| Mon 16 Nov 2009, 17:49 | | ARQ - Anooraq Resources Corporation - Unaudited condensed consolidated |
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ARQ
ARQ
ARQ - Anooraq Resources Corporation - Unaudited condensed consolidated
financial statements for the three and nine months ended 30 September, 2009
Anooraq Resources Corporation
Incorporated in British Columbia, Canada
Registration number 10022-2033
TSXV/JSE share code: ARQ
AMEX share code: ANO
ISIN: CA03633E1088
("Anooraq" or the "Company" or the "Group")
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE
MONTHS ENDED 30 SEPTEMBER, 2009
(Expressed in Canadian Dollars, unless otherwise stated)
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITIONS
Unaudited Audited
30 September 31 December
Note 2009 2008
Assets
Non-current assets
Property, plant and equipment 13 695,144,027 469,635
Mineral property interests 14 12,769,823 4,200,000
Goodwill 8 10,565,322 -
Capital work in progress 15 224,562,709 -
Investments in equity accounted investees 16 - 2,518,971
Cash deposits held in environmental trust 17 2,309,891 -
Deferred acquisition costs - 1,587,959
Total non-current assets 945,351,772 8,776,565
Current assets
Trade and other receivables 18 30,865,484 271,554
Cash and cash equivalents 19 29,688,616 3,850,674
Total current assets 60,554,100 4,122,228
Total assets 1,005,905,872 12,898,793
Equity
Share capital 20 72,346,321 54,948,341
Treasury shares (5,190,894) -
Convertible redeemable preference shares 20 162,910,000 -
Share based payment reserve 19,460,510 17,584,974
Hedge reserve 20 (180,759) -
Foreign currency translation reserve 20 (16,845,478) 129,684
Accumulated loss (97,731,555) (76,266,461)
Total equity attributable to equity holders
of the Company 134,768,145 (3,603,462)
Non-controlling interest 92,149,549 -
Total equity 226,917,694 (3,603,462)
Liabilities
Non-current liabilities
Loans and borrowings 21 522,826,795 12,967,753
Financial liabilities 995,344 -
Commitment fee liability 218,356 -
Provisions 22 4,219,526 -
Deferred taxation 11 215,887,904 -
Total non-current liabilities 744,147,925 12,967,753
Current liabilities
Trade and other payables 23 34,722,121 1,798,839
Loans and borrowings 21 - 1,735,663
Tax payable 118,132 -
Total current liabilities 34,840,253 3,534,502
Total liabilities 778,988,178 16,502,255
Total equity and liabilities 1,005,905,872 12,898,793
The accompanying notes are an integral part of these condensed consolidated
financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Nine months ended
Unaudited Unaudited
30 September 30 September
Note 2009 2008
Revenue 9 27,805,577 -
Cost of sales (34,595,797) -
Operating Loss (6,790,220) -
Depreciation and amortisation (5,987,468) (32,138)
Administrative expenses (8,838 ,747) (10,018,538)
Transaction costs 8 (7,498,775) -
Other income 3,989,788 5,894
Loss before finance expense and tax (25,125,422) (10,044,782)
Finance income 449,369 147,461
Finance expense 10 (9,985,062) (1,401,597)
Net finance expense (9,535,693) (1,254,136)
Share of loss of equity accounted investees (212,423) (163,702)
(net of income tax)
Loss before income tax (34,873,538) (11,462,620)
Income tax 11 5,495,022 -
- -
Loss for the period (29,378,516) (11,462,620)
Other comprehensive (loss)/income
Foreign currency translation differences (21,592,220) 441,841
for foreign operations
Effective portion of changes in fair value (180,759) -
of cash flow hedges
Other comprehensive (loss) / income for the (21,772,979) 441,841
period, net of income tax
Total comprehensive loss for the period (51,151,495) (11,020,779)
Loss attributable to:
Owners of the Company (21,465,095) (11,462,620)
Non-controlling interest (7,913,421) -
Loss for the period (29,378,516) (11,462,620)
Total comprehensive (loss) / income
attributable to:
Owners of the Company (38,621,016) (11,020,779)
Non-controlling interest (12,530,479) -
Total comprehensive loss for the period (51,151,495) (11,020,779)
Earnings per share
Basic and diluted loss per share 12 (0.16) (0.06)
Headline loss per share (0.10) (0.06)
Diluted headline earnings / (loss) per (0.10) (0.06)
share
Weighted average number of ordinary shares
outstanding 189,286,554 185,485,041
Fully diluted average number of ordinary
shares outstanding 245,980,800 185,485,041
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (CONTINUED)
Three months ended Year ended
Unaudited Unaudited Audited
Note 30 September 30 September 31 December
2009 2008 2008
Revenue 9 27,805,577 - -
Cost of sales (34,595,797) - -
Operating Loss (6,790,220) - -
Depreciation and amortisation (5,927,746) (14,020) (61,140)
Administrative expenses (2,913,138) (1,732,253) (12,010,258)
Transaction costs 8 (276,638) - -
Other income 3,963,481 158 5,779
Loss before finance expense (11,944,261) (1,746,115) (12,065,619)
and tax
Finance income 380,775 12,002 179,119
Finance expense 10 (8,793,750) (495,104) (1,848,574)
Net finance expense (8,412,975) (483,102) (1,669,455)
Share of loss of equity - (59,285) (235,022)
accounted investees (net of
income tax)
Loss before income tax (20,357,236) (2,288,502) (13,970,096)
Income tax 11 5,495,022 - -
- - -
Loss for the period (14,862,214) (2,288,502) (13,970,096)
Other comprehensive
(loss)/income
Foreign currency translation (10,138,564) 197,024 129,684
differences for foreign
operations
Effective portion of changes (180,759) - -
in fair value of cash flow
hedges
Other comprehensive (loss) / (10,319,323) 197,024 129,684
income for the period, net of
income tax
Total comprehensive loss for (25,181,537) (2,091,478) (13,840,412)
the period
Loss attributable to:
Owners of the Company (6,948,793) (2,288,502) (13,970,096)
Non-controlling interest (7,913,421) - -
Loss for the period (14,862,214) (2,288,502) (13,970,096)
Total comprehensive (loss) /
income attributable to:
Owners of the Company (12,651,058) (2,091,478) (13,840,412)
Non-controlling interest (12,530,479) - -
Total comprehensive loss for (25,181,537) (2,091,478) (13,840,412)
the period
Earnings per share
Basic and diluted loss per 12 (0.08) (0.01) (0.08)
share
Headline loss per share (0.03) (0.01) (0.07)
Diluted headline earnings /
(loss) per share (0.03) (0.01) (0.07)
Weighted average number of
ordinary shares outstanding 189,286,554 185,485,041 185,775,361
Fully diluted average number
of ordinary shares
outstanding 245,980,800 185,485,041 185,775,361
The accompanying notes are an integral part of these condensed consolidated
financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Treasury shares
Number of Amount Number of Amount
shares shares
For the nine months ended
30 September 2008
Balance at 1 January 2008 185,208,607 51,855,350 - -
Total comprehensive income
for the period
Loss for the period - - - -
Other comprehensive income
Foreign currency - - - -
translation differences
Total other comprehensive - - - -
income
Total comprehensive income - - - -
for the period
Transactions with owners, - - - -
recorded directly in equity
Contributions by and
distributions to owners
Fair value of stock options - 1,055,432 - -
allocated to share issued
on exercise
Share-based payment 1,431,400 2,037,558 - -
transactions
Total contributions by and 1,431,400 3,092,990 - -
distributions to owners
Balance at 30 September 186,640,007 54,948,340 - -
2008
For the nine months ended
30 September 2009
Balance at 1 January 2009 186,640,007 54,948,340 - -
Arising from business - - - -
acquisition
Total comprehensive - - - -
(loss)income for the period
Loss for the period - - - -
Other comprehensive
(loss)/income
Foreign currency - - - -
translation differences
Effective portion of - - - -
changes in fair value of
cash flow hedges, net of
tax
Total other comprehensive - - - -
loss
Total comprehensive - - - -
(loss/)income for the
period
Transactions with owners,
recorded directly in equity
Contributions by and
distributions to owners
Ordinary shares issued 14,296,567 16,502,324 (4,497,062) (5,190,894)
Preference shares issued - - - -
Share options repriced - - - -
Share-based payment 806,898 895,657 - -
transactions
Total contributions by and 15,103,465 17,397,981 (4,497,062) (5,190,894)
distributions to owners
Balance at 30 September 201,743,472 72,346,321 (4,497,062) (5,190,894)
2009
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
Convertible
redeemable Share based
preference Translation payment Hedge
shares reserve reserve reserve
For the nine months ended
30 September 2008
Balance at 1 January 2008 13,254,905 -
Total comprehensive income
for the period
Loss for the period - - - -
Other comprehensive income
Foreign currency
translation differences - 441,841 - -
Total other comprehensive 441,841
income - - -
Total comprehensive income 441,841
for the period - - -
Transactions with owners,
recorded directly in - - - -
equity
Contributions by and
distributions to owners
Fair value of stock
options allocated to share - (1,055,432) -
issued on exercise
Share-based payment
transactions 5,311,104 -
Total contributions by and
distributions to owners 4,255,672 -
Balance at 30 September
2008 441,841 17,510,577
For the nine months ended
30 September 2009
Balance at 1 January 2009 129,684 17,584,974 -
Arising from business
acquisition - - - -
Total comprehensive
(loss)income for the - - - -
period
Loss for the period - - - -
Other comprehensive
(loss)/income
Foreign currency
translation differences - (16,975,162) - -
Effective portion of -
changes in fair value of - - -
cash flow hedges, net of
tax
Total other comprehensive (16,975,162)
loss - - (180,759)
Total comprehensive
(loss/)income for the (16,975,162) (180,759)
period - -
Transactions with owners,
recorded directly in (16,975,162) (180,759)
equity
Contributions by and
distributions to owners
Ordinary shares issued
Preference shares issued 162,910,000 - 758,095 -
Share options repriced - - - -
Share-based payment
transactions - - 1,117,441 -
Total contributions by and 1,875,536 -
distributions to owners 162,910,000 -
Balance at 30 September
2009 162,910,000 (16,845,478) 19,460,510 (180,756)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
Non-
Accumulated controlling
loss Total interest Total equity
For the nine months
ended 30 September 2008
Balance at 1 January 2,910,262 2,910,262
2008 (62,199,993) -
Total comprehensive
income for the period
Loss for the period (11,462,620) (11,462,620) - (11,462,620)
Other comprehensive
income
Foreign currency
translation differences - 441,841 - 441,841
Total other 441,841 441,841
comprehensive income - -
Total comprehensive (11,020,779) (11,020,779)
income for the period (11,462,620) -
Transactions with
owners, recorded
directly in equity - - - -
Contributions by and
distributions to owners
Fair value of stock
options allocated to
share issued on - - - -
exercise
Share-based payment
transactions - 7,348,662 - 7,348,662
Total contributions by - 7,348,662 - 7,348,662
and distributions to
owners
Balance at 30 September (761,855) - (761,855)
2008 (73,662,613)
For the nine months
ended 30 September 2009
Balance at 1 January (76,266,460) (3,603,462)
2009 (3,603,462) -
Arising from business 104,680,028
acquisition - - 104,680,028
Total comprehensive
(loss)income for the
period - - - -
Loss for the period (21,465,095) (21,465,095) (7,913,421) (29,378,516)
Other comprehensive
(loss)/income
Foreign currency
translation differences - (16,975,162) (4,617,058) (21,592,220)
Effective portion of
changes in fair value
of cash flow hedges,
net of tax - (180,759) - (180,759)
Total other (17,155,921) (4,617,058) (21,772,979)
comprehensive loss -
Total comprehensive
(loss/)income for the
period (21,465,095) (38,621,016) (12,530,479) (51,151,495)
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to owners
Ordinary shares issued - 12,069,525 - 12,069,525
Preference shares - 162,910,000 - 162,910,000
issued
Share options repriced - 1,117,441 - 1,117,441
Share-based payment
transactions - 895,657 - 895,657
Total contributions by
and distributions to
owners - 176,992,623 - 176,992,623
Balance at 30 September 226,917,694
2009 (97,731,555) 134,768,145 92,149,549
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
Nine months ended Year ended
Note Unaudited Unaudited Audited
30 September 30 September 31 December
2009 2008 2008
Operating activities
Cash flows from operating (29,378,516) (11,462,620) (13,970,096)
activities
Loss for the period
Adjustments for:
Depreciation and amortisation 5,987,468 32,138 61,140
Finance expense 9,985,062 1,300,884 1,848,416
Profit on sale of assets - (5,894) (5,779)
Unrealised foreign exchange (156,592) (337,868) (265,050)
loss / (gain)
Share of profit of equity 212,423 163,702 310,130
accounted investees, net of
tax
Equity-settled share-based 1,875,536 5,311,104 5,385,472
payment transactions
Ordinary shares issued as 895,657 - -
compensation
Deferred tax (5,495,022) - -
(16,073,984) (4,998,554) (6,635,767)
Change in trade and other (4,626,235) 98,778 746,098
receivables
Change in trade and other (228,396) 435,763 529,665
payables
(20,928,615) (4,464,013) (5,360,004)
Financing costs paid - (1,764,651) -
Net cash used in operating (20,928,615) (6,228,664) (5,360,004)
activities
Acquisition of property, 8 (1,829) (452,804) (473,642)
plant and equipment
Acquisition of Bokoni 8 (119,956,365) - -
Platinum Mine (Pty) Ltd
Contributions received from 8 6,741,102 - -
Anglo Platinum relating to
ESOP trust
Acquisition of cash in 3,576,912 - -
business combination
Proceeds from the sale of 15 - 23,832 54,140
assets
Capital work-in- progress 8 (10,370,098) - -
Additions to mineral property (6,592,523) - -
interest
Deferred acquisition costs (11,824,920) (1,154,461) (1,219,813)
previously capitalised now
expensed
Net cash used in investing (138,427,721) (1,583,433) (1,639,315)
activities
Proceeds from the issue of 21 2,037,558 5,667,587
share capital
Proceeds from the issue of A 21 177,720,000 - -
preference shares
Redemption of "A" preference (1,066,320) - -
shares
Proceeds from the issue of 162,910,000 - -
convertible "B" preference
shares
Loans raised from Rustenburg 21 29,531,388 - -
Platinum Mines Limited
Loan received from Standard 8 74,050,000 - -
Chartered Bank
Repayment of loans and 21 (251,770,000) - -
borrowings to RPM at
acquisition
Repayment of bridging loan to 12 (18,079,846) - (1,747,324)
Rustenburg Platinum Mines
Limited
Net cash from financing 173,295,222 2,037,558 3,920,263
activities
Net increase in cash and cash 13,938,886 (5,774,539) (3,079,056)
equivalents
Effect of exchange rate 11,898,966 (136,716) (202,091)
fluctuations on cash held
Cash flows from investing 3,850,764 7,131,821 7,131,821
activities
Cash and cash equivalents at $29,688,616 1,220,566 3,850,674
30 September 2009
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
Three months ended
Note Unaudited Unaudited
30 September 30 September
2009 2008
Operating activities
Cash flows from operating activities (14,862,214) (2,288,502)
Loss for the period
Adjustments for:
Depreciation and amortisation 5,927,746 14,020
Finance expense 8,793,750 394,391
Profit on sale of assets - (5,894)
Unrealised foreign exchange loss / (gain) (170,257) (266,726)
Share of profit of equity accounted - 59,285
investees, net of tax
Equity-settled share-based payment - 78,411
transactions
Ordinary shares issued as compensation - -
Deferred tax (5,495,022) -
(5,805,997) (2,015,015)
Change in trade and other receivables (4,539,384) 195,911
Change in trade and other payables (11,733,233) 317,517
(22,078,614) (1,501,587)
Financing costs paid - (7,997)
Net cash used in operating activities (22,078,614) (1,509,584)
Acquisition of property, plant and 8 - (114,131)
equipment
Acquisition of Bokoni Platinum Mine (Pty) 8 (119,956,365) -
Ltd
Contributions received from Anglo Platinum 8 6,741,102 -
relating to ESOP trust
Acquisition of cash in business combination 3,576,912 -
Proceeds from the sale of assets 15 - 108
Capital work-in- progress 8 (10,370,098) -
Additions to mineral property interest (6,592,523) -
Deferred acquisition costs previously - (191,658)
capitalised now expensed
Net cash used in investing activities (126,600,972) (305,681)
Proceeds from the issue of share capital 21 1,470,000
Proceeds from the issue of A preference 21 177,720,000 -
shares
Redemption of "A" preference shares (1,066,320) -
Proceeds from the issue of convertible "B" 162,910,000 -
preference shares
Loans raised from Rustenburg Platinum Mines 21 29,531,388 -
Limited
Loan received from Standard Chartered Bank 8 74,050,000 -
Repayment of loans and borrowings to RPM at 21 (251,770,000) -
acquisition
Repayment of bridging loan to Rustenburg 12 (18,079,846) -
Platinum Mines Limited
Net cash from financing activities 173,295,222 1,470,000
Net increase in cash and cash equivalents 24,615,636 (345,265)
Effect of exchange rate fluctuations on 4,621,379 425,472
cash held
Cash flows from investing activities 451,601 1,140,359
Cash and cash equivalents at 30 September 29,688,616 1,220,566
2009
The accompanying notes are an integral part of these condensed consolidated
financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NATURE OF OPERATIONS
Anooraq is incorporated in the Province of British Columbia, Canada. The
condensed consolidated financial statements of the Group as at and for the
three and nine months to 30 September 2009 comprise the Company and its
subsidiaries (together referred to as the "Group" and individually as "Group
entities") and the Group`s interest in associates and jointly controlled
entities. Its principal business activity is the mining and exploration of
Platinum Group Metals ("PGM") through its mineral property interests. The
Company focuses on mineral property interests located in the Republic of
South Africa in the Bushveld Complex. Anooraq operates in South Africa
through its wholly owned subsidiary Plateau Resources (Proprietary) Limited
("Plateau") which historically owned the Group`s various mineral property
interests and conducted the Group`s business in South Africa.
