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MTX
MEMTX
MTX - Metorex Limited - Interim results and financial information for the 12
month period ended 30 June 2010
METOREX LIMITED
Interim results and financial information for the 12 month period ended 30 June
2010
(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")
www.metorexgroup.com
e-mail: ir@metorexgroup.com
A NEW FOCUS FOR THE FUTURE
Highlights for the 12 months ended 30 June 2010
* Copper production up by 60 percent to 50,051 tons
* Cobalt production up by 256 percent to 3,102 tons
* Cash mining profit up 678 percent to R866 million, despite R400 million
loss on Ruashi hedges which have now expired
* Balance sheet restored with debt down by 50% and cash on hand at R521
million
* Growth projects being advanced with a high degree of technical diligence
* Post 30 June Consolidated Murchison has been sold
Consolidated condensed statement of comprehensive income
R`000 12 months ended 12 months ended
30 June 2009* 30 June 2010
(Audited) (Reviewed)
Mineral sales
Copper 866 407 2 121 856
Cobalt 70 677 659 444
Gross revenue 937 084 2 781 300
Realisation costs 184 258 369 714
On-mine revenue 752 826 2 411 586
Cost of production 597 580 1 482 391
Stock movement 43 990 63 510
Cash mining profit 111 256 865 685
Other income, net 142 750 305 430
EBITDA 254 006 1 171 115
Impairments (2 273 429) -
Finance income 6 945 14 802
Finance costs (5 881) (93 380)
(Loss) income before depreciation (2 018 359) 1 092 537
Depreciation 108 797 296 141
(Loss) income before assets held for (2 127 156) 796 396
sale
Assets held for sale, net of tax 166 459 (31 903)
(Loss) income before taxation (1 960 697) 764 493
Taxation (credit) expense (420 253) 124 617
(Loss) income after taxation (1 540 444) 639 876
Income attributable to outside (33 226) 59 720
shareholders
Accumulated (loss) retained income (1 507 218) 580 156
for the period
Other comprehensive income, net of
tax
Foreign currency translation reserve 313 084 93 342
Net effect of cash flow hedges (160 760) 126 810
Total comprehensive income 152 324 220 152
Attributable to:
Equity holders of the parent 176 438 263 172
Minority interest (24 114) (43 020)
152 324 220 152
From continuing and discontinuing
operations
(Loss) earnings per share (cents) (272,4) 72,4
Diluted (loss) earnings per share (272,4) 72,3
(cents)
Headline earnings per share (cents) 23,9 25,2
Diluted headline earnings per share 23,9 25,1
(cents)
Adjusted headline (loss) earnings per (8,5) 24,6
share (cents)
Weighted number of shares in issue 553 349 801 794
(`000)
Diluted number of shares in issue 553 349 802 115
(`000)
Shares in issue (`000) 742 538 1 002 263
Headline earnings per share is
calculated using the following:
(Loss) income attributable to (1 507 218) 580 156
ordinary shareholders
Impairments, net of tax and 1 639 557 -
minorities
Profit on the sale of fixed assets (431) (378 485)
and subsidiaries, net of tax
Headline earnings (R`000) 131 908 201 671
Headline earnings per share (cents) 23,9 25,2
Diluted headline earnings per share 23,9 25,1
(cents)
Adjusted headline earnings per share
is calculated using the following:
Headline earnings (R`000) 131 908 201 671
Ruashi hedge profit, net of tax and (118 134) -
minorities
Once-off deferred tax credit relating - (42 077)
to AHFS
AHFS (PAR, CM, VMC) (166 459) 31 903
Minority interest relating to AHFS 105 851 5 740
Adjusted headline (loss) earnings (46 834) 197 237
(R`000)
Adjusted headline (loss) earnings per (8,5) 24,6
share (cents)
*Re-presented for assets held for
sale
Consolidated condensed statement of financial position
R`000 12 months ended 12 months ended
30 June 2009 30 June 2010
(Audited) (Reviewed)
ASSETS
Non-current assets
Property, plant, equipment and 4 835 427 4 900 953
mineral rights
Goodwill 11 514 11 514
Investments 79 718 81 587
Rehabilitation trust funds 779 6 222
Derivative instruments 94 942 34 945
5 022 380 5 035 221
Current assets
Inventories 264 051 243 231
Trade and other receivables 447 628 393 992
Taxation prepaid 6 194 16 281
Derivative instruments - 36 171
Bank balances and cash 73 553 521 322
791 426 1 210 997
5 813 806 6 246 218
EQUITY AND LIABILITIES
Equity attributable to equity holders 2 399 459 3 831 787
of the parent
Minority interest 457 208 85 490
Total equity 2 856 667 3 917 277
Non-current liabilities
Long-term liabilities - interest 1 415 563 751 154
bearing
Long-term provisions 181 310 141 276
Deferred tax liabilities 469 292 531 628
2 066 165 1 424 058
Current liabilities
