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EPS - Eastern Platinum Limited - Consolidated financial statements of Eastern

Release Date: 06/03/2012 15:14
Code(s): EPS
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EPS - Eastern Platinum Limited - Consolidated financial statements of Eastern Platinum Limited December 31, 2011 and 2010 EASTERN PLATINUM LIMITED (Incorporated in Canada) (Canadian Registration number BC0722783) (South African Registration number 2007/006318/10) Share Code TSX: ELR ISIN: CA 2768551038 Share Code AIM: ELR ISIN: CA 2768551038 Share Code JSE: EPS ISIN: CA 2768551038 Consolidated financial statements of Eastern Platinum Limited December 31, 2011 and 2010 Eastern Platinum Limited December 31, 2011 Table of contents Independent Auditor`s Report ........................................ 3 Consolidated income statements ......................... ............ 4 Consolidated statements of comprehensive (loss) income .............. 5 Consolidated statements of financial position .............. ........ 6 Consolidated statements of changes in equity......................... 7 Consolidated statements of cash flows ............................... 8 Notes to the consolidated financial statements....................... 9-51 Deloitte & Touche LLP 2800 - 1055 Dunsmuir Street 4 Bentall Centre P.O. Box 49279 Vancouver BC V7X 1P4 Canada Tel: 604-669-4466 Fax: 604-685-0395 www.deloitte.ca Independent Auditor`s Report To the Shareholders of Eastern Platinum Limited We have audited the accompanying consolidated financial statements of Eastern Platinum Limited (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2011 and 2010, and the consolidated statements of income, comprehensive (loss) income, changes in equity, and cash flows for the years then ended, and a summary of significant accounting policies and other explanatory information. Management`s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor`s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor`s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity`s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity`s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2011 and 2010, and its financial performance and its cash flows for the years then ended in accordance with International Financial Reporting Standards. (Signed) Deloitte & Touche LLP Chartered Accountants Vancouver, British Columbia March 5, 2012 Eastern Platinum Limited Consolidated income statements (Expressed in thousands of U.S. dollars, except per share amounts) Year ended Year ended Note December 31, December 31, 2011 2010 Revenue $ 113,203 $ 155,000 Cost of operations Production costs 114,614 109,901 Depletion and depreciation 7 20,451 22,507 Impairment 7(e), 16 46,327 - 181,392 132,408 Mine operating (loss) earnings (68,189) 22,592 Expenses General and administrative 7(d) 11,847 12,117 Share-based payments 8(f)(g) 8,325 1,452 20,172 13,569 Operating (loss) profit (88,361) 9,023 Other income (expense) Interest income 5,529 1,797 Finance costs 9 (1,549) (1,807) Foreign exchange loss (2,551) (160) (Loss) profit before income taxes (86,932) 8,853 Income tax (expense) recovery 10 (56) 924 Net (loss) profit for the year $ (86,988) $ 9,777 Attributable to Non-controlling interest 11 $ (10,443) $ (3,575) Equity shareholders of the Company (76,545) 13,352 Net (loss) profit for the year $ (86,988) $ 9,777 (Loss) earnings per share Basic 12 $ (0.08) $ 0.02 Diluted 12 $(0.08) $ 0.02 Weighted average number of common shares outstanding in thousands Basic 12 908,199 683,177 Diluted 12 908,199 694,839 See accompanying notes to the consolidated financial statements Eastern Platinum Limited Consolidated statements of comprehensive (loss) income (Expressed in thousands of U.S. dollars) Year ended Year ended December 31, December 31,
2011 2010 Net (loss) profit for the year $ (86,988) $ 9,777 Other comprehensive (loss) income Exchange differences on translating foreign operations (120,935) 70,355 Exchange differences on translating non-controlling interest (268) 762 Comprehensive (loss) income for the year $ (208,191) $ 80,894 Attributable to Non-controlling interest (10,711) (2,813) Equity shareholders of the Company (197,480) 83,707 Comprehensive (loss) income for the year $ (208,191) $ 80,894 See accompanying notes to the consolidated financial statements Eastern Platinum Limited Consolidated statements of financial position as at December 31, 2011 and 2010 (Expressed in thousands of U.S. dollars) December 31, December 31, Note 2011 2010 Assets Current assets Cash and cash equivalents 13 $ 151,838 $ 107,846 Short-term investments 98,963 242,446 Trade and other receivables 14 23,580 33,787 Inventories 15 7,989 8,832 282,370 392,911 Non-current assets Property, plant and equipment 7 615,439 715,976 Refining contract 16 9,009 14,265 Other assets 17 7,995 3,823 $ 914,813 $ 1,126,975 Liabilities Current liabilities Trade and other payables 18 $ 40,459 $ 27,009 Finance leases 19 1,675 3,211 42,134 30,220
Non-current liabilities Provision for environmental rehabilitation 20 8,390 8,934 Deferred tax liabilities 10 33,520 46,642 84,044 85,796 Equity Issued capital 8 1,230,358 1,219,869 Treasury shares 8(g) (334) - Equity-settled employee benefits reserve 41,563 33,390 Foreign currency translation reserve (103,479) 17,456 Deficit (333,856) (236,764) Capital and reserves attributable to equity shareholders of the Company 834,252 1,033,951 Non-controlling interest 11 (3,483) 7,228 830,769 1,041,179 $ 914,813 $ 1,126,975
Approved and authorized for issue by the Board on March 5, 2012. "David Cohen" "Robert Gayton" David Cohen, Director Robert Gayton, Director See accompanying notes to the consolidated financial statements Eastern Platinum Limited Consolidated statements of changes in equity (Expressed in thousands of U.S. dollars, except number of shares) Issued Treasury Equity- Foreign
capital shares settled currency employee translation benefits reserve reserve
Balance December 31, 2009 $ 890,150 $ - $ 32,336 $ (52,899) Net profit - - - - Currency translation adjustment - - - 70,355 Total comprehensive income - - - 70,355 Public offering 345,391 - - - Share issuance costs (16,501) - - - Stock options exercised 829 - (398) - Share-based payments - - 1,452 - Balance, December 31, 2010 $ 1,219,869 $ - $ 33,390 $ 17,456 Net loss - - - - Currency translation adjustment - - - (120,935) Total comprehensive loss - - - (120,935) Acquisition of Lion`s Head (Note 6) 10,389 - - - Stock options exercised 100 - (100) - Share-based payments - - 8,193 - Treasury shares - (334) 80 - Balance, December 31, 2011 $ 1,230,358 $ (334) $ 41,563 $ (103,479) Deficit Capital and
reserves attributable to equity shareholders
of the Company Balance December 31, 2009 $ (250,116) $ 619,471 Net profit 13,352 13,352 Currency translation adjustment - 70,355 Total comprehensive income 13,352 83,707 Public offering - 345,391 Share issuance costs - (16,501) Stock options exercised - 431 Share-based payments - 1,452 Balance, December 31, 2010 $ (236,764) $ 1,033,951 Net loss (76,545) (76,545) Currency translation adjustment - (120,935) Total comprehensive loss (76,545) (197,480) Acquisition of Lion`s Head (Note 6) (20,547) (10,158) Stock options exercised - - Share-based payments - 8,193 Treasury shares - (254) Balance, December 31, 2011 $ (333,856) $ 834,252 Non-controlling Equity interest
Balance December 31, 2009 $ 10,041 $ 629,512 Net profit (3,575) 9,777 Currency translation adjustment 762 71,117 Total comprehensive income (2,813) 80,894 Public offering - 345,391 Share issuance costs - (16,501) Stock options exercised - 431 Share-based payments - 1,452 Balance, December 31, 2010 $ 7,228 $ 1,041,179 Net loss (10,443) (86,988) Currency translation adjustment (268) (121,203) Total comprehensive loss (10,711) (208,191) Acquisition of Lion`s Head (Note 6) - (10,158) Stock options exercised - - Share-based payments - 8,193 Treasury shares - (254) Balance, December 31, 2011 $ (3,483) $ 830,769 See accompanying notes to the consolidated financial statements Eastern Platinum Limited Consolidated statements of cash flows (Expressed in thousands of U.S. dollars) Year ended Year ended December 31, December 31, Note 2011 2010
Operating activities (Loss) profit before income taxes $ (86,932) $ 8,853 Adjustments to net (loss) profit for non-cash items Impairment 7(e), 16 46,327 - Depletion and depreciation 7 21,170 22,507 Refining contract amortization 16 1,530 1,513 Environmental expense 409 - Loss on disposal of property, plant and equipment 67 - Share-based payments 8(f)(g) 8,325 1,452 Interest income (5,529) (1,797) Finance costs 9 1,549 1,807 Foreign exchange loss 2,551 160 Allowance for bad debts 14(b) 528 - Net changes in non-cash working capital items Trade and other receivables 4,147 (2,318) Inventories (828) (3,040) Trade and other payables 3,299 1,322 Cash (used in) generated from operations (3,387) 30,459 Adjustments to net (loss) profit for cash items Interest income received 4,917 1,767 Finance costs paid (243) (252) Net taxes received 126 - Net operating cash flows 1,413 31,974 Investing activities Net maturity of short-term investments 137,999 (223,118) Purchase of other assets (5,387) (1,129) Property, plant and equipment expenditures (87,048) (32,991) Disposal of property, plant and equipment 232 - Acquisition related dividend refund received 228 - Net investing cash flows 46,024 (257,238) Financing activities Common shares issued for cash, net of share issue costs - public financing - 328,890 Common shares issued for cash - exercise of stock options - 423 Payment of finance leases (1,205) (2,161) Net financing cash flows (1,205) 327,152 Effect of exchange rate changes on cash and cash equivalents (2,240) (1,291) Increase in cash and cash equivalents 43,992 100,597 Cash and cash equivalents, beginning of year 107,846 7,249 Cash and cash equivalents, end of year $ 151,838 $ 107,846 See accompanying notes to the consolidated financial statements Eastern Platinum Limited Notes to the consolidated financial statements - years ended December 31, 2011 and 2010 (Expressed in thousands of U.S. dollars, except number of shares and per share amounts) 1. Nature of operations Eastern Platinum Limited (the "Company") is a platinum group metal ("PGM") producer engaged in the mining, exploration and development of PGM properties located in various provinces in South Africa. Eastern Platinum Limited is a publicly listed company incorporated in Canada with limited liability under the legislation of the Province of British Columbia. The Company`s shares are listed on the Toronto Stock Exchange, Alternative Investment Market, and the Johannesburg Stock Exchange. The head office, principal address and records office of the Company are located at 1075 West Georgia Street, Suite 250, Vancouver, British Columbia, Canada, V6E 3C9. The Company`s registered address is 1055 West Georgia Street, Suite 1500, Vancouver, British Columbia, Canada, V6E 4N7. 2. Basis of preparation (a) Statement of compliance These consolidated financial statements, including comparatives, have been prepared using accounting policies in compliance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"). (b) Judgments and estimates The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, and revenue and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and further periods if the review affects both current and future periods. Judgments made by management in the application of IFRS that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the current and following fiscal years are discussed in Notes 4(v) and 4(w). 