Final Results
Anglovaal Mining Limited
('Avmin' or 'the Company')
Reviewed Results for the year ended 30 June 2002
Salient features
• Exceptional performance from Assmang
• Iscor shareholding sold for significant gain
• Significant impairment of Chambishi Metals
• Substantial interest acquired by Anglo American
GROUP BALANCE SHEET 2002 2001
at 30 June Rm Rm
ASSETS
Non-current assets
Tangible assets 5 686 5 987
Intangible assets 7 9
Deferred tax assets 38 47
Environmental rehabilitation trust funds 64 59
Investments 176 1 186
5 971 7 288
Current assets
Inventories 976 722
Trade and other receivables 1 060 664
Taxatin - 1
Deposits and cash 779 439
2 815 1 826
Total assets 8 786 9 114
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 6 6
Share premium 62 56
Non-distributable reserves 110 679
Distributable reserves 2 401 3 267
Shareholders' interest in capital and reserves 2 579 4 008
Minority interest 2 012 1 483
Total shareholders' interest 4 591 5 491
Non-current liabilities
Long-term borrowings 1 181 921
Deferred tax liabilities 493 360
Long-term provisions 215 196
1 889 1 477
Current liabilities
Trade and other payables 637 387
Provisions 62 116
Taxation 45 78
Derivative instruments 47 11
Overdrafts and short-term borrowings 1 515 1 554
2 306 2 146
Total equity and liabilities 8 786 9 114
GROUP INCOME STATEMENT 2002 2001
for the year ended 30 June Rm Rm
Revenue 4 047 2 806
Cost of sales 2 985 2 083
Gross profit 1 062 723
Other operating income 215 211
Other operating expenses 478 338
Profit from operations 799 596
Income from investments 55 108
Finance costs 160 132
Profit before taxation and exceptional items 694 572
Exceptional items (1 084) -
Profit/(Loss) before taxation (390) 572
Taxation 313 167
Profit/(Loss) from ordinary activities (703) 405
Minority interest 163 124
Earnings/(Loss) (866) 281
Headline earnings 204 281
Basic earnings/(Loss) per share (cents) (780) 259
Headline earnings per share (cents) 184 259
Number of shares in issue at end of year (thousand) 111 444 110 105
Weighted average number of shares in issue 110 977 108 379
(thousands)
GROUP CASH FLOW STATEMENT 2002 2001
for the year ended 30 June Rm Rm
CASH FLOW FROM OPERATING ACTIVITIES
Cash receipts from customers 3 823 2 967
Cash paid to suppliers and employees 3 204 2 441
Cash generated from operations 619 526
Interest received 55 106
Interest paid (160) (132)
Dividends received 2 2
Dividends paid (23) (1 222)
Capital distribution - (1 697)
Taxation paid (197) (237)
Net cash inflow/(outflow) from operating activities 296 (2 654)
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of joint venture and subsidiaries - 6
Additions to fixed assets to maintain operations (122) (291)
Additions to fixed assets to expand operations (1 101) (1 793)
Proceeds on disposal of fixed assets 6 2
Proceeds on disposal of investments 1 007 12
Proceeds on dilution in subsidiaries 139 4
Other investments acquired - (497)
Net cash outflow from investing activities (71) (2 557)
CASH FLOW FROM FINANCING ACTIVITIES
Increase in shareholder funding 6 -
Funding received from minority shareholders 264 182
Long-term borrowings raised 314 726
Long-term borrowings repaid (153) (4)
Increase/(Decrease) in short-term borrowings (316) 599
Decrease in treasury liabilities - (13)
Net cash inflow from financing activities 115 1 490
Net increase/(decrease) in cash and cash equivalents 340 (3 721)
Cash and cash equivalents at beginning of year 439 4 160
Cash and cash equivalents at end of year 779 439
Cash generated from operations per share (cents) 558 485
HEADLINE EARNINGS Year ended Year ended
30 June 30 June
2002 2001
Rm Rm
Earnings/(loss) per income statement (866) 281
Impairment of asset - Chambishi 1 619 -
Provisions for guarantees 5 -
Surplus on disposal of investments (540) -
218 281
Taxation 52 -
Minority interest (66) -
Headline earnings 204 281
NOTES TO THE FINANCIAL STATEMENTS
ACCOUNTING POLICY
The annual financial statements are prepared on the historical cost basis as
adjusted for the revaluation of certain freehold land and buildings, and the
fair value revaluation of non-current listed investments and are in accordance
with South African Statements of Generally Accepted Accounting Practice and
International Accounting Standards. The accounting policies are consistent with
the prior year.
