| Tue 2 Mar 2010, 8:00 | | MTX - Metorex Limited - Consolidated unaudited interim results for the period |
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MTX
MEMTX
MTX - Metorex Limited - Consolidated unaudited interim results for the period
ended 31 December 2009
Metorex Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1934/005478/06)
Share code: MTX ISIN: ZAE000022745 Issuer code: MEMTX
("Metorex" or "the Company" or "the Group")
A new focus for the future
Consolidated unaudited interim results for the period ended 31 December 2009
Highlights
* Restoring the balance sheet:
- The Vergenoeg disposal was concluded for US$60 million on 21 December 2009;
and
- A capital raising for US$100 million was initiated and announced on 29
January 2010.
* Cash mining profit from core operations was R462 million for the six months
ended 31 December 2009.
* Operations:
- Group quarterly copper production increased by 3,5% to 12 634 tons
compared with the previous quarter, which was driven by increases at
Ruashi but a reduction at Chibuluma;
- Group quarterly cobalt production increased by 21,4% to 823 tons due
to improved production from Ruashi; and
- Quarterly copper production costs net of by-products from Ruashi and
Chibuluma were well controlled at US$2 929 per ton.
Consolidated condensed statement of comprehensive income
Six months Six months
ended ended
31 December 31 December
2008* 2009
(unaudited) (unaudited)
R000`s R000`s
Mineral sales
Copper 506 290 1 109 384
Cobalt 70 271 279 888
Gross revenue 576 561 1 389 272
Realisation costs 115 307 166 841
On-mine revenue 461 254 1 222 431
Cost of production 386 056 762 005
Stock movement 27 551 (1 275)
Cash mining profit 47 647 461 701
Profit on hedge book close-out 210 954 -
Other income, net 19 473 359 279
EBITDA 278 074 820 980
Impairments (33 236) -
Finance income 611 5 522
Finance costs (15 403) (59 734)
Income before depreciation and taxation 230 046 766 768
Depreciation 52 051 153 071
Income before exceptional 177 995 613 697
Assets held for sale 137 406 (18 382)
Discontinued operations (898) (261)
Income before taxation 314 503 595 054
Taxation 77 623 82 024
Income after taxation 236 880 513 030
Income attributable to outside shareholders 77 214 27 569
Retained income for the period 159 666 485 461
Other comprehensive income (loss), net of tax
Foreign currency translation reserve 882 787 (136 501)
Net effect of cash flow hedges (42 003) (465 350)
Total comprehensive income (loss) 840 784 (601 851)
Attributable to:
Equity holders of the parent 667 584 (453 917)
Minority interest 173 200 (147 934)
840 784 (601 851)
From continuing and discontinuing operations
Earnings per share (cents) 42,09 65,29
Diluted earnings per share (cents) 41,88 64,58
Headline earnings per share (cents) 48,21 14,17
Diluted headline earnings per share (cents) 47,96 14,00
Adjusted headline (loss) earnings per share (0,70) 11,79
(cents)
Weighted shares in issue (000`s) 379 304 743 567
Diluted number of shares in issue (000`s) 381 283 751 747
Shares in issue (000`s) 613 077 745 763
Headline earnings per share is calculated
using the following:
Income attributable to ordinary shareholders 159 666 485 461
Impairments, net of tax and minorities 22 310 -
Profit on the sale of assets, net of tax - (380 368)
Discontinued operations - O`Okiep 898 261
Headline earnings (R000`s) 182 874 105 354
Headline earnings per share (cents) 48,21 14,17
Diluted headline earnings per share (cents) 47,96 14,01
Adjusted headline (loss) earnings per share is
calculated using the following:
Headline earnings (R000`s) 182 874 105 354
Ruashi hedge profit, net of tax and minorities (118 134) -
Once-off deferred tax credit relating to AHFS - (42 077)
AHFS (PAR, CM, VMC) (136 508) 18 643
Minority interest relating to AHFS 69 242 5 740
Adjusted headline (loss) earnings (R000`s) (2 538) 87 660
Adjusted headline (loss) earnings per share (0,70) 11,79
(cents)
*Restated
Consolidated statement of financial position
Year ended Six months
30 June 2009 ended
(audited) 31 December
R000`s 2009
(unaudited)
R000`s
ASSETS
Non-current assets
Property, plant, equipment, mineral rights 4 898 487 4 643 927
and other
Goodwill 11 514 11 514
Investments 79 718 77 650
Rehabilitation trust funds 779 800
Derivative instrument 94 942 -
5 022 370 4 733 891
Current assets
Inventories 264 051 233 464
