The condensed group provisional results for the financial year under review have been prepared in accordance with the framework concepts and the measurement and recognition requirements of the International Financial Reporting Standards (IFRS), the South African Institute of Chartered Accountants (SAICA) Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and contain the information required by IAS 34 Interim financial reporting, requirements of the South African Companies Act and the Listings Requirements of the Johannesburg Stock Exchange (JSE) Limited.

Basis of preparation

The condensed group provisional results for the financial year under review have been prepared under the supervision of the finance director, Ms TTA Mhlanga CA(SA). The condensed group provisional results for the financial year under review have been prepared on the historical cost basis, except for certain financial instruments that are fairly valued. The accounting policies used are in terms of IFRS and are consistent with those applied in the most recent annual financial statements, apart from the new standards adopted in the current year.

Selected explanatory notes are included to explain events and transactions that are significant to an understanding of the changes in the group's financial position, performance and cash flow since the last annual financial statements.

Adoption of new and revised accounting standards

The group has not adopted any new and/or revised standards and interpretations issued by the International Accounting Standards Board (IASB).

New standards issued but not yet effective

The following amendments, standards or interpretations have been issued but are not yet effective for the group. The effective date refers to periods beginning on or after, unless otherwise indicated.

The group does not intend early adopting any of the above amendments or standards.

ARM continuously evaluates the impact of these standards and amendments, the adoption of which is not expected to have a significant effect on the group financial statements.

Business segments

For management purposes, the group is organised into the following operating divisions: ARM Platinum (which includes platinum and nickel), ARM Ferrous, ARM Coal and ARM Corporate. Machadodorp Works, Corporate and other, and Gold are included in ARM Corporate.

2.4 Analysis of the ARM Ferrous segment on a 100% basis

4.1 ARM Ferrous

Property, plant and equipment

Khumani Mine

An impairment loss was recognised in F2022 on property, plant and equipment at Khumani for R40 million before tax. This relates to a capital project to fill an underground cavity. The impairment loss was accounted for due to management's assessment of limited future economic benefits associated with the capital spend. ARM's attributable share of the impairment amounted to R20 million before tax of R6 million (refer note 8). This is accounted for in the income from joint venture line in the statement of profit or loss.

Tshenolo Iron Ore Mine

An impairment loss was recognised in F2021 on property, plant and equipment for R52 million with no tax effect. ARM's attributable share of the impairment loss amounted to R26 million with no tax effect (refer note 8).

Cato Ridge Works

An impairment loss of R514 million before tax of R144 million was recognised in F2021 on property, plant and equipment. ARM's attributable share of the impairment amounted to R257 million before tax of R72 million (refer note 8).

Investments

Cato Ridge Alloys

An impairment loss of R97 million with no tax effect was recognised in F2021 on Assmang's equity-accounted investment in Cato Ridge Alloys. ARM's attributable share of the impairment loss amounted to R48 million with no tax effect (refer note 8).

Sakura

An impairment loss of R337 million with no tax effect was recognised in F2021 on Assmang's equity-accounted investment, Sakura Ferroalloys Sdh Bhd. ARM's attributable share of the impairment loss amounted to R169 million with no tax effect (refer note 8).

4.2 ARM Coal

Investments

Participative Coal Business (PCB)

At 30 June 2022 previous impairment losses recognised against the investment in PCB were reversed by ARM, mainly due to an earlier than anticipated settlement of PCB loans.

A discounted cash flow valuation model was prepared to determine the net present value of the investment in PCB. The recoverable amount of ARM's net investment in PCB amounted to R4 450 million.

The level 3 valuation recoverable amount of the investment in the PCB cash-generating unit was determined based on the fair value less cost of disposal calculation performed in terms of IFRS.

ARM's attributable share of the impairment reversal amounted to R1 121 million (nil tax impact) (refer notes 6 and 8).

A pre-tax discount rate of 20.5% was used for the discounted cash flow valuation model together with the following commodity prices and exchange rates:

4.3 Machadodorp Works

An impairment reversal was recognised in F2022 on property, plant and equipment for R3 million with no tax effect (refer note 8).