3. Application of new and revised International Financial Reporting Standards Effective January 1, 2011, the Company adopted new and revised International Financial Reporting Standards ("IFRSs") that were issued by the International Accounting Standards Board ("IASB"). The application of these new and revised IFRSs has not had any material impact on the amounts reported for the current and prior years but may affect the accounting for future transactions or arrangements. (a) Amendment to IAS 32 Financial Instruments: Presentation Rights, options or warrants to acquire a fixed number of the Company`s equity instruments for a fixed amount of any currency will be allowed to be classified as equity instruments so long as the Company offers the rights, options or warrants pro rata to all of the Company`s existing owners of the same class of the Company`s non- derivative equity instruments. (b) Amendments to IFRS 3 Business Combinations Clarification that the contingent consideration arising in a business combination previously accounted for in accordance with IFRS 3 that is outstanding at the adoption date continues to be accounted for in accordance with IFRS 3. Limiting the accounting policy choice to measure non-controlling interests upon initial recognition at fair value or at the non-controlling interest`s proportionate share of the acquiree`s identifiable net assets to instruments that give rise to a present ownership interest and that currently entitle the holder to a share of net assets in the event of liquidation. Expansion of the guidance with regards to the attribution of the market-based measure of an acquirer`s share-based payment awards issued in exchange for acquiree awards. (c) Amendments to IAS 27 Consolidated and Separate Financial Statements Clarification that the amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates, IAS 28 Investments in Associates, and IAS 31 Interests in Joint Ventures resulting from IAS 27 should be applied prospectively, except for amendments resulting from renumbering. (d) Amendments to IFRS 7 Financial Instruments: Disclosures Amendment to disclosure requirements, specifically, ensuring qualitative disclosures are made in close proximity to quantitative disclosures in order to better enable financial statement users to evaluate an entity`s exposure to risks arising from financial instruments. (e) Amendments to IAS 1 Presentation of Financial Statements Clarification that the breakdown of changes in equity resulting from transactions recognized in other comprehensive income is required to be presented in the statement of changes in equity or in the notes to the financial statements. (f) Amendments to IAS 24 Related Party Disclosures Amendment of the definition for related parties. (g) Amendments to IAS 34 Interim Financial Reporting Addition of further examples of events or transactions that require disclosure and removal of references to materiality when discussing other minimum disclosures. 4. Summary of significant accounting policies The consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments. The Company`s principal accounting policies are outlined below: (a) Basis of consolidation These consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (its subsidiaries, including special purpose entities). Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. All significant intercompany transactions and balances have been eliminated. Non-controlling interest in the net assets of consolidated subsidiaries are identified separately from the Company`s equity. Non-controlling interest consists of the non- controlling interest at the date of the original business combination plus the non- controlling interest`s share of changes in equity since the date of acquisition. Special Purpose Entities ("SPE`s") as defined in SIC 12 Consolidation - Special Purpose Entities are entities which are created to accomplish a narrow and well-defined objective (e.g. to act as a Black Economic Empowerment ("BEE") partner). SPE`s are subject to consolidation when there is an indication that an entity controls the SPE. The Company has determined that its investment in Gubevu Consortium Investment Holdings (Pty) Ltd. ("Gubevu") is a SPE that the Company controls. The accounts of Gubevu are consolidated with those of the Company. (b) Business combinations Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured as the aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Company in exchange for control of the acquiree. Any costs directly attributable to the business combination are generally recognized in profit or loss as incurred. The acquiree`s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS 3 Business Combinations are recognized at their fair values at the acquisition date, except for non- current assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which are recognized and measured at fair value less costs to sell. Goodwill arising on acquisition is recognized as an asset and initially measured at cost, being the excess of the cost of the acquisition over the Company`s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognized. If the Company`s interest in the net fair value of the acquiree`s identifiable assets, liabilities and contingent liabilities exceeds the cost of the acquisition, the excess is recognized immediately in profit or loss. The interest of non-controlling shareholders in the acquiree is initially measured at the non-controlling shareholders` proportion of the net fair value of the assets, liabilities and contingent liabilities recognized. (c) Presentation currency The Company`s presentation currency is the U.S. dollar ("$"), as is general practice within the mining industry. The functional currencies of the Company and its South African subsidiaries are the Canadian Dollar and South African Rand ("ZAR"), respectively. These consolidated financial statements have been translated to the U.S. dollar in accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates. This standard requires that assets and liabilities be translated using the exchange rate at period end, and income, expenses and cash flow items are translated using the rate that approximates the exchange rates at the dates of the transactions (i.e. the average rate for the period). (d) Foreign currency translation In preparing the financial statements of the individual entities, transactions in currencies other than the entity`s functional currency (foreign currencies) are recorded at the rates of exchange prevailing at the dates of the transactions. At each statement of financial position date, monetary assets and liabilities are translated using the period end foreign exchange rate. Non- monetary assets and liabilities are translated using the historical rate on the date of the transaction. Non-monetary assets and liabilities that are stated at fair value are translated using the historical rate on the date that the fair value was determined. All gains and losses on translation of these foreign currency transactions are included in profit or loss. (e) Revenue recognition Revenue is measured at the fair value of the consideration received or receivable. The following specific criteria must be met before revenue is recognized: (i) Sale of goods Revenue from the sale of platinum group and other metals is recognized when all of the following conditions are satisfied: - the specific risks and rewards of ownership have been transferred to the purchaser; - the Company does not retain continuing managerial involvement to the degree usually associated with ownership or effective control over the metals sold; - the amount of revenue can be measured reliably; - it is probable that the economic benefits associated with the transaction will flow to the Company; and - the costs incurred or to be incurred in respect of the sale can be measured reliably. The sale of platinum group and other metals is provisionally priced such that the price is not settled until a predetermined future date based on the market price at that time. Revenue on these sales is initially recognized (when the conditions above are met) at the current market price. The difference between the present value and the future value of the current market price is recognized as interest income over the term of settlement. Subsequent to initial recognition but prior to settlement, sales are marked to market at each reporting date using the forward price for the period equivalent to that outlined in the contract. This mark to market adjustment is recorded in revenue. (e) Revenue recognition (ii) Rental income Rental income from residential properties is recognized on a straight-line basis over the term of the lease. (iii) Interest income Interest income is recognized in profit or loss as it accrues, using the effective interest method. (f) Share-based payments The Company grants stock options to buy common shares of the Company to directors, officers and employees. The board of directors grants such options for periods of up to ten years, with vesting periods determined at its sole discretion and at prices equal to or greater than the closing market price on the day preceding the date the options were granted. The fair value of the options is measured at grant date, using the Black- Scholes option pricing model, and is recognized over the period that the employees earn the options. The fair value is recognized as an expense with a corresponding increase in equity. The amount recognized as an expense is adjusted to reflect the number of share options expected to vest. (g) Finance costs Finance costs comprise interest payable on revenue advances, finance leases, provision for environmental rehabilitation and other borrowings. Interest payable on borrowings is calculated using the effective interest method and foreign exchange gains and losses on foreign currency borrowings. (h) Income taxes Income tax expense consists of current and deferred tax expense. Income tax expense is recognized in profit or loss. Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at period end, adjusted for amendments to tax payable with regards to previous years. Deferred tax assets and liabilities are recognized for deferred tax consequences attributable to unused tax loss carry forwards, unused tax credits and differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in profit or loss in the period that substantive enactment occurs. A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced. The following temporary differences do not result in deferred tax assets or liabilities: - the initial recognition of assets or liabilities, not arising in a business combination, that does not affect accounting or taxable profit - goodwill - investments in subsidiaries, associates and jointly controlled entities where the timing of reversal of the temporary differences can be controlled and reversal in the foreseeable future is not probable. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis. (i) Earnings (loss) per share Basic earnings (loss) per share is computed by dividing the net earnings (loss) attributable to common shareholders by the weighted average number of shares outstanding during the reporting period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the weighted average shares outstanding are increased to include additional shares for the assumed exercise of stock options and warrants, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and warrants were exercised and that the proceeds from such exercises were used to acquire common stock at the average market price during the reporting periods. (j) Comprehensive income (loss) Comprehensive income (loss) is the change in the Company`s net assets that results from transactions, events and circumstances from sources other than the Company`s shareholders and includes items that are not included in net profit such as unrealized gains or losses on available-for-sale investments, gains or losses on certain derivative instruments and foreign currency gains or losses related to translation of the financial statements of foreign operations. The Company`s comprehensive income (loss), components of other comprehensive income, and cumulative translation adjustments are presented in the consolidated statements of comprehensive income (loss) and the consolidated statements of changes in equity. (k) Cash and cash equivalents Cash and cash equivalents consist of cash on hand, deposits in banks and highly liquid investments with an original maturity of three months or less. (l) Short-term investments Short-term investments are investments which are transitional or current in nature, with an original maturity greater than three months. (m) Inventories Inventories, comprising stockpiled ore, concentrate awaiting further processing and sale, and chrome inventory are valued at the lower of cost and net realizable value. Consumables are valued at cost except when inventories are written down to net realizable value, in which case consumables are valued at the lower of cost and net realizable value, with replacement cost used as the best available measure of net realizable value. Cost is determined using the weighted average method and includes direct mining expenditures and an appropriate portion of normal overhead expenditure. In the case of concentrate, direct concentrate costs are also included. