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KMB
KMB
Kumba - Reviewed Group Financial Results for the Six Months Ended 30 June 2006
Kumba Resources Limited
Incorporated in the Republic of South Africa
(Registration Number: 2000/011076/06)
Share Code: KMB
ISIN: ZAE000034310
("Kumba" or "the company")
Kumba Resources
Reviewed Group Financial Results and physical information for the six months
ended 30 June 2006
* Revenue increases by 32%
* Net operating profit up 65%, before impairment charge of R784 million
* Headline earnings per share 61% higher at 508 cents per share
* Interim dividend of 180 cents per share
* Net debt to equity ratio of 18%
* Creation of South Africa"s flagship empowerment company and separately listed
iron ore company scheduled for fourth quarter
Group income statement
6-months 6-months 12-months
ended ended ended
30 June 30 June 31 Dec
2006 2005 2005
Restated Restated
Reviewed Reviewed Audited
Rm Rm Rm
Revenue 6 901 5 247 11 881
Operating expenses (5 168) (3 719) (6 961)
Net operating profit 1 733 1 528 4 920
Net financing costs (150) (171) (282)
Share of income from equity accounted
investments 24 2 7
Profit before taxation (note 2) 1 607 1 359 4 645
Taxation (530) (378) (1 407)
Profit for the period 1 077 981 3 238
Attributable to:
Equity holders of the parent 1 067 948 3 177
Minority interest 10 33 61
1 077 981 3 238
Ordinary shares (million)
- in issue 309 304 306
- weighted average number of shares 307 303 304
- diluted weighted average number of
shares 315 309 311
Attributable earnings per share (cents)
- basic as previously reported 348 315 1 049
- basic restated 313 1 045
- diluted as previously reported 339 309 1 026
- diluted restated 307 1 022
Dividend paid per share (cents) in
respect
of the previous financial year 160 90 90
Dividend paid per share (cents) in
respect
of the interim period 160
Dividend declared per share (cents) in
respect of the interim period 180 160
Final dividend paid per share (cents) in
respect of the financial year 160
Special dividend paid per share in
respect
of the interim period (cents) 220
Reconciliation of headline earnings
Profit for the period attributable to the
equity holders of the parent 1 067 948 3 177
Adjusted for:
- Impairment charges (note 3) 784 7 28
- Excess of minority interest over cost
of acquisition (36) (95)
- Net (surplus)/deficit on disposal or
scrapping of property, plant and (19) 2 2
equipment
- Net (surplus) on disposal of investment (21) (1 179)
- Closure cost 2
- Minority interest on adjustments (1)
- Taxation effect of adjustments (216) (2) 428
Headline earnings 1 559 957 2 360
Headline earnings per share (cents)
- basic as previously reported 508 318 781
- basic restated 316 776
- diluted as previously reported 495 312 763
- diluted restated 310 759
Group balance sheet
As at As at As at
30 June 30 June 31 Dec
2006 2005 2005
Restated Restated
Reviewed Reviewed Audited
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 8 164 8 303 8 469
Biological assets 29 30 28
Intangible assets 67 91 61
Investments in unlisted associates (note 141 95 95
4)
Deferred taxation 636 412 339
Financial assets (note 4) 478 367 392
9 515 9 298 9 384
Current assets
Inventories 1 774 1 414 1 481
Trade and other receivables 2 562 1 667 2 066
Cash and cash equivalents 1 335 2 003 1 483
5 671 5 084 5 030
Non-current assets classified as held for
sale 12 11
Total assets 15 198 14 382 14 425
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders" equity 8 329 6 308 7 319
Minority interest 18 1 301 9
Total shareholders" equity 8 347 7 609 7 328
Non-current liabilities
Interest-bearing borrowings 1 654 2 767 2 210
Non-current provisions 773 690 727
Deferred taxation 1 114 1 172 984
3 541 4 629 3 921
Current liabilities
Trade and other payables 1 524 1 129 1 468
Interest-bearing borrowings 1 162 741 911
Taxation 603 256 773
Current provisions 21 18 24
3 310 2 144 3 176
Total equity and liabilities 15 198 14 382 14 425
Net debt 1 481 1 504 1 638
Net asset value per share (cents) 2 695 2 074 2 392
Capital expenditure
- incurred 861 299 1 044
