RNS Number:1585P
Portman Ld
29 August 2003
PORTMAN LIMITED
A.B.N. 22 007 871 892
REPORT
FOR THE HALF YEAR
ENDED 30 JUNE 2003
Contents Page
Corporate Directory 2
Highlights 3
Chairman's Letter to Shareholders 5
Directors' Report 7
Condensed Statement of Financial Performance 13
Condensed Statement of Financial Position 14
Condensed Statement of Cash Flows 15
Notes to the Financial Statements 16
Directors' Declaration 23
Independent Audit Report 24
PORTMAN LIMITED
A.B.N. 22 007 871 892
CORPORATE DIRECTORY
REGISTERED OFFICE BOARD OF DIRECTORS
Level 11 The Quadrant George Jones
1 William Street Chairman
Perth Western Australia 6000 Barry Eldridge
Telephone: 61 8 9426 3333 Managing Director
Facsimile: 61 8 9426 3344 Martin Albrecht
Internet: portman.com.au Director
Richard Knight
AUDITORS Director
Ernst & Young Michael Perrott
Central Park Director
152 St George's Terrace
Perth WA 6000 SENIOR MANAGEMENT
Geoffrey Clifford
BANKERS General Manager - Administration and Company Secretary
Commonwealth Bank of Australia Limited Shigeru Fujikawa
Level 6, 150 St Georges Terrace Marketing Manager - Iron Ore
Perth WA 6000 Richard Mehan
General Manager - Iron Ore
SOLICITORS Tony Schoer
Blake Dawson Waldron Chief Financial Officer
Level 19 Jonathan Shellabear
Forrest Centre General Manager - Business Development
221 St Georges Terrace
PERTH WA 6000 LONDON ALTERNATIVE INVESTMENTS MARKET
NOMINATED ADVISER
SHARE REGISTRY Nabarro Wells & Co. Limited
Computershare Investor Services Pty Limited Saddlers House
Level 2 Reserve Bank Building Gutter Lane, London EC2V 6HS
45 St Georges Terrace
PERTH WA 6000 SPONSORING BROKER
Canaccord Capital (Europe) Limited
TREASURY ADVISER Brook House
Oakvale Capital Limited Upper Brook Street
Level 3, 50 Colin Street London, W1K 7QF
WEST PERTH WA 6005
PORTMAN LIMITED
A.B.N. 22 007 871 892
HIGHLIGHTS
CORPORATE
Results for announcement to the market
Percentage Increase / $ '000
(Decrease) from previous
corresponding period
Revenue from ordinary activities 9.1% 72,945
Profit / (loss) from ordinary activities after tax
attributable to members (8.8)% 10,168
Net profit (loss) for the period attributable to members (8.8)% 10,168
Amount per security and franked amount per security of Final N/A
final and interim dividends Interim 0.04c/share
Record date for determining entitlements to the dividends
(if any) To be advised
Iron Ore Division
* Portman consolidated the operational improvements of the past two years
and achieved near record sales at its Koolyanobbing operation.
* An unnecessarily long environmental approvals process at both a State and
Federal level has denied Portman access to new orebodies and therefore to
the potential of expanding production and shipments.
Koolyanobbing Project -
* Operating performance resulted in on budget production, railing and ore
shipments. Portman shipped 2.32 million tonnes during the first half of
2003.
* All State Government approvals for Northern Tenement development are now
in place. Pre-construction activities have commenced and haul road
construction and mine development at Windarling and Mt Jackson will commence
following Federal environmental approval.
* Federal environmental and heritage approvals are required in relation to
mining at Windarling. Portman anticipate the Federal process being completed
in the near future.
* Exploration activities around the Koolyanobbing tenements have found more
resources. These resources, the extent of which are under assessment,
together with all existing resources will yield maximum benefits when
blended with the Northern Tenement resources.
* Tenders for haul road construction, haulage and mining have been issued
and will be let in the near future.
* Continuing strong demand from Chinese buyers has led to a 9% benchmark
price increase in April 2003, the elimination of volume related discounts
and an extremely positive outlook for 2004 sales and prices.
Cockatoo Island Project -
* Operating constraints have led to production and shipments being well
under budget.
* The sea wall continues to perform well however the rate of dewatering
required in the pit far exceeded feasibility assumptions.
* The joint venture partners remain confident of finding a technical
solution to this problem.
* Demand for Cockatoo ore is stronger than at any previous time.
* Operating costs during the period have been higher than budget and are
currently being addressed.
Business Development
* Disposal completed of non core asset being Australian Silicon Limited.
* Continued efforts to find suitable acquisitions to complement Portman's
existing operations.
Foreign Exchange
* Significant protection from the appreciation in the Australian Dollar
during the period from the existing hedge book. The average exchange rate
realised for the current period was USD/AUD 0.5715.
PORTMAN LIMITED
A.B.N. 22 007 871 892
Chairman's Letter to Shareholders
Dear Shareholder
On behalf of the Board of Directors of Portman Limited, it is my pleasure to
present your Company's financial results for the half year to 30 June 2003.
In a letter accompanying the 2002 Annual Report to shareholders in March this
year, I advised that one of the most important issues confronting Portman had
been resolved. This occurred on 1 April 2003 when Western Australia's
Environment Minister, the Hon Judy Edwards announced conditional approval for
Portman's application to mine the Northern Tenements, which form part of our
Koolyanobbing Iron Ore Project near Southern Cross in Western Australia.
Development of the Northern Tenement orebodies remains an essential component of
the long term development plans for the Koolyanobbing project. Following the
State Government approval a number of pre-construction activities have
commenced. However, full development of the Windarling deposits awaits a
decision by the Federal Minister for the Environment and Heritage. This matter
has been considered by the Commonwealth for some time. The approvals process
has been a long and exhaustive one for Portman and highlights many of the
difficulties with land access that currently face mining and exploration
companies in Australia. These protracted negotiations and appeals have
effectively diverted considerable resources in terms of time, money and
personnel from Portman's core business of exploring, mining and exporting
materials for use in the steel industry.
