Wrap Text
Management’s Discussion And Analysis Of Financial Conditions And Results Of Operations
EASTERN PLATINUM LIMITED
(Incorporated in Canada)
(Canadian Registration number BC0722783)
(South African Registration number 2007/006318/10)
Share Code TSX: ELR ISIN: CA2768555096
Share Code JSE: EPS ISIN: CA2768555096
EASTERN PLATINUM LIMITED
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2016
The following Management’s Discussion and Analysis (“MD&A”) is intended to assist the reader to assess
material changes in financial condition and results of operations of Eastern Platinum Limited (“Eastplats”
or the “Company”) as at June 30, 2016 and for the three and six months then ended in comparison to the
same period in 2015.
This MD&A should be read in conjunction with the unaudited condensed interim consolidated financial
statements for the three and six months ended June 30, 2016 and the accompanying notes and with the
audited consolidated financial statements of the Company and the accompanying notes for the year ended
December 31, 2015. These unaudited condensed consolidated interim financial statements have been
prepared in accordance with International Accounting Standard 34 Interim Financial Reporting.
All monetary amounts are in thousands of U.S. dollars except per share amount. The effective date of this
MD&A is August 15, 2016. Additional information including the Annual Information Form for the year
ended December 31, 2015 relating to the Company is available on SEDAR at www.sedar.com.
Contents of the MD&A
(All monetary amounts are in thousands of U.S. dollars, except per share amounts or otherwise noted)
1. Overview
2. Second Quarter of Fiscal Year 2016 Highlights
2.1. Significant events
2.2. Financial highlights
3. Selected Quarterly Financial Data
4. Results of Operations for the Three and Six Months ended June 30, 2016
4.1. Crocodile River Mine
4.2. Corporate and other expenses
5. Liquidity and Capital Resources
5.1. Outlook
5.2. Impairment
5.3. Share capital
5.4. Contractual obligations, commitments and contingencies
6. Related Party Transactions
7. Critical Accounting Estimates and Judgments
8. Financial Instruments and Other Instruments
9. New Accounting Standards and Accounting Pronouncements Under IFRS
9.1. Application of new and revised IFRS
9.2. Accounting standards issued but not yet effective
10. Off-Balance Sheet Arrangements
11. Subsequent Events
12. Internal Control Over Financial Reporting
13. Risk Factors
14. Cautionary Statement on Forward-Looking Information
1. Overview
Eastplats is engaged in the mining and development of platinum group metals (“PGM”) deposits in South
Africa. All of the Company’s properties are situated on the western and eastern limbs of the Bushveld
Complex (“BC”), the geological environment that supports over 75% of the world’s PGM production.
As at June 30, 2016, the Company’s primary assets are:
(a) a 87.5% direct and indirect interest in Barplats Investments Limited (“Barplats”), whose main
assets are the Crocodile River Mine (the “CRM”) located on the western limb of the BC and the
Kennedy’s Vale project located on the eastern limb of the BC;
(b) a 87% direct and indirect interest in the Mareesburg project, located on the eastern limb of the BC;
and
(c) a 93.4% direct and indirect interest in the Spitzkop project, also located on the eastern limb of the
BC. Kennedy’s Vale, Spitzkop PGM and Mareesburg projects are collectively referred as the
“Eastern Limb Projects”.
Due to the uncertain outlook in the global economic environment, particularly in Europe, stagnant PGM
pricing and the operating environment in South Africa, the development of the Kennedy’s Vale project was
suspended in mid-2012, the Mareesburg and Spitzkop PGM project was suspended in the fourth quarter of
2012, and the CRM has been placed on care and maintenance since August 1, 2013.
2. Second Quarter of Fiscal Year 2016 Highlights
2.1 Significant events
- On May 5, 2016, Ka An Development Co. Limited (“Ka An”) announced that it entered into a
Share Purchase Agreement with several shareholders, pursuant to which Ka An acquired
ownership and control of 12,777,994 common shares (“Common Shares”), representing
approximately 13.79% of the issued and outstanding Common Shares of the Company. On
May 6, 2016, Ka An delivered notice to the Company and its Corporate Secretary, pursuant to
the Company’s Advance Notice Policy, of its intention to nominate six new directors at the
upcoming annual general meeting on July 5, 2016 (the “AGM”) of the Company’s
shareholders. At the AGM, Ka An’s nominees were elected to the Company’s board of
directors (the “Board”) and the Company underwent a change in management (collectively, the
“Change of Control”). See also “Section 11. Subsequent Events”.
- On June 28, 2016, the Company entered a share purchase agreement (the “CRM Purchase
Agreement”) with Hebei Zhongheng Tianda Platinum Co. Limited (“HZT”), a company
incorporated in People’s Republic of China (“PRC”), whereby HZT will acquire a 100% equity
interest in Barplats Mines Limited (“Barplats Mines”) and associated intercorporate
investments and loans for total consideration of $50,000. Barplats Mines is a wholly owned
subsidiary of Barplats and holds a 100% interest in the CRM. The completion of this
transaction is subject to a number of conditions, including but not limited to approvals by the
necessary regulatory bodies and governmental departments or ministries of South Africa and
the shareholders of the Company. Both HZT and the Company have agreed that certain events,
including the failure to perform certain obligations under the CRM Purchase Agreement, will
trigger the payment of break fees of up to $10,000 in the case of HZT failing to meet its
obligations, and $5,000 in the case of the Company failing to meet its obligations. Both HZT
and the Company are required to place the break fee into an escrow account. As at June 30,
2016, the Company had deposited $5,000 in escrow, representing the break fee deposit.
- On June 30, 2016, the former management of the Company entered into a number of share
purchase agreements (the “BEE Buyout Agreement”) with certain holders’ of its black
economic empowerment partners’ interests in the Company’s south African projects to acquire
all of its interest in the Company’s South Africa projects except for a 17.65% equity interest in
Afriminerals Holdings (Pty) Ltd. (“Afriminerals”) for a total of $13,367. The BEE Buyout
Agreement provides for the buy-out of:
(a) Ingwenya Incorporated’s (“Ingwenya”) 44.12% equity interest in Gubevu Consortium
Investment Holdings (Pty) Ltd. (“Gubevu”) for a total of $8,955 and a 18% equity
interest in Lion’s Head Platinum (Pty) Ltd. (“Lion’s Head”) for $1,099; and
(b) Serina Service AG’s (“Serina”) 8% interest in Lion’s Head for $502, a 5.89% equity
interest in Gubevu for $1,194 and a 33.35% equity interest of Afriminerals for $1,617.
