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Annual Report 2008
Annual Report 2008
CONTENTS
1 Highlights
2 Corporate profile
6 Chairman’s statement
8 Report from the CEO and Managing Director
16 Financial review
22 Safety, health, environment, quality and
community and IFM
26 Corporate governance
32 Contents – annual financial statements
129 Notice of the annual general meeting
133 Explanatory memorandum
139 Form of proxy
IBC Corporate information
HIGHLIGHTS FY2008
• First full-year production of 205,607 tonnes of ferrochrome
• Steady-state operations achieved by year-end
• Ferrochrome prices up 92% to US$1.92/lb over the period
• Revenue increased by 944% to R1.9 billion (£131 million)
• EBITDA of R727 million (£49 million)
• Strong balance sheet with R972 million (£61 million) in cash and no debt
• Board considering share buy-back
• Chromite resources increased from 73.5 to 126 million tonnes
• Maiden dividend of 1 pence per share payable on 3 November 2008
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IFM
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HH11 22000088 HH22 22000088 FFYY22000088 FFYY22000077 YY oonn YY
%% cchhaannggee
FeCr production 93,317 112,290 205,607 49,370 316
R’000 R’000 R’000 R’000
Total revenue 367,252 1,552,144 1,919,396 183,863 944
Cost of goods sold (349,595) (841,331) (1,190,926) (168,006) 609
EBITDA 14,520 712,207 726,727 (255,285) N/A
Net profit/(loss) after tax (23,858) 602,040 578,182 (344,269) N/A
Net operating cash flow (236,234) 487,491 251,257 (204,787) N/A
EPS (cents per share) (4.54) 118.59 114.05 (82.78) N/A
DPS – £0.01 £0.01 – N/A
CORPORATE PROFILE
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International Ferro Metals (IFM) is an integrated
ferrochrome producer listed on the London
Stock Exchange (LSE: IFL).
The Company’s mission is to develop and
operate sustainable, profitable and efficient
mining and mineral processing operations, with
the emphasis being on the production of mineral
products for the international steel industry. In
the process, the Company strives to utilise
ethically, environmentally and socially
responsible methods.
IFM produces ferrochrome from chromite ore
located in the Bushveld Igneous Complex,
one o f the wor ld ’s r i ches t minera l
repositories and largest ferrochrome
producing regions in the world. IFM’s Lesedi
chromite mines and integrated ferrochrome
processing and beneficiation operations are
situated at Buffelsfontein, 100km north-west
of Johannesburg, South Africa. The Company
is currently developing the nearby Skychrome
deposit in which it has an 80% interest
and which wi l l a l low the company to
increase production significantly.
IFM’s integrated ferrochrome mining and
production facilities use the latest technology
ensuring that its product is of international
quality and that IFM is a low-cost producer.
Ferrochrome is an essential ingredient in
stainless steel production. The demand for
ferrochrome is expected to remain strong owing
to the continued industrial growth and demand
for stainless steel, particularly in China. IFM’s
strategic relationship with its major shareholder,
Jiuquan Iron and steel (Group) Company
(JISCO), provides a valuable offtake agreement
for its product.
Having reached steady-state operations in
respect of its first phase of production in FY2008
with a cap of 300 million pounds of chrome per
annum, IFM has embarked on the second phase
of growth by starting its staged expansion
programme. In this second phase, the mining,
processing and smelting facilities will be
expanded and upgraded to produce 750 million
pounds of chrome units per annum.
IFM moved from the Alternative Investment
Market (AIM) to the Main Board of the London
Stock Exchange on 31 August 2007 and the
Company was included in the FTSE 250 on
21 December 2007, making it the first Australian
company to be admitted to the UK index.
IFM is well positioned to take advantage of
opportunities for expansion and consolidation in
the ferrochrome industry with plans to grow its
share of the global ferrochrome market from
around 3.5% to around 7% per annum.
IFM is well positioned to takeadvantage of opportunities for expansion
and consolidation in the ferrochromeindustry with plans to grow its share of
the global ferrochrome market fromaround 3.5% to around 7% per annum.
InternationalFerro Metals Limited
98.75% 100%100%
80%
20%
Purity MetalsHoldings (Pty) Ltd
Skychrome (Pty) Ltd
International Ferro Metals(SA) (Pty) Ltd
Global Eagle Minerals &Benefication (Pty) Ltd
1.25%
Bapo Ba Mogale Tribe
International FerroMetals SA
Holdings (Pty) Ltd
Group structure
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Klipvoor Dam
VaalkopDam
RooikopplesDam
HartebeespoortDam
Pilansberg AlkalineComplex
Pilansberg National Park
Merafe
Bafokeng
Stellite Project
Rustenburg
Wonderkop
TownlandsPurity Minerals
Waterval Section
Bayer
Kroondal Section
Waterkloof Section
Millsell
Sunny Haven
Hernic
Samancor
MooinooiBen Botha
Elandsdrift
HernicHernic
InternationalFerro Metals
Cro
codil
eR
ive
r
Sun CityLedig
Bapong
Rustenburg
Brits
MogwaseRuighoek
Horizon
Chromeden
Batlhako
Saulspoort
Heystekrand
Skychrome
FeCr smelter
Chromite mine
Cape Town
Johannesburg
Bushveld Complex
SouthAfrica
ha
Northern Limb
Western Limb
Eastern Limb
IFM’s operations
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CORPORATE PROFILE (CONTINUED)
The Company’s mission is todevelop and operatesustainable, profitable andefficient mining and mineralprocessing operations, withthe emphasis being on theproduction of mineral productsfor the international steelindustry.
Raw material handling,receiving and storage
Reductants
Ore
Crush and screen
FeCr Ignots
Blending
FeCrproduct
Lumpychip
Run-of-minemine
Slag
Metal recovery plant
CO2 gas
ElectricalCo-generation
Filtercake
Gas cleaning
Submerged arc furnaceclosed furnace
Multiple pre-heating
Slag storage Storage Despatch
Flux
Pelletising and sintering
Carbon
Binder
Waste
Ore beneficationplant
finesss
Ferrochrome process
Screening and 24-hour storage
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CHAIRMAN’S STATEMENT
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The outlook for next year ispositive. IFM expectsmaterially higher production atBuffelsfontein, the start ofmining operations atSkychrome and a continuationof strong market conditionsin ferrochrome.
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The Company has now completed its first full
year of production at its Buffelsfontein
ferrochrome facility, a project which it built
ahead of schedule and on budget. As is usual,
the ramp-up period, which took place in the
first half of the year, included some teething
problems and the Company’s technical
personnel had to surmount a number of well
documented challenges. In addition, during the
year, Eskom, South Africa’s electricity supplier,
encountered generating failures and announced
significant cutbacks in the provision of electricity
to industry.
Despite these difficulties, IFM achieved full
ramp-up, adjusted for the lower electricity
availability, and produced 205,607 tonnes of
ferrochrome in the financial year, including
ferrochrome contained in slag. This represents
77% of the Company’s rated production
capacity of 267,000 tonnes.
During the year the Company commissioned the
design of a co-generation facility which will
harness the offgases from its furnaces to
generate power. This is a cost-effective and
environmentally friendly facility which we
expect will provide sufficient power to make up
for the Eskom reduction currently being
experienced.
Construction of this project has started and it
is expected to deliver 12% more power by
July 2009.
Additional drilling increased chromite resources
from 73.5 million tonnes to 126 million tonnes.
This 72% increase provides the Company with
sufficient resources to feed an expanded five
furnace configuration for over 45 years.
The Company has brought production on stream
in a propitious period in the history of the
ferrochrome industry. Strong demand from the
stainless steel producers is being reflected in
robust ferrochrome prices. the combination of
significant production at low cost by world
standards, and high prices allowed the Company
to achieve its first profit after tax, of
R578 million (£39.5 million) with earnings per
share of R1.14 (7.79 pence). The Board has
declared a maiden dividend of 1 pence per share.
The outlook for next year is positive. IFM expects
materially higher production at Buffelsfontein,
the start of mining operations at Skychrome and
a continuation of strong market conditions in
ferrochrome.
As announced last year, the Company plans to
expand its production facility to 665,000 tonnes
per year by constructing an additional three
furnaces, together with ancillary plants. While
the Company has been assured by Eskom that it
is in a good position to obtain the necessary
power without extensive delay, based on an
earlier contract and payment for power lines and
a sub-station, uncertainty over electricity supply
has forced management to reassess its
expansion plans.
Until the electricity supply situation is clarified,
the Company’s expansion plans will consist of
the following. It will construct the beneficiation
plant which is expected to provide an additional
1.8 million tonnes of beneficiated ore from
December next year and will build a co-
generation plant. The co-generation plant will
generate electricity that should provide for an
additional 27,000 tonnes of ferrochrome
production per annum. The plan also consists of
completing a study into the feasibility of pre-
reducing the furnace feed, a process that utilises
pulverised coal and significantly reduces the
amount of electricity required to produce
ferrochrome.
In the meantime, the Company’s cash position
at year-end of R972 million, with no bank debt,
and its substantial generation of free cash, afford
it the financial strength to fund its expansion
strategy and seek acquisition opportunities at a
time when general access by companies to
external funding is constrained by events in the
global financial industry.
AJ Grey
Executive Chairman
Additional drilling increasedchromite resources from73.5 million tonnes to126 million tonnes
AJ Grey
Executive Chairman
REPORT FROM THE CEO AND MANAGING DIRECTOR
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Fuelled by stainless steelproduction, the demandfor ferrochrome continuesto grow. The chromecontent of ferrochromerepresents approximately18% of stainless steel, andthere is no substitute.
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IntroductionThe 2008 financial year was the first full year of
operation of our integrated facility which
coincided with record market demand – and
hence prices – for ferrochrome.
Our Company’s move from AIM to the Main
Board of the London Stock Exchange on
31 August 2007 was a significant event,
particularly as it was followed in December 2007
by our admission to the FTSE 250 making IFM
the first Australian company to be admitted to
this prestigious UK index. The move promptly
delivered benefits to the Company with the
opening up of our share register to a larger
section of the investment community.
Key achievements and highlights for the year
include:
• Production of ferrochrome of 205,607 tonnes,
with the achievement of steady-state
operations by year-end.The design capacity of
the current plant is 267,000 tonnes
per annum.
• Ferrochrome sales of 207,862 tonnes,
generating revenue of R1.9 billion.
• Significant improvements in the market
during the year, with ferrochrome prices rising
from US$1.00/lb in the first quarter to
US$1.92/lb in the fourth quarter. The current
price of $2.05/lb represents a 12-month
increase of 105%.
Market reviewFuelled by stainless steel production, the
demand for ferrochrome continues to grow. The
chrome content of ferrochrome represents
approximately 18% of stainless steel, and there
is no substitute. The ferrochrome industry
continues to benefit from the conversion trend
from austenitic to ferritic stainless steel
production. These factors caused the
ferrochrome price to increase from US$1.00/lb
in the first quarter of the reviewed year, to
US$1.92/lb in the fourth quarter. The quoted
price for the September 2008 quarter is
currently US$2.05/lb.
Interruptions in supply during the year and
slower than anticipated global production
growth, largely as a result of power constraints
in South Africa, have also affected the market,
with the ferrochrome supply expected to
remain tight. Given the continued rise
in demand and sustained supply constraints,
the outlook for prices remains robust. IFM’s
ability to increase its supply should ensure
the Company’s increasing share of the
global market.
Stephen Turner
Chief Executive Officer
David Kovarsky
Managing Director
Forecast European high-carbon charge chrome contact prices $/lb
07Q1 07Q2 07Q3 07Q4 08Q1 08Q2 08Q3 08Q4 09Q1 09Q2 09Q3 09Q4
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
historic
Source: CRU Ferrochrome Market Service August 2008
Global increase in FeCr supply (announced projects vs MBR * forecast)
5,000
4,000
3,000
2,000
1,000
0,0002008 2009 2010 2011 2012 2013 2014 2015
MBR forecast
* Metal Bulletin Research (MBR)
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REPORT FROM THE CEO AND MANAGING DIRECTOR(CONTINUED)
The three most prominent commentators on
the ferrochrome market, Heinz Pariser Research,
Metal Bulletin Research (MBR) and CRU
International have all forecast ferrochrome prices
increasing over each of the next two years.
IFM benefits from its relationships with JISCO (a
major shareholder of IFM and owned by the
Chinese Government) and CMC Cometals
(NYSE listed metals trader) with guaranteed
offtake agreements in place for over 60% of
both current production and the planned
expanded production.
Review of operationsDuring production ramp-up in the first half of
the year, the Company experienced technical
problems which were promptly overcome and
which were reported during the year. The
replacement of the pressure rings hampered
production in the first half of the year, while the
second half of the year was marred by the
disruptions caused as a result of the national
energy shortage in South Africa.
An area of focus for the year ahead will be the
optimisation of the new Skychrome resource
and its integration with the current plant
expansion.
CostsIFM’s costs remain in the lowest quartile among
international producers, due to the fact that all
our furnaces are closed and that the Lesedi
mine, from which the furnaces derive their feed,
is adjacent to the ferrochrome operations. The
major cost drivers have been, and will remain,
coke, mine labour and electricity. The
commissioning of the co-generation plant at
the beginning of the 2010 financial year is
expected to reduce fixed costs and electricity
costs per unit produced.
In the year under review cost inflation was
offset by increasing production volumes.
However, maintaining costs in an inflationary
environment has been, and will continue to be,
a challenge and a key focus for management.
Dealing with power issuesThe power crisis in early January 2008 had a
serious impact on all industry in South Africa. In
2007, IFM contracted for the installation of
electricity generators to capture waste gas from
its furnaces. The motivation at that time was
the environmental credits of the project and the
resulting carbon credits. This project will abate
approximately 136,000 tonnes of carbon
emissions per annum, generating an estimated
annual income stream from sale of Carbon
Emission Reductions (Carbon Credits) under
the Kyoto framework of f2.6 million at
current prices.
The electricity generated from the offgas
generation plant will help to resolve the longer-
term issue of Eskom’s industry-wide enforced
operation at 90% of contractual electricity
supply. From July 2009, the Company expects
that over 12% of its electricity requirements
will be met from this environmentally friendly,
low-cost source. The first of these generators is
expected to be delivered in December 2008.
While the availability of power has delayed
the full expansion programme, the Company
remains confident that in due course Eskom will
be in a position to honour its commitment to
provide its contracted 150% increase in
electricity supply.
In addition to the power generation initiatives,
we are also looking at introducing pre-reduction
technology, which has the potential to increase
productivity from electricity consumption by
about one-third.
Production H1 2008 H2 2008 FY 2008 FY 2007 % Change
2007-08
Ferrochrome
production (tonnes) 93,317 112,290 205,607 49,370 +316%
Other 1.2%
Sweden 1.6%
Brazil 2.4%
Zimbabwe 2.5%
Finland 3.2%
Russia 3.5%
India 10.4%
Kazakhstan 13.0%
China 16.5%
South Africa 45.8%
FeCr production bycountry 2007(in thousands of tonnes)
Electronics andappliance 18%
Chemical process 16%
Automotive 15%
Food & Beverage 13%
Energy 10%
Architecture 9%
Water 2%
Other 17%
Stainless steelconsumption bysector 2007(91% of Cr ore consumed instainless steel)
Offtake/productioncapacity
Current(two furnaces)
0
100
200
300
400
500
600
700
Expansion(five furnaces)
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Growth projectsIFM intends expanding from our current
configuration of one mine, one beneficiation
plant, one pelletising plant and two furnaces, to a
position of two mines, two beneficiation plants,
two pelletising plants and five furnaces. The
Company is aggressively reviewing new
technology to enhance the two-pelletising
plant/five-furnace model and reduce electricity
consumption because of Eskom constraints. The
intention to produce 665,000 tonnes of
ferrochrome per annum in the medium
term remains.
IFM intends to increase chromite production by
300% over the coming 18 months from a
combination of the expansion of the current
Lesedi mine operation and the current open-pit
mining operation at Buffelsfontein, together with
both new open-pit and underground mines at
Skychrome. The planned increase in chromite
extraction is from 720,000 tonnes per year to
3,120,000 tonnes per year.
In July 2008, IFM reported on the proposed staged
expansion of our integrated production facility.
The plans for the first stage are on track. This
initial stage entails expansion of IFM’s mining
operations and construction of the 1.8-million-
tonnes-per-year-capacity beneficiation plant. This
stage began in May 2008 with the start of the
second decline at the Lesedi mine. Construction
of the new beneficiation plant began in August
2008. Management believes that Stage 1 can be
developed within the current available electricity
supply constraints.
IFM intends to increasechromite product ion by300% over the coming18 months
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The expanded mine is producing and the new
beneficiation plant is scheduled to come into
production in December 2009. IFM intends to
sell surplus chromite arising from this phase of
the expansion to the export market.
ExplorationThe Company’s chromite resource has increased
over the year by 72% to 126 million tonnes.
This would be sufficient to feed an expanded
five-furnace (665,000 tonne per annum of
ferrochrome) facility for over 45 years.
The consolidated Mineral Resource and Mineral
Reserve Statement for IFM is presented on the
opposite page and is deemed by SRK Consulting
to be correct at 30 June 2008. The Mineral
Resources and Mineral Reserves presented are
those directly attributable to IFM, after
deduction of the minority interests in IFM’s
subsidiaries.
The terms and definitions used to present the
statement of Mineral Resources are those given
in the South African Code for the Reporting of
Mineral Resources and Mineral Reserves
(SAMREC Code) of 2007. The Mineral Resources
presented are inclusive of the declared Mineral
Reserves and classified according to the
SAMREC Code.
Management changesThe management team was strengthened in
July 2008 with the appointment of Hannes
Visser and Willie Bester as General Manager
Operations and Manager Operations, respectively.
Three more senior employees joined soon after,
and these appointments have already had a
positive impact and, due to a more stable
operating environment, record production
has been established. The members of the
new team were previously employed by Hernic
Ferrochrome where they were part of the team
responsible for its expansion from a greenfields
operation into the third largest South African
ferrochrome producer.
Safety, health, environmentand communityThe safety of its employees is of great
importance to IFM, and IFM achieved excellent
safety and health performance during the year.
IFM’s Lost Time Injury Rate of 1.51, based on
a 12-month rolling average, is well below the
REPORT FROM THE CEO AND MANAGING DIRECTOR(CONTINUED)
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MMiinneerraall RReesseerrvveess MMiinneerraall RReessoouurrcceess
((ggeeoollooggiiccaall lloosssseess aapppplliieedd))
Tonnage Cr2O3 Cr:Fe Tonnage Cr2O3 Cr:Fe
(kt) (%) ratio (kt) (%) ratioProved: Measured:
Lesedi Lesedi
MG3 4,950 34.93 1.25MG2T 2,173 37.26 1.36
MG2 (1) 6,933 28.05 1.36 MG2B 5,448 38.67 1.37MG1 3,950 35.61 1.49 MG1 6,182 40.50 1.49Skychrome Skychrome
MG2T 323 28.77 1.21MG2B_2 152 28.73 1.18MG2B 850 26.96 1.14MG1 1,022 27.18 1.20
Probable: Indicated:
Lesedi Lesedi
MG3 1,220 34.46 1.19MG2T 580 37.31 1.36
MG2 (1) 2,142 28.03 1.37 MG2B 1,467 38.55 1.38MG1 831 35.80 1.49 MG1 1,926 40.66 1.49Skychrome Skychrome
MG2T 15,082 26.73 1.16MG2B_2 3,227 30.04 1.22MG2B 29,410 29.87 1.21MG1 28,535 34.20 1.40
Proved and Probable Measured and Indicated
Reserves 13,856 30.66 1.41 Resources 102,546 32.49 1.29
Inferred:
Lesedi
MG3 1,882 34.38 1.18MG2T 827 37.23 1.36MG2B 2,004 38.51 1.38MG1 2,713 40.67 1.50Skychrome
MG2T 2,996 29.31 1.22MG2B_2 739 28.89 1.20MG2B 5,888 33.49 1.29MG1 6,435 36.14 1.44Inferred Resources 23,482 35.00 1.34
Total Reserves 13,856 30.66 1.41 Total Resources 126,028 32.96 1.30
(1) Tonnages and grades for the MG2 include the parting between the MG2B and MG2T reefs.
The information in this report that relates to exploration results is based on information compiled by SRK Consulting under the supervision of Mr HG Waldeck (Pr Eng), V Simposya (Pr Sci Nat),and M Wanless (Pr Sci Nat). All Competent Persons have sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration, and to the activity whichhas been undertaken, to qualify as a Competent Person as defined by the 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. SRKconsents to the report being issued in the form and context in which it appears.
Mineral Resource and Mineral Reserve Statement attributable to IFM as at 30 June 2008
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REPORT FROM THE CEO AND MANAGING DIRECTOR(CONTINUED)
IFM’s Lost TimeInjury Rate of1.51, based ona 12-month rollingaverage, is wellbelow the industryaverage of 5.02.
industry average of 5.02. Similarly, our Disabling
Injury Incidence Rate, again based on a 12-
month rolling average, of 0.19 is significantly
below the industry average of 0.38.
Regarding the environment, the Company’s
performance has also been exemplary. The two
major environmental issues facing the
ferrochrome industry are general particulate
emissions and hexavalent chrome generation.
On both of these IFM’s emissions are lower than
industry averages. IFM’s daily average
particulate matter emission is 0.034mg/m3
compared with a limit of 0.075mg/m3, and
because of the technology deployed, it has
been measured that no hexavalent chrome
is generated.
Black economicempowermentIFM embraces the objectives of transformation
and empowerment and, following the South
African Government’s promulgation of the
Mineral and Petroleum Resources Development
Act (MPRDA), is working diligently to convert its
mining rights as required.
Share buy-backThe Company is utilising part of its existing cash
resources to acquire its shares in the market.
As IFM is incorporated in Australia, under its
constitution and Division 2 of Part 2J.1 of
Australia’s Corporations Act 2001 (Cth) (the
Corporations Act), IFM has the general authority
to buy-back or purchase up to 10% of its issued
ordinary shares (currently up to 50,756,268
shares) in the ordinary course of trading on the
London Stock Exchange in a 12-month period,
without the need to obtain shareholder
approval.
The price paid by IFM for its shares is dependent
on the market price for such shares. However,
the maximum price may not exceed the higher
of: (a) 105% of the average of the middle
market quotations for IFM's shares in the five
business days immediately preceding any such
buy-back or purchase being made; and (b) that
stipulated by Article 5(a) of the Buy-back and
Stabilisation Regulation 2003.
As required by the Corporations Act, any shares
purchased by the Company must be cancelled
and will not be held as treasury stock.
ThanksThe Board thanks our shareholders and
employees for their support during the year.
ProspectsIFM is extremely well placed to benefit from the
continuing shortage in supply of ferrochrome
and to increase production. We are a
substantial, fully capitalised business, well
resourced in assets and skills.
We anticipate capitalising on further efficiency
improvements over the next six months at our
existing operations, and reaping the benefits of
our current expansion.
Stephen Turner
Chief Executive Officer
David Kovarsky
Managing Director
2 October 2008
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FINANCIAL REVIEW
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• Production increased to 205,607 tonnes of ferrochrome (including recovery
stockpile) from the previous year’s 49,370 tonnes.
• Ferrochrome sales increased to 207,862 tonnes from 36,572 tonnes.
• Revenue of ferrochrome per pound up 84% in rand terms and 81% in US
dollar terms.
• Sales rose by 944% to R1.9 billion.
• Operating margins for the year increased from 9% in FY2007 to 38% in
FY2008.
• Normalised headline earning per share increased from a loss of 82.78 cents
(5.81 pence) to a profit of 114.05 cents per share (7.79 pence).
• Cost of sales per chrome unit increased from US64c/lb in FY2007 to
US65c/lb, excluding head office overheads and share-based payments.
• Strong cash generated from operations of R251 million for the year ended
30 June 2008, of which R487 million represents cash generated over the second
six months of the year.
• The Company raised R1,196 million (£85.2million), before costs, in equity
capital and repaid all interest-bearing debt amounting to R833 million.
• The Group’s net cash position at year-end totalled R972 million with no
bank debt.
• The Company has declared a maiden dividend of 1 pence per share to
shareholders registered on 3 October 2008, payable on 3 November 2008.
Financial resultsIFM has achieved significant headline earnings
growth over the past year, increasing from a loss
of R344 million in 2007 (headline loss per share
of 82.78) to a profit of R578 million achieved
for the year ended 30 June 2008 (headline
earnings cents per share of 114.05). This is
largely attributable to the Company having
ramped up its production from 49,370 tonnes
to 205,607 tonnes.
The past year has been a pivotal one in which
the Company has stabilised its production
facilities, improved its operational performance
per quarter, and successfully transformed itself
from a construction phase to a steady-state
operational level with adequate equity funding
for further staged expansion. The financial
review reflects these activities.
The results presented below cover
International Ferro Metals Limited and the
entities it controlled at the end of, or during,
the year ended 30 June 2008. The functional
currency of each entity in the Group and the
presentation currency of the Group is South
African rand (R).
Group revenue increased by R1,736 million, or
944%, to R1,919 million (FY2007: R183 million)
during the period.The major contributors to this
growth were:
• the ramp-up of the Company’s production
from 49,370 tonnes to 205,607 tonnes;
• the increase in the average ferrochrome prices
from US78c/lb in FY2007 to US128c/lb in
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FY2008 driven by the growth in stainless steel
in China; and
• the R0.11 weaker rand/US dollar average
exchange rate over the financial year (R7.20/$
in FY2007 compared with R7.31/$ in FY2008).
Cost of sales per chrome unit increased from
US64c/lb in FY2007 to US65c/lb, excluding head
office overheads and share-based payments.
Significant price increases were experienced for
coke and electricity. In the year under review
cost inflation was offset by increasing
production volumes. However, maintaining
costs in an inflationary environment has been
and will continue to be a challenge and a key
focus for management.
Despite these increases, gross profit increased
from R15.9 million in FY2007 to R728 million
in FY2008.
Earnings before interest, taxes, depreciation
and amortisation (EBITDA) moved from a loss
of R255 million in FY2007, to a profit of
R727 million for the year under review.
The net increase in administration and other
expenses reflects the increased staff required
following ramp-up of operations and the
Company’s move to the Main Board of the LSE.
All options issued to service and finance
providers have been extinguished, resulting in a
gain of approximately R6 million. The Group
recognised a foreign exchange profit of
R109 million that arose primarily from its
foreign-denominated cash holdings.
Dion Cohen
Chief Financial Officer
Group income statement
H1 2008 H2 2008 FY2008 FY2007
R’000 R’000 R’000 R’000
Total Revenue 367,252 1,552,144 1,919,396 183,863
Cost of goods sold (349,595) (841,331) (1,190,926) (168,006)
Operating margin 5% 46% 38% 9%
EBITDA 14,520 712,207 726,727 (255,285)
PBT ( 23,858) 654,217 630,359 (344,269)
Taxation – ( 52,177) (52,177) –
Net profit/(loss)after tax (23,858) 602,040 578,182 (344,269)
Net operating cash flow (236,234) 487,491 251,257 (204,787)
EPS (cents per share) (4.54) – 114.05 ( 82.78)
Weighted average number of shares ('000) 500,527 – 520,734 413,265
DPS (pence) – 1 1 –
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Finance income of R44 million is a function of
the large cash balances held by the Group over
the financial year. Interest expense reduced
by R10 million due to early settlement of
project debt.
The Group recognised deferred tax for the first
time. This is attributable to profits of the Group
being offset against losses incurred in previous
financial years, and unredeemed capital
expenditure.The unredeemed capital expenditure
is estimated at R1.1 billion at 30 June 2008.
Headline earnings increased from a loss of
R344 million to a profit of R578 million which
translates into an increase in earnings per share
from a loss of 82.78 cents (5.81 pence) to a
profit of 114.05 cents per share (7.79 pence).
Cash generated from operations increased
by R456 million during the year of which
R487 million represents the cash generated over
the past six months.
The key features over the year are as follows:
• The Company raised R1,196 million
(£85.2 million) before costs in equity capital
for expansion ahead of the Company’s move
to the Main Board of the London Stock
Exchange. The Company received R38 million
from the exercise of share options.
• The Company financed all increases in working
capital through cash generated from
its operations.
• Amortisation and depreciation increased by
R21 million, from R33 million in FY2007 to
R54 million in FY2008.
• In September 2007, the Company optimised
its cash management by repaying its
outstanding debt of R833 million. The Group
may raise additional debt financing as required
ahead of its planned expansion programme.
The equity capital raised, combined with the
strong cash generated from operations of
R251 million, resulted in the Group attaining a
net cash position of R972 million at year-end
and no bank debt.
IFM has continued its programme of organic
growth projects and expects to see the benefits
flowing through in its attributable earnings and
cash flow. Although substantial capital will be
required to finance the current expansion plans,
the Board believes that IFM’s existing cash
position, together with cash generated from
ongoing operations and indicative debt
proposals, will prove to be sufficient to fund
these plans.
