Wrap Text
EXX - Exxaro - Reviewed condensed group interim financial results and physical
information for the six months ended 30 June 2007
Exxaro Resources Limited
Registration number: 2000/011076/06
ISIN code: ZAE000084992
JSE share code: EXX
ADR code: EXXAY
Reviewed condensed group interim financial results and physical information
for the six months ended 30 June 2007
* Delivering on growth
* Successful integration of Kumba Coal and Eyesizwe Coal
* Headline earnings of 246 cents per share
* Interim dividend of 60 cents per share
* Share placement increased free float
CONDENSED GROUP INCOME STATEMENT
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2007 2006 2006
Reviewed Reviewed Audited
CONTINUING OPERATIONS Rm Rm Rm
Revenue 4 852 3 055 7 263
Operating expenses (3 961) (2 393) (6 022)
Fair value adjustment on unbundling of 17 963
subsidiary
BEE credential expense and unbundling
costs (79) (821)
Impairment of property, plant and
equipment (784) (784)
Net operating profit/(loss) 891 (201) 17 599
Net financing costs (note 4) (109) (125) (307)
Share of income from equity accounted
investments 401 24 159
Profit/(loss) before taxation (note 2) 1 183 (302) 17 451
Taxation (330) (42) (578)
Profit/(loss) for the period from
continuing operations 853 (344) 16 873
Profit for the period from discontinued
operations (note 5) 1 421 2 323
Profit for the period 853 1 077 19 196
Attributable to:
Equity holders of the parent 839 1 067 19 169
Minority interest 14 10 27
Profit for the period 853 1 077 19 196
Ordinary shares (million)
- in issue 352 309 351
- weighted average number of shares 341 307 313
- diluted weighted average number of
shares 354 315 318
Attributable earnings per share (cents)
- basic 246 348 6 124
- diluted 237 339 6 028
Attributable earnings/(loss) per share
from continuing operations (cents)
- basic 246 (115) 5 382
- diluted 237 (112) 5 297
Attributable earnings per share from
discontinued
operations (cents)
- basic 463 742
- diluted 451 731
Dividend paid per share (cents) in
respect
of the previous financial year 160 160
Dividend paid per share (cents) in
respect
of the interim period 180 180
Special dividend paid per share (cents) 185
on unbundling
Dividend declared per share (cents) in
respect of the interim period 60
Reconciliation of headline earnings
Net profit for the period attributable to
ordinary shareholders 839 1 067 19 169
Adjusted for:
- Impairment charges (note 3) 784 784
- Share of associate`s net profit on
disposal of property, plant and equipment (1) (1)
- Excess of minority interest over cost
of acquisition (36) (36)
- Net deficit/(surplus) on disposal of
property, plant and equipment 2 (19) 3
- Fair value adjustment prior to
unbundling (17 963)
- Net profit on disposal of investment (21) (39)
- Taxation effect of adjustments (1) (216) (219)
Headline earnings 839 1 559 1 698
Headline earnings from discontinued
operations 1 423 2 328
Headline earnings from continuing
operations 839 136 (630)
Headline earnings per share (cents)
- basic 246 508 542
- diluted 237 495 534
Headline earnings per share from
continuing operations (cents)
- basic 246 44 (201)
- diluted 237 43 (198)
Headline earnings per share from
discontinued operations (cents)
- basic 464 744
- diluted 452 732
CONDENSED GROUP BALANCE SHEET
As at 30 As at 30 As at 31
June June Dec
2007 2006 2006
Reviewed Reviewed Audited
Rm Rm Rm
ASSETS
Non-current assets
Property, plant and equipment 7 743 8 164 7 583
Biological assets 26 29 26
Intangible assets 74 67 69
Investments in unlisted associates and
joint ventures (note 7) 724 141 384
Deferred taxation 701 636 748
Other financial assets (note 7) 1 046 478 693
10 314 9 515 9 503
Current assets
Inventories 1 645 1 774 1 391
Trade and other receivables 1 633 2 562 1 663
Cash and cash equivalents 857 1 335 906
4 135 5 671 3 960
Non-current assets classified as held for
sale 95 12 2
Total assets 14 544 15 198 13 465
EQUITY AND LIABILITIES
Capital and reserves
Ordinary shareholders` equity 9 276 8 329 8 142
Minority interest 29 18 27
Total shareholders` equity 9 305 8 347 8 169
Non-current liabilities
Interest-bearing borrowings 1 299 1 654 1 214
Non-current provisions 1 168 773 931
Deferred taxation 1 097 1 114 1 116
3 564 3 541 3 261
Current liabilities
Trade and other payables 1 436 1 524 1 321
Interest-bearing borrowings 131 1 162 613
Taxation 82 603 67
Current provisions 26 21 30
Shareholders for dividends 4
1 675 3 310 2 035
Total equity and liabilities 14 544 15 198 13 465
Net debt (note 9) 573 1 481 921
Net asset value per share (cents) 2 635 2 695 2 320
Capital expenditure
- incurred 396 861 2 010
- contracted 417 1 337 842
- authorised but not contracted 693 2 603 732
Capital expenditure contracted relating
to
captive mines (30 June 2006 Tshikondeni
and Thabazimbi; 30 June 2007 and 31
December 2006 Tshikondeni, Arnot and
Matla), which will be financed by Mittal
Steel South Africa and Eskom respectively 444 131 8
