| Thu 20 May 2004, 17:25 | | QUARTERLY RESULTS ENDED 31 MARCH 2004 |
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WESTERN AREAS LIMITED - QUARTERLY RESULTS ENDED 31 MARCH 2004
WESTERN AREAS LIMITED
REGISTRATION NUMBER 1959/003209/06
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
JSE SHARE CODE: WAR ISIN: ZAE000016549
INVESTING IN PROSPERITY
Quarterly results ended 31 March 2004
PRODUCTION AND UNIT RESULTS
Year Quarter Quarter
ended ended ended
31.12.03 31.12.03 31.03.04
IMPERIAL
Reef mined (000) 1,097 260 208 tons
Ore milled (000) 1,095 306 290 tons
Yield. 0.205 0.181 0.161 oz/ton
Gold produced 224,227 55,471 46,643 oz
Gold sold 225,218 58,371 47,565 oz
Cash costs 287 346 406 US$/oz
Total production costs 341 406 492 US$/oz
Gold price achieved 315 326 284 US$/oz
Average exchange rate achieved
Period end exchange rate
Capital expenditure 63 14 14 US$m
Capital commitment at end
of period 13 13 14 US$m
Quarter Quarter Year
ended ended ended
31.03.04 31.12.03 31.12.03
METRIC
Reef mined (000) tonnes 189 236 996
Ore milled (000) tonnes 262 278 995
Yield. g/tonne 5.54 6.21 7.01
Gold produced kg 1,451 1,725 6,974
Gold sold kg 1,480 1,798 7,005
Cash costs R/kg 88,550 75,036 69,861
Total production costs R/kg 107,162 87,910 83,150
Gold price achieved R/kg 61,861 71,400 76,647
Average exchange rate achieved R/$ 6.7750 6.8122 7.5682
Period end exchange rate R/$ 6.2675 6.615 6.615
Capital expenditure Rm 88 95 417
Capital commitment at end
of period Rm 84 86 86
ABRIDGED INCOME STATEMENT
Quarters ended Year ended
31.03.04 31.12.03 31.12.03
SA Rand million Notes Unaudited Unaudited Unaudited
Gold revenue 84.4 173.9 582.4
Total production costs 1 (155.5) (151.7) (579.9)
Production costs - cash (128.5) (129.5) (487.3)
Production costs - non-cash (27.0) (22.2) (92.6)
Operating (loss)/profit
from gold (71.1) 22.2 2.5
Other (costs)/income (1.5) (0.7) 176.7
Administration and other
expenditure (5.6) (4.9) (25.6)
Operating (loss)/profit
before derivative
transactions (78.2) 16.6 153.6
Present value adjustment
for option premium payable (16.2) 46.9 (75.0)
Fair value adjustment 2 74.7 447.4 447.4
Exchange gains 3 55.1 77.5 340.8
Prof it before taxation 35.4 588.4 866.8
Taxation (21.5) (354.3) (402.0)
Minority interest in profit - - (4.1)
Profit for the period 13.9 234.1 460.7
Headline earnings per share
- Cents 12 229 330
Earnings per share - Cents 13 222 437
Number of issued shares
(million) 105.4 105.4 105.4
Determination of headline
earnings:
Net profit for the period 13.9 234.1 460.7
Net loss on disposal of
subsidiary - - 40.0
Loss on disposal of fixed
assets - 2.4 2.4
Net (profit)/loss on
disposal of investments (1.2) 4.3 (155.7)
Headline earnings 12.7 240.8 347.4
ABRIDGED CASH FLOW STATEMENT
Quarters ended Year ended
31.03.04 31.12.03 31.12.03
SA Rand million Unaudited Unaudited Unaudited
Cash flow (utilised in)/from
operating activities (35.8) (10.3) 43.1
Cash flow (utilised in)/from
investing activities (59.0) 12.3 (59.7)
Cash flow from (utilised in)/ finance
activities 86.6 (7.3) (37.5)
Net decrease in cash and cash
equivalents (8.2) (5.3) (54.1)
Cash and cash equivalents:
Cash flow (utilised in)/from
operating activities (35.8) (10.3) 43.1
Cash flow (utilised in)/from
investing activities (59.0) 12.3 (59.7)
Cash flow (utilised in)/from finance
activities 86.6 (7.3) (37.5)
Net decrease in cash and cash
equivalents (8.2) (5.3) (54.1)
Cash and cash equivalents:
- at beginning of period 21.9 25.0 76.4
- effect of exchange rate
fluctuations on cash held (0.1) 2.2 1.4
- cash and cash equivalents of
subsidiary disposed of - - (1.8)
At end of period 13.6 21.9 21.9
ABRIDGED BALANCE SHEET
Period ended Year ended
31.03.04 31.12.03
SA Rand million Notes Unaudited Unaudited
ASSETS
Mining assets 4 3,293.4 3,223.9
Derivative asset 753.5 792.1
Listed investments 5 0,3 33.0
Deferred taxation 402.7 429.3
Cash and cash equivalents 13.6 21.9
Other assets 73.9 88.2
Total assets 4,537.4 4,588.4
EQUIT Y AND LIABILITIES
Shareholders` equity 1,163.0 1,144.5
Option premium payable 1,020.4 1,084.7
Derivative liability 2,100.0 2,217.6
Other liabilities 6 254.0 141.6
