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EPS - Eastern Platinum - Unaudited Consolidated Financial Statements Of Eastern
Platinum Limited For The Year Ended March 31, 2008
EASTERN PLATINUM LIMITED
(Incorporated in Canada)
(Canadian Registration number BC0722783)
(South African Registration number 2007/006318/10)
Share Code TSX: ELR ISIN: CA2768551038
Share Code AIM: ELR ISIN: CA2768551038
Share Code JSE: EPS ISIN: CA2768551038
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF EASTERN PLATINUM LIMITED FOR THE
YEAR ENDED MARCH 31, 2008
Eastern Platinum Limited
Consolidated statements of operations
(Expressed in thousands of U.S. dollars, except per share amounts - unaudited)
Three months Three months
ended ended
March 31, March 31,
2008 2007
Revenue USD 56,408 USD 31,332
Cost of operations
Production costs 19,750 19,763
Depletion and depreciation 4,362 2,718
24,112 22,481
Mine operating earnings 32,296 8,851
Expenses
General and administrative 4,333 3,738
Stock-based compensation 1,227 12,582
5,560 16,320
Operating income (loss) 26,736 (7,469)
Other income (expense)
Interest income 2,455 88
Interest expense (227) (484)
Foreign exchange (gain) loss 1,057 (942)
Income (loss) before income
taxes and 30,021 (8,807)
non-controlling interests
Future income tax (expense)
recovery (8,248) 314
Non-controlling interests
(Note 8) (1,811) (1,446)
Net earnings (loss) for the
period USD 19,962 USD (9,939)
Basic and diluted earnings
(loss) per share USD 0.03 USD (0.02)
Weighted average number of
common shares outstanding -
basic 669,872,192 518,350,389
Weighted average number of
common shares outstanding -
diluted 718,406,612 518,350,389
Eastern Platinum Limited
Consolidated balance sheets
(Expressed in thousands of U.S. dollars - unaudited)
March 31, December 31,
2008 2007
Assets
Current assets
Cash and cash equivalents USD 58,199 USD 18,818
Short-term investments 111,744 171,038
Trade receivables 56,869 33,157
Inventories (Note 3) 5,539 6,888
232,351 229,901
Property, plant and equipment
(Note 4) 723,117 813,461
Refining contract (Note 5) 15,289 18,467
Other assets 1,082 1,247
USD 971,839 USD 1,063,076
Liabilities
Current liabilities
Accounts payable and accrued
liabilities USD 21,952 USD 22,967
Future income taxes 11,950 6,416
Current portion of long-term
liability 4,040 3,837
37,942 33,220
Asset retirement obligation
(Note 6) 2,525 2,889
Capital leases and other
long-term liabilities 7,211 9,127
Future income taxes 122,662 143,616
170,340 188,852
Non-controlling interests (Note 8) 21,769 23,402
Commitments (Note 11)
Shareholders` equity
Share capital (Note 7) 872,351 868,045
Contributed surplus 28,574 27,428
Accumulated other comprehensive
income (loss) (73,025) 23,481
Deficit (48,170) (68,132)
(121,195) (44,651)
779,730 850,822
USD 971,839 USD 1,063,076
Approved by the Board
"David Cohen" "Robert Gayton"
David Cohen, Director Robert Gayton, Director
Eastern Platinum Limited
Consolidated statements of shareholders` equity
(Expressed in thousands of U.S. dollars - unaudited)
Common Shares
Without Par Value
Shares Amount
Balance June 30, 2007 667,778,358 865,103
Warrants exercised 100,000 178
Stock options exercised 1,153,333 2,764
Stock-based compensation - -
Net loss for the period - -
Currency translation adjustment - -
Balance December 31, 2007 669,031,691 USD 868,045
Warrants exercised 2,117,400 3,936
Stock options exercised 160,000 370
Stock-based compensation - -
Net earnings for the period - -
Currency translation adjustment - -
