| Mon 14 Nov 2011, 15:11 | | EPS - Eastern Platinum Limited - Eastern Platinum Limited management`s |
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EPS
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EPS - Eastern Platinum Limited - Eastern Platinum Limited management`s
discussion and analysis of financial conditions and results of operations for
the three and nine months ended September 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 NINE MONTHS ENDED
SEPTEMBER 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
September 30, 2011 and for the three and nine 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 nine months ended
September 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 November 9, 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 September 30, 2011
2.2. Summary of results for the nine months ended September 30, 2011
3. Results of operations for the three and nine months ended September 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 September 30, 2011
- Eastplats recorded earnings attributable to equity shareholders of the Company
of $1,364,000 ($0.00 per share) in the quarter ended September 30, 2011 ("Q3
2011") compared to earnings of $4,039,000 ($0.01 per share) in the quarter ended
September 30, 2010 ("Q3 2010").
- EBITDA decreased to $2,912,000 in Q3 2011 compared to $11,120,000 in Q3 2010.
- PGM ounces sold decreased 29% to 26,955 ounces in Q3 2011 compared to 37,798
PGM ounces in Q3 2010.
- The U.S. dollar average delivered price per PGM ounce increased 14% to $1,088
in Q3 2011 compared to $953 in Q3 2010.
- The Rand average delivered price per PGM ounce increased 12% to R7,768 in Q3
2011 compared to R6,966 in Q3 2010.
- Total Rand operating cash costs increased 3% to R204 million in Q3 2011
compared to R197 million in Q3 2010.
- Rand operating cash costs net of by-product credits increased 34% to R6,097
per ounce in Q3 2011 compared to R4,566 per ounce in Q3 2010. Rand operating
cash costs increased 45% to R7,561 per ounce in Q3 2011 compared to R5,212 per
ounce in Q3 2010.
- U.S. dollar operating cash costs net of by-product credits increased 37% to
$854 per ounce in Q3 2011 compared to $625 per ounce achieved in Q3 2010. U.S.
dollar operating cash costs increased 49% to $1,059 per ounce in Q3 2011
compared to $713 per ounce in Q3 2010.
- Head grade increased to 4.1 grams per tonne in Q3 2011 from 4.0 grams per
tonne in Q3 2010.
- Average concentrator recovery decreased to 78% in Q3 2011 compared to 81% in
Q3 2010.
- Development meters increased by 21% to 3,976 meters and on-reef development
increased by 25% to 2,248 meters compared to Q3 2010.
- Stoping units decreased 20% to 40,594 square meters in Q3 2011 compared to
50,892 square meters in Q3 2010.
- Run-of-mine ore hoisted decreased by 27% to 265,889 tonnes in Q3 2011 compared
to 362,042 tonnes in Q3 2010.
- Run-of-mine ore processed decreased by 27% to 261,280 tonnes in Q3 2011
compared to 357,219 tonnes in Q3 2010.
- The Company`s Lost Time Injury Frequency Rate (LTIFR) improved to 1.66 in Q3
2011 compared to 4.66 in Q3 2010.
- At September 30 2011, the Company had a cash position (including cash, cash
equivalents and short term investments) of $267,164,000 (December 31, 2010 -
$350,292,000).
2.2 Summary of results for the nine months ended September 30, 2011
- Eastplats recorded a net loss attributable to equity shareholders of the
Company of $12,220,000 ($0.01 loss per share) in the nine months ended September
30, 2011 ("9M 2011") compared to earnings of $8,311,000 ($0.01 per share) in the
nine months ended September 30, 2010 ("9M 2010").
- EBITDA decreased 83% to $5,044,000 in 9M 2011 compared to $29,873,000 in 9M
2010.
- PGM ounces sold decreased 27% to 72,870 ounces in 9M 2011 compared to 99,149
PGM ounces in 9M 2010.
- The U.S. dollar average delivered price per PGM ounce increased 14% to $1,112
in 9M 2011 compared to $974 in 9M 2010.
- The Rand average delivered price per PGM ounce increased 7% to R7,777 in 9M
2011 compared to R7,249 in 9M 2010.
- Total Rand operating cash costs increased 4% to R620 million in 9M 2011
compared to R594 million in 9M 2010.
