| Tue 6 Mar 2012, 15:14 | | EPS - Eastern Platinum Limited - Consolidated financial statements of Eastern |
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EPS
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EPS - Eastern Platinum Limited - Consolidated financial statements of Eastern
Platinum Limited December 31, 2011 and 2010
EASTERN PLATINUM LIMITED
(Incorporated in Canada)
(Canadian Registration number BC0722783)
(South African Registration number 2007/006318/10)
Share Code TSX: ELR ISIN: CA 2768551038
Share Code AIM: ELR ISIN: CA 2768551038
Share Code JSE: EPS ISIN: CA 2768551038
Consolidated financial statements of
Eastern Platinum Limited
December 31, 2011 and 2010
Eastern Platinum Limited
December 31, 2011
Table of contents
Independent Auditor`s Report ........................................ 3
Consolidated income statements ......................... ............ 4
Consolidated statements of comprehensive (loss) income .............. 5
Consolidated statements of financial position .............. ........ 6
Consolidated statements of changes in equity......................... 7
Consolidated statements of cash flows ............................... 8
Notes to the consolidated financial statements....................... 9-51
Deloitte & Touche LLP
2800 - 1055 Dunsmuir Street
4 Bentall Centre
P.O. Box 49279
Vancouver BC V7X 1P4
Canada
Tel: 604-669-4466
Fax: 604-685-0395
www.deloitte.ca
Independent Auditor`s Report
To the Shareholders of
Eastern Platinum Limited
We have audited the accompanying consolidated financial statements of Eastern
Platinum Limited (the "Company"), which comprise the consolidated statements
of financial position as at December 31, 2011 and 2010, and the consolidated
statements of income, comprehensive (loss) income, changes in equity, and cash
flows for the years then ended, and a summary of significant accounting
policies and other explanatory information.
Management`s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these
consolidated financial statements in accordance with International Financial
Reporting Standards, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
Auditor`s Responsibility
Our responsibility is to express an opinion on these consolidated financial
statements based on our audits. We conducted our audits in accordance with
Canadian generally accepted auditing standards.
Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the
amounts and disclosures in the consolidated financial statements. The
procedures selected depend on the auditor`s judgment, including the assessment
of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments,
the auditor considers internal control relevant to the entity`s preparation
and fair presentation of the consolidated financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity`s
internal control. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the
consolidated financial statements.
We believe that the audit evidence we have obtained in our audits is
sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31,
2011 and 2010, and its financial performance and its cash flows for the years
then ended in accordance with International Financial Reporting Standards.
(Signed) Deloitte & Touche LLP
Chartered Accountants
Vancouver, British Columbia
March 5, 2012
Eastern Platinum Limited
Consolidated income statements
(Expressed in thousands of U.S. dollars, except per share amounts)
Year ended Year ended
Note December 31, December 31,
2011 2010
Revenue $ 113,203 $ 155,000
Cost of operations
Production costs 114,614 109,901
Depletion and depreciation 7 20,451 22,507
Impairment 7(e), 16 46,327 -
181,392 132,408
Mine operating (loss) earnings (68,189) 22,592
Expenses
General and administrative 7(d) 11,847 12,117
Share-based payments 8(f)(g) 8,325 1,452
20,172 13,569
Operating (loss) profit (88,361) 9,023
Other income (expense)
Interest income 5,529 1,797
Finance costs 9 (1,549) (1,807)
Foreign exchange loss (2,551) (160)
(Loss) profit before income taxes (86,932) 8,853
Income tax (expense) recovery 10 (56) 924
Net (loss) profit for the year $ (86,988) $ 9,777
Attributable to
Non-controlling interest 11 $ (10,443) $ (3,575)
Equity shareholders of the Company (76,545) 13,352
Net (loss) profit for the year $ (86,988) $ 9,777
(Loss) earnings per share
Basic 12 $ (0.08) $ 0.02
Diluted 12 $(0.08) $ 0.02
Weighted average number of common
shares
outstanding in thousands
Basic 12 908,199 683,177
Diluted 12 908,199 694,839
See accompanying notes to the consolidated financial statements
Eastern Platinum Limited
Consolidated statements of comprehensive (loss) income
(Expressed in thousands of U.S. dollars)
Year ended Year ended
December 31, December 31,
2011 2010
Net (loss) profit for the year $ (86,988) $ 9,777
Other comprehensive (loss) income
Exchange differences on translating foreign
operations (120,935) 70,355
Exchange differences on translating
non-controlling interest (268) 762
Comprehensive (loss) income for the year $ (208,191) $ 80,894
Attributable to
Non-controlling interest (10,711) (2,813)
Equity shareholders of the Company (197,480) 83,707
Comprehensive (loss) income for the year $ (208,191) $ 80,894
See accompanying notes to the consolidated financial statements
Eastern Platinum Limited
Consolidated statements of financial position as at
December 31, 2011 and 2010
(Expressed in thousands of U.S. dollars)
December 31, December 31,
Note 2011 2010
Assets
Current assets
Cash and cash equivalents 13 $ 151,838 $ 107,846
Short-term investments 98,963 242,446
Trade and other receivables 14 23,580 33,787
Inventories 15 7,989 8,832
282,370 392,911
Non-current assets
Property, plant and equipment 7 615,439 715,976
Refining contract 16 9,009 14,265
Other assets 17 7,995 3,823
$ 914,813 $ 1,126,975
Liabilities
Current liabilities
Trade and other payables 18 $ 40,459 $ 27,009
Finance leases 19 1,675 3,211
42,134 30,220
Non-current liabilities
Provision for environmental
rehabilitation 20 8,390 8,934
Deferred tax liabilities 10 33,520 46,642
84,044 85,796
Equity
Issued capital 8 1,230,358 1,219,869
Treasury shares 8(g) (334) -
Equity-settled employee benefits reserve 41,563 33,390
Foreign currency translation reserve (103,479) 17,456
Deficit (333,856) (236,764)
Capital and reserves attributable to
equity shareholders of the Company 834,252 1,033,951
Non-controlling interest 11 (3,483) 7,228
830,769 1,041,179
$ 914,813 $ 1,126,975
Approved and authorized for issue by the Board on March 5, 2012.
"David Cohen" "Robert Gayton"
David Cohen, Director Robert Gayton, Director
See accompanying notes to the consolidated financial statements
Eastern Platinum Limited
Consolidated statements of changes in equity
(Expressed in thousands of U.S. dollars, except number of shares)
Issued Treasury Equity- Foreign
capital shares settled currency
employee translation
benefits reserve
reserve
Balance December 31, 2009 $ 890,150 $ - $ 32,336 $ (52,899)
Net profit - - - -
Currency translation
adjustment - - - 70,355
Total comprehensive
income - - - 70,355
Public offering 345,391 - - -
Share issuance costs (16,501) - - -
Stock options exercised 829 - (398) -
Share-based payments - - 1,452 -
Balance, December 31,
2010 $ 1,219,869 $ - $ 33,390 $ 17,456
Net loss - - - -
Currency translation
adjustment - - - (120,935)
Total comprehensive loss - - - (120,935)
Acquisition of Lion`s
Head (Note 6) 10,389 - - -
Stock options exercised 100 - (100) -
Share-based payments - - 8,193 -
Treasury shares - (334) 80 -
Balance, December 31,
2011 $ 1,230,358 $ (334) $ 41,563 $ (103,479)
Deficit Capital and
reserves
attributable to
equity
shareholders
of the Company
Balance December 31, 2009 $ (250,116) $ 619,471
Net profit 13,352 13,352
Currency translation adjustment - 70,355
Total comprehensive income 13,352 83,707
Public offering - 345,391
Share issuance costs - (16,501)
Stock options exercised - 431
Share-based payments - 1,452
Balance, December 31, 2010 $ (236,764) $ 1,033,951
Net loss (76,545) (76,545)
Currency translation adjustment - (120,935)
Total comprehensive loss (76,545) (197,480)
Acquisition of Lion`s Head (Note 6) (20,547) (10,158)
Stock options exercised - -
Share-based payments - 8,193
Treasury shares - (254)
Balance, December 31, 2011 $ (333,856) $ 834,252
Non-controlling Equity
interest
Balance December 31, 2009 $ 10,041 $ 629,512
Net profit (3,575) 9,777
Currency translation adjustment 762 71,117
Total comprehensive income (2,813) 80,894
Public offering - 345,391
Share issuance costs - (16,501)
Stock options exercised - 431
Share-based payments - 1,452
Balance, December 31, 2010 $ 7,228 $ 1,041,179
Net loss (10,443) (86,988)
Currency translation adjustment (268) (121,203)
Total comprehensive loss (10,711) (208,191)
Acquisition of Lion`s Head (Note 6) - (10,158)
Stock options exercised - -
Share-based payments - 8,193
Treasury shares - (254)
Balance, December 31, 2011 $ (3,483) $ 830,769
See accompanying notes to the consolidated financial statements
Eastern Platinum Limited
Consolidated statements of cash flows
(Expressed in thousands of U.S. dollars)
Year ended Year ended
December 31, December 31,
Note 2011 2010
Operating activities
(Loss) profit before income taxes $ (86,932) $ 8,853
Adjustments to net (loss) profit for
non-cash items
Impairment 7(e), 16 46,327 -
Depletion and depreciation 7 21,170 22,507
Refining contract amortization 16 1,530 1,513
Environmental expense 409 -
Loss on disposal of property,
plant and equipment 67 -
Share-based payments 8(f)(g) 8,325 1,452
Interest income (5,529) (1,797)
Finance costs 9 1,549 1,807
Foreign exchange loss 2,551 160
Allowance for bad debts 14(b) 528 -
Net changes in non-cash working
capital items
Trade and other receivables 4,147 (2,318)
Inventories (828) (3,040)
Trade and other payables 3,299 1,322
Cash (used in) generated from operations (3,387) 30,459
Adjustments to net (loss) profit for cash items
Interest income received 4,917 1,767
Finance costs paid (243) (252)
Net taxes received 126 -
Net operating cash flows 1,413 31,974
Investing activities
Net maturity of short-term investments 137,999 (223,118)
Purchase of other assets (5,387) (1,129)
Property, plant and equipment expenditures (87,048) (32,991)
Disposal of property, plant and equipment 232 -
Acquisition related dividend refund received 228 -
Net investing cash flows 46,024 (257,238)
Financing activities
Common shares issued for cash, net
of share issue costs - public financing - 328,890
Common shares issued for cash -
exercise of stock options - 423
Payment of finance leases (1,205) (2,161)
Net financing cash flows (1,205) 327,152
Effect of exchange rate changes on
cash and cash equivalents (2,240) (1,291)
Increase in cash and cash equivalents 43,992 100,597
Cash and cash equivalents, beginning of year 107,846 7,249
Cash and cash equivalents, end of year $ 151,838 $ 107,846
See accompanying notes to the consolidated financial statements
Eastern Platinum Limited
Notes to the consolidated financial statements - years ended December 31, 2011
and 2010 (Expressed in thousands of U.S. dollars, except number of shares and
per share amounts)
1. Nature of operations
Eastern Platinum Limited (the "Company") is a platinum group metal ("PGM")
producer engaged in the mining, exploration and development of PGM properties
located in various provinces in South Africa.
