Notes to the condensed group financial statements

for the year ended 30 June 2023 (Reviewed)

1. STATEMENT OF COMPLIANCE

The condensed group financial statements for the financial year under review have been prepared in accordance with the framework concepts and the measurement and recognition requirements of 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 contains 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 financial statements for the financial year under review have been prepared under the supervision of the finance director, Ms TTA Mhlanga CA(SA). The condensed group financial statements 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 adopted the following new and/or revised standards and interpretations issued by the International Financial Reporting Interpretation Committee (IFRIC) of the International Accounting Standards Board (IASB) during the period under review. The date of initial application for the group being 1 July 2022.

Standard Subject Effective date
IFRS 3 Business combinations – Reference to the conceptual framework – amendment 1 January 2022
IAS 16 Property, plant and equipment – Proceeds before intended use – amendment 1 January 2022
IAS 37 Provisions, contingent liabilities and contingent assets – Costs of fulfilling a contract – amendment 1 January 2022
IFRS 9 Financial instruments – Fees in the ’10 percent’ test for derecognition of financial liabilities – amendment 1 January 2022

The adoption of the above standards and interpretations had no significant effect on the condensed group financial statements.

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.

Standard Subject Effective date
IFRS 17 Insurance contracts 1 January 2023
IAS 8 Accounting policies, changes in accounting estimates and errors – Definition of accounting estimates – amendment 1 January 2023
IAS 1 and Practice statement 2 Presentation of financial statements – Disclosure of accounting policies – amendment 1 January 2023
IAS 12 Income taxes – Deferred tax related to assets and liabilities arising from a single transaction – amendment 1 January 2023
IFRS 16 Leases – Lease liability in a sale and leaseback – amendment 1 January 2024
IAS 1 Presentation of financial statements – Classification of liabilities as current or non-current – amendments 1 January 2024
IFRS 10 Consolidated financial statements – Sale or contribution of assets between an investor and its associate or joint venture – amendment To be determined
IAS 28 Investments in associates and joint ventures – Sale or contribution of assets between an investor and its associate or joint venture – amendment To be determined

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

The group has performed an assessment for the impact of IFRS 17. The group, by virtue of Cell AVL 18 (Mannequin) being consolidated, has issued insurance contracts as defined by IFRS only to the extent that the underlying parties insured by Cell AVL 18 (via Guardrisk) are not consolidated by the group. Accordingly, IFRS 17 is applicable to the condensed group financial statements of the group only to this extent. IFRS 17 experts are being engaged to assist with closing out the impact on the group.

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

2. PRIMARY SEGMENTAL INFORMATION

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.

  Attributable ARM
Platinum
Rm
ARM 
Ferrous1
Rm 
ARM
Coal
Rm
ARM
Corporate
Rm
Total
Rm
IFRS 
adjust- 
ment2
Rm 
Total per
IFRS
financial
statements
Rm
2.1 Year to 30 June 2023 (Reviewed)
  Sales 11 857 20 179 2 689 116 34 841 (20 179) 14 662
  Cost of sales (7 298) (11 822) (1 475) 42 (20 553) 11 717 (8 836)
  Other operating income 208 454 31 1 470 2 163 (346) 1 817
  Other operating expenses3 (965) (1 922) (193) (1 534) (4 614) 1 922 (2 692)
  Segment result 3 802 6 889 1 052 94 11 837 (6 886) 4 951
  Income from investments 256 415 17 595 1 283 (415) 868
  Finance cost (120) (45) (123) (43) (331) 45 (286)
  Income from associate – – 1 007 – 1 007 – 1 007
  Income from joint venture – 206 – – 206 4 351 4 557
  Capital items before tax (refer note 8) 53 (1 269) 2 1 (1 213) 1 269 56
  Taxation (1 232) (1 637) (407) (193) (3 469) 1 636 (1 833)
  Profit after tax 2 759 4 559 1 548 454 9 320 – 9 320
  Non-controlling interest (1 240) – – (2) (1 242) – (1 242)
  Consolidation adjustment4 – (2) – 2 – – –
  Contribution to basic earnings 1 519 4 557 1 548 454 8 078 – 8 078
  Contribution to headline earnings 1 465 5 528 1 535 453 8 981 – 8 981
  Other information              
  Segment assets, including investment in associate 22 466 28 432 5 016 14 831 70 745 (6 619) 64 126
  Investment in associate     1 847   1 847   1 847
  Investment in joint venture           21 814 21 814
  Segment liabilities 3 409 3 089 689 1 654 8 841 (3 089) 5 752
  Unallocated liabilities (tax and deferred tax)         7 761 (3 530) 4 231
  Consolidated total liabilities         16 602 (6 619) 9 983
  Cash generated from operations 6 124 8 005 1 827 139 16 095 (8 005) 8 090
  Cash inflow/(outflow) from operating activities 4 774 6 614 2 148 (679) 12 857 (6 614) 6 243
  Cash (outflow)/inflow from investing activities (7 610) (2 012) (222) 321 (9 523) 2 012 (7 511)
  Cash outflow from financing activities (24) (6) (146) (222) (398) 6 (392)
  Capital expenditure 4 420 2 440 331 10 7 201 (2 440) 4 761
  Amortisation and depreciation 682 1 277 187 9 2 155 (1 277) 878
  Impairment before tax – 1 261 – – 1 261 (1 261) –
  EBITDA 4 484 8 166 1 239 103 13 992 (8 163) 5 829
 

There were no significant inter-company sales.