Trade and other payables 557 831 376 525
Short-term borrowings - interest 695 604 321 964
bearing
Short-term provisions 35 065 48 550
Bank overdraft 54 323 31
Derivative instruments 230 240 110 831
Taxation 29 999 11 653
1 603 062 869 554
Assets held for sale, net (712 088) 35 329
Total equity and liabilities 5 813 806 6 246 218
Net asset value per share (cents) 323 382
Net tangible asset value per share 322 381
(cents)
Condensed consolidated cash flow statement
R`000 12 months ended 12 months ended
30 June 2009 30 June 2010
(Audited) (Reviewed)
Cash generated by operations, pre 400 136 692 641
working capital
Working capital 65 861 (256 749)
Cash generated by operations 465 997 435 892
Dividends paid to minorities (108 224) -
Taxation paid (236 421) (89 346)
Finance income (costs), net 250 (78 578)
Cash inflows from operating 121 602 267 968
activities
Cash (outflows) inflow from investing (1 393 693) 412 622
activities
Additions to property, plant, (1 393 693) (523 424)
equipment, mineral rights and
investments
Proceeds on disposals of shares in - 936 046
subsidiary
Cash inflows (outflow) from financing 1 191 426 (171 280)
activities
Shares issued 704 527 886 155
Borrowings raised (repaid) 486 899 (1 057 435)
Net (decrease) increase in cash and (80 665) 509 310
cash equivalents
Cash at beginning of year 101 331 19 230
Effect of foreign exchange rate (1 436) (198)
changes
Cash at end of year 19 230 528 342
Disposal of Vergenoeg Mining Company - (7 051)
(Pty) Ltd
Cash at end of year - continuing 19 230 521 291
operations
Cash at end of year - discontinuing 23 191 -
operations
Cash at end of year - continuing and 42 421 521 291
discontinuing operations
Condensed statement of changes in equity
R`000 12 months ended 12 months ended
30 June 2009 30 June 2010
(Audited) (Reviewed)
Shareholders` equity at start of year 4 133 674 2 856 667
Ordinary shares issued 723 728 886 154
Other comprehensive income (152 324) (220 152)
Equity reserve - 17 278
Profit for the period (1 507 218) 580 156
Share option equity 25 789 22 408
Minority interests (226 362) (371 718)
Equity attributable to assets held (140 620) 146 484
for sale
Total equity 2 856 667 3 917 277
Commentary
Johannesburg 7 September 2010: Metorex Limited, a base metals producer, today
announced its reviewed second interim report for the 12 months ended 30 June
2010. Shareholders are reminded that the Company`s year-end has changed to 31
December.
Terence Goodlace, Chief Executive Officer said: "We are pleased to announce that
Metorex has now effectively restored its balance sheet and that these much
improved results bode well for the future. Operationally, Chibuluma was the star
performer for the Group with a 7,5 percent increase in copper produced for the
year. Ruashi continued its positive trend with total copper production having
increased by 165 percent and cobalt production by 324 percent over the last 12
months. The disposal of Consolidated Murchison has now been concluded and the
Group`s re-positioning as a copper/cobalt mining company with producing and
development assets in the DRC and Zambia is now complete. Our focus has
transitioned from one of survival to that of sustainable growth and we are
actively advancing the bankable feasibility studies for the Kinsenda and Lubembe
deposits in the DRC."
Salient features
Financial 12 months 6 months 6 months 12 months
performance June December June June
2009* 2009 2010 2010
Gross revenue (R`000) 937 084 1 389 272 1 392 028 2 781 300
Cash mining profit (R`000) 111 256 461 701 403 984 865 685
Cash mining profit (%) 12 33 29 31
margin
EPS (cents) (272,4) 65,3 8,9 72,4
HEPS (cents) 23,9 14,2 12,5 25,2
Adjusted HEPS (cents) (8,5) 11,8 14,3 24,6
Market (R`000) 2 227 614 3 577 500 3 307 468 3 307 468
capitalisation
Shares in issue (`000) 742 538 745 763 1 002 263 1 002 263
Weighted average (`000) 553 349 743 567 860 091 801 794
number of shares
Share price (cents) 300 481 330 330
ZAR/US$ rate - (R/US$) 9,03 7,63 7,53 7,58
Average
ZAR/US$ rate - (R/US$) 7,72 7,39 7,67 7,67
Closing
*Re-presented
Commodity
production**
12 months 6 months 6 months 12 months
June December June June
2009 2009 2010 2010
Copper (t) 31 207 24 840 25 211 50 051
Cobalt (t) 871 1 501 1 601 3 102
Commodity sales**
12 months 6 months 6 months 12 months
June December June June
2009 2009 2010 2010
Copper (t) 31 846 24 723 25 492 50 215
Cobalt (t) 578 1 505 1 741 3 246
** The production and sales figures are stated as gross and do not
represent the attributable beneficial interest.
