the speciality
alloy producer
20
20
Afarak
Annual Report
We are
AfarakA 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.
We are
Afarak
‘ ‘
the speciality
alloy producer
Contents
03.
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 2020
Board Committees
Corporate Governance Statement
Internal Control
Insider Administration
Resolutions of the AGM
Additional Information
Remuneration Report
62
63
64
65
66
68
71
73
74
75
76
78
79
80
81
01.
Strategic Review
Global Footprint
CEO Report
The Ferro-Chrome and Chrome Ore Market
Key Figures
8
10
12
14
Group Operational Review 18
Group Financial Performance
Segments Review
Speciality Alloys Segment
Ferroalloys Segment
Risk Management
Sustainability
02.
Resource Statement
Stellite Mine
PGM Mineral Resource
Mecklenburg Mine
Vlakport Mine
Combined Chromebite Mineral
Combined PGM Mineral
Kavak Mine and Taves Mine
20
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31
35
39
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50
51
52
54
56
58
04.
Financial Statements
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
86
86
88
89
91
92
92
92
105
105
106
109
1.7 Notes to the Consolidated Income Statement 112
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
118
141
144
144
05.
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
146
147
149
150
150
151
152
154
156
156
160
161
Strategic
Review
Global Footprint
CEO Report
The Ferrochrome and chrome ore market
Key Figures
Group Operational Review
Group Financial Performance
Speciality Alloys Segment
FerroAlloys Segment
Risk Management
Sustainability
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14
18
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GLOBAL
FOOTPRINT
01. HELSINKI
Registered office, Primary listing
02. MALTA
Corporate Office
03. LONDON
Secondary listing
04. SOUTH AFRICA
Mines – Ferroalloys mines
05. TURKEY
Mines – Speciality alloys mines
06. GERMANY
EWW – Speciality alloys processing plant
07. SERBIA
Magnohrom - mines in Kraljevo
05
Afarak Annual Report 2020 Strategic
Review
Resource
Statement
Governance
Review
Financial
Statements
Parent Company’s
Financial Statements
9
9 9
SEGMENTS
Ferroalloys
End-user
Industry
Stainless steel
Speciality Alloys
LLL FeCr
ELC FeCr
HCr FeCr
Products
End-user
Industry
Aerospace
Renewable Energy
Automotive
Oil & Gas
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10
Afarak Annual Report 2020
CEO
REPORT
2020 IN REVIEW
THANK YOU
2020 was another bad year for the complete Ferro-
Chrome industry. The pandemic led to world-wide
collapse of demand with low prices. The South African
energy prices made it impossible for Afarak to continue
operations and the decision had to be taken to put
Mogale into business rescue. Our Specialty Alloys segment
also had to cope with falling market prices and reduced
demand therefore underperformed, when compared to
previous years. We have widely continued to temporarily
stop 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 saw improving market prices and
demand in the specialty segment. Our top priority
remains the protection of our colleagues’ health and
the preservation of our assets. Even if we have reduced
the losses compared to 2019, the general status of the
company has certainly not improved during 2020. Chrome
Ore prices, Ferrochrome benchmark and Low Carbon
Ferrochrome prices have seriously improved recently, but
it will take time before these developments can translate
into positive cash flows for the company.
GROWTH STRATEGY
We have further enhanced the PGM recovery in the Stellite
mine and are in production at present.
We are back to full production in Germany since beginning
of 2021. The Business rescue of Mogale resulted in a sale of
the asset. The consequences on our balance sheet will be
positive. 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.
The times are very tough, and we have received
enormous commitment and support from our staff
across the organization. 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.
GUY KONSBRUCK
CEO
12
Afarak Annual Report 2020
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.
2020 REVIEW
The Global Economy has been affected by the Pandemic which have generated general lockdowns, with many mines and
plants closing, giving to all the markets very heavy hard times and giving signs of necessary changes to the World. IMF sees
the World Economy shrinking by 4,4%.
The vaccines approvals and distribution will be one of the key factors for a change in the market place.
STAINLESS STEEL
The Global crude Stainless steel production decreased by almost 3%, to 50.7 million tonnes, which was lower than what was projected
earlier in the year.
This is the first reduction in the world output after four years of continuous growth with the exception of China growth of 2.5%, due to
the very rapid economic recovery post pandemic, and Indonesia of 15.5% which was marginally affected by the Pandemic and had a
strong demand from export markets.
The productions in USA and Japan registered a reduction of more than 18%, with Europe showing a lower reduction at 7%.
In the main part of the stainless-steel producing Countries the output is reaching now the pre-pandemic outputs and the global
production is expected to grow up to 55 million tonnes in 2021.
The aerospace industry reached its bottom in 2020, and 2021 is expected to be better in terms of number of flights and
aircrafts orders.
The Chrome market was in a downtrend for almost four years, mainly due to an oversupply factor. In 2020, the Chrome Ore and
Ferrochrome prices have been under sharp downward pressure which started than to soften slowly by the end of the year. This has
been triggered by the demand, which has not been stable during all year, with a rollercoaster trend from the Automotive sector and
consumer goods markets in combination with a general destocking trend during Q2 and Q3. China’s Chrome ore stocks increased to
over four million tonnes in mid 2020.
The Ferrochrome market have entered the 2021 with a fast increase in prices reflected across the major products including Low
Carbon and Ultra Low Carbon Ferrochrome. This is basically triggered by robust demand from many different sectors which are fuelled
by economic stimulus packages implemented by the major economies.
The price for Ore could be influenced by a South Africa’s export tax decision, and the heavy dependence of the Chinese Ferrochrome
producers might be an additional factor to be taken into consideration during 2021.
The general expectation in the industry is that prices will recover during 2021, however this could be impacted by the Pandemic
incidence and the relevant influence on the supply and demand resultants.
In view of this uncertainty, to keep building resilience is a key goal for Afarak which will continue to allow to deal with extremely
variable market conditions.
The Group has taken a conservative view for 2021 and is prepared also for weak market.
Strategic
Review
Resource
Statement
Governance
Review
Financial
Statements
Parent Company’s
Financial Statements
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KEY FIGURES
FINANCIAL INDICATORS
CONTINUING OPERATIONS
Revenue
EBITDA
% of revenue
EUR’000
EUR’000
Operating (loss) / profit (EBIT)
EUR’000
% of revenue
(Loss) / profit before taxes
EUR’000
% of revenue
Return on equity
Return on capital employed
Equity ratio
Gearing
Personnel at the end of the accounting period
%
%
%
%
2020
59,805
-4,050
-6.8 %
-28,192
-47.1 %
-32,447
-54.3 %
-53.0 %
-18.3 %
20.9 %
161.8 %
621
2019
Restated
97,894
-5,432
-5.5 %
-9,050
-9.2 %
-5,756
-5.9 %
-5.4 %
0.9 %
33.3 %
74.0 %
905
2018
194,013
-1,017
-0.5 %
-14,092
-7.3 %
-18,541
-9.6 %
-11.5 %
-6.0 %
-58.3 %
8.2 %
942
Afarak Annual Report 2020 15
SHARE-RELATED KEY INDICATORS
2020
2019
Restated
2018
Group
Continuing
Operations
Group
Continuing
Operations
Group
Continuing
Operations
-0.07
-0.07
0.58
Earnings per share, basic
Earnings per share, diluted
Equity per share
Price to earnings
EUR
EUR
EUR
EUR
Average number of shares
1,000
Average number of shares,
diluted
Number of shares at the end
of the period
1,000
1,000
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
%
-0.07
-0.07
0.12
neg.
238,488
241,403
252,042
0.33
0.15
0.98
56,961
15,687
18.7 %
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
%
0.32
0.28
0.06
0.05
0.84
0.75
56,070
50,408
96
85
0.1 %
-0.10
-0.10
0.12
-0.23
-0.23
0.28
neg.
251,785
254,374
252,042
0.90
0.40
0.97
133,834
37,961
16.8 %
0.72
0.63
0.43
0.38
0.88
0.78
111,090
94,516
167
146
0.1 %
-0.02
-0.02
0.28
-0.07
-0.07
0.58
neg.
260,080
260,702
263,040
0.94
0.67
1.2
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 %
* From the financial year 2019 and 2020 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 from the financial year 2020.
Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial StatementsAfarak Annual Report 2020 16
FORMULAS FOR CALCULATION OF INDICATORS
FINANCIAL INDICATORS
Return on equity
Return on capital employed
Equity ratio
Gearing
EBITDA
Operating profit / loss
(Loss) / profit for the period / Total equity (average for the period) * 100
(Loss) / 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 (loss) / profit + depreciation + amortisation + impairment
losses
Operating (loss) / 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
(Loss) / profit attributable to owners of the parent company / Average
number of shares during the period.
Earnings per share, diluted
(Loss) / 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.
Afarak Annual Report 2020 17
Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial StatementsAfarak Annual Report 2020 18
GROUP
OPERATIONAL
REVIEW
Operationally, 2020 presented lower sales and lower production for the Group which was mainly driven by the negative
impact of the ongoing Covid-19 pandemic. Both the Speciality Alloys segment and the FerroAlloys recorded lower
production compared to a year earlier, due to lower demand. In addition, within the FerroAlloys segment, Mogale was put
in business rescue during 2020 and is now reported as discontinued operation, and COVID-19 also restricted the Group to
move material out of South Africa during the second quarter. Sales volumes contracted from a year earlier in both the
Speciality Alloys and FerroAlloys segments.
Group Sales
34,256mt
(81,802mt)
Group Mining
184,779mt
(357,557mt)
Group Processing
29.997mt
(69,217mt)
SALES
Sales volumes dropped in both the
Speciality Alloys and FerroAlloys
segments. The Group processing sales
stood at 34,256 (2019: 81,802) tonnes,
representing a contraction of 58.1%
when compared to a year earlier. Sales
of Speciality Alloys processed material
contracted by 9,610 tonnes on account
of lower demand. In the FerroAlloys
segment, sale of processed material
decreased significantly from a year earlier
due to lower demand and sales are only
accounted up to the demerge of Mogale
business from Afarak Group.
Human Resources
621
(905)
Group sales of processed material (tonnes)
Group sales (tonnes)
120000
120,000
100000
100,000
80,000
80000
60,000
60000
40,000
40000
20,000
20000
0
0
2018
2019
2020
Speciality Alloys
2016
FerroAlloys
2017
Speciality Alloys
FerroAlloys
Afarak Annual Report 2020 19
GROUP MINING
Group mining activity decreased
by 48.3% to 184,779 (2019: 357,557)
tonnes, when compared to a year
earlier, with marginal decrease in the
Turkish mines and significantly lower
mining activity in South African mines.
Annual mining levels in the Speciality
Alloys segment decreased marginally
by 2.6% to 73,306 (75,251) tonnes. In
the FerroAlloys segment, the mines in
South Africa recorded lower mining
activity during 2020 of 60.5% to
111,472 (2019: 282,306) tonnes due to
minimal mining activity at the South
African mines.
GROUP PROCESSING
Group processing for 2020 decreased by
56.7% to 29,997 (2019: 69,217) 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 2020, processing levels in the
Speciality Alloys segment contracted by
35.7% to 16,409 (2019: 25,515) tonnes to
address lower demand. Processing levels
in the FerroAlloys decreased by 68.9% to
13,588 (2019: 43,702) tonnes and are only
accounted up to the demerge of Mogale
business from Afarak Group.
HUMAN RESOURCES
Group sales of mining (tonnes)
Group sales (tonnes)
550,000
500,000
450,000
120000
400,000
100000
350,000
300, 000
250,000
200,000
150,000
100,000
50,000
0
80000
60000
40000
20000
0
2018
2016
2019
2017
2020
Speciality Alloys
FerroAlloys
Group sales (tonnes)
Group processing (tonnes)
120,000
100,000
80,000
60,000
40,000
20,000
0
120000
100000
80000
60000
40000
20000
2018
0
2019
2020
2016
2017
Speciality Alloys
FerroAlloys
At the end of 2020, Afarak had 621 (905) employees. The average number of employees during the 2020 was 747 (1,022).
Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial StatementsAfarak Annual Report 2020 20
Afarak Annual Report 2020
GROUP FINANCIAL
PERFORMANCE
The ongoing Covid-19 pandemic negatively affected the Group results of 2020. The lower demand for low carbon
ferrochrome and the weaker selling prices led to lower margins to the Group results when compared to 2019.
Afarak Group has restated its figures for 2019 due to the loss of control and the end of the consolidation of Afarak Mogale
(Pty) Ltd. Afarak Group reclassified Afarak Mogale (Pty) Ltd’s previously reported income statement figures as discontinued
operations. There is no change to the previously reported balance sheet figures.
REVENUE
€59.8 mln
[€144.9 mln]
EBITDA
€-4.1 mln
[€-5.4 mln]
EBIT
€-28.2 MLN
[€-9.1 mln]
PROFIT FROM CONTINUING
OPERATIONS
€-27.6 MLN
[€-6.1 mln]
The adverse selling prices and the higher unabsorbed costs as a result of lower production during 2020 negatively affected
EBITDA to EUR -4.1 (2019: -5.4) million, however margins were kept at the same level as prior year. Results were also
negatively impacted by an impairment write-down on long term assets in Stellite mine amounting to EUR 21.5 million less
deferred tax of EUR 6.0 million.. The result of the discontinued operation was EUR 6.1 (2019: -52.8) million, consisting of the
result of the Mogale business no longer being consolidated in Afarak Group.
20. 0
15.0
10.0
5.
0
0.0
-5.0
-10.0
EBITDA (€mln)
18.0
17.2
14.0
8.4
5.5
-1.0
2013
2014
2015
2016
2017
2018
-5.4
201 9
(Restated)
-4.1
2020
15.0
10.0
5.
0
0.0
-5.0
-10.0
-20.0
EBIT (€mln)
9.9
11.1
1.7
-8.0
-1. 0
-14.1
-9.1
2013
2014
2015
2016
2017
2018
-28.2
2020
201 9
(Restated)
EBITDA (€mln)
At the beginning of 2020, market
started to recover and as a result
both segments performed better
than prior year during the first
quarter of 2020, with margins being
better than same period last year.
However, the outbreak of COVID-19
pandemic impacted heavily on the
recovery and margins deteriorated
throughout the year.
20
15
10
5
0
-5
-10
2013
2014
2015
2016
2017
2018
201 9
(Restated)
2020
H1
H2
21
2020 PERFORMANCE
Afarak Group faced a challenging year. The Group revenue for the year decreased significantly by 38.9%. and stood at
EUR 59.8 (2019: 97.9) million. Revenues in both segments were lower when compared to prior year. In the Speciality Alloys
segment revenue decreased by 35.5% and in the FerroAlloys segment revenue dropped by 58.6%.
Revenue (€mln)
198. 8
194. 0
153. 6
97.9
59.8
2016
2017
2018
201 9
2020
250
200
150
100
50
0
40. 0
30. 0
20. 0
10.0
0.0
35.5
24.3
H1
H2
In the Speciality Alloys segment, the adverse low carbon
ferrochrome selling prices, together with lower sales
volumes throughout 2020 resulted in a decrease in revenue
for the full year by 35.5%, to EUR 53.2 (2019: 82.5) million. In
the FerroAlloys segment, revenue decreased significantly in
2020 to EUR 6.1 (2019: 14.8) million, when compared to prior
year, mainly due to lower availability of saleable material,
lower sales prices, as well as the impact of COVID-19 which
restricted the Group to move material out of South Africa
during the second quarter.
