| Mon 15 Aug 2011, 15:53 | | EPS - Eastern Platinum Limited - Eastern Platinum Limited management`s |
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EPS
EPS
EPS - Eastern Platinum Limited - Eastern Platinum Limited management`s
discussion and analysis of financial conditions and results of operations
for the three and six months ended June 30, 2011
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
EASTERN PLATINUM LIMITED
MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2011
The following Management`s Discussion and Analysis ("MD&A") is intended to
assist the reader to assess material changes in financial condition and
results of operations of Eastern Platinum Limited ("Eastplats" or the
"Company") as at June 30, 2011 and for the three and six months then ended
in comparison to the same period in 2010.
This MD&A should be read in conjunction with the unaudited condensed
consolidated interim financial statements for the three and six months ended
June 30, 2011 and supporting notes. These unaudited condensed consolidated
interim financial statements have been prepared using accounting policies
consistent with IFRS and in accordance with International Accounting
Standard 34 - Interim Financial Reporting("IAS 34").
In this MD&A, the Company also reports certain non-IFRS measures such as
EBITDA and cash costs per ounce which are explained in Section 3.2 of this
MD&A.
All monetary amounts are in U.S. dollars unless otherwise specified. The
effective date of this MD&A is August 11, 2011. Additional information
relating to the Company is available on SEDAR at www.sedar.com.
Contents of the MD&A
1. Overview
2. Summary of results
2.1. Summary of results for the quarter ended June 30, 2011
2.2. Summary of results for the six months ended June 30, 2011
3. Results of operations for the three and six months ended June 30, 2011
3.1. Mining operations at Crocodile River Mine ("CRM")
3.2. CRM non-IFRS measures
3.3. Development projects
3.3.1. CRM
3.3.2. Eastern Limb projects
3.4. Corporate and other expenses
4. Liquidity and Capital Resources
4.1. Outlook
4.2. Impairment
4.3. Share capital
4.4. Contractual obligations, commitments and contingencies
5. Related party transactions
6. Adoption of accounting standards and accounting pronouncements under IFRS
6.1. Application of new and revised IFRSs
6.2. Accounting standards issued but not yet effective
7. Internal control over financial reporting
8. Cautionary statement on forward-looking information
1. Overview
Eastplats is a platinum group metals ("PGM") producer engaged in the mining
and development of PGM deposits with properties located in South Africa. All
of the Company`s properties are situated on the western and eastern limbs of
the Bushveld Complex ("BC"), the geological environment that supports over
75% of the world`s PGM mine production.
The Company`s primary operating asset is an 87.5% direct and indirect
interest in Barplats Investments Limited ("Barplats"), whose main assets are
the PGM producing Crocodile River Mine ("CRM") located on the western limb
of the BC and the non-producing Kennedy`s Vale Project located on the
Eastern Limb of the BC. The Company also has a 75.5% direct and indirect
interest in Mareesburg Platinum Project ("Mareesburg") and a 93.4% direct
and indirect interest in Spitzkop PGM Project ("Spitzkop"), both located on
the Eastern Limb of the BC.
2. Summary of results
2.1 Summary of results for the quarter ended June 30, 2011
- Eastplats recorded a net loss attributable to equity shareholders of the
Company of $7,951,000 ($0.01 loss per share) in the quarter ended June 30,
2011 ("Q2 2011") compared to earnings of $3,448,000 ($0.01 per share) in the
quarter ended June 30, 2010 ("Q2 2010").
- EBITDA decreased to ($4,280,000) in Q2 2011 compared to $9,757,000 in Q2
2010.
- PGM ounces sold decreased 33% to 20,528 ounces in Q2 2011 compared to
30,820 PGM ounces in Q2 2010.
- The U.S. dollar average delivered price per PGM ounce increased 10% to
$1,113 in Q2 2011 compared to $1,015 in Q2 2010.
- The Rand average delivered price per PGM ounce decreased 1% to R7,557 in
Q2 2011 compared to R7,643 in Q2 2010.
- Rand operating cash costs net of by-product credits increased 67% to
R8,119 per ounce in Q2 2011 compared to R4,866 per ounce in Q2 2010. Rand
operating cash costs increased 55% to R10,287 per ounce in Q2 2011 compared
to R6,639 per ounce in Q2 2010.
- U.S. dollar operating cash costs net of by-product credits increased 85%
to $1,196 per ounce in Q2 2011 compared to $646 per ounce achieved in Q2
2010. U.S. dollar operating cash costs increased 72% to $1,515 per ounce in
Q2 2011 compared to $882 per ounce in Q2 2010.
- Head grade decreased to 3.9 grams per tonne in Q2 2011 from 4.1 grams per
tonne in Q2 2010.
- Average concentrator recovery decreased to 76% in Q2 2011 compared to 80%
in Q2 2010.
- Development meters increased by 11% to 3,562 meters and on-reef
development increased by 33% to 2,090 meters compared to Q2 2010.
- Stoping units decreased 37% to 31,828 square meters in Q2 2011 compared to
50,573 square meters in Q2 2010.
- Run-of-mine ore hoisted decreased by 32% to 203,166 tonnes in Q2 2011
compared to 297,186 tonnes in Q2 2010.
- Run-of-mine ore processed decreased by 30% to 201,986 tonnes in Q2 2011
compared to 290,028 tonnes in Q2 2010.
- The Company`s Lost Time Injury Frequency Rate (LTIFR) improved to 0.63 in
Q2 2011 compared to 2.78 in Q2 2010.
- At June 30 2011, the Company had a cash position (including cash, cash
equivalents and short term investments) of $327,773,000 (December 31, 2010 -
$350,292,000).
2.2 Summary of results for the six months ended June 30, 2011
- Eastplats recorded a net loss attributable to equity shareholders of the
Company of $13,584,000 ($0.01 loss per share) in the six months ended June
30, 2011 ("6M 2011") compared to earnings of $4,272,000 ($0.01 per share) in
the six months ended June 30, 2010 ("6M 2010").
- EBITDA decreased 89% to $2,132,000 in 6M 2011 compared to $18,753,000 in
6M 2010.
- PGM ounces sold decreased 25% to 45,915 ounces in 6M 2011 compared to
61,351 PGM ounces in 6M 2010.
- The U.S. dollar average delivered price per PGM ounce increased 14% to
$1,126 in 6M 2011 compared to $987 in 6M 2010.
