Notes to the consolidated financial statements

for the year ended 30 June 2009

1. ACCOUNTING POLICIES

1.1

Basis of preparation

The financial statements of the group and company are prepared on the historical cost basis, except for financial instruments that are measured at fair value. Details of the accounting policies used in the preparation of the financial statements are set out below which are consistent with those applied in the previous year except as stated under the heading “Changes in accounting policies” below.

1.1.1

Statement of compliance

The consolidated financial statements of the group and company have been prepared in accordance with and comply with International Financial Reporting Standards (IFRS) and interpretations of those standards, as adopted by the International Accounting Standards Board (IASB) and applicable legislation.

1.1.2

Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year except that the group has adopted the following standards or changes to standards in response to changes in IFRS:

	Effective for financial
Standard	periods commencing	Description	Impact
IAS 23	1 January 2009	IAS 23 (Amendment) –	IAS 23 (revised) supersedes the previous IAS 23.The main change
		Borrowing Costs	from the previous version is the removal of the option to
			immediately recognise, as an expense, borrowing costs that relate
			to assets that take a substantial period of time to get ready for use
			or sale.
IFRIC 13	1 July 2008	Customer Loyalty	IFRIC 13 addresses accounting by entities that grant loyalty
		Programmes	award credits to customers who buy goods and services.
			This interpretation did not have any impact on the group’s
			financial statements.
IAS 39,	1 July 2008	IAS 39 (Amendment)	The amendments to the standards and the interpretation allow
IFRS 7 and		– Financial Instruments:	entities to reclassify certain financial instruments from held-for-
IFRIC 9		Recognition and	trading and available-for-sale categories.These amendments
		Measurement, IFRS 7	necessitated a review of the implications on the requirement
		(Amendment) – Financial	of IFRIC 9 to reassess embedded derivatives. The amendments
		Instruments: Disclosures	to IAS 39, IFRS 7 and IFRIC 9 were published subsequent to
		and IFRIC 9 (Amendment)	the required effective date, and entities were permitted to
		– Reassessment of	effect retrospective adjustments to 1 July 2008.
		Embedded Derivatives
			Since the group does not have any financial instruments
			classified as held-for-trading, or derivatives, the amendments did
			not have any impact on the group’s financial statements.

1.1.3

IFRS and IFRIC interpretations not yet effective

The group has not applied the following IFRS and IFRIC interpretations which have been issued but are not yet effective:

	Effective for financial
Standard	periods commencing	Description	Impact
IAS 1	1 January 2009	IAS 1 (Amendment) –	IAS 1 (Amendment) – The amendment requires that all non-
			Presentation of Financial owner changes in equity (comprehensive
		Statements	income) be presented in either one statement of comprehensive
			income or in two statements (a separate income statement and a
			statement of comprehensive income). Components of
			comprehensive income are not presented in the statement of
			changes in equity.

			It also requires that a balance sheet is presented at the
			beginning of the earliest comparative period in a complete set
			of financial statements when the entity applies an accounting
			policy retrospectively or makes a retrospective restatement.
			The entity has to disclose income tax relating to each
			component of other comprehensive income, and disclose
			reclassification adjustments relating to components of other
			comprehensive income.

			The group still needs to determine which disclosure option it
			will follow for comprehensive income, but it is not expected
			that the impact on the financial statements will be significant.
IAS 27	1 July 2009	IAS 27 (Amendment)	IAS 27 amendments deal with acquisitions of additional non-controlling
		– Consolidated and	equity interests that have to be accounted for as equity transactions.
		Separate Financial	Disposals of equity interests while retaining control are also accounted
		Statements	for as equity transactions. When control of an investee is lost,
			the resulting gain or loss relating to the transaction
			will be recognised in profit and loss.

			These amendments will impact on the accounting treatment
			where additional minority interests are acquired.
IAS 32	1 January 2009		IAS 32 requires certain puttable instruments that meet the definition of a
			financial liability to be classified as equity if, and only if, they meet the
			required conditions.

