| Tue 6 Mar 2012, 15:17 | | EPS - Eastern Platinum Limited - Management`s discussion and analysis of |
|
EPS
EPS
EPS - Eastern Platinum Limited - Management`s discussion and analysis of
financial conditions and results of operations for the three and twelve months
ended December 31, 2011
EASTERN PLATINUM LIMITED
(Incorporated in Canada)
(Canadian Registration number BC0722783)
(South African Registration number 2007/006318/10)
Share Code TSX: ELR ISIN: CA 2768551038
Share Code AIM: ELR ISIN: CA 2768551038
Share Code JSE: EPS ISIN: CA 2768551038
EASTERN PLATINUM LIMITED
MANAGEMENT`S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER
31, 2011
The following Management`s Discussion and Analysis ("MD&A") is intended to
assist the reader to assess material changes in financial condition and results
of operations of Eastern Platinum Limited ("Eastplats" or the "Company") as at
December 31, 2011 and for the three and twelve months then ended in comparison
to the same period in 2010.
This MD&A should be read in conjunction with the consolidated financial
statements for the year ended December 31, 2011 and supporting notes. These
consolidated financial statements have been prepared using accounting policies
in compliance with IFRS as issued by the International Accounting Standards
Board ("IASB").
In this MD&A, the Company also reports certain non-IFRS measures such as EBITDA
and cash costs per ounce which are explained in Section 3.2 of this MD&A.
All monetary amounts are in U.S. dollars unless otherwise specified. The
effective date of this MD&A is March 5, 2012. Additional information relating to
the Company is available on SEDAR at www.sedar.com.
Contents of the MD&A
1. Overview
2. Summary of results
2.1. Summary of results for the quarter ended December 31, 2011
2.2. Summary of results for the year ended December 31, 2011
3. Results of operations for the three and twelve months ended December 31,
2011
3.1. Mining operations at Crocodile River Mine ("CRM")
3.2. CRM non-IFRS measures
3.3. Development projects
3.3.1. CRM
3.3.2. Eastern Limb projects
3.4. Corporate and other expenses
4. Liquidity and Capital Resources
4.1. Outlook
4.2. Impairment
4.3. Share capital
4.4. Contractual obligations, commitments and contingencies
5. Related party transactions
6. Critical accounting policies and estimates
6.1. Property, plant and equipment
6.2. Revenue recognition
6.3. Share-based payment
6.4. Provision for environmental rehabilitation
7. Adoption of accounting standards and accounting pronouncements under IFRS
7.1. Application of new and revised IFRSs
7.2. Accounting standards issued but not yet effective
8. Risk factors
8.1. Risks associated with the mining industry
8.2. Risks associated with the current global economic uncertainty
8.3. Risks associated with foreign currencies
8.4. Risks associated with metals prices
8.5. Risks associated with foreign operations
8.6. Risks associated with granting of exploration, mining and other
licenses
8.7. Risks associated with the development of the Mareesburg PGM
Project
9. Financial instruments
9.1. Management of capital risk
9.2. Categories of financial instruments
9.3. Financial risk management
10. Internal control over financial reporting
11. Cautionary statement on forward-looking information
1. Overview
Eastplats is a platinum group metals ("PGM") producer engaged in the mining
and development of PGM deposits with properties located in South Africa.
All of the Company`s properties are situated on the western and eastern
limbs of the Bushveld Complex ("BC"), the geological environment that
supports over 75% of the world`s PGM mine production.
The Company`s primary operating asset is an 87.5% direct and indirect
interest in Barplats Investments Limited ("Barplats"), whose main assets
are the PGM producing Crocodile River Mine ("CRM") located on the western
limb of the BC and the non-producing Kennedy`s Vale Project located on the
Eastern Limb of the BC. The Company also has an 87% direct and indirect
interest in Mareesburg Platinum Project ("Mareesburg") and a 93.4% direct
and indirect interest in Spitzkop PGM Project ("Spitzkop"), both located on
the Eastern Limb of the BC.
2. Summary of results
2.1 Summary of results for the quarter ended December 31, 2011
- Eastplats recorded a loss attributable to equity shareholders of the
Company of $64,325,000 ($0.07 loss per share) in the quarter ended
December 31, 2011 ("Q4 2011") compared to earnings of $5,041,000
($0.01 per share) in the quarter ended December 31, 2010 ("Q4 2010").
- During the quarter 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
$46,327,000, of which $33,281,000 pertained to tangible assets owned,
$11,796,000 pertained to intangible mineral properties being depleted,
and $1,250,000 pertained to the refining contract.
- EBITDA decreased to negative $6,455,000 in Q4 2011 compared to
$15,226,000 in Q4 2010.
- PGM ounces sold decreased 39% to 19,854 ounces in Q4 2011
compared to 32,752 PGM ounces in Q4 2010.
- The U.S. dollar average delivered price per PGM ounce decreased 12% to
$931 in Q4 2011 compared to $1,058 in Q4 2010.
- The Rand average delivered price per PGM ounce increased 3% to R7,541
in Q4 2011 compared to R7,311 in Q4 2010.
- Total Rand operating cash costs decreased 1% to R208 million in Q4
2011 compared to R210 million in Q4 2010.
- Rand operating cash costs net of by-product credits increased 93% to
R8,685 per ounce in Q4 2011 compared to R4,509 per ounce in Q4 2010.
Rand operating cash costs increased 63% to R10,455 per ounce in Q4
2011 compared to R6,412 per ounce in Q4 2010.
- U.S. dollar operating cash costs net of by-product credits increased
64% to $1,072 per ounce in Q4 2011 compared to $653 per ounce achieved
in Q4 2010. U.S. dollar operating cash costs increased 39% to $1,291
per ounce in Q4 2011 compared to $928 per ounce in Q4 2010.
- Head grade increased to 4.1 grams per tonne in Q4 2011 from 4.0 grams
per tonne in Q4 2010.
- Average concentrator recovery decreased to 76% in Q4 2011 compared to
78% in Q4 2010.
- Development meters decreased by 16% to 2,929 meters and on-reef
development decreased by 17% to 1,591 meters compared to Q4 2010.
- Stoping units decreased 40% to 31,767 square meters in Q4 2011
compared to 53,044 square meters in Q4 2010.
- Run-of-mine ore hoisted decreased by 38% to 200,919 tonnes in Q4 2011
compared to 324,879 tonnes in Q4 2010.
- Run-of-mine ore processed decreased by 41% to 194,532 tonnes in Q4
2011 compared to 327,872 tonnes in Q4 2010.
- The Company`s Lost Time Injury Frequency Rate (LTIFR) improved to 2.61
in Q4 2011 compared to 3.88 in Q4 2010. As reported on November 7,
2011, a fatality occurred at CRM that resulted in a Section 54 Stop
Work Order being issued by the Department of Mineral Resources
("DMR").
- At December 31, 2011, the Company had a cash position (including cash,
cash equivalents and short term investments) of $250,801,000 (December
31, 2010 - $350,292,000).
2.2 Summary of results for the year ended December 31, 2011
- Eastplats recorded a net loss attributable to equity shareholders of
the Company of $76,545,000 ($0.08 loss per share) in the year ended
December 31, 2011 ("12M 2011") compared to earnings of $13,352,000
($0.02 per share) in the year ended December 31, 2010 ("12M 2010").
- 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
$46,327,000, of which $33,281,000 pertained to tangible assets owned,
$11,796,000 pertained to intangible mineral properties being depleted,
and $1,250,000 pertained to the refining contract.
- EBITDA decreased to negative $1,411,000 in 12M 2011 compared to
$45,099,000 in 12M 2010.
- PGM ounces sold decreased 30% to 92,724 ounces in 12M 2011 compared
to 131,901 PGM ounces in 12M 2010.
- The U.S. dollar average delivered price per PGM ounce increased 8% to
$1,073 in 12M 2011 compared to $995 in 12M 2010.
- The Rand average delivered price per PGM ounce increased 6% to R7,726
in 12M 2011
compared to R7,264 in 12M 2010.
- Total Rand operating cash costs increased 3% to R828 million in 12M
2011 compared to R804 million in 12M 2010.
- Rand operating cash costs net of by-product credits increased 48% to
R7,118 per ounce in 12M 2011 compared to R4,800 per ounce in 12M 2010.
Rand operating cash costs increased 46% to R8,929 per ounce in 12M
2011 compared to R6,099 per ounce in 12M 2010.
- U.S. dollar operating cash costs net of by-product credits increased
50% to $984 per ounce in 12M 2011 compared to $657 per ounce achieved
in 12M 2010. U.S. dollar operating cash costs increased 48% to $1,236
per ounce in 12M 2011 compared to $835 per ounce in 12M 2010.
- Head grade decreased to 4.0 grams per tonne in 12M 2011 from 4.1 grams
per tonne in 12M 2010.
- Average concentrator recovery decreased to 77% in 12M 2011 compared to
79% in 12M 2010.
