| Fri 13 May 2011, 14:01 | | ARQ - Anooraq Resources Corporation - Anooraq announces results for the |
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ARQ
ARQ
ARQ - Anooraq Resources Corporation - Anooraq announces results for the
period ended March 31, 2011
Anooraq Resources Corporation
Incorporated in British Columbia, Canada
Registration number 10022-2033
TSXV/JSE share code: ARQ
NYSE AMEX share code: ANO
ISIN: CA03633E1088
("Anooraq" or the"Company" or the "Group")
ANOORAQ ANNOUNCES RESULTS FOR THE PERIOD ENDED MARCH 31, 2011
Challenging first quarter for Anooraq: Bokoni Group Initiates Strategic
review of Assets, as well as restructuring and refinancing
May 13, 2011. Anooraq announces its operational and financial results for the
three months ended March 31, 2011 ("Q1 2011"). This release should be read
with the Company`s unaudited interim financial statements for the three
months ended March 31, 2011 and related Management Discussion & Analysis,
available at www.anooraqresources.com and filed SEDAR at on www.sedar.com.
Currency values are presented in South African rand ("ZAR"), Canadian dollars
("C$") and United States dollars ("US$").
Key features
- Group restructuring and refinancing initiatives under way
- Management changes:
- Harold Motaung appointed as Chief Executive Officer ("CEO"),
effective as of April 1, 2011
- new senior and technical appointments at Bokoni operations in
progress
- Safety performance improves
- no fatalities
- lost time injury frequency rate ("LTIFR") and serious injury
frequency rate ("SIFR") improve
- seven shifts lost as a result of safety-related stoppages (10% of
production shifts)
- Production of 22,173 4E ounces for Q1 2011, down by 28% from the
previous quarter, largely as a result of safety stoppages, the impact of
the slow start-up after the Christmas break, and continued lack of
mining flexibility
- ZAR/US$ exchange rate weakened by 2%, while US$ PGM basket price
increased by 4%
- Revenues declined by 29% quarter-on-quarter
Harold Motaung, President and CEO of Anooraq, commented, "Bokoni has faced
both challenges and opportunities in the first quarter which have
respectively impacted on our short-term performance, and, in the medium to
longer term, should bring their own rewards.
"Anooraq and Anglo Platinum Limited ("APL") are currently in discussions
relating to a strategic review by the Parties of the Bokoni Group assets,
capital and financing structures of Bokoni Platinum Holdings (Pty) Limited
("Bokoni" or the "Bokoni Group"), with a view to effecting a restructuring
and refinancing transaction. This marks a meaningful step forward in
solidifying our partnership with APL and accelerating our refinancing
initiatives announced at the time of implementing the Bokoni acquisition in
July 2009 when we established the Bokoni Group.
"Whilst corporate restructuring and refinancing initiatives remain important
to the Group, our key focus remains addressing the current operational
challenges which we face at our mine. To that end additional focus at
operational level has been introduced at the Bokoni operations, with an
immediate target to achieve the required production levels of safe ounces and
to generate net free cash. This will require a multi-faceted approach towards
addressing technical or other current challenges, with a strong emphasis on
ensuring that all stakeholders at Bokoni are motivated for that purpose.
"The issue of safety and safety-related stoppages has been a focus point and
priority during Q1 2011. While the safety-related stoppages that have been
imposed by the South African Department of Mineral Resources ("DMR") have had
a negative impact on production - effectively reducing our production shifts
for the quarter by 10% - we understand and support the need for a zero
tolerance approach to safety risks. A number of interventions have been put
in place at Bokoni to address issues of non-compliance with health and safety
regulations and to further improve our safety performance. An internal safety
auditing programme has been put in place: any transgressions result in an
immediate internally-imposed stoppage, and all transgressions must be
rectified before mining may continue. Further, all mining personnel are
currently receiving retraining on mine standards and safe working procedures.
"Clearly though, the most significant issues facing the Bokoni operations
right now are low operating efficiencies and the consequent lack of volume
throughput. Critical to this is the much-needed development to create mining
flexibility, the lack of which continues to hamper our production output. In
addition, we need to improve mining discipline in order to ensure that
stoping systems, controls and practices are implemented to the required
standards. Bokoni infrastructure and staffing is currently geared for a
120,000 tonnes per month ("tpm") operation and we need to focus on reaching
that consistent level of output in the near future in order to generate
positive cash flows and to achieve the required returns from our quality
asset base.
"Our plan remains to reach a production rate of 160,000tpm (17,600 4E PGM
ounces per month) by 2014. Given the current Group strategic review and our
recently reinforced partnership with APL, attention will be focused on
optimising our extensive asset base and extracting maximum value for all of
our stakeholders."
