Wrap Text
Audited Condensed Consolidated Results for the Year Ended 31 December 2012
and Final Cash Dividend Declaration
Kumba Iron Ore Limited
A member of the Anglo American plc group
(Incorporated in the Republic of South Africa)
(Registration number 2005/015852/06)
JSE Share code: KIO
ISIN: ZAE000085346
AUDITED CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2012
AND FINAL CASH DIVIDEND DECLARATION
KEY FEATURES
- Safety performance - LTIFR of 0.10; 2 loss of life incidents
- Record total production - up 4% to 43.1 Mt
- Record export sales volumes up 7% to 39.7 Mt
- Average export iron ore prices realised - down 23% to $122/tonne
- Headline earnings down 28% to R12.2 bn
- Kolomela mine significantly exceeded ramp-up schedule 8.5 Mt production
- Final cash dividend 1,250 cents per share
COMMENTARY
Key features
Kumba Iron Ore Limited (Kumba or the group) wishes to announce its
results for the year ended 31 December 2012.
The groups safety performance remains a key priority, although regrettably,
suffered the first incidences of loss of life since 2010, when two employees
were fatally injured at Sishen mine during the year. The groups lost-time
injury frequency rate (LTIFR) was 0.10 for the year (2011: 0.08).
Kumbas headline earnings for the year ended 31 December 2012 were
R12.2 billion, 28% down from the R17.0 billion achieved in 2011, mainly as a
result of a weighted average decrease of 23% in export iron ore prices
realised and above inflationary cost escalations, which were partially
offset by a 7% increase in export sales volumes. Attributable and headline
earnings for the year were R38.02 and R37.97 per share respectively. A final
cash dividend of 1,250 cents per share has been declared (total dividend for
2012 is 3,170 cents per share; 2011: 4,420 cents per share).
Total production for the group rose by 4% to a record 43.1 million metric
tonnes (Mt) (2011: 41.3 Mt), aided by the ramp-up at Kolomela mine.
Notwithstanding the impact of an unprotected strike at Sishen mine in the
fourth quarter, total export sales volumes for the year increased by 7% to
39.7 Mt (2011: 37.1 Mt) as the production losses at Sishen mine were offset
by production from Kolomela mine and by sales from finished product
stockpiles.
Excellent progress was made at Kolomela mine in 2012. The mine, which was
brought into production five months ahead of schedule in December 2011,
significantly exceeded the production ramp-up schedule and delivered
production of 8.5 Mt for the year.
Safety performance
Regrettably, during the year, the group suffered the first incidences of
loss of life since 2010, when two employees were fatally injured at Sishen
mine. The Board and management once again extend sincere condolences to the
families, friends and colleagues of Ms Sarah Obudilwe and Mr Wickus Coetsee.
As part of our unwavering commitment to achieving zero harm, we have
implemented additional safety initiatives, revisited our safety improvement
plans and interventions and invested significant effort in preventing any
recurrence of the events which caused the fatalities.
The group recorded 20 lost-time injuries (LTIs) for the year, which
resulted in a LTIFR of 0.10 per 200,000 hours compared to 0.08 achieved in
2011. Kolomela mine continued its impressive safety record and achieved
31.4 million LTI-free hours.
Kumba remains committed to zero harm at all the groups sites and management
has intensified the focus on compliance with operational safety standards
and major hazard prevention to further reduce the prevalence of high
potential incidents (HPIs).
Market overview
Demand for iron ore globally is largely dependent on the state of the steel
industry worldwide and, more specifically, on that of the steel
manufacturing sector in China. The country is the largest steel producer and
consumer of iron ore in the world and accounts for more than two-thirds of
global seaborne iron ore imports.
Global crude steel production increased by 2%, from 1,526 Mt in 2011 to
1,550 Mt in 2012. This increase was driven primarily by China, where crude
steel production increased by about 3% year on year to 717 Mt in 2012, from
695 Mt in 2011. In the rest of the world, crude steel production was
essentially flat at 833 Mt.
Seaborne iron ore supplies were impacted by adverse weather conditions in
both Brazil and Australia in the first quarter of 2012, in addition to on-
going Indian supply disruptions following the ban on iron ore mining in Goa.
For the year as a whole, seaborne supplies reached a level of 1,062 Mt,
up 0.3% from 2011.
2012 was characterised by considerable volatility, especially in the third
quarter, when prices fell from $138/tonne at the start of the quarter to
$89/tonne by early September, as Chinese steel mills depleted stockpiles and
reduced raw material inventory levels to as little as 17 days worth of
production requirements. Iron ore prices reached a high of $151/tonne
(62% Fe CFR China) in April 2012, before stabilising around US$130/tonne
towards the end of the year. The market recovered at the end of 2012 with
steel mills returning to the market, which was reflected in the marked
increase in index iron ore prices at the time. For 2012 as a whole, index
prices averaged $130/tonne (CFR 62%Fe Platts), down 23% on 2011s average of
US$169/tonne.
Operational performance
Total tonnes mined at Sishen mine rose by 4% to 171.6 Mt (2011: 165 Mt), of
which waste mined amounted to 133.5 Mt, an increase of 12% (2011: 119.0 Mt).
Total production at Sishen mine, however, decreased by 13% to 33.7 Mt
(2011: 38.9 Mt) mainly owing to the effects of an unprotected strike during
the fourth quarter and low attendance in the mining section subsequent to
the strike action.
On 3 October, around 300 Sishen mine employees on the night shift stopped
working, seized the heavy mining equipment fleet that they were using and
threatened to destroy the equipment if their demands of a salary increase
were not met. This situation ended on 16 October and production recommenced
on 20 October on a limited basis as attendance in the mining section
remained low in the immediate aftermath of the strike. Operations are
subsequently being ramped up. Production rates continue to improve and is
expected to return to normal operating levels by the end of the first
half of 2013.
