REPORTS AND
CONSOLIDATED FINANCIAL STATEMENTS
30 September 2023
CONTENTS Page
2
Consolidated F
inancial
S
tatements
Management
Report
3
Chief Executive Officer and the
Chief Finance Officer
Responsibility Statement
20
Statement by the Members of the Board of Directors and Company
Officials
21
Independent Auditor’s Report
22
Consolidated
S
tatement of
Profit or L
oss and
O
ther
C
omprehensive
I
ncome
29
Consolidated
S
tatement of Financial Position
30
Consolidated S
tatement of Changes in Equity
31
Consolidated S
tatement of Cash Flows
33
Notes to the
Consolidated
Financial Statements
34
Company financial statements
Statement of
Profit or
L
oss and
O
ther
C
omprehensive
I
ncome
95
Statement of Financial Position
96
Statement of Changes in Equity 97
Statement of Cash Flows
98
Notes to the Financial Statements 99
Corporate Governance Report
126
MANAGEMENT REPORT
for the year ended 30 September 2023
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 2023.
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 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 75% shareholding in Karo Mining Holdings
plc which has an indirect 85% interest in a development stage PGM asset, located on the Great Dyke in Zimbabwe.
OPERATIONAL REVIEW
Operational highlights
Lost Time Injury Frequency Rate (‘LTIFR’) of 0.11 per 200 000-man hours worked
Chrome production at 1 580.1 kt (FY2022: 1 582.7 kt)
o Average metallurgical grade chrome concentrate prices up 25.8% at US$263/t (FY2022: US$209/t)
PGM production at 144.7 koz (FY2022: 179.2 kt)
o Average PGM basket price retreated by 26.2% with average prices received at US$1 893/oz (FY2022: US$2 564/oz)
The continued weakening of PGM prices and macro-economic factors has resulted in a prudent and strategic decision to extend the Karo Platinum
Project timeline for commissioning by 12 months to June 2025, with the opportunity to accelerate the timeline as market conditions become more
favourable
Group cash on hand increased to US$269.0 million (including restricted cash) with debt of US$139.7 million, resulting in a net cash position of
US$129.4 million
Production guidance for FY2024 is set between 145 koz and 155 koz PGMs (6E basis) and 1.7 Mt to 1.8 Mt of chrome concentrates
Tharisa Minerals
Tharisa Minerals is wholly owned by the Company and is uniquely positioned as a significant co-producer of both PGMs and chrome concentrates. Tharisa
Minerals’ core asset is the Tharisa Mine, situated near the town of Rustenburg in the Northwest Province of South Africa on the Western Limb of the
Bushveld Complex which is 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. The mining right was granted on 19 September 2008 for an initial period of 30 years, providing
access to five MG Chromitite Layers, which outcrop with a strike length of approximately 5 km. The mined reef is processed through innovative engineering
at two separate integrated plants, extracting both PGMs and chrome concentrates. 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
PGM tails. The primary chrome production is metallurgical grade which is used principally in the manufacture of stainless steel.
Operating in parallel, the separate 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 enables 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 in events such as load curtailment). The unique
Vulcan Plant processes the waste streams from the two primary plants for the extraction of ultra fine chrome and provides low cost chrome concentrate,
lowering our unit cost and minimising our tailing footprint.
The 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 polymetallic products have ensured that it is well placed to manage commodity price volatility. Its
dual revenue stream provides a natural hedge against different commodity cycles with the products used in diverse sector applications and geographics.
The Tharisa Mine is a world-class, long-life asset that underpins our business and will continue to provide a sustainable, low-cost platform for multiple
generations to come.
MANAGEMENT REPORT
for the year ended 30 September 2023
4
Key Operating Numbers
Year ended
30 Sep 2023
Year ended
30 Sep 2022
Year on year
movement %
Reef mined
kt
4
177.3
5
505.4
(24.1)
PGMs produced (6E)
koz
144.7
179.2
(19.3)
PGMs
sold
(6E)
koz
144.0
168.3
(14.4)
Chrome concentrates produced (excluding third party)
kt
1
580.1
1
582.7
(0.2)
Chrome concentrates
sold
(excluding third party)
kt
1
530.6
1
526.0
0.3
Average PGM basket price
US$/oz
1
893
2
564
(26.2)
Average metallurgical grade chrome concentrate contract price
US$/t
263
209
25.8
The decline in reef mined primarily emanates from access restrictions to the open pit due to limitations on mining activities in close proximity to the nearby
community, adverse weather conditions experienced as well as the processing of suboptimal reef horizons which were supplemented by purchased ROM
ore to maintain plant throughput. A mining contractor was awarded a three-year contract to remove waste thereby addressing the backlog and ensuring
access to the reef horizons in the future. The stripping ratio being the ratio measured in m
3
to m
3
at which waste and inter-burden are removed, relative to
ore mined, remained constant at 12.8 m
3
: m
3
. With the waste mining contractor established on site it is envisaged that there will be a recovery in waste
mining volumes for FY2024. The constraints in the mining are being addressed however, in the interim, Tharisa Minerals will continue to purchase third
party ROM ore to maintain plant throughput over the short-term. A comprehensive study on underground portal development is underway, which addresses
ore flexibility, waste removal and proximity limitations. The Company intends to cease ROM ore purchases from FY2025 onwards.
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, resulting 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 pull during smelting, reducing base metal refining requirements.
To enhance chrome recoveries a third high-volume plant, the Vulcan Plant, processes live tailings to further enhance beneficiation of the Tharisa Mine’s
chrome production 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 and design of the Vulcan Plant was developed entirely in-house by the R&D team to extract the ultra-fine chrome from tailings.
Sales
30 September
202
3
30 September
20
22
Change
%
PGM basket price
US$/oz
1
893
2 564
(26.2)
PGM basket price
ZAR/oz
34
107
40 437
(15.7)
PGM ounces sold
koz
144.0
168.3
(14.4)
42% metallurgical grade chrome concentrate contract price
US$/t
263
209
25.8
42% metallurgical grade chrome concentrate contract price
ZAR/t
4
840
3 345
44.7
Metallurgical chrome concentrate sold (including third party)
kt
1
506.5
1
405.5
7.2
Average exchange rate
ZAR:US$
18.2
15.8
15.2
The PGM concentrate is sold to precious metal refiners in South Africa in terms of offtake agreements, the terms of which are typically volume based.
There are no evergreen agreements. Tharisa Minerals is paid a variable percentage of the contained PGMs, and base metals contained within each tonne
of concentrate based on prevailing market prices.
Metallurgical grade chrome concentrates are marketed and sold by a fellow subsidiary – Arxo Resources Limited (‘Arxo Resources’), a Cypriot registered
commodities trading company and wholly owned by the Company – to customers primarily in China and Indonesia as an input into the manufacture of
stainless steel. The chrome market is a ‘spot’ market, and the sales are priced on a CIF Main Ports China basis. Short to medium term volume-based
sales contracts are in place for part of the chrome production with pricing derived from spot market prices. Of the chrome concentrate sales of 1.53 Mt,
211.3 kt (13.8%) comprised higher margin specialty chemical and foundry-grade chrome concentrates. The higher-value specialty chrome concentrates
typically command a premium of US$30/t to US$50/t and are distributed globally.
Arxo Resources also markets and sells third party chrome concentrates.
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 2023
5
Arxo Metals
Arxo Metals Proprietary Limited (‘Arxo Metals’) is the beneficiation, research, and development arm of the Group. Arxo Metals conducts extensive research
into technologies and downstream beneficiation opportunities that can improve yields and recoveries. Its core focus is creating increased value PGM and
chrome products through expanding and optimising the Group’s processing operations.
Arxo Metals owns the Challenger Plant, which is integrated into Tharisa Minerals’ plant circuit at the feed stage and is dedicated to producing specialty
grade (chemical-grade and foundry-grade) concentrates. Specialty-grade concentrates carry more stringent specifications and, therefore, command a
higher selling price. Arxo Metals produced 72.6 kt of chemical-grade chrome concentrate (2022: 80.8 kt) and 11.8 kt of foundry-grade chrome concentrate
(2022: 21.6 kt) in FY2023.
Arxo Metals operates Sibanye Stillwater’s K3 UG2 chrome plant and markets and sells the UG2 chrome concentrate produced. The chrome production
for FY2023 from the K3 UG2 chrome plant improved to 201.9 kt versus 188.2 kt in FY2022.
Arxo Metals operates a comprehensive beneficiation site which includes a 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 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.
In the year under review, Arxo Metals made great strides in furthering its objectives of finding opportunities in the energy space. As such, the Arxo Metals
Renewable Energy Centre (AMREC) was established, focusing on energy storage solutions using our commodities, including long-duration scalable
storage solutions.
Arxo Resources
Arxo Resources, with an established platform of global customers, including stainless steel and ferrochrome producers and commodity traders, has an
offtake agreement to purchase the metallurgical-grade chrome concentrate produced by Tharisa Minerals and markets and sells the concentrate 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 creates an
excellent platform for additional sales of third-party products.
Arxo Logistics
Arxo Logistics Proprietary Limited (‘Arxo Logistics’), a company incorporated in South Africa, 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 its off takers 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 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 and the Durban ports, both in South Africa, and Maputo
Harbour, in Mozambique.
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 provided third-party logistics services during the year under review.
MetQ
MetQ Proprietary Limited (‘MetQ’), a South African-based company, specialises in manufacturing and distributing 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.
Research and development is the keystone to MetQ’ s success and ensures future growth.
MetQ supplies spirals to the Tharisa Group operations and other engineering equipment required by the Group while expanding its footprint to third-party
customers in multiple commodities and jurisdictions.
Development projects
Tharisa’s development pipeline has been focused on developing the Karo Platinum Project.
MANAGEMENT REPORT
for the year ended 30 September 2023
6
Karo Mining Holdings
Karo Platinum (Private) Limited (‘Karo Platinum’), a company incorporated in Zimbabwe. Karo Mining Holdings plc (“Karo Mining’) (85%) and Generation
Minerals (Private) Limited (15%), the Republic of Zimbabwe’s special purpose vehicle (SPV), holds a Mining Lease covering an area of 23 903 ha. It 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’s 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 tarred roads and power access in the project area.
The Karo Project area is located on both the eastern and western flanks of the Great Dyke, which hosts the Main Sulphide Zone ('MSZ'). There is no
outcrop as the mafic and ultramafic rocks weather easily to black cotton soil. The area is underlain by both the mafic and ultramafic sequences dipping at
20° to the east on the western side of the Great Dyke and 32° to the west on the eastern side of the Great Dyke. The MSZ is estimated to be approximately
700 m deep at the southern end of the tenement, up to 1 000 m deep in the centre, and 600 m deep in the northern end of the tenement.
Construction at the Karo Project officially commenced on 7 December 2022. A rapid construction timeline was targeted, with the first ore in mill set to be
delivered by June 2024, with the first concrete poured in June 2023. In the same month, open-pit pilot mining commenced to optimise the mining methods
and produce ore to further test and refine metallurgical processing. Karo Platinum will process approximately 2.5 Mtpa of ore at nameplate capacity and
produce 190.0 kozpa of PGMs (6E basis) from phase one which accesses open pits. The Company has an effective 63.75% economic interest in Karo
Platinum.
One LTI was recorded on the project for the year under review.
The Company committed US$135 million to invest as its equity in the project with the intention to debt fund the balance of ~US$260 million. As part of the
funding solution some US$36.8 million was raised through a US$-denominated structured debt instrument that was successfully listed on the Victoria Falls
Stock Exchange. The bond was guaranteed by the Company and attracted both domestic and international institutional investors. With the depressed
PGM pricing environment and macro-economic factors, a prudent and strategic decision has been taken to extend the Karo Platinum Project timeline for
commissioning by 12 months to June 2025, with the opportunity to accelerate the timeline as markets become more favourable.
Redox One
Redox One Limited (“Redox One’), a company incorporated in Cyprus and a wholly owned subsidiary of the Company, is dedicated to pioneering a
sustainable energy future by delivering safe, reliable, cost-effective, large-scale energy storage solutions to industries, communities and nations. The
objective is to accelerate the clean energy transition with iron-chromium flow battery technology, resulting in long-term storage solutions for the global
energy crisis.
PRODUCTS
The Tharisa Mine produces the following products:
PGM concentrate: The major elements of the PGM concentrate are platinum, followed by palladium and rhodium.
Metallurgical grade chrome concentrate: 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: 44.0% to 46.0% Cr
2
O
3
with the SiO
2
lower than 1.0%.
Foundry grade chrome concentrate: 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 55.
FINANCIAL OVERVIEW
The results of the Group have been audited and the auditors have expressed an unqualified audit opinion.
Key financial metrics
30 September
2023
30 September
2022
Change
%
Revenue
US$’000
649
893
685
996
(5.3)
EBITDA
US$’000
136
8
1
2
237
319
(42.
4
)
Profit before tax
US$’000
114
3
4
0
220
223
(48.1)
Earnings per share
US$ cents
27.4
53.8
(49.1)
Free cash flow
US$’000
78
988
68
662
15.0
Return on invested capital
%
10.
5
23.5
(5
5
.
3
)
Total debt
US$’000
139
656
62
884
122.1
Net cash
US$’000
129
357
80
416
60.9
Net debt/EBITDA
(0.95)
(0.3)
-
Net debt/equity
%
(19.2)
(13.0)
-
Exchange rate (ZAR:US$)
-
average
18.
2
15.8
1
5
.
2
The ZAR:US$ volatility remained elevated during the financial year ranging between a midpoint of ZAR18.1 and a lower range of ZAR16.8. The average
ZAR:US$ exchange rate was ZAR18.2 (2022: ZAR15.8) while the closing exchange rate was ZAR18.91 (2022: ZAR18.07).
MANAGEMENT REPORT
for the year ended 30 September 2023
7
Segmental analysis
The contribution to revenue and gross profit from the respective segments is summarised below:
30 September 2023
30 September 2022
US$ million
PGM
Chrome
Agency
and
trading
Manufac
turing
Total
PGM
Chrome
Agency
and
trading
Manufact
uring
Total
Revenue
198.5
390.0
56.0
5.4
649.9
346.8
295.2
40.5
3.5
686.0
Cost of sales
(153
.
8)
(287
.8
)
(50
.7
)
(4
.3
)
(496.6)
(194.1)
(205.8)
(37.2)
(3.2)
(440.3)
Manufacturing
(153
.2
)
(177.0)
(37.3)
(4
.3
)
(371.8)
(193.3)
(90.8)
(21.2)
(3.2)
(308.5)
Selling costs
(0.6)
(78.7)
(9.0)
-
(88.3)
(0.8)
(69.5)
(9.2)
-
(79.5)
Freight services
-
(32.1)
(4.4)
-
(36.
5
)
-
(45.5)
(6.8)
-
(52.3)
Gross profit
44.7
102.2
5.3
1.1
153.3
152.7
89.4
3.3
0.3
245.7
Gross profit margin
22.5
26.2
9.5
20.4
23.6
44.0%
30.3%
8.1%
8.6%
35.8%
Sales volumes
144.0
koz
1
5
30
.
6
kt
187.2 kt
168.3
koz
1
526.0
kt
186.3 kt
The basis of the allocation of shared costs was revised to 55.0% for chrome (2022: 30.0%) and 45.0% for PGMs (2022: 70.0%). The basis of the allocation
of shared costs is driven by relative sales values at Tharisa Minerals for each segment.
PGM revenue decreased by 42.8% as a result of the 26.2% decrease in the PGM basket price from US$2 564/oz during FY2022 to US$1 893/oz. The fall
in PGM prices primarily emanated from the correction of the basket price from unprecedented highs during 2020 – 2021. In addition, sales volumes
decreased by 14.4%. The decrease in prices may be further attributed to the decline in PGM demand as a result of the gradual phasing out of Internal
Combustion Engines as part of the global initiative to reduce greenhouse gas emissions. An uptick in PGM demand is expected in the short to medium-
term as result of expected supply deficits. The primary driver of the anticipated increase in PGM demand is the hydrogen economy.
During FY2023, rhodium traded at an average price of US$8 576/oz, a decrease of 42.9% from an average price of US$15 018/oz during FY2022. A
26.4% decrease in the average price of palladium was observed from US$2 108/oz during FY2022 to US$1 552/oz for the current financial year
Total chrome revenue increased by 32.1% primarily due to the 25.8% increase in the metallurgical grade (met-grade) realised selling price.
Average sea freight costs decreased by 35.8% over the financial year to US$22.9/t (2022: US$35.7/t).
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 of US$4.4 million (2022:
US$15.1 million) which are capitalised, were excluded from the per tonne milled analysis.
30
September
2023
30 September
2022
Change
%
Cubes mined
k
m
3
15
629
.3
20
896
.7
(25.2)
Cost per cube mined
US$/m
3
10.4
8.5
2
2
.
2
Reef tonnes mined
k
t
4
177
.
3
5
505
.4
(24.1)
Cost per reef tonne mined
US$/t
38.
8
32.4
19
.
9
Tonnes milled
k
t
5
409
.
8
5
608
.
2
(3.5)
Consolidated cash cost per tonne milled
US$
62.2
5
2
.
9
17.
7
For FY2023, mining costs per cube mined increased by 22.1% to US$10.4/m
3
(2022: US$8.5/m
3
) as a result of inflationary cost pressures evidenced by
the increase in the average PPI, coupled with higher contractor costs from the commencement of third-party waste stripping. The increase in mining costs
per cube mined was further driven by the decrease in cubes mined by 25.2% due to fixed costs on a per unit basis being absorbed by lower production
volumes. A similar pattern of increase can be observed in the 19.9% increase in cost per reef tonne from US$32.4/t during FY2022 to US$38.9/t emanating
from lower reef tonnes mined thus driving up the fixed cost component per unit.
The average diesel price during FY2023 increased by 7.5% to ZAR21.3/l (2022: ZAR19.9/l) primarily due to the supply discipline implemented by the
OPEC+ coupled with the weakening of the ZAR. Average diesel consumption for the year totalled 38.5 million litres.
Inflationary and operational cost pressures were partially offset by the depreciation of the ZAR relative to the US$. The ZAR/US$ is expected to remain at
elevated levels ranging between ZAR18.2 – 18.7 over the short-term which will bode favourably for the Group as it manages inflationary cost increases.
MANAGEMENT REPORT
for the year ended 30 September 2023
8
Summary of results
Revenue for the year decreased by a marginal 5.3% to US$649.9 million (2022: US$686.0 million) remaining relatively resilient to the fall in PGM prices
and sales volumes while benefitting from the strength of robust chrome sales volumes and an uptick of 25.8% in the realised chrome prices.
Othe operating expenses decreased by 10.1% to US$57.4 million (US$63.9 million). The largest cost component of other operating expenses was
employee related expenses of US$28.1 million which contributed 49.0% to total other operating expenses.
EBITDA totalled US$136.8 million (2022: US$237.3 million), a 42.4% decrease primarily due to inflationary and operational cost increases exceeding
revenue growth over the period along with commodity price volatility.
Finance costs for the year amounted to US$7.1 million (2022: US$4.8 million), a 49.2% increase emanating from significant increases in interest rates
globally, the drawdown of US$60.0 million of a bridge finance facility, the drawdown of US$80.0 million of a term loan as well as the utilisation of asset
backed finance facilities to support capital expenditure plans.
Fair value adjustments to financial assets held within the Company, Karo Mining Holdings and Tharisa Minerals decreased by 50.4% to US$22.0 million
(US$44.3 million) with the primary adjustment being the US$16.8 million fair value adjustment to the option to Generation Minerals to increase its
shareholding in Karo Mining Holdings.
The Group generated a profit before tax of US$114.3 million (US$220.2 million), a 48.1% decrease year on year.
The taxation charge totalled US$27.6 million (2022:US$53.1 million) with an effective tax rate of 24.1% (2022: 24.1%). Total cash taxes paid totalled
US$30.0 million (2022: US$41.2 million).
Taking into account the foreign currency translation reserve of US$12.8 million, total comprehensive income amounted to US$74.0 million (2022:
US$97.4 million), a decrease of 24.0% year on year.
Basic earnings per share for the financial year amounted to US 27.4 cents (2022: US 53.8 cents).
Return on invested capital for the year decreased from 23.5% during FY2022 to 10.5% for FY2023.
Outlook
Our co-product model proved its resilience once again benefiting from a 25.8% increase in chrome prices. The earlier operational mining challenges and
subsequent sub optimal ore mix from our own mined ore and purchased ore did have a negative impact on PGM recovery and thus production.
Our margins remain strong due to our mechanised low-cost operations, with a continued disciplined capital allocation strategy, ensuring investment in our
existing businesses, providing sustainable growth and returns to shareholders.
Given the current PGM basket price weakness and uncertain global economic outlook, we have taken the measured decision to extend the Karo Platinum
timeline out to commissioning by June 2025, with the opportunity to accelerate the timeline as markets become more favourable. The Karo Platinum
Project has progressed well, and the revised timeline is aligned to funding availability and provides flexibility to navigate volatile market conditions.
Our growth strategy remains firmly intact, with continuous optimisation at the Tharisa Mine, investment in downstream beneficiation, and our commitment
to the development of the multi-generational Tier 1 Karo Platinum Project subject to funding and favourable market conditions.
Production guidance for FY2024 is set between 145 koz and 155 koz PGMs (6E basis) and 1.7 Mt to 1.8 Mt of chrome concentrates.
RESULTS
The Group’s results are set out on page 29 of the consolidated financial statements while the results of the Company are set out on page 95.
Capital expenditure
Total capital expenditure (CAPEX) amounted to US$97.2 million. Of the total CAPEX, US$27.3 million pertained to additions to the mining fleet and
US$11.8 million related to other mining assets. Total CAPEX for Karo Platinum amounted to US$46.3 million.
MANAGEMENT REPORT
for the year ended 30 September 2023
9
Cash flows and working capital
Cash flows generated from operations before accounting for working capital movements amounted to US$142.6 million (2022: US$239.6 million).
Working capital movements for the year include the following:
An increase in inventories of US$18.8 million
A decrease in trade and other receivables of US$39.6 million
An increase in trade and other payables of US$0.7 million
Total cash additions to property, plant, and equipment for the year totalled US$69.9 million. After taking into account, inter alia, debt and interest
repayments, there was a net increase in cash and cash equivalents of US$117.0 million.
Cash and cash equivalents, including the restricted cash, totalled US$269.0 million at 30 September 2023 (2022: US$143.3 million). Net current assets
totalled US$248.2 million (2022: US$207.2 million).
Funding
Total interest-bearing debt to equity for the Group was 20.7% (2022: 10.1%). Of the total interest-bearing debt, US$126.2 million was US$ denominated
whilst US$13.2 million was ZAR denominated.
Cash and cash equivalents as at financial year end amounted to US$269.0 million, including restricted cash (2022: US$143.3 million).
Net debt to EBITDA for the financial year was negative 0.9 times (2022: negative 0.3 times).
An amount of US$60.0 million of the ABSA Bridge Facility was drawn during the financial year. The loan was repayable monthly over 12-months and bore
interest at SOFR plus a margin of 3.0% over the first 6-months with a ratchet structure adding 25 bps dependent on the period till repayment. The Bridge
Facility was repaid in full during September 2023 as part of the initial drawdown of the ABSA/SOCGEN Term Loan.
The syndicated ABSA and SOCGEN facilities of US$80.0 million (the total maximum facility) was drawn during September 2023. The outstanding balance
of the ABSA Bridge Loan Facility was settled in full from the proceeds of the Term Loan Facility. The Revolving Credit Facility (RCF) of US$50.0 million
has not been drawn and remains available to Tharisa Minerals. The tenor of each facility is 42-months bearing interest at SOFR plus a margin of 3.6%
and 4.2% for the Term Loan and the RCF respectively. The Term Loan has an accelerated repayment profile. To mitigate commodity price volatility, the
lenders required Tharisa Minerals to enter into monthly derivative commodity hedges (i.e. cash settled) equal to the capital repayment of the Term Loan,
on a rolling 12-month basis. Tharisa Minerals has therefore hedged certain of its platinum and palladium sales.
The limited recourse receivables discounting facility has been wound down.
Karo Mining Holdings concluded a bond listing on the Victoria Falls Stock Exchange (VFEX) raising an amount of US$32.0 million with a tenor of three
years at a semi-annual coupon of 9.5%, on 16 December 2022. The bond was the first of its kind to be listed on the VFEX. Arxo Finance plc, a company
incorporated in Cyprus and a wholly owned subsidiary of the Company, participated in the bond issue in the amount of US$10.0 million. Subsequent to
the listing, the bond was granted prescribed asset status by IPEC, and a 'tap' issue raised a further US$5.0 million. The balance as at the financial year-
end of US$27.2 million excludes the US$10.0 million from Arxo Finance.
Karo Platinum Project
The Group has committed US$135.0 million as an equity contribution to the project structured as equity and quasi-equity. Currently the Group owns 75.0%
of Karo Mining Holdings plc, but once all equity has been utilised will result in an 80.0% ownership.
MANAGEMENT REPORT
for the year ended 30 September 2023
10
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.
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
There were no changes to the group structure during the year ended 30 September 2023, however, the Company increased its shareholding in Karo
Mining Holdings plc. Effective 30 June 2023, Karo Mining issued an additional 3 800 new ordinary shares for a cash subscription of US$27.3 million to the
Company. The additional shares issued represented 2.33% of the issued share capital of Karo Mining which increased the Company’s shareholding to
72.33%. Effective 31 July 2023, Karo Mining issued an additional 5 248 new ordinary shares for a cash subscription of US$37.7 million to the Company.
The additional shares issued represented 2.68% of the issued share capital of Karo Mining which increased the Company’s shareholding to 75.00%.
Refer to notes 30 of the consolidated financial statements and note 11 of the Company financial statements.
DIVIDENDS
During the year ended 30 September 2023, the Company declared and paid a final dividend of US 4.0 cents per share in respect of the financial year
ended 30 September 2022. 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 2023.
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.
On 12 December 2023, the Board proposed a final dividend of US 2.0 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 33) and the Company financial statements (refer to note 20).
CONTINGENCIES AND COMMITMENTS
The Group’s contingencies and commitments are disclosed in notes 34 and 35 to the consolidated financial statements and note 21 to the Company
financial statements.
MANAGEMENT REPORT
for the year ended 30 September 2023
11
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 2023, the issued and fully paid ordinary share capital comprised 300 019 694 (2022: 299 746 365) ordinary shares.
As at 30 September 2023 and the date of this report, treasury shares totalled 2 577 049 (2022: 2 850 378) ordinary shares (refer to note 23 to the
consolidated financial statements and note 14 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 2023 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
Shelley Wai Man Lo Non-Executive Director
Chen Hao* Non-Executive Director
Zhong Liang Hong** Non-Executive Director
* Appointed 1 October 2023
** Resigned 30 September 2023
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 2023 and the date of approval of the consolidated and Company financial statements.
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
2023
30 September
2022
%
%
LC Pouroulis
0.41
0.40
P Pouroulis
2.6
9
2.68
MG Jones
0.24
0.26
A Djakouris
0.01
0.01
C Bell
0.02
0.02
Total
3.3
7
3.37
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 2023 and the date of approval
of the consolidated and Company financial statements.
MANAGEMENT REPORT
for the year ended 30 September 2023
12
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 36 to the consolidated financial statements and note 22 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 33 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 2023 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.
BRANCHES
During the year, a subsidiary of the Company, Redox One Limited established a branch in Germany.
GOING CONCERN
These consolidated financial statements have been prepared on a going concern basis.
Refer to note 32 to the consolidated financial statements and note 19 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 24 to the consolidated financial statements).
MANAGEMENT REPORT
for the year ended 30 September 2023
13
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 to 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 values 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.
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.
