| Thu 17 Feb 2005, 9:26 | | FINANCIAL RESULTS |
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KUMBA RESOURCES LIMITED
Incorporated in the Republic of South Africa
(Registration Number: 2000/011076/06)
Share Code: KMB
ISIN Number: ZAE000034310
("Kumba")
AUDITED GROUP FINANCIAL RESULTS AND UNAUDITED
PHYSICAL INFORMATION
FOR THE 18-MONTHS ENDED 31 DECEMBER 2004
- Record production and strong sales volumes
- Solid financial performance
- Final dividend of 90 cents per share (145 cents for the 18-months to 31
December 2004)
GROUP INCOME STATEMENT
18-months 12-months
ended ended
31 Dec 30 June
2004 2003
Audited Audited
Rm Rm
Revenue 12 599 7 469
Operating expenses (10 744) (6 280)
Net operating profit 1 855 1 189
Net financing costs (401) (244)
Share of pre-taxation (losses)/income (13) 2
from equity accounted investments
Profit before taxation (note 3) 1 441 947
Taxation (434) (229)
Profit from ordinary activities 1 007 718
Minority interest (65)
Net profit attributable to ordinary 942 718
shareholders
Ordinary shares (million)
- in issue 302 294
- weighted average number of shares 300 294
- diluted weighted average number of 302 296
shares
Attributable earnings per share
(cents)
- basic (2003 as previously reported) 314 242
- basic restated for June 2003 244
- diluted (2003 as previously 312 240
reported)
- diluted restated for June 2003 242
Dividend paid per share (cents) in 60 85
respect of the previous financial year
Dividend paid per share (cents) in 20
respect of the first interim period
Dividend paid per share (cents) in 35
respect of the second interim period
Final dividend declared per share 90
(cents) in respect of this 18-month
period
Reconciliation of headline earnings
Net profit attributable to ordinary 942 718
shareholders
- Impairment charges 35 2
- Share of associates' goodwill 27 38
amortisation
- Goodwill amortisation (6) 21
- Share of associates exceptional 20 7
items
- Net deficit/(surplus) on disposal or 48 (3)
scrapping of property, plant and
equipment
- Net surplus on disposal of (72)
investment in joint ventures and
associates
- Closure cost 35
- Taxation effect of adjustments (12) 1
Headline earnings 1 017 784
Headline earnings per share (cents)
- basic (2003 as previously reported) 339 264
- basic restated for June 2003 267
- diluted (2003 as previously 337 262
reported)
- diluted restated for June 2003 265
GROUP BALANCE SHEET
At 31 Dec At 30 June
2004 2003
Audited Audited
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 8 473 8 205
Biological assets 31 29
Intangible asset 71 98
Goodwill (53) (80)
Investments in associates and joint
ventures (note 8)
- listed 6 100
- unlisted 90 18
Deferred taxation (note 10) 63 154
Other financial assets (note 8) 285 272
8 966 8 796
Current assets
Inventories 1 348 1 346
Trade and other receivables 1 397 1 333
Cash and cash equivalents 1 258 964
4 003 3 643
Total assets 12 969 12 439
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders' funds 5 353 4 895
Minority interest 1 110 1 191
Total shareholders' funds 6 463 6 086
Non-current liabilities
Interest-bearing borrowings 2 331 2 801
Other long-term payables 609 388
Non-current provisions 425 355
Deferred taxation (note 10) 1 042 1 055
4 407 4 599
Current liabilities
Trade and other payables 1 061 1 095
Interest-bearing borrowings 836 537
Taxation 182 94
Current provisions 20 28
2 099 1 754
Total equity and liabilities 12 969 12 439
Net debt (note 11) 1 909 2 374
Net asset value per share (cents) 1 773 1 665
Capital expenditure
- incurred 1 396 1 386
- contracted 219 345
- authorised but not contracted 668 624
Contingent liabilities 36 50
Operating lease commitments 167 237
Operating sublease rentals 28 38
receivable
GROUP CASH FLOW
18-months 12-months
ended ended
31 Dec 30 June
2004 2003
Audited Audited
Rm Rm
Cash flow from operating activities 2 632 1 613
Net financing costs (355) (240)
Taxation paid (311) (310)
Dividends paid (note 12) (361) (283)
Cash used in investing activities
- capital expenditure (1 396) (1 386)
- proceeds from disposal of property, 138 44
plant and equipment
- increase in cash resources on 366
acquisition of a controlling interest
in subsidiaries
- acquisition of joint ventures and (34)
associates
Proceeds from disposal of associate 100
Other (159) (8)
Net cash inflow/(outflow) 288 (238)
Cash flows from issue of shares 132
Borrowings (repaid)/raised (126) 523
Net increase in cash and cash 294 285
equivalents
Cash and cash equivalents beginning of 964 679
period
1 258 964
Calculation of movement in net debt:
Net cash inflow/(outflow) 288 (238)
- shares issued 132
- cash flows included above relating 2
to non-interest-bearing debt
- loans from minority shareholders (1) 95
- increase in debt on acquisition of a (891)
