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MTX
MEMTX
Metorex Limited - Consolidated unaudited interim results for the period ended 31
December 2005
Metorex Limited
("The Group")
(Registration number 1934/005478/06)
(Incorporated in the Republic of South Africa)
JSE code: MTX ISIN: ZAE000022745 Issuer code: MEMTX
Listed on the JSE Limited and London Stock Exchange
Consolidated unaudited interim results for the period ended 31 December 2005
Net earnings increased to R60,5 million from R6,7 million
EBITDA increased to R136 million from R52 million
Ruashi/Sable capital project 70% complete
Profit contributions from all divisions
Divisional expansion projects nearing completion
Consolidated income statement
Six months Six months
31 December 2005 31 December 2004
(Unaudited) (Unaudited)
R000 R000
Mineral sales
Copper 93 478 43 012
Coal 194 587 186 039
Fluorspar 66 950 48 729
Gold 195 623 179 610
Antimony 79 472 44 084
Other - 788
Gross revenue 630 110 502 262
Realisation costs 54 623 38 129
On-mine revenue 575 487 464 133
Cost of production 456 876 415 746
Stock movement 1 806 (14 398)
Depreciation 33 357 24 444
Mining profit 83 448 38 341
Discontinued operations (89) (9 600)
Other income/(expenses) 19 495 (766)
Operating income before finance
costs 102 854 27 975
Finance income 3 638 282
Finance costs (4 308) (8 039)
Income before taxation 102 184 20 218
Taxation - normal and STC 2 709 2 353
Taxation - deferred 24 067 8 087
Income after taxation 75 408 9 778
Income attributable to outside
shareholders 14 909 3 060
Income attributable to ordinary
shareholders 60 499 6 718
Earnings per share (cents) 21,21 3,58
Headline earnings per share
(cents) 13,41 6,51
Diluted earnings per
share (cents) 20,16 3,58
Diluted headline earnings
per share (cents) 12,75 6,51
Dividend per share (cents) - -
Earnings per share and headline earnings per share
are calculated using the following:
Income attributable to
ordinary shareholders 60 499 6 718
Profit on sale of assets,
net of tax (22 340) (4 090)
Discontinued operations 89 9 600
Headline earnings (R000"s) 38 248 12 228
Weighted average number of
shares in issue (000"s) 285 210 187 874
Consolidated balance sheet
31 December 2005 30 June 2005
(Unaudited) (Restated)
R000 R000
ASSETS
Non-current assets
Property, plant and equipment 695 404 568 727
Mineral rights 269 443 250 748
Goodwill 18 309 18 309
Investments 929 929
Rehabilitation trust fund 40 027 43 033
Deferred tax asset 2 862 16 170
1 026 974 897 916
Current assets
Inventories 49 034 47 691
Trade and other receivables 181 788 161 777
Derivative instruments 4 311 -
Taxation prepaid 4 962 4 985
Bank balances and cash 118 133 207 779
358 228 422 232
Total assets 1 385 202 1 320 148
EQUITY AND LIABILITIES
Capital and reserves
Share capital and premium 798 445 765 197
Hedging and translation reserve (91 394) (60 631)
Retained income 183 360 122 861
Share option equity 5 000 3 500
Equity reserve (128 066) (128 066)
767 345 702 861
Minority interest 181 276 151 391
Non-current liabilities
Long-term liabilities -
interest bearing 42 982 48 953
Long-term provisions 76 225 72 645
Deferred tax liabilities 81 908 74 456
201 115 196 054
Current liabilities
Trade and other payables 136 718 162 577
Short-term borrowings -
interest bearing 29 485 43 610
Short-term provisions 28 264 29 673
Derivative instruments 40 609 14 947
Bank overdraft - 18 713
Taxation 390 322
235 466 269 842
Total equity and liabilities 1 385 202 1 320 148
Net asset value per share
(cents) 267 251
Net tangible asset value per
share (cents) 260 245
Abridged consolidated cash flow statement
Six months Six months
31 December 2005 31 December 2004
(Unaudited) (Unaudited)
R000 R000
Cash generated before working
capital changes 115 371 53 669
Working capital changes (41 682) 18 227
Cash generated by operations 73 689 71 896
Dividends paid (2 567) (1 500)
Taxation paid (2 605) (2 930)
Finance costs, net (670) (7 757)
Cash inflows from operating
activities 67 847 59 709
Cash outflows from investing
activities (196 538) (38 384)
Cash inflows/(outflows)
from financing activities 57 836 (35 509)
Net decrease in cash and
cash equivalents (70 855) (14 184)
Cash at beginning of year 189 066 (1 041)
Effect of foreign exchange
rate changes (78) (102)
Cash at end of period 118 133 (15 327)
Abridged statement of changes in equity
Six months Six months
31 December 2005 31 December 2004
(Unaudited) (Unaudited)
R000 R000
Shareholders equity at start
of period 702 861 419 455
Ordinary shares issued 33 248 1 942
Hedging and translation reserve (30 763) (9 267)
Net income for the period 60 499 6 718
Share option equity 1 500 1 250
Total equity 767 345 420 098
COMMENTARY
SAFETY
The Group"s safety record was marred by a fatal accident at O"Okiep and
Wakefield. Sincere condolences are extended to the families of the deceased.
