PALABORA MINING COMPANY LIMITED - Reviewed Provisional Results for the year ended 31 December 2013

Release Date: 04/03/2014 07:30
Code(s): PAM
 
Wrap Text
Reviewed Provisional Results for the year ended 31 December 2013

Palabora Mining Company Limited
and its Subsidiaries                   
("Group" or "Palabora" or "Company")
             
Incorporated in the Republic of South Africa
Registration Number: 1956/002134/06        
JSE Code: PAM              ISIN: ZAE000005245

REVIEWED PROVISIONAL RESULTS
for the year ended 31 December 2013

Company Secretary:    KN Mathole

Registered address:   1 Copper Road, Phalaborwa, 1389
                      PO Box 65, Phalaborwa, 1390

Transfer Secretaries: Computershare Investor Services Proprietary Limited
                      70 Marshall Street, Johannesburg, 2001
                      PO Box 61051, Marshalltown, 2107

Sponsor:              One Capital

The preparation of the condensed consolidated provisional financial information was
supervised by:

Dikeledi L Nakene (CA) SA

Chief Financial Officer

Key group financial statistics                                                          
                                                              Reviewed        Audited   
                                                          For the year   For the year   
                                                                 ended          ended   
                                                           31 December    31 December   
                                                                  2013           2012   
Post hedge revenue                                R'm           11 625          8 716   
Net profit/(loss) for the year                    R'm            1 032           (97)   
Basic earnings/(loss) per share                 Cents          2 136          (201)   
Earnings before interest, tax, depreciation and                                         
amortisation (EBITDA)                             R'm            1 669            413   
Adjusted EBITDA (excluding non-recurring items                                          
and growth costs)                                 R'm            2 536          1 097   
Headline earnings/(loss)                          R'm            1 033           (82)   
Headline earnings/(loss) per share              Cents          2 138          (171)   
Cash and cash equivalents                         R'm            3 342          1 980   
Exploration, development and growth costs                                               
(expense)                                         R'm              845            684   

Overview
Palabora reached a number of key milestones during the year of 2013.

   -   The Company welcomed new investors, a consortium of Chinese and South African
       entities led by Hebei Iron & Steel Group Co. Limited and the Industrial Development
       Corporation of South Africa SOC Limited (IDC), as the Rio Tinto and Anglo American
       divestment process was finalised during the second half of 2013.
   -   The Broad Based Black Economic Empowerment (BBBEE) Transaction came to
       effect on 15 July 2013.
   -   The hedge facility expired at the end of September 2013 with the last payment made
       in October 2013, which brings much needed relief to the copper business as it
       approaches the end of life of mine for the current Lift I operations in 2015.
   -   The major shareholders (Consortium) of Palabora made an offer to the remaining
       shareholders to acquire all their Palabora ordinary shares at the JSE Limited (JSE).
       Palabora will delist from the JSE once all shares have been mandatorily acquired in
       terms of the Take-over Regulation Panel (TRP). The Consortiums' interests were
       99.2% at year end. An application to delist was lodged with the JSE on 10 February
       2014 and management expect to be delisted by 15 April 2014.

   -   On 28 November 2013 the Board of Directors approved capital expenditure to the
       amount of R707 million to progress the Lift II project from prefeasibility to feasibility
       study. The feasibility study will be conducted from 1 January 2014 and is expected to
       be concluded around May 2014.

Magnetite sales volumes increased 30% to 6.38Mt compared to 4.89Mt for 2012 mainly due
to increased road trucking to the Maputo port and improved rail capacity to both the Maputo
and Richards Bay ports. The magnetite operations continues to do well and remains critical
to the business during the copper contraction phase pending on the Board's decision on Lift
II to extend the life of mine. Magnetite exports through the Maputo port were negatively
affected during the first quarter of 2013 by a rail bridge collapse due to a derailment in
Mozambique.

There were a number of challenges which affected copper production. During the first
quarter the underground south hoisting winder bearing failed followed by an unfortunate
illegal sit-in strike by underground employees. In the second quarter production was affected
by the underground north hoisting winder tail rope entanglement and a second unprotected
strike by smelter employees which compounded operational challenges at the same plant.
Eight Section 54s served by the Department of Mineral Resources (‘DMR') during the year
also affected production due to production days lost.

Taking the production challenges into consideration, Palabora's adjusted EBITDA, excluding
non-recurring items and growth costs increased 131% to R2.5 billion compared to 2012.
Palabora also managed to maintain a healthy cash position of R3.34 billion as at 31
December 2013 compared to R1.98 billion at 31 December 2012. This was mainly achieved
through an increase in magnetite sales, receipt of the insurance claim relating to the guide
rope failure in 2012 and the weakening of the rand against the US dollar.

Non-recurring items consist of the following transactions:

   -   Insurance claim of R244 million received during June and July 2013 in respect of the
       underground guide rope failure in the third quarter of 2012. In terms of the Palabora
       business interruption insurance policy the first 30 days were not covered and
       additionally the excess limit was US$10 million. See note 6 of the consolidated
       provisional financial information.
   -   A cost of R78 million (GBP4.7 million) for a debt under section 75 of the United
       Kingdom Pensions Act 1995 payable to the Rio Tinto Pension Fund. Palabora
       Europe Limited (PEL) is a subsidiary of Palabora and participated in a group pension
       arrangement of the Rio Tinto Pension Fund in the United Kingdom. Due to the
       divestment PEL ceased to participate in the Fund on 30 November 2013, which
       triggered the debt, payable to the Fund. The cost is included under "employee benefit
       expense" on note 8 of the consolidated provisional financial information.
   -   BBBEE share based expense of R151 million and minimum dividend liability expense
       of R37 million relating to the 6% shareholding by Palabora BEE Investment Company
       Proprietary Limited (BEE Consortium). See note 7 of the consolidated provisional
       financial information.

