assmang limited (“assmang”), a company incorporated in the republic of south africa (company...

Annual Report 2011

www.assmang.co.za

www.assmang.co.za

1 Annual Report 2011

2 Group profile

2 Forward looking statements

2 Salient features

3 Administration

4 Location of operations

5 Mineral Resources and Reserves

16 Corporate governance and responsibility

17 Five-year review

18 – 55 Annual financial statements

Contents


Group profile

Assmang Limited (“Assmang”), a company incorporated in the Republic of South Africa (Company registration number 1935/007343/06) and its joint venture and subsidiary companies (“Group”).

The company mines manganese at Black Rock Mine and iron ore at Beeshoek and Khumani mines in the Northern Cape province and chrome ore at Dwarsrivier Mine in the Mpumalanga province. The company also produces manganese alloys at its works at Cato Ridge in the KwaZulu-Natal province, and chrome alloys and manganese alloys at its works at Machadodorp in the Mpumalanga province.

Cato Ridge Alloys (Proprietary) Limited, a joint venture between the company and Mizushima Ferroalloys Company Limited (40%) and Sumitomo Corporation (10%), both of Japan, produces refined ferromanganese at Cato Ridge Works.

Incorporated in 1935, the Group employs 5 716 (2010: 4 892) permanent employees and operates as three divisions, namely iron ore, manganese and chrome. Assmang is controlled jointly by African Rainbow Minerals Limited and Assore Limited, which each hold 50% of the issued share capital of the company. Both shareholders are listed on the JSE Limited (“JSE”).

The bulk of the Group’s production is exported to the Far East, Europe and the United States of America.

In addition to the export of ore, manganese ore is also transferred to the works at Cato Ridge and Machadodorp where it is used in the production of manganese alloys. Assmang’s Dwarsrivier Chrome Ore Mine near Steelpoort supplies ore to the company’s Machadodorp Works for the production of chrome alloys.

Forward looking statements

Certain statements included in this report may constitute “forward looking statements”. Inevitably such forward looking statements involve known and unknown risks and uncertainties and other factors that may cause the actual results, performance or achievements of the Group to be materially different from future results, performance or achievements expressed or implied by those forward looking statements. The business of the Group is subject to fluctuations in commodity prices, exchange rates and interest rates as well as the risks involved in mining and smelting operations. While every effort is made to anticipate and counter adverse impacts of these risks on the Group’s performance, it is not possible to guarantee the outcome of future results.

Salient features

Year ended30 June

2011R’000

Year ended30 June

2010R’000

Turnover 19 074 942 12 869 713

Profit for the year 5 786 808 2 732 222

Dividends paid 2 000 000 1 000 297

Capital expenditure 4 150 047 3 336 315


Administration

DIRECTORSDesmond Sacco – ChairmanA J Wilkens – Deputy Chairman M Arnold*G C Butler*‡C J Cory*P C CrousA JoubertS M LangaL S MatsimelaP E SaccoA D Stalker‡J C Steenkamp

ALTERNATE DIRECTORSW M GuleP G W Henderson F H KalpA McAdam‡F T OlivierB H van AswegenJ C VenterG R PieterseG C T KarstenB R Mashiane (Mrs)R Avenant-Buys (Mrs)* Audit Committee‡ British

MANAGEMENT SERVICESAfrican Rainbow Minerals Limited29 Impala RoadChislehurston, 2196South AfricaPO Box 786136Sandton, 2146South AfricaTelephone: +2711 779 1300Telefax: +2711 779 1318

TECHNICAL ADVISERSAfrican Rainbow Minerals LimitedAfrican Mining and Trust Company Limited

SOLE SELLING AGENTS AND DISTRIBUTORSOre & Metal Company LimitedAssore House15 Fricker RoadIllovo Boulevard, 2196South AfricaPrivate Bag X03Northlands, 2116South AfricaTelephone: +2711 770 6800Telefax: +2711 268 6440

MANAGEMENT AT THE OPERATIONSIron ore divisionW S Grobbelaar, Divisional ManagerP Becker, Senior General Manager – KhumaniM A Oosthuizen, Senior General Manager – BeeshoekW Smith, Financial Manager

Manganese divisionL Meyer, Divisional Manager

Manganese oreS Letaba, Senior General ManagerM Smit, Financial Manager

Manganese alloysMs P Thwala, Senior General ManagerA Santhilal, Financial Manager

Chrome divisionJ Meintjies, Divisional Manager

Chrome oreF Uys, Senior General ManagerR Burger, Administrative Manager

Chrome alloysA Mcleod, Senior General ManagerL R Wohlberg, Financial Manager

AUDITORSErnst & Young Incorporated

BANKERSThe Standard Bank of South Africa LimitedABSA Bank Limited

REGISTERED OFFICEAfrican Rainbow Minerals Limited24 Impala RoadChislehurston, 2196South AfricaPO Box 782058Sandton, 2146South AfricaTelephone: +2711 779 1300Telefax: +2711 779 1318

RESPONSIBILITY OF THE FINANCIAL STATEMENTSThe financial statements are prepared under the supervision of George Karsten, Executive Finance

COMPANY SECRETARYAfrican Rainbow Minerals Limited


Location of operations

Machadodorp

Richards Bay

Durban

Black RockNchwaning

Gloria

Khumani

Beeshoek Postmasburg

Port ElizabethCape Town

Saldanha Bay East London

Johannesburg

Dwarsrivier

Cato RidgeKathu

Cr ChromeFe Iron oreMn ManganeseFeCr FerrochromeFeMn Ferromanganese

MineProcessing plantCity/TownExport chain


Mineral Resources and Reserves

COMPETENT PERSON’S REPORT ON MINERAL RESOURCES AND MINERAL RESERVES 2011This report is issued as the annual update of Mineral Resources and Reserves to inform shareholders and potential investors of the mineral assets held by Assmang Limited.

Salient features F2011

Khumani Waste stripping at King progressed in preparation for production.

Beeshoek Production mainly for the domestic market came from off-grade stockpiles processed through the jig plant.

Nchwaning Investigations initiated to model the full package of the manganese seams in 0,5 metre layers.

Gloria Measured and Indicated Mineral Resources increased by 79% to 92,23 million tonnes at 37,8% Mn as a result of remodelling which incorporated 42 new additional surface boreholes. The Inferred Resource decreased to 84 million tonnes.

Dwarsrivier Surface drilling of 52 boreholes to upgrade the Mineral Resource confidence in the southern portion of the mine completed. Remodelling to commence when all assay results are received.

F2011 MINERAL RESOURCES/RESERVES SUMMARY

MANGANESEMEASURED AND

INDICATEDPROVED AND

PROBABLE

Mineral Resources Mineral Reserves

Mt Mn % Fe % Mt Mn % Fe %

NCHWANING

No 1 Seam 126,69 44,9 8,6 106,28 44,9 8,6

No 2 Seam 180,80 42,4 15,5 – – –

GLORIA

No 1 Seam 92,23 37,8 4,9 68,25 37,8 4,9

No 2 Seam 29,40 29,9 10,1 – – –

BLACK ROCK

No 1 Seam 43,60 40,6 18,1 – – –

No 2 Seam 26,81 38,6 19,8 – – –

IRON OREMEASURED AND

INDICATEDPROVED AND

PROBABLE


Mt Fe % Mt Fe %

BEESHOEK 118,97 63,75 55,13 64,04

KHUMANI

Bruce 226,97 64,44 196,96 64,43

King 376,46 64,51 348,40 64,60

CHROMITEMEASURED AND

INDICATEDPROVED AND

PROBABLE


Mt Cr2O

3% Mt Cr

2O

3%

DWARSRIVIER 48,77 39,05 33,44 35,69

General statementAssmang’s method of reporting Mineral Resources and Mineral Reserves conforms to the South African Code for Reporting Mineral Resources and Mineral Reserves (“SAMREC Code”) and the Australian Institute of Mining and Metallurgy Joint Ore Reserves Committee Code (“JORC Code”).

The convention adopted in this report is that Mineral Resources are reported inclusive of that portion of the total Mineral Resource converted to a Mineral Reserve. Resources and reserves are quoted as at 30 June 2011. External consulting firms audit the resources and reserves of the Assmang operations on a three- to four-year cycle basis.

Underground resources are in situ tonnages at the postulated mining width, after deductions for geological losses. Underground Mineral Reserves reflect milled tonnages, while surface Mineral Reserves (dumps) are in situ tonnages without dilution. Both are quoted at the grade fed to the plant. Open-pit Mineral Resources are quoted as in situ tonnages and Mineral Reserves are tonnages falling within an economic pit-shell.

The evaluation method is generally Ordinary Kriging with mining block sizes ranging from 10 x 10 metres to 100 x 100 metres to 250 x 250 metres in the plan view. The blocks vary in thickness from 2,5 to 10 metres. The evaluation process is fully computerised, generally utilising the Datamine software package.

The Mineral Resources and Mineral Reserves are reported on a total basis regardless of the attributable beneficial interest that Assmang has on the individual projects or mines. When the attributable beneficial interests on a mine or project is less than 100%, the actual percentage of the attributable interest is specified.

Maps, plans and reports supporting resources and reserves are available for inspection at Assmang’s registered office and at the relevant mines.

In order to satisfy the requirements of the Minerals and Petroleum Resources Development Act (“the Act”), Assmang’s operations will have to obtain new mining rights for all properties required to support the planned operations over the next 30 years. The Act was effective from 1 May 2004 and the new rights must be obtained within five years from then. Certain operations have already had their conversions approved while some are still in various stages of application.

Refer to the directors’ report for a summary of stages of completion.

Rounding of figures may result in computational discrepancies on the Mineral Resource and Reserve tabulations.


DefinitionsThe definitions of Mineral Resources and Reserves, quoted from the SAMREC Code, are as follows:

A ‘Mineral Resource’ is a concentration or occurrence of material of economic interest in or on the earth’s crust in such form, quality and quantity that there are reasonable and realistic prospects for eventual economic extraction. The location, quantity, grade, continuity and other geological characteristics of a Mineral Resource are known, or estimated from specific geological evidence, sampling and knowledge interpreted from an appropriately constrained and portrayed geological model. Mineral Resources are subdivided, and must be so reported, in order of increasing confidence in respect of geoscientific evidence, into Inferred, Indicated or Measured categories.

An ‘Inferred Mineral Resource’ is that part of a Mineral Resource for which volume or tonnage, grade and mineral content can be estimated with only a low level of confidence. It is inferred from geological evidence and sampling and assumed but not verified geologically or through analysis of grade continuity. It is based on information gathered through appropriate techniques from locations such as outcrops, trenches, pits, workings and drill holes that may be limited in scope or of uncertain quality and reliability.

An ‘Indicated Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a reasonable level of confidence. It is based on information from exploration, sampling and testing of material gathered from locations such as outcrops, trenches, pits, workings and drill holes. The locations are too widely or inappropriately spaced to confirm geological or grade continuity but are spaced closely enough for continuity to be assumed.

A ‘Measured Mineral Resource’ is that part of a Mineral Resource for which tonnage, densities, shape, physical characteristics, grade and mineral content can be estimated with a high level of confidence. It is based on detailed and reliable information from

exploration, sampling and testing of material from locations such as outcrops, trenches, pits, workings and drill holes. The locations are spaced closely enough to confirm geological and grade continuity.

A ‘Mineral Reserve’ is the economically mineable material derived from a Measured or Indicated Mineral Resource or both. It includes diluting and contaminating materials and allows for losses that are expected to occur when the material is mined. Appropriate assessments to a minimum of a Pre-Feasibility Study for a project and a Life-of-Mine Plan for an operation must have been completed, including consideration of, and modification by, realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors (the modifying factors). Such modifying factors must be disclosed.

A ‘Probable Mineral Reserve’ is the economically mineable material derived from a Measured or Indicated Mineral Resource or both. It is estimated with a lower level of confidence than a Proved Mineral Reserve. It includes diluting and contaminating materials and allows for losses that are expected to occur when the material is mined. Appropriate assessments to a minimum of a Pre-Feasibility Study for a project or a Life-of-Mine Plan for an operation must have been carried out, including consideration of, and modification by, realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. Such modifying factors must be disclosed.

A ‘Proved Mineral Reserve’ is the economically mineable material derived from a Measured Mineral Resource. It is estimated with a high level of confidence. It includes diluting and contaminating materials and allows for losses that are expected to occur when the material is mined. Appropriate assessments to a minimum of a Pre-Feasibility Study for a project or a Life-of-Mine Plan for an operation must have been carried out, including consideration of, and modification by, realistically assumed mining, metallurgical, economic, marketing, legal, environmental, social and governmental factors. Such modifying factors must be disclosed.

RELATIONSHIP BETWEEN EXPLORATION RESULTS, MINERAL RESOURCES AND MINERAL RESERVES

Mineral Resources and Reserves (continued)


CompetenceThe competent person with overall responsibility for the compilation of the Mineral Reserves and Resources Report is Paul van der Merwe, PrSciNat, an ARM employee. He consents to the inclusion in this report of the matters based on this information in the form and context in which it appears.

Paul van der Merwe graduated with a BSc (Hons) in Geology from Free State University. He spent four years as an exploration geologist for FOSKOR. He then joined the Uranium Resource Evaluation Group of the then Atomic Energy Corporation of South Africa for 12 years. While employed there he studied geostatistics and spent some time at the University of Montreal, Canada. In 1991, he joined Anglovaal Mining (now ARM) in the Geostatistics Department and evaluated numerous mineral deposit types for this group in Africa. In 2001, he was appointed as Mineral Resources Manager for the Group. He is registered with the South African Council for Natural Scientific Professions as a Professional Natural Scientist in the field of practice of Geological Science, Registration number 400498/83, and as such is considered to be a Competent Person.

All competent persons at the operations have sufficient relevant experience in the type of deposit and in the activity for which they have taken responsibility. Details of the competent persons are available from the Company Secretary on written request.

The following competent persons were involved in the calculation of Mineral Resources and Reserves:

M Burger PrSciNat IronS van Niekerk PrSciNat IronB Ruzive PrSciNat ManganeseA Pretorius* PrSciNat ChromeS Kadzviti PrSciNat Iron/Chrome/Manganese*External consultant

P J van der Merwe 24 Impala Road, Chislehurston, Sandton30 September 2011

MANGANESE MINES LOCALITY – The manganese mines are situated in the Northern Cape province in South Africa, approximately 80 kilometres north-west of the town of Kuruman. Located at latitude 27°07’50”S and longitude 22°50’50”E, the site is accessed via the national N14 route between Johannesburg and Kuruman, and the provincial R31 road.

HISTORY – In 1940, Assmang acquired a manganese ore outcrop on a small hillock known as Black Rock. Several large properties underlain by ore were subsequently found and acquired. Today the Black Rock area is considered to be the largest and richest manganese deposit in the world. Manganese ore operations were extended and today include the Gloria and Nchwaning underground mines. Manganese ore is supplied locally to Assmang-owned smelters, but is mainly exported through Port Elizabeth to Japanese and German customers.

MINING AUTHORISATION – The Nchwaning mining lease (ML10/76) comprises an area of 1 986 hectares and is located on the farms Nchwaning (267), Santoy (230) and Belgravia (264). The Gloria mining lease (ML11/83) comprises an area of 1 713 hectares and is located on portion 1 of the farm Gloria (266). The new mining right was executed on 13 July 2011. Registration of right is in process.

GEOLOGY – The manganese ores of the Kalahari Manganese Field are contained within sediments of the Hotazel Formation of the Griqualand West Sequence, a subdivision of the Proterozoic Transvaal Supergroup. At Black Rock, Belgravia and Nchwaning, the Hotazel, Mapedi and Lucknow Formations have been duplicated by thrusting. The thrusted ore bodies comprising Black Rock (Koppie), Belgravia 1 and Belgravia 2 are collectively known as Black Rock ore bodies. The average thickness of the Hotazel Formation is approximately 40 metres.

