Afarak
Annual
Report
2019
We are
Afarak
the speciality
alloy producer
A vertically-integrated producer of
speciality alloys, Afarak is a global
organisation with operations in South
Africa, Turkey and Germany. Afarak is
listed on the NASDAQ OMX Helsinki Stock
Exchange and the London Stock Exchange.
Contents
Strategic Review
Financial Statements
Global Footprint
CEO Report
The Ferro-Chrome and Chrome Ore Market
Group Operational Review
Group Financial Performance
Segments Review
Speciality Alloys Segment
Ferroalloys Segment
Risk Management
Sustainability Review
8
10
12
14
16
23
24
28
31
35
Resource Statement
Resource Statement
42
Governance Review
Chairman’s Introduction
Information Presented by Reference
Our People
The Board of Directors
The Executive Management Team
The Corporate Management Team
Governance Structure
The Board of Directors
The Board in 2019
Board Committees
Corporate Governance Statement
Internal Control
Insider Administration
Resolutions of the AGM
Additional Information
Remuneration Report
60
62
64
65
66
68
71
73
74
75
76
78
79
80
81
Key Figures
Consolidated Financial Statements
Consolidated Income Statement and Statement Of
Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
1. Notes to the Consolidated Financial Statements
1.1 Company Information
1.2 Accounting Principles
1.3 Going Concern
1.4 Business Combinations and Acquistion Of
Non-Controlling Interest
1.5 Impairment Testing
1.6 Operating Segments
1.7 Notes to the Consolidated Income Statement
1.8 Notes to the Consolidated Statement Of
Financial Position
1.9 Related Party Disclosures
1.10 Commitments and contingent liabilities
1.11 Events After The Reporting Period
Parent Company’s Financial
Statements
Income Statement (FAS)
Statement of Financial Position (FAS)
Statement of Cash Flows (FAS)
2. Notes to the Financial Statements of the Parent
Company (FAS)
2.1 Accounting Policies
2.2 Notes to the Income Statement
2.3 Notes to Assets
2.4 Notes to Equity and Liabilities
2.5 Pledges and Contingent Liabilities
2.6 Other Notes
Signatures to the Board of Directors Report and the
Financial Statements
The Auditor’s Note
86
89
89
91
93
95
96
96
96
110
110
111
115
118
121
146
149
149
151
152
154
155
155
156
157
160
162
162
166
167
11
Strategic
Review
8
Global
Footprint
3
7
1
8
2
6
1. HELSINKI
Registered office, Primary listing
2. MALTA
Corporate Office
3. LONDON
Secondary listing
4. SOUTH AFRICA
Mines – Ferroalloys mines
5. SOUTH AFRICA
Mogale – Ferroalloys processing plant
6. TURKEY
Mines – Speciality alloys mines
7. GERMANY
EWW – Speciality alloys processing plant
8. SERBIA
Magnohrom - mines in Kraljevo
4
5
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019
9
SEGMENTS
FERROALLOYS
SPECIALITY ALLOYS
FeCr
Mc FeCr
Products
LLL FeCr
ELC FeCr
HCr FeCr
Products
End-user
Industry
Stainless steel
End-user
Industry
Aerospace
Renewable Energy
Automotive
Oil & Gas
AFARAK ANNUAL REPORT 2019 10
CEO
Report
If the expected 40% export tax on South African Cr
Ore materializes, we expect a recovery of the market
and we are ready and prepared to resume mining
operations within short time frames.
The same applies for our smelters both in Germany
and South Africa, who could go back to full
production within weeks. Our Magnesia project in
Serbia is another asset with very big potential. Our
focus today resides in raising the capital to start
creating positive returns there.
THANK YOU
The times are very tough, and we have received
enormous commitment and support from our
staff across the organisation. I cannot thank them
enough. I also wish to extend my deepest thanks
to our board members, who help us with valuable
advice and support on continuous basis.
2019 IN REVIEW
2019 was a bad year for the complete Ferro-
Chrome industry, particularly so, in South Africa.
Whereas our Specialty segment performed very
well, and our implemented resilience strategies
worked out to counterbalance falling market prices,
our ferro-chrome segment has been struggling.
Benchmark falling quarter by quarter, unfavorable
Rand/$ exchange rates, very expensive energy and
continuous disruptions of energy supply made it very
difficult to operate in South Africa. Afarak, as the
smallest of the remaining producers resisted better
than others, but heavy losses have been incurred,
in spite of huge cost cutting efforts, including lay-
offs and capacity reductions. We have temporarily
discontinued mining operations in all mines. Some
sites like Stellite and Zeerust continue to treat
tailings, and/or toll-treat for third parties.
OUTLOOK
In recent months, we succeeded in further reducing
cost and a certain outlook of improving markets
glimpsed, when the coronavirus hit us all hard. It is
difficult today to assess the final consequences that this
crisis is going to have on the economy in general, and
Afarak in particular. Our top priority today more than
ever, is the protection of our colleagues’ health and the
preservation of our assets. So far, the consequences
have been minimal for us outside South Africa, but we
cannot exclude that things may get worse, especially
if economical shut-downs would occur in certain key
markets.
GROWTH STRATEGY
We have further enhanced the PGM recovery in the
Stellite mine, and should resume production there
by May. This is expected to become one of the most
profitable units in Afarak.
GUY KONSBRUCK
CEO
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019
12
The Ferrochrome and
Chrome Ore market
Afarak Group operates primarily in the chrome ore market.
Globally, most of the chrome ore is used in metallurgical applications. However, chrome ore is also used, though to a much
lesser extent, in refractories, as foundry sands and as a chemical grade as shown below. Afarak produces ferrochrome which
is the main type of chrome used in metallurgical applications, in turn mainly driven by the demand for stainless steel.
Therefore, chrome ore and ferrochrome are very much correlated to the developments of the stainless-steel industry.
2019 Review
The global expansion has weakened with global average growth for 2019 estimated at 2.9%. The tariff increases in
the United States and China had a bearing with the latter economy slowing down faster than expected. Growth is
expected to contract further in 2020.
STAINLESS STEEL
The Stainless steel production in China, which represents 57% of the world production, grew by about 10% at the expense of the
rest of the world last year, with major declines in non-Chinese output, whilst the global stainless steel production grew by 2.2% in
2019, coming from a long period trend of 5,5%, and is expected to grow at the same 2% rate during 2020.
Looking at the main economies in the world, based on the 2019 figures from different sources, Europe decreased of about 8% ,
USA of about 7% , Japan of about 7% and India of about 7%.
These trends are not only due to a general weak economic situation with weak demand on the end users’ side, but also to the
competition from imported products as well as in many other Countries.
By the end of 2019 the global purchasing manager indices started to recover in many areas, including China, giving signs that
the global growth was reaching the bottom but the spread of the coronavirus has brought even more uncertainty about the
trends of the World economy.
During the first quarter of 2020 the Stainless Steel output is projected to fall 7 %YoY but the impact from the latest
developments related to the COVID-19 virus outbreak is still unknown. According to SMM, stainless-steel production in China in
January decreased by 13.06%, while other market sources mention 17% drop from the previous month.
While is very difficult to predict the trend of the virus spread and the recovery of the economies , some forecasters are
predicting a possible world production fall in 2020 ,which might lead to further price pressure on the Chrome raw materials
as the stainless market accounts for more than 80% of Chrome units, so the trend in this market is closely followed also by
the trend of the Chrome units.
FeCr Benchmark (USD cents/lb)
FERROCHROME
180
160
140
120
100
80
60
40
20
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
2016
2017
2018
2019
2020
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019 13
Cr ore and ferrochrome prices have been under sharp downward pressure in 2019, reflecting a weakening demand in China and an
excessive production, the global ferrochrome production rose around 9%YoY in H1 2019. Reported Chinese ferrochrome production
was running over 20% higher YoY up until July and falling prices led to cuts from loss making South African and Chinese supply. It
is estimated that the global ferrochrome production was then cut by around 8%YoY in 2019.
Despite the higher ferrochrome production, chrome ore prices have weakened as South African exports have continued to grow
(+6%YoY) and China’s ferrochrome producers have drawn down 1Mt of port stocks over the past year. Ore prices have fallen faster
in $US terms than Rand terms and serious production cuts did not materialise.
European Ferrochrome benchmark prices were cut by 16c/lb, in the third quarter, to $1.04/lb reflecting lower China prices, and
were then cut by a further 2c/lb for fourth quarter deliveries. These are the lowest EBM levels experienced since the end of 2009.
Most likely, this is the low point of the cycle. Expected production cuts will probably succeed in stabilsing prices during 2020.
In the medium term, the price for ore needs to hold at levels that will allow sufficient new supply in South Africa which, in turn,
largely depends on the ZAR-USD exchange rate. Incremental units from South Africa will become more expensive to produce,
suggesting that a price above $200/t CFR China is still likely over the medium term.
FeCr Benchmark (USD cents/lb)
250
200
150
100
50
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
2012 2013 2014 2015 2016 2017 2018 2019 2020
The general expectation in the industry is that prices recover during 2020, however this could be impacted by a
macroeconomic incidence, such as the present corona virus epidemic which has already started disrupting production
output in China and which extended to other parts of the world, could create further damage that currently cannot be
forecasted. The company is currently doing all efforts to manage the situation.
In view of this volatility, building resilience is a key goal for Afarak. Apart from enhancing its vertical-integration, Afarak
continues to take measures and undertake investments that will allow it to produce higher value-added products and
offer a broader product portfolio.
The Group has taken a conservative view for 2020 and is prepared for weak market conditions, though still expecting
lower losses when compared to 2019.
AFARAK ANNUAL REPORT 2019 14
Group Operational Review
Operationally, 2019 presented lower sales and lower production for the Group. In the Speciality Alloys sector, the
tonnages gained from the mining sector were partly offset by the contracting in processing activity to address inventory
level and lower demand. In the FerroAlloys segment lower mining and processing activity was experienced during the
year, mainly driven by Mogale not being in full operation with only one furnace operating. In addition, sales volumes
contracted from a year earlier in both the Speciality Alloys and FerroAlloys segments.
Group Sales
81,802mt
(100,567mt)
Group Mining
357,557mt
(549,410mt)
Group Processing
69,217mt
(102,120mt)
SALES
Sales volumes dropped in both the
Speciality Alloys and FerroAlloys
segments. The Group processing sales
stood at 81,802 (100,567) tonnes,
representing a contraction of 18.7%
when compared to a year earlier. Sales
of Speciality Alloys contracted by 2,858
tonnes on account of lower demand.
In the FerroAlloys segment, the lower
ferrochrome benchmark prices and
adverse industry conditions, forced us to
change production strategy which led to
a decrease of 15,907 tonnes from a year
earlier in the FerroAlloys Segment.
Group sales (tonnes)
Group sales (tonnes)
Human Resources
905
(942)
120,000
100,000
80,000
60,000
40,000
20,000
120000
100000
80000
60000
40000
20000
0
0
2017
2016
2018
2017
201 9
Speciality Alloys
FerroAlloys
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019 15
Group mining (tonnes)
Group sales (tonnes)
2017
2016
2018
2017
201 9
Speciality Alloys
FerroAlloys
Group sales (tonnes)
Group processing (tonnes)
550,000
500,000
120000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
100000
80000
60000
40000
20000
0
0
120000
120,000
100000
100,000
80,000
60,000
80000
60000
40,000
40000
20,000
0
20000
2017
0
2018
2019
2016
2017
Speciality Alloys
FerroAlloys
GROUP MINING
When compared to a year earlier, Group
mining activity decreased by 34.9% and
stood at 357,557 (549,410) tonnes, with
growth registered in the Turkish mines
offset by the lower mining activity in
South African mines.
Annual mining levels in the Speciality
Alloys segment expanded by 16.7% to
75,251 (64,461) tonnes on account of
productivity gains in the mines in Turkey.
In the FerroAlloys segment, the mines
in South Africa recorded lower mining
activity during 2019 of 41.8% to 282,306
(484,949) tonnes due to the weak market
conditions. This was mainly driven by
significantly lower mining activity at
Stellite, and Mecklenburg mine being
temporarily closed since the second
quarter of 2019. In 2019, Vlakpoort
increased its mining activity when
compared to prior year and minor mining
activity started at Zeerust mine.
GROUP PROCESSING
Group processing for 2019 decreased by
32.2% to 69,217 (102,120) tonnes in both the
Speciality Alloys and FerroAlloys segments.
The contraction in Group processing was
driven by lower activity in both the Speciality
Alloys and FerroAlloys segments. During
2019, processing levels in the Speciality Alloys
segment contracted by 17.5% to 25,515
(30,927) tonnes to manage inventory levels
and to address lower demand. Processing
levels in the FerroAlloys decreased by 38.6%
to 43,702 (71,193) tonnes. The interplay of
several operational issues in South Africa led
to this decline. These were further impacted
by the closure of the P2 and P3 furnace
in Mogale and extended maintenance
shutdown at furnace P1 for replacement of
the roof.
HUMAN RESOURCES
At the end of 2019, Afarak had 905 (942) employees. The average number of employees during the 2019 was 1,022 (932).
AFARAK ANNUAL REPORT 2019 16
Group Financial Performance
2019 marked a particularly disruptive and difficult year for Afarak. The unforeseen challenges in the South African assets
were exacerbated by the lower average ferrochrome benchmark prices. These factors led to the Group posting further
poor results when compared to 2018.
REVENUE
PROFIT
EBIT
EBITDA
€144.9 mln
€-58.9 mln
€-63.2 mln
€-23.8 mln
[€194.0 mln]
[€-18.6 mln]
[€-14.1 mln]
[€-1.0 mln]
The adverse selling prices and the higher unabsorbed costs as a result of lower production during 2019 led to a drop in
EBITDA to EUR -23.8 (-1.0) million. Results were also negatively impacted by an impairment write-down on goodwill and
other long-term assets related to Mogale business of EUR 32.0 (6.5) million.
EBITDA (€mln)
17.2
18.0
14.0
8.4
5.5
25. 0
20. 0
15.0
10.0
5.0
0.0
-5.0
-10.0
-15.0
-20.0
-25.0
-30.0
20. 0
10.0
0.0
-10.0
-20.0
-30.0
-40.0
-50.0
-60.0
-70.0
-1. 0
-23.8
EBIT (€mln)
9.9
11.1
1.7
-8.0
-1. 0
-14.1
2013
2014
2015
2016
2017
2018
201 9
2013
2014
2015
2016
2017
2018
-63. 2
201 9
EBITDA (€mln)
Seasonality remains a key issue
effecting our business, with the
third quarter being the period
impacting us with the electricity
winter tariffs in South Africa
and the summer slow down in
Europe. As a control measure we
conduct periodic maintenance
during that time. In 2019, the
poor performance throughout
the year was mainly due to lower
ferrochrome benchmark prices
and higher unabsorbed costs as a
result of lower production.
15
10
5
0
-5
-10
2013
2014
2015
2016
2017
2018
201 9
Q1
Q2
Q3 Q4
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019 17
2019 PERFORMANCE
Afarak Group faced a challenging year. The Group revenue for the year decreased significantly by 25.3% and stood at
EUR 144.9 (194.0) million. Revenues in both segments were lower when compared to prior year. In the Speciality Alloys
segment revenue decreased by 14.2% and in the FerroAlloys segment revenue dropped by 36.3%.
Revenue (€mln)
198. 8
194. 0
153. 6
144. 9
2016
2017
2018
201 9
250
200
150
100
50
0
50. 0
40. 0
30. 0
20. 0
10.0
0.0
41.3
41.5
33.6
28. 6
Q1
Q2
Q3
Q4
In 2019, revenues in the Speciality Alloys segment
decreased to EUR 82.5 (96.1) million due to the
unfavourable low carbon ferrochrome selling prices,
together with lower sales volumes throughout 2019. In
the FerroAlloys segment, the adverse average benchmark
prices in 2019 and a contraction in sales volumes caused
revenues to decline to EUR 61.8 (97.0) million.
Due to the challenging environment of the FerroAlloys
segment in South Africa, profitability for the year was
hard-hit when compared to a year earlier. Lower average
market prices and adverse conditions in South Africa,
primarily relating to lower mining activity and Mogale
not being in full operation led to a significant contraction
in EBITDA. On the other hand, the performance of the
Speciality Alloys segment also negatively affected the
Group results. This was mainly driven by lower demand
which had an impact on low Carbon FeCr prices and
sales volumes, leading to lower Ferrochrome production
to manage inventory level, and as a result incurring
additional unabsorbed costs. Profitability was also
negatively impacted by an impairment write-down on
goodwill related to Mogale business of EUR 32.0 (6.5)
million. Such negative factors led to a drop in Group
EBITDA to EUR -23.8 (-1.0) million.
EBITDA (€mln)
18.0
5.5
2016
2017
2018
-1.0
2019
0.0
-1.0
-2.0
-3.0
-4.0
-5.0
-6.0
-7.0
-8.0
-9.0
-4.8
Q1
-4.5
-6. 3
-8.1
Q2
Q3
Q4
-23.8
20
15
10
5
0
-5
-10
-15
-20
-25
AFARAK ANNUAL REPORT 2019 19
The full year EBITDA from unallocated items was EUR -7.0 (-5.5) million. The increase is mainly due to provision of EUR
1.5 million was accounted for a penalty payment imposed by FIN-FSA relating to an alleged delay in opening an insider
register and additional legal and professional fees incurred amounting to EUR 0.5 million higher than last year mainly
due to the repurchase of own shares. EBITDA included EUR -0.9 (-0.6) million, relating to net operating expenditure
incurred by the Group in Magnohrom.
EUR MILLION
Revenue
EBITDA
EBITDA margin
EBIT
EBIT margin
Q1
41.3
-4.8
Q2
41.5
-8.1
Q3
33.6
-4.5
Q4
28.6
-6.3
FY19
144.9
-23.8
FY18
194.0
-1.0
-11.6%
-19.6%
-13.5%
-22.1%
-16.4%
-0.5%
-6.6
-31.1
-10.1
-15.4
-63.2
-16.1%
-74.9%
-29.9%
-53.8% -43.6%
-14.1
-7.3%
-18.6
Profit for the period
-7.5
-21.6
-16.3
-13.9
-58.9
BALANCE SHEET, CASH FLOW AND FINANCING
The performance registered during 2019 had an impact on the Group’s balance sheet however management remained
focused on prudent cash management.
On 31st July 2019, the Company completed the public tender offer of purchasing own shares. As a result of completing
the offer equity of the Company decreased by EUR 26.4 million. Major changes in Balance sheet during the year related
to changes resulting from the impairment test reviews of South African minerals processing; a prepayment of USD 30.0
million in relation to an off-take agreement and the acquisition of Synergy Africa.
ROE
ROCE
-52.2%
(-11.5%)
-33.0%
(-6.0%)
Equity ratio
33.3%
(58.3%)
Gearing ratio
74.0%
(8.2%)
Inventories
Turnover-on-inventory
Trade receivables
Cash balance
€30.0 mln
(€56.9 mln)
4.8
(3.4)
€12.4 mln
(€27.2 mln)
€5.4 mln
(€12.1 mln)
The Group’s total assets on 31 December 2019 stood at EUR 223.6 (258.6) million and net assets totaled EUR 74.5 (150.9) million.
During the year the translation differences on conversion of foreign denominated subsidiaries moved by EUR -3.0 (-2.5) million.
The Group’s cash and cash equivalents, as at 31 December 2019, totalled EUR 5.4 (12.1) million. Cash flow from operations during
the year was EUR -2.1 (3.1) million.
The equity ratio was 33.3% (58.3%). Afarak’s gearing at the end of 2019 increased to 74.0% (8.2%), driven by the expansion in
the interest-bearing debt to EUR 60.1 (24.4) million.
AFARAK ANNUAL REPORT 2019 20
INVESTMENTS, ACQUISITIONS AND DIVESTMENTS
Capital expenditure for the full year of 2019 totalled EUR 5.0 (7.7) million, with the major part being in the Speciality
Alloys segment, were TMS continued investing in the new fines tailing plant at Kavak mine, EWW refurbishment of the
furnace feeding system and minor investments in the South African operational mines.
Afarak acquired 49% balance of Synergy Africa Ltd previously a joint venture. Afarak now holds 100% of Synergy Africa
Ltd and the Joint Venture agreement was terminated. Afarak acquired full control over its mining assets and is now
consolidating Synergy Africa as a subsidiary as from 1st April 2019.
The purchase price allocation of the acquisition is presented below. The figures on the table represent the 100% of the
assets and liabilities of Synergy Africa which is consolidated into Afarak Group’s financial statements.
EUR million
Non-current assets
Net working capital
Deferred tax
Provision
Loans
Non-controlling interest
Net Assets
Cost of acquisition
Net assets acquired
Cash flow effect
Cash consideration paid
Cash acquired
Net cash
Book value
Fair Value
adjustments
Fair Value
69.7
0.0
-19.5
0.0
0.0
-11.4
38.8
77.3
-5.5
-19.5
-6.8
-37.2
-8.4
0.0
7.6
-5.5
0.0
-6.8
-37.2
3.0
-38.8
0.0
0.0
0.0
0.7
0.7
Intercompany Loans are now eliminated and external loans are now consolidated.
Fair valuation of former Synergy Africa joint venture resulted in a EUR 7.1 million accounting gain.
During the second quarter, Afarak also acquired a further 49% of the shares in Zeerust Chrome Mine, in exchange
for total consideration of two million shares in Afarak Group Plc, amounting to Eur 1,654,000. Of which 26% are to be
transferred to a prospective BEE partner and therefore Afarak holds and consolidate 74% interest in the company.
Afarak entered into an agreement during 2019 to acquire the remaining interest of 26% in Chromex Mining Company (Pty) Ltd. This
has not yet been executed as there need to be an approval from South Africa Reserve bank and it is expected to be executed in 2020.
TRADING INFORMATION
Afarak Group Plc’s shares are listed on the main market of the London Stock Exchange and on NASDAQ Helsinki. Afarak
shares are traded on the London Stock Exchange under the trading code AFRK and on the NASDAQ Helsinki under code
AFAGR. The ISIN code is FI0009800098 and the trading takes place in Pound Sterling (GBP) and in Euros (EUR).
SHARE PERFORMANCE AND TRADING
During the financial year 2019, the price of Afarak Group’s share in London Stock Exchange varied between GBP 0.38
(2018: 0.73) and GBP 0.78 (2018: 0.93) and in NASDAQ Helsinki between EUR 0.40 (2018: 0.67) and EUR0.97 (2018: 1.20).
Afarak’s share closed in London at the end of the financial year at GBP 0.38 (2018: 0.73) and Helsinki at EUR 0.53
(2018: 0.73). The closing price on 31 December gives the Company a market capitalisation of the entire capital stock
252,041,814 (2018: 263,040,695) shares of GBP 94.5 (2018: 190.7) million and EUR 133.8 (2018: 191.0) million.
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019 21
A total of 248,862 (2018: 28,124) Afarak shares were traded in London and 42,304,860 (2018: 29,237,916) shares in Helsinki
during the financial year, representing 0.10% (2018: 0.01%) of stock in London and 16.78% (2018: 11.12%) in Helsinki.
SHAREHOLDERS
On 31 December 2019, the Company had a total of 5,952 shareholders (6,266 shareholders on 31 December 2018), of
which eight were nominee-registered. The registered number of shares on 31 December 2019 was 252,041,814 (2018:
263,040,695).
LARGEST SHAREHOLDERS ON 31 DECEMBER 2019
Shareholder
1
Skandinaviska Enskilda Banken AB
2 Hino Resources Co. Ltd
3 Afarak Group Plc
4 Hanwa Company Limited
5 Joensuun Kauppa ja Kone Oy
6 Nordea Bank ABP
7 Kankaala Markku Olavi
8 Hukkanen Esa Veikko
9 OP Life Assurance Company Ltd
10 Taloustieto Incrementum Ky
Total
Other Shareholders
Total shares registered
Shares
144,331,083
36,991,903
13,677,599
9,000,000
6,950,736
5,639,428
3,576,867
1,901,840
1,066,658
1,020,606
224,156,720
27,885,094
252,041,814
%
57.3 %
14.7 %
5.4 %
3.6 %
2.8 %
2.2 %
1.4 %
0.8 %
0.4 %
0.4 %
88.9 %
11.1 %
100.0 %
Afarak Group Plc’s Board members and Chief Executive Officer owned in total 1,150,000 (2018: 800,000) Afarak Group Plc
shares on 31 December 2019, including shares owned either directly, through persons closely associated with them or through
controlled companies. This corresponds to 0.5% (2018: 0.3%) of the total number of registered shares on 31 December 2019.
SHAREHOLDERS BY CATEGORY 31 DECEMBER 2019
Shares
1 - 100
101 - 1000
1001 - 10000
10001 - 100000
100001 - 1000000
1000001 - 1000000
10000001 -
Total
of which nominee-registered
Total outstanding
Number of
shareholders
% share of
shareholders
Number of shares
held % of shares held
1,061
2,582
1,839
426
34
7
3
5,952
8
17.83%
43.38%
30.90%
7.16%
0.57%
0.12%
0.05%
100%
0.13%
52,595
1,225,518
6,067,445
11,623,502
8,916,034
29,156,135
195,000,585
252,041,814
151,421,335
252,041,814
0.02%
0.49%
2.41%
4.61%
3.54%
11.57%
77.37%
100%
60.08%
100%
AFARAK ANNUAL REPORT 2019 22
SHAREHOLDERS BY SHAREHOLDER TYPE ON 31 DECEMBER 2019
Finnish shareholders
of which:
Companies and business enterprises
Banking and insurance companies
Non-profit organisations
Households
Foreign shareholders
Total
of which nominee-registered
% of share capital
21.59%
9.84%
0.81%
0.00%
10.94%
78.41%
100.00%
60.08%
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019
23
Speciality Alloys Segment
2019 in Review
Specialty Alloys segment continued to perform in a satisfactory way, given the circumstances. Low Carbon ferrochrome
prices have also been under pressure, which resulted in lower revenue and lower Ferrochrome production to manage
inventory levels and to address lower demand, has led to additional unabsorbed costs. Nonetheless, the Speciality
Alloys segment performance was good overall, which indicates stability and consistency within this segment.
REVENUE
€82.5mln
(€96.1mln)
EBITDA
€6.8mln
(€12.6mln)
EBIT
€4.5mln
(€10.8mln)
MINING
PRODUCTION
75,251mt
(64,461mt)
PROCESSING
PRODUCTION
25,515mt
(30,927mt)
SALES OF
PROCESSED MATERIALS
26,609mt
(29,467mt)
PERSONNEL
534
(526)
AFARAK ANNUAL REPORT 2019 24
PRODUCTION
Total production levels during 2019 increased by 5.6%
to 100,765 (95,388) tonnes driven by an increase in
mining tonnages, which was partly offset by the
lower production of processed material, were there
was an earlier shutdown to manage inventory level.
The mining activity at both
100,000
80,000
60,000
40,000
20,000
0
Total Speciality Alloys Production (mt)
2018
201 9
Mini ng
Processin g
Mining Production (mt)
Turkish mines increased significantly by 16.7%
during the year when compared to prior year.
The production of processed material decreased
by 17.5% following various temporary shutdowns
during the year to manage inventory level.
SALES
The unfavourable low carbon ferrochrome
selling prices, together with lower sales volumes
throughout 2019 resulted in a decrease in revenue
for the full year.
25,000
20,000
15,000
10,000
5,000
0
10,000
8,000
6,00 0
4,000
2,000
0
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Q1
Q2
Q3
Q4
201 8
201 9
Processing production (mt)
Q1
Q2
Q3
Q4
201 8
201 9
Sales of processed material (mt)
Q1
Q2
Q3
Q4
201 8
201 9
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019 25
FINANCIAL PERFORMANCE
The unfavourable low carbon ferrochrome selling prices, together with lower sales volumes throughout 2019 resulted in
a decrease in revenue for the full year by 14.2%, to EUR 82.5 (96.1) million. The lower Ferrochrome production to manage
inventory levels and to address lower demand, has led to additional unabsorbed costs of EUR 2.1 million in 2019. The
above factors negatively impacted profitability during 2019, which caused EBITDA to decrease to EUR 6.8 (12.6) million
when compared to prior year.
EUR MILLION
Revenue
EBITDA
EBITDA margin
EBIT
EBIT margin
Q1
22.2
2.0
Q2
24.9
2.2
Q3
20.1
2.5
9.0%
8.7%
12.4%
1.4
6.4%
1.5
6.1%
1.8
9.1%
Q4
15.3
0.2
1.4%
-0.3
-1.9%
FY19
82.5
6.8
8.3%
4.5
5.4%
FY18
96.1
12.6
13.1%
10.8
11.2%
Revenue (€ mln)
89. 4
96. 1
82.5
68. 7
2016
2017
2018
201 9
EBITDA (€ mln)
12.6
12.6
5.4
6.8
2016
2017
2018
2019
120
100
80
60
40
20
0
14
12
10
8
6
4
2
0
30. 0
25. 0
20. 0
15. 0
10. 0
5.0
0.0
3.0
2.0
1.0
0.0
Revenue (€ mln)
24. 9
22. 2
20.1
15.3
Q1
Q2
Q3
Q4
EBITDA (€ mln)
2.5
2.0
2.2
Q1
Q2
Q3
0.2
Q4
AFARAK ANNUAL REPORT 2019 26
12
10
8
6
4
2
0
EBIT (€ mln)
11. 1
10.8
3.1
4.5
2016
2017
2018
2019
EBIT (€ mln)
1.8
1.4
1.5
Q1
Q2
Q3
Q4
-0.3
2.0
1.0
0.0
-1.0
LOOKING AHEAD
Afarak will continue concentrating on specialities. Management is focused on optimising production costs. Through various
initiatives and with the cooperation of its staff, Afarak is becoming much more responsive to market needs and trends.
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019 27
FerroAlloys Segment
2019 in Review
The lower ferrochrome benchmark prices and a contraction in sales volumes led to a weakened financial performance
of the segment compared to a year earlier.
REVENUE
€61.8mln
(€97.0mln)
EBITDA
€-23.6mln
(€-8.1mln)
EBIT
€-60.3mln
(€-19.3mln)
MINING PRODUCTION
PROCESSING PRODUCTION
282,306mt
(484,949mt)
43,702mt
(71,193mt)
SALES OF
PROCESSED MATERIALS
55,193mt
(71,100mt)
PERSONNEL
307
(324)
AFARAK ANNUAL REPORT 2019 28
PRODUCTION
Total FerroAlloys Production (mt)
Operationally, the segment registered a decrease in total
production by 41.4% to 326,008 (556,142) tonnes.
Mining Production (mt)
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
Q1
Q2
Q3
Q4
201 8
201 9
600,000
500,000
400,000
300,000
200,000
100,000
0
2018
2019
Mining
Processing
This decrease was mainly due to no mining activity
at Mecklenburg mine, since the second quarter of
2019, due to lower mining activity at Stellite mine
when compared to prior year. Marginal increase in
mining activity was recorded in Vlakpoort mine when
compared to 2018, and minor mining activity started
at Zeerust Chrome mine in 2019.
Processing production (mt)
During the second half of 2019, our processing plant,
Mogale was not in full operation, as both AC furnaces
P2 and P3 were switched off and an extended
maintenance was carried out at furnace P1 for
replacement of the roof. As a result, the processing
levels at Mogale during 2019 were down by a 38.6%
contraction and stood at 43,702 (71,193) tonnes.
25,000
20,000
15,000
10,000
5,000
0
SALES
Q1
Q2
Q3
Q4
201 8
201 9
The sales of processed material from the FerroAlloys segment declined by 15,907 tonnes throughout the year with a
significant contraction as from the second quarter of 2019.
Sales of processed material (mt)
25,000
20,000
15,000
10,000
5,000
0
Q1
Q2
Q3
Q4
201 8
201 9
The contraction in sales of processed
material is mainly due to the lower
average ferrochrome benchmark
prices. In addition, the decline in
production levels did not support the
sales function.
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019 29
FINANCIAL PERFORMANCE
The adverse ferrochrome benchmark prices and the market conditions made 2019 a challenging and difficult year for
the FerroAlloys segment.
EUR MILLION
Revenue
EBITDA
EBITDA margin
EBIT
EBIT margin
Q1
18.9
-5.5
Q2
16.6
-8.5
Q3
13.2
-4.1
Q4
13.1
-5.5
FY19
61.8
-23.6
FY18
97.0
-8.1
-29.2%
-51.4%
-31.0%
-41.5%
-38.2%
-8.4%
-6.8
-30.9
-8.9
-13.7
-60.3
-19.3
-36.0% -185.7%
-67.8% -104.6%
-97.6%
-19.9%
Revenue (€ mln)
106. 1
97.0
84. 5
61.8
Revenue (€ mln)
18.9
16.6
13.2
13.1
20. 0
18.0
16.0
14.0
12.0
10.0
8.0
6.0
4.0
2.0
0.0
2016
2017
2018
201 9
Q1
Q2
Q3
Q4
EBITDA (€ mln)
EBITDA (€ mln)
Q1
Q2
Q3
Q4
11.4
5
2016
2017
2018
-8.1
2019
-23.6
0.0
-1.0
-2.0
-3.0
-4.0
-5.0
-6.0
-7.0
-8.0
-9.0
-4. 1
-5.5
-5.5
-8. 5
120
100
80
60
40
20
0
15
10
5
0
-5
-10
-15
-20
-25
-30
AFARAK ANNUAL REPORT 2019 30
The lower ferrochrome benchmark prices
negatively impacted sales volumes and
revenues. During the year Mogale was not
in full operation and the mines in South
Africa recoded lower mining activity,
which resulted in higher unabsorbed
costs. Performance was impacted also by
unsustainable energy costs and disruptive
availability. During the year, profitability
was further adversely impacted by an
impairment on goodwill and other long
term assets related to Mogale business
of EUR 32.0 (6.5) million and an inventory
theft at Mogale of EUR 2.1 million.
10
0
-10
-20
-30
-40
-50
-60
-70
EBIT (€ mln)
0.9
2016
6.4
2017
0.0
-5.0
-10. 0
-15. 0
-20. 0
-25. 0
-30. 0
-35. 0
Q1
Q2
Q3
Q4
-6. 8
-8.9
-13. 7
-30. 9
2018
2019
-19. 3
-60.3
LOOKING AHEAD
The Group is responding to these challenging circumstances and is prepared for a longer period of subdued markets. We
have cut maximum cost in the loss-making assets in South Africa and will do all that is necessary to achieve a break-
even point. We have reduced headcount in both Stellite and Mogale. We have temporarily discontinued operations
in the mines Mecklenburg, Zeerust and partially in Stellite. In Mogale only one furnace is currently operating. Market
participants expect a higher benchmark in the foreseeable future. If this would not materialise, the company will assess
the possibility of discontinuing charge chrome production temporarily.
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019 31
Risk Management
Afarak’s prudent approach to risk management is a crucial
component of our continued success and is present in
managing all aspects of our performance.
in the mines Mecklenburg, Zeerust and partially in Stellite.
In Mogale, two furnaces P2 and P3 were switched off and is
currently operating with one furnace.
By understanding and managing risk, we provide greater
certainty and confidence for our shareholders, employees,
customers, suppliers and host communities. In fact, we
believe that successful risk management can be a source of
competitive advantage.
Our risks are viewed and managed on a Group-wide
basis. As a truly global operation, managing diversity
in our operations, portfolio of products, geographies,
economies and currencies is a key characteristic of our risk
management approach.
Risk management is one of the key responsibilities of the
Board and its Audit and Health & Safety Committees.
2019 DEVELOPMENTS
2019 was a tough year for Afarak. The Audit and Risk
Management Committee played a key role in monitoring
the risk management function of the Group.
The Audit Committee, together with management,
continued improving internal processes and procedures to
mitigate critical risks. Certain production decisions were also
taken in view of the lower benchmark prices.
A risk mitigation initiative was done in South Africa and
further actions were taken to strengthen existing operations.
The Company has cut maximum cost in the loss-making
assets in South Africa and will do all that is necessary to
achieve a break-even point. Headcount were reduced in both
Stellite and Mogale and temporarily discontinued operations
Afarak’s processing operations in Germany and South
Africa are intensive users of energy, primarily electricity.
