TIDMPPN
RNS Number : 3790M
Platmin Limited
15 August 2011
PLATMIN LIMITED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED June 30, 2011
August 15, 2011
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Management's Discussion and Analysis of Financial Condition
and Results of Operations ("MD&A") for the three and six months
ended June 30, 2011. 2011 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 (which together with Platmin is referred to as
"the Platmin Group" or "the Group"), and its mineral projects, the
future price of 4E metals (commonly used to refer to platinum,
palladium, rhodium and gold), 4E production levels, mining rates,
the future price of copper and nickel, 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 ongoing capital 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 reaching a monthly rate of 12,000 4E
ounces by end FY2011 and 20,000 4E ounces by end FY2012 provided
the planned volumes of waste stripping can be achieved; lodging of
an amended Environmental Management Plan in August 2011; recovery
rates and grade; targets, estimates and assumptions in respect of
4E metal prices and production; allocation of funds for current
commitments; and the timing and completion of definitive
feasibility engineering studies 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 time frames,
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 function
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 the Platmin Group 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 4E metals; 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 31 March 2011, 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
1.1 Incorporation and listing of Platmin's shares
Platmin Limited ("Platmin" or "the Company") was incorporated
under the Canada Business Corporation Act on May 29, 2003. It has
continued as a company under the Business Corporations Act of
British Columbia, Canada, effective April 1, 2009.
Platmin's 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 the TSX
and the AIM and under the symbol "PLN" on the JSE.
1.2 Nature of business
The Platmin Group, consisting of Platmin and its subsidiaries
and affiliated companies, is a natural resources group engaged in
the acquisition, exploration, development and operation of Platinum
Group Metals ("PGM") properties in South Africa.
1.3 Pilanesberg Platinum Mines
Through its 72.39% owned subsidiary, Pilanesberg Platinum Mines
(Proprietary) Limited, Platmin has established the Pilanesberg
Platinum Mines ("PPM") on the Western Limb of the Bushveld Complex.
PPM declared commercial production from January 1, 2011 which means
the results of operations are now reported in the statement of
income (as opposed to being capitalised to development cost, as was
the case until December 31, 2010).
PPM is the Group's primary asset and consists of:
(i) the open-cast Tuschenkomst Pit; and
(ii) an adjacent PGM concentrator.
The principal focus of the Platmin Group is to build up the
PPM's production from the Tuschenkomst Pit to the levels forecast
in the bankable feasibility study.
Mining at PPM has been contracted to MCC Contracts (Proprietary)
Limited ("MCC"), a wholly-owned subsidiary of Eqstra Holdings
Limited.
The operation of the concentrator, which entails crushing,
milling and flotation of the ore to produce a PGM concentrate has
been contracted to Mineral Operations Executive (Proprietary)
Limited ("Minopex"), a division of DRA Engineering (Proprietary)
Ltd. The plant has capacity to process 417,000 tonnes of material
per month and mill 285,000 tonnes of ore per month.
The PGM concentrate is toll refined under contract by Northam
Platinum Limited ("Northam") to produce platinum, palladium,
rhodium, and gold (collectively referred to as "4E"), plus iridium,
ruthenium, copper and nickel.
The 4E's contributed approximately 90% of the gross revenue
earned by the PPM during the three and six month periods ended June
30, 2011.
1.4 Consolidation of the Western Limb of the Bushveld
Complex
Due to common shareholders in other PGM properties on the
Western Limb, its recent acquisition of the Sedibelo West PGM
property dealt with in 2.1 below and its recent acquisition of a
50% interest in the power and water rights and certain other assets
pertaining to the Sedibelo area (see 2.2 below), Platmin is ideally
placed to participate in the consolidation of several adjacent
properties within the Western Limb of the Bushveld Complex.
1.5 Acquisition, exploration and development of other PGM
properties
The Platmin Group holds valuable interests in PGM deposits on
the Eastern Limb of the Bushveld Complex through its three
exploration and development projects namely Mphahlele, Grootboom
and Loskop.
1.6 Purpose of this MD&A
This Management's Discussion and Analysis of Financial Condition
and Results of Operations ("MD&A") is provided to enable the
reader to assess and understand the financial position and results
of operations for the three and six months ended June 30, 2011, in
comparison to corresponding periods. Certain information in this
MD&A must be read in conjunction with:
(i) 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");
(ii) the condensed consolidated interim financial statements for
the three and six months ended June 30, 2011 and supporting notes;
and
(iii) 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.
1.7 Reporting currency and periods
Whilst the mining and exploration activities are conducted in
South Africa and reported in South African rand ("ZAR"), in this
MD&A the financial amounts have been converted to and are
reported in United States dollars ("US$").
2. The Sedibelo West and related transactions
2.1 The acquisition of 5.99 million 4E ounces
On March 23, 2011 Platmin announced the acquisition of an
incremental 5.99 million 4E inferred resource ounces, (42.57
million tonnes at a grade of 4.38 g/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 (Proprietary) Limited ("IBMR"), for a
total purchase consideration payable in cash of US$82.000 million
(US$75.000 million including VAT of US$7.000 million). This is
equivalent to US$12.50 per 4E inferred resource ounce.
Sedibelo West is contiguous with and down-dip of the eastern
boundary of the Tuschenkomst property, where the PPM opencast
mining operation is currently taking place.
The acquisition of the Sedibelo West property will add value to
PPM by:
-- materially increasing the PGM resource base accessible from
the existing opencast pit;
-- accessing sulphide material at depth from the down dip
contiguous section of the ore body;
-- providing operational flexibility, particularly in the north
pit;
-- extending the current life of mine; and
-- creating economy of scale with the existing plant
infrastructure.
