14th Nov 2007 07:02
Lonmin PLC14 November 2007 Lonmin Final Results - Part 2 of 2 Financial Review Introduction The financial information presented has been prepared on the same basis andusing the same accounting policies as those used to prepare the financialstatements for the year ended 30 September 2006. Analysis of results Income Statement A comparison of the 2007 total operating profit with the prior year is set outbelow: $mTotal operating profit - 2006 842Less profit on sale of houses - 2006 (special) (12) ----------Underlying operating profit - 2006 830PGM price 345PGM volume (303)PGM mix (28)Base metals 52Cost changes (after foreign exchange benefit) (100) ----------Underlying operating profit - 2007 796Sale of houses, pension refund and impairment loss - 2007 (special) (2) ----------Total operating profit - 2007 794 ========== The 2006 total operating profit of $842 million benefited from $12 million ofgains arising on the disposal of company housing and therefore underlyingoperating profit for 2006 was $830 million. The metal markets have continued tostrengthen in 2007 for both PGMs and base metals. The average price per PGMounce has increased 23% to $1,196 per ounce resulting in an additional $345million of profit generated. This year has however been a challenging one interms of production for a number of reasons including the Number One furnacebeing out of action for quarter two, lower concentrator recoveries andindustrial action towards the end of the year. In addition a decision was takennot to sell semi-finished product at the year end as part of a strategy toachieve more steady state production flows. As a result of these factors PGMsales were down by nearly 309,000 ounces and operating profit was adverselyaffected by $303 million. In addition the PGM mix was unfavourable with theproportion of highly priced Rhodium ounces falling from 7.5% to 7.0% of theounces sold. Base metal revenues were up $52 million entirely driven by Nickelfor which volume was up 15% and price up 47%. After other cost changes of $100million, which are explained in more detail below, the resulting underlyingoperating profit was $796 million, down 4% on the prior year. Total operatingprofit for 2007 was $794 million after allowing for a number of small specialgains and losses. Other cost changes (increase) / decrease: $mSafety, health, environment and community (28)Exploration, development and marketing (16)Shared services and support functions (19)Productive costs (67)Toll fees (18)Royalties (7)Share based payments (18)Depreciation and amortisation (6)Foreign exchange 79 ---------- (100) ========== We recognise the vital role we have in caring for our employees both within thework environment and in the wider community and have spent an incremental $28million this year. Safety has remained a major area of focus and we haveinvested in both training programmes and equipment. We have run a major AIDs /HIV testing programme and nearly 14,000 employees have been tested and knowtheir status. The anti-retroviral programme to support employees has beenextended and the general medical scheme has been improved. The company has alsodeveloped a major learning programme to improve basic educational skills,including literacy, of the workforce. In 2007 on average some 500 employees wereenrolled on the course and this is expanding to 750 in 2008. The business has also been strengthened in the year through otherforward-looking investments. Our exploration expenditure has increased by morethan 50%. We have also increased our marketing spend with particular focus inthe jewellery sector and we are investing in development programmes withpre-feasibility projects for metallurgical expansion and Limpopo. Costs of shared services and other functions which support the business havealso been increased this year. In part this reflects recognition that theseareas need to be expanded to cope with a more complex environment. IT costs forexample have increased reflecting the costs of operating new ERP andmetallurgical systems. The Human Capital function is being expanded to enhancecapabilities in areas such as labour welfare and labour relations. The Groupalso recognised in the year that strategic and production planning needed to beenhanced and is developing and broadening this function. Productive costs increased by some $67 million in the period. This principallyarose from inflationary pressures in the mining sector in South Africa, however,some other factors were at play. Opencast contracting costs increased driven byincreases in UG2 ore content and ore transport costs increased due to theproduction shifts across the property. Also the business experienced higherlevels of labour absenteeism which necessitated increased staff numbers andresulted in lower productivity. A number of other specific areas impacted costs. Outside toll-refining wasutilised to process some 12% of our metallurgical production as a direct resultof the smelter burn through and this resulted in some $18 million of charges.The increase in profits derived from the Eastern side of the property due tohigher tonnes mined has lead to an increase in royalties of $7 million.Furthermore, the cost of share based payments increased by $18 million driven bya number of factors including the impact of the £11 increase in share price oncash-settled schemes, the impact of accelerated vesting and the newco-investment plan. Foreign exchange has been a strong positive factor with costs benefiting $79million due to an 8% weaker Rand against the Dollar in 2007. The Rand hashowever appreciated considerably at the start of 2008 and, if continued, thiswill have a significantly adverse effect on 2008 reported costs in Dollar terms. The C1 cost per PGM ounce sold net of by-product credits on own production fromthe Marikana operations amounted to R3,165 for 2007 compared with R2,441 for2006, an increase of 30% despite the benefit of improved base metal credits (upfrom R400/oz to R762/oz). Rand costs incurred on C1 ounces increased by 13%. TheC1 cost per ounce increased significantly due to high levels of fixed costsbeing spread over fewer ounces as sales of C1 ounces fell by 18%. Furtherdetails of unit costs analysis can be found in the operating statistics tablewithin the Annual Review. Summary of net finance costs 2007 2006 $m $mNet interest charges (29) (36)Capitalised interest 23 16Prior years capitalised interest adjustment - 21Movement in fair value of embedded derivative of convertible bond (104) (227)Other 3 (2) -------- ---------Net finance expenses (107) (228) --------- -------- Net interest charges have fallen by $7 million due to a lower average net debtversus the prior year and therefore interest cover has strengthened to 27.4times (2006 - 23.1 times). Capitalised interest for the period has increased to$23 million of which $13 million relates to the acquisition funding of theAkanani asset. A key change in the year has been the redemption of theconvertible bond following the notice issued by the company in November 2006.Movements in fair value of the embedded derivative have been recognised to thepoint of conversion resulting in a lower charge at $104 million in the period.Net finance expenses in 2007 were therefore $107 million compared with $228million in 2006. Profit before tax amounted to $705 million in 2007 compared with $633 million in2006 reflecting the operating profit decrease of $48 million which was more thanoffset by the improvement in net finance expenses. The 2007 tax charge was $297 million compared with $202 million in 2006. Thecorporate tax rate in South Africa has remained at 29% during the year. Theeffective tax rate, excluding the effects of exchange and special items, was 31%compared with 34% last year. The key reason for the reduction is the overseastaxes on dividends which fell by $29 million reflecting lower levels ofdividends remitted in the year by subsidiaries. This is largely a timingdifference which is expected to reverse in 2008 although the rate on suchremissions has been reduced from 12.5% to 10.0% with effect from 1 October 2007.The overall tax charge includes a debit of $51 million on the translationadjustment of the current and deferred tax balances resulting from the 12%appreciation of the closing Rand/Dollar exchange rates at the respective yearends. Profit for the year attributable to equity shareholders amounted to $314 million(2006 - $313 million) and earnings per share were 205.1 cents compared with219.5 cents in 2006. Underlying earnings per share, being earnings excludingspecial items, amounted to 295.9 cents (2006 - 312.1 cents). Balance sheet A reconciliation of the movement in equity shareholders' funds is given below. $mEquity shareholders' funds - 2006 1,089Total recognised income 392Conversion of the convertible bond 587Other share issues 70Dividends (171)Other 1 -----------Equity shareholders' funds - 2007 1,968 =========== Equity interests were $1,968 million at 30 September 2007 compared with $1,089million at 30 September 2006. The total recognised income attributable to equityshareholders of Lonmin Plc for the year was $392 million. The conversion of theconvertible bond into equity generated $216 million of share capital and sharepremium as well as the reversal of $371 million of fair value adjustmentspreviously charged to the income statement. Further share capital and premium of$70 million was generated by the issuance of shares under option schemes for $33million and through an equity investment by the IFC. Dividend payments in theperiod totalled $171 million made up of $85 million for the 2006 final and $86million for the 2007 interim dividend. On 26 January 2007 the Group acquired 94% of AfriOre Limited with a compulsoryacquisition of the remaining shares by 16 February 2007. Total considerationpaid was $413 million against net assets acquired under Group accountingpolicies of $15 million. This has therefore resulted in the recognition of $611million of exploration and evaluation assets, $73 million of goodwill, adeferred tax liability of $173 million and the minority interest share of thefair value uplift of $113 million as required by IFRS. Net debt amounted to $375 million at 30 September 2007 with the components beingbank loans of $596 million offset by cash net of overdrafts of $221 million. Netdebt has reduced in the period from $458 million with the net cash outflows of$137 million being offset by the bond conversion. Gearing was 15% compared with 27% at 30 September 2006, calculated on netborrowings attributable to the Group divided by those attributable netborrowings and the equity interests outstanding at the balance sheet date. Cash flow The following table summarises the main components of the cash flow during theyear: 2007 2006 $m $mOperating profit 794 842Depreciation and amortisation 87 81Change in working capital 81 (202)Other 21 1--------------------------------------------------- ------------- ------------Cash flow from operations 983 722Interest and finance costs (25) (31)Tax (266) (185)--------------------------------------------------- ------------- ------------Trading cash flow 692 506Capital expenditure (276) (182)Proceeds from assets held for sale 5 28Dividends paid to minority (41) (62)--------------------------------------------------- ------------- ------------Free cash flow 380 290Acquisitions (393) (14)Financial investments (21) (36)Shares issued 68 15Equity dividends paid (171) (124)--------------------------------------------------- ------------- ------------Cash inflow / (outflow) (137) 131Opening net debt (458) (585)Bond conversion 213 -Exchange 7 (4)--------------------------------------------------- ------------- ------------Closing net debt (375) (458)--------------------------------------------------- ------------- ------------ Trading cash flow (cents per share) 452.0c 354.9c--------------------------------------------------- ------------- ------------Free cash flow (cents per share) 248.2c 203.4c--------------------------------------------------- ------------- ------------ Despite the fall in operating profit cash flow from operations for 2007 was $983million, a 36% increase on last year's figure of $722 million. This was mainlydue to an inflow on working capital of $81 million compared with an outflow of$202 million last year. The large outflow in 2006 was as a result of an increaseof $249 million in debtors due to concentrate sales at the end of the year.During this year there has been a $58 million decrease in debtors. Afterinterest and finance costs of $25 million and tax payments of $266 million,trading cash flow amounted to $692 million in 2007 against $506 million in 2006,with trading cash flow per share of 452.0 cents in 2007 against 354.9 cents in2006. Capital expenditure of $276 million was incurred during the year, up $94 millionon the prior year. This was, however, lower than the $300 million expected andmost of this shortfall relates to timing differences which will flow into 2008.Free cash flow amounted to $380 million with free cash flow per share at 248.2cents (2006 - 203.4 cents). Acquisitions of $393 million in 2007 represented thepurchase of AfriOre Limited as described above net of $20 million cash acquired.Proceeds from shares issued were up $53 million as, in addition to shares issuedin respect of share schemes, a $35 million equity investment was made by the IFCwhich was at a 5% discount to market price. After equity dividends paid of $171million, the cash outflow during 2007 was $137 million and net debt amounted to$375 million at 30 September 2007. Dividends As dividends are now accounted for on a cash basis under IFRS the dividend shownin the accounts represents the 2006 final of 55 cents and the 2007 interim of 55cents making a total of 110 cents for the year. In addition the Board recommendsa final 2007 dividend of 60 cents (2006 - 55 cents). Financial risk management The Group's functional currency remains the US Dollar and the share capital ofthe Company is based in US Dollars. The Group's business is mining and it does not undertake trading activity infinancial instruments. Interest rate risk Monetary assets and liabilities are subject to the risk of movements in interestrates. The borrowings at 30 September 2007 comprised $296 million of borrowingsin the UK, of which $237 million was drawn under an acquisition facility on thepurchase of AfriOre, and in South Africa a long-term bank loan of $300 millionwas drawn together with an overdraft of $1 million. Cash deposits representedbalances of $12 million in the UK and $210 million in South Africa. Liquidity risk Liquidity risk measures the risk that the Group may not be able to meet itsliabilities as they fall due and, therefore, its ability to continue trading.The Group's policy on overall liquidity is to ensure that there are sufficientcommitted facilities in place which, when combined with available cashresources, are sufficient to meet the funding requirements in the foreseeablefuture. At the 2007 year end the Group had $1,450 million of committedfacilities in place of which $596 million were drawn down. Foreign currency risk Foreign currency risk arises when movements in exchange rates, particularly theUS Dollar against the South African Rand, affect the transactions the Groupenters into, reported profits and net assets. Most of the Group's operations arebased in South Africa and the majority of the revenue stream is in US Dollars.However the bulk of the Group's costs, and taxes, are in Rand. Most of the cashheld in South Africa is in US Dollars and is normally remitted to the UK on aregular basis. Short-term working capital facilities required in South Africaare drawn primarily in US Dollars. Fluctuations in the Rand to US Dollar exchange rate can have a significantimpact on the Group's results. A strengthening of the Rand against the US Dollarhas an adverse effect on profits due to the majority of costs being denominatedin Rand. The approximate effect on the Group's results of a 10% movement in theRand to US Dollar 2007 year average exchange rate would be as follows: --------------------------- ------ -------EBIT +/- $83mProfit for the year +/- $48mEPS (cents) +/- 31.4c--------------------------- ------ ------- These sensitivities are based on 2007 prices, costs and volumes and assume allother variables remain constant. They are estimated calculations only. Commodity price risk Commodities are traded on worldwide commodities markets and are subject to pricefluctuations. Therefore the prices obtained are dependent upon the prevailingmarket prices. Any change in prices will have a direct effect on the Group'strading results. Forward sales are undertaken where the Board determines that itis in the Group's interest to hedge a proportion of future cash flows. The Grouphas