| Mon 30 Aug 2010, 7:05 | | ARI - African Rainbow Minerals Limited - Reviewed Provisional |
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ARI
ARIM
ARI - African Rainbow Minerals Limited - Reviewed Provisional
results for the year ended 30 June 2010
African Rainbow Minerals Limited
(Incorporated in the Republic of South Africa)
Registration number 1933/004580/06
ISIN code: ZAE000054045
JSE share code: ARI
("ARM" or "the Company")
Reviewed Provisional results for the year ended 30 June 2010
Salient features
- Headline earnings down 26% to R1.7 billion from R2.3 billion
mainly due to a 16% stronger Rand and lower commodity prices
(headline earnings per share of 807 cents per share compared to 1
094 cents per share in the previous financial year)
- Second half (2H F2010) headline earnings substantially up 178% to
R1.26 billion from the first half year (1H F2010) headline earnings
of R454 million
- Significant increase in the 2H F2010 headline earnings to R1.26
billion compared to the corresponding six month period (2H F2009)
headline earnings of R85 million
- ARM declares an increased dividend of 200 cents per share (F2009:
175 cents per share)
- Significant increases in sales volumes across all commodities
except domestic thermal coal
- Decrease in unit costs of iron ore, nickel and platinum group
metals (PGM) reflects a strong focus on continuing cost control
- Cash and cash equivalents of R3.0 billion; net debt to equity of
1.7%
- Approval of the development of Konkola North Copper Project in
Zambia. The mine will be developed in conjunction with ARM`s
partner Vale at project cost of US$380 million (on a 100% basis)
- Successful conclusion of 2 X 2010 growth strategy
- Continuation of aggressive growth in ARM`s portfolio of
commodities
ARM operational review
Against the background of the decline in commodity prices and the
strengthening of the Rand against the US Dollar, ARM`s Board of
Directors ("the Board") is pleased to announce good operational
results for the financial year ended 30 June 2010 (F2010). ARM has
successfully completed its 2 X 2010 production growth strategy
which commenced in 2005 and is continuing with its aggressive
growth strategy in its portfolio of commodities. Headline earnings
for the year were R1 714 million or 807 cents per share and
represent a 26% decrease compared to the 2009 financial year
(F2009). The 2H F2010 headline earnings of R1 260 million are 178%
more than the R454 million achieved for 1H F2010.
The provisional results for the year ended 30 June 2010 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 12 months ended 30 June
Reviewed Audited
R million 2010 2009 % change
Platinum Group Metals 315 (348)
Nkomati nickel and chrome 206 29 610
Ferrous metals 1 364 3 150 (57)
Coal (17) 135 (113)
Exploration (143) (689) 79
Corporate and other (11) 40
ARM headline earnings 1 714 2 317 (26)
These results have been achieved in conjunction with ARM`s partners
at the various operations, Anglo Platinum Limited ("Anglo
Platinum"), Assore Limited ("Assore"), Impala Platinum Holdings
Limited ("Implats"), Norilsk Nickel Africa (Pty) Limited
("Norilsk"), Xstrata Coal ("Xstrata") and Vale S.A. ("Vale").
Volume growth
Conditions in commodity markets continued to be challenging
especially in the first six months of the financial year as the
global economy continued to be affected by the economic slowdown
that began in the latter part of the 2009 calendar year.
Notwithstanding this ARM managed to increase annual sales volumes
across all commodities except domestic thermal coal. Operational
features for the year (on a 100% basis) include:
- 516% increase in chrome concentrate sales to 313 735 tonnes
(Nkomati Mine only)
- 112% increase in nickel sales to 8 697 tonnes
- 103% increase in ferromanganese sales to 238 thousand tonnes
- 44% increase in manganese ore sales to 3.1 million tonnes
- 32% increase in iron ore sales volumes to 9.8 million tonnes
- 31% increase in ferrochrome sales to 272 thousand tonnes
- 11% increase in PGM sales to 688 957 ounces
- 6% increase in export thermal coal sales to 11.9 million tonnes
ARM`s headline earnings were negatively impacted by both lower US
Dollar commodity prices, especially in iron ore and manganese, as
well as the strengthening of the average Rand exchange rate against
the US Dollar by 16% relative to F2009. The Platinum Division
(which includes the nickel mine) showed a significant improvement
by increasing from a headline loss of R319 million in F2009 to
headline earnings of R523 million in F2010 owing to an improvement
in US Dollar platinum prices, increased sales volumes and rigorous
cost control.
In the period under review, consistent with ARM`s strategy to get
each of the mining operations below the 50th percentile of the
global cost curve by 2012, ARM continued to focus on cost
containment. Unit production cost reductions were achieved at the
Khumani Iron Ore mine, Nkomati Nickel mine as well as at the
Modikwa and Two Rivers Platinum mines. Above inflation cost
increases at the manganese operations were as a result of reduced
mine production at the Nchwaning and Gloria mines. The
ferromanganese and ferrochrome operations were impacted by
increases in electricity tariffs and by the price of reductants.
Through the restructuring of ARM Exploration and the benefit of
sharing costs with ARM`s joint venture partner, Vale, the headline
loss from ARM Exploration was reduced substantially by 79% to R143
million.
2 X 2010 growth
The financial year 2010 represents a significant milestone for ARM
as the company successfully completed its 2 X 2010 growth strategy
to double production volumes from 2005 in its portfolio of
commodities including iron ore, nickel and coal. The Khumani Iron
Ore Expansion to 10 million tonnes per annum (mtpa) was
successfully completed on time and within budget. The project is
now fully ramped up to name plate capacity. Phase 2a of the Nkomati
Large Scale Expansion Project which involved the building of a 375
thousand tonnes per month (ktpm) plant was commissioned on time and
within budget in September 2009. The Goedgevonden Coal Mine was
also commissioned in October 2009 and is currently ramping up to
its name plate capacity of saleable 6.7 mtpa. Since 2005 ARM has
spent approximately R13.5 billion (on an attributable basis) on
growth projects and maintenance capital expenditure. This includes
R2.7 billion spent in the 2010 financial year.
Further growth is planned at all operations in addition to those
opportunities which present themselves through corporate action and
partnerships.
ARM is well positioned financially given that the Company`s growth
is supported by a robust balance sheet with low gearing. At end
June 2010 ARM`s net debt to equity percentage had been maintained
at below 2% year on year.
Konkola North Copper Project
ARM`s strategy is to continue to pursue profitable growth
opportunities vigorously. In August 2010 the ARM Board approved the
development of the Konkola North Copper Project in Zambia.
Development of the project has commenced and will be at a capital
cost of US$380 million, in July 2010 terms, to produce 45 000
tonnes of contained copper in concentrate per annum with potential
for significant expansion.
Financial commentary
Headline earnings for the six month period to 30 June 2010 were R1
260 million (1H F2010: R454 million) and total R1 714 million for
the full year (1H F2009: R2 232 million; 2H F2009: R85 million,
F2009 total of R2 317 million) reflecting a continuing improvement
since the massive economic downturn which commenced approximately
four months into the 2009 financial year.
The F2010 average Rand/US Dollar exchange rate of R7.59/$ was 16%
stronger than the average for the previous financial year of
R9.03/US$ and negatively impacted earnings.
Sales for the year of R11 billion were 9% higher than sales in
F2009. This comprises sales of R4.2 billion for 1H F2010 and R6.8
billion for 2H F2010 (1H F2009: R6.4 billion and 2H F2009: R3.7
billion). The increase in 2H F2010 when compared to 1H F2010 is
largely attributable to increased sales volumes and commodity
prices.
The gross profit margin for F2010 reduced to 32.1% (F2009: 40.1%)
as increased sales volumes and unit cost improvements were impacted
particularly by lower average Rand manganese and iron ore prices,
while Rand PGM prices remained largely constant. The 2H F2010 gross
profit margin was 35.6%. ARM`s earnings before interest, tax,
depreciation and amortisation (EBITDA) excluding exceptional items
and income from associates were R3.9 billion, which represents a
decrease of 13% relative to F2009. The 2H F2010 EBITDA of R2.7
billion is however R1.5 billion (or 123%) higher than that achieved
in 1H F2010.
The detailed segmental contribution analysis is provided in note 2
to the financial statements.
- The largest contributor to ARM`s headline earnings for the
reporting period was the Ferrous Division which contributed R1 364
million (F2009: R3 150 million).
- The Platinum Division contribution amounted to R521 million which
represents a significant improvement over the F2009 results which
reflected a loss of R319 million. The previous year`s results were
negatively impacted by the R547 million realised marked-to-market
loss on the opening balance for debtors (at 30 June 2008) which
resulted from the sharp fall in the Rand price of PGMs and nickel
during 1H F2009. The F2010 results include a realised gain on the
30 June 2009 debtors of R50 million.
- The contribution from ARM Coal was a loss of R17 million (F2009:
R135 million profit). This significant decline is largely due to
lower sales volumes and Rand export prices realised at the
Participating Coal Business (PCB).
