| Wed 18 Aug 2004, 9:23 | | ARM - REVIEWED RESULTS FOR THE YEAR ENDED 30 JUNE |
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ARM - REVIEWED RESULTS FOR THE YEAR ENDED 30 JUNE 2004
African Rainbow Minerals Limited
(Formerly Anglovaal Mining Limited (`Avmin`))
(Incorporated in the Republic of South Africa)
(Registration number 1933/004580/06)
JSE Share code: ARI LSE Share code: AGM ISIN: ZAE000054045
(`ARM` or the `Company`)
REVIEWED RESULTS for the year ended 30 June 2004
HIGHLIGHTS
BASIC EARNINGS FOR THE YEAR R1,4 BILLION (FY 2003: R191 MILLION LOSS)
STRONG SECOND HALF PERFORMANCES FROM NICKEL AND FERROUS OPERATIONS
PROFIT FROM OPERATIONS
H2: R409 MILLION (H1: R5 MILLION LOSS)
SUBSTANTIALLY STRONGER BALANCE SHEET
GROUP RESTRUCTURED TO REFLECT NEW FOCUS
GROWTH STRATEGY FORMULATED
GOOD PROGRESS WITH IN-HOUSE PROJECTS
BALANCE SHEET at 30 June
Reviewed Audited
2004 2003
Rm Rm
ASSETS
Non-current assets
Tangible assets 4 674 4 786
Intangible assets 5 6
Deferred tax assets 7 12
Environmental rehabilitation trust funds 29 45
Investments 4 606 215
9 321 5 064
Current assets
Inventories 914 896
Trade and other receivables 1 162 936
Deposits and cash 328 265
2 404 2 097
Total assets 11 725 7 161
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 10 6
Share premium 3 495 79
Reserves (193) 218
Retained earnings 3 568 2 208
Shareholders` interest in capital and reserves 6 880 2 511
Minority interest 1 326 2 451
Total shareholders` interest 8 206 4 962
Non-current liabilities
Long-term borrowings 857 -
Deferred tax liabilities 866 519
Long-term provisions 151 153
Non-hedge derivatives - 103
1 874 775
Current liabilities
Trade and other payables 567 521
Provisions 41 39
Taxation 63 42
Overdrafts and short-term borrowings 974 822
1 645 1 424
Total equity and liabilities 11 725 7 161
CASH FLOW STATEMENT for the year ended 30 June
Reviewed Audited
2004 2003
Rm Rm
CASH FLOW FROM OPERATING ACTIVITIES
Cash receipts from customers 4 474 5 009
Cash paid to suppliers and employees (3 693) (4 160)
Cash generated from operations 781 849
Interest received 25 80
Interest paid (74) (180)
Dividends received 1 3
Dividends paid (13) (21)
Taxation paid (82) (101)
Net cash inflow from operating activities 638 630
CASH FLOW FROM INVESTING ACTIVITIES
Additions to fixed assets to maintain operations (475) (420)
Additions to fixed assets to expand operations (184) (132)
Net cash effect of acquisitions (32) -
Cash disposed of with sale of Avgold (1) -
Proceeds on disposal of fixed assets 19 8
Proceeds on disposal of investments 167 -
Purchase of remaining interest in Nkomati (260) -
Proceeds from sale of ETC mine - 252
Net cash effect of sale of Chambishi - (67)
Proceeds on dilution of interest in investment
in subsidiaries - 564
Net cash inflow/(outflow) from investing
activities (766) 205
CASH FLOW FROM FINANCING ACTIVITIES
Increase in shareholder funding 54 17
Funding received from minority shareholders 63 11
Long-term borrowings raised 280 -
Long-term borrowings repaid (127) (901)
Decrease in short-term borrowings (79) (476)
Net cash inflow/(outflow) from financing
activities 191 (1 349)
Net increase/(decrease) in cash and
cash equivalents 63 (514)
Cash and cash equivalents at beginning of year 265 779
Cash and cash equivalents at end of year 328 265
Cash generated from operations per share (cents) 610 758
INCOME STATEMENT
Unaudited Unaudited Reviewed Audited
Six months ended Year ended
30 June 31 December 30 June 30 June
2004 2003 2004 2003
Rm Rm Rm Rm
Revenue 2 525 2 004 4 529 4 896
Cost of sales (1 972) (1 681) (3 653) (3 882)
Gross profit 553 323 876 1 014
Other operating income 53 23 76 424
Other operating expenses (191) (167) (358) (779)
Retrenchment costs (23) - (23) (35)
Profit/(loss) on non-hedge
Derivatives 17 (184) (167) (103)
