Wrap Text
Unaudited interim report for the six months ended 30 June 2012
Palabora Mining Company Limited
(Incorporated in the Republic of South Africa)
Registration number 1956/002134/06
JSE code: PAM ISIN: ZAE000005245
("PMC" or "Palabora" or "the Company")
UNAUDITED INTERIM REPORT
for the six months ended 30 June 2012
The preparation of the condensed consolidated interim financial information was supervised by:
Dikeledi Nakene (CA) SA
Chief Financial Officer
Group financial highlights
Six months Six months
ended ended
For the period ended 30 June 30 June
2012 2011
Net profit for the period R'million 338 758
Basic earnings per share Cents 699 1 568
Earnings before interest, tax, depreciation
and amortisation (EBITDA) R'million 747 1 429
Adjusted EBITDA (excl. Lift II) R'million 1 110 1 469
Headline earnings R'million 337 764
Headline earnings per share Cents 697 1 580
Exploration development and growth costs R'million 363 40
Dividend per share (declared) Cents 931
Overview
The first half of the 2012 financial year was characterised by falling commodity prices and the continued
sovereign debt crisis in Europe exacerbated the demand for commodities in a volatile exchange rate environment.
Lower prices were partially offset by a weaker rand. Declining commodity prices and approved exploration and
development works on the Lift II totalling R363 million, saw Palabora posting profit after tax of R338 million
compared to R758 million for the comparative period in 2011. The Lift II project is seeking feasibility approval
during the last quarter of 2012.
Exploration development and growth costs have increased significantly from R40 million to R363 million as Lift II
progressed from order of magnitude to pre-feasibility with early development works. Critically early development
work on Lift II is ongoing including the construction of the decline and return airways, as well as ongoing detailed
analysis around the auto-mill circuit, concentrator and smelter to make Lift II more viable.
This had the effect of reducing net profit from R758 million to R338 million (a decrease of 55%). Excluding the
impact of Lift II costs, net profit including the tax impact fell from R785 million to R591 million (a decrease of
25%) and net profit excluding the tax impact fell from R798 million to R701 million (a decrease of 12%). The
impact on EBITDA of increased exploration development and growth costs is also worth noting as adjusted
EBITDA is down 24% vs. headline EBITDA down 48%.
Six months Six months
ended ended
30 June 2012 30 June 2011
Net profit for the period R'million 338 758
Add back income tax expense R'million 147 346
Profit before tax R'million 485 1 104
Exploration and development costs R'million 363 40
Adjusted profit before tax R'million 848 1 144
Adjusted net profit for period (incl. tax impact) R'million 591 785
Adjusted net profit for period (excl. tax impact) R'million 701 798
Adjusted EBITDA R'million 1 110 1 469
Tony Lennox, the Managing Director, said "Palabora achieved its previously stated goal of trucking magnetite to
Maputo which resulted in 34% increase in sales volumes and 33% increase in revenue. This enabled Palabora
to offset the decline in copper sales due to declining prices and continue to fund Lift II exploration and early
development works as well as maintaining a healthy cash balance". Total sales of the trucked iron oxide was 576kt
for the period. No iron oxide was sold for the comparative period in 2011.
Whilst ore hoisted increased 3% compared to the same period in 2011, a 9% decline in ore grade from the block
cave reduced copper output. This is in line with the ageing process of an underground block cave mine. The
failure of a new ore-hoisting shaft guide rope on 4 July, during installation, has resulted in damage to the skip
loading station in the production shaft. Recovery plans have been implemented to safely bring the shaft back into
operation as quickly as possible. Scheduled and opportune maintenance at the smelter and concentrator is being
brought forward to align with the downtime associated with the guide rope failure.
Palabora has, as part of its risk management, a property damage and business interruption insurance cover.
A loss adjuster nominated by the business and agreed upon by the insurers has already visited the site for initial
assessment of the guide rope failure.
As previously announced to the market, Rio Tinto and Anglo American intend to divest their shareholding in
Palabora. Investors should continue exercising caution in trading Palabora shares.
