Wrap Text
Lonmin Plc - Interim Results
Lonmin Plc
(Incorporated in England and Wales)
(Registered in the Republic of South Africa under registration number
1969/000015/10)
JSE code: LON
Issuer Code: LOLMI & ISIN: GB0031192486
Building Growth in Robust Markets
* Record EBIT up 127% to US$304 million
* Underlying earnings per share up 152% to 110.3 cents pershare
* Strong cash generation with trading cash flow of S$174 million (122.3 cents
per share)
* Excellent operating performance:
* Record mine production to deliver 501,827 ounces of Platinum and
977,352 ounces of total PGMs in concentrate
* Smelter rebuild completed in record 27 days and Smelter achieved
record throughput in March
* Costs well managed in the first half in line with our expectations with C1
costs at Marikana net of by product credits up only 0.5% to R2,345 per PGM
ounce sold .
* Six Sigma programme continues to deliver with R201 million (US$32 million)
of additional net EBIT benefit
* Acquisition of minorities in Messina Limited for US$13 million and 25%
stake in Platmin Limited for US$32 million
* Interim dividend increased by 50% to 45.0 cents per share.
Financial highlights % change
Six Months to 31 March 2006 2006 2005 (i)
Revenue $708m $421m 68%
EBITDA $342m $163m 110%
EBIT $304m $134m 127%
Underlying profit before $288m $130m 122%
taxation
Underlying earnings per 110.3c 43.8c 152%
share (ii)
Earnings per share (47.1)c 51.5c n/a
Interim dividend per share 45.0c 30.0c 50%
(iii)
Trading cash flow per share 122.3c (14.1)c n/a
(iv)
Free cash flow per share 63.2c (90.4)c n/a
(v)
Equity shareholders" funds $734m $781m (6)%
Net Debt $590m $468m 26%
Interest cover (v) 15.9x 34.3x n/a
NOTES ON HIGHLIGHTS
(i) All comparative figures for 2005 are restated under IFRS and are as
announced on 15 February 2006 in the Group"s Adoption of International
Financial Reporting Standards Publication.
(ii) Underlying earnings per share are calculated on profit for the period
excluding special items (note 3 to the Interim Accounts)
(iii)The interim dividend will be paid on 4 August 2006 to shareholders on the
register on 7 July 2006
(iv) Trading cash flow is cash flow from operating activities.
(v) Free cash flow is trading cash flow less net expenditure on property, plant
and equipment, intangibles, proceeds from disposal of assets held for sale
and dividends paid to minority interests.
(vi) Interest cover is calculated for the 12 month periods to 31 March 2006 and
31 March 2005 on the underlying operating profit divided by underlying net
interest payable excluding exchange.
Commenting on the results, Brad Mills, Lonmin"s Chief Executive said:
"We have delivered record financial results for the half year to 31 March 2006
with underlying earnings per share up 152% versus the first half of 2005.
Reflecting our confidence in the outlook for the Platinum market and the
continued growth of our business we have today declared an interim dividend of
45 cents per share, an increase of 50%. Our operational performance has been
excellent with record production from our mines with 501,827 ounces of Platinum
produced in concentrate and the completion of the Smelter rebuild in only 27
days. We expect to produce around 1 million ounces of Platinum from our mines
in 2006 with sales of between 970,000 to 980,000 ounces. We are on track to grow
our production to 1.3 million Platinum ounces in 2010 and are working to lock in
additional growth beyond this from identified projects, our exploration
portfolio and where appropriate strategic acquisitions. We are starting to
achieve operational excellence in a number of areas and remain committed to
continual improvement and the transformation of our business into a world class
natural resources company"
Enquiries:
Alex Shorland-Ball, Lonmin Plc +44 (0) 20 7201 6060
This press release is available on www.lonmin.com. A live webcast of the
interim results" presentation starting at 09.30hrs (London) on 4 May 2006 can be
accessed through the Lonmin website. There will also be a web question facility
available during the presentation. An archived version of the presentation,
together with the presentation slides, will be available on the Lonmin website.
Chief Executive"s Comments
Introduction
We achieved a record output in the six months from our mines with 501,827 ounces
of Platinum and 977,352 ounces of total PGMs produced in concentrate. Sales
were 413,030 ounces of Platinum and 802,766 ounces of total PGMs. We
successfully completed the planned rebuild of the number one furnace during the
period in a record time of 27 days (matte tap to matte tap).
Our forecast for mine production remains around 1 million ounces of Platinum in
concentrate for the financial year to 30 September 2006. Sales for the full
year will be impacted as a result of the loss of 11 days production in April
while the Smelter was shutdown to repair a minor leak. We now forecast full
year sales of 970,000 to 980,000 ounces of Platinum and 1.86 to 1.89 million
ounces of total PGMs.
Safety
We have seen significant improvement in our safety performance during the first
six months of the financial year. Our lost time injury (LTI) frequency rate
dropped to a new record low of 10.8 per million man hours worked versus last
year"s figure of 18.1 an improvement of 40% and well ahead of our targeted 30%
improvement. We regrettably suffered three industrial fatalities at our
Marikana operations.
Our Limpopo operations are showing a dramatic improvement in safety performance
and were fatality free for the six months. The operation achieved a lost time
injury frequency rate of 7.1 per million man hours worked.
We have instigated a number of campaigns to focus on running the operations
injury free and will continue to roll these out during the second half of the
year. We are also continuing our focus on the implementation of our Fatal Risk
Protocols to ensure that these are fully embedded in each business area.
Marikana Mining
Our Marikana mining operations achieved record production of 5,739,000 tonnes
milled (5,793,000 tonnes mined) from underground operations and 1,264,000 tonnes
milled (996,000 tonnes mined) from opencast operations. This equated to 474,961
ounces of Platinum and 913,386 ounces of total PGMs in concentrate despatched to
the Process Division and for external sales.
