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EPS - Eastern Platinum - Consolidated Financial Statements Of Eastern Platinum

Release Date: 13/11/2008 17:00
Code(s): EPS
Wrap Text

EPS - Eastern Platinum - Consolidated Financial Statements Of Eastern Platinum Limited September 30, 2008 (Unaudited) EASTERN PLATINUM LIMITED (Incorporated in Canada) (Canadian Registration number BC0722783) (South African Registration number 2007/006318/10) Share Code TSX: ELR ISIN: CA2768551038 Share Code AIM: ELR ISIN: CA2768551038 Share Code JSE: EPS ISIN: CA2768551038 CONSOLIDATED FINANCIAL STATEMENTS OF EASTERN PLATINUM LIMITED SEPTEMBER 30, 2008 (UNAUDITED) Consolidated statements of operations (Expressed in thousands of U.S. dollars, except per share amounts - unaudited) Three months ended September 30, September 30, 2008 2007
Revenue $ 9,291 $ 31,452 Cost of operations Production costs 20,629 20,416 Depletion and depreciation 4,716 3,972 25,345 24,388 Mine operating earnings (loss) (16,054) 7,064 Expenses General and administrative 5,585 3,480 Stock-based compensation 278 54 5,863 3,534 Operating income (loss) (21,917) 3,530 Other income (expense) Interest income 1,975 2,188 Interest expense (659) (779) Foreign exchange gain (loss) (28) (5,344) Income (loss) before income taxes (20,629) (405) and non-controlling interests Future income tax (expense) 6,363 (376) recovery Non-controlling interests (Note 8) 3,705 (609) Net earnings (loss) for the period $ (10,561) $ (1,390) Earnings (loss) per share Basic $ (0.02) $ (0.00) Diluted $ (0.02) $ (0.00) Weighted average number of common share outstanding Basic 680,245,010 667,834,880 Diluted 680,245,010 667,834,880 Nine months ended September 30, September 30, 2008 2007 Revenue $ 115,842 $ 85,108 Cost of operations Production costs 61,437 58,032 Depletion and depreciation 13,528 6,365 74,965 64,397
Mine operating earnings (loss) 40,877 20,711 Expenses General and administrative 15,227 12,267 Stock-based compensation 1,845 14,278 17,072 26,545 Operating income (loss) 23,805 (5,834) Other income (expense) Interest income 6,285 3,769 Interest expense (2,821) (4,180) Foreign exchange gain (loss) 1,100 (8,224) Income (loss) before income taxes 28,369 (14,469) and non-controlling interests Future income tax (expense) (7,417) 914 recovery Non-controlling interests (Note 8) 1,154 (2,467) Net earnings (loss) for the period $ 22,106 $ (16,022) Earnings (loss) per share Basic $ 0.03 $ (0.03) Diluted $ 0.03 $ (0.03) Weighted average number of common share outstanding Basic 675,978,818 598,287,756 Diluted 705,249,374 598,287,756 See accompanying notes to the unaudited consolidated financial statements. Eastern Platinum Limited Consolidated balance sheets (Expressed in thousands of U.S. dollars - unaudited) September 30, December 31,
2008 2007 Assets Current assets Cash and cash equivalents $ 169,294 $ 18,818 Short-term investments 2,766 171,038 Trade receivables 5,533 33,157 Inventories (Note 3) 6,771 6,888 Future income taxes 2,753 - 187,117 229,901 Property, plant and equipment (Note 4) 766,611 813,461 Refining contract (Note 5) 14,226 18,467 Other assets 1,104 1,247 $ 969,058 $ 1,063,076 Liabilities Current liabilities Accounts payable and accrued liabilities $ 30,688 $ 22,967 Future income taxes - 6,416 Current portion capital leases 681 Current loans 3,195 3,837 34,564 33,220 Asset retirement obligation (Note 6) 2,613 2,889 Capital leases 3,842 9,127 Future income taxes 133,227 143,616 174,246 188,852 Non-controlling interests (Note 8) 18,495 23,402 Commitments (Note 11) Shareholders` equity Share capital (Note 7) 889,720 868,045 Contributed surplus 29,037 27,428 Accumulated other comprehensive income (loss) (96,414) 23,481 Deficit (46,026) (68,132) (142,440) (44,651) 776,317 850,822 $ 969,058 $ 1,063,076
Approved by the Board "David Cohen" "Robert Gayton" David Cohen, Director Robert Gayton, Director See accompanying notes to the unaudited consolidated financial statements. Eastern Platinum Limited Consolidated statements of shareholders` equity (Expressed in thousands of U.S. dollars - unaudited) Common Shares