Balance sheetIFM has a strong balance sheet with R2,762million in shareholders’ equity.
The balance sheet key features and movementsfrom FY2007 to FY2008 are explainedas follows:• The increase in property, plant and equipment
is attributable to capital work in progress formine development, plant and machinery andcapital expenditure relating to the co-generation plant.
• Net current assets, excluding cash and cashequivalents and derivatives increased byR251 million largely owing to the building upof the working capital pipeline of inventoriesand receivables.
FINANCIAL REVIEW (CONTINUED)
Chrome ore 21.6c
Reductants 20.2c
Fluxes 0.5c
Electricity 8.8c
Electrode cost 0.8c
Operating costs 5.0c
Fixed costs 7.7c
Production cost 2008(US65c/lb)
Lesedi MG2 shaft 65
Skycrome open pit 35
Skychrome decline 1&2 330
Beneficiation plant No.2 210
Pelletiser No.2 950
Furnaces 2,300
Infrastructure and other 580
Total 4,470
Expansion capexRmillion
Cash flow
H1 2008 H2 2008 FY 2008 FY 2007
R’000 R’000 R’000 R’000
Net cash flows from operating activities (236,234) 487,491 251,257 (204,787)
Net cash flows from investing activities (3,204) (36,497) (39,701) (536,674)
Net cash flows from financing activities 526,479 80,735 607,214 710,378
Net increase/(decrease) in cash held 287,041 531,729 818,770 (31,083)
Cash at the beginning of the financial year 43,929 341,721 43,929 85,348
Effects of exchange rate changes on cash 10,751 98,740 109,491 (10,335)
Cash and cash equivalents at the end of the year 341,721 972,190 972,190 43,929
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Balance sheet summary
H1 2008 FY2008 FY2007
R’000 R’000 R’000
Cash and cash equivalents 341,721 972,190 43,929
Total other current assets 350,963 586,053 319,854
Total current assets 692,684 1,558,243 363,783
Property, plant & equipment 1,632,301 1,672,281 1,632,388
Other non-current assets 126,427 25,625 124,371
Total non-current assets 1,758,728 1,697,906 1,756,759
Total Assets 2,451,412 3,256,149 2,120,542
Trade and other payables 105,304 213,149 134,406
Other current liabilities 59,440 100,852 44,112
Total current liabilities 164,744 314,001 178,518
Interest-bearing loans and borrowings 115,622 92,716 898,631
Deferred tax liability _ 50,602 _
Total other non-current liabilities 69,070 27,184 76,403
Total non-current liabilities 184,692 170,502 975,034
Total liabilities 349,436 484,503 1,153,552
Total shareholders’ equity 2,101,976 2,771,646 966,990
• Interest-bearing borrowings of R833 million
have been repaid.
• All options issued to service and finance
providers have been exercised or cancelled,
extinguishing the derivative liability at
year-end.
Capital expenditure planningOn 19 May 2008, IFM announced that its
estimated capital expenditure for its three
furnace expansion is R4,150 million. IFM holds
f59 million (R738 million) at 30 June 2008,
which it believes is sufficient to hedge against
any foreign exchange movement in foreign
denominated capital expenditure. The Company
has been working with various banks with
regard its debt funding requirements and is
confident it will secure the requisite debt
component if required for the expansion.
Accounting policiesIFM presents its financial information fully
in compliance with International Financial
Reporting Standards (IFRS). The financial
Ferrochrome production costs per country, delivered, c/lb, 2007 and 2008(H1)
150
75
0Kazakhstan South Africa Europe Russia India China 2008(H1)
2007 2008(H1)
South African costs willincrease by a minimum
of 30% this year
Chinese costs couldincrease by more
than 50% this year
Average contract price2008(H1)=$156.5/lb
chrome ore reductants power other
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FINANCIAL REVIEW (CONTINUED)
Cash generated fromoperations increasedby R456 million duringthe year of whichR487 million representsthe cash generated overthe past six months.
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information for the year ended 30 June 2008
has been prepared adopting the same
accounting policies used in the most recent
annual financial statements, except for the
change in accounting policy below and the
adoption of various new and revised IFRS
standards.
Basis of preparation andchanges in account policiesThe Financial Report complies with Australian
Accounting Standards and IFRS as issued by the
International Accounting Standards Board (IASB).
The Financial Report is a general-purpose financial
report, which has been prepared in accordance
with the requirements of the Corporations Act
2001 and Australian Accounting Standards. The
Financial Report has also been prepared on a
historical cost basis, except for derivative financial
instruments which have been measured at
fair value.
There has been no change to accounting
policies over the reporting period.
DividendsThe Company’s intention to pay dividends is
subject to the financial capacity of the Company
and any future debt covenants of the banking
parties for the plant expansion. The Company´s
dividend policy takes into account the
profitability of the business and underlying
earnings growth, its capital requirements for
ongoing operations and expansion, as well as its
cash flows, while maintaining an appropriate
level of dividend cover.
The Board of Directors has resolved to declare
a maiden dividend of 1 pence per share, which
will be paid in sterling to shareholders on the
register as at 3 October 2008. The amount to
be paid is estimated to be around R73 million
(£5 million), and was covered by approximately
eight times FY2008 headline earnings. The
ex dividend date will be 1 October 2008
and estimated payment date will be
3 November 2008.
Dion Cohen
Chief Financial Officer
2 October 2008
Average exchange rate
8.5
8
7.5
7
6.5
6July Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun
6.93
7.197.03
6.856.73
6.826.99
7.59
7.92
7.747.60
7.91
SAFETY, HEALTH, ENVIRONMENT,QUALITY AND COMMUNITY AND IFM
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The group’s policy isunderpinned by thebelief that an effectivehealth and safetymanagement systemconstitutes an integralpart of the managementof the company
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IFM has adopted an integrated approach to the
management of safety, health, environment and
quality (SHEQ). As a new facility, operating on
an existing site, the Company has been able to
adopt new technology and practices in its
endeavours to ensure not only legal compliance,
as a minimum, but also leading practice in a
number of areas. In addition to SHEQ matters,
overseen by a dedicated team, IFM places an
emphasis on involvement with and care for
the community from which its employees
are drawn.
Key policies established by the company
include:
• Quality policy: The group’s philosophy is
expressed through the selection of the highest
quality of raw materials, the employment of
sophisticated production technology and the
application of advanced procedures in the
services offered.
• Health and safety policy: The group’s policy
is underpinned by the belief that an effective
health and safety management system
constitutes an integral part of the management
of the company, ensuring the company’s
employees and contractor employees of
quality of work life.
• Environmental policy: IFM recognises that
the long-term sustainability of its business
is dependent on operating within the
carrying capacity of the environment and
that the company must maintain a balance
between economic development, the
requirements of its business, the community
and environmental conservation.
Safety and healthSafety performance for the year under review
has been excellent, with all key safety
parameters – both at the mining and smelting
operations – outperforming the Company’s
peers. There were no fatal accidents and only
three reportable injuries reported, all by
contractor employees. To date, the Group has
recorded in excess of 2.6 million fatality-free
man-hours, and has recorded a Disabling Injury
Incidence Rate of 0.19 per million man-hours.
Key to the Company’s success has been the
integration of the Company’s contractors into
its management systems. Compliance with
standards is required at all levels of the
organisation. IFM has introduced the
OHSAS18001 system as the basis for safety
management and auditing . Extensive
communication formed part of the
implementation process. The IFM integrated
SHEQ policy was also communicated to
employees during the year.
The introduction of a safety mascot, Inyati
(meaning buffalo, the Company’s logo),
together with five chrome rules, was the basis of
a successful campaign during the year. These
chrome rules were effectively communicated to
all employees and ensure that employees are
aware that safety is a priority. A part of this
campaign is the empowerment of individuals,
and indeed the encouragement of individuals,
to take responsibility for their own safety
and to stop unsafe work and practices. IFM
regularly recognises teams and individuals for
good safety performance.
IFM was subject to the industry-wide
Presidential audits that were undertaken during
the year under review and received good
feedback from the Department of Minerals
and Energy (DME). The site was subsequently
chosen for a DME visit.
In respect of health matters, all requisite health
monitoring systems are in place as well as
programmes to mitigate negative effects on
employee health and personal protective
equipment (PPE) is issued to all employees who
require it. IFM’s emphasis is on considering the
entire health and well-being of the employees
and information and education campaigns
address a wide range of issues, including fatigue
management and nutrition.
EnvironmentIFM has all the necessary permits and licences
in place and has operated in compliance with all
regulations and permits during the year under
review. These include mining licences, the
environmental management programme (EMP),
In respect of health matters, allrequisite health monitoringsystems are in place as well asprogrammes to mitigate negativeeffects on employee health
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SAFETY, HEALTH, ENVIRONMENT, QUALITY AND COMMUNITYAND IFM (CONTINUED)
change of land use, integrated water use
permits, air pollution control permits, among
others.The Company’s water use licence has not
yet been granted by the Department of Water
Affairs (DWAF) although this was applied for
within the required time frame.
A schedule for the reporting of significant
incidents has been implemented and no
significant incidents were reported during the
year under review. The only incidents of concern
related to the spillage of oil, which was
remediated.
The conservation of scarce resources is
a fundamental part of the Company’s
commitment, not only from an environmental
perspective, but it is also in line with the
broader economic approach of the Company.
Electricity shortages and power cuts had an
impact on the company during the year, not
only in respect of lost production, but also in
that power losses to the local water utility
affected the provision of water to IFM, which in
turn had an impact on smelter operation. The
company is seeking an independent long-term
water provision solution and discussions are
under way, in collaboration with other industry
partners, in pursuing this. From a pollution control
point of view, IFM is a zero discharge property.
Even prior to the recent energy crisis in South
Africa, IFM began the implementation of a
Clean Development Mechanism (CDM) project,
an arrangement under the Kyoto Protocol which
allows net global greenhouse gas (GHG)
emissions to be diminished through the
promotion of investment in emissions reduction
projects in developing countries. IFM will be the
first ferroalloys company in the world to
undertake a CDM project, an act which
demonstrates the Company’s awareness of
international environmental issues as well as its
determination to effect a positive impact.
The project comprises a R200 million co-
generation plant that will utilise the waste
furnace offgas, carbon monoxide, as a source of
energy to generate clean electricity, and to
contribute to lower GHG emissions by replacing
fossil fuel-based power from the national grid.
The clean electricity produced through the
conversion of carbon monoxide’s chemical
energy amounts to approximately 12% of
IFM’s needs.
A fundamental aspect of CDM accreditation is
the demonstration of additionality, which
proves empirically that a particular project will
achieve reductions that are additional to those
that would otherwise occur. In the case of IFM,
once the plant is operational, it will be
capable of generating approximately 140,000
megawatt hours (MWH) per year.The associated
annual emission reduction will be in the
region of 160,000 tonnes of carbon dioxide
equivalents. IFM’s co-generation plant is set to
expand in line with the anticipated plant
expansions, thereby ensuring that the benefits
of this process are incremental.
IFM will be seeking a gold standard
accreditation through the Certified Emission
Reduction (CER), a tradeable credit which
represents GHG emission reductions equivalent
to one tonne of carbon dioxide equivalent.
Gold standard accreditation requires
stringent adherence to criteria formulated by
international non-governmental organisations
(NGOs) and represents the highest level of
excellence. Significantly, a project has to meet
the sustainable development criteria set by
each host country, an aspect governed by the
Designated National Authority (DNA) for the
Safety performance for theyear under review has been
excellent, with all key safetyparameters – both at the
mining and smelting operations– outperforming the
Company’s peers.
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08CDM in South Africa, a division of the DME. The
DNA’s sustainable development criteria include
the creation of job opportunities and the
preservation of the environment, among others.
The DNA’s approval of IFM’s project shows the
Company’s due consideration of these
fundamental points.
As required by legislation, IFM has in place the
provisions for the rehabilitation and closure of
the operation at the end of its productive
life. Rehabilitation of open-pit mining
areas is planned for and implemented as
mining progresses.
CommunityIFM is aware that the Company has a broader
responsibility to the community in which it
operates. The group is currently in the process
of formulating a social and community
programme for the upliftment of local
communities. An important part of this process
is the provision of jobs and training to local
community members.
During the year IFM, with the support of
individual employees, undertook a drive to
provide local communities with blankets prior
to the start of the winter season.
CORPORATE GOVERNANCE
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International FerroMetals Limited(IFM) is committedto maintaining highstandards of corporategovernance.
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International Ferro Metals Limited (IFM) iscommitted to maintaining high standards ofcorporate governance. With the Company'smove to the Main Board of the London StockExchange (LSE) on 31 August 2007, thedirectors have complied with the CombinedCode, as far as possible, given the Company'ssize and the composition of the Board. An areain which the Company does not comply isindicated below.
The Board of DirectorsAs at 30 June 2008, the Board of Directorscomprised nine directors, with two newdirectors joining the Board during the course ofthe year. Currently there are eight directorsfollowing the resignation of Mr R Barnard on17 July 2008. Mr Barnard joined the Board on14 November 2007 and Mr D Kovarsky on1 February 2008, both as executive directors.There are currently three executive directorsand five non-executive directors, of which threeare considered to be independent. It is theBoard's policy to maintain independence byhaving at least two independent non-executivedirectors on the Board. The independent non-executive directors are Mr S Oke, Mr T Willsteedand Mr I Watson (from 18 May 2008). Ms T Xiaand Mr X Yang are non-executive directors andare not considered independent as they arerepresentatives of JISCO, a major shareholderand customer of IFM. The Board believes bothMs Xia and Mr Yang provide valuablecontributions to the Company through theircollective experience in the ferrochrome andsteel industries.
Mr A Grey, as Executive Chairman of theCompany, is considered the lead director and useshis experience, skills and leadership abilities tofacilitate the governance process. Inside theboardroom, Mr Grey is responsible for the chairingof meetings and providing guidance to Boardmembers, while outside the boardroom he servesas the spokesperson for the Company and as themajor point of contact between the Board andthe Chief Executive Officer (CEO). As CEO, Mr STurner, who is based in South Africa, is responsiblefor the attainment of the Company's future goalsand visions, in accordance with the strategies,policies, programmes and performancerequirements approved by the Board. The CEO'sprimary objective is to ensure the ongoingsuccess of the Company through the effectivemanagement and development of all aspectsof the Company.
The Board of Directors is responsible for thecorporate governance of the Company. TheBoard guides and monitors the business andaffairs of the Company on behalf of the
shareholders by whom they are elected and towhom they are accountable. The primaryresponsibilities of the Board include:• formulating and approving the strategic
direction, objectives and goals of theCompany;
• monitoring the financial performance of theCompany, including the approval of theCompany's annual financial statements;
• ensuring that adequate internal controlsystems and procedures are in place andthat compliance with these is maintained;
• identifying significant business risks andensuring that such risks are adequatelymanaged;
• reviewing the performance and remunerationof executive directors; and
• establishing and maintaining appropriateethical standards.
To enable the Board to perform its duties,each director has full access to all relevantinformation and to the services of theCompany Secretary. If necessary, the non-executive directors may take independentprofessional advice at the Company's expense.This service was not utilised during the courseof the 2008 financial year.
Mr Willsteed has been appointed SeniorIndependent Director and, as such, his mainduty is to address the concerns of majorshareholders if these concerns cannot beresolved by the Chairman or the otherexecutive directors.
The Board considers Mr Grey's continued
involvement as Executive Chairman to
be vitally important to the Company
at its present stage of development,
notwithstanding the fact that the Company is
not compliant with the Combined Code in this
respect. However, the Board believes that the
role of the executive directors, who take
collective responsibility for the running of the
Company, creates a well-balanced structure
capable of managing the Company in an
effective and successful manner. The Board,
therefore, believes that it is structured so as to
ensure that no individual has unfettered
powers of decision-making.
The Board guides andmonitors the business andaffairs of the Company onbehalf of the shareholders
CORPORATE GOVERNANCE (CONTINUED)
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Areas of non-complianceDuring the financial year, the Company
continued to comply with the
recommendations of the Combined Code, as
demonstrated by the above prescribed
actions, save that the Chairman is not
independent within the terms of the
Combined Code.
Terms of appointment as adirectorThe constitution of the Company provides
that a director, other than the Managing
Director, may not retain office for more than
three calendar years or beyond the third
annual general meeting following his or her
election, whichever is longer, without
submitting for re-election. One third of the
directors must retire each year and are eligible
for re-election. The directors who retire by
rotation at each annual general meeting are
those with the longest length of time in office
from their appointment or last election.
During the year, Mr Grey and Mr Yang retired
and both were re-elected by shareholders at
the annual general meeting of the Company
held on 14 November 2007.
The Nomination CommitteeThe Nomination Committee is chaired by
Mr Grey. Other members include Mr Willsteed
and Mr Oke, who are deemed by the Board to
be independent in character and judgement,
thus ensuring the Nomination Committee
complies with the recommendation of the
Combined Code as to membership. The
committee met twice during the financial
year. The role of the Nomination Committee is
to identify and nominate candidates for the
approval of the Board to fill Board vacancies
and make recommendations to the Board
on Board composition and balance. TheNomination Committee also prepares theChairman's job description and othersignificant commitments for which heis responsible.
The RemunerationCommitteeThe Remuneration Committee comprisingMr Willsteed (Chairman), Mr Oke andMr Watson (appointed on 18 May 2008) met sixtimes during the financial year. The committeeis responsible for reviewing the performance ofthe executive directors and for setting the scaleand structure of their remuneration, having dueregard for the interests of shareholders as awhole and the performance of the Group. Theremuneration of the non-executive directors isreviewed by the Board. Where appropriate, thecommittee obtains advice from independentremuneration consultants.
The Audit CommitteeThe Audit Committee comprises Mr Oke(Chairman), Mr Willsteed and Mr Watson(appointed 18 May 2008), with Mr D Cohen andMr P Russouw attending by invitation. Thecommittee met four times during the financialyear. The committee reviews the Company'shalf-year and annual financial statementsbefore submission to the Board for approvalas well as any announcements relating tofinancial performance. Regular reports frommanagement, the internal audit departmentand the external auditors are also managed bythe committee.With regard to internal controls,the Audit Committee has reviewed the monthlymanagement accounts process as well as plansfor the further development of the internalreporting process, the adequacy of theinformation technology systems within thefinancial control function, and the Group'streasury procedures and controls. The Companyestablished an internal audit division, effective1 August 2007.
The Risk CommitteeThe Board determines the Company's riskprofile and is responsible for overseeing andapproving risk management strategies andpolicies, internal compliance and internalcontrol. Management is required by the Boardto assess risk management and associatedinternal compliance and control proceduresand report back on the efficiencyand effectiveness of risk management.The Company's process of risk management
and internal compliance and control includes:• establishing the Company's goals and
objectives, and implementing andmonitoring strategies and policies to achievethese;
• continuously identifying and measuring risksthat might impact on the achievement ofthe Company's goals and objectives;
• formulating risk management strategies tomanage identified risks and designing andimplementing appropriate risk managementpolicies and internal controls; and
• monitoring the performance of, andcontinuously improving the effectiveness of,risk management systems and internalcompliance and controls.
Comprehensive practices which are in place aredirected towards achieving the followingobjectives:• effectiveness and efficiency in the use of the
Company's resources;• compliance with applicable laws and
regulations; and• preparation of reliable published financial
information.
The Risk committee consists of Mr Grey(Chairman), Mr Turner, Mr Willsteed, Mr Watsonand Mr Cohen. The committee met twice duringthe year, with all members attending.
The Treasury CommitteeThe Treasury Committee, newly formed as of18 December 2007, is chaired by Mr Cohen.Other members include Mr J Muller andMr Russouw, both qualified charteredaccountants, and Mr S de Klerk, the ChiefFinancial Officer of IFMSA. During the course ofthe financial year, the committee met three
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Attendance at meetings for the Risk and Treasury committees isdetailed below:
Risk Treasury
Name Committee Committee
Anthony Grey 2 N/A
Stephen Turner 2 N/A
Ian Watson 2 N/A
Terence Willsteed 2 N/A
Dion Cohen N/A 3
Stoffie de Klerk N/A 3
Jannie Muller N/A 3
Pieter Russouw N/A 3
Number of meetings held 2 3
times.The purpose of the Treasury Committee isto monitor the Group's financial concerns. Theoverall treasury objectives are to support theGroup's development by ensuring:• sufficient liquidity, thereby guaranteeing
that the Group is at all times in a position tomeet its obligations as they fall due in atimely manner and in all reasonablyforeseeable circumstances;
• the most competitive return on surplus cashbalances (within acceptable risk levels);
• availability of flexible and competitivelypriced funding at all times;
• identification and management of thefinancial risks arising from operationalactivities (this would include the hedging offoreign exchange and interest ratesmovements);
• professional interaction with financialmarkets; and
• clear accountability within the treasuryfunction.
The monthly treasury reports are included inthe Board meeting papers.
Attendance at meetingsAttendance at Board meetings, NominationCommittee meetings, Remuneration Committeemeetings and Audit Committee meetings isset out on page 38.
HedgingDirectors and executives are not generallypermitted to hedge their shareholdings exceptas prescribed in the Securities Dealing Policy.
Performance rights may not be hedged. Hedgingincludes entering into any transaction orarrangement in financial products whichoperates to limit the economic risk of a securityholding in the Company, including equity swapsand contracts for difference. Details of theCompany's policy in relation to hedging is
contained in the Remuneration Report on pages40 to 59 of the Annual Report.
Terms of referenceThe terms of reference for the Nomination,Remuneration, Audit and Treasury committees,explaining their role and the authoritydelegated to them by the Board, can be viewedon the Company's website at www.ifml.com.
Model codeFollowing admission to the LSE on 31 August2007, the Company has complied with a codeof securities dealings in relation to the ordinaryshares which is consistent with the Model Codepublished in the Listing Rules. The code adoptedwill apply to the directors and other relevantemployees of the Group.
Communication to marketand shareholdersThe Board of Directors aims to ensure that theshareholders, on behalf of whom they act, areinformed of all information necessary to assessthe performance of the directors and theCompany. Information is communicated toshareholders and the market through:• the Annual Report which is distributed
to all shareholders;• other periodic reports which are lodged
with the LSE and are available forshareholder scrutiny;
• other announcements made inaccordance with LSE Rules;
• special purpose informationmemoranda issued to shareholders asappropriate; and
• the annual general meeting and othermeetings called to obtain approval forBoard action as appropriate.
Independent professionaladviceDirectors have the right, in connection withtheir duties and responsibilities as directors, toseek independent professional advice at theCompany's expense. Prior approval of theChairman is required (only if the costs areabove A$50,000). Approval will not beunreasonably withheld.
Share tradingDealings are not permitted at any time while inthe possession of price sensitive information
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CORPORATE GOVERNANCE (CONTINUED)
The Board of Directors aims to ensurethat the shareholders, on behalf of whom
they act, are informed of all informationnecessary to assess the performance of
the directors and the Company.
not already available to the market. In addition,
the Corporations Act 2001 prohibits the
purchase or sale of securities while a person is in
possession of inside information.
Ethical standardsAll directors, management and staff are
expected to consistently apply the highest
ethical standards to their conduct to ensure
that the Company's affairs and reputation are at
all times maintained at the highest level.
Going concernA statement on the directors' position regarding
the Company as a going concern is contained in
the Directors' Report on pages 33 to 39.
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CONTENTS
33 Directors’ report
40 Remuneration report
60 Auditor’s independence declaration
61 Financial report
– Consolidated income statement
– Consolidated statement of recognised
income and expense
– Consolidated balance sheets
– Statement of cash flows
– Reconciliation of operating profit to cash
flows from operating activities
– Notes to the financial report
127 Independent auditor’s report
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DIRECTORS’ REPORT
The directors present their report together with the Financial Report for the year ended 30 June 2008. Directors were in office for this
entire year unless otherwise stated.
International Ferro Metals Limited (IFM) is an integrated ferrochrome producer listed on the London Stock Exchange (LSE: IFL). The head
office is in Sydney, Australia and the production facilities are located in the North West Province of South Africa.
The directors
Name Age Position Date of appointment
Anthony John Grey 71 Executive Chairman 9 December 2002
Stephen John Turner 47 Chief Executive Officer 26 January 2002
David Chaim Kovarsky 61 Managing Director 1 February 2008
Ronald Henry Barnard 47 Chief Operating Officer 14 November 2007 (resigned 17 July 2008)
Xiaoping Yang 53 Non-executive Director 12 October 2005
Terence Vincent Coleman Willsteed 74 Non-executive Director 12 October 2005
Ian Clyde Watson 65 Non-executive Director 2 April 2003
Stephen Douglas Oke 54 Non-executive Director 16 November 2005
Tian Xia 38 Non-executive Director 16 November 2005
Principal activitiesIFM produces ferrochrome from chromite ore located in the Bushveld Igneous Complex, one of the world's richest mineral repositories
and the largest ferrochrome producing region in the world. IFM's Buffelsfontein and Lesedi chromite mines and integrated ferrochrome
processing and beneficiation operations are situated at Buffelsfontein, 100km north-west of Johannesburg, South Africa. The Company
is currently developing the nearby Skychrome deposit in which it has an 80% interest and which will allow the company to increase
production significantly.
Having reached steady-state operations in respect of its first phase of production in FY2008 with a cap of 300 million pounds of chrome
units per annum – IFM has embarked on an ambitious second phase of growth. In this second phase, both the mining, processing and
smelting facilities will be expanded and upgraded to produce 750 million pounds of chrome units per annum.
Review of operationDuring the ramp-up to production we experienced technical problems which were promptly overcome and have been well reported on
during the year. The replacement of the pressure rings hampered production in the first half of the year, while the second half of the
year was marred by the disruptions caused as a result of the national energy shortage in South Africa.
Maintaining costs in an inflationary environment, and one in which there are skills shortages, has been a challenge. Nonetheless, we
believe we have done so creditably, and our costs remain in the lowest quartile among international producers. The major cost drivers
have been, and will remain, coke, labour and electricity.
An area of focus for the year ahead will be the optimisation of the new Skychrome resource and its integration into the current
plant expansion.
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DIRECTORS’ REPORT (CONTINUED)
Executive directorsMr Anthony (Tony) Grey – Executive Chairman (71)
Tony Grey graduated with a BA (Hons) in History and a Juris Doctor from the University of Toronto.
Thereafter, he practised law with a major law firm in Toronto for seven years. He immigrated to Australia
in 1972 and founded Pancontinental Mining, which he built into a publicly listed major diversified
mining house with interests in gold, base metals, coal, industrial minerals and uranium. He left
Pancontinental Mining in 1992 and became a director of National Mutual Royal Bank for four years.
Thereafter, Tony was appointed chairman of Kingsgate Consolidated, a gold mining company listed on
the Australian Stock Exchange. In 1992, he became a major shareholder and Executive Chairman of
Polartechnics Limited, an Australian Stock Exchange-listed biomedical company developing the
revolutionary Australian invention of an optoelectronic means of diagnosing pre-cancer cells and cancer.
Tony has written three books and numerous articles about the mining industry. He has recently been
appointed to the board of International Potash Limited, a Canadian potash producer, as a non-
executive director.
Mr Stephen Turner – Chief Executive Officer (47)
Stephen Turner, founder of IFM, has over 20 years' experience in financial markets and for the last
15 years has specialised in the natural resources sector. He has delivered resource projects in Australia,
southern Africa, Fiji, New Caledonia and the Solomon Islands. Stephen was a founding director of the
Australian subsidiary of PSG Investment Group, then South Africa's sixth largest investment bank. He has
an extensive network of business contacts and has raised equity capital in Australia, the United Kingdom,
Hong Kong, Malaysia and the United States. Stephen is an Australian chartered accountant.
Mr David Kovarsky – Managing Director (61)
David Kovarsky has extensive experience in the ferrochrome industry, both in operations and
construction and has been a valuable contributor to IFM for many years. He has a close working
relationship with IFM's management team, having assisted in the company's initial feasibility studies,
construction and commissioning. Prior to this appointment in February 2008, David was the CEO of
South Africa's largest submerged arc furnace supplier, Pyromet, which designed and constructed IFM's
two ferrochrome furnaces and its beneficiation plant. Before joining Pyromet, he was an executive
director of Johannesburg Consolidated Investment Company Limited (JCI) with direct management
responsibility for Consolidated Metallurgical Industries (CMI) – at that time the world's second largest
ferrochrome producer.
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Non-executive directorsMr Xiaoping Yang – Non-executive Director (53)
Xiaoping Yang holds a Master’s degree from the Beijing University of Science and Technology. He joined
Sinosteel Corporation as a project manager and became a branch general manager in 1994. Xiaoping
moved to South Africa in 1998 where he became a Managing Director and Chief Executive Officer of
ASA Metals (Pty) Ltd, a South African chrome mining and smelter business. Xiaoping joined JISCO as
Assistant President in July 2002.