Sishen mine lost around 5 Mt of final product as a result of the prolonged
impact of the industrial action and the subsequent need to ramp-up
operations. These losses exacerbated the production challenges experienced
earlier in the year resulting from mining feedstock and quality constraints
that affected the availability of material supplied to the mines
processing plants.
Following successful commissioning in 2011, Kolomela mine continued its
ramp-up ahead of schedule and delivered an outstanding performance in 2012,
producing 8.5 Mt. Production has exceeded monthly design capacity since
July 2012 and reached record levels during the second half of the year.
Total tonnes mined increased by 26% to 43.5 Mt (2011: 34.6 Mt), of which
waste mined increased by 11% to 33.5 Mt (2011: 30.3 Mt).
Waste mining at Thabazimbi mine decreased by 30% to 31.1 Mt (2011: 44.2 Mt)
as the development of the last new pit was hampered by geological
constraints. Production at Thabazimbi mine reduced by 11% to 0.8 Mt
(2011: 0.9 Mt) in line with the progression towards the end of the life of
the mine and resulted in reduced off-take from ArcelorMittal South Africa
Limited (AMSA).
Kumbas total sales volumes for 2012 were 2% higher at 44.3 Mt
(2011: 43.5 Mt). Export sales volumes for the year increased by 7% to
39.7 Mt (2011: 37.1 Mt) as production losses at Sishen mine were
offset by production from Kolomela mine and by sales from stock. The
production losses caused by the unprotected strike reduced export stock
levels across the value chain and impacted export spot sales volumes.
Notwithstanding the impact of the strike, Kumba met all its export customer
sales commitments for 2012. Kumbas export sales volumes to China of 27.3 Mt
totalled 69% of total export volumes for the year, against 68% in 2011.
Off-take from Europe was essentially flat, whilst export sales volumes to
Japan and Korea together rose by 12%. Domestic sales volumes to AMSA reduced
by 27% to 4.7 Mt (2011: 6.4 Mt).
A record 40.0 Mt was railed on the Sishen/Kolomela-Saldanha line in 2012,
an increase of 2% over 2011. This included 8.6 Mt railed from Kolomela mine.
Transnets performance in 2012 was exceptional, and supported Kumba in
achieving record volumes railed and exported, despite the unprotected strike
action at Sishen mine. Kumba loaded 38.5 Mt at the port of Saldanha for the
export market, an improvement of 2% from the prior year. Total finished
product stockpile levels at the mines and the ports decreased to 3.7 Mt as
the production losses due to the unprotected strike were offset by sales
from finished product stockpiles.
Financial results
The groups total mining revenue (excluding shipping operations) reduced by
8% to R42.3 billion (2011: R45.8 billion). Revenue from shipping operations
increased by 19% to R3.2 billion (2011: R2.7 billion).
Primarily as a result of the 23% decrease in realised export prices, the
groups operating profit margin declined to 51% (2011: 66%).
Excluding the net freight loss incurred from providing a shipping service to
customers, the groups mining operating margin was 55% (2011: 69%).
Operating profit decreased by 28% to R23.2 billion (2011: R32.0 billion)
principally as a result of:
- A weighted average decrease of 23% in realised iron ore export prices,
which reduced operating profit by R10.5 billion;
- A R5.1 billion or 39% increase in operating expenses (excluding selling
and distribution expenses, shipping expenses and the mineral royalty) driven
by the 17.6 Mt increase in waste mined at Sishen and Kolomela mines,
inflationary pressures and a significant rise in the cost of diesel. Of
this, R2.1 billion was as a result of the year on year increase in
production costs of Kolomela mine. In 2012, Kolomela mine incurred
R2.4 billion production costs compared to the R332 million recorded in 2011.
In 2011, R953 million incurred on 34.6 Mt of material mined, were
capitalised to property, plant and equipment as part of the directly
attributable cost of bringing the mine into production in December 2011;
and - A net freight loss was incurred by the groups shipping operations of
R30 million (profit of R337 million earned in 2011) as a result of volatile
freight rates. Total tonnes shipped by Kumba on behalf of customers
increased by 2.4 Mt to 24.1 Mt (2011: 21.7 Mt).
This decrease in operating profit was offset mainly by:
- The average Rand/US$ exchange rate of R8.19/USD1.00, which was 13% weaker
than the R7.25 achieved during 2011 and resulted in an increase in revenue
of R4.5 billion;
- The 7% growth in export sales volumes, which contributed R2.9 billion; and
- The mineral royalty for 2012, at an effective rate of 3.2% (2011: 4.4%) of
free-on-rail (FOR) iron ore revenue, which resulted in a R635 million
reduction in operating expenditure. This was a result of the redemption of
capital expenditure and reduced sales.
As a result of the planned increase in mining activity at Sishen mine, the
production shortfalls from the unprotected strike and above inflationary
input cost escalations, the mines unit cash cost increased by 39% to
R210/tonne compared to R150/tonne at the end of 2011. Kumba continues to
focus on operational excellence, productivity improvements and efficiencies
to mitigate the effect of rising costs. Achieving this optimisation is
currently a critical factor at Sishen mine, which is facing a period of
increasing waste stripping. The western-dipping ore body requires increased
waste stripping and tight pit conditions constrain face lengths which, in
turn, limits flexibility. Sishen mines productivity improvement project,
Bokamoso continues to deliver efficiency and productivity improvements
required to partially offset cost pressures associated with increased mining
activity. Kolomela mines unit cash cost was R191/tonne for 2012.
The groups cash generated from its operations, although 33% lower than the
R34.3 billion of 2011, remains healthy at R25.3 billion (before the mineral
royalty of R1.2 billion). These cash flows were used to pay aggregate
dividends of R18.0 billion, taxation of R5.2 billion and mineral royalties
of R1.2 billion during 2012. Capital expenditure of R5.4 billion was
incurred, of which R3.2 billion was to maintain operations, mainly for
Sishen mines fleet expansion programme and workshop infrastructure.
