| Thu 25 Feb 2010, 7:05 | | EXX - Exxaro Resources Limited - Audited group financial results and physical |
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EXX
EXX
EXX - Exxaro Resources Limited - Audited group financial results and physical
information for the 12-month period ended 31 December 2009
Exxaro Resources Limited
(Incorporated in the Republic of South Africa)
Registration number: 2000/011076/06
JSE share code: EXX
ISIN code: ZAE000084992
ADR code: EXXAY
("the company" or "the group")
Audited group financial results and physical information for the 12-month
period ended 31 December 2009
OVERVIEW
* Revenue increased 8% to R15 billion
* Net operating profit adversely impacted by R1 435 million impairment at KZN
Sands
*Currency strength impacted negatively on earnings
*Headline earnings 31% lower at 729 cents per share
* Final dividend of 100 cents per share; total dividend of 200 cents per
share
* Targeted savings realised through optimisation initiatives and prioritising
capital expenditure
CONDENSED GROUP INCOME STATEMENT
Year ended 31 December 2009 2008
Audited Audited
Rm Rm
Revenue 15 009 13 843
Operating expenses (14 705) (11 376)
Net operating profit 304 2 467
Net financing cost (note 4) (415) (241)
Share of income from investments and 1 900 1 665
equity-accounted investments
Profit before tax (note 2) 1 789 3 891
Income tax expense (766) (510)
Profit for the year 1 023 3 381
Profit attributable to:
Owners of the parent 1 023 3 405
Non-controlling interests (24)
Profit for the year 1 023 3 381
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 December 2009 2008
Audited Audited
Rm Rm
Profit for the year 1 023 3 381
Other comprehensive income:
Exchange differences on translating foreign (35) 193
operations
Cash flow hedges (474) 520
Share of comprehensive income of associates 8 187
Share-based payment movements 118 92
Income tax relating to components of other 142 (115)
comprehensive income
Net (loss)/gain recognised in other comprehensive (241) 877
income
Total comprehensive income for the year 782 4 258
Total comprehensive income attributable to:
Owners of the parent 919 4 117
Non-controlling interests (137) 141
Total comprehensive income for the year 782 4 258
Ordinary shares (million)
- in issue 357 355
- weighted average number of shares 345 343
- diluted weighted average number of shares 358 361
Attributable earnings per share (cents)
- basic 297 993
- diluted 286 943
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
At 31 December 2009 2008
Audited Audited
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 11 869 11 309
Biological assets 41 34
Intangible assets 87 79
Investments in unlisted associates and 1 966 1 849
joint ventures (note 6)
Deferred tax 629 1 083
Other financial assets (note 6) 1 217 1 577
15 809 15 931
Current assets
Inventories 3 133 2 481
Trade and other receivables 3 121 2 924
Current tax receivable 57 2
Cash and cash equivalents 1 023 1 769
7 334 7 176
Non-current assets classified as held for 86 78
sale
Total assets 23 229 23 185
EQUITY AND LIABILITIES
Capital and reserves
Equity attributable to owners of the parent 12 908 12 996
Non-controlling interests 1 128
Total equity 12 909 13 124
Non-current liabilities
Interest-bearing borrowings 4 347 3 650
Non-current provisions 1 853 1 746
Financial liabilities 75 31
Deferred tax 995 1 257
7 270 6 684
Current liabilities
Trade and other payables 2 510 2 366
Interest-bearing borrowings 407 500
Current tax payable 57 440
Current provisions 27 21
3 001 3 327
Non-current liabilities classified as held 49 50
for sale
Total equity and liabilities 23 229 23 185
Net debt (note 9) 3 731 2 381
Net asset value per share (cents) 3 616 3 697
Capital expenditure
- incurred 1 982 1 617
- contracted 3 550 889
- authorised but not contracted 1 420 2 711
Capital expenditure contracted relating to 18 70
captive mines, Tshikondeni, Arnot and
Matla, which will be financed by
ArcelorMittal SA Limited and Eskom
respectively
Contingent liabilities (note 10) 717 587
Contingent assets (note 11) 158 192
Operating lease commitments 92 77
Operating sublease rentals receivable 4
CONDENSED GROUP STATEMENT OF CASH FLOWS
Year ended 31 December 2009 2008
Audited Audited
Rm Rm
Cash retained from operations 2 117 3 574
- net financing costs (381) (193)
- tax paid (892) (487)
- dividends paid (note 7) (1 050) (984)
Cash used in investing activities
- capital expenditure (1 982) (1 617)
- proceeds from disposal of property, plant and 11 29
equipment
- dividends from investments and equity accounted 1 754 1 044
investments
- increase in investments (8) (179)
- increase in joint venture (note 8) (1 082)
- associate acquired (221)
- acquisition of subsidiaries and other business (2 757)
operations
- other (107) (55)
Net cash outflow (1 620) (1 846)
Net cash flows from financing activities
- shares issued 43 31
- increase in non-controlling interests` loans 10
- net borrowings raised 821 2 734
Net (decrease)/increase in cash and cash equivalents (746) 919
Cash and cash equivalents at beginning of year 1 769 850
Cash and cash equivalents end of year 1 023 1 769