			These amendments will not have any impact on the group’s
			financial statements.
IFRS 2	1 January 2009	IAS 32 (Amendment) –	The amendments apply to equity-settled share-based payment
and		Financial Instruments:	transactions and clarify what are vesting and non-vesting conditions.
AC 503		Presentation
		IAS 1 (Amendment) –
		Presentation of Financial	Vesting conditions are now limited to service conditions as defined in
		Statements	the current IFRS 2 and performance conditions. Non-vesting
		IFRS 2 (Amendment) –	conditions are conditions that do not determine whether the entity
		Share-based Payment:	receives the services that entitle the counterparty to a share-based
		Vesting Conditions and	payment. Non-vesting conditions are taken into account in measuring
		Cancellations and AC 503	the grant date fair value and thereafter there is no true-up for
		– Accounting for Black	differences between expected and actual outcomes. Amendments to
		Economic Empowerment	AC 503 as issued by the South African Institute of Chartered
		(BEE) Transactions	Accountants (SAICA) were made as a result of the changes of IFRS 2.

			These amendments will not have any impact on the group’s financial statements.
IFRS 3	1 July 2009	Business Combinations	IFRS 3 applies to all new business combinations that occur after 1 July
		(Revised)	2010. The statement requires that all transaction costs be expensed
			and the contingent purchase consideration be recognised at fair value
			on acquisition date. For successive share purchases, any gain or loss
			for the difference between the fair value and the carrying amount of
			the previously held equity interest in the acquiree will have to be
			recognised in profit and loss.

			These amendments will have an impact on the disclosures regarding
			any future business combinations.
IFRS 8	1 January 2009	Operating Segments	IFRS 8 sets out requirements for disclosure of information about an entity’s operating segments, the entity’s products and services, the geographical areas in which it operates and its major customers. This standard may require additional disclosures regarding segmental information, and the group is still determining the impact of the standard on its financial statements.
IAS 39	1 July 2009	IAS 39 (Amendment)	The amendments to IAS 39 clarify the application of principles when
		– Financial Instruments:	associating the risks attributable to a portion of cash flows or fair
		Recognition and	value of a financial instrument designated as a hedged item.
		Measurement	Since the group does not apply hedge accounting, these amendments
			will not have any impact on the group’s financial statements.
IFRS 7	1 January 2009	IFRS 7 (Amendment)	The amendments are intended to enhance disclosures about
		– Financial Instruments:	fair value measurement and liquidity risk.
		Disclosures
			Adoption of these amendments will not impact on the group’s
			financial position, but may give rise to additional disclosures.
IFRIC 15	1 January 2009	Agreements for the	IFRIC 15 clarifies when and how revenue and related expenses from the
		Construction of Real	sale of a real estate unit should be recognised if an agreement between
		Estate
			a developer and a buyer is reached before the construction of the real estate is completed. Furthermore, the interpretation provides guidance on how to determine whether an agreement is within the scope of IAS 11 – Construction Contracts within the scope of IAS 18 – Revenue. This interpretation will not have any impact on the group’s financial statements.
IFRIC 16	1 October 2008	Hedges of a Net	IFRIC 16 provides guidance in respect of hedges of foreign exchange
		Investment in a Foreign	gains and losses on a net investment in a foreign operation.
		Operation
			Since the group does not undertake hedging of foreign exchange
			impacts in its offshore subsidiary, the interpretation will not have any
			impact on the group’s financial statements.
IFRIC 17	1 July 2009	Distribution of non-cash	IFRIC 17 provides guidance on the recognition and measurement of
		assets to owners	liabilities and the associated assets in the event entities distribute
			non-cash assets to shareholders.

			Since the group does not effect distributions as described in the
			interpretation, the interpretation will not have any impact on the
			group’s financial statements.
IFRIC 18	1 July 2009	Transfer of assets from	IFRIC 18 provides guidance on accounting for assets received from
		customers	customers used for a specific purpose.

			Since the group does not receive assets as described in the
			interpretation, the interpretation will not have any impact on the
			group’s financial statements.
AC 504	1 April 2009	IAS 19 – Employee Benefits:	AC 504 provides guidance on the application of IFRIC 14 – The Limit
		The limit on a defined	on a Defined Benefit Asset, Minimum Funding Requirements and
		benefit asset, minimum	their Interaction in a South African environment.
		funding requirements
		and their interaction in a	The group adopted IFRIC 14 in the previous financial year, and
		South African pension	has assessed that the interpretation will not have impact on the
		fund environment	group’s financial statements.