- The Rand average delivered price per PGM ounce increased 5% to R7,782 in
6M 2011 compared to R7,424 in 6M 2010.
- Rand operating cash costs net of by-product credits increased 38% to
R7,040 per ounce in 6M 2011 compared to R5,100 per ounce in 6M 2010. Rand
operating cash costs increased 40% to R9,072 per ounce in 6M 2011 compared
to R6,478 per ounce in 6M 2010.
- U.S. dollar operating cash costs net of by-product credits increased 51%
to $1,021 per ounce in 6M 2011 compared to $678 per ounce achieved in 6M
2010. U.S. dollar operating cash costs increased 53% to $1,315 per ounce in
6M 2011 compared to $861 per ounce in 6M 2010.
- Head grade decreased to 3.9 grams per tonne in 6M 2011 from 4.1 grams per
tonne in 6M 2010.
- Average concentrator recovery decreased to 78% in 6M 2011 compared to 79%
in 6M 2010.
- Development meters increased by 29% to 7,781 meters and on-reef
development increased by 29% to 4,524 meters compared to 6M 2010.
- Stoping units decreased 25% to 76,502 square meters in 6M 2011 compared to
102,333 square meters in 6M 2010.
- Run-of-mine ore hoisted decreased by 25% to 450,535 tonnes in 6M 2011
compared to 601,495 tonnes in 6M 2010.
- Run-of-mine ore processed decreased by 23% to 447,486 tonnes in 6M 2011
compared to 580,882 tonnes in 6M 2010.
The table below sets forth selected results of operations for the Company`s
eight most recently completed quarters (in thousands of U.S. dollars, except
per share amounts) in accordance with IFRS.
Selected quarterly data 2011 2010
June 30 Mar 31 Dec 31 Sept 30
Revenues $ 26,876 $ 35,702 $ 45,616 $ 38,073
Cost of operations (36,415) (34,409) (36,272) (32,735)
Mine operating (loss) earnings (9,539) 1,293 9,344 5,338
Expenses (G&A and share-based
payment) (2,978) (11,318) (4,382) (2,202)
Operating (loss) profit (12,517) (10,025) 4,962 3,136
Net (loss) profit
attributable to equity
shareholders of the Company $ (7,951) $(5,633) $ 5,041 $ 4,039
(Loss) earnings per share -
basic $ (0.01) $ (0.01) $ 0.01 $ 0.01
(Loss) earnings per share -
diluted $ (0.01) $ (0.01) $ 0.01 $ 0.01
Average foreign exchange rates
South African Rand per US dollar 6.79 7.01 6.91 7.31
US dollar per Canadian dollar 1.0335 1.0141 0.9870 0.9621
Period end foreign exchange
rates
South African Rand per US dollar 6.76 6.75 6.59 7.00
US dollar per Canadian dollar 1.0368 1.0314 1.0054 0.9718
Selected quarterly data 2010 200
June 30 March 31 Dec 31 Sept 30
Revenues $ 36,612 $ 34,699 $ 34,259 $ 27,365
Cost of operations (32,383) (31,018) (29,294) (26,702)
Mine operating (loss) earnings 4,229 3,681 4,965 663
Expenses (G&A and share-based
payment) (2,050) (4,935) (3,523) (2,445)
Operating (loss) profit 2,179 (1,254) 1,442 (1,782)
Net (loss) profit attributable
to equity
shareholders of the Company $ 3,448 $ 824 $ 330 $ 1,839
(Loss) earnings per share -
basic $ 0.01 $ 0.00 $ 0.00 $ 0.00
(Loss) earnings per share -
diluted $ 0.00 $ 0.00 $ 0.00 $ 0.00
Average foreign exchange rates
South African Rand per US
dollar 7.53 7.51 7.50 7.80
US dollar per Canadian dollar 0.9727 0.9608 0.9459 0.9114
Period end foreign exchange rates
South African Rand per US dollar 7.66 7.33 7.41 7.53
US dollar per Canadian dollar 0.9393 0.9844 0.9515 0.9340
3. Results of Operations for the three and six months ended June 30, 2011
The following table sets forth selected consolidated financial information
for the three and six months ended June 30, 2011 and 2010:
Condensed consolidated interim income statements
(Expressed in thousands of U.S. dollars, except per share amounts -
unaudited)
Three months ended
June 30,
2011 2010
Revenue $ 26,876 $ 36,612
Cost of operations
Production costs 31,156 26,855
Depletion and depreciation 5,259 5,528
Mine operating (loss) earnings (9,539) 4,229
Expenses
General and administrative 2,932 2,037
Share-based payments 46 13
Operating (loss) profit (12,517) 2,179
Other income (expense)
Interest income 1,413 421
Finance costs (353) (593)
Foreign exchange gain (loss) 113 (36)
(Loss) profit before income taxes (11,344) 1,971
Deferred income tax recovery 471 548
Net (loss) profit for the period $ (10,873) $ 2,519
Attributable to
Non-controlling interest $ (2,922) $ (929)
Equity shareholders of the Company (7,951) 3,448
Net (loss) profit for the period $ (10,873) $ 2,519
(Loss) earnings per s hare
Basic
Diluted $ (0.01) $ 0.01
Weighted average number of common share outstanding $ (0.01) $ 0.00
Basic 908,183 682,792
Diluted 908,183 693,988
Six months ended
June 30,
2011 2010
Revenue $ 62,578 $ 71,311
Cost of operations
Production costs 60,446 52,558
Depletion and depreciation 10,378 10,843
Mine operating (loss) earnings (8,246) 7,910
Expenses
General and administrative 6,027 5,233
Share-based payments 8,269 1,752
Operating (loss) profit (22,542) 925
Other income (expense)
Interest income 2,922 793
Finance costs (875) (963)
Foreign exchange gain (loss) 1,677 232
(Loss) profit before income taxes (18,818) 987
Deferred income tax recovery 593 1,096
Net (loss) profit for the period $ (18,225) $ 2,083
Attributable to
Non-controlling interest $ (4,641) $ (2,189)
Equity shareholders of the Company (13,584) 4,272
Net (loss) profit for the period $ (18,225) $ 2,083
(Loss) earnings per s hare
Basic
Diluted $ (0.01) $ 0.01
Weighted average number of common share outstanding $ (0.01) $ 0.01