Eastern Platinum Limited is a publicly listed company incorporated in Canada
with limited liability under the legislation of the Province of British
Columbia. The Company`s shares are listed on the Toronto Stock Exchange,
Alternative Investment Market, and the Johannesburg Stock Exchange.
The head office, principal address and records office of the Company are
located at 1075 West Georgia Street, Suite 250, Vancouver, British Columbia,
Canada, V6E 3C9. The Company`s registered address is 1055 West Georgia Street,
Suite 1500, Vancouver, British Columbia, Canada, V6E 4N7.
2. Basis of preparation
(a) Statement of compliance
These consolidated financial statements, including comparatives, have been
prepared using accounting policies in compliance with International Financial
Reporting Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB").
(b) Judgments and estimates
The preparation of financial statements requires management to make judgments,
estimates and assumptions that affect the application of policies and reported
amounts of assets and liabilities, and revenue and expenses. The estimates and
associated assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances, the
results of which form the basis of making the judgments about carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognized in the period in which the
estimate is revised if the revision affects only that period or in the period
of the revision and further periods if the review affects both current and
future periods.
Judgments made by management in the application of IFRS that have a
significant effect on the financial statements and estimates with a
significant risk of material adjustment in the current and following fiscal
years are discussed in Notes 4(v) and 4(w).
3. Application of new and revised International Financial Reporting Standards
Effective January 1, 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.
4. Summary of significant accounting policies
The consolidated financial statements have been prepared under the historical
cost convention, except for the revaluation of certain financial instruments.
The Company`s principal accounting policies are outlined below:
(a) Basis of consolidation
These consolidated financial statements incorporate the financial statements
of the Company and the entities controlled by the Company (its subsidiaries,
including special purpose entities). Control exists when the Company has the
power, directly or indirectly, to govern the financial and operating policies
of an entity so as to obtain benefits from its activities. The financial
statements of subsidiaries are included in the consolidated financial
statements from the date that control commences until the date that control
ceases. All significant intercompany transactions and balances have been
eliminated.
Non-controlling interest in the net assets of consolidated subsidiaries are
identified separately from the Company`s equity. Non-controlling interest
consists of the non- controlling interest at the date of the original business
combination plus the non- controlling interest`s share of changes in equity
since the date of acquisition.
Special Purpose Entities ("SPE`s") as defined in SIC 12 Consolidation -
Special Purpose Entities are entities which are created to accomplish a narrow
and well-defined objective (e.g. to act as a Black Economic Empowerment
("BEE") partner). SPE`s are subject to consolidation when there is an
indication that an entity controls the SPE.
The Company has determined that its investment in Gubevu Consortium Investment
Holdings (Pty) Ltd. ("Gubevu") is a SPE that the Company controls. The
accounts of Gubevu are consolidated with those of the Company.
(b) Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the
acquisition method. The consideration for each acquisition is measured as the
aggregate of the fair values (at the date of exchange) of assets given,
liabilities incurred or assumed, and equity instruments issued by the Company
in exchange for control of the acquiree. Any costs directly attributable to
the business combination are generally recognized in profit or loss as
incurred.
The acquiree`s identifiable assets, liabilities and contingent liabilities
that meet the conditions for recognition under IFRS 3 Business Combinations
are recognized at their fair values at the acquisition date, except for non-
current assets (or disposal groups) that are classified as held for sale in
accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations, which are recognized and measured at fair value less costs to
sell.
Goodwill arising on acquisition is recognized as an asset and initially
measured at cost, being the excess of the cost of the acquisition over the
Company`s interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities recognized. If the Company`s interest
in the net fair value of the acquiree`s identifiable assets, liabilities and
contingent liabilities exceeds the cost of the acquisition, the excess is
recognized immediately in profit or loss.
The interest of non-controlling shareholders in the acquiree is initially
measured at the non-controlling shareholders` proportion of the net fair value
of the assets, liabilities and contingent liabilities recognized.
(c) Presentation currency
The Company`s presentation currency is the U.S. dollar ("$"), as is general
practice within the mining industry. The functional currencies of the Company
and its South African subsidiaries are the Canadian Dollar and South African
Rand ("ZAR"), respectively. These consolidated financial statements have been
translated to the U.S. dollar in accordance with IAS 21 The Effects of Changes
in Foreign Exchange Rates. This standard requires that assets and liabilities
be translated using the exchange rate at period end, and income, expenses and
cash flow items are translated using the rate that approximates the exchange
rates at the dates of the transactions (i.e. the average rate for the period).
(d) Foreign currency translation
In preparing the financial statements of the individual entities, transactions
in currencies other than the entity`s functional currency (foreign currencies)
are recorded at the rates of exchange prevailing at the dates of the
transactions. At each statement of financial position date, monetary assets
and liabilities are translated using the period end foreign exchange rate. Non-
monetary assets and liabilities are translated using the historical rate on
the date of the transaction. Non-monetary assets and liabilities that are
stated at fair value are translated using the historical rate on the date that
the fair value was determined. All gains and losses on translation of these
foreign currency transactions are included in profit or loss.
(e) Revenue recognition
Revenue is measured at the fair value of the consideration received or
receivable. The following specific criteria must be met before revenue is
recognized:
(i) Sale of goods
Revenue from the sale of platinum group and other metals is recognized when
all of the following conditions are satisfied:
- the specific risks and rewards of ownership have been transferred to the
purchaser;
- the Company does not retain continuing managerial involvement to the degree
usually associated with ownership or effective control over the metals sold;
- the amount of revenue can be measured reliably;
- it is probable that the economic benefits associated with the transaction
will flow to the Company; and
- the costs incurred or to be incurred in respect of the sale can be measured
reliably.
The sale of platinum group and other metals is provisionally priced such that
the price is not settled until a predetermined future date based on the market
price at that time. Revenue on these sales is initially recognized (when the
conditions above are met) at the current market price. The difference between
the present value and the future value of the current market price is
recognized as interest income over the term of settlement. Subsequent to
initial recognition but prior to settlement, sales are marked to market at
each reporting date using the forward price for the period equivalent to that
outlined in the contract. This mark to market adjustment is recorded in
revenue.
(e) Revenue recognition
(ii) Rental income
Rental income from residential properties is recognized on a straight-line
basis over the term of the lease.
(iii) Interest income
Interest income is recognized in profit or loss as it accrues, using the
effective interest method.
(f) Share-based payments
The Company grants stock options to buy common shares of the Company to
directors, officers and employees. The board of directors grants such options
for periods of up to ten years, with vesting periods determined at its sole
discretion and at prices equal to or greater than the closing market price on
the day preceding the date the options were granted.
The fair value of the options is measured at grant date, using the Black-
Scholes option pricing model, and is recognized over the period that the
employees earn the options. The fair value is recognized as an expense with a
corresponding increase in equity. The amount recognized as an expense is
adjusted to reflect the number of share options expected to vest.
(g) Finance costs
Finance costs comprise interest payable on revenue advances, finance leases,
provision for environmental rehabilitation and other borrowings. Interest
payable on borrowings is calculated using the effective interest method and
foreign exchange gains and losses on foreign currency borrowings.
(h) Income taxes
Income tax expense consists of current and deferred tax expense. Income tax
expense is recognized in profit or loss.
Current tax expense is the expected tax payable on the taxable income for the
year, using tax rates enacted or substantively enacted at period end, adjusted
for amendments to tax payable with regards to previous years.
Deferred tax assets and liabilities are recognized for deferred tax
consequences attributable to unused tax loss carry forwards, unused tax
credits and differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using the enacted or substantively enacted
tax rates expected to apply when the asset is realized or the liability
settled.
The effect on deferred tax assets and liabilities of a change in tax rates is
recognized in profit or loss in the period that substantive enactment occurs.
A deferred tax asset is recognized to the extent that it is probable that
future taxable profits will be available against which the asset can be
utilized. To the extent that the Company does not consider it probable that a
deferred tax asset will be recovered, the deferred tax asset is reduced.
The following temporary differences do not result in deferred tax assets or
liabilities:
- the initial recognition of assets or liabilities, not arising in a business
combination, that does not affect accounting or taxable profit
- goodwill
- investments in subsidiaries, associates and jointly controlled entities
where the timing of reversal of the temporary differences can be controlled
and reversal in the foreseeable future is not probable.
Deferred tax assets and liabilities are offset when there is a legally
enforceable right to set off current tax assets against current tax
liabilities and when they relate to income taxes levied by the same taxation
authority and the Company intends to settle its current tax assets and
liabilities on a net basis.
(i) Earnings (loss) per share
Basic earnings (loss) per share is computed by dividing the net earnings
(loss) attributable to common shareholders by the weighted average number of
shares outstanding during the reporting period. Diluted earnings (loss) per
share is computed similar to basic earnings (loss) per share except that the
weighted average shares outstanding are increased to include additional shares
for the assumed exercise of stock options and warrants, if dilutive. The
number of additional shares is calculated by assuming that outstanding stock
options and warrants were exercised and that the proceeds from such exercises
were used to acquire common stock at the average market price during the
reporting periods.
(j) Comprehensive income (loss)
Comprehensive income (loss) is the change in the Company`s net assets that
results from transactions, events and circumstances from sources other than
the Company`s shareholders and includes items that are not included in net
profit such as unrealized gains or losses on available-for-sale investments,
gains or losses on certain derivative instruments and foreign currency gains
or losses related to translation of the financial statements of foreign
operations. The Company`s comprehensive income (loss), components of other
comprehensive income, and cumulative translation adjustments are presented in
the consolidated statements of comprehensive income (loss) and the
consolidated statements of changes in equity.
(k) Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, deposits in banks and
highly liquid investments with an original maturity of three months or less.
(l) Short-term investments
Short-term investments are investments which are transitional or current in
nature, with an original maturity greater than three months.
(m) Inventories
Inventories, comprising stockpiled ore, concentrate awaiting further
processing and sale, and chrome inventory are valued at the lower of cost and
net realizable value.
Consumables are valued at cost except when inventories are written down to net
realizable value, in which case consumables are valued at the lower of cost
and net realizable value, with replacement cost used as the best available
measure of net realizable value. Cost is determined using the weighted average
method and includes direct mining expenditures and an appropriate portion of
normal overhead expenditure. In the case of concentrate, direct concentrate
costs are also included.
Net realizable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
Obsolete, redundant and slow moving stores are identified and written down to
net realizable values.
(n) Property, plant and equipment
(i) Mining assets
Assets owned and mineral properties being depleted are recorded at cost less
accumulated depreciation and accumulated impairment losses. Mineral properties
not being depleted are recorded at cost less accumulated impairment losses.
