| Tue 1 Mar 2011, 7:05 | | MTX - Metorex - Provisional reviewed results for the period ended 31 December |
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MTX
MEMTX
MTX - Metorex - Provisional reviewed results for the period ended 31 December
2010
METOREX LIMITED
(Incorporated in the Republic of South Africa)?
(Registration number: 1934/005478/06)
Share code: MTX ISIN: ZAE000022745 Issuer code: MEMTX
("Metorex" or "the Company" or "the Group")
Provisional reviewed results for the period ended 31 December 2010
Highlights
for the 6 months ended 31 December 2010
- Copper production up 5 percent to 26 358 tons
- Cobalt production up 26 percent to 2 021 tons
- Mining profit up 111 percent to R851 million
- Adjusted HEPS up 152 percent to 32 cents
- Net debt further reduced to R416 million
- Well positioned to advance growth projects with a high degree of technical due
diligence
Johannesburg, 1 March 2011: Metorex Limited, a base metals producer, today
announced its provisional reviewed results for the 18 month period ended 31
December 2010. Shareholders are reminded that the Company`s year-end has changed
to 31 December.
Terence Goodlace, Chief Executive Officer said: "This is a pleasing result for
Metorex shareholders with gross revenue having increased by 27 percent to R1,8
billion and mining profit by 111 percent to R851 million. Operationally, copper
production increased by 5 percent and cobalt production 26 percent for the six
months under review, despite transformer challenges at Ruashi which impacted
production for a period of five weeks. Unit costs remain competitive and robust
copper prices continue to positively impact on the ability of the Group to
advance our DRC copper development projects."
Salient features
Financial 6 months 6 months 18 months 12 months
performance December June December June
2010 2010 2010 2009*
Gross revenue (R`000) 1 774 621 1 392 028 4 555 921 937 084
Gross revenue (US$`000) 247 162 184 864 614 056 103 775
Mining profit (R`000) 850 643 403 984 1 716 328 111 256
Mining profit (US$`000) 118 474 53 650 231 311 12 321
Mining profit margin (%) 48 29 38 12
EPS (cents) 25,6 11,0 96,3 (272,4)
HEPS (cents) 27,6 11,2 55,1 23,9
Adjusted HEPS (cents) 32,2 12,8 59,9 (8,5)
Market (R`000) 5 251 858 3 307 468 5 251 858 2 227 614
capitalisation
Shares in issue (`000) 1 002 263 1 002 263 1 002 263 742 538
Weighted average (`000) 1 002 263 860 091 868 982 553 349
number of shares
Share price (cents) 524 330 524 300
ZAR/US$ rate - (R/US$) 7,18 7,53 7,42 9,03
Average
ZAR/US$ rate - (R/US$) 6,60 7,67 6,60 7,72
Closing
*Re-presented for assets held for sale (Vergenoeg Mining Company (Pty)
Ltd).
Commodity production
6 months 6 months 18 months 12 months
December June December June
2010 2010 2010 2009
Copper (t) 26 358 25 211 76 409 31 207
Cobalt (t) 2 021 1 601 5 123 871
The production and sales figures are stated as gross and do not represent
the attributable beneficial interest.
Commodity sales
6 months 6 months 18 months 12 months
December June December June
2010 2010 2010 2009
Copper (t) 26 282 25 492 76 497 31 846
Cobalt (t) 1 945 1 741 5 191 578
The production and sales figures are stated as gross and do not represent
the attributable beneficial interest.
Average prices achieved, net of hedges
6 months 6 months 18 months 12 months
December June December June
2010 2010 2010 2009
Copper (US$/t) 7 518 5 275 6 239 4 464
Cobalt (70% of LMB) (US$/t) 25 483 28 952 26 366 30 856
Cobalt (70% of LMB) (US$/lb) 12 13 12 14
Safety, health, environment and communities ("SHEC")
From a safety performance perspective the Group has not had a fatality in over
30 months and has a reported lost time injury frequency rate of 1,0 (June 2010:
2,9) per million man hours worked as measured over the last six months. The
Company continues to promote a set of Safe Production Rules whilst increasing
the intensity of risk management and safety training. The Group is implementing
a new integrated, computer-based SHEC system. There have been no major
environmental and community incidents at any of the Group operations over the
last six months. The Group has approved a programme for the implementation of
the Voluntary Principles on Security and Human Rights. These principles provide
a guide to companies in maintaining the safety and security of their operations
within an operating framework that ensures respect for human rights and
fundamental freedoms.
Financial overview - six months ended December 2010 ("current period")
(reviewed) compared with the six months ended June 2010 ("June 2010")
(unaudited)
Shareholders are referred to the Company announcement dated Friday, 4 June 2010
wherein Metorex announced its change in year-end from June to December. This
release constitutes a reviewed provisional report for the 18 months ended 31
December 2010 and includes additional information for the six month periods
ended 30 June 2010 and 31 December 2010.
Group operations saw an increase in production during the six months ended
December 2010, which was particularly pleasing considering the impact of
recurring transformer electrical faults at Ruashi. Copper production increased
by 5 percent to 26 358 tons (June 2010: 25 211 tons). Cobalt production
increased to a record level of 2 021 tons for the current period, up 26 percent
from June 2010 mainly as a result of an increase in overall process recoveries
to 65 percent (June 2010: 55 percent).
Group revenue increased by 27 percent to R1,8 billion (June 2010: R1,4 billion)
and benefited from both volume growth and a substantial increase in achieved
copper prices partially offset by a reduction in cobalt prices. The Ruashi hedge
book impacted on the current period earnings, with 53 percent of its production
having been priced at US$5 972 per ton of copper. These hedges will continue
until 30 June 2011 for an estimated 45 percent of Ruashi`s production.
