| Tue 14 May 2002, 0:00 | | Southern Mining Corporation Limited - Preliminary |
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Southern Mining Corporation Limited - Preliminary report for the year ended
28 February 2002
Southern Mining Corporation Limited
(Incorporated in the Republic of South Africa)
(Registration number 1996/014149/06)
("Southern Mining" or "the Company")
(Share code: SMC ISIN number: ZAE000029799)
Preliminary report for the year ended 28 February 2002
CONSOLIDATED INCOME STATEMENT Audited Audited
year ended year ended
28 February 28 February
2002 2001
R R
Operating profit before
interest and tax 50 156 134 6 281 177
Net interest received 8 418 031 5 215 127
Exceptional items (4 868 567) 132 002 633
Net profit before taxation 53 705 598 143 498 937
Taxation - -
Net profit after taxation 53 705 598 143 498 937
Accumulated profit/(loss)
at beginning of period 115 000 641 (28 498 296)
Accumulated profit at end of period 168 706 239 115 000 641
CONSOLIDATED BALANCE SHEET Audited Audited
28 February 28 February
2002 2001
R R
ASSETS
Non-current assets
Mining rights, prospecting options and
deferred exploration expenditure 180 044 643 125 100 329
Fixed assets 220 087 235 650
Current assets
Accounts receivable 806 187 7 359 211
Cash and short-term investments 254 838 080 172 984 409
Total assets 435 908 997 305 679 599
EQUITY AND LIABILITIES
Capital and reserves
Share capital 899 299 899 299
Share premium 178 298 525 178 298 525
Foreign currency translation reserve 67 537 302 1 136 157
Accumulated profit 168 706 239 115 000 641
Capital and reserves 415 441 365 295 334 622
Non-current liabilities
Long-term borrowings 5 287 694 450 137
Long-term environmental
rehabilitation provision 500 000 -
Current liabilities
Accounts payable 14 679 938 9 853 068
Short-term liabilities - 41 772
Total equity and liabilities 435 908 997 305 679 599
Weighted average shares in issue 89 929 905 85 889 613
Headline earnings per share (cents) 59,7 167,1
Net asset value per share (cents) 462,0 343,9
CONSOLIDATED CASH FLOW STATEMENT Audited Audited
year ended year ended
28 February 28 February
2002 2001
R R
Operating activities 69 961 694 144 032 986
Cash generated by operating activities 61 543 663 2 002 859
Net interest received 8 418 031 5 215 127
Exceptional items - 136 815 000
Investing activities (59 346 725) (62 159 048)
Acquisition of remaining shareholding
in Corridor Sands Limitada - (5 660 000)
Acquisition of fixed assets (213 254) (26 300)
Proceeds on disposal of fixed assets 179 410 3 000
Prospecting options acquired and deferred
exploration expenditure (59 312 881) (56 475 748)
Financing activities 4 837 557 71 369 938
Increase in share capital - 70 919 801
Increase in long-term borrowings 4 837 557 450 137
Net movement in cash and
cash equivalents 15 452 526 153 243 876
Increase in foreign currency
translation reserve 66 401 145 1 136 157
Cash and cash equivalents at
beginning of period 172 984 409 18 604 376
Cash and cash equivalents at
end of period 254 838 080 172 984 409
Represented by:
Cash and short-term investments 254 838 080 172 984 409
STATEMENT OF Ordinary Share Foreign Retained
CHANGES IN EQUITY share premium currency earnings/
capital translation (accumulated
reserve loss) Total
Balance at
1 March 2000 815 726 107 462 297 (28 498 296) 79 779 727
Issues of share
capital 83 573 70 836 228 70 919 801
Foreign currency
Translation
differences 1 136 157 1 136 157
Net profit for the year 143 498 937 143 498 937
Balance at 28
February 2001 899 299 178 298 525 1 136 157 15 000 641 295 334 622
Foreign currency
Translation
differences 66 401 145 66 401 145
Net profit for
the period 53 705 598 53 705 598
Balance at
28 February 2002 899 299 178 298 525 67 537 302 168 706 239 415 441 365
COMMENTS
1. FINANCIAL AND CORPORATE
Financial results
The Company recorded a profit after tax of R53,7 million.
Non-refundable contributions to the Bankable Feasibility Study ("BFS") of
the Corridor Sands Project ("Corridor Sands") from WMC Limited ("WMC") of
Australia amounting to R48,5 million which together with realised foreign
exchange gains exceeding overhead costs, resulted in an operating profit of
R50,2 million.
The exceptional items relate to the write-off of exploration expenditure
capitalised in respect of the Bothaville deposit and the project in South
America.
The Industrial Development Corporation of South Africa Limited (the "IDC")
advanced R4,9 million towards the cost of the BFS. This advance, reflected
as a long-term liability, will be capitalised on project go-ahead or waived
should the IDC not participate therein.
Approximately R55 million was spent on the BFS of Corridor Sands during the
year. Subsequent to the year-end a further approximately R18 million has
been spent to date, again funded by the IDC and WMC.
These financial statements have been prepared in accordance with statements
of Generally Accepted Accounting Practice. The accounting policies used are
consistent with those of the previous year.
Cash position
Southern Mining`s net cash resources, after adjusting for accounts payable,
increased by R77 million to R241 million (representing R2,67 per share).
These are considered more than adequate to maintain its projected 36%
interest in Corridor Sands without the need to raise further financing.
