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ARI
ARIM
ARI- African Rainbow Minerals Ltd - Interim Results for the six months
ended 31 December 2006
African Rainbow Minerals Limited
(Incorporated in the Republic of South Africa)
(Registration number 1933/004580/06)
ISIN: ZAE000054045
Share Code: ARI
INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2006
WE DO IT BETTER
Highlights
* Headline earnings up by 318% to R548 million
* EBITDA increased to R1.2 billion
* Record profits from Nkomati Nickel Mine
* Two Rivers Platinum Mine commissioned, capex R197 million below budget and
contributing R97 million to earnings
* ARM Coal transaction with Xstrata successfully completed
* Khumani export iron ore mine construction commenced
Commentary
The Board is delighted to announce its interim results for the six months ended
31 December 2006 which have been prepared in accordance with International
Financial Reporting Standards.
Headline earnings increased by 318% to R548 million when compared to the
corresponding six month period ended 31 December 2005. This significant earnings
increase is mainly attributable to:
* A much higher contribution from platinum operations resulting from strong PGM
prices and an increase in ounces produced at Modikwa Platinum Mine as well as
the inclusion of results from the new Two Rivers Platinum Mine since October
2006;
* A spectacular increase in contribution from Nkomati Nickel Mine which
benefited from exceptionally high nickel prices;
* An improved contribution from the ferrous division due to strong performances
from its iron ore division and increased prices for manganese alloys;
* Results from the investments into coal which have been consolidated for the
first time.
Earnings were partially offset by exploration expenditure and an increase in
corporate financing costs. Attributable exploration expenses, through TEAL
Exploration & Mining Incorporated (TEAL) increased significantly to R39 million
(2005: R5 million) for these six months in line with the ARM growth strategy
into Africa.
The contributions to headline earnings for the six month periods were made up as
follows:
Commodity group
Six months
ended 31
December
R`million 2006 2005 %
change
Platinum 198 (17) >100
Nickel 200 52 >100
Ferrous metals 261 138 89
Coal 24 - 100
Exploration investment (39) (5) >100
Corporate and other (23) (17) (35)
Corporate-finance costs (73) (20) >100
548 131 318
Total consolidated short- and long-term borrowings increased by R1.5 billion
since 30 June 2006. This debt was largely raised to fund the investments in
Xstrata Coal South Africa, including the acquisition of Goedgevonden by ARM
Coal, as well as to fund the final development of the Two Rivers Mine. This
increase in borrowings has resulted in total finance costs increasing by R70
million (excluding capitalised interest of R24 million) over the comparable
period to December 2005. Net gearing (excluding the Implats shareholders` loan
and their proportion of bank funding at Two Rivers Platinum Mine) amounted to
R2.3 billion (2005: R1.0 billion), equating to a net gearing ratio of 21%.
Total assets increased by R2.4 billion since June 2006 largely as a result of
the investments made in coal and capital expenditure of R684 million. Most of
the capital expenditure was attributable to Two Rivers Platinum Mine and the
development of the 8.4 mtpa Khumani export iron ore mine. During the same period
trade and other receivables increased by R606 million of which R397 million
relates to the Two Rivers Platinum Mine receivables pipeline.
ARM successfully commissioned its Two Rivers Platinum Mine during the period
under review. The mine was completed ahead of schedule and under budget. On 1
October 2006 the capitalisation of costs ceased when commercial production
commenced. During the past three months, while still in its ramp-up phase, the
mine achieved a cash operating profit of R288 million.
On 1 September 2006 ARM acquired an additional 10% direct equity based
participation interest in Xstrata Coal South Africa for a subscription price of
R400 million. This gives ARM a 20.2% effective interest in Xstrata Coal South
Africa.
Assmang has been accounted for on a proportionate consolidated basis for the
period under review, as opposed to having been fully consolidated to February
2006.
OPERATIONAL REVIEW
ARM Ferrous
The ARM Ferrous operations, which are held through its 50% investment in Assmang
Limited (Assmang), consist of three divisions, namely, iron, manganese and
chrome.
Assmang reported an increase of 39% in its turnover for the six months to 31
December 2006 to R2.6 billion (2005: R1.87 billion). Headline earnings increased
significantly by 90% to R525 million (2005: R275 million) (on a 100% basis).
The increase in headline earnings is primarily attributed to a weaker Rand/US
Dollar exchange rate, increased sales volumes for iron ore and charge chrome as
well as substantial US Dollar price increases for manganese alloys and iron ore
as a result of positive market conditions during the period under review. Sales
volumes for manganese ore increased substantially compared to low demand levels
experienced during the comparative period for 2005. The increased sales volumes
for manganese ore were largely offset by lower US Dollar prices when compared to
prices secured during the comparative period.
Earnings for Assmang - 100% basis
Six months
ended 31
December
R`million 2006 2005
Iron ore division 260 169
Manganese division 244 152
Chrome division 21 (46)
Total 525 275
Headline earnings attributable to ARM (50%) 261 138
Assmang product sales volumes
Six months
ended 31
December
(`000 tonnes) 2006 2005 %
change
Iron ore 2 783 2 600 7
Manganese ore* 1 046 573 82
Manganese alloys 133 130 2
Charge chrome 107 89 20
Chrome ore* 69 56 23
* Excluding intra-group sales
Major capital projects
Capital expenditure amounted to R657 million (2005: R313 million) during the
period under review. Of this, R441 million was spent on the construction of the
first phase of the new Khumani iron ore mine and R43 million on furnace rebuilds
at Assmang`s Machadodorp ferrochrome smelter.
