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LON
LOLMI
Lonmin Plc - FINAL RESULTS
Lonmin Plc
(Incorporated in England and Wales)
(Registered in the Republic of South Africa under registration number
1969/000015/10)
JSE code: LON
Issuer Code: LOLMI & ISIN: GB0031192486
("Lonmin")
Delivering Growth and Raising Targets
In a sustained strong market for Platinum Group Metals Lonmin has
achieved:
Record EBIT up 141% to US$842 million
Underlying earnings per share up 163% to 312.1 cents per share
Strong improvement in cash generation with free cash flow of US$290
million (203.4 cents per share)
Record mine production of 1,017,137 ounces of Platinum in concentrate and
sales of 952,682 ounces of Platinum and 1,817,624 ounces of total PGMs
First Platinum major to convert old order mining rights to new order
mining rights
Growth target raised to around 1.4 million ounces of Platinum in 2012
Effective conversion of US$215.8 million Convertible Bond
Total dividend declarations of US$1.00 per share, an increase of 39%
(final dividend 55 cents per share)
Financial highlights -
Continuing Operations 2006 2005 Variance
Year to 30 September
Turnover US$m 1,855 1,128 64%
EBITDA (i) US$m 923 417 121%
EBIT (ii) US$m 842 350 141%
Underlying profit before US$m 827 339 144%
taxation (iii)
Profit before taxation US$m 633 319 98%
Earnings per share cent 219.5 111.5c 97%
s
Underlying earnings per cent 312.1 118.5c 163%
share (iii) s
Trading cash flow per share cent 354.9 191.2c 86%
s
Free cash flow per share cent 203.4 39.5c 415%
s
Equity shareholders" funds US$m 1,089 838 30%
Net debt US$m 458 585 (22)%
Interest cover (iv) x 23.1 15.1 53%
Gearing (v) % 27 41 (34)%
NOTES ON HIGHLIGHTS
EBITDA is EBIT before depreciation and amortisation.
EBIT is defined as revenue and other operating expenses before net finance
costs and before share of profit of associates and joint ventures.
Underlying measures for the year are calculated excluding movements in the
fair value of the embedded derivative associated with the convertible
bond, exchange on tax balances, profits on the sale of Marikana houses, an
adjustment to the interest capitalised in prior years and, for 2005, the
effects of a change in the South African tax rate on the opening deferred
tax balance and re-organisation costs as disclosed in note 3 to the
accounts.
Interest cover is calculated as EBIT excluding special items divided by
net interest excluding exchange.
Gearing is calculated on the net debt attributable to the group divided by
the net debt attributable to the Group plus equity shareholders" funds.
Commenting on the results, Brad Mills, Lonmin"s Chief Executive said:
"These are an excellent set of results, with record levels of production,
sales and earnings. Lonmin has a clear strategy and we are targeting
production growth to around 1.4 million ounces of Platinum in 2012.
Lonmin today has a market leading safety performance, a robust growth
profile and a culture of innovation and operational excellence. We are the
first Platinum major to be awarded new order mining rights by the South
African Government and we are developing a new generation of mechanised
and automated Platinum mines."
Enquiries:
Alex Shorland-Ball, Lonmin Plc +44 (0) 20 7201 6060
This press release is available on www.lonmin.com. A live webcast of the
final results" presentation starting at 09.30hrs (London) on 15 November
2005 can be accessed through the Lonmin website. There will also be a web
question facility available during the presentation. An archived version
of the presentation, together with the presentation slides, will be
available on the Lonmin website.
Chief Executive"s Comments
Introduction
Our mining operations performed strongly during the year producing
1,017,137 ounces of Platinum in concentrate. The Marikana mines had a
record year producing 966,733 Platinum ounces and 1,861,179 total Platinum
Group Metal (PGM) ounces in concentrate from 11.9 million tonnes of
underground ore and 2.0 million tonnes of opencast ore. At Limpopo we are
continuing to re-engineer the mine and ramp up mechanised production.
Our current target is to achieve a monthly throughput rate of 120,000
tonnes of ore. We expect to be at this level in the second half of the
2007 fiscal year, some 6 months behind our original schedule.
We achieved a new record for total sales of 952,682 ounces of Platinum.
However, our refined metal sales were impacted by our Smelter rebuild
programme and an unscheduled Smelter outage in April. We achieved stable
Smelter operations in the fourth quarter of the year. Based on our growth
targets and the desire to ensure more stable processing operations we have
decided to re-commission our Merensky furnace which is currently expected
to be operational in the second quarter of the 2007 fiscal year. The
combination of our Number 1 Furnace and the Merensky Furnace with back up
from our Pyromet furnaces should give us sufficient operational
flexibility to overcome outages of any single smelting unit and ensure our
ability to smelt all of our own concentrate.
We continue to build growth into our business to supply robust market
demand. We are now forecasting a growth profile which, including
contributions from Limpopo Phase 2 and Pandora, will allow us to reach
around 1.4 million ounces of Platinum in 2012.
Balance Sheet Management and Dividends
We will give notice later today to the holders of our outstanding
conversion price of approximately 1233p per share. Bondholders have the
right to convert their Bonds into new Lonmin shares until the close of
business in London on 12 December 2006. During this period we expect to
receive notices of conversion of the balance of the Bonds, which currently
amount to US$199.45 million. Assuming full conversion of all outstanding
Bonds, Lonmin will have approximately 154 million shares in issue. The
conversion of these securities will leave the group with net debt of some
US$250 million.
At 30 September due to higher prices and increased concentrate sales in
the second half of the year we had an increase of US$249 million in
receivables on our balance sheet. The majority of this will reverse in
the first half of 2007 as these accounts are settled in line with their
normal contractual terms.
The Board has recommended a final dividend of US 55.0 cents per share
which, subject to approval at the Company"s AGM on 25 January 2007, will
be paid on 9 February 2007 to shareholders on the registers at the close
of business on 12 January 2007. Together with the interim dividend paid
during the year this represents a full year dividend of US$1.00 per share
an increase of 39%.
Safety
The momentum to achieve injury free running of our operations has grown
substantially during the year across all areas of the business. We
achieved a 31% reduction in our lost time injury frequency rate which
dropped to 12.45 per million man hours worked from 18.10 for the 2005
fiscal year. We have also significantly reduced the severity of accidents
in our operations with our severity ratio now standing at an average of
13.81 days, an improvement of some 14% on last year.
We regrettably suffered four industrial fatalities at the Marikana
operations during the year and two at our Limpopo mine.
We have completed DuPont Visible Felt Leadership Training for all
management employees and have successfully used industrial theatre and
other methods to improve safety awareness. During 2007 we will continue to
focus on embedding safe production both within our systems and behaviours
with key projects including the continued roll out of our Fatal Risk
Protocols, continued use of industrial theatre and the re-design of our
underground materials handling system.
Marikana Mining
Our Marikana Mining Division achieved record underground production of
11.942 million tonnes mined an increase of 8% on the previous fiscal year.
Our largest shafts K3 and Rowland both set new monthly hoisting records
during the second half of the year. We continued to cut back our opencast
production (2.032 million tonnes mined) and replace these tonnes with
higher quality underground ore. At the current reduced production rate we
now expect the opencast operations at Marikana to continue until 2009.
Previously each concentrator at Marikana was controlled by the nearest
shaft and predominantly milled the production of that shaft. We made a
decision in the first half of the year to group all the concentrators
together in one unit and manage the feed across the operations. This has
allowed us to optimise throughput with tonnes milled up 5% year on year.