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Obsolete, redundant and slow moving stores are identified and written down to net realizable values. (n) Property, plant and equipment (i) Mining assets Assets owned and mineral properties being depleted are recorded at cost less accumulated depreciation and accumulated impairment losses. Mineral properties not being depleted are recorded at cost less accumulated impairment losses. All direct costs related to the acquisition, exploration and development of mineral properties are capitalized until the properties to which they relate are ready for their intended use, sold, abandoned or management has determined there to be impairment. If economically recoverable ore reserves are developed, capitalized costs of the related property are reclassified as mineral properties being depleted and amortized using the units-of-production method following commencement of production. Interest on borrowings incurred to finance mining assets is capitalized until the asset is capable of carrying out its intended use. Mining properties and mining and process facility assets are amortized on a units-of-production basis which is measured by the portion of the mine`s proven and probable ore reserves recovered during the period. Capital work- in- progress, which is included in mining assets, is not depreciated until the assets are ready for their intended use. Although the Company has taken steps to verify title to the properties in which it has an interest, in accordance with industry standards for properties in the exploration stage, these procedures do not guarantee the Company`s title. Property title may be subject to unregistered prior agreements and non- compliance with regulatory requirements. (ii) Residential properties and other property, plant and equipment Residential properties and other property, plant and equipment are recorded at cost less accumulated depreciation and impairment losses. These assets are depreciated using the straight-line method based on estimated useful lives, which generally range from 5 to 7 years, with the exception of residential properties and mine houses whose estimated useful lives are 50 years and office buildings whose estimated useful lives are 20 years. Land is not depreciated. (ii) Residential properties and other property, plant and equipment (continued) Where an item of plant and equipment comprises significant components with different useful lives, the components are accounted for as separate items of plant and equipment. Expenditures incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul expenditures, are capitalized. Directly attributable expenses incurred for major capital projects and site preparation are capitalized until the asset is brought to a working condition for its intended use. These costs include dismantling and site restoration costs to the extent these are recognized as a provision. The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate portion of normal overheads. The costs of day-to-day servicing are recognized in profit or loss as incurred. These costs are more commonly referred to as "maintenance and repairs." Financing costs directly associated with the construction or acquisition of qualifying assets are capitalized at interest rates relating to loans specifically raised for that purpose, or at the weighted average borrowing rate where the general pool of group borrowings is utilized. Capitalization of borrowing costs ceases when the asset is substantially complete. The depreciation method, useful life and residual values are assessed annually. (iii) Leased assets Leases in which the Company assumes substantially all risks and rewards of ownership are classified as finance leases. Assets held under finance leases are recognized at the lower of the fair value of the leased property and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses. Lease payments are accounted for as discussed in Note 4(q). (iv) Subsequent Costs The cost of replacing part of an item within property, plant and equipment is recognized when the cost is incurred if it is probable that the future economic benefits will flow to the group and the cost of the item can be measured reliably. The carrying amount of the part that has been replaced is expensed. All other costs are recognized as an expense as incurred. (v) Impairment The Company`s tangible and intangible assets are reviewed for indications of impairment at each statement of financial position date. If indication of impairment exists, the asset`s recoverable amount is estimated. An impairment loss is recognized when the carrying amount of an asset, or its cash-generating unit, exceeds its recoverable amount. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Impairment losses are recognized in profit and loss for the period. Impairment losses recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash- generating units and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis. The recoverable amount is the greater of the asset`s fair value less costs to sell and value in use. 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 an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. (vi) Reversal of impairment An impairment loss is reversed if there is an indication that 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 amortization, if no impairment loss had been recognized. An impairment loss with respect to goodwill is never reversed. (o) Refining contract The Company sells substantially all its PGM concentrate to one customer under the terms of an off-take or refining contract. The refining contract is amortized over the original life of the contract, estimated to be fifteen years, commencing in mid 2004. An evaluation of the carrying value of the contract is undertaken whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. (p) Financial assets Financial assets are classified into one of four categories: - fair value through profit or loss ("FVTPL"); - held-to-maturity ("HTM"); - available for sale ("AFS"); and, - loans and receivables. The classification is determined at initial recognition and depends on the nature and purpose of the financial asset. (i) FVTPL financial assets Financial assets are classified as FVTPL when the financial asset is held for trading or it is designated as FVTPL. A financial asset is classified as held for trading if: - it has been acquired principally for the purpose of selling in the near future; - it is a part of an identified portfolio of financial instruments that the - Company manages and has an actual pattern of short-term profit-taking; or - it is a derivative that is not designated and effective as a hedging instrument. Financial assets classified as FVTPL are stated at fair value with any resultant gain or loss recognized in profit or loss. The net gain or loss recognized incorporates any dividend or interest earned on the financial asset. The Company does not have any assets classified as FVTPL financial assets. (ii) HTM investments HTM investments are recognized on a trade-date basis and are initially measured at fair value, including transaction costs. The Company does not have any assets classified as HTM investments. (iii) AFS financial assets Short-term investments and other assets held by the Company are classified as AFS and are stated at fair value. Gains and losses arising from changes in fair value are recognized in other comprehensive income and are accumulated in the investments revaluation reserve. To date, these gains and losses have not been significant due to the nature of the underlying investment. Impairment losses, interest calculated using the effective interest method and foreign exchange gains and losses on monetary assets, are recognized directly in profit or loss rather than equity. When an investment is disposed of or is determined to be impaired, the cumulative gain or loss previously recognized in the investments revaluation reserve is included in profit or loss for the period. The fair value of AFS monetary assets denominated in a foreign currency is translated at the spot rate at the statement of financial position date. The change in fair value attributable to translation differences on amortized cost of debt instruments is recognized in profit or loss, while other changes are recognized in equity. (iv) Loans and receivables Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Loans and receivables are initially recognized at the transaction value and subsequently carried at amortized cost less impairment losses. The impairment loss of receivables is based on a review of all outstanding amounts at period end. Bad debts are written off during the year in which they are identified. Interest income is recognized by applying the effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. (v) Effective interest method The effective interest method calculates the amortized cost of a financial asset and allocates interest income over the corresponding period. The effective interest rate is the rate that discounts estimated future cash receipts over the expected life of the financial asset, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. Income is recognized on an effective interest basis for debt instruments other than those financial assets classified as FVTPL. (vi) Impairment of financial assets Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each period end. Financial assets are impaired when there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. Objective evidence of impairment could include the following: - significant financial difficulty of the issuer or counterparty; - default or delinquency in interest or principal payments; or - it has become probable that the borrower will enter bankruptcy or financial reorganization. For financial assets carried at amortized cost, the amount of the impairment is the difference between the asset`s carrying amount and the present value of the estimated future cash flows, discounted at the financial asset`s original effective interest rate. The carrying amount of all financial assets, excluding trade receivables, is directly reduced by the impairment loss. The carrying amount of trade receivables is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognized in profit or loss. With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease relates to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed through profit or loss. On the date of impairment reversal, the carrying amount of the financial asset cannot exceed its amortized cost had impairment not been recognized. (vii) Derecognition of financial assets A financial asset is derecognized when: - the contractual right to the asset`s cash flows expire; or - if the Company transfers the financial asset and substantially all risks and rewards of ownership to another entity. (q) Leases (i) The Company as lessor Rental income from operating leases is recognized on a straight-line basis over the term of the corresponding lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognized on a straight-line basis over the lease term. (ii) The Company as lessee Assets held under finance leases are recognized as assets of the Company at the lower