CURRENTLY VIEWING: AUDITED FINANCIAL RESULTS » COMMENTARY
 
COMMENTARY
Headline earnings for the financial year to 30 June 2010 have declined by 54,2% to R1,494 billion due to the decline in the earnings of Assmang Limited (Assmang), and the reduced commissions earned on the significantly lower sales of Group products,compared to the previous financial year. The remaining effects of the global recession that set in during the last calendar quarter of 2008, impacted negatively on earnings in the first half of the financial year, which amounted to R338 million. Earnings for the second half of R1,142 billion were significantly higher than those of the first half due to increased sales prices of the Group’s products, and in particular, of iron ore.
The demand for all Group commodities was also much improved, due to the continued strong demand from the East. The strength of the Rand, which prevailed across most of the financial year, further impacted earnings negatively.

As a result of the trading conditions described above, Assmang’s headline earnings declined by 56,7% to R2,729 billion compared to the previous year. Assore holds a 50% interest in Assmang, which is proportionately consolidated in accordance with International Financial Reporting Standards (IFRS).

On 2 December 2009 shareholders were advised of the Company’s intention to enter into its second empowerment transaction, which was approved by shareholders in a meeting convened for this purpose on 19 January 2010. As a result,26,07% of Assore’s shares will be controlled by Historically Disadvantaged South Africans, as required by the Mining Charter.

On 20 August 2010, shareholders were advised of a proposed sub-division of ordinary shares, on a 5 for 1 basis. A general meeting has been scheduled for 10 September 2010 in order to approve the transaction (refer EVENT AFTER THE REPORTING PERIOD).

SALES VOLUMES
Sales volumes for all products were higher in the current year, however, the prices realised in 2010 were lower due mainly to the strong Rand, which prevailed over most of the year. This resulted in Assmang’s turnover for the year under review declining to R12,9 billion (2009: R15,3 billion). The following table sets out the sales volumes of Assmang’s commodities for the year under review:
 
2010
2009
%   
 
M tons ’000
M tons ’000
increase   
Iron ore 
9 799
7 409
32  
Manganese ore* 
3 095
2 152
44  
Manganese alloys* 
238
117
103  
Charge chrome 
189
144
31  
Chrome ore* 
272
256
6  
* Excluding intra-group sales

CAPITAL EXPENDITURE
The bulk of the Group’s capital expenditure occurs in Assmang, and amounted to R3,3 billion (2009: R2,8 billion). The major capital expenditure for the year occurred in the iron ore and manganese divisions of Assmang. A total of R2,085 billion was spent on the ongoing infrastructural development at the Khumani Iron Ore Mine, which will result in the mine capacity increasing to 16 million sales tons per annum from 1 July 2012. R258 million was spent on rebuilding manganese and chrome furnaces, with a further R46 million spent on the conversion of a chrome furnace to a manganese furnace at the Machadodorp Works. Apart from the expenditure in Assmang, R42 million has been spent on further developing two underground shafts at the Rustenburg Chrome Ore Mine, which is 44% held by a black economic empowerment partner for the benefit of historically disadvantaged groups in the area surrounding the mining operations. One of these shafts has recently been commissioned, and full production is expected towards the end of the 2011 calendar year.

OUTLOOK
Markets have recovered from the lows experienced towards the end of 2008 and into 2009. The extent of this recovery has been muted, however, due mainly to the recent pullback in Chinese economic growth and the European debt crisis, placing a degree of pressure on commodity prices in general. Ore and alloy prices for manganese and chrome have recently come under pressure, but iron ore prices remain robust. The pricing convention in the iron ore industry has undergone a structural change with effect from 1 April 2010, where prices are negotiated on a quarterly or spot basis, superseding the previous negotiations, which occurred annually between miners and customers. The new basis is now in line with the pricing convention operating in the manganese ore market. These circumstances, in combination with the Group’s exposure to fluctuations in exchange rates, make it difficult to estimate developments on Group earnings with reasonable assurance or accuracy.

DIVIDENDS

The results in this announcement include the interim dividend of 500 cents (2009: 1 000 cents) per share which was declared on 16 February 2010 and paid to shareholders on 29 March 2010. In line with the results for the year the Board has declared a final dividend of 1 200 cents per share making a total dividend for the year of 1 700 cents (2009: 2 000 cents) per share. The final dividend will be paid to shareholders on or about 27 September 2010 and in accordance with IFRS, is not included in the results as it was declared after year-end.

REVIEW BY AUDITORS
Ernst & Young Inc, the Group’s auditors, has reviewed the financial results included in this announcement in accordance with ISRE 2410 – Review of Interim Financial Information Performed by the Independent Auditor of the Entity. Their unmodified report is available for inspection at the registered office of the Company.

ACCOUNTING POLICIES AND BASIS OF PREPARATION

The financial results for the year under review have been prepared on the historical cost basis, except for financial instruments that are fairly valued and in accordance with IAS 34 – Interim Reporting, issued by the International Accounting Standards Board (IASB). The accounting policies applied are consistent with those adopted in the financial year ended 30 June 2009, with the exception of the adoption of the following policies in response to changes in IFRS:
  • IAS 1 (Amendment) – Presentation of Financial Statements; and
  • IFRS 8 – Operating Segments.
The adoption of these changes to IFRS has had no effect on the financial statements of the Group except for the disclosure of additional information. In addition, further minor amendments to IFRS and interpretations as issued by the IASB, have also been considered and adopted by the Group. These amendments and interpretations have not had any effect on the financial results for the year or any requirement for additional disclosure.

EVENT AFTER THE REPORTING PERIOD

On 20 August 2010, shareholders were advised of a proposed sub-division of ordinary shares, on a 5 for 1 basis, for which a general meeting has been scheduled for 10 September 2010 in order to approve the transaction. Should the sub-division be approved, the comparative figures for future financial results of all earnings per share information will be divided by a factor of 5. The results for the financial year presented were not affected by the proposed sub-division.

DECLARATION OF FINAL DIVIDEND
Final dividend No. 107 of 1 200 cents per share was declared on 1 September 2010, 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 Thursday, 16 September 2010.

The Company’s ordinary shares will commence trading “ex dividend”from the commencement of business on Friday, 17 September 2010.

The record date will be Thursday, 23 September 2010.

Dividend cheques in payment of this dividend to holders of certificated shares will be posted on or about Monday, 27 September 2010. 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, 27 September 2010.

Share certificates may not be dematerialised or rematerialised between Friday, 17 September 2010 and Thursday, 23 September 2010, both days inclusive.

On behalf of the Board

Desmond Sacco
Chairman

Johannesburg
2 September 2010
CJ Cory Chief
Executive Officer
   
   
Registered office
Assore House,
15 Fricker Road,
IIlovo Boulevard, Johannesburg,
2196
Company secretaries
African Mining and
Trust Company Limited
Transfer office
Computershare Investor Services (Proprietary) Limited, 70 Marshall Street, Johannesburg, 2001
     
Directors    
Executive
D Sacco (Chairman),
RJ Carpenter (Deputy Chairman),
CJ Cory (Chief Executive Officer),
PC Crous (Technical and Operations)
Non-executive
BM Hawksworth,
MC Ramaphosa,
EM Southey,
Dr JC van der Horst
Alternate
NG Sacco,
PE Sacco,
R Smith
     
Assore Limited
Company registration number: 1950/037394/06 Share code: ASR ISIN: ZAE000017117