The manganese orebodies exhibit a complex mineralogy and more than 200 mineral species have been identified to date. The hydrothermal upgrading has resulted in a zoning of the orebody with regard to fault positions. Distal areas exhibit more original and low-grade kutnohorite and braunite assemblages, while areas immediately adjacent to faults exhibit a very high-grade hausmannite ore. The intermediate areas exhibit a very complex mineralogy, which includes bixbyite, braunite and jacobsite among a host of other manganese-bearing minerals. A similar type of zoning also exists in the vertical sense. At the top and bottom contacts it is common to have high iron (Fe) and low manganese (Mn) contents, while the reverse is true towards the centre of the seam. This vertical zoning has given rise to a mining practice where only the centre 3,5 metre-high portion of the seam is being mined. At the Gloria Mine the intensity of faulting is much less, which also explains the lower grade.

Two manganese seams are present. The No 1 Seam is up to 6 metres in thickness, of which 3,5 metres are mined, using a manganese marker zone for control. There is, therefore, minimum dilution. No mining is presently undertaken on No 2 Seam at Nchwaning or Gloria.

Nchwaning Mineral Resources and ReservesMineral Resource classification at Nchwaning Mine is based on consideration of a number of parameters: kriging variance, kriging efficiency, regression slope, geological structures and quality of assay data. Each of these parameters contributes to the overall classification depending on weighting assigned to each of the parameters. Measured and Indicated Resources have been defined for Nchwaning. Geological losses are built into the grade models.

The Nchwaning Mine was diamond drilled from surface at 330 metre centres and the data is now captured in a Geological Database Management System (GDMS) developed by CAE Datamine SA. The core was logged and 0,5-metre-long, half-core, diamond-saw cut samples were submitted to Assmang’s laboratory at Black Rock for X-ray fluorescence (XRF) analyses. Mn and Fe values were checked by Wet Chemical analyses. Several standards were used to calibrate XRF equipment, and results are compared with other laboratories on a regular basis.

At Nchwaning a total of 316 boreholes as well as a total of 30 587 face samples were considered in the grade estimation for Nchwaning 1 orebody. The available data for an area was optimised over a thickness of 3,5 metres and exported into data files for computerised statistical and geostatistical manipulation to determine the average grades of Mn, Fe, silica (SiO

2), calcium (CaO)

and magnesium (MgO).

Ordinary Kriging interpolation within Datamine was used to estimate the grade of each 50 x 50 x 3,5 metre block generated within the geological model.

Sub-cell splitting of the 50 x 50 metre blocks was allowed to follow the geological boundaries accurately. The relative density of Nchwaning manganese ore was taken as 4,3 t/m3.


Nchwaning Mine: Lower Seam (1 Body) Manganese Resources and Reserves



Measured 37,61 46,3 9,0 Proved 32,34 46,3 9,0

Indicated 89,08 44,3 8,4 Probable 73,94 44,3 8,4

Total Resources 1 Body 2011 126,69 44,9 8,6 Total Reserves 1 Body 2011 106,28 44,9 8,6


Mineral Resources are inclusive of Mineral Reserves.Totals are rounded off.Modifying factors: pillar losses, mining losses.

Trackless mechanised equipment is used in the board-and-pillar mining method. Mining in the eastern extremity of Nchwaning occurs at a depth of 200 metres, while the deepest (current) excavations can be found at a depth of 519 metres below surface.

Ore from Nchwaning No 2 Mine is crushed underground before being hoisted to a surface stockpile via a vertical shaft. Similarly, ore from the Nchwaning No 3 Mine is crushed underground before being conveyed to a surface stockpile via a declined conveyor system. Ore is withdrawn from the surface stockpile and forwarded to two stages of crushing, dry screening and wet screening to yield lumpy and fine products.

At the plant the finer fractions are stockpiled, while the coarser fractions are extracted from the respective product boxes into road haulers, sampled, weighed and stored on stacks ahead of despatch. Samples from each stack are analysed for chemical content and size distribution. This ensures good quality control and enables the ore control department to blend various stacks according to customer demand.

NCHWANING YEAR-ON-YEAR CHANGE – Mineral Reserves for Nchwaning lower seam (1 Body) decreased to 106,28 from 107,96 million tonnes mainly due to depletion by production. The Mineral Resources for 1 Body changed from 128,63 to 126,69 million tonnes. Nchwaning 2 Body Mineral Resources remained at 180,8 million tonnes.

Nchwaning Mine: Upper Seam (2 Body) Manganese Resources

Mineral Resources Mt Mn % Fe %

Measured 53,37 42,0 16,3

Indicated 127,43 42,6 15,2

Total Resources 2 Body 2011 180,80 42,4 15,5


Totals are rounded off.



Black Rock Mineral Resources The Black Rock ore bodies occur in the Black Rock (Koppie), Belgravia 1 and Belgravia 2 areas. They are all part of a large thrust complex. Modelling of these ore bodies was undertaken using 151 Nchwaning boreholes that intersected the thrust complex and 174 Black Rock infill boreholes. A cut-off 38% manganese was used in the modelling. 1 and 2 Body seams were modelled at different thicknesses.

Black Rock: Lower Seam (1 Body) Manganese Resources

Mineral Resources Mt Mn% Fe%

Measured 9,03 40,3 18,1

Indicated 34,57 40,7 18,1


Total Resources 1 Body 2010 – – –


Black Rock: Lower Seam (2 Body) Manganese Resources

Mineral Resources Mt Mn% Fe%

Measured 8,23 37,4 19,8

Indicated 18,58 39,2 19,8


Total Resources 2 Body 2010 – – –


Gloria Mineral Resources and Reserves Procedures for drilling and assaying at Gloria Mine are the same as at Nchwaning. A total of 149 boreholes and 6 480 face samples were considered in the evaluation of the Gloria 1 Body Mine. The underground sampling values were used in evaluating areas close

to current mining. The boreholes were optimised over a stoping width of 3,5 metres and the relative density was taken as 3,8 t/m3. The seams were evaluated by means of statistical and geostatistical methods to determine the average grades of Mn, Fe, SiO

2, CaO

and MgO. Ordinary Kriging interpolation within Datamine was used to estimate the grade of each 50 x 50 x 3,5 metre block generated within the geological model. Sub-cell splitting of the 50 x 50 metre blocks was allowed to follow the geological boundaries.

Gloria Mine is extracting manganese at depths that vary between 180 to 250 metres. Ore is crushed underground before being conveyed to surface stockpile via a decline shaft.

GLORIA YEAR-ON-YEAR CHANGE – Remodelling of Gloria ore body after drilling of 42 new boreholes resulted in significant 79% increase in Measured and Indicated Mineral Resources to 92,23 million tonnes as the Inferred Resources were upgraded to higher category resources. Mineral Reserves also increased from 39,71 to 68,25 million tonnes. The Mineral Resources for Gloria 2 Body remained the same. No South African markets exist for Gloria 2 Body ore at this time.

Gloria Mine: Upper Seam (2 Body) Manganese Resources

Mineral Resources Mt Mn % Fe %

Measured – – –

Indicated 29,40 29,9 10,1



Inferred 2011 128,24 – –

Inferred 2010 128,24 – –


Gloria Mine: Lower Seam (1 Body) Manganese Resources and Reserves



Measured 31,46 37,7 4,8 Proved 23,28 37,7 4,8




Inferred 2011 84,00 36,8 4,8

Inferred 2010 128,24 – –

Mineral Resources are inclusive of Mineral Reserves.Totals are rounded off.Modifying factors: pillar losses, mining losses.


Historical manganese production at Nchwaning and Gloria mines (saleable product)

Year Nchwaning Mt Gloria Mt

2006/2007 2,49 0,43

2007/2008 2,71 0,41

2008/2009 2,63 0,51

2009/2010 1,30 0,67

2010/2011 2,35 0,70

IRON ORE MINES LOCALITY – The iron ore division is made up of the Beeshoek Mine located on the farms Beeshoek 448 and Olynfontein 475, and the Khumani Mine situated on the farms Bruce 544, King 561 and Mokaning 560. All properties are in the Northern Cape, approximately 200 kilometres west of Kimberley. The Beeshoek open-pit operations are situated 7 kilometres west of Postmasburg and the new Khumani open pits are adjacent to, and south-east of, the Sishen Mine, which is operated by Kumba Resources. Located at latitude 28°30’00”S/longitude 23°01’00”E, and latitude 27°45’00”S/longitude 23°00’00”E respectively. Khumani Mine supplies iron ore to the export markets. Exports are railed to the iron ore terminal at Saldanha Bay. Beeshoek ore is supplied to local customers.

HISTORY – Mining of iron ore (mainly specularite) was undertaken as early as 40 000 BC on the farm Doornfontein which is due north of Beeshoek. The potential of iron ore in this region was discovered in 1909, but, due to lack of demand and limited infrastructure, this commodity was given little attention. In 1929, the railway line was extended from Koopmansfontein (near Kimberley) to service a manganese mine at Beeshoek. In 1935, The Associated Manganese Mines of South Africa Limited (Assmang) was formed, and in 1964 the Beeshoek Iron Ore Mine was established, with a basic hand- sorting operation. In 1975, a full washing and screening plant was installed and production increased to 7 million tonnes over the years. The Khumani Iron Ore Mine was commissioned in 2007 and is ramping up to approximately 10 million tonnes per annum, with expansion plans to 16 million tonnes per annum being investigated.



MINING AUTHORISATION – The Beeshoek mining lease (ML3/93) comprises an area of 5 686 hectares and is located on the farms Beeshoek (448) and Olynfontein (475). The application for the conversion to a new mining order right submitted during the 2009 financial year is still pending. The application has been forwarded to the Pretoria DMR from the Kimberley regional office recommending its approval.

The Khumani mining right comprises an area of 7 388 hectares and is located on the farms Bruce (544), King (561) and Mokaning (560). The mining right was granted during the 2007 financial year.

GEOLOGY – The iron ore deposits are contained within a sequence of early Proterozoic sediments of the Transvaal Supergroup deposited between 2 500 and 2 200 million years ago. In general, two ore types are present, namely laminated hematite ore forming part of the Manganore Iron Formation and conglomerate ore belonging to the Doornfontein Conglomerate Member at the base of the Gamagara Formation.

The older laminated ore types occur in the upper portion of the Manganore Iron Formation as enriched high-grade hematite bodies. The boundaries of high-grade hematite orebodies cross-cut primary sedimentary bedding, indicating that secondary hematitisation of the iron formation took place. In all of these, some of the stratigraphic and sedimentological features of the original iron formation are preserved.

The conglomeratic ore is found in the Doornfontein Conglomerate Member of the Gamagara Formation and is lenticular and not persistently developed along strike. It consists of stacked, upward fining conglomerate-gritstone-shale sedimentary cycles. The lowest conglomerates and gritstones tend to be rich in sub-rounded to rounded hematite ore pebbles and granules and form the main orebodies. The amount of iron ore pebbles decreases upwards in the sequence so that upper conglomerates normally consist of poorly sorted, angular to rounded chert and banded iron formation pebbles.

The erosion of the northern Khumani deposit is less than that in the southern Beeshoek area. The result is that Khumani is characterised by larger stratiform bodies and prominent hangingwall outcrops. The down-dip portions are well preserved and developed, but in outcrop the deposits are thin and isolated. Numerous deeper extensions occur into the basins due to karst development. A prominent north-south strike of the ore is visible. The southern Beeshoek orebodies were exposed to more erosion and are more localised and smaller. Outcrops are limited to the higher topography on the eastern side of the properties. Down-dip to the west, the ore is thin and deep. The strike of the orebodies is also in a north-south direction, but less continuous.

Hematite is the predominant ore mineral, but limonite and speccularite also occur.

Mining operations are all open pit, based on the conventional drill-and-blast, truck-and-shovel operations. Run-of-mine ore is crushed and stored as on-or off-grade on blending stockpiles. Ore from the stockpiles is either sent to the wash-and-screen plants or, if off-grade, to the beneficiation plants. The wash-and-screen plants consist primarily of tertiary crushing, washing, screening, conveying and stacking equipment. The beneficiation plants consist of tertiary crushers; scrubbers; coarse and fine jigs; lumpy, fines and scaw product stockpiles; and a rapid load-out facility. No chemical is being used in any of the treatment plants.

MINERAL RESOURCES AND RESERVES – In the iron ore operations, the following table shows how the search ellipse (ie the ellipsoid used by the Kriging process to determine if a sample is used in the estimation of a block) is used to classify the Mineral Resources:

Minimumnumber

of samples

Maximumnumber

of samples

Search ellipse settingsXYZ (m)

Measured 6 30 100 x 100 x 10

Indicated 5 30 200 x 200 x 20

Inferred 4 30 400

Only Measured and Indicated Resources are converted to Proved and Probable Reserves respectively. Modifying factors were applied to these resources and financially optimised. The financial outline is used to define the optimal pit by means of the Lersch-Grossman algorithm. The resources within this mining constraint are defined as reserves. These are categorised into different product types, destined for the different plant processes and scheduled for planning.

The methodology followed to identify targets is initiated with geological mapping, followed by geophysics (ground magnetics and gravity). Percussion drilling is used to pilot holes through overlying waste rock down to the iron ore bodies. Diamond drilling is the next phase, which is usually on a 200 x 200 metre grid. Further infill drilling is carried out at spacing ranging from 100 x 100 metres to 25 x 25 metres, depending on the complexity of the geological structures. Numerous exploration programmes have been completed in the last 40 years. A total of 2 832 holes (1 315 holes on Khumani and 1 517 holes on Beeshoek) have been drilled. Core samples are logged and split by means of a diamond saw and the half-core is sampled every 0,5 metres. Before submission for assaying, the half-cores are crushed, split and pulverised. Samples with values larger than 60% are included in the definition of the orebodies. Any lower-grade samples inside the orebody are defined as internal waste and modelled separately. Each zone is modelled per section, and then wireframed to get a three-dimensional (3D) model.

Ordinary Kriging interpolation within CAE Datamine is used to estimate the grade of each 10 x 10 x 10 metre block generated within the geological model. Density in the resource model is calculated using a fourth degree polynomial fit applied to the estimated Fe grade. Densities range from 4,38 t/m3 (60% Fe) to 5,01 t/m3 (68% Fe). A default density of 3,2 t/m3 is used for waste.

At the iron ore mines all blast holes are sampled per metre, but composited per hole. All holes are analysed for density and blast holes in ore are sampled and analysed for Fe, potassium oxide (K

2O), sodium oxide (Na

2O), silica (SiO

2), aluminium oxide (Al

2O

3),

phosphorus (P), sulphur (S), CaO, MgO, Mn and barium oxide (BaO). Every fifth blast hole is geologically logged per metre, which is used to update the geological model. The chemical results of these holes are used to update the ore block model. The major analytical technique for elemental analyses is XRF spectroscopy. Volumetric titration is used as verification method for the determination of total iron in the ore. International standards (eg SARM11) and in-house iron standards are used for calibration of the XRF spectrometer. The Khumani laboratory participates in a round-robin group that includes 11 laboratories for verification of assay results.


BEESHOEK IRON ORE MINE: RESOURCES AND RESERVES

MeasuredResources

IndicatedResources

InferredResources

Total Resources Measured and

IndicatedProved

ReservesProbableReserves

TotalReserves

Pit/Area Mt Fe % Mt Fe % Mt Fe % Mt Fe % Mt Fe % Mt Fe % Mt Fe %

BN 23,42 63,40 – – – – 23,42 63,40 13,92 63,55 – – 13,92 63,55

HF/HB 16,00 64,10 – – – – 16,00 64,10 6,87 64,27 – – 6,87 64,27

BF 8,45 63,51 0,23 63,54 0,001 65,24 8,68 63,51 1,02 61,59 – – 1,02 61,59

East Pit 8,91 64,63 0,04 64,23 – – 8,95 64,63 6,16 64,43 0,01 63,64 6,17 64,43

Village 42,71 63,72 2,98 63,57 0,002 63,71 45,69 63,71 27,15 64,24 – – 27,15 64,24

GF 3,13 63,81 0,09 61,80 – – 3,22 63,75 – – – – – –

HH Ext 0,28 62,63 – – – – 0,28 62,63 – – – – – –

HL 3,23 65,07 0,05 65,20 – – 3,28 65,07 – – – – – –

West Pit 9,45 63,19 – – 0,050 61,88 9,45 63,19 – – – – – –

Detrital – – – – 2,500 60,00 – – – – – – – –

Total 2011 115,58 63,76 3,39 63,55 2,553 60,04 118,97 63,75 55,12 64,04 0,01 63,64 55,13 64,04

Total 2010 112,59 63,71 0,76 63,61 2,55 60,04 113,35 63,71 47,64 64,93 0,03 66,45 47,67 64,93

Mineral Resources are inclusive of Mineral Reserves.Totals are rounded off.Modifying factors: Economic pit design; fines generated; customer product specifications.