Trade and other receivables 447 638 413 061
Taxation prepaid 6 194 15 077
Bank balances and cash 73 553 238 550
791 436 900 152
Total assets 6 525 894 5 634 043
EQUITY AND LIABILITIES
Equity attributable to equity holders of the 2 399 459 2 467 124
parent
Minority interest 457 208 (48 721)
Total equity 2 856 667 2 418 403
Non-current liabilities
Long-term liabilities - interest bearing 1 415 563 1 298 556
Long-term provisions 181 310 153 305
Deferred tax liabilities 469 292 449 695
Derivative instruments - 85 835
2 066 165 1 987 391
Current liabilities
Trade and other payables 557 831 401 998
Short-term borrowings - interest bearing 695 604 179 300
Short-term provisions 35 065 27 836
Bank overdraft 54 323 37 240
Derivative instruments 230 240 453 306
Taxation 29 999 53 117
1 603 062 1 152 797
Assets held for sale, net (712 088) 75 452
Total equity and liabilities 6 525 894 5 634 043
Net asset value per share (cents) 323 331
Net tangible asset value per share (cents) 322 329
Condensed consolidated cash flow statement
Six months Six months
ended ended
31 December 31 December
2008 2009
(unaudited) (unaudited)
R000`s R000`s
Cash generated by operations, pre working 294 951 356 772
capital
Working capital (62 059) (216 218)
Cash generated by operations 232 892 140 554
Dividends paid to minorities (39 096) -
Taxation paid (107 020) (11 452)
Finance costs, net (10 947) (35 737)
Cash inflows from operating activities 75 829 93 365
Cash outflows from investing activities (1 079 298) 708 565
Cash inflows from financing activities 1 193 707 (611 372)
Net increase in cash and cash equivalents 190 238 190 558
Cash at beginning of year 183 571 19 230
Effect of foreign exchange rate changes 18 331 (1 427)
Cash at end of year 392 139 208 361
VMC cash on hand - (7 051)
Cash at end of year - continuing operations - 201 310
Condensed statement of changes in equity
Six months Six months
ended ended
31 December 31 December
2008 2009
(unaudited) (unaudited)
R000`s R000`s
Shareholders` equity at start of year 4 133 674 2 856 667
Ordinary shares issued 467 252 7 655
Other comprehensive income and other reserves 1 086 917 (579 951)
Profit for the period 159 666 485 461
Share option equity 8 000 12 638
Minority interests 240 206 (505 929)
Assets held for sale - 141 862
Total equity 6 095 715 2 418 403
Commentary
Johannesburg, 2 March 2010: Metorex Limited, the focused base metals miner,
today announced a 141% increase in Group revenue to R1,4 billion, despite
the US$3 900 per ton Ruashi hedges. Adjusted headline earnings of 12 cents per
share for the six months ended 31 December 2009. Group copper and cobalt sales
increased to 24 723 tons and 1 505 tons respectively. Non-core asset disposals
substantially restored the balance sheet with Group debt having been reduced by
29% to R1,5 billion. The recently announced capital raising will restore the
balance sheet and sets the scene for new project development and value creation.
Terence Goodlace, CEO of Metorex said, "Metorex has entered a new phase in its
life and the Group has rapidly advanced various recapitalisation, repositioning
and refocusing initiatives over the last six months. The recently announced
capital raising, along with the disposals of Pan African in July 2009 and
Vergenoeg in December 2009, fundamentally changes and strengthens the Metorex
balance sheet and places the company in a position to undertake project
development. The focus has now switched from one of survival to one of growth
and we are now actively advancing the completion of bankable feasibility
studies for the Musonoi (Dilala East), Kinsenda and Lubembe deposits in the
DRC. Operationally, Ruashi has continued its positive trend, with quarterly
copper production having increased by 32,1% to 7 518 tons and cobalt by 21,9%
to 812 tons."
Salient features
Six months
Financial performance December December
2008* 2009
Gross revenue (R`000) 576 561 1 389 272
Cash mining profit (R`000) 47 647 461 701
Cash mining profit (%) 8 33
margin
EPS (cents) 42,09 65,29
HEPS (cents) 48,21 14,17
Adjusted HEPS (cents) (0,70) 11,79
Market capitalisation (R`000) 1 324 246 3 577 500
Shares in issue (`000) 613 077 745 763
Weighted average number (`000) 379 304 743 567
of shares
Share price (cents) 216 481
ZAR/US$ rate - average (R/US$) 8,88 7,63
ZAR/US$ rate - closing (R/US$) 9,55 7,39
* Restated for assets-
held-for-sale.
