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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 JUNE 2010


Notes  1-10  |  11-20   |   21-33

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
      During the year, the group has adopted the following standards or changes to standards in response to changes in IFRS:
       
      Standard Description Impact
      IAS 1 IAS 1 (Revised) – Presentation of Financial Statements The revised standard requires that all non-owner changes in equity be presented in either one statement of comprehensive income or in two linked statements. Components of comprehensive income are not presented in the statement of changes in equity. It also requires that a statement of financial position is presented at the beginning of the earliest comparative period when the entity applies an accounting policy retrospectively or makes a retrospective restatement.
           
          The group has adopted the presentation of a separate income statement and statement of comprehensive income. There has been no impact on the results of the group as a result of adopting these amended presentation and disclosure requirements.
      IFRS 8 Operating Segments IFRS 8 sets out the 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.
           
          The results of the group have not been affected as a result of adopting this IFRS. The disclosure of segmental information has been aligned on the basis upon which the chief operating decision-maker manages the group with the most significant resultant change being the presentation of joint-venture entities’ information.
      IFRS 7 IFRS 7 (Amendment) – Financial Instruments: Disclosures The amendments are intended to enhance disclosures about fair value measurement and liquidity risk.
       
      The results of the group have not been affected as a result of adopting these amendments.
           
      The following new, revised and amended standards and interpretations were adopted in the current year, but did not have any impact on the accounting policies, financial position or performance of the group or the company:
       
     
  • IFRS 2 (Amendment) – Share-based Payment: Vesting Conditions and Cancellations
  • IFRS 3 (Revised) – Business Combinations
  • IAS 27 (Amendment) – Consolidated and Separate Financial Statements
  • IAS 27 (Amendment) – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or an Associate
  • Amendments to IAS 1 – Presentation of Financial Statements and IAS 32 – Financial Instruments – Presentation: Puttable Financial Instruments and Obligations Arising on Consolidation
  • IAS 39 (Amendment) – Financial Instruments: Recognition and Measurement: Eligible Hedged Items
  • IFRIC 15 – Agreements for the Construction of Real Estate
  • IFRIC 16 – Hedges of a Net Investment in a Foreign Operation
  • IFRIC 17 – Distribution of Non-cash Assets to Owners
  • IFRIC 18 – Transfer of Assets from Customers
  • AC 504 – IAS 19 – Employee Benefits: The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction in a South African Pension fund Environment
       
    1.1.3 IFRS and IFRIC interpretations not yet effective
      The group has not applied the following IFRS and IFRIC new, revised and amended standards and interpretations which have been issued as they are not yet effective:
       
      Standard Description Effective for financial periods commencing Impact
      IFRS 2 IFRS 2 (Amendment) – Group Cash-settled Share-based Payment  Transactions 1 January 2010 The amendment clarifies the accounting treatment for group cash-settled share-based payment transactions, where a subsidiary receives goods or services from employees or suppliers but the parent or another entity in the group pays for those goods or services  (replacing previous interpretations published on this issue)
             
            Neither the group’s results nor its disclosures are expected to be affected by this amendment.
      IAS 32 IAS 32 – Financial Instruments: Presentation (Amendment) – Classification of Rights Issues 1 February 2010 The definition of a financial liability has been amended to classify rights issues as equity instruments if certain requirements are met. The application of this amendment is retrospective.
 
Neither the group’s results nor its disclosures are expected to be affected by this amendment.
      IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments 1 July 2010 IFRIC 19 clarifies that equity instruments issued to a creditor to extinguish a financial liability are to be measured at their fair value, unless this cannot be reliably measured, in which case they are measured at the fair value of the liability extinguished. Any gain or loss is recognised immediately in profit or loss. The application of this interpretation is retrospective.
             