MANAGEMENT REPORT
for the year ended 30 September 2023
14
PRINCIPAL RISKS AND UNCERTAINTIES
The Group’s critical estimates and judgements and financial risk management are disclosed in notes 3 and 32 to the consolidated financial statements
and notes 3 and 19 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 34 and 35 to the consolidated financial statements and note 21 to the
Company financial statements.
Principal business risks are those that, if they materialise, can materially affect the Group’s ability to create and sustain value in the short, medium and
long term. The material risks, i.e. the possibility of loss or harm occurring, whether permanent or causing significant damage, whether physical, financial
or reputational, to Tharisa and its stakeholders are identified through 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 considers known risks, which are assessed regularly, updated and included in the organisational risk matrix.
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, considered by management quarterly,
and reported to the Board at least twice a year.
Mitigating risks, whether partial or full, forms part of management’s responsibility and is aligned with the Group’s strategy.
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 s
afety
The safety and health of our people is our core
value.
Operating safely is a key performance indicator
for all executives and managers at Tharisa and
its subsidiaries.
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.
Implementation of a safety strategy focusing on eliminating serious
injuries from our business.
Implement a consequence management guideline for breaches of
Tharisa’s Fatal Hazard codes and safe life behaviours.
Comprehensive training on mandatory code of practices and standard
operating procedures.
Continuous training and adherence to global best practices.
Regular reviews/inspections conducted by the SHEC department.
Transparent and open relationships with the DMRE inspectorate and
other regulatory bodies.
Key performance indicator (”KPI”) in Group cash bonus scheme to
incentivise safe behaviour.
Ensuring alignment and standardisation across all jurisdictions and
operations.
Tharisa has put in place measures that, at a minimum,
comply with
government regulations and adhere to best practices.
MANAGEMENT REPORT
for the year ended 30 September 2023
15
Risk Impact Mitigation
Political uncertainty
South Africa
The burgeoning unemployment, increasing
government debt and negligible GDP growth
have 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 US$ currency liquidity.
Instability in Eastern Europe.
Unattractive investment destination(s) for
investors.
Political and civil unrest adversely impacting
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 flows and increase GDP growth.
Continuous drive by the Government of Zimbabwe to create an investor-
friendly environment.
Recent general election in Zimbabwe has confirmed a new government
for five years.
Establishment and awarding of SEZ in Zimbabwe to assist capital flows
and investment.
Tharisa has a wide range of off-
takers who value the quality products
Tharisa produces, while Tharisa consistently builds on its relationships
and commitments with vendors to ensure a steady supply of goods and
services.
The Company continuously strives to create new markets for its
products.
Regulatory compliance
Tharisa Minerals’ right to mine is dependent on
strict adherence to various legal and legislative
requirements, such as:
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 non-compliance with the regulations
could temporarily shutdown all or a portion of
the Group’s mining activities.
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/or
imprisonment of directors and risks to the right
to mine through forfeiture or cancellation.
Access to forms of capital is hindered.
Identifications of country and industry-specific laws and regulations.
Ensure compliance with current MPRDA.
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, m
ining regulations promulgated under
section 403 of the Mines and Minerals Act, the Labour Act, e
xchange
c
ontrol 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 SHEC department to
ensure compliance with regulatory requirements.
Reports are prepared and distributed and any known non-
compliances
are timeously brought to the attention of the relevant regulator to discuss
and agree on a remediation plan.
Production/location concentration
Tharisa currently owns and operates one
primary producing asset located in South
Africa.
The Group has made investments in
Zimbabwean development projects; however, it
is still exposed to the potential political risk and
instability within the country of its primary
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.
Development of the Karo Platinum Project in Zimbabwe will provide
geographic diversification.
Considering investment
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 2023
16
Risk Impact Mitigation
Global commodity prices, currency volatility and other economic factors
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.
Inflationary impact.
Downward pressure on PGMs and/or chrome
prices may negatively affect the Group’s
profitability and cash flows.
The Group’s reporting currency is the US$. The
Group’s dominant current operations are
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.
Impact on input and operating costs and thus
margins.
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 specialty grade chrome concentrates
comprising ~20% of Group chrome concentrate production.
Focus on operating performance to maintain unit costs.
Sourcing of multiple suppliers for best pricing.
Cost control measures are implemented when appropriate.
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.
Debt funding for Karo Platinum.
“Greylisting” of South Africa by the Financial
Action Task Force.
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.
Stalling of the Karo Project due to the
Company’s inability to raise the required debt
capital.
Potential increase in regulatory compliance
and cost of funding.
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.
A 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 and assurance of ESG standards.
Multiple debt structures and funding options are being considered to
ensure funding for the Karo Platinum project is brought on board.
Slowing of the Karo Platinum project to ensure funding timelines are met.
Engagement with lenders ensures
all parties are fully compliant to
ensure better transaction flows.
Investigate international funding for non-greylisted operations.
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.
The customer base primarily 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 comprise
approximately
20% 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.
PGM offtake diversification.
Beneficiation strategy
.
MANAGEMENT REPORT
for the year ended 30 September 2023
17
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.
Engagement with employees.
Ongoing engagements with competent authorities to source advice on
new or amended regulations.
Continuously monitoring climate change and developing plans, e.g.
planting trees, land restoration.
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 change
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.
Introduction of 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.
Introduction and implementation of energy and water-efficient
ways of
product processing.
Construction of new water storage facilities to cater to projected water
shortages.
Active participation in
the water management forums in the catchment
area.
Electricity generation from renewable sources wherever possible.
Replacement of diesel fuel as an energy source, where possible,
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.
Community relocation programme.
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.
Inability to continue expanding the mine in line
with operational requirements.
Ongoing environmental impact monitoring.
Property purchase agreements are
being concluded with local
landowners.
Partner with the
government and local municipality to develop identified
land within the municipal spatial development area where
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 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.
Continue with the best-in-practice community relocation programme.
MANAGEMENT REPORT
for the year ended 30 September 2023
18
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 and active
technology/communication.
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 rail transportation and port facilities’ agreement
concluded
with Transnet and Maputo Port authorities.
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 water storage
facilities.
Salt and water balancing have improved water quality. Supply of
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 water ingression,
which is dewatered for surface 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
,
including energy storage initiatives
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 risky,
particularly with the current political climate,
which may contribute to heightened labour and
community unrest.
Potential property damage. Loss of production.
Inflationary labour cost pressures.
Improved recruitment process from job specifications, interviewing and
assessments to offer of employment.
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 nearly three years of a four-
year wage
agreement without disruptions, providing certainty for both
parties.
Management of resources and reserves
Management and planning of extracting 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 resource
sterilisation.
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 in the event 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.
Strategic purchase of ROM ore.
Accuracy and execution of mine plan.
Mining employees managed on KPIs.
Comprehensive assessment of underground potential underway.
MANAGEMENT REPORT
for the year ended 30 September 2023
19
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 as a result 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 the cycle ensures unscheduled
breakdowns are kept to a minimum.
Partnering with local
mines for supply of run of mine ore, processing of
run of mine ore sourced from third parties.
Comprehensive assessment of underground potential underway.
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 IT 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 well 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
12 December 2023
CHIEF EXECUTIVE OFFICER AND THE CHIEF FINANCE OFFICER RESPONSIBILITY
STATEMENT
20
The directors, whose names are stated below, hereby confirm that:
The consolidated annual financial statements and company annual financial statements set out on pages 29 to 93 and 95 to 125 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
12 December 2023
21
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 2023,
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
Shelley Lo Wai Man Non-executive director
Chen Hao Non-executive director
Cyprus, 12 December 2023
22
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 comprise the consolidated and parent company
statements of financial position as at 30 September 2023, 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 2023, 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.
23
Key Audit Matters
Our
response to the Key Audit Matters
Revenue recognition:
Revenue for the year ended 30 September 2023
amounted to US$650m (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 the continuous re-estimation by
management of the fair value of the price
adjustment. 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 effectively 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 is 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.
24
Rehabilitation provision:
The carrying value of the Group’s rehabilitation
provision as at 30 September 2023 amounted to
US$19,3m (refer to Note 24 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, and we involved our
valuations experts to assess 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 to
evaluate 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 involved our
valuations experts to evaluate the work performed by
the management 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.
25
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.
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.
26
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.
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.
27
Report on other regulatory requirements
Pursuant to additional regulatory requirements in the Disclosure Rules and Transparency Rules sourcebook made by the
UK Financial Conduct Authority, we report the following:
In our opinion, based on the work undertaken in the course of the audit:
(i) the Management Report has been prepared in accordance with applicable regulatory requirements;
(ii) the information given in the Management Report is consistent with the consolidated and parent company
financial statements for the year ended 30 September 2023; and
(iii) In light of the knowledge and understanding of the Group and its environment obtained in the course of
the audit, we are required to report if we have identified material misstatements in the Management
Report. We have nothing to report in this respect.
In our opinion, based on the work undertaken in the course of the audit, the information given in the corporate
governance statement in compliance with rules 7.2.5 and 7.2.6 in the Disclosure Rules and Transparency Rules
sourcebook made by the UK Financial Conduct Authority (information about internal control and risk management
systems in relation to financial reporting processes and about share capital structures):
(i) is consistent with the consolidated and parent company financial statements; and
(ii) has been prepared in accordance with applicable regulatory requirements.
In light of the knowledge and understanding of the Group and its environment obtained in the course of the audit,
we are required to report if we have identified material misstatements in the corporate governance statement. We
have nothing to report in this respect.
In our opinion, based on the work undertaken in the course of the audit, rules 7.2.2, 7.2.3 and 7.2.7 in the
Disclosure Rules and Transparency Rules sourcebook made by the UK Financial Conduct Authority (information
about the Group’s corporate governance code and practices and about its administrative, management and
supervisory bodies and their committees) have been complied with
28
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.
The engagement partner on the audit resulting in this independent auditor’s report is Stavros Pantzaris.
Stavros Pantzaris
Certified Public Accountant and Registered Auditor
for and on behalf of
Ernst & Young Cyprus Limited
Certified Public Accountants and Registered Auditors
Nicosia
12 December 2023
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
for the year ended 30 September 2023
29
20
2
3
20
2
2
Note
s
US$’000
US$’000
Revenue
5
Cost of sales
6
(496 562 )
(440 336 )
Gross profit
Other income
7
Net foreign exchange
(loss)/
gain
(3 590 )
Other operating expenses
9
(57 422 )
(63 880 )
Results from operating activities
Finance income
10
Finance costs
10
(
)
(4 758 )
Changes in fair value of financial assets at fair value through profit or loss
3
2
(5 627 )
Changes in fair value of
financial liabilities at fair value through profit or loss
3
2
Gain on acquisition of subsidiary
3
0
Share of loss of investment accounted for using the equity method
(5 229 )
Profit before tax
Tax
12
(27 564 )
(53 067 )
Profit for the year
Other comprehensive
loss
Items that may be classified subsequently to profit or loss:
Foreign currency translation
differences
for foreign operations, net of tax
(12 831 )
(69 749 )
Other comprehensive
loss
, net of tax
(12 831 )
(69 749 )
Total comprehensive income for the year
Profit for the year attributable to:
Owners of the
C
ompany
Non
-
controlling interest
Total comprehensive income for the year attributable to:
Owners of the
C
ompany
Non
-
controlling interest
Earnings per share
Basic
earnings per share (US cent
s
)
13
D
iluted earnings per share (US cent
s
)
13
The notes on pages 34 to 93 are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 September 2023
30
20
2
3
20
2
2
Notes
US$’000
US$’000
Assets
Non
-
current assets
Property, plant and equipment
14
Intangible assets
15
F
inancial
and other
assets
1
7
Deferred tax assets
1
8
Total non
-
current assets
Current assets
Inventories
19
Trade and other receivables
2
0
Contract assets
2
1
Financial and other assets
1
7
Current taxation
Cash and cash equivalents
2
2
Total current assets
Total assets
Equity and liabilities
Share capital
and premium
2
3
Other reserve
2
3
Foreign currency translation reserve
2
3
(205 350 )
(192 519 )
Retained earnings
2
3
Equity attributable to owners of the Company
Non
-
controlling interests
2
3
Total equity
Non
-
current liabilities
Provisions
2
4
Borrowings
2
5
Other financial liabilities
2
6
Deferred tax liabilities
1
8
Total non
-
current liabilities
Current liabilities
Provisions
*
24
Borrowings
2
5
Other financial liabilities
2
6
Current taxation
Trade and other payables
*
2
7
Contract liabilities
2
8
Total current liabilities
Total liabilities
Total equity and liabilities
* The provision raised for the ongoing mining royalty dispute at 30 September 2022 of US$50.4 million was presented as part of the trade and other payables line item.
This provision has correctly been reclassified from the trade and other payables line item and presented as a provision at 30 September 2023. The prior year
reclassification had no impact on any reported totals presented on the statement of financial position nor any impact on the earnings of the Group.
The consolidated financial statements were authorised for issue by the Board of Directors on 12 December 2023.
Phoevos Pouroulis
Michael Jones
Director
Director
The notes on pages 34 to 93 are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2023
31
Attributable to owners of the Company
Share
capital
Share
premium
Other
reserve
Foreign
currency
translation
reserve
Retained
earnings Total
Non-
controlling
interest
Total equity
Notes
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
US$’000
Balance at 1 October 2022 300
(192 519 )
Total comprehensive income for the year
Profit for the year -
-
-
-
Other comprehensive
loss
Foreign currency translation differences
2
3
-
-
-
(12 831 )
-
(12 831 )
-
(12 831 )
Total comprehensive
(loss)/
income for the year
-
-
-
(12 831 )
Transactions with
owners of the Company
Contributions by and distributions to owners
Dividends paid 37 -
-
-
-
(20 990 ) (20 990 )
-
(20 990 )
Issue of ordinary shares
2
3
-
-
-
-
-
Increase in shareholding of subsidiaries
-
Karo
Mining Holdings plc
2
3
-
-
-
-
(6 594 )
-
Equity
-
settled share
-
based payments
8,
2
3
-
-
-
-
-
Contributions by and distributions to owners of the Company
-
-
-
(12 952 )
(12 556 )
(6 594 )
(19 150 )
Total
transactions with owners of the Company
-
-
-
(12 952 )
(12 556 )
(6 594 )
(19 150 )
Balance at 30 September 202
3
(205 350 )
Companies, which do not distribute 70% of their profits after tax, as defined by the relevant tax law in Cyprus, within two years after the end of the relevant tax year, will be deemed to have distributed this amount as dividend on
the 31
December of the second year. The amount of the deemed dividend distribution is reduced by any actual dividend already distributed by 31 December of the second year for the year the profits relate. The Company pays
special defence contribution on behalf of the shareholders over the amount of the deemed dividend distribution at a rate of 17% when the entitled shareholders are natural persons tax residents of Cyprus and have their domicile
in Cyprus. In addition, from 2019 General Healthcare System contribution at a rate of 1,7% - 2,65%, when the entitled shareholders are natural persons tax residents of Cyprus, regardless of their domicile.
The notes on pages 34 to 93 are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2023
32
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$’000
Balance at 1 October 2021 271
(91 848 )
Total comprehensive income for the year
Profit for the year -
-
-
-
Other comprehensive
loss
Foreign currency translation differences
2
3
-
-
-
(65 939 )
-
(65 939 )
(3 810 )
(69 749 )
Total comprehensive
(loss)/
income for the year
-
-
-
(65 939 )
Transactions with owners of the Company
Contributions by and distributions to owners
Dividends paid 37 -
-
-
-
(23 106 ) (23 106 )
(164 )
(23 270 )
Issue of ordinary shares
2
3
-
-
-
-
Acquisition of non
-
controlling interest
-
Tharisa Minerals (Pty)
Ltd
2
3
-
-
-
(34 732 )
(9 154 )
(16 473 )
(25 627 )
Increase in shareholding of subsidiaries – Karo Mining
Holdings plc 23 -
-
-
-
(4 509 )
-
Acquired through business combination
30
-
-
-
-
-
-
Shares issued by subsidiary to non
-
controlling shareholders
23
-
-
-
-
-
-
Equity
-
settled share
-
based payments
8,23
-
-
-
-
(1 676 )
(1 676 )
-
(1 676 )
Contributions by and distributions to owners of the Company
-
(34 732 )
Total transactions with owners of the Company
-
(34 732 )
Balance at 30 September 2022
(192 519 )
The notes on pages 34 to 93 are an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 September 2023
33
20
2
3
20
2
2
Notes
US$’000
US$’000
Cash flows from operating activities
Profit for the year
Adjustments for:
Depreciation of property, plant and equipment
and amort
isation of
intangible assets
14
(Profit)/l
oss on disposal
of property, plant and equipment
14
(19 )
Share of loss of investment accounted for using the equity method
Impairment of goodwill
15
Net realisable value (write down reversal)/write down of inventory
19
(243 )
Impairment of property, plant and equipment
14
Write off of property, plant and equipment
14
Expected credit loss allowance
(reversal)/raised
2
0
(114 )
Equity
-
settled share
-
based payments
9
Changes in fai
r
value of financial assets at fair value through profit or loss
3
2
(5 151 )
Changes in fai
r
value of financial liabilities at fair value through profit or loss
3
2
(16 827 )
(1 521 )
Gain on acquisition of subsidiary
3
0
(48 391 )
Net foreign exchange loss/(gain)
(2 049 )
Interest
income
10
(4 772 )
(1 376 )
Interest
expense
10
Tax
1
2
Changes in:
Inventories
(18 820 )
(28 172 )
Trade and other
receivables
and contract assets
(30 126 )
Trade and other payables
and contract liabilities
*
Provisions*
Cash
generated
from operations
Income tax paid
29
(29 985 )
(41 197 )
Tax refunds received
Net cash flows
generated
from operating activities
Cash flows from investing activities
Interest received
Additions to property, plant and equipment
14
(
)
(105 014 )
Additions to intangible assets
15
(649 )
Cash inflow
from business combination
3
0
Proceeds from disposal of property, plant and equipment
14
Additions to investments accounted for using the equity method
30
(4 965 )
Increase in restricted cash
17
(14 268 )
R
efunds from
other assets
1
7
Net cash flows used in investing activities
(
)
(101 625 )
Cash flows from financing activities
Net proceeds from/(repayment of)
bank credit facilit
ies
2
5
(23 799 )
Advances received
2
5
Repayment of
borrowings
2
5
(77 422 )
(14 406 )
Principal lease payments
2
5
(2 500 )
(3 793 )
Dividends paid
3
7
(20 990 )
(23 270 )
Interest paid
(6 357 )
(4 017 )
Net cash flows
generated from/(
used in
)
financing activities
(2 518 )
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
(
(9 669 )
Cash and cash equivalents at the end of the year
2
2
* The movement in the disputed mining royalty provision for the year ended 30 September 2022 of US$28.2 million was previously presented as part of the movement
in trade and other payables and contract liabilities. The movement has correctly been reclassified from the movement in trade and other payables and contract
liabilities line item and presented as part of the movement in provisions during the year ended 30 September 2023. The prior year reclassification had no impact on
any reported totals presented on the statement of cash flows nor had any impact on the earnings of the Group.
The notes on pages 34 to 93 are an integral part of these financial statements.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
34
1.
CORPORATE
INFORMATION
‘
the Company
’
) was incorporated in Cyprus on 20 February 2008 under registration number HE223412.
The Company was
converted to a public company and accordingly 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 secondary listing on the main board of the London Stock Exchange
(
‘
LSE
’
)
.
On
6
February
201
9
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 Paphos, Cyprus.
The principal activity of the Group is the exploitation of metals and minerals, principally platinum group metals (
‘
PGMs
’
) and chrome,
the
associated sales and logistics operations
thereof as well as the development of a PGM mining project
.
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 Minerals 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 activity 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 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 Proprietary 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 Administration’)
, 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. Limited
operations were conducted during the financial years ended 30 September 2023 and 30 September 2022.
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 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. During the year ended 30 September 2023, the Company subscribed for additional shares issued by Karo Mining
increasing the Company’s shareholding to 75.0%.
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.
The functional currency of these entities is the United States Dollar.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
35
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% 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 (Cyprus) Limited is the prospecting for minerals and metals. Limited operations were conducted during the financial years
ended 30
September 202
3 and 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 (Cyprus) Limited is the exploration for various metals and minerals. Limited operations were conducted during the financial
year
s
ended 30
September 202
3 and 30 September 2022
.
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. Limited operations were conducted during the financial years
ended 30
September 202
3 and 30 September 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
s
ended 30
September 202
3 and 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
r
esearch and development
operations, specifically
in renewable energy
solutions
.
2.1.
BASIS OF PREPARATION
Statement of compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘I
FRSs’)
,
the
Listings Requirements of the Johannesburg Stock Exchange 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.
Functional 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.
91
(202
2
: ZAR1
8
.0
7
)
• Average rate: ZAR18.18 (2022: ZAR15.82)
Going concern
These consolidated financial statements have been prepared on a going concern basis.
Refer
to note 3
2
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 2023
36
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 ende
d
30 September 2023 for which the nature and effect of the changes as a result of the adoption of these new accounting standards are
described below
:
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 amendment applicable to the Group relates to IFRS 9 and clarifies which fees should be included in the
10% test for derecognition of financial liabilities. The amendment has been applied prospectively and had no impact on the Group’s results
for the year ended 30 September 2023
.
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 apply to contracts for which an entity
has not yet fulfilled all of its obligations at the beginning of the current financial year. The adoption of these amendments had no impact on
the
Group
’s results for the year ended 30
September 2023.
Reference to the Conceptual Framework
–
Amendments to IFRS 3
The amendments add an exception to the recognition principle of IFRS 3 to avoid the issue of potential ‘day 2’ gains or losse
s 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. These amendments had no impact on the
Group’s results for the year ended 30 September 2023
.
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
and non
-
current liabilities with covenants
-
Amendments to IAS 1
The International Accounting Standards Board (IASB) issued Classification of Liabilities as Current or Non
-
current
and non
-
Current liabilities
with Covenants, which amends IAS 1 Presentation of Financial Statements. The amendments affect requirements in IAS 1 for the
classification of liabilities as current or non-current. The amendments clarify what is meant by a right to defer settlement, that a right to defer
settlement must exist at the end of the reporting period, the classification is unaffected by the likelihood that an entity will exercise its deferral
right, that only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its
classification, as well as the required disclosures in this regard. The amendment must be applied retrospectively and is effective for annual
periods beginning on or after 1 January 202
4
. Th
ese
amendment
s
is not expected to have a material impact on the Group.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
37
2.3.
STANDARDS AND INTERPRETATIONS ISSUED BUT NOT YET EFFECTIVE
(continued)
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 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 Group.
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
uary
2020) and issued
non-mandatory 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 am
endment is
not expected to have a material impact on the Group.
International Tax Reform
–
Pillar Two Model Rules
-
Amendments to IAS 12
In May 2023, the
IASB
issued amendments to IAS 12, which introduce a mandatory exception in IAS 12 from recognising and disclosing
deferred tax assets and liabilities related to Pillar Two income taxes. The amendments clarify that IAS 12 applies to income taxes arising
from tax law enacted or substantively enacted to implement the Pillar Two Model Rules published by the Organization for Economic
Cooperation and Development, including tax law that implements qualified domestic minimum top-up taxes. Such tax legislation, and the
income taxes arising from it, are referred to as ‘Pillar Two legislation’ and ‘Pillar Two income taxes’, respectively. The amendments require
an entity to disclose that it has applied the exception to recognising and disclosing information about deferred tax assets and liabilities related
to Pillar Two income taxes. An entity is required to separately disclose its current tax expense (income) related to Pillar Two income taxes,
in the periods when the legislation is effective. The disclosure of the current tax expense related to Pillar Two income taxes and the
disclosures in relation to periods before the legislation is effective are required for annual reporting periods beginning on or after 1 January
2023
.
Th
e Company is currently assessing the impact of these amendments.
2.4.
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
control cease
s
.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
38
2.4.
BASIS OF CONSOLIDATION
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 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.
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 JUDGEMENTS 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.
4.
OPERATING SEGMENTS
Accounting policy
Operating segments, and the amounts of each segment item reported in the consolidated financial statements, are
identified from 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 chrome concentrates are produced at this plant. The Group
enters into short
-
term contracts for the sale of these chrome concentrates.
From time
-
to
-
time the Group enters into t
hird
-
party logistics, third
-
party trading and third party chrome operations
transactions which are
aggregated together as the agency and trading segment.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
39
4.
OPERATING SEGMENTS
(continued)
Accounting policy (continued)
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.
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
information
2023
PGM
US$’000
Chrome
US$’000
Agency and
trading
US$’000
Manufacturing
US$’000
Total
US$’000
Revenue
198
498
389
972
55
961
5
462
649
893
Cost of sales
Manufacturing costs
(15
3
267
)
(17
6
903
)
(3
7
275
)
(4
37
2
)
(37
1
817
)
Selling costs
(550)
(78
713)
(9
0
02
)
-
(88
2
6
5)
Freight services
-
(32
133)
(4
347)
-
(36
480)
(153
8
17)
(28
7
749
)
(50
624
)
(4
37
2
)
(49
6
562
)
Gross profit
44
6
81
10
2
223
5
3
3
7
1
0
90
15
3
331
202
2
Revenue
346
781
295
178
40
526
3
511
685
996
Cost of sales
Manufacturing costs
(193
362)
(90 799)
(21
190)
(3
229)
(308
580)
Selling costs
(785)
(69
490)
(9
238)
-
(79
513)
Freight services
-
(45
475)
(6
768)
-
(52
243)
(194
147)
(205 764)
(37
196)
(3
229)
(440 336)
Gross profit
152
634
89
414
3
330
282
245
660
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 2023, 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 45.0% for PGM concentrate and 55.0% for chrome concentrates. The allocation basis of shared
costs was
7
0.0% (PGM concentrates) and
3
0.0% (chrome concentrate) for the year ended 3
0 September 202
2
.
Cost of sales includes a charge for the write off of property, plant and equipment totalling US
$
3.2
million (202
2
: US$
1
.
3
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
40
4.
OPERATING SEGMENTS
(continued)
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
and
intangible assets (‘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.
(i)
Revenue from external customers
2023
PGM
US$’000
Chrome
US$’000
Agency and
trading
US$’000
Manufacturing
US$’000
Total
US$’000
South Africa
198
498
47
365
3
686
5
081
254
630
China
-
170
659
52
275
-
222
934
Singapore
-
133
103
-
-
133
103
Hong Kong
-
17
313
-
-
17
313
Australia
-
5
381
-
-
5
381
United Arab Emirates
-
16
029
-
-
16
029
Japan
-
122
-
-
122
Other countries
-
-
-
38
1
38
1
198
498
389
972
55
961
5
462
649
893
202
2
South Africa
346 781 47 276 4 040 2 703 400 800
China
- 96 388 24 554 - 120 942
Singapore
-
79 779 5 485 - 85 264
Hong Kong
-
59 536 1 433 - 60 969
Australia
-
3 358 - - 3 358
Japan
-
8 748 4 846 - 13 594
Other countries
-
93 168 808 1 069
346
781
295 178
40
526
3
511
685
996
Revenue represents the sales value of goods supplied to customers, net of value
-
added tax. The following table summarises sales to customers
with whom transactions have individually exceeded
5.0% (202
2
: 5
.0%
)
of the Group's revenues.
202
3
202
2
Segment
US$’000
Segment
US$’000
Customer 1
PGM
128
131
PGM
262 073
Customer 2
Chrome
118
978
PGM and Agency and trading
84
449
Customer 3
Chrome and Agency and trading
51
187
Chrome
53
721
Customer 4
Chrome and Agency and trading
48
854
Chrome and Agency and trading
49
160
Customer 5
PGM
41
543
Chrome and
Agency and trading
37
487
Customer
6
Chrome and Agency and trading
39
100
-
-
(ii)
Specified non
-
current assets
2023
US$’000
2022
US$’000
South Africa
346
389
350
008
Zimbabwe
263
656
220
152
Cyprus
1
20
4
360
611
249
570
520
Non
-
current assets includes property, plant and equipment
and
intangible assets.
