Wrap Text
LON - Lonmin Plc - Interim Results 2008
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
("Lonmin")
Lonmin Interim Results
8 May 2008
- Focusing on Operational Performance
- Record financial results in a strong pricing environment
- Continued progress in safety performance with a 45% improvement in LTIFR
- New mining team embedded and implementing plans to optimise mine
performance
- Production impacted by four day Eskom power outage, safety shutdowns and
absenteeism
- Refined production of 282,650 ounces of Platinum and 536,128 ounces of
total PGMs
- Pre-feasibility studies for Limpopo and Pandora completed
- Attributable Indicated Resource for Akanani significantly increased to 8.8
million ounces of PGMs (3PGE+Au)
Interim dividend increased by 7.3% to US$0.59 per share
Financial highlights -
Continuing Operations 2008 2007 Variance
Six Months - 31 March 2008
Revenue US$m 907 631 43.7%
Underlying EBIT (i) US$m 371 228 62.7%
EBIT (ii) US$m 368 229 60.7%
Underlying profit before US$m 399 235 69.8%
taxation (iii)
Profit before taxation US$m 396 132 200.0%
Underlying earnings per cent 132.5 81.5 62.6%
share (iii) s
Earnings per share cent 181.1 (2.0) -
s
Declared dividend per share cent 59 55 7.3%
s
Free cash flow per share cent (19.2) 25.8 -
(iv) s
Net debt (v) US$m 506 665 -
Gearing (vi) % 17 27 -
NOTES ON HIGHLIGHTS
Underlying EBIT is defined as EBIT excluding special items (see note (iii))
EBIT is defined as revenue and other operating expenses before net finance costs
and before share of profit of associates and joint ventures.
Underlying earnings are calculated on profit for the period excluding special
items being pension scheme payments to fund augmentations of transfer values as
part of a liability reduction exercise, profits on disposal of subsidiaries,
foreign exchange on tax balances and effects of changes in corporate tax rates
on deferred tax. For prior periods, special items also includes profit on the
sale of Marikana houses, impairment of non-mining investments and movements in
the fair value of the embedded derivative associated with the convertible bonds.
Free cash flow is trading cash flow from operating activities less expenditure
on property, plant and equipment, intangibles, proceeds from disposal of assets
held for sale and dividends paid to minority interests.
Net debt as defined by the Group comprises cash and cash equivalents, bank
overdrafts repayable on demand, interest-bearing loans and borrowings, and
convertible bonds.
Gearing is calculated on the net debt attributable to the Group divided by the
total of the net debt attributable to the Group and equity shareholders` funds.
Commenting on the results, Brad Mills, Lonmin`s Chief Executive said:
"Financial results for the first six months were at record levels on the back of
strong PGM price appreciation. Our safety performance continued to improve and
we made further progress with our sustainability efforts. Production was
impacted by the Eskom power interruption at the end of January, safety shutdowns
and absenteeism. Our new mining team is now in place with a primary focus on
improving operational performance. We are making steady progress with our
growth projects, which position Lonmin to take advantage of the strong expected
growth in PGM demand in the coming years."
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 final
results` presentation starting at 09.30hrs (London) on 8 May 2007 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
The strong pricing environment for our metals continued during the first half
of 2008 as the supply of PGMs from South Africa remained constrained. In
this higher price environment, we report today record half year revenue and
earnings. Revenue for the period was US$907 million, up 44% on the same
period for 2007 and underlying profit before tax was US$399 million, an
increase of 70% on the first six months of the 2007 financial year.
Underlying earnings per share were 132.5 cents, up 63% on the first half of
2007. Our average price received for Platinum rose to US$1,578 per ounce an
increase of 43% on the same period last year. The average basket price per
PGM ounce was up 41% to US$1,558 per ounce.
Total refined production for the first half was 282,650 ounces of Platinum
and 536,128 ounces of total PGMs and we achieved sales of 288,963 ounces of
Platinum and 557,276 ounces of total PGMs. Our metallurgical production was
impacted by lower throughput from the mines, the four day Eskom power outage
at the end of January and the planned Number One furnace inspection and
repair which we brought forward as a result of the Eskom power crisis. The
work on the Number One furnace was successfully completed in four weeks with
the furnace tapping matte again on 2 March 2008.
Total mining production for the first six months of the year was 6.0 million
tonnes of ore, 13% less than the same period last year. Production at both
our Marikana and Limpopo operations was impacted by the four day Eskom power
outage at the end of January which, we estimate, resulted in the loss of
around 15,000 saleable ounces of Platinum in concentrate. In addition we
saw an increase in the number of safety related shutdowns in the period and
high levels of absenteeism around Christmas and Easter particularly among key
skill groups.
We made steady progress with our development projects during the period. Our
new Saffy and Hossy mechanised shafts continued to increase production with
mechanised operations contributing 552,000 tonnes of ore, a 134% increase on
the performance for the first half of 2007. Our K4 shaft will complete shaft
equipping later this month at which point we will begin ore reserve
development.
We completed pre-feasibility studies on both the Limpopo phase 2 and Pandora
project during the six months and we have continued our drilling programme
and mine design work at Akanani. Using these new drill results we have
updated our resource estimate for Akanani with Attributable Indicated
Resources of 8.8 million ounces of PGMs (3PGE+Au) now defined for the
southern P2 section of the property. We remain confident about the prospects
for this project which is ideal for large scale mechanised mining and aim to
complete pre-feasibility work on phase one of the Akanani project during the
last quarter of this year.
We estimate that sales for the 2008 financial year will be around 775,000
ounces of Platinum. This guidance is based on a steady improvement in the
underlying performance of our mines in the second half as the initiatives
implemented by the new mining team gain traction. This guidance also takes
account of the current constraints in relation to electricity supply.
However any deterioration of the current power supply situation or any
further significant safety stoppages would be risks to this target.
Power Situation
One of the key issues facing the mining industry in South Africa today is the
availability and security of electricity supply. Since the beginning of
February we have been operating within a 90% of normal consumption constraint
imposed by Eskom. In order to manage within that constraint we have
scheduled planned maintenance in the concentrators to coincide with periods
when our power consumption peaks. In addition we have rolled out energy
saving initiatives across the business including maximising the efficiency of
the compressed air networks in our shafts, running a number of energy saving
programmes for electrical equipment and better managing our internal energy
network. On 24 April 2008, Eskom gave notice that we could increase our
power utilisation to 95% of normal consumption, giving us increased
operational flexibility for the remainder of the financial year.
In addition, we are investigating a number of medium to longer term options
to improve power supply to our operations, including self generation.
Eskom has indicated that they will provide more definitive information to the
mining industry on power availability and how power demands for new projects
will be treated in June of this year. Once we have more clarity around this
we will develop plans with the aim of ensuring that we have adequate power to
match our growth requirements.
Safety
Our safety performance improved further during the half with our lost time
injury frequency rate (LTIFR) falling to 6.76 per million man hours worked, a
decrease of 45% on the LTIFR for the first six months of 2007. Our severity
rate (number of days lost per million man hours worked) also fell by 48%
during the period from 122.4 for the first half of 2007 to 64.0 for 20081.
We regrettably suffered one industrial fatality at our Marikana operations
during the six months.
We completed the roll out of our mine wide safety campaign based on learning
map technology during the period and have extended this initiative to cover
the Process Division. This campaign is based around the 2010 World Cup using
football as a means to highlight safe behaviours and procedures. Initial
signs indicate that the campaign has been well received and we will continue
to raise awareness and increase its visibility in the second half. We have
also strengthened our corporate safety team during the period with the
appointment of Alvaro Pinto as Vice President, Safety. Alvaro joined us in
December 2007 from the Canadian Albian Sands Energy project, owned by Shell
where he was Operations Expansion HSE Manager. Alvaro will be responsible
for the design and implementation of the Group safety strategy and for
tracking our safety performance at a Group level.
Sustainability
We have continued to make good progress with our sustainability and community
development efforts during the six months. The Lonmin-IFC Technical
Assistance Programme, which was signed in March 2007, has made significant
progress since its inception. One key piece of this programme is the
development and promotion of suppliers and service providers within the
communities around our operations. To date we have awarded 13 contracts to
local suppliers nurtured under this scheme to the value of US$25 million.
Another successful part of the programme is the peer education and training
of our local community workers on HIV and AIDS. We have now trained 34
workplace and 56 community based peer educators.
One of our key focus areas is to facilitate the delivery of quality education
in our communities. We have constructed sanitation facilities at three
schools benefiting 1,500 children and we support the school nutrition
programme at fifteen schools in collaboration with the national education
department to ensure that all children have at least one balanced meal a
day.
Mining
Chris Sheppard and the new senior mining team joined us at the beginning of
the period and have now completed their initial assessment of the mining
operations and their potential. The team has implemented a number of
initiatives to optimise our mining operations and increase efficiency and
productivity. These include the optimisation of our mining extraction
strategy; a renewed focus on increasing productivity and reducing costs,
through improvement programmes centred on half level optimisation and the
acceleration of development at certain shafts; a review and upgrade of our
management operating system in the shafts; and a focus on tackling non-
attendance through communication with the workforce combined with a zero
tolerance policy towards offenders.
Marikana
Overall production from the Marikana operations was 5.5 million tonnes for
the six months, a decrease of 12% on the same period last year. Production
was impacted by safety related shutdowns (including the loss of seven shifts
at our K3 and Rowland shafts following the fatal accident at K3 in October),
the four day Eskom power outage in January and high levels of absenteeism
around Christmas and Easter.
