4th May 2006 07:00
Lonmin PLC04 May 2006 News Release Interim Results4 May 2006 Building Growth in Robust Markets • Record EBIT up 127% to US$304 million • Underlying earnings per share up 152% to 110.3 cents per share • Strong cash generation with trading cash flow of US$174 million (122.3 cents per share) • Excellent operating performance: • Record mine production to deliver 501,827 ounces of Platinum and 977,352 ounces of total PGMs in concentrate • Smelter rebuild completed in record 27 days and Smelter achieved record throughput in March • Costs well managed in the first half in line with our expectations with C1 costs at Marikana net of by product credits up only 0.5% to R2,345 per PGM ounce sold . • Six Sigma programme continues to deliver with R201 million (US$32 million) of additional net EBIT benefit • Acquisition of minorities in Messina Limited for US$13 million and 25% stake in Platmin Limited for US$32 million • Interim dividend increased by 50% to 45.0 cents per share. Financial highlights 2006 2005(i) % change Six Months to 31 March 2006 ---------------------------------------------------------------------------Revenue $708m $421m 68% EBITDA $342m $163m 110% EBIT $304m $134m 127%Underlying profit before taxation $288m $130m 122%Underlying earnings per share (ii) 110.3c 43.8c 152% Earnings per share (47.1)c 51.5c n/a Interim dividend per share (iii) 45.0c 30.0c 50%Trading cash flow per share (iv) 122.3c (14.1)c n/aFree cash flow per share (v) 63.2c (90.4)c n/aEquity shareholders' funds $734m $781m (6)%Net Debt $590m $468m 26%Interest cover (v) 15.9x 34.3x n/a--------------------------------------------------------------------------- NOTES ON HIGHLIGHTS (i) All comparative figures for 2005 are restated under IFRS and are as announced on 15 February 2006 in the Group's Adoption of International Financial Reporting Standards Publication.(ii) Underlying earnings per share are calculated on profit for the period excluding special items (note 3 to the Interim Accounts)(iii) The interim dividend will be paid on 4 August 2006 to shareholders on the register on 7 July 2006(iv) Trading cash flow is cash flow from operating activities.(v) Free cash flow is trading cash flow less net expenditure on property, plant and equipment, intangibles, proceeds from disposal of assets held for sale and dividends paid to minority interests.(vi) Interest cover is calculated for the 12 month periods to 31 March 2006 and 31 March 2005 on the underlying operating profit divided by underlying net interest payable excluding exchange. Commenting on the results, Brad Mills, Lonmin's Chief Executive said: "We have delivered record financial results for the half year to 31 March 2006with underlying earnings per share up 152% versus the first half of 2005.Reflecting our confidence in the outlook for the Platinum market and thecontinued growth of our business we have today declared an interim dividend of45 cents per share, an increase of 50%. Our operational performance has beenexcellent with record production from our mines with 501,827 ounces of Platinumproduced in concentrate and the completion of the Smelter rebuild in only 27days. We expect to produce around 1 million ounces of Platinum from our mines in2006 with sales of between 970,000 to 980,000 ounces. We are on track to growour production to 1.3 million Platinum ounces in 2010 and are working to lock inadditional growth beyond this from identified projects, our explorationportfolio and where appropriate strategic acquisitions. We are starting toachieve operational excellence in a number of areas and remain committed tocontinual improvement and the transformation of our business into a world classnatural resources company" Enquiries: Alex Shorland-Ball, Lonmin Plc +44 (0) 20 7201 6060 This press release is available on www.lonmin.com. A live webcast of the interimresults' presentation starting at 09.30hrs (London) on 4 May 2006 can beaccessed through the Lonmin website. There will also be a web question facilityavailable during the presentation. An archived version of the presentation,together with the presentation slides, will be available on the Lonmin website. Chief Executive's Comments Introduction We achieved a record output in the six months from our mines with 501,827 ouncesof Platinum and 977,352 ounces of total PGMs produced in concentrate. Sales were413,030 ounces of Platinum and 802,766 ounces of total PGMs. We successfullycompleted the planned rebuild of the number one furnace during the period in arecord time of 27 days (matte tap to matte tap). Our forecast for mine production remains around 1 million ounces of Platinum inconcentrate for the financial year to 30 September 2006. Sales for the full yearwill be impacted as a result of the loss of 11 days production in April whilethe Smelter was shutdown to repair a minor leak. We now forecast full year salesof 970,000 to 980,000 ounces of Platinum and 1.86 to 1.89 million ounces oftotal PGMs. Safety We have seen significant improvement in our safety performance during the firstsix months of the financial year. Our lost time injury (LTI) frequency ratedropped to a new record low of 10.8 per million man hours worked versus lastyear's figure of 18.1 an improvement of 40% and well ahead of our targeted 30%improvement. We regrettably suffered three industrial fatalities at our Marikanaoperations. Our Limpopo operations are showing a dramatic improvement in safety performanceand were fatality free for the six months. The operation achieved a lost timeinjury frequency rate of 7.1 per million man hours worked. We have instigated a number of campaigns to focus on running the operationsinjury free and will continue to roll these out during the second half of theyear. We are also continuing our focus on the implementation of our Fatal RiskProtocols to ensure that these are fully embedded in each business area. Marikana Mining Our Marikana mining operations achieved record production of 5,739,000 tonnesmilled (5,793,000 tonnes mined) from underground operations and 1,264,000 tonnesmilled (996,000 tonnes mined) from opencast operations. This equated to 474,961ounces of Platinum and 913,386 ounces of total PGMs in concentrate despatched tothe Process Division and for external sales. We have moved away from treating the operations at Marikana as three distinctmines and have restructured the management so that the operation is treated asone mine split into shallow, deep, mechanised and opencast sections. This isoperating well and has allowed greater efficiency in the sharing of informationand best practice. We have continued to mechanise our mines and now have two fleets of Ultra LowProfile (ULP) equipment at work on the property. We are developing our new Saffyand K4 Shafts as fully mechanised operations and at Saffy we will begin a fullscale trial of the ULP equipment later this year. The percentage of productionfrom fully mechanised stopes will be slightly lower than we initially targetedat around 4.5% by the end of the 2006 fiscal year. We will meet our 8% target bythe end of the calendar year and remain on track to meet our 50% target by theend of 2010. In addition to our ULP equipment we have also been assessing other methods tomodernise our mining operations. As