TIDMPPN
RNS Number : 0297E
Platmin Limited
31 March 2011
PLATMIN LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
March 31, 2011
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition
and Results of Operations ("MD&A") for the year ended December
31, 2010 and the ten months ended December 31, 2009 contains
"forward-looking information" which may include, but is not limited
to, statements with respect to the future financial and operating
performance of Platmin Limited (the "Company" or "Platmin"), its
subsidiaries and affiliated companies, and its mineral projects,
the future price of platinum or other Platinum Group Elements
("PGEs"), PGE production levels, mining rates, the future price of
other base metals, future exchange rates, the estimation of mineral
resources and reserves, the realization of mineral resource
estimates or their conversion into reserves, costs and future costs
of production, capital and exploration expenditures, including
remaining project development expenditure at the Pilanesberg
Platinum Mine ("PPM"), costs and timing of the development of new
deposits, costs and timing of the development of new mines, costs
and timing of future exploration, requirements for additional
capital, government regulation of mining operations and exploration
operations, timing and receipt of approvals, licenses, and
conversions under South African mineral legislation, environmental
risks, title disputes or claims, limitations of insurance coverage
and the timing and outcome of regulatory matters. Often, but not
always, forward-looking statements can be identified by the use of
words such as "plans", "expects", "is expected", "budget",
"scheduled", "estimates", "forecasts", "intends", "anticipates",
"targeted" or "believes" or variations (including negative
variations) of such words and phrases, or state that certain
actions, events or results "may", "could", "would", "might" or
"will" be taken, occur or be achieved.
Forward-looking statements in this market release, amongst
others, forecast production and sales reaching a monthly rate of 12
500 4E ounces during the 2011 year and 20 000 4E ounces during the
2012 year; recovery rates and grade; targets, estimates and
assumptions in respect of platinum and other PGM prices and
production; allocation of funds for current commitments; and the
timing and completion of definitive feasibility work at the
Mphahlele, Grootboom and Loskop Projects.
Such forward-looking statements are based on a number of
material factors and assumptions, including, that contracted
parties provide goods and/or services on the agreed timeframes,
that budgets and production forecasts are accurate, that equipment
necessary for construction and development is available as
scheduled and does not incur unforeseen break downs, that no labour
shortages or delays are incurred, that plant and equipment
functions as specified, that geological or financial parameters do
not necessitate future mine plan changes, that no unusual
geological or technical problems occur, and that grades and
recovery rates are as anticipated in mine planning.
Forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results,
performance or achievements of Platmin and/or its subsidiaries
and/or its affiliated companies to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements. Such factors include, among others,
general business, economic, competitive, political and social
uncertainties; the actual results of current exploration and mining
activities; development and operational risks; title risks;
regulatory risks; conclusions of economic evaluations and studies;
fluctuations in the value of the United States dollar relative to
the Canadian dollar or South African rand; changes in project
parameters as plans continue to be refined; future prices of
platinum or other PGEs; possible variations of ore grade or
recovery rates (including the existence of potholes, faults and
other geological conditions that may affect the existence or
recovery of resources and reserves); failure of plant, equipment or
processes to operate as anticipated; accidents, labour disputes,
industrial unrest and strikes and other risks of the mining
industry; political instability, insurrection or war; the effect of
HIV/AIDS on labour force availability and turnover; delays in
obtaining governmental approvals or financing or in the completion
of development or construction activities, as well as those factors
communicated in the section entitled "Risk Factors" of Platmin's
current annual information form ("AIF") and its final short form
prospectus dated May 5, 2010, which can both be viewed at
www.sedar.com. Although Platmin has attempted to identify important
factors that could cause actual actions, events or results to
differ materially from those described in forward-looking
statements, there may be other factors that cause actions, events
or results to differ from those anticipated, estimated or intended.
Forward-looking statements contained herein are made as of the date
of this MD&A and Platmin disclaims any obligation to update any
forward-looking statements, whether as a result of new information,
future events or results or otherwise. There can be no assurance
that forward-looking statements will prove to be accurate, as
actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not
place undue reliance on forward-looking statements due to the
inherent uncertainty therein.
1. Introduction
This MD&A is provided to enable the reader to assess and
understand the financial condition and results of operations for
the year ended December 31, 2010 and the ten months ended December
31, 2009, in comparison with corresponding periods. Information in
this MD&A must be read in conjunction with the audited
consolidated financial statements of Platmin for the year ended
December 31, 2010 and the notes thereto (collectively, the "annual
financial statements") prepared in accordance with International
Financial Reporting Standards ("IFRS").
The MD&A should also be read in conjunction with the
Company's annual information form ("AIF") and the technical reports
prepared by qualified persons in accordance with NI 43-101 on file
with the Canadian provincial securities regulatory authorities.
These documents can be found at www.sedar.comand at
www.platmin.com.
All dollar amounts in this MD&A are expressed in United
States dollars ("US$"), unless otherwise specified. When used, C$
refers to Canadian dollars, GBP refers to British pounds and ZAR
refers to South African rands. References to quarters are to
financial quarters and not to calendar quarters, unless otherwise
specified.
2. Overview
Platmin Limited (the "Company" or "Platmin") is continued under
the laws of British Columbia, Canada and its common shares are
listed on the Toronto Stock Exchange ("TSX"), the Alternative
Investment Market of the London Stock Exchange ("AIM") and the
Johannesburg Securities Exchange Limited ("JSE"). The Company
trades under the symbol "PPN" on both TSX and AIM, whilst the
symbol "PLN" identifies the shares on the JSE.
The Group (being Platmin and its consolidated subsidiaries)
changed its financial year end from the last day of February in
each calendar year to the last day of December, effective for the
period ending December 31, 2009. As a result of the change in year
end, the comparative amounts for the ten months ended December 31,
2009, are not directly comparable with the current balances and
results for the twelve months ended December 31, 2010.
Platmin is a mineral exploration, development and operating
company engaged in the exploration for, development and operation
of mines exploiting Platinum Group Element ("PGE") deposits in
South Africa. The Company has developed and completed the
construction of the Pilanesberg Platinum Mines ("PPM"), which was
building up to full production during the year under review, and is
exploring for PGEs on its other three key development projects
namely Mphahlele, Grootboom and Loskop.
The principal focus of the Company's operations is the
development and operation of PPM. For a full description of the
development activities, please refer to section 7.1 of this
MD&A.
3. Overall performance
The Group recorded a loss for the year ended December 31, 2010
of US$28.516 million before taking into account the US$24.120
million share based payment expense (fair value adjustment)
relating to the zero percent convertible debentures issued and the
foreign exchange loss of US$12.806 million due to the strengthening
of the South African rand against the US dollar and the subsequent
revaluation of cash held in a currency other than the functional
currency of the group. In total, the loss for the year ended
December 31, 2010 was US$65.442 million, or US$0.09 per share,
compared with a net loss of US$11.115 million or a loss of US$0.02
per share, for the ten months ended December 31, 2009.
During the period under review, the build-up of mining
operations to commercial production continued with associated
costs, net of revenue from metal sales, capitalized as part of the
total project capital expenditure.
As at December 31, 2010, the total project capital expenditure
for the development of PPM, including plant capital expenditure,
capitalised pre-production costs, and offsetting revenue from metal
sales during the pre-production phase amounted to US$562.881
million (ZAR3.709 billion).
On May 13, 2010, the Company issued, by way of a prospectus
offering, a total of 205,761,317 new common shares of Platmin at a
price of US$1.215 per common share for gross proceeds of US$250.000
million. Underwriting fees and costs associated with the capital
raising of US$8.740 million were capitalized and offset against
share capital resulting in net proceeds of US$241.260 million. As
part of the fund-raising process US$135.000 million of zero percent
convertible debentures were placed, initially subject to conversion
by December 31, 2010 at a price of US$1.215 that would have
resulted in 111,111,111 shares being issued. The maturity date of
the convertible debentures was extended from December 31, 2010 to
February 28, 2011 and subsequently to March 31, 2011, and the
conversion price reduced from US$1.215 to US$0.84. The reduction of
the conversion price would lead to 160,714,286 shares being issued.