- Rand operating cash costs net of by-product credits increased 37% to R6,691
per ounce in 9M 2011 compared to R4,896 per ounce in 9M 2010. Rand operating
cash costs increased 42% to R8,513 per ounce in 9M 2011 compared to R5,995 per
ounce in 9M 2010.
- U.S. dollar operating cash costs net of by-product credits increased 46% to
$959 per ounce in 9M 2011 compared to $658 per ounce achieved in 9M 2010. U.S.
dollar operating cash costs increased 52% to $1,221 per ounce in 9M 2011
compared to $805 per ounce in 9M 2010.
- Head grade decreased to 4.0 grams per tonne in 9M 2011 from 4.1 grams per
tonne in 9M 2010.
- Average concentrator recovery decreased to 78% in 9M 2011 compared to 80% in
9M 2010.
- Development meters increased by 26% to 11,757 meters and on-reef development
increased by 28% to 6,772 meters compared to 9M 2010.
- Stoping units decreased 24% to 117,096 square meters in 9M 2011 compared to
153,225 square meters in 9M 2010.
- Run-of-mine ore hoisted decreased by 26% to 716,424 tonnes in 9M 2011 compared
to 963,537 tonnes in 9M 2010.
- Run-of-mine ore processed decreased by 24% to 708,766 tonnes in 9M 2011
compared to 938,101 tonnes in 9M 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
Sept 30 June 30 Mar 31 Dec 31
Revenues $ 31,453 $ 26,876 $ 35,702 $ 45,616
Cost of operations (34,043) (36,415) (34,409) (36,272)
Mine operating (loss)
earnings (2,590) (9,539) 1,293 9,344
Expenses (G&A and
share-based payment) (2,568) (2,978) (11,318) (4,382)
Operating (loss) profit (5,158) (12,517) (10,025) 4,962
Net (loss) profit
attributable to equity
shareholders of the Company $ 1,364 $ (7,951) $ (5,633) $ 5,041
(Loss) earnings per
share - basic $ 0.00 $ (0.01) $ (0.01) $ 0.01
(Loss) earnings per
share - diluted $ 0.00 $ (0.01) $ (0.01) $ 0.01
Average foreign exchange
rates
South African Rand per
US dollar 7.14 6.79 7.01 6.91
US dollar per Canadian dollar 1.0204 1.0335 1.0141 0.9870
Period end foreign exchange
rates
South African Rand per
US dollar 8.09 6.76 6.75 6.59
US dollar per Canadian dollar 0.9540 1.0368 1.0314 1.0054
Selected quarterly data 2010 2009
Sept 30 June 30 March 31 Dec 31
Revenues $ 38,073 $ 36,612 $ 34,699 $ 34,259
Cost of operations (32,735) (32,383) (31,018) (29,294)
Mine operating (loss)
earnings 5,338 4,229 3,681 4,965
Expenses (G&A and
share-based payment) (2,202) (2,050) (4,935) (3,523)
Operating (loss) profit 3,136 2,179 (1,254) 1,442
Net (loss) profit
attributable to equity
shareholders of the Company $ 4,039 $ 3,448 $ 824 $ 330
(Loss) earnings per
share - basic $ 0.01 $ 0.01 $ 0.00 $ 0.00
(Loss) earnings per
share - diluted $ 0.01 $ 0.00 $ 0.00 $ 0.00
Average foreign exchange
rates
South African Rand per
US dollar 7.31 7.53 7.51 7.50
US dollar per Canadian dollar 0.9621 0.9727 0.9608 0.9459
Period end foreign exchange
rates
South African Rand per
US dollar 7.00 7.66 7.33 7.41
US dollar per Canadian dollar 0.9718 0.9393 0.9844 0.951
3. Results of Operations for the three and nine months ended September 30, 2011
The following table sets forth selected consolidated financial information for
the three and nine months ended September 30, 2011 and 2010:
Condensed consolidated interim income statements
(Expressed in thousands of U.S. dollars, except per share amounts - unaudited)
Three months ended
September 30,