Without Par Value Shares Amount Balance, June 30, 2007 667,778,358 $ 865,103 Warrants exercised 100,000 178 Stock options exercised 1,153,333 2,764 Stock-based compensation - - Net earnings for the period - - Currency translation adjustment - - Balance, December 31, 2007 669,031,691 868,045 Warrants exercised 10,824,077 21,213 Stock options exercised 395,686 462 Stock-based compensation - - Net earnings for the period - - Currency translation adjustment - - Balance, September 30, 2008 680,251,454 $ 889,720 Contributed Deficit
Surplus Balance, June 30, 2007 $ 17,897 $ (55,928) Warrants exercised - - Stock options exercised (720) - Stock-based compensation 10,251 - Net earnings for the period - (12,204) Currency translation adjustment - - Balance, December 31, 2007 27,428 (68,132) Warrants exercised - - Stock options exercised (236) - Stock-based compensation 1,845 - Net earnings for the period - 22,106 Currency translation adjustment - - Balance, September 30, 2008 $ 29,037 $ (46,026) Accumulated Other Total Comprehensive Shareholders`
Income (Loss) Equity Balance, June 30, 2007 $ (23,024) $ 804,048 Warrants exercised - 178 Stock options exercised - 2,044 Stock-based compensation - 10,251 Net earnings for the period - (12,204) Currency translation adjustment 46,505 46,505 Balance, December 31, 2007 23,481 $ 850,822 Warrants exercised - 21,213 Stock options exercised - 226 Stock-based compensation - 1,845 Net earnings for the period - 22,106 Currency translation adjustment (119,895) (119,895) Balance, September 30, 2008 $ (96,414) $ 776,317 Consolidated statements of comprehensive income (loss) (Expressed in thousands of U.S. dollars - unaudited) Three months ended September 30, September 30, 2008 2007 Net earnings (loss) for the period before other comprehensive loss $ (10,561) $ (1,390) Other comprehensive income (loss) - currency (45,656) 42,290 translation adjustment Comprehensive income (loss) $ (56,217) $ 40,900 Nine months ended September 30, September 30, 2008 2007 Net earnings (loss) for the period before other comprehensive loss $ 22,106 $ (16,022) Other comprehensive income (loss) - currency (119,895) 72,020 translation adjustment Comprehensive income (loss) $ (97,789) $ 55,998 See accompanying notes to the unaudited consolidated financial statements. Eastern Platinum Limited Consolidated statements of cash flows (Expressed in thousands of U.S. dollars - unaudited) Three months ended Sept 30, 2008 Sept 30, 2007 Operating activities Net earnings (loss) for the period $ (10,561) $ (1,390) Items not involving cash Accretion (Note 6) 67 87 Depletion and depreciation 4,716 3,972 Stock-based compensation 278 54 Foreign exchange (gain) loss 28 5,344 Future income tax expense (recovery) (6,3 63) 376 Non-controlling interests (3,7 05 ) 609 (15,540) 9,052
Net changes in non-cash working capital items Trade receivables 37,226 (3,470) Inventories (832) (1,556) Accounts payable and accrued liabilities 6,229 1,058 27,083 5,084 Financing activities Common shares issued for cash, net of share issue costs - 181 Short-term debt 56 - Other long-term liabilities 1,533 - 1,589 181
Investing activities Purchase of debt - - Acquisitions, net of cash acquired - - Maturity of short-term investments 101,195 18,379 Property, plant and equipment expenditures (42,896) (12,417) 58,299 5,962 Effect of exchange rate changes on cash and cash equivalents (8,411) (1,082) Increase in cash and cash equivalents 78,560 10,145 Cash and cash equivalents, beginning of period 90,734 6,192 Cash and cash equivalents, end of period $ 169,294 $ 16,337 Cash and cash equivalents are comprised of: Cash in bank $ 9,916 $ 15,399 Short-term money market instruments 159,378 938 $ 169,294 $ 16,337
Supplementary cash flow information Interest paid $ 2 $ 504 Income taxes paid $ - $ - Nine months ended