Commitment relating to the acquisition of
Namakwa Sands and a 26% interest in Black
Mountain (Pty) Limited from Anglo
Operations Limited, subject to price
adjustments 2 353
Contingent liabilities 166 100 100
Operating lease commitments 122 165 124
Operating sublease rentals receivable 1 1 10
CONDENSED GROUP CASH FLOW STATEMENT
6 months 6 months 12 months
ended 30 ended 30 ended 31
June June Dec
2007 2006 2006
Reviewed Reviewed Audited
Rm Rm Rm
Cash retained from operations 1 255 2 282 4 761
- income from equity accounted
investments 71
- net financing costs (64) (121) (278)
- taxation paid (309) (895) (1 927)
- dividends paid (note 6) (4) (492) (3 396)
Cash used in investing activities
- capital expenditure (396) (861) (2 010)
- proceeds from disposal of property,
plant and equipment 10 150 170
- acquistion of subsidiary (8) (1 545)
- investments acquired (240)
- proceeds from disposal of investment 23 26
- other (5) 96 308
Net cash inflow/(outflow) 310 182 (3 891)
Net cash flow from financing activities
- cash flows from issue of shares 100 105 2 199
- borrowings (repaid)/raised (468) (435) 1 518
Net (decrease) in cash and cash
equivalents (58) (148) (174)
Special purpose entities consolidated 9
Less cash and cash equivalents of
unbundled subsidiaries (403)
Cash and cash equivalents beginning of
period 906 1 483 1 483
Cash and cash equivalents end of period 857 1 335 906
NOTES TO THE GROUP FINANCIAL RESULTS
1. Basis of preparation
The condensed interim financial results are prepared in accordance with
International Accounting Standard 34 on Interim Financial Reporting and should
be read in conjunction with the 2006 financial statements. The group financial
results have been prepared on the historical cost basis excluding financial
instruments and biological assets which are fair valued, and conform to
International Financial Reporting Standards. The accounting policies adopted
are consistent with those applied in the annual financial statements for the
year ended 31 December 2006.
6 months 6 months 12 months
ended 30 ended 30 ended 31
June June Dec
2007 2006 2006
Reviewed Reviewed Audited
Rm Rm Rm
2. Profit/(loss) before taxation from
continuing and discontinuing operations
is arrived at after
Depreciation and amortisation of
intangible assets (368) (423) (813)
Financing costs (153) (200) (451)
Interest received 44 50 115
Net realised foreign exchange
(losses)/gains on:
- currency exchange differences (2) 159 199
- revaluation of derivative instruments 6 (144) (278)
Net unrealised foreign exchange
(losses)/gains on:
- currency exchange differences (41) (107) (97)
- revaluation of derivative instruments (10) 8 51
Fair value adjustment on financial assets 29 36 84
Impairment charges (note 3) (784) (784)
Excess of minority interest over cost of
acquisition 36 36
Net profit on disposal of investments 21 39
Fair value adjustment on unbundling of
subsidiary 17 963
Net (deficit)/surplus on disposal of
property, plant and equipment (2) 19 (3)
Share-based payment: BEE credential
expense (580)
Share-based payment expense (38) 2 (185)
Cost of empowerment transaction,
unbundling, integration and branding (79) (241)
3. Impairment charges
Impairment of property, plant and
equipment (6) (784) (784)
Reversal of impairment of other
investments 6
(784) (784)
Taxation effect 227 227
(557) (557)
4. Net financing cost
Interest expense and loan costs 78 143 354
Finance leases 30 28 39
Interest income (44) (50) (115)
Net interest expense 64 121 278
Interest adjustment on non-current
provisions 45 29 58
109 150 336
Less discontinued operations (note 5) 25 29
Net financing cost as per income 109 125 307
statement
5. Discontinued operations
Exxaro unbundled its iron ore business
effective 1 November 2006 as part of an
empowerment transaction and now holds
only
a 20% interest in Sishen Iron Ore Company
(Pty) Limited which is equity accounted.
Revenue 3 846 6 483
Operating expenses (1 912) (3 385)
Net operating profit 1 934 3 098
Net financing costs (25) (29)
Profit before taxation 1 909 3 069
Taxation (488) (746)
Profit for the period from discontinued
operations 1 421 2 323
Cash flow attributable to operating
activities 430 982
Cash flow attributable to investing
activities (430) (7 025)
Cash flow attributable to financing
activities (261) 5 853
Cash flow attributable to discontinued
operations (261) (190)
6. Dividends paid
Cash dividends 491 1 628
Share repurchase 1 763
Cash dividends paid to minorities
relating
to previous year 4 1 5
4 492 3 396
As at 30 As at 30 As at 31
June June Dec
2007 2006 2006
Reviewed Reviewed Audited
Rm Rm Rm
7. Investments
Unlisted investments in associates
- directors` valuation 8 900 169 4 812
Listed investments included in other
financial assets - market value(1) 78 92
Unlisted investments included in other
financial assets - directors` valuation 333 35 93
(1) Reclassified as non-current asset
held
for sale in 2007.