- 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 partner, Vale. The impact on headline
earnings for the year was a negative R143 million (F2009: R689
million loss), an improvement of R546 million.
- ARM corporate and other costs reflect a loss of R43 million for
the year (F2009: R40 million profit).
- ARM received a dividend of R32 million in October 2009 from its
investment in Harmony Gold Mining Company Limited ("Harmony")
relating to their F2009 results (ARM F2009: nil).
The effective taxation charge for the year was 34% which is lower
than the 39% for F2009 as a result of the lessened impact on this
calculation of non-deductible expenditure (exploration costs much
lower in F2010) and reduced STC amounts.
The Mineral Royalty tax which was payable for the period 1 March
2010 to 30 June 2010 is included in Other Operating Expenses and
amounts to R19 million for the period. The calculation of this tax
differs for each operation and commodity as it is a function of
many variables including (i) a sales value dependent on the
specified condition and point of sale for each commodity, (ii) the
cost structure at the operation, (iii) the amount of capital
expenditure as well as the tax status on previously unredeemed
capital expenditure.
ARM`s earnings for the F2010 year approximate the reported headline
earnings for F2010 as exceptional items amounted to only a R98
million gain as compared to a R551 million gain for the previous
financial year, which related largely to the R557 million gain on
the TEAL restructuring transaction.
The net debt position at 30 June 2010 of R307 million reflects a
marginal increase of R76 million relative to the previous year
after attributable capital expenditure of R2.7 billion (F2009: R3.3
billion) and represents an improvement of R1.1 billion since 31
December 2009.
- The net debt to equity percentage is 1.7% at 30 June 2010 (F2009:
1.4%). The total debt at 30 June 2010 of R3.3 billion includes an
amount R2.1 billion advanced by ARM`s partners (Implats: R343
million; Anglo Platinum: R114 million; Xstrata: R1.66 billion) and
therefore the net cash amount excluding partner loans at 30 June
2010 is R1.8 billion (F2009: net cash R1.6 billion).
- Cash and cash equivalents were R3.0 billion at 30 June 2010
(F2009: R3.5 billion).
- The only significant external bank debt at 30 June 2010 is in ARM
where the year-end balance on the corporate loan was R784 million
(F2009: R967 million). This loan is repayable in August 2012.
- The Company has agreed terms with a financial institution for a
US$80 million term loan commencing on 1 July 2011 to assist with
the funding of the Konkola North Copper Project.
Cash generated from operations, after working capital adjustments,
amounted to R3.4 billion (F2009: R6.7 billion). The working capital
adjustments during the past year have been significant as
operations increased production and sales activity levels. The
working capital funding requirement in F2010 utilised R598 million
compared to the release of working capital in F2009 of R1 616
million. The details of these movements are shown in Note 9 to the
financial statements.
The consolidated ARM total assets of R28.2 billion (F2009: R25.5
billion) include the marked-to-market valuation of ARM`s investment
in Harmony of R5.2 billion at a share price of R81.40 per share
(F2009: R5.1 billion; share price of R80.00 per share).
Safety
We believe that a safe and healthy workplace is every employee`s
right and this value is an integral part of the way we run our
business. Safety awareness, risk assessment and responsible
supervision have led to reduction of fatalities in ARM to one
during the past financial year, compared to five fatalities during
the previous financial year.
Regrettably one fatality was reported during the financial year
ending 30 June 2010 at Machadodorp Works. On 10 April 2010 Mr Erick
Maluka was fatally injured during slinging operations. ARM and its
Board of Directors convey their deepest condolences to Mr Maluka`s
family, friends and colleagues.
The number of Lost Time Injuries (LTIs) increased slightly, while
the Lost Time Injury Frequency Rate (LTIFR) for the year was 0.770
(per 200 000 man hours) compared to 0.736 in the previous year.
Achievements
- Beeshoek Mine achieved 7 000 fatality-free production shifts in
the DMR competition on 2 August 2009.
- Khumani Iron Ore Mine was the winner and Cato Ridge Works was the
runner-up in the ARM Internal `Excellence in Safety` competition
during the financial year 2010.
- Modikwa Platinum Mine achieved 6 000 000 fatality-free shifts on
2 December 2009; to date the mine has completed 52 months fatality
free.
- On 16 April 2010, Nkomati Mine achieved 1 000 000 fatality-free
shifts and received the ARM internal St Barbara floating trophy.
- Two Rivers Platinum Mine surpassed 1 500 000 fatality-free shifts
during January 2010.
Safety figures and statistics in this report are presented on a
100% basis and currently exclude the ARM Coal operations. A
Sustainable Development Report, which will contain a detailed
section on employee health and safety, will be available in October
2010.
ARM Ferrous
For the financial year ended 30 June 2010, Assmang Limited
("Assmang") reported a 57% decrease in headline earnings to R2.7
billion (F2009: R6.3 billion). Despite challenging market
conditions, especially pronounced in the first half of the
financial year under review, Assmang achieved increased sales
volumes across all commodities. The decrease in earnings was due
mainly to the decline in dollar commodity prices and a
strengthening of the Rand versus the US Dollar. Realised prices
decreased in US Dollar terms for iron ore (14%), manganese (57%),
ferromanganese (49%) and ferrochrome (17%) when compared to the
2009 financial year.
Iron ore sales volumes increased by 32.3% to 9.8 million tonnes,
whilst sales of manganese ore increased by 43.8% to 3.1 million
tonnes.
Manganese export sales are limited by export capacity from Port
Elizabeth, Assmang has successfully secured additional export
capacity through Durban and Richards Bay to take advantage of
improving market conditions and increasing demand. This additional
export capacity however incurs higher logistics cost.
There was a marked improvement in prices and thus headline earnings
in the last quarter of the financial year. Iron ore prices
increased by 42% in the second half of the year while manganese,
ferromanganese and ferrochrome prices increased by 15%, 33% and 27%
respectively owing to an improvement in market conditions.
Assmang`s headline earnings in the second half of the year
increased by 252% to R2 127 million when compared to the first half
year earnings of R604 million.
The iron ore operations achieved a decrease in unit production
costs of 6% owing to increased production at the Khumani mine as
the 10 mtpa expansion ramped up. On mine production unit costs at
the manganese operations increased as a result of lower mined
production with the increase in sales of manganese ore achieved
from inventory. Above inflation cost increases at the manganese
alloys and charge chrome operations were due mainly to an increase
in electricity and reductants.
Total capital expenditure was R3.3 billion (F2009: R2.8 billion).
The main expenditure items include the ongoing infrastructure
development at the Khumani 16 mtpa Expansion Project (R2.1 billion)
and the upgrading of the beneficiation plant at Nchwaning Mine
(R305 million), while development at the Nchwaning Mine amounted to
R63 million. At Cato Ridge and Machadodorp Works, R258 million was
spent on rebuilding furnaces, with a further R46 million incurred
at Machadodorp Works on the conversion of a chrome furnace to a
manganese furnace. The remaining capital was spent on IT related
projects, vehicles and other equipment replacements.
Assmang headline earnings
100% basis 12 months ended 30 June
Reviewed Audited
R million 2010 2009 % change
Iron ore division 1 436 2 160 (34)
Manganese division 1 478 3 927 (62)
Chrome division (185) 213 (187)
Total 2 729 6 300 (57)
Headline earnings attributable to ARM 1 364 3 150 (57)
(50%)
Assmang product sales
100% basis 12 months ended 30 June
Thousand tonnes 2010 2009 % change
Iron ore 9 799 7 409 32
Manganese ore* 3 095 2 152 44
Manganese alloys* 238 117 103
Charge chrome 189 144 31
Chrome ore* 272 256 6
*Excluding intra-group sales
Assmang cost and EBITDA margin performance
Rand per tonne EBITDA
cost change margin
Commodity group % %
Iron ore (6.0) 50.9
Manganese ore 20.1 45.6
Manganese alloys 13.6 23.9
Charge chrome 16.8 0.23
Assmang capital expenditure
100% basis 12 months ended 30 June
R million 2010 2009
Iron ore 2 304 1 529
Manganese 743 854
Chrome 289 397
Total 3 336 2 780
Khumani Expansion Project
The Khumani Expansion to 10 mtpa was completed successfully on time
and within budget. The mine is now at full production. The
expansion project to 16 mtpa is underway and is expected to be
completed ahead of the scheduled date of July 2012 and within
budget.
