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AVGOLD - Report for the Quarter Ended 30 September 2002
Avgold Limited ("the Company")
Registered Number: 1990/007025/06
Share code: AVG ISIN: ZAE000012175
(Incorporated in the Republic of South Africa)
Report
FOR THE QUARTER ENDED 30 SEPTEMBER 2002
QUARTERLY features
* Operating profit increased to R33 million from a R5 million loss previously
* Target`s cash cost below US$150/oz
* THE PARADISE, SIBERIA AND MARIASDAL AREAS` indicated resources increased from
18,8 million ounces to 21,6 million ounces
CONTACT DETAILS
Julian Gwillim
Direct line: (+27 11) 634-0092
Fax: (+27 11) 634-0038
Mobile: 082 452 4389
SAFETY AND HEALTH
There were no fatal accidents at Avgold`s operations during the quarter.
Avgold`s total number of reportable injuries for the quarter was 17. This is a
concerning increase on the previous year and considerable effort is being
directed at reducing these incidents at all operations. The lost day injury
frequency rate* for Avgold is as follows:
Quarter ended Quarter ended Year to
30 Sept 2002 30 June 2002 June 2002
ETC 16,8 16,6 8,9
Target 21,3 20,2 10,9
Avgold 19,5 18,9 10,1
*expressed as the number of lost day cases per one million man-hours worked.
AVGOLD
The operating profit increased to R33 million from a loss in the previous
quarter of R5 million as a result of an improving grade at Target and better
gold sales from Target and ETC. The headline earnings for the three months ended
30 September 2002, which includes Target for its first full quarter, decreased
to R12 million (30 June 2002: R14 million), which equates to an unchanged 2
cents a share. The previous quarter`s earnings included R30,3 million as a
result of an unrealised foreign exchange gain, while this quarter`s results were
decreased by a R10,5 million foreign exchange loss related to Target`s US$35
million borrowing. Avgold`s results continue to be impacted by the delivery of
gold against the hedge book, which had a negative mark-to-market value of R934
million at 30 September 2002. The gold price achieved for the quarter was R84
719/kg compared to the spot price of R104 866/kg. As Target achieves planned
full-scale operating production the impact on the hedged position will lessen.
Both Target and ETC showed improving performances during the quarter. ETC
performed satisfactorily: gold sales were higher as a result of improved
production, despite grades being lower.
The total capital expenditure for the quarter was R20 million (R42 million),
incurred mainly at Target. This is slightly below the planned capital
expenditure.
Avgold`s cash balance increased to R115 million (R109 million), in anticipation
of the commencement of loan repayments for the facility raised to complete the
Target mine. The first repayment will be made in March 2003 followed by another
11 equal quarterly payments thereafter.
TARGET
Target milled 282 894 tonnes (172 500 tonnes - two months only) at an average
yield of 8,39g/t (7,96g/t), with gold sales of 2 373kg (1 374kg - two months),
or 76 299oz (44 167oz - two months). Cash costs decreased to R49 724/kg (R52
992/kg - two months), or US$149/oz (US$156/oz - two months). While the
production tonnage from underground was satisfactory, the handling of large
rocks is proving problematic.
When more massive stopes are established during the current quarter, hoisted
tonnes will increase further. The effects of waste dilution, as reported in the
previous quarter, has reduced as is evident in the improved yields. The mill
performed well over the past quarter.
Capital expenditure reduced significantly to R16 million (R35 million).
ETC
ETC`s three mines - Fairview, Sheba and New Consort - performed well, increasing
tonnes milled by nearly 12 per cent to 79 641 tonnes. Although the average yield
was lower at 8,82g/t (9,72g/t), primarily as a result of low grades from New
Consort, gold sales rose to 702kg (694kg), or 22 574oz (22 305oz). Cash costs
rose to R77 871/kg (R71 646/kg), or US$233/oz (US$210/oz), as a result of higher
tonnages and power costs as well as expenditure incurred in closing the Sheba
mine infrastructure.
ETC`s biological oxidation (BIOX(r)) plant operated well and is running at full
capacity treating about 62 tonnes a day.