Optimisation and mine planning studies to maximize the value of
the enlarged PPM/Sedibelo West property have begun, and are
expected to be materially concluded by the end of the 2011
financial year.
2.2 The acquisition of an effective 50% interest in an
infrastructure vehicle
On March 23, 2011 Platmin also announced the acquisition, for an
aggregate consideration of US$12.025 million, of an effective 50%
interest in the Special Purpose Vehicle ("SPV") that acquired from
Barrick Platinum South Africa (Proprietary) Limited ("Barrick") all
of its power and water rights as well as certain other assets
originally purchased by Barrick to develop a PGM project in the
Sedibelo area, contiguous to the Sedibelo West property which
Platmin has acquired. The acquisition was completed in partnership
with the Bakgatla (25.05%) and Ivy Lane Capital Limited
(24.95%)
Through this transaction, Platmin has positioned itself ideally
for participation in further regional consolidation.
2.3 The conversion of the convertible debentures into equity
As a consequence of the above transactions the convertible
debentures issued on May 13, 2010, in principal amount of
US$135.000 million, were converted into 160,714,286 new common
shares in Platmin on March 31, 2011. Upon conversion, the proceeds
from the convertible debentures previously held in a collateralized
bank account and classified as "restricted cash" in the
Consolidated Statement of Financial Position as at December 31,
2010 totaling US$135.131 million, were released to the Company in
full.
2.4 Payment to the Bakgatla and IBMR
On April 20, 2011 the purchase consideration and VAT, totaling
US$82.000 million, was placed in an escrow account pending the
approval by the Department of Mineral Resources ("DMR") to
incorporate the Sedibelo West area as part of PPM's Tuschenkomst
mining area. Application to incorporate the Sedibelo West mining
areas into PPM's mining area has been lodged with the DMR. The
approved Environmental Management Program (EMP) will also be
required to be amended and approved to give effect to the
acquisition.
3. Overall performance
3.1 Financial condition
At June 30, 2011 the Group was adequately funded and possessed
sufficient liquidity to fund the operations. The following is a
summary of key financial indicators as at June 30, 2011:
June 30, Dec 31,
2011 2010
US$ million US$ million
Equity 901.557 834.396
Net current assets, including cash 185.634 192.232
Cash and cash equivalents (unrestricted) 160.060 188.596
3.2 Cashflows
Unrestricted cash and cash equivalents decreased by US$28.536
million from December 31, 2010 to June 30, 2011. This net decrease
is primarily due to the following significant transactions during
the six month period:
-- US$135.131 million cash inflow on March 31, 2011, upon
conversion of the convertible debentures plus interest received
(see 2.3 above);
-- US$82.000 million cash outflow for payment into escrow of the
total purchase consideration for the Sedibelo West transaction (see
2.1 and 2.4 above);
-- US$28.822 million cash outflow for the repayment in full of
the Pallinghurst Resources Limited ("Pallinghurst") promissory
note, including interest and costs;
-- US$37.085 million cash outflow used in operating
activities;
-- US$6.558 million cash inflow from revolving credit
facility;
-- US$4.322 million cash outflow used for capital
expenditure;
-- US$12.025 million cash outflow for the payment of the
purchase consideration for a 50% interest in the SPV (see 2.2
above);
-- US$5.971 million cash outflow for the incremental
rehabilitation liability.
3.3 Results of operations
Mining operations commenced in December 2008 with mining of the
oxidized layer and the first concentrate was delivered for smelting
and processing on April 1, 2009. Operational costs, net of revenue
from metal sales, for PPM were capitalized until December 31, 2010.
From January 1, 2011, PPM declared commercial production and the
results of operations are now reported in the statement of income.
Key operational statistics for the quarter and six months are
summarized as follows:
For the three For the six
months ended months ended
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
Averaged
milled head
grade g/t 1.72 1.64 1.78 1.72
Average
concentrator
recovery
rate % 43.8 36.1 47.3 37.0
Average
recovered
grade g/t 0.75 0.69 0.84 0.64
Total 4E
ounces
produced Ounces 18,198 10,548 37,823 24,941
Total 4E
ounces
dispatched
and sold Ounces 21,888 10,548 39,791 24,941
Total losses US$'million 23,183 24,026 58,017 29,207
3.4 Market trends and outlook
Average PGM prices increased by 12% and 22 % in US dollar terms
during the three and six month periods ended June 30, 2011 compared
to the three and six month periods ended June 30, 2010. The
strengthening of the South African rand offset the stronger dollar
prices, resulting in a net 2% and 12% increase in the rand PGM
basket over the same period. The rand has held onto its gains after
the end of the quarter and continues to impact negatively on
operating margins.
The global outlook for PGM demand remains positive.