- Pursuant to the BEE Buyout Agreement, the Company is required to place 100% of the
consideration with an escrow agent (the “Escrow Agent”) on or before July 4, 2016. The funds
held in escrow will be released to Ingwenya and Serina at the closing. The closing date is the
earlier of any change of control as defined in the BEE Buyout Agreement and December 31,
2016. On June 30, 2016, the Company entered into the escrow agreements with Ingwenya and
Serina in accordance with the BEE Buyout Agreement. The investigation includes a review of
the status and validity of the share cancellations contemplated by the BEE Buyout Agreement.
On July 4, 2016, the Company deposited $13,367 with the Escrow Agent. On July 5, 2016, the
Company underwent the Change of Control and the funds held in escrow were automatically
released on July 6, 2016.
- On July 24, 2016, the Company press released an update to shareholders with respect to new
management’s investigations into certain transactions, including the CRM Purchase
Agreement and the BEE Buyout Agreement. The Company continues to investigate these
transactions undertaken and disclosed by the former management of the Company and will
update the shareholders of the Company as more details become available.
2.2 Financial highlights
- At June 30, 2016, the Company had a cash position (including cash, cash equivalents and short
term investments) of $45,831.
- The Company recorded an impairment charge of $23,357 with respect to the CRM representing
a reduction of net carrying value of the CRM. The impairment charge is calculated based on
the fair value less cost to sell. The fair value less cost to sell was estimated to be $47,400
calculated based on the HZT’s purchase price pursuant to the CRM Purchase Agreement less
estimated costs to sell of approximately $2,600.
- The Company recorded a loss attributable to equity shareholders of the Company of $22,207
($0.24 per share) in the three months ended June 30, 2016 (“Q2 2016”) compared to a loss of
$2,666 ($0.03 per share) in the three months ended June 30, 2015 (“Q2 2015”).
- General and administrative costs increased from $492 in Q2 2015 to $1,010 in Q2 2016
resulting from an increase in shareholder relations costs incurred in Q2 2016. These costs were
largely incurred by the former management of the Company and the Board, including investor
relations with respect to the AGM and the proposed change in the Board and management.
- Care and maintenance costs decreased from $2,622 in Q2 2015 to $1,455 in Q2 2016 at the
CRM and the Eastern Limb Projects, representing a 45% reduction compared to Q2 2015.
3. Selected Quarterly Financial Data
The table below sets forth selected results of operations for the Company’s eight most recently completed
quarters (in thousands of U.S. dollars, except per share amounts) in accordance with IFRS.
Selected quarterly data 2016 2015 2014
June 30 Mar. 31 Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31 Sept. 30
$ $ $ $ $ $ $ $
Expenses:
General and administrative (1,010) (1,907) (1,281) (478) (492) (638) (644) (672)
Care and maintenance (1,455) (1,851) (3,872) (2,562) (2,622) (2,336) (3,450) (3,205)
Care and maintenance depreciation (122) (74) (104) (130) (411) (509) (922) (539)
Impairment (23,357) — (14,514) — — — (129,994) —
Other income, net of expenses 490 (1,346) 1,644 2,631 267 1,332 1,575 559
Loss before income taxes (25,454) (5,178) (18,127) (539) (3,258) (2,151) (133,435) (3,857)
Net loss for the period (25,509) (4,970) (17,375) (547) (3,219) (2,212) (121,994) (3,967)
Net loss attributable to equity
shareholders of the Company (22,207) (4,611) (15,204) (16) (2,666) (1,729) (118,680) (2,456)
Loss per share - basic and diluted (0.24) (0.05) (0.16) (0.00) (0.03) (0.02) (1.28) (0.03)
Average foreign exchange rates
South African Rand per US dollar 14.98 15.82 14.18 12.99 12.08 11.73 11.21 10.77
US dollar per Canadian dollar 0.7763 0.7284 0.7493 0.7640 0.8136 0.8060 0.8803 0.9182
Period end foreign exchange rates
South African Rand per US dollar 14.68 14.73 15.46 13.77 12.16 12.12 11.54 11.30
US dollar per Canadian dollar 0.7742 0.7700 0.7225 0.7493 0.8006 0.7895 0.8620 0.8929
The Company’s operations are not impacted by seasonality considerations.
Higher general and administrative costs in Q2 2016 were largely due to investor relations with respect to
the AGM and the proposed changes in the Board and management. Higher general and administrative costs
in Q1 2016 were largely due to a termination payment of $1,442 (Cdn$1.98 million) made to Ian Rozier
who stepped down as President and Chief Executive Officer (“CEO”) of the Company on January 31, 2016.
Care and maintenance costs were reduced significantly in both Q1 and Q2 2016 as the Company
continuously reduced its activities and staff after its projects were placed on care and maintenance. See also
“Subsection 4.2. Corporate and Other Expenses”.
4. Results of Operations for the Three and Six Months Ended June 30, 2016
The following table sets forth selected consolidated financial information for the three and six months ended
June 30, 2016 and 2015:
Consolidated statements of loss
(Expressed in thousands of U.S. dollars, except per share amounts)
Three months ended Six months ended
June 30, June 30,
2016 2015 2016 2015
$ $ $ $
Revenue — — — —
Mine operating (loss) earnings — — — —
Expenses
General and administrative 1,010 492 2,917 1,130
Care and maintenance 1,455 2,622 3,306 4,958
Care and maintenance depreciation and amortization 122 411 196 920
Impairment 23,357 — 23,357 —
Operating loss (25,944) (3,525) (29,776) (7,008)
Other income (expense)
Gain on disposal of property, plant and equipment 227 104 418 202
Interest income 214 313 415 695
Other income 391 355 856 943
Finance costs (161) (257) (316) (449)
Foreign exchange gain (loss) (181) (248) (2,229) 208
Loss before income taxes (25,454) (3,258) (30,632) (5,409)
Income tax recovery (expense) (55) 39 153 (22)
Net loss for the period (25,509) (3,219) (30,479) (5,431)
Attributable to
Non-controlling interest (3,302) (553) (3,661) (1,036)
Equity shareholders of the Company (22,207) (2,666) (26,818) (4,395)
Net loss for the period (25,509) (3,219) (30,479) (5,431)
Loss per share
Basic and diluted (0.24) (0.03) (0.29) (0.05)
Weighted average number of common shares outstanding
Basic and diluted 92,599 92,599 92,599 92,599
June 30, December 31,
Consolidated statements of financial position 2016 2015
$ $
Total assets 161,981 184,113
Total long-term liabilities 9,950 9,078
4.1 Crocodile River Mine
The proposed sale of the CRM in connection with the CRM Purchase Agreement signed with HZT on June
28, 2016 remains subject to approval by the shareholders of the Company as well as applicable regulatory
bodies and governmental departments or ministries of South African authorities. In the meantime, the
Company is continuing to meet its commitments with respect to its environmental management programs
and the relevant aspects of its Social and Labour Plan. Care and maintenance costs are discussed under
Section 4.2 hereof.