2011 2010
Revenue $ 31,453 $ 38,073
Cost of operations
Production costs 28,541 26,953
Depletion and depreciation 5,502 5,782
Mine operating (loss) earnings (2,590) 5,338
Expenses
General and administrative 2,546 2,186
Share-based payments 22 16
Operating (loss) profit (5,158) 3,136
Other income (expense)
Interest income 1,376 459
Finance costs (322) (392)
Foreign exchange gain (loss) 3,108 (576)
(Loss) profit before income taxes (996) 2,627
Deferred income tax recovery 447 561
Net (loss) profit for the period $ (549) $ 3,188
Attributable to
Non-controlling interest $ (1,913) $ (851)
Equity shareholders of the Company 1,364 4,039
Net (loss) profit for the period $ (549) $ 3,188
Earnings (loss) per share
Basic $ 0.00 $ 0.01
Diluted $ 0.00 $ 0.01
Weighted average number of common share outstanding
Basic 908,188 683,038
Diluted 916,706 693,409
Nine months ended
September 30,
2011 2010
Revenue $ 94,031 $ 109,384
Cost of operations
Production costs 88,987 79,511
Depletion and depreciation 15,880 16,625
Mine operating (loss) earnings (10,836) 13,248
Expenses
General and administrative 8,573 7,419
Share-based payments 8,291 1,768
Operating (loss) profit (27,700) 4,061
Other income (expense)
Interest income 4,298 1,252
Finance costs (1,197) (1,355)
Foreign exchange gain (loss) 4,785 (344)
(Loss) profit before income taxes (19,814) 3,614
Deferred income tax recovery 1,040 1,657
Net (loss) profit for the period $ (18,774) $ 5,271
Attributable to
Non-controlling interest $ (6,554) $ (3,040)
Equity shareholders of the Company (12,220) 8,311
Net (loss) profit for the period $ (18,774) $ 5,271
Earnings (loss) per share
Basic $ (0.01) $ 0.01
Diluted $ (0.01) $ 0.01
Weighted average number of common share outstanding
Basic 908,129 682,350
Diluted 90 8,129 693,754
Condensed consolidated statements of September 30, December 31,
2011 2010
financial position
Total assets $ 963,956 $ 1,126,975
Total long-term liabilities $ 44,627 $ 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
September 30 June 30 March 31
Key financial statistics
(dollar amounts stated in U.S. dollars)
Sales - PGM ounces 26,955 20,528 25,387
Average delivered price per ounce (2) $1,088 $1,113 $1,136
Average basket price $1,290 $1,319 $1,344
Rand average delivered price per ounce R 7,768 R 7,557 R 7,963
Rand average basket price R 9,211 R 8,956 R 9,421
Cash costs per ounce of PGM (1) $1,059 $1,515 $1,154
Cash costs per ounce of PGM,
net of chrome by-product credits (1) $854 $1,196 $880
Rand cash costs per ounce of PGM (1) R 7,561 R 10,287 R 8,090
Rand cash costs per ounce of PGM,
net of chrome by-product credits (1) R 6,097 R 8,119 R 6,167
Key production statistics
Run-of-mine ("ROM") ore tonnes processed 261,280 201,986 245,500
Development meters 3,976 3,562 4,219
On-reef development meters 2,248 2,090 2,434
Stoping units (square meters) 40,594 31,828 44,674
Concentrator recovery from ROM ore 78% 76% 79%
Chrome sold (tonnes) 64,608 60,661 63,578
Metal in concentrate sold (ounces)
Platinum (Pt) 13,656 10,363 12,790
Palladium (Pd) 5,844 4,485 5,494
Rhodium (Rh) 2,294 1,740 2,162
Gold (Au) 98 74 97
Iridium (Ir) 967 728 919
Ruthenium (Ru) 4,096 3,138 3,925
Total PGM ounces 26,955 20,528 25,387
2010
December 31 September 30 June 30
Key financial statistics
(dollar amounts stated in U.S.
