Wrap Text
ANO - Anooraq announces audited consolidated financial statements for the
years ended 31 December 2010 and 2009
Anooraq Resources Corporation
(Incorporated in British Columbia, Canada)
(Registration number 10022-2033)
TSXV/JSE share code: ARQ)
NYSE Amex share code: ANO
ISIN: CA03633E1088
("Anooraq" or the "Company")
ANOORAQ ANNOUNCES AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS
ENDED 31 DECEMBER 2010 AND 2009
Anooraq announces its audited consolidated financial results for the years
ended 31 December 2010 and 2009. This announcement should be read with the
Company`s full Financial Statements and Management Discussion & Analysis,
available at www.anooraqresources.com and filed on www.sedar.com.
Independent audit by the auditors
The consolidated financial statements of Anooraq Resources Corporation, which
comprise the consolidated statement of financial position as at 31 December
2010 and 2009 and the consolidated statements of comprehensive income, changes
in equity and cash flows for each of the years in three-year period ended 31
December 2010, and the notes to the consolidated financial statements were
audited by KPMG Inc. The individual auditor assigned to perform the audit is
Mr CH Basson. KPMG`s unqualified audit report is available for inspection at
the registered office of the company.
AUDITED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2010
AND 2009
(Expressed in Canadian Dollars, unless otherwise stated)
Note 31 December 31 December
2010 2009
Assets
Non-current assets
Property, plant and equipment 7 984,906,533 693,393,736
Capital work-in-progress 8 10,311,973 235,838,915
Intangible assets 9 3,280,056 -
Mineral property interests 10 13,716,383 13,223,703
Goodwill 11 13,185,952 12,382,569
Platinum Producers` Environmental 13 2,862,075 2,578,131
Trust
Other non-current assets 348,076 729
Total non-current assets 1,028,611,048 957,417,783
Current assets
Inventories 14 - 1,091,860
Trade and other receivables 15 36,190,110 23,466,503
Current tax receivable 163,244 -
Cash and cash equivalents 16 25,764,590 30,947,511
Restricted cash 17 1,377,263 1,291,348
Total current assets 63,495,207 56,797,222
Total assets 1,092,106,255 1,014,215,005
Equity and Liabilities
Equity
Share capital 18 71,852,588 71,713,114
Treasury shares 18 (4,991,726) (4,991,726)
Convertible preference shares 18 162,910,000 162,910,000
Foreign currency translation reserve (5,197,843) (9,390,899)
Hedging reserve (4,124,155) (731,293)
Share-based payment reserve 22,032,571 19,770,786
Accumulated loss (163,519,502) (111,798,092)
Total equity attributable to equity 78,961,933 127,481,890
holders of the Company
Non-controlling interest 42,404,014 82,025,730
Total equity 121,365,947 209,507,620
Liabilities
Non-current liabilities
Loans and borrowings 19 622,534,699 555,509,417
Deferred taxation 20 208,805,557 213,484,109
Provisions 21 8,184,494 7,021,038
Derivative liability 22 4,969,563 1,590,945
Total non-current liabilities 844,494,313 777,605,509
Current liabilities
Trade and other payables 23 31,844,332 26,948,647
Current tax payable - 153,229
Short-term portion of loans and 19 94,401,663 -
borrowings
Total current liabilities 126,245,995 27,101,876
Total liabilities 970,740,308 804,707,385
Total equity and liabilities 1,092,106,255 1,014,215,005
The accompanying notes are an integral part of these consolidated financial
statements.
AUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED 31
DECEMBER 2010, 2009 AND 2008
(Expressed in Canadian Dollars, unless otherwise stated)
Note 31 December 31 December 31 December
2010 2009 2008
Revenue 24 148,286,833 62,627,868 -
Cost of sales 25 (173,151,188) (80,966,467) -
Gross loss (24,864,355) (18,338,599) -
Administrative expenses (18,291,753) (11,781,689) (12,071,398)
Transaction costs (1,811,294) (10,401,725) -
Other income 426,617 1,138,850 5,779
Operating loss (44,540,785) (39,383,163) (12,065,619)
Finance income 26 1,113,642 529,285 179,119
Finance expense 27 (67,521,703) (20,340,287) (1,848,574)
Net finance expense (66,408,061) (19,811,002) (1,669,455)
Share of loss of equity (219,849) (235,022)
accounted investees (net
of income tax) -
Loss before income tax 28 (110,948,846) (59,414,014) (13,970,096)
Income tax 29 17,290,040 7,633,485 -
Loss for the year (93,658,806) (51,780,529) (13,970,096)
Other comprehensive
income
Foreign currency 6,237,524 (14,072,611) 129,684
translation differences
for foreign operations
Effective portion of (3,121,650) (731,293) -
changes in fair value of
cash flow hedges
Other comprehensive 30 3,115,874 (14,803,904) 129,684
income for the year, net
of income tax
Total comprehensive loss (90,542,932) (66,584,433) (13,840,412)
for the year
Loss attributable to:
Owners of the Company (51,721,410) (35,531,631) (13,970,096)
Non-controlling interest (41,937,396) (16,248,898) -
Loss for the year (93,658,806) (51,780,529) (13,970,096)
Total comprehensive loss
attributable to:
Owners of the Company (50,921,216) (45,783,507) (13,840,412)
Non-controlling interest (39,621,716) (20,800,926) -
Total comprehensive loss (90,542,932) (66,584,433) (13,840,412)
for the year
Earnings per share
Basic and diluted loss 31 (12 cents) (12 cents) (8 cents)
per share
The accompanying notes are an integral part of these consolidated financial
statements
AUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31
DECEMBER 2010, 2009 AND 2008
(Expressed in Canadian Dollars, unless otherwise stated)
Attributable to equity holders of the Company
No Share Capital Treasury Shares
te
s
Number of Amount Number of Amount
shares shares
Balance at 1 185,208,607 51,855,351 - -
January 2008
Total
comprehensive loss
for the year
Loss for the - - - -
year
Total other 30 - - -
comprehensive -
income
Total - - - -
comprehensive loss
for the year
Transactions with
owners, recorded
directly in equity
Fair value of - 1,055,432 - -
stock options
allocated to
shares issued on
exercise
Share-based 1,431,400 2,037,558 - -
payment
transactions
Total 1,431,400 3,092,990 - -
contributions by
and distributions
to owners
Balance at 1 186,640,007 54,948,341 - -
January 2009
Arising from - - - -
business
acquisition 34
Total
comprehensive loss
for the year
Loss for the - - - -
year
Total other - - - -
comprehensive loss 30
Total - - - -
comprehensive loss
for the year
Transactions with
owners, recorded
directly in equity
Contributions by
and distributions
to owners
Common shares 14,296,567 15,869,148 (4,497,062) (4,991,726)
issued 18
Preference 18 - - - -
shares issued
Share options re- - - - -
priced
Share-based 806,898 895,625 - -
payment
transactions
Total 15,103,465 16,764,773 (4,497,062) (4,991,726)
contributions by
and distributions
to owners
Balance at 31 201,743,472 71,713,114 (4,497,062) (4,991,726)
December 2009
Total
comprehensive loss
for the year
Loss for the - - - -
year
Total other 30 - - - -
comprehensive loss
Total - - - -
comprehensive loss
for the year
Transactions with
owners, recorded
directly in equity
Contributions by
and distributions
to owners
Common shares 70,000 139,474 - -
issued
Share-based - - - -
payment
transactions
Total 70,000 139,474 - -
contributions by
and distributions
to owners
Balance at 31 201,813,472 71,852,588 (4,497,062) (4,991,726)
December 2010
The accompanying notes are an integral part of these consolidated financial
statements.
AUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31
DECEMBER 2010, 2009 AND 2008 (Continued)
(Expressed in Canadian Dollars, unless otherwise stated)
Attributable to equity holders of the Company
Not Convertible Foreign Share- based Hedging
es preference currency payment reserve
shares translation reserve
reserve
Balance at 1 - - 13,254,905 -
January 2008
Total
comprehensive
loss for the
period
Loss for the - - - -
year
Total other 30 129,684
comprehensive - - -
income
Total - 129,684 - -
comprehensive
loss for the
year
Transactions
with owners,
recorded
directly in
equity
Fair value of - - (1,055,432) -
stock options
allocated to
shares issued on
exercise
Share-based - - 5,385,501 -
payment
transactions
Total - - 4,330,069 -
contributions by
and
distributions to
owners
Balance at 1 - 129,684 17,584,974 -
January 2009
Arising from 34 - - - -
business
acquisition
Total
comprehensive
loss for the
year
Loss for the - - - -
year
Total other - (9,520,583) - (731,293)
comprehensive 30
loss
Total - (9,520,583) - (731,293)
comprehensive
loss for the
year
Transactions
with owners,
recorded
directly in
equity
Contributions by
and
distributions to
owners
Common shares - - - -
issued 18
Preference 162,910,000 - - -
shares issued 18
Share options - - 1,117,441 -
re-priced
Share-based - - 1,068,371 -
payment
transactions
Total 162,910,000 - 2,185,812 -
contributions by
and
distributions to
owners
Balance at 31 162,910,000 (9,390,899) 19,770,786 (731,293)
December 2009
Total
comprehensive
loss for the
year
Loss for the - - - -
year
Total other - 4,193,056 - (3,392,862)
comprehensive
loss 30
Total - 4,193,056 - (3,392,862)
comprehensive
loss for the
year
Transactions
with owners,
recorded
directly in
equity
Contributions by
and
distributions to
owners
Common shares - - (71,665) -
issued
Share-based - - 2,333,450 -
payment
transactions
Total - - 2,261,785 -
contributions by
and
distributions to
owners
Balance at 31 162,910,000 (5,197,843) 22,032,571 (4,124,155)
December 2010
AUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31
DECEMBER 2010, 2009 AND 2008 (Continued)
(Expressed in Canadian Dollars, unless otherwise stated)
Attributable to equity holders of the Company
No Accumulated Total Non- Total equity
te loss controlling
s interest
Balance at 1 (62,296,365) 2,813,891 - 2,813,891
January 2008
Total
comprehensive
loss for the
period
Loss for the (13,970,096) (13,970,096) - (13,970,096)
year
Total other 30 129,684 - 129,684
comprehensive
income -
Total (13,970,096) (13,840,412) - (13,840,412)
comprehensive
loss for the
year
Transactions
with owners,
recorded
directly in
equity
Fair value - - - -
of stock
options
allocated to
shares issued
on exercise
Share-based - 7,423,059 - 7,423,059
payment
transactions
Total - 7,423,059 - 7,423,059
contributions
by and
distributions
to owners
Balance at 1 (76,266,461) (3,603,462) - (3,603,462)
January 2009
Arising from 34 - - 102,826,656 102,826,656
business
acquisition
Total
comprehensive
loss for the
year
Loss for the (35,531,631) (35,531,631) (16,248,898) (51,780,529)
year
Total other - (10,251,876) (4,552,028) (14,803,904)
comprehensive 30
loss
Total (35,531,631) (45,783,507) (20,800,926) (66,584,433)
comprehensive
loss for the
year
Transactions
with owners,
recorded
directly in
equity
Contributions
by and
distributions
to owners
Common 18 - 10,877,422 - 10,877,422
shares issued
Preference 18 - 162,910,000 - 162,910,000
shares issued
Share - 1,117,441 - 1,117,441
options re-
priced
Share-based - 1,963,996 - 1,963,996
payment
transactions
Total - 176,868,859 - 176,868,859
contributions
by and
distributions
to owners
Balance at 31 (111,798,092) 127,481,890 82,025,730 209,507,620
December 2009
Total
comprehensive
loss for the
year
Loss for the (51,721,410) (51,721,410) (41,937,396) (93,658,806)
year
Total other 30 - 800,194 2,315,680 3,115,874
comprehensive
loss
Total (51,721,410) (50,921,216) (39,621,716) (90,542,932)
comprehensive
loss for the
year
Transactions
with owners,
recorded
directly in
equity
Contributions
by and
distributions
to owners
Common - 67,809 - 67,809
shares issued
Share-based - 2,333,450 - 2,333,450
payment
transactions
Total - 2,401,259 - 2,401,259
contributions
by and
distributions
to owners
Balance at 31 (163,519,502) 78,961,933 42,404,014 121,365,947
December 2010
The accompanying notes are an integral part of these consolidated financial
statements.
AUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER
2010, 2009 AND 2008
(Expressed in Canadian Dollars, unless otherwise stated)
Notes 31 December 31 December 31 December
2010 2009 2008
Cash flows from
operating activities
Cash receipts from 138,546,181 41,293,161 -
customers
Cash paid to suppliers (154,336,968) (69,086,487) (5,348,995)
and employees
Cash utilised by 32 (15,790,787) (27,793,326) (5,348,995)
operations
Interest received 985,573 426,621 179,119
Interest paid (13,731) (1,258,710) (1,885,517)
Tax paid (299,394) - -
Cash utilised by (15,118,339) (28,625,415) (7,055,393)
operating activities
Cash flows from
investing activities
Investment in - (216,245) -
environmental trusts
Acquisition of cash in 34 - 3,576,912 -
a business combination
- Bokoni Mine
Bokoni Mine 34 - (119,956,375) -
acquisition
Asset acquisition 34 - (6,592,523) -
ESOP Trust 34 - (6,741,102) -
contribution
Proceeds on disposal - 118,311 54,140
of property, plant and
equipment
Acquisition of 7 (494,095) (31,478) (473,642)
property, plant and
equipment
Acquisition of capital 8 (28,193,472) (24,418,832) -
work-in-progress
Acquisition of 9 (3,328,100) - -
intangible assets
Deferred acquisition - - (1,219,813)
costs
Proceeds on disposal - 14 -
of financial assets
Other (335,800) - -
Cash utilised from (32,351,467) (154,261,318) (1,639,315)
investing activities
Cash flows from
financing activities
Long term borrowings 19 41,382,644 125,380,745 3,630,000
raised
Common shares issued 67,809 15,869,148 2,037,558
"A" Preference shares 19 - 177,720,000 -
issued
"A" Preference shares 19 - (1,066,320) -
repaid
"B" Preference shares 18 - 162,910,000 -
issued
Transaction costs paid - (4,857,128) -
Vendor claims settled 34 - (251,770,000) -
Interest-free loan 19 599,442 4,267,913 -
raised
Loans repaid 19 (590,537) (16,790,368) -
Cash generated from 41,459,358 211,663,990 5,667,558
financing activities
Effect of foreign 827,527 (1,680,420) (253,997)
currency translation
Net (decrease)/ (5,182,921) 27,096,837 (3,281,147)
increase in cash and
cash equivalents
Cash and cash 30,947,511 3,850,674 7,131,821
equivalents, beginning
of the year
Cash and cash 16 25,764,590 30,947,511 3,850,674
equivalents, end of
the year
The accompanying notes are an integral part of these consolidated financial
statements.
AUDITED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31
DECEMBER 2010, 2009 AND 2008
(Expressed in Canadian Dollars, unless otherwise stated)
1. NATURE OF OPERATIONS
Anooraq Resources Corporation ("Company" or "Anooraq") is incorporated in the
Province of British Columbia, Canada. The consolidated financial statements of
the Company as at 31 December 2010 and 2009 and for the years ended 31
December 2010, 2009 and 2008 comprise the Company and its subsidiaries
(together referred to as the "Group" and individually as "Group entities") and
the Group`s interest in associates, special purpose entities and jointly
controlled entities. Its principal business activity is the mining and
exploration of Platinum Group Metals ("PGM") through its mineral property
interests. The Company focuses on mineral property interests located in the
Republic of South Africa in the Bushveld Complex. Anooraq operates in South
Africa through its wholly-owned subsidiary Plateau Resources (Proprietary)
Limited ("Plateau") which owns the Group`s various mineral property interests
and conducted the Group`s business in South Africa.
2. GOING CONCERN
The consolidated financial statements are prepared on the basis that the Group
will continue as a going concern which contemplates the realisation of assets
and settlement of liabilities in the normal course of operations as they
become due.
As a result of the acquisition of the operating mine (refer note 34) in 2009,
the Group secured various funding arrangements (refer note 19) in order to
fund the purchase consideration and to fund its planned business objectives.
The funding agreements included securing a long-term credit facility, the
Operating Cash Flow Shortfall Facility ("OCSF"), with Rustenburg Platinum
Mines Limited ("RPM") for an amount of $222 million (ZAR 1,470 million). The
facility is used to fund operating cash and capital requirements for an
initial period of three years. As at 31 December 2010, the Group utilised $112
million (ZAR 741.4 million) thereof to fund operating requirements from 1 July
2009 as the mining operations are not currently generating sufficient cash
flows to fund operations and operational projects. The Group has no
significant obligation to repay interest and capital on its outstanding loans
and borrowings during 2011 even though the Group did not meet certain loan
covenants at 31 December 2010 (refer note 19).
As a result of securing the financial resources and long-term funding,
management expects that cash flows from the mining operations and the OCSF
will be sufficient to meet immediate ongoing operating and capital cash
requirements of the Group.
The Group is currently pursuing various alternative funding structures to
achieve a more affordable debt equity level as management believes that the
Group would not be able to service the repayments on the loans and borrowings
once it becomes due in the medium to long term.
3. BASIS OF PRESENTATION
3.1 Statement of compliance
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board.
3.2 Basis of measurement
The consolidated financial statements have been prepared on the historical
cost basis as set out in the accounting policies below. Certain items,
including derivative financial instruments, are stated at fair value.
3.3 Use of estimates and judgements
The preparation of the consolidated financial statements in accordance with
IFRS requires management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
Information about critical judgements in applying accounting policies that
have the most significant effect on the amounts recognised in the consolidated
financial statements is included in the notes to the financial statements
where applicable.
4. ACCOUNTING POLICIES
These consolidated financial statements are presented in (unless stated
otherwise) Canadian Dollars ("$"), which is also the Company`s functional
currency.
The accounting policies set out below are applied consistently to all years
presented in these consolidated financial statements and have been applied
consistently by Group entities.
4.1 Basis for consolidation
(i) Business combination
All business combinations are accounted for by applying the acquisition
method.
Control is the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. In assessing control,
consideration is given to potential voting rights that are currently
exercisable. The acquisition date is the date on which control is transferred
to the acquirer. Judgement is applied in determining the acquisition date and
determining whether control is transferred from one party to another.
Goodwill is measured as the fair value of the consideration transferred
including the recognised amount of any non-controlling interest in the
acquiree, less the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed, all measured at the
acquisition date. To the extent that the fair value exceeds the consideration
transferred, the excess is recognised in profit or loss.
Consideration transferred includes the fair values of the assets transferred,
liabilities incurred by the Group to the previous owners of the acquiree, and
equity interests issued by the Group. Consideration transferred also includes
the fair value of any contingent consideration and share-based payment awards
of the acquiree that are replaced mandatorily in the business combination.
A contingent liability of the acquiree is assumed in a business combination
only if such a liability represents a present obligation and arises from a
past event, and its fair value can be measured reliably.
Non-controlling interest is measured at its proportionate interest in the fair
value of the identifiable net assets of the acquiree.
Transaction costs incurred in connection with a business combination, such as
legal fees, due diligence fees and other professional and consulting fees are
expensed as incurred, unless it is debt related. Directly attributable
transaction costs related to debt instruments are capitalised.
If the Group obtains control over one or more entities that are not
businesses, then the bringing together of those entities are not business
combinations. The cost of acquisition is allocated among the individual
identifiable assets and liabilities of such entities, based on their relative
fair values at the date of acquisition. Such transactions do not give rise to
goodwill and no non- controlling interest is recognised.
(ii) Acquisition of non-controlling interests
Acquisitions of non-controlling interests are accounted for as transactions
with equity holders in their capacity as equity holders and therefore no
goodwill is recognised as a result of such transactions.
(iii) Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements of
subsidiaries are included in the consolidated financial statements from the
date that control commences until the date that control ceases. The accounting
policies of subsidiaries have been changed where necessary to align them with
the policies adopted by the Group.
(iv)Investments in jointly controlled entities (equity accounted investees)
Joint ventures are those entities over whose activities the Group has joint
control, established by contractual agreement and requiring unanimous consent
for strategic financial and operating decisions.
Investments in jointly controlled entities are accounted for using the equity
method ("equity accounted investees") and are recognised initially at cost.
The Group`s equity investment includes goodwill identified on acquisition, net
of any accumulated impairment losses. The consolidated financial statements
include the Group`s share of the income and expenses and equity movements of
equity accounted investees, after adjustments to align accounting policies
with those of the Group, from the date that significant influence or joint
control commences until the date that significant influence or joint control
ceases. When the Group`s share of losses exceeds its interest in an equity
accounted investee, the carrying amount of that interest, including any long-
term investments, is reduced to nil, and the recognition of further losses is
discontinued except to the extent that the Group has an obligation or has made
payments on behalf of the investee.
(v) Special purpose entities
A Special Purpose Entity ("SPE") is consolidated if, based on an evaluation of
the substance of its relationship with the Group and the SPE`s risks and
rewards, the Group concludes that it controls the SPE. SPE`s
controlled by the Group were established under terms that impose strict
limitations on the decision-making powers of the SPE`s management and that
result in the Group receiving the majority of the benefits related to the
SPE`s operations and net assets, being exposed to the majority of risks
incident to the SPE`s activities, and retaining the majority of the residual
or ownership risks related to the SPE`s or their assets.
(vi) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised income and expenses
arising from intra-group transactions, are eliminated in preparing the
consolidated financial statements. Unrealised gains arising from transactions
with equity accounted investees are eliminated against the investment to the
extent of the Group`s interest in the investee. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that
there is no evidence of impairment.
4.2 Foreign currencies
(i) Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional
currencies of Group entities at exchange rates at the date of the
transactions. Monetary assets and liabilities denominated in foreign
currencies at the reporting date are translated to the functional currency at
the exchange rate at that date. The foreign currency gain or loss on monetary
items is the difference between amortised cost in the functional currency at
the beginning of the year, adjusted for effective interest and payments during
the year, and the amortised cost in foreign currency translated at the
exchange rate at the end of the year. Such gains and losses are recognised in
profit or loss.
Non-monetary assets and liabilities denominated in foreign currencies that are
measured at fair value are retranslated to the functional currency at the
exchange rate at the date that the fair value was determined. Non-monetary
items in a foreign currency that are measured in terms of historical cost are
translated using the exchange rate at the date of the transaction. Foreign
currency differences arising on retranslation are recognised in profit or
loss, except for differences arising on the retranslation of available-for-
sale equity investments, a financial liability designated as a hedge of the
net investment in a foreign operation that is effective, or qualifying cash
flow hedges, which are recognised in other comprehensive income.
(ii) Foreign operations
The financial results of Group entities that have a functional currency
different from the presentation currency are translated into the presentation
currency. The presentation currency of the Company is Canadian Dollars. Income
and expenditure transactions of foreign operations are translated at the
average rate of exchange for the year except for significant individual
transactions which are translated at the rate of exchange in effect at the
transaction date. All assets and liabilities, including fair value adjustments
and goodwill arising on acquisition, are translated at the rate of exchange
ruling at the reporting date.
When the settlement of a monetary item receivable from or payable to a foreign
operation is neither planned nor likely in the foreseeable future, foreign
exchange gains and losses arising from such a monetary item are considered to
form part of the net investment in a foreign operation and are recognised in
other comprehensive income and are included in the foreign currency
translation reserve ("FCTR").
On disposal of part or all of the operations, the proportionate share of the
related cumulative gains and losses previously recognised in the FCTR through
the statement of comprehensive income are included in determining the profit
or loss on disposal of that operation recognised in the profit or loss.
4.3 Financial instruments
(i) Non-derivative financial assets
Non-derivative financial assets comprise loans and receivables.
Loans and receivables are recognised on the date of origination. All other
financial assets are recognised initially on the trade date at which the Group
becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised when the contractual rights to the cash
flows from the asset expire, or the Group transfers the rights to receive the
contractual cash flows on the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the financial assets
are transferred. Any interest in transferred financial assets that is created
or retained is recognised as a separate asset or liability.
Financial assets and financial liabilities are offset and the net amount
presented in the statement of financial position when, and only when, the
Group has a legal right to offset the amounts and intends either to settle on
a net basis or to realise the asset and settle the liability simultaneously.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable payments
that are not quoted in an active market. Such assets are recognised initially
at fair value plus any directly attributable transaction costs. Subsequent to
initial recognition loans and receivables are measured at amortised cost using
the effective interest method, less any impairment losses.