of the fair value at the inception of the lease or the present value of the minimum lease payments. The corresponding liability is recognized as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation to achieve a constant rate of interest on the remaining liability. Finance charges are charged to profit or loss, unless they are directly attributable to qualifying assets, in which case they are capitalized. Operating lease payments are expensed on a straight-line basis over the term of the relevant lease. Incentives received upon entry into an operating lease are recognized straight-line over the lease term. (r) Provisions Provisions are recorded when a present legal or constructive obligation exists as a result of past events where it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the statement of financial position date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount receivable can be measured reliably. (s) Environmental rehabilitation The Company recognizes liabilities for statutory, contractual, constructive or legal obligations associated with the retirement of property, plant and equipment, when those obligations result from the acquisition, construction, development or normal operation of the assets. The net present value of future rehabilitation cost estimates arising from the decommissioning of plant and other site preparation work is capitalized to mining assets along with a corresponding increase in the rehabilitation provision in the period incurred. Discount rates using a pre-tax rate that reflect the time value of money are used to calculate the net present value. The rehabilitation asset is depreciated on the same basis as mining assets. The Company`s estimates of reclamation costs could change as a result of changes in regulatory requirements, discount rates and assumptions regarding the amount and timing of the future expenditures. These changes are recorded directly to mining assets with a corresponding entry to the rehabilitation provision. The Company`s estimates are reviewed annually for changes in regulatory requirements, discount rates, effects of inflation and changes in estimates. Changes in the net present value, excluding changes in the Company`s estimates of reclamation costs, are charged to profit and loss for the period. The net present value of restoration costs arising from subsequent site damage that is incurred on an ongoing basis during production are charged to profit or loss in the period incurred. The costs of rehabilitation projects that were included in the rehabilitation provision are recorded against the provision as incurred. The cost of ongoing current programs to prevent and control pollution is charged against profit and loss as incurred. (t) Employee benefits (i) Employee post-retirement obligations - defined contribution retirement plan The Company`s South African subsidiaries operate a defined contribution retirement plan for its employees. The pension plan is funded by payments from the employees and the subsidiaries and payments are charged to profit and loss for the period as incurred. The assets of the different plans are held by independently managed trust funds. The South African Pension Funds Act of 1956 governs these funds. (ii) Leave pay Employee entitlements to annual leave are recognized as they are earned by the employees. A provision, stated at current cost, is made for the estimated liability at period end. (u) Financial liabilities and equity Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. (i) Other financial liabilities Other financial liabilities are initially measured at fair value, net of transaction costs, and are subsequently measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expenses over the corresponding period. The effective interest rate is the rate that exactly discounts estimated future cash payments over the expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition. The Company has classified trade and other payables, short-term financial liabilities and long-term financial liabilities as other financial liabilities. (ii) Derecognition of financial liabilities The Company derecognizes financial liabilities when, and only when, the Company`s obligations are discharged, cancelled or they expire. (v) Critical accounting estimates Critical accounting estimates are estimates and assumptions made by management that may result in material adjustments to the carrying amount of assets and liabilities within the next financial year. (i) Impairment of property, plant and equipment Please refer to Note 4(n)(v). (ii) Rehabilitation provision The future value of the provision for environmental rehabilitation was determined using an inflation rate of 6.00% (December 31, 2010 - 5.49%) and an estimated life of mine of 20 years for Zandfontein (December 31, 2010 - 20 years), 9 years for Maroelabult (December 31, 2010 - 11 years), 16 years for Crocette (December 31, 2010 - 14 years), 21 years for Kennedy`s Vale (December 31, 2010 - 1 year) and 21 years for Spitzkop (December 31, 2010 - 22 years). The provision has been discounted to present value at a discount rate of 8.47% (December 31, 2010 - 8.29%). (w) Critical accounting judgments Critical accounting judgements are accounting policies that have been identified as being complex or involving subjective judgments or assessments. (i) Determination of functional currency In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates, management determined that the functional currencies of Eastern Platinum Limited and its South African subsidiaries are the Canadian Dollar and South African Rand ("ZAR"), respectively, as these are the currencies of the primary economic environment in which the companies operate. (ii) Useful life of assets At December 31, 2011 the remaining life of mine for Zandfontein, Maroelabult, Crocette, Kennedy`s Vale and Spitzkop was assessed at 20 years, 9 years, 16 years, 21 years and 21 years, respectively (December 31, 2010 - 20 years, 11 years, 14 years, 1 year and 22 years, respectively) based on proven and probable ore reserves. The change in remaining mine life will be evaluated each year as the reserves move to the proven and probable category. (iii) Depreciation rates The estimated maximum useful lives of property, plant and equipment are: Mining assets owned Underground and other assets Life of mine Mine houses 50 years Office buildings 20 years Plant Life of mine Computer equipment 3 years Mining assets leased 5 years Mineral properties being depleted Life of mine Residential properties 50 years Properties and land 50 years (x) Accounting standards issued but not yet effective (i) Effective for annual periods beginning on or after July 1, 2011 - Amendments to IFRS 7 Financial Instruments: Disclosures Increase in disclosure with regards to the transfer of financial assets, especially if there is a disproportionate amount of transfer transactions that take place around the end of a reporting period. (ii) Effective for annual periods beginning on or after January 1, 2013 - New standard IFRS 10 Consolidated Financial Statements IFRS 10 outlines the principles for the presentation and preparation of consolidated financial statements. - New standard IFRS 11 Joint Arrangements IFRS 11 defines the two types of joint arrangements (joint operations and joint ventures) and outlines how to determine the type of joint arrangement entered into and the principles for accounting for each type of joint arrangement. - New standard IFRS 12 Disclosure of Interests in Other Entities IFRS 12 outlines the disclosures required in order to provide users of financial statements with the information necessary to evaluate an entity`s interest in other entities, the corresponding risks related to those interests and the effects of those interests on the entity`s financial position, financial performance and cash flows. - New standard IFRS 13 Fair Value Measurement IFRS 13 defines fair value, summarizes the methods of determining fair value and outlines the required fair value disclosures. IFRS 13 is utilized when another IFRS standard requires or allows fair value measurements or disclosures about fair value measurements. - New interpretation IFRIC Interpretation 20 Stripping Costs in the Production Phase of a Surface Mine IFRIC Interpretation 20 summarizes the method of accounting for waste removal costs incurred as a result of surface mining activity during the production phase of a mine. - Amended standard IAS 19 Employee Benefits IAS 19 outlines the accounting treatment and required disclosures for employee benefits. The amendments applicable to the Company consist of modification of the accounting treatment for termination benefits and the clarification of miscellaneous issues including the classification of employee benefits. - Amended standard IAS 27 Separate Financial Statements IAS 27 outlines the accounting principles to be applied with regards to investments in subsidiaries, joint ventures and associates when an entity elects or is required by local regulations to present separate, non- consolidated, financial statements. The previous standard was titled IAS 27 Consolidated and Separate Financial Statements. - Amended standard IAS 28 Investments in Associates and Joint Ventures IAS 28 outlines the accounting treatment and corresponding application of the equity method of accounting in investments in associates and joint ventures. The previous standard was titled IAS 28 Investments in Associates. (iii) Effective for annual periods beginning on or after January 1, 2015 - New standard IFRS 9 Financial Instruments Partial replacement of IAS 39 Financial Instruments: Recognition and Measurement The Company has not early adopted these new and amended standards and is currently assessing the impact that these standards will have on the consolidated financial statements. IFRS 10, IFRS 11, IAS 27 and IAS 28 cannot be early adopted on a stand-alone basis and may only be early adopted as a group along with IFRS 12. Early adoption must be disclosed. IFRS 12 disclosure is encouraged prior to adoption of the standard. This early disclosure does not require the entity to apply IFRS 10, IFRS 11, IAS 27 or IAS 28. IFRS 13 may be early adopted on a stand-alone basis so long as this fact is disclosed and the standard is applied prospectively as at the beginning of the annual reporting period in which the standard is initially applied. 5. Subsidiaries and associates (a) Subsidiaries Details of the Company`s subsidiaries at December 31, 2011 are as follows: Place of incorporation Name of subsidiary Principal activity and operation Eastern Platinum Holdings Limited Holding company BVI (i) Eastplats Holdings Limited Holding company BVI (i) Eastplats Acquisition Co. Ltd. Holding company BVI (i) Eastplats International Incorporated Holding company Barbados Royal Anthem Investments 134 (Pty) Ltd. Holding company South Africa Spitzkop Joint Venture Mining South Africa Barplats Investments Limited Mining South Africa Spitzkop Platinum (Pty) Ltd. Mining South Africa Mareesburg Joint Venture Mining South Africa Lion`s Head Platinum (Pty) Ltd. Holding company South Africa Gubevu Consortium Investment Holdings (Pty) Ltd. (ii) Holding company South Africa Proportion of ownership interest and voting power held December 31, December 31, Name of subsidiary 2011 2010 Eastern Platinum Holdings Limited 100% 100% Eastplats Holdings Limited 100% 100% Eastplats Acquisition Co. Ltd. 100% 100% Eastplats International Incorporated 100% 100% Royal Anthem Investments 134 (Pty) Ltd. 100% 100% Spitzkop Joint Venture 93.37% 93.37% Barplats Investments Limited 87.49% 87.49% Spitzkop Platinum (Pty) Ltd. 86.74% 86.74% Mareesburg Joint Venture 87% 75.5% Lion`s Head Platinum (Pty) Ltd. 74% 51% Gubevu Consortium Investment Holdings (Pty) Ltd. (ii) 49.99% 49.99% (i) British Virgin Islands ("BVI") (ii) The Company has determined that its investment in Gubevu Consortium Investment Holdings (Pty) Ltd. is a Special Purpose Entity. (b) Associates Details of the Company`s associates at December 31, 2011 are as follows: Place of incorporation Name of associate Principal activity and operation Afrimineral Holdings (Pty) Ltd. Holding company South Africa Proportion of ownership interest and voting power held December 31, December 31, Name of associate 2011 2010 Afrimineral Holdings (Pty) Ltd. 49% 49% 6. Purchase of Lion`s Head Platinum (Pty) Ltd. On December 14, 2011 the Company acquired a further 23% of Lion`s Head Platinum (Pty) Ltd. ("Lion`s Head") to increase its direct and indirect interest to 74%. The acquisition was by way of a purchase of 23 shares in Lion`s Head for consideration of $10 million and 20,000,000 common shares in Eastern Platinum Limited. The cash of $10 million was paid in January 2012 (Note 18). This transaction increased the Company`s direct and indirect ownership in the Mareesburg Joint Venture from 75.5% to 87%. As the acquisition did not lead to the Company acquiring control nor losing control of the Mareesburg JV, the increase in ownership was accounted for as an equity transaction. Purchase price Acquisition of 23% of Lion`s Head Cash ($10 million) $ 10,000 Shares (20,000,000 common shares of Eastern Platinum Limited) 10,389 Acquisition costs 158 $ 20,547