We have moved away from treating the operations at Marikana as three distinct
mines and have restructured the management so that the operation is treated as
one mine split into shallow, deep, mechanised and opencast sections. This is
operating well and has allowed greater efficiency in the sharing of information
and best practice.
We have continued to mechanise our mines and now have two fleets of Ultra Low
Profile (ULP) equipment at work on the property. We are developing our new
Saffy and K4 Shafts as fully mechanised operations and at Saffy we will begin a
full scale trial of the ULP equipment later this year. The percentage of
production from fully mechanised stopes will be slightly lower than we initially
targeted at around 4.5% by the end of the 2006 fiscal year. We will meet our 8%
target by the end of the calendar year and remain on track to meet our 50%
target by the end of 2010.
In addition to our ULP equipment we have also been assessing other methods to
modernise our mining operations. As part of this process, we are operating DDT
stope drill rigs at our E2 shaft. The results to date have been positive and we
are rolling these out, where appropriate, across the operations. By the end of
2006 an additional 4.5% of our production will be produced from mechanised
methods other than our ULP equipment.
Limpopo Mining
I am pleased with the progress of our Limpopo operations which produced 487,000
tonnes milled (491,000 tonnes mined) from underground operations and contributed
26,866 ounces of Platinum and 63,966 ounces of total PGMs in concentrate in the
period. During the six month period we consolidated control of Limpopo by
acquiring the outstanding 8.5% minorities in Messina Limited, the South African
listed company which owned the Limpopo assets. The cost of the acquisition was
some US$13 million. Limpopo contributed US$8 million to our EBIT in the first
six months of this year, substantially ahead of our budget.
The re-engineering, mechanisation and ramp up of this operation remains broadly
on plan to achieve our steady state of 120,000 tonnes per month by September
2006 and remains on target to produce 75,000 ounces of Platinum in fiscal year
2007.
Process Division
Final metal sales were 413,030 Platinum ounces and 802,766 ounces of total PGMs.
The Smelter rebuild in February was completed successfully in 27 days matte tap
to matte tap and came in on budget. We took advantage of this planned downtime
to accelerate deliveries of concentrate to Impala under the Limpopo offtake
contract. In total we have delivered around 49,000 Platinum ounces during the
period and this contract is now complete.
We have continued during the six month period to address the bottlenecks within
the Process Division. The Smelter has continued to increase throughput smelting
a record 28,021 tonnes in March. The debottlenecking of the Base Metal
Refinery has also seen initial success with a record 1,039 tonnes of converter
matte milled in March and production of a record 2,092 tonnes of Nickel
Sulphate. At the Precious Metal Refinery we have completed the automation of
the Primary Metals Separations Plant and the next phase of the project is
focusing on the pure Platinum and Palladium processing streams. This will be
completed by September 2006. The Rhodium, Iridium and Ruthenium stream
automation will be completed during 2007. The automation project will improve
recoveries and reduce costs at the PMR through improved process control and
improved first pass recoveries.
On 9 April 2006, a matte and slag leak occurred at the number one furnace down
the sides of the matte waffles. It appears that due to an original installation
error the base plate of the furnace shell was not welded in the matte waffle
zone. The expansion of the hearth following the February rebuild created
differential pressure in the matte tap block support structure which moved the
matte waffles allowing the leak to occur. The repairs to the furnace included
welding the base plate of the furnace to the supporting girders, reinforcing the
support structure around the matte tap holes and replacing the matte waffles and
refractories at the site of the leak. These have been successfully completed
and the total downtime of the furnace was limited to 11 days (matte tap to matte
tap).
Six Sigma and Shared Business Services
Our Six Sigma continuous improvement programme continues to perform extremely
well and we have realised R201 million (US$32 million) of net EBIT benefit in
the first half primarily in revenue improvements.
We have now implemented our Shared Business Services Programme and realised
savings of R14.4 million (US$ 2.3 million) in the first half. On 1 March 2006
we successfully went live on SAP and have now switched off our various legacy
information systems.
We remain on track to deliver our forecast R370 million of benefits from a
combination of our Six Sigma and Shared Business Services Programmes for the
full year.
Costs and Capital Expenditure
Our costs were well controlled during the period increasing only 2.9% gross and
0.5% net of by product credits over the same period last year despite a major
furnace rebuild undertaken during the six months and the South African inflation
rate running at some 4.5%. For our Marikana operations C1 costs of own metal
production net of by product credits were R2,345 per PGM ounce sold. We
continue to forecast C1 costs for the full year of between R2,300 and R2,400 per
PGM ounce sold net of base metal credits.
Our Limpopo operations delivered a C1 cost per saleable PGM ounce in concentrate
net of by product credits of R3,385, a reduction of 17.5% versus the costs at
Limpopo for the full year to September 2005. We expect the costs at Limpopo to
continue to improve as we ramp up production from the mine and complete the re-
engineering of the operation with C1 costs at the end of the full year forecast
to be at the R2,900 level per PGM ounce sold. We are now forecasting a slightly
higher C1 cost per saleable PGM ounce in concentrate net of by product credits
for Limpopo of around R3,100 to R3,200 for the full year.
As a result of our increased focus on mechanisation and the continued
debottlenecking of our metallurgical capacity, we have revised our projection
for capex for the 2006 financial year. We now forecast a gross capex spend of
some US$230 million by the end of September 2006.
Mining Licence Conversion
The Social and Labour Plan portion of our New Order Mining Licence application
has been approved by the local Klerksdorp Office of the Department of Minerals
and Energy (DME). The Pretoria office of the DME is now considering the entire
licence for conversion. We anticipate a successful outcome in due course.