Segment results take into account inter-company eliminations with the exception of inter-company re-measurements.

1 Refer to ARM Ferrous segment note 2.4 and note 7 for more detail.
2 Includes IFRS 11 Joint arrangements – adjustments related to ARM Ferrous and other consolidation adjustments.
3 The re-measurement adjustment of the Harmony loan amounts to R8 million gain with no tax effect.
4 Relates to fees capitalised in ARM Ferrous and reversed upon consolidation.

  Attributable ARM
Platinum
Rm
ARM 
Ferrous1
Rm 
ARM
Coal
Rm
ARM
Corporate
Rm
Total
Rm
IFRS 
adjust- 
ment2
Rm 
Total per
IFRS
financial
statements
Rm
2.2 Year to 30 June 2022 (Audited)
  Sales 13 960 21 291 2 821 136 38 208 (21 291) 16 917
  Cost of sales (6 246) (11 988) (1 303) (61) (19 598) 11 938 (7 660)
  Other operating income³ 217 240 84 1 577 2 118 (135) 1 983
  Other operating expenses³ (1 087) (1 692) (1 025) (1 127) (4 931) 1 692 (3 239)
  Segment result 6 844 7 851 577 525 15 797 (7 796) 8 001
  Income from investments 171 285 11 503 970 (285) 685
  Finance cost (84) (34) (159) (47) (324) 34 (290)
  Income from associate4 – – 927 – 927 – 927
  Income from joint venture – 728 – – 728 5 921 6 649
  Capital items before tax (refer note 8) – (45) 382 746 1 083 45 1 128
  Taxation (1 929) (2 096) (435) (357) (4 817) 2 081 (2 736)
  Profit after tax 5 002 6 689 1 303 1 370 14 364 – 14 364
  Non-controlling interest (1 936) – – (2) (1 938) – (1 938)
  Consolidation adjustment5 – (40) – 40 – – –
  Contribution to basic earnings 3 066 6 649 1 303 1 408 12 426 – 12 426
  Contribution to headline earnings 3 066 6 682 928 662 11 338 – 11 338
  Other information              
  Segment assets, including investmentin associate  16 063  28 252  5 448  15 516  65 279  (6 108)  59 171
  Investment in associate     2 048   2 048 – 2 048
  Investment in joint venture           22 145 22 145
  Segment liabilities 2 671 2 488 676 1 980 7 815 (2 488) 5 327
  Unallocated liabilities (tax and deferred tax)         7 101 (3 620) 3 481
  Consolidated total liabilities         14 916 (6 108) 8 808
  Cash generated from operations 8 333 10 836 (46) 221 19 344 (10 836) 8 508
  Cash inflow/(outflow) from operating activities  5 524  9 172  (230)  (501)  13 965  (9 172)  4 793
  Cash outflow from investing activities (1 911) (2 415) (125) (456) (4 907) 2 415 (2 492)
  Cash outflow from financing activities (34) (14) (1) (292) (341) 14 (327)
  Capital expenditure 2 159 2 450 110 8 4 727 (2 450) 2 277
  Amortisation and depreciation 651 1 189 190 12 2 042 (1 189) 853
  Impairment/(impairment reversal) before tax – 20 (378) (746) (1 104) (20) (1 124)
  EBITDA 7 495 9 040 767 537 17 839 (8 985) 8 854
 

There were no significant inter-company sales.

Segment results take into account inter-company eliminations with the exception of inter-company re-measurements.

1Refer to ARM Ferrous segment note 2.4 and note 7 for more detail.
2Includes IFRS 11 Joint arrangements – adjustments related to ARM Ferrous and other consolidation adjustments.
3The re-measurement of the ARM Coal loans amounts to R323 million loss with no tax effect. The re-measurement adjustment of the Harmony loan amounts to R5 million gain with no tax effect.
4The re-measurement of the ARM Coal loans amounts to R490 million loss with no tax effect.
5Relates to fees capitalised in ARM Ferrous and reversed upon consolidation.

The ARM Platinum segment is analysed further into Nkomati, Two Rivers Platinum Proprietary Limited and ARM Platinum Proprietary Limited which includes 50% of the Modikwa Platinum Mine and 100% of the Bokoni Platinum Mine.

  Attributable Two Rivers
Rm
Modikwa
Rm
Bokoni
Rm
Nkomati
Rm
ARM
Platinum
total
Rm
2.3 Year to 30 June 2023 (Reviewed)
  Sales 7 896 3 961 – – 11 857
  Cost of sales (4 612) (2 686) – – (7 298)
  Other operating income 103 97 7 1 208
  Other operating expenses (263) (136) (396) (170) (965)
  Segment result 3 124 1 236 (389) (169) 3 802
  Income from investments 129 109 8 10 256
  Finance costs (42) (4) (25) (49) (120)
  Capital items (refer note 8) (3)   56 – 53
  Taxation (876) (354) – (2) (1 232)
  Profit/(loss) after tax 2 332 987 (350) (210) 2 759
  Non-controlling interest (1 072) (168) – – (1 240)
  Contribution to basic earnings/(losses) 1 260 819 (350) (210) 1 519
  Contribution to headline earnings/(losses) 1 262 819 (406) (210) 1 465
  Other information          
  Segment and consolidated assets 13 025 4 832 4 440 169 22 466
  Segment liabilities 1 368 758 412 871 3 409
  Unallocated liabilities (tax and deferred tax)         2 775
  Consolidated total liabilities         6 184
  Cash inflow/(outflow) from operating activities 3 908 1 327 (365) (96) 4 774
  Cash (outflow)/inflow from investing activities (3 128) (561) (3 922) 1 (7 610)
  Cash outflow from financing activities (4) (20) – – (24)
  Capital expenditure 3 167 561 692 – 4 420
  Amortisation and depreciation 534 136 12 – 682
  EBITDA 3 658 1 372 (377) (169) 4 484
 

The ARM Platinum segment is analysed further into Nkomati, Two Rivers Platinum Proprietary Limited and ARM Platinum Proprietary Limited which includes 50% of the Modikwa Platinum Mine.

