CMO - Chrometco Limited - Abridged Audited Group Annual Financial Statements

CMO
CMO - Chrometco Limited - Abridged Audited Group Annual Financial Statements
for the Year Ended 29 February 2012
Chrometco Limited
(Incorporated in the Republic of South Africa)
(Registration number 2002/026265/06)
Share code: CMO
ISIN: ZAE00007020249
("Chrometco" or "the Company" or "the Group")
ABRIDGED AUDITED GROUP ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 29
FEBRUARY 2012 AND POSTING OF THE INTEGRATED ANNUAL REPORT AND THE NOTICE OF
ANNUAL GENERAL MEETING
ABRIDGED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Audited as at Audited as at
29 Feb 2012 28 Feb 2011
R'000 R'000
ASSETS

Non-current assets 184 532 46
Tangible assets 52 46
Intangible assets 184 480 -

Current assets 38 606 39 211
Inventory 6 870 -
Trade and other receivables 126 1 552
Cash and cash equivalents 31 610 37 659

Total assets 223 138 39 257

EQUITY AND LIABILITIES

Capital and reserves 173 105 38 817
Issued capital 2 2
Share premium 35 485 35 485
Retained earnings 101 786 3 330
Non-controlling interest 35 832 -

Non-current liabilities 34 436 386
Deferred taxation 34 436 386

Current liabilities 15 597 54
Trade and other payables 12 499 54
Provisions 10 -
Taxation payable 3 088 -

Total equity and liabilities 223 138 39 257
Net asset value per share (cents) 93.61 20.99
Closing number of shares ('000) 184 929 184 929
ABRIDGED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited for year Audited for year
ended 29 Feb 2012 ended 28 Feb 2011
R'000 R'000

Revenue 619 -
Cost of sales (314) -
Gross profit 305 -
Other income - 318
Reversal of impairment loss - 13 000
Gain on bargain purchase 115 128 -
Change in measurement - VAT (6 018) -
Operating expenses (10 520) (8 077)
Net profit before interest
and taxation 98 895 5 241
Investment income 1 623 1 813
Finance charges - -
Profit before taxation 100 518 7 054
Taxation (2 412) (1 906)
Profit for the year 98 106 5 148
Other comprehensive income - -
Taxation on other comprehensive - -
income
Total comprehensive income
for the year 98 106 5 148
Loss attributable to non controlling 350 -
interest
Total comprehensive income for the 98 456 5 148
year attributable to owners of the
company
Reconciliation between earnings and
headline loss per share
Basic earnings per share (cents) 53.24 2.78
Diluted earnings per share (cents) 53.24 2.78

