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EPS
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EPS - Eastern Platinum Limited - Consolidated financial statements of Eastern
Platinum Limited December 31, 2010 and 2009
EASTERN PLATINUM LIMITED
(Incorporated in Canada)
(Canadian Registration number BC0722783)
(South African Registration number 2007/006318/10)
Share Code TSX: ELR ISIN: CA 2768551038
Share Code AIM: ELR ISIN: CA 2768551038
Share Code JSE: EPS ISIN: CA 2768551038
Consolidated financial statements of Eastern Platinum Limited
December 31, 2010 and 2009
Eastern Platinum Limited
December 31, 2010
Table of contents
Independent Auditor`s Report ............................................... 3
Consolidated income statements ............................................. 4
Consolidated statements of comprehensive income ............................ 5
Consolidated statements of financial position .............................. 6
Consolidated statements of changes in equity................................ 7
Consolidated statements of cash flows ...................................... 8
Notes to the consolidated financial statements........................... 9-49
Deloitte & Touche LLP
2800 - 1055 Dunsmuir Street
4 Bentall Centre
P.O. Box 49279
Vancouver BC V7X 1P4
Canada
Tel: 604-669-4466
Fax: 604-685-0395
www.deloitte.ca
Independent Auditor`s Report
To the Shareholders of
Eastern Platinum Limited
We have audited the accompanying consolidated financial statements of Eastern
Platinum Limited (the "Company"), which comprise the consolidated statements of
financial position as at December 31, 2010 and 2009, and the consolidated
statements of income, comprehensive income, changes in equity, and cash flows
for the years then ended, and a summary of significant accounting policies and
other explanatory information.
Management`s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these
consolidated financial statements in accordance with International Financial
Reporting Standards, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
Auditor`s Responsibility
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits. We conducted our audits in accordance with
Canadian generally accepted auditing standards. Those standards require that we
comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the consolidated financial statements. The procedures
selected depend on the auditor`s judgment, including the assessment of the risks
of material misstatement of the consolidated financial statements, whether due
to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity`s preparation and fair presentation of
the consolidated financial statements in order to design audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity`s internal control. An audit also
includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is sufficient
and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2010
and 2009, and its financial performance and its cash flows for the years then
ended in accordance with International Financial Reporting Standards.
(Signed) Deloitte & Touche LLP
Chartered Accountants
Vancouver, British Columbia
March 21, 2011
Eastern Platinum Limited
Consolidated income statements
(Expressed in thousands of U.S. dollars, except per share amounts)
Year ended Year ended
Note December 31, December 31,
2010 2009
Revenue $ 155,000 $ 111,365
Cost of operations
Production costs 109,901 82,839
Depletion and depreciation 9 22,507 17,154
132,408 99,993
Mine operating earnings 22,592 11,372
Expenses
General and administrative 12,117 10,528
Share-based payments 17(c) 1,452 582
13,569 11,110
Operating profit 9,023 262
Other income (expense)
Interest income 1,797 1,786
Finance costs 19 (1,807) (1,691)
Foreign exchange loss (160) (758)
Profit (loss) before income taxes 8,853 (401)
Deferred income tax recovery 15 924 1,623
Net profit for the year $ 9,777 $ 1,222
Attributable to
Non-controlling interest 18 $ (3,575) $ (4,428)
Equity shareholders of the Company 13,352 5,650
Net profit for the year $ 9,777 $ 1,222
Earnings per share
Basic 20 $ 0.02 $ 0.01
Diluted 20 $ 0.02 $ 0.01
Weighted average number of common shares
outstanding in thousands
Basic 20 683,177 680,577
Diluted 20 694,839 687,790
Eastern Platinum Limited
Consolidated statements of comprehensive income
(Expressed in thousands of U.S. dollars)
Year ended Year ended
December 31, December 31,
2010 2009
Net profit for the year $ 9,777 $ 1,222
Other comprehensive income
Exchange differences on translating
foreign operations 70,355 116,678
Exchange differences on translating
non-controlling interest 762 2,467
Comprehensive income for the year $ 80,894 $ 120,367
Attributable to
Non-controlling interest (2,813) (1,961)
Equity shareholders of the Company 83,707 122,328
Comprehensive income for the year $ 80,894 $ 120,367
Eastern Platinum Limited
Consolidated statements of financial position as at
December 31, 2010 and 2009
(Expressed in thousands of U.S. dollars)
December 31, December 31,
Note 2010 2009
Assets
Current assets
6
Cash and cash equivalents $ 107,846 $ 7,249
Short-term investments 242,446 14,409
Trade and other receivables 7 33,787 29,138
Inventories 8 8,832 4,825
392,911 55,621
Non-current assets
Property, plant and equipment 9 715,976 634,778
Refining contract 10 14,265 14,169
Other assets 11 3,823 2,282
$ 1,126,975 $ 706,850
Liabilities
Current liabilities
Accounts payable and accrued
liabilities 12 $ 27,009 $ 22,919
Current portion of finance leases 13 3,211 926
30,220 23,845
Non-current liabilities
Provision for environmental
rehabilitation 14 8,934 8,152
Finance leases 13 - 2,850
Deferred tax liabilities 15 46,642 42,491
85,796 77,338
Equity
Issued capital 17 1,219,869 890,150
Equity-settled employee benefits
reserve 33,390 32,336
Currency translation adjustment 17,456 (52,899)
Deficit (236,764) (250,116)
Capital and reserves
attributable to equity
shareholders of the Company 1,033,951 619,471
Non-controlling interest 18 7,228 10,041
1,041,179 629,512
$ 1,126,975 $ 706,850
Approved and authorized for issue by the Board on March 21, 2011.
"David Cohen" "Robert Gayton"
David Cohen, Director Robert Gayton, Director
Eastern Platinum Limited
Consolidated statements of changes in equity
(Expressed in thousands of U.S. dollars, except number of shares)
Issued capital
Shares Amount
Balance, December 31, 2008 680,526,454 $ 890,049
Stock options exercised 366,871 101
Share-based payments - -
Net profit - -
Currency translation adjustment - -
Balance, December 31, 2009 680,893,325 $ 890,150
Public offering 224,250,000 345,391
Share issuance costs - (16,501)
Stock options exercised 2,446,242 829
Share-based payments - -
Net profit - -
Currency translation adjustment - -
Balance, December 31, 2010 907,589,567 $ 1,219,869
Equity- Currency
settled translation
employee adjustment
benefits
reserve
Balance, December 31, 2008 $ 31,827 $ (169,577)
Stock options exercised (73) -
Share-based payments 582 -
Net profit - -
Currency translation adjustment - 116,678
Balance, December 31, 2009 $ 32,336 $ (52,899)
Public offering - -
Share issuance costs - -
Stock options exercised (398) -
Share-based payments 1,452 -
Net profit - -
Currency translation adjustment - 70,355
Balance, December 31, 2010 $ 33,390 $ 17,456
Deficit Capital and
reserves
attributable to
equity
shareholders
of the Company
Balance, December 31, 2008 $ (255,766) $ 496,533
Stock options exercised - 28
Share-based payments - 582
Net profit 5,650 5,650
Currency translation adjustment - 116,678
Balance, December 31, 2009 $ (250,116) $ 619,471
Public offering - 345,391
Share issuance costs - (16,501)
Stock options exercised - 431
Share-based payments - 1,452
Net profit 13,352 13,352
Currency translation adjustment - 70,355
Balance, December 31, 2010 $ (236,764) $ 1,033,951
Non-controlling Equity
interest
Balance, December 31, 2008 $ 12,002 $ 508,535
Stock options exercised - 28
Share-based payments - 582
Net profit (4,428) 1,222
Currency translation adjustment 2,467 119,145
Balance, December 31, 2009 $ 10,041 $ 629,512
Public offering - 345,391
Share issuance costs - (16,501)
Stock options exercised - 431
Share-based payments - 1,452
Net profit (3,575) 9,777
Currency translation adjustment 762 71,117
Balance, December 31, 2010 $ 7,228 $ 1,041,179
Eastern Platinum Limited
Consolidated statements of cash flows
(Expressed in thousands of U.S. dollars)
Year ended Year ended
December 31, December 31,
Note 2010 2009
Operating activities
Profit (loss) before income taxes $ 8,853 $ (401)
Adjustments to net profit (loss) for
non-cash items
Depletion and depreciation 9 22,507 17,154
Refining contract amortization 10 1,513 1,332
Share-based payments 17 1,452 582
Interest income (1,797) (1,786)
Finance costs 19 1,807 1,691
Foreign exchange loss 160 758
Environmental expense - 301
Net changes in non-cash working capital items
Trade and other receivables (2,318) (13,169)
Inventories (3,040) 22
Accounts payable and accrued liabilities 1,322 (15,135)
Cash generated from (utilized in) operations 30,459 (8,651)
Adjustments to net profit (loss) for cash items
Interest income received 1,767 1,855
Finance costs paid (252) (69)
Acquisition related dividend taxes paid - (2,422)
Net operating cash flows 31,974 (9,287)
Investing activities
(Purchase) maturity of short-term investments (223,118) 22,647
Purchase of other assets (1,129) (929)
Property, plant and equipment expenditures (32,991) (28,955)
Sale of property, plant and equipment - 1,552
Net investing cash flows (257,238) (5,685)
Financing activities
Common shares issued for cash, net of share
issue costs - public financing 328,890 -
Common shares issued for cash - exercise
of stock options 423 32
Repayment of current loans - (3,065)
Payment of finance leases (2,161) (1,223)
Net financing cash flows 327,152 (4,256)
Effect of exchange rate changes on cash
and cash equivalents (1,291) 671
Increase (decrease) in cash and cash equivalents 100,597 (18,557)
Cash and cash equivalents, beginning of year 7,249 25,806
Cash and cash equivalents, end of year $ 107,846 $ 7,249
Eastern Platinum Limited
Notes to the consolidated financial statements - years ended December 31, 2010
and 2009
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts)
1. Nature of operations
Eastern Platinum Limited (the "Company") is a platinum group metal ("PGM")
producer engaged in the mining, exploration and development of PGM properties
located in various provinces in South Africa.
Eastern Platinum Limited is a publicly listed company incorporated in Canada
with limited liability under the legislation of the Province of British
Columbia. The Company`s shares are listed on the Toronto Stock Exchange,
Alternative Investment Market, and the Johannesburg Stock Exchange.
The head office, principal address and records office of the Company are located
at 1075 West Georgia Street, Suite 250, Vancouver, British Columbia, Canada, V6E
3C9. The Company`s registered address is 1055 West Georgia Street, Suite 1500,
Vancouver, British Columbia, Canada, V6E 4N7.
