| Tue 29 Jan 2002, 0:00 | | Partial Write-down Of Avmin's Chambishi Metals Ass |
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Anglovaal Mining Limited
(Incorporated in the Republic of South Africa)
(Registration number 1933/004580/06)
("Avmin" or "the Company")
(ISIN Code: ZAE 0000017141)
(Share Code: "AIN")
PARTIAL WRITE-DOWN OF AVMIN'S CHAMBISHI METALS ASSETS
1. Introduction
Further to Avmin's announcement on 18 December 2001, the Board of Directors
("the Board") has considered a detailed analysis of the future prospects of
Chambishi Metals plc ("Chambishi") and reviewed this investment in the
context of the Avmin Group ("the Group") as a whole.
Avmin is a South African based diversified mining company with interests in
the ferrous, precious and base metals sectors. Its ferrous metal assets,
held in Assmang Limited ("Assmang") include iron ore, manganese ore, ferro-
manganese, chrome ore and ferro-chrome. The precious metals assets held
through Avgold Limited ("Avgold"), comprise the Target and ETC gold mines,
and the Company is conducting a full feasibility programme on its new
platinum group metals ("PGM") operation, Two Rivers Platinum (Pty) Limited
("Two Rivers") in partnership with Impala Platinum Holdings Limited. Within
its base metals unit, Avmin operates South Africa's only primary nickel
mine, Nkomati, and the cobalt and copper producer, Chambishi, located in
Zambia.
2. Chambishi write-down
The Board has fully assessed the impact of the various technical problems
that have been experienced at Chambishi, which relate largely to the furnace
refractory lining, the furnace cooling system, and the effects of an
unexpected decline of the cobalt price from US$10/lb to US$7/lb, as well as
weaker economic fundamentals for base metal markets, exacerbated by the
tragic events of 11 September 2001. In order to account for these changed
circumstances in accordance with the Company's commitment to prudent and
conservative accounting practices, the Board has made a decision to write-
down R1 538 million in relation to these assets. This amount is determined
as follows:
- A US$176 million write-down on the Chambishi assets; with Avmin's shares
equating to US$172 million* (R1 978 million)
- Less R440 million, being the foreign exchange gain due to Avmin from
Chambishi;
- Resulting in a net amount of R1 538 million.
*Calculated at R11,50 : US$1,00.
The residual value of US$70 million is deemed reasonable and appropriate by
the Board and the Company's independent auditors, who have verified the
assumptions and the calculations.
3. Financial effects
The Financial Effects of the write down at 30 June 2001 are as follows:
Before After % change
(cents) (cents) increase/(decrease)
Headline EPS 259 259 0
EPS 259 (1022) N/A
Fully diluted
headline EPS 251 251 0
NAV 3640 2243 (38.4)
The above financial effects are based on the following:
- Headline EPS, EPS and fully diluted headline EPS in the "Before" column
reflect headline EPS, EPS and fully diluted headline EPS for the year ended
30 June 2001.
- Headline EPS and fully diluted headline EPS in the "After" column reflect
headline EPS and fully diluted headline EPS for the year ended 30 June 2001,
as the write-down of Chambishi assets is an exceptional charge.
- EPS in the "After" column reflects the exceptional once-off nature of the
write-down of the Chambishi assets, and the reason for its exclusion from
headline EPS. (Exchange rate effects since 30 June 2001 have been ignored.)
- NAV in the "Before" column reflects the NAV as at 30 June 2001. NAV in the
"After" column reflects the pro forma effect of the write-down of Chambishi
assets on the NAV.
4. Chambishi now focused on achieving full production
Avmin's Board and management continue to support the viability of Chambishi
and are committed to complete the remaining work on the project, the Company
is confident that the plant will be in full production by the end of the
2002 calendar year.
5. Avmin's enhanced Group value
Over the last six months, the value of the majority of assets within Avmin
have been enhanced as a result of the weaker rand, US dollar exchange rate
and the completion of major projects, together with ongoing improvements in
operating performances and strong growth possibilities in the pipeline:
- Assmang - all divisions within this company, which export's the majority
of its commodities, are benefiting from improved operating performances in
terms of production volumes and good cost containment; the significant new
ferro-chrome expansion that was officially opened today, 29 January 2002,
has been commissioned on schedule and within budget and is set to benefit
from the improved environment; while its new manganese shaft expansion
remains on schedule for completion in 2003.
- Nkomati - an improving nickel price and better than planned PGM prices are
all factors contributing to value enhancements for the existing mine and has
made the significant expansion project more robust.
- Avgold - costs are being well contained and its major new gold mine,
Target, has been commissioned ahead of schedule and within budgeted cost
with lower US dollar operating costs now possible.
- The value of the low-risk Two Rivers project is more robust and shows
considerable upside.
In addition, Avmin's strategy of strengthening its balance sheet through the
disposal of its investment in Iscor Limited and shares in Assore Limited as
well as a small number of shares in Avgold has reduced planned gearing and
interest charges. The Group balance sheet remains strong with cash on-hand,
as at the date of this announcement, of nearly R500 million, which is
expected to increase materially by the end of the financial year.
Despite the write-down, the Board is confident that the value being created
by a weaker rand and improved operating performances in its South African
operations will more than offset this decrease.
Johannesburg
29 January 2002