controlling interest in subsidiaries
- non-cash flow movements in net debt (22) (18)
applicable to special purpose entities
- non-cash flow movements in net debt 101 (11)
applicable to currency translation
differences of transactions
denominated in foreign currency
- non-cash flow movements in net debt (33) (170)
of the group arising from currency
translation differences
Decrease/(increase) in net debt 465 (1 231)
GROUP STATEMENT OF CHANGES IN EQUITY
18-months 12-months
ended ended
31 Dec 30 June
2004 2003
Audited Audited
Rm Rm
Shareholders' funds at beginning of 4 921 4 816
period as previously reported
Prior period adjustment (note 6 and (26) (31)
7)
Shareholders' funds at beginning of 4 895 4 785
period
Changes in share capital and premium
- issue of shares
- share premium(1) 132
- movement in shares held by 33 2
Management Share Trust
Changes in non-distributable reserves
- currency translation differences (301) (432)
- financial instruments movements 10 71
- realised in associate and joint (11) (76)
venture
- transfer of equity accounted 31 (38)
earnings
- transfer of insurance reserve (5) 3
- transfer to retained income (9)
Changes in retained income
- net profit for the year 942 718
- dividends paid (note 6 and note 12) (344) (252)
- reduction in dividends paid to
Management Share
Trust (note 6) 2 3
- realised in associate and joint 76
venture
- transfer of equity accounted (31) 38
earnings
- transfer of insurance reserve (3)
- transfer from translation reserve 9
Shareholders' funds at end of period 5 353 4 895
(1) Issued to the Management Share Option Scheme due to options exercised.
(2) Dividends declared after this 18-month period amount to 90 cents per share.
STC at 12,5% (R34 million) will be payable on the dividend.
Notes to the Group financial results
1. Basis of preparation
The group financial results have been prepared on the historical cost basis
excluding financial instruments and biological assets which are fair valued and
conform to South African Statements of Generally Accepted Accounting Practice
and International Financial Reporting Standards. The accounting policies are
consistent with those applied in the annual financial statements for the year
ended 30 June 2003 except for the consolidation of the Management Share Trust
(note 6) and biological assets (note 7).
2. Change of year end
The group changed its year end from 30 June to 31 December to be in line with
the year end of its majority shareholder, Anglo American plc. Consequently the
comparative amounts for the income statement, changes in equity, cash flows and
related notes are not comparable.
18-months 12-months
ended ended
31 Dec 30 June
2004 2003
Audited Audited
Rm Rm
3. Profit before taxation is arrived
at after
Depreciation and amortisation of (977) (532)
intangible assets
Financing costs (448) (321)
Interest received 47 77
Dividends received 18 49
Net realised foreign exchange
gains/(losses) on:
- currency exchange differences (210) (193)
- revaluation of derivative 173 144
instruments
Net unrealised foreign exchange
gains/(losses) on:
- currency exchange differences 121 (92)
- revaluation of derivative (124) 19
instruments
Fair value adjustment on financial 28
assets
Fair value adjustment on financial (5)
liabilities
Impairment charges (note 4) (35) (2)
Goodwill amortisation 6 (21)
Net surplus on disposal of 72
investments in joint ventures and
associates
Net (deficit)/surplus on disposal (48) 3
of fixed assets
4. Impairment charges
Impairment of cyanide chemicals (89)
plant
Impairment of fixed assets (15)
Reversal of impairment of shipping 90
assets
Reversal of impairment of other 1
fixed assets
Impairment of intangible assets (11)
Impairment of investments (11) (2)
(35) (2)
Taxation effect
(35) (2)
5. CLOSURE OF TICOR CHEMICALS PLANT
On 21 April 2004 Ticor Limited announced its intention
to discontinue its chemicals business, included in the
heavy minerals segment. The revenue, operating results,
assets, liabilities and cash flow of the chemicals
business for the current and previous periods are:
Revenue 217 254
Expenses 192 258
Provision for closure 35
Provision for impairment 89
Pre-tax loss (102) (4)
Income tax expense 28 5
Total assets 76 240
Total external liabilities 6 100
Cash inflows from operating 50 37
activities
In June 2004, a contract was signed for AU$5 million for the
sale of the plant, equipment and portion of the land owned
by Ticor Chemicals. All proceeds from the sale have been
received including AU$0,5 million which was initially held
in escrow until particular environmental releases had been
obtained. Negotiations continue for the sale of the
remaining land held by Ticor Chemicals. It is anticipated
that an agreement will be reached for the sale early in the
new calendar year.