- contracted 1 337 1 359 1 635
- authorised but not contracted 2 603 2 558 2 182
Contingent liabilities 100 40 82
Operating lease commitments 165 167 163
Operating sublease rentals receivable 1 1
Group cash flow
6-months 6-months 12-months
ended ended ended
30 June 30 June 31 Dec
2006 2005 2005
Restated Restated
Reviewed Reviewed Audited
Rm Rm Rm
Cash retained from operations 2 282 1 460 3 864
- net financing costs (121) (125) (189)
- taxation paid (895) (279) (821)
- dividends paid in respect of the
previous financial year (492) (284) (284)
- dividends paid in respect of the
current financial period (1 163)
Cash used in investing activities
- capital expenditure (861) (299) (1 044)
- proceeds from disposal of property,
plant and equipment 150 8 23
- increase in investment in subsidiaries
-
buy out of Ticor Ltd minorities (1 174)
- proceeds from disposal of investment 23 1 179
- other 96 244 68
Net cash inflow 182 725 459
Net cash flow from financing activities
- cash flows from issue of shares 105 54 128
- borrowings (redeemed) (435) (73) (401)
Net (decrease)/increase in cash and cash
equivalents (148) 706 186
Adjusted opening balance 1 483 1 297 1 297
Increase in cash and cash equivalents due
to proportionate consolidation of joint
ventures 39 39
Cash and cash equivalents beginning of
period as previously disclosed 1 258 1 258
Cash and cash equivalents end of period 1 335 2 003 1 483
Group statement of changes in equity
Non-distributable reserves
Shares
held by Attri-
butable
reserves
of Foreign Financial
Share Share Share equity currency Instruments-
capital premium Trust acc transla- revaluation
invest- tions
ments
Rm Rm Rm Rm Rm Rm
Balance at 31
December 2004 3 2 809 20 (141) 48
Adjustments to
opening
balances
- recognition
of finance
leases in
terms of IFRIC
4
- transfer of
attributable
reserve of
equity
accounted
investments (20)
- negative
goodwill
adjustment
-
decommissionin
g asset
restated
Restated
opening
balance 3 2 809 (141) 48
Net
gains/(losses)
not recognised
in
income
statement 257 (30)
Currency
translation
differences 257 8
Minority share
of reserve
movements
Share-based
payments
movement
Financial
instruments
fair value
movements
recognised in
equity
- recognised
in current
year income
- recognised
in equity
Net profit
Dividends paid
Issue of share
capital(1) 54
Movement in
shares issued
to
Management
Share Trust
Balance at 30
June 2005 3 2 863 116
Net gains/
(losses) not
recognised in
income
statement (145)
Currency
translation
differences (104)
Minority share
of reserve
movements
Share-based
payments
movement
Financial
instruments
fair value
movements
recognised in
equity
- recognised
in current
year income
- recognised
in equity
- fair value
adjustment
Deferred
taxation (41)
Net profit
Dividends paid
Issue of share
capital(1) 78
Movement in
shares issued
to
Management
Share Trust (4)
Minority share-
buy out
Balance at 31
December 2005 3 2 937 (29)
Net gains/
(losses) not
recognised in
income
statement 313
Currency
translation
differences 313
Share-based
payments
movement
Financial
instruments
fair
value
movements
recognised in
equity
- recognised
in current
year income
- recognised
in equity
- fair value
adjustment
Net profit
Dividends paid
Issue of share
capital(1) 105
Balance at 30
June 2006 3 3 042 284
Group statement of changes in equity (continued)
Non-distributable reserves
Attributable
Equity to equity
settled Insurance Retained holders of Minority Total
reserve reserve income the parent interest equity
Rm Rm Rm Rm Rm Rm
Balance at 31
December 2004 34 2 516 5 289 1 197 6 486
Adjustments to
opening balances
- recognition of
finance leases
in
terms of IFRIC 4 (45) (45) (45)
- transfer of
attributable
reserve of
equity accounted
investments 20
- negative
goodwill
adjustment 53 53 53
-
decommissioning
asset restated 18 18 (11) 7
Restated opening
balance 34 2 562 5 315 1 186 6 501
Net
gains/(losses)
not recognised
in
income statement 15 6 248 93 341
Currency
translation
differences 6 271 187 458
Minority share
of reserve
movements (94) (94)
Share-based
payments
movement 15 15 15
Financial
