2012 Annual Report (2 April 2013) - Grange Resources

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8 PAGE 2012 ANNUAL REPORT Chairman’s & Managing Director’s Review (cont.) Southdown Project During the year a number of milestones were achieved in relation to the Southdown project. The project’s Definitive Feasibility Study was completed and all major primary permitting approvals were obtained. This means that the project is in a good position for development at an appropriate stage in the future. In 2012 Grange announced it was seeking to sell down at least 30% of its 70% share in the Southdown Project. Despite significant interest by a number of parties this had not been achieved by year’s end. This process, which is supported by Deutsche Bank, continues into 2013. In view of the Company’s stated position on its equity share in the project, Grange announced in late November 2012 that it had decided to significantly reduce expenditure on the project in 2013. Grange’s expenditure on the project for 2013 will be capped at $2.5 million. Wayne Ollington and Steven Monson, inspecting the hot product conveyer. Board During the year Managing Director, Mr Russell Clark, announced his resignation. The Board would like to thank Russell for his significant contribution to the Company during his four and half years as Managing Director and CEO. On 6 August 2012, Mr Richard Mehan joined the Board as Managing Director and CEO. Richard has extensive experience in senior roles in the iron ore industry and the Board looks forward to his efforts to strengthen the Company. Outlook and Grange’s 2013 Priorities The focus at Savage River for the forthcoming year is to drive costs down and to progress our long term mining and tailings strategy by gaining approval for the implementation of planned developments at South Deposit. The sharp falls in iron ore prices experienced during August and September 2012 and the subsequent strong recovery are clear evidence of the volatility in all major traded commodities. We will work to take advantage of upswings in the iron ore price as they occur. The Board is confident that by progressing its long term mining strategy which focuses on improving our access to higher grade ore, and driving down operating costs, the operations at Savage River will provide cash flow to not only sustain the business but also to gradually increase production and the operating margin for the benefit of our shareholders. Thank you On behalf of Grange’s Board of Directors, we would like to thank shareholders for their continuing support. We would also like to thank our management team and all our employees for their on-going commitment and contributions to the Company. Zhiqiang Xi Chairman Richard Mehan Managing Director
2012 ANNUAL REPORT 9 PAGE Review of Operations Key 2012 Highlights ◆◆ ◆◆ ◆◆ ◆◆ ◆◆ Exceptional safety record at Savage River continues with no Lost Time Injuries recorded since July 2010 Solid operating performance during a period of operational challenges and volatile market conditions Revenues from mining operations of $331.3 million Net profit after tax of $35.9 million Disciplined cash management has preserved balance sheet strength ◆◆ Disciplined operating cost review processes ◆◆ Rigid capital expenditure approval processes ◆◆ Net cash inflows from operating activities of $131.9 million ◆◆ Cash and term deposits of $174.9 million ◆◆ No net debt and reduced gearing levels with borrowings of $22.9 million ◆◆ Paid $46.2 million of dividends to shareholders during 2012 with a further $11.6 million to be paid in April 2013 ◆◆ ◆◆ Revised off-take agreement with Shagang providing flexibility to broaden customer base and take advantage of improving market conditions ◆◆ Significant increase in 62% Fe iron ore prices since market lows in September 2012 ◆◆ Continue to receive a quality premium for iron ore pellets Successfully addressed operational challenges arising from the July 2012 rock slide at Savage River ◆◆ Re-established access to higher grade ore, improved production and reduced C1 operating costs during Q4 2012 ◆◆ Strong emphasis on reducing operating costs and maintaining access to higher grade ore will continue during 2013 ◆◆ Capital expenditure and major maintenance programs rescheduled and bought forward into 2012 to de-risk operations in 2013 ◆◆ ◆◆ Announced a mineral resource of approximately 49 million tonnes grading 45% DTR at Long Plains providing an opportunity to extend the life of Savage River Timely reassessment of Southdown Project Expenditure ◆◆ Completed definitive feasibility study, showing the project to have robust economics. ◆◆ Commenced the search for new equity partners with the assistance of Deutsche Bank ◆◆ Announced a significant reduction in project expenditure for 2013 Above Left: Tony Ferguson, Environmental and Social Responsibility Officer, checking water samples at Savage River. Above right: Wayne Ollington, Port Latta Plant Operator.
Page 1 and 2: Australia’s most experienced magn
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Roger Hill, Senior Geologist and Sc
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2012 Annual Report (2 April 2013) - Grange Resources

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