| Thu 12 Sep 2002, 13:23 | | Avmin - Financial Results |
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Avmin - Financial Results
Anglovaal Mining Limited
("Avmin" or "the Company")
Reviewed Results for the year ended 30 June 2002
Salient features
- Exceptional performance from Assmang
- Iscor shareholding sold for significant gain
- Significant impairment of Chambishi Metals
- Substantial interest acquired by Anglo American
GROUP BALANCE SHEET
at 30 June
2002 2001
Rm Rm
ASSETS
Non-current assets
Tangible assets 5 686 5 987
Intangible assets 7 9
Deferred tax assets 38 47
Environmental rehabilitation trust funds 64 59
Investments 176 1 186
5 971 7 288
Current assets
Inventories 976 722
Trade and other receivables 1 060 664
Taxation - 1
Deposits and cash 779 439
2 815 1 826
Total assets 8 786 9 114
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 6 6
Share premium 62 56
Non-distributable reserves 110 679
Distributable reserves 2 401 3 267
Shareholders` interest in capital and reserves 2 579 4 008
Minority interest 2 012 1 483
Total shareholders` interest 4 591 5 491
Non-current liabilities
Long-term borrowings 1 181 921
Deferred tax liabilities 493 360
Long-term provisions 215 196
1 889 1 477
Current liabilities
Trade and other payables 637 387
Provisions 62 116
Taxation 45 78
Derivative instruments 47 11
Overdrafts and short-term borrowings 1 515 1 554
2 306 2 146
Total equity and liabilities 8 786 9 114
GROUP INCOME STATEMENT
for the year ended 30 June
2002 2001
Rm Rm
Revenue 4 047 2 806
Cost of sales 2 985 2 083
Gross profit 1 062 723
Other operating income 215 211
Other operating expenses 478 338
Profit from operations 799 596
Income from investments 55 108
Finance costs 160 132
Profit before taxation and exceptional items 694 572
Exceptional items (1 084) -
Profit/(Loss) before taxation (390) 572
Taxation 313 167
Profit/(Loss) from ordinary activities (703) 405
Minority interest 163 124
Earnings/(Loss) (866) 281
Headline earnings 204 281
Basic earnings/(Loss) per share (cents) (780) 259
Headline earnings per share (cents) 184 259
Number of shares in issue at end of year
(thousand) 111 444 110 105
Weighted average number of shares
in issue (thousands) 110 977 108 379
GROUP CASH FLOW STATEMENT
for the year ended 30 June
2002 2001
Rm Rm
CASH FLOW FROM OPERATING ACTIVITIES
Cash receipts from customers 3 823 2 967
Cash paid to suppliers and employees 3 204 2 441
Cash generated from operations 619 526
Interest received 55 106
Interest paid (160) (132)
Dividends received 2 2
Dividends paid (23) (1 222)
Capital distribution - (1 697)
Taxation paid (197) (237)
Net cash inflow/(outflow)
from operating activities 296 (2 654)
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of joint venture
and subsidiaries - 6
Additions to fixed assets to maintain
operations (122) (291)
Additions to fixed assets to expand operations (1 101) (1 793)
Proceeds on disposal of fixed assets 6 2
Proceeds on disposal of investments 1 007 12
Proceeds on dilution in subsidiaries 139 4
Other investments acquired - (497)
Net cash outflow from investing activities (71) (2 557)
CASH FLOW FROM FINANCING ACTIVITIES
Increase in shareholder funding 6 -
Funding received from minority shareholders 264 182
Long-term borrowings raised 314 726
Long-term borrowings repaid (153) (4)
Increase/(Decrease) in short-term borrowings (316) 599
Decrease in treasury liabilities - (13)
Net cash inflow from financing activities 115 1 490
Net increase/(decrease) in cash and cash
equivalents 340 (3 721)
Cash and cash equivalents at beginning of year 439 4 160
Cash and cash equivalents at end of year 779 439
Cash generated from operations per share
(cents) 558 485
HEADLINE EARNINGS
Year ended Year ended
30 June 30 June
2002 2001
Rm Rm
Earnings/(loss) per income statement (866) 281
Impairment of asset - Chambishi 1 619 -
Provisions for guarantees 5 -
Surplus on disposal of Investments (540) -
218 281
Taxation 52 -
Minority interest (66) -
Headline earnings 204 281
NOTES TO THE FINANCIAL STATEMENTS
ACCOUNTING POLICY
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 non-current listed
investments and are in accordance with South African Statements of
Generally Accepted Accounting Practice and International Accounting
Standards. The accounting policies are consistent with the prior year.
