Business of the company
Impala Platinum Holdings Limited (Implats/company/group) is principally in the business of producing and supplying platinum group metals (PGMs) to industrial economies. The companys holdings in various mining and exploration activities as at 30 June 2006 are described below:
Authorised and issued capital
The authorised share capital of the company as at 30 June 2006 was 100,000,000 ordinary shares of 20 cents each.
At a general meeting on 4 July 2006, the authorised share capital of the company was increased to:
During the year, 335,348 new ordinary shares were issued in terms of the Implats share option scheme. Following these allotments, the issued capital of the company was 67,180,543 ordinary shares of 20 cents each (2005: 66,845,195).
After the year end 2,054,072 new ordinary shares were issued to the Morokotso Trust at a price of R1,274.40 per share. These shares were issued in terms of an employee share ownership programme approved at a general meeting of shareholders on 4 July 2006. Following this issue the issued share capital currently stands at 69,234,615 ordinary shares of 20 cents each.
The company has an obligation, subject to certain conditions precedent being fulfilled to issue 5,501,000 A ordinary shares to the Royal Bafokeng Tholo Holding Company (Proprietary) Limited (RBTIH) in terms of a black economic empowerment (BEE) initiative as described under the heading of Post Balance Sheet Events later in this report.
The A shares will be unlisted, rank pari passu with the Implats ordinary shares in all respects save that the Implats A ordinary shares do not participate in any dividend distributions other than extraordinary dividend distributions outside the stated dividend policy of 1.8 to 2.2 times headline earnings.
It is proposed to subdivide the authorised and issued share capital of the company by a factor of 8 to improve liquidity and tradability of the companys shares. Should the share split be approved, it will result in the following authorised and issued share capital for the company:
In terms of a resolution passed at the last annual general meeting, 10% of the unissued shares are under the control of the directors until the forthcoming annual general meeting. Shareholders will be asked to extend the general authority to issue up to 10% of the companys issued share capital at the forthcoming annual general meeting.
The group holds 1,230,622 (1.83%) (2005: 1,230,622) of its own shares in terms of an approved share buy-back scheme. The shares are held as treasury shares by a subsidiary.
The general authority for the company or any of its subsidiaries to acquire up to 10% of the shares issued by the company expires at the forthcoming annual general meeting. Shareholders will be asked to consider a resolution renewing this general authority in terms of the Companies Act and the Listing Requirements of the JSE Limited (JSE). The proposed resolution is set out in the notice convening the annual general meeting.
Share option scheme
The directors are authorised to issue, allot or grant options to acquire up to a maximum of 2,177,000 ordinary shares in the unissued share capital of the company in terms of employee share option schemes. Details of participation in the share option scheme are set out in Note 13 of the financial statements.
In line with recent remuneration developments, the group will no longer offer employees any further options under the existing Share Incentive Scheme, but will pay relevant employees a fully taxable bonus based on the increase in the share price. Employees interests will still be aligned with those of shareholders but without any dilutionary effect.
The rules governing the quantum and timing of benefits to be delivered to employees under the new bonus scheme will be no different from those under the existing Share Incentive Scheme.
The trustees of the scheme are Ms NDB Orleyn and Messrs JM McMahon and JV Roberts.
Shareholding in the company
The issued capital of the company held by public and non-public entities as at 30 June 2006 is as follows:
The following shareholders beneficially hold more than 5% of the issued share capital:
Zimplats Holdings Limited
The company owns 86.9% of Zimplats Holdings Limited (Zimplats). Zimbabwe Platinum Mines Limited is a wholly owned subsidiary of Zimplats.
Zimplats has entered into an agreement with the Government of Zimbabwe to exchange 36% of its resource base, with a market value of US$153 million, for a combination of empowerment credits and cash or an equity share in a joint venture. The resources exchanged contain an estimated 51 million ounces of platinum or 99 million ounces of PGMs (3E + Au). The agreement also allowed for the extension of the existing special mining lease to include all ground required for long-term expansion. The land released has no impact on the production programme to produce 1 million ounces of platinum annually over the 50-year life-of-mine.
Mimosa Holdings (Pvt) Limited
The company holds a 50% shareholding in Mimosa Holdings (Pvt) Limited (Mimosa) with the balance held by Aquarius Platinum Limited.
Two Rivers (Pty) Limited
The company owns a 45% interest in Two Rivers (Pty) Limited (Two Rivers) with the balance held by African Rainbow Minerals Limited.
