
Weighted average number of shares (`000) 347 797 553 349
Share price (cents) 2 399 300
ZAR/US$ rate - Average (R/US$) 7,30 9,03
ZAR/US$ rate - Closing (R/US$) 7,83 7,72
Commodity production Quarter* Year**
Unit March June June June
2009 2009 2008 2009
Copper (t) 7 316 10 329 25 350 31 207***
Cobalt (t) 165 571 565 871***
Antimony (mtu) 35 692 71 921 361 455 257 983
Fluorspar (dmt) 37 908 26 851 180 854 152 934
Gold (kg) 696 772 3 517 3 498
***Includes Ruashi II production.
Commodity sales Quarter* Year**
Unit March June June June
2009 2009 2008 2009
Copper (t) 7 533 10 472 23 291 31 846***
Cobalt (t) 10 221 386 578***
Antimony (mtu) 43 368 97 313 337 403 271 286
Fluorspar (dmt) 28 523 19 784 184 299 135 962
Gold (kg) 822 795 3 603 3 451
*** Includes Ruashi II sales, not part of income statement.
Prices received Quarter* Year**
Unit March June June June
2009 2009 2008 2009
Copper (US$/t) 3 894 4 290 7 277 4 464
Cobalt (64% of LMB) (US$/lb) 7 9 18 14
Antimony (US$/mtu) 25 26 58 39
Fluorspar (R/t) 3 200 2 354 1 387 2 241
Gold (US$/oz) 910 921 804 818
* Unaudited
** Reviewed
Safety, health, environmental and communities ("SHEC")
Whilst pleasing to report that the Group had no fatal accidents during the
financial year, independent SHEC audits carried out at four of the
group operations during the quarter have highlighted deficiencies and
inconsistencies in Group SHEC policies and procedures.
The development of a holistic Group SHEC strategy resulting in leading industry
practice is a priority at Metorex and a range of initiatives
has commenced which includes:
- Addressing the occupational health and safety competence of Metorex line
managers as well as related specialist functions by focusing on specific
training interventions including hazard identification, and risk assessment;
- Compiling and introducing Metorex Safe Production Rules for the Group;
- Introducing and maintaining baseline risk assessments at all mines in the
Group;
- Introducing rigorous and consistent SHEC reporting standards across all
operations; and
- Achieving the 2013 Mine Health and Safety Council milestones targets for
occupational safety and hygiene is a key focus area.
Financial overview (reviewed)
The 2009 financial year ("F2009") saw an unprecedented collapse in world
markets, impacting severely on raw material demand and resulting in a period of
sustained de-stocking from November 2008 to March 2009. This impacted on
commodity prices with the copper price having declined some 60% over a three-
month period.
At the same time the Group`s main capital development programme in the
Democratic Republic of Congo ("DRC"), the Ruashi copper/ cobalt mine,
experienced capital cost-overruns and ramp-up delays which required an emergency
fund raiser concluded during December 2008. The result was an injection of new
equity totalling R704 million, net of costs. In addition, a one-year bridge loan
facility of R178 million repayable on 30 November 2009 was secured and the Group
restructured some of its loan repayments. The Group embarked upon a process of
disposing of some of its non-core assets, which resulted in the disposal of
Phoenix Platinum Mining (Proprietary) Limited ("Phoenix Platinum") for R72
million and subsequent to the financial year-end the Pan African Resources PLC
("Pan African") 55% holding for R386 million and the conclusion of a Vergenoeg
Mining Company (Proprietary) Limited ("Vergenoeg") black economic
empowerment deal for R109 million. These proceeds provided much needed liquidity
and secured the completion of Ruashi Mining sprl ("Ruashi"), repayment of the
Group`s bridge loans, ongoing funding of Copper Resources Corporation ("CRC")
and absorption of losses at Consolidated Murchison Mine ("Consolidated
Murchison"), including the closure of its prohibitive gold hedge book for R41
million.
The financial statements for the year ended 30 June 2009 were prepared on the
basis of the Pan African and Consolidated Murchison assets being held for sale.
This follows the disposal of Pan African subsequent to year-end and the Group`s
intention to exit the Consolidated Murchison operation. The Group`s continuing
operating assets are Vergenoeg, Chibuluma Mines plc ("Chibuluma"), Ruashi and
Sable Zinc Kabwe Limited. The operational results from these assets other than
the Ruashi project comprise mining profit as reported in the consolidated income
statement with comparatives having been reclassified for assets held for sale.
The Group capitalised operations for the Ruashi phase II project during the
entire financial year as this project remains under development.