Basic 908,099 682,000
Diluted 908,099 693,909
Condensed consolidated statements of June 30, December 31,
financial position 2011 2010
Total assets $ 1,113,338 $ 1,126,975
Total long-term liabilities $ 53,606 $ 55,576
3.1 Mining operations at Crocodile River Mine ("CRM")
The following is a summary of CRM`s operations for the eight most recently
completed quarters:
Crocodile River Mine operations
Three months ended
2011
June 30 March 31
Key financial statistics
(dollar amounts stated in U.S. dollars)
Sales - PGM ounces 20,528 25,387
Average delivered price per ounce (2) $1,113 $1,136
Average basket price $1,319 $1,344
Rand average delivered price per ounce R 7,557 R 7,963
Rand average basket price R 8,956 R 9,421
Cash costs per ounce of PGM (1) $1,515 $1,154
Cash costs per ounce of PGM,
net of chrome by-product credits (1) $1,196 $880
Rand cash costs per ounce of PGM (1) R 10,287 R 8,090
Rand cash costs per ounce of PGM,
net of chrome by-product credits (1) R 8,119 R 6,167
Key production statistics
Run-of-mine (" ROM") ore tonnes processed 201,986 245,500
Development meters 3,562 4,219
On-reef development meters 2,090 2,434
Stoping units (square meters) 31,828 44,674
Concentrator recovery from ROM ore 76% 79%
Chrome sold (tonnes) 60,661 63,578
Metal in concentrate sold (ounces)
Platinum (Pt) 10,363 12,790
Palladium (Pd) 4,485 5,494
Rhodium (Rh) 1,740 2,162
Gold (Au) 74 97
Iridium (Ir) 728 919
Ruthenium (Ru) 3,138 3,925
Total PGM ounces 20,528 25,387
Three months ended
2010
December 31 September 30
Key financial statistics
(dollar amounts stated in U.S. dollars)
Sales - PGM ounces 32,752 37,798
Average delivered price per ounce (2) $1,058 $953
Average basket price $1,250 $1,128
Rand average delivered price per ounce R 7,311 R 6,966
Rand average basket price R 8,638 R 8,246
Cash costs per ounce of PGM (1) $928 $713
Cash costs per ounce of PGM,
net of chrome by-product credits (1) $653 $625
Rand cash costs per ounce of PGM (1) R 6,412 R 5,212
Rand cash costs per ounce of PGM,
net of chrome by-product credits (1) R 4,509 R 4,566
Key production statistics
Run-of-mine (" ROM") ore tonnes processed 327,872 357,219
Development meters 3,501 3,299
On-reef development meters 1,925 1,797
Stoping units (square meters) 53,044 50,892
Concentrator recovery from ROM ore 78% 81%
Chrome sold (tonnes) 89,123 50,148
Metal in concentrate sold (ounces)
Platinum (Pt) 16,526 19,195
Palladium (Pd) 7,055 8,129
Rhodium (Rh) 2,786 3,216
Gold (Au) 117 131
Iridium (Ir) 1,183 1,323
Ruthenium (Ru) 5,085 5,804
Total PGM ounces 32,752 37,798
Three months ended
2010
June 30 March 31
Key financial statistics
(dollar amounts stated in U.S. dollars)
Sales - PGM ounces 30,820 30,531
Average delivered price per ounce (2) $1,015 $959
Average basket price $1,200 $1,130
Rand average delivered price per ounce R 7,643 R 7,202
Rand average basket price R 9,036 R 8,486
Cash costs per ounce of PGM (1) $882 $841
Cash costs per ounce of PGM,
net of chrome by-product credits (1) $646 $711
Rand cash costs per ounce of PGM (1) R 6,639 R 6,315
Rand cash costs per ounce of PGM,
net of chrome by-product credits (1) R 4,866 R 5,336
Key production statistics
Run-of-mine (" ROM") ore tonnes processed 290,028 290,854
Development meters 3,202 2,812
On-reef development meters 1,573 1,931
Stoping units (square meters) 50,573 51,760
Concentrator recovery from ROM ore 80% 78%
Chrome sold (tonnes) 76,677 75,846
Metal in concentrate sold (ounces)
Platinum (Pt) 15,433 15,405
Palladium (Pd) 6,769 6,562
Rhodium (Rh) 2,661 2,607
Gold (Au) 108 105
Iridium (Ir) 1,077 1,106
Ruthenium (Ru) 4,772 4,746
Total PGM ounces 30,820 30,531
Three months ended
2009
December 31 September 30
Key financial statistics
(dollar amounts stated in U.S. dollars)
Sales - PGM ounces 34,000 29,986
Average delivered price per ounce (2) $860 $765
Average basket price $1,008 $878
Rand average delivered price per ounce R 6,450 R 5,967
Rand average basket price R 7,560 R 6,848
Cash costs per ounce of PGM (1) $706 $758
Cash costs per ounce of PGM,
net of chrome by-product credits (1) $621 $583
Rand cash costs per ounce of PGM (1) R 5,296 R 5,915
Rand cash costs per ounce of PGM,
net of chrome by-product credits (1) R 4,661 R 4,548
Key production statistics
Run-of-mine (" ROM") ore tonnes processed 321,983 280,777
Development meters 3,254 2,882
On-reef development meters 2,135 1,562
Stoping units (square meters) 55,153 36,263
Concentrator recovery from ROM ore 79% 78%
Chrome sold (tonnes) 66,694 76,900
Metal in concentrate sold (ounces)
Platinum (Pt) 17,012 15,080
Palladium (Pd) 7,444 6,613
Rhodium (Rh) 2,923 2,499
Gold (Au) 121 115
Iridium (Ir) 1,240 1,095
Ruthenium (Ru) 5,260 4,584
Total PGM ounces 34,000 29,986
(1) These are non-IFRS measures as described in Section 3.2
(2) Average delivered price is the average basket price at the time of
delivery of PGM concentrates, net of associated smelting, refining and
marketing costs, under the Company`s primary off-take agreement.
Quarter ended June 30, 2011 compared to the quarter ended June 30, 2010
In Q2 2011, CRM recorded a Lost Time Injury Frequency Rate ("LTIFR") of 0.63
compared to 2.78 in Q2 2010. There was one lost time injury in Q2 2011
compared to 5 lost time injuries in Q2 2010.