During the year we developed a comprehensive new life of mine plan for the
Marikana operations incorporating all elements of our mechanisation,
automation and safety technology. As a result of this work we will
develop our new Hossy, Saffy and K4 shafts as fully mechanised operations
from day one using our ultra low profile (ULP) equipment. We will also
incorporate a variety of additional safety, efficiency and employee
friendly measures in these shafts to improve the working environment for
our employees. We are currently carrying out development at Hossy and
Saffy with stoping scheduled to start early in 2007. K4 will come into
production in 2008.
Wherever possible we are looking at ways to modernise the remainder of our
shafts based on the production life remaining and the cost of re-
engineering the operation. Solutions could include using the full fleet
of ultra low profile equipment, parts of the fleet in partnership with
conventional mining and innovations such as the DDT jigs. We remain on
track to meet our 50% mechanisation target by 2010.
Limpopo Mining
In our first full year of ownership of Limpopo we have continued to ramp
up production from the mine and re-engineer the operations to a
predominantly mechanised mining basis. The Limpopo operations contributed
50,404 ounces of Platinum and 113,364 ounces of total PGMs in concentrate
during the year.
Our plan for Limpopo phase 1 is to achieve steady state production of
120,000 tonnes hoisted per month. In the fourth quarter of 2006 we
encountered adverse ground conditions at Limpopo and have accelerated
development to maintain our growth plan. We are currently forecasting
that we will be able to achieve a steady rate of 120,000 tonnes per month
in the second half of 2007 some six months behind schedule. Largely as a
result of price improvements, Limpopo contributed US$33 million to our
EBIT during the year, well ahead of our original acquisition plan
assumptions for the mine.
Pandora Joint Venture
During the year we have mined ore from our Pandora joint venture property
both underground as an extension of our E3 shaft and in an open pit
operation. Going forward we will split out the Pandora Joint Venture as a
separate EBIT centre.
New Order Mining Licences
We are delighted that on 9 October 2006 we were granted the
conversion of our old order mining rights into new order mining
rights for our Marikana operations. This is a highly significant
moment for us as it ensures the future of the Marikana operation
giving us the right to mine for PGMs and associated metals at
Marikana for the next 30 years with a right to apply for renewal for
a further 30 years thereafter.
We will apply for our new order mining rights in respect of our Limpopo
operations in the early part of calendar 2007. The application for our
Pandora project has been submitted and we will continue to discuss this
with the DME during the coming months.
Process Division
The Process Division experienced a difficult year. After a very
successful planned Number 1 Furnace rebuild campaign of some 27 days in
February, the Division struggled to achieve stable operations. Unplanned
outages occurred at both the Smelter and Precious Metal Refinery with the
Smelter only achieving stable design throughput in the fourth quarter of
the financial year. As a consequence of these issues, refined metal sales
were behind prior year results. We were able to offset this shortfall in
refined metal in part by selling concentrate and other partially refined
materials (around 166,000 ounces of Platinum and just under 360,000 ounces
of total PGMs). Final metal sales for the year were 952,682 ounces of
Platinum and 1,817,624 ounces of total PGMs.
Our Base Metal Refinery has become the bottleneck in our refining process.
We instigated a comprehensive evaluation of this facility during the year
and have developed a project to improve throughput at this facility. We
have seen some initial success from this project with new monthly records
being set in the tonnes of matte milled and tonnes of nickel sulphate
crystals produced. During 2007 we will continue to upgrade and expand
this plant to support our production growth profile.
We experienced a fire at the Precious Metal Refinery in September.
Necessary repairs were carried out within 54 hours to allow the Refinery
to return to normal production. We are converting the Precious Metal
Refinery from a manual processing operation to a new automated standard to
improve both reliability and recoveries. This programme will be completed
by the end of 2007.
Six Sigma and Shared Business Services
Our Six Sigma continuous improvement programme performed well during the
year delivering R330 million of net EBIT benefit. The programme is now
self-sustaining in Lonmin and we continue to progress with the training of
Black Belts and Green Belts across the business. We are targeting an
additional R400 million of Six Sigma EBIT benefits for the 2007 fiscal
year.
We have completed the preliminary integration of our Shared Business
Services division and expect to see significant benefits from this
initiative in 2007. We also implemented the first phase of our SAP
Enterprise Resource Planning system in March. The implementation of this
system has been a positive step forward for us in terms of creating one
source for business information. Our intent is to continue modernising
our information system environment over the next two years with full
conversion of all our core systems to SAP or related systems by the end of
2008.
Costs and Capital Expenditure
In common with the majority of the mining sector we saw increasing cost
pressures in the second half of the year for a number of consumables and
scarce skill sets such as mining engineers. We also made a number of
investments to improve safety, the health of our employees and our
environmental impact.
Our unit costs were impacted by the Smelter outages, which added around 80
Rand per PGM ounce sold to the Process Division costs. C1 costs of own
metal production at Marikana net of by product credits were R2,441 up 8.8%
on last year.
At Limpopo costs have continued to decline on last year"s figure of R4,102
as we have ramped up production from the mine. However, costs for the
full year are above our target range as a result of the lower than
expected production throughput. C1 costs of metal in concentrate at
Limpopo were R3,891 per PGM ounce, a decrease of 5.1% year on year.
We are committed to maintaining our advantage as the lowest cost producer
and are targeting C1 costs for fiscal 2007 for Marikana of around R2,450
to R2,500 per PGM ounce sold net of by product credits and for Limpopo
R3,000 to R3,250 per PGM ounce in concentrate.
Our gross capital expenditure for the year was US$182 million. We are
forecasting gross capex for fiscal 2007 of US$370 million which includes
investment in the modernisation of our mines and the programme to de-
bottleneck the Process Division.
Markets
During fiscal 2006 the prices for all our metals continued to be strong
with our average realised Platinum price increasing by 27% to US$1,084 per
ounce. We are confident of continued growth in demand for Platinum over
the medium term with regulatory driven demand for autocatalysts continuing
to be the prime driver. Supply will continue to lag demand due to the
economics of the new South African projects and the longer lead times for
bringing mines into production.
Rhodium demand has been driven by the autocatalyst sector where the metal
is important for the reduction of Nitrous Oxide from the exhaust gases of
motor vehicles. Rhodium is entirely a by-product of Platinum production
so supply response to demand is inelastic. As a result of these factors,
our average realised Rhodium price has increased by some 135% over the
financial year to US$3,897 per ounce. The metal now represents some 28% of
our revenue. We are cautious about predicting the future supply/demand
balance for this thinly traded metal as price volatility may contribute to
thrifting and substitution in the medium term.
The Palladium market has seen a pick up in demand both in the autocatalyst
sector and the early reports of a potentially promising Chinese jewellery
market. Our average realised price for Palladium rose by 58% in the year
to US$299 per ounce. On the supply side, we see continuing oversupply and
inventory overhang.
Growth Profile
We are committed to growing our business to supply what we believe will be
continuing strong demand growth for Platinum. Our original growth profile
for Marikana targeted around 1 million Platinum ounces per annum from the
operation in 2008. We have this year developed a comprehensive new life
of mine plan for our Marikana operations and are now targeting an
additional 175,000 ounces of production from the mines to reach around
1.175 million ounces of Platinum production in 2012.
At Limpopo our base case for growth was to reach a steady state of 75,000
Platinum ounces per annum. We have now revised this profile upwards and
are targeting around 87,000 Platinum ounces per annum from 2009.
Work has continued on the pre-feasibility studies for both our Limpopo
phase 2 and Pandora projects. Both these studies will be completed during
the first half of our 2007 financial year. At Limpopo phase 2 we are
targeting around 93,000 Platinum ounces per annum at full production for
Lonmin"s account from 2012. At full production the Pandora project has
the potential, to add an additional 55,000 Platinum ounces per annum
attributable to Lonmin from 2012.