Mr Terence (Terry) Willsteed – Non-executive Director (74)
Terry Willsteed, who holds a Bachelor of Engineering (Hons) degree in Mining, is a Fellow of the
Australasian Institute of Mining and Metallurgy and, since 1973, has been the Principal of consulting
mining engineers, Terence Willsteed and Associates. His 40-year career in the mining industry has
included senior line operational and engineering positions with Zinc Corporation, Mt Isa Mines Limited
and Consolidated Goldfields Limited. Other public directorships include European Gas Limited, Citigold
Corporation Limited and Goldsearch Limited. In his consulting experience, Terry has been involved in the
assessment and development of a wide range of mineral, coal and oil shale projects, and has participated
in the management of developing and operating mineral projects both in Australia and internationally.
Mr Ian Watson – Non-executive Director (65)
Ian Watson is a professional engineer. He obtained a National Diploma of Mining from the
Witwatersrand Technical College, South Africa in 1968 before joining Gold Fields South Africa (GDFSA)
as a trainee mining engineer. Ian progressed through the GDFSA Group and held various senior positions
at the East Driefontein, Vlakfontein and Doornfontein gold mines before becoming the mine manager
of West Driefontein gold mine in 1978. He became the manager of Kloof Gold Mining Company in 1982,
and the mine manger of Northam Platinum Limited in 1986 where he led the start-up of the Northam
Platinum mine, including underground mine design, pioneering the use of hydropower, installing
metallurgical plants (concentrator, smelter and base metal removal plant) and ultimately bringing the
mine into production in 1992. In 1992, Ian became a consulting engineer for GDFSA, where he was the
Technical and Managerial Adviser to various boards and management teams in the group's gold,
platinum and base metal companies. In 1998, Ian returned to Northam Platinum Limited as its
Managing Director, responsible for the performance and overall strategic direction of the company as
well as all aspects of new business initiatives and acquisitions. In April 2003, Ian joined the Group as
Managing Director and became non-executive director on 3 April 2005.
Mr Stephen Oke – Non-executive Director (54)
Stephen Oke holds a BSc (Hons) degree in Geology from the University of Southampton and an MBA from
the University of the Witwatersrand Graduate School of Business. He has over 30 years' experience in the
mining and metals industry of which some 12 years were spent in various operational management
positions for the National Coal Board,Anglovaal Limited, BP Coal and JCI Limited. Subsequently he has held
senior positions in the investment banking industry for Smith New Court, Merrill Lynch, NM Rothschild and
Sons and Standard Bank, specialising in the metals and mining sector where he advised on a number of
transactions and equity capital fund raisings worldwide. He is a non-executive director of Katanga Mining
Limited.
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DIRECTORS’ REPORT (CONTINUED)
Ms Tian Xia – Non-executive Director (38)
Tian Xia received a Bachelor of Industrial Accounting degree in 1992 from the East China University of
Metallurgy. In the same year she joined JISCO as an accountant. Tian became a certified public accountant
of China in 1996 and received an EMBA degree in 2000 from Xi'an University of Science and Technology.
She was appointed the Director of the Financial Department of JISCO Group and was promoted to the
position of Associate General Accountant in 2005. She was appointed Chief Financial Officer of the JISCO
Group in 2008.
ManagementThe management of the Group, excluding the executive directors mentioned above includes:
Mr Dion Cohen – Chief Financial Officer (38)
After qualifying as a chartered accountant at Ernst & Young in 1995, Dion was involved in corporate
finance and private equity in South Africa from 1996 to 2003. His experience ranges from mergers and
acquisition structuring, to capital raisings and management of mining companies in private equity
ownership. He has also held board positions on listed and unlisted companies. In 2003, he immigrated
to Australia and has been involved in consulting and corporate finance work. Dion worked with IFM prior
to its listing on AIM in 2005.
Mr Hannes Visser – General Manager, Operations (51)
Hannes Visser has more than 20 years' experience in the ferrochrome industry. He holds a degree in
Chemical Engineering (Extr. Met.) from the University of Stellenbosch, South Africa. Prior to joining IFM
in July 2008, he was employed by leading global ferrochrome producers and has participated in the
design, construction, commissioning, operation and management of a number of furnaces as well as
pelletising and sintering plants, ore beneficiation plants and other processes in the ferro-alloy industry.
He is very experienced in managing production facilities according to best practice quality, safety and
environmental standards.
Mr Willie Bester – Maintenance and Project Manager (59)Willie Bester has close to 40 years' experience in the ferrochrome and processing industry. Prior to hisappointment at IFM in July 2008, he held positions at Hernic Ferrochrome, Rand Carbide, Richards BayMinerals. His experience, including that of several major rebuilds and projects on open and closedfurnaces, make him well suited for the current expansion project under way at IFM and, in particular,oversight of the maintenance, planning and quality control aspects of the business.
Company SecretaryW Kernaghan
Mr Kernaghan is a member of the Institute of Chartered Accountants in Australia with a number of years' experience in various areas ofthe mining industry. He is also a Fellow of the Australian Institute of Company Directors and a chartered secretary.
Interests in the shares and options of the Company and related bodies corporateAs at the date of this report, the interests of the directors in the shares and options of International Ferro Metals Limited were:
Number of
Number of options over
ordinary Shares ordinary Shares
AJ Grey 1,266,667 –SJ Turner 6,916,667 –DC Kovarsky – 1,000,000X Yang 166,667 –TV Willsteed 166,667 –IW Watson 333,334 –SD Oke 50,000 –T Xia 166,667 –
DividendsThe Board of Directors has resolved to declare a maiden dividend of 1 pence per share, which will be paid in sterling to shareholders onthe register as at 3 October 2008. The amount to be paid is estimated to be around R73 million (£5 million) and was coveredapproximately eight times by FY2008 headline earnings. The ex dividend date will be 1 October 2008 and estimated payment date willbe 3 November 2008.
Operating and financial reviewThe results of the operations and the financial position of the consolidated entity as at the end of the financial year are contained onpages 61 to 125 of the Annual Report.
In summary, the IFM Group reported a consolidated profit of R578 million for the year ended 30 June 2008. Key achievements andhighlights for the year include:• Production of ferrochrome of 205,607 tonnes, with the achievement of steady-state operations by year-end. The design
capacity of the current plant is 267,000 tonnes per annum (tpa).
Ferrochrome sales of 207,862 tonnes , generating revenue of R1.9 billion.
• Significant improvements in the market during the year, with ferrochrome prices rising from US$1.00/lb in the third calendar
quarter of 2007 to US$1.92/lb in the second calendar quarter of 2008. The current price of US$2.05/lb represents a 12-month
increase of 105%
Financial highlights• Sales rose by 944% to R1.9 billion.
• Margins for the year increased from 9% in FY2007 to 38% in FY2008.
• Normalised headline earning per share increased from a loss of 82.75 cents to a profit of 114.05 cents per share.
• Group unit cost per chrome unit before head office overheads and excluding share-based payments, was 65 US cents/lb for
the financial year ended 30 June 2008 (FY2007: 64 US cents/lb).
• Strong cash generated from operations of R251 million for the year ended 30 June 2008, of which R487 million represents
cash generated over the past 6 months.
• Raised R1,196 million (£85.2 million), before costs, in equity capital and repaid all interest-bearing debt amounting to
R833 million.
• The Group's cash position at year end totalled R972 million with no bank debt.
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DIRECTORS’ REPORT (CONTINUED)
Significant changes in the state of affairsOther than the above there were no significant changes in the state of affairs of the Group for the year ended 30 June 2008.
Matters subsequent to balance dateOther than those outlined in note 31 to the financial statements, no matters or circumstances have arisen since 30 June 2008 that have
significantly affected or may significantly affect:
• the Company's operations in future financial years;
• the result of those operations in future financial years; or
• the Company's state of affairs in future financial years.
Likely developmentsFurther information on likely developments in the operations of the entity and the expected results of operations have not been included
in this report because the directors believe it would be likely to result in unreasonable prejudice to the entity.
Environmental regulationThe Group is compliant with all the environmental regulations which apply to it.
Insurance of officersDuring the financial year, a premium was paid to insure the directors and secretary of International Ferro Metals Limited. The total
amount of insurance contract premiums paid was A$80,365.
Directors' meetingsThe number of meetings of directors (including meetings of committees of directors) held during the year and the numbers of meetings
attended by each director were as follows:
Attendance at meetings up to and including the date of this annual report, namely 30 June 2008, is indicated below:Nomination
Name Board (23) Committee (4) Committee (6) Committee (2)
Anthony Grey 23 N/A N/A 2Stephen Turner 23 N/A N/A N/ADavid Kovarsky 9 (1) N/A N/A N/AStephen Oke 21 4 6 2Ian Watson 19 N/A 0 (1) N/ATerence Willsteed 23 4 6 2Ronnie Barnard 13 (1) N/A N/A N/ATian Xia 21 N/A N/A N/AXiaoping Yang 21 N/A N/A N/A
(1) Attended the maximum number of meetings held since appointment as a director.
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Going concernAfter making enquiries, the directors have a reasonable expectation that the company has adequate resources to continue in operationalexistence for the foreseeable future. For this reason, we continue to adopt the going-concern basis in preparing the accounts.
RoundingThe amounts contained in the Financial Report for the year ended 30 June 2008 have been rounded to the nearest R1,000 (whererounding is applicable) under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to whichthe Class Order applies.
Auditor’s independenceThe directors received a declaration from Ernst & Young, which is on page 60.
Non-audit servicesThe following non-audit services were provided by the entity's auditor, Ernst & Young. The directors are satisfied that the provision ofnon-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.The nature and scope of each type of non-audit service provided means that auditor independence was not compromised.
Ernst & Young received or is due to receive the following amounts for the provision of non-audit services:
R’000
Equity raising and due diligence services 1,769Other assurance services 42
139
Signed in accordance with a resolution of the directors.
Stephen Turner
Director
Sydney21 September 2008
REMUNERATION REPORT
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IntroductionThe directors of International Ferro Metals Limited present the audited Remuneration Report for the Group for the year ended 30 June
2008. This Remuneration Report forms part of the Directors' Report in accordance with the requirements of the Corporation Act 2001
and its Regulations.
For the purposes of this report key management personnel of the Group are defined as those persons having authority and responsibility
for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director
(whether executive or otherwise) of the Parent Company, and includes the five executives of the Parent and the Group receiving the
highest remuneration.
The details of the key management personnel are:
Name Position
Anthony Grey Chairman
Stephen Turner Chief Executive Officer
David Kovarsky Managing Director (1)
Ronald Barnard Chief Operating Officer (2)
Xiaoping Yang Executive Director – IFMSA
Terry Willsteed * Chairman – Remuneration Committee
Ian Watson * Non-executive Director – IFML
Stephen Oke * Chairman – Audit Committee
Tian Xia * Non-executive Director – IFML
Seth Phalatse * Non-executive Director – IFMSA
Dion Cohen Chief Financial Officer
* Non-executive director.
(1) Appointed 1 February 2008.
(2) Resigned subsequent to year-end on 17 July 2008.
Remuneration Committee and principlesThe Remuneration Committee of the Board of Directors of the Company is responsible for determining and reviewing compensation
arrangements for the directors and executive management. The Remuneration Committee will assess the appropriateness of the nature
and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall
objective of ensuring maximum shareholder benefit from the retention of a high quality Board and executive management.
To this end, the Group embodies the following principles in its compensation framework:
• provide competitive rewards to attract and retain high calibre executives;
• link executive rewards to shareholder value; and
• establish appropriate performance hurdles in relation to variable executive compensation.
Remuneration structureIn accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate
and distinct.
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Non-executive director remuneration
ObjectiveTo enable the Company to attract and retain the services of suitable individuals to serve as directors, the Board seeks to remunerate ata level that provides the Company with this objective, while incurring a cost that is acceptable to shareholders.
Structure The LSE Listing rules and Board Charter specify that the maximum aggregate cash fees of non-executive directors shall be approved byshareholders. On 30 November 2004, the shareholders approved a maximum aggregate cash remuneration of A$500,000 per annum.As per the Notice of General Meeting to be posted on or around 15 October 2008, the directors propose that this maximum aggregatefee remuneration be increased to £750,000 per annum to provide for the possible re-organisation of executive director's responsibilitiesand increasing Board activity.
Each non-executive director receives a base fee of £50,000 per annum with additional fees proposed for committee activities. Non-executive director fees do not vary according to the performance of the Company nor do they receive retirement benefits other thanthose required by legislation.
Non-executive directors are also incentivised through equity ownership.To this end, non-executive directors have been issued share optionsand phantom share options in the Company. Non-executive directors do not have any equity share options outstanding. Refer to the short-term incentive and long-term incentive structure discussion below for the details on share options and phantom share options.
The remuneration of non-executive directors for the years ending 30 June 2008 and 30 June 2007 is detailed in Tables 1 and 2 of thisreport respectively.
Executive remuneration
ObjectiveThe Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities withinthe Group so as to align the interests of executives with those of shareholders and ensure total remuneration is competitive by industrystandards.
StructureThe remuneration levels for executives are market-aligned by comparison with similar roles in market. The Remuneration Committeeengages external consultants to provide independent advice on salary levels and incentives for comparable executive positions in similarcompany structures.
The Group has entered into detailed contracts of employment with key management personnel and standard contracts with otherexecutives. Details of these contracts are provided below.
Remuneration consists of the following key elements:• fixed remuneration (base salary, superannuation, consulting fees and non-monetary benefits);• variable remuneration, consisting of:
• short-term incentive; and• long-term incentive.
The proportion of fixed remuneration and variable remuneration (potential short-term and long-term incentives) for each executive is
set out in Table 1.
REMUNERATION REPORT (CONTINUED)
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Fixed remunerationObjectiveFixed remuneration is reviewed annually by the Remuneration Committee. The last review was performed on 28 July 2008. The processconsists of a review of relevant comparative remuneration externally and internally and, where appropriate, external advice on policiesand practices. As noted above, the committee has access to external advice independent of management.
StructureExecutives receive their fixed remuneration in cash. Details of the fixed remuneration component of executives are detailed in Table 1.
Variable remuneration – short-term incentive (STI)ObjectiveThe objective of the STI is to link the achievements of the Group's production targets with the remuneration received by the executivesresponsible to meet those targets. The total potential STI available is set at a level so as to provide sufficient incentive to the executivesto achieve the operational targets and such that the cost to the Group is reasonable in the circumstances.
StructureActual STI payments granted to each executive depend on the extent to which specific targets are met. Provisions are accrued in thefinancial year in which the targets are set, with payments delivered as a cash bonus in the following reporting period.
STI bonus for 2008 financial yearThe STI bonus reward to align the executives with the Group's production targets for the year ended 30 June 2008 was approved at aBoard meeting on 6 February 2008. The targeted ferrochrome production was set at 125,000 tonnes for the period 1 January 2008 to30 June 2008. Due to the uncontrolled nature of Eskom's load-shedding programme, the production target included a downwardadjustment to take account of any power shortfalls over the period. The STI bonus was payable on a sliding scale on the achievementof between 80% and 120% of target and then multiplied by a factor of between 10% and 100% of the annual cost to the Company ofthe employee depending on the job grade of the employee as approved by the Board and pro rata for the period employed during theyear. The bonus payments were calculated and finalised for payment on 10 July 2008.
For the 2008 financial year, the STI cash bonus of R14.6 million for key management personnel was accrued, based on the achievementof 98.5% of the target and paid subsequent to year-end.
STI bonus for 2007 financial yearFor the 2007 financial year, 100% of the STI bonus of £980,000 (R25 million) as previously accrued in that period was paid in the 2008financial year. This bonus was payable only to key executives who were directly involved in planning the facility expansion and inrecognition of achievements outside the construction and commissioning phase of the project.
Variable remuneration – long-term incentive (LTI)ObjectiveThe objective of the LTI plan is to reward executives in a manner that provides incentives aimed at increasing the market value of theGroup and as a retention mechanism. It is separate from the bonus schemes which are related to short-term performances.
StructureA Phantom Option Scheme was introduced on 15 November 2006 as a long-term incentive scheme. Options are granted to eligible keymanagement personnel subject to the satisfaction of certain vesting and exercise conditions. A cash amount is determined by referenceto the excess of the market price of an ordinary share in the Company over the exercise price at the time the options are exercised.The options, in most cases, vest in equal tranches over three years subject to the recipients’ continued employment by the Company.The options may also vest immediately.Vesting and exercise conditions are determined by the Board. Executives are able to exercise theshare options for up to five years from the grant of the options. Each tranche of the options is capped at between £1.50 and £3.50 (i.e.the maximum strike price of the option). Refer to Table 5 of this report for details of the phantom options granted.
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On 6 February 2008, three million phantom options were issued to key management personnel at an exercise price of £1.00 and at aprice cap of £2.50. Only 2.955 million of these options vested to directors and senior management, based on the 98.5% productiontarget that was achieved at year-end. These phantom options issued were subject to the same conditions as described under the STIscheme for 30 June 2008 (see STI bonus for 2008 financial year).
For each phantom option issue, specific parameters relating to vesting conditions, term and pricing are recommended by theRemuneration Committee and, if deemed, appropriate, approved by the Board.
Share options are granted to directors usually at the time of joining the Board.
Share trading and margin loans by directors and executivesDirectors and executives are not permitted to hedge their shareholdings or share options except where each of the following
requirements has been satisfied:• permission has been obtained from the Chairman;• the shares have fully vested and are not subject to any hurdles or transfer restriction;• the hedge transaction is treated as a sale or purchase of shares by the director or executive and the relevant approvals,
disclosures (to the LSE, as appropriate) and notifications are made on this basis;• the hedge transaction may not be entered into, renewed, altered or closed out when the director or executive is in possession
of price sensitive information; and• all costs or expenses associated with any hedging arrangement are for the director's or executive's own account.
No such request for hedging shareholdings or share options have been received.
Analysis of Company's performance against STI and LTIShare-based incentive constitutes approximately 37% of total key management personnel total remuneration (2007: 27%). Set out
below is IFM's share price performance between September 2005 and June 2008:
360.0%
270.0%
180.0%
90.0%
0%
-90.0%
165.6
133.2
100.8
68.4
36.0
3.6
30.033
15,017
0
2005 2006 2007 2008
0312090603120906031209
Volume (in 1,000s)
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REMUNERATION REPORT (CONTINUED)
Remuneration and pension entitlements of key management personnel
Table 1: Remuneration for the year ended 30 June 2008 Fixed
Post- Non-
Salary Leave Other employment monetary
and fees accrued (2) fees (3) superannuation (4) benefits (5)
R R R R R
Non-executive directors
Xiaoping Yang 1,800,000 47,682 – – –
Terence Willsteed 820,000 – 571,287 73,800 –
Ian Watson 697,498 – – – –
Stephen Oke 731,922 – 333,792 – –
Tian Xia 731,922 – – – –
Seth Phalatse 250,000 – – – –
Sub-total: non-executive directors 5,031,342 47,682 905,079 73,800 –
Executive directors
Anthony Grey 1,640,000 – 1,702,210 147,600 50,301
Stephen Turner 3,454,273 284,689 – 310,885 –
David Kovarsky * 1,208,334 27,880 1,025,116 – –
Ronald Barnard ** 2,250,000 34,256 – – –
Sub-total: executive directors 8,552,607 346,825 2,727,326 458,485 50,301
Other key management personnel
Dion Cohen 2,239,151 181,727 – 328,002 25,150
Total remuneration 15,823,100 576,234 3,632,405 860,287 75,451
* Appointed 1 February 2008.
** Appointed 14 November 2007 and resigned 17 July 2008.
(1) Bonus provision of £5,000 (R73,200) at year-end June 2007 which was subsequently reversed and cancelled because of the non-achievement of the ramp-up targets.
(2) These amounts represent movement in leave accruals during the year.
(3) These amounts represent additional work undertaken for the Company. Included in other fees is an amortised portion of Mr Kovarsky's retention fee which represents R937,238. The full retention fee amounts to R8.9 million, of which R6.1 million was paid in May 2008.
(4) ncludes superannuation payment and any voluntary fee sacrifice to superannuation.
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STI LTI Total % breakdown
Phantom Share-based
Incentive options payments
payments (cash settled) (6) options (7) Fixed STI LTI
R R R R % % %
1,773,000 2,208,864 – 5,829,546 32 30 38
(73,200) (1) 592,344 – 1,984,231 74 (4) 30
– 1,412,108 – 2,109,606 33 – 67
(73,200) (1) 592,344 – 1,584,858 67 (4) 37
(73,200) (1) 592,344 – 1,251,066 59 (6) 47
– – – 250,000 100 – –
1,553,400 5,398,004 – 13,009,307
3,440,801 3,923,802 – 10,904,714 32 32 36
3,708,680 3,923,802 – 11,682,329 35 32 33
1,173,904 – 1,621,453 5,056,687 45 23 32
2,216,250 3,956,216 – 8,456,722 27 26 47
10,539,635 11,803,820 1,621,453 36,100,452
2,528,644 2,359,834 – 7,662,508 36 33 31
14,621,679 19,561,658 1,621,453 56,772,267
(5) This figure represents the value of car parking provided.
(6) Options are granted with certain vesting and exercise conditions, with the fair value recorded at each reporting date until it is settled, by using an option-pricing model.
(7) The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted using an option-pricing model. Invaluing these transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares in International Ferro MetalsLimited. The value of equity instruments which do not vest during the reporting period is determined as at the grant date and is progressively allocated over thevesting period.
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REMUNERATION REPORT (CONTINUED)
Remuneration and pension entitlements of key management personnel
Table 2: Remuneration for the year ended 30 June 2007 Fixed
Post- Non-
Salary Leave Other employment monetary
and fees accrued fees superannuation benefits
R R R R R
Non-executive directors
Xiaoping Yang 1,590,000 109,116 – – –
Terence Willsteed 422,960 – – 35,727 –
Ian Watson 350,000 – – – –
Stephen Oke 441,612 – – – –
Tian Xia 441,612 – – – –
Seth Phalatse 250,000 – – – –
Sub-total: non-executive directors 3,496,184 109,116 – 35,727 –
Executive directors
Anthony Grey 793,937 – 1,477,673 71,454 –
Stephen Turner 2,593,544 220,403 – 224,912 –
Sub-total: executive directors 3,387,481 220,403 1,477,673 296,366 –
Other key management personnel
Ronald Barnard 1,992,837 (3,178) – –
Dion Cohen 450,843 52,366 1,352,271 40,576
Sub-total: other key management
personnel 2,443,680 49,188 1,352,271 40,576 –
Total remuneration 9,327,345 378,707 2,829,944 372,669 –
(1) Bonus provision of £5,000 (R73,200) was subsequently cancelled.
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STI LTI Total % breakdown
Phantom Share-based
Incentive options payments
payments (cash settled) options Fixed STI LTI
R R R R % % %
2,803,833 1,816,783 – 6,319,732 27 44 29
348,641 (1) – – 807,328 57 43 –
280,000 1,219,152 45,259 1,894,411 18 15 67
348,641 (1) – – 790,253 56 44 –
348,641 (1) – – 790,253 56 44
– – 250,000 100 – –
4,129,756 3,035,935 45,259 10,851,977
3,905,895 2,752,881 134,536 9,136,376 26 43 32
7,463,852 2,955,218 53,815 13,511,744 22 55 22
11,369,747 5,708,099 188,351 22,648,120
5,530,304 2,748,759 45,259 10,313,981 19 54 27
3,982,661 2,193,438 – 8,072,155 23 49 27
9,512,965 4,942,197 45,259 18,386,136
25,012,468 13,686,231 278,869 51,886,233
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REMUNERATION REPORT (CONTINUED)
Mr Anthony Grey
Executive Chairman
Mr Grey is employed under a rolling contract. The current employment contract started on 1 January 2005. Under the terms of the
present contract:• Mr Grey receives director’s fees of R1,640,000 (A$250,000) per annum. In accordance with Australian legislation superannuation of
9% of Mr Grey's director's fees, an amount of R147,600 (A$22,500), was contributed to a superannuation fund on his behalf.• Additional consulting work for the Company undertaken by Mr Grey is paid at the rate of A$450 per hour.• In respect of Mr Grey's service as Executive Chairman of the Company, an incentive payment of R3,440,801 (A$524,512) was
accrued to Gordian Investments Pty Ltd, a company controlled by Mr Grey at 30 June 2008, with payment made in July 2008. Theincentive payment was paid based on certain production targets being met (refer to STI structure for details).
• Mr Grey was granted 500,000 phantom options on 15 November 2006 through the Phantom Options Plan (see note 29). The fairvalue of these options expensed in the period to 30 June 2008 was R1,554,424 (£106,177). Of the 500,000 phantom options issued,33% vested during the financial year. In the current financial year an incentive scheme was approved at a Board meeting held on18 December 2007, whereby Mr Grey was allotted an additional 500,000 phantom options at 30 June 2008 based on productiontargets being met (refer to LTI structure for details). The fair value of these options expensed in the period to 30 June 2008 wasR2,369,378 (£161,843). Of the 500,000 phantom options issued, 98.5% (492,500 options) vested at year-end from satisfaction ofthe vesting conditions (that is the production targets).
• Mr Grey was not granted any share options during the year ended 30 June 2008.• The service agreement may be terminated at any time by Mr Grey giving the Company not less than six months’ notice in writing.
The Company may terminate the agreement without cause by providing not less than 12 months’ written notice. In the event of amaterial breach of any of the terms of the agreement or serious misconduct, the Company can terminate Mr Grey's employmentat any time. A termination payment will not be payable on resignation or dismissal for serious misconduct.
Mr Stephen Turner
Chief Executive Officer
Mr Turner is employed under a rolling contract.The current employment contract started on 1 April 2005. Under the terms of the present
contract:• He is paid an annual salary of R3,454,273 (A$526,566). In accordance with Australian legislation superannuation of 9% of
Mr Turner's salary, an amount of R310,885 (A$47,391), was contributed to a superannuation fund on his behalf.• In respect of Mr Turner's service, an incentive payment of R3,708,680 (A$565,348) was accrued at 30 June 2008, with payment
made in July 2008.The incentive payment was paid based on certain production targets being met (refer to STI structure for details).• Mr Turner was granted 500,000 phantom options on 15 November 2006 through the Phantom Options Plan (see note 29). The fair
value of these options expensed in the period to 30 June 2008 was R1,554,424 (£106,177). Of the 500,000 phantom options issued,33% vested during the financial year. In the current financial year an incentive scheme was approved at a Board meeting held on18 December 2007, whereby Mr Turner was allotted an additional 500,000 phantom options at year-end. These options were issuedbased on certain production targets being met (refer to LTI structure for details). The fair value of these options expensed in theperiod to 30 June 2008 was R2,369,378 (£161,843). Of the 500,000 phantom options issued, 98.5% (492,500 options) vested atyear-end from satisfaction of the vesting conditions (that is the production targets).
• Mr Turner was not granted any share options during the year ended 30 June 2008.• The service agreement may be terminated at any time by Mr Turner giving the Company not less than six months’ notice in writing.
The Company may terminate the agreement without cause by providing not less than 12 months’ written notice. In the event of amaterial breach of any of the terms of the agreement or serious misconduct, the Company can terminate Mr Turner's employmentat any time. A termination payment will not be payable on resignation or dismissal for serious misconduct.
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Mr David Kovarsky
Managing Director
Mr Kovarsky is employed under a fixed contract from 1 February 2008. The employment term is for four years, subject to termination
provisions. Under the terms of the present contract:
• He is paid an annual salary of R2,900,000.
• Additional work for the Company undertaken by Mr Kovarsky, before his employment contract started, amounted to R87,878.
• A retention fee of R8,997,492, of which R6,104,734 was paid in advance on 23 May 2008, for the services that Mr Kovarsky will
provide over the period of his employment contract. The amortised value of this retention fee amounted to R937,238 for the year
ending 30 June 2008. Should Mr Kovarsky resign prior to the end of his employment contract, he will repay the remaining
unamortised value as at the date of his resignation. On termination or death, the fee is not repayable.
• In respect of Mr Kovarsky's service, an incentive payment of R1,173,904 was accrued at 30 June 2008, with payment made in July
2008. The incentive payment was paid based on certain production targets being met (refer to STI structure for details).
• Mr Kovarsky was not granted any phantom options during the year ended 30 June 2008.
• Mr Kovarsky was issued one million share options on 1 February 2008. The fair value expensed of these options during the period
amounted to R1,621,453 with the total fair value being R3,269,597. Please refer to Table 3 for further details.
• The service agreement may be terminated at any time by Mr Kovarsky giving the Company not less than six months’ notice in
writing. The Company may terminate the agreement without cause by providing not less than 12 months’ written notice provided
that such notice cannot be given by IFM within the first six calendar months of Mr Kovarsky's employment or on expiry of the first
six calendar months of Mr Kovarsky's employment by paying his cost to company for the 12 months immediately prior to ceasing
employment, including bonuses, in lieu of such notice. In the event of a material breach of any of the terms of the agreement or
serious misconduct, the Company can terminate Mr Kovarsky's employment at any time. A termination payment will not be payable
on resignation or dismissal for serious misconduct.