SEGMENTAL INFORMATION
Precious Cobalt/ Ferrous Corporate
Rm metals Copper Nickel metals and other Total
Year to 30 June 2002
External revenue 364 548 326 2 809 - 4 047
Contribution to 21 (2 175) 122 270 896 (866)
earnings
Contribution to 21 (221) 122 270 12 204
headline earnings
Consolidated total 3 138 1 282 250 3 339 777 8 786
assets
Consolidated total 959 1 148 69 1 211 808 4 195
liabilities
Capital expenditure 466 362 22 372 1 1 223
Year to 30 June 2001
External revenue 218 326 327 1 926 9 2 806
Contribution to 39 (64) 130 153 23 281
earnings
Contribution to 39 (64) 130 153 23 281
headline earnings
Consolidated total 2 688 2 080 206 2 589 1 551 9 114
assets
Consolidated total 517 1 704 58 1 400 (56) 3 623
liabilities
Capital expenditure 600 834 21 626 3 2 084
The financial information set out in the reviewed results has been reviewed by
the Company's auditors Ernst & Young. Their unqualified opinion is available
for inspection at the Company's registered office.
GROUP STATEMENT OF CHANGES IN EQUITY
Share
capital Foreign
and currency Revaluation Retained
Rm premium translation surplus Other earnings Total
Balance at
30 June 2001 62 6 638 35 3 267 4 008
Earnings - - - - (866) (866)
Revaluation of - - 65 - - 65
listed
investments
Disposal of - - (562) - - (562)
listed
investments
Foreign entity - (48) - - - (48)
translation
Share options 6 - - - - 6
exercised
Unrealised loss - - - (26) - (26)
on currency
derivative
contracts
Other - - - 2 - 2
Balance at 30 68 (42) 141 11 2 401 2 579
June 2002
Balance at 30 60 6 3 47 2 971 3 087
June 2000
Earnings - - - - 281 281
Revaluation of - - 635 - - 635
listed
investments
Share options 2 - - - - 2
exercised
Reallocation of - - - (12) 12 -
reserves
Other - - - - 3 3
Balance at 30 62 6 638 35 3 267 4 008
June 2001
COMMENTARY
INTRODUCTION
We have pleasure in submitting our report to shareholders on an eventful year.
Three significant events occurred during the period under review: firstly, the
Company disposed of its entire shareholding in Iscor Limited to Deutsche Bank
and Stimela Mining Limited for a total consideration of R911 million,
representing a gain of R417 million; secondly, on 29 January 2002, the Company
announced a decision to write-down its Chambishi Metals plc (Chambishi)
investment by R1 619 million; and thirdly Anglo American plc (Anglo American)
acquired, subject to regulatory approvals, 34,9 per cent of Avmin from Arctic
Resources Limited, effective 12 March 2002, which resulted in the elimination
of Avmin's historical control structure.
All the divisions performed well during the year, particularly Assmang Limited
(Assmang), but this was offset by the losses incurred at Chambishi. For the
year ended 30 June 2002, Avmin recorded headline earnings of R204 million (30
June 2001: R281 million).
The Avmin Group has a 42 per cent net debt/equity ratio. A variety of options
are being considered to reduce this level of debt.
REVIEW OF OPERATIONS
Assmang's headline earnings increased by 92 per cent to R443 million from R231
million. A weakening South African rand exchange rate was the main contributing
factor to this increase. The restructuring of the businesses into three
distinct operating entities; manganese, iron ore and chrome continued. Good
cost containment and improving efficiencies also contributed to the higher
earnings.
The manganese division, consisting of the manganese mines as well as an alloy
smelter, once again had a pleasing year with a contribution to overall
operating profit of R582 million. Manganese ore sales, excluding sales to the
company's manganese smelter, were higher at 993 000 tons (979 000 tons).
Manganese alloy sales were slightly lower at 187 000 tons (193 000 tons). Iron
ore sales rose as a result of a full year's production from the new jig plant
to 4,8 million tons (4,3 million tons). Chrome alloy sales, fed by Assmang's
chrome mine, Dwars Rivier, were 190 000 tons (125 000 tons).
