| Thu 26 Feb 2004, 17:06 | | QUARTERLY RESULTS ENDED 31 DECEMBER 2003 |
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WESTERN AREAS LIMITED - QUARTERLY RESULTS ENDED 31 DECEMBER 2003
WESTERN AREAS LIMITED
("Western Areas")
Registration number 1959/003209/06
Incorporated in the Republic of South Africa
SHARE CODE: WAR * Isin: ZAE000016549
QUARTERLY RESULTS ENDED 31 DECEMBER 2003
PRODUCTION AND UNIT RESULTS
Year Year Quarter Quarter
ended ended ended ended
31.12.02 31.12.03 30.09.03 31.12.03
IMPERIAL
995 1 095 307 306 tons Ore milled, (000)
0,198 0,205 0,204 0,181 oz/ton Yield
197 419 224 227 62 709 55 471 oz Gold produced
195 297 225 218 60 787 58 371 oz Gold sold
196 287 303 346 US$/oz Cash costs
226 341 369 406 US$/oz Total production costs
291 315* 345 326* US$/oz Gold price achieved
42 62 17 7 US$m Capital expenditure
25 13 13 13 US$m Capital commitment at end of
period
*See note 5 to the abridged financial statements
Quarter Quarter Year Year
ended ended ended ended
31.12.03 30.09.03 31.12.03 31.12.02
METRIC
Ore milled, (000) tonnes 278 279 995 903
Yield g/tonne 6,21 6,99 7,01 6,79
Gold produced kg 1 725 1 949 6 974 6 141
Gold sold kg 1 798 1 890 7 005 6 075
Cash costs R/kg 75 036 68 311 69 861 66 070
Total production costs R/kg 87 910 83 106 83 150 76 262
Gold price achieved R/kg 71 400* 77 653 76 647* 98 189
Capital expenditure Rm 44 121 411 437
Capital commitment at
end of period Rm 86 91 86 214
*See note 5 to the abridged financial statements
ABRIDGED INCOME STATEMENT
Quarters ended
31.12.03 30.09.03
Rand million Notes Unaudited Unaudited
Gold revenue 173,9 146,8
Total production costs 1 (151,7) (162,0)
Production costs - cash (129,5) (133,2)
Production costs - non cash (22,2) (28,8)
Operating profit/(loss) from gold 22,2 (15,2)
Other income 2 (0,7) 37,6
Administration and other costs (4,9) (8,5)
Exchange gains 3 77,5 -
Derivative transaction income/(costs) 5 46,9 68,2
Fair value adjustment 5 447,4 -
Hedge position closure costs - -
Non-recurring costs - -
Profit/(Loss) before taxation 588,4 82,1
Taxation (354,3) 29,2
Minority interest in profit - (1,0)
Attributable profit/(loss) after taxation 234,1 110,3
Headline earnings/(loss) per share (cents) 229 88
Earnings/(Loss) per share (cents) 222 105
Number of issued shares (million) 105,4 105,4
Determination of headline earnings:
Net profit/(loss) for period 234,1 110,3
Net loss on disposal of subsidiary - 40,0
Non-recurring costs - -
Loss on disposal of fixed assets 2,4 -
Net loss/(profit) on disposal of investments 4,3 (57,5)
Headline earnings/(loss) 240,8 92,8
Year ended Year ended
31.12.03 31.12.02
Rand million Unaudited Audited
Gold revenue 582,4 596,5
Total production costs (579,9) (468,4)
Production costs - cash (487,3) (405,8)
Production costs - non cash (92,6) (62,6)
Operating profit/(loss) from gold 2,5 128,1
Other income 176,7 111,6
Administration and other costs (25,6) (48,8)
Exchange gains 340,8 -
Derivative transaction income/(costs) (75,0) (51,2)
Fair value adjustment 447,4 -
Hedge position closure costs - (592,5)
Non-recurring costs - (9,0)
Profit/(Loss) before taxation 866,8 (461,8)
Taxation (402,0) 185,2
Minority interest in profit (4,1) (3,9)
Attributable profit/(loss) after taxation 460,7 (280,5)
Headline earnings/(loss) per share (cents) 330 (289)
Earnings/(Loss) per share (cents) 437 (266)
Number of issued shares (million) 105,4 105,4
