| Mon 17 Aug 2009, 8:00 | | ARQ - Anooraq - Consolidated Interim Financial Statements For The Three And Six |
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ARQ
ARQ
ARQ - Anooraq - Consolidated Interim Financial Statements For The Three And Six
Months Ended June 30, 2009
Anooraq Resources Corporation
(Incorporated in British Columbia, Canada)
(Registration number 10022-2033)
(JSE share code: ARQ)
(TSXV share code: ARQ)
(AMEX share code: ANO)
(ISIN: CA03633E1088)
("Anooraq" or "the Company")
CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE THREE AND SIX MONTHS ENDED
JUNE 30, 2009
These financial statements have not been reviewed by the Company`s auditors.
Consolidated Interim Statements of Financial Position
(Unaudited - Expressed in Canadian Dollars)
June 30 December 31
Note 2009 2008
(as restated per
note 11)
ASSETS
Non-Current assets
Deferred acquisition costs $ 13,412,879 $ 1,587,959
Equipment 411,742 469,635
Investment in joint venture 7 2,239,932 2,518,971
Mineral property interests 8 4,200,000 4,200,000
20,264,553 8,776,565
Current assets
Accounts receivable 340,862 158,644
Prepaid expenses 17,543 112,910
Cash and cash equivalents 451,601 3,850,674
810,006 4,122,228
Total Assets $ 21,074,559 $ 12,898,793
EQUITY
Share capital $ 55,843,998 $ 54,948,341
Reserves 19,460,510 17,584,974
Foreign Currency Translation
Reserve (2,178,249) 129,684
Accumulated deficit (83,560,626) (76,266,461)
(10,434,367) (3,603,462)
LIABILITIES
Non-current Liabilities
Long term loan 9 - 12,967,753
Current Liabilities
Balances payable to related
parties 10 748,000 794,072
Accounts payable and accrued
liabilities 12,555,676 1,004,767
Current portion of term loan 9 18,205,250 1,735,663
31,508,926 3,534,502
Total Liabilities 31,508,926 16,502,255
Total Equity and Liabilities $ 21,074,559 $ 12,898,793
The accompanying notes are an integral part of these consolidated interim
financial statements.
Approved by the Board of Directors
/s/ Philip Kotze /s/ Iemrahn Hassen
Philip Kotze Iemrahn Hassen
Director Director
Consolidated Interim Statements of Comprehensive Loss
(Unaudited - Expressed in Canadian Dollars)
Three months ended June 30
2009 2008
(as restated per
note 11)
Expenses
Accounting, audit and legal $ 311,985 $ 35,117
Amortization 31,350 10,287
Conference and travel 149,959 188,412
Consulting 105,361 106,908
Exploration 1,350 59,811
Foreign exchange loss 2,049 81
Office and administration 165,098 287,981
Salaries and benefits 1,800,194 689,525
Share-based compensation 1,824,077 5,110,375
Shareholders communications 86,626 53,986
Trust and filing 85,946 26,332
Net loss from operating activities 4,563,995 6,568,815
Equity loss from joint venture 106,064 52,772
Interest income (18,317) (40,734)
Interest costs 590,446 491,616
Rental income (12,037) -
Gain on disposal of equipment - (5,736)
Loss for the period 5,230,151 7,066,733
Other comprehensive loss (income)
Foreign exchange loss (gain) on
translation of foreign operation 2,150,388 181,101
Total comprehensive loss $ 7,380,539 $ 7,247,834
Basic and diluted loss per share $ 0.04 $ 0.04
Weighted average number of common shares
outstanding 186,640,007 185,253,743
Six months ended June 30
2009 2008
(as restated per
note 11)
Expenses
Accounting, audit and legal $ 372,575 $ 114,546
Amortization 59,722 18,118
Conference and travel 198,651 241,138
Consulting 167,397 128,890
Exploration 28,542 110,350
Foreign exchange loss 2,768 1,598
Office and administration 397,855 464,353
Salaries and benefits 2,598,947 1,705,087
Share-based compensation 1,875,536 5,232,693
Shareholders communications 122,299 98,451
Trust and filing 161,039 189,179
Net loss from operating activities 5,985,331 8,304,403
Equity loss from joint venture 212,423 104,417
Interest income (68,594) (135,459)
Interest costs 1,191,312 906,493
Rental income (26,307) -
Gain on disposal of equipment - (5,736)
Loss for the period 7,294,165 9,174,118
Other comprehensive loss (income)
Foreign exchange loss (gain) on
translation of
foreign operation 2,307,933 (244,817)
Total comprehensive loss $ 9,602,098 $ 8,929,301
Basic and diluted loss per share $ 0.05 $ 0.05
Weighted average number of common shares
outstanding 186,640,007 185,253,743
The accompanying notes are an integral part of these consolidated interim
financial statements.
Consolidated Interim Statement of Changes in Equity
(Unaudited - Expressed in Canadian Dollars)
Share capital
Number of shares Amount Reserves
Balance at January 1,
2008 185,208,607 $ 51,855,350 $ 13,254,905
Share based compensation - - 5,232,693
Share options exercised 1,431,400 866,990 (299,432)
Comprehensive income
(loss) for the period - - -
Balance at June 30, 2008 186,640,007 $ 52,722,340 $ 18,188,166
Balance at January 1,
2009 186,640,007 $ 54,948,341 $ 17,584,974
Share based compensation - - 1,875,536
Shares issued 806,898 895,657 -
Comprehensive loss for
the period - - -
Balance at June 30, 2009 187,446,905 $ 55,843,998 $ 19,460,510
Translation
Deficit reserve Total Equity
Balance at January 1,
2008 $ (62,296,365) $ - $ 2,813,890
Share based compensation - - 5,232,693
Share options exercised - - 567,558
Comprehensive income
(loss) for the period (9,174,118) 244,817 (8,929,301)
Balance at June 30, 2008$ (71,470,483) $ 244,817 $ (315,160)
Balance at January 1,
2009 $ (76,266,461) $ 129,684 $ (3,603,462)
Share based compensation - - 1,875,536
Shares issued - - 895,657
Comprehensive loss for
the period (7,294,165) (2,307,933) (9,602,098)
Balance at June 30, 2009$ (83,560,626) $ (2,178,249) $ (10,434,367)
The accompanying notes are an integral part of these consolidated interim
financial statements.
Consolidated Interim Statement of Cash Flows
(Unaudited - Expressed in Canadian Dollars)
Three months ended June 30
2009 2008
Operating activities
Net loss for the period $ (5,230,151) $ (7,066,733)
Adjustments for:
Amortization 31,350 10,287
Interest costs 590,446 491,616
Share-based compensation 1,824,077 5,110,375
Unrealized foreign exchange loss (gain) 20,681 (40,558)
Equity loss from joint venture 106,064 52,772
Common shares issued as compensation 895,657 -
Changes in non-cash operating working
capital:
Accounts receivable and prepaid expenses (118,389) (55,267)
Accounts payable and accrued liabilities 11,844,174 253,073
Balances payable to related parties 125,115 (236,484)
Cash and cash equivalents provided by (used
in) operating activities 10,089,024 (1,480,919)
Investing activities
Purchase of equipment (89) (131,340)
Proceeds on disposal of fixed assets - 23,724
Deferred acquisition costs (11,793,765) (623,823)
Cash and cash equivalents used in investing
activities (11,793,854) (731,439)
Financing activities
Finance costs paid - 21,325
Common shares issued for cash, net of issue
costs - 504,000
Cash and cash equivalents provided by (used
in) financing activities - 525,325
Decrease in cash and cash equivalents (1,704,830) (1,687,033)
Effect of exchange rate fluctuations on
cash held 110,066 75,238
Cash and cash equivalents, beginning of
period 2,046,365 2,752,154
Cash and cash equivalents at end of period $ 451,601 $ 1,140,359
Six months ended June 30
2009 2008
Operating activities
Net loss for the period $ (7,294,165) $ (9,174,118)
Adjustments for:
Amortization 59,722 18,118
Interest costs 1,191,312 906,493
Share-based compensation 1,875,536 5,232,693
Unrealized foreign exchange loss (gain) 13,665 (71,142)
Equity loss from joint venture 212,423 104,417
Common shares issued as compensation 895,657 -
Changes in non-cash operating working
capital:
Accounts receivable and prepaid expenses (86,851) (97,133)
Accounts payable and accrued liabilities 11,550,909 74,306
Balances payable to related parties (46,072) 43,940
Cash and cash equivalents provided by (used
in) operating activities 8,372,136 (2,962,426)
Investing activities
Purchase of equipment (1,829) (338,673)
Proceeds on disposal of fixed assets - 23,724
Deferred acquisition costs (11,824,920) (962,803)
Cash and cash equivalents used in investing
activities (11,826,749) (1,277,752)
Financing activities
Finance costs paid - (1,756,654)
Common shares issued for cash, net of issue
costs - 567,558
Cash and cash equivalents provided by (used
in) financing activities - (1,189,096)
Decrease in cash and cash equivalents (3,454,613) (5,429,274)
Effect of exchange rate fluctuations on
cash held 55,540 (562,188)
Cash and cash equivalents, beginning of
period 3,850,674 7,131,821
Cash and cash equivalents at end of period $ 451,601 $ 1,140,359
The accompanying notes are an integral part of these consolidated interim
financial statements.
Consolidated Schedules of Exploration Expenses
(Unaudited - Expressed in Canadian Dollars)
Three months ended June 30
Republic of South Africa
2009 2008
Northern Limb of the Bushveld Complex
Amortization $ - $ -
Assays and analysis (61) -
Engineering 1,322 6,426
Geological and consulting - 54,816
Graphics - 1,348
Property fees and assessments (recovery) (424) (9,219)
Property option payments 513 (126)
Site activities - 23,396
Transportation - (25,719)
1,350 50,922
Eastern Limb of the Bushveld Complex
Geological and consulting - 12
Graphics - (454)
Property fees and assessments - 9,331
- 8,889
Exploration expenses 1,350 59,811
Cumulative expenditures, beginning of period 26,296,327 25,977,731
Cumulative expenditures, end of period $ 26,297,677 $ 26,037,542
Six months ended June 30
Republic of South Africa
2009 2008
Northern Limb of the Bushveld Complex
Amortization $ - $ -
Assays and analysis (61) -
Engineering 26,749 11,354
Geological and consulting - 56,661
Graphics 53 3,286
Property fees and assessments (recovery) (8,589) (10,664)
Property option payments 10,390 10,406
Site activities - 25,292
Transportation - 9,358
28,542 105,693
Eastern Limb of the Bushveld Complex
Geological and consulting - 4,657
Graphics - -
Property fees and assessments - -
- 4,657
Exploration expenses 28,542 110,350
Cumulative expenditures, beginning of period 26,269,135 26,927,192
Cumulative expenditures, end of period $ 26,297,677 $ 27,037,542
The accompanying notes are an integral part of these consolidated interim
financial statements.
Notes to Consolidated Interim Financial Statements
For the three and six months ended June 30, 2009
(Unaudited - Expressed in Canadian Dollars, unless stated otherwise)
1. NATURE OF OPERATIONS
Anooraq is incorporated in the Province of British Columbia, Canada and its
principal business activity is the mining and exploration of mineral property
interests. Since 1999, the Company focused on mineral property interests located
in the Republic of South Africa, with particular attention on the Bushveld
Complex (note 8). Subsequent to June 30, 2009 on July 1, 2009 the Company
acquired a controlling interest in an operating platinum mine (note 2).
2. SUBSEQUENT EVENT
Lebowa Transaction
On July 1, 2009, Anooraq, through its wholly owned subsidiary, Plateau
Resources (Proprietary) Limited ("Plateau"), completed various acquisition
agreements (the "Acquisition Agreements") with Anglo American Platinum
Corporation and certain of its wholly-owned subsidiaries (collectively, "Anglo
Platinum") in respect of the Lebowa Transaction whereby Plateau would acquire
an effective 51% of Lebowa Platinum Mine ("Lebowa") and control of the
Ga-Phasha Project, the Boikgantsho Project and the Kwanda Project by acquiring
an additional 1% of these projects for an aggregate cash consideration of ZAR
2.6 billion.
Lebowa, which was 100% owned by Anglo Platinum, is located on the north-eastern
limb of the Bushveld Complex adjacent to the Ga-Phasha Project. The Lebowa
mining operation consists of a vertical shaft and declines to access the
underground development on the Merensky and UG2 Reefs, and two concentrators
Pursuant to the terms of the Acquisition Agreements, Anooraq through Plateau
acquired 51% of the shares in, and claims on shareholders loan account against,
Richtrau No. 179 (Proprietary) Limited ("Holdco"), a private company
incorporated under the laws of South Africa, which will be renamed Bokoni
Platinum Holdings (Proprietary) Limited, the holding company through which
Anooraq and Anglo Platinum hold their interests in Lebowa. The joint venture
agreements in respect of the Ga-Phasha Project, Boikgantsho Project and Kwanda
Project have been terminated and these projects were transferred into separate
project companies, established as wholly-owned subsidiaries of Holdco.
Lebowa funding
The Company financed the acquisition consideration of $360 million (ZAR 2.6
billion) as follows:
$103.6 million (ZAR 750 million) of senior debt funding (the "Debt Facility")
from Standard Chartered Bank plc ("Standard Chartered") provided to Plateau, of
which $69.1 million (ZAR 500 million) was drawn down on July 1, 2009. The
balance of the Debt Facility will be applied to an interest and capital
repayment holiday during the first three years while the Lebowa mine completes
its initial ramp up stage to 2012. The Company applied approximately $45.1
million (ZAR 300 million) of the Debt Facility in part settlement of the
transaction consideration. The balance of the funding received by Plateau from
the Debt Facility was used to settle the Company`s transaction costs and repay
its existing bridge loan to Rustenberg Platinum Mines Limited ("RPM"), a wholly
owned subsidiary of Anglo Platinum.
The Debt Facility term is nine years with an interest and capital repayment
holiday during the first three years. The Debt Facility bears interest equal to
the Johannesburg Inter Bank Agreed Rate (currently 7.95%) plus 4.5%. A portion
of the coupon will be swapped to a fixed rate under a hedging arrangement
agreed with Standard Chartered. The Debt Facility is secured by the Company`s
51% interest in the Lebowa assets and cash flows generated by the Lebowa
operations.
$168.6 million (ZAR 1.219 billion) through the issue of cumulative redeemable
"A" preference shares ("A Prefs") of Plateau to RPM. The A Prefs are entitled
to a 12% cumulative dividend compounded annually and may be redeemable at any
time at the option of Plateau until their maturity on July 1, 2018; and
$152.1 million (ZAR 1.1 billion) through the effects of a share settled
financing with the issue of cumulative convertible "B" preference shares ("B
Prefs") of Plateau to the Pelawan Finance SPV (the "SPV") (a wholly owned
subsidiary of Pelawan Investments (Proprietary) Limited ("Pelawan") "), a
private South African Black Economic Empowerment ("BEE") company, the majority
shareholder in the Company.