Although the maturity date and conversion price were subsequently
changed, the principle amount of US$135.000 million remains
unchanged. The total funding from the prospectus offering and
private placement was US$385.000 million (excluding the
underwriting fees and associated costs of US$8.740 million).
On December21, 2010, the Company issued, by way of a private
placement, 98,901,099 new common shares at a price of US$0.91
(C$0.93) per common share for total gross proceeds of US$90.000
million.
In light of the fact that the board has decided to focus cash
resources and capacity on bringing the PPM into full production,
the Mphahlele, Grootboom and Loskop projects continue on a reduced
work program. In the short term, Platmin will commit sufficient
expenditure to these projects to ensure that the new order
Prospecting Rights and Mining Rights are preserved. This
expenditure will be funded from existing cash on hand.
Significant developments during the three months ended December
31, 2010 were as follows:
-- On October 18, 2010, the six week strike at Northam Platinum
Limited ("Northam"), which effectively halted all PGE concentrate
dispatches to the smelter since September 6, 2010, ended and
dispatches of PGE concentrate to the smelter resumed on October 25,
2010;
-- On November 30, 2010 the Company announced a placing of
98,901,099 new common shares at a price of US$0.91 (C$0.93) per
common share for total gross proceeds of US$90.000 million. The
placement successfully closed on December 21, 2010;
-- On December 22, 2010 the holders of the US$135.000 million
zero percent convertible debentures that were issued on May 13,
2010 notified the Company that they wish to extend the maturity
date of the convertible debentures to 28 February 2011, as
permitted by the terms of the debenture. Platmin accepted this
extension.
Important events which occurred subsequent to December 31, 2010
include:
-- On February 18, 2011, the Company announced that agreements
have been executed with the holders of all the zero percent
convertible debentures issued on May 13, 2010, in principal amount
of US$135.000 million, to convert the convertible debentures into
160,714,286 new common shares, subject to certain conditions and
the conversion price was reduced from US$1.215 to US$0.84;
-- On February 28, 2011, the Pallinghurst Resources Limited
("Pallinghurst") promissory note of US$26.000 million entered into
on March 22, 2010 was repaid in full including accrued interest and
cost;
-- On March 23, 2011, it was announced that the Company
successfully concluded the acquisition of an incremental 5.99
million 4E PGM* inferred resource ounces (42.57 million tonnes at a
grade of 4.38g/t) contained within the western portion of the
Sedibelo PGM Project concession ("Sedibelo West") from the
Bakgatla-Ba-Kgafela Tribe ("Bakgatla") and Itereleng Bakgatla
Mineral Resources (Pty) Limited ("IBMR"), for an aggregate
consideration of US$75 million in cash (equivalent to US$12.50 per
4E PGM inferred resource ounce). In addition to the Sedibelo West
purchase, Platmin has also acquired an effective 50% interest in an
infrastructure vehicle, which has acquired all of Barrick Platinum
South Africa ("Barrick") strategically important infrastructure
rights and assets such as power and water rights;
-- On March 23, 2011, Platmin formally announced that Kgosi
Molefe John Pilane had been invited to join the board of Platmin.
He is the appointed traditional leader of the Bakgatla
community;
-- March 31, 2011, the Company announced that all the conditions
precedent for the conversion of the $135.000 million in convertible
debentures had been fulfilled and that conversion had taken place
at US$0.84 per share. A total of 160,714,287 new shares are to be
issued resulting in a total of 910,395,054 shares in issue;
-- Mr Wayne Koonin the Chief Financial Officer of the Company
has resigned with effect from May 31, 2011, to take up another
senior financial role in the mining industry. The replacement for
Mr Koonin has been identified and is set to join the company
shortly, providing sufficient time for a seamless handover period.
An announcement to this effect will be made shortly.
* 4E PGM is commonly used in the platinum mining industry as
reference to the following four metals: Platinum, Palladium,
Rhodium and Gold.
4. Selected annual financial information
The table below sets forth selected financial data relating to
the Company's financial year ended December 31, 2010 and the ten
months ended December 31, 2009. The financial data is derived from
the Company's audited annual consolidated financial statements,
which are prepared in accordance with IFRS. The Company had no
operating profit in any of such financial periods, all revenue and
operating costs from PPM were capitalised and the Company did not
declare a dividend in any of such financial periods.
For the
For the 10 months
year ended ended
Dec 31, Dec 31,
Loss and deficit summary 2010 2009
Loss for the period (US$ '000) (65,442) (11,115)
Net loss per Common Share* (US cents) (0.09) (0.02)
Weighted average number of Common
Shares 590,434,320 430,015,242
Total number of Common Shares in issue 749,680,767 445,018,352
*attributable to the owner of the parent
The loss for the year consists of expenditure relating to
administration costs required to manage the exploration and
development activities, overheads of the Company and foreign
exchange losses on shareholder loan accounts. For a full
description of the results, please refer to section 4.1 of this
MD&A.
As at
Dec 31 Dec 31
2010 2009
Statement of financial position US$ '000 US$ '000
Current assets 381,889 65,612
Other assets 164,108 76,761
PPM plant and mine development costs 562,881 407,789
---------- ----------
TOTAL ASSETS 1,108,878 550,162
---------- ----------
Current liabilities 189,657 28,290
Long-term liabilities 84,825 68,843
---------- ----------
Total liabilities 274,482 97,133
Shareholder's equity 834,396 453,029
---------- ----------
TOTAL LIABILITIES & SHAREHOLDER'S
EQUITY 1,108,878 550,162
---------- ----------
4.1 Results of operations
Quarter ended December 31, 2010
In accordance with IFRS, revenue is recognised when the transfer
of the risks and rewards of ownership takes place. During the
quarter under review, revenue recognised in respect of concentrate
deliveries made to Northam and Impala was offset against
capitalized project development costs. Revenue from metal sales of
US$33.169 million (ZAR218.626 million) based on 21,016 4E ounces
dispatched and sold was recorded in the quarter ended December 31,
2010. This amount was off-set against operating costs of US$44.898
million (ZAR295.936 million), resulting in net operating costs
capitalised of US$11.729 million (ZAR77.310 million).
Interest income of US$1.498 million was recorded in the quarter
ended December 31, 2010 with finance costs amounting to US$1.264
million.
The Company recorded a net loss for the quarter ended December
31, 2010 of US$10.201 million, or US$0.02 per share.
Administrative expenses, which include management, professional
and consulting fees, salary costs related to the vesting of share
options and office rentals amongst other costs, totalled US$7.306
million for the quarter ended December 31, 2010. The major expense
item was an increase in employee costs due to the increase in
workforce at the PPM.
During Q4FY2010, the three inclined grizzlies in the feed bins
at the Run of Mine ("ROM") tips were replaced with vibrating
feeders, effectively de-bottlenecking the ore feed
arrangements.
The BFS for the project recommended treating the silicate reefs
("Merensky") through the DMS plant, with a back-up plan to revert
to treating UG2 if this was warranted. Towards the end of Q4FY2010
a bulk test of the UG2 through the DMS was commissioned and during
this quarter, the geological model for the whole property was
upgraded, based on current information and accumulated experience.
The results from this test work are most promising and a strategy
to permanently treat UG2 through the DMS, based on mining cuts from
the revised geological model is expected to materially reduce ore
losses and waste dilution from the high grade UG2 reef.
Year ended December 31, 2010 compared to the ten months ended
December 31, 2009
For the year ended December 31, 2010, mining and processing
activities at PPM continued in the build-up phase towards
commercial production. The delivery of PGE concentrate to Northam
continued at regular intervals until September 2, 2010, when strike
action at Northam commenced and temporarily halted accepted
deliveries of PGE concentrate to their smelter until October 18,
2010 when the strike action at Northam ended. Dispatches of PGE
concentrate to Northam resumed on October 25, 2010. As an interim
measure, a short term Offtake Agreement was entered into with
Impala Refining Services ("Impala") to process concentrate until
such time that the Northam strike ended. As a development stage
company, Platmin will offset revenue from mining activities against
capitalised operating costs until such time as PPM is brought into
commercial production.
