As per IAS 36, an entity shall assess at the end of each reporting period whether there is an indication that an asset may
be impaired. If such an indication exists, the entity shall estimate the recoverable amount of the asset.
On 31 December 2025, Merafe's share price closed at 109 cents per share (2024: 140 cents per share). Based on this
share price, the market capitalisation of R2.7 billion was R2.0 billion lower than the net asset value (NAV) of R4.7 billion.
As per IAS36.12(d), if the carrying amount of net assets of an entity is higher than its market capitalisation, this is an
impairment indicator. The impairment indicator was prevalent at both the interim period and at year end.
As the impairment indicator remained at year-end, management estimated the recoverable amount of the Group's assets
by calculating the value in use of the Group. This calculation was based on the future cash flows expected to be derived
from the Venture. No impairment adjustment was considered necessary at year-end. The following long-term average
assumptions were used in the calculation of the value-in-use (VIU) model (30 years) at the reporting date:
Assumptions
| |
Unit of measure |
2025 |
2024 |
| Average exchange rate – real |
ZAR/USD |
18.00 |
19.22 |
| Weighted average cost of capital – real (pre-tax) |
% |
10.10 |
16.50 |
| Ferrochrome prices – real |
$c/lb |
91 |
89 |
| Chrome ore prices (CIF) – real |
$/tonne |
246 |
206 |
| Platinum prices – real |
$/oz |
1 294 |
1 249 |
| Rhodium prices – real |
$/oz |
5 170 |
4 437 |
| Palladium prices – real |
$/oz |
1 033 |
1 109 |
The inputs into the VIU model include key macroeconomic assumptions as detailed above as well as operational
assumptions. These assumptions are necessary given the uncertainty that underlies future outcomes. In determining
the final VIU amount, Merafe considered scenarios involving possible changes in the macro assumptions while keeping
operational assumptions constant. The sensitivity ranges are indicated below. There was no CGU impairment recognised
for the current reporting period.
Key sensitivity analysis for impairment
Change in weighted average cost of capital
A decrease/increase of 5% in the weighted average cost of capital will increase the valuation by approximately R267 million
and decrease the valuation by approximately R255 million, respectively. This analysis assumes that all other variables
remain constant.
Change in exchange rate
A decrease (i.e. stronger ZAR)/increase of 5% in the exchange rates will decrease the valuation by approximately
R1.5 billion and increase the valuation by approximately R1.5 billion, respectively. This analysis assumes that all other
variables remain constant.
A decrease (i.e. stronger ZAR)/increase of 10% in the exchange rates will decrease the valuation by approximately
R3.0 billion and increase the valuation by approximately R3.0 billion, respectively. This analysis assumes that all other
variables remain constant.
Change in ferrochrome and chrome ore prices
A decrease/increase of 5% in the ferrochrome and chrome ore prices will decrease the valuation by approximately
R1.1 billion and increase the valuation by approximately R1.1 billion, respectively. This analysis assumes all other variables
remain constant. |