R2.2 billion was invested to expand operations, mainly on housing
construction at Kolomela mine. Capital expenditure of R377 million was
incurred on the Sishen Westerly Expansion Project (SWEP) in 2012
(2011: R317 million). This project will provide access to additional run of
mine ore at Sishen mine from 2013. Total capital expenditure on this project
is expected to be approximately R1 billion at completion in 2016.
At 31 December 2012 the group was in a net debt position of R4.3 billion
(2011: R1.6 billion net cash).
Net working capital increased by R2.6 billion from 31 December 2011 to
R5.5 billion. This increase is due to an increase in trade receivables on
the back of an increase in sales volumes in December 2012 relative to
December 2011, as well as a decrease in payables as a result of the
employees tax accrued in 2011 for the Envision payout which was paid in
2012.
Contribution to BEE shareholders and the government
One of Kumbas significant achievements since its inception has been the
delivery of broad-based black economic empowerment (BBBEE) that the group
believes meets the letter and spirit of the Mineral and Petroleum Resources
Development Act (MPRDA), and further provides the group with a sustainable
future. While Kumbas compliance with the various elements of the Mining
Charter ultimately delivers economic opportunity, the most direct mechanism
has been the benefits that have accrued to Kumbas BEE shareholders through
both capital appreciation and the payment of substantial cash dividends. The
groups BEE shareholders have received in excess of R17 billion in dividends
over the past six years.
Kumbas contribution to the South African fiscus by means of income tax and
mineral royalty over the past six years amounted to R32.5 billion.
Mineral resources and ore reserves
As at 31 December 2012 Kumba had ore reserves estimated at 1.1 billion
tonnes at its three mining operations: Sishen, Kolomela and Thabazimbi
mines. Kumbas estimated mineral resources in excess of its ore reserves at
these three operations as well as the Zandrivierspoort magnetite project and
Phoenix project are 1.2 billion tonnes. The net decrease of 5% in Kumbas
ore reserves in 2012 was primarily attributable to annual production.
Kumbas mineral resources, excluding ore reserves, showed a net decrease of
12% from 2011 to 2012. The decrease is primarily attributable to the
re-estimation of the banded iron formation (BIF) mineral resource at Sishen
mine. Previous estimation of the BIF mineral resource were adjusted for in
2012 when new sample data became available following a large scale
re-sampling project at Sishen mine. The estimation approach of the
decreasing trend in %Fe of the BIF with depth was also adjusted.
Outlook*
A similar level of growth in global crude steel production is expected for
2013 as was seen in 2012, with Chinas crude steel production forecast to
grow and reach 740 Mt, whilst growth in crude steel production in other
developing countries is expected to be counter balanced by reduced
production in some of the developed markets. In 2013, Indian iron ore
production is expected to remain under pressure as a result of domestic
policy changes. However new supply capacity, primarily from Australia, is
expected to partially offset this reduction in Indian supply.
The start of 2013 has seen a rapid price recovery in iron ore prices. The
consensus view is that this rally will not be sustained throughout the year.
However, some positive sentiment in relation to Chinese steel consumption
growth has been restored and is expected to provide support to prices
throughout the year. Seaborne iron ore supply growth may lead to iron ore
prices softening in the second half of 2013, but on average prices are
anticipated to be firmer than in 2012.
As guided previously, waste mining at Sishen mine is anticipated to increase
by an additional 30 Mt per year in line with the planned ramp-up that
commenced in 2009. However, in order to make up mining volumes lost as a
result of the strike, it is anticipated that an additional ~10 Mt to 20 Mt
of waste further to the 30 Mt previously guided, will be mined in 2013,
which will put upward pressure on unit cash costs. Annual production volumes
from Sishen mine are expected to increase from the 33.7 Mt achieved in 2012,
to at least 37 Mt in 2013, which is lower than previously guided due to the
knock on effect of the unprotected strike in 2012.
Kolomela mines ramp-up is on track to produce at full design capacity of
9 Mt in 2013 which will enhance the groups ability to supply iron ore to
the market during 2013. Waste mining at Kolomela mine is anticipated to
increase as the new pits are opened up, which will put upward pressure on
unit cash costs. Kolomela mines cash unit cost is expected to be
~R180/tonne as the mine reaches full design capacity of 9 Mtpa.
Export sales volumes in 2013 are anticipated to be in line with the volumes
achieved in 2012. Domestic sales volumes from Sishen mine to AMSA are
anticipated to be 4.8 Mt, in line with the interim pricing agreement.
Kumbas operating profit remains highly sensitive to the Rand/US Dollar
exchange rate.
Managements focus will be on executing the groups strategy by optimising
the value of current operations, capturing value across the value chain and
delivering on the groups growth aspirations.
* Any reference to future financial performance included in this
announcement has not been reviewed or reported on by the companys auditors
and does not constitute an earnings forecast.
Changes in directorate
The Board of directors of Kumba announced the following changes in Kumbas
directorate during 2012. The Board expresses its gratitude to the members
who have resigned, for their invaluable contribution to the Board and the
company, and wishes them well in their future endeavours.
Resignations:
- Mr Chris Griffith, chief executive, on 31 August 2012;
- Mr Peter Matlare, a non-executive director, on 31 March 2012; and
- Mr Godfrey Gomwe, a non-executive director, on 15 October 2012.
Appointments:
- Mr Fani Titi as non-executive chairman, on 1 October 2012;
- Mr Norman Mbazima, as executive director and chief executive, on
1 September 2012;
- Mr Frikkie Kotzee, as executive director and chief financial officer, on
1 June 2012;
- Ms Buyelwa Sonjica, as a non-executive director, on 1 June 2012; and
- Ms Khanyisile Kweyama, as a non-executive director on 15 October 2012.
KUMBA IRON ORE LIMITED PRODUCTION AND SALES REPORT FOR THE YEAR ENDED
31 DECEMBER 2012
Total production increased by 4% year on year to 43.1 Mt mainly as a result
of the exceptional performance at Kolomela mine. This was partially offset
by a decline in production from Sishen mine due to the unprotected strike in
the fourth quarter and mining feedstock and quality constraints that
affected the availability of material supplied to the mines processing
plants. Kolomela mine delivered an outstanding performance and produced
8.5 Mt for the year.
Total export sales volume of 39.7 Mt for the year increased by 7% year on
year. Domestic sales of 4.7 Mt declined by 27% year on year due to reduced
off take from AMSA.