Production and realisation costs, including stock movements, decreased by 6
percent to R924 million (June 2010: R988 million). This decrease resulted from
the average Rand/US Dollar exchange rate having strengthened by 5 percent during
the current period compared to June 2010 as well as reduced mining costs
following a lower open pit stripping ratio at Ruashi. Cash costs per ton of
copper sold decreased by 14 percent to US$2 228 at Ruashi (June 2010: US$2 598)
and Chibuluma`s unit costs remained substantially in line with June 2010 at US$2
932 per ton (June 2010: US$2 840 per ton).
Mining profit amounted to R851 million for the current period, an increase of
111 percent compared to June 2010, reflecting a margin of 48 percent (June 2010:
29 percent). Subsequent to period end, spot copper prices increased to
approximately US$10 000 per ton from an average of US$8 000 per ton during the
current reporting period. This increase in price should have a positive impact
on the Group`s mining profit margin.
Income attributable to Metorex shareholders increased to R257 million (June
2010: R95 million) and included a number of non-recurring expenditure items. The
current period earnings includes a non-cash amortisation charge of R88 million
related to historical put option premiums at Ruashi. These put option premiums
were fully paid-up in December 2008 and subsequently restructured as part of
Ruashi`s current forward contracts for 1 350 tons per month at US$5 972 per ton
over the 12 months ending 30 June 2011. The put premium amortisation charge will
continue to June 2011. The assets held for sale ("AHFS") and discontinued
operations charge for the current period includes R20 million related to an
increase in the Group`s estimated closure liability at O`Okiep Copper Company
("OCC").
Adjusted headline earnings per share amounted to 32,2 cents for the six months
ended 31 December 2010, an increase of 152 percent from June 2010. Adjusted
headline earnings exclude non-recurring items, specifically the non-cash put
option premium amortisation charge at Ruashi (5 cents per share) and the
increased closure costs at OCC (2 cents per share).
The Group financial position improved to a satisfactory level following the
Group re-capitalisation over the last 18 months. The positive earnings attained
during the current period have led to a stronger balance sheet as at 31 December
2010. Group debt reduced from R2,1 billion at 30 June 2009 to R853 million at 31
December 2010 and cash on hand increased by R418 million to R437 million at
period end. The Group continued to invest in working capital during the current
period following an increase in trade receivables on the back of higher sales
and copper prices, a reduction in trade payables to acceptable payment terms and
an increased stock holding both at an engineering spares level as well as
increased ore stockpiles at Ruashi.
Capital expenditure
6 months 6 months 18 months 12 months
December June December June
2010 2010 2010 2009
Ruashi (Rm) 167 157 416 889
Chibuluma (Rm) 94 90 232 121
Copper Resource (Rm) 77 67 211 383
Corporation
Other (Rm) 4 1 6 206
Total (Rm) 342 315 865 1 599
The Ruashi capital expenditure for the six months ended December 2010
principally related to over-burden stripping of pit 3 which amounted to R45
million, expenditure on the construction of the acid plant amounting to R50
million, exploration expenditure of R17 million and ongoing recurring
expenditure of some R55 million.
Capital expenditure at Chibuluma is related to ongoing decline ramp development,
a new emergency power generator unit and the purchase of new underground
machinery. The decline ramp development expenditure will continue for a further
18 months until the lowest levels of the ore body are fully accessed and
established.
Copper Resources Corporation capital expenditure related to ongoing monthly
holding costs of US$1 million as well as the advancement of the bankable
feasibility study for the Kinsenda mine together with ongoing exploration
drilling at the Lubembe prospect.
Contracted capital commitments at 31 December 2010 amount to R18 million (June
2010: R86 million), whilst uncontracted approved capital commitments amount to
R297 million (June 2010: nil). Operating lease commitments, which fall due
within the next year amount to R5 million (June 2010: R6 million), whilst
commitments of R18 million (June 2010: R9 million) fall due during the next four
years.
Group debt position
Nature of debt December June
2010 2010
Ruashi 1 (Rm) Project finance 568 1 420
Ruashi 2 (Rm) Pre-offtake finance 90 162
Chibuluma 1 (Rm) Term loan 161 282
Chibuluma 2 (Rm) Equipment leases and other 34 45
Corporate (Rm) Bridge loans - 190
Other (Rm) Other - 12
Total (Rm) 853 2 111
Copper hedge book
Commodity Maturity Period Volume Price Comment
(months) (tons) (US$/t)
Copper: Ruashi 6 (Jan `11 - Jun `11) 8 100 5 972 Forwards
Ruashi 12 (Jul `11 - Jun `12) 12 000 6 600 - Zero cost
7 600 collar
Chibuluma 6 (Jan `11 - Jun `11) 3 000 6 805 - Zero cost
8 000 collar
Chibuluma 6 (Jul `11 - Dec `11) 3 000 7 000 - Zero cost
8 015 collar
Zambian tax
The Government of the Republic of Zambia ("GRZ") introduced a new mining tax
regime effective 1 April 2008. The Company is involved in discussions with the
GRZ to find an alternative solution to arbitration or litigation to fully
resolve all outstanding matters in relation to the tax changes introduced in
conflict with the Development Agreement signed in 1997 ("DA"). The Company
recognises that resolving this dispute through arbitration may not be in the
best interest of either the Company or the GRZ. The variable taxes and historic
windfall taxes have been recorded as a receivable from GRZ against the tax
account. As at 31 December 2010, this receivable amounted to US$9,7 million
("GRZ receivable"). This GRZ receivable will be assessed for impairment on an
ongoing basis and depends on the outcome of negotiations with the GRZ. The
Group`s tax charge for the six months ended 31 December 2010 would have
increased by R33 million (at an effective tax rate of 42 percent) had the
Chibuluma taxes been accrued in accordance with the new tax regime.
