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Anglo Platinum - Interim Results
Anglo American Platinum Corporation Limited
(`Anglo Platinum`)
(Incorporated in the Republic of South Africa)
(Registration number 1946/022452/06)
JSE Codes: AMS; AMSP
ISIN: ZAE000013181; ZAE000054474
- Equivalent refined Pt production# increases by 7,8%
- Headline earnings## per share up 32%
# Mines` production and purchases of metal in concentrate converted to
equivalent refined production using Anglo Platinum standard smelting and
refining recoveries.
## Before the adoption of AC 501 - Accounting for Secondary Tax for Companies
Consolidated Income Statement
Reviewed Reviewed
Six Six Audited
months months Year
ended ended ended 31
30 June 30 June % December
R millions Notes 2004 2003 Change 2003
Gross sales revenue 9 589,5 7 349,6 16 508,6
Commissions paid (172,7) (203,5) (408,2)
Net sales revenue 9 416,8 7 146,1 32 16 100,4
Cost of sales (6 936,9) (5 266,6) (32) (12
190,5)
Gross profit on metal 2 479,9 1 879,5 32 3 909,9
sales
Other net (expenditure)/ 4 (150,2) 25,5 (269,3)
income
Market development and (94,5) (129,4) (257,5)
promotional expenditure
Operating profit 2 235,2 1 775,6 26 3 383,1
Net interest paid 5 (179,8) (19,5) (236,9)
Income from associates 37,7 12,8 35,0
Profit before taxation 2 093,1 1 768,9 18 3 181,2
Taxation (642,0) (657,6) 2 (1 089,3)
Net profit 1 451,1 1 111,3 31 2 091,9
Headline earnings 6 1 530,8 1 044,2 2 091,7
Adjustment for the 13 (27,8) 71,7
adoption of AC 501
Headline earnings before 1 503,0 1 115,9 35 2 091,7
adoption of AC 501
- Attributable to 1 479,0 1 115,9 33 2 091,7
ordinary shareholders
- Attributable to 24,0
preference shareholders
Number of ordinary 217,1 215,1 215,4
shares in issue
(millions)
Weighted average number 215,9 215,0 215,1
of ordinary shares in
issue (millions)
Attributable earnings
per ordinary share
(cents)
- Basic 661,0 516,9 28 972,5
- Headline - before AC 685,0 519,0 32 972,4
501
- Headline - after AC 697,9 485,7 972,4
501
- Diluted (basic) 658,6 516,4 28 971,2
- Diluted (headline) 695,3 485,2 971,1
Dividends per ordinary 400 370 8 640
share (cents)
- Interim 400
370 370
- Final 270
Dividend cover
(attributable headline
earnings per share) 1,7 1,3 1,5
Proposed ordinary dividend
Segmental Information+
Purchased
metals in
R millions Notes Mined Total
concentrate
For the six months ended
30 June 2004 (reviewed)
GROSS SALES REVENUE 9 278,4 311,1 9 589,5
Commissions paid (166,9) (5,8) (172,7)
Net sales revenue 9 111,5 305,3 9 416,8
Sales of refined metal 8 895,5 305,3 9 200,8
Sales of metals in 216,0 - 216,0
concentrate ++
COST OF SALES (6 660,4) (276,5) (6 936,9)
On-mine (5 504,0) - (5 504,0)
Cash operating costs (4 904,7) - (4 904,7)
Amortization 3 (599,3) - (599,3)
Purchase of metals in - (412,4) (412,4)
concentrate
Smelting (523,7) (29,8) (553,5)
Cash operating costs (428,8) (24,4) (453,2)
Amortization 3 (94,9) (5,4) (100,3)
Treatment and refining (414,6) (15,8) (430,4)
Cash operating costs (366,8) (13,9) (380,7)
Amortization 3 (47,8) (1,9) (49,7)
Increase in metal 154,7 182,3 337,0
inventories
Other costs (372,8) (0,8) (373,6)
GROSS PROFIT ON METAL 2 451,1 28,8 2 479,9
SALES
Gross profit margin (%) 26,4 9,3 25,9
Cost of sales per Pt 5 880 7 139 5 922
ounce sold
(Rand)
For the six months ended
30 June 2003 (reviewed)
GROSS SALES REVENUE 7 210,4 139,2 7 349,6
Commissions paid (199,5) (4,0) (203,5)
