REPORTS AND
CONSOLIDATED FINANCIAL STATEMENTS
30 September 2022
CONTENTS Page
2
Consolidated F
inancial
S
tatements
Management
Report
3
Corporate Governance Report
2
3
Chief Executive Officer and the
Chief Finance Officer
Responsibility Statement
4
3
Statement by the Members of the
Board of Directors and Company Officials
4
4
Independent Auditor’s Report
4
5
Consolidated
S
tatement of
Profit or L
oss and
O
ther
C
omprehensive
I
ncome
53
Consolidated
S
tatement of Financial Position
5
4
Consolidated S
tatement of Changes in
Equity
5
5
Consolidated S
tatement of Cash Flows
5
7
Notes to the
Consolidated
Financial Statements
5
8
Company financial statements
Statement of
Profit or
L
oss and
O
ther
C
omprehensive
I
ncome
12
3
Statement of Financial Position 124
Statement of Changes in Equity
12
5
Statement of Cash Flows 126
Notes to the Financial Statements
1
2
7
MANAGEMENT REPORT
for the year ended 30 September 2022
3
The Board of Directors of Tharisa plc (‘the Company’ or ‘Tharisa’) presents to the members its Management Report together with the audited consolidated
financial statements of the Company and its subsidiaries (together with the Company, ‘the Group’) and the Company financial statements for the year
ended 30 September 2022.
The Company is a Cypriot incorporated public company with a primary listing on the main board of the Johannesburg Stock Exchange, a secondary
standard listing on the main board of the London Stock Exchange and a secondary listing on the A2X Exchange in South Africa. The Group’s consolidated
financial statements and Company financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) as
issued by the International Accounting Standards Board.
PRINCIPAL ACTIVITY
The principal activity of the Company is that of an investment holding company with controlling interests in platinum group metals (‘PGM’) and chrome
mining, processing operations and associated sales and logistics operations. The principal activity remains unchanged from the previous year. Its major
investment is its wholly-owned subsidiary, Tharisa Minerals Proprietary Limited (‘Tharisa Minerals’). Tharisa Minerals owns and operates the Tharisa Mine,
an open pit PGM and chrome mine located in the Bushveld Complex of South Africa. In addition, the Company has a 70% shareholding in Karo Mining
Holdings plc which has an indirect 85% interest in a development stage, low cost, open pit PGM asset, located on the Great Dyke in Zimbabwe.
The principal activity of the Group is the exploitation of metals and minerals, principally PGMs and chrome, and associated sales and logistics operations.
OPERATIONAL REVIEW
Tharisa is an integrated resource group critical to economies' energy transition and decarbonisation. It incorporates mining, processing, exploration, and
the beneficiation, marketing, sales, and logistics of PGMs and chrome concentrates, using innovation and technology as enablers.
Our multi-operational business has been transformed from a single pit mine to a portfolio of assets complementing the business and operating in metals
that we believe are vital for the future sustainability of this planet.
Operational highlights
The total reef mined for the year amounted to 5 505.4 kt (2021: 5 379.9 kt), an improvement of 2.3% compared to the prior year. The annualised stripping
ratio was 12.8 m
3
: m
3
(2021: 11.6 m
3
: m
3
).
A strong mining performance ensured milling throughput reached a record in the last quarter of the year while totalling 5 608.2 kt (2021: 5 600.0 kt) for the
year, in line with the previous year’s milling throughput. The strong mining performance has contributed to a run of mine stockpile ahead of the crushing
circuit equivalent to around six weeks of milling requirements.
The confidence in the mining, which is a result of several factors, including continued investment, investment in training of the operators and detailed mine
planning, means that grade control is addressed as a vital requirement to improve output further and achieve the stated operational excellence, resulting
in an improved PGM rougher feed grade (rougher feed grade is the grade measured into the metallurgical circuit post the first mass chrome extraction) up
14.1% to 1.7g/t as compared to 1.49 g/t in 2021.
Overall PGM recoveries were slightly lower for the year at 76.6% (2021: 77.6%) as some oxidised ore was fed into the milling circuit. The Company
maintains that PGM recoveries in the low 80% range are being targeted, a number that has historically been achieved on numerous occasions.
Chrome output increased 5.1% to 1 582.7 kt (2021: 1 506.1 kt). While grade was slightly lower on an annual basis at 17.4% Cr
2
O
3
(2021: 17.9% Cr
2
O
3
),
a better recovery performance, in part due to the commissioning of the Vulcan Plant meant that annualised recovery was 68.3% (2021: 63.3%). Of the
total chrome output, 1 233.2 kt was metallurgical chrome and 349.5 kt specialty-grade chrome or some 22.1% of the total.
Safety
The safety and health of our people is a core value and Tharisa acknowledges that the safety of its people, in turn, is critical to its success. The Company
had one fatality, Legohu Raymond Mothapo, on Friday, 21 October 2022. The LTIFR for 2022 was 0.40 (2021: 0.34) per 200 000 man hours worked.
Before 21 October 2022, the mine achieved seven years fatality-free and over six million fatality-free shifts.
MANAGEMENT REPORT
for the year ended 30 September 2022
4
Tharisa Minerals
Tharisa Minerals is 100% owned by Tharisa and is uniquely positioned as a significant co-producer of both PGMs and chrome concentrates. Tharisa
Minerals’ core asset is the Tharisa Mine, which is situated on South Africa’s Western Limb of the Bushveld Complex – home to more than 70% of the
world’s platinum and chrome resources.
Tharisa Minerals holds a Mining Right over 5 475 ha of land near the town of Rustenburg in the North West province of South Africa. The Mining Right
was granted on 19 September 2008 for an initial period of 30 years, providing access to MG Chromitite Layers, which outcrop with a strike length of
approximately 5 km.
Tharisa Minerals mines and processes five MG Chromitite Layers. The mined reef is processed through innovative engineering at two independent plants
extracting both PGMs and chrome concentrates. This combined co-product output reduces unit costs and positions Tharisa Minerals in the lower cost
quartile of operating costs in South Africa for both PGMs and chrome concentrates.
Tharisa Minerals’ low unit costs, operating flexibility and multiple polymetallic products have ensured that it is well placed to manage commodity price
and exchange rate volatility.
Its dual revenue streams provide a natural hedge against different commodity cycles with the products used in various applications.
The Tharisa Mine has a remaining open-pit life of 19 years with a managed transition 40-year underground mining operation thereafter. The open pit
is divided into the east and west pits and extracts reef from five MG Chromitite Layers. The Tharisa Mine remains a world-class, long-life asset that
underpins our business and will continue to provide a sustainable, low-cost platform for over 50 years.
Key Operating Numbers
Year ended
30 Sep 2022
Year ended
30 Sep 2021
Year on year
movement %
Reef mined
kt
5
505.4
5
379.9
2.3
PGMs produced (6E)
koz
179.2
157.8
13.6
PGMs
sold
(6E)
koz
168.3
151.5
11.1
Chrome concentrates produced (excluding third party)
kt
1
582.7
1
506.1
5.1
Chrome concentrates
sold
(excluding third party)
kt
1
526.0
1
480.8
3.1
Average PGM basket price
US$/oz
2 564
3
074
(16.6)
Average metallurgical grade chrome concentrate contract price
US$/t
209
154
35.7
Tharisa Minerals’ two independent processing plants are designed to treat the MG Chromitite Layers of the Bushveld Complex. The smaller volume
Genesis Plant was commissioned in August 2011 with the PGM circuit being commissioned in December 2011. The larger-volume Voyager Plant was
commissioned in December 2012. Both plants operate above nameplate capacity following various upgrades and milled 5.6 Mt (2021: 5.6 Mt). The plants
have a similar process flow that includes crushing and grinding, primary removal of chrome concentrate by spirals, followed by PGM flotation from the
chrome tails and a second spiral recovery of chrome from the PGM tails.
Using off-the-shelf technology, the Genesis and Voyager processing plants are uniquely engineered to produce both PGM and chrome concentrates. This
innovative approach to production has made Tharisa a world-class PGM and chrome concentrate co-producer.
A third high-volume plant, the Vulcan Plant, was commissioned in 2021. The plant processes live tailings produced by the independent Voyager and
Genesis plants, will ensure further beneficiation of the Company’s chrome production at the Tharisa Mine while reducing the unit output of carbon
emissions.
The Vulcan Plant is the first large-scale plant to produce chrome concentrates from ultra-fines, consolidating Tharisa’s position as a key chrome producer.
The concept of Vulcan was developed entirely in-house by the R&D team, to extract the ultra-fine chrome from tailings.
Specialty chrome recovery circuits are integrated into the feed circuit of the Genesis Plant, known as the Challenger Plant. The Challenger Plant, owned
by fellow subsidiary Arxo Metals, was commissioned in July 2013 and produces chemical and foundry-grade chrome concentrates, significantly adding to
the revenue diversification strategy of Tharisa.
MANAGEMENT REPORT
for the year ended 30 September 2022
5
The PGMs in the MG ore mined by Tharisa Minerals occur in the silicates. They are not associated with chromite, thus enabling the process to extract
chrome before PGMs without sacrificing PGM recovery.
This lowers the chrome content in the PGM circuit and results in much lower chrome content in the PGM concentrate compared to typical UG2 operations.
Base metal content in the MGs is also significantly lower than in Merensky and UG2 ores, resulting in a low matte fall during smelting, reducing base metal
refining requirements.
Operating in parallel, the independent plants provide processing flexibility and production stability by allowing one plant to be shut down without hampering
the production of the other. The modular design of the processing circuits allows sections of the plant to be stopped without affecting the rest of the
operation (i.e. a crushing circuit can be stopped independently of the milling, spiral, and flotation circuits). While Tharisa Minerals has stand-by generating
capacity to withstand stage 4 loadshedding, the operational flexibility of the two independent processing plants adds to continued production during times
of loadshedding, which was prominent in the latter part of the financial year and has, unfortunately, continued into the new reporting period.
Sales
30 September
202
2
30 September
20
21
Change
%
PGM
basket price
US$/oz
2 564
3 074
(16.6)
PGM basket price
ZAR/oz
40 437
45 336
(10.8)
42% metallurgical grade chrome concentrate contract price
US$/t
209
154
35.7
42% metallurgical grade chrome concentrate contract price
ZAR/t
3 345
2 284
46.5
Average exchange rate
ZAR:US$
15.8
14.8
6.8
This Group’s dual exposure to both the PGM and chrome markets gives the Group a hedge against volatility in either commodity price.
Tharisa Minerals supplied most of its PGM concentrate to Impala Platinum in terms of its offtake agreement and is paid a variable percentage of the PGMs
and base metals contained within each tonne of concentrate in terms of an agreed market formula. The remainder of the PGM concentrate is sold to
Sibanye-Stillwater. Notice has been gives on the contract with the last delivery scheduled for November 2022. An off-take contract has been entered into
with Northam Platinum and PGM concentrate will be delivered to both Sibanye-Stillwater and Northam Platinum following the termination of the Impala
Platinum off-take agreement.
The average PGM basket price was down 16.6% to US$ 2 564/oz (2021: US$3 074/oz)
Chrome concentrate sales totalled 1.50 Mt, 307 kt of which was Tharisa’s higher margin specialty chemical and foundry-grade chrome concentrates. The
bulk of Tharisa’s sales is derived from metallurgical-grade chrome concentrate, which included 188.2 kt of third-party chrome concentrates.
Specialty-grade chrome concentrates produced within the Group are sold in terms of an agency and offtake agreement.
Tharisa and an independent third party jointly market the chemical-grade chrome concentrate.
Chrome prices and sales volumes improved year on year, with Tharisa increasing output by 5.11% to 1.6 Mt, with an average metallurgical price received
of US$209/t (2021 US$154/t), an increase of 35.7%.
The production of the higher-value specialty chrome concentrates, which typically command a premium of US$30/t to US$50/t, provided additional margin.
Metallurgical chrome production is shipped in bulk and containers via South African and Mozambiquan ports to major stainless steel and ferrochrome
producers in China and Indonesia.
MANAGEMENT REPORT
for the year ended 30 September 2022
6
Arxo Metals
Arxo Metals is also the beneficiation, research, and development arm of the Group. Arxo Metals conducts extensive research into technologies and
downstream beneficiation opportunities that have the potential to improve yields and recoveries at the Tharisa Mine and allows the Group to benefit in the
downstream value chain. Its core focus is creating increased value PGM and chrome products through expanding and optimising the Group’s processing
operations.
Arxo Metals operates a comprehensive beneficiation site near Brits, 40km from the Tharisa Mine. Incorporated at the beneficiation site is the Company’s
1 MW DC furnace, owned by Tharisa Minerals, which produces PGM alloy, and is continuing its research work into refining processes. The beneficiation
site also now houses other metal production facilities, in line with the Company’s stated strategy of maximising value for the raw materials it produces and
research facilities for energy production and storage.
Arxo Metals owns the Challenger Plant, which is integrated into Tharisa Minerals’ Genesis Plant. The Challenger Plant is dedicated to producing chemical-
grade and foundry-grade concentrates. Specialty-grade concentrates carry more stringent specifications and therefore fetch a higher selling price. Arxo
Metals has an offtake agreement to sell its concentrates to customers globally in the chemical and foundry industries. Arxo Metals accounted for producing
80.8 kt of chemical-grade chrome concentrate (2021: 99.5 kt) and 21.6 kt of foundry-grade chrome concentrate (2021: 25.5 kt) in FY2022.
In August 2017, Arxo Metals entered into an agreement with Sibanye-Stillwater on the operation of its K3 UG2 chrome plant and for the sales and marketing
of the UG2 chrome concentrate produced. The chrome production for FY2022 from the K3 UG2 chrome plant was 188.2 kt, down slightly from 223.0 kt in
2021.
Arxo Resources
Arxo Resources, with a strong established platform of global customers, customers in China, including stainless steel and ferrochrome producers, and
global commodity traders, has the exclusive right to sell the metallurgical-grade chrome concentrate produced by Tharisa Minerals to customers in China
and other international markets.
The scale of Arxo Resources’ operations allows for direct access to market and price discovery. Its established contact with customers also directly creates
an excellent platform for additional sales of third-party products.
In 2022, Arxo Resources sold 1.4 Mt (2021: 1.3 Mt) metallurgical-grade chrome concentrates, of which 1.2 Mt was produced by Tharisa Minerals.
Arxo Logistics
Arxo Logistics provides an integrated logistics platform that reduces the risk and costs of transporting concentrates. It manages the road transportation of
Tharisa Minerals’ PGM concentrates to Impala Platinum and Sibanye-Stillwater and the long-haul transportation of chrome concentrates from the Tharisa
Mine and K3 UG2 chrome plant to international customers through bulk and container shipping. Due to inland logistical constraints on the rail network,
Arxo Logistics has, over the past year and beyond, expanded its footprint and operating ports to ensure greater flexibility and supply certainty for global
customers. Arxo Logistics now ships via Richards Bay Dry Bulk Terminal, Maputo Harbour, and the Durban container port.
The logistics arm of the Group has the necessary road and rail transport capacity, warehousing facilities, and port facilities to manage Tharisa Minerals’
full production capacity. It also serves as a platform from which the Group can provide services to additional third-party customers.
Arxo Logistics shipped a total of 1.4 Mt (2021: 1.3 Mt) of chrome concentrate in 2022, primarily to main ports in China, including third-party materials.
MetQ
MetQ is a South African-based company founded in 1979 that specialises in the manufacturing and distribution of mineral processing equipment, with
a manufacturing facility based in Rosslyn, Pretoria, South Africa, becoming one of the market leaders in processes relying on particle sizing and gravity
concentration of various minerals. It was acquired by Tharisa with effect from 1 October 2019.
MetQ developed and built its own polyurethane spraying equipment to spray solventless polyurethane as a wear-resistant coating. With this spraying
system, spirals could be manufactured to rival the best international offerings and bring enormous cost savings for the mining industry. MetQ has expanded
its spiral range to include custom-designed units to ensure maximum efficiency in gravity separation circuits used to recover numerous minerals. Other
products like hydrocyclones, hydrosizers and screening media were also developed and added to the range. Products are continuously improved and
developed to ensure an ever-expanding range of solutions.
MetQ supplies spiral to the Tharisa Group operations and other engineering equipment required by the Group while expanding its footprint to third-party
customers within the mining industry.
MANAGEMENT REPORT
for the year ended 30 September 2022
7
Development projects
Tharisa’s development pipeline has been focused on developing the Karo Platinum Project.
Karo Mining Holdings
The Mining Lease area for the Karo Project covers an area of 23 903 ha and is located within the Great Dyke in the Mashonaland West District of Zimbabwe,
approximately 80 km southwest of Harare and 35 km southeast of Chegutu.
The Great Dyke is a PGM-bearing geological feature that runs north to south. At approximately 550 km in length and up to 11 km wide, it is second to the
Bushveld Complex of South Africa in terms of its PGM resource base.
The project, situated within a designated special economic zone ('SEZ'), is in the southern portion of the middle chamber of the Great Dyke and is supported
by good infrastructure, including road and power access in the project area.
On 31 March 2022, Tharisa exercised its farm-in option and acquired a controlling interest in Karo Mining for a purchase consideration of US$27.0 million,
which was settled through the issue of 13.69 million new Tharisa shares to The Leto Settlement (‘Leto’), a related party, thereby increasing Tharisa’s
shareholding in Karo Mining from 26.8% to 66.3%. After the acquisition on 31 March 2022, Tharisa has increased its stake in Karo Mining to 70%, with
Leto holding 30%.
The Republic of Zimbabwe has a 15% stake on a free carry basis at the Karo Platinum level, held via Generation Minerals.
The increased shareholding in the Karo Platinum Project is in line with Tharisa’s growth strategy and is a natural evolution for Tharisa as it fulfils its strategy
of becoming an integrated diversified developer of new metal assets. It also meets the Company’s strict capital allocation policy, ensuring all three aspects
of capital are met, namely continuous investment, growth capital and shareholder returns, while the Karo Platinum Project meets all of the strategic
investment criteria for Tharisa, being open pit, quick to market, providing returns in line with Tharisa’ stated strategy while providing diversification for the
Group.
The Karo Platinum Project has been well funded to date and Tharisa has spent some significant capital developing the project.
Investment to date of US$70.3 million:
US$4.5 million cash - acquisition of 26.8% shareholding
US$8.0 million Phase 1 exploration capital
US$3.4 million technical studies
US$25.0 million early development funding (not fully drawn)
US$29.4 million in shares - acquisition of 39.5% shareholding
Following the completion of an update study, which saw output increase from an initial 150koz of PGMs per annum, the project continues to show strong
fundamentals,
Tier 1 world-class PGM asset
17 years open-pit life of mine
Annual production of 194 koz of PGMs with significant base metal credits
Licensed for the life of mine
The Karo Project has a 24-month design and construction schedule - starting 1 July 2022, with the first ore in the mill (‘FOIM’) planned for July 2024. The
capital and working capital cost to FOIM is budgeted at US$391 million.
MANAGEMENT REPORT
for the year ended 30 September 2022
8
Outlook
Operationally, this has been a rewarding year, despite the macro challenges that have impacted global supply chains, inflation, and the mining sector. This
operational performance is built on critical decisions Tharisa undertook some years ago, in order to accelerate our growth strategy and thus build a highly
innovative, stronger, and more sustainable company.
Central to the success has been the continued efficiency at the flagship Tharisa Mine, where production increased across the board. The Vulcan Plant
contributed to increased production resulting in improved recoveries.
Tharisa has simplified its structure by fully aligning the long-term BEE partners as shareholders in the broader Tharisa business.
The long-life Platinum Karo Project, when added to the more than 60-year LOM of the Tharisa PGM and chrome operations in South Africa, sets the
foundation for Tharisa's growth, particularly in the downstream value-enhancing beneficiation sector. The development of the Karo Platinum Project will
significantly consolidate Tharisa as one of the world’s most forward-thinking and low-cost producers of PGMs in Africa.
Tharisa remains a key participant in the global transition to a low-carbon economy through the critical metals we produce. The development of the ESG
pathway into 2030 and 2050 respectively, further propels Tharisa to transition to low-carbon and renewable energy frontiers with an end goal of
decarbonisation. We are committed to carbon neutrality by 2050 and contributing to the transition through the development of new technologies that will
help industries transition into a low-carbon economy.
Production guidance for 2023 is set between 175 koz and 185 koz PGMs (6E basis) and 1.75 Mt to 1.85 Mt of chrome concentrates.
PRODUCTS
The Tharisa Mine produces the following products:
PGM concentrate: PGM concentrate is produced by Tharisa Minerals from both processing facilities typically processing different chromitite reefs. The
major element of the PGMs is platinum, followed by palladium and rhodium.
Metallurgical grade chrome concentrate: The typical metallurgical grade produced by Tharisa is 40.0% to a 42.0% chrome (as Cr
2
O
3
) with the silica
(SiO
2
) lower than 5.0%.
Chemical grade chrome concentrate: The typical chemical grade produced by Tharisa is 44.0% to 46.0% Cr
2
O
3
with the SiO
2
lower than 1.0%. This is a
higher value chromite product than the metallurgical grade chrome concentrate.
Foundry grade chrome concentrate: The typical foundry grade produced by Tharisa is 45.0% to 46.0% Cr
2
O
3
with the SiO
2
lower than 1.0%. The American
Foundryman Society Grain Fineness Number (AFS Number) is managed between 45 and 50. As with the chemical grade chromite, this is a higher value
chrome concentrate than the metallurgical grade chrome concentrate.
MANAGEMENT REPORT
for the year ended 30 September 2022
9
FINANCIAL OVERVIEW
The results of the Group for the year ended 30 September 2022 presented in this report have been audited and the auditors have expressed an unqualified
audit opinion. The comparable financial and production information, unless otherwise stated, is for the preceding financial year ended 30 September 2021.
Key financial metrics
30 September
202
2
30 September
20
2
1
Change
%
Revenue
US$’000
685
996
596
345
15.0
PGM basket price
US$/oz
2
564
3
074
(16.6)
Metallurgical grade CIF basis selling price
US$/t
209
154
35.7
EBITDA
US$’000
237
319
224
292
5.8
Profit before tax
US$’000
220
223
185
256
18.9
Profit attributable to owners of the Company
US$’000
153
881
100
469
53.2
Earnings per share
US$ cents
53.8
37.4
43.9
Equity attributable to owners of the
Company
US$’000
559
026
444
432
25.8
Free cash flow
US$’000
68
662
102
363
(32.9)
Return on invested capital
%
23.5
25.5
(7.8)
Total debt
US$’000
62
884
36
850
70.6
Net debt/(cash)
US$’000
(80
416)
(46
586)
72.6
Net debt/EBITDA
(0.3)
(0.2)
50
Net debt/equity
%
(13.0)
(10.3)
26.2
Net current assets
US$’000
207
212
168
651
22.9
Current ratio
2.2
2.4
(8.3)
Exchange rate (ZAR:US$)
-
average
15.82
14.83
6.7
The ZAR:US$ exchange rate since the commencement of the financial year has remained volatile with a midpoint upper and lower trading range of
ZAR18.08 and ZAR14.44 respectively, with a trading average of ZAR15.82.
Segmental analysis
The contribution to revenue and gross profit from the respective segments is summarised below:
30 September 202
2
30 September 202
1
US$ million
PGM
Chrome
Agency
and
trading
Manufac
turing
Total
PGM
Chrome
Agency
and
trading
Manufact
uring
Total
Revenue
346.8
295.2
40.5
3.5
686.0
353.4
203.9
36.5
2.6
596.4
Cost of sales
(194.1)
(205.8)
(37.2)
(3.2)
(440.3)
(205.6)
(147.1)
(33.7)
(2.6)
(389.0)
Manufacturing
(193.3)
(90.8)
(21.2)
(3.2)
(308.5)
(205.0)
(63.6)
(13.6)
(2.6)
(284.8)
Selling
costs
(0.8)
(69.5)
(9.2)
-
(79.5)
(0.6)
(54.3)
(14.9)
-
(69.8)
Freight services
-
(45.5)
(6.8)
-
(52.3)
-
(29.2)
(5.2)
-
(34.4)
Gross profit
152.7
89.4
3.3
0.3
245.7
147.8
56.8
2.8
-
207.4
Gross profit margin
44.0%
30.3%
8.1%
8.6%
35.8%
41.8%
27.9%
7.7%
-
34.8%
Sales volumes
168.3
koz
1
526.0
kt
186.3 kt
151.5
koz
1
480.8
kt
219.5 kt
-
The basis of the allocation of shared costs is 70% for the PGM segment (2021: 80%) and 30% for the chrome segment (2021: 20%). The allocation is
reviewed half yearly.
The decrease in PGM revenue is e is primarily due to the 16.6% decrease in basket prices, notwithstanding the increase in volumes sold.
MANAGEMENT REPORT
for the year ended 30 September 2022
10
Rhodium prices averaged US$14 972/oz (2021: US$19 473/oz) for the period, a decrease of 23.1%. Platinum prices averaged US$968/oz (2021:
US$1 074/oz), a decrease of 9.9% and palladium prices averaged US$2 108/oz (2021: US$2 506/oz), a decrease of 15.9%.
Chrome revenue increased 44.8% due mainly to a 35.7% increase in metallurgical grade selling prices. In terms of volumes sold, metallurgical grade sales
totalled 1 219.2 kt (2021: 1 123.1 kt) an increase of 8.6% and specialty grade sales totalled 306.8 kt (2021: 371.9 kt) a decrease of 17.5%.
Average sea freight rates increased 38.9% during the period to US$35.7/t (2021: US$25.7/t). Average sea freight rates were elevated due to shipping
capacity constraints in the first half of the year but have declined into the second half of the year.
Costs
The following analysis computes the cash costs (i.e. excluding non-cash flow items such as depreciation) on a per cube and per ROM tonne mined for
mining costs and then analyses the major cost categories on a per tonne milled basis. Costs relating to deferred stripping (which are capitalised) of
US$15.1 million (2021: US$25.4 million) were excluded from the per tonne milled analysis.
30 September
202
2
30 September
20
2
1
Change
%
Cubes mined
m
3
20
896 674
19
191 407
8.9
Cost per cube mined
US$
/m
3
8.5
8.9
(4.5)
Reef
tonnes mined
tonnes
5
505 369
5
379 913
2.3
Cost per reef tonne mined
US
$/t
32.4
31.9
1.2
Tonnes milled
t
onnes
5
608 200
5
600 011
0.1
Consolidated cash cost per tonne milled
US
$
47.0
49.4
(4.9)
Mining costs per cube decreased by 4.5%. Diesel cost, a significant input cost for mining in South Africa, increased by 46.5% per litre from ZAR13.55
(US$1.3) per litre to ZAR19.85 (US$0.9) per litre.
Summary of results
In summary, revenue for the period amounted to US$686.0 million (2021: US$596.3 million), an increase of 15.0%. Gross profit amounted to
US$245.7 million (2021: US$207.4 million). The gross profit margin widened 100 bps to 35.8% (2021: 34.8%).
Other operating expenses amounted to US$63.9 million (2021: US$44.8 million), an increase of 42.6%. The major cost within other operating expenses
was employee costs at US$26.7 million (including equity settled share-based payment expenses) (2021: US$26.3 million) comprising 41.8% of other
operating expenses (2021: 56.6%).
EBITDA amounted to US$237.3 million (2021: US$224.3 million).
Finance costs of US$4.8 million (2021: US$4.9 million) relate primarily to the asset equipment finance and trade finance facilities utilisation.
The Group generated a profit before tax of US$220.2 million (2021: US$185.3 million) benefiting from US$44.3 million in net fair value gains (2021:
US$15.4 million net gains).
The tax charge amounted to US$53.1 million (2021: US$53.7 million), an effective charge of 24.1% (2021: 29.0% charge). A normalised tax rate should
be circa 25%. Cash taxes paid amounted to US$41.2 million.
The total comprehensive income for the period, as a consequence a of foreign currency translation difference charge of US$69.7 million (2021: US$20.4
million (gain)), amounted to US$D97.4 million (2021: US$152.0 million).
Basic earnings per share for the period amounted to US 53.8 cents (2021: US 37.4 cents).
The return on invested capital, calculated as the net operating profit after tax divided by the average invested capital (comprising total assets less cash
and non-interest-bearing short-term liabilities), for the period under review was 23.5% (2021: 25.5%).
Impairment
Salene Chrome was placed in care and maintenance following the introduction of a ban on exports of chrome concentrates by the Government of Zimbabwe
and pending a review of the business case. In addition, MetQ incurred a net loss. As a consequence, the Company impaired the goodwill and other
acquisition intangibles recognised on consolidation of these subsidiaries. The goodwill impairment amounts to US$1.9 million and the other acquisition
intangible amounts totals US$8.4 million.
MANAGEMENT REPORT
for the year ended 30 September 2022
11
Funding
At 30 September 2022 there were 302 596 743 shares in issue, of which 299 746 365 carried voting rights and 2 850 378 were treasury shares.
Tharisa Minerals has an OEM funding facility from CAT Finance for new mining equipment purchased from Barloworld. The facility is available on a
revolving basis with the maximum of US$35.0 million (2021: USD30.0 million). The facility bears interest at a margin to the SOFR rate and has a tenor of
4 years with monthly repayments. At 30 September 2022 the facility had headroom of US$11.1 million.
Tharisa Minerals has a ZAR150 million (US$8.3 million) asset finance facility from ABSA on which it made its maiden drawdown in November 2021. The
facility bears interest at a discount to the South African prime lending rate and has a tenor of 4 years with monthly repayments. At 30 September 2022 the
facility had headroom of US$1.4 million.
Tharisa Minerals has a ZAR125 million (US$6.9 million) asset finance facility from Wesbank on which it made its maiden drawdown during September
2022. The facility bears interest at a discount to the South African prime lending rate and has a tenor of between 3- and 4-years dependent on the
machinery procured, repayable monthly. At 30 September 2022 the facility had headroom of US$5.5 million.
The discounting facility in Arxo Resources includes a US$10.0 million trade finance facility from Nedbank which bears interest at Libor + 2.5% as well as
a US$10.0 million trade finance facility from Absa Mauritius which bears interest at Libor + 3.0%.
The facility limit of the limited recourse disclosed receivables discounting facility is US$33.0 million. This facility is being reduced on a phased basis to
coincide with the end of the off-take contract with Impala Platinum.
The debt (interest bearing) to total equity ratio for the Group was 10.0% (2021: 8.1%). Of the total interest-bearing debt US$50.6 million was USD
denominated and US$12.0 million was ZAR denominated.
Tharisa Minerals has an unutilised overdraft facility of ZAR150 million. A US$60.0 million bridge facility secured by the proceeds of the Tharisa Minerals
PGM production was concluded with ABSA repayable over 12 months. The facility bears interest at SOFR plus 2.65%. The proceeds of the facility will be
used towards the Karo Project. The first drawdown is expected to be in late December 2022.
Cash and cash equivalents at 30 September 2022 amounted to US$143.3 million resulting in a net debt to equity ratio of -13.0%.
The net debt to EBITDA multiple is -0.3x.
Credit Rating
Sovereign debt rating as per the latest available information at the reporting date:
Country
Agency
30 September
202
2
30 September
20
2
1
Cyprus
Standard & Poor’s
BBB*
BBB
-
*
Fitch’s
BBB
-
*
BBB
-
*
Moody’s
Ba1*
Ba2*
South Africa
Standard & Poor’s
BB
-
*
BB
-
*
Fitch’s
BB
-
*
BB*
Moody’s
Ba2*
Ba2*
Zimbabwe
Credit rating not available at date
of report
*Speculation grade/non-investment grade
Capital expenditure
Of the total capex spend for the period of US$105.0 million, approximately US$34.8 million related to additions to the mining fleet and US$59.2 million
related to other mining assets. Of the US$59.2 million, US$12.4 million related to expansion capital principally the Vulcan Plant construction.
MANAGEMENT REPORT
for the year ended 30 September 2022
12
Cash flows and working capital
Cash flows from operations before movements in working capital for the period amounted to US$239.6 million. Working capital requirements including (i)
an increase in trade and other receivables of US$30.1 million, (ii) an increase in trade and other payables of US$41.1 million, (iii) an increase in inventories
of US$28.2 million, and (iv) a decrease in provisions of US$7.6 million resulted in net cash flows from operating activities after tax of US$173.7 million.
Additions to property, plant and equipment amounted to US$105.0 million.
After taking into account, inter alia, debt and interest repayments, there was a net increase in cash and cash equivalents for the period of US$69.5 million.
Cash and cash equivalents on hand totalled US$143.3 million.
Net current assets amounted to US$207.2 million.
Commitments
Capital commitments amount to US$28.9 million.
Corporate actions
Karo Platinum
The Company announced the exercise of the farm-in option to acquire control, with effect from 30 March 2022, of the Karo Platinum Project. This increased
the Company’s shareholding in Karo Mining Holdings from 26.8% to 66.3% which was settled by the issue of 13 693 000 shares. For accounting purposes,
the settlement of the transaction consideration was valued at US$29.4 million.
The first-time consolidation of Karo Mining Holdings at 31 March 2022 resulted in the recognition of US$201.8 million in assets related to the mineral right
of the Karo Platinum Project. Furthermore, the consolidation entries resulted in a US$33.5 million fair value gain on the 26.8% shareholding held by the
Company before the exercise of the farm-in option and a US$14.9 million bargain purchase income from acquiring control of Karo Mining Holdings at a
discount to the valuation metrics as provided in the farm-in agreement between the parties.
Karo Mining Holdings currently controls an indirect 85% of the shareholding of Karo Platinum with the Republic of Zimbabwe holding the remaining 15%
on a free funded carry basis. Furthermore, the Zimbabwean Government holds an option to increase its shareholding in Karo Platinum by 11% from the
current 15% to 26% after 24 months but before 36 months from 30 March 2022. The fair value of the option liability relating to the 11% of Karo Platinum
was valued at 30 September 2022 at US$16.8 million. The Company followed its rights in a US$25.0 million rights offer by Karo Mining Holdings including
taking up the rights of the minority shareholder. Following the rights offer, and together with the capitalisation of the shareholders loan of US$8.0 million,
the Company holds ~70% of the share capital in Karo Mining Holdings.
Tharisa Minerals
The Company announced the acquisition of the minority shareholders’ interests in Tharisa Minerals for a consideration of ZAR390 million settled through
the issue of 13.9 million new shares of the Company during the year. Tharisa Minerals is now a wholly owned subsidiary of the Company after all conditions
precedent to complete the transaction were fulfilled during June 2022.
MANAGEMENT REPORT
for the year ended 30 September 2022
13
Definitions to non-IFRS financial information
EBITDA represents the sum of: results from operating activities, depreciation and impairments and write offs of property, plant and equipment as stated in
the consolidated statement of cash flows and changes in fair value of financial assets and liabilities as stated in the consolidated statement of profit or
loss.
Return to the ordinary shareholders on the equity attributable to the owners of the company: calculated as the profit attributable to the owners of the
company divided by the average equity attributable to the owners of the company.
Return on invested capital: calculated as the net operating profit after tax divided by the average invested capital (comprising total assets less cash and
non-interest bearing short term liabilities).
Debt to equity ratio is calculated by dividing the total of the non-current and current borrowings by the total equity as stated in the statement of financial
position.
Net debt to equity ratio is calculated by dividing the total of the non-current and current borrowings less the cash and cash equivalents by the total equity
as stated in the statement of financial position.
Headroom: undrawn available funding in terms of the relevant financing facility
Net debt to EBITDA multiple: the total of the non-current and current borrowings less the cash and cash equivalents divided by the EBITDA as defined
previously.
Current ratio: represents the current assets divided by the current liabilities.
Free cash flow: represents the cash flows from operations less the additions to property, plant and equipment.
Total debt: represents the total of the non-current and current borrowings.
CHANGES IN THE GROUP STRUCTURE
On 18 April 2022, the Company incorporated Redox One Limited, a company established in Cyprus. The principal activity of Redox One Limited is the
research and development on renewable energy solutions. On 16 December 2021, the Company incorporated Skyler Storm (Private) Limited, a company
established in Zimbabwe. The principal activity of Skyler Storm (Private) Limited is the mining and beneficiation of chrome concentrate. On 19 April 2021,
the Company incorporated Arxo Prospecting (Cyprus) Limited, a company established in Cyprus. The principal activity of Arxo Prospecting (Cyprus)
Limited is the prospecting for minerals and metals. On 20 April 2021, the Company incorporated Arxo Exploration (Cyprus) Limited, a company established
in Cyprus. The principal activity of Arxo Exploration (Cyprus) Limited is the exploration for various metals and minerals. On 30 June 2021, the Company
incorporated Arxo Technologies Limited, a company established in Cyprus. The principal activity of Arxo Technologies Limited is to perform research and
development operations. On 30 March 2022, the Company acquired the controlling interest in Karo Mining Holdings plc and subsidiary companies. Karo
Mining Holdings plc is a company incorporated in Cyprus and its principal activity is an investment holding company. Since the acquisition, the Company
subscribed to additional ordinary shares in Karo Mining Holdings plc. At 30 September 2022 and the date of this report, the effective interest in Karo Mining
Holdings plc is 70.0%. Effective 16 February 2022, the Company acquired 20.0% of the issued share capital of Tharisa Minerals from one of the non-
controlling shareholders. At the same time, the Company purchased the remaining 6.0% of the issued ordinary shareholding of Tharisa Minerals from the
remaining non-controlling shareholder. Refer to notes 31 of the consolidated financial statements and note 11 of the Company financial statements.
RESULTS
The Group’s results are set out on page 53 of the consolidated financial statements while the results of the Company are set out on page 123.
MANAGEMENT REPORT
for the year ended 30 September 2022
14
DIVIDENDS
During the period ended 30 September 2022, the Company declared and paid a final dividend of US 5.0 cents per share in respect of the financial year
ended 30 September 2021. In addition, an interim dividend of US 3.0 cents per share was declared and paid in respect of the financial year ended
30 September 2022.
During the period ended 30 September 2021, the Company declared and paid a final dividend of US 3.5 cents per share in respect of the financial year
ended 30 September 2020. In addition, an interim dividend of US 4.0 cents per share was declared and paid in respect of the financial year ended
30 September 2021.
On 1 December 2022, the Board has proposed a final dividend of US 4.00 cents per share, subject to the necessary shareholder approval at the Annual
General Meeting.
RELATED PARTIES
From time to time, the Group concludes transactions with related parties. Outstanding balances at year-end are unsecured and settlement occurs in cash
and are disclosed in the ensuing consolidated financial statements (refer to note 34) and the Company financial statements (refer to note 21).
CONTINGENCIES AND COMMITTMENTS
The Group’s contingencies and commitments are disclosed in notes 35 and 36 to the consolidated financial statements and note 22 to the Company
financial statements.
SHARE CAPITAL AND PREMIUM AND TREASURY SHARES
The authorised share capital of the Company comprises 10 000 million ordinary shares of US$0.001 each and 1 051 convertible redeemable preference
shares of US$1 each. At 30 September 2022, the issued and fully paid ordinary share capital comprised 299 746 365 (2021: 271 284 379) ordinary shares.
During the year ended 30 September 2020, the Company issued 5 000 000 ordinary shares to be held as treasury shares mainly for the purpose of settling
obligations in respect of the conditional awards and share appreciation rights as employees exercise their rights. As at 30 September 2022 and the date
of this report, treasury shares totalled 2 850 378 (2021: 3 715 621) ordinary shares (refer to note 24 to the consolidated financial statements and note 16
to the Company financial statements).
All ordinary shares other than for the treasury shares rank equally with regard to the Company's residual assets. The holders of ordinary shares, other
than the treasury shares, are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
There are no restrictions in the exercising of voting rights of shares issued by the Company.
SIGNIFICANT SHAREHOLDERS
Refer to the Corporate Governance report for stakeholders holding more than 5% of the issued share capital of the Company.
MEMBERS OF THE BOARD OF DIRECTORS
The Board of Directors, during the year, as at 30 September 2022 and the date of this report are:
Loucas Christos Pouroulis Executive Chairman
Phoevos Pouroulis Chief Executive Officer
Michael Gifford Jones Chief Finance Officer
Carol Bell* Lead Independent Non-Executive Director
John David Salter Independent Non-Executive Director
Antonios Djakouris Independent Non-Executive Director
Omar Marwan Kamal Independent Non-Executive Director
Roger Owen Davey Independent Non-Executive Director
Zhong Liang Hong Non-Executive Director
Shelley Wai Man Lo Non-Executive Director
* Appointed as lead independent director effective 1 October 2021
There has been no other change in the composition or the allocation of responsibilities of the Board of Directors’ of the Company between
30 September 2022 and the date of approval of the consolidated and Company financial statements.
MANAGEMENT REPORT
for the year ended 30 September 2022
15
DIRECTORS’ INTEREST
The interest in the share capital of the Company, both direct and indirect, of the Board of Directors is disclosed below:
30 September
2022
30
September
2021
%
%
LC Pouroulis
0.40
0.38
P Pouroulis
2.68
2.90
MG Jones
0.26
0.25
A Djakouris
0.01
0.02
C Bell
0.02
0.02
Total
3.37
3.57
The interest percentage represents the percentage of voting rights.
There has been no change in the Board of Directors’ interests in the share capital of the Company between 30 September 2022 and the date of approval
of the consolidated and Company financial statements.
COMPANY SECRETARIES
Sanet Findlay serves as the Company Secretary. Lysandros Lysandrides serves as the Assistant Company Secretary. The Board of Directors formally
assessed and considered the performance and qualifications of the Company Secretaries and is satisfied that they are competent, suitably qualified and
experienced. They are not directors of the Company, nor are they related or connected to any of the Directors and the Board of Directors is satisfied that
they maintain an arm's length relationship with the Board of Directors. Their contact details are as follows:
Sanet Findlay Lysandros Lysandrides
2nd Floor, The Crossing 31 Evagoras Avenue
372 Main Road Evagoras House, 6
th
Floor
Bryanston, 2191 Nicosia
South Africa Cyprus
The Company Secretaries are available to advise all Directors to ensure compliance with the Board procedures. A procedure is also in place to enable
Directors, if they so wish, to seek independent professional advice at the Group’s expense.
EVENTS AFTER THE REPORTING PERIOD
Events after the reporting period are disclosed in note 37 to the consolidated financial statements and note 23 to the Company financial statements.
DIRECTORS’ AND MANAGEMENT REMUNERATION
Directors’ remuneration is disclosed in note 11 to the consolidated financial statements and note 6 to the Company financial statements. Key management’s
remuneration is disclosed in note 34 to the consolidated financial statements. There has been no significant change in the remuneration of the Board of
Directors’ and key management of the Company between 30 September 2022 and the date of approval of the consolidated financial statements.
ARTICLES OF ASSOCIATION
Refer to the Corporate Governance Report for provisions relating to how Articles of Association may be amended.
COMPANY’S INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS IN RELATION TO THE FINANCIAL REPORTING PROCESS
Refer to the Corporate Governance Report for provisions relating to internal control and risk management.
INDEPENDENT AUDITORS
The independent auditors, Ernst & Young Cyprus Ltd, have expressed their willingness to continue in office. A resolution giving authority to the Board of
Directors to fix their remuneration will be proposed at the Annual General Meeting.
MANAGEMENT REPORT
for the year ended 30 September 2022
16
BRANCHES
During the year the Group and the Company did not operate any branches.
GOING CONCERN
These consolidated financial statements have been prepared on a going concern basis.
Refer to note 33 to the consolidated financial statements and note 20 to the Company financial statements for statements on the Group’s objectives,
policies and processes for managing its capital, details of its financial instruments and hedging activities; its exposures to market risk in relation to
commodity prices and foreign exchange risks; interest rate risk; credit risk; and liquidity risk.
ENVIRONMENTAL
The Group has a legal obligation to rehabilitate the mining area, once the mining operations cease (refer to note 25 to the consolidated financial statements).
RESEARCH AND DEVELOPMENT
The Group’s approach to research and development is founded on its core value of innovation. The Group strives to push through established boundaries
and limitations within existing processing and product development, optimizing processes and challenging convention. The development of downstream
beneficiation of the Group’s PGMs is part of its philosophy of capturing value and margin down the supply chain and ultimately being in control of metal
flows through direct sales.
CORPORATE SOCIAL RESPONSIBILITY
Sustainability starts with a corporate value system that upholds responsibilities to the planet and to people. This corporate value system is based on a
principled approach to doing business and is guided by the need to protect the environment, human rights and stakeholders that are affected by the
Group's businesses.
Sustainability is a blueprint for shared value and it is through sustainability that the Group is able to create additional value for its investors and for all of its
stakeholders including employees, contractors, suppliers, the communities in which it operates, and various levels of government.
On a broader basis, the Group subscribes to the Equator Principles and has embraced the Ten Principles of the UN Global Compact.
The Equator Principles are a risk management framework, adopted by financial institutions, for determining, assessing and managing environmental and
social risk in projects. They are primarily intended to provide a minimum standard for due diligence to support responsible risk decision-making.
The safety and health of the Group's employees is a core value. Tharisa Minerals is proud of its track record in minimising its environmental impact and,
while it strives to improve further, it takes similar pride in its mature and mutually beneficial relationships with the communities that border the Tharisa
Minerals’ mine.
The Group not only understands its obligations to create social capital as enshrined in the MPRDA, but also strives to achieve these obligations in ways
that create ongoing positive social impacts.
The Group will be publishing its sustainability report within its Annual Report and it will be available on the Company’s website. The sustainability report
will contain information about safety and health, human resources, environmental matters, social development and human rights.
STAKEHOLDER ENGAGEMENT
The Group believes that stakeholder engagement is a business imperative and that strong lines of communication between stakeholders ensure the
success of the Group and secure its place within the community. The Group’s stakeholder engagement strategy aims to maintain good working relations,
manages social risk and develops solutions to social challenges faced by its stakeholders. Tharisa’s stakeholder engagement framework will be further
developed for the new jurisdictions that it is entering as those operations are established.
HUMAN RESOURCES
The Group considers the wellbeing of employees central to its success and strives to maintain exemplary working standards, ensure job satisfaction and
create opportunities for professional growth. The Group’s human resources policy focuses on creating a positive atmosphere at all offices and facilities to
maximise productivity. The Group’s future success will partly depend on its ability to continue to attract, retain and motivate key employees and qualified
personnel, in particular an experienced management team.
Adequate remuneration packages, which are in line with or in excess of market levels, are offered to all employees and key managers. The Human
Resource function regularly monitors salary levels and other benefits offered by competitors to ensure that the Group’s remuneration packages are
adequate.
MANAGEMENT REPORT
for the year ended 30 September 2022
17
NON-FINANCIAL INFORMATION
The Group will be publishing its non-financial information within its Annual Report that will be issued within four months after the balance sheet date and
will be available on the company’s website: www.tharisa.com.
PRINCIPAL RISKS AND UNCERTAINTIES
The Group’s critical estimates and judgements and financial risk management are disclosed in notes 3 and 33 to the consolidated financial statements
and notes 3 and 20 to the Company financial statements. Additional disclosure on financial risk and judgement is disclosed in each note to the financial
statements.
The Group’s contingencies, commitments and guarantees are disclosed in notes 35 and 36 to the consolidated financial statements and note 22 to the
Company financial statements.
Tharisa regards principal business risks as issues that may, if they materialise, substantially affect the Group’s ability to create and sustain value in the
short, medium and long term. The risks that are material to Tharisa and its stakeholders are determined by an analysis of the Group's risks, the external
environment and the Group's engagement with stakeholders. Material risks may impact the achievement of the Group’s strategy. Each risk also carries
with it challenges and opportunities. The Group's strategy takes into account known risks, but risks may exist of which the Group is currently unaware.
Material risks are considered and reported on an ongoing basis by those members of the management team responsible for risk management. The Tharisa
Risk Committee comprises all members of the Board. Risks are identified in the Group Risk Register and are considered by management on a quarterly
basis and reported to the Board at least twice a year.
The following tables summarise the material risks identified by management in consultation with stakeholders and with reference to the Group’s business
model and strategy.
Risk Impact Mitigation
Health and safety
The safety and health of our people are our
core value.
Operating safely is a key performance indicator
for all executives and managers at Tharisa and
its subsidiaries.
COVID-19.
Harm to people, the environment and assets.
Potential section 54 and section 55 instructions
from the DMRE in terms of the South African
Mine Health and Safety Act and the impact on
production.
Strive for a zero-harm working environment.
Further, implement a culture where safety risks will not be tolerated.
Comprehensive training o
n mandatory code of practices and standard
operating procedures.
Continuous training and adherence to global best practices.
Transparent and open relationships with the DMRE
inspectorate and
other regulatory bodies.
Key performance indicator (‘KPI’) in Gro
up cash bonus scheme to
incentivise safe behaviour.
Ensuring alignment and standardisation across all jurisdictions and
operations.
Tharisa continues to put in place measures that, at a minimum,
comply
with government regulations and adhere to best practices.
A comprehensive communication strategy for
employees and
contractors remains in place,
providing educational awareness to
employees on the impact, prevention and treatment of COVID-19.
MANAGEMENT REPORT
for the year ended 30 September 2022
18
Risk
Impact
Mitigation
Political uncertainty
South Africa – the burgeoning unemployment,
increasing government debt and negligible
GDP growth has led to a negative response to
political certainty.
Negative business confidence.
Zimbabwe – limited international sanctions still
exist and may affect the economy's stability.
Hyperinflation and monetary policy uncertainty.
Negative business confidence and political
uncertainty.
Lack of currency liquidity.
Instability in Eastern Europe.
Unattractive investment destination(s) for
investors.
Potential for further credit rating downgrades.
Political and civil unrest adversely impacted
mining production.
Closing (temporary or permanent) of end-user
markets.
Imposition of sanctions on countries buying our
products.
The South African government has indicated commitment and intent to
ensuring South Africa remains politically stable and that the economy
is
advanced.
Pledges by global concerns to invest in the country will improve business
confidence, unlock investment by local concerns and build GDP growth.
Continuous drive by the Government of Zimbabwe to create an investor-
friendly environment.
Establishment and awarding of SEZ
in Zimbabwe to assist capital flows
and investment.
Tharisa has a wide range of offtakers w
ho value the quality product
Tharisa produces.
The Company continuously strives to create new markets for its products
to ensure offtake is not overly
concentrated and thus has a negative
effect on purchases.
Regulatory compliance
Tharisa Minerals’ right to mine is dependent on
strict adherence to various legal and legislative
requirements such as:
Non-compliance with the MPRDA and/or
Mining Charter and/or the Group’s Social and
Labour Plan.
The Group is required to comply with a range
of health and safety laws and regulations in
connection with its mining, processing,
manufacturing and logistics activities. Any
perceived violation of the regulations could
lead to a temporary shutdown of all or a portion
of the Group’s mining activities.
Non-compliance with the Mines and Minerals
Act of Zimbabwe and mining regulations
promulgated under such Act.
Cost of compliance to changes in the Mining
Charter.
Non-compliance resulting in potential legal
sanctions including fines, penalties and risks to
the right to mine through forfeiture or
cancellation.
Access to forms of capital is hindered.
Ensure compliance with current MPRDA is applicable to legislation.
Mining Charter provides some certainty.
Ensure compliance with the terms of the Mining Charter.
Ensure compliance with the Group’s Social and Labour Plan.
Proactive engagement with regulatory authorities
and industry
organisations.
Ensure communication and awareness with investors are maintained.
Ensure compliance with all relevant Zimbabwean legislation including
the Mines and Minerals Act, Mining regulations promulgated under
section 403 of the Mines and
Minerals Act, the Labour Act, Exchange
Control regulations and other laws and enactments governing
investments.
Routine audits are carried out by regulatory/competent authorities in line
with the relevant legislative prescripts to ensure compliance.
Regular internal inspections are conducted by the SHE d
epartment to
ensure compliance with regulatory requirements
Production/location concentration
Tharisa currently owns and operates one
primary producing asset located in South Africa
The Group has made early entry investments
into Zimbabwean development projects;
however, it is still exposed to the potential
political risk and instability within the country of
its operation.
Exposure to potential macroeconomic, social
and socio-political risks and instability.
Sovereign rating downgrades of the country of
operation can limit the Group’s ability to raise
financing and increase the cost thereof.
Exposure to only two main commodities.
Third-party operations,
such as the operations of Sibanye Stillwater’s K3
UG2 chrome plant,
provide additional revenue from an alternate
operation
Diversification into higher-grade
chrome products has opened new
markets for Tharisa.
Development of the Karo Platinum project in Zi
mbabwe will provide
geographic diversification c
onsidering opportunities to diversify
commodities as they arise.
Development of new offtake agreements for the Company’s PGM
concentrates.
In-
house development of downstream beneficiated products to create a
broader market for our products.
MANAGEMENT REPORT
for the year ended 30 September 2022
19
Risk
Impact
Mitigation
Global commodity prices and currency volatility
The Group’s revenues, profitability and future
growth rate depend on the prices of PGMs and
chrome.
The state of the world’s economies impacts
demand and market prices for PGMs and
chrome.
Volatility in the ZAR:US$ exchange rate affects
the Group’s profitability, of which South Africa’s
land reform uncertainty and effects of other
emerging markets are contributing factors.
Downward pressure on PGMs and/or chrome
prices may negatively affect the Group’s
profitability and cash flows.
The Group’s reporting currency is US dollar.
The Group’s dominant current operations are
predominately based in South Africa, with a
ZAR cost base, while the majority of the
revenue stream is in US dollar, exposing the
Group to the volatility and movement in the
currencies.
Risk of competitor product dumping and
undercutting market prices in respect of the
chrome market.
Monitor costs closely to
ensure that the Group remains in the lowest cost
quartile.
Stringent cost control.
Improved operating efficiencies and production driving down unit costs.
Service providers appointed to manage the Group foreign exchange and
PGM hedging strategy.
Production of higher-value-
add speciality grade chrome concentrates
comprising ~25% of Group chrome concentrate production.
Diversification into higher-
priced chrome products through the
development of the Salene Chrome operation.
Financing and liquidity
The Group's activities expose it to various
financial risks including market, commodity
prices, credit, foreign exchange and interest
rate risks.
