| Thu 23 Jan 2003, 17:53 | | Palabora Mining Company Limited And Its Subsidiari |
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Palabora Mining Company Limited and its Subsidiaries - Preliminary Report For
The Year Ended 31 December 2002
PALABORA MINING COMPANY LIMITED AND ITS SUBSIDIARIES
(Incorporated in the Republic of South Africa)
(Reg. No. 1956/002134/06)
Share code: PAM ISIN: ZAE000005245
PRELIMINARY REPORT FOR THE YEAR ENDED 31 DECEMBER 2002
COMMENTARY
Group profit for the year was R257 million, up 17% on the R220 million achieved
in 2001. The increase can largely be attributed to the decrease in the value of
the Rand in 2002.
Group operating expenditure increased by R125 million mainly due to the
increased imports of copper concentrates (R91 million), open pit contract mining
costs (R88 million) and the cost of pension fund contributions arising from a
change in pension fund legislation (R30 million). These additional costs were
partly offset by the realisation of cost savings from the Total Operating
Performance (TOP) programme.
As expected, 2002 was a year of significant transition for Palabora Mining
Company. The planned closure of the open pit for large-scale mining took place
as scheduled on 30 April 2002. Smaller scale contract mining of the open pit
ramps began in May. This has been a great success with mining rates being in
excess of those forecast.
The underground mine did not achieve its targeted full production rate of 30 000
tons of ore per day by the end of 2002. Production increased during the year
from a monthly average of 4 700 tons per day in January to 13 500 tons per day
in December.
Production rates have been constrained primarily by the poor availability of
secondary breaking equipment. This is required to handle oversize material
reporting to the drawbells from the cave. Operating plans to improve production
rates are currently being implemented, including the increase in size of the
secondary breaking fleet and changes to operating methods. It is anticipated
that the target of 30 000 tons per day will be achieved in the third quarter of
2003.
As regards the development of the mine, the ore handling system, with a capacity
of 30 000 tons per day, is in place. More specifically, the undercut progressed
well and according to plan. The third crusher was commissioned on schedule and
construction of the fourth and last crusher commenced according to plan. This
will be commissioned in April 2003. 113 drawbells were completed and handed over
to operations by the end of 2002 against a target of 120 drawbells.
The delayed ramp up of the underground mine resulted in production of new copper
in concentrate of 52 197 tons, down 33 % on the 78 381 tons achieved in 2001.
Reduced new copper in concentrate production was supplemented by the processing
of smelter secondaries and low-grade concentrate stockpiles. These sources
provided an additional 12 170 tons of copper in concentrate. Total production of
copper in concentrate was 64 367 tons (2001: 82 243 tons). Imported concentrate
and stock-piled concentrates and scrap copper were also processed as feed to the
smelter, as well as stockpiled concentrate. As a result of this, refined copper
production was 81 392 tons, 6% lower than 2001 production of 86 848 tons.
Industrial Minerals profits are lower than those for 2001 following the closure
of the zirconia plant in August 2001. The upgraded ZBS plant was commissioned in
the second half of 2002. Commissioning of the plant was delayed following a fire
in January 2002. As a result, production of ZBS was limited to 501 tons in 2002
(2001: 1 229 tons). Production of ZBS within customer specifications is being
achieved on a consistent basis from the refurbished plant. Average sales prices
achieved for ZBS in 2002 were low due to the sale of stockpiled low-grade
material. Production of vermiculite improved significantly in 2002 as a result
of improved plant recoveries.
During 2001, Palabora embarked on a number of business improvement initiatives
in order to retain its position as a small-scale world-class mining company.
Good progress was made with these projects in 2002, resulting in improved
process and equipment efficiencies and reduced operating costs. A successful
redeployment programme was undertaken in the first half of 2002 to ensure that
employees working in the open pit were redeployed elsewhere in the company
wherever possible. A number of redundant assets from the open pit operations
were sold during 2002, generating cash income of R19 million.
The Group`s net debt decreased by R158 million during the year. Consolidated net
debt was R1 435 million at 31 December 2002. This was largely due to exchange
gains on the US$90 million loan facility due to the strengthening of the Rand
between the start and end of 2002. The company will be paying the first half
yearly installment of its long-term loan facility of US$15 million and R47
million on 11 June 2003. As a consequence of the strengthening of the South
African Rand in late 2002, coupled with the delay in ramp up of underground mine
production, the cash flow in the latter part of 2002 was below plan. Management
is taking the necessary action to ensure that adequate funding is available. It
is unlikely that dividend payments will recommence within the next two years.
Palabora`s safety performance has deteriorated. The lost time injury frequency
rate (LTIFR) for the year was 0,46 (2001: 0,27) arising from 26 lost time
injuries. Of the 26 lost injuries 17 occurred in the underground mine.
Contractors accounted for 65% of the lost time injuries.
There was an increase in raw water consumption with an average of 43,5 Ml/day
for 2002, compared with 36,6 Ml /day for 2001. This increase is largely due to
the low rainfall for the calendar year of 154mm against the annual average of
527mm.