NET SALES REVENUE 7 010,9 135,2 7 146,1
Sales of refined metal 7 010,9 135,2 7 146,1
Sales of metals in - - -
concentrate ++
COST OF SALES (5 166,3) (100,3) (5 266,6)
On-mine (4 594,1) - (4 594,1)
Cash operating costs (4 165,5) - (4 165,5)
Amortization 3 (428,6) - (428,6)
Purchase of metals in - (126,3) (126,3)
concentrate
Smelting (451,9) (13,3) (465,2)
Cash operating costs (405,0) (11,9) (416,9)
Amortization 3 (46,9) (1,4) (48,3)
Treatment and refining (409,4) (7,1) (416,5)
Cash operating costs (372,3) (6,4) (378,7)
Amortization 3 (37,1) (0,7) (37,8)
Increase in metal 612,9 53,0 665,9
inventories
Other costs (323,8) (6,6) (330,4)
GROSS PROFIT ON METAL 1 844,6 34,9 1 879,5
SALES
Gross profit margin (%) 25,6 25,1 25,6
Cost of sales per Pt 5 304 6 507 5 323
ounce sold (Rand)
For the year ended 31
December 2003 (audited)
GROSS SALES REVENUE 16 161,3 347,3 16 508,6
Commissions paid (399,2) (9,0) (408,2)
NET SALES REVENUE 15 762,1 338,3 16 100,4
Sales of refined metal 15 762,1 338,3 16 100,4
Sales of metals in - - -
concentrate ++
COST OF SALES (11 923,1) (267,4) (12 190,5)
On-mine (9 968,9) - (9 968,9)
Cash operating costs (9 027,1) - (9 027,1)
Amortization 3 (941,8) - (941,8)
Purchase of metals in - (291,6) (291,6)
concentrate
Smelting (1 015,9) (21,2) (1 037,1)
Cash operating costs (891,5) (18,6) (910,1)
Amortization 3 (124,4) (2,6) (127,0)
Treatment and refining (857,2) (16,9) (874,1)
Cash operating costs (781,1) (15,2) (796,3)
Amortization 3 (76,1) (1,7) (77,8)
Increase in metal 511,0 73,9 584,9
inventories
Other costs (592,1) (11,6) (603,7)
GROSS PROFIT ON METAL 3 839,0 70,9 3 909,9
SALES
Gross profit margin (%) 23,8 20,4 23,7
Cost of sales per Pt 5 305 5 735 5 313
ounce sold (Rand)
+ The Group produces PGMs in South Africa. The risks and rewards associated with
the individual operations are not sufficiently dissimilar to warrant
identification of separate geographical segments. Therefore, only business
segments are reported.
++ Sale of metal in concentrate attributable to Anglo Platinum from the Kroondal
Pooling and Sharing Agreement (KPSA). The metal was sold to Impala in terms of
an off-take agreement that was in place when the KPSA commenced. Metal in
concentrate surplus to the volumes stipulated in the off-take agreement will be
refined by Anglo Platinum.
Group Statement of Changes in Equity
Unrealized
Share Share hedging Accumulated
R millions capital premium deficit profits Total
Balance as at 31 21,5 754,0 - 12 408,6 13 184,1
December 2002
(audited)
Net profit 1 111,3 1 111,3
(restated)
Dividends paid in (1 935,4) (1 935,4)
cash
Ordinary share -* 13,5 13,5
capital issued
Balance as at 30 21,5 767,5 - 11 584,5 12 373,5
June 2003
(reviewed)
Net profit 980,6 980,6
(restated)
Dividends paid in (796,2) (796,2)
cash
Ordinary share -* 28,8 28,8
capital issued
After-tax changes (164,0) (164,0)
in forward metal
price
Balance as at 31 21,5 796,3 (164,0) 11 768,9 12 422,7
December 2003
(audited)
Net profit 1 451,1 1 451,1
Final dividend no. 0,2 481,4 (581,5) (99,9)
102
Dividends paid in (99,9) (99,9)
cash
Dividends 0,2 481,4 (481,6) -
reinvested
Preference share 0,4 3 923,9 3 924,3
capital issued
(Note 9)
Proceeds on issue 0,4 3 999,6 4 000,0
Less: Share issue (75,7) (75,7)
expenses
Ordinary share -* 6,0 6,0
capital issued
After-tax changes 105,5 105,5
in forward metal
price (Note 10)
Balance as at 30 22,1 5 207,6 (58,5) 12 638,5 17 809,7
June 2004
(reviewed)
* Less than R50 000.