The Company generated revenue of $26,876,000 in Q2 2011 of which $20,322,000
is PGM revenue and $6,554,000 is chrome revenue. PGM revenues represent the
amounts recorded when PGM concentrates are physically delivered to the
buyer, which are provisionally priced on the date of delivery. The Company
settles its PGM sales three to five months following the physical delivery
of the concentrates and adjustments are made when the prices for the metal
sold to the market are established.
The Company recorded an average delivered basket price of $1,113 per PGM
ounce in Q2 2011, compared to $1,015 in Q2 2010 and $1,136 in the first
quarter of 2011 ("Q1 2011"). The delivered price per ounce refers to the PGM
prices in effect at the time the PGM concentrates are delivered to the
smelter.
As a result of fluctuations in PGM prices, the Company recorded negative
provisional price adjustments of $1,244,000 in the three months ended June
30, 2011, compared to negative price adjustments of $824,000 in the three
months ended June 30, 2010.
The following table shows a reconciliation of revenue and provisional price
adjustments.
Crocodile River Mine
Effect of provisional price adjustments on revenues
(stated in thousands of U.S. dollars)
Three months ended Six months ended
June 30, June 30,
2011 2010 2011 2010
Revenue before provisional
price adjustments $ 28,120 $ 37,436 $ 62,549 $ 69,237
Provisional price adjusments
Adjustments to revenue upon
settlement of prior periods`
sales (308) 1,053 965 3,951
Mark-to-market adjustment on
sales not yet settled at end
of period (936) (1,877) (936) (1,877)
Revenue as reported in the
income statement $ 26,876 $ 36,612 $ 62,578 $ 71,311
PGM ounces sold decreased by 33% in Q2 2011 compared to Q2 2010 due to lower
run-of-mine ore tonnes processed (201,986 tonnes in Q2 2011 compared to
290,028 tonnes in Q2 2010), lower head grade (3.9 grams per tonne in Q2 2011
compared to 4.1 grams per tonne in Q2 2010), and lower concentrator recovery
(76% in Q2 2011 compared to 80% in Q2 2010). Second quarter production and
mining were negatively impacted by labour issues related to the illegal
underground sit-in followed by an unprotected strike and damage to
underground infrastructure at CRM operations in May. The labour issues were
settled in late May with the signing of a two-year wage agreement with the
National Union of Mineworkers ("NUM") and agreement on other disputed
matters. 155 production workers were suspended as a result of the damage
caused, and consequently, labour resources were consolidated into the
Zandfontein operations and the services of a contract mining company were
engaged on a fixed-term contract to restore the Maroelabult section to full
production by the end of the third quarter. The disruptions to the steady
state operation of the mine and processing plant contributed to lower
concentrator recoveries.
Operating cash costs, a non-IFRS measure, are incurred in Rand. Total Rand
operating cash costs increased by only 3% compared to Q2 2010, but Rand
operating cash costs per ounce increased by 55% from R6,639 per ounce in Q2
2010 to R10,287 per ounce in Q2 2011 primarily due to a 33% decrease in
ounces sold, a 26.95% increase in power costs effective April 1, 2011, and
general inflation.
Operating cash costs stated in U.S. dollars increased by 72% from $882 per
ounce in Q2 2010 to $1,515 per ounce in Q2 2011 primarily due to a 33%
decrease in ounces sold and a 3% increase in total Rand operating cash costs
combined with a 10% appreciation of the South African Rand relative to the
U.S. dollar. The average U.S. dollar-Rand exchange rate was R6.79:$1.00 in
Q2 2011 compared to R7.53:$1.00 in Q2 2010.
A reconciliation of production costs, as reported in the income statement,
to cash operating costs, is shown in Table 5 under Section 3.2 CRM non-IFRS
measures.
Chrome revenues and effect on cash costs per ounce
The Company recorded revenue for 60,661 tonnes of chrome in Q2 2011 (76,677
tonnes in Q2 2010).
Net chrome revenue recognized was $108 per tonne ($95 per tonne in Q2 2010)
for a total of $6,554,000 ($7,257,000 in Q2 2010). The 14% increase in
chrome revenue recognized per tonne compared to Q2 2010 was mainly due to
the 10% appreciation of the South African Rand relative to the U.S. dollar
over the same period.
Q2 2011 chrome revenues of $6,554,000 reduced operating cash costs from
$1,515 to $1,196 per ounce net of by-product credits and from R10,287 to
R8,119 per ounce net of by-product credits.
Quarter ended June 30, 2011 compared to the quarter ended March 31, 2011
Revenues decreased by 25% compared to Q1 2011 as a result of a 19% decrease
in the ounces produced in the quarter, a 2% decrease in the average
delivered price per ounce, and a change in price adjustments from $1,273,000
in Q1 2011 to ($1,244,000) in Q2 2011. The decrease in ounces produced was
due to an 18% decrease in run-of-mine ore processed (245,500 tonnes in Q1
2011 compared to 201,986 tonnes in Q2 2011) combined with a decrease in
concentrator recovery from 79% in Q1 2011 to 76% in Q2 2011, both of which
were the result of interruption caused by the illegal underground sit-in
followed by an unprotected strike and damage to underground infrastructure
at CRM operations in May.
Rand operating cash costs increased by 27% from R8,090 per ounce in Q1 2011
to R10,287 per ounce in Q2 2011 primarily as a result of a 19% decrease in
ounces produced and a 26.95% increase in power costs effective April 1,
2011. Total Rand operating cash costs, however, increased by less than 3%
compared to Q1 2011. Operating cash costs stated in U.S. dollars increased
by 31% from $1,154 per ounce in Q1 2011 to $1,515 per ounce in Q2 2011 also
due to the 19% decrease in ounces produced, and due to a 3% increase in
total Rand operating cash costs, combined with a 3% appreciation of the
South African Rand relative to the U.S. dollar. The average U.S. dollar-Rand
exchange rate was R6.79:$1.00 in Q2 2011 compared to R7.01:$1.00 in Q1 2011.
