VALUE-DRIVEN RESULTS
2016
A N N U A L R E P O R T
VALUE-DRIVEN RESULTS
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 responsible, 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 while honouring their heritage
and traditions.
CONTENTS
ABOUT SYLVANIA
Report profile
Location of operations and projects
Our vision, mission and strategy
Financial and operating snapshot in 2016
STRATEGIC MANAGEMENT
Chairman’s letter
CEO’s review
Sustainability
GOVERNANCE
Directors’ report
Corporate governance statement
FINANCIAL STATEMENTS
Directors’ responsibility in the preparation of the
financial statements
Independent auditor’s report
Consolidated statement of profit or loss and other
comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
SHAREHOLDER INFORMATION
Additional information for listed public companies
Glossary of terms
Corporate directory
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3
4
5
6
9
12
14
20
22
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24
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71
72
IBC
1
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 REPORT PROFILE
This annual report presents a review of the operational and financial performance of Sylvania
Platinum Limited (Sylvania) or (the Company) for the 12 months ended 30 June 2016. The report
includes an analysis of the Company’s material issues and the steps taken to operate successfully
and sustainably within its governance and risk framework.
Sylvania Platinum Limited is a
LOW-COST
PRODUCER
of platinum group metals
(PGMs) including platinum,
palladium and rhodium.
The consolidated financial statements, set out on pages 24
to 70, were approved on 30 August 2016. They include the
Company’s financial results and were prepared in accordance
with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board
(IASB). The consolidated financial statements represent the
ongoing activities of the Sylvania Group.
Throughout the report, financial data is reported in US
Dollars, unless otherwise stated.
The Company, being listed on London’s Alternative
Investment Market (AIM:SLP), is not required to comply
with the UK Corporate Governance Code, re-issued in
September 2014 and applicable to periods beginning on
or after October 2014, or the City Code on Mergers and
Takeovers (the Codes). However, the Directors support the
objectives of the Codes and intend to comply with those
aspects that they consider relevant to the Group’s size and
circumstances. The Corporate Governance Statement can
be found on page 20.
This annual report is available on www.sylvaniaplatinum.com
2
LOCATION OF OPERATIONS AND PROJECTS
LOCALITY WITHIN SOUTH AFRICA
LOCALITY WITHIN SOUTH AFRICA
LIMPOPO PROVINCE
LIMPOPO PROVINCE
NORTH WEST
NORTH WEST
PROVINCE
PROVINCE
Polokwane
(Pietersburg)
Polokwane
(Pietersburg)
EASTERN
LIMB
EASTERN
LIMB
NORTHERN
LIMB
NORTHERN
LIMB
4
4
N
11
N
11
N
1
Mokopane
(Potgietersrus)
N
1
3
Mokopane
2
(Potgietersrus)
3
2
WESTERN
LIMB
WESTERN
LIMB
Nylsvlei RAMSAR
Modimolle
(Nylstroom)
Nylsvlei RAMSAR
Modimolle
(Nylstroom)
N
1
N
1
Rustenburg
1
3
2
Rustenburg
1
2
3
N
4
N
14
Pretoria
N
4
Krugersdorp
Pretoria
N
14
Johannesburg
Krugersdorp
Johannesburg
N
4
N
4
4
5
4
6
5
7
6
1
7
Groblersdal
Groblersdal
1
Dullstroom
Middelburg
Dullstroom
Middelburg
Rustenburg
Layered
Suite
Rustenburg
Layered
Suite
Granites and allied rocks
Upper zone
Main zone
Critical, lower and marginal zones
Granites and allied rocks
Upper zone
Main zone
Critical, lower and marginal zones
Merensky reef
UG2 Chromitite layer
Platreef
Merensky reef
UG2 Chromitite layer
Platreef
Main roads
Main river
SLP
Sylvania
Main roads
Main river
SLP
Sylvania
N
4
N
4
Mbombela
(Nelspruit)
Mbombela
(Nelspruit)
0
SCALE
50km
SDO
Sylvania Dump Operations
SCALE
0
50km
Younger cover rocks
Younger alkaline intrusions
and carbonatities
Sylvania Dump Operations
SDO
Younger cover rocks
Younger alkaline intrusions
and carbonatities
LEGEND
Operating Sylvania complexes
LEGEND
1
Millsell (SDO)
Operating Sylvania complexes
CTRP (25% JV)
2
Mooinooi – Dump and ROM (SDO)
3
4
Millsell (SDO)
Doornbosch (SDO)
CTRP (25% JV)
Mooinooi – Dump and ROM (SDO)
Doornbosch (SDO)
1
2
3
4
5
6
Steelpoort (SDO)
Lannex (SDO)
Tweefontein (SDO)
7
Steelpoort (SDO)
Lannex (SDO)
Tweefontein (SDO)
5
6
7
Mineral projects
1
Everest North
2
Mineral projects
Volspruit
Grasvally
Everest North
3
1
4
2
3
4
Northern Limb projects
Volspruit
Grasvally
Impaired during financial year ended 30 June 2014
Northern Limb projects
Impaired during financial year ended 30 June 2014
3
Nylsvlei RAMSARKrugersdorpMokopane(Potgietersrus)Polokwane(Pietersburg)GroblersdalDullstroomMiddelburgMbombela(Nelspruit)RustenburgJohannesburgPretoriaModimolle (Nylstroom)N11N14N1N1N4N4N4WESTERNLIMBNORTHERNLIMBEASTERNLIMB1123412342345671234Millsell (SDO)CTRP (25% JV)Mooinooi – Dump and ROM (SDO)Doornbosch (SDO)567Steelpoort (SDO)Lannex (SDO)Tweefontein (SDO)Everest NorthVolspruitGrasvallyNorthern Limb projectsImpaired during financial year ended 30 June 2014LOCALITY WITHIN SOUTH AFRICALIMPOPO PROVINCENORTH WEST PROVINCESCALE050kmLEGENDMain roadsMain riverSylvaniaRustenburg Layered SuiteSLPSylvania Dump OperationsYounger cover rocksYounger alkaline intrusionsand carbonatitiesSDOGranites and allied rocksUpper zoneMain zoneCritical, lower and marginal zonesMerensky reefUG2 Chromitite layerPlatreefOperating Sylvania complexesMineral projectsNylsvlei RAMSARKrugersdorpMokopane(Potgietersrus)Polokwane(Pietersburg)GroblersdalDullstroomMiddelburgMbombela(Nelspruit)RustenburgJohannesburgPretoriaModimolle (Nylstroom)N11N14N1N1N4N4N4WESTERNLIMBNORTHERNLIMBEASTERNLIMB1123412342345671234Millsell (SDO)CTRP (25% JV)Mooinooi – Dump and ROM (SDO)Doornbosch (SDO)567Steelpoort (SDO)Lannex (SDO)Tweefontein (SDO)Everest NorthVolspruitGrasvallyNorthern Limb projectsImpaired during financial year ended 30 June 2014LOCALITY WITHIN SOUTH AFRICALIMPOPO PROVINCENORTH WEST PROVINCESCALE050kmLEGENDMain roadsMain riverSylvaniaRustenburg Layered SuiteSLPSylvania Dump OperationsYounger cover rocksYounger alkaline intrusionsand carbonatitiesSDOGranites and allied rocksUpper zoneMain zoneCritical, lower and marginal zonesMerensky reefUG2 Chromitite layerPlatreefOperating Sylvania complexesMineral projectsABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 OUR VISION, MISSION AND STRATEGY
VISION
To be the
LEADING
MID-TIER,
lowest unit cost,
PGMs mining company.
STRATEGY
Sylvania Platinum Limited is a low-
cost producer of PGMs, including
platinum, palladium and rhodium.
The Company’s core business
is the retreatment of PGM rich
chrome tailings material. The
Company also holds prospecting
and mining rights for a number of
PGM projects on the Northern
Limb of the Bushveld Igneous
Complex.
In order to strengthen the Company’s
position as a low-risk specialist in the low-
cost production of PGMs, Sylvania operates
according to the following business priorities:
• Identifying projects that balance minimal
operational and financial risk with the
potential for high margins;
• Ensuring that the management teams
are always well resourced with the right
combination of skills;
• Focus on cash generation during uncertain
economic times; and
• Continually apply appropriate practices/
technology to maintain the Company as a
lower quartile producer.
The Company’s focus is on cash generation and
it will return capital to shareholders according
to the dividend policy.
4
MISSION
To generate wealth for all of our stakeholders using
safe and innovative processes with a focus on PGMs
while exploiting any value-adding associated minerals.
FINANCIAL AND OPERATING SNAPSHOT IN 2016
OPERATIONS
FINANCIAL
LTI –
FREE
across all operations
for the year
Third consecutive year of
RECORD
SDO production
at steady state, achieving
60,643 ounces
– a 5% increase from the previous
record of 57,587 ounces achieved
in FY2015
Group cash cost
$470/oz,
33% below the Company’s
guidance of $700/oz
EBITDA increased 3% to $13.0 million for
SDO (FY2015: $12.6 million)
Group adjusted EBITDA improved by 9%
to $11.1 million (FY2015 $10.1 million)
General and administrative costs are
down by 31% from $3.3 million in FY2015
to $2.3 million
Gross profit up by 19% year-on-year from
$6.5 million in FY2015 to $7.7 million
Profit after income tax of $3.7 million
achieved (FY2015: $1.7 million)
Group cash profit achieved of $8.2 million
(FY2015: $8.4 million)
Basic earnings per share (EPS) improved
125% to 1.28 US cents per share from
0.57 US cents per share in FY2015
Group capital and exploration
expenditure down by 56% to $1.8 million
(FY2015: $4.1 million)
$
5
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 CHAIRMAN’S LETTER
If 2015 was difficult from a PGMs perspective, 2016 was worse. The past financial year was
characterised by further declines in PGM prices, ameliorated by some degree of weakness in the
Rand, as well as political problems related to South Africa’s possible ratings downgrade.
A long-running criticism of the Company has
been the Company’s finite production profile
and diminishing life. A year long strategic review
of the Sylvania tailings retreatment operations,
which is made up of between 60% to 70%
dump material and 30% to 40% current arisings,
collectively referred to as Sylvania Dump
Operations (SDO), has revealed an opportunity
not only to maintain PGM production of around
60,000 ounces, but also to substantially prolong
Group production at this rate for many more
years. This is, of course, subject to our host
mine holding chrome output at a steady rate.
I am delighted to introduce our shareholders
and stakeholders to Project “ECHO” which
addresses the SDO’s diminishing and finite
life, and focuses on improving PGM recovery
efficiencies by adding secondary milling and
flotation modules to existing operations over
the next two to three years. Sylvania has
consistently maintained that treating tailings
from single stage milling and flotation (MF1)
operations a second or even a third time –
where grade allows – has the dual benefit of
recovering PGMs from the primary process,
while lowering the initial capital requirement
for processing plants. Metallurgical performance
and test work on the second pass treatment of
dumps, as well as operational improvements
in recent years, means that the primary and
secondary milling and flotation (MF2) strategy
will be more beneficial owing to lower overall
PGM recovery efficiency, and will result in
lower combined operating costs, increased cash
generation and extended profitable operating
life of operations.
Sylvania SDO production profile
PGM ounces
MF2 expansion
Current SDO operatons
70 000
60 000
50 000
40 000
30 000
20 000
10 000
s
r
a
e
y
0
1
-
5
t
x
e
n
e
h
t
r
o
f
z
o
k
0
6
-
5
5
“
2008
2009
2010
2011
2012
2013
2014
2015
2016 2017E 2018E 2019E 2020E 2021E
Stuart Murray
Chairman
We opened the financial year with $1,082 per
ounce platinum, dropping as low as $814 per
ounce in January 2016 and ending the financial
year at $1,021.
Management’s response to the challenging
environment has been most gratifying. PGMs
output rose by 5% from a record of 57,587 ounces
in FY2015 to 60,643 ounces in FY2016, while
cost containment has been excellent with
cash costs per 3E & Au ounce and general and
administrative costs decreasing 28% and 31%
year-on-year respectively. We are reaping the
rewards of stricter operational controls and
improved capital management – and the proof is
in our performance. We maintained a prudent
balance sheet: we opened the year with a cash
balance of $8.4 million, closing with $6.7 million.
This after having spent $1.1 million on share
transactions to satisfy Sylvania Share Option
Scheme exercises and bonus share awards to
prevent any dilution to shareholders, repayment
of the pipeline finance of $1.9 million and tax
payments of $3.6 million for the year. This is
commendable in the prevailing environment.
I am also pleased to report that our plants were
lost time injury (LTI) free throughout the year,
which is testament to the health and safety
procedures we uphold and the commitment of
management and employees.
6
Dump reprocessing remains the primary focus
of the business and the Board’s decision to
suspend exploration in favour of defending title
has proven to be sound. We see insufficient
tangible improvement in capital markets
to warrant exploration for PGMs and/or
chromite. Our Board had indicated that we
would, subject to the appropriate process, sell
or spin-out the Grasvally chrome opportunity.
This remains in our sights, but progress has
slowed due to continued difficult chrome
market conditions. As a result of production
curtailment by responsible producers, there
are signs that chrome ore markets are
recovering and as such there is renewed
interest in the Grasvally opportunity. We will
not rush into a process that does not capture
the full opportunity for shareholders.
During the course of the year, project
development costs of $0.15 million were
expended in examining an opportunity outside
of South Africa, in a related business, for the
reclamation of value from substantial dumps
using our technical ability. Given the political
risks and uncertainty attached to the project,
our Board decided not to proceed. This is
evidence that we continue to examine other
opportunities, but they need to stack up to the
benchmark of our own SDO to be considered
significantly valuable. We will not do anything
that endangers the balance sheet in these
tough times.
Disappointingly, community protests have had
some impact on our operations. Unfortunately,
we have again borne the brunt of regional
service delivery inadequacies. While we have
not been able to circumvent the issue, we can
and will continue to safeguard the interests of
our employees.
Shareholders need not be concerned that the
Company will be seeking further funding as
has been the case with several major platinum
producers in the short or longer term. It is
apparent that equity investors continue to
leave the platinum space as they see that the
fundamentals are not improving as anticipated.
In Sylvania’s case, there has been some sell-
down among our larger shareholders, mostly
as a result of portfolio adjustments and an
ongoing weak AIM market, but not, we believe,
as a reflection of Company performance. We
have continued to judiciously buy shares to
augment our employee share plan authorised
by shareholders five years ago, to avoid the
issue of new shares. This is in the interests of
all shareholders as it avoids dilution. Our Board
remains intent on continuing share buybacks
7
Despite difficult market
conditions, we have created a more
STABLE
production environment
Capital expenditure of around $12.0 million,
to be funded from Group cash flows without
recourse to any form of debt, will be spent
over the next four years to bring this project to
fruition. This new initiative will improve margins
and fundamentally change the outlook for the
Company. Ongoing capital expenditure, which
is a sustained cost in the mining industry, has
been well controlled by the Group and has been
reduced by 56% year-on-year. It is anticipated
that once metal prices, in both US Dollar and
Rand terms, rise to create the margins received
in the past, shareholders can look forward to
dividends and buy backs as and when the margins
of the business finally improve.
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 CHAIRMAN’S LETTER continued
and/or paying a dividend as and when this is
warranted by free cash flow. All buybacks are
contemplated opportunistically, subject to the
availability of cash.
It remains cause for concern that platinum
demand ended its fourth successive year in
deficit, while supply rose by 19% globally. It is,
we believe, the irresponsible refusal of South
African producers to match supply and demand
that has continued to cause platinum to sink
below the $900 per ounce mark during the year.
Platinum demand is however growing in tandem
with the automotive sector, while jewellery
is starting to show signs of life only because
the price has collapsed. Despite this, above
ground stocks continue to fund deficits and
consequently no meaningful price activity
is evident. In fact, as previously mentioned,
prices have fallen as low as $814 per ounce
platinum, which can be traced back to holders
of investment products who have either stayed
or quit.
Nevertheless, every year, it is worth saying that
things will get better. Inevitably they will. But,
until we see fundamental non-stock movement
related deficits in the major metals we produce,
conditions will remain difficult.
We have heard mutterings about recent
events in Europe affecting us as an AIM listed
Company. The fact is that we are too small,
and largely irrelevant in terms of the platinum
markets, to be concerned about the macro-
economic events of Brexit and the Euro.
Importantly, the automotive markets of the
world continue to consume more metal for
catalytic converters and the financial speculation
component of the PGM market will, for the
foreseeable future, probably outweigh any of
the fundamentals for consumption of metals
demand hurting the market. There is very little
we can do given we represent approximately
2% of the market.
Our focus for FY2017 will be on achieving SDO
excellence and liberating value for chrome and
platinum exploration as well as the project
plays. This will be best achieved with careful
attention to and husbanding of the balance
sheet while management pursues operational
excellence. We are aiming to maintain our
+60,000 ounce profile, keep a lid on costs
by maintaining cost controls, keep our cash
flow and EBIT positive and embark on our
new Project “ECHO”, which is a self-funded
extension of SDO life, in 2017/2018.
8
As it was last year,
our mantra remains:KEEP
PROCESSING,
NOT DIGGING
In conclusion, I extend thanks to
management, our employees and contractors
as without them we would not be where we
are today. Our performance is testament to
your efforts in continuing to thrive during
adverse conditions. I am confident that, as
we move into the next financial year, you
will continue to make your Board proud.