Sept 30, 2008 Sept 30, 2007 Operating activities Net earnings (loss) for the period $ 22,106 $ (16,022) Items not involving cash Accretion (Note 6) 233 546 Depletion and depreciation 13,528 6,365 Stock-based compensation 1,845 14,278 Foreign exchange (gain) loss (1,100) 7,397 Future income tax expense (recovery) 7,417 (914) Non-controlling interests (1,154) 2, 67 42,875 14,117 Net changes in non-cash working capital items Trade receivables 23,905 1,492 Inventories (1,188) 1,779 Accounts payable and accrued liabilities 12,462 5,399 78,054 22,787 Financing activities Common shares issued for cash, net of share issue costs 21,440 228,596 Short-term debt 348 (31,410) Other long-term liabilities (1,737) 6,023 20,051 203,209 Investing activities Purchase of debt - 8,563 Acquisitions, net of cash acquired - (51,215) Maturity of short-term investments 163,520 (1 20,646) Property, plant and equipment expenditures (101,245) (51,459) 62,275 (214,757) Effect of exchange rate changes on cash and cash equivalents (9,904) 463 Increase in cash and cash equivalents 150,476 11,702 Cash and cash equivalents, beginning of period 18,818 4,635 Cash and cash equivalents, end of period $ 169,294 $ 16,337 Cash and cash equivalents are comprised of: Cash in bank $ 9,916 $ 15,399 Short-term money market instruments 159,378 938 $ 169,294 $ 16,337 Supplementary cash flow information Interest paid $ 365 $ 695 Income taxes paid $ 69 $ - See accompanying notes to the unaudited consolidated financial statements. Eastern Platinum Limited Notes to the consolidated financial statements (Expressed in thousands of U.S. dollars, except number of shares and per share amounts) (Unaudited) 1. Nature of operations Eastern Platinum Limited (the "Company") is a platinum group metal ("PGM") producer engaged in the mining, exploration and development of PGM properties located in various provinces in South Africa. Effective July 1, 2007, the Company changed its fiscal year end from June 30 to December 31 to better align with financial reporting year ends that are predominant in the mining industry. 2. Summary of significant accounting policies These unaudited interim consolidated financial statements have been prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP"). The preparation of financial data is based on accounting principles and practices consistent with those used in the preparation of the audited annual financial statements except as noted below. These unaudited interim financial statements should be read in conjunction with the Company`s audited consolidated financial statements for the six months ended December 31, 2007, as they do not contain all disclosures required by Canadian GAAP for annual financial statements. (a) Adoption of new accounting standards and accounting pronouncements Effective January 1, 2008, the Company adopted four new accounting standards that were issued by the Canadian Institute of Chartered Accountants. These accounting policy changes were adopted on a prospective basis with no restatement of prior period financial statements. (i) Financial Instrument Disclosures and Presentation CICA Handbook Sections 3862 "Financial Instruments - Disclosures" and Section 3863 "Financial Instruments - Presentation" replace Section 3861 "Financial Instruments - Disclosure and Presentation". The new standards carry forward the presentation requirements for financial instruments and enhance the disclosure requirements by placing increased emphasis on disclosures about the nature and extent of risks arising from financial instruments and how the entity manages those risks. (ii) Capital Disclosures CICA Handbook Section 1535 requires the company to disclose (a) its objectives, policies and processes for managing capital; (b) quantitative data about what the entity regards as capital; (c) whether the entity has complied with any capital requirements; and (d) if it has not complied, the consequences of such non-compliance. (iii) Inventories CICA Handbook Section 3031 replaced the existing inventories standard. The new standard requires inventory to be valued on a first-in, first-out or weighted average basis, which is consistent with the Company`s current treatment. The adoption of CICA 3031 did not have a significant impact on the Company`s accounting for inventory or associated disclosures as at January 1, 2008 or for the nine months ended September 30, 2008. Eastern Platinum Limited Notes to the consolidated financial statements (Expressed in thousands of U.S. dollars, except number of shares and per share amounts) (Unaudited) 2. Summary of significant accounting policies (continued) (b) International Financial Reporting Standards In February 2008, the CICA announced that Canadian generally accepted accounting principles ("GAAP") for publicly accountable