Metorex will shut or sell antimony mine

Terence Goodlace, the Chief Executive Officer said, 'Metorex has experienced difficult times over the last six months driven by rapidly declining commodity prices in conjunction with major investment programmes in an inflationary environment. This led to the successful capital raising of R922 million over December 2008 and further decisive action to address challenges and refocus the strategy of the Company. This includes delivery of the Ruashi II project in the DRC, restoring the strength of the balance sheet and pursuing opportunities to further diversify the commodity and geographic mix of the Metorex portfolio. The Group has a declining capital expenditure profile which will go a long way to improving the current cash position of the company. Human resources and appropriate technical skills have been injected into the businesses and we are firmly focused on improving operational performance. We are totally committed to meeting current and future strategic imperatives and I believe there is a solid foundation and the right leadership in place to steer the company through these uncertain times.'

Summary

Metorex's strategy of developing a balanced portfolio of commodities proved itself again in the difficult conditions prevailing during the period under review. Excellent performances from the Group's established gold and fluorspar operations offset lower profitability from the established base metal operations as a consequence of sharply lower base metal prices.

Unfortunately, significant cost overruns and technical challenges at Ruashi Mining sprl ('Ruashi') resulted in the Group facing the economic downturn with excessive debt finance. Poor project management and weak reporting and planning disciplines exacerbated a situation which would otherwise have been addressed in a pre-emptive fashion in a more stable financial environment. Nonetheless, a successful capital raising of R744 million from the issue of fresh equity and bridging loan of R178 million was completed in December 2008, to provide the funds required to complete the Ruashi project capital programme.

Consolidated Murchison Mine is currently being significantly down-scaled and prepared for care and maintenance or disposal at a cost of approximately R100 million – R140 million. These costs, servicing costs and bridging finance loan repayments from the Standard Bank of South Africa, together with uncertainties regarding commodity prices and the ramp-up to full production at Ruashi will result in the Group needing further funding.

To address this and to reduce Group debt to acceptable levels, a programme to dispose of non-core assets, to raise project-specific funds to develop the Group's high-grade Democratic Republic of the Congo ('DRC') copper assets and reduce debt at project level and to progress corporate transactions with entities with synergistic cash-flow, growth and commodity/geographic portfolios has commenced and is making encouraging progress.

Finally, decisive improvements to the Group's core executive and operational team and corporate disciplines have been and, continue to be, made.

Antimony

Consolidated Murchison              2008      2007      2006      2005

Tons milled               (t)       181 046   152 098   213 260   225 733

Produced: Sb              (mtu)     150 371   158 995   201 132   341 289
 
Au                        (kg)      234       223       278       372

Sold: Sb                  (mtu)     130 605   163 038   191 800   326 041

Au                        (kg)      241       235       279       370
 
Total cash cost/mtu sold* (R/mtu)   613       421       333       174

Mining profit before      (R'000)   (14 850)  (6 085)   10 297    22 792

depreciation

Depreciation              (R'000)   6 300     3 000     2 400     1 980
 
*Net of gold revenue.

As noted above, this business is faced with serious problems. Demand for its primary product, antimony, has effectively disappeared and the division's major customer has defaulted on offtake contractual commitments. It is uneconomic to rely solely on its gold production. Consolidated Murchison is currently being significantly down-scaled and prepared for care and maintenance or disposal at a cost of approximately R100 million – R140 million. This includes the cost of injudicious historic gold hedging contracts at a cost of approximately R52 million. – Press Release