| Thu 27 Jan 2005, 23:07 | | Palabora - Preliminary Report For The Year Ended 3 |
|
X
- Sharenet contact details
- Customer support
- Customer/visitor feedback
- Advertise on the Sharenet website
- Other Financial Websites
- More about Sharenet
X
What is QuickShare?
Palabora - Preliminary Report For The Year Ended 31 December 2004
Palabora Mining Company Limited and its Subsidiaries
(Incorporated in the Republic of South Africa)
(Reg. No. 1956/002134/06)
JSE Code: PAM ISIN: ZAE000005245
(`Palabora` or `the Company`)
PRELIMINARY REPORT FOR THE YEAR ENDED 31 DECEMBER 2004
REVIEWED GROUP RESULTS
Abridged income statement
Reviewed Audited
2004 2003
R`000 R`000
Revenue 1 970 631 1 554 727
Operating costs (1 870 921) (1 402 594)
Depreciation (268 854) (126 413)
Operating (loss)/profit (169 144) 25 720
Impairment on copper stream (2 341 752) -
Interest received 99 215
Interest paid (184 942) (93 003)
Foreign exchange gains 127 612 14 366
Movement in provisions 54 408 (30 495)
Fair value adjustment (a) (7 374) -
Loss before taxation (2 521 093) (83 197)
Taxation 788 977 48 505
Current (12 575) (17 871)
Deferred tax 801 552 66 376
Loss after taxation (1 732 116) (34 692)
Headline loss (b) (65 323) (62 584)
Reconciliation of earnings to headline
earnings (per share)
Loss per share (6 117)c (123)c
Reversal of loss/(profit) on disposal
of fixed assets & buildings 164c (30)c
Fair value adjustment (a) 17c -
Reversal of provision for Palabora
Foundation donation - (68)c
Reversal of impairment provision
on copper stream 5 705c -
Headline loss per share (231)c (221)c
Notes:
1. Trading statement follow up
The indicative loss and headline loss per share, pre impairment, as disclosed
in the Trading Statement issued on 20 January 2005 was between 275c - 295c and
775c - 795c respectively more when compared to 2003. The audit review of the
Company`s financial results has clarified the accounting treatment of items to
be included in the loss and headline loss. Items relating to (i) recognition of
pension fund surpluses and (ii) release of excess provisions for post
retirement medical benefits have now been included in headline loss. A
reconciliation loss and headline loss per share between amounts communicated in
the Trading Statement of 20 January 2005 and this Preliminary Report dated
27 January 2005 is show below:
Loss per Headline Loss
share (pre- per share (pre-
impairment) impairment)
Per Preliminary Report
for year ended
31 December 2004
dated 27 January 2005
(post impairment) (6 117) (231)
Adjust for impairment loss 5 705 -
Adjust for Pension Surplus - (625)
Adjust for Post Retirement
Medical Provision - (157)
Adjusted comparative A (412) (1 013)
Per Audited Financial
Statements for year ended
31 December 2003 B (123) (221)
Difference (A-B) (289) (792)
Range per Trading 275 - 295 775 - 795
Statement dated (more than (more than
20 January 2005 2003) 2003)
2. Accounting policies
All accounting policies used are consistent with those used in the audited
financial statements for the year ended 31 December 2003.
3. Impairment
The balance sheet value of Palabora`s copper assets has been assessed in light
of completing a recent business review and the ongoing strengthening of the Rand
against the US dollar. An impairment loss of R2 341 million before taxation is
recognised in the financial statements for the year ending 31 December 2004
which has the effect of reducing the carrying value of the copper assets from R4
311 million to R1 970 million. The net impact after tax on the income statement
is R1 615 million.
4. Audit review
The year-end financial results have been reviewed in terms of Rule 3.18 of the
Listings Requirements of the JSE Securities Exchange SA by the Company`s
auditors, PricewaterhouseCoopers Inc. The review opinion is available on request
from the Company Secretary.