Safety
All injuries for 2013 decreased to 23 compared to 24 injuries for 2012, with an all injury
frequency rate of 0.46 for 2013 compared to 0.49 for 2012. The safety of our employees and
contractors remain the foremost priority for Palabora. For this reason sustaining capital
expenditure is largely restricted to safety and regulatory compliance during the copper
contraction phase of the current Lift I operation.

Copper production
Ore hoisted increased by 9% to 9.4Mt for 2013 compared to 8.6Mt for 2012 mainly due to
production recovery from the guide rope failure in 2012, partially offset by production
challenges highlighted above.

The ore grade was lower compared to 2012 (0.57% vs 0.59%) and consistent with
expectation as the current Lift I operations draw to an end in 2015.

Total ore treated increased by 3% to 9.5Mt for 2013 compared to 9.2Mt for 2012 and in line
with ore hoisted.

New concentrate smelted increased by 33% to 209kt compared to 157kt for 2012 due to
supplementary concentrate imports in 2013 (8.9kt contained copper) and production
recovery from the guide rope failure in 2012.

New copper anode production increased by 24% (51kt vs 41kt) and refined copper
production increased 20% to 49kt compared to 41kt for 2012.

Magnetite production
Total magnetite production, consisting of course material (65% fe), iron oxide (56% fe) and
dense medium separation fine material (DMS), increased to 6.5Mt from 5.3Mt in 2012. This
increase is in line with increased logistical capacity from road trucking to the Maputo port,
partially offset by the impact of a rail bridge collapse following a derailment in Mozambique
which affected production for two months during the first quarter of 2013.

Vermiculite production
Vermiculite production was deliberately decreased by 4% to 128kt compared to 133kt for
2012 to ensure continued alignment with sales in line with competitive market conditions.

Profit for the year
The increase in profit after tax to R1 032 million profit in 2013 from R97 million loss in 2012
is mainly due to:

   -   Post tax insurance claim of R176 million for the underground guide rope failure in
       2012;
   -   Net foreign exchange gains due to weakening of the rand against the US dollar
       (R9.65/US$ in 2013 vs R8.19/US$ in 2012);
   -   Increase in magnetite sales volumes and realised prices; and
   -   Hedge expiring on 30 September 2013.

The increase in profit after tax is partially offset by increase in growth costs, PEL pension
fund expense and the BBBEE share based costs.

Revenue                                                 
Turnover variance analysis                      (R'm)   
Turnover for the year ended 31 December 2012    8 716   
Copper price                                    (389)   
Magnetite price                                   263   
Vermiculite and by-products prices               (30)   
Hedge                                             144   
Foreign exchange                                1 736   
Flexed turnover                                10 440   
Copper volume                                   (731)   
Magnetite volume                                1 838   
Vermiculite volume                                 23   
By-product volume                                  55   
Turnover for the year ended 31 December 2013   11 625   

Revenue increased by 33% mainly due to the following:

   -   Increased magnetite sales volumes (6.4Mt vs 4.9Mt) from increased trucking to
       Maputo and marginally improved wagon availability from Transnet increased turnover
       by R1.8 billion;
   -   Weaker rand on foreign currency denominated sales increased turnover by R1.7
       billion;
   -   Lower copper prices and copper volumes (55kt vs 65kt) reduced turnover by R389
       million and R731 million respectively.

                                                For the year   For the year              
                                                       ended          ended              
                                                 31 December    31 December              
                                                        2013           2012   % change   
Copper sales volume mix (kt)                                                             
Copper rod*                                             53.6           51.6          4   
Cathode                                                  1.4            5.9       (76)   
Refined copper scrap                                     0.2            7.9       (97)   
Total copper sold                                       55.2           65.4       (16)   

* Includes rod produced from imported cathode                                            

                               For the year   For the year              
                                      ended          ended              
                                31 December    31 December              
                                       2013           2012   % change   
Magnetite sales volumes (kt)                                            
Export                                6 152          4 619         33   
Rail: Maputo port                     2 139          1 688         27   
Rail: Richards Bay port               1 558          1 551          -   
Trucking: Maputo port                 2 455          1 380         78   
Local sales                             232            273       (15)   
Total magnetite sold                  6 384          4 892         30   

Selling, distribution and administration costs
Selling and distribution costs increased 50% to R4.5 billion from R3 billion in 2012 mainly
due to increased magnetite sales and weaker rand against the US dollar. Magnetite sales
exports increased by 33% to 6.15Mt compared to 4.6Mt in 2012.

Administration expenses increased by 9% to R845 million compared to R772 million in 2012.

Cash flow and Capital
Cash generated from operating activities increased by 866% to R1.43 billion from R148
million in 2012 mainly due to the insurance claim received, increase in magnetite volumes
and realised prices and higher foreign exchange gains realised.