With effect from January 1, 2011, the Company declared
commercial production which will result in all revenue, mine
operating costs and the amortization of the total capitalized cost
over the life of mine, being reported through the Statement of
Income.
For the year ended December 31, 2010, net development
expenditures at PPM that were capitalized to the balance sheet are
summarized as follows:
For the
For the 10 months
year ended ended Life to date
Net development Dec 31, Dec 31, Dec 31, Dec 31,
expenditure capitalised in 2010 2009 2010 2009
ZAR ZAR'000 ZAR'000 ZAR'000 ZAR'000
Revenue (599,996) (240,821) (840,818) (240,821)
Operating costs 1,171,199 679,182 2,296,799 1,125,600
------------ ----------- ---------- ----------
Net operating costs
capitalised 571,203 438,361 1,455,981 884,779
Capital - development
expenditure 65,322 448,128 1,800,837 1,735,513
Rehabilitation asset 67,864 257,444 452,364 384,501
------------ ----------- ---------- ----------
Net development
expenditure capitalised 704,389 1,143,933 3,709,182 3,004,793
---------- ----------
Net development
expenditure capitalised -
beginning of the year 3,004,793 1,860,860
------------ -----------
Net development
expenditure capitalised -
end of the year 3,709,182 3,004,793
------------ -----------
For the
For the 10 months
year ended ended Life to date
Net development Dec 31, Dec 31, Dec 31, Dec 31,
expenditure capitalised in 2010 2009 2010 2009
USD USD'000 USD'000 USD'000 USD'000
Revenue (91,028) (32,728) (127,565) (32,728)
Operating costs 177,689 92,302 348,459 152,970
------------ ----------- ---------- ----------
Net operating costs
capitalised 86,661 59,574 220,894 120,242
Capital - development
expenditure 10,028 60,685 273,356 235,293
Rehabilitation asset 10,296 34,987 68,631 52,254
Net development
expenditure capitalised 106,985 155,246 562,881 407,789
---------- ----------
Net development
expenditure capitalised -
beginning of the year 407,789 186,379
Foreign exchange movement 48,107 66,164
------------ -----------
Net development
expenditure capitalised -
end of the year 562,881 407,789
------------ -----------
The Company recorded a net loss for the year ended December 31,
2010 of US$65.442 million, or US$0.09 per share, compared with a
net loss of US$11.115 million, or a loss per share of US$0.02, for
the ten months ended December 31, 2009. The increase in loss year
on year was principally the result of a US$24.120 million share
based payment expense (fair value adjustment) relating to the zero
percent convertible debentures issued on May 13, 2010, and a
US$12.806 million foreign exchange loss due to the strengthening of
the South African rand against the US dollar and the subsequent
revaluation of cash held in a currency other than the functional
currency of the group.
The results are summarized as follows:
For the
For the 10 months
year ended ended
Dec 31, Dec 31,
2010 2009
US$'000 US$'000
------------------------------------------ ------------ -----------
Operating expenses (23,539) (13,693)
Other (expenses) / income (36,883) 3,233
------------ -----------
- Share-based payment expense (fair
value adjustment) (24,120) -
- Foreign exchange (losses) / gains (12,806) 3,216
- Other 43 17
------------ -----------
Net finance costs (5,020) (655)
------------ -----------
Loss before taxation (65,442) (11,115)
Income tax - -
------------ -----------
LOSS FOR THE PERIOD (65,442) (11,115)
------------ -----------
Operating expenses totalled US$23.539 million for the year ended
December 31, 2010, compared to the US$13.693 million for the ten
months ended December 31, 2009. The increase in general operating
expenses was principally the result of increased employee and admin
costs and the strengthening of the average exchange rates year on
year.
Other income and expenses includes foreign exchange losses of
US$12.806 million for the year ended December 31, 2010, compared to
foreign exchange gains of US$3.216 million for the ten months ended
December 31, 2009. The movement in foreign exchange rates for the
respective periods can be summarised as follows:
For the
For the 10 months
Foreign exchange rates year ended ended
Dec 31, Dec 31,
(US$1.00 = ZAR) 2010 2009
------------------------ ------------ -----------
Minimum 6.5716 7.2113
Maximum 7.9465 10.5663
Closing spot 6.5913 7.3685
Average for the year
(period) 7.2903 8.1850
Net finance costs of US$5.020 million were recorded in the year
ended December 31, 2010, compared to net finance costs of US$0.655
million in the ten months ended December 31, 2009. The net increase
in finance costs is principally due to increased debt during the
year as a result of the Pallinghurst Resources Limited promissory
note of US$26.000 million entered into on March 22, 2010 and the
amortization of the fair value adjustment on the zero percent
non-interest bearing convertible debenture.
A total of US$0.107 million (ZAR0.744 million) of deferred
exploration expenditure on Mphalele, Grootboom and Loskop was
capitalized in the year ended December 31, 2010 compared with
US$0.326 million (ZAR2.266 million) in the period ended December
31, 2009. This decrease in costs is due to reduced activities on
all projects other than PPM, whilst PPM built up to commercial
production.
5. Summary of quarterly results
Expressed in US$'000 except per share amounts.
In accordance with IFRS
May Feb
Dec'10 Sept'10 Jun'10 Mar'10 Nov'09 Aug'09 '09 '09
---------- ------- -------- ------- ------- ------- -------- ------- -------
Loss /
(profit)
for the
period 10,201 26,034 24,026 5,181 2,276 (6,620) 13,585 12,490
Basic and
diluted
loss /
(profit)
per
share 0.02 0.05 0.04 0.01 0.01 (0.02) 0.03 0.07
6. Liquidity and capital resources
Unrestricted
The Company had unrestricted cash and cash equivalents of
US$188.596 million at December 31, 2010, compared with US$29.375
million at December 31, 2009. The net increase in cash and cash
equivalents is primarily due to the capital raisings of US$250.000
million and US$90.000 million completed during May 2010 and
December 2010 respectively. Revenue from metal sales of US$91.028
million based on 60,067 (3PGE+Au) ounces dispatched and sold was
recorded in the year ended December 31, 2010. This amount was
off-set against operating costs of US$177.689 million, resulting in
net operating costs capitalised of US$86.661 million. In addition
to the capitalised operating costs, capital expenditure amounted to
US$10.028 million.
As at December 31, 2010, provision has been made for a total of
US$170.431 million of current commitments that will be settled from
the US$188.596 million unrestricted cash and cash equivalents as
follows:
-- US$20.100 million have been committed to fund current
liabilities due in the normal course of business;
-- US$28.822 million (ZAR210.411 million) have been allocated
for the repayment of the short term Pallinghurst promissory note
due and repaid in full on February 28, 2011 (the total outstanding
liability in SA rand at year end totalled ZAR210.411 million,
resulting in US$31.923 million at a closing rate of
ZAR6.5913:US$1);
-- US$12.023 million have been allocated for the water and
electricity assets purchased from Barrick, representing 50% of the
total purchase consideration;
-- US$20.000 million have been allocated for the estimated
future obligation relating to the Magalies Water project. This
represents the 50% of Barrick's commitment in the pipeline project
acquired by the Company on March 23, 2011;
-- US$7.486 million (ZAR49.543 million) have been provided for
the environmental rehabilitation liabilities incurred for the year
ended December 31, 2010 in terms of the current approved
Environmental Management Program ("EMP") that would fall due for
payment in early 2011. An application to amend the current EMP is
currently in progress in order to reduce the current and ongoing
rehabilitation liabilities. Refer to Note 13 of this MD&A for
discussion on the application to amend;
-- US$82.000 million (including VAT of US$7.000 million) have
been allocated for the estimated future obligation relating to the
acquisition cost for the Sedibelo West mineral rights and
commission.