Safety
The 50% increase in all injuries to 15 compared to 10 for the same period in 2011 demonstrates the need for
sustained improvement in safety in order to create and embed a lifelong culture of zero harm. A significant
number of the injuries have come about with the commencement of the Lift II work and in this context a Site
Safety Acceleration Programme to embed safety consciousness, with the assistance of Rio Tinto, is currently
underway.
Copper production
Refined copper production declined 15% to 27.4kt compared to 32.1kt for the comparative period in 2011 due to
lower ore grades (0,60% as compared to 0,66%) and lower efficiencies at the concentrator. The total concentrator
recovery averaged 80,3% compared to 82,1% for 2011 due to operational challenges from the latter part of 2011.
Normal efficiency levels were restored in the second quarter of the year following the implementation of business
improvement initiatives.
The smelter operational efficiency continued to improve with the first pass recovery of 89,7% surpassing the 88%
in 2011 even though concentrate throughput of 31.3kt was lower than the 36kt achieved same time last year.
The lower concentrate throughput was supplemented by the re-processing of reverts which helped increase the
efficiency rate.
A taphole freeze at the rod plant furnace, which has since been resolved, impacted copper rod production for
three weeks in the second quarter. This resulted in the purchase of 748 tonnes of rod at a cost of R51 million to
meet customer contractual agreements.
Production shaft guide rope failure
Following the SENS announcement released on 5 July 2012 regarding the production shaft guide rope failure,
the Company would like to give an update of the status of the initial assessment and impact on our operations.
A Business Resilience & Recovery Management (BRRP) team has been established. Investigation and recovery
teams are in action. The investigation team comprised of mostly external independent parties investigated the
event whilst the recovery team is dealing with the recovery work. The recovery team is working closely with the
Department of Mineral Resources (DMR) to ensure a safe work programme.
This incident has an impact on the business' revenue and for the duration of the shaft recovery extraordinary
measures such as bringing forward the downstream (concentrator, smelter, refinery and rod plant) planned
shutdowns and ramping-up projects which could help reduce the impact on our revenue are being taken to
mitigate the anticipated impact on cash flow.
The Company anticipates that the production shaft will be back to full operation by the second half of September
2012 based on the current assessment of damage.
Magnetite production
Magnetite production increased to 2.4Mt from 1.7Mt in 2011 in line with increased sales volumes from the road
trucking of iron oxide to Maputo that commenced in December 2011. Iron oxide production was 727kt or 30%
of the total magnetite production. A belt filter press is currently under construction at an estimated cost of
R128 million to increase the drying capacity of magnetite which will enable Palabora to sell more concentrated
magnetite to maximise margins.
Vermiculite production
Efforts to transform the vermiculite business to increase its contribution to the bottom line have been hampered
by adverse developments in the world market including increased competition in the American market and
reduced demand in Europe. Production decreased 20% to 76kt compared to 95kt for the comparative period
in 2011 due to lower sales volumes. Palabora continues to explore new markets but the vermiculite business is
expected to remain challenging into the second half of the year.
Earnings variance analysis (R'm)
Net profit for the six months ended 30 June 2011 758
Prices (585)
Hedge 18
Foreign exchange 479
Exploration and early development (230)
Flexed earnings excluding growth related costs 440
Volumes 104
Cash costs (232)
Non cash costs and tax 26
Net profit for the six months ended 30 June 2012 338
Lower commodity prices on copper and magnetite reduced earnings by R585 million;
Lower realised magnetite prices attributed to softening spot prices and impact of increased volumes of lower
grade material sold through the trucking initiatives;
A weaker rand on turnover net of foreign currency-denominated costs increased earnings by R479 million,
averaging R7.94/$ vs. R6.90/$;
Lift II and growth-related costs reduced earnings by R230 million;
Higher magnetite sales volumes partially offset by lower copper and vermiculite sales volumes increased
earnings by R104 million; and
Cash costs including general inflation of (R137 million), increased due to above inflation increases in power
(18%), labour costs, rail cost increases and maintenance costs (R95 million) reduced earnings by R232 million.
