Home > Financial statements > Company financial statements > Notes to the company financial statements

Financial statements

Notes to the company financial statements

    2011 2010
    R’000 R‘000

1.

Investment in group companies

    
  Joint-venture entity (refer below) 468 153 468 153
  Subsidiary companies (refer below) 1 503 846 1 514 646
    1 971 999 1 982 799
  Investment in joint-venture entity    
  Assmang Limited    
  1 774 103 (2010:1 774 103) ordinary shares at cost 468 153 468 153
  Directors’ valuation 30 650 717 19 265 766
  Investment in subsidiary companies (refer note 13)    
  Shares at cost 1 503 846 1 514 646
  Amounts due by/(to) subsidiary companies    
  Loan accounts receivable 635 938 594 330
  Loan accounts payable (628 039) (628 039)
  Current accounts (payable)/receivable (14 598) 38 080
  Per note 13 (6 699) 4 371
       

2.

Available-for-sale investments

    
  Listed – at market value    
  Balance at beginning of year 602 851 415 066
  Purchases at cost 42 062 20 690
  Fair value adjustment for the year 242 336 167 095
  Balance at end of year 887 249 602 851
  Unlisted – at cost and directors’ valuation 125 125
  Per statement of financial position 887 374 602 976
  Listed – at cost 358 417 316 355
  Fair value adjustment transferred to other reserves (refer note 5) 528 832 286 496
  As above 887 249 602 851
       

3.

Share capital

    
  Authorised    
  200 000 000 (2010: 200 000 000) ordinary shares of 0,5 cents each 1 000 1 000
  Issued    
  At beginning of year (139 607 000 (2010: 137 858 260)) ordinary shares of 0,5 cents each 698 689
  Shares issued during the prior year (1 748 735 ordinary shares of 0,5 cents each) in terms of the authority granted at a general meeting held on 19 January 2010 – 9
  At end of year (139 607 000 (2010: 139 607 000) ordinary shares of 0,5 cents each) 698 698
       

4.

Share premium

    
  Balance at beginning and end of year 264 092 30 358
  Arising on shares issued during the year (refer note 3) – 233 734
  Balance at end of year 264 092 264 092
       

5.

Other reserves

    
  Surplus on the revaluation to fair value of available-for-sale investments (refer note 2) 528 832 286 496
  Less: Deferred capital gains taxation (73 821) (39 893)
    455 011 246 603
       

6.

Deferred taxation

    
  Balance at beginning of year 39 893 16 500
  Arising on the revaluation of available-for-sale investments at year-end (refer note 5) 33 928 23 393
  Balance at end of year 73 821 39 893
       

7.

Short-term borrowings

    
  220 redeemable cumulative variable rate preference shares issued to SBSA on 15 September 2008, which are required to be redeemed annually in tranches of at least R500 million, commencing on the last day of February in 2010. Preference dividends accrued at a rate linked to the prime lending rate applied by SBSA.    
  Balance at beginning of year (93 shares (2010: 143 shares)) 930 000 1 430 000
  Shares redeemed during the year (93 shares (2010: 50 shares)) (930 000) (500 000)
  Balance at end of year (nil (2010: 93 shares)) – 930 000
       

8.

Revenue

    
  Revenue comprises:    
  Dividends received 1 128 849 517 919
  Interest received 27 436 66 695
    1 156 285 584 614
       

9.

Profit before taxation

    
  Profit before taxation is stated after taking into account the following items of income and expenditure:    
  Income    
  Dividends received: 1 128 849 517 919
  – Joint-venture entity 1 000 000 500 149
  – Preference dividend received from subsidiary company 92 644 –
  – Available-for-sale investments 36 205 17 770
  Interest received 27 436 66 695
  Preference dividend accrual adjustment – 2 955
  Expenditure    
  Auditors’ remuneration – fees 101 101
  Directors’ remuneration – paid by subsidiary 76 369 54 785
  – fees 1 134 1 059
  – other services 75 235 53 726
       

10.

Taxation

    
  South African normal tax    
  – current year 11 147 18 970
  – Secondary tax on companies 30 727 –
  – Securities transfer taxation 1 220 –
  – (over)/under provisions relating to prior years (8 400) 5 040
    34 694 24 010
  Reconciliation of tax rate (%)    
  Statutory tax rate 28,00 28,00
  Adjusted for:    
  – dividend income (27,96) (14,29)
  – exempt income (1,56) (11,63)
  – prior year adjustment (0,7) –
  – disallowable expenditure 1,02 –
  – Secondary tax on companies 2,7 –
  – Securities transfer taxation 0,1 –
  – other 1,47 0,30
  Effective tax rate 3,07 2,38
       

11.