undertaken a limited number of forwards on Nickel and Copper by-productsales as disclosed in note 21 to the financial statements. The approximate effects on the Group's results of a 10% movement in the 2007year average market prices for Platinum (Pt), Palladium (Pd), Rhodium (Rh) andNickel (Ni) would be as follows: Pt Pd Rh Ni------------------- --------------- --------------- --------------- ------------EBIT +/- $96m +/- $12m +/- $60m +/- $14mProfit for the year +/- $56m +/- $7m +/- $35m +/- $8mEPS (cents) +/- 36.5c +/- 4.6c +/- 22.7c +/- 5.4c------------------- ----- --------- ------ -------- ------ -------- ------ ----- The above sensitivities are based on 2007 volumes and assume all other variablesremain constant. They are estimated calculations only. Fiscal risk Changes in governmental fiscal policy in the territories in which the Groupoperates will impact on Group profitability. In South Africa the Government hasbeen drafting and debating a Royalty Bill which will come into effect on 1 May2009. As currently drafted this Bill would see a royalty based on revenue with arate of 3% for refined Platinum group metals. Alan FergusonChief Financial Officer14 November 2007 Operating Statistics - 5 Year Review -------------------- ------------ ------ --------- --------- -------- -------- -------- 2007 2006 2005 2004 2003 Units Restated Restated Restated Restated-------------------- ------------ ------ --------- --------- -------- -------- --------Tonnes minedMarikana Underground 000 11,211 11,484 10,921 11,053 11,450 Opencast 000 1,597 1,583 2,653 2,730 2,880Limpopo Underground 000 757 857 212 N/A N/A Opencast 000 - 14 - N/A N/APandora attributable(2) Underground 000 128 100 54 7 N/A Opencast 000 286 175 - - N/ALonmin Platinum Underground 000 12,096 12,441 11,187 11,060 11,450 Opencast 000 1,883 1,772 2,653 2,730 2,880 Total 000 13,979 14,213 13,840 13,790 14,330% tonnes mined from UG2 reef % 72.0 71.2 74.3 82.4 81.6-------------------- ------------ ------ --------- --------- -------- -------- --------Tonnesmilled(3)Marikana Underground 000 11,216 11,502 10,975 11,103 11,418 Opencast 000 1,469 1,854 2,444 3,283 2,790Limpopo Underground 000 781 887 214 n/a n/a Opencast 000 - 14 n/a n/a n/aPandora(4) Underground 000 301 236 127 18 n/a Opencast 000 649 394 - - n/aOre Purchases(5) Underground 000 75 14 - - - Opencast 000 20 18 - - -Lonmin Platinum Underground 000 12,373 12,639 11,316 11,121 11,418 Opencast 000 2,138 2,280 2,444 3,283 2,790 Total 000 14,511 14,919 13,760 14,404 14,208-------------------- ------------ ------ --------- --------- -------- -------- --------Milled head gradeMarikana Underground g/t 4.98 5.00 4.98 5.00 5.00 Opencast g/t 4.11 4.25 4.88 4.86 4.95Limpopo Underground g/t 3.50 4.09 3.84 n/a n/a Opencast g/t - 3.29 n/a n/a n/aPandora Underground g/t 4.88 5.05 4.54 4.89 n/a Opencast g/t 5.33 4.92 n/a n/a n/aOre Purchases Underground g/t 3.92 3.92 n/a n/a n/a Opencast g/t 5.16 4.14 n/a n/a n/aLonmin Platinum Underground g/t 4.88 4.94 4.95 5.00 5.00 Opencast g/t 4.39 4.36 4.88 4.86 4.95 Total g/t 4.80 4.85 4.94 4.97 4.99-------------------- ------------ ------ --------- --------- -------- -------- --------Metals inconcentrate(6)Lonmin Platinum Platinum oz 869,832 964,958 908,972 n/c n/c Palladium oz 404,535 447,894 397,546 n/c n/c Gold oz 25,030 31,973 22,269 n/c n/c Rhodium oz 114,601 125,379 115,436 n/c n/c Ruthenium oz 182,326 198,491 187,967 n/c n/c Iridium oz 41,157 41,284 38,465 n/c n/c Total PGMs oz 1,637,481 1,809,979 1,670,655 n/c n/c Nickel(7) mt 4,636 5,120 4,042 n/c n/c Copper(7) mt 2,814 3,104 2,498 n/c n/c-------------------- ------------ ------ --------- --------- -------- -------- -------- -------------------------- ------ ----------- ----------- --------- ---------- --------- Units 2007 2006 2005 2004 2003 Restated Restated Restated Restated-------------------------- ------ ----------- ----------- --------- ---------- ---------Metallurgical production Lonmin refined metal production Platinum oz 695,842 799,070 796,082 771,913 831,936 Palladium oz 318,758 369,859 348,681 334,371 377,982 Gold oz 20,485 20,955 17,059 13,828 14,012 Rhodium oz 88,469 115,453 87,632 79,877 121,334 Ruthenium oz 135,873 174,639 172,610 144,004 184,470 Iridium oz 30,430 40,836 25,110 27,204 31,763 Total PGMs oz 1,289,857 1,520,812 1,447,174 1,371,197 1,561,497Toll refined metal production Platinum oz 93,609 - 46,354 61,909 100,931 Palladium oz 43,274 - 21,115 24,334 39,436 Gold oz - - 731 411 (592) Rhodium oz 12,966 - 7,133 10,135 19,180 Ruthenium oz 20,439 - 11,524 20,436 32,245 Iridium oz 4,090 - 2,263 3,338 5,060 Total PGMs oz 174,378 - 89,120 120,563 196,260Total refined PGMs Platinum oz 789,451 799,070 842,436 833,822 932,867 Palladium oz 362,032 369,859 369,796 358,705 417,418 Gold oz 20,485 20,955 17,790 14,239 13,420 Rhodium oz 101,435 115,453 94,765 90,012 140,514 Ruthenium oz 156,312 174,639 184,134 164,440 216,715 Iridium oz 34,520 40,836 27,373 30,542 36,823 Total PGMs oz 1,464,235 1,520,812 1,536,294 1,491,760 1,757,757Base metals Nickel(8) mt 4,522 4,342 4,187 3,098 3,876 Copper(8) mt 2,466 2,452 2,547 1,965 2,284-------------------------- ------ ----------- ----------- --------- ---------- ---------Capital expenditure Rm 1,923 1,207 1,180 1,230 1,294 $m 276 182 190 187 162-------------------------- ------ ----------- ----------- --------- ---------- --------- ------------------------- ----- ----------- -------- --------- ---------- ---------- Units 2007 2006 2005 2004 2003 Restated Restated Restated Restated------------------------- ----- ----------- -------- --------- ---------- ----------Sales Refined metal sales Platinum oz 786,552 803,471 838,859 858,211 903,077 Palladium oz 362,077 373,303 364,080 366,988 405,073 Gold oz 24,449 22,133 18,122 18,498 17,557 Rhodium oz 102,916 116,281 93,453 103,641 131,752 Ruthenium oz 162,853 179,557 183,372 192,635 231,131 Iridium oz 37,858 38,092 26,676 36,390 39,797 Total PGMs oz 1,476,705 1,532,837 1,524,562 1,576,363 1,728,387Concentrate and other(9) Platinum oz 7,032 136,183 71,396 80,032 - Palladium oz 3,232 61,110 37,003 36,999 - Gold oz 201 4,641 2,362 2,887 - Rhodium oz 1,008 15,965 21,552 20,312 - Ruthenium oz 1,942 26,137 20,517 25,814 - Iridium oz 64 5,291 2,548 4,163 - Total PGMs oz 13,479 249,327 155,378 170,207 -Lonmin Platinum Platinum oz 793,584 939,654 910,255 938,243 903,077 Palladium oz 365,309 434,413 401,083 403,987 405,073 Gold oz 24,650 26,774 20,484 21,385 17,557 Rhodium oz 103,924 132,246 115,005 123,953 131,752 Ruthenium oz 164,795 205,694 203,889 218,449 231,131 Iridium oz 37,922 43,383 29,224 40,553 39,797 Total PGMs oz 1,490,184 1,782,164 1,679,940 1,746,570 1,728,387 Nickel mt 5,308 4,604 3,892 4,017 3,132 Copper mt 2,474 2,974 2,481 2,070 2,196------------------------- ----- ----------- -------- --------- ---------- ---------- Average Prices Platinum $/oz 1,213 1,091 852 818 645 Palladium $/oz 339 300 185 228 212 Gold $/oz 647 571 425 402 346 Rhodium $/oz 5,757 3,971 1,684 762 529 Ruthenium $/oz 404 134 66 46 32 Iridium $/oz 402 233 153 132 87 Basket price of PGMs $/oz 1,196 972 668 590 451 Nickel $/MT 26,461 17,975 12,527 11,444 6,812 Copper $/MT 6,971 7,882 3,168 2,261 1,526------------------------- ----- ----------- -------- --------- ---------- ---------- --------------------------------------- --------- --------------- ----------- ----------- -------------- ------------- Units 2007 2006 2005 2004 2003 Restated Restated Restated Restated--------------------------------------- --------- --------------- ----------- ----------- -------------- -------------Cost per PGM ounce soldGroup: --------------------------------------------------------------------Mining - Marikana R/oz ! 2,306 1,700 1,606 1,422 n/c !Mining - Limpopo R/oz ! 4,463 3,740 3,587 - n/c ! --------------------------------------------------------------------Mining (weighted average) R/oz 2,430 1,827 1,636 1,422 n/c --------------------------------------------------------------------Concentrating - Marikana R/oz ! 470 330 283 274 n/c !Concentrating - Limpopo R/oz ! 