Fuel and energy prices globally have been characterised by
volatility and cost inflation. In South Africa the majority of
the electricity supply, price and availability are controlled
by one entity, Eskom. Increased electricity prices and/or
reduced, or uncertain electricity supply, or allocation have
had a negative impact on Afarak’s current operations. If
this situation is not remedied quickly, it could lead to a
discontinuation of our smelting activity in South Africa.
The evolution of the Coronavirus epidemic, which started
disrupting production output in China and which extended
to other parts of the world, could create further damage
that currently cannot be forecasted. The Company is
currently doing all efforts to manage the situation.
Management continued to work closely with the Units to
provide continuous monitoring and oversight in accordance
with the Group’s risk management policy. Health & safety
and the stated aim of ‘Zero-Harm’ will continue to be a
central pillar of the Company’s risk management strategy
PRINCIPAL RISKS
While a number of different risks may have an effect on
the results and operations to various degrees, the following
describes the key types of risks faced by Afarak in the
normal course of business.
EXTERNAL RISKS
RISK
CONSEQUENCES
CONTROLS TO MITIGATE RISK
Foreign exchange exposure
• Direct risk – commercial cash flows
Interest rate risks
and currency positions
• Indirect risk – loss of competitiveness
within the industry
Changes in interest rates can
• Influence the repayment of loans
• Impact the profitability of
investments
• Alter the fair value of the Group’s
assets
The Group constantly evaluates the need to
enter into forward contract arrangements
The Group constantly evaluates the need to
enter into forward contract arrangements
AFARAK ANNUAL REPORT 2019 32
Volatility of energy costs
Political and social risks
Pandemic risk
Price risks
May negatively impact Afarak’s current
operations, particularly its processing
plants, which could have a consequent
effect on the Group’s operating and
financial results. It may also impact
the plans to expand its operations and
implement its growth strategy
• Changes in the mining, employment
and fiscal regulatory environment
may materially adversely affect the
business and its financial results
• Operations may be affected to varying
degrees by government regulations
The Group constantly evaluates the need
to enter into financial arrangements to
mitigate such risk
Afarak seeks to maintain good
relationships with stakeholders
• Pandemic can cause significant
disruption and may adversely affect
demand and the business as a whole
• Operations will also be affected if
lockdown imposed
In an event of a pandemic, Afarak will
enforce necessary clothing protection and
sanitation on site for the well-being of
our employees, and will abide with local
enforcements as they develop
The Group’s processing operations are
exposed to the availability, quality and
price fluctuations in raw materials
• The price risks on input materials and
commodities are managed by pricing
contracts so that, where possible,
any changes in input materials and
commodities may be absorbed in the
sales prices
• The Group’s business units seek long-
term contract agreements with known
counterparties where possible
Price and demand volatility in
the commodities markets
The global market for Group’s products
may not progress or develop at the levels
forecast and a drop in demand for the
Group’s products could have an adverse
effect on the Group’s revenues and profits
• Using its strong customer interface
and market intelligence to adjust its
production volumes to match demand
• Adapting its diverse product mix to meet
customer requirements
FINANCIAL RISKS
RISK
CONSEQUENCES
CONTROLS TO MITIGATE RISK
Liquidity risk - whether Afarak
has sufficient liquidity to service
and finance its operations and
pay back loans
Credit risks
Materialised liquidity risks may cause
• Overdue interest expenses
• Negative impact to the Group’s
relationship with its goods and service
suppliers
• Affect the pricing and other terms for
input goods and services
• Afarak’s key customers are typically
long business relationships including
major international steel and stainless
steel companies and some specialty
agents selling to the steel sector.
• Major changes in that industry’s
future outlook or profitability could
increase the Group’s credit risk
• The Group continuously assesses its
working capital to ensure that it has
sufficient funds to meet its liabilities
• Prepares and assess forecast reports
• Afarak assesses the likelihood that
a borrower will default on the debt
obligations
• Analyse credit limit
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019
33
Acquisition and organic growth
strategy risk
• There is a risk that the investment
will not perform as expected and the
group will not achieve the desired
future operating cash flows and
profitable results from the investment
• There is a risk that the Group might
not be able to find the appropriate
site or to obtain the necessary
licences to develop and operate or to
secure the required financing
The Group’s policy is to carry out extensive
R&D Analysis to mitigate the risk that
such investment will not be successful
OPERATIONAL RISKS
RISK
CONSEQUENCES
CONTROLS TO MITIGATE RISK
Loss of key suppliers
Adverse effect on operations, which
could impact the Group’s operating and
financial results
Competition & Rivalry
May negatively impact Afarak’s
current operations which could have
a consequent effect on the Group’s
operating and financial results. It may
also impact
the plans to expand its operations and
implement its growth strategy
• Afarak carries out continuous financial
health checks of key suppliers
• Evaluations of key supplier controls in
order to minimise the impact associate
with disruption
• Assess safety and security stock levels
• Understand alternate supply options
and how long it will take to employ
alternatives
Afarak continuously monitors industry
trends and adjusts its growth strategy
accordingly. Afarak builds its resilience
through the development of niche
growth areas.
Distribution network risk
This may have adverse effect on
operations which could impact the
Group’s operating and financial results
To mitigate this risk Afarak has standard
operating procedures in place for most
foreseeable circumstances
Technology risk
There may be advances in technology
which the company is not aware off or
has not kept abreast with which may
eventually hinder the operating activity
of the company and affect the financial
results
Afarak regularly assesses the latest
technological equipment and software
available on the market
Loss of key personnel or the
engagement of inappropriate
personnel
Adverse effect on operations,
particularly its processing plants, which
could impact the Group’s operating and
financial results
• Regularly re-assesses its remuneration
policies and packages to attract and
retain suitably skilled and qualified
personnel
• The remuneration commitee is focused
on attracting and retaining such talent
AFARAK ANNUAL REPORT 2019
34
COMPLIANCE RISKS
RISK
Legal risks
CONSEQUENCES
CONTROLS TO MITIGATE RISK
Legal disputes may relate to contractual
or other liabilities or environmental or
other regulatory matters
The Group has legal teams wherever
it operates and constantly reviews
its contracts to ensure that it is duly
safeguarded.
Employment legislation
If not observed, may negatively impact
Afarak’s financial results
Afarak regularly re-assesses its policies in
terms of employment legislations
Tax risks
Data protection risk
SUSTAINABILITY RISKS
Changes in tax laws and regulation, or a
change in interpretation of the tax
authorities in the different jurisdiction
we operate in could have an adverse
impact on Afarak’s financial results
Afarak keeps abreast with changes in tax
regulation and external experts are
appointed to assist in identifying potential
tax liabilities and ensuring compliance with
the tax legislation
If data protection legislation is not
observed, the business may be adversely
affected and have an impact on the
financial results
Data protection law is closely and regularly
assessed in terms of the Group operations
RISK
CONSEQUENCES
CONTROLS TO MITIGATE RISK
Risk of mining and smelting
accidents (fire, flooding, rock
bursts, weather conditions,
seismic events and other natural
phenomena)
Social risk
Environmental risks
This could affect both employees and
operations, resulting in suspension of
operations
• “Zero Harm” policy
• Health and safety guidelines, policies and
procedures
• Continuous employee training
Industry or social unrest and labour
actions may materially adversely affect
the business and its financial results by
temporarily closing down operations
Afarak seeks to resolve the matters with all
stakeholders to reduce the impact on its
operation
• Direct potential harm to the
environment
• Potential post-production
rehabilitation or landscaping
obligations
• Environmental risks are managed closely
and regularly assessed
• Regular assessment of environmental
liabilities
• External experts are appointed to assist
in identifying potential liabilities and
ensuring compliance with environmental
legislation
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019
35
Sustainability
Afarak understands that sustainability is critical to any business and industry.
We want to proceed in the right way at all levels of our business. Our
sustainability initiatives are built around four main pillars that are integrated
in our decision-making.
SAFETY FIRST
SUSTAINABILITY
COMMUNITIES AND
HUMAN RIGHTS
HEALTH
ENVIRONMENT
Our employee’s safety is our top priority. It comes before anything else and we do not take any shortcuts. In this
regard, we are constantly focusing on improving the health and well-being of our co-workers and care for the
communities around our operation facilities. As a primary sector company, we feel committed to gradually minimising
our ecological footprint.
The communities that host our operations are important stakeholders and we are proud of the reputation that we have
built in the years of our co-operation.
OUR COMMITMENT
Afarak vows to deliver its contribution to environmental and social sustainability through its production processes. We
believe that our efforts will support several United Nations’ resolutions on sustainability, such as decreasing poverty
and hunger, but also increasing gender equality, education and access to clean water.
Our most significant impact on local host communities lies in providing direct and indirect employment. We support
local communities in their needs related to education and infrastructure whilst supporting social causes.
AFARAK ANNUAL REPORT 2019 37
SAFETY
Afarak strives to achieve what we call “Zero Harm Policy” at all levels of our operations and provides its employees and
contractors a safe and healthy work environment.
Afarak holds regular Board committees dedicated to health and safety with the aim of integrating the Group
operations to address the social, environmental, health and safety position of all stakeholders. The programme focusing
on pro-active safety and environmental measurements continued in 2019 aiming to achieve “Zero Harm”.
During 2019, the Group’s employees contributed approximately 2,333,048 working hours during which the company
suffered 44 (15) accidents that caused loss of time. Lost Time Injury (LTI) is defined as any work-related injury or illness
which prevents a person from doing any work the day after the accident.
We are proud that no fatalities happened on our sites for the second year running.
Fatal Injury
Lost Time Injury
0
(0)
44
(15)
Frequency Rate
Incidence Rate
18.9
(17.7)
52.6
(47.5)
Going forward, management remains focused on further improving the safety performance at Afarak through various
initiatives and investments.
AFARAK ANNUAL REPORT 2019
38
HEALTH
We are improving the conditions for our employees by
providing a safe working environment as well as tackling
important health issues such as HIV/AIDS (especially in South
African operations). Along with safety, health is a top priority
for Afarak.
By granting healthcare to our co-workers, we can actively
contribute to their long-term well-being.
In our factories we assess, monitor and control the risks of
our workers.
We also want our employees’ physical capabilities to be
compatible with the requirements of their respective jobs. To
help achieve this goal, we conduct routine health checks on
all sites. These checks include drug and alcohol testing. We
are also reviewing the possibility of organising shifts in the
mines to minimise any fatigue-related injuries.
To conclude, Afarak remains committed to investing in the
health of its workforce and local community.
ENVIRONMENT
We aim to demonstrate our environmental responsibility by
minimising our environmental impact. Our environmental
intervention rests on four main pillars.
WATER MANAGEMENT
CO2
AIR EMISSIONS
ENVIRONMENT
WASTE
MANAGEMENT
LAND MANAGEMENT
WATER MANAGEMENT
Water is a shared and limited resource. We aim to preserve
water sources, manage and recycle our use of water whilst
providing access to clean water.
In Turkey, the TMS management has continued to focus
on improving health and safety practices in their mines
in Turkey and has succeeded to implement the previous
year’s expansion in terms of employees and assets. Our
investments in the plants in Turkey in terms of water
conservation and management, have increased our ability
to improve the protection of the environment.
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019 39
WASTE MANAGEMENT
AIR EMISSIONS
We intend to minimise the waste our activity produces. Most
of the waste our activity generates is tailings from mining.
Tailings are usually a big concern for mining companies.
However, through our beneficiation stages, Afarak is able
to recycle and yield more chrome content from mined
goods, thus reducing the amount of tailings too. The new
tailings plant in Kavak, Turkey now recycle mined goods,
reduce volume of tailings, whilst increasing the yield of more
chrome content from mined goods.
LAND REHABILITATION
We aim to manage our land responsibly throughout the
lifecycle of our assets.
To this end, we are working on projects to rehabilitate
mines we currently work in. We recognise that our activities
impact the grounds on which we work. By reestablishing
land, managing its biodiversity and considering the needs of
locals, we can reduce the level of our environmental impact.
The rehabilitation work in Mecklenburg benefit from the
local tree and shrubbery nursery we have supported, as their
supply trees and plants to Afarak will also support the local
flora and fauna.
Our activity carries an influence on air quality and CO2
emissions. Our dependence on electricity is also a source for
CO2 emissions which we would like to decrease by shifting
toward alternative sources of energy.
COMMUNITIES & HUMAN RIGHTS
We bring economic benefits to the countries we work in by
employing people, buying goods and services, paying taxes
and royalties, and investing in infrastructure and healthcare.
We are firm believers that through our operations we deliver
socio-economic benefits to our host communities.
We are committed to building and maintaining constructive,
long-lasting relationships with our stakeholders, including
our host communities. Speaking openly and transparently
with all our stakeholders is vital for our future and
maintaining good relationships with the host community.
We uphold values of mutual respect, social cohesion and
human rights within our staff, communities and contractors.
Finally, we take pride in creating social value through five
main pillars:
PROCUREMENT
EMPLOYMENT
ENTERPRISE
INFRASTRUCTURE
COMMUNITY
INITIATIVES
AFARAK ANNUAL REPORT 2019 40
EMPLOYMENT
PROCUREMENT
By providing direct and indirect employment, we believe
that we are making a tangible contribution to our host
communities.
In our procurement, we work closely with local enterprises
to support the local economy.
LOOKING AHEAD
Afarak will remain committed to upholding and raising
the value of sustainability in its operations. Health and
safety remain a key priority for the Board and a review
of safety policies & procedures is underway. With the
goal of improving safety at all plants. Environmental
investments are important to Afarak and initiatives
will continue throughout 2020 to further minimise the
impact of our operations on nature. Also, community
investments will be maintained.
INFRASTRUCTURE
Throughout the years, we have helped our local
communities with their infrastructural requirements. This
year, we have concluded various investments including
a road project that will improve connectivity between a
local community and a school. This road is also expected
to bring additional benefits to the community.
COMMUNITY INITIATIVES
We continue to support local communities with
various assistance programs that are of a social and
educational nature.
ENTERPRISES
We work closely with local enterprises and support their
development. For example, in mining we are coaching
local contractors from our host community to develop
their business.
STRATEGIC REVIEWAFARAK ANNUAL REPORT 2019 22
Resource
Statement
44
Executive
Summary
Aligning with the Afarak Group strategy to increase its
measured mineral resource base, the aim of this document
is to provide a Mineral Resource and Mineral Reserve
Statement as at 30 November 2019 for:
(i) Chromitite for Mecklenburg, Stellite and Vlakpoort
Mines respectively as well as for
(ii) Platinum Group Metals (PGM), specifically
Platinum, Palladium and Gold, in the Chromitite
seams for Stellite and Vlakpoort Mines. Mecklenburg
Mine is excluded due to the fact that the Platinum
Group Metals (PGM) rights at Mecklenburg Mine do
not belong to Afarak and therefore do not satisfy the
all requirements for reporting.
The Chromitite exploration results reported at Vlakpoort
Mine remained the same at 1.947 million tonnes. Mining
at Vlakpoort commenced during the second quarter of
2018 subsequent the granting of a new- order mining
right for Vlakpoort Mine by the Department of Mineral
Resources. There is continuous planned exploration program
at Vlakpoort Mine with the aim to possibly extending the
proven mineral resources area towards the South-Western
side of the exiting mining area. The exploration conducted
in year 2019 has identified various regional as well as
local geological and structural alterations and - inherent
complexities. Further exploration programs are planned in
order to understand the complexity of geological structures
and also to increase the level of confidence in both Mineral
Resource and Reserve at Vlakpoort Mine.
The combined PGM Mineral Resources for Stellite and
Vlakpoort as declared at 30 November 2019, decreased from
that declared in December 2018, by 0.093 million tonnes
from 26.086 to 25.993 million tonnes. Which resulted in
PGM 2E+Au ounces decreasing by 0.001 million ounces
from 1.2563 million to 1.2552 million ounces.
The decrease in PGM Mineral Resources from November
2019 as compared to December 2018 can be ascribed to
Vlakpoort LG1-3 and LG6 depletion in the respective open pits.
The baseline summary of Stellite PGM Mineral Resources was
based on the Venmyn Deloitte (Pty) Ltd Competent Persons
report for June 2017. Due to the fact that the current PGM
plant is yet to prove economic viability and the feasibility to
extract PGM’s, are still in progress, no Mineral Reserves can
be declared for Stellite as yet.
In compiling this as well as the previous report, actual
production figures were used for 2018 as well as 2019
respectively. Reserves and Resources is thus based on the
historical baseline Mineral Reserve and Mineral Resource
report and – information prior to December 2017, taking
the depletion due to production as well as to add a dilution
factor of 15% to the production tonnages (for Resources) into
account to convert production tonnages into in-situ tonnages.
RESOURCE STATEMENTAFARAK ANNUAL REPORT 2019
45
Stellite Mine
Chromitite Mineral Resource for Stellite Mine
The Chromitite Mineral Resource for Stellite declared on 30 November 2019 decreased by 0.080 million tonnes from 28.752
to 28.672 million tonnes as compared to those declared in December 2018 mainly due to due to depletion.
The chrome grade and Cr to Fe ratio 35.46% and 1.32 respectively is the representative weighted averages of the total
28.672 million tonnes.
Only the MG3 Chromitite seam was mined during this period.
Stellite LG6-MG4 tailings mineral reserve and resource remained unchanged at 0.225 million tons as well as the chrome
grade and Cr to Fe ratio at 24.10 % and 1.14 respectively.
Mineral Reserves' (ROM Feed Numbers)
Mineral Resources (Geological Losses Applied)
Tonnage (kt)
Cr2O3 (%)
Cr:Fe ratio
Tonnage (kt)
Cr2O3 (%)
Cr:Fe ratio
PROVED:
Stellite: Tailings
LG6-MG4
Stellite: Open Pit
MG4
MG3
MG2
MG1
LG6+6A
Stellite: Underground
MG4
LG6 + 6A
Total Proved
Reserves
PROBABLE:
Stellite: Open Pit
MG4
MG3
MG2
MG1
LG6+6A
Stellite: Underground
MG4
LG6 + 6A
Total Proved
Reserves
Total Proved
& Probable
Reserves
225
1,111
604
346
598
103
24.1
30.39
30.64
35.98
37.72
33.68
MEASURED:
Stellite: Tailings
1.14 LG6-MG4
Stellite: Open Pit
1.2 MG4
1.18 MG3
1.32 MG2
1.4 MG1
1.37
LG6+6A
Stellite: Underground
MG4
2,702
34.98
1.36 LG6 + 6A
5,689
33.52
1.30
Total
Measured
Resources
INDICATED:
Stellite: Open Pit
225
1,306
708
405
700
120
1,211
4,222
24.1
31.86
31.68
37.20
39.00
38.11
33.59
37.7
8,897
35.55
3,015
1,276
948
1,914
239
262
3,628
30.75
30.82
36.08
37.53
33.88
32.69
34.26
1.2 MG4
1.16 MG3
1.28 MG2
1.38 MG1
1.43 LG6+6A
Stellite: Underground
1.22 MG4
1.38 LG6 + 6A
3,526
1,492
1,109
2,239
280
306
4,243
32.25
31.68
37.30
38.80
38.54
33.8
37.5
11,282
33.60
1.30
16,971
33.57
1.30
Total
Indicated
Resources
Total
Measured
& Indicted
Resources
INFERRED
Stellite: Open Pit
MG4
MG3
MG2
MG1
LG6+6A
Total Inferred
Resources
Total
Resources
13,195
35.58
22,092
35.57
1,440
2,110
1,920
1,070
40
6,580
28,672
33.18
32.64
37.10
38.90
37.82
35.11
35.46
Table 1.a: Shows the Chromitite Mineral
Reserves and Resources for Stellite Mine as at
30 November 2019.
1.14
1.22
1.19
1.32
1.4
1.46
1.24
1.41
1.33
1.23
1.19
1.31
1.41
1.46
1.25
1.41
1.33
1.33
1.24
1.26
1.32
1.41
1.44
1.30
1.32
AFARAK ANNUAL REPORT 2019 46
PGM Mineral Resource
for Stellite Mine
No Mineral Reserves or Measured Mineral resources could be declared for Stellite yet as the feasibility study to extract PGMs, are
still in progress.
The Indicated and Inferred PGM Mineral Resources for Stellite as declared at 30 November 2019, remained the same as that
declared in December 2018, namely 18.642 million tonnes. The resulting PGM resources declared in 2E+Au ounces are 0.927 million
ounces.
The total declared PGM mineral resource remain the same due to the fact that PGM mineral resources for Stellite are declared in only
the Indicated and Inferred Mineral Resource reporting categories.
Mineral Reserves (ROM Feed Numbers)
Mineral Resources (Geological Losses Applied)
Tonnage (kt)
2E + Au
Ozs
Tonnage (kt)
2E+Au
Ozs
PROVED:
Stellite: Open Pit
MG4
MG3
MG2
MG1
Stellite: Underground
MG4
MG4
MG4
MG4
Total Proved
PROBABLE:
Stellite: Open Pit
MG4
MG3
MG2
MG1
MEASURED:
Stellite: Open Pit
MG4
MG3
MG2
MG1
Stellite: Underground
MG4
MG3
MG2
MG1
Total
Measured
Resources
INDICATED:
Stellite: Open Pit
MG4
MG3
MG2
MG1
Stellite: Underground
Stellite: Underground
MG4
MG4
MG4
MG4
Total Probable
Total Proved
& Probable
Reserves
Table 1.b: Shows the PGM Mineral Reserves and
Resources for Stellite Mine as at 30 November 2019.
MG4
MG3
MG2
MG1
Total
Indicated
Resources
Total
Measured
& Indicted
Resources
INFERRED
Stellite: Open Pit
MG4
MG3
MG2
MG1
Total Inferred
Resources
Total
Resources
-
-
-
-
-
-
-
-
-
952
440
698
722
-
-
-
-
-
-
-
-
-
-
-
-
-
1.40
1.78
1.73
0.84
-
-
-
-
-
-
-
-
-
-
-
-
-
42,855
25,183
38,828
19,501
-
-
-
-
2,812
1.40
126,367
2,812
1.40
126,367
5,710
3,950
2,740
3,430
15,830
18,642
1.38
2.13
2.06
0.86
1.57
1.55
253,370
270,531
181,492
94,849
800,241
926,608
RESOURCE STATEMENTAFARAK ANNUAL REPORT 2019 47
Mecklenburg Mine
The Chromitite Mineral Resources for Mecklenburg declared as at 30 November 2019 decreased by 0.0190 million tonnes from
8.412 to 8.393 million tonnes as those declared in December 2018 mainly due to due to depletion of the remaining open-Pit
(65m high-wall) area. No underground mining was conducted during 2019.
The Chromitite Mineral Reserves for Mecklenburg declared for open-Pit (65m high-wall) as at 31 December 2018, decreased
from that declared in December 2017 from 0, 0739 to 0.055 million tonnes mainly due to depletion.
Mineral Reserves (ROM Feed Numbers)
Mineral Resources (Geological Losses Applied)
Tonnage (kt)
Cr2O3 (%)
Cr:Fe ratio
Tonnage (kt)
Cr2O3 (%)
Cr:Fe ratio
PROVED:
MEASURED:
Mecklenburg: Open Pit
Mecklenburg: Open Pit
LG6+6A
28
40.76
1.58 LG6+6A
55
44.10
1.64
Mecklenburg: Underground
Mecklenburg: Underground
LG6+6A
2,682
41.85
1.57
LG6+6A
4,190
43.66
Total Proved
Reserves
PROBABLE:
2,710
41.84
1.57
Total
Measured
Resources
INDICATED:
4,245
43.67
1.59
1.59
Mecklenburg: Underground
Mecklenburg: Underground
LG6+6A
1,924
41.83
1.57
LG6+6A
3,006
43.37
1.59
Total Proved
& Probable
Reserves
4,634
41.84
1.57
Total
Measured
& Indicted
Resources
INFERRED
7,251
43.54
1.59
Mecklenburg: Underground
LG6+6A
Total
Resources
1,142
8,393
43.41
43.53
1.59
1.59
Table 2. Shows the Chromitite Mineral Reserves and Resources for Mecklenburg Mine as at 30 November 2019.
The chrome grade and Cr to Fe ratio of 43.57% and 1.59 respectively is the representative calculated weighted averages of
the total 8.393 million tonnes. There was no sampling done in 2018 and 2019.
AFARAK ANNUAL REPORT 2019 48
Vlakpoort Mine
Mining at Vlakpoort commenced during the second quarter of 2018 subsequent the granting of a new-order mining right for
Vlakpoort Mine by the Department of Mineral Resources. Please note that the opencast resource is calculated up to a 40m HW.
The Chromitite Mineral Resources for Vlakpoort as at 30 November 2019 decreased by 0.093 million tonnes from 4.630 to
4.537million tonnes from that declared in December 2018 from mainly due to depletion.
The Chromitite exploration results reported at Vlakpoort Mine remained the same at 1.947 million tonnes. There is continuous
planned exploration program at Vlakpoort with the aim to possibly extending the proven mineral resources. The exploration
conducted in year 2019 has identified various regional as well as local geological and structural alteration. Further exploration
programs are planned in order to understand the complexity of geological structures and also to increase the level of
confidence in both Mineral Resource and Reserve.
Mineral Reserves (ROM Feed Numbers)
Mineral Resources (Geological Losses Applied)
Tonnage (kt)
Cr2O3 (%)
Cr:Fe ratio
Tonnage (kt)
Cr2O3 (%)
Cr:Fe ratio
PROVED:
Vlakpoort: Open Pit
LG1-3
LG5
LG6
MG1-4
UG1-2
Vlakpoort: Underground
LG6
UG2
Total Proved
Reserves
PROBABLE:
Vlakpoort: Open Pit
LG1-3
LG5
LG6
MG1-4
UG1-2
Vlakpoort: Underground
LG6
UG2
Total Probable
Reserves
Total Proved
& Probable
Reserves
0
18
1
52
101
0
0
0
3
37
16
9
0
0
65
MEASURED:
Vlakpoort: Open Pit
37.30
39.12
36.72
29.72
22.40
1.74 LG1-3
1.52
LG5
1.51
LG6
1.25 MG1-4
1.14 UG1 -2
0
42
77
131
164
398
754
41.57
38.77
36.85
30.01
21.46
33.32
19.65
1.82
1.55
1.53
1.29
1.12
1.59
1.06
1,566
33.42*
1.52**
1
10
64
75
24
793
421
41.57
39.92
33.95
29.92
27.61
33.92
19.83
1.86
1.55
1.58
1.35
1.25
1.58
1.06
1,388
33.68*
1.56**
2,954
33.54
1.54
Vlakpoort: Underground
LG6
UG2
Total
Measured
Resources
INDICATED:
Vlakpoort: Open Pit
Vlakpoort: Underground
LG6
UG2
Total
Indicated
Resources
Total
Measured
& Indicted
Resources
172
32.18*
1.32**
37.93
35.01
31.25
30.52
27.09
1.78 LG1-3
1.45 LG5
1.63 LG6
1.36 MG1-4
1.22 UG1 -2
31.24*
1.54**
237
31.92
1.38
RESOURCE STATEMENTAFARAK ANNUAL REPORT 2019 49
27
0
1
119
0
1,321
115
41.55
28.61
33.67
33.67
20.27
1.79
1.59
1.30
1.59
1.08
1,583
33.88*
1.57**
4,537
33.64
1.55
50
365
25
264
36.86
33.55
33.60
29.70
1,947
33.50
1.82
1.60
1.65
1.23
1.60
1.56
6,484
33.60*
1.55**
INFERRED
Vlakpoort: Open-Pit
LG1 -3
LG5
LG6
MG1 -4
UG1 -2
Vlakpoort: Underground
LG6
UG2
Total Inferred
Resources
Total
Resources
(Excl
Exploration
Results)
EXPLORATION RESULTS
Vlakpoort: Open-Pit
LG1 -3
LG6
MG1 & MG3
MG4 & MG4a
Total
exploration
Results
Total
Resources
(Incl
Exploration
Results)
Vlakpoort; Underground
LG6
1,243
34.16
NOTES:
* Excluding Cr2O3 % of UG1, UG2 and MR
** Excluding Cr:Fe (ratio) of UG1, UG2 and MR
Table 3. Shows the Chromitite Mineral Reserves and Resources for Vlakpoort Mine as at 30 November 2019.
AFARAK ANNUAL REPORT 2019 50
Combined Chromitite Mineral
Resource and Reserve Statemente
Mineral Reserves (ROM Feed Numbers)
Mineral Resources (Geological Losses Applied)
Tonnage (kt)
Cr2O3 (%)
Cr:Fe ratio
Tonnage (kt)
Cr2O3 (%)
Cr:Fe ratio
MEASURED:
Stellite Tailings
24.1
1.14 LG6 - MG4
225
24.1
30.39
30.64
35.98
37.72
33.68
Stellite: Open-Pit
1.20 MG4
1.18 MG3
1.32 MG2
1.40 MG1
1.37
LG6 + 6A
Stellite: Underground
MG4
1,306
788
405
700
120
1,211
4,222
31.86
31.68
37.20
39.00
38.11
33.59
37.7
2,702
34.98
1.36 LG6 + 6A
Mecklenburg: Open Pit
Mecklenburg:Open-Pit
LG6 + 6A
28
40.76
1.58 LG6 + 6A
55
44.10
Mecklenburg: Underground
Mecklenburg: Underground
LG6 + 6A
2,682
41.85
1.57
LG6 + 6A
4,190
43.66
Vlakpoort: Open Pit
Vlakpoort: Open-Pit
8,464
36.17*
1.39**
14,708
37.95*
1.41**
37.93
35.01
31.25
30.52
27.09
1.78 LG1 -3
1.45 LG5
1.63 LG6
1.36 MG1 -4
1.22 UG1 -2
0
42
77
131
164
398
754
41.57
38.77
36.85
30.01
21.46
33.32
19.65
Vlakpoort: Underground
LG6
UG2
Total
Measured
Resources
INDICATED
Stellite: Open-Pit
3,015
1,276
948
1,914
239
262
3,628
30.75
30.82
36.08
37.53
33.88
32.69
34.26
1.20 MG4
1.16 MG3
1.28 MG2
1.38 MG1
1.43 LG6 + 6A
Stellite: Underground
1.22 MG4
1.38 LG6 + 6A
3,526
1,492
1,109
2,239
280
306
4,243
32.25
31.68
37.30
38.80
38.54
33.8
37.5
Mecklenburg: Underground
Mecklenburg: Underground
LG6 + 6A
1,924
41.83
1.57 LG6 + 6A
3,006
43.37
225
1,111
604
346
598
103
0
3
37
16
9
0
0
PROVED:
Stellite Tailings
LG6 - MG4
Stellite: Open Pit
MG4
MG3
MG2
MG1
LG6 + 6A
Stellite: Underground
MG4
LG6 + 6A
LG1 -3
LG5
LG6
MG1 -4
UG1 -2
Vlakpoort: Underground
LG6
UG2
Total Proved
Reserves
PROBABLE:
Stellite: Open Pit
MG4
MG3
MG2
MG1
LG6 + 6A
Stellite: Underground
MG4
LG6 + 6A
1.14
1.22
1.19
1.32
1.40
1.46
1.24
1.41
1.64
1.59
1.82
1.55
1.53
1.29
1.12
1.59
1.06
1.23
1.19
1.31
1.41
1.46
1.25
1.41
1.59
RESOURCE STATEMENTAFARAK ANNUAL REPORT 2019 Vlakpoort: Open Pit
Vlakpoort: Open-Pit
37.93
35.01
31.25
30.52
27.09
1.78 LG1 -3
1.45 LG5
1.63 LG6
1.36 MG1 -4
1.22 UG1 -2
0
3
37
16
9
0
0
LG1 -3
LG5
LG6
MG1 -4
UG1 -2
Vlakpoort: Underground
LG6
UG2
Total Probable
Reserves
Total Proved
& Probable
Reserves
13,271
34.78*
1.34**
21,735
35.32
1.36
51
1.86
1.55
1.58
1.35
1.25
1.58
1.06
1
10
64
75
24
793
421
41.57
39.92
33.95
29.92
27.61
33.92
19.83
17,589
36.84*
1.39**
32,297
37.34
1.40
Mecklenburg: Underground
LG6 + 6A
1,142
43.41
Vlakpoort: Open-Pit
1,440
2,110
1,920
1,070
40
33.18
32.64
37.10
38.90
37.82
27
1
119
0
1,321
115
41.55
28.61
33.67
33.67
20.27
Vlakpoort: Underground
LG6
UG2
Total
Indicated
Resources
Total
Measured
& Indicated
Resources
INFERRED
Stellite: Open-Pit
MG4
MG3
MG2
MG1
LG6 + 6A
LG1 -3
LG5
LG6
MG1 -4
UG1 -2
Vlakpoort: Underground
LG6
UG2
Total Inferred
Resources
Total
Resources
(Excl
Exploration
Results²)
EXPLORATION RESULTS
Vlakpoort: Open-Pit
LG1 -3
LG6
MG1 & MG3
MG4 & MG4a
Vlakpoort: Underground
LG6
1,243
34.16
50
365
25
264
36.86
33.55
33.60
29.70
1,947
33.50
9,305
35.93*
1.38**
41,602
37.03
1.39
1.24
1.26
1.32
1.41
1.44
1.59
1.79
1.59
1.30
1.59
1.08
1.82
1.60
1.65
1.23
1.60
1.56
“NOTES:
* Excluding Cr2O3 % of UG1, UG2 and MR
** Excluding Cr:Fe (ratio) of UG1, UG2 and MR”
Table 4. Shows the Combined Chromitite Mineral
Reserves and Resources for Stellite, Mecklenburg
and Vlakpoort as at 30 November 2019.
Total
Exploration
Results
Total
Resources
(Incl
Exploration
Results²)
43,549
36.87*
1.40**
AFARAK ANNUAL REPORT 2019 52
Combined PGM Mineral
Resource and Reserve Statemente
Mineral Reserves (ROM Feed Numbers)
Mineral Resources (Geological Losses Applied)
Tonnage (kt)
Cr2O3 (%)
Cr:Fe ratio
Tonnage (kt)
Cr2O3 (%)
Cr:Fe ratio
PROVED:
Vlakpoort: Open Pit
LG1 -3
LG5
LG6
MG1 -4
UG1 -MR
MEASURED:
Vlakpoort: Open-Pit
-
-
-
-
-
-
-
-
-
-
-
LG1 -3
LG5
LG6
- MG1 -4
159
1.4
7,158 UG1 -MR
Vlakpoort: Underground
Vlakpoort: Underground
LG6
UG2
MR
Total Proved
Reserves
PROBABLE:
Stellite: Open Pit
MG4
MG3
MG2
MG1
-
-
-
-
-
-
-
LG6
- UG2
- MR
159
1.40
7,158
Total
Measured
Resources
INDICATED
Stellite: Open Pit
MG4
MG3
MG2
MG1
Vlakpoort: Open Pit
Vlakpoort: Open-Pit
-
-
-
-
-
-
-
LG1 -3
LG5
LG6
- MG1 -4
0.19
55 UG1 -MR
Vlakpoort: Underground
-
-
-
-
LG6
- UG2
- MR
-
-
-
-
9
-
-
-
9
LG1 -3
LG5
LG6
MG1 -4
UG1 -MR
Vlakpoort: Underground
LG6
UG2
MR
Total Probable
Reserves
Total Proved
& Probable
Reserves
0
42
77
131
205
398
754
618
0.18
0.74
0.46
1.13
1.77
0.43
4.04
2.15
0
999
1 138
4 760
11 667
5,503
97,947
42,723
2,225
2.30
164,738
952
440
698
722
1
10
64
75
24
793
421
208
1.40
1.78
1.73
0.84
0.22
0.66
0.40
0.85
0.31
0.43
4.45
2.96
42,855
25,183
38,828
19,501
8
212
823
2 050
239
10,964
60,240
19,797
0.19
55
168
1.34
7,213
Total
Indicated
Resources
Total
Measured
& Indicated
Resources
INFERRED
Stellite: Open-Pit
MG4
MG3
MG2
MG1
4,408
1.56
220,700
6,633
1.81
385,439
5,710
3,950
2,740
3,430
1.38
2.13
2.06
0.86
253,370
270,531
181,492
94,849
RESOURCE STATEMENTAFARAK ANNUAL REPORT 2019 53
Vlakpoort: Open-Pit
LG1 -3
LG5
LG6
MG1-4
UG1 -MR
Vlakpoort: Underground
LG6
UG2
MR
Total Inferred
Resources
Total
Resources
(Excl
Exploration
Results²)
EXPLORATION RESULTS
Vlakpoort: Open-Pit
LG1
LG2
LG3
LG6
MG1
MG3
MG4 + 4a
Vlakpoort: Underground
LG6
Total
exploration
Results
Total
Resources
(Incl
Exploration
Results)
27
0
1
119
0
1,321
115
-
17,413
0.23
-
0.42
1.00
-
0.42
4.78
-
1.50
198
-
14
3 826
-
17,840
17,675
-
839,794
24,046
1.58
1,225,233
10
7
33
365
20
5
264
0.30
0.17
0.27
0.42
0.85
1.67
0.87
96
38
286
4,929
547
268
7,385
1,243
0.41
16,387
1,947
0.48
29,938
25,993
1.50
1,255,171
Table 5. Shows the Combined PGM Mineral Reserves and Resources for Stellite, Mecklenburg and Vlakpoort as at
30 November 2019
Historical Information
The information in this statement that is based on and relates to Exploration Results and Mineral Resources is based on the
Mineral reserve and resource report and information compiled by Hermanus Berhardus Swart, a Competent Person who
is a Professional Natural Scientist registered with South African Council for Natural Scientific Professions accredited (No.
