Page 27 - ar2012

WhileMSCcontinuestopursueopportunities
andevaluateseveral tinprospectsespecially
in the ASEAN region, Australia and
Central Africa with a view to expanding
its tin mining assets and resources for
the MSC Group’s long-term growth, it is
committed to a disciplined and vigorous
investment and risk assessment process
in making an investment decision.
TheMSCGroup went through very trying
and challenging times and has emerged
more resilient than ever. The priority in
2013 is to achieve a rebound in earnings
and cash flows and to strengthen the
balance sheet.
With the MSC Group’s continuing
constructive engagements in Africa, its
strong international business networks
and its profitable smelting and mining
operations in Malaysia, the MSC Group
is well-positioned to deliver positive and
sustainable earnings for its shareholders.
Butterworth international smelting
operations achieved a pre-tax profit of
RM56.6million before exceptional losses
in 2012 compared with RM70.3 million
before exceptional losses recorded in
2011. Production of tin metal decreased
to 37,792 tonnes from 40,267 tonnes in
2011. The reduction was mainly due to
lower intake of African tin concentrates
as the region continues to implement the
International Tin Supply Chain initiative
(iTSCi) to ensure responsible sourcing
of tin concentrates. Despite the fall in
production, the Group maintained its
position as the second largest supplier
of refined tin metal globally.
The Democratic Republic of Congo has
beena significant sourceof tinconcentrates
for the Butterworth international smelting
operations. The Group continues to
engage actively with all stakeholders of
the tin industry in dealing with conflict
minerals issues to ensure transparency
and accountability in its minerals sourcing
and is pleased with the positive outcome
of the Electronic Industry Citizenship
Coalition CFS (Conflict Free Smelters)
audit scheme which has certified the
Butterworth international smelting
operations as CFS compliant smelter
for the 2012/13 audit period.
Despite a satisfactory improvement in
production, lower tin prices affected
the Rahman Hydraulic Tin mine in Perak
which recorded a pre-tax profit of RM29.4
million in 2012 compared with RM59.0
million achieved in 2011.
At PT Koba Tin, Indonesia the delay
in the renewal of the CoW adversely
affected its operations, production
and rationalisation efforts. The planned
revival of small scale mining operations
and expansion of tin smelting volume
under tolling arrangements with third
parties did not materialise in 2012.
Mine development works necessary to
gain access to new ore deposits were
also halted resulting in sharply lower
production. High cost producing units
were also closed down due to lower tin
prices. The overall production from PT
Koba Tin in 2012 was only 1,901 tonnes,
a 70% reduction compared to the 6,332
tonnes produced in 2011.
As announced in 2012, pursuant to a
strategic alliance agreement with an
Indonesian owned company MSC has
agreed to reduce its effective interest in
PT Koba Tin to 30% upon the granting
of a mining licence for another 10
years. Although MSC has made a full
provision on its investment in PT Koba
Tin and contingent liabilities, we are
still hopeful that the GOI would make
a positive decision.
The Straits Trading Company Limited ANNUAL REPORT 2012 25 /