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EXX - Exxaro - Reviewed group financial results and physical information for the
six-month period ended 30 June 2007
EXXARO RESOURCES LIMITED
(formerly Kumba Resources Limited)
Incorporated in the Republic of South Africa
(Registration Number: 2000/011076/06)
Share Code: EXX
ISIN Number: ZAE000084992
("Exxaro" or "the company")For immediate release
EXXARO RESOURCES REVIEWED GROUP FINANCIAL RESULTS AND PHYSICAL INFORMATION FOR
THE SIX-MONTH PERIOD ENDED 30 JUNE 2007
HIGHLIGHTS
*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
NOTE TO EDITORS:
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) Ltd ("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 below 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 comparable 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.
Diversified South African-based resources group Exxaro Resources Limited
(Exxaro) today reported revenue of R4,85 billion for the six-month period ended
30 June 2007, an increase of 23%, while net operating profit increased by R266
million to R891 million.
"The Group continues to benefit from buoyant demand and high commodity prices,"
said Dr Con Fauconnier, Exxaro`s chief executive officer.
An average exchange rate of R7,33 to the US dollar was realised compared with
R6,32 for the corresponding period in 2006. This was significantly offset by the
strengthening of the Australian dollar to the US dollar 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 were expected to be between R815 million and R855
million.
Attributable earnings for the period ended 30 June 2007 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 previous corresponding period of R453 million (148 cents per share).
CASH FLOW
Cash retained from operations was R1,26 billion. 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 re-
purchased 10 million shares from Anglo South Africa Capital (Pty) Ltd ("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 9 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 R2,35 billion, 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 AUD 1,25 per share resulting in a net cash
inflow of AUD 14 million (R84,6 million). The original interest in MDL of 15,37%
was acquired in February 2001 for AUD 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
R1,5 billion 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 occurred during the period under review.
"The Group has renewed its commitment to achieve 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," said Dr Fauconnier.
The average lost time injury frequency rate (LTIFR) per 200 000 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 ex-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," added Dr
Fauconnier.
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.
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 the 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 2007 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 S A Nkosi will succeed Dr C J 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," said Dr Fauconnier.
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.
*View or download the full results announcement on www.exxaro.com
*See Addendum 1 for Operational highlights; Addendum 2 for Growth opportunities
Editor`s Note:
Exxaro is one of the largest South African-based diversified resources groups,
with interests in the coal, mineral sands, base metals, industrial minerals and
iron ore commodities. www.exxaro.com
Enquiries:
Trevor Arran
General Manager: Corporate Affairs & Investor Relations
Tel: +27 (0) 12 307 3292
Mobile: +27 (0) 83 609 1444
Sponsor: J.P.Morgan Equities Limited
16 August 2007
ADDENDUM 1:
OPERATIONAL HIGHLIGHTS
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 R2,3 billion.
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 R1,4 billion 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) Ltd`s
(Rosh Pinah) projected lead sales up to June 2010 were hedged at forward prices
ranging from US$1700 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.
ADDENDUM 2:
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 SA`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 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 a 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
Mpumalanga province, 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 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 is
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 licence or special extension of the prospecting licence
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 process 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 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 low grade 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 that was 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 to follow shortly
thereafter. Exxaro holds a 50% share of this project. On 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 in China
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 G'camines 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 G'camines 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 AlloyStreamT technology,
Furnace One, which allows for improved beneficiation of manganese ore, is
targeted for completion during the second quarter of 2008.
The AlloyStreamT technology also lends itself to the production of ferro-nickel.
The necessary test work and pilot plant campaigns will commence in 2008.
Date: 16/08/2007 07:28:26 Supplied by www.sharenet.co.za
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