Commodity production* Quarter Six months
Unit September December December December
2009 2009 2008 2009
Copper (t) 12 206 12 634 13 563 24 840
Cobalt (t) 678 823 135 1 501
Antimony (mtu) 70 652 35 456 150 371 105 989
Fluorspar (dmt) 41 156 40 738 87 454 81 894
Gold (kg) 116 93 234 209
* The figures are stated as gross and do not represent the attributable
beneficial interest.
Commodity sales* Quarter Six months
Unit September December December December
2009 2009 2008 2009
Copper (t) 11 526 13 197 13 843 24 723
Cobalt (t) 814 691 237 1 505
Antimony (mtu) 90 996 40 623 130 605 131 619
Fluorspar (dmt) 34 761 19 864 84 592 54 625
Gold (kg) 113 104 241 217
*The figures are stated as gross and do not represent the attributable
beneficial interest.
Average prices Quarter Six months
achieved, net of
hedges
Unit September December December December
2009 2009 2008 2009
Copper (US$/t) 4 306 6 452 4 826 5 877
Cobalt (70% of LMB) (US$/t) 22 347 26 642 33 060 24 244
Cobalt (70% of LMB) (US$/lb) 10 12 15 11
Antimony, net (US$/mtu) 34 43 41 37
Fluorspar (R/t) 1 800 1 800 1 989 1 801
Gold (US$/oz) 978 1 117 830 1 043
Safety, health, environmental and communities ("SHEC")
The Group is pleased to report zero fatalities over the last six months and a 10
per cent improvement in lost time injuries when compared to the September 2009
quarter.
The process of implementing a Group SHEC framework is continuing and the
following milestones have been achieved at operations over the last six months:
* The development and implementation of consistent SHEC policies across all
Group operations;
* Responsibility, accountability and authority for SHEC management being
clearly defined at a Group and Operating level;
* Improved emergency preparedness and response arrangements;
The first phase of hazard identification and risk assessment training; and
* New baseline risk assessments completed and submitted for scrutiny.
During the period ahead, the Group plans to complete the SHEC Framework through
implementation of the following:
* Performance monitoring and measurement of the SHEC management system; and
* Continuous improvement in the management of SHEC-related hazards and risks.
Financial overview - six months ended December 2009 ("H2009") compared with the
six months ended December 2008 ("H2008")H2009 was dominated by the continued
focus on restoring the Group balance sheet and the first-time recognition of
results from the newly developed Ruashi project. In line with the Group`s
strategy of being a focused base-metals producer together with the need for
further liquidity, the Pan African Resources ("PAR") and Vergenoeg Mining
Company (Proprietary) Limited ("VMC") asset disposals were concluded during
H2009. The proceeds from these asset sales amounted to R940 million, of which
65% was applied to the reduction of Group debt. As a result, the Group debt
position reduced from R2,1 billion as at 30 June 2009 to R1,5 billion by 31
December 2009, which is a 28,5% reduction.
The Ruashi mine continued its production build-up during H2009 with operating
results now being recognised in the Group income statement from 1 July 2009.
Ruashi results were previously capitalised. The results from Ruashi were
negatively impacted by the current hedge book, which limited copper prices
to US$3 900 per ton and accounted for some 60% of production. These hedges
will continue for a further six months to 30 June 2010, whereafter the revised
hedge book as announced on 17 December 2009 will apply. The revised hedge book
is priced at US$5 972 per ton and accounts for 45% of production during the
12 months ending June 2011.
Ruashi performance during the quarter ended 30 September 2009 was negatively
impacted following extended periods of power outages due to planned maintenance
by the national power utility. However, copper and cobalt production improved
by 32% and 22% respectively during the quarter ended 31 December 2009 when
compared with the production levels of the previous quarter.
Revenue
Group revenue increased by 141% to R1,4 billion (2008: R0,6 billion) following
the commissioning of the Ruashi copper/cobalt project. Group copper and cobalt
sales amounted to 24 723 tons (2008: 13 843 tons) and 1 505 tons (2008: 237
tons) respectively. Cobalt sales were affected by trucking delays over the
festive season.
The overall copper price achieved, inclusive of hedges, increased by 43% to
US$5 877 per ton and the net cobalt price decreased by 27% to US$24 244 per
ton (70% of the London Metals Bulletin ("LMB") price). The Rand/US$ exchange
rate strengthened by 14% which impacted negatively on translation of the
Group`s results to Rand. The recovery in the cobalt price has lagged that of
copper, however LMB prices currently average US$44 000 per ton, of which 70%
is payable to Ruashi in terms of the Group`s off-take agreement.