  1ARM (through ARM Platinum) acquired Bokoni Platinum Mine on 1 September 2022 (refer note 24).
  Attributable Two Rivers
Rm
Modikwa
Rm
Nkomati
Rm
ARM
Platinum
total
Rm
  Year to 30 June 2022 (Audited)        
  Sales 9 416 4 562 (18) 13 960
  Cost of sales (3 927) (2 319) – (6 246)
  Other operating income 91 122 4 217
  Other operating expenses (651) (300) (136) (1 087)
  Segment result 4 929 2 065 (150) 6 844
  Income from investments 97 66 8 171
  Finance costs (41) (15) (28) (84)
  Capital items (refer note 8) (2) – 2 –
  Taxation (1 341) (586) (2) (1 929)
  Profit/(loss) after tax 3 642 1 530 (170) 5 002
  Non-controlling interest (1 676) (260) – (1 936)
  Contribution to basic earnings/(losses) 1 966 1 270 (170) 3 066
  Contribution to headline earnings/(losses) 1 968 1 270 (172) 3 066
  Other information        
  Segment and consolidated assets 11 117 4 759 187 16 063
  Segment liabilities 1 256 659 756 2 671
  Unallocated liabilities (tax and deferred tax)       2 514
  Consolidated total liabilities       5 185
  Cash inflow/(outflow) from operating activities 3 805 1 749 (30) 5 524
  Cash outflow from investing activities (1 711) (149) (51) (1 911)
  Cash outflow from financing activities (4) (30) – (34)
  Capital expenditure 1 806 353 – 2 159
  Amortisation and depreciation 500 151 – 651
  EBITDA 5 429 2 216 (150) 7 495

2.4

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

    Iron ore
division
Rm
Manganese
division
Rm
ARM
Ferrous
total
Rm
ARM
share
Rm
IFRS 
adjustment1
Rm 
Total per
IFRS
financial
statements
Rm
  Year to 30 June 2023 (Reviewed)
  Sales 25 069 15 290 40 359 20 179 (20 179) –
  Cost of sales (12 468) (11 177) (23 645) (11 822) 11 822 –
  Other operating income 319 773 1 092 454 (454) –
  Other operating expenses (2 266) (1 762) (4 028) (1 922) 1 922 –
  Segment result 10 654 3 124 13 778 6 889 (6 889) –
  Income from investments 775 54 829 415 (415) –
  Finance costs (48) (42) (90) (45) 45 –
  Profit from joint venture   414 414 206 (206) –
  Capital items before tax (refer note 8) (2 124) (415) (2 539) (1 269) 1 269 –
  Taxation (2 491) (782) (3 273) (1 637) 1 637 –
  Profit after tax 6 766 2 353 9 119 4 559 (4 559) –
  Consolidation adjustments       (2) 2 –
  Contribution to basic earnings 6 766 2 353 9 119 4 557 – 4 557
  Contribution to headline earnings 8 316 2 744 11 060 5 528 – 5 528
  Other information            
  Consolidated total assets 36 405 22 164 58 569 28 432 (6 619) 21 814
  Consolidated total liabilities 8 000 5 716 13 716 3 089 (3 089) –
  Capital expenditure 3 414 1 682 5 096 2 440 (2 440) –
  Amortisation and depreciation 1 781 982 2 763 1 277 (1 277) –
  Cash inflow from operating activities2 2 952 416 3 368 6 614 (6 614) –
  Cash outflow from investing activities (2 919) (1 244) (4 163) (2 012) 2 012 –
  Cash outflow from financing activities (11) – (11) (6) 6 –
  EBITDA 12 435 4 106 16 541 8 166 (8 166)  
  Additional information for ARM Ferrous at 100% Assmang            
  Non-current assets            
  Property, plant and equipment     31 570   (31 570) –
  Investment in joint venture     2 559   (2 559) –
  Other non-current assets     2 455   (2 455) –
  Current assets            
  Inventories     5 744   (5 744) –
  Trade and other receivables     6 072   (6 072) –
  Taxation     168   (168)  
  Financial assets     125   (125) –
  Cash and cash equivalents     9 877   (9 877) –
  Non-current liabilities            
  Other non-current liabilities     8 863   (8 863) –
  Current liabilities            
  Trade and other payables     3 876   (3 876) –
  Short-term provisions     949   (949) –
 

1Includes consolidation and IFRS 11 Joint arrangements – adjustments.
2 Dividend paid amounting to R5 billion included in cash flows from operating activities.

Refer note 2.1 and note 7 for more detail on the ARM Ferrous segment.