Loans and receivables comprise trade and other receivables, restricted cash,
investment in the platinum Producer`s Environmental Trust and cash and cash
equivalents.
Cash and cash equivalents comprise cash balances and call deposits with
original maturities of three months or less. Bank overdrafts that are
repayable on demand and form an integral part of the Group`s cash management
are included as a component of cash and cash equivalents for the purpose of
the statement of cash flows.
(ii)Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated
liabilities on the date that they originated. All other financial liabilities
are recognised initially on the trade date at which the Group becomes a party
to the contractual provisions of the instrument.
Financial liabilities are derecognised when the contractual obligations are
discharged, cancelled or expire.
Non-derivative financial liabilities comprise loans and borrowings, bank
overdrafts, trade and other payables.
Financial liabilities are recognised initially at fair value plus any directly
attributable transaction costs. Subsequent to initial recognition these
financial liabilities are measured at amortised cost using the effective
interest method.
(iii)Derivative financial instruments, including hedge accounting
The Group holds derivative financial instruments to hedge its interest rate
risk exposures. Embedded derivatives are separated from the host contract and
accounted for separately if the economic characteristics and risks of the host
contract and the embedded derivative are not closely related, a separate
instrument with the same terms as the embedded derivative would meet the
definition of a derivative, and the combined instrument is not measured at
fair value through profit or loss.
On initial designation of the hedge, the Group formally documents the
relationship between the hedging instrument(s) and hedged item(s), including
the risk management objectives and strategy in undertaking the hedge
transaction, together with the methods that will be used to assess the
effectiveness of the hedging relationship. The Group makes an assessment, both
at the inception of the hedge relationship as well as on an ongoing basis,
whether the hedging instruments are expected to be "highly effective" in
offsetting the changes in the fair value or cash flows of the respective
hedged items during the year for which the hedge is designated, and whether
the actual results of each hedge are within a range of 80-125 percent. For a
cash flow hedge of a forecast transaction, the transaction should be highly
probable to occur and should present an exposure to variations in cash flows
that could ultimately affect reported net income.
Derivatives are recognised initially at fair value; attributable transaction
costs are recognised in profit or loss as incurred. Subsequent to initial
recognition, derivatives are measured at fair value, and changes therein are
accounted for as described below.
Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the
variability in cash flows attributable to particular risk associated with a
recognised asset or liability or a highly probable forecast transaction that
could affect profit or loss, the effective portion of changes in the fair
value of the derivative is recognised in other comprehensive income and
presented in the hedging reserve in equity. The amount recognised in other
comprehensive income is removed and included in profit or loss in the same
period as the hedged cash flows affects profit or loss under the same line
item in the statement of comprehensive income as the hedged item. Any
ineffective portion of changes in the fair value of the derivative is
recognised immediately in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting,
expires or is sold, terminated, exercised, or the designation is revoked, then
hedge accounting is discontinued prospectively. The cumulative gain or loss
previously recognised in other comprehensive income and presented in the
hedging reserve in equity remains there until the forecast transaction affects
profit or loss. When the hedged item is a non-financial asset, the amount
recognised in other comprehensive income is transferred to the carrying amount
of the asset when the asset is recognised. If the forecast transaction is no
longer expected to occur, then the balance in other comprehensive income is
recognised immediately in profit or loss. In other cases the amount recognised
in other comprehensive income is transferred to profit or loss in the same
period that the hedged item affects profit or loss.
Separate embedded derivatives
Changes in the fair value of separated embedded derivatives are recognised
immediately in profit or loss.
Other derivatives
When a derivative financial instrument is not held for trading purposes and is
not designated in a qualifying hedge relationship, all changes in its fair
value are recognised immediately in profit or loss.
(iv)Share capital
Common shares
Common shares are classified as equity. Incremental costs directly
attributable to the issue of common shares and share options are recognised as
a deduction from equity, net of any tax effects.
Preference share capital
Preference share capital is classified as equity if it is non-redeemable,
redeemable for a fixed number of the Company`s shares, or redeemable only at
the Company`s option, and any dividends are discretionary. Dividends thereon
are recognised as distributions within equity upon approval by the Company`s
Board of Directors.
Preference share capital is classified as a liability if it is redeemable on a
specific date or at the option of the holders, or if dividend payments are not
discretionary. Dividends thereon are recognised as finance expense in profit
or loss as accrued.
Treasury shares
Shares issued to subsidiaries or SPE`s are reflected as treasury shares on
consolidation.
4.4 Accounting for borrowing costs
In respect of borrowing costs relating to qualifying assets the Group
capitalises borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset as part of the cost of that
asset. The Group has capitalised borrowing costs with respect to property,
plant and equipment under construction
4.5 Property, plant and equipment
Mining assets, including mine development cost and infrastructure costs, mine
plant facilities and buildings are measured at historical cost less
accumulated depreciation and impairment losses.
Mining assets are capitalised to capital work-in-progress and transferred to
mining property, plant and equipment when the mining venture reaches
commercial production.
Capitalised mine development and infrastructure costs include expenditure
incurred to develop new mining operations and to expand the capacity of the
mine to the extent that it gives rise to future economic benefit. Costs
include borrowing costs capitalised during the construction period where
qualifying expenditure is financed by borrowings. Items of mine property,
plant and equipment, excluding capitalised mine development and infrastructure
costs, are depreciated on a straight-line basis over their expected useful
life. Capitalised mine development and infrastructure are depreciated on a
units of production basis. Depreciation is charged on mining assets from the
date on which they are available for use.
When parts of an item of property, plant and equipment have different useful
lives, they are accounted for as separate items (major components) of
property, plant and equipment.
Property, plant and equipment are depreciated over their estimated useful
lives as follows:
Mine development and infrastructure units of production
Plant and equipment 1 - 30 years
Buildings 5 - 30 years
Motor vehicles 1 - 5 years
Furniture and fittings 1 - 10 years
Items of property, plant and equipment that are withdrawn from use, or have no
reasonable prospect of being recovered through use or sale, are regularly
identified and written off.
The assets` residual values, depreciation methods and useful lives are
reviewed, and adjusted if appropriate, at each reporting date.
Non-mining assets are measured at historical cost less accumulated
depreciation and impairment losses. Depreciation is charged on the straight-
line basis over the useful lives of these assets.
Subsequent expenditure relating to an item of property, plant and equipment is
capitalised when it is probable that future economic benefits from the use of
the assets will be increased.
Repairs and maintenance are recognised in profit or loss during the period in
which they are incurred.
Gains and losses on disposal of property, plant and equipment are determined
by comparing the proceeds from disposal with the carrying amount of the asset
and are recognised net within profit or loss.
4.6 Intangible assets
(i) Goodwill
Goodwill is measured at cost less accumulated impairment losses and is not
amortised. In respect of equity accounted investees, the carrying amount of
goodwill is included in the carrying amount of the investment, and an
impairment loss on such an investment is not allocated to any asset, including
goodwill, that forms part of the carrying amount of the equity accounted
investee.
(ii)Other intangible assets
Other intangible assets include mineral property interests (refer note 4.18
below) and purchased software. These intangible assets are recognised if it is
probable that future economic benefits will flow to the entity from the
intangible assets and the costs of the intangible assets can be reliably
measured.
Mineral property interests are carried at cost less impairment losses.
Purchased software is stated at cost less amortisation and impairment losses
and is amortised on a straight line basis over its estimated useful life. The
amortisation method and estimated useful life are reviewed at least annually.
4.7 Imapairment of assets
(i) Non-financial assets
The carrying amounts of the Group`s non-financial assets, other than
inventories and deferred tax assets, are reviewed at each reporting date to
determine whether there is any indication of impairment. If any such
indication exists, then the asset`s recoverable amount is estimated. For
goodwill and intangible assets that have indefinite lives or that are not yet
available for use, the recoverable amount is estimated each year at the same
time.
The recoverable amount of an asset or cash-generating unit is the greater of
its value in use and its fair value less costs to sell. In assessing value in
use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. For the purpose of
impairment testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets (the "cash-
generating unit"). The goodwill acquired in a business combination, for the
purpose of impairment testing, is allocated to cash-generating units that are
expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its
cash-generating units exceed its estimated recoverable amount. Impairment
losses are recognised in profit or loss. Impairment losses recognised in
respect of cash- generating units are allocated first to reduce the carrying
amount of any goodwill allocated to the units and then to reduce the carrying
amounts of the other assets in the unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of other
assets, impairment losses recognised in prior years are assessed at each
reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is
reversed only to the extent that the asset`s carrying amount does not exceed
the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
(ii) Financial assets (including receivables)
A financial asset not measured at fair value through profit or loss is
assessed at each reporting date to determine whether there is objective
evidence that it is impaired. A financial asset is impaired if objective
evidence indicates that a loss event has occurred after the initial
recognition of the asset, and that the loss event had a negative effect on the
estimated future cash flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortised cost
is calculated as the difference between its carrying amount and the present
value of the estimated future cash flows discounted at the asset`s original
effective interest rate. Losses are recognised in profit or loss and reflected
in an allowance account against receivables. Interest on the impaired asset
continues to be recognised through the unwinding of the discount. When a
subsequent event causes the amount of impairment loss to decrease, the
decrease in impairment loss is reversed through profit or loss.
4.8 Inventories
Inventories, comprising ore stockpiles, are measured at the lower of cost and
net realisable value.
The cost of inventories is based on the average cost of ore in stockpiles and
comprises all costs incurred to the stage immediately prior to stockpiling,
including costs of extraction and crushing, as well as processing costs
associated with ore stockpiles, based on the relevant stage of production.
Net realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
4.9 Employee benefits
(i) Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an
entity pays fixed contributions into a separate entity and will have no
legal or constructive obligation to pay further amounts. Obligations
for contributions to defined contribution pension plans are recognised as an
employee benefit expense in profit or loss in the years during which services
are rendered by employees. Prepaid contributions are recognised as an asset to
the extent that a cash refund or a reduction in future payments is available.
Contributions to a defined contribution plan that is due more than 12 months
after the end of the year in which the employees render the service are
discounted to their present value.
(ii)Short-term employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis
and are expensed as the related service is provided.
A liability is recognised for the amount expected to be paid under short-term
cash bonus or profit-sharing plans if the Group has a present legal or
constructive obligation to pay this amount as a result of past service
provided by the employee, and the obligation can be estimated reliably.
(iii)Share-based payment transactions
The grant date fair value of share-based payment awards granted to employees
is recognised as an employee cost, with a corresponding increase in equity,
over the period that the employees unconditionally become entitled to the
awards. The amount recognised as an expense is adjusted to reflect the number
of awards for which the related service and non-market vesting conditions are
expected to be met, such that the amount ultimately recognised as an expense
is based on the number of awards that do meet the related service and non-
market performance conditions at the vesting date.
For share-based payment awards with non-vesting conditions, the grant date
fair value of the share-based payment is measured to reflect such conditions
and there is no true-up for differences between expected and actual outcomes.
The fair value of the amount payable to employees in respect of the share
appreciation rights, which are settled in cash, is recognised as an expense
with a corresponding increase in liabilities over the period that the
employees unconditionally become entitled to payment. The liability is
remeasured at each reporting date and at settlement date. Any changes in the
fair value of the liability are recognised as employee costs in profit or
loss.
Share-based payment arrangements in which the Group receives goods or services
as consideration for its own equity instruments are accounted for as equity-
settled share-based payment transactions, regardless of how the equity
instruments are obtained by the Group.
(iv)Termination benefits
Termination benefits are recognised as an expense as and when the Group is
committed demonstrably, without realistic possibility of withdrawal, to a
formal detailed plan to either terminate employment before the normal
retirement date, or to provide termination benefits as a result of an offer
made to encourage voluntary redundancy.
Termination benefits for voluntary redundancies are recognised as an expense
if the Group has made an offer of voluntary redundancy, it is probable that
the offer will be accepted, and the number of acceptances can be estimated
reliably.
If benefits are payable more than 12 months after the reporting year, the
benefits are discounted to their present value.
4.10 Provisions
A provision is recognised if, as a result of a past event, the Group has a
present legal or constructive obligation that can be estimated reliably and it
is probable that an outflow of economic benefits will be required to settle
the obligation. Provisions are determined by discounting the expected future
cash flows at a pre-tax rate that reflects current market assessments of the
time value of money and the risks specific to the liability. The unwinding of
the discount is recognised as finance expense ("notional interest").
Provisions are reviewed at each reporting date and adjusted to reflect the
current best estimate. If it is no longer probable that an outflow of economic
benefits will be required, the provision is reversed.
(i)Environmental rehabilitation provisions
Estimated environmental provisions, comprising pollution control,
rehabilitation and mine closure, are based on the Group`s environmental policy
taking into account current technological, environmental and regulatory
requirements. The provision for rehabilitation is recognised as and when the
environmental liability arises. To the extent that the obligations relate to
the construction of an asset, they are capitalised as part of the cost of
those assets. The effect of subsequent changes to assumptions in estimating an
obligation for which the provision was recognised as part of the cost of the
asset is adjusted against the asset. Any subsequent changes to an obligation
which did not relate to the initial construction of a related asset are
recognised in profit or loss.
(ii)Restructuring
A provision for restructuring is recognised when the Group has approved a
detailed and formal restructuring plan, and the restructuring has either
commenced or has been announced publically. Future operating losses are not
provided for.
4.11 Platinum Producers` Environmental Trust
The Group contributes to the Platinum Producers` Environmental Trust annually.
The trust was created to fund the estimated cost of pollution control,
rehabilitation and mine closure at the end of the lives of the Group`s mines.
Contributions are determined on the basis of the estimated environmental
obligation over the life of a mine. Contributions made are reflected in non-
current investments held by the Platinum Producers` Environmental Trust.
Interest earned on monies paid to rehabilitation trust funds is accrued on a
time proportion basis and is recorded as finance income.
4.12 Revenue
Revenue arising from the sale of metals and intermediary products is
recognised when the price is determinable, the product has been delivered in
accordance with the terms of the contract, the significant risks and rewards
of ownership have been transferred to the customer and collection of the sales
price is reasonably assured. These criteria are typically met when the
concentrate reaches the smelter. Revenue further excludes value-added tax and
mining royalties.
4.13 Lease payments
(i)Operating leases - Lessor
Operating lease income is recognised as income on a straight-line basis over
the lease term.
Initial direct costs incurred in negotiating and arranging operating leases
are added to the carrying amount of the leased asset and recognised as an
expense over the lease term on the same basis as the lease income. Income for
leases is disclosed under other income in profit or loss.
(ii)Operating leases - Lessee
Operating lease payments are recognised as an expense on a straight-line basis
over the lease term. The difference between the amounts recognised as an
expense and the contractual payments are recognised as an operating lease
liability. This liability is not discounted.
Any contingent rents are expensed in the period they are incurred.
4.14 Finance income and finance expense
Finance income comprises interest income on funds invested and interest
received on loans and receivables. Interest income is recognised as it accrues
in profit or loss, using the effective interest method.
Finance expense comprises interest expense on borrowings, unwinding of the
discount on provisions, dividends on preference shares classified as
liabilities and gains/losses on hedging instruments that are recognised in
profit or loss. Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are recognised
in profit or loss using the effective interest method.
Foreign currency gains and losses are reported on a net basis.
4.15 Income tax
Income tax expense comprises current and deferred tax. Current tax and
deferred tax are recognised in profit or loss except to the extent that it
relates to a business combination, or items recognised directly in equity or
in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or
loss for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous
years.
Deferred tax is recognised in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. Deferred tax is not recognised for
the following temporary differences: the initial recognition of assets or
liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit or loss, and differences
relating to investments in subsidiaries and jointly controlled entities to the
extent that it is probable that they will not reverse in the foreseeable
future. In addition, deferred tax is not recognised for taxable temporary
differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date. Deferred tax assets
and liabilities are offset if there is a legally enforceable right to offset
current tax liabilities and assets, and they relate to income taxes levied by
the same tax authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities and assets on a
net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and
deductible temporary differences, to the extent that it is probable that
future taxable profits will be available against which they can be utilised.
Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax benefit will be
realised.
4.16 Earnings/ (Loss) per share
The Group presents basic and diluted earnings/ (loss) per share ("EPS") data
for its common shares. Basic EPS is calculated by dividing the profit or loss
attributable to owners of the Company by the weighted average number of common
shares outstanding during the year, adjusted for own shares held. Diluted EPS
is determined by adjusting the profit or loss attributable to owners of the
Company and the weighted average number of common shares outstanding,
adjusted for own shares held and for the effects of all dilutive potential
common shares, which comprise share options granted to employees.
4.17 Segment reporting
An operating segment is a component of the Group that engages in business
activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group`s
other components. All operating segments` operating results are reviewed
regularly by the Group`s Chief Executive Officer (who is considered the chief
operating decision maker) to make decisions about resources to be allocated to
the segment and assess its performance, and for which discrete financial
information is available.
4.18 Exploration expenditure and mineral property interests
The acquisitions of mineral property interests are initially measured at cost.
Mineral property acquisition costs and development expenditures incurred
subsequent to the determination of the feasibility of mining operations and
approval of development by the Group are capitalised until the property to
which they relate is placed into production, sold or allowed to lapse.
Exploration and evaluation costs incurred prior to determination of the
feasibility of mining operations are expensed as incurred. Re-imbursement of
previously expensed exploration and evaluation costs are recognised as other
income in profit or loss.
Mineral property acquisition costs include the cash consideration and the fair
market value of shares issued for mineral property interests pursuant to the
terms of the relevant agreements. These costs will be amortised over the
estimated life of the property following commencement of commercial
production, or written off if the property is sold, allowed to lapse, or when
an impairment of value has been determined to have occurred.
4.19 New standards and interpretations not yet adopted
Standards and interpretations issued but not yet effective and applicable to
the Group:
- IAS 24 (revised), Related Party Disclosures
- Amendments to IAS 32, Financial statements: Presentation: Classification of
Rights Issues
- Amendments to IFRS 7, Disclosures - Transfers of Financial Assets
- IFRS 9, Financial instruments
- IFRS 9, Additions to IFRS 9 Financial instruments
- IFRIC 19, Extinguishing Financial liabilities with Equity Instruments
- Various improvements to IFRS 2010
The Group is currently evaluating the impact, if any, that these new standards
will have on the consolidated financial statements.
5. DETERMINATION OF FAIR VALUES
A number of the Group`s accounting policies and disclosures require the
determination of fair value, for both financial and non- financial assets and
liabilities. Fair values have been determined for measurement and/or
disclosure purposes based on the following methods. When applicable, further
information about the assumptions made in determining fair values is disclosed
in the notes specific to that asset or liability.
5.1 Property, plant and equipment
The fair value of property, plant and equipment recognised as a result of a
business combination is based on market values. The market value of property
is the estimated amount for which a property could be exchanged on the date of
valuation between a willing buyer and a willing seller in an arm`s length
transaction after proper marketing wherein the parties had each acted
knowledgeably and willingly. The fair value of items of plant, equipment,
fixtures and fittings is based on the market approach and cost approaches
using quoted market prices for similar items when available and replacement
cost when appropriate.
The fair value of mining rights included in property, plant and equipment
acquired as part of a business combination is determined using the multi-year
excess earnings method, whereby the subject asset is valued after deducting a
fair return on all other assets that are part of creating the related cash
flows.
Mineral property interest
The fair value of mineral property interests acquired is determined using a
market comparative approach. In applying a market comparative approach, a
selection of appropriate historic transactions is used to determine an average
transaction value.
Trade and other receivables
The fair value of trade and other receivables is estimated as the present
value of future cash flows, discounted at the market rate of interest at the
reporting date. This fair value is determined for disclosure purposes.
5.4 Derivatives
The fair value of interest rate swaps is based on the fair value of the cash
flows of the swap using the ZAR zero-coupon swap curve and the fair value of
the projected shifted cash flows discounted using the shifted zero-coupon
rates.
Fair values reflect the credit risk of the instrument and exclude the credit
risk of the Group entity and counterparty when appropriate.
Non-derivative financial liabilities
Fair value is calculated based on the present value of future principal and
interest cash flows, discounted at the market rate of interest at the
reporting date. This fair value is determined for disclosure purposes.
5.6 Share-based payment transactions
The fair value of the employee share options is measured using the Black-
Scholes option pricing model. Measurement inputs include share price on
measurement date, exercise price of the instrument, expected volatility (based
on weighted average historic volatility adjusted for changes expected due to
publicly available information), weighted average expected life of the
instruments (based on historical experience and general option holder
behaviour), expected dividends, and the risk-free interest rate (based on
government bonds). Service and non-market performance conditions attached to
the transactions are not taken into account in determining fair value.
The fair value of the cash-settled share appreciation rights is measured using
the binomial valuation model. Measurement inputs include share price on
measurement date, strike price of the instrument, expected volatility (based
on weighted average historic volatility adjusted for changes expected due to
publicly available information), vesting, expiry and exercise dates, expected
dividends and the risk free interest rate (based on the Bond Exchange of South
Africa).
6. FINANCIAL RISK MANAGEMENT
The Board of Directors has overall responsibility for the establishment and
oversight of the Group`s risk management framework.
The Group`s risk management policies are established to identify and analyse
the risks faced by the Group, to set appropriate risk limits and controls, and
to monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Group`s
activities. The Group, through its training and management standards and
procedures, aims to develop a disciplined and constructive control
environment in which all employees understand their roles and obligations.
Overview
The Group has exposure to the following risks from its use of financial
instruments:
- credit risk
- liquidity risk
- interest rate risk
- foreign currency risk
- commodity price risk
This note presents information about the Group`s exposure to each of the above
risks, the Group`s objectives, policies and processes for measuring and
managing risk and the Group`s management of capital. Further quantitative
disclosures are included throughout these consolidated financial statements.
(i)Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group`s receivables from
customers, and cash and equivalents. Management has evaluated treasury
counterparty risk and does not expect any treasury counterparties to fail in
meeting their obligations.
Trade and other receivables
Trade receivables represents sale of concentrate to Rustenburg Platinum Mines
Limited in terms of a concentrate off-take agreement. The carrying value
represents the maximum credit risk exposure. The Group has no collateral
against these receivables.
100% of the Group`s revenue is generated in South Africa from sale of
concentrate to Rustenburg Platinum Mines Limited.
Cash and cash equivalents
At times when the Group`s cash position is positive, cash deposits are made
with financial institutions having superior local credit ratings.
(ii)Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group ensures that there is
sufficient capital in order to meet short term business requirements, after
taking into account cash flows from operations and the Group`s holdings of
cash and cash equivalents. This is facilitated via an Operating Cash Flow
Shortfall Facility ("OCSF"). The Group`s cash and cash equivalents are
invested in business accounts which are available on demand.
The Group operates in South Africa and is subject to currency exchange
controls administered by the South African Reserve Bank ("SARB"). South
African law provides for exchange control regulations that restrict the export
of capital. The exchange control regulations, which are administered by SARB,
regulate transactions involving South African residents, including legal
entities, and limit a South African company`s ability to borrow from and repay
loans to non-residents and to provide guarantees for the obligations of its
affiliates with regard to funds obtained from non-residents.
A portion of the Company`s funding for its South African operations consist of
loans advanced to its South African subsidiaries from subsidiaries that are
non-residents of South Africa. The Company is in compliance with SARB
regulations and is therefore not subject to restrictions on the ability of its
South African subsidiaries to transfer funds to the Company or to other
subsidiaries. In addition, the SARB has introduced various measures in recent
years to relax the exchange controls in South Africa to entice foreign
investment in the country. However, if more burdensome exchange controls were
proposed or adopted by the SARB in the future, or if the Company was unable to
comply with existing SARB regulations, such exchange control regulations could
restrict the ability of the Company and its subsidiaries to repatriate funds
needed to effectively finance the Company`s operations.
