| Wed 10 May 2006, 10:01 | | Western Areas Limited - Unaudited Quarterly Result |
|
WAR
WARA
Western Areas Limited - Unaudited Quarterly Results Ended 31 March 2006
WESTERN AREAS LIMITED
(Incorporated in the Republic of South Africa)
(Registration Number: 1959/003209/06)
Share code: WAR & ISIN No: ZAE000016549
ADR Ticker symbol: WARUY
CUSIP No: 957654304
("Western Areas" or "the Company")
UNAUDITED QUARTERLY RESULTS ENDED 31 MARCH 2006
PRODUCTION AND UNIT RESULTS
Quarter Quarter Year
ended ended ended
31.03.06 31.12.05 31.12.05
Lost Time Injury per 200 000
hours
Reef mined (000) tons 254 256 947
Ore milled (000) tons 271 301 1 174
Yield (underground) oz/ton 0.221 0.238 0.239
Yield (incl. surface) oz/ton 0.200 0.213 0.200
Gold produced oz 53 973 63 841 234 584
Gold sold oz 55 460 65 951 231 094
Cash costs US$/oz 422 354 367
Total production costs US$/oz 525 451 448
Gold price achieved US$/oz 403 366 338
Average gold spot price US$/oz 561 476 448
Average exchange rate
achieved
Period end exchange rate
Capital expenditure US$m 5 5 18
Capital commitment at end of US$m 9 7 7
period
PRODUCTION AND UNIT RESULTS (Contd)
Quarter Quarter Year
ended ended ended
31.03.06 31.12.05 31.12.05
Lost Time Injury per 200 000 0.88 0.34 0.56
hours
Reef mined (000) tonnes 231 232 859
Ore milled (000) tonnes 246 273 1 058
Yield (underground) g/tonne 7.53 8.17 8.15
Yield (incl. surface) g/tonne 6.83 7.29 6.90
Gold produced kg 1 679 1 985 7 296
Gold sold kg 1 725 2 051 7 188
Cash costs R/kg 83 777 74 676 75 365
Total production costs R/kg 104 161 95 097 91 822
Gold price achieved R/kg 79 862 77 212 69 371
Average gold spot price R/kg 111 196 100 380 91 944
Average exchange rate R/$ 6.1637 6.5617 6.3837
achieved
Period end exchange rate R/$ 6.1890 6.3275 6.3275
Capital expenditure Rm 30 32 113
Capital commitment at end of Rm 53 46 46
period
ABRIDGED CONSOLIDATED INCOME STATEMENT
Quarters ended Year
ended
31.12.05
Audited
31.03.06 31.12.05
Unaudited Restated
SA Rand million Notes
Gold revenue 107.4 131.6 420.6
Gold sales at spot 191.9 206.1 660.9
Realisation of matured options 1 (84.5) (74.5) (240.3)
Total production costs (174.9) (187.1) (668.2)
Production costs - cash (140.6) (148.3) (549.9)
Production costs - non cash 2 (34.3) (38.8) (118.3)
Operating loss from gold (67.5) (55.5) (247.6)
operations
Net other income/expense and 3 23.4 (16.6) (44.4)
finance income/cost
Present value adjustment for (3.7) (11.2) (55.6)
option premium payable
Fair value adjustment 4 52.9 13.4 (128.9)
Exchange gains/(losses) 5 21.0 4.1 (107.7)
Impairments - (90.2) (90.2)
Profit/(Loss) before taxation 26.1 (156.0) (674.4)
Taxation (13.9) 36.9 267.0
Profit/(Loss) for the period 12.2 (119.1) (407.4)
EARNINGS/(LOSS) PER ORDINARY
SHARE (CENTS)
- Basic 7.9 (95.5) (339.2)
- Headline (13.4) (28.6) (273.9)
Number of ordinary shares issued 154.0 154.0 154.0
(million)
Weighted average number of 6 154.0 124.7 120.1
ordinary shares (million)
Determination of headline
earnings:
Profit/(Loss) for the period 12.2 (119.1) (407.4)
Profit on disposal of property, (32.2) (1.2) (6.1)
plant and equipment
Profit on disposal of unlisted - (1.0) (1.0)
investments
Profit on disposal of treasury - (4.3) (4.3)
shares
Fair value adjustment of other (0.6) (0.3) (0.3)
investments
Impairments - 90.2 90.2
Headline loss (20.6) (35.7) (328.9)
ABRIDGED CONSOLIDATED BALANCE SHEET
Period ended Year ended
31.03.06 31.12.05
SA Rand million Notes Unaudited Audited
ASSETS
Property, plant and equipment 7 3 290.1 3 299.6
Derivative asset 4 1 288.1 996.4
Investments 19.8 19.2
Deferred taxation 8 1 050.8 847.7
Cash and cash equivalents 133.6 207.9
Other assets 3 94.9 68.0
Total assets 5 877.3 5 438.8
EQUITY AND LIABILITIES
Shareholders" equity 1 254.8 1 509.3
Option premium payable 887.7 939.4
Derivative liability 4 3 598.1 2 843.9
Other liabilities 136.7 146.2
Total equity and liabilities 5 877.3 5 438.8
STATEMENT OF CHANGES IN SHAREHOLDERS" EQUITY
Cash flow
Share Share Hedge Retained
SA Rand million capital premium Reserve earnings Total
Balance as at 31 154.0 2 842.2 (1 572.7) 85.8 1 509.3
December 2005