NORTHERN FREE STATE EXPLORATION (NFS)
In June 2001, Avgold`s board of directors approved expenditure for the drilling
of boreholes ERO5 and ERO6, immediately north of the Target mine. The objective
was to confirm the postulated extension of the Eldorado Fan and thereby increase
confidence in the Elsburg reefs in the Paradise area. This has been completed
and the drilling was achieved six months ahead of schedule.
This exploration programme resulted in a total increase of 3,3 million ounces in
Target and the northern Free State`s indicated resource category as depicted in
Table 1, below.
Table 1 Oct 2002 June 2002 Change
Target & NFS Mozs Mozs Mozs
Target - Measured* 1,1 1,1 0
Target - Indicated* 2,1 1,6 +0,5
NFS - Indicated 21,6 18,8 +2,8
Total 24,8 21,5 +3,3
*excluding Target reserves
Diagram 1 (on page 3) illustrates where this increase has occurred. The drilling
results have clearly proved the extension of the Eldorado Fan, immediately north
of the Target mine. The diagram shows that 1,1 million ounces of the increase is
immediately north of the blast fault and 0,5 million ounces is on Target`s side
of the Blast fault. The increased resources are shallower than 2 500m and within
500m of Target`s underground workings. The remaining increase of 1,7 million
ounces is within other reefs.
DIAGRAM 1:
Additional indicated resources
The indicated resources now available to a possible new shaft system, north of
Target, are shown in the table below:
indicated resources
000` tonnes g/t Moz
Mariasdal 23 379 8,9 6,7
Siberia 41 435 7,6 10,2
Paradise 17 443 8,4 4,7
Total 82 257 8,1 21,6
In addition to the above, the possible new shaft area contains 48,2 million
ounces in the inferred resource category. All figures are at a cut-off grade of
3g/t and have been confirmed by an external audit.
Target: updated reserves and resources
000` tonnes g/t Moz
Reserves
Proved and probable 7 964 9,83 2,5
Resources
Measured 6 108 5,6 1,1
Indicated 8 688 7,5 2,1
Total 22 760 7,8 5,7
FUNDING
There were no draw-downs on the syndicated loan facility used for the completion
of the Target mine. The first of the mandated 12 equal quarterly payments will
commence in March 2003 and will continue through to December 2005. Early
repayment options as well as the ability to refinance exist in the facility and
Avgold is in discussion on these issues.
HEDGING
At 30 September 2002, Avgold`s hedge book represented 58 per cent of forecast
gold production over the next 45 months and had a mark-to-market value of a
negative R934 million. This was calculated at a gold price of US$320,80/oz and
an exchange rate of US$1,00:ZAR10,53. These hedges were established as a
requirement to the five-year term loan facility arranged for the completion of
the Target mine. The hedge book is represented as follows:
Period Ending June 2003 June 2004 June 2005 June 2006
Dollar forward sales
contracts
Quantity sold kg 1 579 1 601 1 458 672
oz 50 767 51 481 46 885 21 620
US$/oz 313 298 284 290
Rand forward sales
contracts
Quantity sold kg 6 544 7 830 7 679 3 730
oz 210 409 251 733 246 876 119 923
R/kg 83 270 85 135 94 009 100 985
In terms of Accounting Standard AC 133, R47,8 million has been recorded as a
liability on the Balance Sheet under Derivative instruments, with a
corresponding reduction in Reserves, to account for those Rand gold hedges where
the gold and related currency hedges have been contracted with different
counterparties.
DIRECTORATE
Mr Jan Steenkamp was appointed managing director of Avgold Limited with effect
from 1 September 2002. He succeeds Mr David Murray who has been appointed the
chief executive officer of Anglovaal Mining Limited (Avmin), Avgold`s
controlling shareholder. Mr Murray remains on the board as a non-executive
director. The board has thanked Mr Murray for his service as managing director,
particularly during the completion of the Target project. Furthermore, Mr ArnZ
Lewis, Avmin`s vice president: South African operations, has been appointed an
executive director, effective 1 September 2002.