In Q2 2016, the Company sold certain of its property, plant and equipment assets at the CRM and the
Eastern Limb Projects for an overall net gain of $227. These assets were not required during the care and
maintenance phase.
In Q2 2016, the Company increased its environmental guarantee issued to the Department of Mineral
Resources of South Africa by $48. The guarantee consists of money market fund investments and is issued
in respect of the environmental rehabilitation liability at CRM and the Eastern Limb Projects.
4.2 Corporate and other expenses
The Company’s presentation function is the U.S. dollar (“$”) while the Company’s operating expenses are
incurred in Canadian dollars (“Cdn$”) or South African Rand (“ZAR”). The average of foreign exchange
rate is Cdn$1.00 to $0.7763 and ZAR1.00 to $0.0668 for Q2 2016 and Cdn$1.00 to $ 0.8136 and ZAR1.00
to $0.0828 for Q2 2015.
General and administrative
General and administrative expenses (“G&A”) are costs associated with the Company’s Vancouver
corporate head office and include legal and accounting, regulatory, executive management fees, investor
relations, travel and consulting fees. Such costs are incurred in Canadian dollars.
G&A increased to $1,010 and $2,917 for the three and six months ended June 30, 2016, respectively,
compared to $492 and $1,130 for the same period in 2015. The increase is due to the increase of shareholder
relations costs in Q2 2016 and a termination payment of $1,442 (Cdn$1.98 million) made to Ian Rozier
who stepped down as President and CEO of the Company on January 31, 2016.
Care and maintenance, and care and maintenance depreciation
Care and maintenance costs were incurred when the Company suspended production for a project and
reduced its expenditures to the minimum required to maintain the assets in good condition. Such costs
consist of maintenance, pumping to prevent flooding of the workings, underground inspections to ensure
that the integrity of critical excavations is preserved, general and administrative expenses and other costs
necessary to safeguard the assets of the project. The Company’s Mareesburg and Kennedy’s Vale
concentrator project was placed on care and maintenance in the fourth quarter of 2012 and the CRM was
placed on care and maintenance in the third quarter of 2013. Quarterly costs have generally remained
consistent since these projects were placed into care and maintenance.
On January 31, 2016, the Company reduced its care and maintenance workforce at the CRM and the Eastern
Limb Projects by approximately 34% and incurred termination costs of $303. However, overall care and
maintenance costs decreased to $1,455 and $3,306 for the three and six months ended June 30, 2016,
respectively, compared to $2,622 and $4,958 for the same period in 2015, representing a decrease of 45%
and 33% respectively.
Care and maintenance depreciation consists of the depreciation expense related to assets belonging to a
project that is currently on care and maintenance. Care and maintenance depreciation decreased to $122
and $196 for the three and six months ended June 30, 2016, respectively, compared to $411 and $920 for
the same period in 2015. The decrease primarily resulted from the fact that the refining contract was fully
amortized by the end of the second quarter of 2015.
Impairment
The sale of the CRM, although closing of this transaction is subject to certain conditions, represented an
impairment indicator. Therefore, the Company recorded an impairment charge in the amount of $23,357 in
Q2 2016 based on HZT’s purchase price, less estimated costs to sell of approximately $2,600. There was
no such impairment charge in Q1 2016 and for the three and six months ended June 30, 2015.
Interest income
Interest income decreased to $214 and $415 for the three and six months ended June 30, 2016, respectively,
compared to $313 and $695 for the same period in 2015. The decrease is due to the Company’s lower cash
balances over the respective quarters as a result of cash spent on care and maintenance and general and
administrative over the last 12 months and due to a weaker Canadian dollar versus the U.S. dollar compared
to the same period in 2015.
Other income
Other income consists of rental income from company-owned residential properties on the Eastern Limb
Projects and at the CRM as well as other types of income not directly related to operations. The Company
recorded other income of $391 and $856 for the three and six months ended June 30, 2016, respectively,
compared to $355 and $943 for the same period in 2015.
Finance costs
The Company recorded finance costs of $161 and $316 for the three and six months ended June 30, 2016,
respectively, compared to $257 and $449 for the same period in 2015. Finance costs include interest
accretion on the provision for environmental rehabilitation and miscellaneous interest charges. As finance
costs are mostly incurred in South African Rand, the weakening of the Rand during the three and six months
ended June 30, 2016 has led to a decrease in finance costs reported in U.S. dollars in the Company’s
consolidated financial statements.
Income tax
The Company recorded a net income tax expense of $55 and a net income tax recovery of $153 for the three
and six months end June 30, 2016, respectively, compared to a net income tax recovery of $39 and a net
income tax expense of $22 for the same period in 2015. In Q1 2016, the Company reversed a $227 over
accrual of taxes payable following the settlement of some long-term outstanding tax issues in South Africa.
Excluding the over accrual, the Company recorded an income tax expense of $74 for the six months ended
June 30, 2016. The expense relates to the origination and reversal of temporary differences which arose
due to changes in the Company’s net assets and the foreign exchange impact on the deferred tax liabilities.
The consolidated statement of financial position reflects total deferred tax liabilities of $2,679 which arose
primarily as a result of the step-up to fair value of the net assets acquired on the Spitzkop and Mareesburg
business acquisitions in prior years.
5. Liquidity and Capital Resources
At June 30, 2016, the Company had working capital of $52,453 (December 31, 2015 – $55,716) and cash
and cash equivalents and short-term investments of $45,831 (December 31, 2015 – $56,334) in highly
liquid, fully guaranteed, bank sponsored instruments.
Cash, cash equivalents and short-term investments decreased by $6,867 in Q2 2016 compared to the balance
as at March 31, 2016 as the Company used approximately $2,100 cash in operations, including G&A and
care and maintenance of the CRM and the Eastern Limb Projects, and transferred $5,000 to an escrow
account for the HZT break fee deposit, which were partially offset by interest, other income and proceeds
from asset sales of approximately $400.
Cash, cash equivalents and short-term investments decreased $10,503 for the six months ended June 30,
2016 compared to the balance as at December 31, 2015 as the Company incurred approximately $5,806
cash expense in operations including G&A and care and maintenance of the CRM and the Eastern Limb
Projects, incurred expenditures of $0.4 million on property, plant and equipment and other assets, paid taxes
of $1,587 and transferred $5,000 to an escrow account for the HZT break fee deposit, which were partially
offset by interest, other income and proceeds from asset sales of approximately $1,000.
