| Wed 31 Mar 2010, 14:37 | | ARQ - Anooraq Resources Corporation - Anooraq announces audited consolidated |
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ARQ
ARQ
ARQ - Anooraq Resources Corporation - Anooraq announces audited consolidated
financial statements for the years ended December 31, 2009 and 2008
Anooraq Resources Corporation
(Incorporated in British Columbia, Canada)
(Registration number 10022-2033)
TSXV/JSE share code: ARQ)
NYSE Amex share code: ANO
ISIN: CA03633E1088
(`Anooraq` or the `Company`)
ANOORAQ ANNOUNCES AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS
ENDED DECEMBER 31, 2009 AND 2008
Anooraq announces its financial results for the 12 months ended December 31,
2009. This announcement should be read with the Company`s Financial
Statements and Management Discussion & Analysis, available at
www.anooraqresources.com and filed on www.sedar.com.
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AS AT 31 DECEMBER 2009 AND 2008
(Expressed in Canadian Dollars, unless otherwise stated)
Note 2009 2008
Assets
Non-current assets
Property, plant and equipment 7 693,393,736 469,635
Capital work-in-progress 8 235,838,915 -
Mineral property interests 9 13,223,703 4,200,000
Goodwill 10 12,382,569 -
Investment in joint venture 11 - 2,518,971
Platinum producers` environmental 12
trust 2,578,131 -
Deferred acquisition costs 13 - 1,587,959
Other non-current assets 729 -
Total non-current assets 957,417,783 8,776,565
Current assets
Inventories 14 1,091,860 -
Trade and other receivables 15 23,466,503 271,554
Cash and cash equivalents 16 30,947,511 3,850,674
Restricted cash 17 1,291,348 -
Total current assets 56,797,222 4,122,228
Total assets 1,014,215,00 12,898,793
5
Equity and Liabilities
Equity
Share capital 18 71,713,114 54,948,341
Treasury shares 18 (4,991,726) -
Convertible preference shares 18 162,910,000 -
Foreign currency translation reserve (9,390,899) 129,684
Hedging reserve (731,293) -
Share-based payment reserve 19,770,786 17,584,974
Accumulated loss (111,798,092 (76,266,461
) )
Total equity attributable to equity
holders of the Group 127,481,890 (3,603,462)
Non-controlling interest 82,025,730 -
Total equity 209,507,620 (3,603,462)
Liabilities
Non-current liabilities
Loans and borrowings 19 555,509,417 12,967,753
Deferred taxation 20 213,484,109 -
Provisions 21 7,021,038 -
Derivative liability 22 1,590,945 -
Total non-current liabilities 777,605,509 12,967,753
Current liabilities
Loans and borrowings 19 - 1,735,663
Trade and other payables 23 26,948,647 1,798,839
Current tax payable 153,229 -
Total current liabilities 27,101,876 3,534,502
Total liabilities 804,707,385 16,502,255
Total equity and liabilities 1,014,215,00 12,898,793
5
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS FOR THE YEARS ENDED 31 DECEMBER
2009 AND 2008
(Expressed in Canadian Dollars, unless otherwise stated)
Note 2009 2008
Revenue 24 62,627,868 -
Cost of sales 25 (80,966,467 -
)
Gross loss (18,338,599 -
)
Depreciation (124,079) (61,140)
Administrative expenses (11,657,610 (12,010,258
) )
Transaction costs (10,401,725 -
)
Other income 1,138,850 5,779
Operating loss (39,383,163 (12,065,619
) )
Finance income 26 529,285 179,119
Finance expense 27 (20,340,287 (1,848,574)
)
Net finance expense (19,811,002 (1,669,455)
)
Share of loss of equity accounted (219,849) (235,022)
investees (net of income tax)
Loss before income tax 28 (59,414,014 (13,970,096
) )
Income tax 29 7,633,485 -
Loss for the year (51,780,529 (13,970,096
) )
Other comprehensive income
Foreign currency translation (14,072,611 129,684
differences for foreign operations )
Effective portion of changes in fair (731,293) -
value of cash flow hedges
Other comprehensive income for the 30 (14,803,904 129,684
year, net of income tax )
Total comprehensive loss for the year (66,584,433 (13,840,412
) )
Loss attributable to:
Owners of the Company (35,531,631 (13,970,096
) )
Non-controlling interest (16,248,898 -
)
Loss for the year (51,780,529 (13,970,096
) )
Total comprehensive loss attributable
to:
Owners of the Company (45,783,507 (13,840,412
) )
Non-controlling interest (20,800,926 -
)
Total comprehensive loss for the year (66,584,433 (13,840,412
) )
Earnings per share
Basic and diluted loss per share 31 (12 cents) (8 cents)
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2009
AND 2008
(Expressed in Canadian Dollars, unless otherwise stated)
Note 2009 2008
Cash flows from operating activities
Cash utilised by operations 32 (27,793,326) (5,348,995)
Interest received 426,621 179,119
Interest paid (1,258,710) (1,885,517)
Cash utilised by operating
activities (28,625,415) (7,055,393)
Cash flows from investing activities
Investment in environmental trusts (216,245) -
Acquisition of cash in a business 34 3,576,912 -
combination - Bokoni Mine
Bokoni mine acquisition 34 (119,956,375) -
Asset acquisition 34 (6,592,523) -
ESOP Trust contribution 34 (6,741,102) -
Proceeds on disposal of property, 118,311 54,140
plant and equipment
Acquisition of property, plant and 7/8
equipment (24,450,310) (473,642)
Deferred acquisition costs - (1,219,813)
Proceeds on disposal of financial
assets 14 -
Cash utilised from investing
activities (154,261,318) (1,639,315)
Cash flows from financing activities
Long term borrowings raised - 3,630,000
Long term borrowings raised - Senior 19
debt 74,050,000 -
Long term borrowings raised - OCSF 19 51,330,745 -
Common shares issued 15,869,148 2,037,558
"A" Preference shares issued 19 177,720,000 -
"A" Preference shares repaid 19 (1,066,320) -
"B" Preference shares issued 18 162,910,000 -
Transaction costs paid (4,857,128) -
Vendor claims settled 34 (251,770,000)
Interest free loan raised 19 4,267,913
Repayment of Anglo Platinum loan (16,790,368) -
Cash generated from financing
activities 211,663,990 5,667,558
Effect of foreign currency
translation (1,680,420) (253,997)
Net increase/(decrease) in cash and
cash equivalents 27,096,837 (3,281,147)
Cash and cash equivalents, beginning
of period 3,850,674 7,131,821
Cash and cash equivalents, end of
period 30,947,511 3,850,674
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER
2009 AND 2008
Attributable to equity holders of the
Company
Share capital Treasury shares
Not Number of Amount Number of Amount
e shares shares
Balance at 1 January 185,208,60 51,855,35 - -
2008 7 1
Total comprehensive
loss for the year
Loss for the year - - - -
Other comprehensive
income
Foreign currency - - - -
translation differences
Total other - - - -
comprehensive income
Total comprehensive - - - -
loss for the year
Transactions with
owners, recorded
directly in equity
Fair value of stock - 1,055,432 - -
options allocated to
share issued on
exercise
Share-based payment 1,431,400 2,037,558 - -
transactions
Total contributions by 1,431,400 3,092,990 - -
and distributions to
owners
Balance at 31 December 186,640,00 54,948,34 - -
2008 7 1
Arising from business 34 - - - -
acquisition
Total comprehensive
loss for the year
Loss for the year - - - -
Other comprehensive
loss
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 for the year
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to owners
Ordinary shares issued 18 14,296,567 15,869,14 (4,497,062 (4,991,726
8 ) )
Preference shares 18 - - - -
issued
Share options repriced - - - -
Share-based payment 806,898 895,625 - -
transactions
Total contributions by 15,103,465 16,764,77 (4,497,062 (4,991,726
and distributions to 3 ) )
owners
Balance at 31 December 201,743,47 71,713,11 (4,497,062 (4,991,726
2009 2 4 ) )
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER
2009 AND 2008 (CONTINUED)
Attributable to equity holders of the Company
Convertibl Foreign Share- Hedging
e currency based reserve
preference translatio payment
shares n reserve reserve
Not
e
Balance at 1 January - - 13,254,905 -
2008
Total comprehensive
loss for the year
Loss for the year - - - -
Other comprehensive
income
Foreign currency - 129,684 - -
translation differences
Total other - 129,684 - -
comprehensive income
Total comprehensive - 129,684 - -
loss for the year
Transactions with
owners, recorded
directly in equity
Fair value of stock - - (1,055,432 -
options allocated to )
share issued on
exercise
Share-based payment - - 5,385,501 -
transactions
Total contributions by - - 4,330,069 -
and distributions to
owners
Balance at 31 December - 129,684 17,584,974 -
2008
Arising from business 34 - - - -
acquisition
Total comprehensive
loss for the year
Loss for the year - - - -
Other comprehensive
loss
Foreign currency - (9,520,583 - -
translation differences )
Effective portion of - - - (731,293
changes in fair value )
of cash flow
hedges, net of tax
Total other - (9,520,583 - (731,293
comprehensive loss ) )
Total comprehensive - (9,520,583 - (731,293
loss for the year ) )
Transactions with
owners, recorded
directly in equity
Contributions by and
distributions to owners
Ordinary shares issued 18 - -
Preference shares 18 162,910,00 - -
issued 0
Share options repriced - - 1,117,441 -
Share-based payment - - 1,068,371 -
transactions
Total contributions by 162,910,00 - 2,185,812 -
and distributions to 0
owners
Balance at 31 December 162,910,00 (9,390,899 19,770,786 (731,293
2009 0 ) )
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER
2009 AND 2008 (CONTINUED)
Attributable to equity holders of the Company
Accumulated Total Non- Total
loss controlling equity
interest
Not
e
Balance at 1 (62,296,365 2,813,891 - 2,813,891
January 2008 )
Total
comprehensive
loss for the year
Loss for the year (13,970,096 (13,970,096 - (13,970,096
) ) )
Other
comprehensive
income
Foreign currency - 129,684 - 129,684
translation
differences
Total other - 129,684 - 129,684
comprehensive
income
Total (13,970,096 (13,840,412 - (13,840,412
comprehensive ) ) )
loss for the year
Transactions with
owners, recorded
directly in
equity
Fair value of - - - -
stock options
allocated to
share issued on
exercise
Share-based - 7,423,059 - 7,423,059
payment
transactions
Total - 7,423,059 - 7,423,059
contributions by
and distributions
to owners
Balance at 31 (76,266,461 (3,603,462) - (3,603,462)
December 2008 )
Arising from 34 - - 102,826,656 102,826,656
business
acquisition
Total
comprehensive
loss for the year
Loss for the year (35,531,631 (35,531,631 (16,248,898 (51,780,529
) ) ) )
Other
comprehensive
loss
Foreign currency - (9,520,583) (4,552,028) (14,072,611
translation )
differences
Effective portion - (731,293) - (731,293)
of changes in
fair value of
cash flow
hedges, net of
tax
Total other - (10,251,876 (4,552,028) (14,803,904
comprehensive ) )
loss
Total (35,531,631 (45,783,507 (20,800,926 (66,584,433
comprehensive ) ) ) )
loss for the year
Transactions with
owners, recorded
directly in
equity
Contributions by
and distributions
to owners
Ordinary shares 18 - 10,877,422 - 10,877,422
issued
Preference shares 18 - 162,910,000 - 162,910,000
issued
Share options - 1,117,441 - 1,117,441
repriced
Share-based - 1,963,996 - 1,963,996
payment
transactions
Total - 176,868,859 - 176,868,859
contributions by
and distributions
to owners
Balance at 31 (111,798,09 127,481,890 82,025,730 209,507,620
December 2009 2)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31
DECEMBER 2009 AND 2008
(Expressed in Canadian Dollars, unless otherwise stated)
1 NATURE OF OPERATIONS
Anooraq Resources Corporation is incorporated in the Province of British
Columbia, Canada. The consolidated financial statements of the Company as at
and for the years ended 31 December 2009 and 2008 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 owns the Group`s various mineral
property interests and conducted the Group`s business in South Africa.
