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11. NET DEBT
Six months
ended
Effective 30 June
interest rate % Maturity 2006
Description of loan R"000
Non-current
Senior Term Facility Libor+2.3%/ 30.06.13 536 459
Jibar+2.65%
Other Facilities Libor+2.38% 31.01.14 -
Convertible
debentures 4 Jibar+5% 418 340
Rio Tinto unsecured
loan Libor+5% 915 563
1 870 362
Current
Medium Term Facility Libor/Jibor+1.5% 13.09.05 -
Convertible
debentures 5 Jibar+5% 16.09.06 378 820
Proceeds from debentures 378 820
Debenture issue fees -
Senior Term Facility Libor+2.3%/ 30.06.13 147 098
Jibar+2.65%
Revolving credit
facility Libor+2.3%/ 100 848
Jibar+2.65%
Rio Tinto unsecured
loan Libor+5% -
Rio Tinto secured loan Libor+5% -
Other Facilities Libor+2.38% -
626 766
Total borrowings 2 497 128
Bank overdrafts -
Cash and cash
equivalents (400 795)
Net debt 2 096 333
Total equity (3 639 113)
Six months Year
ended ended
Effective 30 June 31 December
interest rate % 2005 2005
Description of loan R"000 R"000
Non-current
Senior Term Facility Libor+2.3%/ - 557 376
Jibar+2.65%
Other Facilities Libor+2.38% 12 122 -
Convertible
debentures 4 Jibar+5% - 418 340
Rio Tinto unsecured
loan Libor+5% - 665 070
12 122 1 640 786
Current
Medium Term Facility Libor/Jibor+1.5% 294 097 -
Convertible
debentures 5 Jibar+5% 849 148 393 730
Proceeds from debentures 849 465 393 730
Debenture issue fees (317) -
Senior Term Facility Libor+2.3%/ - 142 156
Jibar+2.65%
Revolving credit
facility Libor+2.3%/ - 94 925
Jibar+2.65%
Rio Tinto unsecured
loan Libor+5% 856 453 -
Rio Tinto secured
loan Libor+5% - 148 849
Other Facilities Libor+2.38% 1 176 -
2 000 874 779 660
Total borrowings 2 012 996 2 420 446
Bank overdrafts 320 166 -
Cash and cash
equivalents (16 433) (202 279)
Net debt 2 316 729 2 218 167
Total equity 121 950 (514 929)
4. Refer to note 15 on the post balance sheet events: after 30 June 2006 Rio
Tinto exercised their right to convert all 418 340 debentures held by them
into shares;
5. Refer to note 15 on the post balance sheet events: after 30 June 130 566
debentures held will be converted into shares;
The terms of repayments are consistent with the information disclosed in the
December 2005 annual financial statements.
Principal repayments of R59 million were made on the senior term facility
during the six months ended 30 June 2006. For the six months ended 30 June
2006, 14,910 debentures were converted (at a principal amount R1 000
per debenture). All other movements from December 2005 relates to the
revaluation of the US$ denominated debts for a total amount of R150 million
due to the weakening of the US$:Rand exchange rate.
12. SHARE CAPITAL AND PREMIUM
The issued share capital increased by R0,5 million and the share premium by
R14,4 million for the six months ended 30 June 2006. The share issue is due to
the conversion of 14,910 debentures of R1 000 each. All outstanding
debentures as at 18 September 2006 will be redeemed on that date.
Rio Anglo
Tinto American
Total Group Corporation Public
Share capital R"000 R"000 R"000 R"000
Original issued share capital 28 316 13 945 8 118 6 253
Debentures converted into
shares as at
31 December 2005 1 246 - - 1 246
Balance at 31 December 2005 29 562 13 945 8 118 7 499
Debentures converted into
shares
as at 30 June 2006 497 - - 497
Balance at 30 June 2006 30 059 13 945 8 118 7 996
% Shareholding - 31 December
2005 100% 47.2% 27.5% 25.3%
% Shareholding - 30 June 2006 100% 46.4% 27.0% 26.6%
Share premium
Original share premium 575 283 164 128
Debentures converted into
shares
as at 31 December 2005 36 149 - - 36 149
Balance at 31 December 2005 36 724 283 164 36 277
Debentures converted into
shares
as at 30 June 2006 14 413 - - 14 413
Balance at 30 June 2006 51 137 283 164 50 690
13. DERIVATIVE FINANCIAL INSTRUMENTS
At 30 June 2006, the Group held a commodity swap contract designated as a hedge
of expected future sales to local customers under which the Group receives a
fixed price in Rand in relation to a monthly notional quantity of copper sales
as detailed below and pays a floating price based on the arithmetic average
(mean) of the US$ LME Cash Settlement Price.
The net receipt/payment is converted to Rand at the average US$/Rand exchange
rate for the calculation period. The cash flows paid under the terms of the
hedging instrument are designed to reduce variability in the Rand proceeds of
the copper sales set out in the following table.