Incorporating all these elements we have been able to revise our growth
target upwards to 1.4 million ounces of Platinum in 2012.
Based on an assessment of our overall smelting needs going forwards and
our desire to establish more stable smelting operations matching our
mining profile, we have taken the decision to re-commission our Merensky
furnace. This furnace, in combination with our Number 1 furnace and with
modifications to our gas handling system will allow us to achieve capacity
up to 1.4 million Platinum ounces of smelting capacity per annum by 2010.
Beyond this production level we are undertaking pre-feasibility study work
to increase our metallurgical capacity to 2 million ounces of Platinum per
annum.
Looking beyond 2012 we have set ourselves the goal of building optionality
into the business to reach production of 2 million ounces of Platinum. We
have commenced a scoping study on our Loskop project which we estimate has
the potential to generate around 80,000 Platinum ounces in concentrate per
annum (50% Lonmin share). We continue to develop our high quality
portfolio of exploration projects and to assess possible acquisitions in
the PGM sector. In addition during the year we acquired a stake in
emerging junior Platmin Resources and now hold 22% of that company.
Outlook
In 2007 we are targeting around 1.02 to 1.04 million saleable ounces of
Platinum production and 1.93 to 1.97 million saleable ounces of total
PGMs. We are committed to maintaining our advantage as the lowest cost
producer and we are targeting C1 costs of own metal production at Marikana
of around R2,450 to R2,500 per PGM ounce sold and for Limpopo, C1 costs of
metal produced in concentrate of around R3,000 to R3,250 per PGM ounce.
We are targeting around R400 million of additional EBIT benefits from our
Six Sigma continuous improvement programme in the 2007 fiscal year.
Lonmin today has a market leading safety performance, a clear strategy, a
robust growth profile and a culture of innovation and operational
excellence. We are a company which is capitalising on the diversity and
quality of our South African workforce and we are the only South African
Platinum major to have achieved conversion of old order mining rights into
new order mining rights. The contribution of Lonmin employees,
contractors and community members is highly valued and their hard work and
dedication is greatly appreciated.
Bradford A Mills
Chief Executive
Financial Review
Introduction
The financial information presented for 2006 has been prepared on an IFRS
basis for the first time. The comparative information for 2005 has been
restated based on the accounting policies and adjustments as set out in
detail in note 35 to the accounts.
Analysis of results
Income Statement
A comparison of the 2006 total operating profit with the prior year is set
out below:
$m
Total operating profit - 2005 350
Reorganisation cost - 2005 12
Underlying operating profit - 2005 362
Smelter insurance recovery - 2005 (22)
Price 579
Volume 37
Cost changes (126)
Underlying operating profit - 2006 830
Sale of houses - 2006 12
Total operating profit - 2006 842
The 2005 total operating profit of $350 million was adversely impacted by
reorganisation costs of $12 million however this was offset by a non-
recurring insurance recovery relating to the 2004 smelter incident. The
key feature impacting profit in 2006 has been a very strong market with
the average price realised for the basket of metals sold at $30,916/kg up
55% on the prior year. Sales volumes of PGMs increased from 1,692,517
ounces to 1,817,624 ounces and revenue amounted to $1,855 million. After
other cost changes of $126 million, which are explained in more detail
below, the resulting underlying operating profit was $830 million up 129%
on the prior year. This, when combined with a $12 million gain resulting
from the sales of company owned housing, has resulted in a total operating
profit for 2006 of $842 million.
Other cost changes (increase) / decrease:
$m
Safety, health, environment and community (26)
(`SHEC") (14)
Exploration and technical development (59)
Inflation / other (18)
Remuneration restructuring and skills retention (15)
Plant running (8)
Change of costing basis (6)
Royalties (17)
Depreciation and amortisation 37
Foreign exchange impact
(126)
Given the strong market conditions, and to meet our obligations under our
new order mining licence, the Group has chosen to invest $40 million by
developing the business in a number of areas. We have invested some $26
million in SHEC projects to improve the safety, health and environment in
which our employees work and to enhance the communities in which they
live. We are pleased to have made significant reductions in our injury
rate. We have also made substantial investments in mechanisation to
develop our new generation platinum mines which will become operational in
2007 and furthermore we have increased our exploration funding.
During 2006 inflationary pressures have typically added some 7% to our
cost base. This together with abnormal increases in raw materials and
other costs has adversely impacted operating profit by $59 million.
Furthermore, the booming mining sector has created strong competition for
skilled resources. We have made significant changes in our remuneration
policy during 2006. This has involved implementing skills retention
programmes via share schemes and adjusting the level of bonuses. This
approach has also seen the closure of the UK defined benefit pension
scheme to new members which therefore limits the Group"s future exposure.
Plant running costs increased in the year. This was partly caused by
running the smaller capacity (and higher cost) Pyromet furnaces during the
period of the smelter repair, but also reflected the introduction of new
plant to reduce our environmental impact. As part of our implementation of
SAP we have moved from a weekly to monthly costing basis. This resulted in
a one-off catch-up of $8 million in 2006. Royalty payments have increased
by $6 million reflecting the profit growth in the year. Depreciation and
amortisation costs were up $17 million which effectively reflected the
full year effect of the Limpopo mine following our acquisition of Southern
Platinum Corporation on 15 June 2005.
The C1 cost per PGM ounce sold net of by-product credits on own production
from the Marikana operations amounted to R2,441 for 2006 compared with
R2,243 for 2005, an increase of 8.8%. However, as the South African Rand
depreciated against the US Dollar during the year by some 7% this resulted
in an increase in US$ unit costs of 2%. Further details of unit costs
analysis can be found in the operating statistics table within the Annual
Review.
Net finance costs in 2006 were $228 million compared with $34 million in
2005. In 2006 this includes a $227 million charge for the fair value
movement of the embedded derivative in the convertible bond. Borrowing
levels reduced towards the end of the year although interest rates on
average were higher than in the previous year. Interest cover remained
strong at 23.1 times (2005 - 15.1 times).
Profit before tax amounted to $633 million in 2006 compared with $319
million in 2005. Included in 2006 was the $227 million fair value
adjustment on the convertible bond noted above.
The 2006 tax charge was $202 million compared with $118 million in 2005.
The corporate tax rate in South Africa has remained at 29% during the
year. The effective tax rate, excluding the effects of exchange, and
special items was 34% compared with 38% last year mainly due to the
utilisation of brought forward losses in Limpopo. The overall tax charge
includes a credit of $67 million on the translation adjustment of the
deferred tax balance resulting from the 22% depreciation of the closing
Rand/$ exchange rates at the respective year ends.
Profit for the year attributable to equity shareholders amounted to $313
million (2005 - $158 million) and earnings per share were 219.5 cents
compared with 111.5 cents in 2005. Underlying earnings per share, being
earnings excluding special items, amounted to 312.1 cents (2005 - 118.5
cents).
Balance sheet
Equity interests were $1,089 million at 30 September 2006 compared with
$838 million at 30 September 2005 principally reflecting the profit
attributable to equity shareholders of Lonmin Plc of $313 million offset
by dividends declared of $124 million and a fair value uplift in our
investment in Platmin of $36 million.
Dividends are now recorded on a cash basis under IFRS and thus the $124
million includes $60 million for the 2005 final and $64 million for the
2006 interims.
Southern Platinum Corporation was acquired on 15 June 2005, with a
compulsory acquisition of the remaining shares on 28 July 2005. During
the current financial year the 8.5% minority interest in Limpopo was
acquired for $13 million. The fair value assessment on the acquisition of
Southern Platinum Corporation was finalised during the year. This
resulted in an allocation of $60 million to goodwill and a restatement of
the relevant opening balances in accordance with IFRS.