The condensed consolidated financial statements include the results of the
Group`s acquisition of an effective 51% of the Lebowa Platinum Mine, now
known as Bokoni Platinum Mines (Proprietary) Limited ("Bokoni") and control
of the advanced stage Ga-Phasha Project ("Ga-Phasha Project"), the
Boikgantsho Project ("Boikgantsho Project") and the early stage Kwanda
Project ("Kwanda Project") by acquiring an additional 1% of these projects
for an aggregate cash consideration of $385 million (South African Rands
("ZAR") 2.6 billion) as from 1 July 2009 (refer note 8).
The controlling interest was affected through Plateau acquiring 51% of the
shareholding of Bokoni Platinum Holdings (Proprietary) Limited ("Bokoni
Holdco") on 1 July 2009. Bokoni Holdco, a private company incorporated under
the laws of South Africa, is the holding company through which Anooraq and
Anglo Platinum Limited ("Anglo Platinum") hold their interests in Bokoni and
the various exploration project companies.
2.GOING CONCERN
The condensed consolidated financial statements are prepared on the basis
that the Group will continue as a going concern which contemplates the
realization of assets and settlement of liabilities in the normal course of
operations as they become due.
Anooraq completed the acquisition of an operating mine (refer note 8), which
resulted in immediate cash flows from operations. The Group secured various
funding arrangements (refer note 21) in order to meet the purchase
consideration and to fund its planned business objectives. The funding
agreements include securing a long term credit facility, the Operating
Cashflow Shortfall Facility ("OCSF"), with Rustenburg Platinum Mines Limited
("RPM") for an amount of $218 million (ZAR 1.5 billion). The facility will be
used to fund Plateau`s share of operating cash and capital requirements for
an initial period of three years. As at 30 September 2009, the Group utilised
$29.5 million (ZAR 219.4 million) thereof to fund operating requirements at
Bokoni as the mining operations are not currently generating sufficient cash
flows to fund operations.
As a result of securing the 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 immediate ongoing
operating cash requirements.
3.BASIS OF PRESENTATION
STATEMENT OF COMPLIANCE
These condensed consolidated financial statements have been prepared in
accordance 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
those standards.
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 1
January 2009. The Group`s transition date for converting to IFRS was 1
January 2008 (the "Transition Date") and the comparative statement of
financial position as at 31 December 2008, comparative statements of
comprehensive loss for three and nine months ended 30 September 2008 and for
the year ended 31 December 2008, comparative statements of changes in equity
and statements of cash flows for the three and nine months ended 30 September
2008 and for the year ended 31 December 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 Group 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 7 November 2002 which had not vested as of the
Transition Date; and
- to transfer all foreign currency translation differences, recognised 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 Groups` previously reported statement of
financial position and the statements of comprehensive loss under Canadian
generally accepted accounting principles ("GAAP") and those reported under
IFRS are presented in note 26.
BASIS OF MEASUREMENT
The condensed consolidated financial statements have been prepared on the
historical cost basis as set out in the accounting policies below. Certain
items, including derivative financial instruments, are stated at fair value.
USE OF ESTIMATES AND JUDGEMENTS
The preparation of the condensed consolidated financial statements in
accordance with IFRS requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the
reported amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
These condensed consolidated financial statements have been prepared on the
basis of IFRS standards that are expected to be effective or available for
early adoption by the Group on 31 December 2009, the Group`s first annual
reporting date under IFRS. The Group 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 31 December 2009. The
preparation of these condensed consolidated 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
financial statements. They also have been applied in preparing an opening
IFRS balance sheet at 1 January 2008, as required by IFRS 1. The impact of
the transition from GAAP to IFRS is explained in note 26.
Estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
Information about critical judgements in applying accounting policies that
have the most significant effect on the amounts recognised in the
consolidated financial statements is included in the notes to the financial
statements where applicable.
CHANGES IN ACCOUNTING POLICIES
Overview
The Group changed its accounting policies as from 1 January 2009 in the
following areas:
-Accounting for business combinations
-Presentation of financial statements
-Accounting for borrowing costs
ACCOUNTING FOR BUSINESS COMBINATIONS
As a result of the acquisition discussed in note 8, the Group early adopted
IFRS 3 Business Combinations (2008) and IAS 27 Consolidated and Separate
Financial Statements (2008) for all business combinations occurring in the
financial year commencing 1 January 2009. All business combinations occurring
on or after 1 January 2009 are accounted for by applying the acquisition
method. The change in accounting policy is applied prospectively. As a result
of the change in accounting policy, transaction costs amounting to $7.5
million were recognised in profit and loss for the nine months ended 30
September 2009.
The Group applied the acquisition method for the business combination as
disclosed in note 8.
Control is the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. In assessing control,
consideration is given to potential voting rights that are currently
exercisable. The acquisition date is the date on which control is transferred
to the acquirer. Judgement is applied in determining the acquisition date and
determining whether control is transferred from one party to another.
Goodwill is measured as the fair value of the consideration transferred
including the recognised amount of any non-controlling interest in the
acquiree, less the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed, all measured at the
acquisition date. To the extent that the fair value exceeds the consideration
transferred, the excess is recognised in the statement of comprehensive
income.
Consideration transferred includes the fair values of the assets transferred,
liabilities incurred by the Group to the previous owners of the acquiree, and
equity interests issued by the Group. Consideration transferred also includes
the fair value of any contingent consideration and share-based payment awards
of the acquiree that are replaced mandatorily in the business combination.
A contingent liability of the acquiree is assumed in a business combination
only if such a liability represents a present obligation and arises from a
past event, and its fair value can be measured reliably.
Non-controlling interest is measured at its proportionate interest in the
identifiable net assets of the acquiree.
Transaction costs incurred in connection with a business combination, such as
legal fees, due diligence fees, and other professional and consulting fees
are expensed as incurred, unless it is debt related. Transaction costs
related to debt instruments are capitalised.
If the Group obtains control over one or more entities that are not
businesses, then the bringing together of those entities are not business
combinations. The cost of acquisition is allocated among the individual
identifiable assets and liabilities of such entities, based on their relative
fair values at the date of acquisition. Such transactions do not give rise to
goodwill and no non-controlling interest is recognised.
The change in accounting policy is applied prospectively.
The impact of the change in accounting policy has been recorded in the
quarter ended 30 September 2009. The effect on profit and loss on the
quarters of the 2009 financial year previously reported would have been as
follows:
Three months Three months
ended 30 June ended 31 March
2009 2009
Loss as previously reported 9,174,118 2,107,384
Transaction costs expensed 5,551,586 1,670,551
Loss, as restated 14,725,704 3,777,935
Loss per share, as restated (0.08) (0.02)
PRESENTATION OF FINANCIAL STATEMENTS
The condensed consolidated financial statements have been prepared by
applying the revised IAS 1 Presentation of Financial Statements (2007), which
became effective as of 1 January 2009. As a result, the consolidated
statement of changes in equity presents all owner changes in equity, whereas
all non-owner changes in equity are presented in the consolidated statement
of comprehensive income. This presentation has been applied in these
condensed consolidated financial statements.
Comparative information has been changed so that it is in conformity with the
revised standard. Since the change in accounting policy only impacts
presentation aspects, there is no impact on loss per share.
ACCOUNTING FOR BORROWING COSTS
In respect of borrowing costs relating to qualifying assets for which the
commencement date for capitalisation is on or after 1 January 2009, the Group
capitalises borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset as part of the
cost of that asset. Previously the Group immediately recognised all borrowing
costs as an expense. This change in accounting policy was due to the
prospective adoption of IAS 23 Borrowing Costs (2007) in accordance with the
transitional provisions of such standard; comparative figures have not been
restated. The change in accounting policy resulted in the capitalisation of
borrowing costs of $6.9 million in the period ended 30 September 2009. The
change in accounting policy did not impact previously reported quarters of
the 2009 financial year.
4.SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all
periods presented in these condensed consolidated financial statements, and
have been applied consistently by Group entities, except as explained in note
3, which addresses changes in accounting policies.
Certain comparative amounts have been reclassified to conform to the current
period`s presentation.
(a) BASIS OF CONSOLIDATION
BUSINESS COMBINATIONS
The Group changed its accounting policy with respect to accounting for
business combinations. Refer note 3 for further details.
SUBSIDIARIES
Subsidiaries are entities controlled by the Group. The financial statements
of subsidiaries are included in the condensed consolidated financial
statements from the date that control commences until the date that control
ceases. The accounting policies of subsidiaries have been changed when
necessary to align them with the policies adopted by the Group.
SPECIAL PURPOSE ENTITIES
A Special Purpose Entity ("SPE") is consolidated if, based on an evaluation
of the substance of its relationship with the Group and the SPE`s risks and
rewards, the Group concludes that it controls the SPE. SPEs` controlled by
the Group were established under terms that impose strict limitations on the
decision-making powers of the SPEs` management and that result in the Group
receiving the majority of the benefits related to the SPEs` operations and
net assets, being exposed to the majority of risks incident to the SPEs`
activities, and retaining the majority of the residual or ownership risks
related to the SPEs` or their assets.
INVESTMENTS IN JOINTLY CONTROLLED ENTITIES (EQUITY ACCOUNTED INVESTEES)
Joint ventures are those entities over whose activities the Group has joint
control, established by contractual agreement and requiring unanimous consent
for strategic financial and operating decisions.
Investments in jointly controlled entities are accounted for using the equity
method (equity accounted investees) and are recognised initially at cost. The
Group`s equity investment includes goodwill identified on acquisition, net of
any accumulated impairment losses. The condensed consolidated financial
statements include the Group`s share of the income and expenses and equity
movements of equity accounted investees, after adjustments to align the
accounting policies with those of the Group, from the date that significant
influence or joint control commences until the date that significant
influence or joint control ceases. When the Group`s share of losses exceeds
its interest in an equity accounted investee, the carrying amount of that
interest, including any long-term investments, is reduced to nil, and the
recognition of further losses is discontinued except to the extent that the
Group has an obligation or has made payments on behalf of the investee.
TRANSACTIONS ELIMINATED ON CONSOLIDATION
Intra-group balances and transactions, and any unrealised income and expenses
arising from intra-group transactions, are eliminated in preparing the
condensed consolidated financial statements. Unrealised gains arising from
transactions with equity accounted investees are eliminated against the
investment to the extent of the Group`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.
(b) FOREIGN CURRENCY
FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are translated to the respective
functional currencies of Group entities at exchange rates at the date 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
recognised in profit and loss.
FOREIGN OPERATIONS
The financial results of Group entities that have a functional currency
different from the presentation currency are translated into the presentation
currency. The presentation currency of the Group is Canadian Dollars. Income
and expenditure transactions of foreign operations are translated at the
average rate of exchange for the period except for significant individual
transactions which are translated at the rate of exchange in effect at the
transaction date. All assets and liabilities, including fair value
adjustments and goodwill arising on acquisition, are translated at the rate
of exchange ruling at the reporting date. Differences arising on translation
are recognised as other comprehensive income and are included in the foreign
currency translation reserve ("FCTR").
When the settlement of a monetary item receivable from or payable to a
foreign operation is neither planned nor likely in the foreseeable future,
foreign exchange gains and losses arising from such a monetary item are
considered to form part of the net investment in a foreign operation and are
recognised in other comprehensive income and are included in the FCTR.
On disposal of part or all of the operation, the proportionate share of the
related cumulative gains and losses previously recognised in the FCTR through
the statement of comprehensive income are included in determining the profit
or loss on disposal of that operation recognised in the profit or loss.
(c) FINANCIAL INSTRUMENTS
NON-DERIVATIVE FINANCIAL ASSETS
Loans and receivables are recognised on the date of origination. All other
financial assets are recognised initially on the trade date at which the
Group becomes a party to the contractual provisions of the instrument.
Financial assets are derecognised when the contractual rights to the cash
flows from the asset expire, or the Group transfers the rights to receive the
contractual cash flows on the financial asset in a transaction in which
substantially all the risks and rewards of ownership of the financial asset
are transferred. Any interest in transferred financial assets that is created
or retained is recognised as a separate asset or liability.
Financial assets and financial liabilities are offset and the net amount
presented in the statement of financial position when, and only when, the
Group has a legal right to offset the amounts and intends either to settle on
a net basis or to realise the asset and settle the liability simultaneously.
NON-DERIVATIVE FINANCIAL ASSETS COMPRISE LOANS AND RECEIVABLES.
Loans and receivables
Loans and receivables are financial assets with fixed or determinable
payments that are not quoted in an active market. Such assets are recognised
initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition loans and receivables are measured at
amortised cost using the effective interest method, less any impairment
losses.
Loans and receivables comprise trade and other receivables.
Cash and cash equivalents comprise cash balances and call deposits with
original maturities of three months or less.
Non-derivative financial liabilities
The Group initially recognises debt securities issued and subordinated
liabilities on the date that they originated. All other financial liabilities
are recognised initially on the trade date at which the Group becomes a party
to the contractual provisions of the instrument.
Financial liabilities are derecognised when the contractual obligations are
discharged, cancelled or expire.
Financial assets and liabilities are offset and the net amount presented in
the statement of financial position when, and only when, the Group has a
legal right to offset the amounts and intends either to settle on a net basis
or to realise the asset and settle the liability simultaneously.
Non-derivative financial liabilities comprise loans and borrowings, bank
overdrafts, trade and other payables
Financial liabilities are recognised initially at fair value plus any
directly attributable transaction costs. Subsequent to initial recognition
these financial liabilities are measured at amortised cost using the
effective interest method.
SHARE CAPITAL
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly
attributable to the issue of ordinary shares and share options are recognised
as a deduction from equity, net of any tax effects.
Preference share capital
Preference share capital is classified as equity if it is non-redeemable, or
redeemable only at the Company`s option, and any dividends are discretionary.
Dividends thereon are recognised as distributions within equity upon approval
by the Company`s Board of Directors.
Preference share capital is classified as a liability if it is redeemable on
a specific date or at the option of the holders, or if dividend payments are
not discretionary. Dividends thereon are recognised as interest expense in
profit
or loss as accrued.
DERIVATIVE FINANCIAL INSTRUMENTS, INCLUDING HEDGE ACCOUNTING
The Group holds derivative financial instruments to hedge its interest rate
risk exposures. Embedded derivatives are separated from the host contract and
accounted for separately if the economic characteristics and risks of the
host contract and the embedded derivative are not closely related, a separate
instrument with the same terms as the embedded derivative would meet the
definition of a derivative, and the combined instrument is not measured at
fair value through profit or loss.
On initial designation of the hedge, the Group formally documents the
relationship between the hedging instrument(s) and hedged item(s), including
the risk management objectives and strategy in undertaking the hedge
transaction, together with the methods that will be used to assess the
effectiveness of the hedging relationship. The Group makes an assessment,
both at the inception of the hedge relationship as well as on an ongoing
basis, whether the hedging instruments are expected to be "highly effective"
in offsetting the changes in the fair value or cash flows of the respective
hedged items during the period for which the hedge is designated, and whether
the actual results of each hedge are within a range of 80-125 percent. For a
cash flow hedge of a forecast transaction, the transaction should be highly
probable to occur and should present an exposure to variations in cash flows
that could ultimately affect reported net income.
Derivatives are recognised initially at fair value; attributable transaction
costs are recognised in profit or loss as incurred. Subsequent to initial
recognition, derivatives are measured at fair value, and changes therein are
accounted for as described below.