From a broad industry perspective, unless addressed, the price of today's
lengthy environmental, heritage and Native Title approvals process will most
certainly be lost market opportunities and the demise of our once vibrant
minerals exploration industry. Australia is the world's largest exporter of iron
ore, which is currently the nation's fourth largest export earner. The taxes
our industry pays, and the many contributions it makes to public infrastructure
should mean that its future is important to Government. This is particularly
true in Western Australia where iron ore alone contributes over A$5 billion to
the State's economy.
Unfortunately mining at our Cockatoo Island operations was disrupted early this
year by unexpectedly large dewatering requirements. Extensive hydrological and
geotechnical studies were implemented and, while some of this work is ongoing,
we can now manage the water levels in the pit and production and shipping have
resumed. We are working toward resumption of planned production rates as
additional dewatering systems are implemented over the next three months.
I would also like to put on record that allegations of environmental
mismanagement made with regard to Portman's Cockatoo Island operations reported
earlier this year were completely without substance. As a Company, Portman
recognises that excellence in managing environmental responsibilities is
essential to successful business practice and is committed to ensuring that the
protection of the environment is not compromised for profit or production.
Marketing of our iron ore remains a key focus for Portman with traded iron ore
continuing to be in significant under-supply as the demand from a burgeoning
Chinese economy increases. Negotiations with Japanese steel mills by major
Australian producers this year were successful in securing a 9% increase in iron
ore prices backdated to April, with prices for iron ore delivered into China
also rising by a similar amount.
During the half Portman had significant success in developing a market for high
phosphorous iron ores. Portman's first Chinese buyer of high phosphorous fines
ore was secured during the June 2003 Quarter and an additional Japanese buyer of
high phosphorous fines ore was also confirmed. Your Company is also negotiating
with a number of other buyers in China and Japan and is confident of further
customer support for high phosphorous iron ore products.
PORTMAN LIMITED
A.B.N. 22 007 871 892
Chairman's Letter to Shareholders (cont')
It is regrettable that our Koolyanobbing development plans have suffered long
delays at a time when the iron ore market is strengthening. The delays, along
with unexpected difficulties with mining operations at Cockatoo Island, impacted
on Portman's financial results for the period. The disappointing financial
performance in the current record iron ore market was partly offset by a
reversal of the provision against the carrying value of long term high
phosphorous fines stockpiles made in December 2002, and the recognition of
certain high phosphorous stockpiles from 1 January 2003 due to developments in
the market for high phosphorous ore.
The net profit after tax for the period to 30 June 2003 was A$10.168 million.
Before the abovementioned stockpile adjustments the net profit after tax for the
period was A$7.017 million.
The fines written back represent approximately 42% of the volume of high
phosphorous fines ore placed on the long term stockpiles. The remaining high
phosphorous fines ore at 1 January 2003 was recognised at nil value. Production
of high phosphorous ore to the long term stockpiles during the ensuing six month
period has been carried at cost.
Based on the company's performance over the period, your Board has taken the
decision to pay an interim dividend of four (4) cents per share which is franked
to 50%. The lack of available franking credits to fully frank the dividend is
due to the lower tax paid during the period as a result of the December 2002
write-offs, increased exploration expenditure and research and development.
The outlook for the iron ore market is positive, with premium quality Australian
iron ore in strong demand.
Japanese steel output is expected to grow in coming years while Chinese steel
demand is booming, fuelled by the rapid industrial growth in that country. I
can not emphasise strongly enough the importance Portman places on developing
and nurturing long-term relationships with our customers. We understand the
challenges they face and will continue to work with them to provide a product to
suit their specific needs.
In conclusion, your company is emerging from a difficult period in its
development at a time when the outlook for iron ore is at its most positive for
a number of years.
I invite shareholders requiring additional information on the Company's
activities to contact Mr Eldridge or our Company Secretary, Mr Geoff Clifford at
any time during business hours or to access the Company's web site at
www.portman.com.au.
Yours sincerely
George Jones
Chairman
(a) Directors
The names of the directors of Portman Limited in office during or since
the end of the half year are:
George F Jones
Barry J Eldridge
Martin C Albrecht
Richard Knight
Michael D Perrott
Unless otherwise indicated, all directors held their position as a director
throughout the entire half year and up to the date of this report.
(b) Information on Directors
George F Jones - Chairman B.Bus, FCIS, FAICD - Age: 58
Mr. Jones has a Bachelor of Business degree from Curtin University of Western
Australia. He has more than 33 years experience in the mining, banking and
finance industries and has been a director of a number of private and publicly
listed companies.
Barry J Eldridge - Executive Director - Age: 57
Mr Eldridge holds a Bachelor of Science Degree (Exploration Geology) - Sydney
University and a Bachelor of Engineering (Hons) (Mining) - University of Qld.
He has over 31 years experience at Managing Director, CEO, Director and General
Manager level in the resource industry within Australia and overseas. This has
included six years as Managing Director, four of which were with a publicly
listed mining company.
Martin C Albrecht, AC - Non Executive Director B.Tech (Civil), FTSE, FIE Aust,
FAICD, FAIM, DUniv (QUT) - Age: 64
Following the announcement of a strategic alliance with Queensland based Thiess
Pty Ltd, Mr. Albrecht joined the Board of Portman Limited on 19 August 1999. He
is Chairman of Thiess Pty Ltd and Geodynamics Ltd and a Director of Leighton
Holdings Limited, Siemens Limited Advisory Board and Queensland Gas Company
Limited. He is a member of the Queensland Premier's Business Round Table and
maintains an active interest in a wide range of government, community,
educational and cultural activities. He is the former Managing Director of
Thiess Pty Ltd, a position he held for 15 years before retiring in October 2000.