The Company had no long-term debt outstanding at June 30, 2016, other than a provision for environmental
rehabilitation relating to the CRM, Kennedy’s Vale and Spitzkop.
5.1 Outlook
The proposed sale of the CRM and the related buy-out of the BEE Partners’ minority interest in the
Company’s South African assets by the former management have dramatically changed the Company’s
strategic footprint in the area. The new management and Board continue to review the CRM Purchase
Agreement, the BEE Buyout Agreement, the payment to certain minority interest holders and all related
transactions conducted by the former management of the Company and will adopt a new strategy based on
the outcome of this review.
Due to the buy-out of the BEE Partners’ minority interest, the Company is currently in breach of the
provisions of all of its mining rights and certain provisions of the Mineral & Petroleum Resources
Development Act (Republic of South Africa) (“MPRDA”). Under section 93 of the MPRDA, the
Department of Mineral Resources of the Republic of South Africa (“DMR”) may formally order the
Company to rectify this non-compliance. Failure to rectify the non-compliance will ultimately lead to the
Minister cancelling the Company’s mining rights under section 47 of the MPRDA. The Company has met
with DMR and is working proactively to introduce another BEE partner into the Company’s activities.
While the Company is still in the process of reviewing its strategic plan, the Company believes that, given
the continued stagnation of the global economy and the European car market, which consumes
approximately 50% of South Africa’s platinum production, the industry would have to contend with a
continuation of stagnant PGM prices which are hovering near 10-year lows, despite indications of some
meaningful production cuts from the larger PGM producers. At the same time, the South African PGM
industry continues to experience a number of adverse economic factors, particularly ongoing labour unrest,
operating cost inflation, and concerns with respect to reliable power delivery. Ongoing cost pressure and
decreasing productivity in South Africa will continue to significantly reduce free cash flow for the industry.
Should there be a sustained strengthening of PGM prices and marked improvement in the operating
environment in South Africa, the Company believes it currently has sufficient cash resources to react
quickly and ramp up activities at the CRM.
Subject to adequate funding being available, development of the Mareesburg open pit mine and Kennedy’s
Vale concentrator project, which was suspended in mid-2012, may also be restarted once market and
operating conditions support such recommencement. At present the Company does not have sufficient
funds in the form of cash and short-term investments to complete the development and construction of the
open-pit mine and concentrator if the project is restarted.
Additional funding will be required to bring the project into production, and to bring the rest of the Eastern
Limb Projects (including Spitzkop and Kennedy’s Vale) into production, and such funding may include a
financing package, joint venture or other third party participation in one or more of these projects, or the
public or private sales of equity or debt securities of the Company. Any additional financing may be dilutive
to shareholders, and debt financing, if available, may involve restrictions on financing, investing and
operating activities. There can be no assurance that additional funding will be available to the Company
when needed or, if available, that this funding will be on acceptable terms. If adequate funds are not
available, including funds generated from any producing operations, the Company may be required to
further delay or reduce the scope of these development projects or mining operations.
5.2 Impairment
The Company assesses the carrying values of its mineral properties for indication or reversal of impairment
at the end of each quarter. For the purposes of the impairment assessment, the Company identified the
CRM as one cash-generating unit (“CGU”) and the Eastern Limb Projects as one CGU.
As discussed above, although the closing of the transaction contemplated in the CRM Purchase Agreement
is subject to certain conditions, the Company considered that the sale of the CRM represented an
impairment indicator. HZT’s purchase price in the amount of $50,000 less the costs to sell (estimated to
be $2,600) represents the net proceeds from selling Barplats Mines. The excess amount of the net carrying
value of Barplats Mines over the net proceeds in the amount of $23,357 was recorded as an impairment
change towards the CRM.
With respect to the Eastern Limb Projects, the Company has determined that there were no impairment
indicators as at June 30, 2016.
Any changes to future market conditions and commodity prices may result in impairment, a further
impairment or a reversal of impairment of any of the Company’s mineral properties.
5.3 Share capital
During the three and six months ended June 30, 2016, the Company did not issue any Common Shares or
grant any stock options. 66,000 stock options expired during the three and six months ended June 30, 2016.
There was no share-based payment expense recorded for the three and six months ended June 30, 2016 and
2015.
As at the date of this MD&A, the Company had:
- 92,639,032 Common Shares outstanding;
- 39,722 treasury shares outstanding; and
- 3,735,900 stock options outstanding as listed below:
Exercise Remaining
Options Options price Contractual
outstanding exercisable Cdn$ Life (Years) Expiry date
664,400 664,400 6.00 0.70 March 12, 2017
9,000 9,000 23.10 1.27 October 5, 2017
2,462,500 2,462,500 1.90 1.53 January 8, 2018
600,000 — 1.05 5.00 July 4, 2021
3,735,900 3,135,900
5.4 Contractual obligations, commitments and contingencies
- The Company’s major contractual obligations and commitments as at June 30, 2016 were as
follows:
Less than 1 More than 5
Total
(in thousands of U.S. dollars) year years
$ $ $
Provision for environmental rehabilitation 7,271 — 7,271
Capital expenditure and purchase commitments contracted at June 30,
2016 but not recognized on the consolidated statement of financial
position 30 30 —
7,301 30 7,271
The Company has committed to capital expenditures in South Africa of approximately ZAR 436 ($30) as
at June 30, 2016, all of which are expected to be payable by December 31, 2016.
6. Related Party Transactions
The Company has transactions with the following related parties:
Relationships Nature of transactions
Buccaneer Management Inc. ("Buccaneer") Controlled by Ian Rozier, former director of Management
the Company, resigned on July 5, 2016,
upon Change of Control
Gubevu Consortium Investment 50.01% owned by BEE Partner Black economic empowerment
Holdings (Pty) Ltd. ("Gubevu") Holding company
Jazz Financial Ltd. ("Jazz") Controlled by Horng Dih Lee, the former Management
Chief Financial Officer ("CFO") of the
Company, resigned on July 5, 2016, upon
Change of Control
Maluti Services Limited ("Maluti") Controlled by David Cohen, the former Management
Chief Executive Officer ("CEO") and
director of the Company, resigned on July 5,
2016, upon Chang of Control
Remington Resources Inc. ("Remington") Significantly influenced by the former General and administrative
directors and officers of the Company who
resigned on July 5, 2016, upon Change of
Control
Sterling West Management Ltd. ("Sterling") Significantly influenced by the former General and administrative
directors and officers of the Company
resigned on July 5, 2016, upon Change of
Control
Zinpro Engineering (Pty) Ltd ("Zinpro") Controlled by Willie Byleveld, former Consulting and mine contractor
director of the South Africa subsidiaries,
resigned on July 5, 2016, upon Change of
Control
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.