Profit/(loss) from operations 409 (5) 404 521
Income from investments 14 12 26 83
Finance costs (46) (38) (84) (180)
Loss from associates (67) - (67) -
Profit/(loss) before taxation and
exceptional items 310 (31) 279 424
Exceptional items 1 415 4 1 419 (388)
Profit/(loss) before
Taxation 1 725 (27) 1 698 36
Taxation (260) (49) (309) (147)
Profit/(loss) for the period 1 465 (76) 1 389 (111)
Minority interest (104) 75 (29) (80)
Basic earnings/(loss) 1 361 (1) 1 360 (191)
ADDITIONAL INFORMATION
Headline earnings 48 (1) 47 197
Headline earnings per
share (cents) 34 (1) 37 176
Basic earnings/(attributable
loss) per share (cents) 951 (1) 1 062 (170)
Fully diluted earnings/
(attributable loss) per
share (cents) 1 055 (169)
Number of shares in
issue at end of
period (thousands) 204 208 114 128 204 208 112 602
Weighted average number
of shares in
issue (thousands) 142 991 113 713 128 115 112 046
Net asset value per
share (cents) 3 369 2 196 3 369 2 230
NOTES TO THE FINANCIAL STATEMENTS
HEADLINE EARNINGS
Basic earnings per
income statement 1 361 (1) 1 360 (191)
- Loss on sale of Chambishi 18 - 18 649
- Profit on sale of Avgold (1 342) - (1 342) (241)
Surplus on disposal of
investments and
mineral rights (135) - (135) (20)
Impairment of immovable
properties 45 - 45 -
- Other (18) (4) (22) -
(71) (5) (76) 197
- Taxation 116 4 120 4
- Minority interest 3 - 3 (4)
Headline earnings 48 (1) 47 197
EXCEPTIONAL ITEMS
Surplus on disposal of
Avgold shares 1 342 - 1 342 241
Surplus on disposal of
Assore shares 135 - 135 -
Impairment on immovable
properties (45) - (45) -
Loss on disposal of Chambishi (18) - (18) (649)
Other 1 4 5 20
Exceptional items per
income statement 1 415 4 1 419 (388)
Taxation (116) (4) (120) (4)
Minority interest (3) - (3) 4
Profit on sale of fixed assets 5 - 5 -
Associate dilution and
exceptional 12 - 12 -
Net exceptional items 1 313 - 1 313 (388)
STATEMENT OF CHANGES IN EQUITY for the year ended 30 June
Foreign
cur-
Share rency Reval- Re-
capital trans- uation tained
Group and premium lation surplus Other earnings Total
Rm Rm Rm Rm Rm Rm
Balance at 30 June 2002 68 (42) 141 11 2 401 2 579
- - - - (191) (191)
Revaluation of listed
investments - - 39 - - 39
Translation of foreign
subsidiary - 24 - - - 24
Reversal of derivative
instruments - - - 26 - 26
Realisation of reserve
on disposal of Chambishi - 18 - - - 18
Share options exercised 17 - - - - 17
Transfer to insurance
contingency reserve - - - 2 (2) -
Other - - 1 (2) - (1)
Balance at 30 June 2003 85 - 181 37 2 208 2 511
Basic earnings - - - - 1 360 1 360
Investment sales and
revaluations - - (178) - - (178)
Share options exercised 54 - - - - 54
Shares issued for
acqusitions 3 366 - - - - 3 366
Other - - - 2 - 2
Share of associate - - - (235) - (235)
Balance at 30 June 2004 3 505 - 3 (196) 3 568 6 880
BASIS OF PREPARATION AND ACCOUNTING POLICIES
The financial information for the half-year and year ended 30 June 2004 has been
prepared adopting the same accounting policies used in the most recent annual
financial statements which are in accordance with South African Statements of
Generally Accepted Accounting Practice and International Financial Reporting
Standards. The accounting policies are consistent with the year ended 30 June
2003. These condensed financial statements are prepared on the historical cost
basis except as otherwise indicated in the accounting policies.
The condensed balance sheets, income statements, cash flow statements and
statements of changes in shareholders` equity, have been reviewed by Ernst &
Young. Their unqualified review report is available for inspection at the
Company`s registered office.
SEGMENTAL INFORMATION
Primary segmental information
Business segments
For reporting purposes, the Group is presently organised into the following
commodity segments.