            Since the group has not settled any liabilities as envisaged in the interpretation, neither the group’s results nor its disclosures are expected to be affected by this amendment.
      IFRS 9 Financial Instruments 1 January 2013 The IASB intends to replace IAS 39 – Financial Instruments: Recognition and Measurement, with IFRS 9, which is being prepared on a phased basis. The statement aims to simplify many of the aspects contained in IAS 39, and will be required to be applied retrospectively
             
            The group is in the process of determining the impact of the standard on its results and disclosures.
      IAS 24 Related-party Disclosures (Revised) 1 January 2011 The revisions to the standard clarify the definition of a related-party to simplify the identification of related-party relationships, particularly in relation to significant influence and joint control
             
            The group is in the process of determining the impact these revisions may have on its disclosures.
      IFRIC 14 IFRIC 14 (Amendment) – Prepayments of a Minimum Funding Requirement 1 January 2011 The amendment to the interpretation provides guidance on assessing the recoverable amount of a net pension asset, and permits an entity  to treat the prepayment of a minimum funding requirement as an asset
           
          In the event that the group undertakes prepayments as envisaged in the revised interpretation, the impact on its results and disclosures will be determined accordingly.
             
    1.1.4 The IASB has published two sets of improvements to IFRS, which are mostly effective for periods commencing on or after January 2010 (current year) and January 2011 (next year) respectively. The improvements for the current year represent minor changes and the financial position and results of the group have not been affected as a result of their adoption. The improvements for the next year also represent minor changes and the financial position and results of the group are not expected to be materially impacted as a result of their adoption, and are in the process of being assessed by the group.  The IASB has also published annual improvements to IFRS in May 2010 which will only be effective for the group in future years. The improvements represent minor changes and the financial position and results of the group and company are not expected to be materially impacted as a result of their adoption, and are in the process of being assessed.
       
 

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, following the second empowerment transaction (refer “Black economic empowerment” report) the Trust, through its controlling interest in a special-purpose entity, has become extensively indebted to the group. 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 statement of financial position 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.
     
    Project risk and exploration expenditure
    In evaluating whether expenditures meet the criteria to be capitalised, the group 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.
     
    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.
     
    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 33.2.
     
    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. A 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.
     
    Non-controlling 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 statement of financial position, separately from parent shareholder’s equity.
     
    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 losses. 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, are 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 Proved 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 a period 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 Proved 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 stream highly probable.
     
    Exploration expenditure incurred on greenfield 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 brownfield 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 5 and 9 years
Furniture – between 4 and 18 years
Office equipment – between 2 and 11 years
     
    Leased assets
    Leased assets are depreciated on the same basis as the property, plant and equipment owned by the group.
     
    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 group of assets and whether the arrangement conveys a right to use the asset(s).
     
    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 finance costs, and the capital repayment, which reduces the liability to the lessor.
     
    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 accumulated impairment charges. 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 valued 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 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.
     
    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 is initially measured at cost being the excess of the consideration transferred over the group’s net identifiable assets acquired and liabilities assumed. 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 requires 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 the carrying value of 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 pretax 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 as finance costs.
     
    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. The related decommissioning asset is amortised using the lesser of the related asset’s 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 assesses the necessity to make 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
    Recognition methods adopted for financial instruments are described below:
    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 measured at fair value, which equates to market value.
     
    Gains and losses on subsequent measurement are recognised in other comprehensive income until the investment is disposed of, or its original cost is considered to be impaired, at which time the cumulative gain previously reported in other comprehensive income and the impairment below the cost, where considered significant or prolonged, is recognised in 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 statement of financial position 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 charge is recognised when there is evidence that an entity will not be able to collect all amounts due in accordance with the original terms of the receivables. The impairment charge 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.
     
    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, as well as through the amortisation process.
     
 

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 recognised directly in the income statement.
     
    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 is derecognised when the right to receive cash flows from the asset has expired or the group has transferred its rights to receive cash and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset. On derecognition of a financial asset, the difference between the proceeds received or receivable and the carrying amount of the asset is included in the income statement.
     
    Financial liabilities
    A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the liability extinguished or transferred to another party and the amount paid is included in the income statement.
     
 

1.14

Impairment of financial assets
    The group assesses at each statement of financial position 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 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 the income statement, is transferred from other comprehensive income to the income statement. Impairments recorded against available-for-sale equity instruments are not reversed.
     
 

1.15

Foreign currency translation
    The consolidated financial statements are presented in South African currency, which is the company’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 or loss.
     