2004 2003
R000 R000
5. Net debt
Current portion of long-term loans 1 795 527 294 212
Non current portion of the loans 9 638 1 153 707
Total long term loans 1 805 165 1 447 919
Bank overdrafts 369 645 388 660
Cash and cash equivalents (16 580) (16 602)
Net debt 2 158 230 1 819 977
Long-term loans comprise:
(i) US$2.5 million from Daiichi Kigenso Kagaku Kogyo Co Limited in Japan;
Unsecured loan obtained in 2001. Capital and interest repayable in 24 half
yearly instalments of approximately US$135,000, which commenced on 30 June 2003.
Interest rate is based on six-month LIBOR rate plus 2,38%.
(ii) R849 million unsecured redeemable convertible debentures;
Issued in September 2003. Interest rate fixed for six-month intervals at JIBAR
plus 5%, payable semi-annually in arrears in March and September of each year.
(iii) US$90 million tranche and Rand tranche of R283 million;
Unsecured loan facility with a group of domestic and international banks issued
June 2001. Repayable in six equal half yearly instalments of US$15 million and
R47 million respectively, with the fourth repayment effected in December 2004.
This facility is interest bearing at 1,5% above LIBOR for the US$ tranche and
JIBOR for the Rand tranche.
An unsecured short-term facility of US$65 million provided in January 2004 by
the major shareholder, Rio Tinto, was amended in June 2004 to increase the
facility, part working capital funding and part guarantee, to US$130 million.
The facility is interest bearing at LIBOR plus 5% and is repayable on or before
31 July 2005.
During December 2004, Rio Tinto provided an additional facility of US$25
million, secured over the magnetite ore stockpiles. The facility is interest
bearing at LIBOR plus 5% and is repayable from the proceeds from selling the
magnetite asset.
Overdraft facilities are bilateral, unsecured and uncommitted to the extent of
R344 million, with R156 million committed. These facilities are provided by a
number of South African and international banks.
6. Contingencies and commitments
In the 2002 Annual Financial Statements a contingent liability was disclosed
for a potential liability relating to payments made to former employees for
early voluntary retirement. In the 2003 Annual Financial Statements, R37 million
was provided to recognise this liability. In 2004 this provision no longer
exists as Palabora`s liability to the pension fund has been settled by the
distribution of surplus funds from an old fund that has now been closed.
All known expenses related to the disturbances caused by the cave induced
surface cracking have been accounted for in the financial statements for the
year ended 31 December 2004. The possibility of future claims cannot be
excluded.
7. Holding company
The immediate holding company is Palabora Holdings Limited and the ultimate
holding company is Rio Tinto plc, which is incorporated in the United Kingdom.
Reference notes:
(a) Fair value of investment in financial lease related to the sale of the ZBS
plant to Maxima Global (Pty) Ltd.