Operating costs
Group operating costs increased to R928 million (2008: R529 million) as a
result of an increase in volume and the full inclusion of the operating costs
at Ruashi. On a total operating cash cost per ton basis, Ruashi produced copper
at US$3 084 per ton, net of cobalt credits and Chibuluma produced at US$2 853
per ton (2008: US$2 872 per ton). The Ruashi unit costs decreased to US$2 829
per ton during the quarter ended December 2009 from US$3 496 per ton during
the previous quarter. Assuming a gross LMB cobalt price of US$33 060 per ton,
total operating costs at Ruashi are expected to decrease to approximately
US$2 200 per ton of copper at the targeted average annual production levels
of 36 000 tons of copper and 4 500 tons of cobalt over the next four years.
Cash mining profit
The cash mining profit increased to R462 million (2008: R48 million),
which reflects the impact of the Ruashi project contribution albeit during the
ramp-up phase. The Group averaged a cash mining profit margin of 33% during
H2009.
Depreciation
Depreciation amounted to R153 million and compares to R52 million during the
comparative period. This increase followed the commissioning of the Ruashi
project and the resultant depreciation of its capital assets over an estimated
15-year useful life. The Ruashi capital assets include the total project
expenditure, capitalised borrowing costs and commissioning losses together with
mineral rights related to the acquisition cost of this asset.
Other income, net
Net other income of R359 million (2008: R19 million) includes a profit of R431
million on the disposal of VMC and PAR. Royalty charges amounted to R41 million
during H2009 (2008: R10 million) and non-cash share-based payment charges
totalled R12 million (2008: R8 million).
Borrowing costs
Borrowing costs, mainly related to the Ruashi project finance loan and the
Chibuluma term loan amounted to R60 million. Future borrowing costs are
expected to reduce going forward as a result of the Group`s planned lower debt
levels.
Adjusted headline earnings
The Group headline earnings of 14 cents per share ("cps") (2008: 48 cps)
exclude the profit on the disposal of PAR and VMC. The comparative headline
earnings include attributable earnings from PAR (11 cps) as well as the
exceptional profit on the closure of certain Ruashi hedges during December
2008 (31 cps).
Adjusted headline earnings per share ("Adjusted HEPS") amounted to 12 cents
(2008: -1 cent). Adjusted HEPS excludes non-recurring items, therefore the
attributable earnings for H2009 and H2008 from PAR (now sold), VMC (now sold)
and Consolidated Murchison ("CM") (held for sale) are excluded. Furthermore,
the H2009 Adjusted HEPS excludes a positive deferred taxation adjustment of
R42 million following the recognition of taxation losses available for
set-off against gains from the disposal of assets during the period under
review. The H2008 Adjusted HEPS also excludes the exceptional profit on
closure of a portion of the Ruashi hedge book during December 2008.
The weighted average number of shares in issue during H2009 increased by 96%
to 744 million from the 379 million during H2008.
Assets held for sale ("AHFS")
The VMC and CM assets, which were held for sale during the period, incurred
a net loss after taxation of R18 million (2008: profit of R137 million,
including PAR). PAR was sold effective 1 July 2009 and VMC was sold effective
21 December 2009. The H2009 loss from CM followed a poor on-mine operating
performance which was affected by low staff morale, Beta shaft winder breakdowns
and the collapse of a return airway at the Monarch shaft. CM is held either
for a disposal or being placed on care and maintenance or closure, which
decision is imminent.
Capital expenditure and commitments
Capital expenditure for the six months amounted to R228 million (2008: R1
billion), mainly incurred at Chibuluma (ongoing decline development), Ruashi
(front-end project completion and land acquisition) and ongoing funding of
Copper Resources Corporation (CRC) which includes the Kinsenda mine.
Contracted capital commitments at 31 December 2009 amounted to R20 million
(2008: R83 million), while uncontracted commitments amounted to R44 million
(2008: R334 million).
Operating lease commitments, which fall due within the next year, amounted to
R4 million (2008: R33 million), while commitments of R3 million (2008: R36
million) fall due during the next four years.
Group balance sheet and cash flow
The Group`s financial position improved significantly following the disposal
of non-core assets during H2009 with proceeds amounting to R937 million and
net cash generated by operations of R357 million. The resultant total cash
injection of R1,3 billion was applied to reducing interest-bearing debt by
R611 million, working capital investments of R216 million, capital expenditure
totalling R228 million, finance costs of R36 million and taxation payments
of R11 million. Group cash amounted to R201 million as at 31 December 2009.