3.5 Events or uncertainties
During the three and six month periods ended June 30, 2011
-- PPM declared commercial production with effect from January
1, 2011, from which date all losses and profits will be disclosed
in the statement of income;
-- On February 28, 2011, the Pallinghurst promissory note of
US$26.000 million entered into on March 22, 2010 was repaid in
full, together with accrued interest and structuring fees,
totalling US$28.822 million;
-- On February 28, 2011, Wayne Koonin the Chief Financial
Officer of the Company, resigned effective May 31, 2011;
-- On March 23, 2011, it was announced that the Company had
successfully concluded the Sedibelo West acquisition detailed above
in 2.1. and acquired an effective 50% interest in an infrastructure
vehicle detailed above in 2.2.;
-- On 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 160,714,286 new common
shares were issued resulting in a total of 910,395,053 Common
Shares in issue;
-- Craig Shaw was appointed as Chief Financial Officer, with
effect from May 1, 2011;
-- On April 20, 2011, the Company transferred the total purchase
consideration totaling US$82.000 million including VAT of US$7
million for the Sedibelo West acquisition to an escrow account as
detailed above in 2.4;
-- On May 26, 2011 Kgosi Molefe John Pilane, the appointed
traditional leader of the Bakgatla, joined the Board of
Platmin;
-- On June 23, 2011, certain employees of mining contractor MCC
illegally disrupted operations at the Pilanesberg Platinum Mine.
These disruptions comprised intimidation of supervisors, illegal
industrial action and serious damage to property and mining
equipment belonging to MCC. The South African Police Services were
called in to safeguard employees, prevent further damage and
stabilize the situation. Nothwithstanding these events, Platmin's
concentrator operated at full capacity throughout the period and it
immediate aftermath by processing stockpiled oxidised reef and, in
fact record metal in concentrate were dispatched during the month
June. However mining activities and the build-up of production to
target levels have been materially affected, see below.
Subsequent to June 30, 2011
-- On July 8, 2011, Platmin advised that agreement had been
reached between its mining contractor, MCC and the National Union
of Mineworkers (NUM) on resumption of mining operations at the
PPM.
Mining recommenced on 12 July 2011 and progress is being made to
return to previous volumes. Mining volumes were affected materially
during July and August and it will be a significant challenge to
reach previous levels by 4(th) quarter 2011. The assessment of
damage has been completed by the mining contractor and the
replacement of key equipment will be done over the coming months.
Due to capacity constraints arising from the destruction of MCC
vehicles during the disruptions and long lead times on the delivery
of new large mining equipment the management of PPM are evaluating
the introduction of additional contractors to increase volumes to
target levels.
4. Results of operations
4.1 Financial performance for the quarter ended June 30,
2011
The Group recorded a net loss for the three and six month
periods ended June 30, 2011 of US$23.183 million and US$58.017
million, or US$0.02 and U$0.05 per share, compared to a net loss of
US$24,026 million and US$29.207, or a loss of US$0.04 and US$ 0.05
per share, for the three and six month periods ended June 30, 2010.
PPM declared commercial production with effect from January 1, 2011
and the results are summarized as follows:
For the three months For the six months
ended ended
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
$ 000 $ 000 $ 000 $ 000
Revenue 34,489 - 60,527 -
Cost of operations (53,763) - (104,057) -
-------------- -------------- -------------- --------------
On mine
operations (28,498) - (58,274) -
Concentrator
plant
operations (12,041) - (23,800) -
Beneficiation and
transport (2,685) - (4,640) -
Salaries (706) - (1,925) -
-------------- -------------- -------------- --------------
Subtotal (43,930) - (88,639) -
Depreciation of
operating
assets (6,272) - (12,311) -
Change in
inventories (3,561) - (3,107) -
-------------- -------------- -------------- --------------
Operating loss (19,274) - (43,530) -
Operating expenses (5,178) (4,922) (8,505) (9,315)
-------------- -------------- -------------- --------------
Employee expenses (2,090) (2,260) (3,256) (4,363)
Mining overheads (966) - (1,916) -
Amortization and
depreciation (142) (142) (362) (278)
General and
administrative
expenses (519) (1,634) (1,054) (2,924)
Consulting and
professional
fees (1,279) (23) (1,524) (195)
Royalty tax (148) (122) (301) (122)
Audit fees (55) (242) (201) (422)
Share based
payments
expense 21 (499) 109 (1,011)
Other
income/(expenses) 555 (16,407) (6,197) (16,416)
-------------- -------------- -------------- --------------
Other income 121 (1) 175 (1)
Non cash
share-based
payment
expense* (190) (23,455) (14,808) (23,455)
Loss on
impairment of
exploration
project - (255) - (255)
Foreign
exchange gain
(loss) 624 7,304 8,436 7,295
-------------- -------------- -------------- --------------
Net finance
income/(costs) 714 (2,697) 215 (3,467)
-------------- -------------- -------------- --------------
Finance income 1,684 - 3,474 -
Finance costs (970) (2,697) (3,259) (3,476)
-------------- -------------- -------------- --------------
Loss before
taxation (23,183) (24,026) (58,017) (29,207)
Income tax - - - -
-------------- -------------- -------------- --------------
LOSS FOR THE
PERIOD (23,183) (24,026) (58,017) (29,207)
-------------- -------------- -------------- --------------
*Fair value adjustment on the convertible debenture, a non-cash
item. See below for detailed explanation.
Comparative adjusted financial results
The table below sets out for comparison purposes the operating
loss on the like for like basis assuming no capitalisation of
losses in 2010.
The reconciliation of the loss for the period adjusts for
revenue and cost capitalised to property, plant and equipment in
2010 and for the depreciation of operating assets in 2011.
