Final Results
Anglovaal Mining Limited
('Avmin' or the 'Company')
Registration No 1933/004580/06
Incorporated in the Republic of South Africa
JSE Securities Exchange
South Africa Share code: AIN
ISIN: ZAE000017141
London Stock Exchange: AGM
REVIEWED GROUP RESULTS FOR THE YEAR ENDED 30 JUNE 2003
Highlights
* Headline earnings* up 18% to R241 million
* After tax operating cash flow up 113% to R630 million
* Net gearing reduced to 11% from 42%
* US$ borrowings fully repaid by 31 August 2003
* Sale of Chambishi and ETC reduces Group risk profile
*before unrealised non-hedge derivatives
BALANCE SHEET
at 30 June
Reviewed Audited
2003 2002
Rm Rm
ASSETS
Non-current assets
Tangible assets 4 786 5 686
Intangible assets 6 7
Deferred tax assets 12 38
Environmental 45 64
rehabilitation trust funds
Investments 215 176
5 064 5 971
Current assets
Inventories 896 976
Trade and other 936 1 060
receivables
Deposits and cash 265 779
2 097 2 815
Total assets 7 161 8 786
EQUITY AND LIABILITIES
Capital and reserves
Ordinary share capital 6 6
Share premium 79 62
Non-distributable reserves 218 110
Distributable reserves 2 208 2 401
Shareholders' interest in 2 511 2 579
capital and reserves
Minority interest 2 451 2 012
Total shareholders' 4 962 4 591
interest
Non-current liabilities
Long-term borrowings - 1 181
Deferred tax liabilities 519 493
Long-term provisions 153 215
Non-hedge derivatives 103 -
775 1 889
Current liabilities
Trade and other payables 521 637
Provisions 39 62
Taxation 42 45
Derivative instruments - 47
Overdrafts and short-term 822 1 515
borrowings
1 424 2 306
Total equity and 7 161 8 786
liabilities
INCOME STATEMENT
for the year ended 30 June
Revenue 4 896 4 047
Cost of sales (3 882) (2 985)
Gross profit 1 014 1 062
Other operating income 424 215
Other operating expenses (814) (478)
Unrealised loss on (103) -
non-hedge derivatives
Profit from operations 521 799
Income from investments 83 55
Finance costs (180) (160)
Profit before taxation and 424 694
exceptional items
Exceptional items (388) (1 084)
- Loss on disposal of (649) -
discontinued operations
- Other exceptional items 261 (1 084)
Profit before taxation 36 (390)
Taxation (147) (313)
Loss from ordinary (111) (703)
activities
Minority interest (80) (163)
Loss (191) (866)
Additional information
Headline earnings 197 204
Headline earnings before 241 204
unrealised
non-hedge derivatives
Headline earnings per 176 184
share (cents)
Headline earnings per 215 184
share before unrealised
non-hedge derivatives
(cents)
Attributable loss per (170) (780)
share (cents)
Fully diluted attributable (169) (771)
loss per share (cents)
Number of shares in issue 112 602 111 444
at end of
year (thousands)
Weighted average number of 112 046 110 977
shares in
issue (thousands)
Discontinued operations
included above
Revenue 614 548
Cost of sales (574) (561)
Other operating income 32 2
Other operating expenses (92) (107)
Loss from operations (20) (118)
Finance costs (46) (73)
Exceptional items (50) (2 019)
Taxation (24) -
Loss (140) (2 210)
CASH FLOW STATEMENT
for the year ended 30 June
Reviewed Audited
2003 2002
Rm Rm
CASH FLOW FROM OPERATING
ACTIVITIES
Cash receipts from 5 009 3 823
customers
Cash paid to suppliers and (4 160) (3 204)
employees
Cash generated from 849 619
operations
Interest received 80 55
Interest paid (180) (160)
Dividends received 3 2
Dividends paid (21) (23)
Taxation paid (101) (197)
Net cash inflow from 630 296
operating
activities
CASH FLOW FROM INVESTING
ACTIVITIES
Additions to fixed assets (420) (122)
to maintain operations
Additions to fixed assets (132) (1 101)
to expand operations
Chambishi: Net cash effect (67) -
on sale
Net proceeds from sale of 252 -
ETC mine
Proceeds on disposal of 8 6
fixed assets
Proceeds on disposal of - 1 007
investments
Proceeds on dilution of 564 139
interest in
investment in subsidiaries
Net cash inflow/(outflow) 205 (71)
from investing
activities
CASH FLOW FROM FINANCING
ACTIVITIES
Increase in shareholder 17 6
funding
Funding received from 11 264
minority shareholders
Long-term borrowings - 314
raised
Long-term borrowings (901) (153)
repaid
Decrease in short-term (476) (316)
borrowings
Net cash (outflow)/inflow (1 349) 115
from financing
activities
Net (decrease)/increase in (514) 340
cash and cash
equivalents
Cash and cash equivalents 779 439
at beginning of year
Cash and cash equivalents 265 779
at end of year
Cash generated from 758 558
operations:
per share (cents)
NOTES TO FINANCIAL
STATEMENTS
HEADLINE EARNINGS
Loss per income statement (191) (866)
- Impairment of assets - 1 619
- Surplus on disposal of (261) (540)
investments and
mineral rights
- Loss on sale of 649 -
Chambishi
- Provisions - 5
197 218
- Taxation 4 52
- Minority interest (4) (66)
Headline earnings 197 204
EXCEPTIONAL ITEMS
Surplus on disposal of - 343
Iscor Limited investment
Surplus on disposal of - 75
Kumba Resources
Limited options
Surplus on disposal of 241 48
Avgold Limited shares
Surplus on disposal - 20 74
other
Provision for guarantee - (5)
Loss on sale of Chambishi (649) -
Foreign exchange profit on
Chambishi
- debtors book - 400
Impairment of assets - - (2 019)
Chambishi
Exceptional items per (388) (1 084)
income statement
Taxation 4 (52)
Minority interest (4) 66
Net exceptional items (388) (1 070)
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 Financial Reporting Standards. The accounting
policies are consistent with the prior year.