(Expressed in thousands of U.S. dollars) Three months ended Six months ended
June 30, June 30,
2016 2015 2016 2015
$ $ $ $
Trading transactions
Management and consulting fees 138 235 1,735 463
General and administrative expenses 170 127 369 302
Mine contractor fees — — — —
Total trading transactions 308 362 2,104 765
Compensation of key management personnel
Remuneration and directors' fees 167 280 1,809 553
Total compensation of key management personnel 167 280 1,809 553
On January 31, 2016, Ian Rozier stepped down as the President and CEO of the Company and David Cohen,
the then Chairman of the Company, assumed the role of President and CEO until July 5, 2016. Mr. Rozier’s
services were provided pursuant to a management services contract with Buccaneer, a private company
controlled by Mr. Rozier. In accordance with the contract, Buccaneer was paid a termination amount of
$1,442 (Cdn$1.98 million) on January 31, 2016. Mr. Rozier remained a director of the Company until July
5, 2016.
Management and consulting fees decreased to $138 in Q2 2016 compared to $235 in Q2 2015, and increased
to $1,735 for the six months ended June 30, 2016 compared to $463 for the same period in 2015. The
increase was a result of the inclusion of the termination payment referred to above. Excluding this payment,
management and consulting fees were reduced to $293 for the six months ended June 30, 2016.
There were no share-based payments paid to key management personnel for the three and six months ended
June 30, 2016 and 2015.
At June 30, 2016, the Company held a loan receivable from Gubevu in the amount of ZAR 761 million
($51,869) (December 31, 2015 – ZAR 726 million, $46,972), which has been fully provided for in the
consolidated financial statements. The Company did not record any interest income with regards to this
loan or receive cash from, or lend any further cash to Gubevu in the three and six months ended June 30,
2016 and 2015.
Accounts payable at June 30, 2016 included $nil (December 31, 2015 - $13) due to private companies
controlled by officers and directors of the Company. Amounts due to related parties are unsecured, non-
interest bearing and due on demand.
Accounts receivable at June 30, 2016 included $39 (December 31, 2015 - $31) due from Remington which
reimburses the Company for certain general and administrative expenses incurred by the Company on
behalf of Remington.
All related party transactions were recorded at the amounts agreed upon between the parties. Any balances
payable are payable on demand without interest.
7. Critical Accounting Estimates and Judgments
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 those estimates as the estimation process is inherently
uncertain. Estimates are reviewed on an ongoing basis based on historical experience and other factors that
are considered to be relevant under the circumstances. Revisions to estimates and the resulting impact on
the carrying amounts of the Company’s assets and liabilities are accounted for prospectively.
Areas of significant judgment and estimates made by management for the three and six months ended June
30, 2016 includes determination whether selling the CRM is considered to be an asset held for sale in
accordance with IFRS 5. Additional critical judgments and estimates applied in the preparation of the
Company's unaudited condensed interim consolidated financial statements for the three and six months
ended June 30, 2016 are consistent with those applied and disclosed in notes 4(w) and 4(x) of the
Company’s audited consolidated financial statements for the year ended December 31, 2015 as summarized
below.
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
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 or 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.
The Company considers the NPV valuation to be fair value less costs to sell. For the purposes of the
valuation, the Company identified CRM as one cash-generating unit and the Spitzkop, Mareesburg and
Kennedy’s Vale projects (collectively the “Eastern Limb” projects) as one cash-generating unit. There has
been no change to the composition of CGUs compared to the prior year.
(ii) Rehabilitation Provision
The future value of the provision for environmental rehabilitation was determined using an inflation rate of
6.67% (December 31, 2015 – 6.67%) and an estimated life of mine of 16 years for Zandfontein (December
31, 2015 – 16 years), eight years for Maroelabult (December 31, 2015 – 8 years), ten years for Crocette
(December 31, 2015 – 10 years), 23 years for Kennedy’s Vale (December 31, 2015 – 23 years) and 23 years
for Spitzkop (December 31, 2015 – 23 years). The provision has been discounted to present value at a
discount rate of 9.43% (December 31, 2015 – 9.43%). Zandforntein, Maroelabult and Crocette collectively
referred as CRM.
Critical Accounting Judgments
Critical accounting judgments 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, 2015 the remaining life of mine for Zandfontein, Maroelabult, Crocette, Kennedy’s Vale
and Spitzkop was assessed at 16 years, eight years, ten years, 23 years and 23 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 Duration
Underground and other assets Units of production
Mine houses 50 years
Office buildings 20 years
Plant Units of production
Computer Equipment 3 years
Mining assets leased 5 years
Mineral properties being depleted Units of production
Residential properties 50 years
Properties and land 50 years
8. Financial Instruments and Other Instruments
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.
Categories of financial instruments
(expressed in thousands of U.S. dollars) June 30 December 31,
2016 2015
$ $
Financial assets
Loans and receivables
Cash and cash equivalents 26,828 8,283
Restricted cash 5,000 —
Trade and other receivables (excluding VAT receivable and
prepayments) 676 711
Available for sale financial assets
Short-term investments 19,003 48,051
Other assets 8,811 8,049
60,318 65,094
Other Financial liabilities
Trade and other payables 1,220 3,615
1,220 3,615
Fair value of financial instruments
The fair value of financial instruments traded in active markets is based on quoted market prices at the
balance sheet date.
The fair value of cash and cash equivalents, short-term investments, restricted cash, other assets and trade
and other payables approximate their carrying values due to the short-term to maturities of these financial
instruments.
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. At
June 30, 2016, there were no financial assets or liabilities recognized at fair value on a non-recurring basis.
9. New Accounting Standards and Accounting Pronouncements Under IFRS
9.1 Application of new and revised IFRS
Effective January 1, 2016, the Company adopted the following new and amended IFRS that were
issued by the IASB:
(i) Amended standard IAS 1, Presentation of Financial Statements
The amendments to IAS 1 deal with clarification of materiality in terms of the presentation of
financial statements, clarification of the disclosure required in the statement of financial position,
statement of loss and statement of other comprehensive income, and addition of possible ways of
ordering the notes in order to increase the understand ability and comparability of the financial
statements. The application of this amendment did not have a material impact on the amounts
reported for current or prior years but may affect the presentation of future transactions or
arrangements.
