| Thu 5 Aug 2004, 17:36 | | QUARTERLY RESULTS ENDED 30 JUNE 2004 |
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WESTERN AREAS LIMITED - QUARTERLY RESULTS ENDED 30 JUNE 2004
WESTERN AREAS LIMITED
REGISTRATION NUMBER 1959/003209/06
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
ISIN: ZAE000016549
SHARE CODE: WAR
QUARTERLY RESULTS ENDED 30 JUNE 2004
PRODUCTION AND UNIT RESULTS
Year Year Quarter Quarter
ended to date ended ended
31.12.03 30.06.04 31.03.04 30.06.04
IMPERIAL
Reef mined (000) 1,097 418 208 210 tons
Ore milled (000) 1,095 589 290 299 tons
Yield (underground) 0.206 0.214 0.200 0.230 oz/ton
Yield (incl. surface) 0.205 0.168 0.161 0.175 oz/ton
Gold produced 224,227 98,997 46,643 52,354 oz
Gold sold 225,218 99,809 47,565 52,244 oz
Cash costs 287 391 406 379 US$/oz
Total production costs 341 465 491 441 US$/oz
Gold price achieved 315 284 284 284 US$/oz
Average exchange rate
achieved
Period-end exchange
rate
Capital expenditure 63 26 14 12 US$m
Capital commitment at
end of period 13 10 14 10 US$m
Quarter Quarter Year to Year
ended ended date ended
30.06.04 31.03.04 30.06.04 31.12.03
METRIC
Reef mined (000) tonnes 190 189 379 996
Ore milled (000) tonnes 271 262 533 995
Yield (underground) g/tonne 7.89 6.87 7.37 7.05
Yield (incl. surface) g/tonne 6.00 5.54 5.78 7.01
Gold produced kg 1,628 1,451 3,079 6,974
Gold sold kg 1,624 1,480 3,104 7,005
Cash costs R/kg 80,468 88,550 84,276 69,861
Total production costs R/kg 93,738 107,162 100,063 83,150
Gold price achieved R/kg 60,328 61,861 61,060 76,647
Average exchange rate
achieved R/$ 6.6071 6.7750 6.6873 7.5682
Period-end exchange
rate R/$ 6.2700 6.2675 6.2700 6.6150
Capital expenditure Rm 76 88 164 417
Capital commitment at
end of period Rm 61 84 61 86
ABRIDGED INCOME STATEMENT
Quarters ended Year to date Year ended
30.06.04 31.03.04 30.06.04 31.12.03
SA Rand million Notes Unaudited Unaudited Unaudited Audited
Gold revenue 86.2 84.4 170.6 582.4
Total production costs 1 (152.7) (155.5) (308.2) (579.9)
Production costs - cash (131.0) (128.5) (259.5) (487.3)
Production costs
- non-cash (21.7) (27.0) (48.7) (92.6)
Operating (loss)/profit
from gold (66.5) (71.1) (137.6) 2.5
Other (costs)/income (5.5) (1.5) (7.0) 176.7
Administration and other
expenditure (5.0) (5.6) (10.6) (25.6)
Operating (loss)/profit
before derivative
transactions (77.0) (78.2) (155.2) 153.6
Present value adjustment
for option premium
payable 6.3 (16.2) (9.9) (75.0)
Fair value adjustment 2 (1.8) 74.7 72.9 447.4
Exchange (losses)/gains 3 (3.4) 55.1 51.7 340.8
(Loss)/Profit before
taxation (75.9) 35.4 (40.5) 866.8
Taxation 6 44.0 (21.5) 22.5 (402.0)
Minority interest in profit - - - (4.1)
(Loss)/Profit for period (31.9) 13.9 (18.0) 460.7
Headline (loss)/earnings
per share (cents) (30) 12 (18) 330
(Loss)/Earnings per share
(cents) (30) 13 (17) 437
Number of issued shares
(million) 105.4 105.4 105.4 105.4
Determination of headline
earnings:
Net (loss)/profit for
period (31.9) 13.9 (18.0) 460.7
Net loss on disposal of
subsidiary - - - 40.0
Loss on disposal of
fixed assets - - - 2.4
Net profit on disposal
of investments - (1.2) (1.2) (155.7)
Headline (loss)/earnings (31.9) 12.7 (19.2) 347.4
ABRIDGED CASH FLOW STATEMENT
Quarters ended Year to date Year ended
30.06.04 31.03.04 30.06.04 31.12.03
SA Rand million Unaudited Unaudited Unaudited Audited
Cash flow (utilised in)/from
operating activities (40.9) (35.8) (76.7) 43.1
Cash flow utilised in investing
activities (76.4) (59.0) (135.4) (59.7)
Cash flow from/(utilised in)
finance activities 128.4 86.6 215.0 (37.5)
Net increase/(decrease) in cash
and cash equivalents 11.1 (8.2) 2.9 (54.1)
Cash and cash equivalents:
- at beginning of period 13.6 21.9 21.9 76.4
- effect of exchange rate