SEGMENTAL INFORMATION
Precious Cobalt/ Ferrous Corporate
Rm metals Copper Nickel metals and Total
other
Year to 30 June 2002
External revenue 364 548 326 2 809 - 4 047
Contribution to
earnings 21 (2 175) 122 270 896 (866)
Contribution to
headline earnings 21 (221) 122 270 12 204
Consolidated total
assets 3 138 1 282 250 3 339 777 8 786
Consolidated total
liabilities 959 1 148 69 1 211 808 4 195
Capital expenditure 466 362 22 372 1 1 223
Year to 30 June 2001
External revenue 218 326 327 1 926 9 2 806
Contribution to
earnings 39 (64) 130 153 23 281
Contribution to
headline earnings 39 (64) 130 153 23 281
Consolidated total
assets 2 688 2 080 206 2 589 1 551 9 114
Consolidated total
liabilities 517 1 704 58 1 400 (56) 3 623
Capital expenditure 600 834 21 626 3 2 084
The financial information set out in the reviewed results has been
reviewed by the Company`s auditors Ernst & Young. Their unqualified
opinion is available for inspection at the Company`s registered office.
GROUP STATEMENT OF CHANGES IN EQUITY
Foreign Revalu-
Share capital currency ation Retained
Rm and premium translation surplus Other earnings Total
Balance at
30 June 2001 62 6 638 35 3 267 4 008
Earnings - - - - (866) (866)
Revaluation of
listed investments - - 65 - - 65
Disposal of
listed investments - - (562) - - (562)
Foreign entity
translation - (48) - - - (48)
Share options
exercised 6 - - - - 6
Unrealised loss
on currency
derivative
contracts - - - (26) - (26)
Other - - - 2 - 2
Balance at
30 June 2002 68 (42) 141 11 2 401 2 579
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
COMMENTARY
INTRODUCTION
We have pleasure in submitting our report to shareholders on an
eventful year. Three significant events occurred during the period under
review: firstly, the Company disposed of its entire shareholding in
Iscor Limited to Deutsche Bank and Stimela Mining Limited for a total
consideration of R911 million, representing a gain of R417 million;
secondly, on 29 January 2002, the Company announced a decision to write-
down its Chambishi Metals plc (Chambishi) investment by R1 619 million;
and thirdly Anglo American plc (Anglo American) acquired, subject to
regulatory approvals, 34,9 per cent of Avmin from Arctic Resources
Limited, effective 12 March 2002, which resulted in the elimination of
Avmin`s historical control structure.
All the divisions performed well during the year, particularly
Assmang Limited (Assmang), but this was offset by the losses incurred at
Chambishi. For the year ended 30 June 2002, Avmin recorded headline
earnings of R204 million (30 June 2001: R281 million).
The Avmin Group has a 42 per cent net debt/equity ratio. A variety of
options are being considered to reduce this level of debt.
REVIEW OF OPERATIONS
Assmang`s headline earnings increased by 92 per cent to R443 million
from R231 million. A weakening South African rand exchange rate was the
main contributing factor to this increase. The restructuring of the
businesses into three distinct operating entities; manganese, iron ore
and chrome continued. Good cost containment and improving efficiencies
also contributed to the higher earnings.
The manganese division, consisting of the manganese mines as well as
an alloy smelter, once again had a pleasing year with a contribution to
overall operating profit of R582 million. Manganese ore sales, excluding
sales to the company`s manganese smelter, were higher at 993 000 tons
(979 000 tons). Manganese alloy sales were slightly lower at 187 000
tons (193 000 tons). Iron ore sales rose as a result of a full year`s
production from the new jig plant to 4,8 million tons (4,3 million
tons). Chrome alloy sales, fed by Assmang`s chrome mine, Dwars Rivier,
were 190 000 tons (125 000 tons).
Assmang continued its significant capital expenditure programme
spending R372 million (R626 million) during the year, the majority on
its two major projects: the new chrome alloy smelter and the new shaft
at its Nchwaning manganese mine. Assmang has spent R1,8 billion over the
last five years on re-capitalising and expanding its businesses.