(ii) Amended standards IAS 16, Property, Plant and Equipment and IAS 38, Intangibles
The amendments to IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets”
prohibit the use of revenue-based depreciation for plant and equipment and significantly limit the
use of revenue-based amortization for intangible assets. The application of these amendments did
not have a material impact on the amounts reported for the current or prior years but may affect the
presentation of future transactions or arrangements.
(iii) Amended standard IFRS 11, Joint Arrangements
The amendments to IFRS 11 deal with the accounting for acquisitions of an interest in a joint
operation. The application of this amendment did not have any impact for the current or prior years
but may affect the disclosure required in the future.
9.2 Accounting standards issued but not yet effective
(i) Amended standard IAS 7, Statement of Cash Flows
These amendments to IAS 7 “Statement of Cash Flows” were issued to improve information
provided to users of financial statements about an entity’s changes in liabilities arising from
financing activities. Effective for annual periods commencing on or after January 1, 2017.
(ii) Amended standard IAS 12, Income Taxes
These amendments relate to the recognition of deferred tax assets for unrealized losses
associated with debt instruments measured at fair value. Effective for annual periods
commencing on or after January 1, 2017.
(iii) Amended standard IFRS 7, Financial Instruments: Disclosures
The amendments to IFRS 7 outline the disclosures required when initially applying IFRS 9
Financial Instruments. Effective date January 1, 2018.
(iv) New standard IFRS 9, Financial Instruments
Replacement of IAS 39 Financial Instruments: Recognition and Measurement. Effective date
January 1, 2018.
(v) New standard IFRS 15, Revenue from Contracts with Customers
IFRS 15 provides guidance on how and when revenue from contracts with customers is to be
recognized, along with new disclosure requirements in order to provide financial statement
users with more informative and relevant information. Effective date January 1, 2018.
(vi) New standard IFRS 16, Leases
Effective for annual periods commencing on or after January 1, 2019, this replaces existing
lease accounting guidance. All leases will be required to be reported on the statement of
financial position unless certain requirements for exclusion are met.
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.
10. Off-Balance Sheet Arrangements
As at June 30, 2016, the Company has not entered into any off-balance sheet arrangements.
11. Subsequent Events
- At the Company’s AGM held on July 5, 2016, the shareholders of the Company elected a new
Board comprised of George G. Dorin, (chairman), Peter M. Clausi, Michael Cosic, Douglas G.
Perkins, George Pire and Sam Wang.
- On July 5, 2016, Sterling, Maluti and Jazz terminated their services with the Company as a result
of the Change of Control of the Board and management and were paid a termination fee totalling
$1,231 (Cdn$1.59 million) by the Company.
- On July 5, 2016, the Company granted 600,000 stock options to the New Directors at an exercise
price of $1.05 per share. These stock options vest 90 days from the grant date and expire on July
4, 2021.
- On July 27, 2016, the Company appointed Ms. Diana Hu as the Company’s full-time President and
CEO.
- On August 5, 2016, Ka An acquired ownership of an additional 9,356,542 Common Shares of the
Company (the “Acquisition”). As a result of the Acquisition, Ka An owns approximately 23.89%
of the Company’s issued and outstanding Common Shares.
12. Internal Control Over Financial Reporting
Disclosure controls and procedures
The Company’s management has evaluated the effectiveness of the Company’s disclosure controls and
procedures. Based upon the results of that evaluation, the Company’s management has concluded that, as
of the end of the period covered by this report, the Company’s disclosure controls and procedures were
effective to provide reasonable assurance that the information required to be disclosed by the Company in
reports it files is recorded, processed, summarized and reported within the appropriate time periods and is
accumulated and communicated to management, including the CEO and the Chief Financial Officer
(“CFO”) as appropriate to allow timely decisions regarding required disclosure.
Internal control over financial reporting
The CEO and the CFO are also responsible for the design of the internal controls over financial reporting
(“ICFR”) within the Company in order to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with International
Financial Reporting Standards (“IFRS”).
There have been no changes in the Company’s ICFR during the six months ended June 30, 2016 that have
materially affected, or are reasonably likely to materially affect, the Company’s ICFR.
Limitation of controls and procedures
The Company’s management believes that any disclosure controls and procedures or internal control over
financial reporting, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design of a control system must
reflect the fact that there are resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, they cannot provide absolute
assurance that all control issues and instances of fraud, if any, within the Company have been prevented or
detected. These inherent limitations include the realities that judgments in decision making can be faulty,
and that breakdowns can occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or more people, or by
unauthorized override of the control. The design of any control system also is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance that any design will
succeed in achieving its stated goals under all potential future conditions. Accordingly, because of the
inherent limitations in a cost effective control system, misstatements due to error or fraud may occur and
not be detected.
13. Risk Factors
The exploration of mineral deposits involves significant risks and uncertainties. A comprehensive list of
risk factors relating to our business is provided under the heading “Risk Factors”, in the Company’s annual
information form for the year ended December 31, 2015, which is available on SEDAR, at www.sedar.com.
Certain of the more prominent risk factors that may materially affect the Company’s future performance,
in addition to those referred to above, are listed hereunder.
Titles and other rights to the Company’s assets cannot be guaranteed and may be subject to prior
unregistered agreements, transfers or claims and other defects.
The Company cannot guarantee that title to its mineral property will not be challenged. The Company may
not have, or may not be able to obtain, all necessary surface rights to develop its projects. Title insurance
generally is not available for mineral properties, and our ability to ensure that we have obtained secure
claim to individual mineral properties or mining concessions comprising the projects may be severely
constrained. The mineral property may be subject to prior unregistered agreements, transfers or claims, and
title may be affected by, among other things, undetected defects. We have not conducted surveys of all of
the claims in which we hold direct or indirect interests. A successful challenge to the precise area and
location of these claims could result in our being unable to operate on all or part of the property as permitted
or being unable to enforce our rights with respect to all or part of the property. This could result in Eastplats
not being compensated for its prior expenditures relating to the property. In addition, Eastplats' ability to
continue to explore and develop the property may be subject to agreements with other third parties.
Buy-out of certain holders’ of BEE Partners’ minority interest may cause the Company to lose its mining
licence or negatively impact the Company’s ability to operate or sell the property in the future.
The Company currently does not have a BEE partner and is in breach of the provisions of all of its mining
rights and certain provisions of the MPRDA. Although the Company is working proactively to look for a
new BEE partner, there is no guarantee that the Company can successfully find a BEE partner within the
required timeframe. The Company’s operations and value of assets may be negatively impacted due to the
lack of a BEE partner.
Suppliers suspending or denying delivery of products or services.
