| Thu 12 May 2005, 17:09 | | Western Areas Limited - Unaudited Quarterly Result |
|
Western Areas Limited - Unaudited Quarterly Results Ended 31 March 2005
WESTERN AREAS LIMITED
Incorporated in the Republic of South Africa
(Registration number: 1959/003209/06)
(`Western Areas` or `the Company`)
Share code: WAR ISIN No: ZAE000016549
ADR Ticker symbol: WARUY
CUSIP No: 957654304
WESTERN AREAS LIMITED UNAUDITED QUARTERLY RESULTS ENDED 31 MARCH 2005
PRODUCTION AND UNIT RESULTS
Quarter Quarter Year
ended ended ended
31.03.05 31.12.04 31.12.04
IMPERIAL
Reef mined (000) tons 194 222 888
Ore milled (000) tons 292 335 1 241
Yield (underground) oz/ton 0.259 0.254 0.228
Yield (incl. surface) oz/ton 0.158 0.185 0.176
Gold produced oz 46 260 60 795 218 025
Gold sold oz 45 066 61 401 218 582
Cash costs US$/oz 451 366 373
Total production costs US$/oz 553 461 445
Gold price achieved US$/oz 301 320 298
Average exchange rate
achieved
Period end exchange rate
Capital expenditure US$m 5 12 49
Capital commitment at end of US$m 2 5 5
period
Quarter Quarter Year
ended ended ended
31.03.05 31.12.04 31.12.04
METRIC
Reef mined (000) tonnes 176 201 805
Ore milled (000) tonnes 265 297 1 119
Yield (underground) g/tonne 8.87 8.74 7.84
Yield (incl. surface) g/tonne 5.45 6.36 6.06
Gold produced kg 1 439 1 891 6 781
Gold sold kg 1 402 1 911 6 799
Cash costs R/kg 87 278 71 513 77 873
Total production costs R/kg 106 962 89 935 92 770
Gold price achieved R/kg 58 193 62 377 62 289
Average exchange rate R/$ 6.0182 6.0630 6.5009
achieved
Period end exchange rate R/$ 6.2440 5.6600 5.6600
Capital expenditure Rm 31 45 278
Capital commitment at end of Rm 12 28 28
period
ABRIDGED CONSOLIDATED INCOME STATEMENT
Quarters ended Year ended
31.03.05 31.12.04 31.12.04
SA Rand Million Notes Unaudited Unaudited Unaudited
Gold revenue 61.9 102.3 381.4
Total production costs (153.9) (168.4) (627.5)
Production costs - cash (125.6) (135.2) (528.1)
Production costs - non 1 (28.3) (33.2) (99.4)
cash
Operating loss from gold (92.0) (66.1) (246.1)
Other (costs)/income (1.6) 0.4 (6.9)
Administration and other (5.3) (2.0) (20.5)
expenditure
Operating loss before (98.9) (67.7) (273.5)
derivative transactions
Present value adjustment for 3.0 (9.0) (69.8)
option premium payable
Fair value adjustment 2 (126.9) 187.9 221.0
Exchange (losses)/gains 3 (94.8) 128.4 151.2
(Loss)/Profit before (317.6) 239.6 28.9
taxation
Taxation - deferred 130.8 (49.7) (15.4)
(Loss)/Profit for the period (186.8) 189.9 13.5
(Loss)/Earnings per ordinary
share (cents)
- Basic (158.2) 161.1 12.2
- Headline (160.2) 160.7 10.8
- Diluted basic 4 (157.9) 160.8 12.2
- Diluted headline 4 (159.9) 160.4 10.8
Number of ordinary shares 118.5 118.5 118.5
issued (million)
Weighted average number of 5 118.0 117.9 110.3
ordinary shares (million)
Determination of headline
earnings:
Net (loss)/profit for the (186.8) 189.9 13.5
period
Profit on disposal of mining (2.3) (0.7) (0.7)
assets
Unclaimed dividends written - (1.1) (1.1)
back
Loss on disposal of - 1.4 0.2
investments
Headline (loss)/earning (189.1) 189.5 11.9
ABRIDGED CONSOLIDATED BALANCE SHEET
Period ended Year ended
31.03.05 31.12.04
SA Rand Million Notes Unaudited Unaudited
Assets
Mining assets 6 3 417.4 3 411.8
Derivative asset 2 691.6 702.6
Listed/Other investments 38.5 38.2
Deferred taxation 7 528.2 446.0
Cash and cash equivalents 5.0 13.2
Other assets 45.6 54.5
Total assets 4 726.3 4 666.3
Equity and liabilities
Shareholders` equity 1 381.3 1 511.0
Option premium payable 964.9 905.7
Derivative liability 2 2 048.8 2 016.7
JCI Limited loan 8 174.1 95.2
Other liabilities 157.2 137.7
Total equity and liabilities 4 726.3 4 666.3
STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
Cash flow
SA Rand Million Share Share Treasury Hedge Retained
capital premium shares Reserve earnings Total
Balance as at 118.5 2 245.5 (3.1) (1 367.9) 518.0 1 511.0
31 December
2004
Fair value - - - 24.4 - 24.4
adjustment
Recycling of - - - 32.7 - 32.7
fair value on
maturing of
derivatives
Attributable - - - - (186.8) (186.8)
loss for the
period
Balance as at 118.5 2 245.5 (3.1) (1 310.8) 331.2 1 381.3
31 March 2005
ABRIDGED CASH FLOW STATEMENT