dollars)
Sales - PGM ounces 32,752 37,798 30,820
Average delivered price per ounce (2) $1,058 $953 $1,015
Average basket price $1,250 $1,128 $1,200
Rand average delivered price per ounce R 7,311 R 6,966 R 7,643
Rand average basket price R 8,638 R 8,246 R 9,036
Cash costs per ounce of PGM (1) $928 $713 $882
Cash costs per ounce of PGM,
net of chrome by-product credits (1) $653 $625 $646
Rand cash costs per ounce of PGM (1) R 6,412 R 5,212 R 6,639
Rand cash costs per ounce of PGM,
net of chrome by-product credits (1) R 4,509 R 4,566 R 4,866
Key production statistics
Run-of-mine ("ROM") ore tonnes
processed 327,872 357,219 290,028
Development meters 3,501 3,299 3,202
On-reef development meters 1,925 1,797 1,573
Stoping units (square meters) 53,044 50,892 50,573
Concentrator recovery from ROM ore 78% 81% 80%
Chrome sold (tonnes) 89,123 50,148 76,677
Metal in concentrate sold (ounces)
Platinum (Pt) 16,526 19,195 15,433
Palladium (Pd) 7,055 8,129 6,769
Rhodium (Rh) 2,786 3,216 2,661
Gold (Au) 117 131 108
Iridium (Ir) 1,183 1,323 1,077
Ruthenium (Ru) 5,085 5,804 4,772
Total PGM ounces 32,752 37,798 30,820
2009
March 31 December 31
Key financial statistics
(dollar amounts stated in U.S. dollars)
Sales - PGM ounces 30,531 34,000
Average delivered price per ounce (2) $959 $860
Average basket price $1,130 $1,008
Rand average delivered price per ounce R 7,202 R 6,450
Rand average basket price R 8,486 R 7,560
Cash costs per ounce of PGM (1) $841 $706
Cash costs per ounce of PGM,
net of chrome by-product credits (1) $711 $621
Rand cash costs per ounce of PGM (1) R 6,315 R 5,296
Rand cash costs per ounce of PGM,
net of chrome by-product credits (1) R 5,336 R 4,661
Key production statistics
Run-of-mine ("ROM") ore tonnes processed 290,854 321,983
Development meters 2,812 3,254
On-reef development meters 1,931 2,135
Stoping units (square meters) 51,760 55,153
Concentrator recovery from ROM ore 78% 79%
Chrome sold (tonnes) 75,846 66,694
Metal in concentrate sold (ounces)
Platinum (Pt) 15,405 17,012
Palladium (Pd) 6,562 7,444
Rhodium (Rh) 2,607 2,923
Gold (Au) 105 121
Iridium (Ir) 1,106 1,240
Ruthenium (Ru) 4,746 5,260
Total PGM ounces 30,531 34,000
(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 September 30, 2011 compared to the quarter ended September 30,
2010
In Q3 2011, CRM recorded a Lost Time Injury Frequency Rate ("LTIFR") of 1.66
compared to 4.66 in Q3 2010. There were three lost time injuries in Q3 2011
compared to nine lost time injuries in Q3 2010.
The Company generated revenue of $31,453,000 in Q3 2011 of which $25,924,000 is
PGM revenue and $5,529,000 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 $1,088 per PGM ounce
in Q3 2011, compared to $953 in Q3 2010 and $1,113 in the second quarter of 2011
("Q2 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 $1,772,000 in the three months ended September 30, 2011, compared
to positive price adjustments of $239,000 in the three months ended September
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
Sep tember 30,
2011 2010
Revenue before provisional price adjustments $ 33,225 $ 37,834
Provisional price adjusments
Adjustments to revenue upon settlement of prior periods`
sales (291) (192)
Mark-to-market adjustment on sales not yet settled at
end of period (1,481) 431
Revenue as reported in the income statement $ 31,453 $ 38,073
Nine months ended
September 30,
2011 2010
Revenue before provisional price adjustments $ 95,773 $ 107,071
Provisional price adjusments
Adjustments to revenue upon settlement of prior
periods` sales (262) 1,882
Mark-to-market adjustment on sales not yet settled at
end of period (1,481) 431
Revenue as reported in the income statement $ 94,031 $ 109,384
Third quarter production was negatively impacted due to slower than anticipated
production build-up at the Maroelabult section as new JIC crews were integrated
into the section subsequent to the suspension of 155 production workers
following the illegal underground sit-in in May. PGM ounces sold decreased by
29% in Q3 2011 compared to Q3 2010 due to lower run-of-mine ore tonnes processed
(261,280 tonnes in Q3 2011 compared to 357,219 tonnes in Q3 2010) and lower
concentrator recovery (78% in Q3 2011 compared to 81% in Q3 2010), which were
offset by an increase in grade (4.1 grams per tonne in Q3 2011 compared to 4.0
grams per tonne in Q3 2010).
Operating cash costs, a non-IFRS measure, are incurred in Rand. Total Rand
operating cash costs increased by 3% compared to Q3 2010, but Rand operating
cash costs per ounce increased by 45% from R5,212 per ounce in Q3 2010 to R7,561
per ounce in Q3 2011 primarily due to a 29% decrease in ounces sold.