The majority of our safety shutdowns during the period were initiated by
management as we continue our drive to Zero Harm. We have also seen, in
common with the rest of the industry, an increased focus on safety from the
Department of Minerals & Energy ("DME") including more numerous inspections
and ordered shaft closures in conjunction with these inspections. We fully
support the DME in its safety drive and will continue to partner with them in
ensuring safe production at our operations.
Our underground operations hoisted 4.9 million tonnes in the period down 12%
on the same period last year. Conventional underground mining contributed
4.4 million tonnes, a fall of 19% on the first half of 2007. These
operations, in particular our two deep shafts K3 and Rowland, were impacted
by the issues already noted as well as an increased emphasis on accelerating
ore reserve development.
Production from our mechanised operations in the half increased to 552,000
tonnes hoisted, a rise of 134% on the first half of 2007 as we continue to
increase production from Hossy and Saffy shafts. This was behind our
aggressive ramp up schedule partly as a result of the slower than anticipated
implementation of continuous operations which still awaits approval by
relevant stakeholders. Mechanised operations contributed around 11% of our
underground ore in the period. We have revised our targeted production for
Hossy and Saffy for the second half of the year to take account of the
performance of these shafts for the year to date and the lack of continuous
operations. Production will continue to increase steadily for the remainder
of the year and we expect, for the full year, mechanised production will be
around 13% of our underground tonnages or more than double the 6% it
contributed for the 2007 financial year.
Opencast production for the period was 624,000 tonnes mined, a decrease of
11% on 2007. These mines are near the end of their lives and will continue
to decline over the coming years.
Limpopo - Baobab Shaft
Our Limpopo Baobab shaft operation produced 264,000 tonnes of ore in the
period, a decline of 32% on the prior year. Production continued to be
constrained by a lack of flexibility in the mine due to the ore reserve
disruption caused by the IRUP occurrence. We will continue during the second
half of the year to focus on development at Baobab shaft in order to build a
higher degree of ore reserve flexibility at the mine.
Limpopo produced 8,589 saleable ounces of Platinum in concentrate for the
period, a decline of 54% on the same period in 2007 due to the lower
throughput from the mine and the shutdown of the Limpopo concentrator for 6
weeks during the period for repairs.
Pandora Joint Venture
Our share of production from the Pandora Joint Venture ground during the
period through our E3 shaft and UG2 opencast operations was 169,000 tonnes
mined (a decrease of 20% on the first half of 2007) primarily as a result of
planned timing of the start up of our new opencast UG2 pit on the property.
Lonmin purchases 100% of the ore from the Pandora Joint Venture and this ore
contributed 17,824 saleable ounces of Platinum in concentrate and 32,875
saleable ounces of total PGMs in concentrate to our production.
The Pandora Joint Venture contributed US$11 million of profit after tax for
our account in the half year.
Process Division
The concentrators produced a total of 346,892 saleable ounces of Platinum in
concentrate for the first half, a fall of 22% on the first half of the 2007
financial year, mainly as a result of the lower throughput from the mines.
Overall recoveries improved slightly during the half year to 78.8% from 78.1%
for the first half of 2007. Underground recoveries remained flat at 81.5%
versus last year. Our focus on campaigning our opencast ore had a positive
impact on opencast recoveries which rose to 56.8% versus 56.0% last year.
Underground milled head grade was 4.8% lower than the prior year at 4.72
grammes per tonne (5PGE+Au) as a result of the increased percentage of lower
grade development ore from the Marikana mechanised shafts and other ore mix
issues. Opencast milled head grade was 3.18 grammes per tonne (5PGE+Au) as
we continued to mill more oxidised shallow material.
The Smelting operations performed well during the period. We brought forward
the planned inspection and repair of the Number One furnace to coincide with
the Eskom power outage at the end of January. We successfully completed the
work on the furnace in four weeks and it returned to full operations on 2
March 2008. The next planned shutdown of the Number One furnace will take
place in the first quarter of the 2009 financial year to implement design
changes to allow for longer operational campaigns.
Our Base Metal Refinery and Precious Metal Refinery also performed well in
the six months. Total refined production for the half was 282,650 ounces of
Platinum reflecting the lower level of throughput from the mines and a build
up of metal in process across the Process Division of around 70,000 saleable
ounces of Platinum partly as a result of the Number One furnace shutdown. It
is anticipated that this metal in process will be released during the second
half of the financial year.
Final metal sales for the half year were 288,963 ounces of Platinum and
557,276 ounces of total PGMs, slightly ahead of the same period in the 2007
financial year.
Costs and Capital Expenditure
Our C1 cost per ounce during the first half of 2008 was significantly
impacted by lower production volumes, increasing by 24% over the same period
last year to R5,003 per PGM ounce sold for Marikana and Limpopo combined
before base metal credits. Base metal credits were R493 per ounce sold,
which was significantly lower than the R867 per ounce recorded for the prior
year period, due to lower sales of nickel in the half reflecting a stock
release in the prior period and the reduced proportion of Limpopo ore in the
mix while the Limpopo concentrator was offline.
Our gross costs have been impacted, in common with the rest of the South
African mining industry, by continued increases in the cost of power, water
and other key consumables. The shortage of, and difficulty in retaining,
skilled labour has also increased the cost base as we have had to stay
competitive in our packages for certain key skills.
Our capital expenditure for the first half was US$139 million. We expect
that our capital spending will be around US$400 million for the financial
year.
Markets
Supply side concerns from the South African producers continued to dominate
the PGM pricing environment during the period.
In particular, the dual impact of DME enforced stoppages of mining operations
due to safety incidents and the on-going power supply crisis have had an
immediate effect on the mining sector as a whole, in particular PGM supply,
80% of which originates from South Africa. These supply constraints coupled
with continuing current and forecast fundamental strong demand, in particular
from the autocatalyst sector, has underpinned and exerted upward pressure on
Platinum, Palladium and Rhodium prices. Interest from investors increased as
evidenced by higher volumes of Platinum and Palladium Exchange-Traded Funds.
During the period the Platinum price moved from US$1,382 per ounce to
US$2,045 per ounce, an increase of 48.0%; the Palladium price rose by 26.2%
from US$355 per ounce to US$448 per ounce; and the Rhodium price,
historically the most volatile metal increased significantly during the six
months to US$9,025 from US$6,150 per ounce.
Growth Projects
We have made significant progress with our growth projects during the six
months including completing pre-feasibility studies on the Limpopo expansion
project and Pandora. Based on greater clarity surrounding these projects as
well as an emerging view of the potential of our Akanani project, we have
started a total value chain optimisation project. This project will look at
matching our smelting capacity in Marikana with our mining operations on the
Marikana property and determine the required size of a northern smelting and
refining complex to support our Akanani and Limpopo projects. This work will
determine the timing of the phase 2 expansion at Limpopo and, in conjunction
with our plans to address the issues around electricity supply, will drive
our long term growth profile.
Marikana
At Marikana, we continue to focus on a number of growth projects to expand
future production from both our mechanised and conventional operations. Our
existing fully mechanised shafts, Saffy and Hossy, are expected to reach a
combined steady state production of around 3.5 million tonnes per annum by
2010. Shaft equipping at K4, our third mechanised shaft, is on track to be
completed later this month, at which point ore reserve development will
commence, with reef development expected in late 2009. At the conventional
operations, on 2 May 2008, the Board approved a sub-decline project at our K3
shaft to mine a portion of the ore reserve above the K4 mining block and
below the current K3 mining block, with full production from this expected by
2011.
Our power requirements for the Marikana operations will not increase
significantly in the short term.
Limpopo
We completed our additional pre-feasibility work on the Limpopo expansion
project in April this year and have approved the project to enter the
feasibility stage which will be completed during the second quarter of 2010.
The expansion area covered by the study encompasses two farms, Dwaalkop and
Doornvlei. Doornvlei is 100% owned by Lonmin and Dwaalkop is a 50/50 joint
venture between Lonmin and Mvelaphanda Resources.
The pre-feasibility work looked at ways to optimise the output of the Limpopo
ground taking account of the existing operations at Baobab shaft and
confirmed the viability of developing a mechanised operation on the property
with access to the ore body through a series of spiral declines. Given the
shallow nature of the ore body, this mine design allows quick access to the
ore and is scaleable as the mine develops. The completed pre-feasibility
study indicates the combined property supports a mine producing around
360,000 tonnes per month at full production.
Our current expectation is that power supply for the construction of the
Limpopo expansion is relatively secure. We have in place a contract with
Eskom for the provision of power to the Limpopo expansion project. However,
Eskom has indicated it will start to re-evaluate growth projects in June this
year and until this review is completed no real certainty can be given around
the provision of power by Eskom to growth projects. Following Eskom`s review
in June we will evaluate our options for securing power for this project.
Later this month, we expect to sign a memorandum of agreement with the
Department of Water Affairs and Forestry to provide water to the Limpopo
expansion project. We continue to look for additional water sources.
Pandora
A pre-feasibility study has been completed on the standalone Pandora project
during the first half looking at the development of a 240,000 tonne per month
operation on the property using a hybrid mining method combining mechanised
development and conventional down dip stoping. This study has been submitted
to the Joint Venture partners. Subject to our partner`s approval, we
anticipate beginning the work on the feasibility study, which underpins the
full value of this asset.
Akanani
We have continued drilling at Akanani during the six months. Based on this
work and on a better understanding of the variability of Platreef
mineralisation at Akanani, we are today announcing a significant upgrade to
the P2 (Platreef 2) Unit Mineral Resource of the southern portion of the
project, where we have drilled an additional 26 holes since March 2007.
