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ARI
ARIM
ARI - African Rainbow Minerals Limited - Interim results for the six months
ended 31 December 2009
African Rainbow Minerals Limited
(Incorporated in the Republic of South Africa)
(Registration number 1933/004580/06)
JSE Share code: ARI
ISIN code: ZAE 000054045
("ARM" or "the Company")
Interim results for the six months ended 31 December 2009
Shareholder information
Issued share capital as at 31 December 2009 212 259 550 shares
Market capitalisation as at 31 December 2009 ZAR36.88 billion
Market capitalisation as at 31 December 2009 US$4.99 billion
Share price as at 31 December 2009 R173.77
Six month high (1 July 2009 - 31 December R178.99
2009)
Six month low (1 July 2009 - 31 December 2009) R116.51
Average daily volume traded for the six months 501 065 shares
Primary listing JSE Limited
Ticker symbol ARI
Investor relations contact details
Jongisa Klaas
Head of Investor Relations
and Corporate Development
Telephone: +27 11 779 1507
Fax: +27 11 779 1312
E-mail: jongisa.klaas@arm.co.za
Corne Dippenaar
Corporate Development
Telephone: +27 11 779 1478
Fax: +27 11 779 1312
E-mail: corne.dippenaar@arm.co.za
Company secretary
Alyson D`Oyley
Telephone: +27 11 779 1300
Fax: +27 11 779 1318
E-mail: alyson.doyley@arm.co.za
Salient features
- Headline earnings of R454 million reflect a decline of R1.78 billion
relative to the corresponding period last year but reflect an increase of R369
million over the headline earnings of the preceding six months
- Significant decline in commodity prices and a strengthening of the Rand
against the US Dollar negatively impacted earnings
- Increased sales volumes across platinum group metals, nickel, iron ore,
manganese ore, chrome ore and alloys
- Decreased unit costs at platinum, nickel and iron ore operations
- ARM`s financial position remains robust with net debt to equity of 8.4%
- Delivering on growth projects:
- Khumani Iron Ore Mine ramping up to 10 million tonnes per annum
- Phase 2a of the Nkomati Large Scale Expansion project commissioned
- Goedgevonden Coal Mine commissioned; long-term off-take agreement signed
with Eskom
ARM operational review
ARM`s Board of Directors ("the Board") announces improved operational results
compared to the previous six months to 30 June 2009 (2H F2009), with
significant increases in sales volumes in ARM Platinum and ARM Ferrous despite
a challenging global economic environment. Headline earnings for the half-year
to 31 December 2009 (1H F2010), were R454 million, representing a decrease of
80% compared to the corresponding half-year to 31 December 2008 (1H F2009).
This was driven by continued weakness in commodity prices and the
strengthening of the Rand versus the US Dollar. Headline earnings however
increased by 434% when compared to the preceding six months to 30 June 2009
(2H F2009: R85 million) signalling the start of a recovery in commodity
markets, particularly in China and the rest of Asia.
In this challenging environment ARM continues to focus on cost containment.
The period under review reflects the benefits of reorganisations undertaken in
2H F2009 at the Modikwa Platinum Mine ("Modikwa") and Two Rivers Platinum Mine
("Two Rivers"), which have yielded a positive impact on costs. Cash costs for
Two Rivers and Modikwa were reduced by 8% and 6% respectively, while the
R/tonne milled costs at the Nkomati Nickel Mine ("Nkomati") decreased by 28%.
The headline earnings loss contribution from ARM Exploration was reduced to
R85 million from a loss of R454 million in 1H F2009. In addition unit
operating costs for iron ore decreased by 19.5% as a result of the production
ramp up at Khumani Iron Ore Mine ("Khumani").
The interim results for the period ended 31 December 2009 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 Six months Six months
ended 31 December ended 30
June
R million 2009 2008 % change 2009
Platinum Group Metals 131 (293) (55)
Nkomati nickel and chrome 36 24 50 5
Ferrous metals 302 2 812 (89) 338
Coal 36 176 (80) (41)
Exploration (85) (454) 81 (235)
Corporate and other 34 (33) 73
ARM headline earnings 454 2 232 (80) 85
These results have been achieved in conjunction with ARM`s partners at the
various operations, namely Anglo Platinum Limited ("Anglo Platinum"), Assore
Limited ("Assore"), Impala Platinum Holdings Limited ("Implats"), Norilsk
Nickel Africa (Pty) Limited ("Norilsk"), Xstrata Coal ("Xstrata") and
Companhia Vale do Rio Doce ("Vale").
Conditions in the global economic environment continued to be challenging,
especially in the first four months of the period under review, placing
pressure on commodity prices and demand. Despite this, ARM increased sales
volumes at ARM Ferrous and ARM Platinum. Key operational contributors to
increases in sales volumes (on 100% basis except for platinum group metals
("PGM") production which is shown on an attributable basis) are:
- 29% in iron ore sales to 4.4 million tonnes
- 13% in external manganese ore sales to 1.5 million tonnes
- 71% in manganese alloys to 120 thousand tonnes
- 11% in PGMs produced to 183 986 ounces
- 52% in contained nickel to 3 785 tonnes
- 26% in chrome ore/chrome concentrate to 537 thousand tonnes
The largest earnings contributor to ARM`s headline earnings remains ARM
Ferrous with a contribution to headline earnings of R302 million (1H F2009: R2
812 million; 2H F2009: R338 million). Benefits to earnings from the increased
sales volumes for this division have been eroded both by the fall in commodity
prices as well as by the stronger Rand against the US Dollar with headline
earnings having decreased by 89%. Headline earnings for ARM Ferrous however
decreased by only 11% when compared to 2H F2009.
ARM Platinum achieved a significant turnaround of R436 million to R167 million
in its contribution to headline earnings when compared to 1H F2009 (R269
million loss).
The decline in commodity prices when comparing the half-year to 31 December
2009 to the previous corresponding period have been marked, ranging from 16%
for thermal coal to 75% for manganese ore. Commodity price comparisons are
more fully detailed in the divisional commentaries.
The impact of the exchange rate on headline earnings has been pronounced with
the average Rand/US Dollar exchange rate having strengthened by 14% to R7.65/$
relative to the corresponding period (1H F2009: R8.88/$) and by 17% compared
to the preceding 6 months (2H F2009: R9.19/$).
ARM continues to focus on the efficiency and cost competitiveness across all
the divisions as it targets to have all operations below the 50th percentile
of the global commodity cost curve by 2012. For 1H F2010 ARM achieved
decreases in unit costs at Two Rivers and Modikwa as well as at the iron ore
operations. These were achieved by a combination of increased operational
efficiencies on the platinum and nickel operations and increased production
volumes in iron ore and nickel.
ARM`s 2 X 2010 growth strategy remains on track with the Khumani 10 mtpa mine
ramping up production. The Goedgevonden Coal Mine ("Goedgevonden") and Phase
2a of the Nkomati Large Scale Expansion project were successfully commissioned
during the period and have also commenced production ramp up.
ARM`s financial position remains robust with net debt to equity of 8.4% as at
31 December 2009 (F2009: 1.4%).
Financial commentary
Headline earnings for the six-month period to 31 December 2009 were R454
million (1H F2009: R2.2 billion; 2H F2009: R85 million) reflecting good
improvement over the previous six months, while being significantly less than
the corresponding period in 2008. The comparison of 1H F2010 to 1H F2009 does
not adequately reflect the trend in results since the economic collapse in
October 2008. To assist with comparisons, where appropriate, reference is also
made to the half-year to 30 June 2009.
Sales for the half-year to 31 December 2009 were R4.2 billion which is R2.2
billion less than 1H F2009 but R524 million more than the R3.7 billion
recorded for 2H F2009.
The gross profit margin for the period was 26.5% (1H F2009: 50.8%; 2H F2009:
21.4%). ARM`s earnings before interest, tax, depreciation and amortisation
(EBITDA) excluding exceptional items and income from associates were R1.2
billion, which represents an increase of R400 million over 2H F2009 and a
decrease of R2.5 billion over 1H F2009.
The detailed segmental contribution analysis is provided in note 10 to the
financial statements.
- The largest contributor to ARM`s headline earnings for the reporting period
was ARM Ferrous which contributed R302 million (1H F2009: R2.8 billion; 2H
F2009: R338 million).