400101/00) and a Member of the Geological Society of South Africa, each of which is a “Recognised Professional Organisation”
(RPO) that is included in a list that is posted on the ASX website from time to time. Hermanus Berhardus Swart, the Competent
Person is employed by Dunrose Trading 186 (PTY) Ltd trading as Shango Solutions, which provides services as geological
consultants. The Competent Person has sufficient experience which is relevant to the style of mineralisation and types of
deposits under consideration, and to the activity which has been undertaken, to qualify as a Competent Person as defined
by the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC),
the 2001 Code for reporting of Mineral Exploration Results, Mineral Resources and Mineral Reserves in the United Kingdom,
Ireland and Europe (IMMM) as well as the 2007 edition of the South African Code for Reporting of Exploration Results, Mineral
Resources and Mineral Reserves (SAMREC). The Competent Person consents to the inclusion of the matters based on his
information in the form and context in which it appears.
AFARAK ANNUAL REPORT 2019 54
Competent Persons
The information in this statement that relates to Exploration Results and Mineral Resources is based on the historical baseline
Mineral Reserve and Mineral Resource report and information compiled by Hermanus Berhardus Swart. No warranty or
guarantee, whether expressed or implied, is made by the authors with respect to the completeness or accuracy of any aspect
of historical information.
The Mineral Resource and Mineral Reserve Statement Information for this report compiled by:
1. Cuan Berner Kloppers: Chief Consulting Geologist, Afarak SA Mining,
Pr.Sci.Nat (reg no:400092/04), EDP (UNISA SBL), NDip (Geology), NHDip, Geotechnology, MTech
Research only (Industrial Minerals).
Both the people named above are Competent Persons who are both Professional Natural Scientists registered with South
African Council for Natural Scientific Professions accredited and Members of the Geological Society of South Africa, each of
which is a “Recognized Professional Organisation” (RPO) that is included in a list that is posted on the ASX website from time to
time.
Both the Competent Persons, listed above, has sufficient experience which is relevant to the style of mineralisation and types
of deposits under consideration, and to the activity which has been undertaken, to qualify as a Competent Person as defined
by the 2012 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC),
the 2001 Code for reporting of Mineral Exploration Results, Mineral Resources and Mineral Reserves in the United Kingdom,
Ireland and Europe (IMMM) as well as the 2007 edition of the South African Code for Reporting of Exploration Results, Mineral
Resources and Mineral Reserves (SAMREC). The Competent Persons consents to the inclusion of the matters based on his
information in the form and context in which it appears.
Cuan B Kloppers
24 December 2019
RESOURCE STATEMENTAFARAK ANNUAL REPORT 2019
56
Kavak mine and Tavas mine
Turkish mines Resource and reserves
ORE ZONE/ BODY
Cr2O3 %
Proven
Reserve (T)
Probable
(T)
Possible
(T)
Total Reserve
(T)
Hypothetical
Resources (T)
ESKISEHIR KAVAK CONCESSIONS
Kismet+Dereici
Bogurtlen+Erenler 2
Camasirlik 2
Erenler
Erenler 4-18
Erenler 1+ Yeni paralel
Erenler 18 alt yeni adese1/ Güney
İncir 70-91 yeni adese 2
İncir +batı yeni adese 3 /Kuzey
Kuzey doğu
TOTAL
TAVAS BEYAGAC CONCESSIONS
Sarp-Gogebakan Oc.
Cigerderesi Ocak
Dere Ocak
Catak
Cinar Ocak
Sehremen-Keller Oc.
Degirmendere
TOTAL
FETHIYE & KOYCEGIZ CONCESSIONS
Cubuk -Umut
Asarcik-Karacam
Mesebuku
Kizil Akdag
TOTAL
ADANA CONCESSIONS
Yetimli -Sogukoluk
Egni
TOTAL
ESKISEHIR EAGLE CONCESSION
East new
West
TOTAL
16-41
20-22
16-20
16-18
4,000.00
27,000.00
0.00
29,275.00
7-10
2,000,000.00
16-35
35,000.00
198,300.00
7,250.00
100,000.00
136,250.00
2,537,075
10,000
100
740
2,500
20,000
20,000
1,000
54,340
97,783
550
1,400
400
100,133
12,000
9,644
21,644
15,000
60,000
75,000
15-40
25-30
7-41
30-40
20-35
21-30
18-20
28-34
14-26
14-34
8-20
22-26
24-28
16-20
8-28
12-22
14-25
12-14
16-44
30-48
36-44
2,000
30,000
300,000
20,000
51,000
50,000
100,000
553,000
5,000
2,900
500
2,500
10,000
10,000
4,000
34,900
230,000
1,350
3,500
1,300
6,000
27,000
0
59,275
2,000,000
35,000
498,300
27,250
51,000
150,000
236,250
1,500,000
3,090,075
1,500,000
15,000
3,000
1,240
5,000
30,000
30,000
5,000
89,240
327,783
1,900
4,900
1,700
7,500
17,000
10,000
23,000
15,000
20,000
5,000
97,500
165,000
10,000
55,000
28,000
236,150
336,283
258,000
30,000
10,000
40,000
5,000
10,000
15,000
42,000
19,644
61,644
20,000
70,000
90,000
80,000
10,000
90,000
100,000
100,000
0
0
0
0
0
RESOURCE STATEMENTAFARAK ANNUAL REPORT 2019 57
0
0
950,000
1,049,113
1,511,238
3,510,352
233,225
408,812
642,036
0
0
879,050
7,819,630
2,045,500
KAVAK TAILINGS DAM
Tailings Dam 1
Tailings Dam 2
Tailings Dam 3
TOTAL
TAVAS TAILINGS DAM
Tailings Dam 1
Tailings Dam 2
TOTAL
GRAND TOTAL
7-13
7-13
4-6
4-13
9-11
3-6
9-11
950,000
1,049,113
1,511,238
3,510,352
233,225
408,812
642,036
6,940,580
0
0
0
AFARAK ANNUAL REPORT 2019 33
Governance
Review
60
GOVERNANCE REVIEWAFARAK ANNUAL REPORT 2019 61
Chairman’s Introduction
Dear Shareholders,
In 2019 Afarak Group continued to operate in a very
challenging business environment.
Afarak’s determination to return to growth can be attained if
it has strong corporate governance in place. Our aim has been
to achieve good governance commit to fulfill our obligations of
a publicly listed company.
The Ferro-Chrome industry struggled world-wide. Our
operations in South Africa were particularly affected by
this. Our Speciality business did well regardless difficult
circumstances. The financial performance of South
African operations was disappointing in spite of significant
technical improvements, rationalisation of business, cost
cutting, staff reduction and many other measures taken by
the Management.
Although the Board is substantially smaller than in previous
years, it still has diversity of skills and expertise while this
requires from the Board members to be more active and
involved in order to maintain oversight of the business, support
management to implement cost savings, improve information
flows and create a stable environment for long-term strategic
thinking and development. After the AGM, we plan to increase
the size of the Board.
We, as a board, continued to support management to
enable them to implement initiatives to further strengthen
operations and ensure the delivery of our long term strategy.
In South Africa, our management teams are working towards
turn-around strategy which includes additional beneficiation
plants and a further developed PGM recovery plant. This
should expand the spectrum of our products and increase our
resilience to the market volatility.
Afarak’s position as a vertically integrated producer of
speciality alloys; acting as a miner, producer and marketer
of its products, enables it to adapt better to changing
market circumstances and to extract value at every stage
of this process. Our ability to be specialist producers as
well as volume miners, will further support our resilience
and adaptability.
As a company we are committed to safety and sustainability.
Our focus remains on ensuring a “Zero Harm” policy and
we are proud and thankful that no fatalities happened in
2019. Improvements in health & safety performance were
registered across the whole Group. Throughout the year, we
have invested comprehensively in ensuring that safety of our
employees is prioritised across all production units. We have
also supported health education and health promotion.
In our business we face many challenging situations, as we
work to extract resources safely, profitably and responsibly,
to mitigate our environmental impact and support our
host communities. We recognize the value of multi-
stakeholder engagement and we continue to tackle these
challenges with Management, our employees, unions and
our host communities.
Every year we participate in a number of initiatives across
many areas including our host communities in South Africa
and Turkey. Our support has extended beyond charitable
donations towards assisting NGOs and educational services.
I thank all for their continuing commitment and contribution
in 2019. As a small Board we all had multiple duties and
responsibilities and jointly participated in all tasks usually
carried by Board committees.
As always, we remain mindful of the trust shareholders place
in us as elected Directors and of our responsibilities towards
them. We seek to apply rigorous governance standards in our
work that is described in the Governance Review.
As instructed by the Extraordinary General Meeting held in
November 2018, the management has ensured the repurchase
and cancellation of 25,998,881 of Afarak’s own shares for
a sum of EUR 26,388,864 in August 2019, and reissued
15,000,000 treasury shares.
I am confident that we have a leadership team with the
resolve and commitment to ensure that Afarak returns
to growth. I share our CEO’s enthusiasm for the future
prospects of Afarak as an innovator of value-added
ferrochrome products and its ability to deliver value for
customers and shareholders.
As I continue to talk to our employees around the world, I
am constantly reminded that our achievements are only
made possible by this very skilled, hard-working and very
talented team. I am grateful for all their efforts and impressive
commitment over the past year and look forward to working
with them during difficult times towards delivering a return to
growth.
THORSTEIN ABRAHAMSEN
Chairman
AFARAK ANNUAL REPORT 2019
62
Information Presented
by Reference
The Group’s key financial figures, related party disclosures, information on share capital and option rights are
presented in the notes to the consolidated financial statements. The share ownership of the parent company’s
Board members and Chief Executive Officer is presented in the notes to the parent company’s financial
statements.
The Corporate Governance Statement and the Remuneration Report are presented as separate reports in this
Annual Report.
For the purposes of United Kingdom Listing Authority listing rules (“LR”) 9.8.4C R, the information required to be
disclosed by LR 9.8.4 R can be found in the following locations:
SECTOR
TOPIC
LOCATION
1
2
4
5
6
7
8
9
10
11
12
13
14
Interest capitalised
1.8. Notes to the statement of financial
position, 9. Property, plant and equipment.
Publication of unaudited financial information Not applicable
Details of long-term incentive schemes
1.8. Notes to the statement of financial
position, 17. Share-based payments
Waiver of emoluments by a director
Not applicable
Waiver of future emoluments by a director
Not applicable
Non pre-emptive issues of equity for cash
Not applicable
Item (7) in relation to major subsidiary
undertakings
Parent participation in a placing by a listed
subsidiary
Not applicable
Not applicable
Contracts of significance
Provision of services by a controlling
shareholder
Shareholder waivers of dividends
1.8. Notes to the statement of financial position,
1.9.2 Related party transactions
Not applicable
Not applicable
Shareholder waivers of future dividends
Not applicable
Agreements with controlling shareholders
Not applicable
All the information cross-referenced above is hereby incorporated by reference into this Board of Directors report.
GOVERNANCE REVIEWAFARAK ANNUAL REPORT 2019 63
AFARAK ANNUAL REPORT 2019 64
Our People
The Board of Directors
CHAIRMAN
Thorstein Abrahamsen
Chairman and Independent Non-Executive Director
M.Sc. (Electrochemical Engineering)
Born 1948
Thorstein Abrahamsen is an internationally respected stainless steel and ferro-alloy industry professional. He has served
as Chief Executive Officer of various manufacturing companies within stainless steel, ferro-alloy, construction equipment
and mining industries. He also served as Vice- President Sales & Distribution of a global stainless steel production company.
Throughout his career he has served on over 30 boards including chairmanships of ferro- alloy and steel trading & marketing
companies around the world. He is currently chairman of a construction industry company, a board member and partner of a
management consultancy company and two investment companies. Mr Abrahamsen was appointed to the Board of Afarak on
23 May 2017 and appointed Chairman on 11 November 2019.
INDEPENDENT NON-EXECUTIVE DIRECTOR
Dr Jelena Manojlovic
Chairman and Dependent Non-Executive Director
Ph.D. (Medicine), Clin. D. (Psychology), MA (Psychotherapy)
Born 1950
Jelena Manojlovic has been a member of the Board since July 11, 2008. She has acted as Chairman of the Board during 2009
and 2015 and again during 2017 and 2019 She is an established university lecturer and organizational consultant and has 35
years’ experience in the human resources field and 20 years’ in management positions in a diverse range of organisations,
including the UK’s National Health Service, universities and other companies. Dr Manojlovic is independent of the Company but
is dependent on a major shareholder of the Company.
EXECUTIVE DIRECTOR
Guy Konsbruck
CEO and Executive Director
BA; MBA (SHU Fairfield)
Born 1965
Guy Konsbruck was appointed Chief Executive Officer of Afarak on 15 January 2017. He has
previously served as an Executive Vice-President of MFC Industrial since 2014. Before that he served
as CEO of FESIL’s global sales companies and was also the co-founder of Luxalloys. Mr Konsbruck
was appointed to the Board during the Extraordinary General Meeting held on 5th February 2018.
Barry Rourke
Independent Non-Executive
Director
FCA
Born 1950
Barry Rourke was a member of the Afarak Board, the Chairman of the Audit Committee and
a member of the Remuneration Committee from April 2010 to February 2013 and rejoined
the Board in 2015. He was an Audit Partner at PWC for 17 years from 1984 to 2001 where he
specialised in the Oil & Gas and Mining sectors. He currently holds a number of non-executive
directorships and positions on the audit committees in other companies. Barry Rourke resigned
from the board 11 November 2019.
Yolanda Bolleurs
Independent Non-Executive
Director
Certified accountant
Born 1972
Mrs Bolleurs is a certified accountant with long experience in auditing, financial services and financial
consultancy. She worked for KPMG as auditor, as CFO in several companies before forming her own
consulting company providing auditing and financial services. She has international experience
of working with several listed companies in the mining sector (coal, gold) and has participated in
restructuring companies and has built and lead multinational teams of professionals in various
management structures. Mrs. Yolanda Bolleurs resigned from the board 11 November 2019.
GOVERNANCE REVIEWAFARAK ANNUAL REPORT 2019 65
Our People
The Executive Management Team
The Group’s Executive Management Team (“EMT”) assists the Group CEO in effectively accomplishing his
duties. The EMT is an advisory body which was set up by the Board of Directors in November 2009. It has neither
authority, based on laws or the Articles of Association, nor any independent decision-making rights. Decisions on
matters discussed by the EMT are taken by the CEO, the EMT member responsible for the matter in question or
the Group’s Board of Directors, as appropriate.
Guy Konsbruck
CEO
BA; MBA (SHU Fairfield)
Born 1965
Guy Konsbruck was appointed Chief Executive Officer of Afarak on 15 January 2017. He has
previously served as an Executive Vice-President of MFC Industrial since 2014. Before that he
served as CEO of FESIL’s global sales companies and was also the co-founder of Luxalloys.
Melvin Grima
CFO
FCCA, FIA, CPA
Born 1982
Melvin Grima joined Afarak in 2013 as Group Finance Manager. He was responsible of the
relocation of the Group’s corporate finance function to Malta and its setup. He was promoted
to Finance Director in 2015 and was appointed the Chief Financial Officer in January 2019. Prior
to joining Afarak, he held a number of management positions including Group Accountant of a
hotel Group and Finance Manager of a Group trading in the petroleum industry.
Dr Danko Koncar
COO
Diploma (Engineering), M.Sc. (Engineering), Ph.D. (Engineering)
Born 1942
Dr Danko Koncar was appointed as Chief Operating Officer on December 9, 2016. He has
extensive experience in minerals processing and trading, more than 20 years in ferrochrome
industry with six years of experience in application of direct current technology to
ferrochrome processing. Before joining Afarak, he served in different management positions
in chrome industry and was the Chairman of Samancor Chrome from 2005 - 2009.
AFARAK ANNUAL REPORT 2019 66
Our People
The Corporate Management Team
The Company’s Corporate Management includes, in addition to the Executive Management Team, the following
personnel responsible for corporate functions:
Seyda Caglayan
Managing Director, Afarak TMS
MSc Mining Engineering
Born 1958
Seyda Caglayan joined Afarak TMS in December 2007. Prior to joining Afarak, she held a number of senior management
and directorate positions in the mining and chrome industry including the Istanbul Mineral Exporters’ Association and
the International Chromium Development Association (ICDA). Seyda currently serves as Member of the Board of Turkish
Miners Association, Member of Chrome Committee of ICDA and Member of the Board of Trustees of the Turkish Mining
Development Foundation.
Christoph Schneider
Managing Director, Afarak EWW
MA Economics
Born 1964
Christoph Schneider is currently the Managing Director of Afarak EWW. He joined EWW in 1992 as Sales Manager. Over
the years, Christoph rose the ranks of EWW and was appointed as Managing Director in December 2003.
Dr Kurt Maske
Managing Director, Afarak SA Mining
PhD (Minerals Engineering)
Born 1955
Kurt Maske is the acting General Manager for the SA Mining Operations and manages the South African marketing and
logistics processes. Prior to joining Afarak in 2011, Kurt was with BHP Billiton for nearly 25 years where he started his
career as a Process Engineer responsible for developing the DC arc furnace technology for FeCr production at what is now
Mogale Alloys. After serving as Works Manager he was transferred to Samancor’s marketing team to globally manage the
sale of the group’s low and medium carbon ferrochrome products.
GOVERNANCE REVIEWAFARAK ANNUAL REPORT 2019 67
AFARAK ANNUAL REPORT 2019 68
Governance Structure
The management and control of Afarak Group Plc and its subsidiaries (“Group”) is divided between the shareholders,
the Board of Directors (“Board”), supported by the Board’s audit and risk management committee, nomination and
remuneration committee and the Chief Executive Officer.
Shareholders
(AGM)
Board of
Directors &
Board
Committees
Health, Safety &
Sustainable
Development
Committee
Nomination &
Remuneration
Committee
GOVERNANCE REVIEWAFARAK ANNUAL REPORT 2019 69
Executive
Management Team
Audit & Risk
Management
Committee
Corporate
Management Team
Chief Executive
Officer
(CEO)
AFARAK ANNUAL REPORT 2019 70
In addition, certain significant matters (such as amending
the Articles of Association or deciding on a capital
increase) require a resolution by the shareholders in a
General Meeting.
General Meetings are organised in a manner that permits
shareholders to exercise their ownership rights effectively.
A shareholder wishing to exercise his or her ownership
rights shall register for a General Meeting in the manner
stated in the notice of meeting. All the shareholders
who have been registered in the Company’s shareholder
register, maintained by Euroclear Finland Ltd, on the
record date of the meeting have the right to attend a
General Meeting, provided they have delivered a proper
notice to attend the meeting. Holders of nominee
registered shares may be registered temporarily on the
shareholder register, and they are advised to request
further instructions from their custodian bank regarding
the temporary registration and issuing of a proxy
document.
Resolutions by a General Meeting usually require a simple
majority. Certain resolutions, however, such as amending
the Articles of Association and directed share issues
require a qualified majority represented by shares, and the
votes conferred by the shares, at the General Meeting.
The majority of the Board members, if not all, attend
General Meetings together with the CEO and the auditor.
In addition, if a person is proposed for election as a
director for the first time, he or she will also attend the
General Meeting.
GENERAL MEETINGS IN 2019
The Annual General Meeting was held on June 25, 2019 at
Union Square Auditorium, Helsinki, Finland.
All the resolutions of the above-mentioned General
Meeting can be found at:
http://www.afarak.com/en/investors/shareholder-
meetings/2019/
GENERAL MEETING
Afarak’s ultimate decision-making body is the
shareholders’ General Meeting which convenes once
a year and is held within six months of the end of the
financial year. Pursuant to the Company’s Articles of
Association, the convening notice for a General Meeting
will be published on the Group’s website and in a stock
exchange release no earlier than two months, and no
later than 21 days, prior to the General Meeting or nine
days prior to the record date of the General Meeting.
The notice of a General Meeting, the proposals for
resolutions, and the documents to be submitted to the
General Meeting, such as the financial statements, the
annual report and the auditor’s report, will be available on
the Group’s website and at the Group’s office in Helsinki
at least three weeks before the meeting. The resolutions
passed by the General Meeting will be published as a
stock exchange release without undue delay and will be
available on the Group’s website, along with the minutes
of the General Meeting, no later than two weeks after the
meeting.
Shareholders have the right to add items falling within
the scope of the Annual General Meeting to the meeting’s
agenda. The request must be submitted to the Board of
Directors in advance so that the item can be included to
the notice. Afarak publishes the details of how and when
to submit the requests to the Board on its website.
The Company uses the Annual General Meeting to develop
an understanding of the views of its shareholders about
the Company.
An Extraordinary General Meeting can be convened if the
Board of Directors deems it necessary or if the auditor
of the Company or the shareholders owning at least 10
percent of the shares demand one in writing in order to
deal with a specific matter, or if it is required by law or
other regulations.
The most significant items on the Annual General
Meeting’s agenda include:
• Approving the year’s financial statements;
• Confirming the financial year’s profit or loss, the
dividend distribution or other distribution, such as
capital redemption;
• Determining the number of directors on the Board
of Directors, their remuneration and electing those
directors to the Board; and
• Electing the auditor or auditors and approving
their fees.
GOVERNANCE REVIEWAFARAK ANNUAL REPORT 2019
71
The Board of Directors
TASKS AND RESPONSIBILITIES
The Board of Directors is composed of between three and
nine members who are elected by the General Meeting of
shareholders, which also approves their remuneration. The
tenure of each Board member is for one year and expires at
the end of the next Annual General Meeting immediately
following their election. The Board elects a chairman from
among its members. None of the non-executive directors
has a service contract with the Company and none of the
directors has waived or agreed to waive any emoluments
from the Company or any subsidiary undertaking.
The duties of a Board member are specified in the Finnish
Companies Act. The Afarak Board also has a written charter
governing its functions.
The Board of Directors oversees the administration of the
Group and is responsible for the internal control of its assets,
finances and accounts on behalf of shareholders. Its specific
responsibilities include:
• Formulating the Group’s business strategy and
overseeing its implementation;
• Deciding on the Group’s capital structure;
• Making decisions on significant investments,
divestments, credits and collaterals, guarantees and
other commitments;
• Approving the quarterly interim reports, the Board
of Directors Report, the annual financial results and
future forecasts and/or outlook;
• Deciding on the Group’s organisational structure;
• Appointing the CEO and approving his or her service
agreement and remuneration; and
• Convening and submitting proposals to the
shareholders’ General Meeting.
Key elements of the Board’s charter and operations are:
It convenes on prearranged dates, with a view to
•
meeting approximately once a month, or more often if
necessary. Meetings can be arranged as conference calls;
• Matters to be dealt with by the Board are presented
by the Chairman, the CEO or another person who has
participated directly in assessing and preparing the
issue for consideration;
It aims to make unanimous decisions;
It prepares an annual plan for its operation; and
It acts at all times in the interest of the Group and all
of its shareholders.
•
•
•
The Board oversees all communications and other
requirements stipulated by the rules of the relevant
stock exchanges and financial supervision authorities
and conducts regular self-assessments to ensure these
requirements continue to be fulfilled. The Group has
established specific targets for the development of its
administrative functions and processes, and continues to
implement these.
The Board also evaluates and decides on acquisitions and
disposals of subsidiaries and associated companies. To
ensure the efficiency of board and committee work, the
Board regularly evaluates the operations and working
methods of each committee and the Board. The evaluation
is conducted as internal self-evaluation. The Board is also
regularly in contact with the major shareholders of the
Company to ensure that the Board is aware of their views.
The 2019 Annual General Meeting elected five members to the
Board. Dr Jelena Manojlovic, Mr Barry Rourke, Mr Thorstein
Abrahamsen and Mr Guy Konsbruck were re-elected and
Yolanda Bolleurs was elected as a new Board member. Mr
Barry Rourke and Yolanda Bolleurs resigned from the Board on
November 2019.
DIVERSITY OF THE BOARD OF DIRECTORS - SKILLS,
EXPERIENCE AND ATTRIBUTES
The Board considers that a diversity of skills, backgrounds,
knowledge, experience, geographic location, nationalities
and gender is required to effectively govern the business.
The Board and its Nomination and Remuneration
Committee work to ensure that the Board continues to have
the right balance of skills, experience, independence and
Group knowledge necessary to discharge its responsibilities
in accordance with the highest standards of governance.
To govern the Group effectively, Non-Executive Directors
must have a clear understanding of the Group’s overall
strategy, together with knowledge about the Group and the
industries in which it operates. Non-Executive Directors must
be sufficiently familiar with the Group’s core business to be
effective contributors to the development of strategy and to
monitor performance.
The Board requires that Directors commit to the collective
decision-making processes of the Board. Individual Directors
are required to debate issues openly and are free to question
or challenge the opinions of others. Each Director must
ensure that no decision or action is taken that places his or
her interests in front of the interests of the Company.
Current Board profile
The Board considers that each of the Non-Executive
Directors has the following attributes:
• time to undertake the responsibilities of the role;
• unquestioned honesty and integrity;
• a willingness to understand and commit to the
highest standards of governance;
• knowledge of commodity markets and mining
• an ability to think strategically
AFARAK ANNUAL REPORT 2019
72
• a preparedness to question, challenge and critique
• experience of managing in the context of uncertainty,
and an
• understanding of the risk environment of the Group,
including the potential for risk to impact our health
and safety, environment, community, reputation,
regulatory, market and financial performance;
• knowledge of world capital markets.
SENIOR INDEPENDENT DIRECTOR
During the year under review, Barry Rourke, then followed by
Thorstein Abrahamsen held the role of Senior Independent
Director of Afarak Group in accordance with the UK Corporate
Governance Code. He acted independently in the best
interests of the Group. His expertise and broad international
experience materially enhanced the skills and experience
profile of the Board. He is available to shareholders who have
concerns that cannot be addressed through the Chairman,
CEO or CFO. As Senior Independent Director, he also provides
a sounding board for the Chairman and serves as an
intermediary for other Directors if necessary.
BOARD INDEPENDENCE
The Finnish Corporate Governance Code requires that the
majority of the directors are independent of the Company.
In addition, at least two of the directors representing this
majority must be independent of the significant shareholders
of the Company. The Company believes that Mr Thorstein
Abrahamsen and Dr Jelena Manojlovic are independent of
the Company and significant shareholders. Furthermore, the
Company believes that Mr. Barry Rourke and Mrs. Yolanda
Bolleurs were independent of the Company and significant
shareholders. The company believes that Mr. Guy Konsbruck
is dependent of the company since Mr. Konsbruck has had a
non-temporary employment relationship with the Company
during past three years.
Current
Position
Appointed to the
Board
Status
Audit & Risk
Management
Committee
Nomination &
Remuneration
Committee
Health, Safety
& Sustainable
Development
Committee
Jelena Manojlovic
NED
11 July 2008
Independent
Member1
Member
Member2
Thorstein Abrahamsen
Chariman
11 May 2017
Independent
Member
Member
Member
Guy Konsbruck
ED
5 February 2018
Dependent
Member3
Member4
Member5
Resigned 11
November 2019
Resigned 11
November 2019
8 May 2015
Independent
25 June 2019
Independent
Member6
Barry Rourke
Yolanda Bolleurs
1As of 11 March 2019
2As of 11 March
3As of 11 March 2019
4As of 11 March
5As of 11 March
6Until 11 March 2019
GOVERNANCE REVIEWAFARAK ANNUAL REPORT 2019
73
REMUNERATION
The AGM resolved that all Board members will receive EUR
3,500 a month and will receive additional EUR 1,500 for the
committee work. Chairman of the audit committee will
receive in addition EUR 500 a month while Chairman of the
Board will receive additional EUR 2,000 a month.
Those members of the Board of Directors that are executives
of the Company are not entitled to receive any remuneration
for Board membership.
During the financial year 2019, the Board members received
a total of EUR 227,000 and Committee membership fees.
The Board in 2019
The new Board of Directors made it a priority to review
various elements relating to the operation and corporate
governance of Afarak. Highlights of the main discussions and
decisions are presented below. A strategic workshop was
held by the Board soon after election and various elements
relating to Afarak’s core business were reviewed.
COMPANY PERFORMANCE
The Board supported various initiatives to make the
Company more resilient and responsive to the market.
Throughout the year, the Board agreed on various projects,
especially in South Africa and Germany, which made the
units able to respond to changing market conditions. The
Board also supported various capital investments and
restructuring processes especially in South Africa, acquisition
of Synergy Africa and acquisition of own shares.
RISK MANAGEMENT
The Board continued enhancing the Group’s risk management
function across the Group. Key factors were identified and
various mitigating measures, including reducing the exposure
to currency fluctuations and more controls in our South
African operations to reduce staff. In addition, the Board has
overseen measures to improve liquidity and in particular to
manage its working capital effectively.
SUSTAINABILITY
The Board highlighted health & safety as a key priority.
The Board is working closely with the respective units to
strengthen the health & safety culture within the Company.
The Board remains committed to continue investing in
training, equipment and reporting to ensure that its policy
of ‘Zero Harm’ is practiced throughout the Company. From
the environmental perspective, investments were made
in the plants in Turkey in terms of water conservation and
management.The Board continued the Company’s support
towards host communities in South Africa.
A total of 19 meetings of the Board were held during the
reporting period and the attendance of the directors is
tabled below.
Meetings attended
Thorstein Abrahamsen
Jelena Manojlovic
Guy Konsbruck
Barry Rourke (resigned 11.11.2019)
Yolanda Bolleurs (resigned 11.11.2019)
19/19
19/19
19/19
16/16
6/6
A total of 19 meetings were held during the reporting period.
The differences in the meetings attended, related to the
changes in Board composition.
AFARAK ANNUAL REPORT 2019 74
Board Committees
AUDIT AND RISK MANAGEMENT COMMITTEE
NOMINATION AND REMUNERATION COMMITTEE
The Audit and Risk Management Committee is currently
composed of the three Board members: Thorstein
Abrahamsen, Jelena Manojlovic and Guy Konsbruck. Yolanda
Bolleurs was a chairman of the committee until 11 November
2019. The Committee convened five times.
The Board has defined the Committee’s duties in
accordance with the recommendations of the Finnish
and the UK Corporate Governance Codes. The Audit
and Risk Management Committee reviews the auditors’
work and monitors the Group’s financial position and
the appropriateness of its financial reporting. The
Committee oversees risk management procedures and
internal controls, maintaining contact with auditors and
evaluating their reports. The Committee reports regularly
to the Board.
In 2019, the Committee continued to oversee the Group’s
financial performance and reporting. The Committee
also worked with management to continuously improve
the reporting function of the Group, both internally and
externally. Regular scrutiny of the Group’s compliance with
laws, regulations and best practice continued being an area
of focus during the year.
The Committee assessed various growth options, strategies
and investments. It worked with Management on finalising
the acquisition of Synergy Africa and share buy back. The
Committee also assessed various external financing facilities.
Throughout the year, the Committee worked on improving the
internal budgeting and forecasting models and processes.
The Committee also reviewed each quarterly report before
release and recommended changes where necessary, before
recommending the reports to the Board.
The combined Nomination and Remuneration Committee of the
Company is currently composed of the three Board members:
Thorstein Abrahamsen, Jelena Manojlovic and Guy Konsbruck.
The Committee convened one time.
The Committee leads the process for making appointments
to the Board and the executive management and submits
recommendations to the Board in this regard. The Committee
also leads the process relating to the remuneration of
the executive management and the Board and makes
recommendations to the Board and to the General Meeting in
relation to the Board’s remuneration.
THE COMMITTEE FOR HEALTH, SAFETY AND
SUSTAINABLE DEVELOPMENT
The combined Health, Safety and Sustainable Development
Committee of the Company is currently composed of
the three Board members: Thorstein Abrahamsen, Jelena
Manojlovic and Guy Konsbruck.
The Committee’s stated mission is to ensure that Afarak
conducts its business in a responsible and ethical manner
for the benefit of all its stakeholders. Throughout 2019,
the Committee continued to monitor safety improvement
progress and initiatives across various Units of the Company
Afarak is continuously investing in environmental initiatives
and projects. It supported investments that will allow the
Group to rehabilitate its mines and to invest in alternative
energy sources. It continued supporting the business units
in their efforts to improve water management and dust
reduction. The Committee also continued to monitor
Afarak’s work and social investment programmes with local
communities, particularly in South Africa.
GOVERNANCE REVIEWAFARAK ANNUAL REPORT 2019 75
Corporate Governance
Statement
Afarak Group Plc (“Afarak”, the “Company” or the “Group”)
is a Finnish public limited company listed on the Nasdaq
Helsinki Stock Exchange (AFAGR) and the Main Market of
the London Stock Exchange (AFRK).
Afarak’s corporate governance is based on, and complies
with, the laws of Finland, the Articles of Association of the
Company, the Finnish Corporate Governance Code and the
regulations of the Finnish Financial Supervisory Authority,
the UK Listing, Disclosure and Transparency Rules, the
Nasdaq Helsinki Stock Exchange and the London Stock
Exchange. As Afarak primarily follows the Finnish Corporate
Governance Code, certain sections of the UK Corporate
Governance Code issued in September 2012 (“UK CG”) are
not strictly complied with. However, in the areas that the
Company diverges from the UK CG the Company believes
that its policies are acceptable for the reasons which are
set out below.
UK CG Section Description
The Reason for Non-Compliance
C.3.8
E.2.1
E.2.2
A separate section of the annual
report should describe the
work of the Audit committee in
discharging its responsibilities.
While this report includes a description of the work of the audit
and risk management committee, the contents requirements of
this section under the UK GC are not the same as those under the
Finnish CG and, therefore some information required under the UK
GC is not included.
For each resolution, proxy
appointment forms should
provide shareholders with the
option to direct their proxy to vote
either for or against the resolution
or to withhold their vote.
The Company’s AGM is arranged in accordance with the Finnish
Companies Act so certain procedural and other matters differ from
the UK CG recommendation. The Company does not provide proxy
voting forms.
Miscellaneous general meeting
procedures.
The Company’s AGM is arranged in accordance with the Finnish
Companies Act so certain procedural and other matters differ from
the UK CG recommendation.
Afarak’s foreign subsidiaries operate under the local laws
and regulations of the countries in which they are located,
including but not limited to local accounting and tax
legislation as well as exchange controls. This Corporate
Governance Statement for the financial period 1 January
to 31 December 2019 is issued as a separate report to the
Board of Directors’ Report and is available on the Group’s
website at www.afarak.com. It has been prepared pursuant
to the Finnish Corporate Governance Code 2020 which
entered into force on 1.1.2020. The statement also includes
a Remuneration Statement for the accounting period
2019 following the instructions of the Finnish Corporate
Governance Code 2015 which entered into force on 1.1.2016.