Eastplats’ business and technology systems and platforms depend on products and services provided by
third parties including contractors, surveyors and consultants. If there is any interruption to products or
services provided by third parties or those products or services are not as adaptable to Eastplats’ needs as
anticipated, or there are problems in upgrading such products or services, Eastplats’ business may be
adversely affected, and Eastplats may be unable to fund adequate replacement products or services on a
timely basis or at all.
Eastplats’ activities are subject to changes in government legislation, taxation, controls, regulations and
political or economic developments in Canada, the United States, South Africa, or Barbados or other
countries in which Eastplats carries or may carry on business in the future, that may increase Eastplats’
costs of doing business and restrict the Company’s operations.
The current mining, exploration and development activities of Eastplats require permits from various
governmental authorities, and such operations are and will be governed by laws and regulations regarding
prospecting, labour standards, occupational health, waste disposal, toxic substances, land use,
environmental protection, safety and other matters. Companies engaged in exploration activities generally
experience increased costs and delays as a result of the need to comply with applicable laws, regulations
and to obtain permits. There can be no assurance that all permits which Eastplats may require for exploration
will be obtainable on reasonable terms or on a timely basis, or that such laws and regulations would not
have a materially adverse effect on any project that Eastplats may undertake.
Failure to comply with applicable laws, regulations, and permitting requirements may result in enforcement
actions, including but not limited to orders issued by regulatory or judicial authorities causing operations
to cease or to be curtailed, and may include corrective measures requiring capital expenditures, installation
of additional equipment, or remedial actions. There can be no assurance that compliance with these laws
and regulations or changes thereto or the cost of rehabilitation of site operations or the failure to obtain
necessary permits, approvals or leases or successful challenges to the grant of such permits, approvals and
leases will not adversely affect the results of operations or the financial condition of Eastplats. Parties
engaged in exploration operations may be required to compensate those suffering loss or damage by reason
of the exploration activities and may have civil or criminal fines or penalties imposed for violations of
applicable laws or regulations and, in particular, environmental laws.
Amendments to current laws, regulations and permits governing operations and activities of exploration
companies, or more stringent implementation thereof, could have a material adverse impact on Eastplats
and cause increases in expenditure and costs, or require abandonment, or cause delays in developing new
mining properties.
Eastplats may have difficulty obtaining additional funding.
As a result of Eastplats’ decision to suspend funding for the project, the Company terminated certain
facilities agreements that were to be used to partly fund the development costs of the project. Eastplats and
the banks agreed to investigate the restructuring of the financing package when the project is restarted.
There is no assurance that a restructuring of the financing package will be available to Eastplats or, if
available, that this funding will be on acceptable terms.
Additional funding will be required to bring the project into production, and to bring the rest of the Eastern
Limb Projects (including Spitzkop and Kennedy’s Vale) into production, and such funding may include a
restructuring of Eastplats’ financing. Any additional financing may be dilutive to shareholders, and debt
financing, if available, may involve restrictions on financing, investing and operating activities. There can
be no assurance that additional funding will be available to Eastplats when needed or, if available, that this
funding will be on acceptable terms. If adequate funds are not available, including funds generated from
any producing operations, Eastplats may be required to delay or reduce the scope of these development
projects or mining operations.
The trading market for the common shares may be subject to volatility.
The market price of the common shares may be subject to wide fluctuations in response to many factors,
including variations in the operating results of Eastplats, divergence in financial results from analysts’
expectations, changes in earnings estimates by stock market analysts, general economic conditions,
legislative changes in Eastplats’ sector and other events and factors outside the control of Eastplats.
In addition, stock markets, and in particular the market for shares of resource companies, have from time
to time experienced extreme price and volume fluctuations which, as well as general economic and political
conditions, could adversely affect the market price for Eastplats’ common shares.
Eastplats is susceptible to the risks of currency fluctuation that directly impact the Company, such as the
Canadian dollar, South African Rand and U.S. dollar.
Prior to the suspension of Eastplats’ South African mining and development activities in 2012 and 2013,
operations at the CRM were predominantly conducted in Rand, with costs paid in Rand and revenues
received in Rand, even though PGM prices were based in U.S. dollars. Development costs at Eastplats’
Eastern Limb Projects were also predominantly in Rand. Eastplats did not and has no plans to hedge or sell
forward any of its PGM production and would therefore be exposed to exchange rate fluctuations should
the CRM production and the Eastern Limb development resume. As Eastplats also has not and has no plans
to purchase any forward currency exchange contracts, a deterioration of the U.S. and Canadian dollar
against the Rand could increase the cost of PGM production and the cost of the Eastern Limb development
and therefore may have a material adverse effect on the earnings of the CRM when operations resume, and
on the overall costs of bringing the Eastern Limb into production.
Eastplats cannot predict the effect of exchange rate fluctuations upon future operating results and there can
be no assurance that exchange rate fluctuations will not have a material adverse effect on its business,
operating results or financial condition.
Eastplats is exposed to the risks associated with fluctuations in the assumed prices of PGMs and other
commodities.
Metal prices have a direct impact on Eastplats’ decision to resume operations at the CRM and to reinitiate
development at the Eastern Limb, and on Eastplats’ earnings should production at the CRM resume. Since
late 2011, demand and industrial consumption of platinum has been negatively impacted by the volatility
of the Eurozone financial markets, by the global economy in general, and more recently by the strength in
the U.S. dollar and the weakening of gold prices. Supplies have been negatively affected by the depletion
of existing resources and the lack of new mining projects, and by intermittent production stoppages
experienced by many of the South African PGM miners. This has resulted in a significant increase in the
recycling of scrap. Some of the other key factors that may influence platinum prices are policies in the most
important producing countries, namely South Africa and Russia, the amount of stockpiled platinum,
economic conditions in the main consuming countries, international economic and political trends,
fluctuations in the U.S. dollar and other currencies, interest rates, and inflation. A decline in the market
price of PGMs mined by Eastplats may render ore reserves containing relatively low grades of
mineralization uneconomic and may in certain circumstances lead to a restatement of reserves.
Since late 2011, PGM prices have generally declined with occasional periods of high volatility due to
unplanned and unlawful labour actions experienced by the South African PGM industry. There is no
assurance that PGM prices will return to the 2008 highs (when platinum reached $2,200 per ounce) in the
future, or to levels which would result in a positive decision to restart mining at the CRM in the near future.
Eastplats may incur unexpected costs from litigation.
Eastplats is or may be subject to legal proceedings related to the development of its projects, its operations,
titles to it properties, environmental issues and shareholder or other investor lawsuits. Given the uncertain
nature of these actions and the recent significant change in management, despite Eastplats’ diligence in
obtaining information and investigating the actions of the former management of the Company, Eastplats
cannot reasonably predict the outcome thereof. The Company may face lawsuits due to its operations and
if Eastplats is unable to win or favourably settle any lawsuits, it may have a material adverse effect on
Eastplats.