During 2020, Mogale has been reclassified to discontinued
operation due to the loss of control and both the reported
first half of 2020 and prior year has been restated and
reclassified to discontinued operation.
The positive EBITDA recorded during the first half of 2020
in the Speciality Alloys segment was offset by the losses
incurred during the second half of 2020, due to the above
factors and the negative impact of COVID-19 pandemic
throughout the year, resulting in an EBITDA of EUR 0.3
(2019: 6.8) million. The lower Ferrochrome production
to address lower demand, has led to higher unabsorbed
costs. At the same time production within the FerroAlloys
segment decreased significantly due to minimal mining
activity at the South African mines. Despite profitability
being negatively affected by lower revenue and lower
production, EBITDA margins improved when compared
to previous year as a result of the cost cutting initiative
that have been implemented. Results were also negatively
impacted by an impairment write-down on long term
assets in Stellite mine amounting to EUR 21.5 million less
deferred tax of EUR 6.0 million.
EBITDA (€mln)
20
15
10
5
0
-5
-10
18.0
5.5
-1.0
2016
2017
2018
-5.4
2019
(Restated)
-4.1
2020
0.0
-1.0
-1.5
-2.0
-2.5
-3.0
-3.5
-4.0
-0.4
H1
-3.7
H2
20
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Resource
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Governance
Review
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Statements
Parent Company’s
Financial Statements
23
The full year EBITDA from unallocated items was EUR -3.1 (2019: -7.0) million.
EUR MILLION
Revenue
EBITDA
EBITDA margin
EBIT
EBIT margin
Profit from continuing operations
Profit from discontinued operations
Profit for the period
BALANCE SHEET, CASH FLOW AND FINANCING
H1/20
Restated
35.5
-2.8
-7.9
-9.6
-27.0
-4.6
-11.5
-16.2
H2/20
24.3
-3.7
-15.2
-18.6
-76.5
-23.0
17.6
-5.4
FY20
59.8
-4.1
-6.8
-28.2
-47.2
-27.6
6.1
-21.6
FY19
Restated
97.9
-5.4
-5.5
-9.1
-9.2
-6.1
-52.8
-58.9
ROE
-53.0%
(-5.4)
ROCE
-18.3%
(0.9)
Equity ratio
20.9%
(33.3)
Gearing ratio
161.8%
(74.0)
Inventories
Turnover-on-inventory
Trade receivables
Cash balance
€13.5 mln
(€30.0 mln)
4.4
(3.3)
€7.7 mln
(€12.4 mln)
€1.1 mln
(€5.4 mln)
The Group’s total assets on 31 December 2020 stood at EUR 142.6 (223.6) (30 June 2020: 195.9) million and net assets totalled EUR
29.8 (74.5) (30 June 2020: 50.3) million. During the second half, the translation differences on conversion of foreign denominated
subsidiaries was adjusted by EUR 13.7 million, which is the circulation of Mogale’s translation reserve to discontinued operation. The
Group’s cash and cash equivalents, as at 31 December 2020, totalled EUR 1.1 (5.4) million (30 June 2020: 6.1). Operating cash flow in
the second half was negative, standing at EUR -2.2 (3.1) million.
The equity ratio stood at 20.9% (33.3%) (30 June 2020: 25.7%). Afarak’s gearing at the end of the year decreased to 161.8% (74.0%)
(30 June 2020: 108.7%), due to lower interest-bearing debt of EUR 49.3 (60.5) (30 June 2020: 60.8) million.
Major changes in Balance sheet during the year related to the write off Mogale Balance sheet to discontinuing operation, as a
result of Afarak Group loss of control in Afarak Mogale (Pty) Ltd.
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Afarak Annual Report 2020
INVESTMENTS, ACQUISITIONS AND DIVESTMENTS
Capital expenditure for the full year of 2020 totalled EUR 1.1 (5.0) million. Capital Expenditure was mainly incurred to
sustain Group operations.
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 2020, the price of Afarak Group’s share in London Stock Exchange varied between GBP 0.05 (2019: 0.38)
and GBP 0.75 (2019: 0.78) and in NASDAQ Helsinki between EUR 0.147 (2019: 0.40) and EUR0.978 (2019: 0.97). Afarak’s share closed
in London at the end of the financial year at GBP 0.20 (2019: 0.38) and Helsinki at EUR 0.226 (2019: 0.53). The closing price on 31
December gives the Company a market capitalisation of the entire capital stock 252,041,814 (2019: 252,041,814) shares of GBP 50.4
(2019: 94.5) million and EUR 57.0 (2019: 133.8) million.
A total of 335,874 (2019: 248,862) Afarak shares were traded in London and 47,131,285 (2019: 42,304,860) shares in Helsinki during
the financial year, representing 0.13% (2019: 0.10%) of stock in London and 18.7% (2019: 16.78%) in Helsinki.
SHAREHOLDERS
On 31 December 2020, the Company had a total of 6,238 shareholders (5,952 shareholders on 31 December 2019), of which eight
were nominee-registered. The registered number of shares on 31 December 2020 was 252,041,814 (2019: 252,041,814).
LARGEST SHAREHOLDERS ON 31 DECEMBER 2020
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 Saxo Bank A/S
10 Osuusasunnot Oy
Total
Other Shareholders
Total shares registered
Shares
144,013,036
36,991,903
13,162,599
9,000,000
5,746,777
3,245,735
2,921,314
1,908,108
1,720,379
1,700,000
220,409,851
31,631,963
252,041,814
%
57.14%
14.68%
5.22%
3.57%
2.28%
1.29%
1.16%
0.76%
0.68%
0.67%
87.45%
12.55%
100.00%
Afarak Group Plc’s Board members and Chief Executive Officer owned in total 1,550,000 (2019: 1,150,000) Afarak Group Plc shares
on 31 December 2020, including shares owned either directly, through persons closely associated with them or through controlled
companies. This corresponds to 0.6% (2019: 0.5%) wof the total number of registered shares on 31 December 2020.
Strategic
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Financial Statements
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SHAREHOLDERS BY CATEGORY 31 DECEMBER 2020
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
1,134
2,596
1,978
475
44
8
3
6,238
11
18.1%
41.5%
31.7%
7.6%
0.7%
0.1%
0.0%
100%
0.18%
57,830
1,250,095
6,903,606
12,935,193
9,175,239
27,552,313
194,167,538
252,041,814
149,803,858
252,041,814
0.0%
0.5%
2.7%
5.1%
3.6%
10.9%
77.0%
100%
59.44%
100%
SHAREHOLDERS BY SHAREHOLDER TYPE ON 31 DECEMBER 2020
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
22.07%
10.33%
0.34%
0.00%
11.40%
77.93%
100.00%
59.44%
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Afarak Annual Report 2020 27
SPECIALITY
ALLOYS SEGMENT
2020 in Review
Speciality Alloys segment started the year to perform in a satisfactory way, however the outbreak of COVID-19 pandemic
impacted heavily on the recovery. Low Carbon ferrochrome prices which resulted in lower revenue and lower Ferrochrome
production to address lower demand, has led to additional unabsorbed costs.
REVENUE
€53.2mln
(€82.5mln)
EBITDA
€0.3mln
(€6.8mln)
EBIT
€1.3mln
(€4.5mln)
MINING
PRODUCTION
73,306mt
(75,251mt)
PROCESSING
PRODUCTION
16,409mt
(25,515mt)
SALES OF
PROCESSED MATERIALS
16,999mt
(26,609mt)
PERSONNEL
516
(534)
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Afarak Annual Report 2020
PRODUCTION
Total production levels during 2020 decreased by
11% to 89,715 (2019: 100,765) tonnes, mainly in the
second half of the year, were it was driven by a slight
decrease in mining tonnages and a larger decrease
in the production of processed material to address
lower demand.
The mining activity at both Turkish mines for the
full year of 2020 decreased marginally by 2.6%
during the year when compared to prior year.
The production of processed material decreased
by 35.7% following various temporary shutdowns
during the year to manage lower demand.
SALES
The unfavourable low carbon ferrochrome
selling prices, together with lower sales volumes
throughout 2020 resulted in a decrease in revenue
for the full year.
Total Speciality Alloys Production (mt)
100,000
80,000
60,000
40,000
20,000
0
42,000
41,000
40,000
39,000
38,000
37,000
36,000
35,000
34,000
33,000
32,000
31,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0
2019
2020
Mining
Processing
Mining Production (mt)
H1
H2
2019
2020
Processing production (mt)
H1
H2
2019
2020
Sales of processed material (mt)
H1
H2
2019
2020
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FINANCIAL PERFORMANCE
The unfavourable low carbon ferrochrome selling prices, together with lower sales volumes throughout 2020 resulted in a
decrease in revenue for the full year by 35.5%, to EUR 53.2 (2019: 82.5) million. The lower Ferrochrome production to address
lower demand, has led to additional unabsorbed costs of EUR 3.4 (2.1) million in 2020. The positive EBITDA recorded during the
first half of 2020 was offset by the losses incurred during the second half of 2020, due to the above factors and the negative
impact of COVID-19 pandemic throughout the year, resulting in an EBITDA of EUR 0.3 (2019: 6.8) million.
EUR MILLION
Revenue
EBITDA
EBITDA margin
EBIT
EBIT margin
H1/20
H2/20
31.6
1.7
21.7
-1.4
5.3%
-6.3%
-2.0
0.7
2.1%
FY20
53.2
0.3
0.6%
-1.3
-9.2%
-2.5%
FY19
82.5
6.8
8.3%
4.5
5.4%
Revenue (€ mln)
Revenue (€ mln)
EBITDA (€ mln)
EBITDA (€ mln)
2.0
1.0
0.0
-1.0
-2.0
1.7
H1
-1.4
H2
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Afarak Annual Report 2020
11.1
EBIT (€ mln)
10.8
4.5
12
10
8
6
4
2
0
-2
2017
2018
2019
-1.3
2020
LOOKING AHEAD
1.0
0.0
-1.0
-2.0
-3.0
EBIT (€ mln)
0.7
H1
-2.0
H2
Positive news on the vaccines, should trigger a recovery in the demand of Stainless Steel and hence of Chrome, with China as
the main contributor.
The expectation is based on the tangible signals of recovery from the automotive market.
The bottoming of the aerospace industry in 2020, can only lead to a better 2021 in terms of aircrafts orderbooks and number of
flights sold.
Last but not least, the household and housing market will also play an important role in demand growth.
The expectation to the trend has been given by the rise of the European ferro-chrome benchmark to $1.175/lb for Q1 2021 with
an increase of 3.1% from the fourth quarter of 2020. The first 2 months of 2021 show improved demand and prices for LC Ferro-
Chrome already.
31
FERROALLOYS
SEGMENT
2020 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.
The inability of Afarak to export, and the lack of sales price recovery despite increase in benchmark, created additional
challenges during the first half of the year that led to Afarak Mogale being put in business rescue.
Afarak Group has restated its figures for 2019 due to the loss of control and the end of the consolidation of Afarak Mogale
(Pty) Ltd. Afarak Group reclassified Afarak Mogale (Pty) Ltd’s previously reported income statement figures as discontinued
operations. There is no change to the previously reported balance sheet figures.
REVENUE
€6.1mln
(€14.8mln)
EBITDA
€-1.3mln
(€-5.3mln)
EBIT
€-23.8mln
(€-6.2mln)
MINING PRODUCTION
111,472mt
(282,306mt)
PROCESSING PRODUCTION
13,588mt
(43,702mt)
SALES OF
PROCESSED MATERIALS
13,588mt
(43,702mt)
PERSONNEL
83
(307)
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Afarak Annual Report 2020
PRODUCTION
Operationally, the segment registered a decrease in total
production by 61.6% to 125,060 (326,008) tonnes.
Total FerroAlloys Production (mt)
600,000
500,000
400,000
300,000
200,000
100,000
0
Mining Production (mt)
2019
2020
Mining
Processing
Production within the FerroAlloys segment decreased
significantly due to minimal mining activity at the South
African mines.
Processing Production (mt)
Mining Production (mt)
140,000
120,000
100,000
80,000
60,000
40,000
20,000
0
H1
H2
201 9
2020
Production of processed material in the first half of
2020 was significantly lower when compared to same
period last year and during the second half of 2020
Mogale business was demerged from Afarak Group.
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
SALES
The sales of processed material from the FerroAlloys segment declined by 37,936 tonnes throughout the year with a
significant contraction as from the second quarter of 2020. Sales volume of processed material in the second half of 2020
are only accounted up to the demerge of Mogale business from Afarak Group.
H1
H2
201 9
2020
Sales of processed material (mt)
30,000
25,000
20,000
15,000
10,000
5,000
0
H1
H2
201 9
2020
33
FINANCIAL PERFORMANCE
EUR MILLION
Revenue
EBITDA
EBITDA margin
EBIT
EBIT margin
H1/20
Restated
3.7
-0.5
-13.5%
-0.9
-24.3%
H2/20
2.4
-0.8
-31.2%
-22.9
-954.2%
FY20
6.1
-1.3
-20.5%
-23.8
-388.1%
FY19
Restated
14.8
-5.3
-35.6%
-6.2
-42.2%
120
100
80
60
40
20
0
15
10
5
0
-5
0
Revenue (€ mln)
106.1
97.0
2017
2018
14.8
2019
(Restated)
6.1
2020
EBITDA (€ mln)
11.4
2017
-8.1
2018
-5. 3
2019
(Restated)
-1.3
2020
4
3.5
3
2.5
2
1.5
1
0.5
0
0
-0.1
-0.2
-0.3
-0.4
-0.5
-0.6
-0.7
-0.8
-0.9
Revenue (€ mln)
3.7
2.4
H1
H2
EBITDA (€ mln)
-0.5
H1
-0.8
H2
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10
5
0
-5
-10
-15
-20
-25
6.4
2017
EBIT (€ mln)
-6.2
201 9
(Oikaistu)
-19.3
2018
-22,9
2020
0
-1
-2
-3
-4
-5
-6
-7
-8
-9
10
-0.9
H1
-22.0
H2
The South African mines were disrupted due to COVID regulations but were allowed to restart with reduced
complements and the implementation of infection mitigation controls.
Revenue decreased significantly in 2020 when compared to prior year, mainly due to lower availability of saleable
material, lower sales prices, as well as the impact of COVID-19 which restricted the Group to move material out of
South Africa during the second quarter.
Despite profitability being negatively affected by lower revenue and higher unabsorbed cost due to lower production,
EBITDA margins improved when compared to previous year as a result of the cost cutting initiative that have been
implemented. Results were also negatively impacted by an impairment write-down on long term assets in Stellite
mine amounting to EUR 21.5 million less deferred tax of EUR 6.0 million.
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 African mines.
EVENTS AFTER THE REPORTING PERIOD
On 07 January 2021, the Company published the financial calendar for 2021.