8. Business combination
On 27 February 2007, the group acquired
100% of the issued share capital of Rosh
Pinah Mine Holdings (Pty) Limited which
is
included in the base metals segment
results. The acquired business
contributed neither revenue nor operating
profits to the group for the period from
27 February 2007 to 30 June 2007. This
transaction increased the Exxaro
effective
shareholding in Rosh Pinah Zinc
Corporation (Pty) Limited from 89,5% to
93,9%.
Details of assets acquired are as
follows:
- cash paid on acquisition (8)
- fair value of assets acquired 8
Goodwill
Fair value of assets acquired:
- property, plant and equipment 18
- investments 15
- interest-bearing borrowings (25)
Fair value of net assets 8
Total purchase consideration (8)
Cash outflow on acquisition of subsidiary (8)
9. Net debt
Net debt is calculated as being interest-bearing borrowings less cash and cash
equivalents.
10. Related party transactions
During the period the company and its subsidiaries, in the ordinary course of
business, entered into various sale and purchase transactions with associates
and joint ventures. These transactions were subject to terms that are no less
favourable than those arranged with third parties.
11. Post-balance sheet event
Subsequent to the interim reporting date, Exxaro disposed of its 3,78% interest
in Mineral Deposits Limited (MDL) for AU$1,25 per share resulting in a net cash
inflow of AU$14 million.
12. JSE Limited requirements
The interim announcement has been prepared in accordance with the listings
requirements of the JSE Limited.
13. Corporate governance
The group complies in all material respects with the Code of Corporate Practice
and Conduct published in the King II Report on Corporate Governance.
14. Auditors` review
The interim results have been reviewed by the company`s auditors, Deloitte and
Touche. Their unmodified review opinion is available for inspection at the
company`s registered office.
UNAUDITED COMPARABLE PHYSICAL INFORMATION (`000 TONNES)
6 6 months 12 months
months
ended ended ended 31
30 June 30 June Dec
2007 2006 2006
Coal(1)
Production
- Power station 16 830 16 849 34 599
Tied operations(2) 8 353 8 638 17 596
Commercial operations 8 477 8 211 17 003
- Coking 1 479 1 109 2 496
Tied operations 242 180 363
Commercial operations 1 237 929 2 133
- Other commercial operations 2 016 2 339 4 665
Total 20 325 20 297 41 760
Sales
- Eskom 16 604 16 554 34 665
Tied operations 8 337 8 623 17 598
Commercial operations 8 267 7 931 17 067
- Other domestic 2 572 2 449 4 892
Tied operations 214 207 381
Commercial operations 2 358 2 242 4 511
- Export commercial operations 813 1 092 2 434
Total 19 989 20 095 41 991
Mineral Sands - RSA
Production
- Ilmenite 187 160 319
- Zircon 19 26 50
- Rutile 9 12 25
- Pig iron 48 41 75
- Scrap pig iron 9 5 10
- Chloride slag 77 72 134
- Sulphate slag 14 18 36
Sales
- Ilmenite 30 30 50
- Zircon 14 23 48
- Rutile 9 9 31
- Pig iron 45 29 60
- Scrap pig iron 4 5 9
- Chloride slag 81 64 104
- Sulphate slag 8 10 30
Mineral Sands - Australia(3)
Production
- Ilmenite 111 116 227
- Zircon 19 18 36
- Rutile 8 9 18
- Synthetic rutile 48 54 98
- Leucoxene 8 7 14
- Pigment 26 27 54
Sales
- Ilmenite 10 30
- Zircon 16 16 32
- Rutile 2 8 18
- Synthetic rutile 21 19 27
- Leucoxene 7 4 10
Base metals
Production
- Zinc concentrate 53 55 104
- Zinc metal 61 56 106
Zincor 51 48 90
Chifeng(4) 10 8 16
- Lead concentrate 11 13 21
Zinc metal sales
- Domestic 45 45 91
- Export 12 15 24
Total 57 60 115
Lead concentrate sales
- Export 7 12 32
(1) For comparative purposes the Eyesizwe Coal mines are included for the full
periods disclosed.
(2) Tied operations refer to mining operations that supply their entire
production to either Eskom or Mittal Steel South Africa in terms of contractual
agreements.
(3) The production and sales tonnes reflect Exxaro Sands Australia`s 50%
interest in the Tiwest joint venture with Tronox Inc., western Australia.
(4) The effective interest in the physical information for the Chifeng (Hongye)
refinery has been disclosed.