Afarak complies with the Finnish Corporate Governance
Code 2020 which can be found on the Securities Market
Association’s website at www.cgfinland.fi. Afarak has made
no exceptions in its Finnish Corporate Governance Code
compliance.
AFARAK ANNUAL REPORT 2019 76
Internal Control
The principles of internal control are confirmed by the Board.
The Group’s EMT members are in charge of the day-to-day
business management and administrative control in their
respective responsibility areas.
MAIN PRINCIPLES OF RISK MANAGEMENT AND
INTERNAL CONTROL
The purpose of risk management is to identify, evaluate and
mitigate the potential risks that could impact the Group’s
business and the implementation of its strategy, and to ensure
that risks are proportional to the Group’s risk-bearing capacity.
The Group’s risk management policy is approved by the
Board of Directors and defines the objectives, approaches
and areas of responsibility of risk management activities.
The Group’s key risks are reviewed and assessed by the
Board on a regular basis. The Group’s business segments,
and the business units within those segments, are primarily
responsible for managing their risks, their financial
performance and their compliance with the Group’s risk
management policies and internal control procedures.
The Board of Directors is responsible for organising and
maintaining adequate and effective internal control
performed by the senior and executive management as
well as other Afarak personnel and assisted by third-party
experts when appropriate.
The Board of Directors decides on the Group’s management
system and the corporate and organisational structure
required by each business unit with a view to providing
solid foundations for effective internal control. Internal
control and risk management related to financial reporting
at the Group level are performed in a coordinated way
by a function independent of the business areas. Each
subsidiary’s executive management is responsible for the
implementation of internal control and risk management to
the agreed Group principles and guidelines.
The system of internal control provides reasonable rather than
absolute assurance that Afarak’s business objectives will be
achieved within the risk tolerance levels defined by the Board.
Internal control refers to elements of financial and
operational management which are designed to ensure:
• Achievement of defined performance targets;
• Efficient use of resources and protection of assets;
• Effective management of risks;
• Accurate, timely and continuous delivery of financial
and operational information;
• Full compliance with laws and regulations as well as
internal policies; and
• Business continuity through secure systems and stable
operating procedures.
THE STRUCTURE OF INTERNAL CONTROL SYSTEMS
The main structural elements of the Group’s internal control
system are:
• The risk management and internal control policies and
•
principles defined by the Board;
Implementation of the policies and principles under
the supervision of Group management;
• Supervision of the efficiency and functionality of the
business operations by Group management;
• Supervision of the quality and compliance of the
financial reporting by the Group finance department;
• An effective control environment within all
organisational levels and business units, including
tailored controls for each business process; and
Internal audits conducted as and when needed.
•
THE INTERNAL CONTROL OF THE FINANCIAL
REPORTING PROCESS
The Group’s financial organisation is structured so that
each business unit has its own finance function, but overall
financial management including accounting, taxation and
financing is centralised within the Group’s parent company.
The Group finance department is responsible for ensuring
the compliance, quality and timeliness of the Group’s
external and internal financial reporting. The internal control
mechanisms are based on the policies, procedures and
authorisations established and approved by the Board. In
addition to control mechanisms, training and sharing of
knowledge are also significant tools of internal control.
Each business unit has its own finance function which
reports to the Group Finance. The business unit’s finance
function is responsible for the unit’s accounting and daily
financial operations and internal reporting. The finance
function and administration is overseen by the unit’s
management team and reports to the head of the business
unit’s segment.
The tasks of the Group Finance consist, among other things,
of monthly consolidation of the Group’s accounts, preparation
of the quarterly interim reports and consolidated financial
statements, financing of the Group, and tax planning.
Consolidated financial statements are prepared by using
consolidation software. The accounting of the Company’s
subsidiaries is carried out by accounting systems and the
accountants within each subsidiary enter the accounting
information directly into the consolidation system, or in
some cases send the information in a predefined format to
the Group’s financial administration to be consolidated.
GOVERNANCE REVIEWAFARAK ANNUAL REPORT 2019
77
ROLES AND RESPONSIBILITIES REGARDING RISK
MANAGEMENT AND INTERNAL CONTROL
BOARD OF DIRECTORS
The Board of Directors is ultimately responsible for
the administration and the proper organisation of the
Group’s operations and approves all internal control, risk
management and corporate governance policies. The Board
establishes the risk-taking level and risk-bearing capacity of
the Group and reassess them on a regular basis as part of
the Group’s strategy and goal-setting process. The Board
reports to the shareholders of the Company.
AUDIT AND RISK MANAGEMENT COMMITTEE
The Audit and Risk Management Committee is responsible
for the following internal control related activities:
• Monitoring the reporting process of the financial
statements;
• Supervising the financial reporting process;
• Monitoring the efficiency of the Group’s internal
control, internal audit and risk management systems; and
• Monitoring the statutory audit of the financial
statements and consolidated financial statements.
GROUP MANAGEMENT
The Group’s management is in charge of the day-to-
day management of the Group in accordance with the
instructions and orders given by the Board. It sets the
framework of the internal control environment and is
in charge of the Group’s risk management process and
its continuous development. This includes allocation of
resources to the work and continuous review of the risk
management policies, as well as defining the principles of
operation and overall processes.
EXTERNAL AUDIT
According to the Articles of Association, the Annual General
Meeting of shareholders elects the Company’s auditor, which
must be a firm authorised by the Finnish Central Chamber
of Commerce; otherwise the Company will have one main
auditor and one deputy auditor. The auditor’s term is for
one year and finishes at the end of the first General Meeting
following election.
During Afarak’s General Meeting held in May 2018, Authorised
Public Accountant Ernst & Young Oy (“EY”) was elected as
auditor, with Authorised Public Accountant Erkka Talvinko
having the principal responsibility. EY is also the local auditor of
all of the Group companies.
In 2019, the Company paid EUR 794,000 for audit fees (504,000)
and EUR 36,000 for non-audit services (36,000) to EY. The
increase from 2018 mainly relates to the Chromex Group
Companies which stared to be consolidated as from this year.
AFARAK ANNUAL REPORT 2019
78
Insider Administration
The Board of Directors of Afarak Group has confirmed the Insider
Guidelines for the Company. The Insider Guidelines supplement
the applicable regulations in force at any given time on the
management and processing of insider information in accordance
with the Market Abuse Regulation (EU) No 596/2014 (MAR),
Chapter 51 of the Criminal Code, Chapter 15 of the Securities
Markets Act, the Finnish Financial Supervisory Authority’s
regulations and Nasdaq Helsinki Ltd’s Insider Guidelines.
All persons who have access to insider information on
the company and who work for them on the basis of an
employment contract or otherwise perform duties through
which they have access to insider information, such as
advisers, are included in the company's insiders.
The company maintains a separate list named Permanent
Insiders. The supplementary section of Permanent Insiders
contains information only on persons who have continuous access
to all insider information within the company, such as persons in
Company’s finance department, legal counsels and auditors.
The Company maintains separate Project-Specific Insider
Lists. Each Project-Specific Insider List only contains the details
of such persons who have access to specific Inside Information
relating to the particular project. Trading is prohibited during
the project from the project-specific insiders
The Company has set up a list named PDMR -list (Persons
Discharging Managerial Responsibilities) with Notification
Obligation (Article 19 MAR) for the company's Board of
Directors, Management Team and advisers as well as their
closely associated persons.
The company's permanent insiders include the members of
the Board of Directors, the Executive management team,
members of the senior management, and the principal
auditor appointed by the audit firm responsible for auditing
the company, legal advisors, and translators. In addition, a
non-public, project-specific insider register is kept concerning
significant projects referred to in the insider regulations.
The Company trains and informs permanent insiders and
project-specific insiders in such a way that they recognize
their position and its importance. As concerns persons
included in the register of Company´s PDMR list with
Notification Obligation and in the Permanent Insiders
register, the Company's Insider Guidelines set a 30-day
closed period prior to the publication of the interim report or
the financial statements. During the closed period, trading in
the issuer's financial instruments on one’s own account or on
behalf of a third party, directly or indirectly, is prohibited.
The Chief Executive Officer of the Company is responsible for
insider issues.
WHISTLE-BLOWING
The Company maintains an internal system available for all
employees for reporting any detected violations of internal
or external standards and regulations (so called whistle-
blowing). All such notifications will be investigated as a
matter of urgency and confidentiality while protecting the
identity of the notifier as far as possible.
Shareholdings of the CEO, members of the Board of Directors, Executive Management Team and auditors at 31 December 2019
Title
Shares
Related Party Shares
Options
Members of the Board
Thorstein Abrahamsen
Jelena Manojlovic
Guy Konsbruck*
Auditors
Erkka Talvinko
Other Insiders
Danko Koncar**
Melvin Grima
Chairman
Non-Executive Director
Chief Executive Officer,
Executive Director
0
150,000
1,000,000
Auditor
Executive
Chief financial Officer
0
0
0
0
0
0
* The CEO was due to receive an additional 500,000 shares in January 2020 after completing his third year of sservice. These will be granted
after the AGM when a new board is formed, however these were self-reduced by 20% to 400,000 Company shares in 2020.
** Dr Koncar has sold his shareholding in LNS (formerly Kermas Resources Ltd) on January 20,2018.
PRINCIPLES CONCERNING RELATED PARTY TRANSACTIONS
The Company complies with the provisions of the Securities Markets Act and Limited Liability Companies Act, the recommendations
of the Finnish Corporate Governance Code 2020 and the rules of Nasdaq Helsinki Ltd stock exchange concerning related party
transaction. The Board of Directors of the company has adopted the policy on Related Party Transactions (“Policy”) to be observed
in the business operations of Company. The purpose of the Policy is to set out the processes and procedures that should be followed
in relation to inter-company and related party transactions of the Group, mainly to ensure that transactions are carried out on
arm's length terms. Related party transactions which do not form part of the Company's regular business activities or which are not
conducted on normal market terms will be decided on by the Board of Directors of the Comp
GOVERNANCE REVIEWAFARAK ANNUAL REPORT 2019 79
Resolutions of the
Annual General Meeting
The Company’s Annual General Meeting (“AGM’) was held
on 25 Jun 2019. The AGM adopted the financial statements
and the consolidated financial statements and discharged
the members of the Board of Directors and the CEO from
liability for the financial period 2018.
The AGM decided to change the company´s company
form from a public limited company (Oyj) into a European
company (SE) in accordance with the conversion plan
signed by the Board of Directors of the company on 17 May
2019 and registered into the Trade Register on 22 May 2019.
The AGM resolved that no dividend would be paid for 2018.
2019 ANNUAL GENERAL MEETING
Afarak’s 2019 Annual General Meeting will be held within
the time stipulated in the Finnish Companies Act.
DISTRIBUTION PROPOSAL
The Board of Directors will propose to the Annual General
Meeting that no distribution would be paid in 2020.
The AGM resolved that all Board members shall be paid
EUR 3,500 per month, and will receive additional Eur 1,500
for the committee work. Chairman of the Audit and Risk
Management Committee shall receive in addition EUR
500 a month while chairmen of the board will receive
additional Eur 2,000 a month. Those members of the Board
of Directors that are executives of the Company are not
entitled to receive any remuneration for Board membership
or Board Committee work. Board Members shall be
compensated for travel and accommodation expenses as
well as other costs directly related to Board and Committee
work in accordance with the company’s travel rules.
The AGM resolved that the Board of Directors would
comprise of five members: Dr Jelena Manojlovic, Mr Barry
Rourke, Mr Thorstein Abrahamsen and Mr Guy Konsbruck
were re-elected and Yolanda Bolleurs was elected as a new
Board member.
The AGM resolved that authorised public accountant
firm Ernst & Young Oy is re-elected as the Auditor of the
Company for the year 2019.
The AGM resolved to authorize the Board of Directors to
issue shares and stock options and other special rights
that entitle to shares in one or more tranches up to a
maximum of 25,000,000 new shares or shares owned by
the Company. The authorization replaces all previous
authorizations and is valid two (2) years from the decision
of the AGM
The AGM decided to direct a share issuance without
payment to the company itself. The share issuance consists
of 15,000,000 new shares. The new shares will be registered
into the Trade Register without undue delay after which the
company will apply for the shares to be publicly traded on
Nasdaq Helsinki Oy.
AFARAK ANNUAL REPORT 2019
80
Additional Information
Ltd, a company incorporated and existing under the
laws of Malta, regarding the shares of Afarak Group Oyj.
In accordance with the flagging notification, Atkey Ltd
has completed a sale of shares in Afarak Group and the
transaction has resulted in Atkey decreasing its shareholding
in the Company to under 25 per cent and becoming a 23.62%
per cent holder of the shares and voting rights in Afarak.
On 7 August 2019, Afarak received from Joensuun Kauppa ja
Kone Oy, Esa Hukkanen, Markku Kankaala, Kari Kakkonen,
Timo Kankaala, Juhani Lemmetti, Antti Kivimaa, Juha
Halttunen, AJ Elite Value Hedge and Veikko Karhulahti
(together the “Flagging Notifies”) a flagging notification
pursuant to Chapter 9, Section 5 and Section 6 of the Finnish
Securities Markets Act, according to which the Flagging
Notifiers aggregate portion of the Company’s shares and
votes has gone below the threshold of 10 per cent. According
to the notification the Flagging Notifies have agreed to
use thevoting rights of Afarak together in consensus.
According to the notification, the Flagging Notifies holds
together 13,768,809 shares in Afarak, which corresponds
to approximately 5.81 % of the shares and voting rights in
Afarak as a result of the transaction that was executed on 2
August 2019 whereby Afarak purchased its own shares.
SHARE INFORMATION
Afarak Group Plc’s shares are listed on NASDAQ Helsinki
(AFAGR) and on the Main Market of the London Stock
Exchange (AFRK).
On 31 December 2019, the registered number of Afarak
Group Plc shares was 252,041,814 (263,040,695) and the
share capital was EUR 23,642,049.60 (23,642,049.60).
On 31 December 2019, the Company had 13,677,599
(2,387,494) own shares in treasury, which was equivalent to
5.43% (0.91%) of the issued share capital. The total number
of shares outstanding, excluding the treasury shares held
by the Company on 31 December 2019, was 238,364,215
(260,653,201).
At the beginning of the period under review, the Company’s
share price was EUR 0.73 on NASDAQ Helsinki and GBP 0.73
on the London Stock Exchange. At the end of the review
period as at December 2019, the share price was EUR 0.53
and GBP 0.38 respectively. During 2019, the Company’s share
price on NASDAQ Helsinki ranged from EUR 0.40 to 0.97
per share and the market capitalisation, as at 31 December
2019, was EUR 133.83 (1 January 2019: 191.0) million. For
the same period on the London Stock Exchange, the share
ranged from GBP 0.38 to 0.78 per share and the market
capitalisation was GBP 94.52 (1 January 2019: 190.7) million,
as at 31 December 2019.
The board resolved on 29 May 2019, based on authorization
granted by the EGM held on 12 November 2018, that the
Company repurchases 26 millions of its own shares at a price
of EUR 1.015 by means of voluntary public tender offer made
to all shareholders. On 31st July 2019, the Company completed
the public tender offer of purchasing own shares amounting
to 25,998,881 shares. Such shares were then cancelled
by Afarak on 8th August 2019. On 26th August 2019, the
Company announced an issue of 15,000,000 new shares.
As at end of 31 December 2019, the Company had 2,238,343
shares pending to be transferred to the subscribers, which
related to the acquisition of additional ownership in South
African mining assets.
FLAGGING NOTIFICATIONS
On 7 May 2019, Afarak received a flagging notification in
accordance with Chapter 9,
Section 5 of the Finnish Securities Markets Act from Atkey
GOVERNANCE REVIEWAFARAK ANNUAL REPORT 2019 81
Remuneration Report
The Group makes no pension arrangements for the CEO
beyond the statutory pension coverage and there is no set
retirement age.
NON-EXECUTIVE DIRECTORS’ SERVICE CONTRACTS
Non-executive directors do not have service contracts with
the company.
The remuneration of members of the Board of Directors
is agreed at the Company’s General Meetings. Directors’
remuneration consists of monthly fixed fees. The Annual
General Meeting held on June 25, 2019 resolved that all
Board members will receive EUR 3,500 a month and will
receive additional EUR 1,500 for the committee work.
Chairman of the audit committee will receive in addition
EUR 500 a month while Chairman of the Board will receive
additional EUR 2,000 a month.
Those members of the Board of Directors that are executives
of the Company are not entitled to receive any remuneration
for Board or committee membership.
As some of the Board members have also had executive
management roles, both the Board fees and the salaries in
relation to executive role have been presented below.
This report sets out the remuneration policy and practices
for Afarak’s Board and Executive Management Team
(“EMT) and provides details of their remuneration and share
interests for the year ended 31 December 2019.
REMUNERATION POLICY
Afarak operates in a very competitive sector in terms of
human capital with a shortage of highly qualified and
experienced executives. The Group’s remuneration policy
is designed to attract, retain and incentivise high-calibre
executives to implement its business strategy and enhance
shareholder value.
The policy seeks to align the interests of the business and
shareholders by rewarding executives appropriately for
achieving individual and group targets and thereby ensuring
long-term value creation for the benefit of all shareholders.
NOMINATION AND REMUNERATION COMMITTEE
The Nomination and Remuneration Committee makes
recommendations to the Board regarding executive
remuneration and submits proposals to the Annual General
Meeting of shareholders regarding the Board’s remuneration.
The committee is responsible for the overall direction of
the remuneration policy, as well as determining, within
agreed terms of reference, the specific remuneration
packages of the EMT. This includes pension rights,
executive incentive schemes and any compensation
payments. To ensure that the Group’s remuneration
packages are both appropriate and competitive, the
committee evaluates information on market-based
remuneration levels for comparable companies.
The members of the committee in 2019 were Dr Jelena
Manojlovic (Chair) and Thorstein Abrahamsen and
Guy Konsbruck.
CEO SERVICE AGREEMENT
The Board appoints the Chief Executive Officer (CEO)
to manage, develop, guide and supervise the Group’s
activities and leads the EMT. The Board decides upon the
CEO’s remuneration based on the recommendations made
by the Committee.
The CEO has an annual salary of EUR360,000. He shall also
receive 500,000 Company shares as an incentive for each
completed year of service acting as CEO. Mr. Guy Konsbruck
received one share transfer in 2018 and another in 2019. In
2019 it was agreed that his package will decrease by 20%
until the market recovers and results improve.
AFARAK ANNUAL REPORT 2019 82
RELATED PARTY TRANSACTIONS WITH PERSONS BELONGING TO THE GROUP’S BOARD AND MANAGEMENT
EUR ‘000
CEO
Konsbruck
Guy
BOARD
MEMBERS
Abrahamsen
Thorstein
Hoyer Thomas
Jakovcic Ivan
Manojlovic
Jelena
Rourke Barry
Bolleurs
Yolanda
Total
Board member
05.2.2018 onwards, CEO
15.1.2017 onwards
Board member 23.5.2017
onwards, Chairman
11.11.2019 onwards
Board member
23.5.2017 - 05.2.2018
Board member 8.5.2015
- 31.07.2018, Chairman
12.5.2016 - 23.5.2017
Board member 11.7.2008
onwards, Chairperson
23.5.2017 – 25.6.2019
Board member 8.5.2015
– 11.11.2019, Chairman
25.06.2019 – 11.11.2019
Board member
25.6.2019 – 11.11.2019
2019
2018
Salaries
Fees
Share-based
remuneration
Salaries
Fees
Share-based
remuneration
294
605
360
219
63
0
0
66
73
25
521
0
60
6
34
72
85
0
617
219
605
0
OTHER EMT MEMBERS’ SERVICE CONTRACTS
As Afarak operates within highly competitive environment,
its performance depends on the individual contributions
of the executive directors and other senior employees. The
remuneration packages are designed to attract, motivate and
retain executives to manage the Group’s operations effectively
and to reward them for enhancing shareholder value.
There are no early retirement options in the EMT’s employment
contracts and the notice period and/or non-compete period is
normally six months, unless otherwise agreed.
The table below includes the EMT but excludes the CEO since
the compensation for Board members and CEO has been
presented separately.
The EMT remuneration package is a combination of a base
salary and long-term based incentives, fringe benefits include
liability insurance, traveller’s insurance and telephony services.
None of Afarak’s executive directors have received any
compensation for serving as a NED in other companies.
GOVERNANCE REVIEWAFARAK ANNUAL REPORT 2019 83
Management remuneration
EUR ‘000
Fixed salaries and fees
Provision for variable performance related compensation
Total
2019
591
0
591
2018
564
-14
550
SHARE-BASED COMPENSATION
SHARE OPTIONS
As part of the remuneration packages of its CEOs, Afarak
pays a share-based compensation of 500,000 shares for every
completed year. Guy Konsbruck, after completing his first year
as CEO in 2018 received 500,000 in share-based
compensation, after completing his second year as
CEO in 2019 received another 500,000 in share-based
compensation, and he is due to receive another 400,000 for
his third year of service.These shares have a lock-up period of
two years from subscription date.
DIRECTORS’ AND EMT MEMBERS’ SHAREHOLDINGS AND OPTIONS AT 31 DECEMBER 2019
Title
Shares
Related Party Shares
Options
Members of the Board
Thorstein Abrahamsen
Chairman
0
Jelena Manojlovic
Non-Executive Director
150,000
Guy Konsbruck*
Auditors
Erkka Talvinko
Other Insiders
Danko Koncar
Melvin Grima
Chief Executive Officer,
Executive Director
1,000,000
Auditor
Executive
Chief financial Officer
0
0
0
800,000
0
0
0
0
0
0
0
0
0
* The CEO was due to receive an additional 500,000 shares in January 2020 after completing his third year of service. These will
be granted after the AGM when a new board is formed, however these were self-reduced by 20% to 400,000 Company shares
in 2020.
** Dr Koncar has sold his shareholding in LNS (formerly Kermas Resources Ltd) on January 20,2018.
AFARAK ANNUAL REPORT 2019 44
Financial
Statements
86
Key Figures
FINANCIAL INDICATORS
CONTINUING OPERATIONS
2019
2018
2017
Revenue
EBITDA
% of revenue
EUR’000
EUR’000
Operating profit / loss (EBIT)
EUR’000
% of revenue
Profit / loss before taxes
EUR’000
% of revenue
Return on equity
Return on capital employed
Equity ratio
Gearing
Personnel at the end of the accounting period
%
%
%
%
144,918
-23,754
-16.4%
-63,154
-43.6%
-60,582
-41.8%
-52.2%
-33.0%
-33.3%
74.0%
905
194,013
-1,017
-0.5 %
-14,092
-7.3 %
-18,541
-9.6 %
-11.5 %
-6.0 %
-58.3 %
8.2 %
942
198,814
17,969
9.0 %
11,399
5.7 %
4,241
2.1 %
3.0 %
8.2 %
66.3 %
0.7 %
928
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 2019
Continuing
Operations
-0.23
-0.23
0.28
Key Figures
SHARE-RELATED KEY INDICATORS
Earnings per share, basic
Earnings per share, diluted
Equity per share
Distribution*
Distribution per share*
Price to earnings
Average number of shares
Average number of shares,
diluted
Number of shares at the end of
the period
EUR
EUR
EUR
EUR’000
EUR
EUR
1000
1000
1000
Share price information (NASDAQ Helsinki)
Average share price
Lowest share price
Highest share price
Market capitalisation
Share turnover
Share turnover
EUR
EUR
EUR
EUR’000
EUR’000
%
Group
-0.23
-0.23
0.28
0
0
neg.
251,785
254,374
252,042
0.90
0.40
0.97
133,834
37,961
16.8 %
Share price information (London Stock Exchange)
Average share price
Lowest share price
Highest share price
Market capitalisation
Share turnover
Share turnover
EUR
GBP
EUR
GBP
EUR
GBP
EUR’000
GBP’000
EUR’000
GBP’000
%
0.72
0.63
0.43
0.38
0.88
0.78
111,090
94,516
167
146
0.1 %
87
2018
2017
Continuing
Operations
Group
Continuing
Operations
-0.01
-0.01
0.66
-0.07
-0.07
0.58
0.02
0.02
0.66
5,186
0.02
35.2
259,329
260,718
263,040
0.91
0.72
1.15
222,269
58,773
24.7 %
0.84
0.74
0.63
0.55
1.06
0.93
214,944
190,705
56
49
0.0 %
Group
-0.07
-0.07
0.58
0
0
neg.
260,080
260,702
263,040
0.94
0.67
1.20
190,968
27,594
11.1 %
1.00
0.89
0.82
0.73
1.05
0.93
213,190
190,705
28
25
0.0 %
* In 2017 the company distributed a capital redemption of EUR 0.02 per share out of the paid-up unrestricted equity fund. In
2018 and in 2019 the company did not distribute capital redemption. In 2020 the Board of Directors proposes to the Annual
General Meeting that no distribution would be paid in 2020.
AFARAK ANNUAL REPORT 2019 88
Key Figures
FORMULAS FOR CALCULATION OF INDICATORS
FINANCIAL INDICATORS
Return on equity
Return on capital employed
Equity ratio
Gearing
EBITDA
Operating profit / loss
Profit for the period / Total equity (average for the period) * 100
(Profit before taxes + financing expenses) / (Total assets –
Interest-free liabilities) average * 100
Total equity / (Total assets - prepayments received) * 100
(Interest-bearing debt - liquid funds) / Total equity * 100
Operating profit + depreciation + amortisation + impairment losses
Operating profit is the net of revenue plus other operating income, plus
gain/loss on finished goods inventory change, minus employee benefits
expense, minus depreciation, amortisation and impairment and minus
other operating expense. Foreign exchange gains or losses are included
in operating profit when generated from ordinary activities. Exchange
gains or losses related to financing activities are recognised as financial
income or expense.
SHARE-RELATED KEY INDICATORS
Earnings per share, basic
Profit attributable to owners of the parent company / Average number
of shares during the period.
Earnings per share, diluted
Profit attributable to owners of the parent company / Average number
of shares during the period, diluted.
Equity per share
Equity attributable to owners of the parent / Average number of shares
Distribution per share
Price to earnings
Average share price
Market capitalisation
during the period.
Distribution / Number of shares at the end of the period. In the
attached table of share related key indicators, the dividend and
capital redemptions are presented in that year’s column on which
results the pay-out are based; hence the actual payment takes place
during next year.
Share price at the end of the period / Earnings per share
Total value of shares traded in currency / Number of shares traded
during the period.
Number of shares * Share price at the end of the period.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 89
Consolidated
Financial Statements
CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME
EUR '000
Revenue
Other operating income
Materials and supplies
Employee benefits expense
Depreciation and amortisation
Impairment
Other operating expenses
Share of profit from joint ventures
Operating (loss) / profit
Acquisition of Synergy Africa Ltd
Finance Income
Finance Expense
(Loss) / profit before taxes
Income taxes
(Loss) / profit for the year
(Loss) / profit attributable to:
Owners of the parent
Non-controlling interests
Earnings per share (counted from profit / (loss)
attributable to owners of the parent):
basic (EUR), Group total
diluted (EUR), Group total
basic (EUR), continuing operations
diluted (EUR), continuing operations
Note
1.1.-31.12.2019
1.1.-31.12.2018
1
2
3
4
4
5
12
6
6
7
8
144,918
194,013
2,378
-127,359
-24,839
-7,449
-31,951
-17,984
-868
4,624
-157,718
-25,589
-6,532
-6,543
-13,654
-2,693
-63,154
-14,092
7,069
12,027
-9,455
0
3,275
-7,724
-60,582
-18,541
1,705
-42
-58,877
-18,583
-57,576
-1,301
-58,877
-0.23
-0.23
-0.23
-0.23
-18,056
-527
-18,583
-0.07
-0.07
-0.07
-0.07
AFARAK ANNUAL REPORT 2019 90
Consolidated
Financial Statements
CONSOLIDATED INCOME STATEMENT AND STATEMENT OF COMPREHENSIVE INCOME (CONT.)
EUR ‘000
(Loss) / profit for the year
Other comprehensive (loss)/income
1.1.-31.12.2019
1.1.-31.12.2018
-58,877
-18,583
Items that will not be reclassified to profit and loss
Remeasurements of defined benefit pension plans
-2,740
-577
Items that may be reclassified to profit and loss
Exchange differences on translation of foreign operations - Group
Exchange differences on translation of foreign operations –
Associate and Joint Ventures
Other comprehensive (loss), net of tax
2,166
0
-574
-2,208
-340
-3,125
Total comprehensive (loss)/income for the year
-59,451
-21,708
Total comprehensive (loss)/income attributable to:
Owners of the parent
Non-controlling interests
-58,123
-1,328
-59,451
-21,111
-597
-21,708
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 91
Consolidated
Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
EUR '000
ASSETS
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Other financial assets
Receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Note
31.12.2019
31.12.2018
9
10
10
13
13
19
14
15
16
110,798
45,414
7,010
1,048
0
3,419
167,688
29,964
20,556
5,389
55,909
44,984
56,245
13,475
511
22,192
3,935
141,342
56,965
48,175
12,132
117,272
Total assets
223,597
258,614
AFARAK ANNUAL REPORT 2019 92
Consolidated
Financial Statements
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONT.)
EUR '000
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital
Share premium reserve
Legal Reserve
Paid-up unrestricted equity reserve
Translation reserve
Accumulated losses
Non-controlling interests
Total equity
Non-current liabilities
Deferred tax liabilities
Interest-bearing debt
Share of joint ventures´ losses
Pension liabilities
Other non-current debt
Provisions
Current liabilities
Trade and other payables
Provisions
Tax liabilities
Interest-bearing debt
Note
31.12.2019
31.12.2018
17
19
13
12
21
22
20
22
20
22
13
23,642
25,740
89
207,850
-19,618
-170,397
67,306
7,230
74,536
21,573
18,290
0
22,475
2,667
19,052
84,058
19,853
177
2,754
42,220
65,003
23,642
25,740
98
231,292
-21,811
-108,485
150,476
372
150,848
3,435
2,103
16,871
20,106
2,679
8,876
54,070
27,028
105
4,232
22,331
53,696
Total liabilities
149,061
107,766
Total equity and liabilities
223,597
258,614
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 93
Consolidated
Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS
EUR ‘000
Operating activities
(Loss) / profit for the year
Adjustments for:
Non-cash items
Depreciation and impairment
Acquisition of Synergy Africa Ltd
Finance income and expense
Income from joint ventures
Income taxes
Share-based payments
Proceeds from non-current assets
Working capital changes:
Change in trade receivables and other receivables
Change in inventories
Change in trade payables and other debt
Change in provisions
Interest paid
Interest received
Other financing items
Income taxes paid
Net cash from operating activities
Investing activities
Acquisitions of subsidiaries, net of cash acquired
Acquisition of non-controlling interest
Capital expenditure on non-current assets, net
Other investments, net
Repayments of loan receivables and loans given, net
Net cash used in investing activities
Financing activities
Acquisition of own shares
Proceeds from borrowings
Repayments of borrowings
Payment of principal portion of lease liabilities
Movement in short term financing activities
Net cash from financing activities
Change in cash and cash equivalents
Note
1.1-31.12.2019
1.1-31.12.2018
-58,877
-18,583
4
6
12
7
18
17
17
39,400
-7,069
4,497
868
-1,705
605
-3,188
18,221
28,439
-14,087
8,892
-3,766
-58
-13,631
-649
-2,108
684
-398
-2,068
-193
398
-1,577
-26,389
33,440
-6,981
-222
-3,088
-3,240
-6,926
13,075
0
4,449
2,693
42
-227
-56
5,795
-7,860
4,669
-107
-1,088
590
340
-663
3,069
-1,003
-457
-7,497
141
-1,139
-9,955
0
7,787
-6,088
-239
6,518
7,978
1,092
AFARAK ANNUAL REPORT 2019 94
Consolidated
Financial Statements
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT.)
EUR ‘000
Cash at beginning of period
Exchange rate differences
Cash at end of period
Change in the consolidated statement of financial position
16
Note
1.1.-31.12.2019
1.1.-31.12.2018
12,132
182
5,389
-6,926
10,702
338
12,132
1,092
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 95
Consolidated
Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
EUR ‘000
A = Share capital
B = Share premium reserve
C = Paid-up unrestricted equity reserve
D = Translation reserve
E = Retained earnings
F = Legal reserve
G = Equity attributable to owners of the parent, total
H = Non-controlling interests
I = Total equity
ATTRIBUTABLE TO OWNERS OF THE PARENT
EUR ‘000
Equity at 31.12.2017
A
B
C
D
E
F
G
H
I
Note
23,642
25,740
230,835
-19,334
-89,618
131
171,396
969
172,365
Impact of the adoption of IFRS 9
Total impact of the adoption of
new IFRS standards
Loss for the period 1-12/2018
Other Comprehensive income and
Share of OCI in associates and JV
Total comprehensive income
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-18,056
-18,056
-527
-18,583
-2,477
-577
-3,054
-70
-3,124
-2,477
-18,633
-21,110
-597
-21,707
Share-based payments
18
457
- 234
Other changes in equity
223
-33
- 33
223
-33
Equity at 31.12.2018
23,642
25,740 231,292
- 21,811 - 108,485
98
150,476
372
150,848
Loss for the period 1-12/2019
Other Comprehensive income
Total comprehensive income
Share-based payments
Share issue
Acquisition of own shares
Acquisition of non-controlling
interest
Other changes in equity
18
17
17
17
-57,576
-57,576
-1,301
-58,877
2,193
-2,740
-547
-27
-574
2,193
-60,316
-58,123
-1,328
-59,451
605
783
-26,389
605
783
-26,389
-1,596
-37
8,186
8,149
-9
-9
-9
605
783
-26,389
1,559
Equity at 31.12.2019
23,642
25,740
207,850
- 19,618
- 170,397
89
67,306
7,230
74,537
AFARAK ANNUAL REPORT 2019
96
1. Notes to the Consolidated
Financial Statements
1.1 COMPANY INFORMATION
Afarak Group is a chrome mining and minerals producer focused on delivering sustainable growth with a speciality
alloys business in southern Europe and a ferro alloys business in southern Africa. The Group’s parent company is
Afarak Group Plc (business ID: 0618181-8). The parent company is domiciled in Helsinki, and its registered address is
Kaisaniemenkatu 4, 00100 Helsinki, Finland. Copies of the consolidated financial statements are available at Afarak
Group Plc’s head office or at the Company’s website: www.afarak.com.
Afarak Group Plc is quoted on the NASDAQ Helsinki Oy (trading code: AFAGR) in the industrials group, in the small-cap
category, and on the main market of the London Stock Exchange (AFRK).
1.2 ACCOUNTING PRINCIPLES
BASIS OF PREPARATION
These consolidated financial statements of Afarak Group have been prepared in accordance with the International
Financial Reporting Standards (IFRS) and in conformity with the IAS and IFRS standards as well as the SIC and
IFRIC interpretations in force on 31 December 2019. In the Finnish Accounting Act and the regulations issued on
the basis thereof, International Financial Reporting Standards refer to the standards and their interpretations that
have been approved for application within the EU in accordance with the procedure prescribed in the EU regulation
(EC) 1606/2002. Notes to the consolidated financial statements also meet the requirements set forth in the Finnish
accounting and company legislation.
The consolidated financial statements have been prepared on the historical cost basis, unless otherwise explicitly
stated. All the figures in the consolidated financial statements are given in EUR thousands.
Afarak Group Plc’s Board of Directors resolved on 31 March 2020 that these financial statements are to be published.
According to the Finnish Companies Act, shareholders shall endorse the financial statements in the Annual General
Meeting convening after the financial statements have been published.
PRESENTATION OF FINANCIAL STATEMENTS
The consolidated financial statements provide comparative information in respect of the previous period. In addition,
the Group presents an additional statement of financial position at the beginning of the earliest period presented when
there is: a retrospective application of an accounting policy; a retrospective restatement; or a reclassification of items
in financial statements that has a material impact on the Group.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the parent company Afarak Group Plc, its subsidiaries, joint ventures and
associated companies. Subsidiaries refer to companies controlled by the Group. The Group gains control of a company
when it holds more than half of the voting rights or otherwise exercises control. The existence of potential voting rights
has been taken into account in assessing the requirements for control in cases where the instruments entitling their
holder to potential voting rights can be exercised at the time of assessment. Control refers to the right to govern the
financial and operating policies of an enterprise so as to obtain benefits from its activities.
