|
KMB
KMB
Kumba Resources Limited - Audited Abridged Group Financial Results For Year
Ended 31 December 2005
KUMBA RESOURCES LIMITED
Incorporated in the Republic of South Africa
(Registration Number: 2000/011076/06)
Share Code: KMB
ISIN Number: ZAE000034310
("Kumba")
audited abridged group Financial Results for year ended 31 December 2005
Harnessing the power of the earth
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
Group income statement
12-months 18-months
ended ended
31 Dec 31 Dec
2005 2004
Restated
Audited Audited
Rm Rm
Revenue 11 962 12 600
Operating expenses (7 075) (10 755)
Net operating profit 4 887 1 845
Net financing costs (note 3) (231) (424)
Share of (losses)/income from equity 7 (42)
accounted investments (note 11)
Profit before taxation (note 3) 4 663 1 379
Taxation (1 412) (423)
Profit for the period 3 251 956
Attributable to:
Equity holders of the parent 3 190 891
Minority interest 61 65
Net profit 3 251 956
Ordinary shares (million)
- in issue 306 302
- weighted average number of shares 304 300
- diluted weighted average number of 311 302
shares
Attributable earnings per share (cents)
- basic (2004 as previously reported) 1 049 314
- basic restated for December 2004 297
- diluted (2004 as previously reported) 1 026 312
- diluted restated for December 2004 295
Dividend paid per share (cents) in 90 60
respect of the previous financial year
Dividend paid per share (cents) in 160
respect of the interim period
Special dividend paid per share (cents) 220
in respect of the interim period
Final dividend declared per share 160
(cents) in respect of this 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 3 190 891
shareholders
- Impairment charges 28 35
- Share of associates" goodwill 27
amortisation
- Goodwill amortisation (6)
- Excess of minority interest over cost (95)
of acquisition
- Share of associates" exceptional 20
items
- Net deficit on disposal or scrapping
of property,
plant and equipment 2 48
- Net surplus on disposal of investment (1 179) (72)
- Closure cost (note 5) 35
- Minority interest on adjustments (1)
- Taxation effect of adjustments 428 (12)
Headline earnings 2 373 966
Headline earnings per share (cents)
- basic (2004 as previously reported) 781 339
- basic restated for December 2004 322
- diluted (2004 as previously reported) 763 337
- diluted restated for December 2004 320
Group balance sheet
At 31 At 31 Dec
Dec 2005 2004
Restated
Audited Audited
Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 8 826 8 476
Biological assets 28 31
Intangible assets 61 71
Goodwill (note 7) (53)
Investments in associates and joint
ventures (note 9 & 12)
- listed 6
- unlisted 95 79
Deferred taxation (note 10) 339 258
Other financial assets (note 9) 392 286
9 741 9 154
Current assets
Inventories 1 481 1 348
Trade and other receivables 2 066 1 365
Cash and cash equivalents 1 483 1 297
5 030 4 010
Non-current assets classified as held 11
for sale
Total assets 14 782 13 164
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders" funds 7 377 5 289
Minority interest 9 1 197
Total shareholders" funds 7 386 6 486
Non-current liabilities
Interest-bearing borrowings 1 963 2 331
Other long-term payables 604 609
Non-current provisions (note 8) 727 599
Deferred taxation 1 006 1 040
4 300 4 579
Current liabilities
Trade and other payables 1 388 1 061
Interest-bearing borrowings 911 836
Taxation 773 182
Current provisions 24 20
3 096 2 099
Total equity and liabilities 14 782 13 164
Net debt (note 14) 1 391 1 870
Net asset value per share (cents) 2 411 1 751
Capital expenditure
- incurred 1 044 1 396
- contracted 1 635 219
- authorised but not contracted 2 182 668
Contingent liabilities 82 36
Operating lease commitments 163 167
Operating sublease rentals receivable 1 28
Capital expenditure contracted relating 6 27
to captive mines (Thabazimbi and
Tshikondeni), which will be financed by
Mittal Steel (South Africa)
Group cash flow
12-months 18-months
ended ended
31 Dec 31 Dec
2005 2004
Restated
Audited Audited
Rm Rm
Cash retained from operations 3 864 2 661