The IASB has published two sets of improvements to IFRIS, which are mostly effective for periods commencing on or after January 2009 and January 2010 respectively.These improvements represent generally minor changes, and material impacts on the financial position of the group as a result of their adoption are not expected, and are to be assessed in due course.

1.2

Significant accounting judgements and estimates Judgements

in the process of applying the group’s accounting policies, management has made the following judgements, apart from those involving estimations, which could have a significant effect on the amounts recognised in the financial statements:

Consolidation of special-purpose vehicles
Management is of the opinion that the Bokamoso Trust, a broad-based community trust, is still controlled by Assore, as suitable beneficiaries which comply with the broad-based requirement set out in the trust deed have yet to be identified. Accordingly, the trust has been consolidated in the group financial statements.

Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Impairment of goodwill
Goodwill is tested for impairment annually or more frequently if events or changes in circumstances indicate a possible impairment.This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows.The goodwill relates to the acquisition of a foreign subsidiary and, based on current circumstances, no impairment is necessary.

Post-retirement medical aid liability
Independent actuaries determine the quantum of the liability on a regular basis, and the related assumptions are disclosed in note 32.2.

Provisions for environmental rehabilitation
The group provides for the estimated costs of rehabilitation which include both restoration and associated decommissioning of assets. An independent environmental liability assessment is conducted on an annual basis to assess the adequacy of the environmental rehabilitation provisions. Significant risk of material adjustment exists due to the inherent uncertainty surrounding the future life of the mines, the forward-looking nature of the provisions and the uncertainty regarding the underlying assumptions.

1.3

Basis of consolidation

The consolidated financial statements comprise the financial statements of the company and its joint-venture and subsidiary companies, which are prepared for the same reporting year as the holding company, using consistent accounting policies. All intercompany balances and transactions, including unrealised profits and losses arising from intragroup transactions, have been eliminated.

Subsidiary companies
Investments in subsidiary companies are accounted for in the company at cost less impairments. Subsidiary companies are fully

consolidated from the date of acquisition, being the date on which the group obtains control, and continue to be consolidated until the date that such control ceases. All intragroup transactions and balances (including profits and losses that arise between group companies) are eliminated on consolidation.

Minority interests represent the portion of profit or loss and net assets and liabilities not held by the group which are presented separately in the income statement and within equity in the consolidated balance sheet, separately from parent shareholders’ equity. Acquisitions of minority interests are accounted for using the parent entity extension method, whereby the difference between the consideration and the book value of the share of the net assets acquired is recognised as goodwill.

Joint ventures
Investments in jointly controlled entities are accounted for using the proportionate consolidation method. Entities are regarded as joint ventures where the group, in terms of contractual agreements, has joint control over the financial and operating policy decisions of the enterprise.The group’s attributable share of the assets, liabilities, income and expenses of such jointly controlled entities is incorporated on a line-by-line basis in the group financial statements and all intragroup transactions and balances are eliminated on consolidation.The joint venture is proportionately consolidated until the date on which the group ceases to have joint control over the joint venture.

1.4

Property, plant and equipment and depreciation

Plant and equipment is stated at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and accumulated impairment in value. Such cost includes the cost of replacing part of such plant and equipment when that cost is incurred if the recognition criteria are met.The carrying amounts of plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable.

An item of property, plant and equipment is derecognised upon disposal or when future economic benefits are no longer expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognised.

The assets’ residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, at each financial year-end.

The costs to add to, replace part of, or service an item following a major inspection is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied.

Depreciation of the various types of assets is determined on the following bases:

Mineral and prospecting rights
Mineral rights, which are being depleted, are amortised over their estimated useful lives using the units-of-production method based on proven and probable ore reserves. Where the reserves are not determinable, due to their scattered nature, the straight-line method is applied.The maximum rate of depletion of any mineral right is 25 years. Mineral rights, which are not being depleted, are not amortised. Mineral rights, which have no commercial value, are written off in full.