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 June
Foreign
Rm Share currency Revaluation Other Distri- Total
capital translation surplus butable
reserves
and premium
Balance at 30 62 6 638 35 3 267 4 008
June 2001
Earnings - - - - (866) (866)
Revaluation - - 65 - - 65
of listed
investments
Disposal of - - (562) - - (562)
listed
investments
Translation - (48) - - - (48)
of foreign
subsidiary
Unrealised - - - (26) - (26)
loss on
currency
derivative
contracts
Share options 6 - - - - 6
exercised
Other - - - 2 - 2
Balance at 30 68 (42) 141 11 2 401 2 579
June 2002
Earnings - - - - (191) (191)
Revaluation - - 39 - - 39
of listed
investments
Translation - 24 - - - 24
of foreign
subsidiary
Realisation - 18 - - - 18
of reserve
on disposal
of Chambishi
Realisation - - - 26 - 26
of loss on
Derivative
instruments
Share options 17 - - - - 17
exercised
Transfer to - - - 2 (2) -
insurance
contingency
reserve
Other - - 1 (2) - (1)
Balance at 30 85 - 181 37 2 208 2 511
June 2003
SEGMENTAL
INFORMATION
Rm Precious Cobalt/ Nickel Ferrous Corporate Total
metals Copper metals and other
Year ended 30
June 2003
Revenue
External 1 000 614 377 2 905 - 4 896
revenue
Cost of sales (863) (574) (198) (2 247) - (3 882)
Contribution 28 (140) 108 152 (339) (191)
to earnings
Contribution 26 (95) 108 152 6 197
to headline
earnings
Contribution 21 (221) 122 270 12 204
to headline
earnings -
2002
Other
information
Consolidated 2 683 - 227 3 627 624 7 161
total assets
Consolidated 385 - 54 1 338 422 2 199
total
liabilities
Capital 154 29 30 338 1 552
expenditure
The financial information set out in the results has been reviewed by the
Company's auditors Ernst & Young. Their unqualified reviewed opinion is
available for inspection at the Company's registered office.
INTRODUCTION
Revenue for the year ended 30 June 2003 rose nearly R850 million to
R4,9 billion, largely as a result of the inclusion of Avgold Limited's
('Avgold') Target gold mine for its first full year of operation. Operating
income decreased by 35 per cent to R521 million from R799 million. This
decrease, notwithstanding higher outputs of our products and increased US
dollar prices, was largely as a result of the impact of the 11 per cent
strengthening in the year-on-year average rand/US dollar exchange rate, as
well as the R103 million charge for unrealised non-hedge derivatives.
The Group's results were adversely affected by Chambishi Metals plc's
performance and a weak cobalt price. Avmin sold its 90 per cent ownership of
Chambishi at year-end.
The Group's headline earnings before unrealised non-hedge derivatives
increased to R241 million (30 June 2002: R204 million), which equates to
215 cents a share (184 cents a share).
KEY ISSUES:
* Chambishi. Avmin repaid Chambishi Metals plc's outside borrowings and
sold Chambishi Metals plc and Chambishi Marketing (Proprietary) Limited
('Chambishi') to the Swiss incorporated J&W Holding AG's subsidiary ENYA
Holdings BV, effectively at year-end, for a cash consideration of
US$6,5 million, equivalent to R48 million. Additional sums of up to
US$25 million are payable to Avmin over the next six years. These sums are
dependant on production volumes and defined minimum cobalt prices being
achieved by Chambishi over the next five years, as well as the resolution of
Chambishi's tax position. These additional sums have not been accrued.In
addition, the purchasers will assume responsibility for approximately
US$25 million, equating to R188 million, of infrastructural contingent
liabilities.