On behalf of the board of directors
R P Menell J C Steenkamp
Chairman Managing director
Johannesburg
23 October 2002
R P Menell (Chairman), J C Steenkamp* (Managing), D N Campbell*, J J Geldenhuys,
D N Murray, A N Lewis*, W A Nairn, G S Potgieter*, G J Robbertze, J Thomas (Mrs)
*Executive directors
Company secretary: S E Sather
INCOME STATEMENT - Rand thousand
Unaudited Audited
Quarter ended Year ended
September September June June
2002 2001 2002 2002
Revenue 260 728 65 485 170 762 363 802
- gold revenue 260 538 65 485 169 669 362 709
- by-products 190 - 1 093 1 093
Costs and expenses 227 554 59 030 175 833 346 468
- gold operating 172 610 49 982 122 712 265 137
- retrenchments - - 4 747 4 747
- amortisation 49 112 5 971 39 064 57 389
- general and administration 5 832 3 077 9 310 19 195
Operating profit/(loss) 33 174 6 455 (5 071) 17 334
Investment income 3 113 129 1 982 2 147
Finance cost 14 137 - 8 419 8 419
Unrealised forex (loss)/gain (10 498) - 30 335 30 335
Income before taxation 11 652 6 584 18 827 41 397
Taxation - - 5 000 5 000
Net earnings for the period 11 652 6 584 13 827 36 397
Headline earnings 11 652 6 584 13 827 36 397
Headline earnings per share (cents) 2 1 2 5
Earnings per share (cents) 2 1 2 5
Weighted number of shares in
issue (million) 673 668 672 670
BALANCE SHEET - Rand thousand
Unaudited Audited
September June
2002 2002
ASSETS
Non-current assets
Fixed assets 2 853 586 2 883 336
Investments 47 871 47 871
2 901 457 2 931 207
Current assets
Inventories 55 208 44 761
Trade and other
receivables 57 379 55 171
Deposits and cash 114 688 108 810
227 275 208 742
Total assets 3 128 732 3 139 949
EQUITY AND LIABILITIES
Capital and reserves
Share capital 6 734 6 729
Share premium 2 208 043 2 206 385
Accumulated (loss)/profit (19 224) 16 958
Total shareholders`
interest 2 195 553 2 230 072
Non-current
liabilities 638 200 630 105
Long-term loans 556 789 548 072
Long-term provisions 81 411 82 033
Current liabilities 294 979 279 772
Trade and other
payables 117 076 153 343
Derivative instruments 47 834 -
Overdrafts and
short-term borrowings 130 069 126 429
Total equity and
liabilities 3 128 732 3 139 949
CASH FLOW STATEMENT - Rand thousand
Unaudited Audited
Quarter ended Year ended
September 2002 June 2002
Cash generated from/(utilised by) operations
Operating profit 33 174 17 334
Non-cash items and adjustments:
Amortisation and depreciation 49 112 57 389
Provisions (620) 7 788
81 666 82 511
Retrenchment payments - (5 873)
Payments to environmental trust funds - (4 151)
Investment income 3 113 2 147
Finance charges (14 137) (8 419)
70 642 66 215
Cash provided by/(reinvested in)
working capital
Inventories (10 447) (11 514)
Payables and provisions (36 266) 10 155
Receivables (2 247) (7 303)
Net cash generated from
operating activities 21 682 57 553
Cash utilised in
investment activities
Fixed assets acquired (20 559) (345 645)
Investments acquired - (1 124)
Fixed assets sold 1 196 5 531
(19 363) (341 238)
Cash provided by
financing activities
Net increase in shareholders` funding 1 662 22 868
Leased assets (341) (1 634)
(Decrease)/increase in long-term loans (1 743) 191 952
Net increase in overdrafts and short-term borrowings 3 981 123 402
3 559 336 588
Increase in cash balances 5 878 52 903
Cash and cash equivalents at beginning of period 108 810 55 907
Cash and cash equivalents at end of period 114 688 108 810
INCOME STATEMENT - US dollar thousand
Unaudited Audited
Quarter ended Year ended
September September June June
2002 2001 2002 2002
Revenue 25 094 7 897 16 115 36 060
- gold revenue 25 076 7 897 16 012 35 952
- by-products 18 - 103 108
Costs and expenses 21 901 7 119 16 593 34 342