Determination of headline earnings:
Net profit/(loss) for period 460,7 (280,5)
Net loss on disposal of subsidiary 40,0 -
Non-recurring costs - 16,7
Loss on disposal of fixed assets 2,4 -
Net loss/(profit) on disposal of investments (155,7) (40,7)
Headline earnings/(loss) 347,4 (304,5)
ABRIDGED cash flow statement
Quarters ended Year ended Year ended
31.12.03 30.09.03 31.12.03 31.12.02
Rand million Unaudited Unaudited Unaudited Audited
Cash flow (utilised in)/
from operating activities (10,3) 40,3 43,1 (422,8)
Cash flow from/(utilised in)
investing activities 12,3 (41,3) (59,7) (441,8)
Cash flow utilised in
financing activities (7,3) (9,1) (37,5) -
Net decrease in cash and
cash equivalents (5,3) (10,1) (54,1) (864,6)
Cash and cash equivalents:
- at beginning of period 25,0 39,6 76,4 1,104,1
- effect of exchange rate
fluctuations on cash held 2,2 (2,7) 1,4 (163,1)
- cash and cash equivalents
of subsidiary disposed of - (1,8) (1,8) (163,1)
At end of period 21,9 25,0 21,9 76,4
NOTES TO THE ABRIDGED FINANCIAL STATEMENTS
1. Non-cash operating costs generally include the amortisation of Western
Areas" share of South Deep and the change in inventory for the period.
2. Other income includes the fair value revaluation adjustment of R2,4 million
to unlisted investments.
3. Exchange gains relating to option premium payable are attributable to the
change in the Rand/US Dollar exchange rate from 8.691 to the US Dollar at 31
December 2002 to 6.615 at 31 December 2003.
4. No adjustment has been made to reflect mining assets at their fair value.
These assets are in the process of been revalued jointly with Placer Dome
South Africa (Pty) Limited.
5. AC 133 is effective for financial years commencing on or after 1 July 2002
and was thus implemented as at 1 January 2003 for the current financial year.
The requirements of AC 133 - "Financial Instruments: Recognition and
Measurement" have a profound impact on the accounting treatment applied to the
derivative structure.
The accounting treatment applied during the previous year ended 31 December
2002 gave rise to four items on the balance sheet:
* Deferred option premium expense - amortised to the Income Statement
* Cash and cash equivalents
* Option premium payable - revaluation and payment.
* Deferred option premium income - amortised to the Income Statement
The accounting treatment post AC 133 results in the derivative
structure/instruments being carried at fair value on the balance sheet. The
accounting treatment applicable to the option premium payable balance remains
unchanged under AC 133.
The current years accounting treatment gives rise to the following items on
the balance sheet:
* Cash flow hedge reserve
* Derivative asset
* Option premium payable
* Derivative liability
The post AC 133, re-occurring accounting entries can be summarised as
follows:
* Fair value adjustment to derivative asset, derivative liability and cash
flow hedge reserve attributable to US Dollar gold price fluctuations
* Fair value adjustment to derivative asset, derivative liability and income
statement attributable to changes in the Rand/US Dollar exchange rates
* Release of a portion of the cash flow hedge reserve to the Income Statement
on option maturity
* Revaluation of Option premium payable to its present value at period-end
exchange rates
* Actual payment of option premiums payable.