Six months ended June 30, 2011 compared to the six months ended June 30,
2010
In 6M 2011, the Company sold 45,915 PGM ounces, a decrease of 25% compared
to 6M 2010, primarily as a result of a 23% decrease in run-of-mine ore
processed in 2011 (580,882 tonnes in 6M 2010 compared to 447,486 tonnes in
6M 2011), combined with a decrease in the recovery rate (79% in 6M 2010 co
mpared to 78% in 6M 2011) and a decrease in head grade (4.1 grams per tonne
in 6M 2010 compared to 3.9 grams per tonne in 6M 2011).
The average delivered basket price per ounce increased from $987 in 6M 2010
to $1,126 in 6M 2011.
PGM prices quoted in U.S. dollars have generally experienced a rising trend
since January 2009.
Operating cash costs increased 53% from $861 per ounce in 6M 2010 to $1,315
per ounce in 6M 2011 due to a 25% decrease in ounces produced and a 5%
increase in total Rand operating cash costs combined with an 8% appreciation
of the South African Rand relative to the U.S. dollar. The average U.S.
dollar- Rand exchange rate was R6.90:$1.00 in 6M 2011 compared to
R7.52:$1.00 in 6M 2010.
Total Rand operating cash costs increased 5% between 6M 2010 and 6M 2011
mainly due to a 26.95% increase in power and electricity costs effective
April 1, 2011, an increase in repairs and maintenance due to damages caused
during the interruption in May, 2011, a higher number of vehicle repairs in
2011 than in 2010 and general inflation. Power and electricity costs now
comprise approximately 7% of the mine`s total operating costs.
3.2 CRM non-IFRS measures
The following table provides a reconciliation of EBITDA and cash operating
costs per PGM ounce to mine operating earnings and production costs,
respectively:
Crocodile River Mine non-IFRS measures
(Expressed in thousands of U.S. dollars, except ounce and per ounce data)
Three months ended Six months ended
June 30, June 30,
2011 2010 2011 2010
Mine operating (loss) earnings$ (9,539) $ 4,229 $ (8,246) $ 7,910
Depletion and depreciation 5,259 $ 5,528 10,378 10,843
EBITDA (1) (4,280) 9,757 2,132 18,753
Production costs as reported 31,156 26,855 60,446 52,558
Adjustments for miscellaneous
costs(2) (56) 318 (49) 289
Cash operating costs 31,100 27,173 60,397 52,847
Less by-product credits -
chrome revenues and
adjustments (6,554) (7,257) (13,517) (11,237)
Cash operating costs net of
by-product credits 24,546 19,916 46,880 41,610
Ounces sold 20,528 30,820 45,915 61,351
Cash cost per ounce sold $ 1,515 $ 882 $ 1,315 $ 861
Cash cost per ounce sold net
of by-product credits $ 1,196 $ 646 $ 1,021 $ 678
(1) EBITDA includes provisional price adjustments, chrome revenues, chrome
penalties, and foreign exchange adjustments to sales.
(2) Miscellaneous costs include costs such as housing, technical services
and planning.
The Company is of the opinion that conventional measures of performance
prepared in accordance with IFRS do not meaningfully demonstrate the ability
of its operations to generate cash flow. Therefore, the Company has included
certain non-IFRS measures in this MD&A to supplement its financial
statements which are prepared in accordance with IFRS. These non-IFRS
measures do not have any standardized meaning prescribed under IFRS, and
therefore they may not be comparable to similar measures employed by other
companies.
In this MD&A, the Company has reported its share of earnings before
interest, depletion, depreciation, amortization and tax ("EBITDA") for CRM.
This is a liquidity non-IFRS measure which the Company believes is used by
certain investors to determine the Company`s ability to generate cash flows
for investing and other activities. The Company also reports cash operating
costs per ounce of PGM produced, another non-IFRS measure which is a common
performance measure used in the precious metals industry.
3.3 Development projects
3.3.1 CRM
During the six months ended June 30, 2011, the Company spent approximately
$24,328,000 at CRM on underground mine development, underground electrical
upgrades, and ongoing underground works at the Zandfontein vertical shaft,
including the development of a decline for a conveyor and chairlift system
that will move ore and workers to and from the new stopes being developed
below 4-level as well as workshops and refuelling systems underground to
improve equipment availability.
Mine development at the shallow Crocette ore body continued in the second
quarter. The Company expects Crocette to reach full production by the first
quarter of 2013, at which time Crocette is planned to deliver up to 40,000
tonnes of ore per month. Combined with the mining at Zandfontein and
Maroelabult, this will enable CRM to achieve its production target of
approximately 160,000 tonnes of ore per month with an estimated head grade
of 4.1 g/t (5PGE+Au). Construction power for the project is being provided
by Eskom, the South African public utility company and the Company is in
discussions with Eskom for the supply of permanent power.
3.3.2 Eastern Limb projects
Development of Mareesburg, Spitzkop and Kennedy`s Vale, which was
reinitiated in Q4 2010, continued. During the three months ended June 30,
2011,
expenditures of $9,171,000 at these projects consisted of site capture,
installation of temporary works, engineering and construction planning for
the open-pit mine at Mareesburg and an associated 90,000 tonne-per-month
(tpm) concentrator. The Company expects significant expenditures to commence
in the third quarter of 2011 as development activities ramp up and
construction contractor mobilization begins.
Under the current development plan, a 90,000 tpm concentrator would be
located on the Kennedy`s Vale site and the planned rapid production build-up
at Mareesburg would allow the concentrator to ramp up quickly to full
capacity immediately upon commissioning. To accommodate future capacity
increases, the plant at Kennedy`s Vale would include the civil and other
surface infrastructure work required for an additional 90,000 tpm processing
stream and appropriate tailings facility infrastructure to process up to
180,000 tonnes per month of ore.
Mareesburg will initially be an open-pit mining operation and consequently
require little power. A power line currently provides 800 KVA across the
Mareesburg property and this will be adequate to run administration and
workshop/maintenance facilities with any further power requirements to be
provided by on-site diesel power generators.
Design for the mine and concentrator are well advanced, and long lead items
such as mills and flotation equipment have been delivered. The mill terrace
is complete. A project management and construction management contract has
been awarded to Fluor, an international engineering and construction
company, and the contract for the detailed design for the concentrator and
support facilities was awarded to K`Enyuka, a respected engineering company
based in Johannesburg. Site capture and planning have been ongoing and
earthworks commenced on site in July 2011. Production startup is scheduled
for the fourth quarter of 2012.