Capital expenditure increased to R406 million from R366 million in 2012. Growth capital
expenditure in respect of a magnetite belt filter plant and magnetite expansion project was
R85 million in 2013 compared to R111 million in 2012. Sustaining capital expenditure will be
maintained at minimum levels until the end of life of mine of Lift I unless such expenditure
can benefit Lift II.

Broad Based Black Economic Empowerment (‘BBBEE') Transaction
The group has fully met the equity ownership (26%) objectives of the Mineral and Petroleum
Resources Development Act as it recognises that the transformation of the equity ownership
of the company is a key strategic goal. Our BBBEE partners comprise our employees
(Palabora Employee Trust at 10% shareholding), the community (Leolo Trust at 10%
shareholding) and BBBEE Consortium (6% shareholding).

As part of the BBBEE Transaction a subsidiary of Palabora Mining Company Limited,
Palabora Copper Proprietary Limited was formed. On 15 July 2013 the BBBEE Transaction
was implemented, where after Palabora Copper Proprietary Limited became the operating
company and Palabora Mining Company Limited became the holding company.

On the effective date Palabora Mining Company Limited sold its business comprising the
copper, magnetite and vermiculite operations to Palabora Copper Proprietary Limited and
also transferred all existing contracts with suppliers and customers, assets (except cash in
excess of R400 million) and liabilities to Palabora Copper Proprietary Limited.

Palabora Copper Proprietary Limited issued shares to the BBBEE partners such that the
BBBEE partners collectively have 26% interest in Palabora Copper Proprietary Limited. The
ownership of Palabora Copper Proprietary Limited, since 15 July 2013, is structured as
follows:

   -   74% owned by Palabora Mining Company Limited;
   -   10% owned by Palabora Employee Trust;
   -   10% owned by Leolo Trust i.e. the Community Trust; and
   -   6% owned by Palabora BEE Investment Company Proprietary Limited.

Social responsibility
During the year Palabora disbursed R38 million (2012: R43 million) in support of Enterprise
and Socio Economic Development through the Palabora Foundation in terms of the BBBEE
Act and the Mining Charter to ensure self sustainability of the surrounding communities.

Directorship
Pursuant to the completion of the Rio Tinto and Anglo American Divestment, the following
non-executive directors Messrs Craig Kinnell, Jean-Sabastien Jacques (and his alternate,
Eric Yan), Hendrik Faul and the Managing Director, Anthony Lennox, have resigned with
effect from 31 July 2013.

Mr Jinghua Han was appointed as a non-executive, non-independent director effective from
31 July 2013. With effect from 1 November 2013 he was appointed as an executive director
and Chief Executive Officer of Palabora.

With effect from 31 July 2013, Messrs Jie Yan, Abel Patrick Malinga and George Maanda
Negota were appointed as non-executive, non-independent directors of the company.

Messrs Zejun Tian and Ng Tze For (‘Benjamin') were appointed as non-executive, non-
independent alternate directors, with effect from 31 July 2013.

Mr Abel Patrick Malinga resigned from the Board with effect from 1 November 2013 and Ms
Katinka Schumann was appointed as non-executive, non-independent director with effect
from 1 November 2013.

At 31 December 2013 the Palabora Board was constituted as follows:

Directors
1. Clifford N Zungu (Chairman)^
2. Jinghua Han (Chief Executive Officer)* (Chinese)
3. Dikeledi L Nakene (Chief Financial Officer)*
4. Francine A du Plessis^
5. Moegamat R Abrahams^
6. Nhlanhla A Hlubi^
7. Peter K Ward^
8. George M Negota#
9. Jie Yan (Chinese) #
10. Katinka Schumann#
*Executive director
^ Independent non-executive
# Non-executive
Alternate directors

Ng Tze For (Chinese)

Appreciation
We are grateful to all the employees, contractors and all stakeholders for their continued
support and dedication to Palabora.

CN Zungu           J Han                     DL Nakene
Chairman           Chief Executive Officer   Chief Financial Officer

28 February 2014

Group selected statistics                                                           
                                                                   31          31   
                                                             December    December   
                                                                 2013        2012   
Revenue                                                                             
Copper (net of hedge)                        Rand million       3 074       3 283   
Magnetite                                    Rand million       7 862       4 890   
By-products                                  Rand million         222         138   
Industrial minerals                          Rand million         467         405   
Net profit/(loss) before tax                 Rand million       1 534       (110)   
Copper                                                                              
Dry ore hoisted                               kilo tonnes         9.4         8.6   
Underground ore treated                       kilo tonnes         9.5         9.2   
Average copper grade                                 % Cu        0.57        0.59   
New copper in concentrate produced            kilo tonnes        41.4        49.1   
Cathode produced                              kilo tonnes        48.9        40.9   
Average copper price realised                      USc/lb       337.1       365.2   
Average LME copper price                           USc/lb       333.4       360.7   
Average ZAR/US$ exchange rate                       R/US$        9.65        8.19   
Spot ZAR/US$ exchange rate                          R/US$       10.49        8.48   
Average copper price realised (pre-hedge)         R/tonne      71 710      65 943   
Average copper price realised (post-hedge)        R/tonne      55 746      50 250   
Magnetite                                                                           
Magnetite produced                            kilo tonnes       6 517       5 280   
Magnetite sold                                kilo tonnes       6 384       4 892   
Average magnetite price realised                  R/tonne       1 231       1 000   
Average magnetite price realised                US$/tonne         128         122   
Vermiculite                                                                         
Vermiculite sold                                   tonnes     121 490     115 428   
Average vermiculite price realised                R/tonne       3 845       3 508   
Anode slimes                                                                        
Anode slimes sold                                  tonnes         165         121   
Average anode slimes price realised               R/tonne   1 220 667   1 008 842   
Nickel sulphate                                                                     
Nickel sulphate sold                               tonnes         144         155   
Average nickel sulphate price realised            R/tonne      27 666      28 621   
Sulphuric acid                                                                      
Sulphuric acid sold                                tonnes      75 140      65 502   
Average sulphuric acid price realised             R/tonne         226         182   
Imported concentrate purchased                                                      
Volumes (copper contained)                         tonnes       8 848           -   
Cost                                         Rand million         661           -   
Average unit purchase price                       R/tonne      74 745           -   

