1 2002 saw the end of an era with mining in its present form in the open pit coming to an end at precisely 14:45 on Thursday, 25 April 2002. The detonator to ignite 64 000 kg of explosives to blast 166 000 tons of ore was activated at bench 60 in the Palabora open pit. It signified the end of an era and the transition from an open cast mine to an underground operation.
76
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12734 New AR 2002 new - Palaborafrom the University of Stellenbosch as well as a GDE (Mechanical Engineering) qualification. Oscar L Groeneveld(49) became a director in April 1999.
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Transcript
Ind
ustr
ial M
iner
als
1
2002 saw the end of an era with mining in
its present form in the open pit coming to
an end at precisely 14:45 on Thursday,
25 April 2002. The detonator to ignite
64 000 kg of explosives to blast 166 000
tons of ore was activated at bench 60 in the
Palabora open pit. It signified the end of an
era and the transition from an open cast
mine to an underground operation.
2
Scenic view over Foskor-thickener with the Palabora shafts in the backgroundScenic view over Foskor-thickener with the Palabora shafts in the background
Group o perations in brief
PALABORA MIN ING COMPANY IS SOUTH AFR ICA’S LARGEST
PRODUCER OF REFINED COPPER.
PRODUCT
THE COMPANY PRODUCES COPPER AS A PR IMARY PRODUCT
TOGETHER WITH BY-PRODUCTS, WHICH INCLUDE MAGNETITE,
N ICKEL SULPHATE , ANODE SL IMES AND SULPHUR IC AC ID .
INDUSTRIAL MINERALS PRODUCTION COMPRISES VERMICULITE,
AND ZIRCONIUM BASIC SULPHATE (ZBS) .
OPERATIONS
THE COPPER D IV IS ION COMPRISES AN OPEN-P IT AND
UNDERGROUND MINING OPERATION, A CONCENTRATOR CAPABLE
OF MILLING 80000 TONS OF ORE PER DAY, A COPPER SMELTER
WITH ANODE CASTING FACIL IT IES AND AN ASSOCIATED ACID
PLANT, AN ELECTROLYT IC REF INERY TANK HOUSE , A ROD
CASTING PLANT AND BY-PRODUCT RECOVERY PLANTS.
THE INDUSTRIAL MINERALS DIVIS ION COMPRISES AN ADJACENT
OPEN-P IT VERMICUL ITE MIN ING OPERAT ION AND RECOVERY
PLANT, AND A NEW ZIRCONIUM BASIC SULPHATE PRODUCTION
PLANT, WHICH USES IMPORTED ZIRCON SAND AS A FEEDSTOCK.
OVERSEAS SUBSIDIARIES IN THE UNITED STATES OF AMERICA,
THE UNITED KINGDOM AND SINGAPORE ARE INVOLVED WITH THE
SELLING OF INDUSTRIAL MINERAL PRODUCTS.
3
Financial
and o perational
highligh ts
2002 2001
Share performance
Rand per share
Headline earnings 8,39 7,75
Dividends declared — 0,60
Cash available from operations 20,80 27,24
Interests of shareholders
(net asset value) 70,96 63,31
Market price
High 76,00 65,50
Low 58,50 34,00
Financial
R million
Revenue 2 121 1 985
Distributable earnings 257 220
Headline earnings 237 219
Shareholders’ equity 2 009 1 793
Capital expenditure 695 702
Production
000 metric tons
Material mined 9 976 12 002
Ore milled 9 933 14 522
Concentrate produced
(new copper content) 52 78
Cathode produced 81 87
Sales
000 metric tons
Cathode sold 83 96
Concentrate sold (copper content) 10 4
Employees 2 011 2 428
(tons are metric tons)
160
140
120
100
80
60
40
20
081
Tons
Actual Indicative
99 01
Copper produced (thousand tons)
Material mined (million tons)
2002
Production perspective 1981 - 2002
Palabora Mining Company LimitedRegistered in the Republic of South Africa
Reg No. 1956/002134/0647th Annual Report 2002
4
DIRECTORS
Chairman
Z W Ntuli (57) (Resigned 31 December 2002)
J H K Sachikonye (48) (Zimbabwean)
Appointed with effect from 1 January 2003
(Acting non-executive Chairman)
EXECUTIVE
Managing Director
D S Sadler (54) (Australian)
Appointed 21 August 2000
General Manager and Chief Financial Officer –
Finance Compliance and Administration
M D Humphries (48) Appointed 4 May 2000
General Manager – External Affairs
S Langa (49) Appointed 24 April 2002
NON-EXECUTIVE
D A Farnaby (38) Appointed 1 July 2000
O L Groeneveld (Australian) (49)
Appointed 20 April 1999
R M Maruma (43) Appointed 29 April 1999
G M Negota (51) Appointed 20 May 1998
J E Rickus (55) (British) Appointed 17 February 2000
R M Whyte (59) (British) Appointed 5 September 2000
J C M van Gaalen (46) (Dutch)
Appointed 24 January 2002
C N Zungu (47) Appointed 24 April 2002
ALTERNATE DIRECTORS
F B Weldon (55) Appointed 8 August 2002
B K Wood (52) Appointed 24 January 2002
W R J Ranson (37) Appointed 11 March 2003
MANAGEMENT
General Manager – Underground Mining Project
K P P Calder (until 31 December 2002)
K J McLeish (with effect 1 January 2003)
General Manager – Copper Operations
H J R Kenyon-Slaney
General Manager – Industrial Minerals
A S Siregar (until 31 December 2002)
L du Plessis (with effect 1 January 2003)
General Manager – Asset Management
K J McLeish (until 31 December 2002)
B Iqani (Acting) (with effect 1 January 2003)
General Manager – Safety, Health, Environment and
Quality
A Grundling
Company Secretary
E B R Hone
Directorate and management
PALABORA MINING COMPANY LIMITED
PALABORA MINING COMPANY LIMITED
5
Directorate
EXECUTIVE DIRECTORsDavid S Sadler (54) was appointed managingdirector in August 2000. A metallurgist with aMSc in Metallurgical Quality Control/Statistics and a BSc in Metallurgy, he has heldvarious managerial positions within the RioTinto Group in Australia and London since1984. He came to Palabora from Londonwhere he was safety adviser to the ChiefExecutive of Rio Tinto plc
Michael (Mike) D Humphries (48) is thegeneral manager for Finance and HumanResources. He joined Palabora in May 2000when he was appointed to the board. He hasheld previous managerial positions within theRio Tinto Group in Namibia and Portugal andelsewhere in the mining industry over aperiod of years. Mr Humphries has a BCommand MBA degrees from the University ofCape Town. He is a chartered accountant andis a member of the South African Institute ofChartered Accountants and AAPA (des).