Consolidated Balance Sheet
Reviewed Reviewed Audited
as at as at as at
30 June 30 June 31 December
R millions Notes 2004 2003 2003
ASSETS
Non-current assets 23 577,4 18 760,3 22 493,9
Property, plant and 18 425,4 14 355,6 14 550,8
equipment
Capital work-in-progress 3 882,3 3 718,5 7 249,2
Platinum Producers` 118,9 95,1 113,4
Environmental Trust
Investment in associates 7 476,3 492,5 484,0
Non-current accounts 674,5 98,6 96,5
receivable *
Current assets 5 247,6 4 632,0 5 295,7
Inventories 2 774,6 2 537,8 2 439,6
Accounts receivable 1 720,5 1 452,7 2 286,7
Other financial assets 10 19,9 - -
Cash and cash equivalents 732,6 641,5 569,4
Total assets 28 825,0 23 392,3 27 789,6
EQUITY AND LIABILITIES
Share capital and
reserves
Share capital 22,1 21,5 21,5
Share premium 5 207,6 767,5 796,3
Unrealized hedging (58,5) - (164,0)
deficit
Accumulated profits 12 638,5 11 584,5 11 768,9
before proposed ordinary
dividend and related STC
Accumulated profits after 11 661,3 10 689,1 11 114,6
proposed ordinary
dividend and related STC
Proposed ordinary 868,6 795,9 581,6
dividend
STC in respect of 108,6 99,5 72,7
proposed ordinary
dividend
Shareholders` equity 17 809,7 12 373,5 12 422,7
Non-current liabilities 6 069,0 5 126,7 5 560,8
Deferred taxation 4 903,4 4 198,0 4 438,9
Environmental obligations 321,2 207,5 308,7
Employees` service 477,0 459,4 488,9
benefit obligations
Obligations due under 367,4 261,8 324,3
finance leases
Current liabilities 4 946,3 5 892,1 9 806,1
Interest bearing 8 2 378,8 3 553,2 7 168,1
borrowings
Accounts payable 2 088,8 1 795,0 1 903,4
Other financial 10 113,1 58,9 336,2
liabilities
Taxation 365,6 485,0 398,4
Total equity and 28 825,0 23 392,3 27 789,6
liabilities
* The increase in this balance is mainly attributable to the amount owing to
Anglo Platinum as a result of the disposal of 50% of the Bafokeng-Rasimone
Platinum Mine to Royal Bafokeng Resources (Pty) Ltd on formation of the BRPM
Joint Venture.
Consolidated Cash Flow Statement
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
R millions 2004 2003 2003
CASH FLOWS FROM OPERATING
ACTIVITIES
Cash receipts from 9 744,9 7 187,1 15 476,5
customers
Cash paid to suppliers (6 289,9) (5 550,8) (12 117,2)
and employees
Cash from operations 3 455,0 1 636,3 3 359,3
Interest paid (231,8) (79,8) (277,4)
Taxation paid (238,1) (1 277,3) (1 474,9)
Net cash from operating 2 985,1 279,2 1 607,0
activities
CASH FLOWS USED IN
INVESTING ACTIVITIES
Purchase of property, (2 015,8)## (3 053,9) (7 423,6)
plant and equipment
To maintain operations (1 065,4) (1 482,7) (3 952,7)
To expand operations (877,0) (1 519,8) (3 270,4)
Interest capitalized (73,4) (51,4) (200,5)
Proceeds from sale of 16,2 76,3 134,8
plant, equipment and
mineral rights
Investment in associates - * (1,4) (1,5)
Interest received 64,8 66,5 106,7
Growth in Platinum 5,5 5,9 11,2
Producers` Environmental
Trust
Capital reduction by - 10,3 28,7
Northam Platinum Limited
Dividends received from 23,4 47,3 47,3
associates
Net cash used in (1 905,9) (2 849,0) (7 096,4)
investing activities
CASH FLOWS (USED IN)/FROM
FINANCING ACTIVITIES
Proceeds from the issue 0,4 - * - *
of preference share
capital
Increase in share premium 3 929,9 13,5 42,3