                                                                    31         31   
                                                              December   December   
                                                                  2013       2012   
Imported cathode purchased                                                          
Volumes                                              tonnes      6 457     12 585   
Cost                                           Rand million        468        860   
Average unit purchase price                         R/tonne     72 528     68 311   
Imported rod purchased                                                              
Volumes                                              tonnes          -      6 735   
Cost                                           Rand million          -        440   
Average unit purchase price                         R/tonne          -     65 350   
Cash flow                                                                           
Net cash generated from operating activities   Rand million      1 430        148   
Cash and cash equivalents                      Rand million      3 342      1 980   
Costs                                                                               
Production cost (excluding product                                                  
purchases)                                     Rand million      2 702      2 460   
Cost of sales                                  Rand million      4 411      4 338   
Total capital expenditure                      Rand million        406        366   
Sustaining capital                             Rand million        321        255   
Growth capital                                 Rand million         85        111   
Share capital                                                                       
Authorised ordinary shares of R1 each                 R'000    100 000    100 000   
Issued ordinary shares of R1 each                     R'000     48 337     48 337   
Net asset value per share                           R/share        126         86   

Palabora Mining Company Ltd and its subsidiaries
Reviewed condensed consolidated income statement

                                                             Reviewed        Audited   
                                                         For the year   For the year   
                                                                ended          ended   
                                                          31 December    31 December   
                                                  Note           2013           2012   
                                                                  R'm            R'm   
Sale of products                                               12 506          9 741   
Hedge loss realised                                             (881)        (1 025)   
Revenue                                                        11 625          8 716   
Cost of sales                                                 (4 411)        (4 338)   
Gross profit                                                    7 214          4 378   
Selling and distribution costs                       4        (4 543)        (3 018)   
Administration expenses                                         (845)          (772)   
Mineral and petroleum royalty                                    (98)           (47)   
Exploration, development and growth costs            5          (845)          (684)   
Impairment of property, plant and equipment                         -           (22)   
Other income                                         6            271             23   
Share based payment and minimum dividends            7            187              -   
Other expenses                                                   (41)           (31)   
Profit/(loss) before net finance income and                                          
tax                                                  8            926          (173)   
Net finance income                                   9            608             63   
Finance income                                       9            669            122   
Finance cost                                         9           (61)           (59)   
Profit/(loss) before tax                                        1 534          (110)   
Income tax (expense) / income                       10          (502)             13   
Profit/(loss) for the year                                      1 032           (97)   
Profit/(loss) for the year attributable to:                                          
Equity holders of the parent                                    1 032           (97)   
Earnings/(loss) per share attributable to the                                        
equity holders of the parent (expressed in                                             
cents per share)                                                                       
Basic and diluted earnings/(loss) per share                                          
(cents)                                             11          2 136          (201)   

The notes on pages 15 to 25 are an integral part of the condensed consolidated provisional
financial information.

Reviewed condensed consolidated statement of comprehensive income

                                                            Reviewed        Audited   
                                                        For the year   For the year   
                                                               ended          ended   
                                                         31 December    31 December   
                                                                2013           2012   
                                                                 R'm            R'm   
Profit/(loss) for the year                                     1 032           (97)   
Other comprehensive income:                                                           
Items that will not be reclassified to profit or loss              -           (14)   
Actuarial loss on defined benefit plans                            -           (19)   
Income tax relating to items that will not be                                         
reclassified                                                       -              5   
Items that may be subsequently reclassified to                                        
profit or loss                                                   762            695   
Available-for-sale investments                                                        
-   Valuation gains arising during the year                      134             57   
Exchange differences on translation of foreign                                        
operations                                                        48             16   
Cash flow hedges                                                                      
-   Mark to market losses arising during the year               (30)          (150)   
-   Transferred to profit or loss for the year                   881          1 025   
-   Hedge ineffectiveness                                          4              6   
Income tax relating to items that may be                                              
subsequently reclassified                                      (275)          (259)   
Other comprehensive income for the year, net                                          
of tax                                                           762            681   
Total comprehensive income for the year                        1 794            584   
Total comprehensive income attributable to:                                           
Equity holders of the parent                                   1 794            584   

The notes on pages 15 to 25 are an integral part of the condensed consolidated provisional
financial information.