6. Consolidation of Kumba Management Share Trust
Kumba operates the Kumba Management Share Trust for
senior employees and executive directors of Kumba. The
Trust has been consolidated for the 18-months under
review. Prior periods' figures have been restated. The
amount of the adjustment for the current and comparable
period is as follows:
Income statement impact
- Reduction of dividends paid to 2 3
external parties
Balance sheet impact
- Share capital and premium (33) 33
(increase)/decrease
- Retained income increase 5 3
- Current liabilities increase 13 8
- Trade and other receivables 17 22
decrease
The amount of the adjustment relating to the 2002
financial statements is a decrease of R35 million in
shareholders' reserves, a decrease of R3 million in
financial assets, a decrease of R24 million in trade
and other receivables and an increase of R14 million in
trade and other payables.
7. Biological assets
With effect from 1 July 2003 the group has changed its
accounting policy to comply with IAS 41 Agriculture.
This resulted in the reclassification of certain
inventories as biological assets and the fair value of
plantations.
Statement of changes in equity
impact
- fair value adjustment 1
plantations
Balance sheet impact
- Retained income increase 5 4
- Biological assets increase 31 29
- Inventories decrease 24 23
- Deferred taxation liabilities 2 2
increase
The amount of the adjustment relating to the 2002
financial statements is an increase of R4 million in
retained income, an increase of R25 million in
biological assets, a decrease of R19 million in
inventories and an increase of R2 million in deferred
taxation liabilities.
8. Investments
Listed investments in joint
ventures and associates
- market value 24 130
Unlisted investments in joint
ventures and associates
- directors' valuation 153 18
Listed investments included in
financial assets
- market value 20 8
Unlisted investments included in
financial assets
- directors' valuation 33 90
9. Chifeng investment
The investment in Chifeng Kumba Hongye Zinc Corporation Limited was reclassified
as a joint venture during the period resulting in an increase in investments in
joint ventures of R14 million at the beginning of the period.
10. Reclassification of leave pay provision and deferred taxation
During the 18-months under review the provision for leave pay benefits has been
reclassified as an accrual and is presented as part of trade and other payables.
The comparative figures have been adjusted to reflect this. At 31 December 2004
the leave pay benefit accrual was R212 million (30 June 2003 R146 million). The
basis of calculating the leave pay benefit has been amended to total cost of
employment.
The deferred taxation assets and liabilities have been reclassified to ensure
better presentation.
11. Net debt
Net debt is calculated as being interest-bearing borrowings less cash and cash
equivalents.
18-months 12-months
ended ended
31 Dec 30 June
2004 2003
Audited Audited
Rm Rm
12. Dividends paid
- Kumba 344 252
- Less paid to Kumba Management (2) (3)
Share Trust
- Ticor Limited to minorities 19 34
361 283
13. Related party transactions
During the period the company and its subsidiaries, in the ordinary course of
business, entered into various sale and purchase transactions with associates
and joint ventures. These transactions were subject to terms that are no less
favourable than those arranged with third parties.
14. JSE Securities Exchange requirements
The announcement has been prepared in accordance with the listing requirements
of the JSE Securities Exchange South Africa.
15. Corporate Governance
The group complies with the Code of Corporate Practice and Conduct published in
the King II Report on corporate governance.
