| Thu 28 Feb 2002, 0:00 | | Avmin - Results For The Six Months Ended 31 |
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ANGLOVAAL MINING LIMITED
(Registration number 1933/004580/06)
JSE Share code: ANLM ISIN: ZAE000017141
("Avmin" or "the Company")
RESULTS
for the six months ended 31 December 2001
SIGNIFICANT FEATURES
* GOOD CONTRIBUTION FROM ASSMANG
- FERRO-CHROME EXPANSION COMMISSIONED ON SCHEDULE
* AVGOLD'S TARGET MINE COMMISSIONED AHEAD OF SCHEDULE
* R1,5 BILLION WRITE-DOWN TAKEN ON CHAMBISHI METALS
* ISCOR SHAREHOLDING SOLD
GROUP BALANCE SHEET
Unaudited Audited
at 31 December at 30 June
2001 2000 2001
Rm Rm Rm
ASSETS
Non-current assets
Tangible and intangible fixed assets 5 528 4 867 5 996
Loans and long-term receivables - 3 -
Deferred tax assets 39 13 47
Environmental rehabilitation trust funds 59 51 59
Investments 104 252 1 186
5 730 5 186 7 288
Current assets
Inventories 867 746 722
Trade and other receivables 1 263 449 664
Taxation - 7 1
Deposits and cash 472 923 439
2 602 2 125 1 826
Total assets 8 332 7 311 9 114
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 6 5 6
Preference share capital - 4 -
Share premium 59 51 56
Non-distributable reserves 85 73 679
Distributable reserves 2 142 3 118 3 267
Shareholders' interest in capital
and reserves 2 292 3 251 4 008
Minority interest 1 854 1 413 1 483
Total shareholders' interest 4 146 4 664 5 491
Non-current liabilities
Long-term borrowings - interest bearing 1 478 955 921
- non-interest bearing - 5 -
Deferred tax liabilities 369 297 360
Long-term provisions 212 201 196
2 059 1 458 1 477
Current liabilities
Trade and other payables 591 291 387
Short-term provisions 63 101 116
Taxation 68 103 78
Derivative instruments - - 11
Overdrafts and short-term borrowings 1 405 694 1 554
2 127 1 189 2 146
Total equity and liabilities 8 332 7 311 9 114
GROUP INCOME STATEMENT
Unaudited Audited
Half-year ended Increase/ Year ended
31 December (Decrease) 30 June
2001 2000 % 2001
Rm Rm Rm
Revenue 1 663 1 224 36 2 806
Cost of sales 1 271 891 43 2 083
Gross profit 392 333 18 723
Other operating income 153 70 211
Other operating expenses 322 149 338
Profit from operations 223 254 (12) 596
Income from investments 27 89 108
Finance costs 74 60 132
Profit before taxation and
exceptional items 176 283 (38) 572
Exceptional items (1 157) 12 -
Profit/(Loss) before taxation (981) 295 (433) 572
Taxation 134 94 - 167
Profit/(Loss) after taxation (1 115) 201 (655) 405
Minority interest 10 55 (82) 124
Earnings/(Loss) (1 125) 146 (871) 281
Headline earnings 31 134 (77) 281
Earnings/(loss)
per share (cents) (1 017) 135 259
Headline earnings
per share (cents) 28 124 259
Fully diluted earnings/(Loss)
per share (cents) (1 002) 131 251
Fully diluted headline earnings
per share (cents) 28 121 251
Number of shares in issue at
end of period (thousands) 111 159 108 409 110 105
Weighted average
number of shares in issue
(thousands) 110 661 108 050 108 379
Weighted average number of
shares used in calculating
fully diluted earnings
per share (thousands) 112 246 111 071 112 073
Note:
The Group results for 2000 include Hartebeestfontein gold mine to date of
disposal on 16 August 2000.
Refer to notes to the financial statements.