Cash Flow Hedges
When a derivative is designated as the hedging instrument in a hedge of the
variability in cash flows attributable to a particular risk associated with
a recognised asset or liability or a highly probable forecast transaction
that could affect profit or loss, the effective portion of changes in the
fair value of the derivative is recognised in other comprehensive income
and presented in the hedge reserve in equity. The amount recognised in other
comprehensive income is removed and included in profit or loss in the same
period as the hedged cash flows affect profit or loss under the same line
item in the statement of comprehensive income as the hedged item. Any
ineffective portion of changes in the fair value of the derivative is
recognised
immediately in profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting,
expires or is sold, terminated, exercised, or the designation is revoked,
then hedge accounting is discontinued prospectively. The cumulative gain or
loss previously recognised in other comprehensive income and presented in the
hedge reserve in equity remains there until the forecast transaction affects
profit
or loss. When the hedged item is a non-financial asset, the amount recognised
in other comprehensive income is transferred to the carrying amount of the
asset when the asset is recognised. If the forecast transaction is no longer
expected to occur, then the balance in other comprehensive income is
recognised immediately in profit or loss. In other cases the amount
recognised in other comprehensive income is transferred to profit or loss in
the same period that the hedged item affects profit or loss.
Separable Embedded Derivatives
Changes in the fair value of separable embedded derivatives are recognised
immediately in profit or loss.
Other Non-Trading Derivatives
When a derivative financial instrument is not held for trading, and is not
designated in a qualifying hedge relationship, all changes in its fair value
are recognised immediately in profit or loss.
(d) PROPERTY, PLANT AND EQUIPMENT
MINING
Mine development and infrastructure costs are capitalised to capital
work-in-progress and transferred to mining property, plant and equipment when
the mining venture reaches commercial production.
Capitalised mine development and infrastructure costs include expenditure
incurred to develop new mining operations and to expand the capacity of the
mine. Costs include borrowing costs capitalised during the construction
period where qualifying expenditure is financed by borrowings. Capitalised
development costs are amortised on the unit of production basis.
Items of non-mine property, plant and equipment, excluding capitalized mine
development and infrastructure assets, are depreciated on a straight-line
basis over their expected useful lives. Capitalised mine development and
infrastructure are depreciated on a unit of production basis. Depreciation is
first charged on mining assets from the date on which they are available for
use.
Items of property, plant and equipment that are withdrawn from use, or have
no reasonable prospect of being recovered through use or sale, are regularly
identified and written off.
Residual values, depreciation methods and useful economic lives are reviewed
at least annually.
Revenue derived during the project phase is recognised in profit and loss and
appropriate amounts of development costs are charged against it.
(e) INTANGIBLE ASSETS
GOODWILL
Goodwill that arises upon the acquisition of subsidiaries is included in
intangible assets. For measurement of goodwill at initial recognition, refer
note 3.
ACQUISITIONS OF NON-CONTROLLING INTERESTS
Acquisitions of non-controlling interests are accounted for as transactions
with equity holders in their capacity as equity holders and therefore no
goodwill is recognised as a result of such transactions.
SUBSEQUENT MEASUREMENT
Goodwill is measured at cost less accumulated impairment losses. In respect
of equity accounted investees, the carrying amount of goodwill is included in
the carrying amount of the investment, and an impairment loss on such an
investment is not allocated to any asset, including goodwill, that forms
part of the carrying amount of the equity accounted investee.
OTHER INTANGIBLE ASSETS
Other intangible assets include mineral property interests (refer note (p)
below).
(f) IMPAIRMENT
NON-FINANCIAL ASSETS
The carrying amounts of the Group`s non-financial assets are reviewed at
each reporting date to determine whether there is any indication of
impairment. If any such indication exists, then the asset`s recoverable
amount is estimated. For goodwill and intangible assets that have indefinite
lives or that are not yet available for use, the recoverable amount is
estimated each year at the
same time.
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"). The goodwill acquired in a business combination,
for the purpose of impairment testing, is allocated to cash-generating
units that are expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its
cash-generating unit exceeds its estimated recoverable amount. Impairment
losses are recognised in profit or loss. Impairment losses recognised in
respect of cash-generating units are allocated first to reduce the carrying
amount of any goodwill allocated to the units and then to reduce the carrying
amounts of the other assets in the unit (group of units) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. In respect of
other assets, impairment losses recognised 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
amortisation, if no impairment loss had been recognised.
FINANCIAL ASSETS (INCLUDING RECEIVABLES)
A financial asset not carried at fair value through profit or loss is
assessed at each reporting date to determine whether there is objective
evidence that it is impaired. A financial asset is impaired if objective
evidence indicates that a loss event has occurred after the initial
recognition of the asset, and that the loss event had a negative effect on
the estimated future cash flows of that asset that can be estimated reliably.
An impairment loss in respect of a financial asset measured at amortised cost
is calculated as the difference between its carrying amount and the present
value of the estimated future cash flows discounted at the asset`s original
effective interest rate. Losses are recognised in profit or loss and
reflected in an allowance account against receivables. Interest on the
impaired asset continues to be recognised through the unwinding of the
discount. When a subsequent event causes the amount of impairment loss to
decrease, the
decrease in impairment loss is reversed through profit or loss.
(g) EMPLOYEE BENEFITS
DEFINED CONTRIBUTION PLANS
A defined contribution plan is a post-employment benefit plan under which
an entity pays fixed contributions into a separate entity and will have no
legal or constructive obligation to pay further amounts. Obligations for
contributions to defined contribution pension plans are recognised as an
employee benefit expense in profit or loss in the periods during which
services are rendered by employees. Prepaid contributions are recognised
as an asset to the extent that a cash refund or a reduction in future
payments is available. Contributions to a defined contribution plan that are
due more than 12 months after the end of the period in which the employees
render the service are discounted to their present value.
SHORT-TERM EMPLOYEE BENEFITS
Short-term employee benefit obligations are measured on an undiscounted
basis and are expensed as the related service is provided.
A liability is recognised for the amount expected to be paid under short-term
cash bonus or profit-sharing plans if the Group has a present legal or
constructive obligation to pay this amount as a result of past service
provided by the employee, and the obligation can be estimated reliably.
(h) PROVISIONS
A provision is recognised if, as a result of a past event, the Group has a
present legal or constructive obligation that can be estimated reliably and
it is probable that an outflow of economic benefits will be required to
settle the obligation. Provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market assessments
of the time value of money and the risks specific to the liability. The
unwinding of the discount is recognised as finance expense ("notional
interest").
ENVIRONMENTAL REHABILITATION PROVISIONS
Estimated long-term environmental provisions, comprising pollution control,
rehabilitation and mine closure, are based on the Group`s environmental
policy taking into account current technological, environmental and
regulatory requirements. The provision for rehabilitation is recognised as
and when the environmental liability arises. To the extent that the
obligations relate to
the construction of an asset, they are capitalised as part of the cost of
those assets. The effect of subsequent changes to assumptions in estimating
an obligation for which the provision was recognised as part of the cost of
the asset is adjusted against the asset. Any subsequent changes to an
obligation which did not relate to the initial construction of a related
asset are charged to profit and loss.
ONGOING REHABILITATION EXPENDITURE
Ongoing rehabilitation expenditure is charged to profit and loss.
(i) REVENUE
Revenue from the sale of concentrate and intermediary product is recognised
when the significant risk and rewards of ownership are transferred to the
buyer on delivery at the smelter in terms of the sale agreements. All sales
from
by-products are recognised as revenue. Gross sales revenue represents the
invoiced amounts excluding value-added tax.
(j) SHARE-BASED PAYMENT TRANSACTIONS
The share option plan allows Group employees, directors and consultants to
acquire ordinary shares of the Company. The fair value of options granted is
recognised 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
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.
(k) LEASE PAYMENTS
Payments made under operating leases are recognised in profit or loss on a
straight-line basis over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the
finance expense and the reduction of the outstanding liability. The finance
expense is allocated to each period during the lease term so as to produce a
constant periodic rate of interest on the remaining balance of the liability.
(l) FINANCE INCOME AND FINANCE EXPENSE
Finance income comprises interest income on funds invested and interest
received on loans and receivables. Interest income is recognised as it
accrues in profit or loss, using the effective interest method.
Finance expense comprise interest expense on borrowings, unwinding of the
discount on provisions, dividends on preference shares classified as
liabilities and losses on hedging instruments that are recognised in profit
or loss. Borrowing costs that are not directly attributable to the
acquisition, construction or production of a qualifying asset are recognised
in profit or loss using the effective interest method.
Foreign currency gains and losses are reported on a net basis.
(m) INCOME TAX
Income tax expense comprises current and deferred tax. Current tax and
deferred tax are recognised in profit or loss except to the extent that it
relates to a business combination, or items recognised directly in equity or
in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income
or loss for the year, using tax rates enacted or substantively enacted at the
reporting date, and any adjustment to tax payable in respect of previous
years.
Deferred tax is recognised in respect of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for taxation purposes. Deferred tax is not recognised
for the following temporary differences: the initial recognition of assets or
liabilities in a transaction that is not a business combination and that
affects neither accounting nor taxable profit or loss, and differences
relating to investments in subsidiaries and jointly controlled entities to
the extent that it is probable that they will not reverse in the foreseeable
future. In addition, deferred tax is not recognised for taxable temporary
differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted by the reporting date. Deferred tax assets
and liabilities are offset if there is a legally enforceable right to offset
current tax liabilities and assets, and they relate to income taxes levied by
the same tax authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities and assets on a
net
basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and
deductible temporary differences, to the extent that it is probable that
future taxable profits will be available against which they can be utilised.
Deferred tax assets are reviewed at each reporting date and are reduced to
the extent that it is no longer probable that the related tax benefit will be
realised.
(n) EARNINGS (LOSS) PER SHARE
The Group presents basic and diluted earnings (loss) per share (EPS) data for
its ordinary shares. Basic EPS is calculated by dividing the profit or loss
attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period, adjusted for own
shares held. Diluted EPS is determined by adjusting the profit or loss
attributable to ordinary shareholders and the weighted average number of
ordinary shares outstanding, adjusted for own shares held, for the effects
of all dilutive potential ordinary shares, which comprise convertible notes
and share options granted to employees.
(o) SEGMENT REPORTING
An operating segment is a component of the Group that engages in business
activities from which it may earn revenues and incur expenses, including
revenues and expenses that relate to transactions with any of the Group`s
other components. All operating segments` operating results are reviewed
regularly by the Group`s CEO to make decisions about resources to be
allocated to the segment and assess its performance, and for which discrete
financial information is available.
(p) EXPLORATION EXPENDITURE AND MINERAL PROPERTY INTERESTS
The acquisitions of mineral property interests 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 Group, are capitalized
until the property to which they relate is placed into production, sold or
allowed to lapse.
Exploration and evaluation costs incurred prior to determination of the
feasibility of mining operations are expensed as incurred. Re-imbursement of
previously expensed exploration and evaluation costs are recognised as other
income in profit and loss.
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.
(q) NEW STANDARDS NOT YET ADOPTED
Standards and interpretations issued but not yet effective and applicable to
the Group:
- Amendments to IAS 39, Eligible hedged items
- Amendments to IFRS 1 and IAS 27, Cost of an investment in a subsidiary,
jointly controlled entity or associate
- Amendments to IFRS 1, First time adoption of financial reporting standards
- Amendments to IFRS 2, Share-based payments: vesting conditions and
cancellations
- Amendments to IFRS 7, Improving disclosures about financial instruments
- IFRIC 17, Distribution of Non-cash assets to owners
- Various improvements to IFRS 2008
- Various improvements to IFRS 2009
The Group is currently evaluating the impact, if any, that these new
standards will have on the consolidated financial statements.
5.DETERMINATION OF FAIR VALUES
A number of the Group`s accounting policies and disclosures require the
determination of fair value, for both financial and non-financial assets and
liabilities. Fair values have been determined for measurement and/or
disclosure purposes based on the following methods. When applicable, further
information about the assumptions made in determining fair values is
disclosed in the notes specific to that asset or liability.
(a) PROPERTY, PLANT AND EQUIPMENT
The fair value of property, plant and equipment recognised as a result of a
business combination is based on market values. The market value of property
is the estimated amount for which a property could be exchanged on the date
of valuation between a willing buyer and a willing seller in an arm`s length
transaction after proper marketing wherein the parties had each acted
knowledgeably and willingly. The fair value of items of plant, equipment,
fixtures and fittings is based on the market approach and cost approaches
using quoted market prices for similar items when available and replacement
cost when appropriate.
The fair value of mining rights included in property, plant and
equipment acquired as part of a business combination is determined using
the multi-period excess earnings method, whereby the subject asset is valued
after deducting a fair return on all other assets that are part of creating
the related cash flows.
(b) MINERAL PROPERTY INTEREST
The fair value of mineral property interests acquired is determined using a
market comparative approach. In applying a market comparative approach, a
selection of appropriate historic transactions is used to determine an
average transaction value.
(c) TRADE AND OTHER RECEIVABLES
The fair value of trade and other receivables is estimated as the present
value of future cash flows, discounted at the market rate of interest at the
reporting date. This fair value is determined for disclosure purposes.
(d) DERIVATIVES
The fair value of interest rate swaps is based on the clean fair value of the
cash flows of the swap using the ZAR zero-coupon swap curve and the clean
fair value of the projected shifted cash flows discounted using the shifted
zero-coupon rates.
Fair values reflect the credit risk of the instrument and exclude the credit
risk of the Group entity and counterparty when appropriate.
(e) NON-DERIVATIVE FINANCIAL LIABILITIES
Fair value is calculated based on the present value of future principal and
interest cash flows, discounted at the market rate of interest at the
reporting date.
(f) SHARE-BASED PAYMENT TRANSACTIONS
The fair value of the employee share options is measured using the
Black-Scholes option pricing model. Measurement inputs include share price on
measurement date, exercise price of the instrument, expected volatility
(based on weighted average historic volatility adjusted for changes expected
due to publicly available information), weighted average expected life of the
instruments (based on historical experience and general option holder
behaviour), expected dividends, and the risk-free interest rate (based on
government bonds). Service and non-market performance conditions attached
to the transactions are not taken into account in determining fair value.
6.FINANCIAL RISK MANAGEMENT
OVERVIEW
The Group has exposure to the following risks from its use of financial
instruments:
- credit risk
- liquidity risk
- interest rate risk
- foreign currency risk
- commodity risk
This note presents information about the Group`s exposure to each of the
above risks, the Group`s objectives, policies and processes for measuring and
managing risk and the Group`s management of capital. Further quantitative
disclosures are included throughout these consolidated financial statements.
RISK MANAGEMENT FRAMEWORK
The Board of Directors has overall responsibility for the establishment and
oversight of the Group`s risk management framework.
The Group`s risk management policies are established to identify and
analyse the risks faced by the Group, to set appropriate risk limits and
controls, and to monitor risks and adherence to limits. Risk management
policies and systems are reviewed regularly to reflect changes in market
conditions and the Group`s activities. The Group, through its training and
management standards and procedures, aims to develop a disciplined and
constructive control environment in which all employees understand their
roles and obligations.
CREDIT RISK
Credit risk is the risk of financial loss to the Group if a customer or
counterparty to a financial instrument fails to meet its contractual
obligations, and arises principally from the Group`s receivables from
customers.
TRADE AND OTHER RECEIVABLES
Trade receivables represents sale of concentrate to Rustenburg Platinum Mines
Limited in terms of a concentrate off-take agreement concluded on March 28,
2008. The carrying value represents the maximum credit risk exposure.
LIQUIDITY RISK
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group ensures that there is
sufficient capital in order to meet short term business requirements, after
taking into account cash flows from operations and the Group`s holdings of
cash and cash equivalents. This is facilitated via the OCSF facility,
discussed in note 2.
The Group`s cash and cash equivalents are invested in business accounts which
are available on demand for the Group`s programs.
The Group operates in South Africa and is subject to currency exchange
controls administered by the South African Reserve Bank, that country`s
central bank. A portion of the Group`s funding for its South African
operations consists of loans advanced to its South African incorporated
subsidiaries and it is possible the Group 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 held in South Africa is permitted upon the approval of
the South African Reserve Bank.
The following are the contractual maturities of financial liabilities as at
30 September 2009:
Carrying Amount 2010 2011
Trade and other payables 34,722,121 34,722,121 -
Loans and borrowings 522,826,795 - -
Financial liabilities 995,344 995,344 -
Commitment fee liability 218,356 - -
558,762,616 35,717,465 -
2012 2013 Thereafter
Trade and other payables - - -
Loans and borrowings 14,203,067 74,528,371 434,095,357
Financial liabilities - - -
Commitment fee liability - - 218,356
14,203,067 74,528,371 434,313,713
INTEREST RATE RISK
As a result of the Group completing the Bokoni acquisition (refer note 8),
the Group has secured loan facilities with Rustenburg Platinum Mines Limited
(RPM) in order to ensure the sustainability of the Group. RPM provided a loan
of $30 million (ZAR 219 million) to the Group which is subject to interest
rate change risk.