2. Basis of preparation
In February 2009, the British Columbia and Ontario Securities Commissions
granted the Company exemptive relief to adopt International Financial Reporting
Standards ("IFRS") with an adoption date of January 1, 2009 and a transition
date of January 1, 2008. These consolidated financial statements, including
comparatives, have been prepared using accounting policies in compliance with
International Financial Reporting Standards ("IFRS") as issued by the
International Accounting Standards Board ("IASB").
The preparation of financial statements requires management to make judgments,
estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, and revenue and expenses. The estimates and
associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the results
of which form the basis of making the judgments about carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results
may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the
estimate is revised if the revision affects only that period or in the period of
the revision and further periods if the review affects both current and future
periods.
Judgments made by management in the application of IFRS that have a significant
effect on the financial statements and estimates with a significant risk of
material adjustment in the current and following fiscal years are discussed in
Notes 4(v) and 4(w).
3. Application of new and revised International Financial Reporting Standards
Effective January 1, 2010, the Company adopted new and revised International
Financial Reporting Standards ("IFRSs") that were issued by the International
Accounting Standards Board ("IASB"). The application of these new and revised
IFRSs has not had any material impact on the amounts reported for the current
and prior years but may affect the accounting for future transactions or
arrangements.
(a) Amendments to IFRS 2 Share-based Payment - Group Cash-settled Share-based
Payment Transactions
The amendments clarify the scope of IFRS 2, as well as the accounting for group
cash- settled share-based payment transactions in the separate (or individual)
financial statements of an entity receiving the goods or services when another
group entity or shareholder has the obligation to settle the award.
(b) Amendments to IFRS 3 Business Combinations
The main amendments to IFRS 3 Business Combinations are as follows:
(i) The revised standard also applies to business combinations involving only
mutual entities and to business combinations achieved by contract alone.
(ii) The definition of a business has been amended to clarify that it can
include a set of activities and assets that are not being operated as a
business, as long as an acquirer is capable of operating the set of activities
and assets as a business.
(iii) All business combinations are accounted for by applying the acquisition
method (previously the purchase method).
(iv) The acquirer can elect to measure any non-controlling interest at fair
value at the acquisition date, or at its proportionate interest in the fair
value of the identifiable assets and liabilities of the acquiree, on a
transaction-by- transaction basis.
(v) Subsequent recognition of deferred tax assets acquired in a business
combination that did not satisfy the criteria for recognition at the acquisition
date would be recognized in profit or loss.
This standard applies prospectively to acquisitions with a date on or after the
beginning of the first annual period beginning on or after July 1, 2009.
(c) Amendments to IFRS 8 Operating Segments
The amendments clarify that disclosing segment information with respect to total
assets is only required if such information is regularly reported to the chief
operating decision maker.
(d) Amendments to IAS 7 Statement of Cash Flows
The amendments clarify that only expenditures that result in the recognition of
an asset can be classified as a cash flow from investing activities.
(e) Amendments to IAS 17 Leases
The IASB deleted guidance stating that a lease of land with an indefinite
economic life normally is classified as an operating lease, unless at the end of
the lease term title is expected to pass to the lessee. The amendments also
clarify that when a lease includes both the land and building elements, an
entity should determine the classification of each element taking into account
the fact that land normally has an indefinite economic life.
(f) Amendments to IAS 27 Consolidated and Separate Financial Statements
The main amendments to IAS 27 Consolidated and Separate Financial Statements are
as follows:
(i) Changes in a parent`s ownership interest that do not result in the loss of
control of a controlled subsidiary are accounted for as equity transactions.
Accordingly, acquisitions of additional non-controlling interests are accounted
for as equity transactions. Disposals of equity interests while retaining
control are accounted for as equity transactions.
(ii) Transactions resulting in a loss of control would cause a gain or loss to
be recognized in profit or loss.
(iii) Losses applicable to the non-controlling interests, including negative
other comprehensive income, are allocated to non-controlling interests even if
doing so causes the non-controlling interests to have a negative balance.
(g) Amendments to IAS 36 Impairment of Assets
The amendments clarify that the largest unit to which goodwill should be
allocated is the operating segments level. This amendment applies prospectively.
(h) Amendments to IAS 38 Intangible Assets
The amendments clarify that an intangible asset that is separable only together
with a related contract, identifiable asset or liability is recognized
separately from goodwill together with the related item, and that complementary
intangible assets with similar useful lives may be recognized as a single asset.
The amendments also describe valuation techniques commonly used by entities when
measuring the fair value of intangible assets acquired in a business combination
for which no active market exists. These amendments are applied prospectively.
(i) Amendments to IAS 39 Financial Instruments: Recognition and Measurement
The main amendments consist of:
(i) Additional guidance provided to help determine whether loan prepayment
penalties result in an embedded derivative that needs to be separated.
(ii) Clarification that the scope exemption is restricted to forward contracts
between an acquirer and a selling shareholder to buy or sell an acquiree that
will result in a business combination at a future acquisition date within a
reasonable period normally necessary to obtain any required approvals and to
complete the transaction.
(iii) Clarification that the gains or losses on a cash flow hedge should be
reclassified from other comprehensive income to profit or loss during the period
that the hedged forecast cash flows impact profit or loss.
The amendments apply prospectively to all unexpired contracts from the date of
adoption.
4. Summary of significant accounting policies
The consolidated financial statements have been prepared under the historical
cost convention, except for the revaluation of certain financial instruments.
The Company`s principal accounting policies are outlined below:
(a) Basis of consolidation
These consolidated financial statements incorporate the financial statements of
the Company and the entities controlled by the Company (its subsidiaries,
including special purpose entities). Control exists when the Company has the
power, directly or indirectly, to govern the financial and operating policies of
an entity so as to obtain benefits from its activities. The financial statements
of subsidiaries are included in the consolidated financial statements from the
date that control commences until the date that control ceases. All significant
intercompany transactions and balances have been eliminated.
Non-controlling interest in the net assets of consolidated subsidiaries are
identified separately from the Company`s equity. Non-controlling interest
consists of the non-controlling interest at the date of the original business
combination plus the non-controlling interest`s share of changes in equity since
the date of acquisition.
Special Purpose Entities ("SPE`s") as defined in SIC 12 Consolidation - Special
Purpose Entities are entities which are created to accomplish a narrow and well-
defined objective (e.g. to act as a Black Economic Empowerment ("BEE") partner).
SPE`s are subject to consolidation when there is an indication that an entity
controls the SPE. The Company has determined that its investment in Gubevu
Consortium Investment Holdings (Pty) Ltd. ("Gubevu") is a SPE that the Company
controls. The accounts of Gubevu are consolidated with those of the Company.
(b) Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the
acquisition method. The consideration for each acquisition is measured as the
aggregate of the fair values (at the date of exchange) of assets given,
liabilities incurred or assumed, and equity instruments issued by the Company in
exchange for control of the acquiree. Any costs directly attributable to the
business combination are generally recognized in profit or loss as incurred.
The acquiree`s identifiable assets, liabilities and contingent liabilities that
meet the conditions for recognition under IFRS 3 Business Combinations are
recognized at their fair values at the acquisition date, except for non-current
assets (or disposal groups) that are classified as held for sale in accordance
with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, which
are recognized and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognized as an asset and initially measured
at cost, being the excess of the cost of the acquisition over the Company`s
interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities recognized. If the Company`s interest in the net fair
value of the acquiree`s identifiable assets, liabilities and contingent
liabilities exceeds the cost of the acquisition, the excess is recognized
immediately in profit or loss.
The interest of non-controlling shareholders in the acquiree is initially
measured at the non-controlling shareholders` proportion of the net fair value
of the assets, liabilities and contingent liabilities recognized.
(c) Presentation currency
The Company`s presentation currency is the U.S. dollar ("$"). The functional
currencies of Eastern Platinum Limited and its South African subsidiaries are
the Canadian Dollar and South African Rand ("ZAR"), respectively. These
consolidated financial statements have been translated to the U.S. dollar in
accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates. This
standard requires that assets and liabilities be translated using the exchange
rate at period end, and income, expenses and cash flow items are translated
using the rate that approximates the exchange rates at the dates of the
transactions (i.e. the average rate for the period).
(d) Foreign currency translation
In preparing the financial statements of the individual entities, transactions
in currencies other than the entity`s functional currency (foreign currencies)
are recorded at the rates of exchange prevailing at the dates of the
transactions. At each statement of financial position date, monetary assets and
liabilities are translated using the period end foreign exchange rate. Non-
monetary assets and liabilities are translated using the historical rate on the
date of the transaction. Non-monetary assets and liabilities that are stated at
fair value are translated using the historical rate on the date that the fair
value was determined. All gains and losses on translation of these foreign
currency transactions are included in profit or loss.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable. The following specific criteria must be met before revenue is
recognized:
(i) Sale of goods
Revenue from the sale of platinum group and other metals is recognized when all
of the following conditions are satisfied:
- the specific risks and rewards of ownership have been transferred to the
purchaser;
- the Company does not retain continuing managerial involvement to the degree
usually associated with ownership or effective control over the metals sold;
- the amount of revenue can be measured reliably;
- it is probable that the economic benefits associated with the transaction will
flow to the Company; and
- the costs incurred or to be incurred in respect of the sale can be measured
reliably.
The sale of platinum group metals is provisionally priced such that the price is
not settled until a predetermined future date based on the market price at that
time. Revenue on these sales is initially recognized (when the conditions above
are met) at the current market price. The difference between the present value
and the future value of the current market price is recognized as interest
income over the term of settlement. Subsequent to initial recognition but prior
to settlement, sales are marked to market at each reporting date using the
forward price for the period equivalent to that outlined in the contract. This
mark to market adjustment is recorded in revenue.
(ii) Rental income
Rental income from residential properties is recognized on a straight-line basis
over the term of the lease.
(iii) Interest income
Interest income is recognized in profit or loss as it accrues, using the
effective interest method.
(f) Share-based payments
The Company grants stock options to buy common shares of the Company to
directors, officers and employees. The board of directors grants such options
for periods of up to ten years, with vesting periods determined at its sole
discretion and at prices equal to or greater than the closing market price on
the day preceding the date the options were granted.
The fair value of the options is measured at grant date, using the Black-Scholes
option pricing model, and is recognized over the period that the employees earn
the options. The fair value is recognized as an expense with a corresponding
increase in equity. The amount recognized as an expense is adjusted to reflect
the number of share options expected to vest.