enterprises will be replaced by International Financial Reporting Standards ("IFRS") for fiscal years beginning on or after January 1, 2011. Companies will be required to provide IFRS comparative information for the previous fiscal year. Accordingly the conversion from Canadian GAAP to IFRS will be applicable to the Company`s reporting for the first quarter of 2011 for which the current and comparative information will be prepared under IFRS. The Company expects the transition to IFRS to impact accounting, financial reporting, and IT systems and processes. The Company is currently assessing the impact of the transition to IFRS. Training and additional resources have been engaged to ensure the timely conversion to IFRS. 3. Inventories September 30, December 31, 2008 2007 Consumables $ 6,316 $ 5,446 Ore and concentrate 455 1,442 $ 6,771 $ 6,888 4. Property, plant and equipment September 30, 2008
Accumulated depreciation/ Net book Cost depletion value Mining plant and equipment $ 362,951 $ 151,030 $ 211,921 Mineral properties Crocodile River Mine (a) 123,743 15,666 108,077 Kennedy`s Vale Project (b) 318,653 12,911 305,742 Spitzkop PGM Project (c) 114,338 - 114,338 Mareesburg JV (c) 26,426 - 26,426 Other property, plant and equipment 127 20 107 $ 946,238 $ 179,627 $ 766,611
December 31, 2007 Accumulated depreciation/ Net book Cost depletion value
Mining plant and equipment $ 216,380 $ 58,597 $ 157,783 Mineral properties Crocodile River Mine (a) 138,163 9,711 128,452 Kennedy`s Vale Project (b) 377,804 238 377,566 Spitzkop PGM Project (c) 121,442 - 121,442 Mareesburg JV (c) 28,076 - 28,076 Other property, plant and equipment 191 49 142 $ 882,056 $ 68,595 $ 813,461 Eastern Platinum Limited Notes to the consolidated financial statements (Expressed in thousands of U.S. dollars, except number of shares and per share amounts) (Unaudited) 4. Property, plant and equipment (continued) (a) Crocodile River Mine ("CRM") The Company holds directly and indirectly 85% of CRM, which is located on the eastern portion of the western limb of the Bushveld Complex. The Maroelabult, Zandfontein, and Crocette sections are currently in production with the Kareespruit deposit and other potential near-surface opportunities being in the development stages. (b) Kennedy`s Vale Project ("KV") The Company holds directly and indirectly 85% of KV, which is located on the eastern limb of the Bushveld Complex, near Steelpoort in the Province of Mpumalanga. It comprises PGM mineral rights on five farms in the Steelpoort Valley. (c) Spitzkop PGM Project and Mareesburg Joint Venture The Company holds directly and indirectly a 93.4% interest in the Spitzkop PGM Project and a 75.5% interest in the Mareesburg project. The Company currently acts as the operator of both the Mareesburg Platinum Project Joint Venture and Spitzkop PGM Project, both located on the eastern limb of the Bushveld Complex. 5. Refining Contract As at September 30, 2008, the refining contract had a total aggregate value of $14,226. The value of the contract is amortized on a units-of-production basis. The amortization expense for the three and nine months ended September 30, 2008 was $355 and $1,078 respectively. The accumulated amortization at September 30, 2008 was $5,352. 6. Asset retirement obligation Although the ultimate amount of the asset retirement obligation is uncertain, the fair value of these obligations is based on information currently available, including closure plans and applicable regulations. Significant closure activities include land rehabilitation, demolition of buildings and mine facilities and other costs. The liability for the asset retirement obligation at September 30, 2008 is approximately ZAR21.8 million ($2,613). The undiscounted value of this liability is approximately ZAR92 million ($11,031). An accretion expense component of approximately $67 for the three months ended September 30, 2008 and $233 for the nine months ended September 30, 2008 (6 months ended December 31, 2007 - $180) has been charged to operations for the corresponding period ended September 30, 2008 to reflect an increase in the carrying amount of the asset retirement obligation which has been determined using a discount rate of 13%. Changes to the asset