CURRENTLY VIEWING: Final Results for the year ended 30 June » Commentary


Earnings for the financial year to 30 June 2011 have increased by 117,6% on the previous year to R3,2 billion due mainly to the significant increase in the earnings of Assmang Limited (Assmang), and the resulting increased commissions earned on the higher sales of Group products, compared to the previous financial year. The increase in earnings for the year was due to a stronger demand for all Group products and in particular substantially higher prices for iron ore across the year. Strength in the iron ore price was driven by demand from China where total steel production is expected to reach record levels during the current calendar year. However, the effect of the higher iron ore prices on earnings was partly offset by the impact of the stronger Rand, particularly in the second half.

As a result of the trading conditions described above, Assmang's earnings increased by 111,8% to R5,8 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).

Sales volumes

In line with higher crude and stainless steel production levels, sales volumes for iron ore and chrome products were higher in the current financial year. In conjunction with the increased prices for iron ore, Assmang's turnover for the year under review increased to R19,1 billion (2010: R12,9 billion). The following table sets out the sales volumes of Assmang's commodities for the year under review:

'000 M tons
'000 M tons
Iron ore
10 006
9 799
Manganese ore*
2 882
3 095
Manganese alloys*
Charge chrome
Chrome ore*
*Excluding intra-group sales to alloy plants

Capital expenditure

The bulk of The Group's capital expenditure occurs in Assmang, and amounted to R4,1 billion (2010: R3,3 billion) for the year under review. The major capital expenditure for the year occurred in the iron ore and manganese divisions of Assmang. A total of R2,8 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. R313 million was spent on rebuilding manganese and chrome furnaces at Cato Ridge Works and Machadodorp Works. Apart from the expenditure in Assmang, R38 million has been spent on further developing two underground mines at the chromite mines at Rustenburg Minerals, which are expected to meet their planned production volumes during calendar 2013.


Although it is anticipated that world steel production will reduce marginally in the second half of the calendar year, from the record levels in the first half of the year, the iron ore market is expected to remain tight due to continued strong levels of production in Asia. The world manganese and chrome ore and alloy markets are currently in oversupply, and although prices appear to have stabilised, it is unlikely that there will be a significant recovery in prices in the short term. Further short term volatility is also expected, due to the sovereign debt issues in the United States, and certain European countries. Of particular concern to The Group, are the continuing increases in the cost prices of electricity and other local inputs, which are placing pressure on the sustainability of its smelting operations. Assmang and Transnet continue to negotiate increased capacity allocation for iron and manganese ores railed from the Northern Cape. Compounded by the above, the results of The Group remain significantly exposed to fluctuations in exchange rates.


The results in this announcement include the interim dividend of 200 cents (2010: 100 cents) per share which was declared on 15 February 2011 and paid to shareholders on 14 March 2011. In line with the results for the year, the Board has declared a final dividend of 250 cents per share, making a total dividend for the year of 450 cents (2010: 340 cents) per share. The final dividend will be paid to shareholders on or about 19 September 2011 and in accordance with IFRS, is not included in the results in this announcement as it was declared after year-end.

Review by auditors

Ernst & Young Inc, The Group's auditors, have reviewed and issued an unmodified report on 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. A copy of their 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 under the supervision of Mr CJ Cory, CA(SA) and in accordance with IAS 34 - Interim Financial Reporting. The accounting policies applied are consistent with those adopted in the financial year ended 30 June 2010. Amendments to, and interpretations of IFRS effective in the year have not had any impact on the results or disclosures of The Group, while no other impacts resulted due to a set of improvements representing mostly minor changes, as published by the International Accounting Standards Board. The comparatives for earnings and dividends per share, and weighted average number of ordinary shares in issue have been restated for the subdivision of 5 for 1 ordinary shares on 10 September 2010.

Event after the reporting period

The special and ordinary resolutions tabled at the general meeting of shareholders on 10 August 2011 relating to the first phase of The Group's third empowerment transaction were approved by the requisite majorities of shareholders. In terms of the transaction, 11,8% of Assore's shares have been warehoused in a special purpose vehicle (SPV), prior to being disposed of into a broad-based BEE structure. In accordance with the resolutions, the shares were acquired from Shanduka Resources (Proprietary) Limited on 19 August 2011, for which bridging finance was granted by the Standard Bank of South Africa Limited. The impact of this transaction on The Group's statement of financial position is an increase in long term liabilities of R2,8 billion, and a decrease in equity, in the form of treasury shares, of R2,8 billion.


Since the issuing of the Company's previous annual report, the following changes to the board took place, on the following dates:
  • 11 November 2010 - Mr RJ (Bob) Carpenter stood down as Deputy Chairman, after 47 years of service with The Group, and on 28 February 2011 resigned as an executive director, remaining on the Board in a non-executive capacity;
  • 11 November 2010 - Mr EM (Ed) Southey was appointed as Deputy Chairman and Lead Independent Director;
  • 8 March 2011 - Mr NG Sacco resigned as alternate director;
  • 3 May 2011 - Mr DMJ (Don) Ncube was appointed as an independent nonexecutive director; and
  • 19 August 2011 - following the conclusion of the first phase of the third empowerment transaction, Mr MC (Cyril) Ramaphosa (and his alternate, Mr RM Smith) resigned as non-executive director.

Declaration of final dividend

Final dividend No. 109 of 250 cents per share was declared on 24 August 2011, in the currency of the Republic of South Africa. The salient dates are as follows:

• Last day for trading to qualify and participate in the final dividend
(and change of address of dividend instructions)
Friday, 9 September 2011
• Trading "ex dividend" commences Monday, 12 September 2011
• Record date Friday, 16 September 2011
• Dividend payment date Monday, 19 September 2011

Share certificates may not be dematerialised or rematerialised between Monday, 12 September 2011 and Friday, 16 September 2011, both days inclusive.

On behalf of the Board

Desmond Sacco
CJ Cory
Chief Executive Officer
25 August 2011