7. Property, plant and equipment Tangible Tangible Intangible Intangible assets assets mineral mineral owned leased properties properties
being being not being depleted depleted depleted Cost Balance as at December 31, 2009 $ 426,223 $ 6,132 $ 136,100 $ 546,122 Assets acquired 32,444 - - 261 Foreign exchange movement 56,520 768 17,040 58,901 Balance as at December 31, 2010 $ 515,187 $ 6,900 $ 153,140 $ 605,284 Assets acquired 85,857 265 - 34 Assets disposed (2,221) - - - Transfer (10,876) - 862 (862) Foreign exchange movement (101,804) (1,272) (28,364) (94,591) Balance as at December 31, 2011 $ 486,143 $ 5,893 $ 125,638 $ 509,865 Accumulated depreciation and impairment losses Balance as at December 31, 2009 $ 126,944 $ 3,691 $ 20,765 $ 342,322 Depreciation 15,452 1,244 5,676 - Foreign exchange movement 17,574 598 3,224 42,862 Balance as at December 31, 2010 $ 159,970 $ 5,533 $ 29,665 $ 385,184 Depreciation 15,282 1,114 4,339 - Depreciation of disposed assets (1,989) - - - Impairment loss 33,281 - 11,796 - Transfer - - 862 (862) Foreign exchange movement (31,014) (1,149) (5,997) (70,989) Balance as at December 31, 2011 $ 175,530 $ 5,498 $ 40,665 $ 313,333 Carrying amounts At December 31, 2009 $ 299,279 $ 2,441 $ 115,335 $ 203,800 At December 31, 2010 $ 355,217 $ 1,367 $ 123,475 $ 220,100 At December 31, 2011 $ 310,613 $ 395 $ 84,973 $ 196,532 Residential Properties TOTAL
properties and land Cost Balance as at December 31, 2009 $ 10,071 $ 6,978 $1,131,626 Assets acquired 286 - 32,991 Foreign exchange movement 1,275 874 135,378 Balance as at December 31, 2010 $ 11,632 $ 7,852 $ 1,299,995 Assets acquired 892 - 87,048 Assets disposed - - (2,221) Transfer 10,876 - - Foreign exchange movement (3,509) (1,450) (230,990) Balance as at December 31, 2011 $ 19,891 $ 6,402 $ 1,153,832 Accumulated depreciation and impairment losses Balance as at December 31, 2009 $ 2,296 $ 830 $ 496,848 Depreciation 135 - 22,507 Foreign exchange movement 302 104 64,664 Balance as at December 31, 2010 $ 2,733 $ 934 $ 584,019 Depreciation 435 - 21,170 Depreciation of disposed assets - - (1,989) Impairment loss - - 45,077 Transfer - - - Foreign exchange movement (563) (172) (109,884) Balance as at December 31, 2011 $ 2,605 $ 762 $ 538,393 Carrying amounts At December 31, 2009 $ 7,775 $ 6,148 $ 634,778 At December 31, 2010 $ 8,899 $ 6,918 $ 715,976 At December 31, 2011 $ 17,286 $ 5,640 $ 615,439 Eastern Platinum Limited Notes to the consolidated financial statements (Expressed in thousands of U.S. dollars, except number of shares and per share amounts) 7. Property, plant and equipment Crocodile Kennedy`s Spitzkop River Mine Vale Project PGM Project (a) and (c)
Concentrator (b) Cost Balance as at December 31, 2009 $ 585,376 $ 400,017 $ 118,994 Assets acquired 32,728 - 47 Foreign exchange movement 76,470 50,082 7,316 Balance as at December 31, 2010 $ 694,574 $ 450,099 $ 126,357 Assets acquired 52,384 34,618 30 Assets disposed (2,221) - - Transfer (55,783) 55,783 - Foreign exchange movement (127,312) (92,043) (10,894) Balance as at December 31, 2011 $ 561,642 $ 448,457 $ 115,493 Accumulated depreciation and impairment losses Balance as at December 31, 2009 $ 154,417 $ 342,322 $ - Depreciation 22,500 - - Foreign exchange movement 21,796 42,861 - Balance as at December 31, 2010 $ 198,713 $ 385,183 $ - Depreciation 20,444 719 - Depreciation of disposed assets (1,989) - - Impairment loss 45,077 - - Foreign exchange movement (38,690) (71,191) - Balance as at December 31, 2011 $ 223,555 $ 314,711 $ - Carrying amounts At December 31, 2009 $ 430,959 $ 57,695 $ 118,994 At December 31, 2010 $ 495,861 $ 64,916 $ 126,357 At December 31, 2011 $ 338,087 $ 133,746 $ 115,493 Mareesburg Other TOTAL
Project property (c) plant and equipment Cost Balance as at December 31, 2009 $ 27,111 $ 128 $ 1,131,626 Assets acquired 214 2 32,991 Foreign exchange movement 1,503 7 135,378 Balance as at December 31, 2010 $ 28,828 $ 137 $ 1,299,995 Assets acquired 14 2 87,048 Assets disposed - - (2,221) Transfer - - - Foreign exchange movement (739) (2) (230,990) Balance as at December 31, 2011 $ 28,103 $ 137 $ 1,153,832 Accumulated depreciation and impairment losses Balance as at December 31, 2009 $ - $ 109 $ 496,848 Depreciation - 7 22,507 Foreign exchange movement 1 6 64,664 Balance as at December 31, 2010 $ 1 $ 122 $ 584,019 Depreciation - 7 21,170 Depreciation of disposed assets - - (1,989) Impairment loss - - 45,077 Foreign exchange movement (1) (2) (109,884) Balance as at December 31, 2011 $ - $ 127 $ 538,393 Carrying amounts At December 31, 2009 $ 27,111 $ 19 $ 634,778 At December 31, 2010 $ 28,827 $ 15 $ 715,976 At December 31, 2011 $ 28,103 $ 10 $ 615,439 (a) Crocodile River Mine ("CRM") The Company holds directly and indirectly 87.5% of CRM, which is located on the eastern portion of the western limb of the Bushveld Complex. The Maroelabult and Zandfontein sections are currently in production. Development of the Crocette section was put on hold in December 2011. (b) Kennedy`s Vale Project ("KV") The Company holds directly and indirectly 87.5% of KV, which is located on the eastern limb of the Bushveld Complex, near Steelpoort in the Province of Mpumalanga. It comprises PGM mineral rights on five farms in the Steelpoort Valley. The development of this project was on hold as at December 31, 2011. However, the design and construction of a concentrator located on the KV property is currently in progress and is expected to be completed in the first quarter of 2013. The concentrator will initially be used to process ore from the Mareesburg Project. (c) Spitzkop PGM Project and Mareesburg Project The Company holds directly and indirectly a 93.4% interest in the Spitzkop PGM Project and an 87% interest in the Mareesburg Project. The Company currently acts as the operator of both the Mareesburg Platinum Project and Spitzkop PGM Project, both located on the eastern limb of the Bushveld Complex. Construction of the Mareesburg Project is currently in progress and is expected to be completed in the first quarter of 2013. The Spitzkop PGM Project is planned to be developed after the Mareesburg Project goes into production. (d) Depreciation Depreciation of $719 (December 31, 2010 - $Nil) is included in general and administrative expenses for the twelve months ended December 31, 2011. This depreciation pertains to assets which are not currently being used for mining operations. (e) Impairment of property, plant and equipment During the year ended December 31, 2011, the Company determined that the carrying value of CRM exceeded the expected net present value of its future cash flows. This resulted in an impairment charge of $45,077 at CRM, of which $33,281 pertained to tangible assets owned and $11,796 pertained to intangible mineral properties being depleted. The expected net present value of CRM`s future cash flows were calculated using a weighted average cost of capital of 8.63%, and the following forecasted foreign exchange rates and prices. South African Rand 2012 2013 2014 per U.S. Dollar 7.35 7.20 8.20 Platinum US$/oz 1,750 1,753 1,741 Palladium US$/oz 750 784 821 Rhodium US$/oz 1,525 1,763 2,413 Gold US$/oz 1,580 1,430 1,319 Iridium US$/oz 1,040 1,019 643 Ruthenium US$/oz 120 118 230 Nickel US$/tonne 24,150 22,865 21,598 Copper US$/tonne 9,855 9,001 7,828 Chrome Rand/tonne 600 600 600 South African Rand 2015 2016 2017+ per U.S. Dollar 8.59 9.03 10.59 Platinum US$/oz 1,752 1,735 1,665 Palladium US$/oz 859 825 702 Rhodium US$/oz 2,678 2,692 3,625 Gold US$/oz 1,221 1,113 1,005 Iridium US$/oz 648 644 620 Ruthenium US$/oz 225 230 220 Nickel US$/tonne 20,886 20,231 18,210 Copper US$/tonne 7,319 6,916 5,565 Chrome Rand/tonne 600 600 600 (f) Assets pledged as security As at December 31, 2011, $338,087 of property, plant and equipment has been pledged as security for the $100 million credit facility (December 31, 2010 - Nil). 8. Issued capital (a) Authorized - Unlimited number of preferred redeemable, voting, non-participating shares without nominal or par value, - Unlimited number of common shares with no par value. (b) Issued and outstanding Changes to the number of shares issued and outstanding are as follows: December 31,
2011 2010 Note Number of Number of shares shares Balance outstanding, beginning of period 907,589,567 680,893,325 Lion`s Head acquisition 8(d) 20,000,000 - Public offering 8(e) - 224,250,000 Shares issued upon option exercise 8(f) 598,273 2,446,242 Balance outstanding, end of period 928,187,840 907,589,567 (c) Treasury shares December 31, 2011 December 31, 2010 Number of Number of
treasury treasury shares shares Balance outstanding, beginning of period - - Purchase of shares pursuant to Key Skills Retention Plan (Note 8(g)) 198,563 - Balance outstanding, end of period 198,563 - (d) December 14, 2011 Lion`s Head acquisition On December 14, 2011, the Company acquired a further 23% of Lion`s Head for consideration of $10 million and 20,000,000 common shares in Eastern Platinum Limited (Note 6). (e) December 30, 2010 Public Offering On December 30, 2010, the Company completed a public offering (the "Public Offering"). The Public Offering consisted of 224,250,000 common shares, of which 195,361,476 common shares were sold at a price of Cdn$1.55 and 28,888,524 common shares were sold at a price of GBP0.9568. Share issue costs of Cdn$16,501 were incurred. (f) Share options The Company has an incentive plan (the "2011 Plan"), approved by the Company`s shareholders at its annual general meeting held on June 9, 2011, under which options to purchase common shares may be granted to its directors, officers, employees and others at the discretion of the Board of Directors. Under the terms of the 2011 Plan: - 79 million common shares are reserved for issuance upon the exercise of options, of which 19,144,497 remain available for issuance at December 31, 2011. - All outstanding options at June 9, 2011 granted under the Company`s previous plan (the "2008 Plan") will continue to exist under the 2011 plan provided that the fundamental terms governing such options will be deemed to be those under the 2008 Plan. - Each option granted shall be for a term not exceeding five years from the date of being granted and the vesting period is determined based on the discretion of the Board of Directors. Vesting is dependent on continued employment with the Company. - The option exercise price is set at the date of the grant and cannot be less than the closing market price of the Company`s common shares on the Toronto Stock Exchange on the day immediately preceding the day of the grant of the option. - The 2011 Plan includes share appreciation rights providing for an optionee to elect to exercise options and to receive an amount in common shares equal to the difference between fair market value at the time of exercise and the exercise price for the options exercised. (i) Movements in share options during the year The changes in share options during the years ended December 31, 2011 and 2010 were as follows: December 31, 2011 Weighted average Number of exercise