The Bokoni acquisition was partially financed by a $111 million (ZAR 750
million) senior debt facility ("Senior debt facility") from Standard
Chartered Bank plc ("Standard Chartered") provided to Plateau, of which $74
million (ZAR 500 million) was drawn down on 1 July 2009. The term of the
Senior debt facility is nine years with an interest and capital repayment
holiday during the first three years. The Senior debt facility bears interest
equal to the Johannesburg Inter Bank Agreed Rate (currently 7.95%) plus 4.5%.
The Group has entered into an interest rate swap arrangement with Standard
Chartered Bank to fix the variable interest rate on $74 million (ZAR 500
million) of the principal amount of the loan at 7.925%.
A 100 basis point change in the interest rate for the three month period
ended 30 September 2009 on the Standard Chartered loan and the RPM loan,
would have changed the loss for the period by approximately $333 thousand.
This analysis assumes that all other variables, in particular foreign
exchange rates, remain constant.
FOREIGN CURRENCY RISK
The Group from time to time enters into transactions for the purchase of
supplies and services denominated in foreign currency. As a result, the
Group is subject to foreign exchange risk from fluctuations in foreign
exchange rates. The Group has not entered into any derivative or other
financial instruments to mitigate this foreign exchange risk.
Within the Group, certain loans between Group entities amounting to $48.4
million are exposed to foreign exchange fluctuations. A 1% change in the
$/ZAR exchange rate at 30 September 2009 would have resulted in an
increase/decrease $0.5 million (ZAR 3.4 million) in equity. The Group has no
significant external exposure to foreign exchange risk.
COMMODITY PRICE RISK
The value of the Group`s revenue and resource properties depends on the
prices of PGM`s and their outlook. The Group currently operates the Bokoni
mines. The Group 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 Group`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 hedging activities.
7. SEGMENT INFORMATION
The Group has three reportable segments, described as follows:
- Corporate - Manages all administrative and corporate functions.
- Bokoni Mine - Mining of PGM`s.
- Projects - Mining exploration in Boikgantsho, Kwanda, and Ga-Phasha
exploration projects.
The reporting segments have changed from the prior year as a result of the
acquisition discussed in note 8. The prior year`s information has been
adjusted in line with this change.
NINE MONTHS ENDED 30 SEPTEMBER 2009
Revenue (Loss) Assets Liabilities
Corporate - (8,595,900) 2,033,252,492 (271,768,584)
Bokoni Mine 27,805,577 (16,149,840) 1,004,287,569 (274,378,076)
Projects - 912,439,293 (15,867,297)
Total 27,805,577 (24,745,740) 3,949,979,354 (562,013,957)
Consolidation - (4,632,776) (2,944,073,482) (216,974,221)
entries
Consolidated 27,805,577 (29,378,516) 1,005,905,872 (778,988,178)
Year ended 31 December 2008
Revenue (Loss) Assets Liabilities
Corporate - (13,970,096) 12,898,793 (16,502,255)
Bokoni Mine - - - -
Projects - - - -
Total - (13,970,096) 12,898,793 (16,502,255)
Consolidation - - - -
entries
Consolidated - (13,970,096) 12,898,793 (16,502,255)
The consolidation entries relate to consolidation eliminations, the at
acquisition adjustments at a consolidation level and the consolidation of the
Bokoni Platinum Mine ESOP Trust (ESOP Trust), a consolidated special purpose
entity.
8.ACQUISITIONS OF SUBSIDIARY AND NON-CONTROLLING INTERESTS
Anooraq, through Plateau, acquired 51% controlling interests in Bokoni as
well as an additional one percent interest in several PGM exploration
projects, including the advanced stage Ga-Phasha Project, the Boikgantsho
Project, and
the early stage Kwanda Project. The acquisition of the controlling interest
was affected by Plateau acquiring 51% of the shareholding of Bokoni Holdco on
1 July 2009, for an aggregate purchase consideration of $385 million (ZAR 2.6
billion), which includes $251 million used to repay loans and borrowings
assumed in the transaction.
Bokoni, previously 100% owned by Anglo Platinum, is located on the
north-eastern limb of the Bushveld Complex adjacent to the Ga-Phasha Project.
The Bokoni 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, Plateau acquired 51% of
the shares in, and claims on shareholders loan account against Bokoni Holdco.
The joint venture agreements in respect of the Ga-Phasha Project, Boikgantsho
Project and Kwanda Project were terminated and these projects were
transferred into separate project companies, established as wholly-owned
subsidiaries of Bokoni Holdco.
FINANCING
The Group financed the purchase consideration transferred of $385 million
(ZAR2.6 billion) as follows:
- $111 million (ZAR 750 million) of senior debt funding in terms of the
Standard Chartered senior term loan facility (the "Senior Debt facility")
from Standard Chartered Bank plc ("Standard Chartered" or "SCB") provided to
Plateau, of which $74 million (ZAR 500 million) was drawn down on 1 July
2009. The Group applied approximately $44 million (ZAR 300 million) of the
Senior Debt facility in part settlement of the consideration transferred
(refer note 21);
- $177.8 million (ZAR 1.2 billion) through the issue of cumulative mandatory
redeemable "A" preference shares ("A Prefs") of Plateau to RPM (refer note
21); and
- $162.9 million (ZAR 1.1 billion) through the effects of a share settled
financing with the issue of cumulative convertible "B" preference shares ("B
Prefs") to RPM. The final effects of the share settled financing will result
in RPM receiving a total of 115.8 million ordinary shares of Anooraq and
Pelawan Investments (Proprietary) Limited, Anooraq`s controlling shareholder,
receiving 111.6 million ordinary shares, to maintain its minimum 51%
shareholding in the Company.
Transaction costs amounting to $12.5 million associated with finalising the
transaction were incurred of which $7.5 million, relating to the acquisition
was recognised in profit and loss.
The following summarises the amounts of assets acquired and liabilities
assumed at the acquisition date:
IDENTIFIABLE ASSETS ACQUIRED AND LIABILITIES ASSUMED
Carrying value Fair value
Property, plant and equipment 770,746,979 728,864,376
Capital work in progress 216,190,579 216,190,579
Cash deposits held in Platinum Producers 2,356,993
Environmental Trust 2,356,999
Other non-current assets 628 628
Trade and other receivables 26,071,536 26,071,536
Cash and cash equivalents 3,576,912 3,576,912
Loans and borrowings (owing to RPM) (493,613,503) (493,613,503)
Deferred tax (68,596,052) (230,891,432)
Provisions (4,308,137) (4,308,137)
Trade and other payables (34,615,237) (34,615,237)
Total identifiable net assets 417,810,704 213,632,715
The fair values of acquired assets and liabilities have been determined on a
provisional basis and are in the process of being finalised.
GOODWILL
Goodwill was recognised as a result of the acquisition as follows:
Total purchase consideration 385,059,990
Assets acquired as part of the transaction (refer note 14) (6,592,523)
Contributions received from Anglo Platinum relating to the ESOP (6,741,102)
Trust (refer note 20)
Repayment of loans and borrowings to RPM (refer note 21) (251,770,000)
Consideration transferred as part of business combination 119,956,365
Non-controlling interest in Bokoni 104,680,030
Less total identifiable net assets (213,632,715)
At acquisition goodwill, as of 1 July 2009 11,003,680
Effect of translation (438,358)
Goodwill at 30 September 2009 10,565,322
Anooraq increased its interest in the PGM exploration project assets from 50%
to 51% through the above mentioned transaction. The acquisition of the
additional one percent was accounted for as an asset acquisition (mineral
property interests) and the additional interests were recognised at their
respective fair values amounting to $6.6 million in total.
The consideration transferred was further reduced by $ 251 million for the
repayment of loans and borrowings owing to RPM as well as contributions
received from Anglo Platinum amounting to $6.8 million relating to the Bokoni
Platinum Mine ESOP Trust, a consolidated SPE, on 1 July 2009.
The contributions to revenue and loss since acquisition and had the
acquisition occurred on 1 January 2009, respectively, are as follows:
Since acquisition For the full year to date
Revenue 27,805,577 84,711,005
Loss before tax 17,236,256 43,305,008
9.REVENUE
Revenue consists of the sale of concentrate to Rustenburg Platinum Mines
Limited (a related party to the Group).
10.FINANCE INCOME AND FINANCE EXPENSES
Finance income relates to interest earned on bank balances and interest
received from the loan to Ga-Phasha prior to the business combination
discussed in note 8 above. Finance expense relate to the following:
Nine months ended Year ended
30 September 2009 31 December 2008
Interest on fair value of 141,998
interest rate swap -
Interest on Standard
Chartered loan 2,397,226 -
Amortisation of loan costs 133,796 -
Interest on redeemable "A"
preference shares 9,458,906 -
Interest on RPM Bridging loan 1,171,936 -
Interest on OCSF-RPM 645,674 -
Interest on RPM loan 2,423,367 1,848,574
Commitment fee on OCSF 10,299 -
Notional interest 83,015 -
Interest on overdraft 72,104 -
Total finance expense 16,538,321 1,848,574
Interest capitalised to
qualifying assets (6,553,259) -
9,985,062 1,848,574
Finance expense includes an accrual for the 12% after tax dividend on the
redeemable "A" preference shares and is regarded as interest accrued for
accounting purposes. Any accrued preference dividend is payable only to the
extent that sufficient funds are available after settling all other funding
obligations. It is not expected that any interest accrued on this basis will
be paid in the next three years.
Finance expense include an amount of $13,710,182 (2008: $1,848,574) owed to
RPM, a related party.
11.INCOME TAX
11.1 Income tax expense
30 September 2009 31 December 2008
Current taxation - -
Deferred taxation (5,495,022) -
Taxation for the period (5,495,022) -
Comprising:
South African normal taxation
Mining (5,495,022) -
Non-mining - -
11.2 Deferred taxation
30 September 2009 31 December 2008
Arising from business combination 230,891,432 -
Income tax (5,495,022) -
Effect of translation (9,508,506) -
215,887,904 -
12.EARNINGS PER SHARE
BASIC LOSS PER SHARE
The calculation of basic and diluted earnings per share for the nine months
ended 30 September 2009 was based on the loss attributable to ordinary
shareholders of $29,378,516 (30 September 2008: $11,462,620, 31 December
2008: $13,970,096 ), and a weighted average number of ordinary shares
outstanding of 189,286,554 (30 September 2008: 185,485,041, 31 December 2008:
185,775,361).
The calculation of basic and diluted earnings for the three months ended 30
September 2009 was based on the loss attributable to ordinary shareholders of
$14,862,214 (2008: $2,288,502) and a weighted average number of ordinary
shares outstanding of 189,286,554 (2008: 185,485,041).
At 30 September 2009, the convertible "B" preference shares and share options
were excluded from the diluted weighted average number of ordinary shares
calculation as the effect would have been anti-dilutive.
13.PROPERTY, PLANT AND EQUIPMENT
Note 30 September 31 December
2009 2008
Cost
Opening balance 540,482 183,208
Arising from business acquisition 8 728,864,376 -
Additions - 473,642
Transfer from capital work-in-progress 948,359 -
Disposals - (116,368)
Effect of translation (32,733,142)
Closing balance 697,620,075 540,482
Accumulated amortisation
Opening balance 70,847 77,713
Disposals - (68,006)
Charge for the period 5,987,468 61,140
Effect of translation (3,582,267)
Closing balance 2,476,048 70,847
Total carrying amount 695,144,027 469,635
At 30 September 2009, Bokoni had capital commitments of$12,392,984.
14.MINERAL PROPERTY INTEREST
Note 30 September 31 December
2009 2008
Cost
Opening balance 4,200,000 4,200,000
Transfer from equity accounted investee 2,518,971 -
Equity loss at 30 June 2009 (212,423) -
Asset acquisition 8 6,592,523 -
Effect of translation (329,248) -
Closing balance 12,769,823 4,200,000
The Group`s mineral property interest consists of various early stage
exploration projects as detailed below:
GA-PHASHA
In January 2004, Anooraq and Pelawan combined their respective Platinum Group
Metals ("PGM") assets, comprising the Anooraq`s Northern and Western Limb PGM
projects and Pelawan`s 50% participation interest in the Ga-Phasha PGM
Project 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 1 July 2009, the joint venture agreements terminated and GPM, a wholly
owned subsidiary of Bokoni Holdco, owns the respective interest in and assets
relating to the Ga-Phasha Project. Anooraq owns an effective 51% interest in
the Ga-Phasha Project.
PLATREEF
As of 1 July 2009, the Group holds an effective 51% in Platreef properties
located on the Northern Limb of the Bushveld Complex in South Africa. Bokoni
Holdco holds a prospecting contract with the South African Department of
Mineral Resources ("DMR") 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 DMR. The Group received conversion
to new order prospecting rights.
BOIKGANTSHO
As of 1 July 2009 the Boikghantsho 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
Bokoni Holdco,
owns the interest in and assets relating to the Boikgantsho Project. Anooraq
owns an effective 51% interest in the 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. The Group has submitted
new order prospecting right applications with the DMR and is awaiting
approval.
KWANDA
As of 1 July 2009, the Kwanda 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 Bokoni Holdco, owns the
interest in and assets relating to the Kwanda Project. The Group received
conversion to new order prospecting rights for the Kwanda North and Kwanda
South properties.
RIETFONTEIN
On 10 October 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 Group`s 2,900 hectare Rietfontein 2KS farm ("Rietfontein").
Under the terms of this agreement, Ivanplats had to incur at least $750,000
in expenditure 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.
15.CAPITAL WORK-IN-PROGRESS
Capital work-in-progress consists of mine development and infrastructure
costs and will be transferred to property, plant and equipment when the
relevant projects are commissioned.
30 September 31 December 2008
2009
Arising from business combination 216,190,579 -
Additions 10,370,098 -
Transfer to property, plant and (948,359)
equipment
Capitalisation of borrowing costs 6,553,259 -
Effect of translation (7,602,868) -
224,562,709 -
The Group`s share of loss in its equity accounted investees for the period
16.EQUITY ACCOUNTED INVESTEES
The Group`s share of loss in its equity accounted investees for the period
was $212,423 until 30 June 2009 (30 September 2008: $ 163,702, 31 December
2008: 163,702). From 1 July 2009, these investees were consolidated as a
result of the transaction reflected in note 8 above.
17.CASH DEPOSITS HELD IN PLATINUM PRODUCERS ENVIRONMENTAL TRUST
The Group contributes to the Platinum Producers` Environmental Trust
annually. The Trust was created to fund the estimated cost of pollution
control, rehabilitation and mine closure at the end of the lives of the
Group`s mines. Contributions are determined on the basis of the estimated
environmental obligation over the life of a mine. Contributions made are
reflected in non-current cash deposits held by Platinum Producers`
Environmental Trust if the investments are not short-term. If the investments
are short-term and highly liquid, the amounts are reflected as cash and cash
equivalents.
The non-current cash deposits are restricted in use as they are to be used
exclusively for pollution control, rehabilitation and mine closure at the end
of lives of the Group`s mines.
Arising from business combination 2,356,999 -
Growth in environmental trust 44,000 -
Effect of translation (91,108) -
2,309,891 -
18. TRADE AND OTHER RECEIVABLES
Trade receivables (related party) 23,124,831 -
Other 7,740,653 271,554
30,865,484 271,554
19. CASH AND CASH EQUIVALENTS
30 September 31 December
2009 2008
Bank balances 27,377,888 3,850,674
Call deposits 1,012,978 -
Cash and cash equivalents 28,390,866 3,850,674
Restricted cash 1,297,750 -
Cash and cash equivalents in the statement 29,688,616 3,850,674
of cash flows
Restricted cash consist of cash and cash equivalents held by the Bokoni
Platinum Mine ESOP Trust which is not available to fund operations.
20. CAPITAL AND RESERVES
SHARE CAPITAL AND SHARE PREMIUM
SHARE CAPITAL
The Company`s authorized share capital consists of an unlimited number of
ordinary shares without par value. During the year, the company issued
cumulative redeemable "A" preference shares and cumulative convertible
redeemable "B" preference shares to facilitate the transaction as discussed
in note 8. The share issues were as follows:
- At 30 September 2009, the issued share capital comprised 201,743,472
ordinary shares.
The Company issued the following ordinary shares on 1 July 2009:
Issue price Number of shares
Bokoni Platinum Mines ESOP Trust $1.11 4,497,062
Anooraq Community Participation Trust $1.11 9,799,505
- Anglo Platinum contributed an amount of $15.4 million (ZAR 103.8 million)
to the Anooraq Community Participation Trust. Approximately $11.3 million
(ZAR 79.3 million) was used to acquire shares of the Company. As of 1 July
2009 the Company issued 9,799,505 ordinary shares to the Anooraq Community
Participation Trust.
- Anglo Platinum contributed approximately $6.8 million (ZAR 45.6 million) to
the Bokoni Platinum Mine ESOP Trust (ESOP Trust), with approximately $5.4
million (ZAR 36.5 million) used to acquire shares of the Company. As of 1
July 2009 the Company issued 4,497,062 ordinary shares to the ESOP Trust. The
ESOP Trust is consolidated as a SPE by the Group (refer (b) below).