Net debt amounted to $458 million at 30 September 2006 with the main
components being the convertible bond of $216 million and bank loans of
$288 million. Gearing was 27% compared with 41% at 30 September 2005,
calculated on net borrowings attributable to the Group divided by those
attributable net borrowings and the equity interests outstanding at the
balance sheet date.
As at 15 November 2006 Lonmin Plc has given notice to force redemption of
all outstanding convertible bonds at their principal amount. Given the
expected differential between prevailing share prices and the conversion
price of GBP12.33 it is expected that this will lead to the issue of
10,576,944 shares subsequent to the balance sheet date and a reduction in
non-current financial liabilities of $211 million. This will further
strengthen the Group balance sheet.
Cash flow
The following table summarises the main components of the cash flow during
the year:
2006 2005
Total Total
$m $m
Cash flow from operations 722 377
Interest and finance costs (31) (27)
Tax (185) (79)
Trading cash flow 506 271
Capital expenditure (182) (190)
Proceeds from disposal of 28 -
assets held for sale
Dividends received from - 2
associate
Dividends paid to minority (62) (27)
Free cash flow 290 56
Acquisitions* (14) (212)
Financial investments (36) 1
Shares issued 15 6
Equity dividends paid (124) (102)
Cash inflow / (outflow) 131 (251)
Opening net debt (585) (272)
Exchange (4) (2)
Net debt in subsidiaries - (60)
acquired
Closing net debt (458) (585)
Trading cash flow (cents per 354.9c 191.2c
share)
Free cash flow (cents per 39.5c
share) 203.4c
* 2005 comparative includes $15 million on intangible non-current assets
acquired in 2005.
Cash flow from operations was $722 million during 2006, a 92% increase on
last year"s figure of $377 million. Included was an outflow on working
capital of $202 million compared with an outflow of $44 million last year.
This was due to a build up in debtors resulting from price increases and
the high volume of concentrate sales in the last quarter of the year which
have significantly longer credit terms than spot metal sales. This will
be reversed in the first half of the new financial year. After interest
and finance costs of $31 million and tax payments of $185 million, trading
cash flow amounted to $506 million in 2006 against $271 million in 2005,
with trading cash flow per share of 354.9 cents in 2006 against 191.2
cents in 2005.
Capital expenditure of $182 million was incurred during the year, broadly
in line with the prior year. Associate and minority dividends received
and paid represented dividends from and to Incwala. Free cash flow
amounted to $290 million with free cash flow per share at 203.4 cents
(2005 - 39.5 cents). Acquisitions of $14 million in 2006 principally
represented the buyout cost of the minority interest in Limpopo at $13
million. Financial investments primarily represented the purchase of a
22% stake in Platmin. After accounting for shares issued on the exercise
of share options of $15 million and equity dividends paid of $124 million,
the cash inflow was $131 million during 2006 and net debt amounted to $458
million at 30 September 2006.
Dividends
As dividends are now accounted for on a cash basis under IFRS the dividend
shown in the accounts represents the 2005 final of 42 cents and the 2006
interim of 45 cents making a total of 87 cents for the year. In addition
the Board recommends a final dividend of 55.0 cents (2005 - 42.0 cents).
Financial risk management
The Group"s functional currency remains the US Dollar and the share
capital of the Company is based in US Dollars.
The Group"s business is mining and it does not undertake trading activity
in financial instruments.
Interest rate risk
Monetary assets and liabilities are subject to the risk of movements in
interest rates. The borrowings at 30 September 2006 represented $211
million of long-term borrowings in the form of US Dollar 3.75% convertible
bonds due 2008 in the UK. In South Africa a long-term bank loan of $288
million was drawn together with an overdraft of $18 million. Cash
deposits represented balances of $47 million in the UK and $14 million in
South Africa.
Liquidity risk
Liquidity risk measures the risk that the Group may not be able to meet
its liabilities as they fall due and, therefore, its ability to continue
trading. The Group"s policy on overall liquidity is to ensure that there
are sufficient committed facilities in place which, when combined with
available cash resources, are sufficient to meet the funding requirements
in the foreseeable future. At the 2006 year end, the Group had $1,411
million of committed facilities in place, of which $499 million were drawn
down.
Foreign currency risk
Foreign currency risk arises when movements in exchange rates,
particularly the US Dollar against the South African Rand, affect the
transactions the Group enters into, reported profits and net assets. Most
of the Group"s operations are based in South Africa and the majority of
the revenue stream is in US Dollars. However the bulk of the Group"s
costs and taxes are Rand driven. Most of the cash held in South Africa is
in US Dollars and is normally remitted to the UK on a regular basis.
Short-term working capital facilities required in South Africa are drawn
primarily in US Dollars.
Fluctuations in the Rand to US Dollar exchange rate can have a significant
impact on the Group"s results. A strengthening of the Rand against the US
Dollar has an adverse effect on profits due to the majority of costs being
denominated in Rand. The approximate effect on the Group"s results of a
10% movement in the Rand to US Dollar 2006 year average exchange rate
would be as follows:
EBIT +/- $87m
Profit for +/- $51m
the year
EPS (cents) +/- 35.8c
These sensitivities are based on 2006 prices, costs and volumes and assume
all other variables remain constant. They are estimated calculations
only.
Commodity price risk
Commodities trade on worldwide commodities markets and are subject to
price fluctuations. Therefore, the prices obtained are dependent upon the
prevailing market prices. Any change in prices will have a direct effect
on the Group"s trading results. Forward sales are undertaken where the
Board determines that it is in the Group"s interest to secure a proportion
of future cash flows. The Group has undertaken a limited number of
forwards on Nickel and Copper by-product sales as disclosed in note 21 to
the financial statements.
The approximate effects on the Group"s results of a 10% movement in the
2006 year average market prices for platinum (Pt), palladium (Pd) and
rhodium (Rh) would be as follows:
Pt Pd Rh
EBIT +/- $103m +/- $13m +/- $53m
Profit for +/- $60m +/- $8m +/- $31m
the year
EPS (cents) +/- 42.1c +/- 5.4c +/- 21.5c
The above sensitivities are based on 2006 volumes and assume all other
variables remain constant. They are estimated calculations only.