Turnover variance analysis (R'm)
Turnover for the six months ended 30 June 2011 4 012
Copper price (368)
Magnetite price (475)
Vermiculite and by-product prices 31
Hedge 25
Foreign exchange 687
Flexed turnover 3 912
Copper volume (88)
Magnetite volume 578
Vermiculite volume (90)
By-product volume (16)
Turnover for the six months ended 30 June 2012 4 296
Lower copper and magnetite prices reduced turnover by R368 million and R475 million, respectively;
Other prices increased revenue by R31 million mainly due to higher realised prices on anode slimes;
Weaker rand on foreign currency-denominated sales increased turnover by R687 million;
Lower copper volumes (32.6kt vs. 34kt) reduced turnover by R88 million; and
Increased magnetite sales (2.1Mt vs. 1.7Mt) from trucking to Maputo and marginally improved wagon availability
from Transnet increased turnover by R578 million.
Copper sales volumes mix
Six months Six months
ended ended
30 June 30 June
2012 2011 %
kt kt change
Copper rod 27.3 27.1 1
Cathode 2.7 3.4 (21)
Reverts 1.7 (100)
Refined copper scrap 2.6 1.8 44
Total copper 32.6 34.0 (4)
Rod sales for 2012 include 748t supplementary imports due to lower production, 2011 nil;
No reverts sales as these were reprocessed to supplement lower concentrate throughput resulting in increased
efficiency; and
Lower imported cathode charged to the rod plant furnace for the period (4.5kt vs. 5.4kt) reduced copper rod
units available for sale, partially offset by rod purchases.
Cash flow
Cash generated from operating activities but before dividends inclusive of the respective STC decreased 54% to
R288 million from R624 million in 2011 mainly due to higher spend on Lift II exploration and early development
works. The dividend policy reflects the need to preserve cash for growth activities including Lift II, with no dividend
to be paid out of the interim results. Sustaining capital expenditure will be maintained at minimum levels for the
next three years unless such expenditure can benefit Lift II.
Broad Based Black Economic Empowerment (BBBEE)
Shareholders are referred to the announcement regarding the BBBEE transaction (the terms of which were
approved by Shareholders in general meeting) published on the Securities Exchange News Service on 15 June 2010,
and the update announcement published on 23 March 2012 (preceded by prior update announcements dated
15 October 2010, 7 February 2011, 20 June 2011 and the announcement dated 19 December 2011 wherein Palabora
announced the conversion, subject to certain administrative corrections, of seven of its eight existing old order
mining rights into new order mining rights). Palabora has made significant progress towards the fulfilment of the
outstanding suspensive conditions and the implementation of the BBBEE transaction.
Suspensive conditions
As certain suspensive conditions to which the BBBEE transaction is subject are still in the process of being
fulfilled, Palabora and its BBBEE partners have agreed to extend the longstop date for the fulfilment or waiver of
the suspensive conditions from 31 August 2012 to 31 January 2013. Palabora and its BBBEE partners are actively
working towards procuring the fulfilment of the suspensive conditions before the revised longstop date.
Palabora has fulfilled a number of key suspensive conditions including the:
adoption or amendment of the constitutional documents of the BBBEE partners and Palabora Copper;
obtaining all consents and/or approvals as may be required under any Senior Finance Document to which
Palabora is party;
execution of four of the seven converted mining rights; and
receipt of the vast majority of counterparty consents for the transfer of essential contracts from Palabora to
Palabora Copper upon implementation of the BBBEE transaction.
The key suspensive conditions which remain to be fulfilled and updates thereof are:
the execution of the remaining three converted mining rights and the transfer of all executed mining rights to
Palabora Copper in terms of Section 11 of the Minerals and Petroleum Resource Development Act;
the Section 11 approval process will commence upon the aforementioned converted mining rights having been
executed;
the receipt of all outstanding consents from counterparties to certain essential contracts as identified by
Palabora for the transfer of such contracts to Palabora Copper;
* Palabora continues to work proactively to secure the outstanding counterparty consents.