- The ARM Platinum contribution amounted to R167 million which represents a
significant improvement over the F2009 results (1H F2009: R269 million loss;
2H F2009: R50 million loss). The previous year`s results were negatively
impacted by the R547 million realised mark-to-market loss on the opening
balance for debtors (at 30 June 2008) which occurred as a result of the sharp
fall in the Rand price of PGM`s and nickel during 1H F2009. This period`s
results include a mark-to-market realised gain on the 30 June 2009 debtors of
R50 million.
- The contribution from ARM Coal was R36 million (1H F2009: R176 million; 2H
F2009: R41 million loss).
- ARM Exploration costs were significantly lower than previous periods as a
result of (i) the restructuring initiatives in 2H F2009, (ii) an increased
focus on costs and (iii) the benefit of sharing costs with ARM`s JV partner,
Vale. The impact on headline earnings for the period was a negative R85
million (1H F2009: R454 million loss; 2H F2009: R235 million loss).
- ARM Corporate and Other costs reflect a positive contribution of R34 million
for the period (1H F2009: R33 million loss; 2H F2009: R73 million) and
includes a dividend of R32 million from Harmony Gold Mining Company Limited
("Harmony").
The effective taxation charge for the period was 34% which is lower than the
39% for F2009 as a result of the reduced impact on this calculation of non-
deductible expenditure (exploration costs much lower), reduced Secondary Tax
on Companies amounts and a prior year reversal of R51 million at Two Rivers.
During the reporting period the net debt position at 30 June 2009 of R231
million increased to R1.4 billion at 31 December 2009 largely as a result of
continuing investment in the new projects at Nkomati, Goedgevonden and Khumani
as well as an increase of R348 million in working capital during the period.
- The total debt on the balance sheet of R3.7 billion includes an amount of
R2.3 billion advanced by our partners (Implats: R539 million; Anglo Platinum:
R132 million; Xstrata: R1.6 billion) therefore the net cash amount excluding
partner loans amounts to R879 million (F2009: net cash R1.6 billion).
- Cash and cash equivalents were R2.3 billion at 31 December 2009 (F2009: R3.5
billion).
- The total attributable capital expenditure for the period was R1.2 billion
(1H F2009: R1.8 billion; 2H F2009: R1.5 billion) and consists largely of
expansion capital.
- The bank loan in the Vale/ARM joint venture of $85.0 million (ARM share
$42.5 million) was repaid by the partners during the period. In addition, the
bridge financing of R300 million (ARM share: R150 million) at Nkomati was
repaid in October 2009. As a result the only significant external bank debt at
31 December 2009 is the ARM R1.75 billion corporate facility, where the
balance was R979 million (F2009: R967 million). This loan is repayable in
August 2012.
Cash generated from operations, before working capital adjustments amounted to
R1.2 billion (1H F2009: R3.9 billion; 2H F2009: R1.2 billion). The working
capital adjustments during the past 18 months have been significant largely
due to the economic slowdown (which resulted in a release from working capital
in 1H F2009 and 2H F2009) and the subsequent partial recovery (which increased
working capital requirements during 1H F2010). This analysis is detailed in
note 8 to the financial statements.
Safety
We believe that a safe and healthy workplace is every employee`s right and is
an integral part of the way we run our business. Safety awareness, risk
assessment and responsible supervision has led to zero fatalities in ARM
during the past six months, compared to the five fatalities during the
previous financial year.
Safety statistics
- Zero fatalities
- The Lost Time Injury Frequency Rate (LTIFR) for the past six months, was
4.19 (per one million man hours) and 0.84 (per 200 000 man hours) compared to
4.32 and 0.86 respectively, during the corresponding six months of the
previous financial year.
Achievements
Modikwa achieved 6 000 000 consecutive fatality-free man shifts worked on 2
December 2009, an exceptional achievement in the industry. Modikwa has
operated fatality-free for 44 months and also won ARM`s internal St Barbara
competition for completing a multiple of a million fatality free shifts during
the 2009 financial year.
Beeshoek Mine ("Beeshoek") achieved 7 000 fatality-free production shifts on 2
August 2009 in the Northern Cape Department of Minerals and Resources ("DMR")
safety competition. Beeshoek achieved 1.67 million fatality free shifts whilst
Two Rivers and Machadodorp achieved 1.48 million and 1.44 million fatality
free shifts respectively in the St Barbara award and "Excellence in Safety"
competitions.
In August 2009 ARM was accepted as a member of the International Council of
Mining and Metals ("ICMM") further reiterating ARM`s commitment to responsible
mining and giving ARM additional access to international best practice in
sustainable development.
ARM Ferrous
For the six months ended December 2009, Assmang Limited ("Assmang") reported a
58% decrease in sales to R4.60 billion (1H F2009 R10.93 billion). This was
despite increases in sales volumes across all ferrous commodities and was due
to weak commodity prices and a strengthening Rand. Headline earnings decreased
by 89% to R0.60 billion (1H F2009: R5.63 billion).
Commodity prices were substantially lower during this period. Manganese ore
prices decreased by 75% when compared to 1H F2009 while iron ore and
ferrochrome prices were 52% and 60% lower respectively.
Khumani achieved increased production volumes and as a result operating costs
per unit for iron ore were reduced by 19.5%. Cost increases at the manganese
ore and chrome ore operations were in excess of the inflation rate for the
period. This was mainly due to a cut back in production for these commodities
driven by reduced demand in commodity markets and downsizing of the labour
force. Despite these cut backs in production for these commodities, higher
sales volumes were achieved as a result of higher stock levels at the
beginning of the financial year. Cost increases for manganese alloys were in
line with inflation.
Capital expenditure for the period amounted to R1 288 million (1H F2008: R1
503 million). R772 million was spent at Khumani on infrastructure development
and the 16 mtpa expansion, while the building of a beneficiation plant at
Black Rock Mine amounted to R194 million. In addition, R170 million was spent
on furnace upgrades at both the Machadodorp and Cato Ridge Works smelters.
Logistics
Transnet is currently experiencing lower performance levels on the iron ore
export channel but is confident that the contractual commitments will be met.
Manganese ore has limited rail and export capacity. This has resulted in
reliance on road transport to move mainly manganese ore to the export ports.
The initial manganese allocation process has been finalised and the contracts
have been signed. Discussions with Transnet will continue on the long-term
manganese allocation process.
Iron ore and manganese producers are in discussions with Transnet to discuss
rail and port capacity for the long term beyond 2016.
Assmang headline earnings contribution
100% basis Six months ended 31 December
R million 2009 2008 % change
Iron ore division 383 1 532 (75)
Manganese division 355 3 642 (90)
Chrome division (136) 454
Total 602 5 628 (89)
Headline earnings attributable to 302 2 812 (89)
ARM (50%)
Assmang product sales
100% basis Six months ended 31 December
Thousand tonnes 2009 2008 % change
Iron ore 4 452 3 455 29
Manganese ore* 1 463 1 291 13
Manganese alloys* 120 70 71
Charge chrome 75 65 15
Chrome ore* 99 80 24
* Excluding intra-group sales
Percentage
cost increases/
(decreases) EBITDA
Rand per tonne margin
Commodity group % %
Iron ore (19.5) 44.6
Manganese ore 25.9 34.7
Manganese alloys 7.7 18.0
Charge chrome 11.8 (22.3)
Assmang capital expenditure
100% basis Six months ended 31 December
R million 2009 2008
Iron ore 777 875
Manganese 376 409
Chrome 135 219
Total 1 288 1 503
Khumani
The second phase of the 10 mtpa expansion project has been completed and is in
the process of ramping up.
The ARM Board has approved R5.5 billion for the expansion of Khumani to 16
mtpa. This is in addition to the R1.2 billion start-up capital that was
approved previously.
The expansion programme is aligned with the increase in capacity of the Sishen
to Saldanha Bay export line to 60 mtpa, of which Khumani has secured 14 mtpa.
The project will be completed by mid-2012.
ARM Platinum
ARM Platinum had an exceptional six months with increases in production and
commodity prices, and a major turnaround in operating results. All three
operations embarked on restructuring plans in F2009 and as a result showed a
reduction in unit costs in comparison to the corresponding half-year period.
