Notes to the summary consolidated annual financial statements

For the year ended 31 December 2012

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1. Basis of presentation

The summary consolidated financial statements have been prepared in accordance with IAS 34, Interim Financial Reporting, the JSE listing requirements and requirements of the Companies Act of South Africa. They should be read in conjunction with the annual financial statements for the year ended 31 December 2012, which have been prepared in accordance with the International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS). The accounting policies are consistent with those described in the annual financial statements.

The financial information is presented in South African Rands which is the Company’s functional currency.

2. Accounting policies

The summary consolidated financial statements have been prepared under the historic cost convention. The principal accounting policies used by the Group are consistent with those of the previous period, except for the adoption of various revised and new standards. The adoption of these standards had no material impact on the financial results for this review period.

3. Audit opinion

The summary consolidated financial statements have been audited by the Group’s external auditors, PricewaterhouseCoopers Inc. whose unqualified opinion is available for inspection at the registered office of Royal Bafokeng Platinum Limited.

The auditors report does not necessarily cover all of the information contained in this financial report. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditors work, they should obtain a copy of that report together with the accompanying financial information form the registered office of Royal Bafokeng Platinum Limited.

4. Capital commitments

Capital commitments in respect of property, plant and equipment.

        Group  
        2012   2011  
        R (million)   R (million)  
  Commitments contracted for     499.0   771.9  
  Approved expenditure not yet contracted for     7 903.9   8 737.9  
  Total     8 402.9   9 509.8  
  The commitments reflect 100% of the BRPM JV project commitments. Effectively Royal Bafokeng Resource Proprietary Limited (RBR) must fund 67% thereof and RPM the remaining 33%.

Should either party elect not to fund their share, the participation interest in the BRPM JV will be diluted according to the terms reflected in the BRPM JV agreement.

5. Guarantees and contingencies
5.1 Guarantee
        Group  
        2012   2011  
        R (million)   R (million)  
  Guarantees issued            
  Royal Bafokeng Resources Proprietary Limited, a wholly-owned subsidiary of RPBlat, granted the following guarantees:            
  Eskom to secure power supply for Styldrift I Project development     17.1   17.1  
  Eskom early termination guarantee for Styldrift I     17.5   17.5  
  Eskom connection charges guarantee for Styldrift I     40.0   40.0  
  Anglo American Platinum Limited for the rehabilitation of land disturbed by mining activities at BRPM     75.3   75.3  
  Security guarantee in favour of Nedbank Capital in respect of the funding facility        
  Royal Bafokeng Platinum Management Services Proprietary Limited, a wholly-owned subsidiary of RBPlat, granted the following guarantees:            
  Tsogo Sun guarantees arising from lease agreements     0.4   0.4  
  Total guarantees issued at 31 December     150.3   150.3  

5.2 Tax contingency

On 31 January 2013 Royal Bafokeng Resources received notice from the South African Revenue Services (SARS) that they have completed an audit of RBR’s 2008 to 2010 tax assessments and that they intend re-opening these assessments to effect certain proposed adjustments. These proposed adjustments primarily relate to SARS intending to disallow interest on shareholder’s loans amounting to R586 million previously deducted by RBR in the 2008 and 2009 income tax assessments. RBR has enlisted independent advice regarding this matter and based upon consultation to date, remain confident that it would be successful in defending this matter.

6. Financing facilities in place

RBPlat had cash and near cash investment on hand of R910.5 million as at 31 December 2012. The Group has an intra-month funding working capital requirement which is met through a R250 million working capital facility of which R150.3 million had been utilised for guarantees as at 31 December 2012. It also has an unutilised revolving credit facility (RCF) of R500 million. The RCF terms were renegotiated in 2012 resulting in a reduction in the commitment fees and the interest rate and the extention of the RCF from 31 December 2013 to 31 December 2015.

7. Earnings per share

The weighted average number of ordinary shares in issue outside the Group for the purposes of basic earnings per share and the weighted average number of ordinary shares for diluted earnings per share are calculated as follows:

        Group  
        2012   2011  
  Number of shares issued     165 548 067   165 123 082  
  Mahube Trust     (563 914)   (563 914)  
  Management incentive scheme     (1 306 354)   (881 369)  
  Number of shares issued outside the Group     163 677 799   163 677 799  
  Adjusted for weighted shares issued during the year     282 910   -  
  Weighted average number of ordinary shares in issue for earnings per share     163 960 709   163 677 799  
  Management incentive scheme     139 362   462 537  
  Weighted average number of ordinary shares in issue for diluted earnings per share     164 100 070   164 140 336  
  Profit attributable to owners of the Company R (million)     170.3   273.4  
  Basic earnings per share (cents per share)     104   167  
  Basic earnings per share is calculated by dividing the profit attributable to owners of the Company for the year by the weighted average number of ordinary shares in issue for earnings per share.            
  Diluted earnings per share (cents per share)     104   167  
  Diluted earnings per share is calculated by dividing the profit attributable to owners of the Company for the year by the weighted average number of ordinary shares in issue for diluted earnings per share.            
  Headline earnings            
  Profit attributable to owners of the Company is adjusted as follows:            
  Profit attributable to owners of the Company R (million)     170.3   273.4  
  Adjustment net of tax:            
  Loss on disposal of property, plant and equipment       0.3  
  Headline earnings R (million)     170.3   273.7  
  Basic headline earnings (cents per share)     104   167  
  Diluted headline earnings (cents per share)     104   166  