Construction of the 8.4 million tonnes per annum Khumani export iron ore mine
commenced in June 2006 following the establishment of the project team, and the
approval of the Environmental Management Programme by the Department of Minerals
and Energy (DME). During the period under review the mining right authorisation
was received from the DME. The expansion by Transnet to 47 million tonnes per
annum on the iron ore export channel is in progress. Assmang has been allocated
10 million tonnes per annum from Transnet in their 41 million tonne to 47
million tonne expansion. Assmang is currently evaluating the viability of the
additional allocation.
All key appointments have been made and major contracts concluded. The current
focus remains on engineering, design and construction. The first production from
Khumani is expected during the first half of the 2008 calendar year. The project
will largely be funded from operating cash flows and by utilising debt
facilities at the Assmang level.
Further expansion to increase production to 16 million tonnes export per annum
is being designed. This second phase of expansion is subject to board
consideration.
Outlook
Assmang`s product sales volumes remain fairly buoyant and tonnages are expected
to approximate those of the period under review. Following the recently
announced price increases for the sector, iron ore prices for the next six
months are expected to be higher than those achieved during the previous six
months whilst manganese ore as well as manganese and chrome alloy prices are
expected to be maintained. Earnings growth will also be influenced by the
Rand/US Dollar exchange rate and continued cost saving measures at Assmang`s
operations.
ARM Platinum
ARM Platinum reported a substantial increase in its contribution to headline
earnings for ARM from R35 million for the comparative six months to R398 million
(R198 million from platinum and R200 million from nickel) for the period under
review. This is mainly due to increased PGM and nickel prices; the successful
commissioning of Two Rivers Platinum Mine; and an increase in ounces produced at
Modikwa Platinum Mine.
Modikwa Platinum Mine
Modikwa has successfully adapted to the breast mining method and achieved the
required development and stoping parameters. We expect to achieve the designed
plant throughput within the second six months of the financial year which will
increase total output to the design capacity of 360 000 ounces of PGMs. The
improved basket of metal prices allowed Modikwa to report a cash operating
profit of R491 million (at 100% ownership) up by R409 million on the December
2005 half year results. During the 2005 period, 108 876 tonnes from other
sources were treated, thereby reducing the unit costs compared to that achieved
for 2006. Cost per PGM ounce and cost per Platinum ounce were up by 6.5%. For
the period under review, the ore from underground stoping was significantly
higher than the previous reporting period resulting in an improved head grade of
7% up to 4.43g/t. The cash cost per tonne is 14.2% higher to R426 (2005: R373)
per tonne.
Six months
ended 31
December
100% basis 2006 2005 %
change
Tonnes milled Million 1.31 1.29 2
tonnes
Head grade (4E) g/t 4.43 4.15 7
PGMs-in-concentrate ounces 158 145 8
247 932
Cash cost R/tonne 426 373 (14)
R/Pt oz 7 808 7 349 (6)
R/4E oz 3 528 3 311 (7)
Capex R million 99 60 65
Cash operating R million 491 82 499
profits
Headline earnings
attributable to ARM
(41.5%) 101 (17)
Mineable ore reserves currently stands at 14 months of production.
A labour strike at Modikwa Platinum Mine commenced on 26 January 2007. To date
(19 February 2007) production losses are estimated at 180 000 tonnes, equating
to an estimated 10 500 platinum ounces lost (or R125 million in lost revenue at
prevailing commodity prices - on 100% basis). Most issues have been resolved and
all employees have returned to the mine for work on 19 February.
Two Rivers Platinum Mine
The plant started wet commissioning ahead of schedule in July 2006, with ore
throughput in August 2006. After an initial build-up plan, the designed milling
capacity of 225 000 tonnes per month has been achieved on a weekly basis from
January 2007. The 1.2 million tonnes stockpile which was built up before
commissioning of the plant has been reduced to 824 351 tonnes by the end of
December 2006. The mine capitalised operating costs for the period up to
September 2006.
Two Rivers Platinum Mine achieved a cash operating profit of R288 million (on a
100% basis) for the three months from October in its ramp-up stage to December
2006. The final project capital cost is R1,103 billion, being R197 million less
than originally planned. The capital expenditure for the six-month period under
review was R228 million.
The mine dispatched 54 882 ounces PGMs after milling 746 466 tonnes for the
period under review and is confident that all technical parameters have been
achieved.
Six months
ended 31
December
100% basis 2006 2005 %
change
Tonnes milled Million 0.75 n/a n/a
tonnes
Head grade (4E) g/t 3.34 n/a n/a
PGMs-in-concentrate ounces 54 882 n/a n/a
Cash cost R/tonne 284 n/a n/a
R/Pt oz 4 508 n/a n/a
R/4E oz 2 580 n/a n/a
Capex R million 228 n/a n/a
Cash operating profits R million 288 n/a n/a
(3 months)
Headline earnings 97 n/a n/a
attributable to ARM
(55%)
Nkomati Nickel Mine
This mine has reported exceptional results with cash operating profit of R602
million being 209% above the corresponding period for the prior year (at 100%
ownership). Costs were well contained with a 12.25% unit cost per tonne treated
decrease for the six months under review. As previously stated, the MSB orebody
is nearing its completion and future production will therefore comprise a mixed
ore. This mine is undergoing a transformation from a low volume high grade mine
to a low grade high volume mine over a short period.
The announcement by ARM and its joint venture partner LionOre relating to
increased reserves and resources on 11 January 2007 follows completion of pit
optimisation studies on a large-scale expansion which included reducing the cut-
off grade applied to portions of the Nkomati mineral resource. The investigation
has confirmed that a significant portion of the lower grade disseminated mineral
resource, previously categorised as waste, is economically extractable at the
present market conditions, adding to the open pit mineral reserve. The Nkomati
optimisation resulted in an increase in Nkomati`s nickel reserves of 50% from
324 627 Ni tonnes to 485 377 Ni tonnes and a revised resource statement of 942
254 tonnes of nickel, from the previous statement of 674 735 tonnes of nickel.
