Notes to the consolidated annual financial statements


1 to 11

table54

25746 25754  

table55  

table56

table57

8.

IFRS 2 CHARGE – COMMUNITY ECONOMIC EMPOWERMENT TRANSACTION

 

Anglo American Platinum Limited (Amplats) shareholders approved a broad-based community economic empowerment transaction involving certain Amplats host communities on 14 December 2011. In terms of this transaction, Amplats established a trust (Lefa La Rona Trust) through which certain mine host communities will hold a participation interest. Amplats has subsequently issued 6,290,365 Amplats ordinary shares (the subscription shares) on 14 December 2011 to Lefa La Rona Trust (the Transaction). The subscription shares have been issued subject to a notional vendor finance (NVF) mechanism. The transaction value is R3.5 billion and equates to a 2.33% ownership interest in Amplats at the date of announcement.

 

The key terms of the transaction are included in the circular sent to shareholders on 14 November 2011. The actual economic cost of the transaction has been determined in accordance with IFRS 2 – Share-based Payments. The economic cost was determined using a Monte Carlo simulation option-pricing model for valuing the option and was done using available market-sourced data and an estimation of future dividend yields at given dates, to determine the expected future ordinary share prices. These amounts were then discounted to the present resulting in an IFRS 2 charge of R1,073 million which has been expensed, in full, on the effective date.

 

table58

  table59

 

12 to 18

12.

EARNINGS PER ORDINARY SHARE

 

The calculation of basic and headline losses/earnings per ordinary share is based on losses of R6,677 million and R1,468 million respectively (2011: earnings of R3,591 million and R3,566 million) and a weighted average of 261,014,624 (2011: 261,363,149) ordinary shares in issue during the year.

 

The calculation of diluted losses/earnings per ordinary share, basic and headline, is based on losses of R6,677 million and R1,468 million respectively (2011: earnings of R3,591 million and R3,566 million). Refer below for weighted average number of potential diluted ordinary shares in issue during the year.

 table60    

 

The weighted average number of ordinary shares in issue has been adjusted to exclude the ordinary shares issued as part of the community economic empowerment transaction, as these shares are subject to repurchase by the Company. For accounting purposes, these shares have been treated as though the Company has granted an option over its own equity to the community development trust. Therefore, the shares issued as part of this transaction only impact diluted earnings per share.

 table61    

table62

table63  

 

Listed investment: Atlatsa Resources Corporation

The Group has subscribed for a preference share instrument which, once converted, gives the Group full equity upside on 115.8 million Atlatsa shares. As this instrument is convertible at the Group’s discretion at any time, this has been taken into consideration when determining whether the Group has significant influence over Atlatsa in terms of IAS 28 – Investments for Associates. As this instrument provides the Group with an effective interest of 27% in Atlatsa on a fully diluted basis, the Group has the ability to exert significant influence over the company and, therefore, the investment in Atlatsa is being equity accounted. Atlatsa has a 51% controlling interest in the operations of Bokoni Platinum Mine and the Ga-Phasha, Boikgantsho and Kwanda projects.

 

This company is listed on the Canadian stock exchange and has a December year end. The equity accounting includes its results for the 12 months ended 30 September 2012, which is done using its latest publically available quarterly results.

table111

 

Listed investment: Wesizwe Platinum Limited

 

On 22 April 2010, the Department of Mineral Resources granted Wesizwe all the required approvals and consent to conclude its acquisition of a 37% interest in the Western Bushveld Joint Venture (WBJV) from the Group. Wesizwe issued 211,850,125 shares to the Group in part settlement of the purchase price resulting in the Group acquiring a 26.6% shareholding in Wesizwe. This shareholding provided the Group with the ability to exert significant influence over Wesizwe and as a result the investment was equity accounted until 30 April 2011. Subsequent to the issue of additional shares by Wesizwe on 6 May 2011, the Group’s shareholding in Wesizwe dropped below 20% and the Group lost significant influence over Wesizwe. Consequently, from 1 May 2011, the Group has accounted for its investment in Wesizwe as an available-for-sale investment in terms of IAS 39 (refer to note 21).