A negative mark-to-market of the Group`s copper hedge book amounting to R540
million at period-end, based on a spot copper price of US$7 400 per ton,
impacted on shareholders` equity. The negative hedge book value principally
relates to the Ruashi hedges at US$3 900 per ton, which will now mature by
30 June 2010.
Analysis of Group debt position - 31 December 2009
Entity Nature Amount Cost Term
(Rm)
Ruashi Jinchuan pre- 155 Fixed 4,68% 36 months, from Jan
offtake finance `10
Ruashi ECIC facility 824 US Libor +1,25% 7 semi-annual from
1 Jan `11
Ruashi Commercial 193 US Libor + 5 semi-annual from
facility 2,75% to 3,5% 1Jan `11
Chibuluma Term Loan 237 US Libor +4,85% 9 semi-annual from
30 Sep `09
Various 69 Various One to three years
TOTAL 1 478
Following the recently announced capital raising, the Group`s gross debt
position will reduce to R1,2 billion.
Group hedge book status - 31 December 2009
Commodity Maturity Volume Price Comment
(months) (tons) (US$/t)
Copper: Ruashi 6 (Jan `10 - 11 700 3 900 Forwards
Jun `10)
Ruashi 12 (Jul `10 - 16 200 5 972 Forwards
Jun `11)
Chibuluma 6 (Jan `10 - 4 200 5 307 Forwards
Jun `10)
Chibuluma 6 (Jul `10 - 3 000 7 000 - Zero cost
* Dec `10) 8 065 collar
Chibuluma 6 (Jan `11 - 3 000 6 805 - Zero cost
* Jun `11) 8 000 collar
*Executed post 31 December 2009.
Operational review - quarter ended 31 December 2009 compared to quarter
ended 30 September 2009
Ruashi Quarter 6 Months
September December December December
2009 2009 2008 2009
Tons (t) 303 786 328 078 112 990 631 864
milled
Headgrade - Copper (%) 2,76 2,81 3,11 2,79
- Cobalt (%) 0,57 0,45 - 0,51
Recovery - Copper (%) 67,9 81,6 63,0 75,0
- Cobalt (%) 38,5 55,0 - 45,9
Copper produced (t) 5 690 7 518 2 215 13 208
Copper sold (t) 4 986 8 052 2 023 13 038
Cobalt produced (t) 666 812 - 1 478
Cobalt sold (t) 800 683 - 1 483
On-mine costs per ton (US$/t) 103 97 * 100
milled
Copper realisation (US$/t) 595 587 * 590
costs per ton of
copper sold
Cobalt realisation (US$/t) 4 298 3 570 * 3 967
costs per ton of
cobalt sold
Total cash cost/ton (US$/t) 3 496 2 829 * 3 084
of copper produced,
net of cobalt credits
Cash mining profit (R`000) 24 944 228 643 * 253 587
Cash mining profit (US$000) 3 267 29 948 * 33 215
Depreciation (R`000) 52 239 58 610 * 110 849
Depreciation (US$000) 6 842 7 677 * 14 519
Capital expenditure (R`000) 24 284 67 833 611 268 92 116
Capital expenditure (US$000) 3 286 9 179 * 12 465
*Project capitalised during H2008
Ore mined at Ruashi was less than in the September 2009 quarter. This was
according to plan and is due to the wet season during which ore is supplemented
from stockpiles built up during the dry season. The wet season generally
runs from November through to March. Waste stripping continues normally during
the wet season, and was 117 740 tons higher than the previous quarter. Ore
milled by the plant was 24 292 tons higher than the previous quarter, an 8%
improvement over the previous quarter.
Copper grades at 2,8%, were 1,8% higher than the previous quarter and
grades on both copper and cobalt are now more in line with the new geological
model. Recoveries of both copper and cobalt have improved over the previous
quarter by 20,2% and 42,9% respectively. This is in line with our production
ramp-up expectations.
Copper and cobalt production improved over the last quarter by 1 828 tons
and 146 tons respectively due to the volume and recovery improvements.
Copper sales were significantly higher than the previous quarter at 8 052
tons. This was at the expense of the cobalt sales which were down on the
previous quarter by 117 tons. Limited trucks were available during December
and priority was given to the shipping of copper cathode. This resulted in
cobalt stock increases which will be normalised in the coming quarter.
Copper pricing, net of hedge losses for the quarter was favourable at
US$6 452 per ton against the previous quarter of US$4 306 per ton. The same
trend was evident for cobalt where we received a price of US$26 624 per ton
against the previous quarter`s price of US$22 348 per ton. Revenue for the
quarter at US$75,2 million was US$15,9 million higher than the previous
quarter.
Costs were well controlled at US$32,6 million, which was comparable with
the previous quarter and operating costs net of cobalt credits improved
from US$3 651 per ton of copper in the previous quarter to US$2 829 per ton
of copper for the current quarter. Cash mining profit increased from US$3,3
million to US$31,9 million.