- net financing costs (189) (355)
- taxation paid (821) (313)
- dividends paid (note 13) (1 447) (361)
Cash used in investing activities
- capital expenditure (1 044) (1 396)
- proceeds from disposal of property, 23 138
plant and equipment
- proceeds from disposal of investment 1 179
- proceeds from disposal of associate 100
- increase in investment in (1 174)
subsidiaries - buy out of Ticor Ltd
minorities
- other 68 (159)
Net cash inflow 459 315
- cash flows from issue of shares 128 132
- borrowings (repaid) (401) (126)
Net increase in cash and cash 186 321
equivalents
Adjusted opening balance 1 297 976
Increase in cash and cash equivalents 39 12
due to the proportionate consolidation
of joint ventures (note 12)
Cash and cash equivalents beginning of 1 258 964
period as previously disclosed
Cash and cash equivalents end of 1 483 1 297
period
Calculation of movement in net debt:
Net cash inflow 459 315
- shares issued 128 132
- loans from minority shareholders 2 (1)
- non-cash increase in loans due to (1)
joint ventures now consolidated
- non-cash flow movements in net debt (22)
applicable to special purpose entities
- non-cash flow movements in net debt (96) 101
applicable to currency translation
differences of transactions
denominated in foreign currency
- non-cash flow movements in net debt (13) (33)
applicable to currency translation
differences of net debt items of
foreign entities
Decrease in net debt 479 492
Group statement of changes in equity
12-months 18-months
ended ended
31 Dec 31 Dec
2005 2004
Restated
Audited Audited
Rm Rm
Shareholders" funds at beginning of 6 486 4 895
period as previously reported
Minority interest opening balance 1 191
Prior period adjustment
- Environmental rehabilitation (136)
provision (note 8)
- Deferred tax asset (note 10) 93
- Deferred tax asset minority interest 87
(note 10)
IFRS adjustments
- negative goodwill adjustment (note 53
7)
- decommissioning asset restated 7
Shareholders" funds at beginning of 6 546 6 130
period
Changes in share capital and premium
- issue of shares
- share premium (1) 132 132
- movement in shares held by 12 33
Management Share Trust
Changes in non-distributable reserves
- currency translation differences 171 (301)
- financial instruments movements (101) 10
- realised in associate and joint (11)
venture
- share-based payment charges for the 38 30
period (note 6)
- transfer of insurance reserve (5)
- transfer to retained income (9)
- transfer of attributable reserves of (20)
equity accounted investments (note 11)
- deferred tax 4
Changes in minority interest
- currency translation differences 60 (133)
- income charge for the period 61 65
- minority share of reserve movements (97) 4
- minority share of dividends (17) (17)
- minority buy out (1 194)
- issue of share capital 10
Changes in retained income
- net profit for the year 3 190 891
- dividends paid (note 13) (1 430) (344)
- reduction in dividends paid to 2
Management Share Trust (note 13)
- transfer of attributable reserves of 20
equity accounted investments (note 11)
- transfer from translation reserve 1 9
Shareholders" funds at end of period 7 386 6 486
(1) Issued to the Management Share Option Scheme due to options exercised.
(2) A final dividend declared after year-end amounts to 160 cents per share. STC
at 12,5% (R61 million) will be payable on the dividend.
Notes to the group financial results
1. Basis of preparation
This abridged report complies with International Accounting Standard 34, Interim
Financial Reporting, and schedule 4 of the South African Companies Act. 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 financial statements for the 18-months
ended 31 December 2004 except for the changes noted in note 6, 7, 11 and 12.
Where applicable prior years have been adjusted.
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. during the
previous period resulting in an 18-month period ended 31 December 2004.
Consequently the amounts for corresponding items in the income statement,
changes in equity, cash flows and related notes are not comparable.
