| Fri 30 Jan 2004, 11:59 | | Preliminary Results For The Year Ended 31 December |
|
Palabora Mining - Preliminary Results For The Year Ended 31 December 2003
Release Date: 30/01/2004 07:00:10 Code(s): PAM
PALABORA MINING - PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2003
Palabora Mining
Company Limited and its Subsidiaries
(Incorporated in the Republic of South Africa)
(Reg. No. 1956/002134/06)
Share code:PAM ISIN: ZAE000005245
("Palabora" or "the Company")
PRELIMINARY RESULTS
for the YEAR ended 31 DECEMBER 2003
commentary
Overview
The ramp up to full production of the underground block-cave mining operation
continued during 2003. In-pit ramp scavenging activities were discontinued in
November 2003. Palabora"s underground mine achieved a number of significant
milestones during 2003. The safety record was the best on record with only seven
lost time injuries recorded. This is consistent with improvements around the
rest of the business where a total of 17 lost time injuries were recorded
compared to 26 in 2002. The Industrial Minerals Division continued with its
excellent safety performance, finishing the year without any lost time injuries.
The first quarter production in 2003 averaged 10,288 tonnes per day, this
increased to 21,983 tonnes per day in the final quarter as a result of the
improvements initiated during 2003. A production rate of 30,000 tonnes of ore
per day was achieved on several occasions during the fourth quarter and the
Company is confident of achieving that rate more regularly in the forthcoming
months. Current work to achieve this is focused on further improvements to
equipment effectiveness, particularly secondary breaking equipment. Production
of refined copper was supplemented by purchased copper concentrate and the
ongoing ramp scavenging operation in the open pit. On 15 September 2003 Palabora
issued convertible debentures via a rights offer which raised R849 million.
During the last quarter Palabora implemented the first stage of the organisation
restructuring process, the aim of which is to process lower throughput
efficiently.
Group financial results
Group loss after taxation for the year was R35 million, which compares with the
R257 million profit achieved in 2002, after offsetting a R66 million deferred
taxation write-back.
The Rand strengthened by 28% on average in 2003 compared with 2002, which led to
reduced revenues of R577 million. Partially offsetting this was an improvement
in the price of copper and other minerals which increased revenues by R169
million. Sales volumes of copper during 2003 were 8.5% below the 2002 level.
Copper sales were limited by reduced production. Overall, lower sales volumes
reduced profit by R65 million.
Group operating expenditure reduced by R184 million mainly due to reduced sales
and production volumes. Achievements obtained through business improvement
initiatives continued from prior years reduced the cost base further. Included
are increased open pit contract mining costs of R72 million and a provision
raised of R37 million for the cost of voluntary early retirement for former
employees.
Finance charges increased due to the increased debt levels of the Group as well
as more expensive loans. This was partially offset by currency gains on
repayment of existing debt.
Earnings were adversely impacted in the final quarter of 2003 as a result of the
commencement of depreciation of the underground asset as well as the cessation
of capitalisation of interest. These changes were made to recognize that the
underground mine had reached commercial levels of production.
Higher inventory values are primarily due to increased unit cost of production,
premium paid on imported concentrates and inclusion of depreciation.
The feasibility study indicated the total expenditure requirement to build the
underground mine would be $437 million. Subsequently the latest estimate
indicates that a total of $460 million is required, an overspend of $23 million.
The following are the main reasons for this increase in cost:
- additional mobile equipment (three additional secondary breaking units have
been ordered for delivery in April 2004);
- enhanced water management;
- slowdown of the development of the production footprint because of seismic
activity; and
- additional support for drawpoints because of excessive wear.
The project to develop an underground mine had been in progress for 92 months at
the end of 2003. A total of 117,556 square metres have been undercut, to date
99% complete. The outstanding 1,783 square metres are anticipated to be
completed in February 2004. A total of 148 drawbells have been commissioned, 89%
of the total complete. Completion of the outstanding 18 drawbells is anticipated
by end April 2004. 16 out of the targeted 19 crosscuts were completed. The
development of a 20th crosscut is being reviewed.