 

This company is listed on the Johannesburg stock exchange and has a December year end. The equity accounting for the period 1 January 2011 to 30 April 2011 is done using its management accounts at the end of April 2011.

table65

 

Unlisted investment: Bokoni Platinum Holdings Proprietary Limited

 

The Group has a 49% shareholding in Bokoni Holdco which effectively holds 100% of Bokoni Platinum Mine and the Ga-Phasha, Boikgantsho and Kwanda projects. This investment is being equity accounted.

 

This company has a December year end. The equity accounting is done to December using its management accounts. The financial information presented below is for the year ended 31 December 2012.

 

  table66

 

Unlisted investment: Bafokeng-Rasimone Platinum Mine (BRPM)

 

As part of the restructuring of BRPM, the Group retained its 33% direct interest in the joint venture. However, until the date of listing of Royal Bafokeng Platinum Limited (RB Plat), the Group continued to exert joint control over the operations of BRPM and, consequently, included its 33% proportionate share of the results and net assets of BRPM in the results and net assets of the Group. Although, after the listing of RB Plat, the Group lost joint control of BRPM, the 33% direct interest still resulted in the Group having significant influence over the operations of BRPM. As a result, the 33% direct interest in BRPM is equity accounted from the date of RB Plat listing.

 

BRPM has a December year end. The equity accounting is done using its management accounts as at 31 December 2012 and is adjusted for certain consolidation entries.

table67

 

† As BRPM is an unincorporated joint venture, its taxation forms part of Rustenburg Platinum Mine Limited’s taxable income.

 

Unlisted investment: Johnson Matthey Fuel Cells Limited (JMFC)

 

At 31 December 2012, the Group held 17.5% of the equity and 43% of the voting rights in JMFC, incorporated in the United Kingdom. The interest is represented by 35 ordinary shares (acquired for GBP13 million) and 7 million redeemable preference shares (acquired for GBP7 million). JMFC carries on research and development for the enhancement and development of fuel cells and associated hydrogen generation technology from fuels and the commercial exploitation thereof, including the manufacture and sale of fuel cell-related products. This company has a March year end, however, equity accounting is based on management accounts.

 

Investment in redeemable preference shares

 

The subscription for the redeemable preference shares in JMFC is treated as initial funding by the Group. Johnson Matthey also provides initial funding in the form of interest-bearing debt. The economic return on the redeemable preference shares matches the economic return of the initial funding provided by the controlling shareholder, which will equate to United Kingdom market returns. The redeemable preference shares are redeemable proportional to the repayment of the initial funding of the controlling shareholder. Preference dividends are cumulative.

 

The summarised information below is based on its management accounts for the 12 months ended 30 November 2012.

 

table68

 * Less than R500,000.

19 - 35

 

Unlisted investment: Pandora

 

The Group, Eastern Platinum Limited, Mvela Resources Limited (on behalf of Northam Platinum Limited) and Bapo-Ba-Mogale Mining Company Proprietary Limited have entered into a 42.5:42.5:7.5:7.5 arrangement. In terms of the agreement, the Group contributed certain mineral rights to the venture, while Eastern Platinum Limited contributed certain surface infrastructure. Pandora has a September year end.

 

The equity accounting is based on its management accounts for the 12 months ended 30 November 2012.

table69

19.

JOINT VENTURES

 

Jointly controlled assets

 

Modikwa Platinum Mine

 

The Group and ARM Mining Consortium Limited (ARMMC) have established a 50:50 jointly controlled operation, known as the Modikwa Platinum Mine Joint Venture (Modikwa). Modikwa operates a mine and a processing plant on the Eastern Limb of the Bushveld Complex.

 

Kroondal Platinum Mine

 

The Group and Aquarius Platinum (South Africa) Proprietary Limited (Aquarius) have pooled certain mineral rights and infrastructure via a pooling-and-sharing agreement. The two parties share 50:50 in the profits and losses from the jointly controlled mine and processing plant, located on the Western Limb of the Bushveld Complex, which is managed by Aquarius.

 

Marikana Platinum Mine

 

The Group and Aquarius have pooled certain mineral rights and infrastructure via a pooling-and-sharing agreement. The two parties share 50:50 in the profits from the jointly controlled mine and processing plant, located on the Western Limb of the Bushveld Complex, which is managed by Aquarius. The mine was placed on care and maintenance during the first half of 2012.

