1. |
Accounting policies |
1.1 |
Basis of preparation |
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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. |
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| 1.1.1 |
Statement of compliance |
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The 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), the South
African Companies Act 71 of 2008, the JSE Listings Requirements, and the AC
500 series of accounting standards. |
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| 1.1.2 |
The following revisions and amendments to IFRS were
adopted during the year: |
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- IFRIC 14 (Amendment) Prepayment of a Minimum Funding Requirement
- IFRS 7 (Amendment) Financial Instruments: Disclosures
- IAS 24 Related Party Disclosures
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The following interpretation of IFRS was early adopted
during the year: |
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IFRIC 20 Stripping Costs in the Production Phase of a
Surface Mine |
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There were no significant changes to the group's results or
disclosures, pursuant to the abovementioned adoptions. |
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In addition to the above changes, a set of Improvements to
IFRS issued by the IASB in May 2010 became effective for the group on 1 July
2011. Implementation of these improvements did not have any impact on the
results or disclosures of the group. |
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| 1.1.3 |
IFRS and IFRIC interpretations not yet effective |
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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: |
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Effective for |
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financial periods |
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Standard |
Description |
commencing |
Anticipated impact |
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IAS 12 |
Income Taxes
(Amendment)
– Deferred Taxes: Recovery of Underlying Assets |
January 2012 |
The amendments introduce a presumption that an investment property is
recovered entirely through its sale. This presumption is rebutted if the
investment property is held within a business model of which the objective
is to consume substantially all of the economic benefits embodied in the
investment property over time, rather than through its sale. |
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The group does not expect this amendment to have a
material effect on its results or disclosures. |
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IAS 1 |
Presentation of
Items of Other Comprehensive Income (Amendment) |
July 2012 |
The amendment to IAS 1 requires that items presented within other
comprehensive income (OCI) be grouped separately into those items that will
be recycled into profit or loss at a future point in time, and those items
that will never be recycled. |
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The group does not expect this amendment to have a material
effect on its results or disclosures. |
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IAS 19 |
Employee Benefits (Revised) |
January 2013 |
The "corridor approach" currently allowed as an alternative basis in IAS
19 for the recognition of actuarial gains and losses on defined benefit
plans has been removed. Actuarial gains and losses in respect of defined
benefit plans will be recognised in other comprehensive income when they
occur. For defined benefit plans, the amounts recorded in profit and loss
are limited to current and past service costs, gains and losses on
settlements and interest income/expenses. |
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Employee Benefits
(Revised) |
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The distinction between short-term and other long-term benefits will be
based on the expected timing of settlement rather than the employee's
entitlement to the benefits. In many instances this is expected to have a
significant impact on the manner in which leave pay and similar liabilities
are currently classified. |
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The group is in the process of determining the impact of
the standard on its results or disclosures. |
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IAS 27 |
Separate Financial Statements
(consequential revision due to the issue of IFRS 10) |
January 2013 |
IAS 27, as revised, is limited to the accounting for investments in
subsidiaries, joint ventures and associates in the separate financial
statements of the investor. |
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The group does not expect this amendment to have a material effect on its
results or disclosures. |
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IAS 28 |
Investments in
Associates and Joint Ventures (consequential revision due to the issue of
IFRS 10 and 11) |
January 2013 |
The revised standard caters for consequential changes upon the |
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introduction of IFRS 11 (refer below). |
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The group is in the process of determining the impact of
the standard on its results or disclosures. |
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IFRS 10 |
Consolidated
Financial Statements |
January 2013 |
This new standard includes a new definition of control which is used to
determine which entities will be consolidated. This will apply to all
entities, including special purpose entities (now known as "structured
entities"). The changes introduced by IFRS 10 will require management to
exercise significant judgement to determine which entities are controlled
and therefore consolidated, and may result in a change to the entities which
are within a group. |
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The group is in the process of determining the impact of
the standard on its results. |
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IFRS 11 |
Joint Arrangements |
January 2013 |
IFRS 11 replaces IAS 31 Interest in Joint Ventures and SIC 13 Jointly
Controlled Entities – Non-monetary Contributions by Venturers. IFRS 11
describes the accounting for a "joint arrangement", which is defined as a
contractual arrangement over which two or more parties have joint control.