part of this process, we are operating DDTstope drill rigs at our E2 shaft. The results to date have been positive and weare rolling these out, where appropriate, across the operations. By the end of2006 an additional 4.5% of our production will be produced from mechanisedmethods other than our ULP equipment. Limpopo Mining I am pleased with the progress of our Limpopo operations which produced 487,000tonnes milled (491,000 tonnes mined) from underground operations and contributed26,866 ounces of Platinum and 63,966 ounces of total PGMs in concentrate in theperiod. During the six month period we consolidated control of Limpopo byacquiring the outstanding 8.5% minorities in Messina Limited, the South Africanlisted company which owned the Limpopo assets. The cost of the acquisition wassome US$13 million. Limpopo contributed US$8 million to our EBIT in the firstsix months of this year, substantially ahead of our budget. The re-engineering, mechanisation and ramp up of this operation remains broadlyon plan to achieve our steady state of 120,000 tonnes per month by September2006 and remains on target to produce 75,000 ounces of Platinum in fiscal year2007. Process Division Final metal sales were 413,030 Platinum ounces and 802,766 ounces of total PGMs.The Smelter rebuild in February was completed successfully in 27 days matte tapto matte tap and came in on budget. We took advantage of this planned downtimeto accelerate deliveries of concentrate to Impala under the Limpopo offtakecontract. In total we have delivered around 49,000 Platinum ounces during theperiod and this contract is now complete. We have continued during the six month period to address the bottlenecks withinthe Process Division. The Smelter has continued to increase throughput smeltinga record 28,021 tonnes in March. The debottlenecking of the Base Metal Refineryhas also seen initial success with a record 1,039 tonnes of converter mattemilled in March and production of a record 2,092 tonnes of Nickel Sulphate. Atthe Precious Metal Refinery we have completed the automation of the PrimaryMetals Separations Plant and the next phase of the project is focusing on thepure Platinum and Palladium processing streams. This will be completed bySeptember 2006. The Rhodium, Iridium and Ruthenium stream automation will becompleted during 2007. The automation project will improve recoveries and reducecosts at the PMR through improved process control and improved first passrecoveries. On 9 April 2006, a matte and slag leak occurred at the number one furnace downthe sides of the matte waffles. It appears that due to an original installationerror the base plate of the furnace shell was not welded in the matte wafflezone. The expansion of the hearth following the February rebuild createddifferential pressure in the matte tap block support structure which moved thematte waffles allowing the leak to occur. The repairs to the furnace includedwelding the base plate of the furnace to the supporting girders, reinforcing thesupport structure around the matte tap holes and replacing the matte waffles andrefractories at the site of the leak. These have been successfully completed andthe total downtime of the furnace was limited to 11 days (matte tap to mattetap). Six Sigma and Shared Business Services Our Six Sigma continuous improvement programme continues to perform extremelywell and we have realised R201 million (US$32 million) of net EBIT benefit inthe first half primarily in revenue improvements. We have now implemented our Shared Business Services Programme and realisedsavings of R14.4 million (US$ 2.3 million) in the first half. On 1 March 2006 wesuccessfully went live on SAP and have now switched off our various legacyinformation systems. We remain on track to deliver our forecast R370 million of benefits from acombination of our Six Sigma and Shared Business Services Programmes for thefull year. Costs and Capital Expenditure Our costs were well controlled during the period increasing only 2.9% gross and0.5% net of by product credits over the same period last year despite a majorfurnace rebuild undertaken during the six months and the South African inflationrate running at some 4.5%. For our Marikana operations C1 costs of own metalproduction net of by product credits were R2,345 per PGM ounce sold. We continueto forecast C1 costs for the full year of between R2,300 and R2,400 per PGMounce sold net of base metal credits. Our Limpopo operations delivered a C1 cost per saleable PGM ounce in concentratenet of by product credits of R3,385, a reduction of 17.5% versus the costs atLimpopo for the full year to September 2005. We expect the costs at Limpopo tocontinue to improve as we ramp up production from the mine and complete there-engineering of the operation with C1 costs at the end of the full yearforecast to be at the R2,900 level per PGM ounce sold. We are now forecasting aslightly higher C1 cost per saleable PGM ounce in concentrate net of by productcredits for Limpopo of around R3,100 to R3,200 for the full year. As a result of our increased focus on mechanisation and the continueddebottlenecking of our metallurgical capacity, we have revised our projectionfor capex for the 2006 financial year. We now forecast a gross capex spend ofsome US$230 million by the end of September 2006. Mining Licence Conversion The Social and Labour Plan portion of our New Order Mining Licence applicationhas been approved by the local Klerksdorp Office of the Department of Mineralsand Energy (DME). The Pretoria office of the DME is now considering the entirelicence for conversion. We anticipate a successful outcome in due course. Growth Profile Over the last year we have built into Lonmin an exciting and robust growthprofile with the expansion of our Marikana operations and addition of theLimpopo resources to our portfolio. This profile will see the business grow to1.3 million ounces of Platinum production in 2010. We currently have threemining projects in various stages of feasibility of which only the Limpopo phase2 expansion is included in our 1.3 million ounce target. In November we announced the possibility of accessing the Limpopo ore bodythrough an opencast operation which we estimated could produce around anadditional 20,000 ounces of Platinum per annum for around two years. Thefeasibility study for this project is ongoing and if we decide to proceed wewould expect this project to commence during 2007. The successful development of the second stage of the Limpopo property formspart of our 1.3 million ounce production target in 2010. We currently expect tocomplete full feasibility on this project by July 2007 and anticipate thatLimpopo phase 2 will contribute around 125,000 ounces of Platinum per annum whenat full production. At our Pandora project we are evaluating the development of the projectutilising our mechanised approach. We commenced pre-feasibility on this projectat the beginning of February 2006. If the pre-feasibility work is positive weexpect to approve the project for full feasibility by the end of the year.Indicative full production from the project is around 200,000 ounces of whichLonmin's share would be 42.5%. During the last six months we have made an investment of US$32 million inPlatmin Limited an