Reviewed condensed consolidated statement of financial position

                                                       Reviewed       Audited   
                                                          As at         As at   
                                                    31 December   31 December   
                                                           2013          2012   
                                             Note           R'm           R'm   
Assets                                                                          
Non-current assets                                        3 042         3 098   
Property, plant and equipment                             2 254         2 474   
Intangible assets                                            13            12   
Financial assets                                            757           612   
Deferred income tax asset                      13            18             -   
Current assets                                            5 852         4 033   
Stores inventories                                          169           167   
Product inventories                                         952           871   
Trade and other receivables                               1 389           851   
Cash and cash equivalents                                 3 342         1 980   
Current income tax assets                                     -           164   
Total assets                                              8 894         7 131   
Equity attributable to owners of parent                                         
Share capital and premium                                   629           629   
Other reserves                                              584         (328)   
Retained earnings                                         4 874         3 842   
Total equity                                              6 087         4 143   
Liabilities                                                                     
Non-current liabilities                                   1 687         1 305   
Close down and restoration obligation                       952           771   
Retirement benefits obligation                              219           205   
Cash settled share based payment liability      7            28             -   
Deferred income tax liabilities                13           488           329   
Current liabilities                                       1 120         1 683   
Financial liabilities                                         -           847   
Retirement benefits obligation                                -             8   
Cash settled share based payment liability      7             9             -   
Trade and other payables                                    970           641   
Related party payables                                        -           187   
Current income tax liabilities                              141             -   
Total liabilities                                         2 807         2 988   
Total equity and liabilities                              8 894         7 131   

The notes on pages 15 to 25 are an integral part of the condensed consolidated provisional
financial information.

Reviewed 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 2012            48           581    (1 023)       4 053      3 659
Total comprehensive income/
(loss) for the year                   -             -        695       (111)        584
Dividends paid                        -             -          -       (100)      (100)
Balance at 31 December 2012          48           581      (328)       3 842      4 143
Total comprehensive income for
the year                              -             -        762       1 032      1 794
BBBEE share option plan               -             -        150           -        150
Balance at 31 December 2013          48           581        584       4 874      6 087

Reviewed condensed consolidated statement of cash flows

                                                       Reviewed        Audited   
                                                   For the year   For the year   
                                                          ended          ended   
                                                    31 December    31 December   
                                                           2013           2012   
                                                            R'm            R'm   
Cash flows from operating activities                                             
Cash generated from operating activities                  1 729            514   
Interest received                                            31             28   
Dividends paid                                                -          (100)   
Income tax paid                                           (330)          (294)   
Net cash generated from operating activities              1 430            148   
Cash flows from investing activities                                             
Acquisition of property, plant and equipment              (399)          (354)   
Acquisition of intangible assets                            (7)           (12)   
Proceeds on disposal of property, plant and                                      
equipment                                                     -              2   
Investment in available-for-sale financial asset           (11)          (110)   
Net cash used in investing activities                     (417)          (474)   
Net increase/(decrease) in cash and cash                                       
equivalents                                               1 013          (326)   
Cash and cash equivalents at beginning of year            1 980          2 210   
Effects of exchange rate changes on the balance                                  
of cash held in foreign currencies                          349             96   
Cash and cash equivalents at end of year                  3 342          1 980   

The notes on pages 15 to 25 are an integral part of the condensed consolidated provisional
financial information.

Notes to the condensed consolidated provisional financial information

1.    Corporate Information

      Palabora Mining Company Limited is an investment company which hold 74% in the
      equity of Palabora Copper Proprietary Limited. Palabora Copper and its subsidiaries
      extracts and beneficiates copper, magnetite and vermiculite from its mines in the
      Limpopo Province, South Africa. It is the primary aim of the Group, to achieve
      excellence in all aspects of its activities and to develop the Group'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 Group'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 stock exchange operated by the JSE Limited.

      The condensed consolidated provisional financial statements of Palabora for the year
      ended 31 December 2013 were authorised for issue in accordance with a resolution
      of the Board of Directors passed on 28 February 2014.

2.    Basis of preparation and accounting policies

2.1   Basis of preparation

      The condensed consolidated provisional financial statements are prepared in
      accordance with the requirements of the JSE Limited Listings Requirements for
      provisional reports and the requirements of the Companies Act of South Africa. The
      Listings Requirements require provisional reports to be prepared in accordance with
      the framework concepts and the measurement and recognition requirements of
      International Financial Reporting Standards (IFRS) and the SAICA Financial
      Reporting Guides as issued by the Accounting Practices Committee and Financial
      Pronouncements as issued by the Financial Reporting Standards Council and to
      also, as a minimum, contain the information required by IAS 34 Interim Financial
      Reporting. The accounting policies applied in the preparation of the condensed
      consolidated provisional financial statements are in terms of IFRS and are consistent
      with those applied in the previous consolidated annual financial statements.

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
      provisional financial information are in terms of IFRS and consistent with those
      followed in the preparation of the Group's annual financial statements for the year
      ended 31 December 2012.

2.3   Independent audit review

      These condensed consolidated financial statements for the year ended 31 December
      2013 have been reviewed by PricewaterhouseCoopers Inc., who expressed an
      unmodified review conclusion. A copy of the auditor's review report is available for
      inspection at the companys' registered office together with the financial statements
      identified in the auditors' report.