Under the share settled financing, Pelawan established the SPV as a wholly
owned subsidiary and will transfer a portion of its interest in the Company to
the SPV. RPM subscribed for preferred shares of the SPV for an aggregate
subscription price of ZAR 1.1 billion. Pelawan encumbered its interest in the
SPV in favour of RPM as security for the obligations of the SPV in terms of the
SPV Preferred Shares.
The SPV subscribed for an aggregate subscription price of $150 million (ZAR 1.1
billion), for two different classes of convertible preferred shares in Plateau,
each such class being convertible into Plateau common shares entitling the
holder to a special dividend in cash, which will immediately be used to
subscribe for additional Plateau common shares. Upon Plateau issuing such
Plateau common shares to the SPV, the Company will immediately take delivery of
all Plateau common shares held by the SPV and, in consideration, issue to the
SPV such number of the Company`s common shares that have a value equal to the
value of the Plateau common shares.
The SPV Preferred Shares will be convertible in one or more tranches into
common shares of the SPV at the option of RPM for a period of 9 years from the
date of issuance. Upon such conversion, RPM will become entitled to a special
dividend in cash, which will immediately be used to subscribe for common shares
of the SPV. Upon the SPV converting the preferred shares of the SPV to common
shares of the SPV and RPM subscribing for additional common shares of the SPV
as a result of the special dividend, the SPV will immediately undertake a share
buyback of all common shares of the SPV held by RPM and will settle the buyback
consideration by delivering 115.8 million common shares of the Company. On
conversion of the SPV Preferred Shares, Anooraq will issue 227.4
million common shares.
The final effects of the share settled financing resulted that: (i) RPM (via
the SPV) funded a payment of $150 million (ZAR 1.1 billion) to Plateau and RPM
will ultimately receive a total of 115.8 million common shares of the Company;
and (ii) Pelawan (via the SPV) will receive 111.6 million common shares in
order to maintain Pelawan`s minimum 51% shareholding in the Company.
In order to ensure the sustainability of the Company and Holdco, Anglo
Platinum, through RPM, made two further facilities available to Plateau:
An operating cash flow shortfall facility ("OCSF") of up to a maximum of
$103.6 million (ZAR 750 million), which facility has a nine year term bearing
interest at 15.84% compounded quarterly. Plateau may utilise this facility to
fund its share of any operating cash flow shortfall that may arise in Holdco
for the first three years post closing of the Transaction; and
A standby loan facility, comprising up to a maximum of 29/49 of RPM`s
attributable share of the free cash flows from Holdco. The standby loan
facility has a 9 year term, bearing interest equal to the prime lending rate in
South Africa (currently 12% per annum). Plateau may utilise this facility to
settle any cash flow shortfall which arise in funding any accrued and/or
capitalised interest and scheduled capital payments on the Debt Facility not
funded by Plateau`s attributable share of free cash flows from Holdco, for the
term of the Debt Facility.
Anglo Platinum further provided approximately $20.7 million (ZAR 149.4 million)
to facilitate the participation of communities and Lebowa employees in the
transaction as follows:
Anglo Platinum and the Company agreed the key commercial principles in
respect of the involvement of communities associated with Lebowa and Ga-Phasha
and the associated community participation will benefit in excess of 35,000
Historically Disadvantaged South Africans ("HDSA") The Anooraq Community
Participation Trust (the "Community Trust") was established for the benefit of
the communities interested in or affected by the Company`s operations. Anglo
Platinum contributed an amount of $14.3 million (ZAR 103.8 million) to the
Community Trust to facilitate this broad-based empowerment. Approximately $3.4
million (ZAR 24.5 million) is retained by the Community Trust to facilitate
annual cash distributions to the communities with the balance of $10.9 million
(ZAR 79.3 million) being used to acquire shares of the Company. As of July 1,
2009 the Company issued 9,799,505 common shares to the Community Trust.
An employee share trust ("ESOP Trust") which is broadly aligned with the
Anglo Platinum Employee Share Participation Scheme ("Kotula Scheme"), provides
for all eligible employees of Lebowa and is expected to benefit approximately
3,700 employees. Anglo Platinum contributed approximately $6.3 million (ZAR
45.6 million) to the ESOP Trust, with approximately $1.3 million (ZAR 9.1
million) was retained by the ESOP Trust to facilitate annual cash distributions
to beneficiaries with the balance of approximately $5.0 million (ZAR 36.5
million) used to acquire shares of the Company.
The final amount to be contributed by Anglo Platinum to the ESOP Trust will be
equal to the value in the Kotula Scheme accruing to Lebowa employees on the day
that the conversion is determined. As of July 1, 2009 the Company issued
4,497,062 common shares to the ESOP Trust.
Transaction cost amounting to $11.1 million associated with finalising the
transaction was accrued. Given the complexity of the acquisition, the Company
and its advisors are currently finalising the Purchase Price Allocation
schedules.
3. GOING CONCERN
These consolidated interim financial statements are prepared on the basis that
the Company will continue as a going concern which contemplates the realization
of assets and settlement of liabilities in the normal course of operations as
they come due.
As at July 1, 2009, all outstanding regulatory approvals were obtained by the
Company and all outstanding conditions fulfilled and the Lebowa Transaction was
completed. As a result the Company secured additional financial resources and
long term funding. Management expects that cash flows from the acquired mining
operations and the additional financing secured will be sufficient to meet
ongoing operating cash requirements.
4. SIGNIFICANT ACCOUNTING POLICIES
(a) Conversion to International Financial Reporting Standards
The consolidated interim financial statements have been prepared in conformity
with IAS 34, Interim Financial Reporting, and do not include all the
information required for full annual financial statements in accordance with
International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board ("IASB") and interpretations of the
International Financial Reporting Interpretations Committee ("IFRIC").
The Company received approval from the Canadian Securities Administrators under
National Instrument 52-107, Acceptable Accounting Principles, Auditing
Standards and Reporting Currency ("NI 52-107") to early adopt IFRS as from
January 1, 2009. The Company`s transition date for converting to IFRS was
January 1, 2008 (the "Transition Date") and the comparative balance sheet as at
December 31, 2008 and comparative statements of comprehensive loss, statements
of changes in equity and statements of cash flows for the six month period
ended June 30, 2008 have been restated in accordance with IFRS.
The guidance for the first time adoption of IFRS is set out in IFRS 1, First
Time Adoption of International Financial Reporting Standards. IFRS 1 provides
for certain mandatory exceptions and optional exemptions for first time
adopters of IFRS. The Company elected to take the following IFRS 1 optional
exemptions:
to apply the requirements of IFRS 3, Business Combinations, prospectively
from the Transition Date;
to apply the requirements of IFRS 2, Share-based payments, only to equity
instruments granted after November 7, 2002 which had not vested as of the
Transition Date; and
to transfer all foreign currency translation differences, recognized as a
separate component of equity, to accumulated loss as at the Transition Date
including those foreign currency differences which arise on adoption of IFRS.
Reconciliations between the Company`s previously reported balance sheets and
the statements of comprehensive loss under Canadian generally accepted
accounting principles ("GAAP") and those reported under IFRS are presented in
note 11.
(b) Basis of preparation
The preparation of interim financial statements in conformity with IAS 34,
Interim Financial Reporting, requires management to make judgments, estimates
and assumptions that affect the application of policies and reported amounts of
assets and liabilities, income and expenses.
Actual results may differ from these estimates.
These consolidated interim financial statements have been prepared on the basis
of IFRS standards that are expected to be effective or available for early
adoption by the Company on December 31, 2009, the Company`s first annual
reporting date under IFRS. The Company has made certain assumptions about the
accounting policies expected to be adopted when the first IFRS annual financial
statements are prepared for the year ended December 31, 2009.
The preparation of these consolidated interim financial statements resulted in
changes to the accounting policies as compared with the most recent annual
financial statements prepared under GAAP. The accounting policies set out below
have been applied consistently to all periods presented in these interim
financial statements. They also have been applied in preparing an opening IFRS
balance sheet at January 1, 2008, as required by IFRS 1. The impact of the
transition from GAAP to IFRS is explained in note 11.
(c) Principles of consolidation
These consolidated interim financial statements include the financial statements
of the Company and all its subsidiaries and jointly controlled entities.
The Company has determined that its investment in Ga-Phasha Platinum Mine
(Proprietary) Limited ("GPM") (formerly Micawber 277 (Proprietary) Limited)
prior to the Lebowa transaction, a 50:50 joint venture with a wholly-owned
subsidiary of Anglo Platinum in the Ga-Phasha Project, qualified as a jointly
controlled entity since the Company has joint control, established by
contractual agreement and requires unanimous consent for strategic financial
and operating decisions. The Company elected to apply the equity method to
account for its interest in GPM (note 7). As a result of the completion of the
Lebowa transaction (note 2), the Company acquired a controlling interest in
GPM.
Inter-company balances and transactions, including any unrealised income and
expenses arising from inter-company transactions, are eliminated in preparing
the consolidated interim financial statements. Unrealised gains arising from
transactions with equity accounted investees are eliminated against the
investment to the extent of the Company`s interest in the investee.
Unrealised losses are eliminated in the same way as unrealised gains, but only
to the extent that there is no evidence of impairment.
(d) Foreign currency translation
The functional and presentation currency of the Company and its subsidiaries is
the Canadian dollar, except for Plateau and GPM which use the South African
rand ("ZAR") as their functional currency.
Transactions in foreign currencies are translated to the functional currencies
of the Company and its subsidiaries at exchange rates at the dates of the
transactions. Monetary assets and liabilities denominated in foreign currencies
at the reporting date are translated to the functional currency at the exchange
rate at that date. The foreign currency gain or loss on monetary items is the
difference between amortized cost in the functional currency at the beginning
of the period, adjusted for effective interest and payments during the period,
and the amortized cost in foreign currency translated at the exchange rate at
the end of the period. Such gains and losses are recognized in profit and loss.
The assets and liabilities of foreign operations with functional currencies
other than the Canadian dollar are translated to Canadian dollars at exchange
rates at the reporting date. The income and expenses of foreign operations are
translated to Canadian dollars at exchange rates at the dates of the
transactions. Foreign currency differences resulting from translation of the
accounts of foreign operations are recognised in the foreign currency
translation reserve as a separate component of shareholder`s equity.
(e) Financial instruments
Non-derivative financial instruments consist of trade and other receivables,
cash and cash equivalents, balance payable to related parties, accounts payable
and accrued liabilities and long- term loans.
Non-derivative financial instruments are recognized initially at fair value
plus, for instruments not recognized at fair value through profit or loss, any
directly attributable transaction costs. Subsequent to initial recognition,
trade and other receivables are classified as loans and receivables and
measured at amortized costs. Accounts payable and accrued liabilities, balances
payable to related parties, and the long-term loans are classified as other
financial liabilities and measured at amortized cost using the effective
interest method.
The Company does not have any derivative financial instruments.
(f) Mineral property interests
The acquisitions of mineral properties are accounted for at initial cost.
Mineral property acquisition costs, and exploration and development
expenditures incurred subsequent to the determination of the feasibility of
mining operations and approval of development by the Company, are capitalized
until the property to which they relate is placed into production, sold,
allowed to lapse.
Exploration and evaluation costs incurred prior to determination of the
feasibility of mining operations are expensed as incurred.
Mineral property acquisition costs include the cash consideration and the fair
market value of shares issued for mineral property interests pursuant to the
terms of the relevant agreements. These costs will be amortized over the
estimated life of the property following commencement of commercial production,
or written off if the property is sold, allowed to lapse, or when an impairment
of value has been determined to have occurred.
(g) Equipment
Equipment is measured at cost less accumulated depreciation and any impairment
losses. Cost includes all costs directly attributable to bringing the assets to
working condition for their intended use.
Cost includes expenditure that is directly attributable to the acquisition of
the asset.
When parts of an item of equipment have different useful lives, they are
accounted for as separate items (major components) of equipment.
Gains and losses on disposal of equipment are determined by comparing the
proceeds from disposal with the carrying amount of equipment, and are
recognized in profit or loss.
Depreciation is charged on a straight-line basis at rates considered
appropriate to reduce the carrying values to estimated residual values of the
assets.
The depreciation rates applicable to each category of asset are as follows:
Motor vehicles 5 years
Office equipment 5 years
Computer equipment 3 years
Expenditure incurred subsequent to initial acquisition of equipment is
capitalized when it is probable that future economic benefits from the use of
the asset will be increased. All other expenditure is recognized as repairs and
maintenance.
(h) Cash and cash equivalents
Cash and cash equivalents consist of cash and highly liquid investments, having
maturity dates of three months or less from the date of purchase, which are
readily convertible to known amounts of cash.
(i) Impairment
Non-financial assets
The carrying values of the Company`s non-financial assets are reviewed annually
to assess whether there is any indication of impairment.
The recoverable amount of an asset or cash-generating unit is the greater of
its value in use and its fair value less costs to sell. In assessing value in
use, the estimated future cash flows are discounted to their present value
using a pre-tax discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset. For the purpose of
impairment testing, assets are grouped together into the smallest group of
assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets (the
"cash-generating unit").
An impairment loss is recognized if the carrying amount of an asset or its
cash-generating unit exceeds its estimated recoverable amount. Impairment
losses are recognized in profit and loss. Impairment losses recognized in prior
periods are assessed at each reporting date for any indications that the loss
has decreased or no longer exists. An impairment loss is reversed if there has
been a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset`s carrying amount
does not exceed the carrying amount that would have been determined, net of
depreciation or amortization, if no impairment loss had been recognized.
Financial assets
A financial asset is assessed at each reporting date to determine whether there
is any objective evidence that it is impaired. A financial asset is considered
to be impaired if objective evidence indicates that one or more events have had
a negative effect on the estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortized cost
is calculated as the difference between its carrying amount and the present
value of the estimated future cash flows, discounted at the original effective
interest rate.
Individually significant financial assets are tested for impairment on an
individual basis. The remaining financial assets are assessed collectively in
groups that share similar credit risk characteristics.
An impairment loss is reversed if the reversal can be related objectively to an
event occurring after the impairment loss was recognized. For financial assets
measured at amortized cost, this reversal is recognized in profit or loss.
(j) Share capital
Common shares are classified as equity. Transaction costs directly attributable
to the issue of common shares and share options are recognized as a deduction
from equity, net of any tax effects.
(k) Share-based payment transactions
The share option plan allows Company employees, directors and consultants to
acquire common shares of the Company. The fair value of options granted is
recognized as an expense with a corresponding increase in equity.
The fair value is measured at grant date and recognised on a straight-line
basis over the period during which the options vest. The fair value of the
options granted is measured using the Black-Scholes option pricing model
taking into account the terms and conditions upon which the options were
granted. The amount recognised as an expense is adjusted to reflect the actual
number of share options that are expected to vest.
Equity-settled share-based payment transactions with non-employees are measured
at the fair value of the goods or services received. However, if the fair value
cannot be estimated reliably, the share-based payment transaction is measured
at the fair value of the equity instruments granted at the date the Company
receives the goods or the services.
(l) Income taxes
Income tax is recognised in profit or loss except to the extent that it relates
to items recognised directly in equity, in which case it is recognised directly
in equity.