Of the cash resources, R209,5 million (US$18,4 million at US$1 = R11,40) is
held in US dollars which has, inter alia, given rise to the R66,4 million
increase in the foreign currency translation reserve.
2. THE CORRIDOR SANDS PROJECT - MOZAMBIQUE
BFS
Since November 2000 WMC has carried out a BFS into the Corridor Sands
Project.
The first phase of the BFS will be completed during the second quarter of
2002 at a budgeted cost of R89 million, thereby enabling the sponsors to
then proceed with the final phase of the BFS which will entail the
procurement of conditional term sheets for limited recourse project finance.
Final financial closure will follow thereafter.
The results of the BFS to date have confirmed and improved all aspects of
the project since completion of the Full Feasibility Study ("FFS") by
Southern Mining in August 2000.
Significant developments include:
Mineral resource and reserves
During the BFS phase 138 air-core and 9 triple-tube diamond drill holes have
been completed to supplement the 956 air-core holes drilled to the
conclusion of the FFS in August 2000.
Total Inferred Resources are now estimated by WMC at over 15 billion tonnes.
The geological model of the deposit remains open in all lateral directions.
Measured and Indicated Mineral Resources, computed in accordance with the
Australasian "JORC" and the South African "SAMREC" codes, in Deposit 1 of
Corridor Sands now exceed 2,7 billion tonnes (compared with 1,08 billion
tonnes at the FFS stage) with sufficient contained ilmenite to produce one
million tons of titanium dioxide slag per year for some 35 years. Mining
grades for the first 12 years will exceed 6% Valuable Heavy Minerals
(ilmenite, rutile and zircon) and 5% for the subsequent 20 years. Given the
zero strip ratio, easy mining conditions, average orebody thickness of over
80 metres and the very low levels of deleterious or non-valuable heavy
minerals, these grades are world class.
Compelling and consistent evidence now exists, from comparisons between the
new diamond core drilling, test mining and pilot plant recoveries and the
original air-core drilling results, that the air-core holes, on which the
above JORC computations are based, are substantially underestimating the
true Valuable Heavy Minerals grades. However, it is not considered to be
economically justifiable to drill the additional number of diamond holes (or
employ other methods) that would be required to geo-statistically restate
the Reserves and Resources.
Engineering and metallurgical process
Progressive improvement and enhancement of the design flowsheets for mineral
separation have been achieved. From extensive testwork carried out during
the BFS process it is now expected that a significantly enhanced recovery of
smelter feed ilmenite will be achieved.
Infrastructure
Discussions are now at an advanced stage on the provision of electrical
power to Corridor Sands through a consortium of Eskom, EDM and Corridor
Sands Limitada.
An alternative export method to the originally proposed rail spur connection
to the Mozambican rail line has been designed and evaluated. This
alternative involves the construction of a 56 km "road train" haul road
directly to the coast, together with a jetty and shiploading facility. This
alternative is now the more attractive proposal, although all possibilities
are being kept under active review.
Coupled with the unique single-site layout at Chibuto, this alternative has
the potential to position Corridor Sands with the lowest total transport and
materials-handling costs in the industry.
Marketing
All the proposed products from Corridor Sands have now achieved full
technical market acceptance, and offtake contractual negotiations are making
encouraging progress.
Environmental approval
The appropriate authorities in Mozambique have recently awarded approval of
the Environmental Impact Assessment at Chibuto. This represents a major
milestone in the progress of the project, and reflects the efforts that have
been made on both environmental and community issues.
Project Implementation Agreement
A comprehensive Project Implementation Agreement was signed on 13 May 2002
with the Republic of Mozambique by the sponsors of the Limpopo Corridor
Sands Project: WMC, the IDC and Southern Mining.
This Project Implementation Agreement brings together the annexed Project
Decree; the Terms of Authorisation; and the Heavy Mineral Sands Exploration
and Development Licencing Agreement. The Project Implementation Agreement
establishes the fiscal benefits and incentives, and a regulatory regime, for
the development of Corridor Sands` mining and beneficiation activities, as
well as providing for the development of the project`s necessary support
infrastructure.
This Project Implementation Agreement thus constitutes the agreed final
fiscal and regulatory arrangements which will govern the project, thereby
providing the required certainty for completion of the project financing
stage.
3. NEW BUSINESS
Lower than expected grades at depth resulted in the exploration project in
Argentina being discontinued and all exploration costs related to this
project have been written off.
The Company is evaluating other mineral sands and industrial mineral
prospects within Southern Africa.
4. WMC
In October 2001 WMC announced its intention to demerge by Scheme of
Arrangement into two listed companies. This procedure was recently delayed
awaiting new "Demerger" legislation in Australia, and WMC has subsequently
announced that it will commence within approximately the next three months.
Southern Mining is actively monitoring this development and assessing any
implications that this proposed demerger may have for the development of
Corridor Sands.
5. ANNUAL REPORT
The annual report will be posted to shareholders on 12 July and will also be
available from that date on the Company`s website. The annual general
meeting will be held in August 2002.
By order of the board
AMD Gnodde
RG Still Directors
Randburg
14 May 2002
Registered office Transfer secretaries
Unit C, Central Park Suites Mercantile Registrars Limited
Cnr Main Street and Orchard Avenue 10th Floor
Bordeaux, Randburg 2194 11 Diagonal Street, Johannesburg
2001
(PO Box 3968, Randburg 2125) (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