The 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)
from 1 July 2009 (refer note 34).
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 consolidated financial statements are prepared on the basis that the
Group will continue as a going concern which contemplates the realisation 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 34) and
secured various funding arrangements (refer note 19) in order to fund the
purchase consideration and to fund its planned business objectives. The
funding agreements include securing a long term credit facility, the
Operating Cash Flow Shortfall Facility ("OCSF"), with Rustenburg Platinum
Mines Limited ("RPM") for an amount of $208 million (ZAR 1,470 million). The
facility will be used to fund operating cash and capital requirements for an
initial period of three years. As at 31 December 2009, the Group utilised $54
million (ZAR 381 million) thereof to fund operating requirements at Bokoni as
the mining operations are not currently generating sufficient cash flows to
fund operations and operational projects.
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 and capital cash requirements of the Group.
3 BASIS OF PRESENTATION
3.1 Statement of compliance
The consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board.
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 of 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 statement of
comprehensive loss for the year ended 31 December 2008, comparative
statement of changes in equity and comparative statement of cash flows 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 ("IFRS1"). 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:
Y to apply the requirements of IFRS 3, Business Combinations (2004),
prospectively from the Transition Date;
Y to apply the requirements of IFRS 2, Share-based payments, only to
equity instruments granted after November 2002 which had not vested as of the
Transition Date; and
Y 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.
The preparation of these consolidated financial statements resulted in
changes to the accounting policies as compared with the most recent annual
financial statements prepared under Canadian generally accepted accounting
principles ("GAAP"). The accounting policies set out below have been applied
consistently to all years presented in these financial statements. They also
have been applied in preparing an opening IFRS statement of financial
position at 1 January 2008, as required by IFRS 1. The impact of the
transition from GAAP to IFRS is explained in note 39.
3.2 Basis of measurement
The 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.
3.3 Use of estimates and judgements
The preparation of the 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.
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.
3.4Change in accounting policies
The Group changed its accounting policies as of 1 January 2009 in the
following areas:
(i) Accounting for business combinations
As a result of the acquisition, discussed in note 34, the Group early adopted
IFRS 3, Business Combinations (2008), ("IFRS 3") and IAS 27, Consolidated
and Separate Financial Statements (2008), ("IAS 27") 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 and resulted in previously capitalised transaction
costs amounting to $1.6 million being expensed on 1 January 2009.
The Group applied the acquisition method for the business combinations as
disclosed in note 34.
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 profit or loss.
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
fair value of 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. Directly attributable
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.
(ii) Presentation of financial statements
The consolidated financial statements have been presented 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
consolidated financial statements.
Comparative information has been re-presented so that it is also in
conformity with the revised standard. Since the change in accounting policy
only impacts presentation aspects, there is no impact on the earnings per
share.
(iii) 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 $13.6 million (ZAR 96.5 million) in the year ended 31
December 2009. The change in accounting policy did not impact previously
reported earnings per share. The Group has capitalised borrowing costs with
respect to property, plant and equipment under construction.
4 ACCOUNTING POLICIES
The consolidated financial statements have been prepared on the historical
cost basis as set out in the accounting policies below. Certain items,
including derivative financial instruments, are stated at fair value. These
consolidated financial statements are presented in (unless stated otherwise)
Canadian Dollars ("$"), which is also the Company`s functional currency.
The accounting policies set out below are applied consistently to all years
presented in these consolidated financial statements and have been applied
consistently by Group entities except as explained in note 3.4, which
addresses changes in accounting policies.
4.1 Basis for consolidation
(i) Business combinations
The Group changed its accounting policy with respect to accounting for
business combinations. Refer note 3.4(i) for further details.
(ii) Subsidiaries
Subsidiaries are entities controlled by the Group. The financial statements
of subsidiaries are included in the consolidated financial statements from
the date that control commences until the date that control ceases. The
accounting policies of subsidiaries have been changed where necessary to
align them with the policies adopted by the Group.
(iii) 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 consolidated financial
statements include the Group`s share of the income and expenses and equity
movements of equity accounted investees, after adjustments to align
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.
(iv) 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. SPE`s
controlled by the Group were established under terms that impose strict
limitations on the decision-making powers of the SPE`s management and that
result in the Group receiving the majority of the benefits related to the
SPE`s operations and net assets, being exposed to the majority of risks
incident to the SPE`s activities, and retaining the majority of the residual
or ownership risks related to the SPE`s or their assets.
(v) 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
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.
4.2 Foreign currencies
(i) 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 year, adjusted for effective interest and payments
during the year, and the amortized cost in foreign currency translated at the
exchange rate at the end of the year. Such gains and losses are recognised
in profit or loss.
(ii) 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 Company is Canadian Dollars.
Income and expenditure transactions of foreign operations are translated at
the average rate of exchange for the year 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
from the Transition Date 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 operations, 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.
4.3 Financial instruments
(i) Non-derivative financial assets
Non-derivative financial assets comprise loans and receivables.
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 assets
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.
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 and cash and cash
equivalents.
Cash and cash equivalents comprise cash balances and call deposits with
original maturities of three months or less. Bank overdrafts that are
repayable on demand and form an integral part of the Group`s cash management
are included as a component of cash and cash equivalents for the purpose of
the statement of cash flows.
(ii) 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.
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.
(iii) 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 year 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 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 hedging 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 affects 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 hedging 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.
Separate embedded derivatives
Changes in the fair value of separate 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.
(iv) 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,
redeemable for a fixed number of the Company`s shares, 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.
Treasury shares
Shares issued to subsidiaries or SPE`s are reflected as treasury shares on
consolidation in the statement of change of equity.
4.4 Property, plant and equipment
Mining assets, including mine development cost and infrastructure costs, mine
plant facilities and buildings are initially recorded at historical cost less
accumulated depreciation and impairment losses.
Mining assets 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 to the extent that it gives rise to future economic benefit. Costs
include borrowing costs capitalised during the construction period where
qualifying expenditure is financed by borrowings. Items of mine property,
plant and equipment, excluding capitalised mine development and
infrastructure costs, are depreciated on a straight-line basis over their
expected useful life. Capitalised mine development and infrastructure are
depreciated on a units of production basis. Depreciation is first charged on
mining assets from the date on which they are available for use.
Property, plant and equipment are depreciated over their estimated useful
lives as follows:
Mine development and infrastructure Life-of-mine
Plant and equipment 1 - 20 years
Buildings 5 - 20 years
Motor vehicles 1 - 5 years
Furniture and fittings 1 - 10 years
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.
The assets` residual values, depreciation methods and useful lives are
reviewed, and adjusted if appropriate, at each reporting date.
Non-mining assets are measured at historical cost less accumulated
depreciation and impairment losses. Depreciation is charged on the straight-
line basis over the useful lives of these assets. Residual values and useful
economic lives are reviewed at least annually, and adjusted if appropriate,
at each reporting date.
Subsequent expenditure relating to an item of property, plant and equipment
is capitalised when it is probable that future economic benefits from the use
of the assets will be increased. All other subsequent expenditure is
recognised as repairs and maintenance.