Simeon Langa (49) is the general managerfor External Affairs. He joined Palabora inSeptember 1987 as a personnel officer. He was promoted within the Company untilhe was appointed general manager – HumanResources in 1999. In 2002 he moved fromhuman resources to external affairs and wasappointed as an executive director in April2002. Mr Langa has a BComm degree fromthe University of the North and an honoursdegree in Business Administration andManagement from the University ofStellenbosch, Business School.
NON-EXECUTIVE DIRECTORS Deborah (Debbie) A Farnaby (38) is anindependent non-executive director havingbeen appointed to the board in July 2000.Mrs Farnaby is the director: GroupInformation Technologies and Services forSappi Limited as well as a non-executivedirector on the Sappi Fine Paper Europeanboard. She is also a Trustee for the SappiProvident Fund. She has held variouspositions within Sappi since 1989. She has aBSc (Hons) Computer Science degree fromthe University of the Witwatersrand and aMSc Computer Science (Cum Laude) degreefrom the University of Stellenbosch as well asa GDE (Mechanical Engineering) qualification.
Oscar L Groeneveld (49) became a directorin April 1999. Mr Groeneveld has been adirector of Rio Tinto plc since 1998. A miningengineer with qualifications in engineering,science and management, he joined the Rio Tinto Group in 1975 and has since held aseries of management positions, includinghead of Technology, before being appointedchief executive of the Copper Group of Rio Tinto in 1999. He is also a director ofFreeport-McMoRan Copper & Gold INC.
Makgabo (Rufus) R Maruma (43) has beenan independent non-executive directorsince April 1999. Mr Maruma is a leadingenvironmental and waste managementexpert and has reviewed environmentalprogrammes for leading utilities andindustries in over forty six countries. He isthe chairman and a director of a number ofcompanies, including Enviroserv Holdings,Stewart Scott International, BohlwekiEnvironmental, Amafaun Faun, Pan AfricanShop Fitters, Group Five Limited, Geo Scottand Bakwena Concession Company. He waschairman of the task team that drew up anational environmental policy for SouthAfrica (CONNEP) and also serves on anumber of committees, including theConservation Advisory Committee of SouthAfrica. Mr Maruma holds a MSc degree inEnvironmental Science from the Universityof Aberdeen.
George M Negota ( 51) was appointed anindependent non- executive director in May1998. He is a practising attorney. Mr Negotastarted a legal firm, Negota IncorporatedAttorneys in June 1998. He has conducted anumber of commissions of enquiry on behalfof government. He has led a team thatrestructured Eskom and has also conducteda study on the rationalization of state assetsin Mpumalanga. He is currently involved inthe research study in preparation for theGauteng express train. He is chairman of theCross Border Transport Agency and of the Gauteng Operating Licence Board andKuthele Projects (Pty) Limited. He is adirector of the N3 Consortium, ORT StepSouth Africa, Read Education Trust, theNational Institute for Community Educationand BKS Group Holdings (Pty) Limited. Mr Negota is also a member of the IncomeTax Appeal Court. He has BA (Hons) and MCom degrees from Rand AfrikaansUniversity, a LLB and a BCom (Hons)degrees from Unisa. In addition Mr Negotahas a H Diploma in Tax Law and a H Diploma in Company Law fromWitwatersrand University and a certificate inTax Law from Unisa.
Directorate
6
John E Rickus (55) is a geologist. He wasappointed a non-executive director inFebruary 2000. He has been employed by theRio Tinto group since 1984 and has workedworldwide as a geological consultant andlater as managing director of RTZ TechnicalServices Limited, the Company providingtechnical input to Rio Tinto projects. He currently is based in London and is amining executive for the Rio Tinto CopperGroup. He has a BSc Honours degree inGeology from Liverpool University. He is aChartered Engineer (CEng) and is a fellow ofthe Institution of Mining and Metallurgy anda Fellow of the Australasian Institute ofMining and Metallurgy.
Josephat (Josh) H K Sachikonye (48) hasbeen the acting non-executive chairman ofthe Company since 1 January 2003 upon theretirement of Mr Z W Ntuli. He wasappointed a director and deputy chairman inJanuary 2002. He is the executive directorOperations for the Rio Tinto Zimbabwegroup and sits on a number of boards ofZimbabwean companies. He has had 23 yearsservice with the Rio Tinto group. Mr Sachikonye is a past president of theInstitute of Chartered ManagementAccountants of Zimbabwe. He has a Bachelorof Accountancy Honours (Bacc Hons) degreefrom the University of Zimbabwe and aMasters of Business Leadership (MBL) degreefrom UNISA. He is also a charteredmanagement accountant and has a diplomafrom the Institute of Marketing in the UnitedKingdom.
Johannes (Jan Kees) C M van Gaalen (46)was appointed a non-executive director inJanuary 2002. He studied economics at theErasmus University in Rotterdam and has anMBA from the ISA at Jouy-en Josas in France.He held several financial positions withSchlumberger Limited during 1981 to 1989. In April 1994 he moved to London as groupfinance director of Carlton HomeEntertainment, a subsidiary of CarltonCommunications plc. In August 1996 hejoined Minorco as chief financial officer of theSalobo Metais project, based in Rio deJaneiro. In 1998 he moved to Minorco’sregional office in Sao Paulo focusing onmarketing, administration and finance. He iscurrently vice president – Base MetalsDivision for Anglo American plc based inJohannesburg. He is also a non-executivedirector of Anaconda Nickel Limited.
Rodney (Rod) M Whyte (59) has been a non-executive director since September2000. He is the deputy technical director(Metallurgy) for Anglo American plc. Mr Whyte has been with the Anglo AmericanGroup since 1978. He has a BSC (Hons)degree in Chemical Engineering from LeedsUniversity in the United Kingdom. He alsohas a MDP diploma from UNISA. He is aChartered Engineer (CEng), a member of theInstitute of Chemical Engineering, a memberof the Institute of Mining and Metallurgy inthe United Kingdom and a fellow of theSouth African Institute of Mining andMetallurgy.
Clifford N Zungu (47) was appointed a non-executive director in April 2002. His career todate has been in marketing and service–driven corporations. He has held variouspositions with BP Southern Africa, CG SmithSugar, Engen Petroleum and Avis Rent a Car.He is currently general manager – peoplemanagement for South African EagleInsurance in Johannesburg. Mr Zungu has aBComm degree from the University ofZululand and attended the GraduateAdvancement Programme (GAP) at WitsBusiness School in 1982, the IndustrialRelations Development Programme (RDP) atthe Stellenbosch School of BusinessLeadership in 1991 and the AdvancedExecutive Programme (AEP) at the UnisaSchool of Business Leadership in 1997.
ALTERNATE DIRECTORSWarrick RJ Ranson (37) was appointed as analternate director to John Rickus on 11 March2003. Mr Ranson joined Rio Tinto followingits acquisition of North Limited in 2000. He holds a degree in accounting and is aFellow of the Institute of CharteredAccountants in Australia. He has held anumber of senior financial and managementpositions, relocating to London in 2002 asFinance Executive for Rio Tinto’s copper andbase metal interests.