On 26 January 2021, the company announced that Helsinki Administrative Court did not amend the FIN-FSA decision to impose
a penalty payment on the company.
On 25 February 2021, the Company published that it has filed the application for a permission to appeal and an appeal to the
Supreme Administrative Court on the decision of the Helsinki Administrative Court.
On 12 March 2021, the Company published that it has resolved on a directed share issue without consideration that will result in
additional ownership of mining assets in South Africa.
On 23 March 2021, the company announced changes regarding Afarak Group Plc’s treasury shares, where a total of 7,088,608
treasury shares has been transferred to subscribers. Afarak entered into an agreement during 2019 to acquire the remaining
interest of 26% in Chromex Mining Company (Pty) Ltd. This was executed after year end on 23 March 2021.
FLAGGING NOTIFICATION AFTER THE REPORTING PERIOD
On 24 March 2021, Afarak Group Plc made a flagging notification to FIN-FSA pursuant to Chapter 9, Section 5 of the Finnish
Securities Markets Act. According to the flagging notification Afarak’s portion of the Company’s shares has fallen below the
threshold of 5 per cent.
According to the notification, Afarak holds 6,073,991 treasury shares in Afarak, which corresponds to approximately 2.41 % of
the total shares in Afarak as a result of the transaction that was executed on 23 March 2021 whereby Afarak transferred its
treasury shares.
Afarak Annual Report 2020 Strategic
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Parent Company’s
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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.
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.
2020 DEVELOPMENTS
2020 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 prices and demand.
The Group is looking into restructuring a short-term
commercial debt into a longer-term arrangement and is
also actively pursuing new funding opportunities via some
divesting. In case of failure to achieve these goals cast
significant risk on the company’s ability to continue as a
going concern.
Afarak’s processing operations in Germany and South African
mines 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 may negatively
impact Afarak’s current operations, which could have an
impact on the Group’s financial performance.
In case the availability and effectiveness of the vaccines will
not keep under control the outbreak of COVID-19 pandemic,
significant disruptions in production and lower demand will
continue to negatively affect the business as a whole. In this
respect Afarak is continuously evaluating the situation in order
to mitigate its current exposures.
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 and
Interest rate risks
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
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Afarak Annual Report 2020
Volatility of energy costs
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
The Group constantly evaluates the need
to enter into financial arrangements to
mitigate such risk
Political and social risks
• 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
Afarak seeks to maintain good
relationships with stakeholders
Pandemic risk
Price risks
• Pandemic can cause significant disruption
and may adversely affect demand and the
business as a whole
• Operations will also be affected if
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
lockdown imposed
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
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37
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
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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
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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
HEALTH
COMMUNITIES AND
HUMAN RIGHTS
ENVIRONMENT
Our employee’s safety is our top priority. It comes before anything else and we do not make 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.
During 2020, the world has encountered very difficult times due to the spread of COVID-19 pandemic. Consequently
Afarak has implemented measures to have the main part of the office based employees working from home. Thanks to
all the precautions implemented in all Afarak Group units very limited amount of cases has been reported which did not
materially impact the production.
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.
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41
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 2020 aiming to achieve “Zero Harm”.
During 2020, the Group’s employees contributed approximately 1,598,153 working hours during which the company suffered
30 (44) 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.
Fatal Injury
0
(0)
Frequency Rate
18.8
(18.9)
Lost Time Injury
30
(44)
Incidence Rate
51.1
(52.6)
Going forward, management remains focused on further improving the safety performance at Afarak through various
initiatives and investments.
Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial StatementsAfarak Annual Report 2020 42
Afarak Annual Report 2020
HEALTH
In 2020, Afarak has taken several safety measures to
mitigate the spread of the COVID-19 pandemic in order to
protect people and minimise the effect on operations, while
always keeping as top priority a safe and healthy working
environment.
Thanks to these decisive and well-timed actions, very limited
amount of cases has been reported which did not materially
impact the production.
In our factories we continuously assess, monitor and control
the risks of our workers.
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 role of organising shifts in the mines to
minimise any fatigue-related injuries.
Afarak is and will remain 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.
Strategic
Review
Resource
Statement
Governance
Review
Financial
Statements
Parent Company’s
Financial Statements
43
WASTE MANAGEMENT
COMMUNITIES & HUMAN RIGHTS
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 culture to minimize and recycle tailings is a
constant focus in our Group.
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.
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 three
main pillars:
AIR EMISSIONS
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.
PROCUREMENT
EMPLOYMENT
COMMUNITY
INITIATIVES
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Afarak Annual Report 2020
EMPLOYMENT
By providing direct and indirect employment, we believe
that we are making a tangible contribution to our host
communities.
COMMUNITY INITIATIVES
We continue to support local communities with
various assistance programs that are of a social and
educational nature.
PROCUREMENT
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 a constant
focus. With the goal of improving safety at all plants.
Environmental investments are important to Afarak
and initiatives will continue throughout 2021 to further
minimise the impact of our operations on nature. Also,
community investments will be maintained.
45
Afarak Annual report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 47
Resource
Statement
Stellite Mine
PGM Mineral Resource
Mecklenburg Mine
Vlakport Mine
Combined Chromebite Mineral
Combined PGM Mineral
Kavak Mine and Taves Mine
48
50
51
52
54
56
58
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
48
STELLITE MINE
Chromitite Mineral Resource for Stellite Mine
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
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
11,282
33.60
16,971
33.57
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
Total
Indicated
Resources
Total
Measured
& Indicted
Resources
1.30
1.30
INFERRED
Stellite: Open Pit
540
1,306
627
405
700
120
1,211
4,222
24.1
31.86
31.68
37.20
39.00
38.11
33.59
37.7
9,131
35.18
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
13,195
35.58
22,326
35.42
Table 1.a: Shows the Chromitite Mineral
Reserves and Resources for Stellite Mine as at
31 December 2020.
MG4
MG3
MG2
MG1
LG6+6A
Total Inferred
Resources
Total
Resources
1,440
2,110
1,920
1,070
40
6,580
28,906
33.18
32.64
37.10
38.90
37.82
35.11
35.35
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 2020 49
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 50
PGM MINERAL
RESOURCE
for Stellite Mine
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 31 December 2020.
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
Afarak Annual Report 2020 51
MECKLENBURG
MINE
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
51
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:
4,241
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
7,247
43.54
1.59
Mecklenburg: Underground
LG6+6A
Total
Resources
1,142
8,389
43.41
43.52
1.59
1.59
Table 2. Shows the Chromitite Mineral Reserves and Resources for Mecklenburg Mine as at 31 December 2020.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 52
VLAKPOORT
MINE
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
56
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
1,545
33.31*
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**
2,933
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
Afarak Annual Report 2020 53
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**
4,516
33.5977458
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
6,463
33.57*
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 31 Decembr 2020.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 54
COMBINED
CHROMITITE MINERAL
Resource and Reserve Statement
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
540
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
627
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
51
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**
14,917
37.67*
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
56
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
Afarak Annual Report 2020 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
55
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
17,589
36.84*
1.39**
32,507
37.22
1.39
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**
41,811
36.94
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 31 December 2020.
Total
Exploration
Results
Total
Resources
(Incl
Exploration
Results²)
43,758
36.78*
1.40**
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 56
COMBINED PGM
MINERAL
Resource and Reserve Statement
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
56
131
205
398
754
618
0.18
0.74
0.46
1.13
1.77
0.43
4.04
2.15
0
999
828
4,760
11,667
5,503
97,947
42,723
2,204
2.32
164,428
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
6,612
1.81
385,128
5,710
3,950
2,740
3,430
1.38
2.13
2.06
0.86
253,370
270,531
181,492
94,849
Afarak Annual Report 2020 57
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
24,045
1.59
1,224,923
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
25,972
1.50
1,254,860
Table 5. Shows the Combined PGM Mineral Reserves and
Resources for Stellite, Mecklenburg and Vlakpoort as at
31 December 2020.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 58
KAVAK MINE AND
TAVAS MINE
Eskisehir - Kavak Area Reserves: (as of 31 Dec. 2020)
ORE ZONE/ BODY
KAVAK CONCESSIONS
Kismet+Dereici
Bogurtlen+Erenler 2
Camasirlik 2
Erenler 4-18
Erenler 1+ Yeni paralel
Erenler 18 alt yeni adhesi1/ Güney
İncir 70-91 yeni adhesi 2
İncir +batı yeni adesi 3 /Kuzey
Kuzey doğu
690 bantli
TOTAL
EAGLE CONCESSION
East new
East new2
West
TOTAL
KAVAK TAILINGS DAM
Tailings Dam 1
Tailings Dam 2
Tailings Dam 3
TOTAL
Cr2O3 %
Proven
Reserve (T)
Probable
(T)
Possible
(T)
Total Reserve
(T)
Hypothetical
Resources (T)
16-41
20-22
16-18
16-35
15-40
25-40
15-41
7-41
16-44
15-40
30-48
201200522
201200522
201200522
36-44
75,000
10,500
29,275
11,000
186,000
7,250
100,000
116,250
50,000
510,275
4.000
5.000
60.000
69.000
7-13
7-13
4-6
916.484
1,136,966
1,517,310
4-13
3,570,760
2,000
30,000
2,000
10,500
59,275
11,000
280,000
466,000
1,500,000
20,000
51,000
50,000
88,000
20,000
27,250
51,000
150.000
204,250
70,000
0
541,000
1,051,275
1,500,000
1,000
5,000
10.000
16,000
5,000
100,000
70,000
75,000
100,000
916.484
1.136.966
1,517,310
0
3,570,760
0
0
0
Denizli Tavas – Fethiye Area Reserves: (as of 31 Dec. 2020)
ORE ZONE/ BODY
BEYAGAC CONCESSIONS
Sarp-Gogebakan Oc.
Cigerderesi Ocak
Dere Ocak
Catak
Cinar Ocak
Sehremen-Keller Oc.
Degirmendere
Cr2O3 %
Proven
Reserve (T)
Probable
(T)
Possible
(T)
Total Reserve
(T)
Hypothetical
Resources (T)
39-344
20064310
1397-693
201400355
1012-320
1411-1773
201400323
30-40
20-35
21-30
18-20
28-34
14-26
11,350
100
740
2,500
6,050
15,000
1,000
2,900
500
2,500
5,000
4,000
11,350
3,000
1,240
5,000
6,050
20,000
5,000
17,000
10,000
23,000
5,000
TOTAL
14-34
36,740
0
14,900
51,640
55,000
Afarak Annual Report 2020 59
FETHIYE & KOYCEGIZ CONCESSIONS
Cubuk -Umut
Asarcik-Karacam
Mesebuku
Kizil Akdag
TOTAL
TAVAS TAILINGS DAM
Tailings Dam 1
Tailings Dam 2
TOTAL
ADANA CONCESSIONS
Yetimli -Sogukoluk
Egni
TOTAL
7732-1902
85948
601-1644
20051322
8-20
22-26
24-28
16-20
8-28
94,097
550
1,400
400
96,447
230,000
324,097
1,350
3,500
1,300
1,900
4,900
1,700
165,000
10,000
55,000
28,000
0
236,150
332,597
258,000
9-11
3-6
9-11
218.744
466.130
684,874
68669
68662
6-12
8-14
6-14
12,000
9,644
21,644
218.744
466.130
0
684,874
0
30,000
10,000
40,000
42,000
19,644
61,644
80,000
10,000
90,000
0
0
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 61
Governance
Review
Chairman's Introduction
Information presented by reference
Our People
Governance Structure
The Board of Directors
The Board in 2020
Board Committees
Corporate Governence Statement
Internal Control
Insider Administration
Resolutions of the Annual General Meeting
Additional Information
Remuneration Report
62
63
64
68
71
73
74
75
76
78
79
80
81
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
62
CHAIRMAN’S
INTRODUCTION
is required to be more active and involved to maintain oversight
of the business, support management and maintain a stable
environment for strategic thinking and development. I thank
all the board members for their continuing commitment and
contribution during 2020, as they have had multiple duties and
responsibilities and jointly participated in many 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.
I am confident that we have a leadership team with the resolve
and commitment to ensure that Afarak returns to growth.
Coming through the Covid-19 Pandemic and finally seeing
increasing chrome-ore and ferro-chrome market prices, already
full production at our German works, I still share the enthusiasm
for the future prospects of Afarak as an innovator of value-
added ferrochrome and chrome-ore products and its ability to
deliver value for customers and shareholders.
In my communications with our employees around the world, I
am reminded every time that our achievements are only made
possible by our skilled, hard-working and very talented team. I
am grateful for all their efforts and impressive commitment over
the past troublesome year and look forward to working with
them towards delivering volume growth and a return to positive
cash flow and profitability.
In 2020 Afarak Group continued to operate in an incredibly
challenging business environment with a world-wide pandemic
that resulted in low volumes and collapsing ferro-chrome prices.
Our operations in South Africa suffered in addition high energy
prices and had to reduce operations to a minimum and even
put Mogale Alloys into Business Rescue.
Our Speciality business underperformed due to reduced market
prices and demand. The financial performance of South African
operations continued to be disappointing despite the actions
from the Management to keep our mining operations going
whilst cutting costs and staff.
We, as a board, continued to support management to enable
them to implement initiatives to take care of the operations as
far as possible whilst having our long-term strategy in mind.
Afarak’s position as a vertically integrated producer of speciality
alloys; acting as a miner, producer and marketer of its products
enabling our group 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 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 2020.
Throughout the year, we have continued our work to ensure that
safety of our employees is prioritised across all production units
including 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.
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 fulfil our obligations of a
publicly listed company.
The Board continued to be substantially smaller than a couple
of years ago as we endure a very week market during the
pandemic. The Board still has diversity of skills and expertise as
THORSTEIN ABRAHAMSEN
Chairman
Afarak Annual Report 2020
63
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, 18. Share-based payments
Waiver of emoluments by a director
Waiver of future emoluments by a director
Non pre-emptive issues of equity for cash
Item (7) in relation to major subsidiary
undertakings
Parent participation in a placing by a listed
subsidiary
Contracts of significance
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
1.8. Notes to the statement of financial position,
1.9.2 Related party transactions
Provision of services by a controlling
shareholder
Shareholder waivers of dividends
Shareholder waivers of future dividends
Agreements with controlling shareholders
Not applicable
Not applicable
Not applicable
Not applicable
All the information cross-referenced above is hereby incorporated by reference into this Board of Directors report.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 64
OUROUR 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
Independent 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.
EXECUTIVE DIRECTOR
Guy Konsbruck
CEO and Executive Director
BA (Hons); 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.
Afarak Annual Report 2020 65
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 (Hons); 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
ACCA, MIA, 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 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. Melvin
resigned in November 2020 and left the company on 31 December 2020.
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 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 66
The Corporate
Management Team
The Company’s Corporate Management includes, in addition to the
Executive Management Team, the following personnel responsible
for corporate functions:
Afarak Annual Report 2020 67
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.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 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
Afarak Annual Report 2020 69
0
2
0
2
t
r
o
p
e
R
l
a
u
n
n
A
k
a
r
a
f
A
Executive
Management Team
Audit & Risk
Management
Committee
Corporate
Management Team
Chief Executive
Officer
(CEO)
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
70
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.