The maturity profile of the contractual cash flows of financial instruments,
including scheduled interest payments on loans and borrowings, at 31 December
were as follows:
2011 2012 2013
2010
Non-derivative financial
liabilities
Loans and borrowings 94,401,663* 15,253,536 28,707,198
Trade and other payables 20,077,869 - -
Total 114,479,532 15,253,536 28,707,198
Derivative financial
liabilities
Interest rate swap - 4,969,563 -
Total 2010 114,479,532 20,223,099 28,707,198
2010 2011 2012
2009
Non-derivative financial
liabilities
Loans and borrowings - 4,099,586 18,051,538
Trade and other payables 11,677,520 - -
Total 11,677,520 4,099,586 18,051,538
Derivative financial
liabilities
Interest rate swap - - 1,590,945
Total 2009 11,677,520 4,099,586 19,642,483
* - Refer note 19
Continued
2014 Thereafter Total
2010
Non-derivative
financial liabilities
Loans and borrowings 27,186,483 941,834,737 1,107,383,617
Trade and other - - 20,077,869
payables
Total 27,186,483 941,834,737 1,127,461,486
Derivative financial
liabilities
Interest rate swap - - 4,969,563
Total 2010 27,186,483 941,834,737 1,132,431,049
2013 Thereafter Total
2009
Non-derivative
financial liabilities
Loans and borrowings 53,183,133 991,102,981 1,066,437,238
Trade and other - - 11,677,520
payables
Total 53,183,133 991,102,981 1,078,114,758
Derivative financial
liabilities
Interest rate swap - - 1,590,945
Total 2009 53,183,133 991,102,981 1,079,705,703
(ii)Interest rate risk
As a result of the Group aquiring the Bokoni business during 2009, the Group
has secured loan facilities with Standard Chartered Bank plc ("Standard
Chartered") and Rustenburg Platinum Mines Limited ("RPM"). Standard Chartered
provided a loan of $75.5 million (ZAR 500 million) and RPM provided a loan of
$72.5 million (ZAR 480 million) to the Group which is subject to interest rate
risk.
The Bokoni acquisition was partially financed by a $111 million (ZAR 750
million) senior debt facility ("Senior debt facility") from Standard Chartered
provided to Plateau, of which $74 million (ZAR 500 million) was drawn down on
1 July 2009. The remaining $37 million (ZAR 250 million) is available for
interest roll-up during the three year period starting 1 July 2009. The term
of the Senior debt facility is nine years with an interest and capital
repayment holiday during the first three years. The Senior debt facility bears
interest equal to the Johannesburg Inter Bank Agreed Rate (5.965% at 31
December 2010) plus 4.5% applicable margin and 1.27% mandatory cost. Also
refer to note 19.
The Group has entered into an interest rate swap arrangement with Standard
Chartered to fix the variable interest rate on $74 million (ZAR 500 million)
of the principal amount of the loan at 14.695% which arrangement expires on 31
July 2012.
A 100 basis point change in the interest rate at 31 December 2010 on the
Standard Chartered loan and the RPM loan would have changed the loss for the
year by approximately $1,337,459 (2009: $681,000). This analysis assumes that
all other variables remain constant.
(iv)Foreign currency risk
The Group, from time to time, enters into transactions for the purchase of
supplies and services denominated in foreign currency. As a result, the Group
is subject to foreign exchange risk from fluctuations in foreign exchange
rates. The Group has not entered into any derivative or other financial
instruments to mitigate this foreign exchange risk.
Within the Group, certain loans between Group entities amounting to $49.3
million (2009: $48.6 million) are exposed to foreign exchange fluctuations. A
10% change in the $/ZAR exchange rate at 31 December 2010 would have resulted
in an increase/decrease of $4.9 million (2009: $4.9 million) in equity. The
Group has no significant external exposure to foreign exchange risk. All loans
and borrowings are denominated in ZAR (refer note 19).
(v)Commodity price risk
The value of the Group`s revenue and resource properties depends on the prices
of PGM`s and their outlook. The Group does not hedge its exposure to
commodity price risk. PGM prices historically have fluctuated widely and are
affected by numerous factors outside of the Group`s control, including, but
not limited to, industrial and retail demand, forward sales by producers and
speculators, levels of worldwide production, and short-term changes in supply
and demand because of hedging activities.
(vi)Capital risk management
The primary objective of managing the Group`s capital is to ensure that there
is sufficient capital available to support the funding and operating
requirements of the Group in a way that optimises the cost of capital,
maximizes shareholders` returns, matches the current strategic business plan
and ensures that the Group remains in a sound financial position.
The Group manages and makes adjustments to the capital structure which
consists of debt and equity as and when borrowings mature or when funding is
required. This may take the form of raising equity, market or bank debt or
hybrids thereof. The Group may also adjust the amount of dividends paid, sell
assets to reduce debt or schedule projects to manage the capital structure.
Anooraq`s ability to raise new equity in the equity capital markets is subject
to the mandatory requirement that Pelawan Investments (Proprietary) Limited
("Pelawan"), its majority Black Economic Empowerment ("BEE") shareholder,
retain a 51% fully diluted shareholding in the Company up until 1 January
2015, as required by covenants given by Pelawan and Anooraq in favour of the
Department of Mineral Resources ("DMR"), the SARB and Anglo Platinum.
There were no changes to the Group`s approach to capital management during the
year.
(vii)Summary of the carrying value of the Group`s financial instruments
At 31 December 2010 Loans and Financial Derivative
receivables liabilities financial
at amortised liabilities
cost
Platinum Producers` 2,862,075 - -
Environmental Trust
Trade and other receivables 33,847,529 - -
Cash and cash equivalents 25,764,590 - -
Restricted cash 1,377,263 - -
Loans and borrowings 347,300 716,936,362 -
Trade and other payables - 20,077,869 -
Derivative - Interest rate - - 4,969,563
swap(1)
At 31 December 2009 Loans and Financial Derivative
receivables liabilities financial
at amortised liabilities
cost
Platinum Producers` 2,578,131 - -
Environmental Trust
Trade and other receivables 22,082,599 - -
Cash and cash equivalents 30,947,511 - -
Restricted cash 1,291,348 - -
Loans and borrowings - 555,509,417 -
Trade and other payables - 11,677,520 -
Derivative - Interest rate - - 1,590,945
swap*
* - The interest rate swap is at a level 2 in the fair value hierarchy as the
fair value is compiled from the swap curve and quoted markets that are
available.
The loans and borrowings carrying value compared to fair value is as follows:
31 December 2010 31 December 2009
Carrying Fair value Carrying Fair value
value value
Loans and 716,936,362 754,066,515 555,509,417 555,509,417
borrowings
The fair value of all other non-derivative financial instruments approximates
carrying value.
7. PROPERTY, PLANT AND EQUIPMENT
Summary
31 December 31 December
2010 2009
Cost
Balance at beginning of year 707,131,018 540,482
Arising from business combinations (refer - 725,226,891
note 34)
Additions 494,095 31,478
Transferred from capital work-in-progress 260,839,548 9,382,489
Disposals (544,766) (49,072)
Adjustment to rehabilitation assets 144,952 2,691,883
Effect of translation 64,583,007 (30,693,133)
Closing Balance 1,032,647,854 707,131,018
Accumulated depreciation and impairment
losses
Balance at beginning of year 13,737,282 70,847
Depreciation for the year 31,397,522 13,557,111
Disposals (499,587) -
Effect of translation 3,106,104 109,324
Closing Balance 47,741,321 13,737,282
Carrying value 984,906,533 693,393,736
2010 Total Mining Plant and
Development and Equipment
Infrastructure
Cost
Balance at beginning 707,131,018 547,552,355 117,808,441
of year
Transfer between - 56,769,748 (46,182,134)
asset classes
Additions 494,095 404,943 61,112
Transferred from 260,839,548 195,269,087 36,141,848
capital work-in-
progress
Disposals (544,766) (85,910) (229,435)
Adjustment to 144,952 144,952 -
rehabilitation
assets
Effect of 64,583,007 49,555,801 10,222,081
translation
Closing Balance 1,032,647,854 849,610,976 117,821,913
Accumulated
depreciation and
impairment losses
Balance at beginning 13,737,282 5,226,244 6,121,393
of year
Transfer between - 17,315,108 (11,007,946)
asset classes
Depreciation for the 31,397,522 19,020,752 6,274,755
year
Disposals (499,587) (85,910) (229,435)
Effect of 3,106,104 1,696,367 830,498
translation
Closing Balance 47,741,321 43,172,561 1,989,265
Carrying Value 984,906,533 806,438,415 115,832,648
Continued
2010 Buildings Motor Vehicles Furniture and
Fittings
Cost
Balance at beginning 39,632,116 1,495,527 642,579
of year
Transfer between (3,452,419) (7,135,195) -
asset classes
Additions 564 20,431 7,045
Transferred from 19,853,568 9,575,045 -
capital work-in-
progress
Disposals (24,483) (204,938) -
Adjustment to - - -
rehabilitation
assets
Effect of 3,992,766 770,163 42,196
translation
Closing Balance 60,002,112 4,521,033 691,820
Accumulated
depreciation and
impairment losses
Balance at beginning 1,893,570 286,996 209,079
of year
Transfer between (3,450,033) (2,857,129) -
asset classes
Depreciation for the 1,813,154 4,157,702 131,159
year
Disposals (24,483) (159,759) -
Effect of 251,071 305,201 22,967
translation
Closing Balance 483,279 1,733,011 363,205
Carrying Value 59,518,833 2,788,022 328,615
2009 Total Mining Plant and
Development and Equipment
Infrastructure
Cost
Balance at beginning 540,482 - -
of year
Arising from 725,226,891 568,739,630 120,784,234
business combination
(refer note 34)
Additions 31,478 - -
Transferred from 9,382,489 260,939 2,145,453
capital work-in-
progress
Disposals (49,072) - -
Adjustment to 2,691,883 2,691,883 -
rehabilitation
assets
Effect of (30,693,133) (24,140,097) (5,121,246)
translation
Closing Balance 707,131,018 547,552,355 117,808,441
Accumulated
depreciation and
impairment losses
Balance at beginning 70,847 - -
of year
Depreciation for the 13,557,111 5,185,702 6,073,907
year
Effect of 109,324 40,542 47,486
translation
Closing Balance 13,737,282 5,226,244 6,121,393
Carrying Value 693,393,736 546,200,612 111,687,048
Continued
2009 Buildings Motor Vehicles Furniture and
Fittings
Cost
Balance at beginning - - 540,482
of year
Arising from 34,114,184 1,528,701 60,142
business combination
(refer note 34)
Additions - 19,629 11,849
Transferred from 6,915,047 61,050 -
capital work-in-
progress
Disposals - (49,072) -
Adjustment to - - -
rehabilitation
assets
Effect of (1,397,115) (64,781) 30,106
translation
Closing Balance 39,632,116 1,495,527 642,579
Accumulated
depreciation and
impairment losses
Balance at beginning - - 70,847
of year
Depreciation for the 1,878,881 284,770 133,851
year
Effect of 14,689 2,226 4,381
translation
Closing Balance 1,893,570 286,996 209,079
Carrying Value 33,864,045 1,208,531 433,500
Certain assets are encumbered (refer to note 19).
The recoverable amount of mining assets and goodwill reviewed for impairment
is determined based on value-in-use calculations. All mining assets and
goodwill are allocated to one cash-generating-unit ("CGU"). Key assumptions
relating to this valuation include the discount rate and cash flows used to
determine the value-in-use. Future cash flows are estimated based on
financial budgets approved by management which is based on the mine`s life-of-
mine plan. Management determines the expected performance of the mine based
on past performance and its expectations of market developments which are
incorporated into a life-of-mine plan.
Key assumptions used in the value-in-use calculation of the impairment
assessment of mining assets were the following:
- Life-of-mine - 34 years
- South African post-tax real discount rate - 9.67% (the weighted average cost
of capital for Bokoni)
- Range of PGM prices - based on market expectations. Initial price of
US$1,825/oz for platinum in 2011
- Range of ZAR/US$ exchange rates - based on market expectations. Initial
exchange rate of ZAR7.27/US$ used in 2011
- South African inflation - long-term inflation rate of 5.5%
8. CAPITAL WORK-IN-PROGRESS
Capital work-in-progress consists of mine development and infrastructure costs
relating to the Bokoni Mine and will be transferred to property, plant and
equipment when the relevant projects are commissioned.
31 December 31 December
2010 2009
Balance at beginning of year 235,838,915 -
Arising from business combination (refer - 216,194,965
note 34)
Additions 28,193,472 24,418,832
Transfer to property, plant and equipment (260,839,548) (9,382,489)
Capitalisation of borrowing costs 8,271,379 13,580,559
Impairment (345,123) -
Effect of translation (807,122) (8,972,952)
10,311,973 235,838,915
Capital work-in-progress is funded through cash generated from operations and
available loan facilities (refer note 19).
9. INTANGIBLE ASSETS
31 December 31 December
2010 2009
Cost
Balance at beginning of year - -
Additions 3,328,100 -
Effect of translation 144,900 -
Balance at end of year 3,473,000 -
Accumulated amortisation and impairment
losses
Balance at beginning of year - -
Amortisation for the year 180,039 -
Effect of translation 12,905 -
Balance at end of year 192,944 -
Carrying value 3,280,056 -
The intangible asset relates to the implementation of a new SAP system
throughout the Group. The asset will be amortised on a straight line basis
over three years.
10. MINERAL PROPERTY INTERESTS
31 December 31 December
2010 2009
Balance at beginning of year 13,223,703 4,200,000
Transfer from equity accounted investee - 2,552,701
(refer note 12)
Asset acquisition (refer note 34) - 6,592,523
Effect of translation 492,680 (121,521)
13,716,383 13,223,703
The Group`s mineral property interest consists of various early stage
exploration projects as detailed below:
Ga-Phasha
In January 2004, Anooraq and Pelawan combined their respective PGM assets,
comprising Anooraq`s Northern and Western Limb PGM projects and Pelawan`s 50%
participation interest in the Ga-Phasha Project ("Ga-Phasha Project") on the
Eastern Limb of the Bushveld Complex in South Africa. The Ga-Phasha property
consists of four farms - Portion 1 of Paschaskraal 466KS, and the whole of
farms Klipfontein 465KS, De Kamp 507KS and Avoca 472KS - covering an area of
approximately 9,700 hectares.
As of 1 July 2009, the joint venture agreements terminated and Ga-Phasha
Platinum Mines (Proprietary) Limited ("GPM"), a wholly-owned subsidiary of
Bokoni Holdco, acquired the respective interest in the assets relating to the
Ga-Phasha Project. Anooraq owns an effective 51% interest in the Ga-Phasha
Project.
Anooraq increased its interest in the GPM exploration project assets from 50%
to 51% through the transaction discussed in note 34.
Work on the Ga-Phasha Project is continuing towards the preparation of a
feasibility study. The mineral title relating to the Ga-Phasha Project is held
by GPM.
Platreef
As of 1 July 2009, the Group holds an effective 51% in Platreef properties
located on the Northern Limb of the Bushveld Igneous Complex ("BIC") in South
Africa. The Group has received conversion to new order prospecting rights in
respect of all Platreef mineral properties.
Boikgantsho
As of 1 July 2009, the Boikgantsho joint venture agreements terminated and
Boikgantsho Platinum Mine (Proprietary) Limited ("BPM"), a private company
incorporated under the laws of South Africa, a wholly-owned subsidiary of
Bokoni Holdco, acquired the interest in and assets relating to the Boikgantsho
Project ("Boikgantsho Project"). Anooraq owns an effective 51% interest in the
Drenthe 778LR ("Drenthe")and Witrivier 777LR ("Witrivier") farms and a portion
of Mogalakwena`s adjacent Overysel 815LR farm. These farms are located on the
Northern Limb of the Bushveld Complex. The Group has received new order
prospecting rights in respect of the Drenthe and Witrivier mineral properties
which have been transferred to BPM.
Kwanda
As of 1 July 2009, the Kwanda joint venture agreements terminated and Kwanda
Platinum Mine (Proprietary) Limited, a private company incorporated under the
laws of South Africa, a wholly-owned subsidiary of Bokoni Holdco, acquired the
interest in assets relating to the Kwanda Project ("Kwanda Project"). Anooraq
owns an effective 51% interest in this project. The Group received conversion
to new order prospecting rights for the Kwanda North and Kwanda South
properties.
Rietfontein
The Group has entered into a settlement agreement (the "Agreement") effective
11 December 2009 with Ivanhoe Nickel & Platinum Ltd. ("Ivanplats") to replace
and supersede the 2001 agreement relating to the Rietfontein property located
on the Northern Limb of the BIC. The Agreement settles the arbitration process
relating to disagreements with respect to the exploration activities
undertaken at the Rietfontein property. Salient terms of the new Agreement are
as follows:
- Both parties abandon their respective claims under dispute forming the
subject matter of arbitration.
- The existing joint venture ("JV") between the parties is amended such that
the current Rietfontein JV is extended to incorporate a defined area of
Ivanplats` adjacent Turfspruit mineral property. Both parties retain their
existing prospecting rights in respect of mineral properties in their own
names but make these rights and technical information available to the
extended JV ("the Extended JV").
- Anooraq will be entitled to appoint a member to the Extended JV technical
committee and all technical programmes going forward will be carried out with
input from Anooraq.
- Anooraq is awarded a 6% free carried interest in the Extended JV, provided
that the Extended JV contemplates an open pit mining operation, incorporating
the Rietfontein mineral property. Anooraq has no financial obligations under
the Extended JV terms and Ivanplats is required to fund the entire exploration
programme to feasibility study with no financial recourse to Anooraq. On
delivery of the feasibility study, Anooraq may elect to either:
- Retain a participating interest of 6% in the Extended JV and finance its
pro rata share of the project development going forward; or
- Relinquish its participating interest of 6% in the Extended JV in
consideration for a 5% net smelter return royalty in respect of mineral
products extracted from those areas of the Rietfontein mineral property
forming part of the Extended JV mineral properties.
11. GOODWILL
31 December 31 December
2010 2009
Balance at beginning of the year 12,382,569 -
Arising from business combination (refer - 12,932,712
note 34)
Effect of translation 803,383 (550,143)
13,185,952 12,382,569
For impairment considerations, refer note 7. The goodwill relates to the
Bokoni Mine.
12. INVESTMENT IN JOINT VENTURES
31 December 31 December
2010 2009
Balance at beginning of the year - 2,518,971
Equity loss - exploration expenses - (219,849)
Effect of translation - 253,579
Transfer to mineral property interest (refer - (2,552,701)
note 10)
- -
13. PLATINUM PRODUCERS` ENVIRONMENTAL TRUST
The Group contributes to the Platinum Producers` Environmental Trust annually.
The Trust was created to fund the estimated cost of pollution control,
rehabilitation and mine closure at the end of the lives of the Group`s mines.
Contributions are determined on the basis of the estimated environmental
obligation over the life of a mine. The Group`s share of the cash deposits
made is reflected in non-current cash deposits held by Platinum Producers`
Environmental Trust.
The non-current cash deposits are restricted in use as it is to be used
exclusively for pollution control, rehabilitation and mine closure at the end
of lives of the Group`s mines.
14. INVENTORIES
31 December 31 December
2010 2009
Ore stock piles - 1,091,860
15. TRADE AND OTHER RECEIVABLES
Financial assets 31 December 31 December
2010 2009
Trade receivables 33,335,405 21,501,503
Other trade receivables 512,124 581,096
33,847,529 22,082,599
Non-financial assets
Prepayments 1,465,826 940,108
Lease debtor 1,132 5,313
Value added tax 91,100 -
Employee receivables 611,551 403,898
Other receivables 172,972 34,585
36,190,110 23,466,503
The Group has one major customer with an outstanding account within the agreed
payment terms. As a result, no allowance for impairment losses has been
recognised.
16. CASH AND CASH EQUIVALENTS
31 December 31 December
2010 2009
Bank balances 25,737,824 30,931,903
Cash on hand 26,766 15,608
25,764,590 30,947,511
17. RESTRICTED CASH
Restricted cash - ESOP Trust 1,377,263 1,291,348
Restricted cash consist of cash and cash equivalents held by the Bokoni
Platinum Mine ESOP Trust, a consolidated SPE, which is not available to fund
operations.
18. SHARE CAPITAL
Authorised and issued
Number of shares
31 December 31 December
2010 2009
Common shares with no par value 201,813,472 201,743,472
B2 Convertible Preference shares of $0.1481 115,800 115,800
(ZAR 1) each
B3 Convertible Preference shares of $0.1481 111,600 111,600
(ZAR 1) each
The Company`s authorised share capital consists of an unlimited number of
common shares without par value. During 2009 cumulative convertible redeemable
"B" preference shares were issued to facilitate the transaction as discussed
in note 34.
Share capital 31 December 31 December
2010 2009
Share capital 74,035,621 73,896,147
Share issue costs (2,183,033) (2,183,033)
71,852,588 71,713,114
The Company issued the following common shares on 1 July 2009:
- Anglo Platinum contributed an amount of $15.4 million (ZAR 103.8 million) to
the Anooraq Community Participation Trust. Approximately $10.9 million was
used to acquire shares of the Company. As of 1 July 2009, the Company issued
9,799,505 common shares at $1.11 to the Anooraq Community Participation Trust.
- Anglo Platinum contributed approximately $6.8 million (ZAR 45.6 million) to
the Bokoni Platinum Mine ESOP Trust ("ESOP Trust"), of which $5 million was
used to acquire shares of the Company. As of 1 July 2009, the Company issued
4,497,062 common shares at $1.11 to the ESOP Trust. The ESOP Trust is
consolidated as a SPE by the Group (refer below).
Treasury shares 4,991,726 4,991,726
Treasury shares relate to shares held by the ESOP Trust in Anooraq, which is
consolidated by the Group.
Preference shares
31 December 31 December
2010 2009
B2 Convertible Preference shares 17,150 17,150
B3 Convertible Preference shares 16,528 16,528
Share premium 162,876,322 162,876,322
162,910,000 162,910,000
$162.9 million (ZAR 1.1 billion) was raised through share-settled financing
with the issue of cumulative mandatory convertible "B" preference shares ("B
Prefs") to RPM and a subsidiary of Pelawan to finance the acquisition
discussed in note 34. The final effects of the share settled financing will
result in RPM receiving a fixed number of 115.8 million common shares of
Anooraq and Pelawan, Anooraq`s controlling shareholder, receiving a fixed
number of 111.6 million common shares.
These preference shares are convertible upon the earlier of the date of
receipt of a conversion notice from RPM and 1 July 2018.
A dividend will be declared on the last business day immediately prior to the
conversion date, in terms of a formula set out in the preference share
subscription agreement.
19. LOANS AND BORROWINGS
31 December 31 December
2010 2009
Senior Term Loan Facility 93,412,907 76,135,180
Capitalised transaction costs (4,251,970) (4,628,874)
Redeemable "A" preference shares (related 418,050,018 352,664,289
party)
Rustenburg Platinum Mines - Funding loans 89,370,192 72,778,897
(related party)
Rustenburg Platinum Mines - OCSF (related 111,208,925 54,050,064
party)
Rustenburg Platinum Mines - Interest free 4,365,567 4,099,586
loan (related party)
Rustenburg Platinum Mines - commitment 1,122,854 410,275
fees (related party)
Other 3,657,869 -
716,936,362 555,509,417
Short-term portion
Senior Term Loan Facility (93,412,907) -
Other (988,756) -
(94,401,663) -
Non-current liabilities 622,534,699 555,509,417
The carrying value of the Group`s loans and borrowings changed during the year
as follows:
31 December 31 December
2010 2009
Balance at beginning of the year 555,509,417 14,703,416
Senior Term Loan Facility - 74,050,000
Rustenburg Platinum Mine - OCSF 39,043,300 51,330,745
Arising from business combination - 493,666,666
Rustenburg Platinum Mine - Interest 599,442 4,267,913
free loan
Repaid as part of acquisition (refer - (251,770,000)
note 34)
Redeemable "A" preference shares - 177,720,000
Redemption of "A" preference shares - (1,066,320)
Loans repaid (590,537) (18,049,078)
Loan costs capitalised - (4,857,128)
Commitment fee capitalised (640,086) (407,076)
Finance expenses accrued 74,436,897 33,028,228
Amortisation of loan costs 631,929 449,149
Commitment fee liability 640,086 407,076
Interest rate swap adjustment (354,093) -
Other 3,328,100 -
Effect of translation 44,331,907 (17,964,174)
Balance at end of the year 716,936,362 555,509,417
Short-term portion
Senior Term Loan Facility (93,412,907) -
Other (988,756) -
(94,401,663) -
Non-current portion 622,534,699 555,509,417
The terms and conditions for the outstanding borrowings at 31 December 2010
are as follows:
Senior Term Loan Facility
The senior term facility is for a period of nine years and is payable in 12
semi-annual instalments beginning 31 January 2013. The loan accrues interest
which is to be paid semi-annually beginning 31 January 2013. During the first
36 months, interest will only be paid if there are available funds. If there
are no available funds, the accrued interest will roll-up into the roll-up
interest loan balance. At 31 December 2010, $17.9 million (ZAR 118.6 million)
has rolled up. This roll-up interest is limited to $37.8 million (ZAR 250
million). Interest is calculated at a variable rate linked to the 3 month
JIBAR plus applicable margin and mandatory cost (11.735 % at 31 December
2010).