(g) Finance costs
Finance costs comprise interest payable on revenue advances, finance leases,
provision for environmental rehabilitation and other borrowings. Interest
payable on borrowings is calculated using the effective interest method and
foreign exchange gains and losses on foreign currency borrowings.
(h) Income taxes
Income tax expense consists of current and deferred tax expense. Income tax
expense is recognized in profit or loss.
Current tax expense is the expected tax payable on the taxable income for the
year, using tax rates enacted or substantively enacted at period end, adjusted
for amendments to tax payable with regards to previous years.
Deferred tax assets and liabilities are recognized for deferred tax consequences
attributable to unused tax loss carry forwards, unused tax credits and
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using the enacted or substantively enacted tax rates
expected to apply when the asset is realized or the liability settled.
The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in profit or loss in the period that substantive enactment occurs.
A deferred tax asset is recognized to the extent that it is probable that future
taxable profits will be available against which the asset can be utilized. To
the extent that the Company does not consider it probable that a deferred tax
asset will be recovered, the deferred tax asset is reduced.
The following temporary differences do not result in deferred tax assets or
liabilities:
- the initial recognition of assets or liabilities, not arising in a business
combination, that does not affect accounting or taxable profit
- goodwill
- investments in subsidiaries, associates and jointly controlled entities where
the timing of reversal of the temporary differences can be controlled and
reversal in the foreseeable future is not probable.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same taxation authority and
the Company intends to settle its current tax assets and liabilities on a net
basis.
(i) Earnings (loss) per share
Basic earnings (loss) per share is computed by dividing the net earnings (loss)
attributable to common shareholders by the weighted average number of shares
outstanding during the reporting period. Diluted earnings (loss) per share is
computed similar to basic earnings (loss) per share except that the weighted
average shares outstanding are increased to include additional shares for the
assumed exercise of stock options and warrants, if dilutive. The number of
additional shares is calculated by assuming that outstanding stock options and
warrants were exercised and that the proceeds from such exercises were used to
acquire common stock at the average market price during the reporting periods.
(j) Comprehensive income (loss)
Comprehensive income (loss) is the change in the Company`s net assets that
results from transactions, events and circumstances from sources other than the
Company`s shareholders and includes items that are not included in net profit
such as unrealized gains or losses on available-for-sale investments, gains or
losses on certain derivative instruments and foreign currency gains or losses
related to translation of the financial statements of foreign operations. The
Company`s comprehensive income (loss), components of other comprehensive income,
and cumulative translation adjustments are presented in the consolidated
statements of comprehensive income (loss) and the consolidated statements of
changes in equity.
(k) Property, plant and equipment
(i) Mining assets
Assets owned and mineral properties being depleted are recorded at cost less
accumulated depreciation and accumulated impairment losses. Mineral properties
not being depleted are recorded at cost less accumulated impairment losses. All
direct costs related to the acquisition, exploration and development of mineral
properties are capitalized until the properties to which they relate are ready
for their intended use, sold, abandoned or management has determined there to be
impairment. If economically recoverable ore reserves are developed, capitalized
costs of the related property are reclassified as mineral properties being
depleted and amortized using the units-of-production method following
commencement of production. Interest on borrowings incurred to finance mining
assets is capitalized until the asset is capable of carrying out its intended
use.
Mining properties and mining and process facility assets are amortized on a
units-of-production basis which is measured by the portion of the mine`s proven
and probable ore reserves recovered during the period. Capital work- in-
progress, which is included in mining assets, is not depreciated until the
assets are ready for their intended use.
Although the Company has taken steps to verify title to the properties in which
it has an interest, in accordance with industry standards for properties in the
exploration stage, these procedures do not guarantee the Company`s title.
Property title may be subject to unregistered prior agreements and non-
compliance with regulatory requirements.
(ii) Residential properties and other property, plant and equipment
Residential properties and other property, plant and equipment are recorded at
cost less accumulated depreciation and impairment losses. These assets are
depreciated using the straight-line method based on estimated useful lives,
which generally range from 5 to 7 years, with the exception of residential
properties and mine houses whose estimated useful lives are 50 years and office
buildings whose estimated useful lives are 20 years. Land is not depreciated.
Where an item of plant and equipment comprises significant components with
different useful lives, the components are accounted for as separate items of
plant and equipment.
Expenditures incurred to replace a component of an item of property, plant and
equipment that is accounted for separately, including major inspection and
overhaul expenditures, are capitalized. Directly attributable expenses incurred
for major capital projects and site preparation are capitalized until the asset
is brought to a working condition for its intended use. These costs include
dismantling and site restoration costs to the extent these are recognized as a
provision.
The cost of self-constructed assets includes the cost of materials, direct
labour and an appropriate portion of normal overheads.
The costs of day-to-day servicing are recognized in profit or loss as incurred.
These costs are more commonly referred to as "maintenance and repairs."
Financing costs directly associated with the construction or acquisition of
qualifying assets are capitalized at interest rates relating to loans
specifically raised for that purpose, or at the weighted average borrowing rate
where the general pool of group borrowings is utilized. Capitalization of
borrowing costs ceases when the asset is substantially complete.
The depreciation method, useful life and residual values are assessed annually.
(iii) Leased assets
Leases in which the Company assumes substantially all risks and rewards of
ownership are classified as finance leases. Assets held under finance leases are
recognized at the lower of the fair value of the leased property and the present
value of the minimum lease payments at inception of the lease, less accumulated
depreciation and impairment losses. Lease payments are accounted for as
discussed in Note 4(r).
(iv) Subsequent Costs
The cost of replacing part of an item within property, plant and equipment is
recognized when the cost is incurred if it is probable that the future economic
benefits will flow to the group and the cost of the item can be measured
reliably. The carrying amount of the part that has been replaced is expensed.
All other costs are recognized as an expense as incurred.
(v) Impairment
The Company`s tangible and intangible assets are reviewed for indications of
impairment at each statement of financial position date. If indication of
impairment exists, the asset`s recoverable amount is estimated.
An impairment loss is recognized when the carrying amount of an asset, or its
cash-generating unit, exceeds its recoverable amount. A cash-generating unit is
the smallest identifiable group of assets that generates cash inflows that are
largely independent of the cash inflows from other assets or groups of assets.
Impairment losses are recognized in profit and loss for the period. Impairment
losses recognized in respect of cash-generating units are allocated first to
reduce the carrying amount of any goodwill allocated to cash- generating units
and then to reduce the carrying amount of the other assets in the unit on a pro-
rata basis.
The recoverable amount is the greater of the asset`s fair value less costs to
sell and value in use. 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 an asset that does not generate largely independent
cash inflows, the recoverable amount is determined for the cash-generating unit
to which the asset belongs.
(vi) Reversal of impairment
An impairment loss is reversed if there is an indication that there has been a
change in the estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset`s carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation
or amortization, if no impairment loss had been recognized. An impairment loss
with respect to goodwill is never reversed.
(l) Refining contract
The Company sells substantially all its PGM concentrate to one customer under
the terms of an off-take or refining contract. The refining contract is
amortized over the original life of the contract, estimated to be fifteen years,
commencing in mid 2004. An evaluation of the carrying value of the contract is
undertaken whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
(m) Inventories
Inventories, comprising stockpiled ore, concentrate awaiting further processing
and sale, and chrome inventory are valued at the lower of cost and net
realizable value. Consumables are valued at the lower of cost and net realizable
value, with replacement cost used as the best available measure of net
realizable value. Cost is determined using the weighted average method and
includes direct mining expenditures and an appropriate portion of normal
overhead expenditure. In the case of concentrate, direct concentrate costs are
also included. Net realizable value is the estimated selling price in the
ordinary course of business, less the estimated costs of completion and selling
expenses. Obsolete, redundant and slow moving stores are identified and written
down to net realizable values.
(n) Short-term investments
Short-term investments are investments which are transitional or current in
nature, with an original maturity greater than three months.
(o) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits in banks and highly
liquid investments with an original maturity of three months or less.
(p) Financial assets
Financial assets are classified into one of four categories:
- fair value through profit or loss ("FVTPL");
- held-to-maturity ("HTM");
- available for sale ("AFS"); and,
- loans and receivables.
The classification is determined at initial recognition and depends on the
nature and purpose of the financial asset.
(i) FVTPL financial assets
Financial assets are classified as FVTPL when the financial asset is held for
trading or it is designated as FVTPL.
A financial asset is classified as held for trading if:
- it has been acquired principally for the purpose of selling in the near
future;
- it is a part of an identified portfolio of financial instruments that the
Company manages and has an actual pattern of short-term profit-taking;
or
- it is a derivative that is not designated and effective as a hedging
instrument.
Financial assets classified as FVTPL are stated at fair value with any resultant
gain or loss recognized in profit or loss. The net gain or loss recognized
incorporates any dividend or interest earned on the financial asset. The Company
does not have any assets classified as FVTPL financial assets.
(ii) HTM investments
HTM investments are recognized on a trade-date basis and are initially measured
at fair value, including transaction costs. The Company does not have any assets
classified as HTM investments.
(iii) AFS financial assets
Short-term investments and other assets held by the Company are classified as
AFS and are stated at fair value. Gains and losses arising from changes in fair
value are recognized in other comprehensive income and are accumulated in the
investments revaluation reserve. To date, these gains and losses have not been
significant due to the nature of the underlying investment. Impairment losses,
interest calculated using the effective interest method and foreign exchange
gains and losses on monetary assets, are recognized directly in profit or loss
rather than equity. When an investment is disposed of or is determined to be
impaired, the cumulative gain or loss previously recognized in the investments
revaluation reserve is included in profit or loss for the period.
The fair value of AFS monetary assets denominated in a foreign currency is
translated at the spot rate at the statement of financial position date. The
change in fair value attributable to translation differences on amortized cost
of debt instruments is recognized in profit or loss, while other changes are
recognized in equity.
(iv) Loans and receivables
Trade receivables, loans, and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as loans and
receivables. Loans and receivables are initially recognized at the transaction
value and subsequently carried at amortized cost less impairment losses. The
impairment loss of receivables is based on a review of all outstanding amounts
at period end. Bad debts are written off during the year in which they are
identified. Interest income is recognized by applying the effective interest
rate, except for short-term receivables when the recognition of interest would
be immaterial.
(v) Effective interest method
The effective interest method calculates the amortized cost of a financial asset
and allocates interest income over the corresponding period. The effective
interest rate is the rate that discounts estimated future cash receipts over the
expected life of the financial asset, or, where appropriate, a shorter period,
to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other
than those financial assets classified as FVTPL.