The decision to dispose of Chambishi was made to reduce the
overall risk profile of the Group and enable the repayment of related
US$170 million debt at a time of rand strength. The disposal resulted in a
consolidated Group loss of R649 million (R1 619 million impairment). Avmin
has no material remaining liabilities or obligations relating to Chambishi.
* Avmin's 56 per cent shareholding in Avgold was reduced to 42 per cent
following the sale of 90 million shares through an international private
placement. The US$72 million proceeds were used to repay Chambishi's debt
guaranteed by Avmin.
* Avgold continues to be consolidated in Avmin's accounts as the latter
controls the board of directors.
* Avgold concluded the sale of its ETC division to a Metorex Limited led
consortium during June 2003 for R255 million resulting in a gain of
R7 million. These funds were utilised to redeem part of the syndicated loan
raised for the development of Target mine. This allowed Avgold to refinance
the remaining debt facility and remove its US dollar debt exposure. Avgold's
year-end gearing was 5,6 per cent.
* The proceeds from the sale of Chambishi and Avgold shares were applied in
reducing the Group's debt, with the net debt to equity ratio being reduced
to 11 per cent at year-end (42 per cent).
* Avmin now has a portfolio comprising low-cost, high-margin mining and
smelting operations in the precious, ferrous and base metals sectors.
* Harmony Gold Mining Company Limited and African Rainbow Minerals Gold
Limited ('ARMgold'), (collectively 'Harmony'), purchased a 34,5 per cent
shareholding in Avmin from Anglo American Corporation of South Africa
Limited ('Anglo') and Arctic Resources Limited.
* Nkomati nickel expansion and the Two Rivers platinum expansion projects
await final approval. In addition, a pre-feasibility study is being
undertaken for a potential major new gold project immediately to the north
of Avgold's Target mine.
* During the year Avmin streamlined its head office, which resulted in a
non-recurring R35 million restructuring charge. It is anticipated that in
excess of R30 million will be saved annually following the restructuring.
REVIEW OF OPERATIONS
Assmang's revenue rose 3,4 per cent to R2 905 million through a strong
operating performance, while headline earnings decreased by 54 per cent to
R204 million (R443 million), primarily as a result of the strengthening of
the rand/US dollar exchange rate.
Headline earnings by the three divisions, before deducting STC, amounted
to R285 million (R351 million) from the manganese division, R59 million
(R135 million) from the iron ore division and a loss of R134 million
(R40 million loss) from the chrome division.
Assmang 2003 2002
Product sales 000 metric
tons
Iron ore 5 263 4 775
Manganese ore (excluding 1 171 999
deliveries to the Cato
Ridge alloy operation)
Manganese alloys 206 187
Charge chrome 244 190
Chrome ore (excluding 20 39
deliveries to
Machadodorp alloy
operation)
Capital expenditure 338 372
R million
Avgold's Target mine was commissioned in May 2002. The ETC division was sold
in June 2003. Revenue increased significantly to R1 000 million
(R364 million) following the commissioning of Target. Headline earnings
declined to R25 million (R36 million) after the R103 million charge to
income following the restructuring of the rand-gold hedge book into
US dollar denominated gold hedges. Headline earnings before the unrealised
hedge derivative adjustment were R128 million (R36 million).
Avgold
Operating results 2003 2002
Operating profit R million 109,9 17,3
Gold sold kg 11 899 4 179
Yield g/t 8,57 8,56
Cash costs R/kg 56 503 64 277
US$/oz 193 198
Capital expenditure R million 122,9 437,5
Target milled 1 068 376 tonnes of ore at a yield of 8,57g/t. Gold sold
amounted to 9 155kg, at a cash cost of R51 327/kg, or US$175/oz. Target's
life of mine plan was updated during the year extending the life of mine by
five years to 18 years. The revised proven and probable underground reserves
increased from 2,52 million ounces to 3,86 million ounces.
During the period to 15 June 2003, the date of sale, ore milled at ETC
rose to 320 388 tonnes (315 523 tonnes) at a yield of 8,56g/t (8,89g/t).
Total gold sold decreased slightly to 2 744kg (2 805kg) at a cash cost of
R73 774/kg (R69 805/kg), or US$252/oz (US$215/oz).
The surface exploration drilling programme in the Paradise area,
immediately north of Target mine was completed. This, together with the
previous underground exploration drilling resulted in 5,66 million ounces
being upgraded from an inferred to an indicated resource category. The
pre-feasibility study on a possible mine design for the Paradise area is to
be presented to the Avgold board by 30 September 2003.