Average prices
achieved, net of
hedges
12 months 6 months 6 months 12 months
June December June June
2009 2009 2010 2010
Copper (US$/t) 4 464 5 877 5 239 5 574
Cobalt (70% of (US$/t) 30 856 24 244 28 759 26 799
LMB)
Cobalt (70% of (US$/lb) 14 11 13 12
LMB)
Safety, health, environmental and communities ("SHEC")
From a safety performance perspective the Group has not had a fatality in over
24 months but there is still work to be done as the lost time injury frequency
rate of 4,2 per million man hours worked measured over the last 12 months must
be improved upon. The Company continues to promote a set of safe production
rules whilst increasing the intensity of risk assessment, hazard identification,
risk management and safety training by implementing an integrated, computer-
based SHEC system. There have been no major environmental incidents at any of
the Group operations during the year.
Financial overview - 12 months ended June 2010 ("2010") compared with the 12
months ended June 2009 ("2009") - (Reviewed)
Shareholders are referred to the Company release dated Friday, 4 June 2010
wherein Metorex announced its change in year-end from June to December. This
release constitutes the Group`s reviewed second interim report for the 12 months
ended 30 June 2010 as required by the Listing Requirements of the JSE Limited.
Group operations saw a significant increase in output, boosted by the production
build-up at Ruashi and higher copper head grades at Chibuluma. Copper production
increased by 60 percent to 50 051 tons (2009: 31 207 tons) and cobalt production
increased to 3 102 tons from 871 tons the previous year. As a result, gross
revenue amounted to R2,8 billion (2009: R0,9 billion). Gross revenue was
negatively impacted by a R400 million copper hedge loss related to the Ruashi
project finance hedges ("Ruashi hedges"). The Ruashi hedges were priced at US$3
900 per ton and expired on 30 June 2010.
Production and realisation costs increased to R1,5 billion (2009: R0,6 billion)
and R0,4 billion (2009: R0,2 billion) respectively on the back of the first-time
recognition of the Ruashi phase two project. Cash costs per ton of copper sold,
including realisation and on-mine production costs, decreased to US$2 831 at
Ruashi and US$2 782 at Chibuluma during 2010. The Ruashi cash costs were
positively impacted by higher cobalt sales credits and the benefit of increased
volume throughput. Group realisation costs per ton of copper and cobalt sold
increased year-on-year. This increase followed higher treatment, refining and
transport charges in Zambia, an additional export tax of US$60 per ton
introduced in the Katanga province of the DRC and the moisture content of cobalt
material shipped to South Africa.
An analysis of Group realisation and production costs is set out
below:
12 months 6 months 6 months 12 months
June December June June
2009 2009* 2010 2010
Realisation costs
Ruashi (Rm) 40 104 135 239
Chibuluma (Rm) 132 58 65 123
Sable (Rm) 12 5 3 8
Total realisation (Rm) 184 167 203 370
costs
Production costs
Ruashi (Rm) 17 483 465 948
Chibuluma (Rm) 264 111 118 229
Sable (Rm) 260 143 102 245
Corporate (Rm) 56 26 35 61
Total production (Rm) 597 763 720 1 483
costs
* Unaudited
Cash mining profit increased by 678 percent to R866 million (2009: R111 million)
at a margin of 31 percent. Current copper and cobalt prices together with the
new copper hedge book bode well for the Group`s mining profit margin going
forward.
Net other income of R305 million (2009: R143 million) includes a profit of R431
million from the disposal of Vergenoeg Mining Company (Pty) Ltd ("VMC") and Pan
African Resources Plc ("PAR").
State royalty charges amounted to R115 million (2009: R20 million) and non-cash
share-based payment charges totalled R21 million (2009: R25 million).
Finance costs, mainly related to the Ruashi project finance loan and the
Chibuluma term loan, amounted to R93 million (2009: R6 million). These borrowing
costs will reduce going forward as a result of the reduction in Group debt.
Depreciation increased to R296 million (2009: R109 million) following the
commissioning of the Ruashi project and the resultant depreciation of its
capital assets over an estimated useful life of 15 years. The Ruashi capital
assets include the project expenditure, capitalised borrowing costs,
commissioning losses and mineral rights on acquisition.
Taxation charges include a once-off positive deferred tax adjustment of R42
million following the recognition of tax losses available for set-off against
gains from the disposal of assets. Excluding this adjustment and the capital
gains tax charge related to the disposal of VMC and PAR, the Group`s effective
tax rate amounted to 31 percent.
Adjusted headline earnings, excluding non-recurring items, increased to 24,6
cents per share from a loss of 9 cents per share during 2009. The 2010 and 2009
attributable earnings from PAR (now sold), VMC (now sold) and losses incurred at
Consolidated Murchison (held for sale) are excluded from adjusted headline
earnings. Furthermore, the 2009 adjusted headline earnings exclude the
exceptional accounting profit of 21 cents per share which arose when the Ruashi
hedge book was restructured during December 2008. The weighted average number of
shares in issue increased to 802 million (2009: 553 million).
Assets held for sale ("AHFS") during 2010 related to VMC, PAR and Consolidated
Murchison ("CM"). PAR was sold effective 1 July 2009 and VMC contributed towards
earnings until December 2009 when it was sold. CM is included as an AHFS. The
AHFS incurred a net loss after taxation of R32 million (2009: profit of R166
million).