Quarters ended Year ended
31.12.04
SA Rand Million Note Unaudited
31.03.05 31.12.04
Unaudited Unaudited
Cash flow utilised in (21.9) (40.1) (147.0)
operating activities
Cash flow utilised in (31.3) (56.8) (261.5)
investing activities
Cash flow from finance 8 45.0 93.5 399.8
activities
Net decrease in cash and (8.2) (3.4) (8.7)
cash equivalents
Cash and cash equivalents:
- at beginning of period 13.2 14.9 21.9
- effect of exchange rate - 1.7 -
fluctuations on cash held
At end of period 5.0 13.2 13.2
NOTES TO THE ABRIDGED FINANCIAL STATEMENTS
1. Non-cash operating costs primarily include the amortisation of Western Areas`
share of South Deep and the change in work-in-progress for the period.
2. The fair value adjustments relate to the revaluation of the derivative
structure at period-end. The revaluation stemming from exchange rate
fluctuations are accounted for in the income statement whilst the revaluation
stemming from the gold price fluctuations are accounted for through the hedge
reserve on the balance sheet.
3. The exchange losses relating to option premium payable are attributable to
the change in the Rand/US Dollar exchange rate from 5.660 at 31 December 2004 to
6.244 at 31 March 2005.
4. Diluted earnings and diluted headline earnings per share are attributable to
the shares held in the Share Incentive Trust (Treasury Shares) for which the
exercise price is lower than the current market value.
5. The weighted average number of ordinary shares is arrived at after making
adjustments for the treasury shares and the rights issue during 2004.
6. No adjustment has been made to reflect mining assets at their fair value.
7. Deferred taxation movement is mainly in relation to the fair value
adjustments of the derivative structure, arising from exchange rate and the US$
gold price fluctuations. The US$ gold price decreased from US$435 at 31 December
2004 to US$427 at 31 March 2005.
8. The JCI Limited loan includes capitalised interest which is in terms of the
stand-by facility arranged in 2004. The facility is unsecured, carries interest
at prime plus 1.5% and is to be repaid out of funds raised from a rights offer.
BASIS OF ACCOUNTING
The accounting policies used to prepare the quarterly results are consistent
with those applied in the previous periods and are in accordance with South
African Statements of Generally Accepted Accounting Practice and International
Financial Reporting Standards.
LETTER TO SHAREHOLDERS
As for the other South African gold mining companies, the first quarter of 2005
proved to be extremely challenging for Western Areas. Attributable gold
production of 1 439 kg declined from the 1 891 kg produced in the December 2004
quarter. 265 000 tonnes of ore were milled during the quarter, representing a
decline of 27 000 tonnes from the previous quarter. Underground ore production
for the quarter was supplemented by treating 112 000 tonnes of ore sourced from
low-grade surface stockpile material. For the March 2004 quarter, attributable
gold production was 1 451 kg, and ore milled was 262 000 tonnes. These figures
are in line with the March 2005 quarter, reflecting the negative impact of the
extended December break and the need to address this issue.
Following the commissioning of the new Twin Shafts infrastructure, and the drive
to increase production, pressure was placed on the older infrastructure at SV2
and SV3 with the result that, and following a record of poor historical
maintenance, certain water pumps and columns failed with the consequential
flooding of the SV3 pump station on 1 March 2005. Accordingly, pumping and
water services for both the South and Twin Shaft complexes was interrupted for
10 days, impacting negatively on production for the quarter. The water service
columns are currently being replaced and power reticulation in the old South
Shaft system is being relocated to reduce the risk of similar occurrences in
future.
The loss of production for the quarter will, to a large extent, be recovered by
re-arranging working rosters of conventional stoping crews and through the
ongoing recovery of gold from the clean-up of the old processing plant.