fluctuations on cash held (2.1) (0.1) (2.2) 1.4
- cash and cash equivalents of
subsidiary disposed of - - - (1.8)
At end of period 22.6 13.6 22.6 21.9
ABRIDGED BALANCE SHEET
Period ended Year ended
30.06.04 31.03.04 31.12.03
SA Rand million Notes Unaudited Unaudited Audited
ASSETS
Mining assets 4 3,350.9 3,293.4 3,223.9
Derivative asset 614.9 753.5 792.1
Listed investments 5 0.3 0.3 33.0
Deferred taxation 6 355.8 402.7 429.3
Cash and cash equivalents 22.6 13.6 21.9
Other assets 71.9 73.9 88.2
Total assets 4,416.4 4,537.4 4,588.4
EQUITY AND LIABILITIES
Shareholders equity 1,237.9 1,163.0 1,144.5
Option premium payable 991.0 1,020.4 1,084.7
Derivative liability 1,777.4 2,100.0 2,217.6
Other liabilities 7 410.1 254.0 141.6
Total equity and liabilities 4,416.4 4,537.4 4,588.4
STATEMENT OF CHANGES IN SHAREHOLDERS` EQUITY
Number of
shares issued
and paid - Share Share Hedge
SA Rand million Millions capital premium reserve
Balance at 31 December 2003 105.4 105.4 1,863.5 (1,330.6)
Fair value adjustment - - - 57.5
Recycling of fair value on
maturing
of options - - - 55.6
Recycling of fair value on
disposal
of investment - - - -
Attributable profit for period - - - -
Balance at 30 June 2004 105.4 105.4 1,863.5 (1,217.5)
Retained
Available earnings/
for-sale (Accumulated
reserve deficit) Total
Balance at 31 December 2003 1.7 504.5 1,144.5
Fair value adjustment - - 57.5
Recycling of fair value on
maturing
of options - - 55.6
Recycling of fair value on
disposal
of investment (1.7) - (1.7)
Attributable profit for period - (18.0) (18.0)
Balance at 30 June 2004 - 486.5 1,237.9
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 inventory for the period. Other
non-cash costs include R9.86 million in respect of the severance and
exploration cost associated with the restructuring process at South Deep.
2. Fair value adjustments relate to the revaluations 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 6.2675 at 31 March 2004 to
6.2700 at 30 June 2004.
4. No adjustment has been made to reflect mining assets at their fair value.
5. The remaining listed investments represent 372 350 JCI Limited shares and
50 651 JCI Limited debentures.
6. Deferred taxation movement includes the effect of the fair value
revaluation of the derivative structure based on the gold price
fluctuations, which is accounted for in equity. The US$ gold price
decreased from US$426 at 31 March 2004 to US$393 at June 2004.
7. JCI Limited, which holds 35.6% of Western Areas Limited, has provided a
loan of R272.6 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 Generally 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
Operating performance at South Deep has started to show the benefits of the
recent management changes. Although April was also adversely affected by the
numerous public holidays, previous management posted cash costs per kilogram of
R92 000 and a gold production of 946 kilograms for the month. By comparison,
cash costs for June were just under R75 000 per kilogram and gold production 1
224 kilograms. This trend is expected to result in the targeted production cost
per kilogram of R60 000 in 2005.
The capital project remains on track for the Main Shaft to be commissioned in
November this year, with the operational efficiencies anticipated to materialise
from 2005 onwards. Given the imminent completion of the capital project and the
last of senior management retrenchments, the focus is now on optimising the
mine`s performance.
An operating loss from gold of R66.5 million for the June 2004 quarter, compared
to R71.1 million in the previous quarter, reflects the ongoing impact of the
strong Rand. It also suggests the need for further operational interventions to
achieve the efficiencies planned for South Deep.