- gold operating 16 613 6 028 11 580 26 280
- retrenchments - - 448 470
- amortisation 4 727 720 3 686 5 689
- general and administration 561 371 879 1 903
Operating profit/(loss) 3 193 778 (478) 1 718
Investment income 300 16 187 213
Finance costs 1 361 - 795 835
Unrealised forex (loss)/gain (1 010) - 2 863 3 007
Income before taxation 1 122 794 1 777 4 103
Taxation - - 472 495
Net earnings for the period 1 122 794 1 305 3 608
Headline earnings 1 122 794 1 305 3 608
Headline earnings per share (cents) - - - 1
Earnings per share (cents) - - - 1
Weighted number of shares in
issue (million) 673 668 672 670
BALANCE SHEET - US dollar thousand
Unaudited Audited
September June
2002 2002
ASSETS
Non-current assets
Fixed assets 270 482 281 301
Investments 4 538 4 670
275 020 285 971
Current assets
Inventories 5 233 4 367
Trade and other receivables 5 439 5 382
Deposits and cash 10 871 10 616
21 543 20 365
Total assets 296 563 306 336
EQUITY AND LIABILITIES
Capital and reserves
Share capital 638 656
Share premium 211 745 217 773
Accumulated loss (4 273) (861)
Total shareholders`
interest 208 110 217 568
Non-current liabilities 60 493 61 474
Long-term loans 52 776 53 471
Long-term provisions 7 717 8 003
Current liabilities 27 960 27 294
Trade and other payables 11 097 14 960
Derivative instruments 4 534 -
Overdrafts and
short-term borrowings 12 329 12 334
Total equity and liabilities 296 563 306 336
Note: Translation to US dollars. (Average rate for the quarter was
US$1,00:R10,39 and the closing rate at 30 September 2002 was US$1,00:R10,55).
To assist international investors, a translation of convenience into United
States dollars is provided for the income statement, balance sheet and cash flow
statement. These translations are based on average rates of exchange for income
statement and cash flow statement items and at those ruling at period end for
the balance sheet.
CASH FLOW STATEMENT - US dollar thousand
Unaudited Audited
Quarter ended Year ended
September 2002 June 2002
Cash generated from/(utilised by) operations
Operating profit 3 193 1 718
Non-cash items and adjustments:
Amortisation and depreciation 4 727 5 689
Provisions (60) 772
7 860 8 179
Retrenchment payments - (582)
Payments to environmental trust funds - (411)
Investment income 300 213
Finance charges (1 361) (835)
6 799 6 564
Cash provided by/(reinvested in)
working capital
Inventories (1 006) (1 141)
Payables and provisions (3 490) 1 007
Receivables (216) (724)
Net cash generated from
operating activities 2 087 5 706
Cash utilised in
investment activities
Fixed assets acquired (1 979) (34 260)
Investments acquired - (112)
Fixed assets sold 115 548
(1 864) (33 824)
Cash provided by financing activities
Net increase in shareholders` funding 160 2 267
Leased assets (33) (162)
(Decrease)/increase in long-term loans (168) 19 026
Net increase in overdrafts and short-term borrowings 383 12 232
342 33 363
Increase in cash balances 565 5 245
Cash and cash equivalents at beginning of period 10 616 6 919
Translation adjustment (310) (1 548)
Cash and cash equivalents at end of period 10 871 10 616
AVGOLD TOTAL
Unaudited Audited
Quarter ended Year ended
September September June June
2002 2001 2002 2002
Metric
Ore milled tonnes 362 535 85 667 243 867 488 023
Gold sold kg 3 075 738 2 068 4 179
Yield g/t 8,48 8,61 8,48 8,56
Cash cost R/kg 56 151 69 090 59 251 64 277
Non-cash cost R/kg 17 782 10 953 25 266 18 375
Total cost R/kg 73 932 80 043 84 517 82 652
Capital expenditure R000`s 20 037 154 320 42 129 437 514
Imperial
Ore milled tons 399 622 94 431 268 815 537 948
Gold sold oz 98 873 23 712 66 472 134 348