For the three months For the six months
ended ended
June 30, June 30, June 30, June 30,
2011 2010 2011 2010
$ 000 $ 000 $ 000 $ 000
Loss for the
period (23,183) (24,026) (58,017) (29,207)
Add: - (21,018) - (32,274)
--------------- --------------- ----------------- -----------------
Revenue - 2010 - 14,998 - 33,501
Cost of Sales -
2010 - (36,016) - (65,775)
--------------- --------------- ----------------- -----------------
Add back:
Depreciation of
operating
assets 6,272 - 12,311 -
--------------- --------------- ----------------- -----------------
Adjusted loss (16,911) (45,044) (45,706) (61,481)
--------------- --------------- ----------------- -----------------
4.1 Financial performance for the quarter ended June 30, 2011
(continued)
The Group generated revenue of US$34.489 million and US$60.527
million based on 21,888 and 37,791 4E ounces dispatched and sold
during the three and six month periods ended June 30, 2011. For the
three and six month periods ended, US$31.219 million and US$54.623
relates to 4E revenue and US$3.270 and US$5.904 million relates to
iridium, ruthenium, copper and nickel. Revenues represent the
amounts recorded when PGM concentrates are physically delivered to
the smelter, which are provisionally priced on the date of
delivery. Metal prices and assayed quantities at the point of sale
are provisional. Adjustments in respect of final assayed quantities
and/or prices arising between the date of recognition and the date
of settlement are recognised in the period in which the adjustment
arises and reflected through revenue and receivables.
The Group recorded an average delivered basket price of US$1,537
(2010 - US$1,438) and US$1,556 (2010 - US$1,431) per 4E ounce for
the three and six month period ended June 30, 2011. As a result of
the adjustments in respect of final assayed quantities and/or
prices arising between the date of recognition and the date of
settlement, the Group recorded a net positive provisional price
adjustment of US$0.475 million for the quarter ended June 30,
2011.
The following table shows a reconciliation of revenue and
provisional price adjustments:
For the For the
three months six months
ended ended
June 30, June 30,
2011 2011
$ 000 $ 000
Revenue before provisional price adjustments
Net provisional price adjustments 33,599 60,117
-------------- ------------
Mark-to-market adjustment on sales not
yet settled at end of the quarter 890 410
-------------- ------------
Revenue as reported in the statement of
income 34,489 60,527
============== ============
General and administrative expenses totalled US$5.178 million
and US$8.505 million for the three and six month periods ended June
30, 2011, compared to the US$4.922 million and US$9.315 million for
the three and six month periods ended June 30, 2010. The increase
in general and administration expenses in Q2 was principally the
result of increase in consulting and professional fees in the
quarter under review.
Other expenses totalled US$(0.555) million for the quarter ended
June 30, 2011, compared to US$16.407 million for the quarter ended
June 30, 2010. The decrease in other expenses was primarily due to
a non-cash fair value adjustment during the quarter ended June 30,
2010 of US$23.455 million due to the option component of the
convertible debenture issued resulting in a positive expense for
accounting purposes.
The increase in finance income to US$1.684 million and US$3.474
million during the three and six month periods ended June 30, 2011,
compared to US$0.433 million and US$0.749 million during the three
and six month periods ended June 30, 2010, was due to the interest
earned on the cash collateral held in bank accounts as security
against the convertible debentures and generally higher interest
bearing balances as a result of the capital raising exercises
completed during the year.
4.1 Financial performance for the quarter ended June 30, 2011
(continued)
The decrease in finance costs to US$0.970 million and US$3.259
million during the three and six month periods ended June 30, 2011,
compared to US$3.130 million and US$4.225 million during the three
and six month periods ended June 30, 2010, was due to interest
charges on the Pallinghurst promissory note entered into on April
22, 2010 and repaid in full on February 28, 2011.
A total of US$0.370 million (ZAR2.514 million) and US$0.805
million (ZAR5.541 million) of deferred exploration expenditure was
capitalized during the three and six month periods ended June 30,
2011 compared to US$0.486 million (ZAR3.723 million) and US$0.943
million (ZAR6.815 million) during the three and six month periods
ended June 30, 2010. This decrease in costs is due to reduced
activities on exploration projects.
4.2 Pilanesberg Platinum Mine
History
In March 2008, the removal of overburden and waste rock from the
open pit commenced. This was followed in December 2008 with the
start-up of reef mining. The stock-piling of PGM-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. Commercial
production was declared on January 1, 2011.
Site establishment commenced in October 2007 and construction
was completed in February 2009. In March 2009, the processing of
material through the UG2 circuit commenced to produce metals in
concentrate for smelting, refining and sale to Northam under the
Concentrate Agreement. 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.
As part of the construction of PPM, the supply of 37MVA of new
power from ESKOM was completed on June 7, 2009. 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 fails 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. 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.
Extraction and processing of ore
Due to the close proximity of the PGM bearing silicate package,
comprising the Merensky and Pseudo reefs ("the silicate package")
and the UG2 package reef in this part of the Bushveld complex, both
these ore bodies are exploited in the Tuschenkomst pit. The
silicate package is processed in the Merensky circuit of the
concentrator and the UG2 package is processed in the UG2 circuit.
Both concentrates are blended and forwarded to Northam's smelter
located in the North West Province of South Africa, for further
processing into refined metals under a current tolling agreement
entered into with Northam on June 30, 2008. The current tolling
agreement expires on 31 December 2011; where after it can be
extended or cancelled on an annual basis up to and including the
calendar year 2016, at PPM's sole discretion by giving six months
notice to Northam.
4.2 Pilanesberg Platinum Mine (continued)
Operational issues, management actions and outlook
The Bankable Feasibility Study envisaged upgrading the silicate
package through the Dense Media Separator ("DMS") circuit. At the
end of Q4 FY2010 a bulk test of faulted UG2 package reef was also
treated through the DMS circuit. The results of this test were most
promising. In addition, UG2 samples from 20 diamond drill boreholes
have been forwarded to Mintek for DMS test work and analysis. As
the concentrator was not designed for UG2 treatment, stress will be
placed on the existing belt, screening and crushing feed facilities
into the concentrator, until permanent modifications are
completed.