instruments fair
value movements
recognised in
equity
- recognised in
current year
income (29) (29)
- recognised in
equity (9) (9)
Net profit 948 948 33 981
Dividends paid (273) (273) (11) (284)
Issue of share
capital(1) 54 54
Movement in
shares issued to
Management Share
Trust 16 16
Balance at 30
June 2005 3 243 6 308 1 301 7 609
Net
gains/(losses)
not recognised
in
income statement 23 10 (135) (130) (265)
Currency
translation
differences 10 (99) (127) (226)
Minority share
of reserve
movements (3) (3)
Share-based
payments
movement 23 23 23
Financial
instruments fair
value movements
recognised in
equity
- recognised in
current year
income 21 21
- recognised in
equity (86) (86)
- fair value
adjustment 2 2
Deferred
taxation 4 4
Net profit 2 229 2 229 28 2 257
Dividends paid (1 157) (1 157) (6) (1 163)
Issue of share
capital(1) 78 10 88
Movement in
shares issued to
Management Share
Trust (4) (4)
Minority share-
buy out (1 194) (1 194)
Balance at
31 December 2005 88 4 325 7 319 9 7 328
Net
gains/(losses)
not recognised
in
income statement (2) 329 329
Currency
translation
differences 313 313
Share-based
payments
movement (2) (2) (2)
Financial
instruments fair
value movements
recognised in
equity
- recognised in
current year
income 8 8
- recognised in
equity 9 9
- fair value
adjustment 1 1
Net profit 1 067 1 067 10 1 077
Dividends paid (491) (491) (1) (492)
Issue of share
capital(1) 105 105
Balance at 30
June 2006 86 4 901 8 329 18 8 347
(1) Issued to the Management Share Option Scheme due to options exercised.
(2) Dividends declared after this interim period comprise of an interim dividend
of 180 cents per share. STC at 12,5% (R62 million) will be payable on the
dividend.
Notes to the reviewed financial statements
1. Basis of preparation
The interim financial results are prepared in accordance with International
Accounting Standard 34 on Interim Financial Reporting and should be read in
conjunction with the 2005 financial statements. 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 adopted are consistent with those applied in
the annual financial statements for the year ended 31 December 2005, except for
the changes noted in note 5. Where applicable prior years" figures have been
adjusted.
6-months 6-months 12-months
ended ended ended
30 June 30 June 31 Dec
2006 2005 2005
Restated Restated
Reviewed Reviewed Audited
Rm Rm Rm
2. Profit before taxation is arrived at
after
Depreciation and amortisation of
intangible assets (423) (369) (826)
Financing costs (200) (304) (432)
Interest received 50 133 150
Net realised foreign exchange
gains/(losses) on:
- currency exchange differences 159 169 225
- revaluation of derivative instruments (144) (60) (64)
Net unrealised foreign exchange
gains/(losses) on:
- currency exchange differences (107) (26) (76)
- revaluation of derivative instruments 8 66 83
Fair value adjustment on financial assets 36 54 43
Fair value adjustment on financial
liabilities (1) 5
Impairment charges (note 3) (784) (7) (28)
Excess of minority interest over cost of
acquisition 36 95
Net surplus on disposal of investments 21 1 179
Net surplus/(deficit) on disposal of
property, plant and equipment 19 (2) (2)
3. Impairment charges
Impairment of property, plant and (784) (1) (3)
equipment
Reversal of impairment of other fixed 2
assets
Impairment of intangible assets (20)
Impairment of investments (7) (7)
(784) (7) (28)
Taxation effect 227
(557) (7) (28)
4. Investments
Unlisted investments in associates
- directors" valuation 169 172 130
Listed investments included in financial
assets
- market value 78 48 60
Unlisted investments included in financial
assets
- directors" valuation 35 41 35
5. Accounting for arrangements that
contain a lease
In terms of IFRIC 4 (Determining whether
an
arrangement contains a lease) and IAS 17
(Leases), arrangements that convey the
right
to use an asset, are evaluated for
recognition, classification as a finance -
or operating lease, and measured, and
accounted for accordingly. The result
is the recognition of a number of finance
leases where Kumba is either the lessee or
the lessor.