Fair value adjustment - - (308.6) - (308.6)
Recycling of fair - - 41.9 - 41.9
value on maturing of
derivatives
Attributable profit - - - 12.2 12.2
for the period
Balance as at 31 March 154.0 2 842.2 (1 839.4) 98.0 1 254.8
2006
ABRIDGED CASH FLOW STATEMENT
Quarters ended Year ended
31.03.06 31.12.05 31.12.05
SA Rand million Unaudited Unaudited Audited
Cash flow utilised by operating (9.5) (30.0) (112.5)
activities
Cash flow utilised in investing (30.0) (26.8) (103.0)
activities
Cash flow (utilised in)/from (34.8) 248.7 410.2
finance activities
Net (decrease)/increase in cash (74.3) 191.9 194.7
and cash equivalents
Cash and cash equivalents:
- at beginning of period 207.9 16.0 13.2
At end of period 133.6 207.9 207.9
OPEN HEDGE POSITION
As at 31 March 2006 2007 2008 2009 2010
2006
Derivative asset
Put options bought
Quantity ozs 153 387 205 572 214 224 209 436 213 960
Average price $/oz 288.20 288.20 288.20 293.20 303.20
Fair value Rm"s - - 0.1 0.3 0.9
Call options
bought
Quantity ozs 63 711 85 392 88 980 87 000 88 872
Average price $/oz 308.70 323.70 333.70 348.70 358.70
Fair value Rm"s 112.6 150.4 159.8 156.9 162.9
Total derivative
asset fair value
Derivative
liability
Call options sold
Quantity ozs 117 990 158 136 164 784 161 100 164 580
Average price $/oz 288.70 288.70 288.70 293.70 303.70
Fair value Rm"s (222.7) (310.6) (336.4) (335.7) (344.8)
Call options sold
Quantity ozs 47 196 63 252 65 916 64 440 65 832
Average price $/oz 333.70 348.70 363.70 378.70 393.70
Fair value Rm"s (76.2) (102.3) (107.7) (106.6) (110.1)
Total derivative
liability fair
value
OPEN HEDGE POSITION (Contd)
As at 31 March 2011 2012 2013 2014 Total
2006
Derivative asset
Put options bought
Quantity ozs 200 436 205 920 205 056 98 166 1 706 157
Average price $/oz 313.20 313.20 323.20 333.20
Fair value Rm"s 1.5 1.9 2.6 1.5 8.8
Call options
bought
Quantity ozs 83 256 85 536 85 188 40 776 708 711
Average price $/oz 373.70 398.70 413.70 428.70
Fair value Rm"s 153.1 154.5 155.1 74.0 1 279.3
Total derivative 1 288.1
asset fair value
Derivative
liability
Call options sold
Quantity ozs 154 176 158 400 157 740 75 516 1 312 422
Average price $/oz 313.70 313.70 323.70 333.70
Fair value Rm"s (324.6) (341.7) (341.7) (163.0) (2 721.2)
Call options sold
Quantity ozs 61 668 63 360 63 096 30 204 524 964
Average price $/oz 408.70 423.70 438.70 453.70
Fair value Rm"s (104.3) (108.3) (109.1) (52.3) (876.9)
Total derivative (3 598.1)
liability fair
value
BASIS OF ACCOUNTING
The accounting policies used to prepare the quarterly results are consistent
with those applied in the previous period and are in accordance with
International Financial Reporting Standards (IFRS).
NOTES TO THE ABRIDGED FINANCIAL STATEMENTS
1. Realisation of matured options includes actual cash flow of R54.1 million for
the March 2006 quarter. (December 2005 quarter: R47.5 million)
2. Non-cash operating costs includes the depreciation of property, plant and
equipment and the change in inventory for the period.
3. The insurance claim arising from the damage to the South Shaft No 1 Sub-
Vertical Shaft in January 2004 has been approved by the insurers. Western Area"s
portion of the net settlement is US$5,8 million (R35.6 million) and is expected
to be received in the next quarter.
4. The fair value adjustments relate to the revaluation of the derivative
structure at period-end. The revaluation stemming from exchange rate
fluctuations are accounted for in the income statement whilst the revaluation
stemming from the gold price fluctuations are accounted for through the hedge
reserve on the balance sheet. The US$ gold price increased from US$515 at 31
December 2005 to US$588 at 31 March 2006.
5. Exchange gains/losses relating to option premium payable are attributable to
the change in the Rand/US Dollar exchange rate from 6.3275 at 31 December 2005
to to 6.189 at 31 March 2006.
6. The weighted average number of ordinary shares is arrived at after making
adjustments for the rights issue during December 2005.
7. Property, plant and equipment are stated at cost less accumulated
depreciation.