1,506 847 814 - n/c ! --------------------------------------------------------------------Concentrating (weighted average) R/oz 526 361 291 274 n/cProcess division R/oz 600 406 269 242 n/cShared business services R/oz 612 463 345 316 n/cStock movement R/oz 28 (9) 14 165 n/c --------------- ----------- ----------- -------------- -------------C1 cost per PGM ounce soldbefore base metal credits R/oz 4,196 3,048 2,555 2,419 n/cBase metal credits R/oz (762) (400) (242) (233) n/c --------------- ----------- ----------- -------------- -------------C1 cost per PGM ounce soldafter base metal credits R/oz 3,434 2,648 2,313 2,186 n/cAmortisation R/oz 360 272 252 232 n/cOther EBIT items R/oz - - (28) - n/c --------------- ----------- ----------- -------------- -------------C2 costs per PGM ounce sold R/oz 3,794 2,920 2,537 2,418 n/c --------------- ----------- ----------- -------------- -------------Pandora Mining cost:C1 Pandora mining cost (in joint venture) R/oz 2,453 1,195 n/c n/c n/c Pandora JV cost/ounce to Lonmin (adjusting Lonmin share of profit) R/oz 4,225 3,110 n/c n/c n/c------------------------------------------------- --------------- ----------- ----------- -------------- -------------Exchange RatesAverage rate for period(10) SA Rand R/$ 7.14 6.63 6.28 6.60 7.90 Sterling £/$ 0.51 0.55 0.54 0.56 0.62Closing rate SA Rand R/$ 6.83 7.77 6.36 6.48 6.97 Sterling £/$ 0.50 0.53 0.57 0.55 0.60------------------------- ------------- --------- --------------- ----------- ----------- -------------- ------------- Footnotes: 1. 2006 comprised an additional 7 days mining performance for WPL and EPL arising on the change of basis to report on a calendar month. The data has been restated to remove these extra days and restate on a like for like basis. 2. Pandora attributable tonnes mined includes Lonmin's share (42.5%) of the total tonnes mined on the Pandora joint venture. Prior years have been restated. 3. Tonnes milled excludes slag milling. 4. Lonmin purchases 100% of the ore produced by the Pandora joint venture for onward processing which is included in downstream operating statistics. 5. Relates to the tonnes milled and derived metal in concentrate from third-party ore purchases. 6. Metals in concentrate have been changed from the previously reported definition of full contained metal to adjust for industry standard downstream processing losses. Prior years have been restated. 7. Corresponds to contained base metals in concentrate. 8. Nickel is produced and sold as nickel sulphate crystals or solution and the volumes shown correspond to contained metal. Copper is produced as refined product but typically at LME grade C. 9. Concentrate and other sales have been adjusted to a saleable ounces basis using standard industry recovery rates. Prior years have been restated. 10. Exchange rates are based on the weighted average rates applicable over the course of the year on revenue between Rand and US$. N/A Not applicableN/C Not calculated Consolidated income statementfor the year ended 30 September --------------------------------------- ------- -------------- ---------- ---------- ------------ ---------- --------- Special Special 2007 items 2007 2006 items 2006 Underlying(i) (note 3) Total Underlying(i) (note 3) TotalContinuing operations Note $m $m $m $m $m $m--------------------------------------- ------- -------------- ---------- ---------- ------------ ---------- ---------Revenue 2 1,941 - 1,941 1,855 - 1,855--------------------------------------- ------- -------------- ---------- ---------- ------------ ---------- ---------EBITDA(ii) 883 (2) 881 911 12 923Depreciation and amortisation (87) - (87) (81) - (81)--------------------------------------- ------- -------------- ---------- ---------- ------------ ---------- ---------Operating profit /(loss) (iii) 2 796 (2) 794 830 12 842Finance income 4 25 - 25 12 - 12Finance expenses 4 (28) (104) (132) (34) (206) (240)Share of profit of associate and joint venture 18 - 18 19 - 19--------------------------------------- ------- -------------- ---------- ---------- ------------ ---------- ---------Profit / (loss) before taxation 811 (106) 705 827 (194) 633Income tax expense (iv) 5 (255) (42) (297) (280) 78 (202)--------------------------------------- ------- -------------- ---------- ---------- ------------ ---------- ---------Profit / (loss) for the year 556 (148) 408 547 (116) 431--------------------------------------- ------- -------------- ---------- ---------- ------------ ---------- --------- --------------------------------------- ------- -------------- ---------- ---------- ------------ ---------- ---------Attributable to: - Equity shareholders of Lonmin Plc 453 (139) 314 445 (132) 313- Minority interest 103 (9) 94 102 16 118--------------------------------------- ------- -------------- ---------- ---------- ------------ ---------- --------- Earnings per share 6 295.9c 205.1c 312.1c 219.5c--------------------------------------- ------- -------------- ---------- ---------- ------------ ---------- ---------Diluted earnings per sharev 6 293.4c 203.3c 307.7c 216.4c--------------------------------------- ------- -------------- ---------- ---------- ------------ ---------- ---------Dividends paid per share 7 110.0c 87.0c--------------------------------------- ------- -------------- ---------- ---------- ------------ ---------- --------- Consolidated statement of recognised income and expensefor the year ended 30 September ----------------------------------------------------------------------------- ------------- ---------- -------- 2007 2006 Total Total Note $m $m----------------------------------------------------------------------------- ------------- ---------- --------Profit for the year 408 431Change in fair value of available for sale financial assets 111 46Net of changes in fair value of cash flow hedges (8) (4)Losses on settled cash flow hedges released to the income statement 20 -Deferred tax on items taken directly to the statement recognised income and expense (32) -Actuarial losses on post retirement benefit plan (11) (6)----------------------------------------------------------------------------- ------------- ---------- --------Total recognised income for the year 488 467----------------------------------------------------------------------------- ------------- ---------- -------- Attributable to:- Equity shareholders of Lonmin Plc 9 392 350- Minority interest 9 96 117----------------------------------------------------------------------------- ------------- ---------- -------- 9 488 467----------------------------------------------------------------------------- ------------- ---------- -------- Footnotes: i Underlying earnings are calculated on profit for the year excluding movements in the fair value of the embedded derivative associated with the convertible bond, exchange on tax balances, profit on the sale of Marikana houses, pension settlement surplus, impairment losses in respect of non core investments and, for 2006, an adjustment to the interest capitalised in prior years. ii EBITDA is operating profit before depreciation and amortisation. iii Operating profit is defined as revenue less operating expenses before net finance costs and before share of profit of associate and joint venture. iv The income tax expense substantially relates to overseas taxation ($6 million income relates to the UK) and includes exchange losses of $51 million (2006 - gains of $82 million) as disclosed in note 5. v The calculation of diluted EPS includes adjustments for the movements in fair value on the embedded derivative within the convertible bond subject to the limitation under IAS 33 - Earnings Per Share, that this cannot thereby create a figure exceeding basic EPS. Consolidated balance sheetas at 30 September --------------------------------------------------------------------- ------- ----------------- -------------- 2007 2006 Note $m $m--------------------------------------------------------------------- ------- ----------------- --------------Non-current assetsGoodwill 186 113Intangible assets 936 328Property, plant and equipment 1,673 1,463Investment in associate and joint venture 131 113Financial assets:- Available for sale financial assets 226 98- Other receivables 22 19Employee benefits - 6--------------------------------------------------------------------- ------- ----------------- -------------- 3,174 2,140--------------------------------------------------------------------- ------- ----------------- --------------Current assetsInventories 186 135Trade and other receivables 338 396Assets classified as held for sale 7 6Tax recoverable 3 3Financial assets:- Derivative financial instruments 8 -Cash and cash equivalents 222 61--------------------------------------------------------------------- ------- ----------------- -------------- 