Balance March 31, 2008 671,309,091 USD 872,351
Contributed Deficit
Surplus
Balance June 30, 2007 17,897 (55,928)
Warrants exercised - -
Stock options exercised (720) -
Stock-based compensation 10,251 -
Net loss for the period - (12,204)
Currency translation adjustment - -
Balance December 31, 2007 USD 27,428 USD (68,132)
Warrants exercised - -
Stock options exercised (81) -
Stock-based compensation 1,227 -
Net earnings for the period - 19,962
Currency translation adjustment - -
Balance March 31, 2008 USD 28,574 USD (48,170)
Accumulated Other Total
Comprehensive Shareholders`
Income (Loss) Equity
Balance June 30, 2007 (23,024) 804,048
Warrants exercised - 178
Stock options exercised - 2,044
Stock-based compensation - 10,251
Net loss for the period - (12,204)
Currency translation adjustment 46,505 46,505
Balance December 31, 2007 USD 23,481 USD 850,822
Warrants exercised - 3,936
Stock options exercised - 289
Stock-based compensation - 1,227
Net earnings for the period - 19,962
Currency translation adjustment (96,506) (96,506)
Balance March 31, 2008 USD (73,025) USD 779,730
Consolidated statements of comprehensive loss
(Expressed in thousands of U.S. dollars - unaudited)
Three months ended Three months ended
March 31, March 31,
2008 2007
Net income (loss) for the period
before
other comprehensive loss USD 19,962 USD (9,939)
Other comprehensive loss -
currency (96,506) (7,560)
translation adjustment
Comprehensive loss USD (76,544) USD (17,499)
Eastern Platinum Limited
Consolidated statements of cash flows
(Expressed in thousands of U.S. dollars - unaudited)
Three months Three months
ended ended
March 31, March 31,
2008 2007
Operating activities
Net income (loss) for the period USD 19,962 USD (9,939)
Items not involving cash
Accretion (Note 6) 80 186
Depletion and depreciation 4,362 2,718
Stock-based compensation 1,227 12,582
Foreign exchange (gain) loss (1,057) 6,804
Future income tax expense (recovery) 8,248 (314)
Non-controlling interests 1,811 1,446
34,633 13,483
Net changes in non-cash working capital
items
Trade receivables (30,801) (4,7 28)
Inventories 314 13,999
Accounts payable and accrued liabilities 2,362 (5,0 43)
6,508 17,711
Financing activities
Common shares issued for cash, net of
share issue costs 4,224 5,308
Repayment of short-term debt 380 (335)
Other long-term liabilities (30 0) -
4,304 4,973
Investing activities
Purchase of debt - (114)
Maturity of short-term investments 54,567 10,996
Property, plant and equipment
expenditures (23,706) (33,228)
30,861 (22,346)
Effect of exchange rate changes on cash
and cash equivalents (2,2 92) (164)
Increase in cash and cash equivalents 39,381 174
Cash and cash equivalents, beginning of
period 18,818 4,635
Cash and cash equivalents, end of period USD 58,199 USD 4,809
Cash and cash equivalents are comprised
of:
Cash in bank USD 17,839 USD 2,864
Short-term money market in struments 40,360 1,945
USD 58,199 USD 4,809
Supplementary cash flow information
Interest paid USD 118 USD 152
Income taxes paid USD 69 USD -
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
1. Nature of operations
Eastern Platinum Limited (the "Company") is a platinum group metal ("PGM")
producer engaged in the acquisition, development and mining of PGM properties
located in various provinces in South Africa.
Effective July 1, 2007 the Company changed its fiscal year end from June 30 to
December 31 to better align with financial reporting year ends that are
predominant in the mining industry.