For the quarter, capital expenditure of US$ 9,1 million was spent against
the previous quarter of US$3,2 million. The previous quarter`s expenditure
was low, and some level of catch-up is evident in the current quarter`s
expenditure. US$6,8 million of this expenditure was incurred to complete
a number of phase II-related projects which included the crushing circuit,
the coarse ore stockpile area and projects related to the cobalt circuit.
The cobalt realisation costs per ton sold were high due to moisture levels
of approximately 55 per cent. The commissioning of the cobalt-drying circuit
should reduce moisture levels to around 20 per cent and have a positive
impact on costs.
Chibuluma Quarter Six months
September December December December
2009 2009 2008 2009
Tons (t) 144 129 138 491 296 244 282 620
milled
Headgrade - Copper (%) 3,47 3,17 3,05 3,32
Recovery - Copper (%) 91,3 87,7 90,0 89,7
Copper produced (t) 4 573 3 846 8 113 8 419
Copper sold (t) 4 613 3 866 7 849 8 479
On-mine costs per ton US$/t) 48 53 51 50
milled
Copper realisation costs (US$/t) 870 945 967 904
per ton of copper sold
Total cash cost/ton of (US$/t) 2 613 3 140 2 872 2 853
copper sold
Cash mining profit (R`000) 89 089 130 364 54 649 219 453
Cash mining profit (US$000) 11 669 17 075 6 154 28 744
Depreciation (R`000) 16 510 16 114 28 739 32 624
Depreciation (US$000) 2 162 2 111 3 236 4 273
Capital expenditure (R`000) 22 164 25 414 86 324 47 578
Capital expenditure (US$000) 2 999 3 439 9 039 6 438
Tonnage mined at Chibuluma for the December quarter was 138 425 tons
and is 3% below the previous quarter due to five power outages, exceptional
adverse weather and limited production face availability. Capital development
improved to 665 metres representing a 41% increase over the previous quarter.
Milled throughput for the quarter at 138 491 tons was 4% below the September
quarter and was attributable to the shortfall of ore from underground.
The plant recovery at 87,7% was less than the previous quarter recovery of
91,3% and an investigation into the low recoveries indicated that the
reduction was a result of a combination of factors. A high proportion of
mill rejects fed to the mills in October, November and first half of December,
together with an increased ore hardness and slightly different mineralogy
due to the mining mix resulted in a reduction in grind which affected the
recoveries. Recoveries at the mine have subsequently been restored to
planned levels.
Copper dispatched at 3 866 tons was 16% below that sold in the September
quarter. In addition to the production shortfall in the December quarter,
the previous quarter benefited from a stock carry-over from the previous
financial year-end. All copper in the quarter was sold to Chambishi Copper
Smelter per contract conditions.
Net on mine revenue increased in the December quarter to US$24,5 million
representing an 18% increase on the previous quarter. The favourable
performance was attributable to an increase in the average copper price
of US$6 664 per ton compared to US$5 844 per ton achieved in the September
quarter.
Mine operating costs for the quarter totalled US$9,0 million, which was
5% higher than the September quarter. The major contributors to the increase
were engineering costs and increased payroll costs due to the appreciation
of the Zambian Kwacha to the United States Dollar.
The reduction in copper tons sold together with the increased costs
resulted in a cost per ton of copper sold of US$3 140 representing a 20%
unit cost increase from the previous quarter cost of US$2 613. However,
as a consequence of the increased net revenue, the cash mining profit at
US$17,1 million was 46% higher than the previous quarter.
Capital expenditure in the December quarter totalled US$3,4 million
representing a 16% increase from the previous quarter. The increase is in
line with budgeted amounts and was incurred primarily on the decline ramp
development on which US$1,8 million was spent.
Sable Quarter Six months
September December December December
2009 2009 2008 2009
Copper produced (t) 1 943 1 270 3 235 3 213
Copper sold (t) 1 927 1 279 3 971 3 206
Cobalt produced (t) 12 11 135 23
Cobalt sold (t) 13 9 237 22
Acquisition cost of (%) 70 73 59 72
contained copper feed
(% of copper LMB price)
Overall copper process (%) 97 92 97 95
recovery
Net margin on copper (%) 11 7 17 9
production after
acquisition and process
costs
Cash mining profit (R`000) 10 154 4 603 14 617 14 757
Cash mining profit (US$000) 1 330 603 1 646 1 933
Depreciation (R`000) 4 859 4 631 23 246 9 490
Depreciation (US$000) 636 607 2 618 1 243
Capital expenditure (R`000) - - 3 181 -
Capital expenditure (US$000) - - 333 -
Ore deliveries from the DRC to the Sable plant reduced from 7 400 tons in
the previous quarter to 4 588 tons this quarter. Local Zambian ore purchases
of 3 576 tons were 400 tons higher than the previous quarter. As a result of
the reduction in ore receipts copper cathode stripped was 1 271 tons which is
672 tons less than the September quarter. Cobalt carbonate production was
steady during the quarter.