Palabora is working towards procuring fulfilment of all of the remaining suspensive conditions as soon as is
practicably possible. Shareholders will be kept appraised of developments in this regard.
Directorship
At 30 June 2012 the Palabora Board was constituted as follows:
Directors Alternate director
1. Clifford N Zungu (Chairman)
2. Anthony W Lennox (Managing Director)* (Australian)
3. Dikeledi L Nakene (Chief Financial Officer)*
4. Francine A du Plessis
5. Moegamat R Abrahams
6. Nhlanhla A Hlubi
7. Craig Kinnell (British)
8. Jean-Sebastien Jacques (French) Coen H Louwarts (Dutch)
9. Hendrik J Faul
*Executive director
Outlook
The mining industry by its very nature operates within economic cycles which impact realised prices.
Continued softening of commodity prices into the second half of the year together with the impact of the guide
rope failure is expected to negatively impact full year 2012 earnings compared to 2011. It is the Board's and
management's current expectation that the Company will be fully operational in Quarter 4 and will continue to
ensure that the operations remain focused on a sustainable future.
The information contained in this paragraph has not been reviewed or reported on by the Company's auditors
or advisors. No representation or warranty express or implied is made as to and no reliance should be placed on
the fairness, accuracy, completeness or correctness of the information or opinions contained herein. Opinions
and forward-looking statements expressed represent those of the Company at the time. Undue reliance should
not be placed on such statements and opinions because, by nature, they are subjective to known and unknown
risk and uncertainties and can be affected by other factors that could cause actual results and Company plans
and objectives to differ materially from those expressed or implied in the forward-looking statements.
CN Zungu AW Lennox DL Nakene
Chairman Managing Director Chief Financial Officer
6 August 2012
GROUP SELECTED STATISTICS
Six months Six months
ended ended
30 June 30 June
2012 2011
Revenue
Copper (net of hedge) R'million 1 635 1 725
Magnetite R'million 2 368 1 967
Other by-products R'million 94 86
Industrial minerals R'million 199 234
Net profit before tax R'million 485 1 104
Copper
Dry ore hoisted million tonnes 5,5 5,3
Average copper grade % Cu 0,60 0,66
New copper in concentrate produced kilo tonnes 31,3 36,0
Cathode produced kilo tonnes 27,4 32,1
Average copper price realised USc/lb 373,7 438,2
Average LME copper price for the period USc/lb 367,0 425,8
Average ZAR/US$ exchange rate R/US$ 7,94 6,90
Spot ZAR/US$ exchange rate R/US$ 8,49 6,83
Average copper price realised (pre-hedge) R/tonne 65 624 66 516
Average copper price realised (post-hedge) R/tonne 50 103 50 809
Vermiculite
Vermiculite sold tonnes 56 454 81 874
Average vermiculite price realised R/tonne 3 523 2 862
Magnetite
Magnetite sold (DMT) tonnes 2 106 024 1 693 090
Average magnetite price realised R/tonne 1 124 1 162
Anode slimes
Anode slimes sold tonnes 81 95
Average anode slimes price realised R/tonne 1 024 634 789 345
Nickel sulphate
Nickel sulphate sold tonnes 102 168
Average nickel sulphate price realised R/tonne 28 376 34 365
Sulphuric acid
Sulphuric acid sold tonnes 45 406 53 241
Average sulphuric acid price realised R/tonne 174 98
Imported cathode purchased
Volumes tonnes 4 498 6 726
Cost R'million 310 444
Unit purchased price R/tonne 68 947 65 980
Imported rod purchased
Volumes tonnes 748
Cost R'million 51
Unit purchased price R/tonne 68 224
Cash flow
Net cash from operating activities R'million 178 239
Cash and cash equivalents R'million 2 245 1 708
Costs
Production cost (excluding product purchases) R'million 1 286 1 131
Cost of sales R'million 1 791 1 603
Capital expenditure and commitments
Capital expenditure R'million 123 218
Contracts placed at end of the period R'million 195 138
Investments
Fair value of unlisted investments R'million 564 410
Share capital
Authorised ordinary shares of R1 each R'000 100 000 100 000
Issued ordinary shares of R1 each '000 48 337 48 337
Net asset value per share R/share 88 61
UNAUDITED INTERIM CONSOLIDATED GROUP RESULTS
CONDENSED CONSOLIDATED INCOME STATEMENT
Six months Six months
ended ended
30 June 30 June
2012 2011
Note R'm R'm
Sale of products 4 803 4 543
