Notes to the consolidated financial information
for the year ended 30 June 2018
1. General information
Impala Platinum Holdings Limited (Implats, Group or Company) is one of the world’s foremost producer of platinum and associated Platinum Group Metals (PGMs). Implats is currently structured around five main operations with a total of 20 underground shafts. The operations are located within the Bushveld Complex in South Africa and the Great Dyke in Zimbabwe, the two most significant PGM-bearing ore bodies in the world.
The Company has its listing on the securities exchange operated by JSE Limited in South Africa, the Frankfurt Stock Exchange (2022 US$ convertible bonds) and a level 1 American Depository Receipt programme in the United States of America.
The summarised consolidated financial information was approved for issue on 13 September 2018 by the board of directors.
2. Audit opinion
This summarised report is extracted from audited information, but is not itself audited. The annual financial statements were audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The audited annual financial statements and the auditor’s report thereon are available for inspection at the Company’s registered office and on the Company’s website.
The directors take full responsibility for the preparation of the summarised consolidated financial statements and that the financial information has been correctly extracted from the underlying annual financial statements.
3. Basis of preparation
The summarised consolidated financial statements for the year ended 30 June 2018 have been prepared in accordance with the JSE Limited Listings Requirements (Listings Requirements) and the requirements of the Companies Act, Act 71 of 2008 applicable to summarised financial statements. The Listings Requirements require financial statements to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, and contain the information required by IAS 34 Interim Financial Reporting.
The summarised consolidated financial information should be read in conjunction with the consolidated financial statements for the year ended 30 June 2018, which have been prepared in accordance with IFRS.
The summarised consolidated financial information has been prepared under the historical cost convention except for certain financial assets, financial liabilities and derivative financial instruments which are measured at fair value and liabilities for cash-settled share-based payment arrangements which are measured using a binomial option model.
The summarised consolidated financial information is presented in South African rand, which is the Company’s functional currency.
4. Accounting policies
The principal accounting policies applied in the preparation of the consolidated financial statements, from which the summarised consolidated financial statements were derived, are in terms of IFRS and are consistent with those of the previous annual financial statements. The following new standards and amendments to standards have become effective or have been early adopted by the Group as from 1 July 2017 without any significant impact:
- IAS 19 – Employee benefits
- Improvements to IFRS Standards 2015-2017 Cycle
- IAS 28 – Investments in Associates and Joint Ventures
5. Segment information
The Group distinguishes its segments between the different mining operations, refining services, chrome processing and an ‘all other segment’.
Management has determined the operating segments based on the business activities and management structure within the Group.
Capital expenditure comprises additions to property, plant and equipment (note 6).
The reportable segments’ measure of profit or loss is profit after tax. This is reconciled to the entities consolidated profit after tax.
Impala mining segment’s two largest sales customers amounted to 11% and 8% of total sales (June 2017: 12% and 10%).