The following far reaching changes to the management of mining
operations were implemented during FY2010:
Q1 FY2010: Additional mining engineers were introduced into the
organisations of both PPM and the mining contractor to enable the
mining contractor to achieve target production.
Q2 FY2010: The PPM geological team was strengthened by the
appointment of senior, experienced platinum geologists and an
on-site open pit planner ,while industrial relations skills were
bolstered. A revised H2 FY 2010 mining plan was compiled which
predicted operating break-even during Q4 FY2010, provided targeted
waste stripping could be delivered by MCC.
Q3 FY2010: The revised mining plan formed the basis of control
of the mining contractor.
Q4 FY2010: The senior management of the mining contractor was
changed. Vibrating feeders were installed to replace the
dysfunctional inclined grizzlies at the run-of-mine pads feeding
the concentrator.
The following far reaching changes to the management of mining
operations were implemented during FY2011:
Q1 FY2011: PPM took managerial control of the concentrator plant
from the party contracted to operate the concentrator.
Q2 FY2011:
Revised planning by this strengthened team forecast break-even
during H2 FY2011, providing the mining contractor was able to mak
up the significant waste stripping backlog. To date, the mining
contractor has been unable to achieve the volumes required to
address this backlog, despite re-structuring of its organization.
Further interventions in the areas of critical spares for the
mining fleet, preventative maintenance, standby machinery and shift
rostering, were made in pursuit of increase waste volumes and
exposing higher reef tonnages sooner.
Record concentrate were dispatched in June 2011. However the
unlawful disruptions and destruction of property have delayed
achievement of targeted volumes, thereby rendering breakeven less
likely in Q4 2011
In June Northam Platinum limited was formally advised by PPM
that it required extension of the tolling agreement for the
calendar year 2012.
Exploration commenced in June 2011 on the extension of the
Tuschenkomst pit into the boundary pillar and the contiguous
Sedibelo West area acquired from the IBMR subject to DMR approval.
A full diamond drilling program comprising approximately 22km of
drilling in 130 diamond drill holes is in progress to upgrade the
resource base into reserve categories to form the basis of a
revised LOM plan. It is expected that this work will be completed
in time for the issue of the Company's 2011 annual financial
statement issue in Q2 2012.
4.2 Pilanesberg Platinum Mine (continued)
Operational performance during the three and six month period
ended June 30, 2011
Important features of the performance for the three and six
month periods ended June 30, 2011, were:
For the three months For the six month
ended ended
June 30, June 30, June 30, June 30,
Unit 2011 2010 2011 2010
Reef delivered
to the ROM pad tonnes 511,565 551,673 1,140,507 1,347,860
Reef processed tonnes 811,525 693,134 1,537,149 1,597,329
Reef milled tonnes 755,537 608,182 1,408,880 1,440,567
Total stockpile 872,186 982,704 872,186 982,704
---------- ----------- ---------- -----------
- UG2 tonnes - 27,498 - 27,498
- Merensky tonnes 108,513 62,406 108,513 62,406
- DMS and
other low
grade
material tonnes 763,673 892,800 763,673 892,800
---------- ----------- ---------- -----------
Average milled
head grade g/t 1.72 1.64 1.78 1.72
Average recovery
rate % 43.8% 36.1% 47.3% 37.0%
Average
recovered
grade g/t 0.75 0.69 0.84 0.64
4E ounces
produced oz 18,198 10,548 37,823 24,941
4E ounces
dispatched and
sold oz 21,888* 10,548 39,791 24,941
4E basket price
**
- USD US$ 1,537 1,438 1,556 1,431
- ZAR ZAR 10,437 10,797 10,713 10,731
Gross revenue
from metal
sales
- USD US$'mil 34.489 14.998*** 60.527 33.501***
- ZAR ZAR'mil 234.967 114.106*** 416.443 252.612***
* 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 4E i.e. 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 offset development costs as PPM has
not yet commenced commercial production.
4.3 Exploration and development of other PGM properties
4.3.1 Pilanesberg exploration projects (on the Western Limb of
the Bushveld Complex)
The total exploration expenditure on various Pilanesberg
exploration projects was US$0.281 million (ZAR1.907 million) for
the quarter ended June 30, 2011. Total exploration expenditure
since the inception of the Pilanesberg exploration projects of
US$7.489 million (ZAR50.795 million) has been capitalized in
accordance with the Group's accounting policies 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.
4.3.2 Mphahlele Project (on the Eastern Limb of the Bushveld
Complex)
During the quarter ended June 30, 2011, a total of US$0.076
million (ZAR0.521 million) was spent on the Mphahlele Project
bringing the cumulative expenditure to date on the project by the
Group to US$14.361 million (ZAR97.406 million), excluding
acquisition costs. In accordance with the Group's accounting
policies, these costs have been capitalised as part of "Exploration
and evaluation assets".
During the quarter 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
resources and management on bringing PPM into full production, the
Mphahlele Project has been put on a reduced work program for the
short term. Expenditure during the 2011 fiscal year is limited to
activities related to the DFS, including metallurgical test work,
and revision of resource models, geotechnical investigations, water
and power guarantees and the environmental impact
assessment/management program.