The Group strives to conduct its activities with due regard to the safety and
health of its employees and regrets the loss of life on its operations.
Financial results and cash flow
All of the divisions contributed to the Group"s earnings during the period, with
the largest contributors to the revenue account being coal and gold. Notable
revenue increases were derived from Chibuluma copper sales and antimony sales
from Consolidated Murchison.
The revenue from mineral sales increased by 26% to R630,1 million from the
comparable period as a result of a combination of an increase in production and
sales volumes and improved commodity prices. The main volume increases occurred
in the copper, fluorspar and antimony sales and price improvements were
experienced in all of the commodities. The most significant commodity price
increases were experienced in copper (+43%) and antimony (+26%).
The increase of 10% in Group cash costs of production is largely due to
increased volumes of production from all the divisions other than the coal
division which experienced a 9% increase in costs due to higher stripping ratios
and fuel price increases.
Cash profit margins improved from 14% to 20% during the period and the profit
from mining operations increased by 118% to R83,5 million. The coal group
increased its empowerment shareholding from 9,5% to 26% with the introduction of
R44 million in cash, which resulted in a non-mining income of R20 million. The
taxation charge was largely deferred taxation.
The Group generated R115,4 million of cash before working capital changes,
R196,5 million was spent on capital projects, mainly Ruashi and Sable and ended
the period with cash balances of R118,1 million.
Earnings per share increased from 3,58 cents to 21,21 cents and headline
earnings per share from 6,51 cents to 13,41 cents during the period.
Operating performance
STATEMENT OF FINANCIAL PERFORMANCE AND RELATED STATISTICS FOR THE SIX MONTHS
ENDED 31 DECEMBER
Financial performance 2005 2004 2003 2002
Gross revenue (R"000) 630 110 502 262 525 596 487 003
EBITDA (R"000) 136 300 62 019 32 565 73 163
Cash mining profit
margin (%) 20 14 7 19
*EPS (cents) 21,21 3,58 (12,36) 20,68
*HEPS (cents) 13,41 6,51 (3,49) 22,00
Market capitalization (R"000) 2 071 166 498 460 411 295 430 959
Shares in issue (`000) 287 662 188 098 175 019 139 019
Share price (cents) 720 265 235 310
ZAR/US$ rate - Average (R/$) 6,53 6,24 7,10 10,06
ZAR/US$ rate - Closing (R/$) 6,31 5,67 6,58 8,53
DENOTES
* Restated Cash mining profit percentage of net on-mine revenue.
OPERATIONAL PERFORMANCE FOR THE SIX MONTHS ENDED 31 DECEMBER
Copper
Chibuluma South 2005 2004 2003 2002
Tons milled (t) 156 127 - -
Headgrade (%) 2,8 - - -
Overall recovery (%) 79 - - -
Copper produced (t) 3 380 - - -
Copper sold (t) 3 462 - - -
Price ($/t)4 135 - - -
Cash cost/ton sold ($/t)2 512 - - -
Cash mining profit
margin (%) 36 - - -
The Chibuluma production levels increased during the period by 59% and will
continue to increase to design capacity of 15 000 tons of copper per year during
the forthcoming six months, notwithstanding the fact that a barren area within
the orebody has been experienced in the upper levels of the orebody.
The Chibuluma South mine and concentrator are operating efficiently and
production levels are increasing with design capacity expected to be reached
before the end of the financial year.
The decline shaft development has been accelerated in order that larger stopes
are available for stoping and to compensate for losses in the upper areas due to
the barren area. The equipment is in good order and management is focused on
increasing production levels. The present copper price has assisted with the
cash flows and cash generation now exceeds the capital development costs.
