Wrap Text
MTX - Metorex Limited - Consolidated unaudited interim results for the six
months ended 30 June 2011
Metorex Limited
(Incorporated in the Republic of South Africa)
(Registration number: 1934/005478/06)
Share code: MTX
ISIN: ZAE000022745
Issuer code: MEMTX
("Metorex" or "the Company" or "the Group")
Consolidated unaudited interim results for the six months ended 30 June 2011
POSITIONED FOR GROWTH
Highlights
for the six months ended 30 June 2011
- Copper production increased by 5% to 26 562 tons
- Cobalt production increased by 18% to 1 890 tons
- Mining profit increased by 148% to US$131 million (ZAR903 million)
- Net debt reduced by 53% to US$29 million (ZAR196 million)
- Adjusted HEPS increased by 155% to 4,5 US cents (31 ZAR cents)
- Sable disposal in progress for a consideration of R190 million
Commentary
Terence Goodlace, Chief Executive Officer said: "Metorex has continued to
improve operational performance and deliver positive cash flows.
Comprehensive due diligence work has provided a Kinsenda copper mine
feasibility study and preliminary works and the ordering of long lead time
items has commenced. Copper prices remain resilient and the Jinchuan offer
remains on track with shareholders having now voted to accept the offer of
R8,90 per share".
Salient features
Financial performance 6 months 6 months
June 2011 June 2010
Gross revenue (US$`000) 259 903 169 601
Cash mining profit (US$`000) 131 201 52 927
Cash mining profit margin (%) 50 31
EPS (US cents) 2,81 1,46
EPS (ZAR cents) 19,3 11,0
HEPS (US cents) 3,81 1,49
HEPS (ZAR cents) 26,3 11,2
Adjusted HEPS (US cents) 4,47 1,75
Adjusted HEPS (ZAR cents) 30,8 13,2
Market capitalisation (R`000) 7 933 678 3 307 468
Shares in issue (`000) 1 004 263 1 002 263
Weighted average number of (`000) 1 003 048 860 091
shares
Share price (ZAR cents) 790 330
ZAR/US$ rate - Average (ZAR/US$) 6,88 7,53
ZAR/US$ rate - Close (ZAR/US$) 6,76 7,67
Commodity production
6 months 6 months
June 2011 June 2010
Copper (t) 26 562 25 211
Cobalt (t) 1 890 1 601
The figures are stated as gross and do not represent Metorex`s attributable
beneficial interest.
Commodity sales
6 months 6 months
June 2011 June 2010
Copper (t) 26 469 25 492
Cobalt (t) 2 127 1 741
The figures are stated as gross and do not represent Metorex`s attributable
beneficial interest.
Average prices achieved, net of hedges
6 months 6 months
June 2011 June 2010
Copper (US$/t) 8 178 5 275
Cobalt (70% of LMB) (US$/t) 26 156 28 952
Safety, health, environment and communities ("SHEC")
6 months 6 months
June 2011 June 2010
Non lost time injuries No 29 104
Lost time injuries ("LTI") No 5 11
Lost time injury frequency Rate 1,2 2,9
rate*
*per million man hours worked
It was pleasing to note that the Group has not had a fatality in over 36
months and the number of injuries reduced over the last six months when
compared to the corresponding period last year. The lost time injury
frequency rate has improved from 2,9 to 1,2 per million man hours worked.
Metorex has commenced with the process of implementing the Voluntary
Principles on Security and Human Rights, and the initial risk assessment at
Ruashi has been completed. The Group had one level three environmental
incident which was recorded at Ruashi and which is being rectified.
Financial overview - six months ended June 2011 ("current period") compared
with the six months ended June 2010 ("previous period")
Shareholders are referred to the Company announcement dated 4 June 2010
wherein Metorex announced its change in year-end from June to December. This
release constitutes an interim unaudited report for the six months ended 30
June 2011.
Shareholders are further referred to the Company announcement dated 1 March
2011 wherein Metorex announced its change in reporting currency from South
African Rand ("ZAR") to United States Dollars ("US$"). This release is
presented in United States Dollars, with the comparative figures accordingly
re-presented.
Group operations
Copper production increased by 5 percent to 26 562 tons and copper sales
increased by 4 percent to 26 469 tons. Copper production at Ruashi was
negatively impacted by grid power interruptions experienced during the months
of May and June 2011.
Cobalt production increased by 18 percent from the previous period to 1 890
tons. The increase followed a 26 percent improvement in cobalt recoveries
from 54,7 percent to 68,7 percent.
Group revenue increased by 53 percent from US$170 million to US$260 million.
This was on the back of higher copper prices, the improved hedge book
positions and higher cobalt volumes.
Production and realisation costs, including stock movements, increased by 10
percent to US$128,7 million (June 2010: US$116,7 million). Cash costs per ton
of copper sold decreased by seven percent to US$2 416 at Ruashi, which was as
a result of the benefits from higher cobalt credits. The Chibuluma cash costs
increased by 15% to US$3 270 per ton due to higher engineering maintenance
costs, diesel and power cost escalations as well as a move to introducing
industry best safety practices.
Mining profit amounted to US$131 million for the six months ended June 2011,
an increase of 148 percent compared to the previous period, reflecting a
margin of 50 percent.
Assets held for sale ("AHFS") relates to Sable Zinc Kabwe Limited ("Sable")
which has been classified as an AHFS in the current period. The comparative
statement of comprehensive income has been re-presented to disclose Sable as
an AHFS.
