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Solid results in a challenging environment

29 Aug 2012 12:00 AMMedia Release

Minmetals Resources Limited (MMR) (Stock Code 1208.HK) is pleased to report its interim financial results for the six months ended 30 June 2012.

Key points

  • Despite a challenging global economic environment, the Company delivered net profit after tax attributable to equity holders of the Company (NPAT) of US$122.4 million and corresponding diluted earnings per share of US 2.31 cents.
  • Robust production performance and higher sales volumes resulted in revenue of US$1,218.7 million, a 14% increase compared to the first half 2011. This was despite lower commodity prices most significantly for copper and zinc which were down 14% and 15% respectively.
  • C1 costs at all sites were below those reported in the first half 2011, with the exception of Golden Grove.  C1 costs in the first half 2012 at Century, Kinsevere and Sepon were below annual guidance demonstrating the Company’s commitment to cost management. 
  • Cost management remains a focus with the Company not immune from industry wide cost pressures of several key inputs. 
  • Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was US$444.5 million, a decrease of 2%.
  • The Total Recordable Injury Frequency Rate (TRIFR) of 3.6 per million hours worked was an improvement compared to 4.1 at the end of 2011; however the Lost Time Injury Frequency Rate (LTIFR) was 0.8, a disappointing increase compared to 0.6 at the end of 2011.
  • Completion of the acquisition of the Anvil operations established a foothold in the southern African copper belt. Following solid performance at the Kinsevere mine we improved production and cost guidance compared to earlier forecasts provided.
  • A focus continues on investment and development of the business foundations necessary to deliver the Company’s future growth potential. This includes implementing a scalable and standardised business model and management system, common across all operations.

Financial highlights

(US$ million)

1H 2012

1H 2011

%

 Revenue

1,218.7

1,070.7

14

 EBITDA

444.5

453.1

(2)

 Operating profit (EBIT)

247.4

347.7

(29)

 Net finance costs

(39.7)

(26.2)

(52)

 Profit before income tax

207.7

321.5

(35)

 Income tax expense

(71.4)

(87.8)

(19)

 Underlying profit from continuing operations

136.3

233.7

(42)

 Profit from continuing operations

136.3

393.2

(65)

 

Underlying earnings per share  - fully diluted

(US cents per share)

1H 2012

1H 2011

%

 

 Continuing operations

2.31

4.54

(49)

 

Segment information

(US$ million)

 

Revenue

 

EBITDA

 

EBIT

EBITDA

 margin

Continuing operations

 

 

 

 

 Century

377.0

145.2

46.6

39

 Golden Grove

165.2

38.9

24.6

24

 Kinsevere

96.6

44.9

18.4

46

 Rosebery

150.0

58.1

46.8

39

 Sepon

429.9

264.7

221.2

62

 

Balance sheet summary

(US$ million)

30 June 2012

30 June 2011

Assets

 

 

Cash and cash equivalents

155.3

1,096.5

Property, plant and equipment

3,128.0

1,754.9

Intangible assets

211.4

-

Total assets

4,179.6

3,453.5

Total equity

1,615.7

1,494.4

Total borrowings

1,063.3

1,081.7

Provisions

605.4

547.6

Other liabilities

895.2

329.8

Total liabilities

2,563.9

1,959.1

Total equity and liabilities

4,179.6

3,456.5

Net current (liabilities) assets

(118.4)

429.3

Total assets less current liabilities

3,395.1

2,285.5

Commentary from the Chief Executive Officer

“I am pleased to report Minmetals Resources Limited’s interim results for 2012. We have delivered a healthy profit to shareholders while continuing to invest in our long term strategy and vision, despite a challenging global economic environment.

In the first half 2012, Minmetals Resources generated US$1,218.7 million in revenue, an increase of US$148.0 million on the first half 2011. This higher revenue was the result of the inclusion of Kinsevere and revenue associated with increased sales at all operating sites, despite lower commodity prices. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was US$444.5 million.

However, there were a number of contributing factors that resulted in lower earnings before interest and tax (EBIT) of US$247.4 million. This included higher costs of sales related to increased production and sales volumes, increased depreciation and amortisation and higher input cost rates associated with the Group’s mining processing and support activities (for example employee, contractor, electricity and fuel costs). There was also an increase to costs associated with supporting the Company’s investment in management information systems.