764 601--------------------------------------------------------------------- ------- ----------------- --------------Current liabilitiesBank overdraft (1) (18)Trade and other payables (286) (209)Financial liabilities:- Interest bearing loans and borrowings (237) -- Derivative financial instruments - (4)Tax payable (40) (91)--------------------------------------------------------------------- ------- ----------------- -------------- (564) (322)--------------------------------------------------------------------- ------- ----------------- --------------Net current assets 200 279--------------------------------------------------------------------- ------- ----------------- -------------- Non-current liabilitiesEmployee benefits (24) (7)Financial liabilities:- Interest bearing loans and borrowings (359) (499)- Derivative financial instruments - (268)Deferred tax liabilities (585) (294)Provisions (46) (39)--------------------------------------------------------------------- ------- ----------------- --------------- (1,014) (1,107)--------------------------------------------------------------------- ------- ----------------- ---------------Net assets 2,360 1,312--------------------------------------------------------------------- ------- ----------------- --------------- Capital and reservesShare capital 9 156 143Share premium 9 299 26Other reserves 9 96 84Retained earnings 9 1,417 836--------------------------------------------------------------------- ------- ----------------- ---------------Attributable to equity shareholders of Lonmin Plc 9 1,968 1,089Attributable to minority interest 9 392 223--------------------------------------------------------------------- ------- ----------------- ---------------Total equity 9 2,360 1,312--------------------------------------------------------------------- ------- ----------------- --------------- Consolidated cash flow statementfor the year ended 30 September ----------------------------------------------------- -------- ------------------------ ----------------------- 2007 2006 Note $m $m----------------------------------------------------- -------- ------------------------ -----------------------Profit for the year 408 431Taxation 5 297 202Finance income 4 (25) (12)Finance expenses 4 132 240Share of profit after tax of associate and joint venture (18) (19)Depreciation and amortisation 87 81Change in inventories (51) (25)Change in trade and other receivables 58 (249)Change in trade and other payables 70 74Change in provisions 4 (2)Profit on sale of assets held for sale (1) (12)Share based payments 24 11Other non cash charges (2) 2----------------------------------------------------- -------- ------------------------ -----------------------Cash flow from operations 983 722Interest received 16 1Interest paid (41) (32)Tax paid (266) (185)----------------------------------------------------- -------- ------------------------ -----------------------Cash flow from operating activities 692 506----------------------------------------------------- -------- ------------------------ ----------------------- Cash flow from investing activitiesAcquisition of subsidiaries (net of cash acquired) 10 (393) (14)Purchase of intangible asset (6) (21)Purchase of property, plant and equipment (270) (161)Proceeds from available for sale financial assets 51 -Purchase of available for sale financial assets (72) (36)Proceeds from disposal of assets held for sale 5 28----------------------------------------------------- -------- ------------------------ -----------------------Cash used in investing activities (685) (204)----------------------------------------------------- -------- ------------------------ ----------------------- Cash flow from financing activitiesEquity dividends paid to Lonmin shareholders (171) (124)Dividends paid to minority (41) (62)Proceeds from current borrowings 237 -Repayment of current borrowings - (86)Proceeds from non-current borrowings 71 288Repayment of non-current borrowings - (296)Issue of ordinary share capital 68 15----------------------------------------------------- -------- ------------------------ -----------------------Cash used in financing activities 164 (265)----------------------------------------------------- -------- ------------------------ -----------------------Increase in cash and cash equivalents 171 37Opening cash and cash equivalents 8 43 10Effect of exchange rate changes 7 (4)----------------------------------------------------- -------- ------------------------ -----------------------Closing cash and cash equivalents 8 221 43----------------------------------------------------- -------- ------------------------ ----------------------- 1. Basis of preparation The financial information presented has been prepared on the basis ofInternational Financial Reporting Standards (IFRSs) as adopted by the EU asdisclosed in note 1 to the financial statements. 2. Segmental analysis The Group's primary operating segment is the mining of platinum group metals.The majority of the Group's operations are based in South Africa. ------------------------------------------- ------------------------------------------------------------------- 2007 ------------------------------------------------------------------- Exploration Platinum Corporate and evaluation TotalAnalysis by business group $m $m $m $m------------------------------------------- ---------------------- --------------- ----------------- ----------Revenue - external sales 1,941 - - 1,941Operating profit 880 (63) (23) 794Segment total assets 3,211 41 686 3,938Segment total liabilities (1,066) (339) (173) (1,578)Capital expenditurei 353 - 19 372Depreciation and amortisation 87 - - 87Share of profit associate and JV 18 - - 18------------------------------------------- ---------------------- --------------- ----------------- ---------- ------------------------------------------- ------------------------------------------------------------------- 2006 - restated(ii) ---------------------- --------------- ----------------- ---------- Exploration Platinum Corporate and evaluation TotalAnalysis by business group $m $m $m $m------------------------------------------- ---------------------- --------------- ----------------- ----------Revenue - external sales 1,855 - - 1,855Operating profit 912 (56) (14) 842Segment total assets 2,680 61 - 2,741Segment total liabilities (931) (498) - (1,429)Capital expenditure(i) 232 1 - 233Depreciation and amortisation 81 - - 81Share of profit of associate and JV 19 - - 19------------------------------------------- ---------------------- --------------- ----------------- ---------- ------------------------------------------- ------------------------------------------------------------------- 2007------------------------------------------- ------------------------------------------------------------------- South Africa UK Other TotalAnalysis by geographical location $m $m $m $m------------------------------------------- ---------------------- --------------- ----------------- ----------Revenue - external sales 1,941 - - 1,941Segment total assets 3,867 41 30 3,938Capital expenditurei 372 - - 372------------------------------------------- ---------------------- --------------- ----------------- ---------- ------------------------------------------- ------------------------------------------------------------------- 2006 - restated(ii) ------------------------------------------------------------------- South Africa UK Other TotalAnalysis by geographical location $m $m $m $m------------------------------------------- ---------------------- --------------- ----------------- ----------Revenue - external sales 1,855 - - 1,855Segment total assets 2,667 55 18 2,741Capital expenditure(i) 232 1 - 233------------------------------------------- ---------------------- --------------- ----------------- ---------- Footnotes: i Capital expenditure includes additions to plant, property and equipment, intangible assets and goodwill in accordance with IAS 14 - Segment reporting. ii 2006 analysis has been restated as certain inter-segment charges had not been eliminated. Revenue by destination is analysed by geographical area below: --------------------------------------------------------------------------------------------------------------- 2007 2006 $m $m------------------------------------------------------------------------- -------------------- ----------------The