Hedge loss realised (507) (531)
Revenue 4 296 4 012
Cost of sales (1 791) (1 603)
Gross profit 2 505 2 409
Selling and distribution costs (1 327) (900)
Administration expenses (384) (364)
Mineral and petroleum royalty (26) (50)
Other income 11 17
Exploration development and growth costs 3 (363) (40)
Other expenses (3) (7)
Profit before net finance cost and tax 4 413 1 065
Net finance income 5 72 39
Finance cost 5 (24) (31)
Finance income 5 96 70
Profit before tax 485 1 104
Income tax expense 6 (147) (346)
Profit for the period 338 758
Profit for the period attributable to:
Equity holders of the parent 338 758
Earnings per share attributable to the equity
holders of the parent
Basic and diluted earnings per share (cents) 7 699 1 568
Headline earnings per share (cents) 8 697 1 580
The notes below are an integral part of these condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months Six months
ended ended
30 June 30 June
2012 2011
R'm R'm
Profit for the period 338 758
Other comprehensive income:
Available-for-sale investments
Valuation gains arising during the period 16 7
Exchange differences on translation of foreign operations 9 6
Cash flow hedges
Mark to market losses arising during the period (52) (77)
Transferred to profit or loss for the period 507 531
Hedge ineffectiveness 3 2
Income tax relating to components of other
comprehensive income (130) (131)
Other comprehensive income for the period, net of tax 353 338
Total comprehensive income for the period 691 1 096
Total comprehensive income attributable to:
Equity holders of the parent 691 1 096
The notes below are an integral part of these condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at As at
30 June 31 December
2012 2011
Note R'm R'm
Assets
Non-current assets 3 058 3 154
Property, plant and equipment 2 481 2 702
Intangible assets 13 7
Financial assets 564 445
Current assets 4 428 4 048
Stores 148 136
Product inventories 1 167 921
Trade and other receivables 836 781
Current income tax assets 32
Cash and cash equivalents 2 245 2 210
Total assets 7 486 7 202
Equity
Equity attributable to owners of the parent
Share capital and premium 629 629
Other reserves (670) (1 023)
Retained earnings 4 291 4 053
Total equity 4 250 3 659
Non-current liabilities 1 406 1 749
Financial liabilities 9 302 754
Close-down and restoration obligation 687 665
Retirement benefit obligation 182 177
Deferred income tax liabilities 10 235 153
Current liabilities 1 830 1 794
Financial liabilities 9 965 968
Retirement benefit obligation 8 9
Trade and other payables 737 641
Related party payables 120 111
Current income tax liabilities 65
Total liabilities 3 236 3 543
Total equity and liabilities 7 486 7 202
The notes below are an integral part of these condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the parent
Share Share Other Retained
capital premium reserves earnings Total
R'm R'm R'm R'm R'm
Balance at 1 January 2011 48 581 (1 801) 3 390 2 218
Total comprehensive income for
the period 778 1 462 2 240
Dividends paid (799) (799)
Balance at 31 December 2011 48 581 (1 023) 4 053 3 659
Total comprehensive income for
the period 353 338 691
Dividends paid (100) (100)
Balance at 30 June 2012 48 581 (670) 4 291 4 250
The notes below are an integral part of these condensed consolidated interim financial information.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months
ended ended
30 June 30 June
2012 2011
R'm R'm
Cash flows from operating activities
Cash generated from operating activities 553 948
Interest paid (4)
Interest received 15 19
Dividends paid (100) (350)
Income tax paid (290) (374)
Net cash generated from operating activities 178 239
Cash flows from investing activities
Acquisition of property, plant and equipment (123) (218)
Proceeds from disposal of property, plant and equipment 1
Investment in available-for-sale financial asset (103) (5)
Dividend income 2
Net cash used in investing activities (225) (221)
Net (decrease)/increase in cash and cash equivalents (47) 18
Cash and cash equivalents at beginning of the period 2 210 1 641
Effects of exchange rate changes on the balance of
cash held in foreign currencies 82 49
Cash and cash equivalents at end of the period 2 245 1 708
The notes below are an integral part of these condensed consolidated interim financial information.