Restricted
The Company had restricted cash of US$219.602 million at
December 31, 2010, as compared with US$7.163 million at December
31, 2009.
The net increase in restricted cash is primarily due to the cash
collateral of US$135.131 million secured as part of the zero
percent convertible debentures issued on May 13, 2010, of
US$135.000 million plus accrued interest earned to date and the
increase in funds deposited as security for the additional
rehabilitation guarantees of US$77.308 million, of which US$75.070
million was for PPM.
Other capital resources
The Company's principal subsidiary, Boynton, operates in South
Africa and as a result is subject to the South African Reserve Bank
("SARB") exchange control regulations. Shareholder loans from
Platmin to Boynton, amounted to US$616.415 million (which includes
capitalised interest of US$38.793 million) at December 31, 2010 and
has primarily been used to fund the development of PPM. Any
repayment of foreign currency loans by a South African company to
an offshore company, are subject to prior approval by the SARB.
New equity raisings
During the period ended December 31, 2010, Platmin completed two
significant equity capital financing deals:
-- On May 13, 2010 the Company issued 205,761,317 new common
shares at a price of US$1.215 per common share for a total
consideration of US$250.000 million, raising US$241.260 million net
of brokerage and legal fees. These funds were used for additional
working capital facilities and general funding requirements.
In accordance with the disclosure in Platmin's Short Form
Prospectus dated May 5, 2010 for the Offering, the table below
reflects the actual use of proceeds against the planned use of
proceeds from the financings as follows:
Total
actual use
Total of proceeds
planned use to
of proceeds Dec 31, 2010
Financing use of proceeds US$'000 US$'000
--------------------------------------- ------------- --------------
PPM operational and working capital
funding requirements 150,000 150,000
Other corporate activities 45,000 -
Repayment of loan from Pallinghurst 26,000 -
Acquisition of 10% equity interest
in Sedibelo West 15,000 -
Offering expenses 2,250 3,564
Exploration, general & administrative
expenses 5,766 3,221
------------- --------------
244,016 156,785
Underwriting fees 5,984 5,984
------------- --------------
250,000 162,769
============= ==============
-- As part of the May 13, 2010 capital raising, US$135.000
million of zero percent convertible debentures were placed,
initially subject to conversion by December 31, 2010 at a price of
US$1.215 that would have resulted in 111,111,111 shares being
issued. The maturity date of the convertible debentures was
extended from December 31, 2010 to February 28, 2011 and
subsequently to March 31, 2011, and the conversion price reduced
from US$1.215 to US$0.84. The reduction of the conversion price
would lead to 160,714,286 shares being issued. Although the
maturity date and conversion price were subsequently changed, the
principle amount of US$135.000 million remains unchanged.
-- On December 17, 2010 the Company issued 98,901,099 new common
shares at a price of US$0.91 (C$0.93) per common share, raising
US$89.785 million net of brokerage and legal fees.
The equity raisings and subsequent use of proceeds can be
summarized as follows:
US$'000
------------------------------------------------------ ----------
Capital raising - May 13, 2010 250,000
Total actual use of proceeds to Dec 31, 2010 (162,769)
----------
Net available cash after May capital raising 87,231
Capital raising - December 17, 2010 90,000
Other funds available 11,365
----------
Cash available at December 31, 2010 188,596
Cash committed (170,431)
----------
- - Current liabilities due in the normal course
of business (20,100)
- - Repayment of the Pallinghurst Promissory Note (28,822)
- - Increase in rehabilitation obligation (7,486)
- - Water and electricity assets purchased from
Barrick (50% of purchase price) (12,023)
- - Capital commitments on Barrick's portion of
the water pipeline (20,000)
- - Acquisition of Sedibelo West mineral rights
(including VAT of US$7.000 million) and commission (82,000)
----------
Net cash available at December 31, 2010 18,165
==========
As at December 31, 2010, Platmin's total working capital was
US$190.329 million (Dec 31, 2009 - US$39.386 million). Working
capital is calculated based on the total of unrestricted cash and
cash equivalents (US$188.596 million), inventory (US$11.285
million) and accounts receivable (US$46.877 million) less accounts
payable and accrued liabilities (US$21.038 million) and short-term
loans (US$35.391 million). Platmin's cash and cash equivalents
comprise of cash in interest earning accounts and are fully liquid
deposits held at major European and South African banks.
Based on current production forecasts for PPM for the twelve
months ending on December 31, 2011, the Company forecasts net cash
expenses (net of forecast revenue from metal sales) of between
US$50.000 million to US$75.000 million. This net cash outflow will
be financed from Platmin's available unrestricted cash and cash
equivalents. Platmin expects approximately 90% of net cash expenses
will be operationally incurred at PPM, with the balance being
exploration and administrative costs.
Working capital increased by US$150.943 million for the year
ended December 31, 2010 primarily due to the capital raisings
completed during the year of US$331.044 million, offset by PPM
operational losses and working capital costs of US$150.000
million.
As at December 31, 2010, the Company had 749,680,767 common
shares in issue compared to 445,018,352 common shares in issue as
at December 31, 2009.
Debt facilities concluded in the period ended December 31,
2010
On March 22, 2010, the Company entered into a ZAR192.000 million
(an equivalent of US$26.000 million at an exchange rate of ZAR7.38
=US$1.00) short term lending facility with Pallinghurst. As at
December 31, 2010, a total of ZAR191.000 million was drawn against
this facility. This facility was initially for a period of 3 months
but was extended until and repaid in full (including accrued
interest and cost) on February 28, 2011.
A bridge loan facility for PPM of US$35.000 million (ZAR350.000
million) was concluded with Standard Bank in May 2008. The term of
the bridge loan facility was initially to August 31, 2008 but
subsequently extended and repaid in full on August 31, 2009 in the
amount of ZAR404.354 million, including interest accrued.
In relation to the original bridge loan facility, the Company
issued 300,000 warrants exercisable at US$6.95 per common share,
exercisable from September 15, 2008 until expiry on May 14, 2011.
The Company has classified this facility as held to maturity, and
the fair value of the warrants of US$0.846 million has been treated
as a cost of the loan transaction. In the year ended February 28,
2009, the fair value of these warrants was fully amortized to net
income over the original loan term of 6 months, using the effective
interest method.
7. Results of operations by Project
In the period ended December 31, 2010, the Company spent
US$177.689 million (ZAR1.171 billion) on development expenditure at
PPM and US$1.307 million (ZAR8.617 million) on exploration
expenditure on the various exploration projects. All development
expenditure spent on PPM was capitalized as project costs.
Exploration expenditure was capitalized and the proportion spent
per project was as follows: Mphahlele Project - 29%, Grootboom
Project - 12%; Pilanesberg Project - 6%; Loskop Project - 29% and
the remaining 24% on other projects. A summary of the expenditures
by project along with the current proposed programs is set forth
below.
7.1 Pilanesberg Platinum Mine
The Company has developed the Pilanesberg Project into the PPM,
which constitutes an open-cast mining operation and a concentrator
processing plant, producing a PGM concentrate for smelting and
refining by and subsequent sale of metals to Northam, a third party
smelting and refining operation. The PGM consists of the following
platinum group metals: platinum, palladium, iridium, rhodium and
ruthenium.
Due to the close proximity of the 'PGE-bearing' Merensky and UG2
reef horizons in this part of the Bushveld complex, these two ore
bodies are exploited in one open-cast mining operation at PPM.
Other economically viable reefs, commonly known as the Pseudo
reefs, also present between the two aforementioned reef horizons
are extracted with the Merensky reef as an overall Silicate
Package. The Silicate Package is processed in the Merensky circuit
and the UG2 reef horizon is processed in the UG2 circuit. Both
concentrates are blended and forwarded to Northam's smelter in
South Africa, for further processing into refined metals under a
current Concentrate Agreement entered into with Northam on June 30,
2008.
