NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

These unaudited condensed consolidated interim results for the six months ended 30 June 2024 have been prepared under the supervision of Ditabe Chocho CA(SA) (Financial Director), in accordance with and containing the information required by IAS 34: Interim Financial Reporting, and for a South African company, the Financial Pronouncements as issued by the Financial Reporting Standards Council and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the requirements of the Companies Act of South Africa No. 71 of 2008 and the Johannesburg Stock Exchange (JSE) Limited Listings Requirements.

The unaudited condensed consolidated financial statements are presented in South African Rands, and all values are rounded to the nearest thousand (R’000), except where otherwise indicated.

1.1

Going concern

In determining the appropriate basis for the preparation of the interim results, the directors are required to consider whether the Group can continue to be in operational existence for the foreseeable future. The financial performance of the Group is dependent upon the wider economic environment in which the Group operates.

These interim results are prepared on a going concern basis. The Board has undertaken a rigorous assessment of whether the Group is a going concern in the light of current economic conditions taking into consideration available information about future risks and uncertainties. The projections for the Group have been prepared, covering its future performance, capital and liquidity including performing sensitivity analyses. The Group has the benefit of a healthy balance sheet and available unutilised debt facilities. The Group’s forecasts and projections of its current and expected profitability, taking account of reasonably possible changes in production and performance, show that the Group will be able to operate within the level of its cash resources for at least the next twelve months.

The Board is satisfied that the Group is sufficiently liquid and solvent to be able to support the operations for the next twelve months.

1.2

Accounting policies

The accounting policies applied in the preparation of these interim results are in terms of the International Financial Reporting Standards (“IFRS”) and are consistent with those applied in the previous consolidated annual financial statements. The Group adopted the amendments to IAS 1 for the first time in the current year. The impact of the amendment is not material.

1.3

Significant accounting judgements and key sources of estimation uncertainty

The preparation of the unaudited condensed 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 are reviewed on an ongoing basis. Underlying assumptions are also 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 unaudited condensed consolidated financial statements are as follows:

• Measurement of depreciation and impairment, useful lives and residual values of property, plant and equipment and intangible assets;
• Inputs used in the determination of the fair value of the share-based payment transactions, lease classification and depreciation of right-of-use assets;
• Assumptions used in the 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, restoration costs and discount rate applied;
• Fair value measurement of trade receivable subject to provisional pricing;
• Assumptions around joint control of the Venture;
• Impairment of non-financial assets — The Group determines whether any of the cash-generating units are impaired at each reporting date. This requires consideration of the current and future economic and trading environment and available valuation information, to ascertain if there are indications of impairment to those owned by the Group;
• Inventories — The Group determines whether there is obsolete inventory on an annual basis and adjustments to the net realisable value of inventory as required;
• Financial risk management — The Group assesses credit risk and the cash and cash equivalents and trade and other receivables. There has been no material increase in either liquidity risk and own credit risk based on this assessment; and
• Contingent liabilities — the Group exercises judgement in measuring and recognising the provisions and the exposure to contingent liabilities related to unresolved tax matters. Judgements, including those involving estimations, are necessary in assessing the likelihood that a pending tax dispute will be resolved, or a liability will arise and to quantify the possible range of the tax exposure.

The global environment, the risk of adverse impacts on our revenue, costs and capital expenditure by the Group, were all taken into account in determining the accounting estimates and judgements for the period.

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 indicated below.

2.1

Trade receivables of R182 million (December 2023: R67 million) are subject to provisional pricing terms which are accordingly accounted for at fair value through profit and loss. Level 2 hierarchy per IFRS 13. The fair value at the reporting date is based on the latest available ferrochrome prices and closing ZAR:USD exchange rate of R18.24.

The Venture has an asset swap arrangement for mineral rights, where a receivable of R37 million (December 2023: R37 million) arises through ore recovery and the sale from mining in the rights area. Level 3 hierarchy per IFRS 13.

The discounted cashflow valuation technique was used with the key inputs being the discount rate, ZAR:USD exchange rate and a forward-looking chrome price. The cash flows are based on the life-of-mine plan of 10 years. The fair value at the reporting date is based on chrome ore prices of USD197.88 per metric ton, an average ZAR:USD exchange rate of 17.80 and a discount rate of 8.5%. There were no transfers between fair value hierarchy levels during the period. There was also no change in the valuation technique compared to the prior corresponding period.