Palabora, through the Palabora Foundation, has a long-term commitment to develop
and maintain sound relations with neighboring communities through a number of
programmes targeting education, community services, skills development and
healthcare.
The company bid farewell to Wells Ntuli upon his retirement at year-end. We
would like to take this opportunity of thanking Mr Ntuli for his valued
contribution during the 11 years he was a director of the company. Josh
Sachikonye will act as Chairman until a successor is appointed later this year.
J H K Sachikonye Acting Chairman
D S Sadler Managing Director 23 January 2003
Directors:
J H K Sachikonye+ (Acting Chairman),
D S Sadler** (Managing Director), D A Farnaby,
O L Groeneveld**, M D Humphries, S Langa, R M Maruma,
G M Negota, J E Rickus*, J C M van Gaalen#
(Alt: B K Wood), R M Whyte* (Alt: F B Weldon),
C N Zungu
Company secretary: E B R Hone
* British **Australian + Zimbabwean # Dutch
Transfer Secretaries: Registered Office:
Computershare Investor 1 Copper Road
Services Limited Phalaborwa
41 Fox Street 1389
Johannesburg 2001
Postal Address: Postal Address:
P O Box 61051 P O Box 65
Marshalltown 2107 Phalaborwa 1390
Reviewed Group Results
Abridged income statement
2002 2001
R000 R000
Revenue 2 121 307 1 985 038
Operating costs 1 586 598 1 461 140
Depreciation 133 187 163 535
Operating profit 401 522 360 363
Interest received 5 495 4 001
Interest payable (31 283) (31 436)
Foreign exchange gains 27 307 38 361
Increase in provisions (40 976) (31 910)
Profit before taxation 362 064 339 379
Taxation 105 211 119 546
Current 25 010 36 432
Deferred tax 80 201 83 114
Profit after taxation 256 853 219 833
Notes:
1. Accounting policies
The preliminary consolidated financial statements are prepared on the historical
cost basis. Accounting principles and policies used in preparing this report
comply with South African Statements of Generally Accepted Accounting Practice
and are consistent with the accounting policies applied in the previous year.
2. Audit review
The year-end financial results have been reviewed in terms of Rule 3.23 of the
listing requirements of the JSE Securities Exchange SA by the company`s
auditors, PricewaterhouseCoopers. This review opinion is available on request
from the Company Secretary.
Year Year
2002 2001
3. Long-term loan
Long-term loan 1 082 331 1 393 218
Current portion (355 450) (1 823)
726 881 1 391 395
The company has arranged a long-term loan with a group of
national and international banks for an unsecured facility agreement of US$125
million. The facility consists of a US$90 million tranche and a Rand tranche of
R283 million. This facility, which is being used for the underground mine
development and the repayment of other short-term loans, is repayable in six
equal half yearly instalments starting on 11 June 2003 and the interest rate is
based on Libor/Jibor + 1,5% - see commentary.
4. Headline earnings per share
The calculation of headline earnings per share is derived from consolidated net
profit after taxation of R256,9 million (2001: R219,8 million) adjusted for any
non-operational losses/ gains, divided by the number of shares in issue. The
only adjustment made to consolidated net profit after taxation is the
elimination of post taxation profit on disposal of fixed assets and subsidiaries
of R19,4 million (2001: R0,4 million). This adjustment resulted in headline
earnings of R237,5 million (2001: R219,5 million).
5. Holding company
The immediate holding company is Palabora Holdings Limited and the ultimate
holding company is Rio Tinto plc, which is incorporated in the United Kingdom.