GROUP STATEMENT OF CHANGES IN EQUITY
Non-distributable reserves
Foreign Financial
Share Share currency instruments
capital premium translations revaluation
Rm Rm Rm Rm
Opening balance at 31
December 2005 3 2 937 (29) (5)
Net gains/(losses) not
recognised in income 313 18
statement
Currency translation
differences 313
Share-based payments movement
Financial instruments fair
value movements recognised in
equity
- recognised in current 8
period profit or loss
- recognised in equity 9
- fair value adjustment 1
Net profit
Dividends paid
Issue of share capital(1) 105
Balance at 30 June 2006 3 3 042 284 13
Net gains/(losses) not
recognised in income 120 13
statement
Currency translation
differences 135
Share of reserve movements of
associates 6
Share-based payments movement
Financial instruments fair
value movements recognised in
equity
- recognised in equity 14
- fair value adjustment (1)
Deferred taxation (21)
Net profit
Dividends paid
Share repurchase
Dividend in specie - fair
value (25) (2)
Dividend in specie - fair
value adjustment
Dividend in specie - net
asset value (25) (2)
Issue of share capital 1 2 093
- Management Share Option
Scheme Trust (1) 143
- empowerment transformation
transaction 1 1 950
- issue of share capital to
share trusts 173
- treasury shares (173)
Balance at 31 December 2006 4 5 135 379 24
Net gains/(losses) not
recognised in income 174 (48)
statement
Currency translation
differences 175 (1)
Share of reserve movements of
associates (1)
Share-based payments movement
Financial instruments fair
value movements recognised in
equity
- recognised in equity (47)
Net profit
Issue of share capital(1) 9
Share placement(2) 91
- issue 640
- repurchase (460)
- expenses (89)
Prior year dividend in specie (3 186)
reclassification
Special purpose entities now
consolidated opening retained
income
Minority share buy-out
Balance at 30 June 2007 4 2 049 553 (24)
Non-distributable reserves
Equity
settled Insurance Retained
reserve reserve income
Rm Rm Rm
Opening balance at 31 December 2005 88 4 325
Net gains/(losses) not recognised in
income statement (2)
Currency translation differences
Share-based payments movement (2)
Financial instruments fair value
movements recognised in equity
- recognised in current period profit
or loss
- recognised in equity
- fair value adjustment
Net profit 1 067
Dividends paid (491)
Issue of share capital(1)
Balance at 30 June 2006 86 4 901
Net gains/(losses) not recognised in
income statement 716
Currency translation differences
Share of reserve movements of
associates 3
Share-based payments movement 713
Financial instruments fair value
movements recognised in equity
- recognised in equity
- fair value adjustment
Deferred taxation
Net profit 18 102
Dividends paid (1 137)
Share repurchase (1 763)
Dividend in specie - fair value (18 305)
Dividend in specie - fair value
adjustment (17 966)
Dividend in specie - net asset value (339)
Issue of share capital
- Management Share Option Scheme Trust
(1)
- empowerment transformation
transaction
- issue of share capital to share
trusts
- treasury shares
Balance at 31 December 2006 802 1 798
Net gains/(losses) not recognised in 72
income statement
Currency translation differences
Share of reserve movements of 34
associates
Share-based payments movement 38
Financial instruments fair value
movements recognised in equity
- recognised in equity
Net profit 839
Issue of share capital(1)
Share placement(2)
- issue
- repurchase
- expenses
Prior year dividend in specie
reclassification 3 186
Special purpose entities now
consolidated opening retained income (3)
Minority share buy-out
Balance at 30 June 2007 874 5 820
Attributable
to equity
holders of Minority Total
the parent interest equity
Rm Rm Rm
Opening balance at 31 December 2005 7 319 9 7 328
Net gains/(losses) not recognised in
income statement 329 329
Currency translation differences 313 313
Share-based payments movement (2) (2)
Financial instruments fair value
movements recognised in equity
- recognised in current period profit or
loss 8 8
- recognised in equity 9 9
- fair value adjustment 1 1
Net profit 1 067 10 1 077
Dividends paid (491) (1) (492)
Issue of share capital(1) 105 105
Balance at 30 June 2006 8 329 18 8 347
Net gains/(losses) not recognised in
income statement 849 849
Currency translation differences 135 135
Share of reserve movements of associates 9 9
Share-based payments movement 713 713
Financial instruments fair value
movements recognised in equity
- recognised in equity 14 14
- fair value adjustment (1) (1)
Deferred taxation (21) (21)
Net profit 18 102 17 18 119
Dividends paid (1 137) (8) (1 145)
Share repurchase (1 763) (1 763)
Dividend in specie - fair value (18 332) (18
332)
Dividend in specie - fair value (17 966) (17
adjustment 966)
Dividend in specie - net asset value (366) (366)
Issue of share capital 2 094 2 094
- Management Share Option Scheme Trust 143 143
(1)
- empowerment transformation transaction 1 951 1 951
- issue of share capital to share trusts 173 173
- treasury shares (173) (173)
Balance at 31 December 2006 8 142 27 8 169
Net gains/(losses) not recognised in
income statement 198 198
Currency translation differences 174 174
Share of reserve movements of associates 33 33
Share-based payments movement 38 38
Financial instruments fair value
movements recognised in equity
- recognised in equity (47) (47)
Net profit 839 14 853
Issue of share capital(1) 9 9
Share placement(2) 91 91
- issue 640 640
- repurchase (460) (460)
- expenses (89) (89)
Prior year dividend in specie
reclassification
Special purpose entities now consolidated
opening retained income (3) (3)
Minority share buy-out (12) (12)
Balance at 30 June 2007 9 276 29 9 305
(1) Issued to the Management Share Option Scheme Trust due to options
exercised.
(2) Repurchase of 10 million shares from Anglo South Africa Capital (Pty)
Limited on 13 April 2007 at R45,99 per share and subsequent re-issue of 10
million new Exxaro shares at R64 per share. STC on the share repurchase of
R57,5 million is included in net profit.