John Robinson
Chief Financial Officer
14 November 2006
Operating Statistics - 5 year review
Sept Sept Sept
Units 2006 2005 2004
Mining
Tonnes Marikana Underground 000 11,959 11,102 11,121
Milled (i)
Opencast 000 2,308 2,444 3,283
Limpopo Underground 000 887 214 N/A
Opencast 000 14 - N/A
Lonmin Total 000 15,168 13,760 14,404 14,208
Platinum
Tonnes Marikana Underground 000 11,942 11,047 11,070
Mined
Opencast 000 2,032 2,653 2,730
Limpopo Underground 000 858 212 N/A
Opencast 000 14 - N/A
Lonmin Total 000 14,846 13,912 13,800 14,330
Platinum
UG2 to
Merensky
Ratio % 72.9 74.3 82.4 81.6
Noble
metals in Marikana kg 56,098 53,290 55,031
matte
Noble
metals in
concentrate Limpopo kg 3,526 801 N/A
Yield into
matte g/t 3.84 3.81 3.82
Metals in Marikana Platinum oz 966,733 930,373 N/C
concentrate Palladium oz 433,699 402,748 N/C
Rhodium oz 137,220 129,872 N/C
Total PGMs oz 1,861,179 1,766,908 N/C
Limpopo Platinum oz 50,404 11,567 N/A
Palladium oz 38,170 9,217 N/A
Rhodium oz 7,845 1,305 N/A
Total PGMs oz 113,364 25,672 N/A
Lonmin Platinum oz 1,017,13 941,940 N/C N/C
Platinum 7
Palladium oz 471,869 411,965 N/C
Rhodium oz 145,065 131,177 N/C
Total PGMs oz 1,974,543 1,792,580 N/C
Metallur-
gical
production
Marikana Platinum oz 739,277 830,911 833,822 932,867
refined
Palladium oz 323,275 360,753 358,705
Rhodium oz 87,674 93,445 90,012
Total PGMs oz 1,352,037 1,510,553 1,491,760
Marikana Platinum oz 158,114 73,985 82,935 -
concentrate
Palladium oz 77,630 38,345 38,341
Rhodium oz 37,855 24,491 23,082
Total PGMs oz 341,643 167,955 184,808
Limpopo Platinum oz 50,404 11,524 N/A N/A
concentrate
Palladium oz 38,170 9,043 N/A
Rhodium oz 7,845 1,320 N/A
Total PGMs oz 113,364 25,741 N/A
Lonmin Platinum oz 947,795 916,420 916,757 932,867
Platinum
Palladium oz 439,075 408,141 397,046
Rhodium oz 133,374 119,256 113,094
Total PGMs oz 1,807,044 1,704,249 1,676,568
Capital Rm 1,207 1,180 1,230 1,294
expenditure
$m 182 190 187 162
Sept Sept Sept
Units 2006 2005 2004
Sales Platinum oz 952,682 912,844 941,146 903,077
Lonmin
Platinum
Palladium oz 442,630 402,425 405,329
Rhodium oz 135,449 117,944 126,723
Total PGMs oz 1,817,624 1,692,517 1,761,171
Prices
Average Platinum R 7,283 5,366 5,356 5,053
price
received
per oz
$ 1,084 856 816
Palladium R 1,999 1,184 1,485
$ 299 189 227
Rhodium R 26,106 10,494 4,876
$ 3,897 1,661 745
Basket $/kg 30,916 19,979 17,072 14,618 13,662
price of
PGMs and
base metals
Marikana -
cash costs
own
production
Cash costs Mining R 2,030 1,889 1,696 N/C
Smelting & R 384 261 242 N/C
refining
Shared R 460 347 316 N/C
business
services
Movement R (33) (11) 165 N/C
in
physical
stock
Cost per R 2,841 2,486 2,419 N/C N/C
PGM ounce
sold before
by-product
credits
Base metal R (400) (243) (233) N/C
credits
C1 cost per R 2,441 2,243 2,186 N/C N/C
PGM ounce
sold net of
by-product
credits
Improved R - (118) (29) N/C
recoveries
Smelter R - 47 - N/C
repair
Stock R - 91 - N/C
accounting
change
Other EBIT Depre- R 227 253 232 N/C
items ciation
and amorti-
sation
Insurance R - (83) - N/C
proceeds
Restruc- R - 23 - N/C
turing
R - 12 26 N/C N/C
Other
C2 Costs R 2,668 2,468 2,415 N/C N/C
per PGM
ounce sold
own
production
Cash cost R N/C N/C N/C 1,974 1,863
per refined
ounce of
PGM sold
(inc.
royalties)
$ N/C N/C N/C 251 176
Cash cost R N/C N/C N/C 1,969 1,847
per refined
ounce of
PGM sold
(exc.
royalties)
$ N/C N/C N/C 250 174
Cash cost
per refined
ounce of
PGM
produced
(exc
royalties):
Under- R N/C N/C N/C
ground
$ N/C N/C N/C
Opencast R N/C N/C N/C
$ N/C N/C N/C
Total R N/C N/C N/C
$ N/C N/C N/C
Limpopo -
cash costs
own
production
C1 cash R 3,891 4,102 N/A N/A N/A
cost per
PGM ounce
in
concentrate
Exchange
Rates
Average GBP/$ 0.55 0.54 0.56 0.62
exchange
rates
R/$ 6.63 6.28 6.60
Closing GBP/$ 0.53 0.57 0.55 0.60
exchange
rate
R/$ 7.77 6.36 6.48
Operating Statistics - 5 year review (Continued)
Sept Sept
Units 2003 2002
Mining
Tonnes Marikana Underground 000 11,418 11,260
Milled (i)
Opencast 000 2,790 -
Limpopo Underground 000 N/A N/A
Opencast 000 N/A N/A
Lonmin Total 000 15,168 11,260
Platinum
Tonnes Mined Marikana Underground 000 11,450 12,346
Opencast 000 2,880 -
Limpopo Underground 000 N/A N/A
Opencast 000 N/A N/A
Lonmin Total 000 14,846 12,346
Platinum
UG2 to % 72.9 78.3
Merensky
Ratio
Noble metals
in matte Marikana kg 54,295 46,557
Noble metals
in Limpopo kg N/A N/A
concentrate
Yield into g/t 3.83 4.13
matte
Metals in Marikana Platinum oz N/C N/C
concentrate Palladium oz N/C N/C
Rhodium oz N/C N/C
Total PGMs oz N/C N/C
Limpopo Platinum oz N/A N/A
Palladium oz N/A N/A
Rhodium oz N/A N/A
Total PGMs oz N/A N/A
Lonmin Platinum oz 1,017,137 N/C
Platinum
Palladium oz N/C N/C
Rhodium oz N/C N/C
Total PGMs oz N/C N/C
Metallur-
gical
production
Marikana Platinum oz 739,277 757,451
refined
Palladium oz 417,418 350,792
Rhodium oz 140,514 113,549
Total PGMs oz 1,757,757 1,467,525
Marikana Platinum oz 158,114 -
concentrate
Palladium oz - -
Rhodium oz - -
Total PGMs oz - -
Limpopo Platinum oz 50,404 N/A
concentrate
Palladium oz N/A N/A
Rhodium oz N/A N/A
Total PGMs oz N/A N/A
Lonmin Platinum oz 947,795 757,451
Platinum
Palladium oz 417,418 350,792
Rhodium oz 140,514 113,549
Total PGMs oz 1,757,757 1,467,525
Capital Rm 1,207 1,558
expenditure
$m 182 150
Sept Sept
Units 2003 2002
Sales Platinum oz 952,682 757,958
Lonmin
Platinum
Palladium oz 405,073 349,243
Rhodium oz 131,752 109,194
Total PGMs oz 1,728,387 1,415,112
Prices
Average Platinum R 7,283 5,357
price
received per
oz
$ 645 501
Palladium R 1,698 3,759
$ 212 351
Rhodium R 4,201 9,123
$ 529 850
Basket price $/kg 30,916 19,979
of PGMs and
base metals
Marikana -
cash costs
own
production
Cash costs Mining R 2,030 N/C
Smelting & R 384 N/C
refining
Shared R 460 N/C
business
services
Movement in R (33) N/C
physical
stock
Cost per PGM R 2,841 2,486
ounce sold
before by-
product
credits
Base metal R (400) N/C
credits
C1 cost per R 2,441 2,243
PGM ounce
sold net of
by-product
credits
Improved R - N/C
recoveries
Smelter R - N/C
repair
Stock R - N/C
accounting
change
Other EBIT Depre- R 227 N/C
items ciation and
amorti-
sation
Insurance R - N/C
proceeds
Restruc- R - N/C
turing
R - 12
Other
C2 Costs per R 2,668 2,468
PGM ounce
sold own
production
Cash cost R N/C N/C
per refined
ounce of PGM
sold (inc.
royalties)
$ N/C N/C
Cash cost R N/C N/C
per refined
ounce of PGM
sold (exc.
royalties)
$ N/C N/C
Cash cost
per refined
ounce of PGM
produced
(exc
royalties):
Underground R 2,022 1,776
$ 257 168
Opencast R 1,801 2,726
$ 229 257
Total R 1,996 1,780
$ 254 168
Limpopo -
cash costs
own
production
C1 cash cost R 3,891 4,102
per PGM
ounce in
concentrate
Exchange
Rates
Average GBP/$ 0.55 0.68
exchange
rates
R/$ 7.90 10.70
Closing GBP/$ 0.53 0.64
exchange
rate
R/$ 6.97 10.54
Footnotes:
Excluding slag.