Joint arrangements are classified as either joint operations or joint
ventures. IFRS 11 provides a new definition of joint control, and
substantially changes the accounting for certain joint arrangements. Jointly
controlled assets and jointly controlled operations (as defined under IAS
31, which is currently applicable), are now termed as joint operations under
IFRS 11, and the accounting of those arrangements will be the same under IAS
31. That is, the joint operator continues to recognise its assets,
liabilities, revenues and expenses, and/or its relative share of those
items, if any. Where proportionate consolidation was used to account for
jointly controlled entities under IAS 31, such entities will most likely be
classified as joint ventures under IFRS 11. The transition to IFRS 11 could
result in substantial changes to the financial statements of the joint
venturer (now defined as a party that has joint control in a joint venture),
due to the requirement that joint ventures will be required to be accounted
for using the equity method and that proportionate consolidation will no
longer be permitted. |
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Because the group is extensively invested in joint
arrangements, the adoption of this standard could result in the financial
statements being significantly affected. The group is, however, in the
process of determining the impact of the standard on its results. |
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IFRS 12 |
Disclosures of
Interests in Other Entities |
January 2013 |
This new standard describes and includes all the disclosures that are
required relating to an entity's interest in subsidiaries, joint
arrangements, associates and structured entities. Entities will be required
to disclose the judgements made to determine whether it controls another
entity. |
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The group is in the process of determining the impact of
the standard. |
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IFRS 13 |
Fair Value
Measurement |
January 2013 |
This new standard provides guidance on how to measure fair value of
financial and non-financial assets and liabilities when fair value
measurement is required or permitted by IFRS. |
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The group is in the process of determining the impact of
the standard on its results or disclosures. |
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IAS 32 |
Offsetting Financial Assets and
Liabilities (Amendments) |
January 2014 |
The amendment clarifies the meaning of the entity currently having a
legally enforceable right to set off financial assets and financial
liabilities as well as the application of IAS 32 offsetting criteria to
settlement systems (such as clearing houses). |
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The group is in the process of determining the impact of the standard on
its results. |
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IFRS 7 |
Offsetting
Financial Assets and Liabilities (Amendments) |
January 2013 |
Provides for additional disclosures relating to offset of financial assets
and financial liabilities. |
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The group is in the process of determining the impact of
the standard on its disclosures. |
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IFRS 9 |
Financial Instruments |
January 2015 |
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. |
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Phase 1 of this project, classification and measurement is complete, and
the required accounting is as follows: |
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Financial assets: |
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- All financial assets are initially measured at fair value;
- Subsequent measurement of debt instruments is only at amortised cost if
the instrument meets the requirements of the "business model test" and the
"characteristics of financial asset test";
- All other debt instruments are subsequently measured at fair value;
- All equity investments are subsequently measured at fair value either
through OCI or profit and loss; and
- Embedded derivatives contained in non-derivative host contracts are not
separately recognised. Unless the hybrid contract qualifies for amortised
cost accounting, the entire instrument is subsequently recognised at fair
value through profit and loss.
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Financial liabilities: |
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- For liabilities designated as being measured at fair value through
profit and loss, the change in the fair value of the liability attributable
to changes in credit risk is presented in OCI. The remainder of the change
in fair value is presented in profit and loss; and
- All other classification and measurement requirements in IAS 39 have
been carried forward into IFRS 9.
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The group is in the process of determining the impact of the standard on
its results. |
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In addition to the above revisions, amendments and
interpretations, the IASB has published further improvements to IFRS in May
2012. These improvements, effective 1 July 2013, are in the process of being
assessed by the group, and are not expected to have any impact on the
results and disclosures of the group. |
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| 1.2 |
Significant accounting judgements and estimates
Judgements |
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In applying the group's accounting policies, management has
made the following judgements, including those involving estimations, which
could have a significant effect on the amounts recognised in the financial
statements: |
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Consolidation of special-purpose vehicles |
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The Bokamoso Trust and Fricker Road Trust (the trusts) are
broad-based community trusts which are independently controlled by and for
the benefit of historically disadvantaged South Africans (HDSAs) as
contemplated in the Mining Charter and are therefore not a group entity. The
trusts are special-purpose vehicles (SPVs) and because the SPVs are indebted
to the group, the trusts and the SPVs have been consolidated in the group
financial statements in order to comply with the requirements of IFRS. The
Assore Employee Trust is operated by the group, and because the SPV in which
the trust is invested is indebted to the group, the trust has been
consolidated into the group financial statements. |
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Estimation uncertainty |
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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 listed below. |
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Project risk and exploration expenditure |
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In evaluating whether expenditures meet the criteria to be
capitalised, the group utilises several different sources of information,
including: |
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- 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,
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which reduce the level of risk associated with the
capitalisation of this expenditure to an acceptable level. |
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Production stripping costs |
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The group incurs waste removal costs (stripping costs) during
the development and production phases of its surface mining operations.
