Avmin – Results for year-ended 30 June 2002

Significant features
Excellent performance from Assmang
Iscor shareholding sold for significant gain
Significant impairment on Chambishi Metals
Substantial interest acquired by Anglo American
Thursday, 12 September 2002: Speaking at the annual results presentation today, Anglovaal Mining Limited (Avmin) Chairman, Rick Menell, commented: “Three significant events occurred during the period under review;

The Company disposed of its entire shareholding in Iscor Limited to Deutsche Bank and Stimela Mining Limited for a total consideration of R911 million, representing a gain of R417 million,
On 29 January 2002, the Company announced a decision to write-down its Chambishi Metals plc (Chambishi) investment by R1 619 million and,
Anglo American plc (Anglo American) acquired, subject to regulatory approvals, 34,9 per cent of Avmin from Arctic Resources Limited, effective 12 March 2002, which resulted in the elimination of Avmin’s historical control structure”.
He continued: “All divisions performed well during the year, particularly Assmang Limited (Assmang), but this was offset by the losses incurred at Chambishi. For the year ended 30 June 2002, Avmin recorded headline earnings of R204 million (30 June 2001: R281 million) or 184 cents per share (259 cents per share)”.

Review Of Operations
Assmang’s headline earnings increased by 92 per cent to R443 million from R231 million. A weakening South African rand exchange rate was the main contributing factor to this increase. The restructuring of the businesses into three distinct operating entities, manganese, iron ore and chrome continued. Good cost containment and improving efficiencies also contributed to the higher earnings.

The manganese division, consisting of the manganese mines as well as an alloy smelter, once again had a pleasing year with a contribution to operating profit of R582 million. Manganese ore sales, excluding sales to the company’s manganese smelter, were higher at 993 000 tons (979 000 tons). Manganese alloy sales were slightly lower at 187 000 tons (193 000 tons). Iron ore sales rose as a result of a full year’s production from the new jigging plant to 4,8 million tons (4,3 million tons). Chrome alloy sales, fed by Assmang’s chrome ore mine, Dwarsrivier, were 190 000 tons (125 000 tons).

Assmang continued its significant capital programme spending R372 million (R626 million) during the year, the majority on its two major projects: the new chrome alloy smelter and the new manganese shaft at Nchwaning. Assmang has spent R1,8 billion over the last five years on re-capitalising and expanding its businesses.

Avgold Limited’s (Avgold) headline earnings for the year ended 30 June 2002 were R36 million (R39 million). The operating profit was R17 million (R28 million) and unrealised foreign exchange gains increased income before taxation to R41 million (R39 million). Total gold sales for the year increased to 4 179kg (2 842kg), the average yield was 8,56g/t (9,18g/t), and the cash cost was R64 277/kg (R58 698/kg), or US$198/oz (US$241/oz). The company received an average gold price over the year of R86 794/kg (R76 586/kg), or US$306/oz (US$315/oz), which includes the results of hedging activities.

The Target project was completed within budget during the year at a total cost of R2,1 billion. The mine contributed to the income statement from 1 May 2002; during the two months of the year the mine milled 172 500 tonnes to sell 1 374kg of gold at a cash cost of US$156 an ounce. On start-up, Target experienced minor mill problems, which have been resolved, and grade dilution issues that are being addressed.

During the year, ETC finalised a restructuring process resulting in a retrenchment cost of R4,7 million. Following various infrastructure changes, planned mining grades were achieved on a consistent basis. ETC’s three mines � Sheba, New Consort and Fairview � milled a total 315 523 tonnes (309 506 tonnes) for the year at an average yield of 8,89g/t (9,18g/t). Gold sales were lower at 2 805kg (2 842kg) and the cash cost increased in rand terms to R69 805/kg (R58 698/kg), but declined in dollar terms to US$215/oz (US$241/oz).

The current Paradise surface exploration drilling programme in the northern Free State has been completed. The results to date have proven that the Eldorado fan extends northwards and has delineated the important geological structures. The ore resource model is currently being updated and this information will be published during October 2002.