Acquired subsidiaries are consolidated from the time when the Group gained control, and divested subsidiaries until the
time when control ceased. All intra-group transactions, receivables, debts, and unrealised profits, as well as internal
distribution of profits, are eliminated when the consolidated financial statements are prepared. The distribution of
profits between parent company owners and non-controlling owners is shown in the statement of comprehensive
income, and the non-controlling interest of equity is shown as a separate item in the statement of financial position
under shareholders’ equity.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 97
Joint ventures are entities in which each venturer has an interest and there is a contractual arrangement establishing
joint control over the economic activity of the entity.
As at 31 March 2019, the Group held 51% of shares of Synergy Africa Ltd, which the shareholders of Synergy Africa Ltd
had entered into a joint venture agreement with joint control over the company. On 1 April 2019, Afarak acquired the
49% balance of Synergy Africa Ltd, and the Joint Venture agreement was terminated. Therefore Afarak now holds 100%
of Synergy Africa Ltd. As at 31 March 2019, the company and its subsidiaries were not consolidated into the Group as
subsidiaries but as joint ventures. The Group’s share of net profit or loss of the Joint venture during the period January
to March 2019 is shown on one line in the income statement. As from 1 April 2019, Synergy Africa Ltd and its subsidiaries
were consolidated into the Group as subsidiaries.
Associates are companies in which Afarak Group exercises significant influence. The Group exercises significant
influence if it holds more than 20% of the target company’s voting rights, or if the Group in other ways exercises
significant influence but not control. Associates have been consolidated in the Group’s financial statements using
the equity method. If the Group’s share of the associate’s losses exceeds the carrying amount of the investment,
the investment is recognised at zero value on the statement of financial position, and losses exceeding the carrying
amount are not consolidated unless the Group has made a commitment to fulfil the associates’ obligations.
Investment in an associate includes the goodwill arising from its acquisition.
TRANSLATION OF FOREIGN CURRENCY ITEMS
Amounts indicating the profit or loss and financial position of Group entities are measured in the currency of each
entity’s main operating environment (‘functional currency’). Figures in the consolidated financial statements are
presented in euro, the functional and presentation currency of the Group’s parent company, Afarak Group Plc.
Transactions in foreign currencies have been recorded at the functional currency using the exchange rate on the date
of the transaction or mid reference rates of central banks. Monetary items denominated in foreign currencies have
been translated into the functional currency using the exchange rates at the end of each reporting period. Exchange
rate gains and losses are included in the revenue, operational costs or financial items, corresponding to their respective
origin. Hedge accounting has not been applied.
In the Group accounts, foreign subsidiaries’ income statements and statements of cash flows are converted into euro
by using average exchange rates for the period, and the statement of financial position is converted by using the
period-end exchange rate. The translation differences arising from this are recognised in other comprehensive income.
Translation differences arising from the elimination of the acquisition cost and post-acquisition equity changes are
also recognised in other comprehensive income. If and when the foreign subsidiary is partially or fully divested, these
accrued translation differences will be taken into account in adjusting the sales gain or sales loss.
Goodwill, other assets and liabilities arising from acquisitions of subsidiaries are recognised in the Group accounts
using the functional currency of each acquired subsidiary. The balances in that functional currency have then been
translated into euro using the exchange rates prevailing at the end of the reporting period.
In accordance with IAS 21, any foreign exchange difference arising from Intra-group loans for which settlement is
neither planned nor likely to occur in the foreseeable future is, in substance, a part of the entity’s net investment in
that foreign operation. This is recognised in the group’s other comprehensive income and reclassified from equity to
profit or loss on disposal of the net investment.
OPERATING PROFIT
IAS 1 Presentation of financial statements does not define the concept of operating profit. Afarak Group has defined
it as follows: Operating profit is the net amount derived by adding to revenue other operating income, less materials
and supplies, and expenses from work performed by the enterprise and capitalised, less costs from employee benefits,
depreciation and impairment losses, and other expenses. Shares of associated companies’and joint venture companies’
profit or loss are included in the operating profit to the extent to which they relate to the Group’s core businesses.
AFARAK ANNUAL REPORT 2019 98
Exchange differences arising from operational transactions with third parties are included in operating profit; otherwise
they are recorded under financial items.
All other items of the income statement are excluded from operating profit.
IAS 1 amendment introduced the requirement for grouping of items presented in Other Comprehensive Income. Items
that are reclassified (or `recycled`) to profit or loss at a future point in time will be presented separately from items
which will never be reclassified. The amendment affected the presentation of Other Comprehensive Income.
REVENUE RECOGNITION
The Group applies IFRS 15 Revenue from Contracts with customers standard. Income from the sale of goods is
recognised once the control of goods have been transferred to the buyer. Control is transferred either over time or at a
point in time. The transfer of control depends on, terms of delivery (Incoterms) and some of which have transfer of risk
to the customer before material is delivered to the final customer. The freight in conjunction with these delivery terms
may be regarded as a separate performance obligation, however as they are limited in number, the Group does not
consider the freight as being separate from the sale.
The most often used terms are FCA, CIF or FOB, under which the revenue is recognised when the goods are assigned to
the buyer’s carrier or loaded on board the vessel nominated by the buyer.
Generally, the Group receives short-term advances or cash against documents (CAD) from its customers. The payment
terms are usually up to 60 days from end of month or after consignment report for customers with consignment
agreement. The transaction price is based on official publications with premiums or discounts, while spot business is
done based on negotiations. Performance obligations are satisfied at delivery of the goods and revenue is recognised
based on the incoterms transfer of risk.
As typical in the business, preliminary invoices are issued for the mineral concentrates at the time of delivery. Final
invoices are issued when quantity, mineral content and pricing have been defined for the delivery lot.
Income not generated by the Group’s main businesses is accounted for as other operating income. The expenses
incurred from disposals of non-current assets or a disposal group of assets are deducted from the gain on disposal.
PENSION LIABILITIES
Pension arrangements in Afarak Group are classified as defined contribution plans or defined benefit plans (Germany
and Turkey). Payments for defined contribution plans are recognised as expenses for the relevant period. The present
value of obligation for the defined benefit plans has been estimated applying the Projected Unit Credit Method
and recognised as a non-current liability on the statement of financial position. The actuarial gains and losses are
recognised in other comprehensive income when they occur and the net defined benefit liability or asset are presented
in full on the statement of financial position.
SHARE-BASED PAYMENTS
Option rights are measured at fair value at the time they were granted and recorded as expenses on a straight-line
basis during the vesting period. The expenses at the time the options were granted are determined according to the
Group’s estimate of the number of options expected to vest at the end of the vesting period. Fair value is determined
on the basis of an applicable option pricing model (e.g. Black-Scholes). The effects of non-market-based terms and
conditions are not included in the fair value of the option; instead, they are taken into account in the estimated
number of options expected to vest at the end of the vesting period. The Group updates the estimated final number of
options at the end of each reporting period. Changes in the estimates are recorded in the statement of comprehensive
income. When the option rights are exercised, the cash payments received from the subscriptions adjusted with
potential transaction costs are recorded under paid-up unrestricted equity reserve.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019
99
The Group from time to time directs free issues of shares to the members of the Board of Directors or key executives,
as approved by the AGM. The compensation is settled in shares and is accordingly recognised as share-based payment
in the Group’s financial statements. The fair value of the granted shares is determined based on the market price of
the Afarak Group share at the grant date. The total fair value is therefore the amount of granted shares multiplied by
the share market price at grant date. The cost is recognised as expense in personnel costs over the vesting periods and
credited to equity (retained earnings).
BROAD BASED BLACK ECONOMIC EMPOWERMENT (BBBEE) TRANSACTIONS
The purpose of South African Broad Based Black Economic Empowerment (BBBEE) regulation is to enable
previously disadvantaged people meaningfully to participate in the South African economy. The Group is
committed to making a positive contribution towards the objectives of BBBEE. Where the Group disposes of a
portion of a South African based subsidiary or operation to a BBBEE company at a discount to fair value, the
transaction is considered to be a share-based payment (in line with the principle contained in South Africa
interpretation AC 503 Accounting for Broad Based Black Economic Empowerment (BBBEE) Transactions). The
discount provided or value given is calculated in accordance with IFRS 2 and recognised as an expense. Where the
BBBEE transaction includes service conditions, the expense is recognised over the vesting period. Otherwise the
expense is recognised immediately on the grant date.
LEASE AGREEMENTS (THE GROUP AS THE LESSEE)
Leases of tangible assets where the Group possesses a material portion of the risks and benefits of ownership are
classified as financial leases. An asset acquired through a financial lease agreement is recognised at the fair value of
the leased object at the beginning of the lease period, or at a lower current value of minimum lease. An asset obtained
through a finance lease is depreciated over the useful life of the asset or the lease term, whichever is shorter. The leases
payable are divided into financial expenses and loan repayment during the lease term so that the interest rate for the
remaining loan is roughly the same each financial year. Leasing obligations are included in interest-bearing liabilities.
Lease agreements in which the risks and benefits typical of ownership remain with the lessor are crecognised in the
statement of financial position as a right-of-use asset and a corresponding lease liability at the date at which the lease
asset is available for the use by the Group. Each lease payment is allocated between the liability and finance cost. The
finance cost is recognised in the income statement over the lease period. The right-of-use asset is depreciated over the
shorter of the asset’s useful life and the lease term on a straight-line basis.
IMPAIRMENT
At the end of each reporting period, the Group makes an assessment of whether there are any indications of asset
impairment. If such indications exist, the recoverable amount of the asset is estimated. In addition, goodwill is
assessed annually for its recoverable amount regardless of whether there are any signs of impairment. Impairment is
examined at the cash-generating unit level; in other words, the lowest level of entity that is primarily independent of
other entities and whose cash flows can be separated from other cash flows. Impairment related to associates and
other assets are tested on a company/asset basis.
The recoverable amount is the fair value of an asset less divestment costs, or the higher value in use. Value in use
means the present value of estimated future cash flows expected to arise from the asset or cash-generating unit. Value
in use is forecast on the basis of circumstances and expectations at the time of testing. The discount rate takes into
account the time value of money as well as the special risks involved for each asset, different industry-specific capital
structures in different lines of business, and the investors’ return expectations for similar investments. An impairment
loss is recorded when the carrying amount of an asset is greater than its recoverable amount. If the impairment loss
is allocable to a cash-flow-generating unit, it is allocated first to reduce the goodwill of the unit and subsequently
to reduce other assets of the unit. An impairment loss is reversed if a change has occurred in circumstances and
the recoverable amount of the asset has changed since the impairment loss was recognised. An impairment loss
recognised for goodwill is not reversed in any circumstances.
Goodwill is tested for impairment annually at year end; for the 2019 financial year, testing took place on 30 June
2019 and 30 September 2019 for the South African minerals processing business and 31 December 2019 for all cash
generating units. Impairment testing and the methods used are discussed in more detail in section 1.5 in the ‘Notes to
the consolidated financial statements’.
AFARAK ANNUAL REPORT 2019 100
FINANCIAL INCOME AND EXPENSE
Interest income and expense is recognised using the effective interest method, and dividends are recognised when
the right to dividends is established. Unrealised changes in value of items measured at fair value are recognised in the
statement of comprehensive income. These items relate to currency forward contracts. Exchange rate gains or losses that
arise from intercompany loans that are considered as part of the net investment in the foreign entity are included, net of
any deferred tax effects, in the translation reserve within the equity. These exchange differences are recognised in other
comprehensive income while accumulated exchange differences are presented in the translation reserves in the equity.
BORROWING COSTS
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset
forming part of the cost of that asset, are capitalised if it is likely that they will provide future economic benefit and
can be measured in a reliable manner. Other borrowing costs are recognised as an expense in the period in which they
are incurred.
INCOME TAXES
Tax expenses in the statement of comprehensive income consist of the tax based on taxable income for the year
and deferred taxes. Taxes based on taxable income for the year are calculated using the applicable tax rates. Taxes
are adjusted with any taxes arising from previous years. Maltese companies’ income taxes are recognised and paid
applying the nominal income tax rate which is 35%. Six sevenths of this tax is refunded when the company pays a
dividend. Consequently the effective tax rate is 5%. The tax refund is recognised when the dividend is declared. Taxes
arising from items recognised directly in equity are presented as income tax relating to other comprehensive income.
Deferred taxes have been calculated for all temporary differences between the carrying amount and taxable amount.
Deferred taxes have been calculated using the tax rates set at the end of the reporting period. Deferred tax assets
arising from taxable losses carried forward have been recognised up to the amount for which there is likely to be
taxable income in the future, and against which the temporary difference can be used.
TANGIBLE ASSETS
Tangible assets have been measured at historical cost less accumulated depreciation and impairment losses. The initial
cost of an asset comprises its purchase price, costs directly attributable to bringing the asset into operation and the
initial estimate of the rehabilitation and decommissioning obligation. Heavy production machinery often contains
components with different useful lives, and therefore the component approach is applied. Material component
replacements and repairs are capitalised. The repair and maintenance of lighter machinery and other intangible items
are recognised as an expense when incurred.
Interest expenses are capitalised as part of the tangible asset’s value if and when the Group acquires or constructs
assets that satisfy the required terms and conditions.
Assets are depreciated over their useful lives using the straight-line method, except for the mineral resources and ore
reserves which are depreciated based on estimated or reported consumption. Land areas are not depreciated. The
estimated useful lives of assets are as follows:
Buildings
Machinery and equipment
Other tangible assets
15–50 years
3–15 years
5–10 years
Mines and mineral assets
Units-of-production method
The residual value of assets and their useful life are reviewed in connection with each financial statement and, if
necessary, they will be adjusted to reflect the changes that have occurred in the expected financial benefit. The sales
gains or losses arising from the decommissioning or divestment of tangible assets are included in other operating
income or expenses.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 101
MINES AND MINERAL ASSETS
Measurement of mineral resources and ore reserves in business combinations
Mineral resources and ore reserves acquired in business combinations are recognised as separate assets. In the
recognition and measurement of mineral resources and ore reserves the Group utilises available third party reports of
the quantities, mineral content, estimated production costs and exploitation potential of the resource. The probability
of the ore reserve is also an essential factor. In the mining and minerals business, the probability is commonly described
by classifying a mineral resource into categories such as ‘proven’, ‘probable’, ‘inferred’ and ‘hypothetical’. There are
also generally accepted standards for the classification of mineral resources in the business, such as the standards of
the South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves (‘SAMREC’).
The measurement of ore reserves is based on estimated market prices, estimated production costs and quantities.
In the Group’s statement of financial position, mineral resources and ore reserves are presented as tangible assets.
Rehabilitation liabilities related to mines are included in their cost of acquisition, and corresponding provision is
recognised on the statement of financial position.
Exploration and evaluation expenses of mineral resources
Exploration and evaluation expenditure relates to costs incurred on the exploration and evaluation of potential mineral
reserves and resources when new potential ore reserves are sought, for example by exploratory drilling. Exploration and
evaluation expenditure is carried forward as an asset if the Group expects such costs to be recouped in full through the
successful development of the area of interest; or alternatively by its sale; or if exploration and evaluation activities
in the area of interest have not yet reached a stage which permits the reasonable assessment of the existence of
economically recoverable reserves and active and significant operations in relation to the area are either continuing
or planned for the future. Exploration and evaluation expenditure includes material and other direct costs incurred,
for instance, by exploratory drilling and surveys. Overheads are included in the exploration and evaluation asset
to the degree to which they can be associated with finding and evaluating a specific mineral resource. Exploration
and evaluation assets are measured at cost and are transferred to mine development assets when utilisation of the
mine begins. The asset is then depreciated using the units-of-production method. Assets are written off when it is
determined that the costs will not lead to economic benefits or expensed when incurred if the outcome is uncertain.
Exploration and evaluation assets are assessed for impairment if and when facts and circumstances suggest that the
carrying amount exceeds its recoverable amount. In particular, the impairment tests are carried out if the period for
which the Group has right to explore the specific area expires or will expire in the near future and future exploration
and evaluation activities are not planned for the area.
Exploration and evaluation assets acquired in conjunction with business combinations are accounted for at fair value in
accordance with the principles of IFRS 3.
Mine establishment costs
Mine establishment costs are capitalised as part of the mine’s acquisition cost and depreciated using the units-of-
production method when the production of the mine begins. The costs arising from changes in mining plan after the
production has begun are expensed as incurred.
Impairment
The value of mineral resources and ore reserves acquired in business combinations is tested for impairment if there are
indications of deterioration in the long-term ability to utilise the asset economically. In the test the cash flows generated by
the asset are assessed based on most recent information on the technical and economic utilisation of the asset.
GOODWILL AND INTANGIBLE ASSETS IDENTIFIED AT ACQUISITION
Goodwill represents the portion of acquisition cost that exceeds the Group’s share of the fair value at the time of
acquisition of the net assets of the acquired company. Instead of regular amortisation, goodwill is tested annually
for potential impairment. For this purpose, goodwill has been allocated to cash-generating units or, in the case of
an associated company, is included in the acquisition cost of the associate in question. Goodwill is measured at
original acquisition cost less impairment losses. Changes in purchase considerations, for example due to earn-out
arrangements, relating to acquisitions carried out before 2010 have been recognised against goodwill in accordance
with the earlier IFRS 3.
AFARAK ANNUAL REPORT 2019 102
The net assets of an entity acquired in a business combination are measured at fair value at the date of acquisition. In
connection with business combinations, the Group also identifies intangible assets that are not necessarily recorded on
the statement of financial position of the acquired entity. These assets include, for instance, customer relationships,
trademarks and technology. The assets are recognised at fair value and amortised over their useful lives on a straight-
line basis. The amortisation periods for these intangible assets are as follows:
Customer relationships: 2-5 years depending on contractual circumstances
Technology:
Trademarks:
5-15 years
1 year
RESEARCH AND DEVELOPMENT COSTS
Research costs are always recognised as expenses. Mine development costs are capitalised as part of mining assets
and depreciated on a unit of production basis. The development costs, which primarily relate to the development of
existing products, are expensed as incurred.
OTHER INTANGIBLE ASSETS
Other intangible assets are initially recognised on the statement of financial position at cost when the costs can be
reliably determined and it is probable that the expected financial benefits of those assets will be reaped by the Group.
Other intangible assets mainly relate to IT software utilised in support of the Group’s business operations and they are
amortised over 3-5 years on a straight-line basis.
INVENTORIES
Inventories are measured at acquisition cost or a lower probable net realisable value. Acquisition costs are determined
using the average cost method. The cost of finished goods and work in progress comprises raw materials, direct labour
expenses, other direct expenses, and an appropriate share of fixed and variable production overheads based on the
normal capacity of the production facilities. In open pit mining operations, the removal costs of overburden and waste
material (stripping costs) are included in the cost of inventory. The net realisable value is the estimated selling price
that is obtainable, less the estimated costs incurred in completing the product and the selling expenses.
FINANCIAL ASSETS
Initial recognition and measurement
Financial assets are classified, at initial recognition, and subsequently measured at amortised cost, fair value through
other comprehensive income (OCI), and fair value through profit or loss in accordance with IFRS 9: Financial Instruments.
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow
characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not
contain a significant financing component or for which the Group has applied the practical expedient, the Group initially
measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss,
transaction costs. See note 13, in section 1.8. Notes to the Statement Of Financial Position, for tabular presentation of
financial instruments.
Trade receivables that do not contain a significant financing component or for which the Group has applied the practical
expedient are measured at the transaction price determined under IFRS 15: Revenue from Contracts with Customers.
In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give
rise to cash flows that are ‘solely payments of principal and interest (SPPI)’ on the principal amount outstanding. This
assessment is referred to as the SPPI test and is performed at an instrument level.
The Group’s business model for managing financial assets refers to how it manages its financial assets in order to
generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows,
selling the financial assets, or both.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or
convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group
commits to purchase or sell the asset.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 103
Subsequent measurement
For purposes of subsequent measurement, financial assets are classified in four categories:
1. Financial assets at amortised cost (debt instruments);
2. Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments);
3.Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon
derecognition (equity instruments); and
4. Financial assets at fair value through profit or loss.
There have been no transfers of financial assets between fair value categories during the financial period. Afarak has
not changed its recognition or fair valuation methods during the financial period.
1. Financial assets at amortised cost (debt instruments)
This category financial assets are measured at amortised cost if both of the following conditions are met:
• The financial asset is held within a business model with the objective to hold financial assets in order to collect
contractual cash flows; and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses
or reversals are recognised in the statement of profit or loss and computed in the same manner as for financial assets
measured at amortised cost.
The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value change
recognised in OCI is recycled to profit or loss.
The Group held loans receivable and trade receivables which were classified as being financial assets at amortised cost.
2. Financial assets at fair value through OCI (debt instruments)
This category of debt instruments are measured at fair value through OCI if both of the following conditions are met:
• The financial asset is held within a business model with the objective of both holding to collect contractual cash
flows and selling; and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of
principal and interest on the principal amount outstanding.
For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses
or reversals are recognised in the statement of profit or loss and computed in the same manner as for financial assets
measured at amortised cost. The remaining fair value changes are recognised in OCI.
Upon derecognition, the cumulative fair value change recognised in OCI is recycled to profit or loss.
The Group did not hold any debt instruments classified as being financial assets at fair value through OCI.
3. Financial assets designated at fair value through OCI (equity instruments)
Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments
designated at fair value through OCI when they meet the definition of equity under IAS 32 Financial Instruments:
Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.
Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income
in the statement of profit or loss when the right of payment has been established, except when the Group benefits
from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in
OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment.
The Group elected to classify irrevocably its non-listed equity investments under this category.
AFARAK ANNUAL REPORT 2019
104
4. Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated
upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured
at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or
repurchasing in the near term.
Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated
as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest
are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding
the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above,
debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or
significantly reduces, an accounting mismatch.
Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with
net changes in fair value recognised in the statement of profit or loss.
The Group did not hold any debt instruments classified as being financial assets at fair value through profit or loss.
Derecognition
A financial asset is primarily derecognised when:
• The rights to receive cash flows from the asset have expired; or
• The Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the
received cash flows in full without material delay to a third party under a ‘pass-through’ arrangement; and
either (a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has
neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of
the asset.
When the Group has transferred its rights to receive cash flows from an asset or has entered into a passthrough
arrangement, it evaluates if, and to what extent, it has retained the risks and rewards of ownership.
When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nor transferred control of
the asset, the Group continues to recognise the transferred asset to the extent of its continuing involvement. In that case,
the Group also recognises an associated liability. The transferred asset and the associated liability are measured on a basis
that reflects the rights and obligations that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the
original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.
Impairment of financial assets
Further disclosures relating to impairment of financial assets are also provided in the following notes:
• Disclosures for significant assumptions
• Debt instruments at fair value through OCI
• Trade receivables, including contract assets
The Group recognises an allowance for expected credit losses (ECLs) for all debt instruments not held at fair value through
profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance with the contract
and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective interest
rate. The expected cash flows will include cash flows from the sale of collateral held or other credit enhancements that are
integral to the contractual terms.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019
105
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase in credit risk
since initial recognition, ECLs are provided for credit losses that result from default events that are possible within the next
12-months (a 12-month ECL). For those credit exposures for which there has been a significant increase in credit risk since
initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective
of the timing of the default (a lifetime ECL).
For trade receivables and should the Group have any contract assets, the Group applies a simplified approach in calculating
ECLs. Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime
ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
For debt instruments at fair value through OCI, the Group applies the low credit risk simplification. At every reporting date,
the Group evaluates whether the debt instrument is considered to have low credit risk using all reasonable and supportable
information that is available without undue cost or effort. In making that evaluation, the Group reassesses the internal
credit rating of the debt instrument. In addition, the Group considers that there has been a significant increase in credit risk
when contractual payments are more than 30 days past due.
The Group considers a financial asset in default when contractual payments are 120 days past due. However, in certain cases,
the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is
unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the
Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGE ACCOUNTING
When necessary, the Group utilises derivative financial instruments, such as forward currency contracts and interest
rate swaps, to hedge its foreign currency risks and interest rate risks. Such derivative financial instruments are initially
recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at
fair value. Derivatives are carried as financial assets when the fair value is positive and as financial liabilities when the
fair value is negative. Any gains or losses arising from changes in fair value on derivatives are recognised on the income
statement. The Group did not have currency hedged at year end.
TREASURY SHARES
Own equity instruments, which are reacquired (treasury shares), are recognised at cost and deducted from the paid-up
unrestricted equity reserve. No gain or loss is recognised on the purchase, sale, issue or cancellation of the Group’s own
equity instruments.
FINANCIAL LIABILITIES
Liabilities are classified as current and non-current, and include both interest-bearing and interest-free liabilities.
Interest-bearing liabilities are liabilities that either include a contractual interest component, or are discounted to
reflect the fair value of the liability. In the earlier financial years discounted non-current liabilities have included
acquisition-related deferred conditional and unconditional liabilities. Certain conditional liabilities have included an
earn-out component that needed to be met to make the liability unconditional and fix the amount of the future
payment. Acquisition-related conditional purchase considerations that were payable in the Company’s shares were
presented as interest-free liabilities.
Initial recognition and measurement
Financial liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and
borrowings, payables, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.
All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings and payables, net of
directly attributable transaction costs.
AFARAK ANNUAL REPORT 2019 106
The company’s financial liabilities include trade and other payables and loans and borrowings including bank overdrafts.
Subsequent measurement
The measurement of financial liabilities depends on their classification, as described below:
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities
designated upon initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing in the near term.
Gains or losses on liabilities held for trading are recognised in the statement of profit or loss. Financial liabilities designated
upon initial recognition at fair value through profit or loss are designated at the initial date of recognition, and only if the
criteria in IFRS 9 are satisfied. The company has not designated any financial liability as at fair value through profit or loss.
Loans and borrowings
This is the category most relevant to the company. After initial recognition, interest-bearing loans and borrowings are
subsequently measured at amortised cost using the EIR method. Gains and losses are recognised in profit or loss when
the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are
an integral part of the EIR. The EIR amortisation is included as finance costs in the statement of profit or loss.
This category generally applies to interest-bearing loans and borrowings. For more information, refer to note 13, in 1.8
Notes to the Consolidated Statement of Financial Position.
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms
of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition
of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is
recognised in the statement of profit or loss.
OFFSETTING OF FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement
of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an
intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.
PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive), as a result of a past event
and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation
and a reliable estimate can be made of the amount of the obligation. If the effect of the time value of money is
material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to
the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as a
finance cost.
The provision for rehabilitation and decommissioning costs has arisen on operating mines and minerals’ processing
facilities. These costs are provided at the present value of expected costs to settle the obligation using estimated
cash flows. The cash flows are discounted at a current pre-tax rate that reflects the risks specific to the rehabilitation
and decommissioning liability. The estimated future costs of decommissioning are reviewed annually and adjusted as
appropriate. Changes in the estimated future costs of or in the discount rate applied to the rehabilitation obligation
are added or deducted from the profit or loss or, respectively, decommissioning obligation adjusted to the carrying
value of the asset dismantled.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 107
NON-CURRENT ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
The standard IFRS 5 requires that an entity must classify a non-current asset or a disposal group as assets held for sale
if the amount equivalent to its carrying amount is accumulated primarily from the sale of the item rather than from
its continued use. In this case, the asset or disposal group must be available for immediate sale in its present condition
under general and standard terms for the sale of such assets, and the sale must be highly probable.
ACCOUNTING POLICIES REQUIRING MANAGEMENT DISCRETION AND KEY UNCERTAINTY FACTORS FOR ESTIMATES
Preparation of the financial statements requires management to make estimates, assumptions and forecasts
regarding the future. Future developments may deviate significantly from the assumptions made if changes occur in
the business environment and/or business operations. In addition, management is required to use its discretion in the
application of the financial statements’ preparation principles.
The scope of the financial statements
The consolidated financial statements include the parent company Afarak Group Plc, its subsidiaries, joint ventures
and associated companies. Subsidiaries refer to companies in which the Group has control. The Group gains control of
a company when it holds more than half of the voting rights or otherwise exercises control. The assessment of whether
control is exercised requires management discretion.
As at 31 March 2019, the Group held 51% of shares of Synergy Africa Ltd, which the shareholders of Synergy Africa Ltd
had entered into a joint venture agreement with joint control over the company. On 1 April 2019, Afarak acquired the
49% balance of Synergy Africa Ltd, and the Joint Venture agreement was terminated. Therefore Afarak now holds 100%
of Synergy Africa Ltd. As at 31 March 2019, the company and its subsidiaries were not consolidated into the Group as
subsidiaries but as joint ventures. The Group’s share of net profit or loss of the Joint venture during the period January
to March 2019 is shown on one line in the income statement. As from 1 April 2019, Synergy Africa Ltd and its subsidiaries
were consolidated into the Group as subsidiaries.
IFRS 11 requires considering all facts and circumstances relating to joint arrangements instead of legal form only,
which influences the accounting treatment of the arrangements. Under the new standard Afarak’s share in Synergy
Africa Limited and its subsidiaries are consolidated under the equity method instead of the proportionate method of
consolidation. Synergy Africa Limited and its subsidiaries form a part of Afarak’s mining operations in South Africa.
Allocation of the cost of a business combination
In accordance with IFRS 3, the acquisition cost of an acquired company is allocated to the assets of the acquired
company. The management has to use estimates when determining the fair value of identifiable assets and liabilities.
Determining a value for intangible assets, such as trademarks and customer relationships, requires estimation and
discretion because in most cases, no market value can be assigned to these assets. Determining fair value for tangible
assets requires particular judgment as well, since there are seldom active markets for them where the fair value could
be obtained. In these cases, the management has to select an appropriate method for determining the value and must
estimate future cash flows.
Impairment testing
Goodwill is tested annually for impairment, and assessments of whether there are indications of any other asset
impairment are made at end of reporting period, and more often if needed. The recoverable amounts of cash-
generating units have been determined by means of calculations based on value in use. Preparation of these
calculations requires the use of estimates to predict future developments.
The forecasts used in the testing are based on the budgets and projections of the operative units, which strive to
identify any expansion investments and rearrangements. To prepare the estimates, efforts have been made to collect
background information from the operative business area management as well as from different sources describing
general market activity. The risk associated with the estimates is taken into account in the discount rate used. The
definition of components of discount rates applied in impairment testing requires discretion, such as estimating the
asset or business related risk premiums and average capital structure for each business segment.
AFARAK ANNUAL REPORT 2019 108
Tangible and intangible assets
Afarak Group management is required to use its discretion when determining the useful lives of various tangible and
intangible assets, which affects the amount of depreciation and thereby the carrying amount of the assets concerned.
The capitalising of mine development assets and exploration and evaluation expenditure, in particular, requires the use
of discretion. Similarly, management is required to use its discretion in determining the useful lives of intangible assets
identified in accordance with IFRS 3, and in determining the amortisation period. This affects the financial result for the
period through depreciation and change in deferred taxes.
Measurement of mineral resources and ore reserves
In the Group’s mining operations, estimates have to be applied in recognising mineral resources acquired in business
combinations as assets. In the recognition and measurement of mineral resources and ore reserves, the Group utilises
available third party analyses of the quantities, mineral content, estimated production costs and exploitation potential
of the resource. The probability of the ore reserve is also a key consideration. In the mining and minerals business,
the probability is commonly described by classifying a mineral resource into categories such as ‘proven’, ‘probable’,
‘inferred’ and ‘hypothetical’. The measurement of ore reserves is based on estimated market prices, estimated
production costs and on the probability classification of the mineral resource and quantities. Therefore, the Group’s
management has to use its discretion in applying recognition and measurement principles for mineral resources.
Rehabilitation provisions
The Group assesses the rehabilitation liabilities associated with its mines and production facilities annually. The amount of
provision reflects the management’s best estimate of the rehabilitation costs. In determining the fair value of the provision,
assumptions and estimates are made in relation to discount rates, the expected cost to rehabilitate the area and remove or
cover the contaminated soil from the site, the expected timing of those costs, and whether the obligations stem from past
activity. These uncertainties may cause the actual costs to differ from the provision which has been made.
STANDARDS AND INTERPRETATIONS EFFECTIVE AND ADOPTED IN THE CURRENT YEAR
The Group applied, for the first time, certain amendments to the standards, which are effective for annual periods
beginning on or after 1 January 2019. The Group has not early adopted any standards, interpretations or amendments
that have been issued but are not yet effective.
Several other amendments apply for the first time in 2019. However, they do not impact the annual consolidated
financial statements of the Group or the interim condensed consolidated financial statements of the Group and,
hence, have not been disclosed.
The nature and the effect of these changes are disclosed below. Although the new standards and amendments applied for the
first time in 2019, they did not have a material impact on the annual consolidated financial statements of the Group. Other
than the changes described below, the accounting policies adopted are consistent with those of the previous financial year.
IFRS 16 LEASES
IFRS 16 was issued in January 2016 and it replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a
Lease, SIC-15 Operating Leases-Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of
a Lease. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires
lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS
17. The standard includes two recognition exemptions for lessees – leases of ’low-value’ assets (e.g., personal computers) and
short-term leases (i.e., leases with a lease term of 12 months or less). At the commencement date of a lease, a lessee will
recognise a liability to make lease payments (i.e., the lease liability) and an asset representing the right to use the underlying
asset during the lease term (i.e., the right-of-use asset). Lessees will be required to separately recognise the interest expense
on the lease liability and the depreciation expense on the right-of-use asset.
Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in
the lease term, a change in future lease payments resulting from a change in an index or rate used to determine those
payments). The lessee will generally recognise the amount of the remeasurement of the lease liability as an adjustment
to the right-of-use asset.
Lessor accounting under IFRS 16 is substantially unchanged from today’s accounting under IAS 17. Lessors will continue
to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases:
operating and finance leases.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 109
IFRS 16 also requires lessees and lessors to make more extensive disclosures than under IAS 17.
The Group has adopted new IFRS 16 standard using modified retrospective approach and the comparative information
has not been restated. The reclassifications and adjustments arising from the new accounting rules have been
recognised in the opening balance sheet on January 1, 2019.
The Group leases mainly consist of offices and motor vehicles. Rental contracts are typically made for fixed periods
from two to three years but may have extension options. The Group continues to treat leases of 12 months or less and
leases of low-value assets as other leases.
Until year 2018 leases of property, plant and equipment were classified as operating leases. Payments made under
operating leases were recognized in the income statement on a straight-line basis over the period of the lease.
From January 1, 2019 according to the new IFRS 16 Leases, leases are recognised in the balance sheet as a right-of-use
asset and a corresponding lease liability at the date at which the lease asset is available for the use by the Group.
Each lease payment is allocated between the liability and finance cost. The finance cost is recognised in the income
statement over the lease period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the
lease term on a straight-line basis. The lease liabilities were discounted at the borrowing rate as at January 1, 2019. The
weighted average discount rate was 3.5 %.
The change in accounting policy affected the following items in the balance sheet on January 1, 2019:
•
right-of-use asset – increase by EUR 0.5 million
• non-current liabilities – increase by EUR 0.5 million
The recognized leases in the balance sheet as at December 31, 2019 and in the income statement for the year 2019 are
as follows:
IMPACT ON STATEMENT OF FINANCIAL POSITION INCREASE / (DECREASE) AS AT 31 DECEMBER 2019
ASSETS
Property, plant and equipment (right-of-use) NBV
LIABILITIES
Lease liabilities
Net impact on equity
EUR million
0.5
0.5
-0
IMPACT ON INCOME STATEMENT INCREASE / (DECREASE) FOR 31 DECEMBER 2019
EUR million
Depreciation expense (increased on cost of sales)
Operating lease expenses
Total comprehensive income
Finance costs
Profit for the year
STANDARDS AND INTERPRETATIONS NOT YET EFFECTIVE
0.1
-0.1
0
0.0
0
The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s
financial statements that the Group reasonably expects will have an impact on its disclosures, financial position or
performance when applied at a future date, are disclosed below. The Group intends to adopt these standards when they
become effective. Of the other standards and interpretations that are issued, but not yet effective, as these are not
expected to impact the Group, they have not been listed.