Year ended 30 June 2009 compared with the year ended 30 June 2008
Revenue
Copper production for the year increased by 23% to 31 207 tons, mainly due to 10
378 tons having been produced at the Ruashi II operation. The Ruashi I
concentrate feed to the Sable business unit was discontinued during December
2008, which resulted in a decrease in its copper production to 4 889 tons from
10 767 tons the previous year. The Chibuluma mine performed well and increased
its annual production by 9% for the year to 15 940 tons of copper. The decline
of some 40% in copper prices to an average of US$4 464 per ton achieved (2008:
US$7 277 per ton) resulted in a significant reduction in revenue for the Group.
Cobalt production for the year increased by 54% to 871 tons following the
commissioning of the cobalt plant at the Ruashi mine. The average price achieved
was US$14 per lb and was based on 64% of London Metals Bulletin ("LMB") quoted
price in terms of the Ruashi off-take agreement with Jinchuan. Cobalt sales
lagged production and were caused by distribution bottlenecks between the Ruashi
mine and Johannesburg. These logistic flows continue to be addressed.
Fluorspar production reduced by 15%, driven largely by weaker demand during the
latter part of the financial year. Contracted fluorspar
price increases were boosted by a weaker Rand/US$ exchange rate and contributed
to an overall 20% increase in fluorspar revenue from
the Vergenoeg mine.
Operating costs
Group operating costs increased by 25% to R749 million for the year, mainly as a
result of a 24% weakening in the Rand/US$ exchange rate on translation of the
foreign operations. The reduction in output from Ruashi/Sable and Vergenoeg did
not translate into absolute savings as the Group experienced inflationary
increases driven largely by high input prices in consumables, utilities and
services.
Mining profit before depreciation
Following the effect of the changes in Group revenues and operating costs,
mining profit before depreciation decreased by 67% to
R263 million.
Depreciation and impairments
Depreciation increased by 28% to R122 million in line with the weaker Rand/US$
exchange rate on translation of the Group`s foreign operations.
It is Group policy to annually assess assets for impairment. Following this
review, the Group impairment charge before taxation and minorities amounted to
R2,3 billion mainly related to CRC (R1,7 billion), the discontinuance of the
Ruashi phase I project (R216 million) and a write-off of the Consolidated
Murchison operation (R125 million). The primary CRC asset, being the Kinsenda
mine, was impaired to R230 million (US$30 million) based on a risk based
valuation at a real after tax discount rate of 20%. This discount rate accounts
for risks related to project funding, project development and operating in the
DRC. A copper price of US$5,000/ton was applied in these valuations. The net CRC
impairment, after tax and minorities, of R1,2 billion principally relates to the
original investment cost. This cost constituted the issue of 37 million new
Metorex shares at R24 per share (R888 million) and R85 million in cash.
Other income
Net other income of R148 million for the year mainly relates to a combination of
the profit on closure of a portion of the Ruashi hedgebook (R210 million) and a
loss on the realisation of the prior year mark to market of Chibuluma`s
outstanding copper invoices and Group share option charges.
Borrowing costs
Cash flows from Group debt introduced during the year were mainly applied to the
Ruashi project. The associated borrowing costs were
accordingly capitalised.
Capital expenditure and commitments
Group capital expenditure totalled R1,5 billion (2008: R2 billion), mainly
related to the Ruashi Phase II project and CRC.
Contracted capital commitments at 30 June 2009 amounted to R40 million (2008:
R359 million), whilst uncontracted commitments amounted to R2 million (2008:
R164 million).
Operating lease commitments, which fall due within the next year, amounted to R4
million (2008: R23 million), whilst commitments of
R3 million (2008: R21 million) fall due during the next four years.
Headline earnings
Group headline earnings per share reduced significantly to 24 cents for the year
ended 30 June 2009 and exclude the effect of the impairment charges. The
weighted average number of shares in issue increased by 59% to 553 349 shares
following the equity issue concluded during December 2008.
Group cash flow
Cash inflows from operating activities reduced by 84% to R122 million. Cash
applied to investing activities of R1,4 billion principally related
to capital expenditure at Ruashi and Chibuluma together with capital project
development costs and ongoing funding of CRC. The Group secured net cash inflows
of R1,2 billion from financing activities, which primarily resulted from new
debt of R282 million introduced at Chibuluma, further project loans at Ruashi of
R125 million, bridge loan draw downs of R132 million and new equity of R704
million at the Metorex corporate level.
Group balance sheet
The Group net asset value reduced by 65% to 323 cents per share following the
impairment of CRC, Ruashi Phase 1 and Consolidated
Murchison and an increase in the issued share capital of 100% to R743 million.