Deferred tax is provided using the balance sheet method, providing for
temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes.
Deferred taxes are not recognised for temporary differences related to the
initial recognition of assets or liabilities that affect neither accounting nor
taxable profit or investments in subsidiaries and equity investments to the
extent it is probable that they will not reverse in the foreseeable future. The
amount of deferred tax provided is based on the expected manner of realisation
or settlement of the carrying amount of assets and liabilities, using tax rates
enacted or substantively enacted at the balance sheet date.
A deferred tax asset is recognised only to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilised.
(m) Decommissioning
An obligation to incur restoration, rehabilitation and environmental costs
arises when environmental disturbance is caused by the exploration, development
or ongoing production of mineral property interests. Such costs arising from
the decommissioning of plant and other site preparation work, discounted to
their net present value, are provided for and capitalized at the start of each
project, as soon as the obligation to incur such costs arises. These costs are
amortized to profit or loss over the life of the related asset. The related
liability is adjusted in each period for the unwinding of the discounted cost.
Costs for restoration of subsequent site damage which is created on an ongoing
basis during production are provided for at their net present values and
charged to profit or loss as extraction progresses.
The Company has no material restoration, rehabilitation and environmental costs
as the disturbance to date is minimal.
(n) Earnings (loss) per share
The Company presents basic and diluted loss per share ("LPS") data for its
common shares. Basic LPS is calculated by dividing the loss attributable to
common shareholders of the Company by the weighted average number of common
shares outstanding during the period. Diluted LPS is determined by adjusting
the profit or loss attributable to common shareholders and the weighted average
number of common shares outstanding for the effects of all dilutive potential
common shares.
(o) Segment Reporting
The Company operates in a single reportable operating segment - the
acquisition, exploration and development of mineral properties in the Republic
of South Africa.
(p) Finance costs and income
Finance costs comprise interest payable on borrowings and amortization of
related transaction costs calculated using the effective interest rate method.
Interest income comprises interest earned on funds invested and is recognized
as it accrues in profit or loss.
(q) Measurement uncertainty
The preparation of financial statements in accordance with IFRS 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 mineral property interests, the Company`s investment in
GPM, equipment, decommissioning costs and share based payment transactions.
The assessment of any impairment of mineral property interest, equipment and
the Company`s investment in GPM is dependent upon estimates that take into
account factors such as reserves, economic and market conditions and the useful
lives of assets and mineral properties. Decommissioning costs are recognized in
the period in which they arise and are stated at the fair value of estimated
future costs. These estimates require extensive judgment 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.
(r) New standards not yet adopted
Standards and interpretations issued but not yet effective and applicable to
the Company:
Amendments to IFRS 3, Business Combinations
Amendments to IFRS 5, Non-current Assets Held for Sale and Discontinued
Operations
Amendments to IAS 16, Property, Plant and Equipment
Amendments to IAS 27 Consolidated and Separate Financial Statements
Amendments to IAS 28, Investments in Associates
Amendments to IAS 31, Interests in Joint Ventures
The Company is evaluating the impact, if any, that these new standards will
have on the consolidated financial statements.
5. CAPITAL AND RESERVES
(a) Authorized share capital
At June 30, 2009, the authorized share capital comprised an unlimited number of
common shares. The common shares do not have a par value. All issued shares are
fully paid. Reserves include the accumulated fair value of share options
recognized as share-based compensation.
(b) Issued share capital
At June 30, 2009, the issued share capital comprised 187,446,905 common shares.
The common shares do not have a par value. All issued shares are fully paid.
Reserves include the accumulated fair value of share options recognized as
share-based compensation.
Subsequent to June 30, 2009 the Company issued the following shares:
Number of
Issue Price Shares
Bokoni Platinum Mines ESOP trust $1.11 4,497,062
Anooraq Community Participation Trust $1.11 9,799,505
The common shares outstanding after this issue are 201,743,472.
(c) Share Options
The Company obtained approval at the Annual General Meeting on June 15, 2009 to
reprice 8,061,000 share options granted to $1, 29. On June 27, 2009 the Company
granted 1,026,000 share options at $0.96 to officers and employees of the
Company which vested immediately. This resulted in a share based payment charge
of $1,887,879 to the statement of comprehensive loss.
As at June 30, 2009 the Company had 9, 077,000 share options outstanding.
6. LOSS PER SHARE
The calculation of basic and diluted loss per share for the six months ended
June 30, 2009 was based on the loss attributable to common shareholders of
$0.05 (2008 - $0.05) and a weighted average number of common shares outstanding
of 186,640,007 (2008 - 185,253,743).
7. INVESTMENT IN JOINT VENTURE
Investment in Ga-Phasha Platinum Mine
(Proprietary) Six months Year ended
Limited ended December 31,
June 30, 2009 2008
Balance, beginning of period $ 2,518,971 $ 2,958,785
Equity loss - exploration expenses (212,423) (51,645)
Foreign currency loss (66,616) (388,169)
Investment in joint venture, end of period $ 2,239,932 $ 2,518,971
In January 2004, the Company and Pelawan combined their respective Platinum
Group Metals ("PGM") assets, comprising the Company`s Northern and Western Limb
PGM projects and Pelawan`s 50% participation interest in the Ga-Phasha PGM
Project ("Ga-Phasha") on the Eastern Limb of the Bushveld Complex in South
Africa. The Ga-Phasha property consists of four farms - Portion 1 of
Paschaskraal 466KS, and the whole of farms Klipfontein 465KS, De Kamp 507KS and
Avoca 472KS - covering an area of approximately 9,700 hectares.
As of July 1, 2009, the Joint Venture agreements terminated and GPM, a wholly
owned subsidiary of Richtrau 179 (Proprietary) Limited ("Holdco"), owns the
respective interest in and assets relating to the Ga-Phasha Project.
Summary financial information of GPM is as follows:
(This summary financial information is not adjusted for the Company`s 50% share
in GPM)
For the six months
ended Year ended
June 30, 2009 December 31, 2008
Comprehensive loss $424,846 $879,104
Total assets $ - $205
Total liabilities $6,726,872 $6,237,616
8. MINERAL PROPERTY INTEREST
The Company`s mineral property interest consists of various early stage
exploration projects as detailed below.
Platreef
The Company`s wholly owned subsidiary Plateau holds the Platreef properties
located on the Northern Limb of the Bushveld Complex in South Africa.
The Company holds a prospecting contract, expiring August 2007, with the South
African Department of Mines and Energy ("DME") for farm Noord Holland 775LR
(1,229 hectares) bringing the aggregate land package of its Platreef Property
to approximately 13,400 hectares. Annual option fees ranging from ZAR 3 per
hectare to ZAR 18 per hectare are payable to the DME. The joint venture
partners (Plateau and RPM) have received conversion to new order prospecting
rights.
Rietfontein
On October 10, 2001, the Company completed an agreement with African Minerals
Ltd., now Ivanhoe Nickel and Platinum Ltd. ("Ivanplats"), a private affiliate
of Ivanhoe Capital Corporation, whereby Ivanplats has the right to earn a 50%
interest in the Company`s 2,900 hectare Rietfontein 2KS farm ("Rietfontein").
Under the terms of this agreement, Ivanplats had to incur at least $750,000 in
expenditures pursuant to exploration activities undertaken on Rietfontein in
accordance with an approved program in each of the ensuing two years (of which
the year one program has been completed) to obtain the right to form a 50/50
joint venture with the Company on Rietfontein. There is disagreement over
budgets, compilation and analysis of the exploration results, and the overall
adequacy and completeness of Ivanplats` exploration activities. The Company and
Ivanplats are currently in discussions over these matters, both outside of and
within a formal arbitration process, pursuant to the terms of the earn-in
agreement.
Kwanda
In 2002, the Company completed an agreement with RPM, for the right to acquire
up to an 80% interest in twelve PGM properties located on the Northern Limb of
the Bushveld Complex. The Company acquired an initial 50% interest in the PGM
rights to the twelve properties and can maintain its interest by incurring
exploration expenditure totalling ZAR 25 million within five years.
The joint venture partners (Plateau and RPM) received conversion to new order
prospecting rights for the Kwanda North and Kwanda South properties.
As of July 1, 2009, the Joint Venture agreements terminated and Kwanda Platinum
Mine (Proprietary) Limited, a private company incorporated under the laws of
South Africa, a wholly owned subsidiary of Holdco, owns the interest
in and assets relating to the Kwanda Project.
Anooraq owns an effective 51% interest in the Kwanda Project.
Boikgantsho
On November 26, 2003, the Company entered into a joint venture agreement with
Potgietersrust Platinum Limited ("PPRust"), a wholly owned subsidiary of Anglo
Platinum. The Joint Venture was formed to explore and develop PGMs, gold and
nickel mineralization on the Company`s Drenthe 778LR and Witrivier 777LR farms
and a portion of PPRust`s adjacent Overysel 815LR farm. These farms are located
on the Northern Limb of the Bushveld Complex. Plateau received new order
prospecting rights on its Witrivier and Drenthe properties.
Pursuant to the terms of the Joint Venture Agreement, the Company and PPRust
formed an initial 50/50 joint venture (the "Boikgantsho JV") to explore these
farms for a period of up to five years.
Anglo Platinum has the right to enter into a PGM Ore or Concentrate Purchase
and Disposal Agreement at the exploitation phase, based on standard commercial
terms, whereby PGM produced from the operation would be treated at Anglo
Platinum`s facilities.
As of July 1, 2009 the Joint Venture agreements terminated and Boikgantsho
Platinum Mine (Proprietary) Limited, a private company incorporated under the
laws of South Africa, a wholly owned subsidiary of Holdco, owns the respective
interest in and assets relating to the Boikgantsho Project.
9. LONG-TERM LOAN
In November 2006, the Company, through its wholly owned subsidiary, Plateau,
entered into a ZAR 70 million term loan agreement with RPM. On November 30,
2008, the loan was increased by an additional amount of ZAR 30 million. The
loan bears interest at prime plus two percent, as quoted by the Standard Bank
of South Africa.
The loan including interest amounting to $18,357,689 (ZAR 122, 078, 634) was
settled in full on July 1, 2009.
10 RELATED PARTY BALANCES AND TRANSACTIONS
A number of key management personnel, or their related parties, hold positions
in other entities that result in them having control or significant influence
over the financial or operating policies of the entities outlined below.
A number of these entities transacted with the Company in the reporting period.
The terms and conditions of the transactions with key management personnel and
their related parties were no more favourable than those available, or which
might reasonably be expected to be available, on similar transactions with
non-related entities on an arm`s length basis.
Certain directors of the Company through their shareholding in Pelawan, the
ultimate holding company of Anooraq, control the voting shares of the Company.
There were no loans to directors for the period ended June 30, 2009 (2008 -
$nil).
The aggregate value of transactions and outstanding balances with related
parties were as follows:
Three months Six months
Note ended June 30 ended June 30
2009 2008 2009 2008
Services
rendered by ref
Hunter
Dickinson
Services Inc. (a) $ 212,486 $ 344,582 $ 439,789 $ 650,328
As at June As at
Related party balances 30, December 31,
payable note 2009 2008
Hunter Dickinson Services Inc. (a) $ 748,000 $ 794,072
(a) Hunter Dickinson Services Inc. ("HDSI") is a private Company owned equally
by several public companies, one of which is the Company. HDSI has a director
in common with the Company. HDSI provides geological, corporate development,
administrative and management services to, and incurs third party costs on
behalf of, the Company and its subsidiaries on a full cost recovery basis.
Compensation benefits to key management personnel consist of executive
directors being paid by a subsidiary in terms of employment contracts.
Six months ended Six months ended
June 30, June 30,
2009 2008
Compensation benefits:
Short term remuneration $637,968 437,970
Other compensation 389,232 -
Incentive bonus 506,425 340,500
$1,533,355 $ 778,470
11. EXPLANATIONS OF TRANSITIONS TO IFRS
The accounting policies in note 4 have been applied in preparing the
consolidated interim financial statements for the six months ended June 30,
2009, the comparative information for the six months ended June 30, 2008, the
financial statements for the year ended December 31, 2008 and the preparation
of an opening IFRS statement of financial position on the Transition Date.
In preparing the consolidated interim financial statements for the three and
six months ended June 30, 2009, comparative information for the three and six
months ended June 30, 2008 and financial statements for the year ended December
31, 2008, have been adjusted from amounts reported previously in the financial
statements prepared in accordance with GAAP.