Nchwaning beneficiation plant
The plant at the Nchwaning section of Black Rock Mine was
successfully commissioned during May 2010. The new plant has a
capacity of 5.0 mtpa which is 2.0 mtpa more than the old plant.
Logistics
Assmang`s rail capacity throughput for iron ore export was affected
by the Transnet strike that occurred during May 2010. Assmang has
an agreement with Transnet to increase its iron ore export to 14
mtpa from 2012.
The iron and manganese ore industries together with Transnet have
embarked on a joint project to expand the current Orex line beyond
60 mtpa.
The main agreement for the export of manganese ore through Port
Elizabeth harbour has been signed and will expire on 31 March 2013.
Manganese ore stockpile capacity has also been secured at Durban
and Richards Bay harbours until June 2013.
Assmang is endeavouring to reduce the current amount of road
transport being used for both raw materials and final product. This
is heavily dependent on operational service levels achieved by
Transnet.
The ARM Ferrous operations, held through its 50% investment in
Assmang, consist of three divisions: iron ore, manganese and
chrome. Assore Limited, ARM`s partner in Assmang, owns the
remaining 50%.
ARM Platinum
ARM Platinum`s operations benefited from the improvement in the
global economy during the year under review. Cash operating profits
were recorded at all operations, resulting in ARM Platinum
contributing R521 million to ARM`s headline earnings, an increase
of R840 million when compared to F2009. The attributable PGM
production (including Nkomati) for F2010 increased by 11% to 359
316 ounces (F2009: 323 259 ounces) in concentrate as a result of
increased production and recoveries at Two Rivers, grade
improvements at Modikwa and the commissioning of the 375 ktpm plant
at Nkomati. ARM Platinum focused on initiatives to improve unit
costs and achieved an annual reduction in costs across all
operations, positioning them within the 50th percentile of the
respective cost curves.
The increase in commodity prices was offset by the strengthening of
the Rand against the US Dollar resulting in the basket prices for
both Modikwa and Two Rivers remaining similar at R225 865/kg and
R247 323/kg respectively. Realising the debtors at 30 June 2009 did
however result in a positive adjustment of R50 million, as reported
in December 2009.
The table below sets out the relevant price comparison:
Average metal prices
Average for 12 months ended 30 June
2010 2009 % change
Platinum $/oz 1 453 1 148 27
Palladium $/oz 393 239 65
Rhodium $/oz 2 173 2 620 (17)
Nickel $/t 20 285 13 312 52
Exchange rate R/$ 7.59 9.03 (16)
Modikwa`s tonnes milled decreased by 8% due to the restructuring of
the mining operations. This decrease was partially offset by a 5%
improvement in the built-up head grade as a result of improved
mining and discontinuing of the Merensky trial mining, resulting in
metal in concentrate being marginally lower at 339 623 PGM ounces.
The unit cost decreased by 10% to R639 per tonne milled, whereas
Rand unit cost per 6E* PGM ounce decreased by 14% to R4 269. This
has moved Modikwa substantially down the unit cost curve and is
well within the 50th percentile of the cost curve. Modikwa achieved
52 months fatality free on 12 August 2010, and reached 6 000 000
consecutive fatality-free man shifts worked on 2 December 2009;a
remarkable achievement in the industry.
At Two Rivers, the successful concentrator plant optimisation
programme, combined with a 12% increase in tonnes milled, yielded a
20% growth in 6E PGM ounces produced to 296 760 PGM ounces. At year
end, the surface stockpile was 22 193 tonnes. Costs were well
contained, with only a 6% increase in unit cost to R425 per tonne
milled (F2009: R399 per tonne milled), whilst the Rand unit cost
per 6E PGM ounce decreased by 2% to R4 174. This is a first
quartile unit cost mine producing approximately 300 000 PGM ounces
and over 140 000 ounces platinum per annum. During January 2010,
Two Rivers surpassed 1 500 000 fatality-free shifts.
The earnings of Two Rivers were negatively affected by interest
charged on the shareholders` loans from ARM and Implats. Interest
was charged at a rate of 8% per annum as at 30 June 2010 (F2009:
11.5%).
After the commissioning of the 375 ktpm concentrator plant in
September 2009, Nkomati achieved a 163% increase in tonnes milled
and contained nickel production increased by 115% to 9 666 tonnes
(F2009: 4 495 tonnes). Copper production showed a 130% increase to
5 210 tonnes. Chrome ore sales decreased to 502 281 tonnes (F2009:
661 336 tonnes), offset by a 262 811 tonnes increase in chrome
concentrate sales. The conversion to a high volume, low grade
operation caused the Rand per tonne unit cost to decrease 38% to
R242, whilst the cash cost net of by products (C1 cash cost)
increased by 32% to $3.26/lb. The increase in the C1 cash cost is
in line with the anticipated cost as per the feasibility study and
places Nkomati in the 40th percentile on the cost curve.
Nkomati achieved 1 000 000 fatality-free shifts on 16 April 2010.
* 6E includes platinum, palladium, rhodium, gold, ruthenium and
iridium
The capital expenditure at ARM Platinum was R1.4 billion (R749
million attributable) of which 86% was spent on the Nkomati Large
Scale Expansion Project. The capital spent at Two Rivers and
Modikwa was largely to sustain operations. Extensions of the
declines and ore reserve development recommenced during F2010.
ARM Platinum capital expenditure
100% basis 12 months ended 30 June
R million 2010 2009 % change
Modikwa 102 368 (72)
Two Rivers 97 346 (72)
Nkomati 1 202 1 756 (32)
Total 1 401 2 470 (43)
Modikwa operational statistics
100% basis 12 months ended 30 June
2010 2009 % change
Cash operating R million 665 (286)
profit/(loss)
Tonnes milled Mt 2.27 2.46 (8)
Head grade g/t, 6E 5.53 5.25 5
PGMs in concentrate Ounces, 6E 339 623 348 866 (3)
Average basket price R/kg, 6E 225 865 227 006 (1)
Cash operating margin % 31 (20)
Cash cost R/kg, 6E 137 241 160 507 (14)
Cash cost R/tonne 639 708 (10)
Cash cost R/Pt oz 11 025 12 798 (14)
Cash cost R/PGM oz, 4 269 4 992 (14)
6E
Cash cost $/oz, 6E 564 553 2
Headline earnings/(loss) R million 135 (129)
attributable to ARM
(41.5%)
Two Rivers operational statistics
100% basis 12 months ended 30 June
2010 2009 % change
Cash operating R million 837 (83)
profit/(loss)
Tonnes milled Mt 2.92 2.62 12
Head grade g/t, 6E 3.95 4.10 (4)
PGMs in concentrate Ounces, 6E 296 760 246 295 20
Average basket price R/kg, 6E 247 323 246 680 0
Cash operating margin % 40 (8)
Cash cost R/kg, 6E 134 213 136 288 (2)
Cash cost R/tonne 425 399 6
Cash cost R/Pt oz 8 792 8 846 (1)
Cash cost R/PGM oz, 4 174 4 239 (2)
6E
Cash cost $/oz, 6E 551 469 17
Headline earnings/(loss) R million 180 (219)
attributable to ARM (55%)
Nkomati operational statistics
100% basis 12 months ended 30 June
2010 2009 % change
Cash operating profit R million 916 181 406
Cash operating
profit/(loss)
- Nickel Mine R million 584 (253)
Cash operating profit
- Chrome Mine R million 332 433 (23)
Cash operating margin % 38 17 124
Tonnes milled Thousand 3 308 1 259 163
Head grade % nickel 0.45 0.54 (17)
Nickel on-mine cash cost R/tonne 242 389 (38)
per tonne milled
Cash cost net of by- $/lb 3.26 2.48 31
products*
Contained metal
Nickel Tonnes 9 666 4 495 115
PGMs Ounces 52 574 26 727 97
Copper Tonnes 5 210 2 268 130
Cobalt Tonnes 578 244 137
Chrome ore sold Tonnes 502 281 661 336 (24)
Chrome concentrate sold Tonnes 313 735 50 925 516
Headline earnings R million 206 29 610
attributable to ARM (50%)
*This reflects US Dollar cash costs net of by-products (PGMs and
chrome) per pound of nickel produced
Nkomati Nickel Large Scale Expansion Project
The 375 ktpm MMZ concentrator plant was completed during the year
and commissioning commenced on 15 September 2009. Since
commissioning, this plant produced 5 359 tonnes of nickel while
production ramp-up is continuing. Teething problems continued with
the new primary crusher and overland conveyor system as equipment
failures affected production causing a lack of ore supply. The
situation is closely monitored and to ensure ore supply, interim
measures were put in place. Management is currently performing test
work on ore and will implement a long-term solution towards the end
of the 2010 calendar year. The project cost for this phase is
currently below budget and board approvals for closure are in
progress.