8. Revenue
        Group  
        2012   2011  
        R (million)   R (million)  
  Revenue from concentrate sales – production from BRPM concentrator     2 720.9   2 846.6  
  Revenue from UG2 toll concentrate     144.4   128.3  
  Total     2 865.3   2 974.9  

9. Cost of sales
        Group  
        2012   2011  
        R (million)   R (million)  
  On-mine costs:            
  – Labour     753.1   673.9  
  – Utilities     171.1   144.5  
  – Contractor costs     478.4   377.0  
  – Movement in inventories     (3.9)   23.3  
  – Materials and other mining costs     648.0   614.8  
  – Elimination of intergroup management fee     (33.3)   (31.5)  
  State royalties     9.6   14.1  
  Depreciation – Property, plant and equipment     272.1   462.1  
  Amortisation – Mineral rights     55.5   56.2  
  Share-based payment expenses     43.6   33.1  
  Social and labour plan expenditure expensed     126.9   35.8  
  Other     4.4   5.4  
  Total     2 525.5   2 408.7  

10. Related party transactions
        Group  
        2012   2011  
        R (million)   R (million)  
  BRPM Joint venture balances:            
  Amount owing by RPM for concentrate sales     1 059.9   941.8  
  Amount owing to RPM for contribution to BRPM JV (working capital nature)     223.1   37.5  
  Amount owing to RPM in respect of Service Level Agreements with RPM       0.1  
  BRPM Joint venture transactions:            
  Concentrate sales to RPM (Refer Note 8)     2 865.3   2 974.9  
  Fellow subsidiary transactions:            
  Transactions with Fraser Alexander for rental of mining equipment, maintenance of tailings dam and operation of sewerage plant     20.6   15.6  
  Impala Platinum Limited for royalty income     61.8   24.9  
  Geoserve Exploration Drilling Company for exploration drilling on Boschkoppie and Styldrift     15.6   15.5  
  Trident South Africa Proprietary Limited     5.7    
  Tarsus Technologies for electronic equipment purchases     3.5   0.8  
  Zurich Insurance Company of SA for underwriting a portion of BRPM insurance (previously related)       0.7  
  Royal Marang Hotel for accommodation and conferences     0.3   0.5  

11. Dividends

No dividends have been declared or proposed for the current period (2011: Rnil).

12. Segmental reporting

The Group is currently operating one mine with two decline shafts BRPM and developing the Styldrift I Project. The BRPM operation is treated as one operating segment.

The Executive Committee of the Company is regarded as the Chief Operating Decision Maker.

        BRPM  
        2012   2011  
        R (million)   R (million)  
  Concentrate sales     2 865.3   2 974.9  
  Cash cost of sales     (2 050.6)   (1 802.4)  
  Depreciation     (170.9)   (357.1)  
  Other operating income     64.9   29.0  
  Other operating expenditure     (171.1)   (101.7)  
  Net finance income     10.3   5.2  
  Segmental profit before tax     547.9   747.9  
  Additional depreciation on purchase price allocation (PPA) adjustment and amortisation     (156.7)   (161.2)  
  Overheads of corporate office     (111.3)   (104.3)  
  Consolidation adjustments     33.9   10.0  
  Other income and net finance income     47.5   82.0  
  Profit before tax per the statement of comprehensive income     361.3   574.4  
  Taxation     (85.6)   (163.6)  
  Profit after tax     257.7   410.8  
  Non-controlling interest     (105.3)   (137.4)  
  Contribution to basic earnings     170.3   273.4  
  Contribution to headline earnings     170.3   237.7  
  Segment assets     7 109.1   6 626.8  
  PPA adjustment to carrying amount of PPE (includes mineral rights)     9 268.4   9 407.1  
  Corporate assets and consolidation adjustments (includes goodwill)     3 723.9   3 458.7  
  Total assets per the statement of financial position     20 101.4   19 492.6  
  Segment liabilities     249.3   245.1  
  Corporate liabilities and consolidation adjustments     256.6   52.8  
  Unallocated liabilities (tax and deferred tax)     4 115.0   4 057.5  
  Total liabilities per the statement of financial position     4 620.9   4 355.4  
  Capital expenditure     1 173.9   1 146.5