A section of the zinc plant was converted into an additional releach circuit
which improves overall copper recoveries.
Copper prices increased during the quarter and the achieved copper price
was US$6 663 per ton. This is US$677 per ton higher than the previous quarter.
The achieved cobalt price was US$24 692 per ton which is US$2 913 lower than
the previous quarter`s achieved price.
Copper revenue at US$ 8,5 million for the quarter was down by US$3,1 million
from the previous quarter. This was due to the low production and sales
volumes resulting from the short supply of feed material. Cobalt revenue at
US$ 0,23 million was US$0,13 less than the previous quarter. This was also
a result of the lack of feed and the lower cobalt grade of the feed.
Total operating costs for the quarter were US$1,9 million lower and this
is driven by the reduced volumes of ore purchased. Cost of production of
cathode, excluding ore purchases, was US$650 per ton for the quarter.
Cash mining profit for the quarter was US$0,6 million which is US$0,7
million lower than the previous quarter. This is a result of the decreased
supply of feed material.
There was no capital expenditure during the quarter.
Subsequent events
On 29 January 2010, the Group announced a R 750 million (US$100 million)
capital raising which will strengthen the Metorex balance sheet and set
the scene for new project development and value creation. R600 million
(US$80 million) of the capital raising target amount has been secured
through an institutional book-build and these funds will substantially reduce
and ring-fence the Ruashi project finance debt in the near term. Additionally,
a favourable Revised Ruashi Debt Package has been concluded with The Standard
Bank of South Africa ("Standard Bank"). The capital raising will:
* provide funds to take our potential development projects, being Musonoi
(Dilala East), Kinsenda and Lubembe in the DRC, up the value curve to bankable
feasibility stage;
* enable the disposal, closure or placement of CM on care and maintenance;
and
* increase Group treasury reserves.
The claw back / rights offer circular is expected to be posted on or about
23 March 2010.
Going concern
The directors are satisfied that the Group is a going concern for the
foreseeable future, and have adopted the going-concern basis in preparing these
financial statements.
Accounting policies
The unaudited provisional results have been prepared and presented in accordance
with IAS 34 Interim Financial Reporting Standards ("IFRS"). The accounting
policies, which are in terms of IFRS, are consistent with those adopted in the
financial year ended 30 June 2009, except for IAS 1 (revised) Presentation of
Financial Statements and IFRS 8 Operating Segments, which have been applied in
the current period. The comparative income statement has been restated for PAR,
VMC and CM as assets held for sale in terms of IRFS S: Non current assets held
for sale and discontinued operations. The copper smelting charges in Chibuluma
has also been reclassified from cost of production to realisation costs in line
with the current year treatment. The accounting standards, amendments to issued
accounting and interpretations, which are relevant to the Group, but not yet
effective at 31 December 2009, have not been adopted. The Group is currently
evaluating the impact of these pronouncements.
The interim results have not been reviewed or reported on by the Company`s
external auditors.
Corporate development
Cash constraints over the last six months have continued to inhibit the
exploration work needed to de-risk the Kinsenda underground project. However,
minor construction and maintenance work continued at the mine. Pumping, at a
rate of 2 000 cubic metres per hour, continued and additional pumping
infrastructure was installed. Holding costs at the mine for the last three
months amounted to US$3 million and this includes the paying down of
creditors. Kinsenda is a sulphide orebody and is typical of Zambian
Copperbelt deposits and has a qualified SAMREC-compliant resource base of
17,1 million tons at a copper grade of 5,0%. Metorex intends initiating a
7 500 metre diamond drilling programme to validate portions of the orebody
through a twin and infill
drilling programme. This programme will commence in the June 2010 quarter.
A study for the development of Kinsenda has been submitted to Societe de
Development Industries et Miniere du Congo ("Sodimico").
Lubembe is geologically analogous to Kinsenda and this deposit has the
potential of being a large open-pit oxide copper mine. Metorex spent US$ 3,5
million on a drilling programme at Lubembe in 2008 and it is planned to
produce a Samrec-compliant resource model by June 2010. The QA/QC and a
newly verified geological database using data from the 2008 drilling campaign
has been completed and a resource model is in the process of being developed.