N/C Not calculated
N/A Not applicable
Consolidated income statement
For the year ended 30 September
Special Special
2006 items 2006 2005 items 2005
Underlying (note 3) Total Underlying (note 3) Total
(i) (i)
Continuing Note $m $m $m $m $m $m
operations
Revenue 2 1,855 - 1,855 1,128 - 1,128
EBITDA (ii) 911 12 923 429 (12) 417
Depreciation (81) - (81) (67) - (67)
and
amortisation
Operating 2 830 12 842 362 (12) 350
profit/
(loss) (iii)
Finance 4 12 - 12 11 - 11
income
Finance 4 (34) (206) (240) (37) (8) (45)
expenses
Share of
profit of 19 - 19 3 - 3
associate and
joint venture
Profit / 827 (194) 633 339 (20) 319
(loss) before
taxation
Income tax 5 (280) 78 (202) (129) 11 (118)
expense (iv)
Profit / 547 (116) 431 210 (9) 201
(loss) for
the year
Attributable
to:
- Equity 445 (132) 313 168 (10) 158
shareholders
of Lonmin
Plc
- Minority 102 16 118 42 1 43
interest
Earnings per 6 312.1c 219.5c 118.5c 111.5c
share
Diluted 6 307.7c 216.4c 118.3c 111.3c
earnings per
share (v)
Dividends 7 87.0c 72.0c
paid per
share
Statement of recognised income and expense
For the year ended 30 September
2006 2005
Total Total
Note $m $m
Profit for the year 431 201
Change in fair value of available for sale 46 -
financial assets
Amounts charged to hedging reserve (4) -
Actuarial (losses)/gains on post retirement (6) 7
benefit plan
Total recognised income for the year 467 208
Attributable to:
- Equity shareholders of Lonmin Plc 10 350 165
- Minority interest 10 117 43
10 467 208
Footnotes:
i Underlying earnings are calculated on profit for the year excluding
movements in the fair value of the embedded derivative associated
with the convertible bond, exchange on tax balances, profit on the
sale of Marikana houses, an adjustment to the interest capitalised in
prior years and, for 2005, the effect of a change in the South
African tax rate on the opening deferred tax balance and
reorganisation costs as disclosed in note 3.
ii EBITDA is operating profit before depreciation and amortisation.
iii. Operating profit is defined as revenue and other operating expenses
before net finance costs and before share of profit of associate and
joint venture.
iv. The income tax expense relates to overseas and includes exchange
gains of $82 million (2005 - losses of $2 million) as disclosed in
note 5.
v. The calculation of diluted EPS includes adjustments for the movements
in fair value on the embedded derivative within the convertible bond
subject to the limitation under IAS 33 - Earnings Per Share that this
cannot thereby create a figure exceeding basic EPS.
Consolidated balance sheet
As at 30 September
2006 2005
Restated
(i)
Note $m $m
Non-current assets
Goodwill 113 100
Intangible assets 328 319
Property, plant and equipment 1,463 1,339
Investment in associate and joint venture 113 91
Financial assets:
- Available for sale financial assets 98 15
- Other receivables 19 22
Employee benefits 6 12
2,140 1,898
Current assets
Inventories 135 110
Trade and other receivables 396 147
Assets held for sale 6 16
Tax recoverable 3 4
Cash and cash equivalents 8 61 11
601 288
Current liabilities
Bank overdraft repayable on demand 8 (18) (1)
Trade and other payables (209) (133)
Financial liabilities:
- Interest bearing loans and borrowings - (86)
- Derivative financial instruments (4) -
Tax payable (91) (28)
(322) (248)
Net current assets 279 40
Non-current liabilities
Employee benefits (7) (1)
Financial liabilities:
- Interest bearing loans and borrowings (499) (506)
- Derivative financial instruments (268) (41)
Deferred tax liabilities (294) (344)
Provisions (39) (42)
(1,107) (934)
Net assets 1,312 1,004
Capital and reserves
Called up share capital 10 143 142
Share premium account 10 26 12
Other reserves 10 84 88
Retained earnings 10 836 596
Attributable to equity shareholders of Lonmin 10 1,089 838
Plc
Attributable to minority interest 10 223 166
Total equity 10 1,312 1,004
Footnote:
i. 2005 has been restated under IFRS 3 - Business combinations,
following the finalisation of the fair values arising upon the
acquisition of Southern Platinum Corporation (note 11).
Consolidated cash flow statement
For the year ended 30 September
2006 2005
Note $m $m
Profit for the year 431 201
Taxation 5 202 118
Finance income 4 (12) (11)
Finance expenses 4 240 45
Share of profit after tax of associate and (19) (3)
joint venture
Depreciation and amortisation 81 67
Change in inventories (25) (30)
Change in trade and other receivables (249) (22)
Change in trade and other payables 74 5
Change in provisions (2) 3
Profit on sale of assets held for sale 3 (12) -
Other non cash charges 13 4
Cash flow from consolidated operations 722 377
Dividend from associate - 2
Cash flow from operations 722 379
Interest received 1 2
Interest paid (32) (23)
Tax paid (185) (79)
Cash flow from operating activities 506 279
Cash flow from investing activities
Acquisition of subsidiaries (net of cash (14) (197)
acquired)
Purchase of intangible asset (21) (27)
Purchase of property, plant and equipment (161) (178)
Proceeds from available for sale financial - 3
assets
Purchase of available for sale financial (36) (2)
assets
Proceeds from disposal of assets held for 28 -
sale
Cash used in investing activities (204) (401)
Cash flow from financing activities
Equity dividends paid to Lonmin shareholders (124) (102)
Dividends paid to minority (62) (27)
Proceeds from current borrowings - 85
Repayment of current borrowings (86) -
Proceeds from non-current borrowings 288 204
Repayment of non-current borrowings (296) (26)
Finance costs - (6)
Issue of ordinary share capital 15 6
Cash used in financing activities (265) 134
Increase in cash and cash equivalents 37 12
Opening cash and cash equivalents 8 10 (2)
Effect of exchange rate changes (4) -
Closing cash and cash equivalents 8 43 10
Basis of preparation
The financial information presented has been prepared on the basis of
International Financial Reporting Standards (IFRSs) as disclosed in note 1
to the financial statements.
Segmental analysis
2006
Platinum Corporate Exploration Total
Analysis by business $m $m $m $m
group
Revenue - external 1,855 - - 1,855
sales
Operating profit 877 (19) (16) 842
Segment total assets 2,596 145 - 2,741
Segment total (926) (503) - (1,429)
liabilities
Capital expenditure 232 1 - 233
(i)
Depreciation and 81 - - 81
amortisation
2005
Platinum Corporate Exploration Total
Analysis by business $m $m $m $m
group
Revenue - external 1,128 - - 1,128
sales
Operating profit 385 (24) (11) 350
Segment total assets 2,051 135 - 2,186
Segment total (672) (510) - (1,182)
liabilities
Capital expenditure 210 - - 210
(i)
Depreciation and 67 - - 67
amortisation
2006
South UK Other Total
Africa
Analysis by $m $m $m $m
geographical
location
Revenue - external 1,855 - - 1,855
sales
Segment total assets 2,594 145 2 2,741
Capital expenditure 232 1 - 233
(i)
2005
South UK Other Total
Africa
Analysis by $m $m $m $m
geographical
location
Revenue - external 1,128 - - 1,128
sales
Segment total assets 2,048 135 3 2,186
Capital expenditure 210 - - 210
(i)
Revenue by destination is analysed by geographical area below:
2006 2005
$m $m
The Americas 435 368
Asia 518 351
Europe 291 210
South Africa 602 191
Zimbabwe 9 8
1,855 1,128
Footnote:
i Capital expenditure includes additions to plant, property and
equipment, intangible assets and goodwilI in accordance with IAS 14 -
Segment reporting
3. Special items
`Special items" are those items of financial performance that the Group
believes should be separately disclosed on the face of the income
statement to assist in the understanding of the financial performance
achieved by the Group. Such items, detailed below, are material by nature
or amount to the results for the period and require separate disclosure in
accordance with IAS 1 - Presentation of financial statements.