Aquarius Platinum Limited
The company holds an 8.6% interest in Aquarius Platinum Limited (Aquarius). Aquarius is listed on the Australian Stock Exchange, London Stock Exchange and the JSE.
Aquarius Platinum (SA) (Pty) Limited
The company holds a 20% interest in Aquarius Platinum (SA) (Pty) Limited.
The company owns a 77.5% interest in Marula Platinum.
During the year, Implats entered into BEE transactions to sell 7.5% equity stakes in Marula Platinum to each of the following companies:
The purchase price to each of the parties was R158.1 million of which R145 million was payable in cash on closure of the sale and the balance of R13.1 million is payable in instalments on commencement of phase II of the mine development. Implats will guarantee the vendor finance for Tubatse and Mmakau until 31 December 2014, and for the Trust until such time as the debt is repaid. Refer to Note 32 in the annual financial statements.
The company withdrew from the feasibility study on the Ambatovy nickel project in Madagascar as the project no longer met Implats internal hurdle rates. Mining capital and production costs had escalated significantly since the original feasibility study was concluded in February 2005. The cost to Implats of its participation in the project was R193 million, of which R127 million represented the investment and R66 million the cost of the feasibility study.
Results for the year
During the year the following accounting standards and interpretation of standards were adopted (IFRIC):
The adoption of these accounting policies had no material effect on the results of the group, apart from IFRIC 8, the impact of which is described in Note 1.2 to the financial statements.
An interim dividend (No 76) of 1,000 cents per share and a special dividend of 5,500 cents per share was declared on 16 February 2006. A final dividend (No 77) of 2,200 cents per share was declared on 25 August 2006, payable on 25 September 2006 to give a total dividend of 8,700 cents per share (2005: 2,300 cents per share). These dividends amounted to R5,809 million of the year (2005:R1,535 million).
Capital expenditure for the year amounted to R2,248 million (2005: R1,992 million).
The estimated R2.9 billion capital expenditure envisaged by Implats for the 2007 financial year will be funded from internal resources and, if appropriate, borrowings.
Post balance sheet events
Employee Share Ownership Programme
Following the general meeting of shareholders on 4 July 2006, 2,054,072 ordinary shares were issued at a price of R1,274.40 per share to the Morokotso Trust in terms of an Employees Share Ownership Programme (ESOP). The Morokotso Trust will facilitate the acquisition of approximately 3% of Implats ordinary shares for the benefit of a broad band of staff employed by Implats South African subsidiaries who are A, B and C grade employees on the Patterson grading system as at the date of approval, and for any new employees who may become so employed in the two years thereafter.
Royal Bafokeng transaction
The company has entered into a transaction with Royal Bafokeng Tholo Investment Holdings Company (Pty) Limited (RBTIH), a wholly owned subsidiary of Royal Bafokeng Holdings Limited in terms of which RBTIH will acquire a 49% holding in the IRS business for a cash consideration of R3.405 billion. The joint holders of the interests in the IRS business will contribute their interests into an unincorporated joint venture.
RBTIH will acquire 5,501,000 A ordinary shares in the company for a consideration of R1.1 million. These shares will be unlisted, rank pari passu with Implats ordinary shares in all respects save that the Implats A ordinary shares do not participate in any dividend distributions other than extraordinary dividend distributions outside the stated dividend policy of 1.8 to 2.2 times headline earnings and carry voting rights on categorised transactions. The company shall be entitled to repurchase the A ordinary shares for a cash consideration of R1.1 million when RBTIH converts its holding in the IRS business to ordinary Implats share as described below.
RBTIH is entitled (but not obliged) to convert, between the second anniversary and the tenth anniversary, its share in the IRS business into Implats ordinary shares. The price of an Implats ordinary share will be the then traded price less a 22.5% discount. If the number of conversion shares is less than the number of A ordinary shares, then RBTIH is entitled to subscribe for additional Implats shares (5,501,000 less the number of conversion shares) at a price of 75% of the then traded price. It is envisaged that the conversion will amount to approximately 7.44% of the issued share capital of Implats. Thereafter the A ordinary shares will be re-purchased (as described above) and cancelled in the authorised and issued share capital of Implats.
The transaction is subject to the fulfilment of a significant condition precedent that the transaction satisfy the ownership requirement of the Minerals and Petroleum Resources Development Act by 30 September 2006. This transaction will result in a BEE compensation charge which will be calculated in terms of accounting policy1.24 per the financial statements.