Earnings attributable to owners of 98 456 5 148
the company
Adjustments:
Gain on bargain purchase (115 128) -
Reversal of impairment loss - (13 000)
Profit on disposal of subsidiary - (7)
Impairment of receivables - 251
Headline loss attributable to owners (16 672) (7 608)
of the company
Headline loss per share (cents) (9.01) (4.11)
Weighted average number of shares 184 929 184 929
(`000)
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited for year Audited for year
ended 29 Feb 2012 ended 28 Feb 2011
R'000 R'000
Cash flows from operating activities (6 041) (7 534)
Cash flows from investing activities (8) 12 993
Cash flows from financing activities - (9 246)
Net movement in cash and cash (6 049) (3 787)
equivalents
Cash and cash equivalents at the 37 659 41 446
beginning of the period
Cash and cash equivalents at the end 31 610 37 659
of the period.
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Share Non Controlling Retained Total
Capital and Interest Earnings
Premium
R'000 R'000 R'000 R'000
Balance at 1 March 2010 35 487 - 7 429 42 916
Comprehensive income for - - 5 148 5 148
the period
Dividends paid - - (9 246) (9 246)
Balance at 28 February 35 487 - 3 330 38 817
2011
Balance at 1 March 2011 35 487 - 3 330 38 817
Acquired through business - 36 182 - 36 182
combination
Non controlling interest's - (350) - (350)
share of loss for the year
Comprehensive income for - - 98 456 98 456
the period
Balance at 29 February 35 487 35 832 101 786 173 105
2012
COMMENTARY - Financial and operational overview.
1. The directors present the reviewed results for the
year ended 29 February 2012
2. Basis of preparation
The accounting policies of the group comply in all
material respects with recognition and measurement
criteria of International Financial Reporting Standards
("IFRS") and its interpretations adopted by the
International Accounting Standards Board ("IASB") in
issue and effective at 1 March 2011, the AC 500 Standards
as issued by the Accounting Practices Board and its
successor, as well as the presentation and disclosure
requirements of IAS 34 - Interim Financial Reporting, the
JSE Listings Requirements and the Companies Act of South
Africa. The accounting policies and methods of
measurement and recognition are consistent with those
applied in the financial period ended 28 February 2011.
The abridged audited group annual financial statements
have been prepared under the supervision of TW Scott CA
(SA), the Financial Director of the Group.
3. Auditors' report
The Chrometco group's auditors, RSM Betty & Dickson
(Johannesburg), have audited these results. Their
unmodified audit report is available for inspection at
the company's registered office during normal office
hours.
4. Nature of business
The company is involved in the exploration of mineral
resources and the possible beneficiation thereof.
5. Effects of Non Fulfillment of Conditions for Sale of
Chrome Assets
As previously announced to shareholders, the group
conditionally sold certain of its subsidiaries holding
its Rooderand mining rights and activities to DCM Chrome
Proprietary Limited ("DCM Chrome") for R62 million in
2007 ("the transactions") and gave that party the right
to mine. Notwithstanding that the sale was conditional,
the Company (based on the recommendation of its IFRS
advisors) was obliged to change its accounting treatment
of the transactions as a sale. The revised accounting
treatment derecognized the Company's interests in the
relevant subsidiaries. In the view of the IFRS advisors,
the Company had lost control of its subsidiaries through
a reading of the sale of shares and mining and management
agreements together. This approach was in line with the
findings of the GAAP Monitoring Panel ("GMP") and the
JSE. The accounting treatment was adopted in accordance
with IFRS not withstanding that the legal ownership of
the subsidiaries had not changed.
Accordingly, the Group accounted for the non-refundable
deposit of R13 million as a capital receipt subject to
Capital Gains Tax ("CGT") and the subsequent receipts of
R39 million in the same way. The matter was discussed
with South African Revenue Services ("SARS") who
concurred in the tax treatment of the initial non-
refundable deposit of R13 million.
The final instalment of R10 million (due in terms of the
mining and management agreement) has not yet been
received, is subject to legal proceedings and has been
provided for in full.
During 2011, shareholders voted against the sale
transaction and as this was one of the suspensive
conditions, the sale of shares agreement has lapsed and
the Group retains its ownership of the relevant
subsidiaries and all of their mining rights.
Having accounted for the transactions as a sale, the
Group is now required under IFRS to re-recognize the
companies as subsidiaries and consolidate them. No
restatements of the prior accounting treatments are
permitted and in addition the re-recognition as
subsidiaries has to be done at fair value. The current
fair value is R186 million being the midpoint of the