Adjustment
to opening
Opening adjustments - AC 133 Balance - Adjustment to retained
31 December Balance earnings-
Reconciliation of derivative 2002 Sheet amortisation
transaction balances Audited balances (a) to date (b)
Deferred option premium expense 1,148.8 (1,148.8) -
Deferred option premium income (1,009.7) 1,009.7 -
Derivative asset - 1,148.8 400.6
Derivative liability - (1,009.7) (262.5)
Option premium payable (1,382.2) - -
Adjustment to
opening Adjustment to Balance -
retained cash flow 1 January
Reconciliation of derivative earnings- hedge 2003
transaction balances Audited fair value (c) reserve (d) Adjusted
Deferred option premium expense - - -
Deferred option premium income - - -
Derivative asset (183.2) (691.2) 675.0
Derivative liability 435.7 (768.8) (1,605.3)
Option premium payable - - (1,382.2)
Movement
2003 movements Balance- per Balance Movement of
1 January Sheet- option
Reconciliation of derivative 2003 maturing premium
transaction balances Adjusted of options payable
Derivative asset 675.0 (44.1) -
Derivative liability (1,605.3) 120.8 -
Option premium payable (1,382.2) - 297.5
Payment of premiums 37.4
Exchange gain/(loss) 335.1
Present value adjustment (75.0)
2003 movements Movement Adjustment to
per Income cash flow Balance-
Reconciliation of derivative Statement hedge 31 December
transaction balances fair value (c) reserve (d) 2003
Derivative asset (248.6) 409.8 792.1
Derivative liability 696.0 (1,429.1) (2,217.6)
Option premium payable - - (1,084.7)
Payment of premiums
Exchange gain/(loss)
Present value adjustment
(a) Reclassification of balances
(b) Reversal of amortisation
(c) Fair value adjustment in respect of Rand/US Dollar exchange rates
(d) Fair value adjustment in respect of US Dollar gold price fluctuations
*The gold price achieved as stated in the production and unit results exclude
AC 133 accounting adjustments. The gold price achieved, including AC 133
adjustments were R96 738/kg (US$442/oz) for the quarter ended 31 December 2003
and R83 151/kg (US$341/oz) for the year ended 31 December 2003.
4. Listed investments of R33,0 million represent 42 268 345 JCI Limited
ordinary shares and 50 651 JCI Limited debentures received in terms of
the Barnato Exploration Limited, scheme of arrangement concluded at 30
September 2003 at fair value.
ABRIDGED BALANCE SHEET
Period ended Year ended
31.12.03 30.09.03 31.12.02
Rand million Notes Unaudited Unaudited Audited
ASSETS
Mining assets 4 3 223,9 3 154,7 2 976,1
Deferred premium costs 5 - 942,4 1 148,8
Derivative asset 5 792,1 - -
Listed investments 6 33,0 165,3 61,5
Cash and cash equivalents 21,9 25,0 76,4
Other assets 88,2 94,3 228,5
Total assets 4 159,1 4 381,7 4 491,3
EQUITY AND LIABILITIES
Shareholders" equity 1 144,5 1 383,6 1 751,7
Outside shareholders" equity - - 22,5
Deferred taxation (429,3) (286,6) 176,7
Option premium payable 5 1 084,7 1 147,2 1 382,2
Deferred premium income 5 - 859,5 1 009,7
Derivative liability 5 2 217,6 - -
Hedge liability 5 - 1 101,3 -
Other liabilities 141,6 176,7 148,5
Total liabilities 4 159,1 4 381,7 4 491,3
STATEMENT OF CHANGEs IN SHAREHOLDERS" EQUITY
Number of
shares issued
and paid- Share Share
Rand million millions capital premium
Balance as at 31 December 2002 105,4 105,4 1,863,5
Change in accounting policy - AC 133 - - -
Restated opening balance 105,4 105,4 1,863,5
Fair value adjustment - - -
Recycling of fair value on maturing of options - - -
Recycling of fair value on disposal of investments - - -
Attributable profit for period - - -
Balance at 31 December 2003 105,4 105,4 1,863,5
Retained
Cash flow Available earnings/
Hedge for-sale (Accumulated
Rand million millions reserve reserve deficit) Total
Balance as at 31 December 2002 - - (217,2) 1,751,7
Change in accounting policy - AC 133 (788,4) - 352,4 (436,0)
Restated opening balance (788,4) - 135,2 1,315,7
Fair value adjustment (550,4) 38,7 - (511,7)
Recycling of fair value
on maturing of options 8,2 - - 8,2
Recycling of fair value on
disposal of investments - (37,0) (91,4) (128,4)
Attributable profit for period - - 460,7 460,7
Balance at 31 December 2003 (1,330,6) 1,7 504,5 1,144,5
BASIS OF ACCOUNTING
The quarterly results are prepared in accordance with South African Statements
of Accepted Accounting Practice and the accounting policies applied are
consistent with that of the previous corresponding period, except for the
adoption of AC 133 Financial Instruments : Recognition and Measurements during
the current year.
LETTER TO SHAREHOLDERS
The results as at 31 December 2003 include significant changes from the
previous quarterly results published in 2003, as well as the historic results.
The changes stem from the revised implementation of the accounting standard AC
133 - "Financial Instruments: recognition and measurement", which has had a
profound impact on the accounting treatment applied to the derivative
structure.