unlisted Canadian exploration company. We now own 25% of theoutstanding share capital on a fully diluted basis. Platmin holds interests in anumber of properties in the Bushveld which could represent a good fit withLonmin's existing properties. The current attributable resource base is around13.7 million ounces (3PGE+Au). In February we announced our intention to undertake a feasibility study toassess the possible expansion of our metallurgical capacity from the currentforecast 1.3 million ounces of Platinum per annum to between 1.75 and 2 millionounces of Platinum per annum. Such an expansion would involve adding to oursmelting capacity through the construction of a new furnace, expanding anddebottlenecking our Base Metal Refinery and upgrading and automating ourPrecious Metal Refinery. We estimate the capital cost of this Brownfield projectwould be between US$300 and 350 million which would represent a low capital costper annual PGM ounce produced of between US$300 and 350, around one third of thecost of new Greenfield capacity. We believe that part of the feed for theexpanded capacity will come from our project pipeline including the Pandoraproject and potentially from commercial custom smelting opportunities. Exploration We continue to develop our high quality portfolio of exploration projects. Atour Loskop project in South Africa we have recently delineated a 2 million ounceresource of Platinum, Palladium and Gold to a depth of 400 metres. Drilling iscontinuing to investigate the down-dip extent. In Tanzania we will follow up our2005 drill results at Luwumbu where we have intersected high grademineralisation with grades of 5.36 grams per tonne PGMs over 16.4 metresincluding 1.67 metres at 26.8 grams per tonne PGMs to ascertain the extent ofPGM mineralisation, width and continuity. We have intersected good grade and thickness of PGM mineralisations on severalof the properties covered by our joint ventures with Inco and Wallbridge inCanada's Sudbury Basin. Our ongoing drilling programme in these areas willdetermine if the size of the deposits is sufficient to support a commercialmine. Markets The Platinum market remains very strong with prices reaching record levelsduring the period, increasing by some 16% since the beginning of October 2005.Crucially this price momentum is underpinned by strong demand particularly fromthe autocatalyst sector. Growth in demand for Platinum in diesel automobilecatalysts continued to be a key driver. We expect this trend to continue for theforeseeable future as Platinum based catalytic solution penetrate the light,medium and heavy duty diesel sectors and start to grow in off road emissionsmanagement. Supply growth remains constrained with limited commitment to newprojects despite current Platinum prices. The Rhodium market has also been very strong during the period, 90% of thismetal is used in the manufacture of autocatalysts and we continue to seefundamental demand supporting the price. Palladium has recently shown signs ofdemand growth, but currently remains oversupplied. Dividend Based on the success we have achieved in the first half and our continuedconfidence in the outlook for our business against a backdrop of strong Platinummarkets, the Board has declared an interim dividend of 45 cents per share anincrease of 50% on the interim dividend paid last year. Outlook Our mines have performed strongly during the first six months and we are ontrack to produce around 1 million ounces of Platinum in concentrate for thefinancial year to 30 September 2006. Taking account of the Smelter incident inApril 2006, we now believe that our Platinum sales for the full year will be inthe range of 970,000 to 980,000 ounces. We believe the Platinum markets will remain strong and we are working to growthe Lonmin business to take advantage of these markets. We continue to targetgrowth to 1.3 million ounces of Platinum in 2010 and beyond this we are lockingin further growth options through our identified projects and high qualityexploration portfolio. Our outlook for full year C1 costs for Marikana own metal production is betweenR2,300 and R2,400 per PGM ounce sold net of by product credits. C1 costs forLimpopo per PGM ounces sold in concentrate will reach around R2,900 at the endof the financial year and we forecast will be between R3,100 and R3,200 for the12 month period. We continue to make good progress on our journey to transform Lonmin into amodern and efficient world class mining company utilising the best availableoperating practices and capitalising on the diversity and quality of our SouthAfrican workforce. I would like to thank all the Lonmin employees, contractorsand community members for your valuable contribution during the last six months. Bradford A MillsChief Executive3 May 2006 Financial Review Introduction The financial information presented has been prepared on the basis ofInternational Financial Reporting Standards (IFRSs) as disclosed in note 1 tothe Interim statements and is consistent with the Group's announcement on 15February 2006. Analysis of results Income statement A comparison of the interim 2006 total operating profit with the prior period isset out below: $m-----------------------------------------------------------------------------Total operating profit for the six months to 31 March 2005 134 Improved recoveries (29) Insurance receipts (22) Smelter incident cost 9 -----------------------------------------------------------------------------2005 operating profit for the six months to 31 March 2005 post one-offs 92 Increase in sales prices 180 Increase in sales volumes 20 Cost base increases (15)Depreciation and amortisation (5)Exchange 17 Messina 8 Gain on sale from disposal of housing 7 -----------------------------------------------------------------------------Total operating profit for the six months to 31 March 2006 304 ----------------------------------------------------------------------------- As previously reported the operating profit in the first half of 2005 benefitedfrom net one-offs of $42 million. This comprised improved recoveries of $29million and insurance receipts of $22 million which were offset by costs of thesmelter incident in November 2004 of $9 million. Sales volumes of PGMs increased from 671,591 ounces to 802,766 ounces. Thecomparatives are adversely impacted by the smelter incident and the currentperiod benefits from approximately 50,000 PGM ounces relating to the acquisitionof Southern Platinum Corporation. The average price realised for the basket ofmetals sold at $26,281 per kg was 39% higher than the prior period resulting ina price variance to operating profit of $180 million and reflecting the strongmarket demand. Revenue has increased 68% to $708 million. Costs were well controlled. The C1 cost per PGM ounce sold before by-productcredits on own production from the Marikana operations increased by 2.9% toR2,598 for 2006. This rise primarily resulted from the increase in processingcosts due to the smelter rebuild in the period which more than offset a strongperformance in mining. After by-product credits C1 costs of own production werebroadly flat compared to the prior period reflecting high by-product commodityprices. Further details of unit costs analysis can be found in