Summarised Income Statement
|Exploration and evaluation expenses||(17.1)||(12.2)|
|Other expenses and income||(38.2)||(38.4)|
|Impairment of exploration and evaluation||-||(753.8)|
|Impairment of available-for-sale financial assets||-||(26.0)|
|Share of loss of an associate||-||(0.9)|
|Income tax (expense)/benefit||(28.1)||237.0|
|Loss after tax attributable to the|
ordinary equity holders of the Company
|Loss per share – basic and diluted (US cents)||(8.0)||(78.0)|
LHM commenced production in 2007 with a capacity of 2.7Mlb per annum. After operating at this level for a sustained period of time, construction of the Stage 2 expansion to 3.7Mlb per annum commenced in calendar year 2008. LHM reached the Stage 2 design capacity in December 2009. The plant has consistently operated at the 3.7Mlb per annum rate from the beginning of calendar year 2010. Construction of the Stage 3 expansion to 5.2Mlb started at the beginning of calendar year 2010 and is planned to continue to the end of the year. Stage 3 production ramp-up is scheduled for the first half of calendar year 2011.
Construction of KM, with a 3.3Mlb design capacity, commenced in 2007 and after a two year construction phase the mine entered its production ramp-up phase in calendar year 2009. KM continued to ramp-up its production volumes through to July 2010. Commercial production was declared from 1 July 2010. KM made its first delivery of uranium to customers in December 2009 from a combination of material produced during ramp-up, supplemented with material loaned from Paladin Nuclear Ltd, the Company’s marketing entity. Unit product costs at KM were higher as a result of expected ramp-up costs as well as the cost of material obtained from Paladin Nuclear Ltd to meet customer obligations during start-up. Going forward it is anticipated that sales will be met from material produced at KM.
References to 2010 and 2009 refer to the equivalent twelve months ended 30 June 2010 and 2009 respectively.
Analysis of Income Statement
Revenue increased from US$114.8M to US$204.3M in 2010 as a result of increased sales of uranium of US$202M (2009: US$111.8M). Total sales volume for the year was 3.73Mlb U3O8 (2009: 2.02Mlb). LHM sold 2.73Mlb U3O8 and KM sold 1Mlb U3O8. KM’s sales are a combination of stock produced during ramp-up and material loaned internally from a group company to fulfil contract commitments. All sales for 2009 relate to Stage 1 of LHM. Total production for the year was 4.32Mlb U3O8 (2009: 2.70Mlb). LHM produced 3.352Mlb U3O8 and KM produced 963,000lb U3O8. All production for 2009 relates to Stage 1 of LHM. The average realised uranium sales price in 2010 was US$54/lb U3O8 (2009: US$55/lb).
Delivery quantities under sales contracts are not evenly distributed from month to month. This will result in fluctuations between production and sales in any one quarter. During the year 530,000lb of Paladin Nuclear Ltd material was loaned to KM to fulfil a portion of scheduled deliveries under sales contracts while the mine was ramping up its production.
Gross Profit in 2010 of US$51.0M is higher than in 2009 (US$48.4M) as a consequence of increased uranium sales. The cost of sales for LHM in 2010 remained at US$26/lb U3O8 (2009: US$26/lb). Overall cost of sales has been impacted by higher costs associated with lower production volumes during the ramp-up of production at KM. Material produced during production ramp-up has been recognised at the lower of cost and net realisable value. The remainder of costs during the ramp-up of KM were capitalised until the plant reached commercial production on 1 July 2010.
Exploration and Evaluation Expenditure of US$17.1M in 2010 related predominantly to the Valhalla/Skal, Isa North, Bigrlyi, Angela, LHM and KM projects. Of this total, US$3.7M was spent on the Valhalla/Skal joint venture project, US$3.8M on the Isa North project and US$3.4M on the Angela joint venture project.
Other Expenses and Income has decreased slightly from US$38.4M to US$38.2M predominantly due to the US$7.7M insurance recovery relating to the heat exchangers at LHM. This was offset by higher corporate costs due to the recognition of a non-recurring provision of US$2.7M and a foreign exchange loss of US$5.2M compared to a foreign exchange gain of US$1.1M in 2009.
Finance Costs have decreased by US$9.1M to US$21.4M despite increased average borrowings year on year due to a proportion of the interest payable on the convertible bonds and project finance being capitalised as part of the construction of KM. Finance costs relate primarily to interest payable on the US$250.0M convertible bonds issued 15 December 2006, the US$325.0M convertible bonds issued 11 March 2008, US$145M project finance for KM and US$47.5M project finance for LHM.
Income Tax Expense of US$28.1M is predominantly attributable to the profits reported for LHM and KM. At this stage a deferred tax credit is not being raised on Australian exploration and corporate expenditure, resulting in the group tax charge being higher than the tax equivalent amount of the group profit or loss. The current period non-cash deferred tax charge has been increased by a net US$7.3M due to a prior period under provision for foreign exchange movements.
Non-controlling Interest in net losses of US$0.9M has been recorded in 2010 attributable to the 18.0% interest in Summit held by third parties and the 15% interest in PAL held by the Government of Malawi.
The Loss after Tax attributable to the ordinary equity holders of the Company for 2010 of US$52.9M was lower than the loss after tax for 2009 of US$480.2M predominantly as a result of the recognition in 2009 of an impairment of the Mount Isa exploration and evaluation asset of US$527.6M net of the deferred tax liability and of the recognition of an impairment of available-for-sale investments of US$26.0M.
The Loss per Share noted on the Income Statements reflects the underlying result for the specific reported periods and the additional shares issued in 2010 compared to 2009.