Coal
Wakefield 2005 2004 2003 2002
ROM production
(excl. Eskom) (t) 2 006 735 2 032 547 1 269 568 1 219 612
Yield (%) 56 58 57 57
Produced (t) 1 133 388 1 178 877 723 654 695 179
Sold (excl. Eskom) (t) 1 143 910 1 136 029 737 644 742 931
Sold - Eskom (t) 377 199 722 060 - -
Price (excl. Eskom)(R/t)162 147 130 123
Cash cost/tonne
sold (excl. Eskom) (R/t)139 119 116 99
Cash mining
profit margin (%) 15 25 5 18
Coal sales were largely in line with the comparable period with the exception of
Eskom coal sales. These sales were affected by an illegal strike during July,
which hampered production at two of the collieries. This situation has been
resolved. The Middelburg Townlands Colliery expansion is complete, which
increases the monthly run-of-mine coal production by approximately 60%. Coal
prices and demand for low phosphorus coal have been affected by the softening of
ferro-chrome and stainless steel prices and the strong rand.
The new plant at Wakefield has been commissioned to produce export quality coal
and increase the monthly production levels from 70 000 tons of saleable coal to
110 000 tons per month.
Application has been made for an export entitlement through the Richards Bay
Coal Terminal. Should this application be successful, a dedicated rail siding
will be required to be constructed on the mine site.
Fluorspar
Vergenoeg 2005 2004 2003 2002
Tons milled (t) 229 023 213 118 227 750 221 871
CaF2 grade (%) 44 42 41 37
CaF2 recovery (%) 73 71 68 62
Acidspar produced (dmt) 66 240 64 034 63 032 51 930
Acidspar sold (dmt) 68 610 50 905 64 825 51 096
Price (Acidspar) (R/dmt) 927 842 767 976
Cash cost/ton sold (R/t) 430 413 445 471
Cash mining profit
margin (%) 33 33 8 37
The fluorspar production and sales volumes for all grades increased by 19% and
28% respectively and the plant expansion is nearing completion. Sales volumes
are expected to be approximately 180 000 tons during the 2006 calendar year,
which is an increase of approximately 20% on the previous year. Fluorspar prices
have continued to strengthen.
Vergenoeg has improved the quality of the fluorspar produced, which has resulted
in increased demand for the product. To meet this demand the plant has expanded
its throughput.
Gold
Barberton 2005 2004 2003 2002
Tons milled (t) 157 452 161 980 169 067 -
Headgrade (g/t) 11,44 10,27 10,96 -
Overall recovery (%) 92 91 92 -
Produced (kg) 1 660 1 510 1 701 -
Sold (kg) 1 648 1 561 1 747 -
Price: Spot (R/kg) 96 772 83 322 86 172 -
Hedge (R/kg) 90 133 100 423 100 957 -
Cash cost/kg
sold (R/kg) 80 769 86 765 73 665 -
Cash mining profit
margin (%) 16 8 26 -
Gold production from Barberton Mines has increased by 10% from the comparable
period as a result of improved grades.
The underground development programme and machinery upgrades should assist with
increasing production tonnage and replacing mined ore reserves.
Antimony
Consolidated Murchison 2005 2004 2003 2002
Tons milled (t) 225 733 223 129 247 729 278 280
Produced: Sb (mtu) 341 289 245 543 271 124 249 637
Au (kg) 372 379 366 463
Sold: Sb (mtu) 326 041 239 429 263 049 286 840
Au (kg) 370 381 360 457
Price: Sb ($/mtu)37,30 29,70 22,30 17,00
Au ($/oz) 464 412 359 318
Cash
cost/mtu sold
(R/mtu)116 154 260 86
Cash mining
profit margin (%) 24 (8) (21) 24
Net of gold revenue
Antimony production and sales volumes have increased by approximately 38% as a
result of improved grades. The antimony price has increased by 26% in dollar
terms and 32% in rand terms from the previous period.
Improved grades and improved commodity prices have resulted in a return to
profitability and the application of cash flows to shaft deepening at Monarch
Shaft and increased underground development at Beta Shaft.
RUASHI/SABLE PROJECT
The capital development programme at the Ruashi mine site in the DRC is
progressing well and the concentrator is approximately 70% complete and is
expected to be in production before the end of the financial year. The project
has been established with the assistance of GRD MinProc, Group 5 and various
local contractors. Gecamines and the local authorities and community have been
supportive and various social projects have been implemented.
Progress has been made on the preparation of a Bankable Feasibility Study on
Phase II of the Ruashi project with a confirmatory drilling programme having
been completed, metallurgical sampling collected for testwork and geophysical
and hydrogeology having been evaluated.
A financial lead arranger and project advisors are being short-listed for
appointment to assist with the metallurgical flow sheets, environmental impact
assessments, social plans and financing arrangements. Ruashi Mining sprl has
also been awarded prospecting rights to additional ore resources/exploration
targets, which will require an exploration programme to commence during the
current calendar year.