2006 2005
$m $m
EBITDA
- Sale of houses 12 -
- Reorganisation - (12)
Finance costs
- Calculation of capitalised interest 21 -
- Movement in fair value of embedded derivative (227) (8)
Special loss before taxation (194) (20)
Taxation on above items (note 5) (4) 2
Tax rate change - effect on opening deferred tax - 11
balance
Exchange on tax balances (note 5) 82 (2)
Special loss before minority interest (116) (9)
Minority interest (16) (1)
Special loss for the year attributable to equity (132) (10)
shareholders of Lonmin plc
Sale of houses: We currently accommodate a substantial number of our
employees in hostels and married quarters with the remainder living in
their homes. We are selling houses to employees to encourage home-
ownership. Any profits or losses from such sales at fair value are not
deemed to represent underlying earnings.
Capitalised interest includes an adjustment to the interest capitalised in
prior years of $21 million.
The convertible bond contains an embedded derivative which is held at fair
value. Due to the cash settlement option the bond is classified within non-
current liabilities and movements in fair value are taken to the income
statement. Fluctuations in fair value are mainly due to changes in share
price.
The Group holds both current and deferred tax balances in Rand which is
not the functional currency of the Group. Given the volatility of the Rand
to US$ exchange rate the revaluation of such tax balances can cause
significant variations in the tax charge and therefore profitability.
Consequently the directors feel that such foreign exchange impacts should
be treated as special.
4. Net finance costs
2006 2005
$m $m
Finance income: 12 11
Interest receivable 2 2
Return on defined benefit pension scheme 8 8
assets
Movement in fair value of non-current other 2 1
receivables
Finance expenses: (34) (37)
On bank loans and overdrafts (35) (24)
Bank fees (3) (2)
Capitalised interest 16 1
Discounting on provisions (2) (2)
Unwind of discounting on convertible bond - (1)
Interest costs of defined benefit pension (6) (7)
scheme
Exchange differences on net debt (4) (2)
Special items: (206) (8)
Prior years capitalised interest (note 3) 21 -
Movement in fair values of derivative (227) (8)
financial instruments (note 3)
Total finance expenses (240) (45)
Net finance costs (228) (34)
5. Taxation
2006 2005
$m $m
United Kingdom:
Current tax expense at 30% (2005 - 30%) 122 53
Less amount of the benefit arising from (122) (53)
double tax relief available
Total UK tax expense - -
Overseas:
Current tax expense at 29% (2005 - 29%) 259 99
Excluding tax on local currency exchange 217 81
profits
Tax on dividends remitted 43 19
Prior year items (1) (1)
Deferred tax expense 21 30
Origination and reversal of temporary 21 30
differences
Special items (note 3) (78) (11)
Deferred tax on sale of houses 4 -
Tax on reorganisation costs - (2)
Exchange on current taxation (15) (3)
Change in South African corporate tax rate to - (11)
29% (from 1 October 2004)
Exchange on deferred taxation (67) 5
Actual tax charge 202 118
Tax charge excluding special items (note 3) 280 129
37%
Tax rate 32%
Effective tax rate excluding special items 34% 38%
(note 3)
A reconciliation of the standard tax charge to the tax
charge was as follows:
2006 2006 2005 2005
% $m % $m
Tax charge at standard tax rate 29 % 184 29 % 93
Overseas taxes on dividends remitted by 7 % 43 6 % 19
subsidiary companies
Change in South African corporate tax rate - - (3)% (11)
Exchange on current and deferred tax (13)% (82) 1 % 2
Tax effect of movements in the fair values 10 % 66 1 % 2
of financial instruments
Tax effect of capitalised interest (1)% (6) - -
adjustment (note 3)
Tax effect of other timing differences - (3) 3 % 13
Actual tax charge 32 % 202 37 % 118
The Group"s primary operations are based in South Africa. Therefore, the
relevant standard tax rate for the Group was the South African statutory
tax rate of 29% (2005 - 29%). The secondary tax rate of the dividends
remitted by South African companies was 12.5% (2005 - 12.5%).
6. Earnings per share
Earnings per share have been calculated on the profit attributable to
equity shareholders amounting to $313 million (2005 - $158 million) using
a weighted average number of 142,594,539 ordinary shares in issue (2005 -
141,727,124 ordinary shares).
Diluted earnings per share are based on the weighted average number of
ordinary shares in issue adjusted by dilutive outstanding share options
and shares issuable on conversion of the convertible bonds. Shares
issuable on conversion of the convertible bonds were anti-dilutive in the
current and prior year and have been excluded from diluted earnings per
share in accordance with IAS 33 - Earnings Per Share.
2006 2005
Profit for Per Profit Per
the year Number of share for Number of share
$m shares amount the year shares amount
cents $m cents
Basic EPS 313 142,594,539 219.5 158 141,727,124 111.5
Share option - 2,021,331 (3.1) - 290,375 (0.2)
schemes
Diluted EPS 313 144,615,870 216.4 158 142,017,499 111.3
2006 2005
Profit for Per Profit Per
the year Number of share for Number of share
$m shares amount the year shares amount
cents $m cents
Underlying EPS 445 142,594,539 312.1 168 141,727,124 118.5
Share option - 2,021,331 (4.4) - 290,375 (0.2)
schemes
Diluted 445 144,615,870 307.7 168 142,017,499 118.3
underlying EPS
Underlying earnings per share have been presented as the Directors
consider it to give a fairer reflection of the underlying results of the
business. Underlying earnings per share are based on the profit
attributable to equity shareholders adjusted to exclude special items (as
defined in note 3) as follows:
2006 2005
Profit for Per Profit Per
the year Number of share for Number of share
$m shares amount the year shares amount
cents $m cents
Basic EPS 313 142,594,539 219.5 158 141,727,124 111.5
Special items 132 - 92.6 10 - 7.0
(note 3)
Underlying EPS 445 142,594,539 312.1 168 141,727,124 118.5
7. Dividends
2006 2005
$m Cents $m Cents per
per share
share
Prior year final dividend, 60 42.0 60 42.0
paid in the year
Interim dividend, paid in the 64 45.0 42 30.0
year
Total dividend paid in the 124 87.0 102 72.0
year
Interim dividend, paid in the year 45.0 30.0
Proposed final dividend for the year 55.0 42.0
Total dividend in respect of the year 100.0 72.0
8. Cash and cash equivalents
2006 2005
$m $m
Bank balances 24 8
Call deposits 37 3
Cash and cash equivalents 61 11
Bank overdraft used for cash management (18) (1)
purposes
Cash and cash equivalents in the statement 43 10
of cash flows
9. Net debt
As at 1 Subsidiary Cash Non-cash As at
October acquired flow movements 30
2005 $m $m $m September
$m 2006
$m
Cash and cash 11 - 54 (4) 61
equivalents
Overdrafts (1) - (17) - (18)
10 - 37 (4) 43
Current (86) - 86 - -
borrowings
Non-current (296) - 8 - (288)
borrowings
Convertible (213) - - - (213)
bonds
Net debt as (585) - 131 (4) (458)
defined by the
Group
As at Subsidiary Cash Non-cash As at
1 acquired flow movements 30
October $m $m $m September
2004 2005
$m $m
Cash and cash 20 - (9) - 11
equivalents
Overdrafts (22) - 21 - (1)
(2) - 12 - 10
Current (1) - (85) - (86)
borrowings
Non-current (56) (60) (178) (2) (296)
borrowings
Convertible (212) - - (1) (213)
bonds
Net debt as (271) (60) (251) (3) (585)
defined by the
Group
10. Total equity
Equity shareholders" funds
Called Share
up premium Other Retained Total Minority Total
share account reserves earnings interests equity
capital
$m $m $m $m $m $m $m
At 1 142 6 88 529 765 150 915
October
2004
Total - - - 165 165 43 208
recognised
income and
expense
Dividends - - - (102) (102) (27) (129)
Share based - - - 4 4 - 4
payment
Shares - 6 - - 6 - 6
issued on
exercise of
share
options
At 30 142 12 88 596 838 166 1,004
September
2005
At 1 142 12 88 596 838 166 1,004
October
2005
Total - - (4) 354 350 117 467
recognised
income and
expense
Buy out of - - - - - 1 1
minority
interests
in Messina
Dividends - - - (124) (124) (62) (186)
Deferred - - - 7 7 1 8
tax on
items taken
directly to
equity
Share based - - - 3 3 - 3
payment
Shares 1 14 - - 15 - 15
issued on
exercise of
share
options
At 30 143 26 84 836 1,089 223 1,312
September
2006
During the year 850,301 share options were exercised on which $15 million
of cash was received (2005 - $6 million).