16. Audit opinion
The auditors, Deloitte & Touche, have issued their opinion on the group's
financial statements for the 18-month period ended 31 December 2004. The audit
was conducted in accordance with South African Auditing Standards. They have
issued an unqualified audit opinion. A copy of their audit report is available
for inspection at the company's registered office. These summarised financial
statements have been derived from the group financial statements and are
consistent in all material respects, with the group financial statements.
UNAUDITED PHYSICAL INFORMATION
(`000 TONNES)
18-months 12-months
ended ended
31 Dec 31 Dec 31 Dec 30 June
2004 2004 2003 2003
Iron ore
Production 44 952 30 112 29 594 28 557
Sales
- Exports 30 762 20 923 20 446 20 946
- Domestic 14 107 9 371 9 235 8 770
Total 44 869 30 294 29 681 29 716
Coal
Production
- Power station 21 218 14 017 13 869 13 036
- Coking 3 486 2 409 2 162 2 207
- Other 4 491 3 018 2 933 2 769
Total 29 195 19 444 18 964 18 012
Sales
- Eskom 21 769 14 356 14 097 13 051
- Other domestic 6 058 4 112 3 879 3 821
- Export 1 688 1 090 1 122 1 128
Total 29 515 19 558 19 098 18 000
Heavy minerals
- Ticor SA project
Production
- Ilmenite 390 262 176 91
- Zircon 74 49 50 53
- Rutile 29 20 17 20
- Pig iron 85 63 25 3
- Scrap pig iron 11 5 6
- Chloride slag 123 96 27
- Sulphate slag 60 40 20
Sales
- Ilmenite 67 27 59 50
- Zircon 71 48 51 59
- Rutile 29 17 30 20
- Pig iron 68 58 10
- Scrap pig iron 11 8 3
- Chloride slag 96 84 12
- Sulphate slag 24 24
Heavy minerals
- Ticor Limited(1)
Production
- Ilmenite 347 236 217 214
- Zircon 59 38 40 40
- Rutile 26 18 17 18
- Synthetic rutile 168 112 97 90
- Leucoxene 20 11 16 13
- Pigment 78 53 48 47
Sales
- Ilmenite 52 30 55 63
- Zircon 58 38 39 42
- Rutile 32 21 16 14
- Synthetic rutile 79 50 49 41
- Leucoxene 25 17 11 10
Base metals
Production
- Zinc concentrate 178 124 108 91
- Zinc metal 174 116 114 115
- Zincor 159 104 111 115
- Chifeng(2) 15 12 3
- Lead concentrate 45 27 31 22
Zinc metal sales
- Domestic 135 91 85 92
- Export 28 16 26 20
- Chifeng(2) 15 12 3
Total 178 119 114 112
Lead concentrate
sales
- Export 29 12 35 30
UNAUDITED PHYSICAL INFORMATION
(`000 TONNES)
6-months
ended
31 Dec 31 Dec
2004 2003
Iron ore
Production 14 900 14 840
Sales
- Exports 10 382 9 839
- Domestic 4 629 4 736
Total 15 011 14 575
Coal
Production
- Power station 7 343 7 201
- Coking 1 243 1 077
- Other 1 549 1 473
Total 10 135 9 751
Sales
- Eskom 7 399 7 413
- Other domestic 2 069 1 946
- Export 593 598
Total 10 061 9 957
Heavy minerals
- Ticor SA project
Production
- Ilmenite 132 128
- Zircon 25 25
- Rutile 10 9
- Pig iron 21 22
- Scrap pig iron 2 6
- Chloride slag 48 27
- Sulphate slag 20 20
Sales
- Ilmenite 27 40
- Zircon 20 23
- Rutile 7 12
- Pig iron 29 10
- Scrap pig iron 4 3
- Chloride slag 42 12
- Sulphate slag 14
Heavy minerals
- Ticor Limited(1)
Production
- Ilmenite 119 111
- Zircon 20 21
- Rutile 8 8
- Synthetic rutile 58 56
- Leucoxene 6 9
- Pigment 27 25
Sales
- Ilmenite 10 22
- Zircon 21 20
- Rutile 7 11
- Synthetic rutile 29 29
- Leucoxene 8 8
Base metals
Production
- Zinc concentrate 57 54
- Zinc metal 58 58
- Zincor 52 55
- Chifeng(2) 6 3
- Lead concentrate 14 18
Zinc metal sales
- Domestic 46 44
- Export 6 12
- Chifeng(2) 6 3
Total 58 59
Lead concentrate
sales
- Export 17
(1) Ticor Limited was consolidated from 1 April 2003. The production and sales
tonnes reflect Ticor's 50% interest in its Tiwest joint venture. Physical
information for the full 12-month periods to 30 June 2003 and 31 December 2003
is provided for comparative purposes only.