The by-product reserves also increased significantly to 193 783 tonnes of
copper, an increase of 43% and 4 181 015 ounces of Platinum Group Metals (PGM),
an increase of 70%.
Six months
ended 31
December
100% basis 2006 2005 %
change
Cash operating profit R million 602 195 209
Tonnes milled (`000) 170 182 (7)
Head grade (% 1.98 1.97 -
nickel)
On-mine cash cost per
tonnes
treated (R/tonne) 446 508 12
Cash cost (net of by- US$/lb 0.11 0.87 87
products)
Market sales
Nickel tonnes 2 448 2 534 (3)
Copper tonnes 1 555 1 485 5
Cobalt tonnes 36 42 (14)
PGMs ounces 19 428 16 18
431
Chrome ore tonnes 166 n/a n/a
648
Headline earnings 200 52
attributable to ARM (50%)
The new interim expansion mine and concentrator is well advanced and on schedule
for commissioning in the third quarter of this year. Full production of 100 000
tonnes milled per month is expected by calendar year-end. This expansion project
(at 100%) will cost R384 million, of which R138 million has been spent during
the period under review. The feasibility for the large scale expansion at
Nkomati will be complete in June 2007 and presented to the various boards for
consideration.
ARM Coal
Subsequent to the June 2006 financial year-end, ARM exercised an option to
acquire a further 10 percent direct participating share in Xstrata`s South
African coal operations, for R400 million, as from 1 September 2006. Our
effective economic interest in Xstrata Coal South Africa has therefore increased
to 20.2%. ARM holds 51% of ARM Coal which has a 51% shareholding in the 6.6 mtpa
Goedgevonden coal project.
Total capital expenditure for Goedgevonden is estimated at R2.9 billion which
will be funded through a project finance facility from Xstrata. Saleable tonnes
will comprise 3.2 million tonnes per annum export thermal coal and 3.3 million
tonnes per annum for the local power generating industry.
An application for capacity in the Richards Bay Coal Terminal`s phase V
expansion was lodged by ARM Coal during the fourth quarter of the 2006 calendar
year and the tender award process is expected to be completed by the second
quarter of the 2007 calendar year.
In December 2006 Xstrata Coal South Africa announced that it had acquired a
further 50% of the ATCOM and ATC mines, previously a joint venture with Total
South Africa, thereby securing outright control. This enables Xstrata to enhance
the efficiency of these mines and resources significantly. ARM will participate
in 20.2% of this investment.
Earnings attributable to our coal investment amounted to R24 million for the
period under review.
On mine saleable cost per tonne was R136.72 for the six months under review.
Production data
Six months
ended 31
December
(million tonnes) 2006 2005
Consolidated saleable production 11.98 9.40
Attributable saleable production 2.57 2.01
Consolidated sales
Thermal export 7.38 7.02
Thermal domestic 4.57 3.57
Attributable sales
Thermal export 1.53 1.48
Thermal domestic 0.98 0.76
Average received export FOB coal price 42.70 41.39
($/t)
Average received FOR domestic coal price 50.04 50.43
(R/t)
Headline earnings attributable to ARM 24 n/a
Consolidated production and sales as disclosed above relates to 100% of the
Xstrata Coal South Africa operations. Attributable production and sales relate
to the ARM Coal share, being 20% of Xstrata Coal South Africa and 51% of
Goedgevonden.
TEAL
TEAL, which is incorporated in Canada and listed on the Toronto Stock Exchange
(TSX) and the JSE Limited (JSE), released its results for the three months ended
31 December 2006 on 6 February 2007.
The company reported that the feasibility study on the economic viability of
mining the south and east limbs for the Konkola North Copper Project in Zambia
remains ahead of schedule and on-track for completion by June 2007. In addition,
the geological scoping study for Konkola North`s Area `A` Extension has been
completed.
The feasibility study for the Mwambashi Copper Project was completed in August
2006. Development remains subject to a favourable off-take arrangement and a
successful financing plan. Once these are finalised, the project will be
presented to the TEAL Board of Directors for a final decision on developing a 12
000 tonnes per annum copper producer with capital expenditure of approximately
US$10 million, including contingencies. In addition, pre-production costs
including exploration drilling, dewatering of the pit area and pre-stripping are
estimated at about US$7.5 million.
At the Kalumines Copper-Cobalt Project, a joint venture with La Generale des
Carrieres et des Mines (Gecamines), an initial scoping study on the Lupoto
resource has been completed, while infill and confirmatory exploration drilling
to verify the historical resource is underway.
The furnace that was acquired by TEAL has been incorporated into a company
called TEAL Metals (DRC) s.p.r.l. and is currently 100%-owned by TEAL. In
December 2006, a Memorandum of Understanding was signed with SNEL, the energy
and power authority in the DRC, to supply the required power for the furnace.
Additional positive exploration drilling results at the Otjikoto Gold Project in
Namibia confirmed higher-grade mineralisation extends down-dip from identified
resources. An independent competent persons report verified TEAL`s Phase 1
resource statement of 1.3 million ounces of gold at Otjikoto. A project
appraisal study has commenced to further scope the critical mining,
metallurgical and financial aspects of the Otjikoto Gold Project based on the
current inferred resource.
Harmony
ARM currently holds 16% of the issued share capital in Harmony and therefore
accounts for Harmony on an investment basis. The Harmony share price reduced
from R114 per share to R111 per share resulting in the ARM investment in
Harmony, which is marked-to-market, reducing by R185 million to R7.1 billion.
Harmony reported a cash operating profit for the six months ended 31 December
2006 of R1.66 billion, some 224% higher than the corresponding six month period
ending 31 December 2005 as the company benefited from a 48% higher Rand Gold
Price. Gold produced for the six month period, however, declined by 3% to 38
196kg and cash operating cost per kilogram increased by 19% to R100 770 per
kilogram.