NOTES TO THE CONDENSED CONSOLIDATED
INTERIM FINANCIAL INFORMATION
1. CORPORATE INFORMATION
Palabora Mining Company Limited (the Company) and its subsidiaries (together the Group) extracts and
beneficiates copper, magnetite and vermiculite from its mine in the Limpopo Province, South Africa. It is the
primary aim of the Company, a member of the worldwide Rio Tinto Group, to achieve excellence in all aspects of
its activities and to develop the Company's resources and assets in a socially and environmentally responsible
way for the maximum benefit of its shareholders, employees, customers and the community in which it operates.
It is the Company's firm belief that efficient and profitable operations go hand-in-hand with high-quality products and
comprehensive and effective safety, health and environmental protection programmes.
The Group is incorporated and domiciled in South Africa. The address of its registered office is 1 Copper Road,
Phalaborwa, 1389. The Company is a public limited company which is listed on the Johannesburg Securities Exchange
Limited (JSE).
The condensed consolidated interim financial statements of Palabora for the period ended 30 June 2012 were
authorised for issue in accordance with a resolution of the Board of Directors passed on 31 July 2012.
2. BASIS OF PREPARATION AND ACCOUNTING POLICIES
2.1 Basis of preparation
The condensed consolidated interim financial information for the six months ended 30 June 2012 has been prepared in
accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting'.
The condensed consolidated interim financial information should be read in conjunction with the annual financial
statements for the year ended 31 December 2011, which have been prepared in accordance with International Financial
Reporting Standards (IFRS) and Interpretations, the AC 500 standards (as issued by the Accounting Practices Board or
its successor), requirements of the South African Companies Act and regulations of the JSE.
2.2 Significant accounting policies
The condensed consolidated financial report has been prepared in accordance with the historical cost convention,
except for certain financial instruments, which are stated at fair value, and is presented in rand, which is Palabora's
functional and presentation currency.
The accounting policies applied in the preparation of the condensed consolidated interim financial information
are consistent with those followed in the preparation of the Group's annual financial statements for the year ended
31 December 2011.
3. EXPLORATION AND DEVELOPMENT COST
Six months Six months
ended ended
30 June 30 June
2012 2011
R'm R'm
Lift II exploration and growth-related costs (363) (40)
Lift II exploration and growth costs relate to pre-feasibility drilling and exploration of a copper mineralisation area under
the current footprint and early development activities and other growth-related projects.