Furthermore, during the production phase, stripping costs are incurred in
the production of inventory as well as in the creation of future benefits by
improving access and mining flexibility in respect of the ore bodies to be
mined, the latter being referred to as a stripping activity asset. Judgement
is required to distinguish between these two activities at the surface
mining operations. |
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The group is required to identify the separately identifiable
components of the ore bodies for each of its surface mining operations.
Judgement is required to identify and define these components, and also to
determine the expected volumes (tons) of waste to be stripped and ore to be
mined in each of these components. These assessments may vary between mines
because the assessments are undertaken for each individual mine and are
based on a combination of information available in the mine plans, specific
characteristics of the ore body, the milestones relating to major capital
investment decisions and the type and grade of minerals being mined. |
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Judgement is also required to identify a suitable production
measure that can be applied in the calculation and allocation of production
stripping costs between inventory and the stripping activity asset. The
group considers the ratio of expected volume of waste to be stripped for an
expected volume of ore to be mined for a specific component of the ore body,
compared to the current period ratio of actual volume of waste to the volume
of ore be the most suitable measure of production. |
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These judgements and estimates are used to calculate and
allocate the production stripping costs to inventory and/or the stripping
activity asset(s). Furthermore, judgements and estimates are also used to
apply the units of production method in determining the depreciable lives of
the stripping activity asset(s). |
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Provisions for environmental rehabilitation |
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The group provides for the estimated costs of rehabilitation
which include both restoration and associated decommissioning of assets. An
environmental liability assessment is conducted by an independent adviser 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. |
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| 1.3 |
Basis of consolidation |
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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 on consolidation. |
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Subsidiary companies |
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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. |
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Non-controlling interests represent the portion of profit or
loss and net assets not held by the group which are presented separately in
the income statement and within equity in the consolidated statement of
financial position. |
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Joint ventures |
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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 from the date the group gains joint control
until the date on which the group ceases to have joint control over the
joint venture. |
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| 1.4 |
Property, plant and equipment and depreciation |
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Property, 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. |
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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. |
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The assets' residual values, useful lives and depreciation
methods are reviewed, and adjusted if appropriate, at each financial
year-end. |
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The costs of adding to, replacing part of, or servicing 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. |
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Depreciation of the various types of assets is determined on
the following bases: |
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Mineral and prospecting rights |
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Mineral reserves, 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. |
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Land, buildings and mine, township and industrial
properties |
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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. |
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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. |
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Plant and equipment |
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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. |
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Industrial plant and equipment is depreciated on the
straight-line basis, over its useful life, up to a maximum of 25 years. |
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Production stripping costs |
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The capitalisation of pre-production stripping costs as part
of mine development and decommissioning assets ceases when the mine is
commissioned and ready for production. |
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Where the benefits of production stripping costs are realised
in the form of inventory produced in the period, the production stripping
costs are accounted for as part of the cost of producing those inventories.
Where production stripping costs are incurred, resulting in the creation of
mining flexibility and improved access to ore bodies to be mined in the
future, the costs are recognised as a non-current asset. These are referred
to as stripping activity assets, if: |
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- future economic benefits (being improved access to the ore body
concerned) are probable;
- the component of the ore body for which access will be improved can be
accurately identified; and
- the costs associated with the improved access can be reliably measured.
