Annual Report 2011
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Clarendon House
2 Church Street
Hamilton HM11
BERMUDA
www.sylvaniaplatinum.com
VISION
To be the leading mid-tier, lowest unit-cost, platinum group metals (“PGMs”) mining company.
OUR MISSION
We generate wealth for all of our stakeholders using safe and innovative processes with a focus on
PGMs whilst exploiting any value-adding associated minerals.
OUR VALUES
We value the safety and health of all
Employees are at the heart of our company; we place their safety and health above all else in
everything that we do.
We value the fundamental rights of people
We treat all people with dignity and respect.
We value honesty and integrity
We act honestly and show integrity by continually striving towards “doing what we say we are
going to do” and showing commitment towards our accountabilities of delivering high performance
outcomes thus projecting an image of professionalism and meeting the expectations of our
colleagues, investors, business partners and social partners.
We respect the environment
We act in a manner that is sustainable and environmentally friendly, applying professional and
innovative methods.
We value the culture, traditional rights and society in which we operate
Our actions will support the communities in which we work whilst honouring their heritage
and traditions.
DESIGNED BY CHAMELEON CREATIVE
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
CONTENTS &
CORPORATE DIRECTORY
CORPORATE DIRECTORY
Directors
TM McConnachie - Chief Executive Officer
RD Rossiter - Non-Executive Chairman
LM Carroll - Finance Director
GM Button - Executive Director
Joint Company
Secretary
LM Carroll/GM Button
Principal registered Clarendon House
office in Bermuda
2 Church Street
Hamilton HM11
Bermuda
Registrar
Auditors
Solicitors
Computershare Investor Services Pty Limited
Reserve Bank Building
Level 2
45 St George’s Terrace
Perth
Western Australia
6000 Australia
Ernst & Young
11 Mounts Bay Road
Perth
Western Australia
6000 Australia
Allen & Overy
Level 27
Exchange Plaza
2 The Esplanade
Perth
Western Australia
6000 Australia
Nominated Advisor Ambrian Partners Limited
and Joint Broker
Old Change House
128 Queen Victoria Street
London, EC4V 4BJ
United Kingdom
RBC Europe Limited
Riverbank House
2 Swan Lane
London, EC4V 3BF
United Kingdom
Stock Exchange
Listings
Sylvania Platinum Limited is listed on the Australian
Securities Exchange (Shares:SLP) and on the AIM
market of the London Stock Exchange (Shares:SLP)
Website
www.sylvaniaplatinum.com
CONTENTS
1 Corporate directory
2 Highlights
4 Chairman and CEO review
6 Deputy CEO’s review
10 Directors’ report
16 Corporate governance
statement
21 Consolidated statement
of comprehensive income
22 Consolidated statement
of financial position
23 Consolidated statement
of changes in equity
24 Consolidated statement
of cash flows
25 Notes to the financial
statements
71 Directors’ declaration
72
Independent auditor’s report
73 Additional information for
listed public companies
75 Glossary of terms
76 Appendix
Final Results
SYLVANIA PLATINUM LIMITED
Audited Final Results for the year ended 30 June 2011
Sylvania Platinum, the low cost Platinum Group Metal (“PGM”) processor and developer,
today announces its audited final results for the year ended 30 June 2011. Unless otherwise
stated, the financial information is presented in US Dollars.
(“Sylvania Platinum”, “Sylvania”
or the “Company”)
(ASX: SLP, AIM: SLP)
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2011
1
HIGHLIGHTS 2011
FINANCIAL
HIGHLIGHTS
• Revenue increased by 79% to $46,872,232
($26,115,145 FY10),
• $7,708,176 Net operating cash inflow
(Outflow $2,660,627 FY10) a 390% turnaround,
• Net profit after tax of $1,608,126
(Loss after tax of $7,781,911 in FY10),
• $12,340,998 Group EBITDA, 547% turnaround
($2,759,039 loss FY10),
• $15,419,750 Sylvania dump operations (“SDO”)
EBITDA, 253% increase ($4,370,742 FY10),
• PGM ounces sold increased by 61% to 42,232oz
(from 26,205 oz in FY10),
• The average cost at operating level decreased by
2.3% to $601/oz ($615/oz FY10),
• Average basket price increased by
15% to $1,166/oz ($1,015 in FY10),
• PGE plant grade decreased by
9% to 4.55g/t (5.02g/t FY10),
• Group cash balance $23,497,092 at
30 June 2011 ($20,107,830 FY10),
• Group earnings per share increased to
0.39 cents (loss per share 3.11 cents FY10)
a 113% turnaround.
CORPORATE
HIGHLIGHTS
• Re-domicile of Sylvania from Australia to
Bermuda completed,
• Commencement of on market share buy-back.
2
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
OPERATIONAL
HIGHLIGHTS
POST-PERIOD
HIGHLIGHTS
• Appointment of deputy CEO Nigel Trevarthen to
directly oversee all production operations,
• PGM production from five Sylvania Dump
Operations (“SDO”) tailings plants increased
67% to 41,013oz (24,605oz in FY’10),
• Plant feed production increased by 56% to
1,410,883 tonnes (907,032 tonnes in FY10),
• PGM Plant feed tonnes increased by 62% to
652,597 tonnes (403,825 tonnes in FY10),
• PGM recoveries increased by 8% to 43%
(40% in FY10),
• Volspruit (Southern section of Northern Limb)
Measured, Indicated and Inferred resource of 5
million ounces and Cu/Ni credits,
• Mining license application on Volspruit section
submitted to the Department of Mineral
Resources (“DMR”),
• PGM production from SDO and Chrome tailings
retreatment plant (“CTRP”) for FY12 forecast to
reach 60,000 ounces,
• Additional target areas identified for further
exploration on the Northern Limb (Northern
part) Platreef Project,
• Developing near surface mining and processing
operations to exploit PGM’s,
• First PGM alloy successfully produced during
testing process.
The Board has resolved to pursue the disposal
of the magnetite iron ore project located in the
Bushveld region of South Africa. Proceeds from the
sale are anticipated to be in the form of equity in a
listed entity which Sylvania intends to distribute to
Sylvania Platinum shareholders.
Commenting, Sylvania Platinum CEO Terry
McConnachie said; “The year saw real tangible
benefits of an on-going restructuring programme
that Sylvania has undertaken over the previous
24 months. Every period during the year saw
the Company exceed operational performance
targets in total output, efficiency and enhanced
margins. Under the guidance of our new Deputy
CEO, Nigel Trevarthen, we look forward to
building on that success and continue to deliver
on production targets for next year. Despite the
challenging economic situation globally Sylvania has
demonstrated its robust economic model.
Despite the Company’s robust performance,
Sylvania’s share price and the performance of the
PGM sector in general has been disappointing. A
range of factors including rising industry costs, a
strong Rand, safety stoppages, the well-publicised
nationalisation debate in South Africa, and on-going
weakness in the global economy have continued
to weigh heavily on the sector. We believe that
investment interest in the PGM sector will recover
in line with the global economy and forecast an
improvement in PGM prices.
Our challenge is to take Sylvania to the next level
of expansion through low cost PGM production
and progress our near surface mining development
programme within the Northern Limb of the
Bushveld complex. The directors have decided to
spin out the iron ore assets to Sylvania shareholders
as a dividend (in specie). This is aligned with
our vision of achieving consistent growth, being
profitable and returning as much of the profits as
we can to shareholders.”
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2011
3
CHAIRMAN AND CHIEF
EXECUTIVE OFFICER’S REVIEW
Group Overview and Strategy
The period covered within these results
saw the first real benefits from a series of
operational and strategic rationales that
have been implemented over the last three
years. The Board has committed to grow
Sylvania to the next level by enhancing the
Company’s low cost platinum group metal
production portfolio and deriving value
from new surface or near surface resources.
Following a long term restructure of our
tailings operations by Nigel Trevarthen
who was appointed as deputy CEO
following a career managing major
precious metals mining and processing
operations in Africa, Sylvania saw record
production growth during this period
with PGM ounces sold increasing by
61% to 42,232 (vs 26,205 in FY10). The
record production results were as a result
of the excellent foundation created by
the original implementation team and
a combination of optimised operational
structures implemented by management at
the plants and the commissioning of new
plants. With improved elements within the
production circuits at the Mooinooi and
Lannex plants Sylvania has also been able
to increase cost effective PGM recovery
and lower operating costs to $601/oz (vs
$615/oz in FY10) despite a negative Rand/
Dollar exchange impact of $54/oz. Further
circuits and new plants are expected to be
commissioned in the next twelve months
that will allow Sylvania to significantly build
PGM production.
The strong operating performance was
reflected in the significantly improved
financial results with revenue increasing by
79% to $46,872,232 vs $26,115,145 in FY10.
This was in part bolstered by the average
basket price received which increased by
15% to $1,166/oz, compared to $1,015/oz
in FY10. EBITDA from the dump operations
improved 253% to $15,419,750 (vs
$4,370,742 in FY10) resulting in an overall
turnaround of 547% in Group EBITDA to
$12,340,998 (vs negative $2,759,039 in
FY10). The Company remains debt free
with the cash balance increasing marginally
to $23,497,092 (vs $20,107,830 in FY10).
Towards the end of the financial year,
Sylvania announced that it would implement
an on-market share buy-back of up to 10%
of the issued share capital of the Company.
Sylvania Platinum has also used the
preceding 12 months to make significant
steps forward in developing its near surface
mining operations in the Northern Limb
area. Sylvania Platinum is compiling feasibility
studies aimed at developing new, low cost
PGM production mines in the Northern
Limb of the Bushveld Igneous Complex
(“BIC”). These deposits are “massive” type
ore bodies and are ideal for open pit mining
operations. Traditionally near surface PGM
material located in the Northern Limb has
not been treated by the Bushveld smelters
due to low PGM grades and the presence
of other difficulties to extract base metals.
Ongoing studies conducted by Sylvania
have identified an extraction process route
utilising proven technologies to recover
base metals, such as Nickel and Iron and a
PGM product of sufficient grade and purity
fit for sale. Other South African platinum
producers traditionally mine the high
grade PGM deposits located within reefs
at depth and accessed through significant
underground mining operations. Since these
surface deposits were typically much lower
grade, this has allowed Sylvania Platinum
to secure prospecting rights over a 25km
strike length in the Northern Limb and thus
far over 8 million JORC compliant resource
ounces (inferred) has been defined (at
Volspruit as published in September 2010
and at the Northern Limb projects as
published in March 2011). The Sylvania
team is building a simple operational
concept referred to as the “Ore to Metal”
strategy for the recovery of low grade
PGM ore. Following standard processing
techniques such as crushing, milling and
floatation the concentrate will be smelted
through a standard DC Arc furnace to
produce a metal alloy. Sylvania Platinum
is working with alloy specialists and other
specialist parties to upgrade the alloy using
base metal refining techniques such that
the remaining metals in the alloy will be
acceptable to a standard PGM refinery.
Sylvania Platinum is currently on schedule
to begin production in FY14 from the first
of their new mines in the Northern Limb
at Volspruit. The study work concluded to
date has produced physical alloy from the
ore at Volspruit using a DC Arc furnace and
this alloy was sent during February of this
year for the final base metal extraction tests,
which are extremely encouraging.
Terry McConnachie
Richard Rossiter
4
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
In the interim, the Company remains
committed to growing shareholder value
by optimising and expanding the PGM
recovery operations from waste tailings and
developing low cost near surface mining
operations in the Bushveld Complex of
South Africa.
PGM Markets
The slow recovery in the global economy
and demand for auto catalysts saw the
average price of platinum increase by
17% to $1,708/oz in FY11 (vs $1,456/oz
in FY10). Rand strength offset the gains
for South African producers with the
platinum price increasing marginally by
8% to R11,985/oz vs R11,072/oz in FY10.
These gains were largely offset by increasing
industry cost pressures resulting from rising
power, water and labour costs as well as
safety related stoppages.
Towards the end of the reporting period
PGM prices weakened due to the
deteriorating global economic outlook and
the earthquake and tsunami in Japan which
further delayed a demand driven recovery.
Jewellery demand remains steady with
China continuing to dominate. Investment
demand for physically backed platinum and
palladium exchange traded funds (“ETFs”)
continued to grow with many investors
preferring to invest in ETFs rather than the
underlying companies.
The constant talk of Nationalisation in
South Africa has also negatively affected
investors’ appetite for South African mining
operations.
Corporate
The Company made significant progress
consolidating and streamlining its business
activities during the year:
Outlook
The Board and executive management
remain focused on delivering value
from low cost PGM operations. Five
PGM tailings recovery plants are now
commissioned and work continuously to
ensure they deliver maximum value and
margin. The Company is also on course
to develop a new set of low cost PGM
production operations by unlocking the
significant potential of near surface, low
grade PGM deposits that Sylvania has
already secured. Sylvania is focussing on
establishing an integrated processing,
smelting and refining capability for low
grade ores.
The production achievements this year have
been excellent and we are excited about
the prospects that lie ahead for Sylvania as
the Company looks to the next phase of
growth and development. Our production
target for the next 12 months is to
produce 60,000 PGM ounces.
Sylvania continues to consider logical
value enhancing acquisitions, restructuring
and industry consolidation opportunities
aimed at transforming the company into a
significant PGM producer in the future.
Acknowledgements
On behalf of the Sylvania Board we want to
express our gratitude to our fellow Board
members, Dr Alistair Ruiters who retired as
non-executive Director, and pay tribute to
the Sylvania executive management team
and all employees for their contributions to
the strong performance of our Company in
what has been an eventful year. We would
also like to thank our shareholders for their
continuing support as we develop the
potential this Company has for significant,
low cost, PGM recovery operations.
•
• The Company raising its ownership
in SDO to 100% (from 74%) via a
transaction that saw Africa Asia Capital
Limited become a 19.5% shareholder in
Sylvania.
Sylvania also has under Licence a large
iron ore target in the Northern Limb
which it plans to develop separately
from the Company’s core PGM business.
Proceeds from any disposal will be passed
to Sylvania shareholders.
Shortly after the period end, on 4 July
2011 Sylvania appointed Royal Bank of
Canada as joint broker to the company.
•
Richard Rossiter
Non-Executive Chairman
Terry McConnachie
Chief Executive Officer
SYLVANIA RESOURCES LIMITED ANNUAL REPORT 2011
5
DEPUTY CEO’S REVIEW
Operating performance
A number of key initiatives intended to optimise performance
at the plants were implemented during the 2011 financial year.
Collectively, Sylvania’s five operating plants have shown consistent
improvements in production, outperforming targeted volumes
and generating positive cash flow. The positive cash inflow from
operating activities for the FY11 was $7,708,176 (versus a cash
outflow in FY10 of $2,660,627) thanks to an increase in revenue
and an unwavering focus on cost management which has made
our 2011 financial period a record year in terms of tons processed,
ounces sold increased by 61% and record Sylvania Dump Operations
(“SDO”) profits after tax of $5,659,814, a turnaround of $5,939,044.
Specifically the commissioning of the Doornbosch plant early in the
year, the commissioning of the new tailings facility at Lannex and the
heavy media separation (“HMS”) plant at Mooinooi later in the year
collectively contributed to the increased volumes and improved
recoveries. Overall, PGM plant recoveries strengthened from 40% in
FY10 to 43% in FY11 whilst PGM production for the year showed a
marked increase from 24,605 oz in FY10 to 41,013 oz this year. The
volumes of primary feed material and PGM feed were also pleasing
with a 56% and 62% increase respectively for the year.
These pleasing results are a function of the first five plants
approaching optimal operating performances. The plants are now
performing at expected levels and unit costs will improve as various
optimisation strategies come into play ensuring that we maintain
our position as one of the lowest cost PGM producers.
Sylvania Dump Operations
The SDO are operated by Sylvania Metals Proprietary Limited
(“Sylvania Metals”), a wholly owned entity of Sylvania Platinum
Limited.
During the year the Company restructured its BEE arrangement. As
part of the restructure, Sylvania Platinum amended its service and
supply agreement with Samancor Chrome Limited (“Samancor”).
As a result of this contract amendment Africa Asia Capital Limited
has taken a significant equity position in Sylvania Platinum and
Samancor continues to receive all processed chrome extracted
from the SDO on an exclusive basis.
The recently negotiated and amended contract will provide
significant benefits for Sylvania and aligns the operational interests
of both companies. The on-going relationship has also provided a
platform to explore other opportunities with Samancor.
6
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
Health, Safety and Environment
The first of Sylvania’s values is that “We value the safety and
Health of all” and believe that “Employees are at the heart of the
Company, we place their safety and health above all else in all that
we do.” This has allowed the Company to work without a Lost
Time Injury from October 2009 until April 2011 when an employee
suffered an injury to one of his fingers. Safety is never compromised
in the achievement of the record production achievements and
the Company remains committed to maintaining a zero lost time
injury rate and strives to achieve this through on-going and relevant
education and improvements to safety procedures as guided by
global best practice.
As a company that re-treats mine tailings, sound management of
the natural environment is important to Sylvania. We measure
our environmental performance against the highest international
standards while ensuring that we are compliant with the host
mine’s environmental programmes and the National Environmental
Management Act. During the year, the company only recorded two
minor incidents.
Millsell
The Millsell plant has had a good year with consistent performance.
A series of production initiatives were successfully implemented to
maintain plant feed grade. Management have known for some time
that the dump immediately associated with the plant will complete
its first pass treatment during 2011 and instituted a programme of
identifying additional feed sources for the plant. Whilst it has always
been SDO strategy to treat the dump material a second time, all
be it at lower recoveries, new feed sources have been successfully
identified. This action, combined with the current arisings fed from
the Millsell mine will allow the plant to operate profitably for many
years to come.
Further work is being done to evaluate the economics of feeding
material from the Mooinooi float plant tailings to the Millsell
operation. Should this strategy prove successful it will dramatically
improve the future production profile for the Millsell plant, both in
terms of ounce production and operational life. Initial results are
extremely encouraging.
Steelpoort
The Steelpoort plant has also had another good year with above
expectation performances being recorded. The Steelpoort plant is
approaching the end of the first pass treatment of its primary feed
dump which is due to be completed towards the end of the 2012
financial year. Current arisings and second pass treatment of the
new tailings dump will continue as planned. Potential feed of float
plant tailings from the Lannex plant may further improve profitability
and life of the plant. This action, will improve the latest life of plant
position which sees the re-treatment of the Steelpoort dump and
allows the plant to operate profitably for many years to come.
Mooinooi
Sylvania entered into a joint investment project at the Mooinooi
mine to expand the MG2 run of mine (“ROM”) capability through
the construction of an HMS plant at the Mooinooi complex, the first
part of a three stage optimisation programme.
The plant was commissioned in May 2011, on time and in budget,
and as expected, production slowed in the final quarter while
resolving anticipated commissioning issues.
The ROM throughput increases from 15,000tpm to 40,000tpm as a
result of the expansion with the ability to treat lumpy chrome ore
directly from underground and effective waste separation. The life
of the Mooinooi complex is thus extended from a 10 year dump
retreatment project to a +15 year dump and ROM operation
due to the displacement of the dump feed. While total plant feed
remains at 40,000tpm, the increased ROM feed allows better
recoveries and is expected to increase ounces produced by 220 oz
per month.
Importantly, this project allows a second phase expansion at the
Mooinooi floatation plant which involves the construction of
additional chrome spiral capacity and a second PGM floatation plant.
These improvements will see an increase in:
•
•
•
the ROM feed by 50% to 60,000tpm
the tailings retreatment, and thus the total plant feed to 75,000tpm
PGM production to +1,600oz per month.
The second expansion phase was approved by the Board in
FY11 and will be completed in the second quarter of the FY12
with capital expenditure budgeted at R54 million. This symbiotic
relationship between chrome and PGM extraction we believe has
huge merit, and as can be seen by recent results on this Mooinooi
plant, the concept of chrome subsidising platinum and platinum
subsidising chrome is an area Sylvania will be researching aggressively.
Lannex
The water licence required for the construction of the new tailings
dam was granted by the Department of Water Affairs in July 2010
and the facility was successfully completed in April 2011.
The tailings disposal facility is now fully operational and Lannex is
ramping up production as it can now handle the deposition of the
increased tonnes and is currently the largest PGM ounce producer
amongst the five plants. This position should remain until the
Mooinooi plant expansion is commissioned in Q2 of the FY12.
Various optimisation projects are underway to both improve plant
and company performance. The backfilling of the underground
workings below the plant to ensure safety has also been completed
at a once off cost of R8m.
Doornbosch
The Doornbosch PGM and chrome recovery plant was
commissioned in July 2010 and the first saleable concentrate was
produced during that month.
Designed to process 20,000tpm, the current feed consists of
ore from dumps as well as tonnage from the underground
operation which is still in development and below our production
capacity. The feed and head grade is expected to improve as the
underground mine builds up to full production.
To ensure that the Doornbosch plant is fully utilised, the float
plant has introduced a system of recirculation which has seen an
improved recovery thus allowing the plant to achieve better than
expected performances.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
7
Tweefontein
The final project study for the sixth SDO chrome and PGM plant
at Tweefontein mine was completed during FY11 and the project
received Board approval. The project has a total capital expenditure
budget of R94 million including an estimated, but still to be ratified,
R10 million set aside for the power reticulation from national
power utility, Eskom. Plant construction is to start imminently and
be completed by June 2012.
Tweefontein also has the possibility of a second phase of MG2 ore
processing, similar to that at Mooinooi, where feed could be treated
directly from underground. This symbiotic arrangement is currently
being discussed with the host mine.
Chrome Tailings Retreatment Project (CTRP)
The CTRP joint venture, in which Sylvania has a 25% interest and
which is managed and operated by Aquarius Platinum, saw a year-
on-year decrease in production. Total output dropped by 24% from
1,599 oz in FY10 to 1,219 oz in FY11. The low ounce production
was largely as a result of low feed density and numerous line
chokes in the course of the year. This project and investment is
being reassessed and shareholders will be advised shortly of the
outcome of this review.
Northern Limb Operations
Since acquiring the important near-surface exploration assets in the
Northern Limb of the Bushveld complex in 2010, we have been
able to further evaluate the resources. An independent review
provided a JORC compliant Inferred Resource on four geological
targets identified for further exploration.
A four-phase drill programme was started in September 2011
aimed at upgrading components of the current declared Inferred
Resource to Indicated category. Further drilling will be undertaken
on two of the four areas which show an elevated PGM grade, with
the intention of applying for a mining right in 2013.
Volspruit Mine and Smelter/Refinery Project
The Volspruit Project has two distinct sections; the development
of a mine and concentrator which will be run by Sylvania and the
development of a smelter and refinery complex which is planned to
be run in a joint venture in which Sylvania will have an equal share.
The Volspruit Mine has a “massive” (ore evenly distributed over
a large volume) ore body located at the southern end of the
Northern Limb of the Bushveld Igneous Complex (“BIC”),
containing both PGMs and base metals accessible by open pit.
The smelter/refinery project will be built at the mine site and will allow
the whole project to complete an “ore to metal” production line.
The project will comprise two open pit mines with combined
production of 300,000 tonnes of ore per month, feeding into three
modular floatation plants, each with a 100,000tpm ROM capacity. The
first of these three plants will be built with the mine and the remaining
two will be constructed to coincide with production ramp-up.
The smelter/refinery project will comprise a smelter complex with
a 10MW DC arc furnace and base metal refining complex using a
carbonyl vapour metal refining process.
The “ore to metal” process uses known technology constructed in a
unique configuration pioneered by this project team. The concept
trials conducted during the year have properly defined the process
and have delivered pleasing results.
8
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
DEPUTY CEO’S REVIEW
DEPUTY CEO’S REVIEW
Outlook
Sylvania is fully underway with the capital expansion projects at
Mooinooi and Tweefontein that will allow the Sylvania Dump
Operations and the CTRP to increase the total annual PGM
production from 40,000oz to 60,000oz in the 2012 financial year
and this level of production is planned to be maintained for at least
10 years.
Additional low cost PGM production should come from our
Volspruit mine, the joint venture with Aquarius Platinum at Everest
North and the development of our Northern Limb projects.