The net debt increased by 27% to R1,820 million during the year mainly due to on
going capital expenditure on the underground project. The Company has negotiated
with its major shareholder to provide an unsecured loan of US$65 million to meet
short term financial obligations. The intent is that this will be repaid out of
the proceeds of a full recapitalisation of the business at a later stage. No
dividends were declared and it is unlikely that dividends will recommence within
the next year.
ZBS (zirconium basic sulphate) production was 1,129 metric tons for the year.
Whilst the plant has been proven technically, the difficult market conditions
have meant that the Board are in the process of considering other options for
the ZBS facility, including, sale to a third-party as a going concern or
alternatively a toll-manufacturing arrangement with the major customer.
Shareholders will be advised in due course regarding the Board"s decision.
Demand for vermiculite was constrained in the United States and efforts were
made to develop new markets. Production during the third quarter of 2003 was
reduced in order to lower supply chain inventory levels.
The sudden death of our previous Chairman, Mr. Wells Ntuli, who retired at the
end of 2002, is announced with sadness.
R M MarumaD S Sadler
ChairmanManaging Director
30 January 2004
Directors:
R M Maruma (Chairman), D S Sadler** (Managing Director), D A Farnaby, O L
Groeneveld**, M D Humphries, S Langa, K Marshall*, G M Negota, J C Posthumus
(appointed 27 January 2004), J E Rickus*, J H K Sachikonye+, J C M van Gaalen#
(resigned 27 January 2004) (Alt: B K Wood), R M Whyte* (Alt: F B Weldon), C N
Zungu
Company secretary: EBRHone
* British **Australian + Zimbabwean # Dutch
Transfer Secretaries:Registered Office:
Computershare Limited 1 Copper Road
70 Marshall StreetPhalaborwa
Johannesburg 20011389
Postal Address:Postal Address:
P O Box 61051P O Box 65
Marshalltown 2107Phalaborwa 1390
REVIEWED Group results
Abridged income statement
2003 2002
R000 R000
Revenue 1 554 727 2 121 307
Operating costs 1 402 401 1 586 598
Depreciation 126 402 133 187
Operating profit 25 924 401 522
Interest received 215 5 495
Interest paid (93 003) (31 283)
Foreign exchange gains 14 366 27 306
Provisions (30 675) (40 976)
(Loss)/profit before taxation (83 173) 362 064
Taxation 48 522 (105 211)
Current (17 871) (25 010)
Deferred tax 66 393 (80 201)
(Loss)/profit after taxation (34 651) 256 853
(Loss)/earnings per share (122)c 907c
Write back of profit on disposal of fixed (30)c (68)c
assets - net of tax
Reversal of provision for Palabora (69)c -
Foundation donation
Headline (loss)/earnings per share (7) (221)c 839c
Weighted average shares in issue 28 316 28 316
Notes:
1. Accounting policies
The preliminary consolidated financial statements are prepared on the historical
cost basis. During the year, Palabora adopted the provisions of AC133,
"Financial Instruments: Recognition and Measurement". As a consequence,
investments are now stated in the balance sheet at fair market value. The impact
of the adoption of AC133 resulted in an increase in investments amounting to R61
million. Unrealised gains and losses on the revaluation are recognised through
the statement of changes in equity. All other accounting policies used are
consistent with those used in the audited financial statements for the year
ended 31 December 2002. The preliminary results have been prepared in accordance
with South African Statements of Generally Accepted Accounting Practice,
including accounting standard AC127, "Interim Reports".
2. Audit review
The year-end financial results have been reviewed in terms of paragraph 3.18 (c)
of the Listings Requirements of the JSE Securities Exchange SA by the Company"s
auditors, PricewaterhouseCoopers Inc. This review opinion is available on
request from the Company Secretary.
2003 2002
R000 R000
3. Net debt
Current portion of long term loans 294 212 355 450
Non current portion of long term loans 1 153 937 726 881
Total long term loans 1 448 149 1 082 331
Bank overdrafts 388 660 391 816
Cash and cash equivalents (16 602) (39 019)
Net debt 1 820 207 1 435 128
In 2001 the Company arranged an unsecured long-term loan with a group of
domestic and inernational banks. The facility consisted of a US$90 million
tranche and a Rand tranche of R283 million.
