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Western Areas Limited - Quarterly Results ended 30 September 2004
WESTERN AREAS LIMITED
INVESTING PROPERTY
REGISTRATION NUMBER 1959/003209/06
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
ISIN: ZAE000016549
SHARE CODE: WAR
QUARTERLY RESULTS ENDED 30 SEPTEMBER 2004
PRODUCTION AND UNIT RESULTS
Year Year Quarter
ended to date ended
31.12.03 30.09.04 31.03.04
IMPERIAL
tons Reef mined (000) 1,097 666 208
tons Ore milled (000) 1,095 906 290
oz/ton Yield (underground) 0.206 0.219 0.200
oz/ton Yield (incl. surface) 0.205 0.173 0.161
oz Gold produced 224,227 157,230 46,643
oz Gold sold 225,218 157,181 47,565
US$/oz Cash costs 287 379 406
US$/oz Total production costs 341 443 491
US$/oz Gold price achieved 315 294 284
Average exchange rate achieved
Period end exchange rate
US$m Capital expenditure 63 37 14
US$m Capital commitment at
end of period 13 8 14
Quarter Quarter
ended ended
30.06.04 30.09.04
IMPERIAL
tons Reef mined (000) 210 248
tons Ore milled (000) 299 317
oz/ton Yield (underground) 0.230 0.229
oz/ton Yield (incl. surface) 0.175 0.184
oz Gold produced 52,354 58,233
oz Gold sold 52,244 57,372
US$/oz Cash costs 379 359
US$/oz Total production costs 441 406
US$/oz Gold price achieved 284 314
Average exchange rate
achieved
Period end exchange rate
US$m Capital expenditure 12 11
US$m Capital commitment at
end of period 10 8
Quarter Quarter Quarter
ended ended ended
30.09.04 30.06.04 31.03.04
METRIC
Reef mined (000) tonnes 225 190 189
Ore milled (000) tonnes 289 271 262
Yield (underground) g/tonne 7.82 7.89 6.87
Yield (incl. surface) g/tonne 6.27 6.00 5.54
Gold produced kg 1,811 1,628 1,451
Gold sold kg 1,784 1,624 1,480
Cash costs R/kg 73,636 80,468 88,550
Total production costs R/kg 83,330 93,738 107,162
Gold price achieved R/kg 64,349 60,328 61,861
Average exchange rate
achieved R/$ 6.3741 6.6071 6.7750
Period end exchange rate R/$ 6.4570 6.2700 6.2675
Capital expenditure Rm 69 76 88
Capital commitment at end of
period Rm 54 61 84
Year Year
to date ended
30.09.04 31.12.03
METRIC
Reef mined (000) tonnes 604 996
Ore milled (000) tonnes 822 995
Yield (underground) g/tonne 7.54 7.05
Yield (incl. surface) g/tonne 5.95 7.01
Gold produced kg 4,890 6.974
Gold sold kg 4,888 7,005
Cash costs R/kg 80,333 69,861
Total production costs R/kg 93,866 83,150
Gold price achieved R/kg 62,248 76,647
Average exchange rate achieved R/$ 6.5855 7.5682
Period end exchange rate R/$ 6.4570 6.6150
Capital expenditure Rm 233 417
Capital commitment at end of period Rm 54 86
ABRIDGED INCOME STATEMENT
Quarters ended
30.09.04 30.06.04
SA Rand million Notes Unaudited Unaudited
Gold revenue 108.6 86.2
Total production costs 1 (151.0) (152.7)
Production costs - cash (133.4) (131.0)
Production costs - non-cash (17.6) (21.7)
Operating (loss)/Profit from gold (42.4) (66.5)
Other (costs)/income (0.3) (5.5)
Administration and other expenditure (7.9) (5.0)
Operating (loss)/Profit before
derivative transactions (50.6) (77.0)
Present value adjustment for option
premium payable (50.9) 6.3
Fair value adjustment 2 (39.5) (1.8)
Exchange (losses)/gains 3 (29.1) (3.4)
(Loss)/Profit before taxation (170.1) (75.9)
Taxation 6 11.7 44.0
(Loss)/Profit for the period (158.4) (31.9)
Headline (loss)/earnings per share - cents (134) (30)
(Loss)/Earnings per share - cents (134) (30)
Number of issued shares (million) 118.5 105.4
Determination of headline earnings:
Net (loss)/Profit for the period (158.4) (31.9)
Net loss on disposal of subsidiary - -
Loss on disposal of fixed assets - -
Net Profit on disposal of investments - -
Headline (loss)/earnings (158.4) (31.9)
Year to date Year ended
30.09.04 31.12.03
SA Rand million Unaudited Audited
Gold revenue 279.1 582.4