At the recent board meeting it was decided to sell off the Sylvania
Iron ore assets. Any advantage derived from this asset sale will be
distributed to shareholders.
Sylvania remains debt free with an increasing production
portfolio from existing operations and a significant new route
to increase growth.
Nigel Trevarthen
Deputy Chief Executive Officer
All comments on resources were extracted from statements
released during the year and the details of the competent persons
that assisted with the compilation of these reports are shown in the
Appendix to this document.
The major focus for the feasibility team for 2012 will be the
completion of an Environmental Impact Assessment (“EIA”). The
EIA process is well underway and this is expected to allow for
submission of the Environmental Scoping Report in Q1 FY12.
Everest North
Sylvania and Aquarius Platinum (South Africa) Proprietary Limited
(AQPSA – a wholly-owned subsidiary of Aquarius Platinum
Limited) entered into an agreement in June 2011 to investigate the
viability of extracting and processing ore from the Everest North
deposit (formerly the Vygenhoek prospecting area). A Feasibility
Committee, assisted by DRA Mining, is in the process of updating
the existing feasibility study, planned for completion by November
2011. The study is focusing on mining for PGMs at Everest North
and then processing the ore at AQPSA’s Everest South Metallurgical
Plant to produce saleable PGM concentrate.
This Committee is determining the viability of mining for PGMs at
Everest North, and it will also be responsible for preparing a Mining
Right application, planned to be submitted in January 2012. Sylvania
and AQPSA have agreed to form a joint venture company after
the successful conclusion of the feasibility. Each party will hold an
equal share and each party will appoint their own BEE partners to
comply with legislation.
Whilst effectively reducing our exposure to the resource, the long-
term benefits to Sylvania can be significant. Notwithstanding the
partnership with the world’s fourth largest platinum producer and
an opportunity to reassess the PGM resource potential, by utilising
existing plant capacity at Everest South, Sylvania has the advantage
of a vastly reduced capex bill which will increase the IRR and NPV
of the project significantly.
Human Resources
In line with restructuring and growth in the organisation, the
Company appointed three new executives to the Sylvania
management team in January 2011. We welcome Michiel van der
Merwe, Executive Officer Operations; Albert Jordaan, Executive
Officer New Business; and Lewanne Carminati, Executive Officer
Finance. We are confident that their combined experience and
expertise will bring immense value to the company.
The Company sees it as an imperative that we continue to promote
a workplace that is representative of the country’s demographics
and, at the same time, attracts and retains high calibre, high
performing employees who subscribe to the vision and values of
the company.
During the year, a recognition agreement was put in place with the
National Union of Mineworkers (“NUM”) which now enjoys majority
recognition at the operations. We successfully concluded a wage
agreement with the NUM in May 2011 for the 2012 financial year.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
9
DIRECTORS’ REPORT
DIRECTORS’ REPORT
Your directors present their report on the
consolidated entity (“the Group”) consisting of
Sylvania Platinum Limited (“the Company” or
“Sylvania”) and the entities it controlled at the end
of, or during, the financial year ended 30 June 2011.
Unless otherwise stated, the consolidated financial
information contained in this report is presented in
US Dollars.
On 26 November 2010, the directors of Sylvania
Resources Ltd (“Sylvania Resources”) announced the
intention to redomicile the holding company of the
Sylvania Group from Australia to Bermuda.
A resolution to approve a scheme of arrangement
between Sylvania Resources and its shareholders
(“Scheme”) was put to the members of Sylvania
Resources at the court ordered scheme meeting
held on 2 March 2011 and was passed in accordance
with section 411(4)(a)(ii) of the Corporations Act.
The Supreme Court of Western Australia approved
the Scheme and the Scheme subsequently became
effective on 9 March 2011. Upon implementation
of the Scheme, Sylvania Platinum Limited, a company
incorporated in Bermuda, became the ultimate holding
company of the Group.
In terms of the Scheme, Sylvania Platinum issued
Sylvania Platinum Shares to Sylvania Resources’
shareholders in exchange for their Sylvania Resources
Shares and Sylvania Platinum DIs to holders of
Sylvania Resources DIs in exchange for their Sylvania
Resources DIs. Sylvania Resources shareholders
received one Sylvania Platinum Share for each Sylvania
Resources Share held at 7.00pm (WST) on 9 March
2011 and holders of Sylvania Resources DIs received
one Sylvania Platinum DI for each Sylvania Resources
DI held at 7.00am (GMT) on the same date.
Holders of Sylvania Resources Options entered into
a binding agreement with Sylvania Resources and
Sylvania Platinum in terms of which the holder agreed
to the cancellation of the Sylvania Resources Options
in consideration for the grant by Sylvania Platinum of
an equivalent number of Sylvania Platinum Options on
terms and conditions which replicate those of Sylvania
Resources Options.
Holders of Sylvania Resources Loan Shares entered
into a binding agreement with Sylvania Resources
and Sylvania Platinum pursuant to which each Share
Loan was assigned by Sylvania Resources to Sylvania
Platinum.
Sylvania shares commenced trading on ASX on a
normal settlement basis on 25 March 2011, and
admission to trading of Sylvania shares on AIM was
granted on the same date.
10
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
Directors
The names of the Directors who held office during or since the end
of the year and until the date of this report are as follows.
TM McConnachie (Chief Executive Officer)
RD Rossiter
(Chairman)
LM Carroll
(Finance Director)
GM Button
(Executive Director)
Dr AP Ruiters
(Non-executive Director,
Resigned 2 October 2010)
The Directors of Sylvania Resources were in office from 1 July
2010 and were appointed to the Board of Sylvania Platinum on 7
September 2010.
Information on directors
TM McConnachie – Chief Executive Officer
Experience and expertise
Mr McConnachie has over 25 years of experience in mining,
benefication of ferroalloys and precious metals. He was the founder
of Merafe Resources Limited (formerly South African Chrome
& Alloys Limited), a successful chrome mining company, black
empowered and listed on the Johannesburg Stock Exchange. He
is well known for identifying mining opportunities and has started
many new green-field operations in gold, manganese, aluminium,
graphite and tantalite. He has been CEO of a number of mining,
mining services and smelting companies in South Africa.
Special responsibilities
Chief Executive Officer
LM Carroll B Com, MAP, H. Dip. Corporate Law,
H. Dip. Property Management, Dip Business
Management – Finance Director
Experience and expertise
Mr Carroll was appointed in August 2007 and acts as Finance
Director having worked for the Company previously in its South
African operations, principally in developing and structuring financial
reporting and systems. He has over 40 years’ experience in the
resources industry and has served as executive and non-executive
director on a number of private and publicly listed companies. He
also served as COO of a listed oil and gas company.
Special responsibilities
Finance Director and Joint Company Secretary
Member of the Audit committee
GM Button CPA – Executive Director
Experience and expertise
Mr Button was a director and company secretary of Sylvania
Resources Limited for four years until June 2007. He rejoined the
Sylvania Group as company secretary in January 2009 and was
appointed to the Board in May 2009. Mr Button is a qualified
accountant with 20 years’ experience at a senior management level
in the resources industry. He has acted as an executive director,
managing director, finance director, chief financial officer and
company secretary for a range of publicly listed companies.
Special responsibilities
Joint Company Secretary
Chairman of the Audit committee
RD Rossiter BSc (Hons) MSc – Non-Executive Chairman
Experience and expertise
Mr Rossiter began his career as a geologist in the South African
gold industry. He subsequently qualified in mine management and
held various production management and business development
roles. He then joined the financial sector as a mining analyst and
later was responsible for corporate advisory, mergers, acquisitions,
divestments and private equity investments. Mr Rossiter is the
Non-executive Chairman of Sylvania Platinum Limited and
Managing Director of Realm Resources Limited (both ASX listed)
and runs his own consultancy firm operating within the mining
sector. He holds a Bachelor of Science (Hons) in Geology from the
University of Natal and a MSc in Mineral Exploration from Rhodes
University in South Africa.
Company secretary
The Company secretary role is jointly held by LM Carroll and GM
Button, both directors of Sylvania Platinum Limited. Please refer to
the above Information on directors section for further details.
Principal activities
The principal activity of the Group during the financial year was
investment in mineral exploration and mineral treatment projects.
As new mineral treatment plants became operational, focus is being
concentrated on operations. Operational focus during the financial
year was concentrated on the five retreatment plants as well as
the further exploration and feasibility studies on the Volspruit and
Northern Limb projects.
Special responsibilities
Non-executive Chairman of the Board
Member of the Audit Committee
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
11
Dividends
No dividend has been paid or declared since the start of the
financial year and the directors do not recommend the payment of
a dividend in respect of the financial year.
Group financial results
Operating results for the year
The consolidated profit of the Group for the year before income
tax expense and non-controlling interest was $5,826,424 (2010:
loss $5,129,670).
Sylvania has had a record year in production and subsequently
recorded a significant financial improvement over the prior year.
Revenue increased 79% from $26,115,145 to $46,872,232 as
a result of the increased ounce production as well as steadily
improving commodity prices. A number of one-off costs impacted
the profit and loss resulting in a net profit after tax of $1,608,126
(2010: loss $7,781,911). These costs include:
• Cost of the redomicile of the Group from Australia to Bermuda
amounted to $2,303,484,
• Termination of consulting contract $1,470,942 (refer to note 4 for
further details),
• Write off of loan to previous Black economic empowerment
shareholder in Sylvania Metals Proprietary Limited of $577,544.
The cash balance at 30 June 2011 was $23,497,092 (2010:
$20,107,830). The Company has used its cash and assets in a way
which is consistent with the objectives of the business.
Review of operations
A detailed review of operations has been included in the Deputy
CEO’s report.
Significant corporate changes
Implementation of Scheme of Arrangement
Sylvania became the holding company of the Group as described at
the beginning of the Directors’ report.
Share exchange agreement with Africa Asia
Capital Limited
On 29 September 2010, Sylvania Resources Limited (“Sylvania
Resources”) announced that it had entered into a share exchange
agreement with Africa Asia Capital Limited (“AACL”), to acquire
AACL’s 26% interest in Sylvania Metals (Pty) Ltd (“Sylvania Metals”).
Sylvania Resources issued an initial tranche of 7,711,888 Sylvania
Resources Shares to a nominee of AACL on 29 September 2010.
The remaining tranche of 51,170,663 Sylvania Resources Shares
was issued to AACL’s nominee on 1 December 2010 upon receipt
of the necessary shareholder approvals. The full consideration of
58,882,551 Sylvania Resources Shares has now been issued to
AACL’s nominee, Rene Nominees (IOM) Limited, pursuant to the
terms of the Share Exchange Agreement.
In accordance with the terms of the Share Exchange Agreement,
AACL has agreed, subject to certain exceptions, that it will not
dispose of 51,170,663 Sylvania Resources Shares issued to it under
the Share Exchange Agreement for a period of 12 months from the
date of issue, being 1 December 2010, without the prior written
consent of Sylvania (which must not be unreasonably withheld or
delayed). AACL subsequently agreed that, upon implementation
of the Scheme of arrangement and the resulting redomicile of
the Group to Bermuda and subject to the same exceptions that
applied to the Sylvania Resources Shares under the Share Exchange
Agreement, it will not sell 51,170,663 of its Sylvania Platinum Shares
before 1 December 2011, without the prior written consent of
Sylvania Platinum (which must not be unreasonably withheld or
delayed).
The Share Exchange Agreement also gives AACL the right to
nominate up to two individuals for appointment to the boards of
each of Sylvania Resources and Sylvania Metals. Sylvania Platinum
has agreed that AACL has the right to nominate for appointment
up to two directors to fill casual vacancies on the board of Sylvania
Platinum. AACL has advised Sylvania Platinum that it has no current
intention to exercise its right to nominate for appointment any
directors to the board of Sylvania Platinum.
Jubilee/Sylvania alliance
Steady progress is being made by Sylvania and Jubilee Platinum Plc
(“Jubilee”) on the feasibility studies for the design and construction
of a smelter and refinery complex which will process concentrate
from the Volspruit mine which will be developed by Sylvania.
The studies are being undertaken in terms of the provisions of the
Smelting and Refining Agreement entered into between Sylvania
and Jubilee during the latter part of 2010. Under the Smelting and
Refining Agreement, the parties agreed that the study work will be
undertaken and if satisfied with the outcome, Sylvania and Jubilee
will incorporate a new company, and subscribe equally for shares in
that company, which will then conduct the smelting and refining of
the ore from Sylvania’s Volspruit mine.
12
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
DIRECTORS’ REPORT
Change in presentation currency of the Group
Following the redomicile of the holding company, and recognising
that most of the Group’s revenue is determined in US dollars,
the Group has elected to change its presentation currency from
Australian dollars to US dollars.
The majority of the Group’s sales and earnings originate in
US Dollars or US Dollar linked currencies and the change of
presentation currency to the US Dollar more closely aligns the
Group’s external financial reporting with the profile of the Group.
The change of the Group’s presentation currency has been
accounted for in accordance with IAS21, The Effects of Changes in
Foreign Exchange Rates.
The following methodology has been used to re-present the 2010
results, originally reported in Australian Dollar, into US Dollar:
•
Income and expenses have been translated at the exchange rates
at the date of the transactions,
• Assets and liabilities have been translated at the closing exchange
•
rate for each balance sheet date,
Share capital, reserves and retained earnings/accumulated losses
were converted at applicable historical rates, and
• All resulting exchange differences have been recognised in other
comprehensive income.
Likely developments and expected results
Additional comments on expected results of certain operations of
the Group are included in the review of operations and activities in
the Chairman and CEO review and the deputy CEO review.
Environmental legislation
The Group is subject to significant environmental legal regulations
in respect of its exploration and evaluation activities in South Africa.
There have been no known significant breaches of these regulations
and principles by the Group.
Meetings of directors
During the financial year there were 4 formal directors’ meetings.
All other matters that required formal Board resolutions were dealt
with via written circular resolutions and through the holding of
conference calls. In addition, the directors met on an informal basis
at regular intervals during the year to discuss the Group’s affairs.
Vygenhoek mining application (Everest North)
On 24 May 2005, Sylvania South Africa (Pty) Ltd (“Sylvania SA”)
entered into an agreement with Aquarius Platinum (SA) (Pty)
Ltd (“AQPSA”), pursuant to which Sylvania SA agreed to act as
independent contractor to manage and carry out prospecting work
at Everest North. Upon completion of the required exploration
work, Sylvania SA submitted an application for the mining right
for PGMs over Mineral Area 2 of the Vygenhoek 10TJ farm in the
Lydenburg magisterial district. However, AQPSA disputed Sylvania
SA’s right to do so and the matter was referred to arbitration.
While an arbitration hearing date was initially set for July 2010,
both parties agreed in June 2010 to explore the possibility of a
commercial settlement. On 3 June 2011 Sylvania and AQPSA
announced that they have entered into an agreement on the PGM
bearing ore on the Vygenhoek farm. A feasibility committee has
been appointed to assess and update the existing data available for
the processing of the PGM bearing ore from Everest North. This
information will enable the Committee to determine the viability of
mining for PGMs and producing a saleable concentrate. All costs
related and incidental to the engagement of independent third
party experts appointed by the feasibility committee to assist with
achieving its objectives will be borne by Sylvania. Should AQPSA
engage additional third party experts to independently verify the
feasibility study, AQPSA shall bear the costs of all such experts
employed by AQPSA to achieve those objectives.
An unincorporated joint venture (“JV”) will be formed in which
Sylvania and AQPSA will each hold a 50% share and both parties
will have equal representation on the management committee that
will manage and oversee the implementation of the project. Upon
receipt of the mining right by the Department of Mineral Resources
to AQPSA and AQPSA contributing the right to the JV, Sylvania will
pay $880,000 to AQPSA.
Share buy back
On 20 June 2011 Sylvania announced that it would implement an
on-market share buy-back of up to 10% of the issued share capital
of the Company. The share buy-back commenced on 21 June 2011
and has a maximum duration of 12 months. The buy-back is limited
to 10% of the Company’s issued share capital and will consist of
fully paid up common shares (“Shares”) on ASX and depositary
interests representing beneficial interests in Shares (“DIs”) on AIM.
The price will be limited to a maximum of 5% above the average
market price paid for Shares or DIs over the preceding five days on
which sales were recorded.
Existing cash reserves will fund the share buy-back and will cost the
Company approximately A$16.76 million (based on the market value
of Shares and DIs on 17 June 2011) should the full 10% be acquired.
The buy-back will benefit shareholders through enhanced liquidity
and forms part of the Board’s on-going capital management strategy.
At 30 June 2011 the Company had bought back a total of 10,000
Shares and 700,000 DIs with a market value of A$405,031.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
13
The number of meetings of the Company’s Board of Directors attended by each director were:
Board
Meetings
Audit Committee
Meetings
Remuneration
Committee Meetings
Other
Number of
meetings
eligible to
attend
Number
of meetings
attended
Number of
meetings eligible
to attend
Number
of meetings
attended
Number of
meetings
eligible to
attend
Number
of meetings
attended
Number of
meetings
eligible to
attend
Number
of meetings
attended
TM McConnachie
RD Rossiter
LM Carroll
GM Button
Dr AP Ruiters
4
4
4
4
1
4
4
4
4
-
-
2
2
2
1
-
2
2
2
-
1
1
1
1
-
1
1
1
1
-
3
3
3
3
-
3
3
3
3
-
Directors’ interest in shares and options
The following relevant interests in the shares and options of the Company or related body corporate were held by the directors as at the
date of this report:
Shares
2011
TM McConnachie
RD Rossiter
GM Button
Common
Shares
500,000
1,032,000
300,000
Options
No share options were held by Directors’ and key management at year end.
Directors and key management personnel
The key management personnel of the Group are the directors of the Company and those executives that report directly to the Chief
Executive Officer or as determined by the Board. Details of directors and key personnel remuneration is as follows:
Directors’ and executives’ remuneration
2011
Short Term Benefits
Post-
employment
benefits
Share-based
payment
TOTAL
Cash salary/
consulting fees
$
Bonus*
Directors’ fees
$
$
Super-
annuation
$
Equity shares/
options#
$
Directors
TM McConnachie
RD Rossiter
LM Carroll
Dr AP Ruiters
GM Button
423,054
282,597
282,793
-
265,528
1,253,972
31,278
23,550
-
-
22,078
76,906
59,334
59,334
59,334
20,154
59,334
257,490
-
5,340
-
-
5,340
10,680
Other key management @
1,130,069
62,533
-
39,852
2,384,041
139,439
257,490
50,532
* Cash bonuses were awarded to Directors and key personnel based on individual performance.
# Equity shares/options awarded to Directors and executive management are disclosed as part of remuneration in total in the reporting period granted.
@ Excludes terminated consultants previously considered key management.
-
-
-
-
-
-
-
-
$
513,666
370,821
342,127
20,154
352,280
1,599,048
1,232,454
2,831,502
14
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
DIRECTORS’ REPORT
DIRECTORS’ REPORT
Indemnification and insurance of Directors
and Officers
During the year the Company paid premiums in respect of a
contract insuring all directors and officers of the Company against
liabilities incurred as directors or officers. Due to confidentiality
clauses in the contract the amount of the premium has not been
disclosed. The Company has no insurance policy in place that
indemnifies the Company’s auditors.
Going concern
The Board of Directors are satisfied that the Company and
the Group have adequate resources to continue in operational
existence for the foreseeable future. It is for this reason that the
consolidated annual financial statements have been prepared on the
going concern basis.
Events after the reporting period
On 8 July 2011 Sylvania announced its decision to dispose of
a significant portion of its magnetite iron ore assets, subject to
shareholder and regulatory approvals. SA Metals Pty Ltd (“SA
Metals”), a wholly owned subsidiary of Sylvania currently owns the
iron assets which are located on the Northern Limb of the Igneous
Bushveld Complex.
A review of the Northern Limb assets has shown that magnetite
layers are present across the entire northern limb properties
held by Sylvania. In those areas where Sylvania does not hold
prospecting rights for the iron ore, it has submitted applications
which have since been accepted. This gives Sylvania a potential +20
kilometre strike of the magnetite layers as indicated by an airborne
magnetic survey undertaken by SA Metals.
Subsequent to the financial year end a decision was taken by the
Sylvania Board to separate the iron ore assets from the existing
Sylvania Dump Operations, and to further develop the Volspruit
open cast mine. The directors believe that the decision to divest
its iron assets will allow the Company to fully focus on reaching its
2012 financial year production targets which will include successful
optimisation of two existing plants, Lannex and Mooinooi, and
development of the Company’s sixth plant, Tweefontein. Sylvania
also expects to make significant progress at its Northern Limb near
surface PGM and base metal operation.
Signed in accordance with a resolution of the directors.
TM McConnachie
Chief Executive Officer
Johannesburg, South Africa
30 September 2011
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
15
CORPORATE GOVERNANCE
STATEMENT
Approach to Corporate Governance
Sylvania Platinum Limited (Company) has adopted systems of
control and accountability as the basis for the administration of
corporate governance. Some of these policies and procedures
are summarised in this statement. Commensurate with the
spirit of the ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations 2nd edition
(Principles & Recommendations), the Company has
followed each recommendation where the Board has considered
the recommendation to be an appropriate benchmark for its
corporate governance practices. Where the Company’s corporate
governance practices follow a recommendation, the Board has
made appropriate statements reporting on the adoption of the
recommendation. In compliance with the “if not, why not” reporting
regime, where, after due consideration, the Company’s corporate
governance practices depart from a recommendation, the Board
has offered full disclosure and an explanation for the adoption of its
own practice.
Further information about the Company’s corporate governance
practices may be found on the Company’s website at www.
sylvaniaplatinum.com, under the section marked “Corporate
Governance”.
The Company reports below on how it has followed (or otherwise
departed from) each of the Principles & Recommendations
during the 2010/2011 financial year (Reporting Period). The
Principles & Recommendations were amended in 2010, and
these amendments apply to the Company’s first financial year
commencing on or after 1 January 2011. Accordingly, disclosure
against the Principles & Recommendations as amended in 2010
will be made in relation to the Company’s financial year ending
30 June 2012. The report below is made against the Principles &
Recommendations prior to their amendment in 2010.
However, the Company has made a partial early transition to the
amended Principles and Recommendations by adopting a Diversity
Policy in accordance with the new Recommendation 3.2. A copy
of the Diversity Policy is available on the Company’s website. The
Board is in the process of establishing measurable objectives for
achieving gender diversity and will disclose the objectives, and its
progress towards achieving them, in its 2012 annual report.
Board
Roles and responsibilities of the Board and Senior
Executives
(Recommendations: 1.1, 1.3)
The Company has established the functions reserved to the Board,
and those delegated to senior executives and has set out these
functions in its Board Charter.
The Board is collectively responsible for promoting the success
of the Company through its key functions of overseeing the
management of the Company, providing overall corporate
governance of the Company, monitoring the financial performance
of the Company, engaging appropriate management commensurate
with the Company’s structure and objectives, involvement in the
development of corporate strategy and performance objectives,
and reviewing, ratifying and monitoring systems of risk management
and internal control, codes of conduct and legal compliance.
Senior executives are responsible for supporting the Chief
Executive Officer (“CEO”) and assisting the CEO in implementing
the running of the general operations and financial business of the
Company, in accordance with the delegated authority of the Board.
Senior executives are responsible for reporting all matters which fall
within the Company’s materiality thresholds at first instance to the
CEO or, if the matter concerns the CEO, directly to the Chair or
the lead independent director, as appropriate.
The Company’s Board Charter is available on the Company’s website.
Skills, experience, expertise and period of office of
each Director
(Recommendation: 2.6)
A profile of each Director setting out their skills, experience,
expertise and period of office is set out in the Directors’ Report.
16
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
Director independence
(Recommendations: 2.1, 2.2, 2.3, 2.6)
The Board does not have a majority of directors who are
independent. Only one of the four directors is independent. The
Board is of the view that it is currently structured so as to add value,
and is appropriate for the complexity of the business at this time.
The Board is aware of the importance of independent judgement,
and will consider independence, amongst other things, when any
new appointments to the Board are made.