Despite the restructuring plans, the attributable 6E PGM production (including
Nkomati) increased by 11% to 183 986 ounces (1H F2009: 165 974* ounces).
Notwithstanding the strengthening of the Rand to the US Dollar the recovery of
metal prices during the six months under review had a positive financial
effect on ARM Platinum, resulting in cash operating profits being generated by
all its operations.
* 1H F2009 restated due to conversion from 4E (platinum palladium, rhodium and
gold) to 6E (4E + ruthenium and iridium).
The table below sets out the relevant price comparisons:
Average metal prices
Six months ended 12 months to
31 December June
2009 2008 2009
Platinum US$/oz 1 323 1 203 1 148
Palladium US$/oz 321 261 239
Rhodium US$/oz 1 800 4 069 2 620
Nickel US$/t 17 566 14 933 13 312
Exchange rate R/US$ 7.65 8.88 9.03
Attributable headline earnings increased to R167 million, compared to the
headline loss of R269 million in 1H F2009.
Cost management initiatives are yielding positive results with unit costs
declining in comparison to those for the half-year to 31 December 2008,
despite increases in labour and electricity costs.
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 2009, ARM
Platinum had metal debtors of R762 million, valued at the 30 June 2009 spot
metal prices and Rand/US Dollar exchange rate. The recovery in Rand metal
prices resulted in final receipts from these debtors of R812 million, a
realised mark-to-market gain of R50 million. In 1H F2009 the comparative
figure was a realised mark-to-market loss of R547 million.
The table below illustrates the effect of these adjustments had on ARM
Platinum`s cash operating profit for the six months to 31 December 2009:
Cash operating profit analysis
Modikwa Two Rivers Nkomati
Total 50% 100% 50%
Gross revenue R`000 1 806 836 512 395 962 122 332 319
Cash cost R`000 1 207 925 376 305 631 166 200 453
Cash operating R`000 598 911 136 090 330 956 131 866
profit before
mark-to-market
gain
Realised mark-to- R`000 50 169 15 540 32 962 1 668
market gain on 30
June 2009 debtors
Cash operating R`000 649 080 151 629 363 918 133 533
profit after mark-
to-market gain
Cash operating 33 27 34 40
profit margin
before mark-to-
market gain
Modikwa`s tonnes milled decreased by 6% to 1.2 million tonnes, with PGM ounces
in concentrate increasing by 1%, mainly as a result of an increase in head
grade and the cessation of mining on the Merensky Reef. Unit costs decreased
by 1% to R625/tonne milled (1H F2009: R635/tonne milled) and by 8% in Rand/PGM
ounce produced to R4 154/PGM ounce. 2 December 2009 marked the milestone of 6
000 000 consecutive fatality-free man shifts for Modikwa, the result of
dedication, hard work and team effort over some 44 months. This safety
achievement marks Modikwa as one of the safest platinum operations in South
Africa.
Two Rivers increased tonnes milled by 12%. This, combined with the plant
optimisation resulted in a 24% increase in PGMs in concentrate. Concentrator
recoveries have improved significantly after modifications to the crushing,
milling and flotation sections, resulting in an 80% concentrator recovery.
Unit cost increased by 4% to R416/tonne milled (1H F2009: R402/tonne milled).
The plant improvement resulted in a 6% reduction in unit costs to R4 079/PGM
ounce. The majority of the surface ore stockpile was utilised and at 31
December 2009, the stockpile was 53 797 tonnes.
At Nkomati, the 375 000 tpm plant was commissioned in September 2009,
resulting in an 80% increase in tonnes milled. Ramp up at this concentrator is
continuing with the aim of operating at steady state by the end of F2010.
Nickel production increased to 3 785 (1H F2009: 2 495) tonnes. Chrome ore
sales decreased by 15% to 295 147 (1H F2009: 346 823) tonnes, while chrome
concentrate sales commenced with 143 193 tonnes sold in 1H F2010. The unit
costs were reduced by 28% to R253/tonne milled. Nkomati had a cash cost, net
of by-products, of $2.91/lb nickel produced, and in excess of 1 800 tonnes
contained nickel in stock due to the quality of concentrate and ramp up of
production.
Capital expenditure in ARM Platinum was well contained and the total capital
expenditure amounted to R711 million (R383 million attributable). Capital
expenditure was mainly incurred on the Nkomati Large Scale Expansion Project,
while sustaining capital was incurred at Modikwa and Two Rivers.
ARM Platinum reviewed the prefeasibility study completed by Platinum Australia
("PLA") at Kalahari Platinum Exploration Project (Kalplats) in January 2010.
PLA is in the process of completing a bankable feasibility study.
For more information please refer to PLA`s website: www.platinumaus.com.au
Nkomati Large Scale Expansion Project
Phase 2a of the project was completed and the 375 000 tpm plant commissioning
started on 15 September 2009. All other components of the Phase 2a project
were completed on schedule to support the supply of ore and services to the
375 000 tpm plant. Production ramp up of the 375 000 tpm plant is currently in
progress and towards the second half of December 2009, the concentrator plant
was operated at design capacity. Some teething problems were experienced with
the new primary crusher and a programme to rectify the throughput capacity is
scheduled to be completed by March 2010. The Phase 2a project cost is
currently below budget and indicates a possible saving of R160 million.
The Phase 2b project (upgrade of the current 100 000 tpm plant to 250 000 tpm
PCMZ plant) was released for implementation and construction started during
August 2009. Estimated date for completion of Phase 2b is December 2010. The
100 000 tpm interim plant will be off line from July 2010 for this upgrade.
Total funds committed at 31 December 2009 on this project amounted to R3.1
billion of the R3.8 billion approved capital budget which now includes Phase
2b.
The Eskom power supply project for Phase 2a is complete and two of the three
new 40MVA transformers are installed and energised. The next phase of the
Eskom power supply project is the upgrade of the 132kV overhead distribution
lines, and the installation of the third 40MVA transformer, which should be
completed by November 2010.
ARM Platinum capital expenditure
100% basis Six months ended 31 December
R million 2009 2008 % change
Modikwa 68 273 (75)
Two Rivers 55 139 (61)
Nkomati 588 904 (35)
Total 711 1 316 (46)
Modikwa operational statistics
Six months ended 31 December
100% basis 2009 2008 % change
Cash operating R million 303 (348)
profit/(loss)
Tonnes milled Mt 1.22 1.30 (6)
Head grade * g/t, 6E 5.56 5.40 3
PGMs in concentrate* Ounces, 6E 183 449 181 968 1
Average basket price* R/kg, 6E 198 167 269 177 (26)
Average basket price* $/oz, 6E 810 946 (14)
Cash operating % 29 (71) -
margin**
Cash cost * R/kg, 6E 133 551 145 748 (8)
Cash cost R/tonne 625 635 (1)
Cash cost R/Pt oz 10 753 11 593 (7)
Cash cost * R/PGM oz, 6E 4 154 4 533 (8)
Cash cost * $/oz, 6E 546 512 7
Capex R million 68 273 (75)
Headline earnings R million 59 (111)
attributable to ARM
(41.5%)
* All production figures have been converted to 6E due to new off-take
agreement in place from 1 December 2008
** The cash operating margin, excluding June debtors realised mark-to-market
adjustment, is 27%
Two Rivers operational statistics
Six months ended 31 December
100% basis 2009 2008 % change
Cash operating R million 364 (232)
profit/(loss)
Tonnes milled Mt 1.48 1.32 12
Head grade g/t, 6E 4.05 4.22 (4)
PGMs in concentrate Ounces, 6E 150 721 121 678 24
Average basket price R/kg, 6E 219 138 287 602 (24)
Average basket price $/oz, 6E 896 1 011 (11)
Cash operating margin % 37 (73) -
**
Cash cost R/kg, 6E 131 146 139 771 (6)
Cash cost R/tonne 416 402 4
Cash cost R/Pt oz 8 503 9 073 (6)
Cash cost R/PGM oz, 4 079 4 347 (6)
6E
Cash cost $/oz, 6E 536 491 9
Capex R million 55 139 (61)
Headline earnings R million 72 (182)
attributable to ARM
(55%)
** The cash operating margin, excluding June debtors realised mark-to-market
adjustment, is 34%
Nkomati operational statistics
Six months ended 31 December
100% basis 2009 2008 % change
Cash operating profit R million 267 87 205
Cash operating profit - R million 151 (279)
Nickel Mine
Cash operating profit - R million 116 366 (68)
Chrome Mine
Cash operating margin** % 40 18 -
Tonnes milled Thousand 1 220 678 80
Head grade % nickel 0.50 0.54 (7)
Nickel on-mine cash cost R/tonne 253 351 (28)
per tonne milled
Cash cost net of by- US$/lb 2.91 0.27 >500
products***
Contained metal
Nickel Tonnes 3 785 2 495 52
PGMs Ounces 18 730 16 134 16
Copper Tonnes 1 846 1 401 32
Cobalt Tonnes 232 143 63
Chrome ore sold Tonnes 295 147 346 823 (15)
Chrome concentrate sold Tonnes 143 193 -
Headline earnings R million 36 24 50
attributable to ARM
(50%)
** The cash operating margin, excluding June debtors realised mark-to-market
adjustment, is 40%
*** This reflects US dollar cash costs net of by-products per pound of nickel
produced
ARM Platinum comprises three operating mines, Modikwa Two Rivers and Nkomati.