Capital expenditure for the 12 months ended 30 June 2010 amounted to
R523 million (2009: R1,6 billion):
Capex
12 months 6 months 6 months 12 months
June December June June
2009 2009* 2010 2010
Ruashi (Rm) 889 92 157 249
Chibuluma (Rm) 121 48 90 138
Copper Resource (Rm) 383 67 67 134
Corporation
Other (Rm) 206 1 1 2
Total (Rm) 1 599 208 315 523
* Unaudited
Ruashi capital expenditure mainly related to the acquisition of land adjacent to
the mine for R61 million, commencement of over-burden stripping of Pit 3 from
April 2010 to the value of R50 million, completion of the plant front-end,
cobalt dryer and related items for R48 million, completion of the infill
drilling programme for R10 million and ongoing recurring expenditure of some R80
million.
Chibuluma capital expenditure principally related to the ongoing decline ramp
development and related infrastructure, the introduction of new underground
mobile machinery and ongoing plant expenditure. The decline ramp development
costs constituted some 40 percent of total capital expenditure and will continue
at this rate for a further two years until the lowest levels of the ore body are
fully accessed and established.
Copper Resources Corporation expenditure related to the annual holding costs of
approximately US$12 million (R92 million) at the Kinsenda mine and costs
associated with the return of the Musoshi mine and related infrastructure to
Sodimico as agreed during the licence review negotiations.
Contracted capital commitments at 30 June 2010 amount to R86 million (2009: R40
million), whilst there were no uncontracted capital commitments (2009: R2
million). Contracted capital commitments mainly relate to the construction of an
acid plant at Ruashi. Operating lease commitments, which fall due within the
next year, amount to R6 million (2009: R4 million), whilst commitments of R9
million (2009: R3 million) fall due during the next four years.
The Group financial position and liquidity has improved to satisfactory levels
incorporating treasury reserves as well as funds to advance the development
projects to feasibility stage. The financial position improved following the R2
billion recapitalisation of the company through the disposal of non-copper
investments for R940 million, a capital raising of R900 million and improved
operational cash flows.
Significant working capital investments were made during 2010 which resulted in
an overall improvement in the net current asset position to R341 million as
compared to the 2009 negative position of R812 million.
The gross debt position reduced by R1 billion to R1,1 billion over the last 12
months and cash on hand amounted to R521 million as at 30 June 2010. The Group`s
gross debt-to-equity ratio has improved to 27 percent from 74 percent a year
ago. The Ruashi project finance debt is now ring-fenced to the Ruashi investment
("non-recourse event"). This non-recourse event de-risked the Metorex company
balance sheet and provides financial flexibility and optionality in terms of the
growth projects` funding strategy.
The Group debt position is set out below:
Nature of debt June 2009 June 2010
Ruashi 1 (Rm) Project finance 1 420 652
Ruashi 2 (Rm) Pre-offtake finance 162 131
Chibuluma 1 (Rm) Term loan 282 215
Chibuluma 2 (Rm) Equipment leases and other 45 75
Corporate (Rm) Bridge loans 190 -
Other (Rm) Other 12 -
Total (Rm) 2 111 1 073
Group cash generated by operations, before working capital investments, amounted
to R693 million (2009: R400 million). The investment in working capital of R256
million principally related to the reduction of accounts payable during 2010.
The balance sheet is substantially restored and no significant working capital
investments are expected during the next 12 months.
The Group`s hedge book now excludes the Ruashi hedges at US$3 900 per ton. The
hedge book provides an element of copper price certainty which mitigates the
risk of a material reduction in spot copper prices that could impact on the
Group`s ability to service debt. The current copper hedge book is set out below:
Commodity Maturity Volume Price (US$/t) Comment
(months) (tons)
Copper: Ruashi 12 (Jul `10 - 16 200 5 972 Forwards
Jun `11)
Ruashi 12 (Jul `11 - 12 000 6 600 - 7 600 Zero cost
Jun `12) collar
Chibuluma 6 (Jul `10 - 3 000 7 000 - 8 060 Zero cost
Dec `10) collar
Chibuluma 6 (Jan `11 - 3 000 6 805 - 8 000 Zero cost
Jun `11) collar
Zambian tax: The Government of the Republic of Zambia ("GRZ") introduced a new
mining tax regime effective 1 April 2008. Subsequently, the GRZ reviewed these
tax changes and abolished windfall taxes but still maintained the variable
profit tax, increased royalties of 3 percent and the concentrate export levy of
15 percent. In terms of Chibuluma`s development agreement ("DA"), signed in 1997
by GRZ and ZCCM Investment Holdings Plc ("ZCCM") under the auspices of the World
Bank, the GRZ provided Chibuluma protection for a fifteen-year period against an
increase in taxes and/or new taxes or fiscal imposts. The current year tax
charge includes corporate taxes at 30 percent for Chibuluma, which is in
accordance with the DA. The variable taxes and historic windfall taxes have been
recorded as a receivable from GRZ against the tax accrual. As at 30 June 2010,
this receivable amounted to US$8 million. The company is involved in discussions
with the GRZ to find an alternative solution to arbitration or litigation.
