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KIO - Kumba Iron Ore Limited - Reviewed Condensed Consolidated Financial
Report for the six months ended 30 June 2008 and interim cash dividend
declaration
KUMBA IRON ORE LIMITED
Company registration number: 2005/015852/06.
Incorporated in the Republic of South Africa
JSE code: KIO & ISIN: ZAE000085346
REVIEWED CONDENSED CONSOLIDATED FINANCIAL REPORT FOR THE SIX MONTHS ENDED 30
JUNE 2008 AND INTERIM CASH DIVIDEND DECLARATION
2008 Interim results
HIGHLIGHTS
Operating profit up 78%
Interim cash dividend 800 cents per share
Headline earnings up 76%
Commitment to zero harm LTIFR of 0,07
COMMENTARY
Highlights
For the six months ended 30 June 2008 Kumba Iron Ore Limited ("Kumba")
continued to deliver strong financial results. Revenue increased by 67% as a
result of higher sales volumes, stronger iron ore prices and increased revenue
from shipping services. Despite continued pressure on operating expenses,
Kumba`s operating margin increased to 58% in 2008 (63% from mining
activities), from 54% (57% from mining activities) in 2007. Profit for the six
months ended 30 June 2008 was R3,5 billion, whilst headline earnings increased
76% from R1,6 billion to R2,8 billion. Cash generated by operations for the
period increased to R4,6 billion, up 52% compared to the R3,0 billion
generated during the corresponding period in 2007.
Attributable and headline earnings for the six months were 890 cents per
share, on which an interim cash dividend of 800 cents per share has been
declared.
Safety performance
Kumba`s commitment to zero harm is reflected in the safety achievements of the
first six months of 2008 which have shown meaningful improvement when measured
by lost time injuries ("LTI`s") as Kumba worked for three of the six months
without a single LTI. Sishen Mine achieved a lost time injury frequency rate
("LTIFR") of 0,08 which is the best ever performance in the history of the
mine.
Thabazimbi Mine achieved a LTIFR of zero for 2008 which was down from 0,12 in
December 2007. Kumba achieved a LTIFR of 0,07 for the six months, recording
only 4 LTI`s in the period. Notwithstanding this improvement, it is with
regret that the group announce that it suffered one fatality for the period
when Mr Kagiso Peace Leboa, a 42 year old truck operator was fatally injured
at Sishen Mine during April 2008. The board expresses its deepest condolences
to the family of Mr Kagiso Peace Leboa.
Operating results
World crude steel production continued to increase during the six months ended
30 June 2008, mostly fuelled by demand from China. Demand for iron ore, which
is a critical input of the steel industry, has continued to increase. China`s
imports of iron ore rose to over 200Mt in the first six months of 2008. This
is expected to grow to 750Mtpa over the next five years.
Export sales for the first three months of 2008 were based on the 9,5%
increase in the iron ore benchmark price for the 2007/2008 iron ore year.
Final price settlement for the 2008/2009 iron ore year between Kumba and its
customers is anticipated in the third quarter of 2008.
In preparing these financial results Kumba has used a prudent estimate of
future prices. These price estimates (April to June 2008) are based on
settlements announced by the three iron ore majors and take into account
Kumba`s lump to fines ratio, its importance as a supplier to the Asian market
and the physical characteristics of its products.
Strong financial and operational performance for the six months ended 30 June
2008 was achieved, with revenue increasing 67% from R5,4 billion in 2007 to
R9,0 billion. Operating profit increased by R2,3 billion or 78% from R2,9
billion in 2007 to R5,2 billion, principally as a result of:
Average export price increases contributed R1,3 billion to operating profit.
Improved sales volumes added R588 million.
The weakening of the average exchange rate of the Rand to the US Dollar
(average spot exchange rates - R7,65/US$1,00 in 2008 compared with
R7,15/US$1,00 in 2007), which contributed R644 million to operating profit.
Increased operating profit from shipping operations of R444 million. Revenue
from shipping operations increased by R1,1 billion to R1,4 billion in 2008,
while shipping expenses increased by R713 million to R979 million during the
same period.
All of which was partially offset by a R608 million or 27% increase in
operating expenses (excluding shipping expenses), mainly as a result of
inflationary pressures, including the rising costs of fuels, lubricants and
maintenance-related activities.