In March 2008, the removal of overburden and waste rock
materials from the open pit commenced. This was followed in
December 2008 with the start-up of reef mining. The stock-piling of
PGE-bearing ore ahead of the processing plant commenced in December
2008 with milling operations commencing in March 2009. The delivery
of the first concentrate to Northam took place on April 1,
2009.
For the year ended December 31, 2010, the mine was still in the
build-up phase, and expects to reach the planned steady state
extraction rates of over 400,000 tonnes of ore per month or over 5
million tonnes per annum. Based on a revised, detailed mining plan,
compiled by a new geological and planning team during Q2 FY2010,
these targets are expected to be reached during the 2013 financial
year. Forecast production and sales for the 2011 financial year is
anticipated to be between 100,000 and 120,000 ounces of 4E. Intense
management focus is being applied to the volumes and sequencing of
waste stripping by the mining contractor in order to ensure that
adequate volumes of reef are exposed. Mine planning continues to
take place at PPM to continuously update the mine scheduling on a
short-term and long-term basis. The target is to accumulate 2-3
months' stockpiles of broken ore at the ROM tips and expose 2-3
months of ore in the pit.
The total project development expenditures, net of revenue from
metal sales and including capital expenditure, for the year ended
December 31, 2010 of US$106.985 million (ZAR704.389 million) has
been capitalized. Total capitalized project development
expenditure, net of revenue from metal sales, to date now stands at
US$562.881 million (ZAR3.709 billion). With effect from January 1,
2011, the Company declared commercial production which will result
in all future revenue, mine operating costs and amortization of the
total capitalized cost over the life of mine, being reported
through the Statement of Income.
As part of the construction of PPM, the supply of 37MVA of new
power from ESKOM was completed on June 7, 2009. Insurance
guarantees in the amount of US$16.039 million (ZAR105.718 million)
have been provided to ESKOM for the supply of power and certain
related infrastructure.
In addition, a complete 10MVA standby diesel generator power
plant ("power plant") was constructed at a cost of US$20.789
million (ZAR144.350 million) in the event that ESKOM is unable to
provide constant power to the mine over an extended period of time.
The construction of the power plant was completed on December 2,
2009.
Construction of the processing plant commenced in October 2007
and was completed in February 2009. In March 2009, the processing
of material through the UG2 circuit commenced, signalling the
commencement of the plant operation to produce a metal in
concentrate ready for smelting, refining and sale under the
Concentrate Agreement to Northam. In June 2009, following the
installation by ESKOM of an additional 23MVA of power for a total
of 37MVA, the processing of material through the Merensky circuit
commenced.
Far reaching changes to the management of operations were
implemented during FY2010 which are expected to begin to positively
influence metal production during H2FY2011.
In Q1FY2010, additional mining engineers were appointed into
both the own organization and that of the mining contractor. These
were supplemented by geological, platinum specialists, an on-site
open pit planner and a senior HR practitioner, familiar with the
local industrial relations climate in mining, during Q22010.
Revised planning by this team at mid-year, which forecast
break-even during H2FY2010, identified a significant waste
stripping backlog as the principal production challenge. To date,
the mining contractor has been unable to achieve the volumes
required to address this, despite radical re-structuring of their
organization. However, powerful interventions in the areas of
critical spares for the fleet, preventative maintenance, standby
machinery and shift rostering are expected to produce significantly
better waste volumes, exposing higher reef tonnages, shortly.
Important features of the performance for the year ended
December 31, 2010, were:
For the
For the period
year ended ended
Dec 31, Dec 31,
Unit 2010 2009
----------------------------------------- --------- ------------ ----------
Reef delivered to the ROM pad tonnes 2,689,900 2,191,640
Reef processed tonnes 3,132,695 1,590,506
Reef milled tonnes 2,905,912 1,488,205
Total stock pile 939,161 1,047,014
------------ ----------
- UG2 tonnes 36,328 9,020
- Merensky tonnes 196,091 49,717
- DMS and other low grade material tonnes 706,742 988,277
------------ ----------
Average milled head grade g/t 1.75 2.45
Average recovery rate % 41.2% 25.0%
Average recovered grade g/t 0.72 0.61
60,067
4E ounces dispatched and sold oz * 27,871
4E basket price **
- USD US$ 1,405 1,096
- ZAR ZAR 10,235 8,629
Gross revenue from metal sales
***
- USD US$'mil 91.028 36.536
- ZAR ZAR'mil 599.996 240.821
* Ounces produced and declared are based on provisional assay
results and the cumulative number is therefore subject to changes
until such time that final assay results are received. These
changes are not considered to be material.
** Basket price for the following four metals: platinum,
palladium, rhodium and gold.
*** Gross revenue includes the proceeds from the sales of
platinum, palladium, rhodium, iridium, ruthenium, gold, copper and
nickel, and was capitalised to development cost.
PPM is ideally situated to place Platmin in a favourable
position to participate in regional consolidation of the Western
Limb of the Bushveld Complex.
7.2 Pilanesberg exploration projects
The total exploration expenditure on various Pilanesberg
exploration projects was US$0.072 million (ZAR0.473 million) for
the year ended December 31, 2010. Total exploration expenditure
since the inception of the Pilanesberg Exploration Project of
US$17.044 million (ZAR112.342 million), has been capitalized. In
accordance with the Group's accounting policies, these costs are
capitalised as part of "Exploration and evaluation assets".
Work program
The Pilanesberg exploration projects consist of properties
adjacent to PPM. The focus is on advancing earlier stage
properties, through programs of soil sampling, trenching,
percussion drilling and ultimately diamond drilling. Platmin is
also conducting limited chrome exploration on properties in the
Pilanesberg Exploration Project area where these rights are
held.
7.3 Mphahlele Project
In the year ended December 31, 2010, a total of US$0.349 million
(ZAR2.304 million) was spent on the Mphahlele project bringing the
cumulative expenditure to date on the project by the Company,
excluding acquisition costs, to US$14.581 million (ZAR96.107
million). In accordance with the Company's accounting policies,
these costs are capitalised as part of "Exploration and evaluation
assets".
During the period under review, the Company continued with the
Definitive Feasibility Study ("DFS") on the Mphahlele project.
Work program
In light of the fact that the board has decided to focus cash
and management resources on bringing PPM into full production, this
project has been put on a reduced work program for the short term.
The reduced primary expenditure at Mphahlele during the 2011 fiscal
year is expected to be limited to activities related to the DFS
including metallurgical test work, the revision of resource models
to include mining dilution (various scenarios), mining design,
geotechnical investigations and the environmental impact assessment
/ management program.
7.4 Grootboom Project
In the year ended December 31, 2010, a total of US$0.135 million
(ZAR0.936 million) was spent on Grootboom and Annex Grootboom (upon
which Platmin has an option to acquire the PGE rights on completion
of a DFS), bringing the cumulative expenditure to date on the
project to US$6.569 million (ZAR43.297 million). In accordance with
the Company's accounting policies, these costs are capitalised as
part of "Exploration and evaluation assets".
The project advanced to the DFS stage during the period under
review and is subject to further engineering refinements that are
ongoing due to the recent economic background.
Work program
In light of the fact that the board has decided to focus cash
and management resources on bringing PPM into full production, this
project has been put on a reduced work program for the short term.
The reduced primary expenditure at Grootboom during the 2011 fiscal
year is expected to be limited to activities related to the DFS
including metallurgical test work, the revision of resource models
to include mining dilution (various scenarios), mining design,
geotechnical investigations and the environmental impact assessment
/ management program.
7.5 Loskop Project
Lonmin Plc is the operator of the Loskop Project and funds all
exploration expenditures on the project (except for a portion of
Rietfontein), as part of their option to acquire 50% in the joint
venture. As a result thereof, limited expenditure has been incurred
by Platmin.
For the year ended December 31, 2010, the Company spent US$0.352
million (ZAR2.321 million) on the Loskop Project, bringing the
cumulative exploration expenditure on this project since inception
to US$1.298 million (ZAR8.555 million). In accordance with the
Company's accounting policies, these costs are capitalised as part
of "Exploration and evaluation assets".
