Interim Results

Anglovaal Mining Limited ('Avmin' or the 'Company') Registration Number 1933/004580/06, Incorporated in the Republic of South Africa JSE Securities Exchange Share code: AIN ISIN: ZAE000017141 and London Stock Exchange: AGM Overview * Headline earnings* down 27% to R77 million * Net cash flow from operating activities up 464% to R237 million following the disposal of Chambishi * Nkomati, now 100% owned, delivers strong operational performance * Net gearing reduced to 11% * US$ borrowings fully repaid by 31 August 2003 *before unrealised non-hedge derivatives Unaudited group interim results for the half-year ended 31 December 2003. BALANCE SHEET Audited Unaudited Unaudited Year ended Half-year ended Half-year ended 30 June 31 December 31 December 2003 2002 2002 % Rm Rm Rm Change ASSETS Non-current assets 4 786 Tangible assets 4 857 5 627 6 Intangible assets 6 7 12 Deferred tax assets 10 38 45 Environmental 45 64 rehabilitation trust funds 215 Investments 167 215 5 064 5 085 5 951 (15) Current assets 896 Inventories 1 030 1 148 936 Trade and other 831 986 receivables ­ Taxation 21 - 265 Deposits and cash 219 905 2 097 2 101 3 039 (31) 7 161 Total assets 7 186 8 990 (20) EQUITY AND LIABILITIES Capital and reserves 6 Ordinary share capital 6 6 79 Share premium 122 69 218 Reserves 171 184 2 208 Retained earnings 2 207 2 531 2 511 Shareholders' interest in 2 506 2 790 capital and reserves 2 451 Minority interest 2 402 2 134 4 962 Total shareholders' 4 908 4 924 - interest Non-current liabilities ­ Long-term borrowings - 1 367 519 Deferred tax liabilities 542 524 153 Long-term provisions 156 219 103 Non-hedge derivatives 286 - 775 984 2 110 53 Current liabilities 521 Trade and other payables 468 523 39 Provisions 40 60 42 Taxation 42 68 ­ Derivative instruments - 3 822 Overdrafts and short-term 744 1 302 borrowings 1 424 1 294 1 956 34 7 161 Total equity and 7 186 8 990 20 liabilities INCOME STATEMENTS Audited Unaudited Unaudited Year ended Half-year ended Half-year ended 30 June 31 December 31 December 2003 2002 2002 % Rm Rm Rm Change 4 896 Revenue 2 004 2 340 (14) (3 882) Cost of sales (1 681) (1 828) 8 1 014 Gross profit 323 512 (37) 424 Other operating income 23 234 (814) Other operating expenses (167) (354) 624 179 392 (54) (103) Unrealised loss on (184) - non-hedge derivatives 521 (Loss)/Profit from (5) 392 operations 83 Income from investments 12 47 (180) Finance costs (38) (113) 424 (Loss)/Profit before (31) 326 (110) taxation and exceptional items (388) Exceptional items 4 13 (649) - Loss on disposal of - - discontinued operations 261 - Other exceptional items 4 13 36 (Loss)/Profit before (27) 339 (108) taxation (147) Taxation (49) (128) (111) (Loss)/Profit after tax (76) 211 (136) (80) Minority interest 75 (93) (191) (Loss)/Earnings (1) 118 (101) Additional information: 241 Headline earnings before 77 105 (27) unrealised non-hedge derivatives 215 Headline earnings per 67 93 (28) share before unrealised non-hedge derivatives (cents) 197 Headline (loss)/earnings (1) 105 (100) 176 Headline (loss)/earnings (1) 93 (101) per share (cents) (170) Basic attributable (loss)/ (1) 106 (100) earnings per share (cents) (169) Fully diluted attributable (1) 104 (100) (loss)/earnings per share (cents) 112 602 Number of shares in issue 114 128 112 225 at end of year (thousands) 112 046 Weighted average number of 113 713 111 783 2 shares in issue (thousands) 2 511 Shareholders interest 2 506 2 790 (10) 2 230 Net asset value per share 2 196 2 486 (12) (cents) STATEMENT OF CHANGES IN EQUITY Rm Total Half-year ended 31 December 2003 Balance at 30 June 2003 2 511 Revaluation of listed investments (47) Loss (1) Share options exercised 43 Balance at 31 December 2003 2 506 Foreign Share capital currency Revaluation Retained and premium translation surplus Other earnings Balance at 30 June 85 ­ 181 37 2 208 2003 Revaluation of listed ­ ­ (47) ­ ­ investments Loss ­ ­ ­ ­ (1) Share options 43 ­ ­ ­ ­ exercised Balance at 31 128 ­ 134 37 2 207 December 2003 Total Half-year ended 31 December 2002 Balance at 30 June 2002 2 579 Earnings 118 Foreign currency translation reserve 32 Revaluation of listed investments 40 Share options exercised 7 Allocation to minority shareholders (10) Unrealised gain on currency derivative contracts 24 Other ­ Balance at 31 December 2002 2 790 Foreign Share capital currency Revaluation Retained and premium translation surplus Other earnings Balance at 30 June 68 (42) 141 11 2 401 2002 Earnings - - - - 118 Foreign currency - 32 - - - translation reserve Revaluation of listed - - 40 - - investments Share options 7 - - - - exercised Allocation to - (24) - - 14 minority shareholders Unrealised gain on - - - 24 - currency derivative contracts Other - - - 2 (2) Balance at 31 75 (34) 181 37 2 531 December 2002 Year ended 30 June 2003 Total Balance at 30 June 2002 2 579 Loss (191) Revaluation of listed investments 39 Translation of foreign subsidiary 24 Realisation of reserve on disposal of Chambishi 18 Reversal of derivative instruments 26 Share options exercised 17 Transfer to insurance contingency reserve ­ Other (1) Balance at 30 June 2003 2 511 Foreign Share capital currency Revaluation Retained and premium translation surplus Other earnings Balance at 30 June 68 (42) 141 11 2 401 2002 Loss - - - - (191) Revaluation of listed - - 39 - - investments Translation of - 24 - - - foreign subsidiary Realisation of - 18 - - - reserve on disposal of Chambishi Reversal of - - - 26 - derivative instruments Share options 17 - - - - exercised Transfer to insurance - - - 2 (2) contingency reserve Balance at 30 June 85 - 181 37 2 208 2003 CASH FLOW STATEMENT Audited Year ended 30 June 2003 Rm CASH FLOW FROM OPERATING ACTIVITIES Cash receipts from customers 5 009 Cash paid to supplier s and employees (4 160) Cash generated from operations 849 Interest received 80 Interest paid (180) Dividends received 3 Dividends paid (21) Taxation paid (101) Net cash inflow from operating activities 630 Unaudited Unaudited Half-year ended Half-year ended 31 December 31 December 2003 2002 % Rm Rm change Cash receipts from customers 2 128 2 399 Cash paid to suppliers and (1 812) (2 201) employees Cash generated from operations 316 198 60 Interest received 12 46 Interest paid (38) (113) Dividends received ­ 1 Dividends paid (9) (12) Taxation paid (44) (78) Net cash inflow from operating activities 237 42 464 Audited Year ended 30 June 2003 Rm CASH FLOW FROM INVESTING ACTIVITIES Additions to fixed assets to maintain operations (420) Additions to fixed assets to expand operations (132) Net cash effect on sale of Chambishi (67) Net proceeds from sale of ETC mine 252 Proceeds on disposal of fixed assets 8 Proceeds on disposal of investments ­ Proceeds on dilution of interest in investment in subsidiaries 564 Net cash (outflow)/inflow from investing activities 205 Unaudited Unaudited Half-year ended Half-year ended 31 December 31 December 2003 2002 % Rm Rm change Additions to fixed assets to maintain operations (250) (199) Additions to fixed assets to expand operations (49) (58) Net cash effect on sale of ­ ­ Chambishi Net proceeds from sale of ETC ­ ­ mine Proceeds on disposal of fixed 13 assets Proceeds on disposal of ­ 13 investments Proceeds on dilution of interest in investment in subsidiaries ­ ­ Net cash (outflow)/inflow from investing activities (286) (244) (17) Audited Year ended 30 June 2003 Rm CASH FLOW FROM FINANCING ACTIVITIES Increase in shareholder funding 17 Funding received from minority shareholders 11 Long-term borrowings raised ­ Long-term borrowings repaid (901) (Decrease)/Increase in short-term borrowings (476) Net cash inflow/(outflow) from financing activities (1 349) Net (decrease)/increase in cash and cash equivalents (514) Cash and cash equivalents at beginning of period 779 Cash and cash equivalents at end of period 265 Cash generated from operations: per share (cents) 758 Unaudited Unaudited Half-year ended Half-year ended 31 December 31 December 2003 2002 % Rm Rm change Increase in shareholder funding 43 7 514 Funding received from minority shareholders 37 8 362 Long-term borrowings raised 348 Long-term borrowings repaid (62) (Decrease)/Increase in short-term borrowings (77) 27 (385) Net cash inflow/(outflow) from financing activities 3 328 (99) Net (decrease)/increase in cash and cash equivalents (46) 126 Cash and cash equivalents at beginning of period 265 779 Cash and cash equivalents at end of period 219 905 (76) Cash generated from operations: per share (cents) 278 177 57 NOTES TO FINANCIAL STATEMENTS Audited Year ended 30 June 2003 Rm HEADLINE EARNINGS (Loss)/Earnings per income statement (191) ­ Surplus on disposal of mine proper ties ­ ETC mine ­ ­ Surplus on disposal of investments and mineral rights (261) ­ Loss on sale of Chambishi 649 197 ­ Taxation 4 ­ Minority interest (4) Headline earnings/(loss) 197 Add non-hedge derivatives 103 Less minority interest (59) Headline earnings before unrealised non-hedge