Growth Profile
Over the last year we have built into Lonmin an exciting and robust growth
profile with the expansion of our Marikana operations and addition of the
Limpopo resources to our portfolio. This profile will see the business grow to
1.3 million ounces of Platinum production in 2010. We currently have three
mining projects in various stages of feasibility of which only the Limpopo phase
2 expansion is included in our 1.3 million ounce target.
In November we announced the possibility of accessing the Limpopo ore body
through an opencast operation which we estimated could produce around an
additional 20,000 ounces of Platinum per annum for around two years. The
feasibility study for this project is ongoing and if we decide to proceed we
would expect this project to commence during 2007.
The successful development of the second stage of the Limpopo property forms
part of our 1.3 million ounce production target in 2010. We currently expect to
complete full feasibility on this project by July 2007 and anticipate that
Limpopo phase 2 will contribute around 125,000 ounces of Platinum per annum when
at full production.
At our Pandora project we are evaluating the development of the project
utilising our mechanised approach. We commenced pre-feasibility on this project
at the beginning of February 2006. If the pre-feasibility work is positive we
expect to approve the project for full feasibility by the end of the year.
Indicative full production from the project is around 200,000 ounces of which
Lonmin"s share would be 42.5%.
During the last six months we have made an investment of US$32 million in
Platmin Limited an unlisted Canadian exploration company. We now own 25% of the
outstanding share capital on a fully diluted basis. Platmin holds interests in
a number of properties in the Bushveld which could represent a good fit with
Lonmin"s existing properties. The current attributable resource base is around
13.7 million ounces (3PGE+Au).
In February we announced our intention to undertake a feasibility study to
assess the possible expansion of our metallurgical capacity from the current
forecast 1.3 million ounces of Platinum per annum to between 1.75 and 2 million
ounces of Platinum per annum. Such an expansion would involve adding to our
smelting capacity through the construction of a new furnace, expanding and
debottlenecking our Base Metal Refinery and upgrading and automating our
Precious Metal Refinery. We estimate the capital cost of this Brownfield
project would be between US$300 and 350 million which would represent a low
capital cost per annual PGM ounce produced of between US$300 and 350, around one
third of the cost of new Greenfield capacity. We believe that part of the feed
for the expanded capacity will come from our project pipeline including the
Pandora project and potentially from commercial custom smelting opportunities.
Exploration
We continue to develop our high quality portfolio of exploration projects. At
our Loskop project in South Africa we have recently delineated a 2 million ounce
resource of Platinum, Palladium and Gold to a depth of 400 metres. Drilling is
continuing to investigate the down-dip extent. In Tanzania we will follow up
our 2005 drill results at Luwumbu where we have intersected high grade
mineralisation with grades of 5.36 grams per tonne PGMs over 16.4 metres
including 1.67 metres at 26.8 grams per tonne PGMs to ascertain the extent of
PGM mineralisation, width and continuity.
We have intersected good grade and thickness of PGM mineralisations on several
of the properties covered by our joint ventures with Inco and Wallbridge in
Canada"s Sudbury Basin. Our ongoing drilling programme in these areas will
determine if the size of the deposits is sufficient to support a commercial
mine.
Markets
The Platinum market remains very strong with prices reaching record levels
during the period, increasing by some 16% since the beginning of October 2005.
Crucially this price momentum is underpinned by strong demand particularly from
the autocatalyst sector. Growth in demand for Platinum in diesel automobile
catalysts continued to be a key driver. We expect this trend to continue for
the foreseeable future as Platinum based catalytic solution penetrate the light,
medium and heavy duty diesel sectors and start to grow in off road emissions
management. Supply growth remains constrained with limited commitment to new
projects despite current Platinum prices.
The Rhodium market has also been very strong during the period, 90% of this
metal is used in the manufacture of autocatalysts and we continue to see
fundamental demand supporting the price. Palladium has recently shown signs of
demand growth, but currently remains oversupplied.
Dividend
Based on the success we have achieved in the first half and our continued
confidence in the outlook for our business against a backdrop of strong Platinum
markets, the Board has declared an interim dividend of 45 cents per share an
increase of 50% on the interim dividend paid last year.
Outlook
Our mines have performed strongly during the first six months and we are on
track to produce around 1 million ounces of Platinum in concentrate for the
financial year to 30 September 2006. Taking account of the Smelter incident in
April 2006, we now believe that our Platinum sales for the full year will be in
the range of 970,000 to 980,000 ounces.
We believe the Platinum markets will remain strong and we are working to grow
the Lonmin business to take advantage of these markets. We continue to target
growth to 1.3 million ounces of Platinum in 2010 and beyond this we are locking
in further growth options through our identified projects and high quality
exploration portfolio.
Our outlook for full year C1 costs for Marikana own metal production is between
R2,300 and R2,400 per PGM ounce sold net of by product credits. C1 costs for
Limpopo per PGM ounces sold in concentrate will reach around R2,900 at the end
of the financial year and we forecast will be between R3,100 and R3,200 for the
12 month period.
We continue to make good progress on our journey to transform Lonmin into a
modern and efficient world class mining company utilising the best available
operating practices and capitalising on the diversity and quality of our South
African workforce. I would like to thank all the Lonmin employees, contractors
and community members for your valuable contribution during the last six months.
Bradford A Mills
Chief Executive
3 May 2006
Financial Review
Introduction
The financial information presented has been prepared on the basis of
International Financial Reporting Standards (IFRSs) as disclosed in note 1 to
the Interim statements and is consistent with the Group"s announcement on 15
February 2006.
Analysis of results
Income statement
A comparison of the interim 2006 total operating profit with the prior period is
set out below:
$m
Total operating profit for the six months to 134
31 March 2005
Improved recoveries (29)
Insurance receipts (22)
Smelter incident cost 9
2005 operating profit for the six months to 92
31 March 2005 post one-offs
Increase in sales prices 180
Increase in sales volumes 20
Cost base increases (15)
Depreciation and amortisation (5)
Exchange 17
Messina 8
Gain on sale from disposal of housing 7
Total operating profit for the six months to 304
31 March 2006
As previously reported the operating profit in the first half of 2005 benefited
from net one-offs of $42 million. This comprised improved recoveries of $29
million and insurance receipts of $22 million which were offset by costs of the
smelter incident in November 2004 of $9 million.