The loan is repayable in six equal half yearly instalments of US$15 million and
R47 million. The first repayment was made in June 2003 and the second repayment
in December 2003. The interest rate is Libor / Jibor plus 1,5%. During the first
half of 2003, Rio Tinto, the Company"s major shareholder, agreed to provide a
short-term facility of up to US$60 million at an interest rate of Libor plus 5%.
US$55 million had been drawn and this loan was repaid from the proceeds of a
rights offer of debentures completed in September 2003. R849 million was raised
by way of a renounceable rights offer to shareholders at an issue price of
R1,000 per convertible debenture at an interest rate of Jibar plus 5%.
4. Contingencies and commitments
In the 2002 Annual Financial Statements a contingent liability was disclosed
relating to payments made to former employees for early voluntary retirement. In
the current financial year Palabora provided R37 million to recognise this
liability.
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.
6. Share capital
The directors are authorised to issue unissued shares until the next annual
general meeting. On 16th July 2003 shareholders approved a special resolution to
increase the authorised share capital of the Company to 100,000,000 ordinary
shares of R1 each and an ordinary resolution placing the newly issued shares
under the control of the directors.
7. Headline loss
The calculation of headline (losses)/earnings per share is derived from
consolidated net loss after taxation of R34.7 million (2002: net profit of
R256.9 million) adjusted for any non-operational losses or gains, divided by the
number of shares in issue. 2003 year losses (2002: earnings) have been adjusted
for the post taxation impact of profit on disposal of fixed assets of R8.5
million (2002: R19.4 million) and the release of provisions for donations to the
Palabora Foundation of R19.4 million. Headline losses for the year ended 31
December 2003 are R62.5 million (2002: headline earnings of R237.5 million).
Abridged balance sheet
2003 2002
R000 R000
Employment of capital
Current assets
Stores 59 322 47 737
Product inventories 374 940 254 607
Accounts receivable 220 677 282 456
Taxation 1 400 3 030
Cash and cash equivalents 16 602 39 019
672 941 626 849
Non-current assets
Mining assets 4 575 672 4 284 701
Investment - unlisted 118 043 54 971
Total assets 5 366 656 4 966 521
Liabilities and shareholders" equity
Current liabilities
Accounts payable 298 031 217 900
Provisions 26 799 39 227
Current portion of long term loans 294 212 355 450
Taxation 6 237 7 403
Group companies - related parties 13 237 8 214
Bank overdraft 388 660 391 816
1 027 176 1 020 010
Non-current liabilities
Provision for close down costs and 196 817 185 147
restoration costs
Provision for post retirement medical 172 209 159 760
benefits
Deferred taxation 799 436 865 535
Long-term loans 1 153 937 726 881
Total liabilities 3 349 575 2 957 333
Total shareholders" equity 2 017 081 2 009 188
Total equity and liabilities 5 366 656 4 966 521
Summarised cash flow
2003 2002
R000 R000
Cash (utilised in)/generated from (4 576) 588 917
operating activities
Cash utilised in investing activities (555 629) (741 996)
Replacement of mining assets (117 964) (195 323)
Development expenditure (450 601) (570 075)
Other investing activities 12 936 23 402
Cash flow from financing activities 540 944 18
Long and short term loans raised 1 268 840 18
Long and short term loans re-paid (727 896) -
Net decrease in cash and cash equivalents (19 261) (153 061)
Cash and cash equivalents at beginning of (352 797) (199 736)
year
Cash and cash equivalents at end of year (372 058) (352 797)