Operating cash costs stated in U.S. dollars increased by 49% from $713 per ounce
in Q3 2010 to $1,059 per ounce in Q3 2011 primarily due to a 29% decrease in
ounces sold and a 3% increase in total Rand operating cash costs combined with a
2% appreciation of the South African Rand relative to the U.S. dollar. The
average U.S. dollar-Rand exchange rate was R7.14:$1.00 in Q3 2011 compared to
R7.31:$1.00 in Q3 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 64,608 tonnes of chrome in Q3 2011 (50,148
tonnes in Q3 2010). Net chrome revenue recognized was $86 per tonne ($67 per
tonne in Q3 2010) for a total of $5,529,000 ($3,341,000 in Q3 2010). The 28%
increase in chrome revenue recognized per tonne compared to Q3 2010 was mainly
due to a one-time adjustment to chrome revenues recorded in Q3 2010 that
resulted from a change to the timing of chrome revenue recognition.
Q3 2011 chrome revenues of $5,529,000 reduced operating cash costs from $1,059
to $854 per ounce net of by-product credits and from R7,561 to R6,097 per ounce
net of by-product credits.
Quarter ended September 30, 2011 compared to the quarter ended June 30, 2011
Revenues increased by 17% compared to Q2 2011 as a result of a 31% increase in
the ounces produced in the quarter, which was offset by a 2% decrease in the
average delivered price per ounce, a 16% ($1,025,000) decrease in chrome
revenues and a 42% ($527,000) increase in negative price adjustments. The
increase in ounces produced was due to a 29% increase in run-of-mine ore
processed (201,986 tonnes in Q2 2011 compared to 261,280 tonnes in Q3 2011)
combined with an increase in concentrator recovery from 76% in Q2 2011 to 78% in
Q3 2011, and an increase in head grade from 3.9 grams per tonne in Q2 2011 to
4.1 grams per tonne in Q3 2011. The increase in ounces produced and concentrator
recovery are the result of operations at the Zandfontein section steadily
returning to levels achieved in late 2010 subsequent to the negative impact of
the labour issues related to the illegal underground sit-in and unprotected
strike in early May.
Rand operating cash costs decreased by 27% from R10,287 per ounce in Q2 2011 to
R7,561 per ounce in Q3 2011 primarily as a result of a 31% increase in ounces
produced which was offset by a 3% decrease in total Rand operating cash costs.
Operating cash costs stated in U.S. dollars decreased by 30% from $1,515 per
ounce in Q2 2011 to $1,059 per ounce in Q3 2011 also due to the 31% increase in
ounces produced, a 3% decrease in total Rand operating cash costs and a 5%
depreciation of the South African Rand relative to the U.S. dollar. The average
U.S. dollar-Rand exchange rate was R7.14:$1.00 in Q3 2011 compared to
R6.79:$1.00 in Q2 2011.
Nine months ended September 30, 2011 compared to the nine months ended September
30, 2010 In 9M 2011, the Company sold 72,870 PGM ounces, a decrease of 27%
compared to 9M 2010, primarily as a result of a 24% decrease in run-of-mine ore
processed in 2011 (938,101 tonnes in 9M 2010 compared to 708,766 tonnes in 9M
2011), combined with a decrease in the recovery rate (80% in 9M 2010 compared to
78% in 9M 2011) and a decrease in head grade (4.1 grams per tonne in 9M 2010
compared to 4.0 grams per tonne in 9M 2011).
The average delivered basket price per ounce increased from $974 in 9M 2010 to
$1,112 in 9M 2011.
Operating cash costs increased 52% from $805 per ounce in 9M 2010 to $1,221 per
ounce in 9M 2011 due to a 27% decrease in ounces produced and a 4% increase in
total Rand operating cash costs combined with a 6% appreciation of the South
African Rand relative to the U.S. dollar. The average U.S. dollar- Rand exchange
rate was R6.98:$1.00 in 9M 2011 compared to R7.45:$1.00 in 9M 2010.
Total Rand operating cash costs increased 4% between 9M 2010 and 9M 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 that led to a higher number of vehicle repairs in 2011
than in 2010, and an increase in support costs as a result of changes to the
support pattern.
Additional grout packs are being installed to support the ground conditions.