The Company has already secured 3MVA of power for the construction phase for
the concentrator at the Kennedy`s Vale site. With respect to permanent
operating power for the concentrator and for the Spitzkop mine which is
planned to be developed after the Mareesburg open-pit mine comes on stream,
the Company has applied for 40 MVA of installed capacity, of which 20MVA
would be required for the initial 90,000 tpm plant. The Company has paid the
necessary fees to initiate the acquisition of power and Eskom has commenced
the engineering work.
3.4 Corporate and other expenses
General and administrative expenses ("G&A") are costs associated with the
Company`s corporate head office in Vancouver and the Johannesburg
administrative office, and costs associated with care and maintenance at the
Company`s Eastern Limb projects, Spitzkop, Kennedy`s Vale and Mareesburg.
Corporate office costs include legal and accounting, regulatory, executive
management fees, investor relations, travel and consulting fees.
G&A increased by 44% from $2,037,000 in Q2 2010 to $2,932,000 in Q2 2011
mainly due to a $382,000 increase in G&A at the Company`s head office and a
$272,000 increase in G&A at the Company`s South African subsidiaries, which
were combined with the appreciation of the South African Rand relative to
the U.S. dollar. Head office G&A expenses increased during the three months
ended June 30, 2011 mainly as a result of increases to annual fees paid to
certain officers and directors. South African G&A expenses increased due to
the recording of $594,000 in depreciation pertaining to assets purchased for
the Mareesburg Project, which is not currently operating. The average U.S.
dollar-Rand exchange rate was R6.79:$1.00 in Q2 2011 compared to R7.53:$1.00
in Q2 2010.
G&A remained relatively consistent between Q1 2011 and Q2 2011, at
$3,095,000 and $2,932,000 respectively.
G&A increased 15% from $5,233,000 in 6M 2010 to $6,027,000 in 6M 2011 due to
a $382,000 increase in G&A at the Company`s head office, as described above,
combined with the appreciation of the South African Rand relative to the
U.S. dollar. The average U.S. dollar-Rand exchange rate was R6.90:$1.00 in
6M 2011 compared to R7.52:$1.00 in 6M 2010.
Interest income recorded during the three and six months ended June 30, 2011
was $1,413,000 and $2,922,000 compared with $421,000 and $793,000 during the
same periods in 2010. The increase in interest income was mainly due to an
increase in cash balances at head office as a result of the Company`s
December 30, 2010 equity financing. Further details on the equity financing
have been included within Section 4.
During the three and six months ended June 30, 2011, the Company recorded a
deferred income tax recovery of $471,000 and a net deferred tax recovery of
$593,000, which consists of current tax expense of $377,000 and a deferred
income tax recovery of $970,000. The current tax expense was the result of
income earned for non-mining activities. The Company`s mining loss carry-
forwards could not be applied against this income as the income was non-
mining based. The deferred income tax recovery was based on changes in the
Company`s net assets. The consolidated statement of financial position
reflects total deferred tax liabilities of $44,538,000 which arose primarily
as a result of the step-up to fair value of the net assets acquired on the
Barplats and Gubevu business acquisitions during the years ended June 30,
2006, June 30, 2007, and December 31, 2008.
4. Liquidity and Capital Resources
At June 30, 2011, the Company had working capital of $332,962,000 (December
31, 2010 - $362,691,000) and cash and cash equivalents and short-term
investments of $327,773,000 (December 31, 2010 - $350,292,000) in highly
liquid, fully guaranteed, bank sponsored instruments.
The Company`s strong working capital and cash position was achieved through
the completion of an equity financing on December 30, 2010. The Company
raised Cdn$348 million through a public offering which consisted of
224,250,000 common shares, of which 195,361,476 common shares were issued at
a price of Cdn$1.55 and 28,888,524 common shares were issued at a price of
GBP0.9568.
The Company had no long-term debt at June 30, 2011, other than a provision
for environmental rehabilitation relating to CRM, Kennedy`s Vale and
Spitzkop.
In January 2011, the Company received formal letters of commitment to
underwrite a U.S.$100 million corporate debt facility through Eastplats
International Inc., a subsidiary of the Company. The mandated lead arrangers
are UniCredit Bank AG, London Branch and The Standard Bank of South Africa
Limited.
4.1 Outlook
The PGM industry has experienced global economic uncertainty and market
volatility since 2008.
Although PGM prices in U.S. dollar terms have recovered since the beginning
of 2009, this has been significantly negated by the strength of the Rand
against the U.S. dollar. The U.S. dollar realized basket prices that the
Company is receiving have improved since the December 2008 lows, but these
prices, in Rand terms, are still significantly below those recorded in June
2008 when basket prices reached their peak. The Company anticipates that PGM
prices will remain volatile and the Rand will remain strong against the U.S.
dollar in the short term, which impacts the income and cash flows generated
by the Company as it has U.S. dollar-based revenues and a Rand-based
operating cost structure. As a result, the Company continues to seek ways to
improve its operating efficiency and thereby minimize its operating costs,
without compromising safety, health and environmental standards.
With the rising trend in PGM prices, the Company resumed mine development at
the Crocette section at CRM in April 2010 and commenced planning for Phase 1
of the development of its Eastern Limb projects in late 2010. Phase 1
includes the development of an open-pit mine at Mareesburg and the
construction of a 90,000 tpm concentrator located on the Kennedy`s Vale
site. Concurrently with the planning for Crocette and for Phase 1, the
Company sought to raise financing to fund these development projects.
On December 30, 2010, the Company completed a Cdn$348 million public
offering, which primary purpose was to finance the development of Phase 1.
In January 2011, the Company received formal letters of commitment to
underwrite a US$100 million corporate debt facility through Eastplats
International Inc., a subsidiary of the Company. The mandated lead arrangers
are UniCredit Bank AG, London Branch and The Standard Bank of South Africa
Limited. The Company expects to complete the final legal documentation for
the debt facility during the third quarter of 2011. Upon the closing of the
debt facility, the Company will have approximately U.S.$420 million in cash,
short-term investments and undrawn credit facilities available for the
development of the Mareesburg open-pit mine and the associated concentrator,
for the Crocette development, and for general corporate purposes.