An explanation of how the transition from GAAP to IFRS has affected the
Company`s statement of financial position and statement of comprehensive loss
is set out below;
Reconciliation of Assets, Liabilities and Equity
As at January 1, 2008
Effect of
Transition to
note GAAP IFRS IFRS
ASSETS
Non-current assets
Deferred
acquisition costs 368,146 - $ 368,146
Equipment 105,494 - 105,494
Investment in
joint venture 11(b) (d) 4,878,714 (1,919,929) 2,958,785
Mineral property interests 4,200,000 - 4,200,000
Total non-current assets 9,552,354 (1,919,929) 7,632,425
Current assets
Accounts receivable 167,779 - 167,779
Receivable from
related parties - - -
Prepaid expenses 101,409 - 101,409
Cash and cash equivalents 7,131,821 - 7,131,821
Total current assets 7,401,009 - 7,401,009
Total Assets 16,953,363 (1,919,929) 15,033,434
As at June 30, 2008
Effect of
Transition to
GAAP IFRS IFRS
ASSETS
Non-current assets
Deferred acquisition costs $1,330,949 $ - $1,330,949
Equipment 408,061 - 408,061
Investment in joint venture 4,926,896 (2,290,525) 2,636,371
Mineral property interests 4,200,000 - 4,200,000
Total non-current assets 10,865,906 (2,290,525) 8,575,381
Current assets
Accounts receivable 337,630 337,630
Receivable from related parties - - -
Prepaid expenses 40 436 - 40,436
Cash and cash equivalents 1,140,359 - 1,140,359
Total current assets 1,518,425 - 1,518,425
Total Assets 12,384,331 (2,290,525) 10,093,806
As at December 31, 2008
Effect of
Transition to
GAAP IFRS IFRS
ASSETS
Non-current assets
Deferred acquisition costs $1,587,959 $ - $1,587,959
Equipment 469,635 - 469,635
Investment in joint venture 4,793,645 (2,274,674) 2,518,971
Mineral property interests 4,200,000 - 4,200,000
Total non-current assets 11,051,239 (2,274,674) 8,776,565
Current assets
Accounts receivable 158,644 - 158,644
Receivable from related parties - - -
Prepaid expenses 112,910 - 112,910
Cash and cash equivalents 3,850,674 - 3,850,674
Total current assets 4,122,228 - 4,122,228
Total Assets 15,173,467 (2,274,674) 12,898.793
As at January 1, 2008
Effect of
Transition to
Note GAAP IFRS IFRS
SHAREHOLDER`S EQUITY
Share capital 51,855,350 - 51,855,350
Reserves 13,254,905 - 13,254,905
Translation reserve 11(b) - - -
Accumulated loss (60,376,436) (1,919,929) (62,296,365)
Total Equity 4,733,819 (1,919,929) 2,813,890
LIABILITIES
Non-Current
Liabilities
Long-term loan 9,806,636 - 9,806,636
Current Liabilities
Balances payable to
related parties 45,609 - 45,609
Accounts payable and
accrued liabilities 475,102 - 475,102
Accrued finance
costs 1,892,197 - 1,892,197
2,412,908 - 2,412,908
Total Liabilities 12,219,544 - 12,219,544
Total Equity and
Liabilities 16,953,363 (1,919,929) 15,033,434
As at June 30, 2008
Effect of
Transition to
GAAP IFRS IFRS
SHAREHOLDER`S EQUITY
Share capital 52,722,340 - 52,722,340
Reserves 18,188,166 - 18,188,166
Translation reserve - 244,817 244,817
Accumulated loss (68,875,109) (2,535,342) (71,410,451)
Total Equity 2,035,397 (2,290,525) (255,128)
LIABILITIES
Non-Current Liabilities
Long-term loan 8,931,210 - 8,931,210
Current Liabilities
Balances payable to
related parties 101,294 - 101,294
Accounts payable and
accrued liabilities 549,408 - 549,408
Accrued finance costs 767,022 - 767,022
1,417,724 - 1,417,724
Total Liabilities 10,348,934 - 10,348,934
Total Equity and Liabilities 12,384,331 (2,290,525) 10,093,806
As at December 31, 2008
Effect of
Transition to
GAAP IFRS IFRS
SHAREHOLDER`S EQUITY
Share capital 54,948,341 - 54,948,341
Reserves 17,584,974 - 17,584,974
Translation reserve - 129,684 129,684
Accumulated loss (73,862,103) (2,404,358) (76,266,461)
Total Equity 1,328,788 (2,274,674) (3,603,462)
LIABILITIES
Non-Current Liabilities
Long-term loan 12,967,753 - 12,967,753
Current Liabilities
Balances payable to
related parties 794,072 - 794,072
Accounts payable and
accrued liabilities 1,004,767 - 1,004,767
Accrued finance costs 1,735,663 - 1,735,663
3,534,502 - 3,534,502
Total Liabilities 16,502,255 - 16,502,255
Total Equity and Liabilities 15,173,467 (2,274,674) 12,898,793
Reconciliation of Loss and Comprehensive Loss
Three months ended June 30, 2008
Effect of
Transition to
Note GAAP IFRS IFRS
Expenses
Accounting, audit
and legal $ 35,117 $ - $ 35,117
Amortization 10,287 - 10,287
Conference and
travel 188,412 - 188,412
Consulting 106,908 - 106,908
Exploration 11(a) 59,811 - 59,811
Foreign exchange
loss (gain) 11(b) 299,021 (289,940) 81
Gain on disposal of
fixed assets (5,736) - (5,736)
Office and administration 287,981 - 287,981
Salaries and benefits 689,525 - 689,525
Share-based compensation 5,110,375 - 5,110,375
Shareholders communications 53,986 - 53,986
Trust and filing 26,332 - 26,332
Net loss from operating
activities 6, 862,019 (289,940) 6,572,079
Equity loss on
joint venture 11(a) - 52,772 52,772
Interest income (40,734) - (40,734)
Finance costs 11(a) 484,356 7,260 491,616
Net loss before taxes 7,305,641 229,908 7,066,733
Future income tax
recovery 11(d) - - -
Loss for the period 7,305,641 (229,908) 7,066,733
Foreign exchange
(gain) loss
on translation of
foreign operation 11(b) - 181,101 181,101
Total comprehensive
loss $ 7,305,641 $ (48,807) $ 7,247,834
Six months ended June 30, 2008
Effect of
Transition to
GAAP IFRS IFRS
Expenses
Accounting, audit and legal $ 114,546 $ - $ 114,546
Amortization 18,118 - 18,118
Conference and travel 241,138 - 241,138
Consulting 128,890 - 128,890
Exploration 110,350 - 110,350
Foreign exchange loss (gain) (612,815) 614,413 1,598
Gain on disposal of fixed
assets (5,736) - (5,736)
Office and administration 464,353 - 464,353
Salaries and benefits 1,705,087 - 1,705,087
Share-based compensation 5,232,693 - 5,232,693
Shareholders
communications 98,451 - 98,451
Trust and filing 189,179 - 189,179
Net loss from operating
activities 7,684,254 614,413 8,298,667
Equity loss on joint venture - 104,417 104,417
Interest income (135,459) - (135,459)
Finance costs 862,108 44 385 906,493
Net loss before taxes 8,410,903 763,215 9,174,118
Future income tax recovery (1,000) 1,000 -
Loss for the period 8,409,903 764,215 9,174,118
Foreign exchange (gain) loss
on translation of foreign
operation - (244,817) (244,817)
Total comprehensive loss $8,409,903 $ 519,398 $8,929,301
Notes to Reconciliations
(a) Basis of Consolidation
Under GAAP, the Company accounted for its 50% interest in GPM as a variable
interest entity. However, the Company is not considered the primary beneficiary
and therefore accounted for its interest using the equity method.
IFRS does not include the concept of a variable interest entity. IFRS requires
the Company to consolidate entities including Special Purpose Entities ("SPE")
only where the Company has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities. On
transition to IFRS, the Company has determined that GPM is not a SPE and that
the Company has joint control of GPM. Accordingly, under IFRS, the Company can
elect to use either the equity method or proportionate consolidation method to
account for its interest in GPM.
The Company has elected to continue using the equity method of accounting for
Anooraq`s interest in GPM. Therefore, other than an adjustment related to
foreign currency discussed below, there was no impact on the opening balance
sheet at the Transition Date or on the consolidated balance sheet at December
31, 2008 other than the effect of the foreign currency translation adjustment
noted below. The Company`s equity investment in joint venture is now presented
separately on the balance sheet rather than included in mineral property
interests.
(b) Functional Currency
Under GAAP, all the Company`s subsidiaries were integrated foreign operations.
Therefore, monetary items were translated at period end rates and non-monetary
items were translated at average rates with all foreign currency gains and
losses recognized in profit or loss. IFRS requires that the functional currency
of each subsidiary of the Company be determined separately.
It was determined that as at the Transition Date, the Canadian dollar was the
functional currency of all subsidiaries except Plateau and GPM, which have ZAR
as their functional currency. In accordance with the IFRS 1 optional
exemptions, the Company has elected to transfer the foreign currency
translation differences, recognized as a separate component of shareholder`s
equity, to accumulated loss on the Transition Date.
(c) Share-based Payment
Under GAAP, the Company measured share-based compensation related to share
options at the fair value of the options granted using the Black-Scholes option
pricing formula and recognized this expense over the vesting period of the
options. For the purpose of accounting for share-based payment transactions, an
individual was classified as an employee when the individual was consistently
represented to be an employee under law. The fair value of the options granted
to employees was measured on the date of grant. The fair value of options
granted to contractors and consultants (non- employee) were measured on the
date the services were completed. Forfeitures were recognized as they occurred.
IFRS 2, similar to GAAP, requires the Company to measure share-based payment
transactions related to share options granted to employees at the fair value of
the options on the date of grant and to recognize such expense over the vesting
period of the options. However, for options granted to non-employees, IFRS
requires that share-based compensation be measured at the fair value of the
services received unless the fair value cannot be reliably measured. For the
purpose of accounting for share-based payment transactions, an individual is
classified as an employee when the individual is an employee for legal or tax
purposes (direct employee) or provides services similar to those performed by a
direct employee. This definition of an employee is broader than that previously
applied by the Company and resulted in certain contractors and consultants
being classified as employees under IFRS. However, the Company has determined
that no adjustments was required at the Transition Date, on June 30, 2008 or
for the year ended December 31, 2008.
(d) Deferred tax on mineral properties
Under GAAP, in determination of the net loss from its interest in GPM, the
Company recognized future income taxes on temporary differences arising on the
initial recognition of the GPM mineral property interest (where the fair value
of the asset acquired exceeded its tax basis) in a transaction which was not a
business combination and affected neither accounting profit (loss) nor taxable
profit (loss). IAS 12, Income Taxes ("IAS 12"), does not permit the recognition
of deferred taxes on such transactions.
As of the Transition Date, June 30, 2008, and December 31, 2008, the Company
has derecognized the impacts of all deferred taxes which had previously been
recognized on the initial acquisition of the mineral properties through
transactions deemed not to be business combinations and affecting neither
accounting profit (loss) nor taxable profit (loss).
(e) Presentation
Certain amounts on the balance sheet, statement of comprehensive loss and
statement of cash flows have been reclassified to conform to the presentation
adopted under IFRS.
MANAGEMENT`S DISCUSSION AND ANALYSIS
THREE AND SIX MONTHS ENDED JUNE 30, 2009
TABLE OF CONTENTS
1.1 DATE ................................................................... 2
1.2 OVERVIEW ............................................................... 4
1.4 SUMMARY OF QUARTERLY RESULTS .......................................... 18
1.5 RESULTS OF OPERATIONS ................................................. 19
1.6 LIQUIDITY ............................................................. 21
1.7 CAPITAL RESOURCES ..................................................... 22
1.8 OFF-BALANCE SHEET ARRANGEMENTS ........................................ 22
1.9 TRANSACTIONS WITH RELATED PARTIES ..................................... 22
1.10 FOURTH QUARTER........................................................ 22
1.12 CRITICAL ACCOUNTING ESTIMATES ........................................ 22
1.13 CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION ............ 23
1.15 OTHER MD&A REQUIREMENTS .............................................. 26
1.15.1 ADDITIONAL DISCLOSURE FOR VENTURE ISSUERS WITHOUT SIGNIFICANT
REVENUE ................................................................... 26
15.2 DISCLOSURE OF OUTSTANDING SHARE DATA ................................. 26
1.15.3 INTERNAL CONTROLS OVER FINANCIAL REPORTING PROCEDURES .............. 26
1.15.4 DISCLOSURE CONTROLS AND PROCEDURES ................................. 27
1.1 Date
This Management`s Discussion and Analysis ("MD&A") should be read in
conjunction with the audited consolidated financial statements of Anooraq
Resources Corporation ("Anooraq", or the "Company") for the year ended December
31, 2008 and the unaudited consolidated interim financial statements for the
three and six months ended June 30, 2009, and are publicly available on SEDAR
at www.sedar.com.
As of January 1, 2009, the Company adopted International Financial Reporting
Standards ("IFRS") and the following disclosure, and associated condensed
interim financial statements, are presented in accordance with the
International Accounting Standard 34, Interim Financial Reporting. The
comparative periods for fiscal 2008 have been restated in accordance with IFRS.
This MD&A is prepared as of August 13, 2009. All dollar figures stated herein
are expressed in Canadian dollars, unless otherwise specified.
This discussion includes certain statements that may be deemed "forward looking
statements". All statements in this MD&A, other than statements of historical
facts, that address potential acquisitions, future production, reserve
potential, exploration drilling, exploitation activities and events or
developments that Anooraq expects are forward looking statements. Anooraq
believes that such forward looking statements are based on reasonable
assumptions, including assumptions that: Lebowa will continue to achieve
production levels similar to previous years; and the Ga-Phasha and Platreef
Project exploration results will continue to be positive. Forward looking
statements however, are not guarantees of future performance and actual results
or developments may differ materially from those in forward looking statements.
Factors that could cause actual results to differ materially from those in
forward looking statements include market prices, exploitation and exploration
successes, changes in and the effect of government policies with respect to
mining and natural resource exploration and exploitation and continued
availability of capital and financing, and general economic, market or business
conditions. Investors are cautioned that any such statements are not guarantees
of future performance and those actual results or developments may differ
materially from those projected in the forward looking statements.
Cautionary Note to Investors Concerning Estimates of Measured and Indicated
Resources
This MD&A uses the terms "measured resources" and "indicated resources". The
Company advises investors that while those terms are recognized and required by
Canadian regulations, the U.S. Securities and Exchange Commission does not
recognize them. Investors are cautioned not to assume that any part or all of
mineral deposits in these categories will ever be converted into reserves.
Investors should refer to our Annual Report on Form 20-F available at
http://www.sec.gov/edgar.shtml
Cautionary Note to Investors Concerning Estimates of Inferred Resources This
MD&A uses the term "inferred resources". The Company advises investors that
while this term is recognized and required by Canadian regulations, the U.S.
Securities and Exchange Commission does not recognize it. "Inferred resources"
have a great amount of uncertainty as to their existence, and as to their
economic and legal feasibility. It cannot be assumed that all or any part of a
mineral resource will ever be upgraded to a higher category. Under Canadian
rules, estimates of Inferred Mineral Resources may not form the basis of
economic studies, except in rare cases. Investors are cautioned not to assume
that any part or all of an inferred resource exists, or is economically or
legally mineable. Investors should refer to our Annual Report on Form 20-F
available at http://www.sec.gov/edgar.shtml
Cautionary Note to Investors Concerning Technical Review of Lebowa Platinum
Mines The following are the principal risk factors and uncertainties which, in
management`s opinion, are likely to most directly affect the conclusions of the
technical review of Lebowa Platinum Mines. Some of the mineralized material
classified as a measured and indicated resource has been used in the cash flow
analysis. For US mining standards, a full feasibility study would be required,
which would require more detailed studies. Additionally all necessary mining
permits would be required or their issue imminent in order to classify the
project`s mineralized material as an economically exploitable reserve. There
can be no assurance that this mineralized material will become classifiable as
a reserve and there is no assurance as to the amount, if any, which might
ultimately qualify as a reserve or what the grade of such reserve amounts would
be. Data is not complete and cost estimates have been developed, in part, based
on the expertise of the individuals participating in the preparation of the
technical review and on costs at projects believed to be comparable, and not
based on firm price quotes. Costs, including design, procurement, construction
and on-going operating costs and metal recoveries, could be materially
different from those contained in the technical review. There can be no
assurance that mining can be conducted at the rates and grades assumed in the
technical review. There can be no assurance that these infrastructure
facilities can be developed on a timely and cost- effective basis. Energy risks
include the potential for significant increases in the cost of fuel and
electricity, and fluctuation in the availability of electricity. Projected
metal prices have been used for the technical review. The prices of these
metals are historically volatile, and the Company has no control of or
influence on the prices, which are determined in international markets.
There can be no assurance that the prices of platinum, palladium, rhodium,
gold, copper and nickel will continue at current levels or that they will not
decline below the prices assumed in the technical review. Prices for these
commodities have been below the price ranges assumed in the technical review at
times during the past ten years, and for extended periods of time. The projects
will require major financing, probably through a combination of debt and equity
financing. There can be no assurance that debt and/or equity financing will be
available on acceptable terms. A significant increase in costs of capital could
materially adversely affect the value and feasibility of constructing the
expansions. Other general risks include those ordinary to large construction
projects, including the general uncertainties inherent in engineering and
construction cost, the need to comply with generally increasing environmental
obligations, and accommodation of local and community concerns. The economics
are sensitive to the currency exchange rates, which have been subject to large
fluctuations in the last several years.
