1 November 2016
International
Ferro Metals Limited
(“IFL” or the
“Company”)
Financial results
for the year to 30 June 2015
IFL announces that its Annual Financial Report for the year
ended 30 June 2015 is now available
on its website at
http://www.ifml.com/investor-centre/results-and-presentations/2015.
For further information please visit www.ifml.com
or contact:
International Ferro Metals Limited
Jannie Muller, Finance Director |
+27 82 785 1364 |
Wayne Kernaghan, Company
Secretary |
+61 407 233 153 |
About International Ferro Metals:
International Ferro Metals produces ferrochrome, the essential
ingredient in stainless steel, from its integrated chromite mine
and ferrochrome processing operations in South Africa.
International Ferro Metals is listed on the London Stock Exchange
under the symbol IFL.
Forward Looking Statements
This announcement contains certain forward looking statements
which by nature, contain risk and uncertainty because they relate
to future events and depend on circumstances that occur in the
future. There are a number of factors that could cause actual
results or developments to differ materially from those expressed
or implied by these forward looking statements.
OPERATIONS REVIEW
Overview
The year under review was noted for the continued marked
slowdown in the ferrochrome market as well as operational issues
that plagued performance. This was on the back of declining demand,
continued oversupply and lower market prices for most commodities
across the globe. Since the beginning of the 2015 financial year,
the IFL Group has suffered from a downtrend in its operations and
profitability that has proved more deep-seated and sustained than
anyone expected.
Chrome ore and alloy prices dropped significantly over the year.
The European benchmark price for ferrochrome dropped throughout the
year and into the subsequent period since year end, from U$c119/lb
in Q3 of calendar 2014 to U$c92/lb Cr in Q1 of calendar 2016, a
drop of 26.7% over the period. Chrome ore prices showed some
resilience in the earlier part of the year but lost steam in
November 2015 dropping from U$183/t
CIF China in Q3 of 2014 to U$110/t CIF China in Q4 of 2015 as
Chinese demand slowed down. The rand/U.S. dollar exchange rate did
bring some relief.
The price of ferrochrome continued to decline. This was caused
largely by the slowdown in Chinese economic activity and its
consequent effect on stainless steel output and increased
production by Chinese ferrochrome producers. These factors drove
prices lower and are expected to continue to keep prices low.
IFMSA was also affected by rising costs and other factors which
impacted its operations, largely outside of its control. This
included militant union activity and a general thrust for above
inflation wage hikes which increased IFMSA's labour costs.
Most significant of all were the rising electricity costs and
interruptions in power supply. Ferrochrome producers rely heavily
on electricity for their furnaces and are particularly vulnerable
to power discontinuity. In July
2015 IFMSA lost more than 10% of its ferrochrome production
because of load shedding and power trips.
Production losses also occurred during the year resulting from
section 54 orders to shut the furnaces made by government
inspectors. While IFMSA was vindicated in court proceedings to lift
these orders, the damage was done. A strike of workers
employed by one of IFMSA's contractors resulted in IFMSA having to
reduce production from its furnaces and disrupted its logistics and
shipping schedule, causing a further loss in production and strain
on its liquidity.
Management made stringent efforts to continue the cost cutting
programme that had previously been reported, but despite these
efforts, the Group’s profitability continued to be under
pressure. As a result of deteriorating business conditions,
IFL’s South African subsidiary, International Ferro Metals (SA)
(Pty) Limited (“IFMSA”), which operates the IFL Group's Lesedi mine
and ferrochrome smelting operations, took the step of entering into
business rescue on 26 August 2015.
This is a South African statutory means of enabling a financially
distressed company to continue in business, under the supervision
of a business rescue practitioner (“BRP”), protected from its
creditors. While in business rescue there is a moratorium on
creditors and others taking legal proceedings or enforcement action
against IFMSA. This allows for the development and
implementation of a business rescue plan.
Mining Operations
Mining activities were challenged on many fronts. The Lesedi
underground mine ramp-up was below expectations as reported in the
second half. In the 4th quarter the mine produced 34,390
tonnes of run-of-mine ore (“RoM”), a decrease of 25% on the
previous quarter. The targeted production level of approximately
25kt/m RoM by the financial year end was not achieved due to low
availabilities of mobile equipment and a Department of Mineral
Resources related stoppage during April
2015. The stoppage lasted for 10 days.
The introduction of a drill rig and roof bolter machines in the
4th quarter improved productivity in the MG2 ore seam
areas significantly. It was a further step in the mechanisation of
the MG2 reef which was expected to improve productivity as the mine
ramps up.
The accelerated mine ramp up plan was in line with the overall
strategy of becoming self-sufficient in terms of ore supply.
Significant infrastructure developments were completed to support
the accelerated ramp up with particular focus on ore reserve
development to ensure sustainability of ore supply. In addition,
the ends on both reef horizons were extended and the load haul
dumper rebuild programme delivered 4 of the 8 machines. These two
key initiatives were designed to decrease downtime and tram
distances to enable increased production levels of 40kt/m RoM by
the end of calendar 2016.
The Company previously announced it had signed agreements with
Chrometco Limited (“Chrometco”) to mine at its LG6 open pit mine
(Rooderand mine) and to purchase the ore mined. Mining at
Chrometco’s Rooderand mine was started in November 2014. The difficulties related to the
ore body exhibiting a higher degree of geological faulting, steeper
dips and a higher degree of weathering resulted in mining
operations being suspended in May
2015. In the meantime the Group was successful in securing
high grade ore supply below the cost of Rooderand Mine
production.
Smelter Operations
The pelletiser plant achieved a new production record for the
year. However, the smelter production was below expectation due
to:
· The furnaces were shut down for the
annual planned maintenance and although the maintenance was carried
out on time, this had a negative impact on production costs.
· The quality of coke sourced within
South Africa deteriorated as
reported in the first half of the year. This had a negative
influence on power efficiency and ultimately production levels. An
alternative supply was secured successfully from China.
· In order to develop alternative
reductant technology IFMSA embarked on a silicon carbide trial,
which did not yield the desired results.
· After this test IFMSA was instructed
to shut down its furnaces as a S54 stoppage was issued by the DMR.
The situation was resolved but had a direct impact on cost and
production.
· With the improved stability of
electrodes during the prior financial year, furnace power was
increased during the first half in an effort to raise output,
testing previous assumptions on electrode integrity versus power
input. However, some issues with electrode integrity recurred,
although not as significant as in the past, which contributed to
lower than planned production. Furnace input power was subsequently
decreased to the levels maintained in the prior financial year to
ensure integrity of electrodes and process stability. Although not
as severe as in previous quarters, the furnace operations were
still affected by tip losses on the electrodes. Continued work on
eliminating these tip losses resulted in an alternative electrode
paste being identified and introduced to the furnaces by the end of
the third quarter of the financial year. The aim of this paste was
to produce an electrode with improved resistance to thermal shock
that occurs during downtimes on the furnaces, which is the main
cause of the tip losses on the electrodes.
· The low grade ore stockpile from Sky
Chrome was used in the furnaces in the first half that negatively
influenced efficiencies therefore production and costs. All low
grade ore was used in the first half of the year.
· This resulted in total ferrochrome
production of 198kt for 2015, 13.2% lower than the previous year.
Commensurately cost increased by 21.7% to R8.36/lb.
· In addition a few safety deviations at
the metal recovery plant resulted in a production stoppage for a
few days to implement corrective actions. This reduced production
and increased costs due to less dilution of the recovered alloy.
Production costs increased 7.8% quarter on quarter due to the
aspects identified above.
During August 2015, the employees
of the materials handling contractor went on strike. This resulted
in the furnaces operating at low load for a number of days. The
dispute seemed to be part of labour unrest affecting other mining
operations in the region, and was with the contractor, Almar
Investments, not with the Company. As a result of the labour
unrest, the Company’s furnaces had to intermittently reduce
production. About 1,000t ferrochrome production for the month of
August was lost. This also caused a disruption to the Company’s
logistics and shipping schedules affecting the Company’s
liquidity.
Power supply and costs
Power supply was at times variable which resulted in regular
load reductions on the furnaces. The annual increase in power
prices amounted to 12.69%, greatly in excess of inflation, further
exacerbating the winter tariff costs.
Since 2007, Eskom’s prices have increased by 374% for heavy
industrial users, which equates to 21.5% p.a. against CPI inflation
of 6.3% p.a. over that same period. In July IFMSA lost more than
10% of its ferrochrome production because of load shedding and
power trips.
Sales and Marketing
The Group achieved ferrochrome sales of 204,730t, 10% down on
the previous year. The decrease is a result of the lower production
of alloy.
Inventories ended at 7,582t at year end. All alloy and ore
stocks were sold during the business rescue proceedings.
Health and Safety
The Group maintained its zero fatality rate since inception
achieving 3 758 238 fatality free shifts. Lost time
injuries increased from 3 in the previous year to 12.
The increase in injuries was mostly due to the recommencement of
underground mining operations.
Environmental Impact
The Group has always, and continued this year, to run
environmentally sustainable operations. This forms part of the zero
harm strategy which includes people and the environment we operate
in.
On the back of the ISO 14001:2004 system, the Group continues to
monitor and manage the impact that the operations had on the
environment. This was done by conducting regular audits, verifying
compliance to these standards and recording and investigating all
incidents.
Black Economic Empowerment
In July 2012, the DMR granted the
conversion of the Old Order Mining Right to a New Order Mining
Right. However, since the submission of the proposed BEE
transaction to the DMR in 2009, there have been legislative
changes, and developments within the Group which have presented an
opportunity for the Group to implement a more simplified BEE
transaction.
The Company has therefore not executed the conversion and in
February 2014 resubmitted its
proposal, which aims to simplify the funding of the BEE
transaction. The DMR has informed the Company that it is satisfied
with the revised plan and ready to execute the conversion of the
mining right. However, because the IFMSA business rescue plan
contemplates the sale of IFMSA’s assets, the proposed BEE
transaction will not be implemented.
UG2 supply
The Company has a chromite supply agreement with Rustenburg
Platinum Mines Limited (“RPM”), a subsidiary of Anglo Platinum, to
provide 15,000t per month of UG2 chrome concentrate until 2020.
This beneficial agreement delivers UG2 at a cost significantly
below the Company’s in-house cost of concentrate production.
Due to the protracted strike action at Anglo Platinum from
February to June 2014, a backlog of
UG2 ore was created, which at 30 June
2015 was approximately 71kt. Anglo Platinum is obliged under
the agreement to make up any shortfalls from future production, and
the Company will benefit from a higher supply of UG2 ore, which is
a direct contributor to profitability.
During December 2015 proceedings
commenced against RPM to protect IFMSA’s interests under the
chromite supply agreement. RPM had purported to terminate the
agreement. The Company received counsel's advice that the purported
termination was invalid, and commenced court proceedings to seek
orders to protect its position, including orders that the purported
termination is ineffective and that RPM is obliged to continue to
supply chrome ore under the agreement.
In January 2016 the company
entered into a settlement agreement RPM under which RPM is obliged
to continue supply of UG2 chrome ore under the following revised
terms:
RPM to supply 10,000 tonnes of UG2 per month for calendar year
2016 at no cost and 7,500 tonnes per month from January 2017 to November
2020 at a cost of ZAR170 per
tonne. The backlog of approximately 57,000 tonnes at the end of
December 2015 to be supplied at a
rate of 10,000 tonnes per month from January
2016, also at no cost. The original contract provided for
RPM to supply 15,000 tonnes per month until November 2020 at no cost. The settlement
eliminated the uncertainty surrounding the supply agreement and
accordingly assisted with the asset sale process that was in
progress.
FINANCIAL REVIEW
Overview
The year was extremely challenging as a combination of lower
ferrochrome prices, high electricity prices, and production losses
due to DMR stoppages and power disruptions, significantly impacted
production, profitability and liquidity.
FeCr production volumes were 198,131t achieved against the
previous year’s 228,260t, a decrease of 13.2%. Production costs
increased by 21.7% from ZAR6.87/lb in
2014 to ZAR8.36/lb with the main
contributors being increase in ore, electricity and fixed
costs.
The Group incurred a loss before tax of ZAR176 million for the first half of the year and
net borrowings increased by ZAR113
million to ZAR451 million at
31 December 2014. The first half was
negatively impacted by annual maintenance, silicon carbide trials,
the DMR stoppage in November 2014,
more expensive ores due to the ramp-up of mining operations at
Lesedi and Rooderand, and the low grade ore stock consumed by the
furnaces during the period. This had a negative impact on all
efficiencies, resulting in lower production volumes and higher
production cost.
In the third quarter of the financial year the European
benchmark price for ferrochrome decreased to 108¢/lb from 115¢/lb
in the previous quarter. Ferrochrome production cost increased to
ZAR8.43/lb, up 7.8% from the previous
quarter’s ZAR7.82/lb, mainly due to
lower recoveries on ore beneficiation, lower UG2 consumption due to
committed UG2 sales, and a lower ratio of alloy recovery production
relative to furnace production as unplanned maintenance was
required on the metal recovery plant. By 31
March 2015 net borrowings had increased by ZAR34 million to ZAR485
million.
The fourth quarter of the financial year saw a rollover in the
European benchmark price at 108¢/lb even though electricity prices
had increased by 12.69% on 1 April
2015 and with June 2015 being
a winter tariff month, where electricity prices are almost 60%
higher than in summer. This resulted in further significant cost
pressures and ferrochrome production costs for the quarter
increased by 3% to ZAR8.70/lb. Net
borrowings decreased by ZAR35 million
to ZAR450 million at 30 June 2015 from ZAR485
million at 31 March 2015, as a
result of a forward sale of 15,000t FeCr during May 2015 for an upfront payment of ZAR116 million.
For the full financial year the Group recorded a loss before tax
from operations of ZAR313 million for
the full year. The deterioration in market conditions and operating
results of the Company has necessitated a re-assessment of the
carrying value of the assets of the Group which has resulted in an
impairment charge of ZAR1.6 billion
for the year. This increased the loss before tax to ZAR1.9 billion for the year. The deferred tax
asset was derecognised resulting in a charge of ZAR235 million to the tax line in the income
statement for an after tax loss of ZAR2.2
billion for the year.
The first quarter of the new financial year staring 1 July 2015 again saw a rollover of the European
benchmark price at 108¢/lb, despite the first two months being
electricity winter tariff months. During July 2015 the supply of electricity was
constrained and the Company lost more than 10% of its ferrochrome
production because of load shedding and power trips. In
August 2015 the Company’s materials
handling contractor’s staff went on strike on site which resulted
in production losses of about 1,000 tonnes of ferrochrome and
caused a disruption to the Company’s logistics and shipping
schedules. This affected approximately 1,500 tonnes of
ferrochrome shipments, and consequently further impacting the
Company’s liquidity.