Richard Knight - Non Executive Director M.Sc (Eng), DIC, ARSM, C.Eng, FAICD -
Age: 62
A mining engineer with 41 years diverse experience, Mr Knight was formerly
Executive Director and Chief Operating Officer of North Limited. He is
currently a member of Pasminco Resources' Advisory Board, as well as Managing
Director of Inco Australia Management Pty Ltd.
Michael D Perrott - Non Executive Director B.Com, FAIM - Age: 57
Mr Perrott has been involved in the construction and contracting industry since
1969. He is currently Chairman of Port Bouvard Ltd, Asset Backed Holdings Ltd,
Aliquot Asset Management Ltd, GME Resources Ltd and a number of unlisted public
and private companies. Mr Perrott is a Council Member for the National Advisory
Council for Suicide Prevention and Community Life, and is a Governor of Notre
Dame University.
(c) Committees of Directors
The names of the directors who constitute the Committees of Directors at
the date of this report are:
AUDIT NOMINATION REMUNERATION
Michael D Perrott (Chair) George F Jones (Chair) George F Jones (Chair)
Martin C Albrecht Michael D Perrott Michael D Perrott
Richard Knight Richard Knight Richard Knight
TREASURY POLICY STRATEGIC PLANNING & DEVELOPMENT
George F Jones (Chair) Richard Knight (Chair)
Barry J Eldridge George F Jones
Michael D Perrott Barry J Eldridge
Advisor from Oakvale Capital Limited (James Cunningham)
(d) Directors' meetings
During the half year the Company held 5 meetings of directors. The names of
directors and members of Committees of the Board are outlined above. The
attendances of the directors at meetings of the Board and its Committees whilst
they were directors were:
Board of Directors Committees of the Board of Directors
Maximum Maximum
Attended Possible Attended Attended Possible Attended
George F Jones 5 5 11 11
Barry J Eldridge 5 5 15 15
Richard Knight 5 5 12 12
Michael D Perrott 5 5 8 9
Martin C Albrecht 5 5 4 4
(e) Results
Portman Limited and its controlled entities' (the "Economic Entity") profit
after income tax and minority interests for the half year was $10,167,924 (2002
- $11,145,767).
(f) Review of operations
Iron Ore Division
During the first half of 2003 Portman consolidated the operational improvements
of the past two years and achieved near record sales at its Koolyanobbing
operation. The Cockatoo Island project did not meet budgeted performance due to
a much larger than anticipated dewatering task.
An unnecessarily long environmental approvals process at both a State and
Federal level has denied Portman access to new orebodies and therefore to the
potential of expanding production and shipments.
Koolyanobbing Project
Operations January - June 2003
Koolyanobbing operations met budget for production, railing and ore shipments.
Portman shipped 2.32 million tonnes during the first half of 2003.
Shipments are expected to exceed budget during the second half largely because
of additional shipments of high phosphorous ore which Portman is now
successfully placing in the market.
The primary focus during the period was finalising State government approvals in
relation to environmental and indigenous heritage issues. Following a negative
recommendation by the Environmental Protection Authority in December 2002, the
State Minister for the Environment approved the Northern Tenements project on 1
April 2003. Ministerial conditions to apply during project operations were then
negotiated and agreed in early June.
In July the Minister for Indigenous Affairs granted Portman a project wide
clearance over any heritage sites in the project area. With this clearance
Portman has all relevant State approvals to proceed. With these approvals in
place, water and resource exploration, in advance of construction activities,
have commenced.
Federal environmental and heritage approval is required in relation to mining at
Windarling. The Federal agency accredited the State approval process and under
this arrangement they are obliged to make their decision known within weeks of
the State process formally concluding. We therefore anticipate the federal
process being completed in the near future.
No new Northern Tenement resource estimates are available given that drilling
activities have not been ongoing during final environmental and heritage
processes. A very active drilling program will now be completed prior to an
updated resource position being reported.
Tenders for haul road construction, haulage and mining have been called and will
be let in the near future.
6 months ended 6 months ended Year ended 31 December
30 June 2003 30 June 2002 2002 2001 2000
Ore Production (tonnes) 2,424,890 2,182,991 4,100,680 4,019,922 1,893,993
Ore Shipments (tonnes) 2,321,659 2,343,831 4,227,354 3,213,626 1,973,478
Marketing
Chinese demand for iron ore continues to defy even the most optimistic
forecasts. As a proximate Australian supplier with capesize shipping capability
Portman is very well placed to deliver ore to the capacity of our resource
availability and infrastructure.
New customers have commenced buying from Portman and in particular strong demand
for high phosphorous ore has given Portman several incremental sales
opportunities. The high levels of demand, exceeding supply has seen Portman
decline several requests to meet increased tonnages.
During the first half benchmark prices were set with an average increase of 9%.
Of equal significance, the strength of demand has led to the elimination of
volume related discounts resulting in strong USD unit revenues for the remainder
of the year.
If demand continues at current levels, and there is no reason to believe
otherwise, the outlook for 2004 sales and prices remains extremely positive.
Portman's ability to meet this demand will require access to the Northern
Tenements.
Project Development
The No.3 berth and associated facilities are operating extremely well and an
increasing proportion of cargoes are being loaded on capesize vessels.
Further improvement to rail infrastructure is underpinning improved rail
availability and on time performance. The effective capacity using a four train
roster now exceeds 5mtpa. This is an important element of our strategy to sell
additional high phosphorous products from the long term stockpiles.
All State Government approvals for Northern Tenement development are now in
place. Pre-construction activities have commenced and haul road construction
and mine development at Windarling and Mt Jackson will commence following
Federal environmental and heritage approval.