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 2023
41
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
the 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 date o
f 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 time 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 2
0
).
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 revenue recogn
ition 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 over time as the obligation is been fulfilled, along with the associated costs (refer to notes 21
and 2
8
).
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
42
5.
REVENUE
(continued)
Accounting policy: chrome and agency and trading revenue (continued)
The Group also provides inland logistics services to customers. These services include ad hoc
short
-
haul
logistics services. Revenue
from
ad hoc short-haul logistics services 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
receivable.
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 satisfaction.
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
applied
practical expedient
in IFRS15
.
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 th
e statement
of profit or loss
when incurred. Such commission
s
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.
2023
PGM
US$’000
Chrome
US$’000
Agency and
trading
US$’000
Manufacturing
US$’000
Total
US$’000
Revenue recognised at a point in
time
Variable revenue based on initial results
218
843
313
648
49
737
-
582
228
Quality and q
uantity adjustments
(5
289)
(3
174)
(100)
-
(8
563)
Revenue based on fixed selling prices
-
47
365
1
977
5
462
54
804
Revenue
recognised over time
Freight services
-
32
133
4
347
-
36
480
Revenue from contracts with
customers
213 554 389 972 55 961 5 462 664 949
Fair value adjustments (refer
to note 3
2
)
(15
056)
-
-
-
(15
056)
Total revenue
198
498
389
972
55
961
5
462
649
893
202
2
Revenue recognised at a point in time
Variable revenue based on initial results
360
082
204
178
29
856
-
594
116
Quality and q
uantity adjustments
(27
573)
(1
751)
(24)
-
(29
348)
Revenue based on fixed selling prices
-
47
276
3
926
3
511
54
713
Revenue recognised over time
Freight services
-
45
475
6
768
-
52
243
Revenue from contracts with customers
332
509
295
178
40
526
3
511
671
724
Fair value adjustments (refer to note 3
2
)
14
272
-
-
-
14
272
Total revenue
346
781
295
178
40
526
3
511
685
996
During the year ended 30 September 2023, revenue from freight services of US$2.1 million (2022: US$2.4 million) was recognised which was
classified as a contract liability at 30 September 202
2 (2022: 30 September 2021)
.
The year ended 30 September 2023 includes
a reversal of
quality and quantity
adjustments of US$4.1 million (2022
: US$1.4 million
additional
revenue) relating to PGM revenue and US$0.1 million (2022: US$0.5 million) increase in revenue relating to chrome revenue which was based
on finalised prices and surveys that became available during the current year for provisional PGM and chrome revenue transactions
recognised during the year ended 30 September 202
2
.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
43
5.
REVENUE
(continued)
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 required to contract, and pay, for the costs and freight necessary to bring the goods to a n
amed 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
over time
as
th
e
obligation
is
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
group
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.
2023
Mining
US$’000
Processing
US$’000
Manufacturing
US$’000
Total
US$’000
Drill and blast
31
097
-
-
31
097
Load and haul
29
614
-
-
29
614
Diesel
43
122
1
562
-
44
684
Maintenance
29
871
4
319
-
34
190
Salaries and wages
33
686
16
040
1
269
50
995
Provident fund contributions
2
145
2
474
129
4
748
Mining
contractor
1
797
-
-
1
797
Depreciation
27
422
9
487
116
37
025
Cost of commodities
*
56
766
28
688
-
85
454
W
rite off of property, plant and equipment
3
208
-
-
3
208
Utilities
910
16
732
82
17
724
Materials and
consumables
-
26
409
2
380
28
789
Overheads
797
2
606
396
3
799
Contractor and equipment hire
-
5
483
-
5
483
260
435
113
800
4
372
378
607
State royalties
9
714
Change in inventories
–
finished products and ore
stockpile
(16
504)
Selling costs
88
2
6
5
Freight services
36
480
Cost of sales
496
562
*
Due to certain limitations on mining activities,
Tharisa Minerals Proprietary Limited purchased ROM ore to maintain
optimal
plant
throughput.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
44
6.
COST OF SALES
(continued)
2022
Mining
US$’000
Processing
US$’000
Manufacturing
US$’000
Total
US$’000
Drill and blast
26
842
-
-
26
842
Load and haul
25
379
-
-
25
379
Diesel
36
707
-
-
36
707
Maintenance
29
964
-
-
29
964
Salaries and wages
29
172
16
376
1
277
46
825
Provident fund contributions
3
738
2
109
118
5
965
Mining contractor
2
210
-
-
2
210
Depreciation
21
303
15
186
104
36
593
Cost of commodities
20
270
-
-
20
270
W
rite off of property, plant and equipment
1
313
-
-
1
313
Utilities
-
16
408
50
16
458
Materials and consumables
-
19
927
2
073
22
000
Overheads
-
6
528
235
6
763
Contractor and equipment hire
-
14
840
-
14
840
196
898
91
374
3
857
292
129
State royalties
31
082
Change in inventories
–
finished products and ore stockpile
(14
631)
Selling costs
79
513
Freight services
52
243
Cost of sales
440 336
7.
OTHER INCOME
Accounting
policy
:
sundry sales
Proceeds from the sale of scrap metals are recognised as sundry sales when the right to receive payment has been
established.
Accounting policy: rental income
Rental income is recognised in profit or loss on a straight
-
line basis over the term of the lease. Lease incentives granted are recognised as
an integral part of the total rental income, over the term of
the lease.
2023
US$’000
2022
US$’000
Insurance proceeds received
1
497
-
Profit on disposal of property, plant and equipment
19
-
Reversal of credit loss allowance
114
-
Sundry sales
573
629
Consulting fees received
152
74
Rental income
–
as lessor
17
17
2
37
2
720
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
45
8.
SHARE
-
BASED PAYMENTS
Accounting policy
Equity settled share
-
based payments to employees 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.
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 vested in three equal tranches for the 2019 and 2020 Awards and will vest at
the third anniversary of the grant for the 2021 and 2022 Awards. 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 may be exercised 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 2023 and 30 September 2022.
At 30 September 202
3
, the Group had the following share
-
based payment arrangements:
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 LTI
Ps
while
the second (final) tranche for SARS vested at 30 June 2021. The final tranche for SARS will expire at 30 June 2024.The vesting of these
awards was subject to the following performance conditions and s
ubject to there being no fatality during the vesting periods
:
• 33.3% of each tranche of the LTIP and the SARS was subjected to continuing employment in good standing (as determined by
the Remuneration Committee) during the applicable vesting period.
• 16.67% of each tranche of the LTIP and SARS was subjected to the production of a minimum of 177.6 koz of PGMs during the
first twelve month period, second twelve month period or third twelve month period, respectively (in the case of the SARS the 1st
twelve month period or 2nd twelve month period, respectively). However 8.34% of each such tranche of the LTIP and SARS would
have vested if the production during the applicable twelve month period was below 177.6 koz of PGMs but above 168.7 koz of
PGM
s
. The
award w
ould have been
forfeited if production in any applicable twelve month
was
below
168.7 koz of PGMs.
• 16.67% of each tranche of the LTIP and SARS was subjected to the production of a minimum of 1.57 Mt of chrome concentrates
during the first twelve month period, second twelve month period or third twelve month period, respectively (in the case of the
SARS the 1st twelve month period or 2nd twelve month period, respectively). However 8.34% of each such tranche of the LTIP
and SARS would have vested if the production during the applicable twelve month period was below 1.57 Mt of chrome
concentrates but above 1.49 Mt of chrome concentrates. The award would have been forfeited if production in any applicable
twelve month
was
below
1.49
Mt of chrome concentrates.
• 33.3% of each tranche of the LTIP and SARS was subjected to the Earnings Before Interest, Tax, Depreciation and Amortization
(‘EBITDA’) of the Tharisa Group at least meeting the board approved budget for the twelve month period commencing on 1 July
and ending the following year on 30 June, with the EBITDA being adjusted for the actual commodity selling prices and exchange
rate (US$:ZAR). However, 16.66% of each tranche of the LTIP and SARS would have vested if the applicable EBITDA was below
the budgeted EBITDA (as recalculated) but equal to or above 95% of the budgeted EBITDA (as recalculated). The award would
have been
forfeited if EBITDA in the applicable twelve month period
was
below 95% of the budgeted EBITDA (as adjusted).
2020 Award
–
third tranche
The seventh award was made on 30 June 2020, comprising LTIPs
only and th
e third (final) tranche vested at
30 June 202
3.
The vesting of
these awards was subject to the following performance conditions and subject to there being no fatality during the vesting periods and
continued employment in good standing:
• 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
46
8.
SHARE
-
BASED PAYMENTS
(continued)
202
1
Award
The eight
h
award was made on 8 December 2021 comprising LTIPs only 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.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 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 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 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 period as provided.
202
2
Award
The ninth award was made on 16 January 2023 comprising LTIPs only with the measurement period being aligned to the Group’s fi
nancial
year-end of 30 September. This award will vest on the third anniversary of the grant, being 15 January 2026.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
:
• 20.00% 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.
• 20.00% 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.
•
20.00% of the vesting will be subject to achieving certain of the Karo Platinum Project deliverables.
• 20.00% of the vesting will be subject to the three-year rolling average return on invested capital exceeding the three-year rolling
weighted average cost of capital.
• 10.00% of the vesting will be subject to the performance against the environmental plan to reduce carbon emissions by 30% by
2030.
• 10.00% of the vesting will be subject to achieving the Group’s vision 2025.
For avoidance of doubt, if any performance condition is not met in any annual measurement period and consequently is forfeite
d (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 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
47
8.
SHARE
-
BASED PAYMENTS
(continued)
LTIP v
aluation of share award at grant date:
First
measurement
period/
tranche
Second
measurement
period/
tranche
Third
measurement
period/
tranche
2019 sixth Award
ZA
R20.34
ZA
R19.48
ZA
R18.49
2020 seventh Award
ZAR11.65
ZAR10.67
ZAR9.66
2021 eighth
Award
ZAR23.83
ZAR23.83
ZAR23.83
2022 nineth Award
ZAR15.73
ZAR15.73
ZAR15.73
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 2023
Ordinary shares
6
989
475
7
210
076
(287
476)
(1
933
704)
11
978
371
LTIP 2022 Ordinary shares
4
272 742
5
431
124
(1
861
133)
(853
258)
6
989
475
An expense of
US$
2.0
million (20
22
: US$
1.7
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. The following inputs were used for LTIP 2022 and
LTIP 2021 issued during the years ended 30 September 2023 and 30 September 2022:
LTIP 2022 ninth
Award
LTIP 2021 eighth
Award
Spot price
ZA
R2
0
.
1
0
ZA
R27.00
Dividend yield
1
8
.
18
%
4.16%
The risk
-
free interest rate
(swap yield curve)
2
7.35%
5.76%
Forfeiture assumption
3
5.00%
10.63%
1
The dividend
yield was calculated by using forecast dividends which
were estimated using a combination of broker consensus forecasts,
historical dividend data, and
the Company’s
view of the future
dividends.
2
The swap yield curve was independently constructed using a bootstrapping methodology together with a
combination of traded money
-
market,
FRA and swap rate inputs
.
3
This adjustment is made with reference to the percentage of employees that are not expected to fulfil the non
-
market or service based vesting
conditions prior to the vesting dates
, taking into account the forfeiture assumption b
ased on
participants’ employee turnover histor
y.
SARS
N
o SARS were issued during the years ended 30 September 202
3
and 30 September 202
2 and consequently no expense was recognised
during these periods. In terms of previous awards, employees may exercise the SARS within five years from the grant date. Number of SARS
vested, not yet exercised:
Award
date
Expiry date
20
23
20
22
30 June 201
8
–
fifth Award
30 June 2023
-
617
852
30 June 20
19
–
sixth
Award
30 June 2024
1
193
009
1
305
071
N
umber of share options exercised during the
year
7
2
9
914
2
397
593
Weighted average
share price of options exercised during the year
ZA
R21.87
ZAR27.76
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.
9.
OTHER OPERATING EXPENSES
Accounting policy
Refer to note 6 for the accounting policy relating to employee benefits. Other operating expenses
are
recognised as incurred by the Company
and are measured at
undiscounted amounts
based on the value
that the
Company
expects to pay as at the reporting date
.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
48
9.
OTHER OPERATING EXPENSES (continued)
2023
US$’000
2022
US$’000
Directors and staff costs
Non
-
e
xecutive
d
irectors (
refer to note 11)
637
642
Employees:
salaries
19
889
19
215
bonuses
2
920
2
889
provident
fund, medical aid and other contributions
2
690
2
226
26
136
24
972
Fees paid to external auditors
–
external audit services
7
65
808
Fees paid to external auditors
–
tax compliance
services
5
-
Bank charges and
related fees
732
774
Consulting and business development cost
5
249
1
798
Consumables and r
epairs and maintenance
1
751
2
138
Corporate and social investment
480
247
Depreciation
and amortisation
2
216
2
203
Equity
-
settled share
-
based payment expense
1
999
1
709
Expected credit loss allowance
-
47
Health and safety
2
277
2
572
Impairment of goodwill
(note 15)
-
1
852
Impairment of property, plant and equipment
-
8 366
Insurance
3
088
3
318
Internal audit
-
20
Legal and professional
563
1
653
Listing fees and investor relations
455
735
Loss on
disposal of property, plant and equipment
-
1 482
Office administration, rent and utilities
2
046
1
747
Research and development
1
247
692
Security
1
406
1
036
Telecommunications and IT related
5
245
4
471
Training
514
499
Travelling and accommodation
590
333
Write offs of property, plant and equipment
246
15
Sundry
4
1
2
393
57
4
2
2
63 880
Number of employees
2
377
2
202
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
rate
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
rate
method.
2023
US$’000
2022
US$’000
Finance income
Interest received
4
772
1
376
Finance costs
Interest expense
(5 915)
(3
018)
Unwinding of present value
of
rehabilitation
provision
(
refer note 2
4
)
(1
186)
(1
740)
(7
101)
(4
758)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
49
11.
DIRECTORS REMUNERATION
The remuneration of the Directors is set out in the following tables:
2023
Directors’
fees
US$’000
Salary
US$’000
Bonus
US$’000
Expense
allowance
US$’000
Share
-
based
payments
US$’000
Provident
fund and
risk benefits
US$’000
Total
US$’000
Executive directors
LC Pouroulis
1
-
772
157
-
230
-
1
159
P Pouroulis
1
-
555
129
7
211
44
946
MG Jones
1
-
432
97
-
165
29
723
Non
-
executive directors
JD Salter
163
-
-
-
-
-
163
A Djakouris
104
-
-
-
-
-
104
OM Kamal
60
-
-
-
-
-
60
C Bell
122
-
-
-
-
-
122
R Davey
104
-
-
-
-
-
104
ZL Hong
*
42
-
-
-
-
-
42
SWM Lo
42
-
-
-
-
-
42
Total
637
1
759
383
7
606
73
3
465
2022
Executive directors
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
Non
-
executive directors
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
*
Re
signed on 30
September
202
3
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 awarded to the Executive Directors are set out in the following tables:
LTIP 2023
Ordinary shares
Opening
balance
Allocated
Vested
Forfeited
Total
LC Pouroulis
860
710
808
473
(38
562)
(154
246)
1
476
375
P Pouroulis
898
038
886
354
(42
378)
(169
510)
1
572
504
MG Jones
512
824
483
377
(23
054)
(92
214)
880
933
2
271
572
2
178
204
(103
994)
(415
970)
3
929
812
LTIP 202
2
Ordinary shares
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
50
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
relates 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 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 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 arise from the distribution of dividends
which
are recognised at the same time as the
right to receive
/pay
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 e
xpense in the period that such a determination is made.
2023
US$’000
2022
US$’000
Corporate income tax
Cyprus
–
current year
3
7
60
4
121
South Africa
–
current year
2
1
552
36
474
South Africa
–
prior year under
provision
739
-
26 051
40
595
Deferred tax
: o
riginating and reversal of temporary differences
(note 1
8
)
609
9
899
Deferred tax
–
prior year under provision
(note 18)
128
-
737
9
899
Special contribution for defence in Cyprus
118
1
Dividend withholding tax
658
2
572
Tax charge
27
5
6
4
53
067
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
51
12.
TAX (continued)
The entities within the Group are taxed in the countries in which they are incorporated and operate at the relevant tax rates
as follows:
Country
2023
2022
Cyprus
12.5%
12.5%
South Africa
2
7
.0%
28.0%
Zimbabwe
*
15
.
0
%
-
Guernsey
0.0%
0.0%
China
25.0%
25.0%
*
Karo Platinum (Private) Limited, Karo Zimbabwe Holdings (Private) Limited and Salene Chrome Zimbabwe (Private) Limited have b
een
awarded a Special Economic Zone Licence (‘SEZ’) which stipulates a 15.0% corporate tax rate. Subsequent to being granted the SEZ,
legislation was amended stipulating that mining companies were not eligible for the SEZ benefits. The Group obtained legal advice
confirming that the legislation cannot be applied retrospectively. The Group has also engaged with regulatory authorities and is expecting
a favourable outcome. Accordingly, while the standard Zimbabwean corporate tax rate is 24.72%, Karo Zim Holdings, Karo Platinum and
Salene Chrome have applied the SEZ
awarded corporate tax rate of 15.0%.
Reconciliation between tax charge and accounting
profit at applicable tax rates
:
2023
US$’000
2022
US$’000
2023
US$’000
2022
US$’000
Profit before tax
11
4
3
4
0
220 223
11
4
3
4
0
220 223
Notional tax
on profit before tax, calculated at the
Cypriot/South African income tax rate of 12.5%/27.0%
(202
2
: 12.5%/2
7
.0%)
14
29
3
27
528
3
0
87
2
61 662
Tax effects of:
Different tax rates from the standard Cypriot/South
African income tax rate
12
4
5
5
27
722
(5
0
6
9
)
(3
716)
Impact of change in South African tax rate
–
deferred tax
-
(1
486)
-
(3
333)
Tax exempt income
Gain on business combination
-
(6
049)
-
(13
550)
Fair value adjustments
(1
887
)
-
(4
076)
-
Interest
received
(
223
)
(50)
(481)
(113)
Currency gains
(800)
(55)
(1
727)
(127)
Other
(
6
)
-
(
1
2
)
-
Non
-
deductible expenses
Share of loss of equity
-
accounted investments
-
654
-
1
464
Fair value adjustments
-
734
-
1
644
Investment related expenses
574
1
014
1
239
2
271
Interest paid
115
30
248
70
Currency losses
789
27
1
704
98
Capital expenses
50
6
147
1
093
322
Impairment of goodwill (note 15)
-
232
-
519
Impairment of property, plant and equipment (note 14)
-
539
-
1
208
Special contribution for defence in Cyprus
118
1
256
2
Dividend withholding tax
-
current year
preference
dividends
6
58
444
1
420
995
Dividend withholding tax
-
accrued
dividends
42
184
90
411
Deferred tax
-
unremitted distributable reserves of
foreign subsidiaries
6
20
1
252
1
3
39
2
804
Prior year under provision of current income tax
58
102
124
229
Deferred tax not
raised: assessed losses
3
0
89
64
199
Recognition of deemed interest income for tax purposes
222
8
480
8
Tax charge
27
5
6
4
53
067
27
5
6
4
53
067
Under certain conditions interest income may be subject to defence contribution at the rate of 30.0% in Cyprus. Such interest income 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% (2022: 5.0%) is
charged on dividends declared.
The Group’s consolidated effective tax rate for the year ended 30 September 202
3
was
24.
1
% (202
2
: 2
4
.
1
%).
Other than Cyprus and South Africa, no provision for tax in other jurisdictions was made as these entities either sustained l
osses for taxation
purposes or did not earn any assessable profits. At 30 September 2023, the Group had unutilised tax losses of US$71.5 million (2022:
US$0.7 million) 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 of
fset against these tax losses. The tax losses don’t expire prov
ided that the entity remains operational.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
52
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 tran
sactions 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 operations 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 select
ed 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 has been based o
n 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, but unexercised Share
Appreciation Rights (‘SARS’) issued to employees at award prices lower than the current share price and allocated unvested conditional
awards (‘LTIP’), granted to employees at no cost in terms of 2021 LTIP Award (first and second measurement period) and 2022 LTIP
(first measurement period) that are still in employment within the Group at year-end, with the remaining vesting condition being to
remain in employment as at the third anniversary of the grant date, result 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.
Vested SARS issued to employees at award prices higher than the current share price, were excluded from the calculation of diluted
weighted average number of issued ordinary shares because their effect would have been anti-dilutive. 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
3
20
2
2
Basic and diluted earnings per share
Profit for the year attributable to ordinary
shareholders (US$’000)
8
2
2
35
153
881
Weighted average number of issued ordinary shares for basic
and headline earnings
per share ('000)
299
816
285
776
Dilutive impact of LTIP (‘000)
2
8
96
-
Dilutive impact of SARS (‘000)
-
125
Weighted average number of issued ordinary shares for diluted
basic and diluted headline earnings
per
share ('000)
302
7
12
285 901
Earnings per share
Basic (US$ cents)
2
7
.
4
53.8
Diluted (US$ cents)
2
7
.
2
53.8
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
53
13.
EARNINGS PER SHARE
(continued)
202
3
20
2
2
Headline and diluted headline earnings per share
Headline earnings for the year attributable to ordinary shareholders (US$’000)
8
4
811
117
393
Headline earnings per share
(US$ cents)
2
8
.
3
41.1
Diluted h
eadline earnings per share (US$ cents)
2
8
.
0
41.1
Reconciliation of profit to headline earnings
202
3
20
22
Gross
US$’000
Tax
US$’000
Non
-
controlling
interest
US$’000
Net
US$’000
Net
US$’000
Profit attributable to ordinary
shareholders
8
2 2
35
153 881
Adjustments:
Gain on acquisition: fair value re
-
measurement of existing 28.38% shareholding
-
-
-
-
(33
503)
Gain on acquisition:
purchase of shares at a
discount
-
-
-
-
(14
888)
Write off
of property, plant and equipment
3
454
(864)
-
2
590
652
Impairment of property, plant and equipment
-
-
-
-
8 332
Impairment of goodwill
-
-
-
-
1
852
(Profit)/l
oss
on disposal of property, plant and
equipment
(19)
5
-
(14)
1
067
Headline earnings
8
4
811
117 393
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
The
Th
arisa Mine
’s
(South Africa)
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
8
(2022: 19 years)
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 2023
54
14.
PROPERTY, PLANT AND EQUIPMENT
(continued)
Accounting policy (continued)
General
A
ssets are initially measured at cost and are subsequently measured at cost less accumulated depreciation and less any accumul
ated
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 tha
t 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 accounted 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
net
proceeds from disposal 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 available 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 le
ases 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 appropriate, 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
accumulated amortisation and impairment losses.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
55
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
include
:
•
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 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.
Impairment losses recognised in prior periods are assessed at each reporting date for any indication that the loss has decrea
sed 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, i
f 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 2023
56
14.
PROPERTY, PLANT AND EQUIPMENT
(continued)
30 September 2023
Freehold land
and buildings
US$’000
Mineral rights
US$’000
Mining assets
and
infrastructure
US$’000
Mining fleet
and
US$’000
Right-of-use
asset: mining
fleet
US$’000
Motor
vehicles
US$’000
Computer
equipment
and software
US$’000
Office
equipment and
furniture,
community
and site office
improvements
US$’000
Right-of-use
asset:
buildings
US$’000
Total
US$’000
Cost
Balance at 30 September 2022
23
200
201
750
387
329
11
1
271
6
456
2
989
4
197
1
332
1
733
740
257
Additions
2
529
-
60 979
27
292
-
2
387
1
625
147
-
94 959
Borrowing costs
-
1
880
-
-
-
-
-
-
1
880
Lease agreements entered into
-
-
-
-
-
-
-
-
211
211
Disposals
-
-
(147)
-
-
(36)
(5)
-
-
(188)
Re
-
measurement
-
-
-
-
1
364
-
-
-
62
1
426
Write offs
(6)
-
(631)
(
7 733
)
(338)
(16)
(58)
(3)
(348)
(9 133)
Transfers
-
-
(168)
1 746
(1
746)
84
86
(2)
-
-
Exchange differences on
translation
(1
077)
-
(16
439)
(
5
783
)
(259)
(151)
(226)
(52)
(71)
(24
058)
Balance at 30 September 202
3
24
646
201
750
432 803
1
26 793
5
477
5
257
5
619
1
422
1
587
805
354
Accumulated depreciation
and
impairment
Balance at 30 September 202
2
1
353
-
110
490
47 815
4
210
1
022
3
994
582
1
211
170 677
Depreciation c
harge for the year
706
-
16 439
1
8 819
1
044
796
963
162
310
39
239
Disposals
-
-
(55)
-
-
(19)
(4)
-
-
(78)
Write offs
(2)
-
(385)
(4
633
)
(236)
(16)
(58)
(3)
(346)
(5
679)
Transfers
-
85
-
-
(81)
(1)
(3)
-
-
Exchange differences on translation
(68)
-
(5
181)
(2
679
)
(219)
(57)
(189)
(55)
(51)
(8
499)
Balance at 30 September 202
3
1
989
-
121 393
59 322
4
799
1
645
4
705
683
1
124
195
660
Freehold land and buildings comprises various portions of the farms Elandsdrift 467 JQ, Buffelspoort 343 JQ and Farm 342 JQ,
North West Province, South Africa. All land is freehold.
Property, plant and equipment, with the exception of motor vehicles, is insured at approximate cost of replacement. Motor veh
icles are insured at market value. Land is not insured.
Included in additions to mining assets and infrastructure are additions to the deferred stripping
asset of US$
4.4
million
(2022: US$15.1
million).
The estimated economically recoverable proved and probable mineral reserve of Tharisa Minerals Proprietary Limited was reasse
ssed during October 2022 which gave rise to a
change in accounting estimate.
The remaining reserve that management had previously assessed was 113.6 Mt (at 18 November 2021). During October 2022, the remaining reserve was assessed to be 107.2 Mt. As a result, the expected useful
life of the plant and other assets, included in mining assets and infrastructure, decreased. The impact of the change on the actual depreciation expense, included in cost of sales, is an increased depreciation charge
of US$0.2 million. T
he change in estimate was recognised pros
pectively.
Included in mining assets and infrastructure are projects under
construction of US$68.0 million
(2022: US$28.7 million).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
57
14.
PROPERTY, PLANT AND EQUIPMENT
(continued)
30 September 2022
Freehold land
and buildings
US$’000
Mineral rights
US$’000
Mining assets
and
infrastructure
US$’000
Mining fleet
US$’000
Right-of-use
asset: mining
fleet
US$’000
Motor vehicles
US$’000
Computer
equipment and
software
US$’000
Office
equipment and
furniture,
community
and site office
improvements
US$’000
Right-of-use
asset:
buildings
US$’000
Total
US$’000
Cost
Balance at 30
September 2022
19
293
-
396 901
99
585
16
790
2
331
4
249
1
014
1
968
542
131
Additions
7
559
-
59
243
34
794
-
1
005
1
929
484
-
105
014
Lease agreements entered into
-
-
-
-
163
-
-
-
59
222
Business
combination (note 3
0
)
-
201
750
1
570
-
-
152
18
20
-
203
510
Disposals
-
-
(790)
(5
486)
-
(18)
(4)
(2)
-
(6
300)
Re
-
measurement
-
-
-
-
4
-
-
-
4
8
Write offs
(3)
-
(87)
(5
219)
-
-
(196)
(8)
-
(5
513)
Transfers
494
-
399
8 277
(8 765)
18
(429)
6
-
-
Exchange differences on translation
(4
143)
-
(69 907)
(20
680)
(1
736)
(499)
(1
370)
(182)
(298)
(98
815)
Balance at 30 September 202
3
23
200
201
750
387
329
111
271
6
456
2
989
4
197
1
332
1
733
740
257
Accumulated depreciation
and
impairment
Balance at 30 September 202
2
1
353
-
105
512
39
744
8
977
730
3
780
509
1
065
161
670
Depreciation c
harge for the year
257
-
16
566
18
325
1
663
400
1
087
167
331
38
796
Business combination (note 3
0
)
-
-
17
-
-
65
10
9
-
101
Disposals
-
-
(106)
(2
967)
-
(13)
(3)
(2)
-
(3
091)
Write offs
(3)
-
(37)
(3
943)
-
-
(193)
(9)
-
(4
185)
Impairment
-
-
8 356
-
-
6
-
4
-
8 366
Transfers
-
-
-
5 394
(5 394)
-
16
(16)
-
-
Exchange differences on translation
(254)
-
(19
818)
(8
738)
(1
036)
(166)
(703)
(80)
(185)
(30
980)
Balance at 30 September 202
3
1
353
-
110
490
47
815
4
210
1
022
3
994
582
1
211
170
677
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
58
14.
