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EVRAZ HIGHVELD STEEL & VANADIUM LTD - Quarterly Unaudited Financial Results

Release Date: 24/11/2014 15:59
Code(s): EHS     PDF:  
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Quarterly Unaudited Financial Results

Evraz Highveld Steel and Vanadium Limited
(Incorporated in the Republic of South Africa)
(Registration No: 1960/001900/06)
Share code: EHS     ISIN: ZAE000146171
("the Company" or "the Group")

GROUP UNAUDITED RESULTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2014

Chairman and CEO's Review

   - Net loss R519 million (September YTD 2013: loss R222 million)
   - EBITDA loss R262 million (September YTD 2013: profit R93 million)


1. Safety

   The Lost Time Injury Frequency Rate increased to 3.0 in Q3 2014 from 2.0 in Q2 2014. YTD is
   2.4. The number of Lost Time Injuries increased to 8 in Q3 2014 from 5 in Q2 2014. YTD is 18.
   Total number of injuries increased to 63 in Q3 2014 from 51 in Q2 2014. YTD is 179.

   Safety is a high priority for the company and safety concerns
   will thus be addressed as a matter of urgency.


2. Key Financials

   The operating loss for the 2014 period was R483 million, compared to a loss of R149 million for
   the same period in 2013, mainly attributed to increased maintenance costs, poor rolling mill yields
   and SEIFSA strike action in July that affected the company's ability to dispatch material. The
   EBITDA for the period was a negative of R262 million, compared to a R93 million profit for the
   same period in 2013.

   During the nine month period in 2014, sales revenue of R4 444 million was up by 8.9% and
   reflected higher average market prices compared to the same period in 2013. Revenue from sale
   of goods increased to R4 438 million, compared to R4 078 million for the previous period. This
   increase in revenue is as a result of favourable steel product pricing.

   Domestic demand remains steady for our structural range of products, whilst demand for flat
   products has decreased, especially in the plate market. Production operations are still
   recovering from the adverse effects of operational challenges in the first half of the year. The
   Company continues to utilise a credit line from shareholders that is committed to 31 December
   2014. Significant progress is being made to secure commercial funding.

   The financial statements are prepared on the basis of accounting policies applicable to a going
   concern. The Board believes that the Company remains a going concern, taking cognisance of
   any matters that may cast doubt about the ability of the Company to continue as a going concern
   and its ability to realise its assets and discharge its liabilities in the ordinary course of business.


3. Operations

   Mining

   Production of lump ore increased by 3.74% from 1 131 920 to 1 173 705 tons for the period when
   compared to the same period in 2013, and fines ore increased by 3.64% from 506 333 to 524 655
   tons for the nine month period. Output stabilised in the third quarter as a result of a plant
   maintenance shut down in Q 1 and increased ongoing maintenance effort.

   In addition to the strip mining operations, commercial large scale pit mining has also commenced
   in the second quarter of 2014 and it is showing to be beneficial to the overall operating
   performance.

   Steel

   Iron output increased by 4.2% to 497 713 tons for the nine-month period compared to the previous
   year, mainly due to improved plant efficiencies. Steel output decreased by 3.84% from 478 707 tons
   for the nine-month period in 2013 to 460 683 tons for the same period in 2014, primarily
   due to operational problems experienced in the Steel Plant. The planned replacement of the BOF
   water cooled hoods in Q1 2015 is expected to improve plant production volumes.

   Production of long products increased by 3.94% to 158 121 tons during H1 2014, compared to 152
   113 for the 2013 period, due to an improved order book and supply of cast steel to the mill.
   Production of flat products decreased by 5.9% from 233 082 to 219 402 tons for the period. The
   reduction in performance was due to lack of cast steel slabs.

   Vanadium

   A total 40 667 tons of vanadium slag was produced containing 5 097 tons V for the period,
   compared to 36 892 tons slag containing 5 012 tons V for the same period last year. Vanadium
   Yield improved by 1.34% compared to the same period last year.