BEESHOEK YEAR-ON-YEAR CHANGE – Measured and Indicated Resources for Beeshoek Mine increased to 118,97 from 113,35 million tonnes, mainly due to the increase in the resources for Village where remodelling of the ore body was undertaken. The 2011 Mineral Reserves increased by 16% to 55,13 million tonnes due to increase in Village and East Pit reserves. A feasibility study for Village Pit is still in progress.



KHUMANI IRON ORE MINE: RESOURCES AND RESERVES

Measured Resources

IndicatedResources

InferredResources

Measuredand

IndicatedProved

ReservesProbableReserves

TotalReserves

Pit/Area Mt Fe % Mt Fe % Mt Fe % Mt Fe % Mt Fe % Mt Fe % Mt Fe %

Bruce A 76,39 64,48 34,36 64,20 0,02 63,93 110,75 64,39 69,13 64,54 31,60 64,21 100,73 64,44

Bruce B 72,32 64,42 25,35 63,98 0,19 65,31 97,67 64,31 69,29 64,41 14,99 63,63 84,28 64,27

Bruce C 11,70 65,45 6,85 65,45 0,36 63,36 18,55 65,45 10,31 65,50 1,64 65,85 11,95 65,55

King-Mokaning 253,73 64,53 122,73 64,48 4,85 63,02 376,46 64,51 238,90 64,63 109,50 64,55 348,40 64,60

Detrital – – – – 4,00 60,00 – – – – – – – –

Total 2011 414,14 64,53 189,29 64,40 9,42 61,80 603,43 64,49 387,63 64,60 157,73 64,41 545,36 64,54

Total 2010 477,18 64,50 136,55 64,52 26,85 63,43 613,73 64,50 463,77 64,45 79,86 64,32 543,63 64,43

Mineral Resources are inclusive of Mineral Reserves.Totals are rounded off.Modifying factors: Economic pit design; fines generated; customer product specifications.

KHUMANI YEAR-ON-YEAR CHANGE – At Khumani Mine Measured and Indicated Resources decreased from 613,73 to 603,43 million tonnes mainly due to Bruce B and C pits where reduced tonnage is attributable to mining depletion and remodelling of Bruce C. Total reserves increased marginally to 545,36 from 543,63 million tonnes in 2010.

HISTORICAL PRODUCTION AT BEESHOEK AND KHUMANI MINES (SALEABLE PRODUCT)

Financial yearBeeshoek

MtKhumani

Mt

2006/2007 6,70 –

2007/2008 5,30 2,00

2008/2009 2,66 6,65

2009/2010 0,52 8,77

2010/2011 0,96 8,73


CHROMITE MINELOCALITY – Chromite operations at Dwarsrivier Mine form part of the chrome division of Assmang Limited. The mine is situated on the farm Dwarsrivier 372KT, approximately 30 kilometres from Steelpoort and 60 kilometres from Lydenburg, in Mpumalanga province, South Africa. Located at longitude 30°05’00”E/latitude 24°59’00”S, Assmang purchased the farm from Gold Fields Limited, together with all surface and mineral rights in October 1998.

HISTORY – Neighbouring properties to the north and south of Dwarsrivier had existing chrome mining operations at the time of purchase. The feasibility study of the plant, tailings dam and designs for the opencast and underground mines then commenced. After the completion of the feasibility study, approval to proceed with the final design and construction work was given in July 1999.

Chromite was obtained from the opencast mining areas at a rate of approximately 0,9 million tonnes a year and these areas were mined out within five years. Underground mining commenced in 2005 at a rate of 1,2 million tonnes ROM a year. Dwarsrivier Mine is specifically geared to deliver high-quality metallurgical grade chromite to the Machadodorp smelter. In addition, the plant has been designed to produce chemical grade products.

MINING AUTHORISATION – An old-order mining licence 21/99 was granted in October 1999. An application for the conversion to a new-order mining right submitted in October 2007 is still pending.

GEOLOGY – Dwarsrivier Mine is situated in the Eastern Limb of the Bushveld Igneous Complex, which comprises persistent layers of mafic and ultramafic rocks, containing the world’s largest known resources of platinum group metals, chromium and vanadium. The mafic rocks termed the Rustenburg Layered Suite, are approximately 8 kilometres thick in the Eastern Lobe, and are divided formally into five zones.

The rocks of the Marginal Zone at the base of the succession consist mainly of pyroxenites with some dunites and harzburgites. Above the Marginal Zone, the Lower Zone comprises mainly pyroxenites, harzburgites and dunite, and is present only in the northern part of the Eastern Lobe, and only as far south as Steelpoort. The appearance of chromitite layers marks the start of the Critical Zone, economically the most important zone. The layers are grouped into three sets termed the Lower, Middle and Upper groups. The sixth chromitite seam in the Lower Group (LG6), is an important source of chromite ore and is the orebody being mined at Dwarsrivier Mine. In the Eastern Lobe, in the vicinity of Dwarsrivier, the strike is nearly north-south, with a dip of approximately 10 degrees towards the west. Average thickness of the LG6 seam is about 1,86 metres in the Dwarsrivier area. Pipe-like dunite intrusions are evident in the area, as well as dolerite

dykes that on average strike north-east – east south-west. No significant grade variation is evident, especially not vertically in the ore seam. Small, insignificant regional variations do, however, exist.

MINERAL RESOURCES AND RESERVES – Information was obtained from boreholes with a 300 to 150 metre grid spacing. Resources were determined with a decreasing level of confidence.

• MeasuredResource(150metresdrillgridspacing);• IndicatedResource(300metresdrillgridspacing);and• InferredResource(drillgridspacinggreaterthan300metres).

All possible resources down to a mineable depth of 350 metres below ground level have been considered.

Vertical diamond drill holes are used for geological and grade modelling, except where information is needed to clarify large-scale fault planes. The Mineral Resources at Dwarsrivier Mine are based on a total of 237 diamond drill holes that have been used for grade estimation and orebody modelling purposes. The drill core is NQ size and is geologically and geotechnically logged. The collar position of the drill holes is surveyed, but no down-hole surveys are done, and the holes are assumed to have minimal deflection.

The chromitite seam is bounded above and below by pyroxenites. As such, the ore horizon is clearly defined. The core is sampled from the top contact downwards at 0,5 metre intervals. The core is split and half is retained as reference material in the core sheds. The other half is crushed and split into representative samples, which are crushed and pulverised for chemical analysis. The samples are analysed using fusion/ICP-OES for chrome oxide (Cr

2O

3),

SiO2, FeO, Al

2O

3, MgO and CaO. Three laboratories, all ISO 17025

accredited for this method, are used. Every tenth sample is analysed in duplicate. SARM 8 and SARM 9 standards, as well as in-house reference material, are included in every 20 to 30 samples in each batch. The density for each sample is measured using a gas pycnometer.

Mineral Resources have been estimated using Ordinary Kriging, where Cr

2O

3, FeO, Al

2O

3, MnO and MgO-contents of the LG6

seam and densities were determined, using block sizes of 50 x 50 x 4 metres.

During mining, a slightly diluted run-of-mine ore inclusive of the ‘false’ hangingwall is fed to the beneficiation plant. In the dense media separation part of the plant, the coarse fraction is upgraded to 40% Cr

2O

3, with a yield of 80% In the spiral section of the

plant, the finer fraction is upgraded to 44% Cr2O

3, and 46% Cr

2O

3

respectively, for metallurgical grade fines and chemical grade fines. A 67% yield is achieved in the spiral circuit.



DWARSRIVIER CHROME MINE: CHROME RESOURCES AND RESERVES



Measured 17,25 39,20 23,07 Proved 9,57 35,75 22,00


Total Measured and Indicated 2011 48,77 39,05 23,03 Total Reserves 2011 33,44 35,69 22,03

Total Measured and Indicated 2010 50,60 39,03 22,98 Total Reserves 2010 39,50 35,75 22,00

Inferred 48,05 39,15 23,01

Mineral Resources are inclusive of Mineral Reserves.Totals are rounded off.Modifying factors: Geological losses, mining losses and pillar losses.

YEAR-ON-YEAR CHANGE – 2011 Mineral Resources decreased by 1,83 to 48,77 million tonnes mainly due to mining depletion. Mineral Reserves reduced to 33,44 from 39, 50 million tonnes due to removal of additional structural blocks, reduction of pillar extraction factor from 77% to 75% and mining depletions during the year.

HISTORICAL PRODUCTION AT DWARSRIVIER CHROME MINE

Financial year Mt

2006/2007 1,01

2007/2008 1,24

2008/2009 1,03

2009/2010 0,78

2010/2011 1,25


Corporate governance and responsibility

The board of Assmang is committed to maintaining the standards of integrity, accountability and openness advocated in the King Report on Corporate Governance for South Africa 2009 (King III Report).

BOARD OF DIRECTORSDetails of the board of directors are set out on page 3 of this report.

The chairman is a non-executive director and the board meets at least four times a year on predetermined dates and none of the directors have a service contract with the company.

During the year Mr R J Carpenter resigned from the board of directors and Mr A D Stalker has been appointed as Executive Director.

MeetingsThe board met on four occasions in the year under review and attendance at these meetings was as follows:

Possible AttendedDesmond Sacco 4 4M Arnold 4 4G C Butler 4 4R J Carpenter 3 3C J Cory 4 4P C Crous 4 4A Joubert 4 4S Langa 4 4L S Matsimela 4 4P E Sacco 4 4A D Stalker 1 1J C Steenkamp 4 4A J Wilkens 4 4

OPERATIONS COMMITTEEJ C Steenkamp (Presiding Officer), G C Butler, P C Crous, A Joubert, A D Stalker and B H van Aswegen.

This board-appointed committee is mandated to consider and implement strategy and maintain effective management of the Group’s operations. The committee meets at least quarterly at predetermined dates, but during the year under review has met 13 times (2010: 15 times). The members of the committee includes four executive directors, and committee members contribute a diverse range of professional skills across a broad spectrum of the Group’s activities.

During the year Mr R J Carpenter was replaced by Mr A D Stalker as executive director and Operations committee member.

AUDIT COMMITTEEC J Cory (Chairman), M Arnold and G C Butler.

The Audit Committee comprises of three non-executive directors and one executive director. The committee meets at least three times a year on predetermined dates to consider the interim and final financial statements, recommends dividend declarations and monitors the internal and external audit functions. The committee operates under a board-approved charter and met three times during the year under review.

The main responsibilities of this committee include the safeguarding of the Group’s assets and shareholders’ investments, the maintenance of high standards of record keeping and systems of internal control as well as monitoring compliance with standards of corporate governance. In addition, the committee pursues the objective of ensuring that effective policies and practices are adopted in the preparation of financial information. Audit plans are based on relative risk and the committee conducts reviews of audits, undertaken by both internal and external auditors. It examines their respective plans and reports to ensure effectiveness. Both external and internal auditors have unrestricted access to the chairman of the Audit Committee who is a non-executive director. The provision of a ‘whistle-blowing’ facility is in operation.

INTERNAL AUDITThe Group’s internal audit function, which has been outsourced, operates with full authority of the directors. The engagement director reports directly to the chairman of the Audit Committee and has unrestricted access to the chairman of the board and other members of the Audit Committee. The internal auditors perform a variety of activities that ultimately result in an examination and evaluation of the effectiveness of internal control in all operating sectors of the Group’s businesses. Through this process, significant business risks are highlighted and the systems of operating and financial controls are monitored. Audit issues are brought to the attention of the Audit Committee and external auditors, and issues that require corrective action are discussed with senior management and acted upon under the auspices of the Audit Committee.

INTERNAL CONTROLBased on the information and explanations given by management, and reports presented by the internal and external auditors on the results of their audits, the directors are of the opinion that the internal accounting controls are adequate to address risks as identified by management.

Nothing has come to the attention of the directors or the internal auditors to indicate that any material breakdown in the functioning of the controls, procedures and systems has occurred during the year under review.

REMUNERATIONThe board-appointed Operations Committee (refer above) ensures appropriate levels of remuneration for senior management of the Group. This committee determines policy for individual remuneration and benefits to maintain a compensation policy which is both competitive and equitable.

Directors of the company are not remunerated for their services other than by way of directors’ fees paid in terms of the company’s Articles of Association.

Details of emoluments paid to directors are disclosed on page 22 of this report.

EMPLOYEE PARTICIPATIONThe Group has for many years entered into collective bargaining arrangements and recognition agreements with various employee organisations and unions.

CODE OF ETHICSThe Group is committed to the highest standards of integrity, behaviour and ethics in dealing with all its stakeholders.


Five-year review

FINANCIAL INFORMATION FOR THE YEAR ENDED

2011 2010 2009 2008 2007

R’000 R’000 R’000 R’000 R’000

Statements of comprehensive income

Revenue 19 222 134 13 071 591 15 263 603 14 835 456 6 127 430

Profit before taxation 8 560 999 4 161 748 9 923 181 8 227 884 1 971 824

Income tax expense 2 774 191 1 429 526 3 604 023 2 691 992 639 660

Comprehensive income for the year 5 786 808 2 732 222 6 319 158 5 535 892 1 332 164

Ordinary dividends declared 2 000 000 1 000 297 4 302 732 479 008 230 634

Retained profit 3 786 808 1 731 923 2 016 426 5 056 884 1 101 530

Statements of financial position

Assets

Property, plant and equipment 14 659 838 11 553 410 9 181 181 7 196 332 4 905 627

Non-current financial assets 106 205 154 024 84 268 – –

Current assets 9 647 584 7 864 229 7 627 762 8 561 439 2 891 045

Total assets 24 413 627 19 571 663 16 893 211 15 757 771 7 796 672

Equity and liabilities

Shareholders’ equity 17 507 326 13 720 518 11 988 593 9 972 167 4 915 285

Deferred tax liabilities 3 980 043 3 146 243 2 438 340 1 488 714 1 000 149

Long-term liabilities 407 769 394 532 378 417 294 003 144 833

Current liabilities 2 518 489 2 310 370 2 087 861 4 002 887 1 736 405

24 413 627 19 571 663 16 893 211 15 757 771 7 796 672

Statistics

Sales volumes:

– Iron ore tonnes ‘000 10 006 9 799 7 409 6 581 6 855

– Manganese ore (excluding sales to Cato Ridge Works) tonnes ‘000 2 882 3 095 2 152 3 711 2 327

– Manganese alloys (excluding sales to Cato Ridge Alloys (Proprietary) Limited) tonnes ‘000 218 238 117 247 251

– Chrome ore (excluding sales to Machadodorp Works) tonnes ‘000 373 272 256 304 172

– Charge chrome tonnes ‘000 238 189 144 275 232

Capital expenditure R’000 4 150 047 3 336 315 2 779 776 2 899 966 2 231 254


Annual financial statements

19 Approval of annual financial statements

19 Certificate by secretary

20 Independent auditors’ report

21 Directors’ report

24 Statements of financial position

25 Statements of comprehensive income

26 Statements of cash flow

27 Statements of changes in equity

28 Accounting policies

38 Notes to the financial statements


Approval of annual financial statements for the year ended 30 June 2011

The annual financial statements of Assmang Limited and Group annual financial statements for the year ended 30 June 2011 as set out on pages 21 to 54 have been prepared under the supervision of Mr G C T Karsten (BCom, FCMA, MBL), have been audited in accordance with section 30(2)(a) of the Companies Act of 2008, as amended, were approved by the board of directors on 9 December 2011 and are signed on its behalf by

Desmond Sacco Chairman

AJ WilkensDeputy Chairman

Johannesburg 9 December 2011

Certificate by secretaries

We certify that the requirements as stated in section 88(2)(e) of the Companies Act have been met and that all returns and notices, as are required of a public company in terms of the aforementioned Act, have been submitted to the Companies and Intellectual Property Commission and that such returns and notices are true, correct and up to date.