Francis (Frank) B Weldon (55) wasappointed alternate to Mr R M Whyte inAugust 2002. He is a mining engineer andhas a MSc Engineering degree from theWitwatersrand University. He has served withAnglo American for the past 23 years in theCoal and Base Metal divisions, in miningmanagement and group technical positions.He currently is a member of the managementcommittees of Black Mountain, NamakwaSands, Lisheen (Ireland), HBMS (Canada) andSkorpion (Namibia). Previous to AngloAmerican, Mr Weldon spent four years inWits type gold mining and twelve years withbase metal mining operations in Namibia.
PALABORA MINING COMPANY LIMITED
PALABORA MINING COMPANY LIMITED
7
Directorate and management
Brian K Wood (52) has been an alternatedirector since July 2001. He was firstlyalternate to Mr R M Whyte and then inJanuary 2002 he was appointed alternate toMr J C M van Gaalen. Mr Wood has had 27 years service with Anglo American plc inthe financial area, including financial andmanagement accounting in AngloCoal andAngloBase Divisions. He is currently vicepresident, finance and administration in theAngloBase Division in Johannesburg. He hasa CA (SA) qualification and is a member ofthe SA Institute of Chartered Accountants(SAICA).
MANAGEMENT The Company is managed by an executivecommittee comprising the managing director,Mr D S Sadler, the two executive directors,Mr M D Humphries who is the generalmanager – Finance, Mr S Langa, the generalmanager – External Affairs and five generalmanagers. The post of general manager –Asset Management is being filled by Mr B Iqani in an acting capacity since thebeginning of 2003 until a permanentappointment is made. The remaining fourcurrent members are:
Louis du Plessis (48) was appointed generalmanager – Industrial Minerals in January2003. He is accountable for the productionand marketing of vermiculite and zirconiumbasic sulphate (ZBS). Mr Du Plessis is ageologist and holds a BSc Hons. degree inGeology from Witwatersrand University and aMBL degree from the University of SouthAfrica. He has been with the Company since1981 and has had management roles intechnical support services and marketing. In 1999 he was seconded to the UnitedKingdom to head up the European sales andmarketing office in Guildford. Mr Du Plessisreturned to South Africa in 2001 to managethe Company’s SAP implementation project.
Andre Grundling (53) has held the positionof general manager – Safety, Health,Environment and Quality since 1999. Prior tothis he managed his own Company by thename of Grundling Environmental Servicesfrom 1997 to 1999. From 1993 to 1996 Mr Grundling was employed by Palabora inthe position of Environmental SciencesSuperintendent. For the period 1983 to 1993he was head of the Atmospheric SciencesDivision of the Atomic Energy Corporation.Mr Grundling has a BSc (Hons) degree inapplied mathematics and meteorology.
Harry J R Kenyon-Slaney (41) who is thegeneral manager – Copper Operations.Mr Kenyon-Slaney was appointed to thisposition in March 2001. He previously heldthe positions of general manager – IndustrialMinerals and marketing director at Palabora,having joined the Company in 1997. Prior tothis Mr Kenyon-Slaney held the positions ofcommercial director – Far East, RTZ MineralServices in London from 1993 to 1997 andManager – New Projects, RTZ MineralServices in London from 1990 to 1993.Between 1984 and 1990 he worked for AngloAmerican initially as a geologist and latterlyin the New Mining Business Division. He hasa BSc degree in Geology as well as aDiploma in Business Management.
Kevin J McLeish (42) was appointed to theposition of general manager – UndergroundMining Project in January 2003. With theintegration of the underground project withthe surface operations, the title of projectdirector has now fallen away and Mr McLeish’s new title is general manager -Underground Operations. He previously heldthe position of general manager – AssetManagement and was seconded to theCompany from Hamersley Iron Ore in 2000.Mr McLeish has been with Rio Tinto for 14 years. He has held various managerialpositions within the Rio Tinto Group inAustralia including manager Remelt -Comalco and manager Port Operations atHamersley Iron Ore. Mr McLeish holds a BSc degree in Metallurgical studies as well asa MSc degree in Business Administration.
During 2002, the following held the positionsindicated:Keith P P Calder held the position ofgeneral manager – Underground MiningProject for the whole year. He has beentransferred within the Rio Tinto Group toNorthparkes/Peak in Australia as managingdirector. Mr Calder was project director sinceFebruary 1999.
Arif S Siregar has returned to Indonesia totake up the position of vice president Rio Tinto Indonesia, a Company within theRio Tinto Group. Dr Siregar held the positionof general manager – Industrial Mineralssince August 2001 to December 2002.
COMPANY SECRETARYE B R (Brett) Hone (52) was appointedcompany secretary in September 1999,having previously filled this role at RossingUranium Limited from 1984 through 1992 andat Rio Tinto Zimbabwe from 1980 to 1984.He gained a LL.B (London) degree in 1972;a post-graduate LL.B (Rhodesia) degree in1979 and was admitted as an advocate inZimbabwe in 1980.
The delayed ramp-up of the underground mine resulted
in production of new copper in concentrate of 52 197 tons,
down 33% on the 78 381 tons achieved in 2001.
Reduced new copper in concentrate production was
supplemented by the processing of smelter secondaries
and low-grade concentrate stockpiles. These sources
provided an additional 12 170 tons of copper in
concentrate. Total production of copper in concentrate
was 64 367 tons (2001:82 243 tons). Imported concentrate
and stock-piled concentrates and scrap copper were also
processed as feed to the smelter. As a result of this,
refined copper production was 81 392 tons, 6% lower than
2001 production of 86 848 tons.
As regards the development of the mine, the ore
handling system, with a capacity of 30 000 tons per day, is
in place. More specifically, the undercut progressed well
and according to plan. The third crusher was
commissioned on schedule and construction of the fourth
and last crusher commenced according to plan. This was
commissioned in May 2003. 113 draw bells were
completed and handed over to operations by the end of
2002 against a target of 120 draw bells.
As a direct result of the delay in the ramp-up of the
underground mine and the strengthening of the Rand
against the US dollar, the Company requires additional
finance. Rio Tinto, Palabora’s largest single shareholder,
has made available a US$50 million short-term loan
facility. This will meet working capital and other
requirements until the process of raising additional
financial resources is complete. The Board of Directors
agreed during May 2003 to raise additional capital in
the form of a shareholder supported re-financing
package. It is anticipated that the re-financing will include
an offer to shareholders to participate and will be
underwritten by Palabora’s major shareholders.
The funds raised will be utilised to service existing
debt commitments as well as to allow completion of the
underground project and other fixed capital
commitments, including enhancements to various plants.
In these circumstances the board is of the opinion
that it is unlikely that dividend payments will
recommence within the next two years.