Static share price trading.
Non-compliance to ESG standards and
requirements may affect capital raising
abilities.
Significant changes in the financial
assumptions made by the Group could impact
its ability to continue operating and jeopardise
its ability to raise financing in the future.
Adverse impact on the ability to raise capital for
growth and acquisitions.
Positioned as a low-
cost producer of both PGM and chrome
concentrates.
Production of higher value-add specialty grade chrome concentrates
Leveraging third-party operations.
Diversified customers and markets.
Undrawn banking facilities.
Trade finance facilities assist with working capital requirements.
Secondary listing on the LSE and an additional listing on A2X in South
Africa provide additional trading platforms and increased liquidity.
Marketing and roadshow efforts have significantly enhanced the
Group’s
profile, investor awareness, and investor spread.
Compliance of ESG standards.
Employment of relevant skills to manage ESG effectively.
Market/customer concentration
The bulk of Tharisa’s chrome production is
exported to China. This gives the Group
significant exposure to a single geographic
market.
Proposal by the South African government to
impose chrome tax.
Customer base is largely located in China, with
accompanying exposure to Chinese markets.
No reliance on a dominant customer within that market.
Tharisa has strategically diversified its production by increasing
specialty
grade chrome concentrates, which make up approximately
25% of Tharisa’s total chrome production.
Chemical and foundry grade chrome concentrates sold into diversified
global markets.
Diversified commodities with
PGM concentrate sold to leading precious
metal refiners on an offtake basis.
Lobbying of government has thus far resulted in the shelving of
the
proposed chrome tax in South Africa
.
MANAGEMENT REPORT
for the year ended 30 September 2022
20
Risk
Impact
Mitigation
Environment
Tharisa is obliged in terms of its undertaking to
stakeholders, including the government,
providers of capital and the community,
to monitor, minimise and mitigate our impact on
the physical environment and not to infringe
on the rights to a safe and healthy
environment. Non-compliance with this
undertaking may infringe on the terms of the
mining licence and the ability to continue
mining.
Harm to the environment.
Increased costs of remediation and
rehabilitation due to legislative changes.
Potential legal sanctions including mine
stoppage and class action suits.
Poor image of mining companies.
Conduct all mining and processing operations in an
environmentally
responsible manner.
Compliance with applicable national and local laws and regulations.
Monitor compliance against EMPR, licences and Equator Principles.
Compliance with provision for rehabilitation and mine closure.
Ongoing environmental impact monitoring, management and evaluation.
Ongoing internal and external compliance audits/inspections.
Update/ amendment of licences, permits and authorisations.
Community engagements through SLP and local forums.
Ongoing engagements with competent authorities to source advice on
new or amended regulations.
Climate change
The Group is exposed to risks arising from
climate change. The risks can be divided into
physical risks, arising from the impact of
climate change on operations, and reputational
risks (arising from Tharisa being perceived as
not contributing to addressing climate risk in a
timely and meaningful way by providers of
capital).
Rising temperature levels can affect the
availability of natural elements required by the
mine, such as access to water.
Rising temperatures can affect the physical
wellbeing of the workforce.
The availability of capital will reflect how well
companies seek to decarbonise their
operations and supply chains.
Implement carbon taxes to encourage
companies to improve their carbon footprints.
Disclosure and reporting on annual CO
2
emissions.
Expand and implement a roadmap to reduce operational CO
2
emissions
with a targeted reduction of 30% set by 2030 and a drive to become net
carbon neutral by 2050.
Engaging with our supply chain on their commitment to decarbonisation
Closer cooperation with suppliers and ensuring the
latest technology is
implemented to reduce CO
2
emissions in South Africa.
Introduction and implementation of energy and water-
efficient ways of
product processing.
Construction of new water storage facilities to cater to proje
cted water
shortages.
Forming part of the water management forums in the catchment area.
Electricity generation from renewable sources wherever possible.
Replacement of diesel fuel as an energy source within the fleet at the
end of asset life.
Local
stakeholders
Tharisa Minerals’ neighbours are impacted by
its operations in terms of dust, noise, water
usage and security.
The stakeholders' perceptions, including
different sections of the community and various
levels of government, are varied and multi-
layered.
Negative and inaccurate media coverage can
influence perception.
Local stakeholder discontent has the potential
to disrupt operations.
Safety and health of the community.
Complaints to regulatory authorities and risk of
intervention.
Potential for adverse litigation.
Poor image of mining companies
Lack of support in equity markets and amongst
stakeholders, ultimately leading to a cost of
capital impact.
Ongoing environmental impact monitoring.
Property purchase agreements being concluded with local landowners.
Partner with government and local municipality to
develop identified land
within the municipal spatial development area to which the community
may be relocated.
Ongoing discussions with the DMRE and other government bodies.
Positive engagements with the local community with a
focus on
sustainable community projects.
Focus on recruiting from local communities as much as possible if there
is a skills match.
Regular and repetitive communication and emphasis on key messages
utilising all available media channels.
Immediate corrective actions and corrections on factual inaccuracies or
misconceptions.
MANAGEMENT REPORT
for the year ended 30 September 2022
21
Risk
Impact
Mitigation
Access to resources and infrastructure
Tharisa’s mining, processing, manufacturing
logistics and marketing operations rely on
sustainable access to water, electricity as well
as road, rail and port infrastructure.
Production interruptions.
Failure to meet delivery and customer
commitments and contracts.
Two independent
processing plants provide flexibility in times of
electricity and water curtailments.
Multi-modal transport optionality via bulk or containers, road and/or rail
Integrated agreement for rail transportation and port facilities concluded
with Transnet.
Improved water supply through close collaboration with the custodian of
the water resource.
Agricultural water rights from Buffelspoort as a result
of the additional properties that were purchased.
Mine water reticulation system and construction of new wat
er storage
facilities.
Salt and water balancing have improved water quality.
Supply potable
water from Samancor Mine (Randwater line).
Drilling and licensing of new boreholes to ensure water
supply volumes
remain positive.
The increased depth of the mine pit provides
more ingression of water
which is dewatered for surface use.
The deeper the open pits (current mining area) the more water
ingression into the pit leading to more water being d
ewatered to the
surface for use.
Open-pit diesel-powered mining fleet reduces reliance on electricity
Generators installed at the processing plants to mitigate
electrical supply
curtailments.
Development of solar energy for further independence from grid power.
Labour
The consistent, assured availability of
appropriately skilled human resources at
economical rates is essential to the
sustainability of Tharisa’s operations. Similarly
important is the efficiency and discipline of the
Group’s workforce.
Labour disruptions in South Africa remain a
risk, particularly with the current political
climate, which may contribute to heightened
labour and community unrest.
Potential damage to property.
Loss of production.
Monthly liaison with shop stewards and regular contact with regional
leadership.
Ongoing training programmes.
Adequate insurance cover in the event of damage to
property arising
from unrest.
All levels of employees are incentivised through bonus and incentive
schemes leading to improved productivity and employee retention.
Tharisa has completed two years of a four-year
wage agreement without
disruptions, providing certainty for both parties.
Care for employees during COVID-
19 with additional safety and health
measures put in place while Tharisa managed through waves 1, 2, 3
and
4
without
retrenc
hing
the
workforce
.
Management of resources and reserves
Management and planning of the extraction of
the multiple MG layers of the reef are critical to
the business model.
Tharisa’s success depends on extracting the
maximum value per tonne of the reef while
avoiding pit dilution and undue sterilisation of
the resource
.
Sub-optimal quantity and quality of reef results
in poor processing plant recoveries, impacting
production and financial performance.
Sterilisation of resources reduces the life of
mine and inhibits mining flexibility.
Loss of production as a result of low ROM
stockpiles ahead of the plants.
Owner mining model enables in-
house management and control of all
mining activities, focusing
on correct mining practices with optimal
quality and quantity of ROM.
Investment in the
latest technology and machinery for optimal mining
practices.
In-house mining skills.
Accuracy and execution of mine plan.
Mining employees managed on KPIs
.
MANAGEMENT REPORT
for the year ended 30 September 2022
22
Risk
Impact
Mitigation
Unscheduled breakdowns
The Group’s performance relies on the
consistent mining and production of PGM and
chrome concentrates from the Tharisa Mine.
Any unscheduled breakdown leading to a
prolonged reduction in mining and/or
production may have a material impact on the
Group’s financial performance and results of
operations.
Loss of production in the event of low ROM
stockpiles ahead of the plants.
Optimisation of the existing mining fleet.
Developed engineering and geological skills that are integral to in-
house
mining.
Preventative maintenance programme for the fleet and plant
Long lead item spares in stock.
Ensure adequate ROM stockpiles (target two months) while
supplementing times of low ROM with purchases
of ROM from third
parties.
Continuous investment throughout t
he cycle ensures unscheduled
breakdowns are kept to a minimum.
Cyber security
The Group's performance may be materially
and adversely impacted by a cyber-attack on
its IT system.
The processing plants at the mine are
controlled by a supervisory control and data
acquisition operating system and a cyber-
attack could potentially subject the Group to a
ransomware demand and/or cause a shutdown
of the processing operations until a backup
system is operational, or a work-around
solution is obtained.
The Group has carried out an audit of its potential exposure to a cyber-
attack in respect of all its I
T and has implemented mitigating measures
which limit its exposure to internal and third-party access.
The Group has implemented and continuously ensures globally
accepted best-in-
class software and protocols to filter malicious and
criminal content, as we
ll as the latest antivirus and security programmes
Insurance against cyber-
attack including backup and restoration
assistance.
Internal backups and scheduled backup tests for integrity and continuity
Investment in people and systems.
CORPORATE GOVERNANCE STATEMENT
The Board is of the opinion that the Company is compliant with the JSE Listings Requirements and King IV in all material respects, other than having an
Executive Chairman. The former has been mitigated by the appointment of a Lead Independent Director (refer to the Corporate Governance Report).
On behalf of the Board of Directors
Phoevos Pouroulis Michael Jones
Cyprus
1 December 2022
CORPORATE GOVERNANCE REPORT
23
BOARD OF DIRECTORS
Loucas Pouroulis (84)
Chairman
Appointed: 27 October 2010
Mining and Metallurgical Engineering (Hons) (National Technical University, Athens, Greece)
Loucas Pouroulis is the Executive Chairman of the Group, with the responsibility of developing strategy and identifying new opportunities for the Group. He began
his career in Cyprus in 1962, and his initial postgraduate training took place in Germany, Sweden and Cyprus. Loucas is trained as a mining and metallurgical
engineer and has more than 50 years’ experience in mining exploration, project management, financing and production in open-pit and underground mining
operations, including PGM and gold mines. He immigrated to South Africa in 1964 and then joined Anglo American, where he rose rapidly through the management
ranks and received extensive training and experience. In 1971, Loucas began to pursue his own mining interests, initially focusing on gold mining opportunities that
were considered uneconomical by the majors. By the 1990s, he had established Petra Diamonds and, since 2000, has established Eland Platinum, Tharisa, Kameni,
Keaton Energy, Salene Chrome and the Karo Mining Group.
Phoevos Pouroulis (48)
Chief Executive Officer (CEO)
Appointed: 27 October 2010
Bachelor of Science and Business Administration (Boston University, USA)
Phoevos Pouroulis is the Chief Executive Officer of the Group, with responsibility for overall strategy and management. Phoevos has held various senior managerial
and operational positions in his career spanning more than 20 years. He has extensive experience in project management, mining design, commissioning and
mining operations, including coal, chrome and PGM mines, having been involved in South Africa’s mining industry since 2003. He has served as Commercial
Director for Chromex Mining and was a founding member of Keaton Energy. Phoevos currently serves on the board of the World Platinum Investment Council.
Michael Jones (60)
Chief Finance Officer (CFO)
Appointed: 30 January 2013
Bachelor of Accounting (University of KwaZulu-Natal, Pietermaritzburg, South Africa) CA(SA)
Member of the South African Institute of Chartered Accountants
Michael Jones is the Chief Finance Officer of the Group and is responsible for the overall financial operation, funding and financial reporting management of the
Group. Michael has more than 12 years’ executive financial management experience in the mining sector. In addition, he has over 20 years’ experience in investment
banking, focusing on mergers and acquisitions and capital raising of both equity and debt.
Non-executive directors
Carol Bell (64)
Lead Independent Director
from 1 October 2021
Appointed: 22 March 2016
Master of Arts in Natural Sciences (University of Cambridge), PhD Archaeology (University College, London)
Carol Bell has more than 40 years’ experience in the energy and allied industries, including a successful career as a Managing Director of Chase Manhattan Bank’s
Global Oil & Gas Group, Head of European Equity Research at JP Morgan and several years as an equity research analyst in the oil and gas sector at Credit Suisse
First Boston and UBS Phillips & Drew. Carol began her career in corporate planning and business development at Charterhouse Petroleum and RTZ Oil and Gas.
She has broad public company experience and currently serves on the Bonheur board and is also a non-executive director of the BlackRock Energy and Resources
Income Trust. Carol also serves on the Board of the Development Bank of Wales and The Football Association of Wales and is one of the founder-directors of
Chapter Zero, a network for non-executive directors to engage with climate risk. She is also Vice-President of the National Museum of Wales, Vice-Chair of the
Wales Millennium Centre, Senior Independent Director of the National Physical Laboratory and Treasurer of the Institute for Archaeo-metallurgical Studies.
CORPORATE GOVERNANCE REPORT
24
David Salter (64)
Independent non-executive director
Appointed: 27 October 2010
Bachelor of Science Engineering (Hons) PhD in Mineral Technology (Imperial College, London), Fellow of the South African Institute of Mining and Metallurgy
(FSAIMM)
David Salter has more than 30 years’ experience in developing and managing mining companies, including open pit and underground PGM mining operations.
David’s most recent public company roles were Chairman of Keaton Energy until its sale to Wescoal in 2017 and Managing Director of Eland Platinum until its sale
to Xstrata in 2007. He serves on the board of Sirius Finance (Cyprus) Limited and is a non-executive director of a number of unlisted companies in the mining,
property and agricultural sectors.
Antonios Djakouris (75)
Independent non-executive director
Appointed: 11 October 2011
Chartered Accountant and Fellow of the Institute of Chartered Accountants in England and Wales
Antonios Djakouris is a qualified Chartered Accountant and has over 30 years’ experience as a manager and director, having served in the accounting profession
and in a number of posts with the Bank of Cyprus, including internal audit, credit review and retail banking, and as Group General Manager in charge of operations.
From 2003 to 2009, he directed the Bank of Cyprus group’s overseas operations, including banks in the United Kingdom, Australia, Russia, Romania and Ukraine.
Antonios currently serves in an honorary capacity on the Board and Executive Committee of the Cyprus Anti-Cancer Society, one of the largest charities in Cyprus.
Omar Kamal (50)
Independent non-executive director
Appointed: 11 June 2014
Bachelor in Economics and Political Science (University of Jordan) PhD in Management (Finance and Banking) (Coventry University in collaboration with Harvard
Islamic Finance Programme at Harvard University)
Omar Kamal has more than 28 years’ international experience in banking, investment management, strategic advisory services and high-growth entrepreneurship.
He has served at high-growth companies and multibillion-dollar corporates in various executive capacities. Until August 2015, he was the co-Group CEO of a
business group owned by a prominent family with global reach based in Geneva, Switzerland. Prior to that, he was one of the initial founders and acted as the CIO
of a regional bank in the Middle East and, before that, was a partner with Ernst & Young on the advisory and consulting side. Omar continues to serve on the boards
of a number of listed and unlisted companies, among others, Cambridge Scientific Innovation (‘CSI’), Cybsafe, Crowdemotion, Quiqup and Arab Bank Switzerland
as Chairman of the Fintech Committee. In the same context, Omar makes a personal strategic contribution toward digital innovation and transformation. Omar is a
member of the Young President Organisation (‘YPO’) and a Learning Chair of the London Stars Chapter in the UK.
Roger Davey (77)
Independent non-executive director
Appointed: 1 June 2017
Master of Science in Mineral Production Management (Royal School of Mines, Imperial College, London) Master of Science in Water Resource Management and
Water Environment (Bournemouth University) Associate of the Camborne School of Mines (‘ACSM’) Chartered Engineer European Engineer Member of the Institute
of Materials, Minerals and Mining (IMMM)
Roger Davey, a British national, has more than 40 years’ operational experience at senior management and director level in the mining industry in South America,
Africa and Europe. His experience at senior management level includes financing, feasibility studies, construction, development, commissioning and operational
management of both underground and surface mining operations in gold and base metals. Previous positions include being the Senior Mining Engineer at NM
Rothschild (London) (1998 to 2010) in the Mining and Metals project finance team, where he was responsible for the assessment of the technical risk associated
with current and prospective project loans Director, Vice-President and General Manager of Minorco (AngloGold) subsidiaries in Argentina (1994 to 1997), where
he was responsible for the development of the Cerro Vanguardia open pit gold-silver mine in Patagonia, Operations Director of Greenwich Resources plc, London
(1984 to 1992), with gold interests in Sudan, Egypt and Australia Production Manager for Blue Circle Industries in Chile (1979 to 1984) and various production roles
from graduate trainee to mine manager, in Gold Fields of South Africa (1971 to 1978). Roger serves on several boards, including Atalaya Mining Plc, Central Asia
Metals plc and Highfield Resources Limited.
CORPORATE GOVERNANCE REPORT
25
Shelley Wai Man Lo (47)
Non-executive director
Appointed: 10 February 2021
Bachelor of Economics (University of Hong Kong)
Shelley Wai Man Lo, a Chinese National and representative of Rance Holdings, has more than 20 years’ experience in accounting, project investment and
management in the infrastructure business in Hong Kong and mainland China. She is the General Manager – Roads of NWS Holdings Limited. Before joining the
NWS group, she worked in the audit department of Deloitte, Hong Kong. Ms Lo is a member of both the Hong Kong and American Institutes of Certified Public
Accountants.
Zhong Liang Hong (59)
Non-executive director
Appointed: 1 April 2018
Bachelor (Ferrous Metallurgy) (Shanghai Metallurgy Technology Academy)
Zhong Liang Hong is a Chinese national with 35 years’ experience in commodity trading. Representing Fujian Wuhang Stainless Steel Co. Limited and Huachuang
Singapore Pte Limited, he has a strong understanding of analysis and forecasting of commodity markets and end-user demand. He started his career in 1980 at
the Baosteel Group. In 2001 he founded Shanghai Hongli Metal Material Co. Limited and is still the Chairman of this company. In 2002 he expanded his business
to import manganese into China and became the sole manganese agent in China acting for BHP Billiton.
CORPORATE GOVERNANCE REPORT
26
Introduction
Tharisa is incorporated in Cyprus and is subject to Cyprus Companies Law. With a primary listing on the JSE under the general mining sector, Tharisa is subject to
the JSE Listings Requirements and the requirements of the South African Code of Corporate Practices and Conduct laid out in King IV. Tharisa also has a secondary
standard listing of its depositary interests on the London Stock Exchange (‘LSE’) and is subject to the LSE Listing Rules and Disclosure and Transparency Rules
applicable to a secondary standard listing. In addition, Tharisa is listed on the A2X Exchange in South Africa with effect from 6 February 2019. Tharisa’s primary
listing on the JSE and secondary standard listing on the main board of the LSE remains unaffected by the secondary listing on A2X. The A2X is a licensed stock
exchange authorised to provide a secondary listing venue for companies and is regulated by the South African Financial Sector Conduct Authority in terms of
the Financial Markets Act 19 of 2012. The listing on A2X provides an opportunity to improve liquidity and attract new investors through the lower trading costs
offered by this trading platform. There are no additional regulatory requirements or ongoing obligations to comply with.
The Board recognises the importance of good governance and considers the principles and recommendations contained therein.
The Board is fully committed to accountability, integrity, fairness, transparency and integrated thinking, which are essential to the Group’s long-term sustainability
and to its ongoing ability to create value for investors and other stakeholders. It endorses and accepts full responsibility for applying the principles necessary to
ensure that effective corporate governance is practised consistently throughout the Group.
In discharging this responsibility, the Board strives to comply with the requirements set out in King IV. The Board believes that the Company complies with the
Cyprus Companies Law and the Company’s Articles of Association. For the application of King IV, refer to the Annual Report which will be available on Tharisa’s
website (www.tharisa.com) within four months after the balance sheet date.
In terms of King IV, independent non-executive directors serving for more than nine years are subject to a rigorous annual review by the Board to evaluate their
continued independence. Having served for more than nine years, David Salter’s and Antonios Djakouris’ independence was considered and reviewed by the Board
during the year under review. In doing so, the Board considered and assessed the presence or absence of any interest, position, association, or relationship that
could potentially influence or cause bias in their decision-making process and concluded that it was satisfied that there were no such factors present that impaired
David Salter’s and Antonios Djakouris’ independence. Both David Salter and Antonios Djakouris continued to bring an independent and objective view
and unfettered judgement distinct from that of shareholders and management and continue to be classified as independent non-executive directors.
The Board also believes that the Company is compliant with the JSE Listings Requirements and King IV in all material respects, other than having an Executive
Chairman, which has been mitigated by the appointment of the Lead Independent Director.
Board composition
Executive directors
Loucas Pouroulis (Executive Chairman)
Phoevos Pouroulis (CEO)
Michael Jones (CFO)
Independent non-executive directors
Carol Bell (Lead Independent Director)
David Salter
Antonios Djakouris
Omar Kamal
Roger Davey
Non-executive directors
Zhong Liang Hong
Shelley Wai Man Lo
CORPORATE GOVERNANCE REPORT
27
The Company has a unitary board, which both leads and controls the Company. It comprises three executive directors and seven non-executive directors. Five of
the seven non-executive directors are independent.
The Board is structured so that there is a clear balance of authority, ensuring that no one director has unfettered powers. The size of the Board is regulated by the
Company’s Articles of Association and directors are appointed through a formal process.
The Nomination Committee identifies suitable candidates for appointment as directors. Directors are required to be individuals of calibre and credibility with the
necessary skills and experience to bring judgement, independent of management, on issues of strategy, performance, resources, diversity, standards of conduct,
and evaluation of performance. Merit, commitment, integrity and diversity are the core considerations in ensuring that the Board and its committees have
an appropriate blend and balance of perspectives, knowledge, and experience to discharge their duties effectively and competently, having regard to the strategic
direction of the Group.
There has been no change to the board composition during the year under review.
Board diversity
The Nomination Committee reviews and assesses the Board's size, structure, and composition on an ongoing basis to ensure it is appropriately diversified. In this
assessment, it takes into consideration that the perspective of Board members is influenced by a combination of three different sets of attributes:
experiential attributes such as skills, education, functional experience, industry experience and accomplishments
demographic attributes such as gender, race, ethnicity, culture, religion, generational cohort and
personal attributes such as personality, interests and values. The Board recognises that having a blend of attributes across all facets of diversity will
lead to more thorough and robust decision-making processes and direction and therefore strives to ensure its diverse composition.
Acknowledging the benefits that can be achieved through diversity, and specifically the meaningful participation of women who possess the appropriate skills and
experience as members of the Board, the Board will continue to focus on the long-term goal of improving gender representation at Board level. At present, the two
female directors represent 20% of the total number of directors and 29% of the non-executive directors.
Similarly, recognising the value of age and ethnic and cultural diversity at Board level, the Board encourages the inclusion and consideration of prospective
candidates' backgrounds and a range of suitable skills based on merit and against objective criteria, and with due regard for the benefits of diversity on the Board.
In compliance with King IV, the JSE Listings Requirements and international best practice, the Nomination Committee and Board have adopted a Board level
diversity policy, without introducing voluntary targets with regard to gender and racial diversification of the Board. The Nomination Committee and the Board are
committed to maintaining a diverse Board of Directors with appropriate skills, without setting numerical targets. When undertaking searches for new Board members,
diversity and inclusion are key considerations within these processes, alongside recruiting for skills and experience relevant to governing the Company effectively.
The Board will also pursue opportunities to increase the number of female and racially and ethnically diverse Board members over time, provided that it is consistent
with the skills and diversity requirements of the Board.
The Nomination Committee also considers the relationship between executive and non-executive directors during the assessment process. The Board believes
there is an appropriate balance between executive and non-executive directors. The Board is satisfied that the current members of the Board collectively possess
the skills, knowledge, and experience required to discharge the responsibilities of the Board effectively to achieve the Group’s objectives, promote shareholder
interests, and to create value for stakeholders over the long term.
Role and responsibilities of the Board
The Board is the ultimate governing authority, responsible for the Company’s strategy, key policies, ethics, and corporate governance, as well as approving the
Company’s financial objectives and targets, and its approach to environmental stewardship. The Board recognises that strategy, performance, risk, and sustainability
are inseparable and that the execution of strategy can have a material impact on the Company’s value creation and its various stakeholders. The Board
is fundamentally important to the achievement of the Company’s mission and financial objectives and the fulfilment of its corporate responsibilities sustainably and
provides effective leadership on an ethical foundation.
The Board is the ultimate custodian of the governance framework, which commits the Company and its representatives to act according to the highest standards
of fairness, accountability, responsibility, transparency, ethics, and sustainability. The Company’s approach to corporate governance strives to be stakeholder
inclusive and based on good communication. This approach has been integrated into every aspect of the Company’s business.
CORPORATE GOVERNANCE REPORT
28
The Board ensures that the Group is, and is seen to be, a responsible corporate citizen by having regard not only for the financial aspects of the business of the
Group but also the impact that the business operations have on the environment and the society in which they operate. In recognition of the importance of this
aspect of the Group’s business, the Board has established a Climate Change and Sustainability Committee.
The Board has adopted a Board Charter setting out the role, functions, obligations, rights, responsibilities, and powers of the Board and the policies and practices
of the Board in respect of its duties, functions, and responsibilities. The Board has also adopted terms of reference for each of its committees. The Board Charter
and terms of reference are available on the Company’s website.
The directors who are also members of the Executive Committee of the Company are involved in the day-to-day business activities of the Company and are
responsible for ensuring that the decisions of the Executive Committee, as approved by the Board, are implemented in accordance with the mandate given by the
Board and Executive Committee.
The Board is satisfied that the approved delegation of authority framework contributes to role clarity and the effective exercise of responsibilities. All non-executive
directors have unrestricted access to the Chairman, management, the Group Company Secretary, the Assistant Company Secretary, and the external and internal
auditors. The Board considers and satisfies itself, on an annual basis, of the qualifications, experience, and arm’s length relationship between the Company
Secretaries and the Board.
Board meetings are held regularly, at least quarterly, and all directors participate in the critical areas of decision-making.
Role of the Executive Chairman
There is a clear distinction between the roles of the Executive Chairman and the CEO. The Executive Chairman is responsible for ensuring the integrity and
effectiveness of the Board and its committees, which includes:
providing overall leadership to the Board, without limiting the principle of collective responsibility for Board decisions
presiding over meetings of the Board and meetings of shareholders
acting as facilitator at Board meetings to ensure that no director, or group of directors, dominate the discussion, that sufficient debate takes place, that
the opinions of all directors relevant to the subject under discussion are solicited and expressed freely, that conflicts of interests are managed and that
Board discussions lead to appropriate decisions
participating in the selection of Board members and overseeing a formal succession plan for the Board and certain senior management appointments
encouraging collegiality among Board members and management while at the same time maintaining an arm’s length relationship
mentoring to enhance directors’ confidence, especially new or inexperienced directors, and encouraging them to contribute at meetings actively.
The non-executive directors appraise the Chairman’s performance on an annual basis, or such other basis as the Board may determine.
Role of the CEO
The Board’s authority conferred on management is delegated through the CEO and the authority and accountability of management is accordingly considered to
be the authority and accountability of the CEO.
The CEO provides executive leadership and is accountable to the Board for the implementation of strategies, objectives, and decisions within the framework of the
delegated authorities, values, and policies of the Company, which include:
recommending or appointing the executive members and ensuring proper succession planning and performance appraisals
developing the Company’s strategy and vision for Board consideration and approval
developing and recommending annual business plans and budgets that support the Company’s long-term strategy to the Board
monitoring and reporting to the Board on performance against and conforming with strategic imperatives
ensuring that the Company has appropriate management structures and a management team to effectively carry out the Company’s objectives, strategy,
and business plans
ensuring that the assets of the Company are properly maintained and safeguarded and not unnecessarily placed at risk
setting the tone from the top in providing ethical leadership and creating an ethical environment and not causing or permitting any decision or internal
or external practice or activity by the Company that may be contrary to commonly accepted business practice, good corporate governance, or
professional ethics
acting as the chief spokesperson of the Company.
The non-executive directors monitor and evaluate the CEO in achieving the approved targets and objectives. The Remuneration Committee considers the results
of such evaluation to guide it in its appraisal of the performance and remuneration of the CEO.
CORPORATE GOVERNANCE REPORT
29
Role of the Lead Independent Director
The Lead Independent Director:
chairs the Nomination Committee and is a member of all other Board committees
facilitates meetings of the non-executive directors
acts as a sounding board to the Executive Chairman and the CEO
leads the non-executive directors in the appraisal of the Executive Chairman and CEO
provides leadership and advice to the Board when the Executive Chairman has a conflict of interest, without detracting from the authority of the Executive
Chairman and
acts as an intermediary for the other Board members and shareholders about concerns that have not been resolved through the normal channels.
Role of the non-executive directors
The role of non-executive directors is to bring independent judgement and to challenge executive directors constructively, without becoming involved in the day-to-
day running of the business.
The key responsibilities of non-executive directors include oversight of the Board on issues relating to:
strategic direction, by providing an objective, informed, and creative insight based on their own experience, to act as a constructive critic in assessing
the strategic objectives devised by the CEO and to ensure that the necessary financial and human resources are in place for the Company to meet its
objectives
monitoring performance of executive management with regard to the progress made towards achieving the Company’s strategy and objectives and, in
doing so, playing an important role in key executive appointments, removals where necessary, and succession planning
remuneration, through the work of the Remuneration Committee, by objectively and independently determining appropriate levels of remuneration of
executive directors
risk and strategic risk in particular, through the work of the Risk Committee, by reviewing the risk philosophy, strategy, and policies as recommended
by executive management and ensuring compliance with such policies, and with the overall risk profile of the Company
integrity of financial information, through the work of the Audit Committee, by ensuring that the Company accounts properly to its shareholders by
presenting an accurate and fair reflection of its actions and financial performance and that the necessary internal control systems are implemented and
monitored regularly
standards of conduct of the Board and executive management.
Tharisa’s non-executive directors bring diverse experience and expertise to the Board. They are required to have a clear understanding of the Group’s strategy and
must be sufficiently familiar with the Group’s businesses to be effective contributors to the development of the Group’s strategy and the identification and monitoring
of risks faced by the Group. Non-executive directors must have sufficient time to perform their duties as directors and make a meaningful contribution. They should
be prepared to challenge executive directors' opinions and provide fresh insight into the Group’s strategic direction. Non-executive directors assess the performance
of the Executive Chairman and CEO and serve on various Board committees. Non-executive directors have a standing invitation to meet without the presence of
the executive directors after every board meeting or when required.
Board appointments
The Company’s shareholders appoint members of the Board. The Board also has the power to appoint directors, subject to such appointments being approved by
shareholders at the next annual general meeting (AGM) following such appointment. In compliance with the JSE Listings Requirements, shareholders may not
consent in writing to the appointment of directors. Pursuant to the terms of the Board Charter, appointments to the Board are made on the recommendation of the
Nomination Committee. A formal policy detailing the procedures for appointments to the Board has been adopted by the Company.
Non-executive directors are required to be individuals of calibre and credibility, be independent of management, and possess the necessary skills and expertise to
bring judgement to bear on issues of strategy, performance, resources, diversity, standards of conduct, and evaluation of performance.
Directors are required to conduct themselves, at all times, in a professional manner, having due regard for their fiduciary duties and responsibilities to the Company
and to ensure that sufficient time is made available to devote to their duties as Board members. Directors are further required to be diligent in discharging their
duties to the Company, seek to acquire sufficient knowledge of the business of the Company, and endeavour to keep abreast of changes and trends in the business
environment and markets in which the Company operates, in order to be able to provide meaningful direction to the Company’s business activities and operations.
CORPORATE GOVERNANCE REPORT
30
Director induction
Upon appointment, all new directors are provided with induction materials to familiarise them with the Group’s operations, business environment and executive
management and to induct them in their fiduciary duties and responsibilities. The induction programme involves an information pack comprising, inter alia, the
Group structure, a list of the top shareholders, Board packs and minutes of previous Board meetings, annual and interim reports, Articles of Association, the Board
Charter, committee terms of reference, information on directors’ and officers’ insurance, a guide to the JSE Listings Requirements, and a memorandum on dealings
in securities, market abuse and insider trading. Periodic site visits are arranged for existing and new non-executive directors to improve their understanding of the
Group’s operations.
Retirement by rotation and re-election of directors
In terms of the Company’s Articles of Association, any directors appointed by the Board during the course of the financial year shall hold office only until the next
AGM of the Company following their appointment and shall then retire and be eligible for election. Shelley Wai Man Lo was appointed on 10 February 2021 and will
accordingly retire at the next AGM and will be eligible for election.
In accordance with the Company’s Articles of Association, one-third of non-executive directors must retire from office at each AGM. Executive directors are not
subject to retirement by rotation. The non-executive directors retiring at each AGM are those directors who have been the longest serving since their last election.
Retiring directors are eligible for re-election and, if so re-elected, are deemed not to have vacated their office. Carol Bell, Omar Kamal, and Roger Davey will be
retiring by rotation at the upcoming AGM. All three directors have made themselves available for re-election.
Board support for election or re-election is not automatic. The Nomination Committee assesses the composition of the Board and the performance of individual
Board members on an annual basis prior to recommending any directors for election or re-election by shareholders at the AGM. Upon recommendation by the
Nomination Committee, the Board decides whether it will endorse a director standing for election or re-election. Having assessed the performance of the directors
standing for election, it is the recommendation of the Board that all three directors be re-elected.
Board meetings
The Board meets formally at least four times per year and at such other times as may be required. The Board met four times during the year under review. In
addition, four informal mid-cycle briefing calls were held during the period.
CORPORATE GOVERNANCE REPORT
31
Key focus areas and decisions of the Board during FY2022
In addition to the standard agenda items such as feedback by the chairmen of the various board committees on the key deliberations and activities of those
committees, consideration of detailed reports on the operational and financial performance of the Group, climate change and sustainability, investor relations and
legal and governance matters. The Board deliberated on the following key areas during the year under review:
Q1 FY2022 Q2 FY2022 Q3 FY2022 Q4 FY2022
Approved the FY2021 annual
financial results
Approved the FY2021 Annual
Report
Proposed a final cash dividend
of US 5.0 cents per ordinary
share
Considered and agreed to
support the re-election of the
directors retiring by rotation at
the AGM
Discussed the market context
in which the Group operates
Considered and discussed the
top strategic risks facing the
Group
Considered the Company’s
production guidance for
FY2022
Considered and approved the
acquisition of the 26% minority
shareholding in Tharisa
Minerals [at a consideration of
ZAR390 million]
Approved the issue of 13.9
million ordinary shares in lieu
of the purchase consideration
Held the Company’s second
virtual AGM
Considered and discussed the
various research and
development projects being
undertaken by the Group’s
research and development
arm
Considered the operating and
market context within which
the Group operates
Considered and discussed the
top strategic risks facing the
Group
Considered management’s
succession plan and new
senior appointments
Considered implementation of
the Group’s Vision 2025
strategy
Discussed risk considerations
as a consequence of the
Russia/Ukraine conflict and
mitigating actions being taken
by management
Exercised Tharisa’s farm-in
option to acquire a controlling
interest in Karo Mining
Holdings at a consideration of
US$27 million] to take control
of the Karo Project in
Zimbabwe
Approved the issue of 27.5
million ordinary shares in lieu
of the purchase consideration
Considered the operating and
market context within which
the Group operates
Considered the progress of
the Karo Project and its
funding requirements
Considered the top strategic
risks facing the Group
Considered implementation of
the Group’s Vision 2025
strategy
Considered reputational risk
matters
Exercised Tharisa’s farm-in
option to acquire a controlling
interest in Karo Mining
Holdings at a consideration of
US$27 million] to take control
of the Karo Project in
Zimbabwe
Approved the issue of 27.5
million ordinary shares in lieu
of the purchase consideration
Considered and approved the
Group’s interim financial
results for FY2022
Declared an interim dividend
of US 3.0 cents per share
Considered and approved, in
principle, the issue of a USD
denominated bond to be listed on
the Victoria Falls Stock Exchange
by Karo Mining Holdings as part
of the fundraising for the Karo
Project
Considered and approved, in
principle, Arxo Finance’s
subscription for US$10 million of
the Karo Mining Holding bond
notes]
Considered and agreed on the
Nomination Committee’s
assessment of the independence
of non-executive directors
Performed the annual assessment
of the independence of non-
executive directors with a tenure
longer than nine years
Considered and approved the
recommendations by the
Remuneration Committee on
executive remuneration
Considered implementation of the
Group’s Vision 2025 strategy
Considered the Company’s
production guidance for FY2023
Interrogated and approved the
FY2023 budget
Considered the progress of the
Karo Project and its funding
requirements
Considered the top strategic risks
facing the Group
Considered reputational risk
matters
Exercised Tharisa’s farm-in option
to acquire a controlling interest in
Karo Mining Holdings at a
consideration of US$27 million] to
take control of the Karo Project in
Zimbabwe
Approved the issue of 27.5 million
ordinary shares in lieu of the
purchase consideration
Considered and approved the
Group’s interim financial results
for FY2022
Declared an interim dividend of
US 3.0 cents per share
CORPORATE GOVERNANCE REPORT
32
Significant shareholders
The shareholders holding more than 5% (directly or indirectly) of the issued share capital:
Number of shares
30 September 2022
%
Number of shares
30 September 2021
%
Medway Development Limited
123
320
006
41.1
109
627
006
40.4
Rance Holdings Limited
38
526
509
12.9
39
226
509
14.5
FIL Limited
-
-
Fujian Wuhang Stainless Steel Products Co. Limited
26
737
540
8.9
27
870
211
10.3
There has been no significant change in the shareholders holding more than 5% of the issued share capital of the Company between 30 September 2022 and the
date of the approval of the consolidated and Company financial statements.
Public and non
-
public shareholders:
2022
Number of
shareholders
Number of shares
% of issued share
capital
Public
2
382
126
802
216
42.3
Non public:
Directors and associates of the Company and its subsidiaries
16
11
097
634
3.7
Persons interested (other than directors), directly or
indirectly, in 10.0% or more
2
161
846
515
54.0
2
400
299
746
365
100.00
2021
Public
1
713
83
820 746
30.9
Non public:
Directors and associates of the Company and its subsidiaries
15
10
739
907
4.0
Persons interested
(other than directors), directly or indirectly, in 10.0% or more
3
176
723
726
65.1
1
731
271
284 379
100.00
The shareholding percentage represents the percentage of voting rights.
Key focus areas for FY2023
Board succession planning
Continue implementation of Vision 2025 strategy
Continue development of the Karo Project
Monitor continued optimisation of existing operations
Continue striving to be the investment of choice.
Board committees
Certain responsibilities are reserved for the Board, while others are delegated to Board committees, each with formal mandates and terms of reference, without
reducing the individual and collective responsibilities of Board members’ overall fiduciary duties and responsibilities. The terms of reference of each Board committee
determines, inter alia, the composition, purpose, scope of mandate, and powers and duties of the committee. Board committees provide feedback to the Board
through reports by their respective chairmen and provide the Board with copies of minutes of committee meetings. All directors receive notice and packs for
committee meetings and are encouraged to join meetings of Board committees of which they are not members. Terms of reference of the various committees are
compliant with the provisions of the Company’s Articles of Association and the JSE Listings Requirements. The terms of reference are reviewed on a regular basis
and are available on the Company’s website. All committees have satisfied their responsibilities in compliance with their respective terms of reference during the
year under review.
CORPORATE GOVERNANCE REPORT
33
The Company’s Board committees during the year were constituted as follows:
Chairman Members By standing invitation
Audit Committee Antonios Djakouris David Salter
Omar Kamal
Carol Bell
CFO
CEO
Group Head of Internal Audit
Risk Committee Antonios Djakouris Loucas Pouroulis
Phoevos Pouroulis
Michael Jones
David Salter
Omar Kamal
Carol Bell
Roger Davey
Zhong Liang Hong
Shelley Wai Man Lo
Chief Operation Officer (COO)
Group Executive: Legal
Chief Technical Officer (CTO)
Group Head of Internal Audit
Nomination Committee Carol Bell Loucas Pouroulis
David Salter
Antonios Djakouris
CEO
Remuneration Committee Carol Bell David Salter
Antonios Djakouris Roger Davey
CEO
CFO
Safety, Health and Environment Committee David Salter Antonios Djakouris
Carol Bell
Roger Davey
CEO
COO
CTO
Social and Ethics Committee David Salter Antonios Djakouris
Omar Kamal
Carol Bell
Phoevos Pouroulis
New Business Committee Roger Davey David Salter
Carol Bell
Loucas Pouroulis
Phoevos Pouroulis
CFO
COO
Group Executive: Legal
CTO
Climate Change and Sustainability Committee Carol Bell Loucas Pouroulis
Phoevos Pouroulis
Michael Jones
David Salter
Antonios Djakouris
Omar Kamal
Roger Davey
Zhong Liang Hong
Shelley Wai Man Lo
COO
Group Executive: Legal
CTO
Group ESG Manager
CORPORATE GOVERNANCE REPORT
34
Audit Committee
The Audit Committee, which must comprise at least three independent non-executive directors, is chaired by Antonios Djakouris, an independent non-executive
director. Other members of the committee are David Salter, Omar Kamal, and Carol Bell, all independent non-executive directors. The Board is satisfied that
the committee’s members have the appropriate mix of qualifications and experience in order to fulfil their responsibilities appropriately. The Group’s independent
external auditor, independent internal auditors, CFO, and CEO attend committee meetings by invitation. The committee meets with the internal and external auditor,
without any executive directors being present.
Both the internal and external auditors have unrestricted access to the chairman of the committee and the Lead Independent Director.
The Audit Committee provides the Board with additional assurance regarding the quality and reliability of financial information used by the Board and the financial
statements of the Group. The committee reviews the internal and financial control systems, accounting systems, and reporting and internal audit functions. It liaises
with the Group’s external auditor and monitors compliance with legal requirements.
Furthermore, the Audit Committee assesses the performance of financial management, approves external audit fees and budgets, monitors non-audit services
provided by the external auditor against an approved policy, and ensures that management addresses any identified internal control weakness. In addition, the
committee oversees the integrated reporting process, risk management systems, information technology risks (as they relate to financial reporting), the Group’s
whistleblowing arrangements, and policies and procedures for preventing corrupt behaviour and detecting fraud and bribery.
During the year under review, the Audit Committee considered and recommended the appointment of BDO as external auditors of the Karo Group to the Karo
Mining Holdings board for approval. BDO has also been appointed as external auditors of the other Zimbabwean operations within the Group.
In terms of the Audit Committee’s oversight role in the integrated reporting process, it considers all factors and risks that may impact the integrity of the integrated
report. In this regard, the committee considers and reviews the findings and recommendations of the Risk, Safety, Health and Environment, and Climate Change
and Sustainability Committees insofar as they are relevant to the functions of the Audit Committee. The committee also reviews and evaluates the disclosure of
material sustainability issues in the integrated report, in conjunction with the Risk, Safety, Health and Environment, and Climate Change and Sustainability
Committees, with specific focus on ensuring that the disclosure is reliable and does not conflict with the financial information. It recommends and/or approves the
engagement of external assurance providers on material sustainability issues and ensures that the appropriate measures of progress towards achieving disclosed
climate change risk mitigation actions are included in the integrated report disclosures.
The committee has unrestricted access to all Company and Group information and may seek information from any employee. The committee may also consult
external professional advisers in executing its duties. The chairman of the Audit Committee is required to report to the Board after each meeting of the committee
and the minutes of meetings of the Audit Committee are provided to the Board. The appropriateness of the expertise and experience of the CFO is considered on
an annual basis and the committee is satisfied with the appropriateness of the expertise of Michael Jones, the CFO.
The Audit Committee meets as often as is deemed necessary but is required to meet at least twice a year. The committee met five times during the year under
review.
Risk Committee
Control of the complete process of risk management, the evaluation of its effectiveness and approval of recommended risk management and internal control
strategies, systems, and procedures are key Board responsibilities. For this reason, the Risk Committee comprises the entire Board. The Risk Committee is chaired
by Antonios Djakouris. Risk Committee meetings are attended by the COO, Group Executive: Legal, Chief Technical Officer (‘CTO’), and Group Head of Internal
Audit by invitation.
The Risk Committee reviews management reports on the adequacy and effectiveness of the Group’s operational risk management functions, ensures compliance
with the Group’s risk management policies, and reviews the adequacy of the Group’s insurance coverage.
During the year under review, in-depth risk reviews were undertaken at operating subsidiary and business unit level throughout the Tharisa Group. The committee
conducted a high-level review of the residual risks identified by management during these reviews. It continues to monitor progress made by risk owners in identifying
mitigating factors, performing gap analyses, and implementing additional mitigating measures where required. In addition, the committee identifies, reviews and
evaluates non-operational and strategic risks impacting the Company and the Group on an ongoing basis. The Risk Committee meets as often as is deemed
necessary and met once during the year under review.
CORPORATE GOVERNANCE REPORT
35
Nomination Committee
During the year under review, the Nomination Committee was chaired by Carol Bell in her capacity as the Lead Independent Director. Other members of the
Nomination Committee were David Salter and Antonios Djakouris, independent non-executive directors, and Loucas Pouroulis, the Executive Chairman. Loucas
Pouroulis is entitled to participate and contribute to the Nomination Committee, but is not entitled to vote on any matter before the Nomination Committee. In the
event of a tied vote, the chairman of the committee has a casting vote. The CEO attends meetings by invitation if required.
The Nomination Committee ensures that the procedures for appointments to the Board are formal and transparent by making recommendations to the Board on all
new Board appointments in accordance with the Company’s policy for Board appointments. It does so by evaluating the Board performance, undertaking
performance appraisals of the executive and non-executive directors, evaluating the effectiveness of Board committees, and making recommendations to the Board.
The Nomination Committee also considers and approves the Board succession plans.
The work of the Nomination Committee during the year followed both its terms of reference and established good practice in corporate governance. The committee
conducted a review of the structure, size, and composition of the Board, with specific emphasis on skills, knowledge, independence, and diversity of the Board
members. During the period under review, the committee considered the independence of non-executive directors. Consideration was given, among others, as to
whether the individual non-executive directors are sufficiently independent of the Company to effectively carry out their responsibilities as directors, whether they
are independent in judgement and character, and that there are no conflicts of interest in the form of contracts, relationships, shareholding, remuneration,
employment, or related-party disclosures that could affect their independence.
The committee determined that David Salter, Antonios Djakouris, Omar Kamal, Carol Bell, and Roger Davey are independent. Zhong Liang Hong and Shelley Wai
Man Lo are not considered independent due to their association with significant shareholders.
The Nomination Committee met formally once during the year under review.
Remuneration Committee
All members of the Remuneration Committee are independent non-executive directors. During the year under review, the committee was chaired by Carol Bell, and
the other committee members were David Salter, Carol Bell, and Roger Davey. The CEO and CFO are invited to attend committee meetings to make presentations,
except when their remuneration is under consideration.
The Remuneration Committee considers the remuneration framework of the Executive Chairman, CEO, CFO, and other members of the executive management of
the Company and its subsidiaries, regarding local and international benchmarks. As far as the remuneration of the Executive Chairman and the CEO is concerned,
the committee considers and if appropriate, recommends the remuneration of the Executive Chairman and the CEO to the Board for final approval.
The committee also considers bonuses, which are discretionary and based upon general economic variables, the performance of the Company and each individual’s
performance against personalised key performance indicators, allocations in terms of the Group’s incentive schemes, and certain other employee benefits and
schemes.
During the year, the committee reviewed various aspects of the Group’s remuneration structure, including executive salaries, both short-term and long-term
performance-based remuneration schemes and annual cost of living adjustments. It continued its work around the methodology for setting appropriate salary levels
for the executive team with Korn Ferry through benchmarking executive remuneration packages against an appropriate peer group and the median of a mining
industry group developed by Korn Ferry. The Committee was satisfied that it had developed a satisfactory method to ensure that the executive team was being
fairly remunerated compared to the peer group.
The Committee also considered and approved an interim relief measure proposed by the executive team in light of the financial pressure placed on employees due
to fuel and food inflation. In terms of the interim relief measure, all employees on Patterson Grades up to and including E5 had been granted either a provident fund
payment holiday or additional bonuses paid for two months depending on where the employees are located, the cost of the contributions being covered by the
employer companies.
The committee met formally six times during the year under review.
Safety, Health and Environment Committee
All members of the committee are independent non-executive directors. The committee is chaired by David Salter and other members are Antonios Djakouris, Carol
Bell, and Roger Davey. The CEO and COO attend the meeting by invitation.
The Safety, Health and Environment Committee develops and reviews the Group’s framework, policies and guidelines on safety, health, and environmental
management, monitors key indicators on accidents and incidents, and considers developments in relevant safety, health, and environmental practices and
regulations.
The committee met four times during the year under review.
CORPORATE GOVERNANCE REPORT
36
Social and Ethics Committee
As required by the JSE Listings Requirements, the Board established a Social and Ethics Committee. The committee is chaired by David Salter and other members
are Antonios Djakouris, Omar Kamal, Carol Bell, and Phoevos Pouroulis.
The committee’s objective is, inter alia, to assist the Board in ensuring that the Company and the other entities in the Group are and remain committed, socially
responsible corporate citizens by creating a sustainable business and regard for the Company’s economic, social, and environmental impact on the communities
in which it operates. This includes, among others, public safety, HIV/Aids, environmental management, corporate social investment, consumer relationships, labour
and employment, the promotion of equality, and ethics management.
The committee has an independent role with accountability to both the Board and the Company’s shareholders. The committee does not assume the functions of
management of the Company. These functions remain the responsibility of the Company’s executive directors, executive management, and senior managers.
It is the committee’s responsibility to monitor the Group’s activities, having regard to any relevant legislation, other legal requirements or prevailing codes of best
practice, with regard to matters relating to, among others, the following:
(i) Social and economic development, focusing on the Company’s standing in terms of the goals and purposes of the 10 United Nations Global Compact
Principles, among others:
upholding and respecting human rights
upholding fair labour practices, which include the freedom of association, the right to collective bargaining, and the elimination of forced labour, child
labour, and discrimination
upholding the promotion of greater responsibility toward the environment
upholding the prevention of bribery and corruption
upholding the Organisation for Economic Co-operation and Development’s recommendations regarding corruption
upholding the Equator Principles
upholding the Employment Equity Act and the Broad-Based Black Economic Empowerment Act, applicable to South African subsidiaries.
(ii) Good corporate citizenship and the impact of the Group’s activities and its products or services on the environment, health, and public safety, the
Company’s employment relationships, and its contribution toward the educational development of its employees. In order to ensure that Tharisa is and is
seen to be a responsible corporate citizen, the committee oversees and monitors, on an ongoing basis, the consequences of the Group’s activities and
outputs on:
the workplace, by ensuring employment equity, fair remuneration, safety, health, dignity, and development of employees and the Group’s standing in
relation to the International Labour Organisation Protocol on decent work and working conditions
the economy, by working towards economic transformation
the prevention, detection, and response to fraud and corruption
society, by upholding public health and safety, consumer protection, community development, and protection of human rights
the environment, by ensuring pollution prevention, minimising waste disposal, and protecting biodiversity.
(iii) Ethical leadership and ethical behaviour, by reviewing the Company’s Code of Ethics and making recommendations to the Board for approval reviewing
results of whistleblowing activities reviewing significant cases of employee conflicts of interest, misconduct, fraud, or any other unethical activity by
employees or the Company and ensuring that the Company’s ethics performance is assessed, monitored, reported and disclosed.
The committee is pleased to report that it has fulfilled its mandate in terms of its terms of reference and that there are no instances of material non-compliance to
report.
The committee meets as often as it deems necessary but, in any case, at least once a year and at such other times as determined. The committee met once during
the year under review.
New Business Committee
The New Business Committee is responsible for the investigation and assessment of new projects and business opportunities, particularly from a strategic, technical
and operational point of view, and identifying project-related risks, and safety, health, and environmental risks. The committee is not authorised to approve individual
projects or investments or commit the Company, but works with executive management to review and evaluate new business opportunities and initiatives and make
recommendations to the Board for approval. The committee has the right of access to management and/or external consultants, and the right to seek additional
information or explanations.
The committee is chaired by Roger Davey and other members are David Salter, Carol Bell, Loucas Pouroulis, and Phoevos Pouroulis. The CFO, COO, Group
Executive: Legal, and CTO attend meetings as invitees. All members of the Board who are not committee members have a standing invitation to attend the meetings.
During the year, the committee considered various opportunities presented to it.
The committee meets as often as necessary to undertake its role effectively. The committee met formally three times during the year under review.
CORPORATE GOVERNANCE REPORT
37
Climate Change and Sustainability Committee
During FY2021, the Board established the Climate Change and Sustainability Committee, delegating the responsibility for overseeing the climate change and
sustainability strategy, policies, and functions of the Group. This committee functions alongside the Safety, Health and Environment and the Social and Ethics
Committees. Given the significance of the subject matter, not only for the business but also for all stakeholders and the planet, the committee comprises, for the
time being, all members of the Board and is chaired by Carol Bell. The committee meetings are attended by the COO, Group Executive: Legal, CTO, Head of
Investor Relations and Communications, and the Group ESG Manager by invitation.
The committee's purpose is to provide stewardship and enhance the Group’s and, in particular, Tharisa Minerals’, efforts in fighting climate change, driving
sustainability and maintaining the social licence to operate within communities. Furthermore, the committee supports management in ensuring that the Company
addresses climate change and sustainability issues through the development and implementation of a climate change and sustainability policy and sustainability
framework. The committee also provides oversight on the Company’s sustainability strategy and reporting and all matters under the theme of climate change
and sustainability.