The Group has entered into an interest rate swap arrangement with Standard
Chartered to fix the variable interest rate on $75.5 million (ZAR 500 million)
of the principal amount of the loan at 14.695%.
At 31 December 2010, the Group did not meet certain covenants specified in the
senior term facility agreement. The lenders have subsequently waived their
rights and entitlements arising from the failure of the Group to meet the
specific covenants. Notwithstanding the waiver received from the lenders and
the fact that there is currently no legal or constructive obligation to settle
the senior term facility within the next 12 months, IAS 1, Presentation of
Financial Statements, requires that the senior term facility be disclosed as a
current liability.
Redeemable "A" Preference Shares
The "A" preference shares were issued by Plateau and Bokoni Holdco to
Rustenburg Platinum Mine (related party) as part of the business combination
and liabilities assumed (refer note 34). These shares are cumulative mandatory
redeemable shares which attract a fixed annual cumulative dividend of 12%. The
Group is obligated to redeem the outstanding amount including undeclared
dividends which should have been declared within six years (1 July 2015) of
issue, to the extent that the Company is in the position to redeem the shares.
Any preference shares not redeemed in six years must be redeemed after nine
years (1 July 2018).
During the three year period prior to the initial maturity date, Plateau will
be required to undertake a mandatory debt refinancing and use 100% of such
external debt funding raised to settle the following amounts owing by Plateau
to RPM at such time, in the following order:
(i)any outstanding amounts of the Standby Facility;
(ii)any outstanding amounts of the OCSF; and
(iii)the redemption amount payable upon the redemption of any outstanding
Redeemable "A" Preference Shares. Plateau is obliged to undertake the
refinancing process but if the debt is not re-financeable based upon the debt
markets at that time then there is no sanction on Plateau. At the acquisition
date, 1 July 2009, an amount of $1.1 million (ZAR 7.2 million) was repaid with
surplus cash available.
Rustenburg Platinum Mines - Funding Loans
This loan is between RPM and Bokoni Holdco and consists of the retention of
the original RPM claims for an amount of $72.5 million (ZAR480.3 million)
The $72.5 million is payable in semi-annual instalments starting 31 January
2013. The unpaid principal balance will bear interest at the interest rate and
on the same terms as the Senior Term Loan Facility.
Rustenburg Platinum Mines - OCSF
Under the Operating Cash flow Shortfall Facility ("OCSF"), if funds are
requested by Bokoni (and authorised by Bokoni Holdco), RPM shall advance such
funds directly to Bokoni. At 31 December 2010, $111.9 million (ZAR741 million)
of the available $222 million (ZAR1.47 billion) has been advanced by RPM. The
remaining facility may be utilised only for the purposes of operating or
capital expenditure cash shortfalls at Bokoni.
The OCSF Loan is payable in semi-annual instalments starting 31 January 2013
to the extent cash is available after payment of the Senior Term Facility and
the RPM funding loan. The unpaid principal balance on the OCSF will bear
interest at a fixed rate of 15.84%, compounded quarterly in arrears.
Rustenburg Platinum Mines - Standby Facility
The Group secured an agreement with RPM to access RPM`s attributable share of
the Bokoni Holdco cash flows ("the Standby Facility") up to a maximum of 29%
of all free cash flow generated from the Bokoni Mine to meet its repayment
obligations in terms of the Senior Term Loan Facility. This facility will bear
interest at the prime rate of interest in South Africa (currently 9%)
The standby facility will bear interest at the prime rate of interest in South
Africa and has a final maturity date on 1 July 2018. As at 31 December 2010,
no draw-down was made on the standby facility.
Rustenburg Platinum Mines - Interest-free loan
This loan is between RPM and Bokoni Holdco. The loan is interest-free and
repayable 12 months and 1 day after requested by RPM.
Other
This loan is between Plateau and the Deloitte Mining Shared Service Centre
("DMSSC") relating to the financing of the new SAP system (refer note 9). The
loan bears interest at prime (9% at 31 December 2010) plus 2% and is payable
in quarterly instalments starting 31 March 2011.
Security
The Senior Term Loan Facility is secured through various security instruments,
guarantees and undertakings provided by the Group against 51% of the cash
flows generated by the Bokoni Mine, together with 51% of the Bokoni Mine asset
base. The Standby Facility, OCSF and the "A" preference shares rank behind the
Senior Term Loan Facility for security purposes.
20. DEFERRED TAX
Deferred tax liabilities and assets on the statement of financial position
relate to the following:
31 December 31 December
2010 2009
Deferred tax liabilities
Property plant and equipment (including 277,619,568 257,251,314
capital work-in-progress)
Prepayments 399,696 253,564
Environmental trust fund contributions 638,540 599,636
Inventories - 305,721
Gross deferred tax liability 278,657,804 258,410,235
Deferred tax assets
Provision for environmental liabilities (2,291,658) (1,965,891)
Unredeemed capital expenditure (32,497,913) (22,440,284)
Accrual for employee leave liabilities (2,057,664) (2,002,797)
Provision for share-based compensation (333,964) (40,974)
Calculated tax losses (32,671,048) (18,476,180)
Gross deferred tax asset (69,852,247) (44,926,126)
Net deferred tax liability 208,805,557 213,484,109
The movement in the net deferred tax liability recognised in the statement of
financial position is as follows:
31 December 31 December
2010 2009
Balance at beginning of year 213,484,109 -
Arising from business combination (refer - 231,040,913
note 34)
Current year (18,868,120) (7,668,639)
Prior year 1,578,080 -
Effect of translation 12,611,488 (9,888,165)
208,805,557 213,484,109
As at 31 December the Group had not recognised the following net deferred tax
assets:
31 December 31 December
2010 2009
Deferred tax assets 12,430,114 12,086,895
The unrecognised temporary differences
are:
Unredeemed capital expenditure 2,118,688 1,989,602
Tax losses 9,806,351 8,659,662
Foreign exchange losses 505,076 1,437,631
12,430,114 12,086,895
Deferred tax assets have not been recognised for the above temporary
differences as it is not probable that the respective Group entities to which
they relate will generate future taxable income against which to utilise the
temporary differences.
Gross calculated tax losses expire as follows:
2010 - (1,735,875)
2011-2016 - (4,456,781)
2012-2016 (4,456,781) -
Thereafter (8,400,233) (7,583,843)
Indefinitely (140,216,282) (84,617,158)
(153,073,296) (98,393,657)
21. PROVISIONS
31 December 31 December
2010 2009
Non-current provisions
Rehabilitation provision
Balance at beginning of the year 7,021,038 -
Arising from business combination (refer - 4,308,137
note 34)
Capitalised to property, plant and 144,952 2,691,883
equipment
Unwinding of interest 515,626 181,813
Effect of translation 502,878 (160,795)
Balance at end of year 8,184,494 7,021,038
Future net obligations
Undiscounted rehabilitation cost 13,723,729 12,642,974
Amount invested in environmental trust (2,862,075) (2,578,131)
fund (refer note 13)
Total future net obligation - 10,861,654 10,064,843
Undiscounted
The Group intends to finance the ultimate rehabilitation costs from the money
invested in environmental trust funds, ongoing contributions as well as the
proceeds on sale of assets and metals from plant clean-up at the time of mine
closure.
Key assumptions used in determining the provision:
Discount period 20 years 20 years
South African discount rate (risk free 8.4% 8.4%
rate)
South African inflation 5.2% 5.2%
Sensitivity Inflation rate Discount
rate
1% increase 1,704,848 (1,310,453)
1% decrease (1,423,175) 1,576,048
22. DERIVATIVE LIABILITY
31 December 31 December
2010 2009
Interest rate swap 4,969,563 1,590,945
23. TRADE AND OTHER PAYABLE
31 December 31 December
2010 2009
Financial liabilities
Trade payables 11,867,027 8,143,426
Arbitration settlement * 2,303,614 -
Other payables 5,907,228 3,534,094
20,077,869 11,677,520
Non-financial liabilities
Payroll accruals 2,876,127 1,455,234
Leave liabilities 7,606,100 7,322,160
Share-appreciation rights accrual 1,170,899 146,334
Lease accrual 99,632 93,583
Restructuring costs - 1,807,996
Operational accruals - 4,128,123
Deferred income 13,705 -
Value added tax - 317,697
31,844,332 26,948,647
*- This relates to the additional amount that QuestCo (Proprietary) Limited
and North Corporate Finance Advisory Services Limited considered payable to
them in respect of corporate advisory services rendered by them pursuant to
the implementation of the Bokoni acquisition on 1 July 2009. This matter was
resolved via an arbitration process finding in favour of Questco (Proprietary)
Limited and North Corporate Finance Advisory Services Limited during 2010. As
a result, the Group was liable to settle an amount of ZAR12.4 million ($1.9
million) for services rendered. The liability includes interest of ZAR 2.8
million ($0.4 million) that was also awarded from 1 July 2009.
24. REVENUE
31 December 31 December 31 December
2010 2009 2008
Revenue from mining operations by
commodity:
Platinum 89,250,257 39,282,459 -
Palladium 20,185,949 6,582,056 -
Rhodium 14,033,214 6,439,392 -
Nickel 15,120,505 6,278,262 -
Other 9,696,908 4,045,699 -
148,286,833 62,627,868 -
Revenue consists of the sale of concentrate to Rustenburg Platinum Mines
Limited (a related party).
25. COST OF SALES
31 December 31 December 31 December
2010 2009 2008
Cost of sales includes:
Labour costs 79,399,203 39,333,125 -
Stores costs 25,468,848 11,036,693 -
Power and compressed air 9,619,321 4,481,837 -
Contractors cost 9,171,193 2,742,494 -
Other costs 17,135,596 11,022,676 -
Inventory movement 1,084,930 (1,083,390) -
Depreciation 31,272,097 13,433,032 -
173,151,188 80,966,467 -
26. FINANCE INCOME
31 December 31 December 31 December
2010 2009 2008
Interest received - Financial
assets at amortised cost
Platinum Producers` Environmental 108,504 102,664 -
Trust
Bank accounts 1,005,138 426,621 179,119
1,113,642 529,285 179,119
27. FINANCE EXPENSES
31 December 31 December 31 December
2010 2009 2008
Financial liabilities at
amortised cost
Bank and short-term facilities 13,617 72,158 -
"A" Preference shares (related 39,661,792 19,560,689 -
party)
OCSF and funding facilities 22,779,618 8,439,108 1,848,574
(related party)
Senior Term Loan Facility 11,512,806 5,028,432 -
Interest on fair value of (195,702) 189,173 -
interest rate swap
Other 563,219 324 -
74,335,350 33,289,884 1,848,574
Non-financial liabilities
Notional interest - 515,626 181,813 -
rehabilitation provision
Commitment fees on OCSF 310,177 38,091 -
Transaction fees 631,929 411,058 -
1,457,732 630,962 -
Total finance costs before 75,793,082 33,920,846 1,848,574
interest capitalised
Interest capitalised (8,271,379) (13,580,559 -
)
Total finance costs 67,521,703 20,340,287 1,848,574
The capitalisation rate used to determine the amount of borrowing costs
eligible for capitalisation during the year is 13.2% (2009: 12.95%).
28. LOSS BEFORE INCOME TAX
Loss before income tax as stated includes the following:
31 December 31 December 31 December
2010 2009 2008
Operating lease expense - 360,925 387,131 353,348
buildings
Restructuring costs - 1,784,452 -
Share-based payment expense - 2,333,450 2,185,812 5,385,501
equity settled
Bonus settled via shares - 895,625 -
Cash settled share-based 947,176 145,199 -
payments
Interest rate swap fair value 223,727 (636,529) -
Depreciation and amortisation 31,577,561 13,557,111 61,140
29. INCOME TAX
SA normal taxation 31 December 31 December 31 December
2010 2009 2008
Current tax - prior year - 35,154 -
Deferred tax - prior year 1,578,080 - -
Deferred tax - current year (18,868,120) (7,668,639) -
(17,290,040) (7,633,485) -
Taxation rate reconciliation:
31 December 31 December 31 December
2010 2009 2008
Statutory Canadian tax rate (28.5%) (30.00%) (31.00%)
Other disallowed expenditure 0.13% 1.62% 7.60%
Transaction costs disallowed 0.63% 5.25% -
Preference dividends 8.89% 5.65% -
Equity settled share based 1.10% 1.10% 12.76%
compensation
Investment income not taxable (0.03%) (0.07%) -
Tax adjustments - prior year 1.45% 0.02% -
Deferred tax assets not 0.47% 3.01% 14.30%
recognised
Effect of rate differences 0.28% 0.57% (3.66%)
Effective taxation rate (15.58%) (12.85%) 0.00%
30. OTHER COMPREHENSIVE INCOME NET OF INCOME TAX
Components of other comprehensive income:
31 December 31 December 31 December
2010 2009 2008
Foreign currency translation 6,237,524 (14,072,611) 129,684
differences for foreign
operations
Effective portion of changes in (3,121,650) (731,293) -
fair value of cash flow hedges
Tax effect - - -
3,115,874 (14,803,904) 129,684
Attributable to:
Owners of the Company 800,194 (10,251,876) 129,684
Non-controlling interest* 2,315,680 (4,552,028) -
3,115,874 (14,803,904) 129,684
*- Relates to the foreign currency translation differences for foreign
operations in 2010 and 2009.
31. EARNINGS PER SHARE
The calculation of basic loss per share for the year ended 31 December 2010
was based on the loss attributable to owners of the Company of $51,721,410
(2009: $35,531,631; 2008: 13,970,096), and a weighted average number of common
shares of 424,665,314 (2009: 305,971,455; 2008:185,775,361).
At 31 December 2010, 2,974,169 (2009: 282,584; 2008: Nil) share options were
excluded in determining diluted weighted average number of common shares as
their effect would have been anti-dilutive.
31 December 31 December 31 December
2010 2009 2008
Issued common shares at 1 January 201,743,472 186,640,007 185,208,607
Effect of shares issued in 18,904 9,817,003 566,754
financial year
Treasury shares (4,497,062) (4,497,062) -
Convertible "B" Preference shares 227,400,000 114,011,507 -
- issued on 1 July 2009
Weighted average number of common 424,665,314 305,971,455 185,775,361
shares at 31 December
The basic and diluted loss per share for the year ended 31 December 2010 was
12 cents (2009:12 cents; 2008: 8 cents).
32. CASH UITILISED BY OPERATIONS
31 December 31 December 31 December
2010 2009 2008
Loss before income tax (110,948,846) (59,414,014) (13,970,096)
Adjustments for:
Finance expense 67,521,703 20,340,287 1,848,574
Finance income (1,113,642) (529,285) (179,119)
Non-cash items:
Depreciation and amortisation 31,577,561 13,557,111 61,140
Equity-settled share-based 2,333,450 2,185,812 5,385,501
compensation
Bonus settled via shares 895,658 -
Loss from equity accounted 219,849 235,022
investees
Loss/(Gain) on disposal of 45,179 (69,239) (5,779)
property, plant and equipment
Derivative (profit)/loss (223,727) 636,529 -
Transaction costs - 1,587,959 -
Impairment of assets 345,123 - -
Other 135 (24,166) -
Cash utilised before working (10,463,064) (20,613,499) (6,624,757)
capital changes
Working capital changes
Increase in trade and other (8,719,410) (1,727,856) (2,366)
receivables (i)
Increase /(decrease) in trade and 2,306,757 (4,368,581) 1,278,128
other payables (ii)
Decrease/(increase) in inventories 1,084,930 (1,083,390) -
(iii)
Cash utilised by operations (15,790,787) (27,793,326) (5,348,995)
(i)Increase in trade and other receivables
Opening balance 23,466,503 271,554 269,188
Arising from business combination - 22,477,941 -
(refer note 34)
Closing balance (36,190,110) (23,466,503) (271,554)
Movement for the year (12,723,607) (717,008) (2,366)
Effect of translation 4,004,197 (1,010,848) -
(8,719,410) (1,727,856) (2,366)
(ii)(Decrease)/increase in trade and other payables
Opening balance (26,948,647) (1,798,839) (520,711)
Arising from business combination - (30,845,374) -
(refer note 34)
Closing balance 31,844,332 26,948,647 1,798,839
Movement for the year 4,895,685 (5,695,566) 1,278,128
Effect of translation (2,588,928) 1,326,985 -
2,306,757 (4,368,581) 1,278,128
(iii)Decrease/(increase) in inventories
Opening balance 1,091,860 - -
Arising from business combination - - -
(refer note 34)
Closing balance - (1,091,860) -
Movement for the year 1,091,860 (1,091,860) -
Effect of translation (6,930) 8,470 -
1,084,930 (1,083,390) -
33. SEGMENT INFORMATION
The Group has two reportable segments as described below. These segments are
managed separately based on the nature of operations. For each of the
segments, the Group`s CEO (the Group`s chief operating decision maker) reviews
internal management reports monthly. The following summary describes the
operations in each of the Group`s reportable segments:
- Bokoni Mine - Mining of PGM`s.
- Projects - Mining exploration in Boikgantsho, Kwanda, and Ga-Phasha
exploration projects.
The majority of operations and functions are performed in South Africa. An
insignificant portion of administrative functions are performed in the
Company`s country of domicile.
During the year, the CEO considered earnings before net finance expense,
income tax, depreciation and amortisation ("EBITDA") to be a more appropriate
measure of each segment`s performance as compared to "Loss before income tax".
Accordingly, the EBITDA for each segment has been included. All external
revenue is generated by the Bokoni Mine segment.
31 December 2010
Bokoni Mine Projects Total
Revenue 148,286,833 - 148,286,833
Cost of sales (175,024,817) - (175,024,817)
EBITDA (4,849,754) (485,829) (5,335,583)
Loss before income (100,296,522) (485,829) (100,782,351)
tax
Income tax 15,258,868 - 15,258,868
Depreciation (29,566,864) - (29,566,864)
Finance income 453,911 - 453,911
Finance expense (66,333,814) - (66,333,814)
Total Assets 1,093,388,333 11,541,285 1,104,929,618
Additions to non- 28,660,090 - 28,660,090
current assets
Total Liabilities (789,428,564) (17,030,115) (806,458,679)
Continued
31 December
2009
Bokoni Mine Projects Total Note
Revenue 62,627,868 - 62,627,868
Cost of sales (81,904,961) - (81,904,961) (i)
EBITDA (7,963,578) (180,426,480) (188,390,058) (ii)
Loss before income (39,753,539) (180,426,480) (220,180,019) (iii)
tax
Income tax 6,596,600 - 6,596,600 (iv)
Depreciation (12,542,425) - (12,542,425) (v)
Finance income 102,664 - 102,664 (vi)
Finance expense (19,113,833) - (19,113,833) (vii)
Total Assets 1,013,025,599 10,769,629 1,023,795,228 (viii
)
Additions to non- 24,438,460 - 24,438,460 (ix)
current assets
Total Liabilities (642,004,400) (15,435,136) (657,439,536) (x)
Reconciliations of reportable segment cost of sales, EBITDA, loss before
income tax, income tax, depreciation, finance income, finance expense, assets,
addition to non-current assets and liabilities:
31 December 31 December
2010 2009
(i)Cost of sales
Total cost of sales for reportable (175,024,817) (81,904,961)
segments
Corporate and consolidation adjustments 1,873,629 938,494
Consolidated cost of sales (173,151,188) (80,966,467)
(ii)EBITDA
Total EBITDA for reportable segments (5,335,583) (188,390,058)
Net finance expense (66,408,061) (19,811,002)
Depreciation and amortisation (31,577,561) (13,557,111)
Corporate and consolidation adjustments (7,627,641) 162,344,157
Consolidated loss before income tax (110,948,846) (59,414,014)
(iii)Loss before income tax
Total loss before tax for reportable (100,782,351) (220,180,019)
segments
Corporate and consolidation adjustments (10,166,495) 160,766,005
Consolidated loss before income tax (110,948,846) (59,414,014)
(iv)Income tax
Taxation for reportable segments 15,258,868 6,596,600
Corporate and consolidation adjustments 2,031,172 1,036,885
Consolidated taxation 17,290,040 7,633,485
(v)Depreciation
Depreciation for reportable segments (29,566,864) (12,542,425)
Corporate and consolidation adjustments (2,010,697) (1,014,686)
Consolidated depreciation (31,577,561) (13,557,111)
(vi)Finance income
Finance income for reportable segments 453,911 102,664
Corporate and consolidation adjustments 659,731 426,621
Consolidated finance income 1,113,642 529,285
(vii)Finance expenses
Finance expense for reportable segments (66,333,814) (19,113,833)
Corporate and consolidation adjustments (1,187,889) (1,226,454)
Consolidated finance expense (67,521,703) (20,340,287)
(viii)Total assets
Assets for reportable segments 1,104,929,618 1,023,795,228
Corporate and consolidation adjustments (12,823,363) (9,580,223)
Consolidated assets 1,092,106,255 1,014,215,005
(ix)Additions to non-current assets
Additions to non-current assets for 28,660,090 24,438,460
reportable segments
Corporate and consolidation adjustments 3,355,577 11,850
Consolidated additions to non-current 32,015,667 24,450,310
assets
(x)Total liabilities
Liabilities for reportable segments (806,458,679) (657,439,536)
Corporate and consolidation adjustments (164,281,629) (147,267,849)
Consolidated liabilities (970,740,308) (804,707,385)
34.ACQUISITIONS OF SUBSIDIARY AND NON-CONTROLLING INTERESTS - 2009
Anooraq, through Plateau, acquired 51% controlling interests in Bokoni as well
as an additional one percent interest in several PGM exploration projects,
including the advanced stage Ga-Phasha Project, the Boikgantsho Project, and
the early stage Kwanda Project. The acquisition of the controlling interest
was affected by Plateau acquiring 51% of the shareholding of Bokoni Holdco on
1 July 2009, for an aggregate purchase consideration of $385 million (ZAR 2.6
billion), which includes $251 million used to repay loans and borrowings
assumed in the transaction.
Bokoni, previously 100% owned by Anglo Platinum, is located on the north-
eastern limb of the Bushveld Complex adjacent to the Ga-Phasha Project. The
Bokoni mining operation consists of a vertical shaft and declines to access
the underground development on the Merensky and UG2 Reefs, and two
concentrators.
Pursuant to the terms of the acquisition agreements, Plateau acquired 51% of
the shares in, and claims on shareholders loan account against Bokoni Holdco.
The joint venture agreements in respect of the Ga-Phasha Project, Boikgantsho
Project and Kwanda Project were terminated and these projects were transferred
into separate project companies, established as wholly- owned subsidiaries of
Bokoni Holdco.
Financing
The Group financed the purchase consideration transferred of $385 million (ZAR
2.6 billion) as follows:
- $111 million (ZAR 750 million) of senior debt funding in terms of the
Standard Chartered senior term loan facility (the "Senior Term Loan Facility")
from Standard Chartered Bank plc ("Standard Chartered" or "SCB") provided to
Plateau, of which $74 million (ZAR 500 million) was drawn down on 1 July 2009.
The Group applied approximately $44 million (ZAR 300 million) of the Senior
Term Loan Facility in part settlement of the consideration transferred. Refer
note 19 for details.
On 11 December 2009, 34% of the facility was acceded to First Rand Bank
Limited, acting through its Rand Merchant Bank division ("RMB"). The same
terms apply as per the initial agreement with SCB;
- $177.8 million (ZAR 1.2 billion) through the issue of cumulative mandatory
redeemable "A" preference shares ("A Prefs") of Plateau to RPM (refer note
19); and
- $162.9 million (ZAR 1.1 billion) through the effects of a share settled
financing with the issue of cumulative convertible "B" preference shares ("B
Prefs") to RPM and a subsidiary of Pelawan Investments (Proprietary) Limited.
The final effects of the share settled financing will result in RPM receiving
a total of 115.8 million common shares of Anooraq and Pelawan Investments
(Proprietary) Limited, Anooraq`s controlling shareholder, receiving 111.6
million common shares, to maintain its minimum 51% shareholding in the
Company.
Transaction costs amounting to $15.2 million associated with finalising the
transaction were incurred of which $10.4 million, relating to the acquisition,
was recognised in profit or loss. The remaining costs were capitalised to the
related debt.