The combined hedged book as at 30 June 2006 amounts to 212,716 tonnes of copper
for a total amount of R3,9 billion spread over 7.5 years. The terms of the
contracts are as follows:
Average Mark
hedged Hedged to market
Maturity Quantity price value loss/(gain)
Year (t) ZAR/t R"000 R"000
2006 22 150 20 993 464 995 678 110
2007 45 021 20 993 945 116 1 188 411
2008 41 801 20 521 857 801 887 291
2009 22 265 15 739 350 426 449 527
2010 22 188 15 739 349 217 365 673
2011 21 825 15 739 343 499 295 807
2012 21 137 15 739 332 667 236 725
2013 16 329 15 739 256 997 155 765
Total 212 716 3 900 718 4 257 309
Less:
Non-Current
portion 2 954 753
Current
portion 1 302 556
The London Metal Exchange (LME) US$ price of copper increased significantly in
the period. This resulted in an increase for the six months ended 30 June 2006
of R3 436 million from the balance at 31 December 2005 of R821 million to a
balance of R4 257 million on the swap liability included under other reserves.
14. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The principal financial risks arising from the Group"s activities are those
related to commodity price risk, currency risk, interest rate risk, credit risk
and liquidity risk.
There has been no significant change to the Group"s financial risk management
objectives or policies reported in the annual financial statements for the year
ended 31 December 2005.
Foreign currency risk
In the normal course of business, the Group enter into transactions denominated
in foreign currencies (primarily with respect to the US dollar and the British
pound).
Approximately 55% of the Group"s existing debt is denominated in US$ for a
total amount of US$ 193 million. As a result of the significant US$ denominated
borrowings, the Group"s balance sheet can be affected significantly by
movements in the US$/ Rand exchange rates. The Group has not undertaken a
strategy to mitigate the effect of its structural currency exposure by
borrowings in US$.
The Group also has transactional currency exposures. Such exposure arises
mainly from sales by an operating unit in currencies other than the unit"s
measurement currency. Approximately 36% of the Group"s sales are denominated in
currencies other than the reporting currency of the operating unit making the
sale, whilst almost 68% of costs are denominated in the unit"s reporting
currency. The Group does not use derivatives to manage this risk.
The following table set out the carrying amount, by maturity, of the Group"s
financial assets and liabilities that are exposed to currency risk:
< 1 year 1 - 5 years > 5 years Total
"000 "000 "000 "000
Accounts receivable
British Pounds (GBP) 2 288 - - 2 288
US Dollar (US$) 7 023 - - 7 023
Accounts payable
British Pounds (GBP) (1 451) - - (1 451)
US Dollar (US$) (4 143) - - (4 143)
Long term loans
US Dollar (US$) (14 419) (34 835) (136 981) (186 235)
Interest rate
The Group"s income and operating cash flows are substantially independent of
changes in market interest rates. The Group"s cash flow interest rate risk
arises from its long and short-term borrowings subject to Libor or Jibar.
Borrowings issued at variable rates expose the Group to cash flow interest rate
risk. 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
R"000 R"000 R"000 R"000
Period ended
30 June 2006
Floating rates
Revolving credit
facility 100 848 - - -
Senior Term
Facility 147 098 162 137 87 879 74 253
Convertible
debentures 378 820 - - -
Rio Tinto loans - - - -
Total 626 766 162 137 87 879 74 253
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 loans 148 849 - - -
Total 779 616 126 984 144 560 65 762
4-5 More than
Years 5 Years Total
R"000 R"000 R"000
Period ended
30 June 2006
Floating rates
Revolving credit
facility - - 100 848
Senior Term
Facility 78 196 133 994 683 557
Convertible
debentures - 418 340 797 160
Rio Tinto loans - 915 563 915 563
Total 78 196 1 467 897 2 497 128
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 loans - 665 070 813 919
Total 78 196 1 269 347 2 464 465
15. POST BALANCE SHEET EVENTS
Debentures
Subsequent to 30 June 2006 the following notices for the conversion of
debentures were received:
Public debenture holders - 130 566 debentures will be converted into
4 352 200 ordinary shares;
Rio Tinto debentures - 418 340 debentures will be converted into 13 944 665
ordinary shares.