Repairs and maintenance are recognised to profit or loss during the period in
which they are incurred.
Gains and losses on disposal of property, plant and equipment are determined
by comparing the proceeds from disposal with the carrying amount of the asset
and are recognised net within other income in the statement of comprehensive
income.
4.5 Intangible assets
(i) Goodwill
Goodwill that arises upon the acquisition of subsidiaries is included in
intangible assets. For measurement of goodwill at initial recognition, refer
note 34.
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 and is not
amortised. 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.
(ii) Other intangible assets
Other intangible assets include mineral property interests (refer note 4.17
below).
4.6 Impairment of assets
(i) Non-financial assets
The carrying amounts of the Group`s non-financial assets, other than
inventories and deferred tax 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 units exceed 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 years 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.
(ii) 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.
4.7 Inventories
Inventories, comprising ore stockpiles, are measured at the lower of cost and
net realisable value.
Costs relating to ore in stockpiles comprises all costs incurred to the stage
immediately prior to stockpiling, including costs of extraction and crushing,
as well as processing costs associated with ore stockpiles, based on the
relevant stage of production.
Net realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
4.8 Employee benefits
(i) 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 years 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 year in which the employees render the
service are discounted to their present value.
(ii) 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.
(iii) Share-based payment transactions
The grant date fair value of share-based payment awards granted to employees
is recognised as an employee cost, with a corresponding increase in equity,
over the year that the employees unconditionally became entitled to the
awards. The amount recognised as an expense is adjusted to reflect the number
of awards for which the related service and non-market vesting conditions are
expected to be met, such that the amount ultimately recognised as an expense
is based on the number of awards that do meet the related service and non-
market performance conditions at the vesting date.
For share-based payment awards with non-vesting conditions, the grant date
fair value of the share-based payment is measured to reflect such conditions
and there is no true-up for differences between expected and actual outcomes.
The fair value of the amount payable to employees in respect of the share
appreciation rights, which are settled in cash, is recognised as an expense
with a corresponding increase in liabilities over the year that the employees
unconditionally become entitled to payment. The liability is remeasured at
each reporting date and at settlement date. Any changes in the fair value of
the liability are recognised as employee costs in profit or loss.
Share-based payment arrangements in which the Group receives goods or
services as consideration for its own equity instruments are accounted for as
equity-settled share-based payment transactions, regardless of how the equity
instruments are obtained by the Group.
(iv) Termination benefits
Termination benefits are recognised as an expense as and when the Group is
committed demonstrably, without realistic possibility of withdrawal, to a
formal detailed plan to either terminate employment before the normal
retirement date, or to provide termination benefits as a result of an offer
made to encourage voluntary redundancy.
Termination benefits for voluntary redundancies are recognised as an expense
if the Group has made an offer of voluntary redundancy, it is probable that
the offer will be accepted, and the number of acceptances can be estimated
reliably.
If benefits are payable more than 12 months after the reporting year, then
they are discounted to their present value.
4.9 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").
Provisions are reviewed at each reporting date and adjusted to reflect the
current best estimate. If it is no longer probable that an outflow of
economic benefits will be required, the provision is reversed.
(i) 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 or loss.
(ii) Restructuring
A provision for restructuring is recognised when the Group has approved a
detailed and formal restructuring plan, and the restructuring has either
commenced or has been announced publically. Future operating losses are not
provided for.
4.10 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 investments held by the Platinum Producers`
Environmental Trust. Interest earned on monies paid to rehabilitation trust
funds is accrued on a time proportion basis and is recorded as interest
income.
4.11 Revenue
Revenue arising from the sale of metals and intermediary products is
recognised when the price is determinable, the product has been delivered in
accordance with the terms of the contract, the significant risks and rewards
of ownership have been transferred to the customer and collection of the
sales price is reasonably assured. These criteria are typically met when the
concentrate reaches the smelter. Revenue further excludes value-added tax.
4.12 Lease payments
(i) Operating leases - Lessor
Operating lease income is recognised as income on a straight-line basis over
the lease term.
Initial direct costs incurred in negotiating and arranging operating leases
are added to the carrying amount of the leased asset and recognised as an
expense over the lease term on the same basis as the lease income. Income
for leases is disclosed under other income in profit or loss.
(ii) Operating leases - Lessee
Operating lease payments are recognised as an expense on a straight-line
basis over the lease term. The difference between the amounts recognised as
an expense and the contractual payments are recognised as an operating lease
liability. This liability is not discounted.
Any contingent rents are expensed in the period they are incurred.
4.13 Finance income and finance expense
Finance income comprises interest income on funds invested, gains on hedging
instruments that are recognised in profit or loss 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 comprises 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.
4.14 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.
4.15 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 year, 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 and for the effects
of all dilutive potential ordinary shares, which comprise share options
granted to employees.
4.16 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 Chief Executive Officer (who is considered the chief
operating decision maker) to make decisions about resources to be allocated
to the segment and assess its performance, and for which discrete financial
information is available.
4.17 Exploration expenditure and mineral property interests
The acquisitions of mineral property interests are initially measured at
cost. Mineral property acquisition costs and development expenditures
incurred subsequent to the determination of the feasibility of mining
operations and approval of development by the Group are capitalised 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 or 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.
4.18 New standards and interpretations not yet adopted
Standards and interpretations issued but not yet effective and applicable to
the Group:
? IAS 24 (revised), Related party disclosures
? 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 2, Share-based payments: vesting conditions and
cancellations
? Amendments to IFRS 7, Improving disclosures about financial instruments
? IFRS 9, Financial instruments
? IFRIC 17, Distribution of Non-cash assets to owners
? 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.
5.1 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-year
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.
5.2 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.
5.3 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.
5.4 Derivatives
The fair value of interest rate swaps is based on the fair value of the cash
flows of the swap using the ZAR zero-coupon swap curve and the 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.
5.5 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.
5.6 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
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.
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 price 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.
(i) 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, and cash and equivalents. Management has evaluated treasury
counterparty risk and does not expect any treasury counterparties to fail in
meeting their obligations.
Trade and other receivables
Trade receivables represents sale of concentrate to Rustenburg Platinum Mines
Limited in terms of a concentrate off-take agreement. The carrying value
represents the maximum credit risk exposure. The Group has no collateral
against these receivables.
Cash and cash equivalents
At times when the Group`s cash position is positive, cash deposits are made
with financial institutions having superior local credit ratings.
(ii) 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 an Operating Cash flow
Shortfall Facility ("OCSF"). The Group`s cash and cash equivalents are
invested in business accounts which are available on demand.
The Group operates in South Africa and is subject to currency exchange
controls administered by the South African Reserve 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 these 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.
2010 2011 2012
2009
Non derivative financial
liabilities
Loans and borrowings - 4,099,586 -
Trade and other payables 11,677,520 - -
Total 11,677,520 4,099,586 -
Derivative financial liabilities
Interest rate swap - - 1,590,945
Total 2009 11,677,520 4,099,586 1,590,945
2008
Non derivative financial
liabilities
Loans and borrowings 1,735,663 - -
Trade and other payables 219,024 - -
Total 2008 1,954,687 - -
2013 Thereafter Total
2009
Non derivative financial
liabilities
Loans and borrowings 11,854,480 539,555,351 555,509,417
Trade and other payables - - 11,677,520
Total 11,854,480 539,555,351 567,186,937
Derivative financial
liabilities
Interest rate swap - - 1,590,945
Total 2009 11,854,480 539,555,351 568,777,882
2008
Non derivative financial
liabilities
Loans and borrowings - 12,967,753 14,703,416
Trade and other payables - - 219,024
Total 2008 - 12,967,753 14,922,440
(iii) Interest rate risk
As a result of the Group completing the Bokoni acquisition (refer note 34),
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 $51.3 million (ZAR 365 million) to the Group which is subject to
interest rate 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 1July 2009. The remaining $37
million (ZAR 250 million) is available for interest roll-up during the next 3
years. 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
(7.279% at 31 December 2009) plus 4.5% applicable margin and 1.27% 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 (ZAR 500
million) of the principal amount of the loan at 14.695% which arrangement
expires on 31 July 2012.
A 100 basis point change in the interest rate at 31 December 2009 on the
Standard Chartered loan and the RPM loan would have changed the loss for the
year by approximately $681,000. This analysis assumes that all other
variables remain constant.
(iv) 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 $48.6
million are exposed to foreign exchange fluctuations. A 10% change in the
$/ZAR exchange rate at 31 December 2009 would have resulted in an
increase/decrease of $4.9 million in equity. The Group has no significant
external exposure to foreign exchange risk.
(v) 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 does not hedge its exposure to
commodity price risk. 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.
(iv) Capital risk management
The primary objective of managing the Group`s capital is to ensure that there
is sufficient capital available to support the funding and operating
requirements of the Group in a way that optimises the cost of capital,
maximizes shareholders` returns, matches the current strategic business plan
and ensures that the Group remains in a sound financial position.
The Group manages and makes adjustments to the capital structure which
consists of debt and equity as and when borrowings mature or when funding is
required. This may take the form of raising equity, market or bank debt or
hybrids thereof. The Group may also adjust the amount of dividends paid, sell
assets to reduce debt or schedule projects to manage the capital structure.
There were no changes to the Group`s approach to capital management during
the year.