Independent professional advice
(Recommendation: 2.6)
To assist directors with independent judgement, it is the
Board’s policy that if a director considers it necessary to obtain
independent professional advice to properly discharge the
responsibility of their office as a director then, provided the director
first obtains approval from the Chair for incurring such expense,
the Company will pay the reasonable expenses associated with
obtaining such advice.
The sole independent director of the Company is Richard Rossiter,
who is Chair of the Board. Mr Rossiter is independent as he is
a non-executive director who is not a member of management
and who is free of any business or other relationship that could
materially interfere with, or could reasonably be perceived to
materially interfere with, the independent exercise of his judgment.
The Board considers the independence of directors having
regard to the relationships listed in Box 2.1 of the Principles &
Recommendations and the Company’s materiality thresholds.
The Board has agreed on, and set out in the Company’s Board
Charter, the following guidelines for assessing the materiality of
matters:
•
•
•
Balance sheet items are material if they have a value of more than
5% of pro-forma net asset.
Profit and loss items are material if they will have an impact on the
current year operating result of 5% or more.
Items are also material if they impact on the reputation of the
Company, involve a breach of legislation, are outside the ordinary
course of business, could affect the Company’s rights to its assets,
if accumulated would trigger the quantitative tests, involve a
contingent liability that would have a probable effect of 5% or
more on balance sheet or profit and loss items, or will have an
effect on operations which is likely to result in an increase or
decrease in net income or dividend distribution of more than 5%.
• Contracts will be considered material if they are outside the
ordinary course of business, contain exceptionally onerous
provisions in the opinion of the Board, impact on income or
distribution in excess of the quantitative tests, there is a likelihood
that either party will default, and the default may trigger any of the
quantitative or qualitative tests, are essential to the activities of the
Company and cannot be replaced, or cannot be replaced without
an increase in cost which triggers any of the quantitative tests,
contain or trigger change of control provisions, are between or for
the benefit of related parties, or otherwise trigger the quantitative
tests.
The non-independent directors of the Company are Terry
McConnachie, Grant Button and Louis Carroll.
The CEO is Terry McConnachie, who is not Chair of the Board.
Selection and (Re)Appointment of Directors
(Recommendation: 2.6)
In determining candidates for the Board, the Nomination
Committee (or equivalent) follows a prescribed process whereby
it evaluates the mix of skills, experience and expertise of the
existing Board. In particular, the Nomination Committee (or
equivalent) is to identify the particular skills that will best increase
the Board’s effectiveness. Consideration is also given to the balance
of independent directors. Potential candidates are identified and, if
relevant, the Nomination Committee (or equivalent) recommends
an appropriate candidate for appointment to the Board. Any
appointment made by the Board is subject to ratification by
shareholders at the next general meeting.
The Board recognises that Board renewal is critical to performance
and the impact of Board tenure on succession planning. Each
director other than the CEO, must not hold office (without re-
election) past the third annual general meeting of the Company
following the director’s appointment or three years following that
director’s last election or appointment (whichever is the longer).
However, a director appointed to fill a casual vacancy or as an
addition to the Board must not hold office (without re-election)
past the next annual general meeting of the Company. At each
annual general meeting a minimum of one director or one third of
the total number of directors must resign. A director who retires at
an annual general meeting is eligible for re-election at that meeting.
Re-appointment of directors is not automatic.
Name of Director in office
at the date of this report*
Date appointed to office
TM McConnachie
RD Rossiter
LM Carroll
GM Button
22 June 2005
15 August 2007
15 August 2007
4 May 2009
* All directors of Sylvania Platinum were previously directors of Sylvania Resources and were
appointed as directors of Sylvania Platinum 7 September 2010.
The Company’s Policy and Procedure for the Selection and (Re)
Appointment of Directors is available on the Company’s website.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
17
Board committees
Nomination Committee
(Recommendations: 2.4, 2.6)
The Board has not established a separate Nomination Committee.
Given the current size and composition of the Board, the Board
believes that there would be no efficiencies gained by establishing a
separate Nomination Committee. Accordingly, the Board performs
the role of the Nomination Committee. Items that are usually
required to be discussed by a Nomination Committee are marked
as separate agenda items at Board meetings when required. When
the Board convenes as the Nomination Committee it carries
out those functions which are delegated to it in the Company’s
Nomination Committee Charter. The Board deals with any conflicts
of interest that may occur when convening in the capacity of
the Nomination Committee by ensuring that the director with
conflicting interests is not party to the relevant discussions.
The full Board did not officially convene as a Nomination
Committee during the Reporting Period, however nomination
related discussions occurred as required.
To assist the Board to fulfil its function as a Nomination Committee,
it has adopted a Nomination Committee Charter which describes
the role, composition, functions and responsibilities of the
Nomination Committee. A copy of the Nomination Committee
Charter is available on the Company’s website.
Audit Committee
(Recommendations: 4.1, 4.2, 4.3, 4.4)
The Board has established an Audit Committee. Given the size and
composition of the Board, the Company is unable to meet the
structural requirements of Recommendation 4.2. The members of
the Audit Committee are Richard Rossiter (independent non-
executive), Louis Carroll (non-independent executive) and Grant
Button (non-independent executive). Grant Button, who is not
Chair of the Board, chairs the Audit Committee. The Company
considers that the members of the Audit Committee are the most
appropriate, given their respective experience and qualifications, for
the Company’s current needs.
The Board has adopted an Audit Committee Charter which
describes the role, composition, functions and responsibilities of the
Audit Committee.
The Audit Committee held two meetings during the Reporting
Period. Details of the directors’ attendance at Audit Committee
meetings are set out in the Directors’ Report.
Details of each of the director’s qualifications are set out in the
Directors’ Report. All Audit Committee members possess industry
knowledge and consider themselves to be financially literate. Mr
Button is a qualified Certified Practising Accountant and provides
the financial expertise required for the Audit Committee. Mr Carroll
is a qualified accountant with over 40 years industry experience. Mr
Button and Mr Carroll provide the necessary and relevant expertise
to enable the Audit Committee to fulfil its responsibilities.
The Company has established procedures for the selection,
appointment and rotation of its external auditor. The Board is
responsible for the initial appointment of the external auditor and
the appointment of a new external auditor when any vacancy
arises, as recommended by the Audit Committee. Candidates
for the position of external auditor must demonstrate complete
independence from the Company through the engagement period.
The Board may otherwise select an external auditor based on
criteria relevant to the Company’s business and circumstances.
18
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
The performance of the external auditor is reviewed on an annual
basis by the Audit Committee and any recommendations are made
to the Board.
The Company’s Audit Committee Charter and the Company’s
Procedure for Selection, Appointment and Rotation of External
Auditor are available on the Company’s website.
Remuneration Committee
(Recommendations: 8.1, 8.2, 8.3)
The Board has not established a separate Remuneration Committee.
Given the current size and composition of the Company, the Board
believes that there would be no efficiencies gained by establishing a
separate Remuneration Committee. Accordingly, the Board performs
the role of Remuneration Committee. Items that are usually required
to be discussed by a Remuneration Committee are marked as
separate agenda items at Board meetings when required. When the
Board convenes as the Remuneration Committee it carries out those
functions which are delegated to it in the Company’s Remuneration
Committee Charter. The Board deals with any conflicts of interest
that may occur when convening in the capacity of the Remuneration
Committee by ensuring that the director with conflicting interests is
not party to the relevant discussions.
The full Board, in its capacity as the Remuneration Committee, held
one meeting during the Reporting Period. Details of the directors’
attendance at the Remuneration Committee meeting are set out in
the Directors’ Report. To assist the Board to fulfil its function as the
Remuneration Committee, the Board has adopted a Remuneration
Committee Charter which describes the role, composition,
functions and responsibilities of the Remuneration Committee.
Details of remuneration, including the Company’s policy on
remuneration, are contained in the “Remuneration Report” which
forms part of the Directors’ Report. The Company’s policy is to
remunerate non-executive directors at market rates (for comparable
companies) for time, commitment and responsibilities. Fees for
non-executive directors are not linked to the performance of the
Company. Given the Company’s stage of development, activities and
financial restrictions, the Company may consider it appropriate to
issue unlisted options to non-executive directors, subject to obtaining
the relevant approvals. This policy is subject to annual review. All
of the directors’ option holdings are fully disclosed. The maximum
aggregate amount of fees that can be paid to non-executive directors
is subject to approval by shareholders at a general meeting.
Executive pay and reward consists of a base salary and
performance incentives. Long term performance incentives may
include options granted at the discretion of the Board and subject
to obtaining the relevant approvals. The grant of options is designed
to recognise and reward efforts as well as to provide additional
incentive and may be subject to the successful completion of
performance hurdles. Executives are offered a competitive level
of base pay at market rates (for comparable companies) and are
reviewed annually to ensure market competitiveness.
There are no termination or retirement benefits for non-executive
directors (other than for superannuation).
The Company’s Remuneration Committee Charter includes a
statement of the Company’s policy on prohibiting transactions in
associated products which limit the risk of participating in unvested
entitlements under any equity based remuneration schemes.
The Company’s Remuneration Committee Charter is available on
the Company’s website.
CORPORATE GOVERNANCE STATEMENT
Performance evaluation
Senior executives
(Recommendations: 1.2, 1.3)
The CEO is responsible for evaluating the performance of senior
executives. The evaluation is undertaken by the CEO (together
with the other executive directors of the Company) at quarterly
management meetings held with each senior executive. At the
meetings, the senior executive’s targets are reviewed. In addition,
regular informal feedback is provided to senior executives.
During the Reporting Period an evaluation of senior executives
took place in accordance with the process disclosed above.
Board, its committees and individual directors
(Recommendations: 2.5, 2.6)
The Chair is responsible for evaluation of the Board and, when
appropriate, Board committees and individual directors deemed.
The Nomination Committee is responsible for evaluating the
Managing Director.
The Chair reviews the performance of the Board as a whole,
and individual directors through formal performance evaluation
questionnaires completed by individual directors. The Chair is
responsible for collating the information from the questionnaires
and taking action if there are any issues raised in the questionnaires.
The Chair provides informal performance feed back to the directors
through regular discussion on an ongoing basis.
The Nomination Committee (or equivalent) evaluates the CEO
annually by way of questionnaire. Further, at quarterly Board
meetings the Managing Director’s objectives are reviewed, and then
at an annual strategic planning session the Managing director’s key
performance indicators are reviewed and set.
During the Reporting Period an evaluation of the Board and
individual directors took place in accordance with the process
disclosed above. During the Reporting Period a formal evaluation of
the Board Committees did not occur.
Ethical and responsible decision making
Code of Conduct
(Recommendations: 3.1, 3.3)
The Company has established a Code of Conduct as to the
practices necessary to maintain confidence in the Company’s
integrity, the practices necessary to take into account its legal
obligations and the reasonable expectations of its stakeholders, and
the responsibility and accountability of individuals for reporting and
investigating reports of unethical practices.
The Company’s Code of Conduct is available on the Company
website.
Policy for Trading in Company Securities
(Recommendations: 3.2, 3.3)
The Company has established a Policy for Trading in Company
Securities by restricted persons (and their associates).
A copy of the Company’s Policy for Trading in Company Securities
is available on the Company’s website.
Continuous Disclosure
(Recommendations: 5.1, 5.2)
The Company has established written policies and procedures
designed to ensure compliance with ASX Listing Rule disclosure
requirements and accountability at a senior executive level for that
compliance.
The Company’s Policy on Continuous Disclosure is available on the
Company’s website.
Shareholder Communication
(Recommendations: 6.1, 6.2)
The Company has designed a communications policy for promoting
effective communication with shareholders and encouraging
shareholder participation at general meetings.
The Company’s Shareholder Communication Policy is available on
the Company’s website.
Risk Management
(Recommendations: 7.1, 7.2, 7.3, 7.4)
The Board has adopted a Risk Management Policy, which sets
out the Company’s risk profile. Under the policy, the Board is
responsible for approving the Company’s policies on risk oversight
and management and satisfying itself that management has
developed and implemented a sound system of risk management
and internal control.
Under the policy, the Board delegate’s day-to-day management
of risk to the CEO, who is responsible for identifying, assessing,
monitoring and managing risks. The CEO is also responsible for
updating the Company’s material business risks to reflect any
material changes, with the approval of the Board.
The responsibility for undertaking and assessing risk management
and internal control effectiveness is the responsibility of the CEO
and the Risk Management Group. The Risk Management Group
comprises senior employees and is chaired by the Finance Director.
Management is required to assess risk management and associated
internal compliance and control procedures. Management is
responsible for ensuring the process of managing risks is integrated
within business planning and management activities.
In fulfilling the duties of risk management, the CEO may have
unrestricted access to Company employees, contractors and
records and may obtain independent expert advice on any matter
they believe appropriate, with the prior approval of the Board.
The Board has established a subcommittee of the Audit
Committee to monitor and review the integrity of financial
reporting and the Company’s internal financial control systems and
risk management systems. The Board has also established a risk
committee as a sub-committee of the Audit Committee, which is
chaired by the Finance Director.
In addition, the following risk management measures have been adopted
by the Board to manage the Company’s material business risks:
•
•
•
the Board has established authority limits for management, which, if
proposed to be exceeded, requires prior Board approval;
the Board has adopted a compliance procedure for the purpose
of ensuring compliance with the Company’s continuous disclosure
obligations; and
the Board has adopted a corporate governance manual which
contains other policies to assist the Company to establish and
maintain its governance practices.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
19
CORPORATE GOVERNANCE STATEMENT
The Board has formalised and documented the management
of its material business risks. The Company’s risk management
system includes the preparation of a risk report which identifies
the Company’s material business risks, prioritises those risks and
identifies strategies to deal with those risks. The risk report is
prepared by the risk committee. The risk committee meets annually
to review and if necessary, update the Company’s risks. The risk
committee reports to the executive directors, who in turn report
to the full Board as required.
As part of the Company’s systems and processes for managing
material business risk, the Board considers the following risk areas
and has developed risk management strategies for each area. The
major areas of risks identified by the Board and management were:
operational risk; strategic risk; commodity prices; exchange rates;
financial reporting risks; environmental risk; sustainability; company
specific risk; compliance; people and market-related risk.
The Board has required management to design, implement and
maintain risk management and internal control systems to manage
the Company’s material business risks. The Board also requires
management to report to it confirming that those risks are
being managed effectively. The Board has received a report from
management as to the effectiveness of the Company’s management
of its material business risks for the Reporting Period.
The CEO and the Finance Director have provided a declaration to
the Board in accordance with section 295A of the Corporations
Act and have assured the Board that such declaration is founded on
a sound system of risk management and internal control and that
the system is operating effectively in all material respects in relation
to financial reporting risks.
The Company’s Risk Management Policy is available on the
Company’s website.
Notification of departure
Disclosure of remuneration policy and procedures
(Recommendation 8.3)
The Group operates in an industry that has a limited number of
participants. The industry is under constant pressure from skills
shortages and is exposed to a high level of staff poaching. To protect
against this, the Company considers it imprudent to disclose the
names and the exact value of remuneration received by each of
key management personnel. However, in accordance with the ASX
Principles of Good Corporate Governance, the Company advises
that the total amount paid, as set out in the Directors report, to
the key continuing management personnel includes payments in
respect of salaries, non-cash benefits such as motor vehicles and
superannuation contributions.
20
20
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
For the year ended 30 June 2011
Revenue
Cost of sales
Gross profit
Other income
Gains/(losses) on sale of property, plant and equipment
Foreign exchange loss
Loss on revaluation of assets at fair value through profit and loss
Transfer of gains on investment from equity upon acquisition of subsidiary
Impairment of mining property
Share based payment expense
Share of equity accounted jointly controlled entities net profit/(loss)
General and administrative costs
Operating profit/(loss) before finance costs and tax expense
Finance revenue
Finance costs
Profit/(loss) before income tax expense
Income tax expense
Notes
4(a)
4(b)
2011
$
46,872,232
(27,571,641)
19,300,591
465,604
1,489
(8,358)
(39,556)
-
-
(1,395,488)
(76,900)
2010
$
26,115,145
(15,550,631)
10,564,514
296,181
(48,761)
(3,030,175)
(79,353)
4,800,478
(4,313,495)
(4,480,318)
758,562
(13,430,093)
(10,192,543)
4,817,289
1,123,612
(114,477)
5
5,826,424
(4,218,298)
(5,724,910)
732,973
(137,733)
(5,129,670)
(2,652,241)
Profit/(loss) from continuing operations
1,608,126
(7,781,911)
Net profit/(loss) for the year
Other comprehensive income/(loss)
Unrealised gains reserve
Foreign currency translation
Total comprehensive income/(loss) for the year
Profit/(Loss) attributable to:
Owners of the parent
Non-controlling interest
Total comprehensive income/(loss) attributable to:
Owners of the parent
Non-controlling interest
Profit/(loss) per share for loss attributable to the ordinary equity holders of the Company:
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
6
6
0.39
0.39
The accompanying notes form part of these financial statements.
1,608,126
(7,781,911)
(48,484)
21,209,407
22,769,049
1,094,260
513,866
1,608,126
22,769,049
-
22,769,049
Cents
(4,825,555)
4,341,500
(8,265,966)
(6,981,688)
(800,223)
(7,781,911)
(7,517,726)
(748,240)
(8,265,966)
Cents
(3.11)
(3.11)
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
21
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
As at 30 June 2011
Assets
Non-current assets
Equity accounted investments in joint ventures
Other financial assets
Exploration and evaluation assets
Property, plant and equipment
Total non-current assets
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Current tax asset
Total current assets
Total assets
Equity and liabilities
Shareholders’ equity
Issued capital
Reserves
Retained profit/(Accumulated losses)
Equity attributable to the owners of the parent
Non-controlling interest
Total equity
Non-current liabilities
Interest bearing loans and borrowings
Provisions
Deferred tax liability
Total non-current liabilities
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Current tax liability
Total current liabilities
Notes
2011
$
2010
$
2009
$
7
8
9
10
11
12
13
14
15
16
17
18
5
19
17
2,814,813
500,548
76,123,444
72,843,970
3,252,972
374,456
59,388,835
65,964,307
152,282,775
128,980,570
23,497,092
20,141,830
628,065
2,591,580
46,858,567
20,107,830
11,616,944
645,655
2,242,090
34,612,519
3,179,469
6,500,319
1,464,221
52,306,514
63,450,523
25,895,421
6,309,807
353,851
1,766,163
34,325,242
199,141,342
163,593,089
97,775,765
29,639,275
114,602,077
20,450,460
164,691,812
-
147,266,101
11,376,340
(20,061,009)
138,581,432
-
164,691,812
138,581,432
298,156
974,832
27,448,194
28,721,182
5,550,646
166,522
11,180
5,728,348
378,670
801,732
18,675,536
19,855,938
4,879,653
266,066
10,000
5,155,719
92,955,717
6,990,214
(13,079,321)
86,866,610
748,240
87,614,850
187,997
731,441
3,288,382
4,207,820
5,823,450
119,936
9,709
5,953,095
Total liabilities
34,449,530
25,011,657
10,160,915
Total liabilities and shareholders’ equity
199,141,342
163,593,089
97,775,765
The accompanying notes form part of these financial statements.
22
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
For the year ended 30 June 2011
Issued
capital
Accumulated
losses
Net
unrealised
gains reserve
Share based
payment
reserve
Foreign
currency
translation
reserve
Non-control-
ling interest
reserve
Owners of
the parent
Non-control-
ling interest
Total
equity
$
$
$
$
$
$
$
$
$
92,955,717
(13,079,321)
4,678,925
2,579,798
(2,408,951)
2,140,442
86,866,610
748,240
87,614,850
Balance as at
1 July 2009
Loss for the year
Other comprehensive
income
Total comprehensive
income for the year
Share transactions
- Shares issued
- Employee share plan
loan repaid - proceeds
Share based
payment reserve
Capital raising costs
(1,083,844)
Share based payments
-
-
-
-
(6,981,688)
-
-
(4,825,555)
(6,981,688)
(4,825,555)
55,109,297
211,868
73,063
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(73,063)
-
4,995,227
-
4,289,517
4,289,517
-
-
-
-
-
-
-
-
-
-
-
-
-
-
55,109,297
211,868
-
(1,083,844)
4,995,227
Balance at
30 June 2010
147,266,101
(20,061,009)
(146,630)
7,501,962
1,880,566
2,140,442
138,581,432
(6,981,688)
(800,223)
(7,781,911)
(536,038)
51,983
(484,055)
(7,517,726)
(748,240)
(8,265,966)
-
-
-
-
-
-
55,109,297
211,868
-
(1,083,844)
4,995,227
138,581,432
Issued
capital
Share
Premium
Reserve
Retained
profits/
(Accu-
mulated
losses)
Net unre-
alised gains
reserve
Share
based
payment
reserve
Foreign
currency
translation
reserve
Non-
controlling
interest
reserve
Equity
reserve
Owners of
the parent
Non-
controlling
interest
$
$
$
$
$
$
$
$
$
$
Total
equity
$
(20,061,009)
(146,630)
7,501,962
1,880,566
2,140,442
1,094,260
-
-
(48,484)
1,094,260
(48,484)
Balance as at
1 July 2010
147,266,101
Profit for the year
Other
comprehensive
income
Total
comprehensive
income for
the year
Shares
transactions
-
-
-
- Shares issued
42,085,151
-
-
-
-
-
- Share buy back
(71,000)
(354,461)
- Capital raising
costs
(305,151)
-
2,511,039
-
- Share based
payments
- Minex share
issue
Acquisition of
non-controlling
interest
Restructure of the
Group with the
establishment of
new parent entity
Balance at
30 June 2011
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(41,919,735)
-
-
-
-
-
-
1,395,488
-
-
(8,227,817)
-
21,723,273
21,723,273
-
-
-
-
-
-
-
-
-
-
-
-
-
-
138,581,432
-
138,581,432
1,094,260
513,866
1,608,126
21,674,789
(513,866)
21,160,923
-
-
-
-
-
-
-
-
-
-
22,769,049
42,085,151
(425,461)
(305,151)
1,395,488
2,511,039
(41,919,735)
-
-
-
-
-
-
-
-
-
22,769,049
-
42,085,151
(425,461)
(305,151)
1,395,488
2,511,039
(41,919,735)
-
164,691,812
(161,846,865) 160,398,686
39,417,209
-
(29,741,213)
-
29,639,275
160,044,225
20,450,460
(195,114)
669,633
23,603,839
(39,779,293)
(29,741,213) 164,691,812
The accompanying notes form part of these financial statements.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
23
CONSOLIDATED STATEMENT
OF CASH FLOWS
For the year ended 30 June 2011
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Finance income
Other revenue
Exploration expenditure
Finance costs
Taxation paid
Notes
2011
$
39,711,612
(32,799,122)
1,169,044
-
(41,064)
(114,477)
(217,817)
Net cash inflow/(outflow) from operating activities
20
7,708,176
Investing activities
Purchase of plant and equipment
Payments for available-for-sale financial assets
Payments for exploration and evaluation
Proceeds from equity accounted investments
Proceeds from sale of plant and equipment
(6,641,194)
-
(986,365)
724,942
4,275
2010
$
20,596,586
(25,216,217)
726,495
568,705
-
-
663,804
(2,660,627)
(19,475,795)
(1,541)
(1,207,030)
639,794
106,340
Net cash outflow from investing activities
(6,898,342)
(19,938,232)
Financing activities
Proceeds from borrowings
Repayment of borrowings
Repayment of loan from related parties
Proceeds from loans from related parties
Proceeds from issue of shares
Payment for share buy back
Capital transaction costs
Net cash (outflow)/inflow from financing activities
Net decrease in cash and cash equivalents
Effect of exchange fluctuations on cash held
Cash acquired through business combination
Cash and cash equivalents beginning of period
Cash and cash equivalents, end of period
The accompanying notes form part of these financial statements.