2. Summary of significant accounting policies
These unaudited interim consolidated financial statements have been prepared in
accordance with Canadian generally accepted accounting principles ("Canadian
GAAP"). The preparation of financial data is based on accounting principles and
practices consistent with those used in the preparation of the audited annual
financial statements except as noted below. The accompanying unaudited interim
financial statements should be read in conjunction with the Company`s audited
consolidated financial statements for the six months ended December 31, 2007,
as they do not contain all disclosures required by Canadian GAAP for annual
financial statements.
(a) Adoption of new accounting standards and accounting pronouncements
Effective January 1, 2008, the Company adopted four new accounting standards
that were issued by the Canadian Institute of Chartered Accountants. These
accounting policy changes were adopted on a prospective basis with no
restatement of prior period financial statements.
(i) Financial Instrument Disclosures and Presentation
CICA Handbook Sections 3862 "Financial Instruments A- Disclosures" and Section
3863 "Financial Instruments A- Presentation" replace Section 3861 "Financial
Instruments A- Disclosure and Presentation". The new standards carry forward the
presentation requirements for financial instruments and enhance the disclosure
requirements by placing increased emphasis on disclosures about the nature and
extent of risks arising from financial instruments and how the entity manages
those risks.
(ii) Capital Disclosures
CICA Handbook Section 1535 requires the company to disclose (a) its objectives,
policies and processes for managing capital; (b) quantitative data about what
the entity regards as capital; (c) whether the entity has complied with any
capital requirements; and (d) if it has not complied, the consequences of such
non- compliance.
(iii) Inventories
CICA Handbook Section 3031 replaced the existing inventories standard. The new
standard requires inventory to be valued on a first-in, first-out or weighted
average basis, which is consistent with the Company`s current treatment. The
adoption of CICA 3031 did not have a significant impact on the Company`s
accounting for inventory or associated disclosures as at January 1, 2008 or for
the three months ended March 31, 2008.
3. Inventories
March 31, December 31,
2008 2007
Consumables USD 4,472 USD 5,446
Ore and concentrate 1,067 1,442
USD 5,539 USD 6,888
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
4. Property, plant and equipment
March 31, 2008
Accumulated
depreciation/ Net book
Cost depletion value
Mining plant and
equipment USD 204,571 USD 52,570 USD 152,001
Mineral properties
Crocodile River Mine (a) 116,924 10,188 106,736
Kennedy`s Vale Project (b) 321,291 202 321,089
Spitzkop PGM Project (c) 116,062 - 116,062
Mareesburg JV (c) 27,123 - 27,123
Other property, plant and 136 30 106
equipment -
USD 786,107 USD 62,990 USD 723,117
December 31, 2007
Accumulated
depreciation/ Net book
Cost depletion value
Mining plant and
equipment USD 216,380 USD 58,597 USD 157,783
Mineral properties
Crocodile River
Mine (a) 138,163 9,711 128,452
Kennedy`s Vale
Project (b) 377,804 238 377,566
Spitz kop PGM
Project (c) 121,442 - 121,442
Mareesburg JV (c) 28,076 - 28,076
Other property,
plant and
equipment 191 49 142
USD 882,056 USD 68,595 USD 813,461
(a) Crocodile River Mine ("CRM")
The Company holds directly and indirectly 85% of CRM, which is located on the
eastern portion of the western limb of the Bushveld Complex. The Maroelabult,
Zandfontein, and Crocette sections are currently in production with the
Kareespruit deposit and other potential near-surface opportunities being in the
development stages.
(b) Kennedy`s Vale Project ("KV")
The Company holds directly and indirectly 85% of KV, which is located on the
eastern limb of the Bushveld Complex, near Steelpoort in the Province of
Mpumalanga. It comprises PGM mineral rights on five farms in the Steelpoort
Valley.
(c) Spitzkop PGM Project and Mareesburg Joint Venture
The Company holds directly and indirectly a 93.4% interest in the Spitzkop PGM
Project and a 75.5% interest in the Mareesburg project. The Company currently
acts as the operator of both the Mareesburg Platinum Project Joint Venture and
Spitzkop PGM Project, both located on the Eastern Limb of the Bushveld Complex.