Harmony reported a headline profit of R438 million for the six months ended 31
December 2006 compared to a headline loss of R628 million during the
corresponding period in the prior year. No dividend was declared and therefore
no contribution from Harmony was reflected.
Safety and health
ARM continued with its focus on safety and health at all of its operations.
During this period, Beeshoek iron ore mine received a 4 000 fatality free
production shift award. Black Rock manganese mine has been declared the winner
of the Safety Achievement flag for 2006 in the category "other mines" by the
Mines Health and Safety Council. Modikwa Platinum Mine achieved One million
fatality free shifts during the period under review.
Outlook
ARM has made significant progress in achieving a more diversified portfolio of
quality, long life mining assets, in particular by the completion of the ARM
Coal transaction and the early commissioning of the Two Rivers Platinum Mine.
Our operations will continue to be favourably impacted by the current buoyant
commodity cycle.
Dividends
The company is continuing its high expansion phase with significant and exciting
projects in the pipeline as well as a number of other growth opportunities. As a
result, the Board of Directors has decided not to declare a dividend for the six
months ended 31 December 2006.
Signed on behalf of the board:
P T Motsepe A J Wilkens
Executive Chairman Chief Executive Officer
Johannesburg
20 February 2007
Group Balance Sheets
as at:
Unaudited Audited
Reviewed
31 December 30 June
2006 2005 2006
Note Rm Rm Rm
ASSETS
Non-current assets
Property, plant, 6 064 5 533 5 006
equipment and intangible
assets
Deferred tax assets 23 69 23
Loans and long-term - 8 -
receivable
Investment in associate 2 834 - -
Other investments 3 7 088 5 404 7 276
14 009 11 014 12 305
Current assets
Inventories 811 1 317 707
Trade and other 1 766 1 166 1 160
receivables
Cash and cash equivalents 441 523 439
3 018 3 006 2 306
Total assets 17 027 14 020 14 611
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 10 10 10
Share premium 3 628 3 511 3 557
Other reserves 2 172 686 2 307
Retained earnings 4 935 4 020 4 376
Shareholders` interest in 10 745 8 227 10 250
capital and reserves
Minority interest 217 1 604 143
Total shareholders` 10 962 9 831 10 393
interest
Non-current liabilities
Long-term borrowings 4 2 793 1 342 1 449
Deferred tax liabilities 1 268 1 106 1 001
Long-term provisions 163 208 156
4 224 2 656 2 606
Current liabilities
Trade and other payables 614 637 627
Short-term provisions 59 35 47
Taxation 241 170 135
Overdrafts and short-term 4 927 691 803
borrowings
1 841 1 533 1 612
Total equity and 17 027 14 020 14 611
liabilities
Group Income Statements
Unaudited Reviewed Audited
Six months ended Year
ended
31 December 30 June
2006 2005 2006
Note Rm Rm Rm
Revenue 2 641 2 362 4 686
Sales 2 606 2 348 4 622
Cost of sales (1 425) (1 702) (3 304)
Gross profit 1 181 646 1 318
Other operating income 67 56 167
Other operating (209) (204) (373)
expenses
Profit from operations 1 039 498 1 112
before exceptional
items
Income from investments 24 10 24
Finance costs (151) (81) (134)
Income from associate 34 - -
Profit before taxation 946 427 1 002
and exceptional items
Exceptional items 5 14 116 139
Profit before taxation 960 543 1 141
Taxation (329) (166) (377)
Profit for the period 631 377 764
Attributable to:
Minority interest 71 130 163
Equity holders of ARM 560 247 601
631 377 764
Additional information
Headline earnings (R 548 131 462
million)
Headline earnings per 264 64 225
share (cents)
Basic earnings per 270 121 293
share (cents)
Fully diluted basic 267 120 291
earnings per share
(cents)
Fully diluted headline 261 64 223
earnings per share
(cents)
Number of shares in 208 457 204 864 206 367
issue at end of period
(thousand)
Weighted average number 207 218 204 724 205 072
of shares in issue
(thousand)
Weighted average number 209 751 205 810 206 780
of shares used in
calculating fully
diluted earnings per
share (thousand)
Net asset value per 5 155 4 016 4 967
share (cents)
Statement of Changes in Equity
Share Revalua-
capital tion of
and Minority listed
premium interest investments
Rm Rm Rm
Six months ended 31 December
2006 (Unaudited)
Balance at 30 June 2006 3 567 143 2 219
Basic earnings - 71 -
Share options exercised 71 - -
Revaluation of listed - - (185)
investments
Deferred tax on revaluation - - 27
of listed investments
Translation reserve on - 3 -
translation of subsidiary
Share based payments - - -
Other - - -
Balance at 31 December 2006 3 638 217 2 061
Six months ended 31 December
2005 (Reviewed)
Balance at 30 June 2005 3 507 1 461 (821)
Basic earnings - - -
Revaluation of listed - - 1 696
investments
Deferred tax on revaluation - - (247)
of listed investments
Translation reserve on - - -
translation of subsidiary
Share based payments - - -
Share options exercised 14 - -
Minority interest in - 130 -
earnings
Dividends paid to minorities - (60) -
TEAL Limited minorities - 73 -
Other - - -
Balance at 31 December 2005 3 521 1 604 628
Year ended 30 June 2006
(Audited)
Balance at 30 June 2005 3 507 1 461 (821)
Basic earnings - 163 -
Dividends paid to minorities - (60) -
Revaluation of listed - - 3 556
investments
Deferred tax on revaluation - - (516)
of listed investments
Transfer out of minority - (1 504) -
interest, Assmang now
accounted for as a joint
venture
Share based payments - - -
Share options exercised 60 - -
TEAL minorities in listing - 83 -
Realignment of currency - - -
Other - - -
Balance at 30 June 2006 3 567 143 2 219
Retained
Other earnings Total
Rm Rm Rm
Six months ended 31 December
2006 (Unaudited)