(vi) Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of
impairment at each period end. Financial assets are impaired when there is
objective evidence that, as a result of one or more events that occurred after
the initial recognition of the financial asset, the estimated future cash flows
of the investment have been impacted.
Objective evidence of impairment could include the following:
- significant financial difficulty of the issuer or counterparty;
- default or delinquency in interest or principal payments; or
- it has become probable that the borrower will enter bankruptcy or financial
reorganization.
For financial assets carried at amortized cost, the amount of the impairment is
the difference between the asset`s carrying amount and the present value of the
estimated future cash flows, discounted at the financial asset`s original
effective interest rate.
The carrying amount of all financial assets, excluding trade receivables, is
directly reduced by the impairment loss. The carrying amount of trade
receivables is reduced through the use of an allowance account. When a trade
receivable is considered uncollectible, it is written off against the allowance
account. Subsequent recoveries of amounts previously written off are credited
against the allowance account. Changes in the carrying amount of the allowance
account are recognized in profit or loss.
With the exception of AFS equity instruments, if, in a subsequent period, the
amount of the impairment loss decreases and the decrease relates to an event
occurring after the impairment was recognized, the previously recognized
impairment loss is reversed through profit or loss. On the date of impairment
reversal, the carrying amount of the financial asset cannot exceed its amortized
cost had impairment not been recognized.
(vii) Derecognition of financial assets
A financial asset is derecognized when:
- the contractual right to the asset`s cash flows expire; or
- if the Company transfers the financial asset and substantially all risks and
rewards of ownership to another entity.
(q) Environmental rehabilitation
The Company recognizes liabilities for statutory, contractual, constructive or
legal obligations associated with the retirement of property, plant and
equipment, when those obligations result from the acquisition, construction,
development or normal operation of the assets. The net present value of future
rehabilitation cost estimates arising from the decommissioning of plant and
other site preparation work is capitalized to mining assets along with a
corresponding increase in the rehabilitation provision in the period incurred.
Discount rates using a pre-tax rate that reflect the time value of money are
used to calculate the net present value. The rehabilitation asset is depreciated
on the same basis as mining assets.
The Company`s estimates of reclamation costs could change as a result of changes
in regulatory requirements, discount rates and assumptions regarding the amount
and timing of the future expenditures. These changes are recorded directly to
mining assets with a corresponding entry to the rehabilitation provision. The
Company`s estimates are reviewed annually for changes in regulatory
requirements, discount rates, effects of inflation and changes in estimates.
Changes in the net present value, excluding changes in the Company`s estimates
of reclamation costs, are charged to profit and loss for the period.
The net present value of restoration costs arising from subsequent site damage
that is incurred on an ongoing basis during production are charged to profit or
loss in the period incurred.
The costs of rehabilitation projects that were included in the rehabilitation
provision are recorded against the provision as incurred. The cost of ongoing
current programs to prevent and control pollution is charged against profit and
loss as incurred.
(r) Leases
(i) The Company as lessor
Rental income from operating leases is recognized on a straight-line basis over
the term of the corresponding lease. Initial direct costs incurred in
negotiating and arranging an operating lease are added to the carrying amount of
the leased asset and recognized on a straight-line basis over the lease term.
(ii) The Company as lessee
Assets held under finance leases are recognized as assets of the Company at the
lower of the fair value at the inception of the lease or the present value of
the minimum lease payments. The corresponding liability is recognized as a
finance lease obligation. Lease payments are apportioned between finance charges
and reduction of the lease obligation to achieve a constant rate of interest on
the remaining liability. Finance charges are charged to profit or loss, unless
they are directly attributable to qualifying assets, in which case they are
capitalized.
Operating lease payments are expensed on a straight-line basis over the term of
the relevant lease. Incentives received upon entry into an operating lease are
recognized straight-line over the lease term.
(s) Provisions
Provisions are recorded when a present legal or constructive obligation exists
as a result of past events where it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation, and a
reliable estimate of the amount of the obligation can be made.
The amount recognized as a provision is the best estimate of the consideration
required to settle the present obligation at the statement of financial position
date, taking into account the risks and uncertainties surrounding the
obligation. Where a provision is measured using the cash flows estimated to
settle the present obligation, its carrying amount is the present value of those
cash flows. When some or all of the economic benefits required to settle a
provision are expected to be recovered from a third party, the receivable is
recognized as an asset if it is virtually certain that reimbursement will be
received and the amount receivable can be measured reliably.
(t) Employee benefits
(i) Employee post-retirement obligations - defined contribution retirement plan
The Company`s South African subsidiaries operate a defined contribution
retirement plan for its employees. The pension plan is funded by payments from
the employees and the subsidiaries and payments are charged to profit and loss
for the period as incurred. The assets of the different plans are held by
independently managed trust funds. The South African Pension Funds Act of 1956
governs these funds.
(ii) Leave pay
Employee entitlements to annual leave are recognized as they are earned by the
employees. A provision, stated at current cost, is made for the estimated
liability at period end.
(u) Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or as
equity in accordance with the substance of the contractual arrangement.
An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Company are recorded at the proceeds received, net of direct issue
costs.
Financial liabilities are classified as either financial liabilities at FVTPL or
other financial liabilities.
(i) Other financial liabilities
Other financial liabilities are initially measured at fair value, net of
transaction costs, and are subsequently measured at amortized cost using the
effective interest method, with interest expense recognized on an effective
yield basis.
The effective interest method is a method of calculating the amortized cost of a
financial liability and of allocating interest expenses over the corresponding
period. The effective interest rate is the rate that exactly discounts estimated
future cash payments over the expected life of the financial liability, or,
where appropriate, a shorter period, to the net carrying amount on initial
recognition.
The Company has classified trade and other payables, short-term financial
liabilities and long-term financial liabilities as other financial liabilities.
(ii) Derecognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, the
Company`s obligations are discharged, cancelled or they expire.
(v) Critical accounting estimates
Critical accounting estimates are estimates and assumptions made by management
that may result in material adjustments to the carrying amount of assets and
liabilities within the next financial year.
(i) Impairment of property, plant and equipment
Please refer to Note 4(k)(v).
(ii) Rehabilitation provision
The future value of the provision for environmental rehabilitation was
determined using an inflation rate of 5.49% (December 31, 2009 - 7.00%) and an
estimated life of mine of 20 years for Zandfontein (December 31, 2009 - 18
years), 11 years for Maroelabult (December 31, 2009 - 18 years), 14 years for
Crocette (December 31, 2009 - Nil), 1 year for Kennedy`s Vale (December 31, 2009
- 1 year) and 22 years for Spitzkop (December 31, 2009 - 26 years). The
provision has been discounted to present value at a discount rate of 8.29%
(December 31, 2009 - 8.39%).
(w) Critical accounting judgments
Critical accounting judgements are accounting policies that have been identified
as being complex or involving subjective judgments or assessments.
(i) Determination of functional currency
In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates,
management determined that the functional currencies of Eastern Platinum Limited
and its South African subsidiaries are the Canadian Dollar and South African
Rand ("ZAR"), respectively, as these are the currencies of the primary economic
environment in which the companies operate.
(ii) Useful life of assets
At December 31, 2010 the remaining LOM for Zandfontein, Maroelabult, Crocette
and Kennedy`s Vale was assessed at 244 months, 133 months, 163 months and 12
months respectively (December 31, 2009 - 211 months, 211 months, 211 months and
12 months, respectively) based on proven and probable ore reserves. The change
in remaining mine life will be evaluated each year as the reserves move to the
proven and probable category.
(iii) Depreciation rates
The estimated maximum useful lives of property, plant and equipment are:
Mining assets owned
Underground and other assets Life of mine
Mine houses 50 years
Office buildings 20 years
Plant Life of mine
Computer equipment 3 years
Mining assets leased 5 years
Mineral properties being depleted Life of mine
Residential properties 50 years
Properties and land 50 years
(x) Accounting standards issued but not yet effective
(i) Effective for annual periods beginning on or after February 1, 2010
- Amendment to IAS 32 Financial Instruments: Presentation
Rights, options or warrants to acquire a fixed number of the Company`s equity
instruments for a fixed amount of any currency will be allowed to be classified
as equity instruments so long as the Company offers the rights, options or
warrants pro rata to all of the Company`s existing owners of the same class of
the Company`s non-derivative equity instruments.
(ii) Effective for annual periods beginning on or after July 1, 2010
- Amendments to IFRS 3 Business Combinations
Clarification that the contingent consideration arising in a business
combination previously accounted for in accordance with IFRS 3 that is
outstanding at the adoption date continues to be accounted for in accordance
with IFRS 3.
Limiting the accounting policy choice to measure non-controlling interests upon
initial recognition at fair value or at the non-controlling interest`s
proportionate share of the acquiree`s identifiable net assets to instruments
that give rise to a present ownership interest and that currently entitle the
holder to a share of net assets in the event of liquidation.
Expansion of the guidance with regards to the attribution of the market-based
measure of an acquirer`s share-based payment awards issued in exchange for
acquiree awards.
- Amendments to IAS 27 Consolidated and Separate Financial Statements
Clarification that the amendments to IAS 21 The Effects of Changes in Foreign
Exchange Rates, IAS 28 Investments in Associates, and IAS 31 Interests in Joint
Ventures resulting from IAS 27 should be applied prospectively, except for
amendments resulting from renumbering.
(iii) Effective for annual periods beginning on or after January 1, 2011
- Amendments to IFRS 7 Financial Instruments: Disclosures
Amendment to disclosure requirements, specifically, ensuring qualitative
disclosures are made in close proximity to quantitative disclosures in order to
better enable financial statement users to evaluate an entity`s exposure to
risks arising from financial instruments.
- Amendments to IAS 1 Presentation of Financial Statements
Clarification that the breakdown of changes in equity resulting from
transactions recognized in other comprehensive income is required to be
presented in the statement of changes in equity or in the notes to the financial
statements.
- Amendments to IAS 24 Related Party Disclosures
- Amendment of the definition for related parties.
- Amendments to IAS 34 Interim Financial Reporting
Addition of further examples of events or transactions that require disclosure
and removal of references to materiality when discussing other minimum
disclosures.
(iv) Effective for annual periods beginning on or after July 1, 2011
- Amendments to IFRS 7 Financial Instruments: Disclosures
Increase in disclosure with regards to the transfer of financial assets,
especially if there is a disproportionate amount of transfer transactions that
take place around the end of a reporting period.
