| Tue 25 Sep 2007, 12:37 | | EPS/ELR - Eastern Platinum Limited - Eastern Plati |
|
EPS
EPS
EPS/ELR - Eastern Platinum Limited - Eastern Platinum Limited reports year-end
results
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
EASTERN PLATINUM LIMITED REPORTS YEAR-END RESULTS
Mining Rate, Development, Production and Revenues All Up Over Comparative Period
2006
LONDON, ENGLAND--(Marketwire - Sept. 24, 2007) - Eastern Platinum Limited (the
`Company` or `Eastplats`)(TSX:ELR)(AIM:ELR)(JSE:EPS) announces the financial
results for the year ended June 30, 2007 and an overview of operations during
the quarter ended June 30, 2007 (all amounts reported in $USD).
Overview
Eastplats is a growing platinum group metal (`PGM`) producer engaged in the
acquisition, development and mining of PGM properties located in South Africa.
All of the Company`s properties are situated on the western and eastern limbs of
the Bushveld Complex, the geological environment that supports over 70% of the
world`s PGM supply.
The Company`s Nominated Adviser (`NOMAD`) in London is Canaccord Adams Limited
and the Company`s Sponsor in Johannesburg is PSG Capital Limited.
Eastplats recorded annual revenue of $101 million for year ended June 30, 2007.
Highlights for the quarter include:
- Substantial progress made in the ongoing underground development of the
Crocodile River Mine (`CRM`) which is integral in generating additional
mineable reserves to support continued production build up at CRM;
- On-reef ore reserve development in the quarter increased significantly to
1,767 meters, up from 278 meters in the comparative period in 2006, an
increase of 535%;
- Off-reef development in the quarter increased to 4,807 metres, up from 463
meters in the comparative period in 2006, an increase of 938%;
- The average monthly mining rate during increased to 81,400 tonnes per month
up from 52,250 tonnes per month the comparative period in 2006, an increase
of 56%;
- Production and sales of 25,111 ounces of PGM, up from 12,533 ounces for the
comparative period in 2006, an increase of over a 100%;
- Operating cash costs of $702/ounce, up from $620/ounce for the comparative
period in 2006 as a result of the dramatic increase in on-reef mine
development that has occurred, much of which is expensed against operating
costs;
- Revenues of $23.1 million, up from $12.6 million for the comparative period
in 2006, an increase of 83%;
- On May 11, 2007, the Company closed an equity fund raising for gross
proceeds of Cdn $201.2 million ($180.7million);
- At June 30, 2007 the Company had a cash position (including temporary
investments) of $204.5 million in cash and GIC`s. Currently, the full
amount is invested in highly liquid, fully guaranteed, bank sponsored
instruments. The Company is not exposed to financial instruments involving
the US residential property markets or mortgages.
Significant Transactions
- On May 21, 2007, Company increased its direct and indirect interest in
Barplats to 74% through the acquisition of the 5% outstanding Barplats
shares.
- On May 11, 2007 the Company closed an equity fund raising for gross
proceeds of over Cdn $200 million ($180.7 million).
- On June 12, 2007, the Company increased its direct and indirect interest in
Barplats to 85% through the acquisition of 42.39% of the shares of Gubevu
Consortium Investment Holdings (Proprietary) Limited, which holds 26% of
the shares of Barplats.
Ian Rozier, the Company`s President and CEO, commented:
`Results reported for 2007 year end and the last quarter 2007 continue to
reflect the excellent progress being made at the CRM operations, particularly
the enormous increase in underground mine development which has built a large
reserve base that provides a strong foundation for the mine`s future success,`
stated Ian Rozier.
`The increased interest in Barplats to 85%, the excellent drilling and assay
results from Spitzkop, our JSE listing, a very healthy treasury and the strong
fundamentals of the PGM sector, are all extremely positive for the outlook of
the Company`s future prospects,` he stated.
Financial Highlights
Please refer to the attached audited consolidated financial statements and
accompanying Management`s Discussion and Analysis for the year ended June 30,
2007. The comparative 2006 financial statements are available on SEDAR at
www.sedar.com and on the Company`s website www.eastplats.com.
About the Company
The Company`s strategy is to provide its stakeholders with superior returns from
assets being developed and mined within the PGM mining sector. The Company has
not hedged or sold forward any of its future PGM production. The Company
continues its process of optimizing orebody development through traditional cost
effective mining methods that place a premium on a safe work environment.
The Company`s assets comprise of a direct and indirect 85% interest in Barplats
whose main assets are the PGM producing CRM located on the western limb of the
Bushveld Complex and the Kennedy`s Vale Project located on the eastern limb. The
Company also has an indirect and direct 75.5% interest in Mareesburg Platinum JV
and an indirect and direct 93% interest in Spitzkop PGM Project both located on
the eastern limb of the Bushveld Complex.
The Company`s shares are listed in Toronto on the TSX and on AIM (Alternative
Investment Market) of the London Stock Exchange and trade under the symbol ELR.
The Company shares are also listed on the Johannesburg Stock Exchange and trade
under the symbol EPS.
Teleconference call details:
Eastern Platinum Limited will host a telephone conference call on Monday,
September 24, 2007 at 11:00 a.m. Pacific Standard Time (4:30 p.m. Eastern) to
discuss these results. The conference call may be accessed by dialing Toll-free
1-800-319-4610 in Canada and the United States or 1-604-638-5340
internationally.
The conference call will be archived for later playback until Monday, October 1,
2007 and can be accessed by dialing 604-683-9010 or 1-800-319-6413 using the pin
code 4296 followed by the number sign.
Total shares issued and outstanding 667,878,194
No stock exchange, securities commission or other regulatory authority has
approved or disapproved the information contained herein.
Certain statements included herein constitute `forward-looking statements`within
the meaning of applicable Canadian securities legislation. These forward-looking
statements are based on certain assumptions by Eastplats and Barplats and as
such are not a guarantee of future performance. Actual results could differ
materially from those expressed or implied in such forward-looking statements
due to factors such as general economic and market conditions, increased costs
of production and a decline in metal prices. Eastplats is under no obligation to
update or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, except as required by applicable laws.
September 24, 2007
Consolidated financial statements of
Eastern Platinum Limited
June 30, 2007 and 2006
Eastern Platinum Limited
June 30, 2007 and 2006
Table of contents
Auditors` report
Consolidated statements of operations and deficit
Consolidated balance sheets
Consolidated statements of cash flows
Notes to the consolidated financial statements
Deloitte & Touche LLP
2800 - 1055 Dunsmuir Street
4 Bentall Centre
P.O. Box 49279
Vancouver BC V7X 1P4
Canada
Tel: 604-669-4466
Fax: 604-685-0395
www.deloitte.ca
Auditors` report
To the Shareholders of Eastern Platinum Limited
We have audited the consolidated balance sheets of Eastern Platinum Limited as
at June 30, 2007 and 2006 and the consolidated statements of operations and
deficit and cash flows for the years then ended. These financial statements are
the responsibility of the Company`s management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at June 30, 2007 and
2006 and the results of its operations and its cash flows for years then ended
in accordance with Canadian generally accepted accounting principles.
Chartered Accountants
September 23, 2007
--------------------------------------------------------------------
Eastern Platinum Limited
Consolidated statements of operations and deficit
years ended June 30, 2007 and 2006
(Expressed in thousands of US dollars,
except share and per share amounts)
--------------------------------------------------------------------
2007 2006
$ $
--------------------------------------------------------------------
Revenue 101,205 12,668
--------------------------------------------------------------------
Cost of operations
Production costs 69,467 7,770
Depletion and depreciation 8,123 2,094
--------------------------------------------------------------------
77,590 9,864
--------------------------------------------------------------------
Income before undernoted items 23,615 2,804
--------------------------------------------------------------------
Expenses
General and administrative 15,979 5,629
Stock-based compensation 14,416 4,587
--------------------------------------------------------------------
30,395 10,216
--------------------------------------------------------------------
Operating loss (6,780) (7,412)
Other income (expense)
Interest income 4,908 1,893
Interest expense (5,427) (855)
Foreign exchange gain (loss) (1,897) 2,274
--------------------------------------------------------------------
Loss before income taxes and
non-controlling interests (9,196) (4,100)
Recovery of future income taxes (Note 11) 2,002 264
Non-controlling interests (Note 12) (3,078) (43)
--------------------------------------------------------------------
Net loss for the year (10,272) (3,879)
Deficit, beginning of year (36,376) (24,094)
Share issue expenses (9,280) (8,403)
--------------------------------------------------------------------
Deficit, end of year (55,928) (36,376)
--------------------------------------------------------------------
--------------------------------------------------------------------
Basic and diluted loss per share (0.02) (0.02)
--------------------------------------------------------------------
--------------------------------------------------------------------
Basic and diluted weighted average
number of common shares outstanding 538,663,898 166,350,090
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
--------------------------------------------------------------------
------------------------------------------------------------------
Consolidated balance sheets
Consolidated balance sheets
as at June 30, 2007 and 2006
(Expressed in thousands of US dollars)
2007 2006
------------------------------------------------------------------
$ $
Assets
Current assets
Cash and cash equivalents 6,192 45,510
Short-term investments 198,306 74,706
Receivables (Note 4) 22,403 12,942
Inventories (Note 5) 4,651 1,676
------------------------------------------------------------------
231,552 134,834
Property, plant and equipment (Note 6) 757,293 538,202
Refining contract 18,828 14,978
Other assets 1,007 410
------------------------------------------------------------------
1,008,680 688,424
------------------------------------------------------------------
------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 21,026 14,449
Future income taxes (Note 11) 11,573 -
Short-term debt (Note 7) - 25,767
------------------------------------------------------------------
32,599 40,216
Asset retirement obligation (Note 8) 2,701 3,283
Capital leases and other long-term liabilities 11,920 -
Future income taxes (Note 11) 132,910 125,431
------------------------------------------------------------------
180,130 168,930
------------------------------------------------------------------
Non-controlling interests (Note 12) 24,502 13,546
------------------------------------------------------------------
Commitments (Notes 3 and 15)
Shareholders` equity
Share capital (Note 9) 865,103 588,279
Contributed surplus (Note 9) 17,897 6,799
Cumulative translation adjustment (Note 10) (23,024) (52,754)
Deficit (55,928) (36,376)
------------------------------------------------------------------
804,048 505,948
------------------------------------------------------------------
1,008,680 688,424
------------------------------------------------------------------
------------------------------------------------------------------
Approved by the Board
David Cohen, Director
Ian Rozier, Director
See accompanying notes to the consolidated financial statements.