Corporate
Ferrous and Copper/
Gold Platinum Nickel metals other Cobalt Total
Rm Rm Rm Rm Rm Rm Rm
Year to 30 June 2004
Revenue
External revenue 644 57 524 3 304 - - 4 529
Cost of sales (589) (71) (252) (2 741) - - (3 653)
Other operating
income 2 - 42 22 10 - 76
Other operating
expenses (182) (1) (73) (194) (98) - (548)
Reallocated
corporate
expenditure - - (5) 71 (66) - -
Segment result (125) (15) 236 462 (154) - 404
Income from
investments 1 - 2 2 21 - 26
Finance cost (4) (16) - (52) (12) - (84)
Loss from associate (67) - - - - - (67)
Exceptional items 4 (35) - - 1 450 - 1 419
Taxation (4) (1) (77) (124) (103) - (309)
Minority interest 73 6 - (108) - - (29)
Contribution to
basic earnings (122) (61) 161 180 1 202 - 1 360
Contribution to
headline earnings (135) (26) 161 178 (131) - 47
Other information
Consolidated total
operating assets - 1 961 248 4 056 5 017 - 11 282
Intangibles and
mineral rights - 63 204 171 5 - 443
Consolidated
total assets - 2 024 452 4 227 5 022 - 11 725
Consolidated total
liabilities - 983 206 1 746 584 - 3 519
Capital expenditure 86 92 9 493 15 - 695
Amortisation and
depreciation 193 9 42 168 3 - 415
Primary segmental information
Year to 30 June 2003
Revenue
External revenue 1 000 - 377 2 905 - 614 4 896
Cost of sales (863) - (198) (2 247) - (574) (3 882)
Other operating
income 67 - 19 13 293 32 424
Other operating
expenses (130) - (48) (281) (342) (116) (917)
Reallocated
corporate
expenditure - - (1) 49 (53) 5 -
Segment result 74 - 149 439 (102) (39) 521
Income from
investments 13 1 3 1 65 - 83
Finance cost (58) - - (57) (18) (47) (180)
Exceptional items 7 - - - (345) (50) (388)
Taxation (9) (1) (44) (130) 61 (24) (147)
Minority interest 1 - - (101) - 20 (80)
Contribution to
earnings 28 - 108 152 (339) (140) (191)
Contribution to
headline earnings 26 - 108 152 6 (95) 197
Other information
Consolidated total
operating assets 2 476 64 227 3 451 619 - 6 837
Intangibles and
mineral rights 143 - - 176 5 - 324
Consolidated
total assets 2 619 64 227 3 627 624 - 7 161
Consolidated total
liabilities 383 2 54 1 338 422 - 2 199
Capital expenditure 124 30 30 338 1 29 552
Amortisation and
depreciation 187 - 18 142 1 39 387
COMMENTARY FOR ANNUAL RESULTS
`It has been a year of fundamental change. We have successfully concluded the
ARMI/Avmin/ Harmony agreement announced on 13 November 2003. We are now
implementing the changes and improvements which transactions of this nature
bring about. ARM is now in a position to focus on maximising the value of its
existing operations and in-house projects, where there are prospects for growth
and attractive financial returns, and to focus on rolling out its growth
strategy.`
GROWTH STRATEGY
The ultimate aim of ARM`s growth strategy is the creation of shareholder wealth.
This strategy has four basic tenets:
- Operational excellence - This will be achieved by being a low cost producer
and continuous increased efficiency, culminating in strong organic growth.
- Maximising value in existing projects - This can be achieved by establishing
the most efficient manner in which to maximise value from existing projects, and
may include strategic partnerships.
- Acquisitive growth through smart deals - ARM`s credentials as an empowered
company and access to capital will present many acquisition opportunities. The
potential for `smart` deals within the Group`s focus areas therefore exists.
- Optimise corporate structure - This will involve addressing the low liquidity
levels of ARM`s shares, the complex shareholding structure and direct access to
cash flows.
MANAGEMENT TEAM
The executive management team at ARM have considerable experience over a wide
range of commodities and operations. Chief Executive Officer Patrice Motsepe
leads the Company. He is supported by Frank Abbott, Financial Director, Jan
Steenkamp, Chief Executive of the ferrous metals division and Andre Wilkens,
Chief Executive of the platinum division.
FINANCIAL REVIEW
Arising from the transactions which have occurred during the year comparisons to
the previous year`s results will be difficult and should be reviewed on an
entity basis.