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.
The Company uses the Annual General Meeting to
develop an understanding of the views of its shareholders
about the Company.
GENERAL MEETINGS IN 2020
The Annual General Meeting was held at the Company’s
headquarter in Helsinki on June 22, 2020 under special
arrangements due to the COVID-19 pandemic.
All the resolutions of the above-mentioned General Meeting
can be found at:
http://www.afarak.com/en/investors/shareholder-
meetings/2020/
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.
Afarak Annual Report 2020
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 2020 Annual General Meeting elected three members to
the Board. Dr Jelena Manojlovic, Mr Thorstein Abrahamsen and
Mr Guy Konsbruck were re-elected.
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
• 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.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
72
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 four years.
SENIOR INDEPENDENT DIRECTOR
During the year under review, 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.
Current
Position
Appointed
to the Board
Status
Audit & Risk
Management
Committee
Nomination &
Remuneration
Committee
Jelena Manojlovic
NED
11 July 2008
Independent
Member
Member
Thorstein Abrahamsen
Chariman
11 May 2017
Independent
Member
Member
Guy Konsbruck
ED
5 February 2018
Dependent
Health, Safety
& Sustainable
Development
Committee
Member
Member
Member
Afarak Annual Report 2020 73
REMUNERATION
The AGM resolved that the Chairman of the Board shall be
paid EUR 4,500 per month, the Chairman of the Audit and
Risk Management Committee shall be paid EUR 5,550 per
month and all Non-Executive Board Members are paid
EUR 3,500 per month. Non-Executive Board Members who
serve on the Board's Committees shall be paid additional
EUR 1,500 per month for committee work. Those members of
the Board of Directors that are executives of the Company
are not entitled to receive any remuneration for Board
membership. 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.
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 2020, the Board members received a
total of EUR 144,000 and Committee membership fees.
THE BOARD
IN 2020
The 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
Throughout the year, the Board supported company’s
various initiatives to mitigate the impact of Covid-19 on our
employees, operations and business.
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 12 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
12/12
12/12
12/12
A total of 12 meetings were held during the reporting period.
The differences in the meetings attended, related to the
changes in Board composition.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 74
BOARD
COMMITTEES
AUDIT AND RISK MANAGEMENT COMMITTEE
The Audit and Risk Management Committee is currently
composed of the two Board members: Thorstein Abrahamsen
and Jelena Manojlovic. The Committee convened three 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 2020, 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. 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.
NOMINATION AND REMUNERATION COMMITTEE
The combined Nomination and Remuneration Committee
of the Company is currently composed of the two Board
members: Thorstein Abrahamsen and Jelena Manojlovic. The
Committee convened three times.
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 three
Board members: Thorstein Abrahamsen, Jelena Manojlovic and
Guy Konsbruck. The Committee convened 1 time.
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 2020, 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.
Afarak Annual Report 2020 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 2020 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 Report for Governing Bodies for the
accounting period 2020 following the instructions of the
Finnish Corporate Governance Code 2020. 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 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
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.
THE STRUCTURE OF INTERNAL CONTROL SYSTEMS
The main structural elements of the Group’s internal control
system are:
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.
Implementation of the policies and principles
• The risk management and internal control policies
and principles defined by the Board;
•
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.
Afarak Annual Report 2020
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 June 2019,
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 2020, the Company paid EUR 794,000 for audit fees
(794,000) and EUR 67,000 for non-audit services (36,000)
to EY.
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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 2020
Title
Related Party Shares
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
1,400,000
Auditor
Executive
Chief financial Officer
0
0
0
0
0
0
* The CEO was due to receive an additional 400,000 shares in 15 January 2021 after completing his fourth year of service. These will be
granted after the AGM when a new board is formed. ** Dr Koncar has sold his shareholding in LNS (formerly Kermas Resources Ltd) on January
20,2018. *** Melvin Grima resigned during November and left the companu on 31st December 2020.
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 Company, observing rules
for conflict of interest.
Afarak Annual Report 2020 79
RESOLUTIONS OF THE
ANNUAL GENERAL
MEETING
and on share issues without payment. The payment of the
subscription price can also be made with consideration
other than money. The authorization contains the right to
decide on derogating from shareholders' pre-emptive right
to share subscriptions provided that the conditions set in
the Finnish Companies' Act are fulfilled. The authorization
replaces all previous authorizations and is valid two (2) years
from the decision of the Annual General Meeting.
2020 ANNUAL GENERAL MEETING
Afarak’s 2020 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 2021.
The Company’s Annual General Meeting (“AGM’) was held on
22 Jun 2020. 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 2019.
The AGM resolved that no dividend would be paid for 2019.
The AGM resolved that the Chairman of the Board shall be
paid EUR 4,500 per month, the Chairman of the Audit and
Risk Management Committee shall be paid EUR 5,550 per
month and all Non-Executive Board Members are paid EUR
3,500 per month. Non-Executive Board Members who serve
on the Board's Committees shall be paid additional EUR
1,500 per month for committee work. Those members of
the Board of Directors that are executives of the Company
are not entitled to receive any remuneration for Board
membership. 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 three (3) members: Dr Jelena Manojlovic (UK
citizen), Mr Thorstein Abrahamsen (Norwegian citizen) and
Mr Guy Konsbruck (Luxembourg citizen) were re-elected as
Board members.
The AGM resolved that authorised public accountant
firm Ernst & Young Oy is re-elected as the Auditor of the
Company for the year 2020.
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 50,000,000 new shares or shares owned by the Company.
This equates to approximately 19.8 % of the Company's
currently registered shares.
The authorization may be used among other things to
raise additional finance and enabling corporate and business
acquisitions or other arrangements and investments of
business activity or for employee incentive and commitment
schemes. By virtue of the authorization, the Board of
Directors can decide both on share issues against payment
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
80
ADDITIONAL
INFORMATION
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 2020, the registered number of Afarak
Group Plc shares was 252,041,814 (252,041,814) and the
share capital was EUR 23,642,049.60 (23,642,049.60).
On 31 December 2020, the Company had 13,162,599
(13,677,599) own shares in treasury, which was
equivalent to 5.22% (5.43%) of the issued share capital.
The total number of shares outstanding, excluding the
treasury shares held by the Company on 31 December
2020, was 238,879,215 (238,634,215).
At the beginning of the period under review, the
Company’s share price was EUR 0.53 on NASDAQ
Helsinki and GBP 0.38 on the London Stock Exchange.
At the end of the review period as at December 2020,
the share price was EUR 0.23 and GBP 0.20 respectively.
During 2020, the Company’s share price on NASDAQ
Helsinki ranged from EUR 0.15 to 0.98 per share and
the market capitalisation, as at 31 December 2020,
was EUR 56.96 (1 January 2020: 133.83) million. For the
same period on the London Stock Exchange, the share
ranged from GBP 0.05 to 0.75 per share and the market
capitalisation was GBP 50.4 (1 January 2020: 94.52)
million, as at 31 December 2020.
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 16 December 2020, the company
announced changes regarding Afarak Group Plc’s
treasury shares, where a total of 400,000 shares has been
transferred to the CEO Guy Konsbruck, which form part
of the remuneration package under the CEO agreement.
FLAGGING NOTIFICATIONS
There were no flagging notifications during the year.
Afarak Annual Report 2020 81
REMUNERATION
REPORT
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 2020.
NON-EXECUTIVE DIRECTORS’ SERVICE CONTRACTS
Non-executive directors do not have service contracts with
the company.
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 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 22, 2020 resolved that the
Chairman of the Board shall be paid EUR 4,500 per month,
the Chairman of the Audit and Risk Management Committee
shall be paid EUR 5,550 per month and all Non-Executive
Board Members are paid EUR 3,500 per month. Non-Executive
Board Members who serve on the Board's Committees shall
be paid additional EUR 1,500 per month for committee work.
Those members of the Board of Directors that are executives
of the Company are not entitled to receive any remuneration
for Board membership. 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.
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.
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 2020 were Dr Jelena
Manojlovic (Chair) and Thorstein Abrahamsen.
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 remuneration of EUR 360,000. 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
one share transfer in 2019. In 2019 it was agreed that his
package will reduce by 20% until the market recovers and
the results improve.
The Group makes no pension arrangements for the CEO
beyond the statutory pension coverage and there is no set
retirement age.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 82
RELATED PARTY TRANSACTIONS WITH PERSONS BELONGING TO THE GROUP’S BOARD AND MANAGEMENT
EUR ‘000
CEO
Konsbruck
Guy
BOARD
MEMBERS
Abrahamsen
Thorstein
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 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
2020
2019
Salaries
Fees
Share-based
remuneration
Salaries
Fees
Share-based
remuneration
288
60
294
605
84
60
0
0
0
432
60
0
63
66
73
25
521
605
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.
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.
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.
Afarak Annual Report 2020 83
The table below includes the EMT but excludes the CEO since the compensation for Board members and CEO has been
presented separately.
None of Afarak’s executive directors have received any compensation for serving as a NED in other companies.
MANAGEMENT REMUNERATION
EUR ‘000
Fixed salaries and fees
Provision for variable performance related compensation
Total
SHARE-BASED COMPENSATION
SHARE OPTIONS
2020
151
0
151
2019
591
0
591
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 2019 received 500,000 in share-based
compensation. He received another 400,000 for third year
of service in 2020 and he is due to receive another 400,000
shares for his fourth year of service in 2021. These shares have a
lock-up period of two years from subscription date.
DIRECTORS’ AND EMT MEMBERS’ SHAREHOLDINGS AND OPTIONS AT 31 DECEMBER 2020
Members of the Board
Thorstein Abrahamsen
Chairman
0
0
Title
Shares
Related Party Shares
Options
Jelena Manojlovic
Non-Executive Director
150,000
Guy Konsbruck*
Chief Executive Officer,
Executive Director
1,400,000
* The CEO will receive an additional 400,000 shares in 2021 after completing his fourth year of service.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
Financial
Statements
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
Parent Company’s Financial Statements (FAS)
Notes to the Financial Statements of the
Parent Company (FAS)
Signatures to the Board of Directors and the
Financial Statements
The Auditor’s Note
86
92
146
150
160
161
Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
86
CONSOLIDATED
FINANCIAL
STATEMENTS, IFRS
CONSOLIDATED INCOME STATEMENT
Afarak Group has restated its figures for 2019 due to the loss of control and the end of the consolidation of Afarak Mogale
(Pty) Ltd. Afarak Group reclassified Afarak Mogale (Pty) Ltd’s previously reported income statement figures as discontinued
operations. There is no change to the previously reported balance sheet figures.
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 from continuing operations
(Loss) / profit on discontinued operations
(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.-31.12.2020
1.1.-31.12.2019
Restated
1
2
3
4
4
5
12
6
6
7
8
9
59,805
1,333
-43,514
-15,432
-2,626
-21,515
-6,243
0
-28,192
0
8,548
-12,804
-32,448
4,804
-27,644
6,073
-21,571
-17,672
-3,899
-21,571
-0.07
-0.07
-0.10
-0.10
97,894
1,216
-73,282
-19,474
-3,618
0
-10,917
-868
-9,050
7,069
3,437
-7,213
-5,756
-309
-6,065
-52,812
-58,878
-57,577
-1,301
-58,878
-0.23
-0.23
-0.02
-0.02
Afarak Annual Report 2020 87
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
EUR ‘000
Note
1.1.-31.12.2020
1.1.-31.12.2019
Restated
(Loss)/profit for the year from continuing operations
-27,644
-6,065
Other comprehensive (loss)/income
Items that will not be reclassified to profit and loss
Remeasurements of defined benefit pension plans
-1,308
-2,740
Items that may be reclassified to profit and loss
Exchange differences on translation of foreign operations - Group
Other comprehensive (loss), net of tax
Total comprehensive (loss)/income from continuing
operations
Total comprehensive (loss)/income from continuing operations
attributable to:
Owners of the parent
Non-controlling interests
-8,264
-9,572
2,166
-574
-37,216
-6,639
-32,256
-4,960
-37,216
-5,311
-1,328
-6,639
(Loss)/profit for the year from discontinuing operations
6,073
-52,812
Items that may be reclassified to profit and loss
Loss of control of subsidiary (Circulation of translation difference)
8
Other comprehensive (loss) / income, net of tax
Total comprehensive (loss)/income from discontinued
operations
Total comprehensive (loss)/income from continuing operations
attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive (loss)/income for the year
Total comprehensive (loss)/income from continuing operations
attributable to:
Owners of the parent
Non-controlling interests
-13,719
-13,719
0
0
-7,646
-52,812
-7,646
0
-7,646
-44,863
-39,903
-4,960
-44,863
-52,812
0
-52,812
-59,451
-58,123
-1,328
-59,451
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 88
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
EUR '000
ASSETS
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Other financial assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY AND LIABILITIES
Equity attributable to owners of the parent
Share capital
Share premium reserve
Legal Reserve
Paid-up unrestricted equity fund
Translation reserve
Retained earnings
Non-controlling interests
Total equity
Non-current liabilities
Deferred tax liabilities
Interest-bearing debt
Pension liabilities
Other non-current debt
Provisions
Note
31.12.2020
31.12.2019
10
11
11
14
20
15
16
17
18
20
14
22
23
21
61,617
42,105
6,232
260
2,916
113,130
13,464
14,901
1,098
29,463
110,798
45,414
7,010
1,048
3,419
167,689
29,964
20,556
5,389
55,909
142,593
223,598
23,642
25,223
65
208,005
-40,540
-188,860
27,536
2,269
29,806
11,437
34,589
23,359
33
11,390
80,808
23,642
25,223
89
207,850
-19,618
-169,880
67,306
7,230
74,536
21,573
18,290
22,475
2,668
19,052
84,058
Afarak Annual Report 2020 89
Current liabilities
Trade and other payables
Provisions
Tax liabilities
Interest-bearing debt
23
21
23
14
14,529
179
2,545
14,725
31,978
19,853
177
2,754
42,220
65,004
Total liabilities
112,786
149,062
Total equity and liabilities
142,593
223,598
CONSOLIDATED STATEMENT OF CASH FLOWS
EUR ‘000
Operating activities
Note
1.1.-31.12.2020
1.1.-31.12.2019
Restated
(Loss) / profit from continuing operation
-27,644
-6,065
Adjustments to net profit:
Non-cash items
Depreciation, amortisation and impairment
Acquisition of Synergy Africa Ltd
Finance income and cost
Income from associates
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
Discontinued operations
Net cash from operating activities
Investing activities
Acquisitions of subsidiaries, net of cash acquired
Capital expenditure on non-current assets, net
4
6
13
7
19
8
23,773
0
4,047
0
-4,803
60
6,244
2,134
7,191
1,616
585
-2,939
-85
-1,701
-1,702
-11,189
-4,415
0
-958
3,619
-7,069
3,632
868
-2,546
605
-3,325
16,079
18,124
-7,289
9,007
-2,492
-66
-14,354
-657
-10,386
-21,315
684
-1,684
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 90
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT.)