    Iron ore
division
Rm
Manganese
division
Rm
ARM
Ferrous
total
Rm
ARM
share
Rm
IFRS 
adjustment1
Rm 
Total per
IFRS
financial
statements
Rm
  Year to 30 June 2022 (Audited)            
  Sales 27 856 14 727 42 583 21 291 (21 291) –
  Cost of sales (13 006) (10 969) (23 975) (11 988) 11 988 –
  Other operating income 105 697 802 240 (240) –
  Other operating expense (2 763) (945) (3 708) (1 692) 1 692 –
  Segment result 12 192 3 510 15 702 7 851 (7 851) –
  Income from investments 558 12 570 285 (285) –
  Finance cost (41) (26) (67) (34) 34 –
  Profit from joint venture – 1 455 1 455 728 (728) –
  Capital items before tax (refer note 8) (73) (15) (88) (45) 45 –
  Taxation (3 383) (811) (4 194) (2 096) 2 096 –
  Profit after tax 9 253 4 125 13 378 6 689 (6 689) –
  Consolidation adjustment

– (40) 40 –
  Contribution to basic earnings 9 253 4 125 13 378 6 649 – 6 649
  Contribution to headline earnings 9 307 4 136 13 443 6 682 – 6 682
  Other information





  Consolidated total assets 34 775 23 427 58 202 28 252 (6 108) 22 145
  Consolidated total liabilities 6 974 5 718 12 692 2 488 (2 488) –
  Capital expenditure 2 890 2 220 5 110 2 450 (2 450) –
  Amortisation and depreciation 1 566 911 2 477 1 189 (1 189) –
  Cash inflow from operating activities 4 3932 2 950 7 343 9 172 (9 172) –
  Cash outflow from investing activities (2 630) (2 200) (4 830) (2 415) 2 415 –
  Cash outflow from financing activities (27) – (27) (14) 14 –
  EBITDA 13 758 4 421 18 179 9 040 (9 040) –
  Additional information for ARM Ferrous at 100% Assmang





  Non-current assets





  Property, plant and equipment

31 548
(31 548) –
  Investment in joint venture

2 130
(2 130) –
  Other non-current assets

2 044
(2 044) –
  Current assets





  Inventories

5 070
(5 070) –
  Trade and other receivables

6 348
(6 348) –
  Financial assets

379
(379) –
  Cash and cash equivalents

10 684
(10 684)
  Non-current liabilities





  Other non-current liabilities

8 629
(8 629) –
  Current liabilities





  Trade and other payables

2 867
(2 867) –
  Short-term provisions

994
(994) –
  Taxation

201
(201)
 

1Includes consolidation and IFRS 11 Joint arrangements – adjustments.
2 Dividend paid amounting to R5.5 billion included in cash flows from operating activities.

Refer note 2.1 and note 7 for more detail on the ARM Ferrous segment.

2.5

Additional information

ARM Corporate as presented in the table above is analysed further into Machadodorp, Corporate and other, and Gold segments.

    Machadodorp
Works
Rm
Corporate
and other
Rm
Gold
Rm
Total
ARM
Corporate
Rm
  Year to 30 June 2023 (Reviewed)
  Sales 116 –   116
  Cost of sales (75) 117   42
  Other operating income 4 1 466   1 470
  Other operating expenses (288) (1 246)   (1 534)
  Segment result (243) 337   94
  Income from investments – 578 17 595
  Finance costs (24) (19)   (43)
  Capital item (refer note 8) – 1   1
  Taxation 71 (264)   (193)
  (Loss)/profit after tax (196) 633 17 454
  Non-controlling interest – (2)   (2)
  Consolidation adjustments1 – 2   2
  Contribution to basic (losses)/earnings (196) 633 17 454
  Contribution to headline (losses)/earnings (196) 632 17 453
  Other information        
  Segment and consolidated assets 123 8 790 5 918 14 831
  Segment liabilities 262 1 392   1 654
  Cash (outflow)/inflow from operating activities – (696) 17 (679)
  Cash inflow from investing activities – 321   321
  Cash outflow from financing activities – (222)   (222)
  Capital expenditure – 10   10
  Amortisation and depreciation 1 8   9
  EBITDA (242) 345   103
 

1Relates to fees capitalised in ARM Ferrous and reversed on consolidation.

    Machadodorp
Works
Rm
Corporate
and other
Rm
Gold
Rm
Total
ARM
Corporate
Rm
  Year to 30 June 2023 (Audited)        
  Sales 136 –   136
  Cost of sales (125) 64   (61)
  Other operating income1 3 1 574   1 577
  Other operating expenses1 (216) (911)   (1 127)
  Segment result (202) 727   525
  Income from investments – 453 50 503
  Finance costs (25) (22)   (47)
  Capital item (refer note 8) 3 743   746
  Taxation 63 (420)   (357)
  (Loss)/profit after tax (161) 1 481 50 1 370
  Non-controlling interest – (2)   (2)
  Consolidation adjustments2 – 40   40
  Contribution to basic (losses)/earnings (161) 1 519 50 1 408
  Contribution to headline (losses)/earnings (164) 776 50 662
  Other information        
  Segment and consolidated assets 62 11 573 3 881 15 516
  Segment liabilities 305 1 675   1 980
  Cash inflow/(outflow) from operating activities 4 (555) 50 (501)
  Cash outflow from investing activities (4) (452)   (456)
  Cash outflow from financing activities – (292)   (292)
  Capital expenditure 4 4   8
  Amortisation and depreciation 4 8   12
  Impairment reversal before tax (3) (743)   (746)
  EBITDA (198) 735   537
 

1Corporate and other includes a re-measurement gain on the loans to ARM Coal of R443 million and a re-measurement gain on the loan from Harmony of R5 million.
2Relates to fees capitalised in ARM Ferrous and reversed on consolidation.

