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VALUE-GROWTH INVESTMENT KEY TO SUSTAINABLE EMPOWERMENT IN MINING INDUSTRY
Kumba Resources Limited
(Incorporated in the Republic of South Africa)
Share code: KMB
ISIN code: ZAE 000034310
(Registration number: 2000/011076/06)
("Kumba" or the "company")
16 April 2003
VALUE-GROWTH INVESTMENT KEY TO SUSTAINABLE EMPOWERMENT IN MINING INDUSTRY
The South African mining industry will need to focus on value-growth investment
propositions to adequately achieve sustainable levels of empowerment as set out
in the Mining Charter.
Speaking at the "Enabling Empowerment in Mining" workshop held by the Black
Business Council in Johannesburg today, Kumba Resources chief executive, Dr Con
Fauconnier, said that value-growth propositions would enable empowerment players
to enter the industry by acquiring stakes in under-lying assets such as new
projects.
"In this way, their investment will generate sufficient value through the
project"s growth curve to pay off the debt that has funded the investment. The
empowerment investors would have the option of rolling the investment up to
controlling entity level once initial investment funding has been repaid," said
Dr Fauconnier.
"This route of entry to the industry will deliver a superior and more
sustainable outcome than that achieved by an empowerment group using debt to
acquire equity ownership in controlling companies, which are often listed."
While investing at controlling level should not be discounted, inherent
difficulties encountered include the fact that dividend yields from listed
investments are generally insufficient to service debt. An example of a R500
million investment in Kumba equity using debt would attract minimum 14% interest
amounting to R70 million of interest per year. The dividends on the 20 million
shares acquired would amount to just R17 million based on the 2002 declared
dividend, resulting in a loss for the investor.
Dr Fauconnier added that it was crucial to find ways to increase the size of the
industry and provide new investment opportunities for empowerment investors to
enter the industry.
Kumba"s commitment to empowerment in the industry is demonstrated by an anchor
empowerment agreement concluded with the Tiso Kgalagadi Consortium in November
2001. In terms of the agreement, Tiso secured a 4,8% shareholding in Kumba.
Kumba intends to include Tiso, and other empowerment groups, in the development
of its Sishen South project in the Northern Cape. The project is expected to
eventually produce 8,5 million tons of iron ore per year.
The company has signed a Memorandum of Understanding with Eyesizwe Coal to
jointly develop the Kalbasfontein Coal Mine near Witbank, and may include Tiso
and empowerment groups based in KwaZulu-Natal in acquiring a 20% stake in the
Ticor South Africa heavy minerals project.
Empowerment targets set out in the Mining Charter include enabling HDSA groups
to acquire 15% ownership of the industry within five years, and 26% ownership
within 10 years. The current total market capitalisation of the mining industry
is estimated at R700 billion.
ends
Note
Kumba Resources Limited, one of the largest South African-based mining companies
listed on the JSE Securities Exchange, is a focused metals and mining company
with a diverse commodity portfolio consisting of iron ore, heavy minerals, coal,
base metals and industrial minerals. www.kumbaresources.com
For media relations enquiries, please contact:
Dr Con Fauconnier
Chief Executive
Tel: 012 - 307-4314
Pat Mdoda
General Manager: Corporate Affairs
Tel: 012 - 307-4553
Mobile: 083 609 1204
For investor relations enquiries, please contact:
Trevor Arran
General Manager: Investor Relations
Tel: 012 - 307-3292
Mobile: 083 609 1444
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