-----------------------------------------------------------------------
Eastern Platinum Limited
Consolidated statements of cash flows
years ended June 30, 2007 and 2006
(Expressed in thousands of US dollars)
2007 2006
-----------------------------------------------------------------------
$ $
Operating activities
Net loss for the year (10,272) (3,879)
Items not involving
cash Accretion (Note 8) 672 47
Depletion and depreciation 8,123 2,094
Stock-based compensation 14,416 4,587
Foreign exchange gain 1,897 (788)
Future income tax recovery (2,002) (264)
Non-controlling interests 3,078 43
-----------------------------------------------------------------------
15,912 1,840
Net changes in non-cash working capital items
Receivables (9,461) (1,656)
Inventories (2,975) (306)
Accounts payable and accrued liabilities 6,577 2,566
-----------------------------------------------------------------------
10,053 2,444
-----------------------------------------------------------------------
Financing activities
Common shares issued for cash, net 213,914 121,849
Shares issued by subsidiary to
non-controlling interests - 2,194
Repayment of short-term debt (Note 7) (25,767) (5,608)
Other long-term liabilities 6,023 -
-----------------------------------------------------------------------
194,170 118,435
-----------------------------------------------------------------------
Investing activities
Acquisitions, net of cash acquired (Note 3) (56,662) (21,584)
Short-term investments (123,600) (52,806)
Property, plant and equipment expenditures, net of
related accounts (62,997) (5,546)
Deferred acquisition costs and intangible assets
recovered - 4,236
-----------------------------------------------------------------------
(243,259) (75,700)
-----------------------------------------------------------------------
Effect of exchange rate changes on cash and cash
equivalents (282) (952)
-----------------------------------------------------------------------
(Decrease) increase in cash and cash equivalents (39,318) 44,227
Cash and cash equivalents, beginning of year 45,510 1,283
-----------------------------------------------------------------------
Cash and cash equivalents, end of year 6,192 45,510
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Cash and cash equivalents are comprised of:
Cash in bank 6,077 43,184
Short-term money market instruments 115 2,326
-----------------------------------------------------------------------
6,192 45,510
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Supplementary cash flow information
Interest paid 598 905
Income taxes paid - -
-----------------------------------------------------------------------
During the year ended June 30, 2007, the Company issued the following common
shares: 3,000,000 common shares with a value of $3.5 million for its investment
in Afriminerals (Note 3 (c)); 12,000,000 common shares with a value of $21.1
million for its acquisition of a 1% net smelter royalty from Rhodium Reef
Royalties (Note 3 (c)); and 17,272,594 shares with a value of $29 million for
its acquisition of additional Barplats shares (Note 3 (a)).
During the year ended June 30, 2006, the Company issued 288,585,122 common
shares with a value of $342.6 million for the acquisition of Barplats (Note 3
(a)). In addition, 18,750,000 common shares with a value of Cdn$24.0 million
($21.4 million) were released from escrow on the acquisition of Eastern Platinum
Holdings Ltd.
See accompanying notes to the consolidated financial statements.
Eastern Platinum Limited
Notes to the consolidated financial statements
June 30, 2007 and 2006
(Tabular amounts expressed in $ thousands, except
as noted and share and per share amounts)
1. Nature of operations
Eastern Platinum Limited (the `Company`) is a platinum group metal (`PGM`)
producer engaged in the acquisition, development and mining of PGM properties
located in various provinces in South Africa.
2. Summary of significant accounting policies
These consolidated financial statements have been prepared in accordance with
Canadian generally accepted accounting principles (`Canadian GAAP`). The
principal accounting policies are outlined below:
(a) Change in reporting currency
Effective July 1, 2006, the Company changed its reporting currency to the U.S.
dollar (`$`). The change in reporting currency is to better reflect the
company`s business activities and to improve investors` ability to compare the
Company`s financial results with other publicly traded businesses in the mining
industry. Furthermore, the international currency of the mining industry is the
U.S. dollar. Prior to July 1, 2006, the Company reported its annual and
quarterly consolidated balance sheets and the related consolidated statements
of operations and shareholders` deficit and cash flows in the Canadian dollar
(`Cdn$`). The related financial statements and corresponding notes prior to July
1, 2006 have been restated to the U.S. dollar for comparison to the 2006
financial results.
These consolidated financial statements have been translated to the U.S. $ in
accordance with EIC 130 `Translation Method when the Reporting Currency Differs
from the Measurement Currency or There is a Change in the Reporting Currency`.
These guidelines require that the financial statements be translated into the
reporting currency using the current rate method. Under this method, the
statement of operations and cash flow items for each year are translated into
the reporting currency using the average rate in effect for the period,and
assets and liabilities are translated using the exchange rate at the period end.
All resulting exchange differences are reported as a separate component of
shareholders` equity titled Cumulative Translation Adjustment (Note 10).
(b) Basis of consolidation
These consolidated financial statements include the accounts of the Company and
all its subsidiaries. All significant intercompany transactions and balances
have been eliminated.
Variable Interest Entities (`VIE`s`) as defined by the Accounting Standards
Board in Accounting Guideline (`AcG`) 15, `Consolidation of Variable Interest
Entities` are entities in which equity investors do not have the characteristics
of a `controlling financial interest` or there is not sufficient equity at risk
for the entity to finance its activities without additional subordinated
financial support. VIE`s are subject to consolidation by the primary beneficiary
who will absorb the majority of the entities expected losses and/or expected
residual returns. The Company has determined that its investment in Gubevu
Consortium Holdings (Pty) Ltd. (`Gubevu`) is a VIE. As the Company is the
primary beneficiary the accounts of Gubevu are consolidated with those of the
Company (Note 3(b)).
(c) Measurement uncertainty
The preparation of financial statements in accordance with Canadian GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Significant accounts that require estimates as the basis
for determining the stated amounts include accounting for doubtful accounts,
inventories, property, plant and equipment, asset retirement obligations, stock-
based compensation, allocation of purchase price of acquisitions and income and
mining taxes.
Depreciation and depletion of property, plant and equipment assets are dependent
upon estimates of useful lives and reserves estimates, both of which are
determined with the exercise of judgement. The assessment of any impairment of
property, plant and equipment is dependent upon estimates of fair value that
take into account factors such as reserves, economic and market conditions and
the useful lives of assets. Asset retirement obligations are recognized in the
period in which they arise and are stated as the fair value of estimated future
costs. These estimates require extensive judgement about the nature, cost and
timing of the work to be completed, and may change with future changes to costs,
environmental laws and regulations and remediation
practices.
(d) Foreign currency translation
The Company and its subsidiaries operate in Canada and South Africa.
The Company`s Canadian operations have the Canadian dollar as their functional
currency and its South African operations have the South African Rand (`R`) as
their functional currency.
Where a subsidiary is self-sustaining, the financial results have been
translated into Canadian dollars using the current rate method. The current rate
method provides that all assets and liabilities are translated at the year-end
rate of exchange and all revenue and expense items are translated at the average
rate of exchange prevailing during the period. Exchange gains and losses arising
from this translation, representing the net unrealized foreign currency
translation gain (loss) on the Company`s net investment in these foreign
operations, are recorded in the cumulative translation account component of
shareholders` equity.
Where a subsidiary is integrated, the financial results have been translated
into Canadian dollars using the temporal method. The temporal method provides
for foreign currency denominated monetary assets and liabilities to be
translated into Canadian dollars at rates of exchange in effect at the balance
sheet date. Non- monetary items are translated at historical exchange rates and
revenues and expenses at average rates of exchange during the period. Exchange
gains and losses arising on translation are included in the statement of
operations and deficit.
Other foreign currency transactions included in these consolidated financial
statements are translated into Canadian dollars at the rates of exchange in
effect at the consolidated balance sheet dates in the case of monetary assets
and liabilities and at the rates of exchange in effect on the date of
transaction in the case of non-monetary assets and income and expenses. All
gains and losses on translation of these foreign currency transactions are
included in the consolidated statement of operations and deficit.
(e) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits in banks and highly
liquid investments with an original maturity of three months or less.
(f) Short-term investments
Short-term investments are investments which are transitional or current in
nature, with an original maturity greater than three months.
(g) Inventories
Inventories comprising stockpiled ore and concentrate awaiting further
processing and sale, are valued at the lower of cost and net realizable value.
Consumables are valued at the lower of cost and replacement value. Cost is
determined using the weighted average method and includes direct mining
expenditures and an appropriate portion of normal overhead expenditure. In the
case of concentrate, direct concentrate costs are also included. Net realizable
value is the estimated selling price in the ordinary course of business, less
the estimated costs of completion and selling expenses. Obsolete, redundant and
slow moving stores are identified and written down to net realizable values.
(h) Property, plant and equipment
Property, plant and equipment are recorded at cost less accumulated depreciation
and depletion. Maintenance, repairs and renewals are charged to operations.
Mining properties and mining and process facility assets are amortized on a
units-of- production basis which is measured by the portion of the mine`s
economically recoverable and proven ore reserves recovered during the
period.
Other assets are depreciated using the straight-line method based on their
estimated useful lives, which generally range from 5 to 7 years, with the
exception of agricultural and residential properties whose
estimated useful lives are 50 years.
All direct costs related to the acquisition, exploration and development of
mineral properties are capitalized until the properties to which they relate are
placed into production, sold, abandoned or management has determined there to be
an impairment. If economically recoverable ore reserves are developed,
capitalized costs of the related property are reclassified as mining assets and
amortized using the units- of-production method following commencement of
production.
The amounts shown for mineral properties do not necessarily represent present or
future values. Their recoverability is dependent upon the discovery of
economically recoverable reserves, the ability of the Company to obtain the
necessary financing to complete the development, and future profitable
production or proceeds from the disposition thereof.
Long-lived assets are tested for recoverability whenever events or changes in
circumstances indicate that their carrying amount may not be recoverable. An
impairment loss is recognized when their carrying value exceeds the
total undiscounted cash flows expected from their use and eventual disposition.
The amount of the impairment loss is determined as the excess of the carrying
value of the asset over its fair value. Future cash flows are estimated based on
expected future production, commodity prices, operating costs and capital costs.
(i) Long-term investments
Long-term investments are carried at cost. When a decline in market value that
is other than temporary has occurred, these investments are written down to
market value to provide for the loss.
(j) Refining contract
The Company sells its concentrate to two customers, with the primary customer
being under the terms of a refining contract. The refining contract is amortized
over the life of the contract, estimated to be twelve years. During the year
ended June 30, 2007, $1.2 million (2006 - $0.2 million) was recorded as
amortization of the refining contract. An evaluation of the carrying value of
the contract is undertaken whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. During the year ended June 30,
2007, there were no such events or circumstances indicating that the carrying
amount was not recoverable.