AFARAK ANNUAL REPORT 2019
110
AMENDMENTS TO IFRS 3: DEFINITION OF A BUSINESS
In October 2018, the IASB issued amendments to the definition of a business in IFRS 3 Business Combinations to help entities
determine whether an acquired set of activities and assets is a business or not. They clarify the minimum requirements for a
business, remove the assessment of whether market participants are capable of replacing any missing elements, add guidance
to help entities assess whether an acquired process is substantive, narrow the definitions of a business and of outputs, and
introduce an optional fair value concentration test. New illustrative examples were provided along with the amendments.
Since the amendments apply prospectively to transactions or other events that occur on or after the date of first
application, the Group will not be affected by these amendments on the date of transition.
AMENDMENTS TO IAS 1 AND IAS 8: DEFINITION OF MATERIAL
In October 2018, the IASB issued amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies,
Changes in Accounting Estimates and Errors to align the definition of ‘material’ across the standards and to clarify certain
aspects of the definition. The new definition states that, “Information is material if omitting, misstating or obscuring it
could reasonably be expected to influence decisions that the primary users of general purpose financial statements make
on the basis of those financial statements, which provide financial information about a specific reporting entity.”
The amendments to the definition of material is not expected to have a significant impact on the Group’s consolidated
financial statements.
1.3 GOING CONCERN
The company is prepared for a longer period of subdued markets. We have cut maximum cost in the loss-making assets in
South Africa and have done all that is possible to achieve a break-even point. We have reduced headcount in both Stellite
and Mogale. We have temporarily discontinued operations in the mines Mecklenburg, Zeerust and partially in Stellite. In
Mogale only one furnace has been operating. Market participants expect a higher benchmark in the foreseeable future. If
this would not materialize, the company will assess the possibility of discontinuing charge chrome production temporarily.
In the meantime, the government lock-down of the country may lead us to put all assets into care and maintenance. We
fully subscribe to the fact that today the lives and health of all populations have priority. We have taken all steps to preserve
the good condition of the production assets in such an eventuality.
The Specialty Alloys segment performance should generate adequate cash flows for the next 18 months to get us through
the weak markets. We enjoy a much greater flexibility in this segment, when it comes to right-sizing production output and
matching it with market requirements.
We are in the process of restructuring a short-term commercial debt into a longer-term arrangement and have secured
further short-term arrangements that should provide us with additional flexibility.
Whereas the management is positive about debt restructuring and further short-term arrangements, there is no certainty
that the Company will be successful in these matters. It must be noted that a failure to achieve these goals may cast
significant doubt on the company’s ability to continue as a going concern.
The recent developments with the COVID-19 epidemic could create further damage that cannot be forecasted at this
moment. The company is presently doing all efforts to manage the situation.
1.4 BUSINESS COMBINATIONS AND ACQUISTION OF
NON-CONTROLLING INTERESTS
1.4.1 FINANCIAL YEAR 2019
Afarak acquired 49% balance of Synergy Africa Ltd previously a joint venture. Afarak now holds 100% of Synergy Africa
Ltd and the Joint Venture agreement was terminated. Afarak acquired full control over its mining assets and is now
consolidating Synergy Africa as a subsidiary as from 1st April 2019.
The purchase price allocation of the acquisition is presented below. The figures on the table represent the 100% of the
assets and liabilities of Synergy Africa which is consolidated into Afarak Group’s financial statements.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019
111
Book value
Fair Value adjustments
Fair Value / Contribution paid
69.7
0.0
-19.5
0.0
0.0
-11.4
38.8
77.3
-5.5
-19.5
-6.8
-37.2
-8.4
0.0
7.6
-5.5
0.0
-6.8
-37.2
3.0
-38.8
0.0
0.0
0.0
0.7
0.7
EUR MILLION
Non-current assets
Net working capital
Deferred tax
Provision
Loans
Non-controlling interest
Net Assets
Cost of acquisition
Net assets acquired
Cash flow effect
Cash consideration paid
Cash acquired
Net cash
Intercompany Loans are now eliminated and external loans are now consolidated.
Fair valuation of former Synergy Africa joint venture resulted in a EUR 7.1 million accounting gain.
During the second quarter, Afarak also acquired a further 49% of the shares in Zeerust Chrome Mine, in exchange
for total consideration of two million shares in Afarak Group Plc, amounting to Eur 1,654,000. Of which 26% are to be
transferred to a prospective BEE partner and therefore Afarak holds and consolidate 74% interest in the company.
Afarak entered into an agreement during 2019 to acquire the remaining interest of 26% in Chromex Mining Company (Pty) Ltd. This
has not yet been executed as there need to be an approval from South Africa Reserve bank and it is expected to be executed in 2020.
1.4.2 FINANCIAL YEAR 2018
During the third quarter, Afarak has concluded the acquisition of Magnohrom, a sinter magnesite refractory material company,
with ore mines and production facilities in Kraljevo, Serbia, for an acquisition price of EUR 1.0 million. The acquisition of
Magnohrom was accounted for in accordance with IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets.
1.5 IMPAIRMENT TESTINGS
GENERAL PRINCIPLES OF IMPAIRMENT TESTING
Afarak Group has carried out impairment testing on goodwill and other assets as of 31 December 2019 and for South African
minerals processing business also in 30 June 2019 and 30 September 2019. The following cash generating units were defined
for the impairment testing:
-
-
-
Speciality Alloys business (Türk Maadin Sirketi and Elektrowerk Weisweiler) with a vertically integrated mining-
beneficiation-smelting-sales operation in the specialty grade ferrochrome business;
South African minerals processing business (Mogale Alloys) which has ferroalloys smelting operations with four
furnaces; and
South African mining business (Mecklenburg, Stellite, Valkpoort and Zeerust);
The Group assesses at the end of each reporting period whether there is any indication that assets may be impaired. If
any such indication exists, the recoverable amount of these assets is estimated. Moreover, the recoverable amount of any
goodwill and unfinished investment projects will be estimated annually, irrespective of whether there is an indication of
impairment. The South African mining business did not have any goodwill at the end of the financial year 2019, while the
goodwill in the South African minerals processing business was fully impaired during 2019.
During 2019, no impairment was recognised at the Speciality Alloys business and South African mines, while an impairment
of EUR 32.0 million in aggregate was recognised at the South African minerals processing business during 2019.
The Vlakpoort mine and Zeerust mine were not tested for impairment as there were no indication of impairment.
AFARAK ANNUAL REPORT 2019
112
CHANGES IN GOODWILL DURING 2019
During the financial year 2019, the total goodwill of the Group decreased by EUR 12.5 million to a total of EUR 45.4
million. The decrease was attributable to the impairment write-down related to Mogale business, of which EUR 12.5
million and an exchange rate movement of EUR 0.2 million related to Goodwill.
In 2014, the synergy goodwill identified in the Mogale acquisition, related to Afarak Trading acting as a global sales
entity for the whole Group, was initially allocated to Speciality Alloys segment. Afarak Trading contribution is divided to
both segments to reflect the nature of serving the whole Group. It is allocated to both segments based on their relative
revenue, reflecting the volume of Afarak Trading related benefits enjoyed by the CGU. The changes are described below:
EUR ‘000
Goodwill 1.1.2019
Impairment
Exchange rate movement
Goodwill 31.12.2019
Speciality Alloys Business
FerroAlloys Business
Group Total
44,001
0
1,412
45,414
12,244
-12,459
215
0.0
56,245
-12,459
1,627
45,414
The changes in goodwill during 2018 are presented below:
EUR ‘000
Goodwill 1.1.2018
Impairment
Exchange rate movement
Goodwill 31.12.2018
Speciality Alloys Business
FerroAlloys Business
Group Total
41,895
0
2,106
44,001
20,514
-6,543
-1,727
12,244
62,409
-6,543
379
56,245
Goodwill as a ratio of the Group’s equity on 31 December 2019 and 31 December 2018 was as follows:
EUR ‘000
Goodwill
Equity
Goodwill/Equity, %
31.12.2019
31.12.2018
45,414
74,536
60.9%
56,245
150,848
37.3%
IMPAIRMENT ON OTHER LONG TERM ASSETS
In addition to the impairment on Goodwill, in 2019, an impairment write down on other long term assets in the South
African minerals processing business amounted to EUR 19.5 million. The impairment of other long term assets is
disclosed in note 9 and note 10 in the notes the the Consolidated Statement of Financial Position.
METHODOLOGY APPLIED IN IMPAIRMENT TESTING
For the cash generating units that were tested, the test was carried out by calculating their value in use. Value in use has been
calculated by discounting estimated future net cash flows based on the conditions and assumptions prevailing at the time of
the testing. Future cash flows for the Speciality Alloys and South African minerals processing have been projected for a five-
year period, after which a growth rate equalling projected long-term inflation has been applied (Speciality Alloys: 2%, South
African minerals processing: 6.0%, and for electricity 8.8%). For the terminal year after the five-year estimation period, the
essential assumptions (e.g. revenue, variable costs and fixed costs) have been based at the estimation period’s previous year’s
figures. Future cash flows for the South African mining business have been projected for the life of mine with a 6.0% growth
rate equaling projected long-term inflation has been applied.
The weighted average cost of capital (WACC) has been calculated separately for each cash generating unit and assets
being tested, taking into account each business’s typical capital structures, investors’ average required rate of return
for similar investments and company size and operational location related factors, as well as risk-free interest rates and
margins for debt financing. The Group has used publicly available information on the peer group companies’ capital
structure, risk premium and other factors. The market interest rates reflect the rates applicable on 31 December 2019.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 113
The information used in the 31 December 2019 impairment testing is based on business units’ management future forecasts,
on general third-party industry expert or analyst reports where available, and to the extent possible on the current business
and asset base excluding any non-committed expansion plans. Forecasted sales volumes and profitability are based on the
management’s view on future development while also taking past performance into account. Price forecasts are based
on independent market forecasts for all cash generating units, but in the South African minerals processing business and
South African mining business USD-based price forecast was adjusted for assumed Rand devaluation. The management’s
approach in preparing cash flow forecasts has not changed significantly from the previous impairment testing.
The underground production in the models of the South African mining business does not solely come from reserves, as some
come from resources that are not yet converted to reserves. This increases the risk that some of the grades may differ, and
tonnes could possibly not be economically extractable. There is also the risk that costs could be different than anticipated even
though due care was taken in the cost evaluation.
These pre-tax discount rates applied in 2019 impairment testing were the following:
CASH GENERATING UNIT
PRE-TAX DISCOUNT RATE
Speciality Alloys
South African minerals processing
South African mines:
- Stellite mine
- Mecklenburg
2019
15.2%
21.1%
26.4%
27.7%
2018
16.8%
24.2%
26.4%
27.6%
The key reasons for the changes in the discount rates compared to 2018 were the changes in risk-free interest rates in
both cash-generating units.
The cash flows in the Stellite mine impairment test review include both opencast and recycling of tailing dam by way
of using the shaking table technology. The cash flows in the Mecklenburg mine impairment test review includes both
opencast and underground operation. The Stellite mine model has a life of mine of 23 years and the Mecklenburg
model has a life of mine of 10 years.
The results of impairment testing have been evaluated by comparing the cash generating units’ recoverable amount to
the corresponding carrying amount based on the following judgment rules:
RECOVERABLE AMOUNT DIVIDED BY THE CARRYING AMOUNT: CONCLUSION:
< 100%
101-120%
121-150%
> 150%
TEST RESULTS 31 DECEMBER 2019
The impairment test results were as follows:
Impairment
Slightly above
Clearly above
Significantly above
CASH GENERATING UNIT
Speciality Alloys
South African minerals processing
South African mines:
- Stellite
- Mecklenburg
Goodwill (MEUR),
pre-testing
Goodwill
(MEUR),
post-testing
Carrying amount
(MEUR),
pre-testing
45.4
12.2
0.0
0.0
45.4
0.0
0.0
0.0
65.2
21.8
Conclusion
Slightly above
Impairment
32.1
Significantly above
27.1
Clearly above
AFARAK ANNUAL REPORT 2019 114
The testable asset base (carrying amount) includes goodwill, intangible and tangible assets and net working capital
less provisions and deferred tax liabilities (in relation to purchase price allocation entries).
Key background and assumptions used in the cash flow forecasts of the impairment testing process are summarised in
the following table:
CASH GENERATING UNIT
Sales volume
Sales prices
Costs
Speciality Alloys business
FeCr:
25,000 t/a
Cr ore:
19,000 t/a
LC/ULC ferrochrome with
average Cr content of 70 %,
based on external experts
(Roskill) price forecasts
Raw material costs generally
change in line with sales
price; other costs growing at
inflation rate
South African minerals processing
South African mining business:
Stellite mine
Metal alloys:
28,000 t in 2020
75,000 t/a as from 2021
Assumption made:
P1 will operate
throughout the period;
P2 and P3 will start to
operate as from 2021;
P4 will not be operating
during the period
Forecast based on Roskill
nominal prices average
adjusted for Rand
devaluation
For 2020 it was assumed
that the Benchmark price
will remain at the same
level of 2019 benchmark
price, that is $1.08/lb
Concentrate:
Opencast mining
averaging 262,000t/a as
from 2020 till 2042
Lumpy:
Average of 29,000 t/a
from 2023 till 2042
SA Concentrate & SA
Lumpy prices are based
on independent market
forecasts adjusted for
Rand devaluation
South African mining business:
Mecklenburg mine
ROM:
Underground mining of
20,000t in 2021; 177,000t
om 2022; and is planned
to increase to an average
of 539,000t/a as from
2023 to 2030
SA Concentrate & SA
Lumpy prices are based
on independent market
forecasts adjusted for
Rand devaluation
Raw material costs
generally change in line
with sales price; Electricity
cost was assumed to be
higher than inflation, while
other costs growing at
inflation rate
The costs applied for
opencast operation is based
on the current historical cost
adjusted for a reduction in
production cost per ton as
a result of higher recoveries
due to better benefication.
This cost has been estimated
and adjusted for inflation
for the opencast life of mine.
The cost over the life of
mine excluding inflation is
estimated to be ZAR 1,109
per saleable ton of chrome.
The costs for underground
are based on past
experiences of our mining
team in underground
operations adjusted for
inflation rate. The cost over
the life of mine excluding
inflation is estimated to be
ZAR 677 per saleable ton
of chrome.
Moreover, the USD/ZAR foreign exchange rate affects significantly the testing of the South African minerals business.
The foreign exchange rate used in the test was 15.34 for the year 2020.
SENSITIVITY ANALYSIS OF THE IMPAIRMENT TESTS
The Group has analysed the sensitivity of the impairment test results by estimating how the essential assumptions
should change in order for the recoverable amount to be equal to the carrying amount. The results of this sensitivity
analysis as of 31 December 2019 are given below:
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 115
CASH GENERATING UNIT
Speciality Alloys
South African minerals processing
South African mining business:
- Stellite mine
- Mecklenburg mine
Change in pre-
tax discount rate
(compared to the level
used in testing)
1.0% - points
- % - points
-32.2% - points
-22.1% - points
Change in free cash
flow (annual average)
Change in CGU’s average
EBITDA margin
-6.7%
- %
-47.4%
-53.4%
-0.7% - points
- % - points
-18.8% - points
-33.9% - points
1.6 OPERATING SEGMENTS
Afarak Group has two operating segments, FerroAlloys and Speciality Alloys, which are also the reporting segments.
The operating segments are organised based on their products and production processes. The current reporting
structure was adopted in 2011. The Group’s executive management reviews the operating results of the segments
for the purpose of making decisions on resource allocation and performance assessment. Segment performance is
measured based on revenue as well as earnings before interest, taxes, depreciation and amortisation (EBITDA) as
included in the internal management reports and defined consistently with the consolidated EBITDA.
The FerroAlloys business consists of the processing plant Mogale Alloys, Vlakpoort mine, Zeerust mine, the Stellite mine
and Mecklenburg mine (the Stellite mine and Mecklenburg mine as Joint Venture until 31 march 2019) in South Africa. The
business produces chrome ore, charge chrome, medium carbon ferrochrome and silicomanganese for sale to global markets.
The Speciality Alloys business consists of Türk Maadin Şirketi A.S (“TMS”), the mining and beneficiation operation in
Turkey, and Elektrowerk Weisweiler GmbH (“EWW”), the chromite concentrate processing plant in Germany. TMS
supplies EWW with high quality chromite concentrate which produces speciality products including specialised low
carbon and ultra low carbon ferrochrome. Chrome ore from TMS that is not utilised for the production of specialised
low carbon ferrochrome is sold to the market.
The revenue and costs of the Group’s sales and marketing arm Afarak Trading Ltd (“ATL”) is allocated to the segments
in proportion to their sales. Afarak’s other operations, including the Group’s headquarters and other Group companies
that do not have significant operations, are presented as unallocated items.
Intercompany transactions are carried out on an arm’s length basis. The transactions between the segments have been
limited but the parent company has provided funding and administrative services to the Group’s subsidiaries.
The accounting policies applied in the operating segment information are the same as those in the consolidated
financial statements.
OPERATING SEGMENT INFORMATION 2019
Year ended 31.12.2019
EUR ‘000
Speciality
Alloys
Ferroalloys
Segments
total
Unallocated
items
Eliminations
Consolidated
Group
External revenue
Rendering of services
Sale of goods
Total external revenue
Inter-segment revenue
Total revenue
0
82,464
82,464
780
109
61,700
61,809
0
109
144,164
144,273
780
83,244
61,809
145,053
625
20
645
1,479
2,124
0
0
0
-2,259 1
-2,259
734
144,185
144,918
0
144,918
AFARAK ANNUAL REPORT 2019
116
Items related to joint ventures (core)
0
-868
-868
0
Segment EBITDA
6,846
-23,581
-16,734
-7,020
Depreciation and amortisation
-2,368
-4,810
-31,951
-7,178
-31,951
-270
0
4,478
-60,342
-55,864
-7,290
Impairment
Segment operating
profit / (loss)
Finance income
Finance cost
Income taxes
Profit for the period
0
0
0
0
0
-868
-23,754
-7,449
-31,951
-63,154
12,027
-9,455
1,705
-58,877
Segment’s assets 2
166,670
115,023
281,693
17,409
-75,504
223,597
Segment’s liabilities 2
82,786
107,856
190,642
33,403
-74,984
149,061
Other disclosures
Capital expenditure 3
Provisions 4
2,651
1,528
1,814
16,251
4,465
17,778
150
1,450
0
0
4,615
19,228
1. Inter-segment items are eliminated on consolidation.
2. The assets and liabilities of the segments represent items that these segments use in their activities or that can be reasonably allocated to them.
3. Investments consist of increases in tangible and intangible assets whose life is longer than one financial year.
4. Balance sheet values.
OPERATING SEGMENT INFORMATION 2018
Speciality
Alloys
Ferro-
alloys
Segments
total
Unallocated
items
Eliminations
Consolidated
Group
Year ended 31.12.2018
EUR ‘000
External revenue
Rendering of services
Sale of goods
Total external revenue
Inter-segment revenue
Total revenue
0
96,148
96,148
634
843
96,202
97,046
0
843
192,350
193,193
634
96,782
97,046
193,827
375
445
819
2,499
3,318
Items related to joint ventures (core)
0
-2,693
-2,693
0
Segment EBITDA
12,605
-8,114
4,491
-5,508
Depreciation and amortisation
-1,834
-4,666
-6,543
-6,500
-6,543
-32
0
Impairment
Segment operating
profit / (loss)
10,771
-19,323
-8,552
-5,540
0
0
0
-3,133 1
-3,133
0
0
0
0
0
1,218
192,795
194,013
0
194,013
-2,693
-1,017
-6,532
-6,543
-14,092
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019
117
3,275
-7,724
-42
-18,583
156,874
118,706
275,580
16,480
-33,446
258,614
Finance income
Finance cost
Income taxes
Profit for the period
Segment’s assets 2
Segment’s liabilities 2
69,731
65,832
135,563
5,853
-33,650
107,766
Other disclosures
Capital expenditure 3
Investment in joint ventures 4
Provisions 4
4,539
3,777
0
-16,871
1,523
7,448
8,316
-16,871
8,971
1,430
0
0
0
0
9
9,746
-16,871
8,981
1. Inter-segment items are eliminated on consolidation.
2. The assets and liabilities of the segments represent items that these segments use in their activities or that can be reasonably allocated to them.
3. Capital expenditure consists of net increase in the year.
4. Balance sheet values.
GEOGRAPHICAL INFORMATION
Revenues from external customers
EUR ‘000
Other EU countries
United States
China
Africa
Finland
Other countries
Total revenue
Non-current assets
EUR ‘000
Africa
Other EU countries
Other countries
Total
2019
61,668
35,068
0
16,244
151
31,788
2018
91,463
44,167
124
17,082
5,934
35,243
144,918
194,013
Revenue figures are based on the
location of the customers.
The largest customer of the Group is
in the FerroAlloys business segment
and represents approximately 7.5%
(4.9%) of the Group’s revenue in
2019. In the Speciality Alloys business
segment the largest customer
represents 3.6% (3.5%) of the
Group’s revenue in 2019.
2019
2018
101,889
42,756
8,548
7,370
7,515
8,187
117,808
58,458
In presenting geographical
information, assets are based on the
location of the assets. Non-current
assets consist of property, plant and
equipment, intangible assets and
exclude Goodwill.
AFARAK ANNUAL REPORT 2019
118
1.7 NOTES TO THE CONSOLIDATED INCOME STATEMENT
1. REVENUE
EUR ‘000
Sale of goods
Rendering of services
Total
2. OTHER OPERATING INCOME
EUR ‘000
Gain on disposal of tangible and intangible assets
Rental income
Other
Total
3. EMPLOYEE BENEFITS
EUR ‘000
Salaries and wages
Share-based payments
Pensions costs
Other employee related costs
Total
AVERAGE PERSONNEL DURING THE ACCOUNTING PERIOD
Speciality Alloys business
FerroAlloys business
Group Management
Other operations*
Total
PERSONNEL AT THE END OF THE ACCOUNTING PERIOD
Speciality Alloys business
FerroAlloys business
Group Management
Other operations*
Total
* Other operations mainly relate to Magnohrom in Serbia
4. DEPRECIATION, AMORTISATION AND IMPAIRMENT
EUR ‘000
Depreciation / amortisation by asset category
Intangible assets
Clientele and technology
Other intangible assets
Total
2019
144,185
733
144,918
2019
26
240
2,112
2,378
2019
-22,092
-605
-11
-2,131
-24,839
2019
528
406
7
81
1,022
2019
534
307
5
59
905
2019
-906
-178
-1,084
2018
192,659
1,354
194,013
2018
126
251
4,247
4,624
2018
-22,936
-231
-750
-1,672
-25,589
2018
511
340
11
70
932
2018
526
324
11
81
942
2018
-1,579
-232
-1,811
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 Property, plant and equipment
Buildings and constructions
Machinery and equipment
Other tangible assets
Right-of-use assets
Total
Impairment by asset category
Impairment write-down on goodwill
Impairment write-down on other long term assets
Total
5. OTHER OPERATING EXPENSES
EUR ‘000
Rental costs
External services1
Travel expenses
Other operating expenses2
Total
119
-514
-3,181
-1,025
0
-4,720
-6,543
0
-6,543
2018
-364
-4,165
-1,101
-8,024
-13,654
-474
-4,174
-1,616
-101
-6,365
-12,459
-19,492
-31,951
2019
-349
-4,266
-673
-12,697
-17,984
1. Audit fees paid to EY totalled EUR 794 (2018: 504) thousand in the financial year. The fees for non-audit services
totalled EUR 36 (2018: 36) thousand.
2. Other operating expenses include costs incurred during shutdown period of EUR 4,462 (2018: 2,827) thousand in the
financial year and a provision of EUR 1,450 thousand for a penalty payment imposed by FIN-FSA relating to a delay in
opening an insider register.
6. FINANCIAL INCOME AND EXPENSE
EUR '000
Finance income
Interest income on loans and trade receivables
Foreign exchange gains
Other finance income
Total
Finance expense
Interest expense on financial liabilities measured at amortised cost
Foreign exchange losses
Unwinding of discount, provisions
Other finance expenses
Total
Net finance expense
7. INCOME TAXES
EUR '000
Income tax for the period
Deferred taxes
Total
2019
251
4,238
468
4,958
-2,320
-4,725
-1,884
-527
-9,455
-4,497
2019
-705
2,411
1,705
2018
1,080
2,482
-287
3,275
-1,158
-5,731
-600
-235
-7,724
-4,449
2018
-1,045
1,003
-42
AFARAK ANNUAL REPORT 2019 120
EUR '000
Profit / (loss) before taxes
Income tax calculated at parent company income tax rate
Difference between domestic and foreign tax rates
Tax credit
Items recognised only for taxation purposes
Income tax for previous years
Income from JV and associates
Impairment losses
Tax losses not recognised as deferred tax assets
Non-tax deductible expenses
Previously unrecognised tax losses now recognised
Total adjustments
Income tax recognised
2019
-60,582
12,116
1,640
48
6,021
-215
1,240
-6,309
-11,153
-5,362
3,760
-10,411
1,705
2018
-18,541
3,708
-1,880
3,584
2,744
0
-539
-1,309
-3,196
-3,256
102
-3,750
-42
On 31 December 2018 the Group companies had unused tax losses totalling EUR 76.8 (2018: 44.1) million for which the
Group has not recognised deferred tax assets.
The Parent company tax rate is of 20% and the effective tax rate is of 2.8%.
8. EARNINGS PER SHARE
Profit / (loss) attributable to owners of the parent company (EUR ‘000)
Weighted average number of shares, basic (1,000)
Basic earnings per share (EUR) total
Profit / (loss) attributable to owners of the parent company (EUR '000)
Weighted average number of shares, basic (1,000)
Effect of share based payments on issue (1,000)
Weighted average number of shares, diluted (1,000)
Diluted earnings per share (EUR) total
2019
-57,576
251,785
-0.23
2019
-57,576
251,785
2,588
254,374
-0.23
2018
-18,056
260,080
-0.07
2018
-18,056
260,080
622
260,702
-0.07
Basic earnings per share is calculated by dividing profit attributable to the owners of the parent company by weighted
average number of shares during the financial year.
When calculating the diluted earnings per share, all convertible securities with a potential dilutive effect are assumed to
be converted into shares. Share options have a dilutive effect if the exercise price is lower than the share price. The diluted
number of shares is the number of shares that will be issued free of charge when share options are exercised since with the
funds received from exercising options, the Company is not able to issue the same number of shares at fair value. The fair
value of shares is based on average share price of the period.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 121
1.8 NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
9. PROPERTY, PLANT AND EQUIPMENT
EUR '000
Land and
water
property
Buildings and
constructions
Machinery
and
equipment
Mines and
mineral
assets
Other
tangible
assets
Total
Balance at 1.1.2019
2,219
7,669
60,006
8,013
4,649
82,556
Additions
Business combinations
Right-of-use assets (IFRS 16)
Disposals
Reclass between items
Effect of movements in exchange rates
Balance at 31.12.2019
Accumulated depreciation and
impairment 1.1.2019
Depreciation
Impairment
Business combinations
Disposals
Effect of movements in exchange rates
Accumulated depreciation and
impairment at 31.12.2019
Carrying amount at 1.1.2019
Carrying amount at 31.12.2019
Balance at 1.1.2018
Additions
Business combinations
Disposals
Reclass between items
Effect of movements in exchange rates
Balance at 31.12.2018
Accumulated depreciation and
impairment 1.1.2018
Depreciation
Disposals
Effect of movements in exchange rates
Accumulated depreciation and
impairment at 31.12.2018
Carrying amount at 1.1.2018
Carrying amount at 31.12.2018
20
0
0
0
0
64
2,303
0
0
0
0
0
0
0
2,219
2,303
2,251
134
-166
2,218
0
0
0
0
0
2,251
2,219
86
527
272
-83
0
-85
8,386
-3,941
-510
0
-135
0
55
3,277
9,400
227
-389
0
1,453
73,974
-25,771
-4,239
-10,793
-4,497
33
-1,083
1,070
72,575
0
0
0
-699
80,959
-5,624
-1,416
0
0
0
587
57
96
0
-18
262
117
4,510
82,598
499
-490
262
850
5,163
170,785
-2,237
-37,573
-200
-82
-46
18
-106
-6,365
-10,875
-4,678
51
-547
-4,531
-46,350
-6,453
-2,653
-59,987
3,728
3,855
7,868
460
382
-1,041
7,669
34,236
27,624
60,796
7,509
86
-2,262
195
-6,318
60,006
2,388
74,506
8,997
1,200
-2,184
8,013
2,412
2,510
4,308
178
446
-283
4,649
44,984
110,798
84,220
9,347
602
-2,262
641
-9,992
82,556
-3,969
-25,701
-6,525
-2,219
-38,414
-514
0
542
-3,941
3,899
3,728
-3,181
252
2,860
-25,770
35,095
34,236
-772
0
1,673
-5,624
2,472
2,389
-254
0
236
-2,237
2,089
2,412
-4,721
252
5,311
-37,572
45,806
44,984
Machinery and equipment include the prepayments made for them.
AFARAK ANNUAL REPORT 2019 122
10. INTANGIBLE ASSETS
EUR '000
Balance at 1.1.19
Additions
Disposals
Business combinations
Effect of movements in exchange rates
Balance at 31.12.19
Accumulated amortisation and
impairment at 1.1.2019
Amortisation
Impairment
Reclass between items
Effect of movements in exchange rates
Accumulated amortisation and
impairment at 31.12.19
Goodwill
Intangible assets
identified in
acquisitions
Other intangible
assets
Exploration and
evaluation assets
103,616
103,585
0
0
0
-2,698
100,918
-47,371
0
-12,459
0
4,326
0
0
0
2,639
106,224
-94,226
-906
-8,617
0
-2,475
4,408
327
-27
3,958
-22
8,644
-1,765
-84
0
-1,486
115
1,560
140
0
0
70
1,770
-87
-94
0
0
-4
Total
213,169
467
-27
3,958
-11
217,556
-143,449
-1,084
-21,076
-1,486
1,962
-55,504
-106,224
-3,220
-185
-165,133
Carrying amount at 1.1.19
Carrying amount at 31.12.19
56,245
45,414
9,359
0
Balance at 1.1.2018
107,625
107,316
Additions
Disposals
Business combinations
Effect of movements in exchange rates
Balance at 31.12.18
Accumulated amortisation and
impairment at 1.1.2018
Amortisation
Impairment
Reclass between items
-4,009
103,616
-45,216
-6,543
-3,731
103,585
-95,245
-1,579
Effect of movements in exchange rates
4,388
2,599
2,643
5,424
4,213
380
-1
398
-582
4,407
-1,735
-173
-195
338
Accumulated amortisation and
impairment at 31.12.18
-47,371
-94,225
-1,765
Carrying amount at 1.1.2018
Carrying amount at 31.12.18
62,409
56,245
12,071
9,360
2,478
2,642
1,473
1,585
1,690
62
-193
1,561
-34
-56
2
-88
1,656
1,473
69,720
52,423
220,844
442
-1
398
-8,515
213,169
-142,230
-1,808
-6,543
-195
7,327
-143,449
78,614
69,720
Other intangible assets include the prepayments made for them. Exploration and evaluation assets consist of mine
projects in various mining projects in Turkey and South Africa.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 123
11. INVESTMENTS IN ASSOCIATES
Afarak has an investment of 8.99% (2018: 8.99%) in Valtimo Components Oyj.
During the financial year 2019 and 2018, Afarak did not acquire or dispose holdings in associates.
12. INVESTMENTS IN JOINT VENTURES
As at 31 March 2019, before the acquisition of 49% balance of Synergy Africa Ltd, the Group had joint control over one
jointly controlled entity, Synergy Africa Ltd, in which the Group has a 51% interest. The acquisition of Chromex Mining
Ltd, a UK company with mining operations and prospecting rights in southern Africa, was carried out by this joint
venture company. Synergy Africa Group has been consolidated as a joint venture company in the financial reporting
of the Group starting at 31 December 2010. Following the 2012 changes in the accounting standards the company
changed the accounting method from proportionate consolidation method to equity method.
In 2019, Afarak acquired 49% balance of Synergy Africa Ltd. Afarak now holds 100% of Synergy Africa Ltd and the
Joint Venture agreement was terminated. Afarak acquired full control over its mining assets and is now consolidating
Synergy Africa as a subsidiary as from 1 April 2019.
Summarised financial statement information (100% share) of the joint venture, based on its IFRS financial statements,
and reconciliation with the carrying amount of the investment in the Group’s consolidated financial statements for the
period January to March 2019 are set out below:
EUR '000
Revenue
Other operating income
Materials and supplies
Employee benefits expense
Depreciation and amortisation
Other operating expenses
Operating profit
Finance income
Finance expense
Profit before taxes
Income taxes
Profit for the year
Group’s share of (loss)/profit for the year
Profit attributable to:
Joint venture owners
Non-controlling interests
1.1-31.3.2019
1.1-31.12.2018
4,677
35
-3,068
-617
-311
-1,442
-726
25
-524
-1,225
-477
-1,702
-868
-727
-141
-868
29,000
711
-19,134
-2,451
-1,440
-9,772
-3,086
38
-2,223
-5,271
-10
-5,281
-2,693
-2,148
-545
-2,693
AFARAK ANNUAL REPORT 2019 124
EUR '000
Assets and liabilities
Non-current assets
Intangible assets
Mines and mineral assets
Property, plant and equipment
Deferred tax asset
Non-current assets total
Current assets
Inventories
Trade and other receivables
Trade and other receivables from JV owners
Cash and cash equivalents
Current assets total
Total assets
Non-current liabilities
Interest-bearing debt
Interest-bearing debt to JV owners
Provisions
Deferred tax liability
Other non-current liabilities to JV owners
Non-current liabilities total
Current liabilities
Trade and other payables
Trade and other payables to JV owners
Current liabilities total
Total liabilities
Net Liability
Proportion of Group's Ownership
Carrying amount of Joint venture
2019
2018
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
-
0
2,375
25,530
5,461
566
33,932
1,728
973
1,105
670
4,476
38,408
19,348
18,990
6,431
7,904
2,177
54,850
4,362
12,276
16,638
71,488
-33,080
51 %
-16,871
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 125
13. FINANCIAL ASSETS AND LIABILITIES
31.12.2019, EUR ‘000
Non-current financial assets
Non-current interest-bearing
receivables
Trade and other receivables *
Current financial assets
Current interest-bearing receivables
Trade and other receivables *
Other Financial Assets
Cash and cash equivalents
At fair value
through profit
and loss
At fair value
through other
comprehensive
income At amortised cost
Carrying value
Fair value
372
676
0
14,168
528
5,389
372
676
0
14,168
528
5,389
372
676
0
14,168
528
5,389
Total financial assets
21,133
21,133
21,133
Non-current financial
liabilities
Non-current interest-bearing
liabilities
Other non-current liabilities
Current financial liabilities
Current interest-bearing liabilities
Trade and other payables *
Total financial liabilities
18,290
2,667
42,176
13,041
18,290
2,667
42,176
13,041
18,290
2,667
42,176
13,041
76,175
76,175
76,175
AFARAK ANNUAL REPORT 2019
126
31.12.2018, EUR ‘000
Non-current financial assets
Non-current interest-bearing
receivables
Trade and other receivables *
Current financial assets
Current interest-bearing receivables
Trade and other receivables *
Other Financial Assets
Cash and cash equivalents
At fair value
through profit and
loss
At fair value
through other
comprehensive
income
At amortised cost
Carrying value
Fair value
19,198
1,025
15,890
34,774
909
12,132
19,198
19,198
1,025
1,025
15,890
34,774
909
12,132
15,890
34,774
909
12,132
Total financial assets
83,928
83,928
83,928
Non-current financial
liabilities
Non-current interest-bearing
liabilities
Other non-current liabilities
Current financial liabilities
Current interest-bearing liabilities
Trade and other receivables *
2,103
2,680
22,331
21,198
2,103
2,103
2,680
2,680
22,331
21,198
22,331
21,198
Total financial liabilities
48,312
48,312
48,312
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019
127
FAIR VALUE HIERARCHY
31.12.2019, EUR ‘000
Financial assets at fair value
Carrying amounts at the end of the reporting period
Level 1
Level 2
Level 3
Derivatives
Other financial assets
Total
Available-for-sale financial assets
Other financial assets
Financial liabilities at fair value
Derivatives
Total
31.12.2018, EUR ‘000
Financial assets at fair value
Carrying amounts at the end of the reporting period
Level 1
Level 2
Level 3
Derivatives
Other financial assets
Total
Available-for-sale financial assets
Other financial assets
Financial liabilities at fair value
Derivatives
Total
31.12.2019, EUR ‘000
Level 3 reconciliation
Acquisition cost at 1.1.2019
Acquisition cost at 31.12.2019
Accumulated impairment losses at 1.1.2019
Accumulated impairment losses at 31.12.2019
Carrying amount at 31.12.2019
40
40
-40
-40
0
AFARAK ANNUAL REPORT 2019
128
31.12.2018, EUR ‘000
Level 3 reconciliation
Acquisition cost at 1.1.2018
Acquisition cost at 31.12.2018
Accumulated impairment losses at 1.1.2018
Accumulated impairment losses at 31.12.2018
Carrying amount at 31.12.2018
Interest-bearing debt
EUR '000
Non-current
Acquisition of NCI liability
Finance lease liabilities
Other interest-bearing liabilities
Total
Current
Bank loans
Finance lease liabilities
Cheque account with overdraft facility
Other interest-bearing liabilities
Total
EUR '000
Finance lease liabilities, minimum lease payments
No later than 1 year
Later than 1 year and not later than 5 years
Finance lease liabilities, present value of minimum lease payments
No later than 1 year
Later than 1 year and not later than 5 years
40
40
-40
-40
0
2018
2,027
75
0
2,102
7,526
196
9,128
5,481
22,331
2019
1,847
487
15,956
18,290
6,021
196
8,961
27,041
42,220
2019
2018
196
487
684
196
487
684
196
75
271
196
75
271
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019
129
Changes in liabilities arising from financing activities
EUR ‘000
1 January 2019
Cash flows
Acquisition
Foreign
exchange
movement
Other 31 December 2019
Non-current borrowings
Current borrowings
Lease liabilities
Total liabilities from
financing activities
2,027
22,135
-408
15,956
88
140
-2,610
-
-4,210
26,705
17,803
41,980
271
-222
653
-18
-
684
24,433
-3,240
16,609
-4,181
26,845
60,466
EUR ‘000
1 January 2018
Cash flows
Acquisition
Non-current borrowings
2,517
-457
-
Current borrowings
9,284
8,674
-
Lease liabilities
140
-239
416
Foreign
exchange
movement
-230
-1,304
-46
Other 31 December 2018
197
2,027
5,481
22,135
-
271
Total liabilities from
financing activities
11,941
7,978
416
-1,580
5,678
24,433
In 2019, the ‘Other’ column includes the effect on unwinding interest on the acquisition of non-controlling interest in
non-current borrowings, and current borrowings include a prepayment of USD 30.0 million in relation to an off-take
agreement.