(b) Reconciliation of headline loss
Reviewed Audited
2004 2003
R000 R000
Losses per financial statements (1 732 116) (34 692)
Reversal of loss/(profit) on disposal
of fixed assets & buildings 46 567 (8 492)
Fair value adjustment 4 901 -
Reversal of provision for Palabora
Foundation Donation - (19 400)
Reversal of impairment provision on
copper stream 1 615 324 -
Headline loss (65 323) (62 584)
Summarised cash flow
Reviewed Audited
2004 2003
R`000 R`000
Cash utilised in operating activities (243 508) (4 467)
Cash utilised in investing activities (217 440) (555 508)
Replacement of mining assets (141 110) (118 142)
Development expenditure (104 613) (450 601)
Other investing activities 28 283 13 235
Cash flow from financing activities 479 941 540 714
Long and short term loans raised 775 557 1 268 629
Long and short term loans re-paid (295 616) (727 915)
Net increase /(decrease) in cash and
cash equivalents 18 993 (19 261)
Cash and cash equivalents at beginning
of year (372 058) (352 797)
Cash and cash equivalents at end of year (353 065) (372 058)
Abridged Balance sheet
Reviewed Audited
2004 2003
R`000 R`000
Employment of capital
Current assets
Stores 58 625 59 322
Product inventories 395 298 374 940
Accounts receivable 382 603 220 725
Taxation 1 400 1 400
Cash and cash equivalents 16 580 16 602
854 506 672 989
Non-current assets
Mining assets 2 107 241 4 575 661
Investment - unlisted 151 005 118 043
Total assets 3 112 752 5 366 693
Liabilities and shareholders` equity
Current liabilities
Accounts payable 273 078 298 279
Provisions 31 300 26 799
Current portion of long-term loans 1 795 527 294 212
Taxation 4 137 6 220
Group companies - related parties 9 881 13 243
Bank overdraft 369 645 388 660
2 483 568 1 027 413
Non-current liabilities
Provision for close down costs and
restoration costs 219 548 196 817
Provision for post retirement medical
benefits 99 072 172 209
Deferred taxation (2 741) 798 707
Long-term loans 9 638 1 153 707
Total liabilities 2 809 085 3 348 976
Total shareholders` equity 303 667 2 017 717
Total equity and liabilities 3 112 752 5 366 693
Selected statistics
2004 2003
R`000 R`000
All tonnes are metric tonnes
Production and sales
Copper grade - Underground ore 0.740 0.680
Ore mined (millions of tonnes)
Surface - 5.5
Underground 8.6 6.0
Copper in concentrate produced
(thousands of tonnes) 50.9 52.4
Cathode produced (thousands of tonnes) 67.5 73.4
Cathode sold (thousands of tonnes) 82.2 76.6
Contained copper sold (thousands of
tonnes) 82.3 77.1
Vermiculite sold (thousands of tonnes) 177 176
ZBS sold (thousands of tonnes) 0.6 1.5
Average copper price realised (USc/lb) 130.5 84.5
Average rand /dollar exchange rate 6.46 7.56
Average copper price realised per tonne
(ZAR) 18 586 14 084
Cash cost per ton - delivered (ZAR) 19 576 15 223
Average vermiculite prices realised
per tonne (ZAR) 978 1 087
Average ZBS prices realised per tonne
(ZAR) 6 297 4 868
Capital expenditure & commitments
Capital expenditure (R million) 267 518
Approved expenditure at end of
each year (R million) 87 277
Contracts placed at end of each year
(R million) 30 185
Interest capitalised (R million) - 53
Exchange gain capitalised (R million) - 149
Investments
Fair value of unlisted investments
(R millions) 151 118
Share capital
Ordinary shares of R1 each (thousands)
- Authorised 100 000 100 000
Ordinary shares of R1 each (thousands)
- Issued 28 316 28 316
Net asset value per share R10.72 R71.26
Statement of changes in equity
for the year ended 31 December 2004
Distri-
Share capital Other butable
and premium reserves reserves Total
R`000 R`000 R`000 R`000
Balance
1 January 2004 28 891 177 465 1 811 361 2 017 717
Revaluation of
investments - 27 741 - 27 741
Currency
translation
difference - (9 702) - (9 702)
Other movements - 27 - 27
Net loss for the
year - - (1 732 116) (1 732 116)
Balance
31 December 2004 28 891 195 531 79 245 303 667
Balance
1 January 2003 28 891 134 244 1 846 053 2 009 188
Revaluation of
investments - 60 795 - 60 795
Currency