3. REVENUE AND SALES

  Reviewed
F2023
Rm
Audited
F2022
Rm
Sales 14 662 16 917
Local sales 12 253 14 308
Export sales 2 409 2 609
Revenue 16 097 18 406
Fair value adjustments to revenue (1 481) (1 257)
Revenue from contracts with customers 17 578 19 663
Sales – mining and related products 16 536 18 479
Penalty and treatment charges (393) (305)
Two Rivers (393) (305)
Fees received 1 435 1 489
Sales by geographical area1:    
– South Africa 12 253 14 308
– Europe 2 409 2 609
  14 662 16 917

1 Sales by geographical area has been included to provide additional information.

4. PROPERTY, PLANT AND EQUIPMENT AND INVESTMENTS

 

The increase in F2023 property, plant and equipment is largely as a result of the acquisition of Bokoni property, plant and equipment of R2 477 million, R266 million for mineral rights and total capital expenditure at Two Rivers of R3 167 million, which mainly relates to the Merensky project (refer note 2.4 and note 24).

4.1

ARM Ferrous

Property, plant and equipment

Impairment

Beeshoek Mine

At 30 June 2023, an impairment loss of R2 110 million before tax of R570 million was recognised on property, plant and equipment at the Beeshoek Mine. ARM’s attributable share of the impairment loss amounted to R1 055 million before tax of R282 million (refer note 8).

This impairment was largely due to a combination of:

  • Export sales, which used to be sold at higher average prices compared to local sales, have now ceased
  • Inadequate sale price increases to keep up with mining cost inflation
  • Significant increase in input costs, including diesel and explosives
  • Forecast low gross margins
  • The continuous capitalisation of stripping costs has been maintained
  • Higher discount rate (WACC) resulting from increased market interest rates.

The recoverable amount of Beeshoek was determined based on a value-in-use (VIU) calculation performed in terms of IFRS. A discounted cash flow valuation model was used to determine the VIU of R496 million. ARM’s attributable share amounted to R248 million.

A nominal pre-tax South African discount rate of 18.29% was used in the 30 June 2023 impairment model. The level 3 valuation model was calculated over a 12-year period.

The recoverable amount of Beeshoek was determined based on a value-in-use (VIU) calculation performed in terms of IFRS. A discounted cash flow valuation model was used to determine the VIU of R496 million. ARM's attributable share amounted to R248 million.

A nominal pre-tax South African discount rate of 18.29% was used in the 30 June 2023 impairment model. The level 3 valuation model was calculated over a 12-year period.

The following assumptions were used in the valuation model:

    F2024 F2025 F2026 F2027 F2028
Weighted average revenue price R/t 933 972 1 012 1 053 1 087
US$/ZAR ZAR nominal 17.80 17.28 17.59 18.29 19.02
SA PPI % 4.40 4.19 4.10 4.10 4.10

Cato Ridge Works

At 30 June 2023, an impairment of R112 million before taxation of R37 million was recognised on the property, plant and equipment at the Cato Ridge Works operation. It was concluded that a discounted cash flow model was not required for this impairment. The total value of property, plant and equipment was fully impaired at 30 June 2021, the impairment at 30 June 2023 is to fully impair the additions of property, plant and equipment subsequent to 30 June 2021. ARM’s attributable share of the impairment loss amounted to R56 million before tax of R18 million (refer note 8).

This impairment was due to a combination of:

  • Short remaining life of the operation
  • Closure of one of the three remaining furnaces in February 2023
  • A decline in recent and forecast high-carbon manganese alloys prices over the short term.

Investments

Impairment

Sakura

At 31 December 2022, an impairment loss of R299 million with no tax effect was recognised on Assmang's equity-accounted investment in Sakura. ARM's attributable share of the impairment loss amounted to R150 million with no tax effect (refer note 8).

This impairment was due to a combination of:

  • A decline in recent and forecast manganese high-carbon alloys prices over the short term
  • Net cash generated by operations expected to be lower than planned
  • Increase in market interest rates.

A discounted cash flow valuation was performed to determine the fair value less cost of disposal of the investment. The valuation was performed in Malaysian ringgit (MYR). This resulted in an impairment of R299 million to the carrying value of Assmang's investment at 31 December 2022. The recoverable amount of the investment amounted to R1 620 million at 31 December 2022. ARM's attributable share amounted to R810 million.

A nominal pre-tax Malaysian discount rate of 14.86% was used in the 31 December 2022 impairment model. The MYR valuation was converted to ZAR using an exchange rate of ZAR3.83 at 31 December 2022. The level 3 valuation model was calculated over a 20-year period.

The following assumptions were used in the valuation model:

    F2024 F2025 F2026 F2027 F2028
Manganese ore price assumptions – 44% Mn $/dmtu CIF 5.80 5.53 5.46 5.46 5.58
Manganese ore price assumptions – 36% – 38% Mn $/dmtu CIF 5.17 5.05 4.89 4.89 5.00
Manganese alloy price assumptions – US import USD/mt DDP 1 534 1 393 1 363 1 392 1 423
Manganese alloy price assumptions – Europe spot USD/mt DDP 1 270 1 218 1 220 1 242 1 267
  Exchange rates            
  US$/MYR MYR nominal 4.29 4.14 4.04 3.98 3.91
  US$/EUR EUR nominal 0.85 0.82 0.81 0.80 0.80

No further impairment was recognised at 30 June 2023.

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.

4.2

ARM Coal

Investments

Impairment reversal

Participative Coal Business (PCB)

At 30 June 2022 previous impairment losses recognised against the investment in PCB was 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 note 6 and note 8).