A number of factors will influence operating costs in
2003. Most significant of these are additional mining
costs associated with the delay in the ramp up of the
underground mine, while another results from the change
from defined benefit pension funds to a defined
contribution pension fund in late 2002. Palabora is in the
process of liquidating the existing defined benefit funds.
The new defined contribution fund was established with
effect from 1 September 2002 and the Company is now
contributing 12,5% of pensionable emoluments to this
Fund for its employees. This adds approximately
R31 million annually to Palabora’s cost base, although the
cost impact would have been twice this if the change in
schemes had not taken place.
The Total Operational Performance programme
(TOP) which was introduced at Palabora in 2000 to create
a culture of performance enhancement and improvement
for the business was concluded for Copper Operations,
Industrial Minerals, SHEQ, Finance, Compliance and
Administration, Asset Management as well as Human
Resources. All departments have up to two years to
implement their TOP ideas and to deliver savings in
operating costs, working capital and capital expenditure
through elimination of uncontrolled process variability
and waste, improved quality and reducing downtime.
A number of other business improvement initiatives
are underway at Palabora, namely:
• Reliability Centred Maintenance (RCM) in order to
ensure that equipment works the way it should, when it
is needed.
• Integrated Process Management System (IPMS)/6
Sigma in order to understand processes, eliminate
unnecessary work and set control plans; and
• 5S – a rigorous way in which an area can prepare itself
for improvement.
During 2002, good progress was made with these
programmes, including implementation of IPMS in
copper operations and development of the ZBS process
control plan. This has resulted in improvements in
productivity, reduced scrap generation and reduction in
equipment in a number of areas.
Key areas that will need to be managed during 2003
Chairman’s statement
8
PALABORA MINING COMPANY LIMITED
include:
• the ramp-up of the underground to full
production and demobilization of the
project team;
• the raising of additional finance;
• the importation of concentrate required to
supplement smelter feed;
• continuation of the business and process
improvement initiatives; and
• further improving the management/union relationship.
Regrettably, the safety performance at Palabora
deteriorated in 2002. The Safety Management Auditing
Techniques (SMAT) system will again be a key driver of
improved safety performance at Palabora in 2003. All
leaders within the business are required to participate in
the SMAT process. The quality of SMATs will be improved
by team leader review and engagement.
A contractor supervisor accreditation system will be
introduced during 2003. This will be used to educate
contractor supervisors in Palabora’s safety standards,
assess their level of understanding and competency and
monitor their performance.
Aside from the re-financing of the business, HIV/AIDS
has been identified as the highest risk facing the
Company within the medium/long term. The Company’s
HIV/AIDS management programme is spearheaded by
the HIV/AIDS steering committee, which is chaired by the
general manager – External Affairs. The programme
focuses on employees and, through the Palabora
Foundation and with other stakeholders, on the local
community from which the Company recruits most of its
employees. Discussions aimed at increased participation
by the National Employees Trade Union (NETU) and the
National Union of Mineworkers (NUM) in the programme
progressed well during the year and should be
concluded during 2003.
Work will continue in 2003 on improving the
leadership skills within the organization. Potential leaders
continue to attend leadership courses based on the
MacDonald & Associates models.
Employment equity targets have been set at
superintendent level. High potential employees will be
supported though a system of mentoring
and coaching in order to meet these
targets. Promotion will be based on merit.
From 2004, the underground operation
should be producing at 30 000 tons per day,
initially at 0,8% copper. This should result in
production of 77 000 tons of copper in
concentrate in 2003, 85 000 in 2004 and
then a steady decline in future years in line
with ore grade.
The key issue in future years is therefore to maintain
the smelter at full capacity through the processing of
purchased concentrate. A project team has been
established to identify and analyse probable impacts on
the operation and possible sources.
The Palabora Foundation has effectively re-focused
on education, skills development, development of
entrepreneurs and the management of HIV/AIDS within
the communities as its core work.
Wells Ntuli retired as a director and as chairman on
31 December 2002. He has been a director since 1991
and chairman since July 1999. On behalf of the Board,
management and employees, I would like to thank Wells
for his invaluable contribution to the Company during
this period and would like to wish him a fulfilling
retirement in Pietermaritzburg. I would like to welcome
Clifford Zungu to the Board. I have been asked to act as
chairman by the Board until a successor to Wells is
appointed later this year.
My thanks and appreciation goes to all our
employees and contractors for their commitment during
a challenging year.
Josh Sachikonye
Acting Chairman
PALABORA MINING COMPANY LIMITED
9
Chairman’s statement
Josh Sachikonye
Acting Chairman
Palabora achieved a consolidated net profit of
R257 million compared with R220 million in 2001.
The increase can largely be attributed to the
strengthening of the Rand in 2002 compared to 2001.
The Board of Directors declared no dividends in
2002 (2001: R0,60 per share). This is in line with the
undertaking given by the Company that it would not, in
respect of the calendar years 2001 and 2002, distribute
any of its distributable profits for each calendar year
except for the dividend that was declared on 24 April
2001. This is one of the conditions pertaining to the
granting of a four-and-a-half year unsecured syndicated
loan of US$125 million by a consortium of nine local and
overseas banks in 2001.
The Group’s net debt decreased by R158 million
during the year. Consolidated net debt was
R1 435 million at 31 December 2002. This was largely due
to exchange gains on the dollar porton of the medium
term loan facility due to the strengthening of the Rand
between the start and end of 2002. The Company will be
paying the first half yearly instalment of its medium-term
loan facility of US$15 million and R47 million on 11 June
2003. As a consequence of the strengthening of the
South African Rand in late 2002, coupled with the delay
in ramp up of underground mine production, the cash
flow in the latter part of 2002 was worse than expected.
Management is taking the necessary action to ensure
that adequate funding is made available and it is unlikely
that dividend payments will recommence within the next
two years.
Copper sales, including concentrates, amounted to
R1 459 million (2001: R1 378 million) representing 69% of
turnover. Vermiculite sales were R373 million compared
to R291 million in 2001.
Some 4 340 dry metric tons of concentrate (952 tons
of contained copper) were sold during 2002 compared to
13 284 tons in 2001.
Capital expenditure
The capital expenditure for the year was R695 million,
R7 million lower than the R702 million in 2002. The major
projects included:
R million
Underground project 504
Information systems strategy – SAP 45
ZBS plant upgrade 22
Electric blowers and 11Kv upgrade 20
Projected expenditure for 2003 includes the following:
R million
Underground project 323
Acid plant modifications 21
Primary converter hood upgrade 7
Operating Costs
Operating costs were R1 720 million compared with
R1 625 million in the previous year.
The increase was mainly due to the increased imports
of copper concentrates (R91 million), open pit contract
mining costs (R88 million) and the cost of pension fund
contributions arising from a change in pension fund
legislation (R30 million). These additional costs were
partly offset by the realization of cost savings from the
Total Operating Performance (TOP) programme.