PROPERTY, PLANT AND EQUIPMENT (continued)
Net book value
2023
US$’000
2022
US$’000
Freehold land and buildings
22
657
21
847
Mineral right
201
750
201
750
Mining assets and
infrastructure
3
1
1
410
276 839
Mining fleet
6
7 471
6
3
456
Right
-
of
-
use mining fleet
678
2
246
Motor vehicles
3
612
1
967
Computer equipment and software
91
4
203
Office equipment and furniture, community and site office
improvements
739
750
Right
-
of
-
use buildings and premises
463
522
6
09
6
94
569 580
At 30 September 2023,
trade and other payables
include US$
25.3 million
(2022: US$ nil)
owing
to vendors providing capital goods and
services to the Group.
B
orrowing costs
relating to the Karo Platinum project
of US$1.9 million
were capitalised during the year ended 30 September 202
3
(202
2
:
no capitalisation of borrowing costs). A capitalisation rate of 9.5% (2022: no capitalisation) was used which is equal to the coupon of the bond
listed on the Victoria Falls Stock Exchange (note 25). The bond was issued specific for the construction of the Karo Platinum (Private) Limited
plant in
Zimbabwe.
Capital commitments
At 30 September 202
3
, the Group’s capital commitments for contracts to purchase property, plant and equipment amounted to
US$
157.7
million (202
2
: US$3
2
.
0
million).
Securities
At 30 September 2023 and 30 September 2022, the majority of the Group’s mining fleet was pledged as security against the asset backed
facilities (refer to note 2
5
).
Write offs
During the year ended 30 September 2023, the Group scrapped individual assets with net book values totalling US$3.2 million (2022:
US$1.3 million). The write offs during both the financial years mainly relate to 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 the operational performance of MetQ Proprietary Limited ('Met
Q’)
wa
s not
as expected and the Group believed that an impairment indicator was 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 amounted 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.
Even though the operational performance
of MetQ
improved compared to the performance for the year ended 30 September 2022, the
Group
believes that the performance was still below expectation and that an impairment indicator was still present at 30 September 2023. The
carrying value of the MetQ CGU of US$1.6 million was tested for impairment by determining the value in use and the fair value less cost to
sell. The Group believes that no additional impairment is required at 30 September 2023 as the fair value less cost to sell of US$2.5 million
exceeds
the value in use
and
supports the recoverability of the
MetQ
CGU
.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
59
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 beneficiation industry.
Consequently operations at Salene Chrome Zimbabwe (Private) Limited (‘Salene’) were ceased as local downstream selling prices of chrome
concentrates were unfavourable to Salene. The Group believed that the change in operational circumstances during the year ended
30 September 2022 represented an impairment indicator. The Group performed a value in use calculation on a Salene CGU level by using a
discounted cash flow forecast covering a period of 72 months, which was equal to the mine plan, a chrome concentrate selling price of US$132
and a weighted average cost of capital of 10.5%. The Group believed that the CGU with a carrying amount of US$12.4 million had a recoverable
amount of US$2.8 million and consequently made a provision for impairment of US$9.6 million. The impairment charge was 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 was allocated to property, plant and equipment within the mining asset and infrastructure asset category.
The Salene CGU forms part of the chr
o
me segment.
At 30 September 2023, the operational environment and circumstances of Salene have not improved and
the operations remain in care and
maintenance. The Group believes that due to a prolonged delay in start-up, an impairment indicator was still present at 30 September 2023.
The carrying value of the Salene CGU of US$2.7 million was tested for impairment by determining the value in use and the fair value less cost
to sell. The Group believes that no additional impairment is required at 30 September 2023 as the fair value less cost to sell of US$2.8 million
exceeds the value in use and supports the recoverabi
lity of the
Salene
CGU.
At 30 September 2023,
operations at Skyler Storm (Private) Limited (‘Skyler’) have not commenced and
remain
ed
in care and maintenance.
The Group believes that due to a prolonged delay in start-up, an impairment indicator was present at 30 September 2023. The carrying value
of the Skyler CGU of US$0.6 million was tested for impairment by determining the value in use and the fair value less cost to sell. The Group
believes that no impairment is required at 30 September 2023 as the fair value less cost to sell of US$0.7 million exceeds the value in use and
supports the recoverability of the
Salene
CGU.
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 independen
t 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.
Karo Mining Holdings plc (‘Karo’) and subsidiary companies collectively in future will collectively generate cash inflows ind
ependently. The
Group therefore believes that Karo together represents the smallest identifiable group of assets that will generate cash inflows largely
independent from other assets and represents
another
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 technical, economic an
d
business circumstances
.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
60
14.
PROPERTY, PLANT AND EQUIPMENT
(continued)
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
8
years
(2022: 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.
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.
Intangible assets with finite useful lives are
amortised using the straight
-
line method over their estimated useful lives. Residual values of
intangible assets are presumed to be zero and along with their useful lives are reassessed on an annual basis.
Impairment of goodwill
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. For goodwill and intangible assets that have indefinite lives or are not yet available for use, the recoverable amount is estimated
annually
as to
whether or not there is any indication of impairment.
For the purposes of goodwill impairment testing, goodwill acquired in a business combination is allocated to groups of CGUs t
hat are expected
to benefit from the synergies of the combination.
An impairment loss in respect of goodwill is not reversed.
Goodwill: reconciliation of carrying
amount
Goodwill
US$’000
2023
Intellectual
property
US$’000
Total
US$’000
Goodwill
US$’000
2022
Intellectual
property
US$’000
Total
US$’000
Cost
Balance at 1 October
2
634
311
2
945
2
883
311
3
194
Additions
-
649
649
-
-
-
Effect of movement in exchange rates
(55)
(
4
)
(5
9
)
(249)
-
(249)
Balance at 30 September
2
579
956
3
53
5
2
634
311
2
945
Accumulated impairment losses
Balance at 1 October
2 005
-
2 005
252
-
252
Amortisation
for the year
-
2
2
-
-
-
Impairment
-
-
-
1
852
-
1
852
Effect of movement in exchange rates
(27)
-
(27)
(99)
-
(99)
Balance at 30
September
1
978
2
1
98
0
2 005
-
2 005
Carrying amount
601
954
1
555
629
311
940
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
61
15.
INTANGIBLE ASSETS
(continued)
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 G
roup’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 specifi
c 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) was attributed to technical expertise and the tal
ent 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
goodwill
was impaired in full during the year ended 30
September
2022
(refer to note 14).
The goodwill relating to Salene Chrome Zimbabwe (Private) Limited (US$1.4 million) was impaired in full during the year ended
30
September
2022
(refer to note 14)
.
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 t
he goodwill
was allocated and was higher than the carrying values.
The recoverable amounts of the
operating segments
were determined based on discounted cash flows app
roved by management covering a
sixteen-year period, which represents the estimated opencast life of mine at 30 September 2023.
The cash flows were discounted using a real
discount rate of 12.2% (2022: 12.6%) for South African operations, an exchange rate of ZAR17.80:US$1; (2022: ZAR16.01
US$1) spot PGM
basket price of US$1 889/oz (2022: US$2 224/oz), spot chrome concentrate prices of US$280/tonne (2022: US$200
/tonne) and a CIF China
logistics cost of US$101/tonne (2022:US$98/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.
It is estimated that a decrease of 18.9% (from US$280/tonne to US$227/tonne) in the long
-
term real chrome concentrate price would cause
the recoverable amount of goodwill to equal its carrying amount without any other changes in key assumptions.
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 ass
ets 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
.
Intellectual property
The Group acquired certain intellectual property associated with the development and commercialisation of an electrical energ
y storage device
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 2023 and 30 September 2022, the Group continued
to
assess that the
majority of the
intellectual property has an indefinite useful life.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
62
16.
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 (75.0% holding, 2022: 70% holding). For the increase in shareholding within Karo Mining
Holdings plc, please refer to note 23.
Tharisa Minerals Proprietary Limited is 100% (2022: 100%) owned
, but during the 30 September 2022 reporting period the Group acquired
the 26% held by the non-controlling shareholders and therefore did not own 100% of Tharisa Minerals throughout the full 30 September 2022
reporting period
(refer to note 2
3).
The following table summarises the information relating to the Company's subsidiar
ies with material non
-
controlling interests
,
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
:
2023
Karo Mining
Holdings plc
US$’000
2022
Karo Mining
Holdings plc
US$’000
Tharisa
Minerals
Proprietary
Limited
US$’000
Non
-
current assets
57
670
12
795
337
242
Current assets
79
635
13
782
242
046
Non
-
current liabilities
(37
22
7
)
(16
779)
(382
713)
Current liabilities
(16
65
1
)
(4
900)
(112
923)
Net assets
83
427
4
898
83
652
Carrying amount of non
-
controlling interest
in the net assets of Karo Mining Holdings
Plc
(1 552) 1 389 -
Fair value
adjustments on the net
assets at acquisition attributable to non
-
controlling
interest
55 451 61 647 -
Value of net assets attributable to non
-
controlling interest, taking acquisition
adjustments into account
53 899 63 036 -
Revenue
-
-
490
383
Net
profit
/(loss)
after tax
and total comprehensive income/(loss)
13
528
(13
286)
64
912
Non
-
controlling interest in (loss)/profit
after tax
130
(338)
13 613
Cash flows
(used in)/generated
from operating activities
(8
351)
32
143
743
Cash flows
used in
investing activities
(44
588)
(12
629)
(93
865)
Cash flows
generated
from
/(used in)
financing activities
102
442
25
097
(70
393)
Net change in
cash and cash equivalents
49
503
12
500
(20
515)
Tharisa Minerals Proprietary Limited, declared and paid an ordinary dividend of US$2.7 million during the year ended 30 Septe
mber 2022 and
prior to the acquisition of the
non
-
controlling interest. The dividend paid to non
-
controlling shareholders amounted to US$0.2 million.
The value of the net assets attributable to the non
-
controlling shareholders of Karo Mining Holdings Plc of US$ 1.4 million for the year ended
30 September 2022 has updated to correctly take into account the IFRS 3 at acquisition fair value adjustments from the acquisition of Karo
Mining Holdings Plc as indicated above. Refer to note 30.
Judgement
s
and estimates: 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
63
17.
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
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.
Accounting policy: Impairment
Financial asset at amortised cost
The classification of financial assets at initial recognition depends on the financial
asset’s contractual cash flow characteristics and the
Group’s business model for managing them.
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.
The Group’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, selling 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 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 the 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 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 2023
64
17.
FINANCIAL
AND OTHER
ASSETS
(continued)
Non
-
current assets
Fair value
hierarchy
2023
US$’000
2022
US$’000
Financial assets
Investments in money markets, current accounts, cash funds and income funds
Level 2
6
040
6
019
PGM commodity hedging derivative
Level
2
81
-
Restricted cash
13
713
-
19 834
6
019
Current assets
Financial assets
PGM commodity hedging derivative
Level 2
2
288
-
Forward exchange contracts
Level
2
68
-
Investments in equity instruments
Level 1
48
19
2
404
19
The carrying amounts of other non
-
current and current assets carried at amortised cost approximate
their
fair value.
Investments in money markets, current accounts, cash fun
ds and income funds
Investment in money market and current accounts
totalling US$5.3 million (202
2
: US$
5.3
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.
Subsequent to 30 September 2023, the cover period of the guarantee was renewed to 30 November 2026.
Investment in cash funds and income funds of US$0.7 million (202
2
: US$
0.7
million)
is
managed by Stanlib Collective Investments. The
investment is ceded to Lombard Insurance Group (‘Lombard’) against a US$0.6 million (ZAR12.0 million) (2022: US$0.7 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 re
stricted.
The investments in cash funds
and income funds are held at fair value through profit or loss. The underlying investments are in money market
and other funds and the fair value has been determined by reference to their quoted prices.
PGM commodity hedging derivative
In terms of the commodity off
-
take financing (note 25), the lenders require commodity price protection for capital repayment amounts against
commodity price volatility. The PGM commodity hedging derivative comprises of commodity hedges for a maximum 13-month rolling basis for
platinum and palladium. The Group enters into commodity hedges over sufficient of the production to match the capital repayment profile. The
total exposure at 30 September 2023 was US$63.8 million expiring not later than 15 October 2024. The commodity hedges were mark-to-
market by using applicable
quoted
closing
commodity prices
at 30 September
2023
.
Restricted cash
The balance
represents a debt reserve account held at Absa Bank Limited and serves
as security
as required by the commodity off
-
take
financing (refer to note 25). The balance arose on 22 September 2023 and represents cash in the name of Tharisa Minerals Proprietary
Limited, but Tharisa Minerals Proprietary Limited is unable to utilise the funds on demand due to access restrictions placed by lenders in
accessing the account, which is only allowed if certain criteria within the commodity off-take financing agreement is satisfied. The balance is
equal to approximately three months’ instalments in terms of the commodity off-take financing with the required balance to be maintained
dependent on the debt profile.
The balance is expected to decrease
to
US$
5.9 million
by 15 October 2024.
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 associated with the
conversion of the US$ to the ZAR. At 30 September 2023 the net exposure of these contracts was US$11.0 million (2022: US$8.5 million)
with various expiries no later than 16 November 2023 (2022: no later than 27 October 2022). The forward exchange contracts were mark-to-
market by using applicable closing exchange rates at 30 September 202
3
(202
2
: 30 September 202
2
).
Investments in equity instruments
–
fair value through profit or loss
Investments at fair value through profit or loss are valued based on quoted market prices at the end of the reporting period
without any
deduction for transaction costs. The investment represents shares in the Bank of Cyprus Public Co
Limited.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
65
18.
DEFERRED TAX
2023
US$’000
2022
US$’000
Deferred tax assets
1
709
1
174
Deferred tax liabilities
(11
0
045
)
(112
341)
Net deferred tax liability
(10
8
336
)
(111
167)
Deferred tax assets
Property, plant and
equipment
(62)
(68)
Tax losses not utilised
501
335
Provisions and a
ccrued leave
461
366
Share
-
based payments
731
459
Other
78
82
1
709
1
174
Deferred tax liabilities
Property, plant and equipment
(11
4
078
)
(115
537)
Inventory
2
730
-
Provisions
and accrued leave
6 106
5 401
Share
-
based payments
160
181
Dividend withholding tax
(166)
(124)
D
ividend withholding ta
x
-
unremitted distributable reserves of foreign subsidiaries
(4
14
3
)
(2
805)
Exchange
losses
(422)
59
Other
(
232
)
484
(11
0
045
)
(112
341)
Reconciliation of deferred tax liability
Balance at the beginning of the year
(111
167)
(86
388)
Business
combination (note 3
0
)
-
(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
(
3
3
75
)
(11
352)
Provisions
and accrued leave
1
533
(431)
Tax losses utilised/available for future set off
against profits
177
645
Currency losses
(497)
(558)
Inventory
2 730
-
Share
-
based payments
2
93
(358)
Dividend withholding tax
(42)
1
945
D
ividend withholding ta
x
-
unremitted distributable reserves of foreign
subsidiaries
(1
3
3
9
)
(2
805)
Other
(
21
7
)
(318)
(
737
)
(9
899)
Exchange differences
3
5
6
8
15
383
Balance at the end of the year
(10
8
336
)
(111
167)
Amounts recognised in:
Profit and loss (refer
to note 12)
(737)
(9
899)
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 immediate future against which the respective entities can utilise the benefits therefrom.
Deferred tax assets were recognised for
MetQ Proprietary Limited (US$0.2 million)
(2022: US$0.2 million)
, Arxo Finance plc (US$0.1 million)
(2022: US$0.1 million) and Redox One Limited (US$0.2 million) (2022: nil), resulting from generated tax losses to be utilised against future
taxable income
The estimates used to assess the recoverability of recognised deferred tax assets include a forecast of the future taxable in
come and future
cash flow projections based on a three
-
year period.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
66
19.
INVENTORIES
Accounting
policy
Inventories comprising PGM and chrome concentrates, ore stockpiled, in
-
process metal contained in ore and consumable items are measured
at the lower of cost and net realisable value. The cost is determined using the weighted average method and includes direct mining expenditure
and an appropriate portion of overhead expenditure. Net realisable value is the estimated selling price in the ordinary course of business, less
the estimated costs of completion and costs to sell. Obsolete, redundant and slow-moving inventories are identified and written down to net
realisable value.
2023
US$’000
2022
US$’000
Finished products
47
644
31
778
Ore stockpile
17
648
19
939
Consumables
24
545
25
085
8
9
837
76 802
Reversal of net realisable value write down/
(net
realisable value write down
)
2
43
(3 562)
Total carrying amount
90 080
73 240
Inventories are stated at the lower of cost or net realisable value. Low
-
grade chrome concentrates to the value of
US$
5.5
million (202
2
:
US$1.6 million) are carried at the realisable value after a net realisable value write down of US$0.2 million (2022: US$0.7 million). The net
realisable write down was allocated to the chrome segment.
Certain PGM finished products, which previously were provided for in full, were reprocessed to an acceptable saleable conditi
on during the
year ended 30 September 2023. This resulted in a reversal of a write down previously recognised. The reversal amounts to US$0.5 million at
30 September 2023 (2022: write down of US$2.0 million). The provision and the reversal of the net realisable value write down were allocated
to the PGM segment.
In addition, certain consumables and spares were provided for during the year ended 30 September
202
3
as their operational use became
doubtful. The provision to the value of US$0.1 million (2022: US$0.9 million) is allocated 45.0% and 55.0% to the PGM and chrome
operating segments respectively (2022: 70.0% and 30.0%).
Judgement and estimates: net realisable value and measurement of inventories
Net realisable value tests are performed at least
quarterly
based on the estimated future sales price of the products based on prevailing metal
prices, less estimated costs to complete production and bring the product to sale. The nature of the net realisable value test inherently limits
the ability to precisely m
onitor recoverability levels and may result in additional write
-
downs of inventories in future periods.
The prevailing PGM basket price and chrome concentrate prices as at 30 September 20
2
3
were used as estimated selling prices less forecast
selling costs to determine the net realisable value of the Group’s inventories. At 30 September 2023, except for certain PGM finished products
and low
-
grade chrome concentrates,
the calculated net realisable values exceeded the cost of inventories.
Below
are
the prices and exchange rate used to determine the net realisable value of inventories:
202
3
20
22
Platinum
US$/oz
922
878
Palladium
US$/oz
1
238
2
113
Rhodium
US$/oz
3
918
13
709
Gold
US$/oz
1
918
1
684
Ruthenium
US$/oz
388
440
Iridium
US$/oz
4
311
3
638
Metallurgical chrome concentrate
US$/tonne
28
4
209
US$: ZAR exchange rate
18.98
17.57
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
67
20.
TRADE AND OTHER RECEIVABLES
Accounting policy
Trade and other receivables, excluding
the PGM discounting receivable
, prepayments
,
deposits and
value added tax, are non
-
derivative
financial assets categorised as financial assets measured at amortised cost.
The
se
non
-
derivative financial assets are initially recognised at fair value and subsequently carried at amortised cost less allowance
for
impairment. Estimates made for impairment are based on a review of all outstanding amounts at year end in line with the impairment policy
described
in note 1
7
.
Irrecoverable
amounts are written off during the period in which they are identified.
The Group entered into offtake agreements in terms of which the concentrate of the PGMs is treated by the offtake parties.
The PGM
discounting receivable is measured at fair value through profit or loss from the date of recognition up to date of settlement, as it fails the IFRS
9 amortised cost requirement of cash flows representing solely payment of principal and interest. Payment is due on the last day of the fourth
month following delivery.
The fair value changes due to non
-
market variability (that is, changes based on quantity and quality of the contained metal) are considered to
be variable consideration within the scope of IFRS 15 as the Group's right to consideration is contingent upon the physical attributes of the
contained metal. Therefore, the variable consideration is considered to be constrained. At each subsequent reporting date the receivable is
restated to reflect the fair value movements (market variability) in the pricing mechanism which are recognised in revenue. Foreign exchange
movements subsequent to the recognition of a sale are recognised as a foreign exchange gain or loss in profit or loss.
2023
US$’000
2022
US$’000
Trade receivables
37
678
28 041
PGM receivables and
PGM
discounting
receivable
27
900
103 634
Total trade receivables
65
578
131
675
Other receivables
–
related parties (
refer
to note 3
3
)
112
57
Deposits, prepayments and other receivables
*
23 455
4
342
Accrued income
4
726
4
660
Value added tax
(VAT)
receivable
9
870
8
935
103 741
149
669
*
The increase in d
eposits, prepayments and other receivables
mainly relates to deposits paid to suppliers of capital equipment for Karo
Platinum (Private) Limited. In order to secure capital orders, suppliers require deposit payments.
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 receivables and PGM discounting receivable was determined on ruling quoted market prices and exchange rates. At
30 September 2022, PGM receivables of US$26.9 million was included in trade receivables. Since the fair value of the PGM receivables is
determined by quoted market prices and exchange rates and it represents a Level 2 financial instrument in terms of the fair value hierarchy,
the amount has been reclassified to PGM receivables and PGM discounting receivable at 30 September 2023. The reclassification had no
impact on any reported totals, earnings per share or on any amounts presented in the statement of financial position.
During the
year
ended 3
0
September
2023, the limited recourse disclosed receivables discounting agreement in respect of the PGM
discounting receivable was wound down and settled in full. The PGM receivable represents receivables arising from the delivery of PGM
concentrates to off
-
take par
ties valued at the closing exchange rate and closing market prices.
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 (30 September 2022: 0 to 120 days). During the year ended
30 September 2023, customers, for which a credit loss allowance was previously recognised, settled the outstanding balances in full.
Consequently, the relating expected credit loss allowance was reversed. The reversal amounted to US$0.1 million (2022: expected credit loss
allowance of US$0.1 million raised). The expected credit loss reversal relates to the chrome and manufacturing segments (2022:
manufacturing segment). No impairment of trade receivables was recognised due to their insignificant exposure to credit risk during the years
ended 3
0
September
2023
and
30
September 2022.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
68
20.
TRADE AND OTHER RECEIVABLES
(continued)
The table below summarises the maturity profile of trade receivables:
2023
US$’000
2022
US$’000
Current
64
977
130
916
Less than 90 days past due but not impaired
558
390
Greater than 90 days past due but not impaired
43
369
65
578
131
675
The credit exposure of trade receivables by country is as follows:
South Africa
36
618
108
378
China
11
483
6
163
Hong Kong
-
12
264
Singapore
17
402
4
310
Other countries
75
560
65
578
131
675
The
foreign currency balances, translated to US$ included in trade receivables were as follows:
ZAR’000
8
123
4
125
US$’000
57
455
127
550
Diesel rebates
At 30 September 2023, the Group had certain
unresolved tax matters. Included in trade and
other receivables is an amount of US$4.4
million
(ZAR82.3 million) (2022: US4.6 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
and believes that it remains probable that the amounts will be recovered.
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.
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 t
o 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 financial 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 across the mining industry.
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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
69
20.
TRADE AND OTHER RECEIVABLES
(continued)
Judgements and estimates:
ECL (continued)
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 rec
eived;
•
The payment 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 industry.
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
South African
rail and port infrastructure.
For customers of the manufacturing operating segment, a combination of the aforementioned considerations are taken into accou
nt to estimate
the ECL allowance.
21.
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.
2023
US$’000
2022
US$’000
Freight services
1 876
2 078
The balance represents prepaid freight costs
and will be recognised in cost of sales upon completion of the performance obligations
.
22.
CASH AND CASH EQUIVALENTS
Accounting policy
Cash and cash equivalents comprise cash at bank and on hand, demand deposits with banks and other
financial institutions, and short
-
term,
highly liquid investments held for the purpose of meeting short-term cash commitments that are readily convertible into known amounts of
cash and which are subject to insignificant risk of changes in value, having been within three months of maturity at acquisition. Cash and cash
equivalents are stated at amortised cost less any expected credit losses.
2023
US$’000
2022
US$’000
Bank balances
1
62 071
106
873
Short
-
term bank
deposits
and money market investments
93
229
36
427
2
55
300
143
300
The credit exposure by country is as follows:
South Africa
1
42
306
58
192
Hong Kong
3
997
38
261
Mauritius
42
471
20
301
United Kingdom
609
586
Zimbabwe
20
3
1
3
2
745
Cyprus
45
596
23
059
Other countries
8
156
2
55
300
143
300
22.
CASH AND CASH EQUIVALENTS
The credit exposure by bank
and credit ratings are
as follows:
2023
US$’000
2022
US$’000
Nedbank
BB
-
90
173
37
108
HSBC
A+
43
502
38
275
Bank of China
A
26
988
3
700
Bank of Cyprus
B+
45
596
23
059
Citibank
A
8
410
3
324
Stanlib Corporate Money Market
BB
-
24
659
17
249
Absa
BB
-
4 194
20
436
C
ommercial
B
ank of
Z
imbabwe
AA
-
(ZW)
8
962
-
Other
A+ to B
2
816
149
2
55
300
143
300
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.
The amounts
reflected approximate fair value.
At 30 September 202
3
, an
amount
of US$2.0 million (2022:
US$
2.1
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 (2022: US$0.3 million) was provided as security against certain credit facilities
of the Group.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
70
23.
SHARE CAPITAL AND RESERVES
Accounting policy
: share capital
The share capital is stated at nominal value. The difference between the fair value of the consideration received by the Comp
any and the
nominal value of the share capital being issued is taken to the share premium account. Incremental costs directly attributable to the issue of
ordinary shares are recognised as a deduction from equity, net of any tax effects.
When share options are exercised
in terms of the Tharisa Share Award Plan
, the Company issues new shares or issues shares from
treasury shares held. The proceeds received net of any directly attributable transaction costs are credited to share capital and share
premium.
Accounting policy: non
-
controlling interest
Non
-
controlling interests are measured at their proportionate share of the acquiree’s identifiable net assets at the date of the
acquisition.
Changes in the Group’s interest in a subsidiary that do not result in a loss of control, are accounted for as equi
ty transactions.
30 September 202
3
30 September 20
2
2
Share capital
Number of
Shares
US$’000
Number of
Shares
US$’000
Authorised
–
ordinary shares of US$0.001 each
10
000 000 000
10 000
10
000 000 000
10
000
Authorised
–
convertible redeemable preference
shares of US$1 each
1 051
1
1 051
1
Issued o
rdinary shares
Balance at the beginning of the year
302
596 743
303
275
000
000
275
Issued
during the year
-
-
27
596 743
28
Balance at the end of the year
302
596
743
303
302
596 743
303
Treasury shares
Balance at the beginning of the year
2
850 378
3
3
715 621
4
Transferred as part of management share award plans
(273
329)
-
(865
243)
(1)
Balance at the end of the year
2
577
049
3
2
850 378
3
Issued and fully paid
300
019
694
300
299
746 365
300
Share premium
Balance at the beginning of the year
299
746 365
345
597
271
284 379
289
547
Shares issued
273
329
396
28
461 986
56
050
Balance at the end of the year
300
019
694
345
993
299
746 365
345
597
Total share capital and premium
346
293
345
897
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
71
23.