Summary of the carrying value of Loans and Financial Derivative
the Group`s financial instruments receivables liabilities financial
At 31 December 2009 at liabilities
amortised
cost
Platinum producers environmental
trust 2,578,131 - -
Trade and other receivables 22,486,497 - -
Cash and cash equivalents 30,947,511 - -
Loans and borrowings - 555,509,417 -
Trade and other payables - 11,677,520 -
Derivative - Interest rate swap - - 1,590,945
At 31 December 2008 Loans and Financial Derivative
receivables liabilities financial
at liabilities
amortised
cost
Cash and cash equivalents 3,850,674 - -
Loans and borrowings - 14,703,416 -
Trade and other payables - 219,024 -
The carrying value of the above financial instruments approximates their fair
value.
2009 2008
7 PROPERTY, PLANT AND EQUIPMENT
Summary
Cost
Balance at beginning of year 540,482 183,208
Arising from business combinations (refer
note 34) 725,226,891 -
Additions 31,478 472,619
Transferred from capital work-in-progress 9,382,489 -
Disposals (49,072) (66,432)
Adjustment to rehabilitation assets 2,691,883 -
Effect of translation (30,693,133) (48,913)
Closing Balance 707,131,018 540,482
Accumulated depreciation
Balance beginning of year 70,847 77,714
Charge for the year 13,557,111 61,140
Disposals - (48,717)
Effect of translation 109,324 (19,290)
Closing Balance 13,737,282 70,847
Carrying value 693,393,736 469,635
Total Mining Plant and
Development and Equipment
Infrastructure
Cost
Balance at beginning of 540,482 - -
year
Arising from business 725,226,891 572,786,270 120,784,234
combination (refer note
34)
Additions 31,478 - -
Transferred from capital 9,382,489 260,939 2,145,453
work-in-progress
Disposals (49,072) - -
Adjustment to 2,691,883 2,691,883 -
rehabilitation assets
Effect of translation (30,693,133) (24,312,236) (5,121,246)
Closing Balance 707,131,018 551,426,856 117,808,441
Accumulated depreciation
Balance beginning of year 70,847 - -
Charge for the year 13,557,111 5,185,702 6,073,907
Effect of translation 109,324 40,542 47,486
Closing Balance 13,737,282 5,226,244 6,121,393
Carrying Value 693,393,736 546,200,612 111,687,048
Certain assets are encumbered (refer to note 19).
Buildings Motor Vehicles Furniture
and Fittings
Cost
Balance at beginning of - - 540,482
year
Arising from business 30,067,544 1,528,701 60,142
combination (refer note
34)
Additions - 19,629 11,849
Transferred from capital 6,915,047 61,050 -
work-in-progress
Disposals - (49,072) -
Adjustment to - - -
rehabilitation assets
Effect of translation (1,224,976) (64,781) 30,106
Closing Balance 35,757,615 1,495,527 642,579
Accumulated depreciation
Balance beginning of year - - 70,847
Charge for the year 1,878,881 284,770 133,851
Effect of translation 14,689 2,226 4,381
Closing Balance 1,893,570 286,996 209,079
Carrying Value 33,864,045 1,208,531 433,500
The recoverable amount of mining assets and goodwill reviewed for impairment
is determined based on value-in-use calculations. All mining assets and
goodwill are allocated to one cash-generating-unit ("CGU"). Key assumptions
relating to this valuation include the discount rate and cash flows used to
determine the value in use. Future cash flows are estimated based on
financial budgets approved by management which is based on the mine`s life-of-
mine plan. Management determines the expected performance of the mine based
on past performance and its expectations of market developments which are
incorporated into a life-of-mine plan.
Key assumptions used in the value in use calculation of impairment of mining
assets were the following:
- Life-of-mine - 34 years
- South African discount rate - 16.48% (the weighted average cost of
capital for Bokoni)
- Range of PGM prices - based on market expectations. Initial price of
US$1,329/oz for platinum in 2010.
- Range of ZAR/US$ exchange rates - based on market expectations. Initial
exchange rate of ZAR8.51/US$ used in 2010.
- South African inflation - long term inflation rate of 5.2%.
8 CAPITAL WORK-IN-PROGRESS
Capital work-in-progress consists of mine development and infrastructure
costs relating to the Bokoni mine and will be transferred to property, plant
and equipment when the relevant projects are commissioned.
2009 2008
Arising from business combination (refer
note 34) 216,194,965 -
Additions 24,418,832 -
Transfer to property, plant and equipment (9,382,489) -
Capitalisation of borrowing costs 13,580,559 -
Effect of translation (8,972,952) -
235,838,915 -
Capital work-in-progress is funded through cash generated from operations and
available loan facilities.
9 MINERAL PROPERTY INTERESTS
2009 2008
Balance at beginning of year 4,200,000 4,200,000
Transfer from equity accounted investee 2,552,701 -
(refer note 11)
Asset acquisition (refer note 34) 6,592,523 -
Effect of translation (121,521) -
13,223,703 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 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 Ga-Phasha
Platinum Mines (Proprietary) Limited ("GPM"), a wholly owned subsidiary of
Bokoni Holdco, owns the respective interest in the assets relating to the Ga-
Phasha Project. Anooraq owns an effective 51% interest in the Ga-Phasha
Project.
Anooraq increased its interest in the GPM exploration project assets from
50% to 51% through the transaction discussed in note 34.
Work on the Ga-Phasha project is continuing towards the preparation of a pre-
feasibility study. The mineral title relating to the Ga-Phasha project is
held by GPM.
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 Boikgantsho joint venture agreements terminated and
Boikgantsho Platinum Mine (Proprietary) Limited ("BPM"), 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. Anooraq owns an
effective 51% interest in this 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 had 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 was completed) to obtain the right to form a 50/50
joint venture with the Company on Rietfontein. There was a disagreement over
budgets, compilation and analysis of the exploration results, and the overall
adequacy and completeness of Ivanplats` exploration activities. Subsequent to
year end, the Ivanhoe Nickel and Platinum dispute was settled and a revised
joint venture agreement was entered into.
2009 2008
10 GOODWILL
Arising from business combination (refer
note 34) 12,932,712 -
Effect of translation (550,143) -
12,382,569 -
For impairment considerations, refer note 7
.
11 INVESTMENT IN JOINT VENTURE
2009 2008
Balance at beginning of the year 2,518,971 2,958,785
Equity loss - exploration expenses (219,849) (235,020)
Effect of translation 253,579 (204,794)
Transfer to mineral property interest (refer
note 9) (2,552,701)
- 2,518,971
The carrying amounts of joint ventures are shown net of impairment losses.
Summary financial information for GPM is as follows:
2009 2008
Comprehensive loss 439,698 470,044
Total assets - 205
Total liabilities - 6,237,616
12 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. The Group`s share of the
cash deposits made is reflected in non-current cash deposits held by Platinum
Producers` Environmental Trust.
The non-current cash deposits are restricted in use as it is to be used
exclusively for pollution control, rehabilitation and mine closure at the end
of lives of the Group`s mines.
13 DEFERRED ACQUISITION COSTS
2009 2008
Acquisition costs capitalised - 1,587,959
Refer note 3.4 (i) for treatment of acquisition costs as a result of the
adoption of IFRS 3 (2008).
14 INVENTORIES
2009 2008
Ore stock piles 1,091,860 -
15 TRADE AND OTHER RECEIVABLES
2009 2008
Financial assets
Trade receivables (Metals) 21,501,503 -
Other trade receivables 581,096 -
Employee receivables 403,898 -
22,486,497 -
Non financial assets
Prepayments 940,108 112,910
Lease debtor 5,313 -
Value added tax - 156,952
Other receivables 34,585 1,692
23,466,503 271,554
The Group has one major customer with an outstanding account within the
agreed payment terms. As a result, no allowance for impairment losses has
been recognised.
16 CASH AND CASH EQUIVALENTS
2009 2008
Bank balances 30,931,903 3,850,674
Cash on hand 15,608 -
30,947,511 3,850,674
17 RESTRICTED CASH
2009 2008
Restricted cash - ESOP Trust 1,291,348 -
Restricted cash consist of cash and cash equivalents held by the Bokoni
Platinum Mine ESOP Trust, a consolidated SPE, which is not available to fund
operations.
18 SHARE CAPITAL
2009 2008
Authorised and issued Number of shares
Ordinary shares with no par value 201,743,472 186,640,007
B2 Convertible Preference shares of 115,800 -
$0.1418 (ZAR 1) each
B3 Convertible Preference shares of 111,600 -
$0.1418 (ZAR 1) each
The Company`s authorised share capital consists of an unlimited number of
ordinary shares without par value. During the year cumulative convertible
redeemable "B" preference shares were issued to facilitate the transaction
as discussed in note 34.
Share capital
2009 2008
Share capital 73,896,147 57,131,414
Share issue costs (2,183,033) (2,183,073)
71,713,114 54,948,341
The Company issued the following ordinary shares on 1 July 2009:
? Anglo Platinum contributed an amount of $15.4 million (ZAR 103.8
million) to the Anooraq Community Participation Trust. Approximately $10.9
million was used to acquire shares of the Company. As of 1 July 2009, the
Company issued 9,799,505 ordinary shares at $1.11 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"), of which $5
million was used to acquire shares of the Company. As of 1 July 2009, the
Company issued 4,497,062 ordinary shares at $1.11 to the ESOP Trust. The
ESOP
Trust is consolidated as a SPE by the Group (refer below).
2009 2008
Treasury Shares 4,991,726 -
Treasury shares relate to shares held by the ESOP Trust in Anooraq, which is
consolidated by the Group.