derivatives 241 EXCEPTIONAL ITEMS Surplus on disposal of mine proper ties ­ ETC mine ­ Surplus on disposal of Avgold Limited shares 241 Surplus on disposal ­ other 20 Loss on sale of Chambishi (649) Exceptional items per income statement (388) Taxation 4 Minority interest (4) Net exceptional items (388) Unaudited Unaudited Half-year Half-year ended ended 31 December 31 December 2003 2002 Rm Rm (Loss)/Earnings per income statement (1) 118 ­ Surplus on disposal of mine properties ­ ETC mine (4) ­ ­ Surplus on disposal of investments and mineral rights ­ (13) ­ Loss on sale of Chambishi (5) 105 ­ Taxation 4 ­ ­ Minority interest ­ ­ Headline earnings/(loss) (1) 105 Add non-hedge derivatives 184 - Less minority interest (106) - Headline earnings before unrealised non-hedge derivatives 77 105 EXCEPTIONAL ITEMS Surplus on disposal of mine proper ties ­ ETC mine 4 ­ Surplus on disposal of Avgold Limited ­ ­ shares Surplus on disposal ­ other ­ 13 Loss on sale of Chambishi ­ ­ Exceptional items per income statement 4 13 Taxation (4) Minority interest ­ Net exceptional items ­ 13 Basis of preparation and accounting policies The financial information for the half-year ended 31 December 2003 has been prepared adopting the same accounting policies used in the most recent annual financial statements which are in accordance with South African Statements of Generally Accepted Accounting Practice and International Financial Reporting Standards. The accounting policies are consistent with the year ended 30 June 2003. These condensed financial statements are prepared in accordance with AC 127 ­ interim reporting, and are prepared on the historical cost basis as adjusted for financial instruments and investment proper ties. These are accounted for on the fair value, or amortised cost basis. Primary segmental information Rm Total Half-year ended 31 December 2003 Revenue External revenue 2 004 Cost of sales (1 681) Contribution to earnings (1) Contribution to headline earnings (1) Contribution to headline earnings before Unrealised non-hedge derivatives 77 Consolidated total assets 7 186 Consolidated total liabilities 2 278 Capital expenditure 299 Amortisation and depreciation 216 Precious Ferrous Corporate Rm metals metals Nickel and other Half-year ended 31 December 2003 Revenue External revenue 447 1 333 224 ­ Cost of sales (385) (1 195) (101) ­ Contribution to earnings (58) 34 77 (54) Contribution to headline earnings (58) 34 77 (54) Contribution to headline earnings before unrealised non-hedge derivatives 20 34 77 (54) Consolidated total assets 2 644 3 867 250 425 Consolidated total liabilities 423 1 592 54 209 Capital expenditure 86 208 5 ­ Amortisation and depreciation 127 81 8 ­ COMMENTARY Strategic transformation update Following a review of the strategic direction and future structure of Avmin, an announcement was made on 13 November 2003 which will result in the creation of the largest black controlled mining company in South Africa after a series of transactions between Avmin, African Rainbow Minerals & Exploration Investments (Proprietary) Limited and Harmony Gold Mining Company Limited ('Harmony'). On 23 March 2004 a circular containing details of the transactions and revised listing particulars was posted to shareholders. Subject to the requisite shareholder, regulatory and other approvals Avmin will change its name to African Rainbow Minerals Limited and the board, management and strategy will be reconstituted to reflect the new ethos of the Company. Group results A major determinant of the financial performance during the six months was the rand/US dollar exchange rate , which averaged US$/R7,13 compared to the corresponding 2002 period's US$/R10,10. This represents a 29 per cent strengthening of the aver age exchange rate between the two periods. The stronger rand has affected Avmin's results in two ways; firstly by lowering revenue and income earned by Group operations, and secondly by lowering earnings as a result of a significant unrealised charge to the income statement from non-hedge derivatives resulting from the conversion of rand gold hedges to US$ gold hedges by Avgold. Shareholders were informed that the value of the rand would negatively affect results in the trading update issued on 27 November 2003. The Group's revenue declined by 14 per cent to R2,0 billion (2002: R2,3 billion). Costs of production were, however, well contained during the period. Headline earnings before unrealised non-hedge derivatives