Review of operational and financial performance
Safety
No fatalities were recorded during the quarter, and Bokoni`s LTIFR improved
by 17% quarter-on-quarter to 1.91 per 200,000 hours worked, continuing its
downward trend. Similarly, the SIFR improved by 22% to 1.08 per 200,000 hours
worked. Seven shifts were lost as a result of stoppages in terms of section
54 of the South African Mine Health and Safety Act (Act 29 of 1996). Anooraq
is determined to address any issues of non-compliance and has introduced an
internal safety audit programme as well as supervisory training programme
known as Rethusanang. In addition, the Company is currently engaging with the
DMR Inspectorate with a view to better understand the DMR`s approach towards
safety standards and protocol.
Production
Production during the quarter was below management expectations as the
operations faced a number of challenges including:
- a slow start-up after the 10-day Christmas break (this is a traditional
break in South Africa across the mining industry);
- production stoppages effected by the DMR;
- ongoing constraints to mining flexibility;
- lack of mining discipline;
- lower delivered grade as a result of increased re- and sub-development;
and
- lower recovered grade as a result of low grade UG2 material being milled
during the quarter and the UG2 primary crusher at the plant only being
commissioned on 20 March 2011.
As a result, Bokoni produced 22,173 4E ounces, a decrease of 28% from the
previous quarter, and a decrease of 17% from Q1 2010 (the equivalent period)
(4E consists of platinum, palladium, rhodium and gold). The mine concentrator
milled 219,991 tonnes, 21% lower than Q4 2010, and 4% lower than the
equivalent period in 2010.
The key production parameters for Bokoni for Q1 2011 are:
Q4 2010 Q1 2011 Variance Q1 2010 Variance
Q-O-Q Q1 11 vs
Q1 10
Tonnes Tonnes 258,033 201,851 (22%) 232,323 (13%)
delivered
Total Metres 2,308 2,302 - 3,140 (27%)
primary
development
Total re- Metres 1,486 1,846 24% 820 225%
and sub-
development
Head grade g/t, 4E* 4.41 4.25 (4%) 4.16 2%
(delivered)
Tonnes Tonnes 278,242 219,991 (21%) 229,344 (4%)
milled
Recovered g/t 4.17 3.84 (8%) 4.30 (11%)
grade milled,
4E*
4E ounces Ounces 30,776 22,173 (28%) 26,594 (17%)
produced*
Metal production was as follows:
Metal Q4 2010 Q1 2011 Variance Q1 2010 Variance
Q-O-Q Q1 11 vs
Q1 10
Platinum Ounces 17,050 12,136 (29%) 14,258 (15%)
Palladium Ounces 10,905 7,987 (27%) 9,820 (19%)
Rhodium Ounces 1,679 1,295 (23%) 1,618 (20%)
Gold Ounces 1,142 755 (34%) 898 (16%)
Nickel Tonnes 264 94 (64%) 182 (48%)
Copper Tonnes 164 153 (7%) 112 37%
Costs
Given that Bokoni`s cost structure comprises largely fixed costs (79%) and
that the operations have been staffed and structured to produce at
120,000tpm, the lower level of production had an acute impact on unit
operating costs - these increased by 23% quarter-on-quarter, to US$1,672/4E
ounces.
Revenue
Revenue from the sale of concentrate for Q1 2011 was $30.7 million (ZAR218.1
million). PGM metal prices (in US$) increased by 6% during Q1 2011 when
compared to the fourth quarter of 2010. The ZAR/US$ exchange rate remained
relatively flat. The net effect of this was that the ZAR PGM basket price
increased by 6% to US$1,457 (ZAR10,210) per ounce during Q1 2011 when
compared to Q4 2010.
Profitability
Anooraq reported an operating loss of $19.2 million and a loss before tax of
$39.1 million for Q1 2011. The increased operating loss is the result of
lower production at Bokoni, and the increased loss before tax is a result of
higher finance costs incurred during the period. The net loss (after tax) was
$31.4 million or ($0.04) per share (basic and diluted).
Capital expenditure
Total capital expenditure for Q1 2011 was $7.8 million, comprising 34%
sustaining capital and 66% project expansion capital.
Group restructuring and refinancing
Subsequent to March 31, 2011, Anooraq and APL (the "Parties") entered into
preliminary discussions surrounding a potential transaction between them. The
nature of these discussions surrounds the completion of a strategic review by
the Parties of of the assets and financing structures of and relating to
Bokoni Platinum Holdings (Pty) Limited, with a view to Anooraq effecting a
restructuring transaction in respect thereof (the "Anooraq Restructuring").
