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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Namakwa DI. | LSE:NAD | London | Ordinary Share | BMG638411113 | ORD USD0.000625 (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1.125 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMNAD
RNS Number : 3013R
Namakwa Diamonds Limited
16 November 2012
16 November 2012
Namakwa Diamonds Limited (AIM: NAD)
Unaudited Preliminary Results for the year ended 31 August 2012
Namakwa Diamonds Limited ("Namakwa", or the "Company" or the "Group"), today announces its unaudited results for the year ended 31 August 2012. The financial summary and commentary on the results is presented below.
Summary
Hot Features
Premium
-- Execution of strategic restructuring
-- Kao mine in Lesotho commissioned and commercial production established
-- Operations in North West Province in South Africa cash positive
-- Trading & Beneficiation operations significantly scaled back
-- Financial position of the Group restructured
-- Board of Directors reconstituted
Operational
-- Lesotho
* 500tph Phase 1 plant commissioned in December 2011
* Phase 1 commencement of commercial production,
pursuant to the Kao Mining Lease Agreement, commenced
on 1 March 2012
* Production of 121,521 carats (2011: 12,405 carats)
from 1,126,048 tonnes processed (2011: 136,376
tonnes) at an average grade of 10.79 cpht (2011: 9.10
cpht)
* Technical review initiated to identify and improve
operational efficiencies in the mining operation and
the treatment plant
* Sale of 87,010 carats at an average price of US$283
per carat realising US$24.6 million in revenue
* Association with Fusion Alternatives and their
partner I Hennig & Co. to host tenders of product in
Antwerp, increasing customer exposure to the Kao
product and an improvement in prices
-- South Africa:
* Operations stabilised through a combination of a
change in operating methodology and a focus on
reducing costs, loss of US$0.51 million after
restructuring costs of US$4.24 million
* Production of 23,830 carats (2011: 38,092) from 3,417
926 (2011: 5,387,131) tonnes, at an average grade of
0.70 cpht (2011: 0.71 cpht)
* Sale of 21,054 carats at an average price of US$919
per carat realising US$19.4 million in revenue
-- Other assets
* Trading & Beneficiation operations significantly
reduced following the closure of trading operations
in Israel, Johannesburg and DRC
* Disposal of DRC mining assets in September 2011
* Disposal of cutting and polishing operations in
November 2011
-- Board and management
* The Board has been reconstituted following the
appointment of a new Chairman, new independent
non-executive directors, and the appointment of a new
CEO and CFO
-- Resource update
The resource base has been restated as at period end. The
Global Resource Inventory for the Group now comprises approximately
18,535,700 carats of which 11.6 million carats is attributed
to the Kao resource, (comprising 3.3 million carats at an
Indicated level of confidence and approximately 8.3 million
carats at an Inferred level of confidence)
Financial
-- Revenue: US$51.02 million (2011: US$86.59 million) down
by 41% following the reduction of third party trading and
increased contributions from the Kao mine during the second
half of the year
-- Net loss: US$41.16 million (2011: US$76.74 million) includes
loss after tax from continuing operations of US$38.49 million
(2011: US$52.47 million) after impairment loss of US$10.39
million for Kao mine (2011: US$10.27 million for North West
operations), depreciation charge of US$5 million (2011:
US$7.65 million)
-- Cash used: in operations of US$9.62 million (2011: US$20.89
million) after net working capital outflow of US$0.99 million
(2011: US$6.18 million net inflow); In addition a net investment
in property, plant and equipment of US$29.38 million (2011:
US$35.93 million)
-- Funding: Repayment of Jarvirne US$40 million facility and
Sputnick US$10 million facility from the proceeds of the
US$55.73 million raised in the Open Offer in June 2012.
-- Cash: Cash on hand at 31 August 2012 of US$14.06 million
(2011: US$2.26 million). At 31 October 2012, the Group had
cash of US$12.74 million and a stock of diamonds that management
expect will realise more than US$5.0 million awaiting tender.
Theo Botoulas, Chief Executive Officer, said: "Our objective this financial year has been to establish sustainability at the core of the company to ensure future success with our operations. The main aims were to cut costs, establish Phase 1 production of the Kao mine and restore the company to profitability. I am pleased to report to shareholders that we have indeed made considerable progress to achieve these goals, ensuring we are in good stead for the coming year to deliver quality production in FY2013."
For further information please visit www.namakwadiamonds.com or contact:
Namakwa Diamonds Shore Capital
+27 11 465
Theo Botoulas 4505 Pascal Keane +44 20 7408 4090
Tavistock Communications
Simon Hudson/Kelsey +44 20 7920
Traynor 3150
About Namakwa Diamonds
Namakwa is a diamond resource group, which seeks to extract maximum value from the marketing and sale of Group mined and contracted production.
The Group's mining activities are focused on the Kao mine in Lesotho. Operated by Storm Mountain Diamonds, the Kao Main Pipe Complex represents a resource endowment of c.183Mt of kimberlite ore containing c.11.6M carats ("cts") (3.3Mcts Indicated and 8.3Mcts at Inferred levels of confidence), with an additional c.1.7Mcts at a Deposit level of confidence, in which Namakwa holds a 62.5% interest. The other shareholders are the Government of Lesotho (25%) and Kimberlite Investments Lesotho Limited (12.5%).
The Group also maintains alluvial mining operations in the North West Province of South Africa and resource-development and exploration assets in the Northern Cape Province of South Africa and in the offshore marine environment of Namibia. These combined resources add a further c.6.9Mcts at Indicated and Inferred levels of confidence to the Group's Global Resource Inventory to a grand total of 18,535,700 carats as at 31 August 2012.
Forward Looking Statements
This announcement includes forward-looking statements that reflect the current views of Namakwa Diamonds' management with respect to future events. These forward-looking statements include matters that are neither historical facts nor are statements regarding the Company's intentions, beliefs or current expectations concerning, inter alia, the Company's results of operations, financial condition, liquidity, prospects, growth, strategies, and the industry in which Namakwa Diamonds operates. Forward-looking statements are based on current plans, estimates and projections, and therefore too much reliance should not be placed upon them. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond the Company's control. Namakwa Diamonds cautions you that forward-looking statements are not guarantees of future performance and that if risks and uncertainties materialise, or if the assumptions underlying any of these statements prove incorrect, the Company's actual results of operations, financial condition and liquidity and the development of the industry in which Namakwa Diamonds operates may materially differ from those made in, or suggested by, the forward-looking statements contained in this announcement. In addition, even if the Company's results of operations, financial condition and liquidity and the development of the industry in which Namakwa Diamonds operates are consistent with the forward-looking statements contained in this announcement, those results or developments may not be indicative of results or developments in future periods. Except as required by the United Kingdom Listing Authority's Listing Rules and applicable law, the Company does not undertake any forward-looking statements to reflect events that occur or circumstances that arise after the date of this announcement.
Review of Operations
Namakwa is a diamond resource group, which seeks to extract maximum value from the marketing and sale of Group mined and contracted production.
Following a sustained period of operational underperformance in the DRC and the North West Province of South Africa during FY2011, a strategic review of Namakwa's operating and financial platform determined a change of direction in September 2011:
(a) the Board of Directors was reconstituted, with the appointment of Edward Haslam as Non-Executive Chairman and Richard Collocott as Chief Executive Officer;
(b) a new financing package was entered into on 7 September 2011, with Jarvirne Limited, to recapitalise the Group's significant debt and provide cash-flow liquidity whilst the Group was restructured;
(c) the portfolio of mining assets in the DRC was sold on 23 September 2011 (with an economic effective date of 31 August 2011);
(d) a process was undertaken to reorganise and reduce the alluvial mining operations in the North West Province of South Africa;
(e) the Group's third party trading operations were suspended and activities reorganised to provide a future platform for the marketing and sale of Group mined and contractual off-take production;
(f) the focal point of the Group's operations became the development of the Kao mine;
(g) in June 2012, the Company successfully raised US$55.73 million in equity, the proceeds of which were used to reduce corporate debt by US$45.44 million;
(h) further changes to the Board of Directors were made during July 2012, with the appointment of Melissa Sturgess as Non-Executive Chairman and Theo Botoulas as Chief Executive Officer; and the appointment of Craig Campbell as Chief Financial Officer in September 2012.
Alongside this re-alignment of the Group's business units, Namakwa determined to significantly reduce its corporate cost structure, in line with its current operational requirements.
During FY2012, the Company has focused on the execution of the abovementioned strategy. Mining operations in the North West Province of South Africa have been realigned to provide a cash generative platform (excluding restructuring costs) and the Kao mine has moved into Phase 1 commercial production, in accordance with the terms of its mining lease agreement. Opportunities to realise shareholder value from the current portfolio of Group assets are continuously evaluated.
Lesotho - Kao Mine
Namakwa's strategic focus is centred on the Kao mine in Lesotho, which is expected to become the largest producer of diamonds in Lesotho by production volume within the next 12 months.
On 24 December 2009, Namakwa entered into a mining lease agreement with the Government of Lesotho in respect of the Kao mine. The project represents Namakwa's first kimberlite mine and is operated by its subsidiary, Storm Mountain Diamonds ("SMD"), in which Namakwa holds a 62.5% equity interest, with the Government of Lesotho holding 25% and Kimberlite Investments Lesotho Limited ("KIL") (a public vehicle for local Lesotho citizen investors) holding 12.5%.
The recently commissioned mine will be developed as an open pit over two phases. The Phase 1 operations are planned for a period of four years, ending in 2015. Thereafter, dependent on the results of a long term planning study and decisions relating to the size of the processing plant in Phase 2, the mine has a potential life of up to 21 years.
Phase 1 involves the mining and processing of K6 hard-rock and hard and weathered K-Other kimberlites over an anticipated three to five year period. This process will establish revenues for the various K-Other facies, which comprise 95% of the pipe and will provide 9Mt of basalt by way of waste stripping to complete the slimes dam wall, as well as exposing high value K6 kimberlite for mining.
During August 2012, the Company's management working in conjunction with Sound Mining Solution (Pty) Ltd ("SMS") initiated a Datamine pit-optimisation and mine-scheduling exercise on the Kao Pipe utilising input parameters from the results of the Venmyn Rand (Pty) Ltd ("Venmyn") resource statement dated 31 August 2012 which provided the base-case for the exercise.
Separately, Storm Mountain Diamonds is currently conducting a resource-definition core drilling campaign to further establish K6 (Quarry) kimberlite facies contacts at depth, both with other kimberlites facies within the Main Pipe Complex, as well as with the surrounding basalt country (waste) rock. The objective of this is to accurately determine whether the K6 resource in particular is gaining, maintaining, or losing ground as the mine progressively deepens. These additional drilling data will be incorporated into future optimisation and scheduling iterations. In addition to geological information, valuable geo-technical data will also be collected from the drilling campaign and incorporated into refining future mine designs. Five boreholes have been planned and it is estimated that 1000 metres of NQ core (47.6mm diameter) will be drilled for geotechnical and resource updating purposes. The drilling of three holes has been completed.
An initial three year mine plan has been developed from the SMS pit optimisation and scheduling exercise. This plan will serve as the foundation for future plan updates and will undergo constant review and updating as new information is acquired by the technical initiatives currently being conducted. The results of the current drilling exercise will also be utilised to prepare a long term planning study which is expected to detail, inter alia, the capital expenditure requirements of the Phase 2 mine. Namakwa expects the study to be carried out during 2013 subject to diamond prices and the prevailing economic climate. The in-built flexibility of the Phase 1 mine plan allows for Phase 2 to be developed at an earlier stage, or for Phase 1 to continue beyond five years operating at an anticipated 300,000 carats per year from the processing of 3.6Mt of kimberlite ore each year.
As at 31 August 2012, Namakwa had financed 100% of the capital costs of the development of the Kao mine, being US$81.14 million, with a total investment of US$92.69 million into SMD. For the period 1 September 2011 to 29 February 2012 the costs related to the Kao mine are classified as part of property, plant and equipment in the Group's consolidated financial statements. A total of US$24.03 million has been capitalised during the first six months of the 2012 financial year.
Kimberlite Investments Lesotho Limited ("KIL")
On 16 June 2011, pursuant to the terms of the transfer of the mining lease agreement for the Kao project area to Storm Mountain Diamonds, the Company transferred a 12.5% equity interest in SMD to Kimberlite Investments Lesotho Limited, at par value.
KIL is obliged to pay the Namakwa Group for its proportionate share of: (i) the acquisition costs relating to the transfer of the mining agreement for the Kao mine to SMD; and (ii) the development and operational costs of the mine, which have been fully funded by Namakwa. In the event that KIL does not pay such costs, then the Group retains the right to dilute KIL's equity interest in SMD.
As at 31 August 2012, KIL had not settled its obligations to the Group. The Group has provided against this receivable due of US$6.26 million, representing the value of the receivable at 29 February 2012, before the continued investment into the Kao mine by Namakwa during FY2012. No further receivable has been raised in respect of KIL's proportionate share of funding post 29 February 2012. The Company understands that it is the intention of KIL to raise the necessary funds to meet its liabilities to the Group from the public markets in Lesotho.
Development of the project area during FY2012
Processing of kimberlite ore commenced in late November and the 500tph Phase 1 plant was commissioned on 31 December 2011. The mine moved into Phase 1 commercial production, pursuant to the terms of the Kao Mining Lease Agreement, on 1 March 2012.
Whilst the economic viability of the mine is built on a steady-state supply of good quality small diamonds from various kimberlite facies, revenues were enhanced by the recovery of some specified (>10.8cts) and fancy diamonds. During the year 121,521 carats were recovered which included an 82 carat stone, a 72 carat stone, a 60 carat stone and a 50 carat stone. Subsequent to the 2012 year end, an 88 carat stone, two 50 carat stones, a 43 carat stone, a 39 carat stone and six stones greater than 20 carats have been recovered. A broken 131.72 carat near-gem white stone (88.6cts and 43.12cts respectively) was recovered just after the financial year end and represents the largest diamond recovered from the Kao mine by SMD to date. A 1.61 carat pink stone recovered in September 2012 and sold in our October tender realised US$50,311per carat.
Due to operational reasons, the plant did not achieve its initial and revised production targets. The major causes of the shortfall in reaching the revised production targets were due to the failure of the scrubber in February 2012 which was repaired and re-commissioned during August 2012. The situation was exacerbated by secondary crusher failures in March 2012 and these were replaced by a single Sandvik crusher during April 2012 while an additional tertiary crusher was added in July 2012.
The current plant is a hybrid one constructed within the capital limitations existing at the time of construction and consequently a determining factor in its build configuration. The plant comprises new and fabricated components from several sources as well as some second-hand equipment. As a consequence of the failure of the plant to reach its stated production capacity, Consulmet (Pty) Limited ("Consulmet") was retained in August 2012 to conduct a comprehensive and systematic analysis of the plant which included establishing the mass balances and creating computer simulations of the plant circuits in order to identify weak points and inefficiencies. The optimisation exercise is aimed at increasing productivity whilst simultaneously reducing plant operating costs and afforded an opportunity to determine the actual physical capacity of the plant in its current hybrid configuration. The analysis of the plant in order to comprehensively establish the actual physical processing capacity thereof is expected to be completed by the end of January 2013.
The results of the study have identified limitations in the plant design which are currently being addressed. Remedial actions, which are currently being undertaken, include the installation of a jet pump system from the sink screen to the final recovery (intended to address double-handling of material and security), a tailings screen upgrade, tailings bin loadout installation, new feed tip installation (intended to address double handling), and a closed circuit re-crush recirculating load installation (intended to increase diamond liberation and revenue). As a consequence of the problems experienced with the scrubber, Consulmet have been mandated to design and provide a capital cost for a new scrubber and its ancillary infrastructure, as a contingency measure. This capital cost is conservatively estimated at R14.0 million.
The geological model for Kao pipe utilised in the 2012 Venmyn resource update indicated a significant reduction in tons and carats of the weathered component of the Main Pipe Complex. This change came about due to new drilling information completed over the total area of the kimberlite pipe during the preparatory and trial mining phase. As previous(2011) estimates of the weathered component were based on a minimum uniform weathered depth of 20m, a consequence of the reduced weathered resource available as reported by Venmyn (c.4.5 Mt from c.10Mt) was that management, in consultation with Consulmet, decided to review the hybrid (weathered and hard) plant design and circuits in order to ensure that the crushing circuit could continue to process the hard ore component, without any decrease in capacity as the weathered resource became progressively depleted and ultimately only hard ore is trammed to the plant. As previously stated, this exercise is expected to be completed by January 2013.
Construction of the 400,000 cubic metre freshwater storage dam was completed during April 2012 and is currently 98% full.
The severe drought which prevailed during the 2011/2012 spring and summer months necessitated the installation of a 9.1 km pipeline, at a cost of US$1.57 million from the confluence of the Kao and Malibamatso rivers the latter being the most significant water-course in Lesotho that feeds the Katse dam, to ensure an alternative source of water in order to prevent disruption to mining operations in the event of unusual weather patterns. The pipeline is also able to provide two villages on the pipeline route with potable water.
The Kao resource base has been restated as at period end and was comprised of approximately 11.6 million carats, of which approximately 3.3 million carats were at an indicated level of confidence and approximately 8.3 million carats were at an inferred level of confidence (Venmyn, 31 August 2012).
Lesotho Litigation
On 30 November 2011 the High Court of Lesotho dismissed an action brought by Batla Minerals SA and its subsidiary, Toro Diamonds (Pty) Limited (together "Batla Minerals"), who laid claim to a 50% interest in the 62.5% of Storm Mountain Diamonds (Pty) Limited held by the Company. The costs of this action were awarded to the Company.
Batla Minerals subsequently appealed the decision which matter was heard by three Honourable Justices of Appeal in the Court of Appeal, Lesotho, on 12 October 2012.
On 19 October 2012 the Court of Appeal delivered its judgement dismissing the appeal of Batla Minerals in this matter, with costs. Namakwa Diamonds continues to hold a 62.5% interest in Storm Mountain Diamonds (Pty) Limited.
Batla Minerals has no further recourse in any court and the matter is now concluded.
Key Performance Indicators
During the period the mining area produced 121,521 (2011: 12,405) carats from 1,126,048 tonnes processed at an average cost of US$335/ct.
The table below sets out the key production statistics during the period under review.
Storm Mountain Diamonds - production 2012 2011 data -------------------------------------- ---------- -------- Tonnage 4,496,807 136,376 Tonnes treated - K6 785,199 - Tonnes treated - K other 340,849 - Waste tonnes 3,370,759 - Total carats recovered 121,521 12,405 - K6 99,100 - - K Other 22,421 - Average grade (cpht) 10.79 - - K6 12.62 - - K Other 6.58 - Carats sold 87,010 17,178 Average price US$/ct 283 356 Average cost $/ct* 335 - -------------------------------------- ---------- --------
*Costs included in the calculation excludes interest, exchange differences and corporate overheads
A technical review of all operations of the company, with the primary focus on the Kao mine in Lesotho was initiated in July 2012. This review is continuing but a number of conclusions and recommendations have already emerged. The most important of these is the identification of improvements in operational efficiencies in the mining operation and in the treatment plant. In order to address these issues and to secure sustainable long-term production levels, short-term production will be negatively impacted.
The identification and rectification of operational issues and the optimization of internal structures is intended to secure a sustainable production profile and positive future for the Kao mine.
Sales Prices during FY2012
Between January 2012 and August 2012, the Group sold 87,010 carats from the Kao mine, realising US$24.6 million in revenue.
Results from the tender of Kao diamonds for the financial year ended 31 August 2012 and subsequent to the year-end are detailed below:
2012 Tenders Location No. Carats Average Price Average Diamond
(US$/ct) Size
------------------ -------------- ----------- -------------- ----------------
No 10 - October Antwerp 25,952 266 0.28
No 9 - September Antwerp 25,210 269 0.36
No 8 - July Antwerp 14,496 286 0.36
No 7 - June Antwerp 22,743 296 0.35
No 6 - May Antwerp 16,388 395 0.36
No 5 - April Johannesburg 6,478 234 0.29
No 4 - March Johannesburg 8,419 224 0.22
No 3 - February Johannesburg 7,242 168 0.21
No 2 - February Johannesburg 7,326 233 0.29
No 1 - January Johannesburg 3,918 246 0.21
------------------ -------------- ----------- -------------- ----------------
South Africa - North West Province
During the first half of the financial year, the Group substantially reduced Namakwa's operations on this project area by moving from a 24/7 operating model, which requires a three-shift mining team to a two-shift mining team working 24 hours per day from 6 a.m. on Monday to 6 a.m. on Saturday, with the remainder of the weekend used for maintenance.