the operatingstatistics table. The exchange rate for South African rand against the US dollaris weaker by 6% compared to the prior period at an average rate of 6.29 rand perdollar and this benefited operating profit by $17 million. The Messina operations contributed $8 million to the Group at an operating profit level. The resulting total operating profit amounted to $304 million (2005 - $134million). The 2006 underlying total operating profit which excludes the gain onsale from the disposal of housing, treated as a special item, amounted to $297million, an increase of 122% on the prior period. Underlying net finance costs in 2006 were $12 million compared with $7 millionin 2005. Debt levels were higher during the interim period following theacquisition of Southern Platinum Corporation in June 2005. At a total level netfinance costs in the period are $226 million. The difference to underlyingreflects a $235 million increase in the fair value of the equity derivativeembedded in the convertible bonds offset by a $21 million correction oncapitalised interest relating to prior years. Profit before tax for the 2006interim period amounted to $81 million compared with $141 million in 2005. The 2006 interim tax charge was $110 million compared with $53 million in theprior period. The effective tax rate, excluding the effects of special items(see note 3) was 33% compared with 41% reflecting a lower level of dividendsremitted (which incur additional STC tax) in relation to profits. The reported loss for the interim period is $29 million (2005 - profit of $88million) and the loss per share is 47.1 cents (2005 earnings per share 51.5cents). Underlying earnings per share, being earnings excluding special items(see note 3), amounted to 110.3 cents (2005 - 43.8 cents) an increase of 152%. Balance sheet Equity interests were $734 million at 31 March 2006 compared with $838 millionat 30 September 2005. This principally reflects the loss for the periodattributable to equity shareholders of $61 million and the payment of the 2005final dividend of $60 million which were offset by movements related to shareschemes. The Southern Platinum Corporation was acquired on 15 June 2005, with acompulsory acquisition of the remaining shares on 28 July 2005. The Group hastaken the opportunity to re-assess the fair value of net assets acquired which had been provisionally established in the accounts as at 30 September 2005, under UK GAAP. This has resulted in the recognition of $60 million of goodwill, an increase of intangible mineral rights of $7 million and a reduction of tangible fixed assets of $67 million. An underlying minority interest of 8.5% remained at the operational level in Messina Platinum until 6 February 2006. $13 million of goodwill was recognised in the purchase of these minorities. An amount of $15 million has also been capitalised within intangible assets. This represented the amount the Company paid to Impala Platinum Holdings Limited to acquire the Messina concentrate off-take contract. This is being amortised over 20 years. The acquisition is expected to be earnings neutral in 2006. Net debt amounted to $590 million at 31 March 2006 with the main componentsbeing the convertible bonds of $213 million and bank loans and overdrafts of$404 million. The net debt is $122 million higher than at March 2005 reflectingthe acquisition of Southern Platinum Corporation as described above. This,combined with higher interest rates, has resulted in a reduction to the rollingtwelve month interest cover to 15.9 times compared with 34.3 times for the priorperiod. Cash flow The following table summarises the main components of the cash flow during theperiod: March 2006 March 2005 Total Total $m $m--------------------------------------------------------------------------------Operating profit 304 134Working capital (68) (119)Other items (mainly depreciation and amortisation) 38 30--------------------------------------------------------------------------------Cash flow from operations 274 45Net interest paid (23) (8)Tax paid (77) (57)--------------------------------------------------------------------------------Trading cash flow 174 (20)Purchase of intangible assets, property, plant andequipment (85) (87)Proceeds from disposal of assets held for sale 19 -Dividends paid to minority (18) (21)--------------------------------------------------------------------------------Free cash flow 90 (128)Acquisition of subsidiary (net of cash acquired) (14) (10)Purchase of other financial assets (33) -Dividends paid to Lonmin shareholders (60) (59)Issue of ordinary share capital 12 ---------------------------------------------------------------------------------Increase in net debt (5) (197)Opening net debt (585) (270)Effect of exchange rate changes - (1)--------------------------------------------------------------------------------Closing net debt (590) (468)--------------------------------------------------------------------------------Trading cash flow per share 122.3c (14.1)c--------------------------------------------------------------------------------Free cash flow per share 63.2c (90.4)c-------------------------------------------------------------------------------- Cash flow from operations was $274 million during the six months to 31 March2006, an increase of $229 million on the prior six months, despite an adverseworking capital flow of $68 million driven by higher stock levels. Afterinterest of $23 million and tax payments of $77 million, trading cash flowamounted to $174 million in 2006 against an outflow of $20 million in 2005, withtrading cash flow per share of 122.3 cents in 2006 against an outflow of 14.1cents in the 2005 interim period. Capital expenditure of $85 million and dividends paid to minorities at $18million were each very similar to the prior period. The disposal of houses heldfor sale realised $19 million. Free cash flow amounted to $90 million with freecash flow per share at 63.2 cents (2005 - outflow per share 90.4 cents). Acquisitions of $14 million in 2006 mainly represented the buy out of theMessina minorities for $13 million. The purchase of other financial assetseffectively represented the purchase of shares in Platmin. After accounting forequity dividends paid of $60 million and shares issued on the exercise of shareoptions of $12 million, net debt increased by $5 million in the period andamounted to $590 million at 31 March 2006. Dividend The Board has declared an interim dividend of 45.0 cents per share(2005 - 30.0 cents per share). On an underlying earnings basis this representsa cover of 2.5 times compared with 1.5 times in 2005. John RobinsonChief Financial Officer3 May 2006 Operating Statistics 6 months to 6 months to 31 March 31 March 2006 2005-------------------------------------------------------------------------------------------------------MiningTonnes milled Marikana Underground (000) 5,739 5,427 Opencast (000) 1,264 1,480 Limpopo Underground (000) 487 - Opencast (000) 14 - Lonmin Platinum Total (000) 7,504 6,907Tonnes mined Marikana Underground (000) 5,793 5,405 Opencast (000) 996 1,244 Limpopo Underground (000) 491 - Opencast (000) 14 - Lonmin Platinum Total (000) 7,294 6,649-------------------------------------------------------------------------------------------------------MetallurgyMetals