Sales volumes of PGMs increased from 671,591 ounces to 802,766 ounces. The
comparatives are adversely impacted by the smelter incident and the current
period benefits from approximately 50,000 PGM ounces relating to the acquisition
of Southern Platinum Corporation. The average price realised for the basket of
metals sold at $26,281 per kg was 39% higher than the prior period resulting in
a price variance to operating profit of $180 million and reflecting the strong
market demand. Revenue has increased 68% to $708 million.
Costs were well controlled. The C1 cost per PGM ounce sold before by-product
credits on own production from the Marikana operations increased by 2.9% to
R2,598 for 2006. This rise primarily resulted from the increase in processing
costs due to the smelter rebuild in the period which more than offset a strong
performance in mining. After by-product credits C1 costs of own production were
broadly flat compared to the prior period reflecting high by-product commodity
prices. Further details of unit costs analysis can be found in the operating
statistics table. The exchange rate for South African rand against the US
dollar is weaker by 6% compared to the prior period at an average rate of 6.29
rand per dollar and this benefited operating profit by $17 million. The Messina
operations contributed $8 million to the Group at an operating profit level.
The resulting total operating profit amounted to $304 million (2005 - $134
million). The 2006 underlying total operating profit which excludes the gain on
sale from the disposal of housing, treated as a special item, amounted to $297
million, an increase of 122% on the prior period.
Underlying net finance costs in 2006 were $12 million compared with $7 million
in 2005. Debt levels were higher during the interim period following the
acquisition of Southern Platinum Corporation in June 2005. At a total level net
finance costs in the period are $226 million. The difference to underlying
reflects a $235 million increase in the fair value of the equity derivative
embedded in the convertible bonds offset by a $21 million correction on
capitalised interest relating to prior years. Profit before tax for the 2006
interim period amounted to $81 million compared with $141 million in 2005.
The 2006 interim tax charge was $110 million compared with $53 million in the
prior period. The effective tax rate, excluding the effects of special items
(see note 3) was 33% compared with 41% reflecting a lower level of dividends
remitted (which incur additional STC tax) in relation to profits.
The reported loss for the interim period is $29 million (2005 - profit of $88
million) and the loss per share is 47.1 cents (2005 earnings per share 51.5
cents). Underlying earnings per share, being earnings excluding special items
(see note 3), amounted to 110.3 cents (2005 - 43.8 cents) an increase of 152%.
Balance sheet
Equity interests were $734 million at 31 March 2006 compared with $838 million
at 30 September 2005. This principally reflects the loss for the period
attributable to equity shareholders of $61 million and the payment of the 2005
final dividend of $60 million which were offset by movements related to share
schemes.
The Southern Platinum Corporation was acquired on 15 June 2005, with a
compulsory acquisition of the remaining shares on 28 July 2005. The Group has
taken the opportunity to re-assess the fair value of net assets acquired which
had been provisionally established in the accounts as at 30 September 2005,
under UK GAAP. This has resulted in the recognition of $60 million of goodwill,
an increase of intangible mineral rights of $7 million and a reduction of
tangible fixed assets of $67 million. An underlying minority interest of 8.5%
remained at the operational level in Messina Platinum until 6 February 2006. $13
million of goodwill was recognised in the purchase of these minorities. An
amount of $15 million has also been capitalised within intangible assets. This
represented the amount the Company paid to Impala Platinum Holdings Limited to
acquire the Messina concentrate off-take contract. This is being amortised over
20 years. The acquisition is expected to be earnings neutral in 2006.
Net debt amounted to $590 million at 31 March 2006 with the main components
being the convertible bonds of $213 million and bank loans and overdrafts of
$404 million. The net debt is $122 million higher than at March 2005 reflecting
the acquisition of Southern Platinum Corporation as described above. This,
combined with higher interest rates, has resulted in a reduction to the rolling
twelve month interest cover to 15.9 times compared with 34.3 times for the prior
period.
Cash flow
The following table summarises the main components of the cash flow during the
period:
March March
2006 2005
Total Total
$m $m
Operating profit 304 134
Working capital (68) (119)
Other items (mainly depreciation 38 30
and amortisation)
Cash flow from operations 274 45
Net interest paid (23) (8)
Tax paid (77) (57)
Trading cash flow 174 (20)
Purchase of intangible assets, (85) (87)
property, plant and equipment
Proceeds from disposal of assets 19 -
held for sale
Dividends paid to minority (18) (21)
Free cash flow 90 (128)
Acquisition of subsidiary (net of (14) (10)
cash acquired)
Purchase of other financial assets (33) -
Dividends paid to Lonmin (60) (59)
shareholders
Issue of ordinary share capital 12 -
Increase in net debt (5) (197)
Opening net debt (585) (270)
Effect of exchange rate changes - (1)
Closing net debt (590) (468)
Trading cash flow per share 122.3c (14.1)c
Free cash flow per share 63.2c (90.4)c
Cash flow from operations was $274 million during the six months to 31 March
2006, an increase of $229 million on the prior six months, despite an adverse
working capital flow of $68 million driven by higher stock levels. After
interest of $23 million and tax payments of $77 million, trading cash flow
amounted to $174 million in 2006 against an outflow of $20 million in 2005, with
trading cash flow per share of 122.3 cents in 2006 against an outflow of 14.1
cents in the 2005 interim period.
Capital expenditure of $85 million and dividends paid to minorities at $18
million were each very similar to the prior period. The disposal of houses held
for sale realised $19 million. Free cash flow amounted to $90 million with free
cash flow per share at 63.2 cents (2005 - outflow per share 90.4 cents).