Land, buildings and mine, township and industrial properties
Land is not depreciated. Owner-occupied properties, which are designed for a specific use are only depreciated if carrying value exceeds estimated residual value, in which case they are depreciated to estimated residual value on a straight-line basis over their estimated useful lives.The annual depreciation rates used vary up to a maximum of 25 years.

Mine, township and industrial properties, including houses, schools and administration blocks, are depreciated to estimated residual values at the lesser of life of mine and expected useful life of the asset on the straight-line basis.

Plant and equipment
Mining plant and equipment is depreciated over the lesser of its estimated useful life, estimated at between five and 19 years, and the units-of-production method based on estimated proven and probable ore reserves. Where ore reserves are not determinable, due to their scattered nature, the straight-line method of depreciation is applied.

Industrial plant and equipment is depreciated on the straight-line basis, over its useful life, up to a maximum of 25 years.

Prospecting, exploration, mine development and decommissioning assets
Costs related to property acquisitions and mineral and surface rights related to exploration are capitalised and depreciated over a maximum period of 30 years.

All exploration expenditures are expensed until they result in projects that are evaluated as being technically and commercially feasible and a future economic benefit is highly probable. In evaluating whether expenditures meet the criteria to be capitalised, the company utilises several different sources of information and also differentiates projects by levels of risks, including:

the degree of certainty over the mineralisation of the orebody;
commercial risks including but limited to country risks; and
prior exploration knowledge available about the target orebody.

Exploration expenditure incurred on greenfields sites where the company does not have any mineral deposits which are already being mined or developed, is expensed as incurred until a bankable feasibility study has been completed after, which the expenditure is capitalised.

Exploration expenditure incurred on brownfields sites, adjacent to any mineral deposits which are already being mined or developed is expensed as incurred until the company has obtained sufficient information from all available sources to ameliorate the project risk areas identified above and which indicates by means of a pre-feasibility study that the future economic benefits are highly probable.

Exploration expenditure relating to extensions of mineral deposits which are already being mined or developed, including expenditure on the definition of mineralisation of such mineral deposits is capitalised and depreciated over a maximum period of 30 years.

Activities in relation to evaluating the technical feasibility and commercial viability of mineral resources are treated as forming part of exploration expenditures.

Vehicles, furniture and office equipment
Vehicles, furniture and office equipment are depreciated on the straight-line basis using the following useful lives:

Vehicles	– between five and nine years
Furniture	– between four and 18 years
Office equipment	– between two and 11 years

Capital work-in-progress Capital work-in-progress is not depreciated and is transferred to the category to which it pertains when the asset is brought into use as intended.

1.5

Leased assets

The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and whether the arrangement conveys a right to use the asset.

Leases of assets where the group assumes substantially all the risks and rewards of ownership are classified as finance leases. Assets subject to finance leases are capitalised as property, plant and equipment at fair value of the leased assets at commencement of the lease, or, if lower, the present value of the minimum lease payments and the corresponding liability to the lessor is raised. Lease payments are allocated using the effective interest rate method to determine the lease finance cost, which is charged against operating profit, and the capital repayment, which reduces the liability to the lessor.These assets are depreciated on the same basis as the fixed assets owned by the group.

Leases where the lessor retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.

1.6

Investment properties

Investment properties are measured initially at cost, including transaction costs.The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property.

Subsequent to initial recognition, investment properties are reflected at cost less accumulated depreciation and impairment losses. Investment properties are only depreciated if their carrying value exceeds estimated residual value, in which case they are depreciated to estimated residual value on a straight-line basis over their estimated useful lives.

Investment properties are derecognised either when they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the income statement in the year of retirement or disposal.

1.7

Intangible assets

Intangible assets represent proprietary technical information and goodwill. Intangible assets acquired separately are measured at cost on initial recognition.The cost of intangible assets acquired in a business combination is fair value as at the date of acquisition. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.

The useful lives of intangible assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised over their useful economic life on a straight-line basis and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation expense on intangible assets with finite lives is recognised in the income statement in the expense category consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives are tested for impairment annually, either individually or at the cash-generating unit level. Such intangibles are not amortised.The useful life of an intangible asset with an indefinite life is reviewed annually to determine whether indefinite life assessment continues to be supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.