      The auditors' report does not necessarily report on all of the information contained in
      these financial results. Shareholders are therefore advised that in order to obtain a
      full understanding of the nature of the auditors' engagement they should obtain a
      copy of the auditors' report together with the accompanying financial information from
      the issuers' registered office.

3.    Changes in estimates

3.1   Close down and restoration obligation

      The provision for close-down and restoration costs was impacted by an increase in
      the nominal discount rate from 7.3% to 9% which resulted in a R120 million increase
      during the year ended 31 December 2013.

3.2   Retirement benefits obligation

      The cost of post employment medical benefits is determined using actuarial
      valuations. The actuarial valuation involves making assumptions about discount
      rates, mortality rates and income at retirement. Due to the long term nature of these
      plans, such estimates are subject to significant uncertainty. The net employee liability
      at 31 December 2013 is valued at R219 million compared with R213 million at 31
      December 2012.

      The valuation resulted in a pre-tax actuarial loss of R0.2 million (2012: R19 million
      loss) as a result of a decrease in real discount rate and an increase in medical
      contributions being recognised in the statement of comprehensive income.

                                                            Reviewed        Audited   
                                                        For the year   For the year   
                                                               ended          ended   
                                                         31 December    31 December   
                                                                2013           2012   
                                                                 R'm            R'm   
4.   Selling and distribution costs                                                   
Magnetite                                                    (4 418)        (2 877)   
Freight                                                      (1 424)          (934)   
Port charges                                                   (628)          (427)   
Sales commission and sundry costs                              (199)          (133)   
Rail costs                                                   (1 118)          (835)   
Trucking costs*                                              (1 049)          (548)   
Vermiculite                                                    (122)          (130)   
Copper and by-products                                           (3)           (11)   
                                                             (4 543)        (3 018)   
*Includes trucking to Mica station for onward railing                                 

5.   Exploration, development and growth costs                                        
Lift II exploration and development                            (845)          (646)   
Transfer from property, plant and equipment                        -           (38)   
                                                               (845)          (684)   

     Lift II exploration and development costs relate to pre-feasibility drilling and
     development of a copper mineralisation area under the current footprint. Some of the
     Western extension project assets are being used for Lift II activities and have been
     transferred out of property, plant and equipment to Lift II exploration and
     development costs in 2012.

     On 28 November 2013 the Board of Directors approved the progress of Lift II from
     prefeasibility to feasibility study commencing on 1 January 2014. All costs incurred
     during the feasibility study phase will be capitalised.

6.   Other income

     Included in "other income" on the income statement is the business interruption
     insurance claim amounting to R244 million received during June and July 2013 in
     respect of the underground production shaft guide rope failure on 4 July 2012 which
     affected ore hoisting until 9 September 2012.

                                                     Reviewed        Audited   
                                                 For the year   For the year   
                                                        ended          ended   
                                                  31 December    31 December   
                                                         2013           2012   
                                                          R'm            R'm   
7.   Share based payment and minimum dividends                                 
Share-based payment                                     (151)              -   
Minimum dividends                                        (37)              -   
                                                        (188)              -   

The share-based payment (IFRS 2 expense) of R151 million included above is
discussed in detail in note 15. The minimum dividend liability expense of R37 million
which is payable to Palabora BEE Investment Company Proprietary Limited is as per
a contractual agreement and is payable during the loan financing period.

8.   Profit/(loss) before net finance income and tax                   
Profit/(loss) before net finance income and tax is                     
stated after charging, amongst other items:                              
Depreciation and amortisation charges                      743     586   
Employee benefit expense                                 1 404   1 124   
Product purchases                                        1 130   1 300   
Repairs and maintenance                                  1 401   1 393  
 
9.   Net finance income                                                  
Finance income                                             669     122   
Interest income on short-term bank deposits                 16      18   
Interest income on available-for-sale financial                          
asset                                                        6       6   
Interest income on account receivable balances               9       4   
Net foreign exchange gain on operating activities          289       -   
Net foreign exchange gain on financing activities          349      94   
Finance cost                                              (61)    (59)   
Unwinding of discount on close-down and                                  
restoration costs                                         (61)    (46)   
Net foreign exchange loss on operating activities            -    (13)   
                                                           608      63   

                                                            Reviewed        Audited   
                                                        For the year   For the year   
                                                               ended          ended   
                                                         31 December    31 December   
                                                                2013           2012   
                                                                 R'm            R'm   
10.   Income tax (expense)/income                                                   
Normal income tax                                              (636)           (55)   
South African                                                                         
Mining tax: Current                                            (602)           (50)   
Mining tax: Prior years                                         (37)              -   
Foreign tax: Current                                               3            (5)   
Secondary tax on companies                                         -           (10)   
Deferred income tax                                              134             78   
South African tax                                                                     
Current                                                          100             80   
Prior years                                                       34            (2)   
Income tax (expense)/income reported in the                                         
income statement                                               (502)             13   
Tax rate reconciliation:                                                              
                                                                   %              %   
Current statutory rate                                          28.0           28.0   
Adjusted for:                                                                         
Secondary tax on companies                                         -          (9.1)   
Tax rate differential on foreign subsidiaries                    1.2          (4.0)   
Prior year adjustment                                            0.2          (1.8)   
Disallowable expenditure                                         3.3          (1.3)   
Effective tax rate                                              32.7           11.8   