Interest-bearing debt increased to R2,1 billion of which R696 million is due
during the forthcoming 12 months. The subsequent disposal of Pan African and the
Vergenoeg deal secured repayment of some of the Group`s short-term loans and
furthermore, the funding of Ruashi to completion as well as the ongoing funding
of CRC and Consolidated Murchison. Chibuluma is in a position to service its
debt instalments during the next financial year. The first Ruashi instalment of
R193 million (US$25 million) is due on 31 December 2009. The Group is still
trading under cautionary as it is involved in negotiations with the objective of
reducing and restructuring the Ruashi debt and removing liquidity constraints.
Group debt position - 30 June 2009
Entity Nature Amount Cost Term
Metorex Short-term loans R190 million Jibar + 7,5% Due 30 Nov `09
Ruashi Pre-off take R162 million Fixed 4,68% 36 months from Jan
finance `10
Ruashi ECIC project R1 041 million US Libor 9 semi-annual from
finance +1,25% 31 Dec `09
Ruashi Commercial R254 million US Libor 7 semi-annual from
project finance +3,5% 31 Dec `09
Ruashi Cost overrun R125 million US Libor 7 semi-annual from
facility +1,25% 31 Dec `09
Chibuluma Term loan R282 million US Libor 9 semi-annual from
+4,85% 30 Sep `09
Various Equipment leases R82 million Various 36 months
TOTAL R2 136
million*
* Includes asset leases at Consolidated Murchison of R24 million
Hedgebook status
Commodity Maturity Volume Price Comment
Copper: Ruashi 15 (Jul `09 - 24 750 t US$3 900/t Forwards
months Sep `10)
Ruashi 21 (Oct `10 - 34 425 t Put Fully paid
months Jun `12) US$3 900/t Puts
Chibuluma 1 month (Jul `09) 650 t US$3 368/t Forwards
Chibuluma 5 months (Aug `09 - 3 075 t US$4 415/t Forwards
Dec `09)
Chibuluma* 6 months (Jan `10 - 4 200 t US$5 308/t Forwards
Jun `10)
*Transaction executed subsequent to year-end
The Ruashi copper hedge book was restructured during December 2008 which
resulted in forward prices of US$3 900 per ton until September 2010 for
approximately 50% to 60% of production. Thereafter, fully paid put options apply
to June 2012 protecting a minimum price of US$3 900 per ton and full price
exposure to the upside. These hedges were an imposed condition of the
continuation of project financing required for the development of the mine.
A limited hedge book was introduced at Chibuluma securing copper prices ranging
between US$4 415 per ton and US$5 308 per ton for 50% of production to June
2010. The objective was to introduce some price certainty at Chibuluma taking
cognisance of its debt commitments for the financial year ending 30 June 2010.
The Consolidated Murchison gold hedge at R111 per gram was closed during April
2009 at R281 per gram and realised a loss of R41 million.
Operational review (unaudited)
Ruashi (Note: The Ruashi II project has been capitalised and does not form part
of the Group income statement)
Quarter Year
March June June June
2009 2009 2008 2009
Tons milled (t) 142 550 232 562 n/a 485 360
Headgrade - Copper (%) 2,6 2,7 n/a 2,8
- Cobalt (%) 0,6 0,5 n/a 0,5
Recovery - Copper (%) 78 84 n/a 76
- Cobalt (%) 18 50 n/a 27
Copper produced (t) 2 919 5 245 n/a 10 378
Copper sold (t) 3 028 5 302 n/a 10 351
Cobalt produced (t) 152 568 n/a 720
Cobalt sold (t) 0 216 n/a 326
Total cash cost/ton of (US$/t) 6 215 3 733 n/a 4 518
copper produced, net of
cobalt credits*
Capital expenditure, (R`000) 57 863 92 500 1 365 773 752 632
excluding losses and
borrowing costs
*Cobalt credit calculated basis cobalt production and a gross cobalt
price of US$15/lb (US$9,60/lb payable) for illustrative purposes.
Quarterly commentary
The waste stripping at Ruashi increased by 53% to 492 000 tons, in line with the
ramp up in tonnage mined. Ore delivered from the pit to the plant increased by
300% and total ore milled increased by 63% to 233 000 tons for the June quarter.