4.3.3 Grootboom Project (on the Eastern Limb of the Bushveld
Complex)
During the quarter ended June 30, 2011, the Company spent
US$0.000 million (ZAR0.000 million) on Grootboom and Annex
Grootboom (over 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$6.393 million (ZAR43.362 million). In
accordance with the Group's accounting policies, these costs have
been capitalised as part of "Exploration and evaluation
assets".
The DFS stage of the project continued during the quarter and is
subject to further review and engineering refinements.
Work program
In light of the fact that the board has decided to focus cash
resources and management on bringing PPM into full production, this
project has also 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, revision of resource
models, design, geotechnical investigations and the environmental
impact assessment / management program.
4.3.4 Loskop Project (on the Eastern Limb of the Bushveld
Complex)
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.
During the quarter ended June 30, 2011, the Company incurred no
expenses on the Loskop Project. Total cumulative exploration
expenditure on this project since inception is US$1.262 million
(ZAR8.561 million). In accordance with the Group's accounting
policies, these costs have been capitalised as part of "Exploration
and evaluation assets".
5. Summary of Quarterly Results
PPM commenced commercial production on January 1, 2011, prior to
which all losses were capitalised to capitalised development
cost.
In accordance with IFRS
June'11 Mar'11 Dec'10 Sept'10 Jun'10 Mar'10 Nov'09 Aug'09
$ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000
Revenue (34,489) (26,038) - - - - - -
Cost of
operations 53,763 50,294 - - - - - -
--------- --------- ------- -------- ------- ------- ------- --------
Operating
loss 19,274 24,256 - - - - - -
Other
operating
costs /
(income) 4,623 10,079 10,435 24,256 21,329 4,402 1,635 (6,482)
Net finance
costs /
(income) (714) 499 (234) 1,778 2,697 779 641 (138)
--------- --------- ------- -------- ------- ------- ------- --------
Loss /
(profit)
for the
period 23,183 34,834 10,201 26,034 24,026 5,181 2,276 (6,620)
--------- --------- ------- -------- ------- ------- ------- --------
Basic and
diluted
loss /
(profit)
per share 0.02 0.04 0.02 0.05 0.04 0.01 0.01 (0.02)
6. Capital Resources
6.1 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$241.260 million net
of brokerage and legal fees. These funds were used for additional
working capital facilities and general funding requirements.
In accordance with the disclosure in Platmin's Short Form
Prospectus dated May 5, 2010 for the Offering, the table below
reflects the actual use of proceeds against the planned use of
proceeds from the financings as follows:
Total
actual use
of proceeds
Total to
planned use June 30,
of proceeds 2011
Financing use of proceeds US$'000 US$'000
--------------------------------------- ------------- -------------
PPM operational and working capital
funding requirements 150,000 150,000
Other corporate activities 45,000 58 409
Repayment of loan from Pallinghurst 26,000 28,822
Acquisition of 10% equity interest
in IBMR 15,000 -
Offering expenses 2,250 3,564
Exploration, general & administrative
expenses 5,766 3,221
------------- -------------
244,016 244,016
Underwriting fees 5,984 5,984
------------- -------------
250,000 250,000
============= =============
* An additional US$35.616 million from subsequent capital
raisings has been used to fund other corporate activities bringing
the total amount spent on other corporate activities to US$94.025
million. This includes $82.000 million for the purchase of Sedibelo
West (including $7.000 million in VAT on a portion of the purchase
consideration) and $12.025 million for a 50% interest in the
SPV.
-- 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 per Platmin common share that would have resulted in
111,111,111 Platmin common 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 per Platmin common share to
US$0.84 per share. The reduction of the conversion price resulted
in 160,714,286 shares being issued. Although the maturity date and
conversion price were subsequently changed, the principle amount of
US$135.000 million remained 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$90.000 million gross or US$89.785 million net of legal fees.
-- On March 31, 2011 the zero percent convertible debentures
were converted and 160,714,286 new Platmin common shares were
issued at a price of US$0.84 per share for a gross amount of
US$135.000 million.
Based on current production forecasts for PPM for the six months
ending December 31, 2011, the Group forecasts net operating cash
expenses (net of forecast revenue from metal sales) of between
US$45.000 million to US$60.000 million before capital expenditure
and rehabilitation provisions. This net cash outflow will be
financed from the Group's available unrestricted cash and cash
equivalents from capital raisings. Platmin expects approximately90%
of net cash expenses will be operationally incurred at PPM, with
the balance being exploration, corporate and administrative
costs.
6.1 New equity raisings (continued)
As at June 30, 2011, Platmin's total working capital was
US$185.634 million (March 31, 2011 - US$209.236 million). Working
capital is calculated based on the total of unrestricted cash and
cash equivalents (US$160.060 million), inventory (US$9.007 million)
and accounts receivable (US$52.883 million) less accounts payable
and accrued liabilities (US$24.736 million) and revolving commodity
facility (US$11.448 million). Platmin's cash and cash equivalents
are held in fully liquid interest earning deposits at major
European and South African banks.
Working capital decreased by US$23.602 million for the quarter
ended June 30, 2011; due to PPM operational losses and working
capital costs. As at June 30, 2011, the Company had 910,395,053
common shares in issue compared to 650,779,668 common shares in
issue as at June 30, 2010.
6.2 Debt facilities concluded in the period ended December 31,
2010
On March 22, 2010, the Company entered into a US$26.000 million
(an equivalent of ZAR192.000 million at an exchange rate of ZAR7.38
=US$1.00) short term lending facility with Pallinghurst. As at
December 31, 2010, the full facility had been drawn. 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 to the amount of US$28.822 million (ZAR202.856
million).