-
332,488
(249,848)
(153,675)
3,105
-
(425,382)
(305,151)
(1,130,951)
(321,117)
3,710,379
-
20,107,830
23,497,092
-
-
65,102
16,361,200
-
(1,083,843)
15,674,947
(6,923,912)
(3,148,680)
2,593,528
27,586,894
20,107,830
11
24
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL
STATEMENTS
For the year ended 30 June 2011
1. Corporate information
The consolidated financial statements of Sylvania Platinum Limited (“Sylvania”) for the year ended 30 June 2011 were authorised
for issue in accordance with a resolution of the directors on 30 September 2011. Sylvania is a limited company incorporated and
domiciled in Bermuda whose shares are publicly traded.
The principal activity of the Group during the financial year was investment in mineral exploration and mineral treatment
projects. As new mineral treatment plants became operational, focus is being concentrated on operations. Operational focus
during the financial year was concentrated on the five retreatment plants as well as the fur ther exploration and feasibility
studies on the Volspruit and Northern Limb projects.
On 26 November 2010, Sylvania Resources Ltd announced the intention to redomicile the holding company of the Sylvania Group
from Australia to Bermuda.
A resolution to approve a scheme of arrangement between Sylvania Resources and its shareholders (“Scheme”) was put to
members of Sylvania Resources at the court ordered scheme meeting held on 2 March 2011 and was passed in accordance with
section 411(4)(a)(ii) of the Corporations Act. The Supreme Court of Western Australia approved the Scheme and the Scheme
subsequently became effective on 9 March 2011. Upon implementation of the Scheme Sylvania Platinum Limited, a company
incorporated in Bermuda, Sylvania Resources became a wholly owned subsidiary of Sylvania Platinum and Sylvania Platinum became
the ultimate holding company of the Group.
In terms of the Scheme Sylvania Platinum issued Sylvania Platinum Shares to Sylvania Resources’ shareholders (other than Ineligible
Foreign Holders) in exchange for their Sylvania Resources Shares and Sylvania Platinum DIs to holders of Sylvania Resources DIs
(other than Ineligible Foreign Holders) in exchange for their Sylvania Resources DIs. Sylvania Resources shareholders (other than
Ineligible Foreign Holders) received one Sylvania Platinum Share for each Sylvania Resources Share held at 7.00pm (WST) on 9
March 2011 and holders of Sylvania Resources DIs (other than Ineligible Foreign Holders) received one Sylvania Platinum DI for each
Sylvania Resources DI held at 7.00am (GMT) on the same date.
Holders of Sylvania Resources Options entered into a binding agreement with Sylvania Resources and Sylvania Platinum in terms of
which the holder agreed to the cancellation of the Sylvania Resources Options in consideration for the grant by Sylvania Platinum of
an equivalent number of Sylvania Platinum Options on terms and conditions which replicate those of Sylvania Resources Options.
Holders of Sylvania Resources Loan Shares entered into a binding agreement with Sylvania Resources and Sylvania Platinum pursuant
to which each Share Loan was assigned by Sylvania Resources to Sylvania Platinum.
Sylvania shares commenced trading on ASX on a normal settlement basis on 25 March 2011, and admission to trading of Sylvania
shares on AIM was granted on the same date.
The consolidated financial statements represent the ongoing activities of the Sylvania group.
2.
Significant accounting policies
2.1 Basis of preparation
The consolidated financial statements have been prepared on a historical cost basis, except for available-for-sale investments
and investments carried at fair value through profit and loss, which have been measured at fair value. The consolidated financial
information is presented in US Dollars.
Statement of compliance
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).
Changes in accounting policies and disclosures
In the current year, the Group has adopted all new and revised Standards and Interpretations issued by the International Accounting
Standards Board (“the IASB”) and the International Financial Reporting Interpretation Committee (“IFRIC”) of the IASB that are
relevant to its operations and effective for the accounting periods beginning on or after 1 July 2010. The adoption of these new and
revised Standards and Interpretations has not resulted in any changes to the Group’s accounting policies.
The Group has changed its presentation currency from Australian dollars to US dollars as detailed at note 28.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
25
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
2.1 Basis of preparation (continued)
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 30 June 2011.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to
be consolidated until the date when such control ceases.
The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent
accounting policies.
All intra-group balances, transactions, unrealised gains and losses resulting from intra-group transactions and dividends are
eliminated in full.
Where ownership of a subsidiary is less than 100%, and therefore a non-controlling interest/s exists, any losses of that subsidiary are
attributed to the non-controlling interest/s even if that results in a deficit balance.
A change in ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses
control over a subsidiary, it:
• Derecognises the assets (including goodwill) and liabilities of the subsidiary,
• Derecognises the carrying amount of any non-controlling interest,
• Derecognises the cumulative translation differences, recognised in equity,
• Recognises the fair value of the consideration received,
• Recognises the fair value of any investment retained,
• Recognises any surplus or deficit in profit or loss,
• Reclassifies the parent’s share of the components previously recognised in other comprehensive income to profit and loss or retained
earnings, as appropriate.
2.2 Significant accounting judgements, estimates and assumptions
The preparation of the Group’s consolidated financial statements in conformity with IFRS requires management to make judgements,
estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the
consolidated financial statements and reported amounts of revenues and expenses during the reporting period.
Estimates and assumptions are continuously evaluated, including expectations of future events that are believed to be reasonable
under the circumstances. However, actual outcomes can differ from these estimates.
Information about significant areas of estimation uncertainty considered by management in preparing the consolidated financial
statements is described below.
Revenue recognition
The accounting policy for sale of PGM concentrates is set out in note 2.3(a). The determination of revenue from the time of initial
recognition of the sale through to final pricing requires management to continuously re-estimate the fair value of the price adjustment
feature. Management determines this with reference to estimated forward prices using consensus forecasts.
Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity instruments
at the date at which they are granted. The fair value is determined by using a Black and Scholes model, using the assumptions detailed
in note 21.
Provision for restoration and rehabilitation and decommissioning of plant and equipment
The Group assesses its restoration and rehabilitation and decommissioning of plant and equipment provision annually. Significant
estimates and assumptions are made in determining the provision as there are numerous factors that will affect the ultimate liability
payable. These factors include estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes,
cost increases as compared to the inflation rates, and changes in discount rates. These uncertainties may result in future actual
expenditure differing from the amounts currently provided.
If the change in estimate results in an increase in the restoration and rehabilitation liability and therefore an addition to the carrying
value of the asset, the entity is required to consider whether this is an indication of impairment of the asset as a whole and test for
impairment in accordance with IAS 36.
26
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
2.2 Significant accounting judgements, estimates and assumptions (continued)
Exploration and evaluation carrying values
The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgment in determining
whether it is likely that future economic benefits are likely either from future exploitation or sale or where activities have not reached
a stage which permits a reasonable assessment of the existence of reserves. The determination of Joint Ore Reserves Committee
(JORC) resource is itself an estimation process that requires varying degrees of uncertainty depending on sub-classification and these
estimates directly impact the point of deferral of exploration and evaluation expenditure. The deferral policy requires management to
make certain estimates and assumptions about future events or circumstances, in particular whether an economically viable operation
can be established. Estimates and assumptions made may change if new information becomes available.
Recovery of deferred tax assets
Judgment is required in determining whether deferred tax assets are recognised on the statement of financial position. Deferred tax
assets, including those arising from un-utilised tax losses, require management to assess the likelihood that the Group will generate
taxable earnings in future periods, in order to utilise recognised deferred tax assets. Estimates of future taxable income are based on
forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows
and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the
reporting date could be impacted.
Additionally, future changes in tax laws in the jurisdictions in which the Group operates could limit the ability of the Group to obtain
tax deductions in future periods.
Impairment of available-for-sale financial assets
The Group follows the guidance of IAS 39 Financial Instruments: Recognition and Measurement to determine when an available-for-sale
financial asset is impaired. This determination requires significant judgement. In making this judgement, the Group evaluates, among
other factors, the duration and extent to which the fair value of an investment is less than its cost and the financial health of and
short-term business outlook for the investee, including factors such as industry and sector performance, changes in technology and
operational and financing cash flows.
Impairment of assets
The Group assesses each cash generating unit annually to determine whether any indication of impairment exists. Where an indicator
of impairment exists, a formal estimate of the recoverable amount is made, which is considered to be the higher of the fair value
less costs to sell and value in use. These assessments require the use of estimates and assumptions such as long-term commodity
prices, discount rates, future capital requirements, exploration potential and operating performance. Fair value is determined as the
amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties.
Fair value for mineral assets is generally determined as the present value of estimated future cash flows arising from the continued
use of the asset, which includes estimates such as the cost of future expansion plans and eventual disposal, using assumptions that an
independent market participant may take into account. Cash flows are discounted to their present value using a pre-tax discount rate
that reflects current market assessments of the time value of money and the risks specific to the asset. Management has assessed its
cash generating units as being an individual mine site, which is the lowest level for which cash inflows are largely independent of those
of other assets.
Contingencies
By their nature, contingencies will only be resolved when one or more uncertain future events occur or fails to occur. The assessment
of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events.
Production start date
The Group assesses the stage of each plant under construction to determine when a mine moves into the production stage being
when the plant is substantially complete and ready for its intended use. The criteria used to assess the start date are determined
based on the unique nature of each plant construction project, such as the complexity of a plant and its location. The Group considers
various relevant criteria to assess when the production phases are considered to commence and all related amounts are reclassified
from ‘Construction in progress’ to ‘Plant and equipment’. Some of the criteria used will include, but are not limited to, the following:
• Level of capital expenditure incurred compared to the original construction cost estimates,
• Completion of a reasonable period of testing of the plant and equipment,
• Ability to produce concentrate in saleable form (within specifications),
• Ability to sustain ongoing production of concentrate.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
27
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
2.2 Significant accounting judgements, estimates and assumptions (continued)
When a construction project moves into the production stage, the capitalisation of certain construction costs ceases and costs are
either regarded as forming part of the cost of inventory or expensed, except for costs that qualify for capitalisation relating to asset
additions or improvements, or reserve development. It is also at this point that depreciation/amortisation commences.
Inventories
Net realisable value tests are performed at least annually and represent the estimated future sales price of the product based on
prevailing spot metals prices at the reporting date, less estimated costs.
Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of contained gold
ounces based on assay data, and the estimated recovery percentage based on the expected processing method.
Stockpile tonnages are verified by periodic surveys.
Fair value hierarchy
Where the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from
active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to
these models are taken from observable markets where possible, but where this is not feasible, a degree of judgment is required
in establishing fair values. The judgments include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in
assumptions about these factors could affect the reported fair value of financial instruments.
2.3 Summary of significant accounting policies
(a) Revenue recognition
Revenue is recognised and measured at the fair value of the consideration received or receivable to the extent that it is probable that
the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria
must also be met before revenue is recognised:
Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer and the costs
incurred or to be incurred in respect of the transaction can be measured reliably. Risks and rewards of ownership are considered
passed to the buyer at the time of delivery of the goods to the customer.
For PGM concentrate sales, the sales are initially recognised at the date of delivery. Adjustments to the sale price occur based on
movements in the metal market price up to the date of final pricing. Final pricing is based on the monthly average market price in the
month of settlement. The period between initial recognition and final pricing is typically between 2 and 4 months. Revenue is initially
recorded at the estimated fair value of the consideration receivable. The revenue adjustment mechanism embedded within sales
arrangements has the characteristics of a commodity derivative. Accordingly the fair value of the final sales price adjustment is re-
estimated continuously and changes in fair value recognised as an adjustment to revenue in the statement of comprehensive income
and trade debtors in the statement of financial position. In all cases, fair value is determined with reference to estimated forward
prices using consensus forecast.
Interest income
For all financial instruments measured at amortised cost and interest bearing financial assets classified as available for sale, interest
income is recorded using the effective interest rate (EIR), which is the rate that exactly discounts the estimated future cash payments
or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount
of the financial asset or liability. Interest income is included in finance income in profit or loss.
(b) Borrowing costs
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial
period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing
costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection
with the borrowing of funds.
The Group capitalises borrowing costs for all eligible assets where construction was commenced on or after 1 January 2009.
Where funds are borrowed specifically to finance a project, the amount capitalised represents the actual borrowing costs incurred.
Where surplus funds are available for a short term out of money borrowed specifically to finance a project, the income generated
from the temporary investment of such amounts is also capitalised and deducted from the total capitalised borrowing cost. Where
the funds used to finance a project form part of general borrowings, the amount capitalised is calculated using a weighted average of
rates applicable to relevant general borrowings of the Group during the period.
28
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
2.3 Summary Significant accounting policies (continued)
(c) Leases
The determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at inception date;
whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to
use the asset, even if that right is not explicitly specified in an arrangement.
For arrangements entered into prior to 1 January 2005, the date of inception is deemed to be 1 January 2005 in accordance with the
transitional requirements of IFRIC 4 ‘Determining whether an Arrangement contains a Lease’.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to
the lessee. All other leases are classified as operating leases.
Assets held under finance leases are initially recognised at their fair value or, if lower, the present value of the minimum lease
payments, each determined at the inception of the lease. The corresponding liability to the lessor is included in the statement of
financial position as a finance lease obligation.
Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of
interest on the remaining balance of the liability.
Finance charges are charged directly against income, unless they are directly attributable to qualifying assets, in which case they are
capitalised in accordance with the general policy on borrowing costs - refer note 2.3(b).
Operating lease payments are recognised as an expense on a straight line basis over the lease term, except where another systematic
basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
Group as a lessee
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are
capitalised at the commencement of the lease at the fair value of the leased property or, if lower, at the present value of the minimum
lease payments. Lease payments are apportioned between finance charges and reduction of the lease liability so as to achieve a constant
rate of interest on the remaining balance of the liability. Finance charges are recognised in finance costs in profit or loss.
A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty that the Group will obtain
ownership by the end of the lease term, the asset is depreciated over the shorter of the estimated useful life of the asset and the lease term.
Operating lease payments are recognised as an operating expense in profit or loss on a straight-line basis over the lease term.
(d) Cash and cash equivalents
Cash comprises cash at bank and in hand. Cash equivalents are short term, highly liquid investments that are readily convertible
to known amounts of cash and which are subject to an insignificant risk of changes in value. Bank overdrafts are shown within
borrowings in current liabilities in the statement of financial position.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net
of outstanding bank overdrafts.
(e) Trade and other receivables
Trade receivables include actual invoiced sales of PGM concentrate as well as sales not yet invoiced for which deliveries have been
made and the risks and rewards of ownership have passed. The receivable amount calculated for the PGM concentrate delivered but
not yet invoiced is recorded at the fair value of the consideration receivable at the date of delivery. At each subsequent reporting
date the receivable is restated to reflect the fair value movements in the pricing mechanism which is considered to represent an
embedded derivative.
Other receivables are stated at cost less any allowance for uncollectable amounts. An allowance is made when there is objective
evidence that the Group will not be able to collect debts. Bad debts are written off when identified.
(f)
Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and conditions are accounted for as follows:
• Raw materials – purchase cost on a first-in, first-out basis; and
• Finished goods and work-in-progress – cost of direct materials and labour and a proportion of manufacturing overheads based on
normal operating capacity but excluding borrowing costs.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
29
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
2.3 Summary Significant accounting policies (continued)
(g) Foreign currency translation
The consolidated financial statements are stated in US Dollars. Each entity in the Group determines its own functional currency and
items included in each entity are measured using that functional currency.
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rates ruling at the date of
the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the
balance date.
All exchange differences are taken to profit or loss with the exception of differences on foreign currency borrowings that provide a
hedge against a net investment in a foreign entity. These are taken directly to equity until the disposal of the net investment, at which
time they are recognised in profit or loss.
As at the reporting date, the assets and liabilities of the subsidiaries are translated into the presentation currency of the Company
at the rate of exchange ruling at the balance date and their statements of comprehensive income are translated at the weighted
average exchange rate for the year.
The exchange differences arising on the translation are taken directly to a separate component of equity.
On disposal of a foreign entity, the deferred cumulative amount recognised in equity relating to that particular foreign operation is
recognised in profit or loss.
(h)
Interest in jointly controlled entities
A jointly controlled entity is a corporation, partnership or other entity in which each venturer holds an interest. A jointly controlled
entity operates in the same way as other entities, except that a contractual arrangement establishes joint control. A jointly controlled
entity controls the assets of the joint venture, earns its own income and incurs its own liabilities and expenses. Interests in jointly
controlled entities are accounted for using the equity method.
Under the equity method, the investment in the joint venture is carried in the statement of financial position at cost plus post
acquisition changes in the Group’s share of net assets of the joint venture. Goodwill relating to the joint venture is included in the
carrying amount of the investment and is neither amortised nor individually tested for impairment.
The profit or loss reflects the Group’s share of the results of operations of the joint venture. Where there has been a change
recognised directly in other comprehensive income or equity of the joint venture, the Group recognises its share of any changes
and discloses this, when applicable, in the statement of comprehensive income or the statement of changes in equity, as appropriate.
Unrealised gains and losses resulting from transactions between the Group and the joint venture are eliminated to the extent of the
interest in the joint venture.
The share of the joint venture’s net profit/(loss) is shown on the face of the Statement of comprehensive income. The financial
statements of the jointly controlled entity are prepared for the same reporting period as the Group. Where necessary, adjustments
are made to bring the accounting policies in line with those of the Group.
Current income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or
paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively
enacted, at the reporting date, in the countries where the Group operates and generates taxable income.
(i)
Income tax
Current income tax
Current income tax relating to items recognised directly in other comprehensive income or equity is recognised in other
comprehensive income or equity and not in profit or loss . Management periodically evaluates positions taken in the tax returns with
respect to situations in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.
Deferred income tax
Deferred income tax is provided using the balance sheet method on temporary differences at the reporting date between the tax
bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable temporary differences, except:
• Where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not
•
a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit; and
In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where
the timing of the reversal of the temporary differences can be controlled by the parent, investor or venturer and it is probable that the
temporary differences will not reverse in the foreseeable future.
30
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
2.3 Summary Significant accounting policies (continued)
(i)
Income tax (continued)
Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused
tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and
the carry forward of unused tax credits and unused tax losses can be utilised, except:
• Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or
liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor
taxable profit or loss; and
In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures,
deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the
foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
•
The carrying amount of deferred income tax assets is reviewed at the end of each reporting period and reduced to the extent that it
is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at the end of each reporting period and are recognised to the extent that it
has become probable that future taxable profit will be available to allow the deferred tax asset to be recovered. Deferred income tax
assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is
settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets
against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.
Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at that date, would
be recognised subsequently if new information about facts and circumstances arose. The adjustment would either be treated as a
reduction to goodwill (as long as it does not exceed goodwill) if it occurred during the measurement period or in profit or loss.
Royalties, resource rent tax and revenue based taxes
Royalties, resource rent taxes and revenue-based taxes are accounted for under IAS 12 when they have the characteristics of
an income tax. This is considered to be the case when they are imposed under government authority and the amount payable is
based on taxable income - rather than based on quantity produced or as a percentage of revenue - after adjustment for temporary
differences. For such arrangements, current and deferred tax is provided on the same basis as described above for other forms of
taxation. Obligations arising from royalty arrangements that do not satisfy these criteria are recognised as current provisions and
included in cost of sales.
Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax except:
• Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case, the sales
tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable.
• Receivables and payables that are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in
the statement of financial position.
(j) Business combinations
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate
of the consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the
acquiree. For each business combination, the acquirer measures the non-controlling interest in the acquiree either at fair value
or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed and included in
administrative expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date.
This includes the separation of embedded derivatives in host contracts by the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the
acquiree is remeasured to fair value as at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in accordance
with IAS 39 either in profit or loss or as change to other comprehensive income. If the contingent consideration is classified as equity,
it is not remeasured until it is finally settled within equity.
Goodwill is initially measured at cost being the excess of the aggregate of the consideration transferred and the amount recognised
for non-controlling interest over the fair value of the net identifiable assets acquired and liabilities assumed. If this consideration is
lower than the fair value of the net identifiable assets of the subsidiary acquired, the difference is recognised in profit or loss.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
31
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
2.3 Summary Significant accounting policies (continued)
(j) Business combinations (continued)
After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing,
goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are
expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated
with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of
the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and
the portion of the cash-generating unit retained.
(k) Property, plant and equipment
Upon completion of mine construction, the assets are transferred into property, plant and equipment or mine properties. Items of
property, plant and equipment and mine properties are stated at cost, less accumulated depreciation and accumulated impairment losses.
The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset
into operation, the initial estimate of the rehabilitation obligation, and for qualifying assets, borrowing costs. The purchase price or
construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. The capitalised
value of a finance lease is also included within property, plant and equipment.
When a mine construction project moves into the production stage, the capitalisation of certain mine construction costs ceases and
costs are either regarded as part of the cost of inventory or expensed, except for costs which qualify for capitalisation relating to
mining asset additions or improvements, underground mine development or mineable reserve development.
Depreciation/amortisation
Accumulated mine/plant development costs are depreciated/amortised on a unit-of-production basis over the economically
recoverable reserves of the mine concerned, except in the case of assets whose useful life is shorter than the life of the mine, in
which case the straight-line method is applied. The unit of account for run of mine (ROM) costs are tonnes of ore whereas the unit
of account for post-ROM costs are recoverable ounces of platinum group metals and recoverable tonnes of copper. Rights and
concessions are depleted on the unit-of-production basis over the total reserves of the relevant area. The unit-of-production rate for
the depreciation/amortisation of mine development costs takes into account expenditures incurred to date, together with sanctioned
future development expenditure.
The premium paid in excess of the intrinsic value of land to gain access is amortised over the life of mine.
Other plant and equipment such as mobile mine equipment is generally depreciated on a straight-line basis over their estimated
useful lives as follows:
• Mining properties, plant and equipment - 10 years
• Motor vehicles - 5 years
• Office equipment - 5 years
• Computer equipment and software - 3 years
• Leasehold improvements - 3 years
• Furniture and fittings - 6 years
An item of property, plant and equipment and any significant part initially recognised is derecognised upon disposal or when no
future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated
as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss when the
asset is derecognised.
The asset’s residual values, useful lives and methods of depreciation/amortisation are reviewed at each reporting period, and adjusted
prospectively if appropriate.
Major maintenance and repairs
Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets and overhaul costs.
Where an asset or part of an asset that was separately depreciated and is now written off is replaced, and it is probable that future
economic benefits associated with the item will flow to the Group through an extended life, the expenditure is capitalised.
Where part of the asset was not separately considered as a component, the replacement value is used to estimate the carrying
amount of the replaced assets which is immediately written off. All other day to day maintenance costs are expensed as incurred.
32
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
Significant accounting policies (continued)
2.
2.3 Summary Significant accounting policies (continued)
(l)
Financial instruments – initial recognition and subsequent measurement
Financial assets
Initial recognition and measurement
Financial assets within the scope of IAS 39 ‘Financial Instruments: Recognition and Measurement’ are classified as financial assets at
fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale financial assets, or as derivatives
designated as hedging instruments in an effective hedge, as appropriate. The Group determines the classification of its financial assets
at initial recognition.
All financial assets are recognised initially at fair value plus, in the case of investments not at fair value through profit or loss, directly
attributable transaction costs.
Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the
marketplace (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.
The Group’s financial assets include cash and short-term deposits, trade and other receivables, loans and other receivables, quoted
and unquoted financial instruments and derivative financial instruments.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as follows:
Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss includes financial assets held for trading and financial assets designated upon initial
recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of
selling or repurchasing in the near term. This category includes any derivative financial instruments entered into by the Group that
are not designated as hedging instruments in hedge relationships as defined by IAS 39. Derivatives, including separated embedded
derivatives are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets at fair
value through profit or loss are carried in the statement of financial position at fair value with changes in fair value recognised in
finance income or finance costs in profit or loss.
The Group evaluated its financial assets as held for trading, other than derivatives, to determine whether the intention to sell them in
the near term is still appropriate. When the Group is unable to trade these financial assets due to inactive markets and management’s
intention to sell them in the foreseeable future significantly changes, the Group may elect to reclassify these financial assets in rare
circumstances. The reclassification to loans and receivables, available for sale or held to maturity depends on the nature of the asset.
This evaluation does not affect any financial assets designated at fair value through profit or loss using the fair value option at designation.
Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic
characteristics and risks are not closely related to those of the host contracts and the host contracts are not held for trading or
designated at fair value though profit or loss. These embedded derivatives are measured at fair value with changes in fair value
recognised in profit or loss. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the
cash flows that would otherwise be required.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate
method (EIR), less impairment. 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 in finance income in profit or loss. The losses arising from
impairment are recognised in profit or loss in finance costs.
Derecognition
A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised when:
• The rights to receive cash flows from the asset have expired.
• 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 pass-through arrangement, and
has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is
recognised to the extent of the Group’s continuing involvement in the asset.
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.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
33
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
2.3 Summary Significant accounting policies (continued)
(l)
Financial instruments – initial recognition and subsequent measurement (continued)
Impairment of financial assets
The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial
assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence
of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’)
and that loss event has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be
reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors are experiencing significant
financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other
financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows,
such as changes in arrears or economic conditions that correlate with defaults.
Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first assesses individually whether objective evidence of impairment exists
individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If
the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant
or not, it includes the asset in a group of financial assets with similar credit risk characteristics and collectively assesses them for
impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised
are not included in a collective assessment of impairment.
If there is objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between
the asset’s carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not
yet been incurred). The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest
rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate.
The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in
profit or loss. Interest income continues to be accrued on the reduced carrying amount and is accrued using the rate of interest
used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded as part of
finance income in profit or loss. Loans together with the associated allowance are written off when there is no realistic prospect of
future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the
estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously
recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the
recovery is credited to finance costs in profit or loss.
Financial liabilities
Initial recognition and measurement
Financial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans and
borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group determines the
classification of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value and in the case of loans and borrowings, plus directly attributable transaction costs.
The Group’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings, financial guarantee contracts,
and derivative financial instruments.
Subsequent measurement
The measurement of financial liabilities depends on their classification as follows:
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon
initial recognition as at fair value through profit or loss.
Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This category includes
derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships as defined
by IAS 39. Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.
Gains or losses on liabilities held for trading are recognised in profit or loss.
The Group has not designated any financial liabilities upon initial recognition as at fair value through profit or loss.
34
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
2.3 Summary Significant accounting policies (continued)
(l)
Financial instruments – initial recognition and subsequent measurement (continued)
Interest-bearing loans and borrowings
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective
interest rate (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 in finance costs in profit or loss.
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 a derecognition of the original liability and the recognition of a
new liability, and the difference in the respective carrying amounts is recognised in the statement of comprehensive income.
Offsetting of financial instruments
Financial assets and financial liabilities are offset and the net amount reported in the consolidated statement of financial position if,
and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net
basis, or to realise the assets and settle the liabilities simultaneously.
Fair value of financial instruments
The fair value of financial instruments that are traded in active markets at each reporting date is determined by reference to quoted
market prices or dealer price quotations (bid price for long positions and ask price for short positions), without any deduction for
transaction costs.
For financial instruments not traded in an active market, the fair value is determined using appropriate valuation techniques. Such
techniques may include using recent arm’s length market transactions; reference to the current fair value of another instrument that is
substantially the same; a discounted cash flow analysis or other valuation models.
An analysis of fair values of financial instruments and further details as to how they are measured are provided in note 22.
Current versus non-current classification
Derivative instruments that are not designated as effective hedging instruments are classified as current or non-current or separated into
a current and non-current portion based on an assessment of the facts and circumstances (i.e., the underlying contracted cash flows).
• Where the Group will hold a derivative as an economic hedge (and does not apply hedge accounting) for a period beyond 12 months
after the reporting date, the derivative is classified as non-current (or separated into current and non-current portions) consistent with
the classification of the underlying item.
• Embedded derivates that are not closely related to the host contract are classified consistent with the cash flows of the host contract.
• Derivative instruments that are designated as, and are effective hedging instruments, are classified consistently with the classification of
the underlying hedged item. The derivative instrument is separated into a current portion and a non-current portion only if a reliable
allocation can be made.
Normal purchase or sale exemption
Contracts that were entered into and continue to be held for the purpose of the receipt or delivery of a non-financial item in
accordance with the Group’s expected purchase, sale or usage requirements fall within the exemption from IAS 32 and IAS 39, which
is known as the ‘normal purchase or sale exemption’ (with the exception of those with quotational period clauses, which result in
the recognition of an embedded derivative. Refer note 2.3(k) for more information). For these contracts and the host part of the
contracts containing embedded derivatives, they are accounted for as executory contracts. The Group recognises such contracts in
its statement of financial position only when one of the parties meets its obligation under the contract to deliver either cash or a
non-financial asset.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
35
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
2.3 Summary Significant accounting policies (continued)
(m) Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists,
or when annual impairment testing for an asset is required, the Group estimates the asset’s recoverable amount. An asset’s
recoverable amount is the higher of an asset’s or cash-generating unit’s (CGU) fair value less costs to sell and its value in use
and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those
from other assets or groups of assets, in which case the asset is tested as part of a larger CGU. Where the carrying amount of an
asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less
costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate
valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded
subsidiaries or other available fair value indicators.
The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of
the Group’s cash-generating units to which the individual assets are allocated.
Impairment losses of continuing operations, including impairment of inventories, are recognised in profit or loss in those expense
categories consistent with the function of the impaired asset, except for a property previously revalued where the revaluation was
taken to other comprehensive income. In this case, the impairment is also recognised in other comprehensive income up to the
amount of any previous revaluation.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s
or cash-generating unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change
in the assumptions used to determine the asset’s recoverable amount since the last impairment loss was recognised. The reversal
is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that
would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal
is recognised in profit or loss unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation
increase and is recognised through other comprehensive income.
(n) Trade and other payables
Trade payables and other payables are carried at amortised cost and represent liabilities for goods and services provided to the
Group prior to the end of the financial year that are unpaid and arise when the Group becomes obliged to make future payments in
respect of the purchase of these goods and services.
(o) Provisions
Where applicable, provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past
event, 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.
When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement
is recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is
presented in the statement of comprehensive income net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks
specific to the liability.
When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Rehabilitation provision
The Group records the present value of estimated costs of legal and constructive obligations required to restore operating locations
in the period in which the obligation is incurred. The nature of these restoration activities includes dismantling and removing
structures, rehabilitating mines and tailings dams, dismantling operating facilities, closure of plant and waste sites, and restoration,
reclamation and re-vegetation of affected areas.
The obligation generally arises when the asset is installed or the ground/environment is disturbed at the production location. When the
liability is initially recognised, the present value of the estimated costs is capitalised by increasing the carrying amount of the related mining
assets to the extent that it was incurred by the development/construction of the mine. Over time, the discounted liability is increased for the
change in present value based on the discount rates that reflect current market assessments and the risks specific to the liability.
The periodic unwinding of the discount is recognised in profit or loss as a finance cost. Additional disturbances or changes in
rehabilitation costs will be recognised as additions or charges to the corresponding assets and rehabilitation liability when they occur.
For closed sites, changes to estimated costs are recognised immediately in profit or loss.
36
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
Significant accounting policies (continued)
2.
2.3 Summary Significant accounting policies (continued)
(p) Employee leave benefits
Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary benefits, annual leave and accumulating sick leave due to be settled within
12 months of the reporting date are recognised in other payables in respect of employees’ services up to the reporting date. They
are measured at the amounts expected to be paid when the liabilities are settled. Liabilities for non-accumulating sick leave are
recognised when the leave is taken and are measured at the rates paid or payable.
(q) Share-based payment transactions
Equity settled transactions
The Group provides benefits to employees and consultants (including senior executives) of the Group in the form of share-based
payments, whereby employees render services in exchange for shares or rights over shares (equity-settled transactions).
The cost of these equity-settled transactions with employees and consultants is measured by reference to the fair value of the equity
instruments at the date at which they are granted. The fair value is determined by using the Black and Scholes model, further details
of which are given in note 21.
In valuing equity-settled transactions, no account is taken of any performance conditions, other than conditions linked to the price of
the shares of the Company (market conditions) if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which the
performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the
award (the vesting period).
The cumulative expense recognised for equity-settled transactions at each reporting date until vesting date reflects (i) the extent to
which the vesting period has expired and (ii) the Group’s best estimate of the number of equity instruments that will ultimately vest.
No adjustment is made for the likelihood of market performance conditions being met as the effect of these conditions is included
in the determination of fair value at grant date. The income statement charge or credit for a period represents the movement in
cumulative expense recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is only conditional upon a
market condition.
If the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In
addition, an expense is recognised for any modification that increases the total fair value of the share-based payment arrangement, or
is otherwise beneficial to the employee, as measured at the date of modification.
If an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised
for the award is recognised immediately. However, if a new award is substituted for the cancelled award and designated as a
replacement award on the date that it is granted, the cancelled and new award are treated as if they were a modification of the
original award, as described in the previous paragraph.
The dilutive effect of outstanding shares and options issued is reflected as additional share dilution in the computation of earnings per
share (see note 6).
(r)
Issued capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in
equity as a deduction, net of tax, from the proceeds.
Treasury shares (employee share plan shares) are deducted from equity and no gain or loss is recognised in profit and loss on
purchase, sale, issue or cancellation of the Groups’ own equity instruments.
(s) Earnings per share
Basic earnings per share is calculated as net profit or loss attributable to members of the parent, adjusted to exclude any costs of
servicing equity (other than dividends) and preference share dividends, divided by the weighted average number of ordinary shares.
Diluted earnings per share are calculated as net profit or loss attributable to members of the parent, adjusted for:
• Costs of servicing equity (other than dividends) and preference share dividends;
• The after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as
expenses; and
• Other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential
ordinary shares,
• Divided by the weighted average number of ordinary shares and dilutive potential ordinary shares.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
37
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
2.3 Summary Significant accounting policies (continued)
(t)
Interest-bearing loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective
interest method.
Gains and losses are recognised in profit or loss when the liabilities are derecognised.
(u) Exploration and evaluation
Exploration and evaluation expenditures in relation to each separate area of interest are recognised as an exploration and evaluation
asset in the year in which they are incurred where the following conditions are satisfied:
(i) the rights to tenure of the area of interest are current; and
(ii) at least one of the following conditions is also met:
-
the exploration and evaluation expenditures are expected to be recouped through successful development and exploration of the
area of interest, or alternatively, by its sale; or
- exploration and evaluation activities in the area of interest have not at the balance date reached a stage which permits a reasonable
assessment of the existence or otherwise of economically recoverable reserves, and active and significant operations in, or in
relation to, the area of interest are continuing.
Exploration and evaluation assets are initially measured at cost and include acquisition of rights to explore, studies, exploratory drilling,
trenching and sampling and associated activities and an allocation of depreciation and amortisation of assets used in exploration
and evaluation activities. General and administrative costs are only included in the measurement of exploration and evaluation costs
where they are related directly to operational activities in a particular area of interest.
Exploration and evaluation assets are assessed for impairment when facts and circumstances suggest that the carrying amount
of an exploration and evaluation asset may exceed its recoverable amount. The recoverable amount of the exploration and
evaluation asset (for the cash generating unit(s) to which it has been allocated being no larger than the relevant area of interest)
is estimated to determine the extent of the impairment loss (if any). Where an impairment loss subsequently reverses, the
carrying amount of the asset is increased to the revised estimate of its recoverable amount, but only to the extent that the
increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been
recognised for the asset in previous years.
Where a decision has been made to proceed with development in respect of a particular area of interest, the relevant exploration
and evaluation asset is tested for impairment and the balance is then reclassified to mine property in development.
Exploration and evaluation assets acquired in a business combination are initially recognised at fair value. They are subsequently
measured at cost less accumulated impairment.
Once JORC compliant reserves are established and development is sanctioned, exploration and evaluation assets are tested for
impairment and transferred to ‘Mines under construction’. No amortisation is charged during the exploration and evaluation phase.
38
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
2.4 New Standards and Interpretations
Future Accounting Standards
Certain International Financial Reporting Standards and IFRIC Interpretations have recently been issued or amended but are not yet
effective and have not been adopted by the Group from the annual reporting period ended on 30 June 2011. The Directors have not
assessed the impact of the new or revised standards and interpretations.
Application
date of
standard*
Application
date for
Group*
1 January 2013
1 July 2013
1 January 2011
1 July 2011
Reference
Title
Summary
IFRS 9
Financial
Instruments
IAS 24 (Revised)
Related Party
Disclosures
(December
2009)
IFRS 9 includes requirements for the classification and measurement
of financial assets resulting from the first part of Phase 1 of the
IASB’s project to replace IAS 39 Financial Instruments: Recognition
and Measurement.
These requirements improve and simplify the approach for
classification and measurement of financial assets compared with
the requirements of IAS 39. The main changes from IAS 39 are
described below.
(a) Financial assets are classified based on (1) the objective of the
entity’s business model for managing the financial assets; (2) the
characteristics of the contractual cash flows. This replaces the
numerous categories of financial assets in IAS 39, each of which
had its own classification criteria.
(b) IFRS 9 allows an irrevocable election on initial recognition to
present gains and losses on investments in equity instruments
that are not held for trading in other comprehensive income.
Dividends in respect of these investments that are a return on
investment can be recognised in profit or loss and there is no
impairment or recycling on disposal of the instrument.
(c) Financial assets can be designated and measured at fair
value through profit or loss at initial recognition if doing so
eliminates or significantly reduces a measurement or recognition
inconsistency that would arise from measuring assets or
liabilities, or recognising the gains and losses on them, on
different bases.
The revised IAS 24 simplifies the definition of a related party,
clarifying its intended meaning and eliminating inconsistencies from
the definition, including:
(a) The definition now identifies a subsidiary and an associate with
the same investor as related parties of each other.
(b) Entities significantly influenced by one person and entities
significantly influenced by a close member of the family of that
person are no longer related parties of each other.
(c) The definition now identifies that, whenever a person or entity
has both joint control over a second entity and joint control
or significant influence over a third party, the second and third
entities are related to each other.
A partial exemption is also provided from the disclosure
requirements for government-related entities. Entities that are
related by virtue of being controlled by the same government can
provide reduced related party disclosures.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
39
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
2.4 New Standards and Interpretations (continued)
Reference
Title
Summary
Improvements
to IFRS
Further
Amendments
to International
Accounting
Standards
arising from
the Annual
Improvements
Project [IFRS
1,IFRS 7, IAS
1,IAS 34 and
IFRIC 13]
Emphasises the interaction between quantitative and qualitative IAS 7
disclosures and the nature and extent of risks associated with financial
instruments.
Clarifies that an entity will present an analysis of other comprehensive
income for each component of equity, either in the statement of
changes in equity or in the notes to the financial statements.
Provides guidance to illustrate how to apply disclosure principles in
IAS 34 for significant events and transactions.
Clarifies that when the fair value of award credits is measured based
on the value of the awards for which they could be redeemed, the
amount of discounts or incentives otherwise granted to customers not
participating in the award credit scheme, is to be taken into account.
Application
date of
standard*
Application
date for
Group*
1 January 2011
1 July 2011
IFRS 7 (Revised)
Disclosures
The amendments increase the disclosure requirements for
transactions involving transfers of financial assets. Disclosures require
enhancements to the existing disclosures in IFRS 7 where an asset is
transferred but is not derecognised and introduce new disclosures
for assets that are derecognised but the entity continues to have a
continuing exposure to the asset after the sale.
1 July 2011
1 July 2011
IFRS 10
Consolidated
Financial
Statements
IFRS 10 establishes a new control model that applies to all entities. It
replaces parts of IAS 27 Consolidated and Separate Financial Statements
dealing with the accounting for consolidated financial statements
and SIC-12 Consolidation – Special Purpose Entities.
1 January 2013
1 July 2013
IFRS 11
Joint
Arrangements
IFRS 12
Disclosure of
Interests in
Other Entities
The new control model broadens the situations when an entity is
considered to be controlled by another entity and includes new
guidance for applying the model to specific situations, including
when acting as a manager may give control, the impact of potential
voting rights and when holding less than a majority voting rights
may give control.
IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC-13 Jointly-
controlled Entities – Non-monetary Contributions by Ventures. IFRS 11
uses the principle of control in IFRS 10 to define joint control, and
therefore the determination of whether joint control exists may
change. In addition IFRS 11 removes the option to account for jointly
controlled entities (JCEs) using proportionate consolidation. Instead,
accounting for a joint arrangement is dependent on the nature of the
rights and obligations arising from the arrangement. Joint operations
that give the venturers a right to the underlying assets and obligations
themselves is accounted for by recognising the share of those assets
and obligations. Joint ventures that give the venturers a right to the net
assets is accounted for using the equity method.
IFRS 12 includes all disclosures relating to an entity’s interests in
subsidiaries, joint arrangements, associates and structures entities.
New disclosures have been introduced about the judgements made
by management to determine whether control exists, and to require
summarised information about any joint arrangements, associates and
structured entities and subsidiaries with non-controlling interests.
1 January 2013
1 July 2013
1 January 2013
1 July 2013
40
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
2.
Significant accounting policies (continued)
2.4 New Standards and Interpretations (continued)
Reference
Title
Summary
IFRS 13
Fair Value
Measurement
Amendments to
IAS 1
Presentation
of Financial
Statements
IFRS 13 establishes a single source of guidance under IFRS for
determining the fair value of assets and liabilities. IFRS 13 does
not change when an entity is required to use fair value, but rather,
provides guidance on how to determine fair value under IFRS
when fair value is required or permitted by IFRS. Application of this
definition may result in different fair values being determined for the
relevant assets.
IFRS 13 also expands the disclosure requirements for all assets or
liabilities carried at fair value. This includes information about the
assumptions made and the qualitative impact of those assumptions
on the fair value determined.
The amendments to IAS 1 Presentation of Financial Statements
require companies preparing financial statements in accordance with
IFRSs to group together items within OCI that may be reclassified to
the profit or loss section of the income statement. The amendments
also reaffirm existing requirements that items in OCI and profit
or loss should be presented as either a single statement or two
consecutive statements.
Application
date of
standard*
Application
date for
Group*
1 January 2013
1 July 2013
1 July 2012
1 July 2012
IAS 19 (Revised)
Employee
Benefits
The main amendments to the standard relating to defined benefit
plans are as follows:
1 January 2013
1 July 2013
(a) Elimination of the option to defer the actuarial gains or losses
(the ‘corridor method’);
(b) Remeasurements (essentially actuarial gains and losses) to be
presented in other comprehensive income;
(c) Past service costs will be expensed when the plan amendments
occur regardless of whether or not they are vested; and
(d) Enhanced disclosure for Tier 1 entities.
The distinction between short-term and other long-term employee
benefits under the revised standard is now based on expected
timing of settlement rather than employee entitlement.
The revised standard also requires termination benefits (outside of a
wider restructuring) to be recognised only when the offer becomes
legally binding and cannot be withdrawn.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
41
NOTES TO THE FINANCIAL STATEMENTS
3.
Segment reporting
Segment information
For management purposes the chief operating decision maker, being the Board of Directors of Sylvania Platinum Limited, reports its results
per project. The Group currently has the following segments:
• five operational retreatment processing plants:
- Millsell
Steelpoort
-
-
Lannex
- Mooinooi
- Doornbosch
• an open cast mining exploration project and a northern limb exploration project which is currently in the drilling stage.
The operating results of each project are monitored separately by the Board in order to assist them in making decisions regarding resource
allocation as well as enabling them to evaluate performance. Segment performance is evaluated on PGM ounce production and operating
costs. The Group’s financing (including finance costs and finance income) and income taxes are managed on a group basis and are not
allocated to operating segments.
The following table’s present revenue and profit information and certain asset and liability information regarding business segments for the
years ended 30 June 2011 and 30 June 2010.
The accounting policies used by the Group in reporting segments internally are the same as those contained in note 2.3 of the accounts.
Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.
2011
Millsell
Steelpoort
Lannex
Mooinooi Doornbosch
Exploration
projects
Corporate/
Unallocated Consolidated
$
$
$
$
$
$
$
$
Segment assets
Capital expenditure
5,937,675
6,748,337
20,713,663
23,405,248
12,320,918
74,373,457
5,468,115 (a)
148,967,413
Other assets
3,705,840
4,513,557
4,206,086
3,351,443
3,299,122
550,306
30,547,575 (b)
50,173,929
Segment liabilities
560,134
636,652
1,040,858
1,008,771
572,061
679,250
29,951,804 (c)
34,449,830
Segment revenue
10,751,068
13,109,859
Segment result
6,757,580
7,318,893
7,948,114
1,604,510
7,949,646
1,003,665
7,113,545
2,703,965
Unallocated expenses
Total segment profit
Included within the
segment results:
Depreciation
880,879
921,333
Direct operating costs
3,112,609
4,869,633
2,028,515
4,315,089
2,281,934
4,664,046
1,230,475
3,179,105
Impairment of loan
Interest revenue
Income tax expense
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(88,022)
46,872,232
19,300,591
(17,692,465) (d)
(17,692,465)
1,608,126
180,573
-
577,544
1,123,612
4,218,298
7,523,709
20,140,482
577,544
1,123,612
4,218,298
42
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
3.
Segment reporting (continued)
2010
Millsell
Steelpoort
Lannex
Mooinooi
Doornbosch
Exploration
projects
Corporate/
Unallocated
Consolidated
$
$
$
$
$
$
$
$
Segment assets
Capital expenditure
5,935,225
6,727,941
18,397,484
20,837,857
11,889,583
54,736,566
6,828,486 (a)
125,353,142
Other assets
3,701,131
3,996,466
776,589
1,950,640
99
1,602,862
26,212,160 (b)
38,239,947
Segment liabilities
1,042,867
1,182,153
3,232,587
3,661,380
2,089,095
1,193,878
12,609,697 (c)
25,011,657
Segment revenue
10,446,058
10,184,906
2,872,666
2,611,515
-
Segment result
6,487,837
5,541,067
(1,138,892)
790,541
(20,669)
Unallocated expenses
Total segment loss
Included within the
segment results:
Depreciation
Direct operating
costs
Interest revenue
Income tax expense
Impairment of mining
property
Transfer of gain
on investment
from equity upon
acquisition of
subsidiary
792,178
831,231
914,822
263,186
18,285
2,567,526
3,771,514
3,212,194
1,460,713
2,384
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,095,370)
26,115,145
10,564,514
(18,346,425) (d)
(18,346,425)
(7,781,911)
146,169
2,965,871
1,653,764
732,973
2,652,241
12,668,095
732,973
2,652,241
4,313,495
4,313,495
4,800,478
4,800,478
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
43
NOTES TO THE FINANCIAL STATEMENTS
3.
Segment reporting (continued)
Major items included in Corporate/Unallocated
(a)
Capital expenditure
Property
Fixed assets for Tweefontein
Fixed assets for Elandsdrift
Exploration expenses Vygenhoek/Everest North
Other
(b)
Other assets
Cash & cash equivalents
Investment in jointly controlled entity
Current tax asset
Other
(c)
Liabilities
Deferred tax
Interest bearing loans and borrowings
VAT/GST payable
Other
(d)
Unallocated expenses
Administrative Salaries & Wages
Auditors’ remuneration
Consulting fees
Legal expenses
Oversees travelling expenses
Premises leases
Share based compensation expense
Termination of consultancy agreements
Tax expense
Other
Total segment revenue
Inter-segment sales elimination
Other revenue from continuing activities
Total revenue
2011
$
2010
$
1,190,780
624,131
1,449,592
1,695,565
508,047
5,468,115
23,497,092
2,591,580
2,814,813
1,644,090
30,547,575
-
443,102
1,296,659
1,516,596
3,572,129
6,828,486
20,107,830
2,242,090
3,252,972
609,268
26,212,160
16,058,087
11,946,636
464,677
369,563
13,059,477
29,951,804
2,553,731
476,373
2,026,518
562,987
360,577
241,946
1,395,488
1,470,942
4,218,298
4,385,605
17,692,465
378,670
156,128
128,263
12,609,697
1,280,654
354,872
2,817,897
749,005
375,449
261,518
4,480,318
-
2,652,241
5,374,471
18,346,425
46,872,232
26,115,145
-
-
46,872,232
26,115,145
Revenue from external customers by geographical locations is detailed below. Revenue is attributed to geographic location based on the location of the customers.