options price Cdn$ Balance outstanding, beginning of year 57,976,836 1.52 Options granted 9,875,000 1.55 Options exercised (741,333) 0.32 Options forfeited (7,255,000) 1.71 Balance outstanding, end of year 59,855,503 1.52 December 31, 2010
Weighted average Number of exercise options price
Cdn$ Balance outstanding, beginning of year 59,575,834 1.48 Options granted 2,231,000 1.30 Options exercised (2,794,995) 0.33 Options forfeited (1,035,003) 1.82 Balance outstanding, end of year 57,976,836 1.52 598,273 shares were issued upon the exercise of 741,333 share options during the year ended December 31, 2011. All 741,333 options exercised were non- cash exercises in accordance with the 2011 Plan`s share appreciation rights. The weighted average closing share price at the date of exercise was Cdn$1.66. Options granted and exercised during the year ended December 31, 2011 resulted in share-based payment expense of $8,193 (December 31, 2010 - $1,452). (ii) Fair value of share options granted in the year The fair value of each option granted is estimated at the time of the grant using the Black-Scholes option pricing model with weighted average assumptions for grants as follows: 2011 March 25 Exercise price Cdn$1.55 Closing market price on day preceding date of grant Cdn$1.38 Grant date share price Cdn$1.39 Risk-free interest rate 2.69% Expected life 5 Annualized volatility 73% Dividend rate 0% Grant date fair value Cdn$0.82 Exercise price for the March 25, 2011 option issuance is equivalent to the December 30, 2010 public offering price. 2010 January 18 Exercise price Cdn$1.30 Closing market price on day preceding date of grant Cdn$1.30 Grant date share price Cdn$1.42 Risk-free interest rate 1.73% Expected life 3 years Annualized volatility 83% Dividend rate 0% Grant date fair value Cdn$0.80 Exercise price for the January 18, 2010 option issuance is equivalent to the closing market price on the day preceding the date the options were granted, as defined by the 2008 Plan. Grant date share price is the closing market price on the day the options were granted. (iii) Share options outstanding at the end of the year The following table summarizes information concerning outstanding and exercisable options at December 31, 2011: Options Options Exercise Remaining Expiry date outstanding exercisable price Contractual Life (Years) Cdn$ 19,987,500 19,987,500 1.82 0.19 March 7, 2012 13,772,001 13,772,001 0.32 1.97 December 18, 2013 400,000 400,000 0.52 2.50 June 30, 2014 75,002 75,002 0.76 2.84 November 3, 2014 2,226,000 2,226,000 1.30 3.06 January 18, 2015 9,875,000 9,875,000 1.55 4.24 March 25, 2016 12,950,000 12,950,000 2.31 5.77 October 5, 2017 400,000 400,000 3.38 6.15 February 20, 2018 170,000 170,000 3.38 6.24 March 27, 2018 59,855,503 59,855,503 2.66 The weighted average exercise price of options exercisable at December 31, 2011 is Cdn$1.52. (g) Key skills retention plan In 2010, the Company`s South African subsidiary, Barplats Investments Limited ("BIL"), implemented a key skills retention plan for its senior employees in South Africa. The purpose of the plan is to retain key employees, attract new employees as the need arises and remain competitive with other South African mining companies. The plan operates through a trust ("the Trust") which purchases shares of the Company on behalf of the employees. These shares then vest to the employees over time. In February, 2011, the Trust purchased 198,563 shares pursuant to the plan which resulted in a share-based payment expense of $132 in the year ended December 31, 2011, and a share-based payment liability of $48 at December 31, 2011. These shares have been recorded as "treasury shares" in the statement of financial position. 9. Finance costs December 31, December 31, 2011 2010 Interest on revenue advances $ 476 $ 614 Interest on finance leases 178 277 Interest on provision for environmental rehabilitation 676 694 Interest on tax 215 209 Other interest 4 13 $ 1,549 $ 1,807
10. Income taxes The income tax recognized in profit or loss comprises of: December 31, December 31, 2011 2010
Deferred tax recovery relating to the origination and reversal of temporary differences $ 4,901 $ 924 Current tax (4,957) - Total income tax $ (56) $ 924 The provision for income taxes reported differs from the amounts computed by applying the cumulative Canadian federal and provincial income tax rates to the loss before tax provision due to the following: December 31, December 31,
2011 2010 Statutory tax rate 26.50% 28.50% Expected tax expense (recovery) on (profit) loss before income tax $ (23,036) $ 2,523 Difference in tax rates between foreign jurisdictions and Canada (11,210) (9,365) Item not deductible for income tax purposes 9,537 534 Secondary tax on companies 4,546 - Tax losses not recognized 20,219 4,572 Change in tax estimates - 812 Income tax expense (recovery) $ 56 $ (924) The approximate tax effect of each item that gives rise to the Company`s deferred tax liabilities are as follows: December 31, December 31, 2011 2010 Non-capital loss carry forwards $ 19,879 $ 12,031 Share issue costs 2,436 3,582 Accumulated cost base difference on assets and other (32,534) (43,517) Deferred receipts (555) (6,102) Deferred tax liabilities before valuation allowance $ (10,774) $ (34,006) Less valuation allowance (22,746) (12,636) Total deferred tax liabilities $ (33,520) $ (46,642) The movement between the opening and closing balances was recognized in profit or loss and in foreign currency translation reserve. At December 31, 2011, the Company has non-capital losses of approximately Cdn$29,471 (December 31, 2010 - Cdn$20,679) available to apply against future Canadian income for tax purposes. In South Africa, the Company has unredeemed capital expenditures available for utilization against future taxable income and estimated tax losses of approximately R3.5 billion (December 31, 2010 - R3.3 billion). The South African losses do not expire unless the Company`s mining activities cease. The Canadian non-capital losses will expire as follows (in thousands of Canadian dollars): Cdn $ (000 `s)
2015 $ 2,780 2026 3,224 2027 9,498 2028 4,217 2029 75 2030 8,665 2031 1,012 $ 29,471
At December 31, 2011, the Company had capital losses of Cdn$1,569 available to apply against future capital gains in Canada. The Company`s operations are conducted in a number of countries with complex tax legislation and regulations pertaining to the Company`s activities. Any reassessment of the Company`s tax filings by the tax authorities may result in material adjustments to net profit or loss, tax assets and operating loss carry-forwards. The Company provides for such reassessments when it is probable that a taxation authority will not sustain the Company`s filing position and the amount of the tax exposure can be reasonably estimated. As at December 31, 2011, no provisions have been made in the financial statements for any estimated tax liability. 11. Non-controlling interest The non-controlling interests are comprised of the following: Balance, December 31, 2009 $ 10,041 Non-controlling interests` share of loss in Barplats (866) Non-controlling interests` share of interest on advances to Gubevu (2,709) Foreign exchange movement 762 Balance, December 31, 2010 $ 7,228 Non-controlling interests` share of loss in Barplats (7,751) Non-controlling interests` share of interest on advances to Gubevu (2,692) Foreign exchange movement (268) Balance, December 31, 2011 $ (3,483) 12. Earnings per share The weighted average number of ordinary shares for the purposes of diluted earnings per share reconciles to the weighted average number of ordinary shares used in the calculation of basic earnings per share as follows: December 31, December 31, 2011 2010
(in thousands) Weighted average number of ordinary shares used in the calculation of basic earnings per share 908,199 683,177 Shares deemed to be issued for no consideration in respect of options - 11,662 Weighted average number of ordinary shares used in the calculation of diluted earnings per share 908,199 694,839 The loss used to calculate basic and diluted earnings per share for the year ended December 31, 2011 was $76,545 (December 31, 2010 - earnings of $13,352). The following potential ordinary shares, outstanding at December 31, 2011, are anti-dilutive and are therefore excluded from the weighted average number of ordinary shares for the purposes of diluted earnings per share: December 31, December 31, 2011 2010 (in thousands) Options 45,609 40,663 13. Cash and cash equivalents Cash and cash equivalents are comprised of: December 31, December 31, 2011 2010
Cash in bank $ 110,150 $ 102,654 Short-term money market instruments 41,688 5,192 $ 151,838 $ 107,846 14. Trade and other receivables Trade and other receivables are comprised of the following: December 31, December 31, 2011 2010 Trade receivables $ 11,550 $ 30,142 Current tax receivable 738 1,283 Other receivables 11,820 2,556 Allowance for doubtful debts for other receivables (528) (194) $ 23,580 $ 33,787 As at December 31, 2011, $18,360 of trade and other receivables has been pledged as security for the $100 million credit facility (December 31, 2010 - Nil). (a) Aging of past due, but not impaired The average credit period of PGM sales is 4 months. The Company has the right to request up to a 90% advance on payment, payable 1 month subsequent to sale. The Company has financial risk management policies in place to ensure that all receivables are received within the pre-agreed credit terms. Included in trade and other receivables are receivables with a carrying value of $124 (December 31, 2010 - $152) that are past due but have not been provided for. For the years ended December 31, 2011 and 2010, substantially all of the Company`s PGM production was sold to one customer and there was no significant change in the credit quality of this customer over that time. The past due amounts are considered recoverable. December 31, December 31,
2011 2010 Less than 5 months $ - $ - 5 months and greater 124 152 $ 124 $ 152
(b) Movement in the allowance for doubtful debts December 31, December 31, 2011 2010 Opening balance $ 194 $ 74 Impairment losses recognized on receivables 413 116 Amounts written off during the year as uncollectible - (16) Foreign exchange translation gains and losses (79) 20 Closing balance $ 528 $ 194 (c) Aging of impaired receivables December 31, December 31, 2011 2010 Less than 4 months 32 46 Greater than 4 months 496 148 $ 528 $ 194 At December 31, 2011, other receivables of $528 (December 31, 2010 - $194) were impaired and provided for. These receivables were for rental income, royalties and scrap sales. Impairment was determined based on payment history and how far past due the receivables were. 15. Inventories December 31, December 31,