African Rainbow Minerals Limited

Secretariesper: GCT Karsten

Johannesburg 9 December 2011


Independent auditors’ report to the members of Assmang Limited

Report on the annual financial statementsWe have audited the annual financial statements of the Group and Company, which comprise the directors’ report, the statements of financial position as at 30 June 2011, the statements of comprehensive income, the statements of changes in equity and statements of cash flow for the year then ended, a summary of significant accounting policies and other explanatory notes, as set out on pages 21 to 54.

Directors’ responsibility for the annual financial statementsThe Company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and in the manner required by the Companies Act of South Africa. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the financial statements present fairly, in all material respects, the financial position of the Group and Company as at 30 June 2011, and of their financial performance and their cash flows for the year then ended in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of South Africa.

Ernst & Young Inc.Director: Crispen MaongeraRegistered Auditor

Chartered Accountant (SA)

Wanderers Office Park52 Corlet Drive, Illovo

Johannesburgtt


Directors’ report

Business of the GroupThe Company and Group are incorporated in the Republic of South Africa (Company registration number 1935/007343/06). The Company mines manganese at Black Rock Mine and iron ore at Beeshoek and Khumani mines in the Northern Cape province and chrome ore at Dwarsrivier Mine in the Mpumalanga province. The Company also produces manganese alloys at its works at Cato Ridge in the KwaZulu-Natal province and chrome and manganese alloys at its works in Machadodorp in the Mpumalanga province. Cato Ridge Alloys (Proprietary) Limited, a joint venture between the Company and Mizushima Ferroalloys Company Limited (40%) and Sumitomo Corporation (10%), both of Japan, produces refined ferromanganese at the Cato Ridge Works.

Incorporated in 1935, the Group employs 5 716 (2010: 4 892) permanent employees and is operated as three divisions, namely iron ore, manganese and chrome. Assmang is controlled jointly by African Rainbow Minerals Limited and Assore Limited, which each hold 50% of the issued share capital and both of which are listed on the JSE Limited (“JSE”).

Most of the Group’s production is exported to the Far East, Europe and the United States of America. Manganese ore is also transferred to the works at Cato Ridge where it is used in the production of manganese alloys. Assmang’s Dwarsrivier Chrome Ore Mine near Steelpoort supplies ore to the Company’s Machadodorp Works for the production of chrome alloys.

Directors’ responsibility relating to the annual financial statementsIt is the directors’ responsibility to prepare annual financial statements that fairly present the state of affairs and the results of the Company and the Group. The independent auditors are responsible for auditing and reporting on these annual financial statements.

The annual financial statements set out in this report have been prepared by management in accordance with International Financial Reporting Standards. They are based on appropriate accounting policies which have been consistently applied. The accounting policies are supported by reasonable and prudent judgements and estimates. The annual financial statements have been prepared on a going-concern basis and the directors have no reason to believe that the business will not be a going concern in the foreseeable future.

In fulfilling its responsibilities, management ensures that adequate accounting records are maintained and has developed and continues to maintain systems of internal accounting controls which are designed to provide reasonable, although not absolute, assurance as to the integrity and reliability of the annual financial statements, and to adequately safeguard, verify and maintain the assets of the Group. These controls are monitored throughout the Group and nothing has come to the directors’ attention to indicate that any material breakdown in the functioning of these controls, procedures and systems has occurred to the date of this report.

Ore and alloys dispatched for export and local markets were as follows:

2011 2010

Group operations for the year ended 30 June tonnes ’000 tonnes ’000

Iron ore 10 006 9 799

Manganese ore (excluding sales to Cato Ridge Works) 2 882 3 095

Chrome ore (excluding sales to Machadodorp Works) 373 272

Manganese alloys 218 238

Charge chrome 238 189

Capital expenditure:

Group expenditure on property, plant and equipment was as follows: R’000 R’000

– iron ore mines 3 225 200 2 304 067

– manganese ore mines 290 441 458 809

– chrome ore mine 76 606 64 915

– ferromanganese alloy plant 418 224 284 689

– ferrochrome alloy plant 139 576 223 835

4 150 047 3 336 315

Borrowing powersIn accordance with the Company’s Articles of Association the borrowing powers of the Group at 30 June 2011 were limited to R17,51 billion (2010: R13,72 billion). Group borrowings at that date were R5 million (2010: R13 million) (refer note 19).

InvestmentsInformation regarding the Company’s interests in a subsidiary and a jointly controlled entity is provided in notes 5 and 6 to the financial statements.


Directorate and SecretaryThe names and details of the directors of the Company and secretary at the end of the year are reflected on page 3. There are no service contracts between the Company and any of its directors.

During the year Mr R J Carpenter resigned from the board of directors and Mr A D Stalker has been appointed as Executive Director.

Directors’ emolumentsThe table below sets out directors’ emoluments paid by the Company during the year under review. No emoluments were paid to alternate directors.

2011 2010 R’000 R’000

Executive directors 180 144

G C Butler* 36 36 R J Carpenter (Resigned 28 February 2011) 18 36 P C Crous 36 36 A Joubert* (Appointed 1 August 2010) 36 –A D Stalker (Appointed 1 March 2011) 18 –J C Steenkamp* 36 36

Non-executive directors 266 302

Desmond Sacco (Chairman) 50 50M Arnold* 36 36C J Cory 36 36S Langa* 36 36 L S Matsimela 36 36 P E Sacco 36 36 D V Simelane* (Resigned 31 July 2010) – 36 A J Wilkens* 36 36

Total 446 446 * Fees paid to African Rainbow Minerals Limited.

Key management personnelAll of the directors, including alternate directors, are employees of one of the two controlling shareholders (African Rainbow Minerals Limited and Assore Limited) and are remunerated by the controlling shareholder concerned. The controlling shareholders provide a combination of management, marketing and administration services to the Group for which they are compensated by way of fee income, details of which are disclosed in note 33 of this report.

Major shareholdersAs at the date of this report, the shareholders of the Company were as follows:

Number Percentage

African Rainbow Minerals Limited 1 774 103 50,0

Assore Limited 1 774 103 50,0

Special resolutionsThere were no special resolutions passed by the Company, joint venture or any of its subsidiaries during the period 1 July 2010 to the date of this report.

Khumani Iron Ore Mine Expansion ProjectThe Khumani Mine Expansion to 16 mtpa is progressing well and is expected to be completed nine months ahead of the scheduled date of July 2012 and well within budget. Capital spent on the 6 mtpa expansion is approximately R4,7 billion. The capital spent during the year ended June 2011 amounts to R2,9 billion (2010: R1,8 billion).

Directors’ report continued


LogisticsAssmang and Transnet Limited (“Transnet”) continue with negotiations with respect to capacity allocations on lines and at ports and future export growth.

The iron and manganese ore industries, together with Transnet, have embarked on a joint feasibility project to expand the current Orex line to beyond 60 mtpa. Completion of the next level feasibility study is expected to be completed during the latter part of 2011.

Assmang and Transnet have an agreement to export manganese ore through the port of Port Elizabeth, which will expire on 31 March 2013. Manganese ore stockpile and export capacity is also secured at Durban and Richards Bay harbours until June 2014.

Assmang is endeavouring to reduce the current amount of road transport being used for both raw materials and final product. This is dependent on operational service levels achieved by Transnet and committed rail and port capacity.

Safety and health Regrettably, a fatality occurred at Machadodorp Works on 2 February 2011 when a trainee crane operator fell from an overhead crane at furnace No 2. An investigation in terms of section 31 of the Occupational Health and Safety Act by the Department of Labour is in progress.

Black Rock Mine achieved one million fatality-free shifts during June 2011.

Beeshoek Iron Ore Mine recorded zero lost-time injuries for 12 consecutive months. The mine also recorded 8 000 fatality-free production shifts in the Department of Minerals and Resources (Northern Cape) safety competition. As at 30 June 2011, the mine had also recorded 1,9 million fatality-free shifts when the last fatality occurred during March 2003.

Khumani Iron Ore Mine achieved its first one million fatality-free shift during November 2010 and was awarded the St Barbara floating trophy for safety. The Mine has recorded 1,6 million fatality-free shifts up to 30 June 2011.

Assmang has achieved a lost-time injury frequency rate of 0,47 compared to an acceptable standard of 0,50 (based on 200 000 shifts).

Medical surveillance has been conducted at all operations according to the requirements of the relevant legislation.

Mining rights statusKhumani Iron Ore Mine: New-order mining right was granted for 30 years during 2008.

Northern Cape Manganese Mines: Old-order mining right converted to new-order mining right for 30 years and signed subsequent to year-end on 13 July 2011.

Beeshoek Iron Ore Mine conversion: Processed by regional office (Kimberley) and submitted to the Department of Minerals and Resources in Pretoria with a recommendation for approval for 30 years.

Dwarsrivier Chrome Mine conversion: Processed by regional office (Polokwane) and submitted to the Department of Minerals and Resources in Pretoria with a recommendation for approval for 30 years.

Conversion of chrome furnaces to manganese furnacesFurnace 5 at Machadodorp Works was successfully converted from a FeCr to a FeMn furnace at the beginning of the financial year. Production of FeMn from No 5 furnace exceeded all production and efficiencies targets at reduced costs. After the successful conversion of the No 5 furnace from the production of FeCr to high-carbon FeMn, a decision was made to convert further furnaces and as such Assmang announced on 30 June 2011 a plan to convert the Nos 2 and 3 furnaces to produce high-carbon FeMn.

DividendsOn 5 August 2010, the board of directors declared dividend number 143 of R281,83 per share amounting to R1 billion, which was paid on 19 August 2010. On 1 February 2011, the board of directors declared dividend number 144 of R281,83 per share amounting to R1 billion, which was paid on 11 February 2011.

Events subsequent to year-endDividendOn 10 August 2011, the board declared dividend number 145 of R281,83 per share amounting to R1,0 billion, which was paid to shareholders on 29 August 2011. Secondary tax on companies relating to this dividend amounted to R100 million.

Explosion at furnace No 6 (February 2008)Assmang and the local insurers have settled the insurance claim. The financial statements have not been adjusted, since the settlement amount is not considered material to the results of the Group or the Company.


Statements of financial position as at 30 June 2011

GROUP COMPANY

2011 2010 2011 2010

Note R’000 R’000 R’000 R’000

ASSETS

Non-current assets 14 766 043 11 707 434 14 982 491 11 965 648

Property, plant and equipment 1 14 657 541 11 550 751 14 621 170 11 519 444

Intangible assets 2 2 299 2 659 – –

Loans and long-term receivables 3 106 203 63 811 304 673 300 683

Non-current financial assets 4 – 90 213 – 90 213

Investment in subsidiary companies 5 18 426 17 086

Interest in a joint venture 6 38 222 38 222

Current assets 9 647 584 7 864 229 9 193 859 7 393 864

Inventories 7 3 420 229 3 120 151 3 130 427 2 812 246

Trade and other receivables 8 3 070 384 2 856 213 3 001 327 2 781 913

Structured investment 9 93 893 – 93 893 –

Cash and cash equivalents 10 3 063 078 1 887 865 2 968 212 1 799 705

Total assets 24 413 627 19 571 663 24 176 350 19 359 512

EQUITY AND LIABILITIES

Equity

Issued capital 11 1 774 1 774 1 774 1 774

Share premium 11 11 612 11 612 11 612 11 612

Retained earnings 17 493 940 13 707 132 17 342 179 13 566 095

Total equity 17 507 326 13 720 518 17 355 565 13 579 481

Non-current liabilities 4 387 812 3 540 775 4 387 491 3 538 861

Long-term borrowings – interest bearing 12 – 5 466 – 5 466

Deferred tax liability 13 3 980 043 3 146 243 3 979 722 3 144 329

Long-term provisions 14 407 769 389 066 407 769 389 066

Current liabilities 2 518 489 2 310 370 2 433 294 2 241 170

Short-term provisions 15 163 168 146 678 163 168 146 678

Trade and other payables 16 2 020 681 1 725 286 1 938 389 1 656 198

South African Revenue Services 30 329 923 431 182 327 020 431 070

Short-term borrowings – interest bearing 17 4 717 7 224 4 717 7 224

Total equity and liabilities 24 413 627 19 571 663 24 176 350 19 359 512


Statements of comprehensive income for the year ended 30 June 2011

GROUP COMPANY

2011 2010 2011 2010

Note R’000 R’000 R’000 R’000

Revenue 20 19 222 134 13 071 591 18 914 386 12 771 435

Turnover 20 19 074 942 12 869 713 18 755 472 12 556 142

Cost of sales (10 017 020) (8 320 945) (9 699 651) (8 174 770)

Gross profit 9 057 922 4 548 768 9 055 821 4 381 372

Other operating income 21 560 917 340 113 550 996 333 646

Other operating expenses 22 (1 174 178) (885 280) (1 203 031) (857 579)

Profit from operations 23 8 444 661 4 003 601 8 403 786 3 857 439

Income from investments 24 141 796 172 497 155 706 186 987

Finance costs 25 (25 458) (14 350) (25 456) (14 350)

Profit before taxation 8 560 999 4 161 748 8 534 036 4 030 076

Taxation 26 (2 774 191) (1 429 526) (2 757 952) (1 380 708)

Total comprehensive income for the year, attributable to shareholders 5 786 808 2 732 222 5 776 084 2 649 368


Statements of cash flow for the year ended 30 June 2011

GROUP COMPANY

2011 2010 2011 2010

Note R’000 R’000 R’000 R’000

Cash flow from operating activities

Cash received from customers 19 403 941 11 475 984 19 069 310 11 195 195

Cash paid to suppliers and employees (10 426 170) (7 886 437) (10 173 031) (7 687 278)

Cash generated from operations 29 8 977 771 3 589 547 8 896 279 3 507 917

Net cash inflow from operating activities (3 901 469) (1 926 443) (3 872 517) (1 901 245)

Interest received 24 141 796 171 161 130 706 160 720

Interest paid 25 (1 615) (3 983) (1 613) (3 983)

Dividends received 24 – – 25 000 25 000

Taxation paid 30 (2 041 650) (1 093 324) (2 026 610) (1 082 685)

Dividends paid (2 000 000) (1 000 297) (2 000 000) (1 000 297)

Net cash outflow from investing activities (3 894 486) (3 100 804) (3 848 652) (3 058 058)

– to maintain operations (873 657) (886 887) (866 225) (885 069)

– to expand operations (2 796 617) (2 031 783) (2 796 617) (2 031 783)

Capitalised fees (183 309) (137 148) (183 309) (137 148)

Increase in long-term receivables (42 392) (63 811) (3 990) (22 883)

Proceeds on disposal of property, plant and equipment 1 489 18 825 1 489 18 825

Net cash (outflow)/inflow from financing activities (6 603) 2 887 (6 603) 2 887

(Decrease)/increase in short-term borrowings (6 603) 2 887 (6 603) 2 887

Cash and cash equivalents

– net increase/(decrease) for the year 1 175 213 (1 434 813) 1 168 507 (1 448 499)

– at beginning of year 1 887 865 3 322 678 1 799 705 3 248 204

– at end of year 10 3 063 078 1 887 865 2 968 212 1 799 705


Statements of changes in equity for the year ended 30 June 2011

GROUP COMPANY

2011 2010 2011 2010

Note R’000 R’000 R’000 R’000

Issued capital and share premium

Issued capital 11 1 774 1 774 1 774 1 774

Share premium 11 11 612 11 612 11 612 11 612

Total 13 386 13 386 13 386 13 386

Retained earnings

Balance at beginning of year 13 707 132 11 975 207 13 566 095 11 917 024

Total comprehensive income for the year 5 786 808 2 732 222 5 776 084 2 649 368

Ordinary dividends paid (2 000 000) (1 000 297) (2 000 000) (1 000 297)

No 141 totalling 14 100 cents per share 500 297 500 297

No 142 totalling 14 092 cents per share 500 000 500 000

No 143 totalling 28 133 cents per share (1 000 000) (1 000 000)

No 144 totalling 28 133 cents per share (1 000 000) (1 000 000)

Balance at end of year 17 493 940 13 707 132 17 342 179 13 566 095

Total equity 17 507 326 13 720 518 17 355 565 13 579 481


Accounting policies

Basis of preparationThe Group and Company financial statements have been prepared on the historical-cost basis except for the revaluation of financial assets and financial liabilities to fair value through the statement of comprehensive income.