The first half 2011 included a number of one-off items (EBIT US$215.9 million) including the profit on the sale of the Company’s investment in Equinox Minerals Limited (US$152.1 million) which is important to consider when comparing these results to the prior period.

Costs

Unit costs remain a focus with price increases of key inputs such as labour, energy, reagents and volume-related cost increases from our operations. Despite this, in the second half of 2012, production and C1 costs, being a cash cost per unit of production, are expected to remain within current guidance at all sites. Following a solid performance in the second quarter at Kinsevere, we increased production guidance and reduced cost guidance compared to the original forecasts provided in April 2012.

Safety

As previously disclosed, a fatality occurred at our Sepon operation in Laos on 28 February 2012. Significant efforts have been made since this tragic incident to strengthen the safety culture, systems and processes at the site with progress already being seen in safety performance. Our total recordable injury frequency rate (TRIFR) ended the first half 2012 at 3.6 compared with 4.1 at the end of 2011. The lost time injury frequency rate (LTIFR) was 0.8 compared with 0.6 at the end of the full year 2011. These statistics encompass our whole workforce – employees and contractors. We continuously seek improvement and our priority remains the safety of our people. Our overall health and safety vision is a ‘Zero Harm and Fatality Free’ workplace.

Integration of Kinsevere

Following the acquisition of Anvil Mining Limited (Anvil) earlier this year, we have focused on the integration of the Kinsevere copper operation into our portfolio. The acquisition has established our foothold in the southern African copper belt, providing a platform for further growth.

Development projects

Work progressed at Golden Grove in Western Australia on the development of a copper open pit which is expected to deliver an additional 59,600 tonnes of copper in concentrate between 2012 and 2014. The project remains on budget and schedule with first production expected in the second half 2012.

We also continue to progress our portfolio of development projects. In August, the final Environmental Authority for our Dugald River zinc project in the north-west Queensland minerals province in Australia was received from the Queensland Department of Environment and Heritage Protection. Pre-commitment activities for the project continued throughout the first half 2012 including engineering design and progression of agreements for gas, power generation, access and infrastructure.

The Dugald River project is due for Board consideration later this year.

In Canada, we continued to progress a definitive feasibility study for the integrated development of the Izok Lake and High Lake copper-zinc deposits. The feasibility study will continue during 2012 and 2013.

Exploration

With exploration a key driver of our future growth, we have expanded work and funding to this key business area. Around 70% of our exploration efforts are focused on near mine development at our current operations, with the aim of extending Resources and Reserves, and thus asset life.

Creating a simple and scalable business

Throughout the first half 2012, we have continued build the foundations of a simple and scalable business aimed at creating long-term shareholder value.

This includes analysing and evaluating opportunities to extract additional potential from our existing assets. We continue to progress our technical and operational projects which focus on incremental output gains, debottlenecking opportunities and optimising our use of existing and new technology.

We have also focused on investment and development of the business foundations necessary to deliver the Company’s future growth potential. This includes implementing a scalable and standardised business model and management system, common across all operations.

We expect these initiatives to result in improvements to safety, costs and efficiencies.

We will also continue to seek value accretive growth opportunities - through our existing operations, development projects, exploration and via acquisitions to ultimately benefit all our shareholders.”

Andrew Michelmore
Chief Executive Officer and Executive Director

Wednesday 29 August 2012

For further details on the 2012 interim results please refer to the full Interim Results announcement.

-Ends-

Media enquiries:
Sally Cox
Group Manager - Communications
T +61 3 9288 0850
M +61 417 144 524
sally.cox@mmg.com

Kathleen Kawecki
Communications Coordinator
T +61 3 9288 0996 
M +61 400 481 868
kathleen.kawecki@mmg.com

Investor enquiries:
Colette Campbell
Group Manager - Investor Relations
T +61 3 9288 9165
M +61 422 963 652
colette.campbell@mmg.com

Chinese language media and investor enquiries:
Maggie Qin
Corporate Affairs Officer – HK & China             
T +61 3 9288 0818
M +61 411 465 468      
maggie.qin@mmg.com

Webcast

A webcast of the results presentation will be held as follows:
Date:  Thursday 30 August 2012
Time: 9:30-10:30 am Hong Kong Time (UTC+08:00)

To view the live webcast, visit: http://www.media-server.com/m/p/d5r75882.

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*The presentation will be conducted in English and a simultaneous Chinese interpretation will be available.

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