This ore was a blend of high grade and low grade ore from the mine and the "G"
stockpile. The blended milled grade improved from 2,6% to 2,7% copper. Further
infill drilling in Pit 1 commenced in July 2009 to further improve the
confidence in the ore body and improve selectivity of mining. In-pit dewatering
has progressed well but will need to be increased to cater for larger water
volumes and the water table. The drilling of pit perimeter dewatering boreholes
has commenced and is planned for completion by March 2010. The primary water
coffer dam has been commissioned and additional boreholes are being drilled to
ensure a secure water supply for production ramp up.
Production ramp up continued with 5 245 tons of copper cathode produced. Mill
downtime reduced from the previous quarter, partly due to improved maintenance
and less bottlenecks in the solvent extraction/electrowinning ("SX/EW") plant.
Stress testing of the leach circuit and copper solution areas have successfully
achieved throughput levels of 180 tons per hour. The overall copper recovery
improved to 84% (78%) during the final quarter.
Cobalt production has been ramping up since the start of cobalt production in
February 2009, and has reached an average of 200 tons per month. Cobalt
production of 568 tons increased by 274% quarter on quarter and the overall
cobalt recovery improved from 18% to 50%. The delayed commissioning of the
cobalt drying unit has resulted in a high moisture content of 55%, but this
project will be completed in the December 2009 quarter which will improve the
situation.
Replacement of slaking agitators in the lime plant resulted in increased lime
plant availability and improved performance. The construction
progress on the front end crusher section and coarse ore stockpile
infrastructure progressed satisfactorily and is planned for completion during
the December 2009 quarter. Modifications to the coarse ore stockpile draw off
points are being made to improve ore flow.
Ruashi produced copper, net of cobalt credits, at lower costs than the previous
quarter due to improved efficiencies and increased volumes. The
total cash cost per ton of copper produced, net of cobalt credits amounted to
US$3 733 compared to US$6 215 in the previous quarter. The unit costs of
production should further reduce in line with the production build-up.
Project expenditure to date amounted to US$320 million with a further US$13,1
million estimated to completion. The costs to completion mainly
relate to the Acid Plant, increased front-end capacity and finalisation of land
purchases. Total project expenditure is estimated at US$333 million.
The production outlook for the coming quarter has been adversely affected
through the power shortages experienced between the end of July
and early August as well as a full mill reline between 4 and 8 August 2009.
However it is planned to exceed the current quarter performance and continue the
ramp up. Logistics continues to be a challenge although the flow of Cobalt from
the mine through to Johannesburg has improved
and the backlog in sales is steadily being reduced. It is expected that Ruashi
will produce 5 400 tons of copper and 560 tons of cobalt in the
September 2009 quarter.
Ruashi Resources and Reserves
The infill drilling programme to confirm the orebody boundaries and improve
confidence limits was completed in June 2009 with 52 boreholes
and 5 229 metres drilled, ahead of schedule. All holes have been logged and
sampled and all samples submitted to the Ruashi mine laboratory for
analyses have been assayed and the results captured in a relational database.
External quality assurance/quality control results from Robinsons International
in Lubumbashi have been reviewed by Coffey Mining and comply with acceptable
industry standards.
Work on the revised Surpac constrained geological resource model has been
completed as well as a Whittle pit optimisation exercise to define
the ultimate life of mine pit shell. The full cost of drilling, assay and
modelling was within the planned budget of US$1,88 million. Infill drilling is
continuing at the mine to further improve geological confidence and ascertain
the extent of the sulphide mineralisation.
The updated Resource inventory and reserve numbers are reflected below:
Mineral Resources Tons (Mt) %Cu Tons Cu %Co Tons Co
inventory (`000t) (`000t)
Oxide measured 1,0 6,8 74 0,29 3
Oxide indicated 19,6 2,8 554 0,35 69
Oxide inferred 8,6 2,2 187 0,13 11
Sulphide inferred 7,9 3,1 248 0,26 21
Total 37,1 2,8 1 062 0,28 104
There are a number of factors which affected the Resource numbers:
- The new geological model and estimates have been constrained by structure and
rock type;
- The Resource tonnage has been discounted for mining losses due to artisanal
mining activities;
- The specific gravity assumptions have been more accurately determined and are
specified per rock type and by orebody; and
- Certain geological zones have been moved to the inferred category on
the basis of confidence in grade continuity
Whittle Pit Reserves Tons (Mt) %Cu Tons Cu %Co Tons Co
(`000t) (`000t)
Proved and Probable 15,1 3,2 478 0,39 59
Reserves
There are a number of factors which have affected the Whittle pit numbers:
- Only Measured and Indicated Resources have been used in the Whittle
optimisation exercise.
- Long-term prices have been changed to reflect consensus forecasts of US$5
000/t Cu and US$15/lb Co.