All direct costs related to the acquisition, exploration and development of
mineral properties are capitalized until the properties to which they relate
are ready for their intended use, sold, abandoned or management has determined
there to be impairment. If economically recoverable ore reserves are
developed, capitalized costs of the related property are reclassified as
mineral properties being depleted and amortized using the units-of-production
method following commencement of production. Interest on borrowings incurred
to finance mining assets is capitalized until the asset is capable of carrying
out its intended use.
Mining properties and mining and process facility assets are amortized on a
units-of-production basis which is measured by the portion of the mine`s
proven and probable ore reserves recovered during the period. Capital work- in-
progress, which is included in mining assets, is not depreciated until the
assets are ready for their intended use.
Although the Company has taken steps to verify title to the properties in
which it has an interest, in accordance with industry standards for properties
in the exploration stage, these procedures do not guarantee the Company`s
title. Property title may be subject to unregistered prior agreements and non-
compliance with regulatory requirements.
(ii) Residential properties and other property, plant and equipment
Residential properties and other property, plant and equipment are recorded at
cost less accumulated depreciation and impairment losses. These assets are
depreciated using the straight-line method based on estimated useful lives,
which generally range from 5 to 7 years, with the exception of residential
properties and mine houses whose estimated useful lives are 50 years and
office buildings whose estimated useful lives are 20 years. Land is not
depreciated.
(ii) Residential properties and other property, plant and equipment
(continued)
Where an item of plant and equipment comprises significant components with
different useful lives, the components are accounted for as separate items of
plant and equipment.
Expenditures incurred to replace a component of an item of property, plant and
equipment that is accounted for separately, including major inspection and
overhaul expenditures, are capitalized. Directly attributable expenses
incurred for major capital projects and site preparation are capitalized until
the asset is brought to a working condition for its intended use. These costs
include dismantling and site restoration costs to the extent these are
recognized as a provision.
The cost of self-constructed assets includes the cost of materials, direct
labour and an appropriate portion of normal overheads.
The costs of day-to-day servicing are recognized in profit or loss as
incurred.
These costs are more commonly referred to as "maintenance and repairs."
Financing costs directly associated with the construction or acquisition of
qualifying assets are capitalized at interest rates relating to loans
specifically
raised for that purpose, or at the weighted average borrowing rate where the
general pool of group borrowings is utilized. Capitalization of borrowing
costs
ceases when the asset is substantially complete.
The depreciation method, useful life and residual values are assessed
annually.
(iii) Leased assets
Leases in which the Company assumes substantially all risks and rewards of
ownership are classified as finance leases. Assets held under finance leases
are recognized at the lower of the fair value of the leased property and the
present value of the minimum lease payments at inception of the lease, less
accumulated depreciation and impairment losses. Lease payments are accounted
for as discussed in Note 4(q).
(iv) Subsequent Costs
The cost of replacing part of an item within property, plant and equipment is
recognized when the cost is incurred if it is probable that the future
economic benefits will flow to the group and the cost of the item can be
measured reliably. The carrying amount of the part that has been replaced is
expensed. All other costs are recognized as an expense as incurred.
(v) Impairment
The Company`s tangible and intangible assets are reviewed for indications of
impairment at each statement of financial position date. If indication of
impairment exists, the asset`s recoverable amount is estimated.
An impairment loss is recognized when the carrying amount of an asset, or its
cash-generating unit, exceeds its recoverable amount. A cash-generating unit
is the smallest identifiable group of assets that generates cash inflows that
are largely independent of the cash inflows from other assets or groups of
assets. Impairment losses are recognized in profit and loss for the period.
Impairment losses recognized in respect of cash-generating units are allocated
first to reduce the carrying amount of any goodwill allocated to cash-
generating units and then to reduce the carrying amount of the other assets in
the unit on a pro-rata basis.
The recoverable amount is the greater of the asset`s fair value less costs to
sell and value in use. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks
specific to the asset. For an asset that does not generate largely independent
cash inflows, the recoverable amount is determined for the cash-generating
unit to which the asset belongs.
(vi) Reversal of impairment
An impairment loss is reversed if there is an indication that there has been a
change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset`s carrying
amount does not exceed the carrying amount that would have been determined,
net of depreciation or amortization, if no impairment loss had been
recognized. An impairment loss with respect to goodwill is never reversed.
(o) Refining contract
The Company sells substantially all its PGM concentrate to one customer under
the terms of an off-take or refining contract. The refining contract is
amortized over the original life of the contract, estimated to be fifteen
years, commencing in mid 2004. An evaluation of the carrying value of the
contract is undertaken whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable.
(p) Financial assets
Financial assets are classified into one of four categories:
- fair value through profit or loss ("FVTPL");
- held-to-maturity ("HTM");
- available for sale ("AFS"); and,
- loans and receivables.
The classification is determined at initial recognition and depends on the
nature and purpose of the financial asset.
(i) FVTPL financial assets
Financial assets are classified as FVTPL when the financial asset is held for
trading or it is designated as FVTPL.
A financial asset is classified as held for trading if:
- it has been acquired principally for the purpose of selling in the near
future;
- it is a part of an identified portfolio of financial instruments that the
- Company manages and has an actual pattern of short-term profit-taking; or
- it is a derivative that is not designated and effective as a hedging
instrument.
Financial assets classified as FVTPL are stated at fair value with any
resultant gain or loss recognized in profit or loss. The net gain or loss
recognized incorporates any dividend or interest earned on the financial
asset. The Company does not have any assets classified as FVTPL financial
assets.
(ii) HTM investments
HTM investments are recognized on a trade-date basis and are initially
measured at fair value, including transaction costs. The Company does not have
any assets classified as HTM investments.
(iii) AFS financial assets
Short-term investments and other assets held by the Company are classified as
AFS and are stated at fair value. Gains and losses arising from changes in
fair value are recognized in other comprehensive income and are accumulated in
the investments revaluation reserve. To date, these gains and losses have not
been significant due to the nature of the underlying investment. Impairment
losses, interest calculated using the effective interest method and foreign
exchange gains and losses on monetary assets, are recognized directly in
profit or loss rather than equity. When an investment is disposed of or is
determined to be impaired, the cumulative gain or loss previously recognized
in the investments revaluation reserve is included in profit or loss for the
period.
The fair value of AFS monetary assets denominated in a foreign currency is
translated at the spot rate at the statement of financial position date. The
change in fair value attributable to translation differences on amortized cost
of debt instruments is recognized in profit or loss, while other changes are
recognized in equity.
(iv) Loans and receivables
Trade receivables, loans, and other receivables that have fixed or
determinable payments that are not quoted in an active market are classified
as loans and receivables.
Loans and receivables are initially recognized at the transaction value and
subsequently carried at amortized cost less impairment losses. The impairment
loss of receivables is based on a review of all outstanding amounts at period
end. Bad debts are written off during the year in which they are identified.
Interest income is recognized by applying the effective interest rate, except
for short-term receivables when the recognition of interest would be
immaterial.
(v) Effective interest method
The effective interest method calculates the amortized cost of a financial
asset and allocates interest income over the corresponding period. The
effective interest rate is the rate that discounts estimated future cash
receipts over the expected life of the financial asset, or, where appropriate,
a shorter period, to the net carrying amount on initial recognition.
Income is recognized on an effective interest basis for debt instruments other
than those financial assets classified as FVTPL.
(vi) Impairment of financial assets
Financial assets, other than those at FVTPL, are assessed for indicators of
impairment at each period end. Financial assets are impaired when there is
objective evidence that, as a result of one or more events that occurred after
the initial recognition of the financial asset, the estimated future cash
flows of the investment have been impacted.
Objective evidence of impairment could include the following:
- significant financial difficulty of the issuer or counterparty;
- default or delinquency in interest or principal payments; or
- it has become probable that the borrower will enter bankruptcy or financial
reorganization.
For financial assets carried at amortized cost, the amount of the impairment
is the difference between the asset`s carrying amount and the present value of
the estimated future cash flows, discounted at the financial asset`s original
effective interest rate.
The carrying amount of all financial assets, excluding trade receivables, is
directly reduced by the impairment loss. The carrying amount of trade
receivables is reduced through the use of an allowance account. When a trade
receivable is considered uncollectible, it is written off against the
allowance account. Subsequent recoveries of amounts previously written off are
credited against the allowance account. Changes in the carrying amount of the
allowance account are recognized in profit or loss.
With the exception of AFS equity instruments, if, in a subsequent period, the
amount of the impairment loss decreases and the decrease relates to an event
occurring after the impairment was recognized, the previously recognized
impairment loss is reversed through profit or loss. On the date of impairment
reversal, the carrying amount of the financial asset cannot exceed its
amortized cost had impairment not been recognized.
(vii) Derecognition of financial assets
A financial asset is derecognized when:
- the contractual right to the asset`s cash flows expire; or
- if the Company transfers the financial asset and substantially all risks
and rewards of ownership to another entity.
(q) Leases
(i) The Company as lessor
Rental income from operating leases is recognized on a straight-line basis
over the term of the corresponding lease. Initial direct costs incurred in
negotiating and arranging an operating lease are added to the carrying amount
of the leased asset and recognized on a straight-line basis over the lease
term.
(ii) The Company as lessee
Assets held under finance leases are recognized as assets of the Company at
the lower of the fair value at the inception of the lease or the present value
of the minimum lease payments. The corresponding liability is recognized as a
finance lease obligation. Lease payments are apportioned between finance
charges and reduction of the lease obligation to achieve a constant rate of
interest on the remaining liability. Finance charges are charged to profit or
loss, unless they are directly attributable to qualifying assets, in which
case they are capitalized.
Operating lease payments are expensed on a straight-line basis over the term
of the relevant lease. Incentives received upon entry into an operating lease
are recognized straight-line over the lease term.
(r) Provisions
Provisions are recorded when a present legal or constructive obligation exists
as a result of past events where it is probable that an outflow of resources
embodying economic benefits will be required to settle the obligation, and a
reliable estimate of the amount of the obligation can be made.
The amount recognized as a provision is the best estimate of the consideration
required to settle the present obligation at the statement of financial
position date, taking into account the risks and uncertainties surrounding the
obligation. Where a provision is measured using the cash flows estimated to
settle the present obligation, its carrying amount is the present value of
those cash flows. When some or all of the economic benefits required to settle
a provision are expected to be recovered from a third party, the receivable is
recognized as an asset if it is virtually certain that reimbursement will be
received and the amount receivable can be measured reliably.
(s) Environmental rehabilitation
The Company recognizes liabilities for statutory, contractual, constructive or
legal obligations associated with the retirement of property, plant and
equipment, when those obligations result from the acquisition, construction,
development or normal operation of the assets. The net present value of future
rehabilitation cost estimates arising from the decommissioning of plant and
other site preparation work is capitalized to mining assets along with a
corresponding increase in the rehabilitation provision in the period incurred.
Discount rates using a pre-tax rate that reflect the time value of money are
used to calculate the net present value. The rehabilitation asset is
depreciated on the same basis as mining assets.