A number of suitably qualified technical staff have been recruited to join the
Portman team handling Northern Tenement development.
Resources
Exploration activity has been centred on the Koolyanobbing projects whilst
approvals have been sought for the development of the Northern Tenement
deposits. Reverse Circulation drilling has successfully expanded the Mineral
Resource at B and C deposits. The C Deposit resource totalling 8.6 million
tonnes at 60.88% iron, 0.047% phosphorous, 0.078% sulphur, 3.15% silica, and
0.97% alumina has been completed by Golder Associates and represents an increase
of 4.4 million tonnes from December 2002. A resource estimate for B Deposit is
currently in progress following the discovery of additional mineralisation down
slope from the existing resource.
The global Mineral Resource base for the Koolyanobbing and Northern Tenement
deposits currently stands at 157.0 million tonnes compared to 153.3 million
tonnes at 31st December 2002.
Area Cut-off Category Mt Fe% Phos% SiO2% Al2O3% S%
Total Fe >58% Measured 7.1 62.16 0.175 2.40 0.89 0.037
Indicated 114.6 61.96 0.108 2.57 1.09 0.077
Inferred 35.3 63.49 0.132 1.89 1.13 0.039
Total 157.0 62.31 0.117 2.41 1.09 0.067
Notes:
1. Tonnage and grade rounded as appropriate.
2. Cut-off grade 58% iron. No upper limit cut-off grades have been
applied to phosphorous, silica, alumina and sulphur.
3. Long term stockpiles included - 100% of stockpiles 2, 5 and 7 and the
lump component (46%) of stockpiles 1, 3, 4, 6 and 12. Total long term stockpiles
at 30 June 2003, 8.4 Mt.
Drill evaluation of priority targets at Koolyanobbing will continue in
conjunction with the planned programmes scheduled for the Northern Tenement
deposits located at Mt Jackson and Windarling in the second half.
The information relating to Mineral Resources or Reserves contained within this
report is based on information compiled by Mr S H Tuckey B.Sc, MBA, MAusIMM
(Manager Exploration) from sources within Portman Limited and from mining
consultants Golder Associates. Mr Tuckey is employed by Portman Limited and has
the relevant experience in relation to the mineralisation being reported on and
techniques used in the estimation process to qualify as a Competent Person as
defined in the Australasian Code for Reporting of Mineral Resources and Ore
Reserves.
Cockatoo Iron Ore Joint Venture (Portman 50%)
6 months ended 6 months ended Year ended Year ended
30 June 2003 30 June 2002 31 December 2002 31 December 2001
Ore Production (tonnes) 268,025 45,920 287,015 1,044,166
Ore Shipments (tonnes) 314,446 50,568 227,760 1,146,196
While the first shipment of ore under the "Sea Wall" project was despatched on
schedule in October 2002, the January to June period has seen production and
shipments well under budget.
Operating constraints have led to this shortfall. While the stage one sea wall
has performed well, the rate of dewatering required in the pit far exceeded
feasibility assumptions. Construction of the stage two seawall has been deferred
whilst solutions to the geotechnical issues identified by the stage two seawall
failure and a successful dewatering strategy are found. Resumption of the stage
two seawall construction is expected during the second half of 2003.
The prime focus of the project currently is the implementation of a successful
dewatering strategy. The joint venture partners remain confident of a technical
solution to this problem. Once the technical issues have been solved the
economic parameters of the project will be updated. This is expected in
September or October of 2003. In the meantime production and shipments continue
at something less than 50% of planned capacity.
Demand for Cockatoo ore is stronger than at any time and following resolution of
the dewatering issue production levels will be increased to capitalise, as much
as possible, on buoyant market conditions. Demand is expected to continue to
exceed our ability to supply.
Resources
Reverse Circulation drilling evaluating the Stage 1 and 2 seawall projects has
been completed testing the deposit to approximately 40 metres below sea level
over the entire strike and up to 60 metres below sea level in selected areas.
The drilling program has shown that the Cockatoo Island mineralisation forms a
tabular body over 1.2 kilometres in length and averages 33m in true thickness
within the designed Stage 1 and 2 seawall areas. The ore body dips at an average
of 53 degrees to the south. Iron grades within the Seawall Hematite
consistently average >68% and vary little along strike and down dip.
Work is currently underway to update the Cockatoo Island Mineral Resource. The
Cockatoo Island Mineral Resource at 30 June 2003 stands at 3.4 Mt compared to
3.7 Mt at 31st December 2002.
Area Category Mt Fe% Phos% SiO2% Al2O3% S%
Total Inferred 3.4 68.5 0.015 1.35 0.40 0.005
Total 3.4 68.5 0.015 1.35 0.40 0.005
Portman (5) 50% 1.7 68.5 0.015 1.35 0.40 0.005
Notes:
1. Estimate based on 6 diamond drill holes, bench mapping from BHP dated
October 1984 and surface of mineralisation determined from seismic survey
completed in 2001.
2. Extent of mineralisation: 1225m east and 2300m east, total length
1,075 m. 0 m to -20m RL. Footwall and hanging wall positions projected based on
surface mapping, constant dip of mineralised zone and drill intercepts.
3. The in-situ bulk density is 5.0 tonnes/m(3).
4. Grades assigned to the resource incorporate dilution and reflect past
production grades 68.5% Fe, 0.013% P, 1.28% SiO2, 0.41% Al2O3 and 0.000% S.
Average grade estimates from diamond drill hole data are 69.35% Fe (BHP drill
data) and 69.58% Fe (Portman/Henry Walker Eltin drill data).
5. The Cockatoo Island project is a 50/50 Joint Venture between Portman
Iron Ore Limited and HWE Cockatoo Pty Ltd.