In the near term, the focus of this committee is oversight of the implementation of the Company’s carbon action plan to become net carbon neutral by 2050. It will
also guide the Group towards its goal of creating a circular economy while producing critical metals for the decarbonisation of global economies.
The committee has access to sufficient resources to carry out its duties, including the authority to obtain, at the Company’s expense, outside legal or other
professional advice on any matter within its terms of reference and to invite those persons to attend meetings of the committee.
Meetings are held as often as necessary, but at least twice a year. The committee held four meetings during the year under review.
Group Company Secretary
The role of the Group Company Secretary is, inter alia, to provide guidance and advice to the Board with respect to matters relating to the JSE Listings Requirements,
the LSE Listings Rules, Disclosure Guidance and Transparency Rules, Cyprus Companies Law, King IV, market abuse laws and regulations, and other corporate
governance-related matters. In addition to her statutory duties, the Group Company Secretary provides individual directors, the Board as a whole, and the various
committees with guidance as to how their responsibilities should be discharged in the best interests of the Group.
Sanet Findlay is a full-time employee within the Group and is based in South Africa. She holds a Bachelor of Science and a Bachelor of Law, a CIS professional
postgraduate qualification: Company Secretarial and Governance Practice and has been an Associate member of the Chartered Governance Institute of Southern
Africa (formerly Chartered Secretaries Southern Africa) since 2003. She has experience as a Group Company Secretary of JSE- and LSE-listed companies since
2009. She is not a director of Tharisa or any of its subsidiaries and maintains an arm’s length relationship with the Board.
Lysandros Lysandrides acts as the Assistant Company Secretary and holds a Bachelor of Law and a postgraduate diploma in Legal Practice (UK). He is an
associate member of the Institute of Chartered Secretaries and Administrators (UK), a Fellow of the Chartered Institute of Legal Executives (UK), and a registered
practising Cyprus attorney at law. He has experience as a company secretary and legal adviser to companies listed on the LSE and Cyprus Stock Exchange.
Lysandros has been appointed as an external adviser to Tharisa and its Cyprus subsidiaries and maintains an arm’s length relationship with the Board.
The Board formally assessed and considered the performance and qualifications of the Company Secretaries and is satisfied that the Company Secretaries are
competent, suitably qualified, and experienced.
The appointment and removal of the Company Secretaries are matters reserved for the Board as a whole.
Board evaluation
The Nomination Committee, under the leadership of the Lead Independent Director, evaluates the performance of the Board, its committees, the Executive
Chairman, CEO, CFO, the Company Secretary, and the performance and contribution of the individual non-executive directors. The Board committees conduct a
self-evaluation against their respective terms of reference and each individual Board member is evaluated by fellow Board members using an evaluation
questionnaire. The results of the evaluation process are considered by the Nomination Committee prior to their presentation to the Board. Results and any identified
training requirements are discussed with individual directors if deemed necessary. An extensive evaluation was conducted in October 2019. There were no material
findings and remedial action is being taken to address areas that can be improved. The Board is satisfied that the evaluation process assists in the improvement of
performance and effectiveness of the Board.
A comprehensive evaluation will be undertaken in FY2023.
CORPORATE GOVERNANCE REPORT
38
Conflicts of interest
Disclosure of other directorships, personal financial interests and any other conflicts of interest, and those of related persons, in any matter before the Board is a
standing Board agenda item and a register is kept of all such disclosures. Directors recuse themselves from discussion on any matters in which they may have a
conflict of interest. Non-executive directors are required to inform the Board of any proposed new directorships and the Board reserves the right to review such
additional appointments to ensure that no conflict of interest would arise and to ensure that a director accepting a new appointment would be able to continue to
fulfil his or her obligations as a member of the Board.
Share dealing and insider trading
All directors of the Company and its major subsidiaries, senior executives, the Company Secretaries, and employees and advisers who, by virtue of their positions,
have access to financial and other price-sensitive information are regarded as insiders and are required, at all times, to obtain prior authorisation to deal in the
Company’s shares.
Directors of the Company and its major subsidiaries and Persons Discharging Managerial Responsibilities (PDMRs) are reminded of their obligation to inform all
their associates, as defined by the JSE Listings Requirements, and investment managers of the fact that dealings by the directors and their associates in Tharisa
shares have to be pre-approved and/or disclosed to the Company within the stipulated timeframe to facilitate the release of the required announcements in terms
of the JSE Listings Requirements. A similar requirement exists under the UK Market Abuse Regime for PDMRs and persons closely associated with them. The
Company’s directors, executives and employees who are classified as insiders are not permitted to deal in the Company’s shares during closed periods or when
they are in possession of non-public information.
An appropriate communication is sent to all such directors, PDMRs and employees alerting them that the Company is entering a closed period. Closed periods are
observed as required by the JSE Listings Requirements, including the period from the end of the interim and annual financial reporting periods to the announcement
of the financial results for the respective periods, and during periods that the Company is under a cautionary announcement. The UK Market Abuse Regulation
stipulates a closed period of 30 calendar days before the announcement of the interim and/or annual results. The Company applies the longer duration in any given
financial reporting period.
Directors of the Company and its major subsidiaries and PDMRs were made aware of an amendment to the JSE Listings Requirements, which expands the
definition of a transaction (for purposes of directors’ dealings in securities) to include the use of the issuer’s securities as security, guarantee, collateral or otherwise
granting a charge, lien or other encumbrance over the securities. In the past, disclosure of such security arrangements had only been required at the time of
enforcement against the security, and not at the time the relevant security agreement was entered into. In terms of the amended Listings Requirements, separate
transactions are regarded to occur, and an announcement is required at the time a security agreement is entered into, at the time when a right of the secured party
is exercised, and at the time that an existing security agreement is amended or terminated. All existing transactions entered into prior to the amendment of the
Listings Requirements must be disclosed in the annual report. None of the directors or Company Secretaries of the Company, its major subsidiaries, or any PDMRs
had entered into any such transactions prior to the amendment to the Listings Requirements, which came into effect on 2 December 2019.
Succession planning
The Board, assisted by the Nomination Committee, is responsible for overseeing succession planning and ensuring that appropriate strategies are in place to
ensure the smooth continuation of roles and responsibilities of members of the Board and senior management.
Compliance
Compliance with financial reporting requirements and accounting standards falls within the ambit of the Audit Committee. The Group’s statutory and regulatory
compliance resides with the Legal, Risk and Compliance Officer and reports on compliance are presented to the Audit and Social and Ethics Committees. In addition
to the formal authorisation processes required for dealings in the Company’s shares, the Group has various policies and procedures in place governing the
declaration of interests, the accepting and granting of gifts and an approved delegation of authorities matrix that governs the delegation of authority and value limits
within the Group and ensures that all transactions are approved appropriately. No incidents of non-compliance were identified and no significant penalties or
regulatory censures were imposed on the Company or any of its subsidiaries during the year under review.
The Board is satisfied that the Company complied with the Cyprus Companies Law, its Articles of Association, and the requirements of the JSE Listings
Requirements pursuant to the Company’s primary listing on the JSE during the year under review. The Board also acknowledges the role and responsibilities of its
JSE sponsor, Investec Bank Limited, and believes that the sponsor has discharged its responsibilities with due care during the period.
Information technology governance
The Board Charter commits the Board to assume ultimate responsibility for ensuring that effective information technology (IT) systems, internal control, auditing
and compliance policies, and procedures and processes are implemented to avoid or mitigate key IT-related business risks. The Board has delegated responsibility
for governing IT to the Audit Committee. An assurance on the IT systems and processes is provided by the Group’s internal auditors, and/or other professional
consultants if required, and findings are reported to the Audit Committee, which ensures that all material findings are addressed appropriately.
A Group Chief Information Officer, responsible for the Group’s strategy and implementation of Information Technology and Information Systems across all Group
companies, has been appointed with effect 1 October 2022.
CORPORATE GOVERNANCE REPORT
39
Climate change governance
The Board is ultimately responsible for the strategic direction of the Group and monitoring that Tharisa and its subsidiaries are operating responsibly. Tharisa has
evolved its approach to dealing with stakeholders, focusing on actively healing rather than merely avoiding harm. Both the risks and opportunities presented by
climate change are debated actively by the Board when developing the Group’s strategy. Investment decisions, likewise, factor in climate risk, as well as the
business opportunities that arise from decarbonisation of energy so that the Group’s capital investment is allocated appropriately and responsively to ensure that
Tharisa’s business model remains both sustainable and competitive. The Group produces several raw materials required for decarbonising the global economy. It
also directs its research and development activities towards minimising its direct carbon footprint and contributing to the worldwide goal of achieving net-zero carbon
emissions by 2050. The Board supports the Paris Climate Agreement, which was adopted in 2015 to address the negative impact of climate change by substantially
reducing global greenhouse gas emissions to limit the global increase in temperature.
During FY2021, the Board established the Climate Change and Sustainability Committee, delegating the responsibility for overseeing the climate change and
sustainability strategy, policies, and functions of the Group.
Tharisa has seen an intense focus on the impacts of climate change and is acutely aware of its accountability in reducing the Group’s carbon footprint. The mining
industry is a critical contributor to the global economy and the delivery of critical metals for the worldwide energy transition. It is also essential for the mining industry
to minimise the environmental impact of its activities and Tharisa has been reviewing its operations with respect to establishing a corporate plan to reduce its carbon
emissions while continuing to grow its operations in producing metals that are needed to effect the energy transition away from fossil fuels and deliver the
decarbonisation of economies. Tharisa’s management is committed to reducing its carbon emissions by 30% by 2030 (from its FY2020 baseline, which uses 2019
data) and the development of a roadmap is continuing to be net carbon neutral by 2050. Investment decisions taken by Tharisa’s Board will be informed by these
decarbonisation targets, alongside the current financial investment criteria. Furthermore, this developed roadmap will ensure that the pre-defined decarbonisation
targets are achieved by deploying numerous sustainability initiatives.
External audit
Ernst & Young Cyprus Limited acts as an external auditor to the Group and its independence is reviewed by the Audit Committee on an annual basis. The
appointment of the external auditor was approved at the AGM on 23 February 2022. The external auditor has unrestricted access to the chairman of the Audit
Committee and the Lead Independent Director.
During the year under review, the Audit Committee and the Karo Mining Holdings board approved the appointment of BDO as external auditor to the Karo Group,
comprising Karo Mining Holdings, Karo Zimbabwe Holdings and Karo Platinum. BDO has also been appointed as the external auditors of the Group’s other
Zimbabwean operations, including Salene Chrome Zimbabwe.
Internal audit
During FY2021 Tharisa established an in-house internal audit function and the Group Head of Internal Audit is responsible for the internal audit function for the
Tharisa Group. He is a member of the South Africa Institute of Chartered Accountants (‘SAICA’), The Institute of Internal Auditors (‘IIA’), The Information Systems
Audit and Control Association (‘ISACA’) and The Association of Certified Fraud Examiners (‘ACFE’) and is subject to the code of ethics of these professional bodies.
The purpose of the Tharisa internal audit function is to provide independent, objective assurance and consulting services designed to add value and improve the
Group’s operations. The Internal Audit Charter sets out the internal audit function's objectives, authority and responsibilities.
The internal audit function evaluates the adequacy and effectiveness of controls in responding to risks within the Group’s governance, operations and information
systems, including information security and cyber security. It derives its authority from the Audit Committee, to which it reports every quarter.
The Group Head of Internal Audit and internal audit team have unrestricted access to all functions, records, property, assets, personnel, and other documentation
and information that the Group Head of Internal Audit considers necessary to enable the internal audit team to carry out its responsibilities. It may obtain the
necessary assistance of personnel in subsidiary companies and divisions of Tharisa where they perform audits, as well as other specialised services from within or
outside the Company. Furthermore, the Group Head of Internal Audit has full and free access to the chairman and members of the Audit Committee, the Lead
Independent Director, the Chairman of the Board and the external auditors.
The internal audit function plays a role in:
developing and maintaining a culture of accountability, integrity and adherence to high ethical standards
facilitating the integration of risk management into the day-to-day business activities and processes and
promoting a culture of cost-consciousness and self-assessment.
Internal audit has a responsibility to advise on governance, risk management and control issues and is required to report inadequately addressed risks and
ineffective control processes to management and/or the Audit Committee. Reporting is escalated to a level consistent with the internal audit assessment of the risk.
Management is responsible and accountable for addressing weaknesses and inefficiencies and taking the necessary corrective action.
CORPORATE GOVERNANCE REPORT
40
The Group Head of Internal Audit and staff of the internal audit function have accountability to, amongst others:
provide assurance to the Audit Committee as to the adequacy and effectiveness of the Group’s governance, risk management and controls
develop and implement an annual audit plan using an appropriate risk‐based methodology, including any risks or control concerns identified by management,
including any special tasks or projects requested by management and the Audit Committee
maintain a professional audit staff with sufficient knowledge, skills, experience, and professional certifications to meet the requirements of this charter
establish a quality assurance programme by which the Group Head of Internal Audit assures the operation of internal audit activities
issue periodic reports to the Audit Committee and management, as well as summarised results of audit activities
assist in the investigation of significant suspected fraudulent activities within the organisation and notify management and the Audit Committee of the results
and
consider the scope of work of the external auditors and regulators, as appropriate, to provide optimal audit coverage to the Group at a reasonable overall
cost.
Management cannot place any restrictions on the scope of the audits. However, it is recognised that management and the Audit Committee provide general direction
as to the scope of work and the activities to be audited and may request internal audit to undertake special reviews or audits. Opportunities for improving
management control, profitability, and the company’s image may be identified during audits, which are communicated to the appropriate management level.
Recommendations on standards of control to apply to a specific activity are included in the written report of audit findings and opinions given to management for
review and implementation. A written report is issued and distributed within a reasonable time after receiving the written management responses.
All significant control weaknesses are followed up on a monthly basis to ensure the remedial action has been implemented by management and the appropriate
feedback is given to the Audit Committee on the status of such remedial action.
The internal auditor is responsible for conducting reviews with professional scepticism, recognising that the application of audit procedures may produce evidential
matter indicating the possibility of errors or irregularities. Deterrence of fraud is however the responsibility of management.
Internal audit will assist in the investigation of fraud to determine if controls need to be implemented or strengthened and design audit tests to help disclose the
possibilities for similar frauds in the future. It will recommend improvements to correct the weaknesses and incorporate appropriate tests in future audits to disclose
the existence of similar weaknesses in other areas of the organisation.
Internal audit maintains an open relationship with external auditors and any other assurance providers. Consistent with the Internal Audit strategy, internal audit
plans its activity to help ensure the adequacy of overall audit coverage and to minimise duplication of assurance effort. The external auditors have full and
unrestricted access to all internal audit strategies, plans, working papers and reports.
Independence and objectivity are essential to the effectiveness of the internal audit function. Internal audit has no direct authority or responsibility for the activities
it reviews or for developing or implementing procedures. In addition, internal audit staff generally do not assume a role other than in an advisory capacity in the
design, installation or operation of control procedures.
Internal audit reports functionally to the chairman of the Audit Committee and administratively to the Chief Finance Officer for the efficient and effective operation
of internal audit function. The Audit Committee decides on the Group Head of Internal Audit appointment and removal and is responsible for his performance
appraisal.
Independence is protected by ensuring that the internal audit function is free from control or undue influence by any party in selecting and applying audit techniques,
procedures, and programmes.
Internal Audit is from control or undue influence in the determination of facts revealed by the examination or in the development of recommendations or opinions
resulting from the examination. The internal audit function is free from undue influence in selecting areas, activities, personal relationships, and managerial policies
to be examined.
The internal audit function has oversight of the independent anonymous safety and ethics hotline administered by Whistleblowers Proprietary Limited. It investigates
all reports received via the Whistleblowers hotline and through other channels and makes recommendations to management.
The Audit Committee ensures that the Internal Audit function is subjected to an independent quality review as and when the Audit Committee determines it
appropriate as a measure to ensure that the function remains effective.
CORPORATE GOVERNANCE REPORT
41
Internal control systems
To meet the Company’s responsibility to provide reliable financial information, the Company maintains financial and operational systems of internal control. These
controls are designed to provide reasonable assurance that transactions are concluded in accordance with management’s authority that the assets are adequately
protected against material losses, unauthorised acquisition, use or disposal and those transactions are properly authorised and recorded. The systems include a
documented organisational structure and division of responsibility and established policies and procedures, which are communicated throughout the Group, and
the careful selection, training, and development of people.
The Audit Committee monitors the operation of the internal control systems to determine whether there are deficiencies. Corrective actions are taken to address
control deficiencies as they are identified. The Board, operating through the Audit Committee, oversees the financial reporting process and internal control systems.
There are inherent limitations to the effectiveness of any internal control system, including the possibility of human error and the circumvention or overriding of
controls.
Code of Business Ethics and Conduct
The Group’s Code of Business Ethics and Conduct reaffirms the high standards of business conduct required of all employees, officers, and directors of Tharisa. It
forms part of the Company’s continuing effort to ensure that it complies with all applicable laws, as an effective programme to prevent and detect violations of law,
and for the education and training of employees, officers, and directors. In most circumstances, the code sets standards that are higher than the law requires and
adherence to the code aims to preserve the confidence and support of the public and Tharisa’s shareholders.
Tharisa expects its employees, officers, and directors to:
act with honesty, integrity, and fairness in all dealings, both internally and externally
comply with all laws and regulations applicable to the Group
comply with Group policies and procedures
protect the health, safety, and wellbeing of co-workers, suppliers, and the communities in which the Group operates
protect the environment by prudent use of resources such as water and energy and to limit waste disposal by recycling
protect and not disclose Tharisa’s confidential information
avoid any potential conflicts of private interests with the interests of the Group, including, but not limited to, improper communications with competitors
or suppliers regarding bids for contracts, having close relationships with contractors or suppliers, and involvement with any other businesses that have
interests adverse to Tharisa, interests in Tharisa, or compete with Tharisa
not give or accept gifts, gratuities, or hospitality from customers or suppliers of inappropriate value, that could incur obligations or that could influence
judgement
avoid any situations or relationships that could interfere with an individual’s ability to make decisions in Tharisa’s best interests
to act courteously, dignified and respectfully when dealing with co-workers and third parties and to refrain from discriminatory, harassing, or bullying
behaviour, whether expressed verbally, in gesture, or through behaviour.
Furthermore, it is Tharisa’s policy not to discriminate against any employee on the basis of race, religion, national origin, language, gender, sexual orientation, HIV
status, age, political affiliation, or physical or other disability. Tharisa desires to create a challenging and supportive environment where individual contributions and
teamwork are highly valued. In order to establish such an environment, all individuals are expected to support this policy of non-discrimination and Tharisa’s equal
employment opportunity policies.
Human rights, modern slavery, and human trafficking
Tharisa acts ethically and with integrity in all business dealings and has the necessary systems and controls in place to safeguard against any form of transgression
of human rights. Tharisa will continue to raise awareness of human rights among its employees, suppliers, and the communities in which it operates.
Modern slavery encapsulates slavery, servitude, and forced or compulsory labour. Tharisa has a zero-tolerance approach to any form of modern slavery and is
committed to ensuring that there is no slavery or human trafficking in its supply chain, or any part of its business.
Anti-bribery and corruption policy
Tharisa is committed to doing business ethically. Tharisa does not tolerate corruption, fraud, and bribery and does not allow donations to any political parties through
any of its operations. The Group’s anti-corruption policy outlines potential risks and steps to mitigate the risk of bribery and corruption, together with a reporting
guideline. All employees, suppliers, and other associated persons are made aware of these policies and procedures with regard to ethical behaviour, business
conduct, and transparency.
CORPORATE GOVERNANCE REPORT
42
Independent, anonymous safety and ethics hotline
The Group has a zero-tolerance approach to safety transgressions, theft, fraud, corruption, violation of the law, and unethical business practices by employees or
suppliers.
A 24-hour independent anonymous safety and ethics hotline monitored by an independent external party is fully operational and facilitates the reporting and
resolution of safety and ethical violations. This confidential and anonymous hotline provides an impartial facility for employees, service providers, customers, and
other stakeholders to report any safety or ethics-related matter such as safety concerns, unsafe behaviour and practices, hazardous conditions, fraudulent activity,
corruption, statutory malpractice, financial and accounting reporting irregularities, and other deviations from safe and ethical behaviour. The Audit Committee must
ensure that arrangements are in place for the independent investigation of such matters and appropriate follow-up action. No action will be taken against anyone
reporting legitimate concerns, even if there is no proven unlawful conduct.
Each report received via the safety and ethics hotline, or any other channel, is considered and assessed by the Group Head of Internal Audit in terms of the nature
of the incident and the level of staff implicated. For the following instances, the Group Head of Internal Audit consults with the Audit Committee Chairperson and
together they decide on the most appropriate follow-up action:
reports that concern individuals that are at the highest level of management of the Group and/or individuals that are responsible for overseeing one or
more departments, or
incidents that indicate a serious or pervasive violation that puts Tharisa at risk (whether from a reputational or financial perspective).
Based on this assessment, the Group Head of Internal Audit, in conjunction with the CFO and/or COO and/or CEO, determines whether to investigate the matter
with internal audit resources or request the senior management within the function/region to investigate where this is appropriate or required. In certain
circumstances it could be appropriate to engage an outside forensic expert to investigate. All incidents are investigated and the outcomes of the investigations are
reported to the Audit Committee every quarter. Based on the outcome of the investigation, appropriate action is taken, which may include, where deemed necessary,
a disciplinary process in accordance with the Tharisa Human Resources Disciplinary Process.
Whistle Blowers Proprietary Limited operates and ensures the confidentiality of the hotline/tip-off process and that the anonymity of the individual using the hotline
is protected while they are in possession of the information, as well as protecting the rights of the individuals referred to in the complaint.
Investor relations
The CEO and CFO, supported by the Investor Relations function, interact with institutional investors and qualified private investors on the performance of the Group
through presentations and scheduled meetings regularly. The Company also participates in selected South African and international conferences and conducts
roadshows in South Africa and internationally.
A wide range of information and documents, including copies of presentations given to investors, annual reports and notices of shareholder meetings, are made
available on the Company’s website www.tharisa.com on an ongoing basis.
Shareholders are encouraged to visit the investors’ section of the website frequently to be kept informed of the corporate timetable, including dates for the AGMs,
forms of proxy, and relevant shareholder information.
CHIEF EXECUTIVE OFFICER AND THE CHIEF FINANCE OFFICER RESPONSIBILITY
STATEMENT
43
The directors, whose names are stated below, hereby confirm that:
The consolidated annual financial statements and company annual financial statements set out on pages 53 to 121 and 123 to 151 of this
document, fairly present in all material respects the financial position, financial performance and cash flows of Tharisa plc and subsidiaries and
of Tharisa plc company in terms of IFRS;
To the best of our knowledge and belief, no facts have been omitted or untrue statements made that would make the consolidated annual
financial statements and company annual financial statements false or misleading;
Internal financial controls have been put in place to ensure that material information relating to Tharisa plc and its consolidated subsidiaries
have been provided to effectively prepare the consolidated financial statements and company financial statements of Tharisa plc;
The internal financial controls are adequate and effective and can be relied upon in compiling the annual financial statements, having fulfilled
our role and function as executive directors with primary responsibility for implementation and execution of controls;
Where we are not satisfied, we have disclosed to the audit committee and the auditors any deficiencies in design and operational effectiveness
of the internal financial controls, and have *remediated the deficiencies / taken steps to remedy the deficiencies”; and
We are not aware of any fraud involving directors.
Phoevos Pouroulis Michael Jones
Cyprus
1 December 2022
44
STATEMENT BY THE MEMBERS OF THE BOARD OF DIRECTORS RESPONSIBLE FOR THE DRAFTING OF THE ANNUAL
CONSOLIDATED FINANCIAL REPORT AND FINANCIAL STATEMENTS OF THARISA PLC ACCORDING TO THE UNITED KINGDOM
DISCLOSURE GUIDANCE AND TRANSPARENCY RULES (‘UK DTR’).
In accordance with DTR4.1 on Annual Financial Reporting, providing for the disclosure and transparency requirements for issuers whose
transferable securities are admitted to trading on a UK Recognised Investment Exchange, we, the members of the Board of Directors,
responsible for the preparation of the annual consolidated financial statements of Tharisa plc for the period ended 30 September 2022,
hereby declare that to the best of our knowledge:
(a) the financial statements, prepared in accordance with International Financial Reporting Standards (IFRS), give a true and
fair view of the assets, liabilities, financial position and profit of the Company and the undertakings included in the
consolidation taken as a whole; and
(b) the management report includes a fair review of the development and performance of the business and the position of the
Company, and the undertakings included in the consolidation taken as a whole, together with a description of the principal
risks and uncertainties that they face.
Loucas Pouroulis Executive Chairman
Phoevos Pouroulis Chief Executive Officer
Michael Jones Chief Finance Officer
Carol Bell Lead independent non-executive director
Antonios Djakouris Independent non-executive director
Omar Kamal Independent non-executive director
David Salter Independent non-executive director
Roger Davey Independent non-executive director
Zhong Liang Hong Non-executive director
Shelley Lo Wai Man Non-executive director
Cyprus, 1 December 2022
45
PAGE 1
Independent Auditor’s Report
To the Members of Tharisa plc
Report on the Audit of the Consolidated and Parent Company Financial Statements
Opinion
We have audited the accompanying consolidated and parent company financial statements of Tharisa plc (the
“Company” and together with its subsidiaries the “Group”), which are presented on pages …. to …. and comprise the
consolidated and parent company statements of financial position as at 30 September 2022, and the consolidated and
parent company statements of profit or loss and other comprehensive income, changes in equity and cash flows for the
year then ended, and notes to the consolidated and parent company financial statements, including a summary of
significant accounting policies.
In our opinion, the accompanying consolidated and parent company financial statements give a true and fair view of the
consolidated and parent company financial position of the Group and the Company as at 30 September 2022, and of its
consolidated and parent company financial performance and its consolidated and parent company cash flows for the
year then ended in accordance with International Financial Reporting Standards (IFRSs) as issued by the IASB.
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those
standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated and Parent Company
Financial Statements section of our report. We remained independent of the Group throughout the period of our
appointment in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics
for Professional Accountants (including International Independence Standards) (IESBA Code) and the ethical
requirements that are relevant to our audit of the consolidated and parent company financial statements in Cyprus, and
we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters incorporating the most significant risks of material misstatements, including assessed risk of
material misstatements due to fraud
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated and parent company financial statements of the current period. These matters were addressed in the
context of our audit of the consolidated and parent company financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our
audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the consolidated and
parent company financial statements section of our report, including in relation to these matters. Accordingly, our audit
included the performance of procedures designed to respond to our assessment of the risks of material misstatement of
the financial statements. The results of our audit procedures, including the procedures performed to address the matters
below, provide the basis for our audit opinion on the accompanying consolidated and parent company financial
statements.
46
PAGE 2
Key Audit Matters
Our response to the Key Audit Matters
Revenue recognition:
Revenue for the year ended 30 September 2022
amounted to US$686m (refer to notes 4 and 5 of the
consolidated financial statements). The identification as
a key audit matter primarily relates to the following:
The significant number of sales transactions and
complex terms under which title and control pass to the
customer increases the risk of measurement and cut-off
errors. We have also identified risks in relation to the
calculation of the adjustment for provisional pricing.
► Cut-off: the complexity of terms that define when
the title and control are transferred to the customer,
as well as the high value of transactions, give rise to
the risk that revenue is not recognised in the correct
period.
► Measurement: the determination of revenue from
the sale of PGM concentrates from the time of initial
recognition of the sale through to final pricing
requires management to re-estimate fair value of
the price adjustment feature continuously.
Management determines this with reference to
actual spot prices. Estimation is used in the valuation
of these transactions and the profit or loss impact of
the mark to market movement is recorded as a fair
value adjustment in revenue in the statement of
profit or loss and other comprehensive income.
These calculations are based on estimations and are
susceptible to potential manipulation.
In this area, we performed the following procedures,
among others:
► We obtained an understanding of the key controls
around the revenue recognition process in order to
assess whether it is designed to prevent, detect or
correct material misstatements in the reported
revenue figures;
► We analysed the terms and conditions for a sample of
sales contracts and evaluated whether they have been
accounted for in line with the Group's revenue
recognition policy. We have reviewed revenue
recognition policies for compliance with the
requirements of IFRS 15 “Revenue from contracts with
customers” (IFRS 15).
► For a risk-based sample of revenue transactions we
performed test of details including: agreeing the main
inputs to supporting evidence (such as provisional and
final invoices, shipment confirmations, assay reports,
market prices, agreements and bank statements),
recalculating the amounts invoiced and recorded as
revenue;
► For a risk-based sample of revenue transactions
selected, we obtained third party confirmations, to
check their completeness and accuracy;
► We assessed the methodology adopted by
management to identify the provisional pricing terms
and the determination of estimates of metal in
concentrate sold to third parties;
► For a risk-based sample of open sales at year-end
where provisional pricing applied, we compared to
external sources the inputs used and recalculated the
provisional price adjustment to evaluate whether it
was correctly measured;
► For a risk-based sample of transactions near to the
year-end we performed cut off testing over the
revenue recognition in the correct period, comparing
the date of revenue recognition to supporting
evidence such as shipment confirmations and assay
reports and considering the appropriate application of
terms of sale arrangements;
► We considered and analysed the nature of any
significant credits raised post year-end to evaluate
that revenue transactions were recorded at the
correct value in the relevant period;
► We performed substantive analytical review
procedures, including yearly and monthly trend
analysis and reasonableness tests; and
► We assessed whether the financial statements include
disclosures in respect of revenue and the provisional
pricing in accordance with the applicable IFRS.
47
PAGE 3
Rehabilitation provision:
The carrying value of the Group’s rehabilitation
provision as at 30 September 2022 amounted to
US$11.5m (refer to Note 25 of the consolidated financial
statements).
The calculation of this provision requires management
judgement in estimating the quantum and timing of
future costs taking into consideration the unique nature
of the site and the long timescales involved. This
calculation also requires management to determine an
appropriate future long term inflation rate as well as a
rate to discount future costs to their present value.
The judgement required to estimate such costs is further
increased by the limited historical precedent available to
accurately determine the future costs and the
uncertainty regarding the final outcome on the
application to amend the Environmental Management
Plan.
Management reviews the close-down, restoration and
environmental obligations on an annual basis, using
experts to provide support in the assessment where
appropriate. This review incorporates the effects of any
changes in local regulations and management’s
anticipated approach to restoration and rehabilitation.
Due to the high level of uncertainty and judgement
involved in the determination of the estimate and
assumptions used and the expected timing of the cash
flows, we consider this to be a key audit matter.
In this area, we performed the following procedures,
among others:
► We assessed management’s process for the review of
the rehabilitation provision and assessed the
movements in the provision in the year, taking into
consideration the intended method of rehabilitation
and the associated cost estimate, and how this relates
to the Environmental Management Plan;
► We tested the mathematical accuracy of
management’s calculations, assessed the
appropriateness of the future inflation and discount
rates as well as the variability of the expected timing
of the cash flows, including possible expansions of the
mine, and evaluated the assumptions used in
determining the provision, considering also the
impact of significant regulatory changes, if any;
► We considered the competence, capabilities and
objectivity of the expert used by management in
estimating the relevant costs and we evaluated the
work performed by the expert;
► We evaluated the classification of the expenditure and
assessed the appropriateness of the related
disclosures in the financial statements in accordance
with IFRS; and
► We considered the amendments currently being
made to the Environmental plans and how
management incorporated these into the judgements
and estimates.
Reporting on other information
The Board of Directors is responsible for the other information. The other information comprises the Management Report,
the Corporate Governance Report, the Chief Executive Officer and the Chief Finance Officer Responsibility Statement and
the Statement by the Members of the Board of Directors and Company Officials but does not include the consolidated and
parent company financial statements and our auditor’s report thereon.
Our opinion on the consolidated and parent company financial statements does not cover the other information and we
do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated and parent company financial statements, our responsibility is to read
the other information identified above and, in doing so, consider whether the other information is materially inconsistent
with the consolidated and parent company financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material
misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
48
PAGE 4
Responsibilities of the Board of Directors and those charged with governance for the Consolidated and Parent Company
Financial Statements
The Board of Directors is responsible for the preparation of consolidated and parent company financial statements that
give a true and fair view in accordance with International Financial Reporting Standards as issued by the IASB, and for such
internal control as the Board of Directors determines is necessary to enable the preparation of consolidated and parent
company financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated and parent company financial statements, the Board of Directors is responsible for assessing
the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Consolidated and Parent Company Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated and parent company financial
statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee, that an audit
conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional scepticism
throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated and parent company financial statements,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit 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
Group’s internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the Board of Directors.
Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based
on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast
significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated and
parent company financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions
are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or
conditions may cause the Group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the consolidated and parent company financial
statements, including the disclosures, and whether the consolidated and parent company financial statements
represent the underlying transactions and events in a manner that achieves a true and fair view.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the consolidated and parent company financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our
audit opinion.
49
PAGE 5
We communicate with those charged with governance regarding, among other matters, the planned scope and timing
of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or
safeguards applied.
From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated and parent company financial statements of the current period and are
therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes
public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh
the public interest benefits of such communication.
50
PAGE 6
Other Matters
(i) This report, including the opinion, has been prepared for and only for the Company’s members as a body
and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other
purpose or to any other person to whose knowledge this report may come to.
(ii) As described in Note 2.1 of the consolidated financial statements and Note 2.1 of the parent company
financial statements, these financial statements have been prepared in accordance with IFRS as issued by
the IASB. We have reported separately on the Cyprus statutory financial statements prepared in
accordance with IFRS as adopted by the EU and the requirements of the Cyprus Companies Law, Cap. 113.
51
PAGE 7
The engagement partner on the audit resulting in this independent auditor’s report is Stavros Pantzaris.
52
PAGE 8
Stavros Pantzaris
Certified Public Accountant and Registered Auditor
for and on behalf of
Ernst & Young Cyprus Limited
Certified Public Accountants and Registered Auditors
Nicosia
1 December 2022
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
for the year ended 30 September 2022
53
20
2
2
20
2
1
Note
s
US$’000
US$’000
Revenue
5
Cost of sales
6
(440 336
)
(388 926 )
Gross profit
Other income
7
Net foreign exchange gain
Other operating expenses
9
(63 880 )
(44 822 )
Results from operating activities
Finance income
10
Finance costs
10
(4 758
)
(4 893 )
Changes in fair value of financial assets at fair value through profit or loss
3
3
(5 627
)
Changes in fair value of financial liabilities at fair value through profit or loss
3
3
(370 )
Gain on acquisition of subsidiary
31
Share of loss of investment accounted for using the equity method
16
(5 229 )
(251 )
Profit before tax
Tax
12
(53 067
)
(53 714 )
Profit for the year
Other comprehensive income
Items that may be classified subsequently to profit or loss:
Foreign currency translation
differences
for foreign operations, net of tax
(69 749
)
Other comprehensive
(loss)
/income
, net of tax
(69 749
)
Total comprehensive income for the year
Profit for the year attributable to:
Owners of the
C
ompany
Non
-
controlling interest
Total comprehensive income for the year attributable to:
Owners of the
C
ompany
Non
-
controlling interest
Earnings per share
Basic
earnings per share (US cent
s
)
13
D
iluted earnings per share (US cent
s
)
13
The notes on pages 58 to 121 are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 September 2022
54
20
2
2
20
2
1
Notes
US$’000
US$’000
Assets
Non
-
current assets
Property, plant and equipment
14
Intangible assets
15
Investment accounted for using the equity method
16
F
inancial
and other
assets
18
Deferred tax assets
19
Total non
-
current assets
Current assets
Inventories
20
Trade and other receivables
21
Contract assets
22
Financial and other assets
18
Current taxation
Cash and cash equivalents
2
3
Total current assets
Total assets
Equity and liabilities
Share capital
and premium
2
4
Other reserve
2
4
Foreign currency translation reserve
2
4
(192 519 )
(91 848 )
Retained earnings
2
4
Equity attributable to owners of the Company
Non
-
controlling interests
2
4
Total equity
Non
-
current liabilities
Provisions
2
5
Borrowings
2
6
Other financial liabilities
27
Deferred tax
liabilities
19
Total non
-
current liabilities
Current liabilities
Borrowings
2
6
Other financial liabilities
2
7
Current taxation
Trade and other payables
2
8
Contract liabilities
29
Total current liabilities
Total liabilities
Total equity and liabilities
The consolidated financial statements were authorised for issue by the Board of Directors on 1 December 2022.
Phoevos Pouroulis
Michael Jones
Director
Director
The notes on pages 58 to 121 are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2022
55
Attributable to owners of the Company
Share capital
Share
premium
Other
reserve
Foreign
currency
translation
reserve
Retained
earnings
Total
Non-
controlling
interest
Total equity
Notes
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Balance at 1 October 2021 271
(91 848 )
Total comprehensive income for the year
Profit for the year -
-
-
-
Other comprehensive income:
Foreign currency translation differences
24
-
-
-
(65 939 )
-
(65 939 )
(3 810 )
(69 749 )
Total comprehensive income for the year
-
-
-
(65 939 )
Transactions with owners of the Company
Contributions by and distributions to owners
Dividends paid 38 -
-
-
-
(23 106 ) (23 106 )
(164 )
(23 270 )
Issue of ordinary shares
24
-
-
-
-
Acquisition of non
-
controlling interest
–
Tharisa Minerals (Pty) Ltd
24
-
-
-
(34 732 )
(9 154 )
(16 473 )
(25 627 )
Increase in shareholding of
subsidiaries
–
Karo Mining Holdings plc
24
-
-
-
-
(4 509 )
-
Acquired through business combination 31 -
-
-
-
- -
S
hares issued by subsidiary
to non
-
controlling shareholders
31
-
-
-
-
-
-
Equity
-
settled share
-
based payments
24
-
-
-
-
(1 676 )
(1 676 )
-
(1 676 )
Contributions by and distributions to owners of the Company
-
(34 732 )
Total transactions with owners of the Company
-
(34 732 )
Balance at 30 September 2022
(192 519 )
Companies which do not distribute 70% of their profits after tax, as defined by the relevant tax law, within two years after the end of the relevant tax year, will be deemed to have distributed as dividends 70% of these
profits. Special contribution for defence at 17% and General Health System contribution at 1.7%-2.65% for deemed distributions after 1 March 2019 will be payable on such deemed dividends to the extent that the
ultimate shareholders are both Cyprus tax resident and Cyprus domiciled. The amount of the deemed distribution is reduced by any actual dividends paid out of the profits of the relevant year at any time. This special
contribution for defence is payable by the Company for the account of the shareholders.
The notes on pages 58 to 121 are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2022
56
Attributable to owners of the Company
Share capital
Share
premium
Other
reserve
Foreign
currency
translation
reserve
Retained
earnings
Total
Non-
controlling
interest
Total equity
Notes
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Balance at 1 October 2020 269
(104 850 )
(30 580 )
Total comprehensive income for the year
Profit for the year -
-
-
-
Other comprehensive income:
Foreign currency
translation differences
2
4
-
-
-
-
Total comprehensive income for the year
-
-
-
Transactions with owners of the Company
Contributions by and
distributions to owners
Dividends paid 38 -
-
-
-
(20 181 ) (20 181 )
(1 098 )
(21 279 )
Issue of ordinary shares
2
4
-
-
-
-
Equity
-
settled share
-
based payments
2
4
-
-
-
-
(3 156 )
(3 156 )
-
(3 156 )
Contributions by and distributions to owners of the Company
-
-
(23 337 )
(20 448 )
(1 098 )
(21 546 )
Total transactions with owners of the Company
-
-
(23 337 )
(20 448 )
(1 098 )
(21 546 )
Balance at 30 September 2021
(91 848 )
The notes on pages 58 to 121 are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 September 2022
57
20
2
2
20
2
1
Notes
US$’000
US$’000
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation of property, plant and equipment
14
Loss
on disposal
of property, plant and equipment
14
Share of loss of investment accounted for using the equity method
16
Impairment of goodwill
15
Net realisable value write down of inventory
20
Impairment of
property, plant and equipment
14
Write off of property, plant and equipment
14
Expected credit loss allowance
21
Equity-settled share-based payments
8
Changes in fai
r
value of financial assets at fair value through profit or loss
33
(10 540 )
Changes in fai
r
value of financial liabilities at fair value through profit or loss
33
(1 521 )
Gain on acquisition of subsidiary
31
(48 391 )
Net foreign exchange gain
(2 049 )
(15 477 )
Interest
income
10
(1 376 )
(1 391 )
Interest
expense
10
Tax
12
Changes in:
Inventories
(28 172 )
(13 442 )
Trade and other receivables
and contract assets
(30 126 )
(11 385 )
Trade and other payables and contract liabilities
Provisions
(7 599 )
Cash
generated
from operations
Income tax paid
30
(41 197 )
(17 412 )
Net cash flows from
operating activities
Cash flows from investing activities
Interest received
Additions to property, plant and equipment
14
(105 014 )
(106 006 )
Cash inflow/(outflow) from business combination
31
(3 079 )
Proceeds from disposal of property, plant and equipment
14
Additions to
investments accounted for using the equity method
16
(4 965 )
Refunds from/(a
dditions
to)
other assets
18
(2 282 )
Net cash flows used in investing
activities
(101 625 )
(110 260 )
Cash flows from financing activities
Net proceeds from
/(repayment of)
bank credit facilit
ies
26
(15 553 )
Advances received
26
Repayment of
borrowings
26
(14 406 )
(48 208 )
Principal lease payments
26
(3 793 )
(4 597 )
Dividends paid
38
(23 270 )
(21 279 )
Interest paid
(4 017 )
(3 003 )
Net cash flows used in financing activities
(2 518 )
(65 853 )
Net increase
in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of exchange rate fluctuations on cash held
(9 663 )
Cash and cash equivalents at the end of the year
23
The notes on pages 58 to 121 are an integral part of these financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
58
1.
CORPORATE
INFORMATION
Tharisa plc (
‘
the Company
’
) was incorporated in Cyprus on 20 February 2008 under registration number HE223412. The Company
changed
its name from Tharisa Limited to Tharisa plc on 19 January 2012. On 10 April 2014, the Company listed its ordinary share capital on the main
board of the Johannesburg Stock Exchange (‘JSE’) as the primary listing. On 8 June 2016 the Company listed its ordinary share capital as
a standard listing on the main board of the London Stock Exchange (‘LSE’). On 6 February 2019 the Company listed its ordinary share capital
as a secondary listing on the A2X Exchange
in South Africa
.
The Company’s r
egistered office is at Sofoklis Pittokopitis Business Centre, Offices 108
-
110, 17 Neophytou Nicolaides and Kilkis Street
s
,
8011 Pap
hos, Cyprus .
The principal activity of the Group is the exploitation of metals and minerals, principally platinum group metals (
‘
PGMs
’
) and chrome, and
associated sales and logistics operations
.
On 9 February 2009, the Company acquired 74
.0
% of
the share capital of Tharisa Minerals Proprietary Limited
(‘Tharisa Minerals’)
, a
company established in South Africa. The principal activity of Tharisa Minerals is PGM and chrome mining and processing. On 16 February
2022, the Company acquired an additional 20.0% of the issued share capital of Tharisa Minerals from a non-controlling shareholder
increasing its shareholding to 94.0%. On 20 May 2022, the Company acquired the remaining 6.0% of the issued share capital of Tharisa
Minerals resulting in Tharisa M
inerals becoming a wholly
-
owned subsidiary of the Company.
On 2 November 2010, the Company incorporated Tharisa Investments Limited, a company established in Cyprus. The principal acti
vity of
Tharisa Investments Limited is that of investment
holding.
On 15 February 2012, Tharisa Investments Limited incorporated Tharisa Fujian Industrial Co.
,
Ltd, a company established in China. The
principal activity of Tharisa Fujian Industrial Co., Ltd is that of ferrochrome smelting. Tharisa Fujian Industrial Co., Ltd has not commenced
operations up to the date of this report.
On 24 August 2011, Tharisa Investments Limited incorporated Tharisa Investments (Hong Kong) Limited, a company established in
Hong
Kong. Tharisa Investments (Hong Kong) Limited
did not
commence
with
operations
and was deregistered on 9 September 2022.
On 4 February 2011, the Company incorporated Arxo Resources Limited, a company established in Cyprus. The principal activity
of Arxo
Resources Limited is the selling and distribution of chrome concentrates. On 7 December 2011, Arxo Resources Limited incorporated Arxo
Metals Proprietary Limited, a company established in South Africa. The principal activity of Arxo Metals Proprietary Limited is metal
processing. It currently produces foundry and chemical grade chrome concentrates, operates a chrome plant owned by a third party and is
involved
in various research and development test work, more specifically test work relating to the
beneficiation of PGM concentrates.
On 1 March 2011, the Company acquired 100% of the share capital of Arxo Logistics Proprietar
y Limited, a company established in South
Africa. The principal activity of Arxo Logistics Proprietary Limited is the provision of logistics services.
On 31 May 2011, the Company incorporated Tharisa Administration Services Limited
(‘Tharisa Administrat
ion’)
, a company established in
Cyprus. Tharisa Administration provides management and administration services to the Group. On 1 April 2013, Tharisa Administration
acquired Braeston Proprietary Limited, a company established in South Africa. The principal activity of Braeston Proprietary Limited is the
provision of management services to the Group. On 19 July 2018, Braeston Proprietary Limited incorporated Ubhova Security Proprietary
Limited, a company incorporated in South Africa. The principal activity of Ubhova Security Proprietary Limited is the provision of security
services.
On 30 May 2013, the Company incorporated Dinami Limited, a company established in Guernsey. The principal activity of Dinami
Limited is
the provision of consultancy
services in relation to the sale of the Group’s foundry and chemical grade chrome concentrate products.
On 12 June 2018, the Company acquired a 26.8% shareholding in Karo Mining Holdings
plc
(‘Karo Mining’)
, a company incorporated in
Cyprus. The principal activity of Karo Mining Holdings plc is that of an investment holding company. On 30 March 2022, the Company
acquired a controlling interest in Karo Mining by increasing its shareholding to 66.34%. Subsequent to acquiring the controlling interest in
Karo Mining, the Company increased its shareholding in Karo Mining to 70.0% by subscribing for additional shares issued by Karo Mining
during the
period
1 April 2022 to
30 September 2022.
The
main subsidiary
of
Karo Mining
is Karo
Zimbabwe
Holdings
(Private)
Limited
,
a company
incorporated in
Zimbabwe
.
Karo Zimbabwe
Holdings (Private) Limited is the holding company of Karo Platinum (Private) Limited, Karo Power Generation (Private) Limited, Karo Refining
(Private) Limited and Karo Coal Mines (Private) Limited. All subsidiary companies of Karo Zimbabwe Holdings (Private) limited are
incorporated in Zimbabwe.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
59
1.
CORPORATE INFORMATION (continued)
On 29 June 2018, the Com
pany incorporated Arxo Finance plc
, a company incorporated in Cyprus. The principal activity of Arxo Finance
plc
is to provide funding for Group entities.
On 1 October 2019, the Company acquired 100% of the share capital of MetQ Proprietary Limited
(‘MetQ’)
, a company
established in South
Africa. The principal activity of MetQ is the manufacturing of mining equipment.
On 31 March 2021, the Company acquired 100.0% of the share capital of Salene Chrome Zimbabwe (Private) Limite
d (‘Salene Chrome’)
, a
company incorporated in Zimbabwe. Salene Chrome’s principal activity is exploration and mining. Salene Chrome has been awarded special
grants under the Zimbabwe Mines and Minerals Act on the Eastern and Western sides of the Great Dyke in Zimbabwe, which entitles it to
mine the minerals thereon.
On 19 April 2021, the Company incorporated Arxo Prospecting (Cyprus) Limited, a company established in Cyprus. The principal
activity of
Arxo Prospecting Limited is the prospecting for minerals and metals. Limited operations were conducted during the financial year ended
30
September 2022.
On 20 April 2021, the Company incorporated Arxo Exploration
(Cyprus)
Limited, a company established in Cyprus. The principal activity of
Arxo Exploration Limited is the exploration for various metals and minerals. Limited operations were conducted during the financial year
ended 30
September 2022.
On 30 June 2021, the Co
mpany incorporated Arxo Technologies Limited, a company established in Cyprus. The principal activity of Arxo
Technologies Limited is to perform research and development operations. Limited operations were conducted during the financial year ended
30
Septe
mber 2022.
On
16 December 2021
, the Company incorporated
Skyler Storm (Private) Limited
, a company established in
Zimbabwe
. The principal activity
of Skyler Storm (Private) Limited is to perform mining and beneficiation of chrome concentrate operations. Limited operations were conducted
during the financial year ended 30
September 2022.
On
18 April 2022
, the Company incorporated
Redox One
Limited, a company established in Cyprus. The principal activity of
Redox One
Limited is to perform research and development operations, specifically in renewable energy solutions. Limited operations were conducted
during the financial year ended 30
September 202
2
.
2.1.
BASIS OF PREPARATION
Statement of compliance
These
consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRSs’)
, the
Listings Requirements of the Johannesburg Stock Exchange, the SAICA Financial Reporting Guides issued by the Accounting Practices
Committee, the Financial Reporting Pronouncements of the Financial Reporting Standards Council and the requirements of the Cyprus
Companies Law, Cap. 113. Statutory consolidated financial statements of the Company were additionally prepared in accordance with
IFRS as adopted by the EU and the requirements of the Cyprus Companies Law, Cap. 113. These have been approved and issued on the
same date and there are no differences in the two sets of consolidated financial statements.
Basis of
measurement
The consolidated financial statements are prepared on the historical cost basis except as otherwise stated in the accounting
policies set out
below.
Accounting policies
The principal accounting policies applied in the
preparation of these consolidated financial statements are set out below. Where an accounting
policy is specific to a note, the policy is described in the note which it relates to. These policies have consistently been applied to all years
presented.
Fu
nctional and presentation currency
The consolidated financial statements are presented in United States Dollars (‘US$’) which is the Company's functional curren
cy and
presentation currency. Amounts are rounded to the nearest thousand.
The
following US$: ZAR exchange rates were used in preparing the consolidated financial statements:
Closing rate: ZAR
18.07
(2021: ZAR15.05)
Average rate: ZAR
15.82
(2021: ZAR14.83)
Going concern
These consolidated financial statements have been prepared on a going concern basis.
Refer to
note 3
3
for s
tatements
on the Group’s objectives, policies and processes for managing its capital, details of its financial instruments
and hedging activities; its exposures to market risk in relation to commodity prices and foreign exchange risks; interest rate risk; credit risk;
and liquidity risk.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
60
2.2.
STANDARDS AND INTERPRETATIONS ADOPTED IN THE CURRENT YEAR
The Group has adopted the following new
and/or revised standards and interpretations which became effective for the year ended
30 September 2022 for which the nature and effect of the changes as a result of the adoption of these new accounting standards are
described below
:
Interest Rate
Benchmark Reform
-
Phase 2 Amendments to IFRS 9, IAS 39, IFRS 4, IFRS 7 and IFRS 16
The Amendments focus on the effects on financial statements when an entity replaces the old interest rate benchmark with an a
lternative
benchmark rate as a consequence of the global regulatory reform of key interbank offered rates (‘IBORs’). For the transition from an IBOR
benchmark rate with an alternative nearly risk-free interest rate (‘RFR’), the amendments include a practical expedient to require contractual
changes, or changes to cash flows that are directly required by the reform and that the transition from an IBOR benchmark rate to an RFR
takes place on an economically equivalent basis with no value transfer having occurred, to be treated as changes to a floating interest rate,
equivalent to a movement in a market rate of interest.
The US Libor that the Group is exposed to will cease to exist by June 2023. The Group is in discussions with debt counterpart
ies as to new
reference rates on the IBOR linked borrowings, including the consideration of the Secured Overnight Financing Rate (‘SOFR’) which is the
recommended US$ Libor alternative. The adoption and initial application of these amendments had no impact on the Group’s results, but
the Group will assess the impact on the balances and cash flows linked to the rate changes arising from the IBOR reform once negotiations
with debt counterparties are more advanced and more information is available on the replacement interest rates.
Refer to note 26 for t
he IBOR linked
borrowings that at the date of this report have not yet transitioned to alternative risk free rates in terms
of the IBOR reform and its contractual maturities
.
For the Caterpillar equipment loan facility and the bank credit
facilities which transitioned from US$ Libor to SOFR, the Group applied the
practical expedient available within the amendments as the transition was as a direct consequence of the IBOR reform and was completed
on an economically equivalent basis.
The transition had no material impact on the results for the year ended 30 September 2022.
The adoption of all other standards, amendments or interpretations had no impact on the results for the year ended 30 Septemb
er 2022.
2.3.
STANDARDS AND
INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
The new standards, interpretations and amendments to standards listed below are not effective and have not been early adopted
, but will
be adopted once these new standards, interpretations and amendments become effective. The Group notes the new standards, amendments
and interpretations which have been issued but not yet effective and does not plan to early adopt any of the standards, amendments and
interpretations. There are no other standards that are not yet effective and that would be expected to have a material impact on the Group
in the current or future reporting periods.
Classification of Liabilities as Current or Non
-
current
-
Amendments to IAS 1
The International Accounting Standards Board (IASB) issued Classification of Liabilities as Current or Non
-
current, which amends IAS 1
Presentation of Financial Statements. The amendments affect requirements in IAS 1 for the presentation of liabilities. Specifically, they clarify
a criterion for classifying a liability as non-current. The amendment must be applied retrospectively and is effective for annual periods
beginning on or after 1 January 2023. This amendment is not expected to have a material impac
t on the
Group
.
Annual Improvements to IFRS Standards 2018
-
2020
As part of its process to make non
-
urgent but necessary amendments to IFRS Standards, the IASB has issued the Annual Improvements to
IFRS Standards 2018–2020. The amendments applicable to the Group relate to IFRS 9 and clarifies which fees should be included in the
10% test for derecognition of financial liabilities.