(k) Asset retirement obligations
The Company recognizes liabilities for statutory, contractual or legal
obligations associated with the retirement of property, plant and equipment,
when those obligations result from the acquisition, construction, development or
normal operation of the assets. Initially, the fair value of the liability for
an asset retirement obligation is recognized in the period incurred. The net
present value is added to the carrying amount of the associated asset and
amortized over the asset`s useful life. The liability is accreted over time
through periodic charges to operations and it is reduced by actual costs of
reclamation.
The Company`s estimates of reclamation costs could change as a result of changes
in regulatory requirements and assumptions regarding the amount and timing of
the future expenditures. A change in estimated discount rates is reviewed
annually or as new information becomes available. Expenditures relating to
ongoing environmental programs are charged against operations as incurred or
capitalized and amortized depending on their relationship to future earnings.
(l) Income taxes
Future income taxes are recorded using the asset and liability method. Under the
asset and liability method, future tax assets and liabilities are recognized for
the future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Future tax assets and liabilities are measured using the
enacted or substantively enacted tax rates expected to apply when the asset is
realized or the liability settled. The effect on future tax assets and
liabilities of a change in tax rates is recognized in income in the period that
substantive enactment or enactment occurs. To the extent that the Company does
not consider it more likely than not that a future tax asset will be recovered,
it provides a valuation allowance against the excess.
(m) Revenue recognition
Revenue, based upon prevailing metal prices, is recorded in the financial
statements when title to the PGMs transfers to the customer. The estimated
revenue is recorded based on metal prices and exchange rates on the date of
shipment and is adjusted at each balance sheet date to the metal prices on those
dates. The actual amounts will be reflected in revenue upon final settlement,
which is three and five months after the date of shipment. These adjustments
reflect changes in metal prices and changes in qualities arising from final
assay calculations.
(n) Stock-based compensation
The Company accounts for stock-based compensation using the Black-Scholes fair
value option pricing model. Stock-based compensation is accrued and charged to
operations, with a corresponding credit to contributed surplus, on a straight-
line basis over the vesting period. If and when the stock options are ultimately
exercised, the applicable amounts of contributed surplus are transferred to
share capital.
(o) Income (loss) per share
Basic income (loss) per share is computed by dividing the net income (loss)
available to common shareholders by the weighted average number of shares
outstanding during the reporting year. Diluted income (loss) per share is
computed similar to basic income (loss) per share except that the weighted
average shares outstanding are increased to include additional shares for the
assumed exercise of stock options and warrants, if dilutive. The number of
additional shares is calculated by assuming that outstanding stock options and
warrants were exercised and that the proceeds from such exercises were used to
acquire common stock at the average market price during the reporting years.
(p) Employee future benefits
The cost of retirement benefits and other benefit obligations are recognized
over the period in which the employees render services in return for the
benefits. The Company has a defined contribution retirement plan for its South
African based employees. The pension plans are funded by payments from the
employees and by the relevant group companies and charged to income as incurred.
(q) Recent accounting pronouncements
Recent accounting pronouncements that have been issued but are not yet
effective, and which may affect the Company`s financial reporting are summarized
below:
In January 2005, the Canadian Institute of Chartered Accountants (`CICA`) issued
Handbook Section 3855, `Financial Instruments -- Recognition and Measurement.`
This standard prescribes when a financial asset, financial liability or non-
financial derivative is to be recognized on the balance sheet and at what
amount, requiring fair value or cost-based measures under different
circumstances. The standard also specifies how financial instrument gains and
losses are to be presented. The Company will adopt this Section on July 1, 2007.
The effect on the Company`s consolidated financial statements is not expected to
be material.
In January 2005, the CICA issued Handbook Section 1530, `Comprehensive Income.`
This Section introduces new standards for reporting and presenting comprehensive
income, which is the change in equity (net assets) of a company during a
reporting period from transactions and other events and circumstances from non-
owner sources. It includes all changes in equity during a period except for
changes resulting from investments by owners and distributions to owners. The
Company will adopt this Section on July 1, 2007. Financial statements for prior
periods will be required to be restated for certain comprehensive income items.
The effect on the Company`s consolidated financial statements is not expected to
be material.
In January 2005, the CICA issued Handbook Section 3251, `Equity,` which
establishes standards for the presentation of equity and changes in equity
during a reporting period. The Company will adopt this Section on July 1, 2007.
The adoption of this new guidance is not expected to have a material impact on
the Company`s financial position, results of operations or cash flows.
In December 2006, the CICA issued Handbook Sections 3862, `Financial
Instruments -- Disclosures` and 3863, `Financial Instruments -- Presentation,`
which will replace Section 3861, Financial Instruments -- Disclosure and
Presentation.` The new disclosure standard increases the emphasis on the risks
associated with both recognized and unrecognized financial instruments and how
those risks are managed. The new presentation standard carries forward the
former presentation requirements. The Company will be required to adopt these
Sections on July 1, 2008 and does not expect the effect on its consolidated
financial statements to be material.
In December 2006, the CICA issued Handbook Section 1535, `Capital Disclosures,`
This Section establishes standards for disclosing information about an entity`s
capital and how it is managed. The Company will adopt this Section on July 1,
2007. The adoption of this Section is not expected to have a material impact on
the Company`s consolidated financial statements.
- In January 2006, the CICA Accounting Standards Board (`AcSB`) adopted a
strategic plan for the direction of accounting standards in Canada. As part
of that plan, accounting standards in Canada for public companies are
expected to converge with International Financial Reporting Standards
(`IFRS`) by the end of 2011. The Company continues to monitor and assess
the impact of convergence of Canadian GAAP and IFRS.
- In July 2006, the CICA issued section 1506, `Changes in Accounting Policies
and Estimates, and Errors` to replace the existing Section 1506,
`Accounting Changes`. This section applies to fiscal years beginning on or
after January 1, 2007, and is therefore effective for the Company in fiscal
2008.
3. Acquisitions and merger
(a) Acquisitions in fiscal 2006
During the year ended June 30, 2006, the Company entered into an agreement to
acquire the shareholdings of three private companies, the combined assets of
which represent a 69% interest in Barplats Investments Limited (`Barplats`), a
PGM producing company in South Africa. The consideration paid by the Company was
the issuance of 288,585,122 common shares of the Company and a cash payment of
$24.7 million.
As a condition of closing, the Company completed an equity financing of Cdn$150
million ($133.9 million), assumed an outstanding convertible loan to Barplats of
approximately $6.2 million and purchased a R108 million ($17.5 million) loan
that was secured by a pledge of 100 million Barplats shares.
The Company`s common shares issued as part of the consideration paid in the
acquisition of the three private companies (who had as their sole assets the
interest in Barplats) have been valued at a price of $1.19
(Cdn$1.33) per common share being the average common share price of the Company
two days before, the day of and the two days after the date of announcement.
The business combination has been accounted for as a purchase transaction with
the Company being identified as the acquirer. The allocation of the purchase
price based on the consideration paid and the preliminary estimate of the fair
value of Barplats` net assets acquired is as follows:
$
Purchase price
288,585,122 Eastern Platinum common shares 342,596
Cash 24,733
Acquisition costs 4,086
------------------------------------------------------
371,415
------------------------------------------------------
------------------------------------------------------
Net assets acquired
Cash and cash equivalents 6,433
Non-cash working capital (201)
Property, plant and equipment 525,943
Refining contract 17,939
Other non-current assets 479
Short-term debt (34,846)
Asset retirement obligation (3,825)
Future income tax liabilities (130,030)
Non-controlling interests (10,477)
------------------------------------------------------
371,415
------------------------------------------------------
------------------------------------------------------
For the purposes of these consolidated financial statements, the purchase
consideration has been allocated to
the fair value of assets acquired and liabilities assumed based on management`s
best estimates and taking into
account all available information at the time of acquisition as well as
applicable information at the time
these consolidated financial statements were prepared.
(b) Acquisitions in fiscal 2007
On May 28, 2007 the Company acquired another 5% of Barplats from the minority
shareholders. In connection with the acquisition Eastplats issued 17,272,594
common shares of the Company and paid R12.3 million ($1.7 million)to the
minority shareholders of Barplats. Following the acquisition, Eastplats owns 74%
of Barplats, with the balance of 26% held by Barplats` Black Economic
Empowerment (`BEE`) partner, Gubevu.
Prior to June 2007, the Company (through a wholly-owned subsidiary) purchased a
loan held by Nedbank Capital in favour of Gubevu, Barplats` minority shareholder
and BEE partner, under the same commercial terms and conditions as the Nedbank
Capital loan. The debt was purchased for $8.9 million and is a demand note with
interest accruing at the floating South African prime rate (June 30, 2007 -
13.%). On June 15, 2007 the Company acquired 42.39% of the shares of Gubevu, for
R43 million, and in addition the Company settled certain debt of Gubevu
totalling R21.6 million. The Company also entered into a four-year put and call
option agreement with the same shareholders of Gubevu over the balance of the
shares of Gubevu. Under the terms of the agreement either party may compel the
Company to purchase further tranches of 28.83% each of the shares of Gubevu at
any time following March 1, 2009 and March 1, 2010 respectively. The purchase
price for each tranche is R50 million, and may be satisfied at the election of
the Company by the issuance of shares of the Company valued at the then market
price. There are a number of conditions that must be met for either the puts or
the calls to be exercised subject to maintaining BEE compliance.
The Company also entered into an agreement to pay an unrelated third party an
amount which existed in the underlying the Gubevu agreements, whereby the
Company paid R37 million ($5.2 million) and issued a promissory note for three
additional payments:
- R27.7 million ($3.9 million) due May 4, 2008;
- R27.7 million ($3.9 million) due May 4, 2009; and
- R30.8 million ($4.4 million) due upon certain corporate reorganization
events.
Based upon the fact that these future payments are based in rand, the Company
has discounted these future payments using a rate of 14.5% which represents the
Company`s borrowing rate in South Africa. The future payments due May 4, 2008
and 2009 were recorded as liabilities of Gubevu at the date of acquisition.
Following these acquisitions, the Company owns directly and indirectly 85% of
Barplats.