- Development meters increased by 15% to 14,686 meters and on-reef
development increased by 16% to 8,363 meters compared to 12M 2010.
- Stoping units decreased 28% to 148,863 square meters in 12M 2011
compared to 206,269 square meters in 12M 2010.
- Run-of-mine ore hoisted decreased by 29% to 917,343 tonnes in 12M 2011
compared to 1,288,416 tonnes in 12M 2010.
- Run-of-mine ore processed decreased by 29% to 903,298 tonnes in 12M
2011 compared to 1,265,973 tonnes in 12M 2010.
- The Company`s LTIFR improved to 1.46 in 12M 2011 compared to 3.32 in
12M 2010. As reported on November 7, 2011, a fatality occurred at CRM
and resulted in a Section 54 Stop Work Order being issued by the DMR.
This came after 3.8 million fatality free shifts at the mine and was a
major blow to the Company`s efforts toward improvements in mine health
and safety during 2011. The DMR`s lengthy investigation into the
accident resulted in lost production.
The table below sets forth selected results of operations for the Company`s
eight most recently completed quarters (in thousands of U.S. dollars,
except per share amounts) in accordance with IFRS.
Selected quarterly data 2011
Dec 31 Sept 30 June 30 Mar 31
Revenues $ 19 172 $ 31 453 $ 26 876 $ 35 702
Cost of operations (92 405) (34 043) (36 415) (34 409)
Mine operating (loss)
earnings (73 233) (2 590) (9 539) 1 293
Expenses (G&A and
share-based payment) (3 308) (2 568) (2 978) (11 318)
Operating (loss) profit (76 541) (5 158) (12 517) (10 025)
Net (loss) profit
attributable to equity
shareholders of the Company $(80 205) $ 1 364 $ (7 951) $ (5 633)
(Loss) earnings per share
- basic $ (0.09) $ 0.00 $ (0.01) $ (0.01)
(Loss) earnings per share
- diluted $ (0.09) $ 0.00 $ (0.01) $ (0.01)
Average foreign exchange
rates
South African Rand per
US dollar 8.10 7.14 6.79 7.01
US dollar per
Canadian dollar 0.9777 1.0204 1.0335 1.0141
Period end foreign
exchange rates
South African Rand per
US dollar 8.08 8.09 6.76 6.75
US dollar per
Canadian dollar 0.9833 0.9540 1.0368 1.0314
Selected quarterly data 2010
Dec 31 Sept 30 June 30 March 31
Revenues $ 45 616 $ 38 073 $ 36 612 $ 34 699
Cost of operations (36 272) (32 735) (32 383) (31 018)
Mine operating (loss) earnings 9 344 5 338 4 229 3 681
Expenses (G&A and share-based
payment) (4 382) (2 202) (2 050) (4 935)
Operating (loss) profit 4 962 3 136 2 179 (1 254)
Net (loss) profit attributable
to equity
shareholders of the Company $ 5 041 $ 4 039 $ 3 448 $ 824
(Loss) earnings per share -
basic $ 0.01 $ 0.01 $ 0.01 $ 0.00
(Loss) earnings per share -
diluted $ 0.01 $ 0.01 $ 0.00 $ 0.00
Average foreign exchange rates
South African Rand per
US dollar 6.91 7.31 7.53 7.51
US dollar per Canadian dollar 0.9870 0.9621 0.9727 0.9608
Period end foreign
exchange rates
South African Rand per
US dollar 6.59 7.00 7.66 7.33
US dollar per Canadian dollar 1.0054 0.9718 0.9393 0.9844
3. Results of Operations for the three and twelve months ended December 31, 2011
The following table sets forth selected consolidated financial information for
the three and twelve months ended December 31, 2011 and 2010:
Consolidated income statements
(Expressed in thousands of U.S. dollars, except per share amounts - unaudited)
Three months ended
December 31,
2011 2010
Revenue $ 19 172 $ 45 616
Cost of operations
Production costs 25 627 30 390
Depletion and depreciation 20 451 22 507
Impairment 46 327 -
Mine operating (loss) earnings (73 233) (7 281)
Expenses
General and administrative 3 274 4 698
Share-based payments 34 (316)
Operating (loss) profit (76 541) (11 663)
Other income (expense)
Interest income 1 231 545
Finance costs (352) (452)
Foreign exchange (loss) gain (7 336) 184
(Loss) profit before income taxes (82 998) (11 386)
Income tax (expense) recovery (1 096) (733)
Net (loss) profit for the period $ (84 094) $ (12 119)
Attributable to
Non-controlling interest (3 889) (535)
Equity shareholders of the Company (80 205) (11 584)
Net (loss) profit for the period $ (84 094) $ (12 119)
(Loss) earnings per share
Basic $ (0.09) $ (0.02)
Diluted $ (0.09) $ (0.02)
Weighted average number of common share outstanding
Basic 908 405 685 633
Diluted 908 405 697 916
Twelve months ended
December 31,
2011 2010 2009
Revenue $ 113 203 $ 155 000 $ 111 365
Cost of operations
Production costs 114 614 109 901 82 839
Depletion and depreciation 20 451 22 507 17 154
Impairment 46 327 - -
Mine operating (loss) earnings (68 189) 22 592 11 372
Expenses
General and administrative 11 847 12 117 10 528
Share-based payments 8 325 1 452 582
Operating (loss) profit (88 361) 9 023 262
Other income (expense)
Interest income 5 529 1 797 1 786
Finance costs (1 549) (1 807) (1 691)
Foreign exchange (loss) gain (2 551) (160) (758)
(Loss) profit before income taxes (86 932) 8 853 (401)
Income tax (expense) recovery (56) 924 1 623
Net (loss) profit for the period $ (86 988) $ 9 777 $ 1 222
Attributable to
Non-controlling interest $ (10 443) $ (3 575) $ (4 428)
Equity shareholders of the Company (76 545) 13 352 5 650
Net (loss) profit for the period $ (86 988) $ 9 777 $ 1 222
(Loss) earnings per share
Basic $ (0.08) $ 0.02 $ 0.01
Diluted $ (0.08) $ 0.02 $ 0.01
Weighted average number of common share
outstanding
Basic 908 199 683 177 680 577
Diluted 908 199 694 839 687 790
December 31, December 31, December 31,
Condensed consolidated
statements of financial position 2011 2010 2009
Total assets $ 914 813 $ 1 126 975 $ 706 850
Total long-term liabilities $ 41 910 $ 55 576 $ 53 493
3.1 Mining operations at Crocodile River Mine ("CRM")
The following is a summary of CRM`s operations for the eight most recently
completed quarters:
Crocodile River Mine operations
Three months ended
2011
December 31 September 30 June 30 March 31
Key financial statistics
(dollar amounts stated
in U.S. dollars)
Sales - PGM ounces 19 854 26 955 20 528 25 387
Average delivered price
per ounce (2) $931 $1 088 $1 113 $1 136
Average basket price $1 104 $1 290 $1 319 $1 344
Rand average delivered
price per ounce R 7 541 R 7 768 R 7 557 R 7 963
Rand average basket price R 8 942 R 9 211 R 8 956 R 9 421
Cash costs per ounce of
PGM (1) $1 291 $1 059 $1 515 $1 154
Cash costs per ounce of
PGM, net of chrome
by-product credits (1) $1 072 $854 $1 196 $880
Rand cash costs per
ounce of PGM (1) R 10 455 R 7 561 R 10 287 R 8 090
Rand cash costs per
ounce of PGM, net of chrome
by-product credits (1) R 8 685 R 6 097 R 8 119 R 6 167
Key production statistics
Run-of-mine ("ROM") ore
tonnes processed 194 532 261 280 201 986 245 500
Development meters 2 929 3 976 3 562 4 219
On-reef development meters 1 591 2 248 2 090 2 434
Stoping units (square
meters) 31 767 40 594 31 828 44 674
Concentrator recovery
from ROM ore 76% 78% 76% 79%
Chrome sold (tonnes) 56 890 64 608 60 661 63 578
Metal in concentrate
sold (ounces)
Platinum (Pt) 9 819 13 656 10 363 12 790
Palladium (Pd) 4 428 5 844 4 485 5 494
Rhodium (Rh) 1 696 2 294 1 740 2 162
Gold (Au) 77 98 74 97
Iridium (Ir) 778 967 728 919
Ruthenium (Ru) 3 056 4 096 3 138 3 925
Total PGM ounces 19 854 26 955 20 528 25 387
Three months ended
2010
December 31 September 30 June 30 March 31
Key financial statistics
(dollar amounts stated
in U.S. dollars)
Sales - PGM ounces 32 752 37 798 30 820 30 531
Average delivered price
per ounce (2) $1 058 $953 $1 015 $959
Average basket price $1 250 $1 128 $1 200 $1 130
Rand average delivered
price per ounce R 7 311 R 6 966 R 7 643 R 7 202
Rand average basket price R 8 638 R 8 246 R 9 036 R 8 486
Cash costs per ounce of
PGM (1) $928 $713 $882 $841
Cash costs per ounce of
PGM, net of chrome by-product
credits (1) $653 $625 $646 $711
Rand cash costs per
ounce of PGM (1) R 6 412 R 5 212 R 6 639 R 6 315
Rand cash costs per
ounce of PGM,
net of chrome by-product
credits (1) R 4 509 R 4 566 R 4 866 R 5 336
Key production statistics
Run-of-mine ("ROM") ore
tonnes processed 327 872 357 219 290 028 290854
Development meters 3 501 3 299 3 202 2812
On-reef development meters 1 925 1 797 1 573 1931
Stoping units (square meters) 53 044 50 892 50 573 51760
Concentrator recovery
from ROM ore 78% 81% 80% 78%
Chrome sold (tonnes) 89 123 50 148 76 677 75 846
Metal in concentrate
sold (ounces)
Platinum (Pt) 16 526 19 195 15 433 15 405
Palladium (Pd) 7 055 8 129 6 769 6 562
Rhodium (Rh) 2 786 3 216 2 661 2 607
Gold (Au) 117 131 108 105
Iridium (Ir) 1 183 1 323 1 077 1 106
Ruthenium (Ru) 5 085 5 804 4 772 4 746
Total PGM ounces 32 752 37 798 30 820 30 531
(1) These are non-IFRS measures as described in Section 3.2
(2) Average delivered price is the average basket price at the time of delivery
of PGM concentrates, net of associated smelting, refining and marketing
costs, under the Company`s primary off-take agreement.