 

Mototolo Platinum Mine

 

The Group and Xstrata Kagiso Platinum Partnership have entered into a 50:50 joint venture. The Mototolo Mine, which is managed by Xstrata SA Proprietary Limited, is located on the Eastern Limb of the Bushveld Complex, while the processing plant is managed by the Group.

      

table70

table7

None of the loans and receivables included as non-current financial assets are past due or have been impaired at balance sheet date.

 

* The Group provided Plateau Resources Proprietary Limited (Plateau) with a facility to meet its obligations in respect of operating and capital expenditure for Bokoni Platinum Mine. The facility is available to Plateau from 1 July 2009 to 31 August 2013 and at 31 December 2012 the undrawn amount was R226 million.

 

In 2012, the Group and Atlatsa agreed in principle to the restructure, recapitalisation and refinancing of Atlatsa and Bokoni Platinum Holdings Proprietary Limited. The implementation of the transactions is subject to the fulfilment of certain conditions precedent including regulatory approval and Atlatsa shareholder approval. This transaction will be accounted for once the agreements have been signed and these conditions have been fulfilled. The Group and Atlatsa are collaborating to optimise Bokoni Platinum Mine.

 

° This advance is interest free and the repayment thereof is dependent on the free cash flows from the Modikwa Joint Venture. This advance was fair valued on initial recognition by discounting the expected cash flows using a market-related interest rate. As security for the repayment of the advance, ARMMC has ceded it rights to payments from the Modikwa Joint Venture to the Group.

 

♦ The Group has made a R45 million loan to the Bakgatla-Ba-Kgafela traditional community (Bakgatla). As security for this loan, the Bakgatla has pledged, to the Group, its 55% interest in Lexshell 49 General Trading Proprietary Limited, the company that holds the right to be granted a prospecting right on portion 2 of Rooderand 46 JQ (Rooderand). The Group has the election to acquire the Bakgatla’s interest in Lexshell at par value in lieu of the capital and any interest accrued on the loan at that date. The Group, as the holder of the unused old-order right over Rooderand, applied for a new-order prospecting right, which application was refused on the basis of not facilitating empowerment.

 

On 24 November 2009, Platinum Australia Limited, in an ASX release, announced that a prospecting right had been issued to Atla Mining Resources Proprietary Limited (Atla) over Rooderand. The Group has lodged a Notice of Appeal with the Department of Mineral Resources (DMR) against the granting of the prospecting right to Atla and have also taken the decision by the DMR to grant a prospecting right to Atla, over Rooderand on judicial review.

 

Atla has also now applied for the conversion of its prospecting right into a mining right, which application was also challenged by the Group under judicial review during April 2012. The Northern Gauteng High Court handed down judgment on 2 May 2012 and ordered the Director-General (DG) of the DMR to process the Group’s pending appeals. Atla appealed part of the judgment which the court dismissed.

 

The Group received the outcome to its appeal on 30 October 2012 against the grant of the Atla prospecting right from the DMR, in which the DMR upheld the Group’s appeal. The DG’s decision has the effect that the grant of the Atla prospecting right (and mining right application) has been set aside.

 

In addition, the Group has provided the Bakgatla with a loan of R47 million to secure their debt under a hedge facility with an external bank. The loan is unsecured and bears interest at JIBAR plus 2%.

 

 The Group acquired R273 million ‘N’ non-voting participating preference shares in Newshelf 848 Proprietary Limited, an Afripalm company. The Group had granted an option to Afripalm to acquire these preference shares on beneficial terms (but at a value not lower than Amplats’ cost) if the Group was released from its conditional subscription obligation to subscribe for ‘S’ preference shares in another Afripalm company (refer to note 30.)

 

◊ The Group holds approximately 12.6% in RB Plat.

 

The Group holds approximately 13% in Wesizwe.

  table8  

 

The average credit period on the sale of precious metals is seven days and base metals is 17 days. Interest is charged at market-related rates on the outstanding balance. No provision for doubtful debts has been raised on any amounts past due at balance sheet date as these amounts have either been received post year end or the amounts are still considered recoverable. The Group holds no collateral over these balances.