In anticipation of the further potential implementation of the Anooraq
Restructuring, Anooraq has unwound its interest rate hedge transaction with
Standard Chartered Plc ("SCB") and APL has acquired Anooraq`s senior loan
obligations with SCB and Rand Merchant Bank, a division of FirstRand Bank
Limited.
The outstanding amount of debt acquired by APL is US$96.4 million (ZAR671
million) and the ultimate treatment and/or terms associated with this debt
are currently under review between the Parties within the context of the
broader refinancing initiative between them.
Future communication
On completion of the Bokoni Group asset review, Anooraq will provide further
guidance on its operating and financial outlook going forward. Given that
Anooraq has concurrently issued a cautionary announcement to the market
today, pursuant to JSE requirements, it is unable to undertake a conference
call at this time. The Company undertakes to update the market as soon as it
is in a position to do so.
Shareholders are referred to the Company`s results presentation available on
the Company`s website at www.anooraqresources.com
Johannesburg
13 May 2011
MACQUARIE FIRST SOUTH ADVISERS (PTY) LIMITED
JSE Sponsor
Queries:
Russell and Associates
Charmane Russell
Office: +27 11 880 3924
Mobile: +27 82 372 5816
Macquarie First South Advisers
Natalie Di-Sante / Melanie de Nysschen / Annerie Britz / Yvette Labuschagne
Office: +27 11 583 2000
Neither the TSX Venture Exchange not its Regulation Services Provider (as
that term is defined in policies of the TSX Venture Exchange) accepts
responsibility for the adequacy or accuracy of this release. The NYSE Amex
has neither approved nor disapproved the contents of this press release.
Cautionary and forward-looking information
This document contains "forward-looking statements" that were based on
Anooraq`s expectations, estimates and projections as of the dates as of which
those statements were made. Generally, these forward-looking statements can
be identified by the use of forward-looking terminology such as "outlook",
"anticipate", "project", "target", "believe", "estimate", "expect", "intend",
"should" and similar expressions.
Forward-looking statements are subject to known and unknown risks,
uncertainties and other factors that may cause the Company`s actual results,
level of activity, performance or achievements to be materially different
from those expressed or implied by such forward-looking statements. These
include but are not limited to:
- uncertainties and costs related to the Company`s exploration and
development activities, such as those associated with determining
whether mineral resources or reserves exist on a property;
- uncertainties related to feasibility studies that provide estimates of
expected or anticipated costs, expenditures and economic returns from a
mining project; uncertainties related to expected production rates,
timing of production and the cash and total costs of production and
milling;
- uncertainties related to the ability to obtain necessary licenses,
permits, electricity, surface rights and title for development projects;
- operating and technical difficulties in connection with mining
development activities;
- uncertainties related to the accuracy of our mineral reserve and mineral
resource estimates and our estimates of future production and future
cash and total costs of production, and the geotechnical or
hydrogeological nature of ore deposits, and diminishing quantities or
grades of mineral reserves;
- uncertainties related to unexpected judicial or regulatory proceedings;
- changes in, and the effects of, the laws, regulations and government
policies affecting our mining operations, particularly laws, regulations
and policies relating to
- mine expansions, environmental protection and associated compliance
costs arising from exploration, mine development, mine operations and
mine closures;
- expected effective future tax rates in jurisdictions in which our
operations are located;
- the protection of the health and safety of mine workers; and
- mineral rights ownership in countries where our mineral deposits
are located, including the effect of the Mineral and Petroleum
Resources Development Act (South Africa);
- changes in general economic conditions, the financial markets and in the
demand and market price for gold, copper and other minerals and
commodities, such as diesel fuel, coal, petroleum coke, steel, concrete,
electricity and other forms of energy, mining equipment, and
fluctuations in exchange rates, particularly with respect to the value
of the U.S. dollar, Canadian dollar and South African rand;
- unusual or unexpected formation, cave-ins, flooding, pressures, and
precious metals losses (and the risk of inadequate insurance or
inability to obtain insurance to cover these risks);
- changes in accounting policies and methods we use to report our
financial condition, including uncertainties associated with critical
accounting assumptions and estimates; environmental issues and
liabilities associated with mining including processing and stock piling
ore;
- geopolitical uncertainty and political and economic instability in
countries which we operate; and
- labour strikes, work stoppages, or other interruptions to, or
difficulties in, the employment of labour in markets in which we operate
mines, or environmental hazards, industrial accidents or other events or
occurrences, including third party interference that interrupt the
production of minerals in our mines.
For further information on Anooraq, investors should review the Company`s
annual Form 40-F filing with the United States Securities and Exchange
Commission www.sec.com and home jurisdiction filings that are available at
www.sedar.com.
Date: 13/05/2011 14:01:01 Produced by the JSE SENS Department.
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