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).

Details of the F2022 impairments and impairment reversals were included in the financial results ended 30 June 2022, which can be found on www.arm.co.za.

5. DEFERRED TAX

  Reviewed
F2023
Rm
Audited
F2022
Rm
Deferred tax assets on the statement of financial position – Opening balance 215 274
Movements:    
Investment in Harmony recognised in other comprehensive income (74) 10
Bokoni 856 –
Other (62) (69)
Deferred tax assets on the statement of financial position – Closing balance 935 215
Deferred tax liabilities on the statement of financial position – Opening balance 3 226 2 968
Movements:    
Investment in Harmony recognised in other comprehensive income 366 –
Two Rivers 282 171
Modikwa (21) (54)
ARM Coal (7) 141
Other (59) –
Deferred tax liabilities on the statement of financial position – Closing balance 3 787 3 226

6. INVESTMENT IN ASSOCIATE

  Reviewed
F2023
Rm
Audited
F2022
Rm
Through ARM’s 51% investment in ARM Coal and ARM’s 10% direct investment, the Group holds a 20.2% investment in the PCB of Glencore Operations South Africa Proprietary Limited (GOSA).    
Opening balance 2 048 534
Income for the current year 1 007 927
Income for the current year before the re-measurement of loans (refer note 19) 1 007 1 417
Re-measurement of loans (refer note 16) – (490)
Dividend received (refer statement of cash flows)1 (1 208)  
Movement in loans (non-cash flow)2 – (534)
Reversal of impairment on investment (refer note 4.2 and note 8) – 1 121
Closing balance 1 847 2 048

1Subsequent to the repayment of the PCB loans, dividends were declared to ARM and ARM Coal.
2Settled together with the partner loans during F2022.

7. INVESTMENT IN JOINT VENTURE

  Reviewed
F2023
Rm
Audited
F2022
Rm
The investment relates to ARM Ferrous and consists of Assmang as a joint venture which include iron ore and manganese segments.    
Opening balance 22 145 20 938
Net income for the period 4 557 6 649
Income for the period1 4 559 6 689
Consolidation adjustment (2) (40)
Foreign currency translation reserve 112 58
Less: Cash dividend received for the period (5 000) (5 500)
Closing balance 21 814 22 145

1 Includes expected credit losses recorded of R19 million less tax of R1 million (F2022: R126 million reversal of expected credit losses less tax of R6 million).

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

8. CAPITAL ITEMS

  Reviewed
F2023
Rm
Audited
F2022
Rm
Reversal of impairment on property, plant and equipment – Machadodorp Works (refer note 4.3) – 3
Profit on sale of property, plant and equipment – Nkomati – 2
Loss on sale of property, plant and equipment – Two Rivers (3) (2)
Profit on sale of property, plant and equipment – ARM Coal 2 4
Profit on sale of property, plant and equipment – ARM Corporate 1 –
Gain on bargain purchase – Bokoni acquisition (refer note 24) 56 –
Reversal of impairment on investment in PCB – ARM Coal (refer note 4.2 and 6) – 1 121
Capital items per statement of profit or loss before taxation effect 56 1 128
Profit/(loss) on sale of property, plant and equipment accounted for directly in associate – ARM Coal 16 (9)
Impairment on investment in Sakura accounted directly in joint venture – Assmang (refer note 4.1) (150) –
Impairment loss on property, plant and equipment accounted for directly in joint venture – Assmang (refer note 4.1) (1 111) (20)
Impairment loss on property, plant and equipment accounted for directly in joint venture – Cato Ridge Alloys (4) –
Loss on sale of property, plant and equipment accounted for directly in joint venture – Assmang (8) (25)
Capital items before taxation effect (1 201) 1 074
Taxation accounted for in joint venture – impairment loss on property, plant and equipment – Assmang 300 6
Taxation accounted for in joint venture – loss on disposal of property, plant and equipment – Assmang 2 6
Taxation accounted for in associate – (profit)/loss on sale of property, plant and equipment – ARM Coal (4) 3
Taxation on loss on sale of property, plant and equipment – Two Rivers 1 –
Taxation on profit on sale of property, plant and equipment – ARM Coal (1) (1)
Total (903) 1 088

9. EARNINGS PER SHARE

  Reviewed
F2023
Rm
Audited
F2022
Rm
Headline earnings (Rm) 8 981 11 338
Headline earnings per share (cents) 4 581 5 787
Basic earnings per share (cents) 4 120 6 343
Diluted headline earnings per share (cents) 4 571 5 783
Diluted basic earnings per share (cents) 4 111 6 338
Number of shares in issue at end of year (thousands) 224 668 224 668
Weighted average number of shares (thousands) 196 053 195 899
Potential ordinary shares due to long-term share incentives granted (thousands) 435 134
Weighted average number of shares used in calculating diluted earnings per share (thousands) 196 488 196 033
Net asset value per share (cents) 21 904 20 545
EBITDA (Rm) 5 829 8 854
Interim dividend declared (cents per share) 1 400 1 200
Dividend declared after year end (cents per share) 1 200 2 000
Reconciliation to headline earnings (Rm)    
Basic earnings attributable to equity holders of ARM 8 078 12 426
– Profit on sale of property, plant and equipment – ARM Coal (2) (4)
– Profit on sale of property, plant and equipment – Nkomati – (2)
– (Profit)/loss on sale of property, plant and equipment – ARM Coal (16) 9
– Loss on sale of property, plant and equipment – Two Rivers 3 2
– Profit on sale of property, plant and equipment – ARM Corporate (1) –
– Gain on bargain purchase – Bokoni (56) –
– Impairment reversal on property, plant and equipment – Machadodorp Works – (3)
– Impairment reversal on investment in 20.2% PCB – ARM – (1 121)
– Impairment loss on property, plant and equipment in joint venture – Assmang 1 111 20
– Impairment loss on investment Sakura in joint venture – Assmang 150 –
– Impairment loss on property, plant and equipment in joint venture– Cato Ridge Alloys 4 –
– Loss on sale of property, plant and equipment in joint venture – Assmang 8 25
  9 279 11 352
– Taxation accounted for in joint venture – impairment loss at Assmang (300) (6)
– Taxation accounted for in joint venture – loss sale of property, plant and equipment at Assmang (2) (6)
– Taxation accounted for in associate – loss on sale of property, plant and equipment – ARM Coal 4 (3)
– Taxation accounted for in associate – loss on sale of property, plant and equipment – Two Rivers (1) –
– Taxation accounted for profit on sale of property, plant and equipment – ARM Coal 1 1
Headline earnings 8 981 11 338