SHARE CAPITAL AND RESERVES
(continued)
Share capital
No shares were issued during the year ended 30 September 2023.
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 30). 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 2023, 273 329 (2022: 865 243) ordinary shares were transferred from treasury shares to sat
isfy the
vesting/exercise of Conditional Awards and Appreciation Rights by the participants of the Tharisa Share Award Plan.
At 30 September 2023, 2
577 049 (2022: 2
850 378) 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 receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Comp
any.
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 2023 and 30 September 2022, the increases in the share premium account related to the iss
ue and
allotment of ordinary shares.
Other reserve
The other reserve represents a historic ordinary share issue by the Company to parties external to the Group in exchange for
preference
shares in Tharisa Minerals. The ordinary shares were issued at a price reflective of the fair value of the preference shares less share issue
costs, which was in excess of the nominal value of the ordinary shares, but the excess was not registered as share premium at the Registrar
of Companies in Cyprus, thus presented and disclosed separately from share premium. The other reserve is not distributable for dividend
purposes.
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.
Retained earnings
The retained earnings include the accumulated retained profits and lo
sses of
the Group
(2023: US$
425.1
million (2022: US$
357.2
million)
and the share-based payment reserve (2023: US$2.6 million (2022: US$1.2 million)). Retained earnings are distributable for dividend
purposes.
Capital management
The Group
’
s target is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain futur
e
development of the business in a way that optimises the cost of capital and matches the current strategic business plan. The Board of Directors
monitors both the demographic spread of shareholders, as well as the return on capital. Capital is defined as equity attributable to owners of
the Company. Management is aware of the risks associated to capital management. Capital needs are monitored on a regular basis and
whenever needed management takes steps in an attempt to effectively manage any corresponding risks.
Non
-
controlling interests
Non
-
controlling interests
at 30 September 202
3
and 30 September 2022
comprise amounts attributable to
the Government of Zimbabwe for
its 15% share in Karo Platinum (Private) Limited as well as amounts attributable to the Leto Settlement for its 25% (2022: 30%) share in Karo
Mining Holdings plc.
The non
-
controlling interest share of total comprehensive income
for the year
amounts
to US$
4
.
5
million (202
2
:
US$
9.5
million).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
72
23.
SHARE CAPITAL AND RESERVES
(continued)
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 30) 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
.
Effective 30 June 2023, Karo Mining issued an additional 3 800 new ordinary shares for a cash subscription of US$27.3 million to the Company.
The additional shares issued represented 2.33% of the issued share capital of Karo Mining which increased the Company’s shareholding to
72.33%.
Effective 31 July 2023, Karo Mining issued an additional 5 248 new ordinary shares for a cash subscription of US$37.7 million to the Company.
The additional shares issued represented 2.68% of the issued share capital of Karo Mining which increased the Company’s shareholding to
75.00%.
2023
US$’000
2022
US$’000
Consideration for additional new shares issued by Karo Mining
-
-
Reduction in
non
-
controlling interest
(6 594)
(4
509)
Increase to equity attributable to ordinary shareholders
6 594
4
509
Acquisition of non
-
controlling interest of Tharisa Minerals (Proprietary) Limited
During the year ended 30 September 2022, the Company acquired the remaining 26% of the issued share capital of
Tharisa Minerals
(Proprietary) Limited (‘Tharisa Minerals’) from the non-controlling shareholders. 20% of the issued share capital was acquired for a purchase
consideration of US$19.9 million (ZAR300.0 million) from Thari Resources Proprietary Limited and the remaining 6% from the Tharisa
Community Trust for a purchase consideration of US$5.7 million (ZAR90.0 million). The purchase consideration was settled through the issue
of
1
3
903
743
new ordinary shares in the Company
.
2022
US$’000
Shares issued as consideration
25
627
Reduction in non
-
controlling interest
(16 473)
Reduction to equity attributable to ordinary
shareholders
9 154
24.
PROVISIONS
Accounting policy
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events where it i
s 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, the 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
probability 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 consolidated 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 provis
ion is at the time that the disturbance occurs and thereafter as and when additional disturbances 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.
G
ains or losses from the expected disposal of assets are not taken
into account when determining the provision.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
73
24.
PROVISIONS
(continued)
Non
-
current
2023
US$’000
2022
US$’000
Provision for
rehabilitation
19
335
12
376
Current
Provision for
mining
royalty
47
715
50
444
Provision for rehabilitation
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 for the Tharisa Mine is determined using commercial closure cost assessments and not the inflation adjusted Department of
Mineral Resources
and Energy
published rates.
Restoration
US$’000
2023
Decommis
-
sioning
US$’000
Total
provision
US$’000
Restoration
US$’000
2022
Decommis
-
sioning
US$’000
Total
provision
US$’000
Opening balance
7
190
5 186
12
376
13
737
6
194
19
931
Recognised in profit and loss
7
383
(203)
7
180
(6
071)
-
(6
071)
Capitalised/(reversal) to mining
assets and infrastructure
-
(604)
(604)
-
(622)
(622)
Unwinding of
discount (note 10)
683
502
1
185
1
197
543
1
740
Exchange differences
(650)
(152)
(802)
(1 673)
(929)
(2
602)
Closing balance
14
606
4
729
19
335
7
190
5 186
12
376
The table below illustrates the movement in the provision as a result of mining operations and changes in variables.
30 September 2023
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
7
190
2
299
5
767
(650)
14
606
Provision for decommissioning
5 186
535
(840)
(152)
4
729
12 376
2
834
4
927
(802)
19
335
30 September 20
22
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)
12 376
The current estimated rehabilitation cost
for the Tharisa Mine
to be incurred taking escalation factors into account is US$73.5
million
(ZAR1 390.5 million) (2022: US$41.3 million (ZAR745.9 million)). The estimate was calculated by an independent external expert. The change
is mainly due to 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 the expected timing of performing this work which is driven to a large extent by the most likely
life of mine
. The change is also impacted to a smaller extent by
the changes in future inflation and discount rates
.
The current estimated rehabilitation cost is
projected to a future value based on a weighted average long
-
term inflation rate of 6.41% (2022:
6.81%). The net present value of the rehabilitation estimated future value is discounted based on a weighted average SWAP cur
ve. The
calculated interest rate w
as 9.98% (2022: 9.61%). 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.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
74
24.
PROVISIONS
(continued)
Judgement and estimates:
closure objectives as set out in the Environmental Management Plan
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. The approved Environmental Management
Programme (‘EMPr’) of Tharisa Minerals Proprietary Limited (‘Tharisa Minerals’) 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. Tharisa
Minerals has evaluated alternative mine closure strategies building on the establishment of a post-mining economy with socioeconomic
benefits. An amendment 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’).
This application was supported by the necessary specialty studies. On 19 September 2023 the DMRE advised that it had decided to refuse
the application. Tharisa Minerals has submitted an appeal of this decision in terms of the applicable regulations and is confident of a successful
ruling in its favour on the appeal. As there is uncertainty as to the successful outcome of the appeal, Tharisa Minerals has applied a probability
weighted factor in calculating the mine closure liability applying a 60% (2022: 60%) probability to the successful outcome of the appeal and
approval of the pit-lake option. In the alternative, Tharisa Minerals has applied a 30% (2022: 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 on a stepped basis for each bench and,
with the passage of time, result in a pit-lake forming in the void. In view of the adverse record of decision by the DMRE and notwithstanding
Tharisa Minerals’ expectation of a favourable ruling on the appeal, Tharisa Minerals has applied a 10% (2022: nil) probability to the complete
backfill of the pit voids to natural ground level. The rehabilitation expense and provision has been accounted for on this basis. Tharisa Minerals
is confident of the successful outcome of the appeal in its engagement with the DMRE, failing which it will proceed to challenge the decision
through the judicial system. It is not possible to determine and measure any additional requirements that may be required as the amended
EMPr is advanced through the various regulatory process, hence no provision has
been made for any such potential additional requirements.
At 30 September 2023 the Group performed a sensitivity analysis by applying different
weighted
probabili
ties to the actual weighted
probability
factor used in determining the provision for rehabilitation. A 57.5% probability was applied to the successful outcome of the appeal and
approval of the pit-lake option, a 27.5% probability used to an alternative ‘make safe’ option with the partial backfilling of the pit and a 15.0%
probability to the complete backfill of the pit voids to natural ground level. By using these probabilities, the provision for rehabilitation would
increase by
US$3.
4
million (ZAR
6
5.2 million).
Provision for
mining
royalty
2023
US$’000
2022
US$’000
Opening balance
50
444
30
953
Raised during the year
-
28
175
Reversed
during the year
(503)
-
Exchange differences
(
2
226
)
(8
684)
Closing balance
47
715
50
444
The provision raised for the ongoing mining royalty dispute
at
30 September 2022 of US$50.4 million was presented as part of the trade and
other payables line item. This provision has correctly been reclassified from the trade and other payables line item and presented as a provision
at 30 September 2023. The prior year reclassification had no impact on any reported totals presented on the statement of financial position
nor any impact on the earnings of the Group
.
The Group has objected and appealed to the assessments issued by SARS imposing an additional mining royalty in relation to th
e 2015 and
2017 years of assessment in an amount of US$5.4 million (ZAR102.3 million) (2022: US$5.7 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 22 July 2024. 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 inc
remental costs which would be incurred in bringing the concentrate to the minimum specified standard.
In the event that SARS would be successful, the Group
has provided for an estimated
incremental mining royalty for the period up to the
current year of assessment to be US$31.4 million (ZAR594.9 million) (2022: US$20.0 million (ZAR361.9 million)), with the amount net of tax
estimated to be US$23.0 million (ZAR434.3 million) (2022: US$10.0 million (ZAR180.6 million)). In addition, the remained of the balance
provided for mainly represents estimated interest and penalties. 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 receivabl
e has been made.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
75
25.
BORROWINGS
Accounting policy: borrowings
Borrowings are non
-
derivative financial liabilities categorised as othisfinancial 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 rate 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
reporting date.
Accounting policy: leases
The Group recognises a lease liability at the commencement date of the contract for all leases conveying the right to ccontrol
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 and
te, discounted
using the interis the implicit rate in the lease or, if that rate cannot be readily theermined, 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.
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 amount 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.
Non
-
current
2023
US$’000
2022
US$’000
Commodity off
-
take financing
30
347
-
Bond
–
listed on the Victoria Falls Stock Exchange
26
392
-
Asset backed
facilit
ies
18
951
21
262
L
ease
liabilities
695
1
786
76
385
23
048
Current
Commodity off
-
take financing
47
356
-
Bond
–
listed on the Victoria Falls Stock Exchange
765
-
Asset backed
facilit
ies
13
133
13
681
L
ease
liabilities
2
017
1
793
Property loans
-
553
Bank credit
facilities
-
23
809
63
271
39
836
The fair value of borrowings approximates its carrying amounts as the interest rates charged are variable and considered to b
e market related.
At 30 September 2023, the Group has unutilised borrowing facilities
available of US$
70.3
million (
2022: US$31.2 million).
Commodity off
-
take financing
On 27 March 2023, the Group concluded a US$130 million, 42
-
month commodity off
-
take based facility with Société Générale and Absa Bank
Limited. The Facility comprises a term loan of US$80 million and a revolving US$50 million facility, secured by commodity off-take agreements,
PGM commodity hedging derivative (note 17) and restricted cash (note 17). Interest accrues at the SOFR plus 360 basis point on the term
loan and the SOFR plus 420 basis points on the revolving facility. The conditions precedent were fulfilled on 22 September 2023 and the first
drawdown occurred on 28 September 2023. The financing is repayable in 42 months from October 2023. The revolving US$ 50 facility remains
undrawn as at 30 September 2023.
The bridge term loan
was
repaid
upon the first drawdown.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
76
25.
BORROWINGS
(continued)
Bond
–
listed on the Victoria Falls Stock Exchange
On 16 December 2022, a subsidiary of the Company, Karo Mining Holdings plc (‘Karo Mining’) raised external funds of US$2
6
.
4
million through
the issuance of a listed bond on the VFEX in Zimbabwe. The bond has a 3-year maturity, has an annual coupon of 9.5% and is measured at
amortised cost using the effective interest rate. Interest payments will occur every 6-months. The Company has guaranteed the capital amount
and interest payments relating to the bond issue.
The fair value of the bond will typically be determined at its closing market value on the VFEX. However, during the
year
ended
30 September 2023, no trading occurred resulting in no available market value of the bond. Consequently, at 30 September 2023 the bond’s
carrying value approximates its fair value.
Asset backed facilities
Asset
backed facilities comprise of the equipment loan facility, Atrafin loan, commercial asset finance and the revolving facility.
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. The total facility amounts to US$35 million (2022: US$35 million), bears interest rates between
the one-month SOFR plus 325 basis points and the one-month SOFR plus 350 basis points (2022: one-month SOFR plus 325 basis points
and one-month SOFR plus 350 basis points) and is repayable over 48 months from drawdown. The unutilised portion of the facility (US$15.8
million) is available for drawdown until 28 February 2027.
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
3
and 30 September 202
2
, the Group complied with all financial covenants.
Atrafin loan
The loan from Atrafin LLC is for a total amount of US$3.7 million (2022: US$3.7 million), bears interest at the six
-
month SOFR plus 225 basis
points (2022: six-month US Libor plus 200 basis points) and is repayable in ten equal bi-annual instalments ending May 2026. For the transition
from LIBOR to SOFR, the Group applied the practical expedient available within the Interest Rate Benchmark Reform - Phase 2 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 2023. The balance outstanding at 30 September 2023 amounted to
US$2.2
million (2022: US$3.0 million).
Commercial Asset Finance
Tharisa Minerals Proprietary Limited entered into a commercial asset finance facility with
Absa Bank Limited to the value of US$7.9 million
(ZAR150.0 million) during the year ended 30 September 2021. The balance outstanding at 30 September 2023 amounted to US$5.5 million
(2022: US$6.9 million). 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$2.6 million (ZAR50.0 million). At
30
September 2023 and 30 September 2022, the overdraft facility was available in full
and included in the unutilised borrowing facilities
.
Revolving 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. The balance outstanding at
30 September 202
3
amounted to US$5.2 million (2022: US$1.4 million).
Bridge term loan
Effective 21 October 2022, the Group concluded a bridge loan facility from Absa Bank Limited to a maximum of US$60
.0
million. The facility
carried interest at the SOFR plus 295 basis points which increased monthly by 25 basis points after the first six-months and was repayable in
twelve equal monthly instalments. The bridge term loan terminated upon the first drawdown of the commodity off-take financing facility on 28
September 2023.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
77
25.
BORROWINGS
(continued)
Lease 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$0.1 million (2022: US$0.2 million) and US$0.1 million (2022: US$0.1 million) were included in cost of sales and other operating expenses
respectively for the year ended 30
September 2023.
The duration of leases relating to buildings and premises is for a period of five years, payments are due at the beginning of
the month escalating
annually on average by 8.0%. At 30 September 2023, the remaining term of these leases vary between one and four and a half years (2022:
one and five years). These leases are secured by cash deposits varying from one to three times the monthly lease payments.
The duration of leases relating to the mining fleet and manufacturing equipment are for periods between twelve and forty eigh
t months (2022:
twelve and forty eight months) and bear interest at interest rates between the South African prime interest rate and the South African prime
interest rate plus 375 basis points (2022: South African prime interest rate plus 375 basis points). The leases are secured by the mining fleet
leased.
Lease payments due:
2023
US$’000
2022
US$’000
Within one year
2
116
2
030
Two to five years
718
1
883
2
834
3
913
Less future finance charges
(12
2
)
(334)
Present value of lease payments due
2
71
2
3
579
Present value of lease payments due:
Within one year
2 017
1
793
Two to five years
695
1
786
2
71
2
3
579
Property loans
As part of the acquisition of MetQ Proprietary Limited during the year ended 30 September 2020, 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 loan
s
were settled in full during the year ended 30 September 2023.
Bank credit
facilities
The bank credit facilities relate to pre
-
and post
-
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 (2022: one-month SOFR plus 165 basis points and the one-month SOFR plus 305 basis points). Inventory serves as security
for credit facilities. The available bank credit facilities at 30 September 2023 amounted to US$20.0 million (2022: nil). Bank credit facilities are
not included in unutlised borrowing facilit
ies at 30 September 2023.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
78
25.
BORROWINGS
(continued)
Asset
backed
facilities
US$’000
Commodity
off-take
financing
US$’000
Bridge term
loan
US$’000
Bond
–
listed on the
Victoria Falls
Stock
Exchange
US$’000
Lease
liabilities
US$’000
Bank credit
facilities
US$’000
Property
loans
US$’000
Total
borrowings
US$’000
Balance 30 September 2022
34
943
-
-
-
3
579
23
809
553
62
884
Changes from financing cash flows
Advances: bank credit facilities
-
-
-
-
-
5
890
-
5
890
Repayment: bank credit facilities
-
-
-
-
-
(29
689)
-
(29
689)
Net repayment of bank credit
facilities
-
-
-
-
-
(23
799)
-
(23
799)
Advances received
13
022
80
732
59
936
26
392
-
-
-
180
082
Repayment of borrowings
(15
443)
-
(61
429)
-
-
-
(550)
(77
422)
Principal l
ease payments
-
-
-
-
(2
500)
-
-
(2
500)
Repayment of interest
(2
865)
-
(2
015)
(1
115)
(241)
(48)
-
(6
284)
Changes from financing cash flows
(5
286)
80
732
(3
508)
25
277
(2
741)
(23
847)
(550)
70
077
Foreign currency translation differences
(1
503)
(3
146)
-
-
(12
9
)
-
(3)
(4
78
1
)
Liability
-
related changes
Lease agreements entered into
-
-
-
-
133
-
-
133
Re
-
measurement of lease liabilities
-
-
-
-
1
502
-
-
1
502
Interest expense
2
945
101
2
255
1
880
241
38
-
7
460
Revaluation of foreign denominated loan
985
16
1
253
-
127
-
-
2
381
Total liability
-
related changes
3
930
117
3
508
1
880
2
003
38
-
11
476
Balance at 30 September 202
3
32
084
77
703
-
27
157
2
71
2
-
-
139
65
6
Non
-
current borrowings
18
951
30
347
-
26
392
695
-
-
76
385
Current borrowings
13
133
47
356
-
765
2
01
7
-
-
63
27
1
Total borrowings
32
084
77
703
-
27
157
2
71
2
-
-
139
65
6
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
79
25.
BORROWINGS
(continued)
Asset backed
facilities
US$’000
Lease
liabilities
US$’000
Bank credit
facilities
US$’000
Property
loans
US$’000
Loan from
related party
US$’000
Total
borrowings
US$’000
Balance 30 September 202
1
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 repayment of bank credit facilities
-
-
22
026
-
-
22
026
Advances received
20
942
-
-
-
-
20
942
Repayment of borrowings
(13
906)
-
-
-
(500)
(14
406)
Principal lease payments
-
(3
793)
-
-
-
(3
793)
Repayment of interest
(1
403)
(406)
(306)
-
(55)
(2
170)
Changes from financing cash flows
5
633
(4
199)
21
720
-
(555)
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
291
Revaluation of foreign denominated loan
5
668
(9)
-
-
5
659
Total liability
-
related changes
7
183
3
159
315
-
13
10
670
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
26.
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
recognised 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.
Non
-
current liabilities
Fair value hierarchy
2023
US$’000
2022
US$’000
Option granted to NCI to call upon shares in Karo Platinum (Private) Limited
Level 3
11
16 779
Current liabilities
PGM d
iscount facility
hedging derivative
Level 2
-
337
Forward excha
nge contracts
(note
17
)
Level 2
-
189
-
526
Option granted to NCI to call upon shares in Karo Platinum (Private)
Limited
(refer to note 3
0
)
T
he Republic of Zimbabwe has an option to increase its shareholding in Karo Platinum (Private) Limited (‘Karo Platinum’) by 11
.0% exercisable
after 24 months from 30 March 2022, but before 36 months, payable in cash at the net present value of Karo Platinum at 30 March 2022. The
increase in the shareholding may, at the election of Karo Mining Holdings plc, be affected either through a sale of shares in Karo Platinum by
Karo Zimbabwe Holdings (Private) Limited or by means of a share subscription by the Republic of Zimbabwe. This shareholding will not be on
a free funded carry basis.
PGM discount facility hedging derivative
During the
year
ended 3
0
September
2023, the limited recourse disclosed receivables discounting agreement in respect of the PGM
discounting receivable was wound down.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
80
27.
TRADE AND OTHER PAYABLES
Accounting policy
Trade and other payables, excluding payroll creditors and leave pay accruals are non
-
derivative financial liabilities categorised as other
financial liabilities. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the
effective interest
rate
method.
Provision is made for employee entitlement benefits accumulated as a result of employees rendering services up to the reporti
ng date.
Liabilities arising in respect of salaries, annual leave and other benefits due to be settled within 12 months of the reporting date are measured
at rates which are expected to be paid when the liability is settled.
2023
US$’000
2022
US$’000
Trade payables
50
3
29
42
753
Accrued expenses
33
8
9
7
24 982
Leave pay accrual
5
520
4 932
Value added tax
payable
3
497
89
Other payables
–
related
parties (note 3
3
)
109
113
Other payables
112
587
93
464
73
456
T
rade payables in foreign currency
balances
translated to US$
were as follows:
US$
2
647
5
554
ZAR
46
793
37
046
EUR
857
142
Other
32
11
50
329
42
753
-
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
.
The provision raised for the ongoing mining royalty dispute at 30 September 2022 of US$50.4 million was presented as part of
the trade and
other payables line item. This provision has correctly been reclassified from the trade and other payables line item and presented as a provision
at 30 September 2023. The prior year reclassification had no impact on any reported totals presented on the statement of financial position
nor any impact on the earnings of the Group.
28.
CONTRACT LIABILITIES
Accounting policy
Contract liabilities
are non
-
derivative financial liabilities categorised as other financial liabilities.
Contract liabilities
are recognised
when a
customer has paid the consideration or the payment is due from the customer before the entity has transferred all of the promised goods or
services in a contract. Timing of revenue recognition may differ from the timing of invoicing to customers. A contract liability is measured based
on the unearned revenue received (income received in advance) within a contract and is presented as a current liability in the statement of
financial position due to its short
-
term nature
.
2023
US$’000
2022
US$’000
Freight services
1
876
2 078
The balance represents deferred revenue for which performance conditions still have to be satisfied.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
81
29.
TAX PAID
2023
US$’000
2022
US$’000
Opening balance
Current taxation receivable
7
302
8
949
Current taxation payable
(2
056)
(286)
Corporate income tax for the year
(2
6
051
)
(40
595)
Special contribution for defence in Cyprus
(118)
(1)
Dividend withholding tax
(658)
(2
572)
Tax refunds received
(
7
225
)
(34)
Interest
receiv
able/(payable)
2
0
(1)
Business
combination (note 3
0
)
-
(6)
Closing balance
Current taxation receivable
(
1 851
)
(7
302)
Current taxation payable
7
6
6
2
056
Exchange differences on translation
(1
14
)
(1
405)
Tax paid
(2
9
985
)
(41
197)
30.
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 consideration 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.
Acquisition of Karo Mining Holdings
plc
Effective 30 March 2022, the Company acquired a controlling interest in Karo Mining by increasing its shareholding to 66.34% in Karo Mining.
Prior to the acquisition, the investment in Karo Mining was accounted for as a joint venture investment at cost. At 30 September 2021 the joint
venture investment represented 26.8% of the issued share capital of Karo Mining, a company incorporated in Cyprus. 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 totalling US$5.0 million.
The 37.96% of the issued share capital of Karo Mining was acquired from The Leto Settlement, a related party (refer to note 33) for a purchase
consideration of US$29.4 million. The purchase consideration was settled through the issue of 13 693 000 ordinary shares of the Company to
The Leto Settlement. The acquisition of Karo Mining represented a business and accordingly the Group accounted for the acquisition as a
business combination in terms of IFRS 3.
Effective 30 March 2022, the Investment
Project Framework Agreement entered into between the Republic of Zimbabwe and the Leto
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 sub
sidiaries 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
The transaction cost
relating to the acquisition
was US$0.1
million
which is classified as other operating expenses
.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
82
30.
BUSINESS COMBINATION (continued)
Acquisition of Karo Mining Holdings
plc (continued)
The following table summarises the fair value of the
consolidated
assets and liabilities of the Karo Group
at the date of acquisition
:
Assets
2022
Fair value recognised on
acquisition
US$’000
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
attribuable
net
assets
acquired
82
202
Consideration
Book value of existing shareholding
(1 656)
Prepaid investment in
With Platinum (Private) Limited (note 1
7
)
(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 approximate
d
their carrying amount due to the
short
-
term nature thereof.
The purchase of shares at a
discount represented 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 2
3
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. 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 67.5
5%.
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$10.2 million to
the Company
.
The additional shares issued represented 1.22% of the issued share capital of Karo Mining which increased the Company’s shareholding to
70.0
0
%.
Effective
7
September
2022,
Karo Mining
issued an additional
44 051
new ordinary shares for a cash subscription of US$
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 by the non
-
controlling shareholder as at 30 September 2022 and remains
unpaid as at 30 September 2023.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
83
30.
BUSINESS COMBINATION (continued)
Effective 30 June 2023, Karo Mining issued an additional 3 800 new ordinary shares for a cash subscription of US$27.3 million to the Company.
The additional shares issued represented 2.33% of the issued share capital of Karo Mining which increased the Company’s shareholding to
72.33%.
Effective 31 July 2023, Karo Mining issued an additional 5 248 new ordinary shares for a cash subscription of US$37.7 million
to the Company.
The additional shares issued represented 2.68% of the issued share capital of Karo Mining which increased the Company’s shareholding to
75.00%.
31.
DIRECTORS INTEREST IN STATED CAPITAL
2023
%
2022
%
LC Pouroulis
0.41
0.40
P
Pouroulis
2.6
9
2.68
MG Jones
0.24
0.26
To Djakouris
0.01
0.01
C Bell
0.02
0.02
Total
3.3
7
3.37
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 yea
r and the date
of the approval of the consolidated financial statements.
32.
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. Theclassificationofdebt 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 commodity hedging derivative
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
Trade
and other receivables
Amortised cost
PGM
receivables and 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 cost
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
84
32.
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 i
nformation about the
Group's exposure to each of the aforementioned 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 their roles a
nd 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 mee
t 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 mitigating 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 current observable data.
The main component of the allowance for credit losses (if
applicable) is a specific loss component that relates to individually significant
exposures. As at 30 September 2023 and 30 September 2022, none of the carrying amounts of trade receivables that are past due, but not
impaired require the recognition of an allowance for credit losses due to their insignificant exposure to credit risk. Receivables that were neither
past due nor impaired relate to customers for whom there was no recent history of default and for whom no current observable adverse credit
inform
ation
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 due to their insignificant exposure
to credit risk. 31.2% and 58.3% of the trade receivables were due from the Group's largest customer as at 30 September 2023 and
30
September
20
22
, 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.
The maximum exposure to credit risk at the reporting date of the consolidated financial
statements was:
2023
US$’000
2022
US$’000
Financial assets
6 040
6
019
Restricted cash
13
713
-
Trade and other receivables
103 741
149
669
Contract
assets
1
876
2
078
Cash and cash equivalents
2
55
300
143
300
380 670
301
066
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
85
32.