6.3 Restrictions on the repayments of inter-group loans
The Company's principal subsidiary, Boynton Investments
(Proprietary) Limited ("Boynton"), operates in South Africa and as
a result is subject to the South African Reserve Bank ("SARB")
Exchange Control Regulations. Any repayment of foreign currency
loans by a South African company to an offshore company is subject
to prior approval by the SARB.
The shareholder loan from Platmin to Boynton amounted to
US$697.109 million (which includes capitalised interest of
US$38.306 million) at June 30, 2011, and has primarily been used to
fund the development of PPM.
7. Liquidity
7.1 Unrestricted cash
The Company had unrestricted cash and cash equivalents of
US$160.060 million at June 30, 2011.
As at June 30, 2011, provision has been made for a total of
US$57.236 million of current commitments that will be settled from
the US$160.060 million unrestricted cash and cash equivalents as
follows:
-- US$24.736 million have been committed to fund current
liabilities due in the normal course of business;
-- US$10.000 million for capital expenditure relating to the
plant at PPM;
-- US$21.000 million have been allocated for the estimated
future obligation relating to the Magalies water project. This
represents the 50% of the SPV commitment in the pipeline project
acquired by the Company on March 23, 2011;
-- US$1.500 million have been allocated for the advisory fees
related to the Sedibelo West transaction.
An application to amend the Environmental Management Plan to
convert the open void being created at the Tuschenkomst Pit into a
water storage facility will be lodged with the DMR during August
2011. Should such application be granted, the cost of
rehabilitating the pit will reduce and a portion of the US$81.577
million (ZAR553.301 million) held in restricted cash at June 30,
2011 to meet the rehabilitation costs would be released. Such
amount will be determined upon final approval by the DMR and
required environmental authorities.
7.2 Restricted cash
The Group had restricted cash investments and guarantees forming
part of its non-current assets totalling US$172.408 million
(US$24.553 million at June 30, 2010).
The net increase of US$147.855 million in restricted cash
forming part of non-current assets is primarily the provision for
the acquisition consideration, including VAT thereon, of US$82.000
million for the Sedibelo West transaction. This amount was placed
into an escrow account on April 20, 2011 (see 2.4 above).
The decrease in restricted cash forming part of its current
assets is due to the cash collateral of US$135.131 million secured
as part of the zero percent convertible debentures issued on May
13, 2010, being released upon conversion of the debentures on March
31, 2011.
7.3 Contractual Obligations
The Group's contractual obligations are as follows:
Contractual Payments due by period as at June 30,
obligations US$ '000 2011
----------------------
After
Total < 1 year 1-3 years 4-5 years 5 years
---------------------- -------- --------- ---------- ---------- ---------
Employee entitlements
(1) 479 479 - - -
Operating lease (2) 210 152 58 - -
Finance lease (3) 9,066 132 960 960 7,014
Asset Retirement
Obligation (4) 100,052 - - - 100,052
Mining costs (5) 354,088 50,584 202,336 101,168 -
Processing costs
(6) 15,589 3,118 12,471 - -
Acquisition of
Sedibelo West (7) 82,000 82,000 - - -
Magalies water
project(8) 21,000 21,000 - - -
-------- --------- ---------- ---------- ---------
Total Contractual
Obligations 582,484 157,465 215,825 102,128 107,066
-------- --------- ---------- ---------- ---------
(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 12 of the condensed consolidated interim
financial statements.
(4) This amount of US$100.052 million (ZAR678.611 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 13 of the condensed consolidated interim
financial statements of US$82.372 million (ZAR558.696 million)
represents the discounted value of such amount. Refer to note 8 in
this MD&A for discussion of the funding requirements for this
obligation.
(5) Committed mining expenses include the contract with MCC for
carrying out the opencast mining operations.
(6) Committed processing expenses include the contracts with
Minopex for managing the plant operations and maintenance of the
Merensky and UG2 metallurgical concentrator plants.
(7) US$82.000 for the acquisition and incorporation of the
Sedibelo West Mining Right into the PPM Mining Rights and
commission, was placed in escrow on April 20, 2011.
(8) US$21.000 million for the estimated future obligation
relating to the Magalies water project. This represents the 50% of
the SPV commitment in the pipeline project acquired by the Company
on March 23, 2011
8. Environmental Matters
8.1 Overview
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 previous 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.
8.2 PPM rehabilitation
The DMR required a rehabilitation guarantee in respect of PPM 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. To date, an amount of US$2.738 million (ZAR18.574 million)
has been paid to Guardrisk as collateral against the issuance of
this guarantee. Ongoing contributions are made by PPM to fund the
balance of the ZAR50.000 million Guardrisk guarantee over the
remaining life of mine.
On May 8, 2009, the DMR placed a moratorium on insurance-backed
guarantees and as a result the subsequent increase in the
rehabilitation liability had to be funded by way of cash-backed
guarantees. On January 25, 2011, the DMR lifted the moratorium.
There has been no increase in guarantees by the DMR, since March
2011.
As at June 30, 2011, the funding of all cash-backed guarantees
can be summarised as follows:
Collateral provided
Cumulative Annual
Rehabilitation Increase in
liability liability Date
ZAR'000 ZAR'000 ZAR'000 Nature provided
Oct 31, Insurance Oct 31,
2007 50,000 50,000 50,000 and cash 2007
Feb 28, June 21,
2009 175,000 125,000 125,000 Cash 2010
Dec 31, Aug 10,
2009 521,905 346,905 346,464 Cash 2010
Dec 31, Mar 22,
2010 571,251 49,346(a) 49,345 Cash 2011
--------- --------------- ------------ --------- ----------- ------------
Total 571,251 570,809
--------- --------------- ------------ --------- ----------- ------------
(a) For the year ended December 31, 2010, the methodology of
back-filling the pit was changed from "load and haul" to the less
expensive "load and convey" system.