4. Markets

   Global and local markets

   The global economy continues to show little sign of supporting a strong recovery in the global
   steel market and will remain weak into 2015. International pricing has started to soften and Far
   East producers have significantly lowered pricing in Q3 with price offers into the domestic market
   falling by as much as 5.0%. Reports indicate a likely global steel demand increase by 2.0% in
   2015.

   Following the various instances of industrial action and constrained power supply seen during
   2014 to date, South African GDP forecasts for 2014 have been revised to 1.5%. The trend of the
   weak Rand seen in H1 2014 has continued during Q3 and this has supported the shift in
   market purchasing trends from imports to domestic supply during this period.

   Evraz Highveld Sales

   Steel sales volumes increased by 3.0% from 381 075 tons for the 2013 period to 392 566 tons for
   the same period in 2014.

   The Steel and Engineering Industries Federation of South Africa (SEIFSA) strike during Q3 
   further compounded weak domestic sales seen YTD 2014 and as a result domestic steel sales 
   decreased by 11.7% from 367 893 to 324 995 tons for the period, while export steel sales volumes 
   increased to 67 571 tons for the nine months against 13 182 tons for previous reporting period.

   Ferrovanadium sales for the 2014 period remained flat at 3 609 tons V compared to 3 603 tons V
   for the same period in 2013. Total vanadium slag sales were 627 tons V for the period compared
   to 285 tons V for the 2013 year.

5. Outlook

   The domestic market has shown some signs of recovering sales lost during 2014. Unfortunately, 
   given the current slow economic growth and the pace of government infrastructure spending, 
   the domestic steel industry is not expected to expand significantly in the near future. The 
   industry will be further impacted by a volatile labour market, continuing difficulties with 
   security of electricity supply and increased input costs. Dialogue between all stakeholders 
   with regard to developmental pricing is imperative given the importance of steel in 
   the economy of South Africa. 
   
   Global steel markets will continue to be under pressure during the last quarter of 2014 as 
   the market struggles with overcapacity and over supply, prices are predicted to soften slightly 
   during the remainder of 2014 and a marked recovery in global steel demand is not expected for 2015.

   The turnaround of the Company is deemed achievable for a number of reasons, including the 
   strategic importance of a significant proportion of its products, the dedicated low cost vanadium 
   bearing iron ore resource base held by Mapochs Mine and the Company's unique processing 
   capability to extract vanadium slag from the ore. The turnaround is however dependent on the 
   urgent sourcing of capital and much needed operational skills.

   The new leadership team has made significant progress with the development of a focussed 
   turnaround strategy to return the Company to a profitable leading niche steel and 
   vanadium producer.


   B Petersen                     IJ Burger
   (Chairman)                     (Chief Executive Officer)
   24 November 2014


   GROUP UNAUDITED FINANCIAL RESULTS
   
   Basis of preparation
   The Group's (Group includes all consolidated entities) financial results for the nine months ended 30 September 2014 set out below have been prepared in
   accordance with the principal accounting policies of the Group which comply with International Financial Reporting Standards (IFRS) and in the manner
   required by the Companies Act in South Africa and are consistent with those applied in the Group's most recent annual financial statements including the
   Standards and Interpretations as listed below.
   
   These results are presented in terms of International Accounting Standards (IAS) 34 applicable to Interim Financial Reporting.

   The unaudited financial statements were prepared under the going concern basis.

   The Group incurred a net loss of R519 for the nine month period during 2014, (2013: loss R222 million).

   Domestic demand remains steady for our structural range of products, whilst demand for flat products has decreased, especially in the plate market.
   Production operations are still recovering from the adverse effects of operational challenges in the first half of the year. The Company continues to utilise a
   credit line from shareholders that is committed to 31 December 2014. Significant progress is being made to secure commercial funding.
   
   The financial statements are prepared on the basis of accounting policies applicable to a going concern. The Board believes that the Company remains a
   going concern, taking cognisance of any matters that may cast doubt about the ability of the Company to continue as a going concern and its ability to
   realise its assets and discharge its liabilities in the ordinary course of business.
   