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If these criteria are not met, the production stripping costs
are charged to the income statement as operating costs. |
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The stripping activity asset is initially measured at cost,
which consists of the accumulation of costs directly incurred to perform the
stripping activity that improves access to the identified component of the
ore body and an allocation of directly attributable overhead costs. If
incidental operations are occurring at the same time as the production
stripping activity, but are not necessary for the production stripping
activity to continue as planned, these costs are not included in the cost of
the stripping activity asset. In the event that the costs of the stripping
activity asset and the inventory produced are not separately identifiable, a
relevant production measure is used to allocate the production stripping
costs between the inventory produced and the stripping activity asset. |
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The stripping activity asset is subsequently depreciated over
the life of the identified component of the ore body that became more
accessible as a result of the stripping activity. Based on proven and
probable reserves, the units-of-production method is used to determine the
expected useful life of the identified component of the ore body that became
more accessible. |
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Prospecting, exploration, mine development and
decommissioning assets |
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Costs related to property acquisitions and mineral and surface
rights related to exploration are capitalised and depreciated over a maximum
period of 25 years. All exploration expenditures are expensed until they
result in projects that are evaluated as being technically and commercially
feasible and from which a future economic benefit stream is highly probable. |
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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. |
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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 prefeasibility study that the future
economic benefits are highly probable. |
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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 on a straight-line basis over a maximum period of 25 years. |
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Activities in relation to evaluating the technical feasibility
and commercial viability of mineral resources are treated as forming part of
exploration expenditures. |
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Vehicles, furniture and office equipment |
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Vehicles, furniture and office equipment are depreciated on
the straight-line basis using the following useful lives: |
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Vehicles |
between 5 and 9 years |
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Furniture |
between 3 and 10 years |
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Office equipment |
between 2 and 11 years |
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Leased assets |
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Leased assets are depreciated over the shorter of the lease
term or the useful life of the assets leased. |
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Capital work-in-progress |
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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. |
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| 1.5 |
Leased assets |
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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. |
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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. |
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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. |
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| 1.6 |
Business combinations and goodwill |
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Business combinations are accounted for using the acquisition
method. The cost of the acquisition is measured as the aggregate of the
consideration transferred, measured at acquisition date fair value and the
amount of any non-controlling interest in the acquiree. For each business
combination, the group elects whether it measures the non-controlling
interest in the acquiree at either fair value or at the proportionate share
of the acquiree's identifiable net assets. Acquisition costs incurred are
expensed and included in administrative expenses. |
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When the group acquires a business, it assesses the financial
assets acquired and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic circumstances
and pertinent conditions as at the acquisition date. |
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Any contingent consideration to be transferred by the acquirer
will be recognised at fair value at the acquisition date. Subsequent changes
to the fair value of the contingent consideration that is deemed to be an
asset or liability will be recognised in accordance with IAS 39 as a change
to profit and loss. If the consideration is classified as equity, it will
not be remeasured. Subsequent settlement is accounted for within equity. In
instances where the contingent consideration does not fall within the scope
of IAS 39, it is measured in accordance with the appropriate accounting
standard per IFRS. |
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Goodwill is initially measured at cost being the excess of the
consideration paid over the fair value of the identifiable assets acquired
net of the liabilities assumed of the acquired entity. Following initial
recognition, goodwill is measured at cost less any accumulated impairment
losses. Goodwill is reviewed for impairment annually or more frequently if
changes in circumstances indicate that the carrying value may be impaired
based on future income streams of the cash-generating unit. |
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| 1.7 |
Intangible assets other than goodwill |
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Intangible assets represent proprietary technical information.
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. Intangible assets with
indefinite useful lives are not amortised. |
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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. Intangible assets with indefinite
useful lives are not amortised, and are subjected to annual impairment
reviews. |
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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. |
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Internally generated intangible assets are not capitalised and
expenditure is reflected in the income statement in the year in which the
expenditure is incurred. |
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| 1.8 |
Capitalisation of borrowing costs |
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Borrowing costs that are directly attributable to the
acquisition, construction or development of major capital projects, 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: |
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- 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.
