| Thu 10 May 2001, 0:00 | | Southern Mining - Preliminary Report |
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SOUTHERN MINING CORPORATION LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1996/014149/06)
("Southern Mining" or "the Company")
Preliminary report for the year ended 28 February 2001
CONSOLIDATED INCOME STATEMENT
Audited Audited
year ended year ended
28 February 29 February
2001 2000
Operating profit/(loss) before interest,
exceptional items and tax 6 281 177 (8 262 882)
Net interest received 5 215 127 2 297 456
Exceptional items 132 002 633 -
Net profit/(loss) before taxation 143 498 937 (5 965 426)
Taxation - 6 171
Net profit/(loss) after taxation 143 498 937 (5 959 255)
Minority interests - 9 103
Accumulated loss at beginning of period (28 498 296) (22 548 144)
Accumulated profit/(loss) at end of period 115 000 641 (28 498 296)
CONSOLIDATED BALANCE SHEET Audited Audited
28 February 29 February
2001 2000
ASSETS
Non-current assets
Mining rights, prospecting options and
deferred exploration expenditure 125 100 329 67 834 898
Fixed assets 235 650 291 363
Current assets
Accounts receivable 7 359 211 650 947
Cash and short-term investments 172 984 409 18 604 376
Total assets 305 679 599 87 381 584
EQUITY AND LIABILITIES
Capital and reserves
Share capital 899 299 815 726
Share premium 178 298 525 107 462 297
Foreign currency translation reserve 1 136 157 -
Accumulated profit/(loss) 115 000 641 (28 498 296)
Capital and reserves 295 334 622 79 779 727
Minority interests - loan - 57 950
Non-current liabilities
Long-term borrowings 450 137 -
Current liabilities
Accounts payable 9 853 068 2 125 631
Short-term liabilities 41 772 5 418 276
Total equity and liabilities 305 679 599 87 381 584
Number of shares in issue at year-end 89 929 905 81 572 575
Weighted average shares in issue 85 889 613 78 490 252
Headline profit/(loss) per share (cents) 167,1 (7,6)
Net asset value per share (cents) 343,9 101,7
COMMENTS
1. FINANCIAL AND CORPORATE
1.1 Financial Results
The Company recorded a profit after tax of R143 million (F2000, loss of R6
million) including an exceptional profit of R132 million (see below).
Contributions to the continuing evaluation of the Corridor Sands Project
("Corridor Sands") from WMC Limited ("WMC") of Australia and the Industrial
Development Corporation of South Africa Limited (the "IDC"), together with
tightly controlled overheads, resulted in an operating profit of R6 million
(F2000, loss of R8 million). Approximately R60 million was spent on the
evaluation of Corridor Sands and on increasing the holding of the Company in
Corridor Sands to 100%.
-The exceptional item represents non-refundable fees paid by WMC (R130 million)
and by the IDC (R7 million) for options to participate further in Corridor
Sands, less a R5 million write-off of the holding costs of the Bothaville
project to R1 million.
1.2 IDC acquires a 9,5% stake in Southern Mining and option in Corridor Sands
-In December 2000 the IDC exercised its option to acquire 4,25 million new
shares of Southern Mining at effectively R8 per share and simultaneously
acquired a similar number of shares from existing shareholders under identical
terms. The IDC now holds approximately 9,5% of the equity of Southern Mining.
The IDC has also purchased an option to acquire 10% of Corridor Sands from
Southern Mining on payment of US$10 million within three months of the
completion of the Bankable Feasibility Study ("BFS") of Corridor Sands.
1.3 Cash position
-Southern Mining's cash resources of over R170 million (representing about
R1,90 per share) are more than adequate to maintain its projected 36% interest
in Corridor Sands without the need to raise further financing. WMC and the IDC
are jointly funding both the BFS and Corridor Sands to "go-ahead" at which
point Southern Mining's only obligation is to invest US$20 million in the
equity of Corridor Sands.
1.4 Directorate
-CAP Galego, representing the IDC, has been appointed a non-executive director
of Southern Mining. AG Esterhuizen, formerly a non-executive director, has been
appointed an executive director.