8. The deferred taxation movement resulted from operating losses and the fair
value revaluation of the derivative structure through the income statement and
equity.
LETTER TO SHAREHOLDERS
Quarter Results
The results of the first quarter of 2006 show a marked improvement when compared
with the fourth quarter of 2005. Net profit for the period was R12.2 million
compared with a net loss of R119.1 million. This turnaround is partly
attributable to the proceeds from the settlement of an insurance claim of R35.6
million and a positive fair value adjustment of R73.9 million. The Company"s
share of profits from the joint venture was R17 million excluding the R84.5
million loss arising from the realisation of matured options. For the third
quarter in a row, the mine generated surplus cash of R18 million after meeting
its capital commitments of R30 million.
Production of 3 300kg for the first quarter at South Deep was 10% below plan.
The main reasons for this were the extended Christmas break, interruptions to
hoisting at the Twin Shaft Complex and loss of certain services at South Shaft.
There were two causes of the hoisting delays at the Twin Shafts: firstly, the
installation of a skip arresting device that will substantially increase
hoisting rates in the future; and secondly the replacement of a winder rope. A
loss of compressed air and service water at South Shaft, due to the failure of
old plant, resulted in delays.
In order to maintain the plant at full capacity, a total of 26 000 tonnes was
processed from surface sources (screened waste dump). This reduced the overall
yield from 7.53g/t to 6.83g/t.
South Deep"s cash cost structure comprises a high proportion of fixed costs,
with unit costs being negatively influenced by shortfalls in production. This is
exacerbated when ore is hoisted at the South Shaft and transported to the Twin
Shaft Complex, due to the higher cost structure. Cash costs for the quarter
were R83 777/kg compared with R74 676/kg in the previous quarter.
The average gold spot price increased significantly during the quarter, being
some 11% higher at R111 196/kg ($561/oz), when compared to
R100 380/kg ($476/oz) for the quarter ended December 2005. The matured sold call
options reduced the benefits of the higher gold price, resulting in a marginal
overall increase of 3% in the gold price achieved from quarter to quarter.
The strengthening of the Rand/US Dollar exchange rate from R6.33/$ on 31
December 2005 to R6.19/$ on 31 March 2006, resulted in a positive total fair
value adjustment of R73.9 million. This compared with a R17.5 million positive
adjustment for the previous quarter.
Fall of skip and rope - 4 May 2006
On 5 May 2006, Western Areas announced that, during regular routine rope
maintenance, at the Twin Shaft Complex, a loaded skip and the attached 6,7km of
rope detached from the winder and fell 1600m from its mid-shaft position.
Fortunately, no injuries were sustained to any personnel. The full extent of the
damage to the shaft, caused by the falling conveyance and rope, will be
determined once the entire shaft has been inspected and evaluated. Initial
estimates are that the Main Shaft will be out of commission for 9-12 months.
Production, albeit at a reduced capacity estimated at approximately 50% of the
planned production, is continuing through the South Shaft. The impact on
earnings will be assessed as more information becomes available and shareholders
will be advised accordingly.
The original 2006 planned production together with the current spot gold price,
would have resulted in South Deep being cash positive, net of capital
expenditure. The net cash from South Deep, due to the higher gold price, would
also have partially funded the derivative obligations and would have given the
board sufficient time to raise the required capital to fund the future long term
capital and derivative obligations. Although the full extent of the impact on
production cannot be established at this point in time, it should nevertheless
be recognised that the reduced production rate arising from this incident will
have a negative effect on the Company"s cash resources in the short term. The
insurance policy is in place and a claim is being submitted.
The Board is currently examining a range of options in order to mitigate the
impact on cash flows arising from this unfortunate incident. It is now critical
that the Company raise additional capital to ensure that sufficient cash
resources are available to meet its cash requirements.
The Company will shortly appoint advisors and commence with the raising of
capital by issuing 10% of the current issued share capital for cash. This is
subject to approval by shareholders at the Annual General Meeting, scheduled for
10th May 2006.
The Board extends it thanks to Mr Sandy McGregor, retiring Non-executive
director, for his invaluable contributions during his years of service on the
Western Areas Board. Furthermore, the Board welcomes Ms Thandi Orleyn (Non-
executive), Mr Bernard Swanepoel (Non-executive) and Mr Steve Tainton
(Executive) as new appointees to the Board as of 11 May 2006.
By order of the Board
Johannesburg
10 May 2006
SPONSOR
Sasfin Capital
A Division of Sasfin Bank Limited
CONTACT DETAILS
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
DIRECTORATEG Marcus (Executive Chairperson) SA Levitt (Chief Financial Officer)
JR Dixon (Independent Non-Executive) DM Nurek (Non-Executive) IS Sehoole
(Independent Non-Executive) HJ Smith (Independent Non-Executive)
COMMUNICATIONSE-mail: info@wal.co.zaFax: +27 (11) 834-9195Website:
www.westernareas.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 4TUTel: +944 (0870) 162 3100Fax: +944 (020) 8639 2142
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)International callers:Tel: +91 212 815 3700
Date: 10/05/2006 10:01:56 AM Produced by the JSE SENS Department