in concentratedespatched Marikana Platinum (oz) 474,961 446,989 Palladium (oz) 219,213 193,334 Rhodium (oz) 71,244 62,235 Total PGMs (oz) 913,386 853,258 Limpopo Platinum (oz) 26,866 - Palladium (oz) 22,388 - Rhodium (oz) 3,646 - Total PGMs (oz) 63,966 - Lonmin Platinum Platinum (oz) 501,827 446,989 Palladium (oz) 241,601 193,334 Rhodium (oz) 74,890 62,235 Total PGMs (oz) 977,352 853,258-------------------------------------------------------------------------------------------------------Production Marikana refined Platinum (oz) 332,803 366,781 Palladium (oz) 142,209 157,058 Rhodium (oz) 53,866 35,253 Total PGMs (oz) 628,668 666,303 Marikana concentrate i Platinum (oz) 49,340 - Palladium (oz) 21,595 - Rhodium (oz) 6,177 - Total PGMs (oz) 92,977 - Limpopo concentrate ii Platinum (oz) 23,548 - Palladium (oz) 17,328 - Rhodium (oz) 2,907 - Total PGMs (oz) 51,417 - Lonmin Platinum Platinum (oz) 405,691 366,781 Palladium (oz) 181,132 157,058 Rhodium (oz) 62,950 35,253 Total PGMs (oz) 773,062 666,303-------------------------------------------------------------------------------------------------------Capital expenditure (R millions) 544 510 ($ millions) 85 87Sales Lonmin Platinum Platinum (oz) 413,030 365,653 Palladium (oz) 192,505 152,725 Rhodium (oz) 65,639 39,330 Total PGMs (oz) 802,766 671,591-------------------------------------------------------------------------------------------------------PricesAverage price receivedper ounce Platinum (R) 6,100 5,000 ($) 968 842 Palladium (R) 1,669 1,170 ($) 266 196 Rhodium (R) 19,726 7,855 ($) 3,142 1,320Basket price of PGMsand base metals ($/kg) 26,281 18,889------------------------------------------------------------------------------------------------------- Cash Costs: Mining (R) 1,855 1,930 Smelting & refining (R) 443 331 Shared Business Services (R) 358 321 Movement in physical stock (R) (58) (57)Cost per PGM ounce sold -----------------------before by productscredits (R) 2,598 2,525 By product credits (R) (253) (192) -----------------------C1 - Cost per PGM ouncesold net of by productcredits Marikana (R) 2,345 2,333 Improved recoveries (R) - (118) Smelter repair (R) - 54Other EBIT items: Amortisation (R) 237 277 Insurance proceeds (R) - (83) -----------------------C2 - Costs per PGMounce sold ownproduction Marikana (R) 2,582 2,463-------------------------------------------------------------------------------------------------------C1 - Cost per PGM ouncesold net of By ProductCredits Limpopo (R) 3,385 --------------------------------------------------------------------------------------------------------Exchange ratesAverage exchange rates Sterling (£/$) 0.58 0.53 S A rand (R/$) 6.29 5.94Closing exchange rates Sterling (£/$) 0.58 0.53 S A rand (R/$) 6.15 6.22------------------------------------------------------------------------------------------------------- Footnotes: i. Produced and sold in concentrate form at Marikanaii. Produced in concentrate form at Limpopo for subsequent refining at Marikana Consolidated income statement 6 months to 6 months to 6 months to 6 months to 31 March Special 31 March 31 March Special 31 March 2006 items 2006 2005 items 2005 Underlying(i) (note 3) Total Underlying(i) (note 3) Total Note $m $m $m $m $m $m---------------------------------------------------------------------------------------------------------------------Revenue 708 - 708 421 - 421---------------------------------------------------------------------------------------------------------------------EBITDA(ii) 335 7 342 163 - 163Depreciation and amortisation (38) - (38) (29) - (29)---------------------------------------------------------------------------------------------------------------------Operating profit(iii) 297 7 304 134 - 134Finance income 4 5 - 5 6 - 6Finance expenses 4 (17) (214) (231) (13) 11 (2)Share of profit of associate 3 - 3 3 - 3---------------------------------------------------------------------------------------------------------------------Profit/(loss) before taxation 288 (207) 81 130 11 141Income tax expense(iv) 5 (96) (14) (110) (53) - (53)---------------------------------------------------------------------------------------------------------------------Profit/(loss) for the period 192 (221) (29) 77 11 88---------------------------------------------------------------------------------------------------------------------- attributable to minority interest 35 3 38 15 - 15- attributable to equity shareholders of Lonmin Plc 157 (224) (67) 62 11 73---------------------------------------------------------------------------------------------------------------------Earnings/(loss) per share 6 110.3c (47.1)c 43.8c 51.5c---------------------------------------------------------------------------------------------------------------------Diluted (loss)/earnings per share(v) 6 (47.1)c 43.3c---------------------------------------------------------------------------------------------------------------------Interim dividend per share 45.0c 30.0c---------------------------------------------------------------------------------------------------------------------Financial ratios---------------------------------------------------------------------------------------------------------------------Tax rate 5 33% 136% 41% 38%---------------------------------------------------------------------------------------------------------------------Interest cover(vi) 15.9 times 34.3 times--------------------------------------------------------------------------------------------------------------------- Statement of recognised income and expenses 6 months to 6 months to 31 March 2006 31 March 2005 Note $m $m-------------------------------------------------------------------------------(Loss) / profit for the period (29) 88Deferred tax on share based payment 8 -Actuarial gains on post retirement benefitplan - 2-------------------------------------------------------------------------------Total recognised (expense) / income for theperiod (21) 90-------------------------------------------------------------------------------Attributable to:- Equity shareholders 11 (61) 75- Minority Interest 11 40 15------------------------------------------------------------------------------- 11 (21) 90------------------------------------------------------------------------------- Footnotes: i. Underlying earnings are calculated on profit for the period excluding movements in fair value of the embedded derivative associated with the convertible bond, exchange on tax balances, profit on the sale of Marikana houses, the mathematical correction to the prior year capitalised interest balances and the effect of a change in the South African tax rate on the prior year opening deferred tax balance as disclosed in note 3.ii. EBITDA is operating profit before depreciation and amortisation.iii. Operating profit is defined as revenue and other operating expenses before net finance costs and share of profit of associate.iv. The income tax expense includes exchange losses of $12 million (March 2005 - $11 million) as disclosed in note 5.v. The calculation of diluted EPS includes adjustments for the movements in fair value on the convertible bond subject to the limitation under IAS 33 - Earnings Per Share