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Capitalisation is suspended when the active development is
interrupted and ceases when the activities necessary to prepare the asset
for its use are completed. |
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Other borrowing costs are charged to finance costs in the
income statement as incurred. |
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| 1.9 |
Impairment of non-financial assets |
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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 |
Treasury shares |
| |
Own equity instruments which are acquired 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, as these transactions are taken directly to
equity. |
| |
|
| 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 of
available-for-sale investments 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. |
| |
|
| |
Cash and cash equivalents |
| |
Cash and cash equivalents are initially recognised at fair
value and subsequently stated at amortised cost. |
| |
|
| |
Preference shares, trade and other payables |
| |
Preference shares, trade and other payables are initially
recognised at fair value and subsequently stated at amortised cost, being
the initial recognised obligation less payments made and any other
adjustments plus interest accrued. |
| |
|
| |
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 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. 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 |
Offsetting of financial instruments |
| |
Financial assets and financial liabilities are offset and the
net amount reported in the consolidated statement of financial position if,
and only if, there is a currently enforceable legal right to offset the
recognised amounts and there is an intention to settle on a net basis, or to
realise the assets and settle the liabilities simultaneously. |
| |
|
| 1.15 |
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. |
| |
|
| |
Available-for-sale investments |
| |
If an available-for-sale investment is impaired, an amount
comprising the difference between its cost 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. |
| |
|
| 1.16 |
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 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 after 1 January 2005 are treated as
assets and liabilities of the acquired entity and are recorded at the
exchange rate at the date of the transaction and are remeasured at the
closing rate at each reporting date. |
| |
|
| 1.17 |
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. |
| |
|
| 1.18 |
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 and
disclosed as follows: |
| |
|
| |
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
to the trust funds are determined in accordance with the estimated
environmental obligation divided by the remaining life of a mine after
taking into account bankers' guarantees in favour of the Department of
Mineral Resources. Income earned on monies paid to the trust is accounted
for as net investment income. The environmental trust funds are
consolidated. |
| |
|
| 1.19 |
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. 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 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) |
| |
Up until 31 March 2012 (on which date it was abolished), STC
was 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. |
| |
|
| |
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. |
| |
|
| 1.20 |
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. |
| |
|
| 1.21 |
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 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
carrying 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. |
| |
|
| 1.22 |
Share-based payment transactions |
| |
Employees of the group are granted share appreciation rights,
which are settled in cash (cash-settled transactions). |
| |
|
| |
Cash-settled transactions |
| |
The cost of cash-settled transactions is measured initially at
fair value at the grant date using a binomial model. The fair value is
expensed over the period until the vesting date with the recognition of a
corresponding liability. The liability is remeasured to fair value at each
reporting date up to and including the settlement date, with changes in fair
value recognised in employee benefits expense. |
| |
|
| 1.23 |
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". 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 defined benefit asset or liability comprises the present
value of the defined benefit obligation less past service costs and
actuarial gains and losses not yet recognised and less the fair value of
plan assets out of which the obligations are to be settled. The value of any
defined benefit asset recognised is restricted to the sum of any