The Company`s estimates of reclamation costs could change as a result of
changes in regulatory requirements, discount rates and assumptions regarding
the amount and timing of the future expenditures. These changes are recorded
directly to mining assets with a corresponding entry to the rehabilitation
provision. The Company`s estimates are reviewed annually for changes in
regulatory requirements, discount rates, effects of inflation and changes in
estimates.
Changes in the net present value, excluding changes in the Company`s estimates
of reclamation costs, are charged to profit and loss for the period.
The net present value of restoration costs arising from subsequent site damage
that is incurred on an ongoing basis during production are charged to profit
or loss in the period incurred.
The costs of rehabilitation projects that were included in the rehabilitation
provision are recorded against the provision as incurred. The cost of ongoing
current programs to prevent and control pollution is charged against profit
and loss as incurred.
(t) Employee benefits
(i) Employee post-retirement obligations - defined contribution retirement
plan
The Company`s South African subsidiaries operate a defined contribution
retirement plan for its employees. The pension plan is funded by payments from
the employees and the subsidiaries and payments are charged to profit and loss
for the period as incurred. The assets of the different plans are held by
independently managed trust funds. The South African Pension Funds Act of 1956
governs these funds.
(ii) Leave pay
Employee entitlements to annual leave are recognized as they are earned by the
employees. A provision, stated at current cost, is made for the estimated
liability at period end.
(u) Financial liabilities and equity
Debt and equity instruments are classified as either financial liabilities or
as equity in accordance with the substance of the contractual arrangement.
An equity instrument is any contract that evidences a residual interest in the
assets of an entity after deducting all of its liabilities. Equity instruments
issued by the Company are recorded at the proceeds received, net of direct
issue costs.
Financial liabilities are classified as either financial liabilities at FVTPL
or other financial liabilities.
(i) Other financial liabilities
Other financial liabilities are initially measured at fair value, net of
transaction costs, and are subsequently measured at amortized cost using the
effective interest method, with interest expense recognized on an effective
yield basis.
The effective interest method is a method of calculating the amortized cost of
a financial liability and of allocating interest expenses over the
corresponding period. The effective interest rate is the rate that exactly
discounts estimated future cash payments over the expected life of the
financial liability, or, where appropriate, a shorter period, to the net
carrying amount on initial recognition.
The Company has classified trade and other payables, short-term financial
liabilities and long-term financial liabilities as other financial
liabilities.
(ii) Derecognition of financial liabilities
The Company derecognizes financial liabilities when, and only when, the
Company`s obligations are discharged, cancelled or they expire.
(v) Critical accounting estimates
Critical accounting estimates are estimates and assumptions made by management
that may result in material adjustments to the carrying amount of assets and
liabilities within the next financial year.
(i) Impairment of property, plant and equipment
Please refer to Note 4(n)(v).
(ii) Rehabilitation provision
The future value of the provision for environmental rehabilitation was
determined using an inflation rate of 6.00% (December 31, 2010 - 5.49%) and an
estimated life of mine of 20 years for Zandfontein (December 31, 2010 - 20
years), 9 years for Maroelabult (December 31, 2010 - 11 years), 16 years for
Crocette (December 31, 2010 - 14 years), 21 years for Kennedy`s Vale (December
31, 2010 - 1 year) and 21 years for Spitzkop (December 31, 2010 - 22 years).
The provision has been discounted to present value at a discount rate of 8.47%
(December 31, 2010 - 8.29%).
(w) Critical accounting judgments
Critical accounting judgements are accounting policies that have been
identified as being complex or involving subjective judgments or assessments.
(i) Determination of functional currency
In accordance with IAS 21 The Effects of Changes in Foreign Exchange Rates,
management determined that the functional currencies of Eastern Platinum
Limited and its South African subsidiaries are the Canadian Dollar and South
African Rand ("ZAR"), respectively, as these are the currencies of the primary
economic environment in which the companies operate.
(ii) Useful life of assets
At December 31, 2011 the remaining life of mine for Zandfontein, Maroelabult,
Crocette, Kennedy`s Vale and Spitzkop was assessed at 20 years, 9 years, 16
years, 21 years and 21 years, respectively (December 31, 2010 - 20 years, 11
years, 14 years, 1 year and 22 years, respectively) based on proven and
probable ore reserves. The change in remaining mine life will be evaluated
each year as the reserves move to the proven and probable category.
(iii) Depreciation rates
The estimated maximum useful lives of property, plant and equipment are:
Mining assets owned
Underground and other assets Life of mine
Mine houses 50 years
Office buildings 20 years
Plant Life of mine
Computer equipment 3 years
Mining assets leased 5 years
Mineral properties being depleted Life of mine
Residential properties 50 years
Properties and land 50 years
(x) Accounting standards issued but not yet effective
(i) Effective for annual periods beginning on or after July 1, 2011
- Amendments to IFRS 7 Financial Instruments: Disclosures
Increase in disclosure with regards to the transfer of financial assets,
especially if there is a disproportionate amount of transfer transactions that
take place around the end of a reporting period.
(ii) Effective for annual periods beginning on or after January 1, 2013
- New standard IFRS 10 Consolidated Financial Statements
IFRS 10 outlines the principles for the presentation and preparation of
consolidated financial statements.
- New standard 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.
- New standard 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.
- New standard 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.
- New interpretation 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.
- Amended standard IAS 19 Employee Benefits
IAS 19 outlines the accounting treatment and required disclosures for employee
benefits. The amendments applicable to the Company consist of modification of
the accounting treatment for termination benefits and the clarification of
miscellaneous issues including the classification of employee benefits.
- Amended standard 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.
- Amended standard 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.
(iii) Effective for annual periods beginning on or after January 1, 2015
- New standard IFRS 9 Financial Instruments
Partial replacement of IAS 39 Financial Instruments: Recognition and
Measurement
The Company has not early adopted these new and amended 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.
5. Subsidiaries and associates
(a) Subsidiaries
Details of the Company`s subsidiaries at December 31, 2011 are as follows:
Place of
incorporation
Name of subsidiary Principal activity and operation
Eastern Platinum Holdings Limited Holding company BVI (i)
Eastplats Holdings Limited Holding company BVI (i)
Eastplats Acquisition Co. Ltd. Holding company BVI (i)
Eastplats International Incorporated Holding company Barbados
Royal Anthem Investments 134 (Pty) Ltd. Holding company South Africa
Spitzkop Joint Venture Mining South Africa
Barplats Investments Limited Mining South Africa
Spitzkop Platinum (Pty) Ltd. Mining South Africa
Mareesburg Joint Venture Mining South Africa
Lion`s Head Platinum (Pty) Ltd. Holding company South Africa
Gubevu Consortium Investment Holdings
(Pty) Ltd. (ii) Holding company South Africa
Proportion of ownership interest
and voting power held
December 31, December 31,
Name of subsidiary 2011 2010
Eastern Platinum Holdings Limited 100% 100%
Eastplats Holdings Limited 100% 100%
Eastplats Acquisition Co. Ltd. 100% 100%
Eastplats International Incorporated 100% 100%
Royal Anthem Investments 134 (Pty) Ltd. 100% 100%
Spitzkop Joint Venture 93.37% 93.37%
Barplats Investments Limited 87.49% 87.49%
Spitzkop Platinum (Pty) Ltd. 86.74% 86.74%
Mareesburg Joint Venture 87% 75.5%
Lion`s Head Platinum (Pty) Ltd. 74% 51%
Gubevu Consortium Investment Holdings (Pty) Ltd. (ii) 49.99% 49.99%
(i) British Virgin Islands ("BVI")
(ii) The Company has determined that its investment in Gubevu Consortium
Investment Holdings (Pty) Ltd. is a Special Purpose Entity.
(b) Associates
Details of the Company`s associates at December 31, 2011 are as follows:
Place of
incorporation
Name of associate Principal activity and operation
Afrimineral Holdings (Pty) Ltd. Holding company South Africa
Proportion of ownership interest
and voting power held
December 31, December
31,
Name of associate 2011 2010
Afrimineral Holdings (Pty) Ltd. 49% 49%
6. Purchase of Lion`s Head Platinum (Pty) Ltd.
On December 14, 2011 the Company acquired a further 23% of Lion`s Head
Platinum (Pty) Ltd. ("Lion`s Head") to increase its direct and indirect
interest to 74%. The acquisition was by way of a purchase of 23 shares in
Lion`s Head for consideration of $10 million and 20,000,000 common shares in
Eastern Platinum Limited. The cash of $10 million was paid in January 2012
(Note 18).
This transaction increased the Company`s direct and indirect ownership in the
Mareesburg Joint Venture from 75.5% to 87%. As the acquisition did not lead to
the Company acquiring control nor losing control of the Mareesburg JV, the
increase in ownership was accounted for as an equity transaction.