Eastern Platinum Limited
Notes to the consolidated financial statements (Expressed in thousands of U.S.
dollars, except number of shares and per share amounts) (Unaudited)
5. Refining Contract
As at March 31, 2008, the refining contract had a total aggregate value of
USD15,289. The value of the contract is amortized on a units-of-production
basis. The amortization expense for the three months ended March 31, 2008 was
USD340 and the accumulated amortization at March 31, 2008 was USD4,614.
6. Asset retirement obligation
Although the ultimate amount of the asset retirement obligation is uncertain,
the fair value of these obligations is based on information currently
available, including closure plans and applicable regulations. Significant
closure activities include land rehabilitation, demolition of buildings and
mine facilities and other costs.
The liability for the asset retirement obligation at March 31, 2008 is
approximately 20.5 million Rand (USD2,525). The undiscounted value of this
liability is approximately 84 million Rand (USD10,278). An accretion expense
component of approximately USD80 (6 months ended December 31, 2007 - USD180)
has been charged to operations in the three months ended March 31, 2008 to
reflect an increase in the carrying amount of the asset retirement obligation
which has been determined using a discount rate of 13%. Changes to the asset
retirement obligation during the three months ended March 31, 2008 are as
follows:
Balance, December 31, 2007 USD 2,889
Foreign exchange movement (444)
Accretion 80
Balance, March 31, 2008 USD 2,525
7. Share capital
(a) Authorized
- Unlimited number of preferred redeemable, voting, non-participating shares
without nominal or par value
- Unlimited number of common shares with no par value
(b) Stock options
The Company has an incentive plan ("Plan") under which options to purchase
common shares may be granted to its directors, officers, employees and others
at the discretion of the Board of Directors. Under the terms of the Plan, the
aggregate number of common shares, which may be reserved for issuance under the
Plan, shall not exceed 10% of the outstanding shares.
Each option granted shall be for a term not exceeding ten years from the date
of being granted unless otherwise approved by the Board of Directors and is
exercisable, in whole or in part, at any time during the term of the relevant
option. The option exercise price is set at the date of the grant and cannot be
less than the closing market price of the Company`s common shares on the
Toronto Stock Exchange on the day immediately preceding the day of the grant of
the option.
Eastern Platinum Limited
Notes to the consolidated financial statements (Expressed in thousands of U.S.
dollars, except number of shares and per share amounts) (Unaudited)
7. Share capital (continued)
(b) Stock options (continued)
The changes in stock options during the period were as follows:
March 31, December 31,
2008 2007
Weighted Weighted
average average
Number of exercise Number of exercise
options price options price
CdnUSD CdnUSD
Balance
outstanding,
beginning of
period 46,360,000 1.94 32,450,000 1.76
Options granted 1,500,000 3.38 15,180,000 2.31
Options exercised (160,000) 1.81 (1,153,333) 1.79
Options expired - - - -
Options cancelled (150,000) 2.57 (116,667) 1.70
Balance
outstanding,
end of period 47,550,000 1.98 46,360,000 1.94
The following table summarizes information concerning outstanding and
exercisable options at March 31, 2008:
Remaining
Options Options Exercise Contractual
outstanding exercisable price Life (Years) Expiry date
CdnUSD
625,000 625,000 0.56 0.60 November 5, 2008
187,500 187,500 1.00 1.41 August 26, 2009
7,725,000 7,391,667 1.70 3.15 May 24, 2011
275,000 275,000 1.70 3.66 November 27, 2011
22,237,500 22,237,500 1.82 3.94 March 7, 2012
14,910,000 12,890,000 2.31 9.52 October 5, 2017
90,000 30,000 2.50 9.71 December 12, 2017
1,000,000 600,000 3.38 9.90 February 20, 2018
500,000 200,000 3.38 9.99 March 27, 2018
47,550,000 44,436,667 5.39
(c) Share purchase warrants
The changes in warrants during the period were as follows:
March 31, 2008 December 31, 2007
Weighted Weighted
average average
Number of exercise Number of exercise
warrants price warrants price
CdnUSD CdnUSD
Balance outstanding,
beginning of period 71,248,050 1.83 71,348,050 1.83
Warrants exercised (2,117,400) 1.87 (100,000) 1.80
Balance outstanding,
end of period 69,130,650 1.83 71,248,050 1.83
Eastern Platinum Limited
Notes to the consolidated financial statements (Expressed in thousands of U.S.