 

Before accepting any new customers, the Group uses a credit bureau or performs a credit assessment to assess the potential customer’s credit quality and credit limits. The credit limits are reviewed on a regular basis throughout the year due to the volatility in the commodity price movements which necessitates the frequent review of credit limits. Trade accounts receivable involve primarily a small group of international companies. The financial condition of these companies and the countries in which they operate are regularly reviewed. Therefore the Group has no provision for doubtful debts.

 

The fair value of accounts receivable is not materially different from the carrying values presented. There are no trade receivables pledged as security to secure any borrowings of the Group.

 

* The amount was received subsequent to year end.

table9

* Cash held in trust comprises funds which may only be utilised for purposes of settling decommissioning and environmental liabilities relating to existing mining operations. All income earned on these funds is reinvested or spent to meet these obligations. These obligations are included in environmental obligations (Note 31).  

table10

Ordinary shares

 

The unissued ordinary shares are under the control of the directors until the forthcoming annual general meeting.

 

‘A’ ordinary shares

 

The ‘A’ ordinary shares are unlisted and were created to facilitate the implementation of the Amplats Employee Share Participation Scheme. Refer to Annexure B for details of the scheme.

 

Treasury shares

 

For details of the treasury shares, refer to Annexure B which contains details of the various equity compensation schemes.

 

* Less than R500,000.

table11

Borrowing powers

 

The borrowing powers in terms of the articles of association of the holding company and its subsidiaries are unlimited. The weighted average borrowing rate at 31 December 2012 was 6.12% (2011: 6.60%).

 

* Committed facilities are defined as the bank’s obligation to provide funding until maturity of the facility, by which time the renewal of the facility is negotiated.

 

R15,595 million (2011: R9,498 million) of the facilities is committed for one to five years, R3,050 million (2011: R3,050 million) is committed for a rolling period of 364 days, while the rest is committed for less than 364 days.

 

♦  Uncommitted facilities are callable on demand.

table12

 

° The Group has marked-to-market commodity contracts that are within the scope of IAS 39. The fair value was estimated using a valuation technique that is based on observable and unobservable market data for future metal prices and observable market interest rates at 31 December 2012.

 

♦  In terms of the refinancing of Afripalm Resources Proprietary Limited and it subsidiaries, the Group had an obligation to subscribe for ‘S’ preference shares in Newshelf 1061 Proprietary Limited to the extent that the ‘B’ preference shares in this company were not redeemed when due. The conditional obligation related specifically to the ‘B’ preference shares with a subscription price of R545 million and capitalised preference dividends in relation thereto. The guarantee was effective until 31 March 2014. By 31 December 2012, the Group settled its obligation in respect of these shares by making a final settlement payment of R86 million.

table13

 

Directors’ remuneration is fully disclosed in the remuneration report, which is included in the directors’ report. The directors’ report is not included in the abridged financial statements.

 

Equity compensation benefits

 

The directors’ report sets out details of the Company’s share option schemes, and Annexure B provides details of share options issued and exercised during the year by participants as well as the disclosures required by IFRS 2 – Share-based Payments. The details pertaining to share options issued to and exercised by directors during the year are disclosed in the remuneration report. The remuneration report is not included in the abridged financial statements.

Retirement funds

 

Separate funds, independent of the Group, provide retirement and other benefits to all employees. These funds consist of defined contribution plans. All funds are subject to the Pension Funds Act, 1956. The Amplats Officials Pension Fund, the Amplats Employees Pension Fund and the MRR Pension Fund are in the process of being wound up.

 

Defined contribution plans

 

Contributions are made to the following defined contribution plans:

table14

 

* Certain members are not in the employment of the Group, while others are members of more than one fund.

 

Defined benefit plan

 

Post-retirement medical aid benefits

 

The post-retirement medical aid obligation is actuarially valued annually. The obligation was last valued as at 31 December 2012 using the projected unit credit method. The assumptions used in the valuation included estimates of life expectancy and long-term estimates of the increase in medical costs, appropriate discount rates and the level of claims based on the Group’s experiences.