Operational review - 12 months ended June 2010 compared with the 12 months ended
June 2009 - (Unaudited)
Ruashi
12 months 6 months 6 months 12 months
June December June June
2009 2009 2010 2010
Tons milled (t) 485 360 631 864 600 437 1 232 301
Headgrade - Copper (%) 2,8 2,79 2,98 2,86
- Cobalt (%) 0,5 0,51 0,48 0,46
Recovery - Copper (%) 76 75,0 80,7 78,1
- Cobalt (%) 27 45,9 54,5 53,8
Copper produced (t) 10 378 13 208 14 323 27 531
Copper sold - total (t) 10 351 13 038 14 702 27 740
Copper sold - into (t) (1) 5 292 11 700 16 992
hedgebook
Copper sold - at (t) (1) 7 746 3 002 10 748
spot price
Copper - (US$/t) (1) 3 900 3 900 3 900
hedgebook price
achieved
Copper - average (US$/t) (1) 6 815 6 163 6 633
spot price achieved
Cobalt produced (t) 720 1 478 1 572 3 050
Cobalt sold (t) 326 1 483 1 709 3 192
On-mine costs per (US$/t) (1) 100 103 101
ton milled
Copper realisation (US$/t) (1) 590 637 615
costs per ton of
copper sold
Cobalt realisation (US$/t) (1) 3 967 4 996 4 518
costs per ton of
cobalt sold
Total cash cost/ton (US$/t) (1) 3 084 2 598 2 831
of copper sold, net
of cobalt credits
Cash mining profit (R`000) (1) 253 587 198 307 451 894
Cash mining profit (US$000) (1) 33 215 26 397 59 612
Depreciation (R`000) (1) 110 849 99 760 210 609
Depreciation (US$000) (1) 14 519 13 264 27 783
Capital expenditure (R`000) (1) 92 116 156 937 249 053
Capital expenditure (US$000) (1) 12 465 20 006 32 471
(1) Project capitalised during 2009
The year for Ruashi was one in which the mine transitioned from a project into a
fully fledged operation. This posed certain challenges from a safety
perspective, mainly in terms of the commitment and understanding regarding
creating a safe working environment, particularly through all levels of the
organisation where exposure to this approach is not common culture. A baseline
risk assessment process was undertaken and the introduction of hazard
identification and risk assessment on an ongoing basis was implemented.
Additionally, a comprehensive set of safe production rules was established which
covered key aspects of the Ruashi process. Total lost time injuries during the
year increased from four to seven as the operational complexity increased.
Milling volume increased by over 154 percent for the year to June 2010 when
compared to the previous year and reflects the commissioning of the operation.
The first half production of 631 864 tons was affected somewhat by power
interruptions. The second half milling throughput was constrained to 600 437
tons due to the transformer and rectifier issues experienced at Ruashi. These
issues have been extensively reported on during the relevant periods in separate
announcements. Ongoing problems with the rectifier and transformers caused by
external power surges were also rectified and production levels have since
stabilised.
The copper and cobalt head grades remained constant in the year to June 2010 in
relation to the previous financial year. However, the confidence levels in the
geological model improved due to continued in-fill drilling and grade control
measures and the grades experienced in the second half of the year are expected
to persist into the next financial year.
Copper recoveries improved to 78 percent during the second half of the year.
Recoveries are a function of both the acid solubility of the plant feed material
and operating efficiencies. The improvements to the geological model will allow
Ruashi to control and predict its feed sources better, while operating
efficiencies are subject to a process of continuous improvement. Cobalt
recoveries have improved by 99 percent year on year in line with the
commissioning of cobalt circuits and the switch to producing cobalt hydroxide.
Cobalt recovery improvements will be more modest off the current base.
Notwithstanding the production pressures caused by the rectifier and transformer
issues, copper and cobalt production improved by 8 percent and 6 percent
respectively over the two halves of 2010. Compared to the previous year, the
production increases of 165 percent and 324 percent respectively to 27 531 tons
of copper and 3 050 of cobalt better reflect the ramp up of Ruashi.
On-mine costs per ton milled increased by 3 percent when comparing the first
half of the financial year to the second. This was as a consequence of the
lower volumes processed affecting the unit costs. The copper and cobalt
realisation costs increased by 8 percent and 26 percent respectively when
comparing the first half of the June 2010 year to the second half. These were
both impacted by an incremental US$60 per ton export charge effective February
2010. Cobalt realisation charges were also significantly higher in the second
half due to concentrate moisture levels rising to 64 percent against 55 percent
in the first half. This was due to conversion to cobalt hydroxide as well as
initial problems experienced in commissioning the cobalt drying circuit.
Total cash costs of copper sold, net of cobalt credits, improved by 16 percent
over the first half of the year. The increased cobalt sales contributed to this
cost indicator falling to US$2 598 per ton of copper in the second half of the
year and an overall cash mining profit of US$59,6 million.
