| Thu 17 Feb 2005, 9:28 | | AUDITED GROUP FINANCIAL |
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KUMBA RESOURCES AUDITED GROUP FINANCIAL AND UNAUDITED PHYSICAL RESULTS FOR THE
18 MONTHS ENDED 31 DECEMBER 2004
KUMBA RESOURCES LIMITED
Incorporated in the Republic of South Africa
(Registration Number: 2000/011076/06)
Share Code: KMB
ISIN Number: ZAE000034310
(`Kumba`)
KUMBA NEWS RELEASE
17 February 2005
KUMBA RESOURCES AUDITED GROUP FINANCIAL AND UNAUDITED PHYSICAL RESULTS 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)
Editor`s Note: Kumba changed its year-end from 30 June to 31 December following
the acquisition of a majority shareholding by Anglo American plc. The audited
financial annual results are presented for the 18 months ended 31 December 2004
compared with the 12 months ended 30 June 2003.
For comparative purposes, comments are based on an analysis of the group`s
unaudited financial results for the 12 month periods ended 31 December 2004 and
31 December 2003 respectively.
Diversified South African-based metals and mining company Kumba Resources
Limited (Kumba) today reported revenue of R12,6 billion and net operating profit
of R1,86 billion for the 18 months ended 31 December 2004. Attributable and
headline earnings per share were respectively 314 cents and 339 cents for this
period.
For the 12-month period ended 31 December 2004 revenue increased by 15% and net
operating profit by 41% when compared with the 12 months ended 31 December 2003.
`The 12-month period to December 2004 was characterised by excellent operational
performances, higher commodity prices and a stronger rand,` said Dr Con
Fauconnier, Kumba`s chief executive.
`The increased revenue and net operating profit were achieved 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,` Dr Fauconnier added.
An average exchange rate of R6.51 to the US dollar was realised compared with
R7.64 for the comparative 12-month period.
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 for the 12-month period were 34% higher at R773 million or 258
cents per share.
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 R1,91 billion with a debt-equity ratio of
30% at 31 December 2004 compared with a net debt of R2,58 billion 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 preventive 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 anti-retroviral programmes (ART) at the Zincor refinery,
Grootegeluk mine and the corporate office proved successful and the programme is
being extended to most business units.
By 31 December 2004, the group had obtained international environmental and
safety management certifications (ISO 14001 and OHSAS 18001) in eight of its ten
business units.
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.
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.
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
Kumba`s 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.
Ends
* View or download the full results announcement on www.kumbaresources.com
* See Addendum 1 for Operational highlights; Addendum 2 for Growth
opportunities
Note:
Kumba Resources Limited, one of the largest South African-based mining companies
listed on the JSE Securities Exchange, is a focused metals and mining company
with a diverse commodity portfolio consisting of iron ore, heavy minerals, coal,
base metals and industrial minerals. www.kumbaresources.com
Enquiries:
Trevor Arran
General Manager: Corporate Affairs & Investor Relations
Tel: +27 (0) 12 307 3292
Mobile: +27 (0) 83 609 1444
ADDENDUM 1:
OPERATIONAL HIGHLIGHTS
(Note: For comparative purposes, comments are based on an analysis of the
group`s unaudited results for the 12-month periods ended 31 December 2004 and 31
December 2003.)
Iron ore
* Record production and sales volumes.
* Revenue increased by 12% and net operating profit by 23% 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
through the Sishen-Saldanha export channel and to provide for Kumba`s growth in
iron ore exports.
Coal
* Strong growth in local demand resulted in record production (2,5%
increase to 19,4Mt) and sales volumes (power station coal up 2% to 14,4Mt and
other domestic sales up 6% to 4Mt).
* Revenue increased by 12% as a result of higher sales prices and
volumes.
* Net operating profit improved by 58% due to the higher revenue and
cost containment initiatives.
Heavy Minerals
Ticor SA
* The two furnaces continued to ramp-up resulting in higher production
of titanium slag and pig iron. This was despite the shutdown to Furnace 2 to
implement improvements and effect repairs. Re-commissioning of Furnace 2 started
on 31 December 2004 and is ahead of schedule.
* Revenue increased by 64% 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 shutdown of Furnace 2 led to an operating
loss of R10 million for the period.
Ticor Limited
* Through its 50% joint venture interest in Tiwest, Ticor Limited had
a strong operational performance with an 8% increase in total production
volumes.
* Revenue increased by 28% as a result of higher sales and stronger
mineral prices.
* Net operating profit improved substantially due to higher revenue,
cost savings and the non-recurring impairment charge of R89 million of Ticor
Chemicals raised in 2003.
Base Metals
* Rosh Pinah mine achieved record production volume of 124 000 tonnes
zinc concentrate.
* Production of zinc metal which includes Kumba`s effective interest
in the Chifeng (Hongye) refinery in China was marginally higher 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 4% due to a 7,8% increase in the average rand
price of zinc and despite being affected by a lead sales order by Rosh Pinah
only realising after the period.
* Lower treatment charges and 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.
ADDENDUM 2:
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.
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 Hope Downs Iron Ore
Pty Ltd (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 Count
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 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 beneficiation 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 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, for 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
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 are expected to be approached for approval to proceed with
a bankable feasibility study during the first half of 2005.
AlloyStream(tm)
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 sub-commercial 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.