Change in Group reporting currency
The Group will change its reporting currency from South African Rands to US
Dollars effective 1 January 2011. The Group`s functional currency is primarily
denominated in US Dollars following the disposal of its South African based
operating subsidiaries. The change in reporting currency is in terms of IAS 21:
The effects of changes in foreign exchange rates. This will become effective
when the Group reports the results for the six months ending 30 June 2011.
Growth projects update
Kinsenda Project:
During the period June to December 2010, Metorex continued to advance the
Kinsenda Bankable Feasibility Study ("BFS") along with appointed consultants.
The 7 790m (26 holes) infill drilling programme on the Kinsenda orebody which
commenced in April 2010 was completed. This programme comprised five twin holes
and 15 infill holes to provide a 75m drillhole spacing and was focused on an
area of high grade mineralisation proximal to current underground
infrastructure. Six of the holes were abandoned in this programme as a result of
poor ground conditions. This drilling was carried out to test the reliability of
the historical assay database and the confidence in the geological
interpretation for further resource modelling for the BFS. All analytical
results have been received and an updated geological resource model for the
western portion of the mine has largely been completed by Snowden Mining
Consultants ("Snowden"). Snowden has recommended a further drilling programme
beyond the western section of the mine to confirm historical drilling. This
US$2,1 million drilling programme has been approved by the Metorex Board and
will commence in the dry season.
Based upon updated geological models and geotechnical considerations Snowden
have delivered mining infrastructure and mining method designs for an envisaged
ore mining rate of 40 000 tons per month from 270m below surface down to an
ultimate depth of 600m. A backfill study is also underway to cater for the
proposed drift and fill mining method. Metallurgical testwork is ongoing and MDM
Engineering are designing a metallurgical plant which comprises conventional
crushing and milling followed by flotation of sulphide and oxide copper minerals
to produce both sulphide and oxide copper concentrates. Metallurgical test work
thus far indicates an overall recovery of copper from run of mine ore to
concentrate of 90% yielding approximately 22 000 tons of copper contained per
annum. Metago Environmental Engineers and rePlan have substantially completed
the dry and wet season environmental and social baseline studies respectively
and the environmental and social impact assessments are underway. Golder
Associates were appointed to complete the tailings storage facility site
selection and design and this work is substantially completed. Groundwater
volume remains a key risk for the project and mine inflows have been estimated
to be between 28 000m3/day to 45 000m3/day when the mine is fully developed. The
actual inflow will depend on how the aquifers respond to pumping from the deeper
levels and water handling and pumping infrastructure requirements are in
planning. Power reticulation studies have also largely been completed. The
schedule for the BFS shows completion before mid-year at a total expenditure of
US$6,1 million. The feasibility report for the US$130 - 150 million project is
almost complete and is in the process of being presented to the DRC authorities,
whereafter it will be presented to the Metorex Board.
Funding of the project will be by way of Metorex cash flows supplemented with
US$66 million in debt facilities currently being negotiated with lenders. The
details and terms of these arrangements will be announced once finalised with
the lenders.
Ruashi Sulphides Project:
The Metorex Board has approved an amount of US$2,3 million to advance the Ruashi
sulphides project to feasibility status. Exploration activities at Ruashi have
been advanced to increase the geological confidence of the Ruashi sulphide
resource base and build on the inferred 7,9 million tons at 3,1 percent copper
declared as at 30 June 2009. This SAMREC compliant sulphide resource has been
increased to 15,8 million tons at 2,9 percent copper of which 1,5 million tons
at 3,0 percent copper is now in the indicated category. The sulphides occur
below the oxides, primarily in pits 1 and 3 at Ruashi. The feasibility study
includes additional exploration, mine design and process design. Metallurgical
treatment of the Ruashi sulphides would require the installation of a new
crushing and milling circuit and refurbishment of the existing Phase 1
concentrator to produce either a bulk concentrate which could be sold to a
roaster capable of recovering both copper and cobalt or produce differential
copper and cobalt concentrates which could be sold and treated separately. Order
of magnitude capital costs for the project are estimated between US$15 and US$25
million. The benefits of the project include optimising the full mineral
resources and capital investments made at Ruashi.
Exploration in Zambia:
Chibuluma has recognised the risk associated with a relatively short remaining
life of mine, and has embarked on a resource replacement exploration programme.
Extension drilling has commenced at both the Chibuluma South and Chifupu
deposits, with encouraging early results at Chifupu. All historical cores at
Chifupu, where available, are now being re-logged and assayed and once all
information has been collected, collated and recalibrated, an infill drilling
programme will be designed and executed.
A high resolution airborne electromagnetic, magnetic and radiometric geophysical
survey was completed by Spectrem Air in October 2010, covering both the
Chibuluma East and Chibuluma South licences. A high resolution gravity survey
over Chibuluma South area also commenced in November 2010. A regional geological
and geophysical data integration study will be completed in early 2011 for
detailed target generation. A total of US$0,6 million was spent on this project
over the last six months.
Lubembe Project:
The Lubembe deposit is an advanced exploration prospect with a SAMREC compliant
resource of 75 million tons at 2,0 percent copper. Based upon current orebody
knowledge and modelling a number of mining scenarios have been completed by
Snowden Mining Industry Consultants (Pty) Ltd. These studies cover the spectrum
of high volume, low grade options to low volume, high grade options. As a result
of these studies it has been decided to drill additional, closely spaced,
drillholes at 50 metre centres to test the geological continuity of high grade
mineralisation. The Metorex Board has approved an additional US$0,9 million to
explore the targeted areas and once completed the results will be used to
further inform the mining scenarios developed by Snowden. Metallurgical testwork
is ongoing and a number of processing scenarios are being advanced.