- Costs have been increased to reflect F2010 steady state budget costs and the
average costs associated with the Whittle shell is US$2 644 per ton (US$1,20 per
lb) net of cobalt.
It is planned to further refine the Reserve numbers and complete the detailed
pit designs with associated scheduling during September and
October 2009. A more detailed report will be made in the annual report.
The Company confirms that the information included above was approved internally
by Mr T P Williams, BSc Hons (Geology), Pr Sci Nat, FSAIMM,
Metorex Group Mineral Resources Manager. The data used in the modelling was
independently reviewed by Mrs K Body, BSc Geology, Pr Sci Nat.,
Senior Resource Geology Consultant with mining consulting company Coffey Mining
(Pty) Limited before release. The Resource modelling has
been completed by Mr S Savage, M.Eng, BSc(Hons), Pr Sci Nat of IGS (Pty)
Limited. Whittle pit optimisation and pit selection has been carried out
by Mr F van Daalen, B.Eng (Mining) of VBKOM Consulting Engineers (Pty)
Limited.
Chibuluma Quarter Year
March June June June
2009 2009 2008 2009
Tons (t) 137 966 133 977 555 575 568 187
milled
Headgrade - Copper (%) 3,1% 3,3% 2,9% 3,1%
Recovery - Copper (%) 90% 90% 90% 90%
Copper produced (t) 3 848 3 979 14 583 15 940
Copper sold (t) 4 009 4 049 14 491 15 907
Total cash cost/ton of copper (US$/t) 2 673 2 671 2 663 2 793
sold
Mining profit before (R`000) 35 505 65 632 539 380 155 786
depreciation
Depreciation (R`000) 22 345 21 697 49 070 72 781
Capital expenditure (R`000) 23 355 32 370 119 568 121 065
Quarterly commentary
Chibuluma copper production was 3% higher than the previous quarter and
increased to 3 979 tons mainly as a result of the higher head grades.
The June 2009 production month was an all time record for Chibuluma with 1 600
tons of copper produced. However, mining production tonnage
at 133 977 tons was 2% less than previous quarter due to limited face
availability on the 411 metre level which was still being established early on
in the quarter. In addition there was a regional power supply interruption
totalling three and a half days caused by a failure of an incoming transformer
in April 2009.
508 metres of capital development was achieved, but was 37 metres less than the
previous quarter, primarily for the same reasons as above.
The mill head grade showed an improvement on the previous quarter to 3,3% copper
(3,1% copper) as a result of mining from the 411 metre
level horizon.
Saleable tonnage of copper in the fourth quarter amounted to a record of 4 049
tons. Concentrate was despatched to Chambishi Copper Smelter
("CCS") in Zambia and exported to Republic House under an export exemption until
the new contract was concluded with the local smelter. From June 2009 to
December 2009, all concentrate production will be sold to CCS.
Chibuluma achieved an average copper price of US$4 235 per ton during the
quarter and this, along with higher production sales and tight cost
control led to a 64% increase in mining profit before depreciation. The total
cash cost was US$2 671 per ton of copper sold.
Capital expenditure increased over the previous quarter, due primarily to timing
of production machine rebuilds.
The improvement of copper grade with the increased depth will continue to
support the current copper production levels. The opening of the
411 metre level has also improved the flexibility for both mining and back
filling cycles. Chibuluma should produce an estimated 4 200 tons of
copper in the September 2009 quarter.
Sable/Ruashi I Quarter Year
March June June June
2009 2009 2008 2009
Copper produced (t) 549 1 105 10 767 4 889
Copper sold (t) 496 1 121 8 800 5 588
Cobalt produced (t) 13 3 565 151
Cobalt sold (t) 10 5 386 252
Mining profit (loss) before (R`000) (4 632) 1 485 176 915 11 470
depreciation
Depreciation (R`000) 6 290 6 290 35 244 35 826
Capital expenditure (R`000) 287 - 20 647 2 803
Quarterly commentary
There was a welcome improvement during the quarter at the Sable operation with
an increase in ore receipts primarily from Anvil in the DRC. Tons treated
increased, and copper cathode produced was 101% higher at 1 105 tons. All copper
cathode and cobalt carbonate was sold to Trafigura Services PTe. The contract
includes an A grade premium of US$15 per ton and a freight credit of US$187 per
ton. There were no acid sales during the quarter as there is a large surplus of
acid from the sulphide smelters, available at low prices, on the Zambian
Copperbelt.
The copper revenue for the quarter exceeded that of the previous quarter due to
increased production and improved copper prices. The quarter`s
profits were negatively affected by a provision being made for cobalt grade
penalties related to cobalt sales in previous periods.