Acquisitions of $14 million in 2006 mainly represented the buy out of the
Messina minorities for $13 million. The purchase of other financial assets
effectively represented the purchase of shares in Platmin. After accounting for
equity dividends paid of $60 million and shares issued on the exercise of share
options of $12 million, net debt increased by $5 million in the period and
amounted to $590 million at 31 March 2006.
Dividend
The Board has declared an interim dividend of 45.0 cents per share (2005 - 30.0
cents per share). On an underlying earnings basis this represents a cover of 2.5
times compared with 1.5 times in 2005.
John Robinson
Chief Financial Officer
3 May 2006
Operating Statistics
6 6
months months
to to
31 31
March March
2006 2005
Mining
Tonnes milled Marikana Underground (000) 5,739 5,427
Opencast (000) 1,264 1,480
Limpopo Underground (000) 487 -
Opencast (000) 14 -
Lonmin Total (000) 7,504 6,907
Platinum
Tonnes mined Marikana Underground (000) 5,793 5,405
Opencast (000) 996 1,244
Limpopo Underground (000) 491 -
Opencast (000) 14 -
Lonmin Total (000) 7,294 6,649
Platinum
Metallurgy
Metals in Marikana Platinum (oz) 474,961 446,989
concentrate
despatched
Palladium (oz) 219,213 193,334
Rhodium (oz) 71,244 62,235
Total PGMs (oz) 913,386 853,258
Limpopo Platinum (oz) 26,866 -
Palladium (oz) 22,388 -
Rhodium (oz) 3,646 -
Total PGMs (oz) 63,966 -
Lonmin Platinum (oz) 501,827 446,989
Platinum
Palladium (oz) 241,601 193,334
Rhodium (oz) 74,890 62,235
Total PGMs (oz) 977,352 853,258
Production Marikana Platinum (oz) 332,803 366,781
refined
Palladium (oz) 142,209 157,058
Rhodium (oz) 53,866 35,253
Total PGMs (oz) 628,668 666,303
Marikana Platinum (oz) 49,340 -
concentrate i
Palladium (oz) 21,595 -
Rhodium (oz) 6,177 -
Total PGMs (oz) 92,977 -
Limpopo Platinum (oz) 23,548 -
concentrate
ii
Palladium (oz) 17,328 -
Rhodium (oz) 2,907 -
Total PGMs (oz) 51,417 -
Lonmin Platinum (oz) 405,691 366,781
Platinum
Palladium (oz) 181,132 157,058
Rhodium (oz) 62,950 35,253
Total PGMs (oz) 773,062 666,303
6 6
months months
to to
31 31
March March
2006 2005
Capital (R 544 510
expenditure millions)
($
millions) 85 87
Sales Lonmin Platinum (oz) 413,030 365,653
Platinum
Palladium (oz) 192,505 152,725
Rhodium (oz) 65,639 39,330
Total PGMs (oz) 802,766 671,591
Prices
Average price Platinum (R) 6,100 5,000
received per
ounce
($) 968 842
Palladium (R) 1,669 1,170
($) 266 196
Rhodium (R) 19,726 7,855
($) 3,142 1,320
Basket price of PGMs and base ($/kg) 26,281 18,889
metals
Cash Costs: Mining - weighted average (R) 1,855 1,930
cost
Smelting & (R) 443 331
refining
Shared (R) 358 321
Business
Services
Movement in (R) (58) (57)
physical stock
Cost per PGM ounce sold before (R) 2,598 2,525
by products credits
By product (R) (253) (192)
credits
C1 - Cost per PGM ounce sold Marikana (R) 2,345 2,333
net of by product credits
Improved (R) - (118)
recoveries
Smelter repair (R) - 54
Other EBIT Amortisation (R) 237 277
items:
Insurance (R) - (83)
proceeds
C2 - Costs per PGM ounce sold Marikana (R) 2,582 2,463
own production
C1 - Cost per PGM ounce sold Limpopo (R) 3,385 -
net of By Product Credits
Exchange rates
Average Sterling (GBP/$) 0.58 0.53
exchange rates
S A rand (R/$) 6.29 5.94
Closing Sterling (GBP/$) 0.58 0.53
exchange rates
S A rand (R/$) 6.15 6.22
Footnotes:
i. Produced and sold in concentrate form at Marikana
ii. Produced in concentrate form at Limpopo for subsequent refining at Marikana
Consolidated income statement
6 6 6 6
months Special months months Special months
to 31 items to 31 to 31 items to 31
March March March March
2006 2006 2005 2005
Underl (note 3) Total Underly (note 3) Total
yingi ingi
Note $m $m $m $m $m $m
Revenue 708 - 708 421 - 421
EBITDA ii 335 7 342 163 - 163
Depreciation and (38) - (38) (29) - (29)
amortisation
Operating profit 297 7 304 134 - 134
iii
Finance income 4 5 - 5 6 - 6
Finance expenses 4 (17) (214) (231) (13) 11 (2)
Share of profit 3 - 3 3 - 3
of associate
Profit / (loss) 288 (207) 81 130 11 141
before taxation
Income tax 5 (96) (14) (110) (53) - (53)
expense iv
Profit / (loss) 192 (221) (29) 77 11 88
for the period
- attributable 35 3 38 15 - 15
to minority
interest
- attributable
to equity
shareholders 157 (224) (67) 62 11 73
of Lonmin Plc
Earnings / 6 110.3c (47.1) 43.8c 51.5c
(loss) per share c
Diluted (loss) / 6 (47.1) 43.3c
earnings per c
share v
Interim dividend 45.0c 30.0c
per share
Financial ratios
Tax rate 5 33% 136% 41% 38%
Interest cover 15.9 34.3
vi times times
Statement of recognised income and expenses
6 months to 6 months to
31 March 2006 31 March
2005
Note $m $m
(Loss) / profit for the period (29) 88
Deferred tax on share based payment 8 -
Actuarial gains on post retirement - 2
benefit plan
Total recognised (expense) / income for (21) 90
the period
Attributable to:
- Equity shareholders 11 (61) 75
- Minority Interest 11 40 15
11 (21) 90
Footnotes:
i. Underlying earnings are calculated on profit for the period excluding
movements in fair value of the embedded derivative associated with the
convertible bond, exchange on tax balances, profit on the sale of Marikana
houses, the mathematical correction to the prior year capitalised interest
balances and the effect of a change in the South African tax rate on the
prior year opening deferred tax balance as disclosed in note 3.