GROUP CASH FLOW STATEMENT
Unaudited Audited
Half-year ended Year ended
31 December 30 June
2001 2000 2001
Rm Rm Rm
CASH FLOW FROM OPERATING ACTIVITIES
Cash receipts from customers 1 651 1 514 2 967
Cash paid to suppliers and employees 1 491 1 309 2 441
Cash generated/(outflow) from operations 160 205 526
Interest received 25 88 106
Interest paid (74) (60) (132)
Dividends received 1 1 2
Dividends paid (9) (1 217) (1 222)
Capital distribution - (1 697) (1 697)
Taxation paid (116) (178) (237)
Net cash outflow from operating activities (13) (2 858) (2 654)
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds on sale of joint venture - 16 6
Additions to fixed assets to
maintain operations 144) (198) (291)
Additions to fixed assets to
expand operations (599) (732) (1 793)
Proceeds on disposal of fixed assets 1 1 2
Proceeds on disposal of investments 712 5 12
Decrease in investment loans - - 4
Other investments acquired - (197) (497)
Net cash outflow from investing activities (30) (1 105) (2 557)
CASH FLOW FROM FINANCING ACTIVITIES
Funding received from minority shareholders 3 176 182
Increase in shareholder funding 248 - -
Long-term borrowings raised 312 376 726
Long-term borrowings repaid - (3) (4)
Increase/(decrease) in short-term borrowings (487) 178 599
(Increase) in treasury liabilities - (1) (13)
Net cash from financing activities 76 726 1 490
Net (decrease)/increase in cash and
cash equivalents 33 (3 237) (3 721)
Cash and cash equivalents at
beginning of period 439 4 160 4 160
Cash and cash equivalents at
end of period 472 923 439
Cash generated from operations
per share (cents) 145 190 485
STATEMENT OF CHANGES IN EQUITY
Share Foreign
capital currency Revalu-
and trans- ation Retained
premium lation surplus Other profit Total
Rm Rm Rm Rm Rm Rm
Half-year ended
31 December 2001
Balance at 30 June 2001 62 6 638 35 3 267 4 008
Earnings - - - - (1 125) (1 125)
Foreign currency translation - (24) - - - (24)
Revaluation and disposal
of listed investments (570) (570)
Share options exercised 3 - - - - 3
Other movements - - 3 (3) - -
Balance at 31 December 2001 65 (18) 71 32 2 142 2 292
Half-year ended
31 December 2000
Balance at 30 June 2000 60 6 3 47 2 971 3 087
Earnings - - - - 146 146
Foreign currency translation - 17 - - - 17
Other movements - - - - 1 1
Balance at 31 December 2000 60 23 3 47 3 118 3 251
Year ended 30 June 2001
Balance at 30 June 2000 60 6 3 47 2 971 3 087
Earnings - - - - 281 281
Revaluation of listed
investments - - 635 - - 635
Share options exercised 2 - - - - 2
Reallocation of reserves - - - (12) 12 -
Other - - - - 3 3
Balance at 30 June 2001 62 6 638 35 3 267 4 008
NOTES TO THE FINANCIAL STATEMENTS
BASIS OF PREPARATION AND CHANGE IN ACCOUNTING POLICIES
The financial information for the half-year ended 31 December 2001 has
been prepared adopting the same accounting policies used in the most recent
annual financial statements.
The annual financial statements are prepared on the historical cost basis
as adjusted for the revaluation of certain freehold land and buildings, and
the fair value revaluation of derivatives, trading and available for sale
investment securities and are in accordance with South African Statements of
Generally Accepted Accounting Practice and International Accounting
Standards.
Group borrowings increased by R408 million during the period to R2 883
million (R2 475 million). Avgold Limited drew down R353 million against
facilities to enable its developing Target mine to be brought into
production.
HEADLINE EARNINGS
Unaudited Audited
Half-year ended Year ended
31 December 30 June
2001 2000 2001
Rm Rm Rm
Earnings per income statement (1 125) 146 281
Impairment of assets - Chambishi 1 619 - -
Provisions for guarantees 4 - -
Surplus on disposal of investments (466) (12) -
32 134 281
Taxation 55 - -
Minority interest (56) - -
Headline earnings 31 134 281
SEGMENTAL INFORMATION
Precious Cobalt/ Ferrous Corporate
Rm metals Copper metals Nickel and other Total
Primary segmental information
Half-year ended
31 December 2001
Revenue
External revenue 128 232 1 162 141 - 1 663
Profit from operations 12 (63) 255 83 (64) 223
Contribution to earnings 6 (1 644) 85 57 371 (1 125)
Contribution to headline
earnings 6 (82) 85 57 (35) 31
Other information
Consolidated total assets 3 133 1 226 2 836 243 894 8 332
Consolidated total liabilities 937 1 236 1 000 68 945 4 186
Capital expenditure 369 274 186 14 - 843
Depreciation 14 34 51 7 2 108
Half-year ended
31 December 2000
External revenue 105 162 786 171 - 1 224
Contribution to earnings 16 (21) 66 72 13 146
Contribution to headline
earnings 16 (21) 66 72 1 134
Other information
Consolidated total assets 2 306 1 535 2 092 271 1 107 7 311
Consolidated total liabilities 177 1 113 1 016 110 231 2 647
Capital expenditure 267 424 229 8 2 930
Depreciation 1 15 42 11 2 71
Year ended 30 June 2001
Revenue
External revenue 218 326 1 926 327 9 2 806
Contribution to earnings 39 (64) 153 130 23 281
Contribution to headline
earnings 39 (64) 153 130 23 281
Other information:
Consolidated total assets 2 688 2 080 2 589 206 1 551 9 114
Consolidated total liabilities 517 1 704 1 400 58 (56) 3 623
Capital expenditure 600 834 626 21 3 2 084
Depreciation 4 31 90 22 4 151
COMMENTARY
Introduction
Despite achieving good profitability in most of the Company's operations,
headline earnings were detrimentally affected by the significant operating
loss incurred at Chambishi Metals plc (Chambishi). This was further
exacerbated by the decision to no longer account for exchange gains on the
United States dollar advances made to Chambishi via the income statement. In
addition, corporate interest received reduced significantly as a result of
lower average cash balances for the period due to investments in Iscor
Limited (Iscor) and Avgold Limited (Avgold) as well as loans to Chambishi.