translation
difference - (17 759) - (17 759)
Other movements - 185 - 185
Net loss for the
year - - (34 692) (34 692)
Balance
31 December 2003 28 891 177 465 1 811 361 2 017 717
SEGMENTAL REPORTING
Copper
R000
Reviewed Audited
31.12.04 31.12.03
Profit and Loss
Revenues 1 547 513 1 082 735
Cost and expenses (1 667 570) (1 140 954)
Operating (loss)/profit (120 057) (58 219)
Impairment on copper stream
Net interest paid
Other costs and provisions
Loss before tax
Taxation
Net loss for the year
Industrial Minerals
R000
Reviewed Audited
31.12.04 31.12.03
Profit and Loss
Revenues 315 172 356 802
Cost and expenses (421 379) (333 338)
Operating (loss)/profit (106 207) 23 464
Impairment on copper stream
Net interest paid
Other costs and provisions
Loss before tax
Taxation
Net loss for the year
Other
R000
Reviewed Audited
31.12.04 31.12.03
Profit and Loss
Revenues 107 946 115 190
Cost and expenses (50 826) (54 715)
Operating (loss)/profit 57 120 60 475
Impairment on copper stream
Net interest paid
Other costs and provisions
Loss before tax
Taxation
Net loss for the year
Total
R000
Reviewed Audited
31.12.04 31.12.03
Profit and Loss
Revenues 1 970 631 1 554 727
Cost and expenses (2 139 775) (1 529 007)
Operating (loss)/profit (169 144) 25 720
Impairment on copper stream (2 341 752) -
Net interest paid (184 843) (92 788)
Other costs and provisions 174 646 (16 129)
Loss before tax (2 521 093) (83 197)
Taxation 788 977 48 505
Net loss for the year (1 732 116) (34 692)
The segmental split on a geographical basis is based on the country in which
the order is received.
South Africa
R000
31.12.04 31.12.03
Profit and Loss
Revenues 1 687 941 1 227 439
Cost and expenses (1 906 278) (1 367 646)
Operating (loss)/profit before tax (218 337) (140 207)
Impairment on copper stream (2 341 752) -
Taxation 801 431 65 852
Net (loss)/profit for the year (1 758 658) (74 355)
America
R000
31.12.04 31.12.03
Profit and Loss
Revenues 125 404 163 241
Cost and expenses (123 257) (154 743)
Operating (loss)/profit before tax 2 147 8 498
Impairment on copper stream - -
Taxation (758) (2 907)
Net (loss)/profit for the year 1 389 5 591
United Kingdom
R000
31.12.04 31.12.03
Profit and Loss
Revenues 157 286 164 047
Cost and expenses (120 437) (115 535)
Operating (loss)/profit before tax 36 849 48 512
Impairment on copper stream - -
Taxation (11 696) (14 440)
Net (loss)/profit for the year 25 153 34 072
Total
R000
31.12.04 31.12.03
Profit and Loss
Revenues 1 970 631 1 554 727
Cost and expenses (2 149 972) (1 637 924)
Operating (loss)/profit before tax (179 341) (83 197)
Impairment on copper stream (2 341 752) -
Taxation 788 977 48 505
Net (loss)/profit for the year (1 732 116) (34 692)
COMMENTARY
Overview
There were fourteen lost time injuries recorded in 2004 compared to seventeen in
2003. This is the lowest number of lost time injuries ever recorded. Commitment
to safety remains a high priority for both management and employees. Palabora
retained both its ISO 14001 (Environmental) and its ISO 9001 (Quality
Management) certifications.
Production ramp up towards design capacity of 30,000 tonnes per day from the
underground mine continued in 2004. In the first quarter of 2004, daily
production averaged 20,200 tonnes per day compared to 26,800 tonnes per day
during the fourth quarter. Improved operating procedures and better equipment
availability have all contributed to the increased production rate. Better
understanding of cave management issues and improved fragmentation of material
reporting to the draw points have further enhanced production performance.
Two major incidents disrupted production during 2004: a water ingress event of
the underground mine due to failure of a pumping station and a major tear on the
principal underground conveyor belt - a total of 15 days was lost. Both
interruptions occurred during the first half of 2004 and, although the second
half of the year saw several minor interruptions (less than a shift), there were
no major production disruptions.