The group increased total sales volumes by 6% from 16,3Mt in 2007 to 17,3Mt.
Export sales volumes from Sishen Mine for the six months increased by 13% from
11,8Mt in 2007 to 13,3Mt. Sales volumes increased on the back of higher
volumes from the Sishen Expansion Project ("SEP") jig plant and the sale of
stock built up at the port towards the end of 2007. Volumes railed on the
Sishen-Saldanha export channel increased by 11%, which is slightly below our
commitment to Transnet. Kumba anticipates an increase in volumes railed as
production volumes from the jig plant increase. Production at Thabazimbi Mine
was stable.
Total tonnes mined at Sishen Mine decreased slightly from 51,2Mt in 2007 to
50,9Mt. During the period an additional 2,8Mt of B-grade material (with an
iron content of between 55% and 60%) mined at Sishen Mine at a cost of R160
million was stockpiled for use in the jig plant to bring the total B-grade
material stockpiled to some 12Mt with a cost of R600 million. Sishen Mine`s
unit cost increase of 17% from 31 December 2007 was contained at R93,39 per
tonne compared to R79,90 per tonne at the end of 2007, despite inflationary
pressures across the mining industry.
South Africa`s power constraints have affected Kumba`s operations during the
period. The direct impact on production volumes was limited to 24 000 tonnes
during the period. However, the decision to periodically stop all electricity
power-assisted trucking to reduce Sishen Mine`s energy usage has resulted in
an increase in the use of diesel, at a time when fuel costs have reached
record levels. Consequently Sishen Mine has seen an increase of 62% in fuel
costs year-on-year.
Cash flows of R4,6 billion were generated from operations, an increase of 52%
on the R3,0 billion generated in 2007. These cash flows were used to pay
taxation of R1,6 billion and dividends of R1,3 billion during the period.
Capital expenditure of R217 million was incurred to maintain operations and
R589 million to expand operations. At 30 June 2008, the group had a gross debt
position of R4,3 billion and cash on hand of R2,0 billion. Interest cover
remained strong at 27 times (19 times at the
end of 2007).
Sishen Expansion Project
Production from the jig plant for the six month to 30 June 2008 was 1,3Mt.
This production level was lower than anticipated and was impacted by several
technical difficulties as well as the late commissioning of the crushing and
sample plants. Through the dedication of the teams involved these technical
issues have been systematically identified and are being addressed through
redesign and re-engineering of certain of the design aspects. Whilst this
process has taken longer than initially anticipated, good progress has been
made with the crushers, which are performing at design capacity, and with
bringing forward the commissioning of the 7`th and 8`th jig modules to the
third quarter of 2008, these initiatives are expected to contribute to the
continued ramp-up of production from the jig plant. It is anticipated that,
based on the recent performance from the jig plants, production of some 5Mt
should be achieved for 2008.
Sishen South Project
The project entails the development of a greenfield opencast mine on a group
of iron ore bodies some 80km south of Sishen Mine. Kumba has been notified by
the Department of Minerals and Energy that its application for new order
mining rights for Sishen South has been granted. In addition, in June 2008,
the Sishen South Project was issued with an integrated water-use licence for
the proposed development at Sishen South. The conclusion of an agreement with
Transnet is imminent in respect of the expansion of the Sishen-Saldanha export
line. The R5,9 billion (real - January 2008) project is progressing through
the final approval stages, whereafter an announcement will be made. Based on
current forecasts it is anticipated that first production from the new 9Mtpa
mine should be in 2012.
Stakeholder value creation
Exxaro Resources Limited holds a 20% interest in Sishen Iron Ore Company
(Proprietary) Limited (`SIOC`) and the SIOC Community Development SPV
(Proprietary) Limited and SIOC Employee Share Participation Scheme
(`Envision`) each hold an interest of 3% in SIOC. Of the profit of R3,5
billion, R729 million is attributable to minority interests in SIOC. In
preparing the condensed consolidated financial report, SIOC Community
Development SPV and Envision are considered special purpose entities and are
consolidated for accounting purposes. Of the total shareholders` equity of
R4,4 billion at 30 June 2008, R320 million is attributable to these entities
through their interests in SIOC.