Purchase price
Acquisition of 23% of Lion`s Head
Cash ($10 million) $ 10,000
Shares (20,000,000 common shares of
Eastern Platinum Limited) 10,389
Acquisition costs 158
$ 20,547
7. Property, plant and equipment
Tangible Tangible Intangible Intangible
assets assets mineral mineral
owned leased properties properties
being being not being
depleted depleted depleted
Cost
Balance as at December
31, 2009 $ 426,223 $ 6,132 $ 136,100 $ 546,122
Assets acquired 32,444 - - 261
Foreign exchange movement 56,520 768 17,040 58,901
Balance as at December
31, 2010 $ 515,187 $ 6,900 $ 153,140 $ 605,284
Assets acquired 85,857 265 - 34
Assets disposed (2,221) - - -
Transfer (10,876) - 862 (862)
Foreign exchange movement (101,804) (1,272) (28,364) (94,591)
Balance as at December
31, 2011 $ 486,143 $ 5,893 $ 125,638 $ 509,865
Accumulated depreciation
and impairment losses
Balance as at December
31, 2009 $ 126,944 $ 3,691 $ 20,765 $ 342,322
Depreciation 15,452 1,244 5,676 -
Foreign exchange movement 17,574 598 3,224 42,862
Balance as at December
31, 2010 $ 159,970 $ 5,533 $ 29,665 $ 385,184
Depreciation 15,282 1,114 4,339 -
Depreciation of disposed
assets (1,989) - - -
Impairment loss 33,281 - 11,796 -
Transfer - - 862 (862)
Foreign exchange movement (31,014) (1,149) (5,997) (70,989)
Balance as at December
31, 2011 $ 175,530 $ 5,498 $ 40,665 $ 313,333
Carrying amounts
At December 31, 2009 $ 299,279 $ 2,441 $ 115,335 $ 203,800
At December 31, 2010 $ 355,217 $ 1,367 $ 123,475 $ 220,100
At December 31, 2011 $ 310,613 $ 395 $ 84,973 $ 196,532
Residential Properties TOTAL
properties and land
Cost
Balance as at December 31, 2009 $ 10,071 $ 6,978 $1,131,626
Assets acquired 286 - 32,991
Foreign exchange movement 1,275 874 135,378
Balance as at December 31, 2010 $ 11,632 $ 7,852 $ 1,299,995
Assets acquired 892 - 87,048
Assets disposed - - (2,221)
Transfer 10,876 - -
Foreign exchange movement (3,509) (1,450) (230,990)
Balance as at December 31, 2011 $ 19,891 $ 6,402 $ 1,153,832
Accumulated depreciation and
impairment
losses
Balance as at December 31, 2009 $ 2,296 $ 830 $ 496,848
Depreciation 135 - 22,507
Foreign exchange movement 302 104 64,664
Balance as at December 31, 2010 $ 2,733 $ 934 $ 584,019
Depreciation 435 - 21,170
Depreciation of disposed assets - - (1,989)
Impairment loss - - 45,077
Transfer - - -
Foreign exchange movement (563) (172) (109,884)
Balance as at December 31, 2011 $ 2,605 $ 762 $ 538,393
Carrying amounts
At December 31, 2009 $ 7,775 $ 6,148 $ 634,778
At December 31, 2010 $ 8,899 $ 6,918 $ 715,976
At December 31, 2011 $ 17,286 $ 5,640 $ 615,439
Eastern Platinum Limited
Notes to the consolidated financial statements
(Expressed in thousands of U.S. dollars, except number of shares and per share
amounts)
7. Property, plant and equipment
Crocodile Kennedy`s Spitzkop
River Mine Vale Project PGM Project
(a) and (c)
Concentrator
(b)
Cost
Balance as at December 31, 2009 $ 585,376 $ 400,017 $ 118,994
Assets acquired 32,728 - 47
Foreign exchange movement 76,470 50,082 7,316
Balance as at December 31, 2010 $ 694,574 $ 450,099 $ 126,357
Assets acquired 52,384 34,618 30
Assets disposed (2,221) - -
Transfer (55,783) 55,783 -
Foreign exchange movement (127,312) (92,043) (10,894)
Balance as at December 31, 2011 $ 561,642 $ 448,457 $ 115,493
Accumulated depreciation and
impairment losses
Balance as at December 31, 2009 $ 154,417 $ 342,322 $ -
Depreciation 22,500 - -
Foreign exchange movement 21,796 42,861 -
Balance as at December 31, 2010 $ 198,713 $ 385,183 $ -
Depreciation 20,444 719 -
Depreciation of disposed assets (1,989) - -
Impairment loss 45,077 - -
Foreign exchange movement (38,690) (71,191) -
Balance as at December 31, 2011 $ 223,555 $ 314,711 $ -
Carrying amounts
At December 31, 2009 $ 430,959 $ 57,695 $ 118,994
At December 31, 2010 $ 495,861 $ 64,916 $ 126,357
At December 31, 2011 $ 338,087 $ 133,746 $ 115,493
Mareesburg Other TOTAL
Project property
(c) plant and
equipment
Cost
Balance as at December 31, 2009 $ 27,111 $ 128 $ 1,131,626
Assets acquired 214 2 32,991
Foreign exchange movement 1,503 7 135,378
Balance as at December 31, 2010 $ 28,828 $ 137 $ 1,299,995
Assets acquired 14 2 87,048
Assets disposed - - (2,221)
Transfer - - -
Foreign exchange movement (739) (2) (230,990)
Balance as at December 31, 2011 $ 28,103 $ 137 $ 1,153,832
Accumulated depreciation and
impairment losses
Balance as at December 31, 2009 $ - $ 109 $ 496,848
Depreciation - 7 22,507
Foreign exchange movement 1 6 64,664
Balance as at December 31, 2010 $ 1 $ 122 $ 584,019
Depreciation - 7 21,170
Depreciation of disposed assets - - (1,989)
Impairment loss - - 45,077
Foreign exchange movement (1) (2) (109,884)
Balance as at December 31, 2011 $ - $ 127 $ 538,393
Carrying amounts
At December 31, 2009 $ 27,111 $ 19 $ 634,778
At December 31, 2010 $ 28,827 $ 15 $ 715,976
At December 31, 2011 $ 28,103 $ 10 $ 615,439
(a) Crocodile River Mine ("CRM")
The Company holds directly and indirectly 87.5% of CRM, which is located on
the eastern portion of the western limb of the Bushveld Complex. The
Maroelabult and Zandfontein sections are currently in production. Development
of the Crocette section was put on hold in December 2011.
(b) Kennedy`s Vale Project ("KV")
The Company holds directly and indirectly 87.5% of KV, which is located on the
eastern limb of the Bushveld Complex, near Steelpoort in the Province of
Mpumalanga.
It comprises PGM mineral rights on five farms in the Steelpoort Valley. The
development of this project was on hold as at December 31, 2011. However, the
design and construction of a concentrator located on the KV property is
currently in progress and is expected to be completed in the first quarter of
2013. The concentrator will initially be used to process ore from the
Mareesburg Project.
(c) Spitzkop PGM Project and Mareesburg Project
The Company holds directly and indirectly a 93.4% interest in the Spitzkop PGM
Project and an 87% interest in the Mareesburg Project. The Company currently
acts as the operator of both the Mareesburg Platinum Project and Spitzkop PGM
Project, both located on the eastern limb of the Bushveld Complex.
Construction of the Mareesburg Project is currently in progress and is
expected to be completed in the first quarter of 2013. The Spitzkop PGM
Project is planned to be developed after the Mareesburg Project goes into
production.
(d) Depreciation
Depreciation of $719 (December 31, 2010 - $Nil) is included in general and
administrative expenses for the twelve months ended December 31, 2011. This
depreciation pertains to assets which are not currently being used for mining
operations.
(e) Impairment of property, plant and equipment
During the year ended December 31, 2011, the Company determined that the
carrying value of CRM exceeded the expected net present value of its future
cash flows. This resulted in an impairment charge of $45,077 at CRM, of which
$33,281 pertained to tangible assets owned and $11,796 pertained to intangible
mineral properties being depleted.
The expected net present value of CRM`s future cash flows were calculated
using a weighted average cost of capital of 8.63%, and the following
forecasted foreign exchange rates and prices.
South African Rand 2012 2013 2014
per U.S. Dollar 7.35 7.20 8.20
Platinum US$/oz 1,750 1,753 1,741
Palladium US$/oz 750 784 821
Rhodium US$/oz 1,525 1,763 2,413
Gold US$/oz 1,580 1,430 1,319
Iridium US$/oz 1,040 1,019 643
Ruthenium US$/oz 120 118 230
Nickel US$/tonne 24,150 22,865 21,598
Copper US$/tonne 9,855 9,001 7,828
Chrome Rand/tonne 600 600 600
South African Rand 2015 2016 2017+
per U.S. Dollar 8.59 9.03 10.59
Platinum US$/oz 1,752 1,735 1,665
Palladium US$/oz 859 825 702
Rhodium US$/oz 2,678 2,692 3,625
Gold US$/oz 1,221 1,113 1,005
Iridium US$/oz 648 644 620
Ruthenium US$/oz 225 230 220
Nickel US$/tonne 20,886 20,231 18,210
Copper US$/tonne 7,319 6,916 5,565
Chrome Rand/tonne 600 600 600
(f) Assets pledged as security
As at December 31, 2011, $338,087 of property, plant and equipment has been
pledged as security for the $100 million credit facility (December 31, 2010 -
Nil).
8. Issued capital
(a) Authorized
- Unlimited number of preferred redeemable, voting, non-participating shares
without nominal or par value,
- Unlimited number of common shares with no par value.
(b) Issued and outstanding
Changes to the number of shares issued and outstanding are as follows:
December 31,
2011 2010
Note Number of Number of
shares shares
Balance outstanding,
beginning of period 907,589,567 680,893,325
Lion`s Head acquisition 8(d) 20,000,000 -
Public offering 8(e) - 224,250,000
Shares issued upon option exercise 8(f) 598,273 2,446,242
Balance outstanding, end of period 928,187,840 907,589,567
(c) Treasury shares
December 31, 2011 December 31, 2010
Number of Number of
treasury treasury
shares shares
Balance outstanding, beginning of period - -
Purchase of shares pursuant to Key Skills
Retention Plan (Note 8(g)) 198,563 -
Balance outstanding, end of period 198,563 -
(d) December 14, 2011 Lion`s Head acquisition
On December 14, 2011, the Company acquired a further 23% of Lion`s Head for
consideration of $10 million and 20,000,000 common shares in Eastern Platinum
Limited (Note 6).
(e) December 30, 2010 Public Offering
On December 30, 2010, the Company completed a public offering (the "Public
Offering"). The Public Offering consisted of 224,250,000 common shares, of
which 195,361,476 common shares were sold at a price of Cdn$1.55 and
28,888,524 common shares were sold at a price of GBP0.9568. Share issue costs
of Cdn$16,501 were incurred.
(f) Share options
The Company has an incentive plan (the "2011 Plan"), approved by the Company`s
shareholders at its annual general meeting held on June 9, 2011, under which
options to purchase common shares may be granted to its directors, officers,
employees and others at the discretion of the Board of Directors. Under the
terms of the 2011 Plan:
- 79 million common shares are reserved for issuance upon the exercise of
options, of which 19,144,497 remain available for issuance at December 31,
2011.
- All outstanding options at June 9, 2011 granted under the Company`s previous
plan (the "2008 Plan") will continue to exist under the 2011 plan provided
that the fundamental terms governing such options will be deemed to be those
under the 2008 Plan.
- Each option granted shall be for a term not exceeding five years from the
date of being granted and the vesting period is determined based on the
discretion of the Board of Directors. Vesting is dependent on continued
employment with the Company.
- The option exercise price is set at the date of the grant and cannot be less
than the closing market price of the Company`s common shares on the Toronto
Stock Exchange on the day immediately preceding the day of the grant of the
option.
- The 2011 Plan includes share appreciation rights providing for an optionee
to elect to exercise options and to receive an amount in common shares equal
to the difference between fair market value at the time of exercise and the
exercise price for the options exercised.
(i) Movements in share options during the year
The changes in share options during the years ended December 31, 2011 and 2010
were as follows:
December 31, 2011
Weighted
average
Number of exercise
options price
Cdn$
Balance outstanding, beginning of year 57,976,836 1.52
Options granted 9,875,000 1.55
Options exercised (741,333) 0.32
Options forfeited (7,255,000) 1.71
Balance outstanding, end of year 59,855,503 1.52
December 31, 2010
Weighted
average
Number of exercise
options price
Cdn$
Balance outstanding, beginning of year 59,575,834 1.48
Options granted 2,231,000 1.30
Options exercised (2,794,995) 0.33
Options forfeited (1,035,003) 1.82
Balance outstanding, end of year 57,976,836 1.52
598,273 shares were issued upon the exercise of 741,333 share options during
the year ended December 31, 2011. All 741,333 options exercised were non- cash
exercises in accordance with the 2011 Plan`s share appreciation rights. The
weighted average closing share price at the date of exercise was Cdn$1.66.