- $162.9 million (ZAR 1.1 billion) through the effects of a share settled
financing with the issue of cumulative convertible "B" preference shares ("B
Prefs") to RPM. The final effects of the share settled financing will result
in RPM receiving a total of 115.8 million ordinary shares of Anooraq and
Pelawan Investments (Proprietary) Limited, Anooraq`s controlling shareholder,
receiving 111.6 million ordinary shares, to maintain its minimum 51%
shareholding in the Company.
TREASURY SHARES
Treasury shares relate to shares held by the Bokoni Platinum Mines ESOP Trust
in Anooraq, which is consolidated by the Group
SHARE OPTION PLAN
The Company obtained approval at the Annual General Meeting on 15 June 2009
to increase its existing share option plan from 18,300,000, to 32,600,000
common shares for issuance in terms of its stock option plan. As at 30
September 2009, 9,086,000 options were outstanding and 15,190,100 options
remained available
to be granted.
TRANSLATION RESERVE
The translation reserve comprises all foreign currency differences arising
from the translation of the financial statements from the Group entities`
functional currency (South African Rand) to the Group`s presentation currency
(Canadian Dollar).
HEDGE RESERVE
The hedge reserve comprises the effective portion of the cumulative net
change in the fair value of cash flow hedging instruments (interest rate
swap) related to hedged transactions that have not yet occurred.
21. LOANS AND BORROWINGS
The Group`s interest-bearing loans and borrowings, which are measured at
amortised cost are as follows:
30 September 31 December
2009 2008
Non-current liabilities
Standard Chartered Bank Senior Term Loan Facility 68,702,835 -
Redeemable "A" preference shares (related party) 343,557,316
RPM Funding Loans (related party) 110,566,644 12,967,753
522,826,795 12,967,753
Current liabilities
Current portion of RPM Funding Loans - 1,735,663
- 1,735,663
The carrying value of the group`s loans and borrowings changed during the
period as follows:
Balance at 1 January 2009 14,703,416
SCB 74,050,000
OCSF 29,531,388
Arising from business combination 493,613,503
Repaid as part of acquisition (note 8) (251,770,000)
Redeemable "A" preference shares 177,720,000
Redemption of "A" preference shares (repaid) (1,066,320)
Loans repaid (18,079,846)
Loan costs capitalised (5,006,755)
Finance expenses accrued 16,097,110
Amortisation of loan costs 144,096
Effect of translation (7,109,797)
Balance at 30 September 2009 522,826,795
Terms and conditions of outstanding borrowings at 30 September 2009 are as
follows:
Standard Chartered Bank Senior Term Loan facility ("Senior term facility")
The senior term facility is for a period of 9 years and is payable in 12
semi-annual instalments beginning 31 January 2013. The loan accrues interest
which is to be paid semi-annually beginning 31 January 2013. During the first
36 months, interest will only be paid if there are available funds. If there
are no available funds, the accrued interest will roll-up into the roll-up
interest loan balance. This roll-up interest is limited to $35.6 million
(ZAR250 million). Interest is calculated at a variable rate linked to the
JIBAR (7.95% at 30 September 2009) plus applicable margin and mandatory cost.
The Group has entered into an interest rate swap arrangement with Standard
Chartered Bank to fix the variable interest rate on $74 million (ZAR500
million) of the principal amount of the loan at 7.925%.
Redeemable "A" Preference Shares
The "A" preference shares were issued by Plateau and Bokoni Holdco to
Rustenburg Platinum Mine (related party) as part of the business combination
and liabilities assumed. These shares are cumulative, mandatory, redeemable
shares which attract an annual cumulative dividend of 12% after tax. The
Group is obligated to redeem the outstanding amount including undeclared
dividends which should have been declared within 6 years of issue to the
extent that the Company is in the position to redeem the shares. Any
preference shares not redeemed in 6 years must be redeemed after 9 years.
RPM Funding Loans
This loan is between RPM and Bokoni Holdco and consists of retention of the
original RPM claims for an amount of $71 million (ZAR480,3 million) and the
operating cash flow shortfall facility. Under the OCSF, if funds are
requested by Bokoni (and authorised by Bokoni Holdco), RPM shall advance such
funds directly to Bokoni. The funds are for the purposes of operating or
capital expenditure cash shortfalls at Bokoni.
The $71 million is payable in semi-annual instalments starting 31 January
2013. The unpaid principal balance will bear interest at the interest rate
and on the same terms as the senior term facility with Standard Chartered
Bank. The unpaid principal balance on the Operating Cash flow Shortfall
Facility (OCSF) will bear interest at the OCSF rate of 15.84%.
The OCSF is secured by a mortgage bond over Bokoni Mines immovable assets.
22. PROVISIONS
30 September 2009
31 December 2008
Arising from business acquisition
4,308,137
-
Notional interest
83,015
-
Effect of translation
(171,626)
Environmental provision
4,219,526
-
23. TRADE AND OTHER PAYABLES
Trade payables 25,466,409 1,307,732
Employee related payables 6,542,695 199,924
Other 2,713,016 291,183
34,722,120 1,798,839
24.CONTINGENCIES
The Group is currently in dispute with Questco (Proprietary) Limited and
North Corporate Finance Advisory Services, transaction advisers, who has
instituted arbitration proceedings against the Group for an amount of $1,848,
600 (ZAR13 million). The Group has solicited legal advice and believe that
the claim will be resolved satisfactorily in its favour.
25. RELATED PARTY TRANSACTIONS AND BALANCES
Related parties include the following:
Hunter Dickinson Services Inc
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 and 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
pursuant to an agreement dated 31 December 1996.
For the nine months and For the year and as of
as of 30 September 2009 31 December 2008
Administration costs 594,285 1,302,304
Trade and other payables 60,928 794,072
CEC Engineering Limited
CEC Engineering Ltd ("CEC") is a private company owned by a former director,
for engineering and project management services at market rates.
Administration costs - 4,927
Rustenburg Platinum Mines
The Group concluded a number of agreements with respect to services at the
Bokoni mine with Rustenburg Platinum Mines (`RPM`), a wholly owned subsidiary
of Anglo Platinum and 49% shareholder in Bokoni Holdco, on 28 March 2008.
These agreements were amended on 13 May 2009 and include a limited off-take
agreement whereby Bokoni Mines sells the concentrate produced at the mine.
Pursuant to the terms of various shared services agreement, the Anglo
American plc Group of companies will continue to provide certain operations
services to Bokoni Mines at a cost that is no greater than the costs charged
to any other Anglo American plc group for the same or similar services. It
is anticipated that, as Anooraq builds its internal capacity, and makes the
transformation to a fully operational PGM producer, these services will be
phased out and replaced either with internal services or third party
services.
Sale of concentrate - revenue 27,805,577 -
Finance expense 13,710,182 -
Administration costs 4,254,760 -
Trade receivables 23,124,831 -
Loans and borrowings 454,123,960 -
Trade and other payables 2,690,160 -
Pelawan Investments (Pty) Ltd
Pursuant to the acquisition of a controlling interest of 51% in Bokoni
Holdco, the Company paid transaction costs amounting to $1.6 million on
behalf of Pelawan Investments (Proprietary) Limited, the Company`s
controlling shareholder, owing to Rand Merchant bank and legal costs. These
amounts were expensed in profit and loss during the three months ended 30
September 2009.
In terms of the Lebowa transaction agreements the Company were obligated to
pay all of the transaction expenses incurred by Anooraq and Pelawan
Investments out of the funding for the transaction that was provided from
Anglo Platinum. A Special Committee appointed by the Anooraq Board of
Directors and the Anooraq Audit Committee approved the payment of the Pelawan
transaction expenses from the proceeds.
Transactions with and amounts due to and from related parties are included in
the respective notes to the financial statements.
26. EXPLANATIONS OF TRANSITIONS TO IFRS
The accounting policies in note 4 have been applied in preparing the
consolidated financial statements for the three and the nine months ended 30
September 2009, the comparative information for the three and the nine
months ended 30 September 2008, the financial statements for the year ended
31 December 2008 and the preparation of an opening IFRS statement of
financial position on 1 January 2008, the Transition Date.
In preparing the consolidated financial statements for the three and nine
months ended 30 September 2009, comparative information for the three and
nine months ended 30 September 2008 and financial statements for the year
ended 31 December 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
Group`s statement of financial position and statement of comprehensive loss
is set out in the following statements
RECONCILIATION OF ASSETS, LIABILITIES AND EQUITY
As at 1 January 2008
Effect of
Transition to
Note GAAP IFRS IFRS
ASSETS
Property plant and 105,494 - 105,494
equipment
Mineral property interests 4,200,000 - 4,200,000
Investment in joint 11(b) (d) 4,878,714 (1,919,929) 2,958,785
venture
Deferred acquisition costs 368,146 - 368,146
Total non-current assets 9,552,354 (1,919,929) 7,632,425
Current assets
Accounts receivable 269,188 96,372 365,560
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) 15,129,806
As at 30 September 2008
Effect of
Transition to
Note GAAP IFRS IFRS
ASSETS
Property plant and 408,061 - 508,222
equipment
Mineral property interests 4,200,000 - 4,200,000
Investment in joint 11(b) 4,926,896 (2,290,525) 2,476,778
venture (d)
Deferred acquisition costs 1,330,949 - 1,522,607
Total non-current assets 10,865,906 (2,290,525) 8,707,607
Current assets
Accounts receivable 378,066 - 223,873
Cash and cash equivalents 1,140,359 - 1,220,566
Total current assets 1,518,425 - 1,444,439
Total Assets 12,384,331 (2,290,525) 10,152,046
As at 31 December 2008
Effect of
Transition
Note GAAP to IFRS IFRS
ASSETS
Property plant and 469,635 - 469,635
equipment
Mineral property interests 4,200,000 - 4,200,000
Investment in joint venture 11(b) (d) 4,793,645 (2,274,674) 2,518,971
Deferred acquisition costs 1,587,959 - 1,587,959
Total non-current assets 11,051,239 (2,274,674) 8,776,565
Current assets
Accounts receivable 271,554 - 271,554
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 1 January 2008
Effect of
Transition
Note GAAP to IFRS IFRS
SHAREHOLDER`S EQUITY
Share capital 51,855,350 - 51,855,350
Share based payment reserve 13,254,905 - 13,254,905
Translation reserve 11(b) - - -
Accumulated loss (60,376,436 (1,823,557) (62,199,993
) )
Total Equity 4,733,819 (1,823,557) 2,910,262
LIABILITIES
Non-Current Liabilities
Loans and borrowings 9,806,636 - 9,806,636
Current Liabilities
Trade and other payables 520,711 - 520,711
Loans and borrowings 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) 15,129,806
As at 30 September 2008
Effect of
Transition
Note GAAP to IFRS IFRS
SHAREHOLDER`S EQUITY
Share capital 54,948,340 - 54,948,340
Share based payment 17,510,577 - 17,510,577
reserve
Translation reserve 11(b) - 441,841 441,841
Accumulated loss (70,844,119) (2,818,494) (73,662,613)
Total Equity 1,614,798 (2,376,653) (761,855)
LIABILITIES
Non-Current Liabilities
Loans and borrowings 8,722,464 - 8,722,464
Current Liabilities
Trade and other 1,009,938 - 1,009,938
payables
Loans and borrowings 1,181,499 - 1,181,499
2,191,437 - 2,191,437
Total Liabilities 10,913,901 - 10,913,901
Total Equity and Liabilities 12,528,699 (2,376,653) 10,152,046
As at 31 December 2008
Effect of
Transition to
Note GAAP IFRS IFRS
SHAREHOLDER`S EQUITY
Share capital 54,948,34 - 54,948,341
Share based payment reserve 17,584,974 - 17,584,974
Translation reserve 11(b) - 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
Loans and borrowings 12,967,753 - 12,967,753
Current Liabilities
Trade and other payables 1,798,839 - 1,798,839
Loans and borrowings 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 30 September 2008
Note GAAP Effect of IFRS
Transition
to IFRS
Revenue - - -
Cost of sales - - -
Operating loss - - -
Depreciation and amortisation (14,020) - (14,020)
Administrative expenses (1,449,943) (282,152) (1,732,095)
Transaction costs 11(a) - - -
Other income 11(b) - - -
Loss before finance expense (1,463,963) (282,152) (1,746,115)
and tax
Finance income 12,002 - 12,002
Finance expense (518,049) 22,945 (495,104)
Net finance expense (506,047) 22,945 (483,102)
Share of loss of equity
accounted investees (net of
income tax) - (59,285) (59,285)
Loss before income tax (1,970,010) (318,492) (2,285,502)
Income tax 1,000 (1,000) -
Loss for the period - - -
Other comprehensive
(loss)/income - - -
Foreign currency translation
differences for foreign
operations 11(a) - 197,024 197,024
Total comprehensive loss for
the period (1,969,010) (122,468) (2,091,478)
Total comprehensive (loss) /
income attributable to owners (1,969,010) (122,468) (2,091,478)
of company
Nine months ended 30 September 2008
Note GAAP Effect of IFRS
Transition
to IFRS
Revenue - - -
Cost of sales - - -
Operating loss - - -
Depreciation and (32,138) - (32,138)
amortisation
Administrative expenses (9,116,262) (896,565) (10,012,827)
Transaction costs 11(a) - - -
Other income 11(b) - - -
Loss before finance expense (9,148,400) (896,565) (10,044,965)
and tax
Finance income 147,461 - 147,641
Finance expense (1,468,927) 67,333 (1,401,594)
Net finance expense (1,321,466) 67,333 (1,253,953)
Share of loss of equity
accounted investees (net of
income tax) - (163,702) (163,702)
Loss before income tax (10,469,866) (992,934) (11,462,620)
Income tax 2,000 (2,000) -
Loss for the period - - -
Other comprehensive - - -
(loss)/income
Foreign currency translation
differences for foreign
operations 11(a) - 441,841 441,841
Total comprehensive loss for
the period (10,467,866) (553,096) (11,020,779)
Total comprehensive (loss) /
income attributable to
owners of company (10,467,866) (553,096)) (11,020,779)
Twelve months ended 31 December 2008
Note GAAP Effect of IFRS
Transition
to IFRS
Revenue - - -
Cost of sales - - -
Operating loss - - -
Depreciation and amortisation (61,140) - (61,140)
Administrative expenses (11,618,993) (385,486) (12,004,479)
Transaction costs 11(a) - - -
Other income 11(b) - - -
Loss before finance expense (11,680,133) (385,486) (12,065,619)
and tax
Finance income 179,119 - 179,119
Finance expense (1,985,653) 137,079 (1,848,574)
Net finance expense (1,806,534) 137,079 (1,669,455)
Share of loss of equity
accounted investees (net of
income tax) - (235,022) (235,022)
Loss before income tax (13,486,667) (483,429) (13,970,096)
Income tax 1,000 (1,000) -
Loss for the period - - -
Other comprehensive - - -
(loss)/income
Foreign currency translation
differences for foreign
operations 11(a) - 129,684 129,684
Total comprehensive loss for
the period (13,485,667) (354,745) (13,840,412)
Total comprehensive (loss) /
income attributable to owners
of company
(13,485,667) (354,745) (13,840,412)
NOTES TO RECONCILIATIONS
(a) BASIS OF CONSOLIDATION
Under GAAP, the Company accounted for its 50% interest in Ga-Phasha
Platinum Mines (Proprietary) Limited ("GPM"), previously a variable
interest entity. The Company was not considered the primary beneficiary
prior to July 1, 2009 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 31 December 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 recognised 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, recognised 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 recognised 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 recognised 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 30 September 2008 or for the year ended 31 December
2008.
(d) DEFERRED TAX ON MINERAL PROPERTIES
Under GAAP, in determination of the net loss from its interest in GPM,
the Company recognised 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, 30 September 2008, and 31 December 2008, the
Company has derecognised the impacts of all deferred taxes which had
previously been recognised 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 DISCUSSION AND ANALYSIS FOR THE THREE AND NINE MONTHS ENDED
30 SEPTMEBER 2009
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 "Group") for the year
ended 31 December 2008 and the unaudited condensed consolidated
financial statements for the three and nine months ended 30 September
2009, and are publicly available on SEDAR at www.sedar.com
As of 1 January 2009, the Group adopted International Financial
Reporting Standards ("IFRS") and the following disclosure, and
associated condensed consolidated 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 13 November 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: Bokoni 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.
Anooraq undertakes no obligation to update these forward-looking
statements except as required by law.
CAUTIONARY NOTE TO INVESTORS CONCERNING ESTIMATES OF MEASURED AND
INDICATED RESOURCES
This MD&A uses the terms "measured resources" and "indicated resources".