Identifiable assets acquired and liabilities assumed
The following summarises the amounts of assets acquired and liabilities
assumed at the acquisition date:
Carrying Fair Value
value
Property, plant and equipment 767,109,345 725,226,891
Capital work in progress 216,194,965 216,194,965
Cash deposits held in Platinum Producers 2,356,993 2,356,993
Environmental Trust
Other non-current assets 741 741
Trade and other receivables 22,477,941 22,477,941
Cash and cash equivalents 3,576,912 3,576,912
Loans and borrowings (owing to RPM) (493,666,666) (493,666,666)
Deferred taxation (60,367,689) (231,040,913)
Provisions (4,308,137) (4,308,137)
Current tax payable (123,034) (123,034)
Trade and other payables (30,845,374) (30,845,374)
Total identifiable net assets 422,405,997 209,850,319
Goodwill on acquisition
Goodwill was recognised as a result of the acquisition as follows:
Total purchase consideration 385,060,000
Assets acquired as part of the transaction (6,592,523)
(refer note 10)
Contributions received from Anglo Platinum (6,741,102)
relating to ESOP Trust
Repayment of loans and borrowings to RPM (251,770,000)
(refer note 19)
Consideration transferred as part of 119,956,375
business combination
Non-controlling interest in Bokoni 102,826,656
Less total identifiable net assets (209,850,319)
At acquisition goodwill, as of 1 July 2009 12,932,712
Anooraq increased its interest in the PGM exploration project assets from 50%
to 51% through the above mentioned transaction. The acquisition of the
additional one percent was accounted for as an asset acquisition (mineral
property interests) and the additional interests were recognised at their
respective fair values amounting to $6.6 million in total.
The consideration transferred was further reduced by $251 million for the
repayment of loans and borrowings owing to RPM as well as contributions
received from Anglo Platinum amounting to $6.8 million relating to the Bokoni
Platinum Mine ESOP Trust, a consolidated SPE, on 1 July 2009.
The contributions to the 2009 revenue and operating loss since acquisition had
the acquisition occurred on 1 January 2009, respectively, are as follows:
2009
Since For the full
acquisition year
Revenue 62,627,868 113,654,693
Loss before income tax (39,753,539) (93,826,099)
35. SHARE OPTIONS
35.1 Equity-settled options
The Group has a share option plan approved by the shareholders that allows it
to grant options, subject to regulatory terms and approval, to its directors,
employees, officers, and consultants to acquire up to 32,600,000 (2009:
32,600,000) common shares. As at 31 December 2010, 13,241,000 options were
outstanding and 19,359,000 options remained available to be granted. On 30
June 2009 the Company obtained shareholder and stock exchange approval to
decrease the exercise price to C$1.29 per option for 8,061,000 share options,
including stock options granted to certain insiders of the Company pursuant to
repricing. The exercise price of each option is set by the Board of Directors
at the time of grant but cannot be less than the market price (less
permissible discounts) on the TSX Venture Exchange. Options have a term of up
to a maximum of ten years (however, the Company has historically granted
options for up to a term of five years), and terminate 30 to 90 days following
the termination of the optionee`s employment or term of engagement, except in
the case of retirement or death. Vesting of options is at the discretion of
the Board of Directors at the time the options are granted. The continuity of
share purchase options is as follows:
Weighted Number of Contractual
average options weighted
exercise average
price remaining
life
(years)
Balance - 31 December 2008 $ 2.72 8,966,000 3.72
Granted 0.86 6,156,000
Cancelled 1.29 (930,000)
Balance - 31 December 2009 $ 1.10 14,192,000 4.32
Granted 1.30 1,240,000
Exercised 0.97 (70,000)
Cancelled 1.02 (717,000)
Expired 1.29 (1,404,000)
Balance - 31 December 2010 $ 1.11 13,241,000 3.97
Options outstanding and exercisable at 31 December 2010 were as follows:
Expiry date Option Number of Number of Weighted
price options options average
outstanding vested life
(years)
15 October 2012 $ 1.29 * 4,145,000 4,145,000 1.8
25 June 2013 $1.29 * 916,000 916,000 2.5
30 June 2013 $ 1.29 * 1,410,000 1,410,000 2.5
25 June 2014 $ 0.96 600,000 600,000 3.5
30 November 2016 $ 0.84 4,930,000 1,608,390 5.9
1 May 2017 $1.61 500,000 - 6.3
1 July 2017 $1.05 260,000 - 6.5
2 August 2017 $1.11 480,000 - 6.6
Total 13,241,000 8,679,390
Weighted average exercise $ 1.11 $1.19
price
* - The options were re-priced to $1.29 on 30 June 2009
The exercise prices of all share purchase options granted during the year were
equal to or greater than the market price at the grant date. Using the Black-
Scholes option pricing model with the assumptions noted below, the estimated
fair value of all options granted have been reflected in the statement of
changes in equity.
The share-based payments expense during the year ended 31 December 2010 was
$2,333,450 (2009: $2,185,812; 2008: $5,385,501).
The assumptions used to estimate the fair value of options granted during the
year were:
2010 2009 2008
Canadian risk- free interest rate 2.8% 3% 3%
Expected life 5- 7 years 5 - 7 years 5 years
Volatility 83% 83% 73%
Forfeiture rate 0% 0% 0%
Expected dividends Nil Nil Nil
The volatility of the shares was calculated over the expected life of the
option. Volatility was calculated by using available historical information on
the share price for Anooraq equal to the expected life of the scheme.
The risk free rate for periods within the contractual term of the share right
is based on the Government of Canada benchmark bond yield.
35.2 Cash-settled share-based payments
The Group also currently has a scheme in place to award share appreciation
rights ("SARs") to recognise the contributions of senior staff to the Group`s
financial position and performance and to retain key employees. These share
appreciation rights are linked to the share price of the Group on the
Johannesburg Securities Exchange ("JSE") and are settled in cash on the
exercise date.
A third of the share appreciation rights granted are exercisable annually from
the grant date with an expiry date of 4 years from the grant date. The offer
price of these share appreciation rights equaled the closing market price of
the underlying shares on the trading date immediately preceding the granting
of the share appreciation rights.
2010 2009 2008
Share appreciation rights granted (all 3,737,103 2,933,000 -
unvested at year-end)
Vesting year of unvested share appreciation rights:
Within one year 1,575,035 977,667 -
One to two years 1,575,035 977,667 -
Two to three years 587,033 977,666 -
Total number of shares unvested 3,737,103 2,933,000 -
The value of the share appreciation rights expensed in the year ended 31
December 2010 was calculated as $947,176 (2009: $145,199, 2008: Nil).
The assumptions used to estimate the fair value of the SARS granted during the
year were:
South African risk-free rate 6.7% 8.4% -
Volatility 82% - 86% 83% -
Forfeiture rate 0% 0% -
Expected dividends Nil Nil -
The only vesting conditions for the scheme are that the employees should be in
the employment of the Group.
The volatility of the shares were calculated with the equally weighted
standard approach of calculating volatility by using available historical
information on the share price for Anooraq equal to the term to maturity of
the scheme.
The risk-free rate for periods within the contractual term of the share right
is based on the South African Government Bonds in effect at the time.
35.3 Bonus settled via shares
The Group issued 806,898 shares to key members of management at a cost of
$895,625 during the year ended 31 December 2009 as consideration for
finalising the acquisition as discussed in note 34 (2010 and 2008: Nil).
35.4 Anglo Platinum Limited senior executive share scheme
In terms of a Management Services Agreement, certain senior management of
Bokoni Mines can still participate in the Anglo Platinum Limited share scheme.
The operation of the scheme is summarised as follows:
- Anglo Platinum Limited will be responsible for any liability up to $755,000
(ZAR 5 million)
- Bokoni Mines will be responsible for any liability between $755,000 and
$2,265,000 (ZAR 5 million and ZAR 15 million)
- Anglo Platinum Limited will be responsible for any liability greater than
$2,265,000 (ZAR 15 million)
Based on the Anglo Platinum Limited share price at 31 December 2010 there is
no liability to the Group (2009: Nil).
36. CONTINGENCIES
There are no contingencies that the directors are aware of at the date of
signature.
37. RELATED PARTIES
None of the directors, officers or major shareholders of Anooraq or, to the
knowledge of Anooraq, their families, had any interest, direct or indirect, in
any transaction during the last two fiscal years or in any proposed
transaction which has affected or will materially affect Anooraq or its
investment interests or subsidiaries, other than as stated below.
Relationships
Related party Nature of relationship
Hunter Dickinson HDSI was a private company owned equally by several
Services Inc. public companies, one of which is the Company. HDSI
("HDSI") has a director in common with the Company and
provides geological, corporate development,
administrative and management services to, and incurs
third party costs on behalf of, the Company and its
subsidiaries on a full cost recovery basis pursuant
to an agreement dated 31 December 1996.
During the year, Hunter Dickinson Inc (a corporation
incorporated under the laws of British Columbia)
negotiated the repurchase of all the outstanding
shares of HDSI from the other HDSI shareholders,
including Anooraq. The purchase price was $1. As at
31 December 2010, HDSI is no longer considered a
related party.
Rustenburg The Group concluded a number of shared services
Platinum Mines agreements between Bokoni mine and Rustenburg
(`RPM`) Platinum Mines (`RPM`), a wholly owned subsidiary of
Anglo Platinum and 49% shareholder in Bokoni Holdco.
Pursuant to the terms of various shared services
agreements, the Anglo American group of companies
will continue to provide certain services to Bokoni
Mines at a cost that is no greater than the costs
charged to any other Anglo American group company for
the same or similar services. It is anticipated
that, as Anooraq builds its internal capacity, and
makes the transformation to a fully operational PGM
producer, these services will be phased out and
replaced either with internal services or third party
services.
Pelawan Pelawan is the Company`s controlling shareholder.
Investments (Pty)
Ltd ("Pelawan")
Key management All directors directly involved in Anooraq and
certain members of top management at Bokoni.
Related party balances
31 December 31 December
2010 2009
HDSI Trade and other payables - (118,698)
RPM Loans and Borrowings (refer (624,117,556) (484,003,094)
note 19)
Trade and other payables (2,490,280) (3,534,094)
Trade and other receivables 33,335,405 21,501,503
Related party transactions
31 December 31 December
2010 2009
HDSI Administration expenses - 713,945
RPM Revenue (refer note 24) (148,286,833) (62,627,868)
Finance expense (before 62,751,587 27,999,797
interest capitalised)
Administration expenses 3,556,086 -
Cost of sales 19,621,801 6,160,349
Costs capitalised to capital 7,576,824 11,534,977
work-in-progress
Pelawan Transaction costs * - 1,600,000
* - The company paid transaction costs amounting to $1.6 million on behalf of
Pelawan Investments (Proprietary) Limited, the Company`s controlling
shareholder, owing to Rand Merchant Bank ("RMB") and legal costs. These
amounts were expensed in profit or loss during the year ended 31 December
2009.
Key Management Compensation
31 December 31 December
2010 2009
Remuneration for executive directors and
key management
Salaries 4,283,048 2,991,921
Short term benefits 725,269 615,789
Share bonuses - 895,625
Share options 1,929,869 1,547,117
Cash settled share-based payments 947,176 145,199
Remuneration for non-executives 609,130 537,263
8,494,492 6,732,914
38. COMMITMENTS
31 December 31 December
2010 2009
Contracted for 8,116,976 10,323,040
Not yet contracted for 54,554,966 21,723,760
Authorised capital expenditure 62,671,942 32,046,800
The committed expenditures relate to property, plant and equipment and will be
funded through cash generated from operations and available loan facilities.
39. EVENTS AFTER THE REPORTING DATE
There are no significant subsequent events after the reporting date, other
than discussed in note 19.
40. EMPLOYEE COSTS
Employee costs included in loss for the year are as follows:
31 December 31 December 31 December
2010 2009 2008
Salaries and wages and other 82,309,144 39,994,754 2,675,008
benefits
Retirement benefit costs 372,975 296,442 147,565
Medical aid contributions 14,088 7,434 8,522
Employment termination costs 56,486 1,793,791 -
Share-based compensation - equity- 2,333,450 2,185,812 5,385,501
settled
Share-based compensation - cash- 947,176 145,199 -
settled
Bonus settled via shares - 895,625 -
86,033,319 45,319,057 8,216,596
41. GROUP ENTITIES
The following are the shareholdings of the Company in the various group
entities:
Company Country of 31 December 31 December
Incorporation 2010 2009
N1C Resources Cayman Islands 100 % 100 %
Incorporation
Anooraq Minera Mexicana # Mexico 100 % 100 %
N2C Resources Cayman Islands 100 % 100 %
Incorporation *
Plateau Resources South Africa 100 % 100 %
(Proprietary) Limited *
Bokoni Holdings South Africa 51 % 51 %
(Proprietary) Limited *
Bokoni Mine (Proprietary) South Africa 51 % 51 %
Limited *
Boikgantsho (Proprietary) South Africa 51 % 51 %
Limited *
Kwanda (Proprietary) South Africa 51 % 51 %
Limited *
Ga-Phasha (Proprietary) South Africa 51 % 51 %
Limited *
Lebowa Platinum Mine South Africa 51 % 51 %
Limited * #
Middlepunt Hill South Africa 51 % 51 %
Management Services
(Proprietary) Limited * #
* - Indirectly held
# - These entities are
dormant
42.HEADLINE AND DILUTED HEADLINE EARNINGS PER SHARE
Headline earnings per share is calculated by dividing headline earnings
attributable to owners of the Company by the weighted average number of
ordinary shares in issue during the period. Diluted headline earnings per
share is determined by adjusting the headline earnings attributable to owners
of the Company and the weighted average number of ordinary shares in issue
during the period, for the effects of all dilutive potential ordinary shares,
which comprise share options granted to employees.
Headline earnings per share
The calculation of headline loss per share for the year ended 31 December 2010
of 12 cents (2009: 12 cents; 2008: 8 cents:) is based on headline loss of
$51,331,108 (2009: $35,600,870; 2008: $13,975,875) and a weighted average
number of shares of 424,665,314 (2009: 305,971,455; 2008: 185,775,361).
The following adjustments to loss attributable to owners of the Company were
taken into account in the calculation of headline loss attributable to owners
of the Company:
31 December 31 December 31 December
2010 2009 2008
Loss attributable to (51,721,410) (35,531,631) (13,970,096)
shareholders of the Company
- Loss/(gain) on disposal of 45,179 (69,239) (5.779)
property, plant and equipment
- Impairment 345,123 - -
Headline loss attributable to (51,331,108) (35,600,870) (13,975,875)
owners of the Company
Diluted headline earnings per share
The calculation of diluted headline loss per share for the year ended 31
December 2010 of 12 cents (2009: 12 cents; 2008: 8 cents) is based on headline
loss of $51,331,108 (2009: $35,600,870; 2008: $13,975,875) and a diluted
weighted average number of shares of 424,665,314 (2009: 305,971,455; 2008:
185,775,361).
At 31 December 2010, 2,974,169 (2009: 282,584; 2008: Nil) share options were
excluded in determining diluted weighted average number of common shares as
their effect would have been anti-dilutive.
There are no reconciling items between headline loss and diluted headline
loss.
Refer to note 31 for the calculation of the weighted average number of shares.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION FOR THE YEAR ENDED 31 DECEMBER 2010
1.1 Date
This Management`s Discussion and Analysis ("MD&A") should be read in
conjunction with the annual consolidated financial statements of Anooraq
Resources Corporation ("Anooraq" or "the Company" or "the Group") for the
years ended December 31, 2010 and 2009, prepared in accordance with
International Financial Reporting Standards ("IFRS"), as issued by the
International Accounting Standards Board, which are publicly available on the
System for Electronic Analysis and Retrieval ("SEDAR") at www.sedar.com and on
the U.S. Securities and Exchange Commission`s ("SEC") Electronic Document
Gathering and Retrieval System ("EDGAR") at www.sec.gov.
Anooraq has prepared this MD&A with reference to National Instrument 51-102
"Continuous Disclosure Obligations" of the Canadian Securities Administrators.
Under the U.S./Canada Multijurisdictional Disclosure System, Anooraq is
permitted to prepare this MD&A in accordance with the disclosure requirements
of Canada, which requirements are different from those of the United States.
Certain statements in this MD&A constitute forward-looking statements or
forward-looking information within the meaning of applicable securities laws.
Investors should carefully read the cautionary note in this MD&A regarding
forward-looking statements and should not place undue reliance on any such
forward-looking statements. See "Cautionary Note Regarding Forward-Looking
Statements".
As of January 1, 2009, Anooraq adopted International Financial Reporting
Standards ("IFRS") and the following disclosure, as well as its associated
consolidated financial statements, has been prepared in accordance with IFRS
as issued by the International Accounting Standards Board.
This MD&A is prepared as of March 23, 2011.
All dollar figures stated herein are expressed in Canadian dollars ("$"),
unless otherwise specified.
Additional information about Anooraq, including Anooraq`s Annual Information
Form for the fiscal year ended December 31, 2010 ("AIF"), which is included in
Anooraq`s Annual Report on Form 40-F, can be found on SEDAR at www.sedar.com
and on EDGAR at www.sec.gov.
Cautionary Note Regarding Forward-Looking Statements
This MD&A includes certain statements that may be deemed "forward-looking
statements". All statements in this MD&A, other than statements of historical
facts, that address potential acquisitions, future production, reserve
potential, exploration drilling, exploitation activities and events or
developments that Anooraq expects, are forward-looking statements. These
statements appear in a number of different places in this MD&A and can be
identified by words such as "anticipates", "estimates", "projects", "expects",
"intends", "believes", "plans", "will", "could", "may", or their negatives or
other comparable words. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause Anooraq`s actual
results, performance or achievements to be materially different from any
future results, performance or achievements that may be expressed or implied
by such forward-looking statements. Anooraq believes that such forward looking
statements are based on material factors and reasonable assumptions, including
assumptions: the Bokoni Mine will increase production levels from the previous
years; the Ga-Phasha, Boikgantsho, Kwanda and Platreef Projects exploration
results will continue to be positive; contracted parties provide goods and/or
services on the agreed timeframes; equipment necessary for construction and
development is available as scheduled and does not incur unforeseen
breakdowns; no material labor slowdowns or strikes are incurred; plant and
equipment functions as specified; geological or financial parameters do not
necessitate future mine plan changes; and no geological or technical problems
occur.
Forward-looking statements, however, are not guarantees of future performance
and actual results or developments may differ materially from those projected
in forward-looking statements. Factors that could cause actual results to
differ materially from those in forward looking statements include
fluctuations in market prices, the levels of exploitation and exploration
successes, changes in and the effect of government policies with respect to
mining and natural resource exploration and exploitation, continued
availability of capital and financing, general economic, market or business
conditions, failure of plant, equipment or processes to operate as
anticipated, accidents, labor disputes, industrial unrest and strikes,
political instability, insurrection or war, the effect of HIV/AIDS on labor
force availability and turnover, and delays in obtaining government approvals.
These factors and other risk factors that could cause actual results to differ
materially from those in forward-looking statements are described in further
detail under Item 6 "Risk Factors" in Anooraq`s AIF.
Anooraq advises investors that these cautionary remarks expressly qualify in
their entirety all forward-looking statements attributable to Anooraq or
persons acting on its behalf. Anooraq assumes no obligation to update its
forward-looking statements to reflect actual results, changes in assumptions
or changes in other factors affecting such statements, except as required by
law. Investors should carefully review the cautionary statements and risk
factors contained in this and other documents that Anooraq files from time to
time with, or furnishes to, applicable Canadian securities regulators and the
SEC.
Cautionary Note to Investors Concerning Estimates of Measured and Indicated
Resources
This MD&A uses the terms "measured resources" and "indicated resources".
Anooraq advises investors that while those terms are recognized and required
by Canadian regulations, the SEC does not recognize them. Investors are
cautioned not to assume that any part or all of mineral deposits in these
categories, not already classified as reserves, will ever be converted into
reserves. In addition, requirements of Canadian National Instrument 43-101
Standards of Disclosure for Mineral Projects ("NI 43-101") for identification
of "reserves" are not the same as those of the SEC, and reserves reported by
us in compliance with NI 43-101 may not qualify as "reserves" under SEC
standards. Under U.S. standards, mineralization may not be classified as a
"reserve" unless the determination has been made that the mineralization could
be economically and legally produced or extracted at the time the reserve
determination is made. Investors should refer to the disclosure under the
heading "Resource Category (Classification) Definitions" in Anooraq`s AIF.
Cautionary Note to Investors Concerning Estimates of Inferred Resources
This MD&A uses the term "inferred resources". Anooraq advises investors that
while this term is recognized and required by Canadian regulations, the SEC
does not recognize it. "Inferred resources" have a great amount of uncertainty
as to their existence, and as to their economic and legal feasibility. It
cannot be assumed that all or any part of an inferred mineral resource will
ever be upgraded to a higher category. Under Canadian rules, estimates of
inferred mineral resources may not form the basis of economic studies, except
in rare cases. Investors are cautioned not to assume that any part or all of
an inferred resource exists, or is economically or legally mineable. Investors
should refer to the disclosure under the heading "Resource Category
(Classification) Definitions" in Anooraq`s AIF.
1.2 Overview
Anooraq Resources Corporation is engaged in mining, exploration and
development of Platinum Group Metals ("PGM") mineral deposits located in the
Bushveld Igneous Complex ("BIC"), South Africa. The BIC is the world`s largest
platinum producing geological region, producing in excess of 75% of the annual
primary platinum supply to international markets.
2009 represented the most important year in Anooraq`s history. With effect
from July 1, 2009, the Company transformed from an exploration and development
company into a PGM producer. Anooraq, through its wholly owned South African
subsidiary Plateau Resources (Proprietary) Limited ("Plateau"), acquired an
indirect 51% controlling interest and management control of Bokoni Platinum
Mines (Proprietary) Limited ("Bokoni") (formerly Lebowa Platinum Mine) and
several PGM projects, including the advanced stage Ga-Phasha PGM Project ("Ga-
Phasha Project"), the Boikgantsho PGM Project ("Boikgantsho Project"), and the
early stage Kwanda PGM project ("Kwanda Project"), collectively, the "Anooraq
Group". These controlling interests were acquired through Plateau acquiring
51% of the shareholding of Bokoni Platinum Holdings (Proprietary) Limited
("Bokoni Holdco"), the holding company of Bokoni and the other project
companies ("Bokoni Group") on July 1, 2009, referred to as "the Bokoni
Transaction".
Anooraq`s objective is to become a significant PGM group with a substantial
and diversified PGM asset base, including producing and exploration assets.
The acquisition of the controlling interest in Bokoni Holdco is the first
stage of advancing the Group`s PGM production strategy and has resulted in the
Group controlling a significant mineral resource base of approximately 200
million PGM ounces, the third largest PGM mineral resource base in South
Africa. Of this, approximately 110 million PGM ounces is directly attributable
to Anooraq. On implementation of the Bokoni Transaction, Anooraq assumed
management control over the Bokoni Group operations. Anglo Platinum Limited
("Anglo Platinum"), a subsidiary of Anglo American plc, through its wholly
owned subsidiary Rustenburg Platinum Mines Limited ("RPM"), retained a 49% non-
controlling interest in Bokoni Holdco. The resultant Group corporate structure
is depicted below:
Anooraq Resources Corporate Structure
(For the release with pictures and schematics, please refer to the Company`s
website: www.anooraqresources.com)
The above corporate structure is illustrated on a fully diluted share basis,
post conversion of the B preference shares.
Plateau is an indirect wholly owned South African subsidiary of Anooraq.
Plateau owns the 51% shareholding in Bokoni Holdco.
Black Economic Empowerment
Pelawan Investments (Pty) Ltd ("Pelawan"), the majority shareholder in
Anooraq, is a broad based Black Economic Empowerment ("BEE") entity. Through
the Pelawan shareholding, Anooraq and the Bokoni Group remain compliant with
the BEE equity requirements as contemplated by South African legislation and
its associated charters regarding BEE equity holding requirements.
Environmental Matters
The South African National Environmental Management Act 107 of 1998 ("NEMA"),
which applies to all prospecting and mining operations, requires that these
operations be carried out in accordance with generally accepted principles of
sustainable development. It is a NEMA requirement that an applicant for a
mining right must make prescribed financial provision for the rehabilitation
or management of negative environmental impacts, which must be reviewed
annually. The financial provisions deal with anticipated costs for:
- Premature closure
- Planned decommissioning and closure
- Post closure management of residual and latent environmental impacts
In respect of Bokoni (discussed in section 1.2.1), an external assessment to
determine the environmental closure liability was undertaken in July 2010. As
at December 31, 2010, the total environmental rehabilitation liability for
Bokoni, in current monetary terms (undiscounted), was estimated to be $13.7
million.