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 used in financing activities
Change in cash and cash equivalents
EUR ‘000
Cash at beginning of period
Exchange rate differences
Cash at end of period
Change in the statement of financial position
17
Discontinued operations’ cash flows are described in more detail in the Note 8.
18
47
48
-863
0
3,215
-3,749
-193
2,002
1,275
-4,002
-193
398
-795
-26,389
33,155
-6,902
-222
-3,457
-3,815
-6,926
Note
1.1.-31.12.2020
1.1.-31.12.2019
5,389
-289
1,098
-4,002
12,132
182
5,389
-6,926
Afarak Annual Report 2020 91
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
EUR ‘000
Equity at 31.12.2018
A
B
C
D
E
F
G
H
I
Note
23,642
25,223
231,292
- 21,811
-107,968
98
150,476
372
150,848
ATTRIBUTABLE TO OWNERS OF THE PARENT
(Loss) / profit for the period 1-12/2019
Other Comprehensive (loss) / income
Total comprehensive (loss) / income
Share-based payments
Share issue
Acquisition of own shares
Acquisition of non-controlling interest
Other changes in equity
Equity at 31.12.2019
(Loss) / profit for the period 1-12/2020
Other Comprehensive (loss) / income
Loss of control of subsidiary (Circulation of
translation difference)
Total comprehensive (loss) / income
Share-based payments
Acquisition of non-controlling interest
Other changes in equity
19
18
18
18
19
18
-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
-
605
783
-26,389
-26,389
-1,596
-37
-9
-9
8,186
8,149
-9
605
783
-26,389
1,559
23,642
25,223
207,850
- 19,618
- 169,880
89
67,306
7,230
74,536
-7,203
-13,719
-17,672
-1,308
-17,672
-3,899
-21,571
-8,511
-1,061
-9,572
-13,719
-13,719
-20,922
-18,980
-39,902
-4,961
-44,863
60
95
60
95
-24
-24
60
95
-24
Equity at 31.12.2020
23,642
25,223
208,005
-40,540
-188,860
65
27,536
2,269
29,806
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
92
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 2020. 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 values are rounded to the nearest thousand (€ 000), unless otherwise explicitly stated.
Afarak Group Plc’s Board of Directors resolved on 31 March 2021 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
Afarak Annual Report 2020 1. NOTES TO THE
CONSOLIDATED
FINANCIAL STATEMENTS
93
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.
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,
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 94
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.
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.
Afarak Annual Report 2020
95
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 recognised 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 2020 financial year, testing took place on 30 June 2020
for the Speciality Alloys business and the South African minerals processing business and on 31 December 2020 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 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 96
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
Mines and mineral assets
15–50 years
3–15 years
5–10 years
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.
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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.
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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 14, 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.
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Subsequent measurement
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.
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 nearterm.
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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.
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).
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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.
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.
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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 14, 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.
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.
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Discontinued operation is a component of the entity with operations and cash flows that can be clearly distinguished
operationally and for financial reporting purposes, from the rest of the entity, that is either held for sale or already
disposed of; and
• represents a major line of business or geographical area of operations,
• is part of a single-coordinated plan to dispose of a separate major line of business or geographical area of
operations, or is a subsidiary acquired exclusively with a view to resale and the disposal involves loss of control.
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.
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.
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.
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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 2020. 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 2020. 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 2020, 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.
In 2020, the Group has adopted the following amended standards issued by the IASB.
• Amendments to IFRS 3 Business Combinations – definition of business combination or as an asset acquisition.
• Amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting
Estimates - Definition of ‘material’.
• Amendments to IFRS 9 Financial Instruments, IAS 39 Financial Instruments: Recognition and Measurement, and
IFRS 7 Financial Instruments - IBOR reform
• Amendment to IFRS 16 Leases Covid-19-Related Rent Concessions
The above changes did not have an impact on the 2020 consolidated financial statements and they are not expected
to have any impact in the 2021 consolidated financial statements.
STANDARDS AND INTERPRETATIONS NOT YET EFFECTIVE
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.
• Amendments to IAS 1: Classification of Liabilities as Current or Non-current. The amendments to IAS 1 to specify
the requirements for classifying liabilities as current or non-current.
• Amendments to IAS 16: Property, Plant and Equipment: Proceeds before Intended Use. Under the amendment,
proceeds from selling items before the related item of PPE is available for use should be recognized in profit or loss,
together with the costs of producing those items.
• Amendments to IAS 37: Onerous Contracts – Costs of Fulfilling a Contract. Under the amendment, when assessing
whether a contract is onerous or loss-making, an entity needs to include both the direct costs as well as
incremental costs and an allocation of costs directly related to contract activities.
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• Amendments to IFRS 9: Fees in the ’10 per cent’ test for derecognition of financial liabilities The amendment to
IFRS 9 clarifies the fees that an entity includes when assessing whether the terms of a new or modified financial
liability are substantially different from the terms of the original financial liability to determine whether to
derecognise the existing financial liability.
• Interest Rate Benchmark Reform - Phase 2 - Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16. The
amendment provides temporary reliefs related to financial reporting effects when an interbank offered rate (IBOR)
is replaced with an alternative nearly risk-free rate (RFR).
• Amendments to IFRS 3: Reference to the Conceptual Framework. The amendments are intended to replace a
reference to the Framework for the Preparation and Presentation of Financial Statements, issued in 1989, to an
updated version issued in 2018 without significantly changing its requirements.
• Additionally IFRS 17 Insurance contracts and amendments to IFRS 1 and IAS 41 have been issued but they will not
have an impact on Afarak Group financial statements.
The new and amended standards that become effective of 1 January 2021 or later are not expected to have an impact on
Afarak Group Oyj consolidated financial statements.
1.3 GOING CONCERN
Price and market recovery seems to be finally happening. As long as no major obstacles arise with a wide spread
vaccination of the global population, both stainless steel and special steel producers seem to be filling up their order
books LC FeCr prices have increased by 15% already, and Chrome Ore prices by more than 25% since beginning of the
year. However, the chrome market had traditionally been highly volatile and there is no certainty that the chrome price
level will remain at the same level as in January – March 2021.
The Specialty Alloys segment performance should gain from this improved situation and return to profits. The unprofitable
operations in South Africa have been discontinued, and our mining activity is still at a reduced level.
We are in the process of restructuring a short-term commercial debt into a longer-term arrangement. This would provide
the Company the funding needed to be able to continue its operations. If management is not successful in restructuring
the debt as planned, there may be significant uncertainty concerning the continuity of the Group’s operations.
The Company is also actively pursuing new funding via certain asset divestments. The additional funding through asset
divestments would provide opportunity to increase working capital. Restructuring of the debt together with funding from
asset divestments should lead to balanced cash flows in the foreseeable future.
Whereas the management is positive about successfully executing the debt restructuring and asset divestments, there is
no certainty that the Company will be successful in these matters. It must be noted that a failure to achieve one or both
of these goals may cast significant doubt on the company’s ability to continue as a going concern.
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 2020
Afarak did not carry out any acquisitions during the financial year 2020.
1.4.2 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.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
106
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 / 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
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 was approved by South Africa Reserve bank and it was executed after year end on 23 March 2021.
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 2020. 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 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 2020.
During 2020, there were no indication of impairment at the Speciality Alloys business, while an impairment amounting
to EUR 21.5 million less deferred tax of EUR 6.0 million was recognised at the Stellite mine on long term assets.
The Vlakpoort mine and Zeerust mine were not tested for impairment as there were no indication of impairment.
Afarak Annual Report 2020
107
CHANGES IN GOODWILL DURING 2020
During the financial year 2020, the total goodwill of the Group decreased by EUR 3.3 million to a total of EUR 42.1
million. The decrease was attributable to an exchange rate movement of EUR 3.3 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 1.1.2020
Exchange rate movement
Goodwill 31.12.2020
Speciality Alloys Business
FerroAlloys Business
Group Total
45,414
-3,310
42,105
0.0
0.0
0.0
45,414
-3,310
42,105
The changes in goodwill during 2019 are presented 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
Goodwill as a ratio of the Group’s equity on 31 December 2020 and 31 December 2019 was as follows:
EUR ‘000
Goodwill
Equity
Goodwill/Equity, %
31.12.2020
31.12.2019
42,105
29,806
141.3%
45,414
74,536
60.9%
IMPAIRMENT ON LONG TERM ASSETS
In 2020, an impairment write down on other long term assets in the South African mining business amounted to EUR
21.5 million less deferred tax of EUR 6.0 million. The impairment of other long term assets is disclosed in note 10 in the
notes 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 minerals processing have been projected for a five-year period, after
which a growth rate equaling projected long-term inflation has been applied (Speciality Alloys: 2%). 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 6.5% 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 2020.
The information used in the 31 December 2020 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 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.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 108
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.
The recoverable amount of the Stellite mine was values at fair value less costs of disporsal.
These pre-tax discount rates applied in 2020 impairment testing were the following:
CASH GENERATING UNIT
PRE-TAX DISCOUNT RATE
Speciality Alloys
South African mines:
- Stellite mine
- Mecklenburg mine
2020
11.7%
-
33.1%
2019
15.2%
26.4%
27.7%
The key reasons for the changes in the discount rates compared to 2019 were the changes in risk-free interest rates in
both cash-generating units.
The cash flows in the Stellite mine impairment test review in 2019 included both opencast and recycling of tailing dam
by way of using the shaking table technology, while in 2020, Stellite mine was valued at fair value less costs of disposal.
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%
Impairment
Slightly above
Clearly above
Significantly above
TEST RESULTS 31 DECEMBER 2020
The impairment test results were as follows:
CASH GENERATING UNIT
Speciality Alloys
South African mines:
- Stellite
- Mecklenburg
Goodwill (MEUR),
pre-testing
Goodwill
(MEUR),
post-testing
Carrying amount
(MEUR),
pre-testing
Conclusion
42.1
0.0
0.0
42.1
0.0
0.0
48.7
Slightly above
27.8
Impairment
16.9
Significantly above
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).
Afarak Annual Report 2020 109
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
South African mining business:
Mecklenburg mine
FeCr:
23,000 t/a
Cr ore:
13,000 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
ROM:
Underground mining of
20,000t in 2022; 177,000t
om 2023; and is planned
to increase to an average
of 539,000t/a as from
2024 to 2031
SA Concentrate & SA
Lumpy prices are based on
external experts (Roskill)
price forecasts adjusted
for Rand devaluation
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 678 per
saleable ton of chrome.
Moreover, the USD/ZAR foreign exchange rate affects significantly the testing of the South African mining business. The
foreign exchange rate used in the test was 16.8 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 2020 are given below:
CASH GENERATING UNIT
Speciality Alloys
South African mining business:
- Stellite mine
- Mecklenburg mine
Change in pre-
tax discount rate
(compared to the level
used in testing)
Change in free cash
flow (annual average)
Change in CGU’s average
EBITDA margin
1.5% - points
-14.2%
-1.1% - points
- % - points
-21.9% - points
- %
-55.0%
- % - 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 Vlakpoort mine, Zeerust mine, Stellite mine and Mecklenburg mine in South
Africa. The business produces chrome ore 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.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 110
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 2020
Speciality
Alloys
FerroAlloys
Segments
total
Unallocated
items
Eliminations
Consolidated
Group
0
53,234
53,324
0
53,324
98
6,028
6,126
0
6,126
98
59,262
59,360
0
59,360
445
0
445
1,479
1,924
306
-1,257
-951
-3,099
Depreciation and amortisation
-1,641
-1,004
-21,515
-2,644
-21,515
-19
0
-1,335
-23,776
-25,110
-3,080
Year ended 31.12.2020
EUR ‘000
External revenue
Rendering of services
Sale of goods
Total external revenue
Inter-segment revenue
Total revenue
Segment EBITDA
Impairment
Segment operating
profit / (loss)
Finance income
Finance cost
Income taxes
0
0
0
-1,479
-1,479
0
0
0
0
543
59,262
59,805
0
59,805
-4,050
-2,626
-21,515
-28,192
8,548
-12,804
4,804
-27,644
6,073
-21,571
(Loss)/profit for the period from continuing operations
(Loss)/profit for the period from discontinued operations
(Loss)/profit for the period
Segment’s assets 2
126,262
57,474
183,736
15,811
-56,954
142,593
Segment’s liabilities 2
78,548
53,447
131,995
38,374
-57,583
112,786
Other disclosures
Capital expenditure 3
Provisions 4
684
1,413
472
8,706
1,153
10,119
1
1,450
0
0
1,155
11,569
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.
Afarak Annual Report 2020
111
Afarak Group has restated Figures in 2019 due to the loss of control and the end of the consolidation of Afarak
Mogale (Pty) Ltd. Afarak Group reclassified Afarak Mogale (Pty) Ltd’s previously reported income statement figures as
discontinued operations. There is no change to the previously reported balance sheet figures.
OPERATING SEGMENT INFORMATION 2019
Speciality
Alloys
Ferro
Alloys
Segments
total
Restated
Restated
Unallocated
items
Eliminations
Consolidated
Group
Restated
Year ended 31.12.2019
EUR ‘000
External revenue
Rendering of services
Sale of goods
Total external revenue
Inter-segment revenue
Total revenue
0
82,464
82,464
0
96
14,689
14,785
0
96
97,153
97,249
0
82,464
14,785
97,249
625
20
645
1,479
2,124
0
0
0
-1,4791
-2,259
Items related to joint ventures (core)
0
-868
-868
0
Segment EBITDA
6,846
-5,258
1,588
-7,020
Depreciation and amortisation
-2,368
-980
0
-3,348
0
-270
0
4,478
-6,238
-1,760
-7,290
Impairment
Segment operating
profit / (loss)
Acquisition of Synergy Africa Ltd
Finance income
Finance cost
Income taxes
(Loss)/profit for the period from continuing operations
(Loss)/profit for the period from discontinued operations
(Loss)/profit for the period
0
0
0
0
0
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
1,814
1,528
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.
21
97,173
97,894
0
97,894
-868
-5,432
-3,618
0
-9,050
7,069
3,437
-7,213
-309
-6,065
-52,812
-58,878
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
112
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
2020
30,389
18,341
455
5,671
494
4,455
59,805
2019
Restated
45,352
28,442
0
12,374
1
11,725
97,894
Revenue figures are based on the
location of the customers.
The largest customer of the
Group is in the Speciality Alloys
business segment and represents
approximately 6.4% (3.6%) of the
Group’s revenue in 2020.
2020
2019
54,703
101,889
7,975
5,171
8,548
7,370
67,849
117,808
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.
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
2020
59,262
543
59,805
2020
206
203
924
1,333
2020
-13,710
-60
-99
-1,563
-15,432
2019
Restated
97,193
721
97,894
2019
Restated
26
240
950
1,216
2019
Restated
-16,731
-605
-11
-2,127
-19,474
Afarak Annual Report 2020 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
Other intangible assets
Total
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 long term assets
Total
113
2019
Restated
528
406
7
81
1,022
2019
Restated
534
307
5
59
905
2019
Restated
-171
-171
-243
-1,648
-1,454
-102
-3,447
0
0
2020
529
179
4
45
747
2020
516
83
5
17
621
2020
-100
-100
-30
-1,389
-1,000
-107
-2,526
-21,515
-21,515
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 114
5. OTHER OPERATING EXPENSES
EUR ‘000
Rental costs
External services1
Travel expenses
Other operating expenses2
Total
2020
-173
-2,574
-159
-3,337
-6,243
2019
Restated
-325
-3,799
-505
-6,287
-10,917
1. Audit fees paid to EY totalled EUR 878 (2019: 794) thousand in the financial year. The fees for non-audit services
totalled EUR 67 (2019: 36) thousand.