Quarter ended December 31, 2011 compared to the quarter ended December 31,
2010
In Q4 2011, CRM recorded a Lost Time Injury Frequency Rate ("LTIFR") of
2.61 compared to 3.88 in Q4 2010. There were four lost time injuries in Q4
2011 compared to seven lost time injuries in Q4 2010.
The Company generated revenue of $19,172,000 in Q4 2011 of which
$14,834,000 is PGM revenue and $4,338,000 is chrome revenue. PGM revenues
represent the amounts recorded when PGM concentrates are physically
delivered to the buyer, which are provisionally priced on the date of
delivery. The Company settles its PGM sales three to five months following
the physical delivery of the concentrates and adjustments are made when the
prices for the metal sold to the market are established.
The Company recorded an average delivered basket price of $931 per PGM
ounce in Q4 2011, compared to $1,058 in Q4 2010 and $1,088 in the third
quarter of 2011 ("Q3 2011"). The delivered price per ounce refers to the
PGM prices in effect at the time the PGM concentrates are delivered to the
smelter. As a result of fluctuations in PGM prices, the Company recorded
negative provisional price adjustments of $1,719,000 in Q4 2011, compared
to positive price adjustments of $1,706,000 in Q4 2010.
The following table shows a reconciliation of revenue and provisional price
adjustments.
Crocodile River Mine
Effect of provisional price adjustments on revenues
(stated in thousands of U.S. dollars)
Three months ended
December 31,
2011 2010
Revenue before provisional price adjustments $ 22 149 $ 42 543
Provisional price adjusments
Adjustments to revenue upon settlement of prior
periods` sales (1 719) 1 706
Mark-to-market adjustment on sales not yet settled
at end of period (1 258) 1 376
Revenue as reported in the income statement $ 19 172 $ 45 616
Twelve months ended
December 31,
2011 2010
Revenue before provisional price adjustments $ 117 923 $ 149 606
Provisional price adjusments
Adjustments to revenue upon settlement of prior
periods` sales (1 258) 1 376
Mark-to-market adjustment on sales not yet settled
at end of period (4 099) 1 126
Revenue as reported in the income statement $ 113 203 $ 155 000
sold decreased by 39% in Q4 2011 compared to Q4 2010 due to lower
run-of-mine ore tonnes processed (194,534 tonnes in Q4 2011 compared to
3 27,872 tonnes in Q4 2010), and lower concentrator recovery (76% in Q4 2011
compared to 78% in Q4 2010), which were offset by an increase in grade (4.1
grams per tonne in Q4 2011 compared to 4.0 grams per tonne in Q4 2010).
Fourth quarter mining and production was negatively impacted by strike action by
employees of CRM`s main mining contractor, JIC Mining Services, in October.
Production in Q4 was also negatively impacted as a result of the shut-down of
operations following the fatality that occurred in a blasting accident at a new
ore pass being developed at CRM`s Zandfontein Section by High Point Trading, an
independent engineering company. The Section 54 Stop Work Order was issued by
the Department of Mineral Resources ("DMR"), and the subsequent investigation
into the accident resulted in a total shut-down of operations at CRM for 10
days. This tragic accident was a major blow to the Company`s efforts toward
health and safety which it has made a key priority at all of its operations.
Concentrator recovery decreased as a result of the subsequent disruptions to the
steady state operation of the processing plant.
Operating cash costs, a non-IFRS measure, are incurred in Rand. Total Rand
operating cash costs decreased by 1% compared to Q4 2010, but Rand operating
cash costs per ounce increased by 63% from R6,412 per ounce in Q4 2010 to
R10,455 per ounce in Q4 2011 primarily due to a 39% decrease in ounces sold.
By comparison, total U.S. dollar operating cash costs per ounce increased by 39%
from $928 per ounce in Q4 2010 to $1,291 per ounce in Q4 2011 also primarily due
to a 39% decrease in ounces sold. This was offset by a 1% decrease in total Rand
operating cash costs combined with a 17% depreciation of the South African Rand
relative to the U.S. dollar. The average U.S. dollar-Rand exchange rate was
R8.10:$1.00 in Q4 2011 compared to R6.91:$1.00 in Q4 2010.
A reconciliation of production costs, as reported in the income statement, to
cash operating costs, is shown in Table 5 under Section 3.2 CRM non-IFRS
measures.
Chrome revenues and effect on cash costs per ounce
The Company recorded revenue for 56,890 tonnes of chrome in Q4 2011 (89,123
tonnes in Q4 2010). Net chrome revenue recognized was $76 per tonne ($101 per
tonne in Q4 2010) for a total of $4,338,000 ($9,021,000 in Q4 2010). The 25%
decrease in chrome revenue recognized per tonne compared to Q4 2010 was due to a
softer market for chrome in Q4 2011 compared to Q4 2010 combined with the 17%
depreciation of the South African Rand relative to the U.S. dollar. The average
U.S. dollar-Rand exchange rate was R8.10:$1.00 in Q4 2011 compared to
R6.91:$1.00 in Q4 2010. Q4 2011 chrome revenues of $4,338,000 reduced operating
cash costs from $1,291 to $1,072 per ounce net of by-product credits and from
R10,455 to R8,685 per ounce net of by-product credits.
Quarter ended December 31, 2011 compared to the quarter ended September 30, 2011
Revenues decreased by 39% compared to Q3 2011 as a result of a 26% decrease in
the ounces produced in the quarter, a 14% decrease in the average delivered
price per ounce, a 22% ($1,191,000) decrease in chrome revenues and a 68%
increase ($1,206,000) increase in negative price adjustments, which were offset
by a 54% decrease ($1,036,000) in chrome penalties. The decrease in ounces
produced was due to a 26% decrease in run-of-mine ore processed (194,532 tonnes
in Q4 2011 compared to 261,280 tonnes in Q3 2011) combined with a decrease in
concentrator recovery from 78% in Q3 2011 to 76% in Q4 2011. The decrease in
ounces produced and concentrator recovery are the result of strike action by
employees of CRM`s main mining contractor, JIC Mining Services, in October, and
by a Section 54 shut-down of operations following the fatality at CRM in
November. Both incidents resulted in stoppages of mining operations and
concentrator recovery decreased as a result of the subsequent disruptions to the
steady state operation of the processing plant.
Rand operating cash costs increased by 38% from R7,561 per ounce in Q3 2011 to
R10,455 per ounce in Q4 2011 primarily as a result of a 26% decrease in ounces
produced combined with a 2% increase in total Rand operating cash costs.
Operating cash costs stated in U.S. dollars increased by 22% from $1,059 per
ounce in Q3 2011 to $1,291 per ounce in Q4 2011 also due to the 26% decrease in
ounces produced and a 2% increase in total Rand operating cash costs, which were
offset by a 13% depreciation of the South African Rand relative to the U.S.
dollar. The average U.S. dollar-Rand exchange rate was R8.10:$1.00 in Q4 2011
compared to R7.14:$1.00 in Q3 2011.