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 Implats, with ARM holding 55% and Implats 45%.
Nkomati is a 50:50 partnership with Norilsk Nickel Africa. ARM Platinum also
has an interest in Kalplats, which 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 Coal
Headline earnings contribution from ARM Coal decreased from R176 million for
the six months to 31 December 2008 to R36 million for the six months ended 31
December 2009. Operating margins decreased to 34% (1H F2009: 47%) as a result
of a decline in local and international prices due to a decrease in demand,
compounded by the stronger Rand to the US Dollar.
Total saleable production attributable to ARM decreased by 5% compared to the
previous review period.
Export sales volumes attributable to ARM increased by 13% compared to the
previous reporting period but domestic sales decreased by 27% mainly as a
result of a decrease in demand by local customers due to the downturn in the
local economy.
Total revenue attributable to ARM decreased by 25% during the period under
review as a result of lower volumes and a decrease in sales prices. During the
six months to December 2009 approximately 61% of ARM Coal`s production was
exported.
ARM Coal operational statistics
Six months ended 31 December
2009 2008 % change
Total production sales
Saleable production Mt 11.72 12.14 (4)
Export thermal coal sales Mt 6.92 6.14 13
Domestic thermal coal Mt 4.40 5.65 (22)
sales
Attributable production
and sales
Saleable production Mt 2.41 2.54 (5)
Export thermal coal sales Mt 1.42 1.26 13
Domestic thermal coal Mt 0.89 1.21 (27)
sales
Average received coal
price
Export (FOB) US$/tonne 65.04 77.81 (16)
Domestic (FOR) R/tonne 100.69 145.56 (31)
On-mine saleable cost R/tonne 200.27 184.26 5
Cash operating profit
Total R million 1 029 2 342 (56)
Attributable R million 218 485 (54)
Headline earnings 36 176 (80)
attributable to ARM
Earnings from ARM Coal 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.
Reconciliation
Six months ended 31 December
R million 2009 2008
ARM attributable headline earnings 36 176
reported
Add: additional amortisation 28 4
Imputed interest on Xstrata R4 19 17
billion debt facilitation
Less: Taxation 13 6
ARM attributable headline earnings 69 191
excluding IFRS adjustment
Add: normal interest 1 50
Add: normal amortisation 121 170
Add: taxation 27 74
ARM`s attributable operating profit 218 485
Total figures reflected above relate to 100% of the Xstrata Coal South Africa
("XCSA") Operations plus Goedgevonden. Attributable figures relate to ARM`s
effective 20,2% of XCSA Operations and 26% of Goedgevonden.
Goedgevonden Thermal Coal Project
The Goedgevonden Thermal Coal Project is progressing well and as at 31
December 2009 about 95% of the total project costs had been committed.
Commissioning of the project is progressing well and one module of the coal
processing plant has achieved sustained design washing capacity during the
review period. Commissioning of the second module commenced towards the end of
the review period and this is expected to achieve design capacity during Q1 of
the 2010 calendar year. The major overhaul on the dragline was completed in
the review period and it was commissioned in January 2010.
A long-term 17-year coal supply agreement was concluded with Eskom in December
2009 and supply of coal in terms of this agreement has already commenced.
ARM`s economic interest in XCSA as at 31 December 2009 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 Coal (GGV) project situated near Ogies in Mpumalanga. ARM holds
51% of ARM Coal as well as a 10% direct investment in XCSA`s Operations.
ARM Exploration
The Vale/ARM joint venture has constituted a steering committee and a
dedicated management team has been put in place to implement the strategy of
growing ARM`s copper business in southern Africa. The JV`s priority projects
are the Konkola North Copper Project ("Konkola North") in Zambia where a
bankable feasibility study is nearing completion, and the copper-cobalt
exploration project in the DRC ("Kalumines").
The bankable feasibility study of the Konkola North project has advanced and
is scheduled for completion in June 2010. A total of 23 boreholes have been
completed for 12 082 metres (out of a total of 22 000 metres), including six
geotechnical boreholes. The additional drilling will increase the confidence
of the mineable reserves of the ore body. A mining consultant, under the
direction of the Vale/ARM JV team, has reviewed the previous feasibility
study, has included scope changes (i.e. the decline access, another
ventilation shaft and changes to the mining method in certain places), and has
reviewed the capital and operating costs of the proposed mine. An updated
Environmental Impact Assessment study has been submitted to the authorities in
Zambia, and approval is expected in the near future.
In the DRC, at the Kalumines property, a 12 000 metres exploration drilling
programme has commenced in November 2009 on the Lupoto and Kasonta prospects,
and 5 061 metres of drilling has been completed to 31 December 2009.
The Otjikoto Gold Project in Namibia has nearly 2 million ounces of gold in
the indicated and inferred category with a large land holding of prospective
geology. The JV`s strategy in southern Africa is to focus on copper and base
metals, and a decision has been taken to sell the gold asset in Namibia. An
independent broking institution has been appointed to procure a potential
purchaser.
ARM Exploration has as its main objective the identification and assessment of
exploration and mineral business opportunities for base metals, PGMs, ferrous
metals and coal in sub-Saharan Africa. A key focus area is the development of
the Vale/ARM JV assets.
The earnings loss attributable to ARM for the six months to end December 2009
is R85 million (1H F2009: R454 million), comprising mainly costs associated
with the feasibility study, exploration, finance and administration costs.
Harmony
Harmony reported total headline earnings for the period under review of R156
million (1H F2009: R427 million), and a decrease in cash operating profit of
29.7% to R1 351 million (1H F2009: R1 921 million). Gold production for the
period was 1.2% lower at 23 283 kilograms (1H F2009: 23 554 kilograms), with
cash costs 17.0% higher at R190 172/kg (1H F2009: R162 550/kg).
As part of its stated strategy Harmony continues to focus on the turnaround
and restructuring of the business for more quality ounces. Restructuring
during the period under review lead to a loss of ounces as Harmony seeks to
eliminate high cost ounces from its production profile.
Harmony continues to work on the commissioning of growth projects and on
production planning for the Pamodzi Gold Free State assets.
During the review period, Harmony declared a dividend of 50 cents per share;
R32 million accruing to ARM.
The ARM balance sheet as at 31 December 2009 reflects a mark-to-market
investment in Harmony of R4 823 million, which is based on a Harmony share
price of R75.79. Changes in the value of the investment in Harmony are
accounted for by ARM through the statement of comprehensive income net of
deferred capital gains tax. The investment reflected at market value in the
balance sheet represents approximately 13% of ARM`s market capitalisation of
R36.9 billion as at 31 December 2009, compared to 18% as at 30 June 2009.
Harmony`s results for the quarter and six months ended 31 December 2009 can be
viewed on Harmony`s website at www.harmony.co.za
ARM BBEE Trust
On 10 December 2009 the ARM Broad-based Economic Empowerment Trust (the "ARM
BBEE Trust"), which holds approximately 10% of the share capital of ARM,
announced a cash distribution of R8.9 million to the beneficiaries of the
Trust. Previous cash distributions amounted to R24.5 million in 2008 and R7.6
million in 2007. To date the ARM BBEE Trust has distributed approximately R41
million to the beneficiaries.