   Significant accounting policies
   i)  The Group has adopted the following new and revised Standards and Interpretations issued by the International Accounting Standards Board (the IASB)
       and the International Financial Reporting Interpretation Committee (IFRIC) of the IASB, that are relevant to its operations and effective for accounting
       periods beginning on 1 January 2014. These Standards had no impact on the results or disclosures of the Group.
       -  IAS 32, Amended - Offsetting financial assets and financial liabilities (effective from 1 January 2014);
       -  IFRS 10, IFRS 12 and IAS 27, Amended - Investment entities (effective from 1 January 2014);
       -  IFRIC 21, Levies (effective from 1 January 2014);
       -  IAS 36, Amended - Recoverable amount disclosures for non-financial assets (effective from 1 January 2014);
       -  IAS 39, Amended - Novation of derivatives and continuation of hedge accounting (effective from 1 January 2014)
   
   ii) The following Standards, amendments to the Standards and Interpretations, effective in future accounting periods have not been adopted in these
       financial statements:
       -  IFRS 9, Financial instruments - classification and measurement (1 January 2015 effective date has been deferred until the issue date of the completed
          version of IFRS 9 is known);
       -  IFRS 9 and IFRS 7, Amended - Mandatory effective date and transition disclosures (IFRS 9 effective date deferred, IFRS 7 depends on when IFRS 9 is
          adopted);
       -  IFRS 14, Regulatory deferral accounts (effective from 1 January 2016);
       -  IAS 19, Amended - Defined benefit plans: employee contributions (effective from 1 July 2014);
       -  Improvements to IFRS – issued December 2013 (effective from 1 July 2014).
   
   This abridged report was prepared under supervision of the Financial Director, Mr Valery Borisov.
   
   CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                         Unaudited as at   Reviewed as at      
                                                            30 Sept 2014      31 Dec 2013      
                                                 Notes                Rm               Rm      
   ASSETS                                                                                      
   Non-current assets                                              1 662            1 723      
   Property, plant and equipment                                   1 558            1 621      
   Restricted cash                                  14                42               40      
   Deferred tax asset                                5                62               62      
   Current assets                                                  2 081            1 865      
   Inventories                                                       980            1 059      
   Trade and other receivables and prepayments       6               733              522      
   Income tax receivable                                               1                2      
   Cash and short-term deposits                                      367              282      
   TOTAL ASSETS                                                    3 743            3 588      
   EQUITY AND LIABILITIES                                                                      
   Total equity                                                      955            1 461      
   Non-current liabilities                                           783              757      
   Interest-bearing loans and borrowings             7                11               11      
   Provisions                                                        772              746      
   Current liabilities                                             2 005            1 370      
   Trade and other payables                                        1 543              935      
   Interest-bearing loans and borrowings             7               332              304      
   Income tax payable                                                  -                -      
   Provisions                                                        130              131      
   TOTAL EQUITY AND LIABILITIES                                    3 743            3 588      
   Net cash                                                           66                7      
   Net asset value - cents per share                                 963            1 474      
   
   
   CONDENSED CONSOLIDATED INCOME STATEMENT
                                               Unaudited for   Unaudited for the   Unaudited for the                                          
                                                   the three        three months         nine months   Unaudited for the   Reviewed for the   
                                                months ended               ended               ended   nine months ended         year ended   
                                                30 Sept 2014        30 Sept 2013        30 Sept 2014        30 Sept 2013        31 Dec 2013   
                                        Note              Rm                  Rm                  Rm                  Rm                 Rm   
   Revenue                                             1 245               1 215               4 444               4 081              5 192   
   Sale of goods                                       1 243               1 214               4 438               4 078              5 190   
   Cost of sales                                     (1 331)             (1 274)             (4 503)             (3 855)            (4 990)   
   Gross (loss)/profit                     8            (88)                (60)                (65)                 223                200   
   Other operating income                  9              33                   2                  57                  28                 77   
   Selling and distribution costs                       (68)                (63)               (232)               (190)              (273)   
   Administrative expenses                              (80)                (59)               (212)               (181)              (242)   
   Other operating expenses                9             (9)                (14)                (31)                (25)               (55)   
   Operating loss                                      (212)               (194)               (483)               (145)              (293)   
   Finance costs                                        (14)                (18)                (42)                (55)               (69)   
   Finance income                                          2                   1                   6                   3                  2   
   Loss before tax                                     (224)               (211)               (519)               (197)              (360)   
   Income tax credit/(expense)            10               7                 (1)                   *                (25)               (19)   
   Loss for the period/year                            (217)               (212)               (519)               (222)              (379)   
   (*)Less than R1 million.                                                                                                                    
                                                       Cents               Cents               Cents               Cents              Cents   
   Loss per share - basic and diluted                (219.2)             (213.9)             (523.4)             (224.0)            (382.2)   
   