An interest cost of R6.8 million was incurred on the bridging loan from JCI
Limited prior to the finalisation of the rights issue. The small change in the
quarter-on-quarter exchange rate reduced the financial impact of the revaluation
of the Dollar liabilities associated with the derivative structure This resulted
in an after tax loss of R31.9 million, compared to an after-tax profit in the
previous quarter of R13.9 million, which included a R74.7 million unrealised
exchange rate gain on the derivative structure in accordance with AC 133.
Gold sales increased by 9.7% on the previous quarter as the benefits of the
management changes at South Deep started to yield positive results, despite the
adverse impact of the Easter and election breaks in April. This translated into
marginally higher gold revenues of R130 million, which were again impacted by
hedge commitments of R46 million that remained much in line with the previous
quarter.
The yield for the June 2004 quarter was 6.00g/t, up from the 5.54g/t in the
previous quarter. This was primarily because of increased focus on mining pay
ore from underground, although 81 000 tonnes of low-grade surface materials was
treated to ensure that the metallurgical plant operated at capacity and to
provide backfill material for underground support.
Total production costs decreased slightly to R152.7 million from R155.5 million
for the March quarter. This included R3.3 million, compared to R5.6 million last
quarter, for management retrenchment costs at South Deep.
The respective unit costs of production continued to be adversely impacted by
relatively low production results and the increased costs stemming from the
retrenchments. Cash production costs decreased from R88 550 per kilogram last
quarter to R80 468 per kilogram this quarter, and total production costs
decreased by 12.5% to R93 738 per kilogram, inclusive of the retrenchment costs
As announced on 26 February 2004, the insurance claim for the rock fall at the
South Shaft SV-1 sub-vertical shaft is under consideration by the insurance
underwriters and their assessors. Indications are that it will take some time to
reach finality, owing both to the size and complexity of the claim.
Placer Dome has released a new estimated proven and probable mineral reserve for
South Deep which accords with that released in December 2003, as was
incorporated in the Western Areas 2003 annual report. The updated estimate was
conducted at a gold price of R91 500 per kilogram and a cut-off grades of
5.00g/t to 7.40g/t. Steffen, Robertson and Kirsten (South Africa) (Pty) Ltd
(`SRK`) in concluding its review of the estimate, proposed that additional
geological modelling would improve the estimation of Phase I and Phase II
mineral resources in addition to selection of the most appropriate mining
methodologies.
SRK also highlighted the need to achieve the targeted cost reductions for the
realisation of these mineral reserves to be achievable.
While the short-term planning and optimisation of operations at South Deep is
ongoing, Placer Dome concludes that production will remain static at around 425
thousand ounces a year (approximately 13 000 kilograms a year) for the next two
years, assuming no major changes in the Rand gold price.
The rights issue was successfully concluded on 27 July 2004, with the issue of
some 13.2 million new ordinary shares against receipt of R401.7 million. The
bridging loan from JCI Limited of R294 million has been repaid and the Company
has sufficient cash reserves and facilities to meet its commitments in respect
of the completion of the South Deep capital project this year.
Post the rights issue on a fully diluted basis the loss per share for the June
quarter would have been 27 cents per share and for the six month period ended 30
June 2004 would have reflected 15 cents per share.
Mafika Mkwanazi Brett Kebble
Johannesburg
Non-executive Chairman Chief Executive Officer
5 August 2004
For more information visit our website at www.westernareas.co.za
CONTACT DETAILS
WESTERN AREAS LIMITED INVESTOR RELATIONS
(Western Areas ) Brian Gibson
28 Harrison Street Telephone: +27 (11) 880-1510
Johannesburg, 2001 Fax: +27 (11) 880-1392
PO Box 61719, Marshalltown, 2107 email: gibson@icon.co.za
Telephone: +27 (11) 688-5000
Fax: +27 (11) 834-9195
OFFICE OF SOUTH AFRICAN TRANSFER SECRETARIES OFFICE OF UNITED KINGDOM
Computershare Investor Services 2004 (Pty) Ltd REGISTRARS
(formerly Computershare Limited) Capita Registrars
70 Marshall Street The Registry
Johannesburg, 2001 34 Beckenham Road
PO Box 61051, Marshalltown, 2107 Beckenham
Telephone: +27 (11) 370-5000 Kent, BR3 4TU
Fax: +27 (11) 688-7721
REGISTRATION NUMBER 1959/003209/06
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
ISIN: ZAE000016549
SHARE CODE: WAR
Date: 05/08/2004 05:30:08 PM
Produced by the JSE SENS Department