Attributable Indicated P2 Resources have increased from the previous resource
estimate published in March 2007 to 8.8 million ounces of PGMs (3PGE+Au) at a
grade of 5.15 grammes per tonne. This same drilling has also indicated that
we will need fairly close spaced drilling to classify P1 (Platreef 1) Unit
mineralization as Inferred or Indicated Resources and we are consequently
downgrading our certainty around areas of the P1 Unit deposit until such time
as we can complete the detailed infill drilling required to ensure the
mineability of mineralized intercepts in the P1 unit. The overall drilled
mineralised envelope of the Akanani project continues to grow and we are
confident that ultimately, much of this mineralisation will be converted to
mineable reserves. The updated Resource statement is set out below:
Summary of P2 Unit Attributable Mineral Resource
Category 29 April 2008
Mt 3PGE+Au Pt
g/t Moz Moz
Indicated 53.5 5.15 8.8 3.8
Inferred 72.9 4.27 10.0 4.3
Total 126.4 4.64 18.8 8.1
Summary of P1 Unit Attributable Mineral Resource
Category 29 April 2008
Mt 3PGE+Au Pt
g/t Moz Moz
Inferred 28.1 3.39 3.1 1.2
Notes on the Mineral Resource Estimates
The Mineral Resource estimate has been completed by Mr. J. C. Witley (BSc
Hons, Pr. Sci Nat.) of Lonmin who is a Competent Person as defined by the
SAMREC Code (2007). Mr. Witley is registered as a Professional Natural
Scientist with the South African Council for Natural Scientific Professions
(SACNASP) and a member of the Geological Society of South Africa (GSSA), with
approximately 20 years` experience in the Base and Precious Metals Resource
Industry and more than five years` experience relevant to PGE resource
estimation.
The Mineral Resources at Akanani comprise stratiform disseminated PGM, Ni and
Cu mineralisation that occurs within the Platreef pyroxenites of the Northern
Limb of the Bushveld Complex. The Mineral Resource occurs between
approximately 800 m and 1,900 m below surface in two sub-divisions of the
Platreef known by Lonmin as the P2 and the P1 Units. The thickness of the P2
Mineral Resource, although variable, is on average approximately 20 m thick.
Mineralisation in the P1 Unit is less well constrained than the P2 and occurs
within a package of pyroxenites that are in the order of 100`s metres in
thickness. The thickness of the P1 Unit mineralisation is also variable and
the P1 Unit mineralisation currently identified as Mineral Resource is also
on average approximately 20 m thick.
The Mineral Resources were estimated using composited sample assays that have
passed the relevant Quality Assurance and Quality Control (QAQC) tests, from
over 60 drillhole intercepts and their deflections. Grades were interpolated
by Ordinary Kriging into geological and/or grade constrained three
dimensional block models.
The P2 Unit Mineral Resource was defined using a lithological hanging wall
and a 2g/t 3PGE+Au (Pt, Pd, Rh and Au) assay footwall. The P1 Unit resource
occurs in the P1 lithologies immediately below and contiguous with the P2
Unit resource and is constrained to a mineralized envelope of greater than
2g/t 3PGE+Au that is comparable between drillhole intersections.
The P2 Unit Mineral Resource was classified into the Indicated category
taking into account continuity of mineralisation, structure and lithology
within a drillhole grid of less than 250 m. Over 60% of the Inferred P2
Mineral Resource is covered by this drill grid and the maximum extrapolation
distance for the P2 Unit Inferred Mineral Resources is 450 m. The P1 Unit
Mineral Resource was classified as Inferred Resources due to this
mineralisation exhibiting less continuity than the P2 Unit mineralisation.
Geological losses of 10% have been applied to the P2 Unit Mineral Resource
and 20% for the P1 Unit. Geological losses include those from dykes and
veins, fault loss, calc silicates and minor alteration.
Tabulated estimates have been rounded to two decimal places for grade and one
decimal place for tonnage and content.
All Mineral Resources and Reserves have been restated to reflect Lonmin`s 74%
attributable shareholding in Akanani. Incwala Resources owns the remaining
26% in Akanani.
We have completed an additional 2 drill holes in the northern section of the
property. This drilling indicates that the Platreef mineralisation continues
in this area, but with a higher degree of variability than we have seen in
the southern section of the property. The most recent drill results from the
northern section are set out below:
Borehole Drilled 3PGE+Au Cu Ni
width (g/t) (%) (%)
(metres)
MO021 12.06 3.70 0.09 0.17
MO022 2.00 5.74 0.14 0.24
These results, especially the grade enhancements in the P2 reef, confirm our
confidence in the longer term potential of the Akanani project and we are in
the process of evaluating options for large scale mechanised mine development
for this project.
The supply of power to Akanani is subject to the building of one of Eskom`s
planned new power stations which is expected to be completed in 2013. We
currently have a contract in place with Eskom for power supply for the
construction of the Akanani project. We are in the process of securing water
for the Akanani project and we expect to enter into a memorandum of agreement
for the provision of water with the Department of Water Affairs and Forestry
later this month. The local municipality is planning the development of the
bulk water infrastructure needed to support mining development in the region
and we are continuing discussions with them to secure the additional water we
need.
Dividend
As a result of our continued confidence in the long term prospects for the
business, the Board has approved an interim dividend of 59.0 cents per share,
an increase of 7.3% on the interim dividend paid last year. This dividend
will be payable on 8 August 2008 to shareholders on the register on 11 July
2008.
Outlook
We estimate that Platinum sales for the 2008 financial year will be around
775,000 ounces of Platinum. This guidance is based on a steady improvement
in the underlying performance of our mines in the second half as the
initiatives implemented by the new mining team gain traction. This guidance
does take account of the current constraints in relation to electricity
supply but any deterioration of the current power supply situation or any
further significant safety stoppages are risks to this target.
The contribution of Lonmin employees, contractors and community members
during the last year is highly valued and their hard work and dedication is
greatly appreciated.
The production environment remains challenging with the uncertainty over
electricity supply, a tight market for certain skill groups and a continued
emphasis on safety likely to continue in the medium term. These factors will
continue to constrain PGM supply and should continue to support the current
higher price environment.
Bradford A Mills
Chief Executive
8 May 2007
Financial Review
Introduction
The financial information presented has been prepared on the same basis and
using the same accounting policies as those used to prepare the financial
statements for the year ended 30 September 2007.
Analysis of results
Income Statement
Reported operating profit has increased by $139 million, or 61%, to $368
million in the six months to 31 March 2008. A comparison with the six months
to 31 March 2007 is set out below:
$m
Reported operating profit for the six months to 229
31 March 2007
PGM price 239
PGM volume 45
PGM mix 15
Base metals (22)
Cost changes (including foreign exchange (134)
impact) (4)
Movement on special items
Reported operating profit for the six months to 368
31 March 2008
The PGM metal markets have continued to strengthen over the last six months
with supply issues evident for most South African producers. The average
price per PGM ounce has increased 41% to $1,558 per ounce resulting in an
additional $239 million of profit generated. The PGM sales volume for the six
months was up by 40,000 ounces, or 8%, giving an additional $45 million
profit. This performance, however, was below our expectations with metal
production in the period adversely impacted by a variety of factors including
the four-day shutdown imposed by Eskom due to electrical power supply
constraints throughout South Africa, an increase in the number of safety
closures implemented, high levels of absenteeism around Christmas and Easter
and an increased focus on ore reserve development. The Number 1 furnace was
also shut down for a planned inspection and repair in the period. The PGM mix
was favourable by $15 million with Rhodium increasing by 0.75% points to
almost 8% of the basket of ounces sold. The contribution from base metals
fell by $22 million with Nickel sales falling by just over a 1,000 tonnes
partly reflecting a one-off stock reduction in the prior period and ore mix
factors.
Other cost changes (increase) / decrease:
$m
Productive costs (87)
Safety, health, environment and community (12)
Exploration, development and marketing (10)
Shared services and support functions (6)
Depreciation and amortisation (3)
Foreign exchange (16)
(134)
Productive costs increased by some $87 million in the period. These
principally arose from the very significant inflationary pressures in South
Africa both in the mining sector and in respect of raw materials. In
addition, some other factors were at play. Since half one of financial year
2007 we have ramped-up our mechanised operations significantly and moved from
a development to an operational phase resulting in the recognition of
operating costs. The business also has continued to experience higher levels
of labour absenteeism which necessitated increased staff numbers and resulted
in lower productivity and increased use of contractors. Whilst we are taking
steps to improve this situation the effects are likely to continue into the
second half. The Process Division is also undertaking a major enhancement of
its plant maintenance programme which, whilst increasing costs today, will
improve the reliability of our operations over time.
We recognise the vital role we have in caring for our employees both within
the work environment and in the wider community and have spent an incremental
$12 million in the six months to March. Safety has remained a major area of
focus and we have invested in training programmes, improved equipment and
have extended our programme to enhance our roof-bolting to help prevent fall
of ground incidents.
The Group continues to develop its growth opportunities and has recently
completed the pre-feasibility studies on the Limpopo and Pandora expansion
projects. The capital projects team is being developed to ensure that we have
the appropriate delivery capability on our portfolio of projects. Our
expenditure rate on exploration projects is increasing reflecting market
conditions and several new exploration projects.