8. Contractual obligations
The Company's contractual obligations are as follows:
Contractual Payments due by period as at December
obligations US$ '000 31, 2010
----------------------
After
Total < 1 year 1-3 years 4-5 years 5 years
---------------------- -------- --------- ---------- ---------- ---------
Employee entitlements
(1) 439 439 - - -
Operating lease
(2) 286 228 58 - -
Finance lease (3) 21,279 1,495 2,991 2,991 13,802
Asset Retirement
Obligation (4) 86,667 - - - 86,667
Mining costs (5) 415,723 103,931 207,861 103,931 -
Processing costs
(6) 19,217 6,406 12,811 - -
Acquisition of
Sedibelo West (7) 94,000 94,000 - - -
Total Contractual
Obligations 637,611 206,499 223,721 106,922 100,469
-------- --------- ---------- ---------- ---------
(1) The employee entitlements include the leave pay due to
employees in terms of their employment contracts.
(2) This includes the contractual monthly payments for the
rental of the Company's corporate office.
(3) These amounts constitute the minimum lease payments due to
ESKOM for the substation and related infrastructure supplied at
PPM. Please refer to note 14 of the consolidated annual financial
statements.
(4) This amount of US$86.667 million (ZAR571.251 million)
represents the gross asset retirement obligation incurred to date,
to rehabilitate the opencast pit and plant at PPM at the end of
life of mine, in accordance with the mining license. The amount
disclosed in note 15 of the annual consolidated financial
statements of US$70.705 million (ZAR466.040 million) represents the
discounted value of such amount. Refer to note 13 in this MD&A
for discussion of the funding requirements for this obligation.
(5) Committed mining expenses include the contract with MCC
Opencast Mining Contractors ("MCC") for carrying out the opencast
mining operations.
(6) Committed processing expenses include the contracts with
Minerals Operations Executive (Pty) Ltd ("Minopex") for managing
the plant operations and maintenance of the Merensky and UG2
metallurgical concentrator plants.
(7) US$12.023 million was paid to Barrick on March 22, 2011 for
the power and water rights and the remaining US$82.000 million
(including VAT of US$7.000 million) for the acquisition and
incorporation of the Sedibelo West Mining Right into the PPM Mining
Rights and commission, will be placed in Escrow by April 6,
2011.
9. Off-balance sheet arrangements
The Company has not entered into any off-balance sheet
transactions.
10. Related party transactions
On March 22, 2010, the Company entered into a ZAR192.000 million
(an equivalent of US$26.000 million at an exchange rate of ZAR7.38
=US$1.00) short term lending facility with Pallinghurst. As at
December 31, 2010, a total of ZAR191.000 million was drawn against
this facility. This facility was initially for a period of 3 months
but was extended until February 28, 2011. The loan, accrued
interest and structuring fees were repaid in full on this date.
On May 13, 2010, the Company entered into zero percent
convertible debentures of US$135.000 million of which Pallinghurst
subscribed to US$30.000 million and Investec Bank Limited
("Investec") subscribed to US$5.000 million. (The remaining
US$100.000 million was subscribed to by Temasek Holdings (Private)
Limited ("Temasek") which is not a related party.)
11. Proposed transactions
The Company continues to evaluate opportunities in the market
with a view to expand the current business. At the current time
there are no reportable proposed transactions.
12. Black economic empowerment
Pursuant to the investors and subscription agreement entered
into in December 2008 with, among others, Ivy Lane Capital Limited,
being the South African investment vehicle of the Pallinghurst
Investor Consortium, the Bakgatla-Ba-Kgafela Tribe and the Bakgatla
Pallinghurst JV (Proprietary) Limited, the Moepi Group was required
by March 31, 2010, subject to certain conditions precedent, to
exchange its 27.61% interest in Boynton for common shares in
Platmin ("The Moepi Exchange"). Not all the conditions were
satisfied by March 31, 2010 and the parties to the agreement agreed
not to extend the fulfilment date thereof and accordingly the Moepi
Exchange was not completed.
Platmin has funded a total of US$10.703 million on behalf of its
BEE partners for exploration activities, and US$154.190 million for
mine development. All such amounts remain outstanding on
inter-company loan accounts.
13. Environmental matters
The Company conducts exploration on its key projects and
prospects subject to mineral exploration permit applications made
to and issued by the DMR. For each exploration program, a
rehabilitation plan is included with the application and where
required, the appropriate bond or funds are lodged with the
relevant agent of the DMR in respect of the rehabilitation work
which may have to be carried out when the exploration program is
completed and no further work is planned on the property. All such
environmental plans or bonds are in the normal course of the
business.
During the year under review, PPM was still in the commissioning
phase and the environmental liability represents the quantum of
closure costs (relating to the increase in pit volume and
dismantling the plant) necessary in order to fulfil the
requirements of the DMR, as well as meeting specific closure
objectives outlined in the mine's Environmental Management
Programme ("EMP").
Environmental guarantees are released by the DMR on completion
of the obligations in terms of the rehabilitation plans contained
within either the application for the prospecting permits, or the
Mining Right.
13.1 PPM rehabilitation
In respect of PPM, the DMR required a rehabilitation guarantee
of US$7.586 million (ZAR50.000 million) before approving the
application for a Mining Right. This guarantee has been provided by
Guardrisk Insurance Company Limited ("Guardrisk") on an insurance
basis, with an amount of US$2.731 million (ZAR18.000 million) paid
to Guardrisk as collateral against the issuance of this guarantee.
Ongoing contributions are made by PPM to fund the balance of the
liability over the remaining life of mine. During the quarter ended
June 30, 2010, bank guarantees to the value of US$18.964 million
(ZAR125.000 million) were provided to the DMR in respect of the
rehabilitation liability as at February 28, 2009.These guarantees
are secured by cash deposited as collateral with the issuing bank.
A further guarantee of US$52.564 million (ZAR346.464 million) in
respect of rehabilitation obligations for the ten months ended
December 31, 2009, was issued on August 12, 2010.
The increase in the undiscounted environmental rehabilitation
obligation for PPM can be summarized as follows:
For the
For the 10 months
year ended ended
Dec 31, Dec 31,
UNDISCOUNTED REHABILITATION LIABILITY 2010 2009
- ZAR ZAR'000 ZAR'000
--------------------------------------------- ------------ -----------
Opening balance 521,906 175,000
346,906
Increase for the period 49,345 (a) (b)
------------ -----------
- Pro-forma increase based on back-fill
methodology 216,005 180,246
- Reduction in increase due to change
in rates (c) (166,660) 166,660
------------ -----------
Closing balance 571,251 521,906
============ ===========
(a) Cash backed guarantee provided to the DMR on March 25,
2011.
(b) Cash backed guarantee provided to the DMR on August 10,
2010.
(c) For the year ended December 31, 2010, the waste hauling
methodology being applied to the original rehabilitation plan
changed from "load and haul" to a conveying system. This resulted
in the rate previously used to determine the liability
decreasing.
An application to amend the EMP to convert the open void into a
water storage facility is currently in progress and is expected to
be lodged with the DMR by the end of the financial year ending
December 31, 2011. The application to amend the current EMP will be
subject to the normal regulatory approval process by the DMR and
various other government departments.
On January 25, 2011, the DMR lifted the moratorium on
insurance-backed rehabilitation guarantees imposed by them on May
8, 2009. During this period, insurance companies lost capacity to
issue rehabilitation guarantees. It is expected that the capacity
will be regained shortly.
13.2 Other development projects' rehabilitation
In respect of the Mphahlele Project, the DMR required a
rehabilitation guarantee of US$2.520 million (ZAR16.609 million) to
be lodged before the issuing of the Mining Right. These guarantees
have been provided by Guardrisk on an insurance basis, with an
amount of US$6.856 million (ZAR45.187 million) in respect of the
ESKOM guarantees and an amount of US$1.077 million (ZAR7.099
million) in respect of the Mphahlele project. This brings the total
amount paid over into a separate Boynton bank account and ceded in
favour of Guardrisk as collateral against the issuance of these
guarantees to US$7.933 million (ZAR52.286 million). Ongoing
contributions are made by Boynton to fund the balance of the
liability over the remaining life of the prospecting permit.