Separately, Namakwa sought to increase the number of contractors operating on the project area. Operations on the Idada mine, which forms part of the South East Node project area, have been indefinitely suspended, following a number of continuing disputes between the local mining company, Oersonskraal Mining (of which Namakwa is a 48% shareholder), the local community and the Department of Mineral Resources. Since the suspension of activities at Idada, the region's safety record improved dramatically.
The impact of a strike called by the National Union of Mineworkers on production has been minimal.
As at 31 August 2012, the project area had produced 23,830 carats, from 3,417,926 tonnes, at an average grade of 0.70cpht and an average cost of US$792/ct (excluding restructuring cost the average cost is US$673/ct). In the same period 21,054 carats were sold at an average price of US$919/ct.
Key performance indicators
The table below sets out the key production statistics for the region during the period under review.
North West - production data 2012 2011 ------------------------------ ---------- ---------- Tonnage 3,417,926 5,387,131 Total carats produced 23,830 38,092 Average grade (cpht) 0.70 0.71 Carats sold 21,054 37,235 Average price US$/ct 919 638 Average cost $/ct 792 961 ------------------------------ ---------- ----------
*Costs included in the calculation excludes interest, exchange differences and corporate overheads
The decision taken to restructure operations in September 2011 is now showing significant positive results, with the mining area operating on a cash-flow positive basis. Recent discoveries of a number of high-value, special diamonds by both Namakwa and contractors demonstrate support for the restructured business model operating on a break-even basis, with the scope for significant upside from the recovery of such "specials".
The average price per carat increased significantly when compared to FY2011. The increase results from a significant rise in the profit-share received by contract miners from sales of high-value, special diamonds discovered by contractors during the period.
Selling Prices during FY2012
The table below highlights the sale value of the top 5 "specials" recovered on the North West Province mining area.
Carat Average Revenue Total Revenue Date
(US$/ct) (US$m)
----------------------- ---------------- -------------- -------------
11.36ct - Vivid Pink 400,934 4.55 June 2012
44.47ct 34,000 1.51 May 2012
7.53ct - Vivid Orange 176,714 1.33 October 2010
26.74ct - Type IIA 44,004 1.18 October 2010
33.43ct 27,645 0.92 March 2012
----------------------- ---------------- -------------- -------------
Democratic Republic of Congo (DRC)
On 23 September 2011, Namakwa announced that it had entered into sale documentation with Hall Farm Avenue Limited in respect of the sale of its entire portfolio of mining assets in the DRC on a going concern basis for US$6.25 million. The consideration would be settled over a five year period, with a minimum payment of US$1.25 million required in each year during this period. Namakwa also agreed to provide a working capital facility of US$0.30 million to Hall Farm Avenue Limited as part of the sale arrangements. Subsequently this receivable has been fully provided against by the Group.
Trading & Beneficiation
The Group's trading and beneficiation operations were significantly reduced, with a small team retained in Johannesburg to sort, value and sell Group production. Trading operations in Kinshasa, Tel Aviv and Gaborone have been closed down and the cutting and polishing business in Johannesburg was sold on a going concern basis.
The trading and settlement agreements with Jarvirne are documented below. Pursuant to the open offer, the agreements are no longer of any force and effect at year end.
Trading Agreement with Jarvirne
On 20 July 2010, Jarvirne and Namakwa entered into a letter of agreement (the "Trading Agreement") to enter into a formal joint venture in respect of the trading of rough and polished diamonds, setting out the principal terms of the formal agreement to be entered into, and providing in the meantime that the joint venture would be operated by the parties on the basis of those principal terms. No such agreement was finally entered into. Pursuant to the Trading Agreement, Jarvirne agreed to advance an initial amount of US$15.00 million (the "Advanced Funds") to Namakwa to enable Namakwa to trade rough and polished diamonds originating from the DRC, and agreed that the Group may use US$5.00 million of such funds for its working capital purposes. Following 20 July 2010, an aggregate amount of US$27.00 million in capital was advanced to Namakwa by Jarvirne between 22 July 2010 and 25 March 2011 for use by Namakwa in accordance with the above terms. In turn, Namakwa returned US$10.00 million in capital in the period between 30 September 2010 and 7 December 2010 and a total amount of US$3.10 million in profit share between 27 September 2010 and 8 August 2011.
Under the terms of the Trading Agreement:
(a) the Advanced Funds are repayable on demand with six weeks' notice in writing of the termination of the Trading Agreement by either party. In the event Namakwa is unable to repay the Advanced Funds in cash in full, it is entitled to repay part in cash and part in diamonds acquired in connection with the Trading Agreement that have been independently valued;
(b) Namakwa is obliged to account to Jarvirne on a monthly basis in respect of the application of the Advanced Funds and the development of the business of the Trading Agreement;
(c) Jarvirne retains all title and risk to the diamond inventory acquired by Namakwa pursuant to the Trading Agreement;
(d) Namakwa is obliged to transfer to Jarvirne each month 50% of all profits arising from the Trading Agreement; and
(e) should the parties fail to enter into a formal joint venture agreement in respect of the Trading Agreement on the terms set out in the letter of agreement dated 30 July 2010 by 29 August 2010, Jarvirne is entitled to demand repayment of the Advanced Funds.
During the course of the relationship an oral agreement was reached by the principals of Namakwa and Jarvirne that Jarvirne would receive a deemed effective return on capital of 3% per month on outstanding amounts of capital held by Namakwa under the trading position. The Board had determined to close down this trading position in April 2011 because of: (i) the volatility in the diamond trading markets; (ii) Namakwa's strategic decision to focus its capital on the development of the Kao mine; and (iii) the inability of Namakwa and Jarvirne to reach agreement on a tax efficient structure through which the trading position would be operated. As a result of the closure of the position, it was agreed that a deemed effective 3% return on capital per month would be paid by Namakwa with effect from the inception of this position. However, the final terms for an orderly sell down of inventory and return of capital remained the subject of negotiation.
On 1 September 2011, Jarvirne served Namakwa with a demand notice to repay the sum of US$19.71 million. In an accompanying letter from Jarvirne to Namakwa, also dated 1 September 2011, Jarvirne simultaneously proposed a simultaneous refinancing package (indicating that it would be prepared to accept Ordinary Shares in Namakwa in satisfaction of its demand, and also that it would be prepared to extend a US$40.00 million loan facility to Namakwa to facilitate the continued development of the Kao valley mining project).
Subsequently, after a period of negotiation, the parties entered into the Settlement Agreement and the Jarvirne facility of US$40 million. Pursuant to the Settlement Agreement (as detailed below), the Trading Agreement terminated on the Capitalisation on 23 November 2011.
US$19.5 million Settlement Agreement
On 7 September 2011, Namakwa entered into the Settlement Agreement with Jarvirne in relation to all trading debts payable under the Trading Agreement. The Settlement Agreement was amended by Namakwa and Jarvirne on 2 November 2011 (pursuant to the Waiver and Amendment Letter). Under the Settlement Agreement (as amended), it was agreed that the Settlement Amount would be capitalised by Namakwa in consideration for the issue and allotment of 77,971,667 Ordinary Shares to Jarvirne (being 11,000,000 Ordinary Shares at a deemed price of 19.5 pence per share (on the basis of an exchange rate of GBP1:US$1.60) and 66,791,667 Ordinary Shares at a deemed price of 15 pence per share (on the basis of an exchange rate of GBP1:US$1.60)). The Settlement Amount represents a capital amount of US$17 million (being aggregated cash advances from Jarvirne to Namakwa for the trading of rough and polished diamonds) and an amount equal to US$2.5 million in lieu of deemed unrealised profits, which were determined to have accrued in favour of Jarvirne under the Trading Agreement. Under the Settlement Agreement, it was agreed that the Settlement Amount would be capitalised by Namakwa in exchange for the issue by Namakwa of Ordinary Shares to Jarvirne in two stages.
The first stage occurred on 20 September 2011, resulting in the issue and allotment of 11,000,000 Ordinary Shares in the capital of Namakwa to Jarvirne (and the admission of those shares to trading on the London Stock Exchange on 21 September 2011), in consideration for the acquisition by Namakwa of the entire issued share capital of a wholly owned subsidiary of Jarvirne, Polished Diamonds Africa Trading Limited ("PDATL"), to which Jarvirne had assigned US$3.47 million of the Settlement Amount. PDATL owns no other assets, and has no liabilities. This transaction reduced the Settlement Amount to the Outstanding Settlement Amount of US$16.03 million.
The second stage involved the issue and allotment of 66,791,667 Ordinary Shares to Jarvirne (and the admission of those shares to trading on the London Stock Exchange) effectively in settlement of the Outstanding Settlement Amount, being US$16.03 million. The Settlement Agreement also provided for the right of Jarvirne to appoint two individuals to the Board, being Mr Allen Gessen as a non-executive director of the Board and Mr Gerard Holden as a non-executive director of the Board (and until Namakwa's next annual general meeting, the chairman of its audit, risk and compliance committee).
The Settlement Agreement also provided that each of Jarvirne and Namakwa relieves the other's directors, officers and employees from all personal liability arising out of or in connection with the Trading Agreement.
Key performance indicators
2012 2011
--------------------------------------------- ------- --------
Rough Purchased:
South Africa - North West Mining Operations
- Carats Purchased 9,833 36,904
- Average Cost (US$/ct) 1,020 605
South Africa - Trading Operations
- Carats Purchased 22,874 83,072
- Average Cost (US$/ct) 214 355
DRC - Mining Operations
- Carats Purchased - 86,255
- Average Cost (US$/ct) - 138
DRC - Trading Operations
- Carats Purchased - 104,930
- Average Cost (US$/ct) - 182
Rough Sold:
Rough Proprietary Trading
- Carats Sold 72,472 358,315
- Average Price (US$/ct) 328 206
Polished Trading
Namakwa Polished Production
- Carats Beneficiated 22 1,312
- Average Cost (US$/ct) 3,812 3,336
Third Party Polished Production Purchased
- Carats Purchased 20 810
- Average Cost (US$/ct) 4,501 9,121
Polished Proprietary Trading
- Polished Carats Sold 1,946 2,425
- Average Price (US$/ct) 2,708 7,696
--------------------------------------------- ------- --------
2012 annual resource update
August saw the annual resource update in the form of technical and material-change statements for Namakwa's Lesotho and South African mining operations. Residual resources, less mining depletions from both contractor and owner-operations, were reviewed by Venmyn for the period ending 31 August 2012.
Inclusive of the Namaqualand and Namibian resource-development properties, the Global Resource Inventory for the Group as at 31 August 2012, now stands at 18,535,700 carats at Indicated and Inferred levels of confidence (Table 1), with an additional c.2 million carats at Deposit level.
Variances with the 2011 Global inventory (19,589,600 cts) are reflected in carat and tonnage depletions, as well as changes to the recovered grade and specific gravity (S.G) of the various Kao ore facies types, following a year of further production statistics (refer Table 1).
Table 1. Breakdown of contained mineralisation in Namakwa's mineral resource assets, as at 31 August 2012
2012 2011
South Africa Indicated carats 229,400 273,500
------------------------------- ------------------- -------------------
South Africa Inferred carats 1,542,100 1,547,500
------------------------------- ------------------- -------------------
Lesotho Indicated carats 3,313,200 3,752,300
------------------------------- ------------------- -------------------
Lesotho Inferred carats 8,349,100 8,914,400
------------------------------- ------------------- -------------------
Namibia Inferred carats 5,101,900 5,101,900
------------------------------- ------------------- -------------------
Variances with the 2011 resource estimate are due to grade and relative density amendments, as well as carat and tonnage depletions.
In terms of the percentage mineral endowment per country, the following is applicable:
Lesotho:
-- As at 31 August 2012, the Kao kimberlite pipe represented 62.92% (2011: 64.66%) of Namakwa's Indicated and Inferred diamond resources, according to Venmyn's Global Resource Statement.
-- Separately, a maiden pit optimisation study and 5D scheduling exercise was completed for the Kao Main Pipe Complex. The results of the optimisation and scheduling exercise return a life of mine ("LOM") of c.16 years, for some c.3.6 million carats recovered from c.55Mt of kimberlite ore mined. An average recovered grade of 6.5 cpht is indicated. These figures are expected to be refined and enhanced through subsequent scheduling runs.
South Africa:
-- The North West Province and the Namaqualand resource-development properties of the Northern Cape Province collectively represents approximately 9.55% (2011: 9.31%) of Namakwa's Indicated and Inferred diamond resources, according to Venmyn's Global Resource Statement.
Namibia:
-- The remaining 27.53% (2011: 26.04%) of the Company's Indicated and Inferred diamond resource inventory resides in the offshore marine environment at Hottentots Bay in Namibia.
The Mineral Resources and Deposit estimates included herein have been conducted and provisionally signed off, by Namakwa Competent Persons Mr R C B Hall and Mr L D Myburgh. The resource estimates have been subsequently and independently reviewed and presented herein by Venmyn Rand (Pty) Ltd ("Venmyn"). Both Mr Hall and Mr Myburgh have sufficient experience which is relevant to the style of mineralisation and type of deposit explored for and exploited by the Group and to the activities which they undertake, to qualify as Competent Persons as defined in the SAMREC Code (2007 edition amended July 2009).
FINANCIAL REVIEW FOR THE PERIOD
Key Financial Indicators
In thousands of US dollars 2012 2011 ----------------------------------------- --------- --------- Revenue 51,022 86,591 Gross profit/(loss) 330 (3,404) EBITDA including discontinued operation (31,833) (57,421) EBITDA excluding discontinued operation (29,163) (37,424) Net loss (41,163) (76,743) Cash at hand 14,062 2,259 Inventory - Rough 9,256 1,923 Inventory - Polished 54 5,328 Receivables - current 3,234 16,906 Receivables - non-current 993 - Debt 1,392 21,656 Net asset value 64,982 41,524 Net working capital 10,944 (10,084) ----------------------------------------- --------- ---------
Analysis of the Consolidated Statement of Comprehensive Income
Group revenue for the year was US$51.02 million compared to US$86.59 million in the previous year. This sharp decline in revenue is the result of phasing out third party trading activity during the year. Revenue generated from mining activities for the year was US$39.45 million, up 66% from the prior year revenue of US$23.74 million. The increase primarily relates to the sale of diamonds from the Kao mine in Lesotho during the second half of the year. Proceeds from the sale of diamonds from Kao mine during the first half of the year, amounting to US$4.81 million, were capitalised (pre-commercial production net costs) and excluded from revenue.
Costs of sales for the year decreased by US$39.31 million to US$50.69 million (2011: US$90.00 million) due to a combination of a significantly lower level of trading activity in third party diamonds, inclusion of the Kao mine's production for the second half of the year, and reduced mining activity in the North West Province of South Africa.
The Group recorded a gross profit for the year of US$0.33 million compared to a gross loss for the prior year of US$3.40 million. The improvement relates mainly to a turnaround in the profitability of the North West Province mining activity in South Africa which was also boosted by the recovery of an 11.36 carat pink diamond which sold for US$400,934/carat.
EBITDA for the year, including discontinued operations, was US$(31.83 million) compared to FY'11 EBITDA of US$(57.42 million). Excluding discontinued operations EBITDA was US$(29.16 million) compared to FY'11 of US$(37.42 million). Discontinued operations consists of Elite Diamond Cutting Works, FY'12 was US$(0.38 million) (2011: US$ 0.58 million) and the Namakwa Diamonds DRC division, FY'12 was US$(0.40 million) (2011: US$(14.46 million)).
The Group incurred a net loss for the year of US$41.16 million compared to a net loss in 2011 of US$76.74 million. The loss includes an impairment to the carrying value of the Kao mine in Lesotho of US$10.39 million (2011: US$10.27 million impairment of the North West Province assets), losses from discontinued operations of US$2.67 million (2011: 24.27 million) and net financing costs of US$4.32 million (2011: US$7.54 million).
Analysis of Consolidated Statement of Financial Position as at 31 August 2012
The share capital increased to US$361.04 million from US$288.26 million during the year. During September and November 2011 the company issued 77,791,667 shares to Jarvirne in settlement of a US$19.50 million trading debt. In September 2011 the company entered into a US$40.00 million two year, secured financing facility with Jarvirne and issued 9,000,000 shares to Jarvirne in lieu of the first year's interest of US$2.84 million. In June 2012, 794,629,171 shares were issued in a pre-emptive open offer of US$55.73 million from which corporate debt facilities of US$45.44 million were repaid immediately. During the year 694,368 shares were issued at a consideration of US$0.09 million, replacing "A" preference shares issued in Namakwa Diamonds Holdings.
The Group's net asset value was US$64.98 million (2011: US$41.52 million) with net current assets of US$10.94 million compared to net current liabilities of US$10.08 million in 2011. The stronger financial position results from the US$72.77 million capital raising during the year which funded capital expenditure of US$29.38 million and net repayment of loans of US$20.26 million.
Current assets represent US$27.23 million (2011: US$27.01 million), being: cash on hand US$14.06 million (2011: US$2.26 million), inventory US$9.93 million (2011: US$7.85 million), and receivables US$3.23 million (2011: US$16.91 million). The 2011 receivables included an amount of US$6.26 million due from Kimberlite Investments Lesotho Limited in respect of its investment in SMD. Due to uncertainty on when this amount will be recovered, management has raised a provision against the receivable
Current liabilities of US$16.28 million (2011: US$37.10 million) comprise the short term portion of long-term liabilities US$0.48 million (2011: US$19.99 million) and trade and other payables US$15.42 million (2011: US$16.85 million). The prior year short term portion of long-term liabilities includes an amount of US$19.31 million due to Jarvirne. This debt was settled through the share issue in November 2011.
Long-term liabilities of US$8.19 million (2011 US$9.08 million) include secured loans of US$0.03 million (2011: US$ 0.07 million) and unsecured loans of US$0.88 million (2011: US$1.59 million) and provision for rehabilitation liabilities US$7.28 million (2011: US$7.42 million).
Analysis of the Statement of Cash Flows
The Group's cash position increased to US$14.06 million from US$2.26 million during the year. Net cash flows from financing activities totalled $48.52 million (2011: US$52.28 million) and arose from the capital raising and repayment of debt. Cash utilised in operating activities decreased to US$9.62 million from US$20.89 million. The Group invested US$29.38 million into property, plant and equipment.
Funding
US$40 million Jarvirne Facility
On 7 September 2011, Jarvirne and Namakwa entered into a two year, secured term facility, pursuant to which Jarvirne agreed to lend US$40 million in five or more tranches to Namakwa (the "Jarvirne Facility").
The term of the loan was two years and was secured by: (i) an inter-company loan assignment (further details of which are set out below under the heading "Inter-Company Loan Assignment pursuant to the US$40 million facility"); and (ii) a share charge over the 62.5% equity interest of Namakwa in the issued share capital of Storm Mountain Diamonds.
The purpose of the loan was for: (i) Namakwa's general corporate purposes (30%); and (ii) to on-lend to Storm Mountain Diamonds to finance the Kao mine (70%).
In lieu of interest accruing on the loan in the first year, 9 000 000 Ordinary Shares were issued to Jarvirne on 20 September 2011, after the first drawdown of US$5 million under the Jarvirne Facility. The value of these Ordinary Shares equates with cash interest which would otherwise have been payable by Namakwa in the first year of the loan (as if it had been fully reorganised). No further amounts of interest were payable on drawn down amounts of principal under the Jarvirne Facility prior to 1 September 2012.
Interest on the outstanding drawn amount of the loan in the second year was to accrue at the rate of 24% per annum. Interest on the loan in the second year would have been determined and would have been payable monthly in arrears, with the first payment due on 7 October 2012.
Total drawdowns under the Jarvirne Facility were limited to US$35.2 million and pursuant to the terms of the Sputnick Facility, the Company agreed not to make any further drawdowns under the Jarvirne Facility.