In 2018, the ‘Other’ column includes the effect on unwinding interest on the acquisition of non-controlling interest in
non-current borrowings, and current borrowings include a sale and buy back transaction that happened in December
which was classified as financing liability.
FINANCIAL RISKS AND RISK MANAGEMENT
The Board of Directors of Afarak Group Plc has outlined the key risks of the Group in the Board of Directors’ Report. In the
following section, the financial and commodity risks are presented in more detail with the related sensitivity analyses.
SUMMARY OF FINANCIAL ASSETS AND LOAN ARRANGEMENTS
Financial assets 31 December 2019
In addition to the operating result and the cash flow generated from it, the factors described below have most
significantly affected the year-on-year change in the Group’s financial assets at the 2019 closing date:
The Group’s financial assets at the end of the reporting period decreased when compared to the comparative period
primarily due to the acquisition of Synergy Africa Ltd and its subsidiaries, now being consolidated in Afarak Group, as a
result such financial assets were eliminated in 2019.
On 31 December 2019, the cash and cash equivalents were invested mainly in interest-bearing EUR, ZAR and USD
denominated bank accounts. Other financial assets comprise interest-bearing loans and other receivables.
One of the Group’s South African subsidiaries has increased its primary lending facility from ZAR 100 million as at the
end of 2016 to ZAR 150 million as at the end of 2017. The South African subsidiary utilised ZAR 141.4 (2018: 135.4) million
as at the end of the reporting period and the Group has given a corporate guarantee amounting to ZAR 75.0 (2018:
75.0) million as collateral.
AFARAK ANNUAL REPORT 2019 130
One of the Group’s Maltese subsidiaries has been granted a trade finance loan facility amounting to US$ 5.0 million
during 2016. In 2017, the trade finance loan facility remained active and a new factoring line of US$ 5.0 million was
granted. Both facilities are still in use. The Maltese subsidiary utilized US$ 1.8 (4.7) million as at the end of the reporting
period and has given a corporate guarantee amounting to US$ 10.0 (10.0) million, and receivables and inventory up to
the value outstanding as collateral.
One of the Group’s Turkish subsidiaries has been granted various short term loans in 2019. The loans amount as at end
of 2019 was of EUR 3.6 (2.6) million.
Interest-bearing debt 31 December 2019
-
-
-
-
Floating rate loans from financial institutions total EUR 14.2 (2018: 15.8) million. Fixed rate loans total EUR 0.8
(2018: 0.9) million.
The interest rate of the South African loans is tied to the market rate of JIBAR. The interest rate on 31 December 2019,
based on market interest rates at that date, was 6.81% (2018: 7.15%). The interest rate margin for floating rate notes was
2.25% (2018: 2.25%) p.a.
The interest rate of the Maltese trade finance loan facility is tied to the market rate of 3 month LIBOR. The interest
rate on 31 December 2019, based on market interest rates at that date, was 1.91% (2018: 2.81%). The interest rate
margin for floating rate notes was 3.5% (2018: 3.5%) p.a.
-
The interest rate of the Maltese factoring facility is tied to the market rate of 1 month LIBOR. The interest rate on
31 December 2019, based on market interest rates at that date, was 1.76% (2018: 2.50%). The interest rate margin
for floating rate notes was 3.3% (2018: 3.3%) p.a.
The interest rate of the Turkish bank loan facility is tied to the market rate of EURIBOR. The interest rate on 31 December 2019,
based on market interest rates at that date, was 1.50% (2018: 1.57%). The interest rate margin for the fixed rate notes was
0.65% (2018: 0.40%) p.a.
Capital Management
The Group’s capital management objective is to maintain the ability to continue as a going concern and to optimise the
cost of capital in order to enhance value to shareholders. As part of this objective, the Group seeks to maintain access to
loan and capital markets at all times. The Board of Directors reviews the capital structure of the Group on a regular basis.
Capital structure and debt capacity are taken into account when deciding on new investments. Practical tools to manage
capital include the application of dividend policy, capital redemption, share buybacks and share issues. Debt capital is
managed considering the requirement to secure liquidity. The Group’s internal capital structure is reviewed on a regular
basis with the aim of optimising the structure by applying measures such as internal dividends and equity adjustments.
The Group’s long term target for capital structure is to keep the equity ratio above 50%. At the end of the reporting
period, the Group’s equity ratio stood at 33.3% (2018: 58.3%).
Financial Risk Management
In its normal operations, the Group is exposed to various financial risks. The main financial risks are liquidity risk,
foreign exchange rate risk, interest rate risk, credit risk and commodity price risk. The objective of the Group’s risk
management is to identify and, to as far as reasonably possible, mitigate the adverse effects of changes in the
financial markets on the Group’s results. The general risk management principles are accepted by Afarak Group Plc’s
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019
131
Board of Directors and monitored by its Audit and Risk Management Committee. The managements of the Group
and its subsidiaries’ are responsible for the implementation of risk management policies and procedures. Group
management monitors risk positions and risk management procedures on a regular basis, and supervises that the
Group’s policies and risk management principles are followed in all day-to-day operations. Risks and risk management
are regularly reported to the Audit and Risk Management Committee.
The Group’s significant financial instruments comprise bank loans and overdraft, off-take agreement, finance leases,
other long-term liabilities, cash and short-term deposits and money market investments. The main purpose of these
financial instruments is to finance the Group’s acquisitions and ongoing operations. The Group also has various other
financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.
(i) Liquidity risk
The Group regularly assesses and monitors its investment and working capital needs and financing, so that it has
enough liquidity to serve and finance its operations and pay back loans. The availability and flexibility of financing are
targeted to be guaranteed by using multiple financial institutions in the financing and financial instruments, and to
agree on financial limit arrangements.
If the liquidity risks were to be realised, it would probably result in overdue interest expenses and damage the relations
with suppliers. Consequently, the pricing and other terms for input goods and services and for financing could be
affected.
The maturity distribution of the Group debt at the end of the financial year was as follows:
31.12.2019, EUR ‘000
Financial liabilities
Secured bank loans
Finance lease liabilities
Carrying
amount
Contractual
cash flows
6 months
or less
6-12
months
6,314
684
-6,411
-684
-6,370
-98
-40
-98
1-2
years
-2
-488
Trade and other payables
61,084
-62,472
-31,566
-14,047
-6,781
8,961
1,847
-8,961
-1,847
-8,961
-154
0
-154
0
-308
78,890
-80,376
-47,149
-14,339
-7,579
Bank overdraft
Acquisition of NCI liability
Total
31.12.2018, EUR ‘000
Financial liabilities
Secured bank loans
Finance lease liabilities
Trade and other payables
Bank overdraft
Acquisition of NCI liability
Carrying
amount
Contractual
cash flows
6 months
or less
6-12
months
13,007
271
23,879
9,128
2,027
-13,381
-13,254
-271
-98
-23,879
-21,199
-9,128
-2,027
-9,128
-145
1-2
years
-85
-75
-2,680
0
-290
-3,130
-42
-98
0
0
-144
-285
Total
48,312
-48,686
-43,823
(ii) Foreign exchange rate risk
The Group operates internationally, including in Turkey, Malta and South Africa, and is therefore exposed to foreign
exchange rate risks. The risks arise both directly from the outstanding commercial cash flows and currency positions,
and indirectly from changes in competitiveness between various competitors. The foreign exchange differences arising
2-5
years
More than
5 years
0
0
0
0
-924
-924
0
0
-10,079
0
-308
-10,387
2-5
years
More than
5 years
0
0
0
0
-869
-869
0
0
0
0
-579
-579
AFARAK ANNUAL REPORT 2019 132
from inter-company loans designated as net investments in foreign subsidiaries have been recognised in the translation
reserve in the equity.
The Group is exposed to currency-derived risks that affect its financial results, financial position and cash flows. In
particular the exchange rates of US Dollar and South African Rand against the Euro have a significant impact on the
Euro-denominated profitability of the Group. The cash inflows of the business are denominated in US Dollars, whereas
a significant portion of the costs are denominated in the South African Rand. The fluctuation of the South African
Rand has a significant impact on the Group’s profit and loss as well as on the Group’s assets and liabilities. In its risk
management, the Group aims to match its cash inflows and outflows as well as receivables and liabilities in terms of
the currency in which these items are denominated.
The following tables present the currency composition of receivables and debt, and changes thereby relative to the
previous year-end.
31.12.2019, EUR ‘000
EUR exchange rate
1
1.1234
0.8508
6.6843
15.7773
117.1156
Cash and cash equivalents (EUR)
Trade and other receivables (EUR)
Loans and other financial assets (EUR)
EUR
509
626
0
USD
3,699
13,047
0
Trade and other current payables (EUR)
-1,924
-610
GBP
18
0
0
0
TRY
198
590
411
ZAR
900
430
637
-651
-9,840
Loans and other liabilities (EUR)
-406
-28,350
-15,956
-3,826
-13,872
RSD
65
4
0
-17
-768
Currency exposure, net (EUR)
-1,195
-12,215
-15,938
-3,278
-21,745
-716
Currency exposure, net in currency ('000)
-1,195
-13,722
-13,560
-21,909
-343,070
-83,867
31.12.2018, EUR ‘000
EUR exchange rate
1
1.1450
0.8945
6.0588
16.4594
117.8360
Cash and cash equivalents (EUR)
EUR
1,831
USD
8,796
GBP
14
Trade and other receivables (EUR)
4,980
20,867
Loans and other financial assets (EUR)
20
0
21,167
TRY
894
71
237
ZAR
576
2,663
975
Trade and other current payables (EUR)
Loans and other liabilities (EUR)
-2,901
-1,958
-4,371
-9,222
-803
-11,854
0
-2,849
-13,084
RSD
21
16
-163
0
Currency exposure, net (EUR)
1,971
16,070
21,181
-2,449
-20,724
-126
Currency exposure, net in currency ('000)
1,971
18,400
18,947
-14,841
-341,107
-14,813
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019
133
The effect on the 31 December 2019 currency denominated net assets which would be caused by changes in foreign
exchange rates compared with the rates used in the Group consolidation is presented below. Due to the high market
volatility of the exchange rates, the range of change was kept at +/- 20%.
31 December 2019
20% strengthening
15% strengthening
10% strengthening
5 % strengthening
0% no change
-5% weakening
-10% weakening
-15% weakening
-20% weakening
31 December 2018
20% strengthening
15% strengthening
10% strengthening
5 % strengthening
0% no change
-5% weakening
-10% weakening
-15% weakening
-20% weakening
USD
-3,054
-2,156
-1,357
-643
0
582
1,110
1,593
2,036
USD
4,017
2,836
1,786
846
0
-765
-1,461
-2,096
-2,678
GBP
-3,984
-2,813
-1,771
-839
0
759
1,449
2,079
2,656
GBP
5,295
3,738
2,353
1,115
0
-1,009
-1,926
-2,763
-3,530
TRY
-819
-578
-364
-173
0
156
298
428
546
TRY
-612
-432
-272
-129
0
117
223
319
408
ZAR
-5,436
-3,837
-2,416
-1,144
0
1,035
1,977
2,836
3,624
ZAR
-5,181
-3,657
-2,303
-1,091
0
987
1,884
2,703
3,454
RSD
-179
-126
-80
-38
0
34
65
93
119
RSD
-31
-22
-14
-7
0
6
11
16
21
Derivatives
The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating
activities (when revenue or expense is denominated in a foreign currency).
Operative foreign currency derivatives that are valued at fair value on the reporting date cause timing differences
between the changes in the derivative’s fair values and hedged operative transactions. Changes in fair values for
derivatives designated to hedge future cash flow but are not accounted for according to the principles of hedge
accounting impact the Group’s operating profit for the financial year. The underlying foreign currency transactions will
realise in future periods.
(iii) Interest rate risk
The Group is exposed to interest rate risk when Group companies take loans, or make other financing agreements or
deposits and investments related to liquidity management. In addition, changes in interest rates can alter the fair
values of the Group’s assets. The Group’s revenue and operative cash flows are mainly independent of the changes in
market interest rates.
AFARAK ANNUAL REPORT 2019 134
To manage interest rate risks, the Group has used both fixed and floating rate debt instruments and derivative
instruments, such as interest rate swaps, when needed. At the end of 2019, the Group’s interest-bearing debt was
mainly based on floating interest rates; and there were no interest rate swaps in place. The Group aims to match the
loan maturities with the businesses’ needs and to have the maturities spread over various periods so that the Group’s
interest rate risks are somewhat diversified. Floating rate financing is mainly tied to the market rates of different
countries (United Kingdom, South Africa), changes to which will then influence the Group’s total financing cost and
cash flows.
The short-term interest-bearing receivables of the Group are mainly loan receivables and receivables on past asset
disposals. The Group’s interest-bearing liabilities have been discussed above. The effects of credit risks for loan
receivables are explained in more detail in section 1.8. (iv) credit risk.
The split of interest-bearing debt and receivables, also classified into fixed rate and floating rate instruments on 31
December 2019 and 31 December 2018 was as follows:
Interest rate profile of interest-bearing financial instruments (EUR '000)
Fixed rate instruments
Financial assets
Financial liabilities
Fixed rate instruments, net
Variable rate instruments
Financial assets
Financial liabilities
Variable rate instruments, net
Interest-bearing net debt
31.12.2019
31.12.2018
0
0
0
372
-42,176
-41,804
-41,804
3,500
0
3,500
31,588
-22,331
9,257
12,757
The following table presents the approximate effect of changes in market interest rates on the Group’s income statement
should the deposits’ and loans’ interest rates change. The analysis includes floating rate financial assets and liabilities.
The sensitivity analysis is illustrative in nature and applicable for the forthcoming 12 month period if the period’s asset
and liability structure were to be equal to that of 31 December 2019, and if there were no changes in exchange rates.
31 December 2019
Interest rate
change
Change in interest income Change in interest expense
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
-7
-6
-4
-2
0
2
4
6
7
844
633
422
211
0
-211
-422
-633
-844
Net
effect
836
627
418
209
0
-209
-418
-627
-836
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 135
31 December 2018
Interest rate
change
Change in interest income Change in interest expense
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
-632
-474
-316
-158
0
158
316
474
632
447
335
223
112
0
-112
-223
-335
-447
Net
effect
-185
-139
-93
-46
0
46
93
139
185
(iv) Credit risk
Credit risk can be realised when the counterparties in commercial, financial or other agreements cannot take care of their
obligations and thus cause financial damage to the Group. The Group’s operational policies define the creditworthiness
requirements for customers and for counterparties in financial and derivative transactions, as well as the principles followed when
investing liquidity. In the case of major sales agreements, the counterparty’s credit rating is checked.
The Group’s key customers are major international stainless steel companies, and a number of specialist agents selling to the steel
sector, with typically long and successful business histories. Since the customers represent one sector of industry, major changes
in that industry’s profitability could increase the credit risk. In order to mitigate credit risk, the Group credit insure its trade
receivables.
The trade receivables and loan receivables form a major share of the assets, which are exposed to the credit risk. Afarak did not
present the expected credit losses in tabular format due to minimal credit losses in the historical data and including the future
credit loss expectations. Additionally, the group collect prepayments from sales from its customers.
As presented in the section 1.8. note 15. The Group’s trade receivables total EUR 12.3 million for financial period end 31 December
2019 (2018: 22.3). The Group did not record any loss allowance on trade receivables during 2019 and during 2018. The portion of
prepaid revenues or portion under trade financing amounts to EUR 1.6 million on 31.12.2019 (2018: 3.9). The prepaid portion of the
trade receivables does not include any potential losses.
The loan receivables amounted to EUR 0.5 million on 31.12.2019 (2018: 0.9). The total potential credit risk for the loan receivables
is higher than for the trade receivables as the potential risk of default is more concentrated with only few lenders. The group
estimates the potential credit risk in relation to the loan receivables frequently and reports any changes at each reporting period
and estimates the possibility for default on a per lender basis.
In 2019, the Group did not recognise a provision on other receivables, while in 2018 the Group recognised a provision of EUR 0.5
million on other receivables.
The credit risk assessment and the method of calculation has remained the same between the financial period ending 31.12.2019
and the previous financial period.
The trade receivables do not pose a credit risk due to concentration, as the sales are diversified to several customers.
Further information about the expected credit loss can be found in the basis of preparation in section 1.2 Accounting Principles
under “Financial Assets” and “Impairment of financial assets”.
Other financial assets in prior year were mainly loans receivable from the joint venture. These loans are now eliminated at Group
level as these companies are now subsidiary companies.
AFARAK ANNUAL REPORT 2019 136
The Board of Directors of Afarak Group Plc has determined a cash management policy for the Group’s parent company,
according to which the excess cash reserves are deposited for a short-term only and with sound financial institutions with which
the Group has established business relations. The credit rating of all significant counterparties is analysed from time to time.
The maximum credit risk is equal to the carrying value of the receivables as of 31 December, and is split as follows:
Category
Interest-bearing
Cash and cash equivalents
Receivables from related parties
Trade and other receivables from associates
Other interest bearing receivables
Interest-bearing, total
Interest-free
Trade receivables
Other short-term receivables
Trade and other receivable from associates
Long-term receivables
Interest-free, total
Total
EUR ‘000
31.12.2019
EUR ‘000
31.12.2018
5,389
0
0
372
5,760
12,325
2,372
0
676
15,373
12,132
22,490
12,382
216
47,220
22,335
2,753
10,594
3,410
31,209
21,133
72,203
(v) Commodity risks
The Group is exposed to price risks on various output and input products, materials and commodities, energy costs and disruptive
availability of electricity. Also, securing the availability of raw materials without any serious disruptions is vital to its businesses.
The price risks on input materials and commodities are managed by pricing policies so that changes in input materials and
commodities can be moved into sales prices. This, however, is not always possible or there may be delays as a result of contractual
or competitive reasons.
The Group’s units that have production operations are exposed to availability, quality and price fluctuations in raw materials
and commodities. To diminish these risks, the Group’s business units seek to enter into long-term agreements with known
counterparties; although this is not always possible due to the tradition and practice of the business. For the most part, because
it is not possible or economically feasible to hedge commodity price risks in the Group’s business sectors with derivative contracts,
the Group did not have any commodity derivative contracts in place as of 31 December 2019.
Sensitivity Analysis - Speciality Alloys business
The effect of changes in the sales price of special grade ferrochrome, produced by the Group’s Speciality Alloys business, to the
Group’s operating profit and equity is illustrated below, assuming that the EUR/USD rate were constant. The analysis is based
on December 2019 price level. Since the products are priced in USD, the exchange rate changes could have a major effect on the
Group’s profitability in EUR. Full capacity is of 36,000 t/a, and for simulation purposes is set at 2019 production of 25,515 t/a. It is
also assumed that only one ferrochrome quality is produced. Various raw materials are used in ferrochrome production, including
chrome concentrate and ferrosilicochrome. The purchase prices of the main raw materials typically move in the same direction
as the sales prices, although the correlation is not perfect and the timing may differ. In practice, therefore the net effect on the
Group’s profitability most probably would be lower than shown below. Electricity usage is also substantial, and hence changes in
electricity prices have a significant effect on profitability; electricity prices do not correlate with changes in commodity prices.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019
137
Financial year 2019
Change in Sales price
(USD / lb Cr)
Change in
Operating Profit
Change in
Group's Equity
EUR ‘000
EUR ‘000
2.08
2.00
1.91
1.82
1.74
1.65
1.56
1.47
1.39
Financial year 2018
Change in Sales price
(USD / lb Cr)
2.50
2.39
2.29
2.18
2.08
1.98
1.87
1.77
1.66
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
12,162
9,122
6,081
3,041
0
-3,041
-6,081
-9,122
-12,162
11,554
8,666
5,777
2,889
0
-2,889
-5,777
-8,666
-11,554
Change in
Operating Profit
Change in
Group's Equity
EUR ‘000
EUR ‘000
17,340
13,005
8,670
4,335
0
-4,335
-8,670
-13,005
-17,340
16,473
12,355
8,237
4,118
0
-4,118
-8,237
-12,355
-16,473
Sensitivity Analysis – FerroAlloys business
The FerroAlloys business’s smelting operation, Mogale Alloys, is able to change its product mix quite rapidly and flexibly,
and so only rough estimates on its sensitivity to commodity price changes can be given. Its full production capacity is
about 98,000 metric t/a of various metal alloys. Assuming, for simplicity, Mogale production in 2019 of 43,702 metric
t/a, and the average 2019 sales price for charge chrome, the following table represents a rough proxy of the sales price
sensitivities. It should also be taken into account that the profitability of the smelting operations can be substantially
impacted by changes in the USD and ZAR exchange rates, chrome ore prices, electricity prices and availability of
electricity, as well l as changes in market prices. In South Africa the majority of the electricity supply, price and
availability are controlled by one entity, Eskom. Mogale Alloys may participate in Eskom’s electricity buyback program
in the foreseeable future.
AFARAK ANNUAL REPORT 2019 138
Chrome ore is the main raw material used in the charge chrome production, and the purchase prices typically move in
the same direction as the sales prices, although the correlation is not perfect and the timing may differ. In practice,
therefore the net effect on the Group’s profitability most probably would be lower than shown below.
Financial year 2019
Change in Sales price
(USD / lb Cr)
Change in
Operating Profit
Change in
Group's Equity
1.02
0.98
0.94
0.89
0.85
0.81
0.77
0.72
0.68
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
7,449
5,587
3,724
1,862
0
-1,862
-3,724
-5,587
-7,449
5,363
4,022
2,682
1,341
0
-1,341
-2,682
-4,022
-5,363
Financial year 2018
Change in Sales price
(USD / lb Cr)
Change in
Operating Profit
Change in
Group's Equity
1.26
1.20
1.15
1.10
1.05
1.00
0.94
0.89
0.84
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
14,650
10,987
7,325
3,662
0
-3,662
-7,325
-10,987
-14,650
10,548
7,911
5,274
2,637
0
-2,637
-5,274
-7,911
-10,548
Sensitivity Analysis – Mining business
As a general rule, the Group sells its concentrate production and chrome ore at market prices and normally does not
enter into forward sales, derivatives or other hedging arrangements to establish a price in advance for the sale of
its future production. The Group is exposed to the risk of fluctuations in prevailing market commodity prices on the
mineral products it produces.
Assuming, for simplicity, an average annual mining activity of 366,638t/a, and the average 2019 sales price for Chrome
Ore, the following table represents a rough proxy of the sales price sensitivities. It should also be taken into account
that the profitability of the mining operations can be substantially impacted by changes in the USD and ZAR exchange
rates, electricity prices and availability of electricity, as well as changes in market prices.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 139
In practice, therefore the net effect on the Group’s profitability most probably would be lower than shown below. Due
to the high market volatility the range of change was kept at +/- 20%.
Financial Year 2019
Change in Sales price (USD/t)
Change in Operating
Profit
Change in Group's Equity
187.64
179.82
172.00
164.18
156.36
148.55
140.73
132.91
125.09
Financial year 2018
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
11,466
8,599
5,733
2,866
0
-2,866
-5,733
-8,599
-11,466
8,255
6,192
4,128
2,064
0
-2,064
-4,128
-6,192
-8,255
Change in Sales price (USD/t)
Change in Operating
Profit
Change in Group's Equity
189.82
181.91
174.00
166.09
158.18
150.27
142.36
134.45
126.55
14. INVENTORIES
EUR '000
Goods and supplies
Unfinished products
Finished products
Total
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
15,342
11,507
7,671
3,836
0
-3,836
-7,671
-11,507
-15,342
11,046
8,285
5,523
2,762
0
-2,762
-5,523
-8,285
-11,046
2019
7,719
347
21,898
29,964
2018
16,602
586
39,777
56,965
AFARAK ANNUAL REPORT 2019 140
15. TRADE AND OTHER CURRENT RECEIVABLES
EUR '000
Trade receivables
Loan receivables
Interest-bearing receivables
Prepaid expenses and accrued income
Income tax receivables
Other receivables
Total
2019
12,325
528
0
3,929
1,930
1,844
20,556
2018
22,335
909
3,508
3,644
3,552
14,227
48,175
Prepaid expenses and accruals mainly relate to rental contracts, personnel expenses, VAT receivables and accrued
interest for loans. The values of receivables at the end of the reporting period closely correspond to the monetary value
of maximum credit risk, in the potential case where the counterparties cannot fulfil their commitments.
The ageing of trade receivables at the end of the reporting period
EUR '000
Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61-90 days
Past due more than 90 days
Total
2019
5,753
5,674
1,070
198
-370
12,325
2018
13,753
7,836
588
2
156
22,335
The expected credit losses have historically been minimal. Thus the expected credit loss is not material and no separate
credit loss reserve has been recorded.
16. CASH AND CASH EQUIVALENTS
EUR '000
Cash and bank balances
Pledged deposits
Cash and cash equivalents in the consolidated cash flow statement:
EUR ‘000
Cash and bank balances
Short-term money market investments
Total
2019
5,004
0
2019
5,004
385
5,389
2018
12,008
0
2018
12,008
124
12,132
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 141
17. NOTES TO EQUITY
Number of
registered shares
Number
of shares
on issue
Share
capital,
EUR '000
31.12.2017
263,040,695
259,686,534
23,642
Subscriptions based on share based payment
966,667
31.12.2018
263,040,695
260,653,201
23,642
Subscriptions based on share based payment
Acquisition of NCI
Cancellations of acquired shares
Share issue
31.12.2019
There is no nominal value for the Company’s share.
The equity reserves are described below:
500,000
3,209,895
-25,998,881
-25,998,881
15,000,000
252,041,814
238,364,215
23,642
SHARE PREMIUM RESERVE
Related to the old Finnish Companies Act, the Company has a share premium reserve in relation to old share issues, where
the premium in excess of the par value of the shares subscribed has been recognised in the share premium reserve.
PAID-UP UNRESTRICTED EQUITY RESERVE
Paid-up unrestricted equity reserve comprises other equity investments and subscription price of shares to the extent
that it is not recognised in the share capital based on a specific decision.
TRANSLATION RESERVE
The translation reserve comprises all foreign currency differences arising from the translation of financial statements of
foreign operations.
TREASURY SHARES
On 31 December 2019, the Company had 13,677,599 (2018: 2,387,494) own shares in treasury, which was equivalent to
5.43% (2018: 0.91%) of the issued share capital. The total number of shares outstanding, excluding the treasury shares
held by the Company on 31 December 2019 was 238,364,215 (2018: 260,653,201).
The Company’s subsidiaries do not hold any of Afarak Group Plc’s shares.
As at 31 December 2019, the Company had 2,238,343 shares pending to be transferred to the subscribers, which related
to the acquisition of additional ownership in South African mining assets.
AFARAK ANNUAL REPORT 2019
142
SHARE ISSUE AUTHORISATIONS GIVEN TO THE BOARD OF DIRECTORS
Based on the resolution at the AGM on 25 Jun 2019, the Board is authorised to buy-back up to a maximum of
15,000,000 of its own shares. The authorisation replaces all previous authorisations and it is valid for 18 months from
the decision at the Annual General Meeting.
The board resolved on 29 May 2019, based on authorisation granted by the EGM held on 12 November 2018, that the
Company repurchases 26 million of its own shares at a price of EUR 1.015 by means of voluntary public tender offer
made to all shareholders. On 31 July 2019, the Company completed the public tender offer of purchasing own shares
amounting to 25,998,881 shares. Such shares were then cancelled by Afarak on 8 August 2019. On 26 August 2019, the
Company announced an issue of 15,000,000 new shares.
18. SHARE-BASED PAYMENTS
In December 2016 the Group granted the new CEO, Guy Konsbruck 1,000,000 shares in the Company. These have been
awarded in two tranches and vested based on completed year of service. The first 500,000 Company shares have
effectively been received on 11 May 2018. The second 500,000 Company shares have effectively been received on 12
February 2019. These shares have a lock-up period of two years from subscription date. The fair value of the granted
shares is determined based on the market price of Afarak Group share at the grant date which was EUR 0.81 per share.
The expense recognized in the income statement during the year was EUR 8,321.92 (2018: EUR 219,143.84).
In the fourth quarter of 2018, the Group extended for another two years the CEO contract and granted another
1,000,000 shares in the Company. These will be awarded in two tranches and vested based on completed year of
service. The first 500,000 Company shares were due to be received in January 2020 after completing his third year
of service. These will be granted after the AGM when a new board is formed, however it was self-reduced by 20%
to 400,000 Company shares in 2020. The second 500,000 Company shares shall be received by the employee on 15
January 2021. These shares have a lock-up period of two years form subscription date. The fair value of the granted
shares is determined based on the market price of Afarak Group share at the grant date which was EUR 0.83 per share.
The expense recognized in the income statement during the year was EUR 596,917.81 as the effective date of service is
15 January 2019.
In July 2017 the Group has granted Alistair Ruiters 400,000 Incentive shares in the company pa on each completed year of
service commencing on the effective date. In December 2018, 466,667 company shares have effectively been received on 20
December 2018. The expense recognized in the income statement in 2018 was EUR 237,919.91, while this had no effect on the
financial year of 2019. Following a revision in the contract, no additional share transfers to Alistair Ruiters are envisaged.
19. DEFERRED TAX ASSETS AND LIABILITIES
Movements in deferred taxes in 2019
EUR '000
Deferred tax assets:
Unrealised expenses
Pension liabilities
From translation difference
Group eliminations
Total
Deferred tax liabilities:
31.12.2018
Exchange
rate
differences
Recognised
in income
statement
Business
combinations
and
divestments
Recognised
in equity
31.12.2019
3,014
459
-69
532
3,935
32
-4
28
-376
-62
-106
-544
2,671
396
-69
421
3,419
Assets at fair value in acquisitions
3,014
-842
-2,919
20,969
20,222
Translation difference
Other timing differences
Total
421
3,435
886
44
-36
-2,955
80
80
80
1,272
20,969
21,573
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 143
Movements in deferred taxes in 2018
EUR '000
Deferred tax assets:
Unrealised expenses
Pension liabilities
From translation difference
Group eliminations
Total
Deferred tax liabilities:
Assets at fair value in acquisitions
Other timing differences
Total
20. PROVISIONS
EUR ‘000
Balance at 1.1.2019
Additions
Business combinationes
Releases and reversals
Unwinding of discount
Exchange differences
Balance at 31.12.2019
EUR ‘000
Long-term provisions
Short-term provisions
Total
31.12.2017
Exchange rate
differences
Recognised
in income
statement
31.12.2018
2,421
677
-69
612
3,641
4,034
426
4,460
-32
-26
-58
-372
-2
-374
625
-219
-54
352
-648
-3
-651
Environmental and
rehabilitation provisions
Other provisions
8,097
1,759
6,900
0
-182
262
16,836
2019
19,052
177
19,229
884
2,044
0
-492
0
-44
2,392
2018
8,876
105
8,981
3,014
459
-69
532
3,935
3,014
421
3,435
Total
8,981
3,803
6,900
-492
-182
218
19,229
The long-term provisions in the statement of financial position relate to environmental and rehabilitation provisions of the
Group’s production facilities and mines. The provisions are based on expected liability.
21. PENSION LIABILITIES
Defined benefit pension plans
The majority of the Group’s pension plans are defined contribution plans for which a total expense of EUR 0.7 (2018: 0.7)
million has been recognised on the 2019 statement of comprehensive income. In addition, the Group’s German subsidiary
has defined benefit plans. The amount of defined benefit obligations of the plan is based on actuarial calculations made by
authorized actuaries. The pension scheme is arranged by recognising a provision on the statement of financial position. The
present value of the obligation less fair value of plan assets totalled EUR 22.5 (2018: 20.1) million on 31 December 2019. The
Group has considered that the value on 31 December also corresponds with the amount of net obligation at the end of the
reporting period. The assets of the pension plans are kept separate from the Group’s assets.
AFARAK ANNUAL REPORT 2019 144
RETIREMENT BENEFIT OBLIGATION
EUR '000
Present value of funded obligation
Fair value of plan assets
Net liability
MOVEMENTS IN DEFINED BENEFIT OBLIGATION
EUR '000
Defined benefit obligations at 1.1.
Benefits paid
Current service costs
Interest expense
Actuarial losses / (gains)
Closing balance at 31.12.
MOVEMENTS IN THE FAIR VALUE OF THE PLAN ASSETS
EUR '000
Fair value of the plan assets at 1.1.
Interest income on plan assets
Benefits paid by the plan
Return on plan assets greater/(less) than discount rate
Contributions paid into the plan
Closing balance at 31.12.
2019
29,353
-6,878
22,475
2019
26,569
-883
373
462
2,832
2018
26,569
-6,463
20,106
2018
26,007
-915
362
452
663
29,353
26,569
2019
6,464
116
-193
91
400
2018
6,071
109
-185
86
383
6,878
6,464
The benefits of the defined benefit plan are insured with an insurance company. The corresponding assets are the
responsibility of the insurance company and a part of the insurance company’s investment assets. The distribution in
categories is not possible to provide.
EXPENSE RECOGNISED IN STATEMENT OF COMPREHENSIVE INCOME
EUR '000
Current service cost
Net interest on net defined benefit liability/(asset)
2019
-373
-346
-719
2018
-362
-343
-705
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 EXPENSE RECOGNISED IN OTHER COMPREHENSIVE INCOME (OCI)
EUR ‘000
Actuarial (gains)/losses due to liability experience
Return on plan assets (greater)/less than discount rate
Actuarial (gains)/losses – demographic assumptions
Actuarial (gains)/losses – financial assumptions
Actual return on plan assets totalled EUR 0.09 (2018: 0.09) million in 2019.