Total production costs (459.1) (579.9)
Production costs - cash (392.9) (487.3)
Production costs - non-cash (66.2) (92.6)
Operating (loss)/profit from gold (180.0) 2.5
Other (costs)/income (7.3) 176.7
Administration and other expenditure (18.5) (25.6)
Operating (loss)/Profit before derivative
transactions (205.8) 153.6
Present value adjustment for option premium
payable (60.8) (75.0)
Fair value adjustment 33.1 447.4
Exchange (losses)/gains 22.8 340.8
(Loss)/Profit before taxation (210.7) 866.8
Taxation 34.3 (402.0)
(Loss)/Profit for the period (176.4) 460.7
Headline (loss)/earnings per share - cents (150) 330
(Loss)/Earnings per share - cents (149) 437
Number of issued shares (million) 118.5 105.4
Determination of headline earnings:
Net (loss)/Profit for the period (176.4) 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) (155.7)
Headline (loss)/earnings (177.6) 347.4
ABRIDGED C ASH FLOW STATEMENT
Quarters ended
30.09.04 30.06.04
SA Rand million Note Unaudited Unaudited
Cash flow (utilised in)/from
operating activities (30.2) (40.9)
Cash flow utilised in investing
activities 7 (69.3) (76.4)
Cash flow from/(utilised in) finance
activities 91.3 128.4
Net (decrease)/increase in cash
and cash equivalents (8.2) 11.1
Cash and cash equivalents:
- at beginning of period 22.6 13.6
- effect of exchange rate
fluctuations on cash held 0.5 (2.1)
- cash and cash equivalents of
subsidiary disposed of - -
At end of period 14.9 22.6
Year to date Year ended
30.09.04 31.12.03
SA Rand million Unaudited Audited
Cash flow (utilised in)/from operating
activities (106.9) 43.1
Cash flow utilised in investing activities (204.7) (59.7)
Cash flow from/(utilised in) f inance activities 306.3 (37.5)
Net (decrease)/increase in cash and cash
equivalents (5.3) (54.1)
Cash and cash equivalents:
- at beginning of period 21.9 76.4
-effect of exchange rate fluctuations on cash
held (1.7) 1.4
- cash and cash equivalents of subsidiary
disposed of - (1.8)
At end of period 14.9 21.9
ABRIDGED BALANCE SHEET
Period ended Year ended
30.09.04 30.06.04 31.12.03
SA Rand million Notes Unaudited Unaudited Audited
ASSETS
Mining assets 4 3,399.8 3,350.9 3,223.9
Derivative asset 694.2 614.9 792.1
Listed investments 5 0.3 0.3 33.0
Deferred taxation 6 418.6 355.8 429.3
Cash and cash equivalents 14.9 22.6 21.9
Other assets 75.1 71.8 88.2
Total assets 4,602.9 4,416.4 4,588.4
EQUIT Y AND LIABILITIES
Shareholders equity 1,414.4 1,237.9 1,144.5
Option premium payable 1,047.2 991.0 1,084.7
Derivative liability 2,013.5 1,777.4 2,217.6
Other liabilities 7 127.8 410.2 141.6
Total equity and liabilities 4,602.9 4,416.4 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)
Number of issued
ordinary shares
(million) 13.1 13.1 388.5 -
Share issue costs - - (6.6) -
Fair value adjustment - - - (23.8)
Recycling of fair value
on maturing
of options - - - 76.8
Recycling of fair value
on disposal
of investment - - - -
Attributable Profit
for the period - - - -
Balance at
30 September 2004 118.5 118.5 2,245.4 (1,277.6)
Retained
Available- earnings/
for-sale (Accumulated
SA Rand million reserve deficit) Total
Balance at 31 December 2003 1.7 504.5 1,144.5
Number of issued ordinary shares
(million) - - 401.6
Share issue costs - - (6.6)
Fair value adjustment - - (23.8)
Recycling of fair value on maturing
of options - - 76.8
Recycling of fair value on disposal
of investment (1.7) - (1.7)
Attributable Profit for the period - (176.4) (176.4)
Balance at 30 September 2004 - 328.1 1,414.4
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 are accounted for in the income statement whilst the
revaluation based on the gold price 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 6.2700 at 30 June 2004 to
6.4570 at 30 September 2004.