Inter-company loan assignment pursuant to the US$40 million facility
Pursuant to a deed of assignment dated 7 September 2011, Namakwa assigned to Jarvirne all its present and future rights and interest in an inter-company loan agreement dated 6 September 2011 between Namakwa as lender and Storm Mountain Diamonds as borrower, including all money due or owing to Namakwa under or in connection with the inter-company loan agreement and all rights and remedies for enforcing that agreement. Namakwa gave a number of covenants, warranties and undertakings in relation which are customary for a deed of this nature.
SMD Share Charge pursuant to the US$40 million facility
Namakwa and Jarvirne obtained consent on 18 May, 2012 from the Minister of Natural Resources in Lesotho, authorising Namakwa to create security over its equity interest from time to time in the issued share capital of Storm Mountain Diamonds (in addition to the existing inter-company loan assignment) by way of a share charge in favour of Jarvirne, with such share charge agreement subsequently entered into on 29 May 2012. As at the date of this document, Namakwa holds a 62.5% interest in the issued share capital of Storm Mountain Diamonds.
The share charge was executed by Namakwa on 29 May 2012 and, if an Event of Default (as defined in the Jarvirne Facility) were subsequently to occur and remain continuing under the Jarvirne Facility, Jarvirne would be entitled to immediately enforce its rights under this share charge. If Jarvirne enforced its rights under the share charge, Namakwa would likely lose control of Storm Mountain Diamonds as a result of the shares being sold to such third party as Jarvirne nominates in order to repay the monies owed by Namakwa to Jarvirne under the Jarvirne Facility.
Settlement
The Jarvirne Facility was settled from the proceeds of the equity raise of US$55.73 million on 29 June 2012.
US$10 million Sputnick Facility
On 10 April 2012, Sputnick Limited ("Sputnick") and Namakwa entered into a short-term, unsecured bridge facility, pursuant to which Sputnick had agreed to lend US$10 million in up to six tranches to Namakwa (the "Sputnick Facility").
The loan was for application towards Namakwa's general corporate purposes, save that it may not be applied in repayment or prepayment of another loan.
Namakwa was required to repay the loan on the earlier of 30 June 2012 and the date on which Namakwa received the proceeds of an equity fund raising transaction of up to US$55 million. All of the interest that accrued on the loan prior to that repayment date was payable on that date at a rate of 15% per annum.
The loan was settled from the proceeds of the equity raise of US$55.73 million on 29 June 2012.
Open Offer
On 28 June 2012 the Company closed its pre-emptive equity open offer of US$55.73 million, with the admission of
794 629 171 new ordinary shares to trading on the Main Market of the London Stock Exchange (the "Open Offer"). From the US$55.73 million gross proceeds of the Open Offer, the Company immediately repaid its corporate debt facilities of US$45.44 million in full, with payment of US$10.24 million to Sputnick Limited and US$35.2 million to Jarvirne Limited. Transaction costs of US$1.81 million were also settled subsequent to year-end.
Going Concern
During the year to 31 August 2012 and the period to the date of this report, the Directors have performed the following fundraising activities:
(i) On 7 September 2011, the US$40 million Jarvirne Facility was entered into, conditional on the capitalisation of a US$19.5 million debt owed to Jarvirne, which was approved by Shareholders on 23 November 2011;
(ii) In November 2011, Namakwa converted a US$16.03 million trading debt owed to Jarvirne Limited into 66,791,667 new ordinary shares;
(iii) On 10 April 2012, the US$10 million Sputnick Facility was entered into; and
(iv) On 6 June 2012 the Company announced a refinancing by way of a pre-emptive Open Offer, to raise gross proceeds of approximately US$55.73 million through the issue of 794,629,171 new ordinary shares which proceeds were used to settle Group debt of US$45.44 million.
Importantly the Directors have performed a number of steps to ensure that the Company and the Group continue as going concerns, which include
(i) Considering various strategies to raise funds through restructure or disposal of other interests; and
(ii) Reviewing the quantum and timing of all discretionary expenditures including exploration and development costs, and wherever necessary, minimising or deferring these costs to suit the Group's cash flow from operations. This includes the active management of working capital commitments.
The ability of the Company and the Group to continue as going concerns and to pay their debts as and when they fall due is dependent on the on-going and active management of the expenditure incurred by the Group in line with the available funding and revenue generated from the operations.
At the date of this report and having considered the above factors, the Directors have assessed the position of the Group and based on this assessment the Group is considered to be a going concern and this basis was adopted for the preparation of the consolidated financial statements.
Operational outlook for the current financial year
Lesotho
It is gratifying to note that the average diamond grades and sizes from the metallurgical test work conducted in 2010 and 2011 have been upheld from the preparatory into the commercial production Phase 1 of the Kao mine. Ongoing ore body delineation in the financial year, in the form of surface mapping and soon to be completed facies delineation drilling, has identified additional kimberlite facies comprising the Kao Main Pipe Complex (KMPC), and the geological model, facies nomenclature and contained mineral resource has been refined as a result.
South Africa - North West Province
The sedimentological environment and genesis of the diamond mineralisation in the NW continues to be investigated and has resulted in highly predictive geological and economic resource modelling over this period. In addition, Prospecting Rights have been issued on contiguous properties (Annex-SEN) immediately adjacent to the current mining operations at SEN. The rights have been issued on the basis of an airborne electromagnetic survey conducted in 2010 in which the strike extent of the palaeochannel system present on SEN has been identified as having more regional continuity. A conservative indicative resource (Deposit level of confidence) of c.200Kcts in c.25Mt has been calculated for the properties comprising the first exploration phase, which will potentially add a minimum of 5 years LOM to SEN at a depletion rate of c.1.5Mt per annum. This calculation assumes a worst case scenario that only one-third of the ore resource being mineralised at an economic level. Once drilling and bulk-sampling exploration work commences in FY2013, this figure may increase.
Other assets
The remaining assets, being the marine assets held by Tidal Diamonds Limited in Namibia and the alluvial Megaladon Channel and Albetros resource-development projects in the Namaqualand area of the Northern Cape in South Africa, are being evaluated. A strategy for the realisation of value from these properties for shareholders will be developed in the first quarter of the 2013 calendar year.
Theo Botoulas
Chief Executive Officer
16 November 2012
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 August 2012
Year ended Year ended
Note 31 August 31 August
2012 2011
In thousands of US dollars Unaudited Audited
(Restated)
Continuing operations:
Revenue 7 51 022 86 591
Cost of sales 8 (50 692) (89 995)
----------- ------------
Gross profit/(loss) 330 (3 404)
Other expenses 9 (54) (1 002)
Exploration and evaluation expenses 10 (311) (8 034)
Administrative and general expenses (34 123) (32 635)
----------- ------------
Other administrative and general expenses 11 (13 632) (22 368)
Doubtful debt allowance (Non-current) 17 (10 104) -
Impairment of non-financial assets 16 (10 387) (10 267)
----------- ------------
Operating loss before finance costs and
taxation (34 158) (45 075)
Finance income 13 183 137
Finance expenses 13 (4 499) (7 680)
----------- ------------
Net finance costs (4 316) (7 543)
Loss before taxation (38 474) (52 618)
Taxation 14 (17) 148
Loss for the year from continuing operations (38 491) (52 470)
----------- ------------
Discontinued operations:
Loss after taxation for the year from
discontinued operations 22 (2 672) (24 273)
Total loss for the year (41 163) (76 743)
----------- ------------
Other comprehensive income for the period
Exchange differences on translating foreign
operations, gross and net of tax (9 308) 1 209
Exchange differences on disposal of foreign
subsidiary 1 251 -
Other comprehensive income for the period,
net of tax (8 057) 1 209
----------- ------------
Total comprehensive income for the period (49 220) (75 534)
----------- ------------
Loss attributable to:
- Owners of the parent (30 182) (70 321)
- Non-controlling interest (10 981) (6 422)
----------- ------------
(41 163) (76 743)
----------- ------------
Total comprehensive income attributable
to:
- Owners of the parent (38 239) (69 112)
- Non-controlling interest (10 981) (6 422)
----------- ------------
(49 220) (75 534)
----------- ------------
Basic loss per ordinary share (dollars)
From continuing operations 15 (0.07) (0.25)
From discontinued operations 15 (0.01) (0.13)
Diluted loss per ordinary share (dollars) 15
From continuing operations 15 (0.07) (0.25)
From discontinued operations (0.01) (0.13)
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 August 2012
As at As at
31 August 31 August
In thousands of US dollars 2012 2011
Unaudited Audited
------------------------------------------ --- ----------- -----------
Assets
Non-current assets
Property, plant and equipment 16 61 236 57 243
Non-current receivable 17 993 -
----------- -----------
Total non-current assets 62 229 57 243
----------- -----------
Current assets
Inventories 18 9 931 7 850
Trade and other receivables 20 3 234 16 906
Cash and cash equivalents 21 14 062 2 259
----------- -----------
Total current assets 27 227 27 015
----------- -----------
Assets of disposal group classified
as held for sale 22 - 5 506
----------- -----------
Total assets 89 456 89 764
----------- -----------
Equity and liabilities
Equity attributable to the owners
of the Company
Issued capital 23 687 136
Share premium 23 360 348 288 126
Other reserves 24 (5 653) 2 412
Accumulated loss (272 207) (242 293)
----------- -----------
Total 83 175 48 381
Non-controlling interests 25 (18 193) (6 857)
----------- -----------
Total equity 64 982 41 524
----------- -----------
Liabilities
Non-current liabilities
Borrowings 26 911 1 666
Provisions 29 7 280 7 415
----------- -----------
Total non-current liabilities 8 191 9 081
----------- -----------
Current liabilities
Trade and other payables 30 15 420 16 846
Borrowings 26 481 19 990
Tax liabilities 31 382 263
----------- -----------
Total current liabilities 16 283 37 099
----------- -----------
Liabilities of disposal group classified
as held for sale 22 - 2 060
----------- -----------
Total liabilities 24 474 48 240
----------- -----------
Total equity and liabilities 89 456 89 764
----------- -----------
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 31 August 2012
In thousands of Share Share Translation Treasury Non Share Accumulated Total Non-controlling Total
US dollars capital premium reserve shares distributable based loss equity interests equity
reserve payment attributable
reserve to ordinary
share
holders
----------------- ------------------- -------------- ------------ --------- -------------- -------- ------------ ------------- ---------------- --------
Year ended 31
August
2012 (Unaudited)
Balance at 1
September
2011 136 288 126 (6 508) (1 062) 6 572 3 410 (242 293) 48 381 (6 857) 41 524
Total
comprehensive (49
income - - (8 057) - - - (30 182) (38 239) (10 981) 220)
------------------- -------------- ------------ --------- -------------- -------- ------------ ------------- ---------------- --------
Other
comprehensive
income - - (8 057) - - - - (8 057) - (8 057)
Loss for the (41
twelve months - - - - - - (30 182) (30 182) (10 981) 163)
------------------- -------------- ------------ --------- -------------- -------- ------------ ------------- ---------------- --------
Transactions
with owners 551 72 222 (47) (38) - 77 268 73 033 (355) 72 678
Issued on Public
Offering 497 55 229 - - - - - 55 726 - 55 726
Costs of Public
Offering - (1 814) - - - - - (1 814) - (1 814)
Issued in
settlement
of debt 53 22 294 - - - - - 22 347 - 22 347
Cost of issue in
settlement
of debt - (3 580) - - - - - (3 580) - (3 580)
Value of
services
provided - - - - - 47 - 47 - 47
Treasury Shares
purchased - - - (263) - - - (263) - (263)
Treasury Shares
sold - - - 225 - - - 225 - 225
Repurchase of
'A' shares 1 93 - - - - - 94 (104) (10)
Gain/ (loss)
arising
from impact on
non-controlling
interests - - (47) - - 30 268 251 (251) -
------------------- -------------- ------------ --------- -------------- -------- ------------ ------------- ---------------- --------
Balance at 31
August
2012 687 360 348 (14 612) (1 100) 6 572 3 487 (272 207) 83 175 ( 18 193) 64 982
------------------- -------------- ------------ --------- -------------- -------- ------------ ------------- ---------------- --------
In thousands of Share Share Translation Treasury Non Share Accumulated Total Non-controlling Total
US dollars capital premium reserve shares distributable based loss equity interests equity
reserve payment attributable
reserve to ordinary
share
holders
----------------- ------------------- -------------- ------------ --------- -------------- -------- ------------ ------------- ---------------- --------
Year ended 31
August
2011
Balance at 1
September
2010 82 235 960 (7 646) (265) - 6 921 (176 891) 58 161 1 041 59 202
Total
comprehensive (75
income - - 1 209 - - - (70 321) (69 112) (6 422) 534)
------------------- -------------- ------------ --------- -------------- -------- ------------ ------------- ---------------- --------
Other
comprehensive
income - - 1 209 - - - - 1 209 - 1 209
Loss for the (76
twelve months - - - - - - (70 321) (70 321) (6 422) 743)
------------------- -------------- ------------ --------- -------------- -------- ------------ ------------- ---------------- --------
Transactions
with owners 54 52 166 (71) (797) 6 572 (3 511) 4 919 59 332 (1 476) 57 856
------------------- -------------- ------------ --------- -------------- -------- ------------ ------------- ---------------- --------
Shares issued - 200 - - - - - 200 - 200
Issued on Public
Offering 54 54 609 - - - - - 54 663 - 54 663
Costs of Public
Offering - (2 996) - - - - - (2 996) - (2 996)
Value of
services
provided - - - - - (9) - (9) - (9)
Lesotho Share
Options
Exercised - - - - - (3 591) 5 008 1 417 (1 417) -
Treasury Shares
purchased - - - (967) - - - (967) - (967)
Treasury Shares
sold - - - 170 - - - 170 - 170
Issue of 'A'
shares - - - - - - - - 207 207
Repurchase of
'A' shares - 353 - - - - - 353 (337) 16
Gain/ (loss)
arising
from impact on
non-controlling
interests - - (71) - - 89 (314) (296) 296 -
Transfer of
shares to
Kimberlite
Investments
Lesotho Ltd - - - - 6 572 - 225 6 797 (225) 6 572
------------------- -------------- ------------ --------- -------------- -------- ------------ ------------- ---------------- --------
Balance at 31
August
2011 136 288 126 (6 508) (1 062) 6 572 3 410 (242 293) 48 381 (6 857) 41 524
------------------- -------------- ------------ --------- -------------- -------- ------------ ------------- ---------------- --------
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 August 2012
Year ended Year ended
Note 31 August 31 August
2012 2011
In thousands of US dollars Unaudited Audited
(Restated)
Cash flows from operating activities
Loss for the year before tax (38 474) (52 618)
Adjustments for:
Depreciation 16 4 999 7 651
Net realisable write down of inventory 8 - 650
Impairment of property, plant and equipment 16 10 387 10 267
Net finance expense 13 4 316 7 543
(Profit)/Loss on disposal of property,
plant and equipment 9 (110) 1 249
Loss on disposal of Employee Benefit
Trust shares 9 196 -
Loss/(Profit) on foreign exchange rate
movements 11 8 (1 052)
Doubtful debt allowance 11 11 304 1 327
Change in provision estimate 29 568 1 234
Non-cash items included in exploration
costs - 1 183
Equity settled share-based payment
transactions 27 47 59
----------- ------------
(6 759) (22 507)
Change in inventories (964) 2 720
Change in trade and other receivables 1 112 (3 649)
Change in trade and other payables (1 142) 7 112
----------- ------------
Net cash outflows from operations (7 753) (16 324)
Interest paid 13 (1 866) (4 561)
Net cash used in continued operating
activities (9 619) (20 885)
----------- ------------
Cash flows from investing activities
Interest received 13 183 137
Acquisition of property, plant and
equipment 16 (29 377) (35 928)
Proceeds on disposal of subsidiary 311 -
Proceeds from disposal of property,
plant and equipment 2 428 1 954
Proceeds on disposal of Employee Benefit
Trust shares 28 -
----------- ------------
Net cash used in investing activities (26 427) (33 837)
----------- ------------
Cash flows from financing activities
Proceeds from the issue of shares 23 55 820 52 220
Proceeds from borrowings 45 200 7 000
Treasury Shares - purchased 24 (263) (967)
Treasury Shares - sold 24 225 170
Buy back of A Shares 25 (111) (129)
Capitalised transaction costs paid (5 114) -
Repayment of borrowings (47 233) (6 017)
----------- ------------
Net cash from financing activities 48 524 52 277
----------- ------------
Net increase/(decrease) in cash and
cash equivalents:
Continuing Operations 12 478 (2 445)
Net decrease in cash and cash equivalents:
Discontinued Operations (336) (9 565)
Cash and cash equivalents at the beginning
of the period 2 019 13 982
Effect of exchange rate fluctuations
on cash held (99) 47
----------- ------------
Cash and cash equivalents at 31 August
2012 14 062 2 019
----------- ------------
Cash and cash equivalents at 31 August
2012: Continuing Operations 14 062 1 894
Cash and cash equivalents at 31 August
2012: Discontinued Operations - 125
----------- ------------
Cash and cash equivalents at 31 August
2012 21 14 062 2 019
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Notes to the Consolidated Financial Statements
for the year ended 31 August 2012
1. General Information
Namakwa Diamonds Limited ("Namakwa" or "the Company") is a company that was incorporated in Bermuda on 20 October 2006. Its common shares are listed on the Alternative Investment Market of the London Stock Exchange ("AIM"). The consolidated financial statements have been prepared for the year ended 31 August 2012 and comprise the Company and its subsidiaries (together referred to as the "Group" and individually as "Group Entities").
The Group is involved in the exploration for and mining of diamonds. The Group's current operating mines are located in South Africa and Lesotho with other exploration and evaluation projects in South Africa and Namibia.
The Company has maintained a listing on AIM since 1 August 2012, pursuant to the cancellation, at the Company's request, of the Company's listing on the Main Market of the London Stock Exchange ("LSE"). Namakwa could no longer satisfy its obligations under Listing Rule 9.2.15 (the "Free Float Requirement") on admission of an additional 794 629 171 new shares to trading on the London Stock Exchange.
The address of its registered office and principal place of business is Clarendon House, 2 Church Street, Hamilton, Bermuda, HM11.
Going concern
The financial report has been prepared on the going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business.
The Group has incurred a net loss after tax for the year ended 31 August 2012 of US$41.16 million, (31 August 2011: loss of US$76.74 million) and experienced net cash outflows from operating activities of US$9.62 million (2011 net outflow: US$20.89 million) and net cash outflows from investing activities of US$26.43 million (2011 net outflow: US$33.84million). As at 31 August 2012 the Group had a net current asset position of US$10.94 million (2011: net current liabilities of US$10.08 million), excluding assets and liabilities classified as held for sale.
During the year to 31 August 2012 and the period to the date of this report, the Directors have performed the following fundraising activities:
(i) On 7 September 2011, the US$40 million Jarvirne Facility was entered into, conditional on the capitalisation of a US$19.5 million debt owed to Jarvirne, which was approved by Shareholders on 23 November 2011;
(ii) In November 2011, Namakwa converted a US$16.03 million trading debt owed to Jarvirne Limited into 66 791 667 new ordinary shares;
(iii) On 10 April 2012, the US$10 million Sputnick Facility was entered into;
(iv) On 6 June 2012 the Company announced a refinancing by way of a pre-emptive Open Offer, to raise gross proceeds of approximately US$55.73 million through the issue of 794 629 171 new ordinary shares which proceeds were used to settle Group debt of US$45.44 million.
Importantly the Directors have performed a number of steps to ensure that the Company and the Group continue as going concerns, which include
(v) Considering various strategies to raise funds through restructure or disposal of other interests; and
(vi) Reviewing the quantum and timing of all discretionary expenditures including exploration and development costs, and wherever necessary, minimising or deferring these costs to suit the Group's cash flow from operations. This includes the active management of working capital commitments.
The ability of the Company and the Group to continue as going concerns and to pay their debts as and when they fall due is dependent on the on-going and active management of the expenditure incurred by the Group in line with the available funding and revenue generated from the operations.
At the date of this report and having considered the above factors, the Directors have assessed the position of the Group and based on this assessment the Group is considered to be a going concern and this basis was adopted for the preparation of the consolidated financial statements.