These factors caused IFMSA’s financial position to deteriorate
so that it became financially distressed and on
26 August 2015 the directors of IFMSA placed it under
business rescue.
Business rescue is a South African statutory means of enabling a
financially distressed company to continue in business, under the
supervision of a business rescue practitioner, protected from its
creditors. While in business rescue there is a moratorium on
creditors and others taking legal proceedings or enforcement action
against IFMSA. This allowed for the development and implementation
of a business rescue plan that seeks to enhance the potential
return for IFMSA's stakeholders.
As a result of the business rescue, operations were placed on
care and maintenance, significantly reducing expenses.
On 7 December 2015 the creditors
of IFMSA approved the business rescue plan which provided for the
sale of the business and assets of IFMSA and the shares and claims
against Sky Chrome, to Samancor Chrome Limited (“Samancor”) for
ZAR650 million and ZAR70 million respectively for a total
consideration of ZAR720 million.
During December 2015 Rustenburg
Platinum Mines Limited (“RPM”) purported to cancel the UG2 chrome
ore supply agreement with IFMSA and the IFL Group proceeded with
legal action to protect its interests under the supply agreement.
In January 2016 the Company entered
into a settlement agreement with RPM under which RPM would continue
the supply of UG2 ore but at reduced quantities and at additional
costs to IFMSA.
The settlement eliminated the uncertainty surrounding the supply
agreement and accordingly assisted with the business rescue
process. However, it had a material impact on the UG2 agreement's
value and consequently on the value of the assets of IFMSA. As a
result, Samancor revised its offer price down from ZAR720 million to ZAR520 million, with the
transaction split into three divisible tranches:
1. ZAR310 million for
the business and assets of IFMSA;
2. ZAR140 million for
the IFMSA Mining Right and Beneficiation Plant; and
3. ZAR70 million for
certain receivables of Sky Chrome and Sky Chrome’s equity for
ZAR100.
The BRP proposed an amendment of the business rescue plan to the
creditors of IFMSA to take account of the settlement agreement
reached in respect of the UG2 supply agreement and the reduced
offer price from Samancor and on 24 March
2016 creditors unanimously approved the amended business
rescue plan.
The proceeds were distributed to creditors of IFMSA in
September 2016 in accordance with the
amended business rescue plan.
The outstanding conditions for the remaining two tranches of the
transactions include obtaining regulatory approvals, specifically
ministerial approval for the transfer of mining rights, and
consents of other parties to certain material contracts, which are
usual for transactions of this nature.
Due to the reduced offer price of ZAR520
million, it is expected that the shareholders will not
receive any dividend or distribution.
Operational Results
Ferrochrome sales volumes decreased by 7.9% to 204,730t
recording a 3% decrease in revenue to ZAR2.04 billion. Adjusting for ore sales, revenue
decreased by 8%. Ore sales of 120kt generated revenue of
ZAR130 million against prior year ore
sales of 40kt as the Group received more UG2 ore from its supply
agreement with Rustenburg Platinum Mines. FeCr sales were well
diversified with 32% to Europe,
25% China and the balance mainly
to India and the U.S.
The Rand depreciated on average by some 10% against the U.S.
dollar. However, the average European benchmark ferrochrome price
for the year decreased by 3.2% to 112¢/lb and discounts increased
in the second half resulting in lower realised ZAR prices.
Condensed Income
Statement |
H1
FY15 |
H2
FY15 |
FY2015 |
FY2014 |
YoY% |
FeCr production
(tonnes) |
98 016 |
100 115 |
198 131 |
228 260 |
-13% |
FeCr sales
(tonnes) |
101 700 |
103 030 |
204 730 |
222 320 |
-8% |
|
|
|
|
|
|
|
ZAR'000 |
ZAR'000 |
ZAR'000 |
ZAR'000 |
YoY% |
Sales Revenue |
1
021 576 |
1
016 169 |
2
037 745 |
2
100 506 |
-3% |
Cost of goods
sold |
(1 073
797) |
(1 074
578) |
(2 148
375) |
(1 869
875) |
15% |
Gross (loss)
profit |
(52
221) |
(58
409) |
(110
630) |
230 631 |
|
Other expenses |
(86
128) |
(46
700) |
(132
828) |
(125
585) |
|
Impairment |
- |
(1 655
939) |
(1 655
939) |
- |
|
Loss (profit) before
int. & tax |
(138
349) |
(1 761
048) |
(1 899
397) |
105 046 |
|
Net finance cost |
(37
253) |
(37
724) |
(74
977) |
(63
946) |
17% |
Loss (profit) before
tax |
(175
602) |
(1 798
772) |
(1 974
374) |
41 100 |
|
Taxation |
- |
(235
081) |
(235
081) |
2 065 |
|
Net loss (profit)
after tax |
(175
602) |
(2 033
853) |
(2 209
455) |
43 165 |
|
|
|
|
|
|
|
Loss (profit) before
int. & tax |
|
|
(1 899
397) |
105 046 |
|
Add back:
Impairment |
|
|
1
655 939 |
- |
|
Add back:
Depreciation |
|
|
100 479 |
97 451 |
|
EBITDA |
|
|
(142
979) |
202 497 |
|
EPS (SA cents per
share) |
|
|
(398.2) |
7.9 |
|
Operating margin deteriorated severely from 11% in the prior
year to -5% this financial year. A gross operating loss of
ZAR111 million was recorded compared
with a gross profit of ZAR231 million
in the prior year.
EBITDA decreased by ZAR345 million
from ZAR202 million in the prior year
to negative ZAR143 million.
Earnings per share were negative 398
ZAR cents for the year against a prior year earnings of
7.91 cents.
Costs
Production costs for the year were ZAR8.36/lb, an increase of 21.7% on the prior
year’s ZAR6.87/lb. This was
mainly driven by higher ore and electricity cost and per unit fixed
costs.
Ore costs increased due to the higher cost of mining Lesedi
underground mine during the ramp-up phase and the buy-in of more
expensive sweetener ores to compensate for higher use of UG2
ore.
Electricity costs increased as a result of Eskom’s annual
increase of 12.69%, a deterioration in electricity consumption due
to the production interruptions and the cogeneration plant not
being in operation. Since 2007, electricity prices for large
industrial users have increased by a total of 374%, which equates
to 21.5% p.a. against CPI inflation of 6.3% p.a. over that same
period.
Fixed costs per unit increased owing to higher maintenance costs
resulting from production interruptions, above-inflation wage
increases and lower production volumes.
Other income and expenses
Administrative and other expenses, excluding asset impairments,
decreased by 9.2% to ZAR86 million. This was mainly because
mine related salaries were recognised in production cost with the
restart of the Lesedi mine whereas in the prior year it was treated
as an unabsorbed cost and expensed directly through the income
statement.
Impairment of assets
The present low price environment and reduction in market
activity, has necessitated the re-assessment of the carrying value
of the assets of the Group. The future viability of the assets has
become uncertain given the current challenges faced by the Group.
Previously impairment was determined using value in use as the
valuation basis. In determining ‘value in use’, future cash flows
are based on estimates for which there is a high degree of
confidence of future production levels, future commodity prices and
future cash costs of production. Due to the Business Rescue
Process, IFMSA was placed under care and maintenance and as a
result of the uncertainties surrounding the timing of restarting
the operations and working capital requirements, the ‘value in use’
assessment was not used.
On the basis of the above it has been concluded that the
carrying value of the assets be written down to the best estimate
of fair value less costs to sell. The fair value is determined as a
level 3 hierarchy as the final offer through the business rescue
process was used to determine the impairment. The Company had
initiated negotiations with an interested party for the sale of
IFMSA before year end but before any transaction could be
concluded, IFMSA became financially distressed and on 26 August 2015 entered into Business Rescue, and
its operations were placed on care and maintenance.
The outcome of the discussions were used to determine the best
estimate of fair value less cost to sell as at 30 June 2015.This
resulted in an impairment of ZAR1,547,057 on the tangible and intangible
assets of IFMSA (refer note 20 and note 21) and ZAR67,378 on the assets of International Ferro
Metals Limited. The remainder of the impairment mainly relates to
specific impairment on the Cogen plant ZAR13,773 due to the failure of the engines,
Furnace winter shutdown of ZAR1,943
due to the items being replaced annually, Capital work in progress
items ZAR6,902 due to the project not
continuing. Bankable feasibility study and previously expansion
costs capitalised ZAR15,418 due to
the financial position of the Group and the unlikelihood for an
expansion to proceed, Rooderand mining development costs
ZAR1,539 due to cessation of mining
operations, and the Madibeng water project ZAR1,927 due to the project not going ahead.
This has resulted in a significant impairment charge of
ZAR1.6 billion on the assets of the
Group and reversal of all deferred tax assets amounting to
ZAR235 million.
Capital expenditure
Capital expenditure amounted to ZAR100
million compared with ZAR35
million in the prior year, and the main items were
engineering capital of ZAR41 million
for furnace maintenance, Lesedi mine development of ZAR35 million and cogeneration plant capital of
ZAR9 million.
Cash
The Company's net borrowings increased by ZAR112 million to ZAR450
million at 30 June 2015, from
ZAR338 million at 30 June 2014. The increase was as a result of
operations utilising ZAR106 million,
working capital generating ZAR162
million, investing activities utilising ZAR119 million and financing activities utilising
ZAR50 million.
During May 2015 a forward sale of
15,000t FeCr was concluded resulting in an upfront receipt of
ZAR116 million.
The ZAR500 million Bank of
China working capital facility
expired on 16 September 2015 and was
rolled forward for 3 months to 9 December 2015 to allow
sufficient time for the business rescue practitioner to publish the
business rescue plan. The Bank of China working capital facility then became
repayable on demand. On 24 March 2016
the amended business rescue plan was approved unanimously by
creditors including the Bank of China. While the facility is repayable on
demand it is subject to the provisions of the business rescue
process which imposes a moratorium on creditor claims and
enforcement. Since year end an amount of ZAR30 million capital was repaid on the facility
resulting in an outstanding balance of ZAR470 million. The proceeds of the first tranche
of the total consideration to be received from Samancor resulted in
a payment of ZAR232 million to the
Bank of China. The proceeds of the
remaining two tranches, which amounts to ZAR210 million, will be distributed to the Bank
of China. These payments along
with any residual funds available in IFMSA, are expected to result
in settlement of the facility.
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE
2015
|
|
Consolidated |
|
|
|
|
|
Note |
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Sales revenue |
5 |
2,037,745 |
2,100,506 |
Cost of goods
sold |
|
(2,148,375) |
(1,869,875) |
Gross
(loss)/profit |
|
(110,630) |
230,631 |
|
|
|
|
Other
(expenses)/income |
|
|
|
Other income |
6 |
3,914 |
4,256 |
Administrative and
other expenses |
7 |
(85,808) |
(94,484) |
Impairment assets |
20 |
(1,655,939) |
(5,679) |
Loss on disposal of
assets |
|
(5,630) |
-
|
Foreign exchange
gain |
|
17,582 |
10,270 |
Write down of
inventory to net realisable value |
18 |
(25,840) |
(4,851) |
Unabsorbed fixed
costs |
|
(35,186) |
(32,985) |
Share based payment
expense |
10 |
(1,860) |
(2,112) |
Net (loss)/profit
before interest and tax |
|
(1,899,397) |
105,046 |
|
|
|
|
Finance income |
11 |
882 |
1,991 |
Finance costs |
11 |
(75,859) |
(65,937) |
|
|
|
|
Net (loss)/profit
before tax |
|
(1,974,374) |
41,100 |
|
|
|
|
Income taxation
(expense)/credit |
12 |
(235,081) |
2,065 |
|
|
|
|
Net (loss)/profit
after tax |
|
(2,209,455) |
43,165 |
|
|
|
|
Attributable to: |
|
|
|
Non-controlling
interest |
30 |
(3,534) |
(665) |
Owners of the
parent |
|
(2,205,921) |
43,830 |
|
|
(2,209,455) |
43,165 |
Earnings per share
(cents per share) |
|
|
|
- basic (loss)/profit
per share |
13 |
(398.17) |
7.91 |
- diluted
(loss)/profit per share |
13 |
(398.17) |
7.91 |
The above income statement should be read in conjunction with
the notes to the financial statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE
2015
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
(Loss)/profit for the
period |
|
(2,209,455) |
43,165 |
Total comprehensive
(loss)/income for the period, net of tax |
|
(2,209,455) |
43,165 |
|
|
|
|
Attributable to: |
|
|
|
Non-controlling
interests |
|
(3,534) |
(665) |
Owners of the
parent |
|
(2,205,921) |
43,830 |
|
|
(2,209,455) |
43,165 |
The above statement of comprehensive income should be read in
conjunction with the notes to the financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE
2015
|
Contributed equity
(Note 26) |
Accumulated losses
(Note 28) |
Share based payment reserve
(Note 27) |
Non-distributable reserve
(Note 29) |
Non-controlling interest
(Note 30) |
Total equity |
|
ZAR'000 |
ZAR'000 |
ZAR'000 |
ZAR'000 |
ZAR'000 |
ZAR'000 |
At 1 July
2013 |
3,088,240 |
(886,722) |
19,179 |
(6,044) |
(3,606) |
2,211,047 |
Profit/(loss) for the
period |
- |
43,830 |
- |
- |
(665) |
43,165 |
Total comprehensive
income for the period |
- |
43,830 |
- |
- |
(665) |
43,165 |
Equity
transactions: |
|
|
|
|
|
|
Share-based payment
transactions |
- |
- |
2,191 |
- |
- |
2,191 |
At 30 June
2014 |
3,088,240 |
(842,892) |
21,370 |
(6,044) |
(4,271) |
2,256,403 |
|
|
|
|
|
|
|
At 1 July
2014 |
3,088,240 |
(842,892) |
21,370 |
(6,044) |
(4,271) |
2,256,403 |
Loss for the
period |
- |
(2,205,921) |
- |
- |
(3,534) |
(2,209,455) |
Total comprehensive
loss for the period |
- |
(2,205,921) |
- |
- |
(3,534) |
(2,209,455) |
Equity
transactions: |
|
|
|
|
|
|
Share-based payment
transactions |
- |
- |
1,944 |
- |
- |
1,944 |
Share buy-back -
subsidiary |
- |
(6,071) |
- |
- |
1,821 |
(4,250) |
At 30 June
2015 |
3,088,240 |
(3,054,884) |
23,314 |
(6,044) |
(5,984) |
44,642 |
The above statement of changes in equity should be read in
conjunction with the notes to the financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 30 JUNE 2015
|
|
Consolidated |
|
|
|
|
|
Note |
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
ASSETS |
|
|
|
Current
assets |
|
|
|
Cash and cash
equivalents |
15 |
49,856 |
162,275 |
Trade and other
receivables |
16 |
205,638 |
169,386 |
Prepayments |
17 |
364 |
29,036 |
Inventories |
18 |
257,210 |
370,054 |
Total current
assets |
|
513,068 |
730,751 |
Non-current
assets |
|
|
|
Deferred tax
asset |
12 |
- |
235,081 |
Financial
investments |
19 |
129,395 |
101,145 |
Property, plant &
equipment |
20 |
367,356 |
2,045,135 |
Intangible assets |
21 |
108,510 |
136,699 |
Other non-current
assets |
22 |
5,760 |
9,866 |
Total non-current
assets |
|
611,021 |
2,527,926 |
Total
assets |
|
1,124,089 |
3,258,677 |
|
|
|
|
EQUITY &
LIABILITIES |
|
|
|
Current
liabilities |
|
|
|
Trade and other
payables |
23 |
359,155 |
294,445 |
Provisions |
24 |
35,198 |
37,612 |
Interest bearing loans
and borrowings |
25 |
510,883 |
506,429 |
Total current
liabilities |
|
905,236 |
838,486 |
Non-current
liabilities |
|
|
|
Provisions |
24 |
110,811 |
103,063 |
Interest bearing loans
and borrowings |
25 |
63,400 |
60,725 |
Total non-current
liabilities |
|
174,211 |
163,788 |
Total
liabilities |
|
1,079,447 |
1,002,274 |
Net assets |
|
44,642 |
2,256,403 |
|
|
|
|
Shareholder's
equity |
|
|
|
Contributed
equity |
26 |
3,088,240 |
3,088,240 |
Share based payment
reserve |
27 |
23,314 |
21,370 |
Accumulated
losses |
28 |
(3,054,884) |
(842,892) |
Non-distributable
reserve |
29 |
(6,044) |
(6,044) |
Parent entity
interests |
|
50,626 |
2,260,674 |
Non-controlling
interests |
30 |
(5,984) |
(4,271) |
Total shareholders’
equity |
|
44,642 |
2,256,403 |
|
|
|
|
The above statement of financial position should be read in
conjunction with the notes to the financial statements.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE
2015
|
|
Consolidated |
|
|
|
|
|
Note |
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Cash flows from
operating activities |
|
|
|
Receipts from
customers and other |
|
2,020,254 |
2,070,602 |
Payments and advances
to suppliers and employees (inclusive of goods and services
tax) |
|
(1,957,206) |
(1,937,536) |
Tax (paid) net of VAT
adjustments |
|
- |
(432) |
Interest paid |
|
(6,616) |
(2,730) |
Net cash flows from
operating activities |
|
56,432 |
129,904 |
Cash flows used
investing activities |
|
|
|
Payments for property,
plant & equipment |
|
(99,886) |
(30,445) |
Interest received |
|
882 |
1,991 |
Restricted cash
deposits and investments |
|
(19,820) |
(14,708) |
Net cash flows used
in investing activities |
|
(118,824) |
(43,162) |
Cash flows used
financing activities |
|
|
|
Payment of finance
costs |
|
(56,988) |
(53,634) |
Increase in
borrowings |
|
12,773 |
- |
Repayment of
borrowings |
|
(5,812) |
(8,342) |
Net cash flows used
in financing activities |
|
(50,027) |
(61,976) |
Net
(decrease)/increase in cash held |
|
(112,419) |
24,766 |
Cash at the beginning
of the financial year |
|
162,275 |
137,509 |
Cash and cash
equivalents at the end of the year |
15 |
49,856 |
162,275 |
The above statements of cash flows should be read in conjunction
with the notes to the financial statements.