4. PROFIT BEFORE TAX AND NET FINANCE COST
Six months Six months
ended ended
30 June 30 June
2012 2011
R'm R'm
Profit before tax and net finance cost is stated after charging,
amongst other items:
Depreciation on property, plant and equipment (331) (363)
Amortisation of intangible assets (3) (1)
Employee benefit expense (593) (496)
5. NET FINANCE INCOME
Six months Six months
ended ended
30 June 30 June
2012 2011
R'm R'm
Finance cost (24) (31)
Interest expense on borrowings (4)
Unwinding of discount on close-down and restoration costs (23) (22)
Net foreign exchange loss on operating activities (1) (5)
Finance income 96 70
Interest income on short-term bank deposits 12 16
Interest income on available-for-sale financial asset 3 3
Net foreign exchange gain on financing activities 81 51
72 39
6. INCOME TAX EXPENSE
The major components of income tax expense are:
Six months Six months
ended ended
30 June 30 June
2012 2011
R'm R'm
Normal income tax (185) (354)
South African
Mining tax: Current (180) (336)
Foreign
Current (5) (18)
Secondary tax on companies (10) (35)
Deferred income tax
South African
Current 48 43
Income tax expense reported in the income statement (147) (346)
The tax rate reconciliation is as follows:
% %
Current statutory rate 28.0 28.0
Adjusted for:
Dividend income (1.7)
Disallowable expenditure 0.1
Tax rate differential of foreign subsidiaries 1.2 1.9
Secondary tax on companies 0.6 3.1
Prior period under provision 0.4
Effective tax rate 30.3 3.3
7. EARNINGS PER SHARE
Basic and diluted
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the parent by the weighted
average number of ordinary shares in issue during the period. There are no potential or actual dilutive effects on the
Six months Six months
ended ended
30 June 30 June
2012 2011
R'm R'm
Reconciliation of net profit for earnings per share
Net profit attributable to equity holders of the parent 338 758
Reconciliation of weighted average number of ordinary shares
Weighted average number of ordinary shares of basic and
diluted earnings per share (million shares) 48 48
Earnings per share (cents) 699 1 568
8. HEADLINE EARNINGS
Profit Profit
before Tax after
tax expense tax
R'm R'm R'm
Six months ended 30 June 2012
Profit per income statement 485 (147) 338
Profit on disposal of property, plant and equipment (1) (1)
Headline profit 484 (147) 337
Six months ended 30 June 2011
Profit per income statement 1 104 (346) 758
Loss on disposal of property, plant and equipment 6 6
Headline profit 1 110 (346) 764
Six months Six months
ended ended
30 June 30 June
2012 2011
Headline earnings per share (cents) 697 1 580
9. FINANCIAL LIABILITIES
Derivative financial instrument Cash flow hedges
The Group held a commodity swap contract designated as a cash flow hedge of expected future sales to local customers
under which the Group receives a fixed price in rand and in relation to a monthly notional quantity of copper sales
as detailed below and pays a floating price based on the arithmetic average (mean) of the US$ LME Cash Settlement
Price, converted to rand at the average SA rand/US dollar exchange rate for the calculation period. The cash flows paid
under the terms of the hedging instrument are designed to reduce variability in the rand proceeds of the copper sales
as set out in the table below.
As at 30 June 2012 the cash flow hedges of the expected future sales were assessed to be highly effective and the
ineffective portion of R3 million was recognised directly under "Other expenses" in the income statement.
Table of terms: 30 June 2012
Average
hedged Hedged Derivative
Quantity price value liability
Maturity year tonnes ZAR/t R'm R'm
2012 10 569 15 739 166 579
2013 16 330 15 739 257 688
26 899 423 1 267
Unamortised component of non-observable inception gains
Total of derivative financial instrument 1 267
Non-current 302
Current 965
Total of derivative financial instrument 1 267
Derivative financial instrument Cash flow hedges
Table of terms: 31 December 2011
Average
hedged Hedged Derivative
Quantity price value liability
Maturity year tonnes ZAR/t R'm R'm
2012 21 137 15 739 333 968
2013 16 330 15 739 257 754
37 467 590 1 722
Unamortised component of non-observable inception gain
Total of derivative financial instrument 1 722
Non-current 754
Current 968
Total of derivative financial instrument 1 722
10. DEFERRED INCOME TAX
Six months Six months
ended ended
30 June 30 June
2012 2011
R'm R'm
At beginning of the period (153) 70
Tax charged to income statement 48 67
Tax charged to statement of other comprehensive income (130) (290)
At end of the period (235) (153)
Deferred tax assets arising from:
Provisions 256 255
Derivative financial instruments 355 482
611 737
Deferred tax liabilities arising from:
Accelerated capital allowances (690) (758)
Available-for-sale investment (157) (125)
Other 1 (7)
(846) (890)
Net deferred tax liabilities (235) (153)
11. DIVIDENDS PAID
The following dividends were declared and paid:
Six months Six months
ended ended
30 June 30 June
2012 2011
R'm R'm
Previous year final dividend:
207 cents per qualifying ordinary share (2010: 724 cents) 100 349
Interim dividend:
Nil cents per qualifying ordinary share (2011: 931 cents) 450
100 799
After the respective reporting dates the following dividends were
proposed by the directors. The dividend declared is recognised
in the period it is paid.