dollars, except number of shares and per share amounts) (Unaudited)
7. Share capital (continued)
(c) Share purchase warrants (continued)
The following table summarizes information concerning outstanding warrants at
March
31, 2008:
Number of Exercise
warrants price Expiry date
CdnUSD
10,644,654 2.00 April 25, 2008
58,485,996 1.80 March 28, 2009
69,130,650
8. Non-controlling interests
The non-controlling interests are comprised of the
following:
Balance, December 31, 2007 USD 23,402
Non-controlling interests` share of income in Barplats (2,652)
Non-controlling interests` share of interest on advances
to Gubevu 841
Foreign Exchange Movement 178
Balance, March 31, 2008 USD 21,769
9. Related party transactions
The Company incurred the following expenses in the normal course of operations,
measured at the exchange amount which is determined on a cost recovery basis,
with companies related by way of directors and officers in common:
March 31, March 31,
2008 2007
(3 months) (3 months)
Consulting fees (a) USD 17 USD 88
General and administrative expenses 73 49
Management fees (b) 358 106
Rent - 21
USD 448 USD 264
(a) The Company paid fees to a private company controlled by a director of the
Company for consulting services performed outside of his capacity as a
director.
(b) The Company paid management fees and expenses to private companies
controlled by officers and directors of the Company.
(c) Amounts due to related parties are unsecured, non-interest bearing and due
on demand. Accounts payable at March 31, 2008 included USD16 (Dec 31, 2007 -
USD2,550) which were due to private companies controlled by officers of the
Company.
10. Segmented information
(a) Operating segment - The Company`s operations are primarily directed towards
the acquisition, exploration and production of PGMs in South Africa.
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
10. Segmented information (continued)
(b) Geographic segments - The Company`s revenues and expenses by geographic
areas for the three months ended March 31 2008 and 2007 are as follows:
March 31, 2008 (3 months)
South Africa Canada Total
Property, plant and
equipment 723,024 93 723,117
Total Assets 776,465 195,374 971,839
Property, plant and
equipment expenditures 23,692 14 23,706
Revenues USD 56,408 USD - USD 56,408
Production costs (19,750) - (19,750)
Depletion and depreciation (4,362) - (4,362)
Expenses (2,847) (1,486) (4,333)
Stock based compensation (1) (1,226) (1,227)
Interest income 586 1,869 2,455
Interest expense (227) - (227)
Foreign exchange gain (loss) 1,058 (1) 1,057
Income (loss) before income
taxes
and non-controlling
interests USD 30,865 USD (844) USD 30,021
March 31, 2007 (3 months)
South Africa Canada Total
Property, plant and
equipment 601,529 15 601,544
Total Assets 670,700 40,319 711,019
Property, plant and
equipment expenditures 115,306 - 115,306
Revenues USD 31,332 USD - USD 31,332
Production costs (19,763) - (19,763)
Depletion and depreciation (2,718) - (2,718)
Expenses (2,511) (1,227) (3,738)
Stock based compensation (144) (12,438) (12,582)
Interest income (389) 477 88
Interest expense (484) - (484)
Foreign exchange gain
(loss) (2,161) 1,219 (942)
Income (loss) before
income taxes
and non-controlling
interests USD 3,162 USD (11,969) USD (8,807)
For the period ended March 31 2008 and 2007, 100% of the Company`s PGM
production was sold to one customer (Note 13(b)).