 

The plan assets comprise a captive cell arrangement with Guardrisk, which arrangement exists to fund the Group’s obligations towards pensioners. The funds are invested in the money market and the medical aid premiums are paid by Guardrisk to the medical aid funds, on behalf of the Group. The Group does not expect to make a contribution (2012: nil) to the captive cell for the 2013 year. The actual return on plan assets for the year amounted to R10 million (2011: R18 million).

table15

* Less than R500,000.

table16

* Less than R500,000.

 

Assumed healthcare trend rates have a significant impact on the amounts recognised in the statement of comprehensive income. A 1% change in the healthcare cost trends would have the following impact:

table17

36 - 41

36.

RELATED-PARTY TRANSACTIONS

 

The Company and its subsidiaries, in the ordinary course of business, enter into various sale, purchase, service and lease transactions with the ultimate holding company, Anglo American plc, its subsidiaries, joint ventures and associates, as well as transactions with the Group’s associates. Certain deposits and borrowings are also placed with the holding company. The Group participates in the Anglo American plc insurance programme. These transactions are priced on an arm’s length basis. Material related-party transactions with subsidiaries and associates of Anglo American plc and the Group’s associates are as follows:

table18

Trade payables

 

Trade payables are settled on commercial terms.

 

Deposits

 

Deposits earn interest at market-related rates and are repayable on maturity.

 

Interest-bearing borrowings

 

Interest-bearing borrowings bear interest at market-related rates and are repayable on maturity.

 

Directors

 

Details relating to directors’ emoluments and shareholding in the Company are disclosed in the remuneration report.

 

Shareholders

 

The principal shareholders of the Company are detailed in note 43 ‘Analysis of shareholders’.

 

* This includes purchase of concentrate from the Group’s associates.

table79

table80

41.

CONTINGENT LIABILITIES

 

Letters of comfort have been issued to financial institutions to cover certain banking facilities. There are no encumbrances of Group assets, other than the assets held under finance leases by the Group.

 

The Group is the subject of various legal claims, which are individually immaterial and are not expected, in aggregate, to result in material losses. In addition, at 31 December 2012, the Group has certain unresolved tax matters where the tax authorities are disputing the Group treatment of these matters. Management has consulted with external tax and legal advisers, who support the Group position. Nonetheless, we are actively discussing the issues with the tax authorities with a view to seeking resolution and believe that these matters have been appropriately treated in the results for the year ended 31 December 2012.

 

The Group has in the case of some of its mines provided the Department of Mineral Resources with guarantees that cover the difference between closure cost and amounts held in the environmental trusts. At 31 December 2012, these guarantees amounted to R2,760 million (2011: R2,653 million). (Refer to note 31.)

 

42

42.

FINANCIAL INSTRUMENTS

 

Capital risk management

 

The capital structure of the Group consists of debt, which includes interest-bearing borrowings disclosed under note 29, cash and cash equivalents, and equity attributable to equity holders of the parent company, which comprises issued share capital and premium, and accumulated profits disclosed in the consolidated statement of changes in equity.

 

The Group’s capital management objective is to safeguard the Group’s ability to meets its liquidity requirements (including its commitments in respect of capital expenditure) and continue as a going concern while achieving an optimal weighted average cost of capital.

 

The policy of the Group is to achieve sufficient gearing so as to have an optimal weighted average cost of capital while also ensuring that at all times its creditworthiness is maintained.

 

The targeted level of gearing is determined after consideration of the following key factors:

 

  • Current and forecast metal prices and exchange rates and their impact upon revenue and gearing under various scenarios.

 

  • The needs of the Group to fund current and future capital expenditure to achieve its production growth target.

 

  • The desire of the Group to maintain its gearing within levels considered to be acceptable and consistent with a suitable credit standing, taking into account potential business volatility and position of the Group in the business cycle.

 

On an annual basis the Group updates its life-of-mine models and long-term business plan. These outputs are then incorporated into the budget process. The targeted production profile determines the Group’s funding requirements under its base case economic assumptions.

 

This then determines whether the Group is likely to have excess capital in terms of its policy or whether it is likely to require additional capital.

 

If it has excess capital, the Group will consider returning this to shareholders (through dividends or share buybacks, whichever may be appropriate at the time). Alternatively, if additional capital is required, the Group will look to source this from either the debt markets or from shareholders, whichever is most appropriate at the time, so as to meet its policy objectives and based on market circumstances.