2. Other operating expenses in the prior year 2019 include 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
2020
73
8,466
9
8,548
-1,624
-9,238
-1,315
-626
-12,804
-4,256
2019
Restated
244
3,172
21
3,437
-1,178
-4,186
-1,322
-527
-7,213
-3,776
The interest expense on financial liabilities measured at amortised cost in both 2020 and 2019, include an accrual for
interest on prepayment received in relation to the off-take agreement.
7. INCOME TAXES
EUR '000
Income tax for the period
Deferred taxes
Total
2020
-1,826
6,630
4,804
2019
Restated
-705
394
-309
Afarak Annual Report 2020 115
2019
Restated
-5,756
1,151
-599
48
1,014
-215
1,240
0
0
-5,891
-818
3,760
-1,460
-309
2020
-32,448
6,490
6,781
0
1,153
-1,281
0
-4,303
-740
-5,540
-839
3,083
-1,686
4,804
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
Deferred tax asset write-offs
Tax losses not recognised as deferred tax assets
Non-tax deductible expenses
Previously unrecognised tax losses now recognised
Total adjustments
Income tax recognised
On 31 December 2020 the Group companies had unused tax losses totalling EUR 47.6 (2019: 76.8) million for which the
Group has not recognised deferred tax assets. A tax audit at TMS covering years 2013-2015 resulted in a tax increase of
Eur 903 thousand. The company has appealed the decision.
8. DISCONTINUING OPERATION
On 16th September 2020 the Business Rescue Plan which provided the plan for the disposal of the assets of Afarak
Mogale (Pty) Ltd was approved. This led to Afarak Group loss of control on its subsidiary Afarak Mogale (Pty) Ltd, and
as a result the Mogale business was reclassified to discontinued operation in the consolidated financial statements of
Afarak Group.
Afarak Group reclassified Afarak Mogale (Pty) Ltd’s previously reported income statement figures as discontinued
operations. As from September 2020 Afarak Group is no longer consolidating Afarak Mogale (Pty) ltd.
In the consolidated income statement, continuing and discontinued operations are presented separately. Discontinued
operations are presented as their own line item and comparative information has been adjusted accordingly.
Profit from discontinued operations in 2020, amounted to EUR 6.1 (-52.8) million arising from the transaction.
Financial information related to the result of the discontinued operation until Afarak’s loss of control of Mogale is
presented below.
EUR ‘000
Revenue
Other operating income
Operating expenses
Depreciation and amortisation
Impairment
Operating loss
Financial income and expense
1.1.-31.12.2020
1.1.-31.12.2019
16,628
228
-17,810
-975
-4,537
-6,466
-5,625
51,768
1,225
-71,316
-3,831
-31,951
-54,104
-722
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 116
Loss before tax
Income tax
Loss on discontinued operations, restated
Net balance sheet impact of discontinued operation
Impact of internal items
Circulation of translation difference
Results of the discontinued operation
Earnings per share calculated from the review period profit for owners of the
Company
Basic earnings per share (EUR)
Diluted earnings per share (EUR)
Net assets of discontinued operation
ASSETS
Non-current assets
Property, plant and equipment
Other intangible assets
Receivables
Deferred tax assets
Circulation of translation difference
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Non-current liabilities
Deferred tax liabilities
Interest-bearing debt (non-current)
Current liabilities
Trade and other payables
Provisions
Interest-bearing debt
Total liabilities
Net assets and liabilities
-54,827
2,014
-52,812
0
0
0
-52,812
-0.21
-0.21
-12,091
145
-11,946
6,385
-2,086
13,719
6,073
0.03
0.03
EUR ‘000
5,118
286
536
13
5,953
4,839
2,404
1,201
8,444
14,397
13
3,793
3,806
8,923
6,469
1,584
16,976
20,782
-6,385
Afarak Annual Report 2020 117
Cash flows from discontinued operations
1.1.-31.12.2020
1.1.-31.12.2019
EUR ‘000
Net cash flow from operating activities
Net cash flow from investing activities
Net cash flow from financing activities
Net cash flow for the period
9. EARNINGS PER SHARE
Profit attributable to owners of the
parent company (EUR ‘000)
Weighted average number of shares,
basic (1 000)
-10,904
-7
-278
-11,189
-10,180
-782
575
-10,386
2020
2019
Continuing
operations
Discontinued
operations
-23,745
6,073
Total
-17,672
Continuing
operations
Discontinued
operations
Total
-4,764
-52,812
-57,577
238,488
238,488
238,488
251,785
251,785
251,785
Basic earnings per share (EUR) total
-0.10
0.03
-0.07
-0.02
-0.21
-0.23
2020
2019
Continuing
operations
Discontinued
operations
Total
Continuing
operations
Discontinued
operations
Total
Profit attributable to owners of the
parent company (EUR '000)
Weighted average number of shares,
basic (1 000)
-23,744
6,073
-17,671
-4,781
-52,796
-57,577
238,488
238,488
238,488
251,785
251,785
251,785
Effect of share options on issue (1 000)
2,915
2,915
2,915
2,589
2,589
2,589
Weighted average number of shares,
diluted (1 000)
Diluted earnings per share (EUR)
total
241,403
241,403
241,403
254,374
254,374
254,374
-0.10
0.03
-0.07
-0.02
-0.21
-0.23
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.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 118
1.8 NOTES TO THE CONSOLIDATED STATEMENT OF FINANCIAL POSITION
10. 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 1.1.2020
2,303
8,386
73,974
80,959
5,163
170,785
Additions
Discontinued operatrion
Disposals
Reclass between items
Effect of movements in exchange rates
Balance at 31.12.2020
Accumulated depreciation and
impairment 1.1.2020
Depreciation
Impairment
Discontinued operation
Disposals
Effect of movements in exchange rates
Accumulated depreciation and
impairment at 31.12.2020
0
-139
-4
0
-193
1,967
0
0
0
0
0
0
0
0
746
243
-2,572
-24,567
-14
0
-984
4,816
-414
0
-9,094
40,645
-4,531
-46,350
-170
0
1,249
4
463
-2,264
0
15,926
317
5,653
0
0
0
-11,216
69,986
-6,453
-980
-21,515
0
0
880
0
-2,141
-6
-237
-626
2,153
989
-29,419
-438
-237
-22,113
119,567
-2,653
-59,987
-78
0
1,961
6
585
-3,492
-21,515
19,136
327
7,581
-2,985
-26,718
-28,068
-179
-57,950
Carrying amount at 1.1.2020
Carrying amount at 31.12.2020
2,303
1,967
3,855
1,831
27,624
13,927
Balance at 1.1.2019
Additions
Business combinationss
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 1.1.2020
Carrying amount at 31.12.2020
2,219
7,669
60,006
20
0
0
0
0
64
2,303
0
0
0
0
0
0
0
2,219
2,303
86
527
272
-83
0
-85
3,277
9,400
227
-389
0
1,453
8,386
73,974
-3,941
-510
0
-135
0
55
-4,531
3,728
3,855
-25,771
-4,239
-10,793
-4,497
33
-1,083
-46,350
34,236
27,624
74,506
41,918
8,013
1,070
72,575
0
0
0
-699
80,959
-5,624
-1,416
0
0
0
587
-6,453
2,388
74,506
2,510
1,974
4,649
57
96
0
-18
262
117
110,798
61,617
82,556
4,510
82,598
499
-490
262
849
5,163
170,785
-2,237
37,573
-200
-82
-46
18
-106
-2,653
2,412
2,510
-6,365
-10,875
-4,678
51
-547
-59,987
44,984
110,798
Machinery and equipment include the prepayments made for them.
Property, plant and equipment include right of use asset EUR 0.4 (2019: 0.5) and a depreciation of EUR 0.1 (2019: 0.1) million.
Afarak Annual Report 2020 119
11. INTANGIBLE ASSETS
EUR '000
Balance at 1.1.2020
Additions
Disposals
Effect of movements in exchange rates
Balance at 31.12.2020
Accumulated amortisation and
impairment at 1.1.2020
Amortisation
Disposals
Effect of movements in exchange rates
Accumulated amortisation and
impairment at 31.12.2020
Goodwill
Intangible assets
identified in
acquisitions
Other intangible
assets
Exploration and
evaluation assets
100,918
106,224
0
0
-7,588
93,330
0
0
-9,818
96,406
8,644
118
-2
-1,128
7,632
-55,504
-106,224
-3,220
0
0
4,279
0
0
9,818
-82
1
512
1,770
48
0
-245
1,573
-185
-25
0
26
Total
217,556
166
-2
-18,779
198,941
-165,133
-107
1
14,635
-51,225
-96,406
-2,789
-184
-150,604
Carrying amount at 1.1.2020
Carrying amount at 31.12.2020
45,414
42,105
0
0
Balance at 1.1.2019
Additions
Disposals
Business combinatios
Effect of movements in exchange rates
Balance at 31.12.2019
Accumulated amortisation and
impairment at 1.1.2019
Amortisation
Impairment
Reclass between items
Effect of movements in exchange rates
Accumulated amortisation and
impairment at 31.12.2019
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
5,424
4,843
4,408
327
-27
3,958
-22
8,644
-1,765
-84
0
-1,486
115
1,585
1,389
1,560
140
0
0
70
52,423
48,337
213,169
467
-27
3,958
-11
1,770
217,556
-87
-94
0
0
-4
-143,449
-1,084
-21,076
-1,486
1,962
-55,504
-106,224
-3,220
-185
-165,133
Carrying amount at 1.1.2019
Carrying amount at 31.12.2019
56,245
45,414
9,359
0
2,643
5,424
1,473
1,585
69,720
52,423
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.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 120
12. INVESTMENTS IN ASSOCIATES
Afarak has an investment of 8.99% (2019: 8.99%) in Valtimo Components Oyj.
During the financial year 2020 and 2019, Afarak did not acquire or dispose holdings in associates.
13. 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
2020
1.1-31.3.2019
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
4,677
35
-3,068
-617
-311
-1,442
-726
25
-524
-1,225
-477
-1,702
-868
-727
-141
-868
Afarak Annual Report 2020 121
14. FINANCIAL ASSETS AND LIABILITIES
31.12.2020, EUR ‘000
Non-current financial assets
Non-current interest-bearing
receivables
Trade and other receivables *
Current financial assets
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
232
29
9,758
412
1,098
232
29
9,758
412
1,098
232
29
9,758
412
1,098
Total financial assets
11,528
11,528
11,528
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
* Non-financial assets and liabilities are not included in the figures.
34,589
34,589
34,589
33
33
33
14,725
9,814
14,725
9,814
14,725
9,814
59,161
59,161
59,161
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
122
31.12.2019, EUR ‘000
Non-current financial assets
Non-current interest-bearing
receivables
Trade and other receivables *
Current financial assets
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
14,168
528
5,389
372
676
14,168
528
5,389
372
676
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 receivables *
18,290
2,667
42,176
13,041
18,290
18,290
2,667
2,667
42,176
13,041
42,176
13,041
Total financial liabilities
76,175
76,175
76,175
* Non-financial assets and liabilities are not included in the figures.
Afarak Annual Report 2020
123
FAIR VALUE HIERARCHY
31.12.2020, 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
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
31.12.2020, EUR ‘000
Level 3 reconciliation
Acquisition cost at 1.1.2020
Acquisition cost at 31.12.2020
Accumulated impairment losses at 1.1.2020
Accumulated impairment losses at 31.12.2020
Carrying amount at 31.12.2020
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
124
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
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
2020
2019
0
319
34,270
34,589
2,928
50
4,162
7,586
14,725
1,847
488
15,956
18,290
6,021
196
8,961
27,041
42,220
2020
2019
50
319
369
50
319
369
196
488
684
196
488
684
Afarak Annual Report 2020
125
Changes in liabilities arising from financing activities
EUR ‘000
1 January
2020
Cash
flows
Acquisition
Foreign
exchange
movement
Reclassification
Discontinued
operation
Other
31 December
2020
Non-current borrowings
17,803
Current borrowings
41,980
-440
Lease liabilities
684
-193
Total liabilities from
financing activities
60,466
-632
93
93
-1,086
-4,476
-71
-5,633
17,454
-17,454
100
-4,061
-874
-145
34,270
14,675
369
0
-4,061
-919
49,314
EUR ‘000
1 January
2019
Cash
flows
Acquisition
Foreign
exchange
movement
Other
31 December
2019
Non-current borrowings
2,027
-408
88
140
17,803
15,956
Current borrowings
22,135
-2,610
-
-4,210
26,705
41,980
Lease liabilities
271
-222
653
-18
-
684
Total liabilities from
financing activities
24,433
-3,240
16,608
-4,181
26,845
60,466
The ‘Other’ column includes the effect on unwinding interest on the acquisition of non-controlling interest in non-
current borrowings.
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 2020
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 2020 closing date:
On 31 December 2020, 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.
In 2017, the Group has given a corporate guarantee amounting to ZAR 75.0 (2019: 75.0) million as collateral for a
lending facility of South African Subsidiary which has now been discontinued.
One of the Group’s Turkish subsidiaries has been granted various short term loans in 2020. The loans amount as at end
of 2020 was of EUR 2.2 (2019: 3.6) million.
Interest-bearing debt 31 December 2020
•
•
Floating rate loans from financial institutions total EUR 2.2 (2019: 14.2) million. Fixed rate loans total EUR 0.7
(2019: 0.8) million.
The interest rate of the Turkish bank loan facility is tied to the market rate of EURIBOR. The interest rate on
31 December 2020, based on market interest rates at that date, was 1.20% (2019: 1.50%). The interest rate
margin for the fixed rate notes was 0.50% (2019: 0.65%) 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.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
126
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 25.3% (2019: 33.3%).
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
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 overdrafts, 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.
Afarak Annual Report 2020 127
The maturity distribution of the Group debt at the end of the financial year was as follows:
31.12.2020, EUR ‘000
Financial liabilities
Secured bank loans
Finance lease liabilities
Carrying
amount
Contractual
cash flows
6 months
or less
6-12
months
2,928
369
-2,972
-369
-2,972
-25
0
-25
1-2
years
0
-319
Trade and other payables
50,010
-50,651
-12,478
-3,615
-25,201
Bank overdraft
Acquisition of NCI liability
Total
31.12.2019, EUR ‘000
Financial liabilities
Secured bank loans
Finance lease liabilities
4,162
1,717
-4,162
-1,717
-4,162
-143
0
-143
0
-286
59,186
-59,870
-19,779
-3,783
-25,626
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
Bank overdraft
Acquisition of NCI liability
Total
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
2-5
years
More than
5 years
0
0
0
0
-858
-858
0
0
-9,538
0
-286
-9,824
2-5
years
More than
5 years
0
0
0
0
-924
-924
0
0
-10,079
0
-308
-10,387
(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
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.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
128
The following tables present the currency composition of receivables and debt, and changes thereby relative to the
previous year-end.