(v) Effective for annual periods beginning on or after January 1, 2013
- New standard IFRS 9 Financial Instruments
Partial replacement of IAS 39 Financial Instruments: Recognition and Measurement
The Company has not early adopted these revised standards and is currently
assessing the impact that these standards will have on the consolidated
financial statements.
5. Subsidiaries and associates
(a) Subsidiaries
Details of the Company`s subsidiaries at December 31, 2010 are as follows:
Place of
incorporation
Name of subsidiary Principal activity and operation
Eastern Platinum Holdings Limited Holding company BVI (i)
Eastplats Holdings Limited Holding company BVI (i)
Eastplats Acquisition Co. Ltd. Holding company BVI (i)
Eastplats International Incorporated Holding company Barbados
Royal Anthem Investments 134 (Pty) Ltd. Holding company South Africa
Spitzkop Joint Venture Mining South Africa
Barplats Investments Limited Mining South Africa
Spitzkop Platinum (Pty) Ltd. Mining South Africa
Mareesburg Joint Venture Mining South Africa
Lion`s Head Platinum (Pty) Ltd. Holding company South Africa
Gubevu Consortium Investment Holdings
(Pty) Ltd. (ii) Holding company South Africa
Proportion of ownership interest
and voting power held
December 31, December 31,
Name of subsidiary 2010 2009
Eastern Platinum Holdings Limited 100% 100%
Eastplats Holdings Limited 100% 100%
Eastplats Acquisition Co. Ltd. 100% 100%
Eastplats International Incorporated 100% 100%
Royal Anthem Investments 134 (Pty) Ltd. 100% 100%
Spitzkop Joint Venture 93.37% 93.37%
Barplats Investments Limited 87.49% 87.49%
Spitzkop Platinum (Pty) Ltd. 86.74% 86.74%
Mareesburg Joint Venture 75.5% 75.5%
Lion`s Head Platinum (Pty) Ltd. 51% 51%
Gubevu Consortium Investment Holdings (Pty) Ltd. (ii) 49.99% 49.99%
(i) British Virgin Islands ("BVI")
(ii) The Company has determined that its investment in Gubevu Consortium
Investment Holdings (Pty) Ltd. is a Special Purpose Entity.
(b) Associates
Details of the Company`s associates at December 31, 2010 are as follows:
Place of
incorporation
Name of associate Principal activity and operation
Afrimineral Holdings (Pty) Ltd. Holding company South Africa
Proportion of ownership interest
and voting power held
December 31, December 31,
Name of associate 2010 2009
Afrimineral Holdings (Pty) Ltd. 49% 49%
6. Cash and cash equivalents
Cash and cash equivalents are comprised of:
December 31, December 31,
2010 2009
Cash in bank $ 102,654 $ 7,249
Short-term money market instruments 5,192 -
$ 107,846 $ 7,249
7. Trade and other receivables
Trade and other receivables are
comprised of the following:
December 31, December 31,
2010 2009
Trade receivables $ 30,142 $ 25,839
Current tax receivable 1,283 1,057
Other receivables 2,556 2,316
Allowance for doubtful debts for
other receivables (194) (74)
$ 33,787 $ 29,138
(a) Aging of past due, but not impaired
The average credit period of PGM sales is 4 months. The Company has the right to
request up to a 90% advance on payment, payable 1 month subsequent to sale. The
Company has financial risk management policies in place to ensure that all
receivables are received within the pre-agreed credit terms.
Included in trade and other receivables are receivables with a carrying value of
$152 (December 31, 2009 - $276) that are past due but have not been provided
for. For the years ended December 31, 2010 and 2009, substantially all of the
Company`s PGM production was sold to one customer and there was no significant
change in the credit quality of this customer over that time. The past due
amounts are considered recoverable.
December 31, December 31,
2010 2009
Less than 5 months $ - $ 276
5 months and greater 152 -
$ 152 $ 276
(b) Movement in the allowance for doubtful debts
December 31, December 31,
2010 2009
Opening balance $ 74 $ 85
Impairment losses recognized
on receivables 116 42
Amounts written off during the year
as uncollectible (16) (26)
Amounts recovered during the year - (43)
Foreign exchange translation
gains and losses 20 16
Closing balance $ 194 $ 74
(c) Aging of impaired receivables
December 31, December 31,
2010 2009
Less than 4 months 46 6
Greater than 4 months 148 68
$ 194 $ 74
At December 31, 2010, other receivables of $194 (December 31, 2009 - $74) were
impaired and provided for. These receivables were for rental income, and
impairment was determined based on payment history.
8. Inventories
December 31, December 31,
2010 2009
Consumables $ 6,607 $ 4,549
Ore and concentrate 477 276
Chrome inventory 1,748 -
$ 8,832 $ 4,825
Production costs for the year ended December 31, 2010 was $109,901 (December 31,
2009 - $82,839). Production costs represent the cost of inventories sold during
the period. For the years ended December 31, 2010 and 2009 production costs did
not include any amounts with regards to the write-down of inventory to net
realizable value or with regards to the reversal of write-downs.
At December 31, 2010 and 2009, no inventories have been pledged as security for
liabilities.
9. Property, plant and equipment
Mineral Mineral
Plant and Plant and properties properties
equipment equipment being not being
owned leased depleted depleted
Cost
Balance as at December
31, 2008 $ 315,547 $ 4,892 $ 108,680 $ 444,115
Assets acquired 27,593 - (186) 921
Disposals (1,510) - - -
Foreign exchange movement 84,593 1,240 27,606 101,086
Balance as at December
31, 2009 $ 426,223 $ 6,132 $ 136,100 $ 546,122
Assets acquired 32,444 - - 261
Foreign exchange movement 56,520 768 17,040 58,901
Balance as at December
31, 2010 $ 515,187 $ 6,900 $ 153,140 $ 605,284
Accumulated depreciation
and impairment losses
Balance as at December
31, 2008 $ 91,179 $ 1,966 $ 12,397 $ 273,084
Depreciation 11,298 1,092 4,646 -
Foreign exchange movement 24,467 633 3,722 69,238
Balance as at December
31, 2009 $ 126,944 $ 3,691 $ 20,765 $ 342,322
Depreciation 15,452 1,244 5,676 -
Foreign exchange movement 17,574 598 3,224 42,862
Balance as at December
31, 2010 $ 159,970 $ 5,533 $ 29,665 $ 385,184
Carrying amounts
At December 31, 2008 $ 224,368 $ 2,926 $ 96,283 $ 171,031
At December 31, 2009 $ 299,279 $ 2,441 $ 115,335 $ 203,800
At December 31, 2010 $ 355,217 $ 1,367 $ 123,475 $ 220,100
Residential Properties
properties and land TOTAL
Cost
Balance as at December 31, 2008 $ 7,954 $ 5,299 $ 886,487
Assets acquired 88 331 28,747
Disposals - - (1,510)
Foreign exchange movement 2,029 1,348 217,902
Balance as at December 31, 2009 $ 10,071 $ 6,978 $ 1,131,626
Assets acquired 286 - 32,991
Foreign exchange movement 1,275 874 135,378
Balance as at December 31, 2010 $ 11,632 $ 7,852 $ 1,299,995
Accumulated depreciation and
impairment losses
Balance as at December 31, 2008 $ 1,726 $ 662 $ 381,014
Depreciation 118 - 17,154
Foreign exchange movement 452 168 98,680
Balance as at December 31, 2009 $ 2,296 $ 830 $ 496,848
Depreciation 135 - 22,507
Foreign exchange movement 302 104 64,664
Balance as at December 31, 2010 $ 2,733 $ 934 $ 584,019
Carrying amounts
At December 31, 2008 $ 6,228 $ 4,637 $ 505,473
At December 31, 2009 $ 7,775 $ 6,148 $ 634,778
At December 31, 2010 $ 8,899 $ 6,918 $715,976
9. Property, plant and equipment
Crocodile Kennedy`s Spitzkop PGM
River Mine (a) Vale Project (b) Project (c)
Cost
Balance as at December
31, 2008 $ 442,262 $ 319,109 $ 101,712
Assets acquired 27,826 - 826
Disposals (1,510) - -
Foreign exchange movement 116,798 80,908 16,456
Balance as at December
31, 2009 $ 585,376 $ 400,017 $ 118,994
Assets acquired 32,728 - 47
Foreign exchange movement 76,470 50,082 7,316
Balance as at December
31, 2010 $ 694,574 $ 450,099 $ 126,357
Accumulated depreciation
and impairment losses
Balance as at December
31, 2008 $ 107,855 $ 273,084 $ -
Depreciation 17,130 - -
Foreign exchange movement 29,432 69,238 -
Balance as at December
31, 2009 $ 154,417 $ 342,322 $ -
Depreciation 22,500 - -
Foreign exchange movement 21,796 42,861 -
Balance as at December
31, 2010 $ 198,713 $ 385,183 $ -
Carrying amounts
At December 31, 2008 $ 334,407 $ 46,025 $ 101,712
At December 31, 2009 $ 430,959 $ 57,695 $ 118,994
At December 31, 2010 $ 495,861 $ 64,916 $ 126,357
Other property
Mareesburg plant and
Project (c) equipment TOTAL
Cost
Balance as at December 31, 2008 $ 23,294 $ 110 $ 886,487
Assets acquired 95 - 28,747
Disposals - - (1,510)
Foreign exchange movement 3,722 18 217,902
Balance as at December 31, 2009 $ 27,111 $ 128 $ 1,131,626
Assets acquired 214 2 32,991
Foreign exchange movement 1,503 7 135,378
Balance as at December 31, 2010 $ 28,828 $ 137 $ 1,299,995
Accumulated depreciation and
impairment losses
Balance as at December 31, 2008 $ - $ 75 $ 381,014
Depreciation - 24 17,154
Foreign exchange movement - 10 98,680
Balance as at December 31, 2009 $ - $ 109 $ 496,848
Depreciation - 7 22,507
Foreign exchange movement 1 6 64,664
Balance as at December 31, 2010 $ 1 $ 122 $ 584,019
Carrying amounts
At December 31, 2008 $ 23,294 $ 35 $ 505,473
At December 31, 2009 $ 27,111 $ 19 $ 634,778
At December 31, 2010 $ 28,827 $ 15 $ 715,976
(a) Crocodile River Mine ("CRM")
The Company holds directly and indirectly 87.5% of CRM, which is located on the
eastern portion of the western limb of the Bushveld Complex. The Maroelabult and
Zandfontein sections are currently in production. Development of the Crocette
section recommenced on April 4, 2010.