Assmang continued its significant capital expenditure programme spending R372
million (R626 million) during the year, the majority on its two major projects:
the new chrome alloy smelter and the new shaft at its Nchwaning manganese mine.
Assmang has spent R1,8 billion over the last five years on re-capitalising and
expanding its businesses.
Avgold Limited's (Avgold) headline earnings for the year ended 30 June 2002
were R36 million (R39 million). The operating profit was R17 million (R28
million) and unrealised foreign exchange gains increased income before taxation
to R41 million (R39 million). Total gold sales for the year increased to 4
179kg (2 842kg), the average yield was 8,56g/t (9,18g/t), and the cash cost was
R64 277/kg (R58 698/kg), or US$198/oz (US$241/oz). The company received an
average gold price over the year of R86 794/kg (R76 586/kg), or US$306/oz
(US$315/oz), which includes the results of hedging activities. Avgold's hedge
book at year-end represented 60 per cent of forecast gold production for the
next 48 months and had a negative mark-to-market value of R873 million. The
hedge book continues to be actively managed and is not subject to margin calls.
The Target project was completed within budget during the year at a cost of
R2,1 billion. The mine contributed to the income statement from 1 May 2002;
during the two months the mine milled 172 500 tonnes to sell 1 374 kg of gold
at a cash operating cost of US$156 per ounce. On start-up, Target experienced
minor mill problems, which have been resolved, and grade dilution issues that
are being addressed.
During the year, ETC finalised a restructuring process, at a retrenchment cost
of R4,7 million. Following various infrastructure changes, planned mining
grades were achieved on a consistent basis. ETC's three mines - Sheba, New
Consort and Fairview - milled a total of 315 523 tonnes (309 506 tonnes) for
the year at an average yield of 8,89g/t (9,18g/t). Gold sales were lower at 2
805kg (2 842kg) and the cash cost increased in rand terms to R69 805/kg (R58
698/kg), but declined in dollar terms to US$215/oz (US$241/oz).
The current Paradise surface exploration drilling programme in the Northern
Free State has been completed. The results to date have proven that the
Eldorado fan extends northwards and has delineated the important geological
structures. The ore resource model is currently being updated and this
information will be published during October 2002.
Two Rivers Platinum (Proprietary) Limited is jointly owned by Avmin (55 per
cent) and Impala Platinum Holdings Limited (45 per cent). During the past year
a R60 million feasibility study to mine and process the UG2 ores was
undertaken. It will be completed by October 2002; initial results confirm the
pre-feasibility work done prior to the purchase of this asset.
Chambishi experienced a very challenging year with furnace availability of only
65 per cent. In November 2001, following a second refractory lining failure,
the decision was made to contract a Canadian company to redesign the furnace
cooling system and refractory lining. The redesigned furnace has been installed
this quarter and recommissioned and full output levels are expected in December
2002. During the year under review 2 600 tons of cobalt were produced from the
toll refining roaster operation, which operated well, and 1 100 tons of cobalt
from the smelter. The design smelter capacity exceeds 4 500 tons of cobalt per
year. As a result of this poor output and a lower cobalt price of US$7,56/lb
(US$11,37/lb), Chambishi recorded a pre-interest operating loss of US$12
million (US$11 million - loss) and a loss, post interest, of US$19 million
(US$12 million - loss). Inclusive of the write-down, the overall loss was
US$195 million.
Nkomati mine experienced lower US dollar prices for its products compared to
last year but the weaker rand, especially during the first half of the
financial year, and a maintained yield enabled the mine to perform very much in
line with the previous year. The mine milled 260 000 tons (280 000 tons) of
ore, producing 46 000 tons (41 000 tons) of concentrate at an average nickel
grade in concentrate of 9,33 per cent (10,47 per cent).
Nkomati sold a slightly lower 3 900 tons (4 000 tons) of nickel as well as 3
000 tons (2 500 tons) of copper, 52 tons (54 tons) of cobalt and 35 000 ounces
(32 600 ounces) of platinum group metals (PGMs). Excluding nickel, other metals
contributed 42 per cent of the mine's total revenue. The nickel price averaged
US$2,69/lb (US$3,28/lb) during the year. The mine's cash cost to produce
nickel, net of by-products, was US$0.32/lb (minus - US$0,82/lb).