Costs of shared services and other functions which support the business have
also increased and reflect a continuation of the expansion highlighted at
year end. We have a number of projects underway which aim to optimise our
usage of our SAP system and to enhance significantly our metallurgical
accounting systems and improve our stock control.
Foreign exchange has been a negative factor with the Rand strengthening
against the dollar versus the comparative period by 2%.
The Group C1 cost before by-product credits increased by 24% to R5,003 per
PGM ounce sold. It should be noted that stock levels at September 2007 were
higher than previous year ends and the Group has benefited by selling these
cheaper ounces in the first half.
After adjusting for the stock movement, the C1 cost per ounce produced at
R5,492 is 33% adverse to the prior period. This increase essentially has been
caused by the increase in mining cost per unit at Marikana which is up by
R1,113 per PGM ounce with costs up 21% and production volume down 21%.
Further details of unit costs analysis can be found in the operating
statistics table within the Interim Report.
Summary of net finance income / (costs):
6 months 6 months
to to
31 March 31 March
2008 2007
$m $m
Net interest charges (12 ) (11)
Capitalised interest 15 6
Movement in fair value of embedded 0 (104)
derivative of convertible bonds
Other 4 2
Net finance income / (costs) 7 (107)
Net interest charges at $12 million were in-line with the prior period.
Capitalised interest for the period has increased to $15 million of which $7
million relates to the acquisition funding of the Akanani asset which was not
a material factor in the prior half year. The convertible bonds redeemed by
the company in the second half of financial year 2007 had a significant
impact in the six months to March 2007 with $104 million of fair value
movements reflected as a cost. This change is the major factor in the $114
million reported improvement in the period.
Reported profit before tax for the current six months at $396 million has
increased by $264 million versus the comparable period. This has been driven
by the $139 million improvement in operating profit, the $114 million
improvement in net finance costs and an increase of $11 million in the
Group`s share of profit from associates and joint ventures. On an underlying
basis profit before tax was up $164 million, or 70%, to $399 million.
The 2008 interim reported tax charge at $41 million was substantially lower
than the reported $112 million to March 2007. However, this comparison is
materially distorted by the special impacts of foreign currency retranslation
differences together with a 1% reduction in the South African corporation tax
rate to 28% for the 2008 financial year.
On an underlying basis tax expense has increased from $84 million to $137
million which has been driven by the improvement in profit before tax. The
underlying tax rate decreased from 36% to 35%. The Group does not expect the
full year underlying tax rate to be above that applied in half one although
this is subject to the impact on secondary taxes based on the timing of
dividends remitted.
Profit for the period attributable to equity shareholders amounted to $283
million (2007 - $3 million loss) and earnings per share were 181.1 cents
compared with a loss per share of 2.0 cents in 2007. Underlying earnings per
share, being earnings excluding special items, amounted to 132.5 cents (2007
- 81.5 cents) an increase of 63%.
Balance sheet
A reconciliation of the movement in equity shareholders` funds over the six
months to 31 March 2008 is given below.
$m
Equity shareholders` funds as at 1 October 2007 1,968
Total recognised income and expense 250
Dividends (94)
Share scheme related and other 9
Equity shareholders` funds as at 31 March 2008 2,133
Equity shareholders` funds were $2,133 million at 31 March 2008 compared with
$1,968 million at 1 October 2007, an increase of $165 million. Equity
shareholder`s funds in the period increased by $250 million through the
recognition of attributable income, however, this was partially offset by the
payment of the final dividend in respect of financial year 2007 of $94
million. The issuance of shares in respect of share option schemes together
with other share based payment adjustments contributed a further $9 million.
Net debt at $506 million has increased by $131 million in the period with a
cash outflow of $134 million (as explained below).
Gearing was 17% compared with 15% at 30 September 2007 and 27% at 31 March
2007 calculated on net borrowings attributable to the Group divided by those
attributable net borrowings and the equity interests outstanding at the
balance sheet date.
Cash flow
The following table summarises the main components of the cash flow during
the year:
6 months 6 months to
to March March
2008 2007
$m $m
Operating profit 368 229
Depreciation and 46 43
amortisation
Change in working capital (100) 44
Other 1 6
Cash flow from operations 315 322
Interest and finance costs (12) (11)
Tax (144) (149)
Trading cash flow 159 162
Capital expenditure (139) (105)
Proceeds from asset held 1 3
for sale
Dividends paid to minority (51) (21)
Free cash flow (30) 39
Disposals / (acquisitions) 3 (393)
Financial investments (17) (3)
Shares issued 4 19
Equity dividends paid (94) (85)
Cash outflow (134) (423)
Opening net debt (375) (458)
Bond conversion - 213
Foreign exchange 3 3
Closing net debt (506) (665)
Trading cash flow (cents 101.8c 107.3c
per share)
Free cash flow (cents per (19.2)c 25.8c
share)
Despite the significant increase in operating profit the cash flow generated
from operations at $315 million was marginally down compared to the prior
period. This was entirely due to changes in working capital with the
comparative period benefiting from abnormally high receipts from debtors
which was a result of high volumes of concentrate sales at the end of the
2006 financial year. Furthermore, the first half profits and therefore cash
flows have been impacted by the operational issues described above and the
significant accumulation of inventory mainly due to the Number 1 smelter shut
down and repair. After interest and finance costs of $12 million and tax
payments of $144 million, trading cash flow to March 2008 amounted to $159
million against $162 million to March 2007, with trading cash flow per share
of 101.8 cents in 2008 against 107.3 cents in 2007.
Capital expenditure of $139 million was incurred during the six months, up
$34 million on the prior period. This rate of spend is expected to accelerate
in the second half as we continue to develop the mechanised operations,
complete our K4 shaft and invest in sub declines at Rowland and K3.
Dividends paid to minorities in the period at $51 million was $30 million
higher than the prior period reflecting a timing difference on the payment of
dividends from South African subsidiaries.
As a result of the above free cash flow generated fell from a positive $39
million at the prior interim to a negative $30 million in 2008 with free cash
flow per share falling from positive 25.8 cents to negative 19.2 cents. After
a small increase in investments and the payment of $94 million on equity
dividends the overall cash outflow for the period was $134 million which
increased net debt accordingly.
Dividends
As dividends are accounted for on a cash basis under IFRS the amount shown in
the accounts represents the 2007 final dividend of 60.0 cents. In addition
the Board has approved an interim dividend of 59.0 cents in respect of the
period (2007 - 55.0 cents).
Financial risk management
The Group`s reporting currency remains the US Dollar and the share capital of
the Company is based in US Dollars.
The Group`s business is mining and it does not undertake trading activity in
financial instruments.
Interest rate risk
Monetary assets and liabilities are exposed to movements in interest rates.
The borrowings at 31 March 2008 comprised $181 million of borrowings in the
UK together with an overdraft of $1 million, and in South Africa a long-term
bank loan of $300 million was drawn together with an overdraft of $37
million. Cash deposits represented balances of $4 million in the UK and $9
million in South Africa.
Liquidity risk
Liquidity risk measures the risk that the Group may not be able to meet its
liabilities as they fall due and, therefore, its ability to continue trading.
The Group`s policy on overall liquidity is to ensure that there are
sufficient committed facilities in place which, when combined with available
cash resources, are sufficient to meet the funding requirements in the
foreseeable future. At 31 March 2008 the Group had $1,127 million of
committed facilities in place of which $519 million were drawn down.
Foreign currency risk
Foreign currency risk arises when movements in exchange rates, particularly
the US Dollar against the South African Rand, affect the transactions the
Group enters into, reported profits and net assets. Most of the Group`s
operations are based in South Africa and the majority of the revenue stream
is in US Dollars. However the bulk of the Group`s costs, and taxes, are in
Rand. Most of the cash held in South Africa is in US Dollars and is normally
remitted to the UK on a regular basis. Short-term working capital facilities
required in South Africa are drawn primarily in US Dollars.
Fluctuations in the Rand to US Dollar exchange rate can have a significant
impact on the Group`s results. A strengthening of the Rand against the US
Dollar has an adverse effect on profits due to the majority of costs being
denominated in Rand.
Commodity price risk
Commodities are traded on worldwide commodities markets and are subject to
price fluctuations. Therefore the prices obtained are dependent upon the
prevailing market prices. Any change in prices will have a direct effect on
the Group`s trading results. Forward sales are undertaken where the Board
determines that it is in the Group`s interest to hedge a proportion of future
cash flows. No forward sales of Nickel and Copper were undertaken in the six
months to 31 March 2008.
Fiscal risk
Changes in governmental fiscal policy in the territories in which the Group
operates will impact on Group profitability. In South Africa the Government
is finalising a Royalty Bill which will come into effect on 1 May 2009. The
original royalty structure proposed was based on turnover, however, this has
recently been amended. The current proposal is that the royalty rate will be
calculated with reference to either profitability or taxable income which
will be applied to turnover or a deemed concentrate value to calculate the
royalty payable. Until the Bill is finalised it is difficult to be definitive
about its financial impact. Our guidance remains that over time the charge is
likely to represent around 3% of revenue and that this will be deductible for
corporation tax purposes.
Principal risks and uncertainties
The Group faces many risks in the operation of its business. The Group`s
strategy takes into account known risks, but risks will exist of which we are
currently unaware. There is an extensive discussion of the principal risks
and uncertainties facing the Company on pages 14 to 16 of the 2007 Annual
Report, available from the Company`s website, www.lonmin.com. As identified
in the Chief Executive`s comments during the half year the availability of
electrical power in South Africa has worsened considerably and the issues
facing the world`s banking and financial sectors have potentially reduced the
availability of capital and the willingness of banks to lend. Aside from
this, there has been no significant change in the Company`s risk environment.