    Foreign entities
    The assets and liabilities of subsidiaries with a different functional currency are translated at the rate of exchange ruling at the statement of financial position date. The income statements of these subsidiaries are translated at weighted average exchange rates for the year. The exchange differences arising on the retranslation are recognised in other comprehensive income. On disposal of a foreign entity, accumulated exchange differences are reclassified 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 and are remeasured at the closing rate at each reporting date.
     
 

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 is determined on a weighted average cost basis, comprises 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 taxation
    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 statement of financial position date.
     
    Deferred taxation
    Deferred tax is provided, using the balance sheet liability method, on all temporary differences at the date of the statement of financial position, 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 the initial recognition of goodwill 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, 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 statement of financial position 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 statement of financial position date.
     
    Income tax relating to items recognised directly in other comprehensive income is recognised in the statement of other comprehensive income 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 taxation (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 statement of financial position.
     
    Secondary taxation on companies (STC)
    STC is calculated on the declaration date of each dividend, net of dividends received during the dividend cycle, 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.
     
    Mining royalty taxation
    Provision for mining royalties is made with reference to the condition specified as contained in the Mining and Petroleum Resources Royalty Act, for the transfer of refined and unrefined mined resources, upon the date such transfer is effected. These costs are included in other expenses.
     
 

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 it is probable that an outflow of economic benefits will occur. The amount recognised as a provision is the best estimate at the statement of financial position 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 pretax 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 finance costs.
     
 

1.19

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

1.20

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 FOB or CIF sales value of ores and alloys exported and the FOR 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.
     
 

1.21

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 vest 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 is fixed and is 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.
     
 

1.22

Contingent liabilities
    A contingent liability is a possible obligation that arises from past events, the existence of which 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 an 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.
     
 

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 non-controlling 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 3/2009 issued by the South African Institute of Chartered Accountants. Adjustments against earnings are made after taking into account attributable taxation and non-controlling 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 in the notes to the financial statements. The book value of cash deposits with banks and money market instruments approximate their fair value.
     
    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.
     
    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.
     
   
Accumulated
Accumulated
   
depreciation
depreciation
   
and
and
   
impairment
Carrying
impairment
Carrying
   
Cost
charges
amount
Cost
charges
amount
   
2010
2010
2010
2009
2009
2009
   
R’000
R’000
R’000
R’000
R’000
R’000

2.

PROPERTY, PLANT AND EQUIPMENT
  At year-end
  Mining assets
  Mineral and prospecting rights
432 476
111 071
321 405
432 476
91 691
340 785
  Land, buildings and mine
  properties
635 494
111 893
523 601
519 949
87 394
432 555
  Plant and equipment
5 143 715
1 073 726
4 069 989
3 746 707
817 747
2 928 960
  Prospecting, exploration,
  mine development and
  decommissioning assets
1 026 865
306 143
720 722
925 642
276 362
649 280
  Vehicles, furniture and office
  equipment
911 885
374 029
537 856
777 391
234 952
542 439
  Leased assets capitalised
26 247
20 574
5 673
27 503
16 363
11 140
  Capital work-in-progress
37 308
–
37 308
107 238
–
107 238
   
8 213 990
1 997 436
6 216 554
6 536 906
1 524 509
5 012 397
  Other assets
  Land and buildings
18 442
782
17 660
11 426
451
10 975
  Industrial property
24 829
13 546
11 283
24 846
13 000
11 846
  Plant and equipment
152 607
98 372
54 235
136 262
79 721
56 541
  Vehicles, furniture and office
  equipment
60 682
16 611
44 071
31 480
20 911
10 569
  Capital work-in-progress
791
–
791
16 357
–
16 357
   
257 351
129 311
128 040
220 371
114 083
106 288
   
8 471 341
2 126 747
6 344 594
6 757 277
1 638 592
5 118 685
               
  Exchange differences
  Exchange differences arising on the translation at year-end of the property, plant and equipment of a foreign subsidiary amounted to R11 714 (2009: R19 953).
   
  Leased assets
  Vehicles with a carrying amount of R5,7 million (2009: R11,1 million) are encumbered as security for the finance lease agreements referred to in note 13.
   
  Borrowing costs
  Acquisitions of mine development assets in 2009 included borrowing costs amounting to R5,9 million that were capitalised during that year. Borrowing costs are capitalised at effective rates applicable to group borrowings during the year. Since no qualifying finance costs were incurred during the year, no borrowing costs were capitalised in the current year.
   