retirement obligation during the nine months ended September 30, 2008 are as follows: Balance, December 31, 2007 $ 2,889 Foreign exchange movement (509) Accretion 233 Balance September 30, 2008 $ 2,613 Eastern Platinum Limited Notes to the consolidated financial statements (Expressed in thousands of U.S. dollars, except number of shares and per share amounts) (Unaudited) 7. Share capital (a) Authorized - Unlimited number of preferred redeemable, voting, non-participating shares without nominal or par value - Unlimited number of common shares with no par value (b) Stock options The Company has an incentive plan (the "2008 Plan"), approved by the Company`s shareholders at its annual general meeting held on June 4, 2008, 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 2008 Plan, 75 million common shares are reserved for issuance upon the exercise of options. All outstanding options at June 4, 2008 granted under the Company`s previous plan (the "2005 Plan") will continue to exist under the 2008 Plan provided that the fundamental terms governing such options will be deemed to be those under the 2005 Plan. Upon adoption of the 2008 Plan, options to purchase a total of 27,525,000 common shares were available for grant under the 2008 Plan, representing 75,000,000 less the 47,475,000 outstanding options at June 4, 2008 granted under the 2005 Plan. 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. 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 changes in stock options during the nine months ended September 30, 2008 were as follows: September 30, December 31, 2008 2007 Weighted Weighted
average average Number of exercise Number of exercise options price options price Cdn$ Cdn$
Balance outstanding, beginning of period 46,360,000 1.94 32,450,000 1.76 Options granted 1,500,000 3.38 15,180,000 2.31 Options exercised (570,000) 1.60 (1,153,333) 1.79 Options cancelled (230,000) 2.76 (116,667) 1.70 Balance outstanding, end of period 47,060,000 1.99 46,360,000 1.94 Eastern Platinum Limited Notes to the consolidated financial statements (Expressed in thousands of U.S. dollars, except number of shares and per share amounts) (Unaudited) 7. Share capital (continued) The following table summarizes information concerning outstanding and exercisable options at September 30, 2008: Remaining Options Options Exercise Contractual outstanding exercisable price Life (Years) Expiry date Cdn$
550,000 550,000 0.56 0.10 November 28, 2008 187,500 187,500 1.00 0.90 August 26, 2009 7,475,000 7,475,000 1.70 2.65 May 24, 2011 250,000 250,000 1.70 3.16 November 27, 2011 22,187,500 22,187,500 1.82 3.44 March 7, 2012 14,880,000 12,880,000 2.31 9.02 October 5, 2017 90,000 30,000 2.50 9.21 December 12, 2017 1,000,000 600,000 3.38 9.40 February 20, 2018 440,000 180,000 3.38 9.49 March 27, 2018 47,060,000 44,340,000 5.22 (c) Share purchase warrants The changes in warrants during the nine months ended September 30, 2008 were as follows: September 30, 2008 December 31, 2007 Weighted Weighted average average
Number of exercise Number of exercise warrants price warrants price Cdn$ Cdn$ Balance outstanding, beginning of period 71,248,050 1.83 71,348,050 1.83 Warrants exercised (10,824,077) 1.97 - - Warrants expired (1,937,977) 2.00 (100,000) 1.80 Balance outstanding, end of period 58,485,996 1.80 71,248,050 1.83 At September 30, 2008, the Company had 58,485,996 warrants outstanding, each warrant exercisable at Cdn$1.80 per common share and expiring on March 28, 2009. 8. Non-controlling interests The non-controlling interests are comprised of the following: Balance, December 31, 2007 $ 23,402 Non-controlling interests` share of income in Barplats 1,523 Non-controlling interests` share of interest on advances to Gubevu (2,677) Foreign exchange movement (3,753) Balance, September 30, 2008 $ 18,495 Eastern Platinum Limited Notes to the consolidated financial statements (Expressed in thousands of U.S. dollars, except number of shares and per share amounts) (Unaudited) 9. Related party transactions The Company incurred the following expenses in the normal course of operations, measured at the exchange amount which is determined on a cost recovery basis, with companies related by way of directors and officers in