4.4 Venture Building Trust

An impairment loss was recognised in F2021 on property, plant and equipment for R9 million with no tax effect (refer note 8).

Details of the F2021 impairments were included in the financial results for the year ended 30 June 2021, which can be found on www.arm.co.za.

Refer notes 2.1 and 2.4 for more detail on the ARM Ferrous segment.

Trade and other receivables contain provisional pricing features linked to commodity prices and exchange rates, which have been designated to be measured at fair value through profit or loss because of the embedded derivative. This is a level 2 valuation in terms of IFRS.

Trade and other receivables include a contract asset from Assmang of R985 million (F2021: R1 156 million). The contract asset resulted from revised fee arrangements in the prior year, whereby fees received from Assmang only become payable following receipt by Assmang from the relevant customer.

Trade and other receivables include an amount of R93 million relating to ARM Coal which was included in loans and long-term receivables in F2021 (refer note 5).

The following guarantees issued are included in financial assets:

• Two Rivers to DMRE, Eskom and BP Oil amounting to R31 million (F2021: R30 million)
• Nkomati to DMRE and Eskom amounting to R114 million (F2021: R59 million)
• Modikwa to DMRE and Eskom amounting to Rnil (F2021: R164 million)
• ARM Coal to DMRE amounting to R50 million (F2021: R46 million).

Other financial assets include trust funds of Rnil (F2021: R9 million).

Cash at bank and on deposit earns interest at floating rates based on daily bank deposit rates.

¹ Cash set aside for specific use in respect of the group includes:

• Mannequin Captive Cell is used as part of the group insurance programme. The cash held in the cell is invested in highly liquid investments and is used to settle claims as and when they arise as part of the risk finance retention strategy
• The trust funds of R16 million (F2021: R6 million)
• African Rainbow Minerals Limited of R37 million (F2021: R35 million)
• Guarantees issued by ARM Coal to DMRE amounting to R46 million (F2021: R44 million)
• Guarantees issued by Modikwa to DMRE and Eskom amounting to R234 million (F2021: Rnil)
• Guarantees issued by Nkomati to DMRE and Eskom amounting to R12 million (F2021: R40 million).

The carrying amounts of the financial liabilities shown above approximate their fair value.

The re-measurements are as a result of changes in the future repayment cash flows applied to the net present value calculations. The discount rate used in the calculation of the re-measurement is 5%. This is a level 3 valuation in terms of IFRS 13.

The fair value at initial recognition in F2021 was as a result of the difference in the stipulated interest rate the lender may charge in the future in the new loan agreement and the interest rate the ARM BBEE Trust would have to pay if the loan was advanced in an open market. The rate used to determine the re-measurement and fair value is 11.69% (F2021: 9.04%).

The carrying amounts of the financial liabilities approximate their fair value.

The company, in the ordinary course of business, enters into various sale, purchase, service and lease transactions with subsidiaries, associated companies, joint ventures and joint operations. Transactions between the company, its subsidiaries and joint operations related to fees, insurances, dividends, rentals and interest are regarded as intra-group transactions and eliminated on consolidation.

¹ These transactions and balances for joint operations do not meet the definition of a related party as per IAS 24 but have been included to provide additional information.

Nkomati

The Nkomati Mine closure may have a potential exposure regarding rehabilitation and management of water post-closure. There are uncertainties regarding the ongoing assessment of long-term water management measures and anticipated amendments to the existing water use licence (WUL). Technical studies towards providing an integrated water management plan are underway. The results of the studies will be used as input towards a risk assessment that is required to apply for an amended WUL, such as applying for authorised water discharges. The WUL conditions are not yet known and the subsequent potential water resource impact liability as part of the mine rehabilitation and closure process is uncertain. The obligation will be recognised when it is probable and can be reliably estimated.

The environmental rehabilitation provision at 30 June 2022 is the best independent estimate and is based on the most reliable information currently available. It will be reassessed on an ongoing basis as engineering designs evolve and new information becomes available, as well as when approvals of a revised environmental management plan and WUL are secured.

There have been no other significant changes in the contingent liabilities of the group as disclosed since the 30 June 2021 annual financial statements.

For a detailed disclosure on contingent liabilities, refer to ARM's annual financial statements for the year ended 30 June 2021 available on the group's website, www.arm.co.za.