Avgold Limited`s (Avgold) headline earnings for the year ended 30 June
2002 were R36 million (R39 million). The operating profit was R17
million (R28 million) and unrealised foreign exchange gains increased
income before taxation to R41 million (R39 million). Total gold sales
for the year increased to 4 179kg (2 842kg), the average yield was
8,56g/t (9,18g/t), and the cash cost was R64 277/kg (R58 698/kg), or
US$198/oz (US$241/oz). The company received an average gold price over
the year of R86 794/kg (R76 586/kg), or US$306/oz (US$315/oz), which
includes the results of hedging activities. Avgold`s hedge book at year-
end represented 60 per cent of forecast gold production for the next 48
months and had a negative mark-to-market value of R873 million. The
hedge book continues to be actively managed and is not subject to margin
calls.
The Target project was completed within budget during the year at a
cost of R2,1 billion. The mine contributed to the income statement from
1 May 2002; during the two months the mine milled 172 500 tonnes to sell
1 374 kg of gold at a cash operating cost of US$156 per ounce. On start-
up, Target experienced minor mill problems, which have been resolved,
and grade dilution issues that are being addressed.
During the year, ETC finalised a restructuring process, at a
retrenchment cost of R4,7 million. Following various infrastructure
changes, planned mining grades were achieved on a consistent basis.
ETC`s three mines - Sheba, New Consort and Fairview - milled a total of
315 523 tonnes (309 506 tonnes) for the year at an average yield of
8,89g/t (9,18g/t). Gold sales were lower at 2 805kg (2 842kg) and the
cash cost increased in rand terms to R69 805/kg (R58 698/kg), but
declined in dollar terms to US$215/oz (US$241/oz).
The current Paradise surface exploration drilling programme in the
Northern Free State has been completed. The results to date have proven
that the Eldorado fan extends northwards and has delineated the
important geological structures. The ore resource model is currently
being updated and this information will be published during October
2002.
Two Rivers Platinum (Proprietary) Limited is jointly owned by Avmin
(55 per cent) and Impala Platinum Holdings Limited (45 per cent). During
the past year a R60 million feasibility study to mine and process the
UG2 ores was undertaken. It will be completed by October 2002; initial
results confirm the pre-feasibility work done prior to the purchase of
this asset.
Chambishi experienced a very challenging year with furnace
availability of only 65 per cent. In November 2001, following a second
refractory lining failure, the decision was made to contract a Canadian
company to redesign the furnace cooling system and refractory lining.
The redesigned furnace has been installed this quarter and
recommissioned and full output levels are expected in December 2002.
During the year under review 2 600 tons of cobalt were produced from the
toll refining roaster operation, which operated well, and 1 100 tons of
cobalt from the smelter. The design smelter capacity exceeds 4 500 tons
of cobalt per year. As a result of this poor output and a lower cobalt
price of US$7,56/lb (US$11,37/lb), Chambishi recorded a pre-interest
operating loss of US$12 million (US$11 million - loss) and a loss, post
interest, of US$19 million (US$12 million - loss). Inclusive of the
write-down, the overall loss was US$195 million.
Nkomati mine experienced lower US dollar prices for its products
compared to last year but the weaker rand, especially during the first
half of the financial year, and a maintained yield enabled the mine to
perform very much in line with the previous year. The mine milled 260
000 tons (280 000 tons) of ore, producing 46 000 tons (41 000 tons) of
concentrate at an average nickel grade in concentrate of 9,33 per cent
(10,47 per cent).
Nkomati sold a slightly lower 3 900 tons (4 000 tons) of nickel as
well as 3 000 tons (2 500 tons) of copper, 52 tons (54 tons) of cobalt
and 35 000 ounces (32 600 ounces) of platinum group metals (PGMs).
Excluding nickel, other metals contributed 42 per cent of the mine`s
total revenue. The nickel price averaged US$2,69/lb (US$3,28/lb) during
the year. The mine`s cash cost to produce nickel, net of by-products,
was US$0.32/lb (minus - US$0,82/lb).
Operating profit declined to R209 million (R241 million) and after
adding other income, mainly interest received, profit before tax was
slightly lower at R221 million (R249 million).