| 2018 | 2017 | |||||
| Revenue Rm |
Profit/(loss) after tax Rm |
Revenue Rm |
Profit/(loss) after tax Rm |
|||
| Mining | ||||||
| – Impala | 13 255 | (12 332) | 14 604 | (9 860) | ||
| – Zimplats | 7 485 | 40 | 7 038 | 576 | ||
| – Marula | 2 357 | (30) | 1 616 | (732) | ||
| Impala Refining Services | 22 044 | 1 210 | 21 711 | 1 292 | ||
| Impala Chrome | 226 | 47 | 432 | 127 | ||
| All other segments | – | (117) | – | 29 | ||
| Inter-segment revenue | (9 513) | – | (8 560) | – | ||
| Total segmental revenue/loss after tax | 35 854 | (11 182) | 36 841 | (8 568) | ||
| Reconciliation: | ||||||
| Share of profit of equity-accounted entities | 383 | 496 | ||||
| Unrealised profit in stock consolidation adjustment | (211) | (51) | ||||
| IRS pre-production realised on Group | 217 | 42 | ||||
| Net realisable value adjustment made on consolidation | – | (17) | ||||
| Total consolidated loss after tax | (10 793) | (8 098) | ||||
| 2018 | 2017 | |||||
| Capital expenditure Rm |
Total assets Rm |
Capital expenditure Rm |
Total assets Rm |
|||
| Mining | ||||||
| – Impala | 2 766 | 29 936 | 2 472 | 35 696 | ||
| – Zimplats | 1 739 | 20 612 | 864 | 18 353 | ||
| – Marula | 101 | 3 796 | 113 | 3 393 | ||
| Impala Refining Services | – | 8 334 | – | 8 402 | ||
| Impala Chrome | – | 150 | 1 | 161 | ||
| All other segments | – | 34 778 | (16) | 32 257 | ||
| Total | 4 606 | 97 606 | 3 434 | 98 262 | ||
| Inter-company accounts eliminated | (34 869) | (26 279) | ||||
| Investments in equity-accounted entities | 4 317 | 3 316 | ||||
| Unrealised profit in stock, NRV and other adjustments to inventory | (886) | (736) | ||||
| Impala segment bank overdraft taken to cash | – | (1 091) | ||||
| Other | – | 9 | ||||
| Total consolidated assets | 66 168 | 73 481 | ||||
6. Property, plant and equipment
| 2018 Rm |
2017 Rm |
|||
| Opening net book amount | 47 798 | 49 722 | ||
|---|---|---|---|---|
| Capital expenditure | 4 606 | 3 434 | ||
| Interest capitalised | 61 | – | ||
| Disposals | (26) | (22) | ||
| Depreciation (note 10) | (3 838) | (3 702) | ||
| Impairment | (13 244) | – | ||
| Rehabilitation adjustment | (34) | 16 | ||
| Exchange adjustment on translation | 722 | (1 650) | ||
| Closing net book amount | 36 045 | 47 798 | ||
| Capital commitment | ||||
| Commitments contracted for | 1 703 | 1 636 | ||
| Approved expenditure not yet contracted | 8 071 | 5 364 | ||
| 9 774 | 7 000 | |||
| Less than one year | 4 017 | 4 338 | ||
| Between one and five years | 5 757 | 2 662 | ||
| 9 774 | 7 000 |
This expenditure will be funded internally and, if necessary, from borrowings.
7. Investment in equity-accounted investments
| 2018 Rm |
2017 Rm |
|||
| Summary balances | ||||
| Joint ventures | ||||
| Mimosa | 2 268 | 1 961 | ||
| Associates | ||||
| Two Rivers | 1 528 | 1 260 | ||
| Makgomo Chrome | 78 | 70 | ||
| Friedshelf | 33 | 25 | ||
| Waterberg | 410 | – | ||
| Total investment in equity-accounted entities | 4 317 | 3 316 | ||
| Summary movement | ||||
| Beginning of the period | 3 316 | 3 342 | ||
| Acquisition of interest in associate – Waterberg | 425 | – | ||
| Share of profit | 473 | 472 | ||
| Gain – Two Rivers change of interest | 248 | – | ||
| Share of other comprehensive income/(loss) | 108 | (219) | ||
| Dividends received | (253) | (279) | ||
| End of the period | 4 317 | 3 316 | ||
| Share of equity-accounted entities is made up as follows: | ||||
| Share of profit | 473 | 472 | ||
| Movement in unrealised profit in stock | (90) | 24 | ||
| Total share of profit of equity-accounted entities | 383 | 496 |
8. Inventories
| 2018 Rm |
2017 Rm |
|||
| Mining metal | ||||
| Refined metal | 1 381 | 350 | ||
| In-process metal | 4 585 | 2 977 | ||
| 5 966 | 3 327 | |||
| Non-mining metal | ||||
| Refined metal | 776 | 993 | ||
| In-process metal | 4 120 | 3 252 | ||
| 4 896 | 4 245 | |||
| Stores and materials inventories | 883 | 735 | ||
| Total carrying amount | 11 745 | 8 307 |
The write-down to net realisable value comprises R250 million (2017: R78 million) for refined mining metal and R1 268 million (2017: R948 million) for in-process mining metal.