Income statement impact
(Decrease) in revenue (50) (39) (81)
Decrease in depreciation 45 35 72
Decrease in operating expenses 26 21 42
(Increase) in financing cost (28) (26) (51)
Decrease in taxation 2 3 5
(Decrease) in profit for the period (5) (6) (13)
Balance sheet impact
(Decrease) in property, plant and (351) (349) (357)
equipment
(Decrease) in deferred tax asset (1)
(Decrease) in retained earnings (63) (51) (58)
Increase in non-current interest-bearing
borrowings -
Finance lease liability 250 243 247
(Decrease) in other long-term payables:
Mittal Steel (South Africa) captive mines (588) (596) (604)
(Decrease) in deferred tax liabilities (24) (20) (22)
Increase in trade and other payables 75 76 80
The impact of the change on the 31 December 2004 financial statements is a
decrease in property, plant and equipment of R349 million, an increase in
deferred tax assets of R18 million, a decrease in retained earnings of R45
million, an increase in finance lease liabilities of R212 million, a decrease in
other long-term payables of R607 million and an increase in trade and other
payables of R109 million.
6. 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.
7. JSE Limited requirements
The interim announcement has been prepared in accordance with the listings
requirements of the JSE Limited.
8. Corporate governance
The group complies with the Code of Corporate Practice and Conduct published in
the King II Report on Corporate Governance.
9. Auditors review
The interim results have been reviewed by the company"s auditors, Deloitte &
Touche. Their unmodified review opinion is available for inspection at the
company"s registered office.
UNAUDITED PHYSICAL INFORMATION ("000 TONNES)
6-months 6-months 12-months
ended ended ended
30 June 30 June 31 Dec
2006 2005 2005
Iron ore
Production 15 330 15 511 30 987
Sales
- Export 11 207 10 603 22 113
- Domestic 3 835 4 813 9 172
Total 15 042 15 416 31 285
Coal
Production
- Power station 7 550 7 331 14 573
- Coking 1 109 1 174 2 273
- Other 1 476 1 441 2 993
Total 10 135 9 946 19 839
Sales
- Eskom 7 457 7 436 14 703
- Other domestic 2 068 2 010 4 174
- Export 555 609 1 109
Total 10 080 10 055 19 986
Mineral sands - Ticor SA
Production
- Ilmenite 160 153 356
- Zircon 26 24 47
- Rutile 12 12 23
- Pig iron 41 37 89
- Scrap pig iron 5 5 8
- Chloride slag 72 56 134
- Sulphate slag 18 12 30
Sales
- Ilmenite 30 30 60
- Zircon 23 26 47
- Rutile 9 9 18
- Pig iron 29 29 79
- Scrap pig iron 5 6 11
- Chloride slag 64 65 150
- Sulphate slag 10 20 41
Mineral sands - Ticor Pty Limited (1)
Production
- Ilmenite 116 105 220
- Zircon 18 17 35
- Rutile 9 8 16
- Synthetic rutile 54 55 111
- Leucoxene 7 5 12
- Pigment 27 26 53
Sales
- Ilmenite 10 13
- Zircon 16 17 36
- Rutile 8 8 18
- Synthetic rutile 19 27 59
- Leucoxene 4 4 14
Base metals
Production
- Zinc concentrate 55 64 126
- Zinc metal 56 60 117
- Zincor 48 53 102
- Chifeng (2) 8 7 15
- Lead concentrate 13 13 25
Zinc metal sales
- Domestic 45 46 92
- Export 15 14 27
Total 60 60 119
Lead concentrate sales
- Export 12 11 35
(1) The production and sales tonnes reflect Ticor"s 50% interest in the Tiwest
joint venture with Tronox Inc., Western Australia.
(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
reviewed financial results and physical information for the six-month periods
ended 30 June 2006 and 2005 respectively.
The results for the six-month period to 30 June 2006 reflect good operational
performance despite disruptions due to heavy rainfall in the first quarter. A
recovery in the zinc metal price and a further 19% iron ore price increase
effective from 1 April 2006 following the 71,5% average increase in the
comparative period last year contributed to the good operating results. An
impairment of R784 million before tax of the mineral sands assets of Ticor SA
located at Empangeni, KwaZulu-Natal, however, negatively affected net operating
profit for the period.
Revenue increased by R1 654 million to R6 901 million and net operating profit,
excluding the impairment, by R989 million to R2 517 million, resulting in an
improved operating margin of 36% against 29% for the comparative period in 2005.
An average exchange rate of R6,32 to the US dollar was realised compared with
R6,20 for the same period in 2005.
EARNINGS
Attributable earnings, after accounting for net financing charges of R150
million and a higher taxation charge of R530 million, increased by 13% to R1 067
million (348 cents per share) for the six months under review. Headline
earnings, which exclude items of a capital nature, were R602 million higher at
R1 559 million or 508 cents per share.