The principal accounting policies as set out below are consistent in all material aspects with those applied in the previous year except as stated under the heading “Changes in accounting policies” below.

The financial statements are presented in South African Rand and all values are rounded to the nearest thousand unless otherwise indicated.

Statement of complianceThe annual financial statements of the Group and Company are prepared in accordance with and comply with International Financial Reporting Standards (IFRS) and interpretations of those standards, as adopted by the International Accounting Standards Board (IASB), and applicable legislation.

Changes in accounting policiesIn addition to a set of improvements to IFRS, published by the IASB, representing mostly minor changes, the following new, revised and amended standards and interpretations were adopted by the Group in the current year, none of which had any impact on the accounting policies, financial position or performance of the Group or the Company:IFRS 2 (Amendment) – Group Cash-settled Share-based Payment TransactionsIAS 32 (Amendment) – Financial instruments: Classification of Rights IssuesIFRIC 19 – Extinguishing Financial Liabilities with Equity Instruments

IFRS and IFRIC interpretations not yet effectiveThe Group has not applied the following IFRS and IFRIC new, revised and amended standards and interpretations which have been issued, as they are not yet effective:

STANDARD DESCRIPTION

EFFECTIVE FOR FINANCIAL PERIODS COMMENCING IMPACT

IAS 24 Related-party Disclosures (Revised)

January 2011 The revisions to the standard clarify the definition of a related party to simplify the identification of related-party relationships, particularly in relation to significant influence and joint control.

The Group is in the process of determining the impact these revisions may have on its disclosures.

IFRIC 14 IFRIC 14 (Amendment) – Prepayments of a Minimum Funding Requirement

January 2011 The amendment to the interpretation provides guidance on assessing the recoverable amount of a net pension asset, and permits an entity to treat the prepayment of a minimum funding requirement as an asset.

Since the Group does not have any funded defined benefit obligations, the amendment is not expected to have any impact its results or disclosures.

IFRS 7 Financial Instruments: Disclosures (Amendment)

July 2011 The amendment requires additional qualitative disclosures relating to transfers of financial assets that are entirely derecognised, but where the entity has continuing involvement in these assets, and to financial assets not entirely recognised.

The Group does not expect this amendment to have a material effect on its results and disclosures.

IAS 12 IAS 12 Income Taxes (Amendment) – Deferred Taxes: Recovery of Underlying Assets

January 2012 The amendments introduce a presumption that the value of an investment property is recovered entirely through its sale. This presumption is rebutted if the investment property is held within a business model of which the objective is to consume substantially all of the economic benefits embodied in the investment property over time, rather than through its sale.

The Group does not expect this amendment to have a material effect on its results and disclosures.




IFRS 9 Financial Instruments January 2013 The IASB intends to replace IAS 39 – Financial Instruments: Recognition and Measurement, with IFRS 9, which is being prepared on a phased basis. The statement aims to simplify many of the aspects contained in IAS 39, and will be required to be applied retrospectively.

The Group is in the process of determining the impact of the standard on its results and disclosures.

IFRS 10 Consolidated Financial Statements

January 2013 This new standard includes a new definition of control which is used to determine which entities will be consolidated. This will apply to all entities, including special purpose entities (now known as “structured entities”). The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled and therefore consolidated, and may result in a change to the entities which are within a group.


IFRS 11 Joint Arrangements January 2013 IFRS 11 replaces IAS 31 Interest in Joint Ventures and SIC 13 Jointly controlled Entities – Non-monetary Contributions by Venturers. IFRS 11 describes the accounting for a "joint arrangement", which is defined as a contractual arrangement over which two or more parties have joint control. Joint arrangements are classified as either joint operations or ventures. IFRS 11 provides a new definition of joint control, and substantially changes the accounting for certain joint arrangements. Jointly controlled assets and jointly controlled operations (as defined under IAS 31, which is currently applicable), are now termed as joint operations under IFRS 11, and the accounting of those arrangements will be the same under IAS 31. That is, the joint operator continues to recognise its assets, liabilities, revenues and expenses, and/or its relative share of those items if any. Where proportionate consolidation was used to account for jointly controlled entities under IAS 31, such entities will most likely be classified as joint ventures under IFRS 11. The transition to IFRS 11 could result in substantial changes to the financial statements of the joint venturer (now defined as a party that has joint control in a joint venture), due to the requirement that joint ventures will be required to be accounted for using the equity method and that proportionate consolidation will no longer be permitted.

IFRS 12 Disclosures of Interests in Other Entities

January 2013 This new standard describes and includes all the disclosures that are required relating to an entity's interest in subsidiaries, joint arrangements, associates and structured entities. Entities will be required to disclose the judgements made to determine whether it controls another entity.





IFRS 13 Fair Value Measurement January 2013 This new standard provides guidance on how to measure fair value of financial and non-financial assets and liabilities when fair value measurement is required or permitted by IFRS.


The Group or Company does not intend early adopting any of the above amendments, standards and interpretations.

Basis of consolidationThe consolidated financial statements comprise the financial statements of the Company, subsidiary companies and a jointly controlled entity, which were prepared for the same reporting year as the parent Company, using consistent accounting policies.

Subsidiary companiesSubsidiary companies are investments in entities in which the Company has control over the financial and operating decisions of the entity.

Subsidiaries are consolidated in full from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date such control ceases. Investments in subsidiaries in the Company’s financial statements are accounted for at cost less impairments.

Joint venturesThe Group has an interest in a joint venture which is a jointly controlled entity, whereby the ventures have a contractual arrangement that establishes joint control over its economic activities. The agreement requires unanimous agreement for financial and operating decisions among the ventures. The Group recognises its interest in the joint venture using the proportionate consolidation method. The Group combines its proportionate share of each of the assets, liabilities, income and expenses of the joint venture with similar items, line by line, in its consolidated financial statements. The financial statements of the joint venture are prepared for the same reporting period as the Group. Adjustments are made where necessary to bring the accounting policies in line with those of the Group.

Adjustments are made in the Group’s consolidated financial statements to eliminate the Group’s share of intragroup balances, transactions and unrealised gains and losses on such transactions between the Group and its jointly controlled entity. Losses on transactions are recognised immediately if the loss provides evidence of a reduction in the net realisable value of current assets or an impairment loss. The joint venture is proportionately consolidated until the date on which the Group ceases to have joint control over the joint venture.

Upon loss of joint control the Group measures and recognises its remaining investment at its fair value. Any difference between the carrying amount of the former joint controlled entity upon loss of joint control and the fair value of the remaining investment and proceeds from disposal are recognised in profit or loss. When the remaining investment constitutes significant influence, it is accounted for as investment in an associate.

Intragroup transactions and balancesConsolidation principles relating to the elimination of intercompany transactions and balances and adjustments for unrealised intercompany profits and losses are applied to all intragroup dealings, for all transactions with subsidiaries and associated companies or joint ventures.

Significant accounting judgements, estimates and assumptionsThe preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities and contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates and assumptions are continuously evaluated and are based on management’s experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. However, actual outcomes can differ from these estimates.

Information regarding significant areas of estimation uncertainty considered by management in preparing the financial statements is described below.

Mine rehabilitation provisionThe Group entity assesses its mine rehabilitation provision annually. Significant estimates and assumptions are made in determining the provision for mine rehabilitation as there are numerous factors that will affect the ultimate liability payable. These factors include estimates of the extent and costs of rehabilitation activities, technological changes, regulatory changes, cost increases and changes in discount rates. These uncertainties may result in future actual expenditure differing from the amounts currently provided. Provision at the date of the statement of financial position represents management’s best estimate of the present value of the future rehabilitation costs required. Changes to estimated future costs are recognised in the statement of financial position by adjusting the rehabilitation asset and liability. If, for mature mines, the revised valued mine assets, net of rehabilitation provisions, exceeds the carrying value, that portion of the increase is charged directly to expense. For closed sights, changes to estimated costs are recognised immediately in the statement of comprehensive income.

Accounting policies continued


Ore reserve and resource estimatesOre reserves are estimates of the amount of ore that can be economically and legally extracted from the Group’s mining properties. The Group estimates its ore reserves and mineral resources based on information compiled by appropriately qualified persons relating to the geological data on the size, depth and shape of the ore body, and requires complex geological judgements to interpret the data. The estimation of recoverable reserves is based upon factors such as estimates of foreign exchange rates, commodity prices, future capital requirements, and production costs along with geological assumptions and judgements made in estimating the size and grade of the ore body. Changes in the reserve or resource estimates may impact upon carrying value of exploration and evaluation assets, mine properties, property, plant and equipment, provisions for rehabilitation, recognition of deferred tax assets, and depreciation and amortisation charges.

Unit of production depreciationEstimated recoverable reserves are used in determining the annual depreciation and/or amortisation of mine specific assets. This results in a depreciation/amortisation charge proportional to the depletion of the anticipated remaining life of mine production. Each item’s life, which is assessed annually, has regard to both its physical life limitations and to present assessments of economically recoverable reserves of the mine property at which the asset is located. These calculations require the use of estimates and assumptions, including the amount of recoverable reserves and estimates of future capital expenditure.

Exploration expenditure The application of the accounting policy for exploration expenditure requires judgement in determining whether it is likely that future economic benefits are likely, which may be based on assumptions about future events or circumstances. Estimates and assumptions made may change if new information becomes available. If, after expenditure is capitalised, information becomes available suggesting that the recovery of expenditure is unlikely, the amount capitalised is written off in the statement of comprehensive income in the period when the new information becomes available.

Impairment of assetsThe Group assesses each cash generating unit annually to determine whether any indications of impairment exist. Where an indicator of impairment exists, a formal estimate of the recoverable amount is made, which is considered the higher of the fair value less costs to sell and value in use. These assessments require the use of estimates and assumptions such as commodity prices, discount rates, future capital requirements, exploration potential and operating performance. Fair value is determined as the amount that would be obtained from the sale of the asset in an arm’s length transaction between knowledgeable and willing parties. Fair value for mineral assets is generally determined as the present value of estimated future cash flows arising from the continued use of the asset, which includes estimates such as the cost of future expansion plans and eventual disposal, using assumptions that an independent market participant may take into account. Cash flows are discounted at an appropriate discount rate to determine the net present value. For the purposes of calculating the impairment of any asset, management regards an individual mine or works site as a cash generating unit.

Property, plant and equipment and depreciationProperty, plant and equipment is stated at cost excluding the day-to-day maintenance costs, less accumulated depreciation and any accumulated impairment in value. Costs include the cost of replacing part of the plant and equipment when incurred, if the recognition criteria are met.

The remaining useful life and residual value of assets are reviewed on an annual basis and depreciation rates are adjusted if required.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income in the year in which the asset is derecognised.

Specific asset categories are accounted for as follows:Mine development Costs to develop new ore bodies, to define further mineralisation in existing ore bodies and to expand the capacity of a mine or its current production, are capitalised. Assets representing the future economic benefits relating to environmental rehabilitation provisions for decommissioning are recognised and capitalised when the obligation arises. Development costs to maintain production are expensed as incurred.

Mine development and decommissioning costs are amortised using the lesser of their estimated useful life or the units-of-production method based on proven and probable ore reserves. Proven and probable ore reserves reflect estimated quantities of economically recoverable reserves which can be recovered in future from known mineral deposits. These reserves are reassessed annually. Where the reserves are not determinable due to their scattered nature, the straight-line method of amortisation is applied based on the estimated life of the mine. The maximum period of amortisation using these methods is 25 years.

Plant and machineryMining plant and machinery is amortised over its estimated useful life using the units-of-production method based on estimated proved and probable ore reserves. Non-mining plant and machinery is depreciated over its useful life or life of mine. The maximum life of any single item of plant and machinery, used in the amortisation calculation, is 25 years.

The carrying values of plant and machinery are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.


An item of plant and machinery is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of comprehensive income of the year in which the asset is derecognised.

The residual values, useful lives and methods of assets are reviewed, and adjusted if appropriate, at each financial year-end.

When each major inspection is performed, its cost is recognised in the carrying amount of the plant and machinery as a replacement if the recognition criteria are satisfied.

When plant and equipment comprises major components with different useful lives, these components are accounted for as separate items. Expenditure incurred to replace or modify a significant component of plant is capitalised and any remaining book value of the component replaced is written off in the statement of comprehensive income.

Land and buildingsLand and buildings are carried at cost. Land is not depreciated. Buildings are depreciated on a straight-line basis over their estimated useful lives to an estimated residual value. The annual depreciation rates used vary between 2 to 5%.

Mineral rightsMineral rights for valid mining licences are carried at cost less depreciation and impairments in value. Mineral rights that are being depleted are amortised over their estimated useful lives using the units-of-production method based on proven and probable ore reserves. Where the reserves are not determinable, due to their scattered nature, the straight-line method is applied. The maximum rate of depletion of any mineral right is 25 years. Mineral rights that are not being depleted are not amortised. Mineral rights are written off in full when they no longer have any commercial value.

Furniture, equipment, vehicles and other propertiesFurniture, equipment, vehicles and other properties are depreciated on the straight-line basis over their expected useful lives to estimated residual values. The residual value is the amount expected to be obtained for the asset at the end of its useful life, after deducting expected costs of disposal.

The annual depreciation rates for vehicles, furniture and office equipment and other properties are:

Motor vehicles 20%

Furniture and office equipment 10 to 33%

Other properties 3 to 25 years

Leased assetsCapitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Intangible assetsIntangible assets represent proprietary technical information acquired from third parties. Intangible assets are reflected at cost and are amortised on a straight-line basis over the anticipated useful life of the assets up to a maximum of 20 years.

Financial instrumentsLoans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable repayments that are not quoted in an active market. Such assets are carried at amortised cost using the effective interest method less any allowance for impairment. Gains and losses are recognised in profit and loss when the loans and receivables are derecognised or impaired, as well as through the amortisation process.

Derivative instrumentsDerivatives, including embedded derivatives, if any, are initially measured at cost and subsequently measured at fair value. Fair value adjustments are recognised in the statement of comprehensive income. Forward exchange contracts are valued at the date of the statement of financial position using the forward rate available at the date of the statement of financial position for the remaining maturity period of the forward contract. Any gain or loss from valuing the contract against the contracted rate is recognised in the statement of comprehensive income. A corresponding forward exchange asset or liability is recognised. On settlement of a forward exchange contract, any gain or loss is recognised in the statement of comprehensive income.

Cash and cash equivalents• Cashandcashequivalentsaremeasuredatamortisedcost.• Cashthatissubjecttolegalorcontractualrestrictionsinuseisclassifiedseparately.

Trade receivablesTrade receivables, which generally have 30- to 60-day terms, are initially recognised at fair value and subsequently at amortised cost. Receivables are classified as loans and receivables for the purposes of IAS 39 disclosures. An impairment is recognised when there is evidence that an entity will not be able to collect all amounts due according to the original terms of the receivable. The impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rates. The amount of the impairment is charged to the statement of comprehensive income when it occurs.