The amendment must be applied prospectively and is effective for annual periods beginning on or after 1 January 202
2
. This
amendment is
not expected to have a material impact on the
Group
.
Onerous Contracts
–
Costs of Fulfilling a Contract
–
Amendments to IAS 37
In May 2020, the IASB issued amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets to specify which c
osts an
entity needs to include when assessing whether a contract is onerous or loss-making. The amendments apply a ‘directly related cost
approach’. The costs that relate directly to a contract to provide goods or services include both incremental costs (e.g. the costs of direct
labour and materials) and an allocation of costs directly related to contract activities (e.g. depreciation of equipment used to fulfil the contract
as well as costs of contract management and supervision). General and administrative costs do not relate directly to a contract and are
excluded unless they are explicitly chargeable to the counterparty under the contract. The amendments must be applied prospectively for
annual periods beginning on or after 1 January 2022, to contracts for which an entity has not yet fulfilled all of its obligations at the beginning
of the annual reporting period in which it first applies the amendments (the date of initial application). Earlier application is permitted and
must be disclosed. Since the amendments apply prospectively to transactions or other events that occur on or after the date of first
application, the
Group
will
not be affected by these amendments on transition.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
61
2.3.
STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
(continued)
Deferred Tax related to Assets and Liabilities arising from a Single Transaction
–
Amendments to IAS 12
In May 2021, the
IASB issued amendments to IAS 12 Income Taxes which narrow the scope of the initial recognition exception under IAS
12,
so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences.
Under the
amendments, the initial recognition exception does not apply to transactions that, on initial recognition, give rise to equal
taxable
and deductible temporary differences. It only applies if the recognition of a decommissioning asset and decommissioning liability (or lease
asset or lease liability) give rise to taxable and deductible temporary differences that are not equal.
An entity should apply the amendments to transactions that occur on or after the beginning of the earliest comparative period
presented and
is effective for annual periods beginning on or after 1 January 2023.
This amendment is not expected to have a material impact on the
Group
.
Lease Liability in a Sale and Leaseback
–
Amendments to IFRS 16
The amendment to IFRS 16 specifies the requirements that a seller
-
lessee uses in measuring the lease liability arising in a sale and leaseback
transaction, to ensure the seller
-
lessee does not recognise any amount of the gain or loss that relates to the ri
ght of use it retains.
A seller
-
lessee applies the amendment to annual reporting periods beginning on or after 1 January 2024. Earlier application is permitt
ed and
that fact must be disclosed.
This amendment is not expected to have a material impact on the
Group
.
Reference to the Conceptual Framework
–
Amendments to IFRS 3
Effective for annual periods beginning on or after 1 January 2022
and must be applied
prospectively
. The amendments add
an exception to
the recognition principle of IFRS 3 to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that
would be within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets or IFRIC 21 Levies, if incurred separately. The
exception requires entities to apply the criteria in IAS 37 or IFRIC 21, respectively, instead of the Conceptual Framework, to determine
whether a present obligation exists at the acquisition date.
Th
ese
amendment
s
are
not expected to have a material impact on the
Group
.
Definition of Accounting Estimate
–
Amendments to IAS 8
The IASB has issued amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (IAS 8) to
clarify how entities
should distinguish changes in accounting policies from changes in accounting estimates, with a primary focus on the definition of and
clarifications on accounting estimates. This is due to the term "accounting estimate" not being defined and the previous definition of a "change
in accounting estimate" being unclear.
The amendments introduce a new definition for accounting estimates, clarifying that they are monetary amounts in the financia
l statements
that are subject to measurement
uncertainty.
The amendment must be applied prospectively and is effective for annual periods beginning on or after 1 January 2023. This am
endment is
not expected to have a material impact on the
Group
.
Disclosure of Accounting Policies
–
Amendments to IAS 1
and IFRS Practice Statement 2
To assist preparers of financial statements, the IASB had previously refined its definition of ‘material’ (effective 1 Jan 20
20) and issued
nonmandatory practical guidance on applying the concept of materiality. As the final step of the materiality improvements, the IASB issued
amendments on the application of materiality to the disclosure of accounting policies. The key amendments include requirements for entities
to disclose their material accounting policies rather than their significant accounting policies as well as certain clarifications regarding
accounting policies related to material transactions or events.
The amendment must be applied prospectively and is effective for annual periods beginning
on or after 1 January 2023. This amendment is
not expected to have a material impact on the
Group
.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
62
2.3.
BASIS OF CONSOLIDATION
The consolidated financial statements include, on a line
-
by
-
line basis, the financial statements of all
subsidiaries.
The following policies have been applied during the consolidation process:
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists where the Group is exposed, or has rights to variable retur
ns from its
involvement with the entity and has the ability to affect those returns through its power over the investee. The financial statements of
subsidiaries are included in the consolidated financial statements from the date on which the control commenced until the date on which the
control is ceased.
Transactions eliminated on consolidation
Intra
-
group balances and
transactions and any unrealised income and expenses arising from intra
-
group transactions are eliminated in
preparing the consolidated financial statements. Unrealised gains arising from transactions with equity-accounted investees are eliminated
against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised
gains, but only to the extent that there is no evidence of impairment.
Foreign operations
As at the reporting date
and
on consolidation, the assets and liabilities of foreign subsidiaries, including goodwill and fair value adjustments
arising on acquisition, are translated into the presentation currency of the Group (US$) at the rate of exchange ruling at the reporting date
and their statements of comprehensive income are translated at the weighted monthly average exchange rate for the period. The exchange
differences arising in the translation on consolidation are recognised in other comprehensive income. On disposal of a foreign entity, the
deferred cumulative amount recognised in equity relating to that particular foreign operation is recognised in profit or loss
.
Non
-
current m
onetary assets that are receivable from a foreign subsidiary and for which settlement is
neither planned nor likely to occur in
the foreseeable future, forms part of the net investment in a foreign operation and the resulting exchange differences are recognised in other
comprehensive income. The repayment of such a balance is not considered to be a partial disposal and the cumulative exchange differences
recognised in other comprehensive income is not reclassified to profit and loss, until the foreign entity is disposed of.
Foreign currency transactions
Transactions in foreign
currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of
the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional
currency at the foreign exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised
cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised
cost in foreign currency translated at the exchange rate at the end of the year.
Non
-
monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the fun
ctional
currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in
terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on
retranslation are recognised in profit or loss.
Foreign currency gains and losses are reported on a net basis.
Loss of control
When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the
subsidiary, and any related non
-
controlling
interest and other components of equity. Any relating gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary
is measured at fair value when control is lost.
3.
USE OF JUDGEME
NTS AND ESTIMATES
The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgements, esti
mates and
assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses and the
accompanying disclosures, and the disclosure of contingent liabilities. The estimates and associated assumptions are based on historical
experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of
making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods. Judgements and estimates made by management in the application of IFRS
that have a significant effect on the consolidated financial statements and major sources of estimation uncertainty are disclosed in the note
relevant to the specific judgement or estimate.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
63
4.
OPERATING SEGMENTS
Accounting policy
Operating segments, and the amounts of each segment item reported in the consolidated financial statements, are identified fr
om the financial
information provided regularly to the Group’s management for the purposes of allocating resources to, and assessing the performance of,
the Group’s various lines of business and geographical locations. The Board of Directors is of the view that the Group had four operating
segments during the reporting period, the PGM segment, the chrome segment, the agency and trading segment and the manufacturing
segment. The following is a description of the Group’s current principal activities separated by reportable segment, from which the Group
recognises its revenue.
PGM segment
The PGM segment principally generates revenue from the sale of PGM concentrate, which consists of the sale of platinum, palla
dium,
rhodium, gold, ruthenium, iridium, nickel and copper. The Group enters into off-take agreements with customers for the supply of PGM
concentrate.
Chrome segment
The Group currently produces metallurgical chrome concentrate and specialty chrome concentrates. It generates revenue from th
e sale of
these products. The chrome market is typically a ‘spot’ market. The Group enters into short-term sale contracts. The Group also enters into
long
-
term volume off
-
take agreements for the supply of chrome concentrates.
Agency and trading segment
The Group operates a third party chrome plant and markets and sells the
chrome concentrate produced at this plant. The Group determines
whether it acts as principal or agent by assessing whether the Group controls the transaction and what its performance obligations are.
Considerations to determine control include whether the Group provides the performance obligation itself, the Group is primarily responsible
for fulfilling the promise to provide the specified chrome concentrates, the Group has inventory risk before the specified products are
transferred to the customer and the Group determines the selling price. In the absence of any of the aforementioned factors, control of the
transaction may be doubtful and the Group would recognise the margin achieved in revenue as an agent. The Group believes that these
factors are present and consequently the Group acts as principal. Metallurgical and specialty chrome concentrates are produced at this plant.
The Group enters into short
-
term contracts for the sale of these chrome concentrates.
Manufacturing segment
The Group manufactures
and sells
mining
and mineral processing equipment which represents the manufacturing segment.
For management purposes, the chief operating decision maker of the Group, being the executive directors of the Company and th
e
executive
directors of the subsidiaries, reports its results per segment. The Group currently has the following four segments:
PGM segment
Chrome segment
Agency and trading segment
Manufacturing segment
The operating results of each segment are monitored separately by the chief
operating
decision maker in order to assist them in making
decisions regarding resource allocation as well as enabling them to evaluate performance. Segment performance is evaluated on a PGM
ounce production and sales basis and a chrome concentrate tonnes production and sales basis. The agency and trading segment
performance is evaluated on third-party chrome concentrate tonnes production and sales basis. Third-party logistics, third-party trading and
third party chrome operations are evaluated individually but aggregated together as the agency and trading segment. For the manufacturing
segment, performance is evaluated on sales and gross profit basis.
The Group’s
administrative costs, financing (including finance income and finance costs) and income taxes are managed on a group basis
and are not allocated to a segment.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
64
4.
OPERATING SEGMENTS (continued)
Due to the in
tegrated
nature of the Group’s PGM and chrome concentrate production processes, assets are reported on a consolidated basis
and cannot necessarily be allocated to a specific segment. Consequently, assets are not disclosed per segment in the following segmental
inf
ormation.
PGM
Chrome
Agency and
trading
Manufacturing
Total
202
2
US$’000
US$’000
US$’000
US$’000
US$’000
Revenue
34
6
781
295
178
40
5
26
3
511
68
5
996
Cost of sales
Manufacturing costs
(19
3
362
)
(9
0
799
)
(21
19
0
)
(3
22
9
)
(3
08
5
80
)
Selling costs
(785)
(69
490)
(9
2
3
8
)
-
(79
513
)
Freight services
-
(45
475)
(6
768)
-
(52
243)
(19
4
147
)
(2
05
764
)
(37
19
6
)
(3
22
9
)
(44
0
336
)
Gross profit
152
634
8
9
414
3
3
30
28
2
2
45
660
202
1
Revenue
353
388
203
875
36
494
2
588
596
345
Cost of sales
Manufacturing costs
(205
008)
(63 608)
(13
600)
(2
551)
(284
767)
Selling costs
(540)
(54
297)
(14
915)
-
(69
752)
Freight services
-
(29
213)
(5
194)
-
(34
407)
(205 548)
(147 118)
(33
709)
(2
551)
(388 926)
Gross profit
147 840
56 757
2
785
37
207 419
The shared costs relating to the manufacturing of PGM and chrome concentrates are allocated to the relevant operating
segments based on
the relative sales value per product on an ex-works basis. During the year ended 30 September 2022, the relative sales value of chrome
concentrates increased compared to the relative sales value of PGM concentrate compared to the comparative year and consequently the
allocation basis of shared costs was revised to 70.0% for PGM concentrate and 30.0% for chrome concentrates. The allocation basis of shared
costs was
80
.0% (PGM concentrates) and 2
0
.0% (chrome concentrate) for the year ended 3
0 September 202
1
.
Cost of sales includes a charge for the write off of property, plant and equipment totalling US$
1.3
million (202
1
: US$
5
.
0
million) which mainly
relates to mining equipment. The write off has been allocated to the PGM and chrome segments in accordance with the allocation basis of
shared costs as described in the preceding paragraph. Refer to the consolidated statement of profit or loss for a reconciliation between the
gross profit and net profit after tax.
Geographical information
The following table sets out information about the geographical location of:
(i)
the Group's revenue from external customers and
(ii)
the Group's property, plant and equipment, intangible assets and investment accounted for using the equity method (‘specified
non
-
current assets’).
The geographical location analysis of revenue from external customers is based on the country of establishment of each custom
er. The
geographical location of the specified non-current assets is based on the physical location of the asset in the case of property, plant and
equipment and intellectual property and the location of the operation to which they are allocated in the case of goodwill.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
65
4.
OPERATING SEGMENTS (continued)
(i)
Revenue from
external customers
PGM
Chrome
Agency and
trading
Manufacturing
Total
202
2
US$’000
US$’000
US$’000
US$’000
US$’000
South Africa
346
781
47
276
4
040
2
703
400
800
China
-
96
388
24
554
-
120
942
Singapore
-
79
779
5
485
-
85
264
Hong Kong
-
59
536
1
433
-
60
969
Australia
-
3
358
-
-
3
358
Japan
-
8
748
4
846
-
13
594
Other countries
-
93
168
808
1
069
346
781
295 178
40
526
3
511
685
996
202
1
South Africa
353
388
37
502
4
961
2
567
398
418
China
-
52
433
27
496
-
79
929
Singapore
-
43
796
-
-
43
796
Hong Kong
-
53
277
3
774
-
57
051
United Arab Emirates
-
7
923
-
-
7
923
Australia
-
5
802
-
-
5
802
Japan
-
3
142
-
-
3
142
Other countries
-
-
263
21
284
353
388
203
875
36
494
2
588
596
345
Revenue represents the sales value of goods supplied to customers, net of value
-
added tax. The following table summarises sales to
customers with whom transactions have individually exceeded
5.0% (2021: 5
.0%
)
of the Group's revenues.
202
2
202
1
Segment
US$’000
Segment
US$’000
Customer 1
PGM
2
62 073
PGM
296
020
Customer 2
PGM and Agency and trading
84
449
PGM and Agency and trading
57
518
Customer 3
Chrome
53
721
Chrome and Agency and trading
41
036
Customer 4
Chrome and Agency and trading
49
160
Chrome
40
661
Customer 5
Chrome and Agency and
trading
37
487
Chrome
35
167
202
2
202
1
(ii)
Specified non
-
current assets
US$’000
US$’000
South Africa
350
008
373
418
Zimbabwe
22
0
152
19
874
Cyprus
360
385
57
0
520
393
677
Non
-
current assets includes property, plant and
equipment, intangible assets and the investment accounted for using the equity method.
Judgement and estimates
Third
-
party logistics, third
-
party trading and third party chrome operations are evaluated individually but aggregated together as the agency
and trading segment. The Group believes that the nature of these operations are similar and it will be impractical to report on these operations
individually. Consequently, these operations have been aggregated together as the agency and trading segment.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
66
5.
REVENUE
Accounting policy
Sales revenue is recognised on individual sales when control transfers to the customer. Control transfers to the customer upo
n satisfaction
of performance obligations within each contract. In most instances, control passes and sales revenue is recognised when the product is
delivered to the vessel or vehicle on which it will be transported to the destination port or the customer’s premises. There may be
circumstances when judgment is required based on the five indicators of control below:
The customer has the significant risks and rewards of ownership and has the ability to direct the use of, and obtain substantially all of
the remaining benefits from the good or service.
The customer has a present obligation to pay in accordance with the terms of the sales contract. For shipments under the Incoterms
Cost, Insurance and Freight (‘CIF’) this is generally when the ship is loaded, at which time the obligation for payment is for both product
and freight.
The customer has accepted the asset. Sales revenue may be subject to adjustment if the product specification does not conform to
t
he terms specified in the sales contract but this does not impact the passing of control.
The customer has legal title to the asset. The Group usually retains legal title until payment is received for credit risk pu
rposes only.
The customer has physical possession of the asset. This indicator may be less important as the customer may obtain control of an
asset prior to obtaining physical possession, which may be the case for goods in transit.
Revenue is presented net of Value Added Tax, rebates and discounts and after eliminating intergroup sales.
PGM revenue
Revenue from the sale of PGM concentrate is recognised based on the quantity of PGM concentrate delivered, prevailing market
prices
and exchange rates, when delivered to the customers in terms of the off-take agreements. Revenue recognised includes variable
consideration as revenue is subject to quality and quantity adjustments, final pricing and currency adjustments after the beneficiation
process is completed. Revenue recognised is adjusted for expected final adjustments based on finally determined quality, quantity and
spot rates, which are estimated based on prevailing market information and recognised as a separate component within revenue.
Adjustments to the sale price occur based on movements in the metal market prices and exchange rates up to the dat
e of final pricing.
Any subsequent changes that arise due to differences between initial and final assay are still considered within the scope of
IFRS
15 and
are subject to the constraint on estimates of variable consideration. When considering the initial assay estimate, the Group has considered
the requirements of IFRS 15 in relation to the constraint on estimates of variable consideration. It will only include amounts in the calculation
of revenue where it is highly probable that a significant revenue reversal will not occur when the uncertainty relating to final
quantity/assay/quality is subsequently determined.
Consequently, at the time the concentrate passes to the customer, the Group will recognise a receivable as from that t
ime it considers it
has an unconditional right to consideration. This receivable is accounted for in accordance with IFRS 9.
The provisional pricing features means the concentrate receivable fails to meet the requirements to be measured at
amortised cost. Instead,
the entire receivable is measured at fair value, with subsequent movements being recognised in profit or loss (refer to note
21).
Chrome and agency and trading revenue
Revenue arising from chrome concentrate sales under short
-
term sale contracts and off
-
take agreements is recognised when the chrome
concentrate is delivered and a customer takes control of the chrome concentrate. Revenue is recognised based on the fixed sale price in
terms of the contract, the quantity delivered and the quality as determined by an independent survey. Export sales may, as specified in the
contract, be subject to a final survey upon arrival at destination port. Revenue recognised for export sales is adjusted for expected final
quality and quantity
adjustments, which are estimated based on historical data for similar transactions.
The majority of the Group’s metallurgical chrome concentrate is exported. For these export sales, the point of r
evenue recognition is
dependent on the contract sales terms, known as the International Commercial Terms (‘Incoterms’). For the Incoterms Cost, Insurance
and Freight (‘CIF’) the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
This means that the Group is responsible (acts as principal) for providing shipping services and, in some instances, insurance after the
date at which control of goods passes to the customer at the loading port.
Consequently, the freight service on export commodity contracts with CIF Incoterms represents a separate performance obligati
on as
defined under IFRS 15 and as such, a portion of the revenue earned under these contracts, representing the obligation to perform the
freight service, is deferred and recognised when this obligation has been fulfilled, along with the associated costs (refer to notes 22 and
29
).
Since separate performance conditions exist for export commodity contracts with CIF Incoterms, the
Group allocates the transaction price
to the separate performance conditions on a relative stand-alone selling price basis. Observable information with specific reference to sea
freight costs is used for allocation of the transaction price.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
67
5.
REVENUE
(continued)
Accounting policy (continued)
Chrome and agency and trading revenue
(continued)
The Group also provides inland logistics services to customers. These services include long
-
term contracts and ad hoc logistics services.
Revenue is recognised at a point in time as the performance obligation has been fulfilled which is the delivery of the specified goods. Any
earned consideration, which is conditional, will be recognised as a contract asset rather than a trade and other rec
eivable.
Revenue is also generated from consulting services rendered. These services include geological, marketing and administration
services.
Revenue is recognised over time, using an input method to measure progress towards complete customer satisfac
tion.
Payment terms and conditions vary by contract type and delivery method, although for
Free Carrier (‘
FCA
’)
sales terms generally include
a requirement of payment upon completion of delivery of the products. For export chrome concentrate transactions, payment terms vary
from 30 to 90 days, however, the Group obtains a letter of credit from a reputable bank in m
ost instances before shipment occurs.
In the instance where the timing of revenue recognition differs from the timing of invoicing, the Group has determined that d
ue to the short
-
term nature, the contracts with customers generally do not include a significant financing component. The primary purpose of the Group’s
invoicing terms is to provide customers with simplified and predictable ways of purchasing products, not to receive financing from customers
or to provide financing to customers. Similarly, due to the short-term nature of unearned revenue received, being less than 12 months. No
financing component exists in line with the practical expedient.
Commissions recognised from costs to obtain a contract with a customer
The Group
recognises the incremental costs, arising from the concluding of sale contracts, as expenses in cost of sales in the statemen
t
of profit or loss when incurred. Such commission fees relate to the chrome segment and are short
-
term in nature.
Manufacturing revenue
Revenue from the sale of mining equipment is recognised at the point in time when control of the asset is transferred to the
customer,
generally on delivery of the equipment at the customer’s location. The Group considers whether there are other undertakings in the contract
that are separate performance obligations to which a portion of the transaction price needs to be allocated. In determining the transaction
price for the sale of mining equipment, the Group considers the effects of variable consideration, existence of a significant financing
component, non-cash consideration, and consideration payable to the customer. Currently there aren’t any other undertakings. Revenue
is presented net of Value Added Tax, rebates and discounts.
PGM
Chrome
Agency and
trading
Manufacturing
Total
202
2
US$’000
US$’000
US$’000
US$’000
US$’000
Revenue recognised at a point in time
Variable revenue based on initial results
36
0
082
204
178
29
856
-
59
4
116
Quality and q
uantity adjustments
(27
573)
(1
751)
(24)
-
(29
348)
Revenue based on fixed selling prices
-
47
276
3
9
2
6
3
511
54
7
13
Revenue recognised over time
Freight services
-
45
475
6
768
-
52
243
Revenue from
contracts with
customers
33
2
5
09
2
95
178
40
5
26
3
511
67
1
724
Fair value adjustments (refer
to note 3
3
)
14
272
-
-
-
14
272
Total revenue
34
6
781
295
178
40
5
26
3
511
68
5
996
202
1
Revenue recognised at a point in
time
Variable revenue based on initial results
375
036
138
169
26
539
-
539
744
Quality and q
uantity adjustments
(15
350)
(1
009)
(316)
-
(16
675)
Revenue based on fixed selling prices
-
37 502
5
077
2
588
45
167
Revenue
recognised over time
Freight services
-
29
213
5
194
-
34
407
Revenue from contracts with customers
359
686
203
875
36
494
2
588
602
643
Fair value adjustments (refer to note 3
3
)
(6
298)
-
-
-
(6
298)
Total revenue
353
388
203 875
36
494
2
588
596
345
During the year ended 30 September 202
2
, revenue from freight services of US$2.
4
million (202
1
: US$
2.1
million) was recognised which was
classified as a contract liability at 30 September 202
1
(2021: 30 September 2020)
.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
68
5.
REVENUE
(continued)
202
2
202
1
US$’000
US$’000
Variable revenue recognised:
PGM revenue recognised in preceding year based on initial results (26 261) (50 023)
PGM revenue based on final results 27 664 64 369
PGM revenue adjustment recognised in current year
1 403
14
346
Chrome revenue recognised in preceding year based on initial results (42 020) (32 394)
Chrome revenue based on final results 42 488 32 238
Chrome revenue adjustment recognised in current year
468
(156)
The year ended 30 September 2022 includes PGM revenue of US$42.0 million (2021: US$26.3 million) and chrome revenue of
US$47.5 million (2021: US$42.0 million) that was based on provisional results as final prices and surveys were not yet available at
30
September 202
2
.
Judgements and estimates
A significant portion of the Group’s
chrome revenue is derived from commodity sales for which the point of recognition is dependent on the
contract sales terms known as the International Commercial Terms (‘Incoterms’). Under Incoterms cost, insurance and freight (‘CIF’), the
seller is require
d to contract, and pay, for the costs and freight necessary to bring the goods to a named port of destination.
Consequently, the Group believes that the freight service on export commodity contracts with CIF Incoterms represents a separ
ate
performance obligation as defined under IFRS 15 and as such, a portion of the revenue earned under these contracts, representing the
obligation to perform the freight service, is deferred and recognised when this obligation has been fulfilled, along with the
associated
costs.
Since separate performance conditions exist for export commodity contracts with CIF Incoterms, the Group allocates the transa
ction price to
the separate performance conditions on a relative stand-alone selling price basis. Observable information with specific reference to sea freight
costs is used for allocation of the transaction price.
The determination of revenue from the sale of PGM concentrates from the time of initial recognition of the sale through to fi
nal pricing requires
management to re-estimate fair value of the price adjustment feature continuously. Management determines this with reference to actual spot
prices.
6.
COST OF SALES
Accounting policy: provident funds
The Group's salaried employees in South Africa are members of
defined contribution retirement benefit plans. The contributions to the
plans range from a minimum of 3.0% to a maximum of 15.0% of staff's pensionable salary. Contributions to the plans vest immediately.
Contributions are accrued in the year in which the associated services are rendered by employees. The Group's employees in Cyprus do
not participate in retirement benefit plans.
Accounting policy: short term benefits
Liabilities for employee benefits for wages, salaries and annual leave that are
expected to be settled within 12 months from the reporting
date are calculated at undiscounted amounts based on remuneration rates that the Group expects to pay as at the reporting date including
related costs, such as workers compensation insurance and payroll tax. Non-accumulating monetary benefits such as medical aid
contribution
s
are expensed as the benefits are taken by the employees.
Accounting policy: termination benefits
Termination benefits are expensed at the earlier of when the Group can no
longer withdraw the offer of those benefits and when the Group
recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the reporting date, then they are
discounted.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
69
6.
COST OF SALES
(continued)
Mining
Processing
Manufacturing
Total
2022
US$’000
US$’000
US$’000
US$’000
Drill and blast
26
842
-
-
26
842
Load and haul
25
379
-
-
25
379
Diesel
36
707
-
-
36
707
Maintenance
29
964
-
-
29
964
Salaries and wages
29
172
16
3
7
6
1
277
46
825
Provident fund contributions
3
738
2
10
9
118
5
965
Mining contractor
2
210
-
-
2
210
Depreciation
21
303
15
186
104
36
593
Cost of commodities
20
270
-
-
20
270
W
rite off of
property, plant and equipment
1
313
-
-
1
313
Utilities
-
16
408
50
16
458
Materials and consumables
-
19
9
27
2
073
22
000
Overheads
-
6
5
28
235
6
763
Contractor and equipment hire
-
14
84
0
-
14
84
0
196
898
91
374
3
857
292
129
State royalties
31
082
Change in inventories
–
finished products and ore
stockpile
(14 631)
Selling costs
79
513
Freight services
52
243
Cost of sales
44
0
336
Mining
Processing
*
Manufacturing
*
Total
2021
US$’000
US$’000
US$’000
US$’000
Drill and blast
29
573
-
-
29
573
Load and haul
26
197
-
-
26
197
Diesel
25
614
-
-
25
614
Maintenance
28
160
-
-
28
160
Salaries and wages
26
980
13
879
1
243
42
102
Provident fund
contributions
3
727
1
861
163
5
751
Depreciation
18
932
15
993
92
35
017
Cost of commodities
23
156
-
-
23
156
W
rite off of property, plant and equipment
4
950
-
-
4
950
Utilities
-
15
056
73
15
129
Materials and
consumables
-
17
853
3
531
21
384
Overheads
-
2
956
460
3
416
Contractor and equipment hire
-
12 115
-
12
115
187
289
79
713
5
562
272
564
State royalties
23
788
Change in inventories
–
finished products and ore
stockpile
(11
585)
Selling costs
69
752
Freight services
34
407
Cost of sales
388
926
*
The manufacturing cost of sales were previously disclosed as part of processing cost of sales. For improved disclosure and to
be
consistent with disclosure for the year ended 30 September 2022, the manufacturing cost of sales were disaggregated. The
disaggregation of the disclosure had no impact on the net profit after tax and earnings per share for the year ended 30 Septe
mber 202
1
.
7.
OTHER INCOME
Accounting policy
:
sundry sales
Proceeds from the sale of scrap metals are recognised as sundry sales when the right to receive payment has been established.
Accounting policy: rental income
Rental income is recognised in
profit or loss on a straight
-
line basis over the term of the lease. Lease incentives granted are recognised as
an integral part of the total rental income, over the term of the lease.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
70
7.
OTHER INCOME
(continued)
202
2
202
1
US$’000
US$’000
Sundry sales
629
653
Consulting fees received
74
110
Rental income
–
as lessor
17
1
720
764
8.
SHARE
-
BASED PAYMENTS
Accounting policy
Equity settled share
-
based payments to employees and others providing similar
services are measured at the fair value of the equity
instruments at the grant date. Details regarding the determination of the fair value of equity settled share-based transactions are set out in
the supporting notes.
The fair value
determined at the grant d
ate of the equity settled share
-
based payment is expensed on a straight line basis over the vesting
period, based on the Company's estimate of equity instruments that will eventually vest, with a corresponding increase in the equity. At the
end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The amount
recogni
s
ed as an expense is adjusted to reflect the revision of the original estimate.
Equity settled share
-
based payment transactions with parties other than the employees are measured at fair value of the goods and
services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity
instr
uments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
Where the Company has the right to elect settlement either equity set
tled or cash settled, the share
-
based payment transactions will be
treated as equity settled share
-
based payments.
Conditional awards (‘
LTIP
’)
is the grant of shares in the Company where the risks and rewards of share ownership will vest on specific vesting
dates with the employee subject to certain conditions. LTIPs vest in three equal tranches for the 2020 Award and at the third anniversary of
the grant for the 2021 Award. The award, on vesting, may at the election of the Company, be either cash-settled or share-settled as provided
for in the rules of the Plan.
Appreciation rights (‘
SARS
’)
is the grant of an award by the Company where the employee is, subject to certain conditions, entitled to receive
the increase in the share value above the award price. The awards vest in two equal annual tranches with the ability to exercise the award
at any time up to five years from the date of the grant. The appreciation in value may, at the election of the Company, be either cash settled
or share settled as provided for in the rules of the Plan. No SARS were issued during the years ended 30 September 2022 and
30
September
2021
and a
ll qualifying SARS awards were vested as at 30 September 202
2.
2019 Award
–
third tranche
The sixth award was made on 30 June 2019, comprising LTIPs and SARS.
The third
(final)
tranche vested at 30 June 2022 for LTIPs while
the
second
(final)
tranche for SARS vested at 30 June 2021.
At 30 September 202
2
, th
e Group had the following
share
-
based payment arrangements:
2020 Award
–
third tranche
The seventh
award
w
as
made on 30 June 2020, comprising
LTIP
s only. The vesting of these awards is subject to
the following performance
conditions
:
Subject to there being no fatality
during the vesting periods and continued employment in good standing for the LTIP’s
:
40% of the vesting will be subject to achieving at least the market guidance for PGM production as publicly disclosed and
referenced to the commencement of the respective financial reporting period (it being noted that the vesting period and financial
year are not coterminous);
40% of the vesting will be subject to achieving at least the market guidance for chrome concentrate production as publicly disclosed
and referenced to the commencement of the respective financial reporting period (it being noted that the vesting period and
financial year are not coterminous), adjusted to exclude the production from the Vulcan Plant;
20% of the vesting will be subject to achieving at least 90% of the Vulcan Plant’s nameplate production capacity of 480 kt of in-
spec chrome concentrate production.
202
1
Award
The
eight’
award was made on 8 December 2021 with the measurement period being aligned to the Group’s financial year
-
end of
30 September. This award will vest on the third anniversary of the grant, being 8 December 2024 and is subject to continued employment as
at 8 December 2024. The three-year vesting period is divided into three annual measurement periods at 30 September, the result of each
being aggregated at the end of the vesting period to determine the final vesting percentage. The vesting of these awards is subject to
continued employment in good standing and the following performance conditions
:
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
71
8.
SHARE
-
BASED PAYMENTS
(continued)
2021 Award (continued)
33.33% of the vesting will be subject to achieving at least the market guidance for PGM production as publicly disclosed and
referenced to the commencement of the respective financial reporting period
;
33.33% of the vesting will be subject to achieving at least the market guidance for chrome concentrate production as publicly
disclosed and r
eferenced to the commencement of the respective financial reporting period;
33.34% of the vesting will be subject to achieving certain strategic measures. All three interim measurement periods will be based
on an equal allocation to:
o
Return on invested c
apital exceeding the weighted average cost of capital of the Group;
o
Performance against the ESG Plan;
o
Tracking on achievement of Vision 2025.
The award will be reduced in each annual measurement period by one
-
third for each fatality that occurred during that measurement period.
For avoidance of doubt, if any performance condition is not met in any annual measurement period and consequently is forfeited (either
wholly or partially) as a result of failure to achieve the performance condition, but the performance condition is achieved in subsequent
measurement periods the award will vest for that annual measurement period as provided. The awards are subject to the rules governing
the Plan and the final discretion of the Tharisa plc Remuneration Committee will prevail should there be any discrepancy.
LTIP
Valuation of share award at grant date:
First
measurement
period
/
tranche
Second
measurement
period
/
tranche
Third
measurement
period
/
tranche
Seventh issue
-
2020
ZAR11.65
ZAR10.67
ZAR9.66
Eighth issue
-
2021
ZAR2
3.83
ZAR2
3
.
83
ZAR2
3
.
83
A reconciliation of the movement in the Group's LTIP in the period under review is as
follows:
Opening
Allocated
Vested
Forfeited
Total
LTIP 202
2
Ordinary shares
4
272
742
5
431
124
(1
861
133)
(853
258)
6
989
475
LTIP 20
21
Ordinary shares
8
166
229
-
(3
516
095)
(377
392)
4
272
742
An expense of
US$
1.7
million (20
21
: US$
3.1
million) was recognised in profit or loss.
The fair value
at grant date
of the LTIP awards was determined by present valuing the share price on grant date less the expected dividends.
No LTIP awards were issued during the year ended 30 September 2021.
The following inputs were used
for LTIP awards issued during the year ended 30 September 2022
:
2022
Spot price
R27.00
Dividend yield
4.16
%
The risk
-
free interest rate
(swap yield curve)
5.76%
Forfeiture assumption
–
based on participants’ employee turnover history
10
.
63
%
SARS
No SARS were issued during the years ended 30 September 2022 and 30 September 2021.
In terms of previous
awards
,
employees
may
exercise the SARS within five years from the grant date. No expense was recognised in profit or loss for SARS exercised during the year
ended 30 September 202
2 (2021:
US$0.4 million
)
.
Number of SARS vested, not yet exercised:
Number of rights
Vesting date
Expiry date
20
2
2
20
2
1
30 June 2018
30 June 2022
-
2
121 393
30 June 2019
30 June 2023
617
852
769
859
30 June 2020
30 June 2024
1
305
071
1
806
612
N
umber of share options exercised during the
year:
2
397
593
2
985 289
Weighted average
share price at date of exercise:
ZAR27.76
ZAR25.07
Judgements and estimates
The Group measures the cost of equity
-
settled transactions with employees by reference to the fair value of the equity instruments at the date
at which they are granted. The fair value is determined by present valuing the share price on grant date less the expected dividends and by
using a Binomial Tree model
, using the
aforementioned assumptions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
72
9.
OTHER OPERATING EXPENSES
20
2
2
20
2
1
US$’000
US$’000
Directors and staff costs
Non
-
Executive Directors (
refer to note 11)
642
631
Employees:
salaries
19
215
17
504
bonuses
2
889
1
831
provident
fund, medical aid and other contributions
2
226
1
823
24
972
21
789
Audit
–
external audit services
808
579
Bank charges and
related fees
774
809
Consulting and business development cost
1
798
2
082
Corporate and social investment
247
246
Depreciation
2
203
1
007
Equity
-
settled share
-
based payment expense
1
709
3
560
Internal audit
20
91
Expected credit loss allowance
47
100
Consumables and r
epairs and maintenance
2
138
-
Impairment of goodwill
(note 15)
1
852
-
Impairment of property, plant and equipment
8 366
-
Write
offs
of property, plant and equipment
15
-
Loss on disposal of property, plant and
equipment
1 482
-
Listing fees and investor relations
735
346
Health and safety
2
572
1
818
Insurance
3
318
2
619
Legal and professional
1
653
1
763
Office administration, rent and utilities
1
747
1
557
Research and development
692
605
Security
1
036
919
Telecommunications and IT related
4
471
3
929
Training
499
403
Travelling and accommodation
333
94
Sundry
39
3
506
63 88
0
44
822
202
2
2021
Number of employees
2
202
1
996
10.
FINANCE INCOME AND
FINANCE COSTS
Accounting policy: Finance income
Finance income comprises interest income on funds invested. Interest income is recognised in profit or loss as it accrues usi
ng the effective
interest method.
Accounting policy: Finance costs
Finance costs comprise interest expense on borrowings
and
unwinding of the discount on provisions. Borrowing costs that are not directly
attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest
method.
202
2
20
21
US$’000
US$’000
Finance income
Interest received
1
376
1
391
Finance costs
Interest expense
(3
018)
(3
351)
Unwinding of present value
of
rehabilitation
provision
(
refer note 25)
(1
740)
(1
542)
(4
758)
(4
893)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
73
11.
DIRECTORS REMUNERATION
The remuneration of the Directors is set out in the following tables:
Directors’
fees
Salary
Bonus
Expense
allowance
Share
-
based
payments
Provident
fund and
risk
benefits
Total
2022
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
LC Pouroulis
1
-
762
133
-
307
-
1
202
P Pouroulis
1
-
527
100
8
337
43
1
015
MG Jones
1
-
423
86
-
184
33
726
JD Salter
169
-
-
-
-
-
169
A Djakouris
103
-
-
-
-
-
103
OM Kamal
60
-
-
-
-
-
60
C Bell
122
-
-
-
-
-
122
R Davey
104
-
-
-
-
-
104
ZL Hong
42
-
-
-
-
-
42
SWM Lo
42
-
-
-
-
-
42
Total
642
1
712
319
8
828
76
3
585
20
2
1
LC Pouroulis
1
-
734
149
-
1
314
-
2
197
P Pouroulis
1
-
483
110
8
1
264
47
1
912
MG Jones
1
-
405
97
-
737
35
1
274
JD Salter
180
-
-
-
-
-
180
A Djakouris
129
-
-
-
-
-
129
OM Kamal
61
-
-
-
-
-
61
C Bell
97
-
-
-
-
-
97
R Davey
79
-
-
-
-
-
79
ZL Hong
43
-
-
-
-
-
43
VWY Chu*
15
-
-
-
-
-
15
SWM Lo**
27
-
-
-
-
-
27
Total
631
1
622
356
8
3
315
82
6
014
*
Retired by
rotation on 10 February 2021
**
Appointed 10 February 2021
1
These salaries were paid by the Company and subsidiaries by which the directors are employed (Braeston Proprietary Limited an
d
Dinami Limited).
Directors’ share awards
Details of each plan are disclosed
in note 8. Non
-
Executive Directors are not entitled to participate in the Group’s share award plan. The
number of LTIP and SARS awarded to the Executive Directors are set out in the following tables:
LTIP
2022 Ordinary shares
Opening
balance
Allocated
Vested
Forfeited
Total
LC Pouroulis
494
126
667
902
(226
590)
(74
728)
860
710
P Pouroulis
543
632
686
150
(249
418)
(82
326)
898
038
MG Jones
295
924
397
556
(135
808)
(44
848)
512
824
1
333
682
1
751
608
(611
816)
(201
902)
2
271
572
LTIP 2021 Ordinary shares
LC Pouroulis
883
490
-
(389
364)
-
494
126
P Pouroulis
955
240
-
(411
608)
-
543
632
MG Jones
541
072
-
(245
148)
-
295
924
2
379
802
-
(1
046
120)
-
1
333
682
SARS 2021 Ordinary shares
LC Pouroulis
162
765
-
(162
765)
-
-
P Pouroulis
179
784
-
(179
784)
-
-
MG Jones
98
082
-
(98
082)
-
-
440
631
-
(440
631)
-
-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
74
12.
TAX
Accounting policy
Income tax comprises current and deferred taxes. Income tax is recognised in profit or loss except to the extent that it rela
tes to items
recognised in other comprehensive income or directly in equity, in which case it is recognised in other comprehensive income or directly
in equity, respectively.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the reporting
date, and any adjustments to tax payable in
respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for fin
ancial reporting
purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to
temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting d
ate.
Apart from certain limited exceptions, all deferred tax assets
, to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets
arising from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences,
provided those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the
same period as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred
tax asset can be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences
support the recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account
if they relate to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the
tax loss or credit can be utilised.
The limited exceptions to recognition of deferred tax assets and liabilities are those temporary differences arising from goo
dwill not
deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are
not part of a business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of
taxable differences, the Group controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable
future, or in the case of deductible differences, unless it is probable that they will reverse in the future.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate
to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but which they intend to settle
current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. A deferred tax asset is
recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable
profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the
extent that it is no longer probable that the related tax
benefit will be realised.
Additional income taxes that arise from the distribution of dividends are recognised at the same time as the liability to pay
the related
dividend is established.
In determining the amount of current and deferred tax, the
Group takes into account the impact of uncertain tax positions and whether
additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgements
about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of
existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that such a determination is
made.
202
2
20
2
1
US$’000
US$’000
Corporate income tax for the year
Cyprus
4
121
1
774
South Africa
36
474
5 895
40
595
7 669
Special contribution for defence in Cyprus
*
1
-
Deferred tax
: o
riginating and reversal of temporary differences
(note 19)
9
899
44 814
Dividend withholding tax
2
572
1
231
Tax charge
53
067
53 714
*
Amount is less than US$1
000.
The entities within the Group are taxed in the countries in
which they are incorporated and operate at the relevant tax rates as follows:
Country
202
2
20
21
Cyprus
12.5%
12.5%
South Africa
28.0%
28.0%
Zimbabwe*
-
-
Guernsey
0.0%
0.0%
China
25.0%
25.0%
*
Tax exempt for the first five years,
thereafter 15% income tax rate (special economic zone companies).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
75
12.
TAX (continued)
Reconciliation between tax charge and accounting
202
2
202
1
202
2
202
1
profit at applicable tax rates
:
US$’000
US$’000
US$’000
US$’000
Profit before tax
2
20
223
185
255
2
20
223
185
255
Notional tax on profit before tax, calculated at the
Cypriot/South African income tax rate of 12.5%/28.0%
(202
1
: 12.5%/28.0%)
2
7
528
23
157
61 662
51 871
Tax effects of:
Different tax rates from the
standard Cypriot/South
African income tax rate
2
7
722
26 989
(
3
716
)
(6
097)
Impact of change in South African tax rate
–
deferred tax
(1 486)
-
(3
33
3
)
-
Tax exempt income
Gain on business combination
(6
049)
-
(13
550)
-
Fair
value adjustments
-
(722)
-
(1 616)
Interest received
(50)
(6)
(1
13
)
(14)
Currency gains
(55)
(37)
(1
27
)
(82)
Other
-
(5)
-
(11)
Non
-
deductible expenses
Share of loss of equity
-
accounted investments
654
31
1
464
70
Fair value adjustments
734
-
1
644
-
Investment related expenses
1
014
558
2
271
1
249
Interest paid
30
-
70
-
Currency losses
27
192
98
430
Capital expenses
147
240
322
538
Impairment of goodwill (note
15
)
232
-
519
-
Impairment of property, plant and equipment (note
14
)
539
-
1
208
-
Special contribution for defence in Cyprus
1
2
2
5
Dividend withholding tax
-
accrued preference dividends
444
2 068
995
4
577
Dividend withholding tax
-
current year dividends
184
1
232
411
2
760
Deferred tax
-
unremitted distributable reserves of
foreign subsidiaries
1
252
-
2
804
-
Prior year under provision of current income tax
102
-
229
-
Deferred tax not raised: assessed losses
89
-
199
-
Recognition of deemed interest income for tax purposes
8
15
8
34
Tax charge
53
067
53 714
53
067
53 714
Under
certain conditions interest income may be subject to defence contribution at the rate of 30.0% in Cyprus. Such interest incom
e is treated
as non-taxable in the computation of corporation taxable income. In certain instances, dividends received from abroad may be subject to
defence contribution at the rate of 17.0%.
In terms of the Double Taxation Agreement between Cyprus and South Africa, dividend withholding tax at a rate of 5.0% (2021: 5.0%) is
charged on dividends declared.
The Group’s consolidated effective tax rate for the year ended 30 September 2022 was
2
4
.
1
% (2021: 29.0%).
At 30 September 2022, the Group’s unredeemed capital balance available for offset against future mining taxable income in Sou
th Africa was
fully ut
ilised (2021: fully utilised).
Effective for the 2023 financial year, the South African corporate tax rate will decrease from 28.0% to 27.0%. For the year ended
30 September 2022, the Group’s South African deferred tax assets and liabilities have been adjusted by applying the newly enacted 27.0%
South African corporate tax rate.
Other than Cyprus and South Africa, no provision for tax in other jurisdictions was made as these entities either sustained l
os
ses for taxation
purposes or did not earn any assessable profits. At 30 September 2022, the Group had unutilised tax losses of US$0.7 million (2021: US$nil)
available for offset against future taxable income. No deferred tax asset has been raised as it is doubtful whether future taxable profits will
exist for offset against these tax losses.
The tax losses don’t expire provided that the entity
remains
operational.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
76
12.
TAX
(continued)
Judgement and estimates: taxes
Judgement is required in
determining the liability for income taxes due to the complexity of legislation. There are many transactions and
calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for
anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in
which such determination is made.
The Group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that
the deductible
temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the Company
to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash
flows from ope
rations and the application of existing tax laws.
Judgement and estimates: most meaningful tax rate
IAS 12 requires entities to disclose a tax rate reconciliation
to enable users to understand whether the relationship between the accounting
profit and taxation is unusual and to understand significant factors that could affect that relationship in the future. In preparation of the tax rate
reconciliation, entities select a most meaningful tax rate to which the profit before tax is applied and to which the tax charge for the year is
then reconciled. The Group previously selected the Cyprus corporate income tax rate as the most meaningful tax rate. Since the majority of
the Group’s profits are currently earned in South Africa, management considers that it is appropriate to include a tax rate reconciliation for
which the South African income tax rate is selected as the most meaningful tax rate.
13.
EARNINGS PER SHARE
Accounting policy
The Group presents basic and diluted earnings per share data
for its ordinary shares. Basic earnings per share is calculated by dividing
the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding
during the period. Diluted earnings per share is determined by adjusting the profit or loss attributable to ordinary shareholders and the
weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise instruments
convertible into ordinary shares and share options granted to employees. The Group also presents headline earnings per share according
to the JSE requirements, by adjusting the earnings as determined in IAS 33, excluding separate identifiable re-measurements, net of
related tax (current and deferred) and related non-controlling interests other than re-measurements specifically included in headline
earnings (included re
-
measurements).
The calculation of basic and diluted earnings per share
and
headline and diluted headline
earnings
per share have
been based on the profit
attributable to the ordinary shareholders of the Company and the weighted average number of ordinary shares outstanding. Treasury shares
are excluded from the weighted average number of ordinary shares outstanding. Vested Share Appreciation Rights (‘SARS’) issued to
employees at award prices lower than the current share price, results in a potential dilutive impact on the weighted average number of issued
ordinary shares and have been included in the calculation of dilutive weighted average number of issued ordinary shares. The average market
value of the Company's shares for the purposes of calculating the potential dilutive effect of SARS was based on quoted market prices for the
year during which the options were outstanding.
20
2
2
20
2
1
Basic and diluted earnings per share
Profit for the year attributable to ordinary shareholders (US$’000)
1
53
881
100
469
Weighted average number of issued ordinary shares for basic earnings per share ('000)
285
776
268
859
Dilutive impact of SARS (‘000)
125
599
Weighted average number of issued ordinary shares for diluted earnings per share ('000)
285
901
269
458
Earnings per share
Basic (US$ cents)
5
3
.
8
37.4
Diluted (US$ cents)
5
3
.
8
37.3
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
77
13.
EARNINGS PER SHARE
(continued)
202
2
20
2
1
Headline and diluted headline earnings per share
Headline earnings for the year
attributable to ordinary shareholders (US$’000)
1
17
39
3
103 107
Weighted average number of issued ordinary shares for basic headline earnings per share ('000)
285
776
268
859
Dilutive impact of SARS (‘000)
125
599
Weighted average number of
issued ordinary shares for diluted headline earnings per share ('000)
285 901
269
458
Headline earnings per share
Basic (US$ cents)
4
1
.
1
38.3
Diluted (US$ cents)
4
1
.
1
38.3
Reconciliation of profit to headline earnings
202
2
20
21
Gross
US$’000
Tax
US$’000
Non-
controlling
interest
US$’000
Net
US$’000
Net
US$’000
Profit attributable to ordinary shareholders
1
53
881
100 469
Adjustments:
Gain on acquisition: fair value re
-
measurement
of existing
28.38% shareholding
(33
50
3
)
-
-
(33
50
3
)
-
Gain on acquisition:
purchase of shares at a
discount
(14
888)
-
-
(14
888)
-
Write off
of property, plant and equipment
1
3
28
(372)
(304)
65
2
2
638
Impairment of property, plant and
equipment
8 366
(34
)
-
8 332
Impairment of goodwill
1
852
-
-
1
852
Loss
on disposal of property, plant and
equipment
1
482
(415)
-
1
067
-
Headline earnings
1
17 39
3
103 107
14.
PROPERTY, PLANT AND EQUIPMENT
Accounting policy
Mining assets and infrastructure
Mining assets and infrastructure typically include those costs incurred for the development of the mine, including the design
of the mine
plan, constructing and commissioning the facilities and preparation of the mine and necessary infrastructure for production. The mine
development phase generally begins after completion of a feasibility study and ends upon the commencement of commercial production.
Mining assets are measured at cost less accumulated depreciation and less any accumulated impairment losses. Expenditure, including
evaluation costs, incurred to establish or expand productive capacity, to support and maintain that productive capacity prior to the
commencement of commercial levels of production, are capitalised to assets under construction and transferred to mining assets and
infrastructure when the mining venture reaches commercial production. Maintenance costs incurred to maintain current production are
expensed.
The remaining useful life of mine and infrastructure
based on the remaining open pit life of mine and excluding future potential underground
development,
is currently estimated to be 1
9
years.
Deferred stripping costs
All stripping costs
incurred (costs incurred in removing overburden to expose the reef) during the production phase of a mine are treated
as variable production costs and as a result are included in the cost of inventory during the period in which the stripping costs are incurred.
However, any costs of overburden stripping in excess of the expected open-pit life average stripping ratio are deferred. Any costs deferred
are capitalised to property, plant and equipment
provided all the following conditions are met:
it is probable that the future economic benefit associated with the stripping activity will be realised;
the component of the ore body for which access has been improved can be identified; and
the costs relating to the stripping activity associated with the improved
access can be reliably measured
.
If all of the criteria are not met, the production stripping costs are charged to the consolidated statement of
profit or loss
as
they are incurred.
This
deferred stripping
asset is depreciated using the units of
production method over the expected useful life of the identified component
of the ore body that becomes more accessible as a result of the stripping activity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
78
14.
PROPERTY, PLANT AND EQUIPMENT
(continued)
Accounting policy (continued)
A
ssets are
initially measured at cost and are subsequently measured at cost less accumulated depreciation and less any accumulated
impairment losses. The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate portion of normal
production overheads. Directly attributable expenses relating to major capital projects and site preparation are capitalised until the asset is
brought to a working condition for its intended use. These costs include dismantling and site restoration costs. Administrative and other
general overhead costs are expensed as incurred. Purchased software that is integral to the functionality of the related equipment is
capitalised as part of that equipment.
Borrowing costs directly attributable to the
construction or acquisition of qualifying assets are capitalised directly to the cost of the qualifying
asset. To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, these borrowing costs shall be
determined as
the actual borrowing costs incurred on that borrowing.
Where an item of property, plant and equipment comprises major components with different useful lives, the components are acc
ounted for
as separate items of property, plant and equipment.
Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, inc
luding major
inspection and overhaul expenditure, is capitalised when the costs can be reliably measured and if it is probable that the future economic
benefits embodied within the component will flow to the Group. The carrying amount of the replaced component, if any, are der
ecognised.
Maintenance and day to day servicing and repairs, which neither materially add to the value of
assets nor appreciably prolong their useful
lives, are recognised in profit or loss.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from dispos
al with the
carrying amount of the item and
are recognised in profit or loss.
Depreciation
Depreciation of mining assets and infrastructure is calculated using the units
-
of
-
production method based on estimated economically
recoverable proved and probable mineral reserves. Proved and probable reserves reflect estimated quantities of economically recoverable
resources which can be recovered in the future from known mineral deposits. Depreciation is first charged on mining assets and infrastructure
from the date on which they are availab
le for use.
Mining fleet is depreciated using the units
-
of
-
production method based on estimated achievable machine hours.
For other property, plant and equipment, depreciation is recognised in profit or loss on a straight
-
line basis at rates that
will reduce the
carrying amounts to estimated residual values over the estimated useful lives of the assets. Leasehold improvements on premises occupied
under leases are expensed over the shorter of the lease term and the useful lives.
Depreciation, unless otherwise stated, is calculated as follows:
buildings at 10.0% pa
motor vehicles at 20.0% pa
computer equipment and software at 33.3% pa
office equipment between 10.0% and 33.3% pa
furniture at 20.0% pa
No
depreciation is provided on freehold land and mine development assets under construction.
Depreciation methods, residual values and useful lives are reviewed at least annually, and adjusted prospectively if appropri
ate, at each
reporting date.
Exploration and evaluation expenditure
All exploration and evaluation expenditure, prior to obtaining the legal rights to explore a specific area, is recognised in
profit or loss. After
the legal rights to explore are obtained, exploration and evaluation expenditure, comprising the costs of acquiring prospecting rights and
directly attributable exploration expenditure, is capitalised as a separate class of property, plant and equipment, on a project-by-project basis,
pending determination of the
technical feasibility and commercial viability.