ii. EBITDA is operating profit before depreciation and amortisation.
iii. Operating profit is defined as revenue and other operating expenses before
net finance costs and share of profit of associate.
iv. The income tax expense includes exchange losses of $12 million (March 2005
- $11 million) as disclosed in note 5.
v. The calculation of diluted EPS includes adjustments for the movements in
fair value on the convertible bond subject to the limitation under IAS 33 -
Earnings Per Share that this cannot thereby create a figure exceeding basic
EPS.
vi. Interest cover is calculated for the 12 month periods to 31 March 2006 and
31 March 2005 on the underlying operating profit divided by underlying net
interest payable excluding exchange.
Consolidated balance sheet
As at As at As at
31 30 31
March Septemb March
2006 er 2005 2005
Note $m $m $m
Non-current assets
Goodwill 8 113 40 -
Intangible assets 323 312 309
Property, plant and equipment 1,399 1,406 1,121
Investment in associate 94 91 91
Assets held for sale 16 16 -
Other financial assets 49 15 13
Other receivables 24 22 22
Retirement benefit asset 12 12 7
2,030 1,914 1,563
Current assets
Inventories 173 110 160
Trade and other receivables 144 147 123
Tax recoverable 5 4 9
Cash and cash equivalents 27 11 10
349 272 302
Current liabilities
Bank overdraft repayable on (6) (1) (209)
demand
Interest bearings loans and (128) (86) -
borrowings
Trade and other payables (123) (133) (73)
Tax payable (36) (28) -
(293) (248) (282)
Net current assets 56 24 20
Non-current liabilities
Trade and other payables - (1) (1)
Financial liabilities
- Interest bearing loans and (481) (506) (266)
borrowings
- Derivative financial (276) (41) (22)
instruments
Deferred tax liabilities (362) (344) (336)
Provisions (44) (42) (33)
(1,163) (934) (658)
Net assets 923 1,004 925
Capital and reserves
Called up share capital 11 143 142 142
Share premium account 11 23 12 6
Other reserves 11 104 104 104
Retained earnings 11 464 580 529
Equity attributable to Lonmin 11 734 838 781
shareholders
Attributable to minority 11 189 166 144
interest
Total equity 11 923 1,004 925
Consolidated cash flow statement
6 6
months months
to to
31 31
March March
2006 2005
Note $m $m
(Loss)/profit for the period (29) 88
Taxation 5 110 53
Finance income 4 (5) (6)
Finance expense 4 231 2
Share of profit after tax of associate (3) (3)
Depreciation and amortisation 38 29
Change in inventories (63) (82)
Change in trade and other receivables 5 3
Change in trade and other payables (10) (40)
Change in provisions 2 (1)
Profit on sale of assets held for sale (7) -
Other non cash charges 5 -
Cash flow from consolidated operations 274 43
Dividend from associate - 2
Cash flow from operations 274 45
Interest paid (23) (8)
Tax paid (77) (57)
Cash flow from operating activities 174 (20)
Cash flow from investing operations
Acquisition of subsidiary (net of cash (14) (10)
acquired)
Purchase of intangible asset (6) (6)
Purchase of property, plant and equipment (79) (81)
Proceeds from disposal of assets held for 19 -
sale
Purchase of other financial assets (33) -
Cash used in investing activities (133) (97)
Cash flow from financing activities
Equity dividends paid to Lonmin (60) (59)
shareholders
Dividends paid to minority (18) (21)
Proceeds from current borrowings 42 -
Repayment of current borrowings - (1)
Proceeds from non-current borrowings - 2
Repayment of non-current borrowings (26) -
Issue of ordinary share capital 12 -
Cash used in financing activities (50) (79)
Increase / (decrease) in cash and cash 11 (196)
equivalents
Opening cash and cash equivalents 10 (2)
Effect of exchange rate changes - (1)
Closing cash and cash equivalents 21 (199)
1. Basis of preparation
The financial information presented has been prepared on the basis of
International Financial Reporting Standards (IFRSs) as disclosed in note 1 to
the Interim financial statements and is consistent with the Group"s
announcements on 15 February 2006.
2. Segmental analysis
6 months to 31 March 2006
Pla Corpor Explor Total
tin ate ation
um
$m $m $m $m
Business segments
Revenue - external sales 708 - - 708
Operating profit 325 (16) (5) 304
Assets 2,2 83 - 2,379
96
Liabilities (68 (772) - (1,456)
4)
Capital expenditure 85 - - 85
Depreciation and amortisation 37 1 - 38
6 months to 31 March 2005
Platinu Corpor Explor Total
m ate ation
$m $m $m $m
Business segments
Revenue - external sales 421 - - 421
Operating profit 148 (11) (3) 134
Assets 1,814 46 - 1,860
Liabilities (682) (253) - (935)
Capital expenditure 86 1 - 87
Depreciation and amortisation 29 - - 29
6 months to 31 March 2006
Sou Corpor Other Total
th ate
Afr
ica
$m $m $m $m
Geographical segments
Revenue - external sales 708 - - 708
Segment total assets 2,2 83 3 2,379
93
Capital expenditure 85 - - 85
6 months to 31 March 2005
Sou Corpor Other Total
th ate
Afr
ica
$m $m $m $m
Geographical segments
Revenue - external sales 421 - - 421
Segment total assets 1,8 46 3 1,860
11
Capital expenditure 86 1 - 87
Turnover by destination is analysed by geographical area below:
6 6 months
months to
to
31 31 March
March
2006 2005
$m $m
The Americas 190 155
Asia 219 167
Europe 89 28
South Africa 207 70
Zimbabwe 3 1
708 421
3. Special items
`Special items" are those items of financial performance that the Group believes
should be separately disclosed on the face of the income statement to assist in
the understanding of the financial performance achieved by the Group. Such
items, as detailed below, are material by nature or amount to the results for
the period and require separate disclosure in accordance with IAS 1 Presentation
of financial statements.