Annual contributions are made to a dedicated environmental trust fund to fund
the estimated cost of rehabilitation during and at the end of the mine`s life.
As at December 31, 2010, the amount invested in the environmental trust fund
was $2.8 million. The shortfall of $10.9 million between the funds invested in
the environmental trust fund and the estimated rehabilitation cost is covered
through a guarantee from Anglo Platinum.
Anooraq`s mining and exploration activities are subject to extensive
environmental laws and regulations. These laws and regulations are continually
changing and are generally becoming more restrictive. The Group has incurred,
and expects to incur in future, expenditures to comply with such laws and
regulations, but cannot predict the full amount of such future expenditures.
Estimated future reclamation costs are based principally on current legal and
regulatory requirements.
1.2.1 Bokoni Mine
Bokoni is an operating mine located on the north eastern limb of the BIC, to
the north of and adjacent to the Ga-Phasha Project. The Bokoni property
consists of two "new order" mining licenses covering an area of 15,459.78
hectares. The mining operation consists of a vertical shaft and three decline
shaft systems to access underground mine development on the Merensky and UG2
Reef horizons. Bokoni has installed road, water and power infrastructure, as
well as two processing concentrators, sufficient to meet its operational
requirements up to completion of its first phase growth plans to 2014. Bokoni
has an extensive shallow ore body, capable of supporting a life-of-mine plan
in excess of 50 years. The December 31, 2009 life-of-mine plan was stated as
being in excess of 100 years. The decrease in the life-of-mine plan is due to
the improvement in the production statistics from roughly 250,000 tonnes per
quarter when the Bokoni Mine was initially purchased in July 2009, to roughly
278,000 tonnes per quarter in the fourth quarter of 2010. The anticipated
future increases in annual production have shortened the life-of-mine. Current
mining operations are being conducted at shallow depths, on average 200m below
surface. This benefits the Bokoni Mine`s operations as a result of the fact
that there are no major refrigeration (and consequent power) requirements at
shallower mining depths.
Bokoni is currently producing approximately 85,000 tonnes per month ("tpm") of
ore from its UG2 and Merensky reef horizons. UG2 production is mined
exclusively from the Middelpunt Hill shaft ("MPH") which consists of 4 adits
and 2 underground levels. Merensky ore is produced from three shafts, namely:
Vertical shaft, UM2 shaft and Brakfontein shaft. The Vertical shaft, which
started in 1973, is the oldest of the three shafts and currently accounts for
the bulk of the Merensky production. Production at Vertical shaft is expected
to be maintained at 35,000 tpm for the medium term. Merensky production from
the UM2 shaft is expected to increase from its current production levels of
10,000 tpm over the next two years. The new Brakfontein shaft is in a ramp up
phase and is planned to increase from its current production levels of 20,000
tpm, to a steady state production level of 120,000 tpm by 2014. On completion
of the initial ramp up phase to 2014, it is anticipated that Bokoni will
produce 160,000 tpm of ore (240,000 PGM ounces per annum) consisting of
120,000 tpm from the Merensky reef and 40,000 tpm from the UG2 reef.
2010 has been the first complete year of mining operations at Bokoni since the
Bokoni Transaction on July 1, 2009. Various operational challenges have been
experienced during 2010 as well as a labor restructuring having been
performed. Management remains confident that the objective of achieving a
production rate of 160,000 tpm will be achieved by 2014.
Given the magnitude of Bokoni`s ore body, lying open at depth with its
numerous attack points, management is of the view that Bokoni has the
potential to be developed into a 375,000 tpm (570,000 PGM ounces per annum)
steady state operation in the medium to longer term.
The older Vertical and UM2 shafts make use of conventional mining methods for
narrow tabular ore bodies. Ore broken in stopes is transported laterally by
means of track bound equipment and then hoisted through a vertical shaft
system at Vertical shaft and an incline shaft system at UM2 shaft. Bokoni will
invest in maintenance of infrastructure at Vertical shaft to sustain mining at
current rates for the next four to five years. Additional opportunities, such
as vamping, will be employed to supplement volumes from these shafts. Further
opportunities to increase the life-of-mine of these shafts will also be
investigated in the short to medium term.
The new Brakfontein shaft is being developed on a semi-mechanized basis, using
a hybrid mining method, whereby ore broken in stopes is loaded directly onto a
strike conveyor belt and taken out of the mine through a main decline conveyer
belt system. This results in less human intervention in the hoisting process
and a resultant lower unit operating cost of production. Development of
haulages and crosscuts are effected by means of mechanized mining methods, and
stoping is conducted using hand held electric drilling machines.
The MPH shaft is in the process of converting the transport of broken ore from
its current mechanized hauling system to a conveyor belt transport system
similar to that of Brakfontein shaft. Vamping opportunities in the older adit
areas are being investigated to supplement underground mining production.
Bokoni, at the current metal prices and United States Dollar ("US$") exchange
rate against the South African Rand ("ZAR"), is slightly cash flow negative at
an operational level (before depreciation and interest expense) largely as a
result of the ramp up phase of the mine currently being experienced. Bokoni
plans to become cash flow positive after capital expenditure towards the
second half of 2011 if production levels increase and the current commodity
prices for the PGM basket and US$ exchange rate against the ZAR continue at
current levels.
Financing the Bokoni Transaction
The Company financed the Bokoni Transaction at the Plateau level through a
combination of a senior term loan facility (the "Debt Facility") provided by
Standard Chartered Bank ("Standard Chartered") and a vendor finance facility
provided by Anglo Platinum, through its wholly owned subsidiary, RPM (the
"Vendor Finance Facility"). In addition, the Company secured an agreement with
RPM whereby RPM will provide Plateau with an operating cash flow shortfall
facility (the "Plateau OCSF") of up to a maximum of $110.3 million (ZAR 750
million) and access to RPM`s attributable share of the Bokoni Holdco cash
flows ("the standby facility") which, with the Company`s portion, will provide
up to a maximum of 80% of all free cash flow generated from Bokoni to meet its
repayment obligations in terms of the Debt Facility.
1.Debt Facility
Plateau secured the Debt Facility with Standard Chartered for an amount of up
to $113.3 million (ZAR 750 million), including capitalized interest up to a
maximum of three years or $37.8 million (ZAR 250 million). On July 1, 2009,
Standard Chartered advanced $75.5 million (ZAR 500 million) to Plateau, and
interest amounting to $17.9 million (ZAR 118.6 million) has been rolled up
through December 31, 2010.
The Debt Facility is repayable in 12 semi-annual instalments, with the first
payment due on January 31, 2013. Interest is calculated at a variable rate
linked to the 3 month Johannesburg Inter Bank Agreed Rate ("JIBAR") plus
applicable margin and mandatory cost (11.735% at December 31, 2010).
The total amount of the interest payable on the notional amount of the Debt
Facility of $75.5 million (ZAR 500 million) drawn down on July 1, 2009 is
hedged with effect from July 1, 2009 until July 31, 2012.
The Debt Facility has a term of 108 months from July 1, 2009. Pursuant to the
Bokoni Holdco Shareholders Agreement (as defined below), if Plateau`s cash
flows derived from Bokoni Holdco are insufficient to meet its debt repayment
obligations under the Debt Facility, RPM is obligated, pursuant to the standby
loan facility, to provide Plateau a portion of its entitlement to the Bokoni
Holdco cash flows such that Plateau can utilize up to 80% of all free cash
flows generated from Bokoni Holdco for this purpose (see "Standby loan
facility" below).
On December 11, 2009, 34% of the Debt Facility was syndicated to First Rand
Bank Limited, acting through its Rand Merchant Bank division ("RMB").
2.Vendor Finance Facility
RPM provided the Vendor Finance Facility to Plateau consisting of a cash
component of $181.2 million (ZAR 1.2 billion) and a share settled component
(the "Share-Settled Financing") amounting to $166.1 million (ZAR 1.1 billion).
Cash component
In terms of the cash component of the Vendor Finance Facility, RPM subscribed
for cumulative redeemable preference shares in the capital of Plateau (the
"Plateau Preferred A Shares") for an aggregate sum of $181.2 million (ZAR 1.2
billion). These shares are cumulative mandatory redeemable shares which
attract a fixed annual cumulative dividend of 12%. The Group is obligated to
redeem the outstanding amount, including undeclared dividends which should
have been declared within six years (July 1, 2015) of issue, to the extent
that the Group is in the position to redeem the shares. Any preference shares
not redeemed in six years (at 2015) automatically roll over and must be
finally redeemed nine years after issue (at July 1, 2018).
During the three year period prior to the initial maturity date (between July
1, 2012 and July 1, 2015), Plateau will be required to undertake a mandatory
debt refinancing and use 100% of such external funding raised to settle the
following amounts owing by Plateau to RPM at such time, in the following
order: (i) any outstanding amounts owing to RPM in respect of the standby
facility (ii) any outstanding amounts owing to RPM in respect of the Plateau
OCSF and (iii) any amount owing to RPM in respect of the Plateau Preferred "A"
Shares. Plateau is obliged to undertake the refinancing process but, if the
debt is not re-financeable based upon the debt capital markets at that time
(between July 1, 2012 and July 1, 2015), then there is no sanction on Plateau
and all debt will automatically roll over until it is repayable in full by no
later than July 1, 2018.
Share Settled Financing - The "B" preference shares
In terms of the Share Settled Financing component, Pelawan, the majority
shareholder of Anooraq, established a wholly owned subsidiary (the "Pelawan
SPV") and transferred 56,691,303 Anooraq common shares to the Pelawan SPV. RPM
subscribed for convertible preferred shares in the capital of the Pelawan SPV
(the "SPV Preferred Shares") for an aggregate sum of $162.9 million (ZAR 1.1
billion). Pelawan encumbered its shareholding in the Pelawan SPV in favour of
RPM as security for the obligations of the Pelawan SPV pursuant to the SPV
Preferred Shares.
The Pelawan SPV subscribed for two different classes of convertible "B"
preferred shares in Plateau for $162.9 million (ZAR 1.1 billion), each such
class being convertible into ordinary shares in the capital of Plateau
("Plateau Ordinary Shares") and entitling the holder of the Plateau Ordinary
Shares to a special dividend in cash, which, upon receipt, will immediately be
used to subscribe for additional Plateau Ordinary Shares ("The "B" preference
shares"). The "B" preference shares are zero coupon shares and carry no rights
to preference dividends.
Pursuant to the agreement between the Pelawan SPV and Anooraq (the "Exchange
Agreement"), upon Plateau issuing Plateau Ordinary Shares to the Pelawan SPV,
Anooraq will take delivery of all Plateau Ordinary Shares held by the Pelawan
SPV and, in consideration thereof, issue to the Pelawan SPV such number of
Anooraq common shares that have a value equal to the value of such Plateau
Ordinary Shares. The total number of Anooraq common shares to be issued on
implementation of the Share-Settled Financing arrangement is 227.4 million
common shares. Once all the "B" preference shares have been converted into
Plateau Ordinary Shares and then into Anooraq common shares, the Company will
have common shares outstanding equal to 425 million common shares of one class
(not including any other Anooraq common shares that may hereafter be issued).
The SPV Preferred Shares are convertible in one or more tranches into ordinary
shares in the capital of the Pelawan SPV ("SPV Ordinary Shares") immediately
upon demand by RPM, upon the earlier of (i) the date of receipt by the Pelawan
SPV of a conversion notice from RPM and (ii) July 1, 2018. Upon such date, RPM
will become entitled to a special dividend in cash, which will immediately be
used to subscribe for SPV Ordinary Shares. Upon the Pelawan SPV converting the
SPV Preferred Shares to SPV Ordinary Shares and RPM subscribing for additional
SPV Ordinary Shares as a result of the special dividend, the Pelawan SPV will
immediately undertake a share buyback of all SPV Ordinary Shares held by RPM
and will settle the buyback consideration by delivering to RPM 115.8 million
Anooraq common shares.
As and when RPM issues a conversion notice as described above, the Pelawan SPV
will require Plateau to convert "B" preference shares in the capital of
Plateau into Plateau Ordinary Shares. Immediately thereafter, Anooraq will
take delivery of such Plateau Ordinary Shares and issue such number of Anooraq
common shares to the Pelawan SPV pursuant to the Exchange Agreement as will
enable the Pelawan SPV to buy back the SPV Ordinary Shares from RPM and result
in Pelawan continuing to own a minimum 51% shareholding in Anooraq. The total
number of Anooraq common shares issuable pursuant to the Exchange Agreement
that will continue to be held by the Pelawan SPV is 111.6 million Anooraq
shares. Such Anooraq common shares will be subject to a lock-in that will
prevent the Pelawan SPV and Pelawan from disposing of such shareholding for so
long as Pelawan is required to maintain a minimum 51% shareholding in Anooraq
(at present the contractual lock-in provision for Pelawan on all of its shares
held in Anooraq remains in place up to January 1, 2015).
The final result of the Share-Settled Financing is that: (i) RPM funded a
payment of $162.9 million (ZAR 1.1 billion) to Plateau whereby RPM will
ultimately receive a total of 115.8 million common shares in Anooraq; and (ii)
Pelawan will receive an additional 111.6 million common shares in Anooraq.
RPM will be able to trade its 115.8 million Anooraq common shares on an
unrestricted basis. RPM is not bound by any contractual lock-ins or
restrictions in respect of any of the Group`s common shares which it will
hold. It will, however, prior to disposing of any such common shares, engage
in a consultative process with Anooraq, and endeavour to dispose of such
common shares in Anooraq in a reasonable manner. Neither Pelawan nor any of
the shareholders of Pelawan have any pre-emptive rights in respect of RPM`s
common shares in Anooraq.
3. Operating Cash Flow Shortfall Facility ("OCSF")
In order for Plateau to meet any required shareholder contributions in respect
of operating or capital expenditure cash shortfalls at Bokoni during the
initial three year ramp up phase at Bokoni, RPM provided Plateau with the
Plateau OCSF which can be drawn up to a maximum of $113.3 million (ZAR 750
million) and is subject to certain annual draw down restrictions, in terms of
quantum, during the first three years. The Plateau OCSF bears fixed interest
at a rate of 15.84%, compounded quarterly in arrears. As at December 31, 2010,
Plateau had drawn $57.2 million (ZAR 379 million) of the Plateau OCSF to meet
its share of Bokoni`s funding requirements.
In addition, RPM has also made available to Bokoni $108.7 million (ZAR 720
million) (the "RPM OCSF") subject to the same terms and conditions as the
Plateau OCSF. As at December 31, 2010, Bokoni had drawn $54.8 million (ZAR
362.9 million) of the available $108.7 million (ZAR 720 million) of the RPM
OCSF.
4. Standby loan facility
Anglo Platinum has made available to Plateau a standby loan facility of an
amount equal to 29% of Bokoni cash flows, which Plateau may use to fund any
cash flow shortfalls that may arise in Plateau funding any repayment
obligations it may have under the Debt Facility during its term. The standby
facility will bear interest at the prime rate of interest in South Africa
(currently 9%). As at December 31, 2010 no draw down has been made on the
standby facility. This standby loan facility will also be activated to the
extent that free cash flow, after capital expenditure, at the Bokoni
operations is generated during the anticipated interest roll up period between
July 1, 2009 and July 1, 2012.
5. Security
The Debt Facility is secured through various security instruments, guarantees
and undertakings provided by the Group against 51% of the cash flows generated
by Bokoni, together with 51% of Bokoni`s asset base. The standby loan
facility, Plateau OCSF and Plateau Preferred "A" shares rank behind the Debt
Facility for security purposes.
Management of the Bokoni Operations
Plateau and RPM entered into a shareholders` agreement (the "Bokoni Holdco
Shareholders Agreement") to govern the relationship between Plateau and RPM,
as shareholders of Bokoni Holdco, and to provide management to Bokoni Holdco
and its subsidiaries, including Bokoni.
Plateau is entitled to nominate the majority of the directors of Bokoni Holdco
and Bokoni, and has undertaken that the majority of such nominees will be
Historically Disadvantaged Persons ("HDPs") in South Africa. Anooraq has given
certain undertakings to Anglo Platinum in relation to the maintenance of its
status as an HDP controlled group pursuant to the Bokoni Holdco Shareholders
Agreement.
Pursuant to the Bokoni Holdco Shareholders Agreement, the board of directors
of Bokoni Holdco, which is controlled by Anooraq, has the right to call for
shareholder contributions, either by way of a shareholder loan or equity. If a
shareholder should default on an equity cash call, the other shareholder may
increase its equity interest in Bokoni Holdco by funding the entire cash call,
provided that, until the expiry of a period from the closing date of the
Bokoni Transaction until the earlier of (i) the date on which the BEE credits
attributable to the Anglo Platinum group and/or arising as a result of the
Bokoni Transaction become legally secure, and (ii) the date on which 74% of
the scheduled capital repayments due by Plateau to Standard Chartered pursuant
to the Debt Facility are made in accordance with the debt repayment profile of
the Debt Facility (the "Initial Period"), Plateau`s shareholding in Bokoni
Holdco cannot be diluted for default in respect of equity contributions.
Pursuant to the terms of the shared services agreements, Anglo Platinum
provides certain services to Bokoni at a cost that is no greater than the
costs charged to any other Anglo American plc group company for the same or
similar services. It is anticipated that, as Anooraq builds its internal
capacity and transforms into a fully operational PGM producer, these services
will be phased out and will be replaced either with internal or third party
services. The Group, through Plateau, provides certain management services to
Bokoni pursuant to service agreements entered into with effect from July 1,
2009.
Sale of Concentrate
Bokoni produces a metal-in-concentrate, all of which is sold to RPM in terms
of a sale of concentrate agreement entered into between Plateau and RPM. This
agreement has an initial five year term to July 1, 2014 and Plateau has the
right to extend this agreement for a further five year term to July 1, 2019.
In terms of the sale of concentrate agreement, RPM receives metal-in-
concentrate from Bokoni and pays for such metal based upon a formula equal to
a percentage of the spot prices for the various metals contained in the
concentrate delivered, including precious and base metals, less certain
treatment charges and penalties (if applied).
In addition, the Bokoni Holdco shareholders agreement also governs the initial
sale of concentrate from the Ga-Phasha Project upon commencement of
production.
1.2.2 Ga-Phasha Project
Management has commissioned ExplorMine Consultants ("ExplorMine") to update
the geological model for Ga-Phasha and compile a new Mineral Resource
Estimate. The Mineral Resource Estimate has been updated with no material
change from the previous estimate ("Technical Report on the Updated Resource
Estimates on the Merensky Reef and UG2 Deposits, Ga-Phasha Platinum Group
Metals Project, Eastern Limb, Bushveld Complex, Limpopo Province, Republic of
South Africa" dated October 19, 2007, filed on SEDAR on October 30, 2007). The
latest mineral resource estimate as of December 31, 2010 is tabled below:
(For the release with pictures and schematics, please refer to the Company`s
website: www.anooraqresources.com)
1.2.3 Platreef Exploration Properties, Northern Limb
Anooraq holds interests in mineral rights (or "farms") over 37,000 hectares
that make up the Central Block, the Rietfontein Block, the Boikgantsho and
Kwanda Projects (see below), collectively, known as the Platreef Properties.
Rietfontein Block
The Group has entered into a settlement agreement (the "Agreement") effective
December 11, 2009 with Ivanhoe Nickel & Platinum Ltd. ("Ivanplats") to replace
and supersede the 2001 agreement relating to the Rietfontein property located
on the northern limb of the BIC. The Agreement settles the arbitration process
relating to disagreements with respect to the exploration activities
undertaken at the Rietfontein property. Salient terms of the new Agreement are
as follows:
- Both parties abandon their respective claims under dispute forming the
subject matter of arbitration.
- The existing joint venture ("JV") between the parties is amended such that
the current Rietfontein JV is extended to incorporate a defined area of
Ivanplats` adjacent Turfspruit mineral property. Both parties retain their
existing prospecting rights in respect of mineral properties in their own
names but make these rights and technical information available to the
extended JV ("the Extended JV").
- Anooraq will be entitled to appoint a member to the Extended JV technical
committee and all technical programmes going forward will be carried out with
input from Anooraq.
- Anooraq is awarded a 6% free carried interest in the Extended JV, provided
that the Extended JV contemplates an open pit mining operation, incorporating
the Rietfontein mineral property. Anooraq has no financial obligations under
the Extended JV terms and Ivanplats is required to fund the entire exploration
programme to feasibility study with no financial recourse to Anooraq. On
delivery of the feasibility study, Anooraq may elect to either:
- retain a participating interest of 6% in the Extended JV and finance its
pro rata share of the project development going forward; or
- relinquish its participating interest of 6% in the Extended JV in
consideration for a 5% net smelter return royalty in respect of mineral
products extracted from those areas of the Rietfontein mineral property
forming part of the Extended JV mineral properties.
Central Block
The Central Block consists of five farms or portions thereof, comprising a
portion of Dorstland 768LR, Hamburg 737 LR, Elandsfontein 766 LR, Molokongskop
780 LR and Noord Holland 775 LR.
The Group is currently evaluating its approach to properties on the Central
Block, which may include potential joint venture relationships with third
party exploration companies.
Kwanda Project
The Group intends to continue with its existing prospecting programs at the
Kwanda mineral properties in 2011 at a cost of approximately $0.2 million.
1.2.4 Boikgantsho Project
Management has commenced a pre-feasibility study of the Boikgantsho project.
The pre-feasibility will occur in phases, with phase 1 focusing on re-logging
of a significant portion of the exploration drill holes. On completion of the
re-logging exercise, management was informed that there was no correlation
between the lithologies logged and the mineralized horizons. Furthermore, some
lithologies were incorrectly identified. Management decided that a new
geological model should be constructed and this necessitated that all the
boreholes should be re-logged in order to develop a robust geological model
that would include a correlation between lithology and mineralization.
The re-logging of all the boreholes has resulted in a change of scope of the
project. The time schedule has increased by four months and Phase 2 is now
expected to be completed by June 2011. The additional cost for the re-logging
is approximately $0.2 million (ZAR1.1 million) resulting in the project cost
for Phase 2 increasing to $1.7 million (ZAR11.3 million).
A preliminary geological model is expected to be completed by the end of
January 2011. Early predictions are that the new geological model may result
in alternative mining methods being considered, such as a higher grade
underground massive stoping options as compared to a lower grade opencast
mining method.
1.2.5 Mineral reserves and resources
The annual Mineral Reserve and Resource Estimates for Bokoni, shown in tables
1 and 2 below, have been updated as of December 31, 2010. The QP responsible
for the Reserve Estimate is Mr B. Reddy (Anooraq executive-non-independent).
The QPs responsible for the Resource Estimate are Messer`s G. Mitchell, A.
Deiss and Dr. W. Northrop of ExplorMine (Independent consultants).
There has been no material change from the reserve and resource estimates as
of December 31, 2009.
Resources are inclusive of reserves.
Table 1: Ore Reserve Tabulation for the Bokoni Mine as at December 31, 2010
(For the release with pictures and schematics, please refer to the Company`s
website: www.anooraqresources.com)
Table 2: Mineral Resources Tabulation for the Bokoni Mine as at December 31,
2010
(For the release with pictures and schematics, please refer to the Company`s
website: www.anooraqresources.com)
Mineral reserves on the Merensky Reef increased by 0.7 million ounces ("Moz")
from 2009 to 2010 to a total of 4.2 Moz, whilst the UG2 Mineral Reserves
decreased by 0.7 Moz. The changes in mineral reserves are due to the
following:
- change in the new Mineral Resource estimate from the ExplorMine optimisation
exercise;
- change in block sizes from previous 400 m by 400 m to the current 100 m by
200 m resulted in a change in the dip. The Merensky mineral reserves increase
due to the dip change from 22.83 to 20.79 is estimated at 1.1 Moz; and
- Vertical shaft Merensky reserves were added as a result of winzes below the
bottom level and addition of strike distance on the western side.
There was an adjustment in the pillar design on the UG2 which resulted in a
reduction of mineral reserves.
None of these changes are deemed material in the opinion of the QP.