10. OTHER INVESTMENTS

  Reviewed
F2023
Rm
Audited
F2022
Rm
Harmony1 5 918 3 881
Opening balance 3 881 3 940
Fair value gain/(loss) in other comprehensive income 2 037 (59)
Guardrisk2 25 9
Preference shares1 1 1
Richards Bay Coal Terminal3 204 213
Closing balance 6 148 4 104
1 This is a level 1 valuation in terms of IFRS 13.
2 This is a level 2 valuation in terms of IFRS 13. Fair value based on the net asset value of the cell captive.
3 This is a level 3 valuation in terms of IFRS 13.
   
Richards Bay Coal Terminal (RBCT)    
The fair value of the RBCT investment was determined by calculating the present value of the future wharfage cost savings by being a shareholder in RBCT as opposed to the wharfage payable by non-shareholders. The fair value is most sensitive to wharfage cost. The current RBCT valuation is based on a wharfage cost differential ranging between R50/tonne and R55/tonne (F2022: R44/tonne and R49/tonne). If increased by 10% this would result in a R21 million (F2022: R22 million) increase in the valuation on the RBCT investment. If decreased by 10% this would result in a R21 million (F2022: R22 million) decrease in the valuation on the RBCT investment. The valuation is calculated based on the duration of the RBCT lease agreement with Transnet SOC Limited to 31 December 2038, using a pre-tax discount rate of 21.4% (F2022: 20.8%).    
Level 2 and level 3 fair value losses or gains are included in other operating expenses or other operating income respectively in the statement of profit or loss.    
Opening balance 213 233
Fair value loss (9) (20)
Closing balance 204 213

11. NON-CURRENT INVENTORIES

Non-current inventories relate to the Two Rivers Merensky project. Stockpile quantities are determined using assumptions such as densities and grades which are based on studies, historical data and industry norms. The non-current inventories will be milled when the Two Rivers Merensky plant is complete. Milling is not expected within the following 12 months from the end of 30 June 2023.

12. TRADE AND OTHER RECEIVABLES

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 has reduced mainly due to a decrease in platinum group metals (PGM) and coal commodity prices.

Trade and other receivables include a contract asset from Assmang of R810 million (F2022: R985 million). The contract asset results from revised fee arrangements, whereby fees received from Assmang only become payable following receipt by Assmang from the relevant customer.

13. FINANCIAL ASSETS

  Reviewed
F2023
Rm
Audited
F2022
Rm
Investments in fixed deposits    
Current financial assets1    
– ARM Finance Company SA2 – 185
– ARM Coal 51 –
– Two Rivers 30 31
– Nkomati 117 114
– Mannequin Captive Cell (Cell AVL 18) 456 500
– Other 7 –
  661 830
Non-current financial assets1    
– ARM Coal 56 50
– Mannequin Captive Cell (Cell AVL 18) (refer note 23.2) 68 162
– Modikwa 4 2
  128 214
Total 789 1 044
1 Cash and cash equivalents were invested in fixed deposits with maturities longer than three months to achieve better returns. When these investments mature, to the extent that amounts are not re-invested in new investments with maturities of longer than three months, they will again form part of cash and cash equivalents. The carrying amounts of the financial assets shown above approximate their fair value.
2 ARM Finance Company SA invested Rnil (F2022: R172 million) in fixed deposits with maturities longer than three months. The amount was translated at the 30 June closing exchange rate in prior year, resulting in a foreign currency translation gain of R13 million for F2022. Since 30 June 2022, ARM Finance Company SA returned U$15 million to ARM as a part return of share capital.

The following guarantees issued are included in financial assets:

  • Two Rivers to the Department of Mineral Resources and Energy (DMRE), Eskom and BP Oil amounting to R30 million (F2022: R31 million)
  • Nkomati to DMRE and Eskom amounting to R117 million (F2022: R114 million)
  • Modikwa to DMRE and Eskom amounting to Rnil (F2022: Rnil)
  • ARM Coal to DMRE amounting to R107 million (F2022: R50 million).

Other financial assets include trust funds of R7 million (F2022: Rnil).