that this cannot thereby create a figure exceeding basic EPS.vi. Interest cover is calculated for the 12 month periods to 31 March 2006 and 31 March 2005 on the underlying operating profit divided by underlying net interest payable excluding exchange. Consolidated balance sheet As at As at As at 31 March 30 September 31 March 2006 2005 2005 Note $m $m $m------------------------------------------------------------------------------Non-current assetsGoodwill 8 113 40 -Intangible assets 323 312 309Property, plant and equipment 1,399 1,406 1,121Investment in associate 94 91 91Assets held for sale 16 16 -Other financial assets 49 15 13Other receivables 24 22 22Retirement benefit asset 12 12 7------------------------------------------------------------------------------ 2,030 1,914 1,563------------------------------------------------------------------------------Current assetsInventories 173 110 160Trade and other receivables 144 147 123Tax recoverable 5 4 9Cash and cash equivalents 27 11 10------------------------------------------------------------------------------ 349 272 302------------------------------------------------------------------------------Current liabilitiesBank overdraft repayable on demand (6) (1) (209)Interest bearings loans and borrowings (128) (86) -Trade and other payables (123) (133) (73)Tax payable (36) (28) ------------------------------------------------------------------------------- (293) (248) (282)------------------------------------------------------------------------------Net current assets 56 24 20------------------------------------------------------------------------------Non-current liabilitiesTrade and other payables - (1) (1)Financial liabilities- Interest bearing loans and borrowings (481) (506) (266)- Derivative financial instruments (276) (41) (22)Deferred tax liabilities (362) (344) (336)Provisions (44) (42) (33)------------------------------------------------------------------------------ (1,163) (934) (658)------------------------------------------------------------------------------Net assets 923 1,004 925------------------------------------------------------------------------------Capital and reservesCalled up share capital 11 143 142 142Share premium account 11 23 12 6Other reserves 11 104 104 104Retained earnings 11 464 580 529------------------------------------------------------------------------------Equity attributable to Lonmin shareholders 11 734 838 781Attributable to minority interest 11 189 166 144------------------------------------------------------------------------------Total equity 11 923 1,004 925------------------------------------------------------------------------------ Consolidated cash flow statement 6 months to 6 months to 31 March 31 March 2006 2005 Note $m $m-----------------------------------------------------------------------------(Loss)/profit for the period (29) 88Taxation 5 110 53Finance income 4 (5) (6)Finance expense 4 231 2Share of profit after tax of associate (3) (3)Depreciation and amortisation 38 29Change in inventories (63) (82)Change in trade and other receivables 5 3Change in trade and other payables (10) (40)Change in provisions 2 (1)Profit on sale of assets held for sale (7) -Other non cash charges 5 ------------------------------------------------------------------------------Cash flow from consolidated operations 274 43Dividend from associate - 2-----------------------------------------------------------------------------Cash flow from operations 274 45Interest paid (23) (8)Tax paid (77) (57)-----------------------------------------------------------------------------Cash flow from operating activities 174 (20)-----------------------------------------------------------------------------Cash flow from investing operationsAcquisition of subsidiary (net of cashacquired) (14) (10)Purchase of intangible asset (6) (6)Purchase of property, plant and equipment (79) (81)Proceeds from disposal of assets held forsale 19 -Purchase of other financial assets (33) ------------------------------------------------------------------------------Cash used in investing activities (133) (97)-----------------------------------------------------------------------------Cash flow from financing activitiesEquity dividends paid to Lonminshareholders (60) (59)Dividends paid to minority (18) (21)Proceeds from current borrowings 42 -Repayment of current borrowings - (1)Proceeds from non-current borrowings - 2Repayment of non-current borrowings (26) -Issue of ordinary share capital 12 ------------------------------------------------------------------------------Cash used in financing activities (50) (79)-----------------------------------------------------------------------------Increase / (decrease) in cash and cashequivalents 11 (196)Opening cash and cash equivalents 10 (2)Effect of exchange rate changes - (1)-----------------------------------------------------------------------------Closing cash and cash equivalents 21 (199)----------------------------------------------------------------------------- 1. Basis of preparation The financial information presented has been prepared on the basis ofInternational Financial Reporting Standards (IFRSs) as disclosed in note 1 tothe Interim financial statements and is consistent with the Group'sannouncements on 15 February 2006. 2. Segmental analysis 6 months to 31 March 2006 Platinum Corporate Exploration Total $m $m $m $m-------------------------------------------------------------------------------Business segmentsRevenue - external sales 708 - - 708Operating profit 325 (16) (5) 304Assets 2,296 83 - 2,379Liabilities (684) (772) - (1,456)Capital expenditure 85 - - 85Depreciation and amortisation 37 1 - 38------------------------------------------------------------------------------- 6 months to 31 March 2005 Platinum Corporate Exploration Total $m $m $m $m-------------------------------------------------------------------------------Business segmentsRevenue - external sales 421 - - 421Operating profit 148 (11) (3) 134Assets 1,814 46 - 1,860Liabilities (682) (253) - (935)Capital expenditure 86 1 - 87Depreciation and amortisation 29 - - 29------------------------------------------------------------------------------- 6 months to 31 March 2006 South Africa Corporate Other Total $m $m $m $m-------------------------------------------------------------------------------Geographical segmentsRevenue - external sales 708 - - 708Segment total assets 2,293 83 3 2,379Capital expenditure 85 - - 85------------------------------------------------------------------------------- 6 months to 31 March 2005 South Africa Corporate Other Total $m $m $m $m-------------------------------------------------------------------------------Geographical segmentsRevenue - external sales 421 - - 421Segment total assets 1,811 46 3 1,860Capital expenditure 86 1 - 87------------------------------------------------------------------------------- Turnover by destination is analysed by geographical area below: 6 months to 6 months to 31 March 31 March 2006 2005------------------------------------------------------------------------------- $m $mThe Americas 190 155Asia 219 167Europe 89 28South Africa 207 70Zimbabwe 3 1------------------------------------------------------------------------------- 708 421------------------------------------------------------------------------------- 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. Suchitems, as detailed below, are material by nature or amount to the results forthe period and require separate disclosure in accordance with IAS 1 Presentationof financial statements. 