Americas 419 435Asia 705 518Europe 314 291South Africa 482 602Zimbabwe 21 9------------------------------------------------------------------------- -------------------- ---------------- 1,941 1,855------------------------------------------------------------------------- -------------------- ---------------- 3. Special Items 'Special items' are those items of financial performance that the Group believesshould be separately disclosed on the face of the income statement to assist inthe understanding of the financial performance achieved by the Group and forconsistency with prior years. ------------------------------------------------------------------- ----------------------- ------------------- 2007 2006 $m $m------------------------------------------------------------------- ----------------------- -------------------EBITDA- Sale of houses(i) 1 12- Pensions refund(ii) 2 -- Impairment loss(iii) (5) -Finance costs- Calculation of capitalised interest from prior years(iv) - 21- Movement in fair value of embedded derivativev (104) (227)------------------------------------------------------------------- ----------------------- -------------------Loss on special items before taxation (106) (194)Taxation related to special items (note 5) (42) 78------------------------------------------------------------------- ----------------------- -------------------Special loss before minority interest (148) (116)Minority interest 9 (16)------------------------------------------------------------------- ----------------------- -------------------Special loss for the year attributable to equity shareholders of Lonmin Plc (139) (132)------------------------------------------------------------------- ----------------------- ------------------- i. Sale of houses: a substantial number of our employees are accommodated in hostels and married quarters. We are selling houses to employees to encourage home-ownership. Any profits or losses from such sales at fair value are not deemed to represent underlying earnings. ii. In February 2006 the Group made a payment into the SUITS pension scheme based on estimates at the time. These payments were charged to the income statement. On finalisation of the settlement Lonmin was refunded $3 million. This has been offset by a $1 million provision for the purchase of additional benefits for members of the scheme which was paid in October 2007. iii. The Group has carried out a review of non-mining investments in the year resulting in a $5 million impairment charge to the income statement. iv. Capitalised interest in 2006 represents an adjustment to the interest capitalised in previous years. v. The bond contained an embedded derivative which, because of the cash settlement option, was held at fair value with movements in fair value taken to the income statement. Fluctuations in fair value were mainly due to share price and were not considered underlying so were reported as special. The bond has now been fully redeemed with the movement reported as special representing the movement from the last year end to the date of redemption. 4. Net finance costs ----------------------------------------------------------------------- --------------------- ----------------- 2007 2006 $m $m----------------------------------------------------------------------- --------------------- -----------------Finance income: 25 12 ---------------------------------------Interest receivable ! 16 2 !Expected return on defined benefit pension scheme assets ! 8 8 !Movement in fair value of non-current other receivables ! 1 2 ! --------------------------------------- Finance expenses: (28) (34) ---------------------------------------On bank loans and overdrafts ! (40) (35) !Bank fees ! (5) (3) !Capitalised interest ! 23 16 !Discounting on provisions ! (3) (2) !Unwind of discounting on convertible bond ! (3) - !Interest costs of defined benefit pension scheme liabilities ! (7) (6) !Exchange differences on net debt ! 7 (4) ! --------------------------------------- Special items: (104) (206) ---------------------------------------Prior years capitalised interest (note 3) ! - 21 !Movement in fair values of derivative financial instruments (note 3) ! (104) (227) ! --------------------------------------- ----------------------------------------------------------------------- --------------------- -----------------Total finance expenses (132) (240)----------------------------------------------------------------------- --------------------- -----------------Net finance costs (107) (228)----------------------------------------------------------------------- --------------------- ----------------- Interest expenses incurred have been capitalised on a Group basis to the extentthat there is an appropriate qualifying asset. 5. Taxation ------------------------------------------------------------------------ ---------------------- --------------- 2007 2006 $m $m------------------------------------------------------------------------ ---------------------- ---------------United Kingdom:Current tax expense at 30% (2006 - 30%) 42 122Less amount of the benefit arising from double tax relief available (42) (122)------------------------------------------------------------------------ ---------------------- ---------------Total UK tax expense - ------------------------------------------------------------------------- ---------------------- --------------- Overseas:Current tax expense at 29% (2006 - 29%) 200 259 --------------------------------------Corporate tax expense ! 186 217 !Tax on dividends remitted ! 14 43 !Prior year items ! - (1)! -------------------------------------- Deferred tax expense 55 21 --------------------------------------Origination and reversal of temporary differences ! 55 21 ! -------------------------------------- Special items - UK and overseas (note 3)' 42 (78) --------------------------------------Deferred tax on sale of houses ! - 4 !Utilisation of losses from prior years to offset deferred tax liability ! (9) - !Exchange on current taxation ! 10 (15)!Exchange on deferred taxation ! 41 (67)! -------------------------------------- ------------------------------------------------------------------------ ---------------------- ---------------Actual tax charge 297 202------------------------------------------------------------------------ ---------------------- --------------- Tax charge excluding special items (note 3) 255 280------------------------------------------------------------------------ ---------------------- --------------- Effective tax rate 42% 32%------------------------------------------------------------------------ ---------------------- --------------- Effective tax rate excluding special items (note 3) 31% 34%------------------------------------------------------------------------ ---------------------- --------------- A reconciliation of the standard tax charge to the tax charge was as follows: --------------------------------------------------------- ------------- ------------- ------------- ----------- 2007 2007 2006 2006 $m $m--------------------------------------------------------- ------------- ------------- ------------- -----------Tax charge at standard tax rate 29% 204 29% 184Overseas taxes on dividends remitted by subsidiary companies 2% 14 7% 43Special items as defined above 6% 42 (13)% (82)Tax effect of movements in the fair values of financial instruments 4% 31 10% 66Tax effect of capitalised interest adjustment (note 3) - - (1)% (6)Tax effect of other timing differences 1% 6 - (3)--------------------------------------------------------- ------------- ------------- ------------- -----------Actual tax charge 42% 297 32% 202--------------------------------------------------------- ------------- ------------- ------------- ----------- The Group's primary operations are based in South Africa. Therefore, therelevant standard tax rate for the Group was the South African statutory taxrate of 29% (2006 - 29%). The secondary tax rate of the dividends remitted bySouth African companies was 12.5% (2006 - 12.5%). The Group holds a number of available for sale assets which are marked tomarket. The value of these investments has increased significantly in the periodresulting in the recognition of unrealised gains through the statement ofrecognised income and expense. This has resulted in the recognition of anassociated deferred tax liability except to the extent that there are availablelosses which, in the opinion of the Directors, can be utilised to offset againstsuch gains. In these cases a credit is recognised in the income statement as aspecial item reflecting the associated tax benefit. $6 million of the credit inthe year related to UK taxation. The Group holds both current and deferred tax balances in Rand which is not thefunctional currency of the Group. Given the volatility of the Rand to US$exchange rate the revaluation of such tax balances can cause significantvariations in the tax charge and therefore profitability. Consequently theDirectors feel that such foreign exchange impacts should be treated as a specialitem. 