1.2 Overview
Anooraq is engaged in the mining, and exploration and development of platinum
group metals ("PGM") prospects in the Bushveld Igneous Complex of the Republic
of South Africa. The Bushveld Complex hosts numerous PGM mines and prospects,
mainly within the UG2 Reef, the Merensky Reef and the Platreef mineralized
horizons.
Anooraq, through its wholly owned South African subsidiary Plateau Resources
(Proprietary) Limited ("Plateau"), holds a controlling interests in Lebowa
Platinum Mine (`Lebowa") and several PGM projects, including the advanced stage
Ga-Phasha PGM Project ("Ga-Phasha Project"), the advanced stage Boikgantsho PGM
Project ("Boikgantsho Project"), and the early stage Kwanda PGM project
("Kwanda Project"). Lebowa, previously 100% owned by Anglo Platinum, is located
on the north-eastern limb of the Bushveld Complex adjacent to the Ga-Phasha
Project. The Lebowa mining operation consists of a vertical shaft and declines
to access the underground development on the Merensky and UG2 Reefs, and two
concentrators.
Anooraq`s objective is to become a significant "mine to market" PGM company
with a substantial and diversified PGM asset base including production,
development and exploration assets. The Lebowa Transaction is the first stage
of advancing the Company`s PGM production strategy and has resulted in the
Company controlling refined production of 147,600 4E ounces (based on 2008
production at Lebowa from 1.1 million tonnes of ore milled) and a significant
mineral resource base of approximately 200 million PGM ounces, the third
largest PGM mineral resource base in South Africa.
1.2.1 Lebowa Mine
Lebowa Transaction Agreements
In September 2007, Anooraq and Anglo Platinum announced that they had entered
into a detailed transaction framework agreement (the "TFA") relating to the
Lebowa Transaction. Thereafter, the Company`s efforts were directed toward due
diligence and other activities associated with the Lebowa Transaction. On March
28, 2008, the Company, through Plateau, entered into the Lebowa Transaction
Agreements with Rustenburg Platinum Mines Limited ("RPM"), a wholly owned
subsidiary of Anglo Platinum.
Pursuant to the transaction agreements, Anooraq acquired 51% (controlling
share) of the shares in, and claims on shareholders loan account against,
Richtrau No. 179 (Proprietary) Limited ("Holdco"), a private company
incorporated under the laws of South Africa, which will be renamed Bokoni
Platinum Holdings (Proprietary) Limited from Anglo Platinum Limited on July
1, 2009. Holdco holds 100% of Richtrau No.177 (Proprietary) Limited ("Opco")
being the Lebowa mining operation, the Boikgantsho Project, the Ga-Phasha
Project and Kwanda t for an aggregate cash consideration of ZAR 3.6 billion.
As a result of the deterioration in global economic conditions since the end of
the third quarter of 2008, and to ensure the sustainability of the Lebowa
Transaction, Anooraq and Anglo Platinum renegotiated the consideration payable
by Anooraq to Anglo Platinum from ZAR 3.6 billion to ZAR 2.6 billion, with
Anglo Platinum agreeing to re-invest a portion of such consideration, in order
to share in expected future equity upside in Anooraq. On May 13, 2009, the
parties entered into a number of agreements amending the Lebowa Transaction
Agreements to reflect such reduced consideration and to facilitate the
financing arrangements relating to the Lebowa Transaction.
The Company concluded all outstanding conditions of the Lebowa Transaction and
the acquisition was implemented effective July 1, 2009. As a result the Company
acquired an effective 51% of Lebowa and a controlling interest in the
Boikgantsho, Ga-Phasha and Kwanda Projects.
Structure of Ownership Following the Lebowa Transaction
Following completion of the Lebowa Transaction, the simplified corporate
structure of the Company`s and Anglo Platinum`s interest in Lebowa and the
Boikgantsho Project, Ga-Phasha Project and Kwanda Project, is as follows:
Financing the Lebowa Transaction
The Company completed a number of financing agreements to finance the Lebowa
Transaction at the Plateau level through a combination of the Debt Facility
provided by Standard Chartered Bank ("Standard Chartered") and a vendor finance
facility provided by Anglo Platinum (the "Vendor Finance Facility").
In addition, RPM provided Anooraq with an operating cash shortfall facility
("the OCSF") of up to a maximum of ZAR 750 million and access to RPM`s
attributable share of the Holdco cash flows ("the standby facility") up to a
maximum of 29/49 (approximately 59.2%) to meet its obligations of the Debt
Facility.
Standard Chartered provided Plateau with a Senior Debt Facility ("the Debt
Facility") of up to ZAR 750 million, including capitalized interest up to a
maximum of three years or ZAR 250 million. On July 1, 2009 Standard Chartered
advanced ZAR 500 million to Plateau in terms of the Debt Facility. The Debt
Facility is repayable in 12 semi-annual equal capital instalments, with the
first payment due on January 31, 2013, at a rate of interest equal to the
relevant JIBAR ("the Johannesburg Inter Bank Agreed Rate") (or the relevant
swap rate) plus 450 basis points, excluding liquidity and reserving costs.
To the extent that Plateau is advised by Standard Chartered that such hedging
may be required, the interest payable on up to 50% of the aggregate amount of
the rollup interest loan of up to ZAR 250 million outstanding under the Debt
Facility may be hedged for a period beginning on the date upon which Plateau is
notified that such hedging is required by Standard Chartered until the Debt
Facility is repaid in full.
The total amount of the interest payable on the notional amount of the Debt
Facility (of ZAR 500 million) drawn down on July 1, 2009 (i.e. other than the
rollup interest loan of up to ZAR 250 million) is hedged with effect from July
1, 2009 until July 31, 2012. As at July 1, 2009, the interest rate hedge was
fixed at a swap rate of 8.925 %. Thereafter, the interest payable on 50% of the
aggregate amount of the Debt Facility (other than the rollup interest loan of
ZAR 250 million) outstanding under the Debt Facility is hedged until the Debt
Facility is discharged in full.
The Debt Facility has a term of 108 months from July 1, 2009. Pursuant to the
Holdco Shareholders Agreement, if Plateau`s cash flows derived from Holdco are
insufficient to meet its debt repayment obligations under the Debt Facility,
RPM is obligated, pursuant to the subordinated interest-bearing standby loan
facility described below, to provide Plateau a portion of its entitlement to
the Holdco cash flows such that Plateau can utilize up to 80% of all cash flows
generated from Lebowa for this purpose.
Anglo Platinum provided the Vendor Finance Facility which represents the
majority of the Lebowa Transaction purchase price. This Vendor Finance Facility
consists of a ZAR 1.2 billion cash component and a ZAR 1.1 billion share
settled financing (the "Share Settled Financing") arrangement.
Under the ZAR 1.2 billion cash component of the Vendor Finance Facility, RPM
subscribed for cumulative redeemable preferred shares in the capital of Plateau
(the "Plateau Preferred A Shares") for an aggregate subscription price of ZAR
1.2 billion. The Plateau Preferred A Shares are entitled to a 12.0% fixed
dividend, compounded on an annual basis and are redeemable in full or in part
at any time following issuance upon payment of an amount equal to the
subscription price of the Plateau Preferred A Shares, as adjusted, and any
accrued and unpaid dividends thereon. The Plateau Preferred A Shares have an
initial maturity date July 15, 2012 and a final maturity date of July 1, 2018
for any redemption amount not settled at the initial maturity date.
During the three year period prior to the initial maturity date, Plateau will
be required to undertake a mandatory debt refinancing and use 100% of the
external debt funding raised to settle the following amounts owing by Plateau
to RPM at such time, in the following order: (i) any outstanding amounts of the
subordinated interest-bearing standby loan facility; (ii) any outstanding
amounts of the operating cash shortfall facility ("OCSF"); and (iii) the
redemption amount payable upon the redemption of any outstanding Plateau
Preferred A Shares. The debt market will determine whether the mandatory debt
refinance is achievable. Plateau is obliged to undertake the refinancing
process but if the debt is not re-financeable based upon the debt markets at
that time then there is no sanction on Plateau.
In terms of the Share Settled Financing component of the funding, Pelawan
Investments (Proprietary) Limited ("Pelawan"), the majority shareholder of the
Company, established a wholly owned subsidiary (the "Pelawan SPV") whereby
Pelawan transferred 56,691,303 Common Shares to the SPV. RPM subscribed for
convertible preferred shares in the capital of the SPV (the "SPV Preferred
Shares") for an aggregate subscription price of ZAR 1.1 billion.
Pelawan encumbered its shareholding in the SPV in favour of RPM as security for
the obligations of the SPV in terms of the SPV Preferred Shares.
The SPV has in turn, for an aggregate subscription price of ZAR 1.1 billion,
subscribed for two different classes of convertible preferred shares in
Plateau, each such class being convertible into ordinary shares in the capital
of Plateau ("Plateau Ordinary Shares") and entitling the holder to a special
dividend in cash, which, upon receipt, will immediately be used to subscribe
for additional Plateau Ordinary Shares.
Pursuant to the agreement between the SPV and Anooraq (the "Exchange
Agreement"), upon Plateau issuing Plateau Ordinary Shares to the SPV, Anooraq
have taken delivery of all Plateau Ordinary Shares held by the SPV and, in
consideration therefore, issued to the SPV such number of Common Shares that
have a value equal to the value of such Plateau Ordinary Shares. The total
number of Common Shares issued on implementation of the share settled financing
is 227.4 million Common Shares The final effects of the Share Settled Financing
is that: (i) RPM has funded a payment of ZAR 1.1 billion to Plateau and RPM
ultimately will receive a total of 115.8 million common shares in Anooraq; and
(ii) Pelawan will receive 111.6 million Common Shares in Anooraq in order to
maintain Pelawan`s minimum 51% shareholding in Anooraq.
The SPV Preferred Shares are be convertible in one or more tranches into
ordinary shares in the capital of the SPV ("SPV Ordinary Shares") immediately
at the instance of RPM, upon the earlier of (i) the date of receipt by the SPV
of a conversion notice from RPM and (ii) the expiry of a 9 year period from the
date (July 1, 2009) of issuance of the SPV Preferred Shares to July 1, 2018.
Upon such date, RPM will become entitled to a special dividend in cash, which
will immediately be used to subscribe for SPV Ordinary Shares. Upon the SPV
converting the SPV Preferred Shares to SPV Ordinary Shares and RPM subscribing
for additional SPV Ordinary Shares as a result of the special dividend, the SPV
will immediately undertake a share buyback of all SPV Ordinary Shares held by
RPM and will settle the buyback consideration by delivering 115.8 million
common shares to RPM.
As and when RPM issues a conversion notice as described above, in order to
prevent the dilution of the Pelawan`s interest in Anooraq below the minimum 51%
threshold as required by South African law, the SPV will require Plateau to
convert sufficient convertible preferred shares in the capital of Plateau into
Plateau Ordinary Shares. Immediately thereafter, Anooraq will take delivery of
such Plateau Ordinary Shares and issue such number of common shares (in an
aggregate amount of 111.6 million common shares) to the SPV pursuant to the
Exchange Agreement. Such common shares will be held by the SPV and will be
subject to a rigid lock-up that will prevent the SPV and Pelawan from disposing
of such shareholding for so long as Pelawan is required to maintain a minimum
51% shareholding in Anooraq.
As a consequence of Anglo Platinum providing the vendor financing, (i) RPM will
ultimately receive a total of 115.8 million common shares in the Company; and
(ii) Pelawan will receive 111.6 million common shares in order to maintain
Pelawan`s minimum 51% shareholding in Anooraq. (These common shares issued to
Pelawan will be subject to a rigid lock-up that will prevent Pelawan from
disposing of such shareholding for as long as Pelawan is required to maintain a
minimum 51% shareholding in Anooraq). The total number of common shares that
will be issued on implementation of the share settled financing is 227.4
million common shares. RPM will be able to trade its 115.8 million common
shares on an unrestricted basis which could have a depressing effect on the
trading price of the Company`s common shares
RPM is not bound by any contractual lock-ins or restrictions in respect of any
of the Company`s common shares which it will hold. It will, however, prior to
disposing of any such Common Shares, engage in a consultative process with
Anooraq, and endeavour to dispose of such Common Shares in Anooraq in a
responsible manner. Neither Pelawan nor any of the shareholders of Pelawan have
any pre-emptive rights in respect of these Common Shares.
In order to enable Anooraq to meet any required shareholder contributions in
respect of any operating or capital expenditure cash shortfalls at Lebowa
during the initial 3 year ramp up phase at the mine, RPM provided Anooraq with
an operating cash flow shortfall facility (the "OCSF") of up to a maximum of
ZAR 778 million subject to certain annual maximums, during the first three
years of the OCSF. The OCSF bears interest at a rate of 15.84%, compounded
quarterly in arrears.
Anglo Platinum will also make available to Plateau a standby facility for up to
a maximum of 29/49 (approximately 59.2%) of RPM`s attributable share of the
Holdco cash flows, which Plateau may use to fund any cash flow shortfall that
may arise in funding any accrued and capitalized interest and fund repayment
obligations under the Debt Facility during its term. The standby facility will
bear interest at the prime rate of interest in South Africa.
The shareholder loans in Holdco and New Opco acquired through the acquisition
structures rank senior to other internal financing arrangements and are on
consistent terms and conditions to the Debt Facility, in order to ensure that
51% of New Opco`s net cash flows are available to meet Plateau`s Debt Facility
obligations. The Debt Facility is secured by a mortgage bond over Opco`s
immovable assets
Management of the Lebowa Operations
Plateau and RPM entered into the Holdco Shareholders Agreement to govern the
relationship between Plateau and RPM, as shareholders of Holdco, and to provide
management of Holdco and its subsidiaries, including Opco.
Plateau is entitled to nominate the majority of the directors of Holdco and
Opco, and has undertaken that the majority of such nominees will be
Historically Disadvantaged Persons ("HDPs") in South Africa. Anooraq has given
certain undertakings to Anglo Platinum in relation to the maintenance of its
status as an HDP controlled company, pursuant to the Holdco Shareholders
Agreement.
Pursuant to the Holdco Shareholders Agreement, the board of directors of
Holdco, which is controlled by Anooraq, has the right to call for shareholder
contributions, either by way of a shareholder loan or equity. If a shareholder
should default on an equity cash call, the other shareholder may increase its
equity interest in Holdco by funding the entire cash call, provided that, until
the expiry of a period from the closing date of the Lebowa Transaction until
the earlier of (i) the date on which the BEE credits attributable to the Anglo
Platinum group and/or arising as a result of the Lebowa Transaction become
legally secure, and (ii) the date on which 74% of the scheduled capital
repayments due by Plateau to Standard Chartered Bank, pursuant to the Debt
Facility as described below are made in accordance with the debt repayment
profile of the Debt Facility (the "Initial Period"), Anooraq`s shareholding in
Holdco cannot be diluted for default in respect of equity contributions.
Pursuant to the terms of shared services agreements, Anglo Platinum provide
certain services to Opco at a cost that is no greater than the costs charged to
any other Anglo American plc group company for the same or similar services. It
is anticipated that, as Anooraq builds its internal capacity and transforms to
a fully operational PGM producer, these services will be phased out and will be
replaced either with internal or third party services. The Anooraq and Plateau
group of companies provide certain management services to Opco pursuant to
service agreements entered into with effect from July 1, 2009.