Dividends

    
  Dividends declared during the year    
  Final dividend No 107 of 240 cents (2010: 200 cents) per share    
  – declared on 1 September 2010 335 057 275 717
  Interim dividend No 108 of 200 cents (2010: 100 cents) per share    
  – declared on 16 February 2011 279 214 139 607
    614 271 415 324
  Per share (cents) 340 300
  Dividends relating to the activities of the group for the year under review    
  Interim dividend No 108 of 200 cents (2010: 100 cents) per share    
  – declared on 16 February 2011 279 214 139 607
  Final dividend No 109 of 250 cents (2010: 240 cents) per share    
  – declared on 24 August 2011 349 018 335 057
    628 232 474 664
  Per share (cents) 450 340
       

12.

Notes to the statement of cash flow

    
  12.1 Cash generated by/(utilised in) operations    
    Profit before taxation 1 130 605 1 006 797
    Adjusted for:    
      (1 112 448) (1 018 131)
    – Dividends received (1 128 849) (517 919)
    – Interest received (27 436) (66 695)
    – Discount on redemption of preference shares (12 500) –
    – Impairment of loan made to wholly owned subsidiary – (539 718)
    – Finance costs 56 337 106 201
         
      18 157 (11 235)
  12.2 Investment income    
    Received during the year 1 128 849 517 919
  12.3 Movements in working capital    
    Increase in other receivables (14 598) (2 750)
    Increase in amounts owing by group companies 11 076 3 333
    Increase/(decrease) in other payables 13 571 (17 219)
      10 049 (16 636)
  12.4 Taxation paid    
    Unpaid at beginning of year (7 361) (4 952)
    Charged to the income statement (34 694) (24 010)
    Unpaid at end of year 1 564 7 361
      (40 491) (21 601)
  12.5 Dividends paid    
    Unpaid at beginning of year (245) (95)
    Declared during the year (614 271) (415 324)
    Unpaid at end of year 571 245
      (613 945) (415 174)
         

13.

Interest of the company in its subsidiary companies
    Issued
share
capital		 Direct
interest in
share
capital		 Shares at cost Amounts due by/(to)
subsidiary companies
    2011/2010 2011/2010 2011 2010 2011 2010
    R % R’000 R’000 R’000 R’000
  Incorporated in South Africa            
  Ordinary shares            
  African Mining and Trust Company Limited 1 000 000 100 1 200 1 200 (14 598) 38 080
  Ceramox (Proprietary) Limited 100 100 1 124 1 124 – –
  Erven 40 and 41 Illovo (Proprietary) Limited 100 100 – – – –
  Erven 27 and 28 Illovo (Proprietary) Limited 100 100 – – – –
  Erf 1263 Parkview Extension 1 (Proprietary) Limited 1 100 – – – –
  General Nominees (Proprietary) Limited^ 4 100 – – – –
  Main Street 460 (Proprietary) Limited* – 100 – – – –
  Ore & Metal Company Limited 100 000 100 105 105 (628 039) (628 039)
  Rustenburg Minerals Development Company            
  (Proprietary) Limited* 232 143 – 232 143 232 143 – –
  Wonderstone Limited 10 000 100 10 10 – –
  Wonderstone 1937 Limited^* 45 940 – 35 35 – –
  Xertech (Proprietary) Limited 100 100 – – – –
  Zeerust Chrome Mines Limited 1 300 000 100 1 114 1 114 – –
  Preference shares            
  Main Street 350 (Proprietary) Limited 99# 100# 1 501 406 1 512 206 635 938 594 330
  Incorporated in Namibia            
  Krantzberg Mines Limited^ 500 000 100 – – – –
  Incorporated in Mozambique            
  Amhold Limitada^ 2 100 – – – –
  Incorporated in the United States of America            
  Minerais U.S. LLC* 17 756 100 51 11 418 11 418 – –
        1 748 655 1 759 455 (6 699) 4 371
  Less – held indirectly     (243 696) (243 696)    
  – provided against     (1 113) (1 113) – –
  Per note 1     1 503 846 1 514 646 (6 699) 4 371
               
               
 
^ Dormant companies.
* Held indirectly.
# Less than R1 000.
               

14.

Financial risk management
 

The company is exposed to various financial risks due to the nature and diversity of its activities and the use of various financial instruments. These risks include:

  • credit risk
  • liquidity risk
  • market risk

Details of the company’s exposure to each of the above risks and its objectives, policies and processes for measuring and managing these risks are included specifically in this note and more generally throughout the company’s financial statements together with information regarding management of capital.