The upgrade of the current 100 ktpm plant to 250 ktpm PCMZ plant
was released for implementation and construction started during
August 2009. The 100 ktpm plant was stopped as planned on 30 June
2010 and will be offline for the upgrade and commissioning of the
new PCMZ plant. The project is on target to achieve the scheduled
completion date of December 2010, within budget.
Total funds committed at 30 June 2010 on the expansion project
amount to R3.3 billion of the R3.7 billion approved for the capital
project.
The Eskom power supply project for the 375 ktpm MMZ plant is
complete and two of the three new 40MVA transformers have been
installed and energised. The third 40MVA transformer will be
commissioned in November 2010. The next phase of the Eskom power
supply project is the upgrade of the 132kV overhead distribution
lines and we anticipate this to be completed by calendar year end
2011. This will improve the mine`s back-up power supply position.
Kalplats PGM Exploration Project
ARM Platinum approved the prefeasibility study completed by
Platinum Australia ("PLA") for the Kalahari Platinum Project
("Kalplats") in January 2010. PLA is in the process of completing a
bankable feasibility study. The transfer of 12% ownership to PLA,
earned from the completion and approval of the prefeasibility
study, awaits approval from the Department of Mineral Resources.
The ARM Platinum division comprises three operating mines, Modikwa,
Two Rivers and Nkomati. It has an effective 41.5% interest in
Modikwa where local communities hold an 8.5% effective interest.
The remaining 50% is held by Anglo Platinum. Two Rivers is an
incorporated joint venture with Implats, with ARM holding 55% and
Impala ("Implats") 45%. Nkomati is a 50:50 partnership with Norilsk
Nickel Africa. ARM Platinum also has an interest in two joint
ventures with PLA. The first is the "Kalplats Platinum Project" in
which ARM Platinum owns 90% (while Anglo American owns 10%) and PLA
can earn-in up to 49% by completing a bankable feasibility study.
The second joint venture, "Kalplats Extended Area Project" is a
50:50 partnership between ARM Platinum and PLA.
ARM Coal
ARM Coal experienced a challenging year which resulted in cash
operating profit and attributable headline earnings declining by
41% to R376 million and 113% to a loss of R17 million respectively.
The major portion of this decline resulted from a stronger Rand,
lower realised US Dollar export sales prices, and lower volumes at
the PCB operations. This was to some extent offset by an increase
in cash operating profit at the Goedgevonden Coal Mine ("GGV").
Goedgevonden Coal Mine ("GGV")
Run of mine (ROM) production at GGV increased by 50% during the
current financial year as the mine transformed from a project to an
operational mine. This performance was negatively affected by
excessive rainfall, causing the pit to be water logged on a number
of occasions during the financial year.
Problems experienced during the commissioning as well as the late
commissioning of the second module of the plant resulted in plant
production not increasing in line with ROM production. Raw coal
inventories increased as the feed to the plant was restricted by
design issues detected during commissioning. Most of these issues
were rectified by the end of F2010. Saleable production in F2011
should reach the full design capacity of 6.7 million sales tonnes
per annum (mtpa).
Export sales volumes increased by 142% during the year and although
domestic sales volumes decreased by 27%, increased volumes of
higher quality coal were sold during the current financial year in
terms of the new long-term agreement concluded with Eskom. The
underperformance of Transnet Freight Rail ("TFR") affected both
export and domestic sales volumes at GGV during the current year.
Cash operating profit was R112 million (53%) higher than the
previous financial year due to an increase in revenue resulting
from higher sales volumes. The increase in sales volumes was
however reduced by the effects of a stronger Rand and lower export
coal prices.
Cash costs per saleable ton increased to R141.03 (F2009: R90.42) as
the long-term cost per saleable ton (which is used to determine the
amount of working costs to be capitalised) was recalculated. The
first-time capitalisation of working costs was impacted by large
volumes of in-pit inventory being exposed during the development
stage of the mine which is not valued. The mine will benefit from
having this inventory available in its future mining operations.
Goedgevonden operational statistics
100% basis 12 months ended 30 June
2010 2009 % change
Total production sales
Saleable production Mt 2.73 2.54 7
Export thermal coal sales Mt 1.19 0.49 143
Domestic thermal coal Mt 1.17 1.61 (27)
sales
Attributable production
and sales
Saleable production Mt 0.71 0.66 8
Export thermal coal sales Mt 0.31 0.13 138
Domestic thermal coal Mt 0.30 0.42 (29)
sales
Average received coal
price
Export (FOB) $/tonne 67.84 65.15 4
Domestic (FOR) R/tonne 171.76 99.35 73
Exchange rate R/$ 7.59 9.06 (16)
On mine saleable cost R/tonne 141.03 90.42 56
Cash operating profit
Total R million 430 279 54
Attributable (26%) R million 112 73 53
Headline earnings R million 34 15 143
attributable to ARM
Attributable profit analysis
12 months ended 30 June
2010 2009 % change
Cash operating profit 112 73 53
Less: interest paid (5) (15) (67)
: amortisation (47) (34) 38
: fair value adjustments (13) (2) 550
Profit before tax 47 22 114
Tax (13) (7) 85
Headline earnings attributable to ARM 34 15 127
Participating Coal Business ("PCB")
The PCB operations experienced a challenging year. Exceptionally
high rainfall during the year and industrial action at some of the
operations reduced saleable production by 6% compared to last year.
Export sales volumes were lower than the previous financial year
due to continued under performance by TFR. Domestic demand
continued to decline and had a negative impact on domestic sales
volumes.
Attributable cash operating profit was R299 million lower than the
previous financial year due to a reduction of R350 million in
revenue caused by a stronger Rand, lower coal prices and lower
sales volumes. A defensive marketing strategy was adopted whereby
coal was sold forward on contract at levels of approximately 65% of
sales volumes in the first six months and 72% of sales volumes in
the second six months. On mine costs were well controlled which led
to a reduction of 3% in on mine unit costs. The result of the above
was negative attributable earnings of R51 million (F2009: R120
million profit).
Participating Coal Business ("PCB") operational statistics
12 months ended 30 June
100% basis 2010 2009 % change
Total production sales
Saleable production Mt 18.20 19.32 (6)
Export thermal coal sales Mt 10.67 10.74 (1)
Domestic thermal coal sales Mt 7.03 7.67 (8)
Attributable production and
sales
Saleable production Mt 3.68 3.90 (6)
Export thermal coal sales Mt 2.15 2.17 (1)
Domestic thermal coal sales Mt 1.42 1.55 (8)
Average received coal price
Export (FOB) $/tonne 66.88 69.24 (3)
Domestic (FOR) R/tonne 114.37 160.24 (29)
Exchange rate R/$ 7.59 9.04 (16)
On mine saleable cost R/tonne 250 257 (3)
Cash operating profit
Total R 1 306 2 787 (53)
million
Attributable (20.2%) R 264 563 (53)
million
(Loss)Income from associate R (51) 120 (143)
attributable to ARM million
Attributable profit analysis
12 months ended 30 June
2010 2009 % change
Cash operating profit 264 563 (53)
Less: interest paid (64) (87) (26)
: amortisation (234) (300) (22)
: fair value adjustments (37) (10) 270
Profit/(loss) before tax (71) 166
Tax PCB 20 (47)
Headline earnings attributable to (51) 120
ARM
ARM`s economic interest in XCSA (PCB) as at 30 June 2010 remains at
20.2%. PCB consists of 12 mines all situated in Mpumalanga. ARM has
a 26% effective interest in the GGV Thermal Coal Mine situated near
Ogies in Mpumalanga.
ARM Copper
The Vale/ARM JV ("the JV") has completed an additional resource
definition drilling campaign during the financial year to update
and enhance the confidence level of the resources associated with
the South and East Limb ore bodies on the Konkola North property,
Copperbelt, Zambia. In addition to various further technical
investigations, the JV has updated the capital budget estimate, the
life of mine planning and costing, and a final feasibility study
has been completed and submitted to the Government of Zambia and
ZCCM- Investment Holdings.
Both ARM and Vale have approved the release of the Konkola North
Copper Project in Zambia.
The development of the Konkola North copper project adds a new
commodity to ARM`s portfolio. This will also be the first time
ARM`s operational interests extend beyond South Africa. ARM sees
this as early development for a copper growth strategy in sub-
Saharan Africa. The newly developed mine will be housed in a new
division, ARM Copper.
Work commenced with the pre-approved capital expenditure in August
2010, commissioning of the concentrator plant is expected 27 months
later and full production is expected to be reached in 2015.
The project capital expenditure in July 2010 terms is $380 million.
The mine`s throughput design is 2.5 mtpa of ore at an average mill
head grade of 2.3% copper, yielding 45 000 tonnes of contained
copper in concentrate to be toll smelted in Zambia.