The beneficiaries of the ARM BBEE Trust are five ARM Provincial Rural
Upliftment Trusts, the National Women`s Upliftment Trust, the ZCC Church
Trust, the South African Democratic Teachers Union ("SADTU") and National
Education, Health and Allied Workers Union ("NEHAWU") which together represent
approximately 400 000 workers, numerous entrepreneurs, community leaders,
women and youth-owned SMMEs.
Outlook
Conditions in the global economic markets have begun showing signs of
improvement, albeit at a much more subdued pace in the United States and in
Europe. This was evident during the last half of the reporting period under
review where signs of the recovery became evident in the increased Dollar
prices for commodities.
The concern remains however that the current strength of the Rand against the
US Dollar will continue to erode the gains made in Dollar commodity prices.
Having continued with the development of our long-term growth projects (even
during the recessionary period) ARM is now well positioned to take advantage
of an upswing in commodity demand as the long-term growth projects` ramp up
coincides with improving commodity markets.
ARM continues to seek opportunities for further growth and in the period under
review began expenditure to expand the Khumani iron ore mine by a further 6
mtpa; 4 mtpa of which will be for the export market. Completion of this
project is expected in mid-2012. The phase 2b of the Nkomati mine is on
schedule while the ramp up at Goedgevonden is also on track.
Notwithstanding the improved outlook ARM continues to focus on cost control
and capital management as it aims to have its operations within the 50th
percentile of the global unit cost curves, at steady-state production, by
2012.
As a globally competitive company, ARM is committed to paying dividends to
shareholders. The payment of dividends will continue to be reviewed on an
annual basis by the Board.
ARM continues to deliver on its 2 x 2010 growth strategy.
Signed on behalf of the Board
PT Motsepe AJ Wilkens
Executive Chairman Chief Executive Officer
Johannesburg
22 February 2010
Group Statement of Financial Position
as at 31 December 2009
Unaudited Unaudited Audited
Six months ended Year
ended
31 December 30 June
2009 2008 2009
Note Rm Rm Rm
ASSETS
Non-current assets
Property, plant and 12 254 10 485 11 500
equipment
Investment property 14 14 12
Intangible assets 212 214 213
Deferred tax assets 37 23 32
Loans and long-term 20 4 134
receivables
Financial assets 82 71 78
Inventories 160 222 169
Investment in associate 1 389 1 394 1 327
Other investments 2 4 833 6 227 5 101
19 001 18 654 18 566
Current assets
Inventories 2 048 1 927 1 854
Trade and other 1 901 4 026 1 565
receivables
Taxation 45 10 1
Cash and cash equivalents 3 2 271 3 660 3 513
6 265 9 623 6 933
Total assets 25 266 28 277 25 499
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 11 11 11
Share premium 3 772 3 737 3 759
Other reserves 424 1 487 600
Retained earnings 11 862 11 152 11 779
Equity attributable to 16 069 16 387 16 149
equity holders of ARM
Non-controlling interest 676 635 602
Total equity 16 745 17 022 16 751
Non-current liabilities
Long-term borrowings 4 2 743 1 228 1 364
Deferred tax liabilities 2 496 2 223 2 277
Long-term provisions 437 377 401
5 676 3 828 4 042
Current liabilities
Trade and other payables 1 534 2 985 1 637
Short-term provisions 163 131 158
Taxation 219 1 319 531
Overdrafts and short-term 4 929 2 992 2 380
borrowings
2 845 7 427 4 706
Total equity and 25 266 28 277 25 499
liabilities
Group Income Statement
for the six months ended 31 December 2009
Unaudited Unaudited Audited
Six months ended Year
ended
31 December 30 June
2009 2008 2009
Note Rm Rm Rm
Revenue 4 386 6 710 10 674
Sales 4 202 6 416 10 094
Cost of sales (3 088) (3 158) (6 048)
Gross profit 1 114 3 258 4 046
Other operating income 438 630 916
Other operating expenses (808) (575) (1 255)
Profit from operations 744 3 313 3 707
before exceptional items
Income from investments 136 205 414
Finance costs (93) (224) (385)
Income from associate* 15 180 147
Profit before taxation and 802 3 474 3 883
exceptional items
Exceptional items 5 - (33) 514
Profit before taxation 802 3 441 4 397
Taxation 7 (276) (1 375) (1 727)
Profit for the period 526 2 066 2 670
Attributable to:
Non-controlling interest 74 (165) (198)
Equity holders of ARM 452 2 231 2 868
526 2 066 2 670
Additional information
Headline earnings (R 6 454 2 232 2 317
million)
Headline earnings per 214 1 055 1 094
share (cents)
Basic earnings per share 213 1 054 1 355
(cents)
Fully diluted basic 211 1 037 1 336
earnings per share (cents)
Fully diluted headline 212 1 037 1 079
earnings per share (cents)
Number of shares in issue 212 260 211 631 212 068
at end of period
(thousands)
Weighted average number of 212 135 211 611 211 707
shares in issue
(thousands)
Weighted average number of 214 083 215 187 214 737
shares used in calculating
fully diluted earnings per
share (thousands)
Net asset value per share 7 570 7 743 7 615
(cents)
EBITDA (R million) 1 209 3 675 4 484
* Exceptional items - 27 27
included in income from
associate (R million)
Dividend declared after - 175
year end (cents)
Group Statement of Comprehensive Income
for the six months ended 31 December 2009
Foreign
Revaluation exhange
of listed translation Retained
investments reserve Other earnings
Rm Rm Rm Rm
Six months ended 31
December 2009
(Unaudited)
Profit for the period - - - 452
Other comprehensive
income:
Net impact of (230) - - -
revaluation of listed
investment
Revaluation of listed (268) - - -
investment
Deferred tax on 38 - - -
revaluation of listed
investment
Exchange differences - (13) - -
in translation of
foreign operations
Net share of cashflow - - 45 -
hedge in associate
Other - - (2) 2
Total comprehensive (230) (13) 43 454
income for the period
Six months ended 31
December
2008(Unaudited)
Profit for the period - - - 2 231
Other comprehensive
income:
Net impact of 148 - - -
revaluation of listed
investment
Revaluation of listed 172 - - -
investment
Deferred tax on (24) - - -
revaluation of listed
investment
Exchange differences - (61) - -
in translation of
foreign operations
Other - - (2) 2
Total comprehensive 148 (61) (2) 2 233
income for the period
Year ended 30 June
2009 (Audited)
Profit for the year - - - 2 868
Other comprehensive
income:
Net impact of (820) - - -
revaluation of listed
investment
Revaluation of listed (954) - - -
investment
Deferred tax on 134 - - -
revaluation of listed
investment
Exchange differences - (43) - -
in translation of
foreign operations
Dilution of interest - 19 29 -
in TEAL
Share appreciation - - 14 -
rights: TEAL -
minority share
Premium paid on - - 15 -
purchase in non-
controlling interest
Foreign currency - 19 - -
translation reserve
realised
Other - - 10 (8)
Total comprehensive (820) (24) 39 2 860
income for the year
Total
share- Non-
holders controlling
of ARM interest Total
Rm Rm Rm
Six months ended 31
December 2009
(Unaudited)
Profit for the period 452 74 526
Other comprehensive
income:
Net impact of (230) - (230)
revaluation of listed
investment
Revaluation of listed (268) - (268)
investment
Deferred tax on 38 - 38
revaluation of listed
investment
Exchange differences (13) - (13)
in translation of
foreign operations
Net share of cashflow 45 - 45
hedge in associate
Other - - -
Total comprehensive 254 74 328
income for the period
Six months ended 31
December
2008(Unaudited)
Profit for the period 2 231 (165) 2 066