Business Development
During the period to 30 June 2003, Portman sought opportunities to both expand
its asset base and dispose of underperforming assets.
Arrangements were made to dispose of Portman's shares in Australian Silicon
Limited. Settlement of this transaction occurred subsequent to 30 June 2003 as
disclosed in the subsequent events note (Note 8) in the financial statements.
Extensive efforts to find suitable acquisitions in carbon steels materials to
complement Portman's existing operations were made with no final results yet
forthcoming.
(g) Significant changes in the state of affairs
There were no significant changes in the state of affairs of the Economic
Entity other than those referred to elsewhere in this report or in the financial
statements or notes thereto.
(h) Rounding of amounts to nearest thousand dollars
The Company is of the kind specified in Australian Securities and
Investments Commission class order 98/0100. In accordance with that class order,
amounts in the directors' report and financial statements have been rounded to
the nearest thousand dollars unless specifically stated to be otherwise.
Signed for and on behalf of the Board in accordance with a resolution of the
directors.
G F Jones B J Eldridge
Chairman Managing Director
29 August 2003
Perth, Western Australia
PORTMAN LIMITED
CONDENSED STATEMENT OF FINANCIAL PERFORMANCE
FOR THE HALF YEAR ENDED 30 JUNE 2003
Notes 30 June 2003 30 June 2002
$'000 $'000
Revenue from sale of product 2(a) 72,945 66,874
Cost of sales (46,732) (40,120)
Gross profit 26,213 26,754
Other revenues 2(a) 2,510 4,551
Shipping and selling expenses (11,371) (10,392)
Marketing expenses (608) (638)
Administrative expenses (3,964) (2,946)
Borrowing costs 2(b) (129) (259)
Other expenses 2(b) 1,040 (640)
Profit from ordinary activities before income tax 13,691 16,430
Income tax expense relating to ordinary activities (3,706) (5,342)
Net Profit 9,985 11,088
Net Loss attributable to outside equity interests 183 58
Net Profit attributable to members of the parent entity 10,168 11,146
Basic earnings per share - cents 5.87 6.48
Diluted earnings per share - cents 5.86 6.40
The accompanying notes form part of this condensed Statement of Financial
Performance.
PORTMAN LIMITED
CONDENSED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2003
Notes 30 June 2003 31 December 2002 30 June 2002
$'000 $'000 $'000
CURRENT ASSETS
Cash assets 63,570 77,892 86,827
Receivables 10,540 5,611 19,912
Inventories 13,052 16,551 11,914
Other 4 42,839 7,587 1,543
TOTAL CURRENT ASSETS 130,001 107,641 120,196
NON CURRENT ASSETS
Receivables - - 1,080
Inventories 10,445 824 1,631
Other financial assets 2,361 1,921 2,065
Exploration and evaluation expenditure 28,486 27,267 29,326
Property, plant and equipment 52,519 49,933 54,122
Deferred tax assets 2,438 4,555 1,248
Other 4 10,204 2,068 1,394
TOTAL NON CURRENT ASSETS 106,453 86,568 90,866
TOTAL ASSETS 236,454 194,209 211,062
CURRENT LIABILITIES
Payables 21,251 26,014 21,703
Interest bearing liabilities 695 599 14,397
Tax liabilities - 1,543 1,457
Provisions 473 7,399 7,852
Other liabilities 5 43,961 6,900 -
TOTAL CURRENT LIABILITIES 66,380 42,455 45,409
NON CURRENT LIABILITIES
Interest bearing liabilities 426 839 -
Deferred tax liabilities 6,887 6,850 5,780
Provisions 1,657 1,376 1,280
Other liabilities 5 10,423 2,412 476
TOTAL NON CURRENT LIABILITIES 19,393 11,477 7,536
TOTAL LIABILITIES 85,773 53,932 52,945
NET ASSETS 150,681 140,277 158,117
EQUITY
Contributed equity 104,984 104,743 104,566
Retained profits 45,697 35,534 50,265
Parent equity interest 150,681 140,277 154,831
Outside equity interest - - 3,286
TOTAL EQUITY 150,681 140,277 158,117
Net tangible assets per security $0.87 $0.81 $0.91
The accompanying notes form part of this condensed Statement of Financial
Position.
PORTMAN LIMITED
CONDENSED STATEMENT OF CASH FLOWS
FOR THE HALF YEAR ENDED 30 JUNE 2003
30 June 2003 30 June 2002
$'000 $'000
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 70,156 56,241
Payments to suppliers and employees (69,123) (52,625)
GST received 4,802 4,851
Interest received 1,447 1,687
Interest and other costs of finance paid (129) (259)
Taxation payments made (3,152) (5,286)
Net Cash Flows From Operating Activities 4,001 4,609
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for property, plant and equipment (847) (5,444)
Payments for mining ventures and tenements (10,539) (9,499)
Proceeds from sale of property, plant and equipment 67 -
Proceeds from sale of listed investments - 53
Net Cash Flows From Investing Activities (11,319) (14,890)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from share issues 241 1,977
Proceeds from borrowings - 12,708
Repayment of lease liabilities (319) (242)
Dividends paid (6,926) (10,320)
Net Cash Flows From Financing Activities (7,004) 4,123
NET DECREASE IN CASH HELD (14,322) (6,158)
Cash at the beginning of the half year 77,892 92,985
CASH AT THE END OF THE HALF YEAR 63,570 86,827
The accompanying notes form part of this condensed Statement of Cash Flows.
Note 1. Basis of preparation of the financial statements
The half-year financial report does not include all notes of the type normally
included within the annual financial report and therefore cannot be expected to
provide as full an understanding of the financial performance, financial
position and financing and investing activities of the Economic Entity as the
full annual report.