weakened by 28 per cent to 67 cents per share (93 cents per share). Taking into account the AC133 adjustment of R184 million (Nil) a headline loss of R1 million was recorded. A net cash flow from operating activities of R237 million (R42 million) was recorded for the period. This increase was primarily as a result of reduced cash demands relating to Chambishi and increased cash distribution from Nkomati. Outflows from investing activities were dominated by the continued heavy capital expenditure in ferrous metals, and totaled R299 million (R257 million). There was a net decrease in cash and cash equivalents of R46 million to R219 million at 31 December 2003. The Group's net debt-to-total-equity ratio showed another significant improvement, declining to 11 percent (36 percent) when comparing to the periods ended 31 December 2003 and 2002, whereas the ratio remained constant at 11 per cent as at 30 June and 31 December 2003. Operationally, Avgold Limited's ('Avgold's') Target gold mine continues to perform well and during the six months exceeded its planned pro-rated annual production levels of 175 000 ounces of gold. Shortly after the end of the half-year, Avmin acquired the remaining 25 per cent of the Nkomati joint venture from Anglo Operations Limited, a subsidiary of Anglo American plc. This acquisition provides Avmin with the strategic flexibility required to advance plans currently being considered for a significant expansion of Nkomati. A strong operational performance and robust US$ nickel price saw the mine's contribution to earnings increase from R57 million to R77 million. Safety, health and sustainable development Management is pleased to announce that operations showed a significant decrease in reportable incidents compared to the previous corresponding period. Avmin continues to proactively manage the Group's HIV/AIDS exposure by ongoing monitoring and management of the impact the pandemic may have on its businesses. Ferrous metals Despite increased sales volumes for all products, earnings were substantially lower than the corresponding period of the previous year as cautioned in the trading update issued on 13 November 2003. Assmang's products are priced principally in US dollar s and the period under review has seen a significant strengthening of the rand with the average exchange rate realised on the group's export proceeds being R6,98 to the US dollar against R10,02 in the equivalent previous period. In the competitive markets in which the group's products trade , and like most other resource companies in South Africa at present, a change of this extent seriously affects profitability and was sufficient to completely negate the higher unit prices achieved in US dollars for ferro-alloys and the strong volume sales performances achieved in the group's products as summarised in the table below: Assmang product sales: Six months to: 31 December 2003 31 December 2002 % change Manganese ore (tons) 662 867 409 443 62 Iron ore (tons) 2 493 824 2 259 433 10 Manganese alloys (tons) 100 489 96 908 4 Charge chrome (tons) 126 860 103 641 22 Assmang's revenue for the half-year ended 31 December 2003 declined by 1,4 per cent to R1 332,7 million (R1 351,2 million). Attributable earnings decreased by 97,0 per cent to R4,1 million (R137,7 million), equivalent to R1,15 per share (R38,75 per share). The tax charge for the period of R14,9 million is high in relation to profit before tax due to charges for the State's share of profit on the manganese mining operations and Secondary Tax on Companies. Assmang continued its significant capital programme, spending R208,1 million (R139,6 million) during the period under review, of which R77,0 million was spent on its new shaft complex at the Nchwaning manganese mine . Production from this shaft is expected to commence during May 2004 and capital expenditure will be substantially completed by December 2004 thereby providing ore reserves for more than 20 years. The cost of the new shaft complex is estimated at R690 million. Planned production levels from the existing and new Nchwaning shaft complex will be adequate to satisfy customer demand taking account of rail and harbour logistical constraints. Current enhancement projects include the completion of the Nchwaning shaft complex, the construction of an underground mine at Dwarsrivier Chrome Mine to replace the existing opencast mine and the development of additional reserves at the iron ore division. Demand for the group's