(Decrease)/increase in (4 746,4) 3 553,2 7 168,1
interest bearing
borrowings
Dividends paid (99,9) (1 935,4) (2 731,6)
Net cash (used in)/from (916,0) 1 631,3 4 478,8
financing activities
Net increase/(decrease) 163,2 (938,5) (1 010,6)
in cash and cash
equivalents
Cash and cash equivalents 569,4 1 580,0 1 580,0
at beginning of the year
Cash and cash equivalents 732,6 641,5 569,4
at end of the period/year
MOVEMENT IN NET DEBT
Net (debt)/cash at (6 923,0) 1 443,6 1 443,6
beginning of year
Net cash from operating 2 985,1 279,2 1 607,0
activities
Net cash used in (1 905,9) (2 849,0) (7 096,4)
investing activities
Net cash from/(used in)
financing activities,
excluding movements in 3 830,2 (2 047,3) (2 877,2)
debt
Net debt at end of the (2 013,6) (3 173,5) (6 923,0)
period/year
Made up as follows:
Cash and cash equivalents 732,6 641,5 569,4
Interest bearing (2 378,8) (3 553,2) (7 168,1)
borrowings
Obligations due under (367,4) (261,8) (324,3)
finance leases
(2 013,6) (3 173,5) (6 923,0)
## The Group concluded the following non-cash transactions during the period:
- The exchange of 50% of Bafokeng-Rasimone Platinum Mine for mineral rights and
a non-current receivable on formation of the BRPM Joint Venture.
- The exchange of 50% of certain mineral rights for mining infrastructure on
formation of the Pandora Joint Venture.
* Less than R50 000.
Notes
1. This interim report complies with International Accounting Standard 34 -
Interim Financial Reporting and South African Statement of Generally Accepted
Accounting Practice, AC127, with the same title as well as with Schedule 4 of
the South African Companies Act and the disclosure requirements of the JSE
Securities Exchange`s listings requirements.
2. The interim report has been prepared using accounting policies that comply
with South African Statements of Generally Accepted Accounting Practice and
International Financial Reporting Standards. The accounting policies are
consistent with those applied in the financial statements for the year ended 31
December 2003, except for the change discribed in Note 13.
Reviewed Reviewed Audited
Six months Six months Year
ended ended ended
30 June 30 June 31 December
R millions 2004 2003 2003
3. Amortization and
depreciation of property,
plant and equipment
Amortization and
depreciation of mining
and process property,
plant and equipment
consists of the following
categories:
Operating assets 749,3 514,7 1 146,6
Mining 599,3 428,6 941,8
Smelting 100,3 48,3 127,0
Treatment and refining 49,7 37,8 77,8
Amortization included in 10,9 - 38,2
other costs
Depreciation - non-mining 22,8 9,7 41,8
assets
783,0 524,4 1 226,6
4. Other net
(expenditure)/income
Other net
(expenditure)/income
consists
of the following
principal categories:
Realized and unrealized (36,4) (198,2) (417,2)
foreign exchange losses
Restructuring costs ***** (18,5) (111,4)
Profit on commodity 1,7 156,3 157,3
contracts
Profit on disposal of 1,7 64,6 64,6
mineral rights
Impact of assets (97,6) - -
exchanged
Property, plant and 93,4 - -
equipment
Mineral rights (191,0) - -
Other (1,1) 2,8 37,4
(150,2) 25,5 (269,3)
***** Restructuring costs
mainly relate to costs
incurred as a result of
the slow-down of
expansion projects.