  Capital work-in-progress
  Included in mine development, plant and machinery and capital work-in-progress above, are assets with a carrying amount of R1 802,1 million (2009: R843,3 million) which relate to projects in progress from which no revenue is currently derived.
   
  Impairment of assets
  Following the impairment of the synthetic diamond operation, Xertech, in the previous year, management has terminated its operations, following the evaluation of various options to establish an alternative sustainable basis for its continued operation. To date, no suitable mechanisms have been identified to exit the synthetic diamond business. Accordingly, Xertech’s assets have been impaired by a further R16,7 million (2009: R59,1 million) on the basis of its fair value less costs to sell. The values have been determined based with reference to equivalent values attainable in the respective active markets for the assets concerned. Management continues to pursue suitable disposal options.
   
   
Opening carrying amount
Acquisitions
Disposals
Reclassi- cations
Current depreciation and impairment charges
Closing carrying amount
   
R’000
R’000
R’000
R’000
R’000
R’000
  Movement for the year – 2010            
  Mining assets            
  Mineral and prospecting rights
340 785
–
–
–
(19 380)
321 405
  Land, buildings and mine properties
432 555
116 513
(190)
203
(25 480)
523 601
  Plant and equipment
2 928 960
1 315 409
(197)
98 899
(273 082)
4 069 989
  Prospecting, exploration,  mine development and  decommissioning assets
649 280
112 175
(10 457)
–
(30 276)
720 722
  Vehicles, furniture and office  equipment
542 439
149 427
(14 665)
7
(139 352)
537 856
  Leased assets capitalised
11 140
–
(1 256)
–
(4 211)
5 673
  Capital work-in-progress
107 238
47 750
(6 306)
(111 374)
–
37 308
        
5 012 397
1 741 274
(33 071)
(12 265)
(491 781)
6 216 554
  Other assets
  Land and buildings
10 975
–
(15)
7 087
(387)
17 660
  Industrial property
11 846
121
–
–
(684)
11 283
  Plant and equipment
56 541
2 253
(109)
15 367
(19 817)
54 235
  Vehicles, furniture and office equipment
10 569
33 924
(900)
5 178
(4 700)
44 071
  Capital work-in-progress
16 357
280
(479)
(15 367)
–
791
           
106 288
36 578
(1 503)
12 265
(25 588)
128 040
        
5 118 685
1 777 852
(34 574)
–
(517 369)
6 344 594
  Movement for the year – 2009
  Mining assets
  Mineral and prospecting rights
360 598
–
–
–
(19 813)
340 785
  Land, buildings and mine  properties
358 853
54 881
(38)
40 107
(21 248)
432 555
  Plant and equipment
2 408 506
888 138
(10 562)
(129 450)
(227 672)
2 928 960
  Prospecting, exploration mine development and  decommissioning assets
594 269
82 933
(3 895)
7 518
(31 545)
649 280
  Vehicles, furniture and office  equipment
187 883
372 461
(902)
81 825
(98 828)
542 439
  Leased assets capitalised
18 086
–
–
–
(6 946)
11 140
  Capital work-in-progress
54 409
52 829
–
–
–
107 238
        
3 982 604
1 451 242
(15 397)
–
(406 052)
5 012 397
  Other assets
  Land and buildings
6 646
4 453
–
–
(124)
10 975
  Industrial property
21 900
34
–
–
(10 088)
11 846
  Plant and equipment
102 310
6 769
–
1 639
(54 177)
56 541
  Vehicles, furniture and office equipment
10 423
3 671
(237)
6
(3 294)
10 569
  Capital work-in-progress
7 189
10 813
–
(1 645)
–
16 357
            
148 468
25 740
(237)
–
(67 683)
106 288
        
4 131 072
1 476 982
(15 634)
–
(473 735)
5 118 685
               
   
   
2010
2009
   
R’000
 
R’000

3.

INVESTMENT PROPERTIES
  Land and buildings
  Carrying amount at beginning of year
61 838
61 838
  Acquisitions
292
 
–
  Carrying amount at end of year
62 130
 
61 838
  Estimated fair value
152 025
 
152 025
  A register containing details of investment properties is available for inspection during business hours at the registered address of the company by shareholders or their duly authorised agents.
   