common: Three months ended Nine months ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, 2008 2007 2008 2007 Consulting fees (a) $ 20 $ 96 $ 62 $ 275 General and administrative expenses 73 - 228 99 Management fees (b) 302 115 971 334 Rent - - - 305 $ 395 $ 211 $ 1,261 $ 1,013 (a) The Company paid fees to a private company controlled by a director of the Company for consulting services performed outside of his capacity as a director. (b) The Company paid management fees and expenses to private companies controlled by officers and directors of the Company. (c) Amounts due to related parties are unsecured, non-interest bearing and due on demand. Accounts payable at September 30, 2008 included $49 (Dec 31, 2007 - $2,550) which were due to private companies controlled by officers of the Company. 10. Segmented information (a) Operating segment - The Company`s operations are primarily directed towards the acquisition, exploration and production of Platinum Group Metals in South Africa. (b) Geographic segments - The Company`s revenues and expenses by geographic areas for the three and nine months ended September 30, 2008 and 2007 are as follows: September 30, 2008 (3 months) South Africa Canada Total Property, plant and equipment 766,517 94 766,611 Total assets 783,884 185,174 969,058 Property, plant and equipment expenditures 42,896 - 42,896 Revenues $ 9,291 $ - $ 9,291 Production costs (20,629) - (20,629) Depletion and depreciation (4,716) - (4,716) Expenses (4,269) (1,316) (5,585) Stock based compensation (278) - (278) Interest income 230 1,745 1,975 Interest expense (570) (89) (659) Foreign exchange gain (loss) (70) 42 (28) Income (loss) before income taxes and non-controlling interests $ (21,011) $ 382 $ (20,629) Eastern Platinum Limited Notes to the consolidated financial statements (Expressed in thousands of U.S. dollars, except number of shares and per share amounts) (Unaudited) 10. Segmented information (continued) September 30, 2007 (3 months) South Africa Canada Total
Property, plant and equipment expenditures 12,417 - 12,417 Revenues $ 31,452 $ - $ 31,452 Production costs (20,416) - (20,416) Depletion and depreciation (3,972) - (3,972) Expenses (2,443) (1,037) (3,480) Stock-based compensation - ( 54) (54) Interest income - 2,188 2,188 Interest expense (779) - (779) Foreign exchange loss (939) (4,405) (5,344) Income (loss) before income taxes and non-controlling interests $ 2,903 $ (3,308) $ (405) September 30, 2008 (9 months) South Africa Canada Total Property, plant and equipment expenditures 103,939 (2,694) 101,245 Revenues $ 115,842 $ - $ 115,842 Production costs (61,437) - (61,437) Depletion and depreciation (13,528) - (13,528) Expenses (11,227) (4,000) (15,227) Stock-based compensation (1,271) (574) (1,845) Interest income 1,721 4,564 6,285 Interest expense (2,821) - (2,821) Foreign exchange gain 1,035 65 1,100 Income before income taxes and non-controlling interests $ 28,314 $ 55 $ 28,369 September 30, 2007 (9 months)
South Africa Canada Total Property, plant and equipment expenditures 51,356 103 51,459 Revenues $ 85,108 $ - $ 85,108 Production costs (58,032) - (58,032) Depletion and depreciation (6,358) (7) (6,365) Expenses (8,319) (3,948) (12,267) Stock-based compensation (144) (14,134) (14,278) Interest income (123) 3,892 3,769 Interest expense (4,180) - (4,180) Foreign exchange loss (3,816) (4,408) (8,224) Income (loss) before income taxes and non-controlling interests $ 4,136 $ (18,605) $ (14,469) Eastern Platinum Limited Notes to the consolidated financial statements (Expressed in thousands of U.S. dollars, except number of shares and per share amounts) (Unaudited) 10. Segmented information (continued) (b) Geographic segments (continued) December 31, 2007 South Africa Canada Total Property, plant and equipment 813,378 83 813,461 Total assets 871,790 191,286 1,063,076 For the period ended September 30, 2008 and 2007, 100% of the Company`s PGM production was sold to one customer (Note 13(b)). 11. Commitments The Company has committed to capital expenditures on projects of approximately 402 million Rand ($48,144) as at September 30, 2008. 