(2) The effective interest in the physical information for the Chifeng (Hongye)
refinery has been disclosed.
COMMENTS
Change in financial year
Following the acquisition of a majority shareholding by Anglo American plc, the
group changed its year-end from 30 June to 31 December and is presenting its
audited financial results for the 18 months ended 31 December 2004 compared with
the 12 months ended 30 June 2003.
Comments are for comparative purposes based on an analysis of the group's
unaudited financial results and physical information for the 12-month periods
ended 31 December 2004 and 31 December 2003 respectively.
OPERATING RESULTS
The 12-month period to December 2004 was characterised by excellent operational
performance, higher US dollar commodity prices and a stronger rand.
Revenue and net operating profit increased by 15% and 41% respectively compared
with the 12-month period ended 31 December 2003 despite the substantial
strengthening of the rand. This was due to higher production and sales volumes,
buoyant iron ore and coal prices, the consolidation of Ticor Limited for the
full 12-month period and ongoing business improvement initiatives. An average
exchange rate of R6,51 to the US dollar was realised compared with R7,64 for the
comparative 12-month period. Average rand/US dollar rates of R6,67 and R9,01
were realised for the 18 and 12-month financial years ended 31 December 2004 and
30 June 2003 respectively.
EARNINGS
The marked improvement in net operating profit and the reduction in the equity-
accounted loss reported for the comparative 12-month period, offset to some
extent by a significantly higher tax charge, resulted in profit attributable to
ordinary shareholders increasing by 21% to R677 million. Headline earnings were
34% higher at R774 million or 258 cents per share. Attributable and headline
earnings per share were respectively 314 cents and 339 cents for the 18-month
financial period ended 31 December 2004.
CASH FLOW
Net cash inflow for the 12-months to December 2004 was R509 million after total
capital expenditure of R886 million, with R487 million invested in new
production capacity.
Net debt decreased by R669 million to R1 909 million with a debt equity ratio of
30% at 31 December 2004. This compares with a net debt of R2 578 million and a
debt equity ratio of 41% at 31 December 2003.
SAFETY, HEALTH AND ENVIRONMENT
After achieving a significant reduction in the lost day injury frequency rate
(LDIFR) from 3,55 to 2,30 per million man-hours worked for the 12 months to June
2004, the group revised its target of 2,50 downwards to 1,75. A LDIFR of 2,54
was achieved for the 12-month period to 31 December 2004, against 2,10 for the
comparative period.
Regrettably, two fatalities were suffered during the past 12-month period and a
further two occurred shortly before this announcement. The group remains
committed to zero fatalities at all its businesses with ongoing safety awareness
and preventative programmes.
The group's HIV/Aids voluntary prevalence-testing and counselling programme is
in place or at an advanced planning stage at all its business units. The
implementation of pilot antiretroviral programmes at the Zincor refinery,
Grootegeluk mine and the corporate office proved successful. The programme is
being extended to more business units.
By 31 December 2004, the group had obtained international environmental and
safety management certifications (ISO 14001 and OHSAS 18001) in 8 of its 10
business units.