2. Basis of presentation 2.1. Statement of compliance
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS's") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations. The financial statements comprise the consolidated financial statements of the Group.
These financial statements were authorised for issue by the Directors on 15 November 2012.
2.2. Basis of measurement
The consolidated financial statements have been prepared on the historical cost basis, except for certain financial instruments that are measured at fair values, as explained in the accounting policies below.
2.3. Use of estimates and judgements
The preparation of financial statements in conforming to IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.
3. Accounting policies
The principal accounting policies applied by the Group in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.
3.1. Basis of Consolidation
The consolidated financial statements incorporate the financial statements of the Company and entities controlled by the Company (its subsidiaries).
(a) Subsidiaries
Subsidiaries are entities (including special purpose entities) controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. Control will generally exist when the parent owns directly or indirectly through its subsidiaries more than half of the voting power of an entity. In assessing the power to govern, the existence and effect of actual and potential voting rights are also considered. A list of subsidiaries is contained in note 33 to the financial statements.
The subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.
Where necessary, the accounting policies of subsidiaries have been changed to align them with the policies adopted by the Group.
The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the group's share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in the statement of comprehensive income.
All inter-company transactions, balances, income and expenses between Group companies are eliminated in full on consolidation.
Changes in the Group's ownership interests in subsidiaries that do not result in the Group losing control are accounted for as equity transactions. The carrying amounts of the Group's interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognised directly in equity and attributed to owners of the Company.
When the Group loses control of a subsidiary, the profit or loss on disposal is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), and liabilities of the subsidiary and any non-controlling interests. When assets of the subsidiary are carried at re-valued amounts or fair values and the related cumulative gain or loss has been recognised in other comprehensive income and accumulated in equity, the amounts previously recognised in other comprehensive income and accumulated in equity are accounted for as if the Company had directly disposed of the relevant assets (i.e. reclassified to profit or loss or transferred directly to retained earnings as specified by applicable Standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IAS 39 'Financial Instruments: Recognition and Measurement' or, when applicable, the cost on initial recognition of an investment in an associate or jointly controlled entity.
(b) Transactions with non-controlling shareholders - 'economic entity approach'
The group applies a policy of treating transactions with non-controlling interests as transactions with equity owners of the group. For purchases from non-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.
(c) Jointly controlled assets
Some joint ventures involve the joint control of one or more assets contributed to, or acquired for the purpose of, the joint venture and dedicated to the purposes of the joint venture. The assets are used to obtain benefits for the ventures. These joint ventures do not involve the establishment of a corporation, partnership or other entity, or a financial structure that is separate from the ventures themselves. Each venture has control over its share of future economic benefits through its share of the jointly controlled asset.
In respect of its interest in jointly controlled assets, the Group recognises:
-- its share of the jointly controlled assets, classified according to the nature of the assets;
-- any liabilities that it has incurred;
-- its share of any liabilities incurred jointly with the other ventures in relation to the joint venture;
-- any income from the sale or use of its share of the output of the joint venture, together with its share of any expenses incurred by the joint venture; and
-- any expenses that it has incurred in respect of its interest in the joint venture. 3.2. Business Combinations
Business combinations occur where an acquirer obtains control over one or more businesses and results in the consolidation of its assets and liabilities.
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity instruments issued by the Group in exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value at the acquisition date, except that:
-- deferred tax assets or liabilities and liabilities are recognised and measured in accordance with IAS 12 'Income Taxes';
-- assets related to employee benefit arrangements are recognised and measured in accordance with IAS 19 'Employee Benefits';
-- liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 'Share-based Payment' at the acquisition date; and
-- assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 'Non-current Assets Held for Sale and Discontinued Operations' are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the entity's net assets in the event of liquidation may be initially measured either at fair value or at the non-controlling interests' proportionate share of the recognised amounts of the acquiree's identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction basis. Other types of non-controlling interests are measured at fair value or, when applicable, on the basis specified in another Standard.
Where the consideration transferred by the Group in a business combination includes assets or liabilities resulting from a contingent consideration arrangement, the contingent consideration is measured at its acquisition-date fair value. Changes in the fair value of the contingent consideration that qualify as measurement period adjustments are adjusted retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from additional information obtained during the 'measurement period' (which cannot exceed one year from the acquisition date) about facts and circumstances that existed at the acquisition date.
The subsequent accounting for changes in the fair value of contingent consideration that do not qualify as measurement period adjustments depends on how the contingent consideration is classified. Contingent consideration that is classified as equity is not remeasured at subsequent reporting dates and its subsequent settlement is accounted for within equity. Contingent consideration that is classified as an asset or liability is remeasured at subsequent reporting dates in accordance with IAS 37 'Provisions, Contingent Liabilities and Contingent Assets', as appropriate, with the corresponding gain or loss being recognised in profit or loss.
Where a business combination is achieved in stages, the Group's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date (i.e. the date when the Group attains control) and the resulting gain or loss, if any, is recognised in profit or loss. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassified to profit or loss where such treatment would be appropriate if that interest were disposed of.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period (see above), or additional assets or liabilities are recognised, to reflect new information obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.
3.3. Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Executive Committee, which consists of the Chief Executive Officer and members of senior management. The Group has three segments: i) Exploration, Evaluation and Development, ii) Mining and iii) Trading & Beneficiation.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Inter-segment pricing is based on arm's length prices. Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill.
3.4. Foreign currency translation (a) Functional and presentation currency
The individual financial statements of each group entity are presented in the currency of the primary economic environment in which the entity operates (its functional currency). For the purpose of the consolidated financial statements, the results and financial position of each group entity are expressed in United States dollars ("USD" or "US Dollars"), which is the Company's functional currency and the presentation currency for the consolidated financial statements. All financial information presented in US dollars has been rounded to the nearest thousand.
(b) Foreign currency transactions
Foreign currency transactions are recorded at the rate of exchange ruling at the transaction date. A rate that approximates the actual rate at the date of the transaction can be used unless the use of the average rate for a period is inappropriate. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the reporting date. Gains and losses arising on translation are credited to or charged against profit or loss.
(c) Foreign currency translation on consolidation
On consolidation, profit or loss items are translated into US dollars at average rates of exchange. Statement of Financial Position items are translated at year end exchange rates. Exchange differences on translation of the net assets of entities with functional currencies other than the US dollar are recognised directly in other comprehensive income.
(d) Net investments in subsidiaries
On consolidation, exchange differences arising from the translation of the net investment in foreign operations, are taken to the foreign currency translation reserve. When control of a foreign operation is lost, exchange differences that were recorded in other comprehensive income are recognised in profit or loss as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate
3.5. Property, plant and equipment
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate components of property, plant and equipment.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within "non-operating expenses" in profit or loss.
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised.
The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.
Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment except for mineral properties which are depreciated using units of production (tonnes). The useful lives of mineral properties and leases and plant and equipment with the same useful lives as the related mineral property are estimated based on the Group's assessment of the expected productive life of mineral resources of each project. Depreciation commences at the point of reaching commercial production or when the asset is available for use. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.
The estimated useful lives are as follows:
5 to 10 years
* Mineral properties and leases
2 to 10 years
* Plant and equipment
Not depreciated
* Assets under construction
Plant and equipment consists of motor vehicles, earth moving equipment, plants, dense medium separators, office equipment and computer equipment.
Certain categories of property, plant and equipment are depreciated over useful lives based on estimated units of production.
Depreciation methods, useful lives and residual values are reviewed at each year end. Assets under construction are not depreciated until they come in use.
3.6. Goodwill
Goodwill arising on an acquisition of a business is carried at cost as established at the date of the acquisition of the business (see 3.2 above) less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss in the consolidated statement of comprehensive income. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
3.7. Exploration, evaluation and development costs
Exploration and evaluation expenditure related to an area of interest is written off as incurred. Development costs, where the rights of tenure of an area are current and it is considered probable that the costs will be recouped through successful development and exploitation of the area of interest, or alternatively by its sale, are capitalised.
Capitalised expenditure includes costs directly related to exploration and evaluation activities in the relevant area of interest, including materials and fuel used, surveying costs, drilling costs and payments made to contractors. General and administrative costs are allocated to a development area of interest and capitalised as an asset only to the extent that those costs can be related directly to operational activities in the relevant area of interest.
The costs of acquiring exploration properties and mineral prospecting rights are written off on acquisition.
All capitalised development expenditure is considered for impairment as part of the process of assessing the carrying value of long lived assets. See note 3.8.
3.8. Impairment of non-financial assets other than goodwill
The carrying amounts of the Group's tangible and intangible assets are reviewed at each reporting date to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss.
Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
3.9. Non-current assets held for sale
Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the non-current asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.
When the Group is committed to a sale plan involving loss of control of a subsidiary, all of the assets and liabilities of that subsidiary are classified as held for sale when the criteria described above are met, regardless of whether the Group will retain a non-controlling interest in its former subsidiary after the sale.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their previous carrying amount and fair value less costs to sell.
3.10. Inventories
Inventories are measured at the lower of cost and net realisable value. Costs of inventories include expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition.
Costs of inventories are determined on the weighted average method.
Net realisable value represents the estimated selling price for inventories in the ordinary course of business less the estimated costs of completion and selling expenses.
3.11. Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganization, and default or delinquency in payments are considered indicators that the accounts receivable is impaired. The amount of the provision is the difference between the asset's carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the consolidated statement of comprehensive income. When an accounts receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited in the consolidated statement of comprehensive income.
3.12. Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short term deposits. Bank overdrafts that are repayable on demand form an integral part of the Group's cash management system and are included as a component of cash and cash equivalents for the purposes of the statement of cash flows.
3.13. Financial instruments
Non-derivative financial instruments comprise trade and other receivables, cash and cash equivalents, loans and borrowings, preference shares and trade and other payables. Financial assets are defined as cash, an equity instrument of another entity, or a contractual right to receive cash or another financial asset or to exchange a financial instrument under favourable conditions. Financial liabilities are contractual obligations to pay cash or transfer other benefits or an obligation to exchange financial instruments under unfavourable conditions.
Financial instruments are recognised when the Group becomes a party to the contractual provisions of the instrument. A financial asset is derecognised when the contractual rights to the cash flows from the financial asset expire, or the Group transfers the financial asset and such transfer qualify for de-recognition. A financial liability is derecognised when the obligation specified in the contract is discharged or cancelled or expires.
Regular purchases and sales of financial assets are recognised on the trade-date - the date on which the Group commits to purchase or sell the asset. Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less provision for impairment. The following financial assets are classified as loans and receivables: Cash and cash equivalents and trade and other receivables.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and short-term deposits, and are stated at amortised cost. Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents for the purpose of the consolidated statement of cash flows.
Trade and other receivables
Trade and other receivables are amounts due from customers for sales performed in the ordinary course of business less impairment losses.
Financial liabilities at amortised cost
Loans and borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs. Subsequent to initial recognition, interest bearing borrowings are stated at amortised cost using the effective interest method with any difference between cost and redemption value being recognised in profit or loss over the period of the borrowings on an effective interest basis.
Trade and other payables
Trade and other payables are stated at amortised cost using the effective interest method.
Financial assets at fair value through profit or loss
An instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group's documented risk management or investment strategy. Upon initial recognition attributable transaction costs are recognised in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in profit or loss.
Other non-derivative financial instruments are measured at amortised cost using the effective interest rate method, less any impairment losses.
The Group does not hold any derivative financial instruments.
Impairment of financial assets
A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy and default or delinquency in payments are considered indicators that the trade receivable is impaired.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset's original effective interest rate. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar risk characteristics.
The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss. When a trade receivable is uncollectible, it is written off against the allowance account.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost the reversal is recognised in profit or loss.
3.14. Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event, it is probable that the Group will be required to settle the obligation, and the amount can be reliably estimated. Provisions are not recognised for future operating losses.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (where the effect of the time value of money is material).
Rehabilitation provision
A provision for rehabilitation is recognised when there is a present obligation as a result of exploration, development or production activities undertaken, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount of the provision can be measured reliably. The estimated future obligations include the costs of removing facilities, abandoning sites and restoring the affected areas.
The provision for future rehabilitation costs is the best estimate of the present value of the expenditure required to settle the rehabilitation obligation at the reporting date, based on current legal and other requirements and technology. Future rehabilitation costs are reviewed annually and any changes in the estimate are reflected in the present value of the rehabilitation provision at each reporting date.
The initial estimate of the rehabilitation provision relating to exploration, development and production facilities is capitalised into the cost of the related asset and depreciated or amortised on the same basis as the related asset, unless the present obligation arises from the production of inventory in the period, in which case the amount is included in the cost of sales for the period. Changes in the estimate of the provision are treated in the same manner, except that the unwinding of the effect of discounting on the provision is recognised as a finance cost rather than being capitalised into the cost of the related asset.
3.15. Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of tax.
"A" Shares
A second class of shares, "A" shares, were issued in Namakwa Diamonds Holdings (Pty) Ltd, a 100% controlled subsidiary of the Company. These "A" shares rank pari passu with the rights attaching to the Namakwa Diamond Limited ordinary shares and give the holder an effective economic interest in the equity of the Company. As these shares were issued by a subsidiary of the Company, they have been classified as a non-controlling interest in the Group accounts.
A gain/(loss) arises on the issue of "A" Shares to the non-controlling shareholders which represents the difference between the fair value of the consideration received and the share of the carrying amount of the Group's net assets attributable to the non-controlling interest. This gain is transferred to the ordinary shareholders of the Group within equity, according to the Economic Entity method.
3.16. Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates.
3.17. Share-based payments
Equity settled
Equity-settled share-based payments to employees and others providing similar services are measured at the fair value of the equity instruments at the grant date. Details regarding the determination of the fair value of equity-settled share-based transactions are set out in note 27.
The fair value determined at the grant date of the equity-settled share-based payments is expensed on the straight-line basis over the vesting period, based on the Group's estimate of equity instruments that will eventually vest, with a corresponding increase in equity. At the end of each reporting period, the Group revises its estimate of the number of equity instruments expected to vest. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to the equity-settled employee benefits reserve.
Equity-settled share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received, except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments granted, measured at the date the entity obtains the goods or the counterparty renders the service.
Cash settled
For cash-settled share-based payments, a liability is recognised for the goods or services acquired, measured initially at the fair value of the liability. At the end of each reporting period until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair value recognised in profit or loss for the year.
Accounting for BEE transactions
Where equity instruments are issued to a broad based black economic empowerment ("BEE") party at less than fair value, these are accounted for as share-based payments. Any difference between the fair value of the equity instrument issued and the consideration received is accounted for as an expense in the consolidated statement of comprehensive income.
A restriction on the BEE party to transfer the equity instrument subsequent to its vesting is not treated as a vesting condition, but is factored into the fair value determination of the instrument.
3.18. Finance leases
Leases in which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at the lower of fair value of the assets and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for as expenses in the period in which they are incurred.
Finance leases are capitalised at commencement of the lease.
3.19. Current and deferred income tax
Income tax expense comprises current and deferred tax. Income tax expense 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 year end, and any adjustment to tax payable in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the year end.
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, where there is a legal right to do so, but 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 to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax assets are reviewed at each year end and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
3.20. Revenue recognition
Revenue from the sale of rough and polished diamonds in the ordinary course of the Group's activities is measured at the fair value of the consideration received or receivable, net of the amount of applicable transaction tax. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the group.
Revenue is recognised when the significant risks and rewards of control have been transferred to the buyer, recovery of the consideration is probable, the associated costs can be estimated reliably, and the amount of revenue can be measured reliably. The significant risks and rewards are considered to have passed upon delivery.
On certain contracts, where the Group acts as agent, only commissions and fees receivable for services rendered are recognised as revenue. Any third-party costs incurred on behalf of the principal that are rechargeable under the contractual arrangement are not included in revenue.
3.21. Finance income and expenses
Finance income comprises interest income on funds invested. Interest income is recognised as it accrues, using the effective interest method.
Finance expenses comprise interest expense on borrowings, unwinding of the discount on provisions and dividends on preference shares classified as liabilities. All borrowing costs are recognised in profit or loss using the effective interest method.
Borrowing costs are expensed as incurred, except for interest directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use, in which case they are capitalised as part of the cost of that asset. Capitalisation of borrowing costs commences when expenditures for the asset and borrowing costs are being incurred and when the activities to prepare the asset for its intended use are in progress. Borrowing costs are capitalised up to the date when the project is completed and ready for its intended use.
To the extent that funds are borrowed specifically for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation is determined at the actual borrowing costs incurred on that borrowing during the period, less any investment income on the temporary investment of those borrowings.
To the extent that funds are borrowed generally and used for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for capitalisation is determined by applying a capitalisation rate to the expenditures on that asset. The capitalisation rate is the weighted average of the borrowing costs applicable to the borrowings of the Group that are outstanding during the period, other than borrowings made specifically for the purpose of obtaining a qualifying asset. The amount of borrowing costs capitalised during a period should not exceed the amount of borrowing cost incurred during that period. Other borrowing costs are recognised as expenses when incurred.
3.22. Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the consolidated statement of comprehensive income on a straight-line basis over the period of the lease.
The group leases certain property, plant and equipment. Leases of property, plant and equipment where the group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's commencement at the lower of the fair value of the leased property and the present value of the minimum lease payments.
Each lease payment is allocated between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other long-term payables. The interest element of the finance cost is charged to the consolidated statement of comprehensive income over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.
3.23. Employee benefits
A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave when it is probable that settlement will be required and they are capable of being measured reliably.
3.24. Comparative amounts
When required by Accounting Standards, comparative figures have been adjusted to conform to changes in presentation for the current financial period. The consolidated statement of comprehensive income for the comparative period has been restated as a result of the diamond polishing operation being classified as a discontinued operation during the year.
3.25. Adoption of new and revised Accounting Standards and Interpretations
At the date of the authorisation of the financial report, a number of Standards and Interpretations were in issue but not yet effective. Management are currently assessing the impact of the initial application of the following Standards. Initial indication is that they will not affect the amounts recognised in the financial report, but will change the disclosures presently made in relation to the Group and the Company's financial report:
Standard Effective for Expected to
the annual reporting be initially
periods beginning applied in
on or after the financial
year ending
---------------------------------------------------------------- ---------------------- ---------------
1 July 2012 31 August 2013
* IAS 1 (Amendment) Presentation of Financial
Statements
1 January 2012 31 August 2013
* IAS 12 (Revised) Income Taxes - Deferred Tax:
Recovery of Underlying Assets
1 January 2013 31 August 2014
* IAS 19 (Amendment) Employee Benefits
1 January 2013 31 August 2014
* IAS 27 (Revised) Separate Financial Statements
1 January 2013 31 August 2014
* IAS 28 (Revised) Investments in Associates and Joint
Ventures
1 January 2014 31 August 2015
* IAS 32 (Amendment) Offsetting of Financial Assets and
Financial Liabilities
1 January 2013 31 August 2014
* IFRS 1 (Amendment): First-time Adoption of
International Financial Reporting Standards -
Guidance on Government Loans
1 January 2015 31 August 2016
* IFRS 7 (Amendment): Financial Instruments:
Disclosures - IFRS 9 Transitional Disclosures
1 January 2013 31 August 2014
* IFRS 7 (Amendment): Financial Instruments:
Disclosures - Offsetting of Financial Assets and
Financial Liabilities
1 January 2015 31 August 2016
* IFRS 9: Financial Instruments
1 January 2013 31 August 2014
* IFRS 10 Consolidated Financial Statements
1 January 2013 31 August 2014
* IFRS 11 Joint Arrangements
1 January 2013 31 August 2014
* IFRS 12 Disclosure of Interest in Other Entities
1 January 2013 31 August 2014
* IFRS 13 Fair Value Measurement
1 January 2013 31 August 2014
* IFRIC 20 Stripping Costs in the Production Phase of a
Surface Mine
1 January 2013 31 August 2014
* Annual Improvements 2009 - 2011 Cycle
1 January 2013 31 August 2014
* IFRS 10: Consolidated Financial Statements, IFRS 11:
Joint Arrangements and IFRS 12: Disclosure of
Interests in Other Entities (Amendment)
---------------------------------------------------------------- ---------------------- ---------------
Standards and Interpretations adopted with no effect on financial statements
The following new and revised Standards and Interpretations have been adopted in these financial statements, but have had no effect on the amounts reported.
