Chief Operating Officer' Review

Doug’s early career was with Arthur Andersen. Various senior financial positions were held with Hunt Leuchars and Hepburn and Murray & Roberts Group, including the latter’s Australian subsidiary as the group financial director. Doug initially joined the Group as financial director of Avgold in 1998 and was promoted to his current position during February 2001.

Avmin’s major development programme, which was initiated during 1999, accelerated during the year under review and will continue as the Company contemplates considerable expansion over the next three years. The successful funding of these new projects is therefore a key issue over this period.

Funding
Attributable borrowings increased from R1 082 million at 30 June 2000 to R2 475 million. The increased long-term debt of R713 million has been applied to Avgold Limited (Avgold), R302 million, and Chambishi Metals plc (Chambishi), R411 million. Short-term borrowings increased by R680 million of which R437 million was utilised by Assmang Limited (Assmang), R107 million by Chambishi and R137 million by the Company. The interest payable on those borrowings applied to  capital expenditure has been capitalised and R60 million (which equates to 39 cents on earnings per share) was charged to income. Two of the Company’s subsidiaries, Avgold and Assmang, raised their funding requirements without recourse to Avmin. Avgold successfully concluded a R500 million rights offer during the current financial year with Avmin following its rights. In addition, Avgold raised a R700 million medium-term facility to complete the Target mine development. The recent acquisition of PGM rights by Avmin (55 per cent) and Impala Platinum Holdings Limited (45 per cent) is currently under review by the Competition Commission. If approved, this acquisition will be concluded and the purchaseconsideration of R551 million will be paid when the properties are transferred in the latter part of this calendar year. The construction of the mine will involve an investment of between R500 million and R700 million and will be subject to a feasibility report. On receipt by Assmang of the R551 million from the above-mentioned sale, the funds will be applied to reducing its short-term borrowings. The feasibility report on the expansion of the Nkomati nickel mine is due early in calendar 2002. If the mine’s partners (Avmin, 75 per cent and Anglo American plc, 25 per cent) agree to proceed with the expansion, construction will commence this financial year. Avmin’s share of the funding for the expansion is expected to be approximately R1,0 billion over two years.
Various funding alternatives are being considered for these and other smaller developments, and initial discussions have commenced, including a review of current facilities. Details of the existing borrowings are shown in the notes to the financial statements.

Insurance
The international insurance market, particularly for mining and energy related risks, became extremely tight during the year as a result of a poor claimsrecord in the industry. This impacted negatively on the ability of mining companies to negotiate and obtain capacity for renewal programmes. Where insurance capacity was available, it was at considerably higher premiums than in previous years and with increased deductible structures. Avmin, through continuing good risk management and open and effective communication with its insurers, managed to renew its insurance cover at reasonable cost and with acceptable deductibles. Avmin continues to use its captive insurance companies to efficiently manage overall premium and risk costs.

Hedging
Avmin has adopted a formal hedging policy for the Group, which has as its primary focus the reduction of risk. Speculation is forbidden, as is the use of exotic hedging instruments. To the extent that the Group enters into hedging arrangements, these are aligned with planned monthly production figureswhich, in turn, are based on production plans approved by the board. Avgold has entered into gold hedges covering 58 per cent of its planned production over the next five years, to coincide with the drawdown and repayment of the R700 million loan raised to complete the  development of the Target mine. Avmin has no other hedging arrangements in place at this time.

Two of the Company’s subsidiaries, Avgold and Assmang, raised their funding requirements without recourse to Avmin