Mr Ronald Barnard
Chief Operating Officer – IFMSA
Mr Barnard was employed under a rolling contract. His employment contract started on 15 January 2003. On 17 July 2008, Mr Barnard
resigned as Chief Operating Officer and from the Company's Board of Directors. Under the terms of the contract:
• He was paid an annual salary of R2,250,000.
• In respect of Mr Barnard's service, an incentive payment of R2,216,250 was accrued at 30 June 2008, with payment made in July
2008. The incentive payment was paid based on certain production targets being met (refer to STI structure for details).
• Mr Barnard was granted 450,000 phantom options on 15 November 2006 through the Phantom Options Plan (see note 29). The
fair value of these options expensed in the period to 30 June 2008 was R1,586,839 (£94,491). Of the 450,000 phantom options
issued, 33% vested during the financial year. In the current financial year an incentive scheme was approved at a Board meeting held
on 18 December 2007, whereby Mr Barnard was allotted an additional 500,000 phantom options. These options were issued based
on certain production targets being met (refer to LTI structure for details). The fair value of these options expensed in the period to
30 June 2008 was R2,369,377 (£161,843). Of the 500,000 phantom options issued, 98.5% (492,500 options) vested at year-end
from satisfaction of the vesting conditions (that is the production targets).
• Mr Barnard was not granted any share options during the year ended 30 June 2008.
• The service agreement was able to be terminated without cause by either party giving not less than three months’ notice in writing
or by IFMSA paying Mr Barnard his remuneration for such period in lieu of notice. IFMSA could also have terminated the agreement
without notice if Mr Barnard had been in breach of the agreement without making any termination payment.
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ual R
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Mr Xiaoping Yang
Non-executive Director of the Company and Executive Director of IFMSA
Mr Yang was appointed a non-executive director of the Company and as an executive director of IFMSA on 12 October 2005. Mr Yang
is not entitled to an additional annual director's fee for acting as a director of the Company. IFMSA entered into a service contract on
20 March 2006 with Mr Yang. He is employed under a rolling contract. Under the terms of the present contract:
• He is paid an annual salary of R1,800,000.
• In respect of Mr Yang's service, an incentive payment R1,773,000 was accrued at 30 June 2008, with payment made in July 2008.
The incentive payment was paid based on certain production targets being met (refer to STI structure for details).
• Mr Yang was granted 300,000 phantom options on 15 November 2006 through the Phantom Options Plan (see note 29). The fair
value of these options expensed in the period to 30 June 2008 was R1,024,175 (£62,994). Of the 300,000 phantom options issued,
33% vested during the financial year. In the current financial year an incentive scheme was approved at a Board meeting held on
18 December 2007, whereby Mr Yang was allotted an additional 250,000 phantom options. These options were issued based on
certain production targets being met (refer to LTI structure for details). The fair value of these options expensed in the period to
30 June 2008 was R1,184,689 (£80,921). Of the 250,000 phantom options issued, 98.5% (246,250 options) vested at year-end from
satisfaction of the vesting conditions (that is the production targets).
• Mr Yang was not granted any share options during the year ended 30 June 2008.
• The service contract may be terminated without cause by either party giving not less than 30 days’ notice in writing, or by IFMSA
paying Mr Yang his remuneration for such period in lieu of notice. IFMSA may also terminate the service contract without notice if
Mr Yang is in breach of the service contract without making any termination payment.
Mr Dion Cohen
Chief Financial Officer
Mr Cohen is employed under a rolling contract.The current employment contract started on 1 April 2007. Under the terms of the present
contract:
• He is paid an annual salary of R2,355,184 (A$359,022) of which Mr Cohen voluntarily sacrificed R116,033 (A$17,688) to his
superannuation fund. In accordance with Australian legislation superannuation, 9% of Mr Cohen's salary, amounting to
R211,969 (A$32,312), was contributed to a superannuation fund on his behalf.
• In respect of Mr Cohen's service, an incentive payment of R2,528,644 (A$385,464) was accrued at 30 June 2008, with payment
made in July 2008.The incentive payment was paid based on certain production targets being met (refer to STI structure for details).
• Mr Cohen was granted 378,000 phantom options on 15 November 2006 through the Phantom Options Plan (see note 29). The fair
value of these options expensed in the period to 30 June 2008 was R1,175,146 (£80,270). Of the 378,000 phantom options issued,
33% vested during the financial year. In the current financial year an incentive scheme was approved at a Board meeting held on
18 December 2007, whereby Mr Cohen was allotted an additional 250,000 phantom options. These options were issued based on
certain production targets being met (refer to LTI structure for details). The fair value of these options expensed in the period to
30 June 2008 was R1,184,688 (£80,921). Of the 250,000 phantom options issued, 98.5% (246,250 options) vested at year-end from
satisfaction of the vesting conditions (that is the production targets).
• Mr Cohen was not granted any share options during the year ended 30 June 2008.
• The service agreement may be terminated at any time by Mr Cohen giving the Company not less than six months’ notice in writing.
The Company may terminate the agreement without cause by providing not less than 12 months’ written notice. In the event of a
material breach of any of the terms of the agreement or serious misconduct, the Company can terminate Mr Cohen's employment
at any time. A termination payment will not be payable on resignation or dismissal for serious misconduct.
REMUNERATION REPORT (CONTINUED)
5511
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ual R
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08
Mr Terence Willsteed
Non-executive Director
Mr Willsteed was appointed non-executive director on 12 October 2005. Under the terms of the present contract:
• He is paid an annual fee of R820,000 (A$125,000) (increase from A$70,000 to A$125,000 effective 1 June 2007) and is expected
to commit about two days per month fulfilling this role. In accordance with Australian legislation superannuation of 9%, R73,800
(A$11,250) of Mr Willsteed's director's fees, was contributed to a superannuation fund on his behalf.
• If he undertakes additional work for the Company he is paid an additional fee to be agreed at the time that such work is undertaken.
Fees charged for additional work amounted to R571,287 (A$87,086) during the financial year ended 30 June 2008.
• Mr Willsteed was granted 125,000 phantom options on 18 December 2007 through the Phantom Options Plan (see note 29).
These options were issued based on certain production targets being met (refer to LTI structure for details). The fair value of
these options expensed in the period to 30 June 2008 was R592,344 (£40,461). Of the 125,000 phantom options issued, 98.5%
(123,125 options) vested at year-end from satisfaction of the vesting conditions (that is the production targets).
• Mr Willsteed was not granted any share options during the year ended 30 June 2008.
Mr Ian Watson
Non-executive Director
Mr Watson was appointed non-executive director on 2 April 2003. Under the terms of the present contract:
• He is paid an annual fee of R697,498 (£50,000) (increase from £30,000 to £50,000 effective 1 June 2007), and is expected to
commit about two days per month fulfilling this role. If he undertakes additional work for the Company, he is paid an additional fee
to be agreed at the time such work is undertaken.
• Mr Watson was granted 250,000 phantom options on 15 November 2006 through the Phantom Options Plan (see note 29). The fair
value of these options expensed in the period to 30 June 2008 was R819,764 (£52,495). Of the 250,000 phantom options issued,
33% vested during the financial year. In the current financial year an incentive scheme was approved at a Board meeting held on
18 December 2007, whereby Mr Watson was allotted an additional 125,000 phantom options. These options were issued based on
certain production targets being met (refer to LTI structure for details). The fair value of these options expensed in the period to
30 June 2008 was R592,344 (£40,461). Of the 125,000 phantom options issued, 98.5% (123,125 options) vested at year-end from
satisfaction of the vesting conditions (that is the production targets).
• Mr Watson was not granted any share options during the year ended 30 June 2008.
Mr Stephen Oke
Non-executive Director
Mr Oke was appointed a non-executive director on 16 November 2006. Under the terms of the present contract:
• He is paid an annual fee of R731,922 (£50,000) (increase from £30,000 to £50,000 effective 1 June 2007) and is expected to
commit about two days per month fulfilling this role. If he undertakes additional work for the Company, he will be paid an
additional fee to be agreed at the time that such work is undertaken. Fees charged for additional work amounted to R333,792
(£22,800) during the financial year ended 30 June 2008.
• Mr Oke was granted 125,000 phantom options on 18 December 2007 through the Phantom Options Plan (see note 29). These
options were issued based on certain production targets being met (refer to LTI structure for details). The fair value of these
options expensed in the period to 30 June 2008 was R592,344 (£40,461). Of the 125,000 phantom options issued, 98.5%
(123,125 options) vested at year-end from satisfaction of the vesting conditions (that is the production targets).
• Mr Oke was not granted any share options during the year ended 30 June 2008.
Key management: personnel share options
Table 3: The following table sets out the details of share options granted and vested during the year(consolidated):
Terms and conditions for each grant Vested
Fair value
per option
Granted at grant Exercise First Last
no of Grant date price per Expiry exercise exercise No of
options date (note 25) option date date date options %
30 June 2008
David Kovarsky 1,000,000 (1) 1/2/2008 £0.22 – £0.23 £0.875 31/12/2010 30/6/2008 31/12/2010 333,333 33
(1) Mr Kovarsky was issued one million options to subscribe for shares in IFM within a three-year period up until 31 December 2010. These options vest in three equaltranches on 30 June 2008, 30 June 2009 and 30 June 2010 and shall be exercised at any time prior to 31 December 2010. The vesting of these options is conditionalon continued employment through the vesting period.
5522
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Ms Tian Xia
Non-executive Director
Ms Xia was appointed a non-executive director on 16 November 2006. Under the terms of the present contract:• She is paid an annual fee of R731,922 (£50,000) (increase from £30,000 to £50,000 effective 1 June 2007) and is expected to
commit about two days per month fulfilling this role. If she undertakes additional work for the Company, she will be paid anadditional fee to be agreed at the time that such work is undertaken.
• Ms Xia was granted 125,000 phantom options on 18 December 2007 through the Phantom Options Plan (see note 29). Theseoptions were issued based on certain production targets being met (refer to LTI structure for details). The fair value of these optionsexpensed in the period to 30 June 2008 was R592,344 (£40,461). Of the 125,000 phantom options issued, 98.5% (123,125 options)vested at year-end from satisfaction of the vesting conditions (that is the production targets).
• Ms Xia was not granted any share options during the year ended 30 June 2008.
Mr Seth Phalatse
Non-executive Director (IFMSA)
Mr Phalatse was a non-executive director of the Company's subsidiary, International Ferro Metals (SA) Pty Limited, throughout the yearended 30 June 2008. He is paid an annual fee of R250,000 and is expected to commit about two days per month fulfilling this role. If heundertakes additional work for the Company, he will be paid an additional fee to be agreed at the time that such work is undertaken.
REMUNERATION REPORT (CONTINUED)
5533
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ual R
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08
Key management personnel: share options (continued)
Table 3: The following table sets out the details of share options granted and vested during the year(consolidated) (continued):
Terms and conditions for each grant Vested
Fair value
per option First Last
Granted at grant Exercise available available
no of Grant date price per Expiry exercise exercise No of
options date (note 25) option date date date options %
30 June 2007
Non-executive directors
Xiaoping Yang 158,193 (1) 13/12/2006 £0.08 £0.415 30/6/2007 19/12/2006 30/6/2007 158,193 100
Ian Watson 166,667 (2) 18/12/2003 A$0.08 A$0.40 30/6/2008 1/7/2006 30/6/2008 166,667 100
166,666 (3) 18/12/2003 A$0.08 A$0.65 30/6/2008 30/1/2007 30/6/2008 166,666 100
491,526 491,526
Executive directors
Anthony Grey 500,000 (2) 18/12/2003 A$0.08 A$0.40 30/6/2008 1/7/2006 30/6/2008 500,000 100
500,000 (3) 18/12/2003 A$0.08 A$0.65 30/6/2008 30/1/2007 30/6/2008 500,000 100
310,350 (1) 13/12/2006 £0.08 £0.415 30/6/2007 19/12/2006 30/6/2007 310,350 100
Stephen Turner 200,000 (2) 18/12/2003 A$0.08 A$0.40 30/6/2008 1/7/2006 30/6/2008 200,000 100
200,000 (3) 18/12/2003 A$0.08 A$0.65 30/6/2008 30/1/2007 30/6/2008 200,000 100
491,960 (1) 13/12/2006 £0.08 £0.415 30/6/2007 19/12/2006 30/6/2007 491,960 100
2,202,310 2,202,310
Other key management personnel
Ronald Barnard 247,840 (1) 13/12/2006 £0.08 £0.415 30/6/2007 19/12/2006 30/6/2007 247,840 100
166,667 (2) 18/12/2003 A$0.08 A$0.40 30/6/2008 1/7/2006 30/6/2008 166,667 100
166,666 (3) 18/12/2003 A$0.08 A$0.65 30/6/2008 30/1/2007 30/6/2008 166,666 100
Dion Cohen 335,433 (1) 13/12/2006 £0.08 £0.415 30/6/2007 19/12/2006 30/6/2007 335,433 100
916,606 916,606
Total 3,610,442 3,610,442
(1) On 13 December 2006, performance rights were granted to senior executives under the IFM executive Employee Share Option Plan. These rights vested on the executivesbecoming entitled to a bonus under the Company's employee bonus structure. The four conditions relating to the payment of the bonus were being time of construction,cost of construction, the company's safety record and the production ramp-up period.
(2) These options were conditional on successful mine commissioning.
(3) These options were conditional on successful smelter commissioning.
5544
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ual R
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Key management personnel: share options (continued)
Table 4: The following table sets out the details of share options exercised during the year by keymanagement personnel (consolidated):
Number of Amount Amount
shares paid per unpaid per
issued share share
30 June 2008
Non-executive directors
Xiaoping Yang 250,000 £0.35 –
Terry Willsteed 250,000 £0.35 –
Ian Watson 166,667 A$0.40 –
Ian Watson 166,666 A$0.65 –
Stephen Oke 250,000 £0.35 –
Tian Xia 250,000 £0.35 –
Executive directors
Anthony Grey 500,000 A$0.40 –
Anthony Grey 500,000 A$0.65 –
Stephen Turner 200,000 A$0.40 –
Stephen Turner 200,000 A$0.65 –
Ronald Barnard 166,667 A$0.40 –
Ronald Barnard 166,666 A$0.65 –
Total 3,066,666
30 June 2007
Non-executive directors
Xiaoping Yang 158,193 £0.415 –
Executive directors
Anthony Grey 310,350 £0.415 –
Stephen Turner 491,960 £0.415 –
Other key management personnel
Ronald Barnard 247,840 £0.415 –
Dion Cohen 335,433 £0.415 –
Total 1,543,776
REMUNERATION REPORT (CONTINUED)
5555
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ual R
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Key management personnel: share options (continued)
Table 5: The following table sets out the details of phantom options granted and vested during the year bykey management personnel (consolidated):
Terms and conditions for each grant Vested
Fair First Last
Granted value per Exercise Price available available
no of Grant option price per cap per Expiry exercise exercise No of
options date (note 29) option option date date date options %
30 June 2008
Non-executive directors
Xiaoping Yang 246,250 (1) 6/2/2008 £0.33 £1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 246,250 100
100,000 (2) 15/11/2006 £0.671 £0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 100,000 100
100,000 (2) 15/11/2006 £0.73 £0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –
100,000 (2) 15/11/2006 £0.75 £0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –
Terry Willsteed 123,125 (1) 6/2/2008 £0.33 £1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 123,125 100
Ian Watson 123,125 (1) 6/2/2008 £0.33 £1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 123,125 100
83,333 (2) 15/11/2006 £0.671 £0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 83,333 100
83,333 (2) 15/11/2006 £0.73 £0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –
83,334 (2) 15/11/2006 £0.75 £0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –
Stephen Oke 123,125 (1) 6/2/2008 £0.33 £1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 123,125 100
Tian Xia 123,125 (1) 6/2/2008 £0.33 £1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 123,125 100
1,288,750 922,083
Executive directors
Anthony Grey 492,500 (1) 6/2/2008 £0.33 £1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 492,500 100
166,667 (2) 15/11/2006 £0.671 £0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 166,667 100
166,667 (2) 15/11/2006 £0.73 £0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –
166,666 (2) 15/11/2006 £0.75 £0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –
Stephen Turner 492,500 (1) 6/2/2008 £0.33 £1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 492,500 100
166,667 (2) 15/11/2006 £0.671 £0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 166,667 100
166,667 (2) 15/11/2006 £0.73 £0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –
166,666 (2) 15/11/2006 £0.75 £0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –
Ronald Barnard 492,500 (1) 6/2/2008 £0.33 £1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 492,500 100
150,000 (2) 15/11/2006 £0.671 £0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 150,000 100
150,000 (2) 15/11/2006 £0.73 £0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –
150,000 (2) 15/11/2006 £0.75 £0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –
2,927,500 1,960,834
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Key management personnel: share options (continued)
Table 5: The following table sets out the details of phantom options granted and vested during the year bykey management personnel (consolidated) (continued):
Terms and conditions for each grant Vested
Fair First Last
Granted value per Exercise Price available available
no of Grant option price per cap per Expiry exercise exercise No of
options date (note 29) option option date date date options %
Other key management
personnel
Dion Cohen 246,250 (1) 6/2/2008 £0.33 £1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 246,250 100
126,000 (2) 15/11/2006 £0.671 £0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 126,000 100
126,000 (2) 15/11/2006 £0.73 £0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –
126,000 (2) 15/11/2006 £0.75 £0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –
624,250 372,250
Total 4,840,500 3,255,167
(1) These options were issued based on certain production targets being met (refer to LTI structure for details).
(2) These options were issued in accordance with the Phantom Option Plan (refer to LTI structure for further details).
Terms and conditions for each grant Vested
Fair First Last
Granted value per Exercise Price available available
no of Grant option price per cap per Expiry exercise exercise No of
options (1) date (note 29) option option date date date options %
30 June 2007
Non-executive directors
Xiaoping Yang 100,000 15/11/2006 £0.685 £0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 – –
100,000 15/11/2006 £0.823 £0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –
100,000 15/11/2006 £0.872 £0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –
Ian Watson 83,333 15/11/2006 £0.685 £0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 – –
83,333 15/11/2006 £0.823 £0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –
83,334 15/11/2006 £0.872 £0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –
550,000 –
(1) These options were issued in accordance with the Phantom Option Plan (refer to LTI structure for further details).
REMUNERATION REPORT (CONTINUED)
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Key management personnel: share options (continued)
Table 5: The following table sets out the details of phantom options granted and vested during the year bykey management personnel (consolidated) (continued):
Terms and conditions for each grant Vested
Fair First Last
Granted value per Exercise Price available available
no of Grant option price per cap per Expiry exercise exercise No of
options (1) date (note 29) option option date date date options %
Executive directors
Anthony Grey 166,667 15/11/2006 £0.685 £0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 – –
166,667 15/11/2006 £0.823 £0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –
166,666 15/11/2006 £0.872 £0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –
Stephen Turner 166,667 15/11/2006 £0.685 £0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 – –
166,667 15/11/2006 £0.823 £0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –
166,666 15/11/2006 £0.872 £0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –
1,000,000 –
Other key management
personnel
Ronald Barnard 150,000 15/11/2006 £0.685 £0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 – –
150,000 15/11/2006 £0.823 £0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –
150,000 15/11/2006 £0.872 £0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –
Dion Cohen 126,000 15/11/2006 £0.685 £0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 – –
126,000 15/11/2006 £0.823 £0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –
126,000 15/11/2006 £0.872 £0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –
828,000 –
Total 2,378,000 –
(1) These options were issued in accordance with the Phantom Option Plan (refer to LTI structure for further details).
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Key management personnel: share options (continued)
Table 6: The following table sets out the details of Phantom options exercised during the year by keymanagement personnel (consolidated):
Number Exercise price
30 June 2008
Non-executive directors
Xiaoping Yang 100,000 £0.35
Ian Watson 83,333 £0.35
Executive directors
Anthony Grey 166,667 £0.35
Stephen Turner 166,667 £0.35
Ronald Barnard 150,000 £0.35
Other key management personnel
Dion Cohen 126,000 £0.35
Total 792,667
No phantom options were exercised or forfeited during the financial year ending 30 June 2007.
REMUNERATION REPORT (CONTINUED)
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Shareholdings of key management personnel
The following table outlines key management personnel shareholdings as at the date of this report:
Key management personnel Amount Description
Anthony John Grey (1) 1,266,667 ordinary shares
Stephen Turner (2) 6,916,667 ordinary shares
David Kovarsky – ordinary shares
Ian Watson 333,334 ordinary shares
Terence Willsteed (3) 166,667 ordinary shares
Xiaoping Yang 166,667 ordinary shares
Tian Xia 166,667 ordinary shares
Stephen Oke 50,000 ordinary shares
Ronald Barnard 333,334 ordinary shares
Dion Cohen – ordinary shares
(1) Mr Grey's shareholding is held by Dalvin (Pty) Ltd, a company of which Anthony Grey is a beneficial owner.
(2) Mr Turner's shareholding are held as follows: 1,000,000 ordinary shares in his own name, 5,541,667 ordinary shares by Kin Yip International Limited and 375,000 ordinaryshares by Elliot Rutledge Group (Pty) Ltd, both being companies of which Stephen Turner is a beneficial shareholder. Mr Turner only has a part interest in these shares.
(3) Terence Willsteed's shareholding is held by Patermat (Pty) Ltd as trustee for T.V. Willsteed and Associates (Pty) Ltd Superannuation Fund.
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Consolidated Parent
2008 2007 2008 2007
Notes R’000 R’000 R’000 R’000
Sales revenue 5 (a) 1,919,396 183,863 – –
Management fees received 5 (a) – – 16,960 24,000
Cost of goods sold (1,190,926) (168,006) – –
Gross profit 728,470 15,857 16,960 24,000
Other income/expenses
Administrative and other expenses 5 (b) (171,837) (107,529) (81,447) (8,784)
Foreign exchange gains/(losses) 109,491 (10,335) 87,432 (10,698)
Gains/(losses) on mark-to-market of derivatives 6 5,919 (176,256) 5,919 (162,127)
Net profit/(loss) before interest and tax 672,043 (278,263) 28,864 (157,609)
Finance income 9 43,898 29,766 134,449 91,388
Finance costs 9 (85,582) (95,772) (2) (10,795)
Net profit/(loss) before tax 630,359 (344,269) 163,311 (77,016)
Taxation expense 10 (52,177) – – –
Net profit/(loss) after tax 578,182 (344,269) 163,311 (77,016)
Attributable to:
Minority interest 28 5,003 (2,640) – –
Members of the parent 573,179 (341,629) 163,311 (77,016)
578,182 (344,269) 163,311 (77,016)
Earnings per share (cents per share)
– basic earnings/(loss) per share 11 114.05 (82.78) 32.49 (18.66)
– diluted earnings/(loss) per share 11 114.01 (82.78) 32.48 (18.66)
FINANCIAL REPORTConsolidated income statement
Consolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Profit/(loss) for the period 578,182 (344,269) 163,311 (77,016)
Total recognised income and expense for the period 578,182 (344,269) 163,311 (77,016)
Attributable to:
Equity holders of the parent 573,179 (341,629) 163,311 (77,016)
Minority interest 5,003 (2,640) – –
578,182 (344,269) 163,311 (77,016)
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Consolidated statement of recognised income and expense
FINANCIAL REPORT (CONTINUED)
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Consolidated balance sheets
Consolidated Parent
2008 2007 2008 2007
Notes R’000 R’000 R’000 R’000
Current assets
Cash and cash equivalents 13 972,190 43,929 815,396 62,582 Receivable – inter-company 14(a) – – 19,127 31,628 Trade and other receivables 14(b) 462,919 33,073 239,559 127,844 Prepayments 15 13,382 4,044 686 4,044 Inventories 16 109,752 140,821 – – Other current assets 17 – 141,916 – –
Total current assets 1,558,243 363,783 1,074,768 226,098
Non-current assets
Other financial assets 18 – – 1,587,258 1,025,657 Property, plant and equipment 19 1,672,281 1,632,388 8,976 70,886 Other non-current assets 20 25,625 124,371 516 516 Total non-current assets 1,697,906 1,756,759 1,596,750 1,097,059
Total assets 3,256,149 2,120,542 2,671,518 1,323,157
Current liabilities
Trade and other payables 21 213,149 134,406 6,169 10,298 Provisions 22 100,852 23,118 27,565 13,151 Derivative liability 24 – 20,994 – 5,479
Total current liabilities 314,001 178,518 33,734 28,928
Non-current liabilities
Interest-bearing loans and borrowings 23 92,716 898,631 – – Deferred tax liability 10 50,602 – – – Provisions 22 27,184 33,971 3,172 7,261 Derivative liability 24 – 42,432 – 42,432 Total non-current liabilities 170,502 975,034 3,172 49,693
Total liabilities 484,503 1,153,552 36,906 78,621
Net assets 2,771,646 966,990 2,634,612 1,244,536
Shareholders' equity
Contributed equity 25 2,834,412 1,607,075 2,834,412 1,607,075 Share-based payment reserve 26 6,617 7,480 6,617 7,189 Accumulated losses 27 (78,036) (651,215) (206,417) (369,728)
Parent entity interests 2,762,993 963,340 2,634,612 1,244,536
Minority interests 28 8,653 3,650 – –
Total shareholders’ equity 2,771,646 966,990 2,634,612 1,244,536
Consolidated Parent
2008 2007 2008 2007
Notes R’000 R’000 R’000 R’000
Cash flows from operating activities
Receipts from customers 1,509,613 169,621 – –
Receipts from subsidiary – – 16,960 24,000
Payments and advances to suppliers and employees
(inclusive of goods and services tax) (1,154,115) (366,406) (52,582) (16,138)
Phantom options exercised and paid (19,493) – (4,688) –
Interest paid (84,748) (8,002) – (709)
Net cash flows from operating activities 251,257 (204,787) (40,310) 7,153
Cash flows from investing activities
Payments for property, plant and equipment (83,599) (501,954) – (50)
Investment in subsidiary – – (500,000) –
Acquisition of subsidiary (Purity) – (64,486) – (64,486)
Interest received 43,898 29,766 22,112 386
Net cash flows from investing activities (39,701) (536,674) (477,888) (64,150)
Cash flows from financing activities
Proceeds from issues of shares 1,196,208 132,515 1,196,208 132,515
Proceeds from issue of options 38,251 – 38,251 –
Receipts from release of restricted cash 240,663 – – –
Proceeds from borrowings 800 577,863 800 –
Payment of share issue costs (51,679) – (51,679) –
Repayment of borrowings (817,029) – – –
Loans to subsidiary – – – (13,136)
Net cash flows from financing activities 607,214 710,378 1,183,580 119,379
Net increase/(decrease) in cash held 818,770 (31,083) 665,382 62,382
Cash at the beginning of the financial year 43,929 85,348 62,582 8,109
Effects of exchange rate changes on cash 109,491 (10,335) 87,432 (7,909)
Cash and cash equivalents at the end of the year 13 972,190 43,929 815,396 62,582
FINANCIAL REPORT (CONTINUED)
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Statement of cash flows
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Reconciliation of operating profit to cash flows fromoperating activities
Consolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Profit/(loss) from ordinary activities after income tax 578,182 (344,269) 163,311 (77,016)
Depreciation 54,684 22,978 352 187
Interest received/accrued (43,898) (29,766) (22,112) (386)
Preference dividend accrued – – (112,337) (91,002)
Foreign exchange (gain)/loss (109,491) 10,336 (87,432) 10,698
Amortisation of debt establishment costs – 10,849 – 10,086
(Profit)/Loss on mark-to-market of derivatives (5,919) 176,257 (5,919) 162,127
Provision against inter-company receivable – – – (37,037)
Provision against investment in subsidiary – – – (19,000)
Share-based payment expense 38,211 33,439 13,935 12,730
(Increase)/decrease in receivables (428,274) 1,025 338 19,500
Decrease/(increase) in inventories 31,069 (140,050) – –
(Increase)/decrease in prepayments (9,338) (717) 3,358 (717)
Increase/(decrease) in payables and accruals 89,051 (39,055) (4,129) 6,701
Increase in deferred tax liabilities 50,602 – – –
Increase in provisions 6,378 17,265 10,325 10,280
Increase in capitalised interest facility – 76,921 – –
Net cash flow from operating activities 251,257 (204,787) (40,310) (7,153)
Cash is represented by:
Cash at bank 66,434 43,929 17,465 62,582
Short-term deposits 905,756 – 797,931 –
972,190 43,929 815,396 62,582
1. Corporate informationInternational Ferro Metals Limited (the Parent) is a company limited by shares incorporated in Australia the shares of which are publicly
traded on the London Stock Exchange, as of 1 September 2007. The Company previously traded on the Alternative Investment Market
(AIM) of the London Stock Exchange.