In April 2004 the north wall of the open pit started exhibiting stress fractures
as a result of the breakthrough of the cave into the bottom of the open pit and
a general destabilisation of the pit bottom. The failure zone is limited to a
strip parallel to the pit rim and, within that zone, the subsidence is
progressing as predicted by the most recent geotechnical analysis. The resultant
surface subsidence has required the relocation of all surface infrastructure
from within the affected area and an exclusion zone has been established.
Concentrator recoveries improved from 85%, during the first half of the year, to
88% during the second half of the year. Excess concentrator capacity was
utilised to toll treat marginal ore from the neighbouring Foskor operation.
Due to production issues in the underground mine, the level of copper
concentrate production was lower than expected. Additional concentrate was
purchased to supplement the Palabora feedstock to the smelter in an effort to
maintain supply to the local market. Total copper production for the year was
67,524 tonnes of which 64% was produced from Palabora`s underground operations
and 36% was purchased from other operations.
Continued improvement in mining and plant operations for the Vermiculite
Operation has improved overall production for 2004. The Zirconium Basic Sulphate
plant (ZBS) was sold to Maxima Global (Pty) Ltd during 2004.
The Company finalised a review of the business in the third quarter of 2004.
Changes were made to operating procedures and organisational structure to
achieve a reduced operating cost base. The costs associated with retrenchment in
the year amounted to R19 million.
Group financial results
The Group incurred a pre tax loss of R2 521 million for the year ended 31
December 2004, compared to R83 million for 2003. The post tax loss for the Group
of R1 732 million, compared to R35 million for 2003, includes the net impact on
earnings of the R1 615 million loss for the impairment of the copper assets.
In the year ended 31 December 2004, headline earnings are stated after (a)
recognition of income accruing to the Company from pension fund surpluses, and
(b) recognition of an accounting benefit as excess provision relating to post
retirement medical is reversed following an actuarial valuation.
Market demand for copper rod and cathode remained high and copper revenues
benefited from the upturn in the commodities market. The Company realised an
average copper price of R18 586 per tonne for 2004, compared to R14 084 per
tonne for 2003. In the year, sales of copper were 82.3 thousand tonnes, compared
to 77.1 thousand tonnes in 2003. Higher copper prices, over the comparable
period, benefited copper revenues by R544 million and the stronger Rand impacted
negatively by R219 million. The benefit of increased copper sales volumes was
R97 million. Higher metal prices increased by-product revenues by R192 million,
when compared to 2003, which was reduced by R194 million due to the stronger
Rand.
Group operating costs, when compared to 2003, were adversely impacted by: (a)
production shortfalls from the underground mine requiring higher levels of
imported copper concentrates and cathode, (b) increased depreciation for the
underground mine as the project phase ended, (c) retrenchment costs associated
with the business review, (d) costs to relocate infrastructure due to cave
induced ground subsidence and (e) draw-point rehabilitation.
Purchased copper concentrate amounted to 65 thousand tonnes of import and
30 thousand tonnes from neighbouring Foskor, supplemented by an additional
12 thousand tonnes of copper purchased in cathode form. The costs of purchased
copper concentrates amounted to R593 million and cathode purchases to R224
million. The total copper purchases for 2003 amounted to R415 million.
The net cash cost of copper, including the impact of purchased concentrates and
cathode, was R19 576 per tonne. This was 29% higher than the
R15 223 achieved for last year. These changes reflect the increased cost of
underground mining and the delayed ramp up in production levels.
The construction of the underground mine is now complete at a final cost of R3
244 million. Overruns on estimated expenditure occurred because of: (i)
additional mobile equipment purchased, (ii) enhanced water management system
installed, (iii) slowdown of the development of the production footprint due to
seismic activity and (iv) installation of additional drawpoint support resulting
from greater than expected drawpoint wear.
Industrial minerals operations
Vermiculite production was curtailed during December 2003 to compensate for the
lower prevailing demand and, production was increased in 2004 by 11.6%, again to
match demand.