Power and electricity costs now comprise approximately 8% 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
September 30,
2011 2010
Mine operating (loss ) earnings $ (2,590) $ 5,338
Depletion and depreciation 5,502 $ 5,782
EBITDA (1) 2,912 11,120
Production costs as reported 28,541 26,953
Adjustments for miscellaneous costs (2) 4 (3)
Cash operating costs 28,545 26,950
Less by-product credits - chrome revenues and adjustments (5,529) (3,341)
Cash operating costs net of by-product credits 23,016 23,609
Ounces sold 26,955 37,798
Cash cost per ounce sold $ 1,059 $ 713
Cash cost per ounce sold net of by-product credits $ 854 $ 625
Nine months ended
September 30,
2011 2010
Mine operating (loss) earnings $ (10,836) $ 13,248
Depletion and depreciation 15,880 16,625
EBITDA (1) 5,044 29,873
Production costs as reported 88,987 79,511
Adjustments for miscellaneous costs (2) (45) 286
Cash operating costs 88,942 79,797
Less by-product credits - chrome revenues and
adjustments (19,046) (14,578)
Cash operating costs net of by-product credits 69,896 65,219
Ounces sold 72,870 99,149
Cash cost per ounce sold $ 1,221 $ 805
Cash cost per ounce sold net of by-product credits $ 959 $ 658
(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 nine months ended September 30, 2011, the Company spent approximately
$42,532,000 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 will begin ramping 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/Kennedy`s Vale open-pit and concentrator project,
which was reinitiated in Q4 2010, continued to advance in 2011. During the nine
months ended September 30, 2011, expenditures of $18,722,000 at this project
consisted of site capture, installation of temporary works, mass earthworks and
the development of tender documentation for installation of concrete, steel,
mechanical equipment and piping for the 90,000 tonne-per-month (tpm)
concentrator. Engineering and construction planning for the open-pit mine at
Mareesburg is well advanced and tenders for contract mining will be released in
early 2012. There are approximately 200 people working on site, with the
workforce growing on a daily basis. A similar sized crew is working on housing
development for the operating staff.
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 of ore from
the Mareesburg open pit will allow the concentrator to start to ramp up quickly
to full capacity immediately upon commissioning. To accommodate future capacity
increases, the plant at Kennedy`s Vale includes 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.
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 Spitzkop
and Mareesburg projects. Corporate office costs include legal and accounting,
regulatory, executive management fees, investor relations, travel and consulting
fees.
G&A increased by 16% from $2,186,000 in Q3 2010 to $2,546,000 in Q3 2011 mainly
due to a $114,000 increase in G&A at the Company`s South African subsidiaries
combined with the appreciation of the South African Rand relative to the U.S.
dollar. South African G&A expenses increased due to legal fees incurred in
connection with the resolution of the strike action at CRM in May. The average
U.S. dollar- Rand exchange rate was R7.14:$1.00 in Q3 2011 compared to
R7.31:$1.00 in Q3 2010.
G&A decreased 13% from $2,932,000 in Q2 2011 to $2,546,000 in Q3 2011 mainly due
to $228,000 decrease in G&A at the Company`s head office that resulted from a
decrease in accounting and legal, shareholder communication and travel related
costs.
G&A increased 16% from $7,419,000 in 9M 2010 to $8,573,000 in 9M 2011 primarily
due to a $562,000 increase in G&A at the Company`s head office as increases in
annual fees were paid to certain officers and directors, combined with the
appreciation of the South African Rand relative to the U.S. dollar. The average
U.S. dollar-Rand exchange rate was R6.98:$1.00 in 9M 2011 compared to
R7.45:$1.00 in 9M 2010.
Interest income recorded during the three and nine months ended September 30,
2011 was $1,376,000 and $4,298,000 compared with $459,000 and $1,252,000 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 nine months ended September 30, 2011, the Company recorded
a deferred income tax recovery of $447,000 and a net deferred tax recovery of
$1,040,000, which consists of current tax expense of $377,000 and a deferred
income tax recovery of $1,417,000. 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 $36,904,000 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 September 30, 2011, the Company had working capital of $283,125,000 (December
31, 2010 - $362,691,000) and cash and cash equivalents and short-term
investments of $267,164,000 (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. In the nine
months ended September 30, 2011, the Company spent over $42 million in
development costs at CRM and over $18 million in the construction of
Mareesburg/Kennedy`s Vale open-pit and concentrator. The Company`s working
capital and cash position are affected by fluctuations in the exchange rates
between the Rand and the U.S. dollar.