12. Management of capital risk The capital structure of the Company consists of equity attributable to common shareholders, comprising of issued capital, contributed surplus, retained earnings and accumulated other comprehensive income. The Company`s objectives when managing capital are to: (i) preserve capital, (ii) obtain the best available net return, and (iii) maintain liquidity. The Company manages the capital structure and makes adjustments to it in light of changes in economic condition and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares, issue new debt, acquire or dispose of assets or adjust the amount of cash and cash equivalents and investments. The Company`s policy is to invest its excess cash in highly liquid, fully guaranteed, bank-sponsored instruments. The Company staggers the maturity dates of its investments over different time periods and dates to minimize exposure to interest rate changes. This strategy is unchanged from 2007. The Company is not subject to externally imposed capital requirements. 13. Management of financial risk The Company`s financial instruments are exposed to certain financial risks, including price risk, currency risk, credit risk, liquidity risk, and interest risk. The Company`s exposure to these risks and its methods of managing the risks remain consistent. (a) Price risk The Company is exposed to price risk with respect to the revenues and costs of production. Revenues are affected by fluctuations in both the prices of platinum group metals and exchange rates. Costs of production include electricity, labour, and diesel amongst others. The Company closely monitors these prices to determine the appropriate course of action to be taken by the Company. The Company has not entered into any derivative financial instruments to manage exposures to price fluctuations. A sensitivity analysis has not been completed at September 30, 2008 as it would not be representative of the actual risk. The future costs of production are unknown and are expected to change frequently. Eastern Platinum Limited Notes to the consolidated financial statements (Expressed in thousands of U.S. dollars, except number of shares and per share amounts) (Unaudited) 13. Management of financial risk (continued) (b) Currency risk The Company is exposed to the financial risk related to the fluctuation of foreign exchange rates. The Company receives revenue in South African Rand, incurs expenses in Canadian dollars and South African Rand and its reporting currency is the US dollar. A significant change in the currency exchange rates between the Canadian dollar and South African Rand relative to the US dollar could have an effect on the Company`s results of operations, financial position or cash flows. The Company has not entered into any derivative financial instruments to manage exposures to currency fluctuations. At September 30, 2008, the Company is exposed to currency risk through the following financial instruments denominated in South African Rand and Canadian dollars: September 30, 2008 December 31, 2007 (000`s (000`s (000`s (000`s
Cdn$) ZAR) Cdn$) ZAR) Cash and cash equivalents $ 161,756 144,441 $ 18,107 3,326 Short-term investments 2,944 - 169,546 - Trade receivables 1,653 33,237 1,880 215,195 Short-term liabilities 3,246 6,891 3,804 - Long-term liabilities - 32,095 3,294 39,958 Accounts payable and accruals 542 252,183 3,646 132,797 The sensitivity of the Company`s net earnings and other comprehensive income due to changes in the exchange rate between the Canadian dollar and the South African Rand is summarized in the tables below: 3 months ended Sept. 30, 2008 10% 10%
increase in decrease in Canadian Canadian dollar dollar Increase (decrease) in net earnings (2,367) 5,747 Increase (decrease) in other comprehensive income 1,682 (2,384) Comprehensive income (loss) (685) 3,363 9 months ended Sept. 30, 2008
10% 10% increase in decrease in Canadian Canadian dollar dollar
Increase (decrease) in net earnings (4,459) 8,305 Increase (decrease) in other comprehensive income (39,802) 48,602 Comprehensive income (loss) (44,261) 56,907 Eastern Platinum Limited Notes to the consolidated financial statements (Expressed in thousands of U.S. dollars, except number of shares and per share amounts) (Unaudited) 13. Management of financial risk (continued) (b) Currency risk (continued) The sensitivity of the Company`s net earnings and other comprehensive income due to changes in the exchange rate between the Canadian dollar and the United States dollar is summarized in the tables below: 3 months ended Sept. 30, 2008 10% 10% increase in decrease in