Total equity and liabilities 4,537.4 4,588.4
STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Number of
shares issued
and paid - Share Share
SA Rand million millions capital premium
Balance as at 31 December 2003 105.4 105.4 1,863.5
Fair value adjustment - - -
Recycling of f air value on
maturing of options - - -
Recycling of f air value on
disposal of investments - - -
Attributable profit for the period - - -
Balance as at 31 March 2004 105.4 105.4 1,863.5
Retained
Available earnings/
Hedge for-sale (Accumulated
SA Rand million reserve reserve def icit) Total
Balance as at 31
December 2003 (1,330.6) 1.7 504.5 1,144.5
Fair value adjustment (19.8) - - (19.8)
Recycling of f air
value on
maturing of options 26.1 - - 26.1
Recycling of f air
value on
disposal of investments - (1.7) - (1.7)
Attributable profit
for the period - - 13.9 13.9
Balance as at 31 March
2004 (1,324.3) - 518.4 1,163.0
NOTES TO THE ABRIDGED FINANCIAL STATEMENTS
1. Non-cash operating costs generally includes the amortisation of Western
Areas` share of South Deep and the change in inventor y for the period.
Other non-cash costs include retrenchment costs of R5.6 million in respect
of the severance cost associated with the restructuring process at South
Deep.
2. Fair value adjustments relate to the revaluation to fair value of the
derivative structure at period end. The revaluation based on exchange rate
fluctuations is accounted for in the Income Statement whilst the
revaluation based on the goldprice fluctuations is accounted for in equity
in the Balance Sheet.
3. Exchange gains relating to option premium payable are attributable to the
change in the Rand/US Dollar exchange rate from 6.615 at 31 December 2003
to 6,2675 at 31 March 2004.
4. No adjustment has been made to reflect mining assets at their fair value.
These assets are in the process of being revalued jointly with Placer Dome
South Africa (Pty) Ltd.
5. 41,895,995 JCI Limited shares have been sold during the first quarter of
2004. The remaining listed investments represent 372,350 JCI Limited shares
and 50,651 JCI Limited debentures.
6. JCI Limited which holds 35.6% of Western Areas Limited, has provided a loan
of R112.9 million (including interest capitalised) in terms of the pending
Western Areas` rights offer.
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 with the adoption of
AC 133 Financial Instruments: Recognition and Measurements in 2003.
LETTER TO SHAREHOLDERS
The Board of Western Areas is conducting a comprehensive review of the last 4
years management of the Placer Dome Western Areas Joint Venture (`PDWA JV`) by
Placer Dome. This was triggered by the announcement in November 2003 - a month
before the scheduled commissioning date of the Twin Shafts - that the project
had been delayed for a year. Concerns were exacerbated by poor production
results during the quarter ended March 2004.
The Board`s review of the PDWA JV is still ongoing, and in the interim the
following measures have been taken:
- The appointment of a new Chief Executive Officer (`CEO`), John Bredenhann,
with effect from June 2004. Breaking with tradition the CEO was not sourced
from within Placer Dome. John is a South African with extensive deep level
hard rock gold mining experience
- The Board of Western Areas is conducting a comprehensive review of the last
4 years management of the Placer Dome Western Areas Joint Venture (`PDWA
JV`) by Placer Dome. This was triggered by the announcement in November
2003 - a month before the scheduled commissioning date of the Twin Shafts -
that the project had been delayed for a year. Concerns were exacerbated by
poor production results during the quarter ended March 2004.
The Board`s review of the PDWA JV is still ongoing, and in the interim the
following measures have been taken:
* The appointment of a new Chief Executive Officer (`CEO`), John Bredenhann,
with effect from June 2004. Breaking with tradition the CEO was not sourced
from within Placer Dome. John is a South African with extensive deep level
hard rock gold mining experience.
* 48 senior employees of the PDWA JV have been retrenched.