A feasibility study to expand the mine, plant and infrastructure was
completed in the last quarter. The study envisages the annual production
of 16 000 tons of refined nickel, 9 000 tons of refined copper, 900 tons
of cobalt oxides, and 80 000 ounces of PGMs for toll refining. The
capital cost will exceed R2 billion. Environmental and mining permits
are being processed.
SAFETY, HEALTH AND SUSTAINABLE DEVELOPMENT
Despite a generally improved safety performance, the board reports
with regret that one fatal accident occurred within the Group during the
year;
Mr Aaron Ndhlovu died from a fall of ground at ETC. Mr Ndhlovu`s death
is viewed as a tragedy and the board extends its condolences to his
family.
HIV/AIDS continues to be a concern. Prevalence testing was completed
throughout the Group during the year and a comprehensive management plan
was devised and is presently being implemented.
Over the last few years, Avmin has been involved in the Global Mining
Initiative, which, through the Mining, Minerals and Sustainable
Development grouping, is assessing the role that the mining, minerals
and metals industries can play in contributing to a global transition
towards a more sustainable future. The Avmin Sustainable Development
Report, 2002, will soon be posted to all shareholders, together with the
annual report. This report details the Group`s activities in
contributing to a sustainable future.
MINERALS AND PETROLEUM RESOURCES DEVELOPMENT BILL
The Avmin Group is continuing to work through the Chamber of Mines of
South Africa and participating, along with all industry stakeholders, in
constructive dialogue to arrive at practical legislative proposals for
the new Minerals and Petroleum Resources Development Bill (the Bill)
that was tabled in parliament in June 2002. All stakeholders are
awaiting two additional pieces of legislation: the re-drafted
Empowerment Charter and the Money Bill. Various Economic Empowerment
initiatives are underway within the Avmin Group that will assist in
dealing with issues arising from the Bill.
DIVIDENDS
No dividends were declared for the year ended 30 June 2002 in terms
of bank covenants.
DIRECTORATE
During May 2002, the board announced the retirement of Mr Kennedy
Maxwell as chairman, effective 30 June 2002, and Mr Rick Menell was
appointed as his successor. Ken has agreed to remain a non-executive
director and continues to chair the audit and remuneration committees.
Mr David Murray, previously Avmin`s chief operating officer, has
succeeded Rick as the Company`s chief executive officer. The board has
appreciated Ken`s expertise, guidance and commitment to the Company
during his term of office as chairman.
Following the introduction of Anglo American as a major shareholder
in Avmin, Messrs David Barber, Philip Baum and Barry Davison were
appointed non-executive directors. We have welcomed their prudent
guidance over the last few meetings and look forward to their continued
involvement. Dr Vincent Maphai, a director since 1998, decided to resign
during the year as a result of his varied and extensive external
commitments. Together with the rest of the board we thank him for his
contribution.
OUTLOOK
The major challenges ahead for the Company are to deliver Chambishi`s
technical performance objectives and to ensure design output levels at
the Target mine are achieved. Earnings growth for the current year will
depend on meeting these challenges and also, to a large extent, on the
Rand/US dollar exchange rates remaining at current or weaker levels,
recoveries in commodity markets and, in particular, a higher cobalt
price than the current level of US$7,00/lb.
RICK MENELL Chairman
DAVID MURRAY Chief executive officer
Johannesburg
12 September 2002
Anglovaal Mining Limited,
Registration No 1933/004580/06,
incorporated in the Republic of South Africa,
JSE Securities Exchange South Africa
Share code: AIN ISIN: ZAE000017141 and
London Stock Exchange 91CJ
(Avmin or the Company)
Executive directors: R P Menell (chairman), D N Murray (chief executive
officer).
Non-executive directors: D D Barber, P M Baum, B E Davison (alt:
W A Nairn), B Frank, D E Jowell, N Livnat,
K W Maxwell, J R McAlpine, B M Menell,
Dr M Z Nkosi, R Oron.
Group company secretary: R H Phillips
Registered Office: 56 Main Street, Johannesburg 2001,
PO Box 62379, Marshalltown 2107, South Africa
For further information: e-mail juliang@avmin.co.za.
www.avmin.co.za
Date: 12/09/2002 12:00:00 PM Produced by the JSE SENS Department