Envision was formed in November 2006. A total of 4 456 employees who
participate in the scheme, have received a total of R11 million in dividends
since inception. A further R21 million will be paid to employee participants
from the dividend declared by SIOC in July 2008. Since inception of the
scheme, meaningful value has been created for employee participants through
the appreciation in the Kumba share price from R110 from when Kumba Listed on
the JSE Limited.
The SIOC Community Development SPV was founded to hold an investment in SIOC
for the greater development of the communities in which SIOC operates. R11
million of dividends have flowed to the SIOC Community Development Trust since
its inception.
Mineral resources and reserves
There have been no material changes to the resources and reserves as disclosed
in the 2007 Kumba Annual Report.
Prospects
Kumba remains positive on the prospects for iron ore given continued strong
Chinese demand for steel and upward pressure on iron ore prices, as supply and
logistics constraints delay bringing on stream new production in response to
increased demand. Final settlement of iron ore prices for the 2008/2009 iron
ore year between Kumba and its customers is anticipated in the third quarter
of 2008.
Technical difficulties have impeded the ramp up of the SEP jig plant. Good
progress is being made in identifying and addressing the remaining technical
risks and as a result the ramp up of SEP production should escalate in the
second half of 2008.
With significant increases in the costs of diesel, steel, explosives and
electricity, as well as the power supply constraints, operating costs will
remain under pressure. The anticipated benefits of a reduction in unit costs
through the additional SEP jig plant volumes is anticipated only when full
design capacity is reached.
Change in directorate
Ras Myburgh handed over the role of Chief Executive Officer of Kumba to Chris
Griffith on 1 July 2008, when Ras began his secondment to South Africa`s
national electricity supplier - Eskom. This forms part of Kumba`s efforts to
continue to support Eskom in developing solutions to meet the country`s energy
needs. The Board extends its sincere thanks to Ras for his leadership during
the birth of our new company and wishes Ras well in his new important role.
Production report
Production summary
Total iron ore production increased 12% in the second quarter from a year
earlier to 8,87Mt. This was due mainly to the additional production delivered
by the SEP jig plant and stable performance from the DMS plant.
Quarterly overview
Quarter ended
30 June 30 June %
`000 tonnes 2008 2007 change
Iron ore 8 873 7 957 12
- Lump 5 292 4 666 13
- Fines 3 581 3 291 9
Mine production 8 873 7 957 12
- Sishen Mine 8 247 7 306 13
- Thabazimbi Mine 626 651 (4)
Quarterly overview (continued)
Quarter ended
31 March 31 March %
`000 tonnes 2008 2007 change
Iron ore 8 190 7 638 7
- Lump 4 888 4 495 9
- Fines 3 302 3 143 5
Mine production 8 190 7 638 7
- Sishen Mine 7 541 6 943 9
- Thabazimbi Mine 649 695 (7)
Six-month overview
Year-to-date
30 June 30 June %
`000 tonnes 2008 2007 change
Iron ore 17 063 15 595 9
- Lump 10 180 9 161 11
- Fines 6 883 6 434 7
Mine production 17 063 15 595 9
- Sishen Mine 15 788 14 249 11
- Thabazimbi Mine 1 275 1 346 (5)
CONDENSED GROUP BALANCE SHEET
as at
Reviewed Restated Restated
30 June 30 June 31 Dec
2008 2007 2007
Rm Rm Rm
Assets
Non-current assets 6 605 5 111 6 085
Property, plant and equipment 6 359 4 948 5 889
Biological assets 6 6 6
Investments in associates and 3 2 2
joint ventures
Investment held by 188 155 165
environmental trust
Long-term prepayments 34 - 14
Deferred tax assets 15 - 9
Current assets 6 115 3 337 3 793
Inventories 1 433 966 1 310
Trade and other receivables 2 637 1 007 1 531
Current tax asset 36 - -
Cash and cash equivalents 2 009 1 364 952
Total assets 12 720 8 448 9 878
Equity and liabilities
Shareholders` equity 4 444 2 247 2 736
Minority interest 1 067 555 661
Total equity 5 511 2 802 3 397
Non-current liabilities 4 809 4 156 2 869
Interest-bearing borrowings 2 840 2 840 1 040
Deferred tax liabilities 1 611 1 141 1 490
Provisions 358 175 339
Current liabilities 2 400 1 490 3 612
Short-term interest-bearing 1 463 693 2 490
borrowings
Short-term provisions 7 - -
Trade and other payables 930 675 1 058
Current tax liabilities - 122 64
Total equity and liabilities 12 720 8 448 9 878
CONDENSED GROUP INCOME STATEMENT
for the period ended
Reviewed Restated Restated
6 months 6 months 12 months
30 June 30 June 31 Dec
2008 2007 2007
Rm Rm Rm
Revenue 9 048 5 431 11 497
Operating expenses (3 802) (2 482) (5 519)
Operating profit 5 246 2 949 5 978
Net finance costs (51) (104) (168)
Profit before taxation 5 195 2 845 5 810
Taxation (1 650) (827) (1 807)
Profit 3 545 2 018 4 003
Attributable to:
Equity holders of Kumba 2 816 1 605 3 181
Minority interests 729 413 822
3 545 2 018 4 003
Attributable earnings per
share (cents)
Basic 890 510 1 011
Diluted 875 502 995
Dividend per share (cents)
Interim* 800 350 350
Final - - 400
*The interim dividend was declared subsequent to 30 June 2008 and is presented
for information purposes.