Yearly overview
Year ended
Unaudited Unaudited % change
000 tonnes 31 Dec 2012 31 Dec 2011
Yearly production overview
Total production 43,066 41,268 4
Sishen mine 33,697 38,899 (13)
DMS plant 23,083 25,359 (9)
Jig plant 10,614 13,540 (22)
Kolomela mine 8,545 1,466 483
Thabazimbi mine 824 903 (9)
Sales summary
Year ended
Unaudited Unaudited % change
000 tonnes 31 Dec 2012 31 Dec 2011
Total sales 44,340 43,572 2
Export sales 39,657 37,131 7
Domestic sales 4,683 6,441 (27)
Sishen mine 3,436 5,082 (32)
Thabazimbi mine 1,247 1,359 (8)
Salient features and operating statistics
for the year ended 31 December 2012
Unaudited Unaudited
31 Dec 2012 31 Dec 2011
Share statistics (000)
- Total shares in issue 322,059 322,059
- Weighted average number of shares 321,223 320,896
- Diluted weighted average number
of shares 321,754 321,719
- Treasury shares 1,064 1,076
- Treasury shares (Rand million) 487 336
Market information
- Closing share price (Rand) 568.88 500.00
- Market capitalisation (Rand million) 183,213 161,030
- Market capitalisation (US$ million) 21,616 19,686
Net asset value (Rand per share) 46.46 49.16
Capital expenditure (Rand million)
- Incurred 5,399 5,849
- Contracted 772 1,988
- Authorised but not contracted 1,335 2,168
Capital expenditure relating to
Thabazimbi mine to be financed
by AMSA
- Contracted 7 29
- Authorised but not contracted 16 7
Operating commitments
- Operating lease commitments 93 88
- Shipping services 8,762 9,469
Economic information
- Average Rand/US dollar exchange rate
(ZAR/US$) 8.19 7.25
- Closing Rand/US dollar exchange rate
(ZAR/US$) 8.48 8.18
Operating statistics (Mt)
- Production 43.1 41.3
- Sishen mine 33.7 38.9
- Kolomela mine 8.5 1.5
- Thabazimbi mine 0.8 0.9
- Sales 44.4 43.5
- Export 39.7 37.1
- Domestic 4.7 6.4
- Sishen mine 3.5 5.1
- Thabazimbi mine 1.2 1.3
Sishen mine FOR unit cost
- Unit cost (Rand per tonne) 257.39 178.90
- Cash cost (Rand per tonne) 209.69 150.47
- Unit cost (US$ per tonne) 31.43 24.68
- Cash cost (US$ per tonne) 25.60 20.75
Kolomela mine FOR unit cost
- Unit cost (Rand per tonne) 255.69 -
- Cash cost (Rand per tonne) 190.83 -
- Unit cost (US$ per tonne) 31.22 -
- Cash cost (US$ per tonne) 23.30 -
FINANCIAL RESULTS
The audited condensed consolidated financial results for the year ended
31 December 2012 were prepared under the supervision of the chief financial
officer, FT Kotzee, CA(SA). Our results were made available on our website
on 12 February 2013 (http://www.angloamericankumba.com/investor_main.php).
The full annual financial statements will be published on our website on
Thursday, 28 March 2013. Copies of the annual financial statements can be
downloaded from our website or obtained from our investor relations
department from this date.
Condensed group balance sheet
as at 31 December 2012
Audited Audited
Rand million Notes 31 Dec 2012 31 Dec 2011
Assets
Property, plant and equipment 5 24,765 20,878
Biological assets 8 6
Investments in associate and
joint ventures 47 33
Investments held by environmental
trust 673 568
Long-term prepayments and other
receivables 130 95
Deferred tax assets 842 658
Non-current assets 26,465 22,238
Inventories 4,136 3,864
Trade and other receivables 4,332 3,537
Current tax asset 76 32
Cash and cash equivalents 1,527 4,742
Current assets 10,071 12,175
Total assets 36,536 34,413
Equity
Shareholders' equity 6 14,964 15,833
Non-controlling interest 4,345 4,759
Total equity 19,309 20,592
Liabilities
Interest-bearing borrowings 7 3,200
Provisions 1,420 901
Deferred tax liabilities 6,697 4,942
Non-current liabilities 11,317 5,843
Short-term portion of
interest-bearing borrowings 7 2,669 3,191
Short-term portion of
provisions 26 11
Trade and other payables 3,012 4,556
Current tax liabilities 203 220
Current liabilities 5,910 7,978
Total liabilities 17,227 13,821
Total equity and liabilities 36,536 34,413
Condensed group income statement
for the year ended 31 December 2012
Audited Audited
Rand million Note 31 Dec 2012 31 Dec 2011
Revenue 45,446 48,553
Operating expenses 8 (22,293) (16,587)
Operating profit 8 23,153 31,966
Finance income 102 241
Finance costs (405) (149)
Profit before taxation 22,850 32,058
Taxation (6,750) (9,760)
Profit for the year 16,100 22,298
Attributable to:
Owners of Kumba 12,212 17,042
Non-controlling interest 3,888 5,256
16,100 22,298
Earnings per share for profit
attributable to the owners of
Kumba (Rand per share)
Basic 38.02 53.11
Diluted 37.95 52.97
Condensed group statement of other comprehensive income
for the year ended 31 December 2012
Audited Audited
Rand million 31 Dec 2012 31 Dec 2011
Profit for the year 16,100 22,298
Other comprehensive income
for the year, net of tax 155 404
- Exchange differences on translation
of foreign operations 193 363
- Net effect of cash flow hedges (38) 41
Total comprehensive income for the year 16,255 22,702
Attributable to:
Owners of Kumba 12,342 17,340
Non-controlling interest 3,913 5,362
16,255 22,702
Condensed group statement of changes in equity
for the year ended 31 December 2012
Audited Audited
Rand million Note 31 Dec 2012 31 Dec 2011
Total equity at the beginning of
the year 20,592 18,376
Changes in share capital and premium 6
Shares issued during the year 5 16
Treasury shares issued to employees
under employee share incentive schemes 105 139
Purchase of treasury shares (261) (278)
Changes in reserves
Equity-settled share-based payment 579 265
Vesting of shares under employee
share incentive schemes (123) (139)
Vesting of Envision share scheme - (2,013)
Total comprehensive income for
the year 12,342 17,340
Dividends paid (13,516) (13,835)
Changes in non-controlling interest
Total comprehensive income for
the year 3,913 5,362
Envision share scheme second phase
increase - (4)
Dividends paid (4,490) (4,078)
Movement in non-controlling interest
in reserves 163 (559)
Total equity at the end of the year 19,309 20,592
Comprising
Share capital and premium
(net of treasury shares) 6 (121) 30
Equity-settled share-based
payment reserve 822 307
Foreign currency translation reserve 571 423
Cash flow hedge reserve (24) (6)
Retained earnings 13,716 15,079
Shareholders' equity 14,964 15,833
- Attributable to the owners of Kumba 14,399 15,214
- Attributable to the non-controlling
interest 565 619
Non-controlling interest 4,345 4,759
Total equity 19,309 20,592
Dividend (Rand per share)
Interim 19.20 21.70
Final* 12.50 22.50
*The final dividend was declared after 31 December 2012 and has not been
recognised as a liability in this condensed consolidated financial report.