Standard Effective for Expected to
the annual reporting be initially
periods beginning applied in
on or after the financial
year ending
---------------------------------------------------------------- ---------------------- ---------------
1 July 2011 31 August 2012
* IFRS 1 (Amendment): First-time Adoption of
International Financial Reporting Standards - Removal
of Fixed Dates for First-time Adopters
1 July 2011 31 August 2012
* IFRS 1 (Amendment): First-time Adoption of
International Financial Reporting Standards -
Guidance on Severe Hyperinflation
1 July 2011 31 August 2012
* IFRS 7 (Amendment): Financial Instruments:
Disclosures - Transfer of Financial Assets
---------------------------------------------------------------- ---------------------- ---------------
4. Critical accounting estimates and key judgements
Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
The primary areas in which estimates and judgements are applied are discussed below.
Impairment of non-financial assets
The Group assesses impairment at the end of each reporting period by evaluating conditions and events specific to the Group that may be indicative of impairment triggers. Recoverable amounts of relevant assets are reassessed using the higher of value-in-use or a fair value less cost to sell calculations which incorporate various key assumptions. Key assumptions include future diamond prices, future operating costs, discount rate, estimates of diamond resources and residual values. Estimates of diamond resources in themselves are dependent on various assumptions (refer above). Changes in these assumptions could therefore affect estimates of future cash flows used in the assessment of recoverable amounts, estimates of the life of mine and depreciation. The impairment loss from a Group perspective has been performed in US dollars (after translation of the carrying amount of the assets of the subsidiary into US dollars). Refer to note 16 for further details.
Mineral resources
The estimate of remaining mineral resources is based on the use of external experts. The estimate of these resources is used for the initial valuation of assets acquired under business combinations and the amortisation of the undeveloped properties and mineral rights. The estimate of the Group's mineral resources is a critical estimate which impacts the recognition and measurement of the Group's assets, liabilities and depreciation expense.
Exploration, evaluation and development assets
Determining the recoverability of development costs capitalised requires estimates and assumptions as to future events and circumstances, in particular, whether successful development and commercial exploitation, or alternatively sale, of the respective areas of interest will be achieved. The Group applies the principles of IFRS 6 and recognises development assets when the rights of tenure of the area of interest are current, and the exploration and evaluation expenditures incurred are expected to be recouped through successful development and exploitation of the area. If, after having capitalised the expenditure under the Group's accounting policy, a judgment is made that recovery of the carrying amount is unlikely, an impairment loss is recorded in profit or loss.
Exposure and liabilities with regard to rehabilitation costs
The Group's mining, development and exploration activities are subject to various laws and regulations governing the protection of the environment. The Group recognises management's best estimate environmental restoration obligations in the period in which they are incurred. Actual costs incurred in future periods could differ materially from the estimates. Additionally, future changes to the environmental laws and regulations, life of mine estimates and discount rates could affect the carrying amount of this provision. Refer to note 29 for details of the assumptions used.
Contingent liabilities - litigation
Certain claims have been made against the Group. Judgments about the validity of the claims have been made by the Directors. Further details are included in note 32.
Utilisation of tax losses
The group is subject to income taxes in a number of jurisdictions. At present many of the entities are making tax losses. These tax losses are only recognised to the extent that expected future taxable profits are available.
Net realisable value of inventory
At year end management performed an extensive exercise to determine the net realisable value of inventory items to ensure compliance with the group's accounting policy to value inventory at the lower of cost or net realisable value. This exercise is performed on an annual basis.
Measurement of share-based payments
The granting of share options to employees requires the recognition of the fair value of the option granted to be recognised over the vesting period of the option. Refer to note 4 for details of the fair value evaluation.
During prior periods the Group set up an employee benefit trust to hold Namakwa Diamonds Limited shares. The scheme is accounted for as a cash-settled employee benefit scheme. The assumptions and estimations used in the calculation of the liability are included in note 27.
Impairment of non-current and current receivables
Non-current and current receivables are evaluated for impairment by comparing the entire carrying value of the receivable balance to the recoverable amount. When significant doubt exists over the recoverability of a balance management provides for the possible impairment of such a balance.
5. Financial risk management
The group's activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The group's overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group's financial performance.
Risk management is carried out by management under policies approved by the board of directors. Management identifies, evaluates and hedges financial risks in close co-operation with the group's operating units. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.
Market Risk
Foreign exchange risk
The group operates internationally and is exposed to foreign exchange risk arising from various currency exposures. Foreign exchange risk arises mainly as a result of operations in underlying subsidiaries which do not have a functional currency of US dollars. Most of the company's purchases are denominated in SA rand and Lesotho Maloti. However, certain items during the exploration, development and plant construction phase as well as long lead-capital items are denominated in US dollars. These have to be acquired by the operating companies due to the Foreign Exchange Control Rulings imposed by the South African Reserve Bank and the Reserve Bank of Lesotho. This exposed the operating subsidiary companies to changes in the foreign exchange rates. The Group does not use derivatives to manage this risk.
The Group's cash deposits are largely denominated in US dollars, Pounds Sterling and SA rand. A foreign exchange risk arises from the funds deposited in US dollars which will have to be exchanged into the functional currency for working capital purposes.
The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the group's foreign operations is managed primarily through borrowings denominated in the relevant foreign currencies.
The following significant exchange rates were applied during the reporting period:
Average rate Reporting date spot rate
Year ended Year ended Year ended Year ended
31 August 31 August 31 August 31 August
2012 2011 2012 2011
---------------------- ----------- ----------- ------------- ------------
US Dollar 1 = SA
Rand 7.9775 6.8963 8.4333 7.0567
SA Rand 1 = US
Dollar 0.1253 0.1450 0.1188 0.1417
US Dollar 1 = Maloti 7.9775 6.8963 8.4333 7.0567
Maloti 1 = US Dollar 0.1253 0.1450 0.1188 0.1417
SA Rand 1 = Maloti 1.0000 1.0000 1.0000 1.0000
---------------------- ----------- ----------- ------------- ------------
At financial period end, the financial instruments exposed to foreign currency risk movements are as follows:
Balances at 31
August 2012 Denominated Denominated Denominated Total
in ZAR in Maloti in USD
In thousands of
US dollars
--------------------------- -------------- -------------- -------------- --------
Financial assets
Non-current receivables 993 - - 993
Trade and other
receivables 1 453 1 278 503 3 234
Cash and cash equivalents 3 040 1 280 9 742 14 062
-------------- -------------- -------------- --------
Total financial
assets 5 486 2 558 10 245 18 289
-------------- -------------- -------------- --------
Financial liabilities
Borrowings 58 1 334 - 1 392
Trade and other
payables 1 643 12 363 1 414 15 420
Total financial
liabilities 1 701 13 697 1 414 16 812
-------------- -------------- -------------- --------
Balances at 31
August 2011 Denominated Denominated Denominated Total
in ZAR in Maloti in USD
In thousands of
US dollars
--------------------------- -------------- -------------- -------------- --------
Financial assets
Non-current receivables - - - -
Trade and other
receivables 3 857 10 406 2 643 16 906
Cash and cash equivalents 1 119 629 511 2 259
-------------- -------------- -------------- --------
Total financial
assets 4 976 11 035 3 154 19 165
-------------- -------------- -------------- --------
Financial liabilities
Borrowings 251 2 092 19 313 21 656
Trade and other
payables 6 170 8 964 1 712 16 846
Total financial
liabilities 6 421 11 056 21 025 38 502
-------------- -------------- -------------- --------
Balances classified as held for sale are not included in the above tables.
The following table summarises the sensitivity of financial instruments held at reporting date to movements in the exchange rate of the SA rand to the US dollar and Lesotho Maloti to the US Dollar, with all other variables held constant. The SA rand and Lesotho Maloti denominated instruments have been assessed using the sensitivities indicated in the table. These are based on reasonably possible changes, over a financial period, using the observed range of actual historical rates for the preceding two-year period.
Impact on profit / (loss)
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
--------------------------------------------------- ------------- -------------
Judgements on reasonable possible movements
USD/ZAR increase by 10% 378 (145)
USD/ZAR decrease by 10% (378) 145
USD/Maloti increase by 10% (1 114) (2)
USD/Maloti decrease by 10% 1 114 2
--------------------------------------------------- ------------- -------------
Price risk
The Group's normal policy is to sell diamonds at their prevailing market price. Accordingly the Group is highly exposed to fluctuations in the price for diamonds. In order to ensure that its product are sold at optimum prices, the Group maintain an internal resource that, in consultation with I. Hennig & Co. Ltd, the world's oldest and largest international diamond broking and consulting group, evaluate and decide on the preferred marketing and selling strategy.
Interest risk
During the year the majority of the Group's borrowings were fixed-rate borrowings. The group's interest rate risk arises from long-term and short-term borrowings. Borrowings issued at variable rates expose the group to cash flow interest rate risk which is partially offset by cash held at variable rates. During both 2012 and 2011, the group's borrowings at variable rate were denominated in SA rand. The low level of borrowings in the group limits the exposure to this risk. The Group had not entered into derivatives to manage the interest rate risk, but monitors exposure to interest rate risk. The Group does not have any undrawn borrowings facilities at reporting date.
At the reporting date the interest rate profile of the Group's interest-bearing financial instruments was as follows:
In thousands of
US dollars Average Average rate Carrying Carrying amount
rate 2011 amount 2011
2012 2012
--------------------------- ---------- --------------- ----------- ------------------
Zero rate instruments
Financial assets - - 3 234 16 906
Financial liabilities - - (15 420) (16 846)
----------- ------------------
(12 186) 60
----------- ------------------
Fixed rate instruments
Financial liabilities:
Secured - 36% - (19 313)
Financial liabilities:
Unsecured 10% 10% (1 334) (2 092)
----------- ------------------
(1 334) (21 405)
----------- ------------------
Variable rate instruments
Financial assets 1.00% 1.10% 14 062 2 259
Financial liabilities:
Secured 8.94% 9.11% (49) (78)
Financial liabilities:
Leases 11.25% 11.19% (9) (173)
14 004 2 008
----------- ------------------
The following table summarises the sensitivity of the financial instruments held at the reporting date, following a movement in variable interest rates, with all other variables held constant. The sensitivities are based on reasonably possible changes over a financial period, using the observed range of actual historical rates.
Impact on profit / (loss) Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
--------------------------------------------------- ----------- -----------
Judgements on reasonable possible movements
Increase of 100 basis points in interest
rate 14 2
Decrease of 100 basis points in interest
rate (14) (2)
--------------------------------------------------- ----------- -----------
The impact is calculated on the net financial instruments exposed to variable interest rates as at reporting date and does not take into account any repayments of long or short-term borrowing.
Credit risk
Credit risk is the risk that a contracting entity will not complete its obligation under a financial instrument that will result in a financial loss to the Group. The carrying amount of financial assets represents the maximum credit exposure. Receivable balances are monitored on an on-going basis with the result that the Group's exposure to bad debts is not significant. The Group's credit risk is limited to the carrying value of its financial assets.
At reporting date there is a significant concentration of credit risk represented in the cash and cash equivalents, restricted cash and trade accounts receivables balance. With respect to accounts receivables, this is due to the fact that sales of large value are made to a limited number of customers. The customers have complied with all contractual sales terms and have not at any stage defaulted on amounts due. The Group manages its credit risk by predominantly dealing with counterparties with a positive credit rating.
The maximum exposure to credit risk was as follows:
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
------------------------------------ ----------- ------------------
Financial assets
Non-current receivables 993 -
Trade and other receivables 3 324 16 906
Cash and cash equivalents 14 062 2 259
----------- ------------------
18 289 19 165
----------- ------------------
In order to maximise credit protection, cash and cash equivalents are placed with a variety of financial institutions. These funds are principally held with the following financial institutions: Investec, Standard Bank, Nedbank and African Alliance.
The credit ratings of these institutions can be summarised as follows:
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
------------------------------------ ----------- -----------
Continuing operations: -
AAA - 152
AA+ 41 -
AA 32 66
A+ 1 11
A 26 -
A- 139 150
BBB+ 4 097 1 029
BBB 9 464 341
Unrated 232 465
----------- -----------
14 032 2 214
----------- -----------
Discontinued operations:
Unrated - (240)
----------- -----------
- (240)
----------- -----------
Liquidity risk
The liquidity position of the Group is managed to ensure sufficient liquid funds are available to meet financial commitments in a timely and cost effective manner. The Group's Executive continually reviews the liquidity position including cash flow forecasts to determine the forecast liquidity position and maintain appropriate liquidity levels.
The concentration of cash balances on hand in geographical areas was as follows:
Balances at 31 South Lesotho UK Other Total
August 2012 Africa
In thousands of
US dollars
------------------ -------- -------- ------ ------ -------
Cash and cash
equivalents 3 040 1 280 9 448 294 14 062
-------- -------- ------ ------ -------
3 040 1 280 9 448 294 14 062
-------- -------- ------ ------ -------
Balances at 31 South Lesotho UK Other Total
August 2011 Africa
In thousands of
US dollars
------------------ -------- -------- --- ------ ------
Cash and cash
equivalents 1 119 629 - 511 2 259
-------- -------- --- ------ ------
1 119 629 - 511 2 259
-------- -------- --- ------ ------
The undiscounted contractual maturity analysis of payables at the reporting date was as follows:
Balances at 31 August 2012
Carrying Contractual Less 6 - 12 1 - 2 More Total
In thousands amount cash flow than months years than
of US dollars 6 months 2 years
----------------- --------- ------------ ---------- -------- ------- --------- ---------
Secured loans 49 (57) (9) (9) (17) (22) (57)
Finance lease
liabilities 9 (15) (15) - - - (15)
Unsecured
loans 1 334 (1 525) (286) (286) (572) (381) (1 525)
Trade and
other payables 15 420 (15 420) (15 420) - - - (15 420)
--------- ------------ ---------- -------- ------- --------- ---------
16 812 (17 017) (15 730) (295) (589) (403) (17 017)
--------- ------------ ---------- -------- ------- --------- ---------
Balances at 31 August 2011
Carrying Contractual Less 6 - 12 1 - 2 More Total
In thousands amount cash flow than months years than
of US dollars 6 months 2 years
----------------- --------- ------------ ---------- -------- ------- --------- ---------
Secured loans 19 391 (19 403) (19 324) (10) (20) (49) (19 403)
Finance lease
liabilities 173 (173) (142) (18) (13) - (173)
Unsecured
loans 2 092 (2 507) (342) (342) (684) (1 139) (2 507)
Trade and
other payables 16 846 (16 846) (16 846) - - - (16 846)
--------- ------------ ---------- -------- ------- --------- ---------
38 502 (38 929) (36 654) (370) (717) (1 188) (38 929)
--------- ------------ ---------- -------- ------- --------- ---------
Capital risk management
The group defines total capital as "equity" in the consolidated statement of financial position plus debt. The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust this capital structure, the Group may issue new shares, adjust the amount of dividends paid to shareholders, return capital to shareholders or sell assets to reduce debt.
The Group monitors capital on the basis of a gearing ratio. This ratio is calculated as total borrowings divided by total equity. Total borrowings comprise both current and non-current borrowings as shown in the consolidated statement of financial position. Total equity is calculated as shown in the consolidated statement of financial position. The Group's gearing ratio is 2% (2011: 52%).
There were no changes to the Group's approach to capital management during the year.
6. Segment reporting
The Group comprises the following operating segments:
Exploration and Development
Exploration, evaluation and development includes all projects up to the stage where a project enters commercial levels of production at which point it will form part of the Mining segment. During the prior year management had concluded that Storm Mountain Diamonds (Pty) Ltd ("SMD") should be reported separately in this segment, as it was closely monitored as a potential growth region and was expected to materially contribute to group revenue in the future.
Management declared commercial production for financial reporting purposes on 1 March 2012. Prior to that SMD was treated as a development asset and all costs associated with the operations were capitalised to property, plant and equipment.
Mining
Mining includes all diamond mining operations. The Group's diamond mining operations consist of alluvial diamond mining operations in the North West Province of South Africa and kimberlite diamond mining operations in Lesotho.
Trading & Beneficiation
Beneficiation includes the purchase of diamonds from the mining segment and external sources, and all revenue from the sale of these beneficiated and mined diamonds. The activities of this segment was scaled down and terminated during the current year.
Other
This includes the administrative function for the Group.
Although the exploration and evaluation as well as the other segment do not meet the quantitative thresholds required by IFRS 8 'Segment Reporting', management has concluded that these segments should be reported, as it is closely monitored by the executive committee.
The accounting policies of the reportable segments are the same as those described in Note 3.3, Accounting policies. The Group evaluates performance on the basis of segment profitability, which represents net operating (loss) / profit earned by each reportable segment before impairment of financial assets and non-financial assets, depreciation, amortisation, exchange differences, and impairment of assets held for sale. They are managed separately because, amongst other things, each reportable segment has substantially different risks.
The Group accounts for intersegment sales and transfers as if the sales or transfers were to third parties, i.e. at current market prices.