The expected life of mine will be 28 years. A further three year
exploration programme to evaluate area "A" which has potential to
double the output to 100 000 tonnes copper per annum in concentrate
is in progress. Initially the South and East Limb Mines will be
developed, after which the deeper, higher grade and wider reef
areas will be mined.
The Vale/ARM joint venture has completed 86 000 metres of
exploration drilling and defined 300 million tonnes at an average
grade of 2.57% total copper as defined in the AMEC 2010 Resource
Statement below:
Classification Measured
Resource Area Mt %TCu %AsCu
South & East Limb 5.13 2.60 0.72
Area `A` - - -
Total 5.13 2.60 0.72
Classification Indicated
Resource Area Mt %TCu %AsCu
South & East Limb 52.28 2.40 0.40
Area `A` 0.0 0.00 0.00
Total 52.28 2.40 0.40
Classification Inferred
Resource Area Mt %TCu %AsCu
South & East Limb 23.9 2.32 0.36
Area `A` 219.5 2.64 1.09
Total 243.4 2.61 1.02
ZCCM-Investment Holding PLC ("ZCCM") has a buy-in right into the
project company of either 15% or 20% with 5% thereof being a free
carry. In addition, ZCCM may elect to have their portion of the non-
free carry equity funding provided by the controlling shareholders;
such financing will be interest bearing.
The JV has commenced an extensive drilling programme in Area `A`
South, situated about 5 km south of the planned mine development on
the Konkola North property. Drilling in the recent past has defined
a substantial copper resource in Area `A`, and the planned drilling
will further enhance this resource base.
ARM Exploration
On the Kalumines mining licence property in the DRC, in close
proximity to Lubumbashi, the JV has defined copper and cobalt
resources through an extensive drilling campaign. Further drilling
and metallurgical test work is in progress to evaluate the possible
development of these copper/cobalt resources.
During the financial year the JV sold its interest in the Otjikoto
Gold Project in Namibia for a net consideration of US$26 million.
The loss attributable to ARM decreased to R143 million in F2010
(F2009: R689 million loss). This was largely due to the stringent
cost control initiatives implemented by the JV partners and the
benefit of sharing costs with ARM`s partner, Vale. F2009 included
once off stock write down and restructuring costs, not repeated in
F2010. ARM further benefited from a strengthening of the Rand/US$
which impacted on the translation of the ARM Exploration results.
ARM Exploration`s main objective is to identify and assess
exploration and mineral business opportunities for base metals,
ferrous metals; PGM`s and coal in sub-Saharan Africa. A key focus
area for ARM Exploration is the development of the ARM/Vale JV
assets.
Harmony Gold Mining Company Limited
Harmony reported a decrease in headline earnings from R1 260
million to R4 million in the year ended June 2010 from continuing
operations. This decline was due to a combination of a 4% decrease
in the gold sold as well as a 16% increase in cash costs as Harmony
continued to execute its stated strategy to restructure its asset
base to deliver safe, profitable and sustainable ounces. As part of
this strategy Harmony closed six shafts as the ore bodies reached
the end of their economic lives. The headline earnings were also
significantly impacted by once-off employment termination and
restructuring costs, as well as impairments associated with the
implementation of the strategy.
There was however an improvement in the Harmony results in the
quarter ended 30 June 2010 (4Q F2010) as the loss in headline
earnings from continuing operations was reduced to 6 cents per
share from 24 cents per share in the third quarter (3Q F2010). This
was as a result of a 6% increase in gold sold and an 11% increase
in the gold price received.
Harmony continues to focus on growth and thus investment in
exploration. In August 2010 Harmony announced a significant
increase in the mineral resource in its Walfi-Golpu porphyry copper-
gold project in Papua New Guinea ("PNG"). This project is part of
Harmony`s joint venture with Newcrest Mining Limited and contains
16 million ounces of gold and 4.8 million tonnes of copper
(expressed in gold equivalent ounces the resource amounts to 38.5
Moz of gold*). In addition Harmony`s international exploration
programme has led to the discovery of a new zone of mineralisation
adjacent to the main Golpu resource in PNG.
For their financial year ended 30 June 2010 Harmony declared a
maintained dividend of 50 cents per share (Harmony F2009: 50 cents
per share). ARM will account for this dividend in its F2011
results.
The ARM balance sheet at 30 June 2010 reflects a marked-to-market
investment in Harmony of R5.2 billion which is based on a Harmony
share price of R81.40 per share. 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. Dividends are recognised in the ARM income statement on the
last day of registration following a dividend declaration.
ARM owns 14.8% of Harmony`s issued share capital.
* Gold equivalents based on US$950 oz Au, $4 412/t Cu at 100%
recovery for both metals
Corporate action
In May 2010, ARM announced the successful disposal of the Otjikoto
Gold Project in Namibia to BC Limited Consortium. The interest in
the company owning the mineral rights was sold for a net
consideration of US$26 million. The funds from the sale will be
utilised towards the development of the Konkola North Project in
Zambia.
Outlook
The past financial year and especially the second half of the year
has seen a remarkable recovery in commodity markets, tempered to
some extent by sovereign debt issues in Europe and elsewhere. In
addition, fears that fiscal stimulus packages in the US and in
Europe will not sustain the recovery have resulted in market
sentiments being increasingly volatile.
While the overall recovery in commodity markets is expected to
continue and to benefit especially export oriented economies, it is
expected that recovery in domestic demand driven economies will be
much slower during the next year.
We believe demand for ferrous commodities will be driven by the
development of steel manufacturing capacity in China, India, Brazil
and other developing economies seeking to build infrastructure,
while supply growth will be constrained by infrastructure
limitations. Our three new mines which are currently ramping up are
coming into steady state production at an opportune time. We will
increase our copper exposure in order to take advantage of the
improved prices. Our operating teams will continue to deliver
projects on time and within budget and will continue to contain
unit costs.
ARM is confident about the future as it is well positioned
financially to continue to grow a profitable asset base with its
focus on long-life, low cost mines. The planned attributable
capital spend is about R10 billion over the next three years to
June 2013 (F2008 - F2010: R8.7 billion) which includes the
development of the first phase of its investment into copper. This
capital expenditure is expected to be funded from operating cash
flows and by utilising available cash and borrowing resources.
The continuing low gearing of the ARM balance sheet provides
increased opportunity for growth beyond that currently planned.
Dividends
The ARM Board is pleased to declare its fourth annual dividend of
200 cents per share. The amount to be paid will be R425 million
(F2009: R371 million). This declaration of a dividend is a 14%
increase on the F2009 dividend and is in line with ARM`s commitment
as a globally competitive company to pay dividends to shareholders
while continuing to grow the company for the future.
The last day to trade in ARM shares to participate in this dividend
(cum-dividend) will be Thursday, 16 September 2010 and ARM shares
will trade ex-dividend from Friday, 17 September 2010. The record
date will be Thursday, 23 September 2010 with payment of the
dividend occurring on Monday, 27 September 2010. No
dematerialisation or rematerialisation of share certificates may
occur between Friday, 17 September and Thursday, 23 September 2010,
both days inclusive.
Review by independent auditors
The financial information has been reviewed by Ernst & Young whose
unqualified review opinion is available for inspection at the
company`s registered office.
The annual report containing a detailed review of the operations of
the company together with the audited financial statements will be
posted to shareholders in October 2010.