Included in refined metal is ruthenium on lease to third parties of 45 000 (2017: 36 000) ounces.
Changes in engineering estimates of metal contained in-process resulted in an increase of in-process metal of R435 (2017: R376) million.
Non-mining metal consists of inventory held by Impala Refining Services. No inventories are encumbered.
9. Borrowings
| Notes | 2018 Rm |
2017 Rm |
|||
| Standard Bank Limited – BEE partners Marula | 887 | 889 | |||
|---|---|---|---|---|---|
| Standard Bank Limited – Zimplats term loan | 1 167 | 1 111 | |||
| Standard Bank Limited – Zimplats revolving credit facility | – | 314 | |||
| Convertible bonds – ZAR (2018) | 9.1 | – | 303 | ||
| Convertible bonds – US$ (2018) | 9.2 | – | 380 | ||
| Convertible bonds – ZAR (2022) | 9.3 | 2 631 | 2 516 | ||
| Convertible bonds – US$ (2022) | 9.4 | 2 858 | 2 609 | ||
| Revolving credit facility | 9.5 | 1 510 | – | ||
| Finance leases | 1 299 | 1 339 | |||
| 10 352 | 9 461 | ||||
| Current | 2 427 | 1 088 | |||
| Non-current | 7 925 | 8 373 | |||
| Beginning of the year | 9 461 | 9 279 | |||
| Proceeds | 1 500 | 6 278 | |||
| Interest accrued | 928 | 664 | |||
| Interest repayments | (689) | (533) | |||
| Capital repayments | (999) | (4 593) | |||
| Conversion option on 2022 Bonds | – | (1 156) | |||
| Loss on settlement of 2018 Bonds | – | 8 | |||
| Exchange adjustment | 151 | (486) | |||
| End of the year | 10 352 | 9 461 |
| 9.1 | Convertible bonds – ZAR (2018) |
| The remaining balance of the ZAR denominated bonds was repaid on 21 February 2018. The effective interest rate was 8.5% (2017: 8.5%). | |
| 9.2 | Convertible bonds – US$ (2018) |
| The remaining balance of the US$ denominated bonds was repaid on 21 February 2018. The effective interest rate was 3.1% (2017: 3.1%). | |
| 9.3 | Convertible bonds – ZAR (2022) (note 10.3) |
| The ZAR denominated bonds have a par value of R3 250 million and carry a coupon of 6.375% (R207.2 million) per annum. The coupon is payable semi-annually for a period of five years ending 7 June 2022. The bond holder has the option to convert the bonds to Implats’ shares at a price of R50.01. The value of this conversion option derivative was R676 million on issue. At the general meeting held by shareholders, shareholders’ approval to settle this option by means of Implats’ shares was obtained, which has resulted in the bond being accounted for as a compound instrument and resulted in the derivative being transferred into equity. Implats has the option to call the bonds at par plus accrued interest at any time if the aggregate value of the underlying shares per bond for a specified period of time is 130% or more of the principal amount of that bond. The effective interest rate of the bond is 12.8%. | |
| 9.4 | Convertible bonds – US$ (2022) (note 10.2) |
| The US$ denominated bonds have a par value of US$250 million and carry a coupon of 3.25% (US$8.1 million) per annum. The coupon is payable semi-annually for a period of five years ending 7 June 2022. The bond holder has the option to convert the bonds to Implats’ shares at a price of US$3.89. The value of this conversion option derivative was R559 million at initial recognition. Implats has the option to call the bonds at par plus accrued interest at any time if the aggregate value of the underlying shares per bond for a specified period of time is 130% or more of the principal amount of that bond. The effective interest rate is 8.38%. (Refer note 10 for additional information regarding the conversion option and the CCIRS entered into to hedge foreign exchange risk on this bond.) | |