SEGMENT RESULTS AND COMPARATIVE EARNINGS
18 months 12 months ended
ended
31 Dec 31 Dec 31 Dec 30 June
2004 2004 2003 2003
Audited Unaudited Unaudited Audited
REVENUE (Rm)
Iron ore 6 064 4 250 3 789 4 234
Coal 2 733 1 878 1 678 1 638
Heavy minerals 2 438 1 662 1 211 587
- Ticor SA 668 514 314 312
- Ticor 1 770 1 148 897 275
Limited*
Base metals ** 1 212 811 808 892
Industrial 138 95 82 78
minerals
Other 14 12 23 40
Total 12 599 8 708 7 591 7 469
NET OPERATING
PROFIT (Rm)
Iron ore 1 119 820 664 882
Coal 548 430 272 279
Heavy minerals 206 254 (6) 62
- Ticor SA (19) (10) (6) 24
- Ticor 225 264 *** 38
Limited*
Base metals** (151) ****(116) (80) (9)
Industrial 30 20 21 21
minerals
Other 103 (28) 105 (46)
Total 1 855 1 380 976 1 189
EARNINGS (Rm)
Net operating 1 855 1 380 976 1 189
profit
Net financing (401) (271) (252) (244)
charges
Income from
equity account
investments (13) (1) (41) 2
Profit before 1 441 1 108 683 947
tax
Taxation (434) (341) (148) (229)
Minority (65) (90) 24
interest
Net profit
attributable
to
ordinary 942 677 559 718
shareholders
Adjustments 75 97 18 66
Headline 1 017 774 577 784
earnings
SEGMENT RESULTS AND COMPARATIVE EARNINGS
6 months ended
31 Dec 31 Dec
2004 2003
Unaudited Reviewed
REVENUE (Rm)
Iron ore 2 130 1 814
Coal 986 855
Heavy minerals 847 776
- Ticor SA 266 154
- Ticor 581 622
Limited*
Base metals ** 354 401
Industrial 51 43
minerals
Other 6 2
Total 4 374 3 891
NET OPERATING
PROFIT (Rm)
Iron ore 446 299
Coal 238 118
Heavy minerals 156 (48)
- Ticor SA 6 (9)
- Ticor 150 (39)
Limited*
Base metals** (94) (35)
Industrial 10 10
minerals
Other 10 131
Total 766 475
EARNINGS (Rm)
Net operating 766 475
profit
Net financing (134) (130)
charges
Income from
equity account
investments 9 (12)
Profit before 641 333
tax
Taxation (181) (93)
Minority (46) 25
interest
Net profit
attributable
to
ordinary 414 265
shareholders
Adjustments 22 (22)
Headline 436 243
earnings
* Equity accounted until 31 March 2003.
** Revenue and net operating profit exclude Kumba's interest in the Chifeng
(Hongye) refinery which is equity accounted.
*** Includes an impairment charge of R89 million in respect of the Ticor
Chemicals cyanide plant.
**** Includes impairment charges of R26 million and R9 million in respect of the
investment in ZnERGY (Pty) Limited and a preference share investment in Rosh
Pinah Mine Holdings (Pty) Limited.
OPERATIONS
Iron Ore
Record production and sales volumes were recorded. Sishen mine increased
production by 499 000 tonnes to 27,6Mt over the comparative period. Export sales
were 477 000 tonnes (2%) higher at 20,9Mt.
Revenue increased by 12% to R4,25 billion and net operating profit by 23% to
R820 million over the comparative period as higher prices and sales volumes
together with an ongoing cost focus offset the effect of the stronger rand.
Following the conclusion of a heads of agreement, good progress is being made on
the finalisation of a new transport agreement between Kumba and Transnet on a
rand-based rail tariff for the transport and handling of iron ore from the
Northern Cape through the Sishen-Saldanha export channel and to provide for
Kumba's growth in iron ore exports.
Coal
The strong growth in local demand resulted in record production and sales
volumes for the period. Total coal production increased by 2,5% to 19,4Mt with
sales of power station coal 2% higher at 14,4Mt and other domestic sales
increasing by 6% to 4Mt.
Revenue increased by 12% over the comparative period as a result of higher sales
prices and volumes. The higher revenue together with cost-containment
initiatives resulted in net operating profit improving by 58% to R430 million.
Heavy minerals
Ticor SA
The ongoing ramp-up of the furnaces during the past 12 months resulted in higher
production of both titanium slag and pig iron despite the shut-down of furnace 2
to implement improvements and to effect repairs to the bottom of the furnace
shell. Re-commissioning of this furnace commenced on 31 December 2004 and is
ahead of schedule.
Revenue increased by 64% over the comparative period due to an increase in sales
of titanium slag and pig iron together with stronger zircon, pig iron and rutile
prices. The stronger currency and shut-down of furnace 2 led to an operating
loss of R10 million for the period.