The half year report should be read in conjunction with the 31 December 2002
Annual Report together with any public announcements made by Portman Limited and
its controlled entities during the half year ended 30 June 2003 in accordance
with the continuous disclosure obligations arising under the Corporations Act
2001 and the Australian Stock Exchange Listing Rules.
(a) Basis of accounting
The half-year financial report is a general purpose financial report which has
been prepared in accordance with the requirements of the Corporations Act 2001,
applicable Accounting Standards including AASB 1029: "Interim Financial
Reporting" and other mandatory professional reporting requirements (Urgent
Issues Group Consensus Views).
The half-year financial report has been prepared in accordance with historical
cost concepts.
For the purpose of preparing the half-year financial report, the half-year has
been treated as a discrete reporting period.
(b) Changes in accounting policies
The accounting policies adopted are consistent with those of the previous year
except for the accounting policies with respect to provisions for dividend and
employee benefits as detailed below.
(i) Provision for dividend
The Economic Entity has adopted the new Accounting Standard AASB 1044
"Provisions, Contingent Liabilities and Contingent Assets" which has resulted in
a change in the accounting for the dividends provision. Previously, the Economic
Entity recognised a provision for dividend based on the amount that was proposed
or declared after the reporting date. In accordance with the requirements of the
new Standard, a provision for dividend will only be recognised at the reporting
date where the dividends are declared, determined or publicly recommended prior
to the reporting date. In accordance with the new Standard, no provision for
dividend has been recognised for the half-year ended 30 June 2003. Subsequent to
30 June 2003 Portman Limited announced an interim dividend of four (4) cents
(50% franked) per share (refer Note 8 for further details).
(ii) Employee Benefits
The Economic Entity has adopted the revised Accounting Standard AASB 1028
"Employee Benefits", which has resulted in a change in the accounting policy for
the measurement of employee benefit liabilities. Previously, the Economic Entity
measured the provision for employee benefits based on remuneration rates at the
date of recognition of the liability. In accordance with the requirements of the
revised Standard, the provision for employee benefits is now measured based on
the remuneration rates expected to be paid when the liability is settled. There
has been no significant change to the employee benefits provisions or payments
as a result of the change in accounting policy.
Note 2. Profit from Ordinary Activities
30 June 2003 30 June 2002
$'000 $'000
The profit from ordinary activities before income tax is
arrived at after:
(a) Profit from ordinary items is after crediting the following
revenues:
Sales revenue 72,945 66,874
Interest received from other corporations 1,470 1,687
Proceeds on sale of property, plant and equipment 67 -
Proceeds on sale of investments - 53
Other income 93 -
Insurance recovery on damaged rail wagons 880 2,811
Other revenues 2,510 4,551
(b) Profit from ordinary items is after charging the following
expenses:
Included in other expenses is the following significant items:
Reversal of provision for write-down of inventory to net
realisable value for products that were previously unsaleable
but are now saleable due to changes in market circumstances 3,211 2,171
Provision for write down of inventory to net realisable value (1,357) -
Reversal of write-off of balances relating to Australian
Silicon Limited 440 -
Borrowing costs
Total interest paid / payable to other corporations (95) (194)
Finance lease charges (34) (65)
Total borrowing costs (129) (259)
Note 3. Dividends paid or provided for on ordinary shares
30 June 2003 30 June 2002
$'000 $'000
(a) Dividends proposed and recognised as a liability
Fully franked dividends - 6,914
(b) Dividends paid during the half year
Fully franked dividends 6,926 10,320
6,926 17,234
The company paid a 4c per share fully franked final dividend for the year ended
31 December 2002 on 16 May 2003.
Subsequent to 30 June 2003 Portman Limited announced an interim dividend of four
(4) cents (50% franked) per share which will be paid on 26 September 2003 (refer
Note 8 for further details).
Note 4. Other Assets
30 June 2003 31 December 2002 30 June 2002
$'000 $'000 $'000
Current
Prepayments 625 229 1,543
Hedge contract receivable 30,924 5,498 -
Deferred foreign exchange loss on hedge
contracts 11,290 1,402 -
Deferred premium on foreign exchange option
contracts - 458 -
Total Other Assets - Current 42,839 7,587 1,543
Non Current
Hedge contract receivable 9,737 2,068 -
Deferred foreign exchange loss on hedge
contracts 467 - 1,394
Total Other Assets - Non Current 10,204 2,068 1,394
Note 5. Other Liabilities
30 June 2003 31 December 2002 30 June 2002
$'000 $'000 $'000
Current
Hedge contract payable 11,290 1,402 -
Deferred foreign exchange gain on hedge
contracts 32,671 5,498 -
Total Other Liabilities - Current 43,961 6,900 -
Non Current
Hedge contract payable 467 - -
Deferred foreign exchange gain on hedge 9,737 2,068 -
contracts
Foreign exchange option 219 344 476
Total Other Liabilities - Non Current 10,423 2,412 476
Note 6. Foreign Exchange
Foreign exchange contracts in place at the half year end were as follows:
$US $A Fair Market Value
June 2003 June 2002 June 2003 June 2002 June 2003 June 2002
$'000 $'000 $'000 $'000 $'000 $'000
Forward exchange contracts 89,116 49,966 160,705 91,454 21,342 204
Option contracts 5,000 81,000 9,551 145,677 1,976 808
94,116 130,966 170,256 237,131 23,318 1,012
At 30 June 2003 the company has made a provision for option premiums payable of
$0.219M.
The mark to spot values of these foreign exchange financial instruments has been
included in the Statement of Financial Position in accordance with the
requirements of AASB 1012 "Foreign Currency Translation".
Note 7. Contingent Liabilities
Since the last annual reporting date, there has been no change in any contingent
liabilities or contingent assets.
Note 8. Changes to the Economic Entity and Subsequent Events
Other than detailed below there have been no changes to the Economic Entity
during the period.