Capital expenditure increased by 62 percent in the second half of the year to
US$32,5 million. The capital cost increases were a result of the commencement of
Pit 3 stripping operations in April 2010. Stripping will increase during the
next 12 months and expenditure is expected to reach US$20 million for that 12
month period. An additional US$13 million is being spent on the completion of
the acid plant and ongoing capital of US$10 million per annum is planned.
Ruashi mine should be at stable production levels of 2 800 tons to 3 000 tons of
copper and 300 tons to 350 tons of cobalt per month for the coming year. Actual
production for the month of August 2010 was 2 917 tons of copper (July 2010: 2
725 tons) and 380 tons of cobalt (July 2010: 347 tons). Production efficiencies
and strategic initiatives should have the effect of somewhat offsetting certain
cost increases such as power, diesel, taxes and wages. Ongoing brownfields
drilling is expected to improve the resource base of Ruashi, which should extend
the life of the mine and increase ore reserve flexibility.
Chibuluma
12 6 months 6 months 12
months December June months
June 2009 2010 June
2009 2010
Tons milled (t) 568 187 282 620 269 431 552 051
Headgrade - Copper (%) 3,1 3,32 3,60 3,46
Recovery - Copper (%) 90 90 90 90
Copper produced (t) 15 940 8 419 8 721 17 140
Copper sold - total (t) 15 907 8 479 8 702 17 181
Copper sold - into (t) - 3 075 4 200 7 275
hedgebook
Copper sold - at spot (t) 15 907 5 404 4 502 9 906
price
Copper - hedgebook (US$/t) - 4 515 5 308 4 912
price achieved
Copper - average spot (US$/t) 3 876 7 020 7 488 7 239
price achieved
On-mine costs per ton (t) 52 50 59 55
milled
Copper realisation (t) 917 904 987 946
costs per ton of copper
sold
Total cash cost/ton of (t) 2 793 2 853 2 713 2 782
copper sold
Cash mining profit (R`000) 155 786 219 453 235 648 455 101
Cash mining profit (US$000) 17 252 28 744 31 291 60 035
Depreciation (R`000) 72 781 32 624 33 825 66 449
Depreciation (US$000) 8 060 4 273 4 493 8 766
Capital expenditure (R`000) 121 065 47 578 89 953 137 531
Capital expenditure (US$`000) 15 682 6 438 11 493 17 931
The introduction of hazard identification and risk management has led to an
improvement in safety related measures. Baseline risk assessments have been
completed and procedures are now continuously being reviewed. Employees and
contractors now attend "Risk Assessment in the Workplace" presentations. Total
lost time injuries during the year improved by 14 percent from seven to six
injuries and non-lost time injuries showed an improvement of 41 percent from 48
injuries in 2009 to 28 injuries for the 12 months ended June 2010. Self
contained self rescuers were implemented at the mine over the last six months.
The volume of ore mined from underground was in line with 2009 performance at
560 595 tons and the amount of ore processed through the plant reduced by 2,8
percent to 552 051 tons for the 12 months to date. Capital development rates
were increased by 11 percent to 2 478 metres for the 12 months. Volumes at the
mine have been affected by electrical power interruptions during the year and
mining continues at deeper levels. The mine is planning to install additional
on site generating capacity to minimise the risk of power interruptions.
Copper head grades increased by 11 percent to 3,46 percent copper as the mine
depleted ores in planned higher grade areas. The increase in the grade was also
attributable to management interventions to reduce dilution at the mine. Within
the usual bounds of variability the ore body grade does improve with depth.
Copper sold for the 12 months increased by 8 percent to a record 17 181 tons.
All copper for the year was sold to the Chambishi Copper Smelters ("CCS") under
a newly negotiated contract. The terms are not as favourable as international
pricing but are not as expensive as incurring the Zambian export tax on
concentrates.
On-mine costs per ton milled were well controlled with the year on year increase
being under 6 percent. This increase was adversely affected in the second half
of the year as milling volumes decreased by 5 percent due to planned maintenance
on the crusher, a mill reline and power outages.
Realisation charges increased by 3 percent due to the increases in the CCS
offtake contract. Stated in terms of cash costs per ton of metal sold, Chibuluma
had a credible performance for the year as costs were held constant.
Capital expenditure for the 12 months was increased by 14 percent to US$17,9
million as a result of increased capital development (US$6,6 million) and the
purchase of new mining fleet vehicles (US$5,0 million) needed to maintain
production levels.
For the 12 months ended 30 June 2010, Chibuluma increased its cash mining profit
from US$17,3 million by 248 percent to US$60,0 million. This was driven by
higher copper production, higher copper prices received and cost control.
The Chibuluma mine is well set to maintain production levels for the coming
period. Volume restrictions, given the increasing depth of mining and erratic
power supply, will be mitigated through careful planning and strategic
interventions, and the depth-related increases in grade will assist in
maintaining production levels. Various cost pressures will be experienced during
the coming year, mainly in the form of wages, power and diesel costs. In
addition the Zambian government remains resolute in terms of increasing taxation
levels on mining companies. Capital expenditure levels are expected to remain
similar to current levels. However, additional expenditure, in the form of
exploration targeted at increasing the life of the mine, is planned.