 

These decisions are evaluated by the Group’s corporate finance and treasury departments, before being approved by the Executive Committee and board, where required.

 

The Group has entered into a number of debt facilities that dictate certain requirements in respect of capital management.

 

These covenants are a key consideration when the capital management strategies of the Group are evaluated.

 

These covenants include:

 

  • maximum net debt/tangible net worth ratios; and

 

  • minimum tangible net worth values.

 

The Group has complied with these requirements. The Group’s overall strategy remains unchanged from 2011.

 

Significant accounting policies

 

Details of significant accounting policies, including the recognition criteria, the basis for measurement and the basis on which income and expenses are recognised, in respect of each category of financial asset, financial liability and equity instrument are disclosed under the note in accounting policies.

Categories of financial instruments

  table81

table19

 

Fair value disclosures

 

The following is an analysis of the financial instruments that are measured subsequent to initial recognition at fair value. They are grouped into levels 1 to 3 based on the extent to which the fair value is observable.

 

The levels are classified as follows:

 

  • Level 1 – fair value is based on quoted prices in active markets for identical financial assets or liabilities.

 

  • Level 2 – fair value is determined using directly observable inputs other than Level 1 inputs.

 

  • Level 3 – fair value is determined on inputs not based on observable market data.

table20

There were no transfers between the levels during the year.

table86

 

Gains of R13 million (2011: gains of R13 million) for the period are attributable to liabilities held at the end of the reporting period.

 

The other financial liabilities and the other current financial liabilities relate to the fair value of commodity sales contracts, which have been marked to market as they are within the scope of IAS 39 – Financial Instruments. The fair valuation is estimated using a discounted cash flow technique which is based on observable and unobservable market data for metal prices and observable data for exchange rates at the relevant valuation date. A 10% increase in the metal prices would result in a R2 million (2011: R9 million) increase in the liability and a 10% decrease would result in a R4 million (2011: R14 million) decrease in the liability. These amounts have been included in the sensitivities to movements in metal prices.

 

Financial risk management

 

The Group does not trade in financial instruments but, in the normal course of its operations, the Group is primarily exposed to currency, metal price, credit, interest rate, equity and liquidity risks. In order to manage these risks, the Group may enter into transactions that make use of financial instruments. The Group has developed a comprehensive risk management process to facilitate, control and monitor these risks. This process includes formal documentation of policies, including limits, controls and reporting structures.

 

Managing risk in the Group

 

The Executive Committee and the board of directors are responsible for risk management activities within the Group. Overall limits have been set by the board, while the Executive Committee is responsible for setting individual limits. In order to ensure adherence to these limits, activities are marked to market on a daily basis and reported to the Group Treasury. The Group Treasury is responsible for monitoring currency, interest rate and liquidity risk within the limits and constraints set by the board. The Marketing Department is responsible for monitoring metal price risk, also within the laid-down limits and constraints set by the board.

 

Currency risk

 

The carrying amount of the Group’s foreign currency-denominated monetary assets and liabilities at 31 December is as follows:

table84

table21

 

Foreign currency sensitivity

 

The US dollar is the primary foreign currency to which the Group is exposed. The following table indicates the Group’s sensitivity at year end to the indicated movements in the US dollar on financial instruments excluding forward foreign exchange contracts:

table22

 

Forward foreign exchange contracts

 

 

 

 

 

The Group operates in the global business environment and many transactions are priced in a currency other than South African rand. Accordingly the Group is exposed to the risk of fluctuating exchange rates and manages this exposure, when appropriate, through the use of financial instruments. These instruments typically comprise forward exchange contracts and options. Forward contracts are the primary instruments used to manage currency risk. Forward contracts require a future purchase or sale of foreign currency at a specified price.

