| Fri 17 Feb 2006, 7:01 | | Kumba - Press Release |
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Kumba - Press Release
KUMBA RESOURCES LIMITED
Incorporated in the Republic of South Africa
(Registration Number: 2000/011076/06)
Share Code: KMB
ISIN Number: ZAE000034310
("Kumba")
17 February 2006
KUMBA RESOURCES AUDITED Group financial results AND PHYSICAL INFORMATION for the
12 MONTHS ENDED 31 DECEMBER 2005
Record production and buoyant sales volumes
Revenue up 37%
Net operating profit up 171%, excluding Hope Downs settlement Headline earnings
per share up 219%
Final dividend of 160 cents per share (540 cents per share for the financial
year, including special dividend)
Net debt to equity ratio of 19%
Creating South Africa"s flagship empowerment company and separately listed iron
ore company
OPERATING RESULTS
Diversified South African-based metals and mining company Kumba Resources
Limited (Kumba) today reported revenue of R11,96 billion and net operating
profit of R3,7 billion for the 12 months ended 31 December 2005, resulting in an
improved operating margin of 31% for the year. This excludes the non-recurring
R1,2 billion pre-tax settlement paid to Kumba for the acquisition of its
interest in the Hope Downs iron ore project in Australia.
"The year was marked by continued excellent operational performance, strong
commodity prices and the realisation of benefits from the ongoing business
improvement programme," said Dr Con Fauconnier, Kumba"s chief executive.
An average exchange rate of R6,36 to the US dollar was realised compared with
R6,51 for the previous 12-month period.
EARNINGS
The significant improvement in net operating profit including the Hope Downs
settlement, after accounting for net financing charges of R231 million and a
higher taxation charge of R1,41 billion, resulted in attributable earnings
increasing by 400% to R3,19 billion for the financial year. Headline earnings,
which exclude the Hope Downs settlement proceeds, were 223% higher at R2,37
billion or 781 cents per share.
CASH FLOW
Total cash of R5,04 billion generated from operations together with the Hope
Downs project settlement, was used partly to settle higher cash taxes of R821
million, increased dividends of R1,45 billion and the acquisition of the
minority interests in Ticor Ltd, Australia for R1,17 billion.
This, together with capital expenditure of R1 044 million, of which R655 million
was invested in new production capacity, resulted in a net cash inflow of R459
million for the year.
Net debt decreased to R1,39 billion, with a debt to equity ratio of 19% at 31
December 2005, from R1,87 billion and a debt to equity ratio of 29% at 31
December 2004.
SAFETY, HEALTH AND ENVIRONMENT
Regrettably, and despite excellent safety achievements at several mines, four
fatalities were suffered during the past year, one of which was a public road
accident. A further fatality occurred at the start of 2006. The group remains
committed to achieving a working environment where no fatalities or serious
injuries occur. Its ongoing safety awareness and preventive programmes have been
strengthened by further initiatives to enhance hazard identification.
The average lost time injury frequency rate per 200 000 man-hours worked (LTIFR)
for the financial year was 0,52. A target LTIFR of 0,25 has been set for 2006.
Programmes for HIV/Aids counselling and voluntary testing are in place at all
South African operations of the group. The extension of anti-retroviral
programmes to all of the group"s businesses is progressing well, with most
employees who tested HIV-positive during the year, now enrolled on the
programme. All business units in the group have obtained international
environment and safety certifications (ISO 14001 and OHSAS 18001).
TRANSFORMATION TRANSACTION
On 13 October 2005 Kumba, its holding company Anglo American and Eyesizwe
Mining, together with the Industrial Development Corporation, the Tiso
Consortium, the Eyabantu Consortium, a Northern Cape Community Group and the
South African Women in Mining Association, jointly announced the largest
empowerment transaction to be implemented to date in South Africa.
The parties have completed their due diligence investigations and are in the
process of finalising the valuations and the requisite legal agreements.
It is envisaged that the transaction will be implemented in the second quarter
of 2006.
OUTLOOK
"Buoyant market demand for the group"s portfolio of commodities, except titanium
dioxide feedstock where surplus supply exists, is expected to support strong
price levels. This, together with the ongoing benefits of Kumba"s business
improvement programme, is expected to have a positive impact on the group"s
results for the next six months. A stronger Rand will, however, affect
earnings," said Dr Fauconnier.
FINAL DIVIDEND
The directors have declared a final dividend, number 7 of 160 cents per share in
respect of the 2005 financial year. The dividend has been declared in South
African currency and is payable to shareholders recorded in the books of the
company at close of business on 10 March 2006.