Options granted and exercised during the year ended December 31, 2011 resulted
in share-based payment expense of $8,193 (December 31, 2010 - $1,452).
(ii) Fair value of share options granted in the year
The fair value of each option granted is estimated at the time of the grant
using the Black-Scholes option pricing model with weighted average assumptions
for grants as follows:
2011
March 25
Exercise price Cdn$1.55
Closing market price on day preceding date of grant Cdn$1.38
Grant date share price Cdn$1.39
Risk-free interest rate 2.69%
Expected life 5
Annualized volatility 73%
Dividend rate 0%
Grant date fair value Cdn$0.82
Exercise price for the March 25, 2011 option issuance is equivalent to the
December 30, 2010 public offering price.
2010
January 18
Exercise price Cdn$1.30
Closing market price on day preceding date of grant Cdn$1.30
Grant date share price Cdn$1.42
Risk-free interest rate 1.73%
Expected life 3 years
Annualized volatility 83%
Dividend rate 0%
Grant date fair value Cdn$0.80
Exercise price for the January 18, 2010 option issuance is equivalent to the
closing market price on the day preceding the date the options were granted,
as defined by the 2008 Plan.
Grant date share price is the closing market price on the day the options were
granted.
(iii) Share options outstanding at the end of the year
The following table summarizes information concerning outstanding and
exercisable options at December 31, 2011:
Options Options Exercise Remaining Expiry date
outstanding exercisable price Contractual Life (Years)
Cdn$
19,987,500 19,987,500 1.82 0.19 March 7, 2012
13,772,001 13,772,001 0.32 1.97 December 18, 2013
400,000 400,000 0.52 2.50 June 30, 2014
75,002 75,002 0.76 2.84 November 3, 2014
2,226,000 2,226,000 1.30 3.06 January 18, 2015
9,875,000 9,875,000 1.55 4.24 March 25, 2016
12,950,000 12,950,000 2.31 5.77 October 5, 2017
400,000 400,000 3.38 6.15 February 20, 2018
170,000 170,000 3.38 6.24 March 27, 2018
59,855,503 59,855,503 2.66
The weighted average exercise price of options exercisable at December 31,
2011 is Cdn$1.52.
(g) Key skills retention plan
In 2010, the Company`s South African subsidiary, Barplats Investments Limited
("BIL"), 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 $132 in the year ended
December 31, 2011, and a share-based payment liability of $48 at December 31,
2011. These shares have been recorded as "treasury shares" in the statement of
financial position.
9. Finance costs
December 31, December 31,
2011 2010
Interest on revenue advances $ 476 $ 614
Interest on finance leases 178 277
Interest on provision for environmental rehabilitation 676 694
Interest on tax 215 209
Other interest 4 13
$ 1,549 $ 1,807
10. Income taxes
The income tax recognized in profit or loss comprises of:
December 31, December 31,
2011 2010
Deferred tax recovery relating to the
origination and reversal of temporary differences $ 4,901 $ 924
Current tax (4,957) -
Total income tax $ (56) $ 924
The provision for income taxes reported differs from the amounts computed by
applying the cumulative Canadian federal and provincial income tax rates to
the loss before tax provision due to the following:
December 31, December 31,
2011 2010
Statutory tax rate 26.50% 28.50%
Expected tax expense (recovery) on
(profit) loss before income tax $ (23,036) $ 2,523
Difference in tax rates between foreign
jurisdictions and Canada (11,210) (9,365)
Item not deductible for income tax purposes 9,537 534
Secondary tax on companies 4,546 -
Tax losses not recognized 20,219 4,572
Change in tax estimates - 812
Income tax expense (recovery) $ 56 $ (924)
The approximate tax effect of each item that gives rise to the Company`s
deferred tax liabilities are as follows:
December 31, December 31,
2011 2010
Non-capital loss carry forwards $ 19,879 $ 12,031
Share issue costs 2,436 3,582
Accumulated cost base difference on assets
and other (32,534) (43,517)
Deferred receipts (555) (6,102)
Deferred tax liabilities before valuation
allowance $ (10,774) $ (34,006)
Less valuation allowance (22,746) (12,636)
Total deferred tax liabilities $ (33,520) $ (46,642)
The movement between the opening and closing balances was recognized in profit
or loss and in foreign currency translation reserve.
At December 31, 2011, the Company has non-capital losses of approximately
Cdn$29,471 (December 31, 2010 - Cdn$20,679) available to apply against future
Canadian income for tax purposes. In South Africa, the Company has unredeemed
capital expenditures available for utilization against future taxable income
and estimated tax losses of approximately R3.5 billion (December 31, 2010 -
R3.3 billion). The South African losses do not expire unless the Company`s
mining activities cease. The Canadian non-capital losses will expire as
follows (in thousands of Canadian dollars):
Cdn $
(000 `s)
2015 $ 2,780
2026 3,224
2027 9,498
2028 4,217
2029 75
2030 8,665
2031 1,012
$ 29,471
At December 31, 2011, the Company had capital losses of Cdn$1,569 available to
apply against future capital gains in Canada.
The Company`s operations are conducted in a number of countries with complex
tax legislation and regulations pertaining to the Company`s activities. Any
reassessment of the Company`s tax filings by the tax authorities may result in
material adjustments to net profit or loss, tax assets and operating loss
carry-forwards. The Company provides for such reassessments when it is
probable that a taxation authority will not sustain the Company`s filing
position and the amount of the tax exposure can be reasonably estimated. As at
December 31, 2011, no provisions have been made in the financial statements
for any estimated tax liability.
11. Non-controlling interest
The non-controlling interests are comprised of the following:
Balance, December 31, 2009 $ 10,041
Non-controlling interests` share of loss in Barplats (866)
Non-controlling interests` share of interest on advances to Gubevu (2,709)
Foreign exchange movement 762
Balance, December 31, 2010 $ 7,228
Non-controlling interests` share of loss in Barplats (7,751)
Non-controlling interests` share of interest on advances to Gubevu (2,692)
Foreign exchange movement (268)
Balance, December 31, 2011 $ (3,483)
12. Earnings per share
The weighted average number of ordinary shares for the purposes of diluted
earnings per share reconciles to the weighted average number of ordinary
shares used in the calculation of basic earnings per share as follows:
December 31, December 31,
2011 2010
(in thousands)
Weighted average number of ordinary shares
used in the calculation of basic earnings per share 908,199 683,177
Shares deemed to be issued for no
consideration in respect of options - 11,662
Weighted average number of ordinary shares
used in the calculation of diluted earnings per share 908,199 694,839
The loss used to calculate basic and diluted earnings per share for the year
ended December 31, 2011 was $76,545 (December 31, 2010 - earnings of $13,352).
The following potential ordinary shares, outstanding at December 31, 2011, are
anti-dilutive and are therefore excluded from the weighted average number of
ordinary shares for the purposes of diluted earnings per share:
December 31, December 31,
2011 2010
(in thousands)
Options 45,609 40,663
13. Cash and cash equivalents
Cash and cash equivalents are comprised of:
December 31, December 31,
2011 2010
Cash in bank $ 110,150 $ 102,654
Short-term money market instruments 41,688 5,192
$ 151,838 $ 107,846
14. Trade and other receivables
Trade and other receivables are comprised of the following:
December 31, December 31,
2011 2010
Trade receivables $ 11,550 $ 30,142
Current tax receivable 738 1,283
Other receivables 11,820 2,556
Allowance for doubtful debts for
other receivables (528) (194)
$ 23,580 $ 33,787
As at December 31, 2011, $18,360 of trade and other receivables has been
pledged as security for the $100 million credit facility (December 31, 2010 -
Nil).
(a) Aging of past due, but not impaired
The average credit period of PGM sales is 4 months. The Company has the right
to request up to a 90% advance on payment, payable 1 month subsequent to sale.
The Company has financial risk management policies in place to ensure that all
receivables are received within the pre-agreed credit terms.
Included in trade and other receivables are receivables with a carrying value
of $124 (December 31, 2010 - $152) that are past due but have not been
provided for. For the years ended December 31, 2011 and 2010, substantially
all of the Company`s PGM production was sold to one customer and there was no
significant change in the credit quality of this customer over that time. The
past due amounts are considered recoverable.
December 31, December 31,
2011 2010
Less than 5 months $ - $ -
5 months and greater 124 152
$ 124 $ 152
(b) Movement in the allowance for doubtful debts
December 31, December 31,
2011 2010
Opening balance $ 194 $ 74
Impairment losses recognized on receivables 413 116
Amounts written off during the year as uncollectible - (16)
Foreign exchange translation gains and losses (79) 20
Closing balance $ 528 $ 194
(c) Aging of impaired receivables
December 31, December 31,
2011 2010
Less than 4 months 32 46
Greater than 4 months 496 148
$ 528 $ 194
At December 31, 2011, other receivables of $528 (December 31, 2010 - $194)
were impaired and provided for. These receivables were for rental income,
royalties and scrap sales. Impairment was determined based on payment history
and how far past due the receivables were.
15. Inventories
December 31, December 31,
2011 2010
Consumables $ 5,348 $ 6,607
Ore and concentrate 634 477
Chrome inventory 2,007 1,748
$ 7,989 $ 8,832
Production costs for the year ended December 31, 2011 was $114,614 (December
31, 2010 - $109,901). Production costs represent the cost of inventories sold
during the period. For the years ended December 31, 2011 and 2010 production
costs did not include any amounts with regards to the write-down of inventory
to net realizable value or with regards to the reversal of write-downs.
16. Refining Contract
During the year ended June 30, 2006, the Company acquired a 69% interest in
Barplats and assigned a portion of the purchase price to the off-take contract
governing the sales of Barplats` PGM concentrate production. The initial value
of the contract was $17,939. During the year ended June 30, 2007, the Company
acquired an additional 5% interest in Barplats resulting in an additional
allocation to the contract of $4,802 for a total aggregate value of $22,741.
During the year ended December 31, 2008, the Company acquired an additional
2.47% interest in Barplats. The acquisition did not affect the aggregate value
of the contract.
The value of the contract is amortized over the remaining term of the contract
which is 7.5 years as at December 31, 2011.
Cost
Balance as at December 31, 2009 $ 21,122
Foreign exchange movement 2,645
Balance as at December 31, 2010 $ 23,767
Foreign exchange movement (4,385)
Balance as at December 31, 2011 $ 19,382
Accumulated amortization
Balance as at December 31, 2009 $ 6,953
Amortization 1,513
Foreign exchange movement 1,036
Balance as at December 31, 2010 $ 9,502
Amortization 1,530
Impairment 1,250
Foreign exchange movement (1,909)
Balance as at December 31, 2011 $ 10,373
Carrying amounts
At December 31, 2009 $ 14,169
At December 31, 2010 $ 14,265
At December 31, 2011 $ 9,009
During the year ended December 31, 2011, the Company determined that the
carrying value of CRM exceeded the expected net present value of its future
cash flows. This resulted in an impairment charge of $1,250 being recorded
against the refining contract.