PayablesTrade and other payables are not interest-bearing and are initially recorded at fair value and subsequently at amortised cost.

Impairment of financial assets The Group assesses at each date of the statement of financial position whether a financial asset or Group of financial assets is impaired.

If there is objective evidence that an impairment loss has been incurred on loans and receivables carried at amortised cost, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (ie the effective interest rate computed at initial recognition).

The amount of the loss shall be recognised in the statement of comprehensive income.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the statement of comprehensive income, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

Derecognition of financial assetsA financial asset (or, where applicable, a part of a financial asset or part of a Group of similar financial assets) is derecognised where:• therightstoreceivecashflowsfromtheassethaveexpired;or• theGroupretainstherighttoreceivecashflowsfromtheasset,buthasassumedanobligationtopaytheminfullwithoutmaterialdelay

to a third party under a ‘pass-through’ arrangement; or• the Group has transferred it rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards

of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Where the Group has transferred its right to receive cash flows from an asset and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Group’s continuing involvement. Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower of the original carrying amount of the asset and the maximum amount of consideration that the Group could be required to repay.

Derecognition of financial liabilitiesA financial liability is derecognised when the obligation under the liability is discharged, cancelled or expired.

Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the statement of comprehensive income.

InventoriesInventories are valued at the lower of cost and net realisable value with due allowance being made for obsolete and slow-moving items.

Cost includes the costs incurred in bringing each product to its present location and condition and is determined as follows:

Raw materials – weighted average cost;Consumables, stores and maintenance spares – average cost;Finished goods and work in progress – cost of direct materials and labour and a proportion of manufacturing

overheads based on normal operating capacity but excluding borrowing costs on an average cost basis.

Net realisable value is determined based on the estimated selling price in the ordinary course of business, less estimated costs of processing and the estimated selling expenses. Stockpile quantities are determined using assumptions such as densities and grades which are based on studies, historical data and industry norms.

Impairment of non-financial assetsThe Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s or a cash-generating unit’s fair value less estimated selling costs, and its value in use. Recoverable amount is determined for assets individually, unless the asset does not generate cash inflows that are largely independent of those from other assets or Groups of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses of continuing operations are recognised in the statement of comprehensive income in those expense categories consistent with the function of the impaired asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount


cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the statement of comprehensive income unless the asset is carried at revalued amount, in which case the reversal is treated as a revaluation increase. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.

Interest-bearing loans and borrowingsAll loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue cost, and any discount or premium on settlement. Gains and losses are recognised in the statement of comprehensive income when the liabilities are derecognised, as well as through the amortisation process.

Leased assetsThe determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement and requires an assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to use the asset.

A reassessment is made after inception of the lease only if one of the following applies:• thereisachargeincontractualterms,otherthanarenewalorextensionofthearrangement;• arenewaloptionisexercisedorextensiongranted,unlessthetermoftherenewalorextensionwasinitiallyincludedintheleaseterm;• thereisachangeinthedeterminationofwhetherfulfilmentisdependentonaspecificasset;or• thereisasubstantialchangetotheasset.

Where a reassessment is made, lease accounting shall commence or cease from the date when the change in circumstances gives rise to the reassessment.

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease either at the fair value of the leased property or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income as incurred.

Operating lease payments are recognised as an expense in the statement of comprehensive income on a straight-line basis over the lease term. Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases.

ProvisionsProvisions are recognised when the following conditions have been met:• Apresentlegalorconstructiveobligation,totransfereconomicbenefitsasaresultofpasteventsexists.• Areasonableestimateoftheobligationcanbemade.

A present obligation is considered to exist when there is no realistic alternative but to make the transfer of economic benefits. The amount recognised as a provision is the best estimate at the statement of financial position date of the expenditure required to settle the obligation. Only expenditure related to the purpose for which the provision is raised is charged against the provision. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

Environmental rehabilitation obligationThe estimated cost of rehabilitation, comprising liabilities for decommissioning and restoration, is based on current legal requirements and existing technology and is reassessed annually. Cost estimates are not reduced by the potential proceeds from the sale of assets.

DecommissioningThe present value of estimated decommissioning obligations, being the cost to dismantle all structures and rehabilitate the land on which the mine is located, is included in long-term provisions. The unwinding of the discount used in the calculation of the obligation is included in the statement of comprehensive income under finance costs. The initial related decommissioning asset is recognised in property, plant and equipment.

RestorationThe present value of the estimated cost of restoration, being the cost to correct damage caused by ongoing mining operations, is included in long-term provisions. This estimate is revised annually and any movement is charged against income.

Expenditure on ongoing rehabilitation is charged to the statement of comprehensive income as incurred.

Environmental rehabilitation trust fundThe Group makes annual contributions to an environmental rehabilitation trust fund which was created to fund the estimated cost of pollution control, rehabilitation and mine closure at the end of the life of each of the Group’s mines. Annual contributions are determined on the basis of the estimated environmental obligation divided by the remaining life of a mine. Income earned on monies paid to the trust is accounted for as investment income in the trust. These contributions are made in accordance with the legal requirements, and with the approval, of the Department of Mineral Resources.



Contingent liabilitiesA contingent liability is a possible obligation that arises from past events, the existence of which will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. These include present obligations that arise from past events, but are not recognised because it is not probable that outflows of resources embodying economic benefits will be required to settle the obligations, or the amounts of the obligations cannot be measured with sufficient reliability.

Revenue recognitionRevenue is recognised when the risks and rewards of ownership have been transferred and when it is probable that the economic benefits associated with a transaction flow to the Group and the amount of revenue can be measured reliably. Revenue is measured at the fair value of the amount received or receivable net of VAT, cash discounts and rebates. Revenue is not discounted when extended payments are given.

The following specific criteria are taken into account in recognition of revenue:

Mining productsRevenue from the sale of mining and related products is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer.

InterestInterest is recognised on a time proportion basis that takes account of the effective yield on the asset and an appropriate accrual is made at each accounting reference date.

Rental incomeRental income on investment properties is accounted for on a straight-line basis over the term of the lease.

House salesRevenue from house sales is recognised as and when risk and rewards transfer to the buyer.

DividendsRevenue is recognised when the right to receive the payment is established.

Cost of salesAll costs directly related to the producing of products are included in cost of sales. Costs that cannot be directly linked are included separately or under other operating expenses.

When inventories are sold, the carrying amount is recognised in cost of sales. Any write-down, losses or reversals of previous write-downs or losses are recognised in cost of sales.

Exploration expenditureCosts related to property acquisitions and mineral and surface rights related to exploration are capitalised.

All exploration expenditures are expensed until they result in projects that are evaluated as being technically and commercially feasible and a future economic benefit is highly probable. In evaluating whether expenditures meet the criteria to be capitalised, the Company utilises several different sources of information and also differentiates projects by levels of risks including:• degreeofcertaintyoverthemineralisationoftheorebody;• commercialrisksincludingbutlimitedtocountryrisks;and• priorexplorationknowledgeavailableaboutthetargetorebody.

Exploration expenditure on greenfield sites is expensed as incurred until a bankable feasibility study has been completed, after which the expenditure is capitalised.

Exploration expenditure on brownfield sites is only expensed as incurred until the Company has obtained sufficient information from all available sources by means of a pre-feasibility study that the future economic benefits are highly probable.

Exploration expenditure relating to extensions of mineral deposits which are already being mined or developed, including expenditure on the definition of mineralisation of such mineral deposits, is capitalised.

Activities in relation to evaluating the technical feasibility and commercial viability of Mineral Resources are treated as forming part of exploration expenditures.

Borrowing costsBorrowing costs that are directly attributable to the acquisition, construction or development of a major capital projects, which require a substantial period of time to be prepared for their intended use, are capitalised. Capitalisation of borrowing costs as part of the cost of a qualifying asset commences when:• expendituresfortheassetarebeingincurred;• borrowingcostsarebeingincurred;and• activitiesthatarenecessarytopreparetheassetforitsintendeduseorsaleareinprocess.


Capitalisation is suspended when the active development is interrupted and ceases when the activities necessary to prepare the asset for its use are complete.

Other borrowing costs are charged to finance costs in the statement of comprehensive income as incurred.

Foreign currency transactions and balancesTransactions in foreign currencies are converted to South African rand at the rate of exchange ruling at the date that the transaction is initially recorded.

Foreign denominated monetary assets and liabilities (including those linked to a forward exchange contract) are stated in South African rand using the exchange rate ruling at the date of the statement of financial position, with the resulting exchange differences being recognised in the statement of comprehensive income.

Employee benefitsContributions in respect of current services relating to defined-contribution pension plans are expensed as incurred.

The Group also has unfunded liabilities in respect of post-retirement medical healthcare benefits for certain employees. The entitlement to these benefits is dependent upon the employee remaining in service until retirement age. These benefits have been provided for but are unfunded. The actuarially determined costs of providing these benefits are expensed as incurred and a corresponding liability is raised. Actuarial gains and losses are expensed in the period in which they are determined.

TaxationCurrent income taxCurrent income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities within legislative periods. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the statement of financial position date.

Deferred income taxDeferred tax is provided using the liability method on temporary differences at the date of the statement of financial position between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all taxable temporary differences, except:• wherethedeferredtax liabilityarises fromthe initialrecognitionofgoodwillorofanassetor liability inatransactionthat isnota

business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and• inrespectoftaxabletemporarydifferencesassociatedwithinvestmentsinsubsidiaries,associatesandinterestsinjointventures,where

the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised, except:• wherethedeferredtaxassetrelatingtothedeductibletemporarydifferencearisesfromtheinitialrecognitionofanassetorliabilityina

transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• inrespectofdeductibletemporarydifferencesassociatedwith investments insubsidiaries,associatesand interests in jointventures,deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each financial position date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each statement of financial position date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the date of the statement of financial position.



Income tax relating to items recognised directly in equity is recognised in equity and not in the statement of comprehensive income.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Secondary taxation on companiesSecondary tax on companies (STC) is recognised on the declaration date of all dividends and is included in the taxation expense in the statement of comprehensive income in the related period.

Value-added taxRevenues, expenses and assets are recognised net of the amount of value-added tax except:• wherethevalue-addedtaxincurredonthepurchaseofgoodsorservicesisnotrecoverablefromthetaxationauthority,inwhichcase

the value-added tax is recognised as part of the cost of the asset or as an expense item; and• receivablesandpayablesthatarestatedwiththeamountofvalue-addedtaxincluded.

The net amount of value-added tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the statement of financial position.

Mining royalty taxation Provision for mining royalties is made with reference to the conditions specified as contained in the Mining and Petroleum Royalty Act, for the transfer of refined and unrefined royalty mined resources, upon the date such transfer is effected. These costs are included in other expenses.

Set-offIf a legally enforceable right exists to set off recognised amounts of financial assets and liabilities and the Group intends to settle on a net basis or to realise the asset and settle the liability simultaneously, all related financial effects are netted.

DefinitionsCash and cash equivalentsCash and cash equivalents include cash on hand and call deposits as well as short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. For cash flow purposes, overdrafts are excluded from cash and cash equivalents.

Cash restricted in useCash which is subject to restrictions in its use is stated separately at the carrying value in the notes.

Fair valueWhere an active market is available, it is used to determine fair value. Where there is no active market, fair value is determined using valuation techniques. Such techniques include using recent arm’s length market transactions, reference to the current market of another instrument which is substantially the same, discounted cash flow analysis or other valuation models.


Mine develop-

ment R’000

Plant and machinery

R’000

Land and buildings

R’000

Mineral rights R’000

Furniture, equipment,

and vehicles R’000

Leased assets

capitalised R’000

2011 Total

R’000

2010 Total

R’000

1. Property, plant and equipmentGroup

Cost

At beginning of year 2 049 714 10 024 216 491 801 141 509 2 539 583 52 493 15 299 316 12 022 734

Additions 415 346 2 805 109 148 433 – 781 159 – 4 150 047 3 336 315

Disposals (4 860) (172 341) (351) – (37 598) – (215 150) (59 733)

Balance at end of year 2 460 200 12 656 984 639 883 141 509 3 283 144 52 493 19 234 213 15 299 316

Accumulated depreciation

At beginning of year 611 165 2 105 243 97 459 44 088 849 463 41 147 3 748 565 2 844 573

Depreciation 66 177 564 178 24 726 4 649 361 259 6 181 1 027 170 936 083

Disposals (4 492) (141 902) (252) – (52 417) – (199 063) (32 091)

Balance at end of year 672 850 2 527 519 121 933 48 737 1 158 305 47 328 4 576 672 3 748 565

Carrying value at 30 June 1 787 350 10 129 465 517 950 92 772 2 124 839 5 165 14 657 541 11 550 751

Company

Cost

At beginning of year 2 049 714 9 945 712 483 334 139 327 2 539 619 52 493 15 210 199 11 935 484

Additions 415 346 2 800 291 146 268 – 780 708 – 4 142 613 3 334 436

Disposals (4 860) (172 341) (351) – (37 597) – (215 149) (59 721)

Balance at end of year 2 460 200 12 573 662 629 251 139 327 3 282 730 52 493 19 137 663 15 210 199

Accumulated depreciation

At beginning of year 611 165 2 048 554 97 096 44 088 848 705 41 147 3 690 755 2 785 069

Depreciation 66 177 561 977 24 726 4 649 361 093 6 181 1 024 803 935 563

Disposals (4 492) (141 904) (252) – (52 417) – (199 065) (29 877)

Balance at end of year 672 850 2 468 627 121 570 48 737 1 157 381 47 328 4 516 493 3 690 755

Carrying value at 30 June 1 787 350 10 105 035 507 681 90 590 2 125 349 5 165 14 621 170 11 519 444

A register containing details of land and buildings is available for inspection, by members or their duly authorised agents, during normal business hours at the registered address of the Company.

Leased assets Equipment with a net book value of R3,9 million (2010: R11,4 million) is encumbered as security for finance lease agreements

referred to in note 12.

Borrowing costs No borrowing costs were capitalised during the year.

Capital work-in-progress Included in mine development, furniture and equipment, and plant and machinery is capital work-in-progress costing R3 850,8 million

(2010: R3 754,0 million), mainly related to the Khumani Iron Ore Mine.

Notes to the financial statements for the year ended 30 June 2011


GROUP COMPANY

2011 2010 2011 2010

R’000 R’000 R’000 R’000

2. Intangible assets

Cost

Balance at beginning of year 7 607 7 607 404 404

Disposal (404) – (404) –

Balance at end of year 7 203 7 607 – 404

Accumulated amortisation

Balance at beginning of year 4 948 4 588 404 404

Amortisation 360 360 – –

Disposal (404) – (404) –

Balance at end of year 4 904 4 948 – 404

Carrying value at 30 June 2 299 2 659 – –

Intangible assets consist of the cost of licensing proprietary technical information.

3. Loans and long-term receivables

Khumani Housing Development Company (Proprietary) Limited (refer note 5) – – 304 673 300 683

Long-term housing receivable from Company employees 106 203 63 811 – –

106 203 63 811 304 673 300 683

The long-term housing receivable consists of loans granted to employees during the year by the Company, the repayment terms of which vary between 5 and 20 years and bear interest at the prime lending rate, less 2%.

Loans are secured by means of an instalment sale agreement.

4. Non-current financial asset

Balance at beginning of year 90 213 90 213 90 213 90 213

Fair value adjustment through profit and loss 3 680 – 3 680 –

Transfer to current financial asset (refer note 9) (93 893) – (93 893) –

Balance at end of year – 90 213 – 90 213

The investment is a structured product, invested over a fixed term, offering a remuneration incentive to attract, retain, motivate and reward middle and senior management. The investment capital growth is linked to the higher of the JSE Top 40 index growth or CPI. The investment maturity date is 1 July 2011.