Thanks also to our Board for your ongoing
contribution and level-headedness that has
steered us to where we are. We keep a
finger on what we can control and buckle up
for those aspects that we cannot control, like
the exchange rate and platinum price.
CEO’S REVIEW
As promised, during the past financial year we have focused on ensuring tight control over
operating costs and capital expenditure, as well as ensuring that planned production targets and
efficiencies were met. I also said that we would watch market conditions and ensure that we
adapted as potential changes arose.
insurance guarantee, $0.3 million on exploration
activities and $1.2 million on stay in business
capital for the SDO plants (FY2015: $2.7 million).
A repayment of $0.3 million was received from
Ironveld Holdings (Pty) Ltd under the terms of the
loan agreement with Ironveld plc. The Company
spent $1.1 million on share transactions and the
impact of exchange rate fluctuations on cash held
at the year-end was $0.8 million.
As at 30 June 2016, the Group cash balance grew
by 31% from $5.1 million reported at the end of
H1 to $6.7 million in H2. The Company further
achieved a profit after income tax of $3.73 million
– an improvement of 120% from $1.7 million in
FY2015. General and administrative costs are down
by 31% from $3.3 million in FY2015 to $2.3 million
this year, with gross profit showing a 19% growth
year-on-year from $6.5 million in FY2015 to $7.7
million. The Company’s basic earnings per share
(EPS) improved significantly from the prior year to
1.28 US cents per share (a 125% improvement).
Group capital expenditure is also down by 56% to
$1.8 million from $4.1 million in FY2015.
2016 OPERATIONAL
PERFORMANCE
For the third consecutive year at steady state,
SDO production set an annual record by
achieving 60,643 ounces – a 5% increase from
the previous record of 57,587 ounces achieved
in FY2015. We exceeded stated and revised
guidance of 57,000 ounces to 58,000 ounces
and broke through the 60,000 ounces mark for
the first time. This marks the third consecutive
year that we have met, and exceeded, stated
guidance. For this, we commend management.
Our aim for FY2016 was to obtain a cash cost
of under $700/oz and a capital expenditure
cap of $3.0 million – this target has also been
exceeded with cash costs per PGM feed
ton decreasing by 28% to $23/ton (FY2015:
$32/ton) and cash costs per 3E & Au ounce
decreasing 28% to $437/oz from $603/oz
disclosed in the previous year. SDO capital
expenditure is also down 51% from $2.9 million
recorded in FY2015 to $1.42 million – 53%
below our stated cap.
9
Terry McConnachie
Chief Executive Officer
We were tested over the first half of the year
when the gross basket price dropped to $785/oz
in the second quarter. However, despite this, and
thankfully due to disciplined cost controls, we still
managed to produce profitably. Group EBITDA in
H2 rose to $7.2 million from $3.6 million in H1 and,
despite the purchase of 7,383,974 Sylvania shares
to be held in treasury to satisfy the Share Option
Scheme and any future management awards, as well
as the payback of the SDO pipeline finance, we are
sitting with no debt or project finance facilities and a
modest amount of cash in the bank.
2016 FINANCIAL PERFORMANCE
The Group cash balance was $6.7 million at 30
June 2016, having decreased by $1.7 million (20%)
from $8.4 million in the previous year. Group cash
profit (earnings after interest and tax paid before
non-cash items including depreciation, amortisation,
impairment, foreign exchange gain/loss, share-based
payments, rehabilitation provision movements and
deferred tax) was $8.2 million.
Cash generated from operations before working
capital movements was $11.5 million, with net
changes in working capital amounting to a reduction
of $6.2 million, $1.9 million of which can be
attributed to the repayment of the 3 month pipeline
financing on the sale of concentrate. A further
$3.6 million in tax payments was made. During the
year, $0.3 million was spent on the rehabilitation
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016
CEO’S REVIEW continued
The SDO continued to build on steady
performance in recent years and, despite a
lower PGM feed grade and some production
interruptions due to the electrical substation
fire at Mooinooi, as well as community
protests related to municipal service delivery
and job opportunities at our Eastern Limb
operations during the year, the operations
managed to improve on the treatment tons of
FY2015 and significantly exceeded the previous
recovery efficiency in order to achieve a
record annual PGM ounce production.
While the overall plant feed head grades were
slightly higher than in FY2015, the FY2016 PGM
feed grades were 5% lower at 4.03g/ton from
4.22g/ton in the previous year. Plant feed tons
for the year are up 2% to 2,179,468 tons from
2,129,352 tons recorded in FY2015, and PGM
plant recovery increased by 13% from 38% in
FY2015 to 43%.
More disciplined production management,
improved plant stability and continuous process
improvement initiatives helped maintain stable
feed tonnages and to achieve higher PGM recovery
efficiencies over the past year. We are now able to
build further on this by expanding our metallurgical
plant infrastructure in order to achieve even higher
process efficiencies at lower overall production cost
through the execution of Project “ECHO”. This
project will enable transformation of the Millsell,
Doornbosch, Tweefontein and Mooinooi Dump
and ROM operations from single stream milling and
flotation (MF1) circuits to primary and secondary
milling and flotation (MF2) circuits over the next
two to three years.
From a financial perspective, SDO revenue
decreased by 17% year-on-year to $39.5 million
from $47.8 million in FY2015, primarily due
to the gross basket price dropping 21% from
$1,072/oz in FY2015 to $850/oz. However,
SDO EBITDA improved by 3% to $13.0 million
from $12.6 million recorded in FY2015, aided
by significantly lower operating costs during the
period. SDO capital expenditure decreased by
51% as a result of stringent cost controls.
FAR NORTHERN LIMB
OPERATIONS
As mentioned by our Chairman, over the
course of the financial year, the Company
continued with capital expenditure on
exploration projects in a bid to defend title.
We will not, however, embark on any action
requiring new debt uptake.
HARRIET’S WISH, AURORA
AND CRACOUW EXPLORATION
(HACRA)
The Company submitted financial guarantees
in order to provide for the reduced financial
EMPLOYEE SAFETY, HEALTH AND
THE ENVIRONMENT
I am proud to report that the Company achieved an
LTI-free year at all operations and did not receive any
Section 54 stoppage notices from the Department of
Mineral Resources (DMR) during the year. This is an
exceptional achievement, which again demonstrates
our commitment towards the safety of our
employees and operations. Particularly notable is the
Steelpoort Plant, which has been LTI-free for more
than eight years while Tweefontein and Doornbosch
both achieved the significant milestone of four years
LTI-free during the year.
Health, safety and environmental compliance remains
a key priority for the Company. The collaborative
efforts of management and all employees across the
operations, upholding the safety culture, contribute
to the high safety standards and plant conditions at
the respective operations.
10
“Unfortunately,
due to the recent
performance of the
chrome market,
potential purchasers
have been slow
to show interest.
However, we expect
this to change as the
market improves.”
security for rehabilitation, as required by the
DMR, and notarial execution of the mining right
for this project occurred on 9 December 2015.
additional costs, it has been postponed pending
the decision on the MRA and EA as part of our
continuous focus on improving cost controls.
In terms of the Mineral and Petroleum
Resources Development Act (MPRDA),
application to transfer the right to mine iron
ore, vanadium and heavy minerals to Ironveld,
pursuant to the iron ore transaction concluded
in FY2013, was granted on 15 April 2016. We
also concluded the notarial cession of this
right and the documents were lodged with
the Mining Titles Office for registration. When
any further update is available, this will be
communicated to all stakeholders.
We intend to proceed with a water use licence
application (WULA) but, as communicated in
our Interim Report this year, this process will
be delayed as transfer of the title deeds from
the deceased original landowners to lawful
occupants and descendants will need to
be facilitated.
VOLSPRUIT
In the first quarter, we reported that a
biodiversity and wetland offset strategy was
delivered to the Limpopo Department of
Economic Development, Environment and
Tourism (LEDET) and the DMR on
14 September 2015. This forms the basis of
implementing remediation towards zero net
impact should planned mitigation during the
mine’s operation prove to be insufficient. In the
form of an addendum to the environmental
impact assessment (EIA), as part of the
Company’s application for environmental
authorisation (EA), the documents were
submitted together with the comments and
responses report following public review.
Unfortunately, in the third quarter, we were
informed that the EA application had been
refused, and that LEDET had listed various
reasons for the refusal. Our advisors believe that
the reasons for the refusal indicated that LEDET
had not duly considered the contents of the
addendum submitted in the first quarter and, as
such, an appeal against the refusal was submitted
to the relevant authority on 3 June 2016.
Sylvania continues to await the outcome of
the mining right application (MRA) from the
DMR for this project, believing that a decision
will be reached when the appeal of the EA
has been concluded.
As communicated in the prior year, the
Company intends to proceed with a WULA
although this will require preliminary detailed
civil designs of all dam facilities. As this will incur
GRASVALLY CHROME OPERATION
A mineral resource estimate statement,
which declared a South African Code for the
Reporting of Exploration Results, Mineral
Resources and Mineral Reserves (SAMREC)
compliant resource over the entire strike length
of 5.2km of the known chromitite body on
the prospect of this project, was completed in
the second quarter of the financial year. This is
necessary for the Company to exercise a mining
right over the resource.
The MRA for Grasvally was submitted in the
first quarter and public participation meetings
with interested and affected parties were
held in February 2016. Stakeholders at these
meetings requested an assessment of potential
loss of agriculture and income should the
project proceed. The DMR then granted a
50-day extension to the submission of the EIA,
which was finally submitted on 10 May 2016.
We await a decision by the DMR.
In addition, the WULA for opencast mining and
waste rock treatment was submitted to the
Department of Water and Sanitation (DWS)
on 1 June 2016 and we also await a decision on
this application.
During the second quarter, we communicated
that the Company intends to sell this asset. An
international agent was appointed to manage
the process and a marketing “teaser” was
released in March 2016. Unfortunately, due to
the recent performance of the chrome market,
potential purchasers have been slow to show
interest. However, we expect this to change as
the market improves.
OUTLOOK
Based on current resources, plant
infrastructure and operational
performance, we should see similar
production performance in FY2017
and, with planned process expansion
projects over the next two to three
years, we should be able to maintain
production levels at around 58,000
ounces to 60,000 ounces of PGMs
for many years going forward.
11
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 SUSTAINABILITY
STAKEHOLDER
ENGAGEMENT
At Sylvania, the Board are serious
about stakeholder engagement and view
communication with all of our stakeholders
as a means to identify shortcomings and
implement strategies that address any issues.
“The Company
achieved one year
LTI-free at all
operations and did
not receive any
Section 54 stoppage
notices from the
DMR during the
financial year.”
Our stakeholder engagement is presented
in quar terly repor ts in the month following
the quar ter end, an interim repor t at the
end of the f irst half of the f inancial year
including the half year f inancial statements,
as well as an annual repor t including the
full year f inancial statements. After the
publication of our annual repor t in August
ever y year, the Company engages with a
specialist corporate communications f irm to
print it in a glossy, illustrated format. As and
when management and our Board considers
it material, information is announced to
the public as soon as reasonably possible
after a decision has been mandated in
terms of the requirements of AIM. The
Board also conduct Investor Roadshows to
present results to the public ever y quar ter.
All of the presentations, announcements
and repor ts are placed on the Company’s
website where they are available to the
public at any time. Whenever possible,
shareholders’ queries are addressed via
email, although replies are limited by the
availability of information that has already
been shared with the public. In these
communiqués, we stress that information
will be released to the public as soon as it
has been deemed material and shareholders
are advised accordingly.
12
SAFETY AND HEALTH
The Company remains
committed to zero harm,
focusing constantly on
compliance at all operations
in order to eliminate safety deviations and to
maintain the highest standards.
The Company achieved one year LTI-free at
all operations and did not receive any Section
54 stoppage notices from the DMR during the
financial year. This is an exceptional achievement,
which again demonstrates our commitment
towards the safety of our employees and
operations. Our Steelpoort Plant has been LTI-
free for more than eight years while Tweefontein
and Doornbosch both achieved the significant
milestone of four years LTI-free during the year.
In that we operate off our host mine’s footprint
and in terms of its mining licence, the Company
holds itself accountable to the Integrated
Management System (IMS) safety requirements
of our host mine. Accordingly, we use our host
mine’s procedures and standards on quality,
safety and environment. We are audited in terms
of the IMS requirements, as well as the ISO 9001,
ISO 14001 and OSHAS 18001 standards.
Technical training is provided at the Process
and Engineering departments, and legislated
safety training is presented on first aid, hazard
identification and risk assessment (HIRA),
working at heights and mobile machinery,
among others.
Employee health and wellness programmes
are aligned with those of the host mine and
typical medical conditions, such as high blood
pressure and noise-induced hearing loss (NIHL),
are monitored with annual examinations.
Our healthcare services include treatment
of minor injuries on duty at our host mine’s
medical facility and referral of serious injuries
to a suitable facility. Drug and alcohol testing
is conducted in terms of our host mine’s
programmes: employees and contractors
are tested randomly at the entrance to the
property before a shift begins. If any substance
is detected, the individual is referred to the
mine clinic immediately.
The Company recently undertook a business risk
assessment to assess the potential for a Section
54 stoppage order by the DMR and found, at the
time of writing, that all legislated safety, wellness
and training requirements were in place.
Health, safety and environmental compliance
remains a key priority for the Company as
a collaborative effort by management and
employees across all operations, with safety
culture in mind, in order to uphold the highest
safety standards and plant conditions.
ENVIRONMENT
As we operate on the
environmental footprint of
our host mine, we adhere to
the culture and standards of their policies and
practices at all times.
In the past financial year, there have been no
reportable environmental incidents, which
is testament to the work ethos of the teams
at the operations. The Company generates
minimal hazardous waste and waste removal is
conducted by a contractor with the necessary
permits to remove and transport hazardous
waste to a designated landfill site.
Our electrical teams have noted an increase in
energy use and are currently identifying energy-
efficient projects aimed at reducing wasteful
energy consumption. Low-energy lighting is being
installed in all our plants and offices, replacing
existing lamps with LEDs. The use of synthetic,
environmentally-friendly oil in our transformers,
for cooling purposes, is being investigated as an
alternative to less expensive mineral-based oil as
synthetic oils are believed to be far superior in
terms of heat dissipation and cooling. In addition,
we match our motor selection closely to the
power requirement of the driven equipment to
reduce overall power consumption and we have
standardised premium efficiency-rated motors
on all plants for greater efficiency at the same
power consumption.
Power factor-correction equipment has been
installed at the Lannex and Doornbosch
operations. Equipment has been reinstated
at Mooinooi where failure in August 2015
resulted in a substation fire and production
downtime of one week. Generators have
been installed at the Tweefontein and Lannex
plants. When required, co-generation of
power parallel with Eskom is used for plants
through a complex synchronisation system. At
Lannex, approximately 1,000kVA is generated,
which constitutes about 60% of the plant’s
requirements. At Tweefontein, approximately
2,000kVA is generated, which is enough power
to run the entire plant.
COMMUNITIES
The Company employs
a total of 420 people
in permanent positions
throughout the
organisation. At the plants, residents of
local communities are sourced unless
specialised skills are not available locally.
The Company also procures goods and
services from local businesses unless
specific goods are not readily
available locally.
The Company regularly assists with local
development projects. In the past year,
these involved the following projects:
• borehole pump maintenance and repair,
as well as cable replacement, for local
drinking water supply;
• maintenance and control of vegetation
around a school to discourage snakes, as
well as sponsorship of kit for the school’s
soccer team;
• sponsorship of a borehole pump to
irrigate a vegetable garden at a school
for disabled children, as well as regular
visits with treats;
• orphaned and vulnerable children
continued to receive a meal every day
through a feeding scheme sponsored by
the Company, including maintenance of the
kitchen and administration support; and
• the Company has committed to supply
building material for construction of a
new community school.
13
EMPLOYEES
The Company is
progressing continuously
towards employment
equity and transformation
within the workplace.
An employment equity
committee has been
established to deal with
the implementation of the
Employment Equity Act,
1998 (Act No 55 of 1998).
Wage negotiations are
conducted biannually with
organised labour in terms
of a recognition agreement
with the National Union
of Mineworkers (NUM),
which allows the Company
to enter into collective
bargaining with the union.
In terms of recent wage
agreements, over and above
a basic salary, employees
are offered a provident
fund and medical aid as well
as, in certain instances,
a commuting allowance.
Certain employees,
particularly at the lowest
income level, also qualify for
a housing allowance.
Our employee relations
are sound and we comply
with the provisions of the
Labour Relations Act,
1995 (Act No 66 of 1995).
The Company also upholds
freedom of association –
employees may choose
whether or not to be a
member of a union.
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 DIRECTORS’ REPORT
RA Williams
SA Murray
E Carr
TM McConnachie
INFORMATION ON
DIRECTORS
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 2016. Sylvania is a limited company incorporated and domiciled in
Bermuda. Unless otherwise stated, the consolidated financial information contained in this report is
presented in US Dollars.
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.