An application to amend the Environmental Management Plan to
convert the open void being created at the Tuschenkomst Pit into a
water storage facility will be lodged with the DMR during August
2011. The application is subject to the normal regulatory approval
process by the DMR and various other government departments. Should
such application be granted, the cost of rehabilitating the pit
will reduce and a portion of the US$81.577 million (ZAR553.301
million) held in restricted cash at June 30, 2011 to meet the pit
rehabilitation costs would be released. Such amount will be
determined upon final approval by the DMR and required
environmental authorities. In the event that this approval is not
forthcoming by the end of the 2011 financial year additional
provisions and contributions in the ordinary course of business for
rehabilitation guarantees will be required. This amount will only
be quantified at or after the December 2011 financial year end.
8.3 Rehabilitation of other development projects
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. Of this amount
US$1.590 million (ZAR10.786 million) has been paid over by the
Group into a separate bank account and ceded in favour of Guardrisk
as collateral against the issuance of the guarantee. Ongoing
contributions are made by the Group 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.
9. 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 royalty has been payable from March 1, 2010 and is
based on a percentage calculated by means of a formula, from a
minimum of 0.5% up to a maximum of 5% of gross sales of refined
mineral resources or 7% on gross sales of unrefined mineral
resources.
During the quarter ended June 30, 2011, Royalty Tax amounting to
US$0.147 million (ZAR1.002 million) was accounted for in respect of
metals sold from April 1, 2011 to June 30, 2011. The Royalty tax of
US$0.301 million (ZAR2.073 million) was paid on June 30, 2011.
10. Black Economic Empowerment ("BEE")
Pursuant to the investors and subscription agreement entered
into in December 2008 with, among others, Ivy Lane Capital Limited,
the Bakgatla 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$8.893 million on behalf of its
BEE partners for exploration activities, and US$157.551 million for
mine development. All such amounts remain outstanding on
inter-company loan accounts.
11. Transactions with related parties
On March 22, 2010, the Company entered into US$26.000 million
short term lending facility with Pallinghurst. This facility was
initially for a period of 3 months but was extended until February
28, 2011. The loan together with accrued interest and fees was
repaid in full on this date, to the amount of US$28.822 million
(ZAR202.857 million).
On May 13, 2010, the Company issued zero percent convertible
debentures to raise US$135.000 million. Pallinghurst Investor
Consortium (Lux) S.a.r.l. and Investec Bank Limited subscribed for
convertible debentures to the value of US$30.000 million and
US$5.000 million respectively. These debentures were converted into
Platmin new common shares on March 31, 2011 (see 6.1 above).
12. Critical accounting estimates
The Company's significant accounting principles and methods of
application are disclosed in the notes of the Company's
consolidated financial statements for the year ended December 31,
2010. The following is a discussion of the critical accounting
policies and estimates which management believes are important for
an understanding of the Company's financial results.
Functional and presentation currency
Items included in the financial statements of each of the
Group's entities are measured using the currency of the primary
economic environment in which the entity operates ("the functional
currency"). The Group's functional currency, as determined at the
transition date of March 1, 2008, is the South African rand
("ZAR"). The consolidated financial statements are presented in US
dollars ("US$") 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.
Capitalised 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 in profit
and loss immediately.
Inventory
Inventories are measured at the lower of cost and net realisable
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.
12. Critical accounting estimates (continued)
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 recognises 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.
13. Other
13.1 Off-Balance Sheet Arrangements
The Group has not entered into any off-balance sheet
arrangements.
13.2 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.
13.3 Financial Instruments and Other Instruments
The Group has the following financial instruments: cash and cash
equivalents, other receivables, accounts payable, accrued
liabilities. These instruments are short-term financial instruments
whose fair value approximates their carrying value given that their
maturity period is short.
13.4 Changes in Accounting Policies including Initial
Adoption
There were no changes in accounting policies.
14. Outstanding share data
As at June 30, 2011, there were 7,182,899 outstanding options
exercisable for common shares and a further 7,631,000 unvested
share options, totalling 14,813,899 options outstanding at June 30,
2011, which, if exercised, would result in the issue of an equal
number of additional common shares.
As at June 30, 2011, the Company had 910,395,053 issued and
outstanding common shares. This number had remained unchanged until
the date of this report (August 15, 2011).
15. Risks and uncertainties
The Company is in the business of the exploration and
development of mineral properties and the operation of mines
directly or through third parties. There are numerous risks
associated with these activities 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 year ended
December 31, 2010, which can be viewed at www.sedar.com.
16. 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 quarter
ended June 30, 2011. 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 financing
reporting since its year-end MD&A for the period ended December
31, 2010 or in the quarter ended June 30, 2011, that has materially
affected, or is reasonably likely to materially affect, Platmin's
internal controls over financial reporting.
For further information:
Charmane Russell Russell & Associates +27 11 880 3924
+27 82 372 5816
Charles Batten
Investec Bank plc (Nominated Advisor)
+44 20 7 597 4000
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR DKPDNNBKDQFD
Platmin (LSE:PPN)
Historical Stock Chart
From Mar 2024 to Apr 2024
Platmin (LSE:PPN)
Historical Stock Chart
From Apr 2023 to Apr 2024