In thousands of US Continuing Operations
dollars
--------------------------------------------------------------------------
Mining: Mining: Exploration Beneficia-tion Other Total
North Lesotho and
West Evaluation
for the year ended
31 August 2012
------------------------------------------ --------- --------- ------------- --------------- --------- ---------
Segment revenue 19 351 24 908 - 23 892 - 68 151
Inter-segment revenue (10 108) (7 021) - - - (17 129)
--------- --------- ------------- --------------- --------- ---------
Revenue from external
customers 9 243 17 887 - 23 892 - 51 022
--------- --------- ------------- --------------- --------- ---------
Segment profitability 800 (10 794) (356) (1 031) 3 904 (7 477)
Items included within
the Group's measure
of segment profitability
* Depreciation and amortisation (975) (3 600) (4) (77) (343) (4 999)
* Impairment of non-financial assets - (10 387) - - - (10 387)
* Impairment of financial assets (355) - (218) (469) (10 262) (11 304)
* Exchange differences - 102 - (109) (1) (8)
* Finance cost (net) 22 (279) (3) 30 (4 086) (4 316)
--------- --------- ------------- --------------- --------- ---------
Segment contribution
to total loss for
the year from continuing
operations (508) (24 958) (581) (1 656) (10 788) (38 941)
Segment assets 10 301 64 257 706 1 508 12 684 89 456
--------- --------- ------------- --------------- --------- ---------
Items included within
the Group's measure
of segment assets
- Additions to non-current
assets 2 315 32 149 - - 41 34 505
--------- --------- ------------- --------------- --------- ---------
Segment liabilities 5 464 17 046 51 793 1 120 24 474
--------- --------- ------------- --------------- --------- ---------
Mining: Exploration Exploration Beneficia-tion Other Total
North and and
West Evaluation: Evaluation:
Lesotho Other
for the year ended
31 August 2011
------------------------------------------ ------------ ------------ ------------ --------------- --------- ---------
Segment revenue 23 741 6 135 - 85 336 - 115 212
Inter-segment Revenue (22 486) (6 135) - - - (28 261)
------------ ------------ ------------ --------------- --------- ---------
Revenue from external
customers 1 255 - - 85 336 - 86 591
------------ ------------ ------------ --------------- --------- ---------
Segment profitability (8 639) (10 256) (559) (969) (6 311) (26 734)
Items included within
the Group's measure
of segment profitability
* Depreciation and amortisation (5 121) (1 785) (303) (117) (325) (7 651)
* Impairment of non-financial assets (10 267) - - - - (10 267)
* Impairment of financial assets (236) - - (25) (1 066) (1 327)
* Exchange differences - (565) - (31) 1 648 1 052
* Finance cost (net) (13) (339) (12) (639) (6 540) (7 543)
------------ ------------ ------------ --------------- --------- ---------
Segment contribution
to total loss for
the year from continuing
operations (24 276) (12 945) (874) (1 781) (12 594) (52 470)
Segment assets 14 675 52 085 1 304 7 881 8 313 84 258
------------ ------------ ------------ --------------- --------- ---------
Items included within
the Group's measure
of segment assets
- Additions to non-current
assets 2 307 32 540 - 71 663 35 581
------------ ------------ ------------ --------------- --------- ---------
Segment liabilities 9 213 14 281 124 524 22 038 46 180
------------ ------------ ------------ --------------- --------- ---------
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
External revenue per geographical segment
South Africa 28 127 55 557
Other Africa 17 887 2 715
Israel 4 984 28 262
Other 24 57
----------- -----------
51 022 86 591
----------- -----------
7. Revenue
Sale of rough diamonds 46 016 71 760
Sale of polished diamonds 5 006 14 831
----------- -----------
51 022 86 591
----------- -----------
8. Cost of sales
Opening diamond inventory (6 938) (9 368)
Third party diamond purchases (23 478) (61 920)
Closing diamond inventory 9 310 7 588
Inventory write down to net realisable
value (Note 18) - (650)
Depreciation relating to operations (4 379) (4 935)
Electricity and water (781) (906)
Equipment rental (5 101) (12)
Fuel and lubricants (8 802) (6 915)
Motor vehicle expenses (36) (124)
Employee costs (4 919) (4 791)
Repairs and maintenance (4 812) (6 492)
Security (295) (840)
Other (461) (630)
----------- -----------
(50 692) (89 995)
----------- -----------
9. Other expenses
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
-------------------------------------------------------- ----------- -----------
Rental income 2 6
Other income 30 241
Profit/(Loss) on disposal/scrapping of
property, plant and equipment 110 (1 249)
Loss on disposal of EBT shares (196) -
----------- -----------
(54) (1 002)
----------- -----------
10. Exploration and evaluation expenses
Costs directly relating to exploration
and evaluation operations
excluding depreciation and acquired exploration
properties (307) (5 727)
Acquired exploration asset expense - (218)
Depreciation (4) (2 089)
----------- -----------
(311) (8 034)
----------- -----------
11. Other administrative and general expenses
Administration and office expenses (1 184) (1 889)
Auditors remuneration: (781) (651)
--------- ---------
External auditors: Audit fee (569) (584)
External auditors: Fees for other services (16) (30)
Other auditors: Fees for other services (196) (37)
--------- ---------
Doubtful debt allowance (Note 20) (1 200) (1 327)
Consulting fees (1 062) (3 832)
Depreciation (Note 16) (616) (627)
Legal fees (325) (830)
(Loss)/Gain on foreign exchange rate movements (8) 1 052
Employee costs (Note 12) (5 760) (10 212)
Rehabilitation costs (Note 29) (568) (1 549)
Short Term Insurance (258) (294)
Travel (939) (1 911)
Bad debt recovered - 71
Other (931) (369)
--------- ---------
(13 632) (22 368)
--------- ---------
12. Employee costs
Salaries and Wages (10 119) (14 032)
--------- ---------
Mining (5 962) (7 110)
Exploration - (596)
Trading (787) (1 646)
Corporate (3 370) (4 680)
--------- ---------
Share-based payments (47) (240)
Non-executive directors emoluments (483) (646)
Other expenses (30) (85)
--------- ---------
(10 679) (15 003)
---------
The above is classified as follows:
Cost of sales - relating to operations
(Note 8) (4 919) (4 791)
Other operating expenses (Note 11) (5 760) (10 212)
--------- ---------
(10 679) (15 003)
---------
Number of employees 324 593
13. Finance income and cost
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
------------------------------------------------------- ------------ ------------
Finance income
Interest income on short term bank deposits 183 137
------------ ------------
183 137
------------ ------------
Finance costs
Jarvirne: trading & beneficiation capital
investment(1) (192) (5 291)
Jarvirne: interest bearing loan facility(2) (2 843) (231)
Sputnick: interest bearing loan facility(3) (243) -
Dantov Strategic Consulting & RYY Future
Ltd(4) (900) (938)
PJ Malan Investment Trust(5) - (671)
Other (321) (549)
------------ ------------
(4 499) (7 680)
------------ ------------
Net finance costs (4 316) (7 543)
------------ ------------
1. The finance expense of US$191 536 (2011: US$5 290 969) relates
to finance in respect of the Jarvirne Ltd capital investment
in the Group's Trading & Beneficiation Division. Refer to note
26 for details on the outstanding liability at 31 August 2011.
Of the US$5 290 969 at 31 August 2011 an amount of US$2 187
945 related to an accrual for interest. Refer to note 26 for
details on the financing agreement entered with Jarvirne Ltd
subsequent to the 31 August 2011 year end.
2. The finance expense of US$2 843 100 relates to the financing
agreement entered with Jarvirne Ltd during the year ended 31
August 2012. Refer to note 26 for details on the financing agreement.
The prior period's finance expense of US$230 657 relates to
the Jarvirne Ltd interest bearing loan facility, which was settled
during the year ended 31 August 2011 (refer note 26).
3. The finance expense of US$243 333 (2011: US$nil) relates
to finance received from Sputnick Ltd during the year ended
31 August 2012. The loan of US$10 000 000 was settled during
the year ended 31 August 2012.
4. An amount of US$900 000 (2011: US$938 104) was paid to Dantov
Strategic Consulting and RYY Future Ltd during the year relating
to the assistance with the Jarvirne Ltd loan and financing.
5. An amount of US$671 470 was paid to PJ Malan Investment Trust
during the year ended 31 August 2011 as part of an agreement
whereby finance of US$2 581 829 was provided to the Group during
the 2010 financial year. As part of the agreement the Group
sold 50% of its ownership in pre-determined diamond inventory
to the PJ Malan Investment Trust. As part of the agreement the
finance charges were to be based on 50% of the net profit or
loss made by the Group on the said diamond inventory.
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
14. Income tax expense and deferred tax
Income tax recognised in profit and loss
Current tax
Current tax expense in respect of the current
year (17) (143)
(17) (143)
----------- -----------
Deferred tax (note 19)
Origination and reversal of temporary differences 1 148 4 132
Change in previously unrecognised differences 8 232 1 319
Benefit of previously unrecognised tax
losses recognised (9 380) (5 160)
----------- -----------
- 291
----------- -----------
Total income tax credit recognised (17) 148
----------- -----------
The Group's effective tax rate for the
year was (0.04)% (2011: 0.28%). The tax
rate used for the 2012 and 2011 reconciliations
below is the weighted average corporate
tax rate of 21% (2011: 21%) payable by
corporate entities on taxable profits under
applicable tax law. The income tax expense
for the year can be reconciled to the accounting
profit as follows:
Loss before income tax expense (38 474) (52 618)
Income tax benefit calculated at 21% (2011:
21%) (8 243) (11 039)
Tax effects of:
Expenses that are not deductible for tax
purposes 203 5 710
Other temporary differences not utilised 8 023 5 477
Income tax credit (17) 148
----------- -----------
15. Loss per share attributable to owners
of the parent
Basic loss per share
The calculation of basic loss per share
at 31 August 2012 was based on the loss
attributable to ordinary equity holders
of the Company of $30.18 million (2011:
$70.32 million) and a weighted average
number of ordinary shares outstanding during
the year ended 31 August 2012 of 392 312
168 (2011: 180 643 749), calculated as
follows:
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
----------------------------------------------------- ----------- -----------
Loss for the year attributable to ordinary
shareholders
Loss from continuing operations attributable
to owners of the Company 27 510 46 048
Loss from discontinued operations attributable
to owners of the Company 2 672 24 273
Weighted number of ordinary shares
Weighted number of ordinary shares at 31 392 312 180 643
August 168 749
----------- -----------
Loss per share
Basic loss per ordinary share: From continuing
operations (0.07) (0.25)
Basic loss per ordinary share: From discontinued
operations (0.01) (0.13)
Diluted loss per share
Due to the loss incurred, there is no dilutive
effect from share options.
16. Property, plant and
equipment
Mineral Property, Capital Land and Total
In thousands of US dollars properties plant work in building
and equipment progress
------------------------------ ------------ --------------- ---------- ---------- ---------
2012
Cost
At 1 September 2011 43 308 60 139 6 094 3 127 112 668
Additions 564 32 073 - 1 868 34 505
Disposals/Transfers - (9 098) (375) - (9 473)
Assets held for sale - - - - -
Exchange differences (6 777) (11 556) (974) (613) (19 920)
------------ --------------- ---------- ---------- ---------
At 31 August 2012 37 095 71 558 4 745 4 382 117 780
------------ --------------- ---------- ---------- ---------
Accumulated depreciation
At 1 September 2011 2 049 15 530 - 210 17 789
Depreciation charge 1 340 6 114 - 522 7 976
Accumulated depreciation
on disposals - (7 155) - - (7 155)
Assets held for sale - - - - -
Exchange differences (815) (3 068) - (63) (3 946)
------------ --------------- ---------- ---------- ---------
At 31 August 2012 2 574 11 421 - 669 14 664
------------ --------------- ---------- ---------- ---------
Accumulated Impairment
At 1 September 2011 27 369 10 267 - - 37 636
Impairment 10 387 - - - 10 387
Assets held for sale - - - - -
Exchange differences (4 467) (1 676) - - (6 143)
------------ --------------- ---------- ---------- ---------
At 31 August 2012 33 289 8 591 - - 41 880
------------ --------------- ---------- ---------- ---------
Net carrying value at
end of year 1 232 51 546 4 745 3 713 61 236
------------ --------------- ---------- ---------- ---------
2011
Cost
At 1 September 2010 42 127 57 213 1 622 1 388 102 350
Additions 266 32 557 4 510 1 866 39 199
Disposals - (4 344) - - (4 344)
Assets held for sale - (26 297) - (136) (26 433)
Exchange differences 915 1 010 (38) 9 1 876
------------ --------------- ---------- ---------- ---------
At 31 August 2011 43 308 60 139 6 094 3 127 112 668
------------ --------------- ---------- ---------- ---------
Accumulated depreciation
At 1 September 2010 1 646 16 249 - 43 17 938
Depreciation charge 244 11 524 - 169 11 937
Accumulated depreciation
on disposals - (1 140) - - (1 140)
Assets held for sale - (11 345) - - (11 345)
Exchange differences 159 242 - (2) 399
------------ --------------- ---------- ---------- ---------
At 31 August 2011 2 049 15 530 - 210 17 789
------------ --------------- ---------- ---------- ---------
Accumulated Impairment
At 1 September 2010 26 323 - - - 26 323
Impairment - 19 969 - - 19 969
Assets held for sale - (9 702) - - (9 702)
Exchange differences 1 046 - - - 1 046
------------ --------------- ---------- ---------- ---------
At 31 August 2011 27 369 10 267 - - 37 636
------------ --------------- ---------- ---------- ---------
Net carrying value at
end of year 13 890 34 342 6 094 2 917 57 243
------------ --------------- ---------- ---------- ---------
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
The carrying amounts of the respective
mines included in property, plant and equipment
at year end are:
Storm Mountain Diamonds 53 977 47 135
North West operations 6 260 7 502
----------- -----------
60 237 54 637
----------- -----------
Shares in Storm Mountain Diamonds (Pty) Ltd transferred to Kimberlite
Investments Lesotho Ltd
In terms of the mining lease agreement and the accompanying
memorandum of understanding, the citizens of Lesotho were entitled
to purchases 12.5% of the issued share capital in Storm Mountain
Diamonds. The purchase price payable equals the proportionate
share of the Group's loan account with Storm Mountain Diamonds.
The 12.5% shareholding was transferred to Kimberlite Investments
Lesotho Ltd during the prior year. The transaction resulted
in an increase in non-controlling interest with a corresponding
increase in non-current receivables. A share based-payment expense
was capitalised to property, plant and equipment representing
the difference between the fair value of the shares transferred
and the fair value of the consideration receivable.
Impairment disclosures
The above mining assets have been assessed for impairment by
comparing the carrying value against recoverable amount of each
operation (which represents individual cash generating units).
Storm Mountain Diamonds
The recoverable amount was determined on a value-in-use calculation.
The value-in-use is calculated based on the present value of
cash flow projections over the expected life of mine. The pre-tax,
nominal discount rate applied in the value-in-use is 10%. A
residual value was determined for the resources which will not
be mined during the expected life of mine. This value was determined
based on the value of a comparable listed company within the
Lesotho diamond mining industry.
The key assumptions used to determine the value in use are as
follows:
* Sales prices were based on the actual results for the
current sales made by SMD.
* Revenue is based on the tonnes mined and the
appropriate recovery grades which are in line with
the Competent Person's report and the current mine
plan.
* Costs per tonne are based on 3 year mine scheduling
done together with actual and budgeted forecasted
costs.
* The discount rate of 10% is pre-tax and reflects
specific risk relating to SMD.
* A residual value has been determined for the
resources which will not be mined during the expected
life of mine. This value was determined based on the
value of a comparable listed company within the
Lesotho diamond mining industry. The present value of
the residual value amounted to US$7.51 million.
Based on the value-in-use calculation, Storm Mountain Diamonds
was impaired as a result of:
(i) a reduction in the volumes forecasted for Phase 1 as a result
of changes in density measurements and percussion drilling results;
(ii) lower average grades; and
(iii) lower diamond prices
The value in use calculation is sensitive to changes in short,
medium and long term revenue, the pre-tax discount rate, cost
per tonne and exchange rates. The impact on value in use of
a change in these assumptions is shown below.
In thousands of US dollars Year ended Year ended
31 August 31 August
2012 2011
Impact on value in use -5% +5%
Diamond prices (8 557) 8 557
Exchange rates ($1:Maloti) (6 519) 6 519
Cost per tonne 5 919 (5 919)
Discount rates 516 (516)
North West operations
The recoverable amount was determined based
on a fair value less cost to sell basis.
The fair value less cost to sell value
is in line with the prior year and as a
result the North West assets were not further
impaired in 2012.
The assets were impaired in 2011 following
Management's review of the significant
loss making history and a decision at the
time to restructure or discontinue the
operations.
The Group recorded the following net impairment
losses:
Impairment loss: Property, plant & equipment
(North West) - 2 759
Impairment loss: Cash-generating unit (North
West) - 7 508
Impairment loss: Cash-generating unit (Lesotho) 10 387 -
------------ -----------
10 387 10 267
------------ -----------
Secured assets
Land with a carrying amount of US$135 178
(2011: US$146 086) was subject to a registered
debenture to secure loans. See note 26.
The Group leases production equipment under
a number of instalment sale agreements.
The leased equipment secures the lease
obligations. See note 26.
17. Non-current receivables
Kimberlite Investments Lesotho Limited(1) - -
Deposits and Guarantees(2) 993 -
Receivable related to sale of DRC operations(3) - -
------------ -----------
993 -
------------
1. An amount of US$6 257 695 arose during the 2011 financial
year as a result of the shares which were transferred to Kimberlite
Investments Lesotho Limited ("KIL"). As at 31 August 2012 management
had not finalised payment terms KIL in respect of its payment
of the proportionate share of the Storm Mountain Diamonds ("SMD")
loan account. As a result of the uncertainty on the timing and
recoverability of these cash flows, the amount, classified as
current receivables during the prior year, was re-classified
as non-current and provided for as doubtful during the year
ended 31 August 2012.
Furthermore, an additional amount of US$5 330 820 million is
recoverable in terms of the mining lease agreement, representing
KIL's proportionate share of the loan account between Namakwa
Diamonds Limited and SMD, has not been recognised as an asset
due to the uncertainty associated with respect to the recoverability
of the amount.
2. The balance relates to deposits and guarantees provided to
Telkom, Eskom, DMR and the like. The balance was reclassified
from current receivables to non-current receivables during the
current year.
3. The balance relates to the sales price owing by and the capital
funding provided to Hall Farm Avenue Limited. The gross value
of US$3 846 500 was provided for as doubtful during the year
ended 31 August 2012. The allowance was made to take into consideration
the risks and uncertainties related to the operational environment
in the DRC.
In thousands of US dollars Year ended Year ended
31 August 31 August
2012 2011
As of 31 August 2012 non-current receivables
with a gross value of US$10 104 195 (2011:
US$nil) were provided for as doubtful.
The ageing of other receivables at year
end is as follows:
Past due by more than 60 days 11 097 -
--------------- -------------
Gross value of non-current receivables 11 097 -
Doubtful debt allowance (10 104)
--------------- -------------
Net value of non-current receivables 993
---------------
Provision for doubtful debt (non-current
receivables)
Balance at the beginning of the year - -
Provisions utilised during the year - -
Provisions raised during the current year 10 104 -
--------------- -------------
Total provision for doubtful debt 10 104 -
---------------
18. Inventories
Rough diamonds 9 256 1 923
Polished diamonds 54 5 328
Consumables 621 599
--------------- -------------
9 931 7 850
--------------- -------------
At 31 August 2012 all rough diamonds were
carried at cost. During 2011, as a result
of a decline in the market prices of polished
diamonds, the total value of inventories
was reduced by US$650 435. Included in
polished diamonds are inventories to the
value of US$54 480 (2011: US$2 143 480)
carried at net realisable value. Included
in the prior year rough diamonds are inventories
to the value of US$968 952 which represent
jointly controlled assets.
19. Deferred tax assets and liabilities
Deferred tax assets and liabilities are
attributable to the following:
Year ended 31 August 2012:
Asset Liability Net
Property, plant and equipment - - -
Tax value of loss carry-forwards recognised - - -
--------- --------------- ------
Net tax assets/(liabilities) - - -
---------
Year ended 31 August 2011:
Asset Liability Net
Property, plant and equipment - - -
Tax value of loss carry-forwards recognised - - -
--------- --------------- ------
Net tax assets/(liabilities) - - -
---------
Unrecognised deferred tax assets
Deferred tax assets have not been recognized
in respect of the following items:
Deductible temporary differences 7 357 7 800
Tax losses 12 093 13 796
--------------- -------------
19 450 21 596
---------------
The deductible temporary differences do
not expire under current tax legislation
in the countries of origin, with the exception
of Israel. Israel has specific tax laws
in place that is applicable to companies
involved in the trade and beneficiation
of diamonds. Deferred tax assets have not
been recognised in respect of these items
because it is not probable that future
taxable profit will be available against
which the Group can utilise the benefits.
Movement in temporary differences during
the year
(in thousands of US dollars)
Year ended 31 August 2012:
Effect of
translation
Opening Recognised of foreign Closing
balance in income currencies balance
Property, plant and - - - -
equipment
Provisions - - - -
Tax value of loss carry-forward - - - -
utilised
--------- ----------- ------------- -----------
- - - -
--------- ----------- ------------- -----------
Year ended 31 August 2011:
Effect of
translation
Opening Recognised of foreign Closing
balance in income currencies balance
Property, plant and
equipment 359 (336) (23) -
Provisions - - - -
Tax value of loss carry-forward
utilised (76) 70 6 -
--------- ----------- ------------- -----------
283 (266) 17 -
--------- ----------- ------------- -----------
20. Trade and other receivables
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
Trade receivables 320 3 383
Other receivables 223 6 630
VAT receivable 2 077 4 634
Prepayments 614 2 259
------------- -----------
3 234 16 906
------------- -----------
The carrying amount of trade and other
receivables approximate their fair value.
Trade receivables:
Trade receivables with a gross value of
US$54 931 (2011: US$428 857) were provided
for as doubtful. No debtors were subject
to renegotiation during the current year
(2011: US$nil).
In thousands of US dollars Year ended Year ended
31 August 31 August
2012 2011
The ageing of trade debtors at year end
is as follows:
Not past due 272 1 676
Past due by 1 to 30 days 16 573
Past due by 31 to 60 days 2 181
Past due by more than 60 days 85 1 382
----------- -----------
Gross value of trade receivables 375 3 812
Doubtful debt allowance (55) (429)
----------- -----------
Net value of trade receivables 320 3 383
----------- -----------
Trade and receivables are provided for
based on estimated irrecoverable amounts,
determined by reference of past default
experience. Before accepting any new customers
an assessment of the potential customer's
quality is done which defines credit limits.
The credit quality of trade and other receivables
that are neither past due nor impaired
can be assessed by reference to historical
information about counter party default
rates.
Credit quality of counterparties that are
neither past due nor impaired:
New customers - 1 187
Existing customers with no defaults in
the past 272 489
Total 272 1 676
----------- -----------
Other receivables:
As of 31 August 2012 other receivables
with a gross value of US$1 566 014 (2011:
US$1 120 083) were provided for as doubtful.