This will result in the following changes in shares issued:
Rio Anglo
Tinto American
Total Group Corporation Public
Share capital R"000 R"000 R"000 R"000
Balance at 30 June 2006 30 059 13 945 8 118 7 997
Option exercised to convert
debentures into shares
as at 21 July 2006 (last day
to exercise
option to convert) 18 297 13 945 - 4 352
Balance 48 356 27 890 8 118 12 349
% Shareholding after final
conversions 100% 57.7 % 16.8% 25.5%
16. GROUP SELECTED STATISTICS
Six months Six months
ended ended
30 June 30 June
2006 2005
Revenue
Copper (including hedge) R"million 1,396 821
By-products R"million 206 67
Vermiculite R"million 129 156
Net profit/(loss) before
tax R" million 263 (207)
Copper
Ore hoisted millions of tonnes 5,42 5,0
Average copper grade % Cu 0.710 0.716
Copper in concentrates
produced "000 of tonnes 28,5 29,7
Cathode produced "000 of tonnes 36,2 37,7
Average copper price
realised USc/lb 273.7 156.0
LME Copper Price USc/lb 275.6 151.0
Average rand/dollar
exchange rate R/US$ 6.27 6.21
Average copper price
realised R/tonne 37,218 21,357
Net cash cost R/tonne 17,537 13,352
Copper Rod
Unit selling price pre
hedge USc/lb 269.1 156.1
Unit selling price post
hedge USc/lb 220.8 156.1
Sales tonnes 34,487 33,810
Cathode
Unit selling price pre
hedge (local) USc/lb 268.3 148.6
Unit selling price post
hedge (local) USc/lb 220.2 148.6
Sales (local) tonnes 2,870 2,142
Unit selling price pre
hedge (export) USc/lb 377 162
Unit selling price post
hedge (export) USc/lb 309.8 148.6
Sales (export) tonnes 1,700 2,491
Vermiculite
Vermiculite sold tonnes 90,768 91,519
Average vermiculite prices
realised R/tonne 1,418 1,375
Operational cash cost R/tonne 423.6 310.2
Magnetite
Magnetite sold tonnes 465,022 375,099
Average magnetite prices
realised R/tonne 193 52
Imported concentrate
Volumes Tonnes copper 7,152 10,721
Cost R"million 283.6 190.1
Unit purchased price R/tonne of copper 39,657 17,728
Marginal ore concentrate
Volumes Tonnes copper 4,411 3,865
Cost R"million 111.9 58.5
Unit purchased price R/tonne of copper 25,370 14,147
Cash flow
Cash from operations R"million 371.3 71.0
Cash in bank R"million 400.8 (303.7)
Costs
Production cost (excluding
concentrate purchases) R"million 693.7 401.7
Cost of sales R"million 993.9 783.6
Capital expenditure and
commitments
Capital expenditure R"million 97 48
Approved expenditure at end
of each period R"million 95 130
Contracts placed at end of
each period R"million 37 25
Investments
Fair value of unlisted
investments R"million 229 169
Share capital
Authorised ordinary shares
of
R1 each R"000 100,000 100,000
Issued ordinary shares of
R1 each R"000 30,059 28,316
Net asset value per share R/share (121.07) 4.31
16. GROUP SELECTED STATISTICS
Year
ended
31 December
2005
Revenue
Copper (including hedge) R"million 1,949
By-products R"million 232
Vermiculite R"million 277
Net profit/(loss) before tax R"million (75)
Copper
Ore hoisted millions of tonnes 10,03
Average copper grade % Cu 0.715
Copper in concentrates produced "000 of tonnes 61,2
Cathode produced "000 of tonnes 80,3
Average copper price realised USc/lb 169.5
LME Copper Price USc/lb 166.9
Average rand/dollar exchange rate R/US$ 6.37
Average copper price realised R/tonne 24,188
Net cash cost R/tonne 14,382
Copper Rod
Unit selling price pre hedge USc/lb 172.1
Unit selling price post hedge USc/lb 167.8
Sales tonnes 69,543
Cathode
Unit selling price pre hedge (local) USc/lb 168.3
Unit selling price post hedge (local) USc/lb 164.2
Sales (local) tonnes 4,089
Unit selling price pre hedge (export) USc/lb 170
Unit selling price post hedge (export) USc/lb 166.3
Sales (export) tonnes 5,021
Vermiculite
Vermiculite sold tonnes 171,097
Average vermiculite prices realised R/tonne 1,404
Operational cash cost R/tonne 325.9
Magnetite
Magnetite sold tonnes 759,203
Average magnetite prices realised R/tonne 127
Imported concentrate
Volumes Tonnes copper 24,530
Cost R" million 531.4
Unit purchased price R/tonne of copper 21,664
Marginal ore concentrate
Volumes Tonnes copper 8,121
Cost R" million 137.1
Unit purchased price R/tonne of copper 21,664
Cash flow
Cash from operations R" million 17.6
Cash in bank R" million 202.3
Costs
Production cost (excluding
concentrate purchases) R" million 874.8
Cost of sales R" million 1,740.2
Capital expenditure and commitments
Capital expenditure R" million 136
Approved expenditure at end
of each period R" million 108
Contracts placed at end of
each period R" million 27
Investments
Fair value of unlisted investments R" million 211
Share capital
Authorised ordinary shares of
R1 each R"000 100,000
Issued ordinary shares of R1 each R"000 29,562
Net asset value per share R/share (18.10)
Directors:
C N Zungu (Acting Chairman), K Marshall* (Managing Director), T Albanese**,
C J Latcham***, M R Maruma, G M Negota, J C Posthumus (Alt: P A Henry),
R M Whyte*(Alt: F B Weldon), J S Yuen-Goh***
*British **American ***Australian
Company secretary:
Keith Mathole
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
These results are also available on our website at: www.palabora.co.za
Date: 01/08/2006 03:36:29 PM Produced by the JSE SENS Department
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