Adjusted headline earnings per share increased by 155 percent to US$4,5 cents
and excludes the non-recurring non-cash put option premium amortisation
charge at Ruashi of US$0,6 cents per share. This put option premium has now
been fully amortised.
The Group`s financial position further improved over the last six months with
net assets increasing by 15 percent to US$600 million and net debt reducing
by 53 percent to US$29 million. Cash on hand increased to US$75 million at 30
June 2011.
Capital expenditure
6 months 6 months
June 2011 June 2010
Ruashi (US$`m) 28,2 20,5
Chibuluma (US$`m) 9,1 11,7
Copper Resources Corporation (US$`m) 10,1 8,7
Other (US$`m) 0,2 -
Total (US$`m) 47,6 40,9
The Ruashi capital expenditure mainly related to increased over-burden
stripping of Pit 3 amounting to US$17 million and US$3 million towards the
construction of the acid plant.
The Chibuluma capital expenditure included ongoing ramp decline development,
the purchase of new production machines and exploration spend.
The capital expenditure at Copper Resources Corporation comprised the ongoing
monthly holding costs of US$1 million and the advancement of the feasibility
study.
Contracted capital commitments amount to US$4,2 million (June 2010: US$11
million), while uncontracted approved capital commitments amount to US$54,9
million (June 2010: US$ nil). Operating lease commitments, which fall due
within the next year amount to US$0,4 million (June 2010: US$0,8 million),
while commitments of US$1,9 million (June 2010: US$1,2 million) fall due
during the next four years.
Group debt position
Nature of debt June 2011 Dec 2010
Ruashi 1 (US$`m) Project Finance 70,0 86,1
Ruashi 2 (US$`m) Pre-offtake Finance 10,1 13,6
Chibuluma 1 (US$`m) Term Loan 20,0 24,4
Chibuluma 2 (US$`m) Invoice discounting 5,0 5,1
facility
Total (US$`m) 105,1 129,2
Commodity hedgebook
'Copper Maturity Period Volume Prices (US$/t) Comment
(months) (tons)
Ruashi 12 July 2011 - 12 000 6 600 - 7 600 Zero cost
June 2012 collar
Ruashi 6 July 2012 - 6 000 7 500 -10 565 Zero cost
December collar
2012
Chibuluma 6 July 2011 - 3 000 7 000 - 8 015 Zero cost
December collar
2011
Chibuluma 12 January 2012 6 000 7 000 - 11 900 Zero cost
- December collar
2012
Zambian tax
The Group`s tax charge includes Chibuluma taxes, accrued at 42 percent (June
2010: 30 percent) in accordance with the new mining tax regime implemented by
the Government of the Republic of Zambia ("GRZ"). Following extended
discussions with the GRZ and other industry players in Zambia, the Group
resolved to impair the GRZ taxation receivable amounting to US$9,8 million.
Arrear taxes amounting to US$6 million were paid in June 2011. This
receivable related to historic taxes in excess of those permitted under the
Chibuluma Development Agreement.
Growth projects update
The first half of 2011 was very productive for the Metorex Growth Projects
team and good progress is being made towards completion of feasibility
studies for each of the projects.
Kinsenda Project
The US$2,1 million phase II drilling programme recommended by Snowden Mining
Consultants ("Snowden") to confirm historical drilling located beyond the
western section of the mine has been completed and an updated resource model
is expected in September 2011. The Board has also approved a further US$1,4
million phase III drilling programme.
During the period January 2011 to June 2011, Metorex, along with its
appointed consultants, completed the Kinsenda Bankable Feasibility Study
("BFS") for a further de-risking and peer review process. Based on the latest
geological model and taking the prevailing geotechnical considerations into
account, Snowden have designed mine access, infrastructure and mining methods
capable of delivering 40 000 tons of ore per month to the concentrator plant.
MDM Engineering have completed the design of the process plant which
comprises conventional crushing and milling followed by flotation of sulphide
and oxide copper minerals to produce both sulphide and oxide copper
concentrates. Recovery of the sulphide copper minerals is estimated at 93
percent while 70 percent of the oxide copper minerals are expected to be
recovered into concentrate. Post the inclusion of all modifying factors the
total forecast copper production from Kinsenda is now estimated at
approximately 17 000 tons of copper contained per annum. The key risk to the
project remains one of flooding and pump tests were conducted to test the
response of the aquifer and thereby model future groundwater inflows into the
mine. The re-modelling exercise increased the estimated inflows from 45 000m3
per day to 70 000m3 per day and as a result of this increase, additional
studies have been recommended to review the mine design and increase the
capacity of water pumping facilities to de-risk the threat of flooding of the
mine.
The Board of Directors of Metorex ("the Board") has approved that the
Kinsenda Project proceed subject to the completion of the de-risking and
optimisation studies underway. The updated ore reserve is due for completion
in October 2011 and to be presented to the Board in November 2011. Expected
project capital costs are now estimated as follows:
US$`million
Direct project spend (concentrator, infrastructure, 208
mining)
Owners costs, holdings costs and community development 47
programmes
Detailed engineering and escalation assumptions 18
Total 273
The ordering of long lead time items worth US$30 million for the project have
commenced and preliminary project work has commenced on site.