HEADLINE EARNINGS
for the period ended
Reviewed Restated Restated
6 months 6 months 12 months
30 June 30 June 31 Dec
2008 2007 2007
Rm Rm Rm
Reconciliation of
headline earnings
Attributable profit 2 816 1 605 3 181
Net profit on disposal or - (4) (14)
scrapping of property,
plant and equipment
Realisation of foreign - - (34)
currency translation
reserve
2 816 1 601 3 133
Taxation effect of - 3 1
adjustments
Minority interest in - - 9
adjustments
Headline earnings 2 816 1 604 3 143
Headline earnings per
share (cents)
Basic 890 510 1 000
Diluted 875 502 983
The calculation of basic and diluted earnings and headline
earnings per share is based on the weighted average number of
ordinary shares in issue as follows:
Weighted average number 316 563 167 314 208 267 314 618 406
of ordinary shares
Diluted weighted average 321 975 153 319 356 550 319 660 289
number of ordinary shares
The adjustment of 5 411 986 shares to the weighted average number of ordinary
shares is as a result of the expected vesting of share options already granted
under the various share-based payment arrangements.
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
for the period ended
Reviewed Restated Restated
6 months 6 months 12 months
30 June 30 June 31 Dec
2008 2007 2007
Rm Rm Rm
Total equity at the beginning 3 397 1 055 1 055
of the period - as previously
disclosed
Change in accounting policy - - 1 1
borrowing costs
Total equity at the beginning 3 397 1 056 1 056
of the period - as restated
Changes in share capital and
premium
Shares (including treasury 25 26 53
shares) issued during the
period
Changes in reserves
Equity-settled share-based 35 28 73
payment
Profit for period 2 816 1 605 3 181
Foreign currency translation 103 (3) (51)
differences
Movement in the revaluation of - 2 2
financial instruments
Dividends paid (1 271) (251) (1 362)
Changes in minority interest
Profit for period 729 413 822
Dividends paid (358) (77) (383)
Movement in minority interest 35 3 6
in reserves
Total equity at the end of the 5 511 2 802 3 397
period
Comprising
Share capital and premium 81 29 56
Equity-settled share-based 290 210 255
payment reserve
Foreign currency translation 104 20 2
reserve
Cash flow hedge accounting - (3) -
reserve
At acquisition reserves - 371 -
Retained earnings 3 969 1 620 2 423
Shareholders` equity 4 444 2 247 2 736
- attributable equity holders 4 124 2 080 2 538
of Kumba Iron Ore
- attributable to the minority 320 167 198
interest in SIOC
Minority interest 1 067 555 661
Total equity 5 511 2 802 3 397
CONDENSED GROUP CASH FLOW STATEMENT
for the period ended
Reviewed Reviewed Audited
6 months 6 months 12 months
30 June 30 June 31 Dec
2008 2007 2007
Rm Rm Rm
Cash flows from operating 1 494 1 953 2 750
activities
Cash generated from operations 4 581 3 017 5 805
Net finance costs paid (185) (147) (301)
Taxation paid (1 639) (666) (1 401)
Dividends paid (1 263) (251) (1 353)
Cash flows from investing (869) (1 155) (2 064)
activities
Capital expenditure (806) (1 177) (2 119)
Proceeds from the disposal of 1 13 26
non-current assets
Acquisition of investments (1) (2) (2)
Other (63) 11 31
Cash flows from financing 432 (528) (828)
activities
Share capital issued 25 26 53
Dividends paid to minority (365) (77) (392)
shareholders
Interest-bearing borrowings 772 (477) (489)
raised/(repaid)
Increase/(decrease) in cash 1 057 270 (142)
and cash equivalents
Cash and cash equivalents at 952 1 094 1 094
beginning of the period
Cash and cash equivalents at 2 009 1 364 952
end of the period