4. No adjustment has been made to reflect mining assets at their fair value.
5. 41 895 995 JCI Limited shares were sold during the first Quarter of 2004.
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 increased
from US$393 at 30 June 2004 to US$418 at 30 September 2004.
7. The loan of R297.5 million (including capitalised interest), provided by JCI
Limited in terms of the Western Areas rights offer has been settled.
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 those of the previous corresponding period with the
adoption of AC 133 Financial Instruments: Recognition and Measurements, in
2003.
For more information visit our website at www.westernareas.co.za
LETTER TO SHAREHOLDERS
The R42.4 million operating loss from gold for the September 2004 quarter,
including hedging obligations, is a significant improvement on the R66.5
million operating loss from gold in the previous quarter. This reflects a turn-
around at South Deep and provides a solid platform for further operational
interventions to achieve planned efficiencies.
Due mainly to revaluation of the liabilities associated with the derivative
structure in accordance with AC 133, western Areas incurred an after-tax loss of
R158.4 million, compared to a loss of R31.9 million for the previous quarter.
The appointment of the new South Deep CEO in June 2004 and the subsequent
corrective action, including a 50% reduction in senior management numbers, has
started to yield positive results. This is demonstrated by meaningful
production and cost improvements over the last quarter.
The yield for the September 2004 quarter was 6.27g/t, up from the 6.00 g/t in
the previous quarter. This was as a consequence of increased tonnages mined
from underground and improved grade control. During the quarter 69 000 tonnes
of low-grade surface material was put through the treatment plant to maximise
capacity and improve cost efficiency.
Total production costs decreased slightly to R151.0 million from R152.7 million
for the June quarter, despite increased cost of wages and electrical power.
Included in this amount is the cost of R3 million for a geophysical survey data
acquired from Gold Fields. Cash production costs decreased by 8.5% from
R80.468/kg last quarter to R73.636/kg this quarter, and total production costs
decreased by 11.1% to R83.330/kg.
The increase in production translated into higher gold revenues, with gold sold
increasing by 9.9%, but these gains were partly offset by the stronger Rand.
During the quarter, R57.3 million was spent on capital projects at South Deep,
primarily on the residual shaft work.
R12 million was spent on optimising Western Areas mineral holdings on
properties contiguous to South Deep.
As South Deep moves towards full operational status following the commissioning
of the Twin Shaft in November, the mine will start to cover its operating and
capital costs and begin to repay the capital invested. Full operational
efficiencies are expected to materialise during the course of the next year.
Given that the major capital investment phase is nearing completion, South Deep
has started consultations with unions that will lead to the adjustment of the
labour force to match what is required to operate the mine with the new main
shaft in place. It is estimated that 700 employees (-14% of strength) will be
affected, with voluntary retrenchments and early retirements being considered
before forced retrenchment.
The mine intends to stop pumping operations at Harmony`s Randfontein No. 4
shaft once the boundary plugs and boundary pillar separating these mines have
been thoroughly tested. This will result in a saving of R4 - 5 million a month
for South Deep.
Discussions continue between Placer Dome representatives, the insurance
underwriters and their assessors regarding the claim for the South Shaft SV-1
sub-vertical shaft that was damaged by a rock fall in January 2004. Every
effort is being made to reach finality on this matter as soon as possible.
The rights offer was successfully concluded on 27 July 2004, with the issue of
13.2 million new ordinary shares against a net receipt of R395.1 million. The
bridging loan from JCI Limited of R297.5 million has been repaid, and Western
Areas has sufficient cash reserves and facilities to meet its hedging
obligations and capital commitments for the year. Discussions are in progress
to restructure the hedge upon completion of a new South Deep Phase I Life of
Mine plan.
Mafika Mkwanazi Brett Kebble
Non-Executive Chairman Chief Executive Officer
11 November 2004
Johannesburg
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
70 Marshall Street
Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Telephone: +27 (11) 370-5000
Fax: +27 (11) 688-7721/2
CONTACT DETAILS
INVESTOR RELATIONS
Brian Gibson Issue Management
Contact person: Brian Gibson
Telephone: +27 (11) 880-1510
Fax: +27 (11) 880-1392
email: gibson@icon.co.za
OFFICE OF UNITED KINGDOM REGISTRARS
Capita Registrars
The Registry
34 Beckenham Road
Beckenham
Kent, BR3 4TU
Date: 11/11/2004 04:45:08 PM
Produced by the JSE SENS Department
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