   
   CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                                         Unaudited for   Unaudited for the   Unaudited for the                                             
                                                                             the three        three months         nine months   Unaudited for the   Reviewed for the      
                                                                          months ended               ended               ended   nine months ended         year ended      
                                                                          30 Sept 2014        30 Sept 2013        30 Sept 2014        30 Sept 2013        31 Dec 2013      
                                                                                    Rm                  Rm                  Rm                  Rm                 Rm      
   Loss for the period/year                                                      (217)               (212)               (519)               (222)              (379)      
   Other comprehensive income:                                                                                                                                             
   Other comprehensive (loss)/income to be reclassified to profit or                                                                                                       
   loss in subsequent periods:                                                                                                                                             
   Exchange differences on translation of foreign operations                       (1)                  17                   1                 105                104      
   Other comprehensive income not to be reclassified to profit or loss                                                                                                     
   in subsequent periods:                                                                                                                                                  
   Actuarial gain on defined benefit plan, net of tax                                -                   -                   -                   -                 12      
   Total comprehensive loss for the period/year                                  (218)               (195)               (518)               (117)              (263)      
                                                                                 Cents               Cents               Cents               Cents              Cents      
   Comprehensive loss per share - basic and diluted                            (220.2)             (196.8)             (522.4)             (118.1)            (265.3)      
   
   
   HEADLINE EARNINGS PER SHARE
                                                                         Unaudited for   Unaudited for the   Unaudited for the                                             
                                                                             the three        three months         nine months   Unaudited for the   Reviewed for the      
                                                                          months ended               ended               ended   nine months ended         year ended      
                                                                          30 Sept 2014        30 Sept 2013        30 Sept 2014        30 Sept 2013        31 Dec 2013      
                                                                                    Rm                  Rm                  Rm                  Rm                 Rm      
   Reconciliation of headline loss                                                                                                                                         
   Loss for the period/year                                                      (217)               (212)               (519)               (222)              (379)      
   (Deduct)/add after tax effect of:                                                                                                                                       
   (Profit)/loss on disposal and scrapping of property, plant and                                                                                                          
   equipment                                                                         1                   *                   1                   *                  5      
   Headline loss                                                                 (216)               (212)               (518)               (222)              (374)      
   (*)Less than R1 million.                                                                                                                                                 
                                                                                 Cents               Cents               Cents               Cents              Cents      
   Loss per share - headline and diluted                                       (217.9)             (213.9)             (522.4)             (224.0)            (377.2)      
                                                                               Million             Million             Million             Million            Million      
   Number of shares
   Ordinary shares in issue as at reporting date *†                               99.2                99.2                99.2                99.2               99.2      
   (*)Rounded to nearest hundred thousand.                                                                                                                                  
   
   (†)Agree to weighted average and diluted number of ordinary                                                                                                        
    shares.                                                                                                                                                               
   
   CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                       Issued capital and                                                                 
                                                                            share premium      Other reserves   Retained earnings              Total      
                                                             Note                      Rm                  Rm                  Rm                 Rm      
   2013                                                                                                                                                   
   Balance at 1 January 2013 - Reviewed(#)                                            585                 264                 860              1 709      
   Profit for the period                                                                                                       30                 30      
   Other comprehensive income for the quarter                                                              47                                     47      
   Share-based payment reserve                                 11                                           3                                      3      
   Balance at 31 March 2013 - Unaudited                                               585                 314                 890              1 789      
   Loss for the period                                                                                                       (40)               (40)      
   Other comprehensive income for the quarter                                                              41                                     41      
   Share-based payment reserve                                 11                                           3                                      3      
   Balance at 30 June 2013 - Unaudited                                                585                 358                 850              1 793      
   Loss for the period                                                                                                      (212)              (212)      
   Other comprehensive income for the quarter                                                              17                                     17      
   Share-based payment reserve                                 11                                           3                                      3      
   Balance at 30 September 2013 - Unaudited                                           585                 378                 638              1 601      
   Loss for the period                                                                                                      (157)              (157)      
   Other comprehensive loss for the quarter                                                               (1)                                    (1)      
   Actuarial gain on defined benefit plan                                                                                      12                 12      
   Share-based payment reserve                                 11                                           6                                      6      
   Balance at 31 December 2013 - Reviewed                                             585                 383                 493              1 461      
   
   2014                                                                                                                                                   
   Balance at 1 January 2014- Reviewed                                                585                 383                 493              1 461      
   Loss for the period                                                                                                      (105)              (105)      
   Other comprehensive income for the quarter                                                               8                                      8      
   Share-based payment reserve                                 11                                           4                                      4      
   Balance at 31 March 2014 - Unaudited                                               585                 395                 388              1 368      
   Loss for the period                                                                                                      (197)              (197)      
   Other comprehensive loss for the quarter                                                               (6)                                    (6)      
   Share-based payment reserve                                 11                                           4                                      4      
   Balance at 30 June 2014 - Unaudited                                                585                 393                 191              1 169      
   Loss for the period                                                                                                      (217)              (217)      
   Other comprehensive loss for the quarter                                                               (1)                                    (1)      
   Share-based payment reserve                                 11                                           4                                      4      
   Balance at 30 September 2014 - Unaudited                                           585                 396                (26)                955      
   (#)Restated
                                                                                                                                            
                                                               Unaudited for the                                                                                         
                                                                    three months       Unaudited for the   Unaudited for the   Unaudited for the   Reviewed for the      
                                                                           ended   three months ended ni    ine months ended   nine months ended         year ended      
                                                                    30 Sept 2014            30 Sept 2013        30 Sept 2014        30 Sept 2013        31 Dec 2013      
                                                                           Cents                   Cents               Cents               Cents              Cents      
   Dividends per share                                                                                                                                                   
   Dividends declared and paid                                                 -                       -                   -                   -                  -      
   
   CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                   Unaudited for           Unaudited for       Unaudited for   Unaudited for the                         
                                                                       the three        the three months            the nine         nine months   Reviewed for the      
                                                                    months ended                   ended        months ended               ended         year ended      
                                                                    30 Sept 2014            30 Sept 2013        30 Sept 2014        30 Sept 2013        31 Dec 2013      
                                                                              Rm                      Rm                  Rm                  Rm                 Rm      
   Cash flows from operating activities                                                                                                                                  
   Loss before tax                                                         (224)                   (211)               (519)               (197)              (360)      
   Non-cash items                                                            113                      87                 388                 227                419      
   Net movement in working capital                                           175                      19                 343               (310)              (385)      
   Net interest received/(paid)                                                1                     (7)                   4                (22)               (28)      
   Income tax paid                                                             -                     (1)                 (1)                 (3)                (4)      
   Net cash generated by/(used in) operating activities                       65                   (113)                 215               (305)              (358)      
   Cash flows from investing activities                                                                                                                                  
   Proceeds from sale and scrapping of property, plant and                                                                                                               
   equipment                                                                   1                       *                   2                   1                  3      
   Additions to property, plant and equipment                               (33)                    (37)               (130)               (105)              (140)      
   Net cash used in investing activities                                    (32)                    (37)               (128)               (104)              (137)      
   Cash flows from financing activities                                                                                                                                  
   (Decrease) / increase in long-term interest-bearing loans and                                                                                                         
   borrowings                                                                  -                       -                   -                   -                (6)      
   (Decrease)/increase in short-term interest-bearing loans and                                                                                                          
   borrowings                                                                  -                    (97)                   -                 186                204      
   Net cash (repaid)/generated by financing activities                         -                    (97)                   -                 186                198      
   Net increase/(decrease) in cash and cash equivalents                       33                   (247)                  87               (223)              (297)      
   Cash and cash equivalents at the beginning of the                                                                                                                     
   period/year                                                               335                     630                 282                 527                527      
   Cash transferred to restricted cash                                         *                    (31)                 (1)                (31)               (40)      
   Effects of exchange rate changes on cash held in foreign                                                                                                              
   currencies                                                                (1)                      27                 (1)                 106                 92      
   Cash and cash equivalents at the end of the period/year                   367                     379                 367                 379                282      
   * Less than R1 million.                                                                                                                                               
   
   NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1  Companies Act and JSE Limited Listings Requirements
   Compliance with the Companies Act, No 71 of 2008, as well as the Listings Requirements of the JSE Limited has been maintained throughout the reporting periods.

2  Related party transactions
   Sales to East Metals A.G. (a fellow subsidiary) amounted to R302 million (September 2013 YTD: R168 million) for the 9 months ended 30 September 2014. This constitutes 7% of total
   revenue for the period, compared to 4% for the period ended 30 September 2013. During 2013 a loan was received from East Metals A.G., a related party, amounting to R 332 million
   (December 2013: R304 million) which is repayable by 31 December 2014 and interest is charged at market rate. Technical services (slag tolling agreement) and other services with
   EVRAZ Vametco Alloys Proprietary Limited (a fellow subsidiary) amounted to R30 million for the 9 months ended September 2014 (September 2013 YTD: R50 million).

3  Segment information
   The Group is organized into business units based on their products and has two reportable segments as follows:

   Steelworks
   The major products of the steel segment are magnetite iron ore, structural steel, plate and coil.

   Vanadium
   The major products of the vanadium segment are vanadium slag and ferrovanadium. Vanadium slag is a by-product from the steelmaking process, and this slag is transferred from the
   steelworks to the vanadium plant, which then forms the input into the business of the vanadium business.

   No operating segments have been aggregated to form the above reportable operating segments. Management monitors the operating results of its business units separately for the
   purposes of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit.

   The following tables present the revenue, operating (loss)/profit and total assets information regarding the Group's operating segments:

                                    Unaudited for the                                                                                              
                                         three months   Unaudited for the three   Unaudited for the nine   Unaudited for the     Reviewed for      
                                                ended              months ended             months ended   nine months ended   the year ended      
                                         30 Sept 2014              30 Sept 2013             30 Sept 2014        30 Sept 2013      31 Dec 2013      
                                                   Rm                        Rm                       Rm                  Rm               Rm      
    Revenue from customers                                                                                                                         
    Steelworks                                  1 017                       942                    3 501               3 162            4 022      
    Vanadium                                      312                       348                    1 208               1 151            1 487      
    Elimination in intersegmental                                                                                                                  
    revenue                                      (86)                      (76)                    (271)               (235)            (319)      
    Total                                       1 243                     1 214                    4 438               4 078            5 190      
                                    Unaudited for the                                                                                              
                                         three months   Unaudited for the three   Unaudited for the nine   Unaudited for the     Reviewed for      
                                                ended              months ended             months ended   nine months ended   the year ended      
                                         30 Sept 2014              30 Sept 2013             30 Sept 2014        30 Sept 2013      31 Dec 2013      
                                                   Rm                        Rm                       Rm                  Rm               Rm      
    Operating (loss)/profit                                                                                                                        
    Steelworks                                  (245)                     (237)                    (640)               (328)            (545)      
    Vanadium                                       33                        43                      157                 183              252      
    Total                                       (212)                     (194)                    (483)               (145)            (293)      
                                      Unaudited as at            Reviewed as at                                                                    
                                         30 Sept 2014               31 Dec 2013                                                                    
                                                   Rm                        Rm                                                                    
    Total assets                                                                                                                                   
    Steelworks                                  3 454                     3 143                                                                    
    Vanadium                                      289                       445                                                                    
    Total                                       3 743                     3 588                                                                    