5. Net interest paid
Net interest
(paid)/received consists
of the following
principal categories:
Interest expensed (231,8) (79,8) (286,9)
Interest paid (305,2) (131,2) (487,4)
Less: capitalized 73,4 51,4 200,5
Time value of money (18,3) (12,5) (68,3)
adjustment to
environmental obligations
Decommissioning (15,9) (11,0) (62,9)
Restoration (2,4) (1,5) (5,4)
Interest received 64,8 66,5 106,7
Growth in Platinum 5,5 5,9 11,2
Producers` Environmental
Trust
Dividends received - 0,4 0,4
(179,8) (19,5) (236,9)
6. Reconciliation between
net profit and headline
earnings
Net profit 1 451,1 1 111,3 2 091,9
Less: Undeclared (24,0)
cumulative preference
share dividend and
related STC
Basic earnings 1 427,1 1 111,3 2 091,9
attributable to ordinary
shareholders
Profit on disposal of (1,7) (64,6) (64,6)
mineral rights
Impact of assets 68,3 -
exchanged (after tax)
Property, plant and (65,4) - -
equipment
Mineral rights 133,7 - -
Net goodwill amortization 0,8 (2,5) 1,5
Scrapping of capitalized 12,3 62,9
development cost (after
tax)
Headline earnings 1 506,8 1 044,2 2 091,7
attributable to ordinary
shareholders
Undeclared cumulative 24,0
preference share dividend
and related STC
Headline earnings 1 530,8 1 044,2 2 091,7
Reviewed Reviewed Audited
as at as at As at
30 June 30 June 31 December
R millions 2004 2003 2003
7. Investment in
associates
Listed - Ordinary shares
(Market value: R453,2
million
(Jun 2003: R643,4 m; Dec 251,4 224,7 240,6
2003: R515,8 m))
Unlisted (Directors`
valuation: R224,9 million
(Jun 2003: R267,8 m; Dec 224,9 267,8 243,4
2003: R243,4 m))
Ordinary shares 145,9 181,2 159,8
Redeemable preference 79,0 86,6 83,6
shares
476,3 492,5 484,0
8. Borrowing facilities
The Group has the
following borrowing
facilities:
Bank overdrafts utilized 2 378,8 3 553,2 7 168,1
Available facilities 10 673,6 4 900,0 10 173,6
Weighted average 8,8 12,8 8,7
borrowing rate (%)
Borrowing powers
The borrowing powers in
terms of the Articles of
Association of the
Company and its
subsidiaries are
unlimited.
9. Preference share
capital
On 31 May 2004 the
Company issued 40 000 000
convertible perpetual
cumulative preference
shares, with a par value
of one cent each, at R100
per share, giving rise to
an increase of R3 923,9m
in share premium, after
share issue expenses of
R75,7m. Dividends, if
declared, are paid six-
monthly in arrears at
6,38% per annum. The
dividend dates are 31 May
and 30 November. The
preference shares are
convertible into ordinary
shares, at the election
of the shareholder, at
any time on or before the
final conversion date,
being the fifth
anniversary of the issue
date,
31 May 2009. Thereafter,
the preference shares are
callable, by the Company,
either through redemption
or acquisition
into perpetuity.
Preference shares which
are not converted nor
called by the Company
will continue to exist as
preference shares.
10. Other financial
assets/liabilities
Other financial assets
Fair value of foreign 19,9 - -
exchange options !
Other financial
liabilities
Fair value of forward 25,5 58,9 90,4
foreign exchange
contracts !!
Fair value of forward
metal contracts
designated
as cash flow hedges !!! 87,6 - 245,8
113,1 58,9 336,2
! Foreign exchange
options:
The fair value of foreign
exchange options
represents the value
derived using option
valuation techniques.
These movements are
recognized in the income
statement.
!! Forward foreign
exchange contracts
(FEC`s):
The fair value of FEC`s
represents the movement
between contracted rates
and forward rates at 30
June 2004. These
movements are recognized
in the income statement.
!!! Forward metal
contracts:
Changes in the value of
forward metal contracts
caused by movement in
forward prices since
inception of the
contracts are recognized
in the unrealized hedging
deficit. The net amount
of R105,5 million
credited to the
unrealized hedging
deficit since the last
balance sheet date is
made up of R150,7 million
less a deferred taxation
movement of
R45,2 million. R41,0
million of this movement
was recognized in the
income statement. Changes
in the value caused by
translating the value of
the forward contracts to
Rand are recognised in
the income statement.
This amounts to a gain of
R13,4 million less
taxation of R4,0 million
for the six months ended
30 June 2004.
At 30 June 2004 the Group
held forward contracts to
fix the US$ price of
future sales relating to
a nickel supply
agreement. The objective
is to hedge the Group
against variability in
future cash flows. The
terms of the outstanding
forward contracts are to
sell a further 5 544 tons
of nickel at US$ 12 540
per ton. The forward
metal contracts are
valued using forward
metal prices that match
the contractual maturity
dates.