Calculation of movement in net debt:
Net cash outflow (1 620) (1 846)
- shares issued 43 31
- loans from non-controlling interests 10 1
- non-cash flow movements in net debt applicable to 340 (352)
currency translation differences of transactions
denominated in foreign currency
- non-cash flow movements in net debt applicable to (123) 282
currency translation differences of net debt items of
foreign entities
- hedging of share-based payment exposure (14)
Increase in net debt (1 350) (1 898)
RECONCILIATION OF HEADLINE EARNINGS
for year ended 31 December 2009 Gross Tax Non- Net
Rm Rm controll- Rm
ing
interest
Rm
Profit for the year attributable to 1 023
owners of the parent
Adjusted for:
- IAS 16 - Impairment of Property, 1 435 1 435
plant and equipment
- IAS 16 - Gains or losses on 88 (24) (2) 62
disposal of property, plant and
equipment
- IAS 28 - Share of associates` IAS (8) 2 (6)
16 - Gains or losses on disposal of
property, plant and equipment
Headline earnings 1 515 (22) (2) 2 514
For the year ended 31 December 2008
Profit for the year attributable to 3 405
equity owners of the parent
Adjusted for:
- IAS 16 - Impairment of Property, 21 21
plant and equipment
- IAS 16 - Gains or losses on 66 (20) 46
disposal of property, plant and
equipment
- IAS 16 - Reversal of impairment of (1) (1)
property, plant and equipment
- IAS 27 - Gains on disposal of (7) (7)
subsidiary
- IAS 28 - Share of associates` IAS 2 (1) 1
16 - Gains or losses on disposal of
property, plant and equipment
- IAS 28 - Share of associates` IAS 4 4
39 - Recycling of remeasurements
from equity to the income statement,
including a hedge of net investment
in a foreign entity but excluding
cash flow hedges
- IAS 28 - Share of associates` IAS 161 161
16 - Impairment of property, plant
and equipment
Headline earnings 246 (21) 3 630
Year ended 31 December 2009 2008
Audited Audited
Rm Rm
Headline earnings per share (cents)
- basic 729 1 058
- diluted 702 1 006
GROUP STATEMENT OF CHANGES IN EQUITY
Other components of equity
Share Share Foreign Financial Equity-
capital premium currency instruments settled
Rm Rm trans- revaluation Rm
lation Rm
Rm
Balance at 1 January 2008 4 2 063 527 7 968
Total comprehensive income 437 138 113
Issue of share capital 31
Non-controlling interests
additional contributions
Liquidation dividend from
subsidiary
Net profit on dilution of
interest in a subsidiary
Dividends paid
Balance at 31 December 4 2 094 964 145 1 081
2008
Total comprehensive income (162) (142) 160
Issue of share capital (1) 43
Non-controlling interests
additional contributions
Dividends paid (2)
Balance at 31 December 4 2 137 802 3 1 241
2009
Dividend paid per share 375
(cents) in respect of the
2008 financial year
Dividend paid per share 100
(cents) in respect of the
2009 interim period
Final dividend declared 100
per share (cents) in
respect of 2009 financial
year
1 Issued to the Kumba Resources Management Share Trust due to options
exercised.
2 The STC on these dividends will amount to Rnil million after taking
into account STC credits.
GROUP STATEMENT OF CHANGES IN EQUITY
Retained Attributable Non- Total
income to owners controlling equity
Rm of the interests Rm
parent Rm
Rm
Balance at 1 January 2008 6 235 9 804 19 9 823
Total comprehensive income 3 429 4 117 141 4 258
Issue of share capital 31 31
Non-controlling interests 2 2
additional contributions
Liquidation dividend from 1 1 1
subsidiary
Net profit on dilution of (7) (7)
interest in a subsidiary
Dividends paid (957) (957) (27) (984)
Balance at 31 December 2008 8 708 12 996 128 13 124
Total comprehensive income 1 063 919 (137) 782
Issue of share capital1 43 43
Non-controlling interests 10 10
additional contributions
Dividends paid (2) (1 050) (1 050) (1 050)
Balance at 31 December 2009 8 721 12 908 1 12 909
Dividend paid per share 375
(cents) in respect of the
2008 financial year
Dividend paid per share 100
(cents) in respect of the
2009 interim period
Final dividend declared per 100
share (cents) in respect of
2009 financial year
1 Issued to the Kumba Resources Management Share Trust due to options
exercised.
2 The STC on these dividends will amount to Rnil million after taking
into account STC credits.
NOTES TO THE GROUP FINANCIAL STATEMENT
1. Basis of preparation
The format of the condensed report has been revised to bring it in
line with the amendments to International Accounting Standard (IAS)
34, Interim Financial Reporting. IAS 34 has been amended following
the revision of IAS 1 Presentation of Financial Statements and IFRS
8 Operating Segments. These amendments were early adopted in 2008.
This condensed report complies with International Accounting
Standard 34, Interim Financial Reporting, and schedule 4 Part iv of
the South African Companies Act. The financial statements from which
these group financial results have been derived are prepared on the
historical basis excluding financial instruments and biological
assets, which are fair valued, and conform to International
Financial Reporting Standards. The accounting policies adopted are
consistent with those applied in the annual financial statements for
the year ended 31 December 2008.