RECONCILIATION OF OPERATING (LOSS)/PROFIT TO CASH FLOWS FROM
OPERATING ACTIVITIES
FOR THE YEAR ENDED 30 JUNE
2015
|
|
Consolidated |
|
|
|
|
|
Note |
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
(Loss)/profit from
ordinary activities before income tax |
|
(1,974,374) |
41,100 |
|
|
|
|
Adjustments to
reconcile (loss)/profit before tax to net cash flow: |
|
|
|
Non-Cash Items: |
|
1,869,637 |
168,651 |
Amortisation of
mineral rights |
|
- |
129 |
Amortisation of
intangible asset |
|
20,442 |
8,735 |
Amortisation of debt
establishment costs |
|
4,326 |
3,350 |
Adjustments to
inventory provisions and quantity write downs |
|
10,466 |
4,076 |
Decommissioning and
restoration expense and unwinding |
|
4,309 |
6,409 |
Depreciation |
|
100,479 |
97,322 |
Impairment of
assets |
|
1,655,939 |
5,679 |
Loss on disposal of
assets |
|
5,630 |
- |
Unrealised foreign
exchange profit |
|
(18,761) |
(3,769) |
Interest
received/accrued |
|
56,234 |
50,655 |
Write down of
inventory to net realisable value |
|
25,840 |
4,851 |
Reversal of impairment
of loan |
|
(3,450) |
- |
Cost of product
adjustments |
|
9,910 |
(8,137) |
Fair value adjustments
on financial assets |
|
(4,323) |
(6,935) |
Share based payment
movements |
|
1,565 |
2,112 |
Increase in
provisions |
|
1,031 |
4,174 |
|
|
|
|
Working Capital
Adjustments: |
|
161,169 |
(79,415) |
(Increase) in
receivables |
|
(17,491) |
(29,904) |
Decrease/(Increase) in
inventories |
|
90,367 |
(97,657) |
Decrease/(Increase) in
prepayments |
|
28,672 |
(28,423) |
Increase in payables
and accruals |
|
59,621 |
76,569 |
|
|
|
|
Tax provision
adjustment |
|
- |
(432) |
Net cash flow from
operating activities |
|
56,432 |
129,904 |
NOTES TO THE FINANCIAL REPORT
1. CORPORATE INFORMATION
International Ferro Metals Limited (“the Parent”) is a Company
limited by shares incorporated in Australia whose shares are publicly traded on
the London Stock Exchange, as of 1 September 2007. The
Company previously traded on the Alternative Investment Market of
the London Stock Exchange.
The financial report for the year ended 30 June 2015 was issued in accordance with a
resolution of Directors on 31 October
2016.
2. ACCOUNTING POLICIES
a) Basis of
preparation
The financial report is a general-purpose financial report,
which has been prepared in accordance with the requirements of the
Corporations Act 2001 and Australian Accounting Standards
and other authoritative pronouncements of the Australian Accounting
Standards Board. The financial report has also been prepared on a
historical cost basis, except for certain financial instruments
which have been measured at fair value.
The financial report is presented in South African Rand and all
values are rounded to the nearest thousand Rand (ZAR’000) unless
otherwise stated.
Comparative information is reclassified where appropriate to
enhance comparability.
Going concern
As at 30 June 2015, the Group had
net current liabilities of ZAR392
million (2014: ZAR114 million)
including the Bank of China
working capital facility. The ZAR500
million working capital facility expired on 16 September 2015 and was rolled forward for 3
months to 10 December 2015 to enable the Business Rescue
Practitioner to publish the Business Rescue Plan. The facility is
payable on demand subject to the provisions of business
rescue. Since year end an amount of ZAR30 million capital was repaid on the facility
resulting in an outstanding balance of ZAR470 million. The proceeds of the first tranche
of the total consideration to be received from Samancor resulted in
a payment of ZAR232 million to the
Bank of China. The proceeds of the
remaining two tranches, which amounts to ZAR210 million, will be distributed to the Bank
of China. These payments along
with any residual funds available in IFMSA, are expected to result
in settlement of the facility.
Since the inception of business rescue the appointed business
rescue practitioner has been facilitating the support of IFML by
cash flow from IFMSA to cover ongoing costs. This support continued
until June 2016. The amount of cash
flow to IFML totalled ZAR17.4 million
which was used to pay expenses subsequent to year end. South
African Exchange Control approval has recently been obtained and
IFML’s claim of ZAR4.5 million is
expected to be paid shortly. This amount is expected to be
sufficient to fund the limited operations of IFML until such time
as the outstanding conditions for the remaining two tranches of the
transaction with Samancor have been met. These conditions include
obtaining regulatory approvals, specifically ministerial approval
for the transfer of mining rights, and consents of other parties to
certain material contracts, which are usual for transactions of
this nature. The company does not expect any further distributions
from its subsidiaries. After the completion of the above
transactions the directors will consider all options available for
the company, which may include the wind up of the company. It is
not expected that the shareholders of IFML will receive any
dividend or distribution from the conclusion of the process.
Taking the above risks into consideration, the Directors have
concluded that the combination of these circumstances presents
material uncertainty that casts significant doubt upon the
Company’s ability to continue as a going concern. The Company may
not be able to realise its assets and discharge its liabilities
whilst IFMSA is under business rescue. However, the Company will
continue to adopt the going concern basis of accounting in
preparing the annual financial statements, with the necessary
disclosures included, regarding the material uncertainties that are
being faced.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
b) Statement
of compliance
The financial report complies with Australian Accounting
Standards and International Financial Reporting Standards (“IFRS”)
as issued by the International Accounting Standards Board
(“IASB”).
4. SEGMENT INFORMATION
Identification of reportable segments.
The group has determined operating segments based on the
information provided to the Board of Directors (Chief Operating
Decision Maker).
The group operates predominately in one business segment, being
the mining and processing of chromite in South Africa and sale of ferrochrome.
There is no material difference between the financial information
presented to the Chief Operating Decision Maker and the financial
information presented in this report.
Sales revenue by geographic location
Revenue obtained from external customers is attributed to
individual countries based on the location of the customer.
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
China |
|
509,328 |
651,880 |
Europe |
|
660,297 |
853,531 |
South Africa |
|
222,904 |
129,014 |
South Korea |
|
19,935 |
39,286 |
India |
|
302,625 |
110,655 |
United States of
America |
|
322,656 |
316,140 |
Total External
Revenue |
|
2,037,745 |
2,100,506 |
Major customers
The group received 76% (2014: 89%) of its external revenue from
its Chinese and European agents. During 2015 the group
received 51% (2014:56%) of its external revenue from CMC Cometals,
16% (2014:5%) from Jindal and 24% (2014:33%) from JISCO.
There are no additional customers which account for more than
10% of the group’s external revenues.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
5. SALES REVENUE
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Sales revenue |
|
|
|
- Ferrochrome
sales |
|
1,915,509 |
2,077,090 |
- Fair value
adjustments (a) |
|
(7,952) |
(3,824) |
- Other sales
(b) |
|
130,188 |
27,240 |
|
|
2,037,745 |
2,100,506 |
a) Fair value adjustments represent
re-valuations performed on chrome ore and ferrochrome sales
contracts for which the price is linked to future fluctuations in
the published ferrochrome and ore prices until the day of
consumption by the end customer (also refer to note 3(j)).
b) Other sales relate to chrome ore, including
UG2 sales.
6. OTHER INCOME
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Other income (a) |
|
3,914 |
4,256 |
|
|
3,914 |
4,256 |
a) Other income for the current financial year
relates mainly to the reversal of a previously recognised
impairment on the loan to Global Eagle Mineral and Beneficiation
(Pty) Ltd. The loan was recovered through the repurchase of their
shares in International Ferro Metals SA (Pty) Ltd. Other
income for the prior year mainly relates to an insurance claim
received of ZAR3,702.
7. ADMINISTRATIVE AND OTHER EXPENSES
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Accounting fees |
|
89 |
600 |
Auditors remuneration
– external |
|
3,760 |
3,803 |
Auditors remuneration
– internal |
|
997 |
598 |
Consulting fees |
|
1,739 |
1,046 |
Depreciation not in
cost of goods sold |
|
6,178 |
422 |
Legal fees |
|
4,939 |
4,283 |
Remuneration of Key
Management Personnel (refer note 8) |
|
23,384 |
23,833 |
Staff costs (refer
note 9) |
|
25,781 |
34,505 |
Fair value adjustments
on financial assets |
|
(4,323) |
(6,935) |
Other administrative
expenses |
|
23,264 |
32,329 |
|
|
85,808 |
94,484 |
NOTES TO THE FINANCIAL REPORT (CONTINUED)
8. REMUNERATION OF KEY MANAGEMENT
PERSONNEL
a) Details of Key Management Personnel
Please refer to the audited Remuneration Report for details of
Key Management Personnel, option and shareholding disclosures.
b) Remuneration of Key Management
Personnel
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Basic salary and
fees |
|
23,082 |
22,079 |
Incentive
payments |
|
- |
1,430 |
Superannuation * |
|
302 |
324 |
Total remuneration
before share based payments |
|
23,384 |
23,833 |
Share based payment
expense |
|
65 |
864 |
Performance share
scheme |
|
433 |
246 |
Phantom option
expense |
|
- |
(139) |
Total
remuneration |
|
23,882 |
24,804 |
* Superannuation represents payments made in respect of a
defined contribution pension scheme.
9. STAFF COSTS (EXCLUDING REMUNERATION
OF KEY MANAGEMENT PERSONNEL
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Basic salary and
fees |
|
331,172 |
214,042 |
Superannuation * |
|
149 |
140 |
Termination costs
** |
|
26 |
825 |
STI bonus
provisions |
|
- |
10,759 |
|
|
331,347 |
225,766 |
Less amounts included
in inventories/cost of goods sold |
|
(305,566) |
(191,261) |
Total staff
costs |
|
25,781 |
34,505 |
* Superannuation represents payments made in respect
of a defined contribution pension scheme.
** Termination payment relate to the organisational
restructuring during the year.