$
Purchase price
Acquisition of 5% interest in Barplats
17,272,460 Eastern Platinum common shares 29,019
Cash 1,760
Acquisition of 42.39% interest in Gubevu
Cash 8,929
Promissory note 11,864
Assumption of debt 34,856
Acquisition costs 283
----------------------------------------------------
86,711
----------------------------------------------------
----------------------------------------------------
Net assets acquired
Cash and cash equivalents 1,030
Non-cash working capital (515)
Property, plant and equipment 152,610
Refining contract 4,802
Short term debt (11,428)
Asset retirement obligation (889)
Future income tax liabilities (18,310)
Non-controlling interests (40,589)
----------------------------------------------------
86,711
----------------------------------------------------
(c) On November 1, 2004, the Company announced that it had entered into a
series of agreements to merge with Elgin Resources Inc. (`Elgin`) and acquire a
controlling interest in PGM mineralization rights at the Spitzkop Platinum
Project (the `Spitzkop PGM Project`) in Mpumalanga Province, South Africa. The
Company entered into a share purchase agreement whereby it acquired a 74%
shareholding in Spitzkop Platinum (Pty) Ltd. (`Spitzplats`)through the
acquisition of a 100% interest in Eastern Platinum Holdings Ltd., which owns a
74% interest in Spitzplats. The remaining 26% interest in Spitzplats is held by
a syndicate of investors (the `Spitzkop Syndicate`) and its South African BEE
partner, Afriminerals (Pty) Ltd.
On August 22, 2006, the Company acquired a 49% interest in Afriminerals (Pty)
Ltd. (`Afriminerals`) which holds a 26% shareholding in Spitzplats. The total
consideration paid was $5.5 million and 3,000,000 shares of the Company, with
$5.0 million and the shares being paid to the Spitzkop consortium in order to
retire the debt owed to them by Afriminerals for its 26% interest in Spitzplats.
Upon completion of the transaction, Afriminerals owns its 26% shareholding in
Spitzplats free and clear with no debts and/or obligations. As part of the
overall transaction, the Company has an obligation to either finance, or
organise, project financing for Afriminerals for its share of capital costs for
the development of a mine at Spitzkop; such financing will be
repaid from the proceeds of initial production attributable to Afriminerals. On
March 20, 2007 the Company purchased the 1% net smelter royalty held by Rhodium
Reef Royalties on all PGM recovered from the Spitzkop PGM project. The
consideration was $6.5 million and 12 million common shares of the Company.
The Company also holds a 50:50 joint venture with Spitzplats to explore, develop
and operate the Spitzkop PGM Project.
The agreements culminated in the consolidation of the rights to the Spitzkop PGM
Project into the Company. The Company entered into an agreement to earn a 50%
joint venture interest with Spitzplats to explore, develop and operate the
Spitzkop PGM Project. The Company has the following conditions to complete:
(1) incurring R30.0 million (approximately $4.3 million) of expenditures on the
Spitzkop PGM Project, within the period ending November 24, 2008 to advance the
project through to a bankable feasibility study (approximately $2.2 million
incurred to June 30, 2007);
(2) the Company will be the operator of the joint venture; and
(3) the Company has equal representation on the management committee of the
joint venture.
The Company currently acts as the operator of both the Mareesburg Platinum
Project Joint Venture (`Mareesburg JV`) and Spitzkop PGM Project, both located
on the Eastern Limb of the Bushveld Complex.
4. Receivables
2007 2006
--------------------------------------------------------
$ $
Trade receivables, net of advances 21,609 11,546
Other receivables 56 1,056
Refundable taxes 605 100
Prepaid expenses 133 240
--------------------------------------------------------
22,403 12,942
--------------------------------------------------------
--------------------------------------------------------
The trade receivables and refundable taxes are due to
the increase in PGM ounces sold under the terms of the
off-take agreements.
5. Inventories
2007 2006
--------------------------------------------------------
$ $
Consumables 2,801 696
Ore and concentrate 1,850 980
--------------------------------------------------------
4,651 1,676
--------------------------------------------------------
--------------------------------------------------------
The Company has increased its consumables inventory to support the increased
production and development
activities at the mine.
6. Property, plant and equipment
2007
-------------------------------------------------------------
Accumulated
depreciation/ Net book
Cost depletion value
-------------------------------------------------------------
$ $ $
Mining plant and equipment 135,202 6,766 128,436
Mineral properties
Crocodile River Mine (a) 133,616 4,438 129,178
Kennedy`s Vale Project (b) 362,510 - 362,510
Spitzkop PGM Project (c) 111,112 - 111,112
Mareesburg JV (d) 25,886 - 25,886
Other property, plant and
equipment 205 34 171
-------------------------------------------------------------
768,531 11,238 757,293
-------------------------------------------------------------
-------------------------------------------------------------
2006
-------------------------------------------------------------
Accumulated
depreciation/ Net book
Cost depletion value
-------------------------------------------------------------
$ $ $
Mining plant and equipment 73,406 1,166 72,240
Mineral properties
Crocodile River Mine (a) 104,255 682 103,573
Kennedy`s Vale Project (b) 271,969 - 271,969
Spitzkop PGM Project (c) 65,974 - 65,974
Mareesburg JV (d) 24,377 - 24,377
Other property, plant and
equipment 96 27 69
-------------------------------------------------------------
540,077 1,875 538,202
-------------------------------------------------------------
-------------------------------------------------------------
(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 Bushveld Complex. The Maroelabult and
Zandfontein sections are currently in production with the Crocette and
Kaarespruit deposits 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
The Company holds directly and indirectly approximately 93% interest in the
Spitzkop PGM Project (Note 3 (c))following transfer of the mineral rights of the
Spitzkop PGM Project to Spitzplats.
(d) Mareesburg JV
The Company holds directly and indirectly a 75.5% interest in the Mareesburg
project.
7. Short-term debt
Short-term debt consists of the following:
2007 2006
-----------------------------------------------------------------------
$ $
Loan from Nedbank Capital maturing on July 31, 2006
(repaid August 1, 2006) for $16.5 million (R106.9 million),
secured by mortgage bonds over various property,
plant and equipment with net book value of $20.5 million
(R132.9 million), interest at the South African prime
lending rate (June 30, 2007 - 13%), payable monthly
and principal payable at the end of the loan term - 14,792
Loan from Impala Platinum Limited maturing on June 10,
2007 for $5.6 million (R36.2 million), secured by mortgage
bonds over various property, plant and equipment
with net book value of $7.4 million (R47.7 million), interest
at Johannesburg Interbank Acceptance Rate plus 3%
(June 30, 2007 - 11.6%), payable monthly and principal
payable at the end of the loan term - 5,013
Loan from Eagle Worldwide Investments, Limited,
due on demand and maturing in December 2007
for $6.0 million secured by mortgage
bonds over various property, plant and equipment
with net book value of $20.5 million (R132.9 million),
interest at LIBOR plus 4% (June 30, 2007 - 9.4%),
is capitalized to the loan; interest and principal payable
before the end of the loan term - 5,962
-----------------------------------------------------------------------
- 25,767
-----------------------------------------------------------------------
-----------------------------------------------------------------------
8. 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 June 30, 2007 is R18
million ($2.7 million and $3.3 million in 2006). The undiscounted value of this
liability is R52 million ($8.3 million and $7.4 million in 2006). An accretion
expense component of approximately $0.7 million (2006 - $0.1 million) has been
charged to operations in 2007 to reflect an increase in the carrying amount of
the asset retirement obligation which has been determined using a discount rate
of 14.5% . Changes to the asset retirement obligation during the year are as
follows:
$
Balance June 30, 2005 -
Additions during the year upon acquisitions (Note 3 (a)) 3,825
Foreign exchange movement (589)
Accretion 47
----------------------------------------------------------------
Balance, June 30, 2006 3,283
Additions during the year upon acquisitions (Note 3 (b)) 889
Foreign exchange movement 200
Revision in estimates (2,343)
Accretion 672
----------------------------------------------------------------
Balance, June 30, 2007 2,701
----------------------------------------------------------------
----------------------------------------------------------------
9. 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) Issued
Number of
common Contributed
shares Amount surplus
-----------------------------------------------------------------------
$ $
Balance, June 30, 2005 84,793,863 89,166 3,061
Released from trust pursuant
to completion of Eastern Platinum
Holdings Ltd. acquisition 18,750,000 21,422 -
Exercise of warrants 1,100,000 1,205 -
Shares issued for cash (1) 120,000,000 133,890 -
Issued for acquisition of
indirect interest in Barplats
(Note 3 (a)) 288,585,122 342,596 -
Stock-based compensation - - 4,587
Dilution loss on issuance of
shares by a subsidiary - - (849)
-----------------------------------------------------------------------
Balance, June 30, 2006 513,228,985 588,279 6,799
Issued for acquisition of
interest in Afriminerals (Note 3 (c)) 3,000,000 3,548 -
Issued for acquisition of
1% NSR in Spitzkop (Note 3 (c)) 12,000,000 21,062 -
Shares issued for cash (2) 105,921,095 188,894 -
Issued on acquisition of additional
5% interest in Barplats (Note 3 (a)) 17,272,594 29,020 -
Exercise of warrants 13,318,184 26,032 -
Exercise of options 3,037,500 8,268 (3,318)
Stock-based compensation - - 14,416
-----------------------------------------------------------------------
Balance, June 30, 2007 667,778,358 865,103 17,897
-----------------------------------------------------------------------
-----------------------------------------------------------------------
1) The agent was paid a cash commission of Cdn$9.0 million.
2) The agent was paid a cash commission of 5%.
(c) Stock options
The Company has an incentive plan (`Plan`) under which options to purchase
common shares may be granted to its directors, officers, employees and
others at the discretion of the Board of Directors. Under the terms of the
Plan, the aggregate number of common shares, which may be reserved for
issuance under the Plan shall not exceed 10% of the outstanding shares.
Each option granted shall be for a term not exceeding ten years from the
date of being granted unless otherwise approved by the Board of Directors
and is exercisable, in whole or in part, at any time during the term of the
relevant option. The option exercise price is set at the date of the grant
and cannot be less than the closing sale price of the Company`s common
share on the Toronto Stock Exchange on the day immediately preceding the
day of the grant of the option.