Alan Ferguson
Chief Financial Officer
8 May 2008
Lonmin Interim Results
Operating Statistics and Financial Statements
Operational statistics
Minin 6 months 6 months
g to to
31 March 31 March
2008 2007
Tonnes mined Marikana Underground 000 4,349 5,344
conventional
Underground 000 552 236
M&A1
Underground - 000 4,901 5,580
total
Opencast 000 624 704
Total 000 5,525 6,284
Limpopo Underground 000 264 390
Opencast 000 0 0
Total 000 264 390
Pandora Underground 000 68 60
attribut
able2
Opencast 000 101 150
Total 000 169 210
Lonmin Underground 000 5,233 6,030
Platinum
Opencast 000 725 854
Total 000 5,958 6,884
Tonnes Marikana Underground 000 4,844 5,581
milled3
Opencast 000 719 738
Total 000 5,563 6,319
Limpopo Underground 000 207 397
Opencast 000 0 0
Total 000 207 397
Pandora4 Underground 000 159 141
Opencast 000 192 336
Total 000 351 477
Ore Underground 000 0 72
purchase Opencast 000 30 0
s5
Total 000 30 72
Lonmin Underground 000 5,210 6,191
Platinum
Head grade6 g/t 4.72 4.96
Recovery rate7 % 81.5% 81.5%
Opencast 000 941 1,074
Head grade6 g/t 3.18 4.34
Recovery rate7 % 56.8% 56.0%
Total 000 6,151 7,265
Head grade6 g/t 4.48 4.87
Recovery rate7 % 78.8% 78.1%
6 months 6 months
to to 31
31 March March
Restated8
2008 2007
Metals in Marikana Platinum oz 319,543 397,103
concentra
te9
Palladium oz 146,474 181,192
Gold oz 8,522 11,030
Rhodium oz 43,328 52,146
Ruthenium oz 66,680 83,954
Iridium oz 13,945 17,284
Total PGMs oz 598,492 742,710
Nickel10 MT 1,493 1,916
Copper10 MT 906 1,155
Limpopo Platinum oz 8,589 18,759
Palladium oz 6,493 13,083
Gold oz 620 1,448
Rhodium oz 894 1,955
Ruthenium oz 1,302 3,053
Iridium oz 274 722
Total PGMs oz 18,172 39,020
Nickel10 MT 175 416
Copper10 MT 120 285
Pandora4 Platinum oz 17,824 25,600
Palladium oz 8,148 11,997
Gold oz 133 226
Rhodium oz 2,478 3,707
Ruthenium oz 3,676 5,511
Iridium oz 615 1,198
Total PGMs oz 32,875 48,238
Nickel10 MT 25 30
Copper10 MT 11 17
Ore Platinum oz 937 2,675
purchase Palladium oz 793 1,233
s5
Gold oz 74 36
Rhodium oz 83 416
Ruthenium oz 107 670
Iridium oz 25 138
Total PGMs oz 2,019 5,167
Nickel10 MT 16 16
Copper10 MT 11 8
Lonmin Platinum oz 346,892 444,136
Platinum
Palladium oz 161,908 207,505
Gold oz 9,350 12,740
Rhodium oz 46,783 58,224
Ruthenium oz 71,765 93,189
Iridium oz 14,859 19,342
Total PGMs oz 651,556 835,136
Nickel10 MT 1,709 2,378
Copper10 MT 1,047 1,466
6 months 6 months
to 31 to 31
March March
2008 2007
Metallurgical Lonmin refined Platinum oz 282,650 259,434
production Metal
Production
Palladium oz 128,140 116,581
Gold oz 9,563 7,555
Rhodium oz 42,437 31,019
Ruthenium oz 62,763 42,587
Iridium oz 10,577 12,838
Total PGMs oz 536,128 470,015
Toll refined Platinum oz 0 23,872
Metal
production
Palladium oz 0 10,862
Gold oz 0 0
Rhodium oz 0 3,447
Ruthenium oz 0 5,409
Iridium oz 0 1,063
Total PGMs oz 0 44,653
Total Platinum oz 282,650 283,306
Refined
PGMs
Palladium oz 128,140 127,443
Gold oz 9,563 7,555
Rhodium oz 42,437 34,466
Ruthenium oz 62,763 47,996
Iridium oz 10,577 13,901
Total PGMs oz 536,128 514,668
Base metals Nickel11 MT 1,323 1,604
Copper11 MT 795 826
Capital Expenditure Rm 1000 750
$m 139 105
Sales Refined Platinum oz 284,730 273,191
Metal
Sales
Palladium oz 133,990 124,884
Gold oz 9,208 7,560
Rhodium oz 43,537 37,170
Ruthenium oz 65,940 56,492
Iridium oz 11,720 13,981
Total PGMs oz 549,127 513,278
Concentrate and Platinum oz 4,233 1,249
other12
Palladium oz 1,833 496
Gold oz 97 2,037
Rhodium oz 758 46
Ruthenium oz 990 90
Iridium oz 240 22
Total PGMs oz 8,150 3,940
Lonmin Platinum Platinum oz 288,963 274,440
Palladium oz 135,823 125,380
Gold oz 9,305 9,597
Rhodium oz 44,295 37,216
Ruthenium oz 66,930 56,582
Iridium oz 11,960 14,003
Total PGMs oz 557,276 517,218
Nickel 11 MT 1,216 2,232
Copper11 MT 805 774
6 months 6 months
to 31 to 31
March March
2008 2007
Average Lonmin Platinum $/oz 1,578 1,103
Prices Platinum
Palladium $/oz 396 325
Gold $/oz 853 602
Rhodium $/oz 7,121 5,325
Ruthenium $/oz 446 305
Iridium $/oz 424 392
Basket $/oz 1,558 1,102
price of
PGMs13
Nickel11 $/MT 27,235 25,067
Copper11 $/MT 6,936 6,558
Cost per PGM ounce sold
Mining - Marikana R/oz 3,247 2,134
Mining - Limpopo R/oz 6,125 4,405
Mining - (weighted average) R/oz 3,366 2,270
Concentrating - Marikana R/oz 638 408
Concentrating - Limpopo R/oz 2,193 1,171
Concentrating - (weighted average) R/oz 684 454
Process division R/oz 604 722
Shared business service R/oz 838 685
Stock movement R/oz (489) (83)
C1 cost per PGM ounce sold before base R/oz 5,003 4,048
metal credits
Base metal credits R/oz (493) (867)
C1 costs per PGM ounce sold after base R/oz 4,510 3,181
credits
Amortisation R/oz 496 367
C2 costs per PGM ounce sold R/oz 5,006 3,548
Pandora mining costs:
C1 Pandora mining costs (in joint R/oz 3945 1,921
venture)
Pandora JV cost/ounce to Lonmin R/oz 6703 3,686
(adjusting Lonmin share of profit)
Average rate for R/$ 7.14 7.31
Exchange period
Rates
Closing rate R/$ 8.08 7.24
Notes:
1 M&A comprises ore produced by our ultra low profile mechanised
equipment.
2 JV attributable tonnes mined includes Lonmin`s share (42.5%) of
the total tonnes mined on the Pandora joint venture.
3 Tonnes milled excludes slag milling.
4 Lonmin purchases 100% of the ore produced by the Pandora joint
venture for onward processing which is included in downstream
operating statistics.
5 Relates to the tonnes milled and derived metal in concentrate
from third-party ore purchases.
6 Head Grade is the grammes per tonne (5PGE + Au) value contained
in the tonnes milled and fed into the concentrator from the
mines (excludes slag milled).
7 Recovery rate in the concentrators is the total content
produced divided by the total content milled (excluding slag).
8 The metals in concentrate numbers for the prior year have been
restated to adjust for a measurement error, discovered during
the fourth quarter in the prior year, which occurred at one of
our concentrators during the 2007 financial year.
9 Metals in concentrate includes slag and have been calculated at
industry standard downstream processing losses.
10 Corresponds to contained base metals in concentrate.
11 Nickel is produced and sold as nickel sulphate crystals or
solution and the volumes shown correspond to contained metal.
Copper is produced as refined product but typically at LME
grade C.
12 Concentrate and other sales have been adjusted to a saleable
ounces basis using standard industry recovery rates.
13 Basket price of PGMs is based on the revenue generated from the
actual PGMs sold in the period.
