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Notes to the consolidated financial statements for the year ended 30 June 2009

Notes 1. ACCOUNTING POLICIES 2. PROPERTY, PLANT AND EQUIPMENT 3. INVESTMENT PROPERTIES 4. INTANGIBLE ASSETS 5. INVESTMENTS 6. INVENTORIES 7. TRADE AND OTHER RECEIVABLES 8. SHARE CAPITAL 9. SHARE PREMIUM 10. TREASURY SHARES  11. OTHER RESERVES  12. LONG-TERM BORROWINGS 13. DEFERRED TAXATION 14. LONG-TERM PROVISIONS 15. TRADE AND OTHER PAYABLES  16. SHORT-TERM PROVISIONS  17. SHORT-TERM BORROWINGS AND OVERDRAFTS 18. REVENUE  19. FINANCE COSTS  20. PROFIT BEFORE TAXATION AND STATE'S SHARE OF PROFITS 21. TAXATION AND STATE'S SHARE OF PROFITS 22. EARNINGS AND HEADLINE EARNINGS PER SHARE 23. DIVIDENDS  24. NOTES TO THE CASH FLOW STATEMENT  25. FINANCIAL RISK MANAGEMENT 26. CAPITAL MANAGEMENT 27. COMMITMENTS/option> 28. CONTINGENT LIABILITIES 29. INVESTMENT IN JOINT-VENTURE ENTITY 30. SEGMENTAL INFORMATION 31. RELATED PARTY TRANSACTIONS 32. RETIREMENT BENEFIT INFORMATION 33. COMPARATIVE INFORMATION

25. FINANCIAL RISK MANAGEMENT   The group is exposed to various financial risks due to the nature and diversity of its activities and the use of various financial instruments.These risks include: – Credit risk – Liquidity risk – Market risk Details of the group’s exposure to each of the above risks and its objectives, policies and processes for measuring and managing these risks are included specifically in this note and more generally throughout the consolidated financial statements together with information regarding management of capital. The boards of directors (boards) of all group companies have the overall responsibility for the establishment and oversight of the group’s risk management framework.These boards have delegated these responsibilities to Executive Committees, which are responsible for the development and monitoring of risk management policies within the group.These committees meet on an ad-hoc basis and regularly report to the respective boards on their activities.The risk management policies are established to identify and analyse the risks faced by the group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the activities of the group. The roles and responsibilities of the committees include: – approval of all counterparties; – approval of new instruments; – approval of the group’s foreign exchange transaction policy; – approval of the investment policy; – approval of treasury policy; and – approval of long-term funding requirements. The internal auditors undertake regular and ad-hoc reviews of risk management, controls and procedures, the results of which are monitored by the Assore Audit Committee.     25.1 Credit risk   Credit risk arises from possible defaults on payments by customers or, where letters of credit have been issued, by bank counterparties.The group minimises credit risk by the careful evaluation of the ongoing creditworthiness of customers and bank counterparties before transactions are concluded. Customers are generally required to raise letters of credit with banking institutions that have acceptable credit ratings, however, certain customers who have well established credit accounts are allowed to transact on open accounts. Overdue amounts are individually assessed and if it is evident that an amount will not be recovered, it is impaired and legal action is instituted to recover the amounts involved. Credit exposure and concentrations of credit risk The carrying amount of financial assets represents the maximum credit exposure at the reporting date and the following table indicates various concentrations of credit risk for all non-derivative financial assets held:           2009     2008       R’000     R’000   Trade receivables (refer to note 7)   585 129     1 980 966   Local   32 808     242 258   Foreign   552 321     1 738 708   Sundry receivables – local (refer to note 7)   7 958     17 576   Cash resources (refer to note 24.6)   3 001 328     1 952 015   Total carrying amount per balance sheet   3 594 415     3 950 557   Ageing         Aged as follows:                  2009       2008          Receivables     Receivables     Impairment     Carrying     Receivables     Receivables     Impairment     Carrying        not impaired     impaired     amount     value     not impaired     impaired     amount     value        R’000     R’000     R’000     R’000     R’000     R’000     R’000     R’000   Trade receivables     585 129     –     –     585 129     1 980 966     –     –     1 980 966   Not past due,                                             not impaired     582 252     –     –     582 252     1 980 966     –     –     1 980 966   Past due     2 877     –     –     2 877     –     –     –     –                                              Other receivables     7 958     –     –     7 958     17 576     –     –     17 576   Not past due,                                           not impaired     7 958     –     –     7 958     17 576     –     –     17 576   Past due     –     –     –     –     –     –     –     –                                              As above     593 087     –     –     593 087     1 998 542     –     –     1 998 