11. Commitments
The Company has committed to capital expenditures on projects of approximately
371 million Rand (USD45,600) as at March 31, 2008.
12. Management of capital risk
The capital structure of the Company consists of equity attributable to common
shareholders, comprising of issued capital, contributed surplus, retained
earnings and accumulated other comprehensive income. The Company`s objectives
when managing capital are to: (i) preserve capital, (ii) obtain the best
available net return, and (iii) maintain liquidity.
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
12. Management of capital risk (continued)
The Company manages the capital structure and makes adjustments to it in light
of changes in economic condition and the risk characteristics of the underlying
assets. To maintain or adjust the capital structure, the Company may attempt to
issue new shares, issue new debt, acquire or dispose of assets or adjust the
amount of cash and cash equivalents and investments.
The Company`s policy is to invest its excess cash in highly liquid, fully
guaranteed, bank- sponsored instruments. The Company staggers the maturity
dates of its investments over different time periods and dates to minimize
exposure to interest rate changes. This strategy is unchanged from 2007.
The Company is not subject to externally imposed capital requirements.
13. Management of financial risk
The Company`s financial instruments are exposed to certain financial risks,
including currency risk, credit risk, liquidity risk, interest risk and
commodity price risk. The Company`s exposure to these risks and its methods of
managing the risks remain consistent.
(a) Currency risk
The Company is exposed to the financial risk related to the fluctuation of
foreign exchange rates. The Company receives revenue in South African Rand,
incurs expenses in Canadian dollars and South African Rand and its reporting
currency is the US dollar. A significant change in the currency exchange rates
between the Canadian dollar and South African Rand relative to the US dollar
could have an effect on the Company`s results of operations, financial position
or cash flows. The Company has not entered into any derivative financial
instruments to manage exposures to currency fluctuations.
At March 31, 2008, the Company is exposed to currency risk through the
following financial instruments denominated in South African Rand and Canadian
dollars:
March 31, December March 31,
2008 31,2007 2008 December 31,
CdnUSD CdnUSD ZAR 2007
(000`s) (000`s) (000`s) ZAR (000`s)
Cash and cash
equivalents 7,841 18,107 80,718 3,326
Short-term investments 114,703 169,546 0 0
Trade receivables 2,945 1,880 443,979 215,195
Short-term liabilities 3,456 3,804 5,471 0
Long-term liabilities 2,992 3,294 34,940 39,958
Accounts payable and
accruals 979 3,646 146,521 132,797
The sensitivity of the Company`s net earnings and other comprehensive income
due to changes in the exchange rate between the Canadian dollar and the South
African Rand is summarized in the table below:
As at March 31, 2008
10% 10% decrease
increase in in
Canadian Canadian
dollar dollar
Increase (decrease) in net earnings (1,313) 1,603
Increase (decrease) in other comprehensive
income (15,489) 70,919
Comprehensive income (loss) (16,802) 72,522
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts) (Unaudited)
13. Management of financial risk (continued)
(a) Currency risk (continued)
The sensitivity of the Company`s net earnings and other comprehensive income
due to changes in the exchange rate between the Canadian dollar and the United
States dollar is summarized in the table below:
As at March 31, 2008
10% 10%
increase in decrease in
Canadian Canadian
dollar dollar
Increase (decrease) in net earnings 1,995 (1,997)
Increase (decrease) in other comprehensive
income (8,004) 7,569
Comprehensive income (loss) (6,009) 5,572
(b) Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a
financial instrument fails to meet its contractual obligations. The Company`s
cash equivalents and short-term investments are held through large Canadian and
South African financial institutions. Short-term and long-term investments
(including those presented as part of cash and cash equivalents) are composed
of financial instruments issued by Canadian and South African banks and
companies with high investment- grade ratings. These investments mature at
various dates over the current operating period. The Company did not invest in
any asset backed commercial paper.