In respect of the Grootboom project, negotiations with the DMR
are currently in progress to determine the amount of the
rehabilitation guarantee required by the DMR before issuing the
Mining Right.
14. Mineral and Petroleum Resources Royalty Act, 2008 (Act no.
28 of 2008)
The South African Government has enacted the Mineral and
Petroleum Resources Royalty Act (the "Royalty Act"), which imposes
a royalty payable to the South African Government by businesses
based upon financial profits made through the transfer of mineral
resources.
The legislation was passed on November 17, 2008 and was due to
come into operation on May 1, 2009. During his budget speech in
February 2009, the South African Minister of Finance deferred the
implementation of the Royalty Act to March 1, 2010. In terms of the
legislation resulting from the Royalty Act, a royalty will be
levied for the benefit of the National Revenue Fund of the
government of the Republic of South Africa. The amount levied will
be based on a percentage calculated by means of a formula, from a
minimum of 0.5% up to a maximum of 5% on gross sales of refined
mineral resources or 7% on gross sales of unrefined mineral
resources.
During the year ended December 31, 2010, Royalty Tax amounting
to US$0.293 million (ZAR2.134 million) has been paid to the South
African Government in respect of metals sold from March 1, 2010 to
December 31, 2010.
15. Critical accounting estimates
The Company's significant accounting principles and methods of
application are disclosed in the notes of the Company's
consolidated financial statements for the year ended December 31,
2010. The following is a discussion of the critical accounting
policies and estimates which management believes are important for
an understanding of the Company's financial results.
Functional and presentation currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ("the functional
currency"). The Group's functional currency, as determined at the
transition date to IFRS of March 1, 2008, is the South African
rand. The consolidated financial statements are presented in United
States dollars which is the Group's presentation currency for
purposes of dual listing and foreign shareholders.
The results and financial position of all the Group entities
(none of which has the currency of a hyper-inflationary economy)
that have a functional currency different from the presentation
currency are translated into the presentation currency as
follows:
- assets and liabilities for each statement of financial
position presented are translated at the closing rate at the date
of that financial period end;
- income and expenses for each statement of income and
comprehensive income are translated at average exchange rates
(unless this average is not a reasonable approximation of the
cumulative effect of the rates prevailing on the transaction dates,
in which case income and expenses are translated at the rate on the
dates of the transactions);
- equity transactions are translated using the exchange rate at
the date of the transaction; and all resulting exchange differences
are recognized as a separate component of equity.
Share based payment transactions
Transactions which may result in the entity issuing its own
equity are within the scope of IFRS2 - Share based payments when
the fair value of the instrument is greater than the proceeds
received. On this basis the convertible debentures have been
accounted for under IFRS 2.
The fair value of the instruments granted is measured using
generally accepted valuation techniques and is recognised as an
expense with a corresponding increase in equity. The fair value is
measured at grant date.
Exploration and evaluation assets and development
expenditure
Exploration and evaluation costs, including the cost of
acquiring licenses, are capitalized as exploration and evaluation
assets on a project-by-project basis pending determination of the
technical feasibility and the commercial viability of the project.
The capitalized costs are presented as either tangible, or
intangible exploration and evaluation assets according to the
nature of the assets acquired.
Capitalized costs include costs directly related to exploration
and evaluation activities in the area of interest. General and
administrative costs are only allocated to the asset to the extent
that those costs can be directly related to operational activities
in the relevant area of interest. When a license is relinquished or
a project is abandoned, the related costs are recognized through
profit and loss immediately.
Inventory
Inventories are measured at the lower of cost and net realizable
value. The cost of inventories includes expenditure incurred in
acquiring the inventories, production or conversion costs and other
costs incurred in bringing them to their existing location and
condition.
Provisions
Provisions are measured at the present value of the expenditures
expected to be required to settle the obligation using a pre-tax
rate that reflects current market assessments of the time value of
money and the risks specific to the obligation. The increase in the
provision due to passage of time is recognized as interest
expense.
The costs for the restoration of site damage, which arises
during production, are provided at their net present values and
charged against their operating profit as extraction progresses.
Changes in the measurement of a liability which arises during
production are charged against operating profit.
The discount rate used to measure the net present value of the
obligations is the pre-tax rate that reflects the current market
assessments of the time value of money and the risks specific to
the obligation.
In accordance with the Group's policy and applicable legal
requirements, a provision for decommissioning liabilities is
recognized when the asset is installed and rehabilitation
liabilities are recognized when the land is disturbed.
Revenue
The Group recognizes revenue when the amount of revenue can be
reliably measured, it is probable that future economic benefits
will flow to the entity and when specific criteria have been met
for each of the Group's activities as described below. The amount
of revenue is not considered to be reliably measurable until all
contingencies relating to the sale have been resolved.
Revenue from the sale of goods is recognized when the
significant risks and rewards of ownership have been transferred to
the buyer. Revenue is not recognized if there are significant
uncertainties regarding recovery of the consideration due.
No revenue is recorded in the annual consolidated interim
statement of income and comprehensive income as the PPM only
reached commercial production as of January 1, 2011.
16. Financial instruments and other instruments
The Company's financial instruments consist of the
following:
Dec 31, Dec 31,
2010 2009
US$ '000 US$ '000
------------------------------------------- -------------- -------------
Loans receivable 63 50
Restricted cash investments and guarantees 84,471 7,163
Accounts and other receivables 46,877 28,452
Cash and cash equivalents 188,596 29,375
-------------- -------------
320,007 65,040
Restricted cash (2) 135,131 -
Total financial assets 455,138 65,040
=========================================== ============== =============
Dec 31, Dec 31,
2010 2009
US$ '000 US$ '000
---------------------------------------- -------------- -------------
Long term borrowings 4,710 3,817
Current portion of long-term borrowings 31,923 -
Trade payables and accrued liabilities 20,747 22,144
Revolving commodity facility 3,468 5,854
-------------- -------------
60,848 31,815
Convertible debenture (2) 133,228 -
Total financial liabilities 194,076 31,815
======================================== ============== =============
(1) None of the Group's financial liabilities have been
categorised as derivatives used for hedging or available for sale
liabilities.
(2) The restricted cash have been provided as collateral against
the convertible debenture.
The fair value of a financial asset or a financial liability is
the amount at which the asset could be exchanged or liability
settled in a current transaction between willing parties in an
arm's length transaction. Financial instruments are initially
measured at fair value when the Company becomes a party to their
contractual arrangements. Transaction costs are included in the
initial measurement of financial instruments. The fair values of
the Group's financial assets and liabilities approximate their
carrying values, as a result of their short maturity or because
they carry floating rates of interest.
All financial assets and liabilities recorded in the financial
statements approximate their respective net fair values.
Financial risk management activities
The Group is exposed to certain financial risks in the normal
course of its operations:
-- Market risk (including foreign exchange / currency risk,
commodity price risk, interest rate risk);
-- Liquidity risk; and
-- Credit risk.
Financial risk management framework, objectives and policies
The Board of Directors has overall responsibility for the
establishment and oversight of the Group's risk management
framework. The Group's Executive is responsible for developing and
monitoring the Group's risk management policies. The Group's
Executive reports regularly to the Board of Directors on its
activities.
The Group's risk management policies are established to identify
and analyse the risks faced by the Group, 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 Group's activities.
The Group, through its training and management standards and
procedures, aims to develop a disciplined and constructive control
environment in which all employees understand their roles and
obligations.
The Group Audit Committee oversees how management monitors
compliance with the Group's risk management policies and
procedures, and reviews the adequacy of the risk management
framework in relation to the risks faced by the Group.