Canadian Canadian dollar dollar Increase (decrease) in net earnings (1,058) 1,054 Increase (decrease) in other comprehensive income 80,517 (80,517) Comprehensive income (loss) 79,459 (79,463) 9 months ended Sept. 30, 2008 10% 10%
increase in decrease in Canadian Canadian dollar dollar Increase (decrease) in net earnings 2,209 (2,212) Increase (decrease) in other comprehensive income 73,093 (73,093) Comprehensive income (loss) 75,302 (75,305) (c) Credit risk Credit risk is the risk of an unexpected loss if a customer or third party to a financial instrument fails to meet its contractual obligations. The Company`s cash equivalents and short-term investments are held through large Canadian and South African financial institutions. Short-term and long-term investments (including those presented as part of cash and cash equivalents) are composed of financial instruments issued by Canadian and South African banks and companies with high investment- grade ratings. These investments mature at various dates over the current operating period. The Company did not invest in any asset backed commercial paper. The Company currently sells all of its concentrate production to one customer under an off-take contract. The loss of this customer or unexpected termination of the off-take contract could have a material adverse effect on the Company`s results of operations, financial condition and cash flows. The Company has not experienced any bad debts with this customer. The Company minimizes credit risk by reviewing the credit risk of the counterparty to the arrangement and has made any necessary provisions related to credit risk at September 30, 2008. Eastern Platinum Limited Notes to the consolidated financial statements (Expressed in thousands of U.S. dollars, except number of shares and per share amounts) (Unaudited) 13. Management of financial risk (continued) (d) 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. (e) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is exposed to interest rate risk on its short-term investments. The risk that the Company will realize a loss as a result of a decline in the fair value of short-term investments is limited because these investments, although available for sale, are generally held to maturity. The Company monitors its exposure to interest rates and has not entered into any derivative financial instruments to manage this risk. 14. Fair value estimation of financial instruments The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The fair value of financial instruments that are not traded in an active market is determined using a Black-Scholes model based on assumptions that are supported by observable current market conditions. Changes in these assumptions to reasonably possible alternative assumptions would not significantly affect the Company`s results. The fair values of cash and cash equivalents, short-term investments, trade receivables and accounts payable approximate their carrying values due to the short-term to maturities of these financial instruments. The fair value of short-term debt was determined using discounted cash flows at prevailing market rates and the fair value is considered to approximate carrying value. The Company has assessed these financial instruments in light of the current market conditions and has not identified any impairment. 15. Subsequent events From October 1, 2008 to November 13, 2008, 275,000 stock options were exercised at Cdn$0.56 per common share for proceeds of Cdn$154. For further information contact: Investor Relations Website: www.eastplats.com Email: info@eastplats.com Tel: 1-(604)-685-6851, Fax: 1-(604)-685-6493 NOMAD: JSE Sponsor: Canaccord Adams Limited, London PSG Capital (Pty) Limited, Email: South Africa Ryan.Gaffney@canaccordadams.com Email:anjem@psgcapital.com Tel: +44 20 7050 6500 Tel: +27 21 887 9602 Date: 13/11/2008 17:00:36 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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