- Increased prices for all products and significantly higher sales volumes for manganese ore
- Headline earnings increased by 315,4% to R3,06 billion
- Final dividend increased from 200 cents to 1 000 cents per share
- Approval for feasibility on 6,0 million ton iron ore expansion at Khumani
Headline earnings for the year increased by 315,4% to an all-time record for the group of R3,06 billion (2007: R0,74 billion) due to substantially higher earnings for Assmang Limited (Assmang) and increased commissions received on the higher sales revenue for group products. Assore holds a 50% interest in Assmang which is proportionally consolidated in accordance with group accounting policies.
Assmang’s headline earnings for the year increased by 317,0% to R5,55 billion (2007: R1,33 billion) due to the continuing boom in base mineral markets worldwide, driven mainly by the sustained demand from China for products used in the manufacturing of carbon and stainless steels. These market conditions resulted in substantially higher US Dollar and Euro prices for all products and significantly higher sales volumes for manganese ore. The higher manganese ore sales were achieved by utilising the ports of Durban and Richards Bay in addition to the conventional ore terminal at Port Elizabeth.
SALES VOLUMES AND DIVISIONAL CONTRIBUTION
Assmang’s turnover for the year under review was R14,8 billion (2007: R6,1 billion) and sales volumes for the year are reflected in the table below:
|Metric tons 000|
|Iron ore||6 581||6 855||(4)|
|Manganese ore*||3 711||2 327||59|
* Excluding intra-group sales
The divisional contributions to headline earnings of Assmang for the year were as follows:
|Iron ore division||780||679||15|
|Manganese division||4 087||576||610|
|Total Assmang||5 550||1 331||317|
|Attributable to Assore 50%||2 775||666||317|
The performance of the manganese division was affected by the disruption to production caused by the explosion at No. 6 furnace at Cato Ridge which took place on 24 February 2008. Furnace No. 6 is currently being rebuilt and is planned to be recommissioned in November 2008. Production losses are expected to continue into the new financial year until furnace No.6 is fully operational. Where possible, contractual sales have been met by selling stock.
The bulk of the groups capital expenditure occurs in Assmang and is summarised by division for the year as follows:
|Iron ore division||2 231||1 735|
|Total Assmang||2 900||2 231|
Of the R2,23 billion spent in the iron ore division, R2,1 billion related to the construction of the Khumani Iron Ore mine which is on schedule and within budget to produce at a rate of 10,0 million tons per annum commencing the first quarter of 2009. The remainder of the capital expenditure related to rebuilding and upgrading the furnaces at Cato Ridge (R102 million) and replacement of equipment, expansion of housing facilities and upgrading of environmental projects.
The demand for carbon steel materials is expected to remain strong with prices for manganese ore, manganese alloys and iron ore at record levels. Assmang will continue to take full advantage of the Richards Bay and Durban ports to maximise the export of manganese ore.
The production of stainless steel is expected to increase marginally worldwide,but there could be some pressure on ferrochrome prices due to increased production volumes.
Following a successful pre-feasibility study, agreement has been reached to proceed with a feasibility study on a 6 million ton expansion at Khumani Iron Ore mine estimated to cost R7,3 billion, which would increase annual capacity to 16,0 million tons per annum. Start up expenditure on the study of R1,2 billion has been approved and the study should be completed by the second quarter of calendar 2009. In line with commitments received from Transnet on the additional rail and port capacity required, 4 million tons will be sold in the export market and the balance of 2 million tons will be placed into the local market.
DISCLOSURE OF SPECIFIC SHARE REPURCHASES
Shareholders were advised in terms of a circular dated 12 August 2008 that, with effect from 23 June 2008, Assore had entered into an arrangement with The Standard Bank of South Africa Limited (Standard Bank) in terms of which Standard Bank agreed to purchase 2 931 653 Assore shares from Old Mutual Life Assurance Company (South Africa) Limited (Old Mutual) and warehouse such Assore shares for and on behalf of Assore for a specified period of time in order to provide Assore an opportunity to seek the requisite approval from shareholders for Assore to repurchase the abovementioned shares for an amount of approximately R2,23 billion, being the consideration paid by Standard Bank to Old Mutual. Shareholders will be requested to approve this and other related transactions at the general meeting convened for Thursday, 4 September 2008.The Assore shares to be purchased from Standard Bank have been disclosed in this announcement as treasury shares having a value equal to the purchase consideration payable by Assore to Standard Bank and have been deducted from issued share capital as required by IFRS. The corresponding liability to Standard Bank has been included in interest-bearing current liabilities.
The results in this announcement include the interim dividend of 250 cents (2007: 150 cents) per share which was declared on 18 February 2008 and paid to shareholders on 17 March 2008.
In line with the results for the year the Board has declared an increased dividend of 1 000 cents (2007: 200 cents) making a total dividend for the year of 1 250 cents per share (2007: 350 cents). The final dividend will be paid to shareholders on or about 22 September 2008 and is not included in the results as it was declared after year-end.
Ernst & Young Inc., the groups auditors, has reviewed the financial results included in this announcement and a copy of their review report is available for inspection at the registered office of the company.
ACCOUNTING POLICIES AND BASIS OF PREPARATION
The financial statements included in this announcement have been prepared on the historical cost basis except for financial instruments that are fairly valued and incorporate accounting policies which are consistent with those adopted in the financial year ended 30 June 2007 with the exception of the adoption of the following policies in response to changes in IFRS:
- IFRS 4 : Insurance contracts
- IFRS 7 : Financial Instruments: Disclosures
- IAS 1 : Presentation of Financial Statements
- IFRIC 11 : IFRS 2: Group and Treasury Share Transactions
The adoption of these amendments, standards and interpretation has had no effect on the financial statements of the group except for the disclosure of additional information where applicable.
DECLARATION OF FINAL DIVIDEND
Final dividend No. 103 of 1 000 cents per share was declared on 27 August 2008, in the currency of the Republic of South Africa. In accordance with STRATE, the following dates apply to the dividend declared:
The last date to trade to qualify for the dividend (and for changes of address or dividend instructions) will be Friday, 12 September 2008.
The companys ordinary shares will commence trading ex dividend from the commencement of business on Monday, 15 September 2008.
The record date will be Friday, 19 September 2008.
Dividend cheques in payment of this dividend to holders of certificated shares will be posted on or about Monday, 22 September. Electronic payment to holders of certificated shares will be undertaken simultaneously.
Holders of dematerialised shares will have their accounts at their Central Securities Depository Participant or broker credited on Monday, 22 September 2008.
Share certificates may not be dematerialised or rematerialised between Monday, 15 September and Friday, 19 September 2008, both days inclusive.
On behalf of the board
|Desmond Sacco||CJ Cory|
|Chairman||Chief Executive Officer|
|29 August 2008|
|Registered office||Transfer office||Directors|
|Assore House||Computershare Investor||Executive|
|15 Fricker Road||Services 2004 (Pty) Ltd||Desmond Sacco (Chairman)|
|IIlovo Boulevard||70 Marshall Street||RJ Carpenter (Deputy Chairman)|
|Johannesburg 2196||Johannesburg 2001||CJ Cory (Chief Executive Officer)|
|PC Crous (Technical and Operations)|
|African Mining and Trust Company Limited||PN Boynton|
|Dr JC van der Horst|
|Company registration number: 1950/037394/06||JW Lewis (British)|
|Share code: ASR ISIN: ZAE000017117||NG Sacco|