(b) Kennedy`s Vale Project ("KV")
The Company holds directly and indirectly 87.5% of KV, which is located on the
eastern limb of the Bushveld Complex, near Steelpoort in the Province of
Mpumalanga. It comprises PGM mineral rights on five farms in the Steelpoort
Valley. The development of this project was on hold as at December 31, 2010.
(c) Spitzkop PGM Project and Mareesburg Project
The Company holds directly and indirectly a 93.4% interest in the Spitzkop PGM
Project and a 75.5% interest in the Mareesburg Project. The Company currently
acts as the operator of both the Mareesburg Platinum Project and Spitzkop PGM
Project, both located on the eastern limb of the Bushveld Complex. Planning for
the development of these projects commenced in late 2010.
10. Refining Contract
During the year ended June 30, 2006, the Company acquired a 69% interest in
Barplats and assigned a portion of the purchase price to the off-take contract
governing the sales of Barplats` PGM concentrate production. The initial value
of the contract was $17,939. During the year ended June 30, 2007, the Company
acquired an additional 5% interest in Barplats resulting in an additional
allocation to the contract of $4,802 for a total aggregate value of $22,741.
During the year ended December 31, 2008, the Company acquired an additional
2.47% interest in Barplats. The acquisition did not affect the aggregate value
of the contract. The value of the contract is amortized over the remaining
term of the contract which is 8.5 years as at December 31, 2010.
Cost
Balance as at December 31, 2008 $ 16,850
Foreign exchange movement 4,272
Balance as at December 31, 2009 $ 21,122
Foreign exchange movement 2,645
Balance as at December 31, 2010 $ 23,767
Accumulated amortization
Balance as at December 31, 2008 $ 4,357
Amortization 1,332
Foreign exchange movement 1,264
Balance as at December 31, 2009 $ 6,953
Amortization 1,513
Foreign exchange movement 1,036
Balance as at December 31, 2010 $ 9,502
Carrying amounts
At December 31, 2008 $ 12,493
At December 31, 2009 $ 14,169
At December 31, 2010 $ 14,265
11. Other assets
Other assets consists of a money market fund investment that is classified as
available-for-sale and serves as security for a guarantee issued to the
Department of Mineral Resources of South Africa in respect of the environmental
rehabilitation liability (Note 14). Changes to other assets for the year ended
December 31, 2010 are as follows:
Balance, December 31, 2008 $ 1,017
Additional investment $ 811
Service fees (6)
Interest income 123
Foreign exchange movement 337
Balance, December 31, 2009 $ 2,282
Additional investment 955
Service fees (8)
Interest income 185
Foreign exchange movement 409
Balance, December 31, 2010 $ 3,823
12. Accounts payable and accrued liabilities
December 31, December 31,
2010 2009
Trade payables $ 10,604 $ 9,932
Accrued liabilities 10,240 6,849
Other 6,165 6,138
$ 27,009 $ 22,919
The average credit period of purchases is 1 month. The Company has financial
risk management policies in place to ensure that all payables are paid within
the pre-agreed credit terms.
13. Finance leases
Finance leases relate to mining vehicles with lease terms of 5 years payable
half yearly in advance. The Company has the option to purchase the vehicles for
a nominal amount at the conclusion of the lease agreements. The Company`s
obligations under finance leases are secured by the lessor`s title to the leased
assets. Interest is calculated at the South African prime rate plus 1%. At
December 31, 2010, the finance leases are repayable in 1 semiannual installment
(December 31, 2009 - 3) of $667 (December 31, 2009 - $611) and a top-up payment
of $2,738 in December 2011. The fair value of the finance lease liabilities
approximated carrying value.
(a) Minimum lease payments
December 31, December 31,
2010 2009
No later than 1 year $ 3,405 $ 1,221
Later than 1 year, but no later
than 5 years - 3,061
3,405 4,282
Less: future finance charges (194) (506)
Present value of minimum
lease payments $ 3,211 $ 3,776
(b) Present value of minimum lease payments
December 31, December 31,
2010 2009
No later than 1 year $ 3,211 $ 926
Later than 1 year, but no later
than 5 years - 2,850
$ 3,211 $ 3,776
14. Provision for environmental rehabilitation
Although the ultimate amount of the environmental rehabilitation provision is
uncertain, the fair value of these obligations is based on information currently
available, including closure plans and applicable regulations. Significant
closure activities include land rehabilitation, demolition of buildings and mine
facilities and other costs.
The liability for the environmental rehabilitation provision at December 31,
2010 is approximately ZAR 58.9 million ($8,934). The liability was determined
using an inflation rate of 5.49% (December 31, 2009 - 7.00%) and an estimated
life of mine of 20 years for Zandfontein (December 31, 2009 - 18 years), 11
years for Maroelabult (December 31, 2009 - 18 years), 14 years for Crocette
(December 31, 2009 - Nil), 1 year for Kennedy`s Vale (December 31, 2009 - 1
year) and 22 years for Spitzkop (December 31, 2009 - 26 years). A discount rate
of 8.29% was used (December 31, 2009 - 8.39%). A guarantee of $3,823 (December
31, 2009 - $2,282) has been issued to the Department of Mineral Resources (Note
11). The guarantee will be utilized to cover expenses incurred to rehabilitate
the mining area upon closure of the mine. The undiscounted value of this
liability is approximately ZAR 215.4 million ($32,694).
Changes to the environmental rehabilitation provision are as follows:
Balance, December 31, 2008 $ 5,598
Revision in estimates 629
Interest expense (Note 19) 443
Foreign exchange movement 1,482
Balance, December 31, 2009 $ 8,152
Revision in estimates (961)
Interest expense (Note 19) 694
Foreign exchange movement 1,049
Balance, December 31, 2010 $ 8,934
15. Income taxes
The income tax recognized in profit or loss comprises of:
December 31, December 31,
2010 2009
Deferred tax recovery relating to
the origination and reversal of
temporary differences $ 924 $ 1,623
Total deferred income tax recovery $ 924 $ 1,623
The provision for income taxes reported differs from the amounts computed by
applying the cumulative Canadian federal and provincial income tax rates to the
loss before tax provision due to the following:
December 31, December 31,
2010 2009
Statutory tax rate 28.50% 30.00%
Expected tax expense (recovery) on
(profit) loss before income tax $ 2,523 $ (120)
Difference in tax rates between foreign
jurisdictions and Canada (9,365) (9,057)
Items not deductible for income tax purposes 534 1,986
Tax losses not recognized 4,572 5,568
Change in tax estimates 812 -
Deferred income tax recovery $ (924) $ (1,623)
The approximate tax effect of each item that gives rise to the Company`s
deferred tax liabilities are as follows:
December 31, December 31,
2010 2009
Non-capital loss carry forwards $ 12,031 $ 5,175
Share issue costs 3,582 1,013
Accumulated cost base difference on
assets and other (43,517) (36,877)
Deferred receipts (6,102) (5,461)
Deferred tax liabilities before valuation
allowance $ (34,006) $ (36,150)
Less valuation allowance (12,636) (6,341)
Total deferred tax liabilities $ (46,642) $ (42,491)
The movement between the opening and closing balances was recognized in profit
or loss.
At December 31, 2010, the Company has non-capital losses of approximately
Cdn$20,679 available to apply against future Canadian income for tax purposes.
In South Africa, the Company has unredeemed capital expenditures available for
utilization against future mining taxable income of approximately R3.2 billion,
and estimated assessable tax losses of approximately R103 million. The South
African losses do not expire unless the Company`s mining activities cease. The
Canadian non-capital losses will expire as follows (in thousands of Canadian
dollars):
2010
Cdn$
(000`s)
2012 272
2013 1,592
2014 916
2025 3,224
2026 6,105
2027 3,393
2028 4,217
2029 75
2030 885
$ 20,679
At December 31, 2010, the Company has capital losses of Cdn$1,569 available to
apply against future capital gains in Canada.
The Company`s operations are conducted in a number of countries with complex tax
legislation and regulations pertaining to the Company`s activities. Any
reassessment of the Company`s tax filings by the tax authorities may result in
material adjustments to net profit or loss, tax assets and operating loss carry-
forwards. The Company provides for such reassessments when it is probable that a
taxation authority will not sustain the Company`s filing position and the amount
of the tax exposure can be reasonably estimated. As at December 31, 2010, no
provisions have been made in the financial statements for any estimated tax
liability.
16. Commitments
The Company has committed to capital expenditures on projects of approximately
ZAR 86 million ($13,056) as at December 31, 2010 (December 31, 2009 - ZAR 37
million, $4,959).
17. Issued capital
(a) Authorized
- Unlimited number of preferred redeemable, voting, non-participating shares
without nominal or par value,
- Unlimited number of common shares with no par value.
(b) December 30, 2010 Public Offering
On December 30, 2010, the Company completed a public offering (the "Public
Offering"). The Public Offering consisted of 224,250,000 common shares, of which
195,361,476 common shares were sold at a price of Cdn$1.55 and 28,888,524 common
shares were sold at a price of GBP0.9568. Share issue costs of Cdn$16,501 were
incurred.
(c) Share options
The Company has an incentive plan (the "2008 Plan"), approved by the Company`s
shareholders at its annual general meeting held on June 4, 2008, under which
options to purchase common shares may be granted to its directors, officers,
employees and others at the discretion of the Board of Directors. Under the
terms of the 2008 Plan:
- 75 million common shares are reserved for issuance upon the exercise of
options.
- All outstanding options at June 4, 2008 granted under the Company`s previous
plan (the "2005 Plan") will continue to exist under the 2008 plan provided that
the fundamental terms governing such options will be deemed to be those under
the 2005 Plan.
- Each option granted shall be for a term not exceeding five years from the date
of being granted and the vesting period is determined based on the discretion of
the Board of Directors. Vesting is dependent on continued employment with the
Company.
- The option exercise price is set at the date of the grant and cannot be less
than the closing market price of the Company`s common shares on the Toronto
Stock Exchange on the day immediately preceding the day of the grant of the
option.
- The 2008 Plan includes share appreciation rights providing for an optionee to
elect to exercise options and to receive an amount in common shares equal to the
difference between fair market value at the time of exercise and the exercise
price for the options exercised.
(i) Movements in share options during the year
The changes in share options during the years ended December 31, 2010 and 2009
were as follows:
December 31, 2010 December 31, 2009
Weighted Weighted
average average
Number of exercise Number of exercise
options price options price
Cdn$ Cdn$
Balance outstanding,
beginning of year 59,575,834 1.48 64,746,000 1.52
Options granted 2,231,000 1.30 695,000 0.57
Options exercised (2,794,995) 0.33 (535,999) 0.32
Options forfeited (1,035,003) 1.82 (5,329,167) 2.00
Balance outstanding,
end of year 57,976,836 1.52 59,575,834 1.48
2,794,995 share options were exercised during the year ended December 31, 2010.