Preference shares
2009 2008
B2 Convertible Preference shares 17,150 -
B3 Convertible Preference shares 16,528 -
Share premium 162,876,322 -
162,910,000 -
$162.9 million (ZAR 1.1 billion) was raised through share settled
financing with the issue of cumulative mandatory convertible "B" preference
shares ("B Prefs") to RPM and a subsidiary of Pelawan Investments
(Proprietary) Limited to finance the acquisition discussed in note 34. The
final effects of the share settled financing will result in RPM receiving a
fixed number of 115.8 million ordinary shares of Anooraq and Pelawan
Investments (Proprietary) Limited, Anooraq`s controlling shareholder,
receiving a fixed number of 111.6 million ordinary shares.
These preference shares are convertible upon the earlier of the date of
receipt of a conversion notice from RPM and 1 July 2018
A dividend will be declared on the last business day immediately prior to the
conversion date, in terms of a formula set out in the preference share
subscription agreement.
19 LOANS AND BORROWINGS
2009 2008
Non-current liabilities
Senior Term Loan Facility 71,506,306 -
Redeemable "A" preference shares (related 352,664,289 -
party)
Rustenburg Platinum Mines - Funding loans 72,778,897 12,967,753
(related party)
Rustenburg Platinum Mines - OCSF (related 54,050,064 -
party)
Rustenburg Platinum Mines - Interest free 4,099,586 -
loan (related party)
Rustenburg Platinum Mines - commitment 410,275 -
fees(related party)
555,509,417 12,967,753
Current liabilities
Rustenburg Platinum Mines - Funding loans - 1,735,663
(current portion)
555,509,417 14,703,416
The carrying value of the Group`s loans and borrowings changed during the
year as follows:
2009 2008
Balance at beginning of the year 14,703,416 11,698,833
Senior Term Loan Facility 74,050,000 -
Rustenburg Platinum Mine - OCSF 51,330,745 -
Arising from business combination 493,666,666 -
Rustenburg Platinum Mine - Interest 4,267,913
free loan
Repaid as part of acquisition (refer (251,770,000) -
note 34)
Redeemable "A" preference shares 177,720,000 -
Redemption of "A" preference shares (1,066,320) -
Loans repaid (18,049,078) (1,885,517)
Increase in RPM term loan - 3,630,000
Loan costs capitalised (4,857,128) -
Commitment fee capitalised (407,076) -
Finance expenses accrued 33,028,228 1,719,866
Amortisation of loan costs 449,149 -
Commitment fee liability 407,076 -
Effect of translation (17,964,174) (459,766)
555,509,417 14,703,416
The terms and conditions for the outstanding borrowings at 31 December 2009
are as follows:
Senior Term Loan Facility
The senior term facility is for a period of nine 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. At 31 December 2009, $5 million (ZAR36.9 million) has
rolled up. This roll-up interest is limited to $35.6 million (ZAR250
million). Interest is calculated at a variable rate linked to the 3 month
JIBAR plus applicable margin and mandatory cost (13.049 % at 31 December
2009).
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 14.695%.
The Group is in compliance with the debt covenant requirements of this
facility as at 31 December 2009.
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 (refer note 34). These shares are cumulative
mandatory redeemable shares which attract a fixed annual cumulative dividend
of 12%. The Group is obligated to redeem the outstanding amount including
undeclared dividends which should have been declared within six years (1 July
2015) of issue, to the extent that the Company is in the position to redeem
the shares. Any preference shares not redeemed in six years must be redeemed
after nine years (1 July 2018).
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) (i)any outstanding amounts of the Standby Facility;
(ii) (ii)any outstanding amounts of the OCSF; and
(iii) (iii) the redemption amount payable upon the redemption of any
outstanding Redeemable "A" Preference Shares. 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, 1 July 2009, an amount of $1.1 million (ZAR7.2 million) was
repaid with surplus cash available.
Rustenburg Platinum Mines - Funding Loans
This loan is between RPM and Bokoni Holdco and consists of the retention of
the original RPM claims for an amount of $68.1 million (ZAR480.3 million)
The $68.1 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 Loan Facility.
Rustenburg Platinum Mines - OCSF
Under the Operating Cash flow Shortfall Facility ("OCSF"), if funds are
requested by Bokoni (and authorised by Bokoni Holdco), RPM shall advance such
funds directly to Bokoni. At 31 December 2009, $54 million (ZAR381 million)
of the available $208 million (ZAR1,470 million) has been advanced by RPM.
The remaining facility may only be utilised for the purposes of operating or
capital expenditure cash shortfalls at Bokoni.
The unpaid principal balance on the OCSF will bear interest at a fixed rate
of 15.84%, compounded quarterly in arrears.
Rustenburg Platinum Mines - Standby Facility
The Group secured an agreement with RPM to access RPM`s attributable share of
the Bokoni Holdco cash flows ("the Standby Facility") up to a maximum of 29%
of all free cash flow generated from the Bokoni Mine to meet its repayment
obligations in terms of the Senior Term Loan Facility.
The standby facility will bear interest at the prime rate of interest in
South Africa and has a final maturity date on 1 July 2018. As at 31 December
2009 no draw down was made on the standby facility.
Rustenburg Platinum Mines - Interest free loan
This loan is between RPM and Bokoni Holdco. The loan is interest free and
repayable 12 months and 1 day after requested by RPM.
Security
The Senior Term Loan Facility is secured through various security
instruments, guarantees and undertakings provided by the Group against 51% of
the cash flows generated by the Bokoni Mine, together with 51% of the Bokoni
Mine asset base. The Standby Facility, OCSF and the "A" preference shares
rank behind the Senior Term Loan Facility for security purposes.
20 DEFERRED TAX
Deferred tax liabilities and assets on the statement of financial position
relate to the following:
2009 2008
Deferred tax liabilities
Property plant and equipment (including
capital work-in-progress) 257,251,314 -
Prepayments 253,564 -
Environmental trust fund contributions 599,636 -
Inventories 305,721 -
Gross deferred tax liability 258,410,235 -
Deferred tax assets
Provision for environmental liabilities (1,965,891) -
Unredeemed capital expenditure (22,440,284) -
Accrual for employee leave liabilities (2,002,797) -
Provision for share-based compensation (40,974) -
Calculated tax losses (18,476,180) -
Gross deferred tax asset (44,926,126) -
Net deferred tax liability 213,484,109 -
The movement in the net deferred tax liability recognised in the statement of
financial position is as follows:
2009 2008
Balance at beginning of year - -
Arising from business combination (refer
note 34) 231,040,913 -
Current year (7,668,639) -
Effect of translation (9,888,165) -
213,484,109 -
As at 31 December the Group had not recognised the following net deferred tax
assets:
2009 2008
Deferred tax assets 12,086,895 14,197,035
The unrecognized temporary differences
are:
2009 2008
Unredeemed capital expenditure 1,989,602 4,384,291
Tax losses 8,659,662 7,852,229
Foreign exchange losses 1,437,631 1,960,515
12,086,895 14,197,035
Deferred tax assets have not been recognised for the above temporary
differences as it`s not probable that the respective entities to which they
relate will generate future taxable income against which to utilise the
temporary differences.
Gross calculated tax losses expire as follows:
2010 (1,735,875)
2011-2015 (4,456,781)
Thereafter (7,583,843)
Indefinitely (18,626,663)
(32,403,162)
21 PROVISIONS
Provision raised for rehabilitation
2009 2008
Balance at beginning of the year - -
Arising from business combination (refer
note 34) 4,308,137 -
Capitalised to property, plant and equipment 2,691,883 -
Notional interest 181,813 -
Effect of translation (160,795) -
7,021,038 -
Future net obligations
2009 2008
Undiscounted rehabilitation cost 12,642,974 -
Amount invested in environmental trust fund (2,578,131) -
(refer note 12)
Total future net obligation - Undiscounted 10,064,843 -
The Group intends to finance the ultimate rehabilitation costs from the money
invested in environmental trust funds, ongoing contributions, as well as the
proceeds on sale of assets and metals from plant clean-up at the time of mine
closure.
Key assumptions used in determining the provision:
2009 2008
Discount period 20 years -
South African discount rate (risk free rate)
8.4% -
South African inflation 5.2% -
Sensitivity Inflation Discount
rate rate
1% increase 1,449,016 (1,167,215)
1% decrease (1,209,612) 1,416,795)
22 DERIVATIVE LIABILITY
Interest rate swap (1,590,945) -
23 TRADE AND OTHER PAYABLES
Financial liabilities
Trade payables 8,143,426 219,024
Other payables 3,534,094 -
11,677,520 219,024
Non financial liabilities
Payroll accruals 1,455,234 195,139
Leave liabilities 7,322,160 -
Share appreciation rights 146,334 -
Lease accrual 93,583 -
Restructuring costs 1,807,996 -
Operational accruals 4,128,123 1,384,676
Value added tax 317,697 -
26,948,647 1,798,839
24 REVENUE
Revenue from mining operations by commodity:
2009 2008
Platinum 39,282,459 -
Palladium 6,582,056 -
Rhodium 6,439,392 -
Nickel 6,278,262 -
Other 4,045,699 -
62,627,868 -
Revenue consists of the sale of concentrate to Rustenburg Platinum Mines
Limited (a related party).
25 COST OF SALES
2009 2008
Cost of sales includes:
Labour costs 39,333,125 -
Stores costs 11,036,693 -
Power and compressed air 4,481,837 -
Contractors cost 2,742,494 -
Other costs 11,022,676 -
Inventory movement (1,083,390) -
Depreciation 13,433,032 -
80,966,467 -
26 FINANCE INCOME
2009 2008
Interest received - Financial assets at
amortised cost
Platinum producers environmental trust 102,664 -
Bank accounts 426,621 179,119
529,285 179,119
2009 2008
27 FINANCE EXPENSES
Financial liabilities
Bank and short term facilities 72,158 -
"A" Preference shares (related party) 19,560,689 -
OCSF and funding facilities (related party) 8,439,108 1,848,574
Senior Term Loan Facility 5,028,432 -
Interest on fair value of interest rate swap 189,173 -
Other payables 324 -
33,289,884 1,848,574
Non-financial liabilities
Notional interest - rehabilitation provision 181,813 -
Commitment fees on OCSF 38,091 -
Transaction fees 411,058 -
630,962 -
Total finance costs before interest
capitalised 33,920,846 1,848,574
Interest capitalised (13,580,559) -
Total finance costs 20,340,287 1,848,574
The capitalisation rate used to determine the amount of borrowing costs
eligible for capitalisation during the year is 12.95% (2008: 0%).