The company does not have external revenues from external customers that are attributable to any foreign country other than as shown.
South Africa
Total revenue
Interest revenue by geographical location is detailed below:
South Africa
Australia
46,872,232
46,872,232
486,202
637,410
1,123,612
The majority of sales of concentrate are to two specific customers. Revenue is split according to segment as detailed below:
Customer 1 (Steelpoort, Lannex, Doornbosch)
Customer 2 (Millsell, Mooinooi)
Analysis of location of non-current assets:
Australia
South Africa
Total non-current assets
44
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
28,171,519
18,700,713
46,872,232
66,881,613
85,401,162
152,282,775
26,115,145
26,115,145
388,138
344,835
732,973
13,057,573
13,057,572
26,115,145
52,026,973
76,953,597
128,980,570
NOTES TO THE FINANCIAL STATEMENTS
4.
Revenue and expenses
(a)
Revenue
Sale of goods
PGM price adjustment
(b)
Other income
Scrap sales
Recoveries
Royalty termination
Derecognition of loan payable
(c)
Expenses
Loss from ordinary activities before income tax expense includes the following specific expenses:
Consulting
Depreciation – plant and equipment
Depreciation – other assets
Finance costs
Foreign exchange loss
Operating lease payments
Devaluations of fair value through profit or loss financial assets
Share based payments expense
Superannuation expense
Impairment of loan (4.1)
Impairment of mining properties (4.2)
Net loss on disposal of non-current asset
Exploration and evaluation costs written off
Termination of consultancy contracts (4.3)
(d)
Staff costs
Salaries and wages
Superannuation
Share based payments
2011
$
43,692,154
3,180,078
46,872,232
40,679
14,562
-
410,363
465,604
2,026,518
7,431,159
92,550
114,477
8,522
265,819
39,556
1,395,488
18,961
577,544
-
-
41,064
1,470,942
3,832,965
18,751
1,173,786
5,025,502
2010
$
21,383,871
4,731,274
26,115,145
31,310
44,446
220,425
-
296,181
2,189,897
2,865,672
100,199
137,733
3,030,175
297,042
79,353
4,480,318
18,935
-
4,313,495
48,761
110,549
-
2,077,832
17,051
3,890,728
5,985,611
4.1
Impairment of loan
Ehlobo Metals (Pty) Ltd (“Ehlobo”) disposed of its 26% shareholding in Sylvania Metals (Pty) Ltd and Sylvania Minerals (Pty) Ltd to
Africa Asia Capital Ltd (“AACL”) during the financial year ended 30 June 2011. A loan of R2,900,000 ($423,661) attracting interest at
the prime lending rate in South Africa had been advanced to Ehlobo in R100,000 ($14,609) increments by Sylvania Metals as a form
of assistance to Ehlobo in order to establish its business. Upon the disposal of Ehlobo’s 26% shareholding in Sylvania Metals the loan
was determined to be irrecoverable by the Directors of Sylvania and subsequently written off.
4.2 Impairment of mining properties
Refer to note 10 for details on the impairment of mining properties.
4.3 Termination of consultancy contracts
In the prior financial years the Group was focused on identifying and pursuing investment opportunities in mineral exploration and
mineral treatment projects. Key management were contracted through fixed term consultancy agreements so as to reduce the
administration of the Group. As a result of the Group moving into a more operational phase, permanent employees have been
appointed by the Board and the consulting agreements terminated. This has resulted in a termination fee of $1,470,942 for the year
ended 30 June 2011.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
45
NOTES TO THE FINANCIAL STATEMENTS
5.
Income tax
Major components of tax expense for the years ended 30 June 2010 and 2009
Income tax recognised in profit or loss
Current income tax charge/(benefit)
Adjustments in respect of current income tax of previous year
Deferred tax expense relating to origination and reversal of temporary differences
Total tax expense
The prima facie income tax expense on pre-tax accounting result from operations
reconciles to the income tax expense in the financial statements as follows:
Accounting profit/(loss)
Tax expense/(benefit) at rate of 30%
Non-deductible expenses
Benefit of tax losses and timing differences not brought to account
Benefit of tax losses not brought to account
Income tax expense
Income tax recognised directly in equity:
The following amounts were charged/(credited) directly to equity during the period:
Current tax
- translation of foreign operation
Deferred tax
- revaluation of financial assets
2011
$
2010
$
80,501
54,496
4,083,301
4,218,298
110,959
-
2,541,282
2,652,241
5,826,424
(5,129,670)
1,747,927
2,192,019
274,640
3,712
4,218,298
(1,538,901)
650,385
3,540,757
-
2,652,241
-
-
-
(12,988)
Sylvania Platinum is a Bermudan incorporated company and has no tax liability under that jurisdiction with respect to income derived. Certain
of the foreign subsidiaries generated income which is subject to the applicable tax in the countries from which such income is derived.
Deferred tax assets comprise:
Losses available for offset against future taxable income
Set-off against deferred tax liabilities
Deferred tax liabilities comprise:
Exploration and evaluation
Plant and equipment
Other
Set-off deferred tax assets
2011
$
6,136,901
6,136,901
(6,136,901)
-
21,509,772
11,017,444
1,057,879
33,585,095
(6,136,901)
27,448,194
2010
$
6,001,062
6,001,062
(6,001,062)
-
17,806,803
5,955,676
914,119
24,676,598
(6,001,062)
18,675,536
46
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
Income tax (continued)
5.
The Group has estimated tax losses arising in Australia of $18,678,899 (2010: $13,619,157) that are available for offset against future taxable
profits of the tax consolidated group in Australia. These losses are subject to specific tests under Australian tax legislation before they can be
set off against future taxable income. In addition, the Group has estimated tax losses arising in South Africa of $3,718,089 (2010: $2,360,906)
that are available indefinitely for offset against future taxable profits of the company in which the losses arose.
Unrecognised deferred tax assets
Deferred tax assets have not been recognised in respect of the following items:
Deductible temporary differences
Tax losses
Capital losses
2011
$
2010
$
16,741,875
5,283,236
1,356,283
23,381,394
12,920,637
4,135,980
1,096,204
18,152,821
The deductible temporary differences and tax losses do not expire under current tax legislation. Deferred tax assets have not been
recognised in respect of these items because at this time it is not probable that future tax profits will be available against which the Group
can utilise the benefits thereof.
Tax consolidation
Sylvania Resources Limited and its 100% owned Australian resident controlled entities have formed a tax consolidated group with effect
from 1 July 2003. Sylvania Resources Pty Ltd is the head entity of the tax consolidated group. Members of the group have entered into a
tax sharing arrangement in order to allocate income tax expense to the wholly owned controlled entity on a pro rata basis. In addition
the agreement provides for the allocation of income tax liabilities between the entities should the head entity default on its tax payment
obligations. At the balance date, the possibility of default is remote.
Reconciliation of deferred tax assets/(liabilities):
2011
Temporary differences
Plant and equipment
Exploration and evaluation
Tax losses
Opening
balance
Charged
to Income
Statement
$
$
(914,119)
210,488
(5,955,676)
(4,306,054)
(17,806,803)
6,001,062
-
12,265
(18,675,536)
(4,083,301)
Charged to
equity
Acquisition/
disposal
Exchange
Difference
Closing
Balance
$
-
-
-
-
-
$
-
-
-
-
-
$
(354,248)
(755,714)
$
(1,057,879)
(11,017,444)
(3,702,969)
(21,509,772)
123,574
6,136,901
(4,689,357)
(27,448,194)
2010
Opening balance
Charged to
Income
Statement
Charged to
equity
Acquisitions/
Disposals
Exchange
Difference
Closing Balance
$
$
$
$
$
$
Temporary differences
Plant and equipment
Exploration and evaluation
Tax losses
(1,916,517)
(3,611,607)
-
(199,479)
(2,256,594)
-
2,239,742
(85,209)
(12,988)
1,177,631
-
-
-
-
(17,270,750)
3,817,018
(3,288,382)
(2,541,282)
(12,988)
(12,276,101)
37,234
(87,475)
(536,053)
29,511
(556,783)
(914,119)
(5,955,676)
(17,806,803)
6,001,062
(18,675,536)
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
47
NOTES TO THE FINANCIAL STATEMENTS
6. Earnings per share
Basic earnings per share amounts are calculated by dividing the net profit for the year by the weighted average number of shares outstanding
during the year.
Basic earnings/(loss) per share - cents per share
Diluted earnings/(loss) per share - cents per share
2011
2010
Cents per share
cents per share
0.39
0.39
2011
$
(3.11)
(3.11)
2010
$
Reconciliations of loss used in calculating loss per share
Earnings/(loss) attributable to the ordinary equity holders of the company used in calculating basic earnings/(loss)
per share
1,094,260
(6,981,688)
Earnings/(loss) attributable to the ordinary equity holders of the company used in calculating diluted earnings/(loss)
per share
1,094,260
(6,981,688)
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic earnings/(loss) per share
279,157,428
224,724,096
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in calculating
diluted earnings/(loss) per share
279,157,428
224,724,096
Diluted earnings/(loss) per share
At 30 June 2011 the Sylvania shares exercisable through the Share option scheme (6,000,000 options) were not considered to be “in the
money” and therefore are not dilutive.
At 30 June 2010 the Group recorded a loss. Therefore, potential ordinary shares on issue in relation to options (15,375,909 options)
are not dilutive.
In the prior financial year SA Metals Pty Ltd (“SA Metals”), a wholly owned subsidiary of Sylvania Platinum negotiated the cancellation of a
royalty agreement between SA Metals and Minex Projects (Pty) Ltd (“Minex”), whereby Minex was to receive R5,000,000 (approximately
$657,000) in cash and 3,000,000 shares in the listed parent entity subject to certain conditions. The conditions have subsequently been met
and the cash payment was made. The shares will only be issued when Minex obtain South African Reserve Bank approval, which to date has
not been obtained. The value of the shares at the date of signing the agreement was $0.84, and has been raised against share capital.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of
completion of these financial statements.
Interest in jointly controlled entity
7.
The Group has a 25% interest in the assets, liabilities and output of an un-incorporated joint venture, CTRP, which operates a chrome tailings
retreatment plant at Kroondal in South Africa (2010: 25%).
Carrying amount of investment in jointly controlled entity
Balance at beginning of the financial period
Distribution received from jointly controlled entity
Share of jointly controlled entity’s profit from ordinary activities, after income tax
2011
$
2,349,723
(724,932)
(76,900)
2010
$
2,371,590
(780,429)
758,562
2009
$
3,290,607
(1,154,130)
235,112
Balance at end of financial period
1,547,891
2,349,723
2,371,589
48
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
7.
Interest in jointly controlled entity (continued)
Foreign currency translation movements
Balance at beginning of financial period
Movement during the financial period
Balance at end of financial period
Share of joint venture entity’s results and financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Revenue
Expenses
Profit from ordinary activities before income tax
Income tax expense
Profit from ordinary activities after income tax
Contingencies & commitments
2011
$
903,249
363,673
1,266,922
2,814,813
987,305
827,002
1,814,307
292,356
-
292,356
1,291,845
(1,368,745)
(76,900)
-
(76,900)
2010
$
807,879
95,370
903,249
3,252,972
1,704,361
720,957
2,425,318
274,039
1,449
275,488
1,830,863
(1,072,301)
758,562
-
758,562
2009
$
886,317
(78,437)
807,880
3,179,469
1,526,444
786,630
2,313,074
204,666
-
204,666
942,449
(707,337)
235,112
-
235,112
The jointly controlled entity does not have any contingencies or capital commitments.
8. Other financial assets
Available for sale investments carried at fair value
Listed shares
Financial assets at fair value through profit and loss
Listed shares
Total
2011
$
2010
$
2009
$
458,168
305,949
6,500,319
42,380
68,507
-
500,548
374,456
6,500,319
Available for sale financial assets consist of investments in ordinary shares and options, and therefore have no fixed maturity date or coupon rate.
9.
Exploration and evaluation assets
2011
Balance at beginning of financial year
Foreign currency movements
Consideration for the termination of future royalty agreement between SA Metals Pty Ltd
and Minex Projects (Pty) Ltd
Direct expenditure for the year
Balance at end of financial year
Mineral rights
Deferred
exploration
expenditure
$
310,017
36,584
-
-
346,601
$
59,078,819
13,200,620
2,511,039
986,365
75,776,843
Total
$
59,388,836
13,237,204
2,511,039
986,365
76,123,444
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
49
NOTES TO THE FINANCIAL STATEMENTS
9.
Exploration and evaluation assets (continued)
2010
Balance at beginning of financial year
Acquired through business combination
Foreign currency movements
Direct expenditure for the year
Balance at end of financial year
2009
Balance at beginning of financial year
Foreign currency movements
Direct expenditure for the year
Balance at end of financial year
Mineral rights
Deferred exploration
expenditure
$
253,740
48,986
7,291
-
310,017
$
1,218,752
58,059,992
(1,541,064)
1,341,138
59,078,818
Mineral rights
Deferred exploration
expenditure
$
251,120
2,620
-
253,740
$
1,100,107
23,069
87,305
1,210,481
Total
$
1,472,492
58,108,978
(1,533,773)
1,341,138
59,388,835
Total
$
1,351,227
25,689
87,305
1,464,221
Ultimate recovery of exploration and evaluation expenditure carried forward is dependent upon the recoupment of costs through
successful development and commercial exploitation, or alternatively, by sale of the respective areas.
10. Property, plant and equipment
2011
Property
Mining
Property
Const-
ruction
in progress
Plant and
equipment Equipment
Leasehold
Improve-
ments
Computer
equipment
and
software
Furniture
and
fittings
Office
Equipment
Motor
vehicles
$
$
$
$
$
$
$
$
$
$
TOTAL
$
8,599,079
19,962,995
46,081,830
606,937
33,967
209,574
60,340
121,407
473,766
76,149,895
(4,313,151)
-
(5,310,135)
(131,062)
(17,132)
(100,130)
(29,017)
(60,748)
(224,213)
(10,185,588)
4,285,928
19,962,995
40,771,695
475,875
16,835
109,444
31,323
60,659
249,553
65,964,307
Exchange differences
29,262
494,917
2,035,597
5,098,279
53,048
4,285,928
19,962,995
40,771,695
475,875
-
-
-
-
-
5,442,328
-
(12,709,245)
12,709,245
-
-
-
16,835
1,794
-
-
-
109,444
31,323
60,659
249,553
65,964,307
11,614
23,820
-
-
3,427
7,705
(2,786)
-
9,822
5,823
-
-
27,209
7,764,969
-
-
-
6,641,194
(2,786)
-
(430,803)
-
(6,762,442)
(123,391)
(7,644)
(75,482)
(15,586)
(19,452)
(88,914)
(7,523,714)
1,190,780
4,350,042
9,289,347
57,259,105
405,532
10,985
69,396
24,083
56,852
187,848
72,843,970
At 30 June 2011
Cost or fair value
1,190,780
9,093,996
9,289,347
69,331,682
659,985
35,761
245,008
68,686
137,052
500,975
90,553,272
Accumulated
Depreciation
-
(4,743,954)
-
(12,072,577)
(254,453)
(24,776)
(175,612)
(44,603)
(80,200)
(313,127)
(17,709,302)
1,190,780
4,350,042
9,289,347
57,259,105
405,532
10,985
69,396
24,083
56,852
187,848
72,843,970
50
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
At 1 July 2010
Cost or fair value
Accumulated
Depreciation
Net book value
Year ended
30 June 2011
Opening net book
value
-
-
-
-
Additions
Disposals
Reallocations
between asset
classes
Depreciation charge
1,161,518
-
-
-
NOTES TO THE FINANCIAL STATEMENTS
10. Property, plant and equipment (continued)
2010
Mining
Property
Construction
in progress
Plant and
equipment
Equipment
Leasehold
Improvements
Computer
equipment
and software
Furniture
and fittings
Office
equipment
Motor
vehicles
$
$
$
$
$
$
$
$
$
TOTAL
$
At 1 July 2009
Cost or fair value
8,322,578
30,370,118
15,624,679
205,967
30,847
118,940
44,783
82,932
412,236
55,213,080
Accumulated
Depreciation
-
-
(2,620,716)
Net book value
8,322,578
30,370,118
13,003,963
(41,465)
164,502
(10,244)
20,603
(40,162)
78,778
(17,512)
27,271
(35,204)
(141,263)
(2,906,566)
47,728
270,973
52,306,514
Year ended
30 June 2010
Opening net book
value
Acquired through
business combination
8,322,578
30,370,118
13,003,963
164,502
20,603
78,778
27,271
47,728
270,973
52,306,514
Exchange differences
276,501
981,526
-
-
74,219
215,590
-
2,982
Additions
Disposals
Reallocations
between asset classes
-
-
-
-
(68,827)
(17,880,632)
17,880,632
6,491,983
12,355,537
397,988
Impairment
(4,313,151)
Depreciation charge
-
-
-
-
(2,689,419)
4,285,928
19,962,995
40,771,695
At 30 June 2010
-
645
2,475
-
-
-
899
2,179
90,002
(2,446)
-
-
-
-
-
(89,597)
475,875
(6,888)
16,835
(59,968)
109,444
2,510
797
3,068
(410)
9,592
-
(11,505)
31,323
-
1,172
46,895
-
77,628
8,304
1,489,696
87,846
19,475,794
-
(34,620)
(106,303)
(9,592)
-
(25,544)
60,659
-
-
-
(4,313,151)
(82,950)
(2,965,871)
249,553
65,964,307
Cost or fair value
8,599,079
19,962,995
46,081,830
606,937
33,967
209,574
60,340
121,407
473,766
76,149,895
Accumulated
Depreciation
(4,313,151)
-
(5,310,135)
(131,062)
(17,132)
(100,130)
4,285,928
19,962,995
40,771,695
475,875
16,835
109,444
(29,017)
31,323
(60,748)
(224,213)
(10,185,588)
60,659
249,553
65,964,307
2009
Mining
Property
Construction
in progress
Plant and
equipment
Equipment
Leasehold
Improvements
Computer
equipment
and software
Furniture
and fittings
Office
equipment
Motor
vehicles
$
$
$
$
$
$
$
$
$
TOTAL
$
At 1 July 2008
Cost or fair value
8,236,643
6,291,489
14,333,848
207,802
31,311
74,751
46,906
61,079
298,357
29,582,186
Accumulated
Depreciation
-
-
(1,391,977)
Net book value
8,236,643
6,291,489
12,941,871
(12,279)
195,523
(4,658)
26,653
(24,819)
49,932
(10,186)
36,720
(22,700)
38,379
(65,050)
(1,531,669)
233,307
28,050,517
Year ended
30 June 2009
Opening net
book value
8,236,643
6,291,489
12,941,871
Exchange differences
85,935
2,880,121
126,481
Additions
Disposals
Reallocations
between asset classes
Depreciation charge
At 30 June 2009
-
-
-
-
21,198,508
1,164,350
-
-
-
-
-
(1,228,739)
8,322,578
30,370,118
13,003,963
195,523
(1,835)
26,653
(464)
-
-
-
-
-
-
(29,186)
164,502
(5,586)
20,603
49,932
3,476
43,698
(2,985)
-
(15,343)
78,778
36,720
(769)
-
-
(1,354)
(7,326)
27,271
38,379
(931)
29,273
(7,843)
1,354
(12,504)
47,728
233,307
28,050,517
6,564
3,098,578
107,315
22,543,144
-
-
(10,828)
-
(76,213)
(1,374,897)
270,973
52,306,514
Cost or fair value
8,322,578
30,370,118
15,624,679
205,967
30,847
118,940
44,783
82,932
412,236
55,213,080
Accumulated
Depreciation
-
-
(2,620,716)
8,322,578
30,370,118
13,003,963
(41,465)
164,502
(10,244)
20,603
(40,162)
78,778
(17,512)
27,271
(35,204)
(141,263)
(2,906,566)
47,728
270,973
52,306,514
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
51
NOTES TO THE FINANCIAL STATEMENTS
10. Property, plant and equipment (continued)
Impairment of mining properties
On 27 April 2008 Sylvania announced that it had signed an amendment to an existing Services and Supply Agreement to treat run of mine
(“ROM”) from the Brokenhill, Spitzkop and Buffelsfontein East mining operations. It was expected that attributable PGM production would
increase by approximately 6,000 ounces per annum in the short term, increasing to approximately 33% of production in five to six years
as current dumps were depleted. It was estimated that 300,000 tonnes of ROM material a year would be made available to Sylvania for
treatment. This ROM was expected to have an average grade of 1.4 grams/ton and the chrome ore recovered from the treatment was to
be returned to the supplier at a nominal charge.
First production of the PGM’s from the ROM material retreatment was expected in the fourth quarter of 2008, ramping up to more
than 200 ounces per month towards the end of the first quarter of 2009. Subsequent to the agreement being signed, the world economy
went into a slump resulting in a change to the chrome market with the annual demand for chrome products being dramatically reduced.
This resulted in the plans for mining of ROM material at Lannex plant serving Brokenhill and Spitzkop and the Mooinooi plant serving
Buffelsfontein East being stopped. The Sylvania Board of Directors can in no way determine whether or not these mines will resume
operations. This does not affect the carrying value of the Lannex plant as sufficient material has been identified for the Lannex plant to
operate at design capacity.
The right to treat the ROM material from Brokenhill, Spitzkop and Buffelsfontein East Chrome mines cannot be sold to a third party and
Sylvania is in no way entitled to any form of compensation for operations at these mines ceasing. Subsequent to the financial year end
at 30 June 2010 the Mooinooi Mine has been supplying ROM material to the Sylvania Mooinooi plant and this mining property is being
depreciated at the current estimated useful life of the Mooinooi plant.
Based on the above information it was resolved by the Directors of Sylvania Resources to impair the asset value attributable to this
transaction at the Lannex plant at 30 June 2010, resulting in an impairment of R32,799,630 ($4,313,495). A review was performed on the
mining properties at 30 June 2011 and no change in impairment was identified.
Leased assets
Equipment and motor vehicles include the following amounts where the Group is a lessee under a finance lease:
Equipment
Cost
Accumulated Depreciation
Motor vehicles
Cost
Accumulated Depreciation
At 30 June 2011
Due within one year
Due between one and five years
At 30 June 2010
Due within one year
Due between one and five years
At 30 June 2009
Due within one year
Due between one and five years
2011
$
628,921
(269,588)
359,333
187,825
(75,533)
112,292
2010
$
557,834
(133,905)
423,929
318,688
(107,694)
210,994
2009
$
158,241
(57,948)
100,293
259,179
(50,088)
209,091
Future Minimum
Lease
Payments Due
Finance Charges
Present Value of
Minimum Lease
Payments Due
$
$
$
197,500
330,688
528,188
314,661
444,470
759,131
143,241
207,358
350,599
(30,978)
(32,532)
(63,510)
(48,595)
(65,780)
(114,375)
(23,305)
(19,361)
(42,666)
166,522
298,156
464,678
266,066
378,690
644,756
119,936
187,997
307,933
Non-current assets pledged as security
Leased assets are pledged as security for the related finance lease liability. No other non-current assets are pledged as security for any liabilities.
52
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
11. Cash and cash equivalents
Cash at bank and on hand
Short term deposits
2011
$
7,928,486
15,568,606
23,497,092
2010
$
2,230,172
17,877,658
20,107,830
2009
$
3,250,265
22,645,156
25,895,421
Cash at banks earns interest at floating rates on daily bank deposit rates. Short-term deposits are made for varying periods of between one
day and three months, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit
rates. The fair value of cash and short-term deposits is $15,568,606 (2010: $17,877,658, 2009: $22,645,156).
The Group only deposits cash surpluses with major banks of high quality credit standing.
12. Trade and other receivables
Trade receivables
Other receivables
2011
$
19,429,304
712,526
20,141,830
2010
$
10,345,328
1,271,616
11,616,944
2009
$
4,731,205
1,578,602
6,309,807
Trade receivables are due from major minerals mining and processing companies. None of the amounts are past due or impaired. At 30 June
2011 gross sales of $12,446,182 (2010: $6,496,192) were subject to price adjustments. Refer to note 4. Other receivables are non-interest
bearing and are generally on 30-90 day terms. No other receivables are considered to be past due or impaired.