31.12.2020, EUR ‘000
EUR exchange rate
1
1.2271
0.89903
9.1131
18.0219
117.131
Cash and cash equivalents (EUR)
Trade and other receivables (EUR)
Loans and other financial assets (EUR)
EUR
342
447
-8
USD
172
7,101
0
Trade and other current payables (EUR)
3,957
-1,895
GBP
24
0
0
0
TRY
250
745
261
ZAR
255
1,871
7
-621
-3,339
RSD
54
5
0
-1
Loans and other liabilities (EUR)
-4,464
-25,040
-15,100
-2,290
-1,751
-703
Currency exposure, net (EUR)
-7,639
-19,663
-15,076
-1,655
-2,957
-644
Currency exposure, net in currency ('000)
-7,639
-24,129
-13,553
-15,080
-53,288
-75,442
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
The effect on the 31 December 2020 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%.
Afarak Annual Report 2020 129
USD
-4,916
-3,470
-2,185
-1,035
0
936
1,788
2,565
3,277
USD
-3,054
-2,156
-1,357
-643
0
582
1,110
1,593
2,036
GBP
-3,769
-2,660
-1,675
-793
0
718
1,371
1,966
2,513
GBP
-3,984
-2,813
-1,771
-839
0
759
1,449
2,079
2,656
TRY
-414
-292
-184
-87
0
79
150
216
276
TRY
-819
-578
-364
-173
0
156
298
428
546
ZAR
-739
-522
-329
-156
0
141
269
386
493
ZAR
-5,436
-3,837
-2,416
-1,144
0
1,035
1,977
2,836
3,624
RSD
-161
-114
-72
-34
0
31
59
84
107
RSD
-179
-126
-80
-38
0
34
65
93
119
31 December 2020
20% strengthening
15% strengthening
10% strengthening
5 % strengthening
0% no change
-5% weakening
-10% weakening
-15% weakening
-20% weakening
31 December 2019
20% strengthening
15% strengthening
10% strengthening
5 % strengthening
0% no change
-5% weakening
-10% weakening
-15% weakening
-20% weakening
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.
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 2020, 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
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 130
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 2020 and 31 December 2019 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
31.12.2020
31.12.2019
0
0
0
232
-32,179
-31,947
0
0
0
372
-42,176
-41,804
Interest-bearing net debt
-31,947
-41,804
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 2020, and if there were no changes in exchange rates.
31 December 2020
Interest rate
change
Change in interest income
Change in interest
expense
Net
effect
-2.00%
-1.50%
-1.00%
-0.50%
0.00%
0.50%
1.00%
1.50%
2.00%
-5
-3
-2
-1
0
1
2
3
5
644
483
322
161
0
-161
-322
-483
-644
639
479
319
160
0
-160
-319
-479
-639
Afarak Annual Report 2020 131
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
(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 7.7 million for financial period end 31 December
2020 (2019: 12.3). The Group did not record any loss allowance on trade receivables during 2020 and during 2019. The portion of
prepaid revenues or portion under trade financing amounts to EUR 3.3 million on 31.12.2020 (2019: 1.6). The prepaid portion of the
trade receivables does not include any potential losses.
The loan receivables amounted to EUR 0.4 million on 31.12.2020 (2019: 0.5). 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 2020 and in 2019, the Group did not recognise a provision on other receivables.
The credit risk assessment and the method of calculation has remained the same between the financial period ending 31.12.2020
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 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 132
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
Other interest bearing receivables
Interest-bearing, total
Interest-free
Trade receivables
Other short-term receivables
Long-term receivables
Interest-free, total
Total
EUR ‘000
31.12.2020
EUR ‘000
31.12.2019
1,098
232
1,329
7,656
2,514
29
10,199
11,528
5,389
372
5,760
12,325
2,372
676
15,373
21,133
(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 2020.
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 2020 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 2020 production of 16,409 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.
Afarak Annual Report 2020
133
Financial year 2020
Change in Sales price
(USD / lb Cr)
Change in
Operating Profit
Change in
Group's Equity
EUR 000’s
EUR 000’s
2.36
2.26
2.16
2.06
1.97
1.87
1.77
1.67
1.57
Financial year 2019
Change in Sales price
(USD / lb Cr)
2.08
2.00
1.91
1.82
1.74
1.65
1.56
1.47
1.39
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
8,110
6,082
4,055
2,027
0
-2,027
-4,055
-6,082
-8,110
7,704
5,778
3,852
1,926
0
-1,926
-3,852
-5,778
-7,704
Change in
Operating Profit
Change in
Group's Equity
EUR 000’s
EUR 000’s
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
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 324,111t/a, and the average 2020 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.
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%.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 134
Financial Year 2020
Change in Sales price (USD/t)
Change in Operating
Profit
Change in Group's Equity
201.82
193.41
185.00
176.59
168.18
159.77
151.36
142.95
134.55
Financial year 2019
20%
15%
10%
5%
0%
-5%
-10%
-15%
-20%
10,902
8,176
5,451
2,725
0
-2,725
-5,451
-8,176
-10,902
7,849
5,887
3,925
1,962
0
-1,962
-3,925
-5,887
-7,849
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
15. 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
2020
3,063
361
10,040
13,464
2019
7,719
347
21,898
29,964
Afarak Annual Report 2020 16. TRADE AND OTHER CURRENT RECEIVABLES
EUR '000
Trade receivables
Loan receivables
Prepaid expenses and accrued income
Income tax receivables
Other receivables
Total
135
2020
7,656
412
2,955
1,776
2,102
14,901
2019
12,325
528
3,929
1,930
1,844
20,556
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 d ue 61-90 days
Past due more than 90 days
Total
2020
1,560
2,697
568
1,141
1,690
7,656
2019
5,753
5,674
1,070
198
-370
12,325
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.
17. CASH AND CASH EQUIVALENTS
EUR '000
Cash and bank balances
Cash and cash equivalents in the consolidated cash flow statement:
EUR ‘000
Cash and bank balances
Short-term money market investments
Total
2020
888
2020
888
210
1,098
2019
5,004
2019
5,004
385
5,389
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 136
18. NOTES TO EQUITY
31.12.2018
263,040,695
260,653,201
23,642
Number of
registered shares
Number
of shares
on issue
Share
capital,
EUR '000
Subscriptions based on share based payment
Acquisition of NCI
Cancellations of acquired shares
Share issue
31.12.2019
Share based on payments
Acquisition of NCI
31.12.2020
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
400,000
115,000
252,041,814
238,879,215
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 2020, the Company had 13,162,599 (2019: 13,677,599) own shares in treasury, which was equivalent to
5.22% (2019: 5.43%) of the issued share capital. The total number of shares outstanding, excluding the treasury shares
held by the Company on 31 December 2020 was 238,879,215 (2019: 238,364,215).
The Company’s subsidiaries do not hold any of Afarak Group Plc’s shares.
As at 31 December 2020, the Company had 2,123,343 shares pending to be transferred to the subscribers, which related
to the acquisition of additional ownership in South African mining assets.
Afarak Annual Report 2020
137
SHARE ISSUE AUTHORISATIONS GIVEN TO THE BOARD OF DIRECTORS
Based on the resolution at the AGM on 22 June 2020, the Board is authorised to issue shares and stock options and
other special rights that entitle to shares in one or more tranches up to a maximum of 50,000,000 new shares or shares
owned by the Company. This equates to approximately 19.8 % of the Company’s currently registered shares.
The authorization may be used among other things to raise additional finance and enabling corporate and business
acquisitions or other arrangements and investments of business activity or for employee incentive and commitment
schemes. By virtue of the authorization, the Board of Directors can decide both on share issues against payment and
on share issues without payment. The payment of the subscription price can also be made with consideration other
than money. The authorization contains the right to decide on derogating from shareholders’ pre-emptive right to
share subscriptions provided that the conditions set in the Finnish Companies’ Act are fulfilled. The authorization
replaces all previous authorizations and is valid two (2) years from the decision of 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.
19. 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 in the comparative period 2019 was EUR 8,321.92.
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 were due to be awarded in two tranches and vested based on completed year
of service, and which were self-reduced by 20% to two tranches of 400,000 Company shares for each year of service
in 2020. The first 400,000 Company shares have effectively been received on 16 December 2020. The second 400,000
Company shares were due to be received in January 2021 after completing his fourth year of service. These will be
granted after the AGM when a new board is formed. 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 0.83 per share. The expense recognized in the income statement during the year was EUR
60,260.27 (2019: EUR 596,917.81) which included a correction of the self reduced shares expense recognised in 2019.
20. DEFERRED TAX ASSETS AND LIABILITIES
Movements in deferred taxes in 2020
EUR '000
Deferred tax assets:
Unrealised expenses
Pension liabilities
From translation difference
Group eliminations
Total
31.12.2019
Exchange rate
differences
Recognised
in income
statement
Discontinued
operation
31.12.2020
2,671
396
-69
421
3,419
-113
0
-50
-164
-149
-84
0
-94
-326
-13
-13
2,396
313
-69
277
2,916
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
138
Deferred tax liabilities:
Assets at fair value in acquisitions
Translation difference
Other timing differences
Total
Movements in deferred taxes in 2019
EUR '000
Deferred tax assets:
Unrealised expenses
Pension liabilities
From translation difference
Group eliminations
Total
Deferred tax liabilities:
20,222
80
1,272
21,573
-2,811
-6,095
-212
-3,023
-861
-6,956
-145
-13
-158
11,171
80
186
11,437
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
21. PROVISIONS
EUR ‘000
Balance at 1.1.2020
Additions
Discontinued operations
Releases and reversals
Unwinding of discount
Exchange differences
Balance at 31.12.2020
EUR ‘000
Balance at 1.1.2019
Additions
Business combinations
Releases and reversals
Unwinding of discount
Exchange differences
Balance at 31.12.2019
EUR ‘000
Long-term provisions
Short-term provisions
Total
421
3,435
886
44
-36
-2,955
80
80
80
1,272
20,969
21,573
Environmental and
rehabilitation provisions
Other provisions
16,836
458
-6,377
-213
622
-2,178
9,148
2,392
381
0
-223
0
-130
2,421
Environmental and
rehabilitation provisions
Other provisions
8,097
1,759
6,900
0
-182
262
16,836
2020
11,390
179
11,569
884
2,044
0
-492
0
-44
2,392
2019
19,052
177
19,229
Total
19,229
839
-6,377
-436
622
-2,307
11,569
Total
8,981
3,803
6,900
-492
-182
218
19,229
Afarak Annual Report 2020 139
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.
Provisions include a FIN-FSA penalty amounting to Eur 1,450 thousand which was provided for in 2019. On 25th February 2021,
Afarak filed an application for a permission to appeal and an appeal to the Supreme Administrative Court on the decision of
the Helsinki Administrative Court.
22. 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 (2019: 0.7)
million has been recognised on the 2020 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 23.4 (2019: 22.5) million on 31 December 2020. 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.
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.
Expected return 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.
2020
30,584
-7,225
23,359
2020
29,353
-868
430
301
1,369
30,584
2020
6,878
73
-193
61
407
7,225
2019
29,353
-6,878
22,475
2019
26,569
-883
373
462
2,832
29,353
2019
6,164
116
-193
91
400
6,878
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.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 140
EXPENSE RECOGNISED IN STATEMENT OF COMPREHENSIVE INCOME
EUR '000
Current service cost
Net interest on net defined benefit liability/(asset)
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 0.06 (2019: 0.09) million in 2020.
PRINCIPAL ACTUARIAL ASSUMPTIONS
Discount rate
Expected retirement age
Expected rate of salary increase
Inflation
2020
-430
-228
-658
2020
-447
-61
1,816
0
1,308
2020
0.69%
65
3.00%
2.25%
2019
-373
-346
-719
2019
-554
-91
3,385
0
2,740
2019
1.04%
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
2020, the employee severance indemnity recognised in accordance with IAS 19 totalled EUR 0.5 (2019: 0.5) million.
23. TRADE PAYABLES AND OTHER INTEREST-FREE LIABILITIES
EUR ‘000
Non-current
Other liabilities
Total non-current
Current
Current liabilities to related parties
Trade payables
Accrued expenses and deferred income
Current advances received
Income tax liability
Other liabilities
Total current
2020
33
33
5
8,705
4,715
1
2,545
1,103
17,075
2019
2,668
2,668
6
12,538
6,811
10
2,754
488
22,607
At end of 2020, Trade payables included a liability to supplier in relation to financing of material amounting to Eur 1.4 million.
Afarak Annual Report 2020 141
1.9 RELATED PARTY DISCLOSURES
1.9.1 GROUP STRUCTURE ON 31 DECEMBER 2020
Name
Afarak doo Belgrade
Afarak Holdings Ltd
Afarak Investments Ltd
Afarak Mining Investments (Pty) Ltd
Afarak Mining (Pty) Ltd
Afarak Services Sagl
Afarak South Africa (Pty) Ltd
Afarak Trading 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.
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
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
(%)
Serbia
Malta
Malta
South Africa
South Africa
Switzerland
South Africa
Malta
Serbia
South Africa
South Africa
South Africa
South Africa
Germany
Turkey
Finland
Turkey
South Africa
South Africa
United Kingdom
United Kingdom
South Africa
South Africa
South Africa
South Africa
South Africa
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
74.00
73.30
100.00
74.00
100.00
99.00
100.00
98.75
74.00
74.00
100.00
100.00
74.00
80.00
100.00
100.00
100.00
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
100.00
98.75
23.00
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.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 142
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 2019, 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. TThis
was approved by South Africa Reserve bank and it was executed after year end on 23 March 2021.
The companies Afarak Commodities Ltd, Afarak Participation Ltd, LP Kunnanharju and Mkhombi Stellite (Pty) Ltd were liquidated
during 2020.
On 16th September 2020 Afarak Group lost control on its subsidiary Afarak Mogale (Pty) Ltd, and as a result the Mogale business was
reclassified to discontinued operation in the consolidated financial statements of Afarak Group.
For the year ended 31 December 2020 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
2020
2019
CEO
Konsbruck Guy
Board Members
Abrahamsen
Thorstein
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 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
Salaries
Fees
Share-
based
remuneration
Salaries
Fees
Share-
based
remuneration
288
60
294
605
84
60
0
0
63
66
73
25
Total
0
432
60
0
521
605
Afarak Annual Report 2020 143
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.
The CEO self-reduced his salary by 20% during 2019, and the fees for his service during 2020 were EUR 288,000 (2019: 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 were self reduced by 20% to 800,000 shares in the Company. These will be awarded in two tranches and
vested based on completed year of service. The first 400,000 Company shares were received on 16 December 2020. The second
400,000 Company shares were due to be received by the employee on 15 January 2021. These will be granted after the AGM when
a new board is formed.
Management remuneration
EUR ‘000
Fixed salaries and fees
Total
2020
338
338
2019
591
591
The table includes the Executive Management Team remuneration excluding the CEO and including salary of Danko Koncar, COO
amounting to Eur 240,000. 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 198,000.