The Holdco Shareholders Agreement also governs the initial sale of concentrate
from the Ga-Phasha Project upon commencement of production.
Share Ownership Trusts
Anglo Platinum contributed an amount of $6.3 million (ZAR 45.6 million) to the
Bokoni Platinum Mine ESOP Trust to facilitate its establishment, and
approximately $5 million (ZAR 36.5 million) of this amount was utilized by the
Bokoni Platinum Mine ESOP Trust to subscribe for 4 497 062 Common Shares. The
balance of Anglo Platinum`s contribution will be used to pay benefits to New
Opco employees for the six years following contribution.
As at the effective date of July 1, 2009, Anglo Platinum donated $14.3 million
(ZAR 103.8 million) to the Anooraq Community Participation Trust, of which
$10.9 million (ZAR 79.3 million) was used to subscribe for 9,799,505 new Common
Shares. As a result of the subscription by the Share Ownership Trusts, Anooraq
received proceeds of approximately $15.9 million (ZAR 115.8 million).
The Share Ownership Trusts subscribed for the Common Shares at a subscription
price equal to $1.11, being the closing price of the Common Shares on the TSX-V
on the day prior to the announcement of the revised Lebowa transaction terms or
reservation of the subscription price. The Share Ownership Trusts holds the
Common Shares along with other investments, for the purpose of making
distributions to their beneficiaries in accordance with their governing trust
deeds.
Lebowa Technical Information
Overview
Lebowa is an operating mine located on the northeastern limb of the Bushveld
Complex, to the north of and adjacent to the Ga-Phasha Project. The Lebowa
property consists of seven mining licenses covering an area of 15,459.78
hectares. On May 12, 2008, the DME granted Lebowa conversion of their "old
order" mining rights to "new order" mining rights.
Previous technical studies conducted by Anglo Platinum indicated that Lebowa`s
maximum value is achieved at a mining rate of 375,000 tonnes per month ("tpm"),
comprising steady state Merensky Reef production at 120,000 tpm and steady
state UG2 Reef production of 255,000 tpm. Anglo Platinum approved a long term
growth plan for Lebowa, which included various replacement and expansion
projects, expected to increase production to approximately 375,000 tpm. The
initial plan was to increase existing mining operations at Lebowa in two
stages:
Stage 1 (2008-2013) comprises an expansion of Merensky Reef and UG2 Reef ore
production to 245,000 tpm, with Merensky Reef production being increased to
120,000 tpm, initially from the Brakfontein Merensky Reef decline shaft system,
and UG2 Reef production being increased to 125,000 tpm, initially from the
Middelpunt Hill UG2 Reef decline shaft system.
Stage 2 (2016 onwards) sees the further expansion of UG2 Reef production to
255,000 tpm with Merensky Reef production remaining at 120,000 tpm.
Both the Stage 1 and Stage 2 expansions at Lebowa will access the Merensky Reef
and UG2 Reef from near surface to approximately 650 meters below surface.
Anooraq considers this an advantage, as there will be no need for refrigeration
at depths above 650 meters below surface.
Due to changes in market conditions the expansion of the UG2 production to
125,000 tpm was postponed by Anglo Platinum, who proceeded to maintain UG2
production at 45,000 tpm and to continue with the buildup of the Merensky
production to 120,000 tpm at the Brakfontein Shaft. These development and
replacement projects are expected to increase the total production of Lebowa to
reach 160,000 tpm in the short term, which will utilize current mill capacity.
Technical Review
Pursuant to the TFA announced with the Lebowa transaction, the Company
commissioned a technical review of the Lebowa mine which was reported in April
2008.
Based on the changing economic conditions and metal price environment, Anooraq
and Anglo Platinum undertook a joint technical review of Lebowa in which the
Anglo Platinum-approved mine plan and capital program for Lebowa was
re-assessed and a revised plan developed.
Anooraq engaged Deloitte Mining Advisory Services ("Deloitte") to update the
April 2008 technical review based on this new work and revised plan. The
Deloitte technical report ("May 2009 Technical Report"), written in compliance
with National Instrument 43-101 and the Canadian Institute and Mining and
Metallurgy ("CIM") Definition Standards, describes the Lebowa mineral
exploration, development and mining production. The May 2009 Technical Report
is based on Deloitte`s detailed technical review of work performed by others
and was completed by the following independent qualified persons: J.
Schweitzer, Pr.Sci.Nat. FSAIMM and S. de Waal, Pr.Sci.Nat. (geology,
mineralization), G. Guler, PrEng, FSAIMM, MAusIMM (mineral resources and
reserves, mine planning), T. Naidoo, Pr.Sci.Nat. (Exploration, drilling,
sampling and data verification), and P. Kramers, PrEng., FSAIMM (mineral
processing and metallurgical testing). Deloitte`s May 2009 Technical Report has
been filed on www.sedar.com.
The technical review confirmed the following Mineral Reserves and Resources,
published by Anglo Platinum in their 2008 annual report and tabulated below,
subject to certain qualifications as detailed in the May 2009 Technical Report.
Lebowa Mine Mineral Reserves as at December 31, 2008
Tonnage 4E 4E
Category (Mt) grade contained
(g/t) metal (Moz)
Proven 21.71 4.34 3.03
Merensky Reef Probable 5.43 4.16 0.73
Total Reserve 27.14 4.31 3.76
Proven 32.10 5.43 5.60
UG2 Reef Probable 9.10 5.17 1.50
Total Reserve 41.20 5.37 7.10
Notes: The Mineral Reserves stated are for 100% of Lebowa. Anooraq`s interest
is 51% of the above Mineral Reserves.
Mineral Reserves are exclusive of Mineral Resources. Tonnes and ounces have
been rounded and this may have resulted in minor discrepancies.
The 4E elements are the sum of platinum (Pt), palladium (Pd), rhodium (Rh) and
gold (Au).
Only Measured and Indicated Resources have been converted to Mineral Reserves.
Mineral Reserve grade is based on the hoisted ore grade.
The Mine Call Factors used in the estimations of Proven and Probable Reserves
are 97% and 98%, respectively.
In contained metal calculations, metallurgical recoveries have been assumed to
be 100%.
Lebowa Mine Mineral Resources as at December 31, 2008
4E
4E contained Pt
Tonnage grade metal grade
Category
(Mt) (g/t) (Moz) (g/t)
Merensky Reef
Measured 25.92 5.64 4.71 3.63
Indicated 27.39 5.51 4.85 3.46
Measured and 53.31 5.58 9.56 3.54
Indicated
Inferred 102.9 5.30 17.53 3.34
UG2 Reef
Measured 108.5 6.60 23.03 2.70
Indicated 71.91 6.56 15.18 2.70
Measured and 180.38 6.58 38.21 2.70
Indicated
Inferred 145.00 6.61 30.82 2.72
Pd Rh Au
grade grade grade
Category
(g/t) (g/t) (g/t)
Merensky Reef
Measured 1.5 0.21 0.30
Indicated 1.52 0.20 0.33
Measured and 1.51 0.20 0.32
Indicated
Inferred 1.45 0.20 0.31
UG2 Reef
Measured 3.23 0.55 0.12
Indicated 3.20 0.53 0.13
Measured and 3.22 0.54 0.12
Indicated
Inferred 3.23 0.53 0.13
Notes: The Mineral Resources stated are for 100% of Lebowa. Anooraq`s interest
is 51% of the above Mineral Resources.
Mineral Resources are exclusive of Mineral Reserves.
Tonnes and ounces have been rounded and this may have resulted in minor
discrepancies.
The 4E elements are the sum of platinum (Pt), palladium (Pd), rhodium (Rh) and
gold (Au).
The UG2 Resources include areas of bifurcated UG2 reef.
In contained metal calculations, metallurgical recoveries have been assumed to
be 100%.
The 2008 Mineral Resource and Reserve estimates were compiled by Anglo Platinum
personnel, who have stated that the estimates are in accordance with the
Australasian Code for the Reporting of Mineral Resources and Mineral Reserves
("JORC 2004") and with the South African Code for Reporting of Mineral
Resources and Mineral Reserves ("SAMREC 2007"). In the opinion of Deloitte,
there would not be a material difference in the estimations if done under CIM
2005.
Results of the Technical Review - Economic analysis
The economic analysis undertaken for the technical review used South African
Rand ("ZAR") as the base currency and takes into consideration relevant taxes
and royalties. The technical review used projected metal prices based on
analyst consensus estimates to 2012 resulting in the following average price
forecast over the next five years:
Metal Prices 2009 2010 2011
Platinum (US$/oz) Nominal 1052 1237 1369
Palladium (US$/oz) Nominal 235 293 349
Rhodium (US$/oz) Nominal 2831 3421 4049
Nickel (US$/lb) Nominal 5.6 6.7 7.5
Copper (US$/lb) Nominal 1.9 2.3 2.7
Trend
Metal Prices 2012 (Real 2008)
Platinum (US$/oz) Nominal 1398 1339
Palladium (US$/oz) Nominal 363 378
Rhodium (US$/oz) Nominal 4436 3700
Nickel (US$/lb) Nominal 7.9 7.2
Copper (US$/lb) Nominal 2.6 1.9
Following is the weighted unit revenue for the 4E basket of metals for the
first four years of production.
LOM
2009 2010 2011 2012
(34 years)
nominal 753 888 999 1035
4E basket US$/oz
real 753 868 950 956 967
nominal 9.67 9.42 9.43 9.81
Exchange rate ZAR/US$
real 9.67 9.21 9.02 9.17 9.60
nominal 234,238 268,718 302,764 326,336
4E basket ZAR/kg
real 234,238 256,901 275,404 281,904 297,371
SA CPI 0.0% 4.6% 5.1% 5.3%
US CPI 0.0% 2.3% 2.8% 2.9%
Tax and Royalties
The current South African Income Tax regime for companies applies to Lebowa and
the Discounted Cash Flow ("DCF") model therefore includes the following tax
regime:
Company income tax rate of 28 % on taxable income.
Secondary tax on companies, a tax on dividends declared, of 10 %.
A withholding tax of 10 % for dividends payable to non-residents.
The South African mining sector enjoys immediate tax relief on capital
expenditure i.e. capital expenditure can be off-set against gross profit in the
year it is incurred (or can be carried forward to create a tax shield) i.e.
capital expenditure is not depreciated or amortised for tax purposes.
The South Africa Royalty Act, which has been deferred for a year, was used as a
basis for calculating estimated Royalties. The DCF uses the third and final
draft average rate to calculate royalties payable to the State, which is based
on gross sales less allowable beneficiation related expenses and transport
expenses between the seller and buyer of the final product. The effective
royalty rate over the Lebowa Life of Mine ("LOM") is expected to be 5.6%.
Certain additional mineral resources, that had been the subject of
prefeasibility-level studies and hence could be considered mineral reserves but
not included in "approved mine plans" by Anglo Platinum, have been used for the
economic analysis. This includes 25.7 million tonnes at an average 4E grade of
5.39 g/t from the Brakfontein UG2 Project.
The table below shows the real term financial indicators of the revised plan
over the expected first 34 years of the LOM at Lebowa.
Units Total Units Total
Material Treated Tonnes 92,740,000 Tonnes 92,740,000
Grade (4E head grade) 4E g/t 5.06 4E g/t 5.06
PGM produced 4E oz 13,684,167 4E oz 13,684,167
Revenue ZAR millions 126,749 CAD millions 17,507
Gross revenue ZAR millions 134,226 CAD millions 18,540
Royalties ZAR millions -7,477 CAD millions -1,033
Operating cost ZAR millions 64,067 CAD millions 8,849
Unit operating cost ZAR/t 703.34 CAD/t 97.15
Gross profit ZAR millions 62,682 CAD millions 8,658
Capital Cost (CAPEX) ZAR millions 12,468 CAD millions 1,722
Real term tax ZAR millions 14,937 CAD millions 2,063
Effective tax rate % 22.00 % 22.00
Working CAPEX ZAR millions 1,303 CAD millions 180
Net profit (after
working CAPEX) ZAR millions 33,974 CAD millions 4,693
Margin % 24.70 % 24.70
Cashflow, Net Present Value and Sensitivities
Based on the assumptions stipulated above, the DCF analysis at Lebowa for the
first 34 years of mine plan, yields Net Present Values ("NPV") at a 7.5%
discount rate of ZAR 9,290 million ($1,283 million).
Sensitivities were calculated in the DCF model for revenue, operating costs and
working costs. The valuation is most sensitive to a change in revenue. A 10.0%
decrease in revenue results in a 28% decrease in value in the case of NPV at a
discount rate of 7.5%. The valuation is not particularly sensitive to capital
expenditure. An increase in capital of 10 % decreases the value by just 4.0% in
the case of NPV at a discount rate of 7.5%. The valuation is sensitive to a
variance in operating costs. An increase of 10.0 % decreases the NPV by 14.1%
in the case of NPV at a discount rate of 7.5%.
1.2.2 Ga-Phasha Project
Prior to July 1, 2009, Anooraq owned 50% interest in the Ga-Phasha Project.
Anooraq and Anglo Platinum reviewed the mineral interest between April and
October 2006. Several approaches were considered to optimize mining of the
deposits at the Ga-Phasha Project. The review confirmed that the UG2 deposit
would remain the primary focus for development, and the Merensky deposit
warrants further study through additional drilling.
Engineering and other work directed toward completion of a pre-feasibility was
initiated in late 2006. Since that time, studies on mining method and
infrastructure have been under way. Socio-economic and environmental studies
have also been done.
As of July 1, 2009, the Joint Venture agreements terminated and GPM, a wholly
owned subsidiary of Holdco, owns the respective interest in and assets relating
to the Ga-Phasha Project.
1.2.3 Platreef Properties, Northern Limb
Anooraq holds interests in mineral rights (or "farms") over 37,000 hectares
that make up the Central Block, the Rietfontein Block, and the Boikgantsho and
Kwanda Projects (see below), collectively, known as the Platreef Properties.
Central Block
The Central Block consists of eight farms or portions acquired by Plateau prior
to its joint ventures with Anglo Platinum. It also includes one portion of the
Dorstland farm acquired by way of an agreement with Rustenberg (see Kwanda
Project). Dorstland 768LR was acquired through an agreement with Pinnacle
Resources in 1999. Rights to the other farms or portions are administered by
the DME.
Rietfontein Block
On October 10 2001, Plateau entered into an agreement with African Minerals
Limited, now Ivanhoe Platinum ("Ivanplats"), whereby Ivanplats had the right to
earn a 50% joint venture interest in the Company`s 2,900 ha Rietfontein 2KS
Farm. Under the terms of this agreement, Ivanplats was to incur at least
$750,000 in expenditures pursuant to exploration activities undertaken on
Rietfontein 2KS in accordance with an approved program in each of the ensuing
two years (of which the year one program has been completed) to obtain the
right to form a 50/50 joint venture with the Company on Rietfontein 2KS.