past-service costs and actuarial gains and losses not yet recognised and the
present value of any economic benefits available in the form of refunds from
the plan or reductions in the future contributions to the plan. |
| |
|
| |
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. |
| |
|
| |
Contributions to all defined contribution funds are expensed
in profit and loss when incurred. |
| |
|
| 1.24 |
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 in the statement of financial position but disclosed in the
notes to the financial statements. |
| |
|
| 1.25 |
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 statement of financial position. |
| |
|
| |
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. |
| |
Directors’ report |
| |
|
|
| |
|
2012 |
2011 |
| |
|
Receivables |
|
|
|
|
|
| |
|
not |
Receivables |
Carrying |
Receivables |
Receivables |
Carrying |
| |
|
impaired |
impaired |
value |
not impaired |
impaired |
value |
| |
|
R'000 |
R'000 |
R'000 |
R'000 |
R'000 |
R'000 |
| |
Loans and long-term receivables |
106 665 |
– |
106 665 |
53 051 |
– |
53 051 |
| |
Not past due, not impaired |
106 665 |
– |
106 665 |
53 051 |
– |
53 051 |
| |
Past due |
– |
– |
– |
– |
– |
– |
| |
Trade receivables |
2 022 734 |
– |
2 022 734 |
1 618 028 |
– |
1 618 028 |
| |
Not past due, not impaired |
2 022 734 |
– |
2 022 734 |
1 618 028 |
– |
1 618 028 |
| |
Past due |
– |
– |
– |
– |
– |
– |
| |
Other receivables |
27 048 |
– |
27 048 |
14 242 |
– |
14 242 |
| |
Not past due, not impaired |
27 048 |
– |
27 048 |
14 242 |
– |
14 242 |
| |
Past due |
– |
– |
– |
– |
– |
– |
| |
|
|
|
|
|
|
|
| |
|
2 156 447 |
– |
2 156 447 |
1 685 321 |
– |
1 685 321 |
| |
Unsecured |
1 801 355 |
– |
1 801 355 |
926 980 |
– |
926 980 |
| |
Secured by irrevocable letters |
|
|
|
|
|
|
| |
of credit, issued by foreign banks |
355 112 |
– |
355 112 |
758 341 |
– |
758 341 |
| |
As above |
2 156 447 |
– |
2 156 447 |
1 685 321 |
– |
1 685 321 |
| |
|
|
|
|
|
|
|
| 26.2 |
Liquidity risk |
| |
The Executive Committees manage the liquidity structure of the group's assets, liabilities and commitments so as to ensure that cash flows are sufficiently balanced within the group as a whole. Updated cash flow information and projections of future cash flows are received by the Executive Committees from the group companies on a regular basis (depending on the type of funding required). Measures have been introduced to ensure that the cash flow information received is accurate and complete. |
| |
|
| |
Surplus funds are deposited in liquid assets (eg liquid money market accounts) (refer note 25.7). |
| |
|
| |
Undrawn credit facilities |
| |
In terms of the Memorandum of Incorporation of the holding company, the borrowing powers are unlimited. However, based on their respective incorporation documents, restrictions on the following joint-venture and subsidiary companies are in place. External borrowings at year-end amounted to R192,0 million (2011: R154,1 million). |
| |
|
| |
|
|
|
|
|
2012 |
2011 |
| |
|
|
|
|
|
R'000 |
R'000 |
| |
Assmang Limited |
|
|
| |
Authorised in terms of the Memorandum of Incorporation |
11 195 657 |
8 753 613 |
| |
Less: External borrowings at year-end |
|
|
| |
– Overdrafts and short-term borrowings |
– |
(3 359) |
| |
Unutilised borrowing capacity |
11 195 657 |
8 751 254 |
| |
Minerais U.S. LLC |
|
|
| |
Authorised in terms of its Certificate of Formation |
415 260 |
338 813 |
| |
External borrowings at year-end |
(191 850) |
(151 788) |
| |
Unutilised borrowing capacity |
223 410 |
187 025 |
| |
With the exception of the preference share debt referred to in note 13 which is long term, the group is cash positive and does not rely on banking facilities for its day-to-day activities. |
| |
|
| |
The general banking facilities made available to group companies are unsecured, bear interest at rates linked to prime, have no specific maturity dates and are subject to annual review by the banks concerned. The facilities are in place, where necessary, to issue letters of credit, bank guarantees and ensure liquidity. |
| |
|
| |
Exposure to liquidity risk |
| |
The following are the terms of cash flows of the group's financial assets and liabilities at year-end as determined by contractual maturity date including interest receipts and payments but excluding the impact of any netting agreements with the third parties concerned. |
| |
|
| |
|
|
|
|
Between |
Between |
|
| |
|
Carrying |
Total |
Less than |
4 and 12 |
1 and 5 |
More than |
| |
|
amount |
cash flows |
4 months |
months |
years |
5 years |
| |
|
R'000 |
R'000 |
R'000 |
R'000 |
R'000 |
R'000 |
| |
2012 |
|
|
|
|
|
|
| |
Financial assets |
|
|
|
|
|
|
| |
Investments |
274 058 |
274 058 |
– |
– |
– |
274 058 |
| |
Other non-current financial assets |
106 665 |