Twelve months ended December 31, 2011 compared to the twelve months ended
December 31, 2010
In 12M 2011, the Company sold 92,724
, a decrease of 30% compared to 12M 2010, primarily as a result of a 29%
decrease in run-of-mine ore processed in 2011 (1,265,973 tonnes processed in
12M 2010 compared to 903,298 tonnes processed in 12M 2011), combined with a
decrease in the recovery rate (79% in 12M 2010 compared to 77% in 12M 2011)
and a decrease in head grade (4.1 grams per tonne in 12M 2010 compared to 4.0
grams per tonne in 12M 2011). Mining and production for the year was negatively
impacted by labour issues related to the illegal sit-in and unprotected strike
and damage to underground infrastructure at CRM in May, followed by strike
action by employees of CRM`s main mining contractor, JIC Mining Services, in
October, and a Section 54 shut-down of operations following the fatality at
CRM in November.
The average delivered basket price per ounce increased from $995 in 12M 2010 to
$1,073 in 12M 2011.
Operating cash costs increased 48% from $835 per ounce in 12M 2010 to $1,236 per
ounce in 12M 2011 primarily due to a 30% decrease in ounces produced combined
with a 3% increase in total Rand operating cash costs, which were offset by a 1%
appreciation of the South African Rand relative to the U.S. dollar. The average
U.S. dollar-Rand exchange rate was R7.26:$1.00 in 12M
2011 compared to R7.32:$1.00 in 12M 2010.
Total Rand operating cash costs increased 3% between 12M 2010 and 12M 2011
mainly due to a 27% increase in power and electricity costs effective April 1,
2011, an increase in repairs and maintenance due to damages caused during the
interruption in May 2011 that led to a higher number of vehicle repairs in 2011
than in 2010, an increase in support costs as a result of changes to the support
pattern, and repair and maintenance costs related to the rock winder, shaft and
mills that were not required in 2010. The various interruptions to production
described above resulted in decreases to mining supplies used and decreases to
overall labour costs, despite the signing of a two-year wage settlement with the
National Union of Mineworkers. The overall labour force at CRM decreased by
approximately 3% compared to 2010.
3.2 CRM non-IFRS measures
The following table provides a reconciliation of EBITDA and cash operating
costs per PGM ounce to mine operating earnings and production costs,
respectively:
Crocodile River Mine non-IFRS measures
(Expressed in thousands of U.S. dollars, except ounce and per ounce data)
Three months ended
December 31,
2011 2010
Mine operating (loss) earnings $ (73 233) $ (7 281)
Depletion and depreciation 20 451 22 507
Impairment 46 327 -
EBITDA (1) (6 455) 15 226
Production costs as reported 25 627 30 390
Adjustments for miscellaneous costs (2) (0) 4
Cash operating costs 25 627 30 394
Less by-product credits - chrome revenues and
adjustments (4 338) (9 021)
Cash operating costs net of by-product credits 21 289 21 373
Ounces sold 19 854 32 752
Cash cost per ounce sold $ 1 291 $ 928
Cash cost per punce sold net of by-product credits $ 1 072 $ 653
Twelve months ended
December 31,
2011 2010
Mine operating (loss) earnings $ (68 189) $ 22 592
Depletion and depreciation 20 451 22 507
Impairment 46 327 -
EBITDA (1) (1 411) 45 099
Production costs as reported 114 614 109 901
Adjustments for miscellaneous costs (2) (45) 290
Cash operating costs 114 569 110 191
Less by-product credits - chrome revenues and
adjustments (23 384) (23 599)
Cash operating costs net of by-product credits 91 185 86 592
Ounces sold 92 724 131 901
Cash cost per ounce sold $ 1 236 $ 835
Cash cost per punce sold net of by-product credits $ 983 $ 656
(1) EBITDA includes provisional price adjustments, chrome revenues and chrome
penalties.
(2) Miscellaneous costs include costs such as housing, technical services and
planning.
The Company is of the opinion that conventional measures of performance
prepared in accordance with IFRS do not meaningfully demonstrate the
ability of its operations to generate cash flow. Therefore, the Company has
included certain non-IFRS measures in this MD&A to supplement its financial
statements which are prepared in accordance with IFRS. These non-IFRS
measures do not have any standardized meaning prescribed under IFRS, and
therefore they may not be comparable to similar measures employed by other
companies.
In this MD&A, the Company has reported its share of mine operating earnings
before interest, depletion, depreciation, amortization, impairment and tax
("EBITDA") for CRM. This is a liquidity non-IFRS measure which the Company
believes is used by certain investors to determine the Company`s ability to
generate cash flows for investing and other activities. The Company also
reports cash operating costs per ounce of PGM produced, another non-IFRS
measure which is a common performance measure used in the precious metals
industry.
3.3 Development projects
3.3.1 CRM
During the year ended December 31, 2011, the Company spent $52,384,000 at
CRM on underground mine development, underground electrical upgrades, and
ongoing underground works at the Zandfontein vertical shaft, including the
development of a decline for a conveyor and chairlift system that will move
ore and workers to and from the new stopes being developed below 4-level as
well as workshops and refuelling systems underground to improve equipment
availability.
Mine development projects are on track at the Zandfontein section with the
new infrastructure for underground ore and waste handling systems on 3 and
4-Level having been successfully installed, and the ongoing development of
the conveyor decline required to mine between 5 and 9-Levels making steady
progress.
At the Maroelabult Section, decline development and conveyor installations
are proceeding and the mine life of this section of CRM has been extended
by two years to 2016.
Mine development at the shallow Crocette ore body recommenced on April 4,
2010 due to the higher trend in PGM prices at that time. However, with the
volatility in the global markets, the Company re- evaluated and re-
prioritized its development projects at the end of 2011 and elected to put
the development of Crocette on hold. All development activities at Crocette
ceased in early 2012. The Company expects that development work at Crocette
can be re-started quickly if there is a significant increase in the ZAR
basket price of PGMs.
3.3.2 Eastern Limb projects
Development of Mareesburg/Kennedy`s Vale open-pit and concentrator project,
which was reinitiated in Q4 2010, continued to advance in 2011. During the
year ended December 31, 2011, expenditures of $34,632,000 at this project
consisted of site capture, installation of temporary works, mass earthworks
and concrete work with initial areas of focus being the ore silos, grinding
and flotation foundations for the 90,000 tonne-per-month (tpm)
concentrator. Construction for the concentrator is on schedule, and long
lead items such as mills and mining equipment have been purchased and
delivered. Engineering and construction planning for the open-pit mine at
Mareesburg is well advanced and tenders for contract mining will be
released in early 2012.
Under the current development plan, a 90,000 tpm concentrator will be
located on the Kennedy`s Vale site and the planned rapid production build-
up of ore from the Mareesburg open pit will allow the concentrator to start
to ramp up quickly to full capacity immediately upon commissioning. The
concentrator has been designed for expansion to 180,000 tpm to handle
future ore from our other Eastern Limb properties.
Mareesburg will initially be an open-pit mining operation and consequently
require little power. A power line currently provides 800 KVA across the
Mareesburg property and this will be adequate to run administration and
workshop/maintenance facilities with any further power requirements to be
provided by on-site diesel power generators.
The Company has already secured 3MVA of power for the construction phase
for the concentrator at the Kennedy`s Vale site. With respect to permanent
operating power for the concentrator and for the Spitzkop mine which is
planned to be developed after the Mareesburg open-pit mine comes on stream,
the Company has applied for 40 MVA of installed capacity, of which 20MVA
would be required for the initial 90,000 tpm plant. The Company has paid
the necessary fees to initiate the acquisition of power and Eskom has
commenced the engineering work.
3.4 Corporate and other expenses
General and administrative expenses ("G&A") are costs associated with the
Company`s corporate head office in Vancouver and the Johannesburg
administrative office, and costs associated with care and maintenance at
the Company`s Spitzkop and Mareesburg projects. Corporate office costs
include legal and accounting, regulatory, executive management fees,
investor relations, travel and consulting fees.
G&A decreased by 30% from $4,698,000 in Q4 2010 to $3,274,000 in Q4 2011
due to a $739,000 decrease in G&A at the Company`s head office combined
with a $751,000 decrease in G&A at the Company`s South African
subsidiaries. The decrease in head office G&A was mainly due to a $531,000
decrease in bonuses granted to executive officers and directors of the
Company compared to Q4 2010. The decrease in G&A at the Company`s South
African subsidiaries was due to employees commencing work on the Mareesburg
and Kennedy`s Vale concentrator development projects in the year ended
December 31, 2011. This resulted in the employees` salary expenses being
capitalized to the projects. In 2010, these same expenses were charged to
the income statement as these projects were on care and maintenance. The
decrease in G&A was also due to the depreciation of the Rand relative to
the U.S. dollar. The average U.S. dollar-Rand exchange rate was R8.10:$1.00
in Q4 2011 compared to R6.91:$1.00 in Q4 2010.
G&A increased 29% from $2,546,000 in Q3 2011 to $3,274,000 in Q4 2011 due
to the $959,000 increase in G&A at the Company`s head office which was
offset by a $279,000 decrease in G&A at the Company`s South African
subsidiaries. The $959,000 increase at head office was mainly due to the
grant of $884,000 in bonuses to executive officers and directors of the
Company.