| 9.5 | Revolving credit facility |
| During the current year, Implats drew down R1 500 million on the Standard bank facility. The facility bears interest at 10.2%. The facility expires end of 2021. |
10. Derivative financial instrument
| Notes | 2018 Rm |
2017 Rm |
|||
| Cross-Currency Interest Rate Swap (CCIRS) (2022) | 10.1 | – | 49 | ||
|---|---|---|---|---|---|
| Conversion option – US$ convertible bond (2022) | 10.2 | 50 | 547 | ||
| Conversion option – ZAR convertible bond (2022) | 10.3 | – | 637 | ||
| 50 | 1 233 |
| 10.1 | Cross-Currency Interest Rate Swap (CCIRS) (2022) |
| Implats entered into a CCIRS amounting to US$250 million to hedge the foreign exchange risk on the
US$ convertible bond, being: exchange rate risk on the dollar interest payments and the risk of a future
cash settlement of the bonds at a rand-dollar exchange rate weaker than R13.025/US$. US$250 million
was swapped for R3 256 million on which Implats pays a fixed interest rate to Standard Bank of 9.8%.
Implats receives the 3.25% coupon on the US$250 million on the same date which Implats pays-on
externally to the bond holders and the interest thereon. In June 2022, Implats will receive US$250 million
for a payment of R3 256 million. The CCIRS is carried at its fair value of R21 million asset (2017: R49 million liability). No hedge accounting has been applied. |
|
| 10.2 | Conversion option – US$ convertible bond (2022) (note 9.4) |
| The US$ bond holders have the option to convert the bonds to Implats shares at a price of US$3.89. The conversion option was valued at its fair value of R50 (June 2017: R547) million at year end, resulting in a R497 million profit for the period in other income. | |
| 10.3 | Conversion option – ZAR convertible bond (2022) (note 9.3) |
| The ZAR bond holders have the option to convert the bonds to Implats shares at a price of R50.01. The conversion option was accounted for in equity, upon receipt of shareholders approval to settle this option by means of Implats shares, at a fair value of R625 million, resulting in a R12 million profit for the period in other income. |
11. Cost of sales
| 2018 Rm |
2017 Rm |
|||
| On-mine operations | 16 392 | 16 341 | ||
|---|---|---|---|---|
| Processing operations | 5 340 | 5 055 | ||
| Refining and selling | 1 522 | 1 378 | ||
| Corporate costs | 710 | 736 | ||
| Share-based compensation | 82 | 88 | ||
| Chrome operation – cost of sales | 146 | 186 | ||
| Depreciation of operating assets | 3 838 | 3 702 | ||
| Metals purchased | 9 651 | 10 030 | ||
| Change in metal inventories | (3 404) | (146) | ||
| 34 277 | 37 370 |
12. Impairment
| 2018 Rm |
2017 Rm |
|||
| Impairment of non-financial assets was made up of the following: | ||||
| Prepaid royalty | – | 10 149 | ||
| Property, plant and equipment | 13 244 | – | ||
| Exploration and evaluation assets | 385 | – | ||
| Investment property | – | 80 | ||
| 13 629 | 10 229 |
Refer to commentary on page 3 to 16 as well as the annual financial statements notes 3 and 4 for more detail regarding the impairments.