SA Murray
Independent
Non-executive Chairman
TM
McConnachie
Chief Executive
Officer
RA Williams
E Carr
Independent
Non-executive Director
Independent
Non-executive Director
The directors of Sylvania were in office from
1 July 2015 unless otherwise stated.
14
SA Murray
Mr Murray has over 25 years of executive
experience in the Southern African platinum
sector, commencing his career at Impala
Platinum’s Refineries in 1984. He held a
number of positions at Impala Platinum,
Rhodium Reefs Ltd, Barplats, and Middelburg
Steel and Alloys, before joining Aquarius
Platinum Limited in 2001 as Chief Executive
Officer, holding that position until 2012. He is
currently a non-executive director of Talvivaara
Mining Company Plc, the Finnish nickel miner
and on 22 July 2015 joined Luiri Gold Limited as
Deputy Chairman and Managing Director.
Special responsibilities
Independent Non-executive
Chairman of the Board
Member of the Remuneration
Committee
TM McConnachie
Mr McConnachie has over 26 years of
experience in mining, beneficiation 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
RA Williams
Mr Williams was appointed to the Board on
29 December 2011. He is a Chartered
Accountant with over 20 years’ international
experience in mining finance, and with an
honours degree in French and Spanish.
After joining Randgold Resources in 1997, he
was appointed Group Finance Director in
2002. Mr Williams went on to become Chief
Financial Officer of JSE-listed AECI Limited
before moving to BSG Resources Limited.
He is currently a director of Taurus Gold and
Commercial Executive for Digby Wells &
Associates environmental consultants.
Special responsibilities
Chairman of the Audit and Remuneration
Committees
E Carr
Ms Carr joined the Board of Sylvania
Platinum Limited on 1 May 2015. She is a
Chartered Certified Accountant with an
MSc in Management from London University
and is a SLOAN fellow of London Business
School (LBS). Ms Carr has over 25 years of
experience within the resources sector. She
was appointed Finance Director of Cluff
Resources in 1993 and has, since that time, held
several executive directorships in the resource
sector. Her first non-executive role was for
Banro Corp in 1998 and more recently she has
been a non-executive director for Talvivaara
Mining Company Plc, the Finnish nickel miner.
Currently, Ms Carr is a non-executive director
of Nobel Holdings Investments Ltd, a Russian oil
and gas company.
Special responsibilities
Member of the Audit Committee
15
Company Secretary
The Company Secretary
role is held by Codan
Services Limited and they
are assisted by E Carr.
Principal activities
The principal activity of
the Group during the
financial year was the low
cost extraction of PGMs
from chrome dumps and
current arisings as well
as investment in mineral
exploration. Further
information is provided in
the CEO’s review.
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 DIRECTORS’ REPORT continued
BUSINESS REVIEW
PRINCIPAL RISKS AND UNCERTAINTIES
The Group is subject to a variety of risks, specifically those relating to the mining and exploration
industry. The CEO, assisted by the senior management, undertakes on-going risk assessments to
identify and consider major internal and external risks to the business model of the Group. Risks
identified are linked to the Group deliverables in order to ensure continuous mitigation of these risks,
which is aligned with corporate objectives.
Outlined below is a description of the principal risk factors that the Board feel may affect
performance. The risks detailed below are not exhaustive and further risks and uncertainties may
exist which are currently unidentified or considered to be immaterial. The risks are not presented in
any order of priority.
“The Group is subject
to a variety of risks,
specifically those
relating to the mining
and exploration
industry.”
Commodity price
Risk and impact:
Mitigation:
Commodity prices are subject to high levels of
volatility and are impacted by a number of factors
that are outside of the control of the Group. Low
PGM prices may affect the ability of the Group to
fund any future growth. The Group’s ability to raise
sufficient capital, through debt or equity, for further
exploration, investment or development is limited.
The Board and management constantly monitor the market in which the Group
operates. Long term financial planning is undertaken on a regular basis and
production is focussed on the extraction of low cost ounces. Any expansion of
existing operations will be funded out of surplus cash and/or pipeline finance. Any
major development capital for the Northern Limb and Volspruit projects remains
on hold until the market improves significantly and/or mining rights are obtained
and will be reassessed by the Board on an on-going basis.
Sustained resources
Risk and impact:
Mitigation:
The retreatment of dump material has a finite life
and it is essential for the long-term continuation of
the SDO that additional feed material is found and
committed to the plants.
The majority of operations have dump resources which will provide several years
of production. The risk is further mitigated by the current arisings from the host
mines which are fed through the SDO. These feed sources will be available to the
Group for the life of the mine and are currently not at risk. A new project has
been identified to increase forecast ounce production from dump resources.
Opportunities to acquire additional resources and the ability to expand the life of
the SDO are continually being investigated by the Board and senior management.
Capital project selection
Risk and impact:
Mitigation:
It is essential that the selection of projects on
which to spend the limited capital that is available,
must provide investors with the required returns
and strategic outcomes. Incorrect decision making
and large capital overruns could have a significant
impact on the sustainability of the Group.
Failure to attract and retain key staff
Detailed analysis and due diligence are performed on all potential capital projects
and are only considered where the Internal Rate of Return (IRR) is at least 20%.
Risk and impact:
Mitigation:
The Group relies on a small team of experienced
professionals for its success. The loss of key
personnel and the failure to attract appropriate staff
may cause short-term disruption to the business.
In order to reduce this risk, key employees have been given longer notice periods
and a share option scheme. Succession planning also features on the agenda at
Board meetings.
Country risk
Risk and impact:
Mitigation:
The Group’s operations are all in South Africa.
The mining labour environment as well as
community unrest in South Africa continues to be
a concern for the sector in general.
Directors and management place great emphasis on maintaining constructive
relations with labour through ongoing communication, engagement and awareness
within the communities within which the Group operates.
16
“The consolidated
profit before tax
expense of the Group
for the year was
$6.0 million (FY2015:
$3.6 million).”
GROUP FINANCIAL RESULTS
RESULTS FOR THE YEAR
The consolidated profit before tax expense
of the Group for the year was $6.0 million
(FY2015: $3.6 million). This increase in profit
before tax is primarily due, in addition to a
weaker ZAR/$ exchange rate, to an increase
in gross profit of the SDO of 19% as well as a
decrease in general and administration costs
of 31%. Further non-cash expenses include
depreciation of $5.3 million and share-based
payments of $0.3 million. The Group adjusted
EBITDA (earnings before interest, tax,
depreciation, amortisation and impairment) for
the year was $11.1 million, a 9% improvement
on the prior year.
Production throughput increased by 2% from
2,129,352 tonnes to 2,179,468 tonnes and total
ounces produced increased by 5% to 60,643
PGM ounces for the year from 57,587 ounces in
the prior year. Revenue decreased by 17% from
$47.8 million in FY2015 to $39.5 million for the
current year primarily due to the gross basket
price dropping 21% from $1,072/oz in FY2015 to
$850/oz. Cost of sales (direct and indirect costs
of production) decreased by 23%.
Capital spend decreased during the current
financial year and consists of $0.3 million
exploration expenditure and $1.5 million
additions to property, plant and equipment.
The cash balance at 30 June 2016 was
$6.7 million (FY2015: $8.4 million). Cash
generated from operations before working
capital movements was $11.5 million, with
net changes in working capital amounting to
a reduction of $6.2 million, $1.9 million of
which can be attributed to the repayment
of the 3 month pipeline financing on the sale
of concentrate. A further $3.6 million in tax
payments was made. Major spend items include
$0.3 million spent on the rehabilitation insurance
guarantee (FY2015: $0.5 million), $0.3 million on
exploration activities (FY2015: $0.6 million),
$1.2 million on stay in business capital for the
SDO plants (FY2015: $2.7 million) and $1.1
million on share transactions (FY2015: $0.7
million). A repayment of $0.3 million
(FY2015: $0.5 million) was received from
Ironveld Holdings (Pty) Ltd under the terms of
the loan agreement with Ironveld Plc. The impact
of exchange rate fluctuations on cash held at year
end was $0.8 million (FY2015: $1 million).
Group cash profit (earnings after interest
and tax paid before non-cash items including
depreciation, amortisation, impairment,
foreign exchange loss, share-based payments,
rehabilitation provision movements and deferred
tax) was $8.2 million (FY2015: $8.4 million).
For more details on the financial performance of
the Group please refer to the financial statements.
17
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 DIRECTORS’ REPORT continued
REVIEW OF OPERATIONS
AND EXPLORATION
A detailed review of operations and
exploration activities has been included
in the CEO’s review.
CORPORATE MATTERS
SHARE BUY-BACKS
During the year, a total of 7,383,974 ordinary
shares of $0.01 each in Sylvania Platinum
Limited were repurchased at prices ranging
from 6.48 to 10.00 pence per share.
REDUCTION OF PAR VALUE OF
SHARES
Pursuant to the resolutions approved at its
Annual General Meeting on 30 October 2015,
the par value of each authorised share has
reduced from US$0.10 per common share to
US$0.01 per common share, effective as of
30 October 2015.
LIKELY DEVELOPMENTS AND
EXPECTED RESULTS
Additional comments on expected results of
operations of the Group are included in the
operational performance section in the
CEO’s 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 under review, there
were 3 formal directors’ meetings and a strategy
session. 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 and made
an annual plant visit.
“During the year, a
total of 7,383,974
ordinary shares
of $0.01 each in
Sylvania Platinum
Limited were
repurchased at
prices ranging from
6.48 to 10.00 pence
per share.”
The number of formal meetings of the Group’s Board of directors attended by each director was:
Board
Meetings
Audit Committee
Meetings
Remuneration Committee
Meetings
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
3
3
3
3
3
3
3
3
–
–
3
3
–
–
3
3
–
2
2
–
–
2
2
–
TM McConnachie
SA Murray
RA Williams
E Carr
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
reporting date:
SHARES AND OPTIONS
2016
TM McConnachie
SA Murray
RA Williams
18
Common
Shares
4,615,000
200,000
907,000
Share
options
400,000
800,000
160,000
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 KEY MANAGEMENT REMUNERATION
2016
Directors
TM McConnachie
SA Murray
RA Williams
E Carr
Other key management
Short Term Benefits
Share-based
payment
Total
Cash salary/
Consulting
fees
$
416,719
–
–
22,000
438,719
771,933
1,210,652
Bonus1
$
–
–
–
–
–
70,614
70,614
Directors’
fees
Equity shares/
share options
$
$
$
60,000
100,000
60,000
60,000
280,000
–
280,000
66,516
37,917
15,002
–
119,435
98,024
217,459
543,235
137,917
75,002
82,000
838,154
940,571
1,778,725
1 Cash bonuses were awarded to directors and key personnel based on individual performance.
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
Details of the financial and operating
performance and cash flows of the Group are
set out in the CEO’s review. In addition, the
Group’s financial risk management objectives
and policies are detailed in note 22 and available
borrowing facilities are set out in note 11. After
reviewing the financial position, operational
performance, budgets and forecasts as well as
timing of cash flows and sensitivity analyses, the
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
financial statements have been prepared on the
going concern basis.
EVENTS AFTER THE
REPORTING PERIOD
On 14 July 2016, the DMR approved the
Section 11 application to transfer the portion
of the Mining Right held by Hacra Mining and
Exploration Company (Pty) Ltd for heavy
metals, iron and vanadium to Ironveld (Pty) Ltd
in terms of the Ironveld transaction entered into
in August 2012.
STATEMENT AS TO DISCLOSURE
OF INFORMATION TO AUDITORS
The directors who were in office on the date
of approval of these financial statements have
confirmed, as far as they are aware, that there
is no relevant audit information of which the
auditors are unaware. Each of the directors has
confirmed that they have taken all the steps that
they ought to have taken as directors in order
to make themselves aware of any relevant audit
information and to establish that it has been
communicated to the auditor.
Signed in accordance with a resolution of
the directors.
TM McConnachie
Chief Executive Officer
30 August 2016
19
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016
CORPORATE GOVERNANCE STATEMENT
The Company, being listed on AIM, is not required to comply with
the UK Corporate Governance Code (the Code), however the
directors support the objectives of the Code and intend to comply
with those aspects that they consider relevant to the Group’s size and
circumstances. Any applicable changes as a result of the revised 2016
Code will be implemented in the financial year commencing 1 July 2016.
RISK ASSESSMENT
The Board undertakes on-going risk assessment
to identify and consider major internal and
external risks to the business model of the
Group. Principal risks and uncertainties are
detailed in the Directors’ report.
SHAREHOLDER RELATIONS
Management and the Chairman meet regularly
with major shareholders to develop a balanced
understanding of the issues and concerns of
shareholders. The Chairman ensures that the
views of shareholders are communicated to the
Board as a whole.
The directors have established Audit
and Remuneration Committees. Board
appointments, succession planning, Corporate
Governance and sustainability issues are dealt
with by the full Board of directors.
“Management and
the Chairman meet
regularly with major
shareholders to
develop a balanced
understanding of the
issues and concerns
of shareholders.”
THE BOARD OF DIRECTORS
The Board’s role is to provide
entrepreneurial leadership of the Group
within a framework of prudent and
effective controls which enables risk to
be assessed and managed. The Board sets
the corporate and operational strategy
and holds regular Board meetings to
review planning, operational and financial
performance. The Board is responsible
for setting the Group’s values and
standards and ensuring that its obligations
to shareholders and others are met.
The Board comprises four members
being the independent non-executive
Chairman, two independent non-executive
directors, and one executive director;
the details of whom are outlined in the
Director’s report. There is a clear division
of responsibilities at the head of the Group
through the separation of the positions of
Chairman and the Chief Executive Officer.
The Board currently comprises:
SA Murray
Independent
Non-executive Chairman
TM
McConnachie
Chief Executive
Officer
RA Williams
Independent
Non-executive Director
E Carr
Independent
Non-executive Director
20
“Under its terms
of reference, the
Remuneration
Committee assists
the Board to
determine the
remuneration
arrangements
and contracts
of the executive
directors and senior
employees.”
AUDIT COMMITTEE
The membership of the Audit Committee
comprises Roger Williams (chairman) and
Eileen Carr, both of whom are qualified
accountants. The Audit Committee invites
representatives of the external auditor as well
as management to all committee meetings.
The Audit Committee is satisfied that the
Group’s auditors are independent.
The Audit Committee met three times during
the year to consider the following agenda items:
August 2015:
• Annual Report for the year ended
30 June 2015
• External audit report on the Group
Annual Financial Statements for the year
ended 30 June 2015
• Intra-group loans accounting and tax
treatment
• Going concern and working capital
requirement/cash forecast
• Impairment
• Subsequent events
• Taxation
February 2016:
• Half year results and report to
31 December 2015
• External audit report on half year
• Impairment
• Going concern assessment
• Internal controls
• IT security
May 2016:
• External audit strategy and plan
• Cyber security
All press releases, including quarterly results,
are approved by the entire Board.
REMUNERATION COMMITTEE
The Remuneration Committee comprises
Roger Williams, who is the chairman, and Stuart
Murray. During the year under review, the
Remuneration Committee met formally twice.
Under its terms of reference, the Remuneration
Committee assists the Board to determine the
remuneration arrangements and contracts of
the executive directors and senior employees.
It also reviews the Board and executives’ key
performance indicators, as well as performance-
related pay and share option allocations.
No director is involved in reviewing his own
remuneration. The directors’ remuneration
report, which includes details of the directors’
interests in options and shares is set out in the
Directors’ report.
The independent non-executive directors may,
if needed, seek independent professional advice,
at the Group’s expense, in the execution of
their duties.
NOMINATIONS COMMITTEE
The role of the Nominations Committee
is undertaken by the full Board of
directors. The Nominations Committee
is charged with finding suitable candidates
for nomination for appointment to the
Board of directors.
INTERNAL CONTROLS
The effectiveness of the internal controls is
overseen by the Board of directors and is
operationally monitored by the management
on various organisational levels. The Group’s
financial control function is responsible for
periodically testing the controls and overseeing
the commitments entered into in connection
with the operations of the Group.
The Group does not have a separate internal
audit function to evaluate and test the operating
procedures and processes relating to internal
controls. The establishment of an internal audit
function is considered by the Audit Committee
and the Board of directors annually and is
regularly discussed with the Group’s external
auditors. The stage of development and
operational scope of the Group have, in the
Board of directors’ view, not yet warranted the
establishment of an internal audit function.
21
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 DIRECTORS’ RESPONSIBILITIES
IN THE PREPARATION OF THE FINANCIAL STATEMENTS
The directors are responsible for preparing the annual report and the financial statements in
accordance with applicable law and regulations.
The directors have elected to prepare the Group financial statements under IFRS.
International Accounting Standard I requires that financial statements present fairly for each financial year the Group’s financial position,
financial performance and cash flows. This requires the faithful representation of the effects of transactions, other events and conditions
in accordance with the definitions and recognition criteria for assets, liabilities, income and expenses set out in the International
Accounting Standards Board’s ‘Framework for the Preparation and Presentation of Financial Statements’. In virtually all circumstances, a fair
presentation will be achieved by compliance with all applicable IFRSs.
The directors are also responsible for:
• properly selecting and applying accounting policies;
• presenting information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information;
• providing additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the entity’s financial position and financial performance; and
• making an assessment of the Group’s ability to continue as a going concern.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and
disclose with reasonable accuracy at any time the financial position of the Group. They are also responsible for safeguarding assets of the
Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s
website.
Legislation in Bermuda governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
DIRECTORS’ RESPONSIBILITY STATEMENT
We confirm that to the best of our knowledge:
1. the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets,
liabilities, financial position, profit or loss and cash flows of the Group and the undertakings included in the consolidation taken as a
whole; and
2. the sections of the annual report include a fair review of the development and performance of the business and the position of the
Group and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and
uncertainties that they face.
