Solid results demonstrate focus, progress and potential

Minmetals Resources Limited (MMR) (Stock Code 1208.HK) is pleased to report its financial results for the year ended 31 December 2011.

• Strong operating results and higher commodity prices resulting in full year Net Profit After Tax attributable to equity holders of the Company of US$540.9 million.
• Increase in the Group’s total diluted earnings per share of 18% to US 10.71 cents.
• Production and costs within revised annual guidance at all operating mines.
• An improvement in the Total Recordable Injury Frequency Rate (TRIFR) of 4.1 per million hours worked compared to 4.8 in 2010; however the Lost Time Injury Frequency Rate (LTIFR) was 0.6, a disappointing increase compared to 0.4 in 2010.
• Completion of the US$726.8 million divestment of the aluminium, trading and other non-core operations to China Minmetals Non-ferrous Metals Co. Ltd.
• Board approval of a further A$157 million in expenditure towards progressing the Dugald River zinc project in Queensland, Australia.
• Announced in 2011 the C$1,330 million acquisition of Anvil Mining Limited (Anvil), which completed in the first quarter 2012 achieving expansion into the southern African copper belt.
• Increases in Mineral Resources and Ore Reserves including 104% increase in zinc Ore Reserves due to the inclusion of Dugald River.

“I am pleased today to report Minmetals Resources’ financial performance for the year with total Net Profit After Tax (NPAT) attributable to equity holders of US$540.9 million, up 32% from 2010. In 2011 we maintained a focus on extracting value from our core mining assets, completing the transformation of our business, progressing our projects portfolio and delivering on the potential of our growth strategy.

MMR is a unique business, listed in Hong Kong, headquartered in Australia, managed by an experienced international team and backed by the strength of a skilled industry player in China Minmetals Corporation. We have a vision to build a major mid-tier mining company focused on upstream base metal production. With our two significant near-term development projects, a suite of exploration opportunities and our five key operating assets (including the recent acquisition of Anvil) we have developed a solid base on which to integrate future acquisitions.

We made significant progress on the transformation of our business as announced last year, with the divestment of the trading, fabrication and other operations completed in December 2011. We have become a dedicated diversified upstream base metals company ready for growth.

Development projects

Supporting our growth aspirations will be the delivery of two important projects, Dugald River and Izok Corridor, which are targeted to replace Century mine production post closure, in zinc equivalent. The Dugald River development project in Queensland, Australia advanced with the Board approving further expenditure of A$157 million toward the next stage of the project. A pre-feasibility study of the Izok Corridor Project in Nunavut, Canada was completed in 2011 and work has now commenced on a definitive feasibility study.

 

Acquisition of Anvil

The acquisition of Anvil provided entry into the southern African copper belt with the C$1,330 million transaction, completed in March 2012, bringing additional copper cathode production capacity and a platform for our expansion into Africa.

 

Financial highlights

Our financial results reveal a focus on careful cost management and highlight future earnings potential. The result included one-off benefits, including the gain realised on our investment in Equinox Minerals Limited (‘Equinox’) and the sale of our non-core assets.

Earnings Before Interest and Tax (EBIT) from continuing operations was US$755.3 million, up 45% from the full year 2010. Underlying Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) for the Company’s continuing operations, excluding one-off items was US$887.8 million, a 2.1% decrease on 2010.

Costs

Operating costs remain a focus across our business with industry-wide cost pressures remaining evident. Cost management will remain a challenge and focus for Board and management in 2012 and future years.

Our operating sites delivered solid results in 2011 with all sites meeting revised production and cost guidance. A key focus for us in 2011 was extracting value from our core mining assets. This includes a 23% increase in copper cathode production at our Sepon operation for 2011, following the commissioning of the Sepon copper expansion project earlier in the year. We also saw the first drill hole take place at the new copper open pit at Golden Grove, which will add approximately 235,000 tonnes of copper concentrate to the site’s production profile. These results benefited considerably from high base and precious metal prices during the first half of 2011 although prices softened in the second half of the year. Copper averaged US$8,806/tonne, zinc averaged US$2,190/tonne, gold averaged US$1,568/ounce, silver averaged US$35.15/ounce, and lead prices averaged US$2,396/tonne. Our cost of sales from continuing operations was US$1,301.9 million representing a 25% increase on 2010. Operating costs were adversely impacted by the strong Australian dollar, higher prices of key inputs such as labour, energy and reagents and volume-related cost increases from our operations. At the corporate level, there was also significant expenditure on process and system standardisation in 2011 to support the Company’s future growth strategy. While costs will remain a challenge, our balance sheet has continued to strengthen. Total liabilities decreased 33% in 2011. Cash generated from operations and the proceeds from the sale of the trading, fabrication and other operations has significantly enhanced the balance sheet. Total borrowings decreased significantly as forecast at our half year results and the Company was effectively net cash positive US$14.8 million at the end of 2011.

Dividend

The Board has given due consideration to the payment of dividends and determined that given the current focus on growth that no dividend will be declared for 2011.

 

Capital and exploration expenditure

Capital expenditure on our assets aims to extend mine life, improve metal recoveries and convert resources into reserves. This, in addition to investment in our suite of development and exploration projects, aims to deliver incremental production gains. In 2012 we expect to spend between US$920 and US$1,000 million of capital expenditure toward our growth, sustaining and mine development projects and US$65 million on exploration expenditure (Includes Dugald River and Kinsevere. Project development is subject to Board and Environmental approval.).

 

Safety

Last month we were immensely saddened by the fatality that occurred at our Sepon operation in the Laos PDR. Our thoughts and condolences are with the contractor’s family and friends. Any incident is one incident too many and on behalf of the Company, I commit us to ensuring we do better.

Safety anchors our performance, and at the end of 2011, the Total Recordable Injury Frequency Rate (TRIFR) per million hours worked was 4.1, an improvement compared with the 2010 result of 4.8. The Lost Time Injury Frequency Rate (LTIFR) was 0.6, a disappointing increase compared with the 2010 LTIFR of 0.4. These statistics encompass our whole workforce – employees and contractors. We continuously seek improvement and our priority remains on safety in 2012.

Creating long-term value for shareholders

As we look to quadruple the size of our business over the next few years, we will continue to identify potential acquisition targets that offer shareholder value. Our focus for 2012 will be to operate our existing assets in a safe and cost efficient manner, take a disciplined approach to assessing and pursuing acquisitions, integrating the Anvil assets into our business and standardising our systems to support the demands of our growth.”

Andrew Michelmore Chief Executive Officer and Executive Director Wednesday 28 March 2012

 

For further details on the 2011 financial results please refer to the full Annual Report.

 

A media conference will be held
Thursday 29 March 2012 11.00am
Hong Kong Time (UTC+08:00)
Ballroom B, Island Shangri-La,
Hong Kong Pacific Place,
Supreme Court Road Central,
Hong Kong

 

 

Dial in details:
International toll dial-in number:          +65 67239381

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Webcast:           http://www.media-server.com/m/p/gfr4vhs5