The Group advises investors that while those terms are recognized and
required by Canadian regulations, the U.S. Securities and Exchange
Commission do 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 Group advises
investors that while this term is recognized and required by Canadian
regulations, the U.S. Securities and Exchange Commission do 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
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 Bokoni 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 permit should 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 Group 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 Resources Corporation ("Anooraq or the Group") is engaged in the
mining, exploration and development of Platinum Group Metals ("PGM")
prospects in the Bushveld Igneous Complex of the Republic of South
Africa.
Anooraq, through its wholly owned South African subsidiary Plateau
Resources (Proprietary) Limited ("Plateau"), acquired a 51% controlling
interests and management control in Bokoni Platinum Mines (Proprietary)
Limited ("Bokoni") formerly Lebowa Platinum Mines and several PGM
projects, including the advanced stage Ga-Phasha PGM Project ("Ga-Phasha
Project"), the Boikgantsho PGM Project ("Boikgantsho Project"), and the
early stage Kwanda PGM project ("Kwanda Project") referred to as the
Bokoni Transaction. The controlling interest were acquired through
Plateau acquiring 51% of the shareholding of Bokoni Platinum Holdings
(Proprietary) Limited ("Bokoni Holdco"), the holding company of Bokoni
and the project companies on 1 July 2009.
Anooraq`s objective is to become a significant "mine to market" PGM
Group with a substantial and diversified PGM asset base including
production, development and exploration assets. The acquisition of the
controlling interest in Bokoni Holdco is the first stage of advancing
the Group`s PGM production strategy and has resulted in the Group
controlling refined production of 147,600 4E ounces (based on 2008
production at Bokoni 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 BOKONI PLATINUM MINE
OVERVIEW
Bokoni 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 Bokoni property consists of seven "new order" mining licenses
covering an area of 15,459.78 hectares. The mining operation consists of
a vertical shaft and declines to access the underground development on
the Merensky and UG2 Reefs, and two concentrators.
The mine is currently producing around 85,000 tpm, approximately 32,000
tpm of UG2 ore and 53,000 tpm of Merensky ore. UG2 production is
exclusively from the Middlepunt Hill Shaft (MPH) which consists of 4
adits and 2 underground levels. Production from MPH is expected to be
increased and maintained at a steady state production level of 45,000
tpm in the short term. Merensky ore is produced from three shafts,
namely: Vertical Shaft, UM2 Shaft and Brakfontein Shaft. The Vertical
shaft is the oldest of the three shafts and accounts for the bulk of the
Merensky production. Production at this shaft is expected to be built up
to a
steady state 50,000 tpm and maintained for approximately four years.
Production from the UM2 shaft is expected to decline from its steady
state volume of 12,500 tpm over the next two years. The Brakfontein
Shaft is in a ramp up phase and will be ramped up from current
production levels of 10,000 tpm, to a steady state production level of
120,000 tpm in the medium term.
The Vertical and UM2 shafts make use of conventional mining methods for
narrow tabular ore bodies. Ore Broken in stopes are transported
laterally by means of track bound equipment and then hoisted through a
vertical shaft arrange at Vertical Shaft and a decline shaft arrangement
at UM2 shaft. Anooraq will invest in maintenance of infrastructure at
Vertical Shaft to sustain mining for the next 4-5 years. Additional
opportunities, such as vamping, will be employed to supplement volumes
from these shafts. Further opportunities to increase the life of mine of
these shafts will also be investigated in the short to medium term.
Brakfontein Mine is being developed on a hybrid mining method whereby
ore broken in stopes is loaded directly onto a conveyor belt system and
taken out of the mine. Development of haulages and crosscuts are done my
means
of mechanized mining methods and stoping is conducted using hand held
drills.
The mining method is based on a "half level" model, whereby mining takes
place in 4 raise lines per half level. Production volumes of 12,500 tpm
per half level is planned from 6 stoping panels in the first two raise
lines, ledging in the third raise line and reef development in the
fourth raise line. In order for the shaft to produce 120,000 tpm 10 half
levels
or 5 complete mining levels will be required to be in steady state
production. Anooraq will focus on optimizing this mining method in the
short to medium term and intend increasing production per half level in
the longer term through smart planning and infrastructure modification.
The MPH shaft is in the process of converting the transport of broken
ore from its current mechanized hauling system to a conveyor belt
transport system similar to that of Brakfontein shaft. A similar half
level mining method will be employed. Mining at MPH will occur on 2 half
levels and the remainder of the mining will occur in the adits. Vamping
opportunities in the older adit areas are being investigated as a
supplement to tonnages.
A technical review conducted in March 2009, by Deloitte Mining Advisory
Services on behalf of Anooraq 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.
Bokoni Mine Mineral Reserves as at 31 December 2008
Category Tonnage (Mt) 4E grade 4E contained
(g/t) metal (Moz)
Merensky Reef Proven 21.71 4.34 3.03
Probable 5.43 4.16 0.73
Total Reserve 27.14 4.31 3.76
UG2 Reef Proven 32.10 5.43 5.60
Probable 9.10 5.17 1.50
Total Reserve 41.20 5.37 7.10
Notes:
The Mineral Reserves stated are for 100% of Bokoni. Anooraq`s interest is 51%
therein.
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%.
Bokoni Mine Mineral Resources as at 31 December 2008
Notes:
Category Tonnage 4E grade 4E Pt grade Pd Rh grade Au grade
(Mt) (g/t) contained (g/t) Grade (g/t) (g/t)
metal (g/t)
(Moz)
Merensky
Reef
Measured 25.92 5.64 4.71 3.63 1.5 0.21 0.30
Indicated 27.39 5.51 4.85 3.46 1.52 0.20 0.33
Measured
and
Indicated 53.31 5.58 9.56 3.54 1.51 0.20 0.32
Inferred 102.9 5.30 17.53 3.34 1.45 0.20 0.31
UG2 Reef
Measured 108.5 6.60 23.03 2.70 3.23 0.55 0.12
Indicated 71.91 6.56 15.18 2.70 3.20 0.53 0.13
Measured
and
Indicated 180.38 6.58 38.21 2.70 3.22 0.54 0.12
Inferred 145.00 6.61 30.82 2.72 3.23 0.53 0.13
The Mineral Resources stated are for 100% of Bokoni. Anooraq`s interest is
51% therein.
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").
The mine is in the process of updating the mineral resource and reserves for
2009. The updated resource and reserve statements are expected to be
published in the first quarter of 2010.
Previous technical studies conducted by Anglo Platinum indicated that
Bokoni`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.
FINANCING THE BOKONI TRANSACTION
Senior Debt facility
The Group financed the Bokoni Transaction at the Plateau level through a
combination of a Debt Facility provided by Standard Chartered Bank
("Standard Chartered") and a vendor finance facility provided by Anglo
Platinum, through its wholly owned subsidiary, Rustenburg Platinum Mines
Limited (RPM") (the "Vendor Finance Facility"). In addition, the Group
secured an agreement with RPM whereby RPM will provide Anooraq with an
operating cash shortfall facility ("the OCSF") of up to a maximum of $ 111
million (ZAR 750 million)
and access to RPM`s attributable share of the Bokoni Holdco cash flows ("the
standby facility") up to a maximum of 29/49 (approximately 59.2%) to meet
its obligations of the Debt Facility.
Plateau secured the senior debt facility ("the Debt Facility") with Standard
Chartered for an amount up to $ 111 million (ZAR 750 million), including
capitalized interest up to a maximum of three years or $ 37 million (ZAR 250
million). On 1 July 2009 Standard Chartered advanced $ 74 million (ZAR 500
million) to Plateau.
The Debt Facility is repayable in 12 semi-annual equal capital instalments,
with the first payment due on 31 January 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 total amount of the interest payable on the notional amount of the Debt
Facility of $ 74 million (ZAR 500 million) drawn down on July 1, 2009 (i.e.
other than the rollup interest loan of up to $ 37 million (ZAR 250 million)
is hedged with effect from 1 July 2009 until 31 July 2012. As at 1 July 2009,
the interest rate hedge was fixed, thereafter, the interest payable on 50% of
the aggregate amount of the Debt Facility (other than the rollup interest
loan of $ 37 million (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 1 July 2009. Pursuant to the
Bokoni Holdco Shareholders Agreement, if Plateau`s cash flows derived from
Bokoni 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, to provide Plateau a portion of its
entitlement to the Bokoni Holdco cash flows such that Plateau can utilize up
to 80% of
all cash flows generated from Bokoni Holdco for this purpose.
Vendor Finance Facility
RPM provided the Vendor Finance Facility to Anooraq and it consists of a cash
component of $177.7 million (ZAR 1.2 billion) and a share settled component
(the "Share- Settled Financing") arrangement amounting to $162.9 million
(ZAR 1.1 billion).
Cash component
In terms of the $ 177.8 million (ZAR 1.2 billion) cash component of the
Vendor Finance Facility, RPM subscribed for cumulative redeemable preference
shares in the capital of Plateau (the "Plateau Preferred A Shares") for an
aggregate sum of $ 177.8 million (ZAR 1.2 billion). The Plateau Preferred A
Shares are entitled to a 12.0% fixed dividend after tax, 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 Shares have an initial maturity date of 1
July 2015 and a final maturity date of 1 July 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 such
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. At the acquisition date an
amount of $ 1.1 million (ZAR 7.2 million) was repaid with surplus cash
available.
Share Settled Financing
In terms of the Share Settled Financing component, Pelawan Investments
(Proprietary) Limited ("Pelawan"), the majority shareholder of the Group,
established a wholly owned subsidiary (the "Pelawan SPV") whereby Pelawan
transferred 56,691,303 Anooraq ordinary shares to the SPV. RPM subscribed
for convertible preferred shares in the capital of the SPV (the "SPV
Preferred Shares") for an aggregate sum of $ 162.9 million (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 subscribed at a sum of $ 162.9 million (ZAR 1.1 billion), 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
will take delivery of all Plateau Ordinary Shares held by the SPV and, in
consideration thereof, issue to the SPV such number of ordinary shares that
have a value equal to the value of such Plateau Ordinary Shares. The total
number of ordinary shares to be issued on implementation of the share settled
financing arrangement is 227.4 million ordinary shares. The final effects of
the Share Settled Financing is that: (i) RPM funded a payment of $ 162.9
million (ZAR 1.1 billion) to Plateau whereby RPM will ultimately receive a
total of 115.8 million ordinary shares in Anooraq; and (ii) Pelawan will
receive 111.6 million ordinary shares in Anooraq in order to maintain
Pelawan`s minimum 51% shareholding in Anooraq.
The SPV Preferred Shares are 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) 1 July 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 ordinary 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 ordinary shares) to the SPV
pursuant to the Exchange Agreement. Such ordinary 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.
RPM will be able to trade its 115.8 million ordinary shares on an
unrestricted basis which could have a depressing effect on the trading price
of Anooraq`s ordinary shares. RPM is not bound by any contractual lock-ins or
restrictions in respect of any of the Group`s ordinary shares which it will
hold. It will, however, prior to disposing of any such ordinary shares,
engage in a consultative process with Anooraq, and endeavour to dispose of
such Ordinary Shares in Anooraq in a responsible manner. Neither Pelawan nor
any of shareholders of Pelawan have any pre-emptive rights in respect of
these Ordinary Shares.
Operating Cash Shortfall Facility (OCSF)
In order that Anooraq meet any required shareholder contributions in respect
of operating or capital expenditure cash shortfalls at Bokoni Mines during
the initial 3 year ramp up phase at the mine, RPM provided Anooraq with the
OCSF which can be drawn up to a maximum of $ 111 million (ZAR 750 million)
and is subject to certain annual draw downs, during the first three years.
The OCSF bears interest at a rate of 15.84%, compounded quarterly in arrears.
As at 30 September 2009 Plateau has drawn $ 15.9 million (ZAR 111.9 million)
of the facility to meet its share of the Bokoni Mine`s funding requirements.
In addition, Anglo Platinum made available to Plateau a "standby facility"
for up to a maximum of 29/49 (approximately 59.2%) of RPM`s attributable
share of the Bokoni 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 Senior Debt Facility during its
term. The standby facility will bear interest at the prime rate of interest
in South Africa.
The shareholder loans in Bokoni Holdco and Bokoni Mines 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 Bokoni Mines net cash flows are available to meet
Plateau`s Debt Facility obligations. The Debt Facility is secured by a
mortgage bond over the immovable assets of the Bokoni Mine.
Management of the Bokoni Operations
Plateau and RPM entered into a shareholders` agreement ("the Bokoni Holdco
Shareholders Agreement") to govern the relationship between Plateau and RPM,
as shareholders of Bokoni Holdco, and to provide management to Bokoni Holdco
and its subsidiaries, including Bokoni Mines.
Plateau is entitled to nominate the majority of the directors of Bokoni
Holdco and Bokoni Mines, 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 Group, pursuant to the Bokoni
Holdco Shareholders Agreement.
Pursuant to the Bokoni Holdco Shareholders Agreement, the board of directors
of Bokoni 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 Bokoni Holdco by funding the entire cash
call, provided that, until the expiry of a period from the closing date of
the Bokoni 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 Bokoni Transaction become legally secure, and (ii) the date on which
74% of the scheduled capital repayments due by Plateau to Standard Chartered,
pursuant to the Debt Facility are made in accordance with the debt repayment
profile of the Debt Facility (the "Initial Period"), Anooraq`s shareholding
in Bokoni Holdco cannot be diluted for default in respect of equity
contributions.
Pursuant to the terms of shared services agreements (including smelting and
refining), Anglo Platinum provide certain services to Bokoni 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 group through Plateau provides
certain management services to Bokoni pursuant to service agreements entered
into with effect from 1 July 2009. In addition the Bokoni Holdco Shareholders
Agreement also governs the initial sale of concentrate from the Ga-Phasha
Project upon commencement of production.
Share Ownership Trusts
On 1 July 2009, Anglo Platinum donated $15.4 million (ZAR103.8 million) to
the Anooraq Community Participation Trust, of which $11.3 million
(ZAR79.3million) was used to subscribe for 9,799,505 new ordinary shares in
Anooraq. The balance of Anglo Platinum`s contribution will be used to pay
assist the communities over the forthcoming periods.
Anglo Platinum contributed an amount of $6.8 million (ZAR 45.6 million) to
the Bokoni Platinum Mine ESOP Trust (:ESOP Trust") to facilitate its
establishment, and approximately $5.4 million (ZAR36.5 million) of this
amount was utilized by the Bokoni Platinum Mine ESOP Trust to subscribe for
4,497,062 ordinary shares in Anooraq. The ESOP Trust is consolidated by
anooraq as a special purpose entity.
The Share Ownership Trusts subscribed for the ordinary shares at a
subscription price equal to $1.11, being the closing price of the ordinary
shares on the TSX Venture Exchange on the day prior to the announcement of
the revised Bokoni transaction terms. As a result of the subscription by the
Share Ownership Trusts, Anooraq received proceeds of approximately $16.7
million (ZAR 115.8) million The Share Ownership Trusts holds the ordinary
shares along with other investments, for the purpose of making distributions
to their beneficiaries in accordance with their governing trust deeds.
1.2.2 GA-PHASHA PROJECT
Prior to 1 July 2009, Anooraq owned a 50% interest in the Ga-Phasha Project.
As of 1 July 2009, the joint venture agreements terminated and Ga-Phasha
Platinum Mine (Proprietary) Limited, a wholly owned subsidiary of Bokoni
Holdco, owns the respective interest in and assets relating to the Ga-Phasha
Project. As a result of the completion of the Bokoni Transaction, Anooraq
effectively owns 51% of 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 underway. Socio-economic and environmental studies
have also been done. Anooraq intends advancing the Ga-Phasha prefeasibility
study in 2010 to incorporate synergistic opportunities between the Ga-Phasha
and the Bokoni mine.
Anooraq is currently investigating opportunities to mine the Merensky Reef at
Ga-Phasha using the adjacent Brakfontein infrastructure. Investigation thus
far indicate encouraging results and the mining operation at the Bokoni mine
may be extended through the Brakfontein haulages on 4 levels into the
Klipfontein (one of the Ga-Phasha farms) lease area.
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.
Rietfontein Block
On 10 October 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 Group`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 Group 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.
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 Rustenburg
(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 Department of Mineral Resources ("DMR").
Kwanda Project
On 16 May 2002, the Group 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
Group acquired an initial 50% interest in the PGM rights to the twelve farms.
As of 1 July 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 Bokoni Holdco, owns the
respective interest in and assets relating to the Kwanda Project. As a result
of the completion of the Bokoni Transaction, Anooraq effectively owns 51% of
the Kwanda Project.
Anooraq will continue with prospecting programs on the Kwanda and Central
Block in order to comply with the Prospecting Works Program. Anooraq will
also pursue opportunities to increase its knowledge base of the Platreef, by
information sharing with other parties conducting exploration activities in
the area. A decision is expected to be taken in the medium term as to the
strategic direction the Group intends to embark on with regards to the
Platreef Projects.
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 Group 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 kilometers east of the
property.