The Company currently sells all of its concentrate production to one customer
under an off-take contract. The loss of this customer or unexpected termination
of the off- take contract could have a material adverse effect on the Company`s
results of operations, financial condition and cash flows. The Company has not
experienced any bad debts with this customer.
The Company minimizes credit risk by reviewing the credit risk of the
counterparty to the arrangement and has made any necessary provisions related
to credit risk at March 31, 2008.
(c) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its
financial obligations as they fall due. The Company has a planning and
budgeting process in place to help determine the funds required to support the
Company`s normal operating requirements on an ongoing basis and its
expansionary plans. The Company ensures that there are sufficient funds to meet
its short-term business requirements, taking into account its anticipated cash
flows from operations and its holdings of cash and cash equivalents.
(d) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates. The Company is exposed to interest rate risk on its short-term
investments. The risk that the Company will realize a loss as a result of a
decline in the fair value of short-term investments is limited because these
investments, although available for sale, are generally held to maturity. The
Company monitors its exposure to interest rates and has not entered into any
derivative financial instruments to manage this risk.
Eastern Platinum Limited
Notes to the consolidated financial statements (Expressed in thousands of U.S.
dollars, except number of shares and per share amounts) (Unaudited)
(e) Price risk
The Company is exposed to price risk with respect to the revenues and costs of
production. These costs include electricity, labour, and diesel amongst others.
The Company closely monitors these prices to determine the appropriate course
of action to be taken by the Company. The Company has not entered into any
derivative financial instruments to manage exposures to price fluctuations.
A sensitivity analysis has not been completed at March 31, 2008 as it would not
be representative of the actual risk. The future costs of production are
unknown and are expected to change frequently.
14. Fair value estimation of financial instruments
The fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date. The fair value of financial
instruments that are not traded in an active market is determined using a
Black-Scholes model based on assumptions that are supported by observable
current market conditions. Changes in these assumptions to reasonably possible
alternative assumptions would not significantly affect the Company`s results.
The fair values of cash and cash equivalents, short-term investments, trade
receivables and accounts payable approximate their carrying values due to the
short-term to maturities of these financial instruments.
The fair value of short-term debt was determined using discounted cash flows at
prevailing market rates and the fair value is considered to approximate
carrying value.
15. Subsequent events
From April 1, 2008 to May 15, 2008:
(a) In April 2008, 8,706,677 trading warrants were exercised at Cdn.USD2.00 per
share for proceeds of Cdn USD17,413. A total of 1,937,977 warrants remained
unexercised.
These warrants expired on April 25, 2008.
(b) 75,000 options were exercised for Cdn USD42 on April 7, 2008.
(c) On May 1, 2008, the Board of Directors of the Company approved the adoption
of a Shareholder Rights Plan Agreement (the "Rights Plan"). Pursuant to the
terms of the Rights Plan, any bid that meets certain criteria intended to
protect the interests of all shareholders are deemed to be "Permitted Bids". A
Permitted Bid must be made by way of a take-over bid circular prepared in
compliance with applicable securities laws and, in addition to certain other
conditions, must remain open for 60 days. In the event a take-over bid does not
meet the Permitted Bid requirements of the Rights Plan, the rights issued under
the plan will entitle shareholders, other than any shareholder or shareholders
involved in the take-over bid, to purchase additional common shares of the
Company at a significant discount to the market price of the common shares at
that time.
The Rights Plan has been accepted by the Toronto Stock Exchange and will be
presented for ratification by the shareholders at the Company`s annual general
meeting to be held on June 4, 2008. If ratified by shareholders, the Rights
Plan will have a term of three years.
Stellenbosch
15 May 2008
Sponsor
PSG Capital (Pty) Limited
Date: 15/05/2008 14:22:28 Supplied by www.sharenet.co.za
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