Signed on behalf of the Board:
PT Motsepe AJ Wilkens
Executive Chairman Chief Executive Officer
Johannesburg
30 August 2010
Group statement of financial position
as at 30 June 2010
Reviewed Audited
R million Note 2010 2009
ASSETS
Non-current assets
Property, plant and equipment 13 256 11 500
Investment property 12 12
Intangible assets 212 213
Deferred tax asset 44 32
Loans and long-term receivables 51 134
Financial assets 84 78
Inventories 148 169
Investment in associate 1 292 1 327
Other investments 5 191 5 101
20 290 18 566
Current assets
Inventories 1 834 1 854
Trade and other receivables 3 026 1 565
Taxation 44 1
Cash and cash equivalents 5 3 039 3 513
7 943 6 933
Total assets 28 233 25 499
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 11 11
Share premium 3 803 3 759
Other reserves 728 600
Retained earnings 13 223 11 779
Equity attributable to equity holders of 17 765 16 149
ARM
Non-controlling interest 764 602
Total equity 18 529 16 751
Non-current liabilities
Long-term borrowings 6 2 582 1 364
Deferred tax liabilities 2 961 2 277
Long-term provisions 500 401
6 043 4 042
Current liabilities
Trade and other payables 2 315 1 637
Short-term provisions 268 158
Taxation 314 531
Overdrafts and short-term borrowings 7 764 2 380
3 661 4 706
Total equity and liabilities 28 233 25 499
Group income statement
for the year ended 30 June 2010
Reviewed Audited
R million Note 2010 2009
Revenue 11 423 10 674
Sales 11 022 10 094
Cost of sales (7 480) (6 048)
Gross profit 3 542 4 046
Other operating income 408 916
Other operating expenses (1 030) (1 255)
Profit from operations before exceptional 2 920 3 707
items
Income from investments 209 414
Finance costs (192) (385)
(Loss)/income from associate* (51) 147
Profit before taxation and exceptional 2 886 3 883
items
Exceptional items 3 97 514
Profit before taxation 2 983 4 397
Taxation 8 (1 009) (1 727)
Profit for the year 1 974 2 670
Attributable to:
Non-controlling interest 162 (198)
Equity holders of ARM 1 812 2 868
1 974 2 670
Additional information
Headline earnings (R million) 4 1 714 2 317
Headline earnings per share (cents) 807 1 094
Basic earnings per share (cents) 854 1 355
Diluted headline earnings per share (cents) 798 1 079
Diluted basic earnings per share (cents) 844 1 336
Number of shares in issue at end of year 212 692 212 068
(thousands)
Weighted average number of shares in issue 212 289 211 707
(thousands)
Weighted average number of shares used in 214 763 214 737
calculating diluted earnings per share
(thousands)
Net asset value per share (cents) 8 352 7 615
EBITDA (R million) 3 907 4 484
*Exceptional items included in income from - 27
associate (R million)
Dividend declared after year end (cents per 200 175
share)
Group statement of comprehensive income
for the year ended 30 June 2010
Total Non-
Available- share- controll-
for-sale Retained holders ing
reserve Other earnings of ARM interest Total
Group Rm Rm Rm Rm Rm Rm
For the year
ended 30 June
2009 (audited)
Profit for the - - 2 868 2 868 (198) 2 670
year
Other
comprehensive
income
Revaluation of (954) - - (954) - (954)
listed
investment
Deferred tax on 134 - - 134 - 134
revaluation of
listed
investment
Net impact of (820) - - (820) - (820)
revaluation of
listed
investment
Realignment of - (43) - (43) - (43)
currency
Foreign - 19 - 19 19
currency
translation
reserve
realised
Other - 2 - 2 - 2
Total (820) (22) 2 868 2 026 (198) 1 828
comprehensive
income for the
year
For the year
ended 30 June
2010 (reviewed)
Profit for the - - 1 812 1 812 162 1 974
year
Other
comprehensive
income
Revaluation of 89 - - 89 - 89
listed
investment
Deferred tax on (13) - - (13) - (13)
revaluation of
listed
investment
Net impact of 76 - - 76 - 76
revaluation of
listed
investment
Foreign - (6) - (6) - (6)
exchange
reversal on
loans
Cashflow hedge - 16 - 16 - 16
reserve
Realignment of - (2) - (2) - (2)
currency
Total 76 8 1 812 1 896 162 2 058
comprehensive
income for the
year
Group statement of changes in equity
for the year ended 30 June 2010
Share
capital Available-
and for-sale Retained
premium reserve Other* earnings
Group Rm Rm Rm Rm
Balance at 30 June 2008 3 744 1 190 176 9 766
(audited)
Profit for the year - - - 2 868
Other comprehensive income - (820) (22) -
Total comprehensive income for - (820) (22) 2 868
the year
Share-based payments - - 64 -
Share options paid in cash - - (25) -
Share options exercised 26 - - -
Share appreciation rights: - - 14 -
TEAL - non-controlling
interest share
Premium paid on purchase in - - 15 -
non-controlling interests
Dividend paid - - - (847)
Other - - 8 (8)
Balance at 30 June 2009 3 770 370 230 11 779
(audited)
Profit for the year - - - 1 812
Other comprehensive income - 76 8 -
Total comprehensive income for - 76 8 1 812
the year
Share-based payments - - 47 -
Share options exercised 44 - - -
Dividend paid - - - (371)
Other - - (3) 3
Balance at 30 June 2010 3 814 446 282 13 223
(reviewed)
Total Non-
share- controll-
holders ing
of ARM interest Total
Group Rm Rm Rm
Balance at 30 June 2008 14 876 800 15 676
(audited)
Profit for the year 2 868 (198) 2 670
Other comprehensive income (842) (842)
Total comprehensive income for 2 026 (198) 1 828
the year
Share-based payments 64 - 64
Share options paid in cash (25) - (25)
Share options exercised 26 - 26
Share appreciation rights: 14 - 14
TEAL - non-controlling
interest share
Premium paid on purchase in 15 - 15
non-controlling interests
Dividend paid (847) - (847)
Other - - -
Balance at 30 June 2009 16 149 602 16 751
(audited)
Profit for the year 1 812 162 1 974
Other comprehensive income 84 - 84
Total comprehensive income for 1 896 162 2 058
the year
Share-based payments 47 - 47
Share options exercised 44 - 44
Dividend paid (371) - (371)
Other - - -
Balance at 30 June 2010 17 765 764 18 529
(reviewed)
2010 2009 2008
* Other reserves consist of the Rm Rm Rm
following:
General reserve 32 32 32
Insurance contingency 15 18 8
Share-based payments 267 220 167
Cash flow hedge reserve 16 - -
Foreign exchange reversal on loans (6) - -
Foreign currency translation (28) (26) (2)
reserve (FCTR)
Premium paid on purchase of non- (14) (14) (29)
controlling interest
Total 282 230 176
Group statement of cash flows
for the year ended 30 June 2010
Reviewed Audited
R million Note 2010 2009
CASH FLOW FROM OPERATING ACTIVITIES
Cash receipts from customers 9 992 13 432
Cash paid to suppliers and employees (6 562) (6 754)
Cash generated from operations 9 3 430 6 678
Interest received 176 406
Interest paid (135) (328)
Dividends received 33 118
Dividend paid (371) (847)
Taxation paid (612) (1 977)
Net cash inflow from operating activities 2 521 4 050
CASH FLOW FROM INVESTING ACTIVITIES
Additions to property, plant and equipment (519) (927)
to maintain operations
Additions to property, plant and equipment (1 981) (2 337)
to expand operations
Proceeds on disposal of property, plant and 13 9
equipment
Net proceeds on disposal of 15% in TEAL - 120
Proceeds on disposal of Otjikoto in 107 -
Vale/ARM joint venture
Decrease in investment loans and 56 -
receivables
Net cash outflow from investing activities (2 324) (3 135)
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds on exercise of share options 44 27
Share options settled in cash - (25)
Long-term borrowings raised 848 259
Long-term borrowings repaid (834) (312)
Decrease in short-term borrowings (787) (120)
Net cash outflow from financing activities (729) (171)
Net (decrease)/increase in cash and cash (532) 744
equivalents
Cash and cash equivalents at beginning of 3 325 2 594
year
Foreign currency translation on cash (2) (13)
balance
Cash and cash equivalents at end of year 5 2 791 3 325
Notes to the financial statements
for the year ended 30 June 2010 (reviewed)
1. STATEMENT OF COMPLIANCE
The consolidated Group provisional financial statements have been
prepared in accordance with International Financial Reporting
Standards (IFRS) of the International Accounting Standards Board
(IASB), requirements of the South African Companies Act, 1973 as
amended, the AC 500 standards, as issued by the Accounting
Practices Board or its successor and the Listing Requirements of
the JSE Limited.
BASIS OF PREPARATION
The consolidated Group provisional financial statements have been
prepared on the historical cost basis, except for certain financial
instruments that are fairly valued by marking to market. The
accounting policies used are consistent with those in the most
recent annual financial statements except for those listed below
and comply with IFRS and are in terms of the disclosure
requirements of IAS 34: Interim Financial Reporting.
The following new and revised accounting standards were adopted by
ARM but have had no financial impact on the provisional financial
statements other than as noted below and certain disclosure
changes.
IFRS 1: First-time adoption International Financial Reporting
Standards - Cost of an investment in a subsidiary, jointly
controlled entity or associate (Amendment).
IFRS 2: Share-based payment - Vesting conditions and cancellations
(Amendment)
IFRS 3: Business combinations (Revised)
IFRS 7: Financial instruments: Disclosures (Amendment)
IFRS 8: Operating segments (new standard)
IAS 1: Presentation of financial statements (Revised) - (Disclosure
impact)
IAS 23: Borrowing costs (Revised)
IAS 27: Consolidated and separate financial statements - Cost of an
investment in a subsidiary, jointly controlled entity or associate
(Amendment)
IAS 27: Consolidated and separate financial statements (Amendment)
IAS 32: Financial instruments: Presentation and IAS 1: Presentation
of financial statements - Puttable financial instruments and
obligations arising on liquidation (Amendment)
IAS 39: Financial instruments: Recognition and measurement -
Eligible hedged items (Amendment)
IFRIC 15: Agreement for the construction of real estate
IFRIC 16: Hedges of a net investment in a foreign operation
IFRIC 17: Distributions of non-cash assets to owners
IFRIC 18: Transfers of assets from customers
Financial impact of adopting IAS 27
The revised IAS 27 par 28 requires losses incurred by subsidiaries
to be allocated to non-controlling shareholders for their share
thereof. The effect of this change was a benefit of R21 million
attributable after tax for the current year.