As of 1 July 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 Bokoni Holdco, owns the
respective interest in and assets relating to the Boikghantsho Project. As a
result of the completion of the Bokoni Transaction, Anooraq effectively owns
51% of the Boikgantsho Project.
Historically, significant exploration drilling has been conducted at the
project site which has led to the declaration of a significant Mineral
Resource in the indicated and inferred categories. This Mineral Resource was
the basis of a high level preliminary evaluation undertaken by Anooraq and
published in February 2005.
Based on drilling to September 2004, total indicated resources in the Drenthe
and Overysel deposits are 176.6 million tonnes grading 1.35 g/t 3PGM and
0.13% nickel, and 0.08% copper and total inferred resources are 104.1 million
tonnes grading 1.23 g/t 3PGM and 0.14% nickel and 0.09% copper at a $20 gross
metal value (GMV) per tonne cut-off. G.J. van der Heever, B.Sc., Pr.Sci.Nat.
of GeoLogix, an independent qualified person as defined by National
Instrument
43-101, is responsible for the resource estimate. Further details of the
resource estimate parameters are included in a December 2004 technical report
on the resource estimate, and also in the March 2005 Preliminary Assessment,
filed on www.sedar.com
Though the preliminary evaluation was at a level where definitive economic
evaluation could not be carried out, the results of the work undertaken
showed that the project value was significant enough to warrant further
investigation. Anooraq intends embarking on a pre-feasibility study with a
view to increase the inherent value of the Boikgantsho Project. On completion
of the pre-feasibility undertaken by the Group, a decision will be made on
the further development of the project.
1.2.5 MARKET TRENDS
The average ZAR: Canadian Dollar exchange rate for the nine months ended 30
September 2009 was ZAR 7.43 with the closing rate on 30 September 2009 at ZAR
7.03.
Platinum prices averaged d US$1,314/oz in 2007 and, averaged US$1,583/oz in
2008. Towards the end of 2008 platinum prices declined significantly but
have shown a steady increase in 2009, from US$930/oz early in the year to a
high of $1 331/oz in October, and averaging US$ 1143 /oz for the nine months
to September 30, 2009.
Palladium prices averaged approximately, 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$324/oz in October, averaging around US$ 236/oz for the nine months to
30 September 2009.
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 31 December and
averaging US$6,532/oz for the year. Prices in 2009 have been improving since
the end of January, averaging around US$ 1,396/oz for the nine months to 30
September 2009.
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 for the nine months to 30 September 2009 is approximately
US$930/oz.
Selected Annual Information
For the year ended 31 December 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 As per Canadian GAAP
per IFRS
As at As at As at
31 December 31 December 31 December
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) (3,603,462) 2,813,890 8,976,101
equity
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 12,898,793 15,033,434 21,828,922
shareholders` equity
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 185,775 168,378 148,220
common shares outstanding
(thousands)
1.4 SUMMARY OF QUARTERLY RESULTS
Bokoni Mine Production Statistics
Three months Six months
ended to ended to
30 September 30 June
2009 2009 % Change
Tonnes broken 000 tons 315,640 550,000 15
Tonnes milled 000 tons 254,399 440,000 15
Built-up head grade g/t milled 4.19 4.32 (3)
4E
UG2 mined to total % 38 38 0
output
R/t operating cost R/t 1,005 1,153 13
Immediately available Months 14 12 17
ore reserves
R/4E operating cost R/4E Oz 8,294 N/A N/A
US$/4E operating cost US$/4E Oz 1,066 N/A N/A
Total employees Oz 4,618 4,731 (2)
Bokoni Mines was formerly wholly owned by Anglo Platinum and historical
production statistics are not available.
ANOORAQ RESOURCES CORPORATION
SUMMARY OF FINANCIAL RESULTS (CONSOLIDATED)
ABRIDGED STATEMENT OF FINANCIAL POSITION
(EXPRESSED IN MILLIONS OF DOLLARS, EXCEPT PER-SHARE AMOUNTS. SMALL DIFFERENCES
ARE DUE TO ROUNDING.)
CAD $ Million 30 Sep 2009 30 Jun 2009 31 Mar 2009 31 Dec 2008
Property, plant and 695.1 13.8 2.1 2.1
equipment
Mineral properties 12.8 4.2 4.2 4.2
Goodwill 10.5 - - -
Capital work in progress 224.6 - - -
Investment in joint
venture - 2.2 2.5 2.5
Other assets 2.3 - - -
Current assets 60.6 0.8 2.2 4.1
Total assets 1,005.9 21,0 11.0 12.9
Ordinary shareholder`s
equity (10.4) (10.5) (5.8) (3.7)
Preference shares 162.9 - - -
Non-controlling interest 92.1 - - -
Loans and borrowings 522.8 - 13.2 12.9
Deferred tax 215.9 - - -
Other non -current
liabilities 5.4 - - -
Current Liabilities 34.8 31.5 3.6 3.5
Total equity and 1005.9 21.0 11.0 12.9
liabilities
Working capital 25.7 (30.7) (1.4) 0.6
ABRIDGED STATEMENT OF FINANCIAL POSITION
(EXPRESSED IN MILLIONS OF DOLLARS, EXCEPT PER-SHARE AMOUNTS. SMALL DIFFERENCES
ARE DUE TO ROUNDING.) (CONTINUED)
CAD $ Million 30 Sep 2008 30 Jun 2008 31 Mar 2008 31 Dec 2008
Property, plant and 2.0 1.7 1.0 9.0
equipment
Mineral properties 4.2 4.2 9.2 -
Goodwill - - - -
Capital work in progress - - - -
Investment in joint
venture 2.5 2.6 - -
Other assets - - -
0.5
Current assets 1.4 1.5 3.0 7.4
Total assets 10.1 12.3 13.3 16.9
Ordinary shareholder`s
equity (0.7) - 3.8 4.7
Preference shares - - - -
Non-controlling interest - - - -
Loans and borrowings 8.7 8.9 8.6 9.8
Deferred tax - - - -
Other non -current
liabilities - - - -
Current Liabilities 2.1 1.4 0.9 2.4
Total equity and
liabilities 10.1 10.0 13.3 16.9
Working capital (0.7) 0.1 2.1 5.0
ABRIDGED STATEMENT OF COMPREHENSIVE LOSS (FOR THE THREE MONTHS)
(EXPRESSED IN MILLIONS OF DOLLARS, EXCEPT PER-SHARE AMOUNTS. SMALL DIFFERENCES
ARE DUE TO ROUNDING)
30 Sep 2009 30 Jun 2009 30 Mar 2009 30 Dec 2008
$ millions
Revenue 27.8 - - -
Cost of sales 34.6 - - -
Loss from operations (6.8) - - -
Depreciation and
amortisation (5.9) (0.03) (0.03) (0.03)
Administrative expenses (2.9) (4.53) (1.39) (1.99)
Transaction costs (0.3) (5.5) (1.7) -
Other income 3.9 0.01 0.01 -
Net finance expense (8.4) (0.6) (0.6) (0.4)
Share of associate loss - (0.1) (0.1) (0.07)
Deferred tax 5.5 - - -
Comprehensive income/
(loss) (15.1) (10.8) (3.8) (2.5)
Minority interest - - - -
(Loss) for the period (15.1) (10.8) (3.8) (2.5)
Foreign exchange
gain/(loss) (10.0) (2.2) (0.2) (0.4)
Comprehensive loss (25.1) (13.0) (4.0) (2.9)
Basic and diluted
earnings (loss) per (0.05) (0.04) (0.01) (0.01)
share( Cents)
Weighted average number
of ordinary shares
outstanding (millions) 189 186 186 185
ABRIDGED STATEMENT OF COMPREHENSIVE LOSS (FOR THE THREE MONTHS)
(EXPRESSED IN MILLIONS OF DOLLARS, EXCEPT PER-SHARE AMOUNTS. SMALL DIFFERENCES
ARE DUE TO ROUNDING) (CONTINUED)
$ millions 30 Sep 2008 30 Jun 2008 30 Mar 2008 30 Dec 2007
Revenue - - - -
Cost of sales - - - -
Loss from operations - - - -
Depreciation and
amortisation (0.01) (0.01) (2.0) (0.09)
Administrative expenses (1.65) (6.55) - (9.7)
Transaction costs - - - -
Other income - - -
Net finance expense (0.5) (0.5) - (0.4)
Share of associate loss (0.06) (0.05) - -
Deferred tax - - - -
Comprehensive income/
(loss) (2.2) (7.2) (2.0) (11.0)
Minority interest - - - -
(Loss) for the period (2.2) (7.2) (2.0) (11.0)
Foreign exchange 0.2 (0.03) 0.9 0.06
gain/(loss)
Comprehensive loss (2.0) (7.3) (1.1) (11.1)
Basic and diluted earnings
(loss) per share( Cents) (0.01) (0.04) (0.01) (0.06)
Weighted average number of
ordinary shares
outstanding (millions) 185 185 185 184.8
15 RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED 30 SEPTEMBER 2009
The Group had a loss of $14.8 million (ZAR 109.9 million) for the three
months ended 30 September 2009 as compared to a loss of $2.2 million (ZAR14.7
million) in the three months ended 30 September 2008. The results for the
three months include an operating loss from Bokoni Mines of $6.8 million,
(ZAR50.5 million), amortisation and depreciation of mining assets of $5.9
million (ZAR49.8 million), offset by the recovery of exploration expenses of
$3.9 million (ZAR28.3 million) relating to the Boikgantsho and Kwanda
projects and offset by a decrease in deferred tax of $5.5 million (ZAR40.8
million).
Interest expense after capitalizing borrowing costs for the three months to
30 September 2009 amounted to $8.80 million (ZAR65.4 million) as compared to
$0.5 million (ZAR3.5 million) in the three months ended 30 September 2008.
The Group had a loss of $29.4 million (ZAR218.5 million) for the nine months
ended 30 September 2009 as compared to a loss of $11.4 million (ZAR76.8
million) in the nine months ended 30 September 2008. The results for the nine
months include an operating loss from Bokoni Mines of $6.8 million (ZAR50.5
million), depreciation and amortisation of $5.9 million (ZAR49.8 million),
offset by the recovery of exploration expenses of $3.9 million (ZAR28.3
million) relating to the Platreef properties and a decrease in deferred tax
for the period of $5.5 million (ZAR40.8 million).
Interest expense for the nine months to 30 September 2009 amounted to $13.5
(ZAR100.2 million) before capitalized borrowing costs as compared to $1.4
million (ZAR9.8 million) in the nine months ended 30 September 2008. Interest
of $6.9 million (ZAR51.3 million) was capitalized since 1 July 2009.
REVENUE
The mine concentrator milled 254 399 tons for the three months ended 30
September 2009, resulting in the delivery of 16,668 platinum ounces and
11,249 palladium ounces. Revenue from concentrate sold amounted to $27.8
million (ZAR206.6 million) and was impacted by the strengthening of the Rand
US Dollar exchange rate at ZAR7.78 in the current quarter.
Sale of concentrate achieved revenue on a PGM basket price basis of $1,448
per platinum ounce as compared to $1,309 per platinum ounce in the three
months to 30 September 2009.
MINE OPERATING COSTS
Operating costs for the three months to 30 September 2009 excluding
amortisation amounted to $34.6 million (R256.2million). On a per ton basis
production costs was $136 per ton (ZAR 1,005 p/ton). Cost was impacted by:
- Labour costs were $ 18.9 million (ZAR140.4 million). The mine completed a
zero based labour plan during the quarter and is currently addressing the
impact of labour on the operation. In addition a number of contractors will
be phased out during the next quarter, which will assist the reassigning of
labour according to the proposed new working requirements.
- Stores cost amounted to $5.3 million (ZAR39 million) for the three months
to September 30, 2009. A flexible budget system was introduced at the mine
and accountability for stores expenditure devolved to operating personnel. It
is anticipated that expenditure on stores will remain at least at current
levels to ensure expenditure is managed in accordance with production
volumes.
- Amortisation and depreciation was $5.9 million (ZAR 49.8 million) for the
three months ended September 30,2009
ADMINISTRATION EXPENSES
Administration expenses for the three months ended 30 September 2009 were
$2.9 million as compared to $1.7 million in the three months of the previous
year.
Administration expense for the nine months ended 30 September 2009 were $8.9
million as compared to $10.0 million in the nine months of the previous year.
Transaction cost amounting to $7.5 million incurred with the acquisition of
the 51% controlling interest of the Bokoni mine was expensed. Transaction
cost was previously capitalised and as a result of the Group`s adoption of
IFRS 3 Revised (Business Combinations) these costs were expensed at 30
September 2009. The Group incurred acquisition-related costs of $12.5
million relating to external legal fees and due diligence costs. The group
capitalised $4.8 million of these cost against the Standard Chartered loan
and the balance has been included in administrative expenses in the Group`s
consolidated statement of comprehensive income.
OTHER INCOME
Other income consist of the recovery of exploration expenses of $3.9 million
(ZAR 28.3 million) relating to the Platreef properties.
EXPLORATION EXPENSES
There was no exploration undertaken in the quarter under review.
INTEREST
Interest expense for the three months ended 30 September 2009 amounted to
$13.5 million (ZAR100.4 million) consisting of $4.9 million (ZAR36.4 million)
attributed to the senior debt funding of $139.4 million (ZAR980 million) and
$0.6 million attributable to the drawdown from the Operating Cash Short Fall
Facility ("OCSF") of $31.2 million (ZAR219.5 million) during the quarter. An
amount of $6.7 million (ZAR49.8 million) is included in interest cost
relating to the A Preference shares of $169.6 million (ZAR1,192.8 million)
for Plateau and $163.0 million (ZAR 1,152.9 million) relating to the Bokoni
Holdco "A" preference shares issued to RPM both carrying a dividend rate of
12%. As a result of the acquisition of Bokoni the Group capitalised borrowing
costs of $6.9 million to assets in the period under review.
The funds drawn from the OCSF were applied to settle the working capital
deficit at 1 July 2009 of approximately $13.7 million (ZAR100 million) and to
fund operating costs and capital as well as the operating losses incurred in
the three months under review. The concentrate revenue is received based on
a 9 week cycle and payment is received on the last day of the month it is
due. The OCSF facility is drawn down to meet cost and accounts payable
obligations prior to receipt of payment of concentrate sales. No interest
payments were made in terms of the senior debt.
TAXATION
An amount of $5.5 million (ZAR40.9 million) was reversed from deferred
taxation as a result of changes to timing differences and tax allowances in
the quarter to 30 September 30, 2009.
LOSS FOR THE PERIOD
The loss for the three months to 30 September 2009 amounted to $14.9 million
as compared to a loss of $2.2 million in the three months to 30 September
2008.
The loss for the nine months to 30 September 2009 amounted to $29.4 million
as compared to a loss of $11.5 million in the nine months to 30 September
2008.
1.6 LIQUIDITY
At 30 September 2009 the Group had available working capital of $24.4 million
compared to available working capital of $0.6 million as at 31 December 2008.
The RPM bridging loan was settled as part of the funding arrangements
associated with the acquisition of the 51% controlling interest in terms of
the Bokoni Transaction.
As at 1 July 2009 all outstanding regulatory approvals were obtained by the
Group and all outstanding conditions fulfilled and the transaction was
completed. As a result of the completion of the Bokoni Transaction the Group
secured additional financial resources and long term funding (as discussed
under Financing the Bokoni Transaction). The Group 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 Group`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.7.03 the closing rate in effect on 30 September 2009.
The Group has the following long-term contractual obligations as at 30
September 2009:
Payments due by period
$ millions Total Less than 1 to 3-5 years More than
1 year 3 years 5 years
Loans and borrowings
obligations 522.8 - 14.2 74.6 434.0
Capital expenditure 12.4 12.4 - - -
Other 1.1 - 1.1 -
Total 537.8 12.65 15.3 74.6 434.0
The Group has routine market-price leases on its office premises in
Johannesburg, South Africa.
The Group has no "Purchase Obligations", defined as any agreement to purchase
goods or services that is enforceable and legally binding on the Group 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 debt and equity.
The Group`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 Group has
secured sustainable long term funding and completed the Bokoni transaction
and obtained funding to meet its operating obligations.
The cash position at 30 September 2009 was approximately $28.4 million
(ZAR219.0 million) as a result of the balance of the funds raised and the
subscription by the ESOP and Community Trusts. The mine currently has $13.2
million (ZAR92.8 million) cash available. Included in cash and cash
equivalents is restricted cash of $1.3 million (ZAR9.6 million) relating to
the ESOP Trust which is under control of the Group.
The Bokoni acquisition transaction included the raising of an $111.4 million
(ZAR750 million) facility from Standard Chartered Bank of which $74.0 million
(ZAR500 million has been drawn and proceeds from the Share subscription of
the Anooraq Community Trust of $10.9 million (ZAR79.3) million and the ESOP
Trust subscription proceeds of $5 million (ZAR36, 3 million).