Other comprehensive
income:
Net impact of 148 - 148
revaluation of listed
investment
Revaluation of listed 172 - 172
investment
Deferred tax on (24) - (24)
revaluation of listed
investment
Exchange differences (61) - (61)
in translation of
foreign operations
Other - - -
Total comprehensive 2 318 (165) 2 153
income for the period
Year ended 30 June
2009 (Audited)
Profit for the year 2 868 (198) 2 670
Other comprehensive
income:
Net impact of (820) - (820)
revaluation of listed
investment
Revaluation of listed (954) - (954)
investment
Deferred tax on 134 - 134
revaluation of listed
investment
Exchange differences (43) - (43)
in translation of
foreign operations
Dilution of interest 48 - 48
in TEAL
Share appreciation 14 - 14
rights: TEAL -
minority share
Premium paid on 15 - 15
purchase in non-
controlling interest
Foreign currency 19 - 19
translation reserve
realised
Other 2 - 2
Total comprehensive 2 055 (198) 1 857
income for the year
Group Statement of Changes in Equity
for the six months ended 31 December 2009
Share Revaluation
capital of listed
and invest- Retained
premium ments Other earnings
Rm Rm Rm Rm
Six months ended 31
December
2009(Unaudited)
Balance at 30 June 3 770 370 230 11 779
2009
Total comprehensive - (230) 30 454
income for the period
Share based payments - - 24 -
Share options 13 - - -
exercised
Dividend paid - - - (371)
Balance at 31 December 3 783 140 284 11 862
2009
Six months ended 31
December 2008
(Unaudited)
Balance at 30 June 3 744 1 190 176 9 766
2008
Total comprehensive - 148 (63) 2 233
income for the period
Share based payments - - 36 -
Share options 4 - - -
exercised
Dividends paid - - - (847)
Balance at 31 December 3 748 1 338 149 11 152
2008
Year ended 30 June
2009 (Audited)
Balance at 30 June 3 744 1 190 176 9 766
2008
Total comprehensive - (820) 15 2 860
income for the year
Share based payments - - 64 -
Share options paid in - - (25) -
cash
Share options 26 - - -
exercised
Dividends paid - - - (847)
Balance at 30 June 3 770 370 230 11 779
2009
Total
share- Non-
holders controlling
of ARM interest Total
Rm Rm Rm
Six months ended 31
December 2009
(Unaudited)
Balance at 30 June 16 149 602 16 751
2009
Total comprehensive 254 74 328
income for the period
Share based payments 24 - 24
Share options 13 - 13
exercised
Dividend paid (371) - (371)
Balance at 31 December 16 069 676 16 745
2009
Six months ended 31
December 2008
(Unaudited)
Balance at 30 June 14 876 800 15 676
2008
Total comprehensive 2 318 (165) 2 153
income for the period
Share based payments 36 - 36
Share options 4 - 4
exercised
Dividends paid (847) - (847)
Balance at 31 December 16 387 635 17 022
2008
Year ended 30 June
2009 (Audited)
Balance at 30 June 14 876 800 15 676
2008
Total comprehensive 2 055 (198) 1 857
income for the year
Share based payments 64 - 64
Share options paid in (25) - (25)
cash
Share options 26 - 26
exercised
Dividends paid (847) - (847)
Balance at 30 June 16 149 602 16 751
2009
Group Statement of Cash Flows
for the six months ended 31 December 2009
Unaudited Unaudited Audited
Six months Year
ended ended
31 December 30 June
2009 2008 2009
Note Rm Rm Rm
CASH FLOW FROM OPERATING
ACTIVITIES
Cash receipts from 4 318 7 017 13 432
customers
Cash paid to suppliers and (3 423) (2 464) (6 754)
employees
Cash generated from 8 895 4 553 6 678
operations
Interest received 96 204 406
Interest paid (81) (140) (328)
Dividends received 32 85 118
Dividends paid (371) (847) (847)
Taxation paid (377) (1 057) (1 977)
Net cash inflow from 194 2 798 4 050
operating activities
CASH FLOW FROM INVESTING
ACTIVITIES
Additions to property, (237) (745) (927)
plant and equipment to
maintain operations
Additions to property, (976) (1 031) (2 337)
plant and equipment to
expand operations
Proceeds on disposal of 2 6 9
property, plant and
equipment
Proceeds on disposal of 50% - - 120
in TEAL
Net cash outflow from (1 211) (1 770) (3 135)
investing activities
CASH FLOW FROM FINANCING
ACTIVITIES
Proceeds on exercise of 13 4 27
share options
Share options settled in - - (25)
cash
Long-term borrowings raised 803 225 259
Long-term borrowings repaid (491) (81) (312)
Decrease in short-term (546) (211) (120)
borrowings
Net cash outflow from (221) (63) (171)
financing activities
Net (decrease)/increase in (1 238) 965 744
cash and cash equivalents
Cash and cash equivalents 3 325 2 594 2 594
at beginning of period
Foreign currency (5) (11) (13)
translation on cash
balances
Cash and cash equivalents 2 082 3 548 3 325
at end of period
Cash generated from 422 2 152 3 154
operations per share
(cents)
Notes to the Financial Statements
for the six months ended 31 December 2009
1. Basis of preparation
The consolidated Group financial statements for the half-year ended 31
December 2009 have been prepared in accordance with International Financial
Reporting Standards (IFRS) on a historical cost convention, as modified by the
revaluation of available-for-sale financial assets, and financial assets and
financial liabilities (including derivative instruments) at fair value through
the income statement or the statement of changes in equity.
These consolidated financial statements are prepared in accordance with IAS 34
- Interim Financial Reporting.
The consolidated Group financial statements for the half-year ended 31
December 2009 have been prepared adopting the same accounting policies used in
the most recent annual financial statements. The Group generally does not
apply hedge accounting, but one of its associates does and the effect is shown
under comprehensive income.
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 became effective 1 January 2009. There were no
financial effects as a result of these. Disclosure issues will be addressed in
the June 2010 annual report.
Unaudited Unaudited Audited
Six months Year
ended ended
31 December 30 June
2009 2008 2009
Rm Rm Rm
2. INVESTMENTS
Listed
Opening balance 5 091 6 045 6 045
Unrealised revaluation (268) 172 (954)
gain/(loss) for the period
4 823 6 217 5 091
Other 10 10 10
Total carrying amount of 4 833 6 227 5 101
investments
3. CASH AND CASH EQUIVALENTS
- African Rainbow Minerals 599 622 1 323
Limited
- Assmang Limited 814 2 107 1 624
- ARM Platinum (Pty) Limited 260 447 248
- Kingfisher Insurance Co 134 127 77
Limited
- Mannequin Insurance PPC 91 176 63
Limited
- Nkomati 63 47 53
- To Rivers Platinum (Pty) 6 27 20
Limited
- Vale/ARM joint venture 12 7 5
- Restricted cash 292 100 100
Cash and cash equivalents per 2 271 3 660 3 513
balance sheet
Less overdrafts 189 112 188
Cash and cash equivalents per 2 082 3 548 3 325
cash flow
4. BORROWINGS
Long-term borrowings are held as
follows:
-African Rainbow Minerals 979 - -
Limited
- Assmang Limited 5 9 6
- ARM Coal (Pty) Limited 1 609 1 069 1 135
- ARM Platinum (Pty) Limited 2 3 3
- Two Rivers Platinum (Pty) 148 147 160
Limited
-Vale/ARM joint venture - - 60
2 743 1 228 1 364
Overdrafts and short-term
borrowings are held as follows:
- African Rainbow Minerals - 1 308 967
Limited
- Assmang Limited 5 7 7
- ARM Platinum (Pty) Limited 144 - 138
- ARM Coal (Pty) Limited - 35 -
- Nkomati - 97 149
- Vale/ARM joint venture 8 850 335
- Two Rivers Platinum (Pty) 196 73 208
Limited- Short-term borrowings
- Two Rivers Platinum (Pty) 539 586 539
Limited - Implats shareholders
loan
- Other 37 36 37
929 2 992 2 380
Total borrowings 3 672 4 220 3 744
Interest of R31 million was
capitalised for the half-year
ended 31 December 2009 (31
December 2008: R71 million, 30
June 2009: R77 million).