There continues to be disagreement over whether Ivanplats ever presented an
`exploration program` as contemplated by the parties and their agreement.
Further disagreement exists with respect to the expenditure budgets,
compilation and analysis of the exploration results, and the overall adequacy
and completeness of Ivanplats` exploration activities. This affects whether or
not Ivanplats completed its earn in requirements. Plateau and Ivanplats are
currently in an arbitration process, pursuant to the terms of the earn-in
agreement. The outcome of the arbitration is not currently determinable.
Kwanda Project
On May 16, 2002, the Company completed an agreement with RPM for the right to
acquire up to an 80% interest in twelve PGM properties located on the Northern
Limb of the Bushveld Complex Under the agreements with RPM, the Company
acquired an initial 50% interest in the PGM rights to the twelve farms.
As of July 1, 2009, the Joint Venture agreements terminated and Kwanda Platinum
Mine (Proprietary) Limited, a private company incorporated under the laws of
South Africa, a wholly owned subsidiary of Holdco, owns the respective interest
in and assets relating to the Kwanda Project
1.2.4 Boikgantsho Project
In November 2003, Anooraq, through its wholly-owned South African subsidiary,
Plateau, entered into a joint venture agreement with PPL to explore and develop
PGM, gold, nickel and copper mineralization on Anooraq`s Drenthe and Witrivier
farms and the northern portion of Anglo Platinum`s adjacent Overysel farm.
Anglo Platinum has the right to enter into a PGM Ore or Concentrate Purchase
and Disposal Agreement with the Company at the exploitation phase, based on
standard commercial terms, whereby PGM produced from the operation would be
treated at Anglo Platinum`s facilities. Anglo Platinum owns and operates a PGM
smelter at Polokwane, which is approximately 80 kilometres east of the
property.
As of July 1, 2009, the Joint Venture agreements terminated and Boikghantsho
Platinum Mine (Proprietary) Limited, a private company incorporated under the
laws of South Africa, a wholly owned subsidiary of Holdco, owns the respective
interest in and assets relating to the Boikghantsho Project.
1.2.5 Market Trends
The average ZAR: Canadian Dollar exchange rate for the six months ended June
30, 2009 was ZAR 7.59 with the closing rate at six months end at ZAR 6.65.
Platinum prices averaged US$1,145/oz in 2006 and US$1,314/oz in 2007. In 2008,
prices increased to midyear, then decreased significantly, but averaged
US$1,583/oz for the year. Prices have shown a steady increase in 2009, from
US$930/oz early in the year to a high of $1,200/oz in July, and averaging
US$1,112/oz to the date of this report.
Palladium prices averaged approximately US$323/oz in 2006, US$358/oz in 2007
and US$353/oz in 2008. Similar to the pattern if platinum prices, palladium has
been steadily increasing in price in 2009 from a low of approximately US$173/oz
in January to US$260/oz in July, averaging US$223/oz to the date of this
report.
Rhodium prices averaged US$4,562/oz in 2006 and US$6,109/oz in 2007. Prices
ranged from US$6000 to US$10,000/oz in the first half of 2008, but decreased in
the latter part of the year, closing at US$1,250/oz on December 31 and
averaging US$6,532/oz for the year. Prices in 2009 have been improving since
the end of January, and to the date of this report have averaged US$1,333/oz.
Gold prices have been on a general uptrend for the past several years, with
some periods of volatility, especially in the latter half of 2008. The gold
price averaged US$604/oz in 2006, US$697/oz in 2007 and US$871/oz in 2008. The
average price in 2009 to the date of this report is approximately US$920/oz.
1.3 Selected Annual Information
For the year ended December 31, 2008, the consolidated financial statements
have been restated in accordance with IFRS. The consolidated financial
statements for the two prior years have been prepared in accordance with
Canadian generally accepted accounting principles ("Canadian GAAP"). All
figures are expressed in Canadian dollars, except per share amounts.
Restated as per
As per Canadian GAAP
IFRS
As at As at As at
December 31 December 31 December 31
2008 2007 2006
Other assets $ 2,057,594 $ 473,640 $ 411,167
Mineral property interests 4,200,000 7,158,785 8,240,751
Investment in joint venture 2,518,971 - -
Current assets 4,122, 228 7,401,009 13,177,004
Total assets 12,898,793 15,033,434 21,828,922
Shareholders` (deficiency)
equity (3,603,462) 2,813,890 8,976,101
Long term liabilities 12,967,753 9,806,636 11,818,677
Current liabilities 3,534,502 2,412,908 1,034,144
Total liabilities and
shareholders` equity $ 12,898,793 $ 15,033,434 $ 21,828,922
Expenses
Legal, accounting and audit $ 576,330 $ 416,745 $ 690,132
Accretion on term loan - 112,459 13,879
Conference and travel 421,469 492,106 360,959
Consulting 309,377 177,809 154,578
Amortization 61,140 24,009 30,862
Exploration 332,771 852,891 720,463
Foreign exchange 56,644 259,488 (34,817)
Gain on disposal of equipment (5,779) - (41,291)
Interest expense 1,848,574 2,042,711 399,062
Interest income (179,119) (799,985) (263,820)
Office and administration 905,877 451,908 354,353
Salaries and benefits 3,626,962 2,016,689 1,511,874
Shareholders communications 212,015 258,882 289,824
Trust and filing 183,311 269,503 415,440
Subtotal 8,349,572 5,727,612 4,601,498
Share -based compensation 5,385,502 8,707,519 24,346
Equity loss on joint venture 235,022 - -
Future income tax recovery - (139,000) (121,000)
Loss for the year $ 13,979,096 $ 14,296,131 $ 4,504,844
Loss per share $ 0.07 $ 0.08 $ 0.03
Weighted average number of
common shares
outstanding (thousands) 185,775 168,378 148,220
1.4 Summary of Quarterly Results
Expressed in thousands of dollars, except per-share amounts. Small differences
are due to rounding.
Jun 30 Mar 31
2009 2009
Current assets 810 2,286
Mineral properties
4,200 4,200
Investment in joint venture 2,239 2.474
Other assets 13,822 2,062
Total assets 21,074 11,022
Current liabilities 31,508 3,586
Long term liabilities - 13,209
Shareholders` (deficit) equity (10,434) (5,773)
Total liabilities and
shareholders` equity 21,074 11,022
Working Capital (30,698) (1,300)
Expenses
Exploration 1 27
Amortization 31 28
Conference and travel 150 49
Consulting 105 62
Foreign exchange loss (gain) 2 1
Interest on term loan 590 601
Interest expense (income) (18) (50)
Accounting, audit and legal 311 61
Gain on disposal of fixed asset - -
Rent received (12) (14)
Office and administration 165 233
Salaries and benefits 1,802 798
Shareholder communications 87 36
Trust and filing 86 75
Subtotal 3,300 1,907
Equity loss from joint venture 106 106
Share-based compensation 1,824 51
Foreign currency translation
loss (gain) 2,150 157
Future income tax expense
(recovery) - -
Loss for the period 7,380 2,221
Basic and diluted loss per share 0.04 0.01
Weighted average number of
common shares outstanding
(thousands) 186,640 186,640
In Accordance with IFRS
Dec 31 Sep 30 Jun 30
2008 2008 2008
Current assets 4,122 1,445 1,518
Mineral properties
4,200 4,200 6,836
Investment in joint venture 2,518 2,836 2,636
Other assets 2,058 2,031 1,739
Total assets 12,898 10,512 10,093
Current liabilities 3,534 2,191 1,418
Long term liabilities 12,968 8,722 8,930
Shareholders` (deficit) equity (3,604) (761) (255)
Total liabilities and
shareholders` equity 12,898 10,512 10,093
Working Capital 588 (746) 100
Expenses
Exploration 207 15 60
Amortization 29 14 10
Conference and travel 51 129 188
Consulting 118 62 107
Foreign exchange loss (gain) 52 3 -
Interest on term loan 447 495 492
Interest expense (income) (32) (12) (41)
Accounting, audit and legal 95 368 35
Gain on disposal of fixed asset - - (6)
Rent received - - -
Office and administration 237 204 288
Salaries and benefits 1,126 796 690
Shareholder communications 51 63 54
Trust and filing (19) 14 26
Subtotal 2,362 2,151 1,903
Equity loss from joint venture 71 59 53
Share-based compensation 74 78 5,111
Foreign currency translation
loss (gain) 312 (197) 181
Future income tax expense
(recovery) - - -
Loss for the period 2,819 2,091 7,248
Basic and diluted loss per share 0.01 0.01 0.04
Weighted average number of
common shares outstanding
(thousands) 185,775 185,978 185,254
Canadian GAAP
Mar 31 Dec 31 Sep 30
2008 2007 2007
Current assets 3,070 7,401 9,296
Mineral properties
4,200 9,079 9,078
Investment in joint venture 2,932 - -
Other assets 1,012 474 103
Total assets 11,214 16,954 18,478
Current liabilities 977 2,413 2,934
Long term liabilities 8,615 9,807 8,574
Shareholders` (deficit) equity 1,622 4,734 6,967
Total liabilities and
shareholders` equity 11,214 16,954 18,478
Working Capital 2,093 5,356 6,362
Expenses
Exploration 50 749 16
Amortization 8 9 6
Conference and travel 53 341 29
Consulting 22 62 30
Foreign exchange loss (gain) 2 (69) (192)
Interest on term loan 415 648 465
Interest expense (income) (94) (234) (103)
Accounting, audit and legal 79 229 47
Gain on disposal of fixed asset - - -
Rent received - - -
Office and administration 176 172 78
Salaries and benefits 1,016 566 488
Shareholder communications 44 66 60
Trust and filing 162 39 31
Subtotal 1,933 2,578 955
Equity loss from joint venture 51 - -
Share-based compensation 122 8,707 -
Foreign currency translation
loss (gain) (425) - -
Future income tax expense
(recovery) - (137) -
Loss for the period 1,681 11,148 955
Basic and diluted loss per share 0.01 0.06 0.01
Weighted average number of
common shares outstanding
(thousands) 185,218 184,823 184,770
1.5 Results of Operations
Three months ended June 30, 2009
The Company incurred a net loss of $5,230,151 for the three months ended June
30, 2009 compared to a loss of $7,066,733 for the three months ended June 30,
2008. The decrease in the loss for the three months to June 30, 2009 resulted
primarily from a lower share-based compensation charge of $1,824,077 as
compared to $5,110,375 in the same period in 2008 due to less share options
granted. The reduction in the loss was partially offset by an increase in
remuneration and audit fee costs.
Accounting, audit and legal costs for the three months to June 30, 2009
amounted to $311,985 in comparison to $35,117 for the same period in 2008
mainly due to additional reviews undertaken resulting from the Company adopting
IFRS from January 2009. All advisory fees and costs incurred relating to the
Lebowa transaction are capitalized.
Conference and travel costs of $149,959 were incurred during the three months
ended June 30, 2009 in comparison to the $188,412 incurred during for the same
period of fiscal 2008 largely due to reduced international travelling.
Consulting costs for the three months ended June 30, 2009 decreased to $105,361
in comparison to $106,908 spent for the same period of fiscal 2008 largely due
to tax related consulting expenses associated with revised reporting
requirements.
Exploration expenditures decreased in the three months ended June 30, 2009 to
$1,350 as compared to $59,811 incurred for the three months ended June 30,
2008. The cost is primarily due to payments related to preserving the
prospecting rights and meeting administration costs on the various projects as
no significant costs were incurred on PGM exploration activities.
Office and administration for the three months ended June 30, 2009 amounted to
$165,098 in comparison to $287,981 spent for the three months ended June 30,
2008. The decrease is due to lower property charges compared to 2008.
Salaries and benefits amounted to $1,800,194 in the three months ended June 30,
2009 in comparison to $689,525 for the three months ended June 30, 2008 due to
the appointment of executives in anticipation of the finalisation of the Lebowa
Transaction and incentive compensation of $506,425 due the completion of the
Lebowa Transaction. The charge for share based compensation was $1,824,077 for
the three months to June 2009 compared to a charge of $5,110,375 for the six
months to June 30, 2008 due to the repricing of outstanding options as approved
at the shareholders meeting on June 15, 2009.
Trust and filing for the three months ended June 30, 2009 increased to $85,946
in comparison to $26,332 incurred for the three months ended June 30, 2008
primarily as a result of increase expenditure relating to the Company`s various
stock exchange listings.
The Company recorded finance costs of $590, 446 for the three months ended June
30, 2009 in comparison to $491,616 incurred for the same period of fiscal 2008.
The interest expense is mainly due to accrued interest on the Company`s
long-term loan with Rustenburg Platinum Mines Limited, which was increased in
November 2008. The decreased prime overdraft rate of 13% was partially offset
by the strengthening of the South African rand against the Canadian dollar.
Prime overdraft interest rates declined to 13% in the first quarter of 2009 and
are expected to decrease further in the coming months.
Interest income amounted to $18,317 for the three months ended June 30, 2009,
in comparison to $40,734 for the same period of fiscal 2008 as a result of
lower cash balances.
Six months to June 2009
The Company incurred a loss of $7,294,165 for the six months ended June 30,
2009 compared to a loss of $9,174,118 for the six months ended June 30, 2008.
The decreased loss for the six months to June 30 2009 resulted primarily from a
lower share based compensation charge of $1,875,536 as compared to $5,232,693
in the previous six months due to fewer share options issued and the impact of
the repricing approved at the shareholders meeting on June 15, 2009.
Accounting, legal and audit charges increased to $372,575 for the period ended
June 30, 2009 in comparison to $114,546 for the previous six months mainly due
to additional review costs incurred resulting from changing the basis of
preparation to IFRS from Canadian GAAP.
Amortization increased to $59,722 as compared to $18,118 in the previous six
months as a result of the acquisition of assets due to the Company relocating
its office in South Africa. Conference and travel costs of $198,651 were
incurred during the six months ended June 30, 2009 in comparison to the
$241,138 incurred during for the same period of fiscal 2008 largely due to
reduced international travelling by management. Consulting costs for the six
months ended June 30, 2009 increased to $167,397 in comparison to $128,890
spent for the same period of fiscal 2008 largely due to tax related consulting
expenses associated with revised reporting requirements in the US.
Exploration expenditures decreased in the six months ended June 30, 2009 to
$28,542 as compared to $110,350 for the six months ended June 30, 2008. The
cost is primarily due to payments related to preserving the prospecting rights
and meeting joint venture costs on the Ga-Phasha Project as no significant
costs were incurred on PGM exploration activities.
Office and administration for the six months ended June 30, 2009 amounted to
$397,855 in comparison to $464,353 for the six months ended June 30, 2008 as a
result of relocation cost incurred in the six months ended June 30, 2008.
Salaries and benefits amounted to $2,598,947 in the six months ended June 30,
2009 in comparison to $1,705,087 for the same period in the prior six months.
Salaries and benefits for the six months ended June 30, 2009 include the
compensation with respect to payment of a success related bonus of $506,425 to
a number of executives associated with the completion of the Lebowa
Transaction.