The changes in stock options were as follows:
2007 2006
------------------------------------------------------------------
Weighted Weighted
average average
Number of exercise Number of exercise
options price options price
------------------------------------------------------------------
Cdn$ Cdn$
Balance outstanding,
beginning of period 17,180,000 1.64 4,605,000 1.48
Options granted 23,487,500 1.82 13,330,000 1.70
Options exercised (3,037,500) 1.66 - -
Options expired/cancelled (5,180,000) 1.70 (755,000) 1.35
------------------------------------------------------------------
Balance outstanding,
end of period 32,450,000 1.76 17,180,000 1.64
The following table summarizes information concerning outstanding and
exercisable options at June 30, 2007:
Options Options Exercise Expiry
outstanding exercisable price date
Cdn$
---------------------------------------------------
75,000 75,000 1.70 January 14, 2008
625,000 625,000 0.56 November 5, 2008
187,500 187,500 1.00 August 26, 2009
8,075,000 7,575,000 1.70 May 24, 2011
350,000 350,000 1.70 November 27, 2011
23,137,500 23,137,500 1.82 March 7, 2012
---------------------------------------------------
32,450,000 31,950,000
---------------------------------------------------
(d) Share purchase warrants
The changes in warrants were as follows:
2007 2006
---------------------------------------------------------------
Weighted Weighted
average average
Number of exercise Number of exercise
warrants price warrants price
---------------------------------------------------------------
Cdn$ Cdn$
Balance outstanding,
beginning of period 87,999,370 1.89 29,199,374 2.05
Warrants issued - - 59,999,996 1.80
Warrants exercised (13,318,184) 2.08 (1,100,000) 1.23
Warrants expired (3,469,618) 2.35 (100,000) 1.20
---------------------------------------------------------------
Balance outstanding,
end of period 71,211,568 1.83 87,999,370 1.89
---------------------------------------------------------------
The following table summarizes information concerning outstanding warrants at
June 30, 2007:
Number of Exercise Expiry
warrants price date
----------------------------------------
Cdn$
11,356,054 2.00 April 22, 2008
59,855,514 1.80 March 28, 2009
----------------------------------------
71,211,568
----------------------------------------
----------------------------------------
(e) Stock-based compensation
The fair value of each option granted is estimated at the time of the grant
using the Black-Scholes option
pricing model with weighted average assumptions for grants as follows:
2007 2006
------------------------------------------------------------------
Risk-free interest rate 3.90% 3.95%
Expected life 3 years 3 years
Annualized volatility 52% 46%
Dividend rate 0% 0%
Weighted average grant date fair
value per option Cdn$0.61 Cdn$0.43
10. Cumulative translation adjustment
2007 2006
----------------------------------------------------------------------
$ $
Balance, beginning of year (52,754) -
Effect of exchange rate variation on translation
of net assets of self-sustaining operation 5,755 (60,793)
Effect of change in reporting currency 23,975 8,039
----------------------------------------------------------------------
Balance, end of year (23,024) (52,754)
----------------------------------------------------------------------
----------------------------------------------------------------------
11. Income taxes
The provision for income taxes reported differs from the amounts computed by
applying the cumulative Canadian federal and provincial income tax rates to the
loss before tax provision due to the following:
2007 2006
---------------------------------------------------------------------
$ $
Statutory tax rate 34.12% 34.12%
---------------------------------------------------------------------
Recovery of income taxes computed at statutory
rates (3,138) (1,505)
Difference in tax rates between South Africa and
Canada (356) 80
Items not deductible for income tax purposes 3,084 563
Benefit of tax losses (recognized) not recognized (1,592) 598
---------------------------------------------------------------------
Recovery of future income taxes (2,002) (264)
---------------------------------------------------------------------
---------------------------------------------------------------------
The approximate tax effect of each type of temporary difference that gives rise
to the Company`s future income tax assets are as follows:
2007 2006
---------------------------------------------------------------------
$ $
Future income tax assets
Non-capital loss carryforwards 2,724 1,606
Share issue costs 4,573 2,994
Other 1,077 -
---------------------------------------------------------------------
Net future income tax assets 8,374 4,600
Less valuation allowance (7,371) (4,600)
---------------------------------------------------------------------
Net future income tax assets 1,003 -
Future income tax liabilities
Accumulated cost base differences on assets 133,913 125,431
Deferred sales 11,573 -
---------------------------------------------------------------------
145,486 125,431
---------------------------------------------------------------------
Net future income tax liability - short-term 11,573 -
Net future income tax liability - long-term 132,910 125,431
---------------------------------------------------------------------
---------------------------------------------------------------------
At June 30, 2007, the Company has non-capital losses of approximately Cdn$9.5
million available to apply
against future Canadian income for tax purposes. The non-capital losses will
expire as follows:
Cdn$
2008 239
2009 1,115
2013 272
2014 1,595
2015 916
2016 57
2026 5,276
--------------------------------------------------------------------
9,470
--------------------------------------------------------------------
--------------------------------------------------------------------
The Company has capital losses of approximately $1.3 million available to apply
against future capital gains.
The Company is subject to assessments by various taxation authorities which may
interpret tax legislations and tax filing positions differently from the
Company. The Company provides for such differences when it is likely that a
taxation authority will not sustain the Company`s filing position and the amount
of the tax exposure can be reasonably estimated. As at June 30, 2007, no
provisions have been made in the financial statements for any estimated tax
liability.
12. Non-controlling interests
During fiscal 2006, a non-controlling interest arose as a result of the
Barplats acquisition. On April 28, 2006 the Company acquired a 69.7%
indirect interest in Barplats. This interest decreased to 69.0% at
June 30, 2006 following the issuance of additional shares by Barplats to
non-controlling interests. This dilution of the Company`s interest gave rise
to a loss of approximately $1.0 million which has been recognized in
shareholders` equity for the year ended June 30, 2006.
During fiscal 2007, non-controlling interest was decreased following
the acquisition of an additional 5% interest in Barplats and increased
following the acquisition of a 42.39% interest in Gubevu (Note 3 (b)).
As Gubevu has been determined to be a VIE, as primary beneficiary, the
Company has measured the non-controlling interest in Gubevu at fair value.
The non-controlling interests are comprised of the following:
2007
-----------------------------------------------------------------------
$
Balance, June 30, 2005 -
Non-controlling interests` share of net assets at
acquisition date (Note 3 (a)) 10,477
Non-controlling interests` share of gain in Barplats 43
Increase in non-controlling interest arising from
share issuances in Barplats 3,026
-----------------------------------------------------------------------
Balance, June 30, 2006 13,546
Non-controlling interests` share of income in Barplats 3,078
Non-controlling interests` share of contributed surplus arising
from stock options and cumulative translation adjustment
for the year (5,564)
Removal of Barplats minority interest (11,060)
Non-controlling interests` share of net assets at
acquisition date , net of advances to Gubevu (Note 3(b)) 24,502
-----------------------------------------------------------------------
Balance June 30, 2007 24,502
-----------------------------------------------------------------------
-----------------------------------------------------------------------
13. Financial instruments
The fair values of cash and cash equivalents, short-term investments,
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 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 June 30, 2007.
The Company is exposed to fluctuations in interest rates, foreign currency
exchange rates and commodity prices. The Company has not entered into any
derivative financial instruments to manage exposure to fluctuations in these
rates.
The Company has a cash position (including temporary investments) of $204.5
million, which is invested in highly liquid, fully guaranteed, bank-sponsored
instruments. The Company is not exposed to financial
instruments involving the US residential markets or mortgages or asset backed
commercial paper.
14. Related party transactions
(a) The Company incurred the following expenses in the normal course of
operations, on a cost recovery basis, with companies and individuals
related by way of directors and/or officers in common:
2007 2006
------------------------------------------------------------------
$ $
Consulting fees 353 1,056
Directors` fees 194 97
Management fees 836 129
Rent 336 62
Rent includes a lease cancellation penalty of Cdn$ 312 ($276) paid to a company
controlled by an officer of the Company as a result of the Company moving to new
premises.
(b) Amounts due to related parties are unsecured, non-interest bearing and due
on demand. Accounts payable at June 30, 2007 included $1.3 (2006 - $4.5)
which were due to companies related by way of directors in common.
15. Commitments
The Company has committed to capital expenditures on projects of approximately
R209.8 million (Cdn$28.6 million) as at June 30, 2007.
16. Segmented information
(a) Operating segment - The Company`s operations are primarily directed towards
the acquisition, exploration and production of PGMs in South Africa.
(b) Geographic segments - The Company`s assets, revenues and expenses by
geographic areas for the years ended June 30, 2007 and 2006 are as follows:
2007
-------------------------------------------------------------
South Africa Canada Total
-------------------------------------------------------------
$ $ $
Property, plant and equipment 757,184 109 757,293
-------------------------------------------------------------
Total assets 810,596 198,084 1,008,680
-------------------------------------------------------------
-------------------------------------------------------------
Property, plant and
equipment expenditures 62,894 103 62,997
-------------------------------------------------------------
Revenues 101,205 - 101,205
Production costs (69,467) - (69,467)
Depletion and depreciation (8,116) (7) (8,123)
Expenses (11,337) (4,642) (15,979)
Stock based compensation - (14,416) (14,416)
Interest income 1,845 3,063 4,908
Interest expense (5,427) - (5,427)
Foreign exchange (loss) gain (1,739) (158) (1,897)
-------------------------------------------------------------
Loss before income taxes
and non-controlling interests 6,964 (16,160) (9,196)
-------------------------------------------------------------
-------------------------------------------------------------
2006
-------------------------------------------------------------
South Africa Canada Total
-------------------------------------------------------------
$ $ $
Property, plant and equipment 538,190 12 538,202
-------------------------------------------------------------
Total assets 573,929 114,495 688,424
-------------------------------------------------------------
-------------------------------------------------------------
Property, plant and
equipment expenditures 5,546 - 5,546
-------------------------------------------------------------
Revenues 12,668 - 12,668
Production costs (7,770) - (7,770)
Depletion and depreciation (2,094) - (2,094)
Expenses (2,590) (3,039) (5,629)
Stock based compensation - (4,587) (4,587)
Interest income - 1,893 1,893
Interest expense (855) - (855)
Foreign exchange (loss) gain (733) 3,007 2,274
-------------------------------------------------------------
Loss before income taxes
and non-controlling interests (1,374) (2,726) (4,100)
-------------------------------------------------------------
-------------------------------------------------------------
For the year ended June 30, 2007 and 2006, 100% of production revenue was from
two customers and as at June 30, 2007, 90% of trade receivables was from two
customers.
MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
Year ended June 30, 2007
This portion of the Quarterly and Annual Report provides Management`s Discussion
and Analysis (`MD&A`) of the financial condition and results of operations to
enable the reader to assess material changes in financial condition and results
of operations of Eastern Platinum Limited (`Eastplats` or the `Company`) as at,
and for the year ended, June 30, 2007 in comparison to the prior year. This MD&A
should be read in conjunction with the audited consolidated financial statements
for the year ended June 30, 2007 and supporting notes that have been prepared in
accordance with Canadian Generally Accepted Accounting Principals (Canadian
GAAP). Effective July 1, 2006, the Company changed its reporting currency to the
U.S. dollar. The change in reporting currency is to better reflect the company`s
business activities and to improve investors` ability to compare the Company`s
financial results with other publicly traded businesses in the mining industry.
Furthermore, the international currency of the mining industry is the U.S.
dollar. Prior to July 1, 2006, the Company reported its annual and
quarterly consolidated balance sheets and the related consolidated statements of
operations and shareholders` deficit and cash flows in the Canadian dollar. The
related financial statements and corresponding notes prior to July 1, 2006 have
been restated to the U.S. dollar for comparison to the 2006 financial results.
