Merafe Resources

On 1 March 2018, the Board of directors (the Board) of Merafe Resources Limited (the Company) approved the audited consolidated annual financial statements of the Merafe Group (Group) and the Company for the year ended 31 December 2017.

These summarised consolidated financial statements have been prepared under the supervision of Kajal Bissessor CA (SA) (Financial Director), in accordance with the framework concepts, the measurement and recognition requirements of International Financial Reporting Standards (IFRS), the requirements of the Companies Act 71 of 2008, as amended, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the Financial Pronouncements as issued by Financial Reporting Standards Council and as a minimum contain the information required by IAS 34 Interim Financial Reporting.

The Board takes full responsibility for the preparation of the summarised consolidated financial statements, which are unaudited, and that the financial information has been correctly extracted from the underlying audited consolidated annual financial statements.

The accounting policies applied in the preparation of the audited consolidated annual financial statements from which the summarised consolidated financial statements were derived are in terms of IFRS and are consistent with those accounting policies applied in the preparation of the previous years audited consolidated annual financial statements.

The consolidated annual financial statements from which the summarised consolidated financial statements were derived have been audited by the Group's auditors, Deloitte & Touche. Their unqualified audit report and the audited consolidated annual financial statements are available on our website (www.meraferesources.co.za).

1.1 Accounting policies
The accounting policies applied in the preparation of these results are in terms of IFRS and are consistent with those applied in the previous consolidated annual financial statements.

No new standards, amendments to the published standards or interpretations which became effective for the year commencing on 1 January 2017 had an effect on the reported results or the Group accounting policies. The Group did not early adopt any new, revised or amended accounting standards or interpretations.

1.2 Use of estimate and judgements
The preparation of the summarised consolidated financial statements 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. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised.

In particular, information about significant areas of estimation, uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amount recognised in the summarised consolidated financial statements are as follows:

• Measurement of depreciation and impairment, useful lives and residual values of property, plant and equipment
• Inputs used in the determination of the fair value of the share-based payment transactions
• Lease classification between operating and finance lease and depreciation of finance lease assets
• Assumptions used in calculation of the life of the mines/smelters, estimation of the closure and restoration costs and inputs used in the calculation of the present value of the provision for closure and restoration costs
• Recognition of deferred tax asset and projection of future taxable income to recover the deferred tax asset
• Consolidation: control assessment
• Fair value measurement of embedded derivative

A number of the accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the methods as indicated below.

2.1 Embedded derivatives
The embedded derivative is included in trade and other receivables at fair value. The fair value of the embedded derivative is based on the latest available ferrochrome prices and closing foreign exchange rate. The embedded derivative at 31 December 2017 was R35.2m liability (2016: R116.7m asset) and is based on level 2 hierarchy per IFRS 13. The valuation is based on observable market inputs of prices and exchange rates.

2.2 Share-based payment transactions
The fair value of employee share options and share grants is measured using the Black-Scholes Merton model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on Government bonds).

5.1 Related party transactions and balances
During the current financial year, management performed a re-assessment of its Related Party relationships in accordance with IAS 24, Related Party Disclosures. The Glencore Plc group was identified as a related party taking into consideration the shareholding and related significant influence coupled with the substance of the relationship. Significant transactions and balances with all entities within the Glencore Plc group are therefore disclosed together with the comparative figures.

All related party transactions were concluded on an arms-length basis and relate to Merafe’s attributable 20.5% interest in the Venture. There are no outstanding commitments at year end.

The Group’s effective tax rate is 28.5% (2016: 28.4%) for the year ended 31 December 2017.

Other than the dividend declared on 1 March 2018, there have been no material events subsequent to 31 December 2017.

No contingent liabilities as at 31 December 2017.

There were no changes in Directors during the year ended 31 December 2017.

Notice is hereby given that on 1 March 2018 the Board declared a gross final ordinary dividend of R225 963 382 (9 cents per share) to holders of ordinary shares. The dividend will be paid out of reserves.

The ordinary dividend will be subject to a local dividend tax rate of 20%. The net ordinary dividend, to those shareholders who are not exempt from paying dividend tax, is therefore 7.2 cents per share. Merafe’s income tax number is 9550 008 602. The number of ordinary shares issued at the date of this announcement is 2 510 704 248.

The important dates pertaining to the dividend are as follows:

Shares may not be dematerialised/rematerialised between Tuesday, 20 March 2018 and Friday, 23 March 2018, both days inclusive. Where applicable, in terms of instructions received by the Company from certificated shareholders, the payment of the dividend will be made electronically to shareholders’ bank accounts on payment date. In the absence of specific mandates, cheques will be posted to shareholders. Shareholders who have dematerialised their shares will have their accounts with their CSDP or broker credited on Monday, 26 March 2018.