Agreement to sell interest in Australian Silicon Limited
As previously announced Portman Limited commenced disposal of its interest in
Australian Silicon Limited during the half-year. On 14 July 2003 the Company
completed the disposal of its interest in Australian Silicon Limited (ASO). As
part of the disposal Portman received $440,000 for the sale of its shares in ASO
which was equal to the carrying value of the investment at 30 June 2003.
Announcement of dividend
Subsequent to 30 June 2003 Portman Limited announced an interim dividend of four
(4) cents (50% franked) per share which will be paid on 26 September 2003. The
dividend is only franked to 50% due to the lower tax paid during the period as a
result of the December 2002 write-offs, increased exploration expenditure and
research and development costs.
Note 9. Segment Information
2003 2002
Corporate Corporate Consoli-
Iron Ore Silicon & Net Interest Consolidated Iron Ore Silicon & Net Interest dated
$'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000
Revenue
Sales to 72,945 - - 72,945 66,874 - - 66,874
customers
outside the
consolidated
entity
Other 1,072 - 1,438 2,510 2,731 141 1,679 4,551
revenues
from
customers
outside the
consolidated
entity
Total 74,017 - 1,438 75,455 69,605 141 1,679 71,425
Segment
Revenue
Result
Segment 16,200 (296) (2,213) 13,691 16,996 (54) (512) 16,430
result
Unallocated
expenses
Consolidated 13,691 16,430
entity
profit from
ordinary
activities
before
income tax
expense
Income tax (3,706) (5,342)
expense
Consolidated 9,985 11,088
entity
profit from
ordinary
activities
after income
tax expense
before
Outside
Equity
Interest
Note 10. Reconciliation with International Financial Reporting Standards ("IFRS")
30 June 2003 30 June 2002
A$'000 A$'000
Net profit attributable to members of Portman Limited under Australian GAAP 10,168 11,146
Increase net of tax in respect of:
Taxation - 160
Net profit attributable to members of Portman Limited under IFRS 10,168 11,306
Earnings per ordinary share under IFRS - cents 5.87 6.57
Diluted earnings per ordinary share under IFRS - cents 5.86 6.49
Equity attributable to members of Portman Limited under Australian GAAP 150,681 158,117
Increase net of tax in respect of:
Hedging 23,099 1,488
Taxation - 160
Dividend - 6,914
Equity attributable to members of Portman Limited under IFRS 173,780 166,679
The Economic Entity's financial statements have been prepared in accordance with
generally accepted accounting principles in Australia ("Australian GAAP"), which
differ in certain respects from IFRS. The material differences relate
principally to the following items, and the effect of each of the adjustments to
net profit and equity, attributable to members of Portman Limited, which would
be required under IFRS is set out above.
Hedging
IAS 39 "Financial Instruments: Recognition and Measurement" provides that hedge
accounting is permitted provided that the hedging relationship is clearly
defined, measurable and actually effective.
The above reconciliation has been prepared on the basis that the hedging
instruments held by Portman Limited at 30 June 2003 meet the effective criteria
as set out in IAS 39.
Taxation
IAS 12 "Income Taxes" follows the balance sheet method of tax effect accounting.
Under this method deferred tax assets and liabilities are recognised for
temporary differences. Temporary differences are differences between the
carrying amount of an asset or liability in the statement of financial position
and its tax base. Temporary differences may be either:
(a) Taxable temporary differences, which are temporary differences that will
result in taxable amounts in determining taxable profit (tax loss) of future
periods when the carrying amount of the asset or liability is recovered or
settled; or
(b) Deductible temporary differences, which are temporary differences that will
result in amounts that are deductible in determining taxable profit (tax loss)
of future periods when the carrying amount of the asset or liability is
recovered or settled.
The adjustment above represents the application of tax effect accounting in
accordance with IAS 12 including the tax effect of the other adjustments
included in the above reconciliation.
Accounting for the Extractive Industries
The financial report has been prepared in accordance with Australian Accounting
Standard AASB 1022 "Accounting for the Extractive Industries" ("AASB1022"). No
International Accounting Standard ("IAS"), upon which IFRS is based, exists.
Accordingly, with the exception of restoration and rehabilitation costs which is
addressed in IAS 37, the treatment adopted under AASB 1022 has been maintained
and no adjustment has been presented in the above reconciliation.
Restoration and Rehabilitation Costs
Applying the principles of IAS 37 "Provisions and Contingencies" to the results
and equity of Portman Limited would not result in a material difference.
Dividends
Under IAS 37 dividends are only recorded when paid. As no dividend has been
provided for at 30 June 2003 no reconciliation adjustment is required.
Note 11. Details of associates and joint venture entities
The Company has a 50% joint venture interest in the Cockatoo Iron Ore Joint
Venture. The Companies share of the results of this joint venture has been
included in the Statement of Financial Performance to 30 June 2003.
30 June 2003 30 June 2002
$'000 $'000
Share of joint venture loss before tax 111 90
Note 12. Inherent uncertainty regarding the carrying value of assets due to the
approval to access and mine the Northern Tenements
As advised in previous announcements the Company is engaged in obtaining Federal
government approvals necessary to fully develop its "Northern Tenements" at
Windarling and Mt Jackson. These tenements represent a significant part of the
expansion plans of the Company.
The Company's 31 December 2002 Annual Report included disclosure of an inherent
uncertainty regarding the carrying value of assets, pending the decision of the
Western Australian Government's Environment Minister to allow access to mine the
Northern Tenements.
Since that time all Western Australian State environmental, heritage and ground
disturbances approvals have been received for the development of the Northern
Tenements.
* On April 1, 2003 the Company welcomed an announcement by the State
Environmental Minister to allow conditional project approval following a
successful appeal against the Environmental Protection Authority's
recommendations.