Two Rivers Platinum (Pty) Limited is jointly owned by Avmin (55 per cent) and Impala Platinum Holdings Limited (45 per cent). During the past year, a R60 million feasibility study to mine and process the UG2 ores was undertaken. It will be completed by October 2002; initial results confirm the pre-feasibility work done prior to the purchase of this asset.

Chambishi experienced a very challenging year with furnace availability of only 65 per cent. In November 2001, following a second refractory lining failure, a decision was taken to contract a Canadian company to re-design the furnace cooling system and refractory lining. The re-designed furnace was installed this quarter and commissioned. Full output levels are expected in December 2002.

During the year under review, 3 700 tons of cobalt was produced from the toll refining operation, which performed well, and the smelter. The design smelter capacity exceeds 4 500 tons of cobalt a year. As a result of the poor output and a lower average cobalt price received for the year, US$7,56/lb (US$11,37/lb), Chambishi recorded a pre-interest operating loss of US$12 million (US$11 million � loss) and a loss, post interest, of US$19 million (US$12 million � loss). Inclusive of the write-down mentioned above, Chambishi’s overall loss was US$195 million.

The Nkomati nickel mine experienced lower US dollar commodity prices compared to last year, but the weaker rand, especially during the first half of the financial year, and a fairly well maintained yield, enabled the mine to perform very much in line with the previous year. The mine milled 260 000 tons (280 000 tons) of ore, selling 46 000 tons (41 000 tons) at an average nickel grade in concentrate of 9,33 per cent (10,47 per cent).

Nkomati sold a slightly lower 3 900 tons (4 000 tons) of nickel and 3 000 tons (2 500 tons) of copper, 52 tons (54 tons) of cobalt and 35 000 ounces (32 600 ounces) of platinum group metals (PGMs). Excluding nickel, other metals contributed 42 per cent of the mine’s total revenue, while the nickel price averaged US$2,69/lb (US$3,28/lb) during the year. The mine’s cash cost to produce nickel, net of by-products, was US$0.32/lb (minus � US$0,82/lb).

Operating profit declined to R209 million (R241 million) and after adding other income, mainly interest received, profit before tax was slightly lower at R221 million (R249 million).

A feasibility study to expand the mine, plant and infrastructure was completed in the last quarter. This envisages annual production of 16 000 tons of nickel, 9 000 tons a year of refined copper, 900 tons of cobalt and 100 000 ounces of PGMs for toll refining. The capital cost will exceed R2 billion. Environmental and mining permits are being processed.

Safety, Health and Sustainable Development
Rick Menell added: “Despite a generally improved safety performance, the board reports with regret that one fatal accident occurred within the Group during the year; Mr Aaron Ndhlovu died from a fall of ground at ETC. Mr Ndhlovu’s death is viewed as a tragedy and the board extends its condolences to his family”.

HIV/AIDS continues to be a concern. Prevalence testing was completed throughout the Group during the year and a comprehensive management plan was devised and is presently being implemented. Menell continued: “Over the last few years, Avmin has been involved in the Global Mining Initiative, which, through the Mining, Minerals and Sustainable Development grouping, is assessing the role that the mining, minerals and metals industries can play in contributing to a global transition towards a more sustainable future”.

Minerals and Petroleum Resources Development Bill
The Avmin Group is continuing to work through the Chamber of Mines of South Africa and participating, along with all industry stakeholders, in constructive dialogue to arrive at practical legislative proposals for the new Minerals and Petroleum Resources Development Bill (the Bill) that was tabled in parliament in June 2002. All stakeholders are awaiting two additional pieces of legislation: the re-drafted Empowerment Charter and the Money Bill. Various Economic Empowerment initiatives are underway within the Avmin Group that will assist in dealing with the issues arising from the Bill.

Dividends
No dividends were declared for the year ended 30 June 2002 in terms of bank covenants.

Outlook
Menell concluded: “The major challenges ahead for the Company are to deliver Chambishi’s technical performance objectives and to ensure that design output levels at the Target mine are achieved. Earnings for the current year will depend on meeting these challenges and also, to a large extent, on the rand/US dollar exchange rates remaining at current or weaker levels, recoveries in commodity markets and, in particular, a higher cobalt price than the current level of US$7,00/lb.

Julian Gwillim
Vice President: Corporate Development