Overall, Avmin's headline earnings for the six months ended 31 December 2001
decreased to R31 million compared with R134 million in the six months ended
31 December 2000. In terms of headline earnings this equates to 28 cents
(124 cents) per share.
The contributions to earnings by the South African operations improved
primarily as a result of the weaker SA Rand/US dollar exchange rate.
However, the Chambishi cobalt and copper operation in Zambia experienced
significant technical difficulties as well as an unexpectedly large decline
in the cobalt price. The price reduced from US$10/lb to US$7/lb over the
reporting period. These two factors were the main reason for the decision on
29 January 2002 to partially write-down the investment in Chambishi by
approximately R1,5 billion. The residual value of approximately R800
million, or US$70 million, is deemed reasonable and has been endorsed by the
Company's independent auditors.
Following a decision to boost the Group's liquidity an agreement was entered
into in terms of which Avmin sold its entire Iscor shareholding to Stimela
Mining Limited (Stimela) and entered into a joint venture with Stimela to
pursue opportunities in iron ore. Stimela also granted Avmin a call option
on between 10 and 25 per cent of Stimela's shares in Kumba Resources
Limited. It was announced on 16 January 2002 that an agreement had been
concluded in terms of which Avmin had sold this option right to Stimela for
R75 million. The joint venture, formed between Avmin and Stimela, remains
intact.
In addition, Avmin made various other disposals during the period, which
included half of the Company's shareholding in Assore Limited (Assore) for
R95 million. Assore is Avmin's partner in Assmang Limited (Assmang). Avmin
also sold 28 million Avgold shares, which raised R139 million. The Company's
holding in Avgold is now 56 per cent.
Ferrous metals
Avmin's 50,3 per cent held manganese, chrome and iron ore producer, Assmang,
increased headline earnings by 14 per cent from R106 million to R121 million
for the six months. This was mainly as a result of the weaker SA rand/US
dollar exchange rate as the majority of Assmang's products are sold in US
dollars.
Sales volumes of manganese ore were unchanged at 0,6 million tons and iron
ore sales, following the commissioning of the jig plant at the end of the
last financial year, rose 22 per cent to 2,2 million tons (1,8 million
tons). Sales of ferro-manganese were slightly lower at 82 400 tons (85 700
tons), while ferro-chrome sales increased significantly to 88 900 tons (44
700 tons).
During the period under review, Assmang's capital expenditure to maintain
and improve operations amounted to R186 million (R229 million). This
expenditure was incurred on Assmang's new chrome furnace and the new shaft
at its existing manganese mine.
Nickel
The Nkomati nickel mine, 75 per cent owned by Avmin, has had another
pleasing half year. Ore milled was slightly lower at 135 000 tons (137 000
tons), which produced 23 700 tons (21 400 tons) of concentrates with average
grades of 9,34 per cent (10,43 per cent) for nickel and 6,81 per cent (6,40
per cent) for copper. The nickel feed grade was lower compared to the
corresponding period. Sales achieved were 1 880 tons (2 290 tons) of nickel,
1 380 tons (1 280 tons) of copper, 26 tons (31 tons) of cobalt and 16 900
ounces (18 670 ounces) of Platinum Group Metals (PGMs). The mine remains
cost competitive with a nickel production cost, net of by-product credits,
of US$0,58/lb, while the average nickel price achieved over the period
amounted to US$2,40/lb (US$3,56/lb). Nkomati's profit before taxation
decreased to R109 million (R137 million). During the review period R14
million was expended on capital projects.
The feasibility study on the major expansion at Nkomati will be presented to
the joint venture partners this quarter. The partners will then assess the
project, its funding and project release date.