Consolidated income statement
for the 6 months ended 31 March 2008
6 Spec 6 6 Spe 6 Year Spe Year
months ial month mont cia mont ended cia ended
to s to hs l hs l
to to
31 item 31 31 ite 31 30 ite 30
March s March Marc ms Marc Septem ms Septe
h h ber mber
2008 2008 2007 2007 2007 2007
Underly (not Total Unde (no Tota Underl (no Total
ing (i) e 3) rlyi te l ying te
ng 3) (i) 3)
(i)
Continui Note $m $m $m $m $m $m $m $m
ng $m
operatio
ns
Revenue 2 907 - 907 631 - 631 1,941 - 1,941
EBITDA (ii) 417 (3) 414 271 1 272 883 (2) 881
Depreciation (46) - (46) (43) - (43) (87) - (87)
and
amortisation
2 371 (3) 368 228 1 229 796 (2) 794
Operating
profit/(loss
) (iii)
Finance 4 8 - 8 12 - 12 32 - 32
income
Finance 4 (1) - (1) (15) (104 (119 (35) (10 (139)
expenses ) ) 4)
Share of 21 - 21 10 - 10 18 - 18
profit of
associate
and joint
venture
Profit / 399 (3) 396 235 (103 132 811 (10 705
(loss) ) 6)
before
taxation
Income tax 5 (137) 96 (41) (84) (28) (112 (255) (42 (297)
income/(expe ) )
nse) (iv)
Profit / 262 93 355 151 (131 20 556 (14 408
(loss) for ) 8)
the period
Attributable
to:
- Equity 207 76 283 123 (126 (3) 453 (13 314
shareholders ) 9)
of Lonmin
Plc
- Minority 55 17 72 28 (5) 23 103 (9) 94
interest
Earnings / 6 132.5c 181.1 81.5 (2.0 295.9c 205.1
(loss) per c c )c c
share
Diluted 6 132.0c 180.5 80.7 (2.0 293.4c 203.3
earnings / c c )c c
(loss) per
share (v)
Dividend per 7 60.0c 55.0 110.0
share paid c c
in period
Footnotes:
(i) Underlying earnings are calculated on profit for the period excluding
pension scheme payments to fund augmentations of transfer values as part of a
liability reduction exercise, profit on disposal of subsidiaries, foreign
exchange on tax balances and effects of changes in corporate tax rates on
deferred tax. For prior periods, special items also includes profit on the
sale of Marikana houses, impairment of non-mining investments and movements
in the fair value of the embedded derivative associated with the convertible
bonds as disclosed in note 3 to the interim accounts.
(ii) EBITDA is operating profit before depreciation and amortisation.
Operating profit is defined as revenue and other operating expenses before
finance income and expense and before share of profit of associate and joint
venture.
(iv) The income tax expense relates to overseas taxation and includes
exchange gains of $83 million (March 2007 - losses of $28 million) as
disclosed in note 5 to the interim accounts.
(v) In the prior periods the calculation of diluted EPS includes
consideration of the movement in fair value of the embedded derivative within
the convertible bonds subject to the limitation under IAS 33 - Earnings Per
Share, that this cannot thereby create a figure exceeding basic EPS.
Consolidated statement of recognised income and expense
for the 6 months ended 31 March 2008
6 months 6 months Year ended
to to
31 March 31 March 30 September
2008 2007 2007
Note $m $m $m
Profit for the period 355 20 408
Change in fair value of (33) 72 111
available for sale financial
assets
Effective portion of changes - (35) 20
in fair value of cash flow
hedges
Net change in fair value of (8) 10 (8)
cash flow hedges transferred
to income statement
Deferred tax on items taken 7 - (32)
directly to the statement of
recognised income and
expense
Actuarial losses on the post - - (11)
retirement benefit plan
Total recognised income for 321 67 488
the period
Attributable to:
- Equity shareholders of 8 250 49 392
Lonmin Plc
- Minority interest 8 71 18 96
8 321 67 488
Consolidated balance sheet
as at 31 March 2008
As at As at As at
31 March 31 March 30
September
2008 2007 2007
Note $m $m $m
Non-current assets
Goodwill 186 186 186
Intangible assets 937 939 936
Property, plant and 1,780 1,526 1,673
equipment
Investment in 152 123 131
associate and joint
venture
Financial assets:
- Available for sale 207 170 226
financial assets
- Other receivables 21 22 22
Employee benefits - 9 -
3,283 2,975 3,174
Current assets
Inventories 299 256 186
Trade and other 246 171 338
receivables
Assets held for sale 6 8 7
Tax recoverable 12 4 3
- - 8
Financial assets:
- Derivative
financial
instruments
Cash and cash 13 48 222
equivalents
576 487 764
Current liabilities
Bank overdraft (38) (1) (1)
repayable on demand
Trade and other (207) (152) (286)
payables
Financial
liabilities:
- Interest bearing (138) (332) (237)
loans and borrowings
- Derivative - (29) -
financial
instruments
Tax payable - (18) (40)
(383) (532) (564)
Net current assets 193 (45) 200
Non-current
liabilities
Employee benefits (27) (10) (24)
Financial
liabilities:
Interest bearing (343) (380) (359)
loans and borrowings
Deferred tax (521) (506) (585)
liabilities
Provisions (40) (43) (46)
(931) (939) (1,014)
Net assets 2,545 1,991 2,360
Capital and reserves
Share capital 8 156 155 156
Share premium 8 303 249 299
Other reserves 8 88 64 96
Retained earnings 8 1,586 1,190 1,417
Attributable to 8 2,133 1,658 1,968
equity shareholders
of Lonmin Plc
Attributable to 8 412 333 392
minority interest
Total equity 8 2,545 1,991 2,360
Consolidated cash flow statement
for the 6 months ended 31 March 2008
6 months 6 months Year ended
to to
31 March 31 March 30
September
2008 2007 2007
Note $m $m $m
Profit for the period 355 20 408
Taxation 5 41 112 297
Finance income 4 (8) (12) (32)
Finance expenses 4 1 119 139
Share of profit after tax (21) (10) (18)
of associate and joint
venture
Depreciation and 46 43 87
amortisation
Change in inventories (113) (121) (51)
Change in trade and other 92 225 58
receivables
Change in trade and other (79) (60) 70
payables
Change in provisions (6) 4 4
Profit on sale of assets - (1) (1)
held for sale
Profit on sale of (2) - -
subsidiary
Share-based payments 7 - 24
Other non cash charges 2 3 (2)
Cash flow from operations 315 322 983
Interest received 4 4 16
Interest paid (16) (15) (41)
Tax paid (144) (149) (266)
Cash flow from operating 159 162 692
activities
Cash flow from investing
activities
Acquisition of subsidiaries 10 - (393) (393)
(net of cash acquired)
Proceeds from disposal of 3 - -
subsidiaries
Purchase of intangible (9) (4) (6)
assets
Purchase of property, plant (130) (101) (270)
and equipment
- - 51
Proceeds from available for
sale financial assets
(17) (3) (72)
Purchase of available for
sale financial assets
Proceeds from disposal of 1 3 5
assets held for sale
Cash used in investing (152) (498) (685)
activities
Cash flow from financing
activities
Equity dividends paid to 8 (94) (85) (171)
Lonmin shareholders
Dividends paid to minority 8 (51) (21) (41)
Proceeds from current 9 - 332 237
borrowings
Repayment of current 9 (99) - -
borrowings
Proceeds from non-current 9 - 92 71
borrowings
Repayment of non-current 9 (16) - -
borrowings
Issue of ordinary share 8 4 19 68
capital
Cash used in financing (256) 337 164
activities
(Decrease)/increase in cash (249) 1 171
and cash equivalents
Opening cash and cash 9 221 43 43
equivalents
Effect of exchange rate 9 3 3 7
changes
Closing cash and cash 9 (25) 47 221
equivalents
Notes to the Accounts
Statement on accounting policies
Basis of preparation
Lonmin Plc (the "Company") is a company domiciled in the United Kingdom. The
condensed consolidated interim financial statements of the Company as at and
for the six months ended 31 March 2008 comprise the Company and its
subsidiaries (together referred to as the "Group") and the Group`s interests
in associates and joint ventures.
These condensed consolidated interim financial statements have been prepared
in accordance with IAS 34 - Interim Financial Reporting, as adopted by the
EU. They do not include all of the information required for full annual
financial statements and should be read in conjunction with the consolidated
financial statements of the Group for the year ended 30 September 2007.
The comparative figures for the financial year ended 30 September 2007 are
not the Group`s full statutory accounts for that financial year. Those
accounts have been reported on by the Group`s auditors and delivered to the
registrar of companies. The report of the auditors was (i) unqualified, (ii)
did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report, and (iii) did
not contain a statement under section 237(2) or (3) of the Companies Act
1985.
The consolidated financial statements for the Group as at and for the year
ended 30 September 2007 are available upon request from the Company`s
registered office at 4 Grosvenor Place, London, SW1X 7YL.
These condensed consolidated interim financial statements were approved by
the Board of Directors on 7 May 2008.
These consolidated interim financial statements apply the accounting policies
and presentation that were applied in the preparation of the Group`s
published consolidated financial statements for the year ended 30 September
2007, except for the changes outlined below.
New standards and amendments in the year
IFRS 7 - Financial Instruments: Disclosure and the Amendment to IAS 1 -
Presentation of Financial Statements: Capital Disclosures require extensive
disclosures about the significance of financial instruments for an entity`s
financial position and financial performance and qualitative and quantitative
disclosures on the nature and extent of risks. IFRS 7 and amended IAS 1,
which become mandatory for the Group`s 2008 annual financial statements, will
require additional disclosure with respect to the Group`s financial
instruments and share capital.
New standards that are relevant to the Group but have not yet been adopted
IFRS 8 - Operating Segments introduces the "management approach" to segment
reporting. IFRS 8, which becomes mandatory for the Group`s 2009 financial
statements, will require the disclosure of segment information based on the
internal reports regularly reviewed by the Group`s Chief Operating Decision
Maker in order to assess each segment`s performance and to allocate resources
to them. Currently the Group presents segment information by business group
and geographical location.
Revised IAS 23 - Borrowing Costs removes the option to expense borrowing
costs and requires that an entity capitalises borrowing costs directly
attributable to the acquisition, construction or production of a qualifying
asset as part of the cost of the asset. The revised IAS 23 will become
mandatory for the Group`s 2009 financial statements. Currently, the Group
has elected to capitalise all relevant borrowing costs to the cost of the
asset and therefore the change will not impact on the Group`s results.