Balance at 30 June 2006 88 4 376 10 393
Basic earnings - 560 631
Share options exercised - - 71
Revaluation of listed - - (185)
investments
Deferred tax on revaluation of - - 27
listed investments
Translation reserve on - - 3
translation of subsidiary
Share based payments 22 - 22
Other 1 (1) -
Balance at 31 December 2006 111 4 935 10 962
Six months ended 31 December
2005 (Reviewed)
Balance at 30 June 2005 49 3 776 7 972
Basic earnings - 247 247
Revaluation of listed - - 1 696
investments
Deferred tax on revaluation of - - (247)
listed investments
Translation reserve on (6) - (6)
translation of subsidiary
Share based payments 14 - 14
Share options exercised - - 14
Minority interest in earnings - - 130
Dividends paid to minorities - - (60)
TEAL Limited minorities - - 73
Other 1 (3) (2)
Balance at 31 December 2005 58 4 020 9 831
Year ended 30 June 2006
(Audited)
Balance at 30 June 2005 49 3 776 7 972
Basic earnings - 601 764
Dividends paid to minorities - - (60)
Revaluation of listed - - 3 556
investments
Deferred tax on revaluation of - - (516)
listed investments
Transfer out of minority - - (1 504)
interest, Assmang now
accounted for as a joint
venture
Share based payments 34 - 34
Share options exercised - - 60
TEAL minorities in listing - - 83
Realignment of currency 3 - 3
Other 2 (1) 1
Balance at 30 June 2006 88 4 376 10 393
Group Cash Flow Statements
Unaudited Reviewed Audited
Six months ended Year
ended
31 December 30 June
2006 2005 2006
Rm Rm Rm
CASH FLOW FROM OPERATING
ACTIVITIES
Cash receipts from customers 2 112 2 799 4 856
Cash paid to suppliers and (1 561) (2 133) (3 613)
employees
Cash generated from operations 551 666 1 243
Interest received 20 10 24
Interest paid (134) (81) (137)
Dividends received 4 - 1
Dividends paid to minorities - (60) (60)
Taxation paid (89) (256) (384)
Net cash inflow from operating 352 279 687
activities
CASH FLOW FROM INVESTING
ACTIVITIES
Additions to property, plant (326) (391) (636)
and equipment to maintain
operations
Additions to property, plant (348) (303) (859)
and equipment to expand
operations
Proceeds on disposal of - 2 45
property, plant and equipment
Proceeds on disposal of 3 - -
investments
Proceeds on termination of 14 - -
agreement
Increase in loans and long-term - (8) -
receivables
Investment in associate (800) - -
Net cash effect on disposal of - - 18
0.35 percent of Assmang
Investments acquired - - (12)
Net cash (outflow) from (1 457) (700) (1 444)
investing activities
CASH FLOW FROM FINANCING
ACTIVITIES
Proceeds on exercise of share 71 14 60
options
Funding received from minority - 47 -
shareholders
Funding received from minority - - 226
shareholders at TEAL listing
Investment by minority - 215 -
shareholders
Long-term borrowings raised 1 371 391 881
Long-term borrowings repaid (154) (135) (183)
Increase/(decrease) in short- 31 129 (91)
term borrowings
Net cash inflow from financing 1 319 661 893
activities
Net increase in cash and cash 214 240 136
equivalents
Cash and cash equivalents at 193 (62) 47
beginning of period
Foreign currency translation on - (5) 10
cash balances
Cash and cash equivalents at 407 173 193
end of period
Cash generated from operations 266 325 606
per share (cents)
Notes to the Financial Statements
1. Basis of preparation
The results for the half-year have been prepared in accordance with the
International Financial Reporting Standards (IFRS) on an historical cost
convention, as modified by the revaluation of available-for-sale assets,
financial assets and financial liabilities (including derivative instruments) at
fair value through the income statement or the statement of changes in equity.
These consolidated financial statements are prepared in accordance with IAS 34 -
interim financial reporting.
The financial information for the half-year ended 31 December 2006 has been
prepared adopting the same accounting policies used in the most recent annual
financial statements.
Unaudited Reviewed Audited
Six months ended Year
ended
31 December 30 June
2006 2005 2006
Rm Rm Rm
2. INVESTMENT IN ASSOCIATE
Opening balance - - -
Movement for the period 800 - -
Income from associate 34 - -
Closing balance 834 - -
During the period ARM invested into the coal assets of Xtrata South Africa (Pty)
Limited (XSA).
The purchase cost allocations (initial business combination accounting) for all
these transactions have only been determined provisionally owing to delays in
finalising the audited effective date accounts and ongoing valuation work by the
company.
The investments were made as follows:
a. Investment in ARM Coal (Pty) Limited at a cost to ARM of R400 million and
XSA of R384 million. These funds were applied by ARM Coal to acquire a 20
percent interest (through participating preference shares in XSA) in the
existing coal mines of Xstrata Coal South Africa (XCSA).
The effective date of this transaction is 1 July 2006.
The purchase cost of R784 million has been provisionally allocated to:
Rm
Non-current assets 1 949
Current assets 153
Less:
Non-current liabilities 1 170
Current liabilities 148
784
b. With effect from 1 July 2006 ARM Coal (Pty) Limited acquired a 51 percent
interest in the Goedgevonden Joint Venture for R765 million, the remaining 49
percent being held by XSA. The acquisition was financed through debt funding
supplied by Xstrata.
The purchase cost of R765 million has been provisionally allocated to:
Rm
Non-current assets 1 114
Current assets 12
Less:
Non-current liabilities 316
Current liabilities 45
765
c. On 1 September 2006 ARM acquired a direct interest of 10 percent in XCSA
through an investment in participating preference shares in XSA at a cost of R
400 million.