Goodwill acquired in a business combination is initially measured at cost, being the excess of the cost of the business combination over the group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities fairly valued, at date of acquisition. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired based on future income streams of the cash-generating unit.

Internally generated intangible assets are not capitalised and expenditure is reflected in the income statement in the year in which the expenditure is incurred.

1.8

Capitalisation of borrowing costs

Borrowing costs that are directly attributable to the acquisition, construction or development of a qualifying asset, which require a substantial period of time to be prepared for its intended use, are capitalised. Capitalisation of borrowing costs as part of the cost of a qualifying asset commences when:

expenditures for the asset are being incurred;
borrowing costs are being incurred; and
activities that are necessary to prepare the asset for its intended use or sale are in progress.

Capitalisation is suspended when the active development is interrupted and ceases when the activities necessary to prepare the asset for its use are completed.

Other borrowing costs are charged to finance costs in the income statement as incurred.

1.9

Impairment of non-financial assets

The group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognised in the income statement in those expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised, in which case the carrying amount of the asset is increased to its recoverable amount.That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in profit or loss, and the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

1.10

Environmental rehabilitation expenditure

The estimated cost of final rehabilitation, comprising the liability for decommissioning of assets and restoration, is based on current legal requirements and existing technology and is reassessed annually.

Decommissioning costs
The present value of estimated future decommissioning obligations at the end of the operating life of a mine is included in long-term provisions.The related decommissioning asset is recognised in property, plant and equipment when the decommissioning provision gives access to future economic benefits.The unwinding of the obligation is included in the income statement.

The estimated cost of decommissioning obligations is reviewed annually and adjusted for legal, technological and environmental circumstances that affect the present value of the obligation for decommissioning. Decommissioning costs capitalised are amortised using the lesser of its estimated useful life or units of production method based on estimated proven and probable ore reserves.

Restoration costs
The estimated cost of restoration at the end of the operating life of a mine is included in long-term provisions and is charged to the income statement based on the units-of-production mined during the current year, as a proportion of the estimated total units which will be produced over the life of the mine. Cost estimates are not reduced by the potential proceeds from the sale of assets.

Ongoing rehabilitation costs
Expenditure on ongoing rehabilitation is charged to the income statement as incurred.

Environmental rehabilitation trust funds
The group makes annual contributions to the environmental rehabilitation trust funds, which have been created to fund the estimated cost of pollution control, rehabilitation and mine closure at the end of the lives of the group’s mines. Annual contributions are determined in accordance with statutory requirements, on the basis of the estimated environmental obligation divided by the remaining life of a mine. Income earned on monies paid to the trust is accounted for as net investment income. The environmental trust funds are consolidated.

1.11

Financial instruments

The group’s financial instruments consist primarily of cash on hand, balances with banks, deposits on call, money market instruments, derivative instruments, trade and other receivables, trade payables, borrowings and investments other than those in subsidiary or joint-venture companies.The initial recognition of financial instruments is at fair value at the trade date and subsequent recognition is at fair value or amortised cost. Recognition methods adopted are disclosed in the policy statements for each item.

Available-for-sale investments
All investments are initially recognised at fair value, including acquisition charges associated with the investment. After initial recognition, investments, other than investments in jointly controlled entities and subsidiary companies, are classified as available-for-sale investments and are disclosed at fair value, which equates to market value.

Gains and losses on subsequent measurement are recognised in equity until the investment is disposed of, or its original cost is considered to be impaired, at which time the cumulative gain previously reported in equity and the impairment of the cost, where considered permanent, is taken to the income statement.

The fair value of available-for-sale investments that are actively traded in organised financial markets is determined by reference to quoted market bid prices at the close of business on the balance sheet date. For investments where there is no active market, fair value is determined using valuation techniques such as discounted cash flow analysis.

Trade and other receivables
Trade receivables, which generally have 60- to 120-day terms, are initially recognised at fair value and subsequently at amortised cost and are classified as loans and receivables. An impairment is recognised when there is evidence that an entity will not be able to collect all amounts due according to the original terms of the receivables.The impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rates. The amount of the impairment is charged to the income statement.

Preference shares, trade and other payables
Preference shares, trade and other payables are stated at amortised cost, being the initial recognised obligation less payments made and any other adjustments.