6 months 6 months
to to
31 March 31 March
2006 2005
$m $m
EBITDA
- Sale of houses 7 -
Finance costs
- Calculation of capitalised interest 21 -
- Movement in fair value of embedded derivative (235) 11
Special (loss) / profit before taxation (207) 11
Taxation on above items (note 5) (2) -
Tax rate change - effect on opening deferred tax - 11
balances
Exchange on tax balances (note 5) (12) (11)
Minority interest (3) -
Special (loss) / profit for the period attributable (224) 11
to equity shareholders of Lonmin plc
* Sale of houses: We currently accommodate a substantial number of our
employees in hostels and married quarters with the remainder living in
their homes. We are selling houses to employees to encourage home-
ownership. Any profits or losses from such sales are not deemed to
represent underlying earnings.
* Capitalised interest includes $21 million in respect of a mathematical
correction of prior year capitalised interest balances.
* The convertible bond (described fully in note 7e to the IFRS transition
document) contains an embedded derivative which is held at fair value. Due
to the cash settlement option the bond is classified within non-current
liabilities and movements in fair value are taken to the income statement.
Fluctuations in fair value are mainly due to changes in share price.
4. Net finance costs
6 months 6 months
to to
31 March 31 March
2006 2005
$m $m
Finance income: 5 6
Interest receivable - 1
Return on defined benefit pension scheme 4 4
assets
Movement in fair value of non-current 1 1
other receivables
Finance expenses: (17) (13)
On bank loans and overdrafts (19) (9)
Bank fees (1) -
Capitalisation of interest 8 -
Discounting on provisions (1) -
Unwind of discounting on convertible bond (1) 1
Interest costs of defined benefit pension (3) (4)
scheme
Exchange differences on net debt - (1)
Special items: (214) 11
Prior years capitalised interest (note 3) 21 -
Movement in fair values of derivative (235) 11
financial instruments (note 3)
Net finance costs (226) 4
5. Taxation
6 months 6 months
to to
31 March 31 March
2006 2005
$m $m
United Kingdom:
Current tax expenses at 30% (March 2005 36 42
- 30%)
less amount of the benefit arising from (36) (42)
double tax relief available
Total UK tax expense - -
Overseas:
Current tax expense at 29% (March 2005 82 41
- 29%)
Excluding tax on local currency 70 27
exchange profits
Tax on dividends remitted 12 14
Deferred tax expense 14 12
Origination and reversal of temporary 14 12
differences
Special items (note 3) 14 -
Current tax on sale of assets held for 2 -
sale
Exchange on current taxation - (1)
Change in South African corporate tax - (11)
rate to 29% (from 1 October 2004)
Tax on local currency exchange profits - (1)
Exchange on deferred taxation 12 13
Tax charge 110 53
Tax charge excluding special items 96 53
(note 3)
38%
Tax rate 136%
Effective tax rate excluding special 33% 41%
items (note 3)
A reconciliation of the standard tax charge to
the tax charge was as follows:
6 months 6 months 6 months 6 months
to to to to
31 March 31 March 31 March 31 March
2006 2006 2005 2005
% $m % $m
Tax charge at standard tax 29% 23 29% 41
rate
Overseas taxes on dividends 10% 14
remitted by subsidiary 15% 12
companies
Change in South African - - (8)% (11)
corporate tax rate
Exchange on current and 15% 12 8% 11
deferred tax
Tax effect of movements in (3)% (4)
the fair value of financial 76% 62
instruments
Tax effect of other timing 1% 1 2% 2
differences
Tax charge 136% 110 38% 53
6. Earnings per share
Earnings per share have been calculated on the loss for the period amounting to
$67 million (2005 - profit of $73 million) using a weighted average number of
142,308,120 ordinary shares in issue for the six months to 31 March 2006 (6
months to March 2005 - 141,625,478 ordinary shares).
Diluted earnings per share are based on the weighted average number of ordinary
shares in issue adjusted by dilutive outstanding share options and shares
issuable on conversion of the convertible bonds during the period. During the
six months to 31 March 2006 outstanding share options and the shares issuable on
conversion of the convertible bonds were anti-dilutive and have been excluded
from diluted earnings per share in accordance with IAS 33 - Earnings Per Share.
6 months to 31 March 6 months to 31 March
2006 2005
Profit Profit
/(loss Per /(loss Per
)for Number share ) Number share
the of amount for of amoun
period shares cents the shares t
$m period cents
$m
Basic EPS (67) 142,308, (47.1) 73 141,625, 51.5
120 478
Share option schemes - - - - 249,745 (0.1)
Convertible bonds - - - (7) 10,576,9 (8.1)
93
Diluted EPS (67) 142,308, (47.1) 66 152,452, 43.3
120 216
Underlying earnings per share have been presented as the Directors consider it
to give a fairer reflection of the underlying results of the business.