The ARM group results to June 2004 are impacted by the following transactions:
- Disposals
- Chambishi (effective 30 June 2003)
- Avgold Limited (`Avgold`) (effective
30 April 2004)
- Acquisitions
- Harmony Gold Mining Company Limited (`Harmony`) - accounted for as an
associated company from 1 May 2004
- Nkomati Mine - (remaining 25% effective 1 February 2004)
- ARM Platinum (effective 1 May 2004)
The average rand/US dollar exchange rate for the year strengthened by 24 percent
from R9,04/$ to R6,90/$. This had a significant impact on results for the year
at all operations.
The group achieved much better results for the second six months of the
financial year, with operating profit increasing substantially to R409 million
(six months to 31 December 2003: R5 million loss). This increase was largely due
to the solid performances from the nickel and ferrous metals operations.
Cash flow generated from operating activities was R638 million (R630 million).
The balance sheet has been strengthened following the acquisitions of Harmony,
ARM Platinum and 25 percent of Nkomati, resulting in total assets increasing to
R11,7 billion (R7,2 billion).
The Group`s long-term borrowings increased to R857 million as a result of the
acquisition of Nkomati for R260 million and debt assumed on the acquisition of
ARM Platinum.
OPERATIONS REVIEW
GOLD
HARMONY
The gold division`s primary asset is a 19,8 percent stake in Harmony. The impact
of the strength of the rand clouded what can be described as a difficult but
rewarding twelve months for Harmony. Harmony continued to show an increase in
gold produced, increasing by 11 percent from 3,0 million ounces to over 3,3
million ounces, year-on-year. Harmony`s revenue in R/kg terms decreased by 12
percent from R96 663/kg to R85 219/kg. As a result of the growth in production,
Harmony managed to sustain revenue levels of R8,8 billion (R9,0 billion - for
the year ended 2002/03). A 24 percent increase in actual working costs following
a nine percent increase in underground tonnages and a 12 percent increase in
cost per tonne resulted in a net cash operating profit of R580 million compared
to the R2,4 billion previously reported. Cash operating profit margins decreased
from 26 percent to seven percent. Harmony declared a final dividend of 30 cents
per share.
Avgold
For the first 10 months of the financial year Avgold was a subsidiary of ARM.
During the 10 months to 30 April 2004 Target milled 877 925 tonnes of ore at a
yield of 10 g/t. The cash cost was R42 777/kg, or US$196/oz. Capital expenditure
was R82 million. Revenue during the 10 months to 30 April 2004 was R644 million
and gross profit was R55 million.
ARM PLATINUM
ARM Platinum consists of two operating mines, Modikwa Platinum Mine and Nkomati
Mine, and three projects, Two Rivers Platinum, Kalplats Exploration and the
Nkomati expansion.
Modikwa Platinum Mine
Although significant progress has been made, Modikwa remains in a build-up phase
to full production; which should be achieved by early 2005. Annualising the
figures from the last quarter, the mine has achieved a significant improvement
in production tonnage and has achieved 70 percent of full platinum production.
The operating cash costs reduced to approximately R300/t.
Nkomati Mine
ARM acquired the remaining 25 percent of Nkomati from Anglo Operations Limited,
a subsidiary of Anglo American plc, for R260 million. The effective date of the
transaction was 1 February 2004. Accordingly, 75 percent of Nkomati`s results
are consolidated from 1 July 2003 to 31 January 2004 and 100 percent from 1
February 2004 to 30 June 2004. The mine treated a total of 344 000 tonnes (292
000 tonnes) of ore, producing 56 800 tonnes (55 300 tonnes) of concentrate at an
average nickel grade in concentrate of 9,82 percent (9,96 percent). The mine has
been consistently operating above its maximum design capacity at an average of
29 000 tonnes of run-of-mine ore per month and the objective is to maintain the
overall nickel grade, while minimising costs. Nkomati continues to optimise the
exploitation of the various ore bodies and 17 percent of the total run-of-mine
ore was comprised of MMZ ore (disseminate sulphides). Excluding nickel, other
metals contributed 29 percent (35 percent) of the mine`s total revenue, making
the mine the lowest cost producer in its sector. The mine`s revenue for the year
increased by 22 percent to R611 million (R503 million), despite the
strengthening of the rand, as a result of the stronger US dollar nickel price
and record levels of nickel production during the year. Year-on-year unit cash
operating costs increased from R344/t to R361/t or 4,9 percent, which is less
than inflation. Cost of sales increased 11 percent to R287 million (R260
million) as a result of the increased production. The focus on cost minimisation
and efficiency at the mine during the year resulted in significant productivity
improvements - operating profit increased 35 percent to R319 million (R236
million). Profit before tax increased 50 percent to R304 million (R203 million).