2011 2010 Consumables $ 5,348 $ 6,607 Ore and concentrate 634 477 Chrome inventory 2,007 1,748 $ 7,989 $ 8,832 Production costs for the year ended December 31, 2011 was $114,614 (December 31, 2010 - $109,901). Production costs represent the cost of inventories sold during the period. For the years ended December 31, 2011 and 2010 production costs did not include any amounts with regards to the write-down of inventory to net realizable value or with regards to the reversal of write-downs. 16. Refining Contract During the year ended June 30, 2006, the Company acquired a 69% interest in Barplats and assigned a portion of the purchase price to the off-take contract governing the sales of Barplats` PGM concentrate production. The initial value of the contract was $17,939. During the year ended June 30, 2007, the Company acquired an additional 5% interest in Barplats resulting in an additional allocation to the contract of $4,802 for a total aggregate value of $22,741. During the year ended December 31, 2008, the Company acquired an additional 2.47% interest in Barplats. The acquisition did not affect the aggregate value of the contract. The value of the contract is amortized over the remaining term of the contract which is 7.5 years as at December 31, 2011. Cost Balance as at December 31, 2009 $ 21,122 Foreign exchange movement 2,645 Balance as at December 31, 2010 $ 23,767 Foreign exchange movement (4,385) Balance as at December 31, 2011 $ 19,382 Accumulated amortization Balance as at December 31, 2009 $ 6,953 Amortization 1,513 Foreign exchange movement 1,036 Balance as at December 31, 2010 $ 9,502 Amortization 1,530 Impairment 1,250 Foreign exchange movement (1,909) Balance as at December 31, 2011 $ 10,373 Carrying amounts At December 31, 2009 $ 14,169 At December 31, 2010 $ 14,265 At December 31, 2011 $ 9,009 During the year ended December 31, 2011, the Company determined that the carrying value of CRM exceeded the expected net present value of its future cash flows. This resulted in an impairment charge of $1,250 being recorded against the refining contract. The expected net present value of CRM`s future cash flows were calculated using a weighted average cost of capital of 8.63%, and the following forecasted foreign exchange rates and prices. South African Rand 2012 2013 2014 per US dollar 7.35 7.20 8.20 Platinum US$/oz 1,750 1,753 1,741 Palladium US$/oz 750 784 821 Rhodium US$/oz 1,525 1,763 2,413 Gold US$/oz 1,580 1,430 1,319 Iridium US$/oz 1,040 1,019 643 Ruthenium US$/oz 120 118 230 Nickel US$/tonne 24,150 22,865 21,598 Copper US$/tonne 9,855 9,001 7,828 Chrome Rand/tonne 600 600 600 South African Rand 2015 2016 2017+ per US dollar 8.59 9.03 10.59 Platinum US$/oz 1,752 1,735 1,665 Palladium US$/oz 859 825 702 Rhodium US$/oz 2,678 2,692 3,625 Gold US$/oz 1,221 1,113 1,005 Iridium US$/oz 648 644 620 Ruthenium US$/oz 225 230 220 Nickel US$/tonne 20,886 20,231 18,210 Copper US$/tonne 7,319 6,916 5,565 Chrome Rand/tonne 600 600 600 17. Other assets Other assets consists of a money market fund investment that is classified as available-for- sale and serves as security for a guarantee issued to the Department of Mineral Resources of South Africa in respect of the environmental rehabilitation liability (Note 20). Changes to other assets for the year ended December 31, 2011 are as follows: Balance, December 31, 2009 $ 2,282 Additional investment $ 955 Service fees (8) Interest income 185 Foreign exchange movement 409 Balance, December 31, 2010 $ 3,823 Additional investment 5,387 Service fees (8) Interest income 344 Foreign exchange movement (1,551) Balance, December 31, 2011 $ 7,995 18. Trade and other payables December 31, December 31, 2011 2010 Trade payables $ 8,133 $ 10,604 Accrued liabilities 20,464 10,240 Other 11,862 6,165 $ 40,459 $ 27,009 Accrued liabilities includes $10 million in respect of the purchase of a further 23% of Lion`s Head (Note 6). The average credit period of purchases is 1 month. The Company has financial risk management policies in place to ensure that all payables are paid within the pre- agreed credit terms. 19. Finance leases Finance leases relate to mining vehicles that had lease terms of 5 years payable half yearly in advance. The leases expired in December 2011 and the final installment was made in January 2012. The Company chose not to purchase the vehicles at the conclusion of the lease agreements. The Company`s obligations under finance leases were secured by the lessor`s title to the leased assets. Interest was calculated at the South African prime rate plus 1%. The fair value of the finance lease liabilities approximated carrying value. (a) Minimum lease payments December 31, December 31, 2011 2010 No later than 1 year $ 1,675 $ 3,405 1,675 3,405
Less: future finance charges - (194) Present value of minimum lease payments $ 1,675 $ 3,211 (b) Present value of minimum lease payments December 31, December 31,
2011 2010 No later than 1 year $ 1,675 $ 3,211 20. Provision for environmental rehabilitation Although the ultimate amount of the environmental rehabilitation provision is uncertain, the best estimate of these obligations is based on information currently available, including closure plans and applicable regulations. Significant closure activities include land rehabilitation, demolition of buildings and mine facilities and other costs. The provision for environmental rehabilitation at December 31, 2011 is ZAR 68 million ($8,390) (December 31, 2010 - ZAR 58.9 million, $8,934). The provision was determined using an inflation rate of 6.00% (December 31, 2010 - 5.49%) and an estimated life of mine of 20 years for Zandfontein (December 31, 2010 - 20 years), 9 years for Maroelabult (December 31, 2010 - 11 years), 16 years for Crocette (December 31, 2010 - 14 years), 21 years for Kennedy`s Vale (December 31, 2010 - 1 year) and 21 years for Spitzkop (December 31, 2010 - 22 years). A discount rate of 8.47% was used (December 31, 2010 - 8.29%). A guarantee of $7,995 (December 31, 2010 - $3,823) has been issued to the Department of Mineral Resources (Note 17). The guarantee will be utilized to cover expenses incurred to rehabilitate the mining area upon closure of the mine. The undiscounted value of this liability is approximately ZAR 328 million ($40,567) (December 31, 2010 - ZAR 215.4 million, $32,694). Changes to the environmental rehabilitation provision are as follows: Balance, December 31, 2009 $ 8,152 Revision in estimates (961) Interest expense (Note 21) 694 Foreign exchange movement 1,049 Balance, December 31, 2010 $ 8,934 Revision in estimates 499 Interest expense (Note 21) 676 Foreign exchange movement (1,719) Balance, December 31, 2011 $ 8,390 During the year ended December 31, 2011, $409 of the revision in estimate was expensed (December 31, 2010 - nil). The remaining $90 (December 31, 2010 - negative $961) was capitalized to fixed assets. 21. Credit facility In December 2011 the Company signed a definitive agreement with UniCredit Bank AG, London Branch and Standard Finance (Isle of Man) Limited (a subsidiary of The Standard Bank of South Africa Limited) for a US$100 million financing package. The borrowers are Barplats Mines Limited, Rhodium Reefs Limited, and Royal Anthem Investments 134 (Pty) Ltd. The financing package consists of an US$70 million term facility and an US$30 million revolving loan facility. The scheduled tenor is for 5.5 years with an 18 month grace period for principal repayments. The initial interest is US LIBOR plus 3.85% rising to US LIBOR plus 4.15% for the last 2.5 years of the loan. The financing package does not require commodity, currency or interest rate hedging. The facility is secured by: - The shares of Barplats Mines Limited ("BML"), Spitzkop Platinum (Pty) Ltd. and Royal Anthem Investments 134 (Pty) Ltd. held by the Company; - The physical assets, accounts receivable, insurance policies and certain property of BML; - The Mareesburg and Spitzkop JV agreements; and, - Certain bank accounts required to be set up for the facilities agreement. As at December 31, 2011, the Company had not drawn down on the term facility or the revolving loan facility. 22. Commitments The Company has committed to capital expenditures on projects of approximately ZAR 144 million ($17,862) as at December 31, 2011 (December 31, 2010 - ZAR 86 million, $13,056). 23. Retirement benefit plans The Barplats Provident Fund is an independent, defined contribution plan administered by Liberty Life Limited in South Africa. The costs associated with the defined contribution plan included in net profit (loss) for the year ended December 31, 2011 were $3,788 (December 31, 2010 - $3,894). The total number of employees in the plan at December 31, 2011 was 1,421 (December 31, 2010 - 1,762). 24. Related party transactions Balances and transactions between the Company and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. Details of the transactions between the Company and other related parties are disclosed below. (a) Trading transactions The Company`s related parties consist of companies owned by executive officers and directors as follows: Nature of transactions Andrews PGM Consulting Consulting Buccaneer Management Inc. Management Jazz Financial Ltd. Management Maluti Services Limited General and administrative Xiste Consulting Ltd. Management The Company incurred the following fees and expenses in the normal course of operations in connection with companies owned by key management and directors. Expenses have been measured at the exchange amount which is determined on a cost recovery basis. December 31, December 31,
Note 2011 2010 Consulting fees (i) $ 186 $ 304 General and administrative expenses 237 193 Management fees 2,338 2,253 $ 2,761 $ 2,750 (i) The Company paid fees to a private company controlled by a director of the Company for consulting services performed outside of his capacity as a director. Amounts due to related parties are unsecured, non-interest bearing and due on demand. Accounts payable at December 31, 2011 included $873 (December 31, 2010 - $1,089) which was due to private companies controlled by officers and directors of the Company. (b) Compensation of key management personnel The remuneration of directors and other members of key management personnel during the years ended December 31, 2011 and 2010 were as follows: December 31, December 31,
Note 2011 2010 Salaries and directors` fees (i) $ 3,547 $ 3,758 Share-based payments (ii) 7,996 1,627 $ 11,543 $ 5,385
(i) Salaries and directors` fees include consulting and management fees disclosed in Note 24(a). (ii) Share-based payments are the fair value of options granted to key management personnel. (iii) Key management personnel were not paid post-employment benefits, termination benefits, or other long-term benefits during the years ended December 31, 2011 and 2010. 25. Segmented information (a) Operating segment - The Company`s operations are primarily directed towards the acquisition, exploration and production of platinum group metals in South Africa. (b) Geographic segments - The Company`s assets by geographic areas as at December 31, 2011 and revenues and expenses by geographic areas for the years ended December 31, 2011 and 2010 are as follows: December 31, 2011 Crocodile Kennedy`s Spitzkop
River Mine Vale Current assets $ 24,460 $ 9,478 $ 1,535 Property, plant and equipment 338,087 133,746 115,493 Refining contract 9,009 - - Other assets 7,995 - - $ 379,551 $ 143,224 $ 117,028 Property, plant and equipment expenditures $ 52,384 $ 34,618 $ 30 Property, plant and equipment disposals 2,221 - - Revenue $ 113,203 $ - $ - Production costs (114,614) - - Depletion and depreciation (20,444) - - Impairment (46,327) - - General and administrative expenses (4,276) (1,442) 31 Share-based payment (254) - - Interest income 1,416 63 16 Finance costs (1,016) (331) (14) Foreign exchange gain (loss) 825 (66) - (Loss) profit before income taxes (71,487) (1,776) 33 Income tax recovery (expense) 53 (109) - Net (loss) profit $ (71,434) $ (1,885) $ 33 December 31, 2011 Mareesburg Other Total South
Africa Current assets $ 68 $ 738 $ 36,279 Property, plant and equipment 28,103 - 615,429 Refining contract - - 9,009 Other assets - - 7,995 $ 28,171 $ 738 $ 668,712 Property, plant and equipment expenditures $ 14 $ - $ 87,046 Property, plant and equipment disposals - - 2,221 Revenue $ - $ - $ 113,203 Production costs - - (114,614) Depletion and depreciation - - (20,444) Impairment - - (46,327) General and administrative expenses (145) (8) (5,840) Share-based payment - - (254) Interest income - - 1,495 Finance costs - (188) (1,549) Foreign exchange gain (loss) - - 759 (Loss) profit before income taxes (145) (196) (73,571) Income tax recovery (expense) - - (56) Net (loss) profit $ (145) $ (196) $ (73,627) December 31, 2011 Barbados Canada TOTAL and BVI