13.
Inventories
Stores and materials
2011
$
628,065
2010
$
645,655
2009
$
353,851
Stores and materials
Strategic spares are held in stock for engineering breakdowns. Spares and materials are carried at the lower of cost or net realisable value.
14.
Issued capital
Authorised capital
Ordinary shares with a par value of $0.10
Issued capital
Share capital
Ordinary shares
2011
No of shares
2011
$
1,000,000,000
100,000,000
2011
2010
2009
No of shares
No of shares
No of shares
2011
$
2010
$
2009
$
Ordinary shares fully paid
298,868,805
240,696,254
179,354,273
29,639,275
147,266,101
92,955,717
Shares reserved for Employees share
plan shares
2,383,000
2,383,000
2,808,000
-
-
-
301,251,805
243,079,254
182,162,273
29,639,275
147,266,101
92,955,717
Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at
shareholders’ meetings. In the event of winding up of the parent entity, ordinary shareholders rank after all creditors and are fully entitled to
any proceeds on liquidation.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
53
NOTES TO THE FINANCIAL STATEMENTS
14.
Issued capital (continued)
Movements in ordinary share capital
Date
Details
1 July 2009
5 Aug 2009
5 Aug 2009
21 Aug 2009
21 Aug 2009
31 Aug 2009
23 Sep 2009
9 Oct 2009
25 Nov 2009
25 Nov 2009
17 Dec 2009
18 May 2010
18 May 2010
30 June 2010
Opening balance
First tranche of shares under GAU takeover
First tranche of shares under SA Metals takeover
Second tranche of shares under GAU takeover
Second tranche of shares under SA Metals takeover
Issue to ineligible overseas shareholders of SA Metals
Final issue for compulsory takeover of SA Metals
Final issue for compulsory takeover of GAU
Transfer from employee share plan
Transfer from share based payment reserve
Issue through placement
Shares issued from employee share plan
Transfer from share based payment reserve
Transaction costs
Closing balance
Number of
shares
Issue price
$
(a)
1.11
1.11
0.93
0.93
0.98
1.08
1.15
$
92,955,717
4,470,419
25,085,377
3,483,656
2,450,955
307,255
1,657,934
1,292,501
172,425
63,114
0.65
16,361,200
179,354,273
4,020,754
22,562,120
3,729,475
2,623,903
315,103
1,541,636
1,123,990
375,000
-
25,000,000
50,000
240,696,254
39,443
9,948
(1,083,843)
147,266,101
$
147,266,101
2,511,039
5,939,264
36,145,887
(57,547)
(161,846,865)
29,957,879
(20,000)
(10,000)
(40,000)
(1,000)
(247,604)
29,639,275
Date
Details
Number of
shares
Issue price
1 July 2010
1 July 2010
Opening balance
Consideration for the termination of royalty agreement between SA
Metals Pty Ltd and Minex Projects (Pty) Ltd (b)
29 September 2010
First tranche of shares issued to Africa Asia Capital Limited
1 December 2010
Second tranche of shares issued to Africa Asia Capital Limited
240,696,254
-
7,711,888
51,170,663
28 February 2011
Restructure of Group with the establishment of new parent entity (c)
-
Transaction costs
$
0.84
0.77
0.71
22 June 2011
28 June 2011
29 June 2011
30 June 2011
30 June 2011
Share buy back
Share buy back
Share buy back
Share buy back
Transaction costs
Closing balance
299,578,805
(200,000)
(100,000)
(400,000)
(10,000)
298,868,805
(a)
(b)
The issue price has been rounded for presentation purposes.
In the prior financial year SA Metals (Pty) Ltd (“SA Metals”) a wholly owned subsidiary of Sylvania Platinum negotiated the
cancellation of a royalty agreement between SA Metals and Minex Projects (Pty) Ltd (“Minex”), whereby Minex was to receive
R5,000,000 (R1,000,000 payable as a non-refundable deposit in cash within 30 days of signature date, and the remaining R4,000,000
payable in cash by Sylvania to Minex on the closing date), as well as 3,000,000 shares in the listed parent entity. The agreement was
subject to the suspensive condition that Sylvania conducted metallurgical test work in relation to the properties governed by the
Contractor Agreement to its reasonable satisfaction and Sylvania gave to Minex a written notice that it has satisfied those conditions.
The conditions have been met and the cash payments made. The shares will be issued after Minex has obtained South African
Reserve Bank approval, which to date has not been obtained.
54
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
14.
Issued capital (continued)
The shares shall be issued to Minex as follows:
• 500,000 shares to be issued on the closing date,
• 5 further tranches of 500,000 shares each to be issued on the lapse of each 6 month period following successively after the closing date.
Each issue of Sylvania shares will be accompanied by share certificates. The benefit and risk in and to the Sylvania Shares shall be deemed
to have passed to Minex with effect from the date of each relevant issue. Minex shall be entitled on written notice to Sylvania, to inform
Sylvania that Minex wishes to defer a subsequent issue of shares to the next issue, provided that Sylvania consents in writing to such deferral.
The value of the shares at the date of signing the agreement was $0.84.
(c)
Arising from the scheme of arrangement associated with the redomicile of Sylvania, Sylvania Platinum became the ultimate holding
company of the group. The share capital of Sylvania Platinum was deemed to have been issued at the carrying amount of its share
of the equity items shown in the separate financial statements of the original parent at the date of reorganisation. The deemed issue
price was allocated between issued capital at par value of $0.10 per share and the share premium reserve.
Movements in shares reserved for employee share plan shares
Date
1 July 2010
30 June 2011
Details
On issue at beginning of the year
On issue at the end of the year
Information relating to the employee share plan, including details of shares issued under the plan, is set out in note 21.
Share options
Number of
shares
2,383,000
2,383,000
Employee option plan options exercisable (refer note 21)
- at $1.63 per share on or before 30 June 2011
- at $1.05 per share on or before 30 June 2012
- at $1.40 per share on or before 30 June 2011
- at $2.67 per share on or before 30 June 2011
- at $2.89 per share on or before 30 June 2011
Number of options
2011
2010
-
6,000,000
-
-
-
5,633,000
6,000,000
359,909
600,000
400,000
6,000,000
12,992,909
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
55
NOTES TO THE FINANCIAL STATEMENTS
15. Reserves
At 1 July 2009
Unrealised gain/(loss) on
available-for-sale financial assets
Transfer to profit and loss
Currency translation differences
Share and option-based payments transferred
to share capital
Share and option-based payments expense
Net
Unrealised
Gains Reserve
Share Based
Payments
Reserve
Foreign
Currency
Translation
Reserve
Non-controlling
interests
premium
reserve
$
$
$
$
Total
$
4,678,925
2,579,798
(2,408,951)
2,140,442
6,990,214
(25,077)
(4,800,478)
-
-
-
-
-
-
(73,063)
4,995,227
-
-
4,289,517
-
-
-
-
-
-
-
(25,077)
(4,800,478)
4,289,517
(73,063)
4,995,227
At 30 June 2010
(146,630)
7,501,962
1,880,566
2,140,442
11,376,340
Share
Premium
Reserve
Net
Unrealised
Gains
Reserve
Share Based
Payments
Reserve
Foreign
Currency
Translation
Reserve
Non-
Controlling
Interest
Reserve
$
$
$
$
$
Equity
Reserve
$
At 30 June 2010
-
(146,630)
7,501,962
1,880,566
2,140,442
Unrealised gain/(loss) on
available-for-sale financial assets
Currency translation differences
Non-controlling interest
acquisition reserve
Share and option-based
payments expense
-
-
-
-
Restructure of the Group
with the establishment of new
parent entity (a)
Share buy back
160,398,686
(354,461)
(48,484)
-
-
-
-
-
-
-
-
1,395,488
(8,227,817)
-
-
21,723,273
-
-
-
-
-
-
(41,919,735)
-
-
-
Total
$
11,376,340
(48,484)
21,723,273
(41,919,735)
1,395,488
-
-
-
-
-
(29,741,213)
122,429,656
-
(354,461)
At 30 June 2011
160,044,225
(195,114)
669,633
23,603,839
(39,779,293)
(29,741,213)
114,602,077
(a)
As described in note 1 and 14, the accounting treatment associated with the insertion of Sylvania Platinum as the ultimate holding
company required the issue price of the Sylvania Platinum shares to be deemed to have been issued at the carrying amount of its
share of the equity items shown in the separate financial statements of the original parent at the date of reorganisation. The deemed
issue price was allocated between issued capital at par value of $0.10 per share and the share premium reserve.
Nature and purpose of reserves
• Net unrealised gains reserve
This reserve records fair value changes on available for sale investments.
• Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of financial statements of
foreign controlled entities.
• Share based payment reserve
This reserve is used to record the value of equity benefits provided to employees, consultants and directors as part of their remuneration.
Refer note 21.
• Non-controlling interests reserve
This reserve is used to record differences between the carrying value of non-controlling interests and the consideration paid/received,
where there has been a transaction involving non-controlling interests that do not result in a loss of control. The reserve is attributable to
the equity of the parent.
• Equity reserve
This reserve arises from the reinstatement of the recyclable reserves in the former parent (Sylvania Resources) as at the date of the
insertion of Sylvania Platinum as the ultimate holding company.
56
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
16. Retained earnings/(Accumulated losses)
Balance as at 1 July
Profit/(loss) for the year
Accumulated losses of former parent entity transferred to equity reserve
following the insertion of Sylvania Platinum as ultimate holding company
2011
$
(20,061,009)
1,094,260
39,417,209
2010
$
(13,079,321)
(6,981,688)
-
2009
$
(9,047,661)
(4,031,660)
-
Balance as at 30 June
20,450,460
(20,061,009)
(13,079,321)
Repatriation of funds from South Africa are subject to regulatory approval.
17.
Interest bearing borrowings
Secured
Current liabilities
Payable within 1 year
Non-current liabilities
Payable within 1-5 years
18. Provisions
Provision for rehabilitation
Movement in provision
Balance at beginning of financial year
Foreign currency movements
Arising during the year
Balance at end of financial year
2011
$
2010
$
2009
$
166,522
266,066
119,936
298,156
378,670
187,997
2011
$
974,832
801,732
96,539
76,561
974,832
2010
$
801,732
731,441
21,612
48,679
801,732
2009
$
731,441
336,822
49,346
345,273
731,441
Provision is made for close down, restoration and environmental rehabilitation costs (which include the dismantling and demolition of
infrastructure, removal of residual materials and remediation of disturbed areas) in the financial period when the related environmental
disturbance occurs, based on the estimated future costs using information available at the balance date.
Rehabilitation is performed and paid for on an on-going basis as mining properties are depleted. The majority of the rehabilitation will be
undertaken progressively over the life of the mine during the depletion of each respective mining property. It is expected that the life of
each mine could vary between 5 and 50 years.
19. Trade and other payables
Trade payables
Other payables
2011
$
2,981,097
2,569,549
5,550,646
2010
$
2,920,602
1,959,051
4,879,653
2009
$
3,982,391
1,841,059
5,823,450
Trade and other payables are non-interest bearing and are normally settled on 60 day terms, predominately payable in ZAR and located in
South Africa.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
57
NOTES TO THE FINANCIAL STATEMENTS
20. Reconciliation of profit after tax to net cash flow from operating activities
Profit before tax
Adjusted for:
Interest received
Joint venture cash distribution
Equity accounted net profit from joint venture
Capital (gain)/loss on sale of non-current assets
Payments for exploration and evaluation
Derecognition of loan payable
Bad debts
Revaluation of assets at fair value through profit and loss
Impairment of mining property
Net foreign exchange difference
Gain on investment through business combination
(Increase)/decrease in prepayments and other debtors
(Increase)/decrease in accrued interest
(Increase)/decrease in GST/VAT recoverable
(Increase)/decrease in tax assets
Net exchange differences on payment to suppliers and employees
Increase in income tax expense
Interest paid
Depreciation
Provisions
Share based payments
2011
$
2010
$
5,826,424
(5,129,670)
(1,169,044)
(724,942)
(76,900)
(1,489)
41,066
(167,181)
577,544
(39,556)
-
164
-
(580,649)
(45,432)
(34,619)
349,489
252,605
1,566,057
114,477
7,523,714
76,561
1,395,488
(726,495)
(639,794)
661,804
48,735
111,239
-
-
79,353
4,341,385
530,701
(4,800,478)
295,419
(9,017)
236,725
(54,031)
(878,104)
2,699,329
137,733
2,965,870
-
4,498,540
Net operating loss before working capital changes
14,883,777
4,369,244
Changes in working capital:
Decrease/(increase) in trade receivables
Decrease/(increase) in inventories
(Decrease)/increase in trade and other payables
(7,864,186)
(5,848,298)
17,590
670,995
(291,804)
(889,769)
7,708,176
(2,660,627)
58
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
21. Share based payment plan
Employee option plan
An employee incentive option plan was approved as part of the implementation of the Scheme of arrangement. The terms of the Scheme
replicated the terms of the former Scheme approved by Group shareholders in 2007. As a component of the Scheme, all existing option
holders transferred their options in Sylvania Resources for options in Sylvania Platinum. The terms and conditions replicated the terms for the
Sylvania Resources options. Disclosure below has been provided based on initial grant date from Sylvania Resources.
Participants of the option plan are determined by the Board and can be employees and directors of, or consultants to, the Company or
a controlled entity. The Board considers length of service, seniority, responsibilities, potential contribution and any other relevant matters
in determining eligibility of potential participants. The Board has sole responsibility to determine the number of options and terms and
conditions of options granted to any participant.
The options issued under the option plan will be granted free of charge. The exercise price for the options is to be not less than the weighted
average share price for the last five trading days immediately preceding the options being offered to the participant.
The expiry date of the options will be determined by the Board and will also lapse within one month of the participant ceasing to be a director,
employee or consultant of the Company or a controlled entity (subject to certain exceptions). The Board at its discretion may apply certain
vesting conditions upon any options issued under the plan.
Subject to any vesting conditions applied by the Board, the options can only be exercised after the expiry of the following periods:
• after 12 months have lapsed from the acceptance date, in respect of not more than one half of the total number of options; and
• after 24 months have lapsed from the acceptance date, in respect to the balance of those options.
The options are not transferable without prior written approval from the Board. The options will not be quoted on a publicly traded stock
market; however application will be made for ASX/AIM quotation of the shares issued upon the exercise of the options.
Options 2011
Grant date
Expiry
date
Exercise
price*
Fair value at
grant date*
Balance at
start of
the year
Granted
during
the year
Expired
during the
year
Balance at
the end
of the year
Vested and
exercisable
at
end of year
17 Mar 2008
17 Mar 2008
18 Aug 2008
30 Jun 2011
30 Jun 2011
30 Jun 2011
18 Dec 2008
30 Jun 2011
10 Jun 2009
31 Jul 2009
Total
30 Jun 2012
30 Jun 2011
Weighted average exercise price
* Prices are in Australian dollars
$2.89
$2.67
$1.63
$1.63
$1.05
$1.40
$1.09
$1.14
$1.33
$1.63
$1.55
$1.21
Number
Number
400,000
600,000
3,383,000
2,250,000
6,000,000
359,909
12,992,909
$1.32
-
-
-
-
-
-
-
-
Number
(400,000)
(600,000)
(3,383,000)
(2,250,000)
Number
Number
-
-
-
-
-
-
-
-
-
6,000,000
6,000,000
(359,909)
-
-
(6,992,909)
6,000,000
6,000,000
$1.55
$1.05
$1.05
The weighted average remaining contractual life of the share options is 1 year (2010: 1.47 years).
Options 2010
Grant date
Expiry
date
Exercise
price*
Fair value at
grant date*
17 Oct 2006
17 Mar 2008
17 Mar 2008
18 Aug 2008
30 Jun 2010
30 Jun 2011
30 Jun 2011
30 Jun 2011
18 Dec 2008
30 Jun 2011
10 Jun 2009
31 Jul 2009
31 Jul 2009
Total
30 Jun 2012
30 Jun 2010
30 Jun 2010
Weighted average exercise price
* Prices are in Australian dollars
$0.75
$2.89
$2.67
$1.63
$1.63
$1.05
$1.40
$1.40
$0.34
$1.09
$1.14
$1.33
$1.63
$1.55
$1.21
$1.21
Balance at
start of
the year
Number
600,000
400,000
600,000
3,383,000
2,250,000
6,000,000
-
-
13,233,000
$1.41
Granted
during
the year
Number
-
-
-
-
-
-
457,435
359,909
817,344
$1.40
Balance at
the end
of the year
Vested and
exercisable at
end of year
Number
Number
Expired during
the year
Number
(600,000)
-
-
-
-
-
(457,435)
-
400,000
600,000
3,383,000
2,250,000
6,000,000
-
-
359,909
(1,057,435)
12,992,909
$1.03
$1.44
-
400,000
600,000
1,691,500
1,125,000
3,000,000
-
359,909
7,176,409
$1.53
The weighted average share price at the date of exercise of options during the year ended 30 June 2011 was nil as no options were
exercised during the current financial year (2010: $Nil, 2009: $1.05).
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
59
NOTES TO THE FINANCIAL STATEMENTS
21. Share based payment plan (continued)
Employee share plan
An employee incentive share plan was approved as part of the implementation of the Scheme of arrangement. The terms of the Scheme
replicated the terms of the former Scheme approved Group shareholders in 2007.
As a component of the Scheme, all existing share plan participants transferred their shares in Sylvania Resources for shares in Sylvania
Platinum. The terms and conditions replicated the terms for the Sylvania Resources share plan. Disclosure below has been provided based
on initial grant date from Sylvania Resources.
Participants of the plan are determined by the Board and can be employees, consultants and directors of, or consultants to, the Company or
a controlled entity. The Board considers length of service, seniority, responsibilities, potential contribution and any other relevant matters in
determining eligibility of potential participants.
The issue price for the shares issued under the plan are not less than the weighted average share price for the last five trading days immediately
preceding the offer to the participant. A participant who is invited to subscribe for shares under the plan may also be invited to apply for a loan
up to the amount payable in respect of the shares accepted by the participant. These loans are to be made on the following terms:
• Applied directly against the issue price of the shares to be acquired under the plan;
• For a term to be determined by the Board;
• Repayable to the extent of the lesser of the issue price of the relevant shares issued, less any cash dividends applied against the
outstanding principal, and the last market sale price of the shares on the date of repayment of the loan;
• The loan must be repaid in full prior to expiry of the loan;
• The Company will have a lien over the shares in respect of which a loan is outstanding;
• Shares issued under the plan are not transferable while a loan amount in respect of those shares remains payable; and
• Shares issued under the share plan will not be quoted on a publicly traded stock market while a loan amount in respect of those shares
remains payable.
The shares can only be transferred or otherwise dealt with until after the expiry of the following periods:
• After 12 months have lapsed from the acceptance date, in respect of not more than one half of the total number of shares; and
• After 24 months have lapsed from the acceptance date, in respect to the balance of those shares.
Set out below are summaries of shares (in substance options) issued under the plan:
Shares 2011
Issue
Date
Expiry
Date
Exercise
Price*
$
0.90
2.89
2.67
1.63
1.63
20 Dec 2006
17 Mar 2008
17 Mar 2008
18 Aug 2008
23 Dec 2008
Total
20 Dec 2010
30 Jun 2011
30 Jun 2011
30 Jun 2011
30 Jun 2011
* Prices are in Australian dollars
Shares 2010
Issue
Date
Expiry
Date
Exercise
Price*
21 Dec 2005
20 Dec 2006
17 Mar 2008
17 Mar 2008
18 Aug 2008
23 Dec 2008
Total
21 Dec 2009
20 Dec 2010
30 Jun 2011
30 Jun 2011
30 Jun 2011
30 Jun 2011
* Prices are in Australian dollars
$
0.50
0.90
2.89
2.67
1.63
1.63
Balance at
start of the
year
Number
200,000
500,000
33,000
950,000
700,000
2,383,000
Balance at
start of the
year
Number
375,000
250,000
500,000
33,000
950,000
700,000
2,808,000
Issued
during
the year
Number
-
-
-
-
-
-
Issued
during
the year
Number
-
-
-
-
-
-
-
Expired
during
the year
Balance at
the end of
the year
Vested at
the end of
the year
Number
(200,000)
(500,000)
(33,000)
(950,000)
(700,000)
(2,383,000)
Number
Number
-
-
-
-
-
-
-
-
-
-
-
-
Exercised
during
the year
Balance at
the end of
the year
Vested at
the end of
the year
Number
(375,000)
(50,000)
-
-
-
-
Number
Number
-
200,000
500,000
33,000
950,000
700,000
-
200,000
500,000
33,000
475,000
350,000
(425,000)
2,383,000
1,558,000
60
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
21. Share based payment plan (continued)
Expense recognised through profit and loss
Options under employee option plan
Shares under employee share plan
Total expense
2011
$
1,317,085
78,403
1,395,488
2010
$
4,290,096
190,222
4,480,318
22. Financial instruments
The Group’s principal financial liabilities comprise trade and other payables, loans, finance leases and other borrowings. The main purpose of
these financial instruments is to manage short term cash flow and raise finance for the Group’s capital expenditure program. The Group has
various financial assets such as accounts receivable and cash and short-term deposits, which arise directly from its operations.
Risk exposures and responses
The Group manages its exposure to key financial risks in accordance with the Group’s financial risk management policy. The objective of the
policy is to support the delivery of the Group’s financial targets while protecting future financial security. The main risks that could adversely affect
the Group’s financial assets, liabilities or future cash flows are market risks, comprising commodity price risk, interest rate risk, foreign currency risk,
liquidity risk and credit risk. Management reviews and agrees policies for managing each of these risks which are summarised below.
The Group’s senior management oversees the management of financial risks. The Board provides assurance to the Group’s senior
management that the Group’s financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are
identified, measured and managed in accordance with Group policies and the Group’s risk appetite. It is the Group’s policy that no trading in
derivatives for speculative purposes shall be undertaken. At this stage, the Group does not currently apply any form of hedge accounting.
The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.
Capital risk management
The Group manages its capital to ensure that all companies within the Group will be able to continue as a going concern while maximising
the return to stakeholders through the optimisation of the debt and equity balance. Due to the inherent risks involved in mining the
Directors prefer not to utilise funding from financing institutions.
The Group’s overall strategy remains unchanged from 2010.
The capital structure of the Group consists of equity attributable to equity holders of the parent comprising issued capital, reserves and
retained earnings/accumulated losses.
None of the Group’s companies are subject to externally imposed capital requirements.
Operating cash flows are used to maintain and expand operations, as well as to make routine expenditures such as tax, dividends and
general administrative outgoings.
Categories of financial instruments
Financial assets
Loans and receivables
Cash and cash equivalents
Financial assets at fair value through profit & loss
Available for sale financial assets
Financial liabilities
Financial liabilities
2011
$
20,141,830
23,497,092
42,380
458,168
2010
$
11,616,944
20,107,830
68,507
305,949
44,139,470
32,099,230
(6,015,324)
(6,015,324)
(5,522,389)
(5,522,389)
Market risk
Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices.
Market prices comprise four types of risk: commodity price risk, interest rate risk, equity price risk and currency risk. Financial instruments
affected by market risk include receivables, loans, borrowings, deposits, available for sale financial instruments and financial assets at fair value
through profit or loss.
There has been no change at the reporting date to the Group’s exposure to market risks or the manner in which it manages and measures
the risk from the previous period.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
61
NOTES TO THE FINANCIAL STATEMENTS
22. Financial instruments (continued)
Commodity price risk
The Group’s revenues are exposed to commodity price fluctuations, in particular movements in the price of platinum group metals (PGM’s).
The Group regularly measures exposure to commodity price risk by stress testing the Group’s forecast financial position to changes in PGM
prices. The Group does not hedge commodity prices.