By order of the Board
TM McConnachie
Chief Executive Officer
30 August 2016
22
INDEPENDENT AUDITOR’S REPORT
KPMG Inc
KPMG Crescent
85 Empire Road, Parktown, 2193
Private Bag 9, Parkview, 2122, South Africa
Telephone +27(0)11 647 7111
Fax +27(0)11 647 8000
Docex 472 Johannesburg
TO THE SHAREHOLDERS OF SYLVANIA PLATINUM LIMITED
We have audited the consolidated financial statements of Sylvania Platinum Limited, which comprise the consolidated statement of financial
position at 30 June 2016, and the consolidated statements of profit or loss and other comprehensive income, changes in equity and cash
flows for the year then ended, and the notes to the consolidated financial statements which include a summary of significant accounting
policies and other explanatory notes, as set out on pages 24 to 70.
DIRECTORS’ RESPONSIBILITY FOR THE FINANCIAL STATEMENTS
The company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with
International Financial Reporting Standards, and for such internal control as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error.
AUDITOR’S RESPONSIBILITY
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with
International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s
preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the
overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
OPINION
In our opinion, these financial statements present fairly, in all material respects, the consolidated financial position of Sylvania Platinum
Limited at 30 June 2016, and its consolidated financial performance and consolidated cash flows for the year then ended in accordance with
International Financial Reporting Standards.
KPMG Inc
Per Alwyn van der Lith
Chartered Accountant (SA)
Registered Auditor
Director
30 August 2016
Policy Board:
Chief Executive: TH Hoole
KPMG Inc is a company incorporated under the South African
Companies Act and a member firm of the KPMG network of
independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity.
KPMG Inc is a Registered Auditor, in public practice, in terms of
the Auditing Profession Act, 26 of 2005.
Registration number 1999/021543/21
Executive Directors: M Letsitsi, SL Louw, NKS Malaba, M
Oddy, CAT Smit
Other Directors: ZA Beseti, LP Fourie, N Fubu, AH Jaffer
(Chairman of the Board), FA Mail, GM
Pickering, JN Pierce
The company’s principle place of business is at KPMG Cresent,
85 Empire Road, Parktown, where a list of the Directors’ names
is available for inspection.
23
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
For the year ended 30 June 2016
Revenue
Cost of sales
Gross profit
Other income
Profit/(loss) on sale of property, plant and equipment
Foreign exchange gain
Profit on sale of financial assets at fair value through profit and loss
Loss on sale of available-for-sale financial assets
Impairment of available-for-sale financial assets
Impairment of exploration and evaluation assets
General and administrative costs
Operating profit before finance costs and income tax expense
Finance income
Finance costs
Profit before income tax expense
Income tax expense
Net profit for the year
Other comprehensive loss
Items that are or may be subsequently reclassified to profit and loss:
Available-for-sale financial assets – net change in fair value
Foreign currency translation
Total other comprehensive loss (net of tax)
Total comprehensive loss for the year
Profit attributable to:
Owners of the parent
Total comprehensive loss attributable to:
Owners of the parent
Notes
2016
$
2015
$
4(a)
39,510,771
47,790,535
(31,780,332)
(41,280,681)
7,730,439
6,509,854
4(b)
9
4(e)
4(e)
42,985
5,734
288,528
729
(4,851)
–
(8,280)
(2,259,578)
5,795,706
396,399
(218,270)
4(c)(d)
5,973,835
(2,240,300)
3,733,535
54,534
(78)
235,109
–
–
(7,250)
(18,552)
(3,270,718)
3,502,899
413,245
(311,688)
3,604,456
(1,907,567)
1,696,889
5
15
15
–
(4,179)
(10,010,647)
(10,010,647)
(6,277,112)
(18,683,558)
(18,687,737)
(16,990,848)
3,733,535
3,733,535
1,696,889
1,696,889
(6,277,112)
(6,277,112)
(16,990,848)
(16,990,848)
Cents
Cents
Profit per share for profit attributable to the ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
The accompanying notes form part of these financial statements.
6
6
1.28
1.24
0.57
0.55
24
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 30 June 2016
ASSETS
Non-current assets
Investments in associates
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
Other financial assets
Inventories
Current tax asset
Total current assets
Total assets
EQUITY AND LIABILITIES
Shareholders' equity
Issued capital
Reserves
Retained profits
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
Total liabilities
Total liabilities and shareholders' equity
The accompanying notes form part of these financial statements.
Notes
7
8
9
10
11
12
8
13
14
15
16
17
18
5
19
17
2016
$
–
710,055
55,723,424
30,132,591
86,566,070
6,707,022
16,055,698
1,343,255
1,693,024
80,679
2015
$
–
509,106
58,785,429
40,984,682
100,279,217
8,416,342
13,150,608
1,823,362
964,973
–
25,879,678
24,355,285
112,445,748
124,634,502
2,979,819
66,917,322
21,164,125
91,061,266
171,286
2,809,228
12,076,899
15,057,413
6,115,147
211,922
–
6,327,069
21,384,482
29,798,190
50,910,179
17,430,590
98,138,959
216,547
2,974,536
16,090,844
19,281,927
6,938,983
265,442
9,191
7,213,616
26,495,543
112,445,748
124,634,502
25
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2016
Share
premium
reserve
Reserve for
own shares
Retained
profits
Issued capital
Share-based
payment
reserve
Foreign
currency
translation
reserve
Non-
controlling
interest
reserve
$
$
$
$
$
$
$
Equity
reserve
$
Total equity
$
Balance as at 1 July 2015
29,798,190
148,887,370
(259,184)
17,430,590
4,052,481
(32,249,982)
(39,779,293)
(29,741,213)
98,138,959
Profit for the year
Other comprehensive loss
Total comprehensive loss
for the year
Share transactions
– Treasury shares acquired
– Share-based payments
– Share options and bonus
shares exercised
Reduction in par value
Balance as at 30 June 2016
–
–
–
–
–
–
–
–
–
–
–
–
(26,818,371)
26,818,371
–
–
–
3,733,535
–
3,733,535
(945,759)
–
467,259
–
–
–
–
–
–
–
–
–
326,594
(648,675)
–
–
(10,010,647)
(10,010,647)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,733,535
(10,010,647)
(6,277,112)
(945,759)
326,594
(181,416)
–
2,979,819
175,705,741
(737,684)
21,164,125
3,730,400
(42,260,629)
(39,779,293)
(29,741,213)
91,061,266
Reserve for
own shares
Retained
profits
Net
unrealised
gains
reserve
Share-
based
payment
reserve
Foreign
currency
translation
reserve
Non-
controlling
interest
reserve
$
$
$
$
$
Equity
reserve
$
Total
equity
$
4,179
3,894,315
(13,566,424)
(39,779,293)
(29,741,213) 115,668,992
15,733,701
1,696,889
–
(4,179)
1,696,889
(4,179)
Issued
capital
$
Share
premium
reserve
$
Balance as at 1 July 2014
29,515,534
149,608,193
Profit for the year
Other comprehensive loss
Total comprehensive loss for
the year
Share transactions
– Capital raising costs
–
–
–
–
–
–
transferred
282,656
(282,656)
$
–
–
–
–
–
– Treasury shares acquired
– Share-based payments
– Share options and bonus
shares exercised
– Minex shares settled
Balance as at 30 June 2015
–
–
–
–
–
–
–
(438,167)
(729,641)
–
470,457
–
29,798,190 148,887,370
(259,184)
17,430,590
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,011,754
(853,588)
-
–
(18,683,558)
(18,683,558)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,696,889
(18,687,737)
(16,990,848)
–
(729,641)
1,011,754
(383,131)
(438,167)
4,052,481
(32,249,982)
(39,779,293)
(29,741,213)
98,138,959
The accompanying notes form part of these financial statements.
26
CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 30 June 2016
Cash flows from operating activities
Receipts from customers
Payments to suppliers and employees
Finance income
Realised foreign exchange gain
Exploration expenditure
Finance costs
Taxation paid
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Payments for exploration and evaluation assets
Payment for rehabilitation insurance guarantee
Proceeds from sale of financial assets
Receipt of loan repayment from Ironveld Holdings
Net cash outflow from investing activities
Cash flows from financing activities
Repayment of borrowings
Payment for treasury shares
Payment for settlement of share options and bonus shares
Settlement of Minex shares
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Effect of exchange fluctuations on cash held
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
The accompanying notes form part of these financial statements.
Notes
2016
$
2015
$
34,237,910
49,133,423
(29,213,329)
(37,670,272)
240,005
271,190
(5,168)
(41,271)
20(b)
20(a)
(3,560,092)
1,929,245
253,988
13,441
(1,392)
(55,262)
(2,591,831)
9,082,095
(1,180,453)
(2,658,768)
(283,128)
(265,003)
13,908
277,200
(624,084)
(504,257)
–
525,000
(1,437,476)
(3,262,109)
(241,079)
(945,759)
(181,416)
–
(181,500)
(729,641)
(383,131)
(438,167)
(1,368,254)
(1,732,439)
(876,485)
4,087,547
(832,835)
(991,552)
8,416,342
5,320,347
11
6,707,022
8,416,342
27
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
For the year ended 30 June 2016
1. CORPORATE INFORMATION
The consolidated financial statements of Sylvania Platinum Limited (Sylvania or the Company) for the year ended 30 June 2016 were
authorised for issue in accordance with a resolution of the directors on 30 August 2016. Sylvania is a limited company incorporated and
domiciled in Bermuda whose shares are publicly traded. Sylvania’s registered office is at Clarendon House, 2 Church Street, Hamilton
HM11, Bermuda. These consolidated financial statements comprise the Company and its subsidiaries and investments in associates
(collectively the Group).
The principal activity of the Group during the financial year was investment in mineral exploration and mineral treatment projects.
Operational focus during the financial year was concentrated on the retreatment plants.
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, embedded
derivatives and investments measured at fair value through profit and loss, which have been measured at fair value.
Functional and presentation currency
The consolidated financial information is presented in US Dollars and the parent’s functional currency is Australian Dollars. The presentation
currency differs from the functional currency of the parent as the sales of platinum metals are denominated in US Dollars and alignment
of the presentation currency with the sales price is considered to provide more useful information to the users of the financial statements.
All amounts have been rounded to the nearest US Dollar, unless otherwise indicated.
Statement of compliance
The consolidated financial statements of the Group have been prepared in accordance with IFRS as issued by the IASB.
Changes in accounting policies
The accounting policies adopted are consistent with those in the previous financial year.
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 application of the Group’s accounting policies and the reported amounts of assets, liabilities
and contingent liabilities at the date of the consolidated financial statements and reported amounts of income and expenses during the
reporting period.
Estimates and underlying 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. Revisions to estimates are recognised prospectively.
Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the
consolidated financial statements is described below.
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.
Assessment of inter-company loans as net investments in foreign operations
Settlement of certain inter-company loans to South African entities denominated in Australian Dollars is neither planned nor likely to occur
in the foreseeable future and the loans are therefore considered to be in substance, part of the Group’s net investment in the foreign
operations. The exchange differences arising on these loans are recognised in the Group’s other comprehensive income and reclassified
from equity to profit or loss on disposal of the net investment.
28
Estimation uncertainty and assumptions
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(b). The determination of revenue from the time of initial
recognition of the sale through to final pricing requires management to re-estimate the fair value of the price adjustment feature
continuously. Management determines this with reference to estimated forward prices.
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-Scholes model, using the assumptions detailed in note 21.
Exploration and evaluation carrying values
The application of the Group’s accounting policy for exploration and evaluation expenditure requires judgement in determining whether
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 (refer to accounting policy note 2.3(j)). The determination of a Joint Ore Reserves
Committee (JORC) or SAMREC 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.
If, after expenditure is capitalised, information becomes available that suggests that the recovery of expenditure is unlikely, the amount
capitalised is written off to profit or loss in the period in which the new information becomes available.
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 Group 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.
The provision at reporting date represents management’s best estimate of the present value of the future rehabilitation costs required.
Impairment of assets
The Group assesses each asset or cash generating unit (CGU) at the end of each reporting period 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 of disposal and value in use. These assessments require the use of estimates and assumptions
such as long-term commodity prices, discount rates, operating costs, future capital requirements, exploration potential, closure and
rehabilitation costs and operating performance. These estimates and assumptions are inherently uncertain and could change over time,
which may impact the recoverable amount of assets and/or CGUs.
Fair value is determined as the price that would be received to sell an asset in an orderly transaction between market participants at
measurement date. 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 or retreatment plant, which is the lowest level for which cash inflows are largely
independent of those of other assets.
Key assumptions used in the assessment of impairment of assets
The recoverable amounts of the Group’s retreatment plants have been based on cash flow projections as at 30 June 2016. The internal
financial model is based on the known and confirmed resources for each plant, and no allowance has been made for expansion capital in
accordance with IAS 36 Impairment of Assets.
29
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
2. SIGNIFICANT ACCOUNTING POLICIES continued
2.2 SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS continued
Key assumptions used in the assessment of impairment of assets continued
The calculation of value in use is sensitive to changes in the available resources, discount rates, commodity price and operating costs.
Changes in key assumptions could cause the carrying value of assets to exceed their recoverable amounts.
Resources – The resources for each plant, including the PGM grade and expected recoveries that have been modelled are based on
extensive test work, sampling and surveying. Where the useful life of a plant is possibly longer than the material currently available to be
processed, alternative feed sources have been considered and the likelihood of these materialising assessed by management.
Discount rate – The discount rate reflects management’s estimate of the time value of money and the risk associated with the plants.
The base discount rate of 9.75% (2015: 7.5%) is the risk free rate as determined by five year South African retail bonds and this has been
increased by a risk premium of 2.75% (2015: 5%).
Commodity price – The Group has used forecast commodity prices obtained from reputable publications and these range for years
from 2017 – 2021 between $1,034 and $1,346/oz (2015: $1,400 and $1,600) for platinum and $618 to $763/oz (2015: $850 to $875) for
palladium. Sensitivities have also been run at lower prices.
Operating costs – Operating costs are calculated on a Rand/ton basis, known contractor rates and planned labour.
Exchange rates – Platinum group metals are priced in USD. The USD/Rand exchange rate used in the discounted cash flow model ranges
for years from 2017 – 2021 from 12.02 ZAR/$1 to 15.04 ZAR/$1 (2015: 12.29 ZAR/$1 to 12.65 ZAR/$1).
Recovery of deferred tax assets
Judgement is required in determining whether deferred tax assets are recognised on the statement of financial position. Deferred tax
assets, including those arising from unutilised tax losses, require management to assess the likelihood that the Group will generate sufficient
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.
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 to complete production.
Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of contained PGM
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 use of discounted cash flow models. The inputs to these
models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing
fair values. The judgements 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) Basis of consolidation
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those returns through its power over the entity.
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.
30
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 and any 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 and liabilities of the subsidiary, the carrying amount of any non-
controlling interest and other components of equity, including the cumulative translation differences recognised in equity. The consideration
received and any investment retained is recognised at fair value and any resulting surplus or deficit is recognised in profit or loss. The
parent’s share of the components previously recognised in other comprehensive income is reclassified to profit or loss or retained earnings,
as appropriate.
Interests in equity-accounted entities
The Group’s interests in equity-accounted entities comprise interests in associates. Associates are those entities in which the Group has
significant influence, but not control or joint control, over the financial and operating policies. Investments in associates are accounted
for using the equity method. Under the equity method, the investment is carried in the statement of financial position at cost plus post
acquisition changes in the Group’s share of net assets of the associate, until the date on which significant influence ceases.
The statement of comprehensive income reflects the Group’s share of the results of operations of the associate. Where there has been a
change recognised directly in other comprehensive income or equity of the associate, the Group recognises its share of any changes and
discloses this, when applicable, in other comprehensive income and the statement of changes in equity. Unrealised gains resulting from
transactions between the Group and the associate are eliminated to the extent of the interest in the associate. Unrealised losses are
eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
The Group’s share of profit or loss of an associate is shown on the face of the statement of comprehensive income. The financial
statements of the associate are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the
accounting policies in line with those of the Group.
After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investments
in associates. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate is
impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of
the associate and its carrying value, then recognises the loss in profit or loss.
Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any
difference between the carrying amount of the associate upon loss of significant influence and the fair value of the retained investment and
proceeds from disposal is recognised in profit or loss.
(b) 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 to be 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 two and four 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 profit or loss and trade debtors in the statement of financial position. In all cases, fair value is determined with reference to
estimated forward prices.
31
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
2. SIGNIFICANT ACCOUNTING POLICIES continued
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(c) 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.
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.
(d) 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.
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 lower of the fair value of the leased property and 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, 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(c).
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.
Group as a lessor
Leases in which the Group does not transfer substantially all the risks and benefits of ownership of an asset are classified as operating
leases. Rental income arising from operating leases is accounted for on a straight-line basis over the lease term and is included in other
income in profit or loss.
(e) Employee 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 wholly 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.
(f) 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 (equity-settled transactions).
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 charge or credit recognised in profit or loss for a period represents the movement in
cumulative expense recognised as at the beginning and end of that period.
32
The entity does not subsequently reverse the amount recognised for services received from an employee if the vested equity instruments
are later forfeited, except for awards where vesting is only conditional upon a market condition or non-vesting condition. These are treated
as vested irrespective of whether or not the market or non-vesting condition is satisfied, provided that all other performance and/or
service conditions are satisfied.