G&A decreased 2% from $12,117,000 in 12M 2010 to $11,847,000 in 12M 2011
primarily due to the decrease in bonuses granted to executive directors and
officers of the Company in 2011 and a $302,000 refund on insurance premiums
on a cancellation of a long-term policy of one of the Company`s South
African subsidiaries.
Interest income recorded during the three and twelve months ended December
31, 2011 was $1,231,000 and $5,529,000 compared with $545,000 and
$1,797,000 during the same periods in 2010. The increase in interest income
was mainly due to an increase in cash balances at head office as a result
of the Company`s December 30, 2010 equity financing. Further details on the
equity financing have been included within Section 4.
During the three and twelve months ended December 31, 2011, the Company
recorded a net income tax expense of $1,096,000 and $56,000, respectively.
The Company`s net income tax expense for the three months ended December
31, 2011 consists of current tax expense of $4,580,000 and a deferred
income tax recovery of $3,484,000. The Company`s net income tax expense for
the twelve months ended December 31, 2011 consists of current tax expense
of $4,957,000 and a deferred income tax recovery of $4,901,000.
The current tax expense was comprised of tax on income earned for non-
mining activities and tax on non- deductible interest as a result of the
South African Revenue Service`s ("SARS") ruling that one of the Company`s
South African subsidiaries is thinly capitalized.
The deferred income tax recovery was based on changes in the Company`s net
assets. The consolidated statement of financial position reflects total
deferred tax liabilities of $33,520,000 which arose primarily as a result
of the step-up to fair value of the net assets acquired on the Barplats and
Gubevu business acquisitions during the years ended June 30, 2006, June 30,
2007, and December 31, 2008.
4. Liquidity and Capital Resources
At December 31, 2011, the Company had working capital of $240,236,000
(December 31, 2010 - $362,691,000) and cash and cash equivalents and short-
term investments of $250,801,000 (December 31, 2010 - $350,292,000) in
highly liquid, fully guaranteed, bank sponsored instruments.
The Company`s healthy working capital and cash position was achieved
through the completion of an equity financing on December 30, 2010. The
Company raised Cdn$348 million through a public offering which consisted of
224,250,000 common shares, of which 195,361,476 common shares were issued
at a price of Cdn$1.55 and 28,888,524 common shares were issued at a price
of GBP0.9568. Working capital, cash and cash equivalents and short-term
investments decreased during 2011 as the Company did not generate positive
cash flows from CRM operations but spent approximately $52 million in
development costs at CRM, approximately $35 million in the construction of
the Kennedy`s Vale concentrator, and approximately $12 million in G&A. The
Company`s working capital and cash position were also affected by
fluctuations in the exchange rates between the Rand and the U.S. dollar.
The Company had no long-term debt outstanding at December 31, 2011, other
than a provision for environmental rehabilitation relating to CRM,
Kennedy`s Vale and Spitzkop.
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 U.S.$100
million financing package. The borrowers are Barplats Mines Limited,
Rhodium Reefs Limited, and Royal Anthem Investments 134 (Pty) Ltd., three
of the Company`s South African subsidiaries. The financing package consists
of a U.S.$70 million term facility and a U.S.$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 U.S. LIBOR plus
3.85% rising to U.S. 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 properties 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.
4.1 Outlook
The PGM industry has experienced significant global economic uncertainty
and market volatility since 2008. From the beginning of 2009 through
September 2011, PGM prices in U.S. dollar terms have generally trended
upward. However, prices were significantly negated by the strength of the
Rand against the U.S. dollar. As a result, the U.S. dollar realized basket
prices that the Company received have improved since the December 2008
lows, but these prices, in Rand terms, were still significantly below those
recorded in June 2008 when basket prices were at their peak. PGM prices
have re-entered a period of volatility since September 2011, and the
Company anticipates that PGM prices will remain volatile and the Rand will
remain strong against the U.S. dollar in the short term, which impacts the
income and cash flows generated by the Company as it has U.S. dollar-based
revenues and a Rand-based operating cost structure. As a result, the
Company continues to seek ways to improve its operating efficiency and
thereby minimize its operating costs, without compromising safety, health
and environmental standards. The recovery of PGM prices in 2009 and 2010
allowed the Company to resume mine development at the Crocette section at
CRM in April 2010 and commence the development of its Eastern Limb projects
in early 2011, including the development of an open-pit mine at Mareesburg
and the construction of a 90,000 tpm concentrator located on the Kennedy`s
Vale site. However, in light of the recent volatility of the eurozone
financial markets and PGM prices, the Company has had to
re-evaluate and re-prioritize its development projects given its
existing financial, human and technical resources. As a result,
the development of Crocette was put on hold in early 2012.
The Company believes that it will have sufficient funds in the form of
cash, short-term investments and undrawn credit facilities available to
complete the development of the Mareesburg open-pit and Kennedy`s Vale
concentrator projects, and for general corporate purposes.
To bring Crocette and the rest of the Eastern Limb projects, which includes
Spitzkop and Kennedy`s Vale, into production, additional funding will be
required and may include joint venture or other third party participation
in one or more of these projects, or the public or private sales of equity
or debt securities of the Company. There can be no assurance that
additional funding will be available to the Company or, if available, that
this funding will be on acceptable terms. If adequate funds are not
available, including funds generated from producing operations, the Company
may be required to delay or reduce the scope of these development projects.
4.2 Impairment
At December 31, 2011, the Company assessed the carrying values of its
mineral properties for indication of impairment. The Company believes that
certain factors, such as a significant drop in production at CRM in 2011
compared to 2010, the unstable labour conditions in the South African PGM
industry, and the volatility in the eurozone
markets which has affected the PGM prices, have contributed to the
decrease in the Company`s share price. In August 2011, the Company`s
market capitalization fell below its book value and has remained below its
book value since then. Based on current and expected PGM prices, exchange
rates and cost structures, management`s best estimates of the future
production profile of CRM and its Eastern Limb projects, and a weighted
average cost of capital of between 8.50% and 9.00%, management has
determined that the value of CRM has been impaired by $46,327,000, of which
$33,281,000 pertained to tangible assets owned, $11,796,000 pertained to
intangible mineral properties being depleted, and $1,250,000 pertained to
the refining contract. The Company also concluded that the Company`s
Eastern Limb projects have not been impaired. The impairment charges on
CRM and the refining contract have been recorded in Q4 2011. Any changes
to future market conditions and commodity prices may result in impairment,
a further impairment or a reversal of impairment of any of the Company`s
mineral properties.
4.3 Share Capital
During the three months ended December 31, 2011, the Company did not grant
any stock options. Total share-based payment expense with regards to stock
options for the quarter was $1,000, which takes into account the vesting of
options and the reversal of share-based payment expense previously
recognized for unvested options that were forfeited in the period. During
Q4 2011, no options were exercised and 460,000 options were forfeited at a
weighted average exercise price of Cdn$2.01.
During the year ended December 31, 2011, the Company granted 9,875,000
stock options at an exercise price of Cdn$1.55. Total share-based payment
expense with regards to stock options for the year was $8,193,000, which
takes into account the vesting of options and the reversal of share-based
payment expense previously recognized for unvested options that were
forfeited in the period. In 2011, 7,255,000 options were forfeited at a
weighted averaged exercise price of Cdn$1.71 and 741,333 options were
exercised at a weighted average exercise price of Cdn$0.32.
In 2010, the Company`s South African subsidiary, Barplats Investments
Limited, implemented a key skills retention plan for its senior employees
in South Africa. The purpose of the plan is to retain key employees,
attract new employees as the need arises and remain competitive with other
South African mining companies. The plan operates through a trust ("the
Trust") which purchases shares of the Company on behalf of the employees.
These shares then vest to the employees over time. In February 2011, the
Trust purchased 198,563 shares pursuant to the plan which resulted in a
share-based payment expense of $34,000 and $132,000 in the three and twelve
months ended December 31, 2011, respectively, and a share-based payment
liability of $48,000.
As at March 5, 2012, the Company had:
- 928,187,840 common shares outstanding; and
- 59,855,503 stock options outstanding, which are exercisable at prices
ranging from Cdn$0.32 to Cdn$3.38 and which expire between 2012 and
2018.