Abridged balance sheet
2002 2001
R000 R000
Employment of capital
Current assets
Stores 47 737 46 976
Production inventories 254 607 240 368
Accounts receivable 282 456 398 699
Taxation 3 030 1 417
Cash and cash equivalents 39 019 66 475
626 849 753 935
Mining assets 4 284 701 3 959 841
Deferred expenditure - 6 534
Investment - (unlisted) 54 971 47 915
Total assets 4 966 521 4 768 225
Liabilities and shareholders` equity
Current liabilities
Accounts payable 217 900 165 821
Provisions 39 227 29 781
Current portion of long-term loans 355 450 1 823
Taxation 7 403 10 593
Group companies - related parties 8 214 13 568
Bank overdraft 391 816 266 211
1 020 010 487 797
Provision for close down costs and 185 147 162 877
restoration costs
Provision for post retirement medical 159 760 148 803
benefits
Deferred taxation 865 535 784 620
Long-term loans 726 881 1 391 395
Total liabilities 2 957 333 2 975 492
Total shareholders` equity 2 009 188 1 792 733
Total equity and liabilities 4 966 521 4 768 225
Summarised cash flow
2002 2001
R000 R000
Cash flow from operating activities 588 917 771 378
Cash flow from investing activities (741 996) (800 407)
Replacement of mining assets (195 323) (108 242)
Development expenditure (570 075) (687 679)
Other investing activities 23 402 (4 486)
Cash flow from financing activities 18 416 461
Long-term loans raised 18 1 032 575
Long and short-term loans repaid - (599 125)
Dividends paid - (16 989)
Net (decrease)/increase in cash and
cash equivalents (153 061) 387 432
Cash and cash equivalents at beginning
of period (199 736) (587 168)
Cash and cash equivalents at end of period (352 797) (199 736)
Statement of changes in equity for the year ended 31 December 2002
Share Distri-
Capital & Other butable
Premium Reserves Reserves Total
R000 R000 R000 R000
Balance
1 January 2002 28 891 174 642 1 589 200 1 792 733
Net gains and losses
not recognised in
income statement:
Currency translation
difference - (40 398) - (40 398)
Net profit for the - - 256 853 256 853
period
Dividends - - - -
Balance
31 December 2002 28 891 134 244 1 846 053 2 009 188
Comparative statement
of changes in equity
for the year ended
31 December 2001
Balance
1 January 2001 28 891 109 419 1 386 356 1 524 666
Net gains and losses
not recognised in
income statement:
Currency translation
difference - 65 223 - 65 223
Net profit for the - - 219 833 219 833
period
Dividends - - (16 989) (16 989)
Balance
31 December 2001 28 891 174 642 1 589 200 1 792 733
Selected statistics
2002 2001
R000 R000
Production and sales
Ore mined surface (millions of tons) 6,7 12,9
Ore mined underground (millions of tons) 3,3 1,0
Copper in concentrate (thousands of tons) 52,2 78,4
Cathode produced (thousands of tons) 81,4 86,9
Cathode sold (thousands of tons) 83,4 95,9
Contained copper sold (thousands of tons) 84,3 100,2
Vermiculite sold (thousands of tons) 190 186
ZBS sold (thousands of tons) 1,1 1,0
Average rand/dollar exchange rate 10,54 8,54
Average copper price realised per ton (ZAR) 17 355 14 006
Cash cost per ton - delivered (ZAR) 14 476 8 928
Average copper price realised (USc/lb) 74,7 74,4
Average vermiculite price realised per ton (ZAR) 1 911 1 571
Average ZBS price realised per ton (ZAR) 10 104 17 338
All tons are metric tons
Capital expenditure (R millions) 695 702
Capital commitments (R millions)
Approved expenditure at end of each period 381 844
Contracts placed at end of each period 293 402
Share capital
Ordinary shares of R1 each (thousands)
- authorised 28 500 28 500
Ordinary shares of R1 each (thousands)
- issued 28 316 28 316
The directors are authorised to issue
unissued shares until the next
annual general meeting
Investments - (R thousands)
Fair value of investments 86 902 81 857
Interest capitalised (R thousands) 70 796 53 927
Dividends paid (R thousands)
2001 total dividend 60 cents per share - 16 989
Earnings per share, based on the
net profit after tax R9,07 R7,76
Headline earnings per share, based on
the net profit after tax adjusted for
non-operational gains/losses R8,39 R7,75
Net asset value per share R70,96 R63,31
Segmental reporting
Copper Industrial
Minerals
R000 R000
31.12.02 31.12.01 31.12.02 31.12.01
Profit and Loss
Revenues 1 459 146 1 378 247 535 249 503 663
Cost and expenses 1 156 909 1 167 593 457 495 374 464
Operating profit 302 237 210 654 77 754 129 199
Finance cost
Profit before tax
Taxation
Net income for the six months
Other Total
R000 R000
31.12.02 31.12.01 31.12.02 31.12.01
Profit and Loss
Revenues 126 913 103 128 2 121 307 1 985 038
Cost and expenses 105 381 82 618 1 719 785 1 624 675
Operating profit 21 531 20 510 401 522 360 363
Finance cost (39 458) (20 984)
Profit before tax 362 064 339 379
Taxation 105 211 119 546
Net income for the six months 256 853 219 833
The segmental split on a geographical basis is based on the country in which the
order is received.
South Africa America United Kingdom
R000 R000 R000
31.12.02 31.12.01 31.12.02 31.12.01 31.12.02 31.12.01
Profit
and Loss
Revenues 1 632 1 486 280 917 208 222 207 636 223 044
754 238
Cost and 1 344 1 250 255 506 187 418 159 626 165 168
expenses 112 938
Operating 288 642 235 300 25 411 20 804 48 011 57 876
profit
before
tax
Taxation 80 945 88 313 9 206 7 387 15 060 18 325
Net 207 697 146 987 16 205 13 417 32 951 39 551
income
for the
year
Singapore Total
R000 R000
31.12.02 31.12.01 31.12.02 31.12.01
Profit
and Loss
Revenues - 67 534 2 121 1 985
307 038
Cost and - 42 135 1 759 1 645
expenses 243 659
Operating - 25 399 362 064 339 379
profit
before
tax
Taxation - 5 521 105 211 119 546
Net - 19 878 256 853 219 833
income
for the
year
Date: 23/01/2003 05:35:25 PM Produced by the JSE SENS Department