The purchase cost of R400 million has been provisionally allocated to:
Rm
Non-current assets 1 079
Current assets 90
Less:
Non-current liabilities 702
Current liabilities 67
400
The coal segment results include the proportionally consolidated results for six
months of ARM Coal (Pty) Limited together with the four months equity accounted
results for the direct investment by ARM in XCSA.
Unaudited Reviewed Audited
Six months ended Year
ended
31 December 30 June
2006 2005 2006
Rm Rm Rm
3. INVESTMENTS
Opening balance 7 276 3 708 3 708
Unrealised revaluation (185) 1 696 3 556
(loss)/gain for the period
Other (3) - 12
Total carrying amount of 7 088 5 404 7 276
investments
4. BORROWINGS
Long-term borrowings are held
as follows
- African Rainbow Minerals 1 251 225 65
Limited
- Assmang Limited 4 13 5
- ARM Coal (Proprietary) 445 - -
Limited
- ARM Platinum (Proprietary) 295 459 351
Limited
- Two Rivers Platinum 798 645 1 028
(Proprietary) Limited
2 793 1 342 1 449
Overdrafts and short-term
borrowings are held as follows:
- African Rainbow Minerals 32 309 548
Limited
- Assmang Limited 139 225 45
- ARM Platinum (Proprietary) 159 148 187
Limited
- Two Rivers Platinum
(Proprietary) Limited
- Short-term borrowings 29 9 23
- Two Rivers Platinum
(Proprietary) Limited
- Implats shareholders` loan 568 - -
927 691 803
Total borrowings 3 720 2 033 2 252
Interest of R24 million was capitalised for the half-year ended 31 December 2006
(31 December 2005: R14 million, 30 June 2006: R29 million).
Unaudited Reviewed Audited
Six months ended Year
ended
31 December 30 June
2006 2005 2006
Rm Rm Rm
5. EXCEPTIONAL ITEMS
Profit on dilution in TEAL - 132 132
Profit on disposal of 0.35 - - 25
percent of Assmang (subsidiary
to joint venture)
Impairment of property, plant - (12) (10)
and equipment
Loss on disposal of 50 percent - - (6)
of Nkomati mine
Termination of agreement 14 - -
Other - (4) (2)
Exceptional items per income 14 116 139
statement
Taxation (2) - (3)
Profit on sale of property, - - 3
plant and equipment
Net exceptional items 12 116 139
6. HEADLINE EARNINGS
Basic earnings per income 560 247 601
statement
Profit on disposal of 0.35 - - (25)
percent of Assmang (subsidiary
to joint venture)
Impairment of property, plant - 12 10
and equipment
Profit on sale of property, - - (3)
plant and equipment
Loss on disposal of 50 percent - - 6
of Nkomati mine
Profit on dilution in TEAL - (132) (132)
Termination of agreement (14) - -
Other - 4 2
546 131 459
Taxation 2 - 3
Headline earnings 548 131 462
7. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments in respect of future capital expenditure which will be funded from
operating cash flows and by utilising debt facilities at entity and corporate
levels, are summarised below:
Approved by directors
- contracted for 2 518 689 673
- not contracted for 563 801 1 641
Total commitments 3 081 1 490 2 314
Contingent liabilities
Shareholders are advised that there have been no significant changes to the
contingent liabilities of the group as disclosed in the June 2006 annual report.
ARM Platinum
Division Ferrous
Platinum Nickel metals Coal
Rm Rm Rm Rm
8. SEGMENTAL INFORMATION
Primary segmental information
(Unaudited)
Six months ended 31 December
200)
Sales
External sales 899 393 1 298 16
Cost of sales (442) (107) (868) (8)
Other operating income - (1) 17 -
Other operating expenses (3) (1) (59) -
Segment result 454 284 388 8
Income from investments 4 1 5 -
Finance cost (55) - (2) (21)
Income from associate - - - 34
Exceptional items - - - -
Taxation (111) (85) (130) 3
Minority interest (94) - - -
Contribution to earnings 198 200 261 24
Contribution to headline 198 200 261 24
earnings
Other information
Segment assets 4 388 518 3 046 1 432
Taxation
Consolidated total assets
Segment liabilities 2 008 39 418 451
Taxation
Consolidated total liabilities
Cash in/(out) flow from (7) 233 286 (13)
operating activities
Cash in/(out) flow from (222) (79) (328) (420)
investing activities
Cash in/(out) flow from 240 - 93 33
financing activities
Capital expenditure 251 74 315 20
Amortisation and depreciation 77 15 100 -
Corporate
Explora- and
tion other Gold Total
Rm Rm Rm Rm
8. SEGMENTAL INFORMATION
Primary segmental
information (Unaudited)
Six months ended 31 December
2006
Sales
External sales - - - 2 606
Cost of sales - - - (1
425)
Other operating income - 51 - 67
Other operating expenses (65) (81) - (209)
Segment result (65) (30) - 1 039
Income from investments 3 11 - 24
Finance cost - (73) - (151)
Income from associate - - - 34
Exceptional items - 14 - 14
Taxation - (6) - (329)
Minority interest 23 - - (71)
Contribution to earnings (39) (84) - 560
Contribution to headline (39) (96) - 548
earnings
Other information
Segment assets 137 407 7 17 004
076
Taxation 23
Consolidated total assets 17 027
Segment liabilities 18 1 622 - 4 556
Taxation 1 509
Consolidated total 6 065
liabilities
Cash in/(out) flow from (60) (87) - 352
operating activities
Cash in/(out) flow from (24) (384) - (1
investing activities 457)
Cash in/(out) flow from - 953 - 1 319
financing activities
Capital expenditure 24 - - 684
Amortisation and - - - 192
depreciation
ARM Platinum
Division Ferrous
Platinum Nickel metals Coal
Rm Rm Rm Rm
8. SEGMENTAL INFORMATION
(continued)