CASH FLOW
Total cash of R2 282 million retained from operations was used partly to settle
lower finance charges of R121 million, higher cash taxes of R895 million,
increased dividends of R492 million and capital expenditure of R861 million, of
which R585 million was invested in new production capacity. Net cash inflow for
the period was R182 million.
Net debt decreased from R1 638 million at 31 December 2005 to R1 481 million at
30 June 2006 at a debt to equity ratio of 18%.
SAFETY, HEALTH AND ENVIRONMENT
Regrettably, and despite a significant improvement in the lost-time injury
frequency rate (LTIFR) per two hundred thousand man-hours worked from 0,52 to
0,34, five fatal injuries were suffered in the period under review. Three of the
fatalities occurred in a single accident at the Glen Douglas mine.
The group remains committed to achieving a safe working environment without
fatalities or serious injuries and continues to drive its ongoing safety
awareness and preventative programmes. A target LTIFR of less than 0,25 has been
set for 2006.
60% of all employees have participated in programmes for HIV/Aids counselling
and voluntary testing that are in place at all South African operations of the
group. A target of 75% of all employees has been set for 2006.
All business units have retained their international environment and safety
certifications (ISO 14001 and OHSAS 18001).
SEGMENT RESULTS AND COMPARATIVE EARNINGS
6-months 6-months 12-months
ended ended ended
30 June 30 June* 31 Dec*
2006 2005 2005
Reviewed Reviewed Audited
Rm Rm Rm
REVENUE
Iron Ore 3 846 2 787 6 572
Coal 1 177 1 037 2 188
Mineral Sands 875 882 1 927
Ticor SA 378 373 839
Ticor Australia 497 509 1 088
Base Metals 948 484 1 070
Industrial Minerals 51 51 107
Other 4 6 17
Total 6 901 5 247 11 881
NET OPERATING PROFIT
Iron Ore 1 934 1 075 2 767
Coal 308 270 554
Mineral Sands (666) 165 259
Ticor SA **(798) 2 (47)
Ticor Australia 132 163 306
Base Metals 215 12 70
Industrial Minerals 11 13 26
Other (69) (7) 1 244
Total 1 733 1 528 4 920
* Restated as set out in note 5 to the group interim financial results to
account for leases based on the right to use an asset.
** Includes a pre-tax impairment charge of R784 million.
OPERATIONS
Iron Ore
Production of 15,3Mt was marginally lower as a result of inclement weather
conditions in the first quarter of the year. The export channel capacity
expansions together with good rail and port operational performance and a lower
domestic iron ore offtake, resulted in increased export sales of 604kt.
Revenue increased by 38% to R3 846 million and net operating profit by 80% to R1
934 million with the operating margin improving to 50%. This was due to stronger
iron ore prices, higher export sales volumes and a weaker local currency,
despite higher labour charges, petroleum prices and scheduled maintenance costs.
An average international iron ore price increase of 19% became effective from 1
April 2006 and will apply until 31 March 2007.
Coal
Production of power station (thermal) coal was 219kt higher due to increased
final product yield at Grootegeluk mine and the commissioning of the jig plant
at Leeuwpan, despite the heavy rainfall experienced in the first quarter of the
year.
Strong demand from Eskom for coal continued. Other domestic sales were also
marginally higher while export volumes were lower as a result of the reduced
availability of trains.
Revenue increased by 14% to R1 177 million due to the higher domestic sales
volumes at improved prices. Net operating profit increased by 14% to R308
million with an operating margin of 26%, after accounting for higher
depreciation charges and the cost of petroleum products.
Mineral Sands
Ticor SA
As announced in the group"s 2005 annual financial results, Furnace 1 was shut in
June 2006 to effect similar modifications and improvements that were
successfully made to Furnace 2.
Production of chloride slag and low manganese pig iron (LMPI) increased in line
with the ongoing ramp-up of the furnaces. Revenue, however, remained at the
level recorded for the corresponding period in 2005 as stronger zircon prices
were offset by delayed sales of chloride slag and LMPI, and a softening in LMPI
prices.
The combined impact of a stronger currency outlook over the life of the assets,
a higher discount rate resulting from an increase in interest rates, and a
projected surplus of high-grade titanium feedstock on world markets, has
necessitated a review of the carrying value of the local mineral sands
operations. As a result, a pre-tax reduction of R784 million in the carrying
value of the assets has been accounted for at 30 June 2006, with a net operating
loss of R798 million reported for the period.