range independently assessed in 2011. This value will be
assessed annually for impairment and is subject to
amortization on a straight line basis over 30 years,
being the life of the mining rights. The amortized
carrying value is accordingly reflected on balance sheet
as an intangible asset at the reporting date.
For income statement purposes the net fair vale gain is
described as Gain on Bargain Purchase Price as required
by IFRS. The gain of R115.1 million has been calculated
after adjusting for other assets and liabilities in the
subsidiaries, deferred CGT on the gain at the newly
enacted rate and the minority shareholders of 24% in the
relevant companies, as will be set out in note 28 to the
annual financial statements. This gain has no effect on
Headline Earnings Per Share ("HEPS") ie is not included
as income in the HEPS calculation.
The other matter arising from the failure of the sale
transaction is the classification of the receipts for tax
purposes and the Company is in discussion with SARS on
this. In the interim the Group has used a conservative
tax interpretation in accounting for the R13 million as a
capital receipt (on which the CGT has been paid) and to
treat the balance of R49 million as taxable income, with
Value Added Tax ("VAT") inclusive in this amount. A VAT
liability and income tax liability (after providing for a
R10 million bad debt) has been provided for. The net VAT
liability provided is R 5 062 893 and the income tax
provided is R 2 959 529.
Shareholders will be notified (to the extent that this
treatment requires change) once an assessment has been
received from SARS.
The VAT liability has been accounted for in the income
statement and has resulted in a higher than expected HEPS
loss of 9.01 cents. Without the additional VAT charge the
HEPS loss would have been 5.37 cents.
6. General review of operations
During the period under review, the group focused its
attention on the following important issues:-
- In May of 2011, the Company prepared and distributed a
circular to shareholders concerning the transactions. At
a general meeting of shareholders held in June of this
year, shareholders voted against the transactions.
- The ongoing detailed review of the Rooderand
transactions and overseeing the commencement of mining
operations at Rooderand subsequent to the expiry of the
mining and management agreement with DCM Chrome on 3
December 2011;
- Evaluation of alternatives relating to the Rooderand
project;
- Updating the mineral resources and reserves statement,
Competent Persons Report and valuation of Rooderand;
- Successful conversion in December 2011 of the "old
order" mineral rights to "new order" mining rights for
chrome at Rooderand in terms of the Mineral and Petroleum
Resources Development Act;
- Overseeing the company's interest in the mining and
management agreement with DCM Chrome. In terms of this
agreement, Chrometco was entitled to receive R 10 million
in cash on 3 December 2011. The company has impaired the
receivable relating to amounts owed by DCM Chrome.
Reversal of the impairment on this receivable will take
place if and when the probability of recovering the
balance owed by DCM Chrome increases. The company is in
the process of attempting to recover monies owed by DCM
Chrome;
- Investigating the acquisition of additional resources;
and
- Optimisation of the allocation of capital resources.
7. Prospects
The group currently has a chrome mine in the North West
province of the Republic of South Africa. Subsequent to
the termination of the mining and management agreement
with DCM Chrome on 3 December 2011, the Group commenced
mining operations for its own account on the Rooderand
site.
The company is also interested in the exploration and
beneficiation of mineral resource opportunities in the
Republic of South Africa and elsewhere.
8. Changes to the board
The board welcomed the appointment of Mr. Chris Seabrooke
and Mr. Ivan Collair in February 2012.
9. Dividends
No dividend has been declared for the period.
10. Posting of the integrated annual report and notice of
the annual general meeting
Shareholders are advised that the integrated annual
report of the company for the year ended 29 February 2012
is to be posted on 21 May 2012.
Notice is hereby given that the annual general meeting of
Chrometco will be held at Computershare Investor Services
Proprietary Limited, 70 Marshall Street, Johannesburg on
Monday, 25 June 2012 at 10:00 to transact the business as
stated in the annual general meeting notice forming part
of the annual financial statements.
For and on behalf of the board of directors
PJ Cilliers
Managing Director
11 May 2011
Directors: JG Scott (Chairman), PJ Cilliers (MD), CS
Seabrooke, E Bramley, IWS Collair, TW Scott (FD)
Designated Advisor: Sasfin Capital, a division of Sasfin
Bank.
Company Secretary: CIS Company Secretaries (Pty) Ltd
Registered Office
70 Marshall Street
Johannesburg
(P.O.Box 3787, Dainfern. 2055)
www.chrometco.co.za
Date: 11/05/2012 16:17:02 Produced by the JSE SENS Department.
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