Primary segmental
information (Reviewed)
Six months ended 31
December 2005
Sales
External sales 309 169 1 870 -
Cost of sales (292) (95) (1 -
315)
Other operating income - 21 16 -
Other operating expenses (1) (22) (126) -
Segment result 16 73 445 -
Income from investments 1 1 1 -
Finance cost (45) - (16) -
Exceptional items - - - -
Taxation 8 (22) (155) -
Minority interest 3 - (137) -
Contribution to earnings (17) 52 138 -
Contribution to headline (17) 52 138 -
earnings
Other information
Segment assets 2 707 272 5 089 -
Taxation - - - -
Consolidated total assets
Segment liabilities 1 390 17 738 -
Taxation - - - -
Consolidated total
liabilities
Cash in/(out) flow from (10) 22 214 -
operating activities
Cash in/(out) flow from (368) (12) (318) -
investing activities
Cash in /(out) flow from 213 - 65 -
financing activities
Capital expenditure 395 14 313 -
Amortisation and 50 22 148 -
depreciation
Corporate
Explora- and
tion other Gold Total
Rm Rm Rm Rm
8. SEGMENTAL INFORMATION
(continued)
Primary segmental
information (Reviewed)
Six months ended 31
December 2005
Sales
External sales - - - 2 348
Cost of sales - - - (1
702)
Other operating income - 19 - 56
Other operating expenses (10) (45) - (204)
Segment result (10) (26) - 498
Income from investments 1 6 - 10
Finance cost - (20) - (81)
Exceptional items - 116 - 116
Taxation - 3 - (166)
Minority interest 4 - - (130)
Contribution to earnings (5) 79 - 247
Contribution to headline (5) (37) - 131
earnings
Other information
Segment assets 214 268 5 401 13 951
Taxation - - - 69
Consolidated total assets 14 020
Segment liabilities 10 758 - 2 913
Taxation - - - 1 276
Consolidated total 4 189
liabilities
Cash in/(out) flow from 2 51 - 279
operating activities
Cash in/(out) flow from (3) 1 - (700)
investing activities
Cash in /(out) flow from 216 167 - 661
financing activities
Capital expenditure - - - 722
Amortisation and - - - 220
depreciation
ARM Platinum
Division Ferrous
Platinum Nickel metals Coal
Rm Rm Rm Rm
8. SEGMENTAL INFORMATION
(continued)
Year ended 30 June 2006
(Audited)
Sales
External sales 767 444 3 411 -
Cost of sales (608) (191) (2 -
505)
Other operating income - 25 78 -
Other operating expenses (6) (16) (179) -
Segment result 153 262 805 -
Income from investments 4 1 4 -
Finance cost (87) - (15) -
Exceptional items - - - -
Taxation (20) (78) (277) -
Minority interest (8) - (176) -
Contribution to earnings 42 185 341 -
Contribution to headline 42 185 338 -
earnings
Other information
Segment assets 3 710 396 2 731 -
Taxation - - - -
Consolidated total assets 3 710 396 2 731 -
Segment liabilities 1 810 29 367 -
Taxation
Consolidated total
liabilities
Cash in/(out) flow from (45) 224 723 -
operating activities
Cash in/(out) flow from (878) (41) (526) -
investing activities
Cash in/(out) flow from 507 - (117) -
financing activities
Capital expenditure 1 064 50 554 -
Amortisation and 121 31 288 -
depreciation
Corporate
Explora- and
tion other Gold Total
Rm Rm Rm Rm
8. SEGMENTAL INFORMATION
(continued)
Year ended 30 June 2006
(Audited)
Sales
External sales - - - 4 622
Cost of sales - - - (3 304)
Other operating income 2 62 - 167
Other operating expenses (74) (98) - (373)
Segment result (72) (36) - 1 112
Income from investments 4 11 - 24
Finance cost - (32) - (134)
Exceptional items - 139 - 139
Taxation - (2) - (377)
Minority interest 21 - - (163)
Contribution to earnings (47) 80 - 601
Contribution to headline (47) (56) - 462
earnings
Other information
Segment assets 195 296 7 261 14 589
Taxation - 22 - 22
Consolidated total assets 195 318 7 261 14 611
Segment liabilities 18 858 - 3 082
Taxation 1 136
Consolidated total 4 218
liabilities
Cash in/(out) flow from (44) (171) - 687
operating activities
Cash in/(out) flow from (2) 3 - (1 444)
investing activities
Cash in/(out) flow from 226 277 - 893
financing activities
Capital expenditure 2 1 - 1 671
Amortisation and - - - 440
depreciation
Additional information
for the six months ended 31 December 2006
Total
Two Modikwa Platinum
Rivers
Platinum Rm Rm Rm
SEGMENTAL INFORMATION
Six months ended 31 December
2006 (Unaudited)
Sales
External sales 366 533 899
Cost of sales (113) (329) (442)
Other operating income - - -
Other operating expenses (2) (1) (3)
Segment result 251 203 454
Income from investments 2 2 4
Finance cost (18) (37) (55)
Taxation (65) (46) (111)
Minority interest (73) (21) (94)
Contribution to earnings 97 101 198
Contribution to headline 97 101 198
earnings
Other information
Segment assets 2 239 2 149 4 388
Segment liabilities 1 470 538 2 008
Cash in/(out) flow from (179) 172 (7)
operating activities
Cash in/(out) flow from (170) (52) (222)
investing activities
Cash in/(out) flow from 319 (79) 240
financing activities
Capital expenditure 198 53 251
Amortisation and depreciation 29 48 77
Six months ended 31 December
2005 (Reviewed)
Sales
External sales - 309 309
Cost of sales - (292) (292)
Other operating expenses - (1) (1)
Segment result - 16 16
Income from investments - 1 1
Finance cost - (45) (45)
Taxation - 8 8
Minority interest - 3 3
Contribution to earnings - (17) (17)
Contribution to headline - (17) (17)
earnings
Other information
Segment assets 713 1 994 2 707
Segment liabilities 671 719 1 390
Cash in/(out) flow from (12) 2 (10)