The weighted average closing share price at the date of exercise was Cdn$1.50.
(ii) Fair value of share options granted in the year
The fair value of each option granted is estimated at the time of the grant
using the Black-Scholes option pricing model with weighted average assumptions
for grants as follows:
2010
January 18
Exercise price Cdn$1.30
Closing market price on day
preceding date of grant Cdn$1.30
Grant date share price Cdn$1.42
Risk-free interest rate 1.73%
Expected life 3 years
Annualized volatility 83%
Dividend rate 0%
Grant date fair value Cdn$0.80
2009
Weighted
February 11 June 30 November 3 average
Exercise price Cdn$0.32 Cdn$0.52 Cdn$0.76 Cdn$0.57
Closing market price on day
preceding date of grant Cdn$0.32 Cdn$0.52 Cdn$0.76 Cdn$0.57
Grant date share price Cdn$0.38 Cdn$0.52 Cdn$0.81 Cdn$0.59
Risk-free interest rate 1.69% 1.84% 1.86% 1.83%
Expected life 3 years 3 years 3 years 3 years
Annualized volatility 78% 79% 82% 80%
Dividend rate 0% 0% 0% 0%
Grant date fair value Cdn$0.21 Cdn$0.27 Cdn$0.45 Cdn$0.32
Exercise price is the closing market price on the day preceding the date the
options were granted, as defined by the 2008 Plan.
Grant date share price is the closing market price on the day the options were
granted.
Expected volatility is based on the historical share price volatility since
Eastern Platinum Limited completed its acquisition of Barplats Investment
Limited on May 2, 2006, or for 3 years prior to the date of grant, whichever is
shorter.
(iii) Share options outstanding at the end of the year
The following table summarizes information concerning outstanding and
exercisable options at December 31, 2010:
Remaining
Options Options Exercise Contractual
outstanding exercisable price Life (Years) Expiry date
Cdn$
6,725,000 6,725,000 1.70 0.40 May 24, 2011
250,000 250,000 1.70 0.91 November 27, 2011
19,987,500 19,987,500 1.82 1.19 March 7, 2012
14,573,334 14,573,334 0.32 2.97 December 18, 2013
20,000 - 0.32 3.12 February 11, 2014
400,000 400,000 0.52 3.50 June 30, 2014
95,002 45,000 0.76 3.84 November 3, 2014
2,226,000 2,226,000 1.30 4.06 January 18, 2015
13,070,000 13,070,000 2.31 6.77 October 5, 2017
460,000 460,000 3.38 7.15 February 20, 2018
170,000 170,000 3.38 7.24 March 27, 2018
57,976,836 57,906,834 3.00
The weighted average exercise price of options exercisable at December 31, 2010
is Cdn$1.53.
(d) Share purchase warrants
The changes in warrants during the years ended December 31, 2010 and 2009 were
as follows:
December 31, 2010 December 31, 2009
Weighted Weighted
average average
Number of exercise Number of exercise
warrants price warrants price
Cdn$ Cdn$
Balance outstanding,
beginning of year - - 58,485,996 1.80
Warrants exercised - - - -
Warrants expired - - (58,485,996) 1.80
Balance outstanding,
end of year - - - -
18. Non-controlling interest
The non-controlling interests are comprised of the following:
Balance, December 31, 2008 $ 12,002
Non-controlling interests` share of loss in Barplats (1,908)
Non-controlling interests` share of interest on advances to Gubevu (2,520)
Foreign exchange movement 2,467
Balance, December 31, 2009 $ 10,041
Non-controlling interests` share of loss in Barplats (866)
Non-controlling interests` share of interest on advances to Gubevu (2,709)
Foreign exchange movement 762
Balance, December 31, 2010 $ 7,228
19. Finance costs
December 31, December 31,
2010 2009
Interest on revenue advances $ 614 $ 482
Interest on finance leases 277 377
Interest on provision for environmental
rehabilitation 694 443
Interest on tax 209 2
Other interest 13 387
$ 1,807 $ 1,691
20. Earnings per share
The weighted average number of ordinary shares for the purposes of diluted
earnings per share reconciles to the weighted average number of ordinary shares
used in the calculation of basic earnings per share as follows:
December 31, December 31,
2010 2009
(in thousands)
Weighted average number of ordinary shares
used in the calculation of basic earnings per share 683,177 680,577
Shares deemed to be issued for no
consideration in respect of options 11,662 7,213
Weighted average number of ordinary shares
used in the calculation of diluted earnings per share 694,839 687,790
The earnings used to calculate basic and diluted earnings per share for the year
ended December 31, 2010 was $13,352 (December 31, 2009 - $5,650).
The following potential ordinary shares, outstanding at December 31, 2010, are
anti-dilutive and are therefore excluded from the weighted average number of
ordinary shares for the purposes of diluted earnings per share:
December 31, December 31,
2010 2009
(in thousands)
Options 40,663 41,434
21. Retirement benefit plans
The Barplats Provident Fund is an independent, defined contribution plan
administered by Liberty Life Limited in South Africa. The costs associated with
the defined contribution plan included in net profit were $3,894 (December 31,
2009 - $2,705). The total number of employees in the plan at December 31, 2010
was 1,762 (December 31, 2009 - 1,800).
22. Related party transactions
Balances and transactions between the Company and its subsidiaries have been
eliminated on consolidation and are not disclosed in this note. Details of the
transactions between the Company and other related parties are disclosed below.
(a) Trading transactions
The Company`s related parties consist of companies owned by executive officers
and directors as follows:
Nature of transactions
Andrews PGM Consulting Consulting
Buccaneer Management Inc. Management
Jazz Financial Ltd. Management
Maluti Services Limited General and administrative
Xiste Consulting Ltd. Management
The Company incurred the following fees and expenses in the normal course of
operations in connection with companies owned by key management and directors.
Expenses have been measured at the exchange amount which is determined on a cost
recovery basis.
December 31, December 31,
Note 2010 2009
Consulting fees (i) $ 304 $ 232
General and administrative expenses 193 48
Management fees 2,253 1,429
$ 2,750 $ 1,709
(i) The Company paid fees to a private company controlled by a director of the
Company for consulting services performed outside of his capacity as a director.
Amounts due to related parties are unsecured, non-interest bearing and due on
demand. Accounts payable at December 31, 2010 included $1,089 (December 31, 2009
- $510) which were due to private companies controlled by officers of the
Company.
(b) Compensation of key management personnel
The remuneration of directors and other members of key management personnel
during the years ended December 31, 2010 and 2009 were as follows:
December 31, December 31,
Note 2010 2009
Salaries and directors` fees (i) $ 3,758 $ 2,695
Share-based payments (ii) 1,627 93
$ 5,385 $ 2,788
(i) Salaries and directors` fees include consulting and management fees
disclosed in Note 22(a).
(ii) Share-based payments are the fair value of options granted to key
management personnel.
(iii) Key management personnel were not paid post-employment benefits,
termination benefits, or other long-term benefits during the years ended
December 31, 2010 and 2009.
23. Segmented information
(a) Operating segment - The Company`s operations are primarily directed towards
the acquisition, exploration and production of platinum group metals in South
Africa.
(b) Geographic segments - The Company`s assets, revenues and expenses by
geographic areas for the years ended December 31, 2010 and 2009 are as follows:
December 31, 2010
Crocodile Kennedy`s
River Mine Vale Spitzkop
Current assets $ 45,787 $ 445 $ 1,669
Property, plant and equipment 495,861 64,916 126,357
Refining contract 14,265 - -
Other Assets 3,823 - -
$ 559,736 $ 65,361 $ 128,026
Property, plant and
equipment expenditures $ 32,728 $ - $ 47
Revenue $ 155,000 $ - $ -
Production costs (109,901) - -
Depletion and depreciation (22,499) - -
General and administrative expenses (4,591) (1,396) (118)
Share-based payment (79) - -
Interest income 1,635 - -
Finance costs (1,027) (752) (28)
Foreign exchange (loss) gain (827) - -
Profit (loss) before income taxes 17,711 (2,148) (146)
Deferred income tax recovery (expense) 2,240 - -
Net profit (loss) $ 19,951 $ (2,148) $ (146)
Total
South
Mareesburg Other Africa
Current assets $ 61 $ 997 $ 48,959
Property, plant
and equipment 28,827 - 715,961
Refining contract - - 14,265
Other Assets - - 3,823
$ 28,888 $ 997 $ 783,008
Property, plant and
equipment expenditures $ 214 $ - $ 32,989
Revenue $ - $ - $ 155,000
Production costs - - (109,901)
Depletion and depreciation - - (22,499)
General and administrative expenses (114) (16) (6,235)
Share-based payment - - (79)
Interest income 8 - 1,643
Finance costs - - (1,807)
Foreign exchange (loss) gain - - (827)
Profit (loss) before income taxes (106) (16) 15,295
Deferred income tax recovery (expense) - - 2,240
Net profit (loss) $ (106) $ (16) $ 17,535
Barbados
and BVI Canada TOTAL
Current assets $ - $ 343,952 $ 392,911
Property, plant and equipment - 15 715,976
Refining contract - - 14,265
Other Assets - - 3,823
$ - $ 343,967 $ 1,126,975
Property, plant and
equipment expenditures $ - $ 2 $ 32,991
Revenue $ - $ - $ 155,000
Production costs - - (109,901)
Depletion and depreciation - (8) (22,507)
General and administrative expenses (60) (5,822) (12,117)
Share-based payment - (1,373) (1,452)
Interest income - 154 1,797
Finance costs - - (1,807)
Foreign exchange (loss) gain - 667 (160)
Profit (loss) before income taxes (60) (6,382) 8,853
Deferred income tax recovery (expense) (1,316) - 924
Net profit (loss) $ (1,376) $ (6,382) $ 9,777
December 31, 2009
Crocodile Kennedy`s
River Mine Vale Spitzkop
Current assets $ 36,749 $ 176 $ 1,509
Property, plant and equipment 430,959 57,695 118,994
Refining contract 14,169 - -
Other assets 2,282 - -
$ 484,159 $ 57,871 $ 120,503
Property, plant and
equipment expenditures $ 27,826 $ - $ 826
Sale of property, plant and equipment (1,510) - -
Revenue $ 111,365 $ - $ -
Production costs (82,839) - -
Depreciation and amortization (17,130) - -
General and administrative expenses (3,397) (2,286) (51 0)
Share-based payment (489) - -
Interest income 1,388 - 38
Finance costs (1,547) - -
Foreign exchange gain (loss) 28 - -
Profit (loss) before income taxes 7,379 (2,286) (472)
Deferred income tax recovery 1,623 - -
Net profit (loss) $ 9,002 $ (2,286) $ (472)
Total
South
Mareesburg Other Africa
Current assets $ 45 $ 1,003 $ 39,482
Property, plant and equipment 27,111 - 634,759
Refining contract - - 14,169
Other assets - - 2,282
$ 27,156 $ 1,003 $ 690,692
Property, plant and
equipment expenditures $ 95 $ - $ 28,747
Sale of property, plant and equipment - - (1,510)
Revenue $ - $ - $ 111,365
Production costs - - (82,839)
Depreciation and amortization - - (17,130)
General and administrative expenses (157) (26) (6,376)
Share-based payment - - (489)
Interest income - - 1,426
Finance costs - - (1,547)
Foreign exchange gain (loss) - - 28
Profit (loss) before income taxes (157) (26) 4,438
Deferred income tax recovery - - 1,623
Net profit (loss) $ (157) $ (26) $ 6,061
Canada TOTAL
Current assets $ 16,139 $ 55,621
Property, plant and equipment 19 6 34,778
Refining contract - 14,169
Other assets - 2,282
$ 16,158 $ 706,850
Property, plant and equipment expenditures $ - $ 28,747
Sale of property, plant and equipment - (1,510)
Revenue $ - $ 111,365
Production costs - (82,839)
Depreciation and amortization (24) (17,154)
General and administrative expenses (4,152) (10,528)
Share-based payment (93) (582)
Interest income 360 1,786
Finance costs (144) (1,691)
Foreign exchange gain (loss) (786) (758)
Profit (loss) before income taxes (4,839) (401)
Deferred income tax recovery - 1,623
Net profit (loss) $ (4,839) $ 1,222
For the years ended December 31, 2010 and 2009, substantially all of the
Company`s PGM production was sold to one customer.