The notice to shareholders in terms of section 45 (5)(b) of the Companies
Act, No 71 of 2008, as amended ("Companies Act") whereby the Board authorised
the financial assistance provided for this project has been posted to all
shareholders per registered mail on 5 September 2011.
Ruashi Sulphides Project
The 4 450m (21 holes) infill drilling programme on the Ruashi Pit 1 orebody
which commenced in December 2010 was completed. This programme comprised five
geotechnical holes, one metallurgical test hole and 15 infill holes to
provide 50m drillhole spacings and was focused on an area immediately
accessible from the Ruashi Pit 1 floor. The analytical results have been
received and the geological model updated. The SAMREC compliant sulphide
resource has increased from 15,8 million tons at 2,9 percent copper to 27,6
million tons at 1,6 percent copper. Significantly, the confidence in the Pit
1 resource has increased considerably as a result of the Indicated Resource
in this particular area increasing from 2,4 million tons at 2,2 percent
copper to 8,0 million tons at 1,4 percent copper. Sound Mining Solutions
(Pty) Limited has been appointed to design the mine and Metorex is at an
advanced stage of appointing the process plant consultants. The US$2,3
million feasibility study is on track for completion by the end of 2011.
Exploration in Zambia
A dedicated exploration team was established at Chibuluma Mine during the
period under review.
Expansion drilling of the Chifupu prospect at depth commenced and by the end
of June, four holes had been completed with two in progress totalling 1 502m
out of a planned meterage of 6 020m (25 percent completed). A total of eight
holes with 12 deflections will be completed during the programme. Results are
awaited for two mineralised intersections while two drillholes were barren,
and have closed off the deposit to the south.
Detailed geophysical interpretation of the Spectrem Airborne electromagnetic,
magnetic and radiometric regional geophysical survey data was completed by
Earthmaps Consulting during this period. Fourteen Lower Roan footwall and two
upper Katangan stratiform targets have been identified on, or close to, the
Chibuluma West and Chibuluma South Mining Licences. Follow up on these
targets will commence in the second half of 2011 with a general increase
expected in exploration drilling activity.
A 900m deep hole is planned to be drilled down dip of the Chibuluma South
mine to test for favourable Lower Roan geological stratigraphy and potential
mineralisation.
Lubembe Project
The US$0,9 million infill drilling programme to test continuity of high grade
mineralisation at Lubembe was completed. The geological model has been
updated and the SAMREC compliant mineral resource estimate for the Lubembe
deposit has now increased from 75 million tons at 2,0 percent copper to 93,4
million tons at 1,9 percent copper. Metallurgical test work is largely
complete, environmental baseline studies have been conducted and conceptual
mining methods evaluated. The initial US$3,7 million concept and pre-
feasibility study work is progressing.
Musonoi Est (Dilala East) Project
Drilling of the Dilala East project continued during H1 2011, focusing on
extending the sulphide resource down to 600m below surface (from its current
limit of 500m). Analytical results for completed boreholes have been received
and the geological model is in the process of being updated. Metorex is
working with its partner to agree and approve the scope of work for a
definitive feasibility study.
Corporate activity
Metorex has, over the last year, been approached by various parties
interested in acquiring the Company, given its critical mass, managerial
record and strategic platform to operate and develop future mines in the
Central African Copper Belt. Mindful of its duty to act in the best interests
of shareholders, Metorex in late 2010 implemented a highly disciplined and
professional process, under a tight legal and confidentiality regime, to
allow qualified and credible parties the necessary access to the Company to
facilitate a potential offer for consideration by the Board and, ultimately,
its shareholders.
On 8 April 2011 Metorex announced a binding offer from Vale S.A.
("Vale")("Vale offer") to acquire the entire issued and to be issued share
capital of Metorex at a price of R7,35 per share, which offer excluded
Metorex`s shareholding in Sable, which was to be sold or unbundled for the
benefit of Metorex shareholders ("shareholders") as a condition of the Vale
offer ("Vale Firm Intention Announcement").
On 8 June 2011, Metorex announced the disposal of its non-core interest in
Sable to a subsidiary of Glencore International plc ("Glencore") for R190
million ("Glencore offer"), subject to a price adjustment mechanism for
undisclosed liabilities and changes in the net asset value from 31 March 2011
to the final disposal date. This disposal was subject to the fulfilment or
waiver of a number of conditions precedent, including the completion of the
Vale offer. The Board believes the Glencore offer represents an attractive
offer for the assets of Sable and the Board took a decision to de-link the
disposal of Sable from the Vale offer. Subject to the fulfilment of the
remaining conditions precedent to the Glencore offer, Sable will be disposed
of to Glencore.
A circular to shareholders with regard to the Vale Offer was posted to
shareholders on 17 June 2011 ("Vale circular"). The Vale circular provided
details of the Vale offer and provided notice of the general meeting, to
consider and vote on the Vale offer, which was held on Friday, 22 July 2011.
On 17 June 2011, shareholders were advised that the Board had received an
unsolicited, non-binding "expression of interest" from a bona fide party to
acquire the entire issued share capital of Metorex ("Alternate Party"). In
terms of the Takeover Regulations issued in terms of the Companies Act, the
Alternate Party was provided with the same information as was provided to
Vale. Shareholders were advised that there was no certainty that the
Alternate Party would make a firm offer for the Company and were advised to
exercise caution when dealing in the Company`s securities.