During 2009 the following accounting pronoucements became effective:
Amended IFRS 2 Share-based Payments, Revised IAS 23 Borrowing Costs,
IFRIC 13 Customer Loyalty Programmes, IFRIC 15 Agreements for the
Constructions of Real Estate, IFRIC 16 Hedges of Net Investments in
a Foreign Operation, Improvements to Financial Reporting Standards
2008 (amendments to various standards) and Circular 3/2009 Headline
Earnings. These pronouncements had no material impact on the
accounting of transactions or the disclosure thereof.
Year ended 31 December 2009 2008
Audited Audited
Rm Rm
2. Profit before tax is arrived at after
Depreciation and amortisation of (1 136) (898)
intangible assets
Financing costs (560) (394)
Interest received 145 153
Net realised foreign currency exchange (576) 476
(losses)/gains
Net unrealised foreign currency exchange (45) 39
(losses)/gains
Derivative instruments held for trading 379 (69)
gains/(losses)
Fair value adjustments on financial 26 (26)
instruments
Impairment charges and reversals (note 3) (1 435) (20)
Net profit on disposal of investments 7
Net deficit on disposal of property, plant (88) (66)
and equipment
3. Impairment charges and reversals
Impairment of property, plant and (1 435) (21)
equipment
Reversal of impairment of investments 1
Total impairments and reversals before and (1 435) (20)
after tax
4. Net financing cost
Interest expense and loan costs 460 283
Finance leases 66 63
Interest income (145) (153)
Net interest expense 381 193
Interest adjustment on non-current 34 48
provisions
Net financing cost as per income statement 415 241
5. Tax rate reconciliation % %
Tax as a percentage of profit before tax 42,8 13,1
Tax effect of
- assessed losses not provided for (1,5) (0,3)
- capital (losses)/profits (1,3) 0,2
- disallowable expenditure (1,3) (0,7)
- reclassification of previously 1,1
disallowable expenditure
- exempt income 2,2 1,0
- special tax allowances 2,1
- share of associates` and joint ventures` 29,6 11,9
- tax rate differences 0,5 0,4
- Secondary Tax on Companies (STC) (0,1)
- withholding tax (0,4)
- Controlled Foreign Company profits (CFC) (0,8) (0,1)
- foreign exchange differences (0,1)
- prior year adjustment 1,7 1,7
- rate change on deferred tax balance 0,3
- derecognition of deferred tax asset (46,0)
28,0 28,0
At 31 December 2009 2008
Audited Audited
Rm Rm
6. Investments
Unlisted investments in associates
- directors` valuation 14 165 13 162
Unlisted investments included in other
financial assets
- directors` valuation 408 387
Year ended 31 December
7. Dividends paid
Cash dividends 1 050 957
Cash dividends paid to minorities 27
Total dividends paid 1 050 984
8. Increase in joint venture
During July 2009, the group invested R1 082
million in Mafube Coal Mining (Pty) Limited, its
joint venture with Anglo South Africa Capital
(Pty) Limited, which is included in the coal
segment results.
The increase consist of the following:
Property, plant and equipment 1 156
Non-current financial assets 3
Inventories 36
Trade and other receivables 49
Deferred tax (26)
Provisions (30)
Trade and other payables (106)
1 082
9. Net debt
Net debt is calculated as being interest-bearing borrowings less
cash and cash equivalents.
10. Contingent liabilities
Includes guarantees in the normal course of business from which it
is anticipated that no material liabilities will arise. This
includes guarantees to banks and other institutions. The increase in
2008 and 2009 is mainly attributable to guarantees to the Department
of Minerals and Energy in respect of environmental liabilities on
immediate closure of mining operations.
11. Contingent assets
An outstanding insurance claim of R99 million for the Furnace 2
incident at Exxaro TSA Sands (Pty) Limited for which it is probable
that settlement will be received in the first half of 2010.
A surrender fee of R59 million in exchange for the exclusive right
to prospect, explore, investigate and mine for coal within a
designated area in Central Queensland and Moranbah, Australia,
conditional on the grant of a mining lease.
12. Related-party transactions
During the period the company and its subsidiaries, in the ordinary
course of business, entered into various sale and purchase
transactions with associates and joint ventures.
These transactions were subject to terms that are no less favourable
than those arranged with third parties.
13. Post-balance sheet event
The directors are not aware of any matter or circumstance arising
after the balance sheet date up to the date of this report, not
otherwise dealt with in this report.
14. JSE Limited Listings Requirements
The announcement has been prepared in accordance with the Listings
Requirements of the JSE Limited.
15. Corporate governance
The Group complies in all material respects with the Code of
Corporate Practice and Conduct published in the King III Report on
Corporate Governance.