The financial statements have been translated into the reporting currency using
the current rate method. Under this method, the statement of operations and cash
flow items for each year are translated into the reporting currency using the
average rate in effect for the period, and assets and liabilities are translated
using the exchange rate at the period end. All resulting exchange differences
are reported as a separate component of shareholders` equity titled Cumulative
Translation Adjustment.
All monetary amounts are in US dollars unless otherwise specified.
Additional information relating to the Company is available on SEDAR at
www.sedar.com. This MD&A contains forward looking statements that are subject to
risk factors set out in the cautionary note contained herein.
This MD&A has been prepared as of September 23, 2007.
1. Overview
Eastplats is a growing platinum group metal (`PGM`) producer engaged in the
acquisition, development and mining of PGM with properties located in various
provinces 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 70% of the world`s PGM supply.
The Company`s strategy is to provide its stakeholders with superior returns from
assets being developed and mined within the PGM mining sector. The Company has
not hedged or sold forward any future PGM production. The Company continues its
process of optimizing orebody development through traditional cost effective
mining methods that place a premium on a safe work environment.
The Company`s assets comprise of a direct and indirect 85% interest in Barplats
Investments Limited (`Barplats`) whose main assets are the PGM producing
Crocodile River Mine (`CRM`) located on the western limb
of the BC and the Kennedy`s Vale Project located on the eastern limb of the BC.
The Company also has a 75.5% direct and indirect interest in Mareesburg Platinum
JV (`Mareesburg`) and a direct and indirect 93% interest in Spitzkop PGM Project
(`Spitzkop`) both located on the eastern limb of the BC.
2. Safety Results
During the quarter, CRM reported six lost time injuries (previous quarter three
lost time injuries) resulting in a Lost Time Injury Frequency Rate (`LTIFR`) of
3.68 (previous quarter 3.22). For the year ended June 30, 2007 the Company`s
LTIFR of 2.97 compares well against some of the other platinum producers in
South Africa, whose average LTIFR was above 8.00 according to information
compiled by the Bushveld Safety Forum.
In March 2007, there was a fatality at CRM, when a contract miner became
entangled in rock drill equipment.
3. Summary of Quarterly Results
The table below presents selected financial data for the Company`s eight most
recently completed quarters:
---------------------------------------------------------
June 30, Mar 31, Dec 31, Sept 30,
US$`000 2007 2007 2006 2006
-----------------------------------------------------------------------
$ $ $ $
Financial results
Revenue 23,146 30,443 24,917 22,699
Net income (loss) (12,339) (10,844) 11,321 1,590
Basic earnings
(loss) per share (0.02) (0.02) 0.02 0.00
Expenditures on
mineral properties 11,609 32,096 13,867 5,425
Balance sheet data
Cash and short term
deposits 204,498 50,646 60,662 82,174
Property, plant
and equipment 757,293 607,864 586,604 526,538
Total assets 1,008,680 717,553 708,620 659,381
-----------------------------------------------------------------------
--------------------------------------------------
June 30, Mar 31, Dec 31, Sept 30,
US$`000 2006 2006 2005 2005
-----------------------------------------------------------------------
$ $ $ $
Financial results
Revenue 12,605 15 36 12
Net income (loss) (6,619) (713) 1,032 2,422
Basic earnings
(loss) per share (0.02) (0.01) 0.01 0.03
Expenditures on
mineral properties 5,704 305 205 337
Balance sheet data
Cash and short term
deposits 120,216 21,433 21,179 19,393
Property, plant
and equipment 538,202 86,933 86,359 53,091
Total assets 688,424 111,580 110,283 73,481
-----------------------------------------------------------------------
The table below presents selected production data for the Company`s five most
recently completed quarters:
-----------------------------------------------------------------------
June 30, Mar 31, Dec 31, Sept 30, June 30,
Production 2007 2007 2006 2006 2006
-----------------------------------------------------------------------
Ounces produced 25,111 26,807 25,873 22,666 12,553
Run of Mine Tons 244,275 211,830 209,978 194,405 134,018
Total tons processed 369,453 415,112 351,045 287,601 178,859
Stoping Units (m2) 35,315 26,441 27,771 30,054 15,530
Development meters 4,807 3,687 2,438 2,351 741
-----------------------------------------------------------------------
4. Fourth Quarter Review
Eastplats recorded revenue of $23.1 million for the fourth quarter ended June
30, 2007 (`Q4-07`). Results for the quarter included:
- The Company made substantial progress in the ongoing underground
development of CRM. On reef ore reserve development in the quarter
increased significantly to 1,767 metres (previous year same quarter 278
metres). Underground development increased to 4,807 metres during the
quarter (previous year same quarter 463 metres)which is integral in
generating additional mineable reserves to support continued production
build up at CRM.
- Production and sales of 25,111 ounces of PGM, a 100% increase over previous
year same quarter of 12,533 ounces.
- Operating cash costs of $702/ounce, in line with previous quarter of
$704/ounce.
- The average monthly mining rate during the fourth quarter of fiscal 2007
increased to 81,400 tonnes per month (52,250 tonnes per month in previous
year same quarter).
- Revenues of $23.1 million, a 83% increase over previous year same quarter
of $12.6 million.
- On May 11, the Company closed an equity fund raising for gross proceeds of
Cdn $201.2 million ($180.7 million).
- On May 18, 2007 the Company completed its acquisition of Barplats shares
thereby increasing the Company`s direct and indirect interest in Barplats
from 69% to 74%.
- On June 12, 2007 the Company completed its investment acquiring 42.39% of
the shares and the assumption of outstanding lender obligations of Gubevu
Consortium Investment Holdings (Proprietary) Limited (`Gubevu`), which
holds 26% of the shares of Barplats. The Company now has a direct and
indirect 85% investment in Barplats.
- At June 30, 2007 the Company had a cash position (including temporary
investments) of $204.5 million which is invested in highly liquid, fully
guaranteed, bank sponsored instruments. The Company is not exposed to
financial instruments involving the US residential property markets or
mortgages.
5. Results of Operations for the three and twelve month periods ended June 30,
2007
----------------------------------------------------------------------
Three Months ended Twelve Months ended
June 30 June 30
2007 2006 2007 2006 2005(5)
Production 5 PGE
+ Au oz(1) 25,111 12,533 100,456 12,533 -
Basket Price 1,322 1,137 1,190 1,137 -
Realized Basket
Price per oz(2) 1,113 1,005 999 1,005 -
US$ `000`s
Total Revenue 23,146 12,605 101,205 12,668 -
Total Cash Costs(3) 17,628 7,770 67,205 7,770 -
Depreciation and
Depletion (237) 2,079 8,123 2,094 -
Total Production
Costs 18,154 9,849 77,590 9,864 -
EBITDA(Loss)(4) (408) 800 15,759 (731) (1,633)
Loss for
the period (12,339) (6,619) (10,272) (3,879) (1,874)
----------------------------------------------------------------------
1. 5 PGE + Au represent Platinum, Palladium, Rhodium, Ruthenium, Iridium and
Gold
2. Realized Basket Price is the price received under the off-take agreement,
and is net of associated smelter costs and excludes any potential
penalties.
3 Operating Cash Costs is a non-GAAP measure and represents all costs
associated with production and operating development, excluding
amortization, depreciation, depletion and inventory accounting adjustments
4 EBITDA(Loss) - is a non-GAAP measure defined by the Company as Net Income
before interest (income and expense including foreign exchange
gains/losses), accounting for stock based compensation and non-controlling
interests, taxes (income and capital), depreciation and amortization
(including depletion). See EBITDA(Loss) note in section 17 for more
details.
5 Management has not presented financial data for the quarter ending June 30,
2005, as the Company was in a development stage and had no revenues and
therefore it would not be meaningful to the reader. The year ended June 30,
2005, was a fifteen month year due to a change in year end.
6. Review of Financial Results
The Company acquired a 69% indirect interest in Barplats which owns CRM and the
Kennedy`s Vale Project (a separate development property) in April 2006. In May
2007, this interest increased to 74% through the direct acquisition of 5% of the
outstanding shares of Barplats. In June 2007, this interest was increased to
approximately 85% with the Company`s investment in Barplats` BEE partner Gubevu.
Revenues and costs directly attributable to activity at CRM have been the
predominate cause of the changes in the financial results when compared to the
year ended June 30, 2006.
During the year ended June 30, 2007, the Company continued to progress the
development of its Mareesburg,Spitzkop and Rhodium Reefs properties.
For the three months ended June 30, 2007, PGM production/sales were 25,111
ounces and 100,456 ounces for the year ended June 30, 2007 (12,553 for the two
months and year ended June 30, 2006). The increase over previous year and
previous year same quarter is attributable to the improvement in mining at CRM
and the full three months of production in the current year (previous year two
months of production).
For the year ended June 30, 2007, EBITDA was $15.8 million against a net loss of
$(0.7) million for the year ended June 30, 2006 predominately due to the full
year activity of Barplats. The decrease in EBITDA in the current quarter
($(408)) over the previous quarter of $7.7 million is a result of the Company
focusing on the reduction of the chrome content within the concentrate produced.
7. Currency Exchange Exposure
As approximately 90% of the Company`s production and development costs are
denominated in South African Rand (`R` or `Rand`) and 100% of the production
revenue is US dollar based, the Company is exposed to fluctuations in the Rand,
Canadian and US exchange rates. As the Company does not hedge any transactions,
it is exposed to the fluctuations of the Rand, Canadian and US dollars over the
reporting period (and remains exposed to future fluctuations in currency
exchange rates).
Rand and Canadian dollar denominated monetary assets and liabilities are
translated at the period end exchange rate. Gains and losses arising from
foreign currency translation are recognized in the statement of operations and
deficit. Translation gains or losses on the consolidation of the financial
statements of self-sustaining operations are accumulated in the cumulative
translation adjustment balance (`CTA`) on the consolidated balance sheet.
Translation adjustments arise as a result of fluctuations in foreign currency
exchange rates. The change in the CTA for the current year is a result of $5.8
million due to the fluctuation in the exchange rate of the Rand against the US
and Canadian dollars and $24.0 million as a result of translating the financial
statements to US dollars.
8. Operating Results
During the year the Company experienced an increase in the realized revenue per
ounce (net of associated smelter costs) to $1,113/ounce from $999/ounce with an
increase in the commodity pricing but a net decrease in funds settled due the
change in the Rand-US exchange rates.
Operating cash costs have increased over the year on a per ounce basis to
approximately $669/ounce from the previous year $620/ounce due to the
accelerated focus on mine development and specifically on reef development which
increased to 1,767 meters in the quarter ended June 30, 2007 from 278 meters in
the previous year same quarter, which is expensed. Additionally, the Company
experienced an increased application of the chrome penalties under the terms of
one of the Company`s off-take agreements. These penalties have caused the
Company
to focus on the grade of the concentrate produced, over the recovery rate, to
minimize the level of chrome.