To bring the rest of the Eastern Limb projects, which includes Spitzkop and
Kennedy`s Vale, into production, additional funding will be required and may
include joint venture or other third party participation in one or more of
these projects, or the public or private sales of equity or debt securities
of the Company. There can be no assurance that additional funding will be
available to the Company or, if available, that this funding will be on
acceptable terms. If adequate funds are not available, including funds
generated from producing operations, the Company may be required to delay or
reduce the scope of these development projects.
4.2 Impairment
At June 30, 2011, the Company determined that there was no indication of
impairment for the carrying values of its mineral properties. Should market
conditions and commodity prices deteriorate or improve in the future, an
impairment or reversal of impairment of the Company`s mineral properties may
be required.
4.3 Share Capital
During the three months ended June 30, 2011, the Company did not grant any
stock options. Total share- based payment expense with regards to stock
options for the quarter was $3,000, which takes into account the vesting of
options and the reversal of share-based payment expense previously
recognized for unvested options that were forfeited in the period. During Q2
2011, 6,765,000 options were forfeited at a weighted average exercise price
of Cdn$1.69 and 151,333 options were exercised at a weighted average
exercise price of Cdn$0.32.
During the six months ended June 30, 2011, the Company granted 9,875,000
stock options at an exercise price of Cdn$1.55. Total share-based payment
expense with regards to stock options for the six months was $8,190,000,
which takes into account the vesting of options and the reversal of share-
based payment expense previously recognized for unvested options that were
forfeited in the period. During 6M 2011, 6,795,000 options were forfeited at
a weighted averaged exercise price of Cdn$1.69 and 741,333 options were
exercised at a weighted average exercise price of Cdn$0.32.
In 2010, the Company`s South African subsidiary, Barplats Investments
Limited, implemented a key skills retention plan for its senior employees in
South Africa, in response to the growing skills shortage in the country. The
purpose of the plan is to retain key employees, attract new employees as the
need arises and remain competitive with other South African mining
companies. The plan operates through a trust ("the Trust") which purchases
shares of the Company on behalf of the employees. These shares then vest to
the employees over time. In February 2011, the Trust purchased 198,563
shares pursuant to the plan which resulted in a share-based payment expense
of $43,000 and $80,000 in the three and six months ended June 30, 2011,
respectively, and a share-based payment liability of $32,000.
As at August 11, 2011, the Company had:
- 908,187,807 common shares outstanding; and
- 60,315,503 stock options outstanding, which are exercisable at prices
ranging from Cdn$0.32 to Cdn$3.38 and expire between 2011 and 2018.
4.4 Contractual Obligations, Commitments and Contingencies
The Company`s major contractual obligations and commitments at June 30, 2011
were as follows:
(in thous ands of U.S. dollars )
Less than 1 More than 5
Total year 1-5 years years
Provision for environmental
rehabilitation $ 31,862 $ - $ - $ 31,862
Capital expenditure and
purchase commitments
contracted at June 30, 2011
but not recognized on the
unaudited condensed
consolidated interim
statement of
financial position 29,526 29,526 - -
Finance lease obligations 2,668 2,668 - -
$ 64,056 $ 32,194 $ - $ 31,862
During the three months ended June 30, 2011, the Company became aware that
the law firm of Siskinds LLP of London, Ontario, had filed a "Notice of
Application" under the Class Action Proceedings Act, 1992, in the Ontario
Superior Court of Justice against the Company and three of its directors and
officers.
The Notice of Application seeks permission of the Court to grant leave or
permission to commence a lawsuit under the Securities Act of Ontario and
other provinces in respect to certain alleged breaches of disclosure
obligations. Subsequent to June 30, 2011, the Company and its officers and
directors were served with court documents. The Company believes the
proposed action has no merit and intends to vigorously defend the action.
5. Related Party Transactions
A number of the Company`s executive officers are engaged under contract with
those officers` personal services companies. Other executive officers are
paid directly via salary and directors` fees. All share options are issued
to the Company`s officers and directors, and not to their companies.
(Expressed in thousands of U.S. dollars, except per share amounts)
Three months ended Six months
ended
June30, June 30,
2011 2010 2011
2010
Trading transactions
Management and consulting fees $ 453 $ 349 $ 845 $ 685
Reimbursements of expenses 37 42 55 62
Total trading transactions $ 490 $ 391 $ 900 $ 747
Compensation of key management
personnel
Salaries and directors` fees $ 705 $ 568 $ 1 ,352 $ 1,116
Share-based payments - - 7,996 1,627
Total compensation of key management
personnel $ 705 $ 568 $ 9 ,348 $ 2,743
Management and consulting fees increased during the three and six months
ended June 30, 2011 mainly due to increases in annual fees granted to
certain directors that were applied retroactively to January 1, 2011,
combined with an appreciation of the Canadian dollar relative to the U.S.
dollar. The average U.S. dollar-Canadian dollar exchange rate was
U.S.$1.0335:Cdn$1.00 in Q2
2011 compared to U.S.$0.9727:Cdn$1.00 in Q2 2010.
Salaries and directors` fees increased during the three and six months ended
June 30, 2011 as a result of increases to annual fees granted to certain
officers and directors applied retroactively to January 1, 2011. Share-based
payments increased from $1,627,000 during the six months ended June 31, 2010
to $7,996,000 during the same period in 2011 mainly due to the issuance of
approximately triple as many stock options in Q1 2011 compared to Q1 2010.
All related party transactions were recorded at the amounts agreed upon
between the parties. Any balances payable are payable on demand without
interest.
6. Adoption of Accounting Standards and Accounting Pronouncements under IFRS
6.1 Application of new and revised IFRSs
Effective January 1, 2011, 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) 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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.
(f) Amendments to IAS 24 Related Party Disclosures
Amendment of the definition for related parties.
(g) 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.
6.2 Accounting standards issued but not yet effective
During the quarter ended June 30, 2011, four new standards were issued
effective for annual periods beginning on or after January 1, 2013.
(a) IFRS 10 Consolidated Financial Statements
IFRS 10 outlines the principles for the presentation and preparation of
consolidated financial statements.
(b) IFRS 11 Joint Arrangements
IFRS 11 defines the two types of joint arrangements (joint operations and
joint ventures) and outlines how to determine the type of joint arrangement
entered into and the principles for accounting for each type of joint
arrangement.
(c) IFRS 12 Disclosure of Involvement with Other Entities
IFRS 12 outlines the disc losures required in order to provide users of
financial statements with the information necessary to evaluate an entity`s
interest in other entities, the corresponding risks related to those
interests and the effects of those interests on the entity`s financial
position, financial performance and cash flows.