(3) Dividends declared after this interim period comprise of an interim
dividend of 60 cents per share. STC at 12,5% (R26 million) will be payable on
the dividend.
COMMENTS
Reported results not comparable
The group`s reviewed interim financial results and physical information for
the six-month periods ended 30 June 2007 and 2006 respectively are not
comparable as a result of the unbundling and separate listing of Kumba Iron
Ore Limited ("KIO") and the revised listing of Kumba Resources Limited as
Exxaro Resources Limited ("Exxaro") in November 2006.
The reported financial results for the six-month period ended 30 June 2006 as
reviewed by the company`s auditors include Sishen Iron Ore Company ("SIOC")
fully consolidated and exclude Eyesizwe Coal (Pty) Limited ("Eyesizwe").
For the interim period ended 30 June 2007, an effective 20% holding in SIOC
is equity accounted while Eyesizwe is fully consolidated.
ComparaBLE supplementary results
Comparable unaudited supplementary financial results and physical information
is additionally provided for information purposes only, on the assumption that
KIO had been unbundled and Exxaro had been created with effect from 1 January
2006.
Comments are for comparative purposes based on an analysis of the group`s
reviewed financial results and physical information for the six-month period
to 30 June 2007 compared with the unaudited supplementary financial results
and physical information compiled for the six-month period to 30 June 2006.
Operating results
The group continues to benefit from buoyant demand and high commodity prices
as comparable revenue increased by 23% to R4,852 million and net operating
profit increased by R266 million to R891 million.
An average exchange rate of R7,33 to the USD was realised compared with R6,32
for the corresponding period in 2006. This was significantly offset by the
strengthening of the AUD to the USD, from an average of 74,06 US cents in the
six months ended 30 June 2006 to 80,98 US cents in the six-month period under
review, which impacted negatively on the financial results of the mineral sands
operations in Australia.
Earnings
According to the trading statement issued on 24 July 2007, both attributable
earnings and headline earnings for the six months ended 30 June 2007 were
expected to be between R815 million and R855 million.
Attributable earnings for the period are R839 million or 246 cents per share
representing a 61% increase on the comparable 2006 attributable earnings of
R520 million or 169 cents per share. This includes Exxaro`s 20% interest in
the after-tax profits of SIOC amounting to R394 million, some R108 million
higher than for the comparable period.
Headline earnings of R839 million (246 cents per share) are 85% higher than
for the corresponding comparable period of R453 million (148 cents per share).
Cash flow
Cash retained from operations was R1,255 million. This was mainly applied to
taxation payments of R309 million, capital expenditure of R396 million
(consisting of R190 million in new capacity and R206 million in sustaining and
environmental capital) and an investment of R239 million in Richards Bay Coal
Terminal (RBCT) to secure Exxaro`s export entitlement. The group had a net cash
inflow of R310 million for the period.
In terms of an option available to Exxaro after its revised listing, Exxaro
repurchased 10 million shares from Anglo South Africa Capital (Pty) Limited
("ASAC") on 13 April 2007 at R45,99 per share and subsequently issued
10 million new Exxaro shares at R64 per share. This, together with an
additional nine million shares made available by ASAC for simultaneous
placement in the market, increased Exxaro`s free float to 25,7%. Exxaro`s
share of the surplus realised on the 10 million shares under option, after
costs and taxes, amounted to R100 million.
Net debt of R921 million at 31 December 2006 decreased to R573 million at a
net debt to equity ratio of 6,2% on 30 June 2007. Net debt will increase by
the contracted payment of R2,353 million, subject to the disclosed price
adjustments, for the acquisition of Namakwa Sands and a 26% interest in Black
Mountain/Gamsberg on conversion and subsequent cession of their mining rights.
After the end of the reporting period, Exxaro disposed of its 3,78% interest
in Mineral Deposits Limited (MDL) for
AU$1,25 per share resulting in a net cash inflow of AU$14 million (R84,6
million). The original interest in MDL of 15,37% was acquired in February 2001
for AU$0,44 per share.
In the release of its interim results to 30 June 2007, KIO announced an interim
dividend of 350 cents per share payable from the proceeds of a dividend of
R1,511 million from SIOC of which Exxaro will receive 20% in September 2007
amounting to R302 million.
Safety, health and environment
Regrettably, and despite excellent safety achievements at several mines, three
fatalities were suffered during the period under review. The group has renewed
its commitment to achieving a working environment that is fatality and injury
free. Safety awareness and preventative programmes continue to be strengthened
by initiatives to enhance hazard identification and safe behaviour. The average
lost time injury frequency rate (LTIFR) per two hundred thousand man-hours
worked for the six-month period improved to 0,33 compared to 0,42 for the
corresponding period in 2006.
The group has an integrated, enterprise-wide risk management programme which
evaluates environmental risk and enhances environmental performance. Out of
the group`s 12 operations, including former Eyesizwe business units, nine have
obtained both the international health and safety certification (OHSAS 18001)
and environmental certification (ISO 14001). The group aims to have all its
business units fully compliant to both certifications by December 2008.
An HIV/Aids voluntary counselling and testing (VCT) programme has been
introduced at all of the group`s South African operations. This includes
awareness, training of peer educators, VCT and a disease management programme.
