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Statement by the Chairman (cont’d)
FInancIal ReSUltS
Amid extreme volatility and growing uncertainty in the global
commodities and financial markets the Group achieved a
13.1% growth in its turnover to a record high of RM3.1billion.
Profits before exceptional losses rose 53.2% to RM116.4 million
for the year ended 31 December 2011 compared to RM76
million in 2010. The Group remained one of the top tin smelters
in the world despite increasing competition.
The Group’s financial position improved during the year. Net
cash flows generated from operating activities improved
from RM56.2 million to RM208.8 million. The strong cash
flows enabled the Group to reduce its bank borrowings by
RM137.6 million and consequently improved its gearing level
to 1.2 from 2.3.
tIn mInIng anD SmeltIng
opeRatIonS
The operating and financial results among the Group’s business
units were, however, mixed. The international tin smelting
business and the tin mining operations in Malaysia achieved
a commendable performance with better production, sales
and profits on the back of improved operating efficiencies and
higher tin prices. However, the Group’s operations in Indonesia
were adversely affected by lower sales and production in
the fourth quarter of 2011 as a result of the unexpected
development over the shipment of tin metals when the
Indonesian Tin Association imposed an export moratorium on
tin shipment from Bangka Island, effective 1 October 2011.
Further, lower tin prices and higher unit cost of production
compounded by the low volume of production in the fourth
quarter had resulted in significant operating losses to PT Koba
Tin. Although PT Koba Tin has submitted an application to
renew its Contract of Work (CoW) for a further extension of
10 years to 2023, on ground of prudence, PT Koba Tin
decided to make an additional provision for mine closure and
reclamation/rehabilitation costs and other impairments. These
had further increased PT Koba Tin’s losses.
During the year, significant resources were mobilised
throughout the supply chains to achieve sustainability and
growth in the volume of tin concentrates and tin bearing
materials for smelting at the Group’s smelting plant in
Butterworth. The Group’s initiatives included pursuing
constructive engagements globally with all stakeholders in the
supply chains, especially in dealing with conflict minerals issues
to ensure transparency and accountability in its international
minerals sourcing. Upgrading of smelting and refining facilities
were also undertaken to improve efficiency and increase
production capacity. An additional production unit was also
successfully installed at the Group’s tin mine in Perak, Malaysia.
The results of all these efforts enabled the Group to increase
its overall metal production in 2011 by 2.7% to 46,599 metric
tonnes, thus maintaining our position as the second largest
supplier of tin metal globally.
The Group continues to pursue opportunities to expand its
tin resources in Malaysia and Indonesia and has identified
several prospective tin mineralised areas for exploration
and developments. Discussions are ongoing with a view of
progressing with possible acquisitions. The Group is also
evaluating several tin prospects in the Democratic Republic
of Congo (DRC). DRC has been a significant source of tin
concentrates for the Group’s international tin smelting business.
DIveStment oF non-tIn
InveStmentS
Several divestments were made during the year in respect of
the Group’s non-tin assets. The Group will continue to pursue
with the divestment of the remainng two non-tin assets at
acceptable prices. At the end of 2011 the Group’s remaining
non-tin investments included a 30% interest in the unlisted
KM Resources Inc which owns a profitable polymetallic mine
MALAYSIA SMELTING CORPORATION BERHAD (43072-A) • ANNUAL REPORT 2011 19