The Company had no long-term debt at September 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 $100 million corporate debt facility through certain of its South African
subsidiaries. The mandated lead arrangers are UniCredit Bank AG, London Branch
and The Standard Bank of South Africa Limited.
The Company expects to formalize the facility agreement before the end of the
year.
4.1 Outlook
The PGM industry has experienced significant global economic uncertainty and
market volatility since 2008. Since the beginning of 2009, PGM prices in U.S.
dollar terms have generally trended upward, but this recovery was significantly
negated by the strength of the Rand against the U.S. dollar. As a result, the
U.S. dollar realized basket prices that the Company receives 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 were at 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.
The recovery of PGM prices in 2009 and 2010 allowed the Company to resume mine
development at the Crocette section at CRM in April 2010 and commence 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.
Upon the closing of the debt facility discussed above, the Company believes that
it will have sufficient funds in the form of cash, short-term investments and
undrawn credit facilities available to complete the development of the
Mareesburg/Kennedy`s Vale open-pit and concentrator project, 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 September 30, 2011, the Company assessed the carrying values of its mineral
properties as a result of the sharp and sudden decrease in PGM prices in late
September. This also contributed to the decrease in the Company`s share price,
resulting in the Company`s market capitalization falling below its book value as
at September 30, 2011. Based on current and expected PGM prices and cost
structures, management has concluded that the values of the Company`s mineral
properties have not been impaired at this time.
However, should current 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 September 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 Q3 2011, no options were
forfeited or exercised.
During the nine months ended September 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 nine months was $8,193,000, 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 9M 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. 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
$19,000 and $99,000 in the three and nine months ended September 30, 2011,
respectively, and a share-based payment liability of $34,000.
As at November 9, 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 which expire between 2011 and 2018.
4.4 Contractual Obligations, Commitments and Contingencies
The Company`s major contractual obligations and commitments at September 30,
2011 were as follows:
(in thousands of U.S. dollars)
Less than 1 More than 5
Total year 1-5 y ears years
Provision for environmental
rehabilitation $ 26,606 $ - $ - $ 26,606
Capital expenditure and
purchase commitments
contracted at September 30,
2011 but not recognized on
the unaudited condensed
consolidated interim
statement of financial
position 30,459 30,459 - -
Finance lease obligations 2,228 2,228 - -
$ 59,293 $ 32,687 $ - $ 26,606
In June, 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. In July, 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 continue 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
September 30,
2011 2010
Trading transactions
Management and consulting fees $ 401 $ 333
Reimbursements of expenses 90 29
Total trading transactions $ 491 $ 362
Compensation of key management personnel
Salaries and directors` fees $ 676 $ 583
Share-based payments - -
Total compensation of key management personnel $ 676 $ 583
Ni ne months ended
September 30,
2011 2010
Trading transactions
Management and consulting fees $ 1,246 $ 1,018
Reimbursements of expenses 145 91
Total trading transactions $ 1,391 $ 1,109
Compensation of key management personnel
Salaries and directors` fees $ 2,028 $ 1,699
Share-based payments 7,996 1,627
Total compensation of key management personnel $ 10,024 $ 3,326
Management and consulting fees increased during the three and nine months ended
September 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.$1.0204:Cdn$1.00 in Q3 2011
compared to U.S.$0.9621:Cdn$1.00 in Q3 2010.
Salaries and directors` fees increased during the three and nine months ended
September 30, 2011 as a result of increases to annual fees granted to certain
officers and directors applied retroactively to January 1, 2011 combined with an
appreciation of the Canadian dollar relative to the U.S. dollar. Share-based
payments increased from $1,627,000 during the nine months ended September 30,
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 nine months ended September 30, 2011, five 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 Interests in Other Entities
IFRS 12 outlines the disclosures 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.
(e) IFRIC Interpretation 20 Stripping Costs in the Production Phase of a Surface
Mine
IFRIC Interpretation 20 summarizes the method of accounting for waste removal
costs incurred as a result of surface mining activity during the production
phase of a mine.
During the nine months ended September 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 September 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 September 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 September 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
September 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.
November 9, 2011
Ian Rozier
Date: 14/11/2011 15:11:50 Produced by the JSE SENS Department.
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