106 665 |
– |
– |
21 333 |
85 332 |
| |
Trade and other receivables |
2 049 782 |
2 049 782 |
2 049 782 |
– |
– |
– |
| |
Cash deposits held by environmental trusts |
81 952 |
81 952 |
81 952 |
– |
– |
– |
| |
Cash resources |
3 242 485 |
3 242 485 |
3 242 485 |
– |
– |
– |
| |
|
5 754 942 |
5 754 942 |
5 374 219 |
– |
21 333 |
359 390 |
| |
Financial liabilities |
|
|
|
|
|
|
| |
Preference shares issued |
1 596 100 |
1 955 795 |
– |
102 752 |
1 854 043 |
– |
| |
Trade and other payables |
1 227 359 |
1 227 359 |
1 227 359 |
– |
– |
– |
| |
Overdrafts |
192 019 |
192 019 |
192 019 |
– |
– |
– |
| |
Guarantees |
180 000 |
180 000 |
180 000 |
– |
– |
– |
| |
|
3 195 478 |
3 555 173 |
1 599 378 |
102 752 |
1 854 043 |
– |
| |
2011 |
|
|
|
|
|
|
| |
Financial assets |
|
|
|
|
|
|
| |
Investments |
918 038 |
918 038 |
– |
– |
30 664 |
887 374 |
| |
Other non-current financial assets |
53 051 |
53 051 |
– |
– |
– |
53 051 |
| |
Trade and other receivables |
1 632 270 |
1 632 270 |
1 632 270 |
– |
– |
– |
| |
Cash deposits held by environmental trusts |
70 292 |
70 292 |
70 292 |
– |
– |
– |
| |
Cash resources |
2 264 442 |
2 264 442 |
2 264 442 |
– |
– |
– |
| |
|
4 938 093 |
4 938 093 |
3 967 004 |
– |
30 664 |
940 425 |
| |
Financial liabilities |
|
|
|
|
|
|
| |
Finance lease liabilities |
2 359 |
2 359 |
– |
2 359 |
– |
– |
| |
Trade and other payables |
1 238 051 |
1 238 051 |
1 238 051 |
– |
– |
– |
| |
Overdrafts |
151 788 |
151 788 |
151 788 |
– |
– |
– |
| |
Guarantees |
180 000 |
180 000 |
180 000 |
– |
– |
– |
| |
|
1 572 198 |
1 572 198 |
1 569 839 |
2 359 |
– |
– |
| |
|
|
|
|
|
|
|
| 26.3 |
Market risk |
| |
Market risk is defined as the risk that movements in market risk factors, in particular US dollar commodity prices and the US dollar/SA rand exchange rate, will affect the group's revenue and operational costs as well as the value of its holdings of financial instruments. The objective of the group's market risk management policy is to manage and control market risk exposures to minimise the impact of adverse market movements with respect to revenue protection and to optimise the funding of the business operations. |
| |
|
| |
The group companies are responsible for the preparation and presentation of market risk information as it affects the relevant entity. Information is submitted to the Executive Committees where it is monitored and further analysed to be used in the decision-making process. The information submitted includes information on currency, interest rate and commodities and is used by the committee to determine the market risk strategy going forward. In addition, key market risk information is reported to the Executive Committees on a weekly basis and forecasts against budget are prepared for the entire group on a monthly basis. |
| |
|
| |
Interest rate risk |
| |
Interest rate risk arises due to adverse movements in domestic and foreign interest rates. The group is primarily exposed to downward interest rate movements on floating investments purchased and to upward movements on overdrafts and other banking facilities. There is no other exposure to fair value interest rate risk as all fixed rate financial instruments are measured at amortised cost. |
| |
|
| |
The board determines the interest rate risk strategy based on economic expectations and recommendations received from the Executive Committees. Interest rates are monitored on an ongoing basis and the policy is to maintain short-term cash surpluses adequate to meet the group's ongoing cash flow requirements at floating rates of interest. |
| |
|
| |
At the reporting date the interest rate profile of the group's interest-bearing financial instruments was as follows: |
| |
|
|
|
|
|
2012 |
2011 |
| |
|
|
|
|
|
R'000 |
R'000 |
| |
Variable rate instruments |
|
|
| |
Liabilities |
|
|
| |
Preference shares (included in long-term borrowings; refer note 13) |
1 596 100 |
– |
| |
Finance leases (refer note 13) |
– |
2 359 |
| |
Overdrafts (refer note 18) |
192 019 |
151 788 |
| |
Assets |
|
|
| |
Other non-current financial assets |
106 665 |
53 051 |
| |
Cash deposits held by environmental trusts per statement of financial position |
81 952 |
70 292 |
| |
Cash resources |
3 242 485 |
2 264 442 |
| |
Fair value sensitivity analysis for fixed rate instruments |
|
|
| |
The group does not account for any fixed rate financial assets and liabilities at fair value |
|
|
| |
through profit and loss, therefore a change in interest rates at the reporting date would not affect profit after tax. |
|
|
| |
Cash flow sensitivity analysis for variable rate instruments |
|
|
| |
An increase of 50 basis points in interest rates at the reporting date would have increased |
|
|
| |
profit after tax by the amounts shown below. This assumes that all other variables remain constant and there is no impact on the group's equity. |