This brings the total dividend declared for the year, including the special
dividend of 220 cents per share, to 540 cents per share.
* Comments are, for comparative purposes, based on an analysis of the group"s
audited financial results and physical information for the financial year ended
31 December 2005 compared with the corresponding unaudited information for the
12-month period ended 31 December 2004. Kumba"s previous audited financial
results were for the 18-month period from 1 July 2003 to
31 December 2004 due to a change in year-end from 30 June to 31 December.
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
Iron ore
Excellent operating performance at Sishen mine resulted in an all-time
production record of 28,5 Mt.
New records were set for railage and exports - total ore railed increased by
1,4Mt to 24Mt while export sales were 1,2Mt higher at 22,1Mt, in line with the
ongoing expansion and ramp-up of the Sishen-Saldanha export channel.
Revenue increased significantly by 56% to R6,64 billion and net operating profit
by 232% to R2,77 billion, with the operating margin improving to 42%. This was
due to the excellent operational performance, the substantial iron ore price
settlements effective1 April 2005, business improvement results, and a higher
margin sales product mix which more than offset the effects of higher fuel
prices and a stronger currency.
Coal
The production of power station (thermal) coal increased by 13% to a record of
14,6Mt over the comparative period due to improved throughput at Grootegeluk
mine and higher final product yield at Leeuwpan. Coking coal production was 136
000 tonnes lower, in line with demand.
Sales of power station coal increased by 347 000 tonnes on the comparative
period to meet growing local electricity demand. Exports were also at higher
volumes, supported by the strong steel and ferro-alloy markets.
Revenue increased by 17% to R2,2 billion from increased sales volumes at higher
prices. The higher revenue together with business improvement initiatives
resulted in net operating profit improving by 29% to R554 million despite
increased stripping costs and fuel prices.
Heavy minerals
Ticor SA
The furnaces are reaching 85% of their production capacity of 250 000 tonnes per
annum.
The ratio of chloride to sulphate slag increased on average from 71 % in the
comparative period to 82 % in the year under review. Furnace 1 is planned to be
shut temporarily in the current year to effect modifications and improvements
that were successfully made to furnace 2 in 2004.
Total production and sales increased in line with the ramp-up of the furnaces.
This, together with higher sales prices for zircon and low manganese pig iron,
resulted in revenue increasing by 63% to R839 million.
The stronger currency, increased raw material costs and the cessation of
capitalisation of costs and interest during the construction period more than
offset the improved revenues, resulting in a net operating loss of R79 million
for the year.
Ticor Australia
Kumba acquired the minority shareholding in Ticor Limited resulting in it
becoming a wholly-owned subsidiary and being de-listed from the Australian Stock
Exchange (ASX) on 22 November 2005. As a result, Ticor"s 40% holding in Ticor SA
was restructured into a direct holding by Kumba.
Mineral production at Ticor"s Western Australian operations was marginally lower
as a result of a planned shutdown of the dry mill and the relocation of the
North mine concentrator. Pigment and synthetic rutile production was in line
with the comparative period despite pigment production being impacted by an
unscheduled shutdown of a contractor"s oxygen plant.
Revenue decreased by 5% over the comparative period as a result of the effects
of the final closure of Ticor"s chemical business in May 2004. Net operating
profit, however, increased by 16% to R306 million as a result of higher pigment
and zircon prices, favourable hedging programmes, the elimination of losses
recorded by the chemicals business, and the ongoing success of margin
improvement initiatives.
Base metals
The sale of an additional 23 000 tonnes of lead and a significant increase in
the LME-traded zinc price from an average of US$1048 per tonne in the
comparative period to US$1382 per tonne in 2005 resulted in revenue improving by
32% to
R1,07 billion, despite continued low treatment charges and a stronger currency.
Net operating profit, which improved to R69 million from a loss of R116 million
in the comparative period, was due to increased revenues, non-recurrence of
impairment charges raised in the comparative period, and the benefits from the
business improvement programme.
As reported in the group"s interim results for the 6 months ended 30 June 2005,
a provision of R182 million, representing the division"s best estimate for the
environmental rehabilitation of a residue disposal site at the Zincor refinery,
was raised against its prior year"s retained income. Investigation of viable
reclamation alternatives is continuing. The provision at 31 December 2005
amounts to R191 million.
Industrial minerals
Revenue and net operating profit improved by 12% and 30% respectively due to
good operating performance and business improvement initiatives, despite lower
market demand.