3. Profit before taxation is arrived at after
Depreciation and amortisation of (898) (977)
intangible assets
Financing costs (381) (471)
Interest received 150 47
Net realised foreign exchange
gains/(losses) on:
- currency exchange differences 225 (210)
- revaluation of derivative instruments (64) 173
Net unrealised foreign exchange
gains/(losses) on:
- currency exchange differences (76) 121
- revaluation of derivative instruments 83 (124)
Fair value adjustment on financial assets 43 28
Fair value adjustment on financial 5 (5)
liabilities
Impairment charges (note 4) (28) (35)
Goodwill amortisation 6
Excess of minority interest over cost of 95
acquisition
Net surplus on disposal of investments 1 179 72
Net deficit on disposal of property, (2) (48)
plant and equipment
Share-based payment expense (note 6) (38) (30)
4. Impairment charges and reversals
Impairment of cyanide chemicals plant (89)
Impairment of property, plant and (3) (15)
equipment
Reversal of impairment of shipping assets 90
Reversal of impairment of other fixed 2 1
assets
Impairment of intangible assets (20) (11)
Impairment of investments (7) (11)
(28) (35)
Taxation effect
(28) (35)
5. Closure of Ticor chemicals plant
On 21 April 2004 Ticor Ltd, Australia
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 1 217
Expenses 2 192
Provision for closure 35
Provision for impairment 89
Pre-tax loss (3) (102)
Income tax expense 28
Total assets 9 76
Total external liabilities 1 6
Cash inflows from operating activities 26 50
6. Share-based payments
As part of the IFRS improvements project
Kumba adopted IFRS 2 Share-based
payments. The adoption of IFRS 2 is made
in accordance with the transitional
provision of IFRS 2. Prior years" figures
have been restated. The amount of the
adjustment for the current and comparable
periods is as follows:
Income statement impact
- Reduction of profit and loss for the 38 30
period
Balance sheet impact
- Retained income decrease 72 34
- Equity-settled reserve increase 72 34
The amount of the adjustment relating to
the 30 June 2003 financial statements is
a decrease of R4 million in retained
income and an increase of R4 million in
equity-settled reserve.
7. Business combinations
In line with IFRS 3, Business
combinations, the carrying value of
previously recognised negative goodwill
at the beginning of the period was
derecognised and adjusted against the
opening balance of retained earnings. The
effect of the adjustment is as follows:
No income statement impact
Balance sheet impact
- Decrease in negative goodwill 53
- Increase in retained income 53
8. Environmental rehabilitation provision
A legal and constructive obligation
exists to provide for rehabilitation at
the Zincor refinery. The provision has
been accounted for as a prior year
adjustment to reflect the existence of
the obligation originating from previous
periods. The effect of the adjustment is
as follows:
Income statement impact
- Increase in finance charges 17 23
- Decrease in deferred taxation 2 2
Balance sheet impact
- Decrease in retained income 172 157
- Increase in provisions 191 174
- Increase in deferred tax asset 2 15
- Decrease in deferred tax liability 2
9. Investments
Listed investments in associates
- market value 24
Unlisted investments in associates
- directors" valuation 130 125
Listed investments included in other
financial assets
- market value 60 20
Unlisted investments included in other
financial assets
- directors" valuation 35 33
10. Deferred taxation
A deferred tax asset was raised as a
prior year adjustment in respect of Ticor
Ltd"s eligibility to claim a bad debt
deduction of A$130,7 million as at 31
December 2002. The effect of the
adjustment is as follows:
No income statement impact
Balance sheet impact:
- Increase in retained income 93 93
- Increase in minority interest 87 87
- Increase in deferred tax asset 180 180
11. Reclassification and presentation
The group has changed the following
accounting policies to be in line with
the accounting policies of its majority
shareholder and parent, Anglo American
plc:
- The equity accounted investments"
recognised profits were previously
transferred to a non-distributable
reserve "Attributable reserves of equity
accounted investments". The opening
balance of R20 million (2004: R11
million) of this reserve was reclassified
as distributable reserves and transfers
to this reserve have ceased.