10. SHARE BASED PAYMENT EXPENSE
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Phantom option
adjustments |
|
380 |
291 |
Share-based payment
expense |
|
(2,240) |
(2,403) |
|
|
(1,860) |
(2,112) |
Refer to note 27 and 31 for further details on the phantom
option plan and share option plan.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
11. FINANCING INCOME AND COSTS
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Interest income |
|
882 |
1,991 |
Interest expense,
comprising: |
|
(75,859) |
(65,937) |
Finance cost |
|
(13,652) |
(11,561) |
- Amortisation of debt
establishment costs |
|
(5,851) |
(4,350) |
- Unwinding of
discount on rehabilitation provision |
|
(7,801) |
(7,211) |
Interest charges |
|
(62,207) |
(54,376) |
- Interest on debt
financing |
|
(49,550) |
(45,228) |
- Interest on finance
leases |
|
(7,567) |
(7,419) |
- Interest paid –
other |
|
(5,090) |
(1,729) |
Net finance
costs |
|
(74,977) |
(63,946) |
12. INCOME TAX
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Income tax
expense |
|
|
|
|
Current Income tax
charge: |
|
- |
- |
|
Adjustment in respect
of income tax of previous year |
|
- |
- |
|
Deferred income tax
relating to origination and reversal of temporary differences |
|
235,081 |
(2,065) |
|
Income tax
expense/(credit) recorded in income statement |
|
235,081 |
(2,065) |
|
(Loss)/profit from
ordinary activities before income tax expense |
|
(1,974,373) |
41,100 |
|
At parent entity
statutory tax rate of 30%: |
|
(592,312) |
12,330 |
|
Overseas tax rate
differential |
|
38,148 |
(880) |
|
Expenses not
deductible for tax purposes |
|
23,690 |
2,304 |
|
Deferred tax assets
not recognised /(utilised) |
|
765,555 |
(15,819) |
|
Aggregate income tax
expense/(credit) |
|
235,081 |
(2,065) |
|
Deferred income tax
liability |
|
|
|
|
Debtors and
prepayments |
|
6,776 |
5,531 |
|
Inventory |
|
129 |
129 |
|
Total deferred tax
liability |
|
6,905 |
5,660 |
|
Deferred income tax
asset |
|
|
|
|
Property plant and
equipment, including unredeemed capital expenditure |
|
(458,696) |
(9,818) |
|
Provisions |
|
(7,948) |
(7,793) |
|
Finance lease
payments |
|
(20,656) |
(18,706) |
|
Other payables |
|
(37,329) |
(12,620) |
|
Share option
charges |
|
(4) |
(100) |
|
Loss available for
offset against future income |
|
(233,766) |
(164,733) |
|
Rehabilitation
provisions, claimable in future |
|
(28,283) |
(26,971) |
|
Total deferred tax
(asset) |
|
(786,683) |
(240,741) |
|
Net deferred tax
(asset) |
|
(779,778) |
(235,081) |
|
Unrecognised
deferred tax (asset) |
|
779,778 |
- |
|
Recognised deferred
tax (asset) |
|
- |
(235,081) |
|
|
|
|
|
|
|
Calculated taxation losses
The Group has de-recognised the net deferred tax asset of
ZAR235 million previously recognised
due to the probability that the asset would not be fully utilised
in future. IFML has unrecognised tax losses of ZAR233 million
(2014:ZAR215 million) in relation to
the parent entity. IFMSA has unrecognised gross tax losses of
ZAR734 million (2014: ZAR49 million). IFMSA Holdings has unrecognized
gross tax losses of ZAR18 million (2014: ZAR14 million). Sky Chrome mining has
unrecognised gross tax losses of ZAR23
million (2014: nil).
Unredeemed mining
capital expenditure available for offset against future mining
taxable income |
1,986,023 |
1,925,412 |
NOTES TO THE FINANCIAL REPORT (CONTINUED)
13. EARNINGS PER SHARE
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
|
|
Basic (loss)/profit
per share (cents per share) |
|
(398.17) |
7.91 |
Diluted (loss)/profit
per share (cents per share) |
|
(398.17) |
7.91 |
(Loss)/profit used in
calculating basic earnings per share (ZAR’000) |
|
(2,205,921) |
43,830 |
(Loss)/profit used in
calculating diluted earnings per share (ZAR ‘000) |
|
(2,205,921) |
43,830 |
|
|
Shares |
Shares |
Weighted
average number of ordinary shares in issue used in calculation of
basic and diluted earnings per share |
554,008,047 |
554,008,047 |
Weighted
average number of ordinary shares in issue used in calculation of
diluted earnings per share |
554,008,047 |
554,008,047 |
|
|
|
|
|
|
Share Options and performance rights at 30 June 2015 and 30 June
2014 are anti-dilutive and therefore have not been included
in the calculation of diluted earnings per share in the current
period.
14. DIVIDENDS PAID AND PROPOSED
The Board of Directors resolved not to declare a dividend for
the year ended 30 June 2015 (2014:
nil).
15. CASH AND CASH EQUIVALENTS
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Cash at bank and on
hand |
|
24,306 |
18,462 |
Short-term
deposits |
|
25,550 |
143,813 |
Closing
balance |
|
49,856 |
162,275 |
16. TRADE AND OTHER RECEIVABLES
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Trade debtors (a) |
|
160,802 |
140,186 |
Outstanding tax
refunds (b) |
|
21,363 |
27,668 |
Other debtors (c) |
|
23,473 |
1,532 |
Closing
balance |
|
205,638 |
169,386 |
a) Trade debtors relate to the sale of
ferrochrome and chrome ore. Payment terms are thirty days
from date of final invoice.
b) Tax refunds relate to the relevant Goods
and Services Tax and Value Added Tax refunds owing in Australia and South
Africa.
c) Other debtors mainly relate to funds
receivable from Eskom under the instantaneous trips of ZAR1,087 as well as ZAR12,600 which relates to VAT paid on forward
sale.
Details of the terms and conditions of receivables are discussed
in detail under note 33.
The carrying value of trade and other receivables is assumed to
approximate the fair value due to the short term nature of the
trade and other receivables.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
17. PREPAYMENTS
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Prepaid creditors |
|
- |
28,443 |
Prepaid stewardship
costs |
|
364 |
593 |
Closing
balance |
|
364 |
29,036 |
Prepaid creditors in the prior period relates to payments made
in advance for raw materials. This was utilised during the current
period.
18. INVENTORIES
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Consumable stores at
cost or net realisable value |
|
77,329 |
47,632 |
Ore stock at cost or
net realisable value |
|
58,818 |
137,704 |
Raw materials at cost
or net realisable value |
|
51,242 |
55,503 |
Finished goods at cost
or net realisable value |
|
69,821 |
129,215 |
Closing
balance |
|
257,210 |
370,054 |
Cost of sales reflects the amount of inventory expensed for the
year.
Included in the value of inventory is provisions for handling
losses of ZAR542 (2014: ZAR1,604).
Included in inventory is a net realisable value adjustment of
R25 840 (2014: R4 851)
19. FINANCIAL INVESTMENTS
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Investments |
|
129,395 |
101,145 |
Closing
balance |
|
129,395 |
101,145 |
a) These financial assets consist of
investment portfolios which are managed by various financial
institutions in favour of rehabilitation. Of these
investments ZAR99,644 (2014:
ZAR75,238) is ceded to Lombard
Insurance Company Ltd for guarantees issued. The remainder of the
funds can only be applied to relevant rehabilitation
expenditure. These financial assets are classified at fair
value through profit and loss.
The fair value of these financial instruments has been estimated
by the financial institutions using a variety of valuation
techniques. These financial instruments are classified as a level 2
in the fair value hierarchy as their fair values have been
estimated using inputs other than quoted prices that are observable
for the assets, either directly or indirectly.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
20. PROPERTY, PLANT & EQUIPMENT
|
Consolidated |
|
|
|
|
|
Cost |
Accumulated depreciation & impairment |
Net book
value |
30 June 2015 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
Mineral rights and
reserves (a) |
157,251 |
(144,034) |
13,217 |
Land and
buildings |
66,083 |
(56,304) |
9,779 |
Decommissioning
asset |
54,563 |
(27,602) |
26,961 |
Plant &
equipment |
1,700,168 |
(1,507,349) |
192,819 |
Leased plant &
equipment |
117,639 |
(102,559) |
15,080 |
Mine development |
448,651 |
(345,828) |
102,823 |
Computer
equipment |
25,784 |
(23,413) |
2,371 |
Furniture &
fittings |
4,510 |
(4,391) |
119 |
Capital work in
progress (b) |
40,478 |
(36,652) |
3,826 |
Vehicles |
5,836 |
(5,741) |
95 |
Leased vehicles |
11,579 |
(11,313) |
266 |
Total |
2,632,542 |
(2,265,186) |
367,356 |
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
Carrying
value
at beginning
of year |
Disposals |
Adjustments(c) |
Additions |
Impairment (d) |
Depreciation |
Carrying
value
at end
of year |
30 June 2015 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
Mineral rights and
reserves (a) |
147,846 |
- |
- |
- |
(134,070) |
(559) |
13,217 |
Land and
buildings |
55,919 |
- |
- |
3,357 |
(47,939) |
(1,558) |
9,779 |
Decommissioning
asset |
47,540 |
- |
375 |
- |
(19,012) |
(1,942) |
26,961 |
Plant &
equipment |
1,290,759 |
(3,920) |
- |
39,234 |
(1,063,507) |
(69,747) |
192,819 |
Leased plant &
equipment |
82,942 |
- |
- |
15,679 |
(79,406) |
(4,135) |
15,080 |
Mine development |
339,937 |
(1,748) |
- |
35,091 |
(253,308) |
(17,148) |
102,824 |
Computer
equipment |
14,799 |
- |
- |
4,580 |
(12,885) |
(4,123) |
2,371 |
Furniture &
fittings |
707 |
- |
- |
22 |
(466) |
(144) |
119 |
Capital work in
progress (b) |
62,325 |
(22,408) |
- |
561 |
(36,652) |
- |
3,826 |
Vehicles |
768 |
(14) |
- |
211 |
(528) |
(343) |
94 |
Leased vehicles |
1,593 |
- |
- |
929 |
(1,476) |
(780) |
266 |
Total |
2,045,135 |
(28,090) |
375 |
99,664 |
(1,649,249) |
(100,479) |
367,356 |
|
|
|
|
|
|
|
|
|
a) Mineral rights and reserves of ZAR61 million relating to the Sky Chrome deposit
is held in Purity Metals Holdings Limited (“Purity”), a wholly
owned subsidiary of the Group.
b) Capital work in progress relates to capital
costs incurred for the expansion of the Group’s associated
infrastructure.
c) The adjustment relates to
reallocation of capital work in progress to the various assets and
changes in estimates in relation to the decommissioning asset.
d) Impairment of
assets
The present low price environment and reduction in market
activity, has necessitated the re-assessment of the carrying value
of the assets of the Group. The future viability of the assets has
become uncertain given the current challenges faced by the Group.
Previously impairment was determined using value in use as the
valuation basis. In determining ‘value in use’, future cash flows
are based on estimates for which there is a high degree of
confidence of future production levels, future commodity prices and
future cash costs of production. Due to the Business Rescue
Process, IFMSA was placed under care and maintenance and as a
result of the uncertainties surrounding the timing of restarting
the operations and working capital requirements, the ‘value in use’
assessment was not used.
On the basis of the above it has been concluded that the
carrying value of the assets be written down to the best estimate
of fair value less costs to sell. The fair value is determined as a
level 3 hierarchy as the final offer through the business rescue
process was used to determine the impairment. The Company had
initiated negotiations with an interested party for the sale of
IFMSA before year end but before any transaction could be
concluded, IFMSA became financially distressed and on 26 August 2015 entered into Business Rescue, and
its operations were placed on care and maintenance.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
20. PROPERTY, PLANT & EQUIPMENT (continued)
(d) Impairment of assets (continued)
The outcome of the discussions were used to determine the best
estimate of fair value less cost to sell as at 30 June 2015.This
resulted in an impairment of ZAR1,547,057 on the tangible and intangible
assets of IFMSA (refer note 21) and ZAR67,378 on the assets of International Ferro
Metals Limited. The remainder of the impairment mainly relates to
specific impairment on the Cogen plant ZAR13,773 due to the failure of the engines,
Furnace winter shutdown of ZAR1,943
due to the items being replaced annually, Capital work in progress
items ZAR6,902 due to the project not
continuing. Bankable feasibility study and previously expansion
costs capitalised ZAR15,418 due to
the financial position of the Group and the unlikelihood for an
expansion to proceed, Rooderand mining development costs
ZAR1,539 due to cessation of mining
operations, and the Madibeng water project ZAR1,927 due to the project not going ahead.
Property, mineral rights and plant and equipment of IFMSA have
been pledged as security for the working capital facility provided
by the Bank of China. (Refer to
note 25 for further details). The carrying value of this
Property, mineral rights and plant and equipment at
30 June 2015 is ZAR0.3
billion (2014: ZAR1.89
billion).
|
Consolidated |
|
|
|
|
|
Cost |
Accumulated depreciation |
Net book
value |
30 June 2014 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
Mineral rights and
reserves (a) |
157,287 |
(9,441) |
147,846 |
Land and
buildings |
62,725 |
(6,806) |
55,919 |
Decommissioning
asset |
54,188 |
(6,648) |
47,540 |
Plant &
equipment |
1,679,600 |
(388,841) |
1,290,759 |
Leased plant &
equipment |
101,960 |
(19,018) |
82,942 |
Mine development |
415,309 |
(75,372) |
339,937 |
Computer
equipment |
21,204 |
(6,405) |
14,799 |
Furniture &
fittings |
4,487 |
(3,780) |
707 |
Capital work in
progress (b) |
62,325 |
- |
62,325 |
Vehicles |
10,694 |
(9,926) |
768 |
Leased vehicles |
10,650 |
(9,057) |
1,593 |
Total |
2,580,429 |
(535,294) |
2,045,135 |
|
Consolidated |
|
|
|
|
|
|
|
|
Carrying
value
at beginning
of year |
Disposals |
Adjustments(c) |
Additions |
Depreciation and impairment |
Carrying
value
at end
of year |
30 June 2014 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
Mineral rights and
reserves (a) |
147,975 |
- |
- |
- |
(129) |
147,846 |
Land and
buildings |
56,527 |
- |
600 |
280 |
(1,488) |
55,919 |
Decommissioning
asset |
48,552 |
- |
848 |
- |
(1,860) |
47,540 |
Plant &
equipment |
1,362,367 |
(6,226) |
1,248 |
5,788 |
(72,418) |
1,290,759 |
Leased plant &
equipment |
74,042 |
- |
10,513 |
- |
(1,613) |
82,942 |
Mine development |
355,833 |
- |
686 |
- |
(16,582) |
339,937 |
Computer
equipment |
3,373 |
(135) |
13,434 |
51 |
(1,924) |
14,799 |
Furniture &
fittings |
861 |
- |
- |
43 |
(197) |
707 |
Capital work in
progress (b) |
59,933 |
- |
(26,481) |
28,873 |
- |
62,325 |
Vehicles |
1,523 |
(218) |
- |
- |
(537) |
768 |
Leased vehicles |
2,296 |
- |
- |
- |
(703) |
1,593 |
Total |
2,113,282 |
(6,579) |
848 |
35,035 |
(97,451) |
2,045,135 |
Refer to previous page for notes (a), (b) and (c).