Notes to the financial statements continued

for the year ended 30 June 2011

Issued capital

Interest in capital

Shares at cost

2010 and 2011

2010 and 2011

2010 and 2011 Indebtedness

Book value of the Company’s interests

Name and nature of business R’000 % R’000

2011 R’000

2010R’000

2011 R’000

2010R’000

5. Investment in subsidiary companies

Investments:Cato Ridge DevelopmentCompany Limited– township development 1 950 100 1 520 16 906 15 566 18 426 17 086

Loans:Khumani Housing DevelopmentCompany (Proprietary) Limited– township development * 100 * 304 673 300 638 304 673 300 638

* Less than a thousand rand.

The Company’s aggregate interest in the losses after taxation of subsidiaries was R1,33 million loss (2010: R1,50 million loss).

The subsidiaries are incorporated and carry on operations in the Republic of South Africa.

The loans to Cato Ridge Development Company Limited are interest free with no fixed repayment terms. Loans to Khumani Housing Development Company (Proprietary) Limited will be repaid over a period longer than five years.

GROUP COMPANY

2011 2010 2011 2010

R’000 R’000 R’000 R’000

6. Interest in a joint venture

The Company owns a 50% interest in Cato Ridge Alloys (Proprietary) Limited (CRA): at cost 38 222 38 222

The venture is controlled jointly by the Company, Mizushima Ferroalloys Company Limited and Sumitomo Corporation and produces refined ferromanganese at the Cato Ridge Works.

These financial statements include the following amounts relating to CRA, which were proportionately consolidated:

Share of the joint venture’s statement of financial position:

Current assets 269 592 252 002

Non-current assets 25 126 20 622

Current liabilities (71 919) (62 531)

Non-current liabilities (3 946) (3 727)

Equity 218 853 206 366

Share of the joint venture’s revenue and profit:

Revenue 289 755 267 642

Cost of sales (218 515) (201 213)

Other operating income 7 733 5 738

Other operating expense (23 435) (15 200)

Profit before tax 55 538 56 966

Income tax expense (18 050) (18 450)

Profit for the year from continuing operations 37 488 38 516

There were R4,53 million (2010: Rnil) of commitments for future capital expenditure at year-end and no contingent liabilities relating to the Company’s interest in the joint venture at end of year.


GROUP COMPANY

2011 2010 2011 2010

R’000 R’000 R’000 R’000

7. InventoriesRaw materials (cost) 378 802 383 933 378 353 383 516

Work-in-progress (cost) 126 257 315 891 126 255 99 990

Consumables stores (cost) 397 175 300 314 392 988 299 423

Finished goods (cost and net realiasable value) 2 517 995 2 120 013 2 232 831 2 029 317

3 420 229 3 120 151 3 130 427 2 812 246

Cost of inventory recognised as an expense included in cost of sales 2 096 566 2 268 030 2 140 545 2 329 069

Cost of inventory written down during the year recognised in cost of sales 181 137 – 180 464 –

8. Trade and other receivablesTrade receivables 2 503 781 2 468 938 2 439 861 2 406 487

Other receivables 566 603 387 275 561 466 375 426

3 070 384 2 856 213 3 001 327 2 781 913

Outstanding on normal cycle terms 2 527 600 2 591 562 2 458 543 2 517 262

Outstanding, longer than 30 days beyond cycle terms 240 360 158 414 240 360 158 414

Outstanding, longer than 60 days outside beyond cycle terms 172 132 72 819 172 132 72 819

Outstanding, longer than 90 days outside beyond cycle terms 88 360 33 418 88 360 33 418

Outstanding, longer than +120 days outside beyond cycle terms 41 932 – 41 932 –

Trade and other receivables are non-interest bearing and are generally on 30- to 60-day payment terms.

Trade receivables not passed due, not impaired

Outstanding on normal cycle terms 2 503 781 2 468 938 2 439 861 2 406 487

No provision is currently necessary for trade receivables as they all fall within the normal 30-day payment cycle. Other receivables mostly consist of VAT receivables at year-end as well as payments in advance and deposits.

9. Structured investments (refer note 4) 93 893 – 93 893 –

The investment is a structured product, invested over a fixed term, offering a remuneration incentive to attract, retain, motivate and reward middle and senior management. The investment capital growth is linked to the higher of the JSE Top 40 index growth or CPI. The investment maturity date is 1 July 2011.

10. Cash and cash equivalentsCash at bank and on deposit 2 946 941 1 794 975 2 852 075 1 706 815

Rehabilitation Trust Fund – subject to legal use restrictions 116 137 92 890 116 137 92 890

3 063 078 1 887 865 2 968 212 1 799 705

All cash earns interest at deposit rates linked to prime.

11. Issued capitalAuthorised

3 636 260 ordinary shares of 50 cents each 1 818 1 818 1 818 1 818

36 740 unclassified shares of 50 cents each 32 32 32 32

Issued

3 548 206 ordinary shares of 50 cents each 1 774 1 774 1 774 1 774

Share premium 11 612 11 612 11 612 11 612




GROUP COMPANY

2011 2010 2011 2010

R’000 R’000 R’000 R’000

12. Long-term borrowings – interest bearingSecured liabilities

Finance lease liabilities over mining vehicles which commenced in January 2007, with a book value of R3,9 million (2010: R11,4 million), was repayable in varying monthly instalments over 60 months and bear interest at 1,28% below the prime overdraft rate. 4 717 12 690 4 717 12 690

Repayable within one year included in short-term borrowings (refer note 17) (4 717) (7 224) (4 717) (7 224)

– 5 466 – 5 466

Total borrowings

Repayable during the years ending 30 June

Rate of interest

2011R’000

2012R’000

2013R’000

2014R’000

Interest payable and repayment terms (Group and Company)

Finance lease liabilities 1,28% below prime overdraft rate 4 717 4 717 – –

Totalborrowings

Repayable during the years ending 30 June

Rate of interest

2010R’000

2011R’000

2012R’000

2013R’000

Finance lease liabilities 1,28% below primeoverdraft rate 12 690 7 224 5 466 –

GROUP AND COMPANY

2011 2010

Minimumpayments

Present valueof payments

Minimumpayments

Present valueof payments

R’000 R’000 R’000 R’000

The finance leases are over mining vehicles. These leases do not include any terms of renewal, purchase options or escalation clauses. Future minimum lease payments under finance leases, together with the present value of the net minimum lease payments, are as follows:

– within one year 5 081 4 717 8 050 7 224

– after one year but not more than five years – – 6 073 5 466

Total minimum lease payments 5 081 4 717 14 123 12 690

Amounts representing finance charges (364) – (1 433) –

Present value of lease payments 4 717 4 717 12 690 12 690


GROUP COMPANY

2011R’000

2010R’000

2011R’000

2010R’000

13. Deferred tax liabilityAt end of year

Raised on the following:

Accelerated capital allowances 4 089 488 3 279 260 4 085 667 3 275 624

Provisions raised (112 816) (122 346) (109 316) (120 624)

Other 3 371 (10 671) 3 371 (10 671)


Movement for the year

Balance at beginning of year 3 146 243 2 438 340 3 144 329 2 466 911

833 800 707 903 835 393 677 418

Accelerated capital allowances 810 228 675 124 810 043 674 914

Provisions raised 9 530 43 327 11 308 13 052

Other 14 042 (10 548) 14 042 (10 548)


14. Long-term provisions

Environmental obligations

Provision for decommissioning costs


Movement for the year 70 857 (2 394) 70 857 (2 394)

Provision raised/(reversed) for the period 52 714 (5 198) 52 714 (5 198)

Unwinding of discount rate 18 143 3 429 18 143 3 429

Transferred from decommissioning assets – (625) – (625)

Balance at end of year 289 425 218 568 289 425 218 568

Provision for restoration costs


Movement for the year (2 618) (9 080) (2 618) (9 080)

Utilisation of provision during the year (8 318) (17 338) (8 318) (17 338)

Unwinding of discount rate 5 700 8 258 5 700 8 258


Provision for post-retirement healthcare benefits


Net benefit movements (refer note 28) 2 508 (101) 2 508 (101)


Provision for deferred investment for senior employees


Provision utilised for the year (4 135) 34 938 (4 135) 34 938

Transferred to short-term provisions (refer note 15) (47 909) – (47 909) –





GROUP COMPANY

2011R’000

2010R’000

2011R’000

2010R’000

14. Long-term provisions (continued)

Summary of long-term provisions:


Total provision raised during the year 42 769 12 301 42 769 12 301

Total unwinding of discount rate 23 843 11 687 23 843 11 687

Total transfer to short-term provision (47 909) – (47 909) –

Total long-term provision at end of year 407 769 389 066 407 769 389 066

Calculation of the net present value of the provision for decommissioning and restoration cost is based on a discount rate of 8,6% (2010: 8,4%), inflation rate of 6% (2010: 6%) and life of mine from 3 and 25 years (2010: 4 and 25 years). The provisions are based on estimates of cash flows which are expected to occur at the end of the life of the mines. These assumptions include inherent uncertainties as they are derived from future estimates of commodity prices, exchange rates and inflation.

15. Short-term provisions


Provision utilised during the year (31 395) (32 466) (31 395) (32 466)

Payments made during the year (24) (15 409) (24) (15 409)

Transfer from long-term provisions (refer note 14) 47 909 – 47 909 –


Short-term provisions consist of leave pay and deferred bonus provisions.

16. Trade and other payables

Trade payables 1 379 138 1 140 210 1 314 444 1 081 092

Capital payables 478 630 287 495 478 630 287 495

Other payables 162 913 297 581 145 315 287 611


Trade and other payables are non-interest bearing and are initially recorded at fair value. Trade payables are normal day-to-day creditors of the Group. These creditors are mostly on a 30- to 60-day payment terms. Payables relating to capital expenditure do not conform to the trade payables payment term as they include retentions.

17. Short-term borrowings – interest bearing

Current portion of long-term borrowings (refer note 12) 4 717 7 224 4 717 7 224


18. Capital commitments

Approved by directors

– contracted for 4 703 185 5 204 372 4 703 185 5 202 762

– not contracted for 670 439 669 341 670 439 665 736

5 373 624 5 873 713 5 373 624 5 868 498

It is anticipated that this expenditure, which relates to the acquisition of property, plant and equipment, will be incurred over a two-year period and will be financed from the Group’s operating cash flows and by utilising existing borrowing facilities.


GROUP COMPANY

2011R’000

2010R’000

2011R’000

2010R’000

19. Borrowing powers

The borrowing powers of the Group, in terms of its Articles of Association, are as follows:

Borrowing powers 17 507 326 13 720 518

Borrowings at end of year

– long term – (5 466)

– short term (4 717) (7 224)

Unutilised borrowing powers 17 502 609 13 707 828

The borrowing powers of the Group are limited to the aggregate of the issued and paid-up share capital and the share premium of the Company and the consolidated retained earnings.

20. Revenue

Revenue comprises

– Turnover derived from the sale of ore and alloy products 19 074 942 12 869 713 18 755 472 12 556 142

– Interest received (note 24) 141 796 172 497 130 706 161 987

– Dividend received (note 24) – – 25 000 25 000

– Rental 5 396 3 254 3 208 2 543

– Other – 26 127 – 25 763

19 222 134 13 071 591 18 914 386 12 771 435

Turnover comprises sales of iron, manganese and chrome ores, ferrochrome and ferromanganese at invoice value, net of value-added tax, trade discounts and intragroup sales.

21. Other operating income

Foreign exchange gains

– realised 431 577 179 503 424 757 176 217

– unrealised 76 078 102 014 75 186 100 635

Profit on disposal of assets – 5 010 – 5 010

Sundry income 53 262 53 586 51 053 51 784

560 917 340 113 550 996 333 646

22. Other operating expensesForeign exchange losses

– realised 296 393 34 838 295 047 32 685

– unrealised 14 063 4 608 14 063 4 554

Management fees 261 771 222 472 261 771 222 472

Loss on disposal of assets 14 602 – 14 602 –

Short workings 94 892 284 483 89 778 283 067

Mining royalties 271 687 29 112 271 687 29 112

Other 220 770 309 767 256 083 285 689

1 174 178 885 280 1 203 031 857 579




GROUP COMPANY

2011R’000

2010R’000

2011R’000

2010R’000

23. Profit from operations

Profit from operations is stated after taking into account the following items of expenditure:

Amortisation of intangible assets 360 360 – –

Auditors’ remuneration 6 512 6 796 6 172 6 796

– audit fees 6 279 6 633 5 939 6 618

– other services 233 163 233 178

Depreciation 1 027 170 936 083 1 024 803 935 563

– mine development 66 177 60 008 66 177 60 008

– plant and machinery 564 178 523 205 561 977 522 573

– land and buildings 24 726 19 505 24 726 19 460

– mineral rights 4 649 3 011 4 649 3 011

– furniture, equipment, motor vehicles and other assets 361 259 321 932 361 093 322 089

– leased assets capitalised 6 181 8 422 6 181 8 422

Directors’ emoluments for services as directors 446 446 446 446

Increase/(decrease) in provisions 35 193 (24 512) 35 193 (24 512)

– long term 18 703 23 363 18 703 23 363

– short term 16 490 (47 875) 16 490 (47 875)

Inventory written down 181 137 – 180 464 –

Loss/(surplus) on disposal of property, plant and equipment 14 602 (5 010) 14 602 (5 010)

Raw materials and consumables included in cost of sales 2 096 566 2 268 030 2 140 545 2 329 069

Research and development 66 561 7 787 66 561 7 787

Remuneration for services

– advisory 5 577 3 387 5 130 3 387

– secretarial, management, administration and technical 273 949 240 020 273 949 240 020

Staff costs

– salaries and wages 1 743 992 1 310 105 1 743 992 1 310 105

– healthcare 63 217 48 463 63 217 48 463

– retirement/provident fund contributions 93 681 69 579 93 681 69 579

24. Income from investments

Interest received 141 796 172 497 130 706 161 987

Dividends received from joint-venture entity – – 25 000 25 000

141 796 172 497 155 706 186 987

25. Finance costs

Unwinding of discount rate – asset decommissioning provision 18 143 3 429 18 143 3 429

– restoration provision 5 700 8 258 5 700 8 258

Finance charges on leases 1 615 2 663 1 613 2 663

25 458 14 350 25 456 14 350


GROUP COMPANY

2011R’000

2010R’000

2011R’000

2010R’000

26. Taxation

South African normal taxation

– current year 1 553 992 458 959 1 538 661 443 125

State’s share of profits 185 649 160 884 185 649 160 884

Deferred taxation

– temporary differences (refer note 13) 833 800 707 903 835 392 677 418

Secondary tax on companies 200 750 101 780 198 250 99 281

2 774 191 1 429 526 2 757 952 1 380 708

Reconciliation of rate of taxation % % % %

Standard rate of company taxation 28,0 28,0 28,0 28,0

Adjusted for :

State’s share of profits 2,1 4,0 2,0 3,8

Secondary tax on companies 2,3 2,4 2,3 2,5

Effective rate of taxation 32,4 34,4 32,3 34,3

Estimated losses available for the reduction of future taxable income arising in certain joint-venture and subsidiary companies 16 528 15 195

27. Retirement benefits informationThe Group has made provision for pension plans covering all employees. These comprise of a defined-contribution retirement fund, which is governed by the Pension Funds Act, 1956, and two defined-contribution provident funds administered by employee organisations within the industries in which members are employed. The contributions paid by the Group for retirement benefits are charged to the statement of comprehensive income as they are incurred.

The above defined-contribution plans are determined based on accumulated contributions and returns on investments.

Members contribute 7,5% and the Company contributes 12,5% of pensionable salaries to the funds which is charged to the income statement.

28. Post-retirement healthcare benefits The Group has obligations to fund a portion of certain retiring employees’ medical aid contributions based on the cost of benefits. The anticipated liabilities arising from these obligations have been actuarially determined using the projected unit credit method, and a corresponding liability has been raised (refer note 14).