Group Treasury risk
The Group monitors its forecast financial position on a regular
basis. The Group's Executive meets regularly and considers cash
flow projections for the following 12 months in detail, taking into
consideration the impact of market conditions including commodity
prices and foreign exchange rates. The Group's Executive also
receives reports from independent exchange consultants and receives
presentations from advisors on current and forecast economic
conditions.
The Group's forecast financial risk position with respect to key
financial objectives and compliance with treasury practice are
regularly reported to the Board.
From time to time, the Group does use derivative financial
instruments to hedge certain identified risk exposures, as deemed
necessary by the Group's Executive. The Group does not acquire,
hold or issue derivative instruments for trading purposes.
The Group's objectives, policies and processes for managing
risks arising from financial instruments have not changed from the
previous financial year.
Foreign exchange (currency) risk
The group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures, primarily
with respect to the United States dollar ("US dollar"). The group's
functional currency is the South African rand ("SA rand").
Foreign exchange risk arises from future commitments, assets and
liabilities that are denominated in a currency that is not the
functional currency. Most of the company's purchases are
denominated in SA rand. However, certain initial capital items
during the plant construction phase as well as long lead-capital
items are denominated in US dollars, Euros or Australian dollars.
These have to be acquired by the South African operating company
due to the South African Reserve Bank's Foreign Exchange Control
Rulings. This exposed the South African subsidiary companies to
changes in the foreign exchange rates.
The Group's cash deposits are largely denominated in US dollar
and SA rand. A foreign exchange risk arises from the funds
deposited in US dollar which will have to be exchanged into the
functional currency for working capital purposes.
Furthermore, the international commodity market is predominately
priced in US dollars which exposes the Group's cash flows to
foreign exchange currency risks.
Commodity price risk
Commodity price risk arises from the possible adverse effect on
current and future earnings due to fluctuations in commodity
prices, in particular the price of PGMs. Most of these prices are
determined in US dollars and are internationally determined in the
open market. The Group regularly measures exposure to commodity
price risk by stress testing the Group's forecast financial
position to changes in PGM prices. The Group reviews it exposure
with reference to the 4E basket price.
The Group does not actively hedge future commodity prices
against price fluctuations. The PPM operation recognises revenue at
the month end during which delivery of concentrate has occurred at
the month's average commodity price for the contained metal. The
revenue is revalued at each month end to the latest commodity price
averages until such time that the commodity is determined under the
Concentrate Agreement entered into with Northam. These fair value
adjustments are set off against revenue, as this is the mining
industry standard.
During 2009 and continuing in 2010, the Group entered into a
Revolving Commodity Facility with Investec (please refer to note 19
in the annual consolidated financial statements for details on this
facility). In terms of this facility, Investec will finance up to
91% of PPM's platinum, palladium, gold, copper and nickel
deliveries to Northam in the month following the delivery month.
This facility is repaid within 2 to 3 months. The respective
commodity prices are determined and fixed upon each drawdown in SA
rand and any fluctuations in the commodity prices or SA rand / US
dollar exchange rate are hedged in terms of a swap agreement. Under
this agreement, the Group agrees to swap a fixed amount on maturity
date of the respective drawdown with the variable amount realised
on the commodity and currency markets. The fair value adjustments
arising from this are set off against revenue, as this is the
mining industry standard.
Interest rate risk
Interest rate risk is the risk that the Group's financial
position will be adversely affected by movements in interest
rates.
The Group's main interest rate risk arises from short-term loans
with interest charges based on the Johannesburg Interbank
Acceptance Rate ("JIBAR"). Floating rate debt exposes the Group to
cash flow interest rate risk. The long-term loans bear interest at
an interest rate linked to the South African prime overdraft rate.
Cash holdings are subject to interest rate risk in the country in
which they are held on deposit. All other financial assets and
liabilities in the form of receivables, payables and provisions, is
non-interest bearing.
The Group currently does not engage in any hedging or derivative
transactions to manage interest rate risk. In conjunction with
external advice, management consideration is given on a regular
basis to alternative financing structures with a view to optimising
the Groups' funding structure.
Liquidity risk
The liquidity position of the Group is managed to ensure
sufficient liquid funds are available to meet financial commitments
in a timely and cost effective manner. The Group's Executive
continually reviews the liquidity position including cash flow
forecasts to determine the forecast liquidity position and maintain
appropriate liquidity levels.
All excess cash is held by the Company or the South African
operating company, Boynton. The Company invests excess funds in a
32 day deposit account and Boynton keeps excess funds in a current
account. Cash is deposited at highly reputable financial
institutions of high quality credit standing within the Republic of
South Africa and their foreign affiliates in the United
Kingdom.
Credit risk
Credit risk is the risk that a contracting entity will not
complete its obligation under a financial instrument that will
result in a financial loss to the Group. The carrying amount of
financial assets represents the maximum credit exposure. Receivable
balances are monitored on an ongoing basis with the result that the
Group's exposure to bad debts is not significant. The Group's
credit risk is limited to the carrying value of its financial
assets.
At balance date there is a significant concentration of credit
risk represented in the cash and accounts receivables balance. With
respect to accounts receivables, this is due to the fact that the
majority of sales are made to one customer, being Northam, as per
contractually agreed terms. The customer has complied with all
contractual sales terms and has not at any stage defaulted on
amounts due. The Group manages its credit risk by predominantly
dealing with counterparties with a positive credit rating.
Capital management
The Group's Corporate office is responsible for capital
management. This involves the use of corporate forecasting models,
which facilitates analysis of the Group's financial position
including cash flow forecasts to determine the future capital
management requirements. Corporate office monitors gearing.
Capital management is undertaken to ensure a secure, cost
effective supply of funds to ensure the Group's operating and
capital expenditure requirements are met. The mix of debt and
equity is regularly reviewed. The Group does not have a target
debt/equity ratio, but has a policy of maintaining a flexible
financing structure so as to be able to take advantage of new
investment opportunities that may arise. Net debt is calculated as
total borrowings (including the current and non-current borrowings
as reported on the Statement of Financial Position). Total capital
is calculated as the total equity (as reported) plus net debt.
17. Outstanding share data
As at December 31, 2010, the Company had 749,680,767 issued and
outstanding common shares.
As at December 31, 2010, there were 7,876,565 outstanding
options exercisable for common shares and a further 8,537,335
unvested share options, which, if exercised, would result in the
issue of an additional 16,413,900 common shares. The total options
outstanding at December 31, 2010, totalled 16,413,900 options.
As at March 31, 2011, the Company had 910,395,054 issued and
outstanding common shares (including 160,714,287 new shares to be
issued as a result of the conversion of the convertible
debentures).
18. Risks and uncertainties
The Company is in the business of exploration and development of
mineral properties, and operating mines, with the objective of
reaching commercial production of the properties directly or
through third parties. There are numerous risks associated with
this business and specific risks with regards to the South African
mining environment.
Readers are urged to review the section titled "Risk Factors"
appearing in Platmin's current AIF for the financial period ended
December 31, 2010, which can be viewed at www.sedar.com.
19. Internal control over financial reporting
Management has evaluated or caused to be evaluated, the
effectiveness of the Company's disclosure controls and procedures
and the internal control over financial reporting and concluded
that the Company's disclosure and internal control over financial
reporting was effective as of the end of the financial period ended
December 31, 2010. Platmin has identified no material weakness in
the design of its internal controls over financial reporting. There
has been no change in Platmin's internal controls over financial
reporting since its year-end MD&A for the period ended December
31, 2009 or in the period ended December 31, 2010, or since
September 30, 2010, that has materially affected, or is reasonably
likely to materially affect, Platmin's internal controls over
financial reporting.
This information is provided by RNS
The company news service from the London Stock Exchange
END
MSCMMGFFZMRGMZM
Platmin (LSE:PPN)
Historical Stock Chart
From Apr 2024 to May 2024
Platmin (LSE:PPN)
Historical Stock Chart
From May 2023 to May 2024