The extension of anti-retroviral programmes to all of the group`s businesses
is progressing with the majority of employees who tested HIV-positive during
the period, now enrolled on the disease management programme.
Reported segment results
6 months 6 months 12 months
ended ended ended
30 June 30 June 31 Dec
2007 2006 2006
Reviewed Pro forma Pro forma
Rm Rm Rm
Revenue
Iron Ore 3 846 6 483
Coal 2 319 1 177 2 882
Mineral Sands 1 040 875 1 859
- Exxaro KZN Sands (previously Ticor SA) 480 378 817
- Exxaro Australia Sands (previously 560 497 1 042
Ticor Australia)
Base Metals 1 416 948 2 379
Industrial Minerals 73 51 122
Other 4 4 21
Total 4 852 6 901 13 746
Net operating profit
Iron Ore 1 934 3 098
Coal 393 308 599
Mineral Sands 8 (666) (698)
- Exxaro KZN Sands (10) (798) (842)
- Exxaro Australia Sands 18 132 144
Base Metals 502 215 609
Industrial Minerals (11) 11 26
Other (1) (69) 17 063
Total 891 1 733 20 697
Comparable unaudited supplementary
results
(Pro formas) 6 months 6 months 12 months
ended 30 ended 30 ended 31
June June Dec
2007 2006 2006
Rm Rm Rm
Revenue
Coal(1) 2 319 2 063 4 433
- Tied operations 838 798 1 625
- Commercial operations 1 481 1 265 2 808
Mineral Sands 1 040 875 1 859
- Exxaro KZN Sands 480 378 817
- Exxaro Australia Sands 560 497 1 042
Base Metals 1 416 948 2 379
- Rosh Pinah 577 429 888
- Zincor 1 358 895 2 234
- Other (519) (376) (743)
Industrial Minerals 73 51 122
- Current operations 73 51 122
Other 4 4 21
Total 4 852 3 941 8 814
Net operating profit
Coal(1) 393 271 620
- Tied operations 50 76 105
- Commercial operations 343 195 515
Mineral Sands 8 118 86
- Exxaro KZN Sands(2) (10) (14) (58)
- Exxaro Australia Sands 18 132 144
Base Metals 502 215 609
- Rosh Pinah 330 155 404
- Zincor 192 66 238
- Other (20) (6) (33)
Industrial Minerals (11) 2 (1)
- Current operations 8 11 26
- AlloyStreamTrade Mark (19) (9) (27)
Other (3) (1) 19 (53)
Net operating profit 891 625 1 261
Net financing costs (109) (130) (315)
Equity accounted income(4) 401 308 638
Taxation(2) (330) (273) (595)
Minority interest (14) (10) (27)
Attributable earnings 839 520 962
Share of associate`s net profit on
disposal of property, plant and equipment (1) (1)
Excess of minority interest over cost of (36) (36)
acquisition
Net deficit/(surplus) on disposal of
property, plant and equipment 2 (22) (3)
Net profit on disposal of investment (21) (39)
Taxation effect of adjustments (1) 12 10
Headline earnings 839 453 893
(1) For comparative purposes the Eyesizwe coal mines are included for the full
periods disclosed.
(2) Excludes the pre-tax impairment in 2006 of R784 million and the taxation
effect of R227 million.
(3) Excludes non-recurring expenditure of R79 million and R241 million
associated with the empowerment transaction in the six months to 30 June 2006
and 12 months to 31 December 2006 respectively.
(4) Includes 20% investment in SIOC equity accounted from 1 January 2006.
Operations
Coal
Power station coal production at the Eskom tied mines was lower by 285kt in the
period under review due to difficult geological conditions at Arnot, partially
offset by increased production from North Block Complex (NBC).
Production of coking coal, however, was 370kt higher than the comparable period
in 2006 as a result of the commissioning of the new coal beneficiation module
(GG6) at the Grootegeluk mine as well as improved production at Tshikondeni
mine.
Steam coal production decreased by 323kt during the period due to the
discontinuation of mining of the Strathrae Reserve at NBC and the closure of the
underground mining operations at New Clydesdale Colliery (NCC).
Total coal sales volumes remained in line with the comparable period in 2006.
Higher demand from Eskom and for metallurgical coal at stronger international
market prices resulted in an increase of 12% in revenue to R2,319 million.
Higher revenue together with lower costs due to the discontinuation of
underground activities at NCC and certain reserves at NBC, resulted in net
operating profit increasing by R122 million to R393 million with an operating
income margin of 17% despite the cost-based arrangements of the Eskom tied
operations.
Exxaro KZN Sands
Revenue increased by 27% to R480 million on the corresponding period in 2006
due to improved production and sales tonnages, with marginally higher prices.
Both furnaces contributed with chloride titanium slag tapped 5kt higher at 77kt
and improved low manganese pig iron production. Ilmenite production was aligned
with the higher smelter feed requirements yielding 27kt more than the
corresponding period in 2006. Zircon and rutile production decreased due to
lower in-situ mineral grades.
Continuous improvement initiatives are impacting positively on production and
should be further enhanced by the pre-heater introduction on Furnace Two
planned for August 2007.