The profit after taxation amounted to R234,1 million for the December 2003
quarter and R460,7 million for the year ended on 31 December 2003. Included in
the profit before taxation is R447,4 million relating to the fair value
adjustment in respect of unrealised exchange rate revaluations of the
derivative structure in accordance with AC 133.
Gold revenue for the year decreased by 2% from R596,0 million in 2002 to
R582,4 million in 2003. This was despite the continued improvement in gold
production, an increase of 833 kg (26,808 ounces) year on year, and the higher
dollar gold price (361 for 2003 versus 291 for 2002). The primary negative
contributory factors to the decline in gold revenue was the sharp appreciation
in the Rand/US Dollar exchange rate (7.5735 for 2003 compared to 10.4808 for
2002), and the cost of settling sold call positions (R37,5 million). Gold
revenue for the quarter is skewed positively by R27,1 million due to the
revised implementation of AC 133.
The gold production for 2003 of 224,227 ounces was disappointing measured
against the anticipated gold production of 237,483 ounces, an under
achievement of some 5%, stemming from the backfill plant fire in March 2003
and the delayed commissioning of the South Deep Twin Shaft Complex ("Shaft")
in the last quarter of 2003.
The yield for the December quarter was down to 6.21g/t as a consequence of the
continued treatment of low-grade surface materials (53,000 tonnes) to help
fill the metallurgical plant and provide backfill material, and similarly for
the year as a whole (146,000 tonnes).
Production costs came down from R162,0 million to R151,7 million for the
December quarter (after taking into account further stock write-downs of
R3 million in the December quarter following the year-end audit, bringing the
total stock write-downs for the year to approximately R9 million). Total
production costs increased from R76,262 per kilogram a year ago to R83,150 per
kilogram, and cash costs increased by 6% to R69,861 per kilogram. These
increases reflect the higher than anticipated wage increase in June (9,5%
compared to the Consumer Price Index), the stock write-downs and no benefit
from the utilization of the new infrastructure.
The final equipping of the Shaft remains on track to be completed in the
latter part of 2004. Efforts are being made to accelerate the equipping and
development of the Shaft, and supporting infrastructure, without compromising
the quality and safety standards.
On 2 January 2004 an unforeseen rock fall occurred at the Placer Dome Western
Areas Joint Venture South Deep SV-1 sub vertical shaft. Although no personnel
were injured as a result of this incident, some 750 tonnes of rock and shaft
liner dislodged causing damage to the shaft steelwork and infrastructure.
Mining operations at the SV-1 sub vertical shaft had ceased in 1999 and
operations were only planned to recommence sometime in the future and hence will
not impact in production in 2004. An insurance review is underway to quantify
the amount of the losses incurred and finalise a claim. Work is presently in
progress as regards finalising a fully SAMREC compliant
Mineral Resource and Reserve Statement based on a more representative modeling
technique, and an expanded database. This follows earlier Mineral Resource
and Reserve Statements based on annual depletions of a model established in
2000.
Further to the announcement published on 5 February 2004 regarding a proposed
rights offer of R400 million, shareholders are referred to the notice to
shareholders convening a general meeting on 2 March 2004, to place the
unissued ordinary shares in the share capital of Western Areas under the
control of the directors. Following this meeting, a circular will be sent to
shareholders in respect of the rights offer. Shareholders will be kept informed
on developments.
Mafika Mkwanazi Brett Kebble Johannesburg
Non Executive Chairman Chief Executive Officer 26 February 2004
CONTACT DETAILS
WESTERN AREAS LIMITED
("Western Areas")
28 Harrison Street
Johannesburg, 2001
PO Box 61719, Marshalltown, 2107
Telephone: +27 (11) 688-5000
Fax: +27 (11) 834-9195
OFFICE OF SOUTH AFRICAN TRANSFER SECRETARIES
Computershare Limited
70 Marshall Street
Johannesburg, 2001
PO Box 1053, Johannesburg, 2000
Telephone: +27 (11) 370-5000
Fax: +27 (11) 372-5271/2
OFFICE OF UNITED KINGDOM REGISTRARS
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TU
INVESTOR RELATIONS
George Poole
Telephone: +27 (11) 688-5000
Fax: +27 (11) 836-3757
email: gpoole@jci.co.za
Date: 26/02/2004 05:01:47 PM Supplied by www.sharenet.co.za
Produced by the JSE SENS Department