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, if the
original terms of the award are met. 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 awards 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).
(g) Foreign currency translation
The Group’s consolidated financial statements are presented in US dollars. Each entity in the Group determines its own functional currency
and items included in the financial statements of each entity are measured using that functional currency.
Transactions and balances
Transactions in foreign currencies are initially recorded by the Group entities at their respective functional currency by applying the
exchange rates ruling at the date the transaction first qualifies for recognition. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the functional currency rate of exchange ruling at the reporting date.
All resulting exchange differences are taken to profit and loss.
Group companies
As at the reporting date on consolidation, the assets and liabilities of foreign subsidiaries are translated into the presentation currency
of the Group at the rate of exchange ruling at the reporting 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 for consolidation are recognised in other
comprehensive income. 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.
Monetary assets and liabilities that are receivable from or payable to a foreign subsidiary and for which settlement is neither planned nor
likely to occur in the foreseeable future, forms part of the net investment in a foreign operation and the resulting exchange differences are
recognised in other comprehensive income. The repayment of such a balance is not considered to be a partial disposal and the cumulative
exchange differences recognised in other comprehensive income is not reclassified to profit or loss, until the foreign entity is disposed of.
(h) Income tax
Current income tax
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.
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 tax
Deferred tax is recognised on temporary differences between the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes.
Deferred tax assets and liabilities are recognised for all taxable temporary differences, except:
• temporary differences on 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;
33
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
2. SIGNIFICANT ACCOUNTING POLICIES continued
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(h) Income tax continued
Deferred tax continued
• in respect of taxable temporary differences associated with investments in subsidiaries and associates, when the timing of the reversal of
the temporary differences can be controlled by the parent or investor and it is probable that the temporary differences will not reverse
in the foreseeable future; and
• in respect of deductible temporary differences associated with investments in subsidiaries and associates, deferred 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.
Deferred tax assets are recognised for the carry forward of unused tax credits and any unused tax losses, to the extent that it is probable
that taxable profit will be available against which the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred 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 tax asset to be utilised. Unrecognised deferred 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
profits will be available to allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in 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 tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax
liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
Royalties, resource rent taxes 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 income 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 liabilities and included in expenses.
(i) Property, plant and equipment
Property, plant and equipment and mine properties are stated at cost, less accumulated depreciation and accumulated impairment losses, if any.
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 finance
leases are also included within property, plant and equipment.
Upon completion of mine construction, the assets are transferred into property, plant and equipment or mine properties. 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
Any premium paid in excess of the intrinsic value of land to gain access is amortised over the life of mine.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets as follows (for the current and comparative
periods):
• mining properties, plant and equipment – ten years
• leasehold improvements – three years
• computer equipment and software – three years
• furniture and fittings – six years
• office equipment – five years
• equipment and motor vehicles – five years
34
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 replacement item will flow to the Group, 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.
(j) Exploration and evaluation assets
Exploration and evaluation activity involves the search for mineral resources, the determination of technical feasibility and the assessment
of commercial viability of an identified resource. 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 when 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 reporting 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, gathering exploration data
through geophysical 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.
Where a decision has been made to proceed with development in respect of a particular area of interest and once JORC or SAMREC
compliant reserves are established, the relevant exploration and evaluation assets are tested for impairment and the balance is then
transferred to mine ‘construction in progress’. No amortisation is charged during the exploration and evaluation phase.
Upon transfer of ‘exploration and evaluation assets’ into ‘construction in progress’, all subsequent expenditure on the construction,
installation or completion of infrastructure facilities is capitalised.
(k) Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset (or CGU) may be impaired. If any indication exists,
or when annual impairment testing for an asset is required, the Group estimates the asset’s or CGU’s recoverable amount. An asset’s
recoverable amount is the higher of an asset’s or CGU’s fair value less costs of disposal 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.
When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered to be impaired and is written
down to its recoverable amount. In calculating 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 or CGU.
In determining fair value less costs of disposal, 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 CGUs to which the individual assets are allocated. Impairment losses are allocated to reduce the carrying amounts of the assets in
the CGU on a pro rata basis.
35
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
2. SIGNIFICANT ACCOUNTING POLICIES continued
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(k) Impairment of non-financial assets continued
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.
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
CGU’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.
An impairment loss in respect of goodwill is not reversed.
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.
(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 or available-for-sale financial assets, 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 financial assets not at fair value through profit or loss, directly
attributable transaction costs. For financial assets at fair value through profit or loss, directly attributable transaction costs are recognised
in profit or loss as incurred.
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 through profit or loss
Financial assets at fair value through profit or loss include 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 as defined by IAS 39.
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 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 in rare circumstances 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.
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.
36
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 through 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.
Available-for-sale financial assets
These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are
measured at fair value and changes therein, other than impairment losses, are recognised in other comprehensive income and accumulated
in the net unrealised gains reserve. When these assets are derecognised, the gain or loss accumulated in equity is reclassified to profit or loss.
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 (EIR) method,
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 revenue in profit or loss. The losses arising from impairment are
recognised in profit or loss in finance costs for loans and in cost of sales or other operating expenses for receivables.
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.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying
amount of the asset and the maximum amount of consideration that the Group could be required to repay.
Impairment of financial assets
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. For an investment in an equity instrument, objective evidence includes a significant or
prolonged decline in its fair value below its cost.
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 revenue 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.
37
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
2. SIGNIFICANT ACCOUNTING POLICIES continued
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(l) Financial instruments – initial recognition and subsequent measurement continued
Impairment of financial assets continued
Financial assets carried at amortised cost continued
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.
Available-for-sale financial assets
Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the unrealised gains reserve
to profit or loss. The amount reclassified is the difference between the acquisition cost and the current fair value, less any impairment
loss previously recognised in profit or loss. If the fair value of an impaired available-for-sale financial asset subsequently increases and the
increase can be related to an event occurring after the impairment loss was recognised, then the impairment loss is reversed through profit
or loss; otherwise it is reversed through other comprehensive income. An impairment loss on available-for-sale financial assets are only
recognised in profit or loss when the impairment is significant or prolonged.
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 or at amortised cost, as
appropriate. Trade and other payables and loans and borrowings are measured at amortised cost. The Group determines the classification
of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value less, in the case of financial liabilities at fair value through profit or loss, directly
attributable transaction costs.
The Group’s other financial liabilities include trade and other payables, and loans and borrowings.
Subsequent measurement
The measurement of financial liabilities depends on their classification as follows:
Financial liabilities at amortised cost
After initial recognition, other financial liabilities are subsequently measured at amortised cost using the EIR method. Gains and losses are
recognised in profit or loss when the liabilities are derecognised.
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.
The difference in the respective carrying amounts is recognised in profit or loss.
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.
38
An analysis of fair values of financial instruments and further details as to how these instruments 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).
• when 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 derivatives 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 quotation period clauses, which result in the recognition of an
embedded derivative. Refer note 2.3(l) Financial assets –Financial assets at fair value through profit or loss for more information). These
contracts and the host part of the contracts containing embedded derivatives 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.
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 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.
Cash and cash equivalents
Cash comprises cash at bank and on 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 purpose of the consolidated statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined
above, net of outstanding bank overdrafts.
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 and at the
date of settlement, 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.
(m) Inventories
Inventories are valued at the lower of cost and net realisable value.
Costs incurred in bringing each product to its present location and condition, 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.
39
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
2. SIGNIFICANT ACCOUNTING POLICIES continued
2.3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued
(n) 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. Changes in rehabilitation costs relating to the asset
will be recognised as additions or charges to the corresponding assets and rehabilitation liability when they occur. Additional disturbances
as a result of producing inventories are treated as a cost of producing inventories and recognised in profit or loss when sold.
For closed sites, changes to estimated costs are recognised immediately in profit or loss.
(o) 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 Group’s own equity instruments.
(p) 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.
40
2.4 NEW STANDARDS AND INTERPRETATIONS
Future Accounting Standards
Certain IFRSs and IFRICs have recently been issued or amended but are not yet effective and have not been adopted by the Group as at
the annual reporting period ended on 30 June 2016. None of these are expected to have a significant impact on the Group’ consolidated
financial statements, with possible exceptions described below.
Application date
of standard
Application date
for Group
1 January 2018
1 July 2018
1 January 2018
1 July 2018
1 January 2018
1 July 2018
1 January 2019
1 July 2019
Reference
Title
Summary
Amendments to
IFRS 2
Share-Based
Payment
IFRS 9
Financial
Instruments
IFRS 15
Revenue from
Contracts with
Customers
IFRS 16
Leases
The amendments provides new guidance on the
classification and measurement of share-based payments
relating to a) the measurement of cash-settled share-
based payments b) classification of share-based payments
settled net of withholdings tax and c) accounting for a
modification of a share-based payment from cash-settled
to equity-settled.
The impact of this amendment is currently being assessed,
however it is unlikely that it will have a material impact on
the Group’s financial position or performance.
IFRS 9 Financial Instruments is a new standard that
replaces IAS 39 Financial Instruments: Recognition and
Measurement. The standard includes requirements for the
classification, measurement and derecognition of financial
instruments, including a new expected credit loss model
for calculating impairment on financial assets, and the new
general hedge accounting requirements.
The impact of this standard is currently being assessed.
IFRS 15 is a new standard that replaces IAS 11
Construction Contracts, IAS 18 Revenue, IFRIC 13 Customer
Loyalty Programmes, IFRIC 15 Arrangements for the
Construction of Real Estate, IFRIC 18 Transfers of Assets
from Customers and SIC 31 Revenue: Barter Transactions
Involving Advertising Services.
The standard requires entities to recognise revenue to
depict the transfer of promised goods and services to
customers in an amount that reflects the consideration
to which the entity expects to be entitled in exchange for
those goods or services, which is achieved through a five
step methodology.
On initial assessment, the standard is not expected to
affect the recognition or measurement of revenue but
may result in increased disclosure.
IFRS 16 is a new standard that replaces IAS 17 Leases,
IFRIC 4 Determining Whether an Arrangement Contains a
Lease, SIC 15 Operating Leases – Incentives and SIC 27
Evaluating the Substance of Transactions Involving the Legal
Form of a Lease.
The standard requires a lessee to recognise a right-of-
use asset and a lease liability for all leases that have a
term greater than 12 months or a lease for which the
underlying asset is not of a low value.
The standard will result in a right-of use asset and a lease
liability being recognised for operating leases that don’t
meet the recognition exemption. It is also likely to result
in increased disclosure.
41
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
2. SIGNIFICANT ACCOUNTING POLICIES continued
2.4 NEW STANDARDS AND INTERPRETATIONS continued
Future Accounting Standards continued
Reference
Title
Summary
Amendments to
IAS 1
Presentation
of Financial
Statements
The amendments are designed to encourage entities
to apply professional judgement in determining what
information to disclose in the financial statements.
Application date
of standard
Application date
for Group
1 January 2016
1 July 2016
Amendments to
IAS 7
Statement of
Cash Flows
The amendments are unlikely to have a material impact
on the Group’s financial position, performance or
disclosure.
The amendment provides additional disclosure
requirements relating to changes in liabilities arising from
financing activities, including both changes arising from
cash and non-cash changes.
The amendment is not expected to result in any changes
to the statement of cash flows, however it is likely that it
will result in increased disclosure.
1 January 2017
1 July 2017
Amendments to
IAS 12
Income Taxes
The amendment clarifies the recognition requirements
for deferred tax assets for unrealised losses.
1 January 2017
1 July 2017
Amendments to
IAS 16
Property, Plant
and Equipment
The amendment is unlikely to have a material impact on
the Group’s financial position or performance.
The amendments establish the principle for the basis
of depreciation as being the expected pattern of
consumption of future economic benefits of an asset
and clarifies that revenue is not an appropriate basis for
measuring the consumption of future economic benefits
of an asset.
The impact of this amendment is unlikely to have a
material impact on the Group’s financial position or
performance.
1 January 2016
1 July 2016
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:
• seven operational retreatment processing plants:
• Millsell
• Steelpoort
• Lannex
• Mooinooi (two plants reported as a single unit)
• Doornbosch
• Tweefontein
• an open cast mining exploration project and a Northern Limb exploration project which is currently in the exploration phase.
42
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 accounting policies used by the Group in reporting segments internally are the same as those contained in note 2.3 of the financial
statements.
Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.
The following items are not allocated to any segment, as they are not considered part of the core operations of any segment:
• finance income;
• finance costs; and
• unallocated expenses (note 3(d))
The following tables present revenue and profit information and certain asset and liability information regarding reportable segments for
the years ended 30 June 2016 and 30 June 2015.
Millsell
Steelpoort
Lannex
Mooinooi Doornbosch Tweefontein
Exploration
projects
Corporate/
Unallocated
Consolidated
$
$
$
$
$
$
$
$
$
4,478,061
3,635,269
8,561,748
15,154,622
7,371,062
11,548,769
58,644,297
3,051,920
112,445,748
1,052,936
1,236,290
5,666,261
9,042,050
3,236,452
6,683,398
58,563,982
374,646 (a)
85,856,015
3,425,125
2,398,979
2,895,487
6,112,572
4,134,610
4,865,371
80,315
2,677,274 (b)
26,589,733
1,092,982
901,669
1,513,175
2,050,782
1,076,449
1,307,136
846,099
12,596,190 (c)
21,384,482
6,531,278
3,092,060
3,482,629
10,641,089
7,357,839
8,405,876
–
396,399
39,907,170
2,844,634
(823,351)
(1,618,844)
1,237,572
2,930,090
3,227,673
(303,067)
(3,761,172) (d)
3,733,535
3,733,535
408,926
474,625
1,112,664
1,617,251
637,758
922,384
3,277,718
3,440,786
3,988,809
7,786,266
3,789,991
4,255,819
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,280
67,335
5,240,943 (e)
–
–
26,539,389 (f)
8,280
–
2,240,300
2,240,300
49,299
62,908
237,171
706,124
58,949
165,119
291,095
209,375
1,780,040
2016
Segment assets
Capital expenditure *
Other assets
Segment liabilities
Segment revenue
Segment result
Net profit for the year
after tax
Included within the
segment results:
Depreciation
Direct operating costs
Impairment of exploration
and evaluation assets
Other items:
Income tax expense
Capital expenditure
additions
* Capital expenditure consists of property, plant and equipment, and exploration and evaluation assets.
43
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
3. SEGMENT REPORTING continued
SEGMENT INFORMATION continued
Millsell
Steelpoort
Lannex
Mooinooi Doornbosch Tweefontein
Exploration
projects
Corporate/
Unallocated
Consolidated
$
$
$
$
$
$
$
$
$
2015
Segment assets
4,933,732
3,525,816
9,502,884
17,921,508
7,697,926
12,461,121
62,336,876
6,254,639
124,634,502
Capital expenditure *
1,700,516
1,981,480
7,811,112
11,994,243
4,598,386
9,087,262
62,241,483
355,629 (a)
99,770,111
Other assets
3,233,216
1,544,336
1,691,772
5,927,265
3,099,540
3,373,859
95,393
5,899,010 (b)
24,864,391
Segment liabilities
1,147,739
1,079,425
1,539,738
2,269,767
1,171,395
1,580,687
1,325,134
16,381,658 (c)
26,495,543
Segment revenue
7,226,739
5,593,970
5,332,848
12,513,750
8,221,079
8,902,149
–
413,245
48,203,780
Segment result
2,682,391
688,653
(1,658,748)
(176,042)
2,848,888
2,195,297
(291,094)
(4,592,456) (d)
1,696,889
Net profit for the year
after tax
Included within the
segment results:
Depreciation
533,988
633,015
1,406,434
2,015,043
827,918
1,110,022
Direct operating costs
4,010,360
4,272,302
5,585,162
10,674,749
4,544,273
5,596,830
–
–
–
–
–
–
–
–
–
–
–
–
Impairment of
exploration and
evaluation assets
Other items:
Income tax expense
Capital expenditure
additions
1,696,889
–
–
18,552
70,585
6,597,005 (e)
–
–
34,683,676 (f)
18,552
–
1,907,567
1,907,567
154,168
110,420
874,519
303,179
326,251
1,164,139
1,041,075
77,347
4,051,098
* Capital expenditure consists of property, plant and equipment, and exploration and evaluation assets.
Major items included in corporate/unallocated
(a) Capital expenditure
Property, plant and equipment
(b) Other assets
Cash and cash equivalents
Current tax asset
Other financial assets
Other
(c) Liabilities
Deferred tax
Interest-bearing loans and borrowings
VAT/GST payable
Current tax liability
Other
44
2016
$
2015
$
374,646
374,646
852,470
80,679
1,343,255
400,870
2,677,274
355,629
355,629
3,615,543
–
1,842,394
441,073
5,899,010
12,076,899
16,090,844
267,004
213,536
–
38,751
175,972
9,429
9,191
96,222
12,596,190
16,381,658
(d) Unallocated income and expenses
Administrative salaries and wages
Auditors’ remuneration
Consulting fees
Depreciation
Finance income
Finance costs
Foreign exchange gain
Impairment of available-for-sale financial assets
Legal expenses
Overseas travelling expenses
Premises leases
Share-based payments
Income tax expense
Other
Reconciliations of total segment amounts to corresponding amount for the Group
(e) Depreciation
Included within cost of sales
Included within general and administrative costs
(f) Cost of sales
Direct operating costs
Depreciation
Total segment revenue
Sales
Finance income
Total revenue
Revenue from external customers by geographical location is detailed below. Revenue is attributed
to geographic location based on the location of the customers. The Group does not have external
revenues from external customers that are attributable to any foreign country other than as shown.