It will be recognised in shareholders equity in the year ending 31 December
2013.
Condensed group cash flow statement
for the year ended 31 December 2012
Audited Audited
Rand million Notes 31 Dec 2012 31 Dec 2011
Cash generated from operations 24,170 32,814
Net finance costs paid (227) (96)
Taxation paid (5,215) (7,035)
Cash flows from operating activities 18,728 25,683
Additions to property, plant and
equipment 5 (5,399) (5,849)
Investments in associate and
joint ventures (14) (4)
Investments held by environmental
trust (45) (183)
Proceeds from disposal of
non-current assets 37 2
Proceeds from disposal of investments 3 -
Cash flows from investing activities (5,418) (6,034)
Shares issued 6 5 16
Purchase of treasury shares 6 (261) (278)
Vesting of Envision share scheme (968) (1,694)
Dividends paid to owners of Kumba (13,428) (13,742)
Dividends paid to non-controlling
shareholders (4,578) (4,170)
Net interest-bearing borrowings raised 2,678 -
Cash flows from financing activities (16,552) (19,868)
Net decrease in cash and
cash equivalents (3,242) (219)
Cash and cash equivalents
at beginning of year 4,742 4,855
Exchange differences on translation
of cash and cash equivalents 27 106
Cash and cash equivalents
at end of year 1,527 4,742
The cash contributions to the environmental trust was previously disclosed
as Cash paid to suppliers and employees as a cash flow from operating
activities. It has been included as a cash flow from investing activities
for 2012 to reflect the underlying cash flows from the transactions. The
comparatives were adjusted to reflect this change in classification.
Headline earnings
for the year ended 31 December 2012
Audited Audited
Rand million 31 Dec 2012 31 Dec 2011
Reconciliation of headline earnings
Profit attributable to owners of Kumba 12,212 17,042
Net (profit)/loss on disposal and
scrapping of property, plant and
equipment (21) 10
Net profit on disposal of investment (3) -
12,188 17,052
Taxation effect of adjustments 6 (3)
Non-controlling interest in adjustments 4 (1)
Headline earnings 12,198 17,048
Headline earnings (Rand per share)
Basic 37.97 53.13
Diluted 37.91 52.99
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 of
ordinary shares 321,223,241 320,895,696
Diluted weighted average number
of ordinary shares 321,753,827 321,719,426
The adjustment of 530,586 shares (2011: 823,730) to the weighted average
number of ordinary shares is as a result of the vesting of share options
previously granted under various employee share incentive schemes.
Notes to the audited condensed consolidated financial report
1. 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, marketing, sale
and shipping of iron ore. The group has its primary listing on the JSE
Limited (JSE).
The audited condensed consolidated financial report of Kumba and its
subsidiaries for the year ended 31 December 2012 was authorised for issue in
accordance with a resolution of the directors on 8 February 2013.
2. Basis of preparation
The audited condensed consolidated financial report has been prepared
in accordance with the framework concepts and the recognition and
measurement principles of International Financial Reporting Standards
(IFRS), including the information required by International Accounting
Standard (IAS) 34, Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee, the
Listings Requirements of the JSE, and the requirements of the South African
Companies Act No 71 of 2008.
The audited 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 Kumbas functional and
presentation currency.
3. Accounting policies
The accounting policies and methods of computation applied in the
preparation of the audited condensed consolidated financial report are
consistent with those applied for the year ended 31 December 2011.
There were no IFRSs, amendments to IASs or IFRIC interpretations that are
effective for the first time for the financial year beginning on or after
1 January 2012 that had a material impact on the group.
The accounting standards, amendments to issued accounting standards and
interpretations, which are relevant to the group but not yet effective at
31 December 2012, are being evaluated for the impact of these
pronouncements.
4. Change in estimates
Management has revised the estimated rehabilitation and decommissioning
provisions at Sishen, Kolomela and Thabazimbi mines as a result of an
independent review and standardisation of all closure cost estimates across
the group.
The life of mine plan on which accounting estimates are based, only includes
proved and probable ore resources as disclosed in Kumbas annual ore
reserves and mineral resources statement. The effect of these changes is
detailed below:
Audited
Rand million 31 Dec 2012
Increase in environmental
rehabilitation provision 371
Increase in decommissioning provision 70
The change in estimate in the environmental rehabilitation provision was
applied prospectively and resulted in a decrease in profit before taxation
and headline earnings per share for the year ended 31 December 2012 of
R371 million and 89 cents, respectively. The change in estimate in the
decommissioning provision has been capitalised to the related property,
plant and equipment.