16. Audit opinion
The auditors, Deloitte & Touche, have issued their opinion on the
group`s financial statements for the year ended 31 December 2009.
The audit was conducted in accordance with International Standards
on Auditing. They have issued an unmodified audit opinion. A copy of
their audit report is available for inspection at the company`s
registered office. These summarised financial results have been
derived from the group financial statements and are consistent in
all material respects, with the group annual financial statements.
REPORTED ACTUAL SEGMENT RESULTS
12 months ended 31 December 2009 2008
Audited Audited
Rm Rm
REVENUE
Coal 9 731 9 040
Tied operations 2 681 2 492
Commercial operations 7 050 6 548
Mineral Sands 3 508 2 776
KZN Sands 705 974
Australia Sands 1 469 1 311
Namakwa Sands1 1 334 491
Base Metals 1 582 1 829
Rosh Pinah 566 436
Zincor 1 413 1 733
Inter-segmental (397) (340)
Other 188 198
Total external revenue 15 009 13 843
NET OPERATING PROFIT
Coal 1 905 2 654
Tied operations 75 83
Commercial operations 1 830 2 571
Mineral Sands (1 559) 104
KZN Sands (1 447) 31
Australia Sands (2) (82)
Namakwa Sands1 (110) 155
Base Metals (8) (172)
Rosh Pinah 105 (14)
Zincor (47) (95)
Other (66) (63)
Other (34) (119)
Total 304 2 467
1 Revenue and net operating profit included from
effective date of acquisition of 1 October 2008.
UNAUDITED PHYSICAL INFORMATION (`000 TONNES)
12 months ended 6 months ended
31 December 30 June
2009 2008 2009 2008
Coal
Production
- Power station coal 36 562 36 700 18 583 18 118
* Tied operations1 16 486 18 095 8 704 8 962
* Commercial operations 20 076 18 605 9 879 9 156
- Coking coal 2 020 2 560 922 1 370
* Tied operations1 268 327 129 171
* Commercial operations 1 752 2 233 793 1 199
- Other coal 6 638 5 574 3 061 2 427
- Char 38
Coal buy-ins 759 733 430 131
Total 46 017 45 567 22 996 22 046
Sales
- Eskom coal 36 299 36 255 18 494 17 880
* Tied operations1 16 473 18 054 8 700 8 942
* Commercial operations 19 826 18 201 9 794 8 938
- Other domestic coal 4 587 5 481 1 920 2 607
* Tied operations1 259 352 130 200
* Commercial operations 4 328 5 129 1 790 2 407
- Coal export2 4 715 3 276 2 389 1 284
- Char 31
Total 45 632 45 012 22 803 21 771
KZN Sands
Production
- Ilmenite 368 229 185 133
- Zircon 36 34 18 16
- Rutile 20 19 10 7
- Pig iron 108 50 54 29
- Scrap pig iron 15 16 7 8
- Slag tapped 205 112 100 63
- Chloride slag 104 95 51 56
- Sulphate slag 24 18 9 10
Sales
- Ilmenite 40 20
- Zircon 21 36 4 22
- Rutile 14 14 3 7
- Pig iron 52 64 17 39
- Scrap pig iron 6 7 4 6
- Chloride slag 68 101 30 49
- Sulphate slag 25 17 13 6
Namakwa Sands3
Production
- Ilmenite 244 315 141 159
- Zircon 116 130 64 65
- Rutile 26 27 15 13
- Pig iron 73 103 41 52
- Scrap pig iron 6 2
- Slag tapped 126 166 71 86
- Chloride slag 97 135 53 64
- Sulphide slag 20 24 10 14
Sales
- Zircon 95 135 37 64
- Rutile 23 27 11 14
- Pig iron 86 82 47 58
- Scrap pig iron 1
- Chloride slag 76 145 37 77
- Sulphate slag 19 26 1 5
Australia Sands4
Production
- Ilmenite 207 174 98 85
- Zircon 33 29 15 13
- Rutile 16 13 8 6
- Synthetic rutile 109 113 54 56
- Leucoxene 14 16 7 6
- Pigment 53 43 25 22
Sales
- Zircon 30 35 6 14
- Rutile 14 14 5 5
- Synthetic rutile 50 62 24 27
- Leucoxene 15 17 1 8
- Pigment 54 44 23 24
Base Metals
Production
- Zinc concentrate 108 109 53 51
* Rosh Pinah 94 94 47 47
* Black Mountain5 14 15 6 4
- Zinc metal 116 110 54 60
* Zincor 87 87 4 47
* Chifeng6 29 23 10 13
- Lead concentrate 38 37 20 18
* Rosh Pinah 20 20 12 12
* Black Mountain5 18 17 8 6
- Zinc metal sales 122 126 58 66
* Domestic 93 93 44 51
* Export 29 33 14 15
Lead concentrate sales
- Export 19 22 6 7
1 Tied operations refer to mines that supply their entire production to
either Eskom or ArcelorMittal SA Limited in terms of contractual
agreements.
2 Includes steam coal exports from Exxaro`s 50% share of the Mafube
joint venture.