The average unit cash cost of cathode delivered to
customers in Rand per ton increased by 62%
(31% increase in US cents per lb.) compared with 2001.
Rand/ton US cents/lb
2002 2001 2002 2001
Cathode cash cost
delivered 14 476 8 928 62,3 47,4
The following major processes and activities contributed
to cash costs in US cents per lb.:
% %
2002 2001
Mining and underground mining 45 37
Milling 30 22
Smelting/refining 16 26
Indirect/selling 24 36
By-products (15) (21)
100 100
10
Review by the managing director
PALABORA MINING COMPANY LIMITED
As expected, 2002 was a year of transition for
Palabora Mining Company.
The planned closure of the open pit for
large-scale mining took place as scheduled in
April 2002. Smaller scale contract mining of
the open pit ramps began in May. This has
been a great success with mining rates being
in excess of those forecast.
The underground mine did not achieve its
targeted full production rate of 30 000 tons of ore per
day by the end of 2002. Production increased during the
year from a monthly average of 4 700 tons per day in
January to 13 500 tons per day in December.
Production rates have been constrained primarily by
the poor availability of secondary breaking equipment.
This equipment is required to handle oversize material
reporting to the draw bells from the cave. Operating
plans to improve production rates are currently being
implemented, including the increase in size of the
secondary breaking fleet and changes to operating
methods. It is anticipated that the target of 30 000 tons
per day will be achieved in the third quarter of 2003.
The delay in the ramp up of production from the
underground mine has necessitated the mining of
the haulage ramps in the open pit (ramp scavenging); the
recovery of low grade or weathered ore from surface
dumps and the purchase of imported concentrate, in
order to maintain consistent feed to the smelter.
The impact of this variation in ore sources from 2001 to
2002 is demonstrated in the following table.
Source Tons ore (000) Tons ore (000)
2002 % 2001 %
Mining (conventional) 2 473 26 11 348 82
Mining (scavenging) 2 705 29 - -
Surface dumps 892 10 1 549 11
Underground 3 277 35 1 007 7
9 347 100 13 905 100
Tons concentrate
purchased 37 000 12 000
Zirconium Basic Sulphate ( ZBS )
The upgraded ZBS plant was commissioned in the second
half of 2002. Commissioning of the plant was delayed
following a fire in January 2002. As a result, production of
ZBS was limited to 501 tons in 2002
(2001: 1 229 tons). Production of ZBS within
tightened customer specifications was being
achieved from the refurbished plant by the
end of 2002. Average sales prices achieved for
ZBS in 2002 were low due to the sale of
stockpiled low-grade material.
Safety and Environment
Palabora’s safety performance deteriorated in 2002,
but I am pleased to report that there were no fatalities
compared to the two fatalities that occurred in 2001.
The lost time injury frequency rate for the year was
0,46 compared to 0,27 achieved in 2001. The 0,27 in 2001
was the lowest on record. Of the 26 lost time injuries
17 occurred in the underground mine. Contractors
accounted for 65% of the lost time injuries.
On the environmental front there was an increase in
the annual average raw water consumption with an
average of 43,5 Ml/day for 2002, compared with
36,6 Ml/day achieved in 2001. This increase is largely due
to the low rainfall for the calendar year of 154mm against
the annual average of 527mm.
Sulphur recovery for the year was 69%, 2% lower
than in 2001. The lower sulphur capture was mainly
due to low SO2 gas flows caused by low smelter
throughput, resulting in poor acid plant performance.
The performance of the primary hooding on converter
1 also contributed to increased fugitive and secondary
gas emissions. This issue will be addressed during 2003.
Conclusion
Detailed reports on Copper Operations, Industrial
Minerals, Asset Management, Human Resources and the
Underground Mine are contained in the following pages.
A detailed Sustainable Development Report accompanies
this Annual Report as a separate document. In conclusion
I would like to express my appreciation to management,
all our employees and contracting staff for their
endeavours during one of the most telling years of
change in the Company’s history.
David Sadler
Managing Director
14 May 2003
PALABORA MINING COMPANY LIMITED
11
Review by the managing director
David Sadler
Managing Director
The smelter experienced a markedly wider variation
in matte grade during the year as the ability to blend concentrate
from different sources diminished
12
Copper
Mining from the open pit ceased in its conventional
form in April 2002 after 38 years. The depth of the pit
was extended to 822 metres, or 416m below sea level,
and production slowed progressively as access
diminished and haul distances to the in-pit crusher
lengthened.
In May a programme to reclaim ore from the main
access ramps was initiated. The exercise, which
involves lowering the ramp level by 20m along most
of its 4.8km available length, supplied a further
2,7 million tons of ore during 2002. Total production
from the open pit was 5,2 million tons at an average
grade of 0.63% Cu.
The recovery of reverbatory furnace slag
continued during the year and a total of almost
680 000 tons, grading 0.60% Cu, was delivered to the
concentrator for further processing.
Ore production from the underground mine rose
steadily during the year and totalled 3,3 million tons,
a rise of 70% over 2001.
Concentrator
Production of copper concentrate declined in 2002 as
the full impact of formal closure of the open pit was
felt. Output of copper-in-concentrate reduced by
16% to 64 367 tons of which just under 20% was
derived from the processing of smelter secondaries,
including slag and low grade reverts.
The copper concentrate grade reduced sharply to
31,1% in line with the change in ore mix. Copper
recoveries declined marginally to 80,9% from 82,3% in
2001 as the weathered nature of ore removed from
the open pit ramps influenced flotation performance.
Smelter
Production of new anode copper totalled 82 262 tons,
a slight decline of 3,8% on the prior year. Output was
constrained by the lower production of concentrate
with the shortfall being filled by the reclaiming of
various low grade concentrate stockpiles. Towards the
end of the year a trial parcel of 10 000 tons imported
copper concentrate was successfully transported to
Palabora and processed through the smelter.
A markedly wider variation in matte grade was
experienced during the year as the ability to blend
ore from different sources diminished. This was
successfully managed in the converters where a
process control initiative enabled a significant
reduction in blowing cycle times to be achieved.
Sulphuric acid production reduced by 15,7% to
117 238 tons on the back of lower throughput in the
converters. Stable plant operations resulted in SO2
emission levels reducing again to 14ppb, a new
record low.
Refinery
Cathode production was dependant upon the supply
of anode copper from the smelter and, with this
dipping slightly, new refined cathode output slipped
by 6% to 81 619 tons.
Production of copper rod rose by 12% from
65 801 tons in 2001 to 73 513 tons in 2002. Production
of the old imperial sizes of 12,25mm and 9,50mm rod
were stopped and replaced by new metric products
of 10mm and 14mm rod. Small quantities of cathode
were again imported in order to supplement feed to
the rod plant during periods when domestic market
demand exceeded the cathode available from the
tank house.