NOTES TO THE FINANCIAL REPORT (CONTINUED)
21. INTANGIBLE ASSETS
|
|
Consolidated |
|
|
|
|
|
|
|
Licence
fees a |
UG2 asset b |
Total |
|
|
ZAR’000 |
ZAR’000 |
ZAR’000 |
|
30 June
2014 |
|
|
|
|
At 1 July 2013 net of
accumulated amortisation |
8,618 |
136,916 |
145,534 |
|
Amortisation |
(362) |
(8,473) |
(8,835) |
|
At 30 June 2014 net
of accumulated amortisation |
8,256 |
128,443 |
136,699 |
|
Cost (gross carrying
amount) |
10,837 |
161,000 |
171,837 |
|
Accumulated
amortisation |
(2,581) |
(32,557) |
(35,138) |
|
Net carrying
amount |
8,256 |
128,443 |
136,699 |
|
30 June
2015 |
|
|
|
|
At 1 July 2014 net of
accumulated amortisation |
8,256 |
128,443 |
136,699 |
|
Amortisation |
(361) |
(21,138) |
(21,499) |
|
Impairment (refer note
20) |
(6,690) |
- |
(6,690) |
|
At 30 June 2015 net
of accumulated amortisation |
1,205 |
107,305 |
108,510 |
|
Cost (gross carrying
amount) |
10,837 |
161,000 |
171,837 |
|
Accumulated
amortisation |
(2,942) |
(53,695) |
(56,637) |
|
Accumulated
impairment |
(6,690) |
- |
(6,690) |
|
Net carrying
amount |
1,205 |
107,305 |
108,510 |
|
|
|
|
|
|
|
|
|
a) Licence fees relate to the fees paid for
the use of patented technology and is amortised over the life of
plant. An impairment of ZAR6,690 was
recognised on the license fees.
b) The UG2 Chrome Retreatment Plant (“CRP”) at
RPM's Waterval operations in Rustenburg started producing the
contractual 15,000 tonnes per month in April 2012. The
original supply agreement entitled IFM to receive 15,000 tonnes per
month of chrome concentrate until November
2020. This intangible is amortised to inventory with the
quantities received.
During January 2016 the company
entered into a settlement agreement with Rustenburg Platinum Mines
Limited ("RPM") regarding its interests under the chromite supply
agreement under which RPM is obliged to supply UG2 chrome ore to
IFMSA.
The terms of the settlement are that RPM will supply IFMSA with
10,000 tonnes of UG2 per month for calendar year 2016 at no cost
and 7,500 tonnes per month from January
2017 to November 2020 at a
cost of ZAR170 per tonne. The backlog
of approximately 57,000 tonnes at the end of December 2015 will be supplied at a rate of
10,000 tonnes per month from January
2016, also at no cost. The original contract provided for
RPM to supply 15,000 tonnes per month until November 2020 at no cost.
22. OTHER NON-CURRENT ASSETS
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Restricted cash
(a) |
|
1,232 |
5,631 |
Deposits (b) |
|
4,528 |
4,235 |
Closing
balance |
|
5,760 |
9,866 |
a) Restricted cash represents cash set aside
for bank guarantees provided by Standard Bank to the Department of
Minerals Resources for environmental rehabilitation and cash set
aside for foreign exchange contracts with the Bank of China.
b) Deposits mainly relates to funds deposited
into a trust account. The trust account was set up to provide funds
for possible damages to houses in the proximity of the Sky Chrome
mining operations.
23. TRADE AND OTHER PAYABLES
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Sundry creditors and
accruals |
|
20,247 |
22,327 |
Trade creditors |
|
198,261 |
253,041 |
Short term portion of
finance lease liability (a) |
|
10,371 |
6,085 |
Pre payments received
(b) |
|
130,276 |
12,992 |
Closing
balance |
|
359,155 |
294,445 |
a) Refer to note 35.
b) This represents advance debtor payments
mainly received from Noble Resources International SA (Pty) Limited
during May 2015. The forward sale was for 15,000t FeCr, to be
delivered at 3,000 tonnes per month for the 5 months to October
2015. As at 30 June 2015
12,000t FeCr remained outstanding for delivery.
Due to the short term nature of these payables, their carrying
value is assumed to approximate their fair value.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
24. PROVISIONS
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Current
provisions |
|
|
|
Employee entitlements
(a) |
|
34,960 |
36,994 |
Share based payment
liability (c) |
|
16 |
396 |
Taxation |
|
222 |
222 |
Total current
provisions |
|
35,198 |
37,612 |
|
|
|
|
Employee
entitlements |
|
|
|
Opening balance |
|
36,994 |
34,126 |
Provision recognised
during the year |
|
43,446 |
44,761 |
Provision utilised
during the year |
|
(45,480) |
(41,893) |
Closing balance |
|
34,960 |
36,994 |
|
|
|
|
Phantom
options |
|
|
|
Opening balance |
|
396 |
586 |
Cash settled share
based payment expense |
|
(380) |
(203) |
Effect of foreign
exchange |
|
- |
13 |
Closing balance |
|
16 |
396 |
|
|
|
|
Income tax |
|
|
|
Opening balance |
|
222 |
655 |
Provision utilised
during the year |
|
- |
(433) |
Income tax paid during
the year |
|
- |
- |
Closing balance |
|
222 |
222 |
|
|
|
|
Non-current
provisions |
|
|
|
Employee entitlements
(a) |
|
9,801 |
6,736 |
Decommissioning and
restoration (b) |
|
101,010 |
96,327 |
Total non-current
provisions |
|
110,811 |
103,063 |
|
|
|
|
Employee
entitlements |
|
|
|
Opening balance |
|
6,736 |
5,230 |
Provision recognised
during the year |
|
8,676 |
6,736 |
Provision utilised
during the year |
|
(5,611) |
(5,230) |
Closing balance |
|
9,801 |
6,736 |
|
|
|
|
Decommissioning and
restoration |
|
|
|
Opening balance |
|
96,327 |
89,069 |
Additional provision
recognised during the year: |
|
|
|
-Recorded
in property, plant and equipment |
|
375 |
848 |
-Unwinding of discount |
|
7,801 |
7,211 |
-Adjustment in restoration provision |
|
(3,493) |
(801) |
Closing balance |
|
101,010 |
96,327 |
|
|
|
|
a) The provision for employee entitlements
represents accrued annual leave liabilities and other employee
provisions. Resulting from the business rescue process all current
and non-current employee entitlements were paid in the 2016
financial year. .
b) The provision for decommissioning and
restoration represents management’s estimate of the restoration and
exit costs associated with the integrated mining and ferrochrome
smelting facility at Buffelsfontein and mining operations at Sky
Chrome. It is expected that these costs will be incurred at
the end of the operations/mine life. Due to the long-term nature of
the liability the greatest uncertainty in estimating the provision
is the costs that will be ultimately incurred. The provision
has been calculated using a pre-tax discount rate of 8% (2014:
8%).
c) The Phantom Share Option scheme
options are treated as “cash settled” share based payments in
accordance with the accounting policy described in note 2(q). These
were cancelled subsequent to year end.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
25. INTEREST BEARING LOANS AND BORROWINGS
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Current interest
bearing loans and borrowings |
|
|
|
Bank debt (a) |
|
500,000 |
500,000 |
Debt Establishment
costs and accrued interest (a) |
|
3,811 |
(643) |
Other loans (c) |
|
7,072 |
7,072 |
Closing
balance |
|
510,883 |
506,429 |
|
|
|
|
Non-current
interest bearing loans and borrowings |
|
|
|
Long term portion of
finance lease liability (b) |
|
63,400 |
60,725 |
Closing
balance |
|
63,400 |
60,725 |
a) Working capital facility
The ZAR500 million Working capital
facility expired on 16 September 2015
and was rolled forward for 3 months to 10
December 2015 to enable the Business Rescue Practitioner to
publish the Business Rescue Plan. On 24
March 2016 the amended business rescue plan was approved
unanimously by creditors including the Bank of China. While the facility is repayable on
demand it is subject to the provisions of the business rescue
process which imposes a moratorium on creditor claims and
enforcement. The facility interest is charged at JIBAR rate plus
3.85%. Since year end an amount of ZAR30 million capital was repaid on the facility
resulting in an outstanding balance of ZAR470 million. The proceeds of the first tranche
of the total consideration to be received from Samancor resulted in
a payment of ZAR232 million to the
Bank of China. The proceeds of the
remaining two tranches, which amounts to ZAR210 million, will be distributed to the Bank
of China. These payments along
with any residual funds available in IFMSA, are expected to result
in settlement of the facility. The entire statement of financial
position of IFMSA is pledged as collateral for the loan
facility. Bank of China has
the option to cancel the loan facility and call upon any balance
outstanding in the event of a material deterioration in the
financial position of IFMSA.
b) Finance leases
The weighted average effective interest rate on finance leases
is 11%. The current portion of this is reflected in note 23. The
lease liabilities were settled in terms of the amended business
rescue in September 2016.
c) Other loans
The loan constitutes the 20% community participation of funding
provided to Sky Chrome by the group. The loan is interest free and
payable on demand before earning distributions are made.
As at 30 June 2015, the Group had
no undrawn loan facilities (2014: nil), excluding debtors
discounting facilities.
The carrying values of each class of interest bearing loans and
borrowings approximates their fair value.
26. CONTRIBUTED EQUITY
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Movement in
ordinary shares on issue |
|
|
|
Opening balance |
|
3,088,240 |
3,088,240 |
Issue of ordinary
shares |
|
- |
- |
Closing
balance |
|
3,088,240 |
3,088,240 |
|
|
Shares |
Shares |
|
|
|
|
Opening balance |
|
554,008,047 |
554,008,047 |
Issue of ordinary
shares |
|
- |
- |
Closing
balance |
|
554,008,047 |
554,008,047 |
No ordinary shares were issued during the years ended
30 June 2015 and 30 June 2014.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
26. CONTRIBUTED EQUITY (continued)
Ordinary shares
Ordinary shares have the right to receive dividends as declared
and, in the event of the winding up of the Company, to participate
in the proceeds from the sale of all surplus assets in proportion
to the number of and amounts paid up on shares held.
Ordinary shares entitle their holder to one vote, either in
person or by proxy, at a meeting of the Company.
Options
The Group has a share option scheme under which options to
subscribe for the Company’s shares have been granted to certain
executives. See note 31 for further details.
JISCO Anti-Dilution Rights
JISCO has certain non-dilution rights under the Subscription
Agreement, which apply if an Option is exercised, to require JISCO
to be offered and issued Ordinary Shares at the same exercise price
at which such Options are exercised to enable JISCO to maintain its
guaranteed holding of 26.1% of the issued Ordinary Shares of the
Company. These non-dilution rights are accounted for as a
derivative liability. Since JISCO’s shareholding is above 26.1%,
under the Subscription Agreement, IFM is not obliged to offer JISCO
shares in terms of the anti-dilution clause, unless the issue would
dilute JISCO’s ownership below 26.1% and therefore no derivative
liability has been recognised at 30 June
2015 (2014: nil).
Capital Management
When managing capital, management’s objective is to ensure the
Group continues as a going concern as well as to maintain optimal
returns to shareholders and benefits for other stakeholders.
Management also aims to maintain a capital structure that ensures
the lowest cost of capital available to the Group.
Capital is defined as total shareholders’ equity which
represented ZAR51 million at
30 June 2015 (2014: ZAR2.3 billion).
The Board of Directors and Management regularly review the
group’s capital structure using a detailed cash flow model.
They assess the adequacy of the capital structure against the major
variables impacting the Group’s profitability.
As the market is constantly changing, management may change the
amount of dividends to be paid to shareholders, return capital to
shareholders or issue new shares to reduce debt. Should a
strategic acquisition be assessed, management may issue further
shares on the market.
27. SHARE BASED PAYMENT RESERVE
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Opening balance |
|
21,370 |
19,179 |
Share based payment
expense |
|
2,240 |
2,403 |
Effect of foreign
exchange |
|
(296) |
(212) |
Closing
balance |
|
23,314 |
21,370 |
Share based payment expense relates to options and performance
rights issued to Mr Jordaan and the performance share scheme
implemented the prior year. See note 31 for further
details.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
28. ACCUMULATED LOSSES
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Opening balance |
|
(842,892) |
(886,722) |
After tax
(loss)/profit attributable to the equity holders of the parent
during the year |
|
(2,205,921) |
43,830 |
Share buy-back –
subsidiary (a) |
|
(6,071) |
- |
Closing
balance |
|
(3,054,884) |
(842,892) |
a) During the year International Ferro Metals
(SA) Pty Ltd (IFMSA) repurchased the 0.625% shareholding that
Global Eagle Minerals and Beneficiation Pty Ltd held in IFMSA.
These shares were cancelled.
29. NON-DISTRIBUTABLE RESERVE
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Opening balance |
|
(6,044) |
(6,044) |
Closing
balance |
|
(6,044) |
(6,044) |
The non-distributable reserve relates to the transaction that
took place to reduce the non-controlling interest shareholding.
30. NON-CONTROLLING INTEREST
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Opening balance |
|
(4,271) |
(3,606) |
Loss attributable to
the non-controlling interest during the year |
|
(3,534) |
(665) |
Share buy-back –
subsidiary (see note 28) |
|
1,821 |
- |
Closing
balance |
|
(5,984) |
(4,271) |
31. SHARE BASED PAYMENT PLANS
Phantom Share Option Plan
The Phantom Share Option Scheme was introduced on 15 November 2006 as a long term incentive
scheme. Options are offered to eligible Key Management
Personnel and employees subject to the satisfaction of certain
vesting and exercise conditions. A cash amount is determined by
reference to the excess of the market price of an ordinary share in
the Company over the exercise price at the time the options are
exercised. The options, in most cases, vest in equal tranches
over three years subject to the recipients’ continued employment by
the Company. The options may also vest immediately.
Vesting and exercise conditions are determined by the Board.
Executives and employees are able to exercise the share options for
up to five years from the grant of the options. Each tranche of
these options has a price cap of £1.00. The Phantom Share
Option Scheme options are treated as “cash settled” share based
payments in accordance with the accounting policy described in note
2(q).