Underlying earnings per share are based on the profit or loss for the period
adjusted to exclude special items (as defined in note 3) as follows:
6 months to 31 March 6 months to 31 March
2006 2005
Profit/(l Profit
oss) Per /(loss Per
for the Number share ) for Number share
period of amoun the of amount
$m shares t period shares cents
cents $m
Basic EPS (67) 142,308, (47.1 73 141,625 51.5
120 ) ,478
Special items (note 224 - 157.4 (11) - (7.7)
3)
Underlying EPS 157 142,308, 110.3 62 141,625 43.8
120 ,478
7. Dividends
The final dividend for the year ended 30 September 2005 of 42.0 cents per share
(42.0 cents per share for the year ended 30 September 2004) was declared in
January 2006, paid on 8 February 2006 and is reflected in the six months to 31
March 2006.
An interim dividend of 45.0 cents per share will be paid on 4 August 2006 to
shareholders on the registers at the close of business on 7 July 2006 (30.0
cents per share for the six months to 31 March 2005 paid on 5 August 2005 to
shareholders on the registers at the close of business on 8 July 2005). In
accordance with IFRS the dividend has not been accrued at 31 March 2006.
8. Goodwill
$m
As at 30 September 2005 40
Purchase of Messina minorities 13
Reassessment of fair values (note 9) 60
As at 31 March 2006 113
As at 30 September 2005 goodwill comprised $40 million arising on the
finalisation of the fair values of 9.11% of the assets and liabilities of
Eastern Platinum Limited and Western Platinum Limited.
Goodwill generated in the period represented the synergistic benefits of the
acquisition of Southern Platinum Corporation (including Messina) to the Group"s
existing operations (note 9) as at the date of the acquisition.
9. Reassessment of fair values of acquisitions in 2005
The Group has taken the opportunity to reassess the fair value of the assets and
liabilities acquired as a result of the acquisition of Southern Platinum
Corporation on 15 June 2005. This has resulted in the changes below.
As required by IFRS 3, Business Combinations, the Group will finalise the
provisional values by 15 June 2006.
Fair value Fair
as at Revision value as
30 s at 31
September March
2005 i 2006
$m $m $m
Goodwill - 60 60
Intangible assets 46 7 53
Property, plant and equipment 216 (67) 149
Net debt, working capital and (70) - (70)
provisions
192 - 192
Footnote:
i. As reported in the IFRS transition document published on 15 February 2006.
10. Analysis of net debt
As at Exchange As at
1 October Cash flow movements 31 March
2005 2006
$m $m $m $m
Cash 11 16 - 27
Overdrafts (1) (5) - (6)
10 11 - 21
Current borrowings (86) (42) - (128)
Non-current borrowings (296) 26 - (270)
Convertible bonds (213) - - (213)
Net debt (585) (5) - (590)
As at Exchange As at
1 October Cash flow movements 31 March
2004 2005
$m $m $m $m
Cash 20 (10) - 10
Overdrafts (22) (186) (1) (209)
(2) (196) (1) (199)
Current borrowings (1) 1 - -
Non-current borrowings (56) (2) - (58)
Convertible bonds (211) - - (211)
Net debt (270) (197) (1) (468)
11. Total equity
Equity shareholders" funds
Called Shar
up e Othe Reta Mino Tota
share prem r ined Total rity l
capita ium rese earn inte equi
l acco rves ings rest ty
unt s
$m $m $m $m $m $m $m
At 1 October 2005 142 12 104 580 838 166 1,00
4
Total recognised income - - - (61) (61) 40 (21)
and expense
Buy out of minority - - - - - 1 1
interests in Messina
Dividends - - - (60) (60) (18) (78)
Share based payment - - - 5 5 - 5
Shares issued on 1 11 - - 12 - 12
exercise of share
options
At 31 March 2006 143 23 104 464 734 189 923
During the period 761,407 share options were exercised on which $12 million of
cash was received (2005 - $nil).
Equity shareholders" funds
Call Shar
ed e Othe Reta Total Mino Tota
up prem r ined rity l
shar ium rese earn inte equi
e acco rves ings rest ty
capi unt s
tal
$m $m $m $m $m $m $m
At 1 October 2004 142 6 104 513 765 150 915
Total recognised income - - - 75 75 15 90
and expense
Dividends - - - (61) (61) (21) (82)
Share based payment - - - 2 2 - 2
At 31 March 2005 142 6 104 529 781 144 925
Within retained earnings is a deduction for the value of own shares of $6
million (31 March 2005 - $7 million).
12. Transition to International Financial Reporting Standards
As stated in note 1 to the interim statement, Accounting Policies, this is the
Lonmin Group"s first consolidated financial report prepared in accordance with
IFRS. The Group published its transition document on 15 February 2006 explaining
the balance sheet, income statement and cash flow impact for the Group of the
transition to IFRS. Included within the document is a reconciliation of the
income statement and cash flow statement from UK GAAP to IFRS for the year ended
30 September 2005 and the six months ended 31 March 2005 and a reconciliation of
equity at the transition date (1 October 2004), 30 September 2005 and 31 March
2005. The document also provides details of the Group"s accounting policies
under IFRS that are expected to be effective at 30 September 2006 and the
exemptions applied by the Group in accordance with IFRS 1 on transition to IFRS.
The most significant changes at the date of the transition to IFRS for the Group
between reporting on a UK GAAP basis and IFRS are as follows:
* the recognition, on the balance sheet, of pension scheme assets;
* the inclusion of a fair value charge in respect of outstanding employee
share options;
* the cessation of goodwill amortisation;
* the recognition, on the balance sheet, of all financial instruments as
either financial assets or financial liabilities;
* the separate accounting treatment as a liability of the embedded derivative
in the convertible bond;
* no longer recognising proposed dividends as a liability at the balance
sheet date;
* the recognition of the change in measurement basis of in-process inventory
as a change in accounting policy.
Date: 04/05/2006 08:00:49 AM Supplied by www.sharenet.co.za
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