The ageing of other receivables at year
end is as follows:
Past due by more than 60 days 1 789 7 750
----------- -----------
Gross value of trade receivables 1 789 7 750
Doubtful debt allowance (1 566) (1 120)
----------- -----------
Net value of trade receivables 223 6 630
----------- -----------
The other receivables include an amount
of US$6 257 695 which arose during the
prior year as a result of the shares which
were transferred to Kimberlite Investments
Lesotho Limited. During the year ended
31 August 2012 this amount was classified
as a non-current receivable.
Provision for doubtful debt
Balance at the beginning of the year (Trade
receivables) 429 427
Provisions utilised during the year (429) (427)
Provisions raised during the current year 55 429
----------- -----------
Total provision for doubtful debt (Trade
receivables) 55 429
----------- -----------
Balance at the beginning of the year (Other
receivables) 1 120 2 278
Provisions utilised during the year (123) (2 278)
Provisions raised during the current year 569 1 120
----------- -----------
Total provision for doubtful debt (Other
receivables) 1 566 1 120
----------- -----------
Balance at the beginning of the year (VAT) - -
Provisions utilised during the year - -
Provisions raised during the current year 333 -
----------- -----------
Total provision for doubtful debt (VAT) 333 -
----------- -----------
Total provision for doubtful debt (Current
receivables) 1 954 1 549
----------- -----------
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
---------------------------------------------------------- ----------- -----------
21. Cash and cash equivalents
Bank balances 14 032 2 214
Cash equivalents 30 45
----------- -----------
Cash and cash equivalents in the statement
of cash flows 14 062 2 259
----------- -----------
22. Assets classified as held for sale
and discontinued operations
22.1. Disposal of Democratic Republic of
the Congo (DRC) operations
The DRC operations formed part of the mining
segment. On 23 September 2011 the Company
announced that it had entered into sale
documentation with Hall Farm Avenue Limited
in respect of the sale of its entire portfolio
of mining assets in the DRC on a going
concern basis for US$6 250 000. The consideration
will be settled over a five year period,
with a minimum payment of US$1 250 000
required in each year during this period.
The Company also agreed to provide a working
capital facility of US$300 000 to Hall
Farm Avenue Limited as part of the sale
agreement.
The present value of the consideration
was arrived at by using a discounted cash
flow valuation method. The fair value was
estimated as the present value of all future
cash receipts discounted using the prevailing
market rate of interest for similar instruments
with a similar credit rating issued at
the same time.
Carrying amounts of the DRC assets 3 447 -
Assets classified as held for sale - 15 209
Liabilities classified as held for sale - (2 060)
----------- -----------
Net asset value prior to disposal/re-measurement 3 447 13 149
Impairment on re-measurement of the assets
held for sale (9 702)
Disposal of DRC assets (3 447) -
----------- -----------
- 3 447
----------- -----------
Assets of disposal group classified as
held for sale (DRC)
Property, plant and equipment - 5 385
Inventory - 121
----------- -----------
Total assets of disposal group classified
as held for sale - 5 506
----------- -----------
The assets of disposal groups held for
sale at 31 August 2011 were measured at
the lower of the carrying value or the
fair value less costs to sell. As the fair
value less costs to sell was lower than
the carrying value, the carrying value
of the assets of disposal groups held for
sale were adjusted to their fair value
less costs to sell.
Liabilities of disposal group classified
as held for sale (DRC)
Trade and other payables - 1 820
Bank overdraft - 240
----------- -----------
Total liabilities of disposal group classified
as held for sale - 2 060
----------- -----------
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
--------------------------------------------------------- ----------- -----------
Analysis of the result of discontinued
operations (DRC)
Revenue* - 11 295
Expenses* (400) (21 430)
----------- -----------
Gross loss (400) (10 135)
Other expenses - (4 328)
----------- -----------
Loss before taxation of discontinued operations (400) (14 463)
Taxation - -
----------- -----------
Loss after taxation of discontinued operations (400) (14 463)
Loss recognised on the re-measurement of
assets of the disposal group - (10 387)
Loss recognised on the sale of assets of
the disposal group (212) -
----------- -----------
Total loss for the year from discontinued
operations (612) (24 849)
----------- -----------
*Revenue comprises operating revenue. Expenses
comprise cost of sales, operating expenses
and other expenses.
22.2. Disposal of Diamond Polishing Operation
During the year the Group suspended all
its diamond polishing activities and disposed
of Elite Diamonds Cutting Works (Pty) Ltd
on 30 November 2011. This represented a
separate major line of business for the
Group. As a result of the disposal of the
operations, these operations have been
treated as discontinued operations.
Financial information for Elite Diamond
Cutting Works (Pty) Ltd after group eliminations
is presented below.
Analysis of the result of discontinued
operations (Elite)
Revenue* 271 6 736
Expenses* (260) (5 253)
----------- -----------
Gross profit 11 1 483
Other expenses (390) (917)
----------- -----------
(Loss)/Profit before taxation of discontinued
operations (379) 566
Taxation - 10
----------- -----------
(Loss)/Profit after taxation of discontinued
operations (379) 576
Loss recognised on the sale of assets of
the disposal group (1 681) -
----------- -----------
Foreign Currency Translation Reserve (1 251) -
Capital (430) -
----------- -----------
(Loss)/Profit for the year from discontinued
operations (2 060) 576
----------- -----------
*Revenue comprises operating revenue. Expenses
comprise cost of sales, operating and other
expenses.
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
---------------------------------------------------------- ----------- -----------
22.3. Net cash flows of discontinued operations
In the cash flow statement, the cash provided
by the operating and investing activities
of the discontinued operations has been
separated from that of the rest of the
Group and reported as a single line item.
Net cash used in operating activities (336) (5 980)
Net cash used in investing activities - (3 585)
----------- -----------
Total cash flows (336) (9 565)
----------- -----------
23. Issued capital
Share capital and share premium
Movements in fully paid ordinary shares:
In thousands of shares
At beginning of the year 217 122 130 162
Equity settled share-based payments - 310
Issued in settlement of debt 86 792 -
Issued for the repurchase of "A" shares 694 473
Issued for cash 794 629 86 177
----------- -----------
At the end of the year 1 099 237 217 122
----------- -----------
The authorised share capital comprised
2 000 000 000 (31 August 2011: 251 200
000) ordinary and deferred shares. All
classes of shares have a par value of US$0.000625
(31 August 2011: US$0.000625) per share.
All issued shares are fully paid. The Group
also granted share options (see note 27).
Ordinary share capital and share premium
Fully paid ordinary shares 687 136
Share premium 360 348 288 126
----------- -----------
361 035 288 262
----------- -----------
Ordinary share capital and share premium
At beginning of the year 288 262 236 042
Issued for services rendered (Equity settled
share-based payment) - 200
Issued in settlement of debt 22 347 353
Cost of issue in settlement of debt (3 580) -
Issued for the repurchase of "A" shares 94 353
Issued on Public Offering 55 726 54 663
Costs of Public Offering (1 814) (2 996)
----------- -----------
At the end of the year 361 035 288 262
----------- -----------
Equity Issuances during the year ended 31 August 2012
On 7 September 2011, the Company entered into a settlement agreement
with Jarvirne Limited, pursuant to which it agreed to capitalise
a trading debt of US$19 500 000 owed by the Group to Jarvirne
Limited. This agreement was subsequently amended on 2 November
2011 (together, the "Settlement Agreement"). Under the terms
of the Settlement Agreement the US$19 500 000 trading debt was
settled by the issue and allotment to Jarvirne Limited of an
aggregate amount of 77 791 667 new ordinary shares in the capital
of the Company, being:
(a) 11 000 000 ordinary shares at a deemed price of GBP 0.195
per share (on the basis of an exchange rate of GBP 1: US$ 1.62)
on 20 September 2011, and
(b) 66 791 667 ordinary shares at a deemed price of GBP 0.15
per share (on the basis of an exchange rate of GBP 1: US$ 1.60)
on 25 November 2011.
On 7 September 2011, the Company also entered into a US$40 000
000 two-year, secured term loan with Jarvirne Limited, pursuant
to which 9 000 000 ordinary shares were issued by the Company
to Jarvirne Limited on 20 September 2011, in lieu of interest
accruing on the loan in the first year. The deemed value of
these shares was GBP 0.195 per share.
On 1 December 2011, 694 368 ordinary shares in the capital of
the Company were allotted and issued fully paid to Namakwa Diamonds
Trustees Limited upon the conversion of 694 368 "A" Preference
Shares in the capital of Namakwa Diamonds Holdings (Pty) Ltd
at a deemed price of GBP 0.09 per share.
On 27 June 2012, 794 629 171 ordinary shares in the capital
of the Company were allotted and issued fully paid to subscribers
pursuant to a placing and open offer at GBP 0.045 per share.
US$53 911 457 (net of expenses) was raised from the offering,
with transaction costs of US$1 814 298 netted off against gross
proceeds.
Equity Issuances during the year ended 31 August 2011
On 5 November 2010, 437 472 ordinary shares in the capital of
the Company were allotted and issued fully paid to Satya Capital
Opportunities Limited upon the conversion of 437 472 "A" Preference
Shares in the capital of Namakwa Diamonds Holdings (Pty) Ltd
at a deemed price of GBP 0.45 per share.
On 24 December 2010, 86 177 025 ordinary shares in the capital
of the Company were allotted and issued fully paid to subscribers
pursuant to a placing and open offer at GBP 0.41 per share.
US$51 667 400 (net of expenses) was raised from the offering,
with transaction costs of US$2 995 635 netted off against gross
proceeds.
On 18 January 2011, 310 243 ordinary shares in the capital of
the Company were allotted and issued to Kronen Investments (Pty)
Ltd at a price of GBP 0.41 per share.
On 16 February 2011, 35 145 ordinary shares in the capital of
the Company were allotted and issued fully paid to Paraka Investments
Limited upon the conversion of 35 145 "A" Preference Shares
in the capital of Namakwa Diamonds Holdings (Pty) Ltd at a deemed
price of GBP 0.62 per share.
The holders of ordinary shares are entitled to receive dividends
as declared from time to time and are entitled to one vote per
share at meetings of the Company.
24. Other Reserves
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
Foreign currency translation reserve (14 612) (6 508)
Non-distributable reserve 6 572 6 572
Share based payment reserve 3 487 3 410
Treasury shares (1 100) (1 062)
----------- -----------
(5 653) 2 412
----------- -----------
24.1. Translation reserve
The translation reserve comprises all foreign
currency differences arising from the translation
of the financial statements of foreign
operations.
24.2. Dividends
No ordinary dividends were declared or
paid during the year (2011: US$nil)
24.3. Share based payment reserve
The reserve for own shares comprises of
the cost of the Company's shares issued
as part of the share-based payment. See
note 27.
24.4. Treasury shares
Pursuant to a zero-rated interest-bearing
loan from the Company, Namakwa Diamonds
Trustees Limited acquired 870 000 ordinary
shares in the Company, on behalf of the
Namakwa Diamonds Employee Benefit Trust,
via on-market purchases at an average price
of GBP 0.35 per ordinary share on 9 October
2009. The total amount paid to acquire
these shares was US$489 296. This amount
has been deducted from reserves within
shareholders' equity, as the shares are
held for accounting purposes as treasury
shares through the Namakwa Diamonds Employee
Benefit Trust. The company allocated all
of these shares to employees qualifying
for its share incentive scheme.
31 August 2012
Employees elected to sell 98 211 shares
during November 2011 at a price of GBP
0.06. During January 2012 an additional
57 362 Namakwa Diamonds Limited shares
at a cost of GBP 0.07 per share were acquired.
Employees elected to sell 57 362 shares
during January 2012 at a price of GBP 0.07.
During June 2012 an additional 3 483 620
Namakwa Diamonds Limited shares at a cost
of GBP 0.045 per share were acquired as
part of the rights issue. During July 2012
an additional 215 474 Namakwa Diamonds
Limited shares at a cost of GBP 0.0368
per share were acquired. Employees elected
to sell 215 474 shares during July 2012
at a price of GBP 0.0368.
31 August 2011
During December 2010 an additional 281
934 Namakwa Diamonds Limited shares at
a cost of GBP 0.41 per share were acquired
as part of the rights issue. Employees
elected to sell 127 697 shares in the allowed
trade window during February 2011 at a
price of GBP 0.5825. During the allowed
trade window in August 2011 employees elected
to sell 172 614 shares at a price of GBP
0.2800.
During May 2011 an additional 160 000 Namakwa
Diamonds Limited shares at a cost of GBP
0.53 per share were acquired. During June
2011 an additional 694 368 "A" shares at
a cost of US$ 0.76 per share were acquired.
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
---------------------------------------------------------- ----------- -----------
Capital Balance of Treasury Shares
Balance at the beginning of the period 1 062 265
Treasury Shares Purchased 263 968
Treasury Shares Sold (225) (170)
----------- -----------
Balance at the end of the period 1 100 1 062
----------- -----------
25. Non-controlling interests
"A" Shares
A subsidiary of the Company has also issued
'A' preference shares with economic rights
to dividends in line with the ordinary
shareholders. The holders of these shares
are therefore treated as non-controlling
shareholders in the group.
Number of "A" shares
Year ended Year ended
In thousands of shares 31 August 31 August
2012 2011
-------------------------------------------------------- ----------- -----------
At the beginning of the period 2 209 2 330
Share buy back (778) (473)
Shares issued - 352
----------- -----------
At the end of the period 1 431 2 209
----------- -----------
Capital balance of "A" shares
Fully paid "A" shares 1 2
Share premium (228) (118)
----------- -----------
(227) (116)
----------- -----------
Capital balance of "A" shares
At the beginning of the period (116) 13
Share buy back - 207
Shares issued (111) (336)
----------- -----------
At the end of the period (227) (116)
----------- -----------
Summary of "A" shares
Rights
Each "A" preference share will be issued
on the basis that the only rights attaching
to the shares shall be in respect of dividends
and on a winding up of the company, and
voting on matters concerning its class.
Dividends
The "A" preference shareholders shall be
entitled to an "A" ordinary dividend out
of the profits of Namakwa Diamond Holdings
(Pty) Ltd equal to the dividend declared
and payable by Namakwa Diamonds Limited,
converted to South African Rand at the
spot foreign exchange rate on the date
on which the relevant Namakwa ordinary
dividend is payable, provided that Namakwa
Diamond Holdings (Pty) Ltd has the resources
to pay such dividend.
Repurchase
Each "A" preference shareholder shall be
entitled to require the Company to repurchase
some or all of the "A" ordinary shares
at any time. The repurchase price is determined
by calculating the aggregate of the par
value of the "A" preference shares plus
any unpaid dividend plus the weighted average
traded price of Namakwa Diamonds Limited
ordinary shares for the 30-day period prior
to repurchase. The Company has the ability
to settle the repurchase through the issue
of Namakwa Diamonds Limited shares. These
shares are issued on a one-for-one basis
with each 'A' share.
Non-controlling interests in subsidiaries
Storm Mountain Diamonds (Pty) Ltd
The Government of Lesotho has been allocated
a 25% stake in the equity of Storm Mountain
Diamonds (Pty) Ltd. Furthermore 12.5% of
the issued share capital in Storm Mountain
Diamonds is held by Kimberlite Investments
Lesotho Limited (the public vehicle for
the Lesotho citizens).
Oersonskraal Mining (Pty) Ltd
A wholly owned subsidiary of the Group,
Idada Trading 167 (Pty) Ltd owns 74% of
Hlosi Mining (Pty) Ltd which on its part
owns 65% of Oersonskraal Mining (Pty) Ltd.
Hence the Group effectively only owns 48%
of Oersonskraal Mining (Pty) Ltd. The rest
of the effective shareholding in Oersonskraal
Mining (Pty) Ltd is non-controlling interest.
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
26. Borrowings
Non-current liabilities
Secured loan 36 65
Unsecured loan 875 1 594
Finance lease liabilities - 7
----------- -----------
911 1 666
-----------
Current liabilities
Secured loan 13 19 326
Unsecured loan 459 498
Current portion of finance lease liabilities 9 166
----------- -----------
481 19 990
----------- -----------
US$40 million Jarvirne Facility
On 7 September 2011, Jarvirne Limited ("Jarvirne") and Namakwa
entered into a two year, secured term facility, pursuant to
which Jarvirne agreed to lend US$40 million in five or more
tranches to Namakwa (the "Jarvirne Facility").
The term of the loan was two years and was secured by: (i) an
inter-company loan assignment; and (ii) a share charge over
the 62.5% equity interest of Namakwa in the issued share capital
of Storm Mountain Diamonds.
The purpose of the loan was for: (i) Namakwa's general corporate
purposes (30%); and (ii) to on-lend to Storm Mountain Diamonds
to finance the Kao Mine (70%).
In lieu of interest accruing on the loan in the first year,
9 000 000 Ordinary Shares were issued to Jarvirne on 20 September
2011, after the first drawdown of US$5.0 million under the Jarvirne
Facility. The value of these Ordinary Shares equates with cash
interest which would otherwise have been payable by Namakwa
in the first year of the loan (as if it had been fully reorganised).
No further amounts of interest were payable on drawn down amounts
of principal under the Jarvirne Facility prior to 1 September
2012.
Interest on the outstanding drawn amount of the loan in the
second year was to accrue at the rate of 24% per annum. Interest
on the loan in the second year would have been determined and
would have been payable monthly in arrears, with the first payment
due on 7 October 2012.
Total drawdowns under the Jarvirne Facility were US$35.2 million
and pursuant to the terms of the Sputnick Facility, the Company
agreed not to make any further drawdowns under the Jarvirne
Facility.
The loan was settled from the proceeds of the equity raise of
US$55.73 million on 29 June 2012.
SMD Share Charge pursuant to the US$40 million facility
Namakwa and Jarvirne obtained consent on 18 May 2012 from the
Minister of Natural Resources in Lesotho, authorising Namakwa
to create security over its equity interest from time to time
in the issued share capital of Storm Mountain Diamonds (in addition
to the existing inter-company loan assignment) by way of a share
charge in favour of Jarvirne, with such share charge agreement
subsequently entered into on 29 May 2012. As at the date of
this document, Namakwa holds a 62.5% interest in the issued
share capital of Storm Mountain Diamonds.
The share charge was executed by Namakwa on 29 May 2012 and,
if an Event of Default (as defined in the Jarvirne Facility)
were subsequently to occur and remain continuing under the Jarvirne
Facility, Jarvirne would be entitled to immediately enforce
its rights under this share charge. If Jarvirne enforced its
rights under the share charge, Namakwa would likely lose control
of Storm Mountain Diamonds as a result of the shares being sold
to such third party as Jarvirne nominates in order to repay
the monies owed by Namakwa to Jarvirne under the Jarvirne Facility.
US$10 million Sputnick Facility
On 10 April 2012, Sputnick Limited ("Sputnick") and Namakwa
entered into a short-term, unsecured bridge facility, pursuant
to which Sputnick had agreed to lend US$10 million in up to
six tranches to Namakwa (the "Sputnick Facility"). The loan
was for application towards Namakwa's general corporate purposes,
save that it may not be applied in repayment or prepayment of
another loan.
Namakwa was required to repay the loan on the earlier of 30
June 2012 and the date on which Namakwa received the proceeds
of an equity fund raising transaction of up to US$55 million.
All of the interest that accrued on the loan prior to that repayment
date was payable on that date at a rate of 15% per annum.
The loan was settled from the proceeds of the equity raise of
US$55.73 million on 29 June 2012.
Terms and debt repayment schedule
31 August 2012:
In thousands Denominated Nominal Year of Fair value Carrying
of US dollars currency interest maturity amount
rate
------------------------ ---------------- -------------- -------------- ----------- -----------
Variable
rate borrowings:
Secured
loan* ZAR SA Prime 2016 49 49
Finance
leases ZAR 13 - 16.5% 2012 - 2013 9 9
Fixed rate
borrowings:
Secured - - - -
loan** USD
Unsecured
loan ZAR 10% 2015 1 334 1 334
1 392 1 392
----------------------------------------- -------------- -------------- ----------- -----------
* The bank loan is secured by fixed property with a book value
of US$ 135,178.