24. Financial instruments
(a) Management of capital risk
The capital structure of the Company consists of equity attributable to common
shareholders, comprising issued capital, equity-settled employee benefits
reserve, deficit and currency translation adjustment. The Company`s objectives
when managing capital are to: (i) preserve capital, (ii) obtain the best
available net return, and (iii) maintain liquidity.
The Company manages the capital structure and makes adjustments to it in light
of changes in economic conditions and the risk characteristics of the underlying
assets. To maintain or adjust the capital structure, the Company may attempt to
issue new shares.
The Company is not subject to externally imposed capital requirements.
(b) Categories of financial instruments
December 31, December 31,
2010 2009
Financial assets
Cash and cash equivalents $ 107,846 $ 7,249
Loans and receivables
Trade receivables 33,787 29,138
Available for sale financial assets
Short-term investments 242,446 14,409
Other assets 3,823 2,282
$ 387,902 $ 53,078
Financial liabilities
Other financial liabilities
Accounts payable and accrued liabilities $ 27,009 $ 22,919
Current portion of finance leases 3,211 926
Long-term portion of finance leases - 2,850
$ 30,220 $ 26,695
(c) Fair value of financial instruments
(i) Fair value estimation of financial instruments
The fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date.
The fair values of cash and cash equivalents, short-term investments, trade
receivables and accounts payable approximate their carrying values due to the
short-term to maturities of these financial instruments. The fair value of
short-
term debt was determined using discounted cash flows at prevailing market rates
and the fair value is considered to approximate carrying value.
(ii) Fair value measurements recognized in the statement of financial position
Financial instruments that are measured subsequent to initial recognition at
fair value are grouped into a hierarchy based on the degree to which the fair
value is observable. Level 1 fair value measurements are derived from
unadjusted, quoted prices in active markets for identical assets or liabilities.
Level 2 fair value measurements are derived from inputs other than quoted prices
included within Level 1 that are observable for the asset or liability directly
or indirectly. Level 3 fair value measurements are derived from valuation
techniques that include inputs for the asset or liability that are not based on
observable market data.
The Company`s short-term investments and other assets are measured subsequent to
initial recognition at fair value and are Level 2 financial instruments at
December 31, 2010. There were no transfers between levels during the year ended
December 31, 2010.
(d) Reclassification of financial assets
There was no reclassification of financial assets during the years ended
December 31, 2010 and 2009.
(e) Financial risk management
The Company`s financial instruments are exposed to certain financial risks,
including currency risk, interest rate risk, price risk, credit risk and
liquidity risk. The Company`s exposure to these risks and its methods of
managing the risks remain consistent.
(i) Currency risk
The Company is exposed to the financial risk related to the fluctuation of
foreign exchange rates. The Company`s revenues are based on US dollar PGM
prices, but the Company receives revenues in South African Rand. A significant
change in the currency exchange rates between the South African Rand relative to
the US dollar could have an effect on the Company`s results of operations,
financial position and cash flows. The Company has not entered into any
derivative financial instruments to manage exposures to currency fluctuations.
The carrying amount of the Company`s subsidiary`s foreign-currency denominated
monetary assets at December 31, 2010, is as follows:
December 31, December 31,
2010 2009
Financial assets
Loans and receivables 30,142 25,839
The sensitivity of the Company`s net earnings due to changes in the exchange
rate between the South African Rand and the United States dollar is summarized
in the table below. This sensitivity is based on loans and receivables not
denominated in the functional currency of the subsidiary. The increase
(decrease) in net earnings is due to the effect of the exchange rate on
financial instruments.
Year ended Dec. 31, 2010
10% 10%
weakening strengthening
of ZAR in of ZAR in
relation to USD relation to USD
FX rate FX rate
Increase (decrease) in net earnings 3,014 (3,014)
The carrying amount of the Company`s head office foreign-currency denominated
monetary assets at December 31, 2010 is as follows:
December 31, December 31,
2010 2009
Financial assets
Cash and cash equivalents 43,110 -
The sensitivity of the Company`s net earnings due to changes in the exchange
rate between the U.K. Pound Sterling and the United States dollar is summarized
in the table below. This sensitivity is based on cash and cash equivalents not
denominated in the functional currency of head office. The (decrease) increase
in net earnings is due to the effect of the exchange rate on financial
instruments.
Year ended Dec. 31, 2010
10% 10%
weakening strengthening
of GBP in of GBP in
relation to USD relation to USD
FX rate FX rate
(Decrease) increase in net earnings (4,311) 4,311
(ii) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest rates.
The Company is exposed to interest rate risk on its short-term investments. The
risk that the Company will realize a loss as a result of a decline in the fair
value of short-term investments is limited because these investments, although
available for sale, are generally not sold before maturity. The Company monitors
its exposure to interest rates and has not entered into any derivative financial
instruments to manage this risk.
The Company has not included a sensitivity analysis of interest rate risk at
year-end as it does not reflect the exposure experienced during the twelve
months ended December 31, 2010. The Company`s financial assets as at December
31, 2010 were significantly higher than throughout the year due to the closing
of the Company`s public offering on December 30, 2010. Presenting such an
analysis would be misleading.
(iii) Price risk
The Company is exposed to price risk with respect to fluctuations in the prices
of platinum group metals. These fluctuations directly affect revenues and trade
receivables. As at December 31, 2010, the Company`s financial assets subject to
metal price risk consist of trade receivables of $30,142 (December 31, 2009 -
$25,839). Historically, the Company has not entered into any derivative
financial instruments to manage exposures to price fluctuations. No such
derivative financial instruments existed at December 31, 2010 and 2009.
The Company has not included a sensitivity analysis of price risk at year-end as
it does not reflect the exposure experienced during the twelve months ended
December 31, 2010. Presenting such an analysis would be misleading.
(iv) Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to a
financial instrument fails to meet its contractual obligations, and arises
principally from the Company`s trade receivables. The carrying value of the
financial assets represents the maximum credit exposure.
The Company currently sells substantially all of its PGM concentrate production
to one customer under an off-take contract. At December 31, 2010, the Company
had receivable balances associated with this one customer of $30,142 (December
31, 2009 - $25,839). The loss of this customer or unexpected termination of the
off-take contract could have a material adverse effect on the Company`s results
of operations, financial condition and cash flows. The Company has not
experienced any bad debts with this customer.
The Company minimizes credit risk by reviewing the credit risk of the
counterparty to the arrangement and has made any necessary provisions related to
credit risk at December 31, 2010.
(v) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its
financial obligations as they fall due. The Company has a planning and budgeting
process in place to help determine the funds required to support the Company`s
normal operating requirements on an ongoing basis and its expansionary plans.
The Company ensures that there are sufficient funds to meet its short-term
business requirements, taking into account its anticipated cash flows from
operations and its holdings of cash and cash equivalents.
The Company`s policy is to invest its excess cash in highly liquid, fully
guaranteed, bank-sponsored instruments. The Company staggers the maturity dates
of its investments over different time periods and dates to minimize exposure to
interest rate changes. This strategy remains unchanged from 2009.
In the normal course of business, the Company enters into contracts that give
rise to commitments for future minimum payments. The following table summarizes
the Company`s significant commitments and corresponding maturities.
December 31, 2010
Total <1 year
Accounts payable $ 27,009 $ 27,009
Finance leases 3,405 3,405
Commitments 13,056 13,056
$ 43,470 $ 43,470
December 31, 2009
Total <1 year 1-3 years
Accounts payable $ 22,919 $ 22,919 $ -
Finance leases 4,282 1,221 3,061
Purchase commitments 881 881 -
Capital expenditures 4,078 4,078 -
$ 32,160 $ 29,099 $ 3,061
25. Events after the reporting period
From January 1, 2011 to March 21, 2011:
(a) 550,000 stock options were exercised by way of stock appreciation rights at
a weighted average exercise price of Cdn$0.32.
(b) The Company received formal letters of commitment to underwrite a US$100
million financing package. The mandated lead arrangers are UniCredit Bank AG,
London Branch and The Standard Bank of South Africa Limited. The terms and
conditions of the financing package include:
- Scheduled tenor of 5.5 years with an 18 month grace period
- Separate amortizing term loan (US$70 million) and revolving loan facilities
(US$30 million)
- Initial interest rate of US LIBOR + 3.85% rising to US LIBOR + 4.15% for the
last three years of the loan.
Date: 24/03/2011 08:51:00 Produced by the JSE SENS Department.
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