5. Property, plant and equipment
Audited Audited
Rand million 31 Dec 2012 31 Dec 2011
Capital expenditure 5,399 5,849
Comprising:
- Expansion 2,195 3,104
- Stay in business (SIB) 3,204 2,745
Transfers from assets under construction
to property, plant and equipment 3,905 8,952
Expansion capital expenditure comprised mainly of housing expenditure for
Kolomela mine and the first phase of SWEP. SIB capital expenditure to
maintain operations was principally for the acquisition of heavy mining
equipment and workshop infrastructure for Sishen mine.
6. Share capital
Audited Audited
Rand million 31 Dec 2012 31 Dec 2011
Reconciliation of share capital and
share premium (net of treasury shares):
Balance at beginning of year 30 153
Total shares issued for cash consideration 5 16
Shares issued share premium - 16
Net movement in shares held by
Kumba Iron Ore Management Share Trust 5
Net movement in treasury shares
under employee share incentive schemes (156) (139)
Purchase of treasury shares (261) (278)
Shares issued to employees 105 139
Share capital and share premium (121) 30
Audited Audited
Number of shares 31 Dec 2012 31 Dec 2011
Reconciliation of number of shares
in issue:
Balance at beginning of year 322,058,624 321,911,721
Ordinary shares issued - 5,377,770
Ordinary shares repurchased
and cancelled - (5,230,867)
Balance at end of year 322,058,624 322,058,624
Audited Audited
Number of shares 31 Dec 2012 31 Dec 2011
Reconciliation of treasury shares held:
Balance at beginning of year 1,075,970 818,272
Shares purchased 473,435 550,781
Shares issued to employees under the
Long-Term Incentive Plan, Kumba
Bonus Share Plan and Share
Appreciation Rights Scheme (400,542) (252,985)
Net movement in shares held by
Kumba Iron Ore Management Share Trust (84,332) (40,098)
Balance at end of year 1,064,531 1,075,970
Treasury shares held as conditional
share awards under the Kumba
Bonus Share Plan 1,035,173 722,701
7. Interest-bearing borrowings
Kumbas net debt/(cash) position at the balance sheet dates was as follows:
Audited Audited
Rand million 31 Dec 2012 31 Dec 2011
Interest-bearing borrowings 5,869 3,191
Cash and cash equivalents (1,527) (4,742)
Net debt/(cash) 4,342 (1,551)
Total equity 19,309 20,592
Interest cover (times) 76 206
Movements in interest-bearing borrowings are analysed as follows:
Audited Audited
Rand million 31 Dec 2012 31 Dec 2011
Balance at beginning of year 3,191 3,185
Interest-bearing borrowings raised 5,869 -
Interest-bearing borrowings repaid (3,195) -
Deferred transaction costs recognised 4 6
Balance at end of year 5,869 3,191
At 31 December 2012, R3.2 billion of the total R8.6 billion long-term debt
facilities and R2.7 billion of the total short-term uncommitted facilities
of R6.3 billion has been drawn down. Kumba was not in breach of any of its
covenants during the year. The group had undrawn long-term borrowing and
uncommitted short-term facilities at 31 December 2012 of R9.0 billion (2011:
R9.3 billion).
A committed debt facility of R6 billion was secured, which replaces a
maturing facility, effective from 1 January 2013. The interest on the
facility is charged at Jibar plus a margin, determined by the period for
which the funds are borrowed.
8. Significant items included in operating profit
Operating expenses is made up as follows:
Audited Audited
Rand million 31 Dec 2012 31 Dec 2011
Production costs 13,832 8,910
Movement in inventories 59 (149)
- Finished products 441 247
- Work-in-progress (382) (396)
Cost of goods sold 13,891 8,761
Mineral royalty 1,127 1,762
Selling and distribution costs 4,065 3,698
Cost of services rendered shipping 3,222 2,374
Sublease rent received (12) (8)
Operating expenses 22,293 16,587
Operating profit has been derived after taking into account the following
items:
Audited Audited
Rand million 31 Dec 2012 31 Dec 2011
Employee expenses 3,466 2,408
Share-based payment expenses 756 369
Depreciation of property, plant and equipment 1,524 997
Net (profit)/loss on disposal and
scrapping of property, plant and equipment (21) 10
Finance gains (148) (587)
Operating expenses capitalised (98) (971)*
* The capitalisation of operating expenses for the year ended 31 December
2011 mainly related to operating costs of R953 million incurred on 34.6 Mt
of material mined at Kolomela mine that have been capitalised to property,
plant and equipment as part of the directly attributable cost of bringing
the mine into production in December 2011.
9. Segmental reporting
Sishen Kolomela Thabazimbi
Rand million mine mine1 mine
Year ended 31 Dec 2012
Revenue 31,227 7,756 1,014
EBIT 21,250 5,288 (25)
Total segment assets 404 198 130
Year ended 31 Dec 2011
Revenue 44,903 32 907
EBIT 32,661 (80) 112
Total segment assets 392 133 268
Inter-
Logistics Shipping segment
Rand million operations2 operations elimination Total
Year ended 31 Dec 2012
Revenue 35,049 3,192 (32,792) 45,446
EBIT (1,754) (30) 9 24,738
Total segment assets - - - 732
Year ended 31 Dec 2011
Revenue - 2,711 - 48,553
EBIT - 337 - 33,030
Total segment assets - - - 793
1 Kolomela mine delivered initial production during 2011 and the financial
performance for the audited 12 months ended 31 December 2011 represented the
month of December 2011.
2 A new segment, Logistics operations, has been reported for 2012, following
an internal restructuring of our operations. It represents our rail and port
operations. Sishen and Kolomela mine sell their ore available for the
export market to the logistics operation, who then sells the ore to
external customers through the marketing organisation.