The expected net present value of CRM`s future cash flows were calculated
using a weighted average cost of capital of 8.63%, and the following
forecasted foreign exchange rates and prices.
South African Rand 2012 2013 2014
per US dollar 7.35 7.20 8.20
Platinum US$/oz 1,750 1,753 1,741
Palladium US$/oz 750 784 821
Rhodium US$/oz 1,525 1,763 2,413
Gold US$/oz 1,580 1,430 1,319
Iridium US$/oz 1,040 1,019 643
Ruthenium US$/oz 120 118 230
Nickel US$/tonne 24,150 22,865 21,598
Copper US$/tonne 9,855 9,001 7,828
Chrome Rand/tonne 600 600 600
South African Rand 2015 2016 2017+
per US dollar 8.59 9.03 10.59
Platinum US$/oz 1,752 1,735 1,665
Palladium US$/oz 859 825 702
Rhodium US$/oz 2,678 2,692 3,625
Gold US$/oz 1,221 1,113 1,005
Iridium US$/oz 648 644 620
Ruthenium US$/oz 225 230 220
Nickel US$/tonne 20,886 20,231 18,210
Copper US$/tonne 7,319 6,916 5,565
Chrome Rand/tonne 600 600 600
17. Other assets
Other assets consists of a money market fund investment that is classified as
available-for- sale and serves as security for a guarantee issued to the
Department of Mineral Resources of South Africa in respect of the
environmental rehabilitation liability (Note 20). Changes to other assets for
the year ended December 31, 2011 are as follows:
Balance, December 31, 2009 $ 2,282
Additional investment $ 955
Service fees (8)
Interest income 185
Foreign exchange movement 409
Balance, December 31, 2010 $ 3,823
Additional investment 5,387
Service fees (8)
Interest income 344
Foreign exchange movement (1,551)
Balance, December 31, 2011 $ 7,995
18. Trade and other payables
December 31, December 31,
2011 2010
Trade payables $ 8,133 $ 10,604
Accrued liabilities 20,464 10,240
Other 11,862 6,165
$ 40,459 $ 27,009
Accrued liabilities includes $10 million in respect of the purchase of a
further 23% of Lion`s Head (Note 6). The average credit period of purchases is
1 month. The Company has financial risk management policies in place to ensure
that all payables are paid within the pre- agreed credit terms.
19. Finance leases
Finance leases relate to mining vehicles that had lease terms of 5 years
payable half yearly in advance. The leases expired in December 2011 and the
final installment was made in January 2012. The Company chose not to purchase
the vehicles at the conclusion of the lease agreements. The Company`s
obligations under finance leases were secured by the lessor`s title to the
leased assets. Interest was calculated at the South African prime rate plus
1%. The fair value of the finance lease liabilities approximated carrying
value.
(a) Minimum lease payments
December 31, December 31,
2011 2010
No later than 1 year $ 1,675 $ 3,405
1,675 3,405
Less: future finance charges - (194)
Present value of minimum lease payments $ 1,675 $ 3,211
(b) Present value of minimum lease payments
December 31, December 31,
2011 2010
No later than 1 year $ 1,675 $ 3,211
20. Provision for environmental rehabilitation
Although the ultimate amount of the environmental rehabilitation provision is
uncertain, the best estimate of these obligations is based on information
currently available, including closure plans and applicable regulations.
Significant closure activities include land rehabilitation, demolition of
buildings and mine facilities and other costs.
The provision for environmental rehabilitation at December 31, 2011 is ZAR 68
million ($8,390) (December 31, 2010 - ZAR 58.9 million, $8,934). The provision
was determined using an inflation rate of 6.00% (December 31, 2010 - 5.49%)
and an estimated life of mine of 20 years for Zandfontein (December 31, 2010 -
20 years), 9 years for Maroelabult (December 31, 2010 - 11 years), 16 years
for Crocette (December 31, 2010 - 14 years), 21 years for Kennedy`s Vale
(December 31, 2010 - 1 year) and 21 years for Spitzkop (December 31, 2010 - 22
years). A discount rate of 8.47% was used (December 31, 2010 - 8.29%). A
guarantee of $7,995 (December 31, 2010 - $3,823) has been issued to the
Department of Mineral Resources (Note 17). The guarantee will be utilized to
cover expenses incurred to rehabilitate the mining area upon closure of the
mine. The undiscounted value of this liability is approximately ZAR 328
million ($40,567) (December 31, 2010 - ZAR 215.4 million, $32,694).
Changes to the environmental rehabilitation provision are as follows:
Balance, December 31, 2009 $ 8,152
Revision in estimates (961)
Interest expense (Note 21) 694
Foreign exchange movement 1,049
Balance, December 31, 2010 $ 8,934
Revision in estimates 499
Interest expense (Note 21) 676
Foreign exchange movement (1,719)
Balance, December 31, 2011 $ 8,390
During the year ended December 31, 2011, $409 of the revision in estimate was
expensed (December 31, 2010 - nil). The remaining $90 (December 31, 2010 -
negative $961) was capitalized to fixed assets.
21. Credit facility
In December 2011 the Company signed a definitive agreement with UniCredit Bank
AG, London Branch and Standard Finance (Isle of Man) Limited (a subsidiary of
The Standard Bank of South Africa Limited) for a US$100 million financing
package. The borrowers are Barplats Mines Limited, Rhodium Reefs Limited, and
Royal Anthem Investments 134 (Pty) Ltd. The financing package consists of an
US$70 million term facility and an US$30 million revolving loan facility. The
scheduled tenor is for 5.5 years with an 18 month grace period for principal
repayments. The initial interest is US LIBOR plus 3.85% rising to US LIBOR
plus 4.15% for the last 2.5 years of the loan. The financing package does not
require commodity, currency or interest rate hedging.
The facility is secured by:
- The shares of Barplats Mines Limited ("BML"), Spitzkop Platinum (Pty) Ltd.
and Royal Anthem Investments 134 (Pty) Ltd. held by the Company;
- The physical assets, accounts receivable, insurance policies and certain
property of BML;
- The Mareesburg and Spitzkop JV agreements; and,
- Certain bank accounts required to be set up for the facilities agreement.
As at December 31, 2011, the Company had not drawn down on the term facility
or the revolving loan facility.
22. Commitments
The Company has committed to capital expenditures on projects of approximately
ZAR 144 million ($17,862) as at December 31, 2011 (December 31, 2010 - ZAR 86
million, $13,056).
23. Retirement benefit plans
The Barplats Provident Fund is an independent, defined contribution plan
administered by Liberty Life Limited in South Africa. The costs associated
with the defined contribution plan included in net profit (loss) for the year
ended December 31, 2011 were $3,788 (December 31, 2010 - $3,894). The total
number of employees in the plan at December 31, 2011 was 1,421 (December 31,
2010 - 1,762).
24. Related party transactions
Balances and transactions between the Company and its subsidiaries have been
eliminated on consolidation and are not disclosed in this note. Details of the
transactions between the Company and other related parties are disclosed
below.
(a) Trading transactions
The Company`s related parties consist of companies owned by executive officers
and directors as follows:
Nature of transactions
Andrews PGM Consulting Consulting
Buccaneer Management Inc. Management
Jazz Financial Ltd. Management
Maluti Services Limited General and administrative
Xiste Consulting Ltd. Management
The Company incurred the following fees and expenses in the normal course of
operations in connection with companies owned by key management and directors.
Expenses have been measured at the exchange amount which is determined on a
cost recovery basis.
December 31, December 31,
Note 2011 2010
Consulting fees (i) $ 186 $ 304
General and administrative expenses 237 193
Management fees 2,338 2,253
$ 2,761 $ 2,750
(i) The Company paid fees to a private company controlled by a director of the
Company for consulting services performed outside of his capacity as a
director.
Amounts due to related parties are unsecured, non-interest bearing and due on
demand. Accounts payable at December 31, 2011 included $873 (December 31, 2010
- $1,089) which was due to private companies controlled by officers and
directors of the Company.
(b) Compensation of key management personnel
The remuneration of directors and other members of key management personnel
during the years ended December 31, 2011 and 2010 were as follows:
December 31, December 31,
Note 2011 2010
Salaries and directors` fees (i) $ 3,547 $ 3,758
Share-based payments (ii) 7,996 1,627
$ 11,543 $ 5,385
(i) Salaries and directors` fees include consulting and management fees
disclosed in Note 24(a).
(ii) Share-based payments are the fair value of options granted to key
management personnel.
(iii) Key management personnel were not paid post-employment benefits,
termination benefits, or other long-term benefits during the years ended
December 31, 2011 and 2010.
25. Segmented information
(a) Operating segment - The Company`s operations are primarily directed
towards the acquisition, exploration and production of platinum group metals
in South Africa.