5. EXCEPTIONAL ITEMS
Impairment of property, plant - (30) (43)
and equipment
Profit on sale of property, 1 - -
plant and equipment
Loss on sale of property, plant (1) - -
and equipment
Surplus on dilution in TEAL to - - 557
50%
Other - (3) -
Exceptional items per income - (33) 514
statement
Impairment of assets (2) - -
Capital portion of insurance - - 14
claim at Cato Ridge
Profit/(loss) on disposal of - 5 (4)
property, plant and equipment
Profit on asset swap in DTJV - - 27 27
ARM Coal
Net exceptional items (2) (1) 551
6. HEADLINE EARNINGS
Basic earnings per income 452 2 231 2 868
statement
Impairment of assets 2 30 43
(Profit)/loss on sale of - (5) 4
property, plant and equipment
Profit on asset swap in DTJV - - (27) (27)
ARM Coal
Capital portion of insurance - - (14)
claim at Cato Ridge
Surplus on dilution in TEAL to - - (557)
50%
Other - 3 -
Headline earnings 454 2 232 2 317
7. TAXATION
South African normal tax - 40 973 979
current year
South African normal tax - prior (51) - 50
year
State`s share of profits 10 245 234
Deferred tax - current year 252 41 248
Secondary Tax on Companies 25 116 216
276 1 375 1 727
8. CASH GENERATED FROM
OPERATIONS BEFORE WORKING
CAPITAL MOVEMENTS
Cash generated from operations 895 4 553 6 678
(per cash flow)
Working capital changes 348 (653) (1 616)
Movement in receivables 315 (70) (2 374)
Movement in payables (156) (1 428) (164)
Movement in inventories 189 845 922
Cash generated from operations 1 243 3 900 5 062
before working capital movement
9. 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 4 163 1 498 3 647
- not contracted for 876 1 715 908
Total commitments 5 039 3 213 4 555
Contingent liabilities
Shareholders are advised that
there have been no significant
changes to the contingent
liabilities of the Group as
disclosed in the June 2009
annual report.
ARM Platinum ARM
Ferrous
Platinum Nickel metals Coal
Rm Rm Rm Rm
10. SEGMENTAL
INFORMATION
Primary segmental
information
Six months ended 31
December 2009
(Unaudited)
Sales
External sales 1 523 334 2 301 44
Cost of sales (1 155) (255) (1 673) (20)
Other operating income 9 22 39 -
Other operating (42) (53) (232) -
expenses
Segment result 335 48 435 24
Income from investments 9 3 49 -
Finance cost (18) (1) (1) 5
Finance cost: (21) - - -
Shareholders loans
partners
Finance cost: (26) - - -
Shareholders loans: ARM
Income from associate - - - 15
Exceptional items (1) - 1 -
Taxation (78) (14) (181) (8)
Non-controlling (70) - - -
interest
Contribution to 130 36 303 36
earnings
Contribution to 131 36 302 36
headline earnings
Other information
Segment assets 5 578 2 052 8 112 3 284
including investment in
associate
Investment in associate 1 389
Segment liabilities 1 546 190 760 1 680
Taxation
Consolidated total
liabilities
Cash generated from 260 91 384 (28)
operations
Cash in/(out) flow from 211 90 92 (28)
operating activities
Cash outflow from (82) (289) (644) (191)
investing activities
Cash (out)/inflow from (40) (150) (1) 222
financing activities
Capital expenditure 89 294 619 220
Amortisation and 163 52 223 21
depreciation
EBITDA 498 100 658 45
Corporate*
Explora- and
tion other Gold Total
Rm Rm Rm Rm
10. SEGMENTAL
INFORMATION
Primary segmental
information
Six months ended 31
December 2009
(Unaudited)
Sales
External sales - - - 4 202
Cost of sales - 15 - (3 088)
Other operating income - 368** - 438
Other operating (64) (417)** - (808)
expenses
Segment result (64) (34) - 744
Income from investments 7 68 - 136
Finance cost (6) (1) - (22)
Finance cost: (3) - - (24)
Shareholders loans
partners
Finance cost: (21) - - (47)
Shareholders loans: ARM
Income from associate - - - 15
Exceptional items - - - -
Taxation - 5 - (276)
Non-controlling - (4) - (74)
interest
Contribution to (87) 34 - 452
earnings
Contribution to (85) 34 - 454
headline earnings
Other information
Segment assets 299 1 118 4 823 25 266
including investment in
associate
Investment in associate 1 389
Segment liabilities 49 1 581 - 5 806
Taxation 2 715
Consolidated total 8 521
liabilities
Cash generated from (105) 293 - 895
operations
Cash in/(out) flow from (106) (65) - 194
operating activities
Cash outflow from (1) (4) - (1 211)
investing activities
Cash (out)/inflow from 71 (323) - (221)
financing activities
Capital expenditure 1 4 - 1 227
Amortisation and 4 2 - 465
depreciation
EBITDA (60) (32) - 1 209
* Corporate, other companies and consolidation adjustments.
** Other operating income and other operating expenses have both been
increased by R273 million due to the grossing up of insurance amounts paid and
received by ARM`s two wholly owned insurance entities.
ARM Platinum Division
Ferrous
Platinum Nickel metals Coal
Rm Rm Rm Rm
10. SEGMENTAL
INFORMATION (continued)
Six months ended 31
December 2008
(Unaudited)
Sales
External sales 563 250 5 464 88
Cost of sales (1 144) (225) (1 562) (47)
Other operating income 4 36 478 -
Other operating 5 (29) (168) -
expenses
Segment result (572) 32 4 212 41
Income from investments 52 5 105 -
Finance cost (46) (1) (14) (9)
Finance cost Implats: (36) - - -
Shareholders loan Two
Rivers
Finance cost ARM: (44) - - -
Shareholders loan Two
Rivers
Income from associate - - - 180
Exceptional items - (1) - -
Taxation 188 (12) (1 486) (9)
Non-controlling 165 - - -
interest
Contribution to (293) 23 2 817 203
earnings
Contribution to (293) 24 2 812 176
headline earnings
Other information
Segment assets 5 508 1 330 9 726 3 156
including investment in
associate
Investment in associate 1 394
Segment liabilities 1 287 247 1 042 1 563
Taxation
Consolidated total
liabilities
Cash generated from 626 173 3 796 143
operations
Cash in/(out) flow from 629 177 2 871 227
operating activities
Cash outflow from (290) (449) (746) (276)
investing activities
Cash (out)/inflow from (368) 97 (253) 142
financing activities
Capital expenditure 275 452 729 347
Amortisation and 166 12 166 12
depreciation
EBITDA (406) 44 4 373 53
Corporate*
Explora- and
tion other Gold Total
Rm Rm Rm Rm
10. SEGMENTAL
INFORMATION (continued)
Six months ended 31
December 2008
(Unaudited)
Sales
External sales 51 - - 6 416
Cost of sales (188) 8 - (3 158)
Other operating income 2 110 - 630
Other operating (296) (87) - (575)
expenses
Segment result (431) 31 - 3 313
Income from investments 2 41 - 205
Finance cost (21) (53) - (144)
Finance cost Implats: - - - (36)
Shareholders loan Two
Rivers
Finance cost ARM: - - - (44)
Shareholders loan Two
Rivers
Income from associate - - - 180
Exceptional items (30) (2) - (33)
Taxation (4) (52) - (1 375)
Non-controlling - - - 165
interest
Contribution to (484) (35) - 2 231
earnings
Contribution to (454) (33) - 2 232
headline earnings
Other information
Segment assets 434 1 906 6 217 28 277
including investment in
associate
Investment in associate 1 394
Segment liabilities 1 043 2 531 - 7 713
Taxation 3 542
Consolidated total 11 255
liabilities
Cash generated from (375) 190 - 4 553
operations
Cash in/(out) flow from (397) (709) - 2 798
operating activities
Cash outflow from (8) (1) - (1 770)
investing activities
Cash (out)/inflow from 311 8 - (63)
financing activities
Capital expenditure 9 - - 1 812
Amortisation and 11 - - 367
depreciation
EBITDA (420) 31 - 3 675
* Corporate, other companies and consolidation adjustments.