Eastplats is prone to the risks associated with mining or development activities and the speculative nature
of exploration and development, including the risk of obtaining necessary licenses and permits and assumed
quantities or grades of reserves.
Eastplats’ exploration and mining activities are dependent upon the grant of appropriate licences,
concessions, leases, permits and regulatory consents which may be granted for a defined period of time, or
may not be granted, or may be withdrawn or made subject to limitations. There can be no assurance that
such authorizations will be renewed following expiry or granted (as the case may be) or as to the terms of
such grants or renewals. There is also no assurance that the issue of a reconnaissance, prospecting or
exploration licence will ensure the subsequent issue of a mining licence.
The business of exploring for minerals and mining involves a high degree of risk. Only a small proportion
of the properties that are explored are ultimately developed into producing mines. The mining areas
presently being assessed by Eastplats may not contain economically recoverable volumes of minerals or
metals. The operations of Eastplats may be disrupted by a variety of factors and hazards which are beyond
the control of Eastplats, including but not limited to geological and geotechnical uncertainties, seismic
events, fires, power outages, labour disruptions, flooding, explosions, cave-ins, landslides, and the inability
to obtain suitable or adequate machinery, industrial and mechanical accidents, equipment or labour
difficulties, environmental events (including discharge of metals, pollutants or hazardous chemicals) and
other risks involved in the operation of mines and the conduct of exploration programs.
There is uncertainty associated with Eastplats’ operating assumptions, many of which are outside Eastplats’
control, and therefore Eastplats’ results may differ materially from those forecast. Eastplats has relied, and
may continue to rely, upon consultants and others for operating expertise. Should economically recoverable
volumes of minerals or metal be identified, it can take a number of years from the initial phases of drilling
and identification of mineralization until production is possible. During this time, the economic feasibility
of production may change. Substantial expenditure is required to establish reserves through drilling, to
develop metallurgical processes, and to develop the mining and processing facilities and infrastructure at
any site selected for mining. Although substantial benefits may be derived from the discovery of a major
mineral deposit, no assurance can be given that minerals will be discovered in sufficient quantities or have
sufficient grade to justify commercial operations, or that funds required for development can be obtained
on a timely basis.
There can be no assurance that minerals recovered in laboratory test work will be recoverable economically
in large scale tests under on-site conditions or in production scale operations, and material changes in
geological resources, grades, stripping ratios or recovery rates may affect the economic viability of projects.
14. Cautionary Statement on Forward-Looking Information
This MD&A contains certain “forward-looking statements” or “forward-looking information” (collectively
referred to herein as “forward-looking statements”) within the meaning of applicable securities legislation.
Such forward-looking statements include, without limitation, forecasts, estimates, expectations and
objectives for future operations that are subject to a number of assumptions, risks and uncertainties, many
of which are beyond the control of the Company. Forward-looking statements are statements that are not
historical facts and are generally, but not always, identified by the words “expects”, “plans”, “anticipates”,
“believes”, “intends”, “estimates”, “projects”, “potential” and similar expressions, or are events or
conditions that “will”, “would”, “may”, “could” or “should” occur or be achieved. This MD&A contains
forward-looking statements, pertaining to, among other things, the following: the future funding of the
Company’s projects, the future development of the Company’s projects, the Company’s plans for its
properties, the ability of the Company to meet all of its commitments with respect to its environmental
management programs and the relevant aspects of its Social and Labour Plan, the continual review of the
CRM Purchase Agreement, BEE Buyout Agreement, payment to certain holders of minority interests and
all related transactions by current management and the adoption of a new strategy based on the outcome of
this review, the Company’s belief that the platinum production industry will have to face a continuation of
stagnant PGM prices, the continuing impact of adverse economic factors on the South African PGM
industry, the assertion that ongoing cost pressure and decreasing productivity in South Africa will continue
to reduce free cash flow for the PGM industry, the Company’s belief that it currently has sufficient cash
resources to ramp up production at the CRM if there is a sustained strengthening of PGM prices and a
marked improvement in the South African operating environment, the possibility of restarting the
development of the Mareesburg open pit mine and Kennedy’s Vale concentrator projects, the insufficiency
of adequate funding when the project is restarted, the requirement of additional funding to bring the project
into production and how that funding will be attained, the possibility of any impairment or reversal of
impairment if there are any changes to future market conditions and commodity prices and the possibility
that the Company may attempt to issue new shares to maintain or adjust the capital structure.
With respect to forward-looking statements contained in this MD&A, assumptions have been made
regarding, among other things, the completion, timing, and potential benefits of the proposed transaction
between the Company and HZT, the price of PGMs, fluctuations in currency markets, inflation, the
regulatory framework in the jurisdictions in which the Company conducts its business, operating costs, the
Company’s ability to obtain financing on acceptable terms and litigation.
Forward-looking statements are subject to all of the risks and uncertainties normally incident in the mining
and development of PGMs that may cause actual results or events to differ materially from those anticipated
in such forward-looking statements. These risks include, but are not limited to, the risk of fluctuations in
the assumed exchange rates of currencies that directly impact the Company, such as the Canadian dollar,
South African Rand and U.S. dollar, the risk of fluctuations in the assumed prices of PGM and other
commodities, the risk of changes in government legislation, taxation, controls, regulations and political or
economic developments in Canada, the United States, South Africa, or Barbados or other countries in which
the Company carries or may carry on business in the future, risks associated with mining or development
activities, the speculative nature of exploration and development, including the risk of obtaining necessary
licenses and permits, assumed quantities or grades of reserves and certain other known and unknown risks
detailed from time to time in the Company’s public disclosure documents, copies of which are available on
the Company’s SEDAR profile at www.sedar.com.
Although the Company believes that the material factors, expectations and assumptions expressed in such
forward-looking statements are reasonable based on information available to it on the date such statements
were made, no assurances can be given as to future results, levels of activity and achievements and such
statements are not guarantees of future performance. The Company’s actual results may differ materially
from those expressed or implied in forward-looking statements and readers should not place undue
importance or reliance on the forward-looking statements. Statements including forward-looking
statements are made as of the date they are given and, except as required by applicable securities laws, the
Company disclaims any intention or obligation to publically update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise. The forward-looking
statements contained in this MD&A are expressly qualified by this cautionary statement.
16 August 2016
JSE Sponsor: PSG Capital Proprietary Limited
Date: 16/08/2016 08:59:00 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,
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