Current assets $ 6 $ 246,085 $ 282,370 Property, plant and equipment - 10 615,439 Refining contract - - 9,009 Other assets - - 7,995 $ 6 $ 246,095 $ 914,813 Property, plant and equipment expenditures $ - $ 2 $ 87,048 Property, plant and equipment disposals - - 2,221 Revenue $ - $ - $ 113,203 Production costs - - (114,614) Depletion and depreciation - (7) (20,451) Impairment - - (46,327) General and administrative expenses (162) (5,845) (11,847) Share-based payment - (8,071) (8,325) Interest income - 4,034 5,529 Finance costs - - (1,549) Foreign exchange gain (loss) - (3,310) (2,551) (Loss) profit before income taxes (162) (13,199) (86,932) Income tax recovery (expense) - - (56) Net (loss) profit $ (162) $ (13,199) $ (86,988) December 31, 2010
Crocodile Kennedy`s Spitzkop River Mine Vale Current assets $ 45,787 $ 445 $ 1,669 Property, plant and equipment 495,861 64,916 126,357 Refining contract 14,265 - - Other assets 3,823 - - $ 559,736 $ 65,361 $ 128,026 Property, plant and equipment expenditures $ 32,728 $ - $ 47 Revenue $ 155,000 $ - $ - Production costs (109,901) - - Depletion and depreciation (22,499) - - General and administrative expenses (4,591) (1,396) (118) Share-based payment (79) - - Interest income 1,635 - - Finance costs (1,027) (752) (28) Foreign exchange (loss) gain (827) - - Profit (loss) before income taxes 17,711 (2,148) (146) Deferred income tax recovery (expense) 2,240 - - Net profit (loss) $ 19,951 $ (2,148) $ (146) December 31, 2010 Mareesburg Other Total South Africa
Current assets $ 61 $ 997 $ 48,959 Property, plant and equipment 28,827 - 715,961 Refining contract - - 14,265 Other assets - - 3,823 $ 28,888 $ 997 $ 783,008 Property, plant and equipment expenditures $ 214 $ - $ 32,989 Revenue $ - $ - $ 155,000 Production costs - - (109,901) Depletion and depreciation - - (22,499) General and administrative expenses (114) (16) (6,235) Share-based payment - - (79) Interest income 8 - 1,643 Finance costs - - (1,807) Foreign exchange (loss) gain - - (827) Profit (loss) before income taxes (106) (16) 15,295 Deferred income tax recovery (expense) - - 2,240 Net profit (loss) $ (106) $ (16) $ 17,535 December 31, 2010 Barbados Canada TOTAL and BVI
Current assets $ - $ 343,952 $ 392,911 Property, plant and equipment - 15 715,976 Refining contract - - 14,265 Other assets - - 3,823 $ - $ 343,967 $ 1,126,975 Property, plant and equipment expenditures $ - $ 2 $ 32,991 Revenue $ - $ - $ 155,000 Production costs - - (109,901) Depletion and depreciation - (8) (22,507) General and administrative expenses (60) (5,822) (12,117) Share-based payment - (1,373) (1,452) Interest income - 154 1,797 Finance costs - - (1,807) Foreign exchange (loss) gain - 667 (160) Profit (loss) before income taxes (60) (6,382) 8,853 Deferred income tax recovery (expense) (1,316) - 924 Net profit (loss) $ (1,376) $ (6,382) $ 9,777 For the years ended December 31, 2011 and 2010, substantially all of the Company`s PGM production was sold to one customer. 26. Financial instruments (a) Management of capital risk The capital structure of the Company consists of equity attributable to common shareholders, comprising issued capital, equity-settled employee benefits reserve, deficit and currency translation adjustment. The Company`s objectives when managing capital are to: (i) preserve capital, (ii) obtain the best available net return, and (iii) maintain liquidity. The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares. The Company is not subject to externally imposed capital requirements. (b) Categories of financial instruments December 31, December 31, 2011 2010
Financial assets Cash and cash equivalents $ 151,838 $ 107,846 Loans and receivables Trade receivables 23,580 33,787 Available for sale financial assets Short-term investments 98,963 242,446 Other assets 7,995 3,823 $ 282,376 $ 387,902
Financial liabilities Other financial liabilities Accounts payable and accrued liabilities $ 40,459 $ 27,009 $ 40,459 $ 27,009
(c) Fair value of financial instruments (i) Fair value estimation of financial instruments The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The fair values of cash and cash equivalents, short-term investments, trade receivables and accounts payable approximate their carrying values due to the short-term to maturities of these financial instruments. (ii) Fair value measurements recognized in the statement of financial position Financial instruments that are measured subsequent to initial recognition at fair value are grouped into a hierarchy based on the degree to which the fair value is observable. Level 1 fair value measurements are derived from unadjusted, quoted prices in active markets for identical assets or liabilities. Level 2 fair value measurements are derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability directly or indirectly. Level 3 fair value measurements are derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data. The Company`s short-term investments and other assets are measured subsequent to initial recognition at fair value and are Level 2 financial instruments at December 31, 2011. There were no transfers between levels during the year ended December 31, 2011. (d) Reclassification of financial assets There was no reclassification of financial assets during the years ended December 31, 2011 and 2010. (e) Financial risk management The Company`s financial instruments are exposed to certain financial risks, including currency risk, interest rate risk, price risk, credit risk and liquidity risk. The Company`s exposure to these risks and its methods of managing the risks remain consistent. (i) Currency risk The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company`s revenues are based on US dollar PGM prices, but the Company receives revenues in South African Rand. A significant change in the currency exchange rates between the South African Rand relative to the US dollar could have an effect on the Company`s results of operations, financial position and cash flows. The Company has not entered into any derivative financial instruments to manage exposures to currency fluctuations. The carrying amount of the Company`s subsidiary`s foreign-currency denominated monetary assets at December 31, 2011, is as follows: December 31, December 31,
2011 2010 Financial assets Loans and receivables 19,712 30,142 The sensitivity of the Company`s net earnings due to changes in the exchange rate between the South African Rand and the United States dollar is summarized in the table below. This sensitivity is based on loans and receivables not denominated in the functional currency of the subsidiary. The increase (decrease) in net earnings is due to the effect of the exchange rate on financial instruments. Year ended Dec. 31, 2011 10% 10% weakening strengthening
of ZAR in of ZAR in relation to USD relation to USD FX rate FX rate Increase (decrease) in net earnings (1,971) 1,971 The carrying amount of the Company`s head office foreign-currency denominated monetary assets at December 31, 2011 is as follows: December 31, December 31, 2011 2010
Financial assets Cash and cash equivalents 42,387 43,110 The sensitivity of the Company`s net earnings due to changes in the exchange rate between the U.K. Pound Sterling and the United States dollar is summarized in the table below. This sensitivity is based on cash and cash equivalents not denominated in the functional currency of head office. The (decrease) increase in net earnings is due to the effect of the exchange rate on financial instruments. Year ended Dec. 31, 2011 10% 10% weakening strengthening of GBP in of GBP in
relation to USD relation to USD FX rate FX rate Increase (decrease) in net earnings (4,239) 4,239 (ii) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its short-term investments. The risk that the Company will realize a loss as a result of a decline in the fair value of short-term investments is limited because these investments, although available for sale, are generally not sold before maturity. The Company monitors its exposure to interest rates and has not entered into any derivative financial instruments to manage this risk. The Company has not included a sensitivity analysis of interest rate risk at year-end as it does not reflect the exposure experienced during the twelve months ended December 31, 2011. The Company`s financial assets fluctuated throughout the year and presenting such an analysis would be misleading. (iii) Price risk The Company is exposed to price risk with respect to fluctuations in the prices of platinum group metals. These fluctuations directly affect revenues and trade receivables. As at December 31, 2011, the Company`s financial assets subject to metal price risk consist of trade receivables of $11,550 (December 31, 2010 - $30,142). Historically, the Company has not entered into any derivative financial instruments to manage exposures to price fluctuations. No such derivative financial instruments existed at December 31, 2011 and 2010. The Company has not included a sensitivity analysis of price risk at year-end as it does not reflect the exposure experienced during the twelve months ended December 31, 2011. Presenting such an analysis would be misleading. (iv) Credit risk Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations, and arises principally from the Company`s trade receivables. The carrying value of the financial assets represents the maximum credit exposure. The Company currently sells substantially all of its PGM concentrate production to one customer under an off-take contract. At December 31, 2011, the Company had receivable balances associated with this one customer of $11,550 (December 31, 2010 - $30,142). The loss of this customer or unexpected termination of the off-take contract could have a material adverse effect on the Company`s results of operations, financial condition and cash flows. The Company has not experienced any bad debts with this customer. The Company minimizes credit risk by reviewing the credit risk of the counterparty to the arrangement and has made any necessary provisions related to credit risk at December 31, 2011. (v) Liquidity risk Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company has a planning and budgeting process in place to help determine the funds required to support the Company`s normal operating requirements on an ongoing basis and its expansionary plans. The Company ensures that there are sufficient funds to meet its short-term business requirements, taking into account its anticipated cash flows from operations and its holdings of cash and cash equivalents. The Company`s policy is to invest its excess cash in highly liquid, fully guaranteed, bank-sponsored instruments. The Company staggers the maturity dates of its investments over different time periods and dates to minimize exposure to interest rate changes. This strategy remains unchanged from 2010. In the normal course of business, the Company enters into contracts that give rise to commitments for future minimum payments. The following table summarizes the Company`s significant commitments and corresponding maturities. December 31, 2011 Total <1 year
Trade and other payables $ 40,459 $ 40,459 Finance leases 1,675 1,675 Commitments 17,862 17,862 $ 59,996 $ 59,996
December 31, 2010 Total <1 year Trade and other payables $ 27,009 $ 27,009 Finance leases 3,405 3,405 Commitments 13,056 13,056 $ 43,470 $ 43,470 27. Contingency In June 2011, the Company became aware that the law firm of Siskinds LLP of London, Ontario, had filed a "Notice of Application" under the Class Action Proceedings Act, 1992, in the Ontario Superior Court of Justice against the Company and three of its directors and officers. The Notice of Application seeks permission of the Court to grant leave or permission to commence a lawsuit under the Securities Act of Ontario and other provinces in respect to certain alleged breaches of disclosure obligations. In July 2011, the Company and its officers and directors were served with court documents. The Company believes the proposed action has no merit and intends to continue to vigorously defend the action. 28. Events after the reporting period There were no events that required adjustment to, or disclosure in, the financial statements after the reporting period from January 1, 2012 to March 5, 2012. Date: 06/03/2012 15:14:02 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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