Actual production for the month of August 2010 was 1 355 tons of copper (July
2010: 1 534 tons).
Sable
12 6 months 6 months 12
months December June months
June 2009 2010 June
2009 2010
Copper produced (t) 4 889 3 213 2 167 5 380
Copper sold (t) 5 588 3 206 2 088 5 294
Cobalt produced (t) 151 23 29 52
Cobalt sold (t) 252 22 32 54
Acquisition cost of (%) 59 72 71 72
contained copper feed
(% of copper LMB
price)
Overall copper process (%) 94 95 94 95
recovery
Net margin on copper (%) 4 9 5 6
production after
acquisition and
process costs
Cash mining profit (R`000) 11 470 14 757 5 445 20 202
Cash mining profit (US$000) 1 270 1 933 732 2 665
Depreciation (R`000) 22 478 9 490 9 355 18 845
Depreciation (US$000) 2 489 1 243 1 242 2 485
Capital expenditure (R`000) 2 803 - 530 530
Capital expenditure (US$000) 363 - 69 69
Improvements in safety and health practices, specifically the introduction of
hazard identification and risk management at the mine has led to an improvement
in all safety related measures over the last 12 months. Total lost time injuries
decreased by 83 percent from six injuries to one injury and non-lost-time
injuries showed an improvement of 75 percent from 29 to seven injuries.
The volume of ore purchased and processed through the plant increased by 14
percent over the last 12 months as compared to 2009 and a total of 33 516 tons
of ore was purchased by the mine. Ore flow to Sable is constrained by government
interventions in the DRC which make it difficult to import materials that have
not been beneficiated. Therefore, there was a change in the mix of ore towards
local Zambian sources which are typically lower grade and have very little
associated cobalt.
Recoveries improved slightly year on year with most of the improvement coming
towards the end of the year as a portion of the Zinc Plant infrastructure was
converted into a leach section to re-treat rejected material. The quality of the
Sable ore remained London Metal Exchange "A" grade material.
Sable produced 5 380 tons of copper for the 12 months to June 2010 which is a 10
percent increase on that achieved in 2009. Cobalt production reduced markedly to
52 tons from 151 tons on the back of the reduced grades of the ore received from
third parties.
The net margin on copper production after acquisition and process costs
increased from 4 percent to 6 percent. The improved margin is as a direct result
of good cost control related to the direct processing costs. The slight recovery
improvement also contributed to the margin increase.
There were no major capital works programmes at the mine although low cost
improvements such as the pre-leach section were carried out.
For the 12 months ended June 2010 Sable Zinc more than doubled its cash mining
profit to US$2,7 million from US$1,3 million.
The Sable Zinc operation is wholly reliant on third party ores and with the
hardening of attitudes in the DRC towards the exporting and taxation of ores one
can expect lower production throughput. Management at the operation has been
tasked to source more local Zambian ores and continue with its efforts at
sourcing DRC ores. The strategic challenge for Sable Zinc is to ensure its long-
term future by improving its returns to a level suitable for an asset of its
quality.
Growth projects update
The Group has adopted a risk-based approach to determine the appropriate
financial strategy required to fund future projects. The funding requirements by
project, considered in relation to the Group`s financial position, will
determine the timelines and sequence of new project development. The second half
of 2010 was very productive for the Metorex Growth Projects team and good
progress was made towards completion of feasibility studies for each of the
projects.
Kinsenda Project:
During the period January to June 2010, the Kinsenda Bankable Feasibility Study
("BFS") scope of work was defined, requests for proposals submitted to various
specialist consultants, adjudications made, and appointment of key consultants
was completed. The BFS is being managed by Metorex with negotiations underway
with third parties to outsource this function. An infill drilling programme of 7
500m on the Kinsenda orebody commenced in April 2010. Assay results have been
received for the first two holes, with a best intersection to date of 6,17%
copper over 13m from 277m in drillhole MKD01. This intersection supports
historical drilling results, and confirms the high grade nature of the remaining
mineral resources at Kinsenda. The drilling programme was completed during
August 2010, with a revised mineral resource estimate to be completed by October
2010. Snowden Mining Consultants delivered a preliminary mining study defining
potential mining methods and scale of operation in June. This work will feed
into the detailed mine design and scheduling study which is set to commence once
the revised mineral resource model has been completed. Metago and rePlan were
appointed for environmental and social impact assessment ("ESIA") studies
respectively. Studies to determine the baseline dry-season biophysical
environment have been completed leaving the wet season studies to be completed
in H1 F2011. Golder Associates were appointed to complete the tailings storage
facility site selection and design, as this is a critical item required for the
ESIA. Metallurgical testwork on drill core is expected to commence at Mintek in
October 2010 once all drilling results have been received. The BFS critical path
runs through the metallurgical testwork and process plant design. The schedule
for the BFS shows completion in March 2011 at a total expenditure of US$5,4
million.