* On June 3, 2003 the State Government granted mineral titles under the
State environmental approvals process, which also included consideration of
Aboriginal heritage circumstances.
* On July 11, 2003 the State Minister for Indigenous Affairs granted consent
to Portman Limited under Section 18 of the WA Aboriginal Heritage Act 1972
to use the land the subject of the proposed Koolyanobbing Northern Tenements
Expansion Project.
The only remaining approvals required are heritage and environmental clearances
for work at the Windarling W3 deposit from Environmental Australia in Canberra.
These Federal government approvals are expected in the near future.
At the date of signing these financial statements a decision by Environment
Australia on whether Portman Limited will be granted access to mine the Northern
Tenements in accordance with the State approvals has not been made. Accordingly,
the recoverability of the assets capitalised in connection with and incidental
to Portman Limited mining the Northern Tenements is uncertain.
Should such access to mine the Northern Tenements not be granted the Company
will be required to write down to recoverable amount some or all the assets
capitalised in connection with and incidental to the Northern Tenements and the
Koolyanobbing Project. The amount of the write down would be up to $35 million.
PORTMAN LIMITED
DIRECTORS' DECLARATION
FOR THE HALF YEAR ENDED 30 JUNE 2003
The directors declare that:
(a) the financial statements and associated notes of the economic entity:
(i) give a true and fair view of the financial position as at
30 June 2003 and the performance for the half-year ended on that date of the
economic entity; and
(ii) comply with the Accounting Standard 1029 "Interim Financial
Reporting" and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the company will be able to
pay its debts as and when they become due and payable.
Signed for and on behalf of the Board in accordance with a resolution of the
directors.
G F Jones B J Eldridge
Chairman Managing Director
29 August 2003
Perth, Western Australia
INDEPENDENT AUDIT REPORT TO THE MEMBERS OF PORTMAN LIMITED
Scope
The financial report and directors' responsibility
The financial report comprises the statement of financial position, statement of
financial performance, statement of cash flows, accompanying notes to the
financial statements, and the directors' declaration for the consolidated
entity, for the half-year ended 30 June 2003. The consolidated entity comprises
both the company and the entities it controlled during that half-year.
The directors of the company are responsible for preparing a financial report
that gives a true and fair view of the financial position and performance of the
consolidated entity, and that complies with Accounting Standard AASB 1029 "
Interim Financial Reporting", in accordance with the Corporations Act 2001.
This includes responsibility for the maintenance of adequate accounting records
and internal controls that are designed to prevent and detect fraud and error,
and for the accounting policies and accounting estimates inherent in the
financial report.
Audit approach
We conducted an independent audit of the financial report in order to express an
opinion on it to the members of the company and in order for the company to
lodge the financial report with the Australian Stock Exchange and the Australian
Securities and Investments Commission. Our audit was conducted in accordance
with Australian Auditing Standards in order to provide reasonable assurance as
to whether the financial report is free of material misstatement. The nature of
an audit is influenced by factors such as the use of professional judgement,
selective testing, the inherent limitations of internal control, and the
availability of persuasive rather than conclusive evidence. Therefore, an audit
cannot guarantee that all material misstatements have been detected.
We performed procedures to assess whether in all material respects the financial
report presents fairly, in accordance with the Corporations Act 2001, including
compliance with Accounting Standard AASB 1029 "Interim Financial Reporting", and
other mandatory financial reporting requirements in Australia, a view which is
consistent with our understanding of the consolidated entity's financial
position, and of its performance as represented by the results of its operations
and cash flows.
We formed our audit opinion on the basis of these procedures, which included:
* examining, on a test basis, information to provide evidence supporting the
amounts and disclosures in the financial report, and
* assessing the appropriateness of the accounting policies and disclosures
used and the reasonableness of significant accounting estimates made by the
directors.
While we considered the effectiveness of management's internal controls over
financial reporting when determining the nature and extent of our procedures,
our audit was not designed to provide assurance on internal controls.
We performed procedures to assess whether the substance of business transactions
was accurately reflected in the financial report. These and our other
procedures did not include consideration or judgement of the appropriateness or
reasonableness of the business plans or strategies adopted by the directors and
management of the company.
Independence
We are independent of the company, and have met the independence requirements of
Australian professional ethical pronouncements and the Corporations Act 2001.
Audit Opinion
In our opinion, the financial report of Portman Limited is in accordance with:
(a) the Corporations Act 2001, including:
(i) giving a true and fair view of the financial position of the
consolidated entity at 30 June 2003 and of its performance for the half-year
ended on that date; and
(ii) complying with Accounting Standard AASB 1029 "Interim Financial
Reporting" and the Corporations Regulations 2001; and
(b) other mandatory financial reporting requirements in Australia.
Inherent uncertainty regarding access to mine the Northern Tenements
Without qualification to the opinion expressed above, attention is drawn to the
following matter.
As set out in Note 12 to the financial report, at the date of signing the
financial statements, a Federal Government decision on whether the consolidated
entity will be granted heritage and environmental clearances to mine the
Northern Tenements in accordance with their proposed mining plan has not been
made. Accordingly, the recoverability of assets capitalised in connection with
and incidental to the consolidated entity mining the Northern Tenements is
uncertain.
Should the consolidated entity not receive heritage and environmental clearances
to mine the Northern Tenements in accordance with the proposed mining plan the
consolidated entity may be required to write down to recoverable amount some or
all of the assets capitalised in connection with, and incidental to, the
consolidated entity mining the Northern Tenements. The amount of any
recoverable amount write down would be approximately $35 million. No adjustments
have been made to the carrying amount of any assets arising out of this
uncertainty regarding access to mine the Northern Tenements.
Ernst & Young
G A Buckingham
Partner
Perth
Date: 29 August 2003
This information is provided by RNS
The company news service from the London Stock Exchange
END
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