NOTES TO THE FINANCIAL REPORT (CONTINUED)
31. SHARE BASED PAYMENTS PLANS (continued)
The following tables list the inputs to the Binomial model
taking into account the terms and conditions upon which the options
were granted.
|
|
2015 |
2014 |
Expected volatility
(a) (%) |
|
68.50% |
67.71% |
Risk-free interest
rate range (%) |
|
0.57%-2.39% |
0.57%-2.39% |
Option exercise price
(GBP) |
|
£0.14 -
£0.29 |
£0.14 -
£0.57 |
Expected dividend
yield range |
|
0% |
0% -
16.17% |
Option cap |
|
£1.00 |
£1.00 |
Exercise multiple |
|
2 |
2 |
a) The expected volatility reflects the
assumption that the historical volatility is indicative of future
trends, which may also not necessarily be the actual outcome. Share
price volatility is re-assessed at each reporting period based on
historical share prices. The current volatility is based on
actual volatility since the listing of the company in September 2005.
The estimated fair value of each phantom option tranche is
estimated as at the financial reporting date and is detailed in the
table below:
Exercise price |
No of options |
Fair value at
reporting date
Tranche 1 |
Fair value at
reporting date
Tranche 2 |
Fair value at
reporting date
Tranche 3 |
£0.14 |
621,000 |
£0.0008 |
£0.0008 |
£0.0008 |
£0.18 |
32,000 |
£0.0000 |
£0.0000 |
£0.3463 |
£0.19 |
860,000 |
£0.0003 |
£0.0003 |
£0.0003 |
£0.20 |
403,000 |
£0.0001 |
£0.0001 |
£0.0001 |
£0.22 |
287,000 |
£0.0000 |
£0.0000 |
£0.0000 |
£0.29 |
149,000 |
£0.0000 |
£0.0000 |
£0.0000 |
Total |
2,352,000 |
|
|
|
The total number of phantom options granted, forfeited or
cancelled and exercised during the relevant periods are as
follows:
|
30 June 2015 |
30 June 2014 |
Phantom Share
Options |
Number
of Options |
Weighted
average exercise price |
Number
of Options |
Weighted
average exercise price |
Opening balance at
beginning of year |
2,987,000 |
£0.12 |
9,985,931 |
£0.15 |
Granted during the
period |
- |
- |
- |
- |
Forfeited/cancelled
during the year |
- |
- |
(688,000) |
£0.20 |
Expired during the
year |
(635,000) |
£0.39 |
(6,310,931) |
£0.16 |
Exercised during the
period |
- |
- |
- |
- |
Closing
balance |
2,352,000 |
£0.04 |
2,987,000 |
£0.12 |
At 30 June 2015 the total number
of options outstanding was 2,352,000 with a fair value of
ZAR16,072 (2014: ZAR395,743). Refer to note 24.
The weighted average share price for the year ended 30 June 2015 is £0.05 (2014: £0.11).
The weighted average remaining contractual life of the above
outstanding options is 1.34 years (2014: 1.6 years).
All these share options were cancelled subsequent to year
end.
Performance Rights Plan
The Performance Right Plan is an incentive aimed at creating a
stronger link between employee and executive officer performance
and reward and increasing shareholder value by enabling
participants to have a greater involvement with, and share in the
future growth and profitability of, the Company. The
Performance Right Plan Options are treated as “equity settled”
share based payments in accordance with the accounting policy
described in note 2(q).
NOTES TO THE FINANCIAL REPORT (CONTINUED)
31. SHARE BASED PAYMENTS PLANS (continued)
i. On 23 November
2011, at the Company’s Annual General Meeting, Mr C Jordaan
was granted a total of 4 million options (rights) to subscribe
for fully paid ordinary shares in the capital of the Company. The
options will vest in three tranches on 31
July 2012, 31 July 2013 and
31 July 2014 subject to
Mr Jordaan being employed on each of these dates. These
rights have been issued under the Company’s Performance Rights Plan
and on the terms and conditions of the Performance Rights Plan
Rules as described below:
· Tranche 1: 1,333,334
Performance Rights vesting on 31 July
2012, subject to employment with the Company until vesting
date, with an exercise price of £0.17 and having an expiry date of
31 July 2015.
· Tranche 2: 1,333,333
Performance Rights vesting on 31 July
2013, subject to employment with the Company until vesting
date, with an exercise price being the volume weighted average
price of the Company’s shares traded on the main market of London
Stock Exchange plc (“LSE”) over the last 30 days prior to
30 June 2012 and having an expiry
date of 31 July 2016.
· Tranche 3: 1,333,333 Performance
Rights vesting on 31 July 2014,
subject to employment with the Company until vesting date, with an
exercise price being the volume weighted average price of the
Company’s shares traded on the main market of London Stock Exchange
plc (“LSE”) over the last 30 days prior to 30 June 2013 and having an expiry date of
31 July 2017.
The following tables list the inputs to the Binomial model
taking into account the terms and conditions upon which the options
were granted at grant date.
|
|
|
|
Expected volatility
(b) (%) |
|
|
71.95% |
Risk-free interest
rate range (%) |
|
|
0.43%-1.51% |
Option exercise price
(GBP) |
|
|
£0.1700
- £0.1353 |
Expected dividend
yield range |
|
|
0% -
14.5% |
Exercise multiple |
|
|
2 |
a) The expected volatility reflects the
assumption that the historical volatility is indicative of future
trends, which may also not necessarily be the actual outcome.
The current volatility is based on actual volatility since the
listing of the company in September
2005.
The fair value of the outstanding share options is estimated as
at the grant date using a Binomial model taking into account the
terms and conditions upon which the options were granted.
The estimated fair value of the share options issued at grant
date is detailed in the table below:
Description of Option
Holder |
Exercise price |
No of options |
Fair value at grant
date
Tranche 1 |
Fair value at grant
date
Tranche 2 |
Fair value at grant
date
Tranche 3 |
C Jordaan |
£0.1700 |
1,333,334 |
£0.10 |
- |
- |
C Jordaan |
£0.1353 |
1,333,333 |
- |
£0.12 |
- |
C Jordaan |
£0.0929 |
1,333,333 |
- |
- |
£0.13 |
|
|
4,000,000 |
|
|
|
The weighted average share price for the year ended 30 June 2015 is £0.05 (2014: £0.11).
The weighted average remaining contractual life of the above
outstanding options is 1.08 years (2014: 2.08 years).
All these options were cancelled subsequent to year end.
ii. The Company also issued Mr Jordaan rights to receive the
equivalent of up to ZAR6 million
worth of fully paid ordinary shares (to a maximum of 1.1 million
shares per tranche), calculated on the basis of the volume weighted
average sale price of the shares of the Company on the LSE on the
five trading days immediately prior to the relevant performance
condition being satisfied. If the relevant performance
condition is satisfied, then the relevant number of shares will
vest and those shares will then be issued upon such performance
rights being exercised. The performance conditions are as
follows:
Transaction 1: ZAR2 million
equivalent of shares, up to a maximum of 1,100,000 shares,
dependent upon continuing employment and the Company achieving
nameplate ferrochrome production of 66,250 tonnes for one calendar
quarter.
This right was cancelled subsequent to year end.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
31. SHARE BASED PAYMENTS PLANS (continued)
Performance Share Scheme
On 25 June 2013, a Performance
Share Scheme (“PSS”) was introduced and implemented to replace the
existing Phantom Option Scheme, where upon fulfilment of certain
performance conditions, employees are issued with fully paid-up
physical shares in the Company. The PSS was implemented after
Shareholder’s approval was obtained at the company’s AGM on 21
November 2012.
Awards of performance shares will be made annually and will have
a three-year vesting cycle. The performance period for each grant
will be the three year period following grant date and coinciding
with the Company’s financial year-end, subject to the recipients’
continued employment by the Company on both grant and ultimate
vesting date. This performance period will apply to all grants,
except for grant 1 during financial year 2013 for which the
performance period will be 2 years and 9 months. The PSS is split
into three equal tranches each with its own performance vesting
criteria being (refer table below for vesting conditions):
· Absolute Total Shareholder
Return (A-TSR);
· Relative Total Shareholder
Return(R-TSR); and
· Return On Capital Employed
(ROCE).
Recipients are awarded the fully paid up shares immediately once
it has been determined that all performance conditions were
satisfied and no exercise conditions will apply. The
Performance Shares are treated as “equity settled” share based
payments in accordance with the accounting policy described in note
2(q).
The following table lists the inputs to the Binomial model
taking into account the terms and conditions upon which the
performance shares were granted as well as the performance
conditions that include a market condition:
NOTES TO THE FINANCIAL REPORT (CONTINUED)
31. SHARE BASED PAYMENTS PLANS (continued)
|
|
A-TSR |
R-TSR |
ROCE |
|
|
|
|
|
Grant 1 |
|
|
|
|
Measurement date |
|
25 June
2013 |
25 June
2013 |
25 June
2013 |
IFM share price |
|
£0.0875 |
£0.0875 |
£0.0875 |
Expected volatility
(a) (%) |
|
79.1% |
79.1% |
79.1% |
Risk-free interest
rate (%) |
|
1.1% |
1.1% |
1.1% |
Expected dividend
yield (%) |
|
0% |
0% |
0% |
Exercise multiple |
|
1 |
1 |
1 |
Performance period
(yrs) |
|
2.44 |
2.44 |
2.44 |
Index |
|
n/a |
FTSE350 |
n/a |
Index volatility
(%) |
|
n/a |
46.9% |
n/a |
0% vesting |
|
50% |
Index |
6% |
100% vesting |
|
100% |
Index
+35% |
13% |
Grant 2 |
|
|
|
|
Measurement date |
|
2
December 2013 |
2
December 2013 |
2
December 2013 |
IFM share price |
|
£0.1075 |
£0.1075 |
£0.1075 |
Expected volatility
(a) (%) |
|
57.0% |
57.0% |
57.0% |
Risk-free interest
rate (%) |
|
0.83% |
0.83% |
0.83% |
Expected dividend
yield (%) |
|
0% |
0% |
0% |
Exercise multiple |
|
1 |
1 |
1 |
Performance period
(yrs) |
|
3.00 |
3.00 |
3.00 |
Index |
|
n/a |
FTSE350 |
n/a |
Index volatility
(%) |
|
n/a |
31.1% |
n/a |
0% vesting |
|
50% |
Index |
6% |
100% vesting |
|
100% |
Index
+35% |
13% |
Grant 3 |
|
|
|
|
Measurement date |
|
4
December 2014 |
4
December 2014 |
4
December 2014 |
IFM share price |
|
£0.0662 |
£0.0662 |
£0.0662 |
Expected volatility
(a) (%) |
|
55.0% |
55.0% |
55.0% |
Risk-free interest
rate (%) |
|
1.11% |
1.11% |
1.11% |
Expected dividend
yield (%) |
|
0% |
0% |
0% |
Exercise multiple |
|
1 |
1 |
1 |
Performance period
(yrs) |
|
3.00 |
3.00 |
3.00 |
Index |
|
n/a |
FTSE350 |
n/a |
Index volatility
(%) |
|
n/a |
26.0% |
n/a |
0% vesting |
|
50% |
Index |
6%
ROCE |
100% vesting |
|
100% |
Index
+35% |
13%
ROCE |
Performance Share
Scheme |
Grant
1 |
Grant
2 |
Grant
3 |
Total |
|
|
|
|
|
Balance at 30 June 2013 |
9,359,529 |
- |
- |
9,359,529 |
Granted during the period |
- |
11,080,119 |
- |
11,080,119 |
Forfeited/cancelled during the
year |
- |
- |
- |
- |
Vested /exercised during the
period |
- |
- |
- |
- |
Balance at 30 June 2014 |
9,359,529 |
11,080,119 |
- |
20,439,648 |
Granted during the
period |
- |
- |
11,080,116 |
11,080,116 |
Forfeited/cancelled during the
year |
- |
- |
- |
- |
Vested /exercised during the
period |
- |
- |
- |
- |
Balance at 30 June 2015 |
9,359,529 |
11,080,119 |
11,080,116 |
31,519,764 |
Number of performance shares
expected to vest |
5,291,012 |
6,294,859 |
7,018,591 |
18,604,462 |
Years remaining to vesting |
0.42 |
1.42 |
2.42 |
1.48 |
Weighted average value of
performance shares (GBP pence) |
1.43p |
2.70p |
1.18p |
1.77p |
NOTES TO THE FINANCIAL REPORT (CONTINUED)
32. PARENT ENTITY INFORMATION
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Current assets |
|
9,441 |
50,464 |
Total assets |
|
10,491 |
2,258,196 |
Current
liabilities |
|
(2,391) |
(1,793) |
Total liabilities |
|
(2,391) |
(1,793) |
Issued capital |
|
3,088,240 |
3,088,240 |
Accumulated
losses |
|
(3,103,454) |
(853,206) |
Share based payment
reserve |
|
23,314 |
21,369 |
Total shareholders’
equity |
|
8,100 |
2,256,403 |
|
|
|
|
(Loss)/profit of the
parent entity |
|
(2,213,705) |
43,166 |
Total comprehensive
income of the parent entity |
|
(2,213,705) |
43,166 |
|
|
|
|
Details of any
guarantees entered into by the parent entity in relation to the
debts of its subsidiaries (a) |
|
500,000 |
500,000 |
Details of other
financial assets (b) |
|
- |
2,199,594 |
a) The ZAR500
million Working capital facility expired on 16 September 2015 and was rolled forward for 3
months to 10 December 2015 to enable
the Business Rescue Practitioner to publish the Business Rescue
Plan. On 24 March 2016 the amended
business rescue plan was approved unanimously by creditors
including the Bank of China. While
the facility is repayable on demand it is subject to the provisions
of the business rescue process which imposes a moratorium on
creditor claims and enforcement. The facility interest is charged
at JIBAR rate plus 3.85%. Since year end an amount of
ZAR30 million capital was repaid on
the facility resulting in an outstanding balance of ZAR470 million. The proceeds of the first tranche
of the total consideration to be received from Samancor resulted in
a payment of ZAR232 million to the
Bank of China. The proceeds of the
remaining two tranches, which amounts to ZAR210 million, will be distributed to the Bank
of China. These payments along
with any residual funds available in IFMSA, are expected to result
in settlement of the facility. The entire statement of financial
position of IFMSA is pledged as collateral for the loan
facility. Bank of China has
the option to cancel the loan facility and call upon any balance
outstanding in the event of a material deterioration in the
financial position of IFMSA.
b) The following table represents details of
other financial assets:
|
|
2015 |
2014 |
Information relating
to International Ferro Metals Limited: |
|
ZAR’000 |
ZAR’000 |
Investment in
subsidiaries at cost |
|
2,955,762 |
3,040,662 |
Provision for
diminution and impairment (c) |
|
(2,955,762) |
(841,068) |
Net investment in
subsidiaries |
|
- |
2,199,594 |
c) This provision has arisen as a result
of losses incurred by subsidiary companies and the impairment of
assets amounting to ZAR1.6 billion
during the current financial year.