1.3 Market Trends and Outlook
Quarterly Trends
PGM metal prices (in US$) increased by 13% during the fourth quarter of 2010
when compared to the third quarter of 2010. In addition, the strength of the
ZAR continued to weigh negatively on the ZAR PGM basket price during this
period. The net effect of this was that the ZAR PGM basket price increased by
6% during the quarter. This continued ZAR strength is affecting operating
margins negatively.
Annual Trends
The PGM basket price (in US$) for the year was 24% higher than the basket
price achieved the previous year. The US$ platinum price was 34% higher in the
current year compared to the previous year.
The average ZAR:US$ exchange rate demonstrated a strengthening of the ZAR of
13% compared to the average exchange rate of the 2009 year.
Outlook
The global outlook for PGM demand remains positive in the medium term, with
the white metals (platinum and palladium) continuing to be viewed as late
cycle recovery metals moving towards 2012 and onwards. This price recovery
remains largely predicated upon expected renewed demand in vehicle sales and
manufacturing in the U.S. and European economies, together with sustained auto
sector growth in emerging market economies.
1.4 Selected Annual Information and results of operations
For the years ended December 31, 2010, 2009 and 2008, the consolidated
financial statements have been prepared in accordance with IFRS as issued by
the International Accounting Standards Board.
Consolidated statements As at As at As at
of financial position December 31, December 31, December 31,
2010 2009 2008
Total assets $1,092,106,255 $1,014,215,00 $12,898,793
5
Non-current liabilities ( $938,895,976 $777,605,509 $12,967,753
including short-term
portion of loans and
borrowings)
Consolidated statements Year ended Year ended Year ended
of comprehensive income December 31, December 31, December 31,
2010 2009 2008
Revenue $148,286,833 $62,627,868 -
Cost of sales ($173,151,188) ($80,966,467) -
Gross loss ($24,864,355) ($18,338,599) -
Loss for the year ($93,658,806) ($51,780,529) ($13,970,096)
Basic and diluted loss $0.12 $0.12 $0.08
per share
Weighted average number 424,665,314 305,971,455 185,775,361
of common shares
outstanding
With effect from July 1, 2009, Anooraq transformed from an exploration and
development company into the manager of an operating mine. This transformation
was achieved through the Bokoni Transaction. The Bokoni Transaction is
discussed in detail in the "Overview" section (Section 1.2). As a result of
the acquisition of Bokoni on July 1, 2009, the financial position and results
of operations of the Group have changed significantly.
Statement of Financial Position
2010 compared to 2009
The increase in total assets is primarily due to additions to capital work-in-
progress relating to mine development and infrastructure costs, capitalization
of borrowing costs as well as increased trade receivables.
The increase in total non-current liabilities, including the short-term
portion of the loans and borrowings, is primarily due to the increase in the
loans and borrowings due to the interest accrued on the A Preference Shares,
Senior Loan Facility and OCSF, as well as the drawdowns made on the OCSF
during the 2010 financial year.
During the fourth quarter of 2010, an arbitration award was made against
Anooraq in the arbitrations between the Company and North Corporate Finance
Advisory Services Limited as well as QuestCo (Pty) Ltd relating to disputed
fee payments associated with the Bokoni Transaction. The award was that the
Company should make payment to North Corporate Finance Advisory Services
Limited of an amount of $1.2 million or the ZAR equivalent as at the date of
payment together with interest at 15.5% from July 1, 2009 to date of payment,
as well as the costs of the arbitration. As against Questco (Pty) Ltd it was
ordered that the Company make payment of the sum of $0.6 million (ZAR 4
million) plus VAT of $0.09 million (ZAR 0.6 million) and interest calculated
at 15.5% from July 1, 2009 as well as costs. These amounts (total of $2.2
million) were discharged in full subsequent to December 31, 2010. The above
was included as part of trade and other payables on the Company`s Statement of
Financial Position.
2009 compared to 2008
The increase in total assets and non-current liabilities was primarily due to
assets and liabilities acquired in the Bokoni Transaction. A summary of the
assets acquired and liabilities assumed at the acquisition date are as
follows:
Fair Value
Property, plant and equipment 725,226,891
Capital work-in-progress 216,194,965
Cash deposits held in Platinum Producers 2,356,993
Environmental Trust
Other non-current assets 741
Trade and other receivables 22,477,941
Cash and cash equivalents 3,576,912
Loans and borrowings (owing to RPM) (493,666,666)
Deferred taxation (231,040,913)
Provisions (4,308,137)
Current tax payable (123,034)
Trade and other payables (30,845,374)
Total identifiable net assets at July 1, 2009 209,850,319
Goodwill and a non-controlling interest of $12.4 million and $102.8 million,
respectively, were recognized on acquisition. Also refer to section 1.2.1 for
a discussion on the financing of the Bokoni Transaction.
Statement of Comprehensive Income
2010 compared to 2009
The loss for the year ended December 31, 2010 increased from $51.8 million in
the previous year to $93.7 million. The loss per share remained unchanged at
12 cents per share as at December 31, 2010.
The primary reason for the increase is that the 2010 financial year includes
the results of the Bokoni Mine as well as the interest expense resulting from
the funding of the Bokoni Transaction for a 12 month period whereas it is only
included from July 1, 2009 (six month period) for the 2009 financial year.
The major contributors to the increase in the loss to $93.7 million for the
year ended December 31, 2010 were:
- A gross loss from mining activities of $24.9 million (2009 - $18.3 million).
The main reason for the higher gross loss in 2010 compared to 2009 is that the
2009 results reflects a six month period of Bokoni Mine being under Anooraq
control and the 2010 results reflect a 12 month period.
Although tons milled for the 12 months of 2010 increased by 10% compared to
the 12 months of 2009, lower grades and recoveries led to ounces produced for
the 12 months of 2010 being in line with the 12 months of 2009.
The PGM basket price for the 12 months of 2010 was 42% higher than the basket
price achieved for the 12 months of 2009. The basket price for the 12 months
of 2010 was US$1,257 / oz (ZAR 9,207 / oz) compared to US$882 / oz (ZAR 7,418
/ oz) for the 12 months of 2009. The average platinum price of US$1,611 / oz
for the 12 months of 2010 was 34% higher than the average platinum price of
US$1,205 / oz for the 12 months of 2009.
The average ZAR/US$ exchange rate for the 12 months of 2010 was ZAR 7.32 / US$
compared to the average exchange rate of the 12 months of 2009 of ZAR 8.41 /
US$ (a strengthening of the ZAR against the US$ of 13%).
Cost of sales, in absolute terms, increased from 2009 to 2010 mainly as a
result of an increase in labour, contractor and utility costs.
On a per ton basis, production costs were US$135 (ZAR 989) per ton as compared
to US$126 (ZAR 1,061) per ton in the previous year, a US$ increase of 7%
(decrease of 7% in ZAR, which is the functional currency of the Bokoni Mine).
The ZAR per ton operating cost for the 12 months of 2010 of ZAR 989 is in line
with the six months of 2009 under Anooraq control of ZAR 965.
Bokoni Production Statistics
The production statistics below reflect year-on-year 2009 compared to 2010,
although Bokoni Mine was only under the control of Anooraq from July 1, 2009,
as well as the production statistics for the six months under Anooraq control.
2010 2009 % 2009
12 months 12 Change 6
months months
4E oz produced Oz 116,164 116,586 - 61,347
Tonnes milled T 1,044,084 943,403 10 503,398
Built-up head grade g/t 4.12 4.31 (4) 4.29
milled,4E
UG2 mined to total output % 32 36 (11) 34
Development meters M 10,292 11,326 (9) 4,922
R/t operating cost/ton milled ZAR/t 989 1,061 7 965
R/4E operating cost/4E oz ZAR/4E oz 8,888 8,582 (4) 7,918
Total labor (mine operations) Number 5,116 4,402 16 4,402
- Transaction costs of $1.8 million (2009 - $10.4 million)
Transaction costs decreased as a result of the completion of the Bokoni
Transaction. The 2010 costs primarily relate to the arbitration matter
discussed in the "Statement of Financial Position" above.
- Finance expenses of $67.5 million (2009 - $20.3 million)
The Bokoni Transaction was funded through a number of interest bearing loans,
which only commenced accruing interest as from July 1, 2009. The loans accrued
interest for the full 12 months in 2010, resulting in increased finance
expenses for the year. Refer to note 19 of the annual consolidated financial
statements (available on SEDAR) for details of the individual liabilities to
which the finance expenses relate. In addition, interest capitalized decreased
compared to the prior year as a result of lower capital work-in-progress
during the year.
- Income tax (credit) of $17.3 million (2009 - $7.6 million)
Due to the taxable losses and deductable expenditure incurred by the Group in
2010, a portion of the deferred tax liabilities was reversed to profit or
loss. Refer to note 29 of the notes to the annual consolidated financial
statements (available on SEDAR) for a reconciliation of the income tax for the
periods. The primary reason for the difference between the statutory tax rate
of 28.5% and the effective tax rate of 15.6% during 2010 is primarily due to
non-deductible expenditure, including preference share dividends which are not
tax deductible.
2009 compared to 2008
The loss for the year ended December 31, 2009 increased from $14 million in
the previous year to $51.8 million primarily as a result of the Bokoni
Transaction. The loss per share increased from 8 cents, for the year ended
December 31, 2008, to 12 cents for the year ended December 31, 2009. The
increase in the loss per share was not as significant as the increase in the
loss for the year as a result of the effect of the change in the weighted
number of common shares from 185.8 million, as at December 31, 2008, to 305.9
million as at December 31, 2009.
The major contributors to the increase in the loss to $51.8 million for the
year ended December 31, 2009 were:
- A gross loss from mining activities of $18.3 million (2008 - nil)
Due to the Bokoni Transaction in 2009, the Company had revenue and cost of
sales for the first time and made a gross loss for the first six months of
trading.
- Transaction costs of $10.4 million (2008 - nil)
These transaction costs included consulting and legal expenses relating to the
Bokoni Transaction, which are discussed in detail in the "Overview" section
(Section 1.2). During the year the Group adopted IFRS 3, Business Combinations
(2008), which resulted in $1.6 million being expensed in the first quarter of
2009 relating to previously capitalised transaction costs.
- Finance expenses of $20.3 million (2008 - $1.8 million)
The Bokoni Transaction was funded through a number of interest bearing loans,
as discussed in Section 1.2, resulting in increased finance expenses for the
year.
- Income tax (credit) of $7.6 million (2008 - nil)
Due to the taxable losses and deductable expenditure incurred by the Group in
2009, a portion of the deferred tax liabilities acquired in the Bokoni
Transaction was reversed to profit or loss. Refer to note 29 of the annual
consolidated financial statements (available on SEDAR) for a reconciliation of
the income tax for the periods.
Also refer to Section 1.9 for a discussion of the quarterly results.
1.5 Liquidity
At December 31, 2010, the Group had negative working capital, excluding
restricted cash, of $64.1 million compared to available working capital of
$28.4 million as at December 31, 2009.
The Group has the following long-term contractual obligations as at December
31, 2010:
Payments due by period ($ million)
Total Less 2 to 3 4 to 5
than one years years
year
More than 5
years
Capital commitments 8.1 8.1 - - -
Long-term debt (1) 1,107.4 94.4 44 890.4 78.6
scheduled interest
payments
Operating lease 0.8 0.4 0.4 - -
commitments (2)
Purchase obligations 27.3 12.5 8.7 6.1 -
(3)
Derivative liability 5 - 5 - -
Total 1,148.6 115.4 58.1 896.5 78.6
(1)The Company`s long-term debt obligations, which include scheduled interest
payments, are denominated in ZAR. Payments and settlement on the obligation
are denominated in ZAR. Long-term obligations have been presented at an
exchange rate of $1 = ZAR 6.6225.
(2)The Company has routine market-related leases on its office premises in
Johannesburg, South Africa.
(3)The term "purchase obligation" means an agreement to purchase goods or
services that is enforceable and legally binding on the Company that specifies
all significant terms, including: fixed or minimum quantities to be purchased;
fixed, minimum or variable price provisions; and the approximate timing of the
transaction.
At December 31, 2010, the Group did not meet certain covenants specified in
the Debt Facility agreements. As a result, the related obligation has been
reflected as due in less than one year.
The lenders have subsequently waived their rights and entitlements arising
from the failure of the Group to meet the specific covenants. Therefore, there
is no legal or constructive obligation to settle the related debt within the
next 12 months.
The breach of the covenant resulted from not meeting certain production levels
of concentrate ("production covenant") during 2010, compared to the operating
budget and mine plan approved by the lenders. In addition to waiving the
breach at December 31, 2010, the lenders have also waived the measurement of
the production covenant against the currently approved operating budget and
mine plan for 2011.
As a result of the completion of the Bokoni Transaction, the Group secured
additional financial resources and long-term funding (as discussed under
Financing the Bokoni Transaction - 1.2.1). The Group expects that the cash
flows from the mining operations and the additional financing secured through
the OCSF will be sufficient to meet its immediate ongoing operational and
capital cash requirements of the Group.
The Group`s major cash commitments for the next year relate to its obligation
to fund project expansion capital requirements at Bokoni.
Default on borrowings would occur if legal obligations according to loan
agreements are not met. Defaults would include failure to make scheduled
payments and violation of loan covenants.
The Group is currently pursuing various alternative funding structures to
achieve a more affordable debt/equity level as management believes that the
Group would not be able to service the repayments on the loans and borrowings
once it becomes due in the medium to long term.
1.6 Capital Resources
Anooraq`s sources of capital are primarily debt and equity.
The Group`s access to capital sources is dependent upon general commodity and
financial market conditions. The Group has secured long-term funding to meet
its operating and capital obligations through to the end of 2012. The Group`s
cash balance as at December 31, 2010 was $25.8 million.
In addition to its cash resources, the Group has access to various committed
debt facilities from senior bank lenders and Anglo Platinum. All of the
Group`s debt facilities have been negotiated such that it is not obliged to
commence with mandatory repayments of any loan capital amounts drawn and/or
any refinancing of these loans during the holiday period while it has
management control at Bokoni (July 1, 2009 - January 1, 2013). The reason for
this capital repayment "holiday" period is that Bokoni is currently in a
highly capital intensive project expansion growth phase until it reaches its
phase 1 steady state of production of 160,000 tpm (240,000 PGM ounces per
annum) expected in 2014. Thereafter, capital repayments will commence on the
Debt Facility and the Group will be required to undertake a refinancing of the
Anglo Platinum debt facilities as and when market conditions allow it to do
so. As discussed in section 1.5, management has already started taking action
to consider refinancing plans in the short-term.
A summary of the Group`s debt facilities as at December 31, 2010 is as
follows:
Balance at Total available Un-utilized
December 31, facility portion of
2010 facility
$ million
Debt facility 93.4 113.3 19.9
OCSF 111.2 222.0 110.8
RPM funding loan 89.4 108.7 19.3
"A" preference 418.1 418.1 -
share facility
Other 4.8 4.8 -
Total 716.9 866.9 150
In addition to the facilities above, Anglo Platinum made available to Plateau
a standby facility for up to a maximum of 29% of Bokoni cash flows, which
Plateau may use to fund any cash flow shortfalls that may arise in funding any
accrued and capitalized interest and fund repayment obligations under the Debt
Facility during its term.
See a discussion of these debt facilities in Section 1.2.1.
In addition, Anooraq`s ability to raise new equity in the equity capital
markets is subject to the mandatory requirement that Pelawan, its majority BEE
shareholder, retain a 51% fully diluted shareholding in the Company up until
January 1, 2015, as required by covenants given by Pelawan and Anooraq in
favour of the Department of Mineral Resources ("DMR"), the South African
Reserve Bank and Anglo Platinum.
1.7 Off-Balance Sheet Arrangements
The Group has not entered into any off-balance sheet transactions.
Transactions with Related Parties
(i)At December 31, 2009, Hunter Dickinson Services Inc. ("HDSI") was a related
party as it was a private company owned equally by several public companies,
one of which was the Company. HDSI and the Company also share a common
director, Ronald Thiessen, who is a member of the key management personnel of
HDSI. During the period, Hunter Dickinson Inc (a corporation incorporated
under the laws of British Columbia) negotiated the repurchase of all the
outstanding shares of HDSI from other HDSI shareholders, including the
Company. The purchase price was $1. The shares were bought back pursuant to an
HDSI restructuring transaction which management believes was at arm`s length.
Due to the above mentioned transaction, as at December 31, 2010, HDSI is no
longer considered to be a related party.
(ii)RPM: The Group concluded a number of agreements with respect to services
at Bokoni with RPM, a wholly owned subsidiary of Anglo Platinum and 49%
shareholder in Bokoni Holdco, on March 28, 2008. These agreements were amended
on May 13, 2009 and include a limited off-take agreement whereby Bokoni sells
the concentrate produced at the mine to RPM at market related prices.
Pursuant to the terms of various shared services agreements, the Anglo
American plc group of companies will continue to provide certain operational
services to Bokoni at a cost that is no greater than the costs charged to any
other Anglo American plc group for the same or similar services. It is
anticipated that, as Anooraq builds its internal capacity, and makes the
transformation to a fully operational PGM producer, these services will be
phased out and replaced either with internal services or third party services.
Transactions with RPM during the twelve months ended December 31, 2010 are
summarized below:
Concentrate sales $148.3 million (2009 - $62.6 million)
Cost of sales(1) $19.6 million (2009 - $6.2 million)
Administration expenses $3.6 million (2009 - $0.2 million)
Finance expense $62.8 million (2009 - $28 million) (before interest
capitalised)
(1) - included in cost of sales are the following:
Metal accounting services $0.5 million (2009 - $0.1 million)
Supply chain services $11.9 million (2009 - $0.7 million)
Treatment of Anglo ore ($1) million (2009 - ($0.8) million)
Other $8.2 million (2009 - $6.2 million)
Total $19.6 million (2009 - $6.2 million)
The following balances were outstanding to/from RPM at December 31, 2010:
Loans and Borrowings $624.1 million (2009 - $484 million
Trade and other payables $2.5 million (2009 - $3.5 million)
Trade and other receivables $33.3 million (2009 - $21.5 million)
1.9 Summary of Quarterly Results
$ Million Jun 30, Mar 31,
Dec 31, Sep 30, 2010 2010
2010 2010
Revenue 43.2 34.5 38.4 32.2
Cost of sales (52) (44.5) (40.9) (35.6)
Gross loss (8.8) (10.0) (2.5) (3.4)
Loss for the period (32.4) (28.1) (19.9) (13.2)
Basic and diluted (0.04) (0.04) (0.03) (0.02)
loss per share ($)
Weighted number of 425 425
common shares 425 425
outstanding
(million)
$ Million Dec 31, Sep 30, Jun 30, Mar 31,
2009 2009 2009 2009
Revenue 34.8 27.8 - -
Cost of sales (40.5) (40.5) - -
Gross loss (5.7) (12.7) - -
Loss for the period (18.6) (18.7) (10.8) (3.7)
Basic and diluted (0.03) (0.04) (0.06) (0.02)
loss per share ($)
Weighted number of 305 245 186 186
common shares
outstanding
(million)
Discussion of Last Eight Quarterly Results in General
During the first two quarters ended March 31, 2009 and June 30, 2009, the
Group was regarded primarily as an exploration company. Therefore, the Group
did not have any significant operating assets.
On July 1, 2009, the Group acquired 51% of the Bokoni Mine and also took
management control. This was the first operating asset acquired by the Group
that generated revenue. There was therefore a significant increase in the
asset base of the Group as revenue generating assets were effectively
acquired.
The Group had the following initiatives identified for Bokoni Mine to be
achieved in the first 18 months, to establish the foundation for its future
growth profile:
- Restructure the labor force to have 60% of labor in direct ore mining and
40% in support services. This was achieved at the end of the first quarter of
2010.
- To commence generating profits on an operational level.
- Reduce the unit cost. The unit cost has reduced by 20% in the first 18
months.
The Group is continuing its efforts to grow production (Phase 1 expansion
program) in order to achieve the Group`s long-term goal of achieving a monthly
production of 160,000 tonnes per month by 2014.
All of the above factors contributed to the increase in revenue from $0 for
the quarter ended March 31, 2009 to $27.8 million for the quarter ended
September 30, 2009, and ultimately to revenue of $43.2 million for the quarter
ended December 31, 2010.
The continuing compounding of the interest on the loans and borrowings,
relating to the Bokoni Transaction, of the Group have contributed to the
increase in the quarterly loss which was $3.7 million for the quarter ended
March 31, 2009, to $18.7 million for the quarter ended September 30, 2009, and
ultimately steadily increasing to a loss of $32.4 million for the quarter
ended December 31, 2010.
Q4 2010 Highlights
Production performance for the fourth quarter of 2010 was below management
expectations. The operations faced a number of challenges in the quarter
resulting in a drop in production as compared to the third quarter. Key
production parameters were significantly down quarter on quarter. Square
meters mined were 3.6% lower than the third quarter, while primary development
was 18% lower than the previous quarter. Vamping (final removal of broken ore
in panels and gullies where stoping (mining) operations have been completed)
and backlog sweepings (removal of broken ore from panels that have been
blasted longer than six month ago) decreased by 7% quarter on quarter.
A number of factors resulted in the poor production performance for the
quarter. The main reasons for the poor performance include lost shifts as the
Bokoni Mine was severely impacted by the fatal accident at MPH. The MPH
operations were stopped for a week to rectify unsafe conditions. It was
further impacted for another two weeks by a slow start up after the accident.
A number of other shifts were lost at the various shafts due to stoppages by
the DMR via the issuing of Section 54`s (a regulation in the Mineral and
Petroleum Resources Development Act, 2002 (South Africa) ("Mineral Development
Act") that gives an inspector of the DMR the power to halt operations in event
of dangerous conditions).
Management is continuing to address issues such as mining flexibility,
trackless fleet availability and infrastructure changes at Brakfontein and MPH
to increase production.
Bokoni Production Statistics:
Q4 2010 Q3 2010 % Change
4E oz produced Oz 30,776 28,868 7
Tonnes milled T 278,242 252,861 10
Built-up head grade g/t milled,4E 4.17 4.01 4
UG2 mined to total output % 24 30 (20)
Development meters M 2,308 2,943 (22)
R/t operating cost/ton milled ZAR/t 1,058 1,012 5
R/4E operating cost/4E oz ZAR/4E oz 9,566 8,861 8
Total labor (mine operations) Number 5,116 4,674 9
Revenue
The mine concentrator milled 278,242 tonnes this quarter, which is 10% higher
than the 252,861 tonnes milled in the third quarter. As a result of the
higher tonnes milled, the mine produced 1,908 4E (includes platinum,
palladium, rhodium and gold) ounces more than the third quarter.
- Revenue from the sale of concentrate was $43.2 million (ZAR 296.1 million)
compared to the third quarter of $34.5 million (ZAR 242.3 million). The
increase in revenue of $8.7 million is mainly due to the higher production as
a result of the increased production efficiencies experienced at the
concentrator.
- The PGM basket price for the quarter was 13% higher than the basket price
achieved the third quarter. The basket price for the current quarter was
US$1,357 (ZAR 9,366) compared to US$1,201 (ZAR 8,804) for the third quarter.
Cost of Sales
Cost of sales of $52 million was $7.5 million higher than the third quarter`s
cost of sales of $44.5 million. The main reason was as follows:
- The stockpile adjustment during for the fourth quarter of 2010 of $3.8
million.
- Labour costs increased by $1.4 million (13%) for the quarter. UMO and MDP
heads remained relatively flat but labour costs relating to compulsory
overtime shifts and Christmas working-in arrangements resulted in an increase
in costs. At Middelpunt Hill, the labour hire costs increased from the third
quarter of 2010 due to the appointment of Manniken, a contractor. Manniken
were appointed to address the repair and maintenance of the trackless fleet
that was intended to be filled by Fermel, a contractor.
- Contractor costs increased by $0.7 million (30%) due to additional square
meters being mined by contractors at UM2 and a 11% increase in the rate per
cube at Brakfontein.
- Store costs increased by $0.4 million (5%) in absolute terms for the fourth
quarter of 2010 mainly as a result of the purchase of new brakes by
Brakfontein, and the conversion of Load Haul Dumps ("LHDs") to the new brake
specifications, as well as increased mechanical costs on snatch blocks and
jackpots by Brakfontein.
- Utilities costs decreased by $0.7 million (24%) due to the application of
summer electricity tariffs.
- Increase in depreciation charge of $0.5 million.