4   Supplementary revenue information - Unaudited
                                                            For the three months   For the three months   For the nine   For the nine   For the year      
                                                                           ended                  ended   months ended   months ended          ended      
                                                                    30 Sept 2014           30 Sept 2013   30 Sept 2014   30 Sept 2013    31 Dec 2013      
    Sales volumes of major products                                                                                                                       
    Total steel                                      Tons                109 044                113 976        392 566        380 872        486 706      
    Ferrovanadium                                  Tons V                  1 001                  1 228          3 609          3 603          4 827      
    Modified vanadium oxide                        Tons V                     20                     48             72            133            143      
    Nitrovan                                       Tons V                      0                     20            331            371            398      
    Vanadium slag                                  Tons V                    252                     93            627            285            386      
    Ore fines                                        Tons                143 691                149 981        480 547        502 303        650 418      
    Weighted average selling prices achieved for major products                                                                          
    Total steel                                     US$/t                    663                    708            662            738            718      
    Ferrovanadium                                US$/kg V                     24                     25             25             27             27      
    Modified vanadium oxide                      US$/kg V                     17                     19             23             20             19      
    Nitrovan                                     US$/kg V                      0                     24             25             28             28      
    Vanadium slag                                US$/kg V                      7                      8              8              9              9      
    Ore fines                                       US$/t                     50                     23             32             33             30      
    Average R/$ exchange rate                                              10.77                   9.99          10.72           9.48           9.65      
    
5   Deferred tax asset
    In light of the Company's own financial performance and the uncertainty of future taxable profits to account against its deferred tax asset, management concluded, following due
    assessment, that it was prudent to impair its deferred tax asset as at 31 December 2013 (R195 million) to the extent that it exceeded the deferred taxation liability. Whilst the taxable
    income forecast for the Company is based on its most favourable outlook scenario, the current assessed tax loss implies that it will take many years before the Company is in a position
    to utilise the tax assets as at 31 December 2013. Following the impairment, a zero balance for deferred taxation is disclosed for the Company. No reversal of the 2012 impairment was
    considered necessary as at 31 December 2013. The deferred tax asset position remained the same at 30 September 2014 as at 31 December 2013.

6   Trade and other receivables and prepayments
    The increase in comparison to 31 December 2013 can mainly be attributed to increased sales volumes on local steel, improved production and an increase in Vanadium slag sales.

7   Interest-bearing loans and borrowings
    The long-term borrowings of R11 million (2013: R11 million) consist of the loan due by Umnotho Iron and Vanadium Proprietary Limited payable to Umnotho weSizwe Group Proprietary
    Limited. This loan has no fixed repayment terms and interest is charged at prime rate. The short-term borrowings consists of a Dollar-denominated loan from East Metals A.G. (a related
    party) which is payable by 31 December 2014, and carries interest at market rate.

8   Gross (loss)/ profit
    The decline in gross profit is mainly attributable to higher production costs in 9m 2014, driven largely by an increase in maintenance spend. A significant increase in export sales volumes
    in 9m 2014 compared to 9m 2013 also contributed to the lower gross profit, as export sales attract a lower margin compared to local sales. The SEIFSA industrial action also had a
    significant impact on 9m 2014 sales volumes.

9   Other operating income and expenses
    The R33 million other operating income for the three months ended 30 September 2014 includes sundry income of R33 million and the R 9 million other operating expense includes
    insurance of R 6 million and loss on disposal of fixed assets of R 1 million. The Q3 2013 other operating income of R2 million includes inventory stock count and inventory net realisable
    value adjustments of R2 million and the R14 million other operating expense includes foreign exchange losses of R12 million.



10 Income tax
                                                                                 Unaudited for the     Unaudited for   Reviewed for      
                                   Unaudited for the   Unaudited for the three         nine months   the nine months       the year      
                                  three months ended              months ended               ended             ended          ended      
                                        30 Sept 2014              30 Sept 2013        30 Sept 2014      30 Sept 2013    31 Dec 2013      
                                                  Rm                        Rm                  Rm                Rm             Rm      
    South African                                                                                                                        
    Deferred                                                                                                                             
    Current                                        -                         -                   -                14             18      
    Non-South African                                                                                                                    
    Normal                                                                                                                               
    Current                                      (7)                         1                   *                11              1      
    Income tax (credit)/expense                  (7)                         1                   *                25             19      
    
    The period income tax expense is accrued using the estimated average annual effective income tax rate applied to the pre-tax income of the interim report.