Yield oz/t 0,25 0,25 0,25 0,25
Cash cost US$/oz 168 259 174 198
Non-cash cost US$/oz 53 41 74 57
Total cost US$/oz 221 300 248 255
Capital expenditure US$000`s 1 928 18 611 3 976 43 495
ETC
Metric
Ore milled tonnes 79 641 85 667 71 367 315 523
Gold sold kg 702 738 694 2 805
Yield g/t 8,82 8,61 9,72 8,89
Cash cost R/kg 77 871 69 090 71 646 69 805
Non-cash cost R/kg 8 887 8 887 19 134 11 919
Total cost R/kg 86 758 77 977 90 780 81 724
Capital expenditure R000`s 3 100 5 841 2 824 17 482
Development results:
Advanced m 1 797 2 340 1 653 7 909
Reef development m 378 590 265 1 872
Sampled m 311 625 235 2 010
Channel width cm 210 228 204 223
Channel value g/t 7,8 4,2 5,9 3,8
cm.g/t 1 638 949 1 204 854
Imperial
Ore milled tons 87 788 94 431 78 668 347 801
Gold sold oz 22 574 23 712 22 305 90 181
Yield oz/t 0,26 0,25 0,28 0,26
Cash cost US$/oz 233 259 210 215
Non-cash cost US$/oz 27 33 56 37
Total cost US$/oz 260 293 266 252
Capital expenditure US$000`s 298 704 266 1 733
TARGET
Metric (May & June)
Ore milled tonnes 282 894 - 172 500 172 500
Gold sold kg 2 373 - 1 374 1 374
Yield g/t 8,39 - 7,96 7,96
Cash cost R/kg 49 724 - 52 992 52 992
Non-cash cost R/kg 18 092 - 26 594 26 594
Total cost R/kg 67 816 - 79 586 79 586
Capital expenditure R000`s 15 666 145 273 35 080 404 754
Development results:
Advanced m 1 903 1 268 1 893 5 933
Reef development m 1 125 309 695 2 561
Sampled m 673 264 398 1 377
Channel width cm 456 443 409 1 757
Channel value g/t 5,98 3,02 4,38 6,31
cm.g/t 2 727 1 339 1 791 11 083
Imperial
Ore milled tons 311 834 - 190 147 190 147
Gold sold oz 76 299 - 44 167 44 167
Yield oz/t 0,24 - 0,23 0,23
Cash cost US$/oz 149 - 156 156
Non-cash cost US$/oz 54 - 78 78
Total cost US$/oz 203 - 234 234
Capital expenditure US$000`s 1 508 17 520 3 310 40 119
AVGOLD TOTAL
Unaudited Audited
Quarter ended Year ended
September September June June
Rand thousand 2002 2001 2002 2002
Gold operating costs per
income statement 172 610 49 982 122 712 265 137
Add: Revenue from closed
operations - 973 884 4 551
Less: Revenue from by-products (190) - (1 093) (1 093)
Cash costs 172 420 50 955 122 503 268 595
Add: Retrenchments - - 4 747 4 747
Amortisation 49 112 5 971 39 064 57 389
General and administration 5 832 3 077 9 310 19 195
Less: Revenue from closed
operations - (973) (884) (4 551)
Non-cash costs 54 944 8 075 52 237 76 780
Total cost 227 364 59 030 174 740 345 375
Gold sold kg 3 075 738 2 068 4 179
Production cost:
Cash cost R/kg 56 151 69 090 59 251 64 277
Non-cash cost R/kg 17 782 10 953 25 266 18 375
Total operating cost R/kg 73 932 80 043 84 517 82 652
Gold price realised R/kg 84 719 88 791 82 054 86 794
US$ thousand
Gold operating costs per
income statement 16 613 6 028 11 580 26 280
Add: Revenue from closed
operations - 117 83 451
Less: Revenue from by-products (18) - (103) (108)
Cash costs 16 595 6 145 11 560 26 623
Add: Retrenchments - - 448 471
Amortisation 4 727 720 3 686 5 689
General and administration 561 371 879 1 903
Less: Revenue from closed
operations - (117) (83) (451)
Non-cash costs 5 288 974 4 930 7 611
Total cost 21 883 7 119 16 490 34 234
Gold sold oz 98 873 23 712 66 472 134 348
Production cost:
Cash cost US$/oz 168 259 174 198
Non-cash cost US$/oz 53 41 74 57
Total cost US$/oz 221 300 248 255
Gold price realised US$/oz 302 333 305 306
AVGOLD LIMITED
(Registered Number 1990/007025/06)
(Incorporated in the Republic of South Africa)
Share code: AVG ISIN: ZAE000012175
56 Main Street, Johannesburg, South Africa 2001
PO Box 62379, Marshalltown, South Africa 2107
www.avgold.co.za
Date: 23/10/2002 02:00:00 PM Produced by the JSE SENS Department
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