SALIENT FEATURES AND OPERATING STATISTICS
for the period ended
Unaudited Unaudited Unaudited
6 months 6 months 12 months
30 June 30 June 31 Dec
2008 2007 2007
Share statistics (`000)
Total shares in issue 317 104 313 594 317 104
Treasury shares 900 742 1 766
Treasury shares (Rand million) 18 29 43
Market information
Closing share price (Rand) 315 185 285
Market capitalisation (Rand 99 888 58 220 90 374
million)
Market capitalisation (US$ 12 636 8 223 13 281
million)
Net asset value per share 1 401 714 1 039
(cents)
Capital expenditure (Rand
million)
Incurred 806 1 166 2 119
Contracted 1 271 461 589
Authorised but not contracted 1 989 1 937 1 185
Capital expenditure relating to
Thabazimbi Mine to be financed
by ArcelorMittal (Rand million)
Contracted 1 2 2
Authorised but not contracted 40 12 2
Operating commitments
Operating lease commitments 49 67 56
Shipping services 600 - 698
Economic information
Average Rand/US dollar exchange 7,65 7,15 7,03
rate (Rand/US$)
Closing Rand/US dollar exchange 7,91 7,08 6,81
rate (Rand/US$)
Operating statistics (Mt)
Production 17,1 15,6 32,4
Sales 17,3 16,3 32,9
- export 13,3 11,8 24,0
- domestic 4,0 4,5 8,9
Sishen Mine unit cost (Rand per 93,39 77,11 79,90
tonne)
Sishen Mine cash cost (Rand per 86,14 69,37 74,32
tonne)
Sishen Mine unit cost (US$ per 12,21 10,78 11,37
tonne)
Sishen Mine cash cost (US$ per 11,18 9,70 10,57
tonne)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL REPORT
Corporate information
Kumba is a limited liability company incorporated and domiciled in South
Africa.
The main business of Kumba, its subsidiaries, joint ventures and associates is
the exploration, extraction, beneficiation and marketing and sale of iron ore.
The group has its primary listing on the JSE Limited.
The condensed consolidated financial report of Kumba and its subsidiaries for
the six months ended 30 June 2008 was authorised for issue in accordance with
a resolution of the directors on 23 July 2008.
Basis of preparation and accounting policies
The condensed consolidated financial report for the six months ended 30 June
2008 has been prepared in compliance with the South African Companies Act No
61 of 1973, as amended, the Listings Requirements of the JSE Limited and
International Accounting Standard 34, Interim Financial Reporting.
The condensed consolidated financial report has been prepared in accordance
with the historical cost convention except for certain financial instruments,
share-based payments and biological assets which are stated at fair value, and
is presented in Rand, which is Kumba`s functional and presentation currency.
Except as disclosed below, the accounting policies and methods of computation
applied in the preparation of the condensed consolidated interim financial
report are consistent with those applied for the period ended 31 December
2007, which comply with International Financial Reporting Standards (IFRS).
Kumba has effected the early adoption of IAS 23 Borrowing costs before its
effective date, with effect from 1 January 2008. IAS 23 requires the
capitalisation of borrowing costs that relate to assets that take a
substantial period of time to get ready for use or sale. The requirements of
the standard have been applied retrospectively from the date when borrowing
costs were first incurred in 2006. The effect on earnings and headline
earnings per share is an increase of 26 cents and 8 cents for the six months
ended 30 June 2008 and 2007 respectively. The effect on equity is disclosed in
the table below.