* The predominantly expatriate capital project team appointed to manage the
Twin Shafts is being redeployed by Placer Dome.
* The Placer Dome executive participation in the South Deep management
structures has been terminated.
* The PDWA JV Board will play a more direct role in the operational affairs
of the mine. The joint venture agreement gives Placer Dome a casting vote
on matters that could be classified as `run of the mill` and any items of
significance require the unanimous approval of both Western Areas and
Placer Dome.
* In addition to the restructuring costs at South Deep, Western Areas
incurred an additional amount of R1,5 million relating to technical
consulting fees.
The Board of Western Areas looks for ward to John providing the strategic
direction and leadership necessary to enable South Deep to achieve its
objectives of becoming a high quality, long life gold mining operation.
An operating loss of R71.1 million from gold for the quarter, compared to a
profit of R4.9 million for the same period last year, reflects the impact of the
stronger Rand (6.7800 for March 2004 versus 8.3800 for March 2003). The
revaluation of dollar liabilities associated with the derivative structure
mitigated the operating loss, resulting in an after tax profit of R13.9 million.
R74.7 million of the profit before tax relates to the fair value adjustment in
respect of unrealised exchange rate gains on the derivative structure (in
accordance with AC 133).
Gold sold decreased quarter on quarter by 17.7% compared to the December quarter
due to a slow star t-up in January after the Christmas break and the uncertainty
of job tenure flowing from the ongoing South Deep review. The transition to full
calendar operations also impacted negatively on productivity. This translated
into lower gold revenues, further exacerbated by Rand strength and additional
hedge commitments of R12 million relative to the previous quarter.
The yield for the March 2004 quarter was 5.54g/t, some 10% down on the 6.21g/t
reported for the previous quarter. 73,000 tonnes of low- grade surface materials
had to be processed to f ill the metallurgical plant, supplement poor
underground production and provide backfill material for underground support.
Total production costs increased marginally to R155.5 million from R151.7
million for the December quarter that includes R5.6 million in retrenchment
costs. Cash production costs increased from R75,036 per kilogram last quarter to
R88,550 per kilogram this quarter, and total production costs increased by 22%
to R107,162 per kilogram, inclusive of the retrenchment costs. The respective
unit costs/kg of production were adversely impacted by the poor production
results and the increased costs stemming from retrenchments.
The final equipping of the Main Shaft remains on track for completion in
November 2004 when the benefits of a decade-long capital investment programme
will star t to flow. The Ventilation Shaft will be commissioned only during the
course of next year, with ventilation provided via South Shaft in the interim.
Efforts are being made to accelerate the equipping and commissioning of the Main
Shaft and supporting infrastructure without compromising quality and safety
standards.
There has been some delay in finalising the insurance claim in respect of the
rock f all early in 2004 at the PDWA JV South Shaft SV-1 sub vertical shaft as
the area had first to be made safe for a detailed assessment. Shareholders will
be kept informed of developments.
The new PDWA JV CEO will continue the restructuring at South Deep. With the
commissioning of the Main Shaft in November 2004, the mine should deliver the
returns expected from a world-class orebody equipped with new infrastructure.
The ongoing process of defining the mineral reserves and resources for South
Deep continues with the assistance of independent consultants, Steffen,
Robertson and Kirsten (South Africa) (Pty) Ltd. The Phase 1 Mineral Reserves as
previously declared should comfortably sustain mining operations at South Deep
for at least the next twenty-five years. Taking into account the current Phase 1
Mineral Reserves and assuming utilisation of the full 220 000 ton per month
hoisting capacity of the South Deep Main Shaft, an average annual production of
approximately 700 000 ounces is anticipated after 2007.
Further to the R400 million rights offer announcement on 5 February 2004 and the
general meeting on 2 March 2004 that placed the unissued shares under the
control of the directors, a circular is undergoing approval by the JSE
Securities Exchange South Africa and will be sent to shareholders, as soon as
such approval has been granted. The JCI Limited guarantee and irrevocable under
takings from Allan Gray Limited (24,5%), Randgold & Exploration Company Limited
(3.8%) and JCI Limited (35,6%) have all been secured.
Mafika Mkwanazi Brett Kebble Johannesburg
Non-executive Chairman Chief Executive Officer 20 May 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 Investor Services 2004 (Pty) Ltd
(formerly Computershare Limited)
70 Marshall Street
Johannesburg, 2001
PO Box 1053, Johannesburg, 2000
Telephone: +27 (11) 370-5000
Fax: +27 (11) 688-7721
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
For more information visit our website at www.westernareas.co.za
Date: 20/05/2004 04:30:11 PM Produced by the JSE SENS Department