The financial instruments exposed to movements in metal prices are as follows:
Financial assets
Trade receivables
2011
$
2010
$
19,429,304
10,345,328
These receivables comprise quotational period embedded derivatives that are carried at fair value in accordance with the policy set out in
Note 2.3(e)
The following table summarises the sensitivity of financial instruments held at reporting date to movements in the relevant forward
commodity price, with all other variables held constant. The sensitivities are based on reasonably possible changes, over a financial year, using
observed ranges of actual historical rates.
10% (2010: 10%) increase in PGM prices
10% (2010: 10%) decrease in PGM prices
2011
2010
Profit/(loss)
1,398,910
(1,398,910)
Equity Increase/
(decrease)
1,398,910
(1,398,910)
Profit/(loss)
639,099
(639,099)
Equity Increase/
(decrease)
639,099
(639,099)
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign
exchange rates. 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 different currency from the Group’s functional currency).
As at 30 June 2010 and 2011 the Group had no exposure to foreign currency risk.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Group’s exposure to interest rate risk arises from cash balances and long term borrowings, relating to finance leases on
motor vehicles and equipment.
Cash and cash equivalents are exposed to AUD, ZAR and GBP deposit rates.
The Group does not engage in any hedging or derivate transactions to manage interest rate risk. In conjunction with external advice,
management consideration is given on a regular basis to alternative financing structures with a view to optimising the Groups’ funding structure.
The risk is managed by the Group by maintaining an appropriate mix between fixed and floating rate liquid funds.
Financial assets
Cash and cash equivalents
Financial liabilities
Interest bearing liabilities
2011
$
2010
$
23,497,092
20,107,830
(464,678)
(644,736)
A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents
management’s assessment of the change in interest rates. At reporting date, if interest rates had been 50 basis points higher or lower and all
other variables were held constant, there would have been an decrease/increase in profit before tax of $74,544 (2010: $67,578). The impact
on equity would have been the same.
62
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
22. Financial instruments (continued)
The financial instruments exposed to movements in variable interest rates are as follows:
Equity price risk
The Group’s listed equity securities are susceptible to market price risk arising from uncertainties about future values of the investment
securities. At the reporting date, the exposure to listed equity securities at fair value was $500,548 (2010: $374,456).
The sensitivity analyses below have been determined based on the exposure to equity price risks at the reporting date.
At reporting date, if the equity prices had been 5% higher or lower:
• Impact on net loss for the year ended 30 June 2011 would have been immaterial; and
• Other equity reserves would decrease/increase by $16,036 (2010: decrease/increase by $18,723) for the Group, mainly as a result of
the changes in fair value of available-for-sale shares. To the extent a decrease in equity prices is considered significant or prolonged, this
decrease may be reflected in profit or loss.
Credit risk
Credit risk is the risk that a contracting entity will not complete its obligation under a financial instrument that will result in a financial loss
to the Group. The carrying amount of financial assets represents the maximum credit exposure. Receivables balances are monitored on an
ongoing basis with the result that the Group’s exposure to bad debts is not significant. The Group’s credit risk is limited to the carrying value
of its financial assets.
At reporting date there is a significant concentration of credit risk represented in the cash and trade receivables balance. With respect to
trade receivables, this is due to the fact that the majority of sales are made to two specific customers as per contractually agreed terms. The
two customers have complied with all contractual sales terms and have not at any stage defaulted on amounts due. The Group manages
its credit risk on trade debtors, cash and financial instruments by predominantly dealing with counterparties with a credit rating equal to or
better than the Group.
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the board of directors, who have built an appropriate liquidity risk
management framework for the management of the Group’s short, medium and long term funding and liquidity management requirements.
The table below summarises the maturity profile of the Group’s financial liabilities based on contractual undiscounted payments based on
the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows.
2011
Non-interest bearing
Finance lease liability
2010
Non-interest bearing
Finance lease liability
Carrying
amount
Contractual
cash flows
Less than
1 year
$
$
$
5,550,635
464,678
6,015,313
4,877,796
644,477
5,522,273
5,550,635
528,188
6,078,823
4,877,796
644,477
5,522,273
5,550,635
144,184
5,694,819
4,877,796
265,958
5,143,754
1 – 5
years
$
-
384,004
384,004
-
378,519
378,519
5+
Years
$
-
-
-
-
-
-
Total
$
5,550,635
528,188
6,078,823
4,877,796
644,477
5,522,273
Fair value of financial instruments
For financial assets and liabilities, the net fair value approximates their carrying value. No financial assets and financial liabilities are readily
traded on organised markets in standardised form, other than listed investments. The Company has no financial assets where carrying
amount exceeds net fair value at balance date.
Fair value of financial instruments
As of 1 July 2009, Sylvania has adopted the amendments to IFRS 7 Financial Instruments: Disclosures which require disclosure of fair value
measurements by level of the following fair value measurement hierarchy:
• quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
• inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or indirectly
(derived from prices) (level 2), and
• inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
63
NOTES TO THE FINANCIAL STATEMENTS
22. Financial instruments (continued)
The following table present the group’s assets and liabilities measured and recognised at fair value at 30 June 2011.
2011
Assets
Available for sale financial assets
Financial assets at fair value through profit or loss
2010
Assets
Available for sale financial assets
Financial assets at fair value through profit or loss
23. Commitments and contingencies
Operating lease commitments
Office premises
Level 1
$
458,168
42,380
500,548
Level 1
$
305,949
68,507
374,456
Level 2
$
Level 3
$
Total
$
-
-
-
-
-
-
458,168
42,380
500,548
Level 2
$
Level 3
$
-
-
-
-
-
-
Total
$
305,949
68,507
374,456
The Group entered into commercial lease arrangements during the period to lease its current office premises, both in Perth and Johannesburg.
Future minimum lease payments (net of GST) as at 30 June are as follows:
Within 1 year
After 1 year but not more than 5 years
More than 5 years
Office equipment
The Group has a number of lease agreements during the period in respect to office equipment.
Future minimum lease payments (net of GST) as at 30 June are as follows:
Within 1 year
After 1 year but not more than 5 years
More than 5 years
Finance lease commitments
Motor vehicles
No new instalment sale agreements during the period in respect of motor vehicles.
Future minimum lease payments (net of GST) as at 30 June are as follows:
Within 1 year
After 1 year but not more than 5 years
More than 5 years
2011
$
273,145
150,271
-
423,416
25,332
64,778
-
90,110
32,876
1,967
-
34,843
2010
$
263,049
394,117
-
657,166
19,313
66,291
-
85,604
112,836
22,114
-
134,950
64
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
23. Commitments and contingencies (continued)
Plant and equipment
No new instalment sale agreements during the period in respect of plant and equipment.
Future minimum lease payments (net of GST) as at 30 June are as follows:
Within 1 year
After 1 year but not more than 5 years
More than 5 years
Commitments for plant construction
At 30 June 2011 commitments were signed for continued improvements of Millsell, Steelpoort, Mooinooi, Lannex
and Doornbosch plants, the expansion of the Mooinooi flotation plant as well as exploration on the Northern Limb.
Within 1 year
After 1 year but not more than 5 years
More than 5 years
2011
$
133,646
296,189
-
429,835
2010
$
153,229
356,556
-
509,785
5,198,502
4,428,586
-
-
-
-
5,198,502
4,428,586
Contingent liabilities
The Group had no contingencies at 30 June 2011.
24. Business combination
Current year acquisitions
There were no acquisitions during the current financial year.
There were no adjustments made in respect of prior year business combinations.
25. Auditors’ remuneration
The auditors of the parent entity are Ernst & Young Australia
Amounts received or due to be receivable by Ernst & Young for:
An audit or review of the financial report of the entity
Other assurance services
Ernst & Young affiliated firms: Ernst & Young South Africa
An audit or review of the financial report of the entity
Other assurance services
Amounts received or due and receivable by non-Ernst & Young audit firms:
An audit or review of the financial report of any other entity in the Group
Taxation and advisory services
Other non-audit services
2011
$
59,334
-
206,637
278,406
120,647
6,230
-
2010
$
-
-
232,288
5,260
119,470
97,544
-
Total auditors’ remuneration
671,254
454,562
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
65
NOTES TO THE FINANCIAL STATEMENTS
26. Key management disclosure
Shareholding of key management personnel
The number of shares in the Company held during the year by each director of the Company of the Group, including their personally
related parties, are set out below.
2011
Director
T M McConnachie
R D Rossiter
G M Button
2010
Director
T M McConnachie
R D Rossiter
G M Button
Balance at
the start of
the year
Issued under
share and
option plan
Other changes
during
the year
Balance at
the end of
the year
500,000
1,032,000
300,000
-
-
-
-
-
-
500,000
1,032,000
300,000
Balance at
the start of
the year
Issued under
share and
option plan
Other changes
during
the year
Balance at
the end of
the year
500,000
1,032,000
300,000
-
-
-
-
-
-
500,000
1,032,000
300,000
All equity transactions with key management personnel other than those arising under the Group’s Incentive Option Plan have been
entered into under terms and conditions no more favourable than those the Group would have adopted if dealing at arm’s length.
Key management personnel compensation
Short-term
Post-employment
Share-based payments
Consultants previously considered key management:
Consulting fees
Termination payments (refer note 4.3)
Share-based payments
Total
2011
$
2,780,969
50,532
113,267
2,944,768
501,219
1,470,942
190,616
2,162,777
5,107,545
2010
$
2,720,913
9,522
1,441,867
4,172,302
-
-
-
-
4,172,302
Compensation options: granted under the employee option plan
Options provide as remuneration and shares issued on exercise of such options
Details of options provided as remuneration and shares issued on the exercise of such options, together with terms and conditions of the
options, can be found in note 21.
Compensation shares: issued under the employee share plan
Shares provided as remuneration
Details of shares provided as remuneration can be found in note 21.
66
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
27. Related party transactions
The consolidated financial statements include the financial statements of Sylvania Platinum Limited and the controlled entities listed in the
following table:
Name of Entity
Sylvania Resources Pty Ltd
Twinloop Nominees Pty Ltd
Great Australian Resources Pty Ltd
SA Metals Pty Ltd
Platinum Mining Ventures Limited
Sylvania Holdings Limited
Aralon Holdings Limited
Sylvania Holdings SA (Pty) Ltd
Sylvania South Africa (Pty) Ltd
Sylvania Metals (Pty) Ltd
Sylvania Minerals (Pty) Ltd
Sylvania Mining (Pty) Ltd
Great Australian Resources SA (Pty) Ltd
Hacra Mining & Exploration Company (Pty) Ltd
Pan Palladium SA (Pty) Ltd
Country of
incorporation
Class of
shares
Equity
Holding
2011
%
2010
%
Australia
Australia
Australia
Australia
Australia
Mauritius
Mauritius
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
74
100
100
100
100
100
100
100
100
100
100
100
100
100
100
74
74
74
100
100
100
100
Sylvania Platinum Limited is the ultimate parent of the Group. Transactions between Sylvania Platinum Limited and its controlled entities during
the year consisted of loan advances between group companies. All intergroup transactions and balances are eliminated on consolidation.
During the year, the non-controlling interest in Sylvania Metals (Pty) Ltd and its wholly owned subsidiary Sylvania Minerals (Pty) Ltd was acquired.
Loans to/(from) related parties
The following table provides detail of advances to/(from) related parties during the year and outstanding balances at balance date:
Loans to related parties
Ehlobo Metals (Pty) Ltd*
2011
Year end
balance
$
-
-
2010
Year end
balance
$
529,597
529,527
* The loan to Ehlobo Metals (Pty) Ltd, the former Black economic empowerment partner in Sylvania Metals (Pty) Ltd was written off during the current financial year (refer note 4 for further details).
The nature of these transactions represents payments made in South Africa on behalf of the above companies.
Terms and conditions
All loans were granted on normal commercial terms and conditions and at market rates, except that there are no fixed terms for the
repayment of loans between related parties.
Outstanding balances are unsecured and are repayable in cash.
Jointly controlled entity
The Group has a 25% interest in the assets, liabilities and output of an un-incorporated joint venture, CTRP, which operates a chrome tailings
retreatment plant at Kroondal in South Africa (2010: 25%).
Terms and conditions with related parties
Payments made on behalf of related parties are made in arm’s length transactions both at normal market prices and on normal commercial terms.
Outstanding balances at year-end are unsecured, interest free and settlement occurs in cash.
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
67
NOTES TO THE FINANCIAL STATEMENTS
27. Related party transactions (continued)
Transactions with related parties
Administration recoveries were received from and service fees paid to the following related parties during the year ended 30 June for
expenses incurred on their behalf:
Service fees paid to related parties
Summer Sun Trading 210 (Pty) Ltd
Southridge Properties (Pty) Ltd
Integrated Geological Solutions (Pty) Ltd
Recoveries from related parties
Summer Sun Trading 210 (Pty) Ltd
Realm Resources Ltd
Ferrum Crescent Ltd
2011
$
(8,810)
(4,197)
-
1,382
17,102
194,427
199,904
2010
$
(5,389)
(14,169)
(388,916)
-
14,955
6,124
(387,395)
28. Change in presentation currency
Following the redomicile of the holding company, and recognising that most of the Group’s revenue is determined in US dollars, the Group
has elected to change its presentation currency from Australian dollars to US dollars. The directors believe that as the majority of the
Group’s sales and earnings originate in US Dollars or US Dollar linked currencies and the change of presentation currency to the US Dollar
will more closely align the Group’s external financial reporting with the profile of the Group.
The change of the Group’s presentation currency has been accounted for in accordance with IAS21, The Effects of Changes in Foreign
Exchange Rates and has been applied retrospectively.
The following methodology has been used to re-present the 2009 and 2010 financial statements, originally reported in Australian Dollar, into
US Dollar:
a) Income and expenses have been translated at the exchange rates at the date of the transactions,
b) Assets and liabilities have been translated at the closing exchange rate for each balance sheet date,
c) Share capital, reserves and retained earnings/accumulated losses were converted at applicable historical rates, and
d) All resulting exchange differences have been recognised in other comprehensive income.
The relevant exchange rates used are as follows:
Year ended 30 June 2011
Average rate
Closing rate
Year ended 30 June 2010
Average rate
Closing rate
Year ended 30 June 2009
Average rate
Closing rate
AUD 1 = US$
R1 = US$
0.98890
1.05951
0.14250
0.14609
AUD 1 = US$
R1 = US$
0.88170
0.85634
0.13150
0.13067
AUD 1 = US$
R1 = US$
0.74750
0.80453
8.92857
7.88208
The above stated procedures resulted in a foreign currency translation reserve of ($2,408,951) at 30 June 2009 and $1,880,566 at 30 June
2010. The earnings per share for the year ended 30 June 2010 has been restated in US dollars to reflect the change in presentation currency.
68
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
NOTES TO THE FINANCIAL STATEMENTS
29. Closed group class order disclosure
The consolidated financial statements include the financial statements of Sylvania Platinum Limited (“Sylvania Platinum”) and its wholly
owned subsidiary Sylvania Resources Proprietary Limited (“Sylvania Resources”).
Name
Country of
incorporation
Sylvania Resources Proprietary Limited
Australia
Equity interest
%
100
Investment
$
190,356,566
Pursuant to Class Order 98/1418, relief has been granted to Sylvania Resources from the Corporations Act 2001 requirements for the
preparation, audit and lodgement of their financial report.
As a condition of the Class Order, Sylvania Platinum and Sylvania Resources entered into a Deed of Cross Guarantee on 23 June 2011. The
effect of the deed is that Sylvania Platinum has guaranteed to pay any deficiency in the event of winding up of controlled entity or if they do
not meet their obligations under the terms of overdraft, loans, leases or other liabilities subject to the guarantee. The controlled entity has
also given a similar guarantee in the event that Sylvania Platinum is wound up or if it does not meet its obligations under the terms of the
overdrafts, loans, leases or other liabilities subject to the guarantee.
The consolidated statement of comprehensive income and statement of financial position of the entities that are members of the Closed
Group are as follows:
Consolidated Statement of Comprehensive Income
Revenue
Cost of sales
Gross profit
Other income
Foreign exchange loss
Share based payment expense
General and administrative costs
Operating profit
Finance revenue
Profit / (loss) before income tax expense
Income tax (expense) / benefit
Net profit / (loss) for the year
2011
$
-
-
-
14,690
(17,581)
(513,646)
(5,986,429)
(6,502,966)
617,728
(5,885,238)
-
(5,885,238)
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
69
NOTES TO THE FINANCIAL STATEMENTS
29. Closed group class order disclosure (continued)
Consolidated Statement of Financial Position
Assets
Non-current assets
Investments
Available-for-sale financial assets
Loans receivable
Property, plant and equipment
Total non-current assets
Current assets
Cash and cash equivalents
Trade and other receivables
Total current assets
Total assets
Equity and liabilities
Shareholders’ equity
Issued capital
Reserves
Accumulated losses
Equity attributable to the owners of the parent
Non-controlling interest
Total equity
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
Total liabilities and shareholders’ equity
No comparatives have been presented as the Class Order is only applicable to the current financial year.
2011
$
103,337,582
458,168
80,004,236
28,976
183,828,962
9,611,383
310,084
9,921,467
193,750,429
29,639,275
167,389,720
(3,547,886)
193,481,109
-
193,481,109
269,320
269,320
269,320
193,750,429
30. Events after the balance sheet date
On 8 July 2011 Sylvania announced its decision to dispose of a significant portion of its magnetite iron ore assets, subject to shareholder
and regulatory approvals. SA Metals Pty Ltd, a wholly owned subsidiary of Sylvania currently owns the iron assets which are located on the
Northern Limb of the Igneous Bushveld Complex.
A review of the Northern Limb assets has shown that magnetite layers are present across the entire northern limb properties held by
Sylvania. In those areas where Sylvania does not hold prospecting rights for the iron ore, it has submitted applications which have since been
accepted. This gives Sylvania a potential +20 kilometre strike of the magnetite layers as indicated by an airborne magnetic survey undertaken
by SA Metals.
Subsequent to the financial year end a decision was taken by the Sylvania Board to separate the iron ore assets from the existing Sylvania
Dump Operations, and to further develop the Volspruit open cast mine. The directors believe that the decision to divest its iron assets will
allow the Company to fully focus on reaching its 2012 financial year production targets which will include successful optimisation of two
existing plants, Lannex and Mooinooi, and development of the Company’s sixth plant, Tweefontein. Sylvania also expects to make significant
progress at its Northern Limb near surface PGM and base metal operation.
70
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
DIRECTORS’ DECLARATION
In accordance with a resolution of the Board of Directors of Sylvania Platinum Limited, I state that:
In the opinion of the Directors:
a) the financial statements and notes of the consolidated entity:
i) give a true and fair view of the financial position as at 30 June 2011 and the performance for the year ended on that date of the
consolidated entity; and
ii) comply with International Accounting Standards; and
b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
c) As at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group comprising of the
Company and the controlled entity as detailed at Note 29 will be able to meet any obligations of liabilities to which they are or may
become subject to by virtue of the deed of cross guarantee referred to in Note 29.
TM McConnachie
Chief Executive Officer
Johannesburg, South Africa
30 September 2011
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
71
INDEPENDENT AUDITOR’S
REPORT
72
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
ADDITIONAL INFORMATION
For Listed Public Companies
Shareholders Profile
as at 31 August 2011
The shareholder information set out below was applicable as at 31 August 2011.
A. DISTRIBUTION OF SHAREHOLDERS
-
-
-
-
1,000
5,000
10,000
100,000
1
1,001
5,001
10,001
100,001 and over
Total
There were 673 holders of a less than a marketable parcel of ordinary shares.
Total number of fully paid shares on issue
Percentage holding of 20 largest holders
B.
SUBSTANTIAL SHAREHOLDERS
Shareholder
Computershare Company Nominees Limited
Number of
shareholders
650
450
140
178
37
1,455
301,251,805
96.44%
Number of shares
Fully paid Shares
Percentage
Fully paid shares
266,227,962
266,227,962
88.37
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
73
ADDITIONAL INFORMATION
C. TWENTY LARGEST HOLDERS OF FULLY PAID SHARES
Shareholder
Computershare Company Nominees Limited
266,227,962
88.37
Bond Street Custodians Limited
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
JP Morgan Nominees Australia Limited
Blackmort Nominees Pty Ltd
National Nominees Limited
Mr Richard Rossiter
J P Morgan Nominees Australia Limited
Bluestar Management Pty Ltd
Eric Preston Pty Ltd
UOB Kay Hian (Hong Kong) Limited
Rogue Investments Pty Ltd
Mr Terence McConnachie
Mrs Tracy Andrea Howell
Delfam Pty Limited
Nefco Nominees Pty Ltd
Mr Richard Alan Jarvis
G Harvey Nominees Pty Ltd
Argento Pty Ltd
4,399,510
3,430,477
3,295,994
2,403,304
1,825,000
1,682,862
1,000,000
802,038
785,000
740,000
710,000
625,000
500,000
488,500
400,000
350,000
325,000
300,000
250,000
1.46
1.14
1.09
0.80
0.61
0.56
0.33
0.27
0.26
0.25
0.24
0.21
0.17
0.16
0.13
0.12
0.11
0.10
0.08
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
D. VOTING RIGHTS
The voting rights attaching to each class of equity securities are set out below:
Ordinary shares
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall
have one vote.
290,540,647
96.44
E.
RESTRICTED SECURITIES
There are no restricted securities on issue.
74
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
GLOSSARY OF TERMS
GLOSSARY OF TERMS 2011
The following definitions apply throughout the annual financial statements:
AIM
ASX
USD
AUD
GBP
JSE
LSE
PGM
Alternative Investment Market of the London Stock Exchange
Australian Securities Exchange
United States Dollar
Australian Dollar
Great British Pound
JSE Limited
London Stock Exchange
Platinum group metals comprising mainly platinum, palladium, rhodium and gold
Sylvania
Sylvania Platinum Limited, a company incorporated in Bermuda
USD
ZAR
United States Dollar
South African Rand
EBITDA
Earnings before interest, tax, depreciation and amortisation
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
75
APPENDIX
APPENDIX
STATEMENT ON RESOURCE
The information in this report that relates to Exploration Results, Mineral Resources or Ore Reserves in relation to the Northern Pit area of the
Volspruit Project is based on information compiled by Mr Mike Hall, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr
Hall is employed by The MSA Group in Johannesburg, South Africa. Mr Hall has sufficient experience which is relevant to the style of mineralisation
and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition
of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Mr Hall consents to the inclusion in the report
of the matters based on his information in the form and context in which it appears.
The information in this report that relates to estimations of Exploration Results, Mineral Resources or Ore Reserves in relation to the Northern Pit
area of the Volspruit Project is based on information compiled by Mr Steve Savage, who is a Member of the Geological Society of South Africa and
is registered with the South African Council for Natural Scientific Professions. Mr Savage is employed by Integrated Geological Solutions. Mr Savage
has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is
undertaking to qualify as a Competent Person as defined in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral
Resources and Ore Reserves’. Mr Hall consents to the inclusion in the report of the matters based on his information in the form and context in
which it appears.
76
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
VISION
To be the leading mid-tier, lowest unit-cost, platinum group metals (“PGMs”) mining company.
OUR MISSION
We generate wealth for all of our stakeholders using safe and innovative processes with a focus on
PGMs whilst exploiting any value-adding associated minerals.
OUR VALUES
We value the safety and health of all
Employees are at the heart of our company; we place their safety and health above all else in
everything that we do.
We value the fundamental rights of people
We treat all people with dignity and respect.
We value honesty and integrity
We act honestly and show integrity by continually striving towards “doing what we say we are
going to do” and showing commitment towards our accountabilities of delivering high performance
outcomes thus projecting an image of professionalism and meeting the expectations of our
colleagues, investors, business partners and social partners.
We respect the environment
We act in a manner that is sustainable and environmentally friendly, applying professional and
innovative methods.
We value the culture, traditional rights and society in which we operate
Our actions will support the communities in which we work whilst honouring their heritage
and traditions.
DESIGNED BY CHAMELEON CREATIVE
SYLVANIA PLATINUM LIMITED ANNUAL REPORT 2011
Annual Report 2011
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Clarendon House
2 Church Street
Hamilton HM11
BERMUDA
www.sylvaniaplatinum.com