Copper By-Products
Magnetite
Magnetite production reduced to 171 651 tons during
2002 as lower demand from the South African coal
washing industry and a stock draw down during the
commissioning of a new recovery circuit both
influenced output.
Nickel Sulphate
Production rose sharply to 316 tons as higher nickel
levels in certain of the ore sources translated into
higher production in the tank house.
PALABORA MINING COMPANY LIMITED
13
Operations review
Co
pp
er
Sales
Sales of copper rod rose to 71 095 tons, a 7% increase
on 2001. Demand remained firm from all sectors of
the local market and small quantities of rod were also
exported to selected Southern African customers.
Sales of copper cathode declined sharply as reduced
product availability necessitated the rescheduling of
certain export commitments.
Copper prices remained stable during the year
averaging US 70,6c/lb, as compared with US 71,6 c/lb
in 2001. The lacklustre copper price was given some
shine through the depreciation of the local currency
against the US dollar with the result that the average
SA Rand price achieved during 2002 rose by 22% over
the prior year. Negative sentiment in many major
economies weighed down copper prices, which failed
to respond to several significant cutbacks in output,
mainly in North and South America.
14
Operations review
Feeding of Wehnberg machine with starting sheets in the refinery tankhouse
Continual casting of copper anodes on the casting wheel
Revenue from by-product sales rose as improved
precious metal and sulphur prices fed through into
higher contractual prices for anode slimes and
sulphuric acid.
15
Operations review
Tarpaulins cover rail trucks filled with vermiculite
16
Ind
ustr
ial M
iner
als
PALABORA MINING COMPANY LIMITED
17
Operations review
Vermiculite
Production of vermiculite improved 40% over the
previous year to 225 033 tons. This set a new record
for the plant. Fortunately 2002 proved to be a dry
year and the projects embarked upon to manage the
effects of high rainfall proceeded according to plan.
The new roof for the covered stockpile was
completed early in the year and construction work on
the Loole creek diversion channel neared completion
at year end.
Plant recoveries improved significantly to 56%,
which was above the planned level of 48% and
allowed for a reduction in plant feed. Product quality
was in line with plan.
Sales volumes to end customers for the full year
improved from 174 392 tons in 2001 to 189 990 tons.
European sales were maintained at the previous years
levels despite a downturn in the international
refractory industry. In America, a key customer
switching grades impacted sales whilst in Asia stiff
competition in the fireproofing industry affected sales.
Palabora still maintains its lead as the main supplier of
vermiculite in the world commanding 40% of the
market
Logistics continues to be an important
component in the industrial minerals market and the
geographic location of Palabora relative to the end
customers contributes almost 70% of the delivered
costs of vermiculite. Ocean freight rates were
successfully contained and remained flat for the year.
Rail transport during the year presented significant
challenges for the logistics team as the local rail
service provider struggled to meet national demands.
Sales revenue was aided by favourable exchange
rates. The development of a particle board in 2002 for
use in dry wall construction in the Far East by one of
Palabora’s vermiculite customers has reached the
stage where the board is now being offered for sale.
Palabora’s vermiculite has been found to be the ideal
raw material in the boards manufacture to meet the
required performance specifications. The impact of
this development will have a significant effect on sales
volumes in the future should the markets find favour
with the end product.
Zirconia
Cessation of mining activities in the copper open pit
also culminated in the closure of the baddeleyite
plants and 193 tons of baddeleyite, the bulk of the
remaining stock, were sold in Europe and America.
Zirconium Basic Sulphate
The zirconium basic sulphate (ZBS) plant upgrade
project was successfully completed, below budget,
on 4 January 2002. However a fire related incident on
29 January 2002 caused extensive damage to the
leaching section of the plant. Repairs to re-instate the
integrity in all sections damaged by the fire
commenced in February and were completed by the
end of April 2002.
Plant operations improved to the extent that the
stringent final product specifications for the major
customer were met by mid December 2002. The plant
is now in a production ramp up mode to meet sales
as they are secured. Total production of ZBS for 2002
was 501 tons of which 399 tons were sold.
Development of markets for the product will be
the key focus for 2003.
Safety
The Industrial Minerals division had an excellent year
on the safety front completing the year without a lost
time injury.
18
The major focus during 2002 was on cost reduction,
improvement of process and equipment effectiveness
and implementation of new business systems.
Asset Management continued to provide high levels
of support and service to the Copper and Industrial
Minerals businesses. The major focus during 2002 was
on cost reduction, improvement of process and
equipment effectiveness and implementation of new
business systems.
The division achieved over eight months LTI Free
during 2002 due to effective safety leadership using
systems such as safety management audit technique
(SMAT) and hazard identification and risk assessment
(HIRA). Asset Management projects team designed
and implemented a new contractor safety
management system for Palabora which included a
revised permit to work system.
Implementation of the SAP R3/4.6c business
system under budget and on time was a major
highlight in 2002. The finance, maintenance, materials
management and human resource modules of SAP
were implemented as part of an overall information
systems strategy that resulted in the mainframe
system being decommissioned. Extensive change
management and communication ensured excellent
business support during “go live” and the business
benefits from SAP are already being realised ahead of
the plan.
Asset Management successfully completed the
total operational performance (TOP) process in
electrical and instrumentation, provisioning and
maintenance services areas during the year. A total of
R36 million was targeted for saving over the next two
years.
PALABORA MINING COMPANY LIMITED
19
O p e r a t i o n s r e v i e w
Service/support departments
Asset planning
The implementation of reliability centred maintenance
(RCM) based equipment strategies was completed on
plan for all critical equipment in both the copper and
industrial minerals businesses. These maintenance
strategies now form the basis for the SAP maintenance
system. A new integrated maintenance planning and
scheduling process was also introduced and is now
fully supported by the SAP system.
Information services and technology
The implementation of the information systems
strategy was the key focus of the IS&T team.
In addition to the implementation of SAP, the team
had to replace the mainframe based legacy systems
and develop a data warehouse and reporting tools to
provide the business with more timely and effective
management information. These projects were
completed on time and under budget.
Provisioning
The provisioning team managed a particularly
challenging year, implementing both SAP materials
management and undertaking TOP successfully.
The SAP implementation required a complete
overhaul of the stock catalogue. SAP has allowed the
integration of the maintenance planning process with
the procurement and warehousing functions.
Cost savings of R10 million were identified in the
Provisioning TOP programme.
A successful programme of asset sales was
undertaken in 2002 to maximise the resale values of
redundant mining equipment from the open pit
operation.
Maintenance services
The maintenance workshops identified R18 million of
cost savings during the TOP programme.
The heavy support equipment team have
achieved excellent availability for the vermiculite
operations through the application of RCM based
maintenance strategies. The maintenance workshops
increased efficiency through the successful
implementation of the “5S” improvement programme
and steadily increased the support for the new
underground mine during 2002.