The processing complex at Kabwe in Zambia is also progressing well with ore
leaching having already commenced. The electrowinning circuit requires certain
piping and power supply for commissioning and the acid and solvent extraction
plants will be operational during the latter part of 2006. This plant will be
commissioned and available for processing of the Ruashi concentrate by April
2006.
Tenders for transport contractors to move the concentrate from Lubumbashi to
Kabwe have been submitted and marketing contracts are being finalised.
FUTURE PROSPECTS
Assuming sustained strength in the ZAR/US$ exchange rate and with expansions in
three of the four divisions and the pending introduction of earnings from
Ruashi, the Group is envisaging a period of sustained earnings growth and the
opportunities that this will bring from an organic and acquisitive growth
perspective.
CAPITAL EXPENDITURE AND COMMITMENTS
Group capital expenditure totalled R199 million (2004: R36 million), which was
mainly related to the Ruashi/Sable projects, Chibuluma South production ramp-up,
the Middelburg Townlands expansion project and Vergenoeg plant expansions.
Contracted capital commitments at 31 December 2005 amount to R73,5 million
(2004: R11,9 million), whilst uncontracted commitments amount to R141,2 million
(2004: R33,6 million).
Operating lease commitments, which fall due within the next year, amount to
R13,5 million (2004: R4,3 million), whilst commitments of R16,3 million (2004:
R10,8 million) fall due during the next four years.
Shares issued
(1) 31 August 2005: 3,3 million shares at R4,41/share; 18 October 2005: 2,9
million shares at R5,05/share - To increase the Metorex Limited
shareholding in Ruashi Holdings to 84%.
(2) July 2005 - Dec 2005: 1,53 million shares at an average of R3,05/share -
Share Option implementations.
Accounting policies
The unaudited consolidated interim results have been prepared in accordance with
International Financial Reporting Standards applicable to Interim Financial
Reporting. The accounting policies are consistent with those adopted in the
financial year ended 30 June 2005, except for the application of IFRS2: Share-
based payments and the adoption of the Revised International Accounting
Standards forthcoming from the IAS improvements project and new IFRS issued by
the International Accounting Standards Board.
Implications of adopting IFRS2: Share-based payments
IFRS2, share-based payments becomes effective for Metorex Limited for the
financial year ending 30 June 2006. In terms of IFRS, Metorex Limited now
recognises the cost of share options (share-based payments) from 1 July 2005.
IFRS2 required that all options granted after 7 November 2002, not vested by 1
July 2005, be accounted for.
Metorex has adopted an appropriate valuation model to fair value the employee
share options. The value of the share options has been determined as of the
grant date of the options and has been expensed on a straight-line basis over
the expected exercise period. Based on this model, the following costs for the
financial years ending after 7 November 2002 and with share option grants
qualifying for IFRS2 have been accounted for:
2004 : R1 million (against opening retained earnings)
2005 : R2,5 million (against opening retained earnings)
2006 : R1,5 million (current year - interim reporting only)
The corresponding entry for the above adjustments was shareholders" equity
within the share-based payment reserve.
The effect on opening shareholders" equity is nil. The 31 December 2004 half
year earnings of R7,968 million have been restated to R6,718 million, the
difference being the share-based costs for that year. These costs are included
in other expenses. Earnings per share, headline earnings per share and diluted
earnings per share have also been restated.
DIVIDEND
With the funding requirements on new project developments and current expansions
in three of the four divisions, no dividend is declared for the six months ended
31 December 2005.
By order of the board
A S Malone C D S Needham
Chairman Managing Director
17 February 2006
Contact details for Metorex Limited and Corporate Advisers
Postal: PO Box 2814, Saxonwold, 2132, South Africa Telephone: (+27 11) 880-3155
Facsimile: (+27 11) 880-3322 Website: www.metorexgroup.com E-mail:
ir@metorexgroup.com
Registrars: South Africa and United Kingdom
Ultra Registrars (Pty) Limited, PO Box 4844, Johannesburg, 2000, South Africa
Telephone: (+27 11) 834-2266
The Capita Group PLC, The Registry, 34 Beckenham Road, Beckenham, Kent, BR34TU,
England Telephone: (+44 208) 639-2157
Company secretaries
Moore Stephens MWM, PO Box 1574, Houghton, 2041, RSA Telephone: (+27 11) 728-
7240
Sponsor
Barnard Jacobs Mellet Corporate Finance Pty Ltd, PO Box 62200, Marshalltown,
2107, RSA Telephone: (+27 11) 283-0300
ADR Programme - North America and Canada
The Bank of New York, 101 Barclay Street, New York, NY 10286, USA Telephone: (+1
212) 815-3326
website: www.metorexgroup.com - e-mail: info@metorexgroup.com
Date: 20/02/2006 08:00:49 AM Produced by the JSE SENS Department