Subsequent to year end ARM received a dividend from Assmang of R3 500 million.

Acquisition of Bokoni Platinum Mine Proprietary Limited (BPM)

On 20 December 2021 ARM entered into a sale and purchase agreement which provides for ARM Platinum, a wholly owned subsidiary of ARM, to acquire all of the shares (100%) of BPM from Bokoni Platinum Holdings Proprietary Limited (BPH), in turn owned by Rustenburg Platinum Mines Limited (RPM), a wholly owned subsidiary of Anglo American Platinum Limited (AAPL), and Plateau Resources Proprietary Limited (Plateau), a wholly owned subsidiary of Atlatsa Resources Corporation (Atlatsa), through a newly formed entity, ARM Bokoni Mining Consortium Limited (ARM BMC), for a consideration of R3 500 million payable in cash.

The sale and purchase agreement included various conditions to the purchase becoming effective, most notably approval for the transfer of the controlling interest in BPM to ARM BMC in terms of Section 11 of the Mineral and Petroleum Resources Development Act, as well as the approval of the acquisition by the Competition Commission.

As at the date of authorising these financial statements, the significant conditions precedent in the sale and purchase agreement had been fulfilled and the expected closing date is 1 September 2022.

As part of fulfilling the closing deliverables, ARM BMC will transfer the consideration of R3 500 million payable in cash. This consideration will be funded through the subscription by ARM of an additional 99 000 shares in ARM Platinum. ARM Platinum thereafter will subscribe for 255 000 ordinary shares and 200 000 preference shares in ARM BMC.

The following are the primary objectives of the transaction:

• Long-life orebody favourably impacting medium-term production. Adding a long-life operation greater than 24 years with significant opportunity for further value-accretive growth
• Provides exposure to a high-grade UG2 resource that has an attractive prill split with high concentration of palladium and rhodium, and favourable iridium and ruthenium contributions
• Improves ARM's portfolio mix and competitiveness, with the addition of a mechanised underground operation (in new mining areas) that is expected to lower ARM's overall PGM cost curve position
• Provides for potential scale benefits and opportunities for operational optimisation, given its proximity to ARM's other Eastern Limb PGM operations.

On 11 June 2022, approval was granted to transfer a controlling interest in BPM (the mining right holder) to ARM BMC for which consent was obtained in terms of Section 11 of the Mineral and Petroleum Resources Development Act from the Department of Minerals Resources and Energy.

On 2 August 2022, the Competition Commission approved the proposed acquisition of BPM, pending Competition Tribunal clearance. Competition Tribunal clearance was granted on 11 August 2022.

In terms of IFRS 3 Business combinations, ARM has concluded that the acquisition of BPM is considered to be a "business combination" as defined in IFRS 3, with an acquisition date of 1 September 2022, in line with transfer of control, being the effective date as per the sale and purchase agreement.

As a result of the timing of the Competition Tribunal clearance and the uncertainties associated with potential directives which may have been issued by the Competition Commission in their consideration of the proposed structure of the sale and purchase agreement, as well as the different mining approaches (conventional versus mechanised) to be determined after the various feasibility studies are completed, the fair value for each major class of assets acquired and liabilities assumed cannot yet be accurately determined. The option analysis (conventional versus mechanised) to restart the mine has an impact on the mine plan. The final mine plan and resultant valuation of assets can therefore only be accurately determined once all of the feasibility studies have been completed. This is a complex process as it involves different sites, and an assessment of which option will yield the best outcome.

ARM Platinum has appointed a valuator in order to conduct a fair value valuation of at acquisition identifiable assets and liabilities through a purchase price allocation (PPA) mechanism, at which point an amount of either goodwill or gain on bargain purchase will be determined.

Since BPM is currently on care maintenance and not generating income from the sale of goods, the amounts of revenue and profit or loss have not been disclosed. Included in operating expenditure (refer note 17) is an amount of R28 million relating to the acquisition costs of ARM BMC. These acquisition costs do not include depreciation or amortisation of BPM or any of the assets which are being acquired.

No other significant events have occurred subsequent to the reporting date that could materially affect the reported results.