The power plant provided consistent blowing
rates to the smelter convertors despite the steam
driven blowers reaching the end of their economic
life. These units will be replaced by electric blowers
early in 2003.
Projects
The projects team completed a very challenging year
of project management maintaining an excellent
“on time / on budget” completion rate of over 90%.
The diverse range of projects included the diversion
of Loole Creek to extend the Vermiculite mining
operations, the construction of materials handling
infrastructure for the imported copper concentrate
and demolition and rehabilitation of the Heavy
Minerals and Zirconia plants.
Process improvement
The implementation of the integrated process
management system (IPMS) continued to gather pace
during 2002 with the completion of the copper stream
and commencing in Vermiculite and ZBS plants.
This process improvement approach has provided
significant operational improvements in reducing
smelter cycle times, reducing scrap rates in rod
casting, improved process management in the
concentrator given the variety of feed materials in
2002 and significantly increasing plant recoveries from
the Vermiculite processing plant.
Electrical and instrumentation
This team identified significant savings of R8 million
during the TOP process including better power
management for the business. The instrumentation
team provided excellent support for the IPMS work
throughout Copper and the upgraded ZBS plant.
Ass
et
Man
agem
ent
To enhance operational performance, all employees are encouraged
to participate in reducing costs associated with all mine activities
20
PALABORA MINING COMPANY LIMITED
21
Hum
an R
eso
urce
s
The Company integrated all systems related to
Employment Equity, such as bursaries,
apprenticeships and engineers in training, as well as
recruitment and selection. The Palabora Foundation,
has been actively running Master Maths and ProTec
programmes with tangible results emerging over the
past several years. This has assisted with the
recruitment of historically disadvantaged South
Africans.
Palabora constituted a task team in August 2002,
arising from the Mineral and Petroleum Resources
Development Act and Charter, to monitor the
development of the legislation and to prepare
Palabora’s compliance with anticipated requirements.
The State President has signed the Act, but a
commencement date has not yet been set. The draft
Charter was issued in October 2002, but has not yet
been finalised. Palabora is in a strong position to
comply with the documentary requirements regarding
the proof of surface and mining rights. The task team
is currently compiling statistics relating to human
resources development, progress with employment
equity plans, socio-economic empowerment in the
mine community and rural development and
procurement from Black Economic Empowerment
businesses. Development of Black Economic
Empowerment businesses is carried out through the
support of the Business Linkage Centre, which assists
with skills training and with preparing tender
documents and business plans.
New mines are being developed in South Africa,
which are anticipated to employ some 13 000 people
over the next two years. 1 800 positions are
anticipated to be in the technically skilled categories,
which are the categories in which Palabora
experiences the highest turnover. There is strong
competition for technical skills in the labour market,
with demand exceeding the presently available
supply. Palabora has developed a new system to
attract and retain key South African professionals.
The year 2002 also delivered a reduction in labour
strength:
• Manpower reductions during 2002
January 2002: 2428
December 2002: 2011
The following avenues were used to redeploy those in
redundant positions:
• Voluntary retrenchment: 46
• Voluntary early retirement: 154
• Redeployment: 121
These labour reductions had an impact on
employment equity through demographic change
and a changed profile in terms of skills requirements.
The Company aspired during 2002 to establish a
culture change to entrench leadership principles and
models, meritocracy, and accountability at the
respective levels. As part of this culture change the
Company continues to identify and develop new
leaders through the leadership courses, implementing
new systems and symbols and integrating the
underground mine with the surface organisation.
New systems were developed to entrench leadership
accountability, such as the new recruitment and
selection redesign, the new disciplinary redesign and
the potential assessment system to identify high
potential employees.
The Company continued to use TOP target
setting exercises, to broaden business objectives at
all levels of the organisation and to improve business
skills. Systems, such as IPMS and RCM, have been
successfully implemented and applied across the
business to achieve process and equipment
performance, continuous improvement and to
develop key people in facilitator roles.
Industrial relations
During the year the National Union of Mineworkers
(NUM) suspended the Palabora Branch Committee
due to internal conflict. The suspension has since
been lifted and the NUM Branch Committee
Operations review
re-instated. With the expiry of the term of office of
this committee, a new Branch Committee and
Executive Committee was elected and appointed.
The election and appointment of the new committee
has since ushered a steady improvement in the
relationship between the Company and the NUM.
With this improved relationship, the parties
succeeded in bringing about amendments to the
Recognition Agreement, Retrenchment Agreement
and the Recognition of Full Time Shop Steward
Agreement to be focused with business objectives.
A successful management/unions annual
“bosberaad” was held in the latter part of the year.
The parties shared their future vision of the Company
and the challenges ahead.
The Congress of South African Trade Unions’
(COSATU) two day strike on 1 and 2 October 2002,
protesting against the government’s privatisation
plans had no effect on Palabora.
The National Employees’ Trade Union (NETU) has
agreed to change from the Performance Management
System to the Work Performance System, which is in
line with the Company’s future objectives. The NUM
are also being engaged with the view to change to
this system.
Audits were conducted on the Company’s
Industrial Relations systems and Employment Equity
initiatives, the results of which were largely
satisfactory.
22
Blacksmiths shaping reaming bars
Operations reviewcontinued
PALABORA MINING COMPANY LIMITED
23
Date of workforce profile: 31 August 2002Total number of employees (including employees with disabilities) in each of the following occupational categories:
Occupational Male Female
Categories African Coloured Indian White African Coloured Indian White Total
Fees paid to former Executive, Non-Executive and Alternate Directors
J Gorman — — — — — — 3,098
H M Khoza — — — — — — 13
W A Nairn — — — — — — 7
C J Colebank — — — — — — —
Notes:
Mr D S Sadler is remunerated in part by the Rio Tinto group. No charge is made by Rio Tinto to Palabora for this costalthough Mr Sadler's full salary is shown above.
The proportion of Mr Sadler's salary that is paid by Rio Tinto is paid in Australian dollars. These amounts have beentranslated to Rand using the average exchange rate for the month in which the amount was paid.
Amounts paid to Mr J Gorman in 2001 include a retrenchment payment.
Donation, including donation to Palabora Foundation 12 400 7 600 12 400 7 600Impairment of investment in subsidiary — — — 6 390Staff costs 393 987 338 519 380 911 329 923Average number of persons employed by thegroup during the yearSouth Africa 2 158 2 270 2 158 2 245Overseas 13 17 — —
2 171 2 287 2 158 2 245
Directors’ emolumentsExecutive– Director fees 40 109– Managerial services 2 461 3 498Non Executive– Director fees 227 180
current liabilities (1 818) (1 823) (1 818) (1 823)
Other long term borrowings 18 — — —
726 881 1 391 395 726 863 1 391 395
Security and terms of repayment
(a) Citibank is acting as an agent for a long-term loan with a group of national and international banks for an
unsecured facility agreement of US$125 million. The facility consists of a US$90 million tranche and a Rand tranche of
R282,8 million. The loan, which is being used to fund the underground mine development and the repayment of other
short term loans, is repayable in six equal half yearly instalments of US$15,0 million and R47,1 million commencing on
11 June 2003. The interest rate is based on Libor/Jibor + 1,5%.
(b) Unsecured loan of US$2,5 million from Daiichi Kigenso Kagaku Kogyo Co Limited in Japan for the development of
the ZBS project. The capital and interest is repayable in 24 half yearly instalments of approximately US$ 135 000 which
commenced on 30 June 2002. The interest rate is based on six month Libor + 2,38%.