There was no capital expenditure incurred during the quarter.
At current copper prices it is anticipated that third party ore supplies will
continue to increase and thus provide for increased copper production and cash
flow from the Sable operation. Production at Sable is estimated at 1 900 tons of
copper for the September 2009 quarter.
Vergenoeg Quarter Year
March June June June
2009 2009 2008 2009
Tons milled (t) 145 567 106 755 570 826 537 589
CaF2 grade (%) 40,1 39,0 39,9 38,9
CaF2 recovery (%) 63,1 60,3 74,2 69,8
Fluorspar produced (all grades) (dmt) 37 908 26 851 180 854 152 934
Fluorspar sold (all grades) (dmt) 28 523 19 784 184 299 135 962
Price (all grades) (R/dmt) 3 200 2 354 1 387 2 241
Total cash cost/ton sold (R/t) 1 101 1 197 841 1 123
Mining profit before (R`000) 59 878 22 882 93 846 151 934
depreciation
Depreciation (R`000) 3 571 3 796 11 218 13 437
Capital expenditure (R`000) 9 337 4 930 18 858 40 647
Quarterly commentary
The Vergenoeg mine milled 106 755 tons (145 567 tons), a reduction of 27%
compared to the previous quarter due to a decision to stop the
mine and plant for four weeks and carry out major maintenance. This was deemed
to be an ideal time because of the poor market conditions and
lower sales. Vergenoeg continued to supply customers requiring a high quality
acidgrade for the quarter and to attain the required quality levels meant that
acidspar recovery fell to 60,3% (63,1%). The feed grade reduced slightly to
39,0% (40,1%). These factors resulted in a 29% lower production level as
compared to the March quarter.
Although local sales of acidgrade increased, export acidspar sales were
significantly affected by the economic downturn. Vergenoeg sold
31% less fluorspar during the quarter. A number of customers cancelled or
delayed shipments and some anticipated new sales never materialised.
The pricing of local sales remained flat, while the prices of export sales were
lower due to a renegotiation of contracts and a strengthening of the Rand.
Fluorspar prices were down 26% in Rand terms quarter on quarter due to a
strengthening in the Rand and a lower dollar price.
Unit costs increased by 9% to R1 197 per ton due to fixed costs over a lower
production base. The difficulties of the quarter were reflected in the 62%
reduction in cash mining profit to R23 million (R60 million).
The capital expenditure almost halved to R5 million (R9 million) quarter on
quarter as a number of projects were completed. An orebody exploration programme
is expected to be completed in the next quarter. There are no other significant
capital programmes in operation for the coming quarter.
The Fluorspar market has stabilised and a number of producers have been
mothballed or closed. The European customers of Vergenoeg are under pricing
pressure due to Chinese supply of cheap hydrofluoric acid and Vergenoeg will
remain supportive of key customers during this period. However, Vergenoeg is a
low cost producer in global terms which should ensure less pressure on volumes,
particularly in the medium term.
Vergenoeg production for the September 2009 quarter is estimated at 38 000 tons
of acidspar.
Consolidated Murchison Quarter Year
(Asset held for sale)
March June June June
2009 2009 2008 2009
Tons milled (t) (t) 82 482 81 820 355 076 345 349
Produced: Sb (mtu) 35 692 71 921 361 455 257 983
Au (kg) 83 105 533 423
Sold: Sb (mtu) 43 368 97 313 337 403 271 286
Au (kg) 78 104 521 423
Total cash cost/mtu (R/mtu) 1 182 417 343 592
sold
Mining (loss) profit (R`000) (40 992) (23 301) 24 925 (79 223)
before depreciation
Depreciation (R`000) 3 645 3 645 10 196 13 590
Capital expenditure (R`000) - 3 173 68 386 29 668
Net of gold revenue
Quarterly commentary
The tons mined at Consolidated Murchison increased marginally during the quarter
partly as a result of the re-opening of Beta shaft and partly
due to the focus of a "Turn Around Plan". The tons milled decreased by less than
a percent to 81 820 tons (82 482 tons) and was affected by
breakdowns in the plant. This has been as a result of previous under expenditure
on maintenance due to cash constraints. However the head
grades improved by 63% and 25% for antimony and gold respectively, the plant
recoveries improved by 25% and 30% for antimony and gold
respectively, and therefore production of antimony and gold increased by 102%
and 27% respectively during the quarter. This was mainly as a
result of efforts to concentrate on higher grade stopes, mining discipline, and
the re-opening of the Beta shaft.