6 months to 6 months to 31 March 31 March 2006 2005 $m $m-------------------------------------------------------------------------------EBITDA- Sale of houses 7 -Finance costs- Calculation of capitalised interest 21 -- Movement in fair value of embedded derivative (235) 11-------------------------------------------------------------------------------Special (loss) / profit before taxation (207) 11Taxation on above items (note 5) (2) -Tax rate change - effect on opening deferred tax balances - 11Exchange on tax balances (note 5) (12) (11)Minority interest (3) --------------------------------------------------------------------------------Special (loss) / profit for the period attributable to equity shareholders of Lonmin plc (224) 11------------------------------------------------------------------------------- • Sale of houses: We currently accommodate a substantial number of our employees in hostels and married quarters with the remainder living in their homes. We are selling houses to employees to encourage home-ownership. Any profits or losses from such sales are not deemed to represent underlying earnings. • Capitalised interest includes $21 million in respect of a mathematical correction of prior year capitalised interest balances. • The convertible bond (described fully in note 7e to the IFRS transition document) contains an embedded derivative which is held at fair value. Due to the cash settlement option the bond is classified within non-current liabilities and movements in fair value are taken to the income statement. Fluctuations in fair value are mainly due to changes in share price. 4. Net finance costs 6 months to 6 months to 31 March 2006 31 March 2005 $m $m-----------------------------------------------------------------------------Finance income: 5 6 +-----------+ +----------+Interest receivable | - | | 1 |Return on defined benefit pension scheme | | | |assets | 4 | | 4 |Movement in fair value of non-current other | | | |receivables | 1 | | 1 | +-----------+ +----------+ Finance expenses: (17) (13) +-----------+ +----------+On bank loans and overdrafts | (19)| | (9)|Bank fees | (1)| | - |Capitalisation of interest | 8 | | - |Discounting on provisions | (1)| | - |Unwind of discounting on convertible bond | (1)| | 1 |Interest costs of defined benefit pension | | | |scheme | (3)| | (4)|Exchange differences on net debt | - | | (1)| +-----------+ +----------+ Special items: (214) 11 +-----------+ +----------+Prior years capitalised interest (note 3) | 21 | | - |Movement in fair values of derivative | | | |financial instruments (note 3) | (235)| | 11 | +-----------+ +----------+ ------------------------------------------------------------------------------Net finance costs (226) 4------------------------------------------------------------------------------ 5. Taxation 6 months to 6 months to 31 March 2006 31 March 2005 $m $m-----------------------------------------------------------------------------United Kingdom:Current tax expenses at 30% (March 2005 - 30%) 36 42less amount of the benefit arising from doubletax relief available (36) (42)-----------------------------------------------------------------------------Total UK tax expense - ------------------------------------------------------------------------------Overseas:Current tax expense at 29% (March 2005 - 29%) 82 41 +---------+ +-----------+Excluding tax on local currency exchange | | | |profits | 70| | 27 |Tax on dividends remitted | 12| | 14 | +---------+ +-----------+ Deferred tax expense 14 12 +---------+ +-----------+Origination and reversal of temporary | | | |differences | 14| | 12 | +---------+ +-----------+ Special items (note 3) 14 - +---------+ +-----------+Current tax on sale of assets held for sale | 2| | - |Exchange on current taxation | -| | (1)|Change in South African corporate tax rate to | | | |29% (from 1 October 2004) | -| | (11)|Tax on local currency exchange profits | -| | (1)|Exchange on deferred taxation | 12| | 13 | +---------+ +-----------+ ------------------------------------------------------------------------------Tax charge 110 53------------------------------------------------------------------------------Tax charge excluding special items (note 3) 96 53------------------------------------------------------------------------------Tax rate 136% 38%------------------------------------------------------------------------------Effective tax rate excluding special items(note 3) 33% 41%------------------------------------------------------------------------------ A reconciliation of the standard tax charge to the taxcharge was as follows: 6 months to 6 months to 6 months to 6 months to 31 March 31 March 31 March 31 March 2006 2006 2005 2005 % $m % $m------------------------------------------------------------------------------Tax charge at standardtax rate 29% 23 29% 41Overseas taxes ondividends remitted bysubsidiary companies 15% 12 10% 14Change in South Africancorporate tax rate - - (8)% (11)Exchange on current anddeferred tax 15% 12 8% 11Tax effect of movementsin the fair value offinancial instruments 76% 62 (3)% (4)Tax effect of othertiming differences 1% 1 2% 2------------------------------------------------------------------------------Tax charge 136% 110 38% 53------------------------------------------------------------------------------ 6. Earnings per share Earnings per share have been calculated on the loss for the period amounting to$67 million (2005 - profit of $73 million) using a weighted average number of142,308,120 ordinary shares in issue for the six months to 31 March 2006 (6months to March 2005 - 141,625,478 ordinary shares). Diluted earnings per share are based on the weighted average number of ordinaryshares in issue adjusted by dilutive outstanding share options and sharesissuable on conversion of the convertible bonds during the period. During thesix months to 31 March 2006 outstanding share options and the shares issuable onconversion of the convertible bonds were anti-dilutive and have been excludedfrom diluted earnings per share in accordance with IAS 33 - Earnings Per Share. 