The Board then received a firm intention from the Alternate Party, Jinchuan
Group Limited ("Jinchuan") to make an offer for 100 percent of Metorex
("Jinchuan offer"). The Jinchuan offer is an all cash offer of R8,90 per
share for the entire issued and to be issued share capital of Metorex.
Further detailed terms were contained in the announcement published on SENS
on Tuesday, 5 July 2011 and in the press on Wednesday, 6 July 2011. In
exercising its fiduciary duty and acting in good faith, the Board and the
Independent Board then determined that the Jinchuan offer was a superior
proposal to the Vale offer, as defined in the Implementation Agreement
entered into between Metorex and Vale S.A. dated 8 April 2011 ("Vale
Implementation Agreement") and as referred to in the Vale Firm Intention
Announcement published on the same date.
Vale was informed of the Independent Board`s decision and were afforded eight
business days ("Matching Period") in which to match (or better) the Jinchuan
offer ("Amended Vale offer"). The Board received written notice from Vale
that it did not intend to submit an Amended Vale offer and Vale agreed to the
termination of the Implementation Agreement subject to receipt by Vale from
Metorex of the break fee provided for in the Vale implementation agreement,
being an amount of R75 240 000 ("Vale break fee"). The Vale Implementation
Agreement was duly terminated and the Vale break fee was paid on 13 July
2011.
At the general meeting of shareholders held on 22 July 2011, the ordinary and
special resolutions contained in the Vale circular and tabled for voting were
voted down, by the requisite percentage of shareholders present or
represented by proxy.
The Jinchuan offer has now been made by Jinchuan`s indirect South African
subsidiary, Newshelf 1124 (Proprietary) Limited ("Jinchuan SubCo") by way of
a scheme of arrangement proposed by the Board ("scheme") in terms of section
114(1)(c) of the Companies Act, and by way of a separate offer to the holders
of options to acquire Metorex shares.
A circular containing details of the scheme and incorporating a notice of
general meeting ("Jinchuan circular") was posted to shareholders on 2 August
2011 and is available on Metorex`s website at www.metorexgroup.com.
Shareholders were advised that the completion of the scheme is subject to the
fulfilment or waiver of certain conditions precedent set forth in the
Jinchuan circular, and were advised to review the Jinchuan circular for the
terms and conditions of the scheme.
A general meeting of shareholders ("general meeting") was held at 10:00 on
Friday, 2 September 2011 for the purpose of considering and, if deemed fit,
passing with or without modification, the resolutions set out in the notice
of the general meeting included in the Jinchuan circular. At this meeting the
requisite majority of shareholders present and represented by proxy voted in
favour of the ordinary and special resolutions, as tabled for voting.
The Scheme is subject to three broad categories of outstanding consents as
conditions precedent to the Scheme, namely Regulatory Consents, Third Party
Consents and People`s Republic of China ("PRC") Consents as defined in the
Jinchuan Circular. The Scheme is also conditional upon a Material Adverse
Change, as defined in the Jinchuan Circular, not occurring.
The Regulatory Consents primarily concern approval of the Scheme by
competition authorities in Zambia, South Africa and the PRC. The South
African and Zambian filings have been submitted and filing fees paid. Good
progress has been made with the Chinese competition authority process. As
the Scheme`s implementation clearly has limited, if any, impact on
competition related matters, it is not anticipated that the approvals in
respect of the various competition authorities will raise concerns.
Some progress has been made with Third Party Consents and, with regard to the
PRC Consents required, and Jinchuan`s opinion, as set out in paragraph 6.3 of
the Jinchuan Circular, namely that it does not anticipate that the
applications and approvals in respect of the various PRC Consents will raise
concerns and that the transaction will be approved and registered in due
course, has not changed.
Nonetheless, the above update in no way provides assurances that the
conditions precedent upon which the fulfilment of the Scheme is conditional
will be met.
Going concern
The directors are satisfied that the Group is a going concern for the
foreseeable future, and have adopted the going-concern basis in preparing
these financial statements.
Accounting policies
The unaudited condensed interim financial information has been prepared in
accordance with the framework, concepts and measurement and recognition of
International Financial Reporting Standards ("IFRS"), the AC 500 standards as
issued by the Accounting Practices Board and the information as required by
IAS 34: Interim Financial Reporting. The accounting policies, which are in
terms of IFRS, are consistent with those adopted in the 18 months ended 31
December 2010, except for the comparative period statement of comprehensive
income which has been re-presented for Sable as an asset held for sale in
terms of IFRS 5: Non-current Assets Held for Sale and Discontinued
Operations. The change in the presentation currency from ZAR to US$ is
applied retrospectively in accordance with IAS 8: Accounting Policies,
Changes in Accounting Estimates and Errors and therefore requires comparative
information to be re-presented and consequently, a third statement of
financial position is presented.
The accounting standards, amendments to issued accounting and
interpretations, which are relevant to the Group, but not yet effective at 30
June 2011, have not been adopted. The Group is currently evaluating the
impact of these pronouncements.
The unaudited condensed interim financial information for the six-month
period ended 30 June 2011 has not been reviewed or reported on by the Group`s
auditors, Deloitte & Touche. Any reference to future financial performance
included in this announcement, has also not been reviewed or reported on by
the Company`s auditors.
Mineral Reserves and Resources
The Group Mineral Resources and Reserves as at 31 December 2010 were
published in the Mineral Resources and Ore Reserves supplement in March 2011.