6. Earnings per share Earnings per share have been calculated on the profit attributable to equityshareholders amounting to $314 million (2006 - $313 million) using a weightedaverage number of 153,097,437 ordinary shares in issue (2006 - 142,594,539ordinary shares). Diluted earnings per share are based on the weighted average number of ordinaryshares in issue adjusted by dilutive outstanding share options and shares issuedon conversion of the convertible bonds. Shares issued on conversion of theconvertible bonds were anti-dilutive in the current and prior year and have beenexcluded from diluted earnings per share in accordance with IAS 33 - EarningsPer Share. ------------------------- ----------------------------------------- ------------------------------------------- 2007 2006 ------------- -------------- ------------ ------------ ----------------- ------------ Profit for Per share Profit for Per share the year Number of amount the year amount $m shares cents $m Number of shares cents------------------------- ------------- -------------- ------------ ------------ ----------------- ------------Basic EPS 314 153,097,437 205.1 313 142,594,539 219.5Share option schemes - 1,324,642 (1.8) - 2,021,331 (3.1)------------------------- ------------- -------------- ------------ ------------ ----------------- -------------Diluted EPS 314 154,422,079 203.3 313 144,615,870 216.4------------------------- ------------- -------------- ------------ ------------ ----------------- ------------- ------------------------- ----------------------------------------- --------------------------------------------- 2007 2006 ------------- -------------- ------------ ------------ ----------------- -------------- Profit for Per share Profit for Per share the year Number of amount the year amount $m shares cents $m Number of shares cents------------------------- ------------- -------------- ------------ ------------ ----------------- --------------Underlying EPS 453 153,097,437 295.9 445 142,594,539 312.1Share options schemes - 1,324,642 (2.5) - 2,021,331 (4.4)------------------------- ------------- -------------- ------------ ------------ ----------------- --------------Diluted underlying EPS 453 154,422,079 293.4 445 144,615,870 307.7------------------------- ------------- -------------- ------------ ------------ ----------------- ------------- Underlying earnings per share has been presented as the Directors consider it togive a fairer reflection of the underlying results of the business. Underlyingearnings per share are based on the profit attributable to equity shareholdersadjusted to exclude special items (as defined in note 3) as follows: ---------------------- -------------------------------------------- ------------------------------------------- 2007 2006 ----------- ----------------- -------------- ----------- ------------------ ------------ Profit for Per share Profit for Per share the year Number of amount the year amount $m shares cents $m Number of shares cents---------------------- ----------- ----------------- -------------- ----------- ------------------ ------------Basic EPS 314 153,097,437 205.1 313 142,594,539 219.5Special items (note 3) 139 - 90.8 132 - 92.6---------------------- ----------- ----------------- -------------- ----------- ------------------ ------------Underlying EPS 453 153,097,437 295.9 445 142,594,539 312.1---------------------- ----------- ----------------- -------------- ----------- ------------------ ------------ 7. Dividends ------------------------------------------------ --------------------------------- ---------------------------- 2007 2006 --------------------------------- ---------------------------- Cents per Cents per $m share $m share------------------------------------------------ ----------------- --------------- ------------- --------------Prior year final dividend, paid in the year 85 55.0 60 42.0Interim dividend, paid in the year 86 55.0 64 45.0------------------------------------------------ ----------------- --------------- ------------- --------------Total dividend paid in the year 171 110.0 124 87.0------------------------------------------------ ----------------- --------------- ------------- -------------- ------------------------------------------------ ----------------- --------------- ------------- --------------Interim dividend, paid in the year 55.0 45.0Proposed final dividend for the year 60.0 55.0------------------------------------------------ ----------------- --------------- ------------- --------------Total dividend in respect of the year 115.0 100.0------------------------------------------------ ----------------- --------------- ------------- -------------- 8. Net debt as defined by the Group ------------------------------------- ----------- --------------- ---------------- ------------ --------------- As at As at 1 October Subsidiary Non-cash 30 September 2006 acquired Cash flow movements 2007 $m $m $m $m $m------------------------------------- ----------- --------------- ---------------- ------------ --------------- -------------------------------------------------------------------------Cash and cash equivalents ! 61 20 134 7 222 !Overdrafts ! (18) - 17 - (1) ! ------------------------------------------------------------------------- 43 20 151 7 221Current borrowings - - (237) - (237)Non-current borrowings (288) - (71) - (359)Convertible bonds (213) - - 213 -------------------------------------- ----------- --------------- ---------------- ------------ ---------------Net debt as defined by the Group (458) 20 (157) 220 (375)------------------------------------- ----------- --------------- ---------------- ------------ --------------- ------------------------------------- ----------- ---------------- --------------- ------------ --------------- As at As at 1 October Subsidiary Non-cash 30 September 2005 acquired Cash flow movements 2006 $m $m $m $m $m------------------------------------- ----------- ---------------- --------------- ------------ --------------- -------------------------------------------------------------------------Cash and cash equivalents ! 11 - 54 (4) 61 !Overdrafts ! (1) - (17) - (18) ! ------------------------------------------------------------------------- 10 - 37 (4) 43Current borrowings (86) - 86 - -Non-current borrowings (296) - 8 - (288)Convertible bonds (213) - - - (213)------------------------------------- ----------- ---------------- --------------- ------------ ---------------Net debt as defined by the Group (585) - 131 (4) (458)------------------------------------- ----------- ---------------- --------------- ------------ --------------- Net debt as defined by the Group comprises cash and cash equivalents, bankoverdrafts repayable on demand, interest bearing loans and borrowings andconvertible bonds grossed up for capitalised fees. On 15 November 2006 Lonmin Plc gave notice to force redemption of alloutstanding convertible bonds at their principle amount. This led to theissuance of 10,576,944 shares and a reduction in net debt as defined by theGroup of $213 million. 