Environmental and social impact assessments are being carried out concurrently
with similar Kinsenda studies.
Musonoi Est (Dilala East) Project:
A study was completed by Metorex in February 2010, which concluded that the
Dilala East project shows reasonable prospects of being developed into a
profitable underground mining operation. This was based on the declared SAMREC
compliant oxide/sulphide resource of 19,1 million tons at 2,9 percent copper and
0,9 percent cobalt. Exploration drilling activities are ongoing and this
drilling is focused on depth extensions of the sulphide zone. A total of 63
holes (15 573 metres) have been drilled on the project to date.
Corporate activity
On 6 September 2010, the Company announced that it had entered into a sale of
business agreement in terms of which it would dispose of Consolidated Murchison
to Cons Murch Mine (Pty) Ltd ("Cons Murch Mine"). The conditions precedent in
respect of Part A to the transaction have been met. Accordingly the business,
including all employees will be transferred as a going concern to Cons Murch
Mine. Metorex will retain the environmental obligations pending the conversion
of the mining licence into a new order mining licence and obtaining of the
necessary consent for the transfer thereof to Cons Murch Mine.
During the 18 month period, H Hickey and P Molapo were appointed to the Metorex
Board.
Going concern
The directors are satisfied that the Group will be a going concern for the
foreseeable future, and have adopted the going-concern basis in preparing these
financial statements.
Accounting policies
The reviewed condensed financial information has been prepared in accordance
with the framework, concepts and measurement and recognition of International
Financial Reporting Standards ("IFRS"), the AC 500 standards as issued by the
Accounting Practices Board and the information as required by IAS 34: Interim
Financial Reporting. 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
statement of comprehensive income has been represented for Vergenoeg Mining
Company ("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 and interpretations, which are relevant to the
Group, but not yet effective at 31 December 2010, have not been adopted. The
Group is currently evaluating the impact of these pronouncements.
The condensed provisional financial information for the 18 month period and six
month period ended 31 December 2010 has been reviewed by the Group`s auditors,
Deloitte & Touche. The review was conducted in accordance with ISRE 2410: Review
of Interim Financial Information performed by the Independent Auditor of the
Entity. A copy of their unmodified review report is available for inspection at
the Company`s registered office. Any reference to future financial performance
included in this announcement, has not been reviewed or reported on by the
Company`s auditors.
Mineral Resources and Reserves
Mineral Resources and Reserves in this report have been compiled, approved and
reviewed by Mr T P Williams, PrSciNat (SA Council of Natural and Scientific
Professionals Registration No 400387/04), Fellow of the Southern African
Institute of Mining and Metallurgy, BSc (Hons). Mr Williams is Group Mineral
Resource Manager and is a full-time employee of the Company. He is a mining
geologist with 20 years experience in exploration, resource development,
estimation and mining geology in gold and base metals through west, central and
east Africa. Mr Williams is based at the Company`s Head Office.
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 continue to 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 six months
ended 31 December 2010 and this is directly attributable to the transformer
repairs and associated contingency measures made at the Ruashi mine. Cost
pressures remain in the countries where Metorex operates. The current market
conditions for copper and cobalt prices remain favourable for growth.
Rob Still Terence Goodlace
Chairman Chief Executive Officer
1 March 2011
Condensed consolidated statement of comprehensive income
18 months 12 months 6 months 6 months
ended ended ended ended
31 December 30 June 31 December 30 June
2010 2009* 2010 2010**
(Reviewed) (Audited) (Reviewed) (Unaudited)
R000`s R000`s R000`s R000`s
Mineral sales
Copper 3 540 602 866 407 1 418 746 1 012 472
Cobalt 1 015 319 70 677 355 875 379 556
Gross revenue 4 555 921 937 084 1 774 621 1 392 028
Realisation costs 595 192 184 258 225 478 202 873
On-mine revenue 3 960 729 752 826 1 549 143 1 189 155
Cost of production 2 239 060 597 580 756 669 720 386
Stock movement 5 341 43 990 (58 169) 64 785
Cash mining profit 1 716 328 111 256 850 643 403 984
Ruashi deferred put premium (88 190) - (88 190) -
Royalties (183 880) (20 410) (68 526) (60 998)
Other income (expenses), 416 943 163 160 (3 841) 7 149
net
EBITDA 1 861 201 254 006 690 086 350 135
Impairments - (2 273 429) - -
Finance income 23 427 6 945 8 201 9 280
Finance costs (121 609) (5 881) (27 805) (33 646)
Income (Loss) before 1 763 019 (2 018 359) 670 482 325 769
depreciation
Depreciation 454 752 108 797 158 611 143 070
Income (Loss) before assets 1 308 267 (2 127 156) 511 871 182 699
held for sale ("AHFS")
AHFS and discontinued (56 054) 166 459 (24 151) (13 260)
operation
Income (Loss) before 1 252 213 (1 960 697) 487 720 169 439
taxation
Taxation expense (credit) 285 790 (420 253) 161 173 42 593
Income (Loss) after 966 423 (1 540 444) 326 547 126 846
taxation
Income attributable to non- 129 596 (33 226) 69 876 32 151
controlling interests
Retained income 836 827 (1 507 218) 256 671 94 695
(accumulated loss) for the
period
Other comprehensive (loss)
income, net of tax
Foreign currency (926 611) (313 084) (833 269) 43 159
translation reserve
Net effect of cash flow (52 111) 160 760 74 699 343 697
hedges
Total other comprehensive (978 722) (152 324) (758 570) 386 856
(loss) income
Attributable to:
Equity holders of the (1 023 682) (176 438) (760 510) 393 779
parent
Non-controlling interests 44 960 24 114 1 940 (6 923)
(978 722) (152 324) (758 570) 386 856
From continuing and
discontinuing operations
Earnings (Loss) per share 96,3 (272,4) 25,6 11,0
(c)
Diluted earnings (loss) per 95,3 (272,4) 25,3 10,9
share (c)
Headline earnings per share 55,1 23,9 27,6 11,2
(c) ("HEPS")
Diluted headline earnings 54,5 23,9 27,3 11,1
per share (c)
Adjusted headline earnings 59,9 (8,5) 32,2 12,8
(loss) per share (c)
("Adjusted HEPS")
Weighted average shares in 868 982 553 349 1 002 263 860 091
issue (000`s)
Diluted number of shares in 878 292 553 349 1 013 451 868 014
issue (000`s)
Shares in issue (000`s) 1 002 263 742 538 1 002 263 1 002 263
?*Re-presented for assets held for sale
**Pro forma results for the six months ended 30 June 2010 as calculated
per the SENS announcement published on 1 March 2011
18 months 12 months 6 months 6 months
ended ended ended ended
31 December 30 June 31 December 30 June
2010 2009* 2010 2010**
(Reviewed) (Audited) (Reviewed) (Unaudited)
R000`s R000`s R000`s R000`s
HEPS reconciliation:
Income (Loss) 836 827 (1 507 218) 256 671 94 695
attributable to ordinary
shareholders
Impairments, net of tax - 1 639 557 - -
and minorities
(Profit) Loss on the sale (381 323) (431) (2 838) 1 893
of fixed assets and
subsidiaries, net of tax
Discontinued operation 23 549 - 23 163 125
Headline earnings 479 053 131 908 276 996 96 713
(R000`s)
Headline earnings per 55,1 23,9 27,6 11,2
share (c)
Diluted headline earnings 54,5 23,9 27,3 11,1
per share (c)
Adjusted HEPS
reconciliation:
Headline earnings 479 053 131 908 276 996 96 713
(R000`s)
Ruashi hedge profit, net - (118 134) - -
of tax and minorities
Ruashi deferred put 44 977 - 44 977 -
premium
Once-off deferred tax (42 077) - - -
credit relating to AHFS
AHFS, net of tax 32 505 (166 459) 988 13 260
Non-controlling interest 5 740 105 851 - -
relating to AHFS
Adjusted headline 520 198 (46 834) 322 961 109 973
earnings (loss) (R000`s)
Adjusted headline 59,9 (8,5) 32,2 12,8
earnings (loss) per share
(c)
?*Re-presented for assets held for sale
**Pro forma results for the six months ended 30 June 2010 as calculated per the
SENS announcement published on 1 March 2011
Condensed consolidated statement of financial position
18 months Year
ended ended
31 December 30 June
2010 2009
(Reviewed) (Audited)
R000`s R000`s
ASSETS
Non-current assets
Property, plant, equipment and mineral rights 4 471 889 4 835 427
Goodwill 11 514 11 514
Investments and rehabilitation trust fund 81 518 80 497
Derivative instrument - 94 942
4 564 921 5 022 380
Current assets
Inventories 330 932 264 051
Trade and other receivables 537 475 447 628
Taxation prepaid 15 115 6 194
Bank balances and cash 436 838 73 553
1 320 360 791 426
5 885 281 5 813 806
EQUITY AND LIABILITIES
Equity attributable to equity holders of the 3 332 531 2 399 459
parent
Non-controlling interests 105 225 457 208
Total equity 3 437 756 2 856 667
Non-current liabilities
Long-term borrowings - interest bearing 504 730 1 415 563
Long-term provisions 145 879 181 310
Deferred tax liabilities 573 658 469 292
Derivative instruments 60 285 -
1 284 552 2 066 165
Current liabilities
Trade and other payables 411 579 557 831
Short-term borrowings - interest bearing 347 814 695 604
Short-term provisions 25 929 35 065
Bank overdraft - 54 323
Derivative instruments 317 254 230 240
Taxation 28 319 29 999
1 130 895 1 603 062
AHFS, net 32 078 (712 088)
Total equity and liabilities 5 885 281 5 813 806
Net asset value per share (c) 333 323
Net tangible asset value per share (c) 331 322
Condensed consolidated cash flow statement
18 months Year
ended ended
31 December 30 June
2010 2009
(Reviewed) (Audited)
R000`s R000`s
Cash generated by operations, pre-working capital 1 542 244 400 136
Working capital (520 734) 65 861
Cash generated by operations 1 021 510 465 997
Dividends paid to non-controlling interests (8 263) (108 224)
Taxation paid (143 626) (236 421)
Finance (costs) income, net (98 182) 250
Cash inflows from operating activities 771 439 121 602
Cash outflows from investing activities (56 028) (1 393 693)
Additions to property, plant, equipment, mineral (864 734) (1 393 693)
rights and investments
Movement in AHFS/discontinued operations (127 340) -
Proceeds on disposals of shares in subsidiary 936 046 -
Cash (outflows) inflows from financing activities (270 003) 1 191 426
Shares issued 887 471 704 527
Borrowings (repaid) raised (1 157 474) 486 899
Net increase (decrease) in cash and cash 445 408 (80 665)
equivalents
Cash at beginning of period 19 230 101 331
Effect of foreign exchange rate changes (20 749) (1 436)
Cash at end of period 443 889 19 230
Disposal of Vergenoeg Mining Company (Pty) Ltd (7 051) -
Cash at end of period - continuing operations 436 838 19 230
Cash at end of period - discontinuing operations - 23 191
Cash at end of period - continuing and 436 838 42 421
discontinuing operations
Condensed consolidated statement of changes in equity
18 months Year
ended ended
31 December 30 June
2010 2009
(Reviewed) (Audited)
R000`s R000`s
Shareholders` equity at start of period 2 856 667 4 133 674
Ordinary shares issued 887 471 723 728
Other comprehensive loss (978 722) (152 324)
Profit (loss) for the period 836 827 (1 507 218)
Equity reserve 17 278 -
Share option equity 21 655 25 789
Non-controlling interests (351 983) (226 362)
Equity attributable to AHFS 148 563 (140 620)
Total equity 3 437 756 2 856 667
Segmental analysis
for the 18 month period ended December 2010
Gross revenue Net income
Ruashi 62 23
Chibuluma 29 44
Sable 9 1
Corporate - 32
Annexure 1: Unaudited operational review
for the 6 months ended December 2010 ("current period") compared with the 6
months ended June 2010 ("June 2010")
The information contained in this Annexure has not been reviewed or reported on
by the Company`s auditors.