No further changes have been made to this document.
Ongoing drilling and related geological model updates at Ruashi mine, Musonoi
and Kinsenda projects are expected to result in incremental changes to the
Mineral Resources in H2 2011. At Ruashi, ongoing high resolution grade
control drilling and a reclassification of a portion of the Calcaire Minerais
Noir ("CMN") zone from the Inferred to Indicated category at Ruashi is also
expected to have a positive effect on the Resource statement.
Detailed life of mine ("LOM") planning has commenced on all operations as the
first phase of the business planning cycle for 2012. Amended mining reserves
based on the revised LOM designs will be presented for approval to the
Metorex Board in November 2011.
Mineral Resources and Reserves in this report have been compiled, approved
and reviewed by Mr TP Williams, PrSciNat (SA Council of Natural and
Scientific Professionals Registration No 400387/04), Fellow of the Southern
African Institute of Mining and Metallurgy, BSc (Hons). Mr Williams is Group
Mineral Resource Manager and is a full-time employee of the Company. He is a
mining geologist with 20 years` experience in exploration, resource
development, estimation and mining geology in gold and base metals through
west, central and east Africa. Mr Williams is based at the Company`s head
office.
Outlook
The Group`s financial position has continued to improve and the focus remains
on operating and project development strategies. Copper and cobalt production
is expected to continue at current levels. Cost pressures remain at all
operating and project development sites and cost reduction measures remain
paramount. The processes and regulatory permissions required to advance the
Jinchuan offer to shareholders are expected to be completed by December 2011
whereupon Metorex will be de-listed from the exchange operated by the JSE
Limited.
Rob Still Terence Goodlace
Chairman Chief Executive Officer
5 September 2011
The preparation of the Group`s condensed consolidated unaudited interim
results was supervised by Maritz Smith, Chief Financial Officer, BComm, BComm
(Hons), CA(SA).
Condensed consolidated statement of comprehensive income
6 months 6 months
June 2011 June 2010*
(US$`000) (US$`000)
Mineral sales
Copper 204 411 120 043
Cobalt 55 492 49 558
Gross revenue 259 903 169 601
Realisation costs 31 126 26 507
On-mine revenue 228 777 143 094
Cost of production 91 738 82 127
Stock movement 5 838 8 040
Cash mining profit 131 201 52 927
Ruashi deferred put premium - non cash (11 888) -
Royalties (11 190) (8 101)
Other (expenses) income, net (3 660) 1 031
EBITDA 104 463 45 857
Loss on the disposal of Cons Murch (3 332) -
Finance income 583 1 232
Finance costs (3 605) (4 468)
Income before depreciation 98 109 42 621
Depreciation 21 550 17 758
Income before assets held for sale ("AHFS") 76 559 24 863
AHFS and discontinued operation 1 310 (2 198)
Income before taxation 77 869 22 665
Impairment - Zambian taxation 9 898 -
Taxation expense 30 263 5 820
Income after taxation 37 708 16 845
Income attributable to non-controlling 9 555 4 270
interests
Retained income for the period 28 153 12 575
Total other comprehensive income 42 533 37 337
Attributable to:
Equity holders of the parent 41 357 38 257
Non-controlling interests 1 176 (920)
42 533 37 337
From continuing and discontinuing operations
Earnings per share (US cents) 2,81 1,46
Diluted earnings per share (US cents) 2,81 1,45
Headline earnings per share (US cents) ("HEPS") 3,81 1,49
Diluted headline earnings per share (US cents) 3,81 1,48
Adjusted headline earnings per share (US cents) 4,47 1,75
("Adjusted HEPS")
Weighted average shares in issue (000`s) 1 003 048 860 091
Diluted number of shares in issue (000`s) 1 003 048 868 014
Shares in issue (000`s) 1 004 263 1 002 263
HEPS reconciliation
Income attributable to ordinary shareholders 28 153 12 575
Zambian tax impairment, net of minorities 8 413 -
Net loss on the sale of fixed assets and Cons 1 258 251
Murch, net of tax
Discontinued operations 441 17
Headline earnings (US$`000`s) 38 265 12 843
Headline earnings per share (US cents) 3,81 1,49
Diluted headline earnings per share (US cents) 3,81 1,48
Adjusted HEPS reconciliation
Headline earnings (US$`000`s) 38 265 12 843
Ruashi deferred put premium, net of tax and 6 241 -
minorities
AHFS, net of tax 323 2 198
Adjusted headline earnings (US$`000`s) 44 829 15 041
Adjusted headline earnings per share (US cents) 4,47 1,75
*Re-presented for assets held for sale and a change to US$ reporting using a
rate of ZAR7,53 to the US$.