Operating profit declined to R209 million (R241 million) and after adding other
income, mainly interest received, profit before tax was slightly lower at R221
million (R249 million).
A feasibility study to expand the mine, plant and infrastructure was completed
in the last quarter. The study envisages the annual production of 16 000 tons
of refined nickel, 9 000 tons of refined copper, 900 tons of cobalt oxides, and
80 000 ounces of PGMs for toll refining. The capital cost will exceed R2
billion. Environmental and mining permits are being processed.
SAFETY, HEALTH AND SUSTAINABLE DEVELOPMENT
Despite a generally improved safety performance, the board reports with regret
that one fatal accident occurred within the Group during the year; Mr Aaron
Ndhlovu died from a fall of ground at ETC. Mr Ndhlovu's death is viewed as a
tragedy and the board extends its condolences to his family.
HIV/AIDS continues to be a concern. Prevalence testing was completed throughout
the Group during the year and a comprehensive management plan was devised and
is presently being implemented.
Over the last few years, Avmin has been involved in the Global Mining
Initiative, which, through the Mining, Minerals and Sustainable Development
grouping, is assessing the role that the mining, minerals and metals industries
can play in contributing to a global transition towards a more sustainable
future. The Avmin Sustainable Development Report, 2002, will soon be posted to
all shareholders, together with the annual report. This report details the
Group's activities in contributing to a sustainable future.
MINERALS AND PETROLEUM RESOURCES DEVELOPMENT BILL
The Avmin Group is continuing to work through the Chamber of Mines of South
Africa and participating, along with all industry stakeholders, in constructive
dialogue to arrive at practical legislative proposals for the new Minerals and
Petroleum Resources Development Bill (the Bill) that was tabled in parliament
in June 2002. All stakeholders are awaiting two additional pieces of
legislation: the re-drafted Empowerment Charter and the Money Bill. Various
Economic Empowerment initiatives are underway within the Avmin Group that will
assist in dealing with issues arising from the Bill.
DIVIDENDS
No dividends were declared for the year ended 30 June 2002 in terms of bank
covenants.
DIRECTORATE
During May 2002, the board announced the retirement of Mr Kennedy Maxwell as
chairman, effective 30 June 2002, and Mr Rick Menell was appointed as his
successor. Ken has agreed to remain a non-executive director and continues to
chair the audit and remuneration committees. Mr David Murray, previously
Avmin's chief operating officer, has succeeded Rick as the Company's chief
executive officer. The board has appreciated Ken's expertise, guidance and
commitment to the Company during his term of office as chairman.
Following the introduction of Anglo American as a major shareholder in Avmin,
Messrs David Barber, Philip Baum and Barry Davison were appointed non-executive
directors. We have welcomed their prudent guidance over the last few meetings
and look forward to their continued involvement. Dr Vincent Maphai, a director
since 1998, decided to resign during the year as a result of his varied and
extensive external commitments. Together with the rest of the board we thank
him for his contribution.
OUTLOOK
The major challenges ahead for the Company are to deliver Chambishi's technical
performance objectives and to ensure design output levels at the Target mine
are achieved. Earnings growth for the current year will depend on meeting these
challenges and also, to a large extent, on the Rand/US dollar exchange rates
remaining at current or weaker levels, recoveries in commodity markets and, in
particular, a higher cobalt price than the current level of US$7,00/lb.
RICK MENELL Chairman
DAVID MURRAY Chief executive officer
Johannesburg
12 September 2002
Anglovaal Mining Limited,
Registration No 1933/004580/06,
Incorporated in the Republic of South Africa,
JSE Securities Exchange South Africa
Share code: AIN ISIN: ZAE000017141 and
London Stock Exchange 91CJ
(Avmin or the Company)
Executive directors: R P Menell (chairman), D N Murray (chief executive
officer).
Non-executive directors: D D Barber, P M Baum, B E Davison (alt: W A Nairn),
B Frank, D E Jowell, N Livnat, K W Maxwell, J R McAlpine, B M Menell,Dr M Z
Nkosi,
R Oron.
Group company secretary: R H Phillips
Registered Office: 56 Main Street, Johannesburg 2001,
PO Box 62379, Marshalltown 2107, South Africa
For further information: e-mail juliang@avmin.co.za.
www.avmin.co.za
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