Lubembe Project:
A SAMREC compliant mineral resource estimate for the Lubembe deposit was
released in July 2010 and indicated a 47 percent increase in the total in-situ
copper content. A total Indicated and Inferred resource of 1,5 tons of copper
have now been defined and will be used to guide preliminary mining studies being
undertaken by Snowden Mining Consultants. An infill diamond drilling programme
is planned on the Lubembe deposit and is expected to further upgrade geological
confidence. An important outcome of the planned drilling campaign will be to
source material for the metallurgical testwork programme. Metago and rePlan have
been appointed for environmental and social impact studies, which are being run
concurrently with the Kinsenda ESIA studies. The schedule for the feasibility
study currently shows completion in August 2011 at a total expenditure of US$3,2
million.
Musonoi Est (Dilala East) Project:
A Scoping Study was completed by Metorex in February 2010, which concluded that
the project shows reasonable prospects of being developed into a profitable
underground mining operation capable of producing from 17 to 26ktpa of copper
and 2 to 3 ktpa of cobalt. This study was submitted to Gecamines as per the
terms of Amendment 4 to the partnership agreement with Gecamines. Limited
feedback from Gecamines has been received to date, and Metorex has thus placed
on hold any non-drilling expenditure on the project until such time as mineral
title to PE4958 has been transferred to Ruashi Mining. Limited drilling
activities are ongoing on the project site and with a focus on depth extension
of the sulphide zone. A maiden SAMREC compliant mineral resource estimate was
released in March 2010, bringing the total contained metal in the deposit to 563
000t of copper and 170 000t of cobalt. This estimate extended to a depth of 400m
below surface, and was based on the results of 45 drillholes available at the
time. An additional 14 drillholes have been completed subsequently, extending
the resource to a depth of 600m below surface as well as infilling portions of
the sulphide resource. A revised estimate for the Dilala East mineral resource
is expected to be released by December 2010. The completion date of the BFS has
been extended to accommodate the delays in transfer of the mineral title by
Gecamines. In the event that title is transferred, the estimated costs to
advance the Musonoi/Dilala East Project to BFS status is US$3,7 million.
Reviewed financial information
Corporate activity
During the period under review, the Company disposed of its interests in PAR and
VMC for R372 million and R563 million respectively. On 29 January 2010, the
Company announced a R900 million capital raising which became unconditional on
12 March 2010. The capital raising was significantly over-subscribed and 250
million new shares were issued at R3,60 per share.
Subsequent event
As part of the capital raising, completed on 12 March 2010, R100 million was
requested from shareholders to either close or sell Consolidated Murchison
("CM"). On 6 September 2010, the Group announced the re-capitalisation and
disposal of the CM division. The disposal is subject to a number of suspensive
conditions, as announced. Metorex has agreed to contribute R51 million towards
the re-capitalisation of CM as well as a further R15 million towards
rehabilitation.
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 reviewed financial information has been prepared and presented in accordance
with IAS 34, Interim Financial Reporting Standards ("IFRS") and the AC 500
standards as issued by the Accounting Practices Board or its successor. 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 has
been applied in the current period. The comparative income statement has been
represented for VMC as an asset held for sale in terms of IFRS 5, Non-current
Assets Held for Sale and Discontinued Operations. The copper smelting charges at
Chibuluma have also been reclassified from cost of production to realisation
costs in line with the current year treatment. The accounting standards,
amendments to issued accounting standards and interpretations, which are
relevant to the Group, but not yet effective at 30 June 2010, have not been
adopted. The Group is currently evaluating the impact of these pronouncements.
The unmodified review report on the 30 June 2010 results, by the Group`s
external auditors Deloitte & Touche is available for inspection at the Group`s
registered office. The Group complies with the Companies Act and the Listing
Requirements as prescribed by the JSE Limited. Any reference to future financial
performance included in this announcement has not been reviewed or reported on
by the Group`s auditors.
Outlook
The re-positioning and re-capitalisation of Metorex has considerably improved
the Group`s financial position when compared to 30 June 2009. It is on this
basis that the Group will advance its operating and project development strategy
for sustainable growth. Copper and cobalt production at Metorex is expected to
increase above the levels reported for the 12 months ended 30 June 2010 and this
is directly attributable to the commissioning of the Ruashi mine. Cost pressures
remain in the countries where Metorex operates. The current market conditions
for copper and cobalt prices remain favourable for positive earnings growth.
Rob Still Terence Goodlace
Chairman Chief Executive Officer
7 September 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
Auditors
Deloitte & Touche
Private Bag X6, Gallo Manor, 2052, South Africa
Telephone: (+27 11) 806-5000
Legal representatives
Bowman Gilfillan attorneys
PO Box 785812, Sandton, 2196
Telephone: (+27 11) 669-9000
ADR Programme - North America and Canada
The Bank of New York, 101 Barclay Street, New York, NY 10286, USA
Telephone: (+1 212) 815-3326
Directors
RG Still* (Chairman), TP Goodlace (CEO), A Barrenechea* (Spanish),
P Molapo* (Lesotho), NN Kgositsile*, HH Hickey*, TV Mabuza*, LJ Paton*, M Smith
(CFO) *non-executive
Date: 07/09/2010 07:05:02 Produced by the JSE SENS Department.
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