Condensed consolidated statement of financial position
6 months 18 months 12 months
ended ended ended
June 2011 December 2010* June 2009*
(US$`000) (US$`000) (US$`000)
ASSETS
Non-current assets
Property, plant, equipment 691 079 677 610 732 696
and mineral rights
Goodwill 1 745 1 745 1 745
Investments and 12 090 12 352 12 197
rehabilitation trust fund
Derivative instrument - - 14 386
704 914 691 707 761 024
Current assets
Inventories 47 912 50 145 40 011
Trade and other receivables 66 571 81 442 67 828
Taxation prepaid 1 292 2 290 939
Bank balances and cash 75 219 66 193 11 145
190 994 200 070 119 923
Assets held for sale, net 16 559 - 107 898
Total assets 912 467 891 777 998 845
EQUITY AND LIABILITIES
Equity attributable to equity 574 713 504 967 363 582
holders of the parent
Non-controlling interests 24 874 15 944 69 279
Total equity 599 587 520 911 432 861
Non-current liabilities
Long-term borrowings - 54 519 76 480 214 495
interest bearing
Long-term provisions 20 951 22 105 27 473
Deferred tax liabilities 97 802 86 924 71 110
Derivative instruments 876 9 135 -
174 148 194 644 313 078
Current liabilities
Trade and other payables 40 313 62 365 84 526
Short-term borrowings - 50 580 52 703 105 403
interest bearing
Short-term provisions 2 593 3 929 5 313
Derivative instruments 35 261 48 072 34 887
Taxation 9 985 4 291 4 546
Bank overdraft - - 8 231
138 732 171 360 242 906
Liabilities held for sale, - 4 862 -
net
Total equity and liabilities 912 467 891 777 988 845
Net assets value per share 57 50 49
(US cents)
Net tangible asset value per 57 50 49
share (US cents)
*Re-presented for US$ reporting using a rate of ZAR6,5995 to the US$.
Condensed consolidated cash flow statement
6 months 6 months
June 2011 June 2010
(US$`000) (US$`000)
Cash generated by operations, pre-working 118 742 44 604
capital
Working capital (5 842) (5 383)
Cash generated by operations 112 900 39 221
Dividends paid to non-controlling interests (1 800) -
Taxation paid (13 459) (10 344)
Arrear Zambian taxes paid (6 116) -
Finance costs, net (3 022) (3 236)
Cash inflows from operating activities 88 503 25 641
Cash outflows from investing activities (53 911) (41 099)
Additions to property, plant, equipment, (47 574) (40 928)
mineral rights and investments
Movement in AHFS/discontinued operations 2 140 (170)
Disposal of Consolidated Murchison (8 477) -
Cash (outflows)/inflows from financing (23 530) 57 391
activities
Shares issued 554 114 549
Borrowings repaid (24 084) (57 158)
Net increase in cash and cash equivalents 11 062 41 933
Cash at beginning of period 66 193 27 241
Sable Zinc - AHFS (922) -
Effect of foreign exchange rate changes (1 114) (1 209)
Cash at end of period 75 219 67 965
Condensed consolidated statement of changes in equity
6 months 6 months
June 2011 June 2010
(US$`000) (US$`000)
Shareholders` equity at start of period 520 911 327 253
Ordinary shares issued 554 114 549
Other comprehensive income 42 533 37 337
Profit for the period 28 153 12 575
Equity reserve - (602)
Share option equity 2 262 1 274
Non-controlling interests 8 930 17 739
Equity attributable to AHFS (3 756) 602
Total equity 599 587 510 727
Annexure 1: Operational review
for the six months ended 30 June 2011 ("current period") compared with the
six months ended June 2010 ("previous period")
Ruashi
6 months 6 months
June 2011 June 2010
Tons mined (t) 524 425 436 588
Tons milled (t) 633 753 600 437
Headgrade - Copper (%) 3,18 2,98
- Cobalt (%) 0,43 0,48
Recovery - Copper (%) 82,1 80,7
- Cobalt (%) 68,7 54,7
Copper produced (t) 16 548 14 323
Copper sold - total (t) 16 444 14 702
- into hedgebook (t) 8 100 11 700
- at spot price (t) 8 344 3 002
- hedgebook price achieved (US$/t) 5 972 3 900
- average spot price achieved (US$/t) 9 306 6 163
Cobalt produced (t) 1 886 1 572
Cobalt sold (t) 2 120 1 709
On-mine costs per ton milled, net of (US$/t) 112 106
ore stock movement
Copper realisation costs per ton of (US$/t) 657 657
copper sold
Cobalt realisation costs per ton of (US$/t) 5 504 4 996
cobalt sold
Total cash cost/ton of copper sold, (US$/t) 2 416 2 598
net of cobalt credits
Safety
There was one lost time injury during the period under review wherein an
employee slipped and fell on a highwall at the open pits.
Environment
The company had one level 3 environmental incident during the six months
wherein ground water activity levels increased in monitoring boreholes near
the tailings dam. Pumps have been installed in these boreholes and the water
is being returned to the tailings dam where it is neutralised.
Production and financial
Tons of ore mined increased by 20 percent for the six-month period to June
2011 when compared to the previous six-month period. The main reason for this
is additional articulated dump truck capacity, availability and performance.
Milling volumes increased by six percent for the reporting period to June
2011 when compared to the previous six-month period. The current period was
affected by both power supply issues and to a lesser extent transformer
issues. Spare transformer units are now on site.
The copper and cobalt feed grades were seven percent above and 10 percent
below those of the comparable period respectively. The reduction in the
cobalt feed grade is in line with the geological model and was supplemented
by feeding a proportion of a high cobalt grade stockpile into the plant.
Copper recoveries improved marginally to 82,1 percent for the six-month
period. Cobalt recoveries showed a significant improvement of 26 percent.
This is attributed to ongoing operating efficiency improvements and greater
residence time.
Copper production for the six-month period was 16,548 tons which represents a
16 percent improvement when compared to the previous six'month period. This
improvement is due to a combination of higher feed tons and feed grade as
mentioned above. Cobalt production has improved by 20 percent to 1,886 tons.