18. PROVISION FOR CLOSE DOWN AND RESTORATION COSTS Group and Company
2002 2001
R000 R000
Balance at beginning of the year 162 877 142 092
Utilised during the year (4 840) —
Charge for the year 27 110 20 785
185 147 162 877
19. PENSION AND POST RETIREMENT OBLIGATIONS
Amount recognised in the balance sheet
Pension schemes — —
Post retirement benefits 159 760 148 803
159 760 148 803
Pension scheme
The most significant pension fund in the Group is that operated by Palabora Mining Company Limited.
Until 31 August 2002 Palabora Mining Company’s pension schemes were defined benefit schemes, registered under the
Pensions Funds Act 1956. The process of closing these schemes commenced on 1 September 2002. Each member’s vested
benefit as at 31 August 2002 was transferred out of the defined benefit schemes and in to a new defined contribution
pension scheme, known as the Palabora Pension Fund. Pensioners in the defined benefit schemes had their vested benefits
transferred to Old Mutual’s Platinum Portfolio. The only assets remaining in the defined benefit schemes at 31 December
2002 were surplus funds that existed in those schemes at the surplus apportionment date, 31 August 2002. These assets are
independent of the Company’s finances and are to be distributed to past members of the schemes in line with the Pension
Funds Second Amendment Act, which was promulgated on 7 December 2001. It is possible that Palabora Mining Company
will be entitled to receive part of this surplus distribution. No account is given to this in the Company’s financial statements,
as its value is uncertain.
An accrual of R30 million has been made in the financial statements for company pension contributions for the period
from 7 December 2001 to 31 August 2002 at the rate advised by the Company’s actuary.
The latest actuarial valuations of the defined benefit schemes were carried out as at 28 February 2001.The schemes were
considered to be in sound financial condition.
Group and Company
2002 2001
R000 R000
Present value of funded obligations — (1 014 781)
Fair value of assets 395 039 1 468 781
Surplus 395 039 454 000
PALABORA MINING COMPANY LIMITED
54
No tes to the f inancial statements continued
for the year ended 31 December 2002
PALABORA MINING COMPANY LIMITED
55
No tes to the f inancial statements continued
for the year ended 31 December 2002
19. PENSIONS AND POST RETIREMENT OBLIGATIONS (continued)
The principal actuarial assumptions used for accounting purposes were: Group and Company
2002 2001
% %
Discount rate — 6,4
Expected return on assets — 11,0
Future salary increases — 9,0
Future pension increases — 9,0
With effect from 1 September 2002, Palabora Mining Company Limited operated a defined contribution scheme. This
pension scheme is registered under the Pension Funds Act 1956. The assets of the scheme are independent of the
Company’s finances. The scheme is funded by contributions from employees and the Company, determined as a percentage
of pensionable emoluments. Company contributions for the period 1 September 2002 to 31 December 2002 were
R7,2 million.
Post retirement medical benefits
The Group’s provision for post retirement medical benefits is based on the assumptions used by the independent actuaries
which includes appropriate mortality tables, long term estimates of increases in medical costs and appropriate discount
rates. The level of claims is based on the Group’s experience. The post retirement medical benefit plan is unfunded.
The principal actuarial assumptions are as follows: Group and Company
2002 2001
% %
Discount rate 12,5 12,5
Expected return on assets 12,5 12,5
Increase of health costs 13,6 10,5
The amounts recognised in the balance sheet are as follows:Actuarial gain 34 248 34 248Amortisation of actuarial gain (5 411) (2 439)
Unamortised actuarial gain 28 837 31 809Present value of unfunded obligations 130 923 116 994
Liability in the balance sheet 159 760 148 803
The amounts recognised in the income statement are as follows:Current service cost 2 214 2 039Interest cost 14 624 11 525Amortisation of actuarial gain (2 972) (2 439)
13 866 11 125
Movement in the liability recognised in the balance sheet:At beginning of year 148 803 141 490Total expenses as above 13 866 11 125Benefits paid (2 909) (3 812)
159 760 148 803
20. DEFERRED TAXATIONDeferred income taxes are calculated on all temporary Group Companydifferences under the liability method using the 2002 2001 2002 2001principal tax rate after deducting leasehold taxes. R000 R000 R000 R000
The following is an analysis of the net deferred tax liability:– Capital allowances 980 685 904 083 980 685 904 083– Deferred mine development cost — 2 089 — 2 089– Post-retirement benefits (53 054) (49 651) (53 054) (49 651)– Provision for close-down and restoration (45 290) (28 923) (45 290) (28 923)– Tax loss — (36 176) — (36 176)– Other temporary differences (16 806) (6 802) (14 345) (5 792)
865 535 784 620 867 996 785 630
Deferred income tax assets are recognised for tax losses carriedforward only to the extent that realisation of the related tax benefit is probable.Deferred tax reconciliation Balance at beginning of year 784 620 701 506 785 630 701 763Temporary differences with respect to:– Capital allowances 67 418 135 529 67 418 135 529– Deferred mine development cost (2 089) (6 265) (2 089) (6 265)– Post-retirement benefits (3 403) (2 441) (3 403) (2 441)– Provision for close-down and restoration (7 182) (5 491) (7 182) (5 491)– Tax loss 36 176 (36 176) 36 176 (36 176)– Other temporary differences (10 005) (2 042) (8 554) (1 289)
865 535 784 620 867 996 785 630
21. SHARE CAPITAL Group and Company
2002 2001
R000 R000
Authorised
28 500 000 ordinary shares of R1 each 28 500 28 500
Issued
28 315 500 ordinary shares of R1 each 28 316 28 316
Share premium 575 575
28 891 28 891
Until the next annual general meeting the unissued shares may be issued by the Directors on such terms as they may
determine (but not below par).
PALABORA MINING COMPANY LIMITED
56
No tes to the f inancial statements continued
for the year ended 31 December 2002
PALABORA MINING COMPANY LIMITED
57
No tes to the f inancial statements continued
for the year ended 31 December 2002
22. OTHER RESERVES Group
2002 2001
R000 R000
Exchange difference on translation of
net investment in foreign subsidiaries:
At 1 January 174 642 109 419
(Decrease)/increase during year (40 398) 65 223
At 31 December 134 244 174 642
23. CASH GENERATED BY OPERATIONS - GROUP Group Company