- Income from equity accounted
investments were previously presented as
pre-tax income, and the tax shown as part
of the taxation charge. Only the post-tax
share of equity accounted profits are now
disclosed. The net effect on earnings is
zero, however the line-by-line effect on
the income statement is as follows:
- Decrease in income from equity 2 9
accounted investments
- Decrease in taxation 2 9
12. Interest in joint ventures
Kumba"s majority shareholder and parent,
Anglo American plc. changed its
accounting policies to be in line with
IFRS with effect 1 January 2005. Anglo
elected to account for interests in joint
ventures per IAS 31, by applying the
proportionate consolidation method. To be
consistent with the parent entity"s
policies Kumba changed its accounting
policy to the proportionate consolidation
method. Prior years" figures have been
restated. This policy change does not
impact on earnings per share. The effect
of the change in accounting policy is as
follows:
Income statement impact:
- Increase in net operating profit 26 20
- Increase in interest income 1
- Decrease in income from equity 27 20
accounted investments
Balance sheet impact:
- Decrease in investments in joint 38 11
ventures
- Increase in property, plant and 3 3
equipment
- Increase in financial assets 2 1
- Decrease in trade and other receivables 32
- Increase in cash and cash equivalents 63 39
- Increase in trade and other payables 48
- Decrease in net debt 63 39
Cash flow impact:
- Increase in net cash flows from 22 29
operating activities
- Increase in taxation paid 2
- Increase in financial assets 1
- Increase in borrowings raised 1
- Increase in foreign currency 3
translation
- Increase in opening balance of cash and 39 12
cash equivalents
13. Dividends paid
- Kumba 1 430 344
- Less paid to Kumba Management Share (2)
Trust
- Paid to minorities 17 19
1 447 361
14. Net debt
Net debt is calculated as being interest-bearing borrowings less cash and cash
equivalents.
15. 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.
16. JSE Limited requirements
The announcement has been prepared in accordance with the listings requirements
of JSE Limited.
17. Corporate governance
The group complies with the Code of Corporate Practice and Conduct published in
the King II Report on Corporate Governance.
18. Audit opinion
The auditors, Deloitte & Touche, have issued their opinion on the group"s
financial statements for the 12-month period ended 31 December 2005. The audit
was conducted in accordance with International Standards on Auditing. They have
issued an unmodified 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 annual financial statements.
UNAUDITED PHYSICAL INFORMATION ("000 TONNES)
12-months
ended
31 Dec
2005 2004
Iron ore
Production 30 987 30 112
Sales
- Exports 22 113 20 923
- Domestic 9 172 9 371
Total 31 285 30 294
Coal
Production
- Power station 14 573 14 383
- Coking 2 273 2 409
- Other 2 993 2 652
Total 19 839 19 444
Sales
- Eskom 14 703 14 356
- Other domestic 4 174 4 112
- Export 1 109 1 090
Total 19 986 19 558
Heavy minerals - Ticor SA
project
Production
- Ilmenite 356 262
- Zircon 47 49
- Rutile 23 20
- Pig iron 89 63
- Scrap pig iron 8 5
- Chloride slag 134 96
- Sulphate slag 30 40
Sales
- Ilmenite 60 27
- Zircon 47 48
- Rutile 18 17
- Pig iron 79 58
- Scrap pig iron 11 8
- Chloride slag 150 84
- Sulphate slag 41 24
Heavy minerals - Ticor
Limited (1)
Production
- Ilmenite 220 236
- Zircon 35 38
- Rutile 16 18
- Synthetic rutile 111 112
- Leucoxene 12 11
- Pigment 53 53
Sales
- Ilmenite 13 30
- Zircon 36 38
- Rutile 18 21
- Synthetic rutile 59 50
- Leucoxene 14 17
Base metals
Production
- Zinc concentrate 126 124
- Zinc metal 117 116
- Zincor 102 104
- Chifeng (2) 15 12
- Lead concentrate 25 27
Zinc metal sales
- Domestic 92 91
- Export 27 28
Total 119 119
Lead concentrate sales
- Export 35 12
UNAUDITED PHYSICAL INFORMATION ("000 TONNES)
6-months 18-months
ended ended
31 Dec 31 Dec
2005 2004 2004
Iron ore
Production 15 476 14 900 44 952
Sales
- Exports 11 510 10 381 30 762
- Domestic 4 360 4 630 14 107
Total 15 870 15 011 44 869
Coal
Production
- Power station 7 243 7 521 21 829
- Coking 1 098 1 243 3 486
- Other 1 552 1 371 3 880
Total 9 893 10 135 29 195
Sales
- Eskom 7 268 7 400 21 769
- Other domestic 2 164 2 069 6 058
- Export 500 593 1 688
Total 9 932 10 062 29 515
Heavy minerals - Ticor SA
project
Production
- Ilmenite 202 132 390
- Zircon 23 25 74
- Rutile 11 10 29
- Pig iron 52 22 85
- Scrap pig iron 3 2 11
- Chloride slag 79 48 123
- Sulphate slag 18 19 60
Sales
- Ilmenite 30 27 67
- Zircon 21 20 71
- Rutile 9 7 29
- Pig iron 50 28 68
- Scrap pig iron 5 4 11
- Chloride slag 85 42 96
- Sulphate slag 20 14 24
Heavy minerals - Ticor
Limited (1)
Production
- Ilmenite 116 120 347
- Zircon 18 20 59
- Rutile 8 9 26
- Synthetic rutile 56 58 168
- Leucoxene 7 6 20
- Pigment 27 27 78
Sales
- Ilmenite 3 10 52
- Zircon 19 21 58
- Rutile 10 6 32
- Synthetic rutile 33 28 79
- Leucoxene 10 8 25
Base metals
Production
- Zinc concentrate 62 57 178
- Zinc metal 58 58 174
- Zincor 50 52 159
- Chifeng (2) 8 6 15
- Lead concentrate 12 13 45
Zinc metal sales
- Domestic 46 45 135
- Export 13 12 43
Total 59 57 178
Lead concentrate sales
- Export 23 6 29
(1) The production and sales tonnes reflect Ticor"s 50% interest in its Tiwest
joint venture.