  There is no depreciation charge for the year as the residual values are either equal to, or exceed, the carrying amounts.
   
 
 
 

4.

INTANGIBLE ASSETS
  Licences
  Carrying amount at beginning of year
1 509
1 690
  Disposals at carrying value
–
(1)
  Amortisation for the year
(180)
 
(180)
  Carrying amount at end of year
1 329
 
1 509
  Goodwill
 
 
 
  Carrying amount at beginning and end of year
1 418
 
1 418
   
2 747
 
2 927
   
 
 
 
  Goodwill represents the excess attributable on the acquisition of a majority stake in an offshore entity (transacted in rands), which has been assessed for impairment at the statement of financial position date. The directors are of the opinion that the goodwill recognised will be recovered in the form of anticipated cash flows from the entity.
 
 
 
   
 
 
 

5.

INVESTMENTS
 
 
 
  Available-for-sale investments
 
 
 
  Listed – at market value
 
 
 
  Balance at beginning of year
415 066
 
590 066
  Purchases at cost
20 690
 
117 813
  Disposals at carrying value
–
 
(3 584)
  Fair value adjustment at year-end
167 095
 
(289 229)
  Balance at end of year (refer below)
602 851
 
415 066
  Other investments
 
 
 
  Unlisted – at portfolio value
73 142
 
42 134
  Unlisted – at cost and directors’ valuation
125
 
125
   
73 267
 
42 259
  Listed investments – at cost
316 355
 
295 665
  Cumulative fair value adjustment transferred to other reserves (refer note 12)
286 496
 
119 401
  As above
602 851
 
415 066
   
 
 
 

6.

OTHER NON-CURRENT FINANCIAL ASSETS
 
 
 
  Loans and long-term receivables
 
 
 
  Loans advanced to employees during the year
31 906
 
–
  Balance at end of year
31 906
 
–
   
 
 
 
  Loans granted to Assmang employees during 2010, the repayment terms of which vary between 5 and 20 years. The loans bear interest at the prime lending rate, less 2%.
 
 
 
   
 
 
 

7.

INVENTORIES
 
 
 
  Raw materials
757 843
 
835 319
  Consumable stores
222 466
 
150 723
  Work in progress
69
 
165 147
  Finished goods
791 875
 
653 172
  Less: Provision for obsolete inventory
(276)
 
(351)
   
1 771 977
 
1 804 010
  Cost of inventory recognised as an expense included in cost of sales
3 277 300
 
2 765 073
  Cost of inventory written down during the year recognised in other expenses (refer note 21)
4 148
 
131 383
   
 
 
 

8.

TRADE AND OTHER RECEIVABLES
 
 
 
  Trade receivables
1 460 915
585 129
  Other receivables
20 131
 
7 958
   
1 481 046
 
593 087
  Trade and other receivables are non-interest bearing, the terms of which are between 60 to 120 days.
   
 
 
 

9.

SHARE CAPITAL
 
  Authorised
  40 000 000 (2009: 40 000 000) ordinary shares of 2,5 cents each
1 000
 
1 000
  Issued
  Balance at beginning of year (27 571 653 (2009: 28 000 000) ordinary shares of 2,5 cents each)
689
700
  Shares issued during the year (349 747 ordinary shares of 2,5 cents each) at a premium of R668,30 per share in terms of the authority granted at a general meeting held on 19 January 2010
9
–
  Shares repurchased and cancelled during the year (428 347 ordinary shares of 2,5 cents each) in terms of the authority granted by shareholders at a general meeting held on 4 September 2008
–
 
(11)
  Balance at end of year (27 921 400 (2009: 27 571 653) ordinary shares of 2,5 cents each)
698
 
689
   
  Subsequent to the year-end, the share capital was subdivided on a five-for-one basis (refer directors’ report for more detail).
   
 
 
 

10.

SHARE PREMIUM
  Balance at beginning of year
30 358
30 358
  Arising on shares issued during the year (refer note 9)
233 734
 
–
  Balance at end of year
264 092
 
30 358
         

 

 
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