Nkomati. This 75 per cent owned mine performed well as a result of
increased production and the strong performance of the US dollar nickel price
during 2003. The mine treated a total of 302 000 tons (255 000 tons) of ore,
producing 55 000 tons (46 000 tons) of concentrate at an average nickel
grade in concentrate of 9,96 per cent (9,33 per cent).
Nkomati
Product sales 2003 2002
Nickel tons 4 900 3 900
Copper tons 3 300 3 000
Cobalt tons 62 52
PGMs ounces 39 000 35 000
Excluding nickel, other metals contributed 35 per cent (42 per cent) of the
mine's total revenue. The nickel price averaged US$3,48/lb (US$2,69/lb)
during the year and the mine's cash cost to produce nickel, net of by-
products, was US$0,67/lb (US$0,32/lb).
Operating profit increased to R236 million (R209 million) and profit
before tax was lower at R203 million (R221 million).
Two Rivers' mining licence and Environmental Management Programme Report
were, respectively, granted and approved by the Department of Minerals and
Energy in March 2003. Expenditure of R29 million was incurred during the
year. An additional R47 million has been approved by the shareholders for
the continuation of the project. Avmin presently holds 55 per cent of the
equity and Impala Platinum Holdings Limited the balance. A memorandum of
understanding was signed with TISO Capital (Proprietary) Limited to acquire
up to 25 per cent of Two Rivers' equity.
SAFETY, HEALTH AND SUSTAINABLE DEVELOPMENT
The board reports, with regret, six fatal accidents that occurred during
the year at Group operations and extends its condolences to the bereaved
families and friends. Three fatalities occurred at the manganese mines, two
at the iron ore mine, and one at ETC. These deaths are viewed as a tragedy,
and steps to reinforce the Group's commitment to safety have been taken.
Avmin is gathering information on the extent to which it is exposed to
business risks that stem from HIV/AIDS. Avmin's HIV/AIDS strategy seeks to
adopt a proactive and caring approach while managing the impact the pandemic
may have on its business.
Avmin's sustainable development initiatives continue to contribute
meaningfully to the social and economic landscape in South Africa. Details
on the Group's activities are contained in the sustainable development
report, which will be posted to shareholders with the annual report.
MINING CHARTER
President Mbeki signed the Minerals and Petroleum Resources Development
Act on 3 October 2002. Avmin is supportive of the Act and accompanying broad
based economic imperatives, and has embarked on initiatives aimed at meeting
these requirements. Avmin will derive some Black Economic Empowerment
benefits from ARMgold's involvement in the newly merged Harmony as well as
Avgold's sale of ETC. The Group is also exploring other empowerment
opportunities.
DIVIDEND
In light of the Company's financial performance, the board does not
consider it appropriate to declare a dividend for the year ended
30 June 2003, but recognises the importance to shareholders of the payment
of regular dividends.
STRATEGIC REVIEW
Avmin is currently well advanced in the process of reviewing
the strategic direction and future structure of the Group, inter alia, to
support the scale of planned growth and to position Avmin as the leading
black empowered company.
To that end, financial advisors have been retained to assist the board
with the evaluation of alternatives. We expect to announce our strategic
intentions by early 2004.
DIRECTORATE
Following the change of major shareholder from Anglo to Harmony, David
Barber, Philip Baum, and Barry Davison resigned as directors on 11 April and
on 5 May 2003 Patrice Motsepe, Pine Pienaar, and Bernard Swanepoel joined
the board. Brian Frank, Nir Livnat, Brian Menell and Roy Oron tendered their
resignations during the year. Jan Steenkamp and Doug Campbell were appointed
executive directors on 12 May 2003.
David Murray retired as the Group's chief executive officer on
30 June 2003 and was succeeded by Jan Steenkamp. David retains his seat on
the board as a non-executive director.
R P Menell J C Steenkamp
Chairman Chief executive officer
Johannesburg
10 September 2003
Anglovaal Mining Limited
('Avmin' or the 'Company')
Registration No 1933/004580/06
Incorporated in the Republic of South Africa
JSE Securities Exchange
South Africa Share code: AIN
ISIN: ZAE000017141
London Stock Exchange: AGM
Executive directors: R P Menell (chairman),
J C Steenkamp (chief executive officer).
D N Campbell.
Non-executive directors: D E Jowell, K W Maxwell, J R McAlpine, PT Motsepe,
D N Murray, M Z Nkosi, P C Pienaar, Z B Swanepoel.
Group company secretary: R H Phillips
Registered Office: 56 Main Street
Johannesburg 2001
PO Box 62379
Marshalltown 2107, South Africa
For further information: Ebrahim Takolia:
General Manager Investor Relations
Tel: 011 634 0333
e-mail ebrahimt@avmin.co.za.
www.avmin.co.za
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