Other reserves represents the capital redemption reserve of $88 million
(2005 - $88 million) and a hedging reserve of $4 million (2005 - $nil).
Minority equity interests represented an 18% shareholding in Eastern
Platinum Limited and Western Platinum Limited throughout the year and,
from 29 June 2006, an 18% shareholding in Messina limited.
11. Business combinations
The Group has made no acquisitions during the year.
Finalisation of fair values on acquisition in 2005 and purchase of
minority interest in 2006
In the prior year the Group acquired 100% of Southern Platinum Corporation
(SPC). During the year the Group has taken the opportunity to reassess the
fair value of the assets and liabilities acquired as a result of the
acquisition on 15 June 2005. In accordance with the treatment prescribed
by IFRS 3 - Business Combinations this has resulted in prior year
adjustment as detailed below.
On 6 February 2006 the Group purchased the remaining 8.5% minority
interest in Messina. The difference between the purchase consideration and
the net assets acquired has been capitalised as goodwill. This has not
been treated as a business combination.
Fair Prior year Fair value Purchase Fair value
value as adjustment as at of as at
at 30 1 October additional 30 September
September 2005 interest 2006
2005 (i)
$m $m $m $m $m
Goodwill - 60 60 13 73
Intangible assets 46 7 53 - 53
Property, plant 216 (67) 149 - 149
and equipment
Net debt, working (70)
capital and (70) - (70) -
provisions
192 - 192 13 205
Footnote:
i. As reported in the IFRS transition document published on 15 February
2006.
12. Transition to International Financial Reporting Standards
As stated in note 1 to the financial statements, Accounting Policies, this
is the Lonmin Group"s first consolidated financial report prepared in
accordance with IFRS. The Group published its transition document on 15
February 2006 explaining the balance sheet, income statement and cash flow
impact for the Group of the transition to IFRS. Included within the
document is a reconciliation of the income statement and cash flow
statement from UK GAAP to IFRS for the year ended 30 September 2005 and a
reconciliation of equity at the transition date (1 October 2004) and 30
September 2005. The document also provides details of the Group"s
accounting policies under IFRS that are expected to be effective at 30
September 2006 and the exemptions applied by the Group in accordance with
IFRS 1 - First-time Adoption of International Financial Standards on
transition to IFRS.
The most significant changes at the date of the transition to IFRS for the
Group between reporting on a UK GAAP basis and IFRS are as follows:
- the recognition, on the balance sheet, of pension scheme assets;
- the inclusion of a fair value charge in respect of outstanding
employee share options;
- the cessation of goodwill amortisation;
- the recognition, on the balance sheet, of all financial instruments
as either financial assets or financial liabilities;
- the separate accounting treatment, as a liability, of the embedded
derivative in the convertible bond;
- no longer recognising proposed dividends as a liability at the
balance sheet date;
- the recognition of the change in measurement basis of in-process
inventory as a change in accounting policy.
13. Statutory Disclosure
The financial information set out above is taken from, but does not
constitute, the company"s statutory accounts for the years ended 30
September 2006 and 2005. The comparative figures for the financial year
ended 30 September 2005 are not the statutory accounts of Lonmin Plc for
that financial year. Those accounts, which were prepared under UK
Generally Accepted Accounting Principles (UK GAAP) have been delivered,
and for statutory accounts for 2006 which have been prepared under IFRS
will be delivered, to the Registrar of Companies. The Auditors have made
unqualified reports on those accounts and such reports did not contain a
statement under Section 237 (2) or (3) of the Companies Act 1985.
Copies of the 2006 Lonmin Accounts will be posted to shareholders and will
be available at the Companies registered office before the end November
2006.
14. Final Dividend Timetable
The Board of Lonmin Plc has recommended a final dividend for the year
ended 30 September 2006 of 55.0 US cents per share.
The dividend timetable in respect of this dividend, assuming shareholder
approval at the AGM, is as follows:-
Last day to trade cum div
SA Friday 5 January 2007
UK Tuesday 9 January 2007
Shares commence trading ex div
SA Monday 8 January 2007
UK Wednesday 10 January 2007
Dividend record date Friday 12 January 2007
Last date for receipt of new applications
to participate in Dividend Re-investment Plan
SA Friday 26 January 2007
UK Friday 26 January 2007
Dividend payment date Friday 9 February 2007
No transfers between the UK principle register and the SA branch register
will be permitted from the date on which the USD/Rand exchange rate is
announced to the record date, both dates inclusive (i.e. last date to
transfer Thursday 28 December 2006).
The SA branch register will be closed for the purposes of trades
(dematerialisation and rematerialisation) from Monday 8 January 2007 to
Friday 12 January 2007, both dates inclusive.
The dividend will be paid:-
1) In Rand to shareholders on the SA branch register calculated at the
Rand to US Dollar exchange rate on Friday 29 December 2006, which rate
will be announced on that day and
2) In sterling to share holders domiciled in the UK (unless they elect to
receive US Dollar dividends) calculated at the US Dollar to sterling
exchange rate on Friday 19 January 2007, which rate will be announced on
that day
3) In Dollars to all other overseas share holders (unless they elect to
receive Sterling dividends or have mandated their dividends to a UK bank
or participate in TAPS).
Elections to receive an alternative currency (Dollars or Sterling) should
comprise a signed request to Lloyds TSB Registrars to be received by 1700
hours on 12 January 2007.
15. Annual General Meeting
The 2007 Annual General Meeting will be held on Thursday 25 January 2007
at the Queen Elizabeth II Conference Centre, Board Sanctuary, Westminster,
London SW1P 3EE.
16. Availability of this report
This report is available on the Lonmin website (www.lonmin.com)
Date: 15/11/2006 09:05:31 AM Produced by the JSE SENS Department
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