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 2023 the Group had undrawn banking facilities of US$70.3 million
(ZAR
1
330
.
3
million) (202
2
: US$
31.2
million (ZAR
564.5
million)) available (note 2
5
).
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
c
urrent at the end of the reporting period) and the earliest date the Group can be required to pay:
Contractual undiscounted cash flow
30 September 2023
Within 1 year
or on
demand
US$’000
More than 1
year but less
than 2 years
US$’000
More than 2
years but
less than 5
years
US$’000
More than 5
years
US$’000
Total
US$’000
Carrying
amount
US$’000
Borrowings
71 402
37 728
48 446
-
157 576
139
656
Trade and other payables
50
550
-
-
-
50
550
50
550
121 952
37 728
48 446
-
208 126
19
0
206
30 September 20
2
2
Borrowings
42 365
12 937
11
381
-
66 683
62
884
Other financial liabilities
526
-
-
-
526
526
Trade
and other payables
43
453
-
-
-
43
453
43
453
86
344
12
937
11
381
-
110
662
106
863
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 exchange rates. Cu
rrency 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 denominated 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$.
Management is aware of the above risk. Currency risk arising from currency fluctuations is monitored on a regular basis and m
anagement is
taking steps deemed necessary in managing the corresponding risk. These steps may include to enter, from time to time, into forward exchange
contracts within board-approval limits. Financial risk management may not be possible for instances where weakened commodity prices
persist, forecast produc
tion not being achieved and further funding is not raised.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
86
32.
FINANCIAL RISK MANAGEMENT (continued)
Market risk (continued)
The following table details the Group's exposure at the end of each reporting period to currency risk arising from recognised
assets and
liabilities denominated in a currency other than the functional currency of the entity to which they relate. Exposures in US$ 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$:ZAR, 18.91 (2022: 18.07); b) US$:EUR, 0.94 (2022: 1.02) and c) US$:GBP, 0.82 (2022: 0.90). Differences resulting
from the translation of the financial statements of foreign operations into the Group's presentation currency are excluded.
The Group entered into a number of forward exchange contracts to hedge certain aspects of the foreign exchange
risk associated to the
conversion of the US$ to the ZAR and the EUR against the ZAR. The net exposure of these contracts was US$11.0 million (2022:
US$
8.5
million) with various expiries no later than
16
November
202
3
(20
2
2
: no later than
2
7
October
20
2
2
)
.
At the reporting date the Group's exposure to currency risk was as follows:
30 September 2023
30 September 2022
Amounts in US$’000
US$
ZAR
€
AUD
GBP
US$
ZAR
€
GBP
Other financial assets
13 713
-
48
-
-
-
-
19
-
Trade and
other receivables
28
485
80
450
-
57
133
214
27
157
19
Current taxation
-
-
(682)
-
-
-
-
(1
726)
-
Cash and cash equivalents
65 329
429
246
-
45
11
604
161
204
142
Borrowings
(101
531)
-
(53)
(1
117)
-
(26
890)
-
-
-
Other financial liabilities
-
-
-
-
-
(526)
-
-
-
Trade and other payables
(103)
(4
606
)
(1
651)
(7)
(258)
(33)
(2
898)
(680)
(342)
5
893
(
4
097
)
(1
642)
(1
124)
(156)
(117
369)
(2
710)
(2
026)
(181)
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 t
he same basis for each reporting date.
2023
(Decrease)/
increase/
in profit or loss
and equity
US$’000
2022
Increase/
(decrease)
in profit or loss
and equity
US$’000
US$
(655)
7
717
ZAR
4
55
216
€
183
159
AUD
125
-
GBP
17
14
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 2023
87
32.
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:
2023
2022
2023
US$’000
2022
US$’000
Variable rate financial assets
Investments in money markets, current
accounts, cash funds and income funds
6.9%
-
8.6%
4.1%
-
6.4%
6
040
6
019
Restricted cash
3.8%
-
13
713
-
Cash and cash equivalents
0%
-
8.2%
0%
-
6.73%
2
55 300
143
300
275
053
149
319
Variable rate financial liabilities
Commodity off
-
take financing
SOFR plus 3.6%
-
77
703
-
Equipment loan facility
1
-
month SOFR plus
between 3.25% and
3.5%
1
-
month SOFR plus
between 3.25% and
3.5%
19
099
23
699
Atrafin loan
6
-
month
SOFR
plus
2
.25
%
6
-
month US Libor plus
2%
2
243
2
955
Absa commercial asset finance
RSA prime less 1.15%
RSA prime less 1.15%
5
508
6 885
Wesbank revolving facility
RSA prime less
between 0.65% and
1.15%
RSA prime less
between 0.65% and
1.15%
5
234
1
404
L
ease
liabilities
5.9%
-
RSA prime +
3.75%
5.9%
-
RSA prime +
3.75%
2
713
3
579
Property loans
-
RSA prime
-
553
Bank credit facilities
-
1
-
month SOFR plus
between 1.65% and
3.05%
-
23
809
1
12 500
62 884
A change of 100
basis points in interest rates at each reporting date would have changed profits and equity by the amounts presented below.
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.
2023
Increase/
(decrease) in
profit or loss and
equity
US$’000
2022
Increase/
(decrease) in
profit or loss
and equity
US$’000
Investments in money markets, current accounts, cash funds and
income funds
498
482
Restricted cash
2
-
Cash and cash equivalents
1
5
35
224
Commodity off
-
take financing
(833)
-
Equipment loan facility
(200)
(273)
Atrafin loan
(24)
(34)
Absa commercial asset finance
(57)
(79)
Wesbank revolving
facility
(54)
(16)
L
ease
liabilities
(29)
(55)
Bank credit facilities
-
(208)
Property loans
-
(1)
8
3
8
40
A decrease of 100 basis points in interest rates 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 2023
88
32.
FINANCIAL RISK MANAGEMENT (continued)
Fair values
The Board of Directors considers that the fair values of significant financial assets and financial
liabilities approximate to 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 levels are 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 instruments, or using valuation met
hodologies 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
Financial
instrument
Fair value
level
2023
US$’000
2022
US$’000
Valuation technique
and key inputs
Financial assets measured at fair value
Investments in money markets, current
accounts, cash funds and income funds
Level 2
6
040
6
019
Quoted market price for similar
instruments
PGM commodity hedging derivative
Level 2
2
369
-
Quoted market metal prices and
exchange rate (refer below)
Forward exchange contracts
Level 2
68 189 Quoted market closing exchange
rates
Investments in equity
instruments
Level 1
48
19
Quoted market price
Trade and other receivables measured at
fair value
PGM receivables
Level 2
27 900 26 884 Quoted market metal prices and
exchange rate (refer below)
PGM
discounting
receivable
Level 2
- 76 750 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
11
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 Quoted market closing exchange
rates
There have been no transfers between fair value hierarchy levels in the current year.
Refer to note 20 for the fair value recognised relating to the PGM discounting receivable.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
89
32.
FINANCIAL RISK MANAGEMENT (continued)
Fair value gains and
losses recognised in the financial instruments during the year:
2023
US$’000
2022
US$’000
Changes in fair value of financial assets at fair value through profit or loss
Investments in equity instruments
29
1
Investments in money
markets, current accounts, cash funds and income funds
367
242
PGM
commodity hedges
derivative
4
497
-
Right to acquire shares in Karo Platinum (Private) Limited
-
(5
870)
Forward exchange contracts
258
-
5
151
(5
627)
Chan
ges in
fair value of financial liabilities
at fair value through profit or loss
PGM discount facility hedging derivative
59
174
Option granted to NCI to call upon shares in Karo Platinum (Private) Limited
16
768
1 100
Forward exchange contracts
-
247
16
827
1 521
Level 3: Option granted to NCI to call upon shares in Karo Platinum (Private) Limited
(‘Karo Platinum’)
Refer to
notes 1
7
and 3
0
.
The 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 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 2023, the Group completed a
valuation of Karo Platinum which was independently reviewed. In determining the fair value, the discounted cash flow valuation technique was
used. The following significant inputs were used in determining the fair value:
2023
2022
PGM basket
price (6E)
US$/oz
1
565
2
140
Base metal basket price
US$/t
19
315
15
099
Life of Mine
years
11
17
Annual throughput
kt
215
205
6E PGM grade per tonne feed
g/t
3.0
3.6
Annual production (6E)
k
oz
211
194
PGM recovery
%
81% first
three
years, thereafter
83%
78% first two
years, thereafter
82%
WACC
%
10.4%
10.
0
%
Tax holiday
years
First 5
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:
2023
2022
Strike price: Independently verified net present value of Karo
Platinum as at 30 March 2022 using a discounted
cash flow model
US$71.8 million US$71.8 million
Valuation of 11.0% of Karo Platinum
Discounted cash flow model
US$37.4 million
US$59.5 million
Volatility:
Sector volatility (converted to monthly)
4.4%
4.4%
Drift:
Risk free rate (converted to monthly) based on the
US risk free zero yield curve and includes a country
risk premium for the operations being in Zimbabwe.
1.3%
1.5%
Time step:
Annual time intervals
1.0
1.0
Discount rate:
Converted to
monthly
0.87%
0.83%
A sensitivity analysis was performed on the option value with the following results in the fair value of the option:
Sensitivity
Option value
US$’000
(Decrease)/increase in
profit or loss and equity
US$’000
Option value
US$’000
(Decrease)/increase in profit
or loss and equity
US$’000
Discount rate minus 5.0%
14
(
3
)
16 795
(16)
Discount plus 5.0%
8
3
16 763
16
Volatility minus 10.0%
5
5
16 299
480
Volatility plus 10.0%
18
(
6
)
17 296
(517)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
90
32.
FINANCIAL RISK MANAGEMENT (continued)
Estimation of fair values
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 simila
r financial instrument
s.
T
he
carrying v
alue of financial assets and liabilities at amortised cost approximates its fair value.
33.
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 decisions, 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.
Close family members of an individual are those family members who may be expected to influence, or be influenced by, that in
dividual in
their dealings with the Group.
In the normal course of the business, the Group enters into various transactions with related parties. Related party transact
ions 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.
2023
US$’000
2022
US$’000
Trade and other receivables
(note 2
0
)
Rocasize Proprietary Limited
112
31
Salene Mining Proprietary Limited
-
13
The Leto Settlement
-
13
112
57
Trade and other payables
(note 2
7
)
Rocasize Proprietary Limited
4
-
Amounts due to Directors
and former Directors
A Djakouris
1
2
18
J Salter
22
21
O Kamal
12
13
C Bell
22
23
R Davey
19
20
Z Hong
9
9
S
Lo Wai Man
9
9
1
05
113
Total other payables
1
09
113
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
91
33.
RELATED PARTY TRANSACTIONS AND BALANCES
(continued)
2023
US$’000
2022
US$’000
Revenue
Salene
Manganese Proprietary Limited
-
1
035
Cost of sales
Rocasize Proprietary Limited
528
541
Other income
Rocasize Proprietary Limited
37
23
Consulting fees received
Karo Mining Holdings plc (before acquisition)
-
6
Karo
Platinum (Private) Limited
(before acquisition)
-
188
Karo Power Generation (Private) Limited
(before acquisition)
-
7
Karo Zimbabwe Holdings (Private) Limited
(before acquisition)
-
28
Rocasize Proprietary Limited
-
8
Salene Manganese
Proprietary Limited
-
45
Interest receivable
Karo Mining Holdings
plc (before acquisition)
-
112
Interest
paid
The Leto Settlement
-
13
Compensation to key management:
2023
Salary and
fees
US$’000
Expense
allowances
US$’000
Share-based
payments
US$’000
Provident
fund and risk
benefits
US$’000
Bonus
US$’000
Total
US$’000
Non
-
Executive Directors
637
-
-
-
-
637
Executive Directors
1
759
7
606
73
383
2
828
Other key management
1
738
17
187
65
406
2
413
4
134
24
793
138
789
5
878
2022
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
Share
-
based awards to the Directors are
disclosed in note 11. Det
ails of each plan are disclosed in note 8. Awards
to the key management in
the period under review are as follows:
2023
Ordinary shares
Opening
balance
Allocated
Vested
Forfeited
Total
LTIP
1
642 207
1
668
225
(64
498)
(257
994)
2
987
940
20
22
Ordinary shares
Opening
balance
Resignation
Allocated
Vested
Forfeited
Total
LTIP
695 276
145
650
1
319
717
(388
628)
(129
808)
1
642
207
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
92
33.
RELATED PARTY TRANSACTIONS AND BALANCES (continued)
Relationships between
parties:
Thari Resources Proprietary Limited
A
former
shareholder of Tharisa Minerals Proprietary Limited
,
refer to note 2
3
.
The Tharisa Community Trust and Rocasize Proprietary Limited
The Tharisa Community Trust is a
former
shareholder of Tharisa Minerals Proprietary Limited
, refer to note 2
3
. The Tharisa Community
Trust
owns 100% of the issued ordinary share capital of Rocasize Proprietary Limited.
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 the 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
and
Karo Power Generation (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 30). Karo Mining Holdings Limited owns 100% of the issued share capital of Karo Zimbabwe Holdings (Private) Limited
and
Karo Power Generation (Private) Limited
and
85% of the issued share capital of Karo Platinum (Private) Limited.
34.
CONTINGENT LIABILITIES
As at 30 September 202
3
, there is no litigation (202
2
: no litigation), current or pending, which is considered likely to have a material adverse
effect on the Group.
Refer to note 3
5
for guarantees.
35.
CAPITAL COMMITMENTS AND GUARANTEES
2023
US$’000
2022
US$’000
Capital commitments
Authorised and contracted
156
219
28
937
Authorised and not contracted
1
490
3
027
157
709
31
964
The above commitments are with respect to property, plant and equipment and are outstanding at the respective reporting perio
d. All
contracted amounts will be funded through existing funding mechanisms within the Group and cash generated from operations. Balances
denominated in currencies other than the US$ were converted at the closing rates of exchange ruling at 30 September
20
2
3
.
Guarantees
Karo Mining Holdings plc, a subsidiary of the Company, issued fixed income notes with a tenor of three years on 16 December 2
022 listed
on the Victoria Falls Stock Exchange to the value of US$26.4 million to external subscribers. The Company guarantees the capital
repayment and interest of subscribers.
Tharisa Minerals Proprietary Limited entered into an equipment loan facility of US$35.0 million (202
2
: US$
3
5.0 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 US$1
5
.
9
million (ZAR300.0 million) (2022: US$16.6 million (ZAR300.0 million)) to Absa Bank Limited in respect
of the Commercial Asset Finance and overdraft facilities
of Tharisa Minerals Proprietary Limited
.
The Company guarantees a total of US$
8.1
million (ZAR
153
million) (202
2
: US$
8.5
million (ZAR1
5
3 million)) to third party suppliers
of Tharisa Minerals Proprietary Limited. In addition, Tharisa Minerals Proprietary Limited has issued guarantees to third party
suppliers amounting to US$4.0 million (ZAR75.9 million) (2022: US$4.2 million (ZAR75.9 million)).
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 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$22.1 million (ZAR418.9 million) (2022: US$18.7 million
(ZAR337.5
million)).
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
for the year ended 30 September 2023
93
35.
CAPITAL COMMITMENTS AND GUARANTEES
(continued)
The Company issued a guarantee to Absa Bank Limited which guarantees the payment of certain
liabilities of Arxo Logistics Proprietary
Limited to Transnet totalling US$1.
0
million (ZAR19.4 million) (202
2
: US$1.
1
million (ZAR19.4 million)).
The Company issued guarantees limited to US$
1
0.0 million (202
2
: 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 Logis
tics
Proprietary Limited to Transnet
totalling US$0.
7
million (ZAR12.0 million) (202
2
: US$0.
7
million (ZAR12.0 million)).
The Company and Arxo Metals Proprietary Limited jointly indemnify a third party for any claims which may result from negligen
ce or breach
in terms of the plant operating agreement between Arxo Metals Proprietary Limited and the third party.
36.
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 approval 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 concer
n concept in relation to part or whole of the Group is not appropriate.
On
12
Dec
ember
202
3
, the Board has proposed a final
dividend of US
2
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 impac
t these financial
results.
37.
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 2023, the Company declared and paid a final dividend of US 4.0 cents per share in respec
t of the
financial year ended 30 September 2022. 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 2023.
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.
D
uring the year ended 30 September 2022
, a
subsidiary of the Company, Tharisa Minerals Proprietary Limited, declared and paid an ordinary
dividend of US
$2.7
million
.
The dividend paid to non
-
controlling shareholders amounted to US
0.2
million.
A subsidiary of the Company,
Arxo Logistics
Proprietary Limited, declared an ordinary dividend of US
$1.0
million during the year ended
30
September 2022.
COMPANY FINANCIAL STATEMENTS
30 September 2023
STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
for the year ended 30 September 2023
95
202
3
20
2
2
Notes
US$’000
US$’000
Revenue
5
41 249
21
556
Dividend income
25
000
10
021
Interest revenue
1
6
249
11
535
Foreign exchange loss
(30)
(912)
Operating expenses
7
(
6 432
)
(17 434)
Expected credit loss
es
19
(5
955)
-
Operating profit
2
8
832
3
210
Finance income
8
28
73
Finance costs
9
(1)
(9)
Changes in fair value of financial assets at fair value through profit or loss
19
(1
418)
(5
869)
P
rofit
/(loss)
before tax
2
7
441
(2
595)
Tax
10
(811)
(732)
P
rofit
/(loss)
for the year
2
6
630
(3
327)
Other comprehensive income
Items that
may not be
classified subsequently to profit or loss
-
-
Items that may be classified
subsequently to profit or loss
-
-
Other comprehensive income
-
-
Total comprehensive income
/(loss)
for the year
2
6 630
(3
327)
The notes on pages 99 to 125 are an integral part of these financial statements.
STATEMENT OF FINANCIAL POSITION
as at 30 September 2023
96
202
3
20
2
2
Notes
US$’000
US$’000
Assets
Non
-
current assets
Investment in subsidiaries
1
1
3
3
4
201
401 050
Financial and other assets
1
2
3
875
2
589
Total non
-
current assets
3
3
8 076
403 639
Current assets
Financial
and other
assets
1
2
4
0
297
629
Other
receivables
1
3
4
668
4 595
Cash and cash equivalents
1
4
40
442
2
429
Total current assets
8
5 407
7 653
Total assets
42
3
483
411 292
Equity and liabilities
Share capital and premium
1
5
346
293
345
897
Other reserve
1
5
47
245
47
245
Retained earnings
1
5
2
2
649
15
611
Total equity
4
1
6 187
408 753
Non
-
current liabilities
Deferred taxation
1
6
166
124
Current liabilities
Financial and other liabilities
1
7
7
02
5
2
352
Current taxation
10
105
63
Total current liabilities
7
1
30
2
415
Total liabilities
7
29
6
2
539
Total equity and liabilities
42
3 48
3
411
292
The financial statements were authorised for issue by the Board of Directors on 12 December 2023.
Phoevos Pouroulis
Michael Jones
Director
Director
The notes on pages 99 to 125 are an integral part of these financial statements.
STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2023
97
Share capital
Share
premium
Other reserve
Retained
earnings
Total equity
Note
US$’000
US$’000
US$’000
US$’000
US$’000
Balance at 1 October 20
21
271
289 547
47 245
43
720
380
783
Total comprehensive income 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
5
29
56
050
-
-
56
079
Dividends paid
2
3
-
-
-
(23
106)
(23
106)
Equity
-
settled share
-
based payments
1
5
-
-
-
(1
676)
(1
676)
Contributions by and distributions to owners of the
Company
29
56
050
-
(24
782)
31
297
Total transactions with owners of the Company
29
56
050
-
(24
782)
31
297
Balance at 30 September 20
22
300
345
597
47 245
15
611
408
753
Total comprehensive
income
for the year
Profit
for the year
-
-
-
2
6
630
2
6 630
Total comprehensive
income
for the year
-
-
-
2
6 630
2
6 630
Transactions with owners of the Company
Contributions by and
distributions to owners
Issue of ordinary shares
1
5
-
396
-
-
396
Dividends paid
2
3
-
-
-
(20
990)
(20
990)
Equity
-
settled share
-
based payments
1
5
-
-
-
1
398
1
398
Contributions by and distributions to owners of the
Company
-
396
-
(19
592)
(19
196)
Total transactions with owners of the Company
-
396
-
(19
592)
(19
196)
Balance at 30 September 202
3
300
345
993
47
245
2
2
649
4
1
6
187
Companies, which do not distribute 70% of their profits after tax, as
defined by the relevant tax law in Cyprus, within two years after the end of the
relevant tax year, will be deemed to have distributed this amount as dividend on the 31
December of the second year. The amount of the deemed
dividend distribution is reduced by any actual dividend already distributed by 31 December of the second year for the year the profits relate. The
Company pays special defence contribution on behalf of the shareholders over the amount of the deemed dividend distribution at a rate of 17% when
the entitled shareholders are natural persons tax residents of Cyprus and have their domicile in Cyprus. In addition, from 2019 General Healthcare
System contribution at a rate of 1,7%
-
2,65%, when the entitled shareholders are natural persons tax res
idents of Cyprus, regardless of their domicile.
The notes on pages 99 to 125 are an integral part of these financial statements.
STATEMENT OF CASH FLOWS
for the year ended 30 September 2023
98
202
3
20
2
2
Notes
US$’000
US$’000
Cash flows from operating activities
P
rofit
/(loss)
for the year
2
6
630
(3
327)
Adjustments for:
Impairment loss
es
7
1
000
10 399
Expected credit loss
es
19
5
955
-
Changes in fair value of financial assets at fair value through profit or loss
19
1
418
5
869
Dividend income
and interest revenue
5
(
41
249
)
(21
556)
Finance income
8
(28)
(73)
Finance costs
9
1
9
Foreign exchange loss
30
912
Tax
10
811
732
Equity
-
settled share
-
based payments
7
23
21
(5
4
09
)
(7
014)
Changes in:
Other receivables
(350)
332
Financial and other liabilities
(837)
(463)
Cash flows used in operations
(6
596)
(7
145)
Dividends received
2
0
2
5
9
0
5
11
650
Interest revenue received
2
0
13
150
47
765
Income tax paid
10
(
727
)
(2
655)
Net cash flows
generated
from
operating activities
31
732
49
615
Cash flows from investing activities
Additions to investment in subsidiaries and increase in investment in preference
shares
11
(68
335)
(28 849)
Redemption of unlisted preference shares
11
95
246
-
Additions to
investments joint venture
11
-
(4
965)
Additions to financial and other assets
1
2
-
(9
003)
Repayment of
financial and other assets
1
2
445
1 122
Interest received
8
28
5
Net cash flows
generated
from/(
used
)
in
investing activities
27
384
(41
690)
Cash flows from financing activities
Dividends paid
2
3
(20
990)
(23
106)
Interest paid
9
(1)
(9)
Net cash flows
used in
financing activities
(20
991)
(23
115)
Net increase
/(decrease)
in cash and cash equivalents
3
8
125
(15
190)
Cash and cash equivalents at the beginning of the year
2
429
17
619
Effect of exchange rate
fluctuations on cash held
(112)
-
Cash and cash equivalents at the end of the year
1
4
40
442
2
429
The notes on pages 99 to 125 are an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
99
1.
INCORPORATION AND PRINCIPAL ACTIVITIES
Tharisa plc (the ‘Company’) was incorporated in Cyprus on 20 February 2008 under registration number HE223412 as a private li
mited liability
company under the Cyprus Companies Law, Cap. 113. The Company was converted to a public company and accordingly 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
Centre, Office 108-110, 17 Neophytou Nicolaides & Kilkis Street, 8011, Paphos, Cyprus. On 10 April 2014, the Company listed its ordinary
share capital on the main board of the Johannesburg Stock Exchange (‘JSE’) as its primary listing. On 8 June 2016 the Company listed its
ordinary share capital as a secondary 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
mainly
in PGM and chrome
development stage mining projects and the subsequent PGM and chrome mining and processing operations and associated sales and logistics
operations.
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 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 Centre, 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 2023 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
in each note
.
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
19
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 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 currency
translated at
the exchange rate at the end of the
year.
Foreign currency gains and losses are reported on a net basis.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
100
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 2023 for which the nature and effect of the changes as a result of the adoption of these new accounting standards are
described below
:
Annual Improvements to IFRS Standards 2018
-
2020
As part of its process to make non
-
urgent but necessary amendment
s
to IFRS Standards, the IASB has issued the Annual Improvements to
IFRS Standards 2018–2020. The amendment applicable to the Company relates to IFRS 9 and clarifies which fees should be included in
the 10% test for derecognition of financial liabilities. The amendment has been applied prospectively and had no impact on the Company’s
results for the year ended 30 September 2023
.
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 apply to contracts for which an entity
has not yet fulfilled all of its obligations at the beginning of the current financial year. The adoption of these amendments had no impact on
the Company’s results for the year ended 30 Septe
mber 2023.
Reference to the Conceptual
Framework
–
Amendments to IFRS 3
The amendments add an exception to the recognition principle of IFRS 3 to avoid the issue of potential ‘day 2’ gains or losse
s 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. These amendments had no impact on the
Company’s results for the year ended 30 September 2023
.
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 th
e current or future reporting periods.
Classification of Liabilities as Current or Non
-
current
and non
-
current liabilities with covenants
-
Amendments to IAS 1
The International Accounting Standards Board (IASB) issued Classification of
Liabilities as Current or Non
-
current
and non
-
Current liabilities
with Covenants, which amends IAS 1 Presentation of Financial Statements. The amendments affect requirements in IAS 1 for the
classification of liabilities as current or non-current. The amendments clarify what is meant by a right to defer settlement, that a right to defer
settlement must exist at the end of the reporting period, the classification is unaffected by the likelihood that an entity will exercise its deferral
right, that only if an embedded derivative in a convertible liability is itself an equity instrument would the terms of a liability not impact its
classification, as well as the required disclosures in this regard. The amendment must be applied retrospectively and is effective for annual
periods beginning on or after 1 January 202
4
. Th
ese
amendment
s
is not expected to have a material impact on the Group.
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
uary
2020) and issued
non-mandatory 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 Company.
International Tax Reform
–
Pillar Two Model Rules
-
Amendments to IAS 12
In May 2023, the
IASB
issued amendments to IAS 12, which introduce a mandatory exception in IAS 12 from recognising and disclosing
deferred tax assets and liabilities related to Pillar Two income taxes. The amendments clarify that IAS 12 applies to income taxes arising
from tax law enacted or substantively enacted to implement the Pillar Two Model Rules published by the Organization for Economic
Cooperation and Development, including tax law that implements qualified domestic minimum top-up taxes. Such tax legislation, and the
income taxes arising from it, are referred to as ‘Pillar Two legislation’ and ‘Pillar Two income taxes’, respectively. The amendments require
an entity to disclose that it has applied the exception to recognising and disclosing information about deferred tax assets and liabilities related
to Pillar Two income taxes. An entity is required to separately disclose its current tax expense (income) related to Pillar Two income taxes,
in the periods when the legislation is effective. The disclosure of the current tax expense related to Pillar Two income taxes and the
disclosures in relation to periods before the legislation is effective are required for annual reporting periods beginning on or after 1 January
2023
Th
e Company is currently assessing the impact of these amendments.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
101
2.
SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2.
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 ris
e 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.The amendment is not expected to have a material impact on the
Company.
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 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 am
endment is
not expected to have a material impact on the Group.
3.
USE OF JUDGEMENTS AND ESTIMATES
The preparation of the financial statements in conformity with IFRS requires management to make judgements, estimates and ass
umptions
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
p
eriods 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.
4.
SHARE
-
BASED PAYMENTS
Accounting policy
Equity settled share
-
based payments to employees are measured at the fair value of the equity instruments at the grant date.
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 adjusted to reflect the revision of the original estimate.