The technical feasibility and commercial viability of extracting a mineral resource is generally considered to be determinabl
e through a
feasibility study and when proven reserves are determinable to exist. Upon determination of proven reserves, exploration and evaluation
assets attributable to those reserves are first tested for impairment and then reclassified to another appropriate class of property, plant and
equipment. Subsequently, all costs directly incurred to prepare an identified mineral asset for production are capitalised to mine development
assets. Amortisation of these assets commences once these assets are available for use. These assets will be measured at cost less
accum
ulated amortisation and impairment losses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
79
14.
PROPERTY, PLANT AND EQUIPMENT
(continued)
Accounting policy
Minerals reserve
The estimation of reserves impacts the amortisation of property, plant and equipment, the recoverable amount of
property, plant and equipment
and the timing of rehabilitation expenditure.
Factors impacting the determination of proved and probable reserves:
commodity prices;
the grade of mineral reserves;
operational issues at the mine; and
the
reliability of the measurement of the fair value or cost of the asset.
The carrying amounts of the Group's non
-
financial assets are reviewed at each reporting date to determine whether there is any indication of
impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised whenever the carrying
amount of an asset or its related CGU exceeds its recoverable amount. A CGU is the smallest identifiable asset group that generates cash
flows that are largely independent from other assets and groups. Impairment losses are recognised in profit or loss. Impairment losses
recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGUs (group of units) and
then, to reduce the carrying amount of the other assets in the CGU (group of units) on a pro rata basis.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assess
ing v
alue 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 assets. For the purpose of impairment testing, assets that cannot be tested individually
are grouped together into the smallest group of assets that generates cash flows from continuing use that are largely independent of the cash
inflows of the other assets of the CGU.
Impairment losses
recognised in prior periods are assessed at each reporting date for any indication that the loss has decreased or no longer
exists. An impairment loss is reversed through profit or loss if there has been a change in the estimates used to determine the recoverable
amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would
have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Accounting policy: leases
The Group recognises a right
-
of
-
use asset at the commencement date of the contract for all leases conveying the right to control the use of
identified assets for a specified period. The commencement date is the date on which a lessor makes an underlying asset available for use
by the lessee.
The right
-
of
-
use assets are initially measured at cost, which comprises the amount of initial measurement of the lease liability adjusted
for
any lease payments made at or before the commencement date plus any initial direct costs incurred by the lessee and an estimate of costs
to be incurred by the lessee in dismantling and removing the underlying assets or restoring the site on which the assets are located, less
any lease incentives.
Subsequent to initial measurement, the right
-
of
-
use assets are depreciated from the commencement date using the straight
-
line method
over the shorter of the estimated useful lives of the right
-
of
-
use assets or the end of lease term. These are as follows:
Right
-
of
-
use asset
Depreciation term in years
Buildings and premises
Straight
-
line over the respective lease terms, between 3 and 5 years
Mining fleet
Based on estimated production hours
After the commencement date, the right
-
of
-
use assets are
measured at cost less any accumulated depreciation and any accumulated
impairment losses and adjusted for any re
-
measurement of the lease liability.
Short
-
term leases and leases of low
-
value assets:
The Group has elected not to recognise right
-
of
-
use assets for short
-
term leases that
do not contain a purchase option and
have a lease
term of 12 months or less and leases of low
-
value assets such as computer equipment.
As a lessor
In the event of
lease contracts based on which the Group is acting as a lessor, each of its leases is classified as either an operating or
finance lease. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership to the
lessee. Indicators of a finance lease include whether the lease is for the major part of the economic life of the asset, whether the lease
transfers ownership of the asset to the lessee by the end of the lease term and whether at inception date of the lease, the present value of
the minimum lease payments amount to substantially all of the fair value of the leased asset.
Leases where a significant portion of the risks and rewards incidental to ownership are retained by the lessor, are classifie
d as operating
leases.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
80
14.
PROPERTY, PLANT AND EQUIPMENT
(continued)
Freehold land
and buildings
Mineral rights
Mining assets
and
infrastructure
Mining fleet
Right-of-use
asset: mining
fleet
Motor
vehicles
Computer
equipment
and software
Office
equipment and
furniture,
community
and site office
improvements
Right-of-use
asset:
buildings
Total
30
September 202
2
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Cost
Balance at 30 September 2021
19
293
-
396 901
99
585
16
790
2
331
4
249
1
014
1
968
542
131
Additions
7
559
-
5
9
243
34
794
-
1
005
1
929
484
-
10
5
014
Lease agreements entered into
-
-
-
-
1
6
3
-
-
-
59
2
2
2
Business combination (note 3
1
)
-
201
750
1
570
-
-
152
18
20
-
203
510
Disposals
-
-
(
790
)
(
5
486
)
-
(18)
(4)
(2)
-
(6 300)
Re
-
measurement
-
-
-
-
4
-
-
-
4
8
Write offs
(3)
-
(87)
(5
219
)
-
-
(196)
(8)
-
(5
513)
Transfers
494
-
399
8
277
(
8
765
)
18
(
429
)
6
-
-
Exchange differences on translation
(4
143)
-
(
69 907
)
(20
6
80
)
(1
7
36
)
(499)
(1
370
)
(182)
(29
8
)
(98
81
5
)
Balance at 30 September 2022
23
200
201
750
38
7
329
111
271
6
456
2
989
4
197
1
332
1
733
7
40
257
Accumulated depreciation
and
impairment
Balance at 30 September 2021
1
353
-
105
512
39
744
8
977
730
3
780
509
1
065
161
670
Depreciation c
harge for the year
257
-
16
566
18
325
1
663
400
1
087
167
331
38
796
Business combination (note 3
1
)
-
-
17
-
-
65
10
9
-
101
Disposals
-
-
(106)
(2
967
)
-
(13)
(3)
(2)
-
(3
091)
Write offs
(3)
-
(37)
(3
943
)
-
-
(193)
(
9
)
-
(4
185)
Impairment
-
-
8 356
-
-
6
-
4
-
8 366
Transfers
-
-
-
5 3
94
(
5 3
94
)
-
16
(16)
-
-
Exchange differences on translation
(254)
-
(19
81
8
)
(8
738)
(1
036)
(16
6
)
(703)
(80)
(185)
(30
98
0
)
Balance at 30 September 202
2
1
353
-
1
1
0
490
47
815
4
210
1 022
3
994
5
82
1
211
1
70
677
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
81
14.
PROPERTY, PLANT AND EQUIPMENT
(continued)
Freehold land
and buildings
Mining assets
and
infrastructure
Mining fleet
Right-of-use
asset: mining
fleet
Motor vehicles
Computer
equipment and
software
Office
equipment and
furniture,
community
and site office
improvements
Right-of-use
asset:
buildings
Total
30 September 202
1
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Cost
Balance at 30 September 202
0
14
280
289
263
70
885
14
799
1
325
3
868
567
1
891
396
878
Additions
3
747
73
004
26
574
-
862
1
427
392
-
106
006
Lease agreements entered into
-
-
-
1
985
-
-
-
172
2
157
Business combination (note 3
1)
-
4
687
-
-
-
-
17
-
4
704
Disposals
-
-
-
-
-
(4)
(1)
-
(5)
Re
-
measurement
-
-
-
(175)
-
-
-
196
21
W
rite offs
(30)
(917)
(5
559)
(624)
-
(1
390)
(11)
(492)
(9
023)
Transfers
(216)
159
237
(810)
12
(3)
7
-
(614)
Exchange
differences on translation
1
512
30
705
7
448
1
615
132
351
43
201
42
007
Balance at 30 September 202
1
19
293
396 901
99
585
16
790
2
331
4
249
1
014
1
968
542
131
Accumulated depreciation
Balance at 30
September 202
0
982
80
916
24
245
6
305
489
3
528
366
1
087
117
918
Depreciation c
harge for the year
267
16
244
14
803
3
028
190
972
128
392
36
024
Business combination (note 3
1
)
-
11
-
-
-
-
1
-
12
Disposals
-
-
-
-
-
(4)
-
-
(4)
W
rite offs
-
(241)
(1
693)
(518)
-
(1
081)
(11)
(529)
(4
073)
Transfers
-
(42)
(73)
(499)
-
-
-
-
(614)
Exchange differences on translation
104
8
624
2
462
661
51
365
25
115
12
407
Balance at 30 September 202
1
1
353
105
512
39
744
8
977
730
3
780
509
1
065
161
670
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
82
14.
PROPERTY, PLANT AND EQUIPMENT (continued)
20
2
2
20
2
1
US$’000
US$’000
Net book value
Freehold land and buildings
21
847
17
940
Mineral right
201
750
-
Mining assets and infrastructure
2
7
6
839
291
389
Mining fleet
63
456
59
841
Right
-
of
-
use mining fleet
2
2
46
7
813
Motor vehicles
1
9
67
1
601
Computer equipment and software
203
469
Office equipment and furniture,
community and site office improvements
75
0
505
Right
-
of
-
use buildings and premises
522
903
5
69
580
380 461
Included in additions to mining assets and infrastructure are additions to the deferred stripping asset of US$
15.1
million (20
2
1
:
US$
2
5.8
million).
The estimated economically recoverable proved and probable mineral reserve of Tharisa Minerals Proprietary Limited was reasse
ssed at
18 November 2021 which gave rise to a change in accounting estimate. Following an annual review of its Minerals Resource and Mineral
Reserve statement, the open pit life of mine was extended by seven years. The remaining reserve that management had previously assessed
was 97.5 Mt (at 1
October 2020).
At 18
November
2021, the remaining reserve was assessed to be 113.6 Mt.
A
s a result, the expected useful life of the plant
, included in mining assets and infrastructure,
increased. The impact of the change on the
actual depreciation expense, included in cost of sales, is a reduced depreciation charge of US$2.1 million. The change in estimate was
recognised prospectively.
Included in mining assets and infrastructure are projects under construction
of US$
28.7
million
(202
1
: US$
61
.
0
million
and included in
computer equipment and software
were
projects under con
struction of US$0.5 million
).
Freehold land and buildings comprises various portions of the farms Elandsdrift 467 JQ, Buffelspoort 343 JQ and Farm 342 JQ,
North West
Province, South Africa. All land is freehold.
Property, plant and
equipment, with the exception of motor vehicles, is insured at approximate cost of replacement. Motor vehicles are
insured at market value. Land is not insured. No borrowing costs were capitalised during the year ended 30 September 2022 (2021: no
capitalis
ation of borrowing costs).
Capital commitments
At 30 September 202
2
, the Group’s capital commitments for contracts to purchase property, plant and equipment amounted to
US$
32.0
million (202
1
: US$3
1
.
9
million).
Securities
At 30 September 202
2
, the majority of the Group’s mining fleet was pledged as security against the
asset backed facilities
(refer to
note 2
6
).
Write offs
During the year ended 30 September 202
2
, the Group scrapped
individual assets
with net book values
totalling US$
1.3
million (202
1
:
US$5.0 million). The write offs during both the financial years relate to certain computer software programmes no longer in use and yellow
fleet equipment identified as no longer fit for use and premature component failures.
The mining component pre
-
mature failures are identified through the measurement of the hours depreciated for each component in
relationship to the expected useful live. A write off is recognised for each component that did not reach its expected useful life. Further to
this, mining fleet is also written off as identified from fleet that is confirmed as obsolete by management.
Impairment
of assets
During the year ended 30 September 2022, it became evident that t
he operational performance of MetQ Proprietary Limited ('MetQ’)
i
s not
as expected and the Group believes that an impairment indicator is present. MetQ was tested for impairment on a MetQ CGU level by using
its value in use. The recoverable amounts of the CGU with a net book value of US$2.0 million were calculated and amount to US$1.4 million
at 30 September 2022. Consequently, a provision for impairment of US$0.6 million was recognised in other operating costs. An impairment
charge of US$0.4 million was firstly allocated to the goodwill within the CGU (refer to note 15) and the remaining amount of the impairment
charge has been allocated to property, plant and equipment within the mining assets and infrastructure (US$113 thousand), motor vehicles
(US$6 thousand) and office equipment and furniture (US$6 thousand) asset categories. The cash flows were discounted using a real discount
rate of
12.6%
.
The MetQ CGU forms part of the manufacturing segment.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
83
14.
PROPERTY, PLANT AND EQUIPMENT
(continued)
Impairment
of assets (continued)
Effective 1 July 2022, the Zimbabwean government enacted an export ban on chrome concentrates to support the local beneficiat
ion industry.
Local downstream selling prices of chrome concentrates are unfavourable to Salene Chrome Zimbabwe (Private) Limited (‘Salene Chrome’)
and consequently operations were ceased while allowing the Group to evaluate and develop downstream opportunities. The Group believes
that the change in operational circumstances during the year ended 30 September 2022 represents an impairment indicator. The Group
performed a value in use calculation on a Salene Chrome CGU level by using a discounted cash flow forecast covering a period of 72 months,
which equals the mine plan, a chrome concentrate selling price of US$132 and a weighted average cost of capital of 10.5%. The Group
believes that the CGU with a carrying amount of US$12.4 million has a recoverable amount of US$2.8 million and consequently has made a
provision for impairment of US$9.6 million. The impairment charge has been recognised in other operating costs. The impairment charge was
first allocated to the goodwill within the CGU (refer to note 15) and the remainder of the impairment charge of US$8.2 million has been allocated
to property, plant and equipment within the mining asset and infrastructure asset category. The Salene Chrome CGU forms part of the chrome
segment.
Judgements and estimates: mineral reserves estimates
Economically recoverable ore reserves represent the
estimated quantity of product in an area of interest that can be expected to be profitably
extracted, processed and sold under current and foreseeable economic conditions. The determination of ore reserves includes estimates and
assumptions about a range of geological, technical and economic factors, including: quantities, grades, production techniques, recovery rates,
production costs, transport costs, commodity demand, commodity prices and exchange rates. Changes in ore reserves impact the assessment
of recoverability of exploration and evaluation assets, property, plant and equipment, the carrying amount of assets depreciated on a
units-of-production basis, provision for site rehabilitation and the recognition of deferred tax assets, including tax losses. The mineral reserve
is re-assessed annually. The Group estimates and reports mineral reserves in accordance with the principles and guidelines contained in the
South African Code for Reporting of Mineral Reserves of 2007, revised in 2016 (SAMREC 2016).
Judgements and estimates:
assessment of CGU
The Group’s main subsidiary, Tharisa Minerals Proprietary Limited (‘Tharisa Minerals’) is a vertically integrated operation.
The Group believes
that there is no active market for the run of mine ore (‘ROM’) mined at Tharisa Minerals due to the high volume being processed and as the
ROM is of a relative low grade compared to other deposits in the same region. Tharisa Minerals’ integrated processing plants are specifically
designed to treat the volume and low grade ROM. Tharisa Minerals produces PGMs and chrome concentrates on a co-product basis and the
operation is managed as a joint product mine. The Group therefore believes that the processing plants together with the mining assets are
dependent on each other in order to generate cash inflows.
The
Group therefore believes that the mining fleet and mining assets cannot generate cash inflows that are largely independent of
the cash
inflows from the processing plants and other assets or group of assets and as a result are not separate cash generating units. Consequently
the Group believes that the mining assets and the processing plants together represents the smallest identifiable Group of assets that
generates cash inflows largely independent from other assets and represents a single CGU.
Judgements and estimates: impairment of assets
Indicators for impairment on non
-
financial assets are assessed at each reporting period. Should an indication exist, individual assessments of
property, plant and equipment are performed based on the technica
l, economic an
d
business circumstances
.
Judgements and estimates: depreciation
Mi
ning assets and infrastructure are
depreciated using the units
-
of
-
production method. Management has elected to use the tonnes mined in
relation to tonnes proved and probable mineral reserve as an appropriate units-of-production depreciation method. Changes in the proved
and probable mineral reserve will impact the useful lives of the assets depreciated based on this method. The average remaining useful life
of the open
pit mine is estimated at 1
9
years
.
Re
fer to the Accounting Policies f
or the depreciation of the remaining assets.
Judgements and estimates: deferred stripping
IFRIC 20 requires that production stripping costs in a surface mine be
capitalised to non
-
current assets if, and only if, all of the following criteria
are met:
it is probable that the future economic benefit associated with the stripping activity will flow to the entity;
the entity can identify the component of the ore body for which access has been improved; and
t
he costs relating to the stripping activity associated with that component can be measured.
The Group uses a long
-
term life of opencast mine stripping ratio which consist
s
of actual historical numbers and forecast numbers. The
forecast numbers are updated annually according to the Reserve and Resource Statement. In the event that the actual stripping ratio exceeds
the life of mine stripping ratio, the actual weighted average stripping cost associated with the stripping ratio that is in excess of the life of mine
stripping ratio is deferred and capitalised to property, plant and equipment. Excess deferred stripping costs are only capitalised if it can be
reliably measured and
if the open pit is improved and
/or the ore body is
exposed for future benefit.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
84
15.
INTANGIBLE ASSETS
Accounting policy
Intangible assets acquired separately are measured on initial recognition at cost. Following initial recognition,
intangible assets are carried
at cost less any accumulated amortisation and accumulated impairment losses. The useful lives of intangible assets are assessed as either
finite or indefinite.
Intangible assets with indefinite useful lives are not
amortised, but are tested for impairment annually, either individually or at the cash
-
generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinite life continues to be
supportable. If not, the change in
useful life from indefinite to finite is made on a prospective basis.
Impairment of goodwill
The carrying amounts of the Group's non
-
financial assets, other than inventories and deferred tax assets, are reviewed at each reporting
date to
determine whether there is any indication of impairment.
For goodwill and intangible assets that have indefinite lives or are not yet available for use, the recoverable amount is est
imated annually
as
to
whether or not there is any indication of impairment.
For the purposes of goodwill impairment testing, goo
dwill acquired in a business combination is allocated to groups of CGUs that are expected
to benefit from the synergies of the combination.
An impairment loss in respect of goodwill is not reversed.
202
2
202
1
Goodwill
Intellectual
property
Total
Goodwill
Intellectual
property
Total
Goodwill: reconciliation of carrying
amount
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Cost
Balance at 1 October
2
883
311
3
194
1
344
311
1
655
Arisen during the year (note 3
1
)
-
-
-
1
392
-
1
392
Effect of movement in exchange rates
(249)
-
(249)
147
-
147
Balance at 30 September
2
634
311
2
945
2
883
311
3
194
Accumulated impairment losses
Balance at 1 October
252
-
252
228
-
228
Impairment
1
852
-
1
852
-
-
-
Effect of movement in exchange rates
(
99
)
-
(
99
)
24
-
24
Balance at 30 September
2 005
-
2 0
05
252
-
252
Carrying amount
629
311
940
2
631
311
2
942
The goodwill arose on the acquisitions of
Braeston Proprietary Limited, Arxo Logistics Proprietary Limited, MetQ Proprietary Limited and
Salene Chrome Zimbabwe (Private) Limited.
The goodwill relating to Braeston Proprietary Limited (US$0.1
million) was attributed to the synergies of operations at the Group’s head office
and established client and supplier relationships. The goodwill was allocated to the PGM and chrome operating segments.
The goodwill relating to Arxo Logistics
Proprietary Limited (US$0.
5
million) was attributed to supplier relationships specific to the transport and
sea freight industry and skills and knowledge of the workforce. The goodwill was allocated to the chrome operating segment.
The goodwill relating
to MetQ Proprietary Limited
(‘MetQ’)
(US$0.5 million)
wa
s attributed to technical expertise and the talent and skills of the
workforce, industry knowledge relating to the manufacture of the mining equipment and relationships with customers. The goodwill was
allocated to the chrome operating segment. The Group believes that an impairment indicator is present at 30 September 2022 on a CGU level
and the impairment loss allocated to the goodwill on the CGU amounted to US$0.5 million recognised in other operati
ng costs
(refer to note
1
4
).
The goodwill relating to Salene Chrome Zimbabwe (Private) Limited (US$1.4 million)
wa
s attributed to existing bilateral relationships with the
Government of Zimbabwe, supplier relationships and knowledge of the workforce. The goodwill was allocated to the chrome operating
segment. The Group believes that an impairment indicator exists at 30 September 2022 (refer to note 14 on a Salene Chrome CGU level and
the impairment loss allocated to the goodwill of the CGU amounted to US$1.4 million recognised in other operating costs.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
85
15.
INTANGIBLE ASSETS
(continued)
The goodwill is not tax deductible. The recoverable amount of
the remaining
goodwill was calculated based on the value in use of the operating
segment to which the goodwill was allocated and was higher than the carrying values, therefore, a reasonably possible adverse change in the
assumptions used would not likely result in an adjustment to the carrying values.
Judgements and estimates: allocation of goodwill
T
he Group believes that the mining assets and the processing plants together
represents the smallest identifiable Group of assets that
generates cash inflows largely independent from other assets and represents a single CGU, refer to note 14. IAS 36 does not prohibit entities
having a CGU larger than its operating segments. However, in such circumstances where a CGU is larger than its operating segments, goodwill
should be allocated and tested on an operating segment level. The Group has consequently allocated and tested the goodwill on an operating
segments
level
.
The recoverable amounts of the
operating segments
were determined based on discounted cash flows app
roved by management covering a
nineteen-year period, which represents the estimated opencast life of mine at 30 September 2022.
The cash flows were discounted using a
real discount rate of 12.6% (2021: 10.9%) for South African operations, an exchange rate of ZAR16.01
:US$1; (2021: ZAR15.205 US$1) spot
PGM basket price of US$2 224/oz (2021: US$3 230/oz), spot chrome concentrate prices of US$200/tonne
(2021: US$160/tonne) and a CIF
China logistics cost of US$98/tonne (2021:US$85/t). The discount rate used was a pre-tax
real rate and reflects specific risks relating to the
relevant operating segment. Cash flows are based on the life-of-
mine plan that takes into account proved and probable ore reserves and
appropriate capital expenditure estimates.
Intellectual property
The Group acquired certain intellectual property associated
with
the development and commercialisation of an electrical energy storage devi
c
e
suitable for large scale static applications and ultimately suitable for large scale usage of chrome concentrates. The
Group believes that
potential cash inflows resulting from the application of the intellectual property to the Group’s existing operational proces
ses and products will
exceed the carrying value and hence no impairment was recognised. At 30 September 2022 and 30 September 2021, the Group
remained to
assess
that
the intellectual property ha
s
an indefinite useful life.
16.
INVESTMENT ACCOUNTED FOR USING THE EQUITY METHOD
Accounting policy: Joint arrangements
The Group applies IFRS 11 to all
joint arrangements. Under IFRS 11, investments in joint arrangements are classified as either joint operations
or joint ventures depending on the contractual rights and obligations of each investor.
Accounting policy: Joint ventures
Joint
ventures are accounted for using the equity method. Under the equity method of accounting, interests in joint ventures are in
itially
recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses and movements in
other comprehensive income. When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture
(which includes any long-term interests that, in substance, form part of the Group’s net investment in the joint ventures), the Group
does not recognise further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent of the Gro
up’s interests in the
joint ventures. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Accounting policies of the joint ventures have been changed where necessary to ensure consistency with the policies adopted by the
Group. Joint ventures are accounted for at cost and are adjusted for impairments where appropriate. The Group considers whether the
carrying amount of the investment in joint venture should be impaired by comparing the recoverable amount to the carrying amount.
Any impairment losses are recognised in the statement of profit or loss.
The investment accounted for using the equity method represented the investment of 28.38% (2021: 26.8%) of the issued share c
apital of
Karo Mining Holdings plc (‘Karo Mining’), a company incorporated in Cyprus. Karo Mining’s principal place of business is in Cyprus. The
functional and presentation currency of Karo
Mining
and its subsidiaries is the US$.
As there were certain
contractual arrangements requiring decisions about the relevant activities to be unanimous consent, t
he Group
determined that a joint arrangement existed and consequently classified its investment in Karo Mining as a joint venture at 30 September 2021.
The Group accounts for joint ventures using the equity method in the consolidated financial statements.
Effective 7 February 2022, the Company acquired an additional 1.58% of the issued share capital of Karo Mining
increasing its shareholding
to 28.38% for a cash subscription of 22 new ordinary shares for US$5.0 million.
Effective 30 March 2022, the Company acquired a controlling interest in Karo Mining by increasing its shareholding to 66.34%
of the issued
share capital of Karo Mining. The additional 37.96% of the issued share capital of Karo Mining was acquired from the Leto Settlement, a
related party (refer to note 34) for a purchase consideration of US$29.4 million. The purchase consideration was settled through the issue of
13
693
000 new ordinary shares of the Company to the Leto Settlement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
86
16.
INVESTMENT ACCOUNTED FOR USING THE EQUITY METHOD
(continued)
The call option that existed at 30 September 2021 allowing the Company, at its election, to directly subscribe for shares in Karo Platinum
(Private) Limited (‘Karo Platinum’) (up to 40.0% of the issued share capital of Karo Platinum) by way of a farm-in agreement was restructured
on 30 March 2022 and replaced by the acquisition of the additional 37.96% in Karo Mining at a discount to the fair value (refer to note 18
and
31).
2022
2021
Investment in Karo Mining
US$’000
US$’000
Opening
balance
10 274
10
303
Interest capitalised
112
222
Share of total comprehensive loss
(
5 229
)
(251)
Additional investment
(1.58%)
4 965
-
Reclassification of
loan receivable to other financial assets
(8
466)
-
Carrying value
of pre
-
existing shareholding prior to the acquisition of controlling interest on
30
March 2022
1
656
10
274
Acquisition of
subsidiary (note
3
1)
(1
656)
-
Carrying value
-
10
274
Shares acquired
-
4
500
Loan advance
-
8
353
Total share of comprehensive loss from joint venture
-
(2
579)
Total investment
-
10
274
The Company provided funding of US$8.5 million (including accrued interest) (2021: US$8.4 million) to Karo Mining as a repayable debt
facility. The loan, subsequently transferred and held through a wholly-owned subsidiary Arxo Finance plc, was previously classified as part of
the investment in Karo Mining. At 30 March 2022 (acquisition date, refer to note 31), the Group reclassified the loan to other financial assets
and transferred the loan from Arxo Finance plc to the Company. Subsequent to the acquisition, the loan was eliminated on consolidation.
Effective 19 May 2022, Karo Mining converted the loan to ordinary shares and issued an additional 38 new ordinary shares to the Company
as consideration. The additional shares issued represented 1.21% of the issued share capital of Karo Mining which increased the Company’s
shareholding to
67
.
55
%.
2
02
2
2021
Summarised consolidated financ
ial
information of Karo Mining
US$’000
US$’000
Summarised statement of financial position
*
Non
-
current assets
1 659
207
Current assets
(excluding cash and cash equivalents)
339
360
Cash and cash equivalents
4 984
54
Loan payable
(8
466
)
(8 353)
Other financial liabilities
(17
879)
-
Trade and other payables and income tax payable
(
3 741
)
(1
892)
Net deficit (100%)
(
23 104
)
(9
624)
Summarised statement of comprehensive income
*
Operating expenses
(
444
)
(696)
Option granted to NCI to call upon shares in
Karo Platinum (Private) Limited
(17
879)
-
Finance costs
(112)
(223)
Tax
(10)
(19)
Total comprehensive loss
(
18 445
)
(938)
Summarised statement of changes in equity*
Opening balance
(
9 624
)
(8 686
)
Shares issued during the period
4 965
-
Net loss for the period/year
(
18 445
)
(
938
)
Balance at the end of the period/year
(
23 104
)
(
9 624
)
*
Balances are reflected at 30 March 2022 immediately prior to the acquisition of a
controlling shareholding in Karo Mining.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
87
17.
GROUP COMPOSITION
Details of the subsidiaries including direct and indirect holdings are disclosed in note 1.
The Group holds 100% of the voting rights in all
subsidiaries apart from
Karo Mining Holdings plc (70.0% holding
)
.
The following table summarises the information relating to the Company's subsidiar
ies
with material non
-
controlling interest
, Tharisa Minerals
Proprietary Limited and Karo Mining Holdings plc and subsidiaries. Tharisa Minerals Proprietary Limited is 100.0% (2021: 74.0%) owned (refer
to note 24) while Karo Mining Holdings plc is 70.0% owned. Karo Mining Holdings plc owns 85.0% of the voting rights of Karo Platinum (Private)
Limited. The non-controlling interests of Karo Mining Holdings plc and subsidiaries and Tharisa Minerals Proprietary Limited before any
inter
-
group eliminations
were
:
Karo Mining
Holdings plc
Tharisa Minerals Proprietary
Limited
202
2
20
21
US$’000
US$’000
US$’000
Non
-
current assets
12
795
337
242
358
556
Current assets
13
782
242
046
208
938
Non
-
current liabilities
(16
779)
(382
713)
(393
304)
Current liabilities
(4
900)
(112
923)
(139 115)
Net assets
4
898
83
652
35 075
Carrying amount of non
-
controlling interest
1
389
-
9 120
Revenue
-
490
383
453
459
Net
(loss)/
profit after tax
and total comprehensive
(loss)/
income
(13
286)
64
912
149 068
Non
-
controlling interest in
(loss)/
profit
after tax
(338)
13 613
38 758
Cash flows from operating activities
32
143
743
180 172
Cash flows from investing activities
(12
629)
(93
865)
(94
486)
Cash flows from financing activities
25
097
(70
393)
(70 986)
Net change in cash and cash equivalents
12
500
(20
515)
14
700
Tharisa Minerals Proprietary Limited, declared and paid an ordinary dividend of US
$2.7
million (2021: US$4.2
million) during the year ended
30 September 2022 and prior to the acquisition of the non-controlling interest. The dividend paid to non-controlling shareholders amounted
to US
0.2
million (2021: US$1.1 million).
Judgement
s
and esti
mates: assessment of intergroup loans as net investments in foreign operations
Settlement of certain intergroup loans to South African entities denominated in US$ is neither planned nor likely to occur in
the foreseeable
future and the loans are therefore considered to be in substance part of the Group’s net investment in the foreign operations. The exchange
differences arising on these loans are recognised in the Group’s other comprehensive income and reclassified from equity to profit or loss on
disposal
of the net investment.
18.
FINANCIAL AND
OTHER ASSETS
Accounting policy
Measurement: Financial assets at amortised cost
Financial assets at amortised cost are initially recognised at fair value, and subsequently carried at amortised cost less an
y
allowance for
impairment.
Measurement: Financial assets at fair value through profit or loss
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characte
ristics and the Group’s
business model for managing them.
Financial assets carried at fair value through profit or loss are initially recorded at fair value and transaction costs are
expensed in the
statement of profit or loss. Realised and unrealised gains and losses arising from changes in the fair value of the financial assets held at fair
value through profit or loss are included in the statement of profit or loss in the period in which they arise.
Derecognition: Financial assets
The Group derecognises financial assets only when the contractual
rights to cash flows from the financial assets expire, or when it transfers
the financial assets and substantially all the associated risks and rewards of ownership to another entity. Gains and losses on derecognition
are generally recognised in the statem
ent of profit or loss
.
Hedge accounting
The Group does not apply hedge accounting.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
88
18.
FINANCIAL
AND OTHER
ASSETS
(continued)
Accounting policy: Impairment
Financial asset at amortised cost
In order for a financial asset to be classified and
measured at amortised cost, it needs to give rise to cash flows that are ‘solely payments of
principal and interest’ (‘SPPI’) on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an
instrument level.
T
he Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate ca
sh flows. The
business model determines whether cash flows will result from collecting contractual cash flows, selling the financia
l assets, or both.
Impairment requirements are based on expected credit losses (expected credit loss model). Expected credit losses (‘ECLs’) are
an estimate
of credit losses over the life of a financial instrument and are recognised as a loss allowance or provision. The amount of ECLs to be
recognised depends on the extent of credit deterioration since initial recognition.
The Group applies the expected credit loss model to all debt instruments classified as measured at amortised cost, or at
fair value through
other comprehensive income, including lease receivables and contract assets.
The Group considers both approaches: the general approach and the simplified approach. For trade receivables (not subject to
provisional
pricing) due in less than 12 months, the group applies the simplified approach in calculating ECLs. Therefore, the Group does not track
changes in credit risk, but instead, recognises a loss allowance based on the financial asset’s lifetime ECL at each reporting date. The Group
considers its historical credit loss experience, adjusted for forward looking factors that could indicate impairments taking into account the
specific debtors and the economic environment.
The general approach requires the assessment of
financial assets to be split into 3 stages:
Stage 1: no significant deterioration in credit quality. This identifies financial assets as having a low credit risk, and th
e asset is considered
to be performing as anticipated. At this stage, a 12 month expec
ted credit loss assessment is required.
Stage 2: significant deterioration in credit quality of the financial asset but no indication of a credit loss event. This st
age identifies assets as
under
-
performing. Lifetime expected credit losses are
required to be assessed.
Stage 3: clear and objective evidence of impairment is present. This stage identifies assets as non
-
performing financial instruments. Lifetime
expected credit losses are required to be assessed
.
Once a default has occurred, i
t is considered a deterioration of credit risk and therefore an increase in the credit risk.
The Group considers a wide variety of indicators when assessing the increase in credit risk as well as the probability of the
default happening
for impairment purposes. Some indicators considered include: Significant changes in the expected performance and behaviour of the debtor;
past due information; significant changes in external market indicators including market information related to the debtor, existing or forecast
adverse changes in business, financial or economic conditions; an actual or expected significant adverse change in the regulatory, economic,
or technological environment; actual or expected significant internal credit rating downgrade or decrease; actual or expected significant
change in the operating results of the debtor.
The expected credit loss value is determined as the estimated cash shortfall that would be incurred, multiplied by the probab
ility of the default
occurring
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
89
18.
FINANCIAL
AND OTHER
ASSETS
(continued)
202
2
20
2
1
Non
-
current assets
Fair value
hierarchy
US$’000
US$’000
Financial assets
Investments in money markets, current accounts, cash funds and income funds
Level 2
6
019
7
702
Right to
acquire shares in Karo Platinum (Private) Limited
Level
3
-
5 870
Other assets
Prepaid investment in Karo Platinum (Private) Limited
Amortised cost
-
2
282
6
019
15 854
Current assets
Financial assets
PGM d
iscount
facility
hedging derivative
Level
2
-
3
023
Investments in equity instruments
Level 1
19
18
19
3
041
The carrying amounts of other non
-
current and current assets carried at amortised cost approximate its fair value.
Investments in
money markets, current accounts, cash fun
ds and income funds
Investment in money market and current accounts
totalling US$
5
.3 million (
20
2
1
: US$
6
.3
million) is managed by Centriq Insurance Company
Limited (‘Centriq’). The investment serves as security for the guarantee issued by Centriq to the Department of Mineral Resources and Energy
for the rehabilitation provision. The guarantee issued by Centriq
has a fixed cover period
from 1 December 2020 to 30 November 2023.
Investment in cash funds and income
funds of US$
0
.
7
million
(20
2
1
: US$1.
4
million) managed by Stanlib Collective Investments. The
investment is ceded to Lombard Insurance Group (‘Lombard’) against a US$0.7 million (ZAR12.0 million) (2021: US$0.8 million
(ZAR12.0 million)) guarantee issued by Lombard on behalf of Arxo Logistics Proprietary Limited to Transnet Freight Rail, a division of Transnet
SOC Limited.
These investments are separately administered and the Group’s right of access to these funds is restricted.
The investments in cash funds and income funds are held at fair value through profit or loss (designated). The underlying inv
estments are in
mon
ey market and other funds and the fair value has been determined by reference to their quoted prices.
Right to acquire shares in Karo Platinum (Private) Limited (‘Karo Platinum’) and p
repaid investment in
Karo Platinum
The Company was granted
an
option
to acquire up to 40% of the issued share capital of Karo Platinum, a company incorporated in Zimbabwe,
at a discount to the market value. The asset represented the fair value gain (50% discount to the market value as the project was at a measured
resource and
reserve stage) of the discount to
the purchase
price
.
As part of the evaluation of the right to acquire shares in Karo Platinum, the Company incurred exploration and evaluation co
sts which were
capitalised
as a prepaid investment in Karo Platinum
.
Effective 30 March 2022, the
option
to acquire shares in Karo Platinum was
restructured and
replaced by an agreement whereby the Company
acquired a controlling interest in Karo Mining Holdings plc (‘Karo Mining’) at a discount to the fair value (refer to notes 16 and 31) which gave
rise to a bargain purchase. Karo Mining (a company incorporated in Cyprus), owns 100% of the issued share capital of Karo Zimbabwe
Holdings (Private) Limited which prior to the acquisition held 100% of the issued share capital of Karo Platinum. Refer to note 31 for Karo
Mining’s list of subsidiaries at 30 September 2022. During the year ended 30 September 2022, the right to acquire shares in Karo Platinum
was derecognised through profit or loss and the prepaid investment in Karo Platinum was capitalised to the cost of the investment in Karo
Mining
subsidiary in the Compa
ny’s separate financial statements
.
PGM discount facility hedging derivative
Refer to note
27
.
Investments in equity instruments
–
fair value through profit or loss
Investments at fair value through profit or loss are valued based on
quoted market prices at the end of the reporting period without any
deduction for transaction costs. The investment represents shares in the Bank of Cyprus Public Co Limited.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
90
19.
DEFERRED TAX
20
2
2
20
2
1
US$’000
US$’000
Deferred tax
assets
1
174
1
177
Deferred tax liabilities
(112
3
41
)
(87
565)
Net deferred tax liability
(111
1
67
)
(86
388)
Deferred tax assets
Property, plant and equipment
(68)
(4)
Tax losses not utilised
335
-
Provisions an
d
a
ccrued leave
36
6
246
Share
-
based payments
459
684
Other
82
251
1
174
1
177
Deferred tax liabilities
Property, plant and equipment
(115
5
37
)
(93
767)
Tax losses not utilised
-
128
Provisions
and accrued leave
5 401
6 907
Share
-
based payments
181
365
Dividend withholding tax
(
124
)
(2
068)
D
ividend withholding ta
x
-
unremitted distributable reserves of foreign subsidiaries
(2
805)
-
Exchange losses
59
681
Other
484
189
(112
341)
(87 565)
Reconciliation of deferred tax
liability
Balance at the beginning of the year
(86
388)
(37
962)
Business combination
(note 31)
(30
263)
-
Temporary differences recognised in profit or loss in relation to:
Change in RSA tax rate
3
333
-
Capital allowances on
property, plant and equipment
(11
352)
(39
749)
Provisions
and accrued leave
(431)
1 116
Tax losses utilised/available for future set off against profits
645
195
Currency losses
(558)
(3 988)
Share
-
based payments
(358)
(259)
Dividend withholding tax
1
945
(2
068)
D
ividend withholding ta
x
-
unremitted distributable reserves of foreign subsidiaries
(2
805)
-
Other
(318)
(331)
(9
899)
(45 084)
Exchange differences
15
383
(3
342)
Balance at the end of
the year
(111
167)
(86 388)
Amounts recognised in:
Profit and loss (refer
to note 12)
(9
899)
(44 814)
Deferred tax assets and deferred tax liabilities are not offset unless the Group has a legally enforceable right to offset su
ch
assets and liabilities.
All of the above amounts have used the currently enacted income taxation rates of the respective tax jurisdictions the Group operates in.
South African taxation losses normally expire within 12 months of the respective entities not trading. The deductible temporary timing
differences do not expire under current taxation legislation. Deferred tax assets have only been recognised in terms of these items when it is
probable that taxable profit will be available in the immed
iate future against which the respective entities can utilise the benefits therefrom.
The estimates used to assess the recoverability of recognised deferred tax assets include a forecast of the future taxable income and future
cash flow projections base
d on a three
-
year period.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
91
20.
INVENTORIES
Accounting policy
Inventories comprising PGM and chrome concentrates, ore stockpiled, in
-
process metal contained in ore and consumable items are measured
at the lower of cost and net realisable value. The cost is determined using the weighted average method and includes direct mining expenditure
and an appropriate portion of overhead expenditure. Net realisable value is the estimated selling price in the ordinary course of business, less
the estimated costs of completion and costs to sell. Obsolete, redundant and slow-moving inventories are identified and written down to net
realisable value.
202
2
20
2
1
US$’000
US$’000
Finished products
3
1
778
15
972
Ore stockpile
19
939
17 553
Consumables
25
085
25
533
7
6
802
59
058
N
et realisable value write down
(3 562)
(789)
Total carrying amount
7
3 240
58
269
Inventories are stated at the lower of cost or net realisable value.
Low
-
grade chrome concentrates to the value
of US$
1
.
6
million
(2021: US$1.2
million) are carried at the realisable value after a net realisable value write down of US$0.7 million (2021: US$0.1 million). The net realisable
write down was allocated to the chrome segment.
Certain PGM finished products were provided for in full
to the value of
US$
2.0
million (2021: US$0.7 million)
. The provision w
as
allocated to
the PGM segment.
In addition, certain consumables and spares were provided for during the year ended 30 September
2022 as
their
operational use became
doubtful. The provision to the value of US$0.9 million (2021: no provision) is allocated 70.0% and 30.0% to the PGM and chrome
operating segments respectively.
Judgement and estimates: net realisable value and measurement of inventories
Net realisable value tests are performed at least
quarterly
based on the estimated future sales price of the products based on prevailing metal
prices, less estimated costs to complete production and bring the product to sale. The nature of the net realisable value test inherently limits
the ability to precisely monitor recoverability levels and may result in additional write
-
downs of inventories in future periods.
The prevailing PGM basket price and chrome concentrate prices as at 30 September 20
22
were used as estimated selling prices less forecast
selling costs to determine the net realisable value of the Group’s inventories. At 30 September 2022, except for certain PGM finished products
and low
-
grade chrome concentrates,
the calculated net realis
able values exceeded the cost of inventories.
Below the prices and exchange rate used to determine the net realisable value of inventories:
202
2
20
21
Platinum
US$/oz
878
976
Palladium
US$/oz
2
113
2
121
Rhodium
US$/oz
13
709
13
380
Gold
US$/oz
1
684
1
779
Ruthenium
US$/oz
440
567
Iridium
US$/oz
3
638
4
105
Metallurgical chrome concentrate
US$/tonne
209
160
US$: ZAR e
xchange rate
17.57
14.55
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
92
21.
TRADE AND OTHER RECEIVABLES
Accounting policy
Trade and other receivables, excluding
the PGM discounting receivable
, prepayments
,
deposits and
value added tax, are non
-
derivative
financial assets categorised as financial assets measured at amortised cost.
The
se
non
-
derivative financial assets are initially recognised at fair value and subsequently carried at amortised cost less allowance
for
impairment. Estimates made for impairment are based on a review of all outstanding amounts at year end in line with the impairment policy
described in note 1
8
. Irrecoverable
amounts are written off during the period in which they are identified.
The Group entered into offtake agreements in terms of which the concentrate of the Platinum Group Metals (PGMs) is treated by
the offtake
parties. The PGM discounting receivable is measured at fair value through profit or loss from the date of recognition up to date of settlement,
as it fails the IFRS 9 amortised cost requirement of cash flows representing solely payment of principal and interest. Payment is due on the
last day of the fourth month following delivery.
The fair value changes due to non
-
market variability (that is, changes based on quantity and quality of the contained metal) are considered to
be variable consideration within the scope of IFRS 15 as the Group's right to consideration is contingent upon the physical attributes of the
contained metal. Therefore, the variable consideration is considered to be constrained. At each subsequent reporting date the receivable is
restated to reflect the fair value movements (market variability) in the pricing mechanism which are recognised in revenue. Foreign exchange
movements subsequent to the recognition of a sale are recognised as a foreign exchange gain or loss i
n profit or loss.
202
2
20
2
1
US$’000
US$’000
Trade receivables
54 925
33 596
PGM
discounting
receivable
76 750
77 286
Total trade receivables
131
675
110
882
Other receivables
–
related parties (
refer to note 3
4
)
57
1
951
Deposits, prepayments and other receivables
4
34
2
8
901
Accrued income
4
660
2
902
Value added tax receivable (VAT)
8
935
11
918
149
669
136
554
The Group has entered into a limited recourse disclosed receivables discounting agreement in respect of part of the
PGM discounting
receivable, specifically in terms of which 98.0% of the sales value of platinum, palladium and gold (included in PGM) and 45% of the sales
value of rhodium are discounted at US Libor plus 290 basis points (2021: US Libor plus 302 points). The facility is for US$33.0 million (2021:
US$33.0 million). The receivable from these elements is sold at the determination of the Group to a consortium of banks on a limited recourse
basis. The Group is entitled to the receivables from the undiscounted elements and assumes the counterpart credit risk in respect of the
receivable of these elements
.
The receivable in respect of the discounting, together with
the fluctuation in the associated
PGM commodity price
, is ceded to the banks (refer
to the PGM discount facility hedging derivative: note 27). As the discounting is with limited recourse, the banks assume the counterpart credit
risk, fair value pricing movements of quoted PGM market prices, as well as the realisation of the related PGM commodity price and therefore
the amount of the disposed discounted PGM receivable is not reflected as an amount payable on the statement of financial position of the
Group.
The Group’s continuing involvement within the derecognised PGM discounting receivable represents the Group’s retained
exposure
to the fair
value movements of quoted PGM market prices above or below the original proceeds of the disposed discounted PGM receivable and is
included
and disclosed
as
part of the
PGM discounting receivable
balance
.
Due to the limited recourse disclosed receivables discounting agreement with the consortium of banks, the Group is required t
o enter into a
derivative to hedge the related PGM commodity price exposure upon the disposal and discounting of the PGM discounting receivable. The
Group’s retained exposure to upward or downward fair value movements within quoted PGM market prices is neutralised by the equal and
opposite fair value movement within the hedging derivative. The fair value movements from the hedging derivative is presented on the Group’s
statement of financial position as the
PGM discount facility hedging derivative
within
note 27.
202
2
20
2
1
US$’000
US$’000
Proceeds from discounting and disposing of the
PGM discount facility hedging derivative
(5
267)
(22
648)
T
he impact on the Group’s income statement as a result of its continuous involvement
is:
PGM discounting
receivable (note 5)
174
(4
615)
PGM discount facility hedging derivative
(note
27
)
(174)
4
615
Net effect in statement of profit or loss
-
-
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
93
21.
TRADE AND OTHER RECEIVABLES
(continued)
The following table summarises the effect on the Group’s statement of
financial position and maximum exposure to risk as a result of its
continuous involvement:
30 September 202
2
30 September 202
1
Carrying
amount of
continuing
involvement
US$'000
Fair value of
continuing
involvement
US$'000
Maximum
exposure
to loss
US$'000
Carrying
amount of
continuing
involvement
US$'000
Fair value of
continuing
involvement
US$'000
Maximum
exposure
to loss
US$'000
PGM discounting receivable
337
337
337
(3
023)
(3
023)
(3
023)
PGM discount facility hedging
derivative
(note
27
)
(337)
(337)
(337)
3
023
3
023
3
023
Net effect
-
-
-
-
-
-
Trade and other receivables of the Group are expected to be recoverable within one year from each reporting date. Trade recei
vables are
unsecured, non-interest bearing and payment terms vary from 0 to 120 days (2021: 0 to 120 days). An expected credit loss allowance of
US$0.1 million was recognised in profit and loss during the year ended 30 September 2022 (2021: US$0.1 million). The expected credit loss
allowance relates to the manufacturing segment, is customer specific and is based on the respective customer’s observable current financial
position. Refer to note 3
3
for the fair value and financial risk disclosure.
The fair value of trade and
other receivables measured at amortised cost approximate the carrying amount due to the short
-
term maturity. The
fair value of the PGM discounting receivable is determined on ruling quoted market prices and exchange rates (refer to note 3
3
).
The table below summarises the maturity of trade receivables:
202
2
20
21
US$’000
US$’000
Current
130
916
109
986
Less than 90 days past due but not impaired
390
53
Greater than 90 days past due but not impaired
369
843
131
675
110
882
The credit exposure of trade receivables by country is as follows:
South Africa
108
378
93
139
China
6
163
5
923
Hong Kong
12
264
297
Singapore
4
310
9
827
Australia
-
1
696
United Arab Emirates
560
-
131
675
110
882
The foreign currency balances, translated to US$ included in trade receivables were as follows:
ZAR’000
4
125
7
383
US$’000
127
550
103
499
At 30
Septe
mber 202
2
, the
Group had certain
unresolved tax matters. Included in the
VAT receivable, is an amount of US$
4.6
million (ZAR82.3
million) (2021: US$5.5 million (ZAR82.3 million)) which relates to diesel rebates receivable from the South African Revenue Service (‘SARS’)
in respect of the mining operations. SARS rejected diesel claims relating to the periods from September 2011 to April 2017 (US$3.0 million)
and May 2017 to February
2018
(US$1.
6
million)
.
Judgements and estimates: expected credit losses (‘ECL’)
The Group applies a simplified approach to measure the loss allowance for trade receivables classified at amortised cost, usi
ng the lifetime
expected loss provision. The expected credit loss on trade receivables is estimated using a provision matrix by reference to past default
experience and credit rating if available, adjusted as appropriate for current observable data.
The customer base of the Group consists of a limited number of premium customers of high credit quality and no historical
defaults, with
relationships that have been established over many years. The sale of products typically is of a high quantity and consequently high value.
The Group’s policy and preference is to sell products in large quantities to only established premium customers. The Group believes that this
policy reduces the overall group credit risk.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
94
21.
TRADE AND OTHER RECEIVABLES
(continued)
Judgements and estimates: expect
ed credit losses (continued)
PGM concentrate is sold in terms of off
-
take
agreements
to a limited number of clients
. The following entity
-
specific observable data
was
considered for each of the PGM customers:
An assessment of the accessibility and transparency of the business relationship with the customer, with
specific reference to how
differences (if any) in assayed results had been resolved and whether any requests to amend contractual terms had been receiv
ed;
The payment history and history of credit limits granted;
A general assessment of the bi
-
annual fin
ancial statements with specific reference to cash flow information, servicing of outstanding
debt and outstanding commitments;
A general review of the quarterly production and operational information; and
An assessment of the reputation of the customer a
cross the mining industry.
Due to the contractual payment terms for the sale of the PGM concentrates,
the Group
has a disclosed limited recourse receivables discounting
facility in place where the platinum, palladium, gold and the rhodium receivables, are sold to banks on a limited recourse basis with the banks
assuming the counterpart
y
credit risk.
The majority
of chrome concentrates are exported from South Africa.
F
or export chrome concentrate transactions, payment terms vary from
30 days to 90 days, however, the Group obtains letters of credit from reputable financial institutions before shipment occurs. The Group only
accepts letters of credit from financial institutions that are approved by the Group’s financiers. Before entering into an export chrome
concentrate sale agreement, the Group ensures that the customer/potential customer is able to provide a letter of credit from such an
acceptable financial institution.
The Group also sells chrome concentrates locally. The following entity
-
specific observable data was considered for local customers:
An assessment of the accessibility and transparency of the business relationship with the customer, with specific reference to the
manner how differences (if any) in results and quantities delivered were resolved and whether any requests to amend contractual
terms had been received;
The paymen
t history and record of the credit limit granted;
A comparison between the Group’s balance owing in terms of the unsecured loan financing and the credit provided to the customer;
and
An assessment of the reputation of the customer across the mining indus
try.
The following entity
-
specific forward looking information was considered in estimating the ECL allowance:
PGM pricing forecast and global supply and demand;
Chrome supply and demand through the value chain i.e. to stainless steel production and general state of growth in the global
economy;
Chinese chrome port stocks;
Banks credit ratings and inflation;
Trade facilities available to the Group;
and
For chrome concentrate sales the
rail and port infrastructure.
For
customers of the manufacturing operating segment, a combination of the aforementioned considerations are taken into account t
o estimate
the ECL allowance.
Based on aforementioned information, available credit quality information of clients and client’s past default experience,
the Group recognised
an expected credit loss
allowance of US$
0.1
million at 30 Sep
tember 202
2
(20
2
1
:
US$0.1 million
)
.
22.
CONTRACT ASSETS
Accounting policy
Contract assets
are non
-
derivative financial assets categorised as
other
financial assets
recognised and
measured at
the amount of
consideration the Group is contractually entitled to in exchange for the transfer of goods and services. Timing of revenue recognition may
differ from the timing of invoicing to customers. The Group records a contract asset in the statement of financial position, when goods or
services have been transferred to a customer before
the customer pays the consideration or before payment is due.
202
2
20
2
1
US$’000
US$’000
Freight services
2
078
2
440
The balance represents prepaid freight costs
and will be recognised in cost of sales upon completion of the performance obligations
.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
95
23.
CASH AND CASH EQUIVALENTS
Accounting policy
Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other
financial institutions, and short
-
term,
highly liquid investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in
value, having been within three months of maturity at acquisition.
202
2
20
21
US$’000
US$’000
Bank balances
106
873
72
945
Short
-
term bank deposits
and money market investments
36
427
10
491
143
300
83
436
The credit exposure by country is as follows:
South Africa
58
192
55
669
Hong Kong
38
261
18
831
Mauritius
20
301
1
017
United Kingdom
586
2
338
Zimbabwe
2
74
5
1
385
Cyprus
23
059
3
872
Other countries
156
324
143
300
83
436
The credit exposure by bank
and credit ratings are
as follows:
Nedbank
BB
-
37
1
0
8
42
597
HSBC
A+
38
275
18
841
Bank of China
A
3
700
6
350
Bank of Cyprus
B
-
23
059
3
872
Citibank
A
3
324
4
409
Stanlib Corporate Money Market
AA+
17
249
5
748
Absa
BB
-
20
436
1
272
Other
A to BB
-
1
4
9
347
143
300
83
436
The
amounts reflected approximate fair value.
Cash at banks earns interest at floating rates based on daily bank deposit rates. Short
-
term deposits are generally call deposit accounts and
earn interest at the respective short
-
term deposit rates.
At 30
September 202
2
, an
amount of US$
2.1
million (202
1
: US$
1
.
0
million) was provided as security for a bank guarantee issued in favour of
a trade creditor of a subsidiary of the Group and US$0.3 million (2021: US$0.3 million) was provided as security against certain credit facilities
of the Group.
24.