(d) IFRS 13 Fair Value Measurement
IFRS 13 defines fair value, summarizes the methods of determining fair value
and outlines the required fair value disclosures. IFRS 13 is utilized when
another IFRS standard requires or allows fair value measurements or
disclosures about fair value measurements.
During the quarter ended June 30, 2011, two standards were amended with the
amendments effective for annual periods beginning on or after January 1,
2013.
(a) IAS 27 Separate Financial Statements
IAS 27 outlines the accounting principles to be applied with regards to
investments in subsidiaries, joint ventures and associates when an entity
elects or is required by local regulations to present separate, non-
consolidated, financial statements. The previous standard was titled IAS 27
Consolidated and Separate Financial Statements.
(b) IAS 28 Investments in Associates and Joint Ventures
IAS 28 outlines the accounting treatment and corresponding application of
the equity method of accounting in investments in associates and joint
ventures. The previous standard was titled IAS 28 Investments in Associates.
The Company has not early adopted these standards and is currently assessing
the impact that these standards will have on the consolidated financial
statements. IFRS 10, IFRS 11, IAS 27 and IAS 28 cannot be early adopted on a
stand-alone basis and may only be early adopted as a group along with IFRS
12. Early adoption must be disclosed.
IFRS 12 disclosure is encouraged prior to adoption of the standard. This
early disclosure does not require the entity to apply IFRS 10, IFRS 11, IAS
27 or IAS 28. IFRS 13 may be early adopted on a stand-alone basis so long as
this fact is disclosed and the standard is applied prospectively as at the
beginning of the annual reporting period in which the standard is initially
applied.
7. Internal Control over Financial Reporting
The Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO")
of the Company, together with the Company`s management, are responsible for
the information disclosed in this MD&A and in the Company`s other external
disclosure documents. For the three months ended June 30, 2011 and 2010, the
CEO and the CFO have designed, or caused to be designed under their
supervision, the Company`s disclosure controls and procedures ("DCP") to
provide reasonable assurance that material information relating to the
Company and its consolidated subsidiaries has been disclosed in accordance
with regulatory requirements and good business practices and that the
Company`s DCP will enable the Company to meet its ongoing disclosure
requirements.
The CEO and CFO have evaluated the effectiveness of the Company`s disclosure
controls and procedures and have concluded that the design and operation of
the Company`s DCP were effective as of June 30, 2011 and that the Company
has the appropriate DCP to ensure that information used internally by
management and disclosed externally is, in all material respects, complete
and reliable.
The CEO and the CFO are also responsible for the design of the internal
controls over financial reporting ("ICFR") within the Company in order to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes
in accordance with International Financial Reporting Standards ("IFRS").
Since 2009, the Company has used the services of an international accounting
firm to act as the Company`s internal auditors for its South African
operations. Under the supervision, and with the participation, of the CEO
and the CFO, management conducted an evaluation of the effectiveness of the
Company`s ICFR based on the framework in the Internal Control - Integrated
Framework developed by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Based on that evaluation, the CEO and the CFO
concluded that the design and operation of the Company`s ICFR were effective
as at June 30, 2011.
The scope of the Company`s design of DCP and ICFR excluded Gubevu Consortium
Investment Holdings (Pty) Ltd., a subsidiary which is accounted for as a
special purpose entity under IFRS. During the design and evaluation of the
Company`s ICFR, management identified certain non-material deficiencies, a
number of which have been addressed or are in the process of being addressed
in order to enhance the Company`s processes and controls. The Company
employs entity level and compensating controls to mitigate any deficiencies
that may exist in its process controls. Management intends to continue to
further enhance the Company`s ICFR.
The Company`s management, including its CEO and CFO, believe that any DCP
and ICFR, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must
be considered relative to their costs. Because of the inherent limitations
in all control systems, they cannot provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been
prevented or detected. These inherent limitations include the realities that
judgments in decision making can be faulty, and that breakdowns can occur
because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or
more people, or by unauthorized override to the future events, and there can
be no assurance that any design will succeed in achieving its stated goals
under all potential future conditions. Accordingly, because of the inherent
limitations in a cost effective control system, misstatements due to error
or fraud may occur and not be detected.
There have been no changes in the Company`s ICFR during the three months
ended June 30, 2011 that have materially affected, or are reasonably likely
to materially affect, the Company`s ICFR.
8. Cautionary Statement on Forward-Looking Information
This MD&A, which contains certain forward-looking statements, is intended to
provide readers with a reasonable basis for assessing the financial
performance of the Company. All statements, other than statements of
historical fact, are forward-looking statements. The words "believe",
"expect", "anticipate", "contemplate", "target", "plan", "intends",
"continue", "budget", "estimate", "may", "will", "schedule" and similar
expressions identify forward looking statements. Forward-looking statements
are necessarily based upon a number of estimates and assumptions that, while
considered reasonable by the Company, are inherently subject to significant
business, economic and competitive uncertainties and contingencies. Known
and unknown factors could cause actual results to differ materially from
those projected in the forward-looking statements. Such factors include, but
are not limited to, fluctuations in the currency markets such as Canadian
dollar, South African Rand and U.S. dollar, fluctuations in the prices of
PGM and other commodities, changes in government legislation, taxation,
controls, regulations and political or economic developments in Canada, the
United States, South Africa, or Barbados or other countries in which the
Company carries or may carry on business in the future, risks associated
with mining or development activities, the speculative nature of exploration
and development, including the risk of obtaining necessary licenses and
permits, and quantities or grades of reserves. Many of these uncertainties
and contingencies can affect the Company`s actual results and could cause
actual results to differ materially from those expressed or implied in any
forward-looking statements made by, or on behalf of, the Company. Readers
are cautioned that forward-looking statements are not guarantees of future
performance. There can be no assurance that such statements will prove to be
accurate and actual results and future events could differ materially from
those acknowledged in such statements. Specific reference is made to the
Company`s most recent Annual Information Form on file with Canadian
provincial securities regulatory authorities for a discussion of some of the
factors underlying forward-looking statements.
The Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future
events or otherwise, except to the extent required by applicable laws.
August 11, 2011
Ian Rozier
Date: 15/08/2011 15:53:01 Produced by the JSE SENS Department.
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