2. Segmental analysis
The Group`s primary operating segment is in the mining of platinum group
metals. The majority of the Group`s operations are based in South Africa.
6 months to 31 March 2008
Platinum Corporate Explorat Total
ion
Analysis by business group $m $m $m $m
Revenue - external sales 907 - - 907
Operating profit / (loss) 426 (42) (16) 368
Segment total assets 3,118 16 725 3,859
Segment total liabilities (937) (196) (181) (1,314)
Capital expenditurei 138 - 16 154
Depreciation and 46 - - 46
amortisation
Share of profit of 21 - - 21
associate and JV
(Restatedii) 6 months to 31 March 2007
Platinum Corporate Explorati Total
on
Analysis by business group $m $m $m $m
Revenue - external sales 631 - - 631
Operating profit / (loss) 255 (18) (8) 229
Segment total assets 2,722 50 690 3,462
Segment total liabilities (956) (342) (173) (1,471)
Capital expenditurei 107 - 4 111
Depreciation and 43 - - 43
amortisation
Share of profit of 10 - - 10
associate and JV
Year ended 30 September 2007
Platinum Corporate Explorat Total
ion
Analysis by business group $m $m $m $m
Revenue - external sales 1,941 - - 1,941
Operating profit / (loss) 880 (63) (23) 794
Segment total assets 3,211 41 686 3,938
Segment total liabilities (1,066) (339) (173) (1,578)
Capital expenditurei 353 - 19 372
Depreciation and 87 - - 87
amortisation
Share of profit of 18 - - 18
associate and JV
6 months to 31 March 2008
South UK Other Total
Africa
Analysis by geographical $m $m $m $m
location
Revenue - external sales 907 - - 907
Segment total assets 3,817 6 36 3,859
Capital expenditurei 154 - - 154
6 months to 31 March 2007
South UK Other Total
Africa
Analysis by geographical $m $m $m $m
location
Revenue - external sales 631 - - 631
Segment total assets 3,410 50 2 3,462
Capital expenditurei 111 - - 111
Year ended 30 September 2007
South UK Other Total
Africa
Analysis by geographical $m $m $m $m
location
Revenue - external sales 1,941 - - 1,941
Segment total assets 3,867 41 30 3,938
Capital expenditurei 372 - - 372
Revenue by destination is analysed by geographical area below:
6 months to 6 months to Year ended
31 March 31 March 30 September
2008 2007 2007
$m $m $m
The Americas 216 76 419
Asia 356 300 705
Europe 104 60 314
South Africa 226 184 482
Zimbabwe 5 11 21
907 631 1,941
Footnotes:
i Capital expenditure includes additions to plant, property and equipment
(including capitalised interest), intangible assets and goodwill in
accordance with IAS 14 - Segment Reporting.
ii Figures for the 6 months to 31 March 2007 have been restated to revise
the classification of Exploration assets and liabilities.
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 and for consistency with prior years.
6 months 6 months to Year ended
to
31 March 31 March 30 September
2008 2007 2007
$m $m $m
EBITDA
- Sale of housesi - 1 1
- Pensions expenseii (5) - 2
- Impairment loss iii - - (5)
- Profit on disposal of 2 - -
subsidiary iv
Finance expenses:
- Movement in fair value of - (104) (104)
embedded derivativev
Loss on special items before (3) (103) (106)
taxation
Taxation related to special 96 (28) (42)
items (note 5)
Special profit / (loss) before 93 (131) (148)
minority interest
Minority interest (17) 5 9
Special profit / (loss) for the 76 (126) (139)
period attributable to equity
shareholders of Lonmin Plc
A substantial number of our employees are accommodated in hostels and married
quarters. The Company is selling houses to employees to encourage home-
ownership. Any profits or losses from such sales at fair value are not deemed
to represent underlying earnings.
In December 2007 the Company contributed $5 million to the Lonmin
Superannuation Scheme to fund augmentations of transfer values as part of a
liability reduction exercise.
The Group carried out a review of non-mining investments in the prior year
resulting in a $5 million impairment charge to the income statement.
During the period the Group disposed of a subsidiary, Southern Era Mining
Exploration South Africa (Pty) Limited, for consideration of $3 million
resulting in a profit before tax of $2 million.
In prior periods convertible bonds existed which contained an embedded
derivative that, because of the cash settlement option, was held at fair
value with movements in fair value taken to the income statement.
Fluctuations in fair value were mainly due to share price and as they were
not considered underlying they were reported as special. The convertible
bonds were fully redeemed during the 2007 fiscal year with the movement in
fair value from the previous year end to the date of redemption being
reported as special.
4. Finance income and expense
6 months 6 months Year
to to ended
31 March 31 March 30
September
2008 2007 2007
$m $m $m
Finance income: 8 12 32
Interest receivable 4 4 16
Expected return on defined - 4 8
benefit pension scheme assets
Movement in fair value of non- 1 3 1
current other receivables 3 7
Exchange gains on net debt as
defined by the Groupi
Finance expenses: (1) 15) (35)
Interest expense (16) (5) (45)
Capitalised interest 15 6 23
Discounting on provisions - - (3)
Unwind of discounting on - (2) (3)
convertible bonds
Interest cost of defined - (4) (7)
benefit pension scheme
liabilities
Special items (note 3): - (104) (104)
Movement in fair values of - (104) (104)
derivative financial
instruments
Total finance expense (1) (119) (139)
Net finance income/(expense) 7 (107) (107)
recognised in the income
statement
Interest expenses incurred have been capitalised on a Group basis to the
extent that there is an appropriate qualifying asset.
Footnote:
Exchange gains on net debt as defined by the Group have been moved from
finance expenses to finance income.
5. Taxation
6 months 6 months Year
to to ended
31 March 31 March 30
September
2008 2007 2007
$m $m $m
United Kingdom:
Current tax expense at 30% 98 42 42
(2007 - 30%)
Less amount of the benefit (98) (42) (42)
arising from double tax relief
available
Total UK tax expense - - -
Overseas:
Current tax expense at 28% (2007 - 120 67 200
29%) excluding special items
Corporate tax expense 93 53 186
Tax on dividends remitted 27 14 14
Deferred tax expense:
17 17 55
Origination and reversal of 17 17 55
temporary differences
Special items (note 3): (96) 28 42
Retranslation of Rand (11) 6 10
denominated current tax
balance
Retranslation of Rand (58) 22 41
denominated deferred tax
balance
Retranslation of monetary (14) - -
assets and other translation
differences
Total effect of foreign (83) 28 51
exchange on taxationi
Utilisation of losses from - - (9)
prior years to offset
deferred tax liability
Change in South African (13) - -
corporate tax rate from 29%
to 28%
Actual tax charge 41 112 297
Tax charge excluding special 137 84 255
items (note 3)
Effective tax rate 10% 85% 42%
Effective tax rate excluding 35% 36% 31%
special items (note 3)
A reconciliation of the standard tax charge to the tax charge was as follows:
6 6 6 6 Year Year
months months months months ended ended
to to to to
31 31 31 31 30 30
March March March March Septembe Septem
r ber
2008 2008 2007 2007 2007 2007
% $m % $m % $m
Tax charge at 28 111 29 38 29 204
standard tax rate
Overseas taxes on 7 27 11 14 2 14
dividends remitted by
subsidiary companies
Special items as (25) (96) 21 28 6 42
defined above
Tax effect of - - 23 30 4 31
movements in the fair
values of financial
instruments
Tax effect of other - (1) 1 2 1 6
timing differences
Actual tax charge 10 41 85 112 42 297
The Group`s primary operations are based in South Africa. Therefore, the
relevant standard tax rate for the Group was the South African statutory tax
rate of 28% (2007 - 29%). The secondary tax rate on dividends remitted by
South African companies was 10% (2007 - 12.5%).
Footnote:
Overseas tax charges are predominantly calculated based on Rand financial
statements. As the Group`s functional currency is US Dollar this leads to a
variety of foreign exchange impacts being the retranslation of current and
deferred tax balances and monetary assets, as well as other translation
differences. The Rand denominated deferred tax balance in US Dollars at 31
March 2008 is $333 million (31 March 2007 - $333 million, 30 September 2007 -
$392 million).
6. Earnings per share
Earnings per share have been calculated on the profit for the period
attributable to equity shareholders amounting to $283 million (March 2007 -
loss of $3 million) using a weighted average number of 156,250,562 ordinary
shares in issue for the 6 months to 31 March 2008 (6 months to 31 March 2007
- 150,911,303 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. Shares issuable on
conversion of the convertible bonds were anti-dilutive in the prior periods
and have been excluded from diluted earnings per share in accordance with IAS
33 - Earnings Per Share.