The Financial Report for the year ended 30 June 2008 was issued in accordance with a resolution of directors on 18 September 2008.
2. Accounting policies
(a) Basis of preparationThe Financial Report is a general-purpose Financial Report, which has been prepared in accordance with the requirements of the
Corporations Act 2001 and Australian Accounting Standards. The Financial Report has also been prepared on a historical cost basis,
except for derivative financial instruments which have been measured at fair value.
The Financial Report is presented in South African rands and all values are rounded to the nearest thousand rands (R'000) unless
otherwise stated.
(b) Basis of consolidationThe consolidated financial statements incorporate the assets and liabilities of all entities controlled by International Ferro Metals
Limited at the end of the reporting period. The Company and its controlled entities together are referred to as the Group. The effects
of all transactions between entities in the Group are eliminated in full.
Where control of an entity is obtained during a financial year, its results are included in the consolidated income statement from
the date on which control commences.Where control of an entity ceases during a financial year, its results are included for that part
of the year during which control existed.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent
accounting policies.
(c) Statement of complianceThe Financial Report complies with Australian Accounting Standards and International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB).
International Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective have
not been adopted by the Group for the annual reporting period ended 30 June 2008. These are outlined in the table below.
FINANCIAL REPORT (CONTINUED)
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Notes to the Financial Report
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2. Accounting policies (continued)
(c) Statement of compliance (continued)
Application Application
date of Impact on Group Financial date for
Reference Title Summary standard Report Group
AASB 8 and Operating Segments New standard replacing AASB 1 January AASB 8 is a disclosure standard 1 July 2009AASB and consequential 114 Segment Reporting, 2009 so will have no direct impact on 2007-3 amendments to which adopts a the amounts included in the
other Australian management reporting Group's financial statements,Accounting Standards approach to segment although it may indirectly
reporting. affect testing for impairment.In addition, the amendments may have an impact on the Group's segment disclosures.
AASB 123 Borrowing Costs and The amendments to 1 January These amendments to AASB 123 1 July 2009(Revised) consequential AASB 123 require that all 2009 require that all borrowing costsand AASB amendments to borrowing costs associated associated with a qualifying 2007-6 other Australian with a qualifying asset be asset be capitalised. The Group
Accounting capitalised. has no borrowing costs Standards associated with qualifying assets
and as such the amendments are not expected to have any impact on the Group's Financial Report.
AASB 101 Presentation of Introduces a statement 1 January These amendments are only 1 July 2009(Revised) Financial Statements of comprehensive income. 2009 expected to affect the and AASB and consequential Other revisions include presentation of the Group's 2007-8 amendments to impacts on the presentation Financial Report and will not
other Australian of items in the statement have a direct impact on the Accounting of changes in equity, new measurement and recognition Standards presentation requirements of amounts disclosed in the
for restatements or Financial Report. The Group reclassifications of items in has not determined at this stagethe financial statements, whether to present a singlechanges in the presentation statement of comprehensiverequirements for dividends income or two separateand changes to the titles statements.of the financial statements.
2. Accounting policies (continued)
(c) Statement of compliance (continued)
Application Application
date of Impact on Group Financial date for
Reference Title Summary standard Report Group
AASB Amendments to The amendments clarify the 1 January The Group has share-based 1 July 2009
2008-1 Australian Accounting definition of 'vesting conditions', 2009 payment arrangements that may
Standard – Share- introducing the term 'non- be affected by these amendments.
based Payments: vesting conditions' for However, the Group has not yet
Vesting Conditions conditions other than vesting determined the extent of the
and Cancellations conditions as specifically impact, if any.
defined and prescribe the
accounting treatment of an
award that is effectively
cancelled because a non-vesting
condition is not satisfied.
AASB Amendments to The amendments provide a 1 January These amendments are not 1 July 2009
2008-2 Australian Accounting limited exception to the 2009 expected to have any impact on
Standards – Puttable definition of a liability so as the Group's Financial Report as
Financial Instruments to allow an entity that issues the Group does not have on
and Obligations puttable financial instruments issue or expect to issue any
arising on with certain specified features, puttable financial instruments as
Liquidation to classify those instruments as defined by the amendments.
equity rather than financial
liabilities.
Adoption of new accounting standardThe Group has adopted AASB 7 Financial Instruments; Disclosures and all consequential amendments which become applicable on
1 January 2007.The adoption of this standard has only affected the disclosure in these financial statements.There has been no effect
on profit and loss or the financial position of the entity.
(d) Revenue recognitionRevenue from the sale of ferrochrome is recognised when significant risks and rewards of the saleable product have transferred to
the customer. Risks and rewards are considered passed to the customer upon delivery to the customer's control.
Interest revenue is bought to account on an accrual basis using the effective interest rate method, which is the rate that exactly
discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amount of the
financial asset.
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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2. Accounting policies (continued)
(e) Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity
of three months or less.
For the purposes of the cash flow statement, cash and cash equivalents consist of cash and cash equivalents as defined above, net
of outstanding bank overdrafts.
(f) Receivables
Trade receivables, which are due for settlement no more than 30 days from the date of the final invoice, are recognised initially at
fair value and subsequently measured at amortised cost using the effective interest method, less an allowance for uncollectible
amounts. The final invoice is issued once the product is received and final specification agreed by the customer. Collectables of trade
debtors are reviewed on an ongoing basis and a provision for non recovery is made accordingly. Debts which are known to be
uncollectable are written off.
(g) Inventories
Inventories, including raw materials, work in progress, consumables and finished goods, are valued at the lower of cost and net
realisable value.
Costs incurred in bringing each product to its present location and conditions are accounted for as follows:
Raw materials – purchase cost assigned on a weighted average cost basis. The cost of purchase comprises the purchase price,
including import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities)
transport, handling and other costs directly attributable to the acquisition of raw materials. Volume discounts and rebates are
included in determining the cost of purchase.
Consumables and maintenance spares are valued at purchase cost on a first-in, first-out basis.
Finished goods and work-in-progress – cost of direct materials and labour and a proportion of variable and fixed manufacturing
overheads based on normal operating capacity. Costs are assigned on the basis of weighted average costs.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the
estimated costs necessary to make the sale.
(h) Property, plant and equipment
Property, plant and equipment are recorded at historical cost less accumulated depreciation and any impairment. The carrying value
of assets is reviewed for impairment at the balance sheet date. An asset is immediately written down to its recoverable amount if
the carrying value of the asset exceeds its estimated recoverable amount.
2. Accounting policies (continued)
(h) Property, plant and equipment (continued)The depreciation rates per annum for each class of fixed asset are as follows:• Property and buildings: between 3.33% and 5%• Plant and equipment: between 3.33% and 33.33%• Motor vehicles: between 16.67% and 20%• Furniture and fittings: 16.67%• Computer equipment: 33.34%
Subsequent expenditure relating to an item of property, plant and equipment, that has already been recognised, is added to thecarrying amount of the asset.
All assets are depreciated over their anticipated useful lives up to their residual values using a straight-line depreciation basis. Theseuseful lives are determined on the day of capitalisation and are reassessed annually by management.
Mineral rights that are being depleted are amortised over the estimated remaining life of mine, using the unit-of-production methodbased on proven and probable ore reserves. Land is not depreciated.
Currently the maximum life applied to components which are expected to last for the life of the plant is 29 years and the maximumresidual value which has been applied to any component is 50% of the cost value.
ImpairmentThe carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate thecarrying value may not be recoverable.
For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generatingunit to which the asset belongs. If any such indication exists and where the carrying values exceed the estimated recoverableamounts, the assets or cash-generating units are written down to their recoverable amount.
(i) Income taxCurrent tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from orpaid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantivelyenacted by the balance sheet date.
Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets and liabilitiesand their carrying amounts for financial reporting purposes.
Deferred income tax assets and liabilities are recognised for all taxable temporary differences:• except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction
that is not a business combination and at the time of the transaction affects neither the accounting profit nor taxableprofit or loss; and
• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in jointventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable thatthe temporary differences will not reverse in the foreseeable future.
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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2. Accounting policies (continued)
(i) Income tax (continued)The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no
longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has
become probable that future taxable profit will allow the deferred income tax to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance
sheet date.
Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same taxation
authority.
(j) Goods and services taxRevenues, expenses and assets are recognised net of the amount of goods and services tax (GST) or value added tax (VAT),
except:• where the amount of GST/VAT incurred is not recoverable from the taxation authority, it is recognised as part of the
cost of the asset or as part of an item of expense; or• for receivables and payables which are recognised inclusive of GST/VAT.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables.
(k) Trade and other creditorsTrade and other creditors amounts represent liabilities for goods and services provided to the entity prior to the end of the financial
year and which are unpaid. The amounts are unsecured and are usually paid within 30 days.
(l) Interest-bearing loans and borrowingsAll loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs
associated with the borrowing.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective
interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or premium on settlement.
Gains and losses are recognised in the income statement when the liabilities are derecognised, as well as through the
amortisation process.
2. Accounting policies (continued)
(m) LeasesThe determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an
assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are
capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease
payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability. Finance charges are recognised as an expense in profit or loss.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if there is no
reasonable certainty that the Group will obtain ownership by the end of the lease term.
Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term. Lease
incentives are recognised in the income statement as an integral part of the total lease expense.
(n) Borrowing costsBorrowing costs are recognised as an expense when incurred.
(o) ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable
that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be
made of the amount of the obligation.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the risks
specific to the liability.
When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.
Environmental rehabilitation provisions:The estimated cost of rehabilitation, comprising liabilities for decommissioning and restoration, is based on current legal
requirements and existing technology and reassessed annually by management. The costs of the provisions do not take into account
the potential proceeds from the sale of the assets at the end of their useful lives.
Decommissioning:The discounted value of the estimated obligation to decommission, being the cost to dismantle all structures and rehabilitate the
land affected by establishing a mine or plant, is included in long-term provisions. The unwinding of the obligation is included in the
income statement under finance costs. The initial related decommissioning asset is recognised as part of property, plant
and equipment.
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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2. Accounting policies (continued)
(o) Provisions (continued)
Restoration:
The discounted value of the estimated obligation of restoration, being the cost to correct damages from ongoing operations, is
included in long-term provisions. Management reviews the estimations on an annual basis and charges any movements directly in
the income statement.
Environmental rehabilitation trust funds:
Monthly payments are made to the trust in accordance with a financial policy agreement. The investment in the trusts is carried as
inter-company investments in each company. The trusts are fully consolidated as IFM is the only contributor to these trusts and
exercises full control via the board of trustees.
The estimated costs of rehabilitating a mine are generally included in the capital cost of the mine. Changes in estimates of the
liability are dealt with on a prospective basis.
(p) Share-based payment transactions
(i) Equity-settled transactions:
The Group provides benefits to employees (including directors) of the Group and other service providers or strategic equity
partners in the form of share-based payment transactions, whereby employees or other parties render services or provide goods
in exchange for shares or rights over shares (equity-settled transactions).
The cost of these equity-settled transactions with employees is measured by reference to the fair value at the date at which
they are granted. The fair value is determined using an option pricing method.
In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked to the price of
the shares of International Ferro Metals Limited (market conditions).
The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over the period in which
the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully
entitled to the award (vesting date).
The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects (i) the
extent to which the vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Group,
will ultimately vest.This opinion is formed based on the best available information at balance sheet date. No adjustment is made
for the likelihood of market performance conditions being met as the effect of these conditions is included in the determination
of fair value at grant date.
2. Accounting policies (continued)
(p) Share-based payment transactions (continued)
(i) Equity settled transactions: (continued)No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market
condition.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been
modified. In addition, an expense is recognised for any increase in the value of the transaction as a result of the modification,
as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet
recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and
designated as a replacement award on the date that it is granted, the cancelled and new award are treated as if they were a
modification of the original award, as described in the previous paragraph.
Where shares are issued at a discount to fair value either by reference to the current market price or by virtue of the Group
providing financing for the share purchase on favourable terms, the value of the discount is considered a share-based payment.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of earnings
per share.
(ii) Cash-settled transactions:The Group also provides benefits to employees in the form of cash-settled share-based payments, whereby employees render
services in exchange for cash, the amounts of which are determined by reference to movements in the price of the shares of
International Ferro Metals Limited.
The ultimate cost of these cash-settled transactions will be equal to the actual cash paid to the employees, which will be the
fair value at settlement date.
The cumulative cost recognised until settlement is a liability and the periodic determination of this liability is as follows:
(i) at each reporting date between grant and settlement, the fair value of the award is determined;
(ii) during the vesting period, the liability recognised at each reporting date is the fair value of the award at that date
multiplied by the expired portion of the vesting period;
(iii) from the end of the vesting period until settlement, the liability recognised is the full fair value of the liability at the
reporting date; and
(iv) all changes in the liability are recognised in profit or loss for the period.
The fair value of the liability is determined, initially and at each reporting date until it is settled. During the financial year ending
2007 a Black-Scholes option pricing model was applied. For the current financial year an option pricing model was applied, taking
into account the terms and conditions on which the award was granted, and the extent to which employees have rendered
service to date.
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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2. Accounting policies (continued)
(q) Earnings per shareBasic earnings per share are calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing
equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted earnings per share are calculated as net profit attributable to members of the parent, adjusted for:• costs of servicing equity (other than dividends) and preference share dividends;• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised
as expenses; and• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of
potential ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
(r) Exploration and evaluation costsExpenditure on exploration and evaluation is accounted for in accordance with the 'area of interest' method. Exploration and
evaluation expenditure is capitalised provided the rights to tenure of the area of interest is current and either:• the exploration and evaluation activities are expected to be recouped through successful development and exploitation of
the area of interest or, alternatively, by its sale; or • exploration and evaluation activities in the area of interest have not at the reporting date reached a stage that permits a
reasonable assessment of the existence or otherwise of economically recoverable reserves, and active and significantoperations in, or relating to, the area of interest are continuing.
When the technical feasibility and commercial viability of extracting a mineral resource have been demonstrated then any
capitalised exploration and evaluation expenditure is reclassified as capitalised mine development. Prior to reclassification,
capitalised exploration and evaluation expenditure is assessed for impairment.
(s) Foreign currency transactionsThe functional currency of International Ferro Metals Limited and its subsidiaries is the South African rand (R) as this is the currency
in which Group primarily generates and expends cash. The directors have chosen the rand, being the group's functional currency, as
being the most appropriate currency in which to present the financial statements.
Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the
balance sheet date.
All differences in the consolidated Financial Report are taken to the income statement.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as
at the date of the initial transaction.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair
value was determined.
2. Accounting policies (continued)
(t) Feasibility expenditureCosts incurred relating to the feasibility study are expensed as incurred until the period in which management considers that a
bankable feasibility study is complete and the Company decides to continue with the project. Following this time, costs directly
related to the feasibility study are deferred as a non-current asset and will be amortised over the life of the mine on a units-of-
production basis.
(u) Financial assetsFinancial assets are categorised as either loans and receivables or held-to-maturity investments. The Group determines the
categorisation of its financial assets at initial recognition. Categorisation is re-evaluated at each financial year-end. When financial
assets are recognised initially, they are measured at fair value, plus directly attributable transaction costs.
The Group classifies its financial assets in the following categories:
(i) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market. Such assets are carried at amortised cost using the effective interest method.
(ii) Held-to-maturity investmentsNon-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held to maturity when
the Group has the positive intention and ability to hold to maturity. Investments intended to be held for an undefined period
are not included in this classification. Other long-term investments that are intended to be held to maturity, such as bonds, are
measured at amortised cost. This cost is computed as the amount initially recognised minus principal repayments, plus or minus
the cumulative amortisation using the effective interest method of any difference between the initially recognised amount and
the maturity amount. This calculation includes all fees paid or received between parties to the contract that are an integral part
of the effective interest rate, transaction costs and all other premiums and discounts. For investments carried at amortised cost,
gains and losses are recognised in income when the investments are derecognised or impaired, as well as through the
amortisation process.
(iii) Parent entity investmentsInvestments in subsidiaries held by the Parent are recorded at cost.
(v) Financial liabilitiesThe Group classifies its financial liabilities in the following categories:
(i) At fair value through profit and loss:Options granted that are not part of a continuing share-based payment relationship (i.e. there is no ongoing provision of goods
and/or services – refer note 2(p)) and are denominated in a currency other than the entity's functional currency, are accounted
for as derivative liabilities in accordance with AASB 139: Financial Instruments: Recognition and Measurement and IFRIC
guidelines. Such options are recorded on the balance sheet at fair value with movements in fair value between being recorded
in the income statement. In respect of the derivative liability, the change in the fair value of the derivative liability, during the
period and cumulatively, is not attributable to changes in the credit risk of that liability.
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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2. Accounting policies (continued)
(v) Financial liabilities (continued)
(i) At fair value through profit and loss: (continued)In addition, contractual arrangements whereby the Company agrees to issue a variable number of shares are accounted for as a
liability. To the extent that these contractual arrangements meet the definition of a derivative, the value of the contractual
arrangement is recorded on the balance sheet at fair value with movements in fair value being recorded in the income
statement.
(ii) Measured at amortised costAll loans and borrowings are initially recognised at the fair value of the considerations received less directly attributable
transaction cost. After initial recognition, loans and borrowings are subsequently measured at amortised cost using the effective
interest rate method.
A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. On derecognition
of a financial liability, the difference between the carrying amount of the liability extinguished or transferred to another party
and the amount paid is included in income.
(w) Contributed equityOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in
equity as a deduction, net of tax, from the proceeds.
Reserved sharesThe Group's own equity instruments, which are reacquired for later use in employee share-based payment arrangements (reserved
shares), are deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the
Group's own equity instruments.
Loans from related partiesLoans from related parties that are not subject to a contract, are non-interest bearing, and have no specified repayment date are
classified as contributed equity. The loans do not represent shares and do not have a right to dividend distributions.
3. Significant accounting judgements, estimates and assumptionsIn the process of applying the Group's accounting policies, management has made the following judgements, apart from those involving
estimations, which have the most significant effect on the amounts recognised in the financial statements:
(i) Significant accounting judgements
(a) Determination of mineral resources and ore reservesThe determination of reserves affects the accounting for asset carrying values, depreciation and amortisation rates, deferred
stripping costs and provisions for decommissioning and restoration. International Ferro Metals Limited estimates its mineral
resources and ore reserves using the Australian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves
2004 (the JORC code) as a minimum standard.The information on mineral resources and ore reserves were prepared by or under
the supervision of Competent Persons as defined in the JORC code. The amounts presented are based on the mineral resources
and ore reserves determined under the JORC code.
3. Significant accounting judgements, estimates and assumptions (continued)
(i) Significant accounting judgements (continued)
(a) Determination of mineral resources and ore reserves (continued)
There are numerous uncertainties inherent in estimating mineral resources and ore reserves and assumptions that are valid at
the time of estimation may change significantly when new information becomes available.
Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the economic
status of reserves and may, ultimately, result in the reserves being restated.
(b) Impairment of capitalised exploration and evaluation expenditure
The future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors, including
whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the related exploration
and evaluation asset through sale.
Factors that could affect the future recoverability include the level of reserves and resources, future technological changes, which
could affect the cost of mining, future legal changes (including changes to environmental restoration obligations) and changes
to commodity prices.
To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the future, profits
and net assets will be reduced in the period in which this determination is made.
In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet reached a stage
that permits a reasonable assessment of the existence or otherwise of economically recoverable reserves. To the extent it is
determined in the future that this capitalised expenditure should be written off, profits and net assets will be reduced in the
period in which this determination is made.
(c) Impairment of capitalised mine development expenditure
The future recoverability of capitalised mine development expenditure is dependent on a number of factors, including the level
of proved, probable and inferred mineral resources, future technological changes that could impact the cost of mining, future
legal changes (including changes to environmental restoration obligations) and changes to commodity prices.
To the extent that capitalised mine development expenditure is determined not to be recoverable in the future, profits and net
assets will be reduced in the period in which this determination is made.
(ii) Significant accounting estimates and assumptions
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events.
The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain
assets and liabilities within the next annual reporting period are:
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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3. Significant accounting judgements, estimates and assumptions (continued)
(ii) Significant accounting estimates and assumptions (continued)
(a) Impairment of property, plant and equipmentProperty, plant and equipment are reviewed for impairment if there is any indication that the carrying amount may not be
recoverable.
Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of 'value in use'
(being the net present value of expected future cash flows of the relevant cash generating unit) and 'fair value less costs to sell'.
In determining value in use, future cash flows are based on:
Estimates of the quantities of ore reserves and mineral resources for which there is a high degree of confidence of:
• economic extraction;
• future production levels;
• future commodity prices; and
• future cash costs of production and capital expenditure.
Variations to the expected future cash flows, and the timing thereof, could result in significant changes to any impairment losses
recognised, if any, which could in turn affect future financial results.
(b) Provisions for decommissioning and restoration costsDecommissioning and restoration costs are a normal consequence of mining, and the majority of this expenditure is incurred at
the end of a mine's life. In determining an appropriate level of provision, consideration is given to the expected future costs to
be incurred, the timing of these expected future costs (largely dependent on the life of the mine), and the estimated future level
of inflation.
The ultimate cost of decommissioning and restoration is uncertain and costs can vary in response to many factors, including
changes to the relevant legal requirements, the emergence of new restoration techniques or experience at other mine sites. The
expected timing of expenditure can also change, for example, in response to changes in reserves or to production rates.
Changes to any of the estimates could result in significant changes to the level of provisioning required, which would in turn
affect future financial results.
(c) Recoverability of potential deferred income tax assetsThe Group recognises deferred income tax assets in respect of tax losses to the extent that it is probable that the future
utilisation of these losses is considered probable. Assessing the future utilisation of these losses requires the Group to make
significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on
forecasted profits from operations and the application of existing tax laws. Future changes in profits resulting in estimated
taxable income could affect recognised or unrecognised deferred tax assets or liabilities.
(d) Valuation of share-based paymentsThe key estimates and assumptions used in the valuation of share-based payment plans are set out in note 2(p) and note 29.
4. Turnover and segmental analysisThe Group operates predominantly in one business segment, being the processing of chromite in South Africa and sale of
ferrochrome in the international market.
5. (a) Sales revenueConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Sales revenue 1,919,396 183,863 – –
Inter-company management fees – – 16,960 24,000
1,919,396 183,863 16,960 24,000
5. (b) Administrative and other expensesConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Accounting fees 815 870 815 870
Auditors remuneration 2,501 2,970 2,459 2,404
Consulting fees 2,672 5,279 1,111 2,742
Depreciation 358 2,067 352 186
Remuneration of key management personnel (refer note 7) 56,772 46,606 38,092 33,287
Legal fees 5,716 3,225 4,105 3,115
Staff costs (refer note 8) 49,277 18,900 3,664 1,630
Write down of inventory – 2,481 – –
Reversal of impairment (1) – – – (56,037)
Other administrative expenses 53,726 25,131 30,849 20,587
171,837 107,529 81,447 8,784
(1) The reversal of impairment represents the provision for diminution in parent company investment in the company's subsidiary, International Ferro Metals (SA) Pty Limited.
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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6. Gains/loss on mark-to-market of derivativesConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
(Gain)/loss on foreign currency options (1) (5,919) 176,256 (5,919) 162,127
(1) This represents the movement in the mark-to-market value of derivative liabilities in accordance with the accounting policy described in note 2(v). Refer also to notes 24and 25 for further details.
7. Remuneration of key management personnel
(a) Details of key management personnel
Name Position Date of appointment
(i) DirectorsTony Grey Executive Chairman 9 December 2002
Stephen Turner Chief Executive Officer 26 January 2002
David Kovarsky Managing Director 1 February 2008
Ronald Barnard Chief Operating Officer 14 November 2007 (resigned 17 July 2008)
Xiaoping Yang Non-executive Director 12 October 2005
Terence Willsteed Non-executive Director 12 October 2005
Ian Watson Non-executive Director 2 April 2003
Stephen Oke Non-executive Director 16 November 2005
Tian Xia Non-executive Director 16 November 2005
(ii) ExecutivesDion Cohen Group Chief Financial Officer 1 April 2007
Hannes Visser General Manager, Operations 14 July 2008
Willie Bester Maintenance and Project Manager 14 July 2008
7. Remuneration of key management personnel (continued)
(b) Remuneration of key management personnel
Consolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Basic salary and fees 16,400 9,706 10,724 5,417
Incentive payments 14,622 25,013 10,132 16,398
Other fees (1) 3,632 2,830 2,695 2,830
Superannuation (2) 860 373 860 373
Non-monetary benefits 75 – 75 –
Share-based payments 21,183 14,144 13,606 8,269
56,772 52,066 38,092 33,287
Less amounts capitalised to capital work in progress – (5,460) – –
56,772 46,606 38,092 33,287
(1) Other fees represent costs for any additional work undertaken for the Company and retention fees paid.
(2) Superannuation represents payments made in respect of a defined contribution pension scheme.
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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7. Remuneration of key management personnel (continued)
(c) Option holdings of key management personnel (consolidated)
Vested at 30 June 2008
Balance at Balance
beginning end of
of period Options Options period Not
1 July 2007 granted exercised 30 June 2008 Total Exercisable exercisable
30 June 2008
Non-executive directors
Xiaoping Yang 250,000 – (250,000) – 250,000 250,000 –
Ian Watson 333,333 – (333,333) – 333,333 333,333 –
Terence Willsteed 250,000 – (250,000) – 250,000 250,000 –
Stephen Oke 250,000 – (250,000) – 250,000 250,000 –
Tian Xia 250,000 – (250,000) – 250,000 250,000 –
Executive directors
Anthony Grey 1,000,000 – (1,000,000) – 1,000,000 1,000,000 –
Stephen Turner 400,000 – (400,000) – 400,000 400,000 –
David Kovarsky – 1,000,000 – 1,000,000 1,000,000 333,333 666,667
Ronald Barnard 333,333 – (333,333) – 333,333 333,333 –
Other key management personnel
Dion Cohen – – – – – – –
Total 3,066,666 1,000,000 (3,066,666) 1,000,000 4,066,666 3,399,999 666,667
7. Remuneration of key management personnel (continued)
(c) Option holdings of key management personnel (consolidated)
Vested at 30 June 2007
Balance at Balance
beginning end of
of period Options Options period Not
1 July 2006 granted exercised 30 June 2007 Total Exercisable exercisable
30 June 2007
Non-executive directors
Xiaoping Yang 250,000 158,193 (158,193) 250,000 250,000 250,000 –
Ian Watson 333,333 – – 333,333 333,333 333,333 –
Terence Willsteed 250,000 – – 250,000 250,000 250,000 –
Stephen Oke 250,000 – – 250,000 250,000 250,000 –
Tian Xia 250,000 – – 250,000 250,000 250,000 –
Executive directors
Anthony Grey 1,000,000 310,350 (310,350) 1,000,000 1,000,000 1,000,000 –
Stephen Turner 400,000 491,960 (491,960) 400,000 400,000 400,000 –
Other key management personnel
Ronald Barnard 333,333 247,840 (247,840) 333,333 333,333 333,333 –
Dion Cohen – 335,433 (335,433) – – – –
Total 3,066,666 1,543,776 (1,543,776) 3,066,666 3,066,666 3,066,666
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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7. Remuneration of key management personnel (continued)
(c) Option holdings of key management personnel (consolidated)
Vested at 30 June 2008
Balance at Balance
beginning Phantom Phantom end of
of period options options period Not
1 July 2007 granted exercised 30 June 2008 Total Exercisable exercisable
30 June 2008
Non-executive directors
Xiaoping Yang 300,000 246,250 (100,000) 446,250 446,250 246,250 200,000
Ian Watson 250,000 123,125 (83,333) 289,792 289,792 123,125 166,667
Terence Willsteed – 123,125 – 123,125 123,125 123,125 –
Stephen Oke – 123,125 – 123,125 123,125 123,125 –
Tian Xia – 123,125 – 123,125 123,125 123,125 –
Executive directors
Anthony Grey 500,000 492,500 (166,667) 825,833 825,833 492,500 333,333
Stephen Turner 500,000 492,500 (166,667) 825,833 825,833 492,500 333,333
Ronald Barnard 450,000 492,500 (150,000) 792,500 792,500 492,500 300,000
Other key management personnel
Dion Cohen 378,000 246,250 (126,000) 498,250 498,250 246,250 252,000
Total 2,378,000 2,462,500 (792,667) 4,047,833 4,047,833 2,462,500 1,585,333
7. Remuneration of key management personnel (continued)
(c) Option holdings of key management personnel (consolidated)
Vested at 30 June 2007
Balance at Balance
beginning Phantom Phantom end of
of period options options period Not
1 July 2006 granted exercised 30 June 2008 Total Exercisable exercisable
30 June 2007
Non-executive directors
Xiaoping Yang – 300,000 – 300,000 300,000 – 300,000
Ian Watson – 250,000 – 250,000 250,000 – 250,000
Executive directors
Anthony Grey – 500,000 – 500,000 500,000 – 500,000
Stephen Turner – 500,000 – 500,000 500,000 – 500,000
Other key management personnel
Ronald Barnard – 450,000 – 450,000 450,000 – 450,000
Dion Cohen – 378,000 – 378,000 378,000 – 378,000
Total – 2,378,000 – 2,378,000 2,378,000 – 2,378,000
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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7. Remuneration of key management personnel (continued)
(d) Shareholdings holdings of key management personnel (consolidated)
Balance end
Balance at Granted as On exercise Shares of period
1 July 2007 remuneration of options sold 30 June 2008
ordinary ordinary ordinary ordinary ordinary
shares shares shares shares shares
30 June 2008
Non-executive directors
Xiaoping Yang – – 250,000 (83,333) 166,667
Ian Watson 666,667 – 333,333 (666,666) 333,334
Terence Willsteed (3) – – 250,000 (83,333) 166,667
Stephen Oke – – 250,000 (200,000) 50,000
Tian Xia – – 250,000 (83,333) 166,667
Executive directors
Anthony Grey (1) 900,000 – 1,000,000 (633,333) 1,266,667
Stephen Turner (2) 12,975,000 – 400,000 (6,458,333) 6,916,667
Ronald Barnard 666,667 – 333,333 (666,666) 333,334
Other key management personnel
Dion Cohen 12,500 – – (12,500) –
Total 15,220,834 – 3,066,666 (8,887,497) 9,400,003
(1) Mr Grey's shareholding is held by Dalvin (Pty) Ltd, a company of which Anthony Grey is a beneficial owner.