PRINCIPAL ACTUARIAL ASSUMPTIONS
Discount rate
Expected retirement age
Expected rate of salary increase
Inflation
2019
-554
-91
3,385
0
2,740
2019
1.04%
65
3.00%
2.25%
145
2018
576
-85
86
0
577
2018
1.77%
65
3.00%
2.25%
The expected retirement age has been assumed to be in accordance with German legislation (RVAGAnpG 2007). Similarly,
the expected pension increases have been assumed to be in line with the German legislation, and mortality expectancy in
accordance with the German “Richttafeln 2005 G” has been applied in the valuations.
PROVISION FOR RETIREMENT PAY LIABILITY IN TURKEY
In accordance with existing social legislation in Turkey, the Turkish subsidiary of the Group is required to make lump-sum payments
to employees whose employment is terminated due to retirement or for reasons other than resignation or misconduct. The
computation of the liability was based on the retirement pay ceiling announced by the Turkish government. On 31 December 2019,
the employee severance indemnity recognised in accordance with IAS 19 totalled EUR 0.5 (2018: 0.8) million.
22. TRADE PAYABLES AND OTHER INTEREST-FREE LIABILITIES
EUR ‘000
Non-current
Other liabilities
Total non-current
Current
Current liabilities to related parties
Trade payables
Payables to associated companies
Accrued expenses and deferred income
Income tax liability
Other liabilities
Total current
2019
4,514
4,514
6
12,538
0
6,811
2,754
498
22,607
2018
4,708
4,708
6
19,420
1,105
5,830
4,232
667
31,260
AFARAK ANNUAL REPORT 2019 146
1.9 RELATED PARTY DISCLOSURES
1.9.1 GROUP STRUCTURE ON 31 DECEMBER 2019
Name
Afarak Commodities Ltd
Afarak doo Belgrade
Afarak Holdings Ltd
Afarak Investments Ltd
Afarak Mining Investments (Pty) Ltd
Afarak Mining (Pty) Ltd
Afarak Mogale (Pty) Ltd
Afarak Services Sagl
Afarak South Africa (Pty) Ltd
Afarak Trading Ltd
Afarak Participations Ltd
Magnohrom doo Kraljevo
Auburn Avenue Trading 88 (Pty) Ltd
Destiny Spring Investments 11 (Pty) Ltd
Destiny Spring Investments 12 (Pty) Ltd
Duoflex (Pty) Ltd
Elektrowerk Weisweiler GmbH
Intermetal Madencilik ve Ticaret A.S.
LP Kunnanharju Oy
Rekylator Oy
Türk Maadin Sirketi A.S.
ZCM Holdco One (Pty) Ltd
Zeerust Chrome Mine Ltd
Synergy Africa Ltd
Chromex Mining Ltd
Chromex Mining Company (Pty) Ltd
Ilitha Mining (Pty) Ltd
Mkhombi Stellite (Pty) Ltd
Afarak Processing Technologies (Pty) Ltd
Afarak Processing Technologies 2 (Pty) Ltd
Afarak Platinum (Pty) Ltd
Country of
incorporation
Group's
ownership and
share of votes
(%)
Afarak Group
Plc's direct
ownership and
share of votes
(%)
Malta
Serbia
Malta
Malta
South Africa
South Africa
South Africa
Switzerland
South Africa
Malta
Malta
Serbia
South Africa
South Africa
South Africa
South Africa
Germany
Turkey
Finland
Finland
Turkey
South Africa
South Africa
United Kingdom
United Kingdom
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
100.00
100.00
100.00
100.00
100.00
100.00
94.50
100.00
100.00
100.00
100.00
100.00
74.00
73.30
100.00
74.00
100.00
99.00
100.00
100.00
98.75
74.00
74.00
100.00
100.00
74.00
80.00
87.00
100.00
100.00
100.00
0.00
0.00
0.00
99.99
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0,00
0.00
0.00
100.00
100.00
98.75
23.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
As at 31 March 2019, the Group held 51% of shares of Synergy Africa Ltd, which the shareholders of Synergy Africa Ltd had entered
into a joint venture agreement with joint control over the company. On 1 April 2019, Afarak acquired the 49% balance of Synergy
Africa Ltd, and the Joint Venture agreement was terminated. Therefore Afarak now holds 100% of Synergy Africa Ltd. As at 31 March
2019, the company and its subsidiaries were not consolidated into the Group as subsidiaries but as joint ventures. The Group’s share of
net profit or loss of the Joint venture during the period January to March 2019 is shown on one line in the income statement. As from
1 April 2019, Synergy Africa Ltd and its subsidiaries were consolidated into the Group as subsidiaries.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 147
Afarak Mogale (Pty) Ltd entered into an agreement in December 2016, to buy back 100 ordinary shares currently held by the trustees
as part of the Mogale Alloys Trust. These shares constitute an effective 10% of the issued share capital of the company and will be
bought back in a series of buy backs over a period of 8 years. During the current year Afarak Mogale (Pty) Ltd repurchased 11 (11)
ordinary shares held by the Mogale Alloys Trust, hence Afarak Mogale (Pty) Ltd has repurchased 45 ordinary shares in total and 55
ordinary shares still to be repurchased. However, in Afarak Group, 100% of Afarak Mogale (Pty) Ltd is being consolidated.
Rekylator Yhtiöt Oy was merged with Afarak Group Oyj during the year 2019.
During the second quarter, Afarak also acquired a further 49% of the shares in Zeerust Chrome Mine, in exchange for total
consideration of two million shares in Afarak Group Plc, amounting to Eur 1,654,000. Of which 26% are to be transferred to a
prospective BEE partner and therefore Afarak holds and consolidate 74% interest in the company.
Afarak entered into an agreement during 2019 to acquire the remaining interest of 26% in Chromex Mining Company (Pty) Ltd. This
has not yet been executed as there need to be an approval from South Africa Reserve bank and it is expected to be executed in 2020.
For the year ended 31 December 2019 Chromex Mining Limited (registration number 05566992) and Synergy Africa Limited
(registration number 07382978) were entitled to an exemption from audit under section 479A of the Companies Act 2006 relating to
subsidiary companies.
1.9.2 RELATED PARTY TRANSACTIONS
Afarak Group Plc defines the related parties as:
• companies, entities or persons having common control or considerable voting power in Afarak Group
• subsidiaries
• joint ventures
• associates
• Afarak Group Plc’s and the above mentioned entities’ top management
Related party transactions with persons belonging to the Group’s Board and management
Finnish accounting legislation, KPA 2:8 § 4 paragraph disclosure requirement
EUR ‘000
2019
2018
Salaries
Fees
Share-
based
remuneration
Salaries
Fees
Share-
based
remuneration
294
605
360
219
CEO
Konsbruck Guy
Board Members
Abrahamsen
Thorstein
Hoyer Thomas
Jakovcic Ivan
Manojlovic Jelena
Rourke Barry
Board member 05.2.2018 onwards,
CEO 15.1.2017 onwards
Board member 23.5.2017 onwards,
Chairman11.11.2019 onwards
Board member 23.5.2017 -
05.2.2018
Board member 8.5.2015 - 31.07.2018,
Chairman 12.5.2016 - 23.5.2017
Board member 11.7.2008 onwards,
Chairperson 23.5.2017 – 25.6.2019
Board member 8.5.2015 – 11.11.2019,
Chairman 25.06.2019 – 11.11.2019
Yolanda Bolleurs
Board member 25.6.2019 – 11.11.2019
Total
0
63
0
0
66
73
25
521
60
6
34
72
85
0
605
0
617
219
As some of the Board members have also had executive management roles, both the Board fees and the salaries in relation to the
executive role have been presented above.
AFARAK ANNUAL REPORT 2019 148
During 2019, the CEO self-reduced his salary by 20% and the Company paid the CEO EUR 294,000 for his service. On 11 May 2018
he received 500,000 Company Shares as an incentive for the first year of service acting as the Chief Executive Officer. The second
500,000 Company shares received on 12 February 2019.
In the fourth quarter of 2018, the Group extended for another two years the CEO contract and granted another 1,000,000
shares in the Company. These will be awarded in two tranches and vested based on completed year of service. The first 500,000
Company shares were due to be received in January 2020 after completing his third year of service. These will be granted after
the AGM when a new board is formed, however these were self-reduced by 20% to 400,000 Company shares in 2020. The second
500,000 Company shares shall be received by the employee on 15 January 2021.
In December 2017 the outgoing CEO received 335,000 Company Shares prorate over the second year of service acting as the
Chief Executive Officer. He is not entitled to any bonus plans or severance pay in addition to the salary for the notice period. In
July 2017 the Group has granted Alistair Ruiters 400,000 Incentive shares in the company pa on each completed year of service
commencing on the effective date. Following a revision in the contract, 466,667 company shares have effectively been received
on 20 December 2018. No additional share transfers to Alistair Ruiters are envisaged.
Management remuneration
EUR ‘000
Fixed salaries and fees
Provision for variable performance related compensation
Total
2019
591
0
591
2018
564
-14
550
The table includes the Executive Management Team remuneration excluding the CEO and including salary of Danko Koncar, COO
amounting to Eur 247,000. The CEO and Board members compensation has been presented separately.
In addition, the shareholders Aida Djakov (director ATL) and Milan Djakov (sales and marketing manager ATL) and the related
party Misha Djakov (technical and commercial advisor Specialty Alloys) received remuneration for their activities for a total
amount of Eur 392,000.
FINANCING ARRANGEMENT WITH RELATED PARTIES
The Group has a EUR 0.0 (2018: 26.2) million loan receivable and EUR 0.0 (2018: 7.3) million trade and other current and non-
current receivables from its joint venture companies. Trade and other payables to joint venture companies amounted to EUR
0.0 (2018: 1.1) million. The Joint venture became a subsidiary as of 1 April 2019, hence balance was zero as at end of year. During
the period from January to March 2019, Interest income from a joint venture company totalled EUR 0.1 (2018: 1.0) million.
The Group had on 31 December 2019 a EUR 0.0 (2018: 3.5) million receivable from LNS Resources Ltd.
OTHER RELATED PARTY TRANSACTIONS
During the period from January to March 2019, the Group has rendered services to joint ventures for a total value of EUR 0.1
(2018: 1.3) million and to other related parties for the value of EUR 0.0 (0.3) million. The Group has also made raw material
purchases from a joint venture amounting to EUR 1.3 (2018: 18.3) million.
Dividends received from associated companies totalled EUR 0.0 (2018: 0.0) million.
During 2019, Afarak acquired the 49% of Synergy Africa Ltd from a related party.
Afarak made an addition of an intangible assets from a related party of EUR 0.1 million.
During 2017, a subsidiary of the Company, signed a Share Purchase Agreement with Mr Guy Konsbruck, Afarak’s CEO to
purchase his 15% shareholding for a purchase price of EUR 0.2 million. Given that LL Resources is a business partner of
Afarak and the share ownership of the CEO could have created a conflict of interest, Afarak bought the shareholding with
an option to sell back the said shares at the same price if, and when, Mr Konsbruck’s term as Group CEO ends. The company
sold its shareholding in business partner LL Resources during Q3 2018 and it is therefore no longer a related party.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 149
1.10 COMMITMENTS AND CONTINGENT LIABILITIES
1.10.1 MORTGAGES AND GUARANTEES PLEDGED AS SECURITY
On 31 December 2019 the Group had loans from financial institutions totalling EUR 15.0 (2018: 16.7) million. The Group
has provided real estate mortgages and other assets as collaterals for total carrying value of EUR 7.0 (2018: 6.2) million.
Moreover, the Group companies have given cash deposits totalling EUR 0.5 (2018: 0.4) million as security for their
commitments. The value of other collaterals totalled EUR17.4 (2018: 17.1) million as at 31 December 2019.
1.10.2 COVENANTS INCLUDED IN THE GROUP’S FINANCING AGREEMENTS
During the year 2019 and the prior year, the Group did not have loan facilities subject to financial covenants that if breached
might have a negative effect on the financial position of the Group.
1.10.3 RENTAL AGREEMENTS
Liabilities associated with rental and operating lease agreements totalled some EUR 0.3 (2018: 0.3) million for the period. Typically,
the rental agreements maturity varies between two to five years, and normally there is a possibility to continue these agreements
beyond the original maturity date. For these contacts, their price indexing, renewal and other terms differ contract by contract. As
guarantees for these rental agreements, the Group companies have made cash deposits of approximately EUR 0.0 (0.0) million as at
31 December 2019.
1.10.4 COLLATERALS GIVEN BY AFARAK GROUP PLC TO THIRD PARTIES
Afarak Group Plc has given guarantees in connection with certain borrowings of Junnikkala Oy, the Group’s former
subsidiary which it sold in June 2011. Under the terms of the disposal it has been agreed that Junnikkala will pay a fee of 2%
per annum to Afarak Group Plc in consideration for the continuation of these guarantees.The indebtedness subject to these
guarantees was fully paid on 15 April 2018.
1.11 EVENTS AFTER THE REPORTING PERIOD
On 28 January 2020, the company announced changes regarding Afarak Group Plc’s treasury shares, where a total of
115,000 treasury shares has been transferred to subscribers.
On 30 January 2020, Afarak Group announced that it has received a notification of managers transactions in connection
with pledging of Afarak shares.
On 26 February 2020, the company announced that EBITDA for the fourth quarter is weaker than expected.
On 5 March 2020, Afarak Group announced that it has received a notification of managers transactions in connection with
disposal of shares.
On 9 March 2020, Afarak Group announced that it has received a notification of managers transactions in connection with
disposal of shares.
On 24 March 2020, Afarak Group announced that, following the nation-wide lockdown of 21 days in South Africa, in order
to combat COVID-19 epidemic, a specific plan is being developed by the Company in order to cope with these extraordinary
measures and preserve the Health and Safety of the workers and the Population.
AFARAK ANNUAL REPORT 2019 151
Parent Company’s
Financial Statements (FAS)
INCOME STATEMENT (FAS)
EUR '000
Revenue
Personnel expenses
Salaries and wages
Pension expenses
Other social security expenses
Social security expenses total
Personnel expenses total
Depreciation, amortisation and impairment
Depreciation and amortisation according to plan
Impairment of investment in subsidiaries
Depreciation and amortisation total
Other operating expenses
Operating Loss
Financial income and expenses:
Dividend from subsidiaries
Other financial income
From Group companies
From others
Interests and other financial expenses
To Group companies
To others
Impairment of intra-group receivable
Financial income and expenses total
Loss before taxes
Income taxes
Income taxes
Loss for the year
Note
1.1.2019 - 31.12.2019
1.1.2018 - 31.12.2018
1
2
3
4
5
1,481
2,881
-1,021
-1,247
2
0
2
-4
-2
-6
-1,019
-1,253
0
-139,526
-139,526
-4,867
-143,931
0
26
1,300
-556
-993
0
-223
0
0
0
-2,870
-1,242
0
798
64
-51
-39
-900
128
-144,154
-1,370
0
0
-144,154
-1,370
AFARAK ANNUAL REPORT 2019 152
STATEMENT OF FINANCIAL POSITION (FAS)
EUR '000
ASSETS
Non-current assets
Property, plant and equipment
Machinery and equipment
Total property, plant and equipment
Investments
Shares in Group companies
Receivables from Group companies
Total investments
Non-current receivables
Receivables from Group companies
Total non-current receivables
Note
31.12.2019
31.12.2018
6
7
0
0
114,959
0
114,959
5
5
0
0
250,931
2,004
252,935
1,785
1,785
Total non current assets
114,964
254,720
Current assets
Current receivables
Trade receivables
Receivables from Group companies
Receivables from Holding companies
Other interest-bearing receivables
Other non interest-bearing receivables
Prepaid expenses and accrued income
Total current receivables
Cash and cash equivalents
Total current assets
Total assets
1
13,993
0
0
69
40
14,103
118
14,226
1
12,826
851
8
58
165
13,909
184
15,878
129,185
268,813
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 153
STATEMENT OF FINANCIAL POSITION (FAS) (CONT.)
EUR '000
Note
31.12.2019
31.12.2018
EQUITY AND LIABILITIES
Shareholders’ Equity
Share capital
Share premium reserve
Paid-up unrestricted equity reserve
Retained earnings
Loss for the period
Total shareholders' equity
Liabilities
Non-current liabilities
Liabilities to Group companies
Provisions
Total non-current liabilities
Current liabilities
Liabilities to Group companies
Accounts payable
Accounts payable to Group companies
Other liabilities
Accrued expenses and deferred income
Total current liabilities
Total liabilities
9
10
23,642
25,223
212,024
-20,576
-144,154
96,159
28,229
1,450
29,679
462
60
119
24
175
3,347
33,026
23,642
25,223
236,071
-19,206
-1,370
264,360
1,248
0
1,248
1,262
410
1,359
25
149
3,205
4,453
Total equity and liabilities
129,185
268,813
AFARAK ANNUAL REPORT 2019 154
STATEMENT OF CASH FLOWS (FAS)
EUR '000
Operating activities
Loss for the year
Adjustments for:
Depreciation and amortisation
Impairment, net
Unrealised foreign exchange gains and losses
Finance income and expense
Other adjustments
Cash flow before working capital changes
Working capital changes:
Change in current trade receivables
Change in current non interest-bearing debt
Cash flow before financing items and taxes
Interests received from Group companies
Interests received and other financing items
Interests paid and other financing items
Income taxes paid
Net cash operating activities
Investing activities
Proceeds from sale of tangible and intangible assets
Net cash from investing activities
Financing activities
Acquisition of own shares
Repayments of current borrowings
Non-current loans from Group companies
Repayments of non-current loans to group companies
Non-current loans to group companies
Repayments of current loan receivables
Net cash from financing activities
Change in cash and cash equivalents
Cash at beginning of period
Cash at end of period
Change in the statement of financial position
1.1.-31.12.2019
1.1.-31.12.2018
-144,154
0
139,526
-306
831
1,501
-2,602
779
105
-1,718
1,303
27
-908
0
-1,296
1
1
-26,389
-44
26,031
1,623
0
8
1,229
-66
184
118
-66
-1,370
0
900
-24
-748
0
-1,242
-2,168
704
-2,706
1,470
85
-17
0
-1,168
0
0
0
0
0
1,320
-8
0
1,312
144
40
184
144
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 155
Notes to the Financial Statements
of the Parent Company (FAS)
2.1 ACCOUNTING POLICIES
SCOPE OF FINANCIAL STATEMENTS AND ACCOUNTING POLICIES
The parent company has prepared its separate financial statements in accordance with Finnish Accounting
Standards. Consolidated financial statements have been prepared in accordance with International Financial
Reporting Standards. Consolidated financial statements are presented separately as a part of these financial
statements.
Information on holdings in subsidiaries and associated companies and information on their consolidation is
presented in the notes to the financial statements.
All figures are presented in thousand Euros, unless otherwise explicitly stated.
VALUATION PRINCIPLES AND METHODS
Investments in associated companies and debt instruments are valued at acquisition cost, less eventual impairment.
Dividends received from Group companies and associates have been recorded as financial income.
The value of property, plant and equipment in the statement of financial position is stated at acquisition cost,
less accumulated depreciation. Other assets have been stated in the statement of financial position at the lower
of acquisition cost or their likely realisable value. Debt items are valued at acquisition cost. Loan receivables from
subsidiaries and Group companies have been valued at acquisition cost.
DEPRECIATION METHODS
Acquisition costs of property, plant and equipment are depreciated over their useful lives according to plan.
Depreciation plans have been defined based on practice and experience.
Asset
Intangible rights
IT equipment
Other machinery and equipment
TRANSLATIONS OF FOREIGN CURRENCY ITEMS
Depreciation Method & Period
5 years straight line
2 years straight line
5 years straight line
Items in the statement of financial position denominated in foreign currency are translated into functional currency
using the exchange rates as at the end of the reporting year. Income statement items are translated applying the
exchange rates prevailing at the date of the transaction.
COMPARABILITY OF THE REPORTED FINANCIAL YEAR AND THE PREVIOUS YEAR
The reported financial year and the previous year were both calendar years and are thus comparable. The Company
has been actively restructuring its business, which has required various ownership and financial arrangements. The
transactions have had significant non-recurring effects on the Company’s income statement and statement of
financial position, which make comparison of financial statements and estimating the future more difficult.
AFARAK ANNUAL REPORT 2019 156
2.2 NOTES TO THE INCOME STATEMENT
1. REVENUE
EUR '000
By business line:
Services
Total
By geography:
Finland
EU countries
Other countries
Total
2019
2018
1,481
1,481
1
1,065
415
1,481
2,881
2,881
7
1,209
1,665
2,881
2. DEPRECIATION, AMORTISATION AND IMPAIRMENT
EUR '000
2019
2018
Depreciation and amortisation according to plan
Machinery and equipment
Impairment
Impairment on investment in subsidiaries
Total
3. OTHER OPERATING EXPENSES
EUR '000
Premise expenses
Machinery and equipment expenses
Travelling expenses
Administration expenses
Other operating expenses
Total
4. FINANCIAL INCOME AND EXPENSE
EUR '000
Dividend from Group companies
Other financial income
From Group companies
From others
Other financial expense
To Group companies
To others
Impairment of intra-group receivables
Total
0
-139,526
-139,526
2019
-16
-19
-152
-3,126
-1,554
-4,867
2019
0
26
1,300
-556
-993
0
-223
0
0
0
2018
-11
-28
-291
-2,477
-61
-2,870
2018
0
798
64
-51
-39
-900
-128
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 157
2018
-1,370
0
-1,370
0
0
0
0
0
0
2019
-144,154
0
-144,154
0
0
0
0
0
0
2019
2018
275
0
275
275
0
275
0
275
0
275
275
0
275
0
5. INCOME TAXES
EUR '000
Loss for the period
Adjustments for tax calculation
Taxable income
Tax advances paid
Tax deferral based on taxable income
Income tax of the period
Tax loss carryforward used
Net income taxes
Income tax receivable
2.3 NOTES TO ASSET
6. NON-CURRENT ASSETS
EUR '000
Machinery and equipment
Acquisition cost 1.1.
Disposals
Acquisition cost 31.12.
Accumulated depreciation 1.1.
Depreciation for the period
Accumulated depreciation 31.12.
Book value 31.12.
AFARAK ANNUAL REPORT 2019 158
7. INVESTMENTS
Acquisition cost 1.1.2019
Additions of investment
Disposal of investment
Acquisition cost 31.12.2019
Shares in Group
companies
Shares in associated
companies
Receivables from
Group companies
320,980
3,554
-1
8,153
0
0
19,618
0
-2,004
Total
348,751
3,554
-2,005
324,533
8,153
17,614
350,300
Accumulated depreciation and impairment
1.1.2019
Impairment of investment in subsidiaries
Accumulated depreciation and impairment
31.12.2019
-70,048
-139,526
-209,574
-8,153
0
-8,153
-17,614
0
-17,614
-95,815
-139,526
-235,341
Book value 31.12.2019
114,959
0
0
114,959
Holdings in Group and other companies
Name
Afarak Commodities Ltd
Afarak doo Belgrade
Afarak Holdings Ltd
Afarak Investments Ltd
Afarak Mining Investments (Pty) Ltd
Afarak Mining (Pty) Ltd
Afarak Mogale (Pty) Ltd
Afarak Services Sagl
Afarak South Africa (Pty) Ltd
Afarak Trading Ltd
Afarak Participations Ltd
Magnohrom doo Kraljevo
Auburn Avenue Trading 88 (Pty) Ltd
Destiny Spring Investments 11 (Pty) Ltd
Destiny Spring Investments 12 (Pty) Ltd
Duoflex (Pty) Ltd
Elektrowerk Weisweiler GmbH
Intermetal Madencilik ve Ticaret A.S.
LP Kunnanharju Oy
Rekylator Oy
Türk Maadin Sirketi A.S.
ZCM Holdco One (Pty) Ltd
Zeerust Chrome Mine Ltd
Synergy Africa Ltd
Chromex Mining Ltd
Chromex Mining Company (Pty) Ltd
Ilitha Mining (Pty) Ltd
Mkhombi Stellite (Pty) Ltd
Afarak Processing Technologies (Pty) Ltd
Afarak Processing Technologies 2 (Pty) Ltd
Afarak Platinum (Pty) Ltd
Country of
incorporation
Group's ownership and
share of votes (%)
AfarakGroup Plc’s direct ownership
and share of votes (%)
Malta
Serbia
Malta
Malta
South Africa
South Africa
South Africa
Switzerland
South Africa
Malta
Malta
Serbia
South Africa
South Africa
South Africa
South Africa
Germany
Turkey
Finland
Finland
Turkey
South Africa
South Africa
United Kingdom
United Kingdom
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
100.00
100.00
100.00
100.00
100.00
100.00
94.50
100.00
100.00
100.00
100.00
100.00
74.00
73.30
100.00
74.00
100.00
99.00
100.00
100.00
98.75
74.00
74.00
100.00
100.00
74.00
80.00
87.00
100.00
100.00
100.00
0.00
0.00
0.00
99.99
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0,00
0.00
0.00
100.00
100.00
98.75
23.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 159
As at 31 March 2019, the Group held 51% of shares of Synergy Africa Ltd, which the shareholders of Synergy Africa Ltd had entered
into a joint venture agreement with joint control over the company. On 1 April 2019, Afarak acquired the 49% balance of Synergy
Africa Ltd, and the Joint Venture agreement was terminated. Therefore Afarak now holds 100% of Synergy Africa Ltd. As at 31
March 2019, the company and its subsidiaries were not consolidated into the Group as subsidiaries but as joint ventures. The
Group’s share of net profit or loss of the Joint venture during the period January to March 2019 is shown on one line in the income
statement. As from 1 April 2019, Synergy Africa Ltd and its subsidiaries were consolidated into the Group as subsidiaries.
Afarak Mogale (Pty) Ltd entered into an agreement in December 2016, to buy back 100 ordinary shares currently held by
the trustees as part of the Mogale Alloys Trust. These shares constitute an effective 10% of the issued share capital of the
company and will be bought back in a series of buy backs over a period of 8 years. During the current year Afarak Mogale
(Pty) Ltd repurchased 11 (11) ordinary shares held by the Mogale Alloys Trust, hence Afarak Mogale (Pty) Ltd has repurchased
45 ordinary shares in total and 55 ordinary shares still to be repurchased. However, in Afarak Group, 100% of Afarak Mogale
(Pty) Ltd is being consolidated.
Rekylator Yhtiöt Oy merged with Afrak Group Oyj during the year 2019.
During the second quarter, Afarak also acquired a further 49% of the shares in Zeerust Chrome Mine, in exchange for total
consideration of two million shares in Afarak Group Plc, amounting to Eur 1,654,000. Of which 26% are to be transferred to a
prospective BEE partner and therefore Afarak holds and consolidate 74% interest in the company.
Afarak entered into an agreement during 2019 to acquire the remaining interest of 26% in Chromex Mining Company (Pty) Ltd. This
has not yet been executed as there need to be an approval from South Africa Reserve bank and it is expected to be executed in 2020.
For the year ended 31 December 2019 Chromex Mining Limited (registration number 05566992) and Synergy Africa Limited
(registration number 07382978) were entitled to an exemption from audit under section 479A of the Companies Act 2006
relating to subsidiary companies.
8. RECEIVABLES
EUR '000
Receivables from group companies
Non-current
Loan and other receivables
Total
Current
Loan receivables
Trade receivables
Interest receivables
Prepayments and accrued income
Total
Other interest-bearing receivables
EUR ‘000
Current
Loan receivables
VAT receivable
Total
2019
2018
5
5
7,424
4,915
822
832
13,993
2019
0
3
3
1,785
1,785
7,304
4,675
13
834
12,826
2018
8
30
38
AFARAK ANNUAL REPORT 2019 160
Other interest-free receivables
EUR ‘000
Current
Trade receivables
Receivables from associated companies
Other receivables
Total
Prepaid expenses and accrued income
EUR ‘000
Accrued interest income
Other prepaid expenses and accrued income
Total
2.4 NOTES TO EQUITY AND LIABILITIES
9. SHAREHOLDERS’ EQUITY
EUR ‘000
Share capital
Share capital 1.1.
Share capital 31.12.
Share premium reserve
Share premium reserve 1.1.
Share premium reserve 31.12.
Paid-up unrestricted equity reserve
Paid-up unrestricted equity reserve 1.1.
Issue of shares
Acquisition of own shares
Paid-up unrestricted equity reserve 31.12
Retained earnings
Retained earnings 1.1.
Loss for the previous financial year
Retained earnings 31.12.
Loss for the financial year
Total shareholders’ equity
2019
2018
1
0
4
5
2019
0
103
103
2019
23,642
23,642
2019
25,223
25,223
2019
236,071
2,341
-26,389
212,024
2019
-19,206
-1,370
-20,576
-144,154
95,159
1
851
27
879
2018
1
164
165
2018
23,642
23,642
2018
25,223
25,223
2018
236,071
0
0
236,071
2018
-14,140
-5,066
-19,206
-1,370
264,360
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 Distributable funds
Retained earnings 1.1.
Loss for the financial year
Retained earnings 31.12.
Paid-up unrestricted equity reserve
Distributable funds 31.12.
10. LIABILITIES
Non-current liabilities
EUR ‘000
Non-current interest bearing debt
Loans from Group companies
Total
EUR ‘000
Non-current interest-free debt
Capital loans
Total
Current Liabilities
EUR ‘000
Current interest bearing debt
Other debt to Group companies
Total
Current interest-free debt
Accounts payable
Payables to Group companies
Other debt
Other debt to Group companies
Accrued expenses and deferred income
Total
161
2018
-19,206
-1,370
-20,576
236,071
216,395
2018
1,248
1,248
2018
0
0
2018
50
50
2018
410
1,359
25
1,212
148
3,154
2019
-20,576
-144,154
-164,730
212,024
47,294
2019
27,279
27,279
2019
950
950
2019
50
50
2019
60
2,531
119
412
175
3,297
AFARAK ANNUAL REPORT 2019 162
2.5 PLEDGES AND CONTINGENT LIABILITIES
EUR million
Commitments on behalf of subsidiaries
Guarantees
Commitments on behalf of others
Guarantees
Commitments and contingent liabilities total
31.12.2019
31.12.2018
17.4
0.0
17.4
17.1
0.0
17.1
PENSION LIABILITIES
The Company’s pension liabilities are directly in accordance with the statutory TyEL-system.
2.6 OTHER NOTES
RELATED PARTY LOANS
The Company has short-term loan receivables from the members and past members of the Board amounting to EUR 0
(8) thousand.
Information on the personnel
Personnel, annual average
(all employees)
Employees
Management remuneration (EUR ’000)
Chief Executive Officer
Board members
2019
3
2019
294
227
2018
3
2018
360
257
During 2019, the CEO self-reduced his salary by 20% and the Company paid the CEO EUR 294,000 for his service. On 11
May 2018 he received 500,000 Company Shares as an incentive for the first year of service acting as the Chief Executive
Officer. The second 500,000 Company shares have effectively been received on 12 February 2019.
In the fourth quarter of 2018, the Group extended for another two years the CEO contract and granted another 1,000,000
shares in the Company. These will be awarded in two tranches and vested based on completed year of service. The first
500,000 Company shares were due to be received in January 2020 after completing his third year of service. These will
be granted after the AGM when a new board is formed, however these were self-reduced by 20% to 400,000 Company
shares in 2020. The second 500,000 Company shares shall be received by the employee on 15 January 2021. These shares
have a lock-up period of two years form subscription date. The fair value of the granted shares is determined based on
the market price of Afarak Group share at the grant date which was EUR 0.83 per share. The value at year end was EUR
596,917.81.
In December 2017 the outgoing CEO received 335,000 Company Shares prorate over the second year of service acting as
the Chief Executive Officer. He is not entitled to any bonus plans or severance pay in addition to the salary for the notice
period. In July 2017 the Group has granted Alistair Ruiters 400,000 Incentive shares in the company pa on each completed
year of service commencing on the effective date. Following a revision in the contract, 466,667 company shares have
effectively been received on 20 December 2018. No additional share transfers to Alistair Ruiters are envisaged.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 163
INFORMATION ON SHARES AND SHAREHOLDERS
Changes in the number of shares and share capital
On 31 December 2019, the registered number of Afarak Group Plc shares was 252,041,814 (2018: 263,040,695) and the
share capital was EUR 23,642,049.60 (2018: 23,642,049.60).
On 31 December 2019, the Company had 13,677,599 (2018: 2,387,494 ) own shares in treasury, which was equivalent to
5.43% (2018: 0.91%) of the issued share capital. The total amount of shares outstanding, excluding the treasury shares
held by the Company on 31 December 2019, was 238,364,215 (2018: 260,653,201).
In December 2017, Afarak transferred 335,000 ordinary shares (the “Shares”) from the treasury to the outgoing CEO,
Dr Alistair Ruiters. The Shares were issued under the authorization given by the Company’s Annual General Meeting in
May 2017 and formed part of the CEOs service based remuneration package. On 20 December 2018, Afarak transferred
466,667 company shares from treasury to Dr Alistair Ruiters, former CEO. The Shares are issued under the authorisation
given by the Company’s Annual General Meeting in May 2018 and formed part of the Mr Ruiter’s service contract.
Following a revision in the contract, no additional share transfers to Alistair Ruiters are envisaged.
On 12 February 2019, the company transferred 500,000 Company Shares from the treasury to Guy Konsbruck, CEO.
On 23 September 2019, the company transferred 1,324,895 Company Shares from treasury to South African suppliers.
The board resolved on 29 May 2019, based on authorisation granted by the EGM held on 12 November 2018, that the
Company repurchases 26 million of its own shares at a price of EUR 1.015 by means of voluntary public tender offer
made to all shareholders. On 31 July 2019, the Company completed the public tender offer of purchasing own shares
amounting to 25,998,881 shares. Such shares were then cancelled by Afarak on 8 August 2019. On 26 August 2019, the
Company announced an issue of 15,000,000 new shares.
On 28 June 2019, Afarak Group Plc has transferred a total of 1,885,000 Company shares from treasury in relation to
additional ownership in certain South African mining assets.
More information on shares, share capital and shareholders has been presented in the notes to the consolidated
financial statements.
Information obligated to a Group company
The Company is the Group’s parent company.
Afarak Group Plc, domicile Helsinki (address: Kaisaniemenkatu 4, 00100 Helsinki, Finland)
BOARD MEMBERS’ AND CHIEF EXECUTIVE OFFICER’S OWNERSHIP
Afarak Group Plc’s Board members and Chief Executive Officer owned in total 1,150,000 (2018: 800,000) Afarak Group
Plc shares on 31 December 2019 when including shares owned either directly, through persons closely associated with
them or through controlled companies. This corresponds to 0.5% (2018: 0.3%) of all outstanding shares that were
registered in the Trade Register on 31 December 2019.
AFARAK ANNUAL REPORT 2019 164
31.12.2019
Board and CEO total:
Thorstein Abrahamsen
Chairman & Non-Executive Director
Jelena Manojlovic
Dependent Non-Executive Director
Guy Konsbruck
Chief Executive Officer & Executive Director
Board and CEO total
All shares outstanding
Proportion of all shares
Options
0
0
0
0
Shares
0
150,000
1,000,000
1,150,000
252,041,814
0.5%
On 31 December 2019 the total number of registered shares was 252,041,814 and the Board and CEO’s ownership
corresponded to 0.5% of the total number of registered shares.
Auditor’s fees
EUR ‘000
Ernst & Young Oy
Audit
Other services
Total
2019
320
36
356
2018
185
36
221
BOARD’S DIVIDEND PROPOSAL
The Board of Directors proposes to the Annual General Meeting that no distribution would be paid in 2020.
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 166
Signatures to the Board
of Directors and the
Financial Statements
HELSINKI 31 MARCH 2020
THORSTEIN ABRAHAMSEN
Chairman
GUY KONSBRUCK
CEO
JELENA MANOJLOVIC
Member of the Board
FINANCIAL STATEMENTSAFARAK ANNUAL REPORT 2019 167
The Auditor’s Note
Our auditor’s report has been issued today.
HELSINKI 31 MARCH 2020
ERNST & YOUNG OY
ERKKA TALVINKO
Authorised Public Accountant
AFARAK ANNUAL REPORT 2019