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 vested in three equal tranches for the 2019 and 2020 Awards and will vest at the
third anniversary of the grant for the 2021 and 2022 Awards. 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 may be exercised 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 2023 and 30 September 2022.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
102
4.
SHARE
-
BASED PAYMENTS
(continued)
At 30 September 202
3
, the Group had the following share
-
based payment arrangements:
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. The final tranche for SARS will expire at 30 June 2024.The vesting of these
awards was subject to the following performance conditions and s
ubject to there being no fatality during the vesting periods
:
33.3% of each tranche of the LTIP and the SARS was subjected to continuing employment in good standing (as determined by the
Remuneration Committee) during the applicable vesting period.
16.67% of each tranche of the LTIP and SARS was subjected to the production of a minimum of 177.6 koz of PGMs during the first
twelve month period, second twelve month period or third twelve month period, respectively (in the case of the SARS the 1st twelve
month period or 2nd twelve month period, respectively). However 8.34% of each such tranche of the LTIP and SARS would have
vested if the production during the applicable twelve month period was below 177.6 koz of PGMs but above 168.7 koz of PGMs.
The awa
rd w
ould have been
forfeited if production in any applicable twelve month
was
below
168.7 koz of PGMs.
16.67% of each tranche of the LTIP and SARS was subjected to the production of a minimum of 1.57 Mt of chrome concentrates
during the first twelve month period, second twelve month period or third twelve month period, respectively (in the case of the SARS
the 1st twelve month period or 2nd twelve month period, respectively). However 8.34% of each such tranche of the LTIP and SARS
would have vested if the production during the applicable twelve month period was below 1.57 Mt of chrome concentrates but above
1.49 Mt of chrome concentrates. The award would have been forfeited if production in any applicable twelve month was below
1.49
Mt of chrome concentrates.
33.3% of each tranche of the LTIP and SARS was subjected to the Earnings Before Interest, Tax, Depreciation and Amortization
(‘EBITDA’) of the Tharisa Group at least meeting the board approved budget for the twelve month period commencing on 1 July and
ending the following year on 30 June, with the EBITDA being adjusted for the actual commodity selling prices and exchange rate
(US$:ZAR). However, 16.66% of each tranche of the LTIP and SARS would have vested if the applicable EBITDA was below the
budgeted EBITDA (as recalculated) but equal to or above 95% of the budgeted EBITDA (as recalculated). The award would have
been
forfeited if EBITDA in the applicable twelve month period
was
below 95% of the budgeted EBITDA (as adjusted).
2020 Award
–
third tranche
The seventh award was made on 30 June 2020, comprising LTIPs
only and th
e third (final) tranche vested at
30 June 202
3.
The vesting of
these awards was subject to the following performance conditions and subject to there being no fatality during the vesting periods and continued
employment in good standing:
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 comprising LTIPs only with the measurement period being aligned to the Group’s fi
nancial
year-end of 30 September. This award will vest on the third anniversary of the grant, being 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 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 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 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 period as provided.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
103
4.
SHARE
-
BASED PAYMENTS
(continued)
202
2
Award
The ninth award was made on 16 January 2023
comprising LTIPs only
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 15 January 2026.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
:
20.00% 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.
20.00% 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.
20.00% of the vesting will be subject to achieving certain of the Karo Platinum Project deliverables.
20.00% of the vesting will be subject to the three-year rolling average return on invested capital exceeding the three-year rolling
weighted average cost of capital.
10.00% of the vesting will be subject to the performance against the environmental plan to reduce carbon emissions by 30% by
2030.
10.00% of the vesting will be subject to achieving the Group’s vision 2025.
For avoidance of doubt, if any performance condition is not met in any annual measurement period and consequently is forfeite
d (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 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 v
aluation of share award at grant date:
First
measurement
period/
tranche
Second
measurement
period/
tranche
Third
measurement
period/
tranche
2019
sixth
Award
ZA
R20.34
ZA
R19.48
ZA
R18.49
2020
seventh
Award
ZAR11.65
ZAR10.67
ZAR9.66
2021
eighth
Award
ZAR23.83
ZAR23.83
ZAR23.83
2022
nineth
Award
ZAR15.73
ZAR15.73
ZAR15.73
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 2023 Ordinary shares
6
989
475
7
210
076
(287
476)
(1
933
704)
11
978
371
LTIP 2022
Ordinary shares
4
272 742
5
431
124
(1
861
133)
(853
258)
6
989
475
An expense
of
US$
23
thousa
nd
(20
2
2
: US$
21
thousand
) was recognised in profit or loss
.
T
he fair value
at grant date
of the LTIP awards was
determined by present valuing the share price on grant date less the expected dividends. The following inputs were used for LTIP 2022 and
LTIP 2021
issued during the year
s
ended 30 September 2023
and 30 September 2022
:
LTIP 2022
ninth
Award
LTIP 2021
eighth
Award
Spot price
ZA
R2
0
.
1
0
ZA
R27.00
Dividend yield
1
8
.
18
%
4.16%
The risk
-
free interest rate
(swap yield curve)
2
7.35%
5.76%
Forfeiture assumption
3
5.00%
10.63%
1
The
dividend
yield was calculated by using forecast dividends which
were estimated using a combination of broker consensus forecasts,
historical dividend data, and
the Company’s
view of the future
dividends.
2
The swap yield curve was
independently constructed using a bootstrapping methodology together with a combination of traded money
-
market,
FRA and swap rate inputs
.
3
This adjustment is made with reference to the percentage of employees that are not expected to fulfil the non
-
market or service based vesting
conditions prior to the vesting dates
, taking into account the forfeiture assumption b
ased on
participants’ employee turnover histor
y.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
104
4.
SHARE
-
BASED PAYMENTS
(continued)
SARS
N
o SARS were issued during the years ended 30
September 202
3
and 30 September 202
2 and consequently no expense was recognised
during these periods. In terms of previous awards, employees may exercise the SARS within five years from the grant date. Number of SARS
vested, not yet exercised:
Award
date
Expiry date
20
23
20
22
30 June 201
8
–
fifth Award
30 June 2023
-
617
852
30 June 20
19
–
sixth Award
30 June 2024
1
193
009
1
305
071
N
umber of share options exercised during the
year
7
29
914
2
397
593
Weighted average
share price of options exercised during the year
ZA
R21.87
ZAR27.76
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
.
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 recognised and measured on the effective interest rate method, as well as the unwi
nding of notional
interest on financial assets classified and measured at fair value through profit or loss. The interest revenue is recognised when it accrues to
the Company.
202
3
20
2
2
US$’000
US$’000
Dividend income (note 2
0
)
25
000
12
671
Interest revenue (note 2
0
)
1
6
249
8
885
41 249
21
556
The
interest revenue on the effective interest rate method of US$
14.0
million (2022: US$
8.9
million) represents the accrued preference share
dividends relating to the preference share investment that forms part of the net investment in Tharisa Minerals (Proprietary) Limited, a subsidiary
of the Company. The interest revenue also includes the unwinding of notional interest of US$2.2 million (2022: US$ no interest) relating to the
preference share investment that forms part of the net investment in Arxo Finance
plc,
a subsidiary of the Company
. Refer to note 11
.
6.
DIRECTORS REMUNERATION
Accounting policy:
employee
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.
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 awarded to the Executive Director by the Company, are set out in the following tables:
LTIP 202
3
Ordinary shares
Opening
balance
Allocated
Vested
Forfeited
Total
LC Pouroulis
82 072
68
702
(3
552)
(14
205)
133
017
LTIP 20
22
Ordinary shares
LC Pouroulis
45
461
64
315
(20
837)
(6
867)
82
072
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
105
6.
DIRECTORS REMUNERATION
(continued)
The remuneration of the Directors is set out in the following table:
2023
2022
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
:
Executive
LC Pouroulis
-
68
15
23
106
-
69
10
21
100
Non
-
executive
JD Salter
122
-
-
-
122
122
-
-
-
122
A Djakouris
104
-
-
-
104
103
-
-
-
103
OM Kamal
60
-
-
-
60
60
-
-
-
60
C Bell
122
-
-
-
122
122
-
-
-
122
R Davey
104
-
-
-
104
104
-
-
-
104
SW
M
Lo
42
-
-
-
42
42
-
-
-
42
ZL Hong
*
42
-
-
-
42
42
-
-
-
42
Total
596
68
15
23
702
595
69
10
21
695
*
Resigned on 30 September 2023
7.
OPERATING EXPENSES
Accounting policy
Refer to note 6 for the accounting policy relating to
employee benefits. Other operating expenses
are
recognised as incurred by the Company
and are measured at
undiscounted amounts
based on the value
that the
Company
expects to pay as at the reporting date
.
202
3
20
22
US$’000
US$’000
Directors
’
remuneration (note 6)
679
674
Equity
-
settled share
-
based payments
23
21
702
695
Business development
179
50
Statutory a
udit
services
319
293
Consulting and professional
364
602
Administration (note 20)
2
966
4
320
Impairment losses (note 11)
1 000
10 399
Listing fees
455
730
Travelling
177
105
Sundry expenses
270
240
6 432
17 434
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
rate
method.
202
3
20
2
2
US$’000
US$’000
Amortisation of intergroup receivable
-
68
Interest income
28
5
Finance income
28
73
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
106
9.
FINANCE
COSTS
Accounting policy
Finance
costs are recognised in profit or loss
as it accrues
using the effective interest
rate
method.
-
202
3
20
22
US$’000
US$’000
Interest paid: banks
1
-
Interest paid: Cyprus Revenue Authority
-
9
1
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 re
porting
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.
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 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 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 det
ermination is made.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
107
10.
TAX
(continued)
202
3
20
22
US$’000
US$’000
Current tax
Corporation tax
–
current year
111
103
Special contribution to the defence fund
–
current year
-
1
Dividend withholding tax
658
2 572
769
2
676
Deferred tax
Dividend withholding tax (note 16)
42
(1 944)
811
732
Income
tax comprises
current tax/
corporation tax
, deferred tax, dividend withholding tax
and special contribution for defence. Corporation tax
is provided at the rate of 12.5% (2022: 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 is disallowed in the computation of chargeable income for corporation tax purposes (20
22
:
100%).
202
3
20
22
Tax reconciliation
US$’000
US$’000
P
rofit
/(loss)
before tax
27
441
(2
595)
Tax calculated at
12.5% (2022: 12.5%)
3
430
(
324
)
Tax effect of allowances and income not subject to tax
(
5 160
)
(1
970)
Tax effect of expenses not deductible for tax purposes
1
717
2
293
Prior year under provision: tax on notional interest
-
104
Current tax
-
dividend withholding tax
658
2
572
Special contribution to the defence fund
-
1
Recognition of deemed interest income for tax purposes
124
-
Deferred tax: dividend withholding tax (note 16)
*
42
(1
944)
Tax charge
*
811
732
Dividend withholding tax arose on ordinary and preference dividends declared and paid by South African subsidiaries to the Company (refer to
notes 11 and 16). Dividend withholding tax is calculated at a tax rate of 5.0% in terms of the Double Taxation Agreement between Cyprus and
South Africa.
* The tax reconciliation for the prior year only reconciled to the current tax element of the income tax expense of US$2.7 million as it excluded
the deferred tax element of (US$1.9 million), represented by the dividend withholding tax raised on accrued dividends. The disclosure has
been corrected, which had no impact on the company’s income tax expense, earnings, nor on any totals and subtotals in the company
financial statements.
202
3
20
22
Tax pa
yable
US$’000
US$’000
Balance at the beginning of the year
63
42
Current tax charge
769
2 676
Payments made
(
727
)
(2
655)
Balance at the end of the year
105
63
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.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
108
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 at 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 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 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 re
cognised.
202
3
20
2
2
US$’000
US$’000
Unlisted ordinary shares
1
81
840
110
330
Unlisted preference shares
1
52
361
290 720
3
3
4
201
401 050
The following table contains the particulars of all direct subsidiaries of the Company.
Name
Country of
establishment/
incorporation
and operation
Principal
activities
2023
Holding
%
2022
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
100
9 February 2009
500
ordinary
shares of ZAR1
each and 1 706
(2022: 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
MetQ
Proprietary
Limited
South Africa
Manufacturing
100
100
1 October 2019
140 ordinary
shares of ZAR1
each
Limited liability
company
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
109
11.
INVESTMENTS IN SUBSIDIARIES (continued)
Name
Country of
establishment/
incorporation
and operation
Principal
activities
2023
Holding
%
2022
Holding
%
Date of
incorporation/
establishment/
acquisition
Particulars of
issued and paid
up capital and
other securities
Type of entity
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
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
1
00 ordinary
shares of US$1
each
Limited liability
company
Arxo
Exploration
(Cyprus)
Limited
Cyprus
Exploration
100
100
20 April 2021
1
1
00 ordinary
shares of US$1
each
Limited liability
company
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
100
18 April 2022
200 ordinary
shares of US$1
each
Limited liability
company
Skyler Storm
(Private)
Limited
Zimbabwe
Mining and
beneficiation of
chrome
concentrate
100
100
1 December
2021
200 000 ordinary
shares of US$1
each
Limited liability
company
Karo Mining
Holdings plc
Zimbabwe
Investment
holding company
75
70
30 March 2022
54 248 ordinary
shares of US$1
each
Limited liability
company
During the year ended 30 September 2023, the Company subscribed
for
an additional 100 ordinary shares issued by Redox One Limited at
US$20 000 a share (US$2.0 million) and an additional 25 ordinary shares issued by MetQ Proprietary Limited at ZAR25 million
(US$1
.
3
million
).
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
110
11.
INVESTMENTS IN SUBSIDIARIES (continued)
Acquisition of 75% 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% in Karo Mining.
Prior to the acquisition, the investment in Karo Mining was accounted for as a joint venture investment at cost. At 30 September 2021 the
joint venture investment represented 26.8% of the issued share capital of Karo Mining, a company incorporated in Cyprus. 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 totalling US$5.0 million. The additional 37.96% of the issued share capital of Karo Mining
was acquired from the Leto Settlement, a related party (refer to note 20), for a purchase consideration of US$29.4 million. The purchase
consideration was settled through the issue of 13
693
000 new ordinary shares of the Company to the Leto Settlement.
Karo Mining’ principal place of business is in Cyprus. The functional and presentation currency of Karo Mining and its subsidiaries is the US$.
The table below details Karo Mining’ interest in subsidiaries as at 30 March 2022 (date of acquisition), 30 September 2022 and 30 September
2023
.
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 Power Generation (Private) Limited
100%
Zimbabwe
Power generation
Karo Refinery
(Private )
Limited
100%
Zimbabwe
Dormant
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 Compa
ny’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 t
he 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
for pro rata to each shareholder’s holding
.
Effective 30 June 2023, Karo Mining issued an additional 3 800 new ordinary shares for a cash subscription of US$27.3 million
to the
Company. The additional shares issued represented 2.33% of the issued share capital of Karo Mining which increased the Company’s
shareholding to 72.33%.
Effective 31 July 2023, Karo Mining issued an additional 5 248 new ordinary shares for a cash subscription of US$37.7 million
to the
Company. The additional shares issued represented 2.68% of the issued share capital of Karo Mining which increased the Company’s
shareholding to 75.00%.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
111
11.
INVESTMENTS IN SUBSIDIARIES (continued)
Terms of preference shares of Tharisa Minerals Proprietary
Limited
(‘Tharisa Minerals’)
The preference
shares
of
US$
135.7
million (2022: US$
270.7
million)
confer
on the holder the right to receive out of distributable profits of
Tharisa Minerals a cumulative preferential cash dividend calculated at the rate of twelve – month SOFR + 1.7% pa (2022: twelve – month
US$ Libor + 1% pa), on the basis that it shall be due and payable annually on the dividend date (30 September). For the transition from US$
Libor to SOFR, the Company 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 2023. 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 Tharisa Minerals, which notice
Tharisa Minerals may give at any time, or the tenth business day after receipt by Tharisa Minerals 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 (June 2008). The remaining preference share capital investment of US$135.7 million (2022: US$270.7
million) is treated by the Company as part of the net investment in Tharisa Minerals on the basis that the redemption is neither planned nor
likely to occur in the foreseeable future
. The preference shares are subordinated in favour of
Tharisa
Minerals
’
ba
nk
borrowings.
During the year ended 30 September 2023, Tharisa
Minerals notified the Company of its intention to redeem US$
135.0
million of the
redeemable cumulative preference share capital. At 30 September 2023, US$95.2 million of the redeemable preference share capital has
been redeemed (2022: no redemption). The remainder of the redeemable portion of the preference share capital balance US$39.8 million
was reclassified as a receivable on the basis that the Company expect
s
the redemption in the foreseeable future, refer to note 12.
During the year ended 30
September 2023
, US$13.2 million (2022: US$4
7
.
8
million) of
accrued preference dividends
was
paid by Tharisa
Minerals. Effective from 30 September 2021, all accrued dividends were classified as short-term receivables and no longer part of the net
investment in Tharisa Minerals as settlement of the preference share dividends occurred and will occur in the foreseeable future, refer to
note 13.
Terms of redeemable preference shares of Arxo Finance plc
During the year ended 30 September 202
2
, the Company acquired
5
non
-
cumulative redeemable preference
shares
for a consideration of
US$ 5 million from Arxo Finance plc. No additional non-cumulative redeemable preference shares were acquired during the year ended 30
September 2023.
The preference share
investment of US$
16.6
million (2022: US$20
.
0
million)
is
treated by the Company as part of the investment in
Arxo
Finance plc. The non-cumulative redeemable preference shares, at a subscription price of US$1 000 000 per share, of which US$1 allocated
as par value and US$999 999 as a share premium entitles the holders thereof to an annual dividend at a variable rate equal to three – month
SOFR + 275 basis points (2022: three - month US$ Libor + 275 basis points). For the transition from US$ Libor to SOFR, the Company
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 2023.
Such dividend payment rights will only accrue for as long as there are sufficient accumulated distributable reserves in any given financial
year, as well as an express declaration of dividends by the board of directors of Arxo Finance plc. 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 redemption of the preference shares by the Company and Arxo Finance plc is neither planned nor likely to occur in the
foreseeable future and are therefore treated by the Company as part of the net Investment in Arxo Finance plc. Arxo Finance plc has not
declared any preference dividends during the year ended 30 September 2023 (2022: no preference dividends declared). The redemption of
the preference shares may be either at the behest of the Company or the preference shareholders, for the following price:
(i) the original subscription price;
(ii) all dividends which have been expressly declared and have accrued (but have not been paid); and
(iii)
any other interest arrears.
Acquisition of 26% equity interest in 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 20). 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 ordinary shares of Tharisa Minerals.
On 20 May 2022 the Company purchased the remaining 6.0% of the issued ordinary shareholding of Tharisa Minerals from the Thar
isa
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. Post the acquisition, the Company owned 100% of the issued ordinary shares
of Tharisa Minerals
.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
112
11.
INVESTMENTS IN SUBSIDIARIES (continued)
Impairment of investment in MetQ Proprietary Limited (‘MetQ’)
During the year ended 30 September 2022, it became evident that the operational performance of MetQ was
not as expected and the Company
believed that an impairment indicator was 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 real discount rate of 12.6%.
The additional capital investment in MetQ of US$1.3 million during the year ended 30 September 2023 enabled MetQ to reduce de
bt and assist
with working capital requirements. Even though the operational performance improved compared to the performance for the year ended 30
September 2022, the Company believes that the operational performance of MetQ was still below expectation and that an impairment indicator
was still present at 30 September 2023. The total investment in MetQ of US$2.4 million was tested for impairment by determining the value in
use and the fair value less cost to sell. The Company believes that no additional impairment is required at 30 September 2023 as the fair value
less cost to sell
, being higher than the value in use, supports the recoverability of the
investment in MetQ.
Impairment of investment in Salene Chrome Zimbabwe (Private) Limited (‘Salene’)
During the year ended 30 September 2022, the Company impaired its investment of US$8.8 million in Salene in full.
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 were unfavourable to Salene and consequently operations were ceased while allowing the company to evaluate
and develop downstream opportunities. The Company believed that the change in operational circumstances during the year ended
30 September 2022 represented 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 represented 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 was not
tax deductible.
At 30 September 2023, the operational environment and circumstances of Salene have not improved and the operations remain in
care and
maintenance.
Impairment of investment in S
kyler Storm
(Private) Limited (‘S
kyler
’)
At 30 September 2023,
Skyler
remained
in care in maintenance
due to prolonged delays in starting up the operations which resulted in
Skyler’s
liabilities exceeding its assets. Consequently the Company believes that an impairment indicator is present. The cost of the investment was
US$1.0 million. The investment in Skyler was tested for impairment and the Company concluded that the fair value less cost to sell value
exceeds the value in use. The key inputs used by the Company in determining the fair value less cost to sell represent adjusted unobservable
information with specific reference to the estimated disposal value and replacement cost of chrome plants (fair value hierarchy level 3). The
Company concluded that the fair value less cost to sell will result in a negative value and consequently an impairment loss of US$1.0 million
was recognised in other operating expenses (note 7).
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 projection
s as
at 30 September 2023 and 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 no future
credit losses are expected.
The following
underlying
assumptions were used in the discounted cash flow model
in determining the value in use recoverable amounts of
the investments in Tharisa Minerals and Karo Mining:
a discount rate of 12.2% (2022: 13.4%) for Tharisa Minerals and 10.4% (2022: 10.0%) for Karo Mining;
forecast timing of cash flows reflects actual practices;
a forecast period of 18 years (2022: 19 years) for Tharisa Minerals and a forecast period of 11 years (2022: 17 years) for Karo
Mining;
an exchange rate of ZAR18.14:US$1 (2022: ZAR18.07:US$1);
spot PGM basket price of US$1 565/oz (2022: US$1 889/oz) and spot chrome concentrate prices of US$280/tonne) (2022:
164/tonne); and
future ongoing capital requirements were included necessary to maintain the assets in its current conditions.
Sensitivity analyses were
performed by adjusting the above assumptions individually and collectively by 90% and 110%.
The recoverable
amounts were higher than the carrying amounts of the investments and consequently no impairment or allowance for credit losses has been
recognised. The calculated recoverable amounts are most sensitive to inputs used for forecast spot PGM basket and chrome concentrate
prices, therefore decreases in these prices could erode the headroom and result in potential impairments of these investments
.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
113
12.
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 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
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.
Fair value
hierarchy
202
3
US$’000
202
2
US$’000
Non
-
current
financial
assets
Share
-
based payment receivables from related parties (note 2
0
)
3
875
2
589
Current financial assets
Unlisted preference shares
–
Tharisa Minerals
Proprietary Limited
(note 11)
3
9
754
-
Share
-
based payment receivables from related parties (note 2
0
)
495
610
Shares in Bank of Cyprus Public Co Limited
Level 1
48
19
4
0
297
629
The
financial and other
assets
at amortised cost approximate its fair value.
Unlisted
preference shares
–
Tharisa Minerals Proprietary Limited
(‘Tharisa Minerals’)
During the year ended 30 September 2023, Tharisa Minerals notified the Company of its intention to redee
m a portion of the
redeemable
cumulative preference share capital amounting to US$39.8 million. This balance represents the preference share capital that remains
redeemable as at 30 September 2023 and that has been reclassified from the net investment in Tharisa Minerals on the basis that the Company
expect
s
the redemption in the foreseeable future, refer to note 11.
Shares in Bank of Cyprus Public Co Limited
The financial assets at fair value through profit or loss represent shares in Bank of Cyprus Public Co Limited that are marke
table securities
and are valued at market value at the close of business on 30 September 2023 by reference to latest available stock exchange quoted bid
prices.
These f
inancial assets
are measured
at fair value through profit or loss
.
13.
OTHER RECEIVABLES
Accounting policy
O
ther receivables, prepayments
,
deposits and dividends receivable
, are non
-
derivative financial assets categorised as financial assets
measured at amortised cost.
The accounting policy for
expected credit loss
es is disclosed in note 12.
202
3
20
22
US$’000
US$’000
Accrued dividends (note 20)
-
913
Accrued interest revenue
–
preference share dividends (note 20)
3
324
2
487
Receivables from related parties (note 20)
1
220
943
Deposits and prepayments
107
95
Other
17
157
4
668
4 595
The carrying amount of other receivables approximate its fair value.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
114
14.
CASH AND CASH EQUIVALENTS
Accounting policy
Cash and cash equivalents comprise cash at bank,
demand deposits with banks and other financial institutions, and short
-
term, highly liquid
investments held for the purpose of meeting short-term cash commitments that are readily convertible into known amounts of cash and which
are subject to insignificant risk of changes in value
and a maturity of three months or less
.
202
3
20
2
2
US$’000
US$’000
Cash at bank
40
182
2
169
Bank deposits
260
260
40
442
2
429
As at 30
September 202
3
,
US$0.3 million
(202
2
: US
$0.3 million)
served as security against certain credit facilities of the Company and its
subsidiaries. The amounts reflected above approximate their fair values.
15.
SHARE CAPITAL AND RESERVES
Accounting policy
: share capital
The share capital is stated at
nominal value. The difference between the fair value of the consideration received by the Company and the
nominal value of the share capital being issued is taken to the share premium account. Incremental costs directly attributable to the issue of
ordinar
y shares are recognised as a deduction from equity, net of any tax effects.
When share options are exercised, the Company issues new shares or issues shares from treasury shares
held
. The proceeds received net of
any directly attributable
transaction costs are credited to share capital and share premium.
Share capital
30 September 202
3
30 September 20
22
Number of
Shares
US$’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
302
596
743
303
275
000
000
275
Issued during the year
-
-
27
596
743
28
Balance at the end of the year
302
596 74
3
303
302
596
743
303
Treasury shares
Balance at the beginning of the year
2
850
378
3
3
715 621
4
Transferred as part of management share award plans
(273
329)
-
(865
243)
(1)
Balance at the end of the year
2
577
049
3
2
850
378
3
Issued and fully paid
300
019
694
300
299
746
365
300
Share premium
Balance at the
beginning of the year
299
746
365
345
597
271
284
379
289
547
Issued during the year
273
329
396
28
461
986
56
050
Balance at the end of the year
300
019
694
345
993
299
746
365
345
597
Total share capital and premium
346
293
345
897
Share capital
No shares were issued during the year ended 30 September 2023.
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
3
,
273
329
(202
2
:
865 243
) 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.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
115
15.
SHARE CAPITAL AND RESERVES
(continued)
Share capital
(continued)
At 30 September 202
3
, 2
577
049
(202
2
:
2
850
378
)
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 receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Comp
any.
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
3
and 30 September 20
2
2
, the increases in the share premium account related to the issue and
allotment of ordinary shares.
Other
reserve
The other reserve represents a historic ordinary share issue by the Company to parties external to the Group in exchange for
preference
shares in Tharisa Minerals. The ordinary shares were issued at a price reflective of the fair value of the preference shares less share issue
costs, which was in excess of the nominal value of the ordinary shares, but the excess was not registered as share premium at the Registrar
of Companies in Cyprus, thus presented and disclosed separately from share premium. The other reserve is not distributable for dividend
purposes.
Retained earnings
The retained earnings include the accumulated retained profits and losses of the Company
(
2023:
US$
20.0
million (2022: US$
14.4
million))
and the share
-
based payment reserve
(
2023:
US$2.6
million (2022: US$
1.2
million))
. 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.
16.
DEFER
R
ED TAX
Accounting policy
Refer to note 10.
202
3
20
2
2
US$’000
US$’000
Deferred tax liability
Dividend withholding tax
166
124
Reconciliation of deferred tax liability
Balance at the beginning of the year
124
2
068
Temporary differences recognised in profit or loss in
relation to:
Dividend withholding tax
42
(1
944)
166
124
The deferred tax liability relates to dividend withholding tax raised on accrued
dividends amounting to US$
3.3
million (202
2
: US$
2.5
million)
which 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% (2022: 5.0%) 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 2023
116
17.