The board of directors, which meets at least four times per year, has overall responsibility for the establishment and oversight of the company’s risk management framework and is responsible for the development and monitoring of risk management policies within the company. The company’s risk management policies are established to identify and analyse the company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the company’s activities.

The roles and responsibilities of the company’s management:

  • approval of all counterparties;
  • approval of new instruments;
  • approval of the company’s foreign exchange transaction policy;
  • approval of the investment policy;
  • approval of treasury policy; and
  • approval of long-term funding requirements.

The company also has an Internal Audit function, which undertakes regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit and Risk Committee.

  14.1 Credit risk
    Credit exposure and concentrations of credit risk
The carrying amount of financial assets represents the maximum credit exposure at the reporting date and the following table indicates various concentrations of credit risk for all non-derivative financial assets held:
     
   

Click the image to view an enlarged version
     
    Security held over non-derivative financial assets
Other receivables are unsecured and overdue amounts are individually assessed and if it is evident that an amount will not be recovered, it is impaired and legal action is instituted to recover the amounts.
     
  14.2 Liquidity risk
   

The board manages the liquidity structure of the company’s assets, liabilities and commitments so as to ensure that cash flows are sufficiently balanced within the company as a whole.

Surplus funds are deposited on call.

The borrowing capacity of the company is determined by its Memorandum of Incorporation in terms of which there is no restriction on its borrowing powers.

Exposure to liquidity risk
The following are the cash flows of the company’s financial assets and liabilities at year-end as determined by contractual maturity date including interest receipts and payments but excluding the impact of any netting agreements with the third parties concerned.

                Between    
            Carrying Less than 4 and 12 Between More
            amount 4 months months 1 and 5 years than 5 years
            R’000 R’000 R’000 R’000 R’000
    2011          
    Financial assets          
    Investment in group companies 1 971 999 – – – 1 971 999
    Available-for-sale investments 887 374 – – – 887 374
    Loans to group companies 635 938 – – – 635 938
    Other receivables 17 481 17 481 – – –
    Cash resources 20 196 20 196 – – –
            3 532 988 37 677 – – 3 495 311
    Financial liabilities          
    Loans from group companies 628 039 – – 628 039 –
    Other payables 31 434 31 434 – – –
    Amounts due to group companies 14 598 14 598 – – –
    Short-term borrowings – – – – –
            674 071 46 032 – 628 039 –
    2010          
    Financial assets          
    Investment in group companies 1 982 799 – – – 1 982 799
    Available-for-sale investments 602 976 – – – 602 976
    Loans to group companies 635 932 – – – 635 932
    Other receivables 2 883 2 883 – – –
    Cash resources 495 493 495 493 – – –
            3 720 083 498 376 – – 3 221 707
    Financial liabilities          
    Loans from group companies 628 039 – – 628 039 –
    Other payables 17 784 17 784 – – –
    Amounts due to group companies 3 522 3 522 – – –
    Short-term borrowings 930 000 930 000 – – –
            1 579 345 951 306 – 628 039 –
     
  14.3 Market risk
   

Market risk is defined as the risk that movements in market risk factors will affect the company’s revenue and operational costs as well as the value of its holdings of financial instruments. The objective of the company’s market risk management policy is to manage and control market risk exposures to minimise the impact of adverse market movements with respect to revenue protection and to optimise the funding of the business operations.

Market risk information is prepared and submitted to the board where it is monitored and further analysed to be used in the decision-making process. The information submitted includes information on currency and interest rates and is used by the company’s management to determine the market risk strategy going forward. In addition, key market risk information is reported to the Executive Committee on a weekly basis and forecasts against budget are prepared on a monthly basis.

Interest rate risk
Interest rate risk arises due to adverse movements in domestic and foreign interest rates. The company is primarily exposed to downward interest rate movements on floating investments purchased and to upward movements on overdrafts and other borrowings. There is no other exposure to fair value interest rate risk as all fixed rate financial instruments are measured at amortised cost.

The board determines the interest rate risk strategy based on economic expectations and recommendations received from the Executive Committee. Interest rates are monitored on a regular basis and the policy is to maintain short-term cash surpluses at floating rates of interest.