|
|
| |
Variable rate instruments |
6 972 |
7 911 |
| |
Net effect on profit after tax is equal but opposite for a 50 basis points decrease in interest rates on the variable rate instruments listed above. |
| |
|
| |
Commodity price and currency risk |
| |
Commodity price risk arises from the risk of an adverse effect on current or future earnings resulting from fluctuations in metal and mineral prices. The group also has transactional foreign exchange exposures, which arise from sales or purchases by the group in currencies other than the group's functional currency. The group's markets are predominantly priced in US dollars and to a lesser extent in euros which exposes the group to the risk that fluctuations in the SA rand exchange rates may have an adverse effect on current or future earnings. |
| |
|
| |
The group manages its commodity price risk where possible by entering into supply contracts with customers covering periods of between three months and a year, depending on the commodity traded. With respect to its exposure to foreign currency fluctuations, the group constantly reviews the extent to which its foreign currency receivables and payables are covered by forward exchange contracts taking into account changes in operational forecasts and market conditions and the group's hedging policy. The group undertakes limited hedging of receivables denominated in US dollars at times when the rand/US dollar exchange rate appears volatile. The level of exposure on these limited hedging activities does not exceed US$35 million at any stage during the year. |
| |
|
|
|
|
|
|
|
| |
The group's exposure to currency risk at year-end was as follows: |
| |
|
|
|
2012 |
2011 |
| |
|
|
|
US dollar |
Euro |
US dollar |
Euro |
| |
|
|
|
(USD) |
(EUR) |
(USD) |
(EUR) |
| |
|
|
|
000 |
000 |
000 |
000 |
| |
Foreign receivables per statement of financial position |
20 397 |
607 |
18 585 |
907 |
| |
Forward sales commitments |
1 506 761 |
78 634 |
1 178 442 |
85 817 |
| |
Total exposure |
1 527 158 |
79 241 |
1 197 027 |
86 724 |
| |
A 5% strengthening of the rand against the following currencies at 30 June would have decreased profit by the following amounts: |
|
|
|
|
| |
|
|
|
R'000 |
R'000 |
R'000 |
R'000 |
| |
|
|
|
8 470 |
317 |
6 297 |
445 |
| |
A 5% weakening of the rand against the above currencies at 30 June would have had an equal but opposite effect on the amounts shown above, on the basis that all other variables remain constant. |
| |
|
| |
Forward exchange contracts and other commitments |
| |
At year-end the group had open forward exchange contracts (FECs) in the amount of R277,7 million (2011: Rnil) which are fully optional over a three-month period and mature on various dates over this time. The fair value of the FECs at year-end, determined with reference to the spot rate at year-end and the rates of the FECs was R3,4 million (2011: Rnil), and is included in other receivables. |
| |
|
| |
A foreign subsidiary had forward commitments with regard to its inventory of ores, alloys and metals, which for accounting purposes are regarded as executory contracts and are therefore not included in the statement of financial position, but can be summarised as follows: |
| |
|
| |
|
| |
|
|
|
2012 |
2011 |
| |
|
|
|
Foreign |
Presentation |
Foreign |
Presentation |
| |
|
|
|
currency |
currency |
currency |
currency |
| |
|
|
|
notional |
notional |
notional |
notional |
| |
|
|
|
amount |
amount |
amount |
amount |
| |
|
|
|
USD'000 |
R'000 |
USD'000 |
R'000 |
| |
Purchase contracts |
|
|
|
|
| |
US dollar |
4 700 |
39 034 |
12 700 |
86 058 |
| |
Sales contracts |
|
|
|
|
| |
US dollar |
16 200 |
134 544 |
29 100 |
285 762 |
| |
|
| |
Equity price risk |
| |
The group's listed and unlisted investment are susceptible to market price risk arising from uncertainties about future value of the investment. The group manages the equity price risk through monitoring developments in the mining and metal industries. The executive directors of the board review and approve all equity investment decisions. |
| |
|
| |
At the reporting date, the exposure to listed investments at fair value was R239,3 million. A decrease of 1% on the relevant market index could have an impact of approximately R2,4 million on the income or equity attributable to the group, depending on whether or not the decline is significant or prolonged. An increase of 1% in the value of the listed investments would only impact equity, but would not have an effect on profit or loss. |
| |
|
| |
At the reporting date, the exposure to unlisted equity investments at fair value was R34,7 million. A change of 1% in the overall earnings stream of the valuations performed would result in an increase or decrease of R0,3 million. |
| |
|