1.8 OFF-BALANCE SHEET ARRANGEMENTS
None.
1.9 TRANSACTIONS WITH RELATED PARTIES
Hunter Dickinson Services Inc. ("HDSI") is a private Group owned equally by
several public companies, one of which is the Group. HDSI has a director s
in common with the Group and provides geological, corporate development,
administrative and management services to, and incurs third party costs on
behalf of, the Group and its subsidiaries on a full cost recovery basis
pursuant to an agreement dated 31 December 1996.
During the nine months ended 30 September 2009, the Group paid nil (2008 -
$4,927) to CEC Engineering Ltd ("CEC"), a private Group owned by a former
director, for engineering and project management services at market rates.
The Group concluded a number of agreements with respect to services at the
Bokoni mine with Rustenburg Platinum Mines (`RPM`) a wholly owned subsidiary
of Anglo Platinum and now a 49% shareholder in Bokoni Holdco, on 28 March
2008. These agreements were amended on 13 May 2009 and include a limited off-
take agreement whereby Bokoni Mines sells the concentrate produced at the
mine. RPM purchase all the concentrate produced at Bokoni and in addition has
provided all the debt in the Group other than the funding provided by
Standard Chartered Bank.
Pursuant to the terms of a shared services agreement, the Anglo American plc
Group of companies will continue to provide certain operations services to
Bokoni Mines at a cost that is no greater than the costs charged to any other
Anglo American plc group for the same or similar services. It is anticipated
that, as Anooraq builds its internal capacity, and makes the transformation
to a fully operational PGM producer, these services will be phased out and
replaced either with internal services or third party services
Pursuant to the acquisition of a controlling interest of 51% in Bokoni
Holdings (Proprietary) Limited, the Group paid transaction costs associated
with Pelawan Investments (Proprietary) Limited, the Group`s controlling
shareholder, costs owing to Rand Merchant bank of $1.5 million ( ZAR10,1
million) and legal costs of $0.1 million ( ZAR0.9 million).
In terms of the Lebowa transaction agreements the Company were obligated to
pay all of the transaction expenses incurred by Anooraq and Pelawan
Investments out of the funding for the transaction that was provided from
Anglo Platinum. A special committee appointed by the Anooraq Board of
Directors and the Anooraq Audit committee approved the payment of the Pelawan
transaction expenses from the proceeds.
1.10 FOURTH QUARTER
Not applicable.
1.11 PROPOSED TRANSACTION
The Bokoni Transaction was completed on 1 July 2009.
1.12 CRITICAL ACCOUNTING ESTIMATES
The Group`s accounting policies are presented in note 3 of the unaudited
condensed consolidated interim financial statements and changes to those
policies are described in note 2 of the condensed consolidated interim
financial statements for the nine months ended 30 September 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 consolidated 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:
- Purchase price allocation as part of a business combination;
- mineral resources and reserves;
- 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 1 January 2009 the Group 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 2 March 2009.
The condensed consolidated interim financial statements for the nine months
ended 30 September 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 group`s third IFRS condensed 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 31 December 2009. Previously, the Group 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 nine months
ended 30 September 2008 and financial statements for the year ended 31
December 2008, have been adjusted from amounts previously reported under
GAAP.
IMPACT OF IFRS ON OUR ORGANIZATION
The conversion to IFRS impacts the way the Group presents its financial
results. The Group 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 Group`s
accounting systems has been minimal as the Group was still in the exploration
phase. The Group internal and disclosure control processes, as currently
designed, have not required significant modifications as a result of its
conversion to IFRS. The Group has assessed the impacts of adopting IFRS on
our contractual arrangements, and has not identified any material compliance
issues. The Group 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 Group elected to take the following IFRS 1
optional exemptions:
- to apply the requirements of IFRS 3, Business Combinations, prospectively
from 1 January 2008, the "Transition Date";
- to apply the requirements of IFRS 2, Share-based payments, only to equity
instruments granted after 7 November 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 Group`s financial position, financial performance and cash flows
is set out in Note 26 of the consolidated interim financial statements.
CHANGES IN ACCOUNTING POLICIES
OVERVIEW
The Group changed its accounting policies as from January 1, 2009 in the
following areas:
- Accounting for business combinations
- Presentation of financial statements
- Accounting for borrowing costs
ACCOUNTING FOR BUSINESS COMBINATIONS
As a result of the acquisition discussed in note 8, the Group early adopted
IFRS 3 Business Combinations (2008) and IAS 27 Consolidated and Separate
Financial Statements (2008) for all business combinations occurring in the
financial year commencing 1 January 2009. All business combinations occurring
on or after 1 January 2009 are accounted for by applying the acquisition
method. The change in accounting policy is applied prospectively. As a result
of the change in accounting policy, transaction costs amounting to $7.5
million were recognised in the loss for the nine months ended 30 September
2009.
The Group applied the acquisition method for the business combination as
disclosed in note 8.
Control is the power to govern the financial and operating policies of an
entity so as to obtain benefits from its activities. In assessing control,
consideration is given to potential voting rights that are currently
exercisable. The acquisition date is the date on which control is transferred
to the acquirer. Judgment is applied in determining the acquisition date and
determining whether control is transferred from one party to another.
Goodwill is measured as the fair value of the consideration transferred
including the recognised amount of any non-controlling interest in the
acquiree, less the net recognised amount (generally fair value) of the
identifiable assets acquired and liabilities assumed, all measured at the
acquisition date. To the extent that the fair value exceeds the consideration
transferred, the excess is recognised in the statement of comprehensive
income.
Consideration transferred includes the fair values of the assets transferred,
liabilities incurred by the Group to the previous owners of the acquiree, and
equity interests issued by the Group. Consideration transferred also includes
the fair value of any contingent consideration and share-based payment awards
of the acquiree that are replaced mandatorily in the business combination.
A contingent liability of the acquiree is assumed in a business combination
only if such a liability represents a present obligation and arises from a
past event, and its fair value can be measured reliably.
Non-controlling interest is measured at its proportionate interest in the
identifiable net assets of the acquiree.
Transaction costs incurred in connection with a business combination, such as
legal fees, due diligence fees, and other professional and consulting fees
are expensed as incurred, unless it is debt related. Transaction costs
related to debt instruments are capitalised.
If the Group obtains control over one or more entities that are not
businesses, then the bringing together of those entities are not business
combinations. The cost of acquisition is allocated among the individual
identifiable assets and liabilities, based on their relative fair values at
the date of acquisition. Such transactions do not give rise to goodwill and
no non-controlling interest is recognised.
The change in accounting policy is applied prospectively.
The impact of the change in accounting policy has been recorded in the
quarter ended 30 September 2009. The effect on profit and loss in the
previous quarters reported would have been as follows:
Three months ended Three months ended
30 June 2009 31 March 2009
Loss as previously reported 9,174,118 2,107,384
Transaction costs expensed 5,551,586 1,670,551
Loss as restated 14,725,704 3,777,935
Loss per share, as restated (0.08) (0.02)
PRESENTATION OF FINANCIAL STATEMENTS
The condensed consolidated financial statements have been prepared by
applying the revised IAS 1 Presentation of Financial Statements (2007), which
became effective as of 1 January 2009. As a result, the consolidated
statement of changes in equity presents all owner changes in equity, whereas
all non-owner changes in equity are presented in the consolidated statement
of comprehensive income. This presentation has been applied in these
condensed consolidated financial statements.
Comparative information has been changed so that it is in conformity with the
revised standard. Since the change in accounting policy only impacts
presentation aspects, there is no impact on loss per share.
ACCOUNTING FOR BORROWING COSTS
In respect of borrowing costs relating to qualifying assets for which the
commencement date for capitalisation is on or after 1 January 2009, the Group
capitalizes borrowing costs that are directly attributable to the
acquisition, construction or production of a qualifying asset as part of the
cost of that asset. Previously the Group immediately recognised all borrowing
costs as an expense. This change in accounting policy was due to the
prospective adoption of IAS 23 Borrowing Costs (2007) in accordance with the
transitional provisions of such standard; comparative figures have not been
restated. The change in accounting policy resulted in the capitalisation of
borrowing costs of $6.9 million in the period ended 30 September 2009.
New standards not yet adopted
Standards and interpretations issued but not yet effective and applicable to
the Group:
- Amendments to IAS 27, Consolidated and separate financial statements
- Amendments to IAS 39, Eligible hedged items
- Amendments to IFRS 1 and IAS 27, Cost of an investment in a subsidiary,
jointly controlled entity or associate
- Amendments to IFRS 1, First time adoption of financial reporting standards
- Amendments to IFRS 2, Share-based payments: vesting conditions and
cancellations
- Amendments to IFRS 7, Improving disclosures about financial instruments
- IFRIC 17, Distribution of Non-cash assets to owners
- Various improvements to IFRS 2008
- Various improvements to IFRS 2009
The Group is evaluating the impact, if any, that these new standards will
have on the consolidated financial statements.
1.14 FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
The Group 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 Group if counterparty to a
financial instrument fails to meet its contractual obligations. The Group`s
credit risk is primarily attributable to its liquid financial assets
including cash and cash equivalents and accounts receivable. The Group 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 Group`s cash and cash equivalents and accounts
receivable represent the maximum exposure to credit risk. The Group does not
have financial assets that are invested in asset backed commercial paper.
LIQUIDITY RISK
Liquidity risk is the risk that the Group will not be able to meet its
financial obligations as they fall due. The Group ensures that there is
sufficient capital in order to meet short term business requirements, after
taking into account cash flows from operations and the Group`s holdings of
cash and cash equivalents. The Group`s cash and equivalents are invested in
business accounts which are available on demand for the Group`s programs, and
which are not invested in any asset backed deposits/investments.
The Group operates in South Africa. Like other foreign entities operating
there, the Group is subject to currency exchange controls administered by the
South African Reserve Bank, that country`s central bank. A significant
portion of the Group`s funding structure for its South African operations
consists of advancing loans to its South Africa incorporated subsidiaries and
it is possible the Group 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 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 Group enters into transactions for the
purchase of supplies and services denominated in South African Rand. In
addition, the Group has cash and certain liabilities denominated in South
African Rand. As a result, the Group is subject to foreign exchange risk
from fluctuations in foreign exchange rates. The Group has not entered into
any derivative or other financial instruments to mitigate this foreign
exchange risk.
INTEREST RATE RISK
The Group has a financing agreement with Standard Chartered whereby a Debt
Facility was made available as part consideration for the Bokoni Transaction.
The Debt Facility is repayable in 12 semi-annual equal capital instalments,
with the first payment due on 31 January 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 GROUP HAS THE FOLLOWING DEBT AGREEMENTS WITH RPM:
- Anglo Platinum through RPM provided vendor financing for the majority of
the Bokoni Transaction purchase price. This Vendor Finance Facility consists
of a $ 177, 8 million (ZAR1.2 billion) cash component and the $162,9 million
(ZAR1.1 billion) share settled financing arrangement to Plateau. The cash
component of the financing described as the "Plateau Preferred A Shares" are
entitled to a 12.0% fixed dividend compounded on an annual basis.
- Anglo Platinum through RPM provided Bokoni Holdings a sum of $163.9 million
(ZAR1.15 billion) redeemable "A" preference share facility. These preference
shares as well as the preference shares issued by Plateau are cumulative,
mandatory redeemable and attract an annual cumulative dividend at 12% after
tax. The group is obligated to redeem the outstanding amount including
undeclared dividends which should have been declared within 6 years of issue
to the extent that the Group is in position to redeem the shares. Any
preference shares not redeemed In 6 years must be redeemed after 9 years.
- RPM a provided Anooraq with an operating cash flow shortfall facility up to
a maximum of $115,2 million (ZAR778 million) ($4.2 million in respect of the
Rehabilitation guarantee in terms of the mining licence) subject to certain
annual maximums, during the first nine years of the OCSF. The OCSF interest
rate has been fixed at a rate of 15.84%, compounded quarterly in arrears.
- RPM provides Plateau a standby facility for up to a maximum of 29/49
(approximately 59.2%) of RPM`s attributable share of the Bokoni 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
bears interest at the prime rate of interest in South Africa.
COMMODITY PRICE RISK
The Group revenue and value of resource properties depend on the price of PGM
and their future demand. The Group 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 Group`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 Group including the Group 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 Group is not a venture issuer.
1.15.2 DISCLOSURE OF OUTSTANDING SHARE DATA.
The following details the share capital structure as at 12 November
2009.These figures may be subject to minor accounting adjustments prior to
presentation in future consolidated financial statements.
Expiry date Exercise price Number Number
Ordinary 201,743,472
shares
Share purchase 17 December $1.29 1,285,000
options 2010
1 July 2010 $1.29 119,000
15 October $1.29 4,195,000
2012
15 October $1.29 126,000
2012
25 June 2013 $1.29 916,000
30 June 2013 $1.29 1,410,000
29 June 2014 $0.96 1,025,000 9,077,000
Potentially issuable upon redemption NIL
of Plateau "A" Preference Shares
Potentially issuable upon redemption 227,400,000
of Plateau "B" Preference Shares
1.15.3 INTERNAL CONTROLS OVER FINANCIAL REPORTING PROCEDURES
The Group`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 1 January 2009, the Group early adopted IFRS as its standard for
financial reporting. In connection with the adoption of IFRS, the Group
updated its internal controls over financial reporting, as necessary, to
facilitate the respective IFRS convergence and transition activities
performed. In addition, the acquisition of the effective 51% controlling
interest in Bokoni Mines required the Company to update its internal controls
over financial reporting to include controls over accounting for business
combinations and consolidation and review of accounting data from the Bokoni
Mine.
Other than the adoption of IFRS and the impact of the acquisition of the
Bokoni Mines, no other significant changes in internal controls over
financial reporting occurred during the nine months ended 30 September 2009
that could have materially affected or are reasonably likely to materially
affect the Group`s internal control over financial reporting.
As the Company acquired Bokoni Mines on 1 July 2009, the Company expects to
exclude from its assessment of the effectiveness of the Company`s internal
controls over financial reporting as of 31 December 2009, the internal
controls over financial reporting at Bokoni Mines associated with total
assets of $978 million and total revenues of $27.8 million included in the
consolidated financial statements of the Company as of and for the period
ended 30 September 2009.
During the three months ended 30 September 2009, the Company determined that
its internal controls over financial reporting were not effective.
Specifically, the acquisition of Bokoni Mines resulted in increased
complexity in the areas of accounting for business combinations,
consolidations, income taxes, non-routine transactions and financial
statement preparation and disclosures.
The Company has identified that it does not currently have sufficient human
resources with the appropriate technical accounting skills to handle the
increased complexity resulting from the acquisition. The Company intends to
ensure that personnel with the required technical proficiency are employed
and existing personnel receives the required training to deal with the
complexities of the accounting procedure and processes. In addition suitable
professional advisors will be retained to assist the company in addressing
the potential deficiencies in its existing controls and where required new
procedures will be implemented at the mine and at corporate level to address
the deficiencies identified. It is expected that the deficiencies will be
addressed prior to end of the Company`s financial year at December 31, 2009.
1.15.4 DISCLOSURE CONTROLS AND PROCEDURES
The Group has disclosure controls and procedures in place to provide
reasonable assurance that any information required to be disclosed by the
Group 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 Group`s management so that
decisions can be made about timely disclosure of that information.
As a result of the acquisition of the effective 51% controlling interest in
Bokoni Mines, disclosure controls and procedures have been severely impacted.
The Company has identified deficiencies in the Group`s disclosure controls
and procedures during the period ended 30 September 2009 which affected
preparation of financial reporting information of the Group during the
quarter under review.
Management has introduced a number of controls and procedures at the Bokoni
Mine and also at the corporate office to mitigate t he impact of the
transaction on the Group`s disclosure controls. These interventions included
the appointment of a number of temporary personnel and the engagement of
professional advisors to assist in the preparation of the required reports in
the period to 30 September 2009.
However, given these deficiencies in disclosure controls and procedures and
deficiencies in internal control over financial reporting identified above,
the Company has concluded that its disclosure controls and procedures are not
effective. Management believes that all the deficiencies affecting financial
reporting and disclosure controls and procedures have been satisfactorily
addressed with the following interventions.
- appointment of a number of temporary and if required permanent personnel to
address the lack of resources
- and the engagement of professional advisors to assist in the preparation of
the required reports in the period to 30 September 2009
- engagement of professional advisors to assist in the reviewing of
disclosure procedures and control
- review and where required introduce additional controls and procedures at
the Bokoni Mine
- and to review procedures at the corporate office to address shortcoming in
its existing processes which may impact on the Group`s disclosure controls
and procedures.
It is expected that the deficiencies will be addressed prior to end of the
Company`s financial year at 31 December 2009.
Johannesburg
16 November 2009
Sponsor
Macquarie First South Advisers (Pty) Limited
Date: 16/11/2009 17:48:56 Produced by the JSE SENS Department.
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