542                                                             2009     2008                  R’000     R’000   Security held over non-derivative financial assets               Irrevocable letters of credit                                      – issued by foreign banks                              214 126     394 739       25.2 Liquidity risk   The Executive Committees manage the liquidity structure of the group’s assets, liabilities and commitments so as to ensure that cash flows are sufficiently balanced within the group as a whole. Updated cash flow information and projections of future cash flows are received by the Executive Committees from the group companies on a regular basis (depending on the type of funding required). Measures have been introduced to ensure that the cash flow information received is accurate and complete. Surplus funds are deposited in liquid assets (eg liquid money market accounts) (refer to note 24.6).   Undrawn credit facilities The borrowing capacity of the holding company, certain of its subsidiary companies and joint-venture entities is limited by their respective Articles of Association and is based on their aggregate issued and paid up share capital, share premium and retained earnings as set out below:        2009     2008        R’000     R’000   Assore Limited             Authorised in terms of the Articles of Association     unlimited     200 000   Less: external borrowings at year-end     1 623 843     –   Unutilised borrowing capacity     unlimited     200 000   Assmang Limited             Authorised in terms of the Articles of Association     5 994 297     4 986 084   Less: external borrowings at year-end             – long-term borrowings     –     (13 805)   – overdrafts and short-term borrowings     (7 404)     (255 915)   Unutilised borrowing capacity     5 986 893     4 716 364   Minerais U.S. LLC             Authorised in terms of the Articles of Association     386 000     392 015   External borrowings at year-end     (186 438)     (137 519)   Unutilised borrowing capacity     199 562     254 496                  With the exception of the preference share debt referred to in note 17, the group is cash positive and does not rely on banking facilities for its day-to-day activities. The general banking facilities made available to group companies are unsecured, bear interest at rates linked to prime, have no specific maturity date and are subject to annual review by the banks concerned.The facilities are in place to issue letters of credit, bank guarantees and ensure liquidity. Exposure to liquidity risk The following are the cash flows of the group’s financial assets and liabilities at year-end as determined by contractual maturity date, including interest receipts and payments but excluding the impact of any netting agreements with the third parties concerned.                           Between     Between             Carrying     Total     Less than     4 and     1 and     More than        amount     cash flows     4 months     12 months     5 years     5 years        R’000     R’000     R’000     R’000     R’000     R’000   2009                                 Financial assets                                 Available-for-sale investments     415 066     415 066     –     –     –     415 066   Other investments     42 259     42 259     –     –     42 134     125   Trade and other receivables     593 087     593 087     593 087     –     –     –   Cash deposits held by                                 environmental trusts     47 739     47 739     47 739     –     –     –   Cash resources     3 001 328     3 001 328     3 001 328     –     –     –        4 099 479     4 099 479     3 642 154     –     42 134     415 191   Financial liabilities                                 Interest-bearing borrowings     13 759     13 759     –     7 403     6 356     –   Preference shares issued     45 200     45 200     45 200     –     –     –   Trade and other payables     648 490     648 490     648 490     –     –     –   Short-term borrowings                                 and overdrafts     1 616 440     1 616 440     1 616 440     –     –     –        2 323 889     2 323 889     2 310 130     7 403     6 356     –                             Between     Between             Carrying     Total     Less than     4 and     1 and     More than        amount     cash flows     4 months     12 months     5 years     5 years        R’000     R’000     R’000     R’000     R’000     R’000   2008                                 Financial assets                                 Available-for-sale investments     590 066     590 066     –     –     –     590 066   Other investments     125     125     –     –     –     125   Trade and other receivables     1 998 542     1 998 542     1 998 542     –     –     –   Cash deposits held by                                 environmental trusts     36 942     36 942     36 942     –     –     –   Cash resources     1 952 015     1 952 015     1 952 015     –     –     –        4 577 690     4 577 690     3 987 499     –     –     590 191   Financial liabilities                                 Interest-bearing borrowings     19 135     19 135     –     5 330     13 805     –   Preference shares