- Sundry costs remained unchanged between the third quarter of 2010 and the
fourth quarter of 2010.
- Exchange rate difference had a negative impact of $1.4 million.
On a cost per ton basis, production cost was US$153 (ZAR 1,058) per ton as
compared to US$141 (ZAR 1,034) per ton the third quarter, an increase of 8.5%
in dollar and in ZAR terms.
Exchange rate
The average ZAR to Canadian dollar exchange rate for the quarter was ZAR 6.82,
a decrease of 5.9% compared to the average exchange rate of the third quarter
of ZAR 7.03.
Finance expense
Finance expense for the quarter was $21 million compared to the previous
quarter of $18.9 million. The reason for this increase was the increase in the
OCSF draw downs and compounded interest on the funding loan facilities.
Safety
The Group`s Lost Time Injury Frequency Rate ("LTIFR") increased to 1.4 in the
fourth quarter from 1.3 in the third quarter of 2010. Management remains
committed to safety at the operations. Active engagement with the South
African Department of Mineral Resources on safety matters continues.
Capital
Total capital expenditure for the fourth quarter was $10.8 million (as opposed
to $7.1 million for the third quarter), comprising 30% sustaining capital and
70% project expansion capital (as opposed to 2% sustaining capital and 98%
project expansion capital for the third quarter).
Royalties: Implementation of the Mineral and Petroleum Resources Royalty Act,
2008 (Act no. 28 of 2008)
The Mineral and Petroleum Resources Royalty Act (the "Act"), imposes a royalty
payable to the South African government based upon financial profits made
through the transfer of mineral resources.
The royalty is based on a predetermined percentage applied to gross sales of
unrefined metal produced. The predetermined percentage = 0.5 + ((EBIT
(earnings before interest and tax) x 9)/gross sales). The percentage cannot be
less than 0.5%.
The royalty is accounted for on a monthly basis in the accounting records of
Bokoni Platinum Mines (Pty) Ltd.
The payments in respect of the royalty are due in three intervals:
- Six months into the financial year (June 30) - calculation based on actual
and estimated figures, and a first provisional payment based on this;
- Twelve months into the financial year (December 31) - calculation based on
actual and estimated figures, and a second provisional payment based on this;
and
- Six months after the financial year (June 30) - true up calculation done,
and a final payment.
The calculated royalty tax percentage for Bokoni for 2010 was the minimum
percentage of 0.5%, and the resulting royalty expense amounted to $0.5 million
for 2010.
Power Tariff Increases
The National Energy Regulator of South Africa released its decision on Eskom`s
tariff increase applications during 2010. The effect of this decision is that
power tariff increases in South Africa will be affected over a three year
period as follows:
2010/2011 : 24.8%
2011/2012 : 25.1%
2012/2013 : 25.9%
The net effect of this decision is that current power input costs at mining
operations in South Africa will increase by approximately 100% over the three
year period from April 1, 2010. Bokoni operations are currently mining at
relatively shallow depths with no major refrigeration requirements needed for
the next 30 years of mining. Power costs currently comprise between 5% (summer
tariffs) and 8% (winter tariffs) of total operating costs at the mine
operations. Accordingly, the recently announced power rate increases will
increase operating costs by between 5% and 8% over a three year period from
April 1, 2010. Bokoni continues to focus efforts on power usage reduction as
part of the efficiency improvement initiatives currently being implemented at
the operations.
1.10 Proposed Transactions
At the current time, there are no reportable proposed transactions.
1.11 Critical Accounting Estimates
The Group`s accounting policies are presented in note 4 of the audited
financial statements for the year ended December 31, 2010, which have been
publicly filed on SEDAR at www.sedar.com.
The preparation of the consolidated financial statements in accordance with
IFRS requires management to make judgments, estimates and assumptions that
affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these
estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the
estimates are revised and in any future periods affected.
Information about critical judgments in applying accounting policies that have
the most significant effect on the amounts recognized in the consolidated
financial statements is included in the notes to the financial statements for
the year ended December 31, 2010 where applicable.
These estimates include:
Taxation
The Group applies significant judgment in determining provisions for income
taxes and deferred tax assets and liabilities.
Temporary differences arise between the carrying values of assets and
liabilities for accounting purposes and the amounts used for tax purposes.
These temporary differences result in tax liabilities being recognized and
deferred tax assets being considered based on the probability of deferred tax
assets being recoverable from future taxable income. A deferred tax asset is
recognized to the extent that it is probable that future taxable profits will
be available against which the deferred tax asset can be realized.
The Group provides deferred tax using enacted or substantively enacted tax
rates at the reporting date on all temporary differences arising between the
carrying values of assets and liabilities for accounting purposes and the
amounts used for tax purposes, unless there is a temporary difference that is
specifically excluded in accordance with IFRS. The carrying value of the
Group`s net deferred tax assets assumes that the Group will be able to
generate sufficient future taxable income in applicable tax jurisdictions,
based on estimates and assumptions.
Impairment of Mining Assets
The recoverable amount of mining assets, including goodwill relating to mining
operations, is generally determined by utilizing discounted future cash flows.
Factors such as the quality of the individual ore body and country risk are
considered in determining the recoverable amount.
Key assumptions for the calculations of the mining assets` recoverable amounts
are the forward platinum group metal prices and the annual life-of-mine plans.
In determining the commodity prices to be used, management assesses the long-
term views of several reputable institutions on the commodity prices and,
based on this, derives the forward platinum group metals prices. The life-of-
mine plans are based on proven and probable reserves and have been approved by
the Group.
During the 2010 fiscal year, the Group calculated the recoverable amounts
based on updated life-of-mine plans using a discount rate that is based on the
real post-tax weighted average cost of capital ("WACC") of 9.67%. The WACC is
based on the risk free rate as at December 31, 2010, a market risk premium, a
Beta factor, an Alpha (Company specific risk premium), the post-tax cost of
debt and the debt-equity ratio.
Refer to note 7 of the annual financial statements for details of key
assumptions used in the 2010 impairment testing.
Cash flows used in the impairment calculations are based on life-of-mine plans
which exceed five years. As per management assessment, no impairment was
required for the year ended December 31, 2010. Management used consensus
price and rate assumptions based on the forward views of several analysts as
at December 31, 2010. Cash generating units are based on individual
subsidiaries within the Anooraq group.
Should management`s estimate of the future not reflect actual events,
impairments may be identified. Factors affecting the estimates include:
- changes to proven and probable ore reserves;
- the grade of the ore reserves may vary significantly from time to time;
- review of strategy;
- differences between actual commodity prices and commodity price assumptions;
- unforeseen operational issues at the mine; and
- changes in capital, operating, mining, processing and reclamation costs.
Exposure and liabilities with regards to rehabilitation costs
Estimated environmental obligations, comprising pollution control,
rehabilitation and mine closure, are based on the Group`s environmental
management plans in compliance with current technological, environmental and
regulatory requirements.
Management used a South African inflation rate of 5.2% over a period of 20
years in the calculation of the estimated net present value of the
rehabilitation liability. The discount rate used for the calculation was 8.4%
based on the future long-term view on government bonds.
Fair value of share based payments
The fair values of options granted and share appreciation rights are
determined using a Black-Scholes and binomial valuation models. The
significant inputs into the models are: vesting period, risk free interest
rate, volatility, price on date of grant and dividend yield. Refer to note 35
of the annual financial statements for the year ended December 31, 2010 for
details on each of the share option and share appreciation schemes and
assumptions used.
Inventory - Stockpiles
Stockpiles are measured by estimating the number of tonnes added and removed
from the stockpile, the number of contained PGM ounces based on assay data and
the estimated recovery percentage based on the expected processing method.
Stockpile tonnages are verified by periodic surveys. There was no stockpile
inventory at December 31, 2010.
Assessment of contingencies
Contingencies will only realize when one or more future events occur or fail
to occur. The exercise of significant judgment and estimates of the outcome of
future events are required during the assessment of the impact of such
contingencies.
Mineral resources and reserves
Mineral reserves are estimates of the amount of ounces that can be
economically and legally extracted from the Group`s properties. In order to
calculate the mineral reserves, estimates and assumptions are required about a
range of geological, technical and economic factors, including quantities,
grades, production techniques, recovery rates, production costs, commodity
prices and exchange rates.
Estimating the quantities and/or grade of the reserves requires the size,
shape and depth of the ore bodies to be determined by analyzing geological
data such as the logging and assaying of drill samples. This process may
require complex and difficult geological judgments and calculations to
interpret the data.
Because the economic assumptions used to estimate the mineral reserves change
from year to year, and because additional geological data is generated during
the course of operations, estimates of the mineral reserves may change from
year to year. Changes in the proven and probable reserves may affect the
Group`s financial results and financial position in a number of ways,
including:
- asset carrying values may be affected due to changes in estimated cash
flows;
- depreciation and amortization charged to profit or loss may change as they
are calculated on the units-of-production method; and
- environmental provisions may change as the timing and/or cost of these
activities may be affected by the change in mineral reserves.
At the end of each financial year, the estimate of proven and probable mineral
reserve is updated. Depreciation of mining assets is prospectively adjusted,
based on these changes.
1.12 Changes in Accounting Policies including Initial Adoption
Changes in accounting policies
The accounting policies applied by the Group in the consolidated financial
statements for the year ended December 31, 2010 are the same as those applied
by the Group in the consolidated financial statements as at and for the year
ended December 31, 2009 (available on SEDAR and EDGAR). There have been no
changes in accounting policies during the year ended December 31, 2010.
New standards not yet adopted
The following standards and interpretations are issued but not yet effective
and applicable to the Group:
- IAS 24 (revised), Related Party Disclosures
- Effective date January 1, 2011.
- The revised IAS 24 Related Party Disclosures amends the definition of a
related party and modifies certain related party disclosure requirements for
government-related entities.
- Amendments to IAS 32, Financial statements: Presentation: Classification of
Rights Issues
- Effective date February 1, 2010.
- The IASB amended IAS 32 to allow rights, options or warrants to acquire a
fixed number of the entity`s own equity instruments for a fixed amount of any
currency to be classified as equity instruments provided the entity offers the
rights, options or warrants pro rata to all of its existing owners of the same
class of its own non-derivative equity instruments.
- Amendments to IFRS 7, Disclosures - Transfers of Financial Assets
- Effective date January 1, 2011.
- The amendments add an explicit statement that qualitative disclosure
should be made in the context of the quantitative disclosures to better enable
users to evaluate an entity`s exposure to risks arising from financial
instruments. In addition, the IASB amended and removed existing disclosure
requirements.
- IFRS 9, Financial instruments
- Effective date January 1, 2013.
- IFRS 9 (2009) is the first standard issued as part of a wider project to
replace IAS 39. IFRS 9 (2009) retains but simplifies the mixed measurement
model and establishes two primary measurement categories for financial assets:
amortised cost and fair value. The basis of classification depends on the
entity`s business model and the contractual cash flow characteristics of the
financial asset. The guidance in IAS 39 on impairment of financial assets and
hedge accounting continues to apply. Prior periods need not be restated if an
entity adopts the standard for reporting periods beginning before January 1,
2012.
- IFRS 9, Additions to IFRS 9 Financial instruments
- Effective date January 1, 2013.
- IFRS 9 (2010) adds the requirements related to the classification and
measurement of financial liabilities, and derecognition of financial assets
and liabilities to the version issued in November 2009. It also includes those
paragraphs of IAS 39 dealing with how to measure fair value and accounting for
derivatives embedded in a contract that contains a host that is not a
financial asset, as well as the requirements of IFRIC 9 Reassessment of
Embedded Derivatives.
- IFRIC 19, Extinguishing Financial liabilities with Equity Instruments
- Effective date July 1, 2010.
- This interpretation provides guidance on the accounting for debt for
equity swaps.
- Various improvements to IFRS 2010
- Effective date July 1, 2010.
- The IASB issued amendments to various standards with various effective
dates.
1.13 Financial Instruments and Risk Management
Financial instruments
The Group`s financial instruments consist primarily of the following financial
assets: cash and cash equivalents, trade and other loans and receivables. The
Group`s financial instruments consist primarily of the following financial
liabilities: loans and borrowings, trade and other payables and certain
derivative instruments. Financial instruments are initially measured at fair
value when the Group becomes a party to their contractual arrangements.
Transaction costs are included in the initial measurement of financial
instruments, with the exception of financial instruments classified as at fair
value through profit or loss.
Financial assets
The Group`s financial assets comprise primarily of cash and cash equivalents
and trade and other receivables.
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They arise when
the Group provides money, goods or services directly to a debtor with no
intention of trading the receivable. Loans and receivables are subsequently
measured at amortized cost using the effective interest rate method. They are
included in current assets, except for those with maturities greater than 12
months after the balance sheet date, which are classified as non-current
assets. Loans and receivables include trade and other receivables (excluding
VAT and prepayments) and restricted cash.
Cash and cash equivalents are defined as cash on hand, deposits held at call
with banks and short-term highly liquid investments with original maturities
of three months or less. Cash and cash equivalents exclude restricted cash
(discussed below).
Restricted cash consists of cash held through investments in the Employee
Share Option Plan Trust ("ESOP Trust").
Trade and other receivables are recognized initially at fair value and
subsequently measured at amortized cost using the effective interest method,
less provision for impairment. A provision for impairment of receivables is
established when there is objective evidence that the Group will not be able
to collect all amounts due according to the original terms of receivables.
Significant financial difficulties of the debtor, probability that the debtor
will enter bankruptcy or financial reorganization, and default or delinquency
in payments are considered indicators that the trade receivable is impaired.
The amount of the provision is the difference between the asset`s carrying
amount and the present value of estimated future cash flows, discounted at the
effective interest rate. The carrying amount of the asset is reduced through
the recognition of a provision for impairment (allowance account) and the
amount of the loss is recognized in the income statement. When a trade
receivable is uncollectible, it is written off against the allowance account
for trade receivables. Subsequent recoveries of amounts previously written off
are credited in the income statement.
Non-derivative financial liabilities
Loans and borrowings are initially recognized at fair value net of transaction
costs incurred and subsequently measured at amortized cost, comprising
original debt less principal payments and amortization, using the effective
yield method. Loans and borrowings are classified as current liabilities
unless the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting date. Trade and other
payables are recognized initially at fair value and subsequently measured at
amortized cost using the effective interest rate method.
Derivative financial instruments
The Group holds derivative financial instruments to hedge its interest rate
risk exposures. Embedded derivatives are separated from the host contract and
accounted for separately if the economic characteristics and risks of the host
contract and the embedded derivative are not closely related, a separate
instrument with the same terms as the embedded derivative would meet the
definition of a derivative, and the combined instrument is not measured at
fair value through profit or loss.
On initial designation of the hedge, the Group formally documents the
relationship between the hedging instrument(s) and hedged item(s), including
the risk management objectives and strategy in undertaking the hedge
transaction, together with the methods that will be used to assess the
effectiveness of the hedging relationship. The Group makes an assessment, both
at the inception of the hedge relationship as well as on an ongoing basis,
whether the hedging instruments are expected to be "highly effective" in
offsetting the changes in the fair value or cash flows of the respective
hedged items during the period for which the hedge is designated, and whether
the actual results of each hedge are within a range of 80-125 percent. For a
cash flow hedge of a forecast transaction, the transaction should be highly
probable to occur and should present an exposure to variations in cash flows
that could ultimately affect reported net income.
Derivatives are recognized initially at fair value; attributable transaction
costs are recognized in profit or loss as incurred.
Financial risk management activities
The Group`s financial instruments expose it to a variety of financial risks:
credit risk, liquidity risk, interest rate risk, foreign currency risk and
commodity price risk. The Group may use derivative financial instruments to
hedge certain risk exposures.
The Board of Directors has overall responsibility for the establishment and
oversight of the Group`s risk management framework.
The Group`s risk management policies are established to identify and analyze
the risks faced by the Group, to set appropriate risk limits and controls, and
to monitor risks and adherence to limits. Risk management policies and systems
are reviewed regularly to reflect changes in market conditions and the Group`s
activities. The Group, through its training and management standards and
procedures, aims to develop a disciplined and constructive control environment
in which all employees understand their roles and obligations.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group`s receivables from
customers, and cash and equivalents. Management has evaluated treasury
counterparty risk and does not expect any treasury counterparties to fail in
meeting their obligations.
Trade receivables represents sale of concentrate to RPM in terms of a
concentrate off-take agreement. The carrying value represents the maximum
credit risk exposure. The Group has no collateral against these receivables.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group ensures that there is
sufficient capital in order to meet short term business requirements, after
taking into account cash flows from operations and the Group`s holdings of
cash and cash equivalents. This is facilitated via the OCSF. The Group`s cash
and cash equivalents are invested in business accounts which are available on
demand.
The Group operates in South Africa and is subject to currency exchange
controls administered by the South African Reserve Bank. A portion of the
Group`s funding for its South African operations consists of loans advanced to
its South African incorporated subsidiaries and it is possible the Group may
not be able to acceptably repatriate such funds once those subsidiaries are
able to repay the loans or repatriate other funds such as operating profits
should any develop. The repatriation of cash held in South Africa is permitted
upon the approval of the South African Reserve Bank.
Interest rate risk
The Bokoni Transaction was partially financed by a $110.3 million (ZAR 750
million) Debt Facility from Standard Chartered provided to Plateau, of which
$73.6 million (ZAR 500 million) was drawn down on July 1, 2009. The remaining
$36.8 million (ZAR 250 million) is available for interest roll-up during the
next three years. The term of the senior Debt Facility is nine years with an
interest and capital repayment holiday period. The senior Debt Facility bears
interest equal to the JIBAR (5.965% at December 31, 2010) plus 4.5% applicable
margin and 1.27% mandatory cost.
The Group has entered into an interest rate swap arrangement with Standard
Chartered to fix the variable interest rate on $73.6 million (ZAR 500 million)
of the principal amount of the loan at 14.695% which arrangement expires on
July 31, 2012.
A 100 basis point change in the interest rate for the three months ended
December 31, 2010 on the Standard Chartered loan and the RPM loan would have
changed the loss for the year by approximately $1.3 million. This analysis
assumes that all other variables remain constant.
Foreign currency risk
The Group from time to time enters into transactions for the purchase of
supplies and services denominated in foreign currency. As a result, the Group
is subject to foreign exchange risk from fluctuations in foreign exchange
rates. The Group has not entered into any derivative or other financial
instruments to mitigate this foreign exchange risk.
Within the Group, certain loans between Group entities amounting to $49.3
million are exposed to foreign exchange fluctuations. A 10% change in the
CDN/ZAR exchange rate at December 31, 2010 would have resulted in an
increase/decrease of $4.9 million in equity. The Group has no significant
external exposure to foreign exchange risk.
Commodity price risk
The value of the Group`s revenue and resource properties depends on the prices
of PGM`s and their outlook. The Group currently operates Bokoni. The Group
does not hedge its exposure to commodity price risk. PGM prices historically
have fluctuated widely and are affected by numerous factors outside of the
Group`s control, including, but not limited to, industrial and retail demand,
forward sales by producers and speculators, levels of worldwide production,
and short-term changes in supply and demand because of hedging activities.
Capital risk management
The primary objective of managing the Group`s capital is to ensure that there
is sufficient capital available to support the funding and operating
requirements of the Group in a way that optimizes the cost of capital,
maximizes shareholders` returns, matches the current strategic business plan
and ensures that the Group remains in a sound financial position.
The Group manages and makes adjustments to the capital structure which
consists of debt and equity as and when borrowings mature or when funding is
required. This may take the form of raising equity, market or bank debt or
borrowings from RPM or hybrids thereof. The Group may also adjust the amount
of dividends paid, sell assets to reduce debt or schedule projects to manage
the capital structure.
In addition, Anooraq`s ability to raise new equity in the equity capital
markets is subject to the mandatory requirement that Pelawan, its majority BEE
shareholder, retain a 51% fully diluted shareholding in the Company up until
January 1, 2015, as required by covenants given by Pelawan and Anooraq in
favour of the DMR, the South African Reserve Bank and Anglo Platinum.
There were no changes to the Group`s approach to capital management as at
December 31, 2010.
Debt Arrangements
Refer to Section 1.2.1 for details of all debt arrangements.
1.14 Other MD&A Requirements
Additional information relating to the Group, including the Group`s Annual
Information Form dated March 23, 2011, is available on SEDAR.
1.15 Internal Controls over Financial Reporting Procedures
The Group`s management, including its Chief Executive Officer and Chief
Financial Officer, is responsible for establishing and maintaining adequate
internal control over financial reporting (as such term is defined in
applicable securities regulations). The Group`s internal control system was
designed to provide reasonable assurance to the Group`s management and the
board of directors regarding reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
IFRS. Internal control over financial reporting includes those policies and
procedures that:
- Pertain to the maintenance of records that in reasonable detail accurately
and fairly reflect the transactions and dispositions of the assets of the
Group.
- Provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with IFRS, and that
receipts and expenditures of the Group are being made only in accordance with
authorizations of management and directors of the Group.
- Provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of the Group`s assets that could
have a material effect on the financial statements.
All internal control systems, no matter how well designed, have inherent
limitations and may not prevent or detect misstatements on a timely basis.
Also, projections of any evaluation of effectiveness of internal control over
financial reporting to future periods are subject to risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate. Therefore, even
those systems determined effective can provide only reasonable assurance with
respect to financial statement preparation and presentation.
The Group excluded Bokoni from its assessment of the effectiveness of the
Group`s internal control over financial reporting as of December 31, 2009.
During 2010, the Group designed and implemented internal control over
financial reporting at Bokoni. This included:
- Documentation of controls;
- Training of staff;
- Risk assessments;
- Design and implementation of controls; and
- Control measures to ensure standards and procedures are maintained.
During the fourth quarter of 2010, the Group went live on its own SAP system.
The Group previously used Anglo Platinum`s SAP system. All the necessary
controls were designed and implemented for the new system, including the
migration to the new system.
This included:
- Documentation of controls;
- Training of staff;
- Risk assessments;
- User acceptance testing;
- Design and implementation of general information technology controls and
application controls;
- Change management controls; and
- Controls around data migration.
Management assessed the effectiveness of the Group`s internal control over
financial reporting as at December 31, 2010. In making this assessment, the
Group`s management used the criteria, established in Internal Control-
Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission. This assessment included review of the documentation
of controls, evaluation of the design effectiveness of controls, testing of
the operating effectiveness of controls and a conclusion on this assessment.
Based on this assessment, management has concluded that the Group`s internal
control over financial reporting was effective as of December 31, 2010.
Disclosure Controls and Procedures
Disclosure controls and procedures are those controls and procedures that are
designed to ensure that the information required to be disclosed in the
filings under applicable securities regulations is recorded, processed,
summarized and reported within the time periods specified in applicable
securities regulations. As at December 31, 2010, under the supervision and
with the participation of our management, including our Chief Executive
Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of the Group`s disclosure controls and procedures. Based on this
evaluation, the Chief Executive Officer and the Chief Financial Officer have
concluded that, as of December 31, 2010, the Group`s disclosure controls and
procedures were effective.
1.16 Disclosure of Outstanding Share Data
The Group has a share option plan approved by the shareholders that allows it
to grant options, subject to regulatory terms and approval, to its directors,
employees, officers, and consultants to acquire up to 32,600,000 common
shares. As at February 28, 2011, 13,166,000 options were outstanding. During
the 2010 year, the Group issued 1,240,000 share options with a weighted
average exercise price of 1.30. Options outstanding and exercisable at
February 28, 2011 were as follows:
Expiry date Option Number of Number of Weighted
price options options average
outstanding vested life
(years)
October 15, 2012 $ 1.29 4,145,000 4,145,000 1.6
June 25, 2013 $ 1.29 916,000 916,000 2.3
June 30, 2013 $ 1.29 1,410,000 1,410,000 2.3
June 25, 2014 $ 0.96 600,000 600,000 3.3
November 30, 2016 $ 0.84 4,855,000 1,583,415 5.8
May 1, 2017 $ 1.68 500,000 - 6.2
July 1, 2017 $ 1.05 260,000 - 6.3
August 1, 2017 $ 1.11 480,000 - 6.4
Total 13,166,000 8,654,415
Weighted average $ 1.11 $1.19
exercise price
As at February 28, 2011, the issued share capital of the Group was 201,888,473
common shares.
Johannesburg
24 March 2011
JSE Sponsor
Macquarie First South Advisers (Pty) Limited
Date: 24/03/2011 15:00:01 Supplied by www.sharenet.co.za
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