 

Current policy prevents the use of option contracts without Executive Committee approval. Options provide the Group with the right but not the obligation to purchase (or sell) foreign currency at a predetermined price, on or before a future date. No foreign currency options were entered into during the year. table88

table89

 

Foreign currency sensitivity

 

 

 

 

 

The following table indicates the Group’s sensitivity to the outstanding forward exchange contracts at balance sheet date to the indicated movements in the US dollar which is the primary currency in which the Group has entered into forward foreign exchange contracts:

table90

 

Metal price risk

 

 

 

 

 

Metal price risk arises from the risk of an adverse effect on current or future earnings or uncertainty resulting from fluctuations in metal prices. The ability to place forward contracts is restricted owing to the limited size of the financial market in PGMs. Financial markets in certain base metals are, however, well established. At the recommendation of the Executive Committee, the Group may place contracts where opportunities present themselves to increase/reduce the exposure to metal price fluctuations. At times, historically, the Group has made use of forward contracts to manage this exposure. Forward contracts enable the Group to obtain a predetermined price for delivery at a future date. No such contracts existed at year end.

 

The carrying amount of the Group’s financial assets and liabilities at balance sheet date that are subject to metal price risk is as follows:

table91

 

 

Metal price sensitivity

 

The Group is exposed primarily to movements in platinum, palladium, rhodium and nickel prices. The following table indicates the Group’s sensitivity at year end to the indicated movements in metal prices on financial instruments. The rates of sensitivity represent management’s assessment of the possible change in metal price movements:

table92

Interest rate risk

 

During the year, the Group was in a net borrowed position, while still maintaining some surplus cash on deposit. The size of the Group’s position, be it either short cash or long cash, exposes it to interest rate risk. This risk is managed through the term structure utilised when placing deposits or taking out borrowings. Furthermore, when appropriate, the Group may also cover these exposures by means of derivative financial instruments subject to the approval of the Executive Committee. During the period, the Group did not use any forward rate agreements to manage this risk.

 

The carrying amount of the Group’s financial assets and liabilities at 31 December that are subject to interest rate risk is as follows:

table93

table23

 

Interest rate sensitivity

 

 

 

 

 

The Group is sensitive to the movements in the ZAR and US dollar interest rates which are the primary interest rates to which the Group is exposed. If the ZAR interest rate decreased by 50 basis points (2011: 50 basis points) and the USD interest rate decreased by 50 basis points (2011: 50 basis points) at year end, then income for the year would have increased by R45 million (2011: R25 million) and decreased by R6 million (2011: R7 million) respectively.

 

Liquidity risk

 

Liquidity risk is the risk that the Group will be unable to meet a financial commitment in any location or currency. This risk is minimised through the holding of cash balances and sufficient available borrowing facilities (refer to note 29). In addition, detailed cash flow forecasts are regularly prepared and reviewed by Group Treasury. The cash needs of the Group are managed according to its requirements.

 

The following table details the Group’s remaining contractual maturity for its financial liabilities. The table has been compiled based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Group can be required to repay the liability. The cash flows include both the principal and interest payments. The adjustment column includes the possible future cash flows attributable to the financial instrument which are not included in the carrying value of the financial liability at 31 December:

table24

* Represents unearned finance charges.

 

Credit risk

 

Potential concentrations of credit risk consist primarily of short-term cash investments and accounts receivable. Credit risk arises from the risk that a counterparty may default or not meet its obligations timeously. The Group minimises credit risk by ensuring that counterparties are banking institutions of the highest quality, that appropriate credit limits are in place for each counterparty and that short-term cash investments are spread among a number of different counterparties. Banking counterparty limits are reviewed annually by the board.

 

Trade accounts receivable involve primarily a small group of international companies. Therefore a significant portion of the Group’s revenue and accounts receivable are from these major customers. The financial condition of these companies and the countries they operate in are reviewed annually by the Executive Committee.

 

The carrying amount of the financial assets represents the Group’s maximum exposure to credit risk without taking into consideration any collateral provided:

table26

In addition, the Group has provided facilities/guarantees to certain third parties. Refer to note 21 and note 30 for details.

 

The Group has the following amounts due from major customers:

table27

 

Market equity risk

 

 

 

 

 

 

 

The Group has equity price risk on certain assets and liabilities. These financial instruments are held for strategic purposes and are managed on this basis.

table28

Equity price sensitivity

 

The Group is sensitive to the movements in equity prices on certain listed shares on the JSE. If the equity prices had been 10% higher at year end, then income for the year would have increased by R37 million (2011: R79 million) and other comprehensive income would have increased by R119 million (2011: R145 million). If the equity prices had been 10% lower at year end, then income for the year would have decreased by R14 million (2011: R53 million) and other comprehensive income would have decreased by R119 million (2011: R145 million).