issued     58 987     58 987     58 987     –     –     –   Trade and other payables     1 043 517     1 043 517     1 043 517     –     –     –   Short-term borrowings                                 and overdrafts     2 616 159     2 616 159     2 616 159     –     –     –        3 737 798     3 737 798     3 718 663     5 330     13 805     –                                    25.3 Market risk   Market risk is defined as the risk that movements in market risk factors, in particular US dollar commodity prices and the US dollar/SA rand exchange rate will affect the group’s revenue and operational costs as well as the value of its holdings of financial instruments.The objective of the group’s market risk management policy is to manage and control market risk exposures to minimise the impact of adverse market movements with respect to revenue protection and to optimise the funding of the business operations. The group companies are responsible for the preparation and presentation of market risk information as it affects the relevant entity. Information is submitted to the Executive Committees where it is monitored and further analysed to be used in the decision-making process.The information submitted includes information on currency, interest rate and commodities and is used by the committee to determine the market risk strategy going forward. In addition, key market risk information is reported to the Executive Committees on a weekly basis and forecasts against budget are prepared for the entire group on a monthly basis. Interest rate risk Interest rate risk arises due to adverse movements in domestic and foreign interest rates.The group is primarily exposed to downward interest rate movements on floating investments purchased and to upward movements on overdrafts and other banking facilities.There is no other exposure to fair value interest rate risk as all fixed rate financial instruments are measured at amortised cost. The Board determines the interest rate risk strategy based on economic expectations and recommendations received from the Executive Committees. Interest rates are monitored on an ongoing basis and the policy is to maintain short-term cash surpluses adequate to meet the group’s ongoing cash flow requirements at floating rates of interest. At the reporting date the interest rate profile of the group’s interest-bearing financial instruments was as follows:            2009     2008        R’000     R’000   Variable rate instruments             Liabilities             Preference shares (included in long-term borrowings; refer to note 12)     45 200     58 987   Finance leases (refer to note 12)     13 759     19 135   Preference shares (included in short-term borrowings; refer to note 17)     1 430 000     –   Share warehousing facility (refer to note 17)     –     2 228 056   Overdrafts (refer to note 17)     186 440     388 103   Assets             Cash resources     3 001 328     1 952 015   Fair value sensitivity analysis for fixed rate instruments             The group does not account for any fixed rate financial assets and liabilities             at fair value through profit and loss, therefore a change in interest rates at             the reporting date would not affect profit or loss.             Cash flow sensitivity analysis for variable rate instruments             An increase of 50 basis points in interest rates at the reporting date would             have decreased profit after tax by the amounts shown below.This assumes             that all other variables remain constant.             Variable rate instruments     10 275     5 630                  Net effect on profit or loss is equal but opposite for a 50 basis point increase on the financial instruments listed above. Commodity price and currency risk Commodity price risk arises from the risk of an adverse effect on current or future earnings resulting from fluctuations in metal and mineral prices.The group also has transactional foreign exchange exposures, which arise from sales or purchases by the group in currencies other than the individual functional currencies of the group.The market is predominantly priced in US dollars and to a lesser extent in euros which exposes the group to the risk that fluctuations in the SA rand exchange rates may have an adverse effect on current or future earnings. The group manages its commodity price risk where possible by entering into supply contracts with customers covering periods of between three months and a year, depending on the commodity traded. With respect to its exposure to foreign currency fluctuations, the group constantly reviews the extent to which its foreign currency receivables and payables are covered by forward exchange contracts taking into account changes in operational forecasts and market conditions and the group’s hedging policy. No speculation in foreign currency is allowed within the group. The group’s exposure to currency risk at year-end was as follows:          30 June 2009   30 June 2008        US dollar     Euro     US dollar     Euro        (USD) 000     (EUR) 000     (USD) 000     (EUR) 000   Assets     67 026     3 920     212 349     7 274   Trade receivables     67 026     3 920     212 