11.   Earnings/(loss) per share                                                     
Basic and diluted                                                                     
Reconciliation of net profit/(loss) to earnings per                                 
share                                                                                 
Net profit/(loss) attributable to equity holders of                                 
the parent (rand million)                                      1 032           (97)   
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/(loss) per share (cents)                              2 136          (201)   

12.   Headline earnings/(loss)                                                   
                                                  Profit /       Tax    Profit /   
                                                    (loss)   expense      (loss)   
                                                before tax             after tax   
Year ended 31 December 2013                                                        
Profit per income statement (R million)              1 534     (502)       1 032   
Loss on disposal of property, plant and                                            
equipment (R million)                                    1         -           1   
Headline profit (R million)                          1 535     (502)       1 033   
Weighted average number of ordinary shares of                                      
basic and diluted headline earnings per share                                      
(million share)                                                               48   
Headline profit per share (cents)                                          2 138   
Year ended 31 December 2012                                                        
Loss per income statement (R million)                (110)        13        (97)   
Profit on disposal of property, plant and                                          
equipment (R million)                                  (1)         -         (1)   
Impairment of property, plant and equipment                                        
(R million)                                             22       (6)          16   
Headline loss (R million)                             (89)         7        (82)   
Weighted average number of ordinary shares of                                      
basic and diluted headline earnings per share                                      
(million share)                                                               48   
Headline loss per share (cents)                                            (171)   

13.   Deferred income tax
                                                                Recognised in
                                      Balance      Recognised           other    Balance
                                         at 1    in profit or   comprehensive      at 31
                                      January            loss          income   December
      2013
      Property, plant and
      equipment                         (756)             198               -      (558)
      Available-for-sale
      financial assets                  (171)             (3)            (38)      (212)
      Derivative financial
      instruments                         237               -           (237)          -
      Close down and
      restoration obligation              266            (76)               -        190
      Retirement benefits
      obligation                           76               5               -         81
      Other items                          19              10               -         29
      Net deferred tax
      (liabilities)/assets              (329)             134           (275)      (470)
      Set off of deferred income tax                                               (488)
      Deferred income tax liabilities                                              (770)
      Deferred income tax assets                                                     300
      Deferred income tax assets                                                      18
      Net deferred tax (liabilities)/assets                                        (470)

                                                    Recognised in              
                           Balance     Recognised           other    Balance   
                              at 1   in profit or   comprehensive      at 31   
                           January           loss          income   December   
2012                                                                           
Property, plant and                                                            
equipment                    (758)              2               -      (756)   
Available-for-sale                                                             
financial assets             (125)           (32)            (14)      (171)   
Derivative financial                                                           
instruments                    482              -           (245)        237   
Close down and                                                                 
restoration obligation         186             80               -        266   
Retirement benefits                                                            
obligation                      69              2               5         76   
Other items                    (7)             26               -         19   
Net deferred tax                                                               
(liabilities)/assets         (153)             78           (254)      (329)   
Consist set off of                                                             
deferred tax                                                           (329)   
Deferred tax liabilities                                               (927)   
Deferred tax assets                                                      598   

                                                      Reviewed        Audited   
                                                  For the year   For the year   
                                                         ended          ended   
                                                   31 December    31 December   
                                                          2013           2012   
                                                           R'm            R'm   
14.   Dividends paid                                                            
The following dividends were declared and paid:                                 
Previous year final dividend:                                                   
Nil cents per qualifying ordinary share                                         
                                                             -            100   
                                                             -            100   
15.   Share based payments

      BBBEE share based expense (equity-settled)

      On 15 July 2013 Palabora Mining Company Limited, as part of the BBBEE
      Transaction, granted an option to Palabora BBE Investment Company Proprietary
      Limited (BEECO) to acquire 290 000 ordinary shares in Palabora Copper Proprietary
      Limited (PC) at the par value of R0.01 per share.

      Key terms and conditions relating to share option plan:
      The award to BEECO has been accounted for as an in-substance option as BEECO
      will only share in the upside and not the downside of their equity interest in PC until
      the date the financing provided by PMC to PC for the acquisition of the business has
      been repaid in full. On this date, which is expected to be 30 September 2021, the
      option will be exercised. The grant of the option is classified as an equity settled
      share based payment with the dividend portion classified as cash settled.

      The in-substance option carries no vesting conditions and the fair value of the option
      of R187 million has been expensed on the grant date, 15 July 2013 (see note 7).

      Upon the date that the loan is repaid, the option will effectively be exercised and the
      PMC group will have to account for the change in its ownership interest in PC at that
      point in time.

      Measurement of fair values:
      The fair value of the share option programme has been measured based on
      discounted cash flows, which involved various sensitivities. The inputs used in the
      measurement of the fair values at grant date of the equity settled share based
      payment plan were as follows:
                                                 Reviewed   
                                             For the year   
                                                    ended   
                                              31 December   
                                                     2013   
Option premium (R'000)                                  3   
Business value (R'm)                                5 273   
Expected dividend yield (%)                          0.57   
Vesting period                                        Nil   
Fair value of dividend payments (R'm)                  30   
Expected vesting date                   30 September 2021   
Risk-free interest rate (%)                           8.0   

In calculating the fair value of the option granted, the expected future enterprise
value of PC at the redemption date, as well as the expected loan balance at the
redemption date was estimated. The present value of the trickle dividend was also
taken into account and determined in accordance with the cash flow waterfall. The
difference between the future enterprise value of PC and the loan balance represent
the expected future equity value of PC.