Balance sheet
Net debt increased by 19% to R2 158 million during 2004. This increase of R338
million for the year was utilised as follows (i) R161 million to finance the
final stage of the underground mine development and (ii) R185 million for loan
capital repayments and finance charges. The Company is expecting its share of
the pension fund surplus distribution to amount to circa R266 million. Accounts
receivable includes an amount of R200 million, R266 million of which R66 million
will be deducted for liabilities accounted for in prior years. Debentures are
disclosed as short-term loans due to the conversion option, which fall due in
September 2005. No dividends were declared and it is unlikely that dividends
will recommence in the medium term.
Cash flow
Cash flow constraints are precipitated by lower than planned production,
impacting sales negatively. Increased debt levels contributed to the increased
finance charges, which were partially offset by currency gains resulting from a
stronger Rand. Development expenditure fell significantly for the year as the
underground project was completed.
Refinancing
During December 2004, Rio Tinto provided an additional facility of
US$25 million, secured over Palabora`s magnetite iron ore stockpile. The Board
has decided to pursue the sale of the magnetite iron ore resource, and Palabora
has retained Cutfield Freeman & Co Limited, an independent London based finance
company to assist with the review work. This loan is to be repaid from the
proceeds of the sale of the magnetite assets. Of the unsecured US$130million
facility obtained from Rio Tinto plc, consisting of part facility and part
guarantee, US$105 million has been utilised at 31 December 2004. Available cash
resources are strictly monitored and it is still the Board`s intention to
revisit its current debt structure by refinancing the business in the short
term.
Sale of assets
The Zirconium Basic Sulphate plant (ZBS) was sold to the BEE company Maxima
Global (Pty) Ltd. The Board approved Maxima`s lease and purchase proposal on 18
November 2004 and the sale documents were signed on 19 November 2004.
Palfos Aviation (Pty) Ltd is in the process of being deregistered following the
sale of the company`s major asset, Palfos Aircraft Citation V (ZS.MVS), on 15
June 2004.
Pension fund surpluses
With effect from 1 September 2002, the Company operated a defined contribution
scheme The total pension surplus apportioned to Palabora Mining Company Limited
amounted to R266 million of which R66 million will be deducted for liabilities
accounted for in prior years. The Financial Services Board has approved the
transfer of the employers` share of the surplus arising from The RTZ (South
Africa) Pension Fund that amounted to R46 million. The funds were paid into an
Employer reserve account with the Fund Administrator on 13 January 2005 and will
be utilised to fund the normal monthly employer pension contributions. The
Trustees of the Palabora Mining Pension Fund have accepted the Company`s request
to liquidate the Palabora Mining Pension Fund. The appointment of the Liquidator
of the Fund is subject to approval by the Registrar of Pension Funds. The
employer`s share of the surplus in this Fund is estimated to amount to
approximately R154 million, before tax. Management is doing its best to ensure
that the surplus portion is received by the third quarter of 2005. A provision
to account for this surplus has been made in the 2004 financial results.
R M Maruma K Marshall
Chairman Managing Director
27 January 2005
Directors:
M R Maruma (Chairman), J H K Sachikonye*** (Deputy Chairman),
K Marshall* (Managing Director), T Albanese****, S M Din*, D A Farnaby,
G M Negota, J C Posthumus (Alt: P A Henry), W R J Ranson**, J E Rickus*,
R M Whyte* (Alt: F B Weldon), C N Zungu
*British **Australian ***Zimbabwean ****American
Company secretary:
Keith Mathole
Transfer Secretaries: Registered Office:
Computershare Investor Services 2004 (Pty) Ltd 1 Copper Road
70 Marshall Street Phalaborwa
Johannesburg 2001 1389
Postal Address: Postal Address:
PO Box 61051 PO Box 65
Marshalltown 2107 Phalaborwa 1390
These results are also available on our website at: www.palabora.co.za