4.4 Contractual Obligations, Commitments and Contingencies
The Company`s major contractual obligations and commitments at December 31,
2011 were as follows:
(in thousands of U.S. dollars)
Less than 1
Total year
Provision for environmental rehabilitation $ 40 567 $ -
Capital expenditure and purchase commitments
contracted at December 31, 2011 but not recognized on
the consolidated statement of financial position 17 862 17 862
Finance lease obligations 1 675 1 675
$ 60 104 $ 19 537
More than 5
1-5 years years
Provision for environmental rehabilitation $ - $ 40 567
Capital expenditure and purchase commitments
contracted at December 31, 2011 but not recognized on
the consolidated statement of financial position - -
Finance lease obligations - -
$ - $ 40 567
In June 2011, the Company became aware that the law firm of Siskinds LLP of
London, Ontario, had filed a "Notice of Application" under the Class Action
Proceedings Act, 1992, in the Ontario Superior Court of Justice against the
Company and three of its directors and officers. The Notice of Application
seeks permission of the Court to grant leave or permission to commence a
lawsuit under the Securities Act of Ontario and other provinces in respect
to certain alleged breaches of disclosure obligations. In July, 2011, the
Company and its officers and directors were served with court documents.
The Company believes the proposed action has no merit and intends to
continue to vigorously defend the action.
5. Related Party Transactions
A number of the Company`s executive officers are engaged under contract
with those officers` personal services companies. Other executive officers
are paid directly via salary and directors` fees. All share options are
issued to the Company`s officers and directors, and not to their companies.
(Expressed in thousands of U.S. dollars, except per share amounts)
Three months ended
December 31,
2011 2010
Trading transactions
Management and consulting fees $ 1 278 $ 1 539
Reimbursements of expenses 92 102
Total trading transactions $ 1 370 $ 1 641
Compensation of key management personnel
Salaries and directors` fees $ 1 519 $ 2 059
Share-based payments - -
Total compensation of key management personnel $ 1 519 $ 2 059
Twelve months ended
December 31,
2011 2010
Trading transactions
Management and consulting fees $ 2 524 $ 2 557
Reimbursements of expenses 237 193
Total trading transactions $ 2 761 $ 2 750
Compensation of key management personnel
Salaries and directors` fees $ 3 547 $ 3 758
Share-based payments 7 996 1 627
Total compensation of key management personnel $ 11 543 $ 5 385
Management and consulting fees decreased during the three months and twelve
months ended December 31, 2011 compared to the same periods in 2010 mainly due
to a $422,000 decrease in bonuses paid to executive officers and directors of
the Company in 2011, offset by increases in annual fees granted to certain
officers and directors combined with an appreciation of the Canadian dollar
relative to the U.S. dollar. The average U.S. dollar-Canadian dollar exchange
rate was U.S.$1.0114:Cdn$1.00 in 2011 compared to U.S.$0.9707:Cdn$1.00 in 2010.
Salaries and directors` fees decreased during the three and twelve months ended
December 31, 2011 compared to the same periods in 2010 as a result of decreases
in bonuses paid to executive officers and directors of the Company in 2011,
offset by increases in annual fees granted to certain officers and directors
combined with an appreciation of the Canadian dollar relative to the U.S.
dollar. Share-based payments increased from $1,627,000 in 2010 to $7,996,000 in
2011 mainly due to the issuance of more stock options in Q1 2011 compared to Q1
2010.
All related party transactions were recorded at the amounts agreed upon between
the parties. Any balances payable are payable on demand without interest.
6. Critical Accounting Policies and Estimates
The preparation of financial statements requires management to establish
accounting policies, estimates and assumptions that affect the timing and
reported amounts of assets, liabilities, revenues and expenses. These estimates
are based upon historical experience and on various other assumptions that
management believes to be reasonable under the circumstances, and require
judgement on matters which are inherently uncertain. A summary of the Company`s
significant accounting policies is set forth in Note 4 of the consolidated
financial statements for the year ended December 31, 2011.
Management reviews its estimates and assumptions on an ongoing basis using the
most current information available and considers the following to be key
accounting policies and estimates:
6.1 Property, plant and equipment
Property, plant and equipment are the most significant assets of the
Company and represent capitalized expenditures related to the development
of mining properties and related plant and equipment and the value assigned
to exploration potential on acquisition. Property, plant and equipment are
recorded at cost less accumulated depreciation and depletion. Maintenance,
repairs and renewals are charged to operations. Capitalized costs are
depreciated and depleted using either the unit-of-production method over
the estimated economic life of the mine which they relate to, or using the
straight-line method over their estimated useful lives.
All direct costs related to the acquisition, exploration and development of
mineral properties are capitalized until the properties to which they
relate are placed into production, 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 mining assets and amortized using the units-of-production method
following commencement of production.
The amounts shown for mineral properties do not necessarily represent
present or future values. Their recoverability is dependent upon the
discovery of economically recoverable reserves, the ability of the Company
to obtain the necessary financing to complete the development, and future
profitable production or proceeds from the disposition thereof.
The Company reviews and evaluates its mining interests for impairment or
reversal of impairment at least annually or when events or changes in
circumstances indicate that the related carrying amounts may not be
recoverable. In accordance with IFRS, these evaluations consist of
comparing each asset`s carrying value with the estimated discounted future
net cash flows. Impairment is considered to exist if the total estimated
future discounted cash flows are less than the carrying amount of the
assets. The resulting impairment loss is measured and recorded based on the
difference between future discounted cash flows and book value. Future cash
flows are estimated based on expected future production, commodity prices,
operating costs and capital costs. Other estimates incorporated in the
impairment evaluations include processing and mining costs, mining tonnage,
ore grades and recoveries, which are all subject to uncertainty.
In accordance with IFRS if, subsequent to impairment, an asset`s discounted
future net cash flows exceeds its book value, the impairment previously
recognized can be reversed. However, the asset`s book value cannot exceed
what its amortized book value would have been had the impairment not been
recognized.
At December 31, 2011, the Company assessed the carrying values of its
mineral properties and concluded that CRM required an impairment of
$46,327,000, of which $33,281,000 pertained to tangible assets owned,
$11,796,000 pertained to intangible mineral properties being depleted, and
$1,250,000 pertained to the refining contract. The Company`s Eastern Limb
properties did not require impairment or reversal of impairment. Any
changes to future market conditions and commodity prices may result in
impairment, a further impairment or a reversal of impairment of any of the
Company`s mineral properties.
6.2 Revenue recognition
Revenue, based upon prevailing metal prices, is recorded in the financial
statements when title to the PGMs and chrome transfers to the customer. For
PGMs, 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. The estimated revenue is recorded based on metal prices and
exchange rates on the date of shipment and is adjusted at each balance
sheet date to the metal prices on those dates. The actual amounts will be
reflected in revenue upon final settlement, which are three and five months
after the date of shipment.
These adjustments reflect changes in metal prices and changes in qualities
arising from final assay calculations.
As a result of fluctuations in PGM prices, the Company recorded negative
provisional price adjustments of $2,977,000 and $4,720,000 in the three and
twelve months ended December 31, 2011, respectively, compared to positive
price adjustments of $3,082,000 and $5,394,000 in the three and twelve
months ended December 31, 2010, respectively.
6.3 Share-based payment
Share-based payment expense is calculated using the Black-Scholes option
pricing model and is recognized over the period that the employees earn the
options, with a corresponding credit to equity- settled employee benefits
reserve. If and when the stock options are ultimately exercised, the
applicable amounts of equity-settled employee benefits reserve are
transferred to share capital. In the event that unvested stock options are
forfeited, any share-based payment expense previously recognized with
regards to these options is reversed in the period of forfeiture.
During the year ended December 31, 2011, the Company`s weighted average
assumptions for the calculation included a risk-free interest rate of
2.69%, expected life of the options of 5 years, no dividends, and an
annualized volatility of the Company`s shares of 73%. The resulting
weighted average option valuation was Cdn$0.82 per share. Share-based
payment expense of $8,325,000 was recognized during the year ended December
31, 2011 (December 31, 2010 - $1,452,000), of which $8,193,000 was due to
the Company`s share option plan and $132,000 was due to the Company`s key
skills retention plan.
6.4 Provision for environmental rehabilitation
The Company recognizes liabilities for statutory, contractual 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. Initially, the
fair value of the liability for an asset retirement obligation is
recognized in the period incurred. If the cost estimates arise from the
decommissioning of plant and other site preparation work, the net present
value is added to the carrying amount of the associated asset and amortized
over the asset`s useful life. If the cost estimates arise from restoration
costs arising from subsequent site damage that is incurred on an ongoing
basis during production, the net present value is charged to profit and
loss for the period. The liability is accreted over time through periodic
charges to operations and it is reduced by actual costs of reclamation.
The Company`s estimates of reclamation costs are based on the Company`s
interpretation of current regulatory requirements and these estimates could
change as a result of changes in regulatory requirements and assumptions
regarding the amount and timing of the future expenditures. A change in
estimated discount rates is reviewed annually or as new information becomes
available. Expenditures relating to ongoing environmental programs are
charged against operations as incurred or capitalized and amortized
depending on their relationship to future earnings.
At December 31, 2011, the expected present value of future rehabilitation
costs at CRM and Spitzkop was $8,390,000 using a discount rate of 8.47%.
The undiscounted value was approximately $40,567,000. The Company has not
recorded any future rehabilitation costs for its Mareesburg project as
these costs are currently determined to be immaterial.