At the reporting date the interest rate profile of the company’s interest-bearing financial instruments was as follows:

                  2011 2010
                  R’000 R’000
    Variable rate instruments    
    Liabilities    
    Short-term borrowings – 930 000
    Assets    
    Cash and cash equivalents 20 196 495 493
    Fair value sensitivity analysis for fixed rate instruments    
    The company does not account for any fixed rate financial assets and liabilities at fair value through profit and loss, therefore a change in interest rates at the reporting date would not affect profit or loss.    
    Cash flow sensitivity analysis for variable rate instruments    
    An increase of 50 basis points in interest rates at the reporting date would have decreased profit after tax by the amounts shown below. This assumes that all other variables remain constant. There is no impact on the company’s equity.    
    Variable rate instruments 73 1 890
    Net effect on profit or loss is equal but opposite for a 50 basis points increase on the financial instruments listed above.
     
  14.4 Fair value of financial assets and liabilities
    The categorisation of each class of financial asset and liability, including their fair values, are included below:
              Available-for-sale investments Loans and receivables Liabilities at amortised cost Other assets and liabilities Total carrying value Fair value
            Note R’000 R’000 R’000 R’000 R’000 R’000
    2011              
    Financial assets              
    Investment in group companies 1 –     1 971 999 1 971 999 1 971 999
    Available-for-sale investments 2 887 249     125 887 374 887 374
    Loans to group companies   – 635 938     635 938 635 938
    Other receivables   – 17 481     17 481 17 481
    Cash resources   – 20 196     20 196 20 196
              887 249 673 615 – 1 972 124 3 532 988 3 532 988
    Financial liabilities              
    Loans from group companies     – 628 039   628 039 628 039
    Other payables     – 31 434   31 434 31 434
    Amounts due to group companies     – 14 598   14 598 14 598
    Short-term borrowings 7   – –   – –
              – – 674 071   674 071 674 071
                         
    2010              
    Financial assets              
    Investment in group companies 1 –   – 1 982 799 1 982 799 1 982 799
    Available-for-sale investments 2 602 851   – 125 602 976 602 976
    Loans to group companies     635 932 –   635 932 635 932
    Other receivables     2 883 –   2 883 2 883
    Cash resources     495 493 –   495 493 495 493
              602 851 1 134 308 – 1 982 924 3 720 083 3 720 083
    Financial liabilities              
    Loans from group companies     – 628 039   628 039 628 039
    Other payables     – 17 784   17 784 17 784
    Amounts due to group companies     – 3 522   3 522 3 522
    Short-term borrowings     – 930 000   930 000 930 000
                – 1 579 345   1 579 345 1 579 345
   

Determination of fair values
Quoted market prices at reporting date have been used to determine the fair value of loans and receivables and interest-bearing borrowings. Where quoted market prices are not available, a valuation technique, most commonly discounted cash flows, was used. For other receivables and payables, the fair value was determined using the discounted cash flow method at market related interest rate. Carrying amounts approximate fair value for all other financial assets and liabilities.

Fair value hierarchy
The company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
   
Level 1: quoted prices in active markets for identical assets or liabilities when available
Level 2: other techniques using inputs that are observable, either directly or indirectly
Level 3: techniques using inputs that are not based on observable market data
                      2011 2010
                      R'000 R'000
    Available-for-sale investments as above measured at Level 1 887 374 602 851
         

15.

Capital management
 

The company holds interests in companies that own mineral rights over resources with remaining lines which vary in accordance with current prices (refer “Mineral Resources and Reserves”). Decisions to exploit resources would be made at board level and only following the completion of a bankable study based on the current life of mine and estimated capital cost, operating cost and cost of finance, where required, so that the deposit can be mined on a sustainable basis to the end of its estimated life.

The board’s policy is therefore to maintain a strong capital base so as to maintain stakeholder confidence and to sustain future development of the business. The company considers its capital to comprise total equity. The company may adjust its capital structure by way of issuing new shares and is dependent on its shareholders for additional capital as required. The company manages its capital structure in light of changes in economic conditions and the board of directors monitors the capital adequacy, solvency and liquidity of the company on a continuous basis.

There were no changes in the group’s approach to capital management during the year.

   

16.

Contingent liabilities

    
  Guarantees    
  Guarantees issued to bankers as security for facilities provided to subsidiary companies 338 813 382 940
       
  Joint-venture entity    
 

The company has issued guarantees to bankers to secure a short-term export finance agreement facility of R180 million (2009: R180 million). The facility is primarily utilised for and on behalf of Assmang in which the company holds a 50% interest and which in turn has provided a back-to-back guarantee against any claims made by bankers in terms of this facility.

BEE transactions
Certain preference shares were issued as part of the BEE transaction entered into in 2006. If an event of default as defined in the contract is triggered in relation to the preference shares, the provisions of the relevant put option and call agreements entered into will apply.

   
ASSORE Integrated Annual Report 2011