| Wed 1 Feb 2006, 17:34 | | Loss from operations before |
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Loss from operations before
tax and finance costs (2,336,250)
Net finance costs (184,843)
Loss before income tax (2,521,093)
Income tax income 788,977
Net loss for the period (1,732,116)
9. DISCONTINUED OPERATIONS
As reported in the 31 December 2004 financial statements, the contractual
obligations relating to the sale of the ZBS plant had not been met.
As a result of several parties showing interest in the plant, however the
executive management of the Group remains committed to a plan to sell the
plant. A potential buyer has been identified and a draft agreement is being
reviewed. As at 31 December 2005, negotiations for the sale were being
undertaken. The fair value of the expected sale amounts to R25 million.
For this reason, as at 31 December 2005 the ZBS plant was classified as a
non-current asset held for sale at the lower of its cost price and fair value
less disposal costs.
IFRS 5 requires an operation to be classified as discontinued when the criteria
to be classified as held for sale have been met or the Group has disposed of
the operation. Held for sale is when the carrying amount of an operation will
be recovered principally through a sale transaction and not through continuing
use.
10. MAGNETITE STOCKPILE
In the 2005 interim financial statements, the Group reported its intention to
sell the magnetite stock piles. After several months of the tender process and
negotiations taking place, the bidders of the stock pile could not meet all the
conditions of the tender and accordingly the Board has decided to terminate the
tender process. The Group will continue to build the current arising business
and evaluate options for the longer term strategy of the magnetite business.
11. COPPER ORE RESERVES
The progressive cave induced surface subsidence has introduced a considerable
amount of waste material into the bottom of the open pit. This waste material
has in all likelihood, sterilized some ore reserves located in the side
walls of the open pit which were scheduled to be extracted during the latter
stages of the mine life. This is not expected to impact mine production in the
near term but in all probability will reduce the overall life of the mine. It
is envisaged that 75.9 million tonnes of undiluted reserve have been
sterilized. The total proven and probable ore reserve remaining as of 31
December 2005 were 142 millions tonnes at an average grade of 0.70 % copper
(2004: 185 million tonnes).
12. HEDGING ACTIVITIES
Cash flow hedges
At 31 December 2005, the Group held a commodity swap contract designated as
hedges of expected future sales to local customers under which the Group
receives a fixed price in Rand in relation to a monthly notional quantity of
copper sales as detailed below and pays a floating price based on the
arithmetic average (mean) of US$ LME Cash Settlement Price. The net
receipt/payment is converted to Rand at the average US$/Rand exchange rate for
the calculation period. The cash flows paid under the terms of the hedging
instrument are designed to reduce variability in the Rand proceeds of the
copper sales set out in the following table.
The combined hedged book as at 31 December 2005 amounts to 234,439 tonnes of
copper for a global amount of R4,4 billion spread over 8 years. The terms of
the contracts are as follows:
Average Mark to
Maturity Quantity(t) Hedged Hedged Market
Price ZAR/t Value R"000 Loss (Gain)
R"000
2006 43,875 20,993 995,579 268,134
2007 45,021 20,993 945,116 126,569
2008 41,801 20,521 857,801 62,075
2009 22,265 15,739 350,426 95,323
2010 22,188 15,739 349,217 80,873
2011 21,825 15,739 343,499 72,489
2012 21,137 15,739 332,667 66,297
2013 16,329 15,739 256,997 48,996
Total 234,441 4,431,302 820,756
13. INTEREST RATE RISK
The Group"s income and operating cash flows are substantially independent of
changes in market interest rates. The Group"s cash flows interest rate risk
arises from its long and short-term borrowings subject to Libor or Jibar. At
the balance sheet date, the Group had not entered into derivatives to manage
the interest rate risk.
The following tables sets out the carrying amount, by maturity, of the Group"s
financial assets and liabilities that are exposed to interest rate risk:
Within 1-2 2-3 3-4
1 year years years years
Year Ended 31 December 2005
Floating rates
Revolving credit facility 94,925 - - -
Senior Term Facility 142,112 126,984 144,560 65,762
Convertible debentures 393,730 - - -
Rio Tinto unsecured loan - - - -
Rio Tinto Secured loan 148,849 - - -
Other Facilities - - - -
Year Ended 31 December 2004
Floating rates
Revolving Credit Facility - - - -
Senior Term Facility - - - -
Medium Term Facility 263,857
Convertible debentures 849,465
Rio Tinto unsecured loan 572,186
Rio Tinto Secured loan 109,000
Other Facilities 11,280
4-5 More than
years 5 years Total
Year Ended 31 December 2005
Floating rates
Revolving credit facility - - 94,925
Senior Term Facility 78,196 185,937 743,551
Convertible debentures - 418,340 812,070
Rio Tinto unsecured loan - 665,070 665,070
Rio Tinto Secured loan - - 148,849
Other Facilities - - -
Year Ended 31 December 2004
Floating rates
Revolving Credit Facility - - -
Senior Term Facility - - -
Medium Term Facility 263,857
Convertible debentures 849,465
Rio Tinto unsecured loan 572,186
Rio Tinto Secured loan 109,000
Other Facilities 11,280
Interest on financial instruments classified as floating rate is repriced at
intervals of less than one year.
14. REFINANCING
On 21 September 2005, the Group concluded its debt restructuring program and
entered into a senior project facility with an available commitment of R1,500
million. Lines provided by the major shareholder Rio Tinto were subordinated.
The senior facility was drawn R1,280 million after a reduction in the available
amount for outstanding, unsubordinated debentures (R450 million) and a debt
reduction amount (R220 million) to be reinstated on the basis of improved
production. Further commitments were provided by Rio Tinto (R115 million) to
maintain working capital requirements and an amount of R105 million was
sterilised for the first senior loan repayment in June 2006. The net amount
drawn was R840 million that was used in part to repay existing debt.