7. Adoption of Accounting Standards and Accounting Pronouncements under IFRS
7.1 Application of new and revised IFRSs
Effective January 1, 2011, the Company adopted new and revised
International Financial Reporting Standards ("IFRSs") that were issued
by the International Accounting Standards Board ("IASB"). The
application of these new and revised IFRSs has not had any material
impact on the amounts reported for the current and prior years but may
affect the accounting for future transactions or arrangements.
(a) Amendment to IAS 32 Financial Instruments: Presentation
Rights, options or warrants to acquire a fixed number of the Company`s
equity instruments for a fixed amount of any currency will be allowed
to be classified as equity instruments so long as the Company offers
the rights, options or warrants pro rata to all of the Company`s
existing owners of the same class of the Company`s non-derivative
equity instruments.
(b) Amendments to IFRS 3 Business Combinations
Clarification that the contingent consideration arising in a business
combination previously accounted for in accordance with IFRS 3 that is
outstanding at the adoption date continues to be accounted for in
accordance with IFRS 3.
Limiting the accounting policy choice to measure non-controlling interests
upon initial recognition at fair value or at the non-controlling interest`s
proportionate share of the acquiree`s identifiable net assets to
instruments that give rise to a present ownership interest and that
currently entitle the holder to a share of net assets in the event of
liquidation.
Expansion of the guidance with regards to the attribution of the market-
based measure of an acquirer`s share-based payment awards issued in
exchange for acquiree awards.
(c) Amendments to IAS 27 Consolidated and Separate Financial Statements
Clarification that the amendments to IAS 21 The Effects of Changes in
Foreign Exchange Rates, IAS 28 Investments in Associates, and IAS 31
Interests in Joint Ventures resulting from IAS 27 should be applied
prospectively, except for amendments resulting from renumbering.
(d) Amendments to IFRS 7 Financial Instruments: Disclosures
Amendment to disclosure requirements, specifically, ensuring
qualitative disclosures are made in close proximity to quantitative
disclosures in order to better enable financial statement users to
evaluate an entity`s exposure to risks arising from financial
instruments.
(e) Amendments to IAS 1 Presentation of Financial Statements
Clarification that the breakdown of changes in equity resulting from
transactions recognized in other comprehensive income is required to
be presented in the statement of changes in equity or in the notes to
the financial statements.
(f) Amendments to IAS 24 Related Party Disclosures
Amendment of the definition for related parties.
(g) Amendments to IAS 34 Interim Financial Reporting
Addition of further examples of events or transactions that require
disclosure and removal of references to materiality when discussing
other minimum disclosures.
7.2 Accounting standards issued but not yet effective
(a) Effective for annual periods beginning on or after July 1, 2011
(i) 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.
(b) Effective for annual periods beginning on or after January 1, 2013
(i) New standard IFRS 10 Consolidated Financial Statements
IFRS 10 outlines the principles for the presentation and preparation
of consolidated financial statements.
(ii) 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.
(iii) 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.
(iv) 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.
(v) 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.
(iv) 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.
(vi) 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.
(vii) 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.
(c) Effective for annual periods beginning on or after January 1, 2015
(i) 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.
8. Risk Factors
The business of exploring for minerals and the mining and processing of
those minerals involve a high degree of risk. These activities involve
significant risks which careful evaluation, experience and knowledge may
not, in some cases, eliminate. These risks include risks associated with
the mining industry, the financial markets, metals prices and foreign
operations.
8.1 Risks associated with the mining industry
The commercial viability of any mineral deposit depends on many
factors, not all of which are within the control of management. Some
of the factors that will affect the financial viability of a mineral
deposit include its size, grade and proximity to infrastructure. In
addition, government regulation, taxes, royalties, land tenure, land
use, environmental protection and reclamation and closure obligations
could have a profound impact on the economic viability of a mineral
deposit.
The mining operations and the exploration and development programmes of the
Company may be disrupted by a variety of risks and hazards which are beyond
the control of the Company, including, but not limited to, geological,
geotechnical and seismic factors, fires, power outages, labour disruptions,
flooding, explosions, cave-ins, land-slides, availability of suitable or
adequate machinery and labour, industrial and mechanical accidents,
environmental hazards (including discharge of metals, pollutants or
hazardous chemicals), and political and social instability. In the past two
years, the Company has experienced power shortages and labour disruptions.
It is not always possible to obtain insurance against all risks described
above and the Company may decide not to insure against certain risks as a
result of high premiums or for other commercial reasons.
The Company does not maintain insurance against political or environmental
risks, but may be required to do so in the future. Should any uninsured
liabilities arise, they could result in increased costs, reductions in
profitability, and a decline in the value of the Company`s securities.
The Company is not able to determine the impact of potential changes in
environmental laws and regulations on its financial position due to the
uncertainty surrounding the form such changes may take. As mining
regulators continue to update and clarify their requirements for closure
plans and environmental protection laws and administrative policies are
changed, additional reclamation obligations and further security for mine
reclamation costs may be required. It is not known whether such changes
would have a material effect on the operations of the Company.
8.2 Risks associated with the current global economic uncertainty
PGM and metals prices in general and shares of mining companies have been
particularly volatile in the past year as a result of the global economic
uncertainty, declining confidence in financial markets, failures of
financial institutions and concerns over the availability of credit. These
factors may impact the ability of the Company to obtain equity or debt
financing in the future and, if obtained, on terms that are favourable to
the Company. If market volatility and uncertainty continue or worsen, the
Company`s operations could be adversely impacted and the value of the
Company`s common shares could be adversely affected, making accessibility
to public financing even more difficult.
8.3 Risks associated with foreign currencies
The Company currently uses the South African Rand and the Canadian dollar
as its functional currencies, and the U.S. dollar as its reporting
currency. Operations at the Company`s CRM are predominately conducted in
Rand, with costs paid in Rand and revenues received in Rand, even though
PGM prices are based in U.S. dollars. The Company does not hedge or sell
forward any of its PGM production and is therefore exposed to exchange rate
fluctuations. A deterioration of the U.S. dollar against the Rand could
increase the cost of PGM production and exploration and development costs
and therefore may have a material adverse effect on the earnings of CRM.
During 2010, the average U.S. dollar to Rand exchange rate weakened by 13%
compared to 2009, causing the 2010 U.S. dollar operating costs per ounce to
increase in the absence of other cost factors. The average U.S. dollar to
Rand exchange rate in 2011 was not significantly different than that of
2010, but there were wide fluctuations in the exchange rates during those
two years.
Fluctuations in the exchange rate between the Canadian dollar and the Rand
may also have a significant impact on the Company`s results of operations
and financial condition. The Company`s assets and liabilities will be
subject to the same exchange rate fluctuations that could also have a
significant effect on the results of the Company.
The Company cannot predict the effect of exchange rate fluctuations upon
future operating results and there can be no assurance that exchange rate
fluctuations will not have a material adverse effect on its business,
operating results or financial condition.
8.4 Risks associated with metal prices
Metal prices, particularly platinum prices, have a direct impact on the
Company`s earnings and the commercial viability of the Company`s other
mineral properties. Platinum is both a precious metal and an industrial
metal. The most important industrial consumption of platinum is in
automobile catalytic converters. Demand recovered in 2010 as a result of
the recovery of the auto sector and acquisition by physically-backed
exchange traded funds (ETFs), but has recently become unstable again due to
the current volatility of the eurozone financial markets. Supplies have
been negatively affected by the depletion of existing resources and the
lack of new mining projects, and by intermittent production stoppages
experienced by many of the South African PGM miners as a result of various
factors such as labour unrest and mine safety issues. Some of the other key
factors that may influence platinum prices are policies in the most
important producing countries, namely South Africa and the Russian
Federation, the amount of stockpiled platinum, economic conditions in the
main consuming countries, international economic and political trends,
fluctuations in the U.S. dollar and other currencies, interest rates, and
inflation. A decline in the market price of PGMs mined by the Company may
render ore reserves containing relatively low grades of mineralization
uneconomic and may in certain circumstances lead to a restatement of
reserves.
Prices for platinum and most of the other PGMs reached all-time highs in
the first half of 2008, and as a result, the Company achieved record
margins for its PGM sales during the first two quarters of that year. While
PGM prices have generally increased steadily since the beginning of 2009,
the weakening of the U.S. dollar over the same period has had an offsetting
effect against the increasing PGM prices as the Company receives its
revenues in Rand and incurs its operating expenses in Rand. There is no
assurance that PGM prices will return to the 2008 highs in the future.
The marketability of metals is also affected by numerous other factors
beyond the control of the Company, including but not limited to government
regulations relating to price, royalties, allowable production and
importing and exporting of minerals, the effect of which cannot accurately
be predicted.