Exxaro Australia Sands
The planned five week shut for the Synthetic Rutile (SR) plant was successfully
completed in line with the original timeframe. The shut, together with a
material strengthening of the AUD against the USD to an 18-year high of
85 US cents to the AUD, led to a substantial reduction in the net operating
profit compared with the corresponding period in 2006. This was somewhat offset
by modest price increases for pigment and rutile.
Zircon and leucoxene production increased as a result of margin improvement
initiatives, whilst pigment and rutile production were in line with the
comparable period in 2006.
Base Metals
Revenue increased by 49% to R1,416 million with the operating margin at 35%
as a result of a 28% increase in the average zinc price for the six months to
US$3,560 per tonne, US$795 per tonne higher than the same period in 2006. The
price increase was aided by higher zinc metal production at the Zincor refinery
emanating from better quality concentrates treated, supported in turn by
improved plant stability.
Zincor is currently undertaking a rebuild of the no. 4 roaster similar to
roaster no. 3 that was rebuilt in the second half of 2006.
A total of 13kt representing 30% of Rosh Pinah Zinc Corporation (Pty)
Limited`s ("Rosh Pinah") projected lead sales up to June 2010 were hedged
at forward prices ranging from US$1,700 to US$940 per tonne to partly
accommodate the stand-alone funding structure targeted for the divestment
of a 43,8% interest in Rosh Pinah to Namibian groupings. It is anticipated that
hedging up to 60% of Rosh Pinah`s zinc and lead sales may be effected on
implementation of the transaction. The divestment is targeted for completion by
year-end.
The Rosh Pinah life of mine (LOM) was increased from four years in 2004 to
seven years in 2006 through an intensified exploration programme. The ongoing
programme continues to render positive results and holds the prospect of
further increasing the life of mine.
Industrial Minerals
Production at both the FerroAlloys plant and the Glen Douglas mine remained
in line with the previous corresponding period. Net operating income declined
by R3 million as a result of higher maintenance expenditure at the Glen
Douglas mine.
GROWTH OPPORTUNITIES
Coal
Ramp-up of the Grootegeluk 6 project which started in August 2006, will
reach design capacity in the fourth quarter of 2007. In addition to
supplementing semi-soft coking coal to Mittal Steel South Africa`s
coking plants, this project contributes to alleviating the shortage of market
coke for the ferro-alloy industry.
A supply agreement for 45 years was awarded to Exxaro Coal by Eskom in March
2007 to supply 8,5Mtpa of power station coal from the Grootegeluk mine to
Eskom`s new 2,400MW Medupi power station consisting of three generating units
and adjacent to the Matimba power station. Feasibility studies are underway to
also supply the planned additional three generating units of Medupi which
could increase the total coal supply from Grootegeluk mine to Medupi, to
17Mtpa.
The Board has approved two further retorts for the Sintel Char facility
currently under construction to produce char for the ferro-alloy industry
from the Grootegeluk mine. Production from this four-retort facility is
expected to ramp-up to 160ktpa by 2008 at a revised total estimated cost of
R290 million.
The feasibility study to investigate the viability of a market coke plant
is now scheduled for completion in November 2007. If viable, the plant will
produce high quality market coke from semi-soft coking coal produced at
Grootegeluk mine.
In May 2007, Exxaro was awarded 2,5Mtpa export entitlement through RBCT by
means of a subscription process, in addition to the existing 0,8Mtpa
entitlement of Eyesizwe Coal. Exxaro also purchased a further 1Mtpa export
entitlement through RBCT from Billiton Energy Coal South Africa Limited,
bringing the total export allocation to 4,3Mtpa. On completion of the RBCT
Phase V expansion scheduled for the second quarter of 2009, Exxaro will
receive a further 2Mtpa export entitlement through the South Dunes Coal
Terminal Company, bringing the total entitlement to 6,3Mtpa.
Exxaro has started producing coal at the new Inyanda mine near Witbank in the
Mpumalanga province of South Africa, four months after construction started.
The R269 million Inyanda coal mine is the first greenfields project to be
developed under the Exxaro corporate identity and will be able to produce up
to 1,5Mtpa of product.
The Mafube expansion project, in which Exxaro is a 50:50 joint venture partner
with Anglo Coal, is expected to cost approximately R1,9 billion on completion.
Construction commenced in July 2006 with the first coal to washing plant
expected in November 2007 and ramp-up to full capacity in seven months.
Geological drilling and modelling at Mmamabula in Botswana, a joint venture
between Exxaro Coal and Magaleng continued until the end of June 2007. An
application for a mining license or special extension of the prospecting
license was submitted in March 2007. The feasibility study is planned to
commence in 2008.
Mining of the Eerstelingsfontein reserves near Belfast to supply 1Mtpa power
station coal to Eskom could commence early in 2008. The feasibility on the
project is planned to be completed by the end of August 2007.
In terms of the 50:50 joint venture agreement between Exxaro and Anglo Coal
Australia, exploration of the coking coal resource on the adjacent properties
of Moranbah South and Grosvenor South in Queensland, Australia, is progressing
according to schedule. The focus is to delineate suitable long wall resources
via geophysics and drilling and it is expected that this will be completed in
the second half of 2009. Moranbah South has the potential to produce about
3,5Mtpa of quality hard coking coal from underground long-wall mining for at
least 20 years.