11. Commitments
Mining and process
property, plant and
equipment
Contracted for 1 569,8 2 776,8 1 800,0
Not yet contracted for 9 701,0 12 548,3 11 943,4
Authorized by the 11 270,8 15 325,1 13 743,4
directors
Allocated for:
Expansion of capacity 5 775,8 8 689,3 7 424,8
- within remainder of 1 077,0 2 334,7 2 844,3
year/one year
- thereafter (within 5 4 698,8 6 354,6 4 580,5
years)
Maintenance of capacity 5 495,0 6 635,8 6 318,6
- within remainder of 1 921,7 1 686,9 3 457,9
year/one year
- thereafter (within 5 3 573,3 4 948,9 2 860,7
years)
Other
Operating lease rentals - 694,7 440,1 711,5
buildings
- within remainder of 38,2 7,9 35,6
year/one year
- within two to five 165,9 59,9 160,5
years
- thereafter 490,6 372,3 515,4
Information Technology 102,2 112,2 126,6
Service Providers
- within remainder of 32,0 15,7 33,4
year/one year
- thereafter (within 5 70,2 96,5 93,2
years)
These commitments will be funded from cash resources, future operating cash
flows, borrowings and any other funding strategies embarked on by the Group.
12. Contingent liabilities
The Group provided guarantees in favour of Changing Tides 166 (Proprietary)
Limited, a wholly owned subsidiary of Group Five. The guarantee provides
security for lease payments to Group Five by the Anglo Platinum Housing Trust.
The probability of any obligation arising under this guarantee is considered
remote.
The Group provided a guarantee in favour of Nedcor Limited (Nedcor) for
financing provided by Nedcor to Salene Mining (Proprietary) Limited (Salene).
The Group provided the guarantee to enable Salene to put mining infrastructure
in place. The guarantee is valid until 1 July 2006 or earlier, on repayment by
Salene of the loan. Salene will sell all ore production from the mine to the
Group. The facility granted by Nedcor to Salene is for a maximum amount of R120
million. In the event that Nedcor calls up the guarantee, the Group holds bonds
over sufficient assets of Salene to make good any obligations that may be
incurred.
Aquarius Platinum (South Africa) (Proprietary) Limited holds a put option to put
its interest in the pooling and sharing arrangement to the Group in the case of
termination of that relationship. The probability of the option being exercised
is considered remote. The amount of such an obligation is dependent on a
discounted cash flow valuation at that point in time.
Letters of comfort have been issued to financial institutions to cover certain
banking facilities. There are no encumbrances of Group assets, other than the
houses held under finance leases by the Group.
13. Change in accounting policy - adoption of AC 501 - `Accounting for Secondary
Tax companies (STC)`
AC 501 became effective on 1 January 2004. This pronouncement determines that
STC should not be anticipated or deferred at the interim reporting stage based
on the effective tax rate that is expected for a full financial year. This
accounting pronouncement requires a change to the Group`s accounting policy of
providing for taxation at the interim reporting stage at the average rate that
is expected for the year and includes expected STC. The impact of this
adjustment of net profit is a gain of R27,8m (June 2003: charge of R71,7m; Dec
2003: R nil).
Corporate Governance
The Board is of the view that the Company and its subsidiaries are fully
compliant with the recommendations as set out in the Code of Corporate Practices
and Conduct contained in King 2.
Report of the Independent Auditors
To the members of Anglo American Platinum Corporation Limited
We have reviewed the accompanying summarised consolidated financial statements
included in the interim report of Anglo American Platinum Corporation Limited
and its subsidiaries for the six months ended 30 June 2004, set out above. This
interim report is the responsibility of the Company`s directors. Our
responsibility is to issue a report on this interim report based on our review.
Scope
We conducted our review in accordance with the statement of the South African
Auditing Standard applicable to review engagements. This standard requires that
we plan and perform the review to obtain moderate assurance that the interim
financial information is free of material misstatement. A review is limited
primarily to enquiries of Company personnel and analytical procedures applied to
financial data and thus provides less assurance than an audit. We have not
performed an audit and, accordingly, we do not express an audit opinion.
Review opinion
Based on our review, nothing has come to our attention that causes us to believe
that the accompanying interim report is not fairly presented, in all material
respects, in accordance with the South African Statement of Generally Accepted
Accounting Practice and the International Financial Reporting Standard as
applicable to Interim Financial Reporting and the Companies Act in South Africa.