3 Namakwa Sands is included from 1 January 2008, for comparable
purposes.
4 Exxaro Sands Australia`s 50% interest in its Tiwest joint venture is
disclosed.
5 Exxaro`s 26% interest in Black Mountain has been disclosed from
1 January 2008, for comparable purposes.
6 Exxaro`s effective interest in the Chifeng refinery is disclosed.
COMMENTS
Reported results not comparable
The group`s audited financial results and actual physical information for the
12-month period ended 31 December 2009 includes a proportionally consolidated
50% interest in the Mafube Coal Mining (Pty) Limited (Mafube) from 1 June
2009. The results are not comparable with the corresponding 12-month period
in 2008 which only includes the acquisition of Namakwa Sands and a 26%
interest in Black Mountain Mining (Pty) Limited (Black Mountain) with effect
from 1 October and 1 November 2008 respectively.
Comparable supplementary financial results have not been disclosed therefore
comments are based on an analysis of the financial results and physical
information compiled for the 12-month periods to 31 December 2009 and 2008
respectively.
Operating results
Group consolidated revenue increased by 8% to R15 billion with net operating
profit reducing by R728 million to R1 739 million before the impairment of
the carrying value of assets at KZN Sands is taken into account.
Export sales were recorded at weaker average exchange rate levels than in
2008. However, realised currency losses were incurred as foreign currency
proceeds on export sales were repatriated at stronger exchange rate levels.
Unrealised foreign currency losses were also incurred on the revaluation of
monetary items in foreign currency at 31 December 2009.
The coal business reported lower net operating profit as an increase in
revenue mainly due to higher export and local power station sales volumes was
more than offset by lower international coal prices and above inflationary
increases in the cost of electricity, rail tariffs and labour costs as well
as and realised as well as unrealised foreign currency losses.
All three units within the mineral sands business reported operating losses
on the back of lower demand for their products at softer prices. The two
local operations, KZN Sands and Namakwa Sands, were adversely impacted by
realised and unrealised foreign currency losses while the Australia Sands
operation was affected by the Australian dollar (AUD) persisting at strong
levels against the US dollar (USD). The operating results of KZN Sands were
also severely impacted by a R1 435 million impairment to the carrying value
of the assets following the decision to not proceed with the development of
the Fairbreeze mine.
Lower realised zinc prices as well as a lower demand for products resulted in
the base metals business recording a small net operating loss.
Earnings
Attributable earnings for the period were R1 023 million (297 cents per
share). This is significantly lower than the comparable 2008 attributable
earnings of R3 405 million (993 cents per share) primarily due to the lower
operating results and the impairment of the carrying value of the assets of
KZN Sands. Attributable earnings include Exxaro`s 20% share of the after tax
profits of Sishen Iron Ore Company (Pty) Limited (SIOC) amounting to R1 762
million, a contribution of R13 million from the effective 22% interest in the
Chifeng zinc refinery and an equity accounted profit of R123 million from the
26% interest in Black Mountain.
Headline earnings which exclude the impact of the impairment of the carrying
value of assets in KZN Sands, were R2 514 million (729 cents per share),
which is 31% lower than the R3 630 million (1 058 cents per share) for the
corresponding period in 2008.
Cash flow
Cash retained from operations was R2 118 million. This was primarily used to
fund net financing charges of R382 million, tax payments of R892 million,
dividend payments of R1 050 million and capital expenditure of R1 982 million
of which R990 million was invested in new capacity and R992 million applied
to sustaining and environmental capital. After the receipt of R1 754 million
in dividends, primarily from SIOC, and the R1 082 million outflow to finalise
the acquisition of the 50% interest in Mafube, the group had a net cash
outflow of R1 620 million for the financial year. The final dividend for
payment in April 2010 will amount to a further cash outflow of R357 million
offset by the dividend inflow from SIOC of approximately R600 million.
Net debt of R2 381 million at 31 December 2008 accordingly increased to R3
731 million at a net debt to equity ratio of 29% at 31 December 2009.
Safety, health and environment
Regrettably, an explosion in the maintenance contractor`s storage area
situated at the Zincor business unit occurred on 10 September 2009, resulting
in the deaths of three contractors and injuries to 12 others.
The average lost time injury frequency rate (LTIFR) per 200 000 man-hours
worked improved by 15% from 0,39 in 2008 to 0,33 in 2009.
Thirteen business units are now ISO 14001 and OHSAS 18001 certified. The
business units that did not achieve certification by end of 2009 will ensure
that their programmes result in certification in 2010.
OPERATIONS
Coal
Total coal production volumes were marginally higher than the previous year.
Power station coal production at the Eskom tied mines was 9% lower at
16,486Mtpa mainly as a result of an inrush of water at Matla`s number 2 mine
which impacted negatively on production for several months, but which has
subsequently been rectified. This was partially offset by increased
production at Arnot mine after ramping up the opencast mining operations to
full production. The commercial mines increased production by 8% to over
20Mtpa to meet the increased demand from Eskom.