Ticor Limited
Ticor Limited, through its 50% joint venture interest in Tiwest, had a strong
operational performance for the period with an 8% increase in total production
volumes. Production records were achieved for pigment, synthetic rutile, rutile
and ilmenite and are attributed to the ongoing success of the Tiwest continuous
improvement programme.
Revenue increased by 28% over the comparative period as a result of higher sales
and stronger mineral prices. Net operating profit improved substantially due to
the higher revenue, cost savings and the non-recurring impairment charge of R89
million of Ticor Chemicals raised in 2003. The chemicals business was finally
closed in May 2004.
Base metals
Rosh Pinah mine reached a record production volume of 124 000 tonnes zinc
concentrate.
Production of zinc metal, including Kumba's effective interest in the Chifeng
(Hongye) refinery in China, was marginally higher than the comparative period as
the ramp-up of the Chifeng refinery reached production at 95% of its design
capacity. Production at the Zincor refinery was 7 000 tonnes lower than for the
comparative period as a result of lower concentrate grades adversely affecting
stable production.
Revenue increased by 1% over the comparative period due to a 7,8% increase in
the rand average prices of zinc, despite being affected by a lead sales order of
Rosh Pinah only realising after the period.
Lower treatment charges, an increase in the environmental rehabilitation
provision and the non-recurring impairment charges reported on in the group's
second interim results, led to an operating loss of R116 million for the past 12
month period.
Kumba's equity accounted investment in the Chifeng refinery contributed R9,8
million to the group's profit before tax for the period.
BUSINESS IMPROVEMENT PROGRAMME
The business improvement programme announced previously is on track. The group
expects to realise the initial benefits of the programme which consists of both
revenue enhancement and cost-saving initiatives in 2005. The programme has a
target of delivering a sustainable contribution of R800 million to net operating
profit from the start of the 2006 financial year.
GROWTH OPPORTUNITIES
Iron ore
A feasibility study into the expansion of Sishen production by 10Mtpa (the SEP
project) was completed by the end of 2004 and will be submitted to the Kumba
board for its consideration early in 2005. The project, with an estimated
capital cost of some R3 billion is scheduled for commissioning in July 2007,
with full production by mid-2008. Its development will proceed in co-ordination
with the recently-announced capacity expansion of the Sishen-Saldanha export
channel.
Work continues on evaluating alternative development scenarios for the
greenfields Sishen South project 70km south of Sishen mine. This 203Mt reserve
has the potential to support up to 9Mtpa of export grade iron ore production,
but its viability has been adversely affected by the appreciation of the rand.
Following the unfavourable arbitration ruling as to whether Kumba's partner in
the Hope Downs Project, Hope Downs Iron Ore Pty Limited (HDIO) had acted
unreasonably in withholding its approval of the change in control of Kumba, a
notice of appeal has been lodged with the Supreme Court of Western Australia in
order to preserve Kumba's rights in the project. Without prejudice to Kumba's
rights of appeal, the process for determining an agreed fair value at which HDIO
can elect to acquire Kumba's project interest, has commenced. If an agreement
cannot be reached between Kumba and HDIO, an independent expert is to be
appointed for determination of such fair value. Until Kumba's participation in
the project is finally resolved, it continues to perform its contractual
obligations in respect of the project.
Following the conclusion of an agreement with the government of Senegal and its
agency Miferso in July 2004 for Kumba to obtain an option over a controlling
interest in the Faleme iron ore deposit in the extreme south-east of the
country, exploration on the property commenced late in the year. This programme
is continuing and it is hoped that a decision to proceed with a bankable
feasibility study can be taken later in the year. Concurrently, Kumba is working
with Miferso to develop an investment case for the considerable infrastructure
development that would be required to support a mine at Faleme.
Coal
The development of the 1Mtpa Inyanda joint venture (with Eyesizwe Coal) near
Middelburg remains dependent on a decision from Spoornet regarding approval of
the Phase V expansion of the Richards Bay Coal Terminal and its impact on the
export coal line to Richards Bay. All other approvals have long been in place.
The Kumba board approved the development of a new coal benefication module at
Grootegeluk mine, intended to provide 0,7Mtpa of semi-soft coking coal, a
product suited to the manufacture of market coke. The project, known as the GG6
plant, will cost some R320 million and is currently under construction; it will
be commissioned in July 2006, ramp up to full production during the year and
deliver product to the Ispat Iscor's Newcastle coke plant, currently under
refurbishment. A 10-year supply agreement, at market-related prices, has been
concluded with Ispat Iscor.