Dividends declared:
Nil cents per qualifying ordinary share (2011: 207 cents) 100
Secondary tax on companies due on closing date
of dividend cycle 10
12. RELATED PARTY TRANSACTIONS
Six months Six months
ended ended
30 June 30 June
2012 2011
R'm R'm
The following transactions were carried out with related parties:
Purchases of goods and services (Rio Tinto Group) 580 370
Marketing fee (Rio Tinto Iron Ore Asia) 72 23
13. OPERATING SEGMENTS
Management has determined the operating segments based on the reports reviewed by the strategic steering committee
that are used to make strategic decisions. The committee considers the business from a product perspective. The
products are divided in the following segments:
Copper produces and markets refined copper;
Joint-product: Magnetite markets processed current arisings and built-up stockpiles of magnetite, a joint-product
from the copper mining process;
By-products: includes anode slimes, sulphuric acid and nickel sulphate; and
Industrial minerals produces and markets vermiculite.
Reportable segments are as follows:
Joint- By-
product: products: Industrial
Copper Magnetite Other minerals Total
R'm R'm R'm R'm R'm
Period ended 30 June 2012
External customers revenue
Sales from products 2 142 2 368 94 199 4 803
Hedge loss realised (507) (507)
Reportable segment revenue 1 635 2 368 94 199 4 296
Reportable segment operating profit
before depreciation 275 753 41 1 069
Depreciation (282) (5) (6) (293)
Reportable segment operating
(loss)/profit (7) 753 36 (6) 776
Joint- By-
product: products: Industrial
Copper Magnetite Other minerals Total
R'm R'm R'm R'm R'm
Period ended 30 June 2011
External customers revenue
Sales from products 2 256 1 967 86 234 4 543
Hedge loss realised (531) (531)
Reportable segment revenue 1 725 1 967 86 234 4 012
Reportable segment operating profit
before depreciation 414 943 38 42 1 437
Depreciation (251) (52) (7) (7) (317)
Reportable segment operating profit 163 891 31 35 1 120
Reconciliation of reportable segment operating profit to profit after tax:
Six months Six months
ended ended
30 June 30 June
2012 2011
R'm R'm
Reportable segment operating profit 776 1 120
Unallocated amounts:
Other including growth and Lift II exploration expenditure (322) (8)
Depreciation and amortisation of tangible and intangible assets (41) (47)
Net finance income cost 72 39
Profit from operations before tax 485 1 104
Income tax expense (147) (346)
Profit after tax 338 758
14. COMMITMENTS
Commitments contracted for at the reporting date was R195 million (31 December 2011: R79 million). Capital
expenditure that was approved by the Board, but not contracted for at 30 June 2012 amounts to R172 million
(31 December 2011: R314 million).
15. CONTINGENT LIABILITIES
Legal matters
Various legal matters, including labour cases before the CCMA, are in progress. The potential exposure is approximately
R1 million.
Land claims
Presently four land claims have been filed regarding the government-owned property that Palabora uses for its mining
operations. The four tribes have joined together and are represented by one legal advisor. Clarifications of the claims
and Palabora's defences are being pursued through legal channels. The legal exposure is uncertain.
Taxation penalty on the closure rehabilitation trust fund
During 2011, the South African Revenue Service (SARS) issued Palabora with a taxation penalty on its 2008 taxable
income relating to the closure rehabilitation trust fund. Palabora has objected to the penalty applied by SARS with a
response pending. The financial implication of the penalty is not material to the underlying results as published.
16. ORE RESERVES
There have not been any material changes to the ore reserves as disclosed in the 2011 annual report.
Registered address:
1 Copper Road, Phalaborwa, 1389
PO Box 65, Phalaborwa, 1390
Company Secretary: KN Mathole
Transfer Secretaries:
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Sponsor: One Capital
6 August 2012
Date: 07/08/2012 09:01:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