Coking coal production showed a marked decrease year on year, down 21% to
2,020Mtpa, due to difficult geological conditions at Tshikondeni mine while
semi-soft coking coal production decreased significantly at Grootegeluk mine
as a result of lower demand from the steel and related industries.
Steam coal production was 19% higher at 6,638Mtpa mainly due to the inclusion
of production from Mafube of some 816kt following the acquisition of a 50%
interest in the joint venture in June 2009. Higher production at the Inyanda
and North Block Complex (NBC) mines was offset by lower production at
Grootegeluk and Leeuwpan mines due to lower domestic steam coal demand.
Production at New Clydesdale`s (NCC) new Diepspruit shaft also ramped up
slower than anticipated.
38kt of char was produced at the four new retorts that were successfully
commissioned at Grootegeluk mine. Ramp-up to full production is expected in
the second half of 2010.
Sales to Eskom were in line with the previous year as increased sales volumes
from the commercial operations were offset by lower sales volumes from the
tied operations mainly due to production challenges at the Matla mine.
Domestic sales were 16% lower at 4,587Mtpa due to lower demand during the
recessionary climate.
In line with Exxaro Coal`s strategy, export volumes increased 44% year on
year to 4,715Mtpa as Exxaro was able to secure additional export allocation
at Richards Bay Coal Terminal (RBCT) from other RBCT users.
Revenue increased by 8% to R9 731 million as higher export volumes combined
with increased domestic power station coal sales at higher prices were
partially offset by lower domestic metallurgical and steam coal sales and
lower export prices realised.
Despite the higher revenue, net operating profit decreased by 28% to R1 905
million, at an operating margin of 20%, as above inflationary increases in
electricity, rail tariffs and labour increased the cost of sales. Costs were
further impacted by realised and unrealised exchange rate losses and an
increase in exploration expenditure for the Moranbah South project in
Australia.
The operating profit from the tied operations was slightly down year on year
as the environmental rehabilitation provision was reduced after extension of
the life of mine at Matla mine.
MINERAL SANDS
KZN Sands
KZN Sands had significantly higher production volumes with both furnaces
operational compared to one furnace being down for 10 months in 2008 after
the water ingress incident in February 2008. Titanium slag tapped was 93kt
higher at 205kt as both furnaces tapped more than 100kt of titanium slag. Low
manganese pig iron and ilmenite production were respectively 58kt and 139kt
higher than in 2008, in line with the increased slag production. Zircon and
rutile production remained in line with 2008 despite the decrease in run of
mine tonnes as a result of higher grades mined.
Despite the increased production, revenue reduced by R269 million to R705
million as lower sales volumes of zircon, pig iron and chloride slag were
recorded at softer prices.
Net operating profit before impairments, was R43 million lower than for the
corresponding period as the lower revenue combined with realised and
unrealised foreign currency losses were only partially offset by improvements
in production efficiencies and cost savings.
The impairment of R1 435 million of the carrying value of the assets is
mainly as a result of the decision taken in the latter part of 2009 not to
proceed with the development of the Fairbreeze mine as a replacement
feedstock producer for Hillendale mine. Hillendale is planned to close during
the last quarter of 2012.
Australia Sands
Improvement initiatives led to pigment production returning to 2007 levels
with 2009 production a 23% improvement on the 2008 year. Zircon and rutile
production increased as a result of higher grades and various improvement
projects. Synthetic rutile production was slightly lower as a result of
maintenance-related problems predominantly experienced in the second quarter
of 2009.
Revenue increased 12% to R1 469 million while net operating results improved
from a loss of R82 million in 2008 to a loss of R2 million in 2009. This was
achieved on the back of a much stronger production performance, higher
pigment sales and higher average prices for both mineral and pigment products
at a realised rate of USD0,79 to the AUD when compared with USD0,84 in 2008.
Namakwa Sands
The impact of the global recession on operations resulted in the postponement
of the Furnace 1 start-up which was shut down for a reline at the end of
March 2009. Furthermore, production activities at the mine and separation
plants were temporarily halted during August to preserve cash flow and avoid
the build up of stocks.
Total annual sales of 299kt were down 28% on the previous year`s record of
416kt.
Net operating profit for only three months in 2008 of R155 million was
followed by a loss in the 2009 financial year of R110 million. Softer prices
albeit at a marginally weaker local currency, realised and unrealised
exchange rate losses, and the R55 million derecognition of the preheaters due
to their deteriorated condition, all added to the weaker financial results.
BASE METALS
Lead and zinc production at the Rosh Pinah mine was in line with 2008 with
lead concentrate exports 14% lower than the corresponding period in 2008.
Production of zinc metal at the Zincor refinery of 87kt was 338 tonnes more
than in 2008, but was adversely affected by downtime on the acid plant as
well as the disruption caused by the explosion in September 2009. Domestic
zinc metal sales were in line with 2008.
A total of 60% of Rosh Pinah`s projected zinc and lead concentrate sales are
hedged to December 2011 at average forward prices ranging from USD2 216 to
USD2 061 for zinc and USD1 967 to USD1 713 for lead. Hedging gains realised
were Namibian dollars 25 million more than in 2008.