The following table summarises the components of the net benefit/(expense) recognised in the consolidated statement of comprehensive income:

2011R’000

2010R’000

2009R’000

2008R’000

2007R’000

2006R’000

Group

Current service cost 548 498 737 651 438 1 034

Interest cost on benefit obligation 2 124 1 886 1 638 1 429 2 062 1 090

Benefits (769) (709) (664) (595) (560) –

Net actuarial loss/(gain) 605 (1 776) 1 064 867 (6 685) –

Charged/(credited) to the statement of comprehensive income 2 508 (101) 2 775 2 352 (4 745) 2 124




28. Post-retirement healthcare benefits (continued)

Sensitivity on accounting provisions for year ended 30 June 2011.

Service cost Interest cost Accrued liability

Change in inflation R’000 % change R’000 % change R’000 % change

1% increase 668 23,0 2 466 16,1 27 250 15,0

1% decrease 446 (17,9) 1 848 (13,0) 20 810 (12,2)

The liability is assessed periodically by an independent actuarial survey based on the following principal actuarial assumptions:

– A net discount rate of 1,0% (2010: 1,0%) per annum.

– An increase in healthcare cost at a rate of 9,11% (2010: 7,92%) per annum.

– Assumed rate of return on assets at 10,2% (2010: 9,0%) per annum.

The liabilities raised in the financial statements are based on the present value of the post-retirement benefits and have been recognised in full.

GROUP COMPANY

2011R’000

2010R’000

2011R’000

2010R’000

29. Reconciliation of profit from operations to cash generated from operations

Profit from operations 8 444 661 4 003 601 8 403 786 3 857 439

Adjusted for :

Non-cash items: 1 065 925 808 600 1 063 417 809 752

– depreciation/amortisation and other non-cash adjustments on property, plant and equipment and intangibles 974 916 936 083 972 189 935 563

– unrealised foreign exchange (gains)/losses, net (62 015) (97 406) (61 123) (96 081)

– inventory written down to net realisable value 181 137 – 180 464 –

– loss/(surplus) on disposal of property, plant and equipment 14 602 (5 010) 14 602 (5 010)

– net movement in long- and short-term provisions 11 373 (20 165) 11 373 (20 166)

– additions to decommissioning asset (52 714) (6 757) (52 714) (6 757)

– non-cash adjustment to short-term borrowings (1 374) – (1 374) –

– other non-cash items – (3 155) – (2 807)

Adjusted operating profit before working capital changes 9 510 586 4 807 191 9 467 203 4 662 181

(Increase)/decrease in inventories (481 215) 47 002 (498 649) 131 130

Decrease in payables 104 237 362 172 91 032 303 555

Increase in receivables (155 837) (1 626 818) (163 307) (1 588 949)

Cash generated from operations 8 977 771 3 589 547 8 896 279 3 507 917

30. Taxation paid

Balance due at beginning of year (431 182) (802 883) (431 070) (810 465)

Amounts charged to the statement of comprehensive income (2 774 191) (1 429 526) (2 757 952) (1 380 708)

Adjustment for deferred taxation 833 800 707 903 835 393 677 418

Balance due at end of year 329 923 431 182 327 020 431 070

(2 041 650) (1 093 324) (2 026 610) (1 082 685)


31. Segmental information

The Group’s operations are managed by commodity in the following divisions, which form the Group’s reportable segments:

– Iron ore (iron ore division)

– Manganese ore and alloys (manganese division)

– Chrome ore and alloys (chrome division)

Iron oredivision

Manganesedivision

Chromedivision Total

R’000 R’000 R’000 R’000

Segment analysis

Year to 30 June 2011

Turnover of ore and alloy products 10 342 212 6 466 071 2 266 659 19 074 942

Contribution to earnings 4 650 908 1 369 738 (233 838) 5 786 808

Contribution to headline earnings 4 653 991 1 377 174 (233 844) 5 797 321

Other information

Consolidated total assets 15 051 052 7 902 456 1 460 119 24 413 627

Consolidated total liabilities 4 203 386 1 984 710 718 205 6 906 301

Capital expenditure 3 225 200 708 664 216 183 4 150 047

Depreciation 592 661 269 890 165 035 1 027 170

Year to 30 June 2010

Turnover of ore and alloy products 4 992 977 6 287 218 1 589 518 12 869 713

Contribution to earnings 1 436 649 1 480 223 (184 650) 2 732 222

Contribution to headline earnings 1 435 759 1 477 505 (184 649) 2 728 615

Other information

Consolidated total assets 8 729 630 8 921 510 1 920 523 19 571 663

Consolidated total liabilities 2 532 876 2 596 170 722 099 5 851 145

Capital expenditure 2 304 067 743 498 288 750 3 336 315

Depreciation 543 938 250 074 142 071 936 083

GROUP TURNOVER BY GEOGRAPHICAL

SEGMENT

2011 2010

R’000 R’000

Geographical analysis (refer note 20)

The geographical locations to which product is supplied are set out below:

Far East 14 261 503 8 141 711

Europe 2 093 053 2 641 269

USA 1 290 532 669 669

South Africa 1 289 119 1 110 472

Other 140 735 306 592

19 074 942 12 869 713

All the Group’s property, plant and equipment is located in South Africa.




GROUP

2011R’000

2010R’000

32. Contingent liabilities

The following guarantees have been issued by the Group:

Eskom: Electricity supply 22 665 18 855

Department of Mineral Resources: Rehabilitation liabilities 203 110 144 746

225 775 163 601

33. Related-party transactions

Related-party transactions are concluded at arm’s length and under terms and conditions that are no less favourable than those arranged with third parties.

The following entities were identified as related parties to the Group:

African Rainbow Minerals Limited Major shareholder

Assore Limited Major shareholder

Minerals USA LLC Subsidiary of Assore Limited

Cato Ridge Development Company (Proprietary) Limited Wholly owned subsidiary

Cato Ridge Alloys (Proprietary) Limited Jointly controlled entity

Khumani Housing Development Company (Proprietary) Limited

Wholly owned subsidiary

Nkomati Mine 50%-held joint venture of African Rainbow Minerals Limited

Two Rivers Platinum (Proprietary) Limited 55%-held subsidiary of African Rainbow Minerals Limited

The following significant related-party transactions occurred during the year :

African Rainbow Minerals Limited – fees for provision of services 426 798 362 057

Assore Limited – fees for provision of services 555 759 382 825

Cato Ridge Development Company (Proprietary) Limited – housing rental received 340 296

Cato Ridge Alloys (Proprietary) Limited – purchases of molten metal 385 032 327 677

– infrastructure rental received 5 962 4 920

Khumani Housing Development Company (Proprietary) Limited – housing rental received 5 396 3 254

Nkomati Mine – purchases of chrome ore – 4 547

Amounts owed to related parties on current account at end of year :

– African Rainbow Minerals Limited 55 004 51 945

– Assore Limited 51 636 86 441

– Nkomati Mine – 4 414

Amounts owed by related parties at end of year :

Khumani Housing Development Company (Proprietary) Limited – Refer to note 5 304 673 300 683

Cato Ridge Development Company (Proprietary) Limited – Refer to note 5 18 426 17 086

Key management personnel – Refer to directors’ report on page 22


34. Financial instruments and risk management

The Group is exposed to certain financial risks in the normal course of its operations. To manage these risks, a treasury risk management committee monitors transactions involving financial instruments. The Group does not acquire, hold or issue derivative instruments for trading purposes and manages the above risks in accordance with the following policies.

Market riskMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market prices comprise four types of risk: interest rate risk, foreign currency risk, commodity price risk and other price risk, such as equity price risk

Foreign currency riskForeign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s revenue activities.

The Group’s markets are predominantly priced in US dollars which exposes the Group’s cash flows to foreign exchange currency risks. In addition, there is currency risk on long-lead items which are denominated in US dollars, euros or other currencies.

The following table demonstrates the sensitivity of the Group’s profit before tax to a reasonably possible change in the US dollar exchange rate, with all other variables held constant. The Group’s exposure to foreign currency changes for all other currencies is not material.

GROUP

2011R’000

2010R’000

At year-end the foreign currency value of accounts receivable amounted to:Accounts receivable balance – (R’000) 1 732 757 1 907 439 Year-end exchange rate 7,76 7,67 Movement in accounts receivable balance if R/$ exchange increase by $1 223 293 248 688 Movement in accounts receivable balance if R/$ exchange decrease by $1 (223 293) (248 688)

There were no forward exchange contracts as at 30 June 2011 (2010: Nil).

Credit riskCredit risk arises from possible defaults by customers or bank counterparties. The Group minimises credit risk by evaluating counterparties before concluding transactions in order to ensure the creditworthiness of such counterparties. The maximum exposure is the carrying amount of receivables disclosed in note 8.

Cash is only deposited with institutions that have credit ratings, with the amounts distributed appropriately among various “A rated” institutions to minimise credit risks through diversification.

Liquidity riskLiquidity risk is the risk that the Group will be unable to meet a financial commitment in a location or currency as it falls due.

This risk is controlled and monitored by the preparation of detailed cash flow forecast and budgets that are reviewed by management on a monthly basis. Banking facilities are established in advance with reputable banks to ensure that forecast cash flow shortfalls can be met from borrowings. The Group’s borrowing powers are described in note 19.




34. Financial instruments and risk management (continued)

The table below summarises the maturity profile of financial liabilities at 30 June based on undiscounted cash flows:

Withinone year

2 – 5years Total

R’000 R’000 R’000

Group

30 June 2011

Trade and other payables (refer note 16) 2 020 681 – 2 020 681

Long-term borrowings (refer note 12) – – –

Short-term borrowings (refer note 17) 4 717 – 4 717

2 025 398 – 2 025 398

30 June 2010

Trade and other payables (refer note 16) 1 725 286 – 1 725 286

Long-term borrowings (refer note 12) – 5 466 5 466

Short-term borrowings (refer note 17) 7 224 – 7 224

1 732 510 5 466 1 737 976

Company

30 June 2011Trade and other payables (refer note 16) 1 938 389 – 1 938 389 Long-term borrowings (refer note 12) – – – Short-term borrowings (refer note 17) 4 717 – 4 717

1 943 106 – 1 943 106

30 June 2010

Trade and other payables (refer note 16) 1 656 198 – 1 656 198Long-term borrowings (refer note 12) – 5 466 5 466 Short-term borrowings (refer note 17) 7 224 – 7 224

1 663 422 – 1 668 888

Commodity price riskCommodity price risk arises from the possible adverse effect of fluctuations in commodity prices on current and future earnings. Most of these prices are in US dollars with some euro exposure and determined internationally on the open market. The Group does not actively hedge future commodity revenue of the commodities that it produces against price fluctuations for the commodities that it produces.

Fair value riskExcept for interest-free loans provided by the Company to its subsidiaries, the carrying amounts of trade receivables, cash and cash equivalents, and trade and other payables approximate fair value because of the short-term duration of these instruments.

Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in prime interest rates.

GROUP

2011R’000

2010R’000

Cash and cash equivalent balances at year end 3 063 078 1 887 865 Effect on profit before tax if interest rate increase by 1% 30 631 18 879 Effect on profit before tax if interest rate decrease by 1% (30 631) (18 879)Effect on net cash flow if interest rate increase by 1% 22 054 13 593 Effect on net cash flow if interest rate decrease by 1% (22 054) (13 593)


Carryingvalue at

year-endR’000

Maturitydates

Effectiveinterest

rate

Exposures of the Group to interest rate risk at year-end were as follows:

Financial assetsYear ended 30 June 2011

Prime less 2%Long-term receivable 106 203 5 – 20 years overnightCash – on deposit with financial institutions 3 063 078 Current call deposit

Year ended 30 June 2010Prime less 2%

Long-term receivable 63 811 5 – 20 years overnightCash – on deposit with financial institutions 1 887 865 Current call deposit

Financial liabilities and leasesYear ended 30 June 2011

Local long-term borrowings – finance lease agreements – –1,28%

below prime Short-term borrowings – interest bearing 4 717 2012 overdraft rate

Year ended 30 June 20101,28%

Local long-term borrowings – finance lease agreements 5 466 2012 below prime

Short-term borrowings – interest bearing 7 224 2012 overdraft rate

Exposures of the Company to interest rate risk at year-end were as follows:

Financial assets Varies

Year ended 30 June 2011 longer than

Long-term receivable 304 673 5 years Prime less 2%

Overnight

Cash – on deposit with financial institutions 2 968 212 Current call deposit

Year ended 30 June 2010

Long-term receivable 300 683 5 – 20 years Prime less 2%

Overnight

Cash – on deposit with financial institutions 1 799 705 Current call deposit

Financial liabilities and leases

Year ended 30 June 2011

1,28%

Local long-term borrowings – finance lease agreements – – below prime


Year ended 30 June 2010 1,28%

Local long-term borrowings – finance lease agreements 5 466 2012 below prime





34. Financial instruments and risk management (continued)

Fair value of financial instrumentsThe estimated fair value of the Group’s financial instruments as at 30 June 2011 was estimated to approximate the carrying amounts reflected in the statement of financial position.

Treasury risk managementThe treasury function is outsourced to a third-party specialists who, together with the Group executives, coordinates the daily cash requirements of the Group in the South African domestic money market.

A treasury committees, consisting of senior managers in the Group and representatives from the third party, meets on a regular basis to analyse currency and interest rate exposure as well as future funding requirements with the Group. The committee reviews the treasury operations dealings to ensure compliance with the Group’s policies and counterparty exposure limits.

Capital managementCapital includes equity attributable to the equity holders of the parent less the net unrealised gains reserve.

The primary objective of the Group’s capital management is to ensure that it maintains a strong rating and healthy capital ratios in order to support its business and ensure significant funding levels for capital projects.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions.

No changes were made in the objectives, policies or processes relating to capital management.

Financial assets and liabilities (and leases) by category

Loans andreceivables

Otherliabilities

at amortised cost Total

R’000 R’000 R’000

Group

Year ended 30 June 2011Long-term loans and receivables 106 203 – 106 203 Trade and other receivables 3 070 384 – 3 070 384 Cash and cash equivalents 3 063 078 – 3 063 078 Current financial asset 93 893 – 93 893 Trade and other payables – (2 020 681) (2 020 681)Short-term borrowings – (4 717) (4 717)Year ended 30 June 2010Long-term loans and receivables 63 811 – 63 811 Trade and other receivables 2 856 213 – 2 856 213 Cash and cash equivalents 1 887 865 – 1 887 865 Non-current financial asset 90 213 – 90 213 Trade and other payables – (1 725 286) (1 725 286)Long-term borrowings – interest bearing – (5 466) (5 466)Short term borrowings – (7 244) (7 244)


Loans andreceivables

Otherliabilities

at amortised cost Total

R’000 R’000 R’000

Company

Year ended 30 June 2011Long-term loans and receivables 304 673 – 304 673 Trade and other receivables 3 001 327 – 3 001 327 Cash and cash equivalents 2 968 212 – 2 968 212 Current financial asset 93 893 – 93 893 Trade and other payables – (1 938 389) (1 633 716)Short-term borrowings – (4 717) (4 717)Year ended 30 June 2010Long-term loans and receivables 300 683 – 300 683 Trade and other receivables 2 781 913 – 2 781 913 Cash and cash equivalents 1 799 705 – 1 799 705 Non-current financial asset 90 213 – 90 213 Trade and other payables – (1 656 198) (1 656 198)Long-term borrowings – (5 466) (5 466)Short-term borrowings – (7 244) (7 244)

Fair value hierarchyThe Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.

Level 2: other techniques for which all inputs that have a significant effect on the recorded fair value are observable, either directly or indirectly.

Level 3: techniques that use inputs that have a significant effect on the recorded fair value that are not based on observable market data.

Currently the only financial asset measured at fair value is the financial asset disclosed in note 9 and falls within level 2 of the hierarchy.

During the year, there were no transfers between any of the levels of fair value measurements. There are currently no financial liabilities measured at fair value.


Notes

www.assmang.co.za

Annual Report 2011

www.assmang.co.za

assmang limited (“assmang”), a company incorporated in the republic of south africa (company...

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