43 - 48

43.

ANALYSIS OF SHAREHOLDERS

 

An analysis of the share register at year end showed the following:

 

 

 

 

 

Ordinary shares

table29

Major shareholder

 

According to the Company’s share register at year end, the following shareholders held shares equal to or in excess of 5% of the issued ordinary share capital of the Company:

table30

Geographical analysis of shareholders

 

Resident shareholders held 251,273,489 shares (94.02%) (2011: 93.12%) and non-resident shareholders held 15,995,433 shares (5.98%) (2011: 6.88%) of the Company’s issued ordinary share capital of 267,268,922 shares at 31 December 2012 (2011: 267,358,763).

 

The treasury shares held by the Kotula Trust (the Group ESOP) of 1,069,015 (2011: 1,069,015) and the 1,343,949 (2011: 1,254,108) shares held in terms of the Bonus Share Plan and other schemes, have been excluded from the shareholder analysis. The shareholder details above include the shares issued by the Company in respect of the community economic empowerment transaction.

 

* Less than 0.01%.

 

44.

CHANGES IN ACCOUNTING ESTIMATES FOR INVENTORY

 

During the current year, the Group updated its estimate of the quantities of inventory based on the outcome of a physical count of 
in-process metals. The Group runs a theoretical metal inventory system based on inputs, the results of previous counts and outputs. Due to the nature of in-process inventories being contained in weirs, pipes, and other vessels, physical counts only take place once per annum, except in the Precious Metals Refinery, which takes place usually once every three years.

 

This change in estimate has had the effect of increasing the value of inventory disclosed in the financial statements by R1,439 million 
(2011: R417 million). This results in the recognition of an after-tax gain of R1,036 million (2011: R300 million).

45.

REFINANCING OF ATLATSA

 

In 2012, the Group and Atlatsa agreed in principle to the restructure, recapitalisation and refinancing of Atlatsa and Bokoni Platinum Holdings Proprietary Limited. The implementation of the transaction is subject to the fulfilment of certain conditions precedent including regulatory approval and Atlatsa shareholder approval. This transaction will be accounted for once the agreements have been signed and these conditions have been fulfilled. The Group and Atlatsa are collaborating to optimise Bokoni Platinum Mine.

46.

UNKI PLATINUM MINES INDIGENISATION PLAN

 

Negotiations with the Zimbabwean government regarding the compliance of Unki Platinum Mine with the requirements of the Indigenisation and Economic Empowerment Act continue and significant progress has been made in this regard. A Heads of Agreement setting out the broad terms of the empowerment plan was signed in November 2012. The detailed agreements to implement this plan are in the process of being finalised prior to the implementation of the plan and the transaction is expected to close in the first half of 2013.

47.

POST-BALANCE SHEET

 

Subsequent to year end, on 15 January 2013, the Group announced the outcome of the Platinum Portfolio Review. The key proposals from the review were as follows:

 

  • Placement of Khuseleka Mine (shafts 1 and 2) and Khomanani Mine (shafts 1 and 2) on long-term care and maintenance.

 

  • Consolidation of the Rustenburg operations into three operating mines.

 

  • Closure of the Union Mine North declines.

 

  • Placement of the Waterval UG2 Concentrator, Mortimer Merensky Concentrator and the one furnace (FCE2) at Waterval Smelter on long-term care and maintenance.

 

As a result, if the Group is not expected to receive future economic benefits from these mines, the property, plant and equipment with a carrying value of approximately R4.1 billion (after tax: R3.0 billion) could be written off in 2013. These write-offs will be excluded from headline earnings.

 

The gross cash costs associated with implementation of the Platinum Portfolio Review and overhead review which is expected to be approximately R3.2 billion (after tax: R2.3 billion) will be expensed as incurred during the course of 2013 and will be included in headline earnings for the year.

 

Reallocation of declared Mineral Reserves to exclusive Mineral Resources will occur at the affected operations (Khomanani, Khuseleka, Union mines), with the amount being dependent on the final scale of implementation of the Platinum Portfolio Review. Currently, reliable, reasonable estimation of the scale of impact is not possible because of uncertainty in the implementation.

 

   

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