Revenue for the 12 months to 31 December 2009 decreased by 14% mainly as a
result of the lower average realised US dollar zinc price. The average zinc
price for 2009 of USD1 658 is 12% lower than in 2008 and was only partially
offset by the slightly weaker local currency.
A turnaround from a net operating loss in 2008 of R172 million to a loss of
R8 million was reported due to cost savings initiatives implemented as well
as the upwards revaluation of inventories at the Zincor refinery at year end.
The impact of above inflationary increases in electricity and maintenance
expenses are however still being experienced.
Production at the Chifeng refinery was in line with 2008. Equity accounted
income from this operation increased by R17 million to
R13 million mainly due to reduced production costs as well as a reduction in
the rates of the environmental duties paid.
Exxaro`s 26% share in Black Mountain, acquired in the last quarter of 2008,
contributed R123 million to equity income due mainly to increased sales
volumes.
OTHER
Production volumes at the FerroAlloys plant were slightly higher while Glen
Douglas production volumes were lower due to unplanned plant stoppages.
Revenue for 2009 decreased marginally when compared to the previous year due
to the lower demand and selling prices. Sales volumes were lower at both Glen
Douglas and FerroAlloys.
CAPITAL EXPENDITURE AND PROJECT PIPELINE
As announced on 1 December 2009, Exxaro reviewed its commodity portfolio and
growth pipeline against the background of the prevailing economic climate to
align resources with a commodity strategy best positioned to release optimal
value for all stakeholders.
Following this review Exxaro plans to reconfigure its zinc assets in order to
ultimately divest from them in an optimal manner. The portfolio of zinc
assets includes the Zincor refinery in Springs, Gauteng, a 50,04% interest in
the Rosh Pinah zinc and lead mine in Namibia, a 26% interest in Black
Mountain which owns the Black Mountain zinc and lead mine and the Gamsberg
zinc project in the Northern Cape, and an effective 22% interest in the
Chifeng zinc smelter in China.
COAL
Detail engineering on the expansion of the Grootegeluk mine to supply Eskom`s
new Medupi power station with 14,6Mtpa of power station coal for 40 years is
progressing in order to be able to supply the first coal to Eskom during the
second quarter of 2012 which coincides with the start-up of the power
station. Full production from 2015 is anticipated.
As previously reported, Exxaro received notice from Eskom, in the third
quarter of 2009, that it was seeking to review certain commercial terms
contained in the Medupi Coal Supply and Off-take Agreement (CSA) signed on 19
September 2008, including the coal price escalation mechanism and the coal
delivery ramp-up. Pending the outcome of the review process, Exxaro`s funding
programme was temporarily suspended in December 2009 as well as the placement
of additional contracts associated with the project. It is expected that the
review process will be concluded in the first quarter of 2010. Due to the
delays in the project execution, it is expected that the capital cost
associated with the project will now increase from R9 billion to R9,5
billion.
The Thabametsi Project pre-feasibility study to develop a potential green
fields mine adjacent to the Grootegeluk mine, with the capability of
supplying the market with power station and metallurgical coal, is scheduled
for completion by end March 2010. Implementation of this project is linked to
Eskom`s future developments in the Waterberg together with the establishment
by the Department of Energy of an appropriate enabling environment to allow
for new generation capacity in terms of Eskom`s multi-site base load
Independent Power Producer (IPP) programme. The scope of the bankable
feasibility study will only be finalised after the details of potential new
generation capacity has been determined, whereafter the required technical
studies will commence. The environmental studies have commenced at the end of
2009 and are due to be completed during 2011. First coal production could be
expected by 2015.
Exxaro entered into a prospecting joint venture agreement with Sasol Mining
for the development of a new coal mine in the Waterberg to supply Sasol`s
potential new 80 000 barrels per day inland coal to liquids facility (Project
Mafutha). The project is in the pre-feasibility stage and a decision to
proceed to a bankable feasibility study is expected in 2010.
An integrated infrastructure plan is being implemented for the Waterberg coal
fields together with the relevant stakeholders. Focus areas include the
supply of raw water to the area, rail, road and housing.
After the successful commissioning of the Sintel Char plant at Grootegeluk
mine for the production of reductants for the ferroalloy industry, Exxaro is
currently evaluating the Phase 2 expansion to produce a further 140ktpa of
char.
Exploration of the hard coking coal resource on the Moranbah South properties
in the Bowen Basin of Queensland Australia is progressing well and the
results obtained are very encouraging. Moranbah South, which is a 50% joint
venture with Anglo American, has the potential to produce premium quality
hard coking coal.
ENERGY
The commodity portfolio review announced on 1 December 2009 stated the
group`s intention to explore opportunities in the energy markets. Clean
energy initiatives encompassing co-generation, carbon credit trading, and
renewable energy (wind and solar projects), are progressing well.
Development of the first five spot test for the Coal Bed Methane project in
Botswana, with the aim of testing for economic gas flow is progressing well.
Completion of the test work is planned for April 2010 after which the site
will be operated until economic gas flow has been attained.