(2) The effective interest in the physical information for the Chifeng (Hongye)
refinery has been disclosed.
COMMENTS
OPERATING RESULTS
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.
The 12-month period to December 2005 was marked by continued excellent
operational performance, strong commodity prices and the realisation of benefits
from the ongoing business improvement programme. Revenue increased by R3 253
million to R11 962 million and net operating profit, excluding the Hope Downs
non-recurring settlement proceeds, by R2 339 million to R3 707 million,
resulting in an improved operating margin of 31% for the year.
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 a non-recurring
settlement of R1 179 million pre-tax for the acquisition of Kumba"s interest in
the Hope Downs project, after accounting for net financing charges of R231
million and a higher taxation charge of R1 412 million, resulted in attributable
earnings increasing by 400% to R3 190 million for the financial year. Headline
earnings were 223% higher at R2 373 million or 781 cents per share.
CASH FLOW
Total cash of R3 864 million retained from operations together with the Hope
Downs project settlement, was used partly to settle lower finance charges of
R189 million, higher cash taxes of R821 million, increased dividends of R1 447
million and the acquisition of the minority interests in Ticor Ltd, Australia
for R1 174 million.
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 391 million, with a debt to equity ratio of 19% at 31
December 2005, from R1 870 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 two fatalities 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 preventative programmes
have been strengthened by further initiatives to enhance hazard identification.
The average lost time injury frequency rate per two hundred thousand 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).
SEGMENT RESULTS AND COMPARATIVE EARNINGS
6-months ended 12-months ended
31 December 31 December
2005 2004** 2005 2004**
Unaudited Unaudited Audited Unaudited
Rm Rm Rm Rm
REVENUE
Iron ore 3 819 2 130 6 638 4 250
Coal 1 159 986 2 203 1 878
Heavy minerals 1 046 847 1 928 1 662
Ticor SA 466 266 839 514
Ticor Australia 580 581 1 089 1 148
Base metals 586 354 1 070 812
Industrial 55 51 106 95
minerals
Other 11 8 17 12
Total 6 676 4 376 11 962 8 709
NET OPERATING
PROFIT
Iron ore 1 692 454 2 767 833
Coal 284 238 554 430
Heavy minerals 173 156 227 254
Ticor SA (65) 7 (79) (10)
Ticor Australia 238 149 306 264
Base metals 58 (94) 69 (116)
Industrial 13 10 26 20
minerals
Other 1 156 (3) 1 244 (53)
Hope Downs* 1 179 1 179
Other (23) (3) 65 (53)
Total 3 376 761 4 887 1 368
EARNINGS
Net operating 3 376 761 4 887 1 368
profit
Net financing (86) (142) (231) (287)
charges
Income from equity 5 (3) 7 (23)
accounted
investments
Profit before 3 295 616 4 663 1 058
taxation
Taxation (1 031) (175) (1 412) (330)
Minority interest (28) (46) (61) (90)
Net profit 2 236 395 3 190 638
attributable to
ordinary
shareholders
Adjustments (826) 22 (817) 96
Headline earnings 1 410 417 2 373 734
* A$236,5 million settlement- and option payment for Kumba"s interest in the
Hope Downs project.