6 months 6 months 12 months
30 June 30 June 31 Dec
2008 2007 2007
Rm Rm Rm
Increase in opening balance 82 1 1
Increase in profit before
taxation
for the period 140 46 140
Taxation (39) (13) (39)
Increase in equity attributable 183 34 102
to equity holders of Kumba
Minority interest (20) (7) (20)
Increase in shareholders` equity 163 27 82
IFRIC 12, Service Concession Arrangements and IFRIC 14, IAS 19 limit on
defined benefit asset, which are effective from 1 January 2008, have no impact
on the financial position, results or cash flow information of the group for
the period under review.
Net debt
Kumba`s net debt position at balance sheet dates is as follows:
30 June 30 June 31 Dec
2008 2007 2007
Rm Rm Rm
Long-term interest-bearing borrowings 2 840 2 840 1 040
Short-term interest-bearing borrowings 1 463 693 2 490
Total 4 303 3 533 3 530
Cash and cash equivalents (2 009) (1 364) (952)
Net debt 2 294 2 169 2 578
Total equity 5 511 2 802 3 397
Interest cover (times) 27 20 19
It is the intention of management to fund Kumba`s capital expansion projects
through debt financing. At 31 December 2007 Kumba was revolving certain of its
debt facilities and, for this reason, a significant portion of the interest-
bearing borrowings were considered short-term. However, as debt is used to
finance Kumba`s expansion, the debt profile is returning to a longer-term
profile. The maximum net debt in terms of current covenants is R4,5 billion.
Kumba remained within its covenants during the year. A process is currently
underway to increase Kumba`s debt capacity.
Segmental reporting
Kumba`s single business segment is the mining, extraction and production of
iron ore. The financial disclosures of the business segment are presented in
the condensed consolidated financial report.
Kumba generated its revenue through the sale of iron ore to customers in the
following geographical regions:
6 months 6 months 12 months
30 June 30 June 31 Dec
2008 2007 2007
Rm Rm Rm
Domestic - South Africa 603 634 1 349
Export 8 445 4 797 10 148
Europe 2 207 1 557 2 999
China 4 482 1 877 4 284
Rest of Asia 1 756 1 363 2 865
Significant items included in operating profit
Operating expenses
Operating expenses is made up as follows:
6 months 6 months 12 months
30 June 30 June 31 Dec
2008 2007 2007
Rm Rm Rm
Production costs 1 864 1 701 3 740
Movement in inventories 97 (73) (402)
Finished products 219 148 7
Work-in-progress (122) (221) (409)
Cost of goods sold 1 961 1 628 3 338
Selling and distribution costs 865 590 1 300
Cost of services rendered - 979 267 887
shipping
Sublease rent received (3) (3) (6)
Operating expenditure 3 802 2 482 5 519
Operating profit has been derived after taking into account the following
items:
6 months 6 months 12 months
30 June 30 June 31 Dec
2008 2007 2007
Rm Rm Rm
Staff costs 601 467 1 017
Share-based payment expenses 54 48 122
Depreciation of property, plant
and equipment 134 129 228
Profit on disposal and
scrapping
of property, plant and - (4) (14)
equipment
Finance gains (159) (38) (40)
Operating profit/(loss) 352 (42) (93)
capitalised (jig plant)
- Revenue 574 - -
- Expenses (222) (42) (93)
Share-based payment expenses
The increase in the share-based payment expense for the six months ended 30
June 2008 is due to additional grants that were awarded to employees during
March 2008 on the Long-Term Incentive Plan ("LTIP") and the Share Appreciation
Rights Scheme ("SARS"). In addition to this a further 613 929 share options
were awarded to participants of the Envision scheme during the period.
Operating profit capitalised (jig plant)
The capitalisation of operating profit for the six months ended 30 June 2008
relates to operating costs (production cost of R165 million and distribution
costs of R57 million) incurred on 0,9Mt of ore from the jig plant that has
been capitalised to property, plant and equipment as part of the directly
attributable cost of bringing the jig plant to the location and condition
necessary for it to be capable of operating in the manner intended by
management. The related revenue of R574 million from the sale of ore from the
jig plant earned during this development stage was also capitalised.
On 1 June 2008 the capitalisation of the revenue and expenses was ceased as
substantially all the activities for bringing the jig plant in the location
and condition necessary for it to be capable of operating in the manner
intended by management had been completed.