** On 20 September 2011 the Group entered into an agreement
with Jarvirne Ltd in respect of a US$ 40 million secured facility
by way of a capitalisation issue. The facility was secured by
an assignment of the intercompany receivable owed by Storm Mountain
Diamonds Ltd. Furthermore Namakwa Diamonds Ltd had covenanted
to seek to execute an agreed form share charge over this equity
interest in Storm Mountain Diamonds, subject to all necessary
approvals being obtained in Lesotho. The facility had certain
covenants attached to it that had to be kept in place by the
Company. The loan was repaid on 29 June 2012 from the proceeds
of the Open Offer.
31 August 2011:
In thousands Denominated Nominal Year of Fair value Carrying
of US dollars currency interest maturity amount
rate
-------------------- ------------- ------------- ------------ --------------- --------------
Variable
rate borrowings:
Secured
loan* ZAR Prime 2016 78 78
Finance
leases ZAR 13 - 16.5% 2011 - 2013 173 173
Fixed rate
borrowings:
Secured
loan** USD 36% - 19 313 19 313
Unsecured
loan ZAR 10% 2015 2 092 2 092
21 656 21 656
---------------------------------- ------------- ------------ --------------- --------------
* The bank loan is secured by fixed property with a book value
of US$161 548.
** On 7 September 2011 the Group entered into an agreement with
Jarvirne Ltd in respect of the refinancing of the facility by
way of a capitalisation issue. The facility was secured at 31
August 2011 over inventory
The carrying value of the Group's interest-bearing liabilities,
which consist of variable interest rate liabilities, approximate
fair value.
In thousands of US dollars Year ended Year ended
31 August 31 August
2012 2011
Finance leases
The Group entered into finance lease liabilities
arrangements for property, plant and equipment.
These finance leases mature during the
2012 and 2013 calendar years. The nominal
interest rates vary between 13% and 16.5%.
Gross finance lease liabilities:
Less than one year 10 186
Between one and five years - 8
--------------- --------------
10 194
--------------- --------------
27. Share-based payments
The number and weighted average exercise prices of the share
options are as follows:
Weighted Weighted
average average
exercise Number exercise Number
price of options price of options
In thousands of options 2012 2012 2011 2011
----------------------------------- ------------- ------------ --------------- --------------
Outstanding balance
at the beginning of
the year 0.62 15 842 1.82 2 628
Forfeited 0.47 (14 558) 2.07 (899)
New grants - - 0.41 14 113
Outstanding balance
at the end of the year 2.28 1 284 0.62 15 842
------------ --------------
Exercisable at the
end of the year 1 230 1 298
------------ --------------
Share options
The terms and conditions of the options granted are listed below
and all options are to be settled by physical delivery of shares:
Original
number
of Contractual
Grant date / employees instruments Vesting life
entitled granted Share class conditions of options
----------------------------------- ------------- ------------ --------------- --------------
#1 Key Management 603 994 Ordinary Vested on 5 years
30 November 2007 Shares 30 November
2007
#2 Key Management 2 1 685 837 Ordinary A portion 5 years
shares vests in
3 equal
tranches
over 12/24/36
months and
the remainder
over 24/36/48
months
30 November 2007
#3 Management and staff 1 421 479 Ordinary Vests in 5 years
30 November 2007 to shares 3 equal
28 July 2008 tranches
over 24/36/48
months
#4 Key Management 14 112 918 Ordinary Vests in 5 years
31 August 2011 shares 3 equal
tranches
over 24/36/48
months
-------------
Total share options 17 824 228
-------------
The fair value of services received in return for share options
granted is based on the fair value of share options granted,
measured using a binomial lattice model, with the following
inputs:
Fair value of share options and assumptions #1 Key
management
personnel
Fair value per option granted (weighted
average) $1.77
hare price (weighted average) $2.09
Exercise price (weighted average) $2.09
Expected volatility 37.22%
Expected option life (weighted average) 4.66 years
Expected dividends 0%
Risk-free interest rate (based on national
government bonds) - USD 3.59%
Fair value of share options and assumptions #2 Key
management
personnel
Fair value per option granted (weighted
average) $1.99
Share price (weighted average) $1.82
Exercise price (weighted average) $1.82
Expected volatility 37.22%
Expected option life (weighted average) 3 years
Expected dividends 0%
Risk-free interest rate (based on national
government bonds) - USD 3.59%
Fair value of share options and assumptions #3 management
and staff
Fair value per option granted (weighted
average) $0.81
Share price (weighted average) $2.76
Exercise price (weighted average) $2.76
Expected volatility 37.22%
Expected option life (weighted average) 3 years
Expected dividends 0%
Risk-free interest rate (based on national
government bonds) - USD 3.59%
Fair value of share options and assumptions #4 Management
and staff
Fair value per option granted (weighted
average) $0.17
Share price (weighted average) $0.41
Exercise price (weighted average) $0.41
Expected volatility 52.26%
Expected option life (weighted average) 3 years
Expected dividends 0%
Risk-free interest rate (based on UK Libor
discount factor) 1.16%
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
On 31 August 2011 the Group granted key
management an option over 6.5% of the issued
capital at an exercise price of 25 pence
per share, pursuant to the Namakwa Global
Share Option Plan. The share options are
to vest in three equal portions on the
second, third and fourth anniversary of
31 August 2011, exercisable in equal proportions
after each anniversary for a period of
two years from the date of such vesting
and on a change of control event. During
the year ended 31 August 2012 the relevant
employees left the Group's employment and
as a result the benefits relating to the
options were forfeited.
The volatility of the company relating
to Grants 1 to 3 was not easily measurable
as the company had been listed for a short
period at the grant date. The volatility
of Trans Hex Group Limited was therefore
used as a surrogate in the share option
valuation of Namakwa Diamonds Limited according
to management's best estimates. The volatility
relating to Grant 4 was based on the company's
own share performance. Non-market vesting
conditions are not taken into account in
the grant date fair value measurement of
the services received. There is no market
conditions associated with the share option
grants.
Personnel expenses
Net expense relating to share options 47 59
Total expense recognised as employee costs 47 59
--------------- --------------
28. Operating leases
Non-cancellable operating lease rentals
are payable as follows:
Less than one year 166 220
Between one and five years 316 419
More than 5 years - -
--------------- --------------
482 639
--------------- --------------
The Group leases office space under operating
leases. The leases run for variable periods
and have fixed annual increases. During
the year ended 31 August 2012, US$184 430
(2011: US$270 294) was recognised as an
expense in profit or loss included in other
operating expenses.
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
--------------------------------------------------------- ----------- -----------
29. Provisions
Rehabilitation provision
Balance at beginning of the year 7 415 5 944
Change in estimate 1 075 1 234
Foreign exchange differences (1 210) 237
----------- -----------
Balance at end of the year 7 280 7 415
----------- -----------
The rehabilitation provision represents
the current cost of environmental liabilities
as year-end. An annual estimate of the
closure costs is necessary in order to
fulfil regulatory requirements as well
as meeting the specific closure objectives
outlined in the mines' Environmental Management
Programmes ("EMP").
Provision for rehabilitation of South African
mining sites (Alluvial)
The provision represents the Group's obligation
to rehabilitate mining sites acquired during
previous periods. In accordance with South
African law, land contamination by the
Group's mines operated by its subsidiaries
in South Africa must be restored to their
original condition at the end of the mines
useful life. All current mining operations'
sites are restored on an on-going basis
and no liability is recognised at the reporting
date. However, a liability exists for past
unrestored sites acquired during previous
years. The long-term nature of the liability
results in considerable uncertainty in
estimating the costs that will be incurred
and the timing of restoration. In particular,
the Group has assumed that the sites will
be restored using technology and materials
that are currently available.
The provision has been calculated using
a South African rand based discount rate
of 5.3% (2011: 6 to 6.5%) and an inflation
rate of 5.7% (2011: 5.7%), depending on
the expected inflation rate for specific
items.
In addition the following assumptions were
embedded in the calculation:
Rehabilitation cost per ton (In South African
rand) 7.36 6.50
Volumes to be filled (In cubic meters) 4 473 194 4 521 335
Discounting period (life of mines) 0 - 4 yrs 0 - 4 yrs
Provision for rehabilitation of Lesotho
mining site (Kimberlite)
The long-term nature of the liability results
in considerable uncertainty in estimating
the costs that will be incurred and the
timing of restoration. In particular, the
Group has assumed that the sites will be
restored using technology and materials
that are currently available.
The provision has been calculated using
a discount rate of 8.25% (2011: 8.26%)
and a variable inflation rate, depending
on the expected inflation rate for specific
items. The liability has been calculated
with the first development phase as a basis
over an expected period of 4 years (2011:
6 years).
The nature of the change in estimate relates
to the unwinding of discount due to the
passage of time and additional disturbances
to the mining site caused during the financial
year ending 31 August 2012. In accordance
with IFRS the unwinding of the discount
due to the passage of time is recognised
as an element of borrowing costs in arriving
at profit or loss for the year.
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
Provisions have been analysed as current
and non-current as follows:
Non-current 7 280 7 415
Current - -
----------- -----------
7 280 7 415
----------- -----------
Reconciliation of change in estimate
Unwinding of discount 197 230
Disturbances 878 1 004
----------- -----------
Change in estimate for the year 1 075 1 234
----------- -----------
30. Trade and other payables
Trade payables 11 408 12 131
Accrued expenses 2 604 4 024
Other 1 363 423
Share-based payment liability* 45 268
----------- -----------
15 420 16 846
----------- -----------
Share-based Payment Liability
At 31 August 2012 the company holds 4 819
007 (2011: 1 433 598) of its own shares
through the employee benefit trust. These
shares were acquired as part of a cash
settled employee benefit scheme and on
31 August 2012 905 447 (2011: 604 669)
of these shares has been allocated to employees.
All of the shares acquired vested immediately
and have no strike price. Therefore the
total obligation is based on the current
market value.
The market value of these shares at 31
August 2012 was GBP 0.03 (2011: GBP 0.27)
per share and the closing rate of exchange
to USD was 1.5822 (2011: 1.6349).
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
-------------------------------------------------------- ----------- -----------
(*) Reconciliation of share-based payment
liability
Opening balance 268 314
Grant of shares 81 181
Paid in Cash (28) (120)
Revaluation (276) (107)
----------- -----------
Closing Balance 45 268
----------- -----------
31. Current tax assets and liabilities
The current tax liability of US$381 954
(2011: US$262 987) represents the amount
of income taxes payable in respect of current
and prior periods that exceed payments
already made.
32. Contingencies and commitments
During the year ended 31 August 2012 the
Group entered into contracts to purchase
property, plant and equipment for US$2
111 056. (2011: US$10 022 034).
The Group is currently involved in litigation
as stated below:
John Ward and Louis Kriel vs Namakwa Diamonds
Limited
Messrs Ward and Kriel have sued Namakwa
Diamonds for US$600 000 and US$270 000
respectively arising from an alleged contract
for the payment of success fees related
to the historical acquisition of the DRC
assets. The Company's shares in Namakwa
Diamonds Holdings (Pty) Ltd and Namakwa
Diamond Management Services (Pty) Ltd were
attached using a writ of execution, secured
ex parte, which was served on the Company.
A provisional sentence summons has been
issued. Namakwa intends defending the action.
Management has provided for the amount
in the consolidated financial statements.
Basil Wheeler vs Namakwa Diamonds Management
Services (Pty) Ltd
Mr Wheeler, a former employee of the Group,
has instituted a claim for an amount of
US$0.82 million (R6.90 million) allegedly
arising from an employment agreement entered
into with a previous CEO of the Company.
The Directors believe the claim is without
merit and intend to defend the action.
No provision has been raised.
33. Related party disclosures
Identity of related parties
The Group has a related party relationship
with its subsidiaries, joint ventures,
directors, executive officers and significant
shareholders.
Related-party transactions
The following transactions were carried
out with related parties:
(a)Key management compensation:
Key management includes directors (executive
and non-executive) and members of the Executive
Committee. The compensation paid or payable
to key management for employee services
is shown below:
Year ended Year ended
In thousands of US dollars 31 August 31 August
2012 2011
---------------------------------------------------- ----------- -----------
Salaries and other short-term employee
benefits 2 853 3 555
Termination benefits 730 331
Share-based payments 34 404
----------- -----------
Total 3 617 4 290
----------- -----------
Directors of the Company and their immediate
relatives control none of the voting shares
of the Company (2011: 14.10 per cent).
Refer to note 27 for share options granted
to related parties.
(b)Loans from related parties
Jarvirne Limited(*)
At 1 September 19 313 15 306
Loans advanced during the year 35 200 17 125
Loan repayments made (57 548) (18 640)
Interest charged 3 035 5 522
----------- -----------
At 31 August - 19 313
----------- -----------
Jarvirne Limited ("Jarvirne") became a
controlling shareholder during the year
ended 31 August 2012 holding 63.5% of the
issued shares of the Company (2011: 13.4%).
During the current and prior financial
years Jarvirne provided funding facilities
to the Group.
US$40 million Jarvirne Facility
On 7 September 2011, Jarvirne Limited and
Namakwa entered into a two year, secured
term facility, pursuant to which Jarvirne
agreed to lend US$40 million in five or
more tranches to Namakwa (the "Jarvirne
Facility").
The term of the loan was two years and
is secured by: (i) an inter-company loan
assignment; and
(ii) a share charge over the 62.5% equity
interest of Namakwa in the issued share
capital of Storm Mountain Diamonds.
The purpose of the loan was for: (i) Namakwa's
general corporate purposes (30%); and (ii)
to on-lend to Storm Mountain Diamonds to
finance the Kao Mine (70%).
In lieu of interest accruing on the loan
in the first year, 9 000 000 Ordinary Shares
were issued to Jarvirne on 20 September
2011, after the first drawdown of US$5
million under the Jarvirne Facility. The
value of these Ordinary Shares equates
with cash interest which would otherwise
have been payable by Namakwa in the first
year of the loan (as if it had been fully
reorganised). No further amounts of interest
are payable on drawn down amounts of principal
under the Jarvirne Facility prior to 1
September 2012.
Interest on the outstanding drawn amount
of the loan in the second year was to accrue
at the rate of 24% per annum. Interest
on the loan in the second year would have
been determined and payable monthly in
arrears, with the first payment due on
7 October 2012.
Total drawdowns under the Jarvirne Facility
were US$35.2 million and pursuant to the
terms of the Sputnick Facility, the Company
agreed not to make any further drawdowns
under the Jarvirne Facility.
The loan was repaid from the proceeds of
the equity raise of $55.73 million on 29
June 2012.
Subsidiaries
As at the year end the following companies
were subsidiaries:
31 August 31 August
2012 2011
Group entities Activities Country Ownership Ownership
Significant subsidiaries of principal of Interest Interest
subsidiaries incorporation
----------------------------- -------------------- ---------------- ---------- ----------
Namakwa Diamonds Trustees
Ltd Trust company Bermuda 100 100
Namakwa Diamonds Botswana Trading &
(Pty) Ltd Beneficiation Botswana 100 100
Kasai Resources Mining
Ltd(5) Holding company BVI - 100
Compagnie De Development
Rural SPRL(5) Mining/Exploration DRC - 100
Dorod SPRL(1)(5) Mining/Exploration DRC - 100
Kobongo Development Co
SPRL(5) Mining/Exploration DRC - 100
Longathsimo Diamond Mining
Co SPRL(5) Mining/Exploration DRC - 80
Lubembe Diamond Mining
Co SPRL(5) Mining/Exploration DRC - 100
Lungudi Diamond Mining
Co SPRL(5) Mining/Exploration DRC - 100
Mbelenge Diamond Mining
Co SPRL(5) Mining/Exploration DRC - 100
Namakwa Diamonds Alluvials
DRC SA(5) Mining/Exploration DRC - 100
Namakwa Diamonds Mining
Company DRC SPRL(1)(5) Exploration DRC - 100
Namakwa Diamonds Israel Trading &
Limited Beneficiation Israel 100 100
Storm Mountain Diamonds
(Pty) Ltd Mining/Exploration Lesotho 62.5 62.5
Storm Mountain Diamonds
Holdings(7) Holding company Mauritius 100 100
Namakwa Properties Namibia
(Pty) Ltd Exploration Namibia 100 100
Tidal Diamonds (Pty) Ltd Exploration Namibia 100 100
Adima SA(5)(1) Holding Company Panama - 100
Amira Enterprises SA(7) Holding Company Panama - 100
Debon Logistics Limited
SA(7) Holding Company Panama - 100
Namakwa Diamonds Botswana
SA(7) Holding Company Panama - 100
Namakwa Diamonds Namibia
SA(7) Holding Company Panama - 100
Namakwa Diamonds DRC SA(5) Holding Company Panama - 100
Namakwa Diamonds West
Africa SA(7) Holding Company Panama - 100
Albetros Inland Diamond
Exploration (Pty) Ltd Mining/Exploration RSA 95 95
Amber Cascades (Pty) Ltd Mining/Exploration RSA 100 100
Batavia Trading 46 (Pty)
Ltd Mining/Exploration RSA 100 100
Big Sky Trading 461 (Pty)
Ltd Mining/Exploration RSA 100 100
Central High Trading 58
(Pty) Ltd Mining/Exploration RSA 100 100
Central Node (Pty) Ltd Mining/Exploration RSA 100 100
Counter Point Trading
403 (Pty) Ltd Mining/Exploration RSA 100 100
Dumela Diamonds (Pty)
Ltd Mining/Exploration RSA 100 100
Elite Diamond Cutting Trading &
Works (Pty) Ltd(6) Beneficiation RSA - 100
Hlosi Mining (Pty) Ltd(3) Mining/Exploration RSA 74 74
Idada Trading 167 (Pty)
Ltd Mining/Exploration RSA 100 100
Meondo Trading 72 (Pty)
Ltd Mining/Exploration RSA 100 100
Mirimar Trading 57 (Pty)
Ltd Mining/Exploration RSA 100 100
Monroe Mining (Pty) Ltd Mining/Exploration RSA 100 100
Morning Dew Properties
(Pty) Ltd Mining/Exploration RSA 100 100
Namakwa Diamond Holdings
(Pty) Ltd Holding Company RSA 100 100
Namakwa Diamonds Management
Services Mining/Exploration RSA 100 100
Namakwa Diamonds Mining
North West (Pty) Ltd Mining/Exploration RSA 100 100
Namakwa Diamonds Mining
South Africa (Pty) Ltd Mining/Exploration RSA 100 100
Namakwa Diamonds Trading Trading &
(Pty) Ltd(2) Beneficiation RSA 100 100
Northern Node (Pty) Ltd Mining/Exploration RSA 100 100
Oersonskraal Mining Company
(Pty) Ltd(4) Mining/Exploration RSA 48.1 48.1
Praxos (Pty) Ltd Mining/Exploration RSA 100 100
Pypklip Diamante (Pty)
Ltd Mining/Exploration RSA 100 100
River Queen Trading (Pty)
Ltd Mining/Exploration RSA 100 100
Scarlett Queen Properties
(Pty) Ltd Mining/Exploration RSA 100 100
South East Node (Pty)
Ltd Mining/Exploration RSA 100 100
South Node (Pty) Ltd Mining/Exploration RSA 100 100
South West Node (Pty)
Ltd Mining/Exploration RSA 100 100
Spring Green Trading 115
(Pty) Ltd Mining/Exploration RSA 100 100
Namakwa Diamonds Swaziland
(Pty) Ltd(7) Dormant Swaziland - 100
(1) In the subsidiaries incorporated in the DRC, 1% of the shareholding
is held by an employee on behalf of the Group to comply with
the regulatory environment of the country. These 1% shareholdings
are effectively held by the Group and are included in the consolidation
of the Group.
(2) 26% of the shareholding in each of these companies has been
allocated to the Company's BEE partners for the South African
Group, subject to certain conditions precedent, which have yet
to be satisfied.
(3) Namakwa Diamonds controls 100% of the economic value in
this company.
(4) Hlosi Mining (Pty) Ltd has a 65% shareholding in this company.
(5) These subsidiaries are all part of the non-current assets
or disposal groups classified as held for sale at 31 August
2011 and were all disposed of during the year ended 31 August
2012 as part of the sale of the DRC mining and exploration operations
to Hall Farm Avenue Limited.
(6) The subsidiary has been disposed of on 30 November 2011.
(7) These subsidiaries were all liquidated during the year ended
31 August 2012.
-ends-
This information is provided by RNS
The company news service from the London Stock Exchange
END
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