Both antimony and gold sales were higher than the previous quarter as a result
of the increase in production and the sales of previously produced material (in
the case of antimony). New customers in India and China were identified during
the quarter and short-term contracts were entered into with them. Rand prices of
antimony and gold fell during the quarter due to a weakening of the Rand to the
US$.
The total costs were lower than the previous quarter as a result of the cost
saving efforts by management. Retrenchments were undertaken
during the quarter and paid for in this amount. Cash costs expressed per metric
ton unit for antimony more than halved as a result. This was partly a function
of the poor March quarter and the improvements made during the current quarter.
Consolidated Murchison remained in a loss-making position, but reduced losses to
R23 million (R41 million) for the quarter.
Capital spending amounted to R3 million (R nil) for the quarter with the only
capital spent during the quarter being an amount provided for a wet
screen installation. This was a contracted amount incurred in a previous
reporting period. Limited capital will be spent in the coming six months and
this will be primarily focused on improving the performance of the plant.
Production volume improvements will be capped due to the lack of flexibility in
the Consolidated Murchison ore body. However, recoveries are expected to
continue to improve and the antimony price is showing strength in dollar terms.
The mine has contracted to sell antimony at improved prices for the quarter and
the antimony price has improved since this contract was entered into. Usual
winter cost pressures will be reflected in the coming quarter and wage increases
will be discussed towards the end of the quarter. While Metorex is doing
everything within its ability to limit the losses at the mine, the operation
remains under a cloud of a possible closure or disposal.
Feasibility studies and evaluations carried out as part of the Turn Around Plan
suggest that the mine may become a viable and sustainable
operation following substantial recapitalisation and investment. As Consolidated
Murchison is not a core asset for Metorex, discussions are taking place with
interested parties in an effort to save the mine, associated jobs and the
affected community. Consolidated Murchison production for the September 2009
quarter is estimated at 120 kilograms of gold and 75 000 metric ton units of
antimony.
Barberton (Asset held for sale) Quarter Year
March June 2009 June June
2009 2008 2009
Tons milled (t) 75 336 78 697 315 305 313 952
Headgrade (g/t) 9,00 9,41 8,91 10,32
Overall recovery (%) 90 90 91 91
Produced: Gold (kg) 613 667 2 984 3 075
including
Calcine dump
Sold: Gold (kg) 744 691 3 082 3 028
including
Calcine dump
Total cash cost/kg sold (R/kg) 128 116 147 905 111 272 136 251
Mining profit before (R`000) 119 200 68 537 226 990 347 604
depreciation
Depreciation (R`000) 9 826 10 303 33 688 33 837
Capital expenditure (R`000) 13 778 13 083 54 173 58 302
Quarterly commentary
The Barberton mine is no longer part of the Metorex portfolio and this will be
the last time that it is reported on by Metorex. Ore milled for the quarter
showed a 5% improvement to 78 697 tons and along with the improved head grade of
9,4 grams per ton there was a 9% improvement in gold produced to 667 kilograms.
Grades were improved through higher grade areas being mined at the Fairview
section. The reduction in mining profit was mainly due to a reduction in gold
sales and the lower spot Rand gold price received.
Capital expenditure for the quarter was marginally up on the previous quarter
but in-line with the budget. The year on year increase in the capital
expenditure was mainly due to the increase in the exploration and capital
development to access new ground and increase reserves.
Corporate development
Cash constraints delayed the exploration work needed at the Kinsenda and Lubembe
projects during the quarter. The Kinsenda underground
mine continues to be dewatered at a rate of 2 000 cubic metres per hour and
contingency pump columns were installed to provide for pumping
flexibility. Holding costs for the quarter were US$3 million. The Lubumbashi
office was closed during the quarter to reduce holding costs and establish a
base closer to the mine which is situated near Kasumbalesa on the DRC/Zambian
border. The Kinsenda project has considerable upside at current copper prices.
Conceptual studies continue to be advanced for the Musonoi project in Kolwezi.
Exploration drilling, at a rate of US$30 000 per month,
recommenced post 30 June 2009.
Condensed financial information (reviewed)
Litigation
Metorex continues to reserve its rights and submitted a claim against CAMEC on
28 April 2009.
Subsequent events
On 25 June 2009, the Group announced the disposal of its entire shareholding in
Pan African Resources Plc for R386 million, subject to certain conditions
precedent. These conditions have subsequently been fulfilled and accordingly the
transaction became unconditional on 20 August 2009. Through this sale Pan
African is now an empowered company with 26% of its shareholding being held by
Shanduka.