FINANCIAL AND OTHER LIABILITIES
Accounting policy
: other payables/liabilities
O
ther payables
/liabilities
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
rate
method.
Accounting policy: financial guarantee contracts
Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is i
nitially measured at fair
value.
The fair value of a financial guarantee contract issued by the Company for no premium
is the present value of the difference between the net
contractual cash flows required under a debt instrument, and the net contractual cash flows that would have been required without the
guarantee.
Subsequent to initial recognition, the
financial
guarantee
liabilities relevant to the company
are mainly
measured at the
ir expected credit losses
in terms of IFRS 9.
The Company’s
liability under
a financial
guarantee
that is subsequently
measured
at
its
expected credit loss in terms of IFRS 9 is determined
based on the cash shortfalls representative of the expected payments to reimburse the holder for a credit loss that it incurs less any amounts
that the entity (issuer) expects to receive from the holder, the debtor or any other party.
202
3
20
2
2
US$’000
US$’000
Accruals
367
363
Financial guarantee contract liability
(note 19)
5 695
-
Other payables
635
846
Share
-
based payment liabilities to related parties
(note 2
0
)
4
833
Payables to related parties (note 2
0
)
32
4
310
7
025
2 352
Financial and other liabilities were previously disclosed as
o
ther payables. The change in
the
description had no impact on the balance sheet
as at 30 September 2022, no impact on the balances disclosed as other payables as at 30 September 2022 nor an impact on the net profit
after tax
for the period ending 30 September 2022
.
T
he Company
issued
financial guarantee contracts to
the
related party creditors of
Skyler Storm (Private) Limited and Salene Chrome
Zimbabwe (Private) Limited. These financial guarantee contracts were effective for the entire year ended 30 September 2023. The recognised
value linked to these financial guarantee contracts represent the expected cash shortfalls in settling these receivables which the Company
would need to reimburse the holders for
, if called upon
. Refer to the financial guarantee credit risk
and liquidity risk disclosures in note 19.
During the year ended 30 September 2022, t
he 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 exposure of the Company to liquidity risk is disclosed in note 19. The amounts reflected
above approximate their fair values.
18.
DIRECTORS INTEREST IN STATED CAPITAL
202
3
20
22
%
%
LC Pouroulis
0.41
0.40
P Pouroulis
2.6
9
2.68
MG Jones
0.24
0.26
A Djakouris
0.01
0.01
C Bell
0.02
0.02
Total
3.3
7
3.37
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.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
117
19.
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.
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. 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, selling the
financial assets, or both.
Equity instruments that are held for trading are classified at fair value through profit or loss, for other equity instrument
s, 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 f
air value through profit or loss.
The following table presents the classification of financial instruments:
Financial assets
Classification
F
inancial
and other
assets
Investment in equity instruments
Fair value through profit or loss
Investments in unlisted preference shares
–
Tharisa Minerals Proprietary Limited
Amortised cost
Investments in unlisted preference shares
–
Arxo Finance plc
Fair value
through profit or loss
Option to acquire shares
Fair value through profit or loss
Other receivables
Amortised cost
Cash and cash equivalents
Amortised cost
Financial liabilities
Classification
Other payables
Amortised cost
Accounting policy:
expected credit losses/
Impairment
of financial assets
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 at 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 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 the 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 stage 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 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 probability of the default
occurring.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
118
19.
FINANCIAL RISK MANAGEMENT
(continued)
Accounting policy (continued)
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
/
expected credit loss allowance
while financial liabilities are
subsequently carried at amortised cost.
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.
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.
Derecognition: Financial liabilities
The Company derecognises financial liabilities only when its obligations under the financial liabilities are
discharged, cancelled 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 a
nd arises
principally from the Company’s financial assets
and issued financial guarantee contracts
.
Credit risk from the Company’s financial assets
The most significant exposure
f
o
r
the Company to credit risk is repr
esented by the carrying amount
of receivables from related parties
, other
financial assets and receivables, unlisted preference share investments in
subsidiaries
and cash and cash
equivalents.
Financial and other assets, other receivables and unlisted preference share investments in subsidiaries
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 receivables from related parties, unlisted preference share investment in Tharisa Minerals
Proprietary Limited
and other financial assets and receivables.
The Company establishes an allowance for credit losses that represents its estimate of expected credit losses. The main compo
nent of this
allowance is a specific loss component that relates to individually significant credit risk exposures. At the reporting date, the Board of Directors
is of the opinion that the expected credit loss provision made for the balance owing by Salene Chrome Zimbabwe (Private) Limited (‘Salene’)
US$175 thousand and Skyler Storm (Private) Limited (‘Skyler’) US$85 thousand is a fair reflection of the potential risk of default and
counterparties potentially not having the ability in the foreseeable future to
satisfy their contractual cash flow obligations to the Company.
The credit risk linked to the receivables from Salene and Skyler has increased significantly during the financial year ended
30
September
2023
due to their ability to meet their contractual cash flow obligations deteriorating significantly as a result of operations that have temporarily been
stopped and remaining in care maintenance for a prolonged period of time. The Company has therefore raised a stage 2 lifetime expected credit
loss provision for these receivables based on the estimated cash shortfall determined as the expected difference between the contractual cash
flows due and the expected cash flows to be received from these subsidiaries, for which consideration was given to the probability of the
expected success of the mining projects which are currently in progress within these entities
.
A reconciliation of the expected credit loss provision on the Company’s financial assets:
Receivables from related parties
2023
2022
US$’000
US$’000
Opening balance
-
-
Expected credit loss
charged to profit or loss
–
receivables from related parties
260
-
Closing balance
260
-
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
119
19.
FINANCIAL RISK MANAGEMENT
(continued)
Credit risk (continued)
Financial and other assets, other receivables and unlisted preference share investments in subsidiaries (continued)
T
he other carrying amounts
in terms of other financial assets and
receivable
s, receivables
from related parties and
the unlisted preference share
investment in Tharisa Minerals are not considered to be impaired nor having a material expected credit loss to be raised as the counterparties
are viewed as having a low risk of default, strong capacity to meet their contractual cash flow obligations and adverse changes in economic and
business conditions is not expected to significantly impact the ability to meet contractual cash flow
obligations
.
Cash and cash equivalents
The Company limits its exposures on cash and cash equivalents by dealing only with well
-
established financial institutions of
investment grade
ratings and of high quality credit standing. At the reporting date, the majority of the Company’s cash resources was deposited with HSBC based
in Hong
Kong.
The maximum exposure to credit risk at the reporting date
for the company is reflected by the gross carrying amount of financial assets as
disclosed below
:
202
3
20
22
US$’000
US$’000
Unlisted preference share investments in
Tharisa Minerals Proprietary Limited
1
3
5
720
2
7
0 720
Unlisted preference share investments in Arxo Finance plc
16
641
20 000
Non
-
current financial and other assets
3
875
2
589
Current financial and other assets
40 297
629
Other receivables
4
668
4
59
5
Cash and cash equivalents
40
442
2
429
241
643
300
962
Credit risk from the Company’s issued financial guarantee contracts
From the financial guarantee contracts
issued
by the
C
ompany
as disclosed in note 20,
it was only
the financial guarantee contracts
issued
to
the related party creditors of Salene
and Skyler, with a gross credit risk exposure of US$9.0 million and US$1.0 million respectively, that was
assessed and determined to require the recognition of an expected credit loss.
The expected credit loss provision, representing a stage 2 lifetime expected credit loss, that was recognised during the year
ended
30 September 2023 (30 September 2022: no material ECL provision relevant on issued financial guarantee contracts) which
was as a result of
a significant increase in credit risk due to the deteriorating ability of these entities to meet their contractual cash flow
obligations.
The expected credit loss provision raised amounting to US$5,7 million (2022: US$ nil) on these
financial guarantees were based on
potential
cash shortfalls by Salene Chrome and Skyler Storm, after taking their future expected ability to settle the payments
due to the creditors into
account, for which consideration was given to their operations
that have temporarily been halted, remaining in care maintenance for a prolonged
period of time as well as
the probability of the success of the mining projects which are currently in progress within these entities. The expected
credit loss represents the potential payments to be made by the Company to reimburse these creditors for a credit loss that they
could potentially
incur if the financial guarantees are called upon by these creditors.
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 liabil
ities 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 a
bove risk.
Liquidity risk is monitored on a regular basis and management is taking s
teps 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 disast
ers. 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.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
120
19.
FINANCIAL RISK MANAGEMENT (continued)
Liquidity risk
(continued)
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
Between 2
and
3
years
Total
Carrying
amount
30 September 202
3
US$’000
US$’000
US$’000
US$’000
Financial and other
liabilities
1 330
-
1 330
1 330
Financial
guarantees
39 463
36
392
7
5
855
5 695
30 September 2022
Financial and o
ther
liabilities
2
352
-
2
352
2
352
Financial guarantees
33
943
-
33
943
-
The values disclosed for the
f
inancial guarantees within the liquidity risk maturity analyses represent the gross value
of financial guarantees
the Company has issued while the carrying amount represents the amount related to these guarantees as included in the statement of financial
position.
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 unlisted shares 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
the higher of
value in use
or the
fair value less cost to sell and has concluded that indications of impairment were present at 30 September 2023, as well as impairments raised.
Certain investments were
impaired
for
during the year ended 30 September 2022. R
efer to note 11.
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
deemed necessary in an attempt to manage the corresponding
risk.
At the reporting date the interest rate profile of interest
-
bearing financial instruments were:
Effective interest rate
20
23
20
22
Unlisted preference shares
20
23
20
22
US$’000
US$’000
Unlisted preference shares
in Tharisa Minerals Proprietary
Limited (non
-
current)
12
–
month
SOFR + 1.7%
12
–
month US$
Libor + 1.0%
13
5
720
270
719
Unlisted preference shares
in Tharisa Minerals Proprietary
Limited (current)
12
–
month
SOFR + 1.7%
39 754
-
Unlisted preference shares
in Arxo Finance plc
3
–
month SOFR
+
2
.
75
%
3
–
month US$
Libor + 2.75%
16 641
20
000
192
115
290
719
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
121
19.
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$2.1 million (2022: US$2.7 million). This analysis assumes that all other variables and in particular foreign exchange rates, remain constant.
The analysis is performed on the same basis for 30 September 2022. A decrease of 100 basis points in interest rates at the reporting date
would have had the equal but opposite effect to the amounts shown above, on the basis that all other variables remain
constant.
Currency risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates. Cu
rrency risk arises
when future commercial transactions and recognised assets and liabilities are denominated in a currency that is not the Company's functional
currency. The Company is exposed to foreign exchange risk arising from various currency exposures primarily with respect to the exchange
rate movement in South African Rand (‘ZAR’), British Pound (‘GBP’) and Euro (‘€’) against the US$. 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
financial
assets
and financial liabilities denominated in a currency other than the functional currency of the Company. For presentation purposes, the amounts
of the exposure are presented in US$, translated using the spot rate at the reporting date. The spot rates used at the reporting date against the
US$ are US$:ZAR 18.
91
(202
2
: 1
8
.0
7
); US$:EUR
0
.
94
(202
2
:
1
.
02
) and US$:
GBP
0.
82
(202
2
: 0.
90
).
202
3
202
2
Amounts in US$’000
€
ZAR
GBP
€
ZAR
GBP
Financial assets
48
4
370
-
19
2
624
-
Other receivables
5
50
43
-
1
070
-
Cash and cash equivalents
37
424
31
29
149
132
Other payables
(223)
(
30
7)
(27)
(201)
(632)
(6)
Current tax liabilities
(105)
-
-
(63)
-
-
(238)
4
53
7
47
(216)
3
211
126
Sensitivity analysis
A 10% strengthening of the US$ against the currencies disclosed in the previous table at 30 September 20
2
3
and 30 September 202
2
, 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
3
20
22
US$’000
US$’000
ZAR
(4
12)
(292)
€
51
20
GBP
(4)
(11)
(
365
)
(283)
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
-
quoted 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 from
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 2023
122
19.
FINANCIAL RISK MANAGEMENT (continued)
Fair values (continued)
Fair value
Fair value
202
3
20
2
2
Valuation technique
Financial
instrument
level
US$’000
US$’000
and key inputs
Financial assets measured at fair value
Investments in equity instruments
-
Shares
in Bank of Cyprus Public Co Limited
Level 1
48
19
Quoted market price for the same
instrument
Preference share investment
–
Arxo Finance
plc
Level
2
16
641
-
Discounted cash flow model
based on
q
uoted market interest rates
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
3
20
22
Changes in fair value of financial assets at fair value
through profit or loss
US$’000
US$’000
Investments in equity instruments
-
Shares in Bank of Cyprus Public Co Limited
29
1
Preference share investment
–
Arxo Finance plc
(1
447)
-
Right to acquire shares in Karo Platinum*
-
(5
870)
(1
418)
(5
869)
*
Upon obtaining control over Karo Mining Holdings
p
lc
and subsidiaries
during the year end
ed
30 September 2022, the option to acquire
shares in Karo Platinum at a discount lapsed and consequently
was
derecognised through profit or loss.
20.
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
3
20
22
Revenue
US$’000
US$’000
Dividend income
(note 5)
Arxo
Logistics Proprietary Limited
-
1
021
Arxo Resources Limited
25
000
9
000
Tharisa Minerals Proprietary Limited
-
2 650
Interest revenue
–
preference share dividends
(note 5)
Tharisa Minerals Proprietary Limited
13
987
8 885
Interest
revenue
–
notional unwinding of finance income
on preference shares
(note 5)
Arxo Finance plc
2
262
-
41 249
21
556
Administration fees
(note 7)
Tharisa Administration Services Limited
258
584
Tharisa Minerals Proprietary Limited
63
77
Braeston Proprietary Limited
2
645
3
659
2
966
4
320
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
123
20.
RELATED PARTY TRANSACTIONS (continued)
202
3
20
2
2
US$’000
US$’000
Amortised interest on related party receivables
(note 8)
Tharisa Minerals Proprietary Limited
-
68
Non
-
current share
-
based payment receivables
(note 1
2
)
Arxo Logistics Proprietary Limited
84
82
Arxo Metals Proprietary Limited
81
68
Arxo Resources Limited
263
40
Braeston Proprietary Limited
2
619
1
589
Dinami Limited
69
48
MetQ
Proprietary Limited
-
12
Tharisa Administration Services Limited
159
47
Tharisa Minerals Proprietary Limited
567
660
Tharisa Fujian Industrial Co., Limited
33
38
Ubhova Security Proprietary Limited
-
5
3
875
2
589
Current
share
-
based payment receivables
(note 12)
Arxo Logistics Proprietary Limited
-
35
Arxo Metals Proprietary Limited
11
-
Arxo Resources Limited
6
-
Braeston Proprietary Limited
419
293
Dinami Limited
9
-
Tharisa Minerals
Proprietary Limited
43
276
Ubhova Security Proprietary Limited
7
6
495
610
Other receivables from related parties
(note 13)
Arxo Exploration (Cyprus) Limited
125
1
Arxo Finance plc
-
5
Arxo Prospecting (Cyprus) Limited
-
3
Arxo Resources Limited
40
-
Arxo Technologies Limited
-
6
Karo Mining Holdings plc
28
13
Karo Zimbabwe Holdings (Private)
Limited
5
5
MetQ Proprietary Limited
150
-
Redox One Limited
172
33
Salene Chrome Zimbabwe (Private) Limited
-
175
Salene Mining Proprietary Limited
-
13
Skyler Storm (Private)
Limited
-
86
Tharisa Administration Services Limited
700
603
1
220
943
Receivables from related parties are unsecured, interest free and with no fixed repayment
dates. The Company has issued financial support
commitments to Tharisa Investments Limited, Tharisa Fujian Industrial Co., Limited, Salene Chrome Zimbabwe (Private) Limited and Skyler
Storm (Private) Limited
.
Share
-
based payment receivables represent receivables
from related parties
and
include
a non
-
current and current share
-
based payment
asset totalling US$4.4 million (2022: US$2.6 million non-current and US$0.6 million current) for the reimbursement for the settlement of the
portion of the LTIP and SARS awards on behalf of subsidiary companies
.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
124
20.
RELATED PARTY TRANSACTIONS (continued)
202
3
20
2
2
US$’000
US$’000
Dividends receivable
(note 1
3
)
Arxo Logistics Proprietary Limited
-
913
Accrued interest revenue
–
preference share
dividends receivable
(note 1
3
)
Tharisa Minerals Proprietary Limited
3
324
2 487
3
324
3 400
Payables to related parties
(note 1
7
)
Braeston Proprietary Limited
186
158
Tharisa Minerals Proprietary Limited
4
4
Arxo Resources
Limited
-
6
Karo Platinum (Private) Limited
29
29
219
197
Amounts due to Directors
and former Directors
A Djakouris
1
2
18
J Salter
22
21
O Kamal
12
13
C Bell
22
23
R Davey
19
20
Z Hong
9
9
S Lo Wai Man
9
9
1
05
113
32
4
310
Current share
-
based payment payables
(note 1
7
)
Tharisa Minerals Proprietary Limited
-
251
Arxo Logistics Proprietary
Limited
4
27
Ubhova Security Proprietary Limited
-
4
Braeston Proprietary Limited
-
488
Dinami
Limited
-
15
Tharisa Administration Services Limited
-
5
Arxo Metals Proprietary Limited
-
24
Arxo Resources Limited
-
19
4
833
Purchase consideration for the acquisition of non
-
controlling interest
in
Tharisa Minerals
Proprietary Limited:
Thari Resources Proprietary Limited
-
19
908
The Tharisa Community Trust
-
5
719
Purchase consideration for the
acquisition o
f
additional interest and
the
controlling interest
in
Karo Mining Holdings plc
from Leto Settlement
7 February 2022
-
4
965
30 March 2022
-
29
445
Guarantees and financial support commitments to related parties
The Company
issued a guarantee limited to US$
1
0.0 million (202
2
: US$20.0 million) as a security for trade finance facilities provided by a bank
to Arxo Resources Limited.
The Company issued financial guarantee contracts to related party creditors of
Salene Chrome Zimbabwe (Private) Limited
and
Skyler Storm
(Private) Limited. The total maximum exposure to related party creditors is US$9 million and US$1.0 million for Salene Chrome Zimbabwe
(Private) Limited
and
Skyler Storm (Private) Limited
respectively.
The Company issued a guarantee limited to
US$15.9 million (ZAR300.0 million) (2022: US$16.6 million (ZAR300.0 million)) to Absa Bank
Limited in respect of the Commercial Asset Finance and overdraft facilities
of Tharisa Minerals Proprietary Limited.
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 30 September 2023
125
20.
RELATED PARTY TRANSACTIONS (continued)
Guarantees and financial support commitments to related parties
(continued)
Karo Mining Holdings plc, a subsidiary of the Company,
issued fixed income notes
with a tenor of three years
on 16 December 2022
listed on
the Victoria Falls Stock Exchange to the value of US$26.8 million to external subscribers and US$10.0 million to Arxo Finance plc. The Company
guarantees the capital
repayment
and interest of subscribers.
The Company issued a guarantee to Absa Bank Limited which guarantees payment of certain liabilities of Arxo Logistics Proprie
tary Limited to
Transnet amounting to US$1.
0
million (ZAR19.4 million) (202
2
: US$1.
1
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.
Tharisa Minerals Proprietary Limited entered into an equipment loan
facility of US$35.0 million (202
2
: US$
3
5
.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$
8
.
1
million (ZAR
153
million) (202
2
: US$
8.5
million (ZAR1
5
3 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 breach in
terms of the plant operating agreement between Arxo Metals Proprietary Limited and the third
-
party.
Relationship between related parties and entities
A Djakouris, J Salter, O Kamal, C Bell, R Davey and S Lo Wai Man
are
directors of the Company
while Z Hong is a former director 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.
21.
CONTINGENT LIABILITIES
As at 30 September 202
3
, there is no litigation (20
2
2
: 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
3
(20
2
2
: no contingent liabilities).
22.
EVENTS AFTER THE REPORTING PERIOD
Accounting 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.
On
12
December
202
3
, the Board has
proposed a final dividend of US
2
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 impa
ct these financial
results.
23.
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 202
3
, the Company declared and paid a final dividend of US
4
.0 cents per share in respect of the financial
year ended 30 September 2022. 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 202
3
.
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.
.
CORPORATE GOVERNANCE REPORT
126
BOARD OF DIRECTORS
Executive directors
Loucas Pouroulis (85) 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 60 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 (49) 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 (61) 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 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.
Independent non-executive directors
Carol Bell (65) 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, 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.
David Salter (65) 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 (76) 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. Antonios will retire at the next Annual General Meeting and will not stand for re-election.
CORPORATE GOVERNANCE REPORT
127
Omar Kamal (51) 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 (78) 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 a 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.
Non-executive directors
Shelley Wai Man Lo (48) 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 of Roads of NWS Holdings Limited. Before joining
the NWS group, she worked in the audit department of Deloitte, Hong Kong. Shelley is a member of both the Hong Kong and American Institutes of Certified
Public Accountants.
Zhong Liang Hong (60) Non-executive director
Appointed: 1 April 2018 Resigned: 30 September 2023 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 remains 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.
Hao Chen (40) Non-executive director
Appointed: 1 October 2023 Bachelor (Micro-electronics) (Fudan University, Shanghai, China)
Hao Chen holds a bachelor’s degree in Micro-electronics from Fudan University, Shanghai, China. He has more than 18 years’ experience as an Engineer,
Foreign Trade Manager and General Manager. He has been the General Manager at Fujian Liju Logistics Company in China since September 2014. Prior to
this position, he had been a Foreign Trade Manager at Guangxi Shenglong Metallurgy Co. Ltd., China between December 2013 and August 2014, and an
Engineer at APEX Information Services in the USA from August 2012 to November 2013. He had also held the position of Engineer at Calvin Wireless, New
York, USA between February 2012 and July 2012. Between August 2006 and January 2012, he had held two Research Assistant positions, the first at the
University of Viginia, USA (August 2006 to December 2009) and at the Tandon School of Engineering, at the University of New York, USA (January 2010 to
January 2012). Following his graduation in July 2005, he had worked as Experimental Technician at the Shanghai Institute of Microsystem and Information
Technology at the Chinese Academy of Sciences until July 2006.
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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 Company has its registered office in Cyprus and is subject to Cyprus disclosure and transparency legislation, Cyprus market abuse legislation, and the
European Commission Market Abuse Regulation EU596/2014, and for such purposes considers Cyprus as its home state, where such term requires
interpretation. The LSE Listing Rules invoke the application of certain provisions of the UK Disclosure and Transparency Rules where similar provisions do
not exist under the national law of its home state. The Company considers that the requirements under the UK Disclosure and Transparency Rules are met
under corresponding national law, but nonetheless the Company aims to apply the relevant UK Disclosure and Transparency Rules applicable to the Company
in circumstances where there may be a deemed discrepancy. For the purposes of the present corporate governance report, a reference to Disclosure and
Transparency Rules shall be a joint reference to applicable UK and Cyprus transparency rules. While the UK Corporate Governance Code published by the
Financial Reporting Council does not apply to the Company, 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 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.
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 and Antonios Djakouris‘ independence was considered and assessed 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 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
Shelley Wai Man Lo
Zhong Liang Hong (Resigned with effect 30 September 2023)
Hao Chen (Appointed with effect 1 October 2023)
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The Company has a unitary board which 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.
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.
This assessment 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.
Roles 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 sustainable fulfilment of its corporate
responsibilities. It 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.
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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 it operates. 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 of all board committees 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;
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;
contributing to the Board’s strategic vision by fostering an entrepreneurial mindset, identifying new opportunities and promoting creative problem solving;
and
applying entrepreneurial principles to optimise resources and growth.
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;
and
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.
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Role of the Lead Independent Director
The Lead Independent Director:
chairs the Nomination Committee and is a member of all other Board committees;
presides over meetings of the Board and meetings of shareholders if required;
facilitates meetings of the non-executive directors;
acts 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;
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 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; and
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 in a professional manner at all times, having due regard for their fiduciary duties and responsibilities to the
Company and ensuring 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.
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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 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.
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. Hao Chen, having been appointed with
effect 1 October 2023, will retire at the next AGM and will be eligible for election. Shelley Lo will be retiring by rotation at the upcoming AGM and has made
herself available for re-election. Antonios Djakouris will be retiring by rotation at the upcoming AGM and will not be available for re-election. The Board thanks
Antonios for his outstanding service over the past 12 years.
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 Hao Chen be elected, and that Shelley Lo 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.
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Key focus areas and decisions of the Board during FY2023
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:
Key focus areas for FY2024
Board succession planning;
Continue implementation of Vision 2025 strategy;
Continue development of the Karo Project;
Monitor continued optimisation of existing operations; and
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.
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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 to fulfil their responsibilities appropriately. The Group’s
independent external auditor, Group Head of Internal Audit, CFO, and CEO attend committee meetings by invitation. The committee meets with the external
auditor and Group Head of Internal Audit, without any executive directors being present, whenever necessary.
Both the Group Head of internal audit 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.
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
toward achieving disclosed climate change risk mitigation actions are included in the integrated report disclosures.
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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 four 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 twice during the year under review.
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.
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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, Antonios Djakouris, 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. Following 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 [three] months depending on where the employees are located, the cost of the contributions
being covered by the employer companies.
The committee met formally twice 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.
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 other entities in the Group 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:
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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; and
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 toward 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; and
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 twice during the year under review.
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 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 toward its goal of creating a circular economy while producing critical metals for the decarbonisation of global economies.
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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.
Attendance at meetings
Attendance at Board and committee meetings during the year under review is set out below:
Director Board Audit
committee
Nomination
committee
Remuneration
committee
Risk
committee
SHE
committee
Social and
ethics
committee
New
business
committee
Climate
change and
sustainability
committee
Number of
meetings
held
4 4 1 2 2 4 1 2 4
Loucas
Pouroulis
3 - 0 - 0 - - 0 1
Phoevos
Pouroulis
4 4 1 2 2 4 1 2 4
Michael
Jones
4 4 - 2 2 - - 2 4
David
Salter
4 4 1 2 1 4 1 2 4
Antonios
Djakouris
4 4 1 2 2 4 1 2 4
Omar
Kamal
4 4 - - 2 4 1 1 4
Carol Bell
4
4
1
2
2
4
1
2
4
Roger
Davey
3 1 1 2 2 3 - 2 3
Zhong
Liang Hong
1 - - - 0 - - - 0
Shelley
Wai Man
Lo
4 4 - - 2 4 - 2 4
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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 is a Fellow of the Chartered Governance Institute of Southern Africa (formerly
Chartered Secretaries Southern Africa) since 2023, having been an Associate member 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 November 2023. 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.
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 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.
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Directors of the Company and its major subsidiaries and PDMRs have been 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 IT and information systems across all Group companies, has
been appointed with effect 1 October 2022. All Audit Committee and Board meetings are attended by the Group Chief Information Officer by invitation.
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, integrate climate risk
considerations, 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. Read more about this committee on page xx.
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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). A roadmap is being developed 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.
Practical measures have been initiated and accelerated during FY2023, such as gaining consent for a solar energy farm to decarbonise electricity supply at
the Tharisa Mine as well as investing in research and development in battery technology to enable storage of this energy.
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 22 February 2023. The external auditor has unrestricted access to the chairman of the Audit
Committee and the Lead Independent Director.
During FY2022, 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 Group Head of Internal Audit has a standing invitation to attend meetings of the Audit Committee and the Board.
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.
The Group Head of Internal Audit and staff of the internal audit function have accountability to, among 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;
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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 free 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.
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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 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.
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; and
avoid any situations or relationships that could interfere with an individual’s ability to make decisions in Tharisa’s best interests; and
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.
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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.
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, integrated 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.