** Restated as set out in note 1 of the group financial results.
OPERATIONS
Iron Ore
Excellent operating performance at Sishen mine resulted in an all-time
production record of 28,5 Mt. Selective mining practices and improved plant
efficiencies contributed to this production record representing an increase of
900 000 tonnes over the comparative period. New records were set for railage and
exports. Total ore railed increased by 1,4 Mt to 24 Mt while export sales were
1,2 Mt higher at 22,1 Mt, in line with the ongoing expansion and ramp-up of the
Sishen-Saldanha export channel.
Despite the break-down of both ship-loaders at the Saldanha Bay iron ore export
terminal hampering ship loading in July 2005, all supply commitments to
customers were met while stock levels at Saldanha Bay were also increased.
Revenue increased significantly by 56% to R6 638 million and net operating
profit by 232% to R2 767 million, with the operating margin improving to 42%.
This was due to the excellent operational performance, the substantial iron ore
price settlements effective 1 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
14,6 Mt 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 203 million from the 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. Encouragingly, 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 re-structured 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 re-location 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$1 048 per tonne in the
comparative period to US$1 382 per tonne in 2005 resulted in revenue improving
by 32% to R1 070 million, 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 six months ended 30 June
2005, a provision of R182 million, representing the business unit"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.
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 11,5 Mtpa of iron ore from
2009. Kumba"s iron ore rail allocation will, as a result, increase to 35 Mtpa by
2009 of which 33,2 Mtpa 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 commodity and labour costs in
the construction industry, resulted in an increase in the capital estimate of
the project from R3 000 million to R3 600 million.
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 3 Mtpa 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 9
Mtpa 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 2,5 to 3 Mtpa 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. Kumba 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 at a capital cost of R97 million was successfully
commissioned in the third quarter of 2005 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 benefication 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 1 Mtpa 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 2,5 Mtpa 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 80 000 tonnes per annum
and ramping up to 160 000 tonnes per annum by 2008, was given. The approval is
conditional upon the conclusion of off-take agreements and an environmental
impact assessment.
Heavy Minerals
Commencement of construction of the Fairbreeze project, subject to board
approval, is planned 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.
AlloyStreamTM
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.
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.
The stronger Rand will, however, affect earnings.
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.
In compliance with the electronic settlement system of JSE Limited, the
following dates are applicable:
Last date to trade cum dividend Friday, 3 March 2006
Shares trade ex dividend Monday, 6 March 2006
Record date Friday, 10 March 2006
Payment date Monday, 13 March 2006
Share certificates may not be dematerialised or rematerialised between Friday, 6
March 2006 and Friday, 10 March 2006, both days inclusive.
On behalf of the Board
AJ Morgan Dr CJ Fauconnier DJ van Staden
(Chairman) (Chief Executive) (Executive
Director, Finance)
17 February 2006
Kumba Resources Limited
Registration number 2000/011076/06
JSE Share code KMB
ADR CODE KBREY
ISIN CODE ZAE 000034310
Registered office
Kumba Resources Limited
Roger Dyason Road
Pretoria West, 0002
TEL NO +27 12 307 5000
FAX NO +27 12 307 4080
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
2nd Floor, Edura House,
70 Marshall Street,
Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Directors
AJ Morgan (Chairman),
Dr CJ Fauconnier (Chief Executive),
PM Baum, BE Davison, TL de Beer, JJ Geldenhuys,
MJ Kilbride*, Dr D Konar, CF Meintjes*, WA Nairn,
SA Nkosi, CML Savage, Dr NS Segal, F Titi,
DJ van Staden*, PL Zim. *Executive
Company Secretary
MS Viljoen
Corporate Affairs and Investor Relations
Trevor Arran +27 12 307 3292
Sponsor
JP Morgan Equities Limited
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 the Kumba Resources website at:
http://www.kumbaresources.com
Date: 17/02/2006 07:00:26 AM Produced by the JSE SENS Department
| Profile Group (Pty) Ltd. has taken care in preparing all information on this website, but does not accept any liability for errors or out-of-date information. | |||||||||||||
| Other Profile Group sites: FundsData Online (unit trust data) | Profile Group corporate site | |||||||||||||
| [ Terms of Use | Privacy Policy | PAIA manual | FAQs/Help | Site Map | © Copyright Reserved 2026 ] | |||||||||||||
|
|||||||||||||