349     7 274   Liabilities     –     (63)     (225)    (997)  Trade payables     –     (63)     (225)    (997)  Gross balance sheet exposure     67 026     3 857     212 124     6 277   Estimated forecast sales     192 627     173     187 371     3 277   Estimated forecast purchases     –     –     –     (342)                         Gross exposure     259 653     4 030     399 495     9 212   Less: export sales covered by forward exchange contracts     (631)    –     –     –   Net exposure     259 022     4 030     399 495     9 212   A 5% strengthening of the rand against the following                       currencies at 30 June would have decreased profit                       before tax by the following amounts:     R’000     R’000     R’000     R’000        25 872     2 081     83 156     3 881                            A 5% weakening of the rand against the above currencies at 30 June would have had an equal but opposite effect on the amounts shown above, on the basis that all other variables remain constant. Forward exchange contracts At year-end, the group had open forward exchange contracts in the amount of R4,9 million (2008: Nil) and a foreign subsidiary had forward commitments with regard to its inventory of ores, alloys and metals, which for accounting purposes are regarded as executory contracts and are therefore not included on the balance sheet, but can be summarised as follows:                 2009               2008             Foreign     Legal          Foreign     Legal             currency     currency          currency     currency             notional     notional          notional     notional             amount     amount     Fair value     amount     amount     Fair value        USD’000     R’000     R’000     USD’000     R’000     R’000   Purchase contracts                                 US dollar     1 500     11 580     11 580     37 700     280 047     280 047   Sales contracts                                 US dollar     19 700     152 084     152 084     68 400     508 096     508 096                                    25.4 Fair value of financial assets and liabilities   The categorisation of each class of financial asset and liability, including their fair values are included below:             Available-          Liabilities at     Other     Total                  for-sale     Loans and     amortised     assets and     carrying                  investments     receivables     cost     liabilities     value     Fair value   2009     Note     R’000     R’000     R’000     R’000     R’000     R’000   Financial assets                                      Available-for-sale investments     5     415 066               –     415 066     415 066   Other investments     5          42 134          125     42 259     42 259   Trade and other receivables     7          593 087          –     593 087     593 087   Cash deposits held by                                      environmental trusts               47 739          –     47 739     47 739   Cash resources     24.6          3 001 328          –     3 001 328     3 001 328             415 066     3 684 288          125     4 099 479     4 099 479   Financial liabilities                                      Interest-bearing borrowings     12               51 556     –     51 556     51 556   Trade and other payables     15               648 490     –     648 490     648 490   Short-term borrowings                                      and overdrafts     17               1 623 843     –     1 623 843     1 623 843                       2 323 889     –     2 323 889     2 323 889   2008                                      Financial assets                                      Available-for-sale investments     5     590 066               –     590 066     590 066   Other investments     5                    125     125     125   Trade and other receivables     7          1 998 542          –     1 998 542     1 998 542   Cash deposits held by                                      environmental trusts               36 942          –     36 942     36 942   Cash resources     24.6          1 952 015          –     1 952 015     1 952 015             590 066     3 987 499          125     4 577 690     4 577 690   Financial liabilities                                      Interest-bearing borrowings     12               72 792     –     72 792     72 792   Trade and other payables     15               1 043 517     –     1 043 517     1 043 517   Short-term borrowings                                      and overdrafts     17               2 621 489     –     2 621 489     2 621 489                       3 737 798     –     3 737 798     3 737 798                                           Determination of fair values Quoted market prices at reporting date have been used to determine the fair value of available-for-sale investments. Where quoted market prices were not available, a valuation technique, most commonly discounted cash flows, was used. For trade receivables and payables, the fair value was determined using the discounted cash flow method at market-related interest rate. Carrying amounts approximate fair value for all other financial assets and liabilities.