Statement of changes in equity for the year ended 31 December 2003
Distri-
Share butable Capital & Other
Premium Reserves Reserves Total
R000 R000 R000 R000
Balance 1 January 2003 28 891 134 244 1 846 053 2 009 188
Revaluation of - 60 795 - 60 795
investments
Currency translation - (18 436) - (18 436)
difference
Other movements - 185 - 185
Net loss for the year - - (34 651) (34 651)
Balance 31 December 28 891 176 788 1 811 402 2 017 081
2003
Statement of changes
in equity for the year
ended 31 December 2002
Balance 1 January 2002 28 891 174 642 1 589 200 1 792 733
Currency translation - (40 398) - (40 398)
difference
Net profit for the - - 256 853 256 853
year
Balance 31 December 28 891 134 244 1 846 053 2 009 188
2002
Selected statistics
2003 2002
R000 R000
All tonnes are metric tonnes
Production and sales
Ore mined (millions of tonnes)
Surface 5.5 6.7
Underground 6.0 3.3
Copper in concentrate produced (thousands of 52.4 52.2
tonnes)
Cathode produced (thousands of tonnes) 73.4 81.6
Cathode sold (thousands of tonnes) 76.6 83.4
Contained copper sold (thousands of tonnes) 77.1 84.3
Vermiculite sold (thousands of tonnes) 174 190
ZBS sold (thousands of tonnes) 1.1 1.1
Average copper price realised (USc/lb) 84.5 74.7
Average rand/dollar exchange rate 7.56 10.54
Average copper price realised per tonne (ZAR) 14 084 17 355
Cash cost per tonne - delivered (ZAR) 15 223 14 476
Average vermiculite prices realised per tonne 1 429 1 911
(ZAR)
Average ZBS prices realised per tonne (ZAR) 7 251 10 104
Capital expenditure & commitments
Capital expenditure (R million) 518 695
Approved expenditure at end of each year (R 277 381
million)
Contracts placed at end of each year (R 185 293
million)
Interest capitalised (R million) 53 71
Exchange gain/(loss) capitalised (R million) 149 302
Investments
Fair value of unlisted investments (R 118 043 86 902
thousands)
Share capital (6)
Ordinary shares of R1 each (thousands) - 100 000 28 500
Authorised
Ordinary shares of R1 each (thousands) - Issued 28 316 28 316
Net asset value per share R71.24 R70.96
Segmental reporting
Copper Industrial Minerals
R000 R000
31.12.03 31.12.02 31.12.03 31.12.02
Profit and Loss
Revenues 1 082 735 1 459 146 356 802 535 249
Cost and expenses 1 140 774 1 156 909 333 338 457 495
Operating (loss)/profit (58 039) 302 237 23 464 77 754
Net interest paid
Other costs and provisions
(Loss)/profit before tax
Taxation
Net (loss)/profit for the year
Other Total
R000 R000
31.12.03 31.12.02 31.12.03 31.12.02
Profit and Loss
Revenues 115 190 126 912 1 554 727 2 121 307
Cost and expenses 54 691 105 381 1 528 803 1 719 785
Operating (loss)/profit 60 499 21 531 25 924 401 522
Net interest paid
Other costs and provisions (92 788) (25 788)
(16 309) (13 670)
(Loss)/profit before tax (83 173) 362 064
Taxation 48 522 (105 211)
Net (loss)/profit for the (34 651) 256 853
year
The segmental split on a geographical basis is based on the country in which the
order is received.
South Africa America
R000 R000
31.12.03 31.12.02 31.12.03 31.12.02
Profit and Loss
Revenues 1 227 439 1 632 754 163 241 280 917
Cost and expenses 1 367 622 1 344 112 154 743 255 506
Operating (loss)/profit before tax (140 183) 288 642 8 498 25 411
Taxation 65 869 (80 945) (2 907) (9 206)
Net (loss)/profit for the year (74 314) 207 697 5 591 16 205
United Kingdom Total
R000 R000
31.12.03 31.12.02 31.12.03 31.12.02
Profit and Loss
Revenues 164 047 207 636 1 554 727 2 121 307
Cost and expenses 115 535 159 625 1 637 900 1 759 243
Operating (loss)/profit 48 512 48 011 (83 173) 362 064
before tax
Taxation (14 440) (15 060) 48 522 (105
211)
Net (loss)/profit for 34 072 32 951 (34 651) 256 853
the year
These results are also available on our website at: www.palabora.co.za