(2) Mr Turner's shareholding is held as follows: 1,000,000 ordinary shares in his own name, 5,541,667 ordinary shares by Kin Yip International Limited and 375,000 ordinaryshares by Elliot Rutledge Group (Pty) Ltd, both being companies of which Stephen Turner is a beneficial shareholder. Mr Turner only has a part interest in these shares.
(3) Terence Willsteed's shareholding is held by Patermat (Pty) Ltd as trustee for T.V. Willsteed and Associates (Pty) Ltd Superannuation Fund.
7. Remuneration of key management personnel (continued)
(d) Shareholdings of key management personnel (consolidated)
Balance end
Balance at Granted as On exercise Shares of period
1 July 2006 remuneration of options sold 30 June 2007
ordinary ordinary ordinary ordinary ordinary
30 June 2007
Non-executive directors
Xiaoping Yang – – 158,193 (158,193) –
Ian Watson 666,667 – – – 666,667
Terence Willsteed – – – – –
Stephen Oke – – – – –
Tian Xia – – – – –
Executive directors
Anthony Grey (1) 900,000 – 310,350 (310,350) 900,000
Stephen Turner (2) 12,975,000 – 491,960 (491,960) 12,975,000
Other key management
Ronald Barnard 666,667 – 247,840 (247,840) 666,667
Dion Cohen 12,500 – 12,500
Total 15,220,834 – 1,543,776 (1,543,776) 15,220,834
(1) Mr Grey's shareholding is held by Dalvin (Pty) Ltd, a company of which Anthony Grey is a beneficial owner.
(2) Mr Turner's shareholding is held as follows: 1,000,000 ordinary shares in his own name, 11,600,000 ordinary shares by Kin Yip International Limited and 375,000 ordinaryshares by Elliot Rutledge Group (Pty) Ltd, both being companies of which Stephen Turner is a beneficial shareholder. Mr Turner only has a part interest in these shares.
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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8. Staff costs (excluding remuneration of key management personnel)Consolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Basic salary and fees 72,218 56,458 3,251 1,045
Share-based payments 22,699 19,295 330 510
Superannuation * 83 66 83 66
Other on-costs – 3,164 – 9
95,000 78,983 3,664 1,630
Less amounts capitalised to cost of product/capital
work in progress – (18,427) – –
Less amounts included in inventories/cost of product (45,723) (41,656) – –
49,277 18,900 3,664 1,630
* Superannuation represents payments made in respect of a defined contribution pension scheme.
9. Financing income and costsConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Interest income 43,898 29,766 134,449 91,388
Interest expense
– Interest on project debt (30,879) (66,137) – –
– Amortisation of debt establishment costs (6,353) (13,940) – –
– Early settlement fees (2,723) – – –
– Interest on Purity acquisition price – (10,086) – (10,086)
– Interest on financing (20,048) – – –
– Interest on leases (23,410) – – –
– Unwinding of discount on rehabilitation provision (834) (763) – –
– Interest paid – other (1,335) (4,846) (2) (709)
(85,582) (95,772) (2) (10,795)
Net finance (costs)/income (41,684) (66,006) 134,447 80,593
10. Income taxConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Income tax expense
Current Income tax charge: 1,575 – – –
Deferred income tax relating to origination and reversal of
temporary differences 50,602 – – –
Income tax expense recorded in income statement 52,177 – – –
Profit/(loss) from ordinary activities before income tax expense 630,359 (344,269) 163,311 (77,016)
At parent entity statutory tax rate of 30%: 189,108 103,281) 48,993 (23,105)
Overseas tax rate differential (9,341) 1,888 – –
Expenses not deductible for tax purposes 41,577 – 8,948 –
Additional tax deductions (74,051) (22,119) (67,418) (22,119)
Utilisation of previously unrecognised tax losses (11,670) – – –
Utilisation of unredeemed capital expenditure (92,984) – – –
Deferred tax asset not recognised 9,538 123,512 9,476 45,224
Aggregate income tax expense 52,177 – – –
Deferred income tax liability
Property plant and equipment, including unredeemed capital
expenditure 100,420 – – –
Debtors and prepayments 6,413 – – –
Total deferred tax liability 106,833 – – –
Deferred income tax asset
Provisions (11,747) – – –
Finance lease payments (28,688) – – –
Share option charges (6,011) – – –
Income received in advance (4,716) – – –
Rehabilitation provisions, claimable in future (5,069) – – –
Total deferred tax asset (56,231) – – –
Net deferred tax liability 50,602 – – –
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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10. Income tax (continued)Calculated taxation losses
The Group has unrecognised tax losses for which no deferred tax asset is recognised on the balance sheet of R29.3 million (2007:
R62.3 million) which are available indefinitely against future taxable income.
Consolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Unredeemed mining capital expenditure
Unredeemed mining capital expenditure available for offset
against future mining taxable income 1,131,709 1,370,712 – –
11. Earnings per share
(a) Earnings used in calculating earning per share
Consolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Basic earnings/(loss) per share (cents per share) 114.05 (82.78) 32.49 (18.66)
Diluted earnings/(loss) per share (cents per share) 114. 01 (82.78) 32.48 (18.66)
Earnings used in calculating basic earnings per share (R'000) 573,179 (341,629) 163,311 (77,016)
Earnings used in calculating diluted earnings per share (R'000) 573,179 (341,629) 163,311 (77,016)
Weighted number of ordinary shares on issue in calculation of
basic earnings per share 502,590,229 412,694,672 502,590,229 412,694,672
Number of potential ordinary shares that are not dilutive and
not used in calculation of diluted earnings per share – 11,395,045 – 11,395,045
(b) Weighted average number of shares
2008 2007
’000 ’000
Weighted average number of ordinary shares (excluding reserved shares) for basic earnings
per share 502,590,229 412,694,672
Effect of dilution:
Share options 144,634 –
Weighted average number of ordinary shares (excluding reserved shares) used in the
calculation of diluted earnings per share 502,734,863 412,694,672
12. Dividends paid and proposed
No dividends have been paid or proposed during any of the historical financial periods.
The Board of Directors declared its first dividend of 1 pence per share on 22 September 2008 which will be paid to shareholders
registered on 3 October 2008.
13. Cash and cash equivalentsConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Cash at bank and on hand 66,434 43,929 17,465 62,582
Short-term deposits 905,756 – 797,931 –
972,190 43,929 815,396 62,582
14. Receivables
(a) Receivable: inter-company
Consolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Loan to wholly owned subsidiary – – 19,127 31,628
(b) Trade and other receivables
Consolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Trade debtors (1) 425,859 16,076 – –
Outstanding tax refunds (2) 35,484 16,193 366 109
Director loans (3) – 800 – 800
Other debtors (4) 1,576 4 239,193 126,935
462,919 33,073 239,559 127,844
(1) Trade debtors relate to the sale of ferrochrome. Payment terms are 30 days from date of final invoice.
(2) Tax refunds relate to the relevant Goods and Services Tax and Value Added Tax refunds owing in Australia and South Africa.
(3) Directors' loans for 30 June 2007 relate to a loan of A$133,334 which was made to Ian Watson on 22 June 2005 to assist him to exercise certain options prior to listingon AIM. This loan was non-interest bearing. The loan was repaid on 31 August 2007.
(4) Other debtors in the parent entity relates to accrued preference share dividends (refer note 19(a)).
Details of the terms and conditions of receivables are discussed in detail under note 30.
The carrying value of trade and other receivables is assumed to approximate the fair value due to the short-term nature of the trade
and other receivables.
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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15. PrepaymentsConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Prepaid capital raising costs (1) – 3,051 – 3,051Prepaid retention fee 8,060 – – –Prepaid shipping costs 4,585 – – –Prepaid stewardship costs 538 – 487 –Prepaid insurance 199 993 199 993
13,382 4,044 686 4,044
(1) Prepaid capital raising costs relate to expenditure paid and accrued prior to the Company's admission to LSE for various advisers directly associated with the capitalraising of the Company. Following the LSE admission, these costs were transferred to share capital and offset against the capital raising proceeds.
16. InventoriesConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Consumable stores at cost 6,895 3,119 – –Ore stock at cost 68,959 57,888 – –Raw materials at cost 22,114 13,594 – –Finished goods at cost (2007: at net realisable value) 11,784 66,220 – –
109,752 140,821 – –
17. Other current assetsConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Restricted cash – 141,916 – –
Restricted cash represents cash set aside for bank guarantees provided by Standard Bank to various contractors and other parties.
18. Other financial assetsConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Investment in subsidiaries at cost – – 891,601 330,000Receivable from Jefferson Investments Limited (1) – – 695,657 695,657
– – 1,587,258 1,025,657
(1) IFML has purchased a preference share in Jefferson Investments, a UK financial institution, for R695 million. Simultaneously, IFMSA issued a debenture to Morgan Stanley
for R695 million. The debenture is secured against the preference shares. The coupon on both the preference shares and the debenture is 12.5% compounded semi-
annually in arrears. The debenture term ends on 25 January 2016.
The preference share is secured by a put option whereby IFML can put the preference share to Morgan Stanley. Conversely Morgan Stanley may put the debenture back
to IFMSA. The Group is entitled to set off the preference share and the debenture, as such these items have been set off in the consolidated balance sheet.
19. Property, plant and equipmentConsolidated
Accumulated Net book
Cost depreciation value
R’000 R’000 R’000
2008
Mineral rights and reserves (1) 157,223 (5,731) 151,492
Land and buildings 30,726 (1,932) 28,794
Decommissioning asset 5,837 (206) 5,631
Plant and equipment 1,234,006 (56,217) 1,177,789
Leased plant and equipment 88,488 (3,232) 85,256
Mine development 137,576 (4,706) 132,870
Computer equipment 3,902 (1,640) 2,262
Leased computer equipment 1,651 (475) 1,176
Furniture and fittings 2,881 (1,238) 1,643
Exploration costs 12,856 – 12,856
Capital work in progress (2) 60,522 – 60,522
Vehicles 5,636 (998) 4,638
Leased vehicles 7,858 (506) 7,352
Total cost 1,749,162 (76,811) 1,672,281
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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19. Property, plant and equipment (continued)Consolidated
Carrying Carrying
value at value at
beginning Transfers/ end of
of year adjustments Additions Depreciation year
R’000 R’000 R’000 R’000 R’000
2008
Mineral rights and reserves (1) 155,257 (28) – (3,737) 151,492
Land and buildings 29,353 – 42 (601) 28,794
Decommissioning asset 5,801 50 – (220) 5,631
Plant and equipment 1,184,741 21,220 10,525 (38,697) 1,177,789
Leased plant and equipment (4) 108,350 (20,559) – (2,535) 85,256
Mine development 117,736 – 20,339 (5,205) 132,870
Computer equipment 2,622 – 736 (1,096) 2,262
Leased computer equipment 1,616 – – (440) 1,176
Furniture and fittings 2,392 – 144 (893) 1,643
Exploration costs – – 12,856 – 12,856
Capital work in progress (2) 22,547 (21,220) 59,195 – 60,522
Vehicles 357 (47) 5,117 (789) 4,638
Leased vehicles 1,616 47 6,160 (471) 7,352
Total cost 1,632,388 (20,537) 115,114 (54,684) 1,672,281
Parent
Accumulated Carrying
Cost depreciation value
R’000 R’000 R’000
2008
Mineral rights and reserves (1) – – –
Land and buildings 3,450 (172) 3,278
Plant and equipment 4,922 (246) 4,676
Mine development 992 (50) 942
Computer equipment 109 (63) 46
Furniture and fittings 51 (17) 34
Total cost 9,524 (548) 8,976
19. Property, plant and equipment (continued)Parent
Carrying Carrying
value at value at
beginning Transfers/ end of
of year adjustments Additions Depreciation year
R’000 R’000 R’000 R’000 R’000
2008
Mineral rights and reserves (1) 61,601 (61,601) – – –
Land and buildings 3,394 – – (115) 3,279
Plant and equipment 4,840 – – (164) 4,676
Mine development 975 – – (33) 942
Computer equipment 35 – 43 (32) 46
Furniture and fittings 41 – – (8) 33
Total cost 70,886 (61,601) 43 (352) 8,976
Consolidated
Accumulated Carrying
Cost depreciation value
R’000 R’000 R’000
2007
Mineral rights and reserves (1) (3) 157,251 (1,995) 155,256
Land and buildings 29,684 (330) 29,354
Decommissioning asset 5,879 (78) 5,801
Plant and equipment 1,202,225 (17,484) 1,184,741
Leased plant and equipment 109,082 (732) 108,350
Mine development 119,448 (1,712) 117,736
Computer equipment 3,166 (543) 2,623
Leased computer equipment 1,651 (35) 1,616
Furniture and fittings 2,736 (345) 2,391
Capital work in progress (2) 22,547 – 22,547
Vehicles 567 (210) 357
Leased vehicles 1,651 (35) 1,616
Total cost 1,655,887 (23,499) 1,632,388
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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19. Property, plant and equipment (continued)Consolidated
Carrying Carrying
value at value at
beginning Transfers/ end of
of year adjustments Additions Depreciation year
R’000 R’000 R’000 R’000 R’000
2007
Mineral rights and reserves (1) (3) 161,426 (4,174) – (1,996) 155,256
Land and buildings 1,536 28,087 – (269) 29,354
Decommissioning asset 4,784 – 1,095 (78) 5,801
Plant and equipment 5,776 1,158,501 37,723 (17,259) 1,184,741
Leased plant and equipment 73,135 – 35,947 (732) 108,350
Mine development – 90,368 29,080 (1,712) 117,736
Computer equipment 109 – 2,910 (396) 2,623
Leased computer equipment – – 1,651 (35) 1,616
Furniture and fittings 66 – 2,636 (311) 2,391
Capital work in progress (2) 701,666 (1,276,956) 597,837 – 22,547
Vehicles – – 513 (156) 357
Leased vehicles – – 1,651 (35) 1,616
Total cost 948,498 (4,174) 711,043 (22,979) 1,632,388
Parent
Accumulated Carrying
Cost depreciation value
R’000 R’000 R’000
2007
Mineral rights and reserves (1) (3) 61,601 – 61,601
Land and buildings 3,451 (57) 3,394
Plant and equipment 4,922 (82) 4,840
Mine development 992 (17) 975
Computer equipment 66 (31) 35
Furniture and fittings 49 (8) 41
Total cost 71,081 (195) 70,886
19. Property, plant and equipment (continued)Parent
Carrying Carrying
value at value at
beginning Transfers/ end of
of year adjustments Additions Depreciation year
R’000 R’000 R’000 R’000 R’000
2007
Mineral rights and reserves (1) 65,775 (4,174) – – 61,601
Land and buildings – – 3,451 (57) 3,394
Plant and equipment – – 4,922 (82) 4,840
Mine development – – 992 (17) 975
Computer equipment 49 – 8 (22) 35
Furniture and fittings – – 49 (8) 41
Capital work in progress (2) 9,373 (9,373) – – –
Total cost 75,197 (13,547) 9,422 (186) 70,886
(1) The mineral rights and reserves of R61 million relating to the Skychrome deposit is held in Purity Metals Holdings Limited (Purity), a wholly owned subsidiary of the
Group. IFM acquired the shares in Purity for US$9 million on 16 December 2005. For accounting purposes Purity is treated as a subsidiary of the Company. Purity owns
80% of the Sky Chrome project, a ferrochrome resource located adjacent to the Buffelsfontein plant. The purchase price has been allocated to the value of the Sky
Chrome Mineral Resource. Purity does not have any other identifiable assets, liabilities or contingent liabilities. There has been no impact on the income statement
subsequent to acquisition. The investment in Purity is disclosed under other financial assets per note 18 as investment in subsidiaries at cost.
(2) Capital work in progress relates to capital costs incurred for the expansion of the company and associated infrastructure.
(3) The adjustment to mineral rights and reserves relates to the de-capitalisation of interest in accordance with the Group's policy to expense all borrowing costs.
(4) The adjustment to plant and equipment is a result of the reassessment of the minimum lease payments to be made on the finance lease of the power sub-station and
feeder bays supporting the Buffelsfontein facility and mine.
No property, plant and equipment have been pledged as security for liabilities of the Group or the Company.
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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20. Other non-current assetsConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Restricted cash (1) 22,942 123,855 – –
Deposits 2,683 516 516 516
25,625 124,371 516 516
(1) Restricted cash represents cash set aside for bank guarantees provided by Standard Bank to the Department of Trade and Industry and contractors for
year-end 2008. Restricted cash for 2007 represents cash set aside for bank guarantees provided by Standard Bank to various contractors and other parties.
21. Trade and other payablesConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Sundry creditors and accruals 61,310 31,068 6,169 10,298
Trade creditors 131,389 83,891 – –
Finance lease liability (1) 9,140 19,447 – –
Other creditors and accruals (2) 11,310 – – –
213,149 134,406 6,169 10,298
(1) Refer to note 32.
(2) Other creditors and accruals represent pre-received income for product sold.
Due to the short-term nature of these payables, their carrying value is assumed to approximate their fair value.
22. ProvisionsConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Current provisions
Employee entitlements (1) 63,589 23,118 14,565 13,151
Share-based payment liability (3) 35,688 – 13,000 –
Taxation 1,575 – – –
100,852 23,118 27,565 13,151
Employee entitlements
Opening balance 23,118 5,852 13,151 2,870
Provision recognised during the year 41,857 18,125 1,794 10,433
Provision utilised during the year (1,386) (859) (380) (152)
Closing balance 63,589 23,118 14,565 13,151
Phantom options
Opening balance – – – –
Transferred from non-current provision 18,599 – 4,089
Cash settled share-based payment expense 36,582 – 13,599 –
Phantom options exercised and paid during the year (19,493) – (4,688) –
Closing balance 35,688 – 13,000 –
Taxation
Opening balance – – – –
Provision recognised during the year 1,575 – – –
Closing balance 1,575 – – –
Non-current provisions
Rehabilitation and restoration (2) 18,104 6,292 – –
Share-based payment liability (3) 9,080 27,679 3,172 7,261
27,184 33,971 3,172 7,261
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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22. Provisions (continued)Consolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Rehabilitation and restoration
Opening balance 6,292 5,022 – – Additional provision recognised during the year:– Recorded in plant, property and equipment – 507 – – – Unwinding of discount 834 763 – – – Adjustment in provision 10,978 – – –
Closing balance 18,104 6,292 – –
Phantom options
Opening balance 27,679 – 7,261 – Cash settled share-based payment expense – 27,679 – 7,261 Transfer to current provision (18,599) – (4,089) –
Closing balance 9,080 27,679 3,172 7,261
(1) The provision for employee entitlements represents accrued annual leave liabilities and other employee provisions. It is expected that these costs will be incurred in thenext financial year.
(2) The provision for rehabilitation and restoration represents management's estimate of the restoration and exit costs associated with the integrated ferrochrome miningand processing facility at Buffelsfontein. It is expected that these costs will be incurred at the end of the mine life. Due to the long-term nature of the liability, thegreatest uncertainty in estimating the provision is the costs that will be ultimately incurred. The provision has been calculated using a pre-tax discount rate of 12%.
(3) The Phantom Share Option Scheme options are treated as cash settled share-based payments in accordance with the accounting policy described in note 2(p).
23. Interest-bearing loans and borrowingsConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Junior debt – 150,000 – –Senior debt – 473,647 – –Working capital debt – 119,400 – –Capitalised interest facility – 62,981 – –Long-term portion of finance lease liability 90,601 92,603 – –Other loans 2,115 – – –
92,716 898,631 – –
On 28 September 2007, the Company settled in full all amounts outstanding under the senior and junior debt facilities.The facilities were cancelled from that date. The amount repaid was R853 million which included breakage fees and the fee for theearly cancellation of the options held in the Company by the banking counterparties. Under the original banking facilities, theserepayments were to start from 30 June 2008.
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FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
23. Interest-bearing loans and borrowings (continued)Finance leases
The weighted average effective interest rate on finance leases is 12.5%.
Other loans
Other loans represent a prepayment premium due to SAAB Supporter ETT AB (SAAB), lenders of the junior debt facility. On
repayment of the junior debt a prepayment premium was agreed to, being 1.25% on all amounts due. This premium may be repaid
with 30 calendar days’ notice to the SAAB but in any event no later than 31 December 2010. No interest is charged on this loan.
Undrawn loan facilities at 30 June 2008, excluding debtors discounting facilities, amounted to R50 million (2007: R5.6 million).
Fair value
Each class of interest-bearing loans and borrowings are carried at cost which is estimates their fair value.
24. Derivative liabilityConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Current
– Foreign currency denominated options (1) – 20,994 – 5,479
Non-current
– Foreign currency denominated options (1) – 42,432 – 42,432
(1) Options that have vested and have no ongoing share-based payment relationship and are denominated in a foreign currency (GBP) are accounted for as derivativeliabilities. No derivative liability is recorded at 30 June 2008 as options have been exercised or cancelled (refer notes 23 and 25). Derivative options that expire within12 months are classified as current liabilities.
For the financial year ending 30 June 2007, the options were valued using a Black-Scholes model using the assumptions listed below:
Consolidated Parent
2007 2007
Expected volatility 36% 36%
Risk free rate 6% 6%
Share price £1.21 £1.21
Dividend yield Nil Nil
Fair value
The derivative liability is carried at fair value with changes recognised through profit and loss.
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25. Contributed equityConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Movement in ordinary shares on issue
Opening balance 1,607,075 1,360,675 1,607,075 1,360,675
Issue of ordinary shares 1,196,208 245,310 1,196,208 245,310
Exercise of options 85,860 – 85,860 –
Share placement costs (54,731) – (54,731) –
Purchase of treasury shares – (10,515) – (10,515)
Issue of treasury shares – 11,605 – 11,605
Closing balance 2,834,412 1,607,075 2,834,412 1,607,075
Shares Shares Shares Shares
Opening balance 428,161,896 410,283,623 428,161,896 410,283,623
Issue of ordinary shares 71,000,000 17,878,273 71,000,000 17,878,273
Exercise of options 8,400,784 – 8,400,784 –
Treasury shares purchased – 2,000,000 – 2,000,000
Treasury shares issued – (2,000,000) – (2,000,000)
Closing balance 507,562,680 428,161,896 507,562,680 428,161,896
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25. Contributed equity (continued)
The details of ordinary shares issued are as follows:
Description Number of Share price/ Proceeds
of share shares issued/ exercise (local Proceeds
Period issue (sold) price currency) (R'000)
Year ended 30 June 2008 LSE Listing (2) 71,000,000 £1.20 £85,200,000 1,196,208
Exercise of options 8,400,784 (3) (3) 85,860
Year ended 30 June 2007 Exercise of options 17,878,273 (1) (1) 245,310
(1) Increase in share capital represents proceeds from the exercise of 17,878,273 options of an exercise price of between £0.3675 and £0.43 raising R107,426,000(£7.5 million) and the accompanying book value of the derivative liability of R137,884,000 (£9.7 million).
(2) On 9 July 2007, the Company raised R1.2 billion (£85.2 million) before expenses, through the issue of 71,000,000 ordinary shares under the placing and JISCOsubscription.
(3) Increase in share capital represents proceeds from the exercise of 8,400,784 options of an exercise price of between £0.22 and £0.4375 which raised R33,690,827, the
accompanying carrying value of the share-based payment reserve of R2,492,279, and the book value of the derivative liability of R45,124,016. In addition,
1,265,562 options were exercised by JISCO under the subscription agreement raising R4,552,770.
Ordinary shares
Ordinary shares have the right to receive dividends as declared and, in the event of the winding up of the Company, to participate in
the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
Options
The following table sets out the options granted and exercised during each year:
As at 30 June
2008 2007
Number Number
Opening balance 11,395,045 29,273,318
Options granted (Table 1) 1,000,000 2,000,000
Options exercised (Table 2) (8,400,786) (19,878,273)
Options cancelled (Table 2) (2,994,259) –
Closing balance (Table 3) 1,000,000 11,395,045
In addition, JISCO has certain non-dilution rights under the subscription agreement, which apply if an option is exercised, to requireJISCO to be offered and issued ordinary shares at the same exercise price at which such options are exercised to enable JISCO tomaintain its guaranteed holding of 26.1% of the issued ordinary shares of the Company. These non-dilution rights are accounted foras a derivative liability. Since JISCO's shareholding is above 26.1%, under the subscription agreement, IFM is not obliged to offerJISCO shares in terms of the anti-dilution clause, unless the issue would dilute JISCO's ownership below 26.1%.
FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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25. Contributed equity (continued)
The following table sets out the details of options issued during the relevant period:
Table 1
Fair value of
Fair value of options at
Number Exercise Vesting date/ Expiry options at grant date
Description of option holder granted price conditions date grant date R
Year ended 30 June 2008
Directors 1,000,000 £0.875 (2) (2) £223,222 3,283,600
Year ended 30 June 2007
Directors 2,000,000 £0.41 (1) (1) £50,061 691,839
(1) On 13 December 2006, 2,000,000 performance rights were granted to senior executives under the IFM Executive Employee Share Option Plan. These rights vested on theexecutives becoming entitled to a bonus under the Company's existing employee bonus scheme. Upon exercise, executives were entitled to receive an ordinary share orthe net proceeds of sale of such share for each right exercised. Employees elected to exercise their rights during the period which will result in the release of 2,000,000shares from the Executive Share Trust. The fair value of the options granted is estimated as at the date of grant, taking into account the terms and conditions upon whichthe options were granted.
The estimated fair value of each option at grant date is £0.08 (R1.10).
(2) For further details refer to audited Remuneration Report (Table 3) included as part of the Directors' Report.
The following table sets out the details of options exercised during the relevant period:
Table 2
Weighted
average share
Number Number Exercise price at time
Description of option holder exercised cancelled price of exercise
Year ended 30 June 2008
Directors 4,400,000 – £0.22-£0.35 £1.27
Service providers 2,735,224 – £0.4025-£0.4375 £1.44
Finance providers (1) – 1,285,714 – –
JISCO (1) – 1,708,545 – –
JISCO 300,203 – £0.35 £1.27
JISCO 965,359 – A$0.40-A$0.65 £1.77 – £1.44
8,400,786 2,994,259
(1) On 28 September 2007 IFM cancelled these options as part of the Group's final settlement with the finance providers. JISCO's anti-dilution right relating to theseoptions was also cancelled.
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25. Contributed equity (continued)
Table 2 (continued)
Weighted
average share
Number Exercise price at time
Description of option holder exercised price of exercise
Year ended 30 June 2007
Directors 2,000,000 £0.41 £0.41Service providers 767,612 £0.3675 £0.909Service providers 600,000 £0.3675 £0.658Finance providers 3,948,144 £0.43 £0.887Finance providers 1,283,147 £0.43 £0.767Finance providers 6,613,141 £0.43 £0.993JISCO 4,666,229 £0.3675-£0.43 £0.77
19,878,273
The following table sets out the details of outstanding options as at 30 June 2008:
Table 3
Number of options Exercise Vesting date/ Expiry
Description of option holder outstanding price conditions date
Directors 1,000,000 £0.88 (1) 31/12/2010
(1) Mr Kovarsky was issued one million options to subscribe for shares in IFM within a three-year period up until 31 December 2010. These options vest in three equaltranches on 30 June 2008, 30 June 2009 and 30 June 2010 and shall be exercised at any time prior to 31 December 2010. The vesting of these options is conditional oncontinued employment through the vesting period.