1.12

Derivative financial instruments and hedging

In the event that the group uses derivative financial instruments, such as forward currency contracts to hedge its risks associated with foreign currency fluctuations, such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative.

The group does not apply hedge accounting and any gains or losses arising from changes in fair value on derivatives are taken directly to profit or loss for the year.

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with similar maturity profiles.

1.13

Derecognition of financial assets and liabilities

Financial assets
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognised where:

the rights to receive cash flows from the asset have expired;
the group retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a “pass-through” arrangement; or

the group has transferred its rights to receive cash flows from the asset and either has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the group has transferred its rights to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the group’s continuing involvement in the asset. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the group could be required to repay.

Financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in profit or loss. If a legally enforceable right exists to set-off recognised amounts of financial assets and liabilities and the group intends to settle on a net basis or to realise the asset and settle the liability simultaneously, all related financial effects are netted.

1.14

Impairment of financial assets

The group assesses at each balance sheet date whether a financial asset or group of financial assets is impaired, which is determined on the following bases:

Assets carried at amortised cost
If there is objective evidence that an impairment loss on trade and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (ie the effective interest rate computed at initial recognition). The carrying amount of the asset is either reduced directly or through use of an allowance account. The amount of the loss is recognised in profit or loss.

The group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised, are not included in a collective assessment of impairment.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

Assets carried at cost
If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset.

Available-for-sale investments
If an available-for-sale investment is impaired, an amount comprising the difference between its cost (net of any principal
payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is
transferred from equity to the income statement. Reversals in respect of equity instruments classified as available-for-sale are not recognised in profit. Reversals of impairment losses on debt instruments are reversed through profit or loss, if the increase in fair value of the instrument can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.

1.15

Foreign currency translation

The consolidated financial statements are presented in South African currency, which is the group’s functional and presentation currency.Transactions in other currencies are dealt with as follows:

Foreign currency balances
Transactions in foreign currencies are converted to South African currency at the rate of exchange ruling at the date of these transactions. Monetary assets and liabilities denominated in a foreign currency at the end of the financial year are translated to South African currency at the approximate rates ruling at that date. Foreign exchange gains or losses arising from foreign exchange transactions, whether realised or unrealised, are included in the determination of profit.

Foreign entities
The assets and liabilities of overseas subsidiaries are translated at the rate of exchange ruling at the balance sheet date. The income statements of overseas subsidiaries are translated at weighted average exchange rates for the year. The exchange differences arising on the retranslation are taken directly to equity. On disposal of a foreign entity, accumulated exchange differences are recognised in the income statement as a component of the gain or loss on disposal. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the acquiring company and are recorded at the exchange rate at the date of the transaction.

1.16

Inventories

Inventories are valued at the lower of cost and estimated net realisable value with due allowance being made for obsolescence and slow-moving items.The cost of inventories, which are determined on a weighted average cost basis, comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.

1.17

Taxation

Current tax
Tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities.The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted at the balance sheet date.

Deferred taxation
Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences except:

where the deferred tax liability arises from goodwill impairment or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries and interests in joint ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, and unused tax assets and unused tax losses carried forward to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the unused tax assets and unused tax losses carried forward can be utilised except:

where the deferred tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
in respect of deductible temporary differences associated with investments in subsidiaries and interests in joint ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income tax relating to items recognised directly in equity are recognised in equity and not in the income statement.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Value added tax (VAT)
Revenues, expenses and assets are recognised net of the amount of VAT except:

where the VAT incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the VAT is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
where receivables and payables are stated with the amount of VAT included.

The net amount of VAT recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

Secondary taxation on companies (STC)
STC is calculated on the declaration date of all dividends net of dividends received and is included in the taxation expense in the income statement.To the extent that it is probable that the entity with the STC credits will declare dividends of its own against which unused STC credits can be utilised, a deferred tax asset is recognised for such STC credits.

1.18

Provisions

Provisions are recognised when:

a present legal or constructive obligation exists as a result of past events where it is probable that a transfer of economic benefits will be required to settle the obligation; and
a reasonable estimate of the obligation can be made.