2. PRIMARY SEGMENTAL INFORMATION
Business segments
For management purposes, the Group is organised into four major
operating divisions. The operating divisions are ARM Platinum
(which includes platinum and nickel), ARM Ferrous, ARM Coal and ARM
Exploration.
ARM has a strategic holding in Harmony (gold).
Platinum comprises Two Rivers Platinum Mine as a 55 % subsidiary
and ARM Mining Consortium Limited through which ARM holds an
effective 41,5% interest in the Modikwa Platinum Mine.
Nickel comprises Nkomati Mine as a 50% joint venture for both its
nickel and chrome operations. In the corporate structure Nickel is
included under ARM Platinum.
ARM Ferrous comprises Assmang as a 50% joint venture. Assmang
comprises iron ore, manganese and chrome operations.
ARM Coal, a 51% joint venture for accounting purposes, consists of
a 10,2% participating investment in the existing coal operations of
XCSA and a 26% joint venture interest in the Goedgevonden Mine. In
addition, ARM has a direct 10% participating investment in the
existing coal operations of XCSA.
ARM Exploration comprises TEAL as a 64,9% held subsidiary up to
February 2009 and thereafter as a 50% joint venture. This division
is involved in identifying and assessing exploration and mineral
business opportunities in sub-Saharan Africa.
The commodity groupings predominantly reflect the risks and rewards
of trading and the operating divisions are therefore identified as
the primary reporting segments.
ARM Platinum ARM ARM
Platinum Nickel Ferrous Coal
Rm Rm Rm Rm
2.1 Year to 30 June 2010
(reviewed)
Total sales 3 156 1 224 6 435 212
Inter-Group sales to ARM - 6 - -
Ferrous
Sales 3 156 1 218 6 435 212
Cost of sales (2 294) (896) (4 160) (157)
Other operating income 11 37 148 -
Other operating expenses (79) (72) (423) (1)
Segment result 794 287 2 000 54
Income from investments 23 7 86 -
Finance cost (38) (2) (7) (7)
Finance cost Implats: (41) - - -
Shareholders` loan Two Rivers
Finance cost ARM: Shareholders` (50) - - -
loan Two Rivers
Loss from associate - - - (51)
Exceptional items - (2) 3 -
Taxation (199) (85) (715) (13)
Non-controlling interest (174) - - -
Contribution to basic earnings 315 205 1 367 (17)
Contribution to headline 315 206 1 364 (17)
earnings
Other information
Segment assets, including 5 717 2 385 9 572 3 270
investment in associate
Investment in associate - - - 1 292
Segment liabilities 1 540 213 1 171 1 746
Unallocated liabilities (tax
and deferred tax)
Consolidated total liabilities
Cash inflow/(outflow) from 760 365 1 322 23
operating activities
Cash (outflow)/inflow from (116) (557) (1 534) (259)
investing activities
Cash (outflow)/inflow from (295) (150) 1 239
financing activities
Capital expenditure 148 601 1 601 339
Amortisation and depreciation 316 144 459 60
Impairment - 3 - -
EBITDA 1 110 431 2 459 114
ARM *Corpor-
explora- ate and
tion other Gold Total
Rm Rm Rm
2.1 Year to 30 June 2010
(reviewed)
Total sales 1 - - 11 028
Inter-Group sales to ARM - - - 6
Ferrous
Sales 1 - - 11 022
Cost of sales - 27 - (7 480)
Other operating income - 212 - 408
Other operating expenses (120) (335) - (1 030)
Segment result (119) (96) - 2 920
Income from investments - 61 32 209
Finance cost (46) (1) - (101)
Finance cost Implats: - - - (41)
Shareholders` loan Two Rivers
Finance cost ARM: - - - (50)
Shareholders` loan Two Rivers
Loss from associate - - - (51)
Exceptional items 96 - - 97
Taxation 1 2 - (1 009)
Non-controlling interest 21 (9) - (162)
Contribution to basic earnings (47) (43) 32 1 812
Contribution to headline (143) (43) 32 1 714
earnings
Other information
Segment assets, including 348 1 761 5 180 28 233
investment in associate
Investment in associate - - - 1292
Segment liabilities 59 1 700 - 6 429
Unallocated liabilities (tax 3 275
and deferred tax)
Consolidated total liabilities 9 704
Cash inflow/(outflow) from (137) 188 - 2 521
operating activities
Cash (outflow)/inflow from 149 (7) - (2 324)
investing activities
Cash (outflow)/inflow from (8) (516) - (729)
financing activities
Capital expenditure 44 5 - 2 738
Amortisation and depreciation 6 2 - 987
Impairment 7 - - 10
EBITDA (113) (94) - 3 907
* Corporate, other companies and consolidation adjustments
ARM Platinum ARM ARM
Platinum Nickel Ferrous Coal
Rm Rm Rm Rm
2.2 Year to 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 per 8 24 615 1
income statement
Other operating expenses per 2 (48) (462) (1)
income statement
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 basic earnings (347) 28 3 160 162
Contribution to headline (348) 29 3 150 135
earnings
Other information
Segment assets 5 334 1 791 8 292 2 973
Investment in associate - - - 1 327
Segment assets, including
investment in associate
Segment liabilities 1 535 332 815 1 463
Unallocated liabilities (tax
and deferred tax)
Consolidated total liabilities
Cash inflow/(outflow) from 830 177 4 034 414
operating activities
Cash (outflow)/inflow from (475) (866) (1 388) (498)
investing activities
Cash (outflow)/inflow from (270) 149 (263) 211
financing activities
Capital expenditure 524 878 1 335 572
Amortisation and depreciation 323 28 378 36
Impairment - 1 - -
EBITDA (234) 54 5 146 73
ARM *Corpor-
explora- ate and
tion other Gold Total
Rm Rm Rm Rm
2.2 Year to 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 per - 268 - 916
income statement
Other operating expenses per (515) (231) - (1 255)
income statement
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 basic earnings (122) (13) - 2 868
Contribution to headline (689) 40 - 2 317
earnings
Other information
Segment assets 483 1 535 5 091 25 499
Investment in associate - - - 1 327
Segment assets, including
investment in associate
Segment liabilities 497 1 298 - 5 940
Unallocated liabilities (tax 2 808
and deferred tax)
Consolidated total liabilities 8 748
Cash inflow/(outflow) from (554) (851) - 4 050
operating activities
Cash (outflow)/inflow from 147 (55) - (3 135)
investing activities
Cash (outflow)/inflow from 276 (274) - (171)
financing activities
Capital expenditure 22 2 - 3 333
Amortisation and depreciation 20 2 - 787
Impairment 42 - - 43
EBITDA (622) 67 - 4 484
* Corporate, other companies and consolidation adjustments
The ARM platinum segment is analysed further into Two Rivers
Platinum (Pty) Limited and ARM Mining Consortium Limited which
includes Modikwa Platinum Mine.