Ticor Australia
Business improvement initiatives led to an increase in pigment and minerals
production. Revenue, however, decreased marginally as a result of a modest
decline in pigment prices and a delay in synthetic rutile shipments. Net
operating profit, in turn, declined by 19% as the hedging programme at
favourable exchange rates matured in 2005 while substantial increases had to be
absorbed in the prices of primarily energy related consumables and labour.
Ticor successfully concluded an agreement with its joint venture partner, Tronox
Inc, to transfer its mineral sands tenements at Dongara in Western Australia
into the Tiwest joint venture.
Base Metals
Zinc concentrate production was 9kt lower as a result of accelerated exploration
development whilst heavy rainfall in southern Namibia also negatively affected
transport from Rosh Pinah mine. Lower quality zinc concentrates treated in the
production of zinc metal resulted in plant instability at the Zincor refinery,
reducing production
volumes by 5kt.
Revenue, however, increased by 96% to R948 million and net operating profit by
R203 million to R215 million with an operating margin of 23%. This was due to an
increase of 114% in the average realised zinc price of US$2 767 per tonne for
the period.
Kumba"s equity accounted income from its investment in the Chifeng refinery in
China increased by R17 million to R24 million in line with production and sales
growth, and the stronger zinc metal price.
Industrial Minerals
Net operating profit declined by 15% on lower ferrosilicon demand from the
ferrochrome industry. Sales of metallurgical dolomite were in line with the
comparative period.
GROWTH OPPORTUNITIES
Iron Ore
Construction of the Sishen Expansion project (SEP) is progressing according to
plan. Production is scheduled to commence in 2007 and will ramp-up to full
production of 10Mtpa by the beginning of 2009, in line with the export channel
capacity expansions agreed with Transnet.
The feasibility study to increase production from SEP by an additional 3Mtpa has
been completed and will be presented to the Board for approval in August 2006.
Production is planned to commence in 2009 in line with the 35 Mtpa iron ore rail
allocation to be available to Kumba by 2009 in terms of the Sishen-Saldanha
export channel expansion agreement concluded with Transnet.
The development of the Sishen South project adding additional production
capacity of 9Mtpa to Kumba"s Northern Cape iron ore operations is dependent on
the further synchronised expansion of the export channel capacity.
The feasibility study for a 2,5 to 3Mtpa iron ore project at Thabazimbi, which
could extend the life of the mine by some 20 years, is planned to be completed
during the third quarter of 2006.
Following notification from the Senegalese government development company,
Miferso, that it disputes Kumba"s rights to the development of the Faleme iron
ore deposit in the south-eastern corner of Senegal, with associated
infrastructure, Kumba is endeavouring to resolve the dispute amicably. Should
this not be successful, legal action available to Kumba will be pursued to
preserve its contractual rights.
Coal
Full ramp-up of the Leeuwpan jig plant, at a capital cost of R97 million, was
achieved in the second quarter of 2006. The plant increases the annual supply to
Eskom by approximately 1Mt of power station coal with potential for a further
increase of 400ktpa.
Commissioning of the R323 million new coal beneficiation module (GG6) at
Grootegeluk mine is planned for the second half of 2006. The plant will treat
and beneficiate coal previously sent untreated to the adjacent Matimba power
station and will supply 530ktpa to the coking plants being refurbished by Mittal
Steel at its Newcastle facility.
Construction of the 1Mtpa export-focused Inyanda mine near Witbank, which is a
50:50 joint venture between Kumba and Eyesizwe Coal to produce high quality
thermal coal, will be aligned with the Richards Bay Coal Terminal (RBCT) Phase V
expansion schedule and finalisation of the environmental impact assessment and
lease agreement with the National Ports Authority.
The Phase V expansion in which Kumba is a 12,5% shareholder, will provide Kumba
Coal with a 2,5Mtpa export allocation which will be filled by production from
the new Inyanda coal mine as well as from expanded output at Kumba"s Leeuwpan
and Grootegeluk mines.
Kumba board approval has been obtained for producing char for the ferroalloy
industry from the Grootegeluk mine. Construction is envisaged to commence in
August 2006. Production from the char plant will start at 80ktpa and is expected
to ramp up to 160ktpa by 2008. The revised capital estimate for the project is
R234 million.