SHARE CAPITAL AND RESERVES
Accounting policy
: share capital
The share capital is stated at nominal value. The difference between the fair value of the consideration received by the Comp
any and the
nominal value of the share capital being issued is taken to the share premium account. Incremental costs directly attributable to the issue of
ordinary shares are recognised as a deduction from equity, net of any tax effects.
When share options are exer
cised, the Company issues new shares or issues shares from the treasury shares. The proceeds received net
of any directly attributable transaction costs are credited to share capital and share premium.
Accounting policy: n
on
-
controlling interest
Non
-
controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the date of the
acquisition.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control, are accounted for as equity t
ransactions.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
96
24.
SHARE CAPITAL AND RESERVES
(continued)
Share capital
30 September 202
2
30 September 20
2
1
Number of
Shares
US$’000
Number of
Shares
US$’000
Authorised
–
ordinary shares of US$0.001 each
As at 30 September
10
000
000 000
10 000
10
000 000 000
10
000
Authorised
–
convertible redeemable preference
shares of US$1 each
As at 30 September
1 051
1
1 051
1
Issued
Ordinary shares
Balance at the beginning of the year
275
000
000
27
5
27
5
000
000
27
5
Issued
during the year
27
596 743
28
-
-
Balance at the end of the year
302
596 743
303
275
000
000
275
Treasury shares
Balance at the beginning of the year
3
715 621
4
6
523
686
6
Transferred as part of management share award plans
(
865 243
)
(
1
)
(
2
808 065
)
(2)
Balance at the end of the year
2
850 378
3
3
715 621
4
Issued and fully paid
2
99
746 365
300
2
71
284
379
2
71
Share premium
Balance at the
beginning of the year
2
71
284 379
289
547
268
476
314
286
660
Shares issued
2
8
461 986
56
050
2
808
065
2
887
Balance at the end of the year
2
99
746 365
345
597
271
284
379
289
547
Total share capital and premium
345
897
289
818
Share capital
During the year ended 30 September 2022, the Company issued 13
693
000
ordinary shares
to The Leto Settlement, a related party, as
consideration for the controlling interest in Karo Mining Holdings plc (refer to note 31). In addition, the Company issued 10 695 187 and
3 208 556 ordinary shares to Thari Resources Proprietary Limited and The Tharisa Community Trust respectively, both related parties, as
consideration for the acquisition of the non
-
controlling interest in Tharisa Minerals Proprietary Limited.
During the year ended 30 September 202
2
,
865 243
(20
21
:
2
808 065
) ordinary shares were transferred from treasury shares to satisfy the
vesting/
exercise of
Conditional Awards and Appreciation Rights
by the participants of the Tharisa Share Award Plan.
At 30 September 2022
,
2
850 378
(20
21
:
3
715 621
) ordinary shares
were held in treasury.
All shares rank equally with regard to the Company
’
s residual assets. The holders of ordinary shares, other than treasury shares, are entitled
to receive dividends as declared from time to time and are entitled to one vote per
share at meetings of the Company.
Share premium
The share premium represents the excess of the issue price of ordinary shares over their nominal value, to the extent that it
is registered at
the Registrar of Companies in Cyprus, less share issue costs.
The share premium is not distributable for dividend purposes.
During the years ended 30 September 202
2
and 30 September 20
21
, the increases in the share premium account related to the issue and
allotment of ordinary shares granted.
Other
reserve
Other reserve represents the excess of the issue price of the Company’s ordinary shares over the sum of their nominal value a
nd share
premium arising from such issuance, as registered with the Registrar of Companies in Cyprus.
Foreign currency
translation reserve
The foreign currency translation reserve comprises all foreign currency differences arising from the translation of the finan
cial statements of
foreign operations with a functional currency other than US$ and foreign currency differences relating to translation of intergroup loans and
funding arrangements which are considered to be part of the Company’s net investment in a foreign operation.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
97
24.
SHARE CAPITAL AND RESERVES
(continued)
Retained earnings
The retained
earnings includes the accumulated retained profits and lo
sses of the Group and the share
-
based payment reserve. Retained
earnings are distributable for dividend purposes.
Capital management
The Group
’
s target is to maintain a strong capital base so as
to maintain investor, creditor and market confidence and to sustain future
development of the business in a way that optimises the cost of capital and matches the current strategic business plan. The Board of Directors
monitors both the demographic spread of shareholders, as well as the return on capital. Capital is defined as equity attributable to owners of
the Company. Management is aware of the risks associated to capital management. Capital needs are monitored on a regular basis and
whenever needed man
agement takes steps in an attempt to effectively manage any corresponding risks.
Non
-
controlling interests
Non
-
controlling interests
at 30 September 2022
comprise amounts attributable to
the Government of Zimbabwe for its 15% share in Karo
Platinum (Private) Limited as well as amounts attributable to the Leto Settlement for its 30% share in Karo Mining Holdings p
lc.
Non
-
controlling interests
at 30 September 2021
comprise
d
amounts attributable to Black Economic Empowerment shareholders in South
Africa for their respective shareholding in the ordinary shares of Tharisa Minerals Proprietary Limited together with associated foreign
exchange translations.
The non
-
controllin
g interest share of total comprehensive income
for the year
amounts
to US$
9
.
5
million
(2021:
US$
38.5
million).
Acquisition of non
-
controlling interest of Tharisa Minerals (Proprietary) Limited
Effective 16 February 2022
, the Company acquired 20.0% of the issued share capital of
Tharisa Minerals (Proprietary) Limited
(‘Tharisa
Minerals’) for a purchase consideration of US$19.9 million (ZAR300.0 million) from Thari Resources Proprietary Limited, a related party (refer
to note 34). The purchase consideration was settled through the issue of 10 695 187 new ordinary shares in the Company. Post the acquisition,
t
he Company own
ed
9
4
.0
% of the issued ordin
ary shares of Tharisa Minerals.
On 20 May 2022,
the Company
purchase
d
th
e
remaining
6
.0
%
of the issued
ordinary shareholding
of
Tharisa Minerals
from the
Tharisa
Community Trust for a purchase consideration of US$5.7 million (ZAR90.0 million) with the purchase consideration being settled through the
issue of 3 208 556 new
ordinary shares in the Company
.
202
2
US$’000
Shares issued as consideration
25
627
Reduction in non
-
controlling interest
(
16 473
)
Reduction to equity attributable to ordinary shareholders
9
154
Increase in shareholding in Karo Mining
Holdings
plc
(‘Karo Mining’)
The Company acquired the controlling interest in Karo Mining at 30 March 2022 (refer to note
31
)
increasing its shareholding to 66.34%
.
Subsequent to the acquisition, the Company subscribed for additional new shares issued by Karo Mining, increasing its shareholding to 70.0%
at 30
September 2022
(refer to note 31)
.
202
2
US$’000
Consideration for additional
new
share
s issued by Karo Mining
-
Reduction in
non
-
controlling interest
(4
509)
Increase to equity attributable to ordinary shareholders
4
509
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
98
25.
PROVISIONS
Accounting policy
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past
events where it is probable that
an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the
obligation can be made. 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 the risks specific to the liability.
Long
-
term environmental obligations are based on the Group
’
s environmental management plans, in
compliance with the current
environmental and regulatory requirements.
Where it is not possible that an outflow of economic benefits will be required, or the amount cannot be estimated reliably, t
he obligation is
disclosed as a contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will
only be confirmed by the occurrence or non-occurrence of one or more future events are disclosed as contingent liabilities unless the
pr
obability of outflow of economic benefits is remote.
Rehabilitation costs
The net present value of estimated future costs for mine closure and rehabilitation is recognised and provided for in the con
solidated financial
statements and capitalised within mining assets on initial recognition. Rehabilitation will generally occur on closure or after closure of a mine.
Initial recognition of the provision is at the time that the disturbance occurs and thereafter as and when additional distur
bances take place.
The estimates are reviewed bi
-
annually to take into account the effects of inflation and changes in estimates and are discounted using rates
that reflect the time value of money. Bi-annual increases in the provision due to the passage of time are recognised in profit or loss as an
unwinding of the value of the provision expense. The present value of additional disturbances and changes in the estimate of the rehabilitation
liability is recognised in mining assets as a direct cost against an increase in the rehabilitation provision. The rehabilitation asset is depreciated
as per the Group’s accounting policy on depreciation. Rehabilitation projects undertaken, included in the estimates, are charged to the
provision as incurred.
Costs for restoration and rehabilitation which are created on an ongoing basis during production of inventories are provided
for at their net
present values and included as part of inventory costs. Environmental liabilities, other than rehabilitation costs, which relate to liabilities
arising from specific events, are recognised in the consolidated statement of financial position when they are known, probable and may be
reasonably estimated.
Gains or losses from the expected disposal of assets are not
taken into account when determining the provision.
The Group has a legal obligation to rehabilitate the mining area, once the mining operations cease. The provision has been ca
lculated based
on total estimated rehabilitation costs, discounted back to their present values. The pre-tax discount rates are adjusted annually and reflect
current market assessments. These costs are expected to be utilised mostly towards the end of the life of mine and associated infrastructure.
The provision is determined using commercial closure cost assessments and not the inflation adjusted Department of Mineral Resources and
Energy
published rates.
20
22
20
21
Provision for rehabilitation
Restoration
Decommis
-
sioning
Total
provision
Restoration
Decommis
-
sioning
Total
provision
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Opening balance
13
737
6
194
19
931
6
181
8
503
14
684
Recognised in profit and loss
(6
071
)
-
(6
071
)
6
333
-
6
333
Capitalised/(reversal) to mining
assets and infrastructure
-
(
622
)
(
622
)
-
(4
182)
(4
182)
Unwinding of
discount (note 10)
1
197
543
1
740
649
893
1
542
Exchange differences
(1 673)
(929)
(2
602)
574
980
1
554
Closing balance
7
190
5 186
1
2
376
13
737
6
194
19
931
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
99
25.
PROVISIONS
(continued)
The table below illustrates the movement in the provision as a result of mining operations
and
changes in variables
.
30 September 202
2
Opening
balance
US$’000
Mining
operations
US$’000
Changes in
variables/
estimates
US$’000
Exchange
differences
US$’000
Closing
Balance
US$’000
Provision for restoration
13
737
918
(
5 792
)
(1
673)
7
190
Provision for decommissioning
6
194
1 132
(
1 211
)
(929)
5 186
19
931
2
050
(
7 003
)
(2
602)
1
2 376
30 September 20
2
1
Provision for restoration
6
181
3
049
3
933
574
13
737
Provision for decommissioning
8
503
1
119
(4
408)
980
6
194
14
684
4
168
(475)
1
554
19
931
The current estimated rehabilitation cost to be incurred taking escalation factors into
account is
US$
41.3
million (ZAR
745.9
million
) (
202
1
:
US$60.5 million (ZAR911.1 million)). The estimate was calculated by an independent external expert. The change is due to the changes in
future inflation and discount rates, the considerations of the closure objectives as set out in the Environmental Management Plan and what is
most likely to occur as these impacts are being reconsidered, and then also the expected timing of performing this work which is driven to a
large extent by the most likely life of mine. Refer
to note 3
5
.
The current estimated rehabilitation cost is projected to a future value based on
a weighted average long
-
term inflation rate of 6.8
1
% (202
1
:
6.87%). The net present value of the rehabilitation estimated future value is discounted based on a weighted avera
ge SWAP curve. The
calculated interest rate was 9.61% (2021: 9.64%).
An insurance company has provided a guarantee to the Department of Mineral Resources
and Energy to satisfy the legal requirements with respect to environmental rehabilitation and the Grou
p has pledged as collateral its investments
in interest
-
bearing instruments to the insurance company to support this guarantee.
Judgement and estimates: rehabilitation provision
The Group
’
s mining and exploration activities are subject to
various laws and regulations governing the protection of the environment. The
Group recognises management’s best estimate for asset retirement obligations in the period in which they are incurred. Actual costs incurred
in future periods can differ materially from these estimates. Additionally, future changes to environmental laws and regulations, life of mine
estimates and discount rates can affect the carrying amount of the provision. The estimated long-term environmental provision, comprising
rehabilitation and mine closure is based on the Group’s environmental policy taking into account the current technological, environmental and
regulatory requirements. The provision for future rehabilitation was determined using calculations, which required the use of
estimates.
26.
BORROWINGS
Accounting policy: borrowings
Borrowings are non
-
derivative financial liabilities categorised as other financial liabilities. Borrowings are recognised initially at fair valu
e,
net of transaction costs incurred, where applicable and subsequently measured at amortised cost using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12
months after the r
eporting date.
Accounting policy: leases
The Group recognises a lease liability at the commencement date of the contract for all leases conveying the right to control
the use of
an
identified assets for a specified period. The commencement date is the date on which a lessor makes an underlying asset available for use
by the lessee.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement da
te, discounted
using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally,
the Group uses its incremental borrowing rate as the discount rate.
Lease payments included in the measurement of the lease liability include the following:
Fixed payments, less
any lease incentives receivable;
Variable lease payments that depend on an index or rate, initially measured using the index or rate as at the commencement da
te;
Amounts expected to be payable by the lessee under residual value guarantees;
The exercise price of a purchase option if the lessee is reasonably certain to exercise that option;
Lease payments in an optional renewal period if the Group is reasonably certain to exercise an extension option; and
Payments of penalties for early
terminating the lease, unless the Group is reasonably certain not to terminate early.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
100
26.
BORROWINGS
(continued)
Accounting policy: leases
(continued)
The lease liability is measured at amortised cost using the effective interest rate method. It is
remeasured when there is a change in future
lease payments arising from a change in an index or rate, if there is a change in the Group’s estimate of the amount expected to be payable
under a residual value guarantee, or if the Group changes its assessment of whether it will exercise a purchase, an extension or a
termination option. When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-of-use
asset, or is recorded in profit or loss if the carrying amo
unt of the right
-
of
-
use asset has been reduced to zero.
Short
-
term leases and leases of low
-
value assets:
The Group has elected not to recognise lease liabilities for short
-
term leases that
do not contain a purchase option and
have a lease term
of 12 months or less and leases of low
-
value assets such as computer equipment.
2022
20
21
US$’000
US$’000
Non
-
current
Asset backed
facilit
ies
21
262
1
7
258
L
ease
liabilities
1
786
2
273
Property loans
-
617
Loan
from related party
-
442
23
048
20
590
Current
Asset backed
facilit
ies
13
681
1
1
2
27
L
ease
liabilities
1
793
3
112
Property loans
553
47
Loan from related party
-
100
Bank credit facilities
23
809
1
774
39
836
16
260
The fair value of borrowings approximates its carrying amounts as the interest rates charged are variable and considered to b
e market related.
At 30 September 2022, the Group has unutilised borrowing facilities available of US$31.2 million (2021: US$28.8 m
illion).
Asset backed facilities
Asset backed facilities comprise of the equipment loan facility, the loan from Atrafin, the commercial asset finance and the Wesbank revolving
facility. These facilities were disclosed on a disaggregated basis for the year ended 30 September 2021. Since the purpose of these facilities
are similar in nature, all utilised for acquiring equipment which serves as security against these facilities, these facilities have been disclosed
on an aggregated basis for the year ended 30 September 2022. The aggregation of the disclosure had no impact on the balance sheet as at
3
0
September 2021 nor any impact on the net profit after tax and earnings per share for
the year ended 30 September 2021.
2022
2021
US$’000
US$’000
Non
-
current
Equipment loan facility
12
725
14
307
Atrafin loan
2
143
2
951
Commercial asset finance
5
407
-
R
evolving facility
987
-
Asset backed
facilities
21
262
17
258
Current liabilities
Equipment loan facility
10
974
10
527
Atrafin loan
812
700
Commercial asset finance
1
478
-
R
evolving facility
417
-
Asset backed facilities
13
681
11
227
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
101
26.
BORROWINGS
(continued)
Equipment loan facility
The equipment loan facility represents funding for certain Caterpillar mining equipment, both replacement parts and new minin
g equipment
,
from Caterpillar Financial Services Corporation. On 2 June 2022, the interest rate was changed from the one-month US Libor to the one-
month Secured Overnight Finance Rate (‘SOFR’). The total facility amounts to US$35 million (2021: US$30 million), bears interest rates
between the one-month SOFR plus 325 basis points and the one-month SOFR plus 350 basis points (2021: one-month US Libor plus 325
basis points and one-month US Libor plus 350 basis points) and is repayable over 48 months. The acquired equipment serves as security for
the loan facility.
The equipment loan facility contains the following Group financial covenants:
Net debt to tangible net worth not higher than 1.4 times;
Net debt to EBITDA lower than 2.0 times; and
EBITDA to interest
greater than 4.0 times.
At 30 September 202
2
and 30 September 2021
, the Group complied with all financial covenants.
Atrafin loan
The loan from Atrafin LLC is for a total amount of US$3.7 million
(2021: US$3.7 million)
, bears interest at the six
-
month US Libor plus 200
basis points and is repayable in ten equal bi-annual instalments ending May 2026. The balance outstanding at 30 September 2022 amounted
to US$3.0 million (2021: US$3.7 million).
Commercial Asset Financ
e
Tharisa Minerals Proprietary Limited entered into a commercial asset finance facility with Absa Bank Limited to the value of US$8.3 million
(ZAR150.0 million) during the year ended 30 September 2021. The balance outstanding at 30 September 2022 amounted to US$6.9 million
(2021: US$nil). The facility bears interest at the South African Prime rate less 115 basis points and is repayable monthly in arrears over 48
months. The equipment acquired by utilising this facility serves as security. As part of the commercial asset finance facility, Absa Bank Limited
provided Tharisa Minerals Proprietary Limited with a bank overdraft facility to the value of US$8.3 million (ZAR150.0 million). At 30 September
2022, the
overdraft
f
acility
was available in full.
R
evolving facility
Tharisa Minerals Proprietary Limited entered into a revolving facility with Wesbank Corporate Finance for a facility of US$6.9 million
(ZAR125 million) during the year ended 30 September 2022. The facility bears interest at the RSA prime rate less between 65 and 115 basis
points and is repayable monthly in arrears between 36 and 48 months commencing in November 2022. The facility is for financing mining
equipment and specifically includes
drill rigs and excavators.
Such equipment serves as security for the
facility.
L
ease
liabilities
The Group entered into a number of lease arrangements for the renting of office buildings, premises, computer equipment, vehi
cles and mining
fleet. The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that do not contain a purchase
option and that have a lease term of 12 months or less and leases of low-value assets such as computer equipment. Lease expenses of
US$0.2 million (2021: US$0.3 million) and US$0.1 million (2021: US$0.1 million) were included in cost of sales and other operating expenses
respectively for the year en
ded 30
September 202
2
.
The duration of leases relating to buildings and premises
is
for a period of five years, payments are due at the beginning of the month escalating
annually on average by 8.0%. At 30 September 2022, the remaining term of these leases vary between one and five and a half years (2021:
t
wo
and
four
a half years). These leases are secured by cash deposits varying from one to three times the monthly lease payments.
The duration of leases relating to the mining fleet and manufacturing equipment are
for periods between
t
welve
and
forty eight
months
(2021:
twenty four and sixty months) and bear interest at interest rates between the South African prime interest rate and the South African prime
interest rate plus 375 basis points (2021: South African prime interest rate plus 375 basis points). The leases are secured by the mining fleet
leased.
202
2
20
21
L
ease payments due:
US$’000
US$’000
Within one year
2
030
3
406
Two to five years
1
883
2
505
3
913
5
911
Less future finance charges
(334)
(526)
Present value of
lease payments due
3
579
5
385
Present value of lease payments due:
Within one year
1
793
3
112
Two to five years
1
786
2
273
3
579
5
385
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
102
26.
BORROWINGS
(continued)
Property loans
As part of the
acquisition of MetQ
Proprietary Limited during the year ended 30 September 202
0
,
the Group
acquired industrial premises and
buildings. MetQ Proprietary Limited acquired these buildings and premises immediately before the business combination and secured funding
in the form of loans owing to the previous owners. These loans are repayable upon securing external financing. The acquired properties serve
as security for the loans.
Bank credit facilities
The bank credit facilities relate to pre
-
shipment finance and discounting of the letters of credit by the Group’s banks following performance of
the letter of credit conditions by the Group, which results in funds being received in advance of the normal payment date. Interest on these
facilities at the reporting date varied between the one-month SOFR plus 165 basis points and the one-month SOFR plus 305 basis points and
the one-month US Libor plus 1.6%, (2021: one-month US Libor plus 1.6% pa and three-month US Libor plus 3.05% pa). Inventory serves as
security for credit facilities.
L
oan
from related party
The loan from related party arose as part of the business combination of Salene Chrome Zimbabwe (Private) Limited
. The
loan
was settled in
full
during the year ended 30 September 2022
Asset
backed
facilities
Lease
liabilities
Bank credit
facilities
Property
loans
Loan from
related party
Total
borrowings
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Balance 30 September 2021
28
485
5
385
1
774
664
542
36
850
Changes from financing cash flows
Advances: bank credit facilities
-
-
209
904
-
-
209
904
Repayment: bank credit facilities
-
-
(187
878)
-
-
(187
878)
Net
proceeds/(
repayment of
)
bank credit
facilities
-
-
22
026
-
-
22
026
Advances received
20
942
-
-
-
-
20
942
Repayment of borrowings
(13
906)
-
-
-
(500)
(14
406
)
Principal l
ease payments
-
(3
793)
-
-
-
(3
793)
Repayment of interest
(1
403)
(406)
(306)
-
(
55
)
(2
17
0
)
Changes from financing cash flows
5
633
(4
199)
21
720
-
(5
55
)
22
599
Foreign currency translation differences
(6
358)
(766)
-
(111)
-
(7
235)
Liability
-
related changes
Lease agreements entered into
-
2
712
-
-
-
2
712
Re
-
measurement of lease liabilities
-
8
-
-
-
8
Interest expense
1
515
448
315
-
13
2
2
91
Revaluation of foreign denominated loan
5
668
(9)
-
-
-
5
659
Total liability
-
related changes
7
183
3
159
315
-
13
10
67
0
Balance at 30 September 202
2
34
943
3
579
23
809
553
-
62
884
Non
-
current borrowings
21
262
1
786
-
-
-
23
048
Current borrowings
13
681
1
793
23
809
553
-
39
836
Total borrowings
34
943
3
579
23
809
553
-
62
884
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
103
26.
BORROWINGS (continued)
Facilities
Asset backed
facilities
Lease
liabilities
Bank credit
facilities
Other loan
Property
loans
Loan from
related party
Total
borrowings
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Balance 30 September 2020
23
849
20
468
6
682
17
345
1
670
599
-
70
613
Changes from
financing cash flows
Advances: bank credit facilities
-
-
-
115
174
-
-
-
115
174
Repayment: bank credit facilities
-
-
-
(130
727)
-
-
-
(130
727)
Net repayment of bank credit facilities
-
-
-
(15
553)
-
-
-
(15
553)
Advances received
10
068
1
6
71
9
-
-
-
-
-
26
787
Repayment of borrowings
(37
095)
(9 232)
-
-
(1
881)
-
-
(48
208)
Principal lease payments
-
-
(4 597)
-
-
-
-
(4 597)
Repayment of interest
(447)
(775)
(560)
(151)
(70)
(28)
-
(2
031)
Changes from financing cash flows
(27
474)
6 712
(5
157)
(15
704)
(1
951)
(28)
-
(43
602)
Foreign currency translation differences
3
008
2 1
57
761
-
211
65
-
6
202
Liability
-
related changes
Lease
agreements entered into
-
-
2
354
-
-
-
-
2
354
Re
-
measurement of lease liabilities
-
-
214
-
-
-
-
214
Business combination
-
-
-
-
-
-
529
529
Interest expense
617
902
567
133
70
28
13
2
330
Revaluation of
foreign denominated loan
-
(
1 754
)
(36)
-
-
-
-
(1
790)
Total liability
-
related changes
617
(
852
)
3
099
133
70
28
542
3
637
Balance at 30 September 2021
-
2
8 485
5
385
1
774
-
664
542
36
850
Non
-
current
borrowings
-
1
7
258
2
273
-
-
617
442
20
590
Current borrowings
-
1
1 2
27
3
112
1
774
-
47
100
16
260
Total borrowings
-
2
8 485
5
385
1
774
-
664
542
36
850
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
104
27.
OTHER FINANCIAL LIABILITIES
Accounting policy
Measurement: Financial liabilities at fair value through profit or loss
Financial liabilities carried at fair value through profit or loss are
initially recorded at fair value and transaction costs are expensed in the
statement of profit or loss. Realised and unrealised gains and losses arising from changes in the fair value of the financial liabilities held at
fair value through profit or loss are included in the statement of profit or loss in the period in which they arise. Where management has
designated to recognise a financial liability at fair value through profit or loss, any changes associated with the Group’s own credit risk will be
recog
nised in other comprehensive income.
Derecognition: Financial liabilities
The Group derecognises financial liabilities only when its obligations under the financial liabilities are discharged, cancel
led or expired. The
difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-
cash assets transferred or liabilities assumed, is recognised in profit or loss.
202
2
20
2
1
Non
-
current liabilities
Fair value
hierarchy
US$’000
US$’000
Option granted to NCI to call upon shares in Karo Platinum (Private) Limited
Level 3
16
779
-
Current liabilities
PGM d
iscount facility
hedging derivative
Level 2
337
-
Forward excha
nge
contracts
Level 2
189
485
526
485
Option granted to NCI to call upon shares in Karo Platinum (Private) Limited
(refer to note
31
)
As part of the Amendment to the Project Framework Agreement, t
he
Republic of Zimbabwe
has an option to increase its shareholding in Karo
Platinum (Private) Limited (‘Karo Platinum’) by 11.0% exercisable after 24 months of the signing of the Amendment dated 30 March 2022, but
before 36 months, payable in cash at the net present value of Karo Platinum at 30 March 2022. The increase in the shareholding may, at the
election of Karo Mining Holdings, be affected either through a sale of shares in Karo Platinum by Karo Zimbabwe Holdings (Private) Limited
or by means of a share subscription by the
R
epublic of Zimbabwe
. This shareholding will not be on a free funded carry basis.
PGM discount facility hedging derivative
The PGM discount facility hedging derivative relates to derivatives taken out to hedge the related PGM commodity price exposu
re up
on the
disposal and discounting of the PGM discounting receivable as explained in note 21. The balance is held at fair value through profit or loss.
The Group does not apply hedge accounting.
Forward exchange contracts
–
fair value through profit or
loss
The Group entered into a number of forward exchange contracts to hedge certain aspects of the foreign exchange risk associate
d
with
the
conversion of the US$ to the ZAR. At 30 September 2022 the net exposure of these contracts was US$8.5 million (2021: US$11.2 million)
with various expiries no later than 27 October 2022 (2021: no later than 22 February 2022). The forward exchange contracts were mark-to-
market by using applicable closing exchange rates at 30 September 202
2
(2021: 30 September 2021)
.
28.
TRADE AND OTHER PAYABLES
Accounting policy
Trade and other payables, excluding payroll creditors and leave pay accruals are non
-
derivative financial liabilities categorised as other
financial liabilities. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest method.
Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporti
ng date.
Liabilities arising in respect of salaries, annual leave and other benefits due to be settled within 12 months of the reporting date are measured
at rates which are expected to be paid when the liability is settled.
202
2
20
21
US$’000
US$’000
Trade payables
42
753
44
467
Accrued expenses
2
4
982
22 767
Leave pay accrual
4 932
5
328
Value added tax
payable
89
261
Provision for mining royalty
50
444
30
953
Other payables
–
related
parties (note 3
4
)
113
509
Other payables
58
7
281
12
3
900
104 566
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
105
28.
TRADE AND OTHER PAYABLES
(continued)
202
2
20
21
US$’000
US$’000
T
rade payables in foreign currency
balances
translated to US$
were as follows:
US$
5
554
94
ZAR
37
046
44
366
EUR
142
3
GBP
11
4
42
753
44
467
The amounts above are
unsecured, non
-
interest bearing and
payable within one year from the reporting period. The amounts reflected above
approximate fair value
, due to the short
-
term thereof
.
29.
CONTRACT LIABILITIES
Accounting policy
Contract liabilities
are non
-
derivative financial liabilities categorised as other financial liabilities.
Contract liabilities
are recognised
when a
customer has paid the consideration or the payment is due from the customer before the entity has transferred all of the promised goods or
services in a contract. Timing of revenue recognition may differ from the timing of invoicing to customers. A contract liability is measured based
on the unearned revenue received (income received in advance) within a contract and is presented as a current liability in the statement of
financial position due to its short
-
term nature
.
202
2
20
21
US$’000
US$’000
Freight services
2
078
2 440
Timing of revenue recognition may differ from the timing of invoicing to customers. The balance represents deferred revenue f
or which
performance conditions still have to be satisfied.
30.
TAX PAID
202
2
20
21
US$’000
US$’000
Opening
balance
Current taxation receivable
8
949
497
Current taxation payable
(286)
(176)
Corporate income tax for the year
(40
595)
(7 669)
Special contribution for defence in Cyprus
(1)
-
Dividend withholding tax
(2
572)
(1
231)
Tax refunds
received
(34)
(51)
Interest
received
(1)
(2)
Business combination (note
31
)
(6)
-
Closing balance
Current taxation receivable
(7
302)
(8 949)
Current taxation payable
2
056
286
Exchange differences on translation
(1
405)
(117)
Tax paid
(41
197)
(17
412)
31.
BUSINESS COMBINATION
Accounting policy
The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consi
deration
transferred in the acquisition is generally
measured at fair value, as are the identifiable net assets acquired.
Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss im
mediately.
Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
The conside
ration transferred does not include amounts related to the settlement of pre
-
existing relationships. Such amounts are generally
recognised in profit or loss.
Any contingent consideration is measured at the fair value at the date of acquisition. If an obligation to pay the contingent
consideration
that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted within equity.
Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in fair value of the
contingent consideration are recognised in profit or loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
106
31.
BUSINESS COMBINATION
(continued)
Acquisition of Karo Mining Holdings
plc
Effective 30 March 2022, the Group acquired an additional 37.96% of the issued share capital of Karo Mining Holdings
plc
(‘Karo Mining’), a
company incorporated in Cyprus. The investment in Karo Mining previously was recognised as an investment accounted for using the equity
method
(note 16)
.
Following the acquisition of the controlling interest in Karo Mining, the Group’s shareholding in Karo Mining
wa
s 66.34%.
The additional 37.96% of the issued share capital of Karo Mining was acquired from the Leto S
ettlement, a related party (refer to
note 3
4
) for
a purchase consideration of US$29.4 million. The purchase consideration was settled through the issue of 13 693 000 new ordinary shares of
the Company to the Leto Settlement. The Group determined that the acquisition of Karo Mining represented a business and accordingly
accounted for the acquisition as a business combination in t
erms of IFRS 3.
The Group assessed that from 30 March 2022 it exercises control over Karo Mining. The Group concluded that it has power over Karo Mining
as the Group has the ability to appoint the majority of the board of directors of Karo Mining, owns the majority of the issued share capital and
has the majority of the decision making rights over relevant activities. From 30 March 2022, the Group is exposed and has the right to variable
returns from Karo Mining which results from its 66.34% shareholding and has the ability to use the shareholding to affect its return on its
investment. The Group controls the development activities and is actively involved with the development of Karo Mining and more specifically
Karo Platinum.
Effective 30 March 2022, the Investment Project Framework Agreement entered into between the Republic of Zimbabwe and the Let
o
Settlement was amended by changing the shareholding in Karo Platinum (Private) Limited (‘Karo Platinum’), an indirect subsidiary of Karo
Mining to 85.0% by Karo Zimbabwe Holdings (Private) Limited and 15.0% by the Republic of Zimbabwe, on a free funded carry basis. Before
the amendment, the Republic of Zimbabwe was entitled to a 50.0% shareholding in Karo Platinum. The remaining entities are all indirect
wholly
-
owned subsidiaries of Karo Mining.
The table below details Karo Mining
’
s
interest in sub
sidiaries as at 3
0
March 2022
(acquisition date) and at 30 September 2022
(collectively
referred to as ‘Karo Group’):
Company name
Effective interest
Country of incorporation and
principal place of business
Principal activity
Karo Zimbabwe Holdings (Private) Limited
100%
Zimbabwe
Investment holding
Karo Platinum (Private) Limited*
85
%
Zimbabwe
Platinum mining
,
smelting and
refining
Karo Coal
Mines (Private) Limited
100%
Zimbabwe
Dormant
Karo Powe
r Generation (Private) Limited
100%
Zimbabwe
Power generation
K
aro Refinery (Private) Limited
100%
Zimbabwe
Dormant
*At 30
September 2022 the shares equalling 15.0% of the issued share capital of Karo Platinum has not been transferred to the Republ
ic of
Zimbabwe. The Group believes that there are no substantive barriers preventing the shares from being transferred. Consequently, the 15.0%
shareholding of the Republic of Zimbabwe in Karo Platinum has been accounted for as non-controlling interest in the acquisition accounting
of Karo Mining and subsidiaries.
The transaction cost
relating to the acquisition
was
US$0.1
million
which is classified as other operating expenses
.
The fair values of the net identifiable assets acquired
were determined independently by using the sum of the parts methodology. The market
multiple approach was used to determine the fair value of Karo Platinum (Private) Limited while the net asset value approach was used to
determine the fair values of the remaining entities. Since the effective acquisition date is 30 March 2022, the Karo Group’s results have been
consolidated within the Group’s results. Up to the effective acquisition date the Karo Group’s results were equity accounted at the Group’s
proportionate share in the investment (refer to note 16).
Below a summary of the Karo Group’s statement of profit or loss for the year
ended 30 September 2022 as if the acquisition took place as at
1 October 2021, as well as a summary of Karo Group’s statement of profit or loss since the acquisition date for the six-months ended
30
September 2022 included in the consolidated statement of
profit or loss for the year ended 30 September 2022.
Year
ended
30 September
2022
Six months
ended
30 September
2022
US$’000
US$’000
Operating expenses
(2
20
7
)
(1
763)
Fair value
adjustments
(1
0
909
)
6
970
Finance costs
(139)
(27)
Tax
(31)
(21)
Net
(
loss
)/profit
after tax
(1
3
286
)
(5
159)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
107
31.
BUSINESS COMBINATION (continued)
Acquisition of Karo Mining Holdings
plc (continued)
The following table summarises the fair value of the assets and liabilities of the Karo Group
comprising Karo Mining and its subsidiaries
at the
date of acquisition
:
Fair value recognised
on acquisition
US$’000
Assets
Property, plant and equipment
203
409
Inventories
2
Trade and other receivables
337
Cash and cash
equivalents
4
984
208
732
Liabilities
Borrowings
(8
466)
Other financial liabilities
(17 879)
Deferred tax
(30
263)
Tax liability
(6)
Trade and other payables
(3
735)
(60 349)
Total identifiable net assets at fair value
148
383
Non
-
controlling interest
(66
181)
Total attributable
net
assets acquired
82
202
Consideration
Book value of existing shareholding (note 1
6
)
(1 656)
Prepaid investment in Karo Platinum (Private) Limited (note 1
8
)
(2
7
10
)
Gain on
acquisition: fair value of existing 28.38% shareholding
(33
503)
Gain on acquisition: purchase of shares at a discount
(
14 88
8
)
Total purchase price to be settled by the issue of ordinary shares
(29
445)
Net cash acquired
4
984
Cash
inflow from business combination
4
984
The fair value of receivables acquired approximates their carrying amount due to the
short
-
term nature thereof.
The purchase of shares at a
discount represents a bargain purchase on the acquisition (US$14.9 million). The non-controlling interest represents the proportionate share
of the fair value of the net identifiable assets.
Subsequent to acquiring the controlling interest in Karo Mining, the Group increased its shareholding in Karo Mining by converting the loan
receivable to ordinary shares and by subscribing to additional shares issued by Karo Mining (described in the following paragraphs). Refer to
note 24 for the consequential decrease in the non
-
controlling interest in Karo Mining.
Effective 19 May 2022, the Company acquired the loan receivable from Arxo Finance plc (a wholly owned subsidiary of the Company) that
was receivable from Karo Mining, refer to note 16. The loan was converted to ordinary shares issued by Karo Mining. Karo Mining issued an
additional 38 new ordinary shares to the Company as consideration. The loan payable (including accrued interest) amounted to US$8.5 million.
The additional shares issued represented 1.21% of the issued share capital of Karo Mining which increased the Company’s shareholding to
67
.
55
%.
Effective 2 June 2022, Karo Mining
issued an additional 44 new ordinary shares for a cash subscription of US$9.9 million to the Company.
The additional shares issued represented 1.29% of the issued share capital of Karo Mining which increased the Company’s shareholding to
68.84%.
Effecti
ve
10
August
2022,
Karo Mining
issued an additional 45 new ordinary shares for a cash subscription of US$10.2 million to
the Company
.
The additional shares issued represented 1.22% of the issued share capital of Karo Mining which increased the Company’s shareholding to
70.0
0
%.
Effective
7
September
2022,
Karo Mining
issued an additional
44 051
new ordinary shares for a cash subscription of US$
44
thousand
to
the
Company and the non-controlling shareholder. The Company subscribed to 30 835 ordinary shares while the non-controlling shareholder
subscribed to 13 216 ordinary shares. The shares were subscribed to according to the existing proportionate share of each shareholder. The
cash subscription was not settled at 30 September 2022 by the non
-
controlling shareholder.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
108
31.
BUSINESS COMBINATION
(continued)
Acquisition of Salene Chrome (Private) Limited (‘Salene Chrome’)
Effective 31 March 2021, the
Company acquired 100% of the issued share capital of Salene Chrome
Zimbabwe
(Private) Limited (‘Salene
Chrome’), a company incorporated in Zimbabwe from the Leto Settlement, a related party (refer to note 34) for a cash consideration of
US$3.0 million. The cash consideration excluded capital expenses previously incurred by the Company on exploration activities. Salene
Chrome holds six special grants on the Great Dyke in Zimbabwe for the prospecting and mining of minerals including chrome.
The Company
previously had a call option to acquire 90.0% of the issued share capital of Salene Chrome for a consideration of US$90 and
was required to fund and undertake an initial exploration programme with a spend of up to US$3.2 million. Leto Settlement would have
retained a 10% free carried shareholding in Salene Chrome and would have been entitled to a 3% commission on the Cost, Insurance and
Freight (‘CIF’) sales value of the chrome concentrates and any other commodities sold.
The call option agreement lapsed at 31 March 2021. On the same day, the Company entered into a purchase agreement to acquire
100% of
the issued share capital of Salene Chrome.
The following table summarises the fair value of the assets and liabilities
of Salene Chrome at 31 March 2021:
Fair value
recognised on
acquisition
US$’000
Assets
Property, plant and equipment
4
692
Trade and other receivables
109
Cash and cash equivalents
2
4
80
3
Liabilities
Borrowings
(529)
Trade
and other payables
(609)
(1
138)
Total identifiable net assets at fair value
3
66
5
Less cash and cash equivalents acquired
(2)
Goodwill arising on acquisition
1
392
Total cash flow on acquisition
5
05
5
Less amounts already
spent
(note 18)
(
1 976
)
Cash outflow on business combination
3 079
Below a summary of Salene Chrome’s statement of profit or loss for the year ended 30 September 2021 as if the acquisition
took
place as at
1 October 2020, as well as a summary of Salene Chrome’s statement of profit or loss since the acquisition date for the six-months ended
30
September 2021 included in the consolidated statement of profit or loss for the year ended 30 September
2021.
Year
ended
30 September
2021
Six months ended
30 September
2021
US$’000
US$’000
Operating expenses
(359)
(248)
Profit on exchange differences
174
174
Operating loss
(185)
(74)
Finance costs
(33)
(20)
Net loss after tax
(218)
(94)
The purchase consideration was funded from existing cash resources of the Group. The transaction cost was US$0.1
million which is
classified as other operating expenses.
The goodwill recognised
wa
s attributed to the Special Economic Zone
status of Salene Chrome, existing bilateral relationships with the
Government of Zimbabwe, supplier relationships and knowledge of the workforce. The goodwill is not tax deductible.
During the year ended 30 September 2022, the goodwill was
impaired. Refer to note 15.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
109
32.
DIRECTORS INTEREST IN STATED CAPITAL
202
2
20
2
1
%
%
LC Pouroulis
0.40
0.38
P Pouroulis
2.68
2.90
MG Jones
0.26
0.25
A Djakouris
0.01
0.02
C Bell
0.02
0.02
Total
3.37
3.57
Where a
member of the Board of Directors holds no direct or indirect interest, the director is not reflected in the table above.
There has been no change in the Director’s interests in the share capital of the Company between the end of the financial yea
r and the date
of the approval of the consolidated financial statements.
33.
FINANCIAL RISK MANAGEMENT
Accounting
policy: Financial instruments
-
classification
The Group classifies its financial instruments in the following categories:
At fair value through profit or loss
At fair value through other comprehensive income
At amortised cost
The Group
determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by
the
Group’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held
for trading are classified at fair value through profit or loss, for other equity instruments, on the day of acquisition the Group can make an
irrevocable election (on an instrument-by-instrument basis) to designate them as at fair value through other comprehensive income.
Financial liabilities are measured at amortised cost, unless they are required to be measured at fair value through profit or loss (such as
derivatives) or the Group has designated to measure them at fair value through profit
or loss.
The following table presents the classification of the Group’s financial instruments:
Financial assets
Classification
Other financial assets
Investments in money markets, current accounts, cash funds and income
funds
Fair
value through profit or loss
PGM discount facility hedging derivative
Fair value through profit or loss
Investment in equity instruments
Fair value through profit or loss
Option to acquire shares
Fair value through profit or loss
Trade and
other receivables
Amortised cost
PGM
discounting
receivable
Fair value through profit or loss
Cash and cash equivalents
Amortised cost
Financial liabilities
Classification
Borrowings
Amortised cost
Option granted to NCI to call upon
shares in Karo Platinum (Private) Limited
Fair value through profit or loss
PGM discount facility hedging derivative
Fair value through profit or loss
Forward exchange contracts
Fair value through profit or loss
Trade and other payables
Amortised co
st
T
he Group made an irrevocable election to classify marketable securities at fair value through profit or loss.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
110
33.
FINANCIAL RISK MANAGEMENT
(continued)
In the ordinary course of business the Group is exposed to credit risk,
liquidity risk, and market risk. This note presents information about the
Group's exposure to each of the above risks and its objectives, policies and processes for measuring and managing risks. Further quantitative
disclosures are included throughout this
note.
The Group's risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate
risk limits and
controls and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in
market conditions and the Group's activities. The Group, through its training and management standards and procedures, aims to develop a
disciplined and constructive control environment in which all employees understand the
ir roles and obligations.
The Board of Directors has overall responsibility for the establishment and oversight of the Group's risk management framewor
k.
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or a
counterparty to a financial instrument fails to meet its contractual obligations
and arises principally from the Grou
p's trade and other receivables,
cash and cash equivalents and
other financial assets
.
Trade and other receivables
The Group's
exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also
considers the demographics of the Group's customer base, including the default risk of the industry and country, in which customers operate,
as these factors may have an influence on credit risk. In monitoring customer credit risk, management reviews on a regular basis the ageing
of trade and other receivables to obtain comfort that there are no past due amounts
without acceptable mitiga
ting credit information available
.
The Group establishes an allowance for credit losses that represents its estimate of expected credit losses in respect of tra
de and other
receivables. The Group applies a simplified approach to measure the loss allowance for trade receivables, using the lifetime expected loss
provision. The expected credit loss on trade receivables is estimated using a provision matrix by reference to past default experience and
credit rating if available, adjusted as appropriate for cu
rrent observable data.
The main component of the allowance for credit losses (if applicable) is a specific loss component that relates to individual
ly significant
exposures. As at 30 September 2022 and 30 September 2021, none of the carrying amounts of trade and other receivables is either past due
or impaired, for which an allowance for credit losses is necessary. Receivables that were neither past due nor impaired relate to customers
for whom there was no recent history of default and
for
who
no
curre
nt
observable
adverse
credit information
is available.
The allowance for credit losses in respect of trade and other receivables is used to record credit losses unless management i
s satisfied that
no recovery of the amount owing is possible and at that point the amount considered irrecoverable is written off against the financial asset
directly.
The most significant exposure of the Group to credit risk is represented by the carrying amount of trade receivables. The Boa
rd of Directors
performs regular ageing reviews of trade receivables to identify any doubtful balances. Based on the review performed for the reporting period,
the Board of Directors concluded that no allowance for credit losses is required in respect of trade receivables. 58.3% and 77.1% of the trade
receivables were due from the Group's largest customer as at 30 September 20
2
2
and 30
September
20
2
1
, respectively.
Cash and cash equivalents and
long
-
term
deposits
The Group limits its exposures on cash and cash
equivalents by dealing only with well
-
established financial institutions of
high
-
quality
credit
standing. The majority of the Group's cash resources were deposited with HSBC based in Hong Kong and South Africa, Bank of China in
South Africa and Nedbank in
South Africa
.
Investments in money markets, current accounts, cash funds and income funds
The Group invests only in well
-
known reputable financial institutions.
The majority of the investment in
money markets, current accounts,
cash
funds
and income funds are kep
t
in cash at financial institutions of high credit quality standing.
20
2
2
20
2
1
The maximum exposure to credit risk at the reporting date of the consolidated financial
statements was:
US$’000
US$’000
Financial assets
6
019
7
702
Trade and other receivables
149
669
136
554
Contract
assets
2
078
2
440
Cash and cash equivalents
143
300
83
436
301
066
230
132
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
111
33.
FINANCIAL RISK MANAGEMENT
(continued)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulties in meeting the obligations associated with its financia
l liabilities that are settled
by delivering cash or another financial asset. The Group's approach to managing liquidity is to ensure, as far as possible, that it will always
have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or
risking damage to the Group's reputation. At 30 September 2022 the Group had undrawn banking facilities of US$31.2 million (ZAR564.5
million) (202
1
: US$
28.
8
million (ZAR290 million)) available (
note 2
6
).
Management is aware of the above risk. Liquidity risk is monitored on a regular basis and management is
taking steps deemed necessary in
an attempt to manage the corresponding risk. This excludes the potential impact of extreme circumstances that cannot reasonably be
predicted, such as natural disasters. In addition, financial risk management may not be possible for instances where weakened commodity
prices persist, forecast production not being achieved and further funding is not raised.
The following table presents the remaining contractual maturities of the Group's financial liabilities at the end
of the reporting period, which are
based on contractual undiscounted cash flows (including interest payments computed using contractual rates or, if floating, based on rates
current at the end of the reporting period) and the earliest date the Group can be
required to pay:
Contractual undiscounted cash flow
Within 1 year
or on
demand
More than 1
year but less
than 2 years
More than 2
years but
less than 5
years
More than 5
years
Total
Carrying
amount
30 September 202
2
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Borrowings
4
2 365
1
2 937
11
381
-
6
6 683
62
884
Other financial liabilities
526
-
-
-
526
526
Trade and other payables
43
453
-
-
-
43
453
43
453
86
344
1
2
937
11
381
-
110
662
106
863
30 September 20
21
Borrowings
17
598
11
403
10
179
463
39
643
36
850
Other financial liabilities
485
-
-
-
485
485
Trade and other payables
45
257
-
-
-
45
257
45
257
63
340
11
403
10
179
463
85
385
82
592
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Gro
up's income and the
values of its financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable
parameters, while optimising the return.
Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign ex
change rates. Currency risk arises
when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Group's functional
currency.
The Group is exposed to currency risk on transactions that are denomi
nated in a currency other than the respective functional currency of the
Group entities. These currency risk exposures arise primarily from exchange rate movements in ZAR, Euro (‘€’), British Sterling (‘GBP’) and
US$.
Management is aware of the above ri
sk. Currency risk arising from currency fluctuations is monitored on a regular basis and management is
taking steps deemed necessary in managing the corresponding risk. These steps may include to enter, from time to time, into forward
exchange contracts within board-approval limits. Financial risk management may not be possible for instances where weakened commodity
prices persist, forecast production not being achieved and further funding is not raised.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
112
33.
FINANCIAL RISK MANAGEMENT (continued)
Market risk (continued)
The following table details the Group's exposure at the end of each reporting period to currency risk arising from recognised
assets and
liabilities denominated in a currency other than the functional currency of the entity to which they relate. Exposures in US$ relate to recognized
assets and liabilities denominated in US$ of entities of the Group that have a functional currency other than US$. For presentation purposes,
the amounts of the exposure are shown in US$, translated using the spot rate at the reporting date. The spot rates used at the reporting date
against the US$ are a) US$:ZAR, 18.07 (2021: 15.05); b) US$:EUR, 1.02 (2021: 0.86) and c) US$:GBP, 0.90 (2021: 0.74). Differences
resulting from the translation of the financi
al statements of foreign operations into the Group's presentation currency are excluded.
The Group entered into a number of forward exchange contracts to hedge certain aspects of the foreign exchange risk associate
d to the
conversion of the US$ to the ZAR and the EUR against the ZAR. The net exposure of these contracts was US$8.5 million (2021:
US$
11
.
2
million) with various expiries no later than
2
7
October
202
2
(20
2
1
: no later than
22
February
20
2
2
)
.
At the reporting date the Group's
exposure to currency risk was as follows:
30 September 202
2
30 September 202
1
US$
ZAR
€
GBP
US$
ZAR
€
GBP
Amounts in US$’000
Other financial assets
-
-
19
-
3 023
-
18
-
Trade and other receivables
133
214
27
157
19
84
561
-
13
-
Current taxation
-
-
(1
726)
-
-
(183)
-
Cash and cash equivalents
11
604
161
204
142
7
964
2
804
270
37
Borrowings
(26
890)
-
-
-
(28
485)
-
-
-
Other financial liabilities
(526)
-
-
-
(485)
-
-
-
Trade and other payables
(33)
(2
898)
(680)
(342)
(11)
(141)
(357)
(6)
(117
369)
(2
710)
(2
026)
(181)
66 567
2
663
(239)
31
A 10.0% strengthening of the US$ against the above currencies at the reporting date would have changed profits and
equity by the amounts
presented below. This analysis assumes that all other variables, and in particular interest rates, remain constant. The analysis has been
performed on the same basis for each reporting date.
202
2
20
21
Increase
in profit or loss
and equity
(Decrease)/
increase/
in profit or loss
and equity
US$’000
US$’000
ZAR
216
259
€
159
(23)
US$
7
717
8 219
GBP
14
3
A 10.0% weakening of the US$ against the above currencies at each reporting date would have had an
equal but opposite effect to the
amounts shown above, on the basis that all other variables remain constant.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
113
33.
FINANCIAL RISK MANAGEMENT (continued)
Interest rate risk
Interest rate risk is the Group's exposure to adverse movements in interest rates. It arises as a result of timing difference
s on the repricing of
assets and liabilities. Management is aware of the above risk. Interest rate risk is monitored on a regular basis and management is taking
steps deemed necessary
managing
the corresponding risk.
As at the reporting date, the interest rate profile of the Group was as follows :
20
2
2
20
2
1
202
2
20
21
US$’000
US$’000
Variable rate financial assets
Investments in money markets, current
accounts, cash funds and income funds
4.
1
%
-
6.4%
4.6%
6
019
7
702
Cash and cash equivalents
0%
-
6
.7
3
%
0%
-
4.72%
143
300
83
436
149
319
91
138
Variable rate financial liabilities
Equipment loan facility
1-month SOFR plus
between 3.25% and 3.5%
1
-
month US LIBOR
plus between 3.2%
and
3.25%
23
699
24
834
Atrafin loan
6
-
month US Libor plus
2%
6
-
month US Libor
plus 2%
2
955
3
651
Absa commercial asset finance
RSA prime
less 1.15%
-
6 885
-
Wesbank revolving facility
RSA prime
less between
0.65% and 1.15%
-
1
404
-
L
ease
liabilities
5
.
9
%
-
RSA prime +
3.75%
8.0%
-
RSA prime
plus
3.75%
3
579
5
385
Property loans
RSA prime
RSA prime
553
664
Loan from
related party
-
3
-
month US LIBOR
plus
5%
-
542
Bank credit facilities
1
-
month US LIBOR +
1.6% and 1-month SOFR
plus between 1.65% and
3.05%
1
-
month US LIBOR
plus 1.6% - 3-month
US LIBOR plus
3.05%
23
809
1
774
62 884
36
850
A change of
100 basis points in interest rates at each reporting date would have changed profits and equity by the amounts presented belo
w.
This analysis assumes that all other variables, and in particular foreign currency rates, remain constant. The analysis has been performed on
the same basis for each reporting date.
202
2
20
21
Increase/
(decrease) in
profit or loss and
equity
Increase/
(decrease) in
profit or loss
and equity
US$’000
US$’000
Investments in money markets, current accounts, cash funds
and income funds
482
157
Cash and cash equivalents
224
388
Equipment loan facility
(273)
(255)
Atrafin loan
(34)
(38)
Commercial asset finance
(79)
-
Revolving facility
(16)
-
L
ease
liabilities
(55)
(54)
Loan from related party
-
(3)
Loan
from related party
-
(7)
Bank credit facilities
(208)
(16)
Property loans
(1)
(2)
40
1
70
A decrease of 100 basis points in interest rates at each reporting date would have had an equal but opposite effect to the am
ounts shown
above, on
the basis that all other variables remain constant.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
114
33.
FINANCIAL RISK MANAGEMENT (continued)
Fair values
The Board of Directors considers that the fair values of significant financial assets and financial liabilities approximate t
o their
carrying values
at each reporting date.
Financial instruments carried at fair value:
The following table presents the carrying values of financial instruments measured at fair value at the end of each reporting
period across the
three levels of the fair value hierarchy defined in IFRS 13, Fair Value Measurement, with the fair value of each financial instrument categorised
in its entirety based on the lowest level of input that is significant to that fair value measurement.
The impact of C
OVID
-
19 should already be priced into the inputs, which for the Group, mostly relates to
commodity price risk used in the level
1 and 2 fair valuation techniques as determined by the market. The level 3 valuation techniques were adjusted internally by amending the
cash flows associated with the discounted cash flow valuations.