The parent entity has no contingent liabilities, nor does it
have any contractual commitments for the acquisition of property,
plant or equipment.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
33. FINANCIAL RISK MANAGEMENT AND OBJECTIVES
Exposure to foreign currency risk, interest rate risk, commodity
price risk, credit risk, liquidity risk and share price risk arises
in the normal course of the Group’s business. Derivative
financial instruments may be used to hedge exposure to fluctuations
in foreign exchange rates, interest rates, and commodity
prices. During the period under review the Group entered into
certain forward exchange contracts (“FEC”) in order to hedge
against fluctuating exchange rates.
The following table displays the financial instruments held at
the end of the year:
Financial assets and liabilities
(including leases) by categories
|
|
Consolidated |
|
|
|
|
|
|
|
At 30 June 2015 |
Loans and
receivables |
Held to maturity
investments |
At fair value through
profit & loss |
Financial liabilities
measured at amortised cost |
Other financial assets
and liabilities |
Total |
|
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR ‘000 |
ZAR’000 |
Recognised Financial
assets |
|
|
|
|
|
|
Cash & cash equivalents (note
15) |
25,550 |
- |
- |
- |
24,306 |
49,856 |
Trade and other receivables (note
16) |
205,638 |
- |
- |
- |
- |
205,638 |
Deposits (note 22) |
4,528 |
- |
- |
- |
- |
4,528 |
Restricted cash (note 22) |
- |
1,232 |
- |
- |
- |
1,232 |
Other financial investments (note
19) |
- |
- |
129,3951 |
- |
- |
129,395 |
Total recognised financial
assets |
235,716 |
1,232 |
129,395 |
- |
24,306 |
390,649 |
Recognised financial
liabilities |
|
|
|
|
|
|
Trade and other payables (note
23) |
- |
- |
- |
(359,155) |
- |
(359,155) |
Interest bearing liabilities (note
25) |
- |
- |
- |
(574,283) |
- |
(574,283) |
Total recognised financial
liabilities |
- |
- |
- |
(933,438) |
- |
(933,438) |
Unrecognised Financial
liabilities |
|
|
|
|
|
|
Un-drawn loan facilities (note
25) |
- |
- |
- |
- |
- |
- |
Total unrecognised financial
liabilities |
- |
- |
- |
- |
- |
- |
¹ These financial assets consist of investment portfolios which
are managed by various financial institutions. The fair value of
these financial instruments has been estimated by the financial
institutions using a variety of valuation techniques. These
financial instruments are classified as a level 2 in the fair value
hierarchy as their fair values have been estimated using inputs
other than quoted prices that are observable for the assets, either
directly or indirectly.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
33. FINANCIAL RISK MANAGEMENT AND OBJECTIVES
(continued)
Financial assets and liabilities
(including leases) by categories
|
|
Consolidated |
|
|
|
|
|
|
|
At 30 June 2014 |
Loans and
receivables |
Held to maturity
investments |
At fair value through
profit & loss |
Financial liabilities
measured at amortised cost |
Other financial assets
and liabilities |
Total |
|
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR ‘000 |
ZAR’000 |
Recognised financial
assets |
|
|
|
|
|
|
Cash & Cash equivalents (note
15) |
143,813 |
- |
- |
- |
18,462 |
162,275 |
Trade and other receivables (note
16) |
169,386 |
- |
- |
- |
- |
169,386 |
Deposits (note 22) |
4,235 |
- |
- |
- |
- |
4,235 |
Restricted cash (note 22) |
- |
5,631 |
- |
- |
- |
5,631 |
Other financial investments (note
19) |
- |
- |
101,1451 |
- |
- |
101,145 |
Total recognised financial
assets |
317,434 |
5,631 |
101,145 |
- |
18,462 |
442,672 |
Recognised financial
liabilities |
|
|
|
|
|
|
Trade and other payables (note
23) |
- |
- |
- |
(294,445) |
- |
(294,445) |
Interest bearing liabilities (note
25) |
- |
- |
- |
(567,154) |
- |
(567,154) |
Total recognised financial
liabilities |
- |
- |
- |
(861,599) |
- |
(861,599) |
Unrecognised financial
liabilities |
|
|
|
|
|
|
Un-drawn loan facilities (note
25) |
- |
- |
- |
- |
- |
- |
Total unrecognised financial
liabilities |
- |
- |
- |
- |
- |
- |
¹ These financial assets consist of investment portfolios which
are managed by various financial institutions. The fair value of
these financial instruments has been estimated by the financial
institutions using a variety of valuation techniques. These
financial instruments are classified as a level 2 in the fair value
hierarchy as their fair values have been estimated using inputs
other than quoted prices that are observable for the assets, either
directly or indirectly.
For all feasibility assessments including expansion planning,
raising of debt funding, evaluation of acquisition opportunities
and corporate strategy, the Group uses various methods to measure
the types of risk to which it is exposed. These methods include
cash flow forecasting, sensitivity and breakeven analysis.
The Group performs an ageing analysis for credit risk.
Treasury risk management is carried out by a central treasury
function under policies approved by the Board of Directors. The
Board provides written principles for overall risk management, as
well as policies covering specific areas, such as foreign exchange
risk, interest rate risk and credit risk, use of derivative
financial instruments and non-derivative financial instruments, and
investment of excess liquidity.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
33. FINANCIAL RISK MANAGEMENT AND OBJECTIVES
(continued)
(i) Foreign currency
risk
Foreign currency risk arises from commercial transactions and
recognised assets and liabilities that are denominated in
currencies other than the functional currency of each entity in the
Group, which is South African Rand (ZAR). In order to hedge
this foreign currency risk, the Group may enter into forward
foreign exchange (“FEC”), foreign currency swaps and foreign
currency option contracts. During the year the Group entered into
FEC contracts in order to hedge against the fluctuations of the ZAR
against the USD. The details of the FEC’s are as follows:
June 2015
FEC Value – USD |
FEC RATE |
ZAR’000
Realised loss on FEC |
ZAR’000
FEC value at year end |
US$51,000,000 |
ZAR/USD11.18 |
(3,619) |
Nil |
June 2014
FEC Value – USD |
FEC RATE |
ZAR’000
Realised Profit on FEC |
ZAR’000
FEC value at year end |
US$77,000,000 |
ZAR/USD10.61 |
4,704 |
Nil |
The above forward exchange contracts were used to manage
transactional exposure and were not classified as cash flow, fair
value or net investment hedges and are entered into for periods
consistent with the currency transaction exposure. These
derivatives do not qualify for hedge accounting and therefore
profits and or losses resulting from the transactions were
accounted for in the income statement with other foreign exchange
movements.
The following table represent the financial assets and
liabilities denominated in foreign currencies:
|
Consolidated |
|
|
|
|
|
Foreign currency amount |
Amount in ZAR |
Rate of exchange |
|
2015 |
2014 |
2015 |
2014 |
2015 |
2014 |
|
‘000 |
‘000 |
ZAR'000 |
ZAR'000 |
|
|
Financial
assets |
|
|
|
|
|
|
Cash and cash
equivalents |
|
|
|
|
|
|
- US Dollar |
1,916 |
7,601 |
23,514 |
80,430 |
ZAR/US$12.27 |
ZAR/US$10.58 |
- Euro |
6 |
7 |
87 |
96 |
ZAR/€13.73 |
ZAR/€14.44 |
- UK pound
sterling |
62 |
78 |
1,203 |
1,409 |
ZAR/£19.30 |
ZAR/£18.02 |
- AU Dollar |
282 |
311 |
2,659 |
3,105 |
ZAR/A$9.41 |
ZAR/A$9.97 |
|
|
|
|
|
|
|
Trade and other
receivables |
|
|
|
|
|
|
- US Dollar |
12,175 |
12,865 |
149,407 |
136,124 |
ZAR/US$12.27 |
ZAR/US$10.58 |
- AU Dollar |
6 |
28 |
52 |
282 |
ZAR/A$9.41 |
ZAR/A$9.97 |
Financial
liabilities |
|
|
|
|
|
|
Trade and other
payables |
|
|
|
|
|
|
- UK pound
sterling |
18 |
21 |
339 |
386 |
ZAR/£19.30 |
ZAR/£18.02 |
- AU Dollar |
117 |
42 |
1,098 |
424 |
ZAR/A$9.41 |
ZAR/A$9.97 |
The Group had no foreign currency borrowings at year end (2014:
nil).
The following table demonstrates the estimated sensitivity to a
10% increase and decrease in the different exchange rates the Group
is exposed to, with all other variables held constant, the
estimated impact on post tax profit would be as shown in the
following table. Equity is not directly affected by changes
in currency rates. The flow through effect of the post-tax effect
will be the same for equity.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
33. FINANCIAL RISK MANAGEMENT AND OBJECTIVES
(continued)
(i) Foreign currency
risk
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
Pre-Tax Profit
Higher/(lower) |
|
ZAR’000 |
ZAR’000 |
ZAR/USD +10% |
|
17,292 |
21,653 |
ZAR/USD - 10% |
|
(17,292) |
(21,653) |
ZAR/EUR +10% |
|
9 |
10 |
ZAR/EUR - 10% |
|
(9) |
(10) |
ZAR/GBP + 10% |
|
154 |
180 |
ZAR/GBP - 10% |
|
(154) |
(180) |
ZAR/AUD + 10% |
|
381 |
381 |
ZAR/AUD - 10% |
|
(381) |
(381) |
(ii) Interest rate risk
Interest rate risk is the risk that the fair value of future
cash flows of a financial instrument will fluctuate because of
changes in market interest rate. The Group is exposed to interest
rate movement through variable rate debt and interest bearing
investment of surplus funds. Other than for finance leases,
the Group has no undrawn borrowing facilities at year end (2014:
ZAR: nil).
The following table sets out the variable interest bearing and
fixed interest bearing financial instruments of the Group:
Consolidated |
|
|
|
|
|
|
30 June
2015 |
30 June
2014 |
|
Variable Interest |
Fixed Interest |
Variable Interest |
Fixed Interest |
|
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
Financial assets |
|
|
|
|
Cash and cash equivalents (note
15) |
49,856 |
- |
162,275 |
- |
Other non-current assets (note
22) |
4,528 |
1,232 |
4,235 |
5,631 |
|
|
|
|
|
Financial liabilities |
|
|
|
|
Interest bearing liabilities (note
23 & 25) |
(503,811) |
(73,771) |
(499,357) |
(66,810) |
Total |
(449,427) |
(72,539) |
(332,847) |
(61,179) |
|
|
Consolidated |
|
|
|
|
Based upon the balance of gross debt (including leases) as
at 30 June 2015, if interest rates increased or decreased by 1%,
with all other variables held constant, the estimated impact on
post tax profit would be as shown in the following table.
Equity is not directly affected by changes in interest rates. The
flow through effect of the post-tax effect will be the same for
equity. |
|
|
Higher/(Lower) |
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Interest rates
+1% |
|
4,494 |
3,328 |
Interest rates
-1% |
|
(4,494) |
(3,328) |
The ZAR500 million Working capital
facility expired on 16 September 2015
and was rolled forward for 3 months to 10
December 2015 to enable the Business Rescue Practitioner to
publish the Business Rescue Plan. On 24
March 2016 the amended business rescue plan was approved
unanimously by creditors including the Bank of China. While the facility is repayable on
demand it is subject to the provisions of the business rescue
process which imposes a moratorium on creditor claims and
enforcement. Since year end an amount of ZAR30 million capital was repaid on the facility
resulting in an outstanding balance of ZAR470 million. The proceeds of the first tranche
of the total consideration to be received from Samancor resulted in
a payment of ZAR232 million to the
Bank of China. The proceeds of the
remaining two tranches, which amounts to ZAR210 million, will be distributed to the Bank
of China. These payments along
with any residual funds available in IFMSA, are expected to result
in settlement of the facility. Since draw down of the funds
commenced, the Group has maintained an interest rate structure
which reduces the impact of rapidly increasing interest rates on
projects. This has been done by alternating between one and
three months JIBAR roll forward. This decision is reviewed at
each treasury committee meeting.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
33. FINANCIAL RISK MANAGEMENT AND OBJECTIVES
(continued)
(iii) Commodity price risk
exposure
The Group is exposed to the risk of fluctuations in prevailing
market commodity prices of ferrochrome and coke. The price of
ferrochrome has fluctuated widely, particularly in recent years,
and is affected by numerous factors beyond the Group’s control
including international, economic and political trends,
expectations of inflation, currency exchange fluctuations, interest
rates, global or regional consumptive patterns, speculative
activities and increased production due to new extraction
developments and improved extraction and production methods. The
effect of these factors on the price of ferrochrome, and therefore
the financial performance of the Group cannot accurately be
predicted. However, the Group may enter into ferrochrome option
contracts to manage its commodity price risk. To date these
contracts have not been easily accessible and the Group has not
entered into any of these agreements. The final trade receivables
balance, where applicable, is adjusted to take into account any
movements in the ferrochrome price.
(iv) Credit risk
Credit risk arises from the financial assets of the Group, which
comprise cash and cash equivalents (note 15), trade and other
receivables (note 16), deposits (note 22) and financial instruments
held by third parties (note 19). The Group's exposure to
credit risk arises from potential default of the counter party,
with a maximum exposure equal to the carrying amount of these
instruments. It is the Group’s policy that all customers who wish
to trade on credit terms are subject to credit verification
procedures. The Group trades only with recognised,
creditworthy third parties and as such collateral is not requested
nor is it the Group's policy to securitise its trade and other
receivables. Due to the global demise in large reputable companies
the group has made use of bank issued Letters of Credit and has
discounted certain of its debtors. In addition, receivable
balances are monitored on an ongoing basis with the result that the
Group's exposure to bad debts is not significant. A provision
for doubtful debts is made when there is objective evidence that
the Group will not be able to collect the debts. Doubtful
debts are written off to the income statement. To date the
Group has not been required to write off any significant debts.
Trade Receivables
IFMSA has an off-take agreement with JISCO, the largest steel
maker in Northwest China. Under
the terms of the agreement entered into in June 2005, JISCO agreed to purchase at least
120,000 tpa of ferrochrome on a take-or-pay basis at a market
related price dependant on IFM’s sales to Europe. JISCO also
agreed to act as agent for IFMSA to market ferrochrome in
China, Taiwan, Japan
and Korea.