ADDENDUM 2:
GROWTH OPPORTUNITIES
Iron ore
Kumba and Transnet concluded an agreement in February 2005 for the expansion of
the Sishen-Saldanha export channel by an additional 11,5Mtpa of iron ore from
2009. Kumba"s iron ore rail allocation will, as a result, increase to 35Mtpa by
2009 of which 33,2Mtpa is destined for the export market.
The Sishen Expansion Project (SEP), under construction, is planned to commence
delivery of product by mid-2007 and will ramp-up to full capacity of 10Mtpa by
the beginning of 2009, in line with the additional export channel capacity
expansions agreed with Transnet. Improvements identified during the detailed
design phase of the project, together with higher construction costs, resulted
in an increase in the capital estimate of the project from R3 billion to R3,6
billion.
Due to export logistics constraints, a phased approach for the development of
the Sishen South project is currently being investigated jointly between Kumba
and Transnet. Final approval of the first phase of 3Mtpa is expected in the
current year upon approval of the application for mining rights and acceptance
of the environmental management plan. Further expansion of the mine to around
9Mtpa during the second phase is dependent on the synchronised expansion of the
export channel capacity.
The evaluation of a project to significantly extend the life of the current mine
at Thabazimbi by approximately 20 years to provide Mittal Steel (South Africa)
with lumpy and fine ore, is expected to be finalised in the current year. If
viable and an investment decision is made, production of 2,5Mtpa to 3Mtpa could
be achieved in 2009.
The commencement of a bankable feasibility study for the development of a mine
to exploit the Faleme iron ore deposit, located in the south-eastern corner of
Senegal, and associated infrastructure, has been approved by Kumba. The company
has exercised its option to acquire a controlling interest in the project. The
Senegalese government development company, Miferso, has put Kumba"s rights in
dispute. Kumba will pursue the legal actions available to it in order to
preserve its contractual rights.
Coal
The jig plant at Leeuwpan was successfully commissioned in the third quarter of
2005 at a capital cost of R97 million, with full ramp-up scheduled for the first
quarter of 2006. Once in full production, Leeuwpan will supply an additional 1
Mtpa of power station coal to Eskom.
Construction of the R323 million new coal beneficiation module (GG6) at
Grootegeluk mine has commenced and is due for commissioning in the fourth
quarter of 2006. The plant will beneficiate coal previously sent to the
adjacent Matimba power station and will supply 530 000 tonnes per annum of semi-
soft coking coal to the coking plants being refurbished by Mittal Steel (South
Africa) at its Newcastle facility.
The Richards Bay Coal Terminal (RBCT) announced in November 2005 the go-ahead
for the RBCT Phase V expansion. This has triggered the 1Mtpa export-focused
Inyanda mine near Witbank which is a 50:50 joint venture operation producing
high quality thermal coal between Kumba and Eyesizwe Coal. Construction of the
mine, at a capital cost of some
R184 million, will commence during the second quarter of 2006 and commissioning
of the mine is planned for December 2007. The expansion at RBCT will provide
Kumba with a 2,5Mtpa export allocation to be filled by production from the
Inyanda mine and expanded output at the Grootegeluk and Leeuwpan mines.
Following encouraging exploration results, Kumba will conclude a joint venture
agreement with Anglo Coal Australia in the first quarter of 2006 to undertake a
feasibility study on the high-grade coking coal resource on the adjacent
properties of Moranbah South and Grosvenor South in Queensland, Australia.
A feasibility study on the possibility of producing char for the ferro-alloy
industry was completed during the year. Board approval for construction at a
capital cost of R210 million for initial production of 80 000tpa and
ramping up to 160 000tpa by 2008, was given. The approval is conditional upon
the conclusion of off-take agreements and an environmental impact assessment.
Heavy Minerals
Construction of the Fairbreeze project, subject to Board approval, is planned to
start in the first half of 2006, with commissioning in the third quarter of
2008.
The bankable feasibility study on the Toliara Sands Project in south-west
Madagascar has commenced and will be completed in early 2007. The currently
delineated deposit within the Toliara Sands Project is capable of providing long
term ilmenite feedstock to the Ticor SA furnaces.
AlloyStream TM
Good progress has been made on the commercialisation of AlloyStreamTM, the
proprietary technology that allows the use of fine un-agglomerated ore and non-
coking coal to produce high carbon ferro-manganese.
Date: 17/02/2006 07:01:06 AM Produced by the JSE SENS Department