Ruashi
6 months 6 months
December June
2010 2010
Tons mined (t) 853 024 436 588
Tons milled (t) 605 735 600 437
Headgrade - Copper (%) 3,03 2,98
- Cobalt (%) 0,51 0,48
Recovery - Copper (%) 84,3 80,7
- Cobalt (%) 65,3 54,5
Copper produced (t) 15 467 14 323
Copper sold - total (t) 15 297 14 702
Copper sold - into hedgebook (t) 8 100 11 700
Copper sold - at spot price (t) 7 197 3 002
Copper sold - hedgebook price achieved (US$/t) 5 972 3 900
Copper sold - average spot price achieved (US$/t) 8 275 6 163
Cobalt produced (t) 2 008 1 572
Cobalt sold (t) 1 933 1 709
On-mine costs per ton milled, net of ore (US$/t) 100 106
stock movement
Copper realisation costs per ton of copper (US$/t) 670 637
sold
Cobalt realisation costs per ton of cobalt (US$/t) 6 384 4 996
sold
Total cash cost/ton of copper sold, net of (US$/t) 2 228 2 598
cobalt credits
The safety culture and commitment at Ruashi is showing pleasing improvements.
All of the initiatives previously reported on such as hazard identification and
risk assessments and the implementation of the Safe Production Rules are
becoming an entrenched way of working. The introduction of a new integrated SHEC
management system for reporting and control has augmented the safety effort.
Total lost time injuries for the current period were zero, compared to six in
the six months to June 2010. The lost time injury frequency rate for the year to
December 2010 (lost time injuries expressed as a proportion of man hours worked)
was the same as the rate for the year to June 2009 when the mine was in
construction and ramp up. This is a pleasing result as the level of complexity
has increased substantially since then.
Milling volumes increased by one percent for the six months to December 2010
when compared to the previous six month period. Both periods were constrained
because of the transformer and rectifier issues experienced at Ruashi. These
issues have been extensively reported on during the relevant periods in separate
market releases. Problems with the rectifier and transformers caused by external
power surges and sub standard transformer design and manufacture, eventually led
to a decision to redesign and replace all of the transformers. This is in
progress and production levels have since stabilised.
The copper and cobalt head grades remained substantially constant for the
previous six month period. The confidence levels in the geological model
continued to improve through the period due to continued in-fill drilling and
grade control measures. The grades experienced in the current period are
expected to persist into the next financial year.
Copper recoveries improved to 84 percent for the current period. Recoveries are
a function of both the acid solubility of the plant feed material and operating
efficiencies. The improvements to the geological model allow Ruashi to control
and predict its feed sources better, while operating efficiencies are subject to
a process of continuous improvement. In addition to the continuous improvement
efforts, the reduced throughput due to the transformer and rectifier problems
allowed for a greater residence time in the leach section as well as better
operational control, both of which had a positive influence on recoveries.
Cobalt recoveries improved by 20 percent for the current period to 65 percent.
Cobalt recoveries also benefited as per the copper discussion above, however,
cobalt recoveries are also very sensitive to feed grade. The higher grade cobalt
fed to the plant therefore also contributed to the improved cobalt recoveries.
Cobalt recovery improvements will be more modest off the current base.
Notwithstanding the extreme production pressures caused by the rectifier and
transformer issues, copper and cobalt production improved by 8 percent and 28
percent respectively over the two halves of 2010.
On mine costs per ton milled decreased by 6 percent when comparing the current
period to June 2010. Stripping costs in the new pit 3 are being capitalised as
they are incurred in pre-production. However there was an offset due to less
stripping of pit 1 and pit 2 which decreased the stripping ratio from 5,5 to
3,5. This reduced cash operating costs. Copper and cobalt realisation costs
increased by 5 percent and 28 percent respectively when comparing June 2010 to
the current period. These costs were both impacted by an incremental US$60/t
export charge effective February 2010. Cobalt realisation charges were also
significantly higher in the current period due to concentrate moisture levels
rising to 70%. This was due to the change to a magnesium oxide based process as
well as problems experienced in commissioning the cobalt drying circuit.
Extensive modifications to the cobalt drying circuit are being planned. The mode
of export was also changed towards the end of the year as it was found that
transporting on the rail system was substantially more expensive than by road.
Total cash costs of copper sold net of cobalt credits improved by 14 percent
over the first half of the year. The increased cobalt sales contributed to this
cost indicator falling to US$2 228 per ton of copper in the current period. The
overall cash mining profit of US$73,6 million was a substantial increase of 179
percent over the six months to June 2010.
Capital expenditure amounted to US$24 million in the current period. The
overburden stripping at pit 3 is being capitalised. These stripping operations
will ramp up in the F2011 year and expenditure is expected to reach US$23
million for the 12 month period. The completion of the acid plant is proceeding
according to plan and accounted for US$6,8 million in the current period.