The improvement is attributed to feed tons and recoveries as mentioned above.
On-mine costs per ton milled increased by 6 percent to US$112 per ton. This
is mainly due to an increase in copper and cobalt processing costs due to
increased reagent prices as well as higher diesel prices affecting mining and
transport costs.
Copper realisation costs were in line with the comparable period, however
cobalt realisation costs per ton of cobalt sold increased by 10 percent. This
increase in the cobalt realisation cost is attributed to both moisture levels
being higher than in the previous period and the effects of the incremental
export costs per ton as a result of, among others, the US$60 per ton export
charge which was introduced mid-way through the comparable period.
Total cash costs cost per ton of copper sold, net of cobalt credits improved
by 7,0 percent for the six-month period to June 2011. The cost reduction is
attributed mainly to improved cobalt production and the consequential
improvement in cobalt sales tonnages.
Capital
Capital expenditure for the six months totalled US$28 million which
represents an increase of 41 percent when compared to the previous six'month
period. The capital spend consists mainly of planned Pit 3 strip volumes that
increased by approximately four million tons, the sulphide drilling programme
and the construction of the acid plant.
Acid plant
Acid Plant construction continued during the period with hot commissioning
now planned for September 2011.
Spin/flash drier
A feasibility study for the construction of a spin/flash drier as an
alternative solution for the drying of the cobalt hydroxide has been
approved. The project cost is estimated at US$14,4 million and is expected to
take 12 months to construct and has a payback of approximately 18 months.
This drier will reduce cobalt hydroxide moisture levels from 65 percent to 20
percent, which will reduce realisation costs.
Chibuluma
6 months 6 months
June 2011 June 2010
Tons milled (t) 279 748 269 432
Headgrade - Copper (%) 3,44 3,60
Overall recovery - Copper (%) 91 90
Copper produced (t) 8 783 8 721
Copper sold - total (t) 8 761 8 702
- into hedgebook (t) 3 000 4 200
- at spot price (t) 5 761 4 502
- hedgebook price achieved (US$/t) 8 000 5 308
- average spot price achieved (US$/t) 9 400 7 488
On-mine costs per ton milled, net of (US$/t) 71 59
ore stock movement
Copper realisation costs per ton of (US$/t) 988 987
copper sold
Total cash cost per ton of copper sold (US$/t) 3 270 2 840
Safety
The company had four lost time injuries during the first three months of the
six-month period. Three of the LTIs were related to fall of ground incidents
and one was related to a moving mobile machine incident. During this period
fall of ground procedures were revised incorporating more practical ways of
barring. A full review of moving mobile equipment operating procedures has
been undertaken encouraging participation at all levels.
Environment
The mine had two level two environmental incidents during the six-month
period, one relating to a utility vehicle diesel leak and one relating to
grease contamination in an exploration diamond drill sump.
Production and financial
Ore milled volumes were four percent higher than the comparative period ended
June 2010 with grades decreasing from 3,60 percent to 3,44 percent. The
increase in milling volumes was mainly due to the processing of additional
low grade ore stockpiles, resulting in an overall lower grade achieved for
the current period.
Copper feed grades decreased by four percent from the previous period and
were in line with the mine plan. Overall plant recoveries improved by one
percent to 91 percent in the current period versus 90 percent in the previous
period. Management has focussed on improving recoveries and numerous
interventions, primarily related to ensuring constant flow through the float
plant and improving the crushing circuit.
Both copper sold and produced increased by one percent over the same period
ending 30 June 2010, mainly due to an increase throughput of ore through the
plant and higher overall recoveries.
On-mine costs per ton of ore milled increased by 20 percent from US$59 to
US$71 per ton. This increase was mainly due to the mine`s move to industry
best practices in terms of systems and processes as well as significant
increases in fuel and electricity, driven by higher oil prices and
electricity levies. The mine embarked on a cost drive exercise during the
current period, using activity based costing methods and tools to assist in
determining areas of focus, specifically engineering.
Total cash costs per ton of copper sold increased by 15 percent to US$3 270
per ton when compared to the previous period.
Capital
Capital expenditure remained relatively constant and amounted to US$9,1
million as a result of the purchase of new mining fleet vehicles (US$1,3
million) needed to maintain production levels as well as increased capital
spend on engineering items required to upgrade the quality of capital
equipment at Chibuluma. In addition, Chibuluma continued with an exploration
programme aimed at increasing the life of the mine (US$1,4 million). Mining
development remained a large proportion of the capital spending (US$3,3
million).
Chibuluma is well set to maintain mining and milling volumes in the coming
period. Although cost pressures will be experienced, the focus will be on
cost management during the next six months. Capital expenditure levels are
expected to remain similar in the next six months, with additional
expenditure incurred on exploration activities targeted at extending the life
of the mine.
Sable
6 months 6 months
June 2011 June 2010
Copper produced (t) 1 231 2 167
Copper sold (t) 1 264 2 008
Cobalt produced (t) 4 29
Cobalt sold (t) 7 32
Acquisition cost of contained copper (%) 69 71
feed (% of copper LMB price)
Overall copper process recovery (%) 95 94
Net margin on copper production after (%) 9 5
acquisition and process costs
Safety and environmental
The company had no major safety or environmental incidents during the period
under review.