12 months 12 months
Audited Audited
Rand million 31 Dec 2012 31 Dec 2011
Revenue from external customers
analysed by goods and services
Sale of products* 42,254 45,842
Shipping services 3,192 2,711
Total revenue 45,446 48,553
Reconciliation of EBIT to total
profit before taxation
EBIT for reportable segments 24,738 33,030
Other segments (1,585) (1,064)
Operating profit 23,153 31,966
Net finance (costs)/income (303) 92
Profit before taxation 22,850 32,058
Reconciliation of reportable
segments assets to total assets
Segment assets for reportable segments 732 793
Other segments and WIP inventory 3,404 3,071
Inventory per balance sheet 4,136 3,864
Other current assets 5,935 8,311
Non-current assets 26,465 22,238
Total assets 36,536 34,413
* Derived from extraction, production and selling of iron ore.
The total reported segment revenue is measured in a manner consistent with
that disclosed in the income statement.
The performance of the operating segments are assessed based on a measure of
earnings before interest and taxation (EBIT), which is measured in a manner
consistent with Operating profit in the financial statements. Finance
income and finance costs are not allocated to segments, as treasury activity
is managed on a central group basis.
Total segment assets comprise finished goods inventory only, which is
allocated based on the operations of the segment and the physical location
of the asset.
Other segments comprise corporate, administration and other expenditure
not allocated to the reported segments.
Geographical analysis of revenue and non-current assets:
Audited Audited
Rand million 31 Dec 2012 31 Dec 2011
Total revenue from external customers
South Africa 2,832 3,388
Export 42,614 45,165
- China 28,277 29,904
- Rest of Asia 9,889 9,274
- Europe 4,322 5,450
- Middle East 126 227
- Americas - 310
45,446 48,553
Total non-current assets*
South Africa 25,445 21,450
China 1 2
25,446 21,452
* Excluding prepayments, investments in associates and joint ventures and
deferred tax assets.
10. Related party transactions
During the period, Kumba, in the ordinary course of business, entered into
various sale, purchase and service transactions with associates, joint
ventures, fellow subsidiaries, its holding company and Exxaro Resources
Limited. These transactions were subject to terms that are no less
favourable than those offered by third parties.
Included in cash and cash equivalents at 31 December 2012 is a short-term
deposit facility placed with Anglo American SA Finance Limited (AASAF) of
R237 million (2011: R3 885 million). Interest earned on this facility during
the year was market related and amounted to R83 million (2011: R197 million)
at a weighted average interest rate of 5.45% (2011: 5.36%).
Interest-bearing borrowings drawn down at 31 December 2012 of R5 869 million
(2011: R nil) was from facilities with AASAF. Interest paid on these
borrowings during the year was market related and amounted to R118 million
(2011: R nil) at a weighted average interest rate of 6.25%.
11. Contingent assets and liabilities
Kumba initiated arbitration proceedings against La Société des Mines De Fer
Du Sénégal Oriental (Miferso) and the Republic of Senegal under the rules of
the Arbitration of the International Chamber of Commerce in 2007, in
relation to the Falémé Project.
Following the arbitration award rendered in July 2010, a mutually agreed
settlement was concluded between the parties. The parties agreed that the
precise terms of the settlement agreement will remain confidential. The
first settlement was paid by the Republic of Senegal in April 2011. A
portion of the second instalment was received in December 2012. In terms of
the settlement agreement, the remaining settlement amount is expected to be
recovered in equal instalments from the Republic of Senegal over the
remaining three-year period.
12. Legal proceedings
12.1. Sishen Supply Agreement arbitration
A dispute arose between Sishen Iron Ore Company Proprietary Limited (SIOC)
and ArcelorMittal South Africa Limited (AMSA) in February 2010, in relation
to SIOCs contention that the contract mining agreement concluded between
them in 2001 had become inoperative as a result of the fact that AMSA had
failed to convert its old order mining rights. This dispute has been
referred to arbitration.
On 9 December 2011, SIOC and AMSA agreed to delay the arbitration
proceedings in relation to the Sishen Supply Agreement until the final
resolution of the mining rights dispute. This arbitration is only expected
to commence in the fourth quarter of 2013, with possible resolution only
expected in the third quarter of 2014 at the earliest (see 12.2 below).
An Interim Pricing Agreement between SIOC and AMSA was in place until
31 July 2012 which was extended to 31 December 2012.
In December 2012 a further interim agreement was concluded, after
negotiations which were facilitated by the Department of Trade and Industry
(DTI). The further interim agreement will govern the sale of iron ore from
the Sishen mine to AMSA for the period 1 January 2013 to 31 December 2013,
or until the conclusion of the legal processes in relation to the 2001
Sishen Supply agreement (whichever is the sooner), at a weighted average
price of US$65 per tonne. Of the total 4.8 Mt, about 1.5 Mt is anticipated
to be railed to Saldanha Steel and the rest to AMSAs inland operations.
12.2. 21.4% undivided share of the Sishen mine mineral rights
After AMSA failed to convert its old order rights, SIOC applied for the
residual 21.4% mining right previously held by AMSA and its application was
accepted by the Department of Mineral Resources (DMR) on 4 May 2009.
A competing application for a prospecting right over the same area was also
accepted by the DMR. SIOC objected to this acceptance. Notwithstanding this
objection, a prospecting right over the 21.4% interest was granted by the
DMR to Imperial Crown Trading 289 (Pty) Limited (ICT). SIOC initiated a
review application in the North Gauteng High Court on 21 May 2010 in
relation to the decision of the DMR to grant a prospecting right to ICT.
In December 2011 judgment was delivered in the High Court regarding the
status of the mining rights at the Sishen mine. The High Court held that,
upon the conversion of SIOCs old order mining right relating to the Sishen
mine properties in 2008, SIOC became the exclusive holder of a converted
mining right for iron ore and quartzite in respect of the Sishen mine
properties. The High Court held further that as a consequence, any decision
taken by the DMR after such conversion in 2008 to accept or grant any
further rights to iron ore at the Sishen mine properties was void. Finally,
the High Court reviewed and set aside the decision of the DMR to grant a
prospecting right to ICT relating to a 21.4% share in respect of the Sishen
mine properties.