11  Share-based payment reserve
    Certain key management personnel participate in a Long Term Incentive Plan (LTIP) over shares in EVRAZ plc. The shares are traded on the London Stock Exchange. The vesting of the
    shares occur on the 90th day following the announcement of EVRAZ plc financial results. The cost of the LTIP award will be settled in equity by EVRAZ plc. The amount recognized
    according to IFRS 2 in 2014 is R12 million (2013 year: R15 million).

12  Guarantees
As required by the Mineral and Petroleum Resources Development Act No.28 of 2002 (the MPRDA), a guarantee amounting to R370 million (2013: R370 million) was issued on 1 September 2013 in favour of the Department of Mineral Resources (DMR) for the unscheduled closure of Mapochs Mine.
    
    As required by certain suppliers of the Group, guarantees were issued in favour of these suppliers to the value of R8 million (2013: R8 million) in the event the Group will not be able to
    meet its obligations to the supplier.

13  Contingent liabilities
    In terms of the Group's employment policies, certain employees could become eligible for post-retirement medical aid benefits at any time in the future prior to their retirement subject to
    certain conditions. The potential liability for the Group, as at 31 December 2013, should they become medical scheme members in the future is R14 million before tax and R10 million
    after tax.
    On 5 June 2008, the Commission initiated a complaint against the Company for an alleged contravention of section 4(1)(b)(i) of the Competition Act, No. 89 of 1998 (the Competition
    Act). The allegations against the Company are that it fixed prices and trading conditions for flat and long steel products. In a letter from the Commission dated 18 September 2009, the
    Commission confirmed that it would not be pursuing a case of collusion in the long steel market against the Company. On 30 March 2012 the Commission referred the complaints
    relating to the flat steel market to the Competition Tribunal for prosecution. The allegations against the Company contained in the Commission's complaint referral are that the
    Company fixed prices and trading conditions for flat steel products, and divided markets in respect of flat steel products, which are contraventions of sections 4(1)(b)(i) and 4(1)(b)(ii) of
    the Competition Act respectively. It is further alleged in the Commission's complaint referral that the Company has contravened sections 4(1)(b)(i) and 4(1)(b)(ii), alternatively section
    4(1)(a), of the Competition Act by engaging in the exchange of information with a competitor through information exchanges and meetings of the SAISI or its committees. Should the
    Competition Commission be successful, it could impose a maximum penalty of R554 million against the Company.

14  Restricted cash
    The restricted cash disclosed as a non-current asset consist of R34 million paid to an insurance company as guarantee to the Department of Mineral Resources (DMR) for the Mapochs Mine
    environmental rehabilitation obligation. An amount of R8 million is deposited with a commercial bank as security for guarantees issued to two supplier companies. Interest on both
    amounts are earned at money market rates.

15  Subsequent events
    There are no events to be reported on since 30 September 2014.

    DIRECTORS: B Petersen (Chairman), I J Burger (Chief Executive Officer), M Bhabha,
    V Borisov (Russian), A P Maralack, T Mosololi, D Šcuka (Czech), P S Tatyanin (Russian),
    T I Yanbukhtin (Russian)

    Company Secretary: Ms A Weststrate
    
    Registered office:                             Transfer secretaries:
    Portion 93 of the farm                         Computershare Investor Services
    Schoongezicht No. 308JS                        Proprietary Limited
    District eMalahleni                            70 Marshall Street
    
    Mpumalanga                                     Johannesburg
    
    PO Box 111                                     PO Box 61051
    Witbank 1035                                   Marshalltown 2107
    Tel: (013) 690 9911                            Tel: (011) 370 5000
    Fax: (013) 690 9293                            Fax: (011) 688 5200
    
    Sponsor
    J.P. Morgan Equities South Africa (Pty) Ltd.



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