Production and financial
Sable`s copper production for the quarter reduced by 43 percent to 1,231 tons
due to reduced tons milled and lower feed grades.
The volume of ore purchased and milled reduced by 25 percent when compared to
the six-month period to June 2010 due to a lack of third party ore. Zambian
ore has been sourced and purchased, however this resulted in both lower
volumes and lower feed grades. Copper recoveries remained consistently good
at approximately 94,5 percent.
Annexure 2: Statement of comprehensive income
For the six months ended 30 June 2011 and 30 June 2010
Condensed consolidated statement of comprehensive income
Ruashi Chibuluma Corporate Group
US$`000 US$`000 US$`000 US$`000
Six months to June 2011
Mineral sales
Copper 126 022 78 389 - 204 411
Cobalt 55 492 - - 55 492
Gross revenue 181 514 78 389 - 259 903
Realisation costs 22 466 8 660 - 31 126
On-mine revenue 159 048 69 729 - 228 777
Cost of production 67 168 19 556 5 014 91 738
Stock movement 5 586 252 - 5 838
Mining profit 86 294 49 921 (5 014) 131 201
Ruashi deferred put premium (11 888) - - (11 888)
Royalties (8 702) (2 488) - (11 190)
Other (expenses) income, net (2 541) (1 036) (83) (3 660)
EBITDA 63 163 46 397 (5 097) 104 463
Disposal of Cons Murch - - (3 332) (3 332)
Finance (costs) income, net (3 009) (470) 457 (3 022)
Income (loss) before 60 154 45 927 (7 972) 98 109
depreciation
Depreciation 14 474 6 988 88 21 550
Income (loss) before AHFS 45 680 38 939 (8 060) 76 559
AHFS and discontinued - - 1 310 1 310
operations
Income (loss) before taxation 45 680 38 939 (6 750) 77 869
Impairment - Zambian taxation - 9 898 - 9 898
Taxation expenses (credit) 14 751 17 037 (1 525) 30 263
Income (loss) after taxation 30 929 12 004 (5 225) 37 708
Income attributable to non- 7 754 1 801 - 9 555
controlling interests
Retained income (accumulated 23 175 10 203 (5 225) 28 153
loss) for the period
Condensed consolidated statement of comprehensive income
Ruashi Chibuluma Corporate Group
US$`000 US$`000 US$`000 US$`000
Six months to June 2010
Mineral sales
Copper 64 034 56 009 - 120 043
Cobalt 49 558 - - 49 558
Gross revenue 113 592 56 009 - 169 601
Realisation costs 17 911 8 596 - 26 507
On-mine revenue 95 681 47 413 - 143 094
Cost of production 61 747 15 677 4 703 82 127
Stock movement 7 599 441 - 8 040
Mining profit 26 335 31 295 (4 703) 52 927
Royalties (6 217) (1 884) - (8 101)
Other income (expenses), net 4 325 (1 406) (1 888) 1 031
EBITDA 24 443 28 005 (6 592) 45 857
Finance (costs) income, net (2 588) (1 103) 455 (3 236)
Income (loss) before 21 855 26 902 (6 136) 42 621
depreciation
Depreciation 13 248 4 493 17 17 758
Income (loss) before AHFS 8 607 22 409 (6 153) 24 863
AHFS and discontinued - - (2 198) (2 198)
operations
Income (loss) before taxation 8 607 22 409 (8 351) 22 665
Taxation expenses (credit) 2 893 5 143 (2 216) 5 820
Income (loss) after taxation 5 714 17 266 (6 135) 16 845
Income attributable to non- 1 273 2 997 - 4 270
controlling interests
Retained income (accumulated 4 441 14 269 (6 135) 12 575
loss) for the period
Contact details for Metorex Limited and Corporate Advisers
Metorex Limited
PO Box 2814, Saxonwold, 2132, South Africa
Telephone: (+27 11) 215-4000
Facsimile: (+27 11) 215-4001
Website: www.metorexgroup.com
E-mail: ir@metorexgroup.com
Investor relations
College Hill
PO Box 413187, Craighall, 2024, South Africa
Telephone: (+27 11) 447-3030
Registrars: South African and United Kingdom
Link Market Services South Africa (Pty) Limited
PO Box 4844, Johannesburg, 2000, South Africa
Telephone: (+27 11) 834-2266
The Capita Group PLC
The Registry, 34 Beckenham Road, Beckenham, Kent, BR34TU, England
Telephone: (+44 208) 639-2157
Company Secretaries
Statucor (Pty) Limited
PO Box 1574, Houghton, 2041, South Africa
Telephone: (+27 11) 728-7240
Sponsor
One Capital
PO Box 784573, Sandton, 2146, South Africa
Telephone: (+27 11) 550-5000
Auditors
Deloitte & Touche
Private Bag X6, Gallo Manor, 2052, South Africa
Telephone: (+27 11) 806-5000
ADR Programme - North America and Canada
The Bank of New York
101 Barclay Street, New York, NY 10286, USA
Telephone: (+1 212) 815-3326
Directors
RG Still* (Chairman), TP Goodlace (CEO), M Smith (CFO), A Barrenechea
(Spanish)*, HH Hickey*, NN Kgositsile*, TV Mabuza*,
P Molapo (Basotho)*, LJ Paton*, *non-executive
www.metorexgroup.com
Date: 05/09/2011 07:06:22 Supplied by www.sharenet.co.za
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