On 3 February 2012 both the DMR and ICT submitted applications for leave to
appeal against the High Court judgment. SIOC applied for leave to present a
conditional cross-appeal, in order to protect its rights. The Supreme Court
of Appeal (SCA) hearing will be held on 19 February 2013, and the SCA
judgement is expected to be received early in the second half of 2013.
The High Court order did not affect the interim supply agreement between
AMSA and SIOC, which was in place until 31 July 2012 and was extended to
31 December 2012 as indicated in note 12.1 above.
SIOC will continue to take the necessary steps to protect its shareholders
interests in this regard.
12.3. Project Phoenix dispute
A dispute exists between AMSA and SIOC concerning AMSAs contention that it
holds an entitlement to require SIOC to supply AMSA with iron ore produced
from the Phoenix Project in terms of the Thabazimbi Supply Agreement. The
Phoenix project is a reserve located within the Thabazimbi mining licence
area. SIOC is the holder of such mining right. In November 2001, a captive
mine supply agreement was concluded with AMSA in terms of which ore
produced at Thabazimbi is supplied to AMSA on a cost-plus basis. There are a
number of provisions in this agreement that regulate the development of
future ore reserves.
AMSA took a strategic decision in November 2006 not to participate in this
Project Phoenix. Kumba accepted AMSAs election and decided to develop the
Phoenix project independently and at its own cost.
In 2011, AMSA indicated that it now wished to pursue the Phoenix project,
and formally declared a dispute with Kumba early in 2012 on the basis that
the supply agreement entitles AMSA to obtain all ore from Thabazimbi.
Kumba rejected this premise and, in line with the supply agreement dispute
mechanisms, a mediation meeting of the respective CEOs was held on
6 June 2012, without resolution. The agreement requires that disputes are
thereafter escalated to arbitration. The matter has not subsequently
progressed.
12.4. Sishen Supply Agreement cost recovery
A dispute relating to historical cost recovery by SIOC, in terms of the
Sishen-AMSA supply agreement (prior to 2010) has been declared by AMSA.
A mediation meeting of the respective CEOs was held on 6 June 2012, as
provided for in the supply agreement as a first step in dispute resolution,
has not resulted in a resolution.
AMSA has indicated its intention to pursue the matter. Kumba will defend its
position.
12.5. Lithos Corporation Proprietary Limited
Lithos Corporation Proprietary Limited is claiming US$421 million from
Kumba for damages in relation to the Falémé project in Senegal. 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. The trial date has now been set for the first quarter
of 2013.
13. Corporate governance
The group subscribes to the Code of Good Corporate Practices and Conduct and
complies with the recommendations of the King III Report. Full disclosure of
the groups compliance will be contained in the 2012 Integrated Report.
14. Events after the reporting period
No further material events have occurred between the end of the reporting
period and the date of the release of these audited condensed consolidated
financial statements.
15. Independent auditors audit report
The auditors, Deloitte & Touche, have issued their opinion on the groups
annual financial statements for the year ended 31 December 2012. The audit
was conducted in accordance with International Standards on Auditing. They
have issued an unmodified audit opinion.
These audited condensed consolidated financial statements have been derived
from the group financial statements and are consistent in all material
respects with the group financial statements. A copy of their audit report
is available for inspection at the companys registered office, and is
incorporated in the full annual financial statements.
Any reference to future financial performance included in this announcement
has not been reviewed or reported on by the companys auditors.
On behalf of the Board
F Titi NB Mbazima
Chairman Chief executive
8 February 2013
Pretoria
NOTICE OF FINAL CASH DIVIDEND
At its Board meeting on 8 February 2013 the directors resolved to declare a
gross final cash dividend of 1,250 cents per share on the ordinary shares
from profits accrued during the year ended 31 December 2012. The dividend
has been declared from income reserves.
The company has utilised Secondary tax on Companies (STC) credits amounting
to 0.90691 cents per share. The balance of the dividend will be subject to
a dividend withholding tax of 15% for all shareholders who are not exempt
from or do not qualify for a reduced rate of withholding tax. The net
dividend, payable to shareholders subject to withholding tax at a rate of
15%, amounts to 1,062.63604 cents per share.
The issued share capital at the declaration date is 322,058,624 ordinary
shares.
The salient dates are as follows:
- Last day for trading to qualify and
participate in the final dividend
(and change of address or dividend instructions) Friday, 8 March 2013
- Trading ex-dividend commences Monday, 11 March 2013
- Record date Friday, 15 March 2013
- Dividend payment date Monday, 18 March 2013
Share certificates may not be dematerialised or rematerialised between
Monday, 11 March 2013 and Friday, 15 March 2013, both days inclusive.
By order of the Board
VF Malie
Company secretary
8 February 2013
Pretoria
ADMINISTRATION
Registered office:
Centurion Gate
Building 2B
124 Akkerboom Road
Centurion, 0157
Republic of South Africa
Tel: +27 12 683 7000
Fax: +27 12 683 7009
Transfer secretaries:
Computershare Investor Services Proprietary Limited
70 Marshall Street
Republic of South Africa
PO Box 61051, Marshalltown, 2107
12 February 2013
Sponsor to Kumba:
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Directors:
Non-executive F Titi (chairman), ZBM Bassa, GS Gouws, KT Kweyama,
DD Mokgatle, AJ Morgan, LM Nyhonyha, BP Sonjica, DM Weston
Executive NB Mbazima (chief executive), FT Kotzee (chief financial
officer)
Company secretary:
VF Malie
Company registration number:
No 2005/015852/06
Incorporated in the Republic of South Africa
Income tax number:
9586/481/15/3
JSE code: KIO
ISIN: ZAE000085346
(Kumba or the company or the group)
www.angloamericankumba.com
Date: 12/02/2013 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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