The Company made substantial progress in the ongoing underground development of
CRM. Underground development increased to 4,807 metres during the quarter June
30, 2007 (previous quarter 3,687 metres and previous year same quarter 463
meters) which is integral in generating additional mineable reserves to support
the continued production build up at CRM towards the targeted production profile
of 200,0000 tonnes per month and an 18 to 24 month reserve base.
The average monthly mining rate during the fourth quarter of fiscal 2007
increased to 81,400 tonnes per month (from an average 71,600 tonnes per month in
the previous quarter and 52,259 per month in the previous year) at an average
and consistent PGM grade of 4.02 g/t (5PGE+Au).
There was no revenue generated from Mareesburg, Spitzkop or Kennedy`s Vale
properties during the year.
9. Other Costs Amortization
The depreciation and amortization due to Barplats` activities for the current
quarter is a recovery of $(0.2)million, a decrease over the previous quarter of
$2.7 million due to the extended life of mine at CRM ($8.1 million for the year
ended June 30, 2007).
Non-Controlling Interest
Non-controlling interest during the quarter was $0.4 million and $3.1 million
for the year ended June 30, 2007 due to Barplats` non-controlling shareholders
as a result of the additional investment in Barplats and the initial investment
in Gubevu.
Corporate Administration
The general and administrative expenses increased in the current year to $16.0
million from previous year of $5.6 million. The increase over the previous year
are costs associated with managing the South African
operations, severance paid to a past director and officer of the Company in the
first quarter and costs associated with moving the Company offices.
Stock-Based Compensation
In the current quarter the Company expensed $1.8 million (previous quarter $12.4
million with the awarding of stock options to executives, directors and
employees of the Company and $14.4 million for the year ended June 30, 2007) in
stock based compensation. The value of the options has been calculated using the
Black-Scholesoption-pricing model.
Interest Income
Interest income recorded, increased during the current year to $4.9 million over
previous year of $1.9 million due to warrants exercised and the Cdn$201 million
($180.7 million) equity fund raise.
Interest Expense
During the quarter the Company purchased all of the third party loans
outstanding (through the Barplats acquisition). The Company continues to incur
interest expense on equipment financing in South Africa of R2.6 million ($0.4
million) for the year and interest expense on settlement of its concentrate
sales under its off-take agreements of R15.2 million ($2.1 million) for the full
year.
10. Development Activity
Management continued to evaluate development priorities on a continuous basis in
the fourth quarter.
CRM
The Department of Agriculture, Conservation and the Environment has given
authorisation for the proposed mining at Crocette. The Department of Minerals
and Energy (`DME`) has indicated that the new order mining right will be issued
before the end of 2007.
At Kareespruit the previously announced drilling programme has progressed and
during the quarter 6,456 meters were drilled. A total of 9,887 metres have been
drilled in the 17 holes completed to date. Assay results will be reported when
available. A pre-feasibility study has been commissioned on the Kareespruit
property.
Kennedy`s Vale
A draft report on accessing the vertical shafts in order to conduct trial mining
has been received and is under review.
Spitzkop
The drilling programme has been completed and all assays received.
Work on the pre-feasibility study and trial mining is progressing and long lead
items such as mills and mining equipment have been ordered.
Mareesburg
The mining works programme (mine design) has been reviewed to incorporate the
work done in conjunction with Sylvania on the property and consequently the new
order mining right application will be submitted by the end of the first quarter
of fiscal 2008.
-----------------------------------------------------------------------
Eastern Platinum Limited Summary of Mineral Resources
Mineral Resource - UG2
Crocodile River Mine Tonnes (`000) 3PGE+Au (g/t) 3PGE+Au (000oz)
Measured 6,894 4.19 928
Indicated 30,324 4.41 4,303
Inferred 52,482 4.41 7,449
Kennedy`s Vale Tonnes (`000) 5PGE+Au (g/t) 5PGE+Au (000oz)
Indicated 152,100 5.41 26,475
Inferred 70,000 6.17 13,880
Spitzkop Project Tonnes (`000) 5PGE+Au (g/t) 5PGE+Au (000oz)
Measured 37,460 7.70 9,270
Mareesburg Project Tonnes (`000) 3PGE+Au (g/t) 3PGE+Au (000oz)
Measured 8,757 5.38 1,515
Indicated 6,737 2.31 501
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Mineral Resource - Merensky
Spitzkop Project Tonnes (`000) 5PGE+Au (g/t) 5PGE+Au (000oz)
Indicated 47,380 2.43 3,710
----------------------------------------------------------------------
11. Investing Activity
During the quarter the Company`s cash investments were $1.9 million to acquire
an additional 5% of the outstanding shares in Barplats, $10.3 million to
purchase the Eagle Worldwide Investment Company (`Eagle`) debt with Barplats,
$19.6 million to purchase the Eagle debt with Gubevu, and in June 2007 Company
completed its investment acquiring 42.39% of the shares for R43 million ($5.9
million) and the assumption of outstanding obligations of Gubevu for R21.6
million ($3.0 million. The Company has entered into a four year put and call
option with the remaining Gubevu shareholders to purchase the remaining
outstanding shares of Gubevu, in equal two tranches of R50 million each, (with a
number of conditions that must be met to maintain BEE compliance prior to the
puts or calls being exercised).
As part of the Gubevu transaction the Company has entered into an agreement to
pay an unrelated third party an amount that existed in the underlying Gubevu
agreements as an obligation of Gubevu, whereby the Company paid R37 million
($5.2 million) and issued a promissory note for R54.4 million ($7.8 million)
which have been included in the total purchase price of Gubevu.
For the year ended June 30, 2007 the Company has invested $63.0 million in new
capital in South Africa ($52.3 million in new capital at Barplats).
12. Liquidity and Capital Resources
As at June 30, 2007, the Company`s working capital position was $199.0 million
(previous quarter $52.7 million)and its cash and cash equivalents and short-term
investments totalled $204.5 million (previous quarter $50.6 million). The net
increase in the cash balances from previous quarter is a result of the sale of
92.1 million company shares for net proceeds of Cdn$201 million; the exercising
of 8.2 million warrants for net proceeds of Cdn$27.5 million; assumption of
debts $37.4 million, investment in Gubevu $8.9 million and investment in
Barplats $1.8 million.
On May 11, 2007, the Company completed an equity fund raising for gross proceeds
of Cdn $201 million ($180.7 million).
The Company has $204.5 million in cash and liquid short term investments which
are invested in highly liquid, fully guaranteed, bank sponsored instruments. The
Company is not exposed to financial instruments involving the US residential
property markets or mortgages.
13. Contractual Obligations and Commitments
At June 30, 2007 the Company had capital obligations for capital projects in
South Africa as follows:
Operating Capital $ 8.1 million
Development Capital $20.5 million
14. Hedging
The Company does not currently have any commodity or foreign exchange hedging or
other derivative instruments and there are currently no plans to enter into any
such contracts. The Company has not forward sold any of its production. The
Company has not factored any of its trade receivable balances.
15. Critical Accounting Policies and Estimates
In preparing financial statements in accordance with Canadian GAAP, management
is required to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenues and expenses for the period end. Critical
accounting estimates represent estimates that are uncertain and for which
changes in those estimates could materially impact on the Company`s financial
statements.
Management reviews its estimates and assumptions on an ongoing basis using the
most current information available. The following accounting estimates are
critical:
Closure and reclamation costs
Closure and reclamation costs are accrued at their fair value and are estimated
based on the Company`s interpretation of current regulatory requirements.
Depletion and impairment of mineral properties
Mining interests are the most significant assets of the Company and represent
capitalized expenditures related to the development of mining properties and
related plant and equipment and the value assigned to exploration potential on
acquisition. Capitalized costs are depreciated and depleted using either a unit-
of-production method over the estimated economic life of the mine which they
relate to, or using the straight-line method over their estimated useful lives.
The costs associated with mining properties are separately allocated to
exploration potential, reserves and resources and include acquired interests in
production, development and exploration-stage properties
representing the fair value at the time they were acquired. The values of such
mineral properties are primarily driven by the nature and amount of material
interests believed to be contained or potentially contained, in properties to
which they relate.
The Company reviews and evaluates its mining interests for impairment at least
annually or when events or changes in circumstances indicate that the related
carrying amounts may not be recoverable. An impairment is considered to exist if
the total estimated future undiscounted cash flows are less than the carrying
amount of the assets. An impairment loss is measured and recorded based on
discounted estimated future cash flows. Future cash flows are estimated based on
expected future production, commodity prices, operating costs and capital costs.
There are numerous uncertainties inherent in estimating mineral reserves and
mineral resources. Differences between management`s assumptions and market
conditions could have a material effect in the future on the Company`s financial
position and results of operation.
Reserve estimates
The figures for reserves and resources are determined in accordance with
National Instrument 43-101, `Standards of Disclosure for Mineral Projects`,
issued by the Canadian Securities Administrators. There are numerous
uncertainties inherent in estimating mineral reserves and mineral resources,
including many factors beyond the Company`s control. Such estimation is a
subjective process, and the accuracy of any reserve or resource estimate is a
function of the quantity and quality of available data and of the assumptions
made and judgments used in engineering and geological interpretation.
Differences between management`s assumptions including economic assumptions such
as metal prices and market conditions could have a material effect in the future
on the Company`s financial position and results of operation.
Income taxes
Future income tax assets and liabilities are determined based on the temporary
differences between financial reporting and tax bases of assets and liabilities,
as well as for the benefit of losses available to be carried forward to future
years for tax purposes.
Future income tax assets and liabilities are measured using substantively
enacted tax rates and laws that will be in effect when the differences are
expected to reverse. Future income tax assets are recorded on the financial
statements if realization is considered more likely than not.
There were no changes in the Company`s accounting policies during the year.
16. Changes in Accounting Policies
Recent accounting pronouncements that have been issues and are not yet
effective, and which may be affect the Company`s financial reporting are
summarized below:
The Canadian Institute of Chartered Accountants (`CICA`) issued:
- Handbook Section 3855 `Financials Instruments - Recognition and
Measurement`
- Handbook Section 1530 `Comprehensive Income`
- Handbook Section 3251 `Equity`
- Handbook Section 3862 `Financial Instruments - Disclosure`
- Handbook Section 3863 `Financial Instruments - Presentation`
- Handbook Section 1535 `Capital Disclosure`
- Handbook Section 1506 `Changes in Accounting Policies and Estimates, and
Errors`
The effects of these pronouncements are not expected to have a material impact
on the Company`s consolidated financial statements and cash flow. The Company
will adopt these pronouncements on a timely basis to insure compliance with the
effective dates.