The construction of access roads to this deposit and workshop facilities are
being planned.
As announced on 1 March 2010 mineral resource estimates have been completed
at Musonoi for the Dilala East deposit. Musonoi is located in Kolwezi in the
DRC. The resource estimate utilises all of the available drillhole and assay
data up to 30 September 2009 and is Samrec compliant. The mineral resources
for Dilala East at a 2,5% copper equivalent grade cut-off are reflected in
the table below:
CLASSIFICATION Tons (Mt) Cu grade Copper Co grade Cobalt
(%) (`000t`) (%) (`000t`)
Oxide material
Measured 4,1 3,0 122 0,95 39
Indicated 1,1 3,2 36 0,86 10
Inferred 0,0 1,3 0 0,45 0
Sub-total 5,2 3,0 158 0,93 48
Sulphide material
Measured 3,5 3,0 106 0,85 30
Indicated 6,5 2,9 189 0,89 58
Inferred 3,9 2,8 110 0,86 34
Sub-total 13,9 2,9 404 0,87 121
Oxide + sulphide
material
Measured 7,6 3,0 228 0,85 68
Indicated 7,6 2,9 225 0,89 68
Inferred 3,9 2,8 110 0,86 34
Total 19,1 2,9 563 0,89 170
Planning has now been initiated to commence further exploration drilling and
conduct the test work necessary to advance the Kinsenda, Lubembe and Dilala
East projects. Requests for quotations ("RFQ`S") have been sent to a number of
industry consultants in order to advance bankable feasibility studies for all
three of these projects.
Outlook
The capital raising is planned for completion by 12 April 2010 although cash
from the claw back amounting to approximately US$78 million is expected to be
received during the second week of March 2010. Negotiations with the Standard
Bank have been completed and it is anticipated that the Revised Ruashi Debt
Package will be implemented by Metorex during March 2010. Once the capital
raising is complete Metorex will have effectively restored the balance sheet
and overall debt levels are expected to reduce from R2,1 billion (US$277
million) at June 2009 to R1,2 billion (US$161 million).
Copper production for the coming quarter is expected to be 12,500 tons
and cobalt production at 750 tons. Ruashi operations will continue to be
affected by higher than normal rainfall, but this is being addressed through
stockpile management. During the month of January 2010 production at Ruashi
was adversely affected by electrical problems in the rectifier bank feeding
the electro winning tank house. This has affected copper production by
approximately 950 tons. The rectifier circuit has largely been repaired but
ongoing improvements to various circuit components are planned. Production
at Chibuluma is expected to increase on the back of restored recoveries and
volumes, partially offset by the replacement of the primary crusher completed
over four days during February 2010. Sable has seen an increase in ore
deliveries which will reflect positively on their results.
Rob Still Terence Goodlace
Chairman Chief Executive Officer
2 March 2010
Contact details for Metorex Limited and Corporate Advisers
Postal: PO Box 2814, Saxonwold, 2132, South Africa
Telephone: (+27 11) 880-3155
Facsimile: (+27 11) 880-3322
Website: www.metorexgroup.com
E-mail: ir@metorexgroup.com
Investor relations
College Hill
PO Box 413187, Craighall, 2024, South Africa
Telephone: (+27 11) 447-3030
St James Corporate Services Limited
6 St James`s Place, London, SW1A INP, England
Telephone: (+44 207) 499-3916
Registrars
Link Market Services South Africa (Pty) Limited
PO Box 4844, Johannesburg, 2000, South Africa
Telephone: (+27 11) 834-2266
Company secretaries
Moore Stephens MWM
PO Box 1574, Houghton, 2041, South Africa
Telephone: (+27 11) 728-7240
Sponsor
Barnard Jacobs Mellet Corporate Finance (Pty) Limited
PO Box 62200, Marshalltown, 2107, South Africa
Telephone: (+27 11) 750-0000
Auditors
Deloitte & Touche
Private Bag X6, Gallo Manor, 2052, South Africa
Telephone: (+27 11) 806-5000
Legal representatives
Bowman Gilfillan attorneys
PO Box 785812, Sandton, 2196
Telephone: (+27 11) 669-9000
ADR Programme - North America and Canada
The Bank of New York, 101 Barclay Street, New York, NY 10286, USA
Telephone: (+1 212) 815-3326
Directors
RG Still* (Chairman), TP Goodlace (CEO), A Barrenechea* (Spanish),
NN Kgositsile*, TV Mabuza*, JG Hopwood*, LJ Paton*, M Smith (CFO)
*non-executive
Date: 02/03/2010 08:00:08 Produced by the JSE SENS Department.
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