In addition, IFMSA has a further off-take agreement with CMC
Cometals, a division of Commercial Metals Company (“CMC”) to
purchase 30,000 tpa of ferrochrome, as well as 20,000 tpa of
ferrochrome fines, on a take-or-pay basis at a market related
price. In addition, CMC acts as an exclusive agent selling the
remainder of the Group’s ferrochrome production outside JISCO’s
territories as identified above.
As a result of the off-take agreements most of the Group’s trade
receivables relate to sales made to JISCO and Co-Metals, presenting
a counterparty concentration of risk. JISCO is a Chinese
state owned company and CMC is a New York Stock Exchange listed
metals trader with a market capitalisation of US$1.6 billion. IFMSA has the option of receiving
a provisional payment from its offtake partners of up to 90% of the
value of each shipment within 15 working days of any shipment. This
provisional payment accrues interest by IFMSA. The balance due,
which is payable up to six months later, is jointly determined by
the offtake partners and IFMSA, based on actual prices, costs and
factors that affect the landed price of each shipment. The
Group does not hold any credit derivatives to offset its credit
exposure, other than Letters of Credit. No impairment was
recognised as the group considers the offtake partners to be in a
sound financial position. There are no receivables past due
and considered impaired.
Cash and Investments
The credit risk policy aims to ensure that the organisation is
adequately protected against settlement risk for cash, investments
and derivatives by transacting with reputable financial
institutions with a minimum Fitch Ratings International long term
credit rating of A (or equivalent S&P or Moody’s rating) and
where applicable, within stated limits. It is noted that the group
is not envisaged to hold large cash balances for extended periods
of time. At the reporting date, cash deposits were spread
amongst a number of financial institutions to minimise the risk of
default by counterparties.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
33. FINANCIAL RISK MANAGEMENT AND OBJECTIVES
(continued)
(iv) Credit risk (continued)
Other receivables
Other balances within trade and other receivables do not contain
impaired assets and are not past due. It is expected that these
other balances will be received when due.
The following table sets out the financial assets that are
exposed to credit risk:
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Financial
assets |
|
|
|
Cash & Cash
equivalents (note 15) |
|
49,856 |
162,275 |
Trade and other
receivables (note 16) |
|
205,638 |
169,386 |
Restricted cash and
investments (note 19 & 22) |
|
135,155 |
111,011 |
Total |
|
390,649 |
442,672 |
Set out below is an ageing analysis on the Group’s trade
receivables:
|
Consolidated |
|
|
|
|
|
|
|
|
Total |
0-30
days |
31-60
days
PDNI* |
61-90
days PDNI |
91-120
days PDNI |
120-150
PDNI daysPDNI |
|
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
2015 |
160,802 |
97,899 |
10,470 |
12,025 |
21,040 |
19,368 |
|
|
|
|
|
|
|
2014 |
140,186 |
70,681 |
10,185 |
12,662 |
11,986 |
34,672 |
* Past due not impaired ('PDNI')
None of the consolidated or parent trade and other receivables
are considered past due or impaired.
Credit terms for customers and agents are 30 days from the date
of the final invoice. The final invoice is issued once the
product is received (average time between product being delivered
FOB and to time received by customer is between 3-4 months) and
final specification agreed by the customer. Debtors’ sales
are recognised, in accordance with AASB 118 “Revenue”, when risks
and rewards transfer. The long shipment lead time between BOL
date and final invoice date may move certain debtors into the PDNI
category. Sales are recognised on “Free On Board”, “at-port”
or “Free on truck”.
(iv) Liquidity risk
Liquidity risk is the risk that there will be inadequate funds
available to meet financial commitments as they fall due. The
Group recognises the ongoing requirement to have committed funds in
place to cover both existing business cash flows and reasonable
headroom for cyclical debt fluctuations, and capital expenditure
programmes. The key funding objective is to ensure the availability
of flexible and competitively priced funding from alternative
sources to meet the Group’s current and future requirements. The
Group utilises a detailed cash flow model to manage its liquidity
risk.
The Group attempts to accurately project the sources and uses of
funds, whereby a framework for decision making is established which
increases the effectiveness and efficiency with which the treasury
function operates.
The table below summarises the maturity profile of the Group’s
contractual cash flow financial liabilities at
30 June 2015 based on contractual undiscounted repayment
obligations. Repayments which are subject to notice are
treated as if notice were to be given immediately.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
33. FINANCIAL RISK MANAGEMENT AND OBJECTIVES
(continued)
(v) Liquidity Risk
(continued)
|
Consolidated |
|
|
|
|
|
|
|
Liabilities |
On
demand |
Less
than 3 months |
3 to 12
months |
1 to 5
years |
Over 5
years |
Total |
30 June 2015 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
Trade and other
payables |
- |
348,784 |
- |
- |
- |
348,784 |
Finance Leases |
- |
4,737 |
13,664 |
41,243 |
85,223 |
144,867 |
Loans |
7,072 |
503,811 |
- |
- |
- |
510,883 |
Total
Liabilities |
7,072 |
857,332 |
13,664 |
41,243 |
85,223 |
1,004,534 |
|
Consolidated |
|
|
|
|
|
|
|
Liabilities |
On
demand |
Less
than 3 months |
3 to 12
months |
1 to 5
years |
Over 5
years |
Total |
30 June 2014 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
ZAR’000 |
Trade and other
payables |
- |
288,360 |
- |
- |
- |
288,360 |
Finance Leases |
- |
3,358 |
10,057 |
36,743 |
92,628 |
142,786 |
Loans |
7,072 |
500,000 |
- |
- |
- |
507,072 |
Total
Liabilities |
7,072 |
791,718 |
10,057 |
36,743 |
92,628 |
938,218 |
34. EVENTS AFTER THE REPORTING DATE
On 19 August 2015, a strike of
workers employed by one of IFMSA's contractors resulted in IFMSA
having to reduce production from its furnaces and disrupted its
logistics and shipping schedule, causing losses in production.
The combination of low ferrochrome prices, rising electricity
prices, interruptions to power supply and other costs and losses of
ferrochrome production strained IFMSA’s liquidity to the point that
it became financially distressed.
As a result, on 26 August 2015,
the Company announced that IFMSA, which operates the IFL Group's
Lesedi mine and ferrochrome smelting operations, was placed under
business rescue by the Board of Directors of IFMSA. Business
rescue is a South African statutory means of enabling a financially
distressed company to continue in business, under the supervision
of a business rescue practitioner (“BRP”), protected from its
creditors. While in business rescue there is a moratorium on
creditors and others taking legal proceedings or enforcement action
against IFMSA. This allows for the development and implementation
of a business rescue plan (“Plan”) that seeks to enhance the
potential return for IFMSA's stakeholders. On the same day
The Financial Conduct Authority (FCA) granted a suspension of the
listing of the Company’s fully paid ordinary shares on the Official
List.
As a result of the business rescue process, IFMSA’s operations
were placed under care and maintenance, significantly reducing its
expenses. In view of the operational requirements of IFMSA, a
process in terms of section 189A of the Labour Relations Act 66 of
1995 ("LRA") commenced on 7 September 2015. In order to treat
all employees equally, the process entailed the retrenchment of the
entire staff compliment and thereafter, the re-engagement of a
limited number of people on a limited duration contract basis for
the duration of the business rescue proceedings. All the
outstanding long term incentive rights were cancelled subsequent to
year end.
The Bank of China, IFMSA’s
largest and secured creditor, agreed to the following:
· Trade receivables that existed
at the date of commencement of business rescue proceedings to be
collected and applied to reduce the Bank of China working capital facility; and
· Proceeds derived from the sale
of inventory at the date of commencement of business rescue
proceedings together with the proceeds derived from the RPM UG2
supply agreement, to be applied to fund business rescue
proceedings.
In January 2016 a settlement was
reached with RPM under which RPM would continue the supply of UG2
chrome ore but at reduced quantities and at additional costs to
IFMSA. The settlement eliminated the uncertainty surrounding the
supply agreement and accordingly assisted in business rescue
process. However, it had a material impact on the UG2 agreement's
value and consequently on the value of the assets of IFMSA.
The amended business rescue plan, which has been approved by
creditors on 24 March 2016, provides
for the sale of IFMSA’s business and assets together with IFMSA’s
loan claim against and IFL’s 80% equity interest in Sky Chrome, to
Samancor for a total of ZAR520
million, split into three divisible tranches:
1. ZAR310
million for the business and assets of IFMSA;
2. ZAR140
million for the IFMSA Mining Right and Beneficiation Plant;
and
3. ZAR70
million for certain receivables of Sky Chrome and Sky
Chrome’s equity for ZAR100.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
34. EVENTS AFTER THE REPORTING DATE (continued)
In August 2016 the first tranche
transaction was concluded and in September
2016 the proceeds from the transaction were distributed to
creditors of IFMSA in accordance with the amended business rescue
plan. South African Exchange Control approval has recently been
obtained and IFML’s claim of ZAR4.5
million is expected to be paid shortly. The proceeds from
the second and third tranches will be paid to the Bank of
China.
Since the inception of business rescue the appointed business
rescue practitioner has been facilitating the support of IFML by
cash flow from IFMSA to cover ongoing costs. This support continued
until June 2016. The amount of cash
flow to IFML totalled ZAR17.4 million
which was used to pay expenses subsequent to year end. IFML will
receive ZAR4.5 million as settlement
of its claim against IFMSA once Exchange Control approval has been
received. This amount is expected to be sufficient to fund the
limited operations of IFML until such time as the outstanding
conditions for the remaining two tranches of transactions with
Samancor have been met. These conditions include obtaining
regulatory approvals, specifically ministerial approval for the
transfer of mining rights, and consents of other parties to certain
material contracts, which are usual for transactions of this
nature. The proceeds of the remaining two tranches, which amounts
to ZAR210 million, will be
distributed to the Bank of China.
These payments along with any residual funds available in IFMSA,
are expected to result in settlement of the facility. After which
the directors will consider all options available including the
wind up of the company. It is not expected that the shareholders of
IFML will receive any dividend or distribution from any of the
above.
Due to the disposal process, assets will be realised principally
through a sales transaction rather than through continuing use. The
affected assets should thus be classified as assets held for sale
in terms of AASB 5 for the year ending 30
June 2016 as the criteria per AASB 5 has only been met after
year end.
Other than those outlined above and in note 34 to the Financial
Statements, no matters or circumstances have arisen since
30 June 2015 that have significantly affected or may
significantly affect:
· the Company’s operations in
future financial years; or
· the result of those operations
in future financial years; or
· the Company’s state of affairs
in future financial years.
35. COMMITMENTS AND CONTINGENCIES
Capital commitments
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Contracted for |
|
33,655 |
51,888 |
Authorised but not
contracted for |
|
- |
32,807 |
Total |
|
33,655 |
84,695 |
Capital incurred for the subsequent financial year amounted to
R13 million.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
35. COMMITMENTS AND CONTINGENCIES (continued)
Finance lease commitments
The minimum lease payments under finance lease arrangements are
set out in the following table:
|
|
Consolidated |
|
|
|
|
|
|
|
|
2015 |
2014 |
|
|
|
ZAR’000 |
ZAR’000 |
|
Within 1 year |
|
18,401 |
13,415 |
|
Between 1 and 5
years |
|
41,243 |
36,743 |
|
Greater than 5
years |
|
85,223 |
92,628 |
|
Total future lease
payments |
|
144,867 |
142,786 |
|
Less: future
finance charges |
|
(71,096) |
(75,976) |
|
Lease
liability |
|
73,771 |
66,810 |
|
Represented by: |
|
|
|
|
Current lease
liability (note 23) |
|
10,371 |
6,085 |
|
Non-current lease
liability |
|
63,400 |
60,725 |
|
Lease
liability |
|
73,771 |
66,810 |
|
The
present values of lease payments under finance lease arrangements
are set out in the following table |
|
|
|
Within 1 year |
|
10,371 |
6,085 |
|
Between 1 and 5
years |
|
16,857 |
12,322 |
|
Greater than 5
years |
|
46,543 |
48,403 |
|
Lease
liability |
|
73,771 |
66,810 |
|
Contingent liabilities
There were no contingent liabilities outstanding at 30 June 2015 (2014: nil).
36. RELATED PARTY TRANSACTIONS
Loans to Directors and
Director-related entities
No loans have been granted to Directors and/or Director-related
entities.
Refer to audited Remuneration Report for details of remuneration
and arrangements with Key Management Personnel.
The community royalty accrued at year end amounted to
ZAR0.3 million (2014: ZAR0.5 million).
The Parent company is due management fees of ZAR6.8 million (2014: ZAR5.67 million) from its subsidiary company
International Ferro Metals (SA) Pty Ltd. Related party
transactions exist between the companies within the
Group.
Jiuquan Iron and Steel Group Company (JISCO) own 29.10% (2014:
29.10%) of the Parent company’s shares. Sales made to JISCO
totalled 46,095 tonnes (2014: 71,546 tonnes) and were made in terms
of the off-take agreement which was entered into at arm’s
length. The value of sales made to JISCO during the year
amounted to ZAR460 million (2014:
ZAR691 million).
37. INTEREST IN SUBSIDIARIES
The Company has the following direct/indirect material interests
in subsidiaries:
Name |
Country
of incorporation |
Ownership
interest |
Ownership
interest |
|
|
|
2015 |
2014 |
Investment |
International Ferro
Metals (SA) (Pty) Ltd (a) |
South
Africa |
100% |
99.375% |
ZAR339
million |
Purity Metals Holdings
Ltd |
British
Virgin Islands |
100% |
100% |
USD9
million |
Sky Chrome Mining
(Pty) Ltd |
South
Africa |
80% |
80% |
ZAR800 |
International Ferro
Metals SA Holdings (Pty) Ltd |
South
Africa |
100% |
100% |
ZAR2.6
billion |
(a) This company was placed under business rescue on
26 August 2015.
NOTES TO THE FINANCIAL REPORT (CONTINUED)
38. AUDITORS REMUNERATION
|
|
Consolidated |
|
|
|
|
|
|
2015 |
2014 |
|
|
ZAR’000 |
ZAR’000 |
Amounts received or due and
receivable by Ernst & Young Australia for: |
|
|
|
(i)
an audit or review of the financial report of the entity and any
other entity in the consolidated entity |
604 |
604 |
Total received by Ernst & Young
Australia |
|
604 |
604 |
Amounts received or due and
receivable by Ernst & Young South Africa for: |
|
|
|
(i)
an audit or review of the financial report of any other entity in
the consolidated entity |
2,307 |
2,645 |
(ii)
other assurance services |
|
- |
469 |
(iii)
taxation services |
|
76 |
86 |
Total received by Ernst & Young
South Africa |
|
2,383 |
3,200 |
Closing balance |
|
2,987 |
3,804 |
--- ENDS ---