6 months to 31 March 2006 6 months to 31 March 2005 Profit/(loss) Profit/(loss) for the Per share for the Per share period Number of amount period Number of amount $m shares cents $m shares cents-------------------------------------------------------------------------------------------------- Basic EPS (67) 142,308,120 (47.1) 73 141,625,478 51.5Share option schemes - - - - 249,745 (0.1) Convertible bonds - - - (7) 10,576,993 (8.1)-------------------------------------------------------------------------------------------------- Diluted EPS (67) 142,308,120 (47.1) 66 152,452,216 43.3-------------------------------------------------------------------------------------------------- Underlying earnings per share have been presented as the Directors consider itto give a fairer reflection of the underlying results of the business.Underlying earnings per share are based on the profit or loss for the periodadjusted to exclude special items (as defined in note 3) as follows: 6 months to 31 March 2006 6 months to 31 March 2005 Profit/(loss) Profit/(loss) for the Per share for the Per share period Number of amount period Number of amount $m shares cents $m shares cents-------------------------------------------------------------------------------------------------- Basic EPS (67) 142,308,120 (47.1) 73 141,625,478 51.5Special items (note 3) 224 - 157.4 (11) - (7.7)-------------------------------------------------------------------------------------------------- Underlying EPS 157 142,308,120 110.3 62 141,625,478 43.8-------------------------------------------------------------------------------------------------- 7. Dividends The final dividend for the year ended 30 September 2005 of 42.0 cents per share(42.0 cents per share for the year ended 30 September 2004) was declared inJanuary 2006, paid on 8 February 2006 and is reflected in the six months to 31March 2006. An interim dividend of 45.0 cents per share will be paid on 4 August 2006 toshareholders on the registers at the close of business on 7 July 2006 (30.0cents per share for the six months to 31 March 2005 paid on 5 August 2005 toshareholders on the registers at the close of business on 8 July 2005). Inaccordance with IFRS the dividend has not been accrued at 31 March 2006. 8. Goodwill $m------------------------------------------------------------------------------As at 30 September 2005 40Purchase of Messina minorities 13Reassessment of fair values (note 9) 60------------------------------------------------------------------------------As at 31 March 2006 113------------------------------------------------------------------------------ As at 30 September 2005 goodwill comprised $40 million arising on thefinalisation of the fair values of 9.11% of the assets and liabilities ofEastern Platinum Limited and Western Platinum Limited. Goodwill generated in the period represented the synergistic benefits of theacquisition of Southern Platinum Corporation (including Messina) to the Group'sexisting operations (note 9) as at the date of the acquisition. 9. Reassessment of fair values of acquisitions in 2005 The Group has taken the opportunity to reassess the fair value of the assets andliabilities acquired as a result of the acquisition of Southern PlatinumCorporation on 15 June 2005. This has resulted in the changes below. As required by IFRS 3, Business Combinations, the Group will finalise theprovisional values by 15 June 2006. Fair value as at Fair value as at 30 September 2005* Revisions at 31 March 2006 $m $m $m-------------------------------------------------------------------------------Goodwill - 60 60Intangible assets 46 7 53Property, plant andequipment 216 (67) 149Net debt, workingcapital and provisions (70) - (70)------------------------------------------------------------------------------- 192 - 192------------------------------------------------------------------------------- Footnote: * As reported in the IFRS transition document published on 15 February 2006. 10. Analysis of net debt As at Exchange As at 1 October 2005 Cash flow movements 31 March 2006 $m $m $m $m------------------------------------------------------------------------------ Cash 11 16 - 27Overdrafts (1) (5) - (6) -------------------------------------------------- 10 11 - 21Current borrowings (86) (42) - (128)Non-current borrowings (296) 26 (270)Convertible bonds (213) - - (213)------------------------------------------------------------------------------Net debt (585) (5) - (590)------------------------------------------------------------------------------ As at Exchange As at 1 October 2004 Cash flow movements 31 March 2005 $m $m $m $m------------------------------------------------------------------------------ Cash 20 (10) - 10Overdrafts (22) (186) (1) (209) -------------------------------------------------- (2) (196) (1) (199)Current borrowings (1) 1 - -Non-current borrowings (56) (2) - (58)Convertible bonds (211) - - (211)------------------------------------------------------------------------------Net debt (270) (197) (1) (468)------------------------------------------------------------------------------ 11. 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 2005 142 12 104 580 838 | 166 1,004Total recognised income and |expense - - - (61) (61)| 40 (21)Buy out of minority interests in |Messina - - - - - | 1 1Dividends - - - (60) (60)| (18) (78)Share based payment - - - 5 5 | - 5Shares issued on exercise of |share options 1 11 - - 12 | - 12----------------------------------------------------------------------------------+--------------------At 31 March 2006 143 23 104 464 734 | 189 923----------------------------------------------------------------------------------+-------------------- During the period 761,407 share options were exercised on which $12 million ofcash was received (2005 - $nil). 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 2004 142 6 104 513 765 | 150 915Total recognised income and |expense - - - 75 75 | 15 90Dividends - - - (61) (61)| (21) (82)Share based payment - - - 2 2 | - 2----------------------------------------------------------------------------------+--------------------At 31 March 2005 142 6 104 529 781 | 144 925----------------------------------------------------------------------------------+-------------------- Within retained earnings is a deduction for the value of own shares of $6million (31 March 2005 - $7 million). 12. Transition to International Financial Reporting Standards As stated in note 1 to the interim statement, Accounting Policies, this is theLonmin Group's first consolidated financial report prepared in accordance withIFRS. The Group published its transition document on 15 February 2006 explainingthe balance sheet, income statement and cash flow impact for the Group of thetransition to IFRS. Included within the document is a reconciliation of theincome statement and cash flow statement from UK GAAP to IFRS for the year ended30 September 2005 and the six months ended 31 March 2005 and a reconciliation ofequity at the transition date (1 October 2004), 30 September 2005 and 31 March2005. The document also provides details of the Group's accounting policiesunder IFRS that are expected to be effective at 30 September 2006 and theexemptions applied by the Group in accordance with IFRS 1 on transition to IFRS. The most significant changes at the date of the transition to IFRS for the Groupbetween reporting on a UK GAAP basis and IFRS are as follows: • the recognition, on the balance sheet, of pension scheme assets;• the inclusion of a fair value charge in respect of outstanding employee share options;• the cessation of goodwill amortisation;• the recognition, on the balance sheet, of all financial instruments as either financial assets or financial liabilities;• the separate accounting treatment as a liability of the embedded derivative in the convertible bond;• no longer recognising proposed dividends as a liability at the balance sheet date;• the recognition of the change in measurement basis of in-process inventory as a change in accounting policy. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Lonmin