(b) Geographic segments - The Company`s assets by geographic areas as at
December 31, 2011 and revenues and expenses by geographic areas for the years
ended December 31, 2011 and 2010 are as follows:
December 31, 2011
Crocodile Kennedy`s Spitzkop
River Mine Vale
Current assets $ 24,460 $ 9,478 $ 1,535
Property, plant and equipment 338,087 133,746 115,493
Refining contract 9,009 - -
Other assets 7,995 - -
$ 379,551 $ 143,224 $ 117,028
Property, plant and equipment
expenditures $ 52,384 $ 34,618 $ 30
Property, plant and equipment disposals 2,221 - -
Revenue $ 113,203 $ - $ -
Production costs (114,614) - -
Depletion and depreciation (20,444) - -
Impairment (46,327) - -
General and administrative expenses (4,276) (1,442) 31
Share-based payment (254) - -
Interest income 1,416 63 16
Finance costs (1,016) (331) (14)
Foreign exchange gain (loss) 825 (66) -
(Loss) profit before income taxes (71,487) (1,776) 33
Income tax recovery (expense) 53 (109) -
Net (loss) profit $ (71,434) $ (1,885) $ 33
December 31, 2011
Mareesburg Other Total
South
Africa
Current assets $ 68 $ 738 $ 36,279
Property, plant and equipment 28,103 - 615,429
Refining contract - - 9,009
Other assets - - 7,995
$ 28,171 $ 738 $ 668,712
Property, plant and
equipment expenditures $ 14 $ - $ 87,046
Property, plant and equipment disposals - - 2,221
Revenue $ - $ - $ 113,203
Production costs - - (114,614)
Depletion and depreciation - - (20,444)
Impairment - - (46,327)
General and administrative expenses (145) (8) (5,840)
Share-based payment - - (254)
Interest income - - 1,495
Finance costs - (188) (1,549)
Foreign exchange gain (loss) - - 759
(Loss) profit before income taxes (145) (196) (73,571)
Income tax recovery (expense) - - (56)
Net (loss) profit $ (145) $ (196) $ (73,627)
December 31, 2011
Barbados Canada TOTAL
and BVI
Current assets $ 6 $ 246,085 $ 282,370
Property, plant and equipment - 10 615,439
Refining contract - - 9,009
Other assets - - 7,995
$ 6 $ 246,095 $ 914,813
Property, plant and equipment expenditures $ - $ 2 $ 87,048
Property, plant and equipment disposals - - 2,221
Revenue $ - $ - $ 113,203
Production costs - - (114,614)
Depletion and depreciation - (7) (20,451)
Impairment - - (46,327)
General and administrative expenses (162) (5,845) (11,847)
Share-based payment - (8,071) (8,325)
Interest income - 4,034 5,529
Finance costs - - (1,549)
Foreign exchange gain (loss) - (3,310) (2,551)
(Loss) profit before income taxes (162) (13,199) (86,932)
Income tax recovery (expense) - - (56)
Net (loss) profit $ (162) $ (13,199) $ (86,988)
December 31, 2010
Crocodile Kennedy`s Spitzkop
River Mine Vale
Current assets $ 45,787 $ 445 $ 1,669
Property, plant and equipment 495,861 64,916 126,357
Refining contract 14,265 - -
Other assets 3,823 - -
$ 559,736 $ 65,361 $ 128,026
Property, plant and
equipment expenditures $ 32,728 $ - $ 47
Revenue $ 155,000 $ - $ -
Production costs (109,901) - -
Depletion and depreciation (22,499) - -
General and administrative expenses (4,591) (1,396) (118)
Share-based payment (79) - -
Interest income 1,635 - -
Finance costs (1,027) (752) (28)
Foreign exchange (loss) gain (827) - -
Profit (loss) before income taxes 17,711 (2,148) (146)
Deferred income tax recovery (expense) 2,240 - -
Net profit (loss) $ 19,951 $ (2,148) $ (146)
December 31, 2010
Mareesburg Other Total
South
Africa
Current assets $ 61 $ 997 $ 48,959
Property, plant and equipment 28,827 - 715,961
Refining contract - - 14,265
Other assets - - 3,823
$ 28,888 $ 997 $ 783,008
Property, plant and equipment expenditures $ 214 $ - $ 32,989
Revenue $ - $ - $ 155,000
Production costs - - (109,901)
Depletion and depreciation - - (22,499)
General and administrative expenses (114) (16) (6,235)
Share-based payment - - (79)
Interest income 8 - 1,643
Finance costs - - (1,807)
Foreign exchange (loss) gain - - (827)
Profit (loss) before income taxes (106) (16) 15,295
Deferred income tax recovery (expense) - - 2,240
Net profit (loss) $ (106) $ (16) $ 17,535
December 31, 2010
Barbados Canada TOTAL
and BVI
Current assets $ - $ 343,952 $ 392,911
Property, plant and equipment - 15 715,976
Refining contract - - 14,265
Other assets - - 3,823
$ - $ 343,967 $ 1,126,975
Property, plant and
equipment expenditures $ - $ 2 $ 32,991
Revenue $ - $ - $ 155,000
Production costs - - (109,901)
Depletion and depreciation - (8) (22,507)
General and administrative expenses (60) (5,822) (12,117)
Share-based payment - (1,373) (1,452)
Interest income - 154 1,797
Finance costs - - (1,807)
Foreign exchange (loss) gain - 667 (160)
Profit (loss) before income taxes (60) (6,382) 8,853
Deferred income tax recovery (expense) (1,316) - 924
Net profit (loss) $ (1,376) $ (6,382) $ 9,777
For the years ended December 31, 2011 and 2010, substantially all of the
Company`s PGM production was sold to one customer.
26. Financial instruments
(a) Management of capital risk
The capital structure of the Company consists of equity attributable to common
shareholders, comprising issued capital, equity-settled employee benefits
reserve, deficit and currency translation adjustment. The Company`s objectives
when managing capital are to: (i) preserve capital, (ii) obtain the best
available net return, and (iii) maintain liquidity.
The Company manages the capital structure and makes adjustments to it in light
of changes in economic conditions and the risk characteristics of the
underlying assets.
To maintain or adjust the capital structure, the Company may attempt to issue
new shares.
The Company is not subject to externally imposed capital requirements.
(b) Categories of financial instruments
December 31, December 31,
2011 2010
Financial assets
Cash and cash equivalents $ 151,838 $ 107,846
Loans and receivables
Trade receivables 23,580 33,787
Available for sale financial assets
Short-term investments 98,963 242,446
Other assets 7,995 3,823
$ 282,376 $ 387,902
Financial liabilities
Other financial liabilities
Accounts payable and accrued liabilities $ 40,459 $ 27,009
$ 40,459 $ 27,009
(c) Fair value of financial instruments
(i) Fair value estimation of financial instruments
The fair value of financial instruments traded in active markets is based on
quoted market prices at the balance sheet date.
The fair values of cash and cash equivalents, short-term investments, trade
receivables and accounts payable approximate their carrying values due to the
short-term to maturities of these financial instruments.
(ii) Fair value measurements recognized in the statement of financial position
Financial instruments that are measured subsequent to initial recognition at
fair value are grouped into a hierarchy based on the degree to which the fair
value is observable. Level 1 fair value measurements are derived from
unadjusted, quoted prices in active markets for identical assets or
liabilities. Level 2 fair value measurements are derived from inputs other
than quoted prices included within Level 1 that are observable for the asset
or liability directly or indirectly. Level 3 fair value measurements are
derived from valuation techniques that include inputs for the asset or
liability that are not based on observable market data.
The Company`s short-term investments and other assets are measured subsequent
to initial recognition at fair value and are Level 2 financial instruments at
December 31, 2011. There were no transfers between levels during the year
ended December 31, 2011.
(d) Reclassification of financial assets
There was no reclassification of financial assets during the years ended
December 31, 2011 and 2010.
(e) Financial risk management
The Company`s financial instruments are exposed to certain financial risks,
including currency risk, interest rate risk, price risk, credit risk and
liquidity risk. The Company`s exposure to these risks and its methods of
managing the risks remain consistent.
(i) Currency risk
The Company is exposed to the financial risk related to the fluctuation of
foreign exchange rates. The Company`s revenues are based on US dollar PGM
prices, but the Company receives revenues in South African Rand. A significant
change in the currency exchange rates between the South African Rand relative
to the US dollar could have an effect on the Company`s results of operations,
financial position and cash flows. The Company has not entered into any
derivative financial instruments to manage exposures to currency fluctuations.
The carrying amount of the Company`s subsidiary`s foreign-currency denominated
monetary assets at December 31, 2011, is as follows:
December 31, December 31,
2011 2010
Financial assets
Loans and receivables 19,712 30,142
The sensitivity of the Company`s net earnings due to changes in the exchange
rate between the South African Rand and the United States dollar is summarized
in the table below. This sensitivity is based on loans and receivables not
denominated in the functional currency of the subsidiary. The increase
(decrease) in net earnings is due to the effect of the exchange rate on
financial instruments.
Year ended Dec. 31, 2011
10% 10%
weakening strengthening
of ZAR in of ZAR in
relation to USD relation to USD
FX rate FX rate
Increase (decrease) in net earnings (1,971) 1,971
The carrying amount of the Company`s head office foreign-currency denominated
monetary assets at December 31, 2011 is as follows:
December 31, December 31,
2011 2010
Financial assets
Cash and cash equivalents 42,387 43,110
The sensitivity of the Company`s net earnings due to changes in the exchange
rate between the U.K. Pound Sterling and the United States dollar is
summarized in the table below. This sensitivity is based on cash and cash
equivalents not denominated in the functional currency of head office. The
(decrease) increase in net earnings is due to the effect of the exchange rate
on financial instruments.
Year ended Dec. 31, 2011
10% 10%
weakening strengthening
of GBP in of GBP in
relation to USD relation to USD
FX rate FX rate
Increase (decrease) in net earnings (4,239) 4,239
(ii) Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates.
The Company is exposed to interest rate risk on its short-term investments.
The risk that the Company will realize a loss as a result of a decline in the
fair value of short-term investments is limited because these investments,
although available for sale, are generally not sold before maturity. The
Company monitors its exposure to interest rates and has not entered into any
derivative financial instruments to manage this risk.
The Company has not included a sensitivity analysis of interest rate risk at
year-end as it does not reflect the exposure experienced during the twelve
months ended December 31, 2011. The Company`s financial assets fluctuated
throughout the year and presenting such an analysis would be misleading.
(iii) Price risk
The Company is exposed to price risk with respect to fluctuations in the
prices of platinum group metals. These fluctuations directly affect revenues
and trade receivables. As at December 31, 2011, the Company`s financial assets
subject to metal price risk consist of trade receivables of $11,550 (December
31, 2010 - $30,142). Historically, the Company has not entered into any
derivative financial instruments to manage exposures to price fluctuations. No
such derivative financial instruments existed at December 31, 2011 and 2010.
The Company has not included a sensitivity analysis of price risk at year-end
as it does not reflect the exposure experienced during the twelve months ended
December 31, 2011. Presenting such an analysis would be misleading.
(iv) Credit risk
Credit risk is the risk of an unexpected loss if a customer or third party to
a financial instrument fails to meet its contractual obligations, and arises
principally from the Company`s trade receivables. The carrying value of the
financial assets represents the maximum credit exposure.
The Company currently sells substantially all of its PGM concentrate
production to one customer under an off-take contract. At December 31, 2011,
the Company had receivable balances associated with this one customer of
$11,550 (December 31, 2010 - $30,142). The loss of this customer or unexpected
termination of the off-take contract could have a material adverse effect on
the Company`s results of operations, financial condition and cash flows. The
Company has not experienced any bad debts with this customer.
The Company minimizes credit risk by reviewing the credit risk of the
counterparty to the arrangement and has made any necessary provisions related
to credit risk at December 31, 2011.
(v) Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its
financial obligations as they fall due. The Company has a planning and
budgeting process in place to help determine the funds required to support the
Company`s normal operating requirements on an ongoing basis and its
expansionary plans. The Company ensures that there are sufficient funds to
meet its short-term business requirements, taking into account its anticipated
cash flows from operations and its holdings of cash and cash equivalents.
The Company`s policy is to invest its excess cash in highly liquid, fully
guaranteed, bank-sponsored instruments. The Company staggers the maturity
dates of its investments over different time periods and dates to minimize
exposure to interest rate changes. This strategy remains unchanged from 2010.
In the normal course of business, the Company enters into contracts that give
rise to commitments for future minimum payments. The following table
summarizes the Company`s significant commitments and corresponding maturities.
December 31, 2011
Total <1 year
Trade and other payables $ 40,459 $ 40,459
Finance leases 1,675 1,675
Commitments 17,862 17,862
$ 59,996 $ 59,996
December 31, 2010
Total <1 year
Trade and other payables $ 27,009 $ 27,009
Finance leases 3,405 3,405
Commitments 13,056 13,056
$ 43,470 $ 43,470
27. Contingency
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.
28. Events after the reporting period
There were no events that required adjustment to, or disclosure in, the
financial statements after the reporting period from January 1, 2012 to March
5, 2012.
Date: 06/03/2012 15:14:02 Produced by the JSE SENS Department.
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