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ARI
ARIM
African Rainbow Minerals Limited - Financial Effects And Withdrawal
Of Cautionary Announcement
African Rainbow Minerals Limited
(Incorporated in the Republic of South Africa)
(Registration number 1933/004580/06)
JSE Share code: ARI
ISIN: ZAE000054045
("ARM")
FINANCIAL EFFECTS AND WITHDRAWAL OF CAUTIONARY ANNOUNCEMENT
1. INTRODUCTION
Further to the announcements dated 28 February 2006,6 July 2006 and 31
August 2006 whereby ARM and Xstrata plc ("Xstrata") announced the
establishment of a major black controlled coal mining company and the
exercise of an option to acquire a further 10% interest in Xstrata South
Africa (Proprietary) Limited"s ("XSA")coal business (together, "the
transaction"), ARM announces that the financial effects arising on the
retrospective application of the transaction, as required in terms of the
Listings Requirements of the JSE Limited, have been finalised.
2. FINANCIAL EFFECTS STATEMENT
The table below has been prepared for illustrative purposes only and sets
out the pro forma financial effects of the transaction. These financial
effects are the responsibility of directors of ARM and are based on the
following:
* the audited annual financial statements for the financial year ended
30 June 2006 for ARM;
* an aggregation of the attributable results for XSA for the six months
to 31 December 2005 as extracted from Xstrata"s audited financial
statements for the year ended 31 December 2005 and the results for the
six months to 30 June 2006 as extracted from Xstrata"s reviewed
interim financial statements for the six months to 30 June 2006.
Audited Pro forma
before the after the
transaction(1) transaction(2)( Percentage
3) change
Basic earnings 293 269 (8%)
per share (cents)
Headline earnings 225 201 (11%)
per share (cents)
Fully diluted 291 267 (8%)
earnings per
share (cents)
Fully diluted 223 200 (10%)
headline earnings
per share (cents)
Net asset value 4,967 4,967 0%
per share (cents)
Net tangible 4,965 4,965 0%
asset value per
share (cents)
Notes:
1. The `before the transaction" financial information has been extracted,
without adjustment, from the ARM published audited results.
2. The `after the transaction" financial information is based on the
following:
* ARM acquired 51% of the issued share capital of ARM Coal. ARM
Coal will hold a 20% interest in the existing coal operations of
XSA and a 51% interest in an unincorporated joint venture in
respect of the Goedgevonden project. The transaction is with
effect 1 July 2005 for earnings effects and 30 June 2006 for net
asset value effects;
* In terms of the debt facilitation provided by XSA, the debt of R4
billion attributable to the existing coal operations has an
interest and capital repayment holiday of five years.
Notwithstanding that this debt facilitation together with the
application of the cash upstream principle enhances cash flows to
ARM, accounting rules require that imputed interest on this debt
be charged against income. This has a negative impact on
attributable earnings;
* ARM acquired a 10% interest in XSA"s coal business, excluding the
Goedgevonden joint venture, save that no facilitation (relating
to interest and capital standstill arrangements and the
application of the cash upstream principle as more fully
described in the announcement dated 28 February 2006) will be
provided by XSA. The transaction is with effect 1 July 2005 for
earnings effects and 30 June 2006 for net asset value effects;
* In terms of the transaction ARM paid R800 million, which in the
financial effects calculation is assumed to be financed out of
borrowing facilities and net operating cash flows; and
* The transaction has been accounted for as follows:
* ARM Coal, in which ARM has a 51% shareholding, has been
accounted for as an incorporated joint venture;
* ARM Coal"s 20% interest in XSA has been accounted for as an
associate;
* ARM Coal"s 51% interest in the Goedgevonden joint venture
has been accounted for as an unincorporated joint venture;
and
* ARM"s direct investment in XSA, in terms of the 10% option,
has been accounted for as an associate.
3. Because of the retrospective nature of the unaudited pro forma
financial effects, these financial effects do not appropriately
reflect ARM"s financial position after the transaction and do not give
an indication of ARM"s future earnings. In particular the financial
effects calculation excludes an indication of the impact on
attributable cash flows.
3. WITHDRAWAL OF CAUTIONARY
Shareholders of ARM are no longer required to exercise caution when trading
in their securities. A further announcement will be made in due course as
soon as the final transaction documents in relation to the 10% option have
been signed.
Johannesburg
11 September 2006
Financial adviser and sponsor
to ARM
Deutsche Securities (SA)
(Pty) Ltd
Attorneys to ARM
Bowman Gilfillan
Date: 11/09/2006 05:05:08 PM Produced by the JSE SENS Department
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