6 months to 31 March 2008 6 months to 31 March 2007
Profit Per share Loss Per
for for share
the Number of amount the Number of amount
period period
$m shares cents $m shares cents
Basic 283 156,250,562 181.1 (3) 150,911,303 (2.0)
EPS
Share - 561,765 (0.6) - - -
option
schemes
Diluted 283 156,812,327 180.5 (3) 150,911,303 (2.0)
EPS
Year ended 30 September 2007
Profit for Per share
the year Number of amount
$m shares cents
Basic EPS 314 153,097,437 205.1
Share option schemes - 1,324,642 (1.8)
Diluted EPS 314 154,422,079 203.3
6 months to 31 March 2008 6 months to 31 March 2007
Profit Per Profit for Per
for share share
the Number of amount the period Number of amount
period
$m shares cents $m shares cents
Underly 207 156,250,562 132.5 123 150,911,303 81.5
ing EPS
Share - 561,765 (0.5) - 1,448,157 (0.8)
option
schemes
Diluted 207 156,812,327 132.0 123 152,359,460 80.7
Underly
ing EPS
Year ended 30 September 2007
Profit for Per share
the year Number of Amount
$m shares cents
Underlying 453 153,097,437 295.9
EPS
Share option - 1,324,642 (2.5)
schemes
Diluted 453 154,422,079 293.4
Underlying
EPS
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 attributable to equity
shareholders adjusted to exclude special items (as defined in note 3) as
follows:
6 months to 31 March 2008 6 months to 31 March 2007
Profit/ Per Profit/ Per
(loss) share (loss) for share
for
the Number of amount the period Number of amount
period
$m shares cents $m shares cents
Basic 283 156,250,562 181.1 (3) 150,911,303 (2.0)
EPS
Special (76) - (48.6) 126 - 83.5
items
(note 3)
Underlyi 207 156,250,562 132.5 123 150,911,303 81.5
ng EPS
Year ended 30 September 2007
Profit for Per share
the year Number of Amount
$m shares cents
Basic EPS 314 153,097,437 205.1
Special items 139 - 90.8
(note 3)
Underlying 453 153,097,437 295.9
EPS
Headline earnings and the resultant headline earnings per share are specific
disclosures defined and required by the Johannesburg Stock Exchange. These
are calculated as follows:
6 months to 6 months to Year ended
31 March 31 March 2007 30 September
2008 $m 2007
$m $m
Earnings attributable to 283 (3) 314
ordinary shareholders (IAS 33
earnings)
Less profit on sale of (2) - -
subsidiary
Less profit on sale of - - (2)
available for sale financial
assets
Add back impairment of 1 - 5
available for sale financial
assets
Tax related to the above - - (1)
items
Headline earnings 282 (3) 316
6 months to 31 March 2008 6 months to 31 March 2007
Profit/ Per Profit/ Per
(loss) for share (loss) share
for
the period Number of amount the Number of amount
period
$m shares cents $m shares cents
Head- 282 156,250,562 180.5 (3) 150,911,303 (2.0)
line
EPS
Share - 561,765 (0.7) - - -
option
scheme
s
Dilute 282 156,812,327 179.8 (3) 150,911,303 (2.0)
d
headli
ne EPS
Year ended 30 September 2007
Profit for Per share
the year Number of amount
$m shares Cents
Head-line EPS 316 153,097,437 206.4
Share option schemes - 1,324,642 (1.8)
Diluted headline EPS 316 154,422,079 204.6
7. Dividends
The final dividend for the year ended 30 September 2007 of 60.0 cents per
share was paid on 8 February 2008 and is shown as a deduction from retained
earnings in the period as disclosed in note 8 (final dividend for the year
ended 30 September 2006 of 55.0 cents per share).
An interim dividend of 59.0 cents per share will be paid on 8 August 2008 to
shareholders on the registers at the close of business on 11 July 2008
(interim dividend of 55.0 cents per share for the 6 months to 31 March 2007
was paid on 3 August 2007 to shareholders on the registers at the close of
business on 6 July 2007).
8. Total equity
Equity shareholders` funds
Called Share
up premium Other Retained Minority Total
share
capital account reserves earnings Total interests equity
$m $m $m $m $m $m $m
At 1 October 143 26 84 836 1,089 223 1,312
2006
Total - - (20) 69 49 18 67
recognised
income and
expense
Dividends - - - (85) (85) (21) (106)
Conversion of 11 205 - - 216 - 216
the
convertible
bonds
Embedded - - - 371 371 - 371
derivative
transfer
Other - - - (1) (1) - (1)
Shares issued 1 18 - - 19 - 19
on exercise
of share
options
Minority - - - - - 113 113
interest on
business
acquisition
At 31 March 155 249 64 1,190 1,658 333 1,991
2007
At 1 April 155 249 64 1,190 1,658 333 1,991
2007
Total - - 32 311 343 78 421
recognised
income and
expense
Dividends - - - (86) (86) (20) (106)
Other - - - 2 2 1 3
Shares issued - 14 - - 14 - 14
on exercise
of share
options
Shares issued 1 36 - - 37 - 37
under the IFC
options
agreement
At 30 156 299 96 1,417 1,968 392 2,360
September
2007
At 1 October 156 299 96 1,417 1,968 392 2,360
2007
Total - - (8) 258 250 71 321
recognised
income and
expense
Dividends - - - (94) (94) (51) (145)
Other - - - 5 5 - 5
Shares issued - 4 - - 4 - 4
on exercise
of share
options
At 31 March 156 303 88 1,586 2,133 412 2,545
2008
During the period 213,220 shares were issued upon the exercise of share
options through which $4 million of cash was received.
Other reserves at 31 March 2008 represent the capital redemption reserve of
$88 million. The movement in the current
period represents the movement on the hedging reserve, which is $nil at 31
March 2008.
9. Analysis of net debt as defined by the Group i
As at As at
1 October Subsidiary Non cash 31 March
2007 acquired Cash movements 2008
flow
$m $m $m $m $m
Cash and cash 222 (212) 3 13
equivalents -
Overdrafts (1) (37) - (38)
Cash and cash 221 (249) 3 (25)
equivalents in -
the statement
of cash flows
Current (237) 99 - (138)
borrowings -
Non-current (359) - 16 - (343)
borrowings
Net debt as (375) (134) 3 (506)
defined by the -
Group
As at As at
1 April Subsidiary Non cash 30
September
2007 acquired Cash flow movements 2007
$m $m $m $m $m
Cash and cash 48 170 4 222
equivalents -
Overdrafts (1) - - (1)
-
Cash and cash 47 170 4 221
equivalents in -
the statement
of cash flows
Current (332) 95 - (237)
borrowings -
Non-current (380) 21 - (359)
borrowings -
Net debt as (665) 286 4 (375)
defined by the
Group -
As at As at
1 October Subsidiary Non cash 31
March
2006 acquired Cash movement 2007
ii flow s
$m $m $m $m $m
Cash and cash 61 20 (36) 3
equivalents 48
Overdrafts (18) - 17 -
(1)
Cash and cash 43 20 (19) 3
equivalents in the 47
statement of cash
flows
Current - - (332) -
borrowings (332)
Non-current (288) - (92) -
borrowings
(380)
Convertible (213) - - 213
bonds -
Net debt as (458) 20 (443) 216
defined by the (665)
Group
Footnotes:
i Net debt as defined by the Group comprises cash and cash equivalents,
banks overdrafts repayable on demand, interest bearing loans and borrowings
and convertible bonds.
ii The analysis of movement in net debt from 1 October 2006 to 31 March
2007 has been expanded to reflect the cash recognised on acquisition of a
subsidiary.
10. Business combinations
On 26 January 2007 the Group acquired 94% of AfriOre Ltd. This increased to
96.5% on 8 February 2007 and to 100% on 16 February 2007. AfriOre`s primary
asset is a 74% stake in Akanani Mining (Pty) Limited which owns the Akanani
PGM deposit. The acquisition was accounted for with an effective date of 1
February 2007, using the acquisition method of accounting. Since its
acquisition AfriOre has only incurred exploration and evaluation expenditure
which has been capitalised in accordance with the Group`s accounting policy.
The assets and liabilities of AfriOre Limited and the final fair values
attributed were as follows:
Final
Accounting
Book value fair value Final
policy
on adjustment fair value
acquisition adjustment
$m $m $m
$m
Intangible assets 13 611 611
(13)
Trade and other (5) - (5)
payables -
Cash and cash 20 - 20
equivalents -
Deferred tax - (173) (173)
liability -
Total assets of 28 438 453
acquired entity (13)
Minority interest (113)
Fair value of assets 340
acquired
Goodwill 73
Consideration paid 413
The fair value exercise recognised the assets of the AfriOre Limited Group at
the fair value they would carry if they held tax benefits. This resulted in
the need to recognise a deferred tax liability of $173 million which in turn
caused the creation of a goodwill balance of $73 million. The fair values
were amended as necessary in accordance with IFRS 3 - Business Combinations
resulting in the final fair values given above. These fair values have not
changed since 30 September 2007.
The total consideration paid for the acquisition of AfriOre Limited amounted
to $413 million comprising cash consideration of $409 million, and expenses
on the transaction of $4 million, all paid in the period. Cash acquired with
the entity amounted to $20 million resulting in a net consideration paid of
$393 million.
There have been no new business combinations in the 6 months to 31 March
2008.
Responsibility statement of the directors in respect of the
interim financial report
We confirm that to the best of our knowledge:
the condensed set of financial statements have been prepared in accordance
with IAS34 Interim Financial Reporting as adopted by the EU,
the interim management report includes a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events that have occurred during the first six months of the
financial year and their impact on the condensed set of financial statements;
and a description of the principle risks and uncertainties for the remaining
six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party
transactions that have taken place in the first six months of the current
financial year and that have materially affected the financial position or
performance of the entity during that period; and any changes in the related
party transactions described in the last annual report that could do so.
For and on behalf of the Board
Sir John Craven Alan Ferguson
Chairman Chief Financial Officer
8 May 2008
_______________________________
1 We have previously reported a severity ratio calculated as the average
number of days lost per lost time injury. In line with the guidelines of
the International Council of Mining and Metals we have moved to report a
severity rate which is calculated as the number of days lost per million man
hours worked.
Date: 08/05/2008 10:26:03 Supplied by www.sharenet.co.za
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