products remains buoyant and tonnages over the balance of the financial year are expected to approximate those of the period under review. US dollar prices for the group's products are also expected to be higher which, given a stable rand/US dollar exchange rate , could cause earnings to increase in the second half. Shareholders are however reminded that earnings performance will continue to be largely dependant upon the rand/US dollar exchange rate and, to a lesser extent, upon cost savings achieved by the operating divisions. Gold Avgold's comparative results for the half-year ended 31 December 2002 include ETC . The sale of ETC in May 2003 combined with the lower average rand/ US dollar exchange rate of R7,13 (R10,12) resulted in a decrease in revenue to R446,9 million (R502,4 million). Gold sold decreased marginally to 5 986kg (6 009kg), while the yield increased significantly to 11,08g/t (8,13g/t) as a result of higher gold grades mined from areas identified as part of the redesigned mining plan - based on rock mechanics design criteria. These grades (11,08g/t) will reduce in future in line with this mining plan. Cash costs decreased 25 per cent to R43 461/kg (R57 951/kg). The increase in operating profit to R51,8 million (R49,6 million), despite the lower revenue , reflects the efficiencies of the mechanised mining methods employed at Target. Capital expenditure increased marginally to R47,9 million (R46,5 million). Avgold operating results: Six months to: 31 December 2003 31 December 2002* % change Gold sold Kg 5 986 6 009 ­ Cash costs R/kg 43 461 57 951 (25) US$/oz 190 178 7 Yield g/t 11,08 8,13 36 *Includes ETC Following the announcement on 13 November 2003 regarding Avmin's proposed sale of its stake in Avgold to Harmony, a joint team has been formed to refine plans for the exploitation of the northern Free State resources. Nickel Avmin has acquired the 25 per cent of Nkomati that it did not already own from Anglo Operations Limited for R260 million with effect from 1 February 2004. The transaction values Nkomati at just over R1 billion and will be value enhancing, allowing for improved cash flow into Avmin. Operationally, Nkomati recorded another strong performance for the half year to 31 December 2003. Ore treated increased 21 per cent to 169 000 tons (140 000 tons), producing 28 700 tons (28 900 tons) of concentrates with average grades of 10,0 per cent (10,2 per cent) for nickel and 6,0 per cent (6,5 per cent) for copper. Nkomati sales volumes: Six months to: 31 December 2003 31 December 2002 % change Nickel (tons) 2 440 2 620 (7) Copper (tons) 1 590 1 670 (5) Cobalt (tons) 28 33 (15) PGMs (ounces) 19 800 19 040 4 Excluding nickel, other metals contributed 24 per cent of the mine's total revenue . The mine remains cost competitive with a nickel production cost, net of by-product credits, of US$1,15/lb, while the average nickel price over the period amounted to US$4,94/lb (US$3,16/lb). Platinum The Two Rivers project team, currently assessing the viability of a new platinum group metals venture in a partner ship between Avmin and Impala Platinum Holdings Limited, has been given board approval to proceed with small-scale trial mining. Full project release is conditional on the outcome of the current programme and the outlook of the rand. Dividends In light of the Company's financial performance, the board does not consider it appropriate to declare a dividend for the six months ended 31 December 2003. Future prospects Demand for the Group's products is at present strong and is expected to remain so. However, volatility of the rand/US dollar exchange rate will affect the results significantly. Directorate changes Mr PC Pienaar, a non-executive director, resigned from the board on 4 February 2004. R P Menell J C Steenkamp Chairman Chief Executive Officer Johannesburg 23 March 2004 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, Z B Swanepoel Group company secretary: R H Phillips Anglovaal Mining Limited ('Avmin' or the 'Company'), Registration Number 1933/004580/06, Incorporated in the Republic of South Africa, JSE Securities Exchange, South Africa Share code: AIN · ISIN: ZAE000017141 and London Stock Exchange: AGM Registered Office: 56 Main Street, Johannesburg 2001, PO Box 62379, Marshalltown 2107, South Africa For further information: Ebrahim Takolia: General Manager Investor Relations, Tel: (+27 11) 634 0333, e-mail ebrahimt@avmin.co.za.

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