The levels ar
e defined as follows:
Level 1: fair values measured using quoted prices (unadjusted) in active markets for identical financial instruments (highest
level).
Level 2: fair values measured using quoted prices in active markets for similar financial instrume
nts, or using valuation methodologies in which
all significant inputs are directly or indirectly based on observable market data.
Level 3: fair values measured using valuation methodologies in which any significant inputs are not based on observable marke
t data.
Fair value
Fair value
202
2
20
2
1
Valuation technique
Financial instrument
level
US$’000
US$’000
a
nd key inputs
Financial assets measured at fair value
Investments in money markets, current
accounts, cash funds and
income funds
Level 2
6
019
7
702
Quoted market price for similar
instruments
Right to acquire shares in Karo Platinum
(Private) Limited
Level 3
-
5
870
Comparable company market
multiple valuation and a Monte Carlo
Simulation model
PGM discount facility hedging derivative
Level 2
-
3 023
Quoted market metal prices and
exchange rate
Investments in equity instruments
Level 1
19
18
Quoted market price
Trade and other receivables measured at
fair value
PGM
discounting
receivable
Level 2
76 750
77 286
Quoted market metal prices and
exchange rate (refer below)
Financial liabilities measured at fair value
Option granted to NCI to call upon shares in
Karo Platinum
(Private) Limited
Level 3
16 779 - Discounted cash flow valuation and a
Monte Carlo Simulation model
PGM discount facility hedging derivative
Level 2
337 - Quoted market metal prices and
exchange rate
Forward exchange contracts
Level 2
189
485
Quoted market closing exchange
rates
There have been no transfers between fair value hierarchy levels in the current year.
Refer
to note 21 for
the fair value recognised relating to the PGM
discounting
receivable.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
115
33.
FINANCIAL RISK MANAGEMENT (continued)
Fair value gains and
losses recognised in the financial instruments during the year:
202
2
20
21
US$’000
US$’000
Changes in fair value of financial assets at fair value through profit or loss
Investments in equity instruments
1
10
Investments in money
markets, current accounts, cash funds and income funds
242
223
PGM discount facility hedging derivative
-
4
615
Right to acquire shares in Karo Platinum (Private) Limited
(5
870)
5
870
Option to acquire shares
in Salene Chrome Zimbabwe (Private) Limited
-
(178)
(5
627)
10
540
Chan
ges in fair value of financial liabilities
at fair value through profit or loss
PGM discount facility hedging derivative
174
-
Option granted to NCI to call upon shares in Karo Platinum (Private) Limited
1 100
-
Forward exchange contracts
247
(370)
1 521
(370)
Level 3: Option granted to NCI to call upon shares in Karo Platinum (Private) Limited
(‘Karo Platinum’)
Refer to
notes 18 and 31
.
T
he
Republic of Zimbabwe
has an option to increase its shareholding in Karo Platinum by 11
.0
% exercisable after
24 months from 30 March 2022, but before 36 months, payable in cash at the current net present value of Karo Platinum at 30 March 2022.
The option represents a financial instrument which is recognised at fair value through profit or loss. At 30 September 2022, the Group
completed an independent reviewed valuation of Karo Platinum. In determining the fair value, the discounted cash flow valuation technique
was used. The following significant inputs were used in determining the fair value:
The initial fair value loss of
US$17.9 million recognised during the interim period ending 31 March 2022 was recognised in the profit or loss of
Karo Zimbabwe Holdings (Private) Limited immediately prior to the acquisition of the controlling interest in Karo Mining Holdings Limited by
the Group. The Group’s proportionate share of the loss is classified in the share of loss of investment accounted for using the equity method
in the statement of profit or loss. Refer to notes 16, 27 and 31.
PGM basket price (6E)
US$/oz
2 140
Base metal basket price
US$/t
15 099
Life of Mine
17 years
Annual throughput
kt
205
6E PGM grade per tonne feed
g/t
3.6
Annual production (6E)
k
oz
194
PGM recovery
%
78% first two years, thereafter 82%
WACC
%
10.3%
Tax holiday
years
First 5
The Monte-Carlo simulation was used in determining the fair value of Karo Platinum at the end of the 36-month period (31 March 2025). The
option value has been determined by averaging the discounted values between month 25 and 36 (the period in which the option can be
exercised).
The following significant inputs were used:
Strike price: US$71.8 million Independently verified net present value of Karo Platinum as at 30 March
2022
using a discounted cash flow model
Valuation of 11.0% of Karo
Platinum at 30
September 2022:
US$59.5 million
Discounted cash flow model
Volatility:
4.4%
Sector volatility (converted to monthly)
Drift:
1.5%
Risk free rate (converted to monthly)
based on the US risk free zero yield
curve at 31 August 2022 based on the Svensson method and includes a
country risk premium for the operations being in Zimbabwe. The country
risk premium for Zimbabwe was sourced from Damodaran
.
Time step:
1.0
Annual time intervals
Discount rate:
0.83%
Converted to monthly
A sensitivity analysis was performed on the option value with the following results in the fair value of the option:
Sensitivity
Option value
US$’000
(Decrease)/increase in profit or loss and equity
US$’000
Discount rate minus 5.0%
16 795
(1
6
)
Discount plus 5.0%
1
6
763
1
6
Volatility minus 10.0%
1
6
299
4
80
Volatility plus 10.0%
1
7 296
(
517
)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
116
33.
FINANCIAL RISK MANAGEMENT (continued)
Estimation of fair
values
The following key inputs were used in determining the fair value of the PGM
discounting
receivable:
202
2
20
21
Platinum
US$/oz
878
976
Palladium
US$/oz
2
113
2
121
Rhodium
US$/oz
13
709
13
380
Gold
US$/oz
1
684
1
779
Ruthenium
US$/oz
440
567
Iridium
US$/oz
3
638
4
105
Metallurgical chrome concentrate
US$/tonne
209
160
US$:ZAR e
xchange rate
17.57
14.55
The fair value of financial instruments that are not traded in an active market (for example, over the counter derivatives) i
s determined by
using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at the
end of each reporting period. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the remaining
financial instruments. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the end of
the reporting period.
T
he carrying value less impairment allowance of trade receivables and the carrying value of trade payables are assumed to appr
oximate their
fair values as the short term effect of discounting is not material. The fair value of financial liabilities for disclosure purposes is estimated by
discounting the future contractual cash flows at the current market interest rate that is available to the Company for similar financial
instrument
s.
T
he
carrying v
alue of financial assets and liabilities at amortised cost approximates its fair value.
34.
RELATED PARTY TRANSACTIONS
AND BALANCES
Accounting policy
A
party is considered to be related to the Group if:
the party has the ability, directly or indirectly through one or more intermediaries, to control the Group or exercise significant
influence over the Group in making financial and operating policy decisi
ons, or has joint control over the Group;
the Group and the party are subject to common control;
the party is an associate of the Group or a joint venture in which the Group is a venturer;
the party is a member of key management personnel of the Group or the Group's parent, or a close family member of such
individual, or is an entity under the control, joint control or significant influence of such individuals;
the party is a close family member of a party referred to in the first bullet point above or is an entity under the control, joint control
or significant influence of such individuals; or
the party is a post-employment benefit plan which is for the benefit of employees of the Group or of any entity that is a related
party of the Group.
Cl
ose family members of an individual are those family members who may be expected to influence, or be influenced by, that indi
vidual in
their dealings with the Group.
In the normal course of the business, the Group enters into various
transactions with related parties. Related part
y
transactions
exist between
shareholders, joint ventures, directors, directors of subsidiaries and key management personnel. Outstanding balances at the year-end are
unsecured and settlement occurs in cash.
All intergroup transactions have been eliminated on consolidation.
202
2
20
2
1
US$’000
US$’000
Loans receivable
(refer to note 16)
Karo Mining Holdings
plc
(before acquisition)
-
8
353
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
117
34.
RELATED PARTY TRANSACTIONS AND BALANCES
(continued)
202
2
20
21
US$’000
US$’000
Trade and other
receivables
(note 21)
Thys and Alta Steenkamp
*
-
188
The Tharisa
Community Trust
-
65
Rocasize Proprietary Limited
31
3
Karo Mining Holdings
plc
((before acquisition)
-
796
Karo Zimbabwe Holdings (Private) Limited
(before acquisition)
-
321
Karo Platinum (Private) Limited
(before acquisition)
-
417
Karo Power Generation (Private) Limited
(before acquisition)
-
146
The Leto Settlement
13
-
Salene Mining Proprietary Limited
13
15
57
1
951
Loan
payable
(note
2
6
)
Leto Settlement
-
542
Trade and other
payables
(note 2
8
)
Karo Zimbabwe Holdings (Private) Limited
(before acquisition)
-
315
Karo Platinum (Private) Limited
(before acquisition)
-
29
Rocasize Proprietary Limited
-
5
7
-
401
Amounts due to Directors
A
Djakouris
18
21
J Salter
2
1
23
O Kamal
13
12
C Bell
23
17
R Davey
20
16
Z Hong
9
9
Lo Wai Man
9
10
113
1
08
Total other payables
113
509
Property loans
payable
Ross Two
-
10
-
Properties Proprietary Limited
*
-
153
Rohcon Engineering Proprietary Limited
*
-
193
PCMQ Proprietary Limited
*
-
199
Thys & Alta Properties Proprietary Limited
*
-
119
-
664
Revenue
Salene Manganese Proprietary Limited
1
035
420
Karo Platinum (Private) Limited
(before acquisition)
-
5
Cost of sales
Rocasize Proprietary Limited
541
511
Other income
Rocasize Proprietary Limited
23
9
Consulting fees received
Salene Manganese Proprietary Limited
45
-
Rocasize Proprietary
Limited
8
14
Salene Chrome
Zimbabwe (Private)
Limited
(before acquisition)
-
54
Karo Mining Holdings plc
(before acquisition)
6
-
Karo Platinum (Private) Limited
(before acquisition)
188
183
Karo Power Generation (Private) Limited
(before acquisition)
7
10
Karo Zimbabwe Holdings (Private) Limited
(before acquisition)
28
10
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
118
34.
RELATED PARTY TRANSACTIONS AND BALANCES
(continued)
202
2
20
21
US$’000
US$’000
Rent paid
PCMQ Proprietary Limited
*
-
23
Thys &
Alta Properties Proprietary Limited
*
-
9
Interest receivable
Karo Mining Holdings
plc
(before acquisition)
112
222
Interest
paid
The Leto Settlement
13
-
Ross Two
-
10
-
Properties Proprietary Limited
*
-
11
Thys & Alta
Properties Proprietary Limited
*
-
4
Rohcon Engineering Proprietary Limited
*
-
14
Dividends paid
Thari Resources Proprietary Limited
-
845
The Tharisa Community Trust
164
253
*
The Group previously disclosed related party
transactions with Thys and Alta Steenkamp
,
PCMQ Proprietary Limited
,
Thys & Alta
Properties Proprietary Limited, Ross Two-10-Properties Proprietary Limited and Rohcon Engineering Proprietary Limited. These related
party relationships have ceased.
Compen
sation to key management:
Salary and
fees
Expense
allowances
Share-based
payments
Provident
fund and risk
benefits
Bonus
Total
202
2
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Non
-
Executive Directors
642
-
-
-
-
642
Executive Directors
1
712
8
828
76
319
2
943
Other key management
1
380
20
817
95
588
2
900
3
734
28
1
645
171
907
6
485
202
1
Non
-
Executive Directors
631
-
-
-
-
631
Executive Directors
1
622
8
3
315
82
356
5
383
Other key management
988
22
1
034
97
220
2
361
3
241
30
4
349
179
576
8
375
Share-based awards to the Directors are disclosed in note 11. Details of each plan are disclosed in note 8. Awards to the key management
in the period under review are as follows:
202
2
Ordinary shares
Opening
balance
Inclusion of
additional
employee
Allocated
Vested
Forfeited
Total
LTIP
*
695 276
145
650
1
319
717
(388
628)
(129
808)
1
642
207
20
21
Ordinary shares
Opening
balance
Resignation
Allocated
Vested
Forfeited
Total
LTIP
**
1
576
158
(272
700)
-
(608
182)
-
695
276
20
2
1
Ordinary shares
SARS
293
919
(50
907)
-
(243
012)
-
-
No SARS were awarded during the year
s
ended 30 September 2022
and 30 September 2021
.
*
Four employees
**
Three employees
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
119
34.
RELATED PARTY TRANSACTIONS AND BALANCES
(continued)
Option to acquire shares in Salene
Manganese Proprietary Limited
On 9 July 2019, the Company
was
granted a call option to acquire a 70.0% shareholding in Salene Manganese Proprietary Limited, a
company incorporated in South Africa. The option was exercisable at the fair market value and consequently had no impact on the Group’s
statement of profit or
loss.
The call option
was
exe
rcisable on or before 14
August
2022
, consequently the option lapsed.
Relationships between parties:
Thari Resources Proprietary Limited
A
former
shareholder of Tharisa Minerals Proprietary Limited
, refer to note
24.
The Tharisa Community Trust and Rocasize Proprietary Limited
The Tharisa Community Trust is a
former
shareholder of Tharisa Minerals Proprietary Limited
, refer to note 24. The Tharisa Community
Trust
owns 100% of the issued ordinary share capital of Rocasize Proprietary Limited.
The Music for the Children Foundation
A Director of the company is a Trustee of the non
-
profit organisation.
Salene Manganese Proprietary Limited and
Salene Mining Proprietary Limited
A director of the Company is also a director of these companies.
The Leto Settlement
Leto Settlement is t
he beneficial shareholder of Medway Developments Limited, a material shareholder in the Company.
Karo Mining Holdings
plc
, Karo Zimbabwe Holdings (Private) Limited, Karo Platinum (Private) Limited
,
Karo Power Generation (Private)
Limited
, Karo Coal Mines (Private) Limited and Karo Refinery (Private) Limited
The Company own
ed
26.8% of the issued share
capital of Karo Mining Holdings
plc before acquiring the controlling interest at 30 March
2022 (refer to note 31). Karo Mining Holdings Limited owns 100% of the issued share capital of Karo Zimbabwe Holdings (Private) Limited,
Karo Power Generation (Private) Limited, Karo Coal Mines (Private) Limited and Karo Refinery (Private) Limited and 85% of the issued
share capital of
Karo Platinum (Private) Limited
.
35.
CONTINGENT LIABILITIES
Diesel rebates
At 30 September 202
2
, the Group had certain
unresolved tax matters. Included in trade and other rec
eivables is an amount of
US$4.6 million (ZAR82.3 million) (2021: US5.5 million (ZAR82.3 million)) which relates to diesel rebates receivable from the South African
Revenue Service (‘SARS’) in respect of the mining operations. SARS rejected diesel claims relating to the period from September 2011 to
February 2018. The Group is taking the necessary action to recover the amount due.
Mining royalty
The Group has
objected and appealed to the assessments issued by SARS imposing an additional mining royalty in relation to the 2015
and 2017 years of assessment in an amount of US$5.7 million (ZAR102.3 million) (2021: US$6.8 million (ZAR102.3 million)) (inclusive of
penalties and interest). Due to the technical nature of the matter at hand, the matter underwent two separate Alternate Dispute Resolution
processes and the matter is now set to be heard at the tax court on 14 August 2023. SARS increased the gross sales value of the PGM
sales to the minimum specified condition (of 150 parts per million) as set out in the legislation by adjusting the average PGM grade on a
linear basis. SARS did not take into account the increase in the associated costs to bring the concentrate to the minimum specified condition
whether on a linear basis or otherwise. This is inconsistent with both past practice by SARS and industry applied norms. The Group objected
and appealed against the assessment on the basis that it is not in terms of the applicable legislation. The Group, together with its legal
adviser, has re-assessed the basis on which it is liable for payment of the mining royalty challenging both the linear basis of grossing up
the sales value and determining the incremental costs which would be incurred in bringing the concentrate to the minimum specified
standard.
In the event that SARS would be successful, the
Group
estimates the incremental mining royalty for the period up to the current year of
assessment to be US$20.0 million (ZAR361.9 million) (2021: US$16.7 million (ZAR250.9 million)), with the amount net of tax estimated to
be US$10.0 million (ZAR180.6 million) (2021: US$12.0 million (ZAR180.6 million)). If the Group is successful with a favourable outcome of
calculating the mining royalty on the re
-
assessed basis, it would result in a refund of past royalty payments with a net inflow to the Group.
The principles being applied have not been tested by either SARS or the judiciary and there is therefore uncertainty on the p
ossible outcome
of the legal process which could lead to an outflow (royalty payable to SARS) or inflow (amount recovered by the Group from SARS).
Furthermore, the time period to reach finality may be protracted. Accordingly, no estimate of the contingent amount receivable has been
made.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
120
35.
CONTINGENT LIABILITIES
(continued)
Rehabilitation provision
The Group’s mining and
exploration activities are subject to extensive environmental laws and regulations. The Group has made, and expects
to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures.
Estimated future rehabilitation costs are based principally on legal and regulatory requirements. Tharisa Minerals Proprietary Limited’s
approved Environmental Management Programme (‘EMPr’) commits the company to completely backfill the pit voids to natural ground level
and restore the pre-mining land potential, namely agricultural land with grazing and wilderness capabilities. The company has evaluated
alternative mine closure strategies building on the establishment of a post-mining economy with socio-economic benefits. An amended
application has been submitted to the Department of Mineral Resources and Energy (‘DMRE’) seeking its approval for a backfill of the pit
voids concurrent with mining only, also called in-pit dumping, which results in a partial void and associated pit lake which is profiled and
‘made safe’ before rehabilitation of the surface with the residual waste rock stockpiles remaining on surface (‘pit-lake option’). In conjunction
with the submission of this application, the company has also engaged with the relevant government departments to ensure their support for
this submission. This application has been submitted supported by the necessary specialty studies. As there is uncertainty as to the
successful outcome of the application, the company has applied a probability weighted factor in calculating the mine closure liability applying
a 60% probability to the successful approval of the pit-lake option. In the alternative, the company has applied a 40% probability to an
alternative ‘make safe’ option with the partial backfilling of the pit whereby the walls of the pit will be profiled at 24 degrees and, with the
passage of time, result in a pit-lake forming in the void. The rehabilitation expense and provision referenced in note 26 has been accounted
for on this basis. The company is confident of the successful outcome in its engagement with the DMRE. No adjustment for any effects on
the company that may result from a complete backfill of the voids, if any, has been made in the financial statements. It is not possible to
determine and measure any additional requirements that may be required as the amended EMP is at an advanced stage through the various
approval levels, hence no provision has been made for these potential additional requireme
nts.
Other
As at 30 September 202
2
, there is no litigation (202
1
: no litigation), current or pending, which is considered likely to have a material adverse
effect on the Group.
Refer to
note 3
6
f
or guarantees
.
36.
CAPITAL COMMITMENTS AND GUARANTEES
20
2
2
20
2
1
US$’000
US$’000
Capital commitments
Authorised and contracted
28
937
30
639
Authorised and not contracted
3
027
1
298
31
964
31
937
The above commitments are with respect to property, plant and equipment and are outstanding at the respective reporting perio
d. All
contracted amounts will be funded through existing funding mechanisms within the Group and cash generated from operations. Balances
denominated in currencies other than the US$ were converted at the closing rates of exchange ruling at 30 September
20
22
.
Guarantees
Tharisa Minerals Proprietary Limited entered into an equipment loan facility of US$3
5
.0 million (202
1
: US$30.0 million) with Caterpillar
Financial Services Corporation. The equipment loan facility is secured by a first notarial bond over the equipment and is guaranteed by the
Company.
Tharisa Minerals Proprietary Limited
guarantees
US$16.6 million (ZAR300.0 million) (2021:
US$20 million (ZAR300.0 million
)
) to Absa Bank
Limited in respect of the Commercial Asset Finance and overdraft
facilities.
The Company guarantees a total of US$12.7 million (ZAR229 million) (2021: US$12.2 million (ZAR183 million)) to third party suppliers
of Tharisa Minerals Proprietary Limited.
An insurance company has provided a guarantee to the Department of Mineral Resources and Energy to satisfy the legal requirem
ents with
respect to environmental rehabilitation and the Group has pledged as collateral its investments in interest-bearing instruments to the
insurance company to support this guarantee. The total value of the guarantee is US$18.7 million (ZAR337.5 million) (2021: US$19.2 million
(
ZAR2
88
.
4
million
)
).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2022
121
36.
CAPITAL COMMITMENTS AND GUARANTEES
(continued)
The Company issued a guarantee to Absa Bank Limited which guarantees the payment of certain liabilities of Arxo Logistics Pro
prietary
Limited to Transnet totalling US$1.
1
million (ZAR19.4 million) (202
1
: US$1.
3
million (ZAR19.4 million)).
The Company issued guarantees limited to US$20.0 million (202
1
: US$
2
0.0 million) as securities for trade finance facilities provided by two
banks to Arxo Resources Limited.
A
guarantee was issued to Lombard Insurance Company Limited which guarantees the payment of certain liabilities of Arxo Logisti
cs
Proprietary Limited to Transnet totalling US$0.
7
million (ZAR12.0 million) (202
1
: US$0.
8
million (ZAR12.0 million)).
The Comp
any and Arxo Metals Proprietary Limited jointly indemnify a third party for any claims which may result from negligence or br
each
in terms of the plant operating agreement between Arxo Metals Proprietary Limited and the third party.
The Company
holds an indirect 100% equity interest in Tharisa Fujian Industrial Co., Limited, the registered capital of which is
US$10.0
million. Up to 30 September 202
2
, US$6.1 million has been paid up.
37.
EVENTS AFTER THE REPORTING PERIOD
Accounting
policies: Events after the reporting period
Assets and liabilities are adjusted for events that occurred during the period from the reporting date to the date of approva
l of the financial
statements by the Board of Directors, when these events provide additional information for the valuation of amounts relating to events existing
at the reporting date or imply that the going concern concept in relation to part or whole of the Group is not appropriate.
On
1 December
2022, the Board has proposed a final dividend of US
4.0
cents per share, subject to the necessary shareholder approval at
the Annual General Meeting.
The Board of Directors is not aware of any matter or circumstance arising since the end of the
financial year that will impact these financial
results.
38.
DIVIDENDS
Accounting policy
: Dividends
Dividends are recognised as a liability in the period they are declared according to IAS 10.
During the period ended 30 September 2022, the Company declared and paid a final dividend of US 5.0 cents per share in respec
t of the
financial year ended 30 September 2021. In addition, an interim dividend of US 3.0 cents per share was declared and paid in respect of the
financial year ended 30 September 2022.
During the period ended 30 September 2021, the Company declared and paid a final dividend of US 3.5 cents per share in respec
t of the
financial year ended 30 September 2020. In addition, an interim dividend of US 4.0 cents per share was declared and paid in respect of the
financial year ended 30 September 2021.
A subsidiary of the Company, Tharisa Minerals Proprietary Limited, declared and paid an ordinary dividend of US
$
2.7
million (2021:
US$4.2 million) during the year ended 30 September 2022. The dividend paid to non-controlling shareholders amounted to US0.2 million
(2021: US$1.1 million).
A subsidiary of the Company,
Arxo Logistics
Proprietary Limited, declared an ordinary dividend of US
$1.0
million (2021:
no dividend
) during
the year ended 30 September 2022.
COMPANY FINANCIAL STATEMENTS
30 September 2022
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
for the year ended 30 September 2022
123
202
2
20
21
Notes
US$’000
US$’000
Revenue
5
21
556
17
685
Dividend income
1
0
021
1
1
000
Interest
revenue
11
535
6
685
Foreign exchange (loss)/gain
(912)
1
172
Operating expenses
7
(
1
7
434
)
(5
847)
Operating profit
3
210
13
010
Finance income
8
73
53
Finance costs
9
(9)
-
Changes in fair
value of financial assets at fair value through profit or loss
20
(5
869)
5 702
(Loss)/p
rofit before tax
(2
595)
18 765
Tax
10
(732)
(3
311)
(Loss)/p
rofit for the year
(3
327)
15 454
Other comprehensive income
Items that
may not be
classified subsequently to profit or loss
-
-
Items that may be classified subsequently to profit or loss
-
-
Other comprehensive income
-
-
Total comprehensive
(loss)/
income for the year
(3
327)
15 454
The notes on pages 127 to 151 are an integral part of these financial statements.
STATEMENT OF FINANCIAL POSITION
as at 30 September 2022
124
202
2
20
21
Notes
US$’000
US$’000
Assets
Non
-
current assets
Investment in subsidiaries
1
1
401 050
305 917
Investment in joint arrangements
1
2
-
4
500
Financial and other assets
1
3
2
589
12
060
Total non
-
current assets
403 639
322 477
Current assets
Financial
and other
assets
1
3
629
874
Other receivables
1
4
4 595
43 062
Cash and cash equivalents
1
5
2
429
17
619
Total current assets
7
653
61 555
Total assets
4
11 292
384 032
Equity and liabilities
Share capital and premium
1
6
345
897
289
818
Other reserve
1
6
47
245
47
245
Retained earnings
1
6
1
5
61
1
43
720
Total equity
4
08 75
3
380 783
Non
-
current liabilities
Deferred taxation
17
124
2
068
Current liabilities
O
ther payables
1
8
2
35
2
1
139
Current taxation
10
63
42
Total current liabilities
2
41
5
1
181
Total liabilities
2
5
39
3
249
Total equity and liabilities
4
11
292
384
032
The financial statements were authorised for issue by the Board of Directors on 1 December 2022.
Phoevos Pouroulis
Michael Jones
Director
Director
The notes on pages 127 to 151 are an integral part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2022
125
Share capital
Share
premium
Other reserve
Retained
earnings
Total equity
Note
US$’000
US$’000
US$’000
US$’000
US$’000
Balance at 1 October 20
20
269
286 660
47 245
51
603
385
777
Total comprehensive income for the year
Profit for the year
-
-
-
15 454
15
454
Total comprehensive income for the year
-
-
-
15
454
15
454
Transactions with owners of the Company
Contributions by and distributions to owners
Issue of ordinary shares
1
6
2
2 887
-
-
2
889
Dividends paid
24
-
-
-
(20
181)
(20
181)
Equity
-
settled share
-
based payments
1
6
-
-
-
(3
156)
(3
156)
Contributions by owners of the Company
2
2 887
-
(23
337)
(20
448)
Total transactions with owners of the Company
2
2 887
-
(23
337)
(20
448)
Balance at 30 September 20
21
271
289 547
47 245
43
720
380
783
Total comprehensive
loss
for the year
Loss
for the year
-
-
-
(3
327)
(3
327)
Total comprehensive
loss
for the year
-
-
-
(3
327)
(3
327)
Transactions with owners of the Company
Contributions by and distributions to owners
Issue of ordinary shares
1
6
29
56
050
-
-
56
079
Dividends paid
24
-
-
-
(23
106)
(23
106)
Equity
-
settled share
-
based payments
1
6
-
-
-
(1
67
6
)
(1
67
6
)
Contributions by and distributions to owners of the
Company
29
56
050
-
(24
78
2
)
31
29
7
Total transactions with owners of the Company
29
56
050
-
(24
78
2
)
31
29
7
Balance at 30 September 202
2
300
345
597
47 245
1
5
61
1
4
0
8
75
3
Companies which do not distribute 70% of their profits after tax, as defined by the
relevant tax law, within two years after the end of the relevant
tax year, will be deemed to have distributed as dividends 70% of these profits. Special contribution for defence at 17% and General Health
System contribution at 1.7%-2.65% for deemed distributions after 1 March 2019 will be payable on such deemed dividends to the extent that
the ultimate shareholders are both Cyprus tax resident and Cyprus domiciled. The amount of the deemed distribution is reduced by any actual
dividends paid out of the profits of the relevant year at any time. This special contribution for defence is payable by the Company for the account
of the shareholders.
The notes on pages 127 to 151 are an integral part of these financial statements.
STATEMENT OF CASH FLOWS
for the year ended 30 September 2022
126
202
2
20
21
Notes
US$’000
US$’000
Cash flows from operating activities
(
L
oss)/p
rofit for the year
(3
327)
15
454
Adjustments for:
Impairment loss
7
10
399
183
Changes in fair value of financial assets at fair value through profit or loss
20
5
869
(5 702)
Dividend income
and interest revenue
5
(21
556)
(17
685)
Finance income
8
(73)
(53)
Finance costs
9
9
-
Foreign exchange
loss/(gain)
912
(1
172)
Tax
10
732
3
311
Equity
-
settled share
-
based payments
7
21
42
(7
014)
(5
622)
Changes in:
Other receivables
332
(804)
Other payables
(463)
818
Cash flows used in operations
(7
145)
(5
608)
Dividends received
*
21
11
650
17
221
Interest revenue received
*
21
47
765
21
394
Income tax paid
10
(2
6
5
5)
(1
239)
Net cash flows
from
operating activities
*
49
615
31
768
Cash flows from investing activities
Additions to
investment in subsidiaries and increase in investment in preference
shares
11
(
28
8
49
)
(7
039)
Additions to
investments
joint venture
12
(4
965)
-
Additions to financial and other assets
13
(9
003)
(2
282)
Repayment of financial and other assets
13
1
122
3
632
Interest received
8
5
2
Net cash flows
used in
investing activities
*
(41
690)
(5
687)
Cash flows from financing activities
Dividends paid
24
(23
106)
(20
181)
Interest paid
9
(9)
-
Net cash flows
used in
financing activities
(23
115)
(20
181)
Net
(decrease)/
increase in cash and cash equivalents
(15
190)
5
900
Cash and cash equivalents at the beginning of the year
17
619
11
719
Cash and cash equivalents at the end of the year
1
5
2
429
17
619
*The dividends received cash in-flows of US$38.6 million previously reported as part of cash flows from investing activities, has been reclassified to
be presented within cash flows from operating activities and disaggregated between dividends received of US$17.2 million and interest revenue of
US$21.4.
The notes on pages 127 to 151 are an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
127
1.
INCORPORATION AND PRINCIPAL ACTIVITIES
company under the Cyprus Companies Law, Cap. 113. The name of the Company was changed from Tharisa Limited to Tharisa plc on 19
January 2012. The registered office is at Sofoklis Pittokopitis Business Center, Office 108-110, 17 Neophytou Nicolaides & Kilkis Street, 8011,
(‘JSE’). On 8 June 2016 the Company listed its ordinary share capital as a standard listing on the main board of the London Stock Exchange
(‘LSE’). On 6 February 2019 the Company listed its ordinary share capital as a secondary listing on the A2X Exchange in South Africa.
The principal activity of the Company is that of an investment holding company with controlling interests in PGM and chrome mining and
.
2.
SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these annual financial statements are set out below. Where an
accounting policy
is specific to a note, the policy is described in the note which it relates to. These policies have consistently been applied to all the years
presented.
2.1.
BASIS OF PREPARATION
Statement of compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards (‘IFRSs’), the Listings
Requirements of the Johannesburg Stock Exchange, the SAICA Financial Reporting Guides issued by the Accounting Practices
Committee, the Financial Reporting Pronouncements of the Financial Reporting Standards Council and the requirements of the Cyprus
Companies Law, Cap. 113. IFRS comprises the standards issued by the International Accounting Standards Board (‘IASB’) and IFRS
Interpretation Committee (‘IFRIC’) as issued by the IASB. Statutory financial statements of the Company were additionally prepared in
accordance with IFRS as adopted by the EU and the requirements of the Cyprus Companies Law, Cap. 113. These have been approved
and issued on the same date and there are no differences in the two sets of financial statements prepared.
These financial statements are the separate financial statements of the Company.
The Company has also prepared consolidated financial statements in accordance with IFRSs for the Company and its subsidiaries
(‘the
Group’). The consolidated financial statements can be obtained from Sofoklis Pittokopitis Business Center, Office 108-110, 17 Neophytou
Nicolaides & Kilkis Street, 8011, Paphos, Cyprus.
Users of these separate financial statements of the Company should read them together with the Group's
consolidated financial statements
as at and for the year ended 30 September 2022 in order to obtain a proper understanding of the financial position, the financial performance
and the cash flows of the Company and its
subsidiaries.
Basis of
measurement
The financial statements are prepared on the historical cost basis, except as otherwise stated in the accounting policies set
out below.
Functional and presentation currency
The financial statements are presented in United States
Dollars (‘US$’) which is the functional and presentation currency of the Company.
Going concern
After making enquiries which include reviews of current cash resources, forecasts and budgets, timing of cash flows, borrowin
g facilities and
sensitivity analyses and considering the associated uncertainties to the Company’s operations, the Directors have a reasonable expectation
that the Company has adequate financial resources to continue in operational existence for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing the financial statements which assumes that the Company will be able to meet its
liabilities as they fall due for the foreseeable future.
Refer to
note 20 for
statements
on the Company’s objectives, policies and processes for managing its capital, details of its financial
instruments, its exposures to market risk in relation to commodity prices and foreign exchange risks, interest rate risk, credit risk, and liquidity
risk.
F
oreign currency translation
Transactions in foreign currencies are translated to the respective
functional currenc
y
of the Company at exchange rates at the dates of the
transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency
at the foreign exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in
the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in
foreign curr
ency translated at the exchange rate at the end of the
year.
Foreign currency gains and losses are reported on a net basis.
Non
-
monetary assets and liabilities denominated in foreign currenc
y
that are measured at fair value are retranslated to the functional currency
at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of
historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are
recognised in profit or
loss.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
128
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1.
S
TANDARDS AND INTERPRETATIONS ADOPTED IN THE CURRENT YEAR
The
Company
has adopted the following new and/or revised standards and interpretations which became effective for the year ended
30 September 2022 for which the nature and effect of the changes as a result of the adoption of these new accounting standards are
described below
:
:
Interest Rate Benchmark Reform
-
Phase 2 Amendments to IFRS 9, IAS 39, IFRS 4, IFRS 7 and IFRS 16
The Amendments focus on the effects on financial statements when an entity replaces the old interest rate benchmark with an
alternative
benchmark rate as a consequence of the global regulatory reform of key interbank offered rates (‘IBORs’). For the transition from an IBOR
benchmark rate with an alternative nearly risk-free interest rate (RFR), the amendments include a practical expedient to require contractual
changes, or changes to cash flows that are directly required by the reform and that the transition from an IBOR benchmark rate to an RFR
takes place on an economically equivalent basis with no value transfer having occurred, to be treated as changes to a floating interest rate,
equivalent to a movement in a market rate of interest.
The Company has IBOR linked preference share investments in subsidiaries and has identified the Secured Overnight Financing R
ate, which
is the recommended US$ Libor alternative, as a replacement of the US$ Libor. At the date of this report, the US$ Libor was still used for
calculating the preference dividends. The US Libor that the Company is exposed to will cease to exist by June 2023. The adoption and initial
application of these amendments had no impact on the Company’s results, but the Company will assess the impact on the balances and
cash flows linked to the rate changes arising from the IBOR reform once the replacement has occurred.
T
he adoption of all other standards, amendments or interpretations had no impact on the results for the year
ended 30 September 2022.
2.2.
STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
The new standards, interpretations and amendments to standards listed below are not effective and have not been early adopted
, but will
be adopted once these new standards, interpretations and amendments become effective. The Company notes the new standards,
amendments and interpretations which have been issued but not yet effective and does not plan to early adopt any of the standards,
amendments and interpretations. There are no other standards that are not yet effective and that would be expected to have a material
impact on the Company in the current or future reporting periods.
Classification of Liabilities as Current or Non
-
current
-
Amendments to IAS 1
Th
e International Accounting Standards Board (IASB) issued Classification of Liabilities as Current or Non
-
current, which amends IAS 1
Presentation of Financial Statements. The amendments affect requirements in IAS 1 for the presentation of liabilities. Specifically, they clarify
a criterion for classifying a liability as non-current. The amendment must be applied retrospectively and is effective for annual periods
beginning on or after 1 January 2023. This amendment is not expected to have a material impact
on the Company.
Annual Improvements to IFRS Standards 2018
-
2020
As part of its process to make non
-
urgent but necessary amendments to IFRS Standards, the IASB has issued the Annual Improvements to
IFRS Standards 2018–2020. The amendments applicable to the Company relate to IFRS 9 and clarifies which fees should be included in
the 10% test for derecognition of financial liabilities.
The amendment must be applied prospectively and is effective for annual periods beginning on or after 1 Ja
nuary 202
2
. This amendment is
not expected to have a material impact on the Company.
Onerous Contracts
–
Costs of Fulfilling a Contract
–
Amendments to IAS 37
In May 2020, the IASB issued amendments to IAS 37 Provisions, Contingent
Liabilities and Contingent Assets to specify which costs an
entity needs to include when assessing whether a contract is onerous or loss-making. The amendments apply a ‘directly related cost
approach’. The costs that relate directly to a contract to provide goods or services include both incremental costs (e.g. the costs of direct
labour and materials) and an allocation of costs directly related to contract activities (e.g. depreciation of equipment used to fulfil the contract
as well as costs of contract management and supervision). General and administrative costs do not relate directly to a contract and are
excluded unless they are explicitly chargeable to the counterparty under the contract. The amendments must be applied prospectively for
annual periods beginning on or after 1 January 2022, to contracts for which an entity has not yet fulfilled all of its obligations at the beginning
of the annual reporting period in which it first applies the amendments (the date of initial application). Earlier application is permitted and
must be disclosed. Since the amendments apply prospectively to transactions or other events that occur on or after the date of first
application, the Company will not be affected by these amendments on transition.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
129
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
2.3.
STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
(continued)
Deferred Tax related to Assets and Liabilities arising from a Single Transaction
–
Amendments to IAS 12
In May 2021, the IASB
issued amendments to IAS 12 Income Taxes which narrow the scope of the initial recognition exception under IAS
12,
so that it no longer applies to transactions that give rise to equal taxable and deductible temporary differences.
Under the
amendments, the initial recognition exception does not apply to transactions that, on initial recognition, give rise to equal
taxable
and deductible temporary differences. It only applies if the recognition of a decommissioning asset and decommissioning liability (or lease
asset or lease liability) give rise to taxable and deductible temporary differences that are not equal.
An entity should apply the amendments to transactions that occur on or after the beginning of the earliest comparative period
prese
nted and
is effective for annual periods beginning on or after 1 January 2023.The amendment is not expected to have a material impact on the
Company.
Reference to the Conceptual Framework
–
Amendments to IFRS 3
Effective for annual periods
beginning on or after 1 January 2022
and must be applied prospectively
. The amendments add an exception to
the recognition principle of IFRS 3 to avoid the issue of potential ‘day 2’ gains or losses arising for liabilities and contingent liabilities that
would be within the scope of IAS 37 Provisions, Contingent Liabilities and Contingent Assets or IFRIC 21 Levies, if incurred separately. The
exception requires entities to apply the criteria in IAS 37 or IFRIC 21, respectively, instead of the Conceptual Framework, to determine
whether a present obligation exists at the acquisition date.
Th
ese
amendment
s
are
not expected to have a material impact on the
Company
.
Disclosure of Accounting Policies
-
Amendments to IAS 1 and IFRS Practice
Statement 2
The IASB has issued amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (IAS 8) to clarify ho
w entities
should distinguish changes in accounting policies from changes in accounting estimates, with a primary focus on the definition of and
clarifications on accounting estimates. This is due to the term "accounting estimate" not being defined and the previous definition of a "change
in accounting estimate" being unclear.
The amendments introduce a new
definition for accounting estimates, clarifying that they are monetary amounts in the financial statements
that are subject to measurement uncertainty.
The amendment must be applied prospectively and is effective for annual periods beginning on or after
1 January 2023. This amendment is
not expected to have a material impact on the Company.
Disclosure of Accounting Policies
–
Amendments to IAS 1
To assist preparers of financial statements, the IASB had previously refined its definition of ‘material’
(effective 1 Jan 2020) and issued
nonmandatory practical guidance on applying the concept of materiality. As the final step of the materiality improvements, the IASB issued
amendments on the application of materiality to the disclosure of accounting policies. The key amendments include requirements for entities
to disclose their material accounting policies rather than their significant accounting policies as well as certain clarifications regarding
accounting policies related to material transactions or ev
ents.
The amendment must be applied prospectively and is effective for annual periods beginning on or after 1 January 2023. This am
endment is
not expected to have a material impact on the Company.
3.
USE OF JUDGEMENTS AND ESTIMATES
The
preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and assumpt
ions
that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses and the accompanying
disclosures, and the disclosure of contingent liabilities. The estimates and associated assumptions are based on historical experience and
various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the
judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from
these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future
periods if the revision affects both current and future periods.
Judgements and estimates made by management in the application of IFRS that have a significant effect on the financial statem
ents and
major sources of estimation uncertainty are
disclosed in each note it relates to.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
130
4.
SHARE
-
BASED PAYMENTS
Accounting policy
Equity settled share
-
based payments to employees and others providing similar services are measured at the fair value of the equity
instruments at the grant date. Details regarding the determination of the fair value of equity settled share-based transactions are set out in
the supporting notes.
The fair value determined at the grant d
ate of the equity settled share
-
based payment is expensed on a straight line basis over the vesting
period, based on the Company's estimate of equity instruments that will eventually vest, with a corresponding increase in the equity. At the
end of each reporting period, the Company revises its estimate of the number of equity instruments expected to vest. The amount recognized
as an expense is ad
justed to reflect the revision of the original estimate.
Equity settled share
-
based payment transactions with parties other than the employees are measured at fair value of the goods and services
received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments
granted, measured at the date the entity obtains the goods or the counterparty renders the service.
Where the Company has the right to elect settlement either
equity set
tled or cash settled, the share
-
based payment transactions will be
treated as equity settled share
-
based payments.
Conditional awards (‘LTIP’) is the grant of shares in the Company where the risks and rewards of share ownership will vest on
specific vesting
dates with the employee subject to certain conditions. LTIPs vest in three equal tranches for the 2020 Award and at the third anniversary of
the grant for the 2021 Award. The award, on vesting, may at the election of the Company, be either cash-settled or share-settled as provided
for in the rules of the Plan.
Appreciation rights (‘SARS’) is the grant of an award by the Company where the employee is, subject to certain conditions, en
titled to receive
the increase in the share value above the award price. The awards vest in two equal annual tranches with the ability to exercise the award at
any time up to five years from the date of the grant. The appreciation in value may, at the election of the Company, be either cash settled or
share settled as provided for in the rules of the Plan. No SARS were issued during the years ended 30 September 2022 and 30 September
2021 and all qualifying SARS awards were vested as at 30 September 2022.
2019 Award
–
third tranche
The sixth award was made on 30 June 2019, comprising LTIPs and SARS. The third (final) tranche vested
at 30 June 2022 for LTIPs while
the second (final) tranche for SARS vested at 30 June 2021.
At 30 September 2022, the Group had the following share
-
based payment arrangements:
2020 Award
–
third tranche
The seventh
award
w
as
made on 30 June 2020, comprising
LTIP
s only. The vesting of these awards is subject to
the following performance
conditions
:
Subject to there being no fatality during the vesting periods and continued employment in good standing for the LTIP’s:
40% of the vesting will be subject to achieving at least the market guidance for PGM production as publicly disclosed and referenced
to the commencement of the respective financial reporting period (it being noted that the vesting period and financial year are not
coterminous);
40% of the vesting will be subject to achieving at least the market guidance for chrome concentrate production as publicly disclosed
and referenced to the commencement of the respective financial reporting period (it being noted that the vesting period and financial
year are not coterminous), adjusted to exclude the production from the Vulcan Plant;
20% of the vesting will be subject to achieving at least 90% of the Vulcan Plant’s nameplate production capacity of 480 kt of in-spec
chrome co
ncentrate production.
202
1
Award
The eight
h
award was made on 8 December 2021 with the measurement period being aligned to the Group’s financial year
-
end of
30 September. This award will vest on the third anniversary of the grant, being 8 December 2024 and is subject to continued employment as
at 8 December 2024.The three-year vesting period is divided into three annual measurement periods at 30 September, the result of each being
aggregated at the end of the vesting period to determine the final vesting percentage. The vesting of these awards is subject to continued
employment in good standing and the following performance conditions
:
33.33% of the vesting will be subject to achieving at least the market guidance for PGM production as publicly disclosed and
referenced to the commencement of the res
pective financial reporting period
;
33.33% of the vesting will be subject to achieving at least the market guidance for chrome concentrate production as publicly
disclosed and referenced to the commencement of the respective financial reporting period;
33.34% of the vesting will be subject to achieving certain strategic measures. All three interim measurement periods will be based
on an equal allocation to:
o
Return on invested capital exceeding the weighted average cost of capital of the Group;
o
Performance against the ESG
p
lan;
o
Tracking on achievement of Vision 2025.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
131
4.
SHARE
-
BASED PAYMENTS
(continued)
202
1
Award
(continued)
The award will be reduced in each annual measurement period by one
-
third for each fatality that occurred during that measurement period.
For avoidance of doubt, if any performance condition is not met in any annual measurement period and consequently is fo
rfeited (either
wholly or partially) as a result of failure to achieve the performance condition, but the performance condition is achieved i
n subsequent
measurement periods the award will vest for that
annual measurement
period as provided.
The awards are subject to the rules governing the Plan and the final discretion of the Tharisa plc Remuneration Committee wil
l prevail should
there be any discrepancy.
LTIP
Valuation of share award at grant date:
First
measurement
period/
tranche
Second
measurement
period/
tranche
Third
measurement
period/
tranche
Seventh issue
-
2020
ZAR11.65
ZAR10.67
ZAR9.66
Eighth issue
-
2021
ZAR2
3
.
83
ZAR2
3
.
83
ZAR2
3
.
83
A reconciliation of the movement in the Group's LTIP in the period
under review is as follows:
Opening
balance
Allocated
Vested
Forfeited
Total
LTIP 202
2
Ordinary shares
4
272 742
5
431
124
(1
861
133)
(853
258)
6
989
475
LTIP 20
21
Ordinary shares
8
166
229
-
(3
516
095)
(377
392)
4
272
742
An expense
of
US$21
thousa
nd
(20
21
: US$
37
thousand
) was recognised in profit or loss.
The fair value
at grant date
of the LTIP awards was determined by present valuing the share price on grant date less the expected
dividends. No LTIP awards were issued during the year ended 30 September 2021.
The following inputs were used
for LTIP grants issued during the year ended 30 September 2022
:
2022
Spot price
R27.00
Dividend yield
4.16
%
The risk
-
free interest rate
(swap yield curve)
5.76%
Forfeiture assumption
–
based on participants’ employee turnover history
1
0
.
63
%
SARS
N
o SARS were issued during the years ended 30 September 2022 and 30 September 2021
. In terms of previous awards, employees may
exercise the SARS within five years from the grant date. No SARS was exercised during the year ended 30 September 2022 and consequently
no expense
(20
21
: US$
5
thousand
) was recognised
.
Number of SARS vested,
not yet exercised:
Number of rights
Vesting date
Expiry date
20
22
20
2
1
30 June 2018
30 June 2022
-
2
121 393
30 June 2019
30 June 2023
617
852
769
859
30 June 2020
30 June 2024
1
305
071
1
806
612
N
umber of share options exercised during the
year:
2
397
593
2
985 289
Weighted average
share price at date of exercise:
ZAR27.76
ZAR25.07
Judgements and estimates
The Group measures the cost of equity
-
settled transactions with employees by reference to the fair value of the equity instruments at the date
at which they are granted. The fair value is determined by present valuing the share price on grant date less the expected dividends and by
using a Binomial Tree model
, using the
aforementioned assumptions.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
132
5.
REVENUE
Accounting policy
Revenue comprises dividend income received from subsidiaries. Dividend income is recognised on the date that the
Company’s right to receive
payment is established.
Revenue also comprises of interest revenue received and calculated on the effective interest method. The interest revenue is recognised when
it accrues to the company.
202
2
20
21
US$’000
US$’000
Dividend
income (
note 21)
12
671
14
221
I
nterest revenue (note 21
)
8
885
3
464
21
556
17
685
The interest revenue represents the accrued preference share dividends from the preference share investments that form part o
f the
net
investments in the Company’s subsidiaries, refer to note 11. The interest revenue is recognised and measured based on the effective interest
method. The interest revenue of US$3.5 million from the prior financial reporting period, has been disaggregated and disclosed separately from
dividend income.
6.
DIRECTORS REMUNERATION
Accounting policy: short term benefits
Liabilities for employee benefits for wages, salaries and annual leave that are expected to be settled within 12 months from
the reporting date
are calculated at undiscounted amounts based on remuneration rates that the Company expects to pay as at the reporting date including related
costs, such as workers compensation insurance and payroll tax. Non-accumulating monetary benefits such as medical aid contributions are
expensed as the benefits are taken by the employees.
The remuneration of the
Directors is set out in the following table:
2022
2021
Directors’
fees
Salary
Bonus
Share
-
based
payment
Total
Directors’
fees
Salary
Bonus
Share
-
based
payment
Total
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Paid by the
Company
:
LC Pouroulis
-
69
10
21
100
-
73
11
42
126
JD Salter
122
-
-
-
122
129
-
-
-
129
A Djakouris
103
-
-
-
103
129
-
-
-
129
OM Kamal
60
-
-
-
60
61
-
-
-
61
C
Bell
122
-
-
-
122
97
-
-
-
97
R Davey
104
-
-
-
104
79
-
-
-
79
ZL Hong
42
-
-
-
42
43
-
-
-
43
SW
M
Lo*
42
-
-
-
42
27
-
-
-
27
VWY Chu*
*
-
-
-
-
-
15
-
-
-
15
Total
595
69
10
21
695
580
73
11
42
706
*
Appointed
on 10 February 2021
*
*
Retired by rotation on 10 February 2021
Directors’ share awards
Details of each plan are
disclosed
in note 4. Non
-
Executive
Directors are not entitled to participate in the Group’s share award plan. The number
of LTIP and SARS awarded to the Executive Director by the Company, are set out in the following tables:
LTIP 202
2
Ordinary shares
Opening
balance
Allocated
Vested
Forfeited
Total
LC Pouroulis
45
461
64
315
(20
837)
(6
867)
82
072
LTIP 20
21
Ordinary shares
LC Pouroulis
97 363
-
(51
902)
-
45
461
SARS 2021 Ordinary shares
LC
Pouroulis
14
919
-
(14
919)
-
-
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
133
7.
OPERATING EXPENSES
202
2
20
21
US$’000
US$’000
Directors remuneration (
note 6)
674
664
Business development
50
190
Equity
-
settled share
-
based payments
21
42
External a
udit
293
242
Consulting and professional
602
880
A
dministration (
note 21)
4
320
3
289
Impairment losses
(note 11)
10 399
183
Listing fees
730
126
Travelling
105
-
Sundry expenses
24
0
231
17 434
5
847
8.
FINANCE INCOME
Accounting
policy
Finance income comprises interest income on funds invested. Interest income is recognised as it accrues using the effective i
nterest
method.
202
2
20
21
US$’000
US$’000
Amortisation of intergroup receivable
68
50
Interest
income
5
3
Finance income
73
53
9.
FINANCE
COSTS
Accounting policy
Finance
costs are recognised in profit or loss using the effective interest method.
-
202
2
20
21
US$’000
US$’000
Interest paid: Cyprus Revenue
Authority
9
-
10.
TAX
Accounting policy
Income tax comprises current and deferred taxes. Income tax is recognised in profit or loss except to the extent that it rela
tes to items
recognised in other comprehensive income or directly in equity, in which case it is recognised in other comprehensive income or directly in
equity, respectively.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted
at the
reporting
date, and any adjustments to tax payable in respect of previous years.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for fin
ancial reporting
purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax rates that are expected to be applied to temporary
differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting
date.
Apart
from certain limited exceptions, all deferred tax assets, to the extent that it is probable that future taxable profits will
be available
against which the asset can be utilised, are recognised. Future taxable profits that may support the recognition of deferred tax assets arising
from deductible temporary differences include those that will arise from the reversal of existing taxable temporary differences, provided
those differences relate to the same taxation authority and the same taxable entity, and are expected to reverse either in the same period
as the expected reversal of the deductible temporary difference or in periods into which a tax loss arising from the deferred tax asset can
be carried back or forward. The same criteria are adopted when determining whether existing taxable temporary differences support the
recognition of deferred tax assets arising from unused tax losses and credits, that is, those differences are taken into account if they relate
to the same taxation authority and the same taxable entity, and are expected to reverse in a period, or periods, in which the tax loss or credit
can be
utilised.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
134
10.
TAX
(continued)
Accounting policy (continued)
The limited exceptions to recognition of deferred tax assets and liabilities are
those temporary differences arising from goodwill not deductible
for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit (provided they are not part of a
business combination), and temporary differences relating to investments in subsidiaries to the extent that, in the case of taxable differences,
the Company controls the timing of the reversal and it is probable that the differences will not reverse in the foreseeable future, or in the
case of de
ductible differences, unless it is probable that they will reverse in the
future.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to
income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but which they intend to settle current
tax liabilities and assets on a net basis or their tax assets and liabilities will be realised
simultaneously.
A deferred
tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is pro
bable
that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and
are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Additional income taxes that arise from
the distribution of dividends are recognised at the same time as the liability to pay the relate
d dividend is established.
In determining the amount of current and deferred tax, the Company takes into account the impact of uncertain tax positions a
nd whether
additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgements
about future events. New information may become available that causes the Company to change its judgement regarding the adequacy of
existing tax liabilities; such changes to tax liabilities will impact tax
expense in the period that such a determination is made.
202
2
20
21
US$’000
US$’000
Corporation tax
–
current year
103
12
Special contribution to the defence fund
–
current year
1
-
Dividend withholding tax
2 572
1
231
2 676
1
243
Deferred tax (
note 17)
(1 944)
2
068
732
3 311
Current tax comprises corporation tax
, deferred tax, dividend withholding tax
and special contribution for defence. Corporation tax is provided
at the rate of 12.5% (2021: 12.5%), dividend withholding tax relating to foreign dividends received at 5.0% and deferred tax at the rate the
temporary difference relates to. Special contribution for defence is provided on passive interest at the rate of 30%. 100% of passive interest
income i
s disallowed in the computation of chargeable income for corporation tax purposes (20
21
:
100%).