South Africa
Total sales
Finance income by geographical location is detailed below:
Australia
South Africa
Total finance revenue
Total revenue
2016
$
2015
$
1,135,450
1,094,964
81,959
261,550
122,228
(396,399)
218,270
(288,528)
–
149,214
170,827
37,982
326,594
2,240,300
(298,275)
3,761,172
5,240,943
54,893
5,295,836
26,539,389
5,240,943
31,780,332
39,510,771
396,399
39,907,170
89,491
661,667
136,302
(413,245)
311,688
(235,109)
7,250
153,311
269,187
64,891
1,011,754
1,907,567
(467,262)
4,592,456
6,597,005
65,717
6,662,722
34,683,676
6,597,005
41,280,681
47,790,535
413,245
48,203,780
39,510,771
39,510,771
47,790,535
47,790,535
2,509
393,890
396,399
7,285
405,960
413,245
39,907,170
48,203,780
45
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
3. SEGMENT REPORTING continued
SEGMENT INFORMATION continued
The majority of sales of concentrate is to one specific customer (2015: two customers).
Revenue is split according to segment as detailed below:
Customer 1
Customer 2
During the prior year, the contract for customer 2 was terminated in May 2015.
The contract for customer 1 was renegotiated and became effective in July 2014.
Analysis of location of non-current assets:
Australia
South Africa
Total non-current assets
4. REVENUE AND EXPENSES
(a) Revenue
Sale of goods
(b) Other income
Scrap sales
Recoveries
Insurance claims
Rent received
(c) Expenses
Profit from ordinary activities before income tax expense includes the following specific expenses:
Included in cost of sales:
Depreciation – plant and equipment
Write-off of property, plant and equipment
Included in general and administrative costs:
Consulting
Depreciation – other assets
Operating lease payments
Prospecting expenses
(d) Staff costs
Salaries and wages included in cost of sales
Salaries and wages included in general and administrative costs
Share-based payments
(e) Net finance income
Interest income on loans and receivables
Finance income
Interest expense on financial liabilities measured at amortised cost
Unwinding of discount on rehabilitation and restoration provision
Finance costs
Net finance income recognised in profit or loss
46
2016
$
2015
$
39,582,811
(72,040)
39,510,771
24,326,455
23,464,080
47,790,535
–
86,566,070
86,566,070
19,032
100,260,185
100,279,217
39,510,771
39,510,771
47,790,535
47,790,535
4,320
19,480
–
19,185
42,985
4,196
26,242
1,149
22,947
54,534
5,240,943
34,137
6,597,005
–
282,756
54,893
85,268
5,168
9,995,030
1,191,160
326,594
11,512,784
396,399
396,399
(41,271)
(176,999)
(218,270)
178,129
704,017
65,717
127,620
1,392
11,332,798
1,151,862
1,011,754
13,496,414
413,245
413,245
(110,987)
(200,701)
(311,688)
101,557
5. INCOME TAX EXPENSE
Major components of tax expense for the years ended 30 June 2016 and 2015
Income tax recognised in profit or loss
Current income tax:
Current income tax charge
Adjustments in respect of current income tax of previous year
Securities transfer tax
Deferred income tax:
Relating to recognition, origination and reversal of temporary differences
Total tax expense
The prima facie income tax expense on pre-tax accounting profit or loss from operations reconciles
to the income tax expense in the financial statements as follows:
Accounting profit before income tax
Tax expense at rate of 28%
Non-deductible expenses
Over provision in respect of prior year
Benefit of tax losses and temporary differences not brought to account
Securities transfer tax
Assessed loss utilised
Income tax expense
2016
$
2015
$
3,473,266
2,580,653
(3,677)
–
–
18,657
(1,229,289)
2,240,300
(691,743)
1,907,567
5,973,835
1,672,674
205,040
(3,677)
367,788
–
(1,525)
3,604,456
1,009,248
856,062
–
23,600
18,657
–
2,240,300
1,907,567
Sylvania Platinum Limited is a Bermudan incorporated company and has no tax liability under that jurisdiction with respect to income
derived. Certain foreign subsidiaries generated income that is subject to the applicable tax in the countries from which such income is
derived.
The tax rate used in the above reconciliation is the corporate tax rate of 28% payable by South African entities on taxable profits under
South African tax law.
Deferred tax assets comprise:
Unrealised gains and losses on foreign exchange
Provision for rehabilitation
Other
Set-off against deferred tax liabilities
Deferred tax liabilities comprise:
Exploration and evaluation assets
Property, plant and equipment
Other
Set-off deferred tax assets
Deferred tax liabilities net
2016
$
2015
$
5,267,435
559,448
462,856
6,289,739
(6,289,739)
–
11,598,513
6,754,758
13,367
18,366,638
(6,289,739)
12,076,899
4,292,250
558,089
536,602
5,386,941
(5,386,941)
–
11,981,342
9,117,535
378,908
21,477,785
(5,386,941)
16,090,844
47
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
5. INCOME TAX EXPENSE continued
The Group has estimated tax losses arising in Australia of $14,546,638 (2015: $15,049,473) and capital losses of $9,356,418
(2015: $1,885,711) 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 $4,043,252 (2015: $4,651,454) and unredeemed capital expenditure of $8,959,842
(2015: $10,293,551) 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
2016
$
2015
$
9,316,765
5,205,169
2,619,797
17,141,731
6,022,823
5,516,260
527,999
12,067,082
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 Pty Ltd and its 100% owned Australian resident controlled entities have formed a tax consolidated group with effect
from 1 July 2003. Sylvania Resources 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
reporting date, the possibility of default is remote.
RECONCILIATION OF DEFERRED TAX ASSETS/(LIABILITIES):
Opening
balance
Charged to
profit or loss
Exchange
differences
$
$
$
Closing
balance
$
157,694
558,089
4,292,250
(9,117,535)
(11,981,342)
324,325
100,595
–
(32,530)
(99,236)
975,185
449,489
559,448
5,267,435
804,369
1,558,408
(6,754,758)
–
382,829
(11,598,513)
(16,090,844)
1,229,289
2,784,656
(12,076,899)
145,971
638,584
5,671,570
(11,207,000)
(14,674,085)
(19,424,960)
33,132
3,960
(21,409)
(84,455)
157,694
558,089
–
(1,379,320)
4,292,250
654,651
–
1,434,814
2,692,743
(9,117,535)
(11,981,342)
691,743
2,642,373
(16,090,844)
2016
Other temporary differences
Provision for rehabilitation
Unrealised gains and losses on foreign exchange
Plant and equipment
Exploration and evaluation assets
2015
Other temporary differences
Provision for rehabilitation
Unrealised gains and losses on foreign exchange
Plant and equipment
Exploration and evaluation assets
48
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 per share
Diluted earnings per share
2016
Cents
per share
2015
Cents
per share
1.28
1.24
2016
$
0.57
0.55
2015
$
Reconciliation of earnings used in calculating earnings per share
Earnings attributable to the ordinary equity holders of the company used in calculating basic earnings
per share
3,733,535
1,696,889
Earnings attributable to the ordinary equity holders of the company used in calculating diluted earnings
per share
3,733,535
1,696,889
2016
Number
of shares
2015
Number
of shares
Weighted average number of shares used as the denominator
Weighted average number of ordinary shares used as the denominator in calculating basic earnings per
share
292,414,880
297,850,449
Effect of dilution:
Share options
7,943,333
13,291,096
Weighted average number of ordinary shares and potential ordinary shares used as the denominator in
calculating diluted earnings per share
300,358,213
311,141,545
In the financial year to 30 June 2010, SA Metals Pty Ltd (SAM), a wholly owned subsidiary of Sylvania negotiated the cancellation of a royalty
agreement between SAM 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 were subsequently met and the cash
payment was made. The value of the shares at the date of signing the agreement was $0.84, and had been raised against share premium.
During the prior year, a cash payment was made to Minex as settlement for the shares.
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of
authorisation of these financial statements.
49
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
7. INVESTMENTS IN ASSOCIATES
Investments in associates
(a) CHROME TAILINGS RETREATMENT PROJECT
2016
2015
$
–
$
–
The Group has a 25% interest in CTRP, which operates a chrome tailings retreatment plant at Kroondal in South Africa (2015: 25%).
The Group’s interest in CTRP is accounted for using the equity method in the consolidated financial statements.
The following table summarises the financial information of CTRP as included in its own financial statements, adjusted for fair value
adjustments at acquisition and differences in accounting policies. The table also reconciles the summarised financial information to the
carrying amount of the Group’s interest in CTRP.
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Total liabilities
Net assets (100%)
Group’s share of net assets (25%)
Fair value adjustment
Net cumulative loss not recognised
Management fee distribution
Foreign currency movements
Impairment
Carrying amount of investment in associate
Revenue
Loss from continuing operations
Total comprehensive income (100%)
Group’s share of loss for the year (25%)
Group’s share of losses unrecognised for the year
2016
$
318,711
86,678
405,389
2,997
13,440
16,437
388,952
97,238
570,692
203,735
33,364
–
2015
$
744,817
135,766
880,583
3,626
16,245
19,871
860,712
215,178
690,402
159,345
40,363
185,316
(905,029)
(1,290,604)
–
–
–
–
(330,631)
(330,631)
(422,090)
(422,090)
(82,658)
(105,523)
(82,658)
(82,658)
(105,523)
(105,523)
IMPAIRMENT OF CHROME TAILINGS RETREATMENT PROJECT
An impairment loss of $1,290,604 on the Group’s 25% investment in CTRP was recognised during the prior financial year. The impairment
was based on a recoverable amount of $ Nil, estimated as its fair value. The plant remains on care and maintenance and there is no
agreement between the parties or plan to restart the operation. The Group ceased to recognise its share of losses of CTRP from the date
of impairment.
UNRECOGNISED LOSSES
The Group has not recognised cumulative losses totalling $203,735 (2015: $159,345) in relation to its interests in associates.
CONTINGENCIES AND COMMITMENTS
The associates had no contingent liabilities or capital commitments as at 30 June 2016 (2015: Nil).
50
8. OTHER FINANCIAL ASSETS
Available-for-sale investments measured at fair value
Listed shares
Financial assets at fair value through profit and loss
Listed shares designated at fair value
Loans and receivables
Loans receivable
Rehabilitation insurance guarantee
Total
Non-current assets
Current assets
2016
$
–
–
1,343,255
710,055
2,053,310
710,055
1,343,255
2015
$
17,494
1,537
1,823,362
490,075
2,332,468
509,106
1,823,362
Available-for-sale financial assets consist of investments in ordinary shares, and therefore have no fixed maturity date or coupon rate.
Loans and receivables consist of loans granted to Ironveld Holdings (Pty) Ltd from Sylvania South Africa (Pty) Ltd (Sylvania SA) and from
Sylvania Metals (Pty) Ltd (Sylvania Metals), both South African subsidiaries of the Group. The loan from Sylvania SA was unsecured, bore
interest at the rate of 1% over Libor after 31 December 2013 and was repaid on 31 December 2015. The loan from Sylvania Metals bears
interest at the prime lending rate in South Africa and was repayable on 30 June 2016. The payment terms have been extended until
31 December 2016. Refer to note 22 for further details.
9. EXPLORATION AND EVALUATION ASSETS
2016
Balance at beginning of financial year
Foreign currency movements
Direct expenditure for the year
Impairment
Balance at end of financial year
2015
Balance at beginning of financial year
Foreign currency movements
Direct expenditure for the year
Impairment
Balance at end of financial year
Deferred
exploration
expenditure
Mineral rights
$
$
Total
$
2,652,301
56,133,128
58,785,429
(461,364)
(2,875,489)
(3,336,853)
60,173
–
222,955
(8,280)
283,128
(8,280)
2,251,110
53,472,314
55,723,424
3,006,581
67,213,857
70,220,438
(399,354)
(11,991,187)
(12,390,541)
45,074
–
929,010
(18,552)
974,084
(18,552)
2,652,301
56,133,128
58,785,429
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.
IMPAIRMENT OF EXPLORATION AND EVALUATION ASSETS
Exploration and evaluation assets relating to the Group’s Everest North project was impaired during the current and prior financial years,
resulting in an impairment loss of $8,280 (2015: $18,552). The impairment was based on a recoverable amount of $Nil, estimated as its
value in use. Everest North is a joint project with Aquarius Platinum SA (Pty) Ltd (AQPSA) and the viability of the project depends on the
operation of AQPSA’s Everest South processing plant. The Everest South operation was placed on care and maintenance in June 2012 and
management are not aware of any plans to restart this operation in the foreseeable future.
51
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 Additions
Disposals
Depreciation charge
Closing net carrying value
At 30 June 2016
Cost
Accumulated depreciation
Net carrying value
2015
At 1 July 2014
Cost
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
10. PROPERTY, PLANT AND EQUIPMENT
Property
Mining
property
Plant and
equipment
Equipment
Leasehold
improve-
ments
Computer
equipment
and
software
Furniture
and
fittings
Office
equipment
Motor
vehicles
$
$
$
$
$
$
$
$
$
Total
$
2016
At 1 July 2015
Cost
Accumulated depreciation
Net carrying value
Year ended 30 June 2016
3,470,767
2,682,354
63,863,401
629,624
23,769
401,905
57,739
90,139
496,426
71,716,124
(53,064)
(1,270,445) (28,142,646)
(482,005)
(23,157)
(293,865)
(56,018)
(69,973)
(340,269) (30,731,442)
3,417,703
1,411,909
35,720,755
147,619
612
108,040
1,721
20,166
156,157
40,984,682
Opening net carrying value
3,417,703
1,411,909
35,720,755
147,619
Exchange differences
(592,159)
(239,721)
(6,102,508)
(24,871)
–
(500)
–
–
1,223,384
10,107
(11,888)
–
(17,582)
(207,614)
(4,928,707)
(39,650)
2,807,462
964,574
25,901,036
93,205
612
(98)
–
–
(311)
203
108,040
(18,326)
24,747
–
(41,349)
73,112
1,721
(298)
933
–
(931)
1,425
20,166
(3,526)
156,157
40,984,682
(30,714)
(7,012,221)
7,401
230,340
1,496,912
–
(28,558)
(40,946)
(6,213)
17,828
(53,479)
(5,295,836)
273,746
30,132,591
2,868,476
2,217,255
53,956,078
530,311
19,649
354,366
48,713
81,729
555,819
60,632,396
(61,014)
(1,252,681) (28,055,042)
(437,106)
(19,446)
(281,254)
(47,288)
(63,901)
(282,073) (30,499,805)
2,807,462
964,574
25,901,036
93,205
203
73,112
1,425
17,828
273,746
30,132,591
3,968,497
3,089,727
70,447,421
688,164
27,379
413,425
62,754
96,097
559,016
79,352,480
Accumulated depreciation
(40,988)
(1,177,138)
(25,760,735)
(484,745)
(26,129)
(274,031)
(60,017)
(69,557)
(388,895) (28,282,235)
Net carrying value
Year ended 30 June 2015
3,927,509
1,912,589
44,686,686
203,419
1,250
139,394
2,737
26,540
170,121
51,070,245
Opening net carrying value
3,927,509
1,912,589
44,686,686
203,419
Exchange differences
(518,392)
(234,789)
(5,676,795)
(24,794)
Additions
Disposals
27,289
–
–
–
17
2.893,418
34,444
Depreciation charge
(18,703)
(265,891)
(6,182,571)
Closing net carrying value
At 30 June 2015
3,417,703
1,411,909
35,720,755
–
(65,450)
147,619
1,250
(131)
–
–
(507)
612
139,394
(17,471)
50,462
(793)
(63,552)
108,040
2,737
(315)
3,522
–
26,540
170,121
51,070,245
(3,302)
(23,022)
(6,499,011)
9,729
(68)
58,150
3,077,014
–
(844)
(4,223)
(12,733)
(49,092)
(6,662,722)
1,721
20,166
156,157
40,984,682
Cost
3,470,767
2,682,354
63,863,401
629,624
23,769
401,905
57,739
90,139
496,426
71,716,124
Accumulated depreciation
Net carrying value
(53,064)
(1,270,445)
(28,142,646)
(482,005)
(23,157)
(293,865)
(56,018)
(69,973)
(340,269)
(30,731,442)
3,417,703
1,411,909
35,720,755
147,619
612
108,040
1,721
20,166
156,157
40,984,682
52
LEASED ASSETS
Plant and equipment, motor vehicles and computer equipment include the following amounts where the Group is a lessee under a
finance lease:
Plant and equipment
Cost
Accumulated depreciation
Motor vehicles
Cost
Accumulated depreciation
Computer equipment
Cost
Accumulated depreciation
2016
$
2015
$
322,994
(58,774)
264,220
407,826
(114,080)
293,746
–
–
–
711,128
(339,718)
371,410
242,665
(97,447)
145,218
38,596
(35,534)
3,062
During the year, the Group acquired under finance lease plant and equipment of $ Nil (2015: $285,814) and motor vehicles of $225,489
(2015: $54,396).
NON-CURRENT ASSETS PLEDGED AS SECURITY
Leased assets are pledged as security for the related finance lease liability (refer to note 17). No other non-current assets are pledged as
security for any liabilities.
11. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Short-term deposits
Short-term deposits – restricted cash
2016
$
2,601,984
3,274,583
830,455
6,707,022
2015
$
7,304,918
39,481
1,071,943
8,416,342
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 $6,707,022 (2015: $8,416,342).
At 30 June 2016, the Group had available $2,413,239 (2015: $2,919,448) of undrawn borrowing facilities.
The Group only deposits cash surpluses with major banks of high quality credit standing.
The Group has pledged part of its short-term deposits with a carrying value of $830,455 (2015: $1,071,943) in order to fulfil collateral
requirements for the guarantees held below.
Bank guarantees are held as follows:
Eskom
The Department of Mineral Resources
2016
$
808,537
16,089
2015
$
978,138
19,464
53
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
12. TRADE AND OTHER RECEIVABLES
Trade receivables
Other receivables
2016
$
15,741,013
314,685
16,055,698
2015
$
12,819,874
330,734
13,150,608
Trade receivables are due from major minerals mining and processing companies. None of the amounts are past due or impaired.
At 30 June 2016, gross sales of $11,488,148 (2015: $9,782,763) were subject to price adjustments.
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
Finished goods in transit
2016
$
906,165
786,859
1,693,024
2015
$
964,973
–
964,973
Inventories of $1,257,202 (2015: $1,657,716) were recognised as an expense during the current year and included in cost of sales.
STORES AND MATERIALS
Spares are held in stock for engineering breakdowns. Stores and materials are measured at the lower of cost or net realisable value.
14. ISSUED CAPITAL
AUTHORISED CAPITAL
Ordinary shares with a par value of $0.01 (2015: $0.10)
1,000,000,000
10,000,000
100,000,000
2016
No of shares
2016
$
2015
$
ISSUED CAPITAL
Share capital
Ordinary shares
Ordinary shares fully paid
2016
2015
No of shares No of shares
2016
$
2015
$
297,981,896
297,981,896
297,981,896
297,981,896
2,979,819
2,979,819
29,798,190
29,798,190
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.
54
MOVEMENTS IN ORDINARY SHARE CAPITAL
Date
Details
1 July 2015
Opening balance
30 June 2016
1 July 2014
Reduction in par value 1
Closing balance
Opening balance
30 June 2015
Closing balance
Transaction costs reallocated to share premium 2
Number
of shares
$
297,981,896
29,798,190
–
(26,818,371)
297,981,896
2,979,819
297,981,896
29,515,534
–
282,656
297,981,896
29,798,190
1 The par value of each authorised ordinary share in Sylvania Platinum Limited was reduced from $0.10 to $0.01 per share. This took effect from 30 October 2015.
2 Transactions costs previously recognised in issued capital have been reallocated to share premium for improved understanding.
The following ordinary shares in Sylvania Platinum Limited were repurchased during the year. The shares are being held to be issued as
bonus shares to senior management in recognition of the achievement of performance criteria. Refer to note 21 for further details.
Date
Opening balance at 1 July 2015
Shares repurchased
18 September 2015
23 September 2015
13 November 2015
27 November 2015
11 December 2015
4 May 2016
Share options and bonus shares exercised
SHARE OPTIONS
Employee option plan options
– At $Nil per share on or before 29 December 2021
– At $Nil per share on or before 11 June 2023
– At $Nil per share on or before 29 August 2023
Number of
shares
Price per
share GBP
2,931,610
2,304,329
9.55 pence
279,645
10.00 pence
500,000
850,000
8.90 pence
8.25 pence
2,250,000
8.00 pence
1,200,000
6.48 pence
(4,873,441)
5,442,143
2016
2015
Number of
options
Number of
options
2,970,000
800,000
1,360,000
5,130,000
6,750,000
1,000,000
1,600,000
9,350,000
Information relating to the employee option plan, including details of options issued under the plan, is set out in note 21.
55
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
15. RESERVES
Share
premium
reserve
Net
unrealised
gains reserve
Reserve for
own shares
Share-based
payments
reserve
Foreign
currency
translation
reserve
Non-
controlling
interest
reserve
$
Balance as at 1 July 2015
148,887,370
Included in other comprehensive loss:
Foreign currency translation
Total other comprehensive loss
Share-based payments
Reduction in par value
Share options and bonus shares
exercised
Treasury shares acquired
Balance as at 30 June 2016
–
–
–
26,818,371
–
–
175,705,741
$
–
–
–
–
–
–
–
–
Balance as at 1 July 2014
149,608,193
4,179
Included in other comprehensive loss:
Available-for-sale financial assets –
net change in fair value
Foreign currency translation
Total other comprehensive loss
Share-based payments
–
–
–
–
Capital raising costs transferred
(282,656)
Share options and bonus shares
exercised
Treasury shares acquired
Minex shares settled
Balance as at 30 June 2015
–
–
(438,167)
148,887,370
(4,179)
–
(4,179)
–
–
–
–
–
–
$
$
$
$
(259,184)
4,052,481
(32,249,982)
(39,779,293)
(29,741,213)
50,910,179
Equity
reserve
$
Total
Reserves
$
–
–
(10,010,647)
(10,010,647) *
–
–
–
–
326,594
–
–
–
–
–
467,259
(945,759)
(648,675)
–
–
–
–
–
–
–
–
–
–
–
–
–
(10,010,647)
(10,010,647)
326,594
26,818,371
(181,416)
(945,759)
(737,684)
3,730,400
(42,260,629)
(39,779,293)
(29,741,213)
66,917,322
–
–
–
–
–
–
470,457
(729,641)
–
3,894,315
(13,566,424)
(39,779,293)
(29,741,213)
70,419,757
–
–
–
–
(18,683,558)
(18,683,558)*
1,011,754
–
(853,588)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(4,179)
(18,683,558)
(18,687,737)
1,011,754
(282,656)
(383,131)
(729,641)
(438,167)
(259,184)
4,052,481
(32,249,982)
(39,779,293)
(29,741,213)
50,910,179
* The following exchange rates where used to translate the Statement of Financial Position at 30 June 2015 and 2016 respectively. USD:ZAR – $1:R12.23 & $1:R14.79; USD:AUD
$1:A$1.30 & $1:A$1.34.
NATURE AND PURPOSE OF RESERVES
• Net unrealised gains reserve
This reserve records fair value changes on available-for-sale investments.
• Reserve for own shares
The reserve comprises the cost of the Company’s shares held by the Group as treasury shares. Refer to notes 14 and 21 for further details.
• 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.
56
• 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 Proprietary Limited) as at
the date of the insertion of Sylvania Platinum Limited as the ultimate holding company.
16. RETAINED PROFITS
Balance as at 1 July
Profit for the year
Balance as at 30 June
Repatriation of funds from South Africa is subject to regulatory approval.
17. INTEREST-BEARING LOANS AND BORROWINGS
At 30 June 2016
Due within one year
Due between one and five years
At 30 June 2015
Due within one year
Due between one and five years
Secured
Current liabilities
Non-current liabilities
2016
$
17,430,590
3,733,535
21,164,125
2015
$
15,733,701
1,696,889
17,430,590
Present value
of minimum
lease
payments due
$
211,922
171,286
383,208
265,442
216,547
481,989
2015
$
265,442
216,547
Finance
charges
$
(6,187)
(49,144)
(55,331)
(33,640)
(14,407)
(48,047)
2016
$
211,922
171,286
Future
minimum
lease
payments due
$
218,109
220,430
438,539
299,082
230,954
530,036
These loans are secured over various motor vehicles, plant and equipment and computer equipment and are repayable in monthly
instalments of $26,420 (2015: $25,317) and bear interest at rates varying between 9.25% and 11% (2015: 8.25% and 10.25%) p.a.
Refer to note 10 for further detail on non-current assets pledged as security.
57
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
18. PROVISIONS
Provision for rehabilitation
Movement in provision
Balance at beginning of financial year
Foreign currency movements
Unwinding of discount factor
Arising during the year
Balance at end of financial year
2016
$
2015
$
2,809,228
2,974,536
2,974,536
(524,574)
176,999
182,267
2,809,228
3,411,056
(450,662)
200,701
(186,559)
2,974,536
Provision is made for the present value of closure, 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 reporting date. These estimates
are reviewed regularly to take into account any material changes to the assumptions. However, actual costs will ultimately depend on future
market prices for the rehabilitation work required.
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 therefore, the timing of rehabilitation work is inherently uncertain.
19. TRADE AND OTHER PAYABLES
Trade payables
Accrued expenses
Other trade payables
2016
$
3,894,076
1,996,733
224,338
6,115,147
2015
$
5,127,062
1,790,175
21,746
6,938,983
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.
20. NET CASH INFLOW FROM OPERATING ACTIVITIES
(a) Reconciliation of profit before tax to net cash flow from operating activities
Profit before income tax expense
Adjusted for:
(Profit)/loss on sale of property, plant and equipment
Write-off of property, plant and equipment
Foreign exchange gain
Loss on sale of financial assets
Impairment of available-for-sale financial assets
Impairment of exploration and evaluation assets
Finance income
Finance costs
Depreciation
Provisions
Share-based payments
2016
$
2015
$
5,973,835
3,604,456
(5,734)
34,137
(17,338)
4,122
–
8,280
(396,399)
218,270
5,295,836
103,841
326,594
78
–
(221,668)
–
7,250
18,552
(413,245)
311,688
6,662,722
(289,129)
1,011,754
Net operating profit before working capital changes
11,545,444
10,692,458
58
Changes in working capital:
(Increase)/decrease in trade receivables
Increase in inventories
Decrease in trade and other payables
Cash generated from operating activities
Finance income received
Finance costs paid
Taxation paid
Net cash inflow from operating activities
(b) Taxation paid
Balance owing at the beginning of the year
Income tax recognised in profit or loss
Foreign currency movements
Balance receivable/(owing) at the end of the year
Taxation paid
21. SHARE-BASED PAYMENT PLAN
Expense arising from equity-settled share-based payment transactions
Total expense
EMPLOYEE OPTION PLAN
2016
$
2015
$
(5,272,861)
(917,886)
(64,094)
1,342,888
(327,551)
(232,595)
5,290,603
11,475,200
240,005
(41,271)
(3,560,092)
1,929,245
9,191
3,469,589
633
80,679
253,988
(55,262)
(2,591,831)
9,082,095
2,534
2,599,310
(822)
(9,191)
3,560,092
2,591,831
2016
$
326,594
326,594
2015
$
1,011,754
1,011,754
On 29 December 2011, an employee incentive option plan (the Sylvania Platinum Option Plan) was approved by the shareholders at the
AGM. This plan replaces the employee incentive option plan and employee incentive share plan as approved as part of the implementation
of the Scheme of arrangement by the Group shareholders in 2007.
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 the length of service, seniority and position, record of employment, 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 (if any) for the options is to be determined by
the Board at its absolute discretion.
The expiry date of the options, unless otherwise determined by the Board, is ten years after the grant date 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 during the exercise period
(subject to certain exceptions); or immediately if the participant ceases to be a director, employee or consultant prior to the commencement
of the exercise period. 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:
• as regards 20% of those options granted, the date which is two years after the grant date,
• as regards 40% of those options granted, the date which is three years after the grant date, and
• as regards the remaining 40% of those options granted, the date which is four years after the grant date.
The options are not transferable without prior written approval from the Board.
59
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
21. SHARE-BASED PAYMENT PLAN continued
EMPLOYEE OPTION PLAN continued
On 29 December 2011, 13,000,000 share options were granted to directors, employees and consultants under the Sylvania Platinum
Option Plan, 1,000,000 of which were forfeited in prior years, with a nil exercise price and an expiry date of 29 December 2021. Exercise
of the options is subject to time-based vesting with 20% of the options having vested on 30 December 2013, a further 40% of the options
vested on 30 December 2014 and the remaining 40% of the options vested on 30 December 2015, subject to the participant’s continued
employment. On 11 June 2013, a further 1,000,000 share options were granted with a nil exercise price and an expiry date of 11 June
2023. Exercise of the options is subject to time-based vesting with 20% of the options having vested on 12 June 2015, a further 40% of
the options vested on 12 June 2016 and the remaining 40% of the options vesting on 12 June 2017, subject to the participant’s continued
employment. On 29 August 2013, 1,600,000 share options were granted with a nil exercise price and an expiry date of 29 August 2023.
Exercise of the options is subject to time-based vesting with 20% of the options having vested on 30 August 2015, a further 40% of the
options vesting on 30 August 2016 and the remaining 40% of the options vesting on 30 August 2017, subject to the participant’s continued
employment.
The fair values of the options granted are determined at the grant date using a Black-Scholes model, taking into account the terms and
conditions upon which the options were granted (the exercise price, the term of the option), the share price at grant date and expected
price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the option. No new share
options were granted during the current year.
OPTIONS
Grant date
2016
Expiry date
Exercise
price
Fair value
at grant
date
Balance at
start of
the year
Granted
during
the year
Exercised
during
the year
Balance
at the end
of the year
Vested and
exercisable
at end
of year
Number
Number
Number
Number
Number
$
Nil
Nil
Nil
Nil
Nil
Nil
29 Dec 2011
29 Dec 2021
11 Jun 2013
11 Jun 2023
29 Aug 2013
29 Aug 2023
Total
Weighted average
exercise price
2015
29 Dec 2011
29 Dec 2021
11 Jun 2013
11 Jun 2023
29 Aug 2013
29 Aug 2023
Total
Weighted average
exercise price
$
0.33
0.17
0.13
6,750,000
1,000,000
1,600,000
9,350,000
–
0.33
0.17
0.13
12,000,000
1,000,000
1,600,000
14,600,000
–
–
–
–
–
–
–
–
–
–
–
(3,780,000)
2,970,000
2,970,000
(200,000)
800,000
400,000
(240,000)
1,360,000
80,000
(4,220,000)
5,130,000
3,450,000
–
–
–
(5,250,000)
6,750,000
1,950,000
–
–
1,000,000
1,600,000
200,000
–
(5,250,000)
9,350,000
2,150,000
–
–
–
The options outstanding at 30 June 2016 had an exercise price of $Nil (2015: $Nil) and a weighted average remaining contractual life of
6 years (2015: 7 years).
The weighted average share price at the date of exercise of options during the year ended 30 June 2016 was $Nil (2015: $Nil).
SHARE BONUS AWARD
On 5 March 2014, 1,700,000 ordinary shares of $0.10 each in Sylvania Platinum Limited were allocated to senior management in
recognition of the achievement of performance criteria. These shares vested on 30 June 2014.
On 21 August 2014, 2,545,584 ordinary of $0.10 each in Sylvania Platinum Limited were allocated to senior management in recognition of
the achievement of performance criteria. These shares vested on 19 August 2015.
60
BONUS SHARES
Issue date
2016
21 August 2014
Total
2015
5 March 2014
21 August 2014
Total
Fair value
at issue
date
Balance at
start of
the year
$
Number
Issued
during
the year
Number
Exercised
during
the year
Balance at
the end of
the year
Vested and
exercisable at
end of year
Number
Number
Number
0.10
0.13
0.10
2,545,584
2,545,584
1,700,000
–
1,700,000
–
–
–
2,545,584
2,545,584
(2,545,584)
(2,545,584)
(1,700,000)
–
(1,700,000)
–
–
–
2,545,584
2,545,584
–
–
–
–
–
The fair values of the bonus shares granted are determined at the grant date using a Black-Scholes model, taking into account the terms
and conditions upon which the bonus shares were granted (the exercise price, the term of the bonus shares), the share price at grant date
and expected price volatility of the underlying share, the expected dividend yield and the risk free interest rate for the term of the bonus
shares. The following assumptions were used to estimate the fair value of the bonus shares granted during the prior year ended 30 June 2015.
Expected volatility (%)
Risk-free rate (%)
Expected life (years)
Share price ($)
Exercise price ($)
Expected dividend yield ($)
2016
–
–
–
–
–
–
2015
39.41
6.00
1
0.10
Nil
Nil
Expected volatility has been based on an evaluation of the historical volatility of the Company’s share price, particularly over the historical
period commensurate with the expected term of the options.
22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial liabilities comprise trade and other payables and interest-bearing loans and 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 trade and other receivables and cash and short-term deposits, which arise directly from its operations.
The Group also held available-for-sale investments and financial assets at fair value through profit or loss which were disposed of during the
current year.
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, foreign
currency risk, interest rate risk and equity price risk), liquidity risk and credit risk.
The Group’s senior management oversees the management of financial risks. The Board ensures 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 sensitivity analyses have been prepared on the basis that the amount of net debt, the ratio of fixed-to-floating interest rates on the
debt and the proportion of financial instruments in foreign currencies are all constant.
61
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued
RISK EXPOSURES AND RESPONSES continued
The following assumptions have been made in calculating the sensitivity analysis:
• The statement of financial position sensitivity relates to receivables subject to commodity price risk, available-for-sale financial assets and
financial assets at fair value through profit or loss and interest-bearing loans and borrowings.
• The impact on equity is the same as the impact on profit before tax, unless stated otherwise.
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 during the years ended 30 June 2016 and 30 June 2015.
The capital structure of the Group consists of equity attributable to equity holders of the parent comprising issued capital, reserves and
retained profits (Refer to notes 14, 15 and 16).