Capital managementWhen managing capital, management's objective is to ensure the Group continues as a going concern as well as to maintain optimalreturns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that ensures thelowest cost of capital available to the Group.
Capital is defined as total shareholders' equity which represented R2.8 billion at 30 June 2008 (2007: R1.6 billion).
The Board of Directors and management often review the Company's capital structure using a detailed cash flow model. They assessthe adequacy of the capital structure against the major variables affecting the Group's profitability.
For expansion plan feasibility studies or evaluations of potential acquisitions, management reviews its capital to ensure optimalstructuring. As the market is constantly changing, management may change the amount of dividends to be paid to shareholders,return capital to shareholders or issue new shares to reduce debt. Should a strategic acquisition be assessed, management may issuefurther shares on the market.
The Company has complied with all externally imposed capital requirements.
FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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26. Share-based payment reserve
The share-based payment reserve records the value of equity benefits provided to employees and directors as part of theirremuneration.
Consolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Opening balance 7,480 1,720 7,189 1,720
Options exercised and transferred to share capital (2,492) – (2,201) –
Share-based payment expense 1,629 5,760 1,629 5,469
Closing balance at the end of the year 6,617 7,480 6,617 7,189
27. Retained earningsConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Opening balance at the start of the year (651,215) (309,586) (369,728) (292,712)
After tax profit/(loss) attributable to the equity holders of
the parent during the year 573,179 (341,629) 163,311 (77,016)
Closing balance at the end of the year (78,036) (651,215) (206,417) (369,728)
28. Minority interestAs at 30 June
2008 2007
R’000 R’000
Opening balance at the start of the year 3,650 6,290
After profit/(loss) attributable to the minority interest during the year 5,003 (2,640)
Closing balance at the end of the year 8,653 3,650
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29. Share-based payment plansThe fair value of the share options granted is estimated as at the date of grant using a Binomial model (2007: Black-Scholes model)
taking into account the terms and conditions upon which the options were granted.
2008 2007
Expected volatility (2) (%) 45% 36% – 60%
Risk-free interest rate range (%) 5.06% – 5.20% 6%
Option exercise price (rand) See note 24 See note 24
Expected dividend yield range 1.6% – 6.6% Nil
Expected life N/A (1)
Strike price £1.50 – £3.50 N/A
(1) The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflectsassumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No other features of options granted wereincorporated into the measurement of fair value. For options granted prior to the Company's initial public offering (IPO), the Company measured the fair value of thegoods and services received in return for options granted based on the market price for these goods or services.
(2) Share price volatility is reassessed at each reporting period based on historical share prices. The current volatility is based on actual volatility since the listing of thecompany in September 2005.
Equity-settled optionsOne million options were issued to Mr Kovarsky to subscribe for shares in IFM within a three-year period up until 31 December 2010.These options vest in three equal tranches on 30 June 2008, 30 June 2009 and 30 June 2010 and shall be exercised at any time priorto 31 December 2010. The vesting of these options is conditional on continued employment through the vesting period.
Phantom Share Option PlanA Phantom Option Scheme was introduced on 15 November 2006 as a long-term incentive scheme. Options are granted to eligible
employees, subject to the satisfaction of certain vesting and exercise conditions. A cash amount is determined by reference to the
excess of the market price of an ordinary share in the Company over the exercise price at the time the options are exercised. The
options, in most cases, vest in equal tranches over three years, subject to the recipients continued employment by the Company.
Executives are able to exercise the share options for up to five years from the grant of the options. Each tranche of the options is
capped at between £1.50 and £3.50 (i.e. the maximum strike price of the option).
On 6 February 2008, three million phantom options were issued to directors and senior management at an exercise price of £1.00and at a price cap of £2.50. These phantom options issued were subject to the same targets as described under the STI scheme for30 June 2008 (see STI bonus for 2008 financial year) in the Remuneration Report. Of the three million phantom options, 2.955million options vested to directors and senior management based on the 98.5% production target that was achieved at year-end.
FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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29. Share-based payment plans (continued)
The estimated fair value of each phantom option at reporting date is:
Fair value at Fair value at Fair value at
reporting date reporting date reporting date
Exercise price Tranche 1 Tranche 2 Tranche 3
£0.35 R9.30 R11.55 R11.84
£0.3750 R8.95 R11.22 R11.54
£0.3775 R8.91 R11.18 R11.52
£0.4100 R8.43 R10.70 R11.09
£0.4350 R8.03 R10.29 R10.70
£0.4750 R7.48 R9.78 R10.26
£0.6800 R4.78 R7.27 R8.08
£0.8225 R5.93 R6.88 R6.56
£1.0000 R5.22 – –
£1.0300 R4.71 R5.64 R5.39
£1.0650 R4.44 R5.39 R5.14
£1.1750 R4.95 R4.82 R4.62
£1.2050 R3.78 R4.78 R4.60
£1.2390 R3.51 R4.48 R4.27
£1.4250 R2.76 R3.80 R3.68
Weighted
average
Phantom options Options exercise price
Opening balance at 1 July 2006 – –
Granted during the period 5,783,000 £0.36
Forfeited during the year (420,000) £0.37
Exercised during the period – –
Expired during the period – –
Closing balance at 30 June 2007 5,363,000 £0.36
Opening balance at 1 July 2007 5,363,000 £0.36
Granted during the period 4,829,000 £1.04
Forfeited during the year (272,000) £0.64
Exercised during the period (1,843,265) £0.38
Expired during the period – –
Closing balance at 30 June 2008 8,076,735 £0.76
The weighted average share price for the year ending 30 June 2008 was £1.15.
The weighted average remaining contractual life of the above outstanding options is 3.29 years.
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29. Share-based payment plans (continued)
Weighted
average
Equity share options Options exercise price
Opening balance at 1 July 2006 29,273,318 A$0.53 and £0.42
Granted during the period 2,000,000 £0.41
Forfeited during the year – –
Exercised during the period (19,878,273) £0.42
Expired during the period – –
Closing balance at 30 June 2007 11,395,045 A$0.53 and £0.39
Opening balance at 1 July 2007 11,395,045 A$0.53 and £0.39
Granted during the period 1,000,000 £0.88
Forfeited during the year (2,994,260) £0.38
Exercised during the period (8,400,786) A$0.53 and £0.34
Expired during the period – –
Closing balance at 30 June 2008 1,000,000 £0.88
The weighted average share price for the year ending 30 June 2008 was £1.15.
The weighted average remaining contractual life of the above outstanding options is 2.9 years.
FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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30. Financial risk management and objectives
The Group's overall financial risk management strategy is to seek to ensure that the Group is able to fund its business operations and
expansion plans.
Exposure to foreign currency risk, interest rate risk, commodity price risk, credit risk, liquidity risk and share price risk arises in the
normal course of the Group's business. Derivative financial instruments may be used to hedge exposure to fluctuations in foreign
exchange rates, interest rates and commodity prices. To date, no such instruments have been used.
The following table displays the financial instruments held at the end of the year:
Financial assets and liabilities by categories At 30 June 2008
Financial
liabilities Other
Held-to- At fair value measured at financial
Loans and maturity through profit amortised assets and
receivables investments and loss cost liabilities Total
Consolidated R’000 R’000 R’000 R’000 R’000 R’000
Recognised financial assets
Cash and Cash equivalents (note 13) 66,434 905,756 – – – 972,190
Trade and other receivables (note 14) 427,434 – – – – 427,434
Prepayments (note 15) 13,382 – – – – 13,382
Deposits (note 20) 2,683 – – – – 2,683
Restricted cash (note 20) – 22,942 – – – 22,942
Total recognised financial assets 509,933 928,698 – – – 1,438,631
Recognised financial liabilities
Trade and other payables (note 21) – – – (9,140) (204,009) (213,149)
Interest bearing liabilities (note 23) – – – (90,601) (2,115) (92,716)
Total recognised financial liabilities – – – (99,741) (206,124) (305,865)
Unrecognised financial liabilities
Un-drawn loan facilities (note 23) – – – – (50,000) (50,000)
Total unrecognised financial liabilities – – – – (50,000) (50,000)
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30. Financial risk management and objectives (continued)
Financial assets and liabilities by categoriesAt 30 June 2007
Financial
liabilities Other
Held-to- At fair value measured at financial
Loans and maturity through profit amortised assets and
receivables investments and loss cost liabilities Total
Consolidated R’000 R’000 R’000 R’000 R’000 R’000
Recognised financial assets
Cash and cash equivalents (note 13) 43,929 – – – – 43,929
Trade and other receivables (note 14) 16,880 – – – – 16,880
Prepayments (note 15) 4,044 – – – – 4,044
Deposits (note 20) 516 – – – 516
Restricted cash (note 17 and 20) – 265,771 – – – 265,771
Total recognised financial assets 65,369 265,771 – – – 331,140
Recognised financial liabilities
Trade and other payables (note 21) – – – (19,447) (114,959) (134,406)
Derivative liability (note 24) (63,426) – – (63,426)
Interest-bearing liabilities (note 23) – – – (898,631) – (898,631)
Total recognised financial liabilities – – (63,426) (918,078) (114,959) (1,096,463)
Unrecognised financial liabilities
Un-drawn loan facilities (note 23) – – – – (5,600) (5,600)
Total unrecognised financial liabilities – – – – (5,600) (5,600)
For all feasibility assessments, including expansion planning, raising of debt funding, evaluation of acquisition opportunities and
corporate strategy, the Group uses various methods to measure the types of risk to which it is exposed. These methods include cash
flow forecasting, sensitivity and break-even analysis. The Group performs an ageing analysis for credit risk.
Treasury risk management is carried out by a central treasury department (Treasury) under policies approved by the Board of
Directors. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as foreign
exchange risk, interest rate risk and credit risk, use of derivative financial instruments and non-derivative financial instruments, and
investment of excess liquidity.
FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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30. Financial risk management and objectives (continued)
(i) Foreign currency riskForeign exchange risk arises from commercial transactions and recognised assets and liabilities that are denominated in currencies
other than the functional currency of each entity in the Group, which is the South African rand (R). In order to hedge this foreign
currency risk, the Group may enter into forward foreign exchange, foreign currency swaps and foreign currency option contracts.
To date, the Group has not sought to enter into any foreign currency hedging arrangements for US dollar denominated sales as
South African producers are price setters, and any foreign exchange differences are considered along with other relevant factors at
the time of price negotiations. Approximately t58 million of the Group’s future capital expenditure requirement is denominated
in euros. The Group has resolved to accumulate foreign currency, preferably in euros, of up to an amount equating to its
estimated uncovered foreign denominated capital requirements.
The following tables represent the financial assets and liabilities denominated in foreign currencies:
Consolidated Foreign currency amount Amount in R Rate of exchange
2008 2007 2008 2007 2008 2007
Financial assets '000 '000 R'000 R'000
Cash and cash equivalents
– US dollar 13,699 306 109,044 2,163 R/US$7.96 R/US$7.07
– Euro 59,091 – 738,638 – R/t12.50 –
– UK pound sterling 3,097 3,335 49,211 47,290 R/£15.89 R/£14.18
– AUS dollar 105 1,019 804 6,124 R/A$7.66 R/A$6.01
Trade and other receivables
– US dollar 53,410 2,043 425,144 14,444 R/US$7.96 R/US$7.07
– UK pound sterling – 8 – 113 – R/£14.18
– AUS dollar 57 158 437 950 R/A$7.66 R/A$6.01
Financial liabilities
Trade and other payables
– UK pound sterling 55 60 874 851 R/£15.89 R/£14.18
– AUS dollar 522 902 3,999 5,421 R/A$7.66 R/A$6.01
Derivative liability
– UK pound sterling – 4,473 – 63,427 R/£15.89 R/£14.18
The Group had no foreign currency borrowings at year-end (2007: nil).
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30. Financial risk management and objectives (continued) Parent Foreign currency amount Amount in R Rate of exchange
2008 2007 2008 2007 2008 2007
R’000 R’000
Financial assets
Cash and cash equivalents
– Euro 59,091 – 738,638 – R/t12.50 –
– UK pound sterling 3,097 3,335 49,211 47,290 R/£15.89 R/£14.18
– AUS dollar 105 1,019 804 6,124 R/A$7.66 R/A$6.01
Trade and other receivables
– UK pound sterling – 8 – 113 – R/£14.18
– AUS dollar 57 158 435 950 R/A$7.66 R/A$6.01
Financial liabilities
Trade and other payables
– UK pound sterling 55 60 874 851 R/£15.89 R/£14.18
– AUS dollar 522 902 3,999 5,421 R/A$7.66 R/A$6.01
Derivative liability
– UK pound sterling – 3,379 – 47,914 R/£15.89 R/£14.18
The Parent had no foreign currency borrowings at year-end (2007: nil).
FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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30. Financial risk management and objectives (continued) The following table demonstrates the estimated sensitivity to a 10% increase and decrease in the different exchange rates the
Group is exposed to, with all other variables held constant, on pre-tax profit. Equity is not affected by changes in foreign currency
exchange rates.
Pre-tax profit
higher/(lower)
2008 2007
R’000 R’000
Consolidated
R/USD +10% 53,419 1,660
R/USD – 10% (53,419) (1,660)
R/Euro +10% 73,864 –
R/Euro – 10% (73,864) –
R/GBP + 10% 4,834 (1,687)
R/GBP – 10% (4,834) 1,687
Parent
R/USD +10% – –
R/USD – 10% – –
R/Euro +10% 73,864 –
R/Euro – 10% (73,864) –
R/GBP + 10% 4,834 (136)
R/GBP – 10% (4,834) 136
Exposure to fluctuations in R/A$ is considered immaterial as the company does not hold large amounts of Australian dollar
denominated funds.
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30. Financial risk management and objectives (continued)
(ii) Interest rate risk
The Group is exposed to interest rate movement through variable rate debt and interest bearing investment of surplus funds.
Other than for finance leases, the Group has no external borrowings at year-end (2007: R899 million).
The following table sets out the variable interest-bearing and fixed interest-bearing financial instruments of the Group:
Consolidated Parent
Variable Fixed Variable Fixed
interest interest interest interest
R’000 R’000 R’000 R’000
2008
Financial assets
Cash equivalents 972,190 – 815,396 –
Restricted cash – 22,942 – –
Financial liabilities
Interest-bearing liabilities (notes 21 and 23) (37,752) 61,990 – –
Total 934,438 (39,048) 815,396 -
2007
Financial assets
Cash equivalents 43,929 – 62,582 –
Restricted cash – 265,771 – –
Financial liabilities
Interest-bearing liabilities (notes 21 and 23) (843,378) (74,701) – –
Total (799,449) 191,070 62,582 –
The Group intends to obtain long-term borrowings in the future. Where the Group enters into long-term borrowings, the Group
will maintain an interest rate structure which reduces the impact of rapidly increasing interest rates on profits.
FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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30. Financial risk management and objectives (continued)
Based upon the balance of gross debt as at 30 June 2008, if interest rates increase or decreased by 1%, with all other variables
held constant, the estimated impact on pre-tax profit would be as shown in the following table. Equity is not directly affected by
changes in interest rates.
Pre-tax profit
higher/(lower)
2008 2007
R’000 R’000
Consolidated
Interest rates +1% 9,344 (7,994)
Interest rates -1% (9,344) 7,994
Parent
Interest rates +1% 8,154 626
Interest rates -1% (8,154) (626)
(iii) Commodity price risk exposureThe price of ferrochrome has fluctuated widely, particularly in recent years, and is affected by numerous factors beyond the
Group's control including international, economic and political trends, expectations of inflation, currency exchange fluctuations,
interest rates, global or regional consumptive patterns, speculative activities and increased production, due to new extraction
developments and improved extraction and production methods. The effect of these factors on the price of ferrochrome, and
therefore the financial performance of the Group, cannot accurately be predicted. However, the Group may enter into
ferrochrome option contracts to manage its commodity price risk. To date, these contracts have not been easily accessible and the
Group has not entered into any of these agreements, thus there are no financial instruments exposed to ferrochrome price
fluctuations at year-end.
(iv) Share price risk exposureThe Group has issued share options denominated in GBP. These liabilities are recorded under derivative liabilities and are revalued
at each reporting period. The factors used in valuation are risk-free rate, expected life, dividend yield, volatility and market price.
The volatility and market price are affected by the market price of the IFM share which may be volatile and subject to wide
fluctuations as a result of a variety of factors, including period-to-period variations in operating results or changes in turnover or
profit estimates by the Company, industry participants or financial analysts. The price could also be adversely affected by
developments unrelated to the Group's operating performance such as the operating and share price performance of other
companies that investors may consider comparable to the Company; speculation about the Company in the press or the
investment community; strategic actions by competitors, such as acquisitions and restructurings; changes in market conditions;
and regulatory changes.
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30. Financial risk management and objectives (continued)The following table reflects the sensitivity on pre-tax profit arising on the valuation of the Group's derivative liabilities where share
price increases and decreases by 10 pence and where share price volatility increases and decreases by 5%. Equity is not directly
affected by changes in share price and share price volatility.
Pre-tax profit
higher/(lower)
2008 2007
R’000 R’000
Consolidated
Share price +10p – (7,715)
Share price -10p – 7,689
Volatility +5% – (26)
Volatility -5% – –
Parent
Share price +10p – (5,892)
Share price -10p – 5,865
Volatility +5% – (26)
Volatility -5% – –
Refer to note 24 for methods and assumptions used.
(v) Credit riskCredit risk arises from the financial assets of the Group, which comprise cash and cash equivalents (note 13) and trade and other
receivables (note 14). The Group's exposure to credit risk arises from potential default of the counterparty, with a maximum
exposure equal to the carrying amount of these instruments. It is the Group's policy that all customers who wish to trade on
credit terms are subject to credit verification procedures. The Group trades only with recognised, creditworthy third parties and, as
such, collateral is not requested nor is it the Group's policy to securitise its trade and other receivables. In addition, receivable
balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant. A provision
for doubtful debts is made when there is objective evidence that the company will not be able to collect the debts. Doubtful
debts are written off to the income statement.
Trade receivablesIFMSA has an off-take agreement with JISCO, the largest steel maker in Northwest China. Under the terms of the agreement
entered into in June 2005, JISCO agreed to purchase at least 120,000tpa of ferrochrome on a take-or-pay basis at a market
related price. JISCO also agreed to act as agent for IFMSA to market ferrochrome in China, Taiwan, Japan and Korea.
In addition, IFMSA has a further offtake agreement with CMC Cometals, a division of Commercial Metals Company (CMC) to
purchase 30,000tpa of ferrochrome, as well as 20,000tpa of ferrochrome fines, on a take-or-pay basis at a market-related price. In
addition, CMC acts as an exclusive agent selling the remainder of the Group's ferrochrome production outside JISCO's territories
as identified above.
FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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30. Financial risk management and objectives (continued)
(v) Credit risk (continued)As a result of the offtake agreements, over 90% of the Group's trade receivables relate to sales made to JISCO and Cometals,
presenting a counterparty concentration of risk. JISCO is a Chinese state-owned company and CMC is a New York listed metals
trader with a market capitalisation of US$3 billion. IFMSA has the option of receiving a provisional payment from its offtake
partners of up to 90% of the value of each shipment within 15 working days of any shipment occurring. This provisional payment
accrues interest by IFMSA. The balance due, which is payable up to six months later, is jointly determined by the offtake partners
and IFMSA, based on actual prices, costs and factors that affect the landed price of each shipment. The Group does not hold any
credit derivatives to offset its credit exposure. No impairment was recognised as IFM considers the offtake partners to be in a
sound financial position. There are no receivables past due and considered impaired.
Cash and investmentsThe credit risk policy aims to ensure that the organisation is adequately protected against settlement risk for cash, investments
and derivatives by transacting with reputable financial institutions with a minimum Fitch Ratings International long-term credit
rating of A (or equivalent S&P or Moody's rating) and where applicable, within stated limits. It is noted that the group is not
envisaged to hold large cash balances for extended periods of time. At the balance sheet date, cash deposits were spread among a
number of financial institutions to minimise the risk of default by counterparties.
Other receivablesOther balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that these
other balances will be received when due.
The following table sets out the financial assets that are exposed to credit risk:
Consolidated Consolidated
2008 2007
R’000 R’000
Financial assets
Cash and cash equivalents 972,190 43,929
Trade receivables 462,919 33,073
Restricted cash 22,942 265,771
Total 1,458,051 342,773
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30. Financial risk management and objectives (continued)Set out below is an ageing analysis on the Group's trade receivables:
0-30 days 31-60 days 61-90 days 91-120 days 120-150 days +150 days
Total PDNI (1) PDNI PDNI PDNI CI (2)
R’000 R’000 R’000 R’000 R’000 R’000 R’000
2008
Consolidated 421,875 334,857 38,825 21,266 28,928 – –
Parent – – – – – – –
2007
Consolidated 13,180 3,112 6,219 3,186 663 – –
Parent – – – – – – –
(1) Past due not impaired (PDNI)
(2) Considered impaired (CI)
Credit terms for customers and agents are 30 days from the date of the final invoice. The final invoice is issued once the product
is received (average time between product being delivered free on board (FOB) and to time received by customer is between
three and four months) and final specification agreed by the customer. Debtors for FOB sales are recognised, in accordance with
IAS18 Revenue, on the bill of lading (BOL) date. The long shipment lead time between BOL date and final invoice date may move
certain debtors into the PDNI category. Sales are recognised on FOB or at-port.
(vi) Liquidity riskLiquidity risk is the risk that there will be inadequate funds available to meet financial commitments as they fall due. The Group
recognises the ongoing requirement to have committed funds in place to cover both existing business cash flows and reasonable
headroom for cyclical debt fluctuations, and capital expenditure programmes. The key funding objective is to ensure the
availability of flexible and competitively priced funding from alternative sources to meet the Group's current and future
requirements. The Group utilises a detailed cash flow model to manage its liquidity risk.
The Group attempts to accurately project the sources and uses of funds, whereby a framework for decision-making is established
which increases the effectiveness and efficiency with which the treasury function operates.
The Group's approach is to develop long-term relationships with a core group of quality banks. The benefit of this approach is to
establish a high degree of confidence and commitment between the parties so that banks are prepared to meet funding
requirements at crucial times and at short notice.
FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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30. Financial risk management and objectives (continued)
The table below summarises the maturity profile of the Company's financial liabilities at 30 June 2008 based on contractual
undiscounted repayment obligations. Repayments, which are subject to notice, are treated as if notice were to be given immediately.
Consolidated
Less than Three to One to Over
On demand 3 months 12 months 5 years 5 years Total
R’000 R’000 R’000 R’000 R’000 R’000
Liabilities
As at 30 June 2008
Trade and other payables – 204,009 – – – 204,009
Finance leases – 5,211 15,632 74,191 129,551 224,585
Loans – – – 2,115 – 2,115
Total liabilities 2008 – 209,220 15,632 76,306 129,551 430,709
Liabilities
As at 30 June 2007
Trade and other payables – 114,959 – – – 114,959
Finance leases – 4,862 14,585 82,817 164,195 266,459
Loans – – 119,400 686,628 – 806,028
Derivative liability – – 20,994 42,432 – 63,426
Total liabilities 2007 – 119,821 154,979 811,877 164,195 1,250,872
Parent
Less than Three to One to Over
On demand 3 months 12 months 5 years 5 years Total
R’000 R’000 R’000 R’000 R’000 R’000
Liabilities
As at 30 June 2008
Trade and other payables – 6,169 – – – 6,169
Total liabilities 2008 – 6,169 – – – 6,169
Liabilities
As at 30 June 2007
Trade and other payables – 10,298 – – – 10,298
Derivative liability – – 5,479 42,432 – 47,911
Total liabilities 2007 – 10,298 5,479 42,432 – 58,209
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31. Post-balance sheet eventsThe following events occurred after the year ended 30 June 2008:
• Mr Ronald Barnard and Mr Mike Horn resigned in July 2008 and were replaced by Mr Hannes Visser and Mr Willie Bester who
between them have over 60 years' experience in the construction and operation of semi-closed and closed ferrochrome
furnaces.
• The Company started construction of an additional beneficiation plant in August 2008 as part of its phased expansion
strategy.
• The Company started extraction of chrome ore from the Skychrome mineral deposit in September 2008.
32. Commitments and contingencies
Capital commitments
Consolidated
2008 2007
Capital commitments R’000 R’000
Contracted for 159,920 13,642
Authorised but not contracted for 8,222 –
168,142 13,642
At balance sheet date the Company had contractual obligations in relation to Phase 1 of the expansion plans totalling R30.2 million
that will be settled within 12 months. Additionally, R116.6 million in respect of the co-generation project has been committed and
will be settled over the next 12 months. The remaining R21.2 million on contractual commitments made by the company are related
to plant maintenance and other projects and will be settled within 12 months.
FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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32. Commitments and contingencies (continued)
Finance lease commitmentsThe minimum lease payments under finance lease arrangements are set out in the following table:
Consolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Within 1 year 20,843 19,447 – –
Between 1 and 5 years 74,191 82,816 – –
Greater than 5 years 129,551 164,195 – –
Total future lease payments 224,585 266,458 – –
Less: future finance charges (124,844) (154,408) – –
Lease liability 99,741 112,050 – –
Represented by:
Current lease liability 9,140 19,447 – –
Non-current lease liability 90,601 92,603 – –
Lease liability 99,741 112,050 – –
The present values of lease payments under finance lease arrangements are set out in the following table:
Consolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Within 1 year 9,140 7,286 – –
Between 1 and 5 years 33,323 35,058 – –
Greater than 5 years 57,278 69,706 – –
Lease liability 99,741 112,050 – –
Contingent liabilities
A claim brought against the company for R37 million by a contractor during the financial year 30 June 2007 has been settled for
R10.2 million during the year. There are no contingent liabilities outstanding at 30 June 2008.
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33. Related party transactions
Loans to directors and director-related entitiesNo loans have been granted to directors and/or director-related entities with the exception of the loans disclosed in note 14(b)
above.
Refer to audited Remuneration Report for details of remuneration and arrangements with key management personnel.
The Parent company received management fees from its subsidiary company International Ferro Metals SA (Pty) Limited. Related
party transactions exist between the groups. Outstanding amounts at year-end relate to inter-company loans of which the details can
be obtained in note 14 (a).
Management fees received by the parent company totalled R16.9 million.
Jiuquan Iron and Steel (Group) Company (JISCO) owns 28.89% of the Parent company's shares. Sales made to JISCO totalled 105,817
tonnes and were made in terms of an offtake agreement which is set up at arm's length. Value of sales made to JISCO during the year
amounted to R901 million.
34. Interest in subsidiariesThe Company has the following direct interest in subsidiaries:
Country of Ownership Investment
incorporation interest
Name 2008 2007
International Ferro Metals SA (Pty) Limited South Africa 98.75% 98.75% R330 million
Purity Metals Holdings Limited (refer notes 23 and 26) British Virgin Islands 100% 100% US$9 million
Sky Chrome Mining (Proprietary) Limited South Africa 80% 80% R800
International Ferro Metals SA Holdings (Pty) Limited South Africa 100% – R500 million
FINANCIAL REPORT (CONTINUED)
Notes to the financial report (continued)
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35. Auditor's remunerationConsolidated Parent
2008 2007 2008 2007
R’000 R’000 R’000 R’000
Amounts received or due and receivable by Ernst & Young
(Australia) for:
(i) an audit or review of the Financial Report of the entity and
any other entity in the consolidated entity 1,309 384 1,309 384
(ii) equity raising and due diligence services 1,769 2,058 1,769 2,058
3,078 2,442 3,078 2,442
Amounts received or due by related practices of Ernst & Young
(Australia) for:
(i) an audit or review of the Financial Report of any other
entity in the consolidated entity 986 1,012 – –
(ii) other assurance services 42 64 – –
1,028 1,076 – –
4,106 3,518 3,078 2,442
DIRECTORS’ DECLARATION
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In accordance with a resolution of the directors of International Ferro Metals Limited, I state that:
1. In the opinion of the directors:
(a) the financial statements, notes and the additional disclosures of the company and of the consolidated entity, included in the
Directors' Report and designated as audited, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Company's and consolidated entity's financial position as at 30 June 2008 and of their
performance for the year ended on that date; and
(ii) complying with Accounting Standards 3 and Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with Section
295A of the Corporations Act 2001 for the financial year ending 30 June 2008.
On behalf of the Board
Stephen Turner
Director
Sydney
21 September 2008
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NOTICE OF THE ANNUALGENERAL MEETING
Notice is hereby given to International Ferro
Metals Limited shareholders of the Company's
annual general meeting (the meeting) to be
held on Wednesday, 12 November 2008 at
10am (Sydney time) at Level 27, AMP Centre,
50 Bridge Street, Sydney, New South Wales,
2000. The purpose of the meeting is to consider,
and if thought fit, to pass with or without
modification the following resolutions.