A present obligation is considered to exist when the group has no realistic alternative but to make the transfer of economic benefits.The amount recognised as a provision is the best estimate at the balance sheet date of the expenditure required to settle the obligation. Only expenditure related to the purpose for which the provision was raised is charged to the provision. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as an interest expense.

1.19

Interest-bearing loans and borrowings

All loans and borrowings are initially recognised at their fair value, being the consideration received, net of issue costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.

Gains and losses are recognised in profit or loss when the liabilities are derecognised or impaired, as well as through the amortisation process.

1.20

Treasury shares

Own equity instruments which are reacquired are regarded as treasury shares and are deducted from equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation of treasury shares.

1.21

Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the revenue can be reliably measured.The following specific recognition criteria must also be met before revenue is recognised.

Sale of mining and beneficiated products
Sale of mining and beneficiated products represents the F.O.B. or C.I.F. sales value of ores and alloys exported and the F.O.R. sales value of ores and alloys sold locally. Sales of mining and beneficiated products are recognised when the significant risks and rewards of ownership of the goods have passed to the buyer.

Technical fees and commissions on sales
Revenue from technical fees and commissions on sales is recognised on the date when the risk passes in the underlying transaction.

Interest received
Interest received is recognised using the effective interest rate method, ie the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net amount of the financial asset.

Dividends received
Dividends received are recognised when the shareholders’ right to receive the payment is established.

Rental income
Rental income arising on investment properties is accounted for on a straight-line basis over the lease term of ongoing leases.

Cost of sales
All costs directly related to the production of products are included in cost of sales. Costs that cannot be directly linked are included separately or under other operating expenses. When inventories are sold, the carrying amount is recognised in cost of sales.

1.22

Post-employment benefits

Retirement benefit plans operated by the group are of both the defined benefit and defined contribution types.The cost of

providing benefits under defined benefit plans is determined using the projected unit credit actuarial valuation method. Actuarial gains and losses are recognised using the “corridor method”, ie as income or an expense when the net cumulative unrecognised actuarial gains or losses for each individual plan at the end of the previous reporting year exceed 10% of the higher of the defined benefit obligation or the fair value of the plan assets at that date.These gains and losses are recognised over the expected average remaining working lives of the employees participating in the plans.

Past-service costs are recognised as an expense on a straight-line basis over the average period until the benefits become vested. If the benefits are already vested immediately following the introduction of, or changes to, a pension plan, past-service cost is recognised immediately.

The rate at which contributions are made to defined contribution funds are fixed and are recognised as an expense when employees have rendered services in exchange for those contributions. No liabilities are raised in respect of the defined contribution fund, as there is no legal or constructive obligation to pay further contributions should the fund not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods.

1.23

Definitions

Earnings and headline earnings per share
The calculation of earnings per share is based on net income after taxation and State’s share of profits, after adjusting for outside shareholders’ interests divided by the weighted number of shares outstanding during the period.

Headline earnings comprise earnings for the year, adjusted for profits and losses on items of a capital nature. Headline earnings have been calculated in accordance with circular 8/2007 issued by the South African Institute of Chartered Accountants. Adjustments against earnings are made after taking into account attributable taxation and minority interests.The adjusted earnings figure is divided by the weighted average number of shares in issue to arrive at headline earnings per share.

Cash resources
The cash resources disclosed in the cash flow statement comprise cash on hand, deposits held on call with banks and highly liquid investments that are readily convertible to known amounts of cash and are subject to insignificant changes in value. Bank overdrafts have been separately disclosed with current liabilities on the balance sheet.The book value of cash deposits with banks and money-market instruments approximate their fair value.

Dividends per share
Dividends declared during the year divided by the weighted number of ordinary shares in issue.

Cash restricted for use
Cash which is subject to restrictions on its use is stated separately at the carrying value in the notes.

Fair value
Where an active market is available it is used to represent fair value. Where there is not an active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions with reference to the current market of another instrument which is substantially the same discounted cash flow analysis or other valuation models.

1.24

Contingent liabilities

A contingent liability is a possible obligation that arises from past events and which existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the group, or a present obligation that arises from past events but is not recognised because it is not probable that on outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability. Contingent liabilities are not recognised as liabilities.