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
Trade and other receivables *
Cash and cash equivalents
Loans receivable
Financial assets at fair value through profit and loss
Available-for-sale financial assets
Financial liabilities
Other financial liabilities at amortised cost
Interest-bearing loans and borrowings
Trade and other payables
2016
$
2015
$
15,901,561
6,707,022
2,053,310
–
–
12,998,094
8,416,342
2,313,437
1,537
17,494
24,661,893
23,746,904
(383,208)
(6,115,147)
(6,498,355)
(481,989)
(6,938,983)
(7,420,972)
* Prepayments are excluded from the trade and other receivables balance as this analysis is required only for financial instruments.
MARKET RISK
Market risk is the risk that the fair value of 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.
Commodity price risk
The Group is exposed to the risk of commodity price fluctuations, in particular movements in the price of PGMs. 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.
62
The financial instruments exposed to movements in metal prices are as follows:
Financial assets
Trade receivables
2016
$
2015
$
11,488,148
9,782,763
These receivables contain quotational period embedded derivatives that are carried at fair value in accordance with the policy set out in
Note 2.3(l).
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% (2015: 10%) increase in PGM prices
10% (2015: 10%) decrease in PGM prices
Foreign currency risk
2016
2015
Profit/(loss)
Equity
increase/
(decrease)
Profit/(loss)
Equity
increase/
(decrease)
827,147
827,147
704,359
704,359
(827,147)
(827,147)
(704,359)
(704,359)
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) and AUD denominated inter-
company loans that have become repayable and are therefore no longer considered to be part of the net investment in the foreign
subsidiary.
US dollar loan balance
Spot rate at 30 June
Average rate
USD
AUD:ZAR
AUD:ZAR
2016
2015
(137,235)
(139,003)
11.01
10.50
9.40
9.55
The following table summarises the sensitivity of financial instruments held at reporting date to movements in the relevant currency
exchange rate, with all other variables held constant. The sensitivities are based on reasonably possible changes, over a financial year, using
observable ranges of actual historical rates.
AUD:ZAR (15% strengthening)
AUD:ZAR (15% weakening)
Interest rate risk
2016
2015
Profit/(loss)
(20,592)
20,592
Equity
increase/
(decrease)
(20,592)
20,592
Profit/(loss)
(22,938)
18,772
Equity
increase/
(decrease)
(22,938)
18,772
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, loans receivable and interest-bearing loans and
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 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 Group’s funding structure.
The Group manages the risk by maintaining an appropriate mix between fixed and floating rate liquid funds.
63
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES continued
Interest rate risk continued
The financial instruments exposed to movements in variable interest rates are as follows:
Financial assets
Cash and cash equivalents
Loans receivable
Financial liabilities
Interest-bearing loans and borrowings
2016
$
2015
$
4,105,038
2,053,310
1,111,424
2,313,437
(383,208)
(481,989)
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 a decrease/increase in profit before tax of $32,708 (2015: $19,535).
The impact on equity would have been the same.
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. The Group’s Board of directors reviews and approves all equity investment decisions. At the reporting date, the exposure to
listed equity securities at fair value was $ Nil (2015: $19,031) as they had been disposed of during the year.
CREDIT RISK
Credit risk is the risk that a contracting entity will not meet its obligation under a financial instrument or customer contract that will
result in a financial loss to the Group. The Group is exposed to credit risk from its financing activities, including deposits with banks and
financial institutions and its operating activities, primarily for trade receivables. The carrying amount of these 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.
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 one specific customer as per contractually agreed terms.
The customer has complied with all contractual sales terms and has not at any stage defaulted on amounts due. The Group manages its
credit risk on trade debtors, cash and financial instruments by predominantly dealing with counterparties with a credit rating equal to or
better than the Group.
Included in loans receivable is a loan granted to Ironveld Holdings (Pty) Ltd, a subsidiary of Ironveld Plc (Ironveld) from Sylvania Metals
(Pty) Ltd, a South African subsidiary of Sylvania. As security for the amount due, Ironveld issued to Sylvania warrants to subscribe for up to
£1.5 million ($2.3 million) of ordinary shares in Ironveld at a price equal to the 90 day VWAP on the business day preceding the exercise
of the warrants. The warrants are exercisable only if the facility is not fully repaid by 30 June 2016 and may be exercised post 30 June 2016
up until the date that is five years from admission (although the warrants will lapse once repayment has been made). Any proceeds derived
from the exercise of the warrants will be used by Ironveld to repay the facility. The payment terms on the loan facility and the warrants
have been extended to 31 December 2016.
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.
64
2016
Trade and other payables
Finance lease liability
2015
Trade and other payables
Finance lease liability
Carrying
amount
Contractual
cash flows
Less than
1 year
$
$
$
6,115,147
383,208
6,115,147
438,539
6,115,147
218,109
6,498,355
6,553,686
6,333,256
1 – 5 years
$
–
220,430
220,430
Total
$
6,115,147
438,539
6,553,686
6,938,983
481,989
7,420,972
6,938,983
530,036
7,469,019
6,938,983
299,082
7,238,065
–
6,938,983
230,954
230,954
530,036
7,469,019
FAIR VALUE OF FINANCIAL INSTRUMENTS
For financial assets and financial liabilities not measured at fair value, 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 Group has no
financial assets where carrying amount exceeds net fair value at reporting date.
The following methods and assumptions were used to estimate fair values:
• Cash and short term deposits, trade receivables, trade payables and other current liabilities approximate their carrying amounts largely
due to the short-term maturities of these instruments.
• Long-term variable-rate receivables and borrowings are evaluated by the Group based on parameters such as interest rates. As at
30 June 2016 the carrying amounts of such receivables and borrowings were not materially different from their calculated fair values.
• The fair values of listed shares is based on quoted prices at reporting date.
FAIR VALUE HIERARCHY
The table below presents the Group’s financial assets and liabilities measured and recognised at fair value, by valuation method in the
hierarchy defined below:
• 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).
Level 1
Level 2
Level 3
Total
2016
Financial assets
Available-for-sale financial assets
Financial assets at fair value through profit or loss
2015
Available-for-sale financial assets
Financial assets at fair value through profit or loss
$
–
–
–
17,494
1,537
19,031
$
–
–
–
–
–
–
$
–
–
–
–
–
–
$
–
–
–
17,494
1,537
19,031
65
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
23. COMMITMENTS AND CONTINGENCIES
Operating lease commitments
Future minimum lease payments (net of VAT or GST) under non-cancellable leases as at 30 June are as
follows:
Office premises
The Group has a commercial lease arrangement whereby it leases its current office premises, in
Johannesburg. This lease has an average life of five years with an option to renew at the end of the lease
term and with rentals escalating at 9% per annum.
Within one year
After one year but not more than five years
Office equipment
The Group has a number of lease agreements during the period in respect to office equipment. These
leases have an average life of five years and no renewal option included in the contract and with rentals
escalating between 0% and 15% per annum.
Within one year
After one year but not more than five years
Finance lease commitments
The Group has instalment sale agreements for various items of motor vehicles, plant and equipment
and computer equipment. Refer to notes 10 and 17 for further details on finance lease commitments.
Commitments for plant construction
At 30 June 2016, there were no commitments signed for continued improvements of Millsell,
Steelpoort, Mooinooi, Lannex, Doornbosch and Tweefontein plants.
24. KEY MANAGEMENT DISCLOSURE
SHAREHOLDING OF KEY MANAGEMENT PERSONNEL
The number of shares in the Company held during the year by each director of the Group is set out below:
2016
$
2015
$
66,662
17,017
83,679
73,986
101,231
175,217
11,688
35,063
46,751
26,044
9,599
35,643
Director
2016
T M McConnachie
S A Murray
R A Williams
2015
T M McConnachie
R A Williams
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
3,715,000
–
667,000
900,000
200,000
240,000
–
–
–
4,615,000
200,000
907,000
1,365,000
1,200,000
1,150,000 *
3,715,000
367,000
300,000
–
667,000
* Treasury shares granted as bonus award (see note 21 for further details)
All equity transactions with key management personnel other than those arising under the Group’s Share 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.
66
The number of options in the Company held during the year by each director of the Group is set out below:
Director
2016
T M McConnachie
R A Williams
S A Murray
2015
T M McConnachie
R A Williams
S A Murray
Balance at
the start of
the year
Issued under
share and
option plan
1,300,000
400,000
1,000,000
2,500,000
700,000
1,000,000
–
–
–
–
–
–
Exercised
during
the year
(900,000)
(240,000)
(200,000)
Balance at
the end of
the year
400,000
160,000
800,000
(1,200,000)
1,300,000
(300,000)
400,000
–
1,000,000
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.
KEY MANAGEMENT PERSONNEL COMPENSATION
Short-term
Share-based payments
Total
2016
$
1,561,266
217,459
1,778,725
2015
$
1,910,709
720,387
2,631,096
25. 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
Country of incorporation Class of shares
Equity Holding
2016
2015
Sylvania Resources Pty Ltd
Twinloop Nominees Pty Ltd
Great Australian Resources Pty Ltd
SA Metals Pty Ltd
Sylvania Holdings Limited
Aralon Holdings Limited
Sylvania (Mauritius) Limited
Sylvania South Africa (Pty) Ltd
Sylvania Metals (Pty) Ltd
Sylvania Properties (Pty) Ltd
Sylvania Mining (Pty) Ltd
Sylvania Northern Platinum (Pty) Ltd
Sylvania Resources (Pty) Ltd
Australia
Australia
Australia
Australia
Mauritius
Mauritius
Mauritius
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Great Australian Resources South Africa (Pty) Ltd South Africa
Hacra Mining and Exploration Company (Pty) Ltd South Africa
Pan Palladium South Africa (Pty) Ltd
Volspruit Mining Company (Pty) Ltd
Zoetveld Properties (Pty) Ltd (formerly
Zoetveld Mining and Prospecting (Pty) Ltd)
Grasvally Chrome Mine (Pty) Ltd
South Africa
South Africa
South Africa
South Africa
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
%
100
100
100
100
100
100
100
100
100
100
100
74
100
100
69
100
74
100
74
%
100
100
100
100
100
100
100
100
100
100
100
–
–
100
71
100
100
100
100
67
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
25. RELATED PARTY TRANSACTIONS continued
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.
NON-CONTROLLING INTERESTS
The non-controlling interests are all held by BEE participants.
OTHER RELATED PARTIES RELATIONSHIPS
Entities controlled or significantly influenced by key management
Summer Sun Trading 210 (Pty) Ltd
Southridge Properties (Pty) Ltd (2015)
TERMS AND CONDITIONS WITH RELATED PARTIES
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.
INVESTMENTS IN ASSOCIATES
The Group has a 25% interest in the assets, liabilities and output of an entity, CTRP, which operates a chrome tailings retreatment plant at
Kroondal in South Africa (2015: 25%).
TERMS AND CONDITIONS WITH INVESTMENTS IN ASSOCIATES
Payments made on behalf of CTRP are made in arm’s length transactions both at normal market prices and on normal commercial terms.
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
LOANS TO/(FROM) RELATED PARTIES
There are no outstanding balances with related parties as at 30 June 2016.
2016
$
(5,215)
–
(5,215)
2015
$
(5,811)
(726)
(6,537)
68
26. CLOSED GROUP CLASS ORDER DISCLOSURE
The consolidated financial statements of Sylvania Platinum Limited includes its wholly owned subsidiary Sylvania Resources Proprietary
Limited (Sylvania Resources).
Name
Country of
incorporation
Sylvania Resources Proprietary Limited
Australia
Equity interest
Investment
2016
%
100
2015
%
100
2016
$
2015
$
141,642,417
146,317,574
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 and Sylvania Resources entered into a Deed of Cross Guarantee on 23 June 2011. The effect of
the deed is that Sylvania has guaranteed to pay any deficiency in the event of winding up of a 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 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 PROFIT OR LOSS
Other income
Foreign exchange gain
Impairment of available-for-sale financial assets
Share-based payment expense
General and administrative costs
Operating profit/(loss)
Finance income
Profit/(loss) before income tax expense
Income tax expense
Net profit/(loss) for the year
2016
$
6,472,363
275,959
–
(220,278)
(1,096,237)
5,431,807
2,135
2015
$
(68)
13,487
(7,250)
(635,603)
(1,461,432)
(2,090,866)
6,223
5,433,942
(2,084,643)
–
–
5,433,942
(2,084,643)
69
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS continued
For the year ended 30 June 2016
26. CLOSED GROUP CLASS ORDER DISCLOSURE continued
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS
Non-current assets
Investments
Available-for-sale financial assets
Loans receivable
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
Total equity
Current liabilities
Trade and other payables
Total current liabilities
Total liabilities
Total liabilities and shareholders’ equity
27. EVENTS AFTER THE REPORTING DATE
2016
$
2015
$
33,881,172
–
51,313,953
85,195,125
75,117,502
17,494
56,362,362
131,497,358
678,795
45,945
724,740
2,993,263
45,480
3,038,743
85,919,865
134,536,101
2,979,819
84,094,299
29,798,190
111,363,357
(1,221,748)
(6,655,690)
85,852,370
134,505,857
67,495
67,495
67,495
30,244
30,244
30,244
85,919,865
134,536,101
On 14 July 2016, the DMR approved the Section 11 application to transfer the portion of the Mining Right held by Hacra Mining and
Exploration Company (Pty) Ltd for heavy metals, iron and vanadium to Ironveld (Pty) Ltd in terms of the Ironveld transaction entered into
in August 2012.
28. GOING CONCERN
The Group’s financial risk management objectives and policies are detailed in note 22 and available borrowing facilities are set out in
note 11. After reviewing the financial position, operational performance, budgets and forecasts as well as the timing of cash flows and
sensitivity analyses, the directors are satisfied that the Company and the Group have adequate resources to continue in operational
existence for the foreseeable future.
70
ADDITIONAL INFORMATION FOR LISTED PUBLIC COMPANIES
Shareholders Profile as at 30 June 2016
SHAREHOLDERS HOLDING 3% OR MORE FULLY PAID SHARES
Shareholder
Africa Asia Capital
M&G Investment Management
Audley Capital
Majedie Asset Management
Hargreaves Lansdown
Miton Asset Management
Barclays Stockbrokers
TD Waterhouse
1
2
3
4
5
6
7
8
Number of shares
% shareholding 1
58,882,551
28,247,500
24,278,694
18,933,963
14,020,751
13,927,315
10,928,351
9,785,556
179,004,681
20.13
9.66
8.30
6.47
4.79
4.76
3.74
3.35
61.20
1 The percentage shareholdings are calculated on the total number of ordinary shares with voting rights being 292,539,753 shares. The total issued number of shares is
297,981,896 including 5,442,143 shares held in treasury.
71
ABOUT SYLVANIASTRATEGIC MANAGEMENTGOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATIONSylvania Annual Report 2016 GLOSSARY OF TERMS
The following definitions apply throughout the consolidated financial statements:
Annual General Meeting
Alternative Investment Market of the London Stock Exchange
Aquarius Platinum (South Africa) (Pty) Ltd
Australian Dollar
Black Economic Empowerment
Cash Generating Unit
Chrome Tailings Retreatment Project
Department of Mineral Resources
Earnings before interest, tax, depreciation and amortisation
Environmental Impact Assessment
Effective Interest Rate
Great British Pound
International Accounting Standards Board
International Financial Reporting Interpretation Committee
International Financial Reporting Standards
Ironveld Plc
Internal Rate of Return
Joint Ore Reserves Committee
Joint Venture
Lost Time Injury
Mineral and Petroleum Resources Development Act
Mining Right Application
Platinum Group Metals comprising mainly platinum, palladium, rhodium and gold
Run of Mine
SA Metals Pty Ltd
The South African Code for the Reporting of Exploration Results, Mineral Resources and Mineral Reserves
Sylvania Dump Operations
Common Shares
Sylvania Platinum Limited, a company incorporated in Bermuda
UK Corporate Governance Code
United States Dollar
Water Use Licence Application
South African Rand
AGM
AIM
AQPSA
AUD
BEE
CGU
CTRP
DMR
EBITDA
EIA
EIR
GBP
IASB
IFRIC
IFRS
Ironveld
IRR
JORC
JV
LTI
MPRDA
MRA
PGM
ROM
SAM
SAMREC
SDO
Shares
Sylvania
The Code
USD
WULA
ZAR
72
CORPORATE DIRECTORY
DIRECTORS
SA Murray – Independent Non-executive Chairman
TM McConnachie – Chief Executive Officer
RA Williams – Independent Non-executive Director
E Carr – Independent Non-executive Director
COMPANY SECRETARY
Codan Services Limited
PRINCIPAL REGISTERED OFFICE IN BERMUDA
Clarendon House
2 Church Street
Hamilton HM11
Bermuda
REGISTRAR
Computershare Services Plc
The Pavilions, Bridgewater Road
Bedminster Down
Bristol, BS99 7NH
United Kingdom
AUDITORS
KPMG Incorporated
85 Empire Road
Parktown, 2193
South Africa
SOLICITORS
Allen & Overy
Level 27, Exchange Plaza
2 The Esplanade
Perth, Western Australia, 6000
Australia
NOMINATED ADVISOR AND BROKER
Liberum Capital
Ropemaker Place
Level 12, 25 Ropemaker Street
London, EC2Y 9LY
United Kingdom
STOCK EXCHANGE LISTING
Sylvania Platinum Limited is listed on the AIM market of the
London Stock Exchange (shares: SLP)
WEBSITE
www.sylvaniaplatinum.com
www.sylvaniaplatinum.com