Resolutions 1 to 7 will be proposed as ordinary
resolutions and Resolution 8 will be proposed as
a special resolution.
The Explanatory Memorandum to this notice
provides additional information on matters
to be considered at the meeting. The
Explanatory Memorandum and Proxy Form part
of this notice.
RecommendationThe directors of the Company consider that all
the proposals to be considered at the meeting
are in the best interests of the Company and its
members as a whole and are most likely to
promote the success of the Company for the
benefit of its members as a whole. Save where
certain directors have abstained from making a
recommendation, as noted in the Explanatory
Memorandum, as a result of their interest
in particular resolutions, the directors
unanimously recommend that you vote in
favour of all the proposed resolutions as they
intend to do in respect of their own beneficial
holdings to the extent they are permitted to
vote on such resolutions by the Corporations
Act 2001 (Cth).
Ordinary business
Reports and accountsTo receive the financial statements and the
reports of the directors and independent
auditor for the financial year ended
30 June 2008.
Ordinary Resolution 1Election of a director
“That Mr David Kovarsky, having been appointed
as a director of the Company since the last
annual general meeting, who retires in
accordance with clause 20.5 of the constitution
of the Company and being eligible, is elected as
a director of the Company.”
Ordinary Resolution 2Re-election of a director
“That, in accordance with clause 21.3 of the
constitution of the Company, Mr Terence
Willsteed retires by rotation and being eligible,
is re-elected as a director of the Company.”
This document is important and requires your immediate attention. If you are in any doubt as to
what action you should take, you are recommended to seek your own financial advice from your
stockbroker or other independent adviser duly authorised under the Financial Services and Markets
Act 2000 if you are resident in the United Kingdom or, if you reside elsewhere, another
appropriately authorised financial adviser. If you have sold or transferred all of your shares in
International Ferro Metals Limited (the Company), please forward this document, together with the
accompanying documents, as soon as possible to the purchaser or transferee or to the stockbroker,
bank or other agent through whom the sale or transfer was effected for transmission to the
purchaser or transferee.
INTERNATIONAL FERRO METALS LIMITED
(ACN 099 355 790)
(the Company)
Notice of Annual General Meeting of Shareholders
To be held at: Level 27, AMP Centre, 50 Bridge Street, Sydney, New South Wales, 2000
On: Wednesday, 12 November 2008 at 10am (Sydney time)
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Ordinary Resolution 3Re-election of a director
“That, in accordance with clause 21.3 of the
Constitution of the Company, Ms Tian Xia
retires by rotation and being eligible, is re-
elected as a director of the Company.”
Special business
Ordinary Resolution 4Issue of options to Mr Anthony Grey
“That for the purposes of Section 208 of the
Corporations Act 2001 (Cth) and for all other
purposes, the issue to Mr Anthony Grey (a
director of the Company) or his nominee, of
1,000,000 options to subscribe for fully paid
ordinary shares in the Company on the terms
set out in the Explanatory Memorandum
accompanying this Notice of General Meeting
and the issue to Mr Anthony Grey or his
nominee of fully paid ordinary shares in the
Company upon the full or partial exercise of
such options, is hereby approved.”
Ordinary Resolution 5Issue of options to Mr Stephen Turner
“That for the purposes of Section 208 of the
Corporations Act 2001 (Cth) and for all other
purposes, the issue to Mr Stephen Turner (a
director of the Company) or his nominee, of
1,000,000 options to subscribe for fully paid
ordinary shares in the Company on the terms
set out in the Explanatory Memorandum
accompanying this Notice of General Meeting
and the issue to Mr Stephen Turner or his
nominee of fully paid ordinary shares in the
Company upon the full or partial exercise of
such options, is hereby approved.”
Ordinary Resolution 6Issue of options to Mr Xiaoping Yang
“That for the purposes of Section 208 of theCorporations Act 2001 (Cth) and for all otherpurposes, the issue to Mr Xiaoping Yang (adirector of the Company) or his nominee, of500,000 options to subscribe for fully paidordinary shares in the Company on the termsset out in the Explanatory Memorandumaccompanying this Notice of General Meetingand the issue to Mr Xiaoping Yang or hisnominee of fully paid ordinary shares in theCompany upon the full or partial exercise ofsuch options, is hereby approved.”
Ordinary Resolution 7Increase of non-executive director cash
remuneration cap
"That, in accordance with clause 22.1 of the
constitution, the maximum aggregate amount of
cash remuneration which may be provided by the
Company to all non-executive directors of the
Company for their services as non-executive
directors of the Company be increased to
£750,000 a year, with effect from the financial
year commencing on 1 July 2008."
Special Resolution 8Disapplication of pre-emption rights
"That the directors be and are hereby authorised
to allot equity securities for cash in accordance
with new clause 3 of the Company's
constitution provided that such powers shall be
limited to the allotment of up to 50,756,268
equity securities (such authority to expire at the
conclusion of the next annual general meeting
of the Company or, if earlier, 30 November
2009). The foregoing power shall allow and
enable the directors to make an offer or
agreement before the expiry of that power
which would or might require securities to be
allotted after such expiry as if the power
conferred hereby had not expired."
Notes to the Notice ofAnnual General Meeting
Explanatory MemorandumThe Company's shareholders (shareholders)
should read the Explanatory Memorandum
accompanying and forming part of this Notice
of Annual General Meeting for more details on
the resolutions to be considered at the annual
general meeting.
Entitlement to attend and voteIn accordance with Reg 7.11.37 of theCorporations Regulations 2001, the Board hasdetermined that persons who are registeredholders of shares of the Company as at 7pm(Sydney time) on 10 November 2008 will beentitled to attend and vote at the meeting as ashareholder. This means that if you are not theregistered holder of a relevant share in theCompany at that time, you will not be entitledto vote in respect of that share.
NOTICE OF THE ANNUAL GENERAL MEETING (CONTINUED)
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Voting exclusionsThe entitlement to vote at the meeting will be
subject to any voting exclusions applicable
under the Corporations Act 2001 (Cth).
Please refer to the Explanatory Memorandum
for voting exclusions applicable to Ordinary
Resolutions 4 to 7 and Special Resolution 8.
How to exercise your right tovoteYou may vote in person, by proxy or by attorney.
For example, you may vote:
• by attending the annual general meeting
and voting in person, or if you are a
corporate shareholder, by having a
corporate representative attend and vote
for you; or
• by appointing a proxy to vote for you, by
completing the Proxy Form provided with
this Notice of Annual General Meeting; or,
• for those persons who hold depository
interests representing ordinary shares in the
capital of the Company by either: (a)
appointing Computershare Clearing Pty Ltd
A/C CCNL DI (depository) as proxy to vote
for you, by completing the Form of
Instruction provided with this Notice of
Annual General Meeting; or (b) through
CREST, by utilising the CREST electronic
proxy appointment service.
Voting by proxyEach shareholder entitled to attend and voteat the annual general meeting, may appointone or more proxies to attend, speak and votein his/her stead. A proxy need not be ashareholder. A shareholder who is entitled tocast two or more votes may appoint twoproxies and may specify the proportion ornumber of votes each proxy is appointed toexercise. If the shareholder does not specifythe proportion or number of votes to beexercised, each proxy may exercise half of theshareholder's votes.
A Proxy Form is attached for the convenience of
any shareholder who cannot attend the annual
general meeting. It should be properly
completed and in order to be effective must be
lodged, together with the authority (if any)
under which it is signed, at the Company's
registered office at Level 11, 151 Macquarie
Street, Sydney, New South Wales, 2000 by
no later than 10am on Monday, 10 November
2008 (Sydney time). The proxy can also be
lodged by fax on +61 2 8298 2060. A
shareholder who completes and lodges a Form
of Proxy will nevertheless be entitled to attend
and vote in person at the general meeting
should he/she subsequently decide to do so.
Appointment of proxies throughCRESTBy completing the enclosed Proxy Form, a
person who holds depository interests
representing ordinary shares in the capital of
the Company will appoint Computershare
Clearing Pty Ltd A/C CCNL DI the depository to
vote on their behalf at the meeting and the
completed Proxy Form should be lodged with
the depository not later than 10am on Friday,
7 November 2008 (London time) (or in the case
of an adjourned meeting, 72 hours before the
time appointed for the meeting).
This facility is only open to depository
interest holders who hold their shares
through CREST.
CREST members who wish to appoint a proxy or
proxies by utilising the CREST electronic proxy
appointment service may do so for the meeting
and any adjournment(s) thereof by using the
procedures described in the CREST Manual.
CREST personal members or other CREST
sponsored members, and those CREST members
who have appointed a voting service
provider(s), should refer to their CREST sponsor
or voting service provider(s), who will be able to
take appropriate action on their behalf.
In order for a proxy appointment or instruction
made using the CREST service to be valid, the
appropriate CREST message (a CREST Proxy
Instruction) must be properly authenticated in
accordance with Euroclear UK & Ireland
Limited's specifications and must contain the
information required for such instructions, as
described in the CREST Manual. The CREST
message, regardless of whether it constitutes
the appointment of a proxy or an amendment
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to the instruction given to a previously
appointed proxy must, in order to be valid, be
transmitted so as to be received by the issuer's
agent (3RA50) no later than 10am on Friday,
7 November (London time) or 72 hours before
the time appointed for the holding of the
adjourned meeting (as applicable). For this
purpose, the time of receipt will be taken to be
the time (as determined by the time stamp
applied to the CREST message by the CREST
applications host) from which the issuer's agent
is able to retrieve the CREST message through
an enquiry to CREST in the manner prescribed
by CREST. After this time any change of
instructions to proxies appointed through
CREST should be communicated to the
appointee through other means.
CREST members and, where applicable, their
CREST sponsors or voting service provider(s),
should note that Euroclear UK & Ireland Limited
does not make available special procedures in
CREST for any particular messages. Normal
system timings and limitations will therefore
apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST
member concerned to take (or, if the CREST
member is a CREST personal member or
sponsored member or has appointed a voting
service provider(s), to procure that the CREST
sponsor or voting service provider(s) take(s))
such action as shall be necessary to ensure that
a CREST message is transmitted by means of
the CREST system by any particular time. In this
connection, CREST members and, where
applicable, their CREST sponsors or voting
service provider(s) is/are referred, in particular,
to those sections of the CREST Manual
concerning practical limitations of the CREST
system and timings.
The Company may treat as invalid a CREST
Proxy Instruction in the circumstances set out in
Regulation 35(5)(a) of the Uncertificated
Securities Regulations 2001.
Corporate representativesA body corporate, which is a shareholder
or which has been appointed as a proxy, is
entitled to appoint any person to act as its
representative at the meeting. The appointment
of the representative must comply with the
requirements under Section 250D of the
Corporations Act. The representative should
bring to the meeting a properly executed letter
or other document confirming its authority to
act as the company's representative.
By order of the Board
Wayne Kernaghan
Company Secretary
International Ferro Metals Limited
Level 11, 151 Macquarie Street
Sydney, New South Wales 2000
Australia
2 October 2008
NOTICE OF THE ANNUAL GENERAL MEETING (CONTINUED)
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INTERNATIONAL FERRO METALS LIMITED
(ACN 099 355 790)(the Company)
This Explanatory Memorandum is to be read together with, and forms part of, the Notice of Annual General Meeting (AGM or meeting).
Business of the meeting
Item 1: Financial statements and reportsThe Financial Statements, Directors' Report and the Independent Auditor's Report for the financial year ended 30 June 2008 will be laidbefore the meeting.
Following the consideration of the reports, the Chairman will give shareholders a reasonable opportunity to ask questions about orcomment on the management of the Company.
The Chairman will also give shareholders a reasonable opportunity to ask the Auditor questions relevant to:(a) the conduct of the audit;(b) the preparation and content of the Auditor's Report;(c) the accounting policies adopted by the Company in relation to the preparation of the financial statements; and(d) the independence of the Auditor in relation to the conduct of the audit.
The Chairman will also give the Auditor a reasonable opportunity to answer written questions submitted by shareholders that arerelevant to the content of the Independent Audit Report or the conduct of the audit. A list of written questions, if any, submitted byshareholders will be made available at the start of the AGM and any written answer tabled by the Auditor at the AGM will be madeavailable as soon as practicable after the AGM.
Ordinary Resolution 1
Election of a directorMr David Kovarsky was appointed as an additional director of the Company since the last annual general meeting. In accordance withthe Company's constitution, Mr Kovarsky must retire and offer himself for re-election. Accordingly, Mr Kovarsky, being eligible, offershimself for re-election as a director of the Company.
Mr Kovarsky was appointed as the Managing Director of International Ferro Metals Limited on 1 February 2008.
Information about the background and experience of this candidate appears below:
Mr Kovarsky has extensive experience in the ferrochrome industry, both in operations and construction and has been a valuablecontributor to the Company for many years. He has a close working relationship with the Company's management team, having assistedin the Company's initial feasibility studies, construction and commissioning. Prior to this appointment in February 2008, Mr Kovarskywas the CEO of South Africa's largest submerged arc furnace supplier, Tenova Pyromet (Pyromet), which designed and constructed theCompany's two ferrochrome furnaces and its beneficiation plant. Before joining Pyromet, he was an executive director of JCI Limitedwith direct management responsibility for Consolidated Metallurgical Industries – at that time the world's second largest ferrochromeproducer.
EXPLANATORY MEMORANDUM
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Mr Kovarsky is currently an independent non-executive director of Randgold & Exploration Company Limited (JSE: RSE).
The directors, with Mr Kovarsky abstaining with respect to Ordinary Resolution 1, unanimously recommend that you vote in favourof this resolution.
Ordinary Resolutions 2 and 3
Re-election of directorsIn accordance with the Company's constitution, Mr Terence Willsteed and Ms Tian Xia retire by rotation and, being eligible, offerthemselves for re-election as directors of the Company.
Information about the background and experience of each of the directors to be elected is set out on pages 34 to 36 of the Company's2008 Annual Report.
The directors, with Mr Willsteed and Ms Xia abstaining with respect to Ordinary Resolution 2 and 3 respectively, unanimouslyrecommend that you vote in favour of these resolutions.
Resolutions 4 to 6 inclusive
Issue of options to executive directorsResolutions 4 to 6 are to approve the giving of a financial benefit to the directors for the purposes of the related party transactionsprovisions in Chapter 2E of the Corporations Act.
It is proposed that the Company issue to the directors of the Company a total of 2,500,000 options, as set out in the table below, tosubscribe for fully paid ordinary shares in the capital of the Company.The exercise price per option will be 115% of the volume weightedaverage price (VWAP) of International Ferro Metals Limited ordinary shares traded on the London Stock Exchange over the 30-daytrading period preceding 30 September 2008, accordingly the exercise price will be £0.68.
Further details on the terms of the options are set out below.
Director Number of options
Anthony Grey 1,000,000Stephen Turner 1,000,000Xiaoping Yang 500,000
Chapter 2E of the Corporations Act 2001 (Cth) prohibits a public company from giving a ‘financial benefit’ to a ‘related party’, whichincludes directors of the public company, unless either:(a) the giving of the financial benefits falls within one of the specified exceptions to the provisions; or(b) prior shareholder approval is obtained for the provision of the financial benefits.
The granting of options to the directors of the Company may constitute the provision of a financial benefit to a related party of theCompany within the meaning of Chapter 2E. Accordingly, shareholder approval is being sought for the issue of these options and theissue of shares upon exercise of the options in accordance with the requirements of Chapter 2E of the Corporations Act 2001.
Information concerning the terms of the options and their value is set out below to assist shareholders in deciding whether to vote infavour of these resolutions.
EXPLANATORY MEMORANDUM (CONTINUED)
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Terms of options 1. If shareholder approval is obtained, the 2,500,000 options will be issued to executive directors within one month of the date of the
meeting subject to applicable laws, rules and regulations.
2. Each option will entitle the holder to subscribe for one fully paid ordinary share in the capital of the Company.
3. No consideration will be payable for the grant of the options.
4. The exercise price of each option will be 115% of the VWAP of International Ferro Metals Limited ordinary shares traded on theLondon Stock Exchange over the 30-day trading period preceding 30 September 2008 (exercise price).
5. The funds raised on the exercise of the options will be used for working capital purposes.
6. The options will vest immediately upon their issue. Save for the exercise conditions, the options are not subject to any other vestingor performance conditions.
7. The options will expire on the earlier of:
(a) the date which is one month after the relevant director ceases to be a director of the Company other than due to redundancy(or such longer period as determined by the Board of Directors); and
(b) 5pm on 11 November 2011 (the expiry date).
8. Subject to satisfaction of the exercise condition, the options shall be exercisable wholly or in part, by notice in writing to theCompany, at any time up until the expiry date.
9. Shares issued on the exercise of options will rank pari passu with the then existing issued ordinary shares of the Company. If theCompany's ordinary shares are admitted to trading on any recognised stock exchange at the time the options are exercised, theCompany shall apply for the ordinary shares issued on exercise of the options to be admitted to trading on such stock exchange.
10. The options shall not entitle the option holder to participate in new issues of capital (except for bonus issues) which may be offeredto shareholders unless the option has been exercised and shares issued prior to the record date for any new issue.
11. If the Company makes a pro rata bonus issue of shares to its shareholders prior to an option being exercised, and the option is notexercised prior to the record date for the issue, the option will, when exercised, entitle the holder to one share plus the number ofbonus shares which would have been issued to the holder if the option had been exercised prior to the record date.
12. On a reorganisation of capital of the Company, the exercise price of the options or the number of shares over which the options canbe exercised will be reorganised in accordance with the relevant provisions of the UKLA Listing Rules in force at the time of thereorganisation.
13. The options will not be admitted to trading on the London Stock Exchange or any other stock exchange.
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EXPLANATORY MEMORANDUM (CONTINUED)
Valuation of optionsThe options have been valued by reference to the Binomial options pricing model, based on the following assumptions:
Call Option Valuation Input
VWAP of share price over 30 trading day period to 30 September 2008 £0.59Exercise price £0.68Risk free rate 5.2%Volatility (annualised) 55.24%Time (years) to expiry 3 yearsValue per option £0.08Number of options 2,500,000
Total value £192,910
It should be noted that no discount has been applied to the valuation of the options with respect to:(a) the lack of liquidity in the options due to their not being listed; or (b) the exercise condition attaching to the options.
Based on the above assumptions it is considered that the total value of the 2,500,000 options to be £192,910 (approximately A$426,331using an exchange rate of £1: A$2.21 as at 30 September 2008).
Impact of proposed option issue on directors' shareholdingMr Grey, Mr Turner and Mr Yang do not currently hold any options in the Company.
The following table sets out the shareholding of each of the above directors and the impact of the proposed issue of options on
their shareholding.
Proposed Shareholding Shareholding
Current Current options to assuming option assuming option
Director shareholding shareholding (%) be issued exercise exercise (%)
Anthony Grey (1) 1,266,667 0.25% 1,000,000 2,266,667 0.44%
Stephen Turner (2) 6,916,667 1.36% 1,000,000 7,916,667 1.54%
Xiaoping Yang 166,667 0.03% 500,000 666,667 0.13%
Total 8,350,001 1.65% 2,500,000 10,850,001 2.12%
(1) Mr Grey's shareholding is held by Dalvin (Pty) Ltd, a company of which Mr Grey is a beneficial owner.
(2) Mr Turner's shareholding is held as follows: 1,000,000 ordinary shares in his own name, 5,541,667 ordinary shares by Kin Yip International Limited and 375,000 ordinaryshares by Elliot Rutledge Group (Pty) Ltd, both being companies of which Mr Turner is a beneficial holder. Mr Turner only has a part interest in these shares.
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Directors' recommendationThe directors unanimously recommend that shareholders vote in favour of Resolutions 4 to 6, but with each of the executive directorsabstaining from such recommendation with respect to the issue of options to them.
The directors recommend approval of the grant of the options as:(a) the Board believes that in order to attract and retain talented executives and directors, equity incentives are a key element of the
remuneration package which needs to be offered; and(b) the options are intended to provide an incentive to the executive directors to work towards improving the performance of the
Company and its share price, therefore aligning the interests of those directors and shareholders.
Voting exclusion statementSection 224 of the Corporations Act provides that each of the directors to whom options are proposed to be issued and their respectiveassociates must not vote on the resolution for the approval of the issue of options to that director. Accordingly, the Company willdisregard any votes cast by each such director and his/her respective associates on the resolution approving the issue of options to thatdirector. However, the Company need not disregard a vote if:(a) it is cast by a person excluded above as proxy for a person who is entitled to vote, in accordance with the directions on the Proxy
Form; or(b) it is cast by a person excluded above that person who is chairing the meeting as proxy for a person who is entitled to vote, in
accordance with a direction on the Proxy Form to vote as the proxy decides.
Ordinary Resolution 7
Increase of non-executive director cash remuneration capIt is proposed to increase the maximum cash aggregate remuneration of the non-executive directors of the Company (NEDs) underclause 22.1 of the Company's constitution (remuneration cap) to £750,000 per annum (approximately A$1,657,500 using an exchangerate of £1: A$2.21).
The remuneration cap applies to cash remuneration payable to NEDs, such as annual director's fees, but does not include certainamounts which may be paid to or on behalf of NEDs, such as superannuation or pension payments or amounts paid under any equityincentive scheme, including the Phantom Option Scheme currently in place which permits participation by NEDs.
The proposed increase will allow for some growth in Board remuneration over time to reflect market movements and changedresponsibilities and provide the Board with the flexibility to appoint additional independent non-executive directors if necessary.
The Board's policy is to remunerate NEDs at market rates for comparable companies for the time commitment and responsibilitiesinvolved.
Directors' recommendation The directors unanimously recommend that shareholders vote in favour of Resolution 7, but with all of the NEDs abstaining from suchrecommendation.
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EXPLANATORY MEMORANDUM (CONTINUED)
Special Resolution 8
Disapplication of pre-emption rightsIf the directors of the Company wish to exercise their right to offer unissued shares for cash, clause 3 of the Company's constitutionadopted at last year's AGM stipulates that they can only do so if shareholders have given specific authority for the waiver of pre-emptionrights which provide that new shares must first be offered to existing shareholders in proportion to their existing holdings. There areexceptions to this requirement for issues of bonus shares, issues of equity securities for non-cash consideration, issues under employeeshare schemes and rights and issues or other pro rata issues. The constitution also allows for the disapplication of such pre-emptionrights by special resolution.
In certain circumstances, it may be in the interests of the Company to allot new shares (or grant rights over shares) for cash withoutfirst offering them to existing shareholders. For example, the directors may need to modify the pre-emption rights in its constitution tothe extent necessary to deal with any legal, regulatory or practical problems arising from a rights issue. Accordingly, Resolution 8 grantsthe directors authority to allot shares for cash without first offering them to shareholders on a pro rata basis, until the conclusion of theCompany's annual general meeting in 2009 or 30 November 2009, whichever is the earlier. The authority sought is limited to the issueof up to 50,756,268 equity securities, representing 10% of the issued ordinary share capital as at 30 September 2008 (the latestpracticable date prior to the date of this notice).
The directors do not have any present intention of exercising the authorities in Resolution 8 other than in relation to issuing sharesto satisfy exercises of share options, but will keep this matter under review.
The directors unanimously recommend that you vote in favour of this resolution.
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Appointment of proxy
I/We
of
being a member/members of International Ferro Metals Limited (Company) hereby appoint
The Chairman of the meeting (mark with an 'X') or
write the name of the person you are appointing if this person is someone other than the Chairman of the meeting.
Or failing the person named attending the meeting, or if no person is named, the Chairman of the meeting as my/our proxy to actgenerally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given,as the proxy sees fit) at the annual general meeting of the Company to be held on 12 November 2008 at 10am (Sydney time) and atany adjournment of that meeting.
IMPORTANT:If the Chairman of the meeting is appointed as your proxy or may be appointed by default and you do not wish to direct yourproxy how to vote as your proxy on each item, please place a mark in this box. By marking this box, you acknowledge thatthe Chairman of the Meeting may exercise your proxy even if he has an interest in the outcome of these resolutions and thatvotes cast by the Chairman of the meeting for these resolutions, other than as a proxy holder, would be disregarded becauseof that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chairman will not castyour votes on these resolutions and your votes will not be counted in computing the required majority if a poll is called onthese resolutions. The Chairman intends to vote undirected proxies in favour of each resolution.
Voting directions to your proxy – please mark an 'X' to indicate your directions.
Resolution For Against Abstain
1. Election of Mr D Kovarsky � � �2. Re-election of Mr T Willsteed � � �3. Re-election of Ms T Xia � � �4. Issue of Options – Mr A Grey � � �5. Issue of Options – Mr S Turner � � �6. Issue of Options – Mr X Yang � � �7. Increase NEDs remuneration cap � � �8. Disapplication of pre-emption rights � � �
Signed this …………………………………………………….……….………. day of ……………………….………………….……….……….……….……….………...... 2008.
Individual shareholder 1 Shareholder 2 Shareholder 3
Individual/sole director Director Director/company secretary
This form must be signed by the shareholder. If a joint holding, either shareholder may sign. If signed by the shareholder's attorney, thepower of attorney must have been previously noted by the registry or a certified copy attached to this form. If executed by a company,the form must be executed in accordance with the shareholder's constitution and the Corporations Act 2001 (Cth).
International Ferro Metals Limited
(ACN 099 355 790)
FORM OF PROXY
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1. A member entitled to attend and vote is entitled to appoint not more than two proxies.
2. Where more than one proxy is appointed, each proxy must be appointed to represent a specified proportion of the member's
voting rights.
3. Appointment of a proxy by a member who is a corporation must be given in accordance with the Corporations Act 2001 (Cth) or
signed on its behalf by an authorised attorney.
4. If this proxy is executed under a power of attorney, the instrument appointing the attorney must accompany the Form of Proxy.
6. Any instrument of proxy in which the name of the appointee is not filled in shall be deemed to be given in favour of the Chairman
of the Meeting.
5. A proxy need not be a member of the Company.
6. To be effective, the Proxy Form must be received by the Company at its registered office, Level 11, 151 Macquarie Street, Sydney
New South Wales 2000, or received by facsimile on (02) 8298 2060 not less than forty-eight (48) hours before the time for holding
the meeting.
7. For the purposes of Section 1109N of the Corporations Act 2001 (Cth), the directors have set a snapshot date to determine the
identity of those entitled to attend and vote at the meeting. The snapshot date and time has been set at 7pm (Sydney time) on
10 November 2008.
INSTRUCTIONS FOR COMPLETION OF PROXY FORM
CORPORATE INFORMATION
ABN 31 099 355 790
This annual report covers International Ferro Metals Limited and the entities it controlled at the end of, or during, the year ended 30 June
2008. The functional currency of each entity in the Group and the presentation currency of the Group is the South African rand (R).
A description of the Group’s operations and of its principal activities is included in the review of operations and activities in the Report
from the CEO and Managing Director on pages 8 to 15. This report does not form part of the Financial Report.
DirectorsAJ GreySJ TurnerDC KovarskyX YangTV WillsteedIW WatsonSD OkeT Xia
Company SecretaryW J Kernaghan
Registered officeLevel 11151 Macquarie StreetSydney New South WalesAustralia, 2000
Telephone: + 612 8298 2090Facsimile: + 612 8298 2020
South African officesMooinooi
Buffelsfontein JQ465Private Bag 2223MooinooiSouth Africa, 0325
Telephone: + 27 14 574 6300Facsimile: + 27 14 574 6307
Johannesburg
3rd Floor, Suite 14b 3 Melrose BlvdMelrose Arch South Africa, 2076
Telephone: + 27 11 994 9600Facsimile: + 27 11 994 9611
Share RegisterAustralia
Computershare Investor Services Pty Ltd
Yarra Falls
452 Johnston Street
Abbotsford
Victoria
Australia, 3067
Australia contact centre:
+ 61 (3) 9415 4000
(1300 850 505 within Australia)
Email:
United Kingdom
Computershare Investor Services PLC
PO Box 82
The Pavillions
Bridgwater Road
Bristol, United Kingdom, BS99 7NH
UK contact centre:
+ 44 (0) 870 702 0000
SolicitorsBaker & McKenzie Level 27, AMP Centre50 Bridge StreetSydney New South WalesAustralia, 2000
BankersNational Bank of AustraliaLevel 36, 100 Miller StreetNorth SydneyNew South WalesAustralia, 2060
BrokersNumis Securities LimitedCheapside House138 CheapsideLondon United Kingdom, EC2V 6LH
AuditorsErnst & Young680 George StreetSydney, NSW Australia, 2000
Russell and Associates 1715_08
Contact details: Tel : +61 2 8298 2090 Fax : +61 2 8298 2020
www.ifml.com
![AR2008 Nxtbook[1]](https://static.documents.pub/doc/80x56/577dac181a28ab223f8d630f/ar2008-nxtbook1.jpg)