28 LOSS BEFORE INCOME TAX
Loss before income tax as stated includes the following:
2009 2008
Operating lease expense - buildings 387,131 353,348
Restructuring costs 1,784,452 -
Share-based payments 2,185,812 5,385,501
Bonus settled via shares 895,625 -
Cash settled share-based payments 145,199 -
29 INCOME TAX
2009 2008
SA normal taxation
Current tax - prior year 35,154 -
Deferred tax - current year (7,668,639) -
(7,633,485) -
Taxation rate reconciliation:
Statutory Canadian tax rate (30.00%) (31.00%)
Other disallowed expenditure 1.62% 7.60%
Transactions costs disallowed 5.25% -
Preference dividends 5.65% -
Equity settled share based compensation 1.10% 12.76%
Investment income not taxable (0.07%) -
Tax adjustments - prior year 0.02% -
Deferred tax assets not recognised 3.01% 14.30%
Effect of rate differences 0.57% (3.66%)
Effective taxation rate (12.85%) 0.00%
30 OTHER COMPREHENSIVE INCOME NET OF INCOME TAX
2009 2008
Components of other comprehensive income:
Foreign currency translation differences
for foreign operations (14,072,611) 129,684
Effective portion of changes in fair
value of cash flow hedges (731,293) -
(14,803,904) 129,684
31 EARNINGS PER SHARE
The calculation of basic loss per share for the year ended 31 December 2009
was based on the loss attributable to shareholders of the Company of
$35,531,631 (2008: $13,970,096), and a weighted average number of ordinary
shares of 305,971,455 (2008: 185,775,361).
At 31 December 2009, 282,584 share options were included in the diluted
weighted average number of ordinary shares calculation.
2009 2008
Issued ordinary shares at 1 January 186,640,007 185,208,607
Effect of shares issued in financial year 5,319,941 566,754
Convertible "B" Preference shares - issued 114,011,507 -
on 1 July 2009
Weighted average number of ordinary shares 305,971,455 185,775,361
at 31 December
Dilutive share options 282,584 -
306,254,039 185,775,361
The loss per share for the year ended 31 December 2009 was 12 cents (2008: 8
cents).
32 CASH USED BY OPERATIONS
2009 2008
CASH UTILISED BY OPERATIONS
Loss before income tax (59,414,014) (13,970,096)
Adjustments for:
Finance expense 20,340,287 1,848,574
Finance income (529,285) (179,119)
Items not involving cash:
Depreciation 13,557,111 61,140
Equity settled share-based compensation 2,185,812 5,385,501
Bonus settled via shares 895,658 -
Loss from equity accounted investees 219,849 235,022
Gain on disposal of property, plant and
equipment (69,239) (5,779)
Derivative loss 636,529 -
Acquisition costs previously capitalised 1,587,959 -
Other (24,166) -
Cash utilised before working capital changes (20,613,499) (6,624,757)
Working capital changes
Increase in trade and other receivables (i) (1,727,856) (2,366)
(Decrease)/increase in trade and other payables
(ii) (4,368,581) 1,278,128
Increase in inventories (iii) (1,083,390) -
Cash utilised by operations (27,793,326) (5,348,995)
(i) Increase in trade and other receivables
Opening balance 271,554 269,188
Arising from business combination (refer note
34) 22,477,941 -
Closing balance (23,466,503) (271,554)
Movement for the year (717,008) (2,366)
Effect of translation (1,010,848) -
(1,727,856) (2,366)
(ii) Decrease/increase in trade and other payables
Opening balance (1,798,839) (520,711)
Arising from business combination (refer note
34) (30,845,374) -
Closing balance 26,948,647 1,798,839
Movement for the year (5,695,566) 1,278,128
Effect of translation 1,326,985 -
(4,368,581) 1,278,128
(iii) Increase in inventories
Opening balance - -
Acquired in 1 July business acquisition - Bokoni - -
(per note 34)
Closing balance (1,091,860) -
Movement for the year (1,091,860) -
Effect of translation 8,470 -
(1,083,390) -
33 SEGMENT INFORMATION
The Group has two reportable segments as described below. These segments are
managed separately based on the nature of operations. For each of the
segments, the Group`s CEO reviews internal management reports monthly. The
following summary describes the operations in each of the Group`s reportable
segments:
? 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 34. The prior year`s information has been re-
classified in line with this change. The majority of operations and
functions are performed in South Africa. An insignificant portion of
administrative functions are performed in the Company`s country of domicile.
31 December 2009
Bokoni Mine Projects Total
Revenue 62,627,868 - 62,627,868
Cost of sales (81,904,961) - (81,904,961)
Loss before income tax (39,753,539) (180,426,480) (220,180,019)
Income tax 6,596,600 - 6,596,600
Depreciation (12,542,425) - (12,542,425)
Finance income 102,664 - 102,664
Finance expense (19,113,833) - (19,113,833)
Total Assets 1,013,025,599 10,769,629 1,023,795,228
Additions to non- 24,438,460 - 24,438,460
current assets
Total Liabilities (642,004,400) (15,435,136) (657,439,536)
31 December 2008
Bokoni Mine Projects Total Note
Revenue - - -
Cost of sales - - - (i)
Loss before income tax - (576,965) - (ii)
Income tax - - - (iii)
Depreciation - - - (iv)
Finance income - - - (v)
Finance expense - - - (vi)
Total Assets - 6,718,971 - (vii)
Additions to non- - - - (viii)
current assets
Total Liabilities - (8,822,050) - (ix)
In the prior year, Ga-Phasha was equity accounted as it was classified as an
investment in joint venture. Therefore, only the Group`s share of Ga-Phasha`s
loss is disclosed in the annual financial statements. Refer note 11 for the
joint venture disclosure.
Reconciliations of reportable segment cost of sales, loss before income tax,
income tax, depreciation, finance income, finance expense, assets, addition
to non-current assets and liabilities:
2009 2008
(i) Cost of sales
Total cost of sales for reportable segments (81,904,961) -
Corporate and consolidation adjustments 938,494 -
Consolidated cost of sales (80,966,467) -
(ii) Loss before income tax
Total loss before tax for reportable
segments (220,180,019) (576,965)
Corporate and consolidation adjustments 160,766,005 (13,393,131)
Consolidated loss before income tax (59,414,014) (13,970,096)
(iii) Income tax
Taxation for reportable segments 6,596,600 -
Corporate and consolidation adjustments 1,036,885 -
Consolidated taxation 7,633,485 -
2009 2008
(iv) Depreciation
Depreciation for reportable segments (12,542,425) -
Corporate and consolidation adjustments (1,014,685) -
Consolidated depreciation (13,557,110) -
(v) Finance income
Finance income for reportable segments 102,664 -
Corporate and consolidation adjustments 426,621 -
Consolidated finance income 529,285 -
(vi) Finance expenses
Finance expense for reportable segments (19,113,833) -
Corporate and consolidation adjustments (1,226,454) -
Consolidated finance expense (20,340,287) -
(vii) Assets
Assets for reportable segments 1,023,795,228 6,718,971
Corporate and consolidation adjustments (9,580,223) 6,179,822
Consolidated assets 1,014,215,005 12,898,793
(viii) Additions to non-current
assets
Additions to non-current assets for
reportable segments 24,438,460 -
Corporate and consolidation adjustments 11,850 -
Consolidated additions to non-current assets
24,450,310 -
(ix) Liabilities
Liabilities for reportable segments (657,439,536) (8,822,050)
Corporate and consolidation
adjustments (147,267,849) (7,680,205)
Consolidated liabilities (804,707,385) (16,502,255)
34 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 (ZAR2.6 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 (ZAR750 million) of senior debt funding in terms of the
Standard Chartered senior term loan facility (the "Senior Term Loan
Facility") from Standard Chartered Bank plc ("Standard Chartered" or "SCB")
provided to Plateau, of which $74 million (ZAR500 million) was drawn down
on
1 July 2009. The Group applied approximately $44 million (ZAR300 million)
of
the Senior Term Loan Facility in part settlement of the consideration
transferred. Refer note 19 for details.
On 11 December 2009, 34% of the facility was acceded to First Rand
Bank Limited, acting through its Rand Merchant Bank division ("RMB").
The same terms apply as per the initial agreement with SCB;
- $177.8 million (ZAR1.2 billion) through the issue of cumulative
mandatory redeemable "A" preference shares ("A Prefs") of Plateau to RPM
(refer note 19); and
- $162.9 million (ZAR1.1 billion) through the effects of a share settled
financing with the issue of cumulative convertible "B" preference shares ("B
Prefs") to RPM and a subsidiary of Pelawan Investments (Proprietary) Limited.
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 $15.2 million associated with finalising the
transaction were incurred of which $10.4 million, relating to the
acquisition, was recognised in profit or loss. The remaining costs were
capitalized to the related debt.