1.5 STRATE
-Southern Mining has implemented the STAR programme to change to the Share
Transactions Totally Electronic ("STRATE") system. Shareholders were notified
on 12 March 2001 to surrender their existing share certificates and share
certificates ceased to be good delivery for transactions on the JSE Securities
Exchange from 6 April 2001.
2. THE CORRIDOR SANDS PROJECT - MOZAMBIQUE
2.1 Successful Completion of Full Feasibility Study
-The Full Feasibility Study ("FFS") of Corridor Sands was completed in August
2000 with positive results. The study estimated capital costs, to within an
accuracy of 10%, of US$366 million for the initial phase for annual production
of 375 000 tons of titanium slag, generating an ungeared real project Internal
Rate of Return of approximately 19%.
2.2 Partners selected for the development of Corridor Sands
-During the past year WMC and the IDC, after conducting comprehensive due
diligence investigations, purchased options to participate in Corridor Sands on
the following basis:
* Joint responsibility for project evaluation costs to go-ahead: WMC, 90%; IDC,
10%.
* -WMC Limited: Participation of 54% for a payment into Corridor Sands of
US$180 million at go-ahead.
* -IDC: Participation of 10% in Corridor Sands for a payment to Southern Mining
of US$10 million.
* Joint responsibility for sponsor support and guarantees to the suppliers of
project finance.
2.3 Bankable Feasibility Study
-Under the management of WMC, work on progressing the investigation of Corridor
Sands to the level of a rigorous and comprehensive Bankable Feasibility Study
("BFS") is well advanced. This study is expected to be completed in the first
quarter of 2002, at a cost of R75 million.
-Significant matters making headway are the construction, operation and
maintenance of a rail link, electrical power supply and port facilities,
together with marketing and project finance arrangements.
2.4 Mineral Reserves and Resources
-Mineral Resources at the Corridor Sands heavy mineral deposits were estimated
in the FFS to contain more than 300 million tons of ilmenite, which is
sufficient to support a mine life, at a production rate of one million tons of
titanium slag per year, of well over a hundred years.
-Within this, Proved and Probable Mineral Reserves in the West Body alone of
Deposit 1 have been estimated, by SRK Consulting, to be over 1 000 million tons
of sand containing 45 million tons of ilmenite.
-Comparisons between bulk mining and borehole results to date demonstrate that
both tonnage and grade of the resource have been materially understated.
Further geological evaluation work, including triple-tube drilling, now
underway as part of the BFS should further improve the estimated grade and
tonnage of both the Mineral Resources and Mineral Reserves of Corridor Sands.
2.5 Agreements with the Mozambican Government Authorities
-The Mineral Sands Exploration and Development Licencing Agreement was signed
on 27 October 2000 with the Ministry of Resources and Energy of Mozambique.
This agreement provides a comprehensive framework for the terms and conditions
of the proposed mine and processing operations of the Corridor Sands Project.
A Heads of Agreement ("HoA") was also signed on 27 October which provides,
amongst other things, for the recognition of the proposed titanium slag smelter
complex under the fiscally-advantageous terms of the Mozambican Free Trade Zone
legislation. The HoA will shortly be replaced by a comprehensive Terms of
Authorisation agreement covering Corridor Sands.
-The approval process for all statutory authorisations and permits, including
environmental aspects, required for the mining to commence is well advanced.
3. ANNUAL REPORT
The annual report will be posted to shareholders on 4 June and will also be
available from that date on the Company's website. The annual general meeting
will be held on 28 June 2001.
By order of the board
AMD Gnodde
RG Still Directors
Randburg
10 May 2001
Registered office
Unit C, Central Park Suites
Cnr Main Street and Orchard Avenue
Bordeaux, Randburg 2194
(PO Box 3968, Randburg 2125)
Transfer secretaries
Mercantile Registrars Limited
10th Floor
11 Diagonal Street, Johannesburg 2001
(PO Box 1053, Johannesburg 2000)
Investor relations
Tel (+27 11) 781-0375
Fax (+27 11) 886-7020
E-mail general@southern-mining.com
www.southern-mining.com