Nkomati 2004 2003
Cash operating profit R million 346 260
Tonnes treated (`000) 344 292
Grade (% nickel) 2,02 2,38
On-mine cash cost tonnes
treated (R/tonne) 361 344
Market sales
Nickel tonnes 4 920 4 900
Copper tonnes 2 830 3 300
Cobalt tonnes 81 62
PGMs oz 36 360 39 000
Two Rivers Platinum
Trial mining is currently underway and 60 000 tonnes of ore has been mined and
stockpiled. The objective of the trial mining is to move the project risk from
greenfields to brownfields. All the feasibility assumptions have been confirmed
and a 4,7 g/t 6E stoping grade has been achieved.
Kalplats PGM Project
ARM Platinum and Platinum Australia Limited have signed a Memorandum of
Understanding to participate as joint venture partners to determine through
further exploration and feasibility studies whether or not the application of
the Panton Process, a patented PGM recovery process, can enhance the recovery of
PGMs at the Kalplats PGM Project.
ARM FERROUS
The operations of ARM Ferrous, which are held through Assmang Limited
(`Assmang`), are grouped into three divisions: Manganese, Chrome and Iron ore.
Assmang`s revenue for the year ended 30 June 2004 rose by 13,8 percent to R3
304,5 million. Attributable earnings increased by 7,1 percent to R218,3 million
(R203,8 million), equivalent to R61,50 a share. Headline earnings increased by
4,9 percent to R213,8 million (R203,8 million). Contributions to attributable
earnings by the three divisions, before deducting secondary tax on companies,
amounted to R235,4 million (R285,1 million) from the manganese division, R11,1
million (R58,6 million) from the iron ore division and a loss of R24,9 million
(R134,5 million - loss) from the chrome division. The rand/US dollar exchange
rate continued to be the key determinant of Assmang`s performance during the
year. An average of R6,77 to the US dollar was realised on export proceeds
compared to R8,97 for the previous year.
Production volumes across all commodities increased in comparison to the
previous year, details of which are included in the table below.
Assmang 2004 2003
000 metric tonnes
Product sales
Iron ore 5 500 5 300
Manganese ore (excluding deliveries to
the Cato Ridge alloy operation) 1 400 1 200
Manganese alloys 218 197
Charge Chrome 295 244
Capital expenditure R million 493 338
EXPLORATION
ARM`s new business development and exploration team has identified and acquired
a portfolio of quality exploration development assets in southern Africa,
comprising gold, copper/cobalt, zinc, nickel, magnesite and fluorspar. The
project maturity scale ranges from early stage to advanced pre-feasibility.
SAFETY AND HEALTH
ARM`s commitment to safety is reflected in the significant improvement in safety
statistics at ARM operations during the year. The Lost Day Injury Frequency Rate
for the year declined to 4,2 cases per million man hours worked (2003: 7,8 cases
per 1 million man hours worked). Regrettably, two people lost their lives during
the year. The Board, management and employees of ARM extend their condolences to
the bereaved families and friends. During the year Nkomati Mine achieved 8 000
fatality-free production shifts and 10 years without a fatality.
DIVIDENDS
We are in a capital growth phase and therefore the Board does not consider it
appropriate to declare a dividend for the year ended 30 June 2004.
DIRECTORATE
The ARM Board has been reconstituted:
Executive directors
PT Motsepe - Chairman and Chief Executive Officer
F Abbott - Financial Director
Non-executive directors
RP Menell - Deputy Chairman
ZB Swanepoel
Independent non-executive directors
Dr MMMM Bakane-Tuoane
MW King
AK Maditsi
PJ Manda
JR McAlpine
Dr PS Sibisi
Dr RV Simelane
MV Sisulu
PT Motsepe
Chairman and Chief Executive Officer
F Abbott Johannesburg
Financial Director 17 August 2004
African Rainbow Minerals Limited (`ARM` or the `Company`)
Formerly Anglovaal Mining Limited (`Avmin`)
Registration number 1933/004580/06
Incorporated in the Republic of South Africa, JSE Securities Exchange South
Africa
Share code: ARI ISIN: ZAE000054045 and London Stock Exchange plc Share code:
AGM
Registered office ARM House 29 Impala Road Chislehurston Sandton 2146
PO Box 786136 Sandton 2146 Tel +27 11 779 1300 Fax +27 11 779 1312
For further information Ebrahim Takolia (General Manager Investor Relations)
Tel +27 11 779 1300 e-mail ir.admin@arm.co.za
Group Company Secretary: RH Phillips