operating activities
Cash in/(out) flow from (303) (65) (368)
investing activities
Cash in/(out) flow from 273 (60) 213
financing activities
Capital expenditure 330 65 395
Amortisation and depreciation - 50 50
Iron ore Manganese Chrome Ferrous
division division division Total
Assmang 100% Rm Rm Rm Rm
SEGMENTAL INFORMATION
Six months ended 31
December 2006 (Unaudited)
Sales
External sales 864 1 097 635 2 596
Other operating income 1 52 1 54
Other operating expenses (35) (58) (45) (138)
Operating profit 365 380 31 776
Contribution to earnings 260 244 21 525
Contribution to headline 260 244 21 525
earnings
Other information
Segment assets 2 494 2 016 1 630 6 140
Segment liabilities 1 106 (472) 1 276 1 910
Cash in/(out) flow from 138 129 154 421
operating activities
Cash in/(out) flow from (483) (87) (86) (656)
investing activities
Cash in/(out) flow from 650 (399) (65) 186
financing activities
Capital expenditure 483 87 87 657
Amortisation and 80 77 43 200
depreciation
Six months ended 31
December 2005 (Reviewed)
Sales
External sales 619 805 446 1 870
Other operating income 7 14 (5) 16
Other operating expenses (21) (43) (62) (126)
Operating profit 237 238 (30) 445
Contribution to earnings 169 152 (46) 275
Contribution to headline 169 152 (46) 275
earnings
Other information
Segment assets 1 273 2 201 1 615 5 089
Segment liabilities 370 19 1 206 1 595
Cash in/(out) flow from 217 (90) 87 214
operating activities
Cash in/(out) flow from (118) (109) (91) (318)
investing activities
Cash in/(out) flow from (16) 98 (17) 65
financing activities
Capital expenditure 112 109 92 313
Amortisation and 47 55 46 148
depreciation
Shareholder information
Issued share capital as at 31 December 2006 208 456 743
Market capitalisation as at 31 December 2006 R21 billion
Share price as at 31 December 2006 R101,00
Primary listing JSE Limited
Ticker symbol `ARI`
Disclaimer
This presentation contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and 21E of the Securities
Exchange Act of 1934, as amended, that are intended to be covered by the safe
harbour created by such sections. All statements other than those of historical
facts included in this presentation are forward-looking statements including,
without limitation, (i) estimates of future earnings, and the sensitivity of
earnings to commodity prices; (ii) estimates of future commodity production and
sales, (iii) estimates of future cash costs; (iv) estimates of future cash
flows, and the sensitivity of cash flows to commodity prices; (v) statements
regarding future debt repayments; (vi) estimates of future capital expenditures;
(vii) estimates of reserves, and statements regarding future exploration results
and the replacement of reserves. Where the Company expresses or implies an
expectation or belief as to future events or results, such expectation or belief
is expressed in good faith and believed to have a reasonable basis. However,
forward-looking statements are subject to risks, uncertainties and other
factors, which could cause actual results to differ materially from future
results expressed, projected or implied by such forward-looking statements. Such
risks include, but are not limited to, commodity price volatility, currency
fluctuations, increased production costs and variances in ore grade or recovery
rates from those assumed in mining plans, as well as political and operational
risks in the countries in which we operate and governmental regulation and
judicial outcomes. The Company does not undertake any obligation to release
publicly any revisions to any "forward-looking statement" to reflect events or
circumstances after the date of this presentation, or to reflect the occurrence
of unanticipated events, except as may be required under applicable securities
laws.
Contact details and administration
Registered office
ARM House
29 Impala Road
Chislehurston
Sandton 2196
PO Box 786136
Sandton
2146
Telephone: +27 11 779 1300
Telefax: +27 11 779 1312
E-mail: ir.admin@arm.co.za
Website: http://www.arm.co.za
Investor relations
Pieter Rorich
Executive Director: Investor Relations and New Business Development
Telephone: +27 11 779 1476
E-mail: pieter.rorich@arm.co.za
Corne Bobbert
Corporate Development
Telephone: +27 11 779 1478
E-mail: corne.bobbert@arm.co.za
Company Secretary
Pat Smit
Telephone: +27 11 779 1480
E-mail: patricia.smit@arm.co.za
Transfer secretaries
Computershare Investor Services 2004 (Pty) Limited
Ground Floor, 70 Marshall Street
Johannesburg 2001
PO Box 61051
Marshalltown
2107
Telephone: +27 11 370 5000
Telefax: +27 11 688 5222
E-mail: web.queries@computershare.co.za
Website: http://www.computershare.co.za
Directors
PT Motsepe (Executive Chairman)
RP Menell (Deputy Chairman)*
AJ Wilkens (Chief Executive Officer)
F Abbott
Dr MMM Bakane-Tuoane**
JA Chissano (Mozambican)**
WM Gule
MW King**
AK Maditsi**
KS Mashalane
JR McAlpine**
PC Rorich
Dr RV Simelane**
MV Sisulu**
JC Steenkamp
ZB Swanepoel*
*Non-executive
**Independent non-executive
REGISTERED AND CORPORATE OFFICE
ARM House
29 Impala Road
Chislehurston, Sandton 2146
www.arm.co.za
19 February 2007
Sponsor: Deutsche Securities (Pty) Limited
Date: 20/02/2007 08:00:03 Produced by the JSE SENS Department.
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