Capital spend in the coming year includes US$6 million to complete the acid
plant, US$4 million on exploration drilling and US$20 million in ongoing capital
expenditure.
Ruashi mine will be stabilising production levels at 3 000 tons of copper per
month for the coming year. Production efficiencies and strategic initiatives
should have the effect of somewhat offsetting certain cost increases such as
power, diesel, taxes and wages. Brown fields drilling will improve the oxide and
sulphide resource base of Ruashi, which should extend the life of the mine as
well as increase ore reserve flexibility.
Chibuluma
6 months 6 months
December June
2010 2010
Tons milled (t) 301 659 269 431
Headgrade - Copper (%) 3,24 3,60
Overall recovery - Copper (%) 92 90
Copper produced (t) 9 008 8 721
Copper sold - total (t) 8 990 8 702
Copper sold - into hedgebook (t) 3 000 4 200
Copper sold - at spot price (t) 5 990 4 502
Copper sold - hedgebook price achieved (US$/t) 7 692 5 308
Copper sold - average spot price achieved (US$/t) 8 322 7 488
On-mine costs per ton milled, net of ore (US$/t) 59 59
stock purchased
Copper realisation costs per ton of copper (US$/t) 924 987
sold
Total cash cost per ton of copper sold (US$/t) 2 932 2 840
The introduction of hazard identification and risk assessment, especially before
commencing any tasks at the mine, has led to an improvement in most safety
related measures. The introduction of the new integrated SHEC management system
for reporting and control has augmented the safety effort. Total lost time
injuries during the current period remained constant relative to June 2010 at
four.
The volume of ore through the plant increased by 12 percent for the current
period. This was as a result of improved mining performance, a successful plant
debottlenecking process and fewer electrical power interruptions. The mine
completed the installation of additional on site generating capacity towards the
end of the period so as to minimise the risk of further electrical interruptions
at a capital cost of US$1 million.
Copper head grades decreased for the current period compared to June 2010. This
is due to the mining having moved into a close out area where mining stresses
are particularly high causing scaling of the hanging wall and subsequent
dilution. This area will be mined out by the end of the first quarter of 2011.
Within the usual bounds of variability the ore body grade does improve with
depth.
Plant recoveries improved by 2 percent to 92 percent. Management has focused on
improving recoveries and numerous interventions, primarily related to ensuring
constant flow through the float plant and improving the crushing circuit, has
resulted in good improvements.
Copper produced and sold for the current period increased by 3 percent to a
record 8 990 tons. All copper for the period was sold to the Chambishi Copper
Smelters under contract. The terms are not as favourable as international
pricing but are not as expensive as incurring the imposed export tax on
concentrates.
On mine costs per ton milled were well controlled and remained flat at US$59 per
ton, assisted by the increased volumes mined and milled. Realisation charges
also decreased by six percent per ton sold following less smelter penalties
incurred. Stated in terms of cash costs per ton of metal sold, Chibuluma had a
credible performance for the current period as costs rose by 3 percent. The
increase in cash costs per ton of metal sold to US$2 932 per ton increased when
compared to June 2010 due to the lower grades and higher volumes mined and
milled.
Capital expenditure remained relatively constant and amounted to US$13,3 million
as a result of the purchase of new mining fleet vehicles (US$3,2 million) needed
to maintain production levels as well as increased capital spend on engineering
items required to upgrade the quality of capital equipment at Chibuluma. In
addition, Chibuluma commenced with an exploration programme aimed at increasing
the life of the mine (US$0,6 million). Mining development remains a large
proportion of the capital spending (US$3,5 million).
For the current period the Chibuluma mine increased its cash mining profit by 34
percent to US$47,1 million. This was driven off the back of higher copper
production; higher copper prices received and cost control. The average copper
price received increased from US$6 436 per ton to US$8 112 per ton.
The Chibuluma mine is well set to maintain mining and milling volumes in 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. In addition the dilution due to the close out
areas should reduce by the end of the first quarter 2011. Various cost pressures
will be experienced during the coming year, mainly in the form of wages, power
and diesel costs. Capital expenditure levels are expected to remain similar in
the coming year. However additional expenditure will be incurred on exploration
activities targeted at extending the life of the mine.
Sable
6 6 months
months June
Decembe 2010
r
2010
Copper produced (t) 1 883 2 167
Copper sold (t) 1 995 2 088
Cobalt produced (t) 13 29
Cobalt sold (t) 12 32
Acquisition cost of contained copper feed (% of (%) 72 71
copper LMB price)
Overall copper process recovery (%) 94 94
Net margin on copper production after (%) 12 5
acquisition and process costs
Improvements in safety and health practices, specifically the introduction of
hazard identification and risk assessments at the plant has led to an
improvement in all safety related measures over the last 12 months. Total lost
time injuries have reduced to zero over the last 12 months after having had six
in the previous year to June 2009.
The volume of ore purchased and processed through the plant continues to be a
constraint. 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 has been a change in mix of ore towards local Zambian sources
which are typically lower grade and have very little associated cobalt, although
they are cheaper to purchase.
Recoveries remained high notwithstanding the lower feed grades as the portion of
the Zinc Plant infrastructure which was converted into a leach section to
retreat rejected material continued to pay dividends. The quality of the Sable
copper remained London Metal Exchange "A" grade material.
Sable produced 1 883 tons of copper for the current period which is a 13 percent
decrease on that achieved for June 2010. Cobalt production more than halved to
13 tons from 29 tons on the back of increased Zambian sourced ores which have a
lower cobalt grade than DRC sourced ores.