Identifiable assets acquired and liabilities assumed
The following summarises the amounts of assets acquired and liabilities
assumed at the acquisition date:
Carrying value Fair Value
Property, plant and equipment 767,109,345 725,226,891
Capital work in progress 216,194,965 216,194,965
Cash deposits held in Platinum
Producers Environmental Trust 2,356,993 2,356,993
Other non-current assets 741 741
Trade and other receivables 22,477,941 22,477,941
Cash and cash equivalents 3,576,912 3,576,912
Loans and borrowings (owing to RPM) (493,666,666) (493,666,666)
Deferred taxation (60,367,689) (231,040,913)
Provisions (4,308,137) (4,308,137)
Current tax payable (123,034) (123,034)
Trade and other payables (30,845,374) (30,845,374)
Total identifiable net assets 422,405,997 209,850,319
2009 2008
Goodwill
Goodwill was recognised as a result of the acquisition as follows:
Total purchase consideration 385,060,000 -
Assets acquired as part of the transaction
(refer note 9) (6,592,523) -
Contributions received from Anglo Platinum (6,741,102) -
relating to ESOP Trust
Repayment of loans and borrowings to RPM
(refer note 19) (251,770,000) -
Consideration transferred as part of
business combination 119,956,375 -
Non - controlling interest in Bokoni 102,826,656 -
Less total identifiable net assets (209,850,319) -
At acquisition goodwill, as of 1 July 2009
12,932,712 -
Effect of translation (550,143) -
Goodwill at 31 December 2009 12,382,569 -
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 operating loss since acquisition had the
acquisition occurred on 1 January 2009, respectively, are as follows:
Since For the full
acquisition year to date
Revenue 62,627,868 113,654,693
Loss before income tax (39,753,539) (93,826,099)
35 OPERATING LEASES
Accucap Properties-Lessor
The company has entered into a five year lease agreement with an option to
extend the lease with its landlord. The lease expires in 30 November 2012 and
the rent escalates at 9% per annum.
Crane (Pty) Ltd-Lessee
The company sublet its premises in terms of a two year lease. The lease
expires on 28 February 2011.
The future minimum lease payments and receipts under non-cancellable leases
are as follows:
Due within 1 Due within Total
2009 year 2-5 years
Accucap Properties - Lessor 367,735 798,347 1,166,082
Crane (Pty) Ltd - Lessee (152,319) (25,740) (178,059)
215,416 772,607 988,023
2008
Accucap Properties - Lessor 311,914 1,078,901 1,390,815
36 SHARE OPTIONS
36.1 Equity settled options
The Company has a share option plan approved by the shareholders that allows
it to grant options, subject to regulatory terms and approval, to its
directors, employees, officers, and consultants to acquire up to 32,600,000
(2008: 18,300,000) common shares. In 2009 the Company increased the number of
shares reserved for issuance under the Plan from 18,300,000 to 32,600,000.
The Company obtained shareholder and stock exchange approval. As at 31
December 2009, 14,192,000 options were outstanding and 18,408,000 options
remained available to be granted. On 30 June 2009 the Company obtained
shareholder and stock exchange approval to decrease the exercise price to
C$1.29 per option for 8,061,000 share options, including stock options
granted to certain insiders of the Company pursuant to repricing. The
exercise price of each option is set by the Board of Directors at the time of
grant but cannot be less than the market price (less permissible discounts)
on the TSX Venture Exchange. Options have a term of up to a maximum of ten
years (however, the Company has historically granted options for up to a term
of five years), and terminate 30 to 90 days following the termination of the
optionee`s employment or term of engagement, except in the case of retirement
or death. Vesting of options is at the discretion of the Board of Directors
at the time the options are granted. The continuity of share purchase options
is as follows:
Weighted Number of Contractual
average options weighted
exercise average
price remaining
life
(years)
Balance - 31 December 2007 $ 2.43 7,695,000 4.12
Granted 2.86 2,851,000
Exercised 1.42 (1,431,400)
Cancelled 3.22 (148,600)
Balance - 31 December 2008 $ 2.72 8,966,000 3.72
Granted 0.86 6,156,000
Cancelled 1.29 (930,000)
Balance - 31 December 2009 $ 1.10 14,192,000 4.32
Options outstanding and exercisable at 31 December 2009 were as follows:
Expiry date Option Number of Number of Weighted
price options options average
outstanding vested life
(years)
17 December 2010 $ 1.29 # 1,285,000 1,285,000 1.9
1 July 2010 $ 1.29 # 119,000 119,000 1.5
15 October 2012 $ 1.29 # 4,306,000 4,306,000 3.8
25 June 2013 $ 1.29 # 916,000 916,000 4.5
30 June 2013 $ 1.29 # 1,410,000 1,410,000 4.5
25 June 2014 $ 0.96 1,126,000 1,126,000 4.5
30 June 2013 $ 0.84 5,030,000 - 6.9
Total 14,192,000 9,162,000
Weighted average exercise $ 1.10 $1.25
price
# - The options were re-priced to $1.29 on 30 June 2009
The exercise prices of all share purchase options granted during the year
were equal to or greater than the market price at the grant date. Using the
Black-Scholes option pricing model with the assumptions noted below, the
estimated fair value of all options granted have been reflected in the
statement of changes in equity.
The share-based payments expense during the year ended 31 December 2009 was
$2,185,812 (2008: $5,385,501).
The assumptions used to estimate the fair value of options granted during the
year were:
2009 2008
Canadian risk free interest rate 3% 3%
Expected life 5 - 7 years 5 years
Volatility 83% 73%
Forfeiture rate 0% 0%
Expected dividends Nil Nil
The volatility of the shares was calculated over the expected life of the
option. Volatility was calculated by using available historical information
on the share price for Anooraq equal to the expected life of the scheme.
The risk free rate for periods within the contractual term of the share right
is based on the Government of Canada benchmark bond yield.
36.2 Cash settled share-based payments
The Group also currently has a scheme in place to award share appreciation
rights ("SARs") to recognise the contributions of senior staff to the Group`s
financial position and performance and to retain key employees. These share
appreciation rights are linked to the share price of the Group on the
Johannesburg Securities Exchange ("JSE") and are settled in cash on the
exercise date.
A third of the share appreciation rights granted are exercisable annually
from the grant date with an expiry date of 4 years from the grant date. The
offer price of these share appreciation rights equaled the closing market
price of the underlying shares on the trading date immediately preceding the
granting of the share appreciation rights.
Share appreciation rights granted (all unvested at year 2,933,000
end)
Vesting year of unvested share appreciation rights:
Within one year 977,667
One to two years 977,667
Two to three years 977,666
Total number of shares unvested 2,933,000
The value of the share appreciation rights expensed in the year ended 31
December 2009 was calculated as $145,199 (2008: Nil).
The assumptions used to estimate the fair value of the SARS granted during
the year were:
South African risk free rate 8.4%
Volatility 83%
Forfeiture rate 0%
Expected dividends Nil
The only vesting conditions for the scheme are that the employees should be
in the employment of the Company.
The volatility of the shares were calculated with the equally weighted
standard approach of calculating volatility by using available historical
information on the share price for Anooraq equal to the term to maturity of
the scheme.
The risk free rate for periods within the contractual term of the share right
is based on the South African Government Bonds in effect at the time.
36.3 Bonus settled via shares
The Company issued shares to key members of management during the year ended
31 December 2009 as consideration for finalising the acquisition as discussed
in note 34. A total of 806,898 (2008: Nil) shares was issued at a cost of
$895,625 (2008: $Nil).
37 CONTINGENCIES
QuestCo (Proprietary) Limited and North Corporate Finance Advisory Services
Limited are of the view that an additional amount of $1.8 million (ZAR13
million) in the aggregate is payable to them in respect of corporate
advisory services rendered by them pursuant to the implementation of the
Bokoni acquisition on 1 July 2009. Anooraq does not believe that the
aforesaid claims have any merit. Accordingly, no provision for such services
has been made. The parties are currently in arbitration on this matter.
38 RELATED PARTIES
None of the directors, officers or major shareholders of Anooraq or, to the
knowledge of Anooraq, their families, had any interest, direct or indirect,
in any transaction during the last two fiscal years or in any proposed
transaction which has affected or will materially affect Anooraq or its
investment interests or subsidiaries, other than as stated below.
Relationships
Related party Nature of relationship
Hunter Dickinson HDSI is a private company owned equally by several
Services Inc. public companies, one of which is the Company.
("HDSI") 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.
CEC Engineering CEC is a private company owned by a former
Ltd ("CEC") director, used by the company for engineering and
project management services at market rates.
Rustenburg The Group concluded a number of shared services
Platinum Mines agreements between Bokoni mine and Rustenburg
(`RPM`) Platinum Mines (`RPM`), a wholly owned subsidiary
of Anglo Platinum and 49% shareholder in Bokoni
Holdco. Pursuant to the terms of various shared
services agreements, the Anglo American group of
companies will continue to provide certain services
to Bokoni Mines at a cost that is no greater than
the costs charged to any other Anglo American group
company 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. The Group also
sells concentrate produced at the mine to RPM at
market related prices.
Pelawan Pelawan is the Company`s controlling shareholder.
Investments (Pty)
Ltd ("Pelawan")
Key management All directors directly involved in Anooraq and
certain members of top management at Bokoni.
2009 2008
Related party balances
HDSI Trade and other payables (118,698) (794,072)
RPM Loans and Borrowings (refer note
19) (484,003,094) (14,703,416)
Trade and other payables (3,534,094) -
Trade and other receivables 21,501,503 -
Related party transactions
2009 2008
HDSI Administration expenses 713,945 1,302,304
CEC Administration expenses - 4,927
RPM Revenue (refer note 24) (62,627,868) -
Finance expense (before interest
capitalised) 27,999,797 -
Cost of sales 6,160,349 -
Pelawan Transaction costs * 1,600,000 -
* - The company paid transaction costs amounting to $1.6 million on behalf of
Pelawan Investments (Proprietary) Limited, the Company`s controlling
shareholder, owing to RMB and legal costs. These amounts were expensed in
profit and loss during the year ended 31 December 2009.