No other material events have occurred since the date of these financial statements and the date of approval thereof, the knowledge of which would affect the ability of the users of these statements to make proper evaluations and decisions.
The financial statements have been prepared using appropriate accounting policies, supported by reasonable and prudent judgements and estimates. The directors have a reasonable expectation that the group has adequate resources to continue as a going concern in the foreseeable future.
Associated and subsidiary companies
Information regarding the companys associated companies is given in Note 6 and regarding subsidiaries in Annexure A, both to the financial statements.
Details of the freehold and leasehold land and buildings of the various companies are contained in registers, which are available for inspection at the registered offices of those companies.
Composition of the board
The board comprises seven independent directors, one non-executive director and five executive directors.
During the year, Mr S Bessit was appointed as an additional executive director of the board. In terms of the articles of association, appointments by the directors of additional directors retain office until the next annual general meeting when they shall retire but be eligible for the re-election. Shareholders will be asked to consider the re-election of Mr S Bessit at the forthcoming annual general meeting.
The directors who retire at the next general meeting are Ms NDB Orleyn, Messrs KC Rumble; L van Vught and K Mokhele, being eligible, they offer themselves for re-election.
Interest of directors
The interests of directors in the shares of the company were as follows and did not individually exceed 1% of the issued share capital or voting control of the company.
The Remuneration Committee provides guidance regarding remuneration for executive directors and senior executives, among other duties. Further details on the composition and roles of this committee may be found under Corporate governance.
Directors remuneration in aggregate for the year under review was as follows:
Details of share options and share appreciation bonus options outstanding and exercised by the executive directors, secretary and senior management are as follows:
No share options were granted to non-executive directors. Other benefits accruing to executive directors are set out below.
There were no contracts of significance during or at the end of the financial year in which the directors of the company were materially interested. No material change in the aforegoing interests has taken place between 30 June 2006 and the date of this report.
The gains on shares sold received through the share option scheme are as follows:
In terms of the Articles of Association, the fees for services as a director are determined by the company in general meeting. The fees to 30 June 2006 were approved at the annual general meeting on 19 October 2005. Fees for the services of a director are currently R157,500 per annum per director with an amount of R735,000 for the Chairman, which includes attendance at all board committee meetings. Directors fees for serving on board committees are set out below.
In order to ensure that directors fees keep pace with inflation and in line with increases granted elsewhere in the organisation, it is proposed that directors fees are increased as follows:
These fees have been waived by the executive directors.
Executive directors benefits
A group-owned residential property is made available to Mr KC Rumble on a rent-free basis. Mr Rumble has an option to purchase the property at market value at any time while in the employ of the company.
In the event of corporate action giving rise to a loss of office, demotion or the blighting of any career (in the opinion of the Remuneration Committee) of an executive director, that executive director is entitled to a severance package of 24 months salary.
Special resolutions proposed
The following special resolutions will be proposed to the Implats general meeting on 12 October 2006:
Acquisition of companys shares
A renewal of the authority to acquire up to 10% of the companys shares subject to JSE rules and the Companies Act.
To sub divide the authorised and issued share capital from ordinary shares of 20 cents each by a factor of 8 to ordinary shares of 2.5 cents each.
Special resolutions passed
During the year the following special resolutions were passed by Implats and its subsidiaries:
Allowing the company and its subsidiaries to acquire shares in the company subject to the Companies Act 1973 and the Listing Requirements of the JSE Limited provided that the authority may not extend beyond 15 months from the date of the granting of the authority.
Amendment to the Articles of Association
An amendment to the companys Articles of Association to regulate the appointment of an independent non-executive Chairman.
Financial, administrative and technical advisers
In terms of service agreement, Impala Platinum Limited acts as financial, administrative and technical advisors to the Implats group during the year on a fee basis. Messrs S Bessit, DH Brown, LJ Paton and KC Rumble and Ms CE Markus had an interest in this contract to the extent that they are directors of Impala and of the company, but they do not beneficially own any shares in Impala.
Mr R Mahadevey acted as Secretary to Implats and Impala, and Impala acted as Secretaries to other subsidiaries in the Implats group. The business and postal addresses of the Secretaries are set out under Contact details and administration.
The business and postal addresses of the London Secretaries are set out under Contact details and administration.
Mr J van Deventer acted as public officer for the group for the year under review.
Impala Platinum Holdings Limited - Annual Report 2006