8.5 Risks associated with foreign operations
The Company`s investments in South Africa carry certain risks associated
with different political and economic environments. Since 1994, South
Africa has undergone major changes to effect majority rule and mineral
title. Accordingly, all laws may be considered relatively new, resulting in
risks such as possible misinterpretation of new laws, unilateral
modification of mining or exploration rights, operating restrictions,
increased taxes, environmental regulation, mine safety and other risks
arising out of a new sovereignty over mining, any or all of which could
have an adverse impact upon the Company. The Company`s operations may also
be affected in varying degrees by political and economic instability,
terrorism, crime, extreme fluctuations in currency exchange rates, and
inflation.
The Government of South Africa has promulgated the Mineral and Petroleum
Resources Royalty Act, 2008. This act allows for a revenue-based royalty on
South African mining companies which came into effect on March 1, 2010. The
royalty rate for unrefined minerals is based on a formula that references
EBIT margins and is estimated to be approximately 1% of gross mining
revenues.
8.6 Risks associated with granting of exploration, mining and other licenses
The Government of South Africa exercises control over such matters as
exploration and mining licensing, permitting, exporting and taxation, which
may adversely impact on the Company`s ability to carry out exploration,
development and mining activities. Failure to comply strictly with
applicable laws, regulations and local practices relating to mineral right
applications and tenure, could result in loss, reduction or expropriation
of entitlements, or the imposition of additional local or foreign parties
as joint venture partners with carried or other interests.
The Company`s exploration and mining activities are dependent upon the
grant of appropriate licences, concessions, leases, permits and regulatory
consents which may be granted for a defined period of time, or may not be
granted, or may be withdrawn or made subject to limitations. There can be
no assurance that such authorizations will be renewed following expiry or
granted (as the case may be) or as to the terms of such grants or renewals.
There is also no assurance that the issue of a reconnaissance, prospecting
or exploration licence will ensure the subsequent issue of a mining
licence. All `Old Order` mineral rights in South Africa are subject to
conversion into `New Order` mineral rights. New Order Mining Rights for the
Spitzkop and Mareesburg Projects were issued by the Department of Mineral
Resources ("DMR") in October 2009 and September 2010, respectively.
CRM currently holds a total of 7 New Order Prospecting Rights and 5 New
Order Mining Rights. The Kennedy`s Vale Project and CRM now hold a combined
total of 10 New Order Prospecting Rights.
8.7 Risks associated with the development of the Mareesburg Project
The Company`s decision to carry out the development of the Mareesburg
Project was based on internal scoping studies and cash flow models. The
Company did not commission an independent economic analysis in respect of
its decision to proceed with this development. If the Company`s internal
scoping studies or cash flow models prove to be inaccurate or incomplete,
the expected returns from the Mareesburg Project could be lower or even
negative, and the Company`s financial condition and results of operations
could be materially adversely affected. There can be no assurance that the
Company`s projects will be fully developed in accordance with the Company`s
current plans or completed on time or on budget.
9. Financial instruments
9.1 Management of capital risk
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.
9.2 Categories of financial instruments
(Expressed in thousands of U.S. dollars)
December 31,
2011 2010
Financial assets
Cash and cash equivalents $ 151 838 $ 107 846
Loans and receivables (1) 23 580 33 787
Available for sale financial assets (2) 106 958 246 269
$ 282 376 $ 387 902
Financial liabilities
Other financial liabilities (3) 40 459 27 009
$ 40 459 $ 27 009
(1) Loans and receivables consist of trade receivables.
(2) Available for sale financial assets consist of short-term investments and
other assets.
(3) Other financial liabilities consist of accounts payable and accrued
liabilities.
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.
9.3 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.
(a) 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 U,S, 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 U.S. 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.
(b) 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.
(c) 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 $11,550,000 (December 31, 2010 -
$30,142,000). 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.
(d) 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 $11,550,000 (December 31, 2010 - $30,142,000). 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.
(e) 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. Table 6 summarizes
the Company`s significant commitments and corresponding maturities.
10. Internal Control over Financial Reporting
The Chief Executive Officer ("CEO") and the Chief Financial Officer ("CFO")
of the Company, together with the Company`s management, are responsible for
the information disclosed in this MD&A and in the Company`s other external
disclosure documents. For the years ended December 31, 2011 and 2010, the
CEO and the CFO have designed, or caused to be designed under their
supervision, the Company`s disclosure controls and procedures ("DCP") to
provide reasonable assurance that material information relating to the
Company and its consolidated subsidiaries has been disclosed in accordance
with regulatory requirements and good business practices and that the
Company`s DCP will enable the Company to meet its ongoing disclosure
requirements.
The CEO and CFO have evaluated the effectiveness of the Company`s
disclosure controls and procedures and have concluded that the design and
operation of the Company`s DCP were effective as of December 31, 2011 and
that the Company has the appropriate DCP to ensure that information used
internally by management and disclosed externally is, in all material
respects, complete and reliable.
The CEO and the CFO are also responsible for the design of the internal
controls over financial reporting ("ICFR") within the Company in order to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes
in accordance with International Financial Reporting Standards ("IFRS").
Since 2009, the Company has used the services of an international
accounting firm to act as the Company`s internal auditors for its South
African operations. Under the supervision, and with the participation, of
the CEO and the CFO, management conducted an evaluation of the
effectiveness of the Company`s ICFR based on the framework in the Internal
Control - Integrated Framework developed by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on that evaluation,
the CEO and the CFO concluded that the design and operation of the
Company`s ICFR were effective as at December 31, 2011.
The scope of the Company`s design of DCP and ICFR excluded Gubevu
Consortium Investment Holdings (Pty) Ltd., a subsidiary which is accounted
for as a special purpose entity under IFRS. During the design and
evaluation of the Company`s ICFR, management identified certain non-
material deficiencies, a number of which have been addressed or are in the
process of being addressed in order to enhance the Company`s processes and
controls. The Company employs entity level and compensating controls to
mitigate any deficiencies that may exist in its process controls.
Management intends to continue to further enhance the Company`s ICFR.
The Company`s management, including its CEO and CFO, believe that any DCP
and ICFR, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control
system are met. Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must
be considered relative to their costs. Because of the inherent limitations
in all control systems, they cannot provide absolute assurance that all
control issues and instances of fraud, if any, within the Company have been
prevented or detected. These inherent limitations include the realities
that judgments in decision making can be faulty, and that breakdowns can
occur because of simple error or mistake. Additionally, controls can be
circumvented by the individual acts of some persons, by collusion of two or
more people, or by unauthorized override to the future events, and there
can be no assurance that any design will succeed in achieving its stated
goals under all potential future conditions. Accordingly, because of the
inherent limitations in a cost effective control system, misstatements due
to error or fraud may occur and not be detected.
There have been no changes in the Company`s ICFR during the year ended
December 31, 2011 that have materially affected, or are reasonably likely
to materially affect, the Company`s ICFR.
11. Cautionary Statement on Forward-Looking Information
This MD&A, which contains certain forward-looking statements, is intended
to provide readers with a reasonable basis for assessing the financial
performance of the Company. All statements, other than statements of
historical fact, are forward-looking statements. The words "believe",
"expect", "anticipate", "contemplate", "target", "plan", "intends",
"continue", "budget", "estimate", "may", "will", "schedule" and similar
expressions identify forward looking statements. Forward-looking statements
are necessarily based upon a number of estimates and assumptions that,
while considered reasonable by the Company, are inherently subject to
significant business, economic and competitive uncertainties and
contingencies. Known and unknown factors could cause actual results to
differ materially from those projected in the forward-looking statements.
Such factors include, but are not limited to, fluctuations in the currency
markets such as Canadian dollar, South African Rand and U.S. dollar,
fluctuations in the prices of PGM and other commodities, changes in
government legislation, taxation, controls, regulations and political or
economic developments in Canada, the United States, South Africa, or
Barbados or other countries in which the Company carries or may carry on
business in the future, risks associated with mining or development
activities, the speculative nature of exploration and development,
including the risk of obtaining necessary licenses and permits, and
quantities or grades of reserves. Many of these uncertainties and
contingencies can affect the Company`s actual results and could cause
actual results to differ materially from those expressed or implied in any
forward-looking statements made by, or on behalf of, the Company. Readers
are cautioned that forward-looking statements are not guarantees of future
performance. There can be no assurance that such statements will prove to
be accurate and actual results and future events could differ materially
from those acknowledged in such statements. Specific reference is made to
the Company`s most recent Annual Information Form on file with Canadian
provincial securities regulatory authorities for a discussion of some of
the factors underlying forward-looking statements.
The Company disclaims any intention or obligation to update or revise any
forward-looking statements whether as a result of new information, future
events or otherwise, except to the extent required by applicable laws.
March 5, 2012
Ian Rozier
Date: 06/03/2012 15:17:01 Produced by the JSE SENS Department.
The SENS service is an information dissemination service administered by the
JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or
implicitly, represent, warrant or in any way guarantee the truth, accuracy or
completeness of the information published on SENS. The JSE, their officers,
employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature,
howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