FINANCING ARRANGEMENT WITH RELATED PARTIES
The Joint venture became a subsidiary as of 1 April 2019, hence balance was zero as at end of 2019. During the period from
January to March 2019, interest income from a joint venture company totalled EUR 0.1 (2018: 1.0) million.
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. The Group has also made raw material purchases from a joint venture amounting to EUR 1.3 million.
Dividends received from associated companies totalled EUR 0.0 (2019: 0.0) million.
During 2019, Afarak acquired the 49% of Synergy Africa Ltd from a related party.
During 2019, Afarak made an addition of an intangible assets from a related party of EUR 0.1 million.
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements
144
1.10 COMMITMENTS AND CONTINGENT LIABILITIES
1.10.1 MORTGAGES AND GUARANTEES PLEDGED AS SECURITY
On 31 December 2020 the Group had loans from financial institutions totalling EUR 2.9 (2019: 15.0) million. The Group
has provided real estate mortgages and other assets as collaterals for total carrying value of EUR 4.5 (2019: 7.0) million.
Moreover, the Group companies have given cash deposits totalling EUR 0.9 (2019: 0.9) million as security for their
commitments. The value of other collaterals totalled EUR 4.2 (2019: 17.4) million as at 31 December 2020.
1.10.2 COVENANTS INCLUDED IN THE GROUP’S FINANCING AGREEMENTS
During the year 2020 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 0.2 (2019: 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 2020.
1.11 EVENTS AFTER THE REPORTING PERIOD
On 07 January 2021, the Company published the financial calendar for 2021.
On 26 January 2021, the company announced that Helsinki Administrative Court did not amend the FIN-FSA decision to
impose a penalty payment on the company.
On 25 February 2021, the Company published that it has filed the application for a permission to appeal and an appeal to
the Supreme Administrative Court on the decision of the Helsinki Administrative Court.
On 12 March 2021, the Company published that it has resolved on a directed share issue without consideration that will
result in additional ownership of mining assets in South Africa.
On 23 March 2021, the company announced changes regarding Afarak Group Plc’s treasury shares, where a total of
7,088,608 treasury shares has been transferred to subscribers. Afarak entered into an agreement during 2019 to acquire the
remaining interest of 26% in Chromex Mining Company (Pty) Ltd. This was executed after year end on 23 March 2021.
FLAGGING NOTIFICATION AFTER THE REPORTING PERIOD
On 24 March 2021, Afarak Group Plc made a flagging notification to FIN-FSA pursuant to Chapter 9, Section 5 of the Finnish
Securities Markets Act. According to the flagging notification Afarak’s portion of the Company’s shares has fallen below the
threshold of 5 per cent.
According to the notification, Afarak holds 6,073,991 treasury shares in Afarak, which corresponds to approximately 2.41 % of
the total shares in Afarak as a result of the transaction that was executed on 23 March 2021 whereby Afarak transferred its
treasury shares.
Afarak Annual Report 2020 146
PARENT COMPANY’S
FINANCIAL STATEMENTS
(FAS)
INCOME STATEMENT (FAS)
EUR '000
Revenue
Personnel expenses
Salaries and wages
Pension expenses
Social security expenses total
Personnel expenses total
Depreciation, amortisation and impairment
Impairment of investment in subsidiaries
Depreciation, amortisation and impairment total
Other operating expenses
Operating Profit (Loss)
Financial income and expenses:
Impairment of non-current investments
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) / PROFIT BEFORE TAXES
Income taxes
Note
1.1.2020
- 31.12.2020
1.1.2019
- 31.12.2019
1
2
3
4
5
1,480
1,481
-430
2
2
-428
-48,296
-48,296
-2,029
-1,021
2
2
-1,019
-139,526
-139,526
-4,867
-49,273
-143,931
-6,574
30
3,841
-898
-1,605
-8,356
-13,562
0
26
1,300
-556
-993
0
-223
-62,835
-144,154
(LOSS) / PROFIT FOR THE PERIOD
-62,835
-144,154
Afarak Annual Report 2020 147
Note
31/12/2020
31/12/2019
6
7
7
64,644
64,644
114,959
114,959
5
5
5
5
64,649
114,964
1
4,523
54
13
56
4,646
54
4,700
69,349
1
13,993
0
69
41
14,104
118
14,226
129,185
STATEMENT OF FINANCIAL POSITION (FAS)
EUR '000
ASSETS
Non-current assets
Investments
Shares in Group companies
Total investments
Current assets
Non-current receivables
Receivables from Group companies
Total non-current receivables
Total non-current assets
Current receivables
Trade receivables
Receivables from Group 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
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 148
STATEMENT OF FINANCIAL POSITION (FAS) (CONT.)
EUR '000
Note
31/12/2020
31/12/2019
EQUITY AND LIABILITIES
Shareholders’ Equity
Share capital
Share premium reserve
Paid-up unrestricted equity reserve
Retained earnings
(Loss) / profit 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
Liabilities to others
Accounts payable
Accounts payable to Group companies
Other liabilities
Accrued expenses and deferred income
Total current liabilities
Total liabilities
Total equity and liabilities
8
9
23,642
25,223
212,119
-164,730
-62,835
33,419
23,831
1,450
25,281
220
4,161
204
5,709
17
338
10,649
35,930
69,349
23,642
25,223
212,024
-20,576
-144,154
96,159
28,229
1,450
29,679
462
0
60
2,531
119
176
3,347
33,026
129,185
Afarak Annual Report 2020 STATEMENT OF CASH FLOWS (FAS)
EUR '000
Operating activities
(Loss) / profit for the period
Adjustments for:
Impairment, net
Unrealised foreign exchange gains and losses
Financial revenue and expense excluding impairment
Other adjustments
Cash flow before working capital changes
Working capital changes:
Change in current trade receivables
Change in current trade payables
Cash flow before financing items and taxes
Interests received from Group companies
Interests received and other financing items
Interests paid and other financing items
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 current borrowings
Non-current loans from 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
149
1.1.-31.12.2020
1.1.-31.12.2019
-62,835
-144,154
54,870
-2,235
3,708
1,914
-4,578
789
286
-3,503
3,841
31
-1,127
-758
0
0
0
0
0
-4
699
0
695
-64
118
54
-64
139,526
-306
831
1,501
-2,602
779
105
-1,718
1,303
27
-908
-1,296
1
1
-26,389
-44
26,031
1,623
0
8
1,229
-66
184
118
-66
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 150
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 2020 2.2 NOTES TO THE INCOME STATEMENT
1. REVENUE
EUR '000
By business line:
Services
Total
By geography:
Finland
EU countries
Other countries
Total
2. DEPRECIATION, AMORTISATION AND IMPAIRMENT
EUR '000
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
Other financial income
From Group companies
From others
Other financial expense
To Group companies
To others
Impairment on Intra-group receivables
Total
151
2020
2019
1,480
1,480
1
1312
167
1,480
1,481
1,481
1
1,065
415
1,481
2020
2019
-48,296
-48,296
-139,526
-139,526
2020
-14
-19
-58
-1,662
-276
-2,029
2019
-16
-19
-152
-3,126
-1,554
-4,867
2020
2019
30
3,841
-898
-1,605
-8,356
-13,562
26
1,300
-556
-993
0
-223
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 152
5. INCOME TAXES
EUR '000
(Loss) / profit for the period
Profit before taxes
2.3 NOTES TO ASSET
6. INVESTMENTS
Acquisition cost 1.1.2020
Disposal of investment
Acquisition cost 31.12.2020
Accumulated depreciation and impairment
1.1.2020
Impairment of investment in subsidiaries
Accumulated depreciation and impairment
31.12.2020
2020
2019
-55,590
-55,590
-144,154
-144,154
Shares in Group
companies
Shares in associated
companies
Receivables from
Group companies
324,533
-2,019
8,153
0
322,514
8,153
-209,574
-48,296
-257,870
-8,153
0
-8,153
17,614
0
17,614
-17,614
0
-17,614
Total
350,300
-2,019
348,281
-235,341
-48,296
-283,637
Book value 31.12.2020
64,644
0
0
64,644
Holdings in Group and other companies
Name
Country of
incorporation
Group's ownership and
share of votes (%)
AfarakGroup Plc’s direct ownership and
share of votes (%)
Afarak doo Belgrade
Afarak Holdings Ltd
Afarak Investments Ltd
Afarak Mining Investments (Pty) Ltd
Afarak Mining (Pty) Ltd
Afarak Services Sagl
Afarak South Africa (Pty) Ltd
Afarak Trading 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.
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
Afarak Processing Technologies (Pty) Ltd
Afarak Processing Technologies 2 (Pty) Ltd
Afarak Platinum (Pty) Ltd
Serbia
Malta
Malta
South Africa
South Africa
Switzerland
South Africa
Malta
Serbia
South Africa
South Africa
South Africa
South Africa
Germany
Turkey
Finland
Turkey
South Africa
South Africa
United Kingdom
United Kingdom
South Africa
South Africa
South Africa
South Africa
South Africa
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
74.00
73.30
100.00
74.00
100.00
99.00
100.00
98.75
74.00
74.00
100.00
100.00
74.00
80.00
100.00
100.00
100.00
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
100.00
98.75
23.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
Afarak Annual Report 2020 153
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 was merged with Afarak Group Oyj during the year 2019.
During 2019, 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 was approved by South Africa Reserve bank and it was executed after year end on 23 March 2021.
The companies Afarak Commodities Ltd, Afarak Participation Ltd, LP Kunnanharju and Mkhombi Stellite (Pty) Ltd were liquidated
during 2020.
On 16th September 2020 Afarak Group lost control on its subsidiary Afarak Mogale (Pty) Ltd, and as a result the Mogale business
was reclassified to discontinued operation in the consolidated financial statements of Afarak Group.
For the year ended 31 December 2020 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.
7. RECEIVABLES
EUR '000
Non-current
Loan and other receivables
Total
Current
Loan receivables
Trade receivables
Interest receivables
Prepayments and accrued income
Total
2020
2019
5
5
719
2,938
44
822
4,523
5
5
7,424
4,915
822
832
13,993
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 154
Other interest-bearing receivables
EUR ‘000
Current
VAT receivable
Total
Other interest-free receivables
EUR ‘000
Current
Trade receivables
Other receivables
Total
Prepaid expenses and accrued income
EUR ‘000
Other prepaid expenses and accrued income
Total
2.4 NOTES TO EQUITY AND LIABILITIES
8. 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)/profit for the previous financial year
Retained earnings 31.12.
2020
54
54
2020
1
13
13
2020
56
56
2020
23,642
23,642
2020
25,223
25,223
2020
212,024
95
0
212,119
2020
-20,575
-144,154
-164,730
2019
3
3
2019
1
4
5
2019
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
Afarak Annual Report 2020 (Loss) / profit for the period
Total shareholders’ equity
Distributable funds
Retained earnings 1.1.
(Loss) / profit for the period
Retained earnings 31.12.
Paid-up unrestricted equity reserve
Distributable funds 31.12.
9. 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
Payables to others
Other debt
Other debt to Group companies
Accrued expenses and deferred income
Total
155
-144,154
96,159
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
0
119
412
176
-62,835
33,419
2020
-164,730
-62,835
-227,565
212,119
0
2020
23,831
23,831
2020
0
0
2020
0
0
2020
204
5,709
4,161
17
220
338
10,649
3,297
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 156
2.5 PLEDGES AND CONTINGENT LIABILITIES
EUR million
Commitments on behalf of subsidiaries
Guarantees
Commitments and contingent liabilities total
31.12.2020
31.12.2019
4.2
4.2
17.4
17.4
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
2020
3
2020
288
144
2019
3
2019
294
227
The CEO fees for his service during 2020 were EUR 288,000.
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 in the comparative period 2019 was EUR 8,321.92.
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 were due to be awarded in two tranches and vested based on completed year of service,
and which were self-reduced by 20% to two tranches of 400,000 Company shares for each year of service in 2020. The first
400,000 Company shares have effectively been received on 16 December 2020. The second 400,000 Company shares were
due to be received in January 2021 after completing his fourth year of service. These will be granted after the AGM when a
new board is formed. 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 0.83 per share. The
expense recognized in the income statement during the year was EUR 60,260.27 (2019: EUR 596,917.81) which included a
correction of the self reduced shares expense recognised in 2019.
Afarak Annual Report 2020 157
INFORMATION ON SHARES AND SHAREHOLDERS
Changes in the number of shares and share capital
On 31 December 2020, the registered number of Afarak Group Plc shares was 252,041,814 (2019: 252,041,814) and the
share capital was EUR 23,642,049.60 (2019: 23,642,049.60).
On 31 December 2020, the Company had 13,162,599 (2019: 13,677,599) own shares in treasury, which was equivalent to
5.22% (2019: 5.43%) of the issued shares. The total number of shares outstanding, excluding the treasury shares held by
the Company on 31 December 2020, was 238,879,215 (2019: 238,364,215).
On 28 January 2020, Afarak Group Plc has transferred a total of 115,000 Company shares from treasury in relation to
additional ownership in certain South African mining assets.
On 16 December 2020, the company transferred 400,000 Company Shares from the treasury to Guy Konsbruck, CEO.
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)
Afarak Annual Report 2020Strategic ReviewResource StatementGovernance ReviewFinancial StatementsParent Company’s Financial Statements 158
BOARD MEMBERS’ AND CHIEF EXECUTIVE OFFICER’S OWNERSHIP
Afarak Group Plc’s Board members and Chief Executive Officer owned in total 1,550,000 (2019: 1,150,000) Afarak Group Plc
shares on 31 December 2020 when including shares owned either directly, through persons closely associated with them or
through controlled companies. This corresponds to 0.6% (2019: 0.5%) of all outstanding shares that were registered in the
Trade Register on 31 December 2020.
31.12.2020
Board and CEO total:
Thorstein Abrahamsen
Chairman & Non-Executive Director
Jelena Manojlovic
Guy Konsbruck
Board and CEO total
All shares outstanding
Proportion of all shares
Dependent Non-Executive Director
Chief Executive Officer & Executive Director
Shares
0
150,000
1,400,000
1,550,000
252,041,814
0.6%
On 31 December 2020 the total number of registered shares was 252,041,814 and the Board and CEO’s ownership
corresponded to 0.6% of the total number of registered shares.
Auditor’s fees
EUR ‘000
Ernst & Young Oy
Audit
Other services
Total
2020
581
67
648
BOARD’S DIVIDEND PROPOSAL
The Board of Directors proposes to the Annual General Meeting that no distribution would be paid in 2021.
Options
0
0
0
0
2019
320
36
356
Afarak Annual Report 2020 160
Signatures to the Board
Financial Statements
HELSINKI 31 MARCH 2021
THORSTEIN ABRAHAMSEN
Chairman
GUY KONSBRUCK
CEO
JELENA MANOJLOVIC
Member of the Board
Afarak Annual Report 2020 161
The Auditor’s
Note
Our auditor’s report has been issued today.
HELSINKI 31 MARCH 2021
ERNST & YOUNG OY
ERKKA TALVINKO
Authorised Public Accountant
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