The accounting charge relating to share based compensation decreased to
$1,875,536 for the six months ended June 30, 2009, compared to $5,232,693
incurred for same period in fiscal 2008 due to the repricing of outstanding
options as approved at the shareholders meeting on June 15, 2009.
Trust and filing for the six months ended June 30, 2009 decreased to $161,039
in comparison to the $189,179 incurred for the six months ended June 30, 2008
primarily as a result of decreased expenditure relating to the Company`s
various stock exchange listings.
The Company recorded interest expense of $1,191,312 for the six months ended
June 30, 2009 in comparison to $906,493 incurred for the same period of fiscal
2008. The charge increased due the increase in the loan advance from RPM offset
by the decreased prime overdraft rate in the period.
Interest income amounted to $68,594 for the six months ended June 30, 2009, in
comparison to $135,549 for the same period of fiscal 2008 as a result of lower
cash balances
1.6 Liquidity
At June 30 2009 the Company had a, working capital deficit of $30,698,920
compared to a working capital surplus of $587,726 as at December 31, 2008
inclusive of the current portion of the RPM loan. Working capital excluding the
current portion of the RPM loan was $1,332,308 compared to $2,323,389 at
December 31, 2008. As at June 30, 2009, the Company had cash and cash
equivalents of $451,601
The Company reached agreement with Anglo Platinum on November 23, 2008, whereby
Anglo Platinum agreed to provide an additional ZAR 30 million to the Company by
increasing the existing loan to Plateau, from ZAR 70 million to ZAR 100 million
and agreed to defer interest payments owing in terms of the existing loan to
the final closing of the Lebowa transaction. The loan and accrued interest
amounting to $18,357,689 (ZAR 122,078,634) was repaid on 1 July, 2009.
As at June 30, 2009 all outstanding regulatory approvals were obtained by the
Company and all outstanding conditions fulfilled and the transaction was
completed. As a result of the completion of the Lebowa transaction the Company
secured additional financial resources and long term funding. The Company
expects that the cash flows from the acquired mining operations and the
additional financing secured will be sufficient to meet ongoing operating cash
requirements
The Company`s long-term debt obligations are denominated in South African Rand.
Long-term debt obligations have been presented at an exchange rate of 1
Canadian dollar = ZAR 7.65 the closing rate in effect on June 30, 2009.
The Company has the following long-term contractual obligations as at June 30,
2009:
Payments due by period
Total Less 1 to 3 3-5 years More than 5 years
than 1 year years
Contractual Nil Nil Nil Nil Nil
Long term debt $18.2M $18.2M Nil Nil Nil
Operating lease $1.45M $0.25M $1.2M Nil Nil
Purchase Nil Nil Nil Nil Nil
Other Nil Nil Nil Nil Nil
Total $19.65M $18.45M $1.2M Nil Nil
The Company has routine market-price leases on its office premises in
Johannesburg, South Africa.
The Company has no "Purchase Obligations", defined as any agreement to purchase
goods or services that is enforceable and legally binding on the Company that
specifies all significant terms, including: fixed or minimum quantities to be
purchased; fixed, minimum or variable price provisions; and the approximate
timing of the transaction.
1.7 Capital Resources
Anooraq`s sources of capital are primarily equity investment and debt.
The Company`s access to capital sources is dependent upon general financial
market conditions, especially those that pertain to venture capital situations
such as mineral exploration and development. The Company has secured
sustainable long term funding and completed the Lebowa transaction and obtained
funding to meet its operating obligations.
As a result of the completion of the Lebowa Transaction, as of July 1, 2009, the
Company has $10,858,397 (ZAR 72,208,340) commitments for its share of
anticipated capital expenditure at the Lebowa mine. The expenditure will be
funded from anticipated operating cash flows from the Lebowa mine and
utilisation of the OCSF with RPM.
1.8 Off-Balance Sheet Arrangements
None.
1.9 Transactions with Related Parties
Hunter Dickinson Services Inc. ("HDSI") is a private company owned equally by
several public companies, one of which is Anooraq. HDSI provides geological,
corporate development, administrative and management services to, and incurs
third party costs on behalf of the Company on a full cost recovery basis,
pursuant to an agreement dated December 31, 1996.
During the six months ended June 30, 2009 services rendered by HDSI were
$212,486 as compared to $650,328 for the six months ended June 30, 2008.
During the six months ended June 30,, 2009, the Company paid or accrued $nil
(three months ended June 30, 2008 - $4,928) to CEC Engineering Ltd, a private
company owned by a former director of a subsidiary, for engineering and project
management services at market rates.
1.10 Fourth Quarter
Not applicable.
1.11 Proposed Transaction
The Lebowa Transaction completed on July 1, 2009.
1.12 Critical Accounting Estimates
The Company`s accounting policies are presented in note 4 of the unaudited
interim consolidated financial statements and changes to those policies are
described in note 4 of the consolidated interim financial statements for the
six months ended June 30, 2009, which have been publicly filed on SEDAR at
www.sedar.com and as presented in Changes in Accounting Policies item 1.13. The
preparation of the condensed interim financial statements in accordance with
International Accounting Standard 34, Interim Financial Reporting ("IAS 34"),
using accounting policies consistent with International Financial Reporting
Standards ("IFRS") and Interpretations of the International Financial Reporting
Interpretations Committee ("IFRIC"), requires management to make judgments,
estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, income and expenses. These estimates
include:
mineral resources and reserves,
carrying value of the investment in the Pebble Partnership;
property, plant and equipment (including depreciation);
impairment testing;
the calculation of share-based payments; and
asset retirement obligations;
Actual amounts could differ from the estimates used and, accordingly, affect
the results of operation.
1.13 Changes in Accounting Policies including Initial Adoption
Transition to and Initial Adoption of International Financial Reporting
Standards ("IFRS") Effective January 1, 2009 the Company early adopted IFRS
following the exemption received from the applicable Canadian Securities
Administrators under National Instrument 52-107, Acceptable Accounting
Principles, Auditing Standards and Reporting Currency ("NI 52-107") on March 2,
2009.
The consolidated interim financial statements for the six months ended June 30,
2009 have been prepared in accordance with IAS 34, Interim Financial Reporting,
using accounting policies consistent with IFRS and as issued by the
International Accounting Standards Board ("IASB") and interpretations of IFRIC
These are the Company`s second IFRS consolidated interim financial statements
for part of the period covered by the first IFRS consolidated annual financial
statements to be presented in accordance with IFRS for the year ending December
31, 2009. Previously, the Company prepared its consolidated annual and
consolidated interim financial statements in accordance with Canadian generally
accepted accounting principles ("GAAP").
The preparation of these consolidated interim financial statements resulted in
changes to the accounting policies as compared with the most recent annual
financial statements prepared under GAAP.
The accounting policies as set out in Note 4 of the consolidated interim
financial statements have been applied consistently to all periods presented in
these financial statements. Comparative information for the six months ended
June 30, 2008 and financial statements for the year ended December 31, 2008,
have been adjusted from amounts previously reported under GAAP.
Impact of IFRS on Our Organization
The conversion to IFRS impacts the way the Company presents its financial
results. The Company has fully prepared and trained its employees and directors
to ensure an appropriate understanding of IFRS during the transition process.
The impact of the conversion to IFRS on the Company`s accounting systems has
been minimal as the Company was still in the exploration phase. The Company`s
internal and disclosure control processes, as currently designed, have not
required significant modifications as a result of its conversion to IFRS. The
Company has assessed the impacts of adopting IFRS on our contractual
arrangements, and has not identified any material compliance issues. The
Company has considered the impacts that the transition will have on our
internal planning process and compensation arrangements and has not identified
any significant impacts.
First Time Adoption of IFRS
The guidance for the first time adoption of IFRS is set out in IFRS 1, First
Time Adoption of International Financial Reporting Standards.("IFRS 1") which
provides for certain mandatory exceptions and optional exemptions for first
time adopters of IFRS. The Company elected to take the following IFRS 1
optional exemptions:
to apply the requirements of IFRS 3, Business Combinations, prospectively
from January 1, 2008, the "Transition Date";
to apply the requirements of IFRS 2, Share-based payments, only to equity
instruments granted after November 7, 2002 which had not vested as of the
Transition Date; and
to transfer all foreign currency translation differences, recognized as a
separate component of equity, to deficit as at the Transition Date including
those foreign currency differences which arise on adoption of IFRS.
An explanation of how the transition from previous Canadian GAAP to IFRS has
affected the Company`s financial position, financial performance and cash flows
is set out in Note 11 of the consolidated interim financial statements and also
discussed below:
New Standards Not Yet Adopted
Standards and interpretations issued but not yet effective applicable to the
Company:
Amendments to IFRS 3, Business Combinations
Amendments to IFRS 5, Non-current Assets Held for Sale and Discontinued
Operations
Amendments to IAS 16, Property, Plant and Equipment
Amendments to IAS 27, Consolidated and Separate Financial Statements
Amendments to IAS 28, Investments in Associates
Amendments to IAS 31, Interests in Joint Ventures
The Company is evaluating the impact that these standards will have on the
consolidated financial statements.
1.14 Financial Instruments and Other Instruments
The Company is exposed in varying degrees to a variety of financial instruments
related risk, including credit risk, liquidity risk, foreign exchange risk,
interest risk and commodity price risk
Credit Risk
Credit risk is the risk of potential loss to the Company if counterparty to a
financial instrument fails to meet its contractual obligations. The Company`s
credit risk is primarily attributable to its liquid financial assets including
cash and cash equivalents and accounts receivable. The Company limits exposure
to credit risk on liquid financial assets through maintaining its cash and cash
equivalents with high-credit quality financial institutions. The carrying value
of the Company`s cash and cash equivalents and accounts receivable represent
the maximum exposure to credit risk. The Company does not have financial assets
that are invested in asset backed commercial paper.
Liquidity Risk
Liquidity risk is the risk that the company will not be able to meet its
financial obligations as they fall due. The Company ensures that there is
sufficient capital in order to meet short term business requirements, after
taking into account cash flows from operations and the Company`s holdings of
cash and cash equivalents. The Company`s cash and equivalents are invested in
business accounts which are available on demand for the Company`s programs, and
which are not invested in any asset backed deposits/investments.
The Company operates in South Africa. Like other foreign entities operating
there, the Company is subject to currency exchange controls administered by the
South African Reserve Bank, that country`s central bank. A significant portion
of the Company`s funding structure for its South African operations consists of
advancing loans to its South Africa incorporated subsidiaries and it is
possible the Company may not be able to acceptably repatriate such funds once
those subsidiaries are able to repay the loans or repatriate other funds such
as operating profits should any develop. The repatriation of cash h held in
South Africa is permitted upon the approval of the South African Reserve Bank
Foreign Exchange Risk
In the normal course of business, the Company enters into transactions for the
purchase of supplies and services denominated in South African Rand. In
addition, the Company has cash and certain liabilities denominated in South
African Rand. As a result, the Company is subject to foreign exchange risk from
fluctuations in foreign exchange rates. The Company has not entered into any
derivative or other financial instruments to mitigate this foreign exchange
risk.
Interest Rate Risk
The Company has a financing agreement with Standard Chartered whereby a Debt
Facility was made available as part consideration for the Lebowa Transaction.
The Debt Facility is repayable in 12 semi-annual equal capital instalments,
with the first payment due on January 31, 2013, at a rate of interest equal to
the relevant JIBAR ("the Johannesburg Inter Bank Agreed Rate") (or the relevant
swap rate) plus 450 basis points, excluding liquidity and reserving costs.
The Company has the following debt agreements with Anglo Platinum:
Anglo Platinum provided vendor financing for the majority of the Lebowa
Transaction purchase price. This Vendor Finance Facility consists of a ZAR 1.2
billion cash component and the ZAR 1.1 billion share settled financing The
Plateau Preferred A Shares are entitled to a 12.0% fixed dividend compounded on
an annual basis
RPM a provided Anooraq with an operating cash flow shortfall facility up to a
maximum of ZAR 778 million subject to certain annual maximums, during the first
three years of the OCSF. The OCSF bears interest at a rate of 15.84%, compounded
quarterly in arrears.
Anglo Platinum provides Plateau a standby facility for up to a maximum of
29/49 (approximately 59.2%) of RPM`s attributable share of the Holdco cash
flows, which Plateau may use to fund any cash flow shortfall that may arise in
funding any accrued and capitalized interest and fund repayment obligations
under the Debt Facility during its term. The standby facility will bear
interest at the prime rate of interest in South Africa.
Commodity Price Risk
The Company`s revenue and resource properties depend on the price of PGM and
their future demand. The Company does not have any hedging or other commodity
based price risks in respect of its operational activities. PGM prices
historically have fluctuated widely and are affected by numerous factors
outside of the Company`s control, including, but not limited to, industrial and
retail demand, forward sales by producers and speculators, levels of worldwide
production, and short-term changes in supply and demand because of speculative
hedging activities.
1.15 Other MD&A Requirements
Additional information relating to the Company including the Company`s Annual
Information Form is available on SEDAR (www.sedar.com)
1.15.1 Additional Disclosure for Venture Issuers without Significant Revenue
Not applicable. The Company is not a venture issuer.
15.2 Disclosure of Outstanding Share Data
The following details the share capital structure as at August 13, 2009. These
figures may be subject to minor accounting adjustments prior to presentation in
future consolidated financial statements.
Exercise
price
Expiry date Number Number
Common shares 201,743,472
Share purchase options December 17, 2010 $1.29 1,285,000
July 1, 2010 $1.29 119,000
October 15, 2012 $1.29 4,195,000
October 15, 2012 $1.29 126,000
June 25, 2013 $1.29 916,000
June 30, 2013 $1.29 1,410,000
June 29, 2014 $0.96 1,026,000 9,077,000
Potentially issuable upon redemption of Plateau "A" Preference Shares Nil
Potentially issuable upon redemption of Plateau "B" Preference Shares
227,400,000
1.15.3 Internal Controls over Financial Reporting Procedures
The Company`s management is responsible for establishing and maintaining
adequate internal controls over financial reporting. Any system of internal
controls over financial reporting, no matter how well designed, has inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation.
As of January 1, 2009, the Company early adopted IFRS as its standard for
financial reporting. In connection with the adoption of IFRS, the Company
updated its internal controls over financial reporting, as necessary, to
facilitate the respective IFRS convergence and transition activities performed.
Other than the adoption of IFRS, no other significant changes in internal
controls over financial reporting occurred during the period ended June 30,
2009 that could have materially affected or are reasonably likely to materially
affect the Company`s internal control over financial reporting.
1.15.4 Disclosure Controls and Procedures
The Company has disclosure controls and procedures in place to provide
reasonable assurance that any information required to be disclosed by the
Company under securities legislation is recorded, processed, summarized and
reported within the applicable time periods and to ensure that required
information is gathered and communicated to the Company`s management so that
decisions can be made about timely disclosure of that information.
There have been no significant changes in the Company`s disclosure controls and
procedures during the period ended June 30, 2009 that could significantly
affect disclosure controls and procedures subsequent to the date the Company
carried out its evaluation.
Date: 17/08/2009 08:00:08 Produced by the JSE SENS Department.
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