In January 2006, The CICA Accounting Standards Board (`AcSB`) adopted a
strategic plan for the direction of accounting standards in Canada. As part of
that plan, accounting standards in Canada in public companies are expected to
converge with International Financial Reporting Standards (`IFRS`) by the end of
2010. The Company continues to monitor and assess the impact of convergence of
Canadian GAAP and IFRS.
17. EBITDA
Earnings before interest, taxes, depreciation and amortization (a non-GAAP
measure) is defined by management as Net Income before interest (income and
expense, foreign exchange gains/losses), stock based compensation and non-
controlling interests, taxes (income and capital), depreciation and amortization
(including depletion). EBITDA for the year is $15.8 million which represents a
significant increase over previous year loss of $(731)predominately as a result
of Barplats full year of operations. The Company uses this non-GAAP measure to
evaluate the financial productivity of operations, allowing management to
evaluate similar operations taking into consideration the various financing
mechanisms and exchange exposures within which these operations exist.
-----------------------------------------------------------------------
Three months ended Twelve months
June 30 ended June 30
------------------ -------------
------------------ -------------
2007 2006 2007 2006
---- ---- ---- ----
$ $ $ $
Net Income (loss) for the period (12,339) (6,619) (10,272) (3,879)
Adjustments:
Depletion and depreciation (237) 2,079 8,123 2,094
Interest expense 2,944 855 5.427 855
Interest income (1,528) (1,161) (4.908) (1,893)
Future income tax recovery (986) (264) (2,002) (264)
Non controlling interest 440 43 3,078 43
Foreign Exchange Adjustments 9,523 1,387 1,897 (2,274)
Stock Based Compensation 1,775 4,481 14,416 4,587
EBITDA/Loss (408) 801 15,759 (731)
-----------------------------------------------------------------------
18. Operational Risks
The South African government has proposed a 3% royalty based upon gross mining
revenues with a projected effective date of January 1, 2009. This proposal is
currently under industry review. Management continues to work with other mining
companies active in South Africa to draft an objection to the proposed royalty.
19. Mineral Tenure - Department of Minerals and Energy
--------------------------------------------------------------------
Mining Prospecting
--------------------------------------------------------------------
Property Applied Granted Pending Applied Granted Pending
--------------------------------------------------------------------
CRM 3 1 2 18 13 5
Kennedy`s Vale 3 2 1
Mareesburg 1 1 0
Spitzkop 1 1 0
--------------------------------------------------------------------
Totals 3 1 2 23 17 6
--------------------------------------------------------------------
Barplats has an approved Social and Labour Plan for the CRM operations.
20. Property, Plant and Equipment
The Company evaluates all costs associated with its acquisition, exploration and
development activities and determines the appropriateness for capitalization to
the mineral property. If economically recoverable ore reserves are developed,
capitalized costs of the related property are reclassified as mining assets and
amortized using the unit of production method. When a property is abandoned, all
related costs are written off to operations. If, after management review, it is
determined that the carrying amount of a mineral property is impaired, that
property is written down to its estimated net realizable value. A mineral
property is reviewed for impairment on an annual basis or whenever events or
changes in circumstances indicate that its carrying amount may not be
recoverable.
The amounts shown within these Financial Statements for mineral properties do
not necessarily represent present or future values. The recoverability of these
minerals are dependent upon the discovery of economically recoverable reserves,
the ability of the Company to obtain the necessary financing; to complete
planned development; the profitable production; and receipts from product sales.
21. Asset Retirement Obligations and Remediation
The Company recognizes liabilities for statutory, contractual or legal
obligations associated with the retirement of property, plant and equipment,
when those obligations result from the acquisition, construction, development or
normal operation of the assets. Initially, the fair value of the liability for
an asset retirement obligation is recognized in the period incurred. The net
present value is added to the carrying amount of the associated asset and
amortized over the asset s useful life. On an annual basis the liability is
evaluated for reasonableness and the properties and assets are evaluated as to
remediation costs.
The Company`s estimates of reclamation and remediation costs could change as a
result of changes in regulatory requirements and assumptions regarding the
amount and timing of the future expenditures. A change in estimated discount
rates is reviewed annually or as new information becomes available.
Expenditures relating to ongoing environmental programs are charged against
operations as incurred or capitalized and amortized depending on their
relationship to future earnings. Funding of the obligation is
managed through insurance coverage and cash contributions to a remediation fund.
22. Related Party Transactions
(a) The Company incurred the following expenses, with companies and individuals
related by way of directors and/or officers in common:
------------------------------------------------------
Three months Twelve months
ended June 30 ended June 30
------------- -------------
------------- -------------
2007 2006 2007 2006
---- ---- ---- ----
Consulting Fees 88 918 353 1,056
Director`s Fees 49 18 194 97
Management fees 106 40 836 129
Rent 283 16 336 62
-------------- -------------
526 992 1,719 1,344
------------------------------------------------------
These transactions, occurring in the normal course of operations, are
measured at the exchange amount, which is the amount of consideration
established and agreed to by the related parties.
Management fees include Cdn $400 ($358) in severance paid to a former
director and officer of the Company.
Rent includes a lease cancellation penalty of Cdn $312 ($276) paid to a
company controlled by an officer of the Company as a result of the Company
moving to new larger premises.
(b) Amounts due to related parties are unsecured, non-interest bearing and due
on demand. Accounts payable at June 30, 2007 included $1,950 (June 30, 2006
- $4,500) of directors fees and expenses.
23. Internal Control
As a reporting issuer, the Company is required to comply with the requirements
of Multilateral Instrument 52- 109, `Certification of Disclosure in Annual and
Interim Filings` (`MI 52-109`) issued by the Canadian Securities regulatory
authorities (often referred to as Bill 198). The Corporation`s senior management
team monitors the disclosure and internal controls over financial reporting. The
Corporation believes it has adequate human and financial resources in place in
order to be able to meet all certification requirements required by the
regulators.
In compliance with the requirements of MI 52-109, the Company`s Chief Executive
Officer (CEO) and Chief Financial Officer (CFO) have certified as to the fair
presentation of the Corporations MD&A and financial statements on a quarterly
basis since the start of fiscal 2005. The Certifying officers have conducted an
evaluation of the disclosure controls and procedures and are of the opinion that
these controls and procedures provide reasonable assurance that all information
considered necessary for appropriate disclosure has been accumulated and
disclosed in the annual and quarterly filings and other reports submitted under
applicable securities legislation.
24. Off Balance Sheet Arrangements and Proposed Transactions
The Company has not entered into any off-balance sheet arrangements or any
significant transactions subsequent
to year end.
25. Outstanding Share Data
As at September 17, 2007 there were 667,878,194 common shares issued and
outstanding. There were also 32,450,000 stock options outstanding to directors,
employees and consultants with exercise prices ranging
between Canadian $0.56 and Canadian $1.82 per share. (32,000,000 of the total
32,450,000 outstanding options have vested). There were also 71,248,050 share
purchase warrants outstanding which expire between April 25, 2008 and March 28,
2009 with exercise prices ranging between Canadian $1.80 and Canadian $2.00 per
share. Refer to Note 9 of the June 30, 2007 audited consolidated financial
statements for more details on these outstanding securities.
26. Cautionary Statement On Forward Looking Information
Management references certain information contained or incorporated by reference
in this Fourth Quarter Report 2007, including any information as to our future
financial or operating performance constitute forward looking statements . All
statements, other than statements of historical fact, are forward looking
statements. The words `believe`, `expect`, `anticipate`, `contemplate`,
`target`, `plan`, `intends`, `continue`, `budget`, `estimate`, `may`, `will`,
`schedule` and similar expressions identify forward-looking statements. Forward-
looking statements are necessarily based upon a number of estimates and
assumptions that, while considered reasonable by us, are inherently subject to
significant business, economic and competitive uncertainties and contingencies.
Known and unknown factors could cause actual results to differ materially from
those projected in the forward-looking statements. Such factors include, but are
not limited to: fluctuations in the currency markets (such as Canadian dollar,
ZAR and US dollar); fluctuations in the PGM basket prices or certain commodities
(such as copper, diesel fuel and electricity); to changes in national and local
government legislation, taxation, controls, regulations and political or
economic developments in Canada, the United States, South Africa, Russia or
Barbados or other countries in which we do or may carry on business in the
future and/or whose participation in the PGM sector may affect the industry s
supply volumes; business opportunities that may be presented to or pursued by
us; our ability to successfully integrate acquisitions, including our recent
investment in Barplats Investments Limited; operating or technical difficulties
in connection with mining or development activities; employee relations; the
speculative nature of exploration and development, including the risk of
obtaining necessary licenses and permits; diminishing quantities or grades of
reserves; adverse changes in our credit rating; and contest over title to
properties, particularly title to undeveloped properties. In addition, there are
risks and hazards associated with the business of PGM exploration, development
and mining, including environmental hazards, industrial accidents, unusual or
unexpected formations, pressures,cave-ins, flooding, staff and equipment
availability. Many of these uncertainties and contingencies can affect our
actual results and could cause actual results to differ materially from those
expressed or implied in any forward-looking statements made by, or on behalf of
us. Readers are cautioned that forward-looking statements are not guarantees of
future performance. All of the forward-looking statements made in this Fourth
Quarter Report 2007 are qualified by these cautionary statements. Specific
reference is made to the Company`s most
recent Form 40-F/Annual Information Form on file with Canadian provincial
securities regulatory authorities for a discussion of some of the factors
underlying forward-looking statements.
We disclaim any intention or obligation to update or revise any forward-looking
statements whether as a result of new information, future events or otherwise,
except to the extent required by applicable laws.
FOR FURTHER INFORMATION PLEASE CONTACT:
Eastern Platinum Limited
Ian Rozier
President & C.E.O.
(604) 685-6851
(604) 685-6493 (FAX)
Email: info@eastplats.com
Website: www.eastplats.com
OR
NOMAD - Canaccord Adams Limited
Robin Birchall
+44 20 7050 6752
Email: Robin.Birchall@CanaccordAdams.com
OR
NOMAD - Canaccord Adams Limited
Clayton Bush
+44 20 7050 6752
Email: Clayton.Bush@CanaccordAdams.com
OR
JSE SPONSOR - PSG Capital (Pty) Limited
Andre Geldenhuys
+27 21 887 9602
Email: andreg@psgcapital.com
OR
JSE SPONSOR - PSG Capital (Pty) Limited
Anje Maasdorp
+27 21 887 9602
Email: anjem@psgcapital.com
Date: 25/09/2007 12:37:03 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.