Mineral Sands
The application for obtaining a new order mining right for the Fairbreeze C
Extension area and the applicable environmental authorisations for the
Hillendale mine in KwaZulu-Natal has not yet been completed. As a result,
production from the Fairbreeze project is expected to now commence early in
2009.
The requisite regulatory approvals for the large deposit on the Port Durnford
property located to the immediate south- west of Exxaro KZN Sands` Hillendale
mine, are also being progressed. This project is a 51:49 joint venture between
Exxaro Sands and Imbiza Resources.
Good progress has been made in confirming the ilmenite feedstock resource of
the Toliara Sands project in Madagascar. Drilling on the Monombo-Marombe
exploration area in south-western Madagascar is continuing while the
feasibility study on the Ranobe area will be resumed in 2008, after which a
development decision could be made.
A study on the pigment plant expansion of an additional 40ktpa to 50ktpa in
2009 at the Tiwest Kwinana pigment plant announced in the first quarter of
2007 at an estimated cost of US$35 million to US$45 million is expected to be
completed during the fourth quarter of 2007 with approval shortly thereafter.
Exxaro holds a 50% share of this project. On the completion of the study, the
final scope of the expansion and capital estimate will be announced by the
joint venture partners.
Production at the Dongara project 90km south of Geraldton in western Australia
is still expected to commence in late 2009.
Base Metals
The capacity expansion from 50ktpa to 110ktpa at the Chifeng smelter has been
successfully commissioned with production to be progressively ramped-up to
design capacity. Exxaro has an effective 22% interest in the expanded operation
consisting of three phases.
A claim for damages for breach of contract by Gecamines regarding the Kipushi
zinc and copper project has been submitted and it is planned to do likewise
for the Kamoto copper and cobalt project whilst in parallel endeavouring to
resolve the issues with Gecamines and the government of the Democratic Republic
of the Congo (DRC) amicably. The government is reviewing all agreements
concluded in the DRC during the past six years.
ALLOYSTREAMTM
The feasibility study for the commercialisation of AlloyStreamTrade Mark
technology, Furnace One, which allows for improved beneficiation of manganese
ore, is targeted for completion during the second quarter of 2008.
The AlloyStreamTrade Mark technology also lends itself to the production of
ferro-nickel. The necessary test work and pilot plant campaigns will commence in
2008.
CONVERSION OF MINING RIGHTS
Exxaro is approaching the conversion of its old order mining rights to the new
order rights in two phases. It is firstly progressing conversion of the former
Kumba Resources-associated rights, excluding iron ore, and this will be
followed by applications for the conversion of the former Eyesizwe mining
rights.
Exxaro held a workshop with the Department of Minerals and Energy (DME) on 17
and 18 July as part of the process to clarify and progress the applications for
new mining rights for the operations.
DIRECTORATE
As disclosed in the revised listing particulars of Exxaro dated 9 October 2006,
Mr SA Nkosi will succeed Dr CJ Fauconnier as chief executive officer on 1
September 2007. Dr Fauconnier will also retire from the Board on that date.
OUTLOOK
The group remains well positioned to continue benefiting from the strong
commodity markets as prices for zinc and coal remain favourable while buoyant
iron ore market conditions will have a positive impact on its share of SIOC`s
earnings. Continued depressed mineral sands prices and the Australian dollar
and South African rand at stronger levels could, however, negatively impact on
operating results.
INTERIM DIVIDEND
The directors have declared an interim dividend number 9 of 60 cents per share
in respect of the 2007 interim period.
The dividend has been declared in South African currency and is payable to the
shareholders recorded in the books of the company at close of business on
Friday, 7 September 2007.
In compliance with the electronic statement system of the JSE Limited, the
following dates are applicable:
Last date to trade cum dividend Friday, 31 August 2007
Shares trade ex dividend Monday, 3 September 2007
Record date Friday, 7 September 2007
Payment date Monday, 10 September 2007
Share certificates may not be dematerialised nor rematerialised between 3
September 2007 and 7 September 2007, both days inclusive.
On behalf of the Board
Dr CJ Fauconnier DJ van Staden
(Chief Executive Officer) (Chief Financial Officer)
15 August 2007
Registered Office Transfer Secretaries
Exxaro Resources Limited Computershare Investor
Roger Dyason Road Services 2004 (Pty) Limited
Pretoria West, 0002 Ground Floor, 70 Marshall Street
Johannesburg, 2001
Tel: +27 12 307 5000 PO Box 61051
Fax: +27 12 323 3400 Marshalltown, 2107
Directors: Dr CJ Fauconnier (Chief Executive Officer), PM Baum,
JJ Geldenhuys, U Khumalo, MJ Kilbride*, Dr D Konar, VZ Mntambo, RP Mohring, PKV
Ncetezo, SA Nkosi*, NMC Nyembezi-Heita, NL Sowazi, DJ van Staden*,
D Zihlangu *Executive
Company Secretary: MS Viljoen
Corporate Affairs and Investor Relations: Trevor Arran (+27 12 307 3292)
Sponsor: JP Morgan (+27 11 507 0300)
If you have any queries regarding your shareholding in Exxaro Resources,
please contact the Transfer Secretaries at +27 11 370 5000
This report is available on:
www.exxaro.com
Date: 16/08/2007 07:00:02 Supplied by www.sharenet.co.za
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