ARM Platinum Division
Ferrous
Platinum Nickel metals Coal
Rm Rm Rm Rm
10. SEGMENTAL INFORMATION
(continued)
Year ended 30 June 2009
(Audited)
Total sales 1 750 543 7 632 121
Inter-group sales to ARM - 2 - -
Ferrous
Sales 1 750 541 7 632 121
Cost of sales (2 317) (491) (3 007) (84)
Other operating income 8 24 615 1
Other operating expenses 2 (48) (462) (1)
Segment result (557) 26 4 778 37
Income from investments 69 8 220 -
Finance cost (60) (1) (36) (15)
Finance cost Implats: (70) - - -
Shareholders loan Two
Rivers
Finance cost ARM: (86) - - -
Shareholders loan Two
Rivers
Income from associate - - - 147
Exceptional items 1 (1) - -
Taxation 152 (4) (1 802) (7)
Non-controlling interest 204 - - -
Contribution to earnings (347) 28 3 160 162
Contribution to headline (348) 29 3 150 135
earnings
Other information
Segment assets including 5 334 1 791 8 292 2 973
investment in associate
Investment in associate 1 327
Segment liabilities 1 535 332 815 1 463
Unallocated - Deferred
taxation and taxation
Consolidated total
liabilities
Cash generated from 896 178 5 705 297
operations
Cash in/(out) flow from 830 177 4 034 414
operating activities
Cash (out)/inflow (475) (866) (1 388) (498)
frominvesting activities
Cash (out)/inflow from (270) 149 (263) 211
financing activities
Capital expenditure 524 878 1 335 572
Amortisation and 323 28 378 36
depreciation
Impairment - 1 - -
EBITDA (234) 54 5 146 73
Corporate*
Explora- and
tion other Gold Total
Rm Rm Rm Rm
10. SEGMENTAL INFORMATION
(continued)
Year ended 30 June 2009
(Audited)
Total sales 50 - - 10 096
Inter-group sales to ARM - - - 2
Ferrous
Sales 50 - - 10 094
Cost of sales (177) 28 - (6 048)
Other operating income - 268 - 916
Other operating expenses (515) (231) - (1 255)
Segment result (642) 65 - 3 707
Income from investments 6 111 - 414
Finance cost (49) (68) - (229)
Finance cost Implats: - - - (70)
Shareholders loan Two
Rivers
Finance cost ARM: - - - (86)
Shareholders loan Two
Rivers
Income from associate - - - 147
Exceptional items 567 (53) - 514
Taxation (4) (62) - (1 727)
Non-controlling interest - (6) - 198
Contribution to earnings (122) (13) - 2 868
Contribution to headline (689) 40 - 2 317
earnings
Other information
Segment assets including 483 1 535 5 091 25 499
investment in associate
Investment in associate 1 327
Segment liabilities 497 1 298 - 5 940
Unallocated - Deferred 2 808
taxation and taxation
Consolidated total 8 748
liabilities
Cash generated from (550) 152 - 6 678
operations
Cash in/(out) flow from (554) (851) - 4 050
operating activities
Cash (out)/inflow 147 (55) - (3 135)
frominvesting activities
Cash (out)/inflow from 276 (274) - (171)
financing activities
Capital expenditure 22 2 - 3 333
Amortisation and 20 2 - 787
depreciation
Impairment 42 - - 43
EBITDA (622) 67 - 4 484
* Corporate, other companies and consolidation adjustments.
Additional information
for the six months ended 31 December 2009
The ARM platinum segment is analysed further into Two Rivers Platinum Mine and
ARM Mining Consortium (which includes Modikwa).
Two Rivers Modikwa Platinum
Platinum Rm Rm Rm
SEGMENTAL INFORMATION
Six months ended 31 December
2009 (Unaudited)
Sales
External sales 995 528 1 523
Cost of sales (749) (406) (1 155)
Other operating income 9 - 9
Other operating expenses (15) (27) (42)
Segment result 240 95 335
Income from investments 1 8 9
Finance cost (17) (1) (18)
Finance cost Implats: (21) - (21)
Shareholders loan Two Rivers
Finance cost ARM: Shareholders (26) - (26)
loan Two Rivers
Exceptional items - (1) (1)
Taxation (47) (31) (78)
Non-controlling interest (58) (12) (70)
Contribution to earnings 72 58 130
Contribution to headline 72 59 131
earnings
Other information
Segment assets 3 040 2 538 5 578
Segment liabilities 1 074 472 1 546
Cash inflow from operating 73 138 211
activities
Cash outflow from investing (50) (32) (82)
activities
Cash outflow from financing (40) - (40)
activities
Capital expenditure 55 34 89
Amortisation and depreciation 120 43 163
EBITDA 360 138 498
Six months ended 31 December
2008 (Unaudited)
Sales
External sales 320 243 563
Cost of sales (695) (449) (1 144)
Other operating expenses 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: (36) - (36)
Shareholders loan Two Rivers
Finance cost ARM: Shareholders (44) - (44)
loan Two Rivers
Taxation 133 55 188
Non-controlling interest 143 22 165
Contribution to earnings (182) (111) (293)
Contribution to headline (182) (111) (293)
earnings
Other information
Segment assets 2 822 2 686 5 508
Segment liabilities 1 002 285 1 287
Cash inflow from operating 355 274 629
activities
Cash outflow from investing (154) (136) (290)
activities
Cash outflow from financing (157) (211) (368)
activities
Capital expenditure 139 136 275
Amortisation and depreciation 133 33 166
EBITDA (243) (163) (406)
Iron ore Manganese Chrome
Proforma analysis of the division division division
Ferrous segment on a 100% basis Rm Rm Rm
SEGMENTAL INFORMATION
Six months ended 31 December
2009 (Unaudited)
Sales
External sales 1 795 2 302 504
Other operating income 27 103 9
Other operating expenses (106) (276) (144)
Operating profit 536 515 (183)
Contribution to earnings 383 355 (136)
Contribution to headline 383 355 (136)
earnings
Other information
Segment assets 6 970 7 751 1 852
Segment liabilities 1 826 2 050 605
Taxation 363 581 (686)
Cash in/(out) flow from 628 (827) (128)
operating activities
Cash outflow from investing (782) (376) (130)
activities
Cash in/(out) flow from 106 - (109)
financing activities
Capital expenditure 777 376 135
Amortisation and depreciation 262 131 68
EBITDA 798 646 (115)
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 1 532 3 642 454
earnings
Other information
Segment assets 5 706 11 669 2 339
Segment liabilities 1 880 1 688 468
Taxation (306) 2 463 227
Cash inflow from operating 1 443 1 688 309
activities
Cash outflow from operating (863) (409) (219)
activities
Cash outflow from operating (368) - (139)
activities
Capital expenditure 875 409 219
Amortisation and depreciation 159 112 62
EBITDA 2 330 5 730 699
Ferrous Attributable
Proforma analysis of the Total to ARM
Ferrous segment on a 100% basis Rm Rm
SEGMENTAL INFORMATION
Six months ended 31 December
2009 (Unaudited)
Sales
External sales 4 601 2 301
Other operating income 139 39
Other operating expenses (526) (232)
Operating profit 868 435
Contribution to earnings 602 303
Contribution to headline 602 302
earnings
Other information
Segment assets 16 573 8 112
Segment liabilities 4 481 760
Taxation 258 -
Cash in/(out) flow from (327) 92
operating activities
Cash outflow from investing (1 288) (644)
activities
Cash in/(out) flow from (3) (1)
financing activities
Capital expenditure 1 288 619
Amortisation and depreciation 461 223
EBITDA 1 329 658
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 5 628 2 812
earnings
Other information
Segment assets 19 714 9 726
Segment liabilities 4 036 1 042
Taxation 2 384 -
Cash inflow from operating 3 440 2 871
activities
Cash outflow from operating (1 491) (746)
activities
Cash outflow from operating (507) (253)
activities
Capital expenditure 1 503 729
Amortisation and depreciation 333 166
EBITDA 8 759 4 373
Contact details
African Rainbow Minerals Limited
Registered office
ARM House
29 Impala Road
Chislehurston
Sandton 2196
South Africa
PO Box 786136
Sandton
2146
South Africa
Telephone: +27 11 779 1300
Fax: +27 11 779 1312
E-mail: ir.admin@arm.co.za
Website: http://www.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*
M Arnold
Dr MMM Bakane-Tuoane**
AD Botha**
JA Chissano (Mozambican)**
WM Gule
MW King**
AK Maditsi**
KS Mashalane
JR McAlpine**
LA Shiels
Dr RV Simelane**
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. They
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 may or may not take into account and may or may not
be affected by 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.
www.arm.co.za
Sandton
22 February 2010
Sponsor to ARM:
Deutsche Securities (SA) (Proprietary) Limited
Date: 22/02/2010 07:05:02 Produced by the JSE SENS Department.
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