13. Cash generated from operations
| 2018 Rm |
2017 Rm |
|||
| Profit/(loss) before tax | (13 042) | (10 688) | ||
|---|---|---|---|---|
| Adjustments for: | ||||
| Depreciation | 3 838 | 3 702 | ||
| Finance cost | 1 051 | 811 | ||
| Impairment | 13 629 | 10 229 | ||
| Other | (51) | (283) | ||
| 5 425 | 3 771 | |||
| Cash movements from changes in working capital: | ||||
| Inventory | (4 247) | (593) | ||
| Receivables/payables | 1 186 | (129) | ||
| Cash generated from operations | 2 364 | 3 049 |
14. Headline earnings
| 2018 Rm |
2017 Rm |
|||
| Headline earnings attributable to equity holders of the Company arise from operations as follows: | ||||
| Loss attributable to owners of the Company | (10 679) | (8 220) | ||
| Remeasurement adjustments: | ||||
| Profit on disposal of property, plant and equipment | – | (24) | ||
| Impairment | 13 629 | 10 229 | ||
| Gain – Two Rivers change in interest | (248) | – | ||
| Insurance compensation relating to scrapping of property, plant and equipment | – | (154) | ||
| Total non-controlling interest effects of adjustments | (159) | – | ||
| Total tax effects of adjustments | (3 771) | (2 814) | ||
| Headline loss | (1 228) | (983) | ||
| Weighted average number of ordinary shares in issue for basic earnings per share (millions) | 718.55 | 718.04 | ||
| Weighted average number of ordinary shares for diluted earnings per share (millions) | 722.11 | 721.79 | ||
| Headline loss per share (cents) | ||||
| Basic | (171) | (137) | ||
| Diluted | (171) | (137) |
15. Contingent liabilities and guarantees
As at the end of June 2018 the Group had contingent liabilities in respect of guarantees and other matters arising in the ordinary course of business from which it is anticipated that no material liabilities will arise. The Group has issued guarantees of R109 (2017: R118) million. Guarantees of R1 477 (2017: R1 396) million have been issued by third parties and financial institutions on behalf of the Group consisting mainly of guarantees to the Department of Mineral Resources for R1 355 (2017: R1 277) million.
16. Related party transactions
The Group entered into PGM purchase transactions of R3 749 (June 2017: R3 745) million with Two Rivers Platinum, an associate company, resulting in a payable of R1 145 (June 2017: R1 034) million at year end. It received refining fees to the value of R33 (June 2017: R32) million.
The Group previously entered into sale and leaseback transactions with Friedshelf, an associate company. At the end of the period, an amount of R1 192 (June 2017: R1 215) million was outstanding in terms of the lease liability. During the period, interest of R125 (June 2017: R130) million was charged and a R148 (June 2017: R147) million repayment was made. The finance leases have an effective interest rate of 10.2%.
The Group entered into PGM purchase transactions of R3 372 (June 2017: R3 199) million with Mimosa, a joint venture, resulting in a payable of R965 (June 2017: R844) million at year end. It received refining fees to the value of R285 (June 2017: R317) million.
These transactions are entered into on an arm’s-length basis at prevailing market rates.
Fixed and variable key management compensation was R67 (June 2017: R60) million.
17. Financial Instruments
| 2018 Rm |
2017 Rm |
|||
| Financial assets – carrying amount | ||||
| Loans and receivables | 6 295 | 9 943 | ||
| Financial instruments at fair value through profit and loss2 | 21 | – | ||
| Held-to-maturity financial assets | 73 | 70 | ||
| Available-for-sale financial assets1 | 198 | 179 | ||
| Total financial assets | 6 587 | 10 192 | ||
| Financial liabilities – carrying amount | ||||
| Financial liabilities at amortised cost | 16 967 | 14 832 | ||
| Borrowings | 10 352 | 9 461 | ||
| Other financial liabilities | 69 | 74 | ||
| Trade payables | 6 535 | 5 289 | ||
| Other payables | 11 | 8 | ||
| Financial instruments at fair value through profit and loss2 | 50 | 1 233 | ||
| Total financial liabilities | 17 017 | 16 065 |
The carrying amount of financial assets and liabilities approximate their fair values.
1 Level 1 of the fair value hierarchy – Quoted prices in active markets for the same instrument.
2 Level 2 of the fair value hierarchy – Valuation techniques for which significant inputs are based on observable market data.