On 29 July 2009, the Group announced the disposal of 15% of the issued ordinary
share capital of Vergenoeg to Medu Capital, a consortium of
Black Economic Empowerment ("BEE") controlled entities, for a cash consideration
of R108,8 million.
Accounting policies
The reviewed provisional results have been prepared and presented in accordance
with IAS 34, Interim Financial Reporting Standards ("IFRS"). The accounting
policies, which are in terms of IFRS, are consistent with those adopted in the
financial year ended 30 June 2008.
The modified review report on the 30 June 2009 results as compiled by the
Group`s external auditors Deloitte & Touche is available for inspection at the
Group`s registered office. The Group complies with the Companies Act and the
Listing Requirements as prescribed by the JSE Limited.
Their modified opinion is as follows: "Without qualifying our opinion, we draw
attention to the directors` statement that subject to a successful
implementation of management`s strategy aimed at reducing and restructuring the
Ruashi project debt, they are satisfied that the Group will be a going concern
for the foreseeable future, and have adopted the going-concern basis in
preparing these financial statements. Should the strategy not be successful this
may cast significant doubt on the Group`s ability to continue as a going concern
with the resultant impact of the classification of assets and liabilities."
Outlook
Copper production is expected to increase during the next quarter due to higher
grades at Chibuluma and the continued ramp up at Ruashi. The
Ruashi performance will be affected by power cuts and subsequent planned
maintenance having taken up 11 days in August 2009. Vergenoeg`s
fluorspar production will be determined by market demand which remains tight,
and an improvement in antimony and gold production is expected
at Consolidated Murchison.
The Group will re-commence exploration work at Musonoi, and ongoing dewatering
and holding costs will be incurred at CRC.
Shareholders are referred to the cautionary announcement dated 21 August 2009
and are advised that the Group remains involved in negotiations
which may have a material effect of the Company`s share price. Accordingly,
shareholders are advised to continue to exercise caution when dealing in their
securities until a further announcement is made.
Going concern
Subject to a successful implementation of the Group`s strategy aimed at reducing
and restructuring the Ruashi project debt, the directors are
satisfied that the Group will be a going concern for the foreseeable future, and
have adopted the going-concern basis in preparing these financial statements.
Board
Ms Nonkululeko ("Nkuli") Kgositsile and Mr Victor Mabuza were appointed as
independent non-executive directors with effect from 11 August
2009. To achieve an optimal balance of executive and non-executive Board
members, Mr Charles Needham has resigned from the Board and
Mr Edward Legg resigned as an alternate director. With effect from 1 October
2009 Mr John Hopwood will be appointed an independent nonexecutive director and
Chairman of the Audit Committee of the Board. Mr Alistair Laughland will then
retire from the Board. This intended change will take only take effect on 1
October 2009 to allow completion of the June 2009 annual financial statements
and review by the Audit Committee of which Mr Laughland is currently the
chairman. The Board thanks Charles and Edward for their valuable contributions
over the years.
Rob Still (Chairman) Terence Goodlace (Chief Executive Officer)
9 September 2009
Contact details for Metorex Limited and Corporate Advisers
Postal: PO Box 2814, Saxonwold, 2132, South Africa
Telephone: (+27 11) 880-3155 Facsimile: (+27 11) 880-3322 Website:
www.metorexgroup.com E-mail: ir@metorexgroup.com Investor relations: College
Hill, PO Box 413187, Craighall, 2024, South Africa
Telephone: (+27 11) 447-3030
St James Corporate Services Limited, 6 St James`s Place, London, SW1A INP,
England
Telephone: (+44 207) 499-3916
Registrars: Link Market Services South Africa (Pty) Limited,
PO Box 4844, Johannesburg, 2000, South Africa
Telephone: (+27 11) 834-2266
Auditors: Deloitte & Touche, Private Bag X6, Gallo Manor, 2052, South Africa
Telephone: (+27 11) 806-5000
Legal representatives: Bowman Gilfillan attorneys, PO Box 785812, Sandton, 2196
Telephone: (+27 11) 669-9000
ADR Programme - North America and Canada: The Bank of New York, 101 Barclay
Street, New York, NY 10286, USA
Telephone: (+1 212) 815-3326
Directors: RG Still* (Chairman), TP Goodlace (CEO), A Barrenechea* (Spanish), P
Chevalier* (Belgian), NN Kgositsile*, AJ Laughland* (British), TV Mabuza*, LJ
Paton*, M Smith (CFO) *non-executive
Date: 09/09/2009 07:38:24 Produced by the JSE SENS Department.
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