Cobalt and copper
Chambishi, owned 90 per cent by Avmin, has experienced a difficult half-year
as a result of the receipt of substandard concentrates with a lower
percentage of contained metal. The plant treated a total of 64 500 tons (43
200 tons) of concentrates during the period. The existing refinery produced
an unchanged 1 500 tons of cobalt of which 300 tons were for Chambishi's own
account. It also produced 6 400 tons (5 840 tons) of copper of which 240
tons was Chambishi's own metal. The average cobalt price received was
significantly down on the last six months at US$8,00/lb (US$11,50/lb). In
addition, operating costs for Chambishi's new smelter and downstream
facilities have been included from 1 November 2001. This all resulted in
Chambishi reporting an operating loss of R69 million (R21 million-loss) for
the six months.
Various technical difficulties at the new Chambishi expansion project have
caused a serious delay in bringing this plant to full production. The
furnace at this new plant had to be shut down for the second time during the
calender year 2001 in order to replace a small section of the refractory
brick lining. The furnace is in the process of being recommissioned at
present and it will have to be shut down in August/September 2002 to install
a redesigned cooling system.
The reduced output prior to the refurbishment in August/September 2002 from
this plant coupled with the lower than planned prevailing cobalt price, will
result in a negative contribution from Chambishi towards Avmin's earnings
for the financial year.
The capital investment to date in Chambishi was US$266 million. US$24
million capital expenditure was incurred during the half year to 31 December
2001.
Precious metals
Avmin's 56 per cent held gold producer, Avgold, increased revenue to R128
million (R105 million), while costs and expenses were higher at R114 million
(R96 million). This led to an improved operating profit of R14 million (R9
million). After investment income, the headline earnings rose to R15 million
(R12 million). Capital expenditure rose significantly to R369 million, from
R267 million, as Target started building-up to its full production level.
This includes an amount of R113 million of capitalised exchange losses on
the US dollar borrowings related to Target.
ETC's total milled tonnages rose to 169 800 tonnes (144 600 tonnes) at the
mine's full capacity; the average yield was lower at 8,47g/t (9,90g/t),
which resulted in gold sales being only slightly higher at 1 438kg (1
432kg). Cash costs increased to R68 140/kg (R57 911/kg), but in dollar terms
reduced to US$233/oz (US$249/oz).
The Target mine's completion test for full production capacity from
underground, being 3 500 tons hoisted on five consecutive days, was achieved
on 19 December 2001, two months ahead of schedule. The commissioning of the
new metallurgical plant has been completed and full performance testing is
underway. The three massive stopes, required to achieve the planned stoping
tonnage, were brought into production during the last quarter of 2001 and
work on the remaining underground infrastructure and facilities is
progressing satisfactorily.
The exploration drilling programme in the northern Free State, immediately
north of the Target mine - within the Paradise area - is continuing. The
drilling of the two boreholes, ERO 5 and ERO 6, are ahead of schedule. Both
holes have now confirmed the position of the EA Zone and deflections are
being drilled to explore the extent of the reef package. It is anticipated
that the first set of results will be available early in the next financial
year.
Avmin's 55 per cent held PGM company, Two Rivers Platinum (Pty) Limited (Two
Rivers), is continuing its exploration drilling programme on the PGM
property recently acquired from Assmang. Impala Platinum Holdings Limited
(Implats) owns the balance of this company. Seven exploration drill rigs are
operating on the property and assay results are expected by the end of the
financial year. A bulk sample was removed for assessment purposes during
January 2002. A full feasibility study is being undertaken in tandem with
the drilling programme and, when completed, will be submitted to the Two
Rivers board. This is expected to occur during the first half of the next
financial year. Pending the outcome of the study, a decision could be made
to proceed with a mine capable of producing between 160-170 000 ounces of
PGMs annually. The estimated total capital expenditure for the new mine will
be approximately R500 million. The mine will produce a concentrate that will
be sent to Implats' refinery to generate the fini
shed product.
Prospects for the remainder of the financial year 2002
Headline earnings for the remaining half of the year, ending 30 June 2002
from the South African operations are expected to comfortably exceed those
of the last six months provided the SA rand/US dollar exchange rate and
commodity prices are maintained at current levels. In addition, earnings
over this period will benefit from good cost containment at all operations.
However, these positive effects will not offset the expected loss from
Chambishi. Therefore, the Board remains of the opinion that Avmin's headline
earnings for the full year, which excludes the Chambishi write-down and the
profit on the sales of investments, will be significantly lower than the
2001 financial year.
For and on behalf of the Board:
Kennedy W Maxwell Richard P Menell
Chairman Deputy Chairman and CEO
Johannesburg
1 March 2002
Registered office:
Anglovaal Mining Limited, 56 Main Street, Johannesburg 2001
Directors:
KW Maxwell (Chairman), RP Menell (Deputy Chairman and Chief Executive
Officer), DN Murray (Chief Operating Officer), B Frank, DE Jowell, N Livnat,
Dr TV Maphai, JR McAlpine, BM Menell, Dr MZ Nkosi, R Oron.
Group Company Secretary: RH Phillips