9. Total Equity ---------------------------------------------------------------------------------------------------------------------- Equity Shareholders' funds ------------- -------------- ---------- ----------- --------- Called up Share share premium Other Retained Minority Total capital account reserves earnings Total interests equity $m $m $m $m $m $m $m----------------------------------- ------------- -------------- ---------- ----------- --------- --------- ----------At 1 October 2006 143 26 84 836 1,089 223 1,312Total recognised income and expense - - 12 380 392 96 488Dividends - - - (171) (171) (41) (212)Conversion of the convertible bond(i) 11 205 - - 216 - 216Embedded derivative movement(ii) - - - 371 371 - 371Deferred tax on share base payments - - - (3) (3) (1) (4)Other - - - 4 4 2 6Shares issued on exercise of share options(iii) 1 32 - - 33 - 33Shares issued under the IFC option agreement(iv) 1 36 - - 37 - 37Minority interest arising on business acquisition - - - - - 113 113----------------------------------- ------------- -------------- ---------- ----------- --------- --------- ----------At 30 September 2007 156 299 96 1,417 1,968 392 2,360----------------------------------- ------------- -------------- ---------- ----------- --------- --------- ---------- ----------------------------------- ------------- -------------- ---------- ----------- --------- --------- ----------At 1 October 2005 142 12 88 596 838 166 1,004Total recognised income and expense - - (4) 354 350 117 467Buy out of minority interests in Messina - - - - - 1 1Dividends - - - (124) (124) (62) (186)Deferred tax on share options - - - 7 7 1 8Other - - - 3 3 - 3Shares issued on exercise of share options 1 14 - - 15 - 15----------------------------------- ------------- -------------- ---------- ----------- --------- --------- ----------At 30 September 2006 143 26 84 836 1,089 223 1,312----------------------------------- ------------- -------------- ---------- ----------- --------- --------- ---------- i. In November 2006 the Company issued notice regarding the redemption of all outstanding convertible bonds. Conversion of the bond resulted in the issuance of 10,576,944 shares with an associated nominal share capital of $11million and the recognition of $205 million share premium. ii. As explained in note 3, the convertible bond contained an embedded derivative, movements in the fair value of which were recognised through the income statement. On conversion of the bond the embedded derivative was released with a corresponding credit taken directly to equity. iii. During the year 1,876,433 share options were exercised (2006 - 850,301) on which $33 million of cash was received (2006 - $15 million). iv. During the year 586,730 share options were exercised under the International Finance Corporation option agreement. As the shares were issued at a discount only $35 million of cash was received. Other reserves represent the capital redemption reserve of $88 million (2006 - $88 million) and a hedging reserve asset of $8 million (2006 - $4 million liability). The movement in the year represents the movement on the hedging reserve. Minority interests represent an 18% shareholding in Eastern Platinum Limited, Western Platinum Limited and Messina Limited throughout the year and, from 1 February 2007 a 26% shareholding in Akanani Mining (Pty) Limited. 10. Business combinations On 26 January 2007 the Group acquired 94% of AfriOre Limited. This increased to96.5% on 8 February 2007 and to 100% on 16 February 2007. AfriOre's primaryasset is a 74% stake in the Akanani PGM deposit. The acquisition was accountedfor with an effective date of 1 February 2007 using the acquisition method ofaccounting. Since its acquisition AfriOre has only incurred exploration andevaluation expenditure which has been capitalised in accordance with the Group'saccounting policy. The assets and liabilities of AfriOre Limited and the provisional fair valuesattributed to these were as follows: ------------------------ --------------- ---------------- -------------- --------------- Accounting Provisional Provisional Book value on policy fair value fair value acquisition adjustment adjustment 2007 $m $m $m $m------------------------ --------------- ---------------- -------------- ---------------Intangible assets 13 (13) 611 611Trade and other payables (5) - - (5)Cash and cash equivalents 20 - - 20Deferred tax liability - - (173) (173)------------------------ --------------- ---------------- -------------- ---------------Total assets of acquired entity 28 (13) 438 453Minority interest (113)------------------------ --------------- ---------------- -------------- ---------------Provisional fair value of assets acquired 340Goodwill 73------------------------ --------------- ---------------- -------------- ---------------Consideration paid 413------------------------ --------------- ---------------- -------------- --------------- The fair value exercise has, in accordance with IFRS 3 - Business Combinations,recognised the assets of the AfriOre Limited Group at the fair value they wouldcarry if they held tax benefits. This has resulted in the need to recognise adeferred liability of $173 million which in turn has caused the creation of agoodwill balance of $73 million. The fair values assigned have been determined provisionally which is inaccordance with IFRS 3 - Business Combinations. A final review of fair valueswill be undertaken prior to 1 February 2008. The total consideration paid for the acquisition of AfriOre Limited amounted to$413 million comprising cash consideration of $409 million, and expenses on thetransaction of $4 million, all paid in the year. Cash acquired with the entityamounted to $20 million resulting in a net consideration paid of $393 million. The acquisition has had no material impact on the operating results of the Groupfor the period. If the acquisition had taken place at the beginning of theperiod it is estimated that some $10 million of exploration and evaluation costswould have been incurred. In accordance with the Group's policy for explorationand evaluation expenditure this would have been capitalised and the impact onthe income statement would have been $nil. 11 Statutory Disclosure The financial information set out above is taken from, but does not constitute,the Company's statutory accounts for the years ended 30 September 2007 and 2006.The statutory accounts for the financial year ended 30 September 2006 have beendelivered, and statutory accounts for 2007 will be delivered, to the Registrarof Companies. The Auditors have made unqualified reports on those accounts andsuch reports did not contain a statement under Section 237 (2) or (3) of theCompanies Act 1985. Copies of the 2007 Lonmin Accounts will be posted to shareholders and will beavailable at the Company's registered office before the end of November 2007. 12. Final Dividend Timetable The Board of Lonmin Plc has recommended a final dividend for the year ended 30September 2007 of 60.0 US cents per share. The dividend timetable in respect of this dividend, assuming shareholderapproval at the AGM, is as follows: Last day to trade cum div SA Friday 4 January 2008 UK Tuesday 8 January 2008Shares commence trading ex div SA Monday 7 January 2008 UK Wednesday 9 January 2008Dividend record date Friday 11 January 2008Last date for receipt of new applications to participate in DividendRe-investment Plan SA Friday 25 January 2008 UK Friday 25 January 2008Dividend payment date Friday 8 February 2008 a) No transfers between the UK principle register and the SA branch register will be permitted from the date on which the US$/Rand exchange rate is announced to the record date, both dates inclusive (i.e. last date to transfer Thursday 27 December 2007). b) The SA branch register will be closed for the purpose of trades (dematerialisation and rematerialisation) from Monday 7 January 2008 to Friday 11 January 2008, both dates inclusive. The dividend will be paid:- c) In Rand to shareholders on the SA branch register calculated at the Rand to US Dollar exchange rate on Friday 28 December 2007, which rate will be announced on that day. d) In Sterling to share holders domiciled in the UK (unless they elect to received US Dollar dividends) calculated at the US Dollar to sterling exchange rate on Friday 18 January 2008, which rate will be announced on that day. e) In US Dollars to all other overseas share holders (unless they elect to receive Sterling dividends or have mandated their US dividends to a UK bank or participate in TAPS). Elections to receive an alternative currency (Dollars or Sterling) should compromise a signed request to Lloyds TSB Registers to be received by 17:00 on 11 January 2008. 13. Annual General Meeting The 2008 Annual General Meeting will be held on Thursday 24 January 2008 at theQueen Elizabeth II Conference Centre, Board Sanctuary, Westminster, London SW1P3EE 14. Availability of this report This report is available on the Lonmin website (www.lonmin.com) This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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