Deloitte & Touche
Registered Accountants and Auditors Johannesburg
Chartered Accountants (SA) 26 July 2004
Commentary
1. FINANCIAL RESULTS
The Group has shown a significant performance improvement in comparison with the
first half of 2003 as a result of increased production and sales volumes and
higher US dollar prices realised on metals sold. Headline earnings attributable
to ordinary shareholders increased to R1,48 billion, 32,5% above those reported
for the same period in 2003, while headline earnings per ordinary share rose by
32,0% to 685 cents. An interim dividend of 400 cents per share has been
declared.
A change in accounting policy required by AC 501 has resulted in the restatement
of results for the six months to June 2003. On a restated basis headline
earnings attributable to ordinary shareholders changed from R1,12 billion to
R1,04 billion.
Gross sales revenue increased by R2,24 billion to R9,59 billion. The increase
was as a result of higher volumes of metals produced and sold, amounting to
R1,60 billion, firmer US dollar metal prices achieved, contributing R1,9
billion, offset by a R1,26 billion reduction in rand revenues as a result of a
17% stronger rand.
Cost of sales rose by R1,67 billion to R6,94 billion:
Cash mining, smelting, and refining costs increased by R0,78 billion to R5,74
billion, as detailed in the Operations section of this commentary.
Purchases of metal in concentrate increased by R286,1 million to R412,4 million,
owing mainly to the commencement of the BRPM Joint Venture in March 2004,and to
increased purchases from the Modikwa Joint Venture.
Amortization of operating assets rose by R234,6 million as a result of charges
against 2003 capital expenditure and higher production at new operations.
The value of metals in inventory increased by R337,0 million during the first
half of 2004 as a result of higher stock levels at the end of June compared to
the end of December 2003 and cost increases which affected the unit cost at
which metal stocks are valued.
Other net expenditure for the first half of 2004 amounted to R150,2 million,
compared with other net income of R25,5 million in 2003. This primarily reflects
the impact of exchanges of assets in connection with joint ventures (R97,6
million) and lower profits realized on commodity contracts and the disposal of
mineral rights, offset by lower foreign exchange losses. The impact of the joint
venture transactions has been added back in calculating headline earnings and
therefore had no effect on headline earnings for the period.
Net interest paid during the review period amounted to R179,8 million, compared
with R19,5 million in 2003, increasing as a result of higher average
borrowings. Interest paid was net of R73,4 million of interest on borrowings
allocated to capital projects under development.
2. OPERATING PERFORMANCE
Refined platinum production for the six months to 30 June 2004 rose by 26,6% to
1 158 900 ounces. The improvement was mainly as a result of the normalisation of
metal flows through the process division; in the first half of last year, some
160 000 ounces of platinum were temporarily locked up in the process pipeline.
In addition, the volume of platinum mined and purchased increased by 91 600
ounces. Equivalent refined platinum production, which reflects mine production
adjusted to expected refined metal output and which eliminates the effect of
temporary pipeline build ups, increased by 7,8%.
The cash operating cost per refined platinum ounce decreased by 7,1% compared to
the first half of 2003 because of the sharp increase in refined production.
After adjusting for the once-off build-up of stock in process in 2003, the unit
cost per equivalent refined ounce increased by 7,4%.
3. SAFETY
It is encouraging to note that the considerable improvement in safety
performance achieved in 2003 was sustained in the first half of 2004. The
Behaviour Based Safety initiatives continued to be successful and have become a
natural part of work practices, resulting in a reduction in the number of
fatalities not related to fall-of-ground incidents. Nevertheless, eleven
employees died at managed operations as a result of work-related accidents
during the first half of 2004. Management and the Board extend their sincere
condolences to the families, friends, and colleagues of the deceased. The Group
remains wholly committed to the extensive safety programmes adopted and to
eliminating fatalities at work.
4. OPERATIONS
Mining operations
All mines produced more than in the first half of 2003 and total platinum
delivered to the smelters rose by 7,8% for the period. The largest contributors
to the increase were the Rustenburg UG2 project, Modikwa, and the Western Limb
Tailings Retreatment plant (`WLTR`).
The cash on-mine cost per equivalent refined platinum ounce rose by 9,6%,
principally as a result of a 9,25% wage increase following the two-year wage
increase settlement of 2002 and the effect of inflationary price increases on
stores.
Process operations
The smelters and the Anglo Platinum Converting Process (`ACP`) Plant performed
well in the first half of 2004. The ACP Plant helped significantly in reducing
sulphur emissions from the Waterval Smelter c
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