Kumba's board also approved the construction of a jig plant at the Leeuwpan mine
near Delmas, at a capital cost of R91 million. This plant will be commissioned
by June 2005 and will deliver an additional 1Mtpa of power station coal for
consumption by Eskom's Majuba power station.
An agreement has been concluded with Anglo Coal Australia to form a joint
venture that will investigate the potential to develop a new coking coal
operation on adjacent properties, Moranbah South and Grosvenor South, in the
Bowen Basin coalfield of Queensland, Australia. The study, to be funded by Anglo
Coal Australia, has commenced and is due for completion by early 2007.
Heavy minerals
At Toliara in south-western Madagascar, a pre-feasibility investigation of the
potential to develop a large mineral sands deposit is close to completion.
Kumba's subsidiary, Ticor Limited has announced that the Ranobe deposit at
Toliara contains an estimated reserve of 465Mt grading 6,2% heavy minerals. The
boards of the two companies will be approached for approval to proceed with a
bankable feasibility study during the first half of 2005.
AlloyStreamTrade Mark
During the year, the technology was demonstrated in an application that produced
market grade ferromanganese from fine manganese ore and fine coal, using a
purpose-built subcommercial scale furnace. The work proved highly successful,
both technically and commercially. Options for the commercial development of the
proprietary technology in this and other applications are under extensive
consideration.
MINING LEGISLATION
The group is progressing a co-ordinated empowerment initiative to achieve a
sustainable position as a pre-eminent South African-based diversified mining
company, thereby also meeting the ownership requirements of the Mineral and
Petroleum Resources Development Act and its associated charter.
OUTLOOK
Strong commodity markets marked by forecasts of substantial increases in the US
dollar prices of iron ore, together with higher prices for coal, heavy mineral
and zinc and the implementation of Kumba's business improvement programme, are
expected to have a positive impact on the group's results.
The strong rand will, however, continue to affect earnings.
DECLARATION OF DIVIDEND NUMBER 5
The directors have declared a final dividend, number 5, of 90 cents per share in
South African currency in respect of the 18-month period ended 31 December 2004.
This will result in a total dividend for the period of 145 cents per share. The
dividend is payable to shareholders recorded in the books of the company at
close of business on 11 March 2005.
In compliance with requirements of the electronic settlement system of the JSE
Securities Exchange South Africa, the following dates are applicable:
Last day to trade cum dividend Friday, 4 March 2005
Shares trade ex dividend Monday, 7 March 2005
Record date Friday, 11 March 2005
Payment date Monday, 14 March 2005
Share certificates may not be dematerialised or rematerialised between Monday, 7
March 2005 and Friday, 11 March 2005, both days inclusive.
On behalf of the board.
MLD Marole Dr CJ Fauconnier DJ van Staden
(Chairman) (Chief Executive) (Executive Director,
Finance)
17 February 2005
Kumba Resources Limited
Registration number 2000/011076/06
JSE Share code KMB
ADR CODE KBREY
ISIN CODE ZAE000034310
Registered office
Kumba Resources Limited
Roger Dyason Road
Pretoria West, Pretoria, 0002
TEL NO +27 12 307 5000
FAX NO +27 12 307 4482
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
TEL NO +27 11 370 5000
FAX NO +27 11 688 5221
DIRECTORS
MLD Marole (Chairman)
Dr CJ Fauconnier* (Chief Executive)
PM Baum BE Davison TL de Beer JJ Geldenhuys
MJ Kilbride* Dr D Konar CF Meintjes* AJ Morgan
WA Nairn SA Nkosi CML Savage Dr NS Segal F Titi
DJ van Staden* RG Wadley* PL Zim
*Executive
Company Secretary MS Viljoen
Investor Relations/
Corporate Affairs Trevor Arran +27 12 307 3292
Sponsor JP Morgan +27 11 507 0300
If you have any queries regarding your shareholding in
Kumba Resources, please contact the Transfer Secretaries at +27 11 370 5000
This report is available at Kumba Resources' world wide website at:
http://www.kumbaresources.com
Date: 17/02/2005 07:01:05 AM Produced by the JSE SENS Department