The ZAR 1.5 billion facility agreement entered into is secured by a first
charge over all immovable property and equipment and the rights to debtors were
ceded in favour of the Lenders.
15. NET DEBT
As a result of the refinancing, the total borrowings including overdrafts
increased by R 289 million (from R2,175 in 2004), mainly explained by:
- a decrease in convertible debenture of R 37 million due to holders of
debentures exercising their option to convert to ordinary shares;
- an additional drawdown of R48 million on the Rio Tinto US$25 million
secured facility;
- an increase in the Rand equivalent of the US$ denominated debts of R 101
million due to a strengthening of the Rand of 0.68 bps (5.653 to 6.334);
- a net increase in proceeds of borrowings of R140 million.
Net debt to net capital employed increase from 88% in 2004 to 129 % in 2005 as
a result of the mark to market loss of the hedging position of R820 million due
to continuing increase in copper prices (88% excluding hedging impact). As a
consequence of the significant mark-to-market loss, the Group"s net equity
dropped to a negative net position of R 515 million leading to a factual
insolvent situation. This does not impact the position of the Company to
continue to operate on a going concern basis.
Cash balances increased by R555 million compared to 2004, resulting in a total
increase in net debt of only R103 million.
As at 31 December 2005, the Group"s funding line amounts to R2,464 million of
which 50% is denominated in US$ for an equivalent of US$ 195 million.
Effective Maturity
interest rate %
Description of loan
Non-current
Medium Term Facility Libor/Jibor + 1.5%
Convertible debentures Jibar + 5%
Senior Term Facility Libor +2.3%/Jibar +2.65% 30.06.13
Other Facilities Libor + 2.38% 31.01.14
Convertible debentures Jibar + 5% 16.09.06
Rio Tinto unsecured loan Libor + 5%
Rio Tinto Secured loan Libor + 5%
Current
Medium Term Facility Libor/Jibor + 1.5% 13.09.05
Convertible debentures Jibar + 5% 16.09.06
Proceeds from debentures
Debentures issue fees
Senior Term Facility Libor +2.3%/Jibar +2.65% 30.06.13
Revolving credit facility Libor +2.3%/Jibar +2.65%
Rio Tinto unsecured loan Libor + 5% 31.12.05
Rio Tinto Secured loan Libor + 5%
Other Facilities Libor + 2.38% 31.01.06
Total borrowings
Bank overdrafts On demand
Cash and cash equivalents
Net debt
Total Equity
Total capital employed
Gearing
Net debt/total capital
employed
Year Year
ended ended
31 December 31 December
2005 2004
R"000 R"000
Description of loan
Non-current
Medium Term Facility - -
Convertible debentures - -
Senior Term Facility 601 439 -
Other Facilities - 11 280
Convertible debentures 418 340 -
Rio Tinto unsecured loan 665 070 -
Rio Tinto Secured loan - -
1 684 849 11 280
Current
Medium Term Facility - 263 857
Convertible debentures 393 730 847 824
Proceeds from debentures 393 730 849 465
Debentures issue fees - (1 641)
Senior Term Facility 142 112 -
Revolving credit facility 94 925 -
Rio Tinto unsecured loan - 681 186
Rio Tinto Secured loan 148 849 -
Other Facilities - 1 018
779 616 1 793 885
Total borrowings 2 464 465 1 805 165
Bank overdrafts - 369 645
Cash and cash equivalents (202 279) (16 580)
Net debt 2 262 187 2 158 230
Total Equity (514 928) 303 667
Total capital employed 1 747 258 2 461 897
Gearing (4) 7.11
Net debt/total capital
employed 129% 88%
Group selected statistics
Year Year
ended ended
31 Dec 2005 31 Dec 2004
Unaudited Unaudited
Copper
Ore hoisted (millions of tonnes) 10,0 8,6
Average copper grade (% Cu) 0.716 0.740
Copper in concentrates produced (thousand of
tonnes) 61,2 50,9
Cathode produced (thousand of tonnes) 80,3 67,5
Cathode sold (thousand of tonnes) 77,8 82,2
Contained copper sold (thousand of tonnes) 78,7 82,3
Average copper price realised (USc/lb) 172.2 130.5
Average rand/dollar exchange rate 6.37 6.46
Average copper price realised per tonne (ZAR) 24,188 18,586
Net cash cost per tonne (ZAR) * 14,367 16,458
Vermiculite
Vermiculite sold (thousand of tonnes) 171 177
Average vermiculite prices realised per tonne
(ZAR) 1,398 1,385
Capital expenditure and commitments
Capital expenditure (R million) 108 267
Approved expenditure at end of each period (R 103 87
million)
Contracts placed at end of each period (R
million) 27 30
Investments
Fair value of unlisted investments (R million) 210 151
Share capital
Ordinary shares of R1 each (thousand) -
Authorised 100,000 100,000
Ordinary shares of R1 each (thousand) - Issued 29,562 28,316
Net asset value per share (R per Share) Negative 10.72
* Exclude Concentrate purchases and finance cost
Directors:
M R Maruma (Chairman), K Marshall1 (Managing Director), T Albanese 3 ,
S M Din1, C J Latcham2 , G M Negota, J C Posthumus (Alt: P A Henry),
W R J Ranson2 , R M Whyte1 (Alt: F B Weldon), C N Zungu
1British 2Australian 3 American
Company Secretary
K N Mathole
1 February 2006
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
Date: 01/02/2006 05:12:05 PM Produced by the JSE SENS Department