ARM Platinum
Two Rivers Modikwa Total
Rm Rm Rm
2.3 Year to 30 June 2010 (Reviewed)
Sales
External sales 2 099 1 057 3 156
Cost of sales (1 507) (787) (2 294)
Other operating income 10 1 11
Other operating expenses (23) (56) (79)
Segment result 579 215 794
Income from investments 3 20 23
Finance cost (35) (3) (38)
Finance cost Implats: Shareholders` (41) - (41)
loan Two Rivers Platinum (Pty)
Limited
Finance cost ARM: Shareholders` loan (50) - (50)
Two Rivers Platinum (Pty) Limited
Taxation (130) (69) (199)
Non-controlling interest (146) (28) (174)
Contribution to basic earnings 180 135 315
Contribution to headline earnings 180 135 315
Other information
Segment and consolidated assets 3 046 2 671 5 717
Segment liabilities 1 007 533 1 540
Unallocated liabilities (tax and 871
deferred tax)
Consolidated total liabilities 2 411
Cash inflow from operating 551 209 760
activities
Cash outflow from investing (75) (41) (116)
activities
Cash outflow from financing (275) (20) (295)
activities
Capital expenditure 97 51 148
Amortisation and depreciation 238 78 316
EBITDA 817 293 1 110
ARM Platinum
Two Rivers Modikwa Total
Rm Rm Rm
2.4 Year to 30 June 2009 (Audited)
Sales
External sales 1 022 728 1 750
Cost of sales (1 373) (944) (2 317)
Other operating income 7 1 8
Other operating expenses (7) 9 2
Segment result (351) (206) (557)
Income from investments 19 50 69
Finance cost (39) (21) (60)
Finance cost Implats: Shareholders` (70) - (70)
loan Two Rivers Platinum (Pty)
Limited
Finance cost ARM: Shareholders` loan (86) - (86)
Two Rivers Platinum (Pty) Limited
Exceptional items 1 - 1
Taxation 131 21 152
Non-controlling interest 177 27 204
Contribution to basic earnings (218) (129) (347)
Contribution to headline earnings (219) (129) (348)
Other information
Segment and consolidated assets 2 853 2 481 5 334
Segment liabilities 1 117 418 1 535
Unallocated liabilities (tax and 638
deferred tax)
Consolidated total liabilities 2 173
Cash inflow from operating 450 380 830
activities
Cash outflow from investing (294) (181) (475)
activities
Cash outflow from financing (168) (102) (270)
activities
Capital expenditure 340 184 524
Amortisation and depreciation 251 72 323
EBITDA (100) (134) (234)
Additional
Information
2.5 Pro forma 100% 50%
analysis of the
Ferrous segment
Attri-
Iron ore Manganese Chrome butable
Division Division Division Total to ARM
Year to 30 June 2010 Rm Rm Rm Rm Rm
(Reviewed)
Sales 4 993 6 088 1 789 12 870 6 435
Other operating 119 187 29 335 148
income
Other operating 201 436 248 885 423
expense
Operating profit 2 003 2 235 (239) 3 999 2 000
Contribution to 1 437 1 480 (185) 2 732 1 367
earnings
Contribution to 1 436 1 478 (185) 2 729 1 364
headline earnings
Other information
Consolidated total 8 729 8 922 1 920 19 571 9 572
assets
Consolidated total 2 532 2 596 722 5 850 1 171
liabilities
Capital expenditure 2 304 743 289 3 336 1 601
Amortisation and 544 250 142 936 459
depreciation
Cash inflow/(outflow) 1 985 (122) (219) 1 644 1 322
from operating
activities
Cash outflow from (2 133) (666) (267) (3 066) (1 534)
investing activities
Cash inflow/(outflow) - 4 (1) 3 1
from financing
activities
EBITDA 2 547 2 485 (97) 4 935 2 459
2.6 Year to 30 June
2009 (Audited)
Sales 5 018 8 436 1 809 15 263 7 632
Other operating 329 914 145 1 388 615
income
Other operating 182 532 368 1 082 462
expense
Operating profit 3 080 6 199 277 9 556 4 778
Contribution to 2 170 3 956 193 6 319 3 160
earnings
Contribution to 2 160 3 927 213 6 300 3 150
headline earnings
Other information
Consolidated total 6 506 8 350 2 038 16 894 8 292
assets
Consolidated total 1 745 2 506 654 4 905 815
liabilities
Capital expenditure 1 529 854 397 2 780 1 335
Amortisation and 409 236 127 772 378
depreciation
Cash inflow from 2 844 610 312 3 766 4 034
operating activities
Cash outflow from (1 541) (840) (395) (2 776) (1 388)
investing activities
Cash outflow from (492) - (34) (526) (263)
financing activities
EBITDA 3 478 6 406 424 10 308 5 146
Reviewed Audited
R million 2010 2009
3. EXCEPTIONAL ITEMS
Surplus on dilution in TEAL to 50% - 557
Profit on sale of Otjikoto 103 -
Profit on sale of fixed assets 3 -
Capital portion of insurance claim at Nkomati 1
Impairments of property, plant and equipment (10) (43)
Exceptional items per income statement 97 514
Taxation 1 -
Profit on asset swap in the DTJV - ARM Coal - 27
Capital portion of insurance claim at Cato Ridge - 14
Loss on disposal of property, plant and equipment - (4)
Total amount adjusted for headline earnings 98 551
4. HEADLINE EARNINGS
Basic earnings per income statement 1 812 2 868
- Surplus on dilution in TEAL to 50% - (557)
- Impairments of property, plant and equipment 10 43
- Capital portion of insurance claim at Cato Ridge - (14)
- Capital portion of insurance claim at Nkomati (1) -
- Profit on sale of Otjikoto (103) -
- (Profit)/loss on disposal of property, plant and (3) 4
equipment
- Profit on asset swap in the DTJV - ARM Coal - (27)
1 715 2 317
- Taxation (1) -
Headline earnings 1 714 2 317
5. CASH AND CASH EQUIVALENTS
- African Rainbow Minerals Limited 903 1 287
- Assmang Limited 897 1 624
- ARM Platinum (Pty) Limited 248 247
- Kingfisher Insurance Co Limited 126 77
- Mannequin Insurance PCC Limited 58 63
- Nkomati 82 53
- Two Rivers Platinum (Pty) Limited 7 21
- Vale/ARM joint venture 115 5
- Other 38 36
- Restricted cash 565 100
Total as per statement of financial position 3 039 3 513
Less: Overdrafts 248 188
Total as per statement of cash flows 2 791 3 325
6. LONG-TERM BORROWINGS
- African Rainbow Minerals Limited 784 -
- Assmang Limited 3 6
- ARM Platinum (Pty) Limited 1 3
- ARM Coal (Pty) Limited 1 657 1 135
- Two Rivers Platinum (Pty) Limited 137 160
- Vale/ARM joint venture - 60
2 582 1 364
Reviewed Audited
R million 2010 2009
7. OVERDRAFTS AND SHORT-TERM BORROWINGS
- African Rainbow Minerals Limited - 967
- Assmang Limited 4 7
- ARM Platinum (Pty) Limited 123 138
- ARM Coal (Pty) Limited 4 -
- Nkomati - 149
- Vale/ARM joint venture - 335
- Two Rivers Platinum (Pty) Limited - Bank asset 252 208
financing
- Implats 343 539
- Other 38 37
764 2 380
8. TAXATION
South African normal taxation
- current year 271 979
- mining 213 814
- non-mining 58 165
- prior year (52) 50
State`s share of profits 80 234
Deferred taxation 659 248
Secondary Tax on Companies 51 216
1 009 1 727
9. CASH GENERATED FROM OPERATIONS BEFORE WORKING
CAPITAL MOVEMENTS
Cash generated from operations (per cash flow) 3 430 6 678
Working capital changes 598 (1 616)
Movement in receivables 1 393 (2 374)
Movement in payables (756) (164)
Movement in inventories (39) 922
Cash generated from operations before working 4 028 5 062
capital movement
10. COMMITMENTS
Commitments in respect of future capital expenditure, which will be
funded from operating cash flows and by utilising available cash
and borrowing resources, are summarised below:
Commitments
Commitments in respect of capital expenditure:
Approved by directors
- contracted for 2 921 4 707
- not contracted for 505 915
Total commitments 3 426 5 622
11. CONTINGENT LIABILITIES
11.1 The Vale/ARM joint venture has a potential contingent
liability of US$15 million (US$7,5 million attributable to ARM)
arising from the DRC government review of a mining licence granted.
The ultimate potential liability will only be the present value of
the above amount that will need to be accrued in the capital cost
of the mine, with payments in incremental instalments thereafter,
should a decision be made by the Vale/ARM joint venture to develop
a mine on this property.
11.2 There have been no other significant changes in the contingent
liabilities of the group as disclosed in the 30 June 2009 annual
report.
12. EVENTS AFTER REPORTING DATE
No reportable events.
Contact details and administration
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
Email: ir.admin@arm.co.za
Website www.arm.co.za
Transfer secretaries
Computershare Investor Services (Pty) Limited
Ground Floor, 70 Marshall StreetJohannesburg, 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
Forward looking statement
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.
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
Shareholder information
Issued share capital at 30 June 2010 212 692 376
Market capitalisation at 30 June 2010 ZAR34 billion
Market capitalisation at 30 June 2010 US$4.5 billion
Closing share price at 30 June 2010 R161.40
12 month high (1 July 2009 - 30 June 2010) R205.99
12 month low (1 July 2009 - 30 June 2010) R116.51
Average volume traded for the 12 months 550 761 shares per day
Primary listing JSE Limited
Ticker symbol ARI
Investor relations
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
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 1480
Fax: +27 11 779 1318
E-mail: alyson.doyley@arm.co.za
www.arm.co.za
Johannesburg
30 August 2010
Sponsor
Deutsche Securities (SA) (Pty) Limited
Date: 30/08/2010 07:05:12 Produced by the JSE SENS Department.
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