Property, plant and equipment
Capital expenditure on property, plant and equipment was R806 million for the
six months ended 30 June 2008. This includes the R352 million capitalised
operating profit as discussed above.
Related party transactions
During the six months Kumba, in the ordinary course of business, entered into
various sale and purchase transactions with associates and joint ventures.
These transactions were subject to terms that are no less favourable than
those offered by third parties.
Included in short-term interest-bearing borrowings at 30 June 2008 is a
facility from Anglo South Africa (Pty) Limited of R750 million. Included in
cash and cash equivalents at 30 June 2008 is a short-term deposit facility
placed with Anglo American SA Finance Limited of R1 490 million.
Changes in contingent liabilities since 31 December 2007
There have been no significant changes in the contingent liabilities disclosed
at 31 December 2007 that arise from the guarantees provided for environmental
rehabilitation and decommissioning obligations of the Kumba Rehabilitation
Trust Fund.
Legal proceedings
Lithos Corporation (Pty) Limited ("Lithos")
Kumba continues to defend the merits of the claim and is of the view, and has
been so advised, that the basis of the claim and the quantification thereof is
fundamentally flawed. A trial date is awaited. No liability has been raised
for this matter.
Miferso - Faleme
Kumba has initiated arbitration proceedings against La Societe Des Mines De
Fer Du Senegal Oriental and the Republic of Senegal under the Rules of
Arbitration of the International Chamber of Commerce. This process is
confidential in nature.
Sishen Supply Agreement
Kumba and ArcelorMittal have agreed to an arbitration process to resolve key
differences of interpretation of the Sishen Supply Agreement. Arbitration
proceedings were initiated in 2007 by Kumba. These proceedings are
confidential in nature.
During 2007 ArcelorMittal paid an amount of R60 million in respect of the
export parity pricing element for 0,2Mt acquired during the period, the price
of which it still disputes. This matter may potentially be subject to further
arbitration.
Post-balance sheet date events
The directors are not aware of any matter or circumstance arising since the
end of the period and up to the date of this report, not otherwise dealt with
in this report.
Corporate governance
The group subscribes to the Code of Good Corporate Practices and Conduct as
contained in the King II Report on corporate governance and the board has
satisfied itself that Kumba has complied throughout the period under review in
all material aspects with the code.
Independent review opinion
The auditors, Deloitte & Touche have issued their unmodified review opinion on
the condensed consolidated financial report for the six months ended 30 June
2008. A copy of their unmodified review opinion is available for inspection at
the company`s registered office.
On behalf of the board
PL Zim CI Griffith 23 July 2008
Chairman Chief Executive Officer Pretoria
Notice of interim cash dividend
At its board meeting on 23 July 2008 the directors declared an interim cash
dividend of 800 cents per share on the ordinary shares from profits accrued
during the year ending 31 December 2008. The salient dates are as follows:
Last day for trading to qualify and participate in the interim dividend (and
change of address or dividend
instructions) Friday, 15 August 2008
Trading ex dividend commences Monday, 18 August 2008
Record date Friday, 22 August 2008
Dividend payment date Monday, 25 August 2008
Share certificates may not be dematerialised or rematerialised between Monday,
18 August 2008 and Friday, 22 August 2008, both days inclusive.
By order of the board
VF Malie 23 July 2008
Company secretary Pretoria
Registered office: Lakefield Office Park, Corner West and Lenchen Roads,
Centurion, Pretoria, 0046. Republic of South Africa.
Tel: +27 12 683 7000 Fax: +27 12 683 7009
With effect from 24 July 2008 the registered address of Kumba will be as
follows:
Centurion Gate, Building 2B, 124 Akkerboom Road, Centurion, 0157. Republic of
South Africa
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70
Marshall Street. Republic of South Africa. PO Box 61051, Marshalltown, 2107
Directors: Non-executive - PL Zim (Chairman), PM Baum, GS Gouws, PB Matlare,
DD Mokgatle, AJ Morgan, N Moyo
Executive - CI Griffith (Chief Executive Officer), VP Uren (Chief Financial
Officer)
Company secretary: VF Malie
Date: 24/07/2008 08:00:02 Supplied by www.sharenet.co.za
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