The net margin on copper production after acquisition and process costs
increased from five percent to 12 percent. The improved margin is as a direct
result of the lower cost of the Zambian ores as well as cost control related to
the direct processing costs. The slight recovery improvement also contributed to
the margin increase.
The average copper price received increased from US$6 353 per ton to US$7 042
per ton and the cash mining profit from operations increased by 175 percent to
US$2,012 million for the current period.
There were no major capital works programmes at the mine.
The Sable Zinc operation is wholly reliant on third party ores and with the
challenged of exporting ore from the DRC one can expect production throughput to
remain constrained. However the strategies to source more local Zambian ores and
continue with its efforts at sourcing DRC ores that management have put in place
are showing signs of paying dividends.
Annexure 2: Statement of comprehensive income
for the 6 month periods ended 31 December 2010 (reviewed) and 30 June 2010
(unaudited)
Condensed consolidated statement of comprehensive income
Ruashi Chibulum Sable Corporat Group
R000`s a R000`s e R000`s
R000`s R000`s
Six months to December
2010 (Reviewed)
Mineral sales
Copper 778 312 523 586 116 848 - 1 418 746
Cobalt 354 162 - 1 713 - 355 875
Gross revenue 1 132 474 523 586 118 561 - 1 774 621
Realisation costs 162 440 59 640 3 398 - 225 478
On-mine revenue 970 034 463 946 115 163 - 1 549 143
Cost of production 496 889 128 070 99 838 31 872 756 669
Stock movement (60 411) 1 556 686 - (58 169)
Mining profit 533 556 334 320 14 639 (31 872) 850 643
Ruashi deferred put (88 190) - - - (88 190)
premium
Royalties (53 138) (15 388) - - (68 526)
Other (expenses) (4 600) 758 671 (670) (3 841)
income, net
EBITDA 387 628 319 690 15 310 (32 542) 690 086
Finance (costs) income, (21 070) (6 393) - 7 859 (19 604)
net
Income (loss) before 366 558 313 297 15 310 (24 683) 670 482
depreciation
Depreciation 102 675 44 959 10 636 341 158 611
Income (loss) before 263 883 268 338 4 674 (25 024) 511 871
AHFS
AHFS and discontinued - - - (24 151) (24 151)
operations
Income (loss) before 263 883 268 338 4 674 (49 175) 487 720
taxation
Taxation expense 85 034 81 297 1 494 (6 652) 161 173
(credit)
Income (loss) after 178 849 187 041 3 180 (42 523) 326 547
taxation
Income attributable to 42 372 27 504 - - 69 876
non-controlling
interests
Retained income 136 477 159 537 3 180 (42 523) 256 671
(accumulated loss) for
the period
Ruashi Chibulum Sable Corporat Group
R000`s a R000`s e R000`s
R000`s R000`s
Six months to June 2010
(unaudited)
Mineral sales
Copper 482 178 421 748 108 546 - 1 012 472
Cobalt 373 170 - 6 386 - 379 556
Gross revenue 855 348 421 748 114 932 - 1 392 028
Realisation costs 134 867 64 734 3 272 - 202 873
On-mine revenue 720 481 357 014 111 660 - 1 189 155
Cost of production 464 956 118 043 101 971 35 416 720 386
Stock movement 57 218 3 323 4 244 - 64 785
Mining profit 198 307 235 648 5 445 (35 416) 403 984
Royalties (46 811) (14 187) - - (60 998)
Other income 32 567 (10 589) (611) (14 218) 7 149
(expenses), net
EBITDA 184 063 210 872 4 834 (49 634) 350 135
Finance (costs) income, (19 486) (8 309) - 3 429 (24 366)
net
Income (loss) before 164 577 202 563 4 834 (46 205) 325 769
depreciation
Depreciation 99 760 33 825 9 355 130 143 070
Income (loss) before 64 817 168 738 (4 521) (46 335) 182 699
AHFS
AHFS and discontinued - - - (13 260) (13 260)
operations
Income (loss) before 64 817 168 738 (4 521) (59 595) 169 439
taxation
Taxation expense 21 788 38 727 (1 233) (16 689) 42 593
(credit)
Income (loss) after 43 029 130 011 (3 288) (42 906) 126 846
taxation
Income attributable to 9 585 22 566 - - 32 151
non-controlling
interests
Retained income 33 444 107 445 (3 288) (42 906) 94 695
(accumulated loss) for
the period
Contact details for Metorex Limited and Corporate Advisers
Metorex Limited
PO Box 2814, Saxonwold, 2132, South Africa
Telephone: (+27 11) 215-4000
Facsimile: (+27 11) 215-4001
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
Registrars: South African and United Kingdom
Link Market Services South Africa (Pty) Limited
PO Box 4844, Johannesburg, 2000, South Africa
Telephone: (+27 11) 834-2266
The Capita Group PLC
The Registry, 34 Beckenham Road, Beckenham, Kent, BR34TU, England
Telephone: (+44 208) 639-2157
Company Secretaries
Statucor (Pty) Limited
PO Box 1574, Houghton, 2041, South Africa
Telephone: (+27 11) 728 7240
Sponsor
Barnard Jacobs Mellet Corporate Finance (Pty) Limited
PO Box 784573, Sandton, 2146, South Africa
Telephone: (+27 11) 550 5000
Auditors
Deloitte & Touche
Private Bag X6, Gallo Manor, 2052, South Africa
Telephone: (+27 11) 806-5000
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), M Smith (CFO), A Barrenechea
(Spanish)*, HH Hickey*, NN Kgositsile*, TV Mabuza*, P Molapo (Basotho)*, LJ
Paton*, ?*non-executive
www.metorexgroup.com
Date: 01/03/2011 07:05:09 Produced by the JSE SENS Department.
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