MINERAL SANDS
As a result of the decision to not continue with the development of the
Fairbreeze mine, the group will plan for the closure of the KZN Sands
operations during the next five years while in parallel investigating other
feedstock alternatives and the continuation of the business should the
outlook for the mineral sands industry improve substantially.
The implementation of the Tiwest Kwinana pigment expansion project which will
increase production by 40ktpa is progressing according to plan with
commissioning targeted for the second half of 2010. Exxaro is funding 100% of
the expansion project of which the capital expenditure is now projected at
some AUD118 million.
BASE METALS
Base Metals activities are focused on the process of optimisation for
divestment. It is expected that potential suitors will be approached in the
second half of 2010.
FERROUS
The final evaluation of the iron ore project in Turkey concluded that it did
not meet the Group`s investment criteria and a decision was made to divest
from the project.
CONVERSION OF MINING RIGHTS
Engagement with the relevant stakeholders continues in order to process the
registration of the new order mining rights granted as well as the converted
old order mining rights of the former Kumba Resources Limited. Approval of
the conversion of the old order mining rights of the former Eyesizwe Coal
(Pty) Limited submitted in 2008, is awaited.
CHANGES TO THE BOARD
Ms Simangele Mngomezulu resigned with effect from 21 December 2009. The board
expresses its appreciation for her contribution to the board. Ms Noluthando
Langeni was appointed to the board in her stead with effect from 23 February
2010. The acting chairman, Dr Len Konar, was elected as chairman of the board
with effect from 23 February 2010.
OUTLOOK
The rate of recovery from the global recession remains uncertain despite a
number of positive indicators.
The group expects the global demand for coal to increase, with the demand for
local power station coal anticipated to remain strong. The domestic demand
for steam and metallurgical coal is however expected to be firmer but still
to remain subdued in 2010.
Coal exports may be affected by the availability of rail and port allocation
at RBCT.
For the mineral sands commodities, higher production and sales volumes are
anticipated at prices which, although still under pressure, are showing signs
of recovery.
The base metals business is expected to remain under pressure in 2010 as a
global zinc oversupply situation may result in downward pressure on zinc
prices in the second half of 2010, while local demand is anticipated to
remain stable.
Based on current market expectations on iron ore price increases anticipated
with effect from 1 April 2010 coupled with strong demand, the equity
accounted contribution from SIOC may have a positive impact on Exxaro`s
earnings.
The introduction of the payment of royalties with effect from 1 March 2010
will have a negative impact on the group`s operating results, most notably
for the coal business.
Overall, the group`s consolidated results for 2010 will largely be driven by
the recovery in demand and the prices for its commodities, as well as by the
trading levels of the local and Australian currencies. The group will
continue with its strong focus on capital prioritisation and working capital
management together with rigorous cost control.
The financial information on which the outlook statement has been based has
not been reviewed or reported on by the company`s external auditors.
FINAL DIVIDEND
The board of directors has declared a final cash dividend number 14 of 100
cents per share in respect of the 2009 financial year end. The dividend has
been declared in South African currency and is payable to shareholders
recorded in the register of the company at close of business on Friday,
16 April 2010.
In compliance with the requirements of Strate the electronic and custody
system used by the JSE, the following dates are applicable:
Last date to trade cum dividend Friday, 9 April 2010
Shares trade ex dividend Monday, 12 April 2010
Record date Friday, 16 April 2010
Payment date Monday, 19 April 2010
Share certificates may not be dematerialised or rematerialised during the
period Monday, 12 April 2010 and Friday, 16 April 2010 both days inclusive.
On Monday, 19 April 2010 the final cash dividend will be electronically
transferred to the bank accounts of all certificated shareholders where this
facility is available. Where electronic fund transfer is not available or
desired, cheques dated 19 April 2010 will be posted on that date.
Shareholders who have dematerialised their share certificates will have their
accounts at their CSDP or broker credited on Monday, 19 April 2010.
On behalf of the board
SA Nkosi WA de Klerk
(Chief Executive Officer) (Finance Director)
25 February 2010
Registered office
Exxaro Resources Limited
Roger Dyason Road,
Pretoria West, 0183
Telephone +27 12 307 5000
Fax +27 12 307 4080
Transfer secretaries
Computershare Investor Services (Pty) Limited
Ground Floor, 70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Directors
SA Nkosi* (Chief Executive Officer), WA de Klerk (Finance Director)*,
JJ Geldenhuys, CI Griffith, U Khumalo, Dr D Konar (Chairman), N Langeni, VZ
Mntambo, RP Mohring, NL Sowazi, J van Rooyen, D Zihlangu *Executive
Company secretary
MS Viljoen
Investor relations
RA de Beer (+27 12 307 4189)
If you have any queries regarding your shareholding in Exxaro Resources,
please contact the Transfer Secretaries at +27 11 370 5000.
Pretoria
25 February 2010
Sponsor
Deutsche Securities (SA) (Pty) Limited (+27 11 775 7000)
Date: 25/02/2010 07:05:34 Produced by the JSE SENS Department.
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