16.   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 arising 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.

      The measure of segment assets and liabilities has not been disclosed as these
      amounts are not provided to management. Management reviews the assets and
      liabilities as one component in the internal management reports and not in separate
      reporting segments.

      Reportable segments are as follows:

                                            Joint-                                     
                                          product:        By-   Industrial             
                                Copper   Magnetite   products     minerals     Total   
                                   R'm         R'm        R'm          R'm       R'm   
Year ended 31 December 2013                                                            
External customers revenue                                                             
Sales from products              3 955       7 862        222          467    12 506   
Hedge loss realised              (881)           -          -            -     (881)   
Reportable segment revenue       3 074       7 862        222          467    11 625   
Reportable segment operating                                                           
(loss)/profit before                                                                 
depreciation                      (67)       2 683        118         (23)     2 711   
Depreciation                     (539)        (66)       (11)         (10)     (626)   
Reportable segment                                                                     
operating (loss)/profit          (606)       2 617        107         (33)     2 085   
Year ended 31 December 2012                                                            
External customers revenue                                                             
Sales from products              4 308       4 890        138          405     9 741   
Hedge loss realised            (1 025)           -          -            -   (1 025)   
Reportable segment revenue       3 283       4 890        138          405     8 716   
Reportable segment operating                                                           
(loss)/profit before                                                                 
depreciation                     (398)       1 442         36         (11)     1 069   
Depreciation                     (422)        (65)        (8)         (10)     (505)   
Reportable segment                                                                     
operating (loss)/profit          (820)       1 377         28         (21)       564   

Reportable segment operating (loss) / profit before depreciation includes:

                                            Joint-                                     
                                          product:        By-   Industrial             
                                Copper   Magnetite   products     minerals     Total   
                                   R'm         R'm        R'm          R'm       R'm   
Year ended 31 December 2013                                                            
Joint product cost allocation      181       (181)          -            -         -   
Overhead allocation costs        (569)       (142)       (42)         (42)     (795)   
Selling and logistics costs        (1)     (4 429)        (1)        (112)   (4 543)   
Year ended 31 December 2012                                                            
Joint product cost allocation      159       (159)          -            -         -   
Overhead allocation costs        (534)       (128)       (41)         (39)     (742)   
Selling and logistics costs       (10)     (2 877)        (1)        (130)   (3 018)   

Reconciliation of reportable segment operating profit to profit / (loss) after tax:

                                                        Reviewed        Audited   
                                                    For the year   For the year   
                                                           ended          ended   
                                                     31 December    31 December   
                                                            2013           2012   
                                                             R'm            R'm   
Reportable segment operating profit                        2 085            564   
Unallocated amounts:                                                              
Exploration, development and growth costs                  (845)          (684)   
Other                                                        (9)             50   
Unallocated depreciation and amortisation                  (117)           (81)   
BBBEE share based expense                                  (151)              -   
Minimum dividend liability expense                          (37)              -   
Impairment of property, plant and equipment                    -           (22)   
Net finance income                                           608             63   
Profit/(loss) from operations before tax                   1 534          (110)   
Income tax expense                                         (502)             13   
Profit/(loss) after tax                                    1 032           (97)   

17. Commitments                                                                   
Commitments for acquisition of sustaining capital             36             94   
Commitments for magnetite growth projects                     27             23   
Commitments for Lift II growth projects                       53              -   
                                                             116            117   
Capital expenditure that was approved by the                                      
Board of Directors, but not contracted for:                                       
Acquisition of sustaining capital                             72            193   
Magnetite growth projects                                    113             45   
Lift II growth projects                                      707              -   
                                                             892            238   
18.   Contingent liabilities

      Legal matters
      Various legal matters, including labour cases before the CCMA, are in progress. The
      potential exposure is approximately R2 million (2012: 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.

19.   Ore reserves

      The total probable ore reserves remaining as at 31 December 2013 were 11.9 million
      tonnes (2012: 35.46 million tonnes) at 0.52% (2012: 0.54%) copper content.

20.   Events after reporting date

      The acquisition of shares by the Chinese Consortium and the Industrial Development
      Corporation ("the Consortium") in Palabora Mining Company Limited has resulted in
      the Consortium, through Rio Tinto South Africa Limited, making a mandatory offer in
      August 2013 to acquire all Palabora shares not already owned by itself either directly
      or indirectly, as required by section 123 of the Companies Act and Regulation 86 of
      the Takeover Regulations.

      An application to delist on the JSE was lodged on 10 February 2014. To date, 0.8%
      of the shareholders had not accepted the offer. As such the process to mandatorily
      acquire the shares remains in progress. A notice was issued to the remaining
      outstanding shareholders on 7 February 2014 in terms of section 124(1)(a) of the Act
      to inform them that the Offer has been accepted by Holders holding in excess of 90%
      of the Offer Shares and that Rio Tinto South Africa Limited desires to compulsorily
      acquire all the remaining Offer Shares. The shareholders have 30 business days to
      object to the JSE. The date for delisting is expected by 15 April 2014.
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