Although gross costs were contained, cash costs per kilogram increased from R71
513/kg in the December quarter to R87 278/kg, mainly due to the production
problems described above (March 2004: R88 550/kg). The average dollar spot gold
price achieved (excluding hedging) decreased from $435/oz in the December
quarter to $427/oz. The benefit of a historically strong US$ gold price was
offset by a strong Rand which averaged R6.02/$ for the quarter.
Before the inclusion of hedge transactions the price of gold realised averaged
R83 345/kg for the quarter relative to R83 976/kg for the December quarter.
Including the hedge transactions (principally `out of the money` sold call
options) the realised gold price averaged
R58 193/kg.
Based on the weakening of the Rand/dollar exchange rate from R/$5.66 on 31
December 2004 to R/$6.24 on 31 March 2005, a negative fair value adjustment of
R126.9 million was incurred (compared to a positive R187.9 million fair value
adjustment in the previous quarter). This together with the decline in
production contributed to a reversal of a R189.9 million profit for the quarter
ended December 2004 into a R186.8 million loss for the current quarter or a loss
of 158.2 cents a share (compared to a positive 161.1 cents in the December 2004
quarter). This includes the consequential deferred tax adjustment of R130.8
million for the current quarter.
Following the commissioning of the Twin Shafts in the last quarter of 2004,
development on 100 Level has commenced to open up high-grade VCR reserves and to
provide access to the Elsburg Massives to the east of the Upper Elsburg.
South Deep is on track to finalise a life of mine plan by the end of the year.
The mine plan will consider accelerating development on 100, 105 and 110 Levels
in support of an increase in production to approximately 320 000 tonnes per
month by 2010.
Discussions continue to be held with the Department of Minerals and Energy
(`DME`) regarding the integrity of the boundary pillar, and with Harmony
regarding the interim cost of pumping at Harmony`s Randfontein Estates No.4
Shaft. The Placer Dome Western Areas Joint Venture has assessed that the
boundary plugs and pillars separating the mines have been thoroughly tested and
confirmed by independent experts, and consequently the closure of the
Randfontein Estates No.4 Shaft is a legal obligation of Harmony.
Discussions are under way with the underwriters regarding the SV1 insurance
claim arising from a fall of ground in the shaft in January 2004. Placer Dome
Inc, which administers the mine`s insurance on behalf of the Placer Dome Western
Areas Joint Venture, is optimistic that there will be a reasonable negotiated
settlement.
Negotiations are progressing with the hedge banks to restructure the derivative
structure to more appropriately match the forecast South Deep production
profile. In the interim, Western Areas will proceed with a R800 million rights
issue to finance the capital expenditure required to increase production at
South Deep, and service the hedge obligations until such time as the hedge is
restructured. The refinancing of the Option Premium Payable and the possible
conversion of this obligation into a Rand-denominated obligation will be
undertaken as soon as is practically possible, taking due consideration that the
life of mine plan for South Deep is scheduled for completion towards the end of
2005.
Mafika Mkwanazi Brett Kebble
Non-executive Chairman Chief Executive Officer
Johannesburg
12 May 2005
WESTERN AREAS LIMITEDIncorporated in the Republic of South Africa(Registration
number: 1959/003209/06)(`Western Areas` or `the Company`)Share code: WAR ISIN
No: ZAE000016549ADR Ticker symbol: WARUYCUSIP No: 95765430428 Harrison Street,
Johannesburg, 2001PO Box 61719, Marshalltown, 2107Telephone: +27 (11) 688-
5000Fax: +27 (11) 834-9195
COMMUNICATIONSBrian Gibson Issue ManagementContact person: Brian
GibsonTelephone: +27 (11) 880-1510Fax: +27 (11) 880-1392e-mail:
gibson@icon.co.za
TRANSFER SECRETARIES - SOUTH AFRICAComputershare Investor Services 2004 (Pty)
Ltd70 Marshall Street, Johannesburg, 2001PO Box 61051, Marshalltown,
2107Telephone: +27 (11) 370-5000Fax: +27 (11) 688-7721/2
OFFICE OF UNITED KINGDOM REGISTRARSCapita RegistrarsThe Registry34 Beckenham
Road, BeckenhamKent, BR3 4TU
UNITED STATES DEPOSITORYAmerican Depository ReceiptsThe Bank of New
YorkShareholder Relations DepartmentTel: +91 212 815 3326Fax: +91 212 571
3050www: adrbny.comShareholder RelationsToll free no: (US or Canada only)1-888-
269-2377 (1-888-BNY-ADRS)
For more information visit our website at www.westernareas.co.za
Date: 12/05/2005 05:00:16 PM
Produced by the JSE SENS Department