202
2
20
21
Tax reconciliation
US$’000
US$’000
(Loss)/p
rofit before tax
(3
327)
18
765
Tax calculated at
12.5% (2021: 12.5%)
(416)
2
346
Tax effect of allowances and income not subject to tax
(1
970)
(2 930)
Tax effect of expenses not deductible for tax purposes
2
385
581
Prior year under provision: tax on notional interest
104
-
Dividend withholding tax
2
572
1
231
Special contribution to the defence fund
1
-
Recognition of deemed interest income for tax purposes
-
15
Tax charge
2 676
1 243
Dividend withholding tax arose on ordinary and preference dividends declared and paid by South African subsidiaries to the Company (refer
to notes 11 and 17). Dividend withholding tax is calculated at a tax rate of 5.0% in terms of the Double Taxation Agreement between Cyprus
and South Africa.
202
2
20
21
Tax pa
yable
US$’000
US$’000
Balance at the beginning of the year
42
38
Current tax charge
2 676
1
243
Payments made
(2
655)
(1
239)
Balance at the end of the year
63
42
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
135
10.
TAX
(continued)
Significant judgement:
Taxes
Judgement is required in determining the liability for income taxes due to the complexity of legislation. There are many tran
sactions and
calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognises liabilities
for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is
different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period
in which such determination is made.
The Company recognises the net future tax benefit related to deferred income tax assets to the
extent that it is probable that the deductible
temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the Company
to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash
flows from operations and the application of existing tax laws.
11.
INVESTMENTS IN SUBSIDIARIES
Accounting policy
Subsidiaries are entities controlled by the
Company. Control exists where the Company is exposed or has rights to variable returns from
its involvement with the entity and has the ability to affect those returns through its power over the investee.
Investments in subsidiary companies are stated a
t cost
less
accumulated
impairment
losses. Impairment losses are recognised as an
expense in the period in which the impairment is identified
.
Accounting policy: impairment of non
-
financial assets
The carrying amounts of the Company's non
-
financial ass
ets are reviewed at each reporting date to determine whether there is any
indication of impairment. If any such indication exists, the asset's recoverable amount is estimated. An impairment loss is recognised
whenever the carrying amount of an asset or its related CGU exceeds its recoverable amount. A CGU is the smallest identifiable asset
group that generates cash flows that are largely independent from other assets and groups. Impairment losses are recognised in profit or
loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the
CGUs (group of units) and then, to reduce the carrying amount of the other assets in the CGU (group of units) on a pro rata
basis.
The
recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. 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 assets. For the purpose of impairment testing, assets that cannot be tested
individually are grouped together into the smallest group of assets that generates cash flows from continuing use that are largely
independent of the cash inflows of the other assets of the
CGU.
I
mpairment losses recognised in prior periods are assessed at each reporting date for any indication that the loss has decreas
ed or no
longer exists. An impairment loss is reversed through profit or loss if there has been a change in the estimates used to determine the
recoverable amount. An impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying
amount that
would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
202
2
20
21
US$’000
US$’000
Unlisted ordinary shares
110
330
20 198
Unlisted preference shares
2
90 720
285 719
401 050
305
917
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
136
11.
INVESTMENTS IN SUBSIDIARIES
(continued)
The following table contains the particulars of all direct subsidiaries of the Company.
Name
Country of
establishment/
incorporation
and operation
Principal
activities
2022
Holding
%
2021
Holding
%
Date of
incorporation/
establishment/
acquisition
Particulars of
issued and paid
up capital and
other securities
Type of entity
Tharisa
Minerals
Proprietary
Limited
South Africa
Mining of
platinum group
metals and
chrome
concentrates
100
74
9 February 2009
500
ordinary
shares of ZAR1
each and 2 632
redeemable
preference
shares of
ZAR0.01 each
Limited liability
company
Tharisa
Investments
Limited
Cyprus
Investment
holding
100
100
2 November
2010
15
12
9
class A
shares of
US$0.01 each
Limited liability
company
Arxo
Resources
Limited
Cyprus
Selling and
distribution of
chrome products
100
100
4 February 2011
1 ordinary share
of EUR1 each
Limited liability
company
Arxo Logistics
Proprietary
Limited
South Africa
Logistics
operations
100
100
1 March 2011
170 ordinary
shares of ZAR1
each
Limited liability
company
Tharisa
Administration
Services
Limited
Cyprus
Management
and
administration
services to other
entities of the
Group and the
Company
100
100
31 May 2011
1
100 ordinary
shares of US$1
each
Limited liability
company
Dinami Limited
Guernsey
Marketing of
chrome products
100
100
30 May 2013
1 000 ordinary
shares of £1
each
Limited liability
company
Arxo Finance
plc
Cyprus
Financing
100
100
29
June 2018
48 000 ordinary
shares of US$1
each and 20
non-cumulative
redeemable
preference
shares of US$1
each
Limited liability
company
MetQ
Proprietary
Limited
South Africa
Manufacturing
100
100
1 October 2019
100 ordinary
shares of ZAR1
each
Limited liability
company
Salene Chrome
Zimbabwe
(Private)
Limited
Zimbabwe
Mining of chrome
concentrates
100
100
31 March 2021
400 ordinary
shares of US$1
each
Limited liability
company
Arxo
Prospecting
(Cyprus)
Limited
Cyprus
Prospecting
100
100
19
April 2021
1 100 ordinary
shares of US$1
each
Limited liability
company
Arxo
Exploration
(Cyprus)
Limited
Cyprus
Exploration
100
100
20 April 2021
1 100 ordinary
shares of US$1
each
Limited liability
company
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
137
11.
INVESTMENTS IN SUBSIDIARIES
(continued)
Name
Country of
establishment/
incorporation
and operation
Principal
activities
2022
Holding
%
2021
Holding
%
Date of
incorporation/
establishment/
acquisition
Particulars of
issued and paid
up capital and
other
securities
Type of entity
Arxo
Technologies
Limited
Cyprus
Research and
development
100
100
30 June 2021
1 000 ordinary
shares of US$1
each
Limited liability
company
Redox One
Limited
Cyprus
Research and
development in
renewable
energy
solutions
100
-
18 April 2022
100 ordinary
shares of US$1
each
Limited liability
company
Skyler Storm
(Private)
Limited
Zimbabwe
Mining and
beneficiation of
chrome
concentrate
100
-
1 December
2021
200 000 ordinary
shares of US$1
each
Limited
liability
company
Karo Mining
Holdings plc
Zimbabwe
Investment
holding company
70
26.8
30 March 2022
45 200 ordinary
shares of US$1
each
Limited liability
company
Tharisa Investments
(Hong Kong)
Limited
, an indirect subsidiary and a
dormant company which was
incorporated
in
Hong Kong
, was
deregistered on 9 September 2022.
Terms of redeemable preference shares of Arxo Finance
plc
During the year ended 30 September 2022, the Company
acquired 5
n
on
-
cumulative redeemable p
reference shares (2021: 2 non
-
cumulative
redeemable preference shares) issued by Arxo Finance plc for a consideration of US$5 million (2021:
US$2 million).
The terms of issue of the class of non
-
cumulative redeemable preference shares for a subscription price of US$1 000 000 per share, of
which US$1 allocated as par value and US$999 999 as a share premium and which entitles the holder(s) thereof to an annual dividend at a
variable rate equal to three - month US$ Libor + 275 basis points, with such dividend payment rights only accruing for as long as there are
sufficient accumulated distributable reserves on the company’s balance sheet after such balance sheet has been subjected to external audit
in any given financial year, as well as an express declaration of dividends by the board of directors, without such dividend declaration arising
as a matter of course simply due to the existence of distributable reserves, as well as redemption of such preference shares at the behest
of the Company or the preference shareholder(s), for the following price:
(i) the original subscription price having been paid for those preference shares;
(ii) all dividends which have been expressly declared and have accrued (but have not been paid); and
(iii)
any other interest arrears.
The
non
-
cumulative redeemable preference shares may be redeemed at the earlier of three years at the election of Arxo Finance plc or
after five years at election of the Company from 31 March 2020. The Company and Arxo Finance plc have no intention to redeem these
preference shares and therefore they are treated by the Company as Investment in Arxo Finance plc. Arxo Finance plc has not declared
any preference dividends during the year ended 30 September 2022 (2021: no preference dividends declared).
Terms of
preference shares of Tharisa Minerals Proprietary
Limited
The preference shares confer on the holder the right to receive out of distributable profits of the subsidiary a cumulative p
referential cash
dividend calculated at the rate of twelve - month US$ Libor + 1% pa, on the basis that it shall be due and payable annually on the dividend
date (30 September). The preference dividend shall, in respect of each preference share which has not been redeemed, be declared and
paid on each dividend date and will be calculated at the dividend rate on the subscription price. The redemption date is the earlier of the
tenth business day after receipt by the preference shareholder of a written notice given by the subsidiary company, which notice the
subsidiary company may give at any time, or the tenth business day after receipt by the subsidiary company of a written notice given by the
preference shareholder, which the preference shareholder may give only after the third anniversary of the subscription date. Three years
since the subscription date have already passed. The preference share investment of US$270.7 million (2021: US$270.7 million) are treated
by the Company as part of the investment in Tharisa Minerals Proprietary Limited as there is no expectation of redemption in the foreseeable
future
.
The preference shares are su
bordinated in favour of the subsidiary’s bank
borrowings.
During the year ended 30 September 2022, US$41.4 million (2021: US$21.4 million) of accrued preference dividends were paid by
Tharisa
Minerals Proprietary Limited. From the prior financial reporting period end 30 September 2021, the accrued dividends were classified as
short-term receivables and no longer part of the investment in Tharisa Minerals Proprietary Limited as the Company expected settlement of
the preference share dividends
in the foreseeable future, refer to note 1
4.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
138
11.
INVESTMENTS IN
SUBSIDIARIES (continued)
Incorporation of Redox One Limited, Skyler Storm (Private) Limited, Arxo Prospecting (Cyprus) Limited, Arxo Exploration (Cypr
us)
Limited and Arxo Technologies Limited
On 18 April 2022, the Company incorporated Redox One
Limited, a company established in Cyprus. The principal activity of Redox One
Limited is the research and development on renewable energy solutions.
On 16 December 2021, the Company incorporated Skyler Storm (Private) Limited, a company
established in Zimbabwe. The principal
activity of Skyler Storm (Private) Limited is the mining and beneficiation of chrome concentrate.
On 19 April 2021, the Company incorporated Arxo Prospecting (Cyprus) Limited, a company established in Cyprus. The p
rincipal activity of
Arxo Prospecting
(Cyprus)
Limited is the prospecting for minerals and metals.
On 20 April 2021, the Company incorporated Arxo Exploration (Cyprus) Limited, a company established in Cyprus. The principal
activity of
Arxo Exploration
(Cyprus)
Limited is the exploration for various metals and minerals.
On 30 June 2021, the Company incorporated Arxo Technologies Limited, a company established in Cyprus. The principal activity
of Arxo
Technologies Limited is to perform research and dev
elopment operations.
Acquisition of 70% equity interest in Karo Mining Holdings
plc (‘Karo Mining’)
Effective 30 March 2022, the Company acquired a controlling interest in Karo Mining by increasing its shareholding to 66.34% of the issued
share capital of Karo Mining. Immediately prior to the acquisition of the controlling interest in Karo Mining, the Company owned 28.28% of
in Karo Mining and was accounted for as a joint venture investment at cost (refer to note 12). The additional 37.96% of the issued share
capital of Karo Mining was acquired from the Leto Settlement, a related party (refer to note 21) for a purchase consideration of US$29.4
million. The purchase consideration was settled through the issue of 13
693
000 new ordinary shares of the Company to the Leto Se
ttlement.
Effective 19 May 2022,
the Company acquired a
loan
receivable from Arxo
Finance
plc
that
was
receivable from Karo Mining in cash at the
value of US$8.5 million. This loan receivable was converted to ordinary shares issued by Karo Mining. Karo Mining issued an additional 38
new ordinary shares to the Company as consideration. The additional shares issued represented 1.21% of the issued share capital of Karo
Mining
which increased
the Company’s
shareholding to
67
.
55
%.
Effective 2 June 2022, Karo Mining issued an additional 44 new ordinary shares for a cash subscription of US$9.9 million to the Company.
The additional shares issued represented 1.29% of the issued share capital of Karo Mining which increased the Company’s shareholding
to 68.84%.
Effective
10
August
2022,
Karo Mining
issued an additional 45 new ordinary shares for a cash subscription of US$10.2 million to
the
Company. The additional shares issued represented 1.22% of the issued share capital of Karo Mining which increased the Company’s
shareholding to 70.0%.
Effective
7
September
2022,
Karo Mining
issued an additional
44 051
new ordinary shares for a cash subscription of US$
44
thousand
to
the Company and the non-controlling shareholder. The Company subscribed to 30 835 ordinary shares while the non-controlling shareholder
subscribed to 13 216 ordinary shares. The shares were subscribed to according to the existing proportionate share of each shareholder.
Th
e cash subscription was receivable from the non
-
controlling shareholder at 30 September 2022.
Acquisition of
26
% equity interest in
Tharisa Minerals Proprietary Limited (‘Tharisa Minerals’)
Effective 16 February 2022
, the Company acquired 20.0% of the issued share capital of
Tharisa Minerals for a purchase consideration of
US$19.9 million (ZAR300.0 million) from Thari Resources Proprietary Limited, a related party (refer to note 21). The purchase consideration
was settled through the issue of 10 695 187 new ordinary shares in the Company. Post the acquisition, the Company owned 94.0% of the
issued ordin
ary shares of Tharisa Minerals.
On 20 May 2022
the Company
purchase
d
the
remaining
6
.0
%
of the issued
ordinary shareholding
of
Tharisa Minerals
from the Tharisa
Community Trust for a purchase consideration of US$5.7 million (ZAR90.0 million) with the purchase consideration being settled through
the issue of 3 208 556 new ordinary shares in th
e Company
.
Acquisition of 100% equity interest in Salene Chrome Zimbabwe (Private) Limited
Effective 31 March 2021, the Company acquired 100% of the issued share capital of Salene Chrome Zimbabwe (Private) Limited (‘
Salene
Chrome’), a company incorporated in Zimbabwe from the Leto Settlement, a related party (note 21) for a cash consideration of US$3.0
million. Salene Chrome holds six special grants on the Great Dyke in Zimbabwe for the prospecting and mining of minerals incl
uding chrome.
The purch
ase consideration was funded from existing cash resources of the Company. The transaction cost was US$0.1
million.
Impairment of investment in MetQ Proprietary Limited
During the year ended 30 September 2022, it became evident that the
operational performance of MetQ Proprietary Limited ('MetQ’) is not
as expected and the Group believes that an impairment indicator is present. The MetQ investment was tested for impairment by using its
value in use. The cost of the investment was US$2.7 million and the recoverable amount of the investment in subsidiary was calculated at
US$1.1 million and consequently an impairment loss of US$1.6 million was recognised in other operating expenses. The discount rate used
within the value in use calculation
was
a rel discount rate
and is
12.6
%.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
139
11.
INVESTMENTS IN SUBSIDIARIES (continued)
Impairment of investment in
Salene Chrome Zimbabwe (
Pr
ivate)
Limited
Effective 1 July 2022, the Zimbabwean government enacted an export ban on chrome
concentrates to support the local beneficiation industry.
Local downstream selling prices of chrome concentrates are unfavourable to Salene Chrome Zimbabwe (Private) Limited and consequently
operations were ceased while allowing the company to evaluate and develop downstream opportunities. The Company believes that the
change in operational circumstances during the year ended 30 September 2022 represents an impairment indicator. The Company’s
investment had a cost of US$8.8 million. The Company performed a value in use calculation and concluded that the recoverable amount of
the investment in subsidiary is zero. The discount rate used within the value in use calculation represents the weighted average cost of capital
and was 10.5%. Consequently an impairment charge of US$8.8 million was recognised in other operating expenses. The impairment is not
tax deductible.
Judgement and estimates: r
ecoverability of investment in subsidiaries and other receivables
The recoverable amounts of the Company’s
investment in subsidiaries and other receivables have been based on cash flow projections as
at 30 September 2022. The internal financial model is based on the known and confirmed resources and circumstances of each investment
and receivable and includes cash flow projections resulting from approved capital projects and the in situ value of the inferred underground
resource, and no future credit losses are expected.
The following
underlying
assumptions were used in the discounted cash flow model:
a discount rate equal to the Group’s weighted average cost of capital;
forecast timing of cash flows reflects actual practices;
a forecast period of nineteen years;
an exchange rate of ZAR16.01:US$1;
spot PGM basket price (US$2 224/oz) and spot chrome concentrate prices (US$200/tonne); and
future ongoing capital requirements were included.
Sensitivity analyses were
performed by adjusting the above assumptions individually and collectively by 90% and 110%.
The recoverable
amount was higher than the carr
ying amount and consequently no impairment or allowance for credit losses has been made.
12.
INVESTMENT IN JOINT ARRANGEMENTS
Accounting policy:
Joint arrangements
The Company applies IFRS 11 to all joint arrangements. Under IFRS 11,
investments in joint arrangements are classified as either joint
operations or joint ventures depending on the contractual rights and obligations of each investor.
Accounting policy:
Joint ventures
Joint ventures are accounted for at cost and are
adjusted for impairments where appropriate in the Company financial statements.
At 30 September 2021 the joint venture investment represented the investment of 26.8% of the issued share capital of Karo Mining Holdings
plc (‘Karo Mining’), a company incorporated in Cyprus. Effective 7 February 2022, the Company acquired an additional 1.58% of the issued
share capital of the Karo Mining joint venture increasing its shareholding to 28.38% for a cash subscription of 22 new ordinary shares totalling
US$5.0 million. Karo Mining’ principal place of business is in Cyprus. The functional and presentation currency of Karo Mining and its
subsidiaries is the US$. The table below details Karo Mining’ interest in subsidiaries as at 30 September 2022 and 30 September 2021 (refer
to note 16 of the consolidated financial statements)
.
Company name
Effective
interest 30
September 2022
Effective
interest 30
September 2021
Country of
incorporation and
principal place of
business
Principal activity
Karo Zimbabwe Holdings (Private) Limited
100%
100%
Zimbabwe
Investment holding
Karo Platinum (Private) Limited
85
%
100
%
Zimbabwe
Platinum mining
, smelting
and refining
Karo Coal Mines (Private) Limited
100%
100%
Zimbabwe
Dormant
Karo Power Generation (Private) Limited
100%
100%
Zimbabwe
Power generation
Karo Refinery (Private )
Limited
100%
100%
Zimbabwe
Dormant
202
2
20
21
Investment in Karo
Mining
US$’000
US$’000
Shares
acquired
4 500
4
500
Additional investment
4
965
-
Cost of the investment prior to the acquisition of the controlling interest at 30 March 2022
9
465
-
Transferred to investment in subsidiary
(9
465)
-
Cost of the investment
-
4
500
During the year ended 30 September 2022, the Company acquired a controlling interest in Karo Mining and capitalised the cost of the
investment in the joint venture to the cost of the Karo Mining subsidiary upon the acquisition. The Company’s effective interest in the issued
share capital of Karo Mining at 30 September 2022 is 70.0% (refer to note 11)
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
140
13.
FINANCIAL AND
OTHER
ASSETS
Accounting policy
Measurement: Financial assets at amortised cost
Financial assets at amortised cost are
initially recognised at fair value, and subsequently carried at amortised cost less any impairment.
Measurement: Financial assets at fair value through profit or loss
The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characte
ristics and the Group’s
business model for managing them.
Financial assets carried at fair value through profit or loss are ini
tially recorded at fair value and transaction costs are expensed in the
statement of profit or loss. Realised and unrealised gains and losses arising from changes in the fair value of the financial assets held at fair
value through profit or loss are inclu
ded in the statement of profit or loss in the period in which they arise.
Derecognition: Financial assets
The
Company
derecognises financial assets only when the contractual rights to cash flows from the financial assets expire, or when it
transfers the financial assets and substantially all the associated risks and rewards of ownership to another entity. Gains and losses on
derecognition are generally recognised in the statement of profit or loss.
Hedge accounting
The Company
does not apply hedge accounting.
Accounting policy: Impairment
Financial asset at amortised cost
In order for a financial asset to be
classified and measured at amortised cost, it needs to give rise to cash flows that are ‘solely payments of
principal and interest’ (‘SPPI’) on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an
instrum
ent level.
The
Company
’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows
.
The business model determines whether cash flows will result from collecting contractual cash flows, sel
ling the financial assets, or both.
Impairment requirements are based on expected credit losses (expected credit loss model). Expected credit losses (‘ECLs’) are
an estimate
of credit losses over the life of a financial instrument, and are recognised as a loss allowance or provision. The amount of ECLs to be
recognised depends on the extent of credit deterioration since initial recognition.
The
Company
applies the expected credit loss model to all debt instruments classified as measured a
t amortised cost, or at fair value through
other comprehensive income, including lease receivables and contract assets.
The
Company
considers both approaches: the general approach and the simplified approach. For trade receivables (not subject to provis
ional
pricing) due in less than 12 months, the Company applies the simplified approach in calculating ECLs. Therefore, the Company does not track
changes in credit risk, but instead, recognises a loss allowance based on the financial asset’s lifetime ECL at each reporting date. The
Company considers its historical credit loss experience, adjusted for forward looking factors that could indicate impairments taking into account
the specific debtors and the economic environment.
The general approach
requires the assessment of financial assets to be split into 3 stages:
Stage 1: no significant deterioration in credit quality. This identifies financial assets as having a low credit risk, and th
e asset is considered to
be performing as anticipated. At
this stage, a 12 month expected credit loss assessment is required.
Stage 2: significant deterioration in credit quality of the financial asset but no indication of a credit loss event. This st
age identifies assets as
under
-
performing. Lifetime
expected credit losses are required to be assessed.
Stage 3: clear and objective evidence of impairment is present. This stage identifies assets as non
-
performing financial instruments. Lifetime
expected credit losses are required to be assessed
.
Once a default has occurred, it is considered a deterioration of credit risk and therefore an increase in the credit risk.
The
Company
considers a wide variety of indicators when assessing the increase in credit risk as well as the probability of the de
fault
happening for impairment purposes. Some indicators considered include: Significant changes in the expected performance and behaviour of
the debtor; past due information; significant changes in external market indicators including market information related to the debtor, existing
or forecast adverse changes in business, financial or economic conditions; an actual or expected significant adverse change in the regulatory,
economic, or technological environment; actual or expected significant internal credit rating downgrade or decrease; actual or expected
significant change in the operating results of the debtor.
The expected credit loss value is determined as the estimated cash shortfall that would be incurred, multiplied by the
probability of the default
occurring
.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
141
13.
FINANCIAL AND
OTHER
ASSETS (continued)
Fair value
hierarchy
2022
US$’000
2021
US$’000
Non
-
current
financial
assets
Right to acquire shares in Karo Platinum (Private) Limited
Level 3
-
5
870
Share
-
based payment receivables from related parties (note 21)
2
589
3
908
Non
-
current other assets
Prepaid investment in Karo Platinum (Private) Limited
Amortised cost
-
2
282
2
589
12
060
Current financial assets
Share
-
based payment receivables from related parties (note 21)
610
856
Shares in Bank of Cyprus Public Co Limited
Level 1
19
18
629
874
The
financial and other
assets
at amortised cost approximate its fair value.
Right to acquire
shares in Karo Platinum (Private) Limited (‘Karo Platinum’)
The Company was granted the right to acquire up to 40% of the issued share capital of Karo Platinum, a company incorporated i
n Zimbabwe,
at a discount to the market value. The asset represented the fair value gain (50% discount to the market value as the project is at a measured
resource and reserve stage) of the discount on the purchase. During the year ended 30 September 2022, the transaction was restructured by
the Company acquiring a controlling interest in Karo Mining Holdings plc (the holding company of Karo Platinum), resulting in Karo Platinum
becoming an indirect subsidiary of the Company (refer to notes 11 and 12. Consequently the right to acquire shares in Karo Platinum was
derecognised
through profit or loss (refer to note 1
1
).
Prepaid investment in
Karo Platinum
As part of the evaluation of the right to acquire shares in Karo Platinum, the Company incurred exploration and evaluation co
sts which have
been capitalised. As part of the acquisition of Karo Mining Holdings plc (refer to note 11), the prepaid investment in Karo Platinum was
capitalised as part of the investment in subsidiaries.
Shares in Bank of Cyprus Public Co Limited
The financial assets at fair value through profit or loss represent shares in Bank of Cyprus Public Co Limited that are marke
table securities
and are valued at market value at the close of business on 30 September 2022 by reference to latest available stock exchange quoted bid
prices.
These f
inancial assets
are measured
at fair value through profit or loss
.
14.
OTHER RECEIVABLES
Accounting policy
O
ther receivables, prepayments
,
deposits and dividends receivable
, are non
-
derivative financial
assets categorised as financial assets
measured at amortised cost.
202
2
20
21
US$’000
US$’000
Accrued d
ividends
(note 21)
913
-
Accrued interest revenue
–
p
reference share dividends
(
note 21)
2
487
41
367
Receivables from related
parties (
note 21)
943
1
532
Deposits and prepayments
95
163
Other
15
7
-
4 595
43 062
The carrying amount of other receivables approximate its fair value.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
142
15.
CASH AND CASH EQUIVALENTS
Accounting policy
Cash and cash
equivalents comprise cash at bank, demand deposits with banks and other financial institutions, and short
-
term, highly liquid
investments that are readily convertible into known amounts of cash and which are subject to insignificant risk of changes in value and a
maturity of three months or less
.
202
2
20
21
US$’000
US$’000
Cash at bank
2
169
17
359
Bank deposits
260
260
2
429
17
619
As at 30
September 202
2
,
US$0.3 million
(202
1
: US
$0.3 million) served as security against
certain credit facilities of the Company and its
subsidiaries. The amounts reflected above approximate their fair values.
16.
SHARE CAPITAL AND RESERVES
Accounting policy
: share capital
The share capital is stated at nominal value. The
difference between the fair value of the consideration received by the Company and the
nominal value of the share capital being issued is taken to the share premium account. Incremental costs directly attributable to the issue of
ordinary shares are recogn
ised as a deduction from equity, net of any tax effects.
When share options are exercised, the Company issues new shares or issues shares from the treasury shares. The proceeds recei
ved net
of any directly attributable transaction costs are credited to
share capital and share premium.
Share capital
30 September 202
2
30 September 20
21
Number of
Shares
US$’000
Number of
Shares
US$’000
Authorised
–
ordinary shares of US$0.001 each
As at 30 September
10
000 000 000
10 000
10
000 000
000
10 000
Authorised
–
convertible redeemable preference
shares of US$1 each
As at 30 September
1 051
1
1 051
1
Issued
Ordinary shares
Balance at the beginning of the year
275
000
000
27
5
275
000
000
275
Issued
during the year
27
596
743
28
-
-
Balance at the end of the year
302
596
743
303
275
000
000
275
Treasury shares
Balance at the beginning of the year
3
715 621
4
6
523
686
6
Transferred as part of management share award plans
(865
243)
(1)
(2
808
065)
(2)
Balance at the end of the year
2
850
378
3
3
715
621
4
Issued and fully paid
299
746
365
300
271
284
379
271
Share premium
Balance at the beginning of the year
271
284
379
289
547
268
476
314
286
660
Issued during the year
28
461
986
56
050
2
808
065
2
887
Balance at the end of the year
299
746
365
345
597
271
284
379
289
547
Total share capital and premium
345
897
289
818
Share capital
During the year ended 30 September 2022, the Company issued 13
693
000
ordinary shares
to The Leto Settlement, a related party, as
consideration for the controlling interest in Karo Mining Holdings (refer to note 11). In addition, the Company issued 10 695 187 and 3 208 556
ordinary shares to Thari Resources Proprietary Limited and The Tharisa Community Trust respectively, both related parties, as consideration
for the acquisition of the non
-
controlling interest in Tharisa Minerals Proprietary Limited (refer to note 11).
During the year ended 30 September 202
2
,
865 243
(20
21
:
2
808 065
) o
rdinary shares were transferred from treasury shares to satisfy the
vesting/
exercise of
Conditional Awards and Appreciation Rights
by the participants of the Tharisa Share Award Plan.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
143
16.
SHARE CAPITAL AND RESERVES
(continued)
Share capital
(continued)
At 30 September 2022
,
2
850 378
(20
21
:
3
715 621
) ordinary shares were held in treasury.
All shares rank equally with regard to the Company's residual assets. The holders of ordinary shares, other than treasury sha
res, are entitled
to rece
ive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company.
Share premium
The share premium represents the excess of the issue price of ordinary shares over their nominal value, to the extent that it
i
s registered at
the Registrar of Companies in Cyprus, less share issue costs. The share premium is not distributable for dividend purposes.
During the years ended 30 September 202
2
and 30 September 20
21
, the increases in the share premium account relate
d to the issue and
allotment of ordinary shares granted.
Other reserve
Other reserve represents the excess of the issue price of the Company’s ordinary shares over the sum of their nominal value a
nd share
premium arising from such issuance, as
registered with the Registrar of Companies in Cyprus.
Retained earnings
The retained earnings includes the accumulated retained profits and lo
sses of the Company and the share
-
based payment reserve. Retained
earnings are distributable for
dividend purposes.
Capital management
The Company
's target is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain futu
re
development of the business in a way that optimises the cost of capital and matches the current strategic business plan. The Board of Directors
monitors both the demographic spread of shareholders, as well as the return on capital. Capital is defined as equity attributable to owners of
the Company. Management is aware of the risks associated to capital management. Capital needs are monitored on a regular basis and
whenever needed management takes steps in an attempt to effectively manage any corresponding risks.
17.
DEFEREED TAX
Accounting policy
Refer to
note 10.
202
2
20
21
US$’000
US$’000
Deferred tax liability
Dividend withholding tax
124
2
068
Reconciliation of deferred tax liability
Balance at the beginning of the year
2
068
-
Temporary differences recognised in
profit or loss in relation to:
Dividend withholding tax
(1
944)
2
068
124
2
068
The deferred tax liability relates to dividend withholding tax raised on accrued dividends amounting to US$2.5 million (2021:
US$41.4 million)
which from 30 September 2021 were classified as short-term receivables, as the Company expects settlement in the foreseeable future. The
accrued dividends attract dividend withholding tax at a rate of 5.0% (2021: 5.0%) (refer to note 10) upon payment. The Company raised the
relevant dividend withholding tax as deferred tax since settlement of the accrued preference dividends is expected within the foreseeable
future.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
144
18.
OTHER PAYABLES
Accounting policy
O
ther payables are non
-
derivative financial liabilities categorised as other financial liabilities.
O
ther payables are recognised initially at fair
value and subsequently measured at amortised cost using the effective interest method.
2022
20
21
US$’000
US$’000
Accruals
36
3
233
Other payables
846
96
Share
-
based payment liabilities to related parties (note 21)
833
-
Payables to related parties (note
21
)
310
810
2 35
2
1
139
The share
-
based payment liabilities arose
from the cash settlement of the
third tranche of the 2019 Award as well as the second tranche of
the 2020 Award (refer to note 4) which has been settled by the relevant subsidiary companies and for which the Company has an obligation
to reimburse the relevant subsidiary companies for this cash settlement. The amounts above are payable within one year from the reporting
period. The e
xposure of the Company to liquidity risk is disclosed in note
20
. The amounts reflected above approximate their fair values.
19.
DIRECTORS INTEREST IN STATED CAPITAL
202
2
20
21
%
%
LC Pouroulis
0.40
0.38
P Pouroulis
2.68
2.90
MG
Jones
0.26
0.25
A Djakouris
0.01
0.02
C Bell
0.02
0.02
Total
3.37
3.57
Where a member of the Board of Directors holds no direct or indirect interest, the director is not reflected in the table abo
ve.
There has been
no change in the Director’s interests in the share capital of the Company between the end of the financial year and the date of the approval of
the financial statements.
20.
FINANCIAL RISK MANAGEMENT
Accounting policy
: classification
The Company classifies its financial instruments in the following categories:
At fair value through profit or loss
At fair value through other comprehensive income
At amortised cost
The Company determines the classification of financial assets at initial recognition. The classification of debt instruments
is driven by the
Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are
held for trading are classified at fair value through profit or loss, for other equity instruments, on the day of acquisition the Company can
make an irrevocable election (on an instrument-by-instrument basis) to designate them as at fair value through other comprehensive income.
Financial liabilities are measured at amortised cost, unless they are required to be measured at fair value through profit or loss (such as
derivatives) or the
Company
has designated to measure them at fair va
lue through profit or loss.
The following table presents the classification of financial instruments:
Financial assets
Classification
Other financial assets
Investment in equity instruments
Fair value through profit or loss
Option to
acquire shares
Fair value through profit or loss
Other receivables
and assets
Amortised cost
Cash and cash equivalents
Amortised cost
Financial liabilities
Classification
Other payables
Amortised cost
T
he Company made an
irrevocable election to classify marketable securities at fair value through profit or loss.
Measurement: Financial assets and liabilities at amortised cost
Financial assets and liabilities at amortised cost are initially recognised at fair value
.
Financial assets are subsequently carried at amortised
cost
less any impairment
while financial liabilities are subsequently carried at amortised cost.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
145
20.
FINANCIAL RISK MANAGEMENT
(continued)
Accounting policy (continued)
Measurement:
Financial assets and liabilities at fair value through profit or loss
Financial assets and liabilities carried at fair value through profit or loss are initially recorded at fair value and transa
ction costs are expensed
in the statement of profit or loss. Realised and unrealised gains and losses arising from changes in the fair value of the financial assets and
liabilities held at fair value through profit or loss are included in the statement of profit or loss in the period in which they arise. Where
management has designated to recognise a financial liability at fair value through profit or loss, any changes associated with the Company’s
own credit risk will be recognised in other comprehensive income.
Decrecognition: Financial assets
The Company derecognises financial assets only when the contractual rights to cash flow
s from the financial assets expire, or when it
transfers the financial assets and substantially all the associated risks and rewards of ownership to another entity. Gains and losses on
derecognition are generally recognised in the statement of profit or lo
ss.
Derecognition: Financial liabilities
The Company derecognises financial liabilities only when its obligations under the financial liabilities are discharged, canc
elled or expired.
The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable, including any non-
cash assets transferred or liabilities assumed, is recognised in the statement of profit or loss.
Hedge accounting
The Company does not apply hedge
accounting.
In the ordinary course of business the Company is exposed to credit risk, liquidity risk, and market risk. This note presents
information about
the Company's exposure to each of the above risks and its objectives, policies and processes for measuring and managing risks. Further
quantitative disclosures are included throughout this note.
The Board of Directors has overall responsibility for the establishment and oversight of the Company's risk management framew
ork.
Credit risk
Credit risk is the
risk of financial loss to the Company if a counterparty to a financial instrument fails to meet its contractual obligations,
and
arises principally from the Company’s financial assets. The most significant exposure of the Company to credit risk is represented by the carrying
amount
of receivables from related parties
, other financial assets
and cash and cash
equivalents.
Financial and other assets and other receivables
The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each party. However, manageme
nt also considers
the demographics of each party including the default risk of the industry and country in which they operate, as these factors may have an
influence on credit risk. In monitoring credit risk, management reviews on a regular basis the ageing and the current and anticipated financial
position and profitability of entities included in loans receivable from related parties and receivables from related parties. The Company
establishes an allowance for credit losses that represents its estimate of expected losses. The main component of this allowance is a specific
loss component that relates to individually significant exposures. At the reporting date, the Board of Directors is of the opinion that other than
the impairment made for the balance owing by Tharisa Investments Limited, none of the other carrying amounts of loans receivable from related
parties and receivables from
related parties are
impaired.
Cash and cash equivalents
The Company limits its exposures on cash and cash equivalents by dealing only with well
-
established financial institutions of high quality credit
standing. At the reporting date, the
majority of the Company’s cash resources was deposited with HSBC based in Hong
Kong.
The maximum exposure to credit risk at the reporting date of the financial statements was:
202
2
20
21
US$’000
US$’000
Non
-
current financial and other
assets
2
589
12 060
Current financial and other assets
54
874
Other receivables
4
594
43 062
Cash and cash equivalents
2
429
17
619
9
666
73 615
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
146
20.
FINANCIAL RISK MANAGEMENT (continued)
Liquidity risk
Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company’
s approach to managing
liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed
conditions, without incurring unacceptable losses or risking damage to the Company’s reputation. Management is aware of the above risk.
Liquidity risk is monitored on a regular basis and management is taking steps deemed necessary in an attempt to manage the corresponding
risk. This excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters. In addition,
financial risk management may not be possible for instances where weakened commodity prices exist, forecast production not being achieved
and funding is not raised.
The following table presents the remaining contractual maturities of the
Company’
s financial liabilities at the end of the reporting period, which
are based on contr
actual undiscounted cash flows
and the earliest date the
Company
can be required to pay:
Contractual undiscounted
cash flow
Within 1 year
or on
demand
Total
Carrying
amount
30 September 202
2
US$’000
US$’000
US$’000
O
ther payables
2
352
2
352
2
352
30 September 2021
O
ther payables
1
139
1
139
1
139
Market
risk
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will
affect the Company's
income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable
parameters, while optimising the return.
Equity price risk
Equity price risk is the risk that changes in equity prices will affect the Company’s income or the value of its investment h
oldings. The maximum
exposure to equity price risk is represented by the carrying amount of investments in subsidiaries as disclosed in note 11 to the financial
statements.
The Board of Directors has performed an impairment assessment of the investments in subsidiaries based on value in use calcul
ation and has
concluded that indications for impairment were present at 30 September 2022. Certain investments were provided for, refer to note 11. The
value in use
calculation uses discounted cash flows of the subsidiaries approved by management.
Interest rate risk
Interest rate risk is the risk that the value of financial
instruments will fluctuate due to changes in market interest rates. The Company's income
and operating cash flows are substantially dependent of changes in market interest rates. Other than cash at bank which attracts interest at
normal commercial rates and investments in preference shares of subsidiary companies, the Company has no other significant interest bearing
financial assets. Management is aware of the above risks. Interest rate risk is monitored on a regular basis and management is taking steps
de
emed necessary in an attempt to manage the corresponding
risk.
At the reporting date the interest rate profile of interest
-
bearing financial instruments were:
Effective
202
2
20
21
Unlisted preference shares
interest rate
US$’000
US$’000
Unlisted preference shares
in Tharisa Minerals Proprietary Limited
12
–
month US
Libor + 1%
270
719
270 719
Unlisted preference shares
in Arxo Finance plc
3
–
month US
Libor
+
2.75
%
20
000
15
000
2
9
0
719
285 719
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
147
20.
FINANCIAL RISK
MANAGEMENT (continued)
Market risk
(continued)
Sensitivity analysis
An increase of 100 basis points in interest
rates at the reporting date would have increased equity and profit or loss by approximately
US$2.7 million (2021: US$2.9 million). This analysis assumes that all other variables and in particular foreign exchange rates, remain constant.
The analysis is performed on the same basis for 30 September 2021. A decrease of 100 basis points in interest rates at the reporting date
w
ould have had the equal but opposite effect to the amounts shown above, on the basis that all other variables remain
constant.
Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in
foreign exchange rates. Currency risk arises
when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Company's functional
currency. The Company is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the exchange
rate movement in South African Rand (‘ZAR’), British Pound (‘GBP’) and Euro (‘€’) against the US$. Management is aware of the above risk.
Currency risk arising from currency fluctuations is monitored on a regular basis and management is taking steps deemed necessary to manage
the corresponding risk.
The following table details the Company’s exposure at the end of the reporting period to currency risk arising from recognize
d assets and
liabilities denominated in a currency other than the functional currency of the Company. For presentation purposes, the amounts of the exposure
are shown in US$, translated using the spot rate at the reporting date. The spot rates used at the reporting date against the US$ are US$:ZAR
18.07
(202
1
: 1
5
.
05
); US$:EUR
1.02
(202
1
: 0.8
6
) and US$:
GBP
0.90
(202
1
: 0.
74
).
202
2
2021
€
ZAR
GBP
€
ZAR
GBP
Amounts in US$’000
Financial assets
19
2
624
-
18
4
763
-
Other receivables
-
1
070
-
9
13
50
Cash and cash equivalents
29
149
132
43
960
24
Other payables
(201)
(632)
(6)
(138)
(814)
-
Current tax liabilities
(63)
-
-
(42)
-
-
(216)
3
211
126
(110)
4
922
74
Sensitivity analysis
A 10% strengthening of the US$ against the currencies disclosed in the previous table at 30 September 20
22
and 30 September 2021
, would
have increased/(decreased) equity and profit or loss by the amounts disclosed in the following table. This analysis assumes that all other
variables, in particular interest rates, remain constant. For a 10% weakening of the US$ against the relevant currency, there would be an equal
and opposite impact on the profit or loss and equity.
P
rofit or loss
and equity
202
2
20
21
US$’000
US$’000
ZAR
(292)
(448)
€
20
10
GBP
(11)
(7)
(283)
(445)
Fair
values
The Board of Directors considered that the fair values of significant financial assets and liabilities approximate to their c
arrying amounts at the
reporting date.
Fair value hierarchy
The carrying value of the Company’s financial instruments at fair value through profit or loss at the end of the reporting pe
riod across the three
levels of the fair value hierarchy defined in IFRS 13, Fair Value Measurement, is represented by the carrying amounts of the financial and other
assets. The fair value is categorised in its entirety based on the lowest level of input that is significant to that fair value measurement. The levels
are defined as
follows:
Level 1
-
quo
ted prices (unadjusted) in active markets for identical assets or
liabilities.
Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as
prices) or indirectly (i.e. derived f
rom
prices).
Level 3
-
inputs for the asset or liability that are not based on observable market data (unobservable inputs).
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
148
20.
FINANCIAL RISK MANAGEMENT (continued)
Fair values (continued)
Fair value
Fair value
202
2
20
21
Valuation
technique
Financial instrument
level
US$’000
US$’000
and key inputs
Financial assets measured at fair value
Right to acquire shares in Karo Platinum
Level 3
-
5
870
Comparable company market
multiple valuation and a Monte Carlo
Simulation model
Investments in equity instruments
Level 1
19 18 Quoted market price for the same
instrument
There have been no transfers between fair value hierarchy levels in the current year.
Fair value gains and losses recognised in the financial instruments during the year:
202
2
20
21
US$’000
US$’000
Changes in fair value of financial
assets at fair value through profit or loss
Investments in equity instruments
1
10
Right to acquire shares in Karo Platinum
(5
870)
5
870
Option to acquire shares
in Salene Chrome Zimbabwe (Private) Limited
-
(178)
(5
869)
5
702
Level 3:
Right
to acquire shares in
Karo Platinum
(Private) Limited
Refer
to note
s
12
and 13
,
the Company had the option to subscribe to up to 40.0% of the issued share capital of Karo Platinum (Private) Limited
(‘Karo Platinum’). The transaction was restructured by the Company acquiring the controlling shareholding in Karo Mining Holdings plc, the
holding company of Karo Platinum (Private) Limited and consequently the fair value gain recognised during the year ended 30 September 2021
was reversed through the profit or loss.
21.
RELATED PARTY TRANSACTIONS
Accounting policy
For the
purpose of these financial statements, a party is considered to be related to the Company if:
The party has the ability, directly or indirectly through one or more intermediaries, to control the Company or exercise significant
influence over the
Company in making financial and operating policy decisions, or has joint control over the Company;
The Company and the party are subject to common control;
The party is an associate of the Company or a joint venture in which the Company is a
venturer;
The party is a member of key management personnel of the Company or the Company's parent, or a close family member of such
individual, or is an entity under the control, joint control or significant influence of such individuals;
The party is a close family member of a party referred to in the first bullet point or is an entity under the control, joint control or
significant influence of such individuals; or
The party is a post-employment benefit plan which is for the benefit of employees of the Company or of any entity that is a related
party of the Company.
Related party transactions exist between shareholders, subsidiaries of the Company, joint ventures and its directors.
202
2
20
21
Revenue
US$’000
US$’000
Dividend
income
(
note 5)
Arxo Logistics Proprietary Limited
1
021
-
Arxo Resources Limited
9
000
11
000
Tharisa Minerals Proprietary Limited
2 650
3 221
Interest
r
evenue
–
preference share dividends
(note 5)
Tharisa Minerals Proprietary
Limited
8 885
3 464
21
556
17
685
Administration fees
(note 7)
Tharisa Administration Services Limited
584
172
Tharisa Minerals Proprietary Limited
77
92
Braeston Proprietary Limited
3
659
3
025
4
320
3
289
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
149
21.
RELATED PARTY
TRANSACTIONS (continued)
202
2
20
21
US$’000
US$’000
Amortised interest on related party receivables
(
note 8)
Tharisa Minerals Proprietary Limited
68
55
Braeston Proprietary Limited
-
(5)
68
50
Non
-
current
share
-
based payment receivables
(
note 13)
Tharisa Administration Services Limited
47
11
Tharisa Minerals Proprietary Limited
660
1
216
Braeston Proprietary Limited
1
589
2
259
Dinami Limited
48
52
Arxo Logistics Proprietary Limited
82
156
Arxo Metals Proprietary Limited
68
97
Arxo Resources Limited
40
52
Ubhova Security Proprietary Limited
5
20
MetQ Proprietary Limited
12
-
Tharisa Fujian Industrial Co., Limited
38
45
2
589
3
908
Current share
-
based
payment receivables
(
note 13)
Tharisa Minerals Proprietary Limited
2
76
659
Braeston Proprietary Limited
293
93
Arxo Logistics Proprietary Limited
35
31
Dinami Limited
-
13
Ubhova Security Proprietary Limited
6
6
Tharisa
Administration Services Limited
-
5
Arxo Metals Proprietary Limited
-
25
Arxo Resources Limited
-
24
610
856
Other receivables from related parties
(
note 14)
Karo Zimbabwe Holdings (Private)
Limited
5
-
Redox One Limited
33
-
Dinami Limited
-
14
Tharisa Administration Services Limited
603
304
Arxo Finance plc
5
-
Skyler Storm (Private)
Limited
86
-
Salene Chrome Zimbabwe (Private) Limited
175
173
Arxo Exploration
(Cyprus)
Limited
1
6
Arxo Prospecting
(Cyprus)
Limited
3
34
Arxo Technologies Limited
6
1
Karo Mining Holdings plc
13
797
Salene Mining Proprietary Limited
13
15
Thys and Alta Steenkamp*
-
188
943
1
532
*
The Company previously disclosed a trade and
other receivable from Thys and Alta Steenkamp. The related party relationship has ceased.
Receivables from related parties are unsecured, interest free and with no fixed repayment dates. The Company has issued finan
cial support
commitments to Tharisa Investments Limited and Tharisa Fujian Industrial Co., Limited confirming that it will not demand repayment of
outstanding balances, until the entities are in a position to repay their balances.
Receivables from related parties include a share based payme
nt asset of US$
2.6
million (202
1
: US$
4.8
m
illion
) for the reimbursement
for the
settlement of the portion of the
LTIP and SARS awards
on behalf of subsidiary companies
.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
150
21.
RELATED PARTY TRANSACTIONS (continued)
202
2
20
21
US$’000
US$’000
Dividends
receivable
(note 14)
Arxo Logistics Proprietary
Limited
913
-
Accrued interest revenue
–
p
reference share dividends
receivable
(note 14)
Tharisa Minerals Proprietary Limited
2 487
41
367
3 400
41
367
Payables to related
parties
(note 18)
Braeston Proprietary Limited
158
632
Tharisa Minerals Proprietary Limited
4
41
Arxo Resources Limited
6
-
Karo Platinum (Private) Limited
29
29
197
702
Amounts due to Directors
A
Djakouris
18
21
J Salter
21
23
O Kamal
13
12
C Bell
23
17
R Davey
20
16
Z Hong
9
9
S Lo Wai Man
9
10
113
108
310
810
Current share
-
based payment
payables
(note 18)
Tharisa Minerals Proprietary Limited
251
-
Arxo
Logistics Proprietary
Limited
27
-
Ubhova Security Proprietary Limited
4
-
Braeston Proprietary Limited
488
-
Dinami
Limited
15
-
Tharisa Administration Services Limited
5
-
Arxo Metals Proprietary Limited
24
-
Arxo Resources
Limited
19
-
833
-
Purchase consideration for the acquisition of non
-
controlling interest
in
Tharisa Minerals
Proprietary Limited:
Thari Resources Proprietary Limited
19
908
-
The Tharisa Community Trust
5
719
-
Purchase
consideration for the acquisition o
f the
controlling interest
and additional interest
in
Karo Mining Holdings plc
7 February 2022
–
from Leto Settlement
4
965
30 March 2022
–
from
Leto Settlement
29
445
-
19 May 2022
–
from
Karo Mining
8
577
-
2 June 2022
–
from
Karo Mining
9
931
-
10 August 2022
–
from
Karo Mining
10
156
-
7 September 2022
–
from Karo Mining
31
-
Option to acquire shares in Salene Manganese Proprietary Limited
On 9 July 2019, the Company was
granted a call option to acquire a 70.0% shareholding in Salene Manganese Proprietary Limited, a company
incorporated in South Africa. The purchase consideration to acquire 70.0% of the shareholding would have been equal to 70.0% of the market
value of Salene Manganese Proprietary Limited. Salene Manganese Proprietary Limited’s principal activity is a manganese exploration and
mining company. Salene Manganese Proprietary Limited purchased a Mining Right issued over the farm Macarthy 559, Kuruman district in
South Africa. The Mining Right is for the mining of iron ore and manganese ore. The call option lapsed on 14 August 2022.
Guarantees and financial support commitments to related parties
The Company has issued the following guarantees with
regards to related parties:
The Company issued a guarantee limited to US$20.0 million (202
1
: US$20.0 million) as a security for trade finance facilities provided by a bank
to Arxo Resources Limited.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2022
151
21.
RELATED PARTY TRANSACTIONS (continued)
Guarantees and financial support commitments to related parties
(continued)
The Company issued a guarantee to A
bsa
Bank Limited which guarantees payment of certain liabilities of Arxo Logistics Proprietary Limited to
Transnet
amounting to US$1.1 million
(
ZAR19.4 million) (2021: US$1.3 million (ZAR19.4 million)).
The Company has issued financial support commitments to its subsidiaries, Tharisa Investments Limited and Tharisa Fujian Indu
strial Co. Ltd,
confirming that it will continue to provide funding to the companies in order to enable the entities to continue as going concerns and meet all
their liabilities as they fall due.
The Company and Arxo Metals Proprietary Limited jointly indemnify a third party for any claims which may result from
negligence or breach in
terms of the plant operating agreement between Arxo Metals Proprietary Limited and the third party.
Tharisa Minerals Proprietary Limited entered into an equipment loan facility of US$3
5
.0 million (202
1
: US$30.0 million) with
Caterpillar Financial
Services Corporation. The equipment loan facility is secured by a first notarial bond over the equipment and is guaranteed by
the Company.
The Company guarantees
a total of US$1
2
.
7
million (ZAR2
29
million) (2021: US$12.2 million (ZAR183 million)) to third party suppliers
of Tharisa Minerals Proprietary Limited.
The Company and Arxo Metals Proprietary Limited jointly indemnify a third party for any claims which may result from negligen
ce or breac
h in
terms of the plant operating agreement between Arxo Metals Proprietary Limited and the third
-
party.
The Company issued guarantees
limited to US$0.5 million (ZAR9.0 million) (2021: US$0.6 million (ZAR9.0 million)) as securities for
bank facilities to be provided to MetQ Proprietary Limited.
Relationship between related parties and entities
A Djakouris, J Salter, O Kamal, C Bell, R Davey, Z Hong and S Lo Wai Man
are
directors of the Company.
Refer to note 11 for details of the Company’s subsidiaries.
The Leto Settlement is the beneficial shareholder of Medway Developments Limited, a material shareholder in the Company.
Thari Resources Proprietary Limited and The Tharisa Community Trust
were former non
-
controlling shareholders of Tharisa Minerals
Proprietary Limited.
A director of the Company is also a director of Salene Mining Proprietary Limited.
22.
CONTINGENT LIABILITIES
As at 30 September 202
2
, there is no litigation (20
21
: no
litigation), current or pending, which is considered likely to have a material adverse
effect on the Company. The Company had no other contingent liabilities at 30 September 202
2
(20
21
: no contingent liabilities).
23.
EVENTS AFTER THE REPORTING PERIOD
Ac
counting policy
Assets and liabilities are adjusted for events that occurred during the period from the reporting date to the date of approva
l of the financial
statements by the Board of Directors, when these events provide additional information for the valuation of amounts relating to events existing
at the reporting date or imply that the going concern concept in relation to part or whole of the Company is not appropriate.
During October 2022, the Company received notice from Tharisa Minerals Proprietary Limited of its intention to redeem a porti
on of the
Redeemable Cumulative Preference Shares. The redemption will impact the Company’s investment in Tharisa Minerals Proprietary Limited in
the statement of financial position.
On
1 December
202
2
, the Board has proposed a final dividend of US
4
cents
per share, subject to the necessary shareholder approval at the
Annual General Meeting.
The Board of Directors are not
aware of any matter or circumstance arising since the end of the financial year that will impact these financial
results.
24.
DIVIDENDS
Accounting policy
Dividends are recognized as a liability in the period they are declared according to
International Accounting Standard 10.
During the period ended 30 September 2022, the Company declared and paid a final dividend of US 5.0 cents per share in respec
t of the financial
year ended 30 September 2021. In addition, an interim dividend of US 3.0 cents per share was declared and paid i
n respect of the financial year
ended 30 September 2022.
During the period ended 30 September 2021, the Company declared and paid a final dividend of US 3.5 cents per share in respec
t of the financial
year ended 30 September 2020. In addition, an interim dividend of US 4.0 cents per
share was declared and paid in respect of the financial year
ended 30 September 2021.