A feasibility study to investigate the viability of constructing a market coke
plant is expected to be completed by the end of 2006. If viable, the plant will
produce high quality market coke from semi soft coking coal produced at
Grootegeluk mine.
A technical feasibility study to potentially supply 7,3Mtpa of power station
coal to a new 2100MW power station, adjacent to the Matimba power station, was
completed in June 2006. Commercial agreements are being negotiated and if
approved by Kumba and Eskom, construction could commence in 2008 with production
from 2010.
Kumba and Anglo Coal Australia concluded a joint venture agreement 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.
Exploration of the potential resources is currently being conducted and a pre-
feasibility study for an initial phase underground mine is expected to be
completed by year-end.
Mineral Sands
The Kumba board has approved the construction of the Fairbreeze mine, south of
Ticor SA"s existing Hillendale mine in KwaZulu-Natal, subject to the obtaining
of a new mining right for the Fairbreeze C Extension area and the applicable
environmental authorisations. Production is planned to commence in 2008.
Drilling on the Ranobe and Monombo-Marombe exploration areas comprising the
Toliara Sands project in south-western Madagascar is indicating resources
capable of supplying long-term ilmenite feedstock to the Ticor SA furnaces. It
is envisaged that the feasibility study will be completed in 2007 after which a
development decision will be made.
Ticor Australia acquired the Dongara project in March 2003 as part of its
takeover of Magnetic Minerals. Located 90 km south of Geraldton in Western
Australia, the 20Mt reserve containing 10% heavy minerals will provide
supplementary feedstock for Tiwest"s mineral separation plant and synthetic
rutile facility. A bankable feasibility study is being conducted and if viable,
production is expected to start at the end of 2009.
Base Metals
Following the recent expansion of the Chifeng zinc refinery located in Chifeng,
Inner Mongolia, People"s Republic of China to a capacity of 50ktpa, smelter
capacity will be further increased to 110ktpa. Kumba will participate in the
expansion by swapping a portion of its existing shareholding into the new
expansion. Kumba will retain a significant interest in the expanded operation.
AlloyStreamTM
An exclusive co-operation agreement has been concluded with Samancor Limited to
establish AlloyStreamTM in the ferromanganese sector. The parties are
undertaking a feasibility study for the construction of a 200ktpa high carbon
ferromanganese project with the first phase of the project, if viable, expected
to come on stream in 2009.
TRANSFORMATION TRANSACTION
Considerable progress has been made on the implementation of the empowerment
transaction announced on 13 October 2005. Most of the legal agreements and
funding arrangements have been finalised and the company has commenced with the
process of obtaining regulatory approvals.
It is expected that the transaction will be implemented in the fourth quarter of
2006.
OUTLOOK
Strong demand for the group"s portfolio of commodities at favourable price
levels, except for titanium feedstock, and a currency at weaker levels, are
expected to benefit the results of the group for the next six months.
Iron ore will benefit from the recent price increase for the full ensuing six
months while the continued strong demand for coal at higher prices, and the
significant recovery in the zinc metal price, should have a positive impact on
the operating results for these commodities. A surplus in the supply of high-
grade titanium feedstock and the repairs and modifications to furnace 1 at Ticor
SA will negatively affect the results of the mineral sands operations while
sales of zircon, which remain in short supply, and stable offtake of pigment
from Ticor Australia, will make a positive contribution.
INTERIM DIVIDEND
The directors have declared an interim dividend (number 8) of 180 cents per
share in respect of the 2006 interim period. 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 8 September 2006.
In compliance with the electronic settlement system of JSE Limited, the
following dates are applicable:
Last date to trade cum dividend Friday, 1 September 2006
Shares trade ex dividend Monday, 4 September 2006
Record date Friday, 8 September 2006
Payment date Monday, 11 September 2006
Share certificates may not be dematerialised or rematerialised between 4
September 2006 and 8 September 2006, both days inclusive.
On behalf of the Board
AJ Morgan Dr CJ Fauconnier DJ van Staden
(Chairman) (Chief Executive) (Executive Director, Finance)
1 August 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 2044 (Pty) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Directors
AJ Morgan (Chairman),
Dr CJ Fauconnier (Chief Executive),
PM Baum, BE Davison, 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 J.P. Morgan Equities Limited +27 11 507 0300
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
Harnessing the Power of the Earth
Date: 02/08/2006 07:01:17 AM Produced by the JSE SENS Department
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