Key Management Compensation
2009 2008
Remuneration for executive directors and key
management
- Salaries 2,991,921 2,030,128
- Benefits 615,789 212,276
- Share bonuses 895,625 -
- Share options 1,547,117 4,944,451
- Cash settled share-based payments 145,199 -
Remuneration for non-executives 537,263 429,988
6,732,914 7,616,843
39 EXPLANATIONS OF TRANSITION TO IFRS
The accounting policies in note 4 have been applied in preparing the
consolidated 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 preparation of these consolidated financial statements, the 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.
1 January 2008
As reported Effects of IFRS
under previous transition to
GAAP IFRS
Assets
Non-current
assets
Property, plant 105,494 - 105,494
and equipment
Mineral property 4,200,000 - 4,200,000
interest
Investment in 4,878,714 (1,919,929) 2,958,785
joint venture
Deferred 368,146 - 368,146
acquisition
costs
Total non- 9,552,354 (1,919,929) 7,632,425
current assets
Current assets
Trade and other 269,188 269,188
receivables
Cash and cash 7,131,821 - 7,131,821
equivalents
Total current 7,401,009 - 7,401,009
assets
Total assets 16,953,363 (1,919,929) 15,033,434
Equity and
Liabilities
Equity
Share Capital 51,855,350 - 51,855,350
Foreign currency - - -
translation
reserve
Share-based 13,254,905 - 13,254,905
payment reserve
Accumulated loss (60,376,436) (1,919,929) (62,296,365)
Total equity 4,733,819 (1,919,929) 2,813,890
Liabilities
Non-current
liabilities
Loans and 9,806,636 - 9,806,636
borrowings
Current
liabilities
Loans and 1,892,197 - 1,892,197
borrowings
Trade and other 520,711 - 520,711
payables
Total current 2,412,908 - 2,412,908
Liabilities
Total equity and 16,953,363 (1,919,929) 15,033,434
liabilities
31 December 2008
As reported under Effects of IFRS
previous GAAP transition to
IFRS
Assets
Non-current
assets
Property, plant 469,635 - 469,635
and equipment
Mineral property 4,200,000 - 4,200,000
interest
Investment in 4,793,645 (2,274,674) 2,518,971
joint venture
Deferred 1,587,959 - 1,587,959
acquisition costs
Total non-current 11,051,239 (2,274,674) 8,776,565
assets
Current assets
Trade and other 271,554 271,554
receivables
Cash and cash 3,850,674 - 3,850,674
equivalents
Total current 4,122,228 - 4,122,228
assets
Total assets 15,173,467 (2,274,674) 12,898,793
Equity and
Liabilities
Equity
Share Capital 54,948,341 - 54,948,341
Foreign currency - 129,684 129,684
translation
reserve
Share-based 17,584,974 - 17,584,974
payment reserve
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 12,967,753 - 12,967,753
borrowings
Current
liabilities
Loans and 1,735,663 - 1,735,663
borrowings
Trade and other 1,798,839 - 1,798,839
payables
Total current 3,534,502 - 3,534,502
Liabilities
Total equity and 15,173,467 (2,274,674) 12,898,793
liabilities
Reconciliation of the statement of comprehensive loss
31 December 2008
As reported Effects of IFRS
under transition
previous GAAP to IFRS
Revenue - - -
Cost of sales - - -
Gross loss - - -
Depreciation (61,140) - (61,140)
Administrative expenses (11,536,001) (474,257) (12,010,258)
Other income 5,779 - 5,779
Operating loss (11,591,362) (474,257) (12,065,619)
Finance income 179,119 - 179,119
Finance expenses (2,074,424) 225,850 (1,848,574)
Net finance expense (1,895,305) 225,850 (1,669,455)
Share of loss of equity - (235,022) (235,022)
accounted investees
Loss before income tax (13,486,667) (483,429) (13,970,096)
Income tax 1,000 (1,000) -
Loss for the year (13,485,667) (484,429) (13,970,096)
Other comprehensive income
Foreign currency translation - 129,684 129,684
difference for foreign
operations
Total comprehensive loss for (13,485,667) (354,745) (13,840,412)
the year
Notes
Basis of Consolidation
Under GAAP, the Company accounted for its 50% interest in Ga-Phasha Platinum
Mines (Proprietary) Limited, previously a variable interest entity The
Company was not considered the primary beneficiary prior to 1 July 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 was
not a SPE and that the Company had joint control of GPM. Accordingly, under
IFRS, the Company could elect to use either the equity method or
proportionate consolidation method to account for its interest in GPM.
The Company 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
statement of financial position at the Transition Date or on the consolidated
statement of financial position 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
statement of financial position rather than included in mineral property
interests.
Functional Currency
Under GAAP, all the Company`s subsidiaries were integrated foreign
operations. Therefore, monetary items were translated at year-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 shareholders`
equity, to accumulated loss on the transition date.
Share-based payments
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 year 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 recognise such expense over the
vesting year 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 or for the year ended 31 December 2008.
Deferred tax on mineral properties
Under GAAP, in the 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 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).
Presentation
Certain amounts on the statement of financial position, statement of
comprehensive loss and statement of cash flows have been reclassified to
conform to the presentation adopted under IFRS.
40 FAIR VALUE ADJUSTMENTS
2009 2008
Market to market adjustment (636,529) -
The fair value loss is related to the valuation of the interest rate swap
with Standard Chartered Bank at 31 December 2009.
41 COMMITMENTS
2009 2008
Contracted for 10,323,040 -
Not yet contracted for 21,723,760 -
Authorised capital expenditure 32,046,800 -
The committed expenditures relate to property, plant and equipment and will
be funded through cash generated from operations and available loan
facilities.
42 EVENTS AFTER THE REPORTING YEAR
Mining Royalty Tax
The Mining and Petroleum Royalty Act (the Act) makes reference to royalties
payable to the South African state in terms of the Mineral and Petroleum
Resources Royalty Act (Act 28 of 2008). The Act provides for the payment of a
royalty according to a formula based on earnings before interest, tax and
depreciation, after the deduction of capital expenditure. This rate is then
applied to revenue to calculate the royalty amount due, with a minimum of
0.5% and a maximum of 5% for mining companies. The royalty is to become
effective on 1 March 2010. The Company is in the process of determining the
rate that will be applicable and the impact on profit or loss.
43 EMPLOYEE COSTS
2009 2008
Employee costs included in loss for the year are as follows:
Salaries and wages and other benefits 39,994,754 2,675,008
Retirement benefit costs 296,442 147,565
Medical aid contributions 7,434 8,521
Employment termination costs 1,793,791 -
Share-based compensation - equity settled 2,185,812 5,385,502
Share-based compensation - cash settled 145,199 -
Bonus settled via shares 895,625 -
45,319,057 8,216,596
44 GROUP ENTITIES
The following are the shareholdings of the Company in the various group
entities:
Country of
Company Incorporation
N1C Resources Incorporation Cayman Islands 100 % 100 %
Anooraq Minera Mexicana Mexico 100 % 100 %
N2C Resources Incorporation * Cayman Islands 100 % 100 %
Plateau Resources Proprietary Limited 100 % 100 %
* South Africa
Bokoni Holdings Proprietary Limited * South Africa 51 % 0 %
Bokoni Mine Proprietary Limited * South Africa 51 % 0 %
Boikgantsho Proprietary Limited * South Africa 51 % 0 %
Kwanda Proprietary Limited * South Africa 51 % 0 %
Ga-Phasha Proprietary Limited * South Africa 51 % 50 %
Lebowa Platinum Mine Limited * South Africa 51 % 0 %
* Indirectly held
45 HEADLINE AND DILUTED HEADLINE EARNINGS PER SHARE
Headline earnings per share is calculated by dividing headline earnings
attributable to shareholders of the Company by the weighted average number of
ordinary shares in issue during the period. Diluted headline earnings per
share is determined by adjusting the headline earnings attributable to
shareholders of the Company and the weighted average number of ordinary
shares in issue during the period, for the effects of all dilutive potential
ordinary shares, which comprise share options granted to employees.
Headline earnings per share
The calculation of headline loss per share for the year ended 31 December
2009 of 12 cents (2008: 8 cents) is based on headline loss of $35,600,870
(2008: $13,975,875) and a weighted average number of shares of 305,971,455
(2008: 185,775,361).
The following adjustments to loss attributable to shareholders of the Company
were taken into account in the calculation of headline loss per share:
2009 2008
Loss attributable to shareholders of the (35,531,631) (13,970,096)
Company
Gain on disposal of property, plant and (69,239) (5,779)
equipment
Headline loss attributable to shareholders (35,600,870) (13,975,875)
of the Company
Diluted headline earnings per share
The calculation of diluted headline loss per share for the year ended 31
December 2009 of 12 cents (2008: 7 cents) is based on headline loss of
$35,600,870 (2008: $13,975,875) and a diluted weighted average number of
shares of 306,536,624 (2008: 185,775,361).
There are no reconciling items between headline loss and diluted headline
loss.
Refer to note 31 for the calculation of the diluted weighted average number
of shares.
Johannesburg
31 March 2010
JSE Sponsor
Macquarie First South Advisers (Pty) Limited
Date: 31/03/2010 14:37:01 Produced by the JSE SENS Department.
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