14. CASH AND CASH EQUIVALENTS

  Reviewed
F2023
Rm
Audited
F2022
Rm
Total cash at bank and on deposit 9 200 11 069
– African Rainbow Minerals Limited 6 378 8 770
– ARM BBEE Trust 43 38
– ARM Coal 227 –
– ARM Finance Company SA 38 92
– ARM Platinum Proprietary Limited (excluding Bokoni) 930 874
– Bokoni 23 –
– ARM Treasury Investments Proprietary Limited 45 43
– Nkomati 27 52
– Two Rivers Platinum Proprietary Limited 1 460 1 174
– Other cash at bank and on deposit 29 26
Total cash set aside for specific use 821 590
– Mannequin Captive Cell (Cell AVL 18)1 454 245
– Rehabilitation trust funds1 77 65
– Other cash set aside for specific use1 290 280
Total as per statement of financial position 10 021 11 659
Less: Overdrafts (refer note 15) (17) (16)
Total as per statement of cash flows 10 004 11 643

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 R10 million (F2022: R16 million)
– African Rainbow Minerals Limited of R37 million (F2022: R37 million)
– Guarantees issued by ARM Coal to DMRE amounting to Rnil (F2022: R46 million)
– Guarantees issued by Modikwa to DMRE and Eskom amounting to R236 million (F2022: R234 million)
– Guarantees issued by Bokoni to DMRE and Eskom amounting to R68 million (F2022: Rnil)
– Guarantees issued by Two Rivers to DMRE and Eskom amounting to R4 million (F2022: Rnil)
– Guarantees issued by Nkomati to DMRE and Eskom amounting to R12 million (F2022: R12 million).

15. BORROWINGS

  Reviewed
F2023
Rm
Audited
F2022
Rm
Long-term borrowings are held as follows:    
ARM Coal Proprietary Limited (lease liability) 18 –
ARM BBEE Trust (loan from Harmony Gold)1 100 166
Anglo Platinum Limited (lease liability) 7 9
Two Rivers Platinum Proprietary Limited (lease liability) 81 130
  206 305
Short-term borrowings    
African Rainbow Minerals Limited (lease liability) 1 –
Anglo Platinum Limited (lease liability) 1 20
ARM Coal Proprietary Limited (partner loans)2 – 139
ARM Coal (lease liability) 13 –
Two Rivers Platinum Proprietary Limited (lease liability) 4 4
  19 163
Overdrafts (refer note 14)    
ARM Treasury Operations 17 16
  17 16
Overdrafts and short-term borrowings – interest bearing 36 40
– non-interest bearing – 139
Overdrafts and short-term borrowings 36 179
Total borrowings 242 484

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

1 Includes repayments of R74 million (F2022: R65 million), re-measurements of R8 million (F2022: R5 million) and interest of R16 million (F2022: R18 million).
2 ARM Coal loans from Glencore were settled at 30 June 2022 from cash generated by the Goedgevonden (GGV) and PCB operations. In terms of the loan agreements, cash generated available for distribution to ARM Coal is utilised by Glencore to settle the outstanding GGV and PCB loans. Therefore these settlements did not result in any cash flows to or from ARM Coal in the prior year. The short-term liability at 30 June 2022 relates ARM Coal's attributable share of the GGV liability owing to PCB for the RBCT entitlement. The short-term liability at 30 June 2023 between GGV and PCB has been settled in cash.

16. RE-MEASUREMENT GAINS AND LOSSES

  Reviewed
F2023
Rm
Audited
F2022
Rm
ARM Coal    
Included in other operating income and income/(loss) from associate are re-measurements with no tax effect relating to the GGV and PCB loans. The gain and loss is as a result of a re-measurement of debt between ARM and Glencore Operations South Africa Proprietary Limited (GOSA) and ARM Coal Proprietary Limited.    
The re-measurement adjustments are as follows:    
Re-measurement gain in operating income – ARM Coal segment – 49
Re-measurement loss in operating expenses – ARM Coal segment (4) (815)
Net re-measurement loss – ARM Coal segment (4) (766)
Re-measurement gain in operating income – ARM Corporate segment 4 443
Net re-measurement loss on group profit from operations before capital items – (323)
Income from associate re-measurement loss on loans (refer note 6) – (490)
Net ARM Coal re-measurement loss – (813)
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 10%.    
This is a level 3 valuation in terms of IFRS 13.    
ARM BBEE Trust (loan from Harmony)    
Included in other operating income for F2023 is a re-measurement gain of R8 million (F2022: R5 million). The gain is as a result of the loans advanced to the ARM BBEE Trust by Harmony in F2021.    
The re-measurement/fair value gains are as follows:    
Other operating income increase – ARM Corporate segment 8 5
Net ARM BBEE Trust gain 8 5

The re-measurement is 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 is 13.85% (F2022: 11.69%).

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

17. OTHER OPERATING INCOME

  Reviewed
F2023
Rm
Audited
F2022
Rm
Management fees 1 435 1 489
Cost recoveries 60 51
Insurance income 64 115
Realised foreign exchange gains 30 35
Royalties received 87 114
Loan re-measurement gains (refer note 16) 8 54
Other 133 125
Total 1 817 1 983

18. OTHER OPERATING EXPENSES

  Reviewed
F2023
Rm
Audited
F2022
Rm
Provisions 209 231
Mineral royalty tax 363 911
Staff cost 476 337
Loan re-measurement loss (refer note 16) – 372
Consulting fees 210 130
Share-based payments expense 254 263
Insurance 63 129
Research and development 212 166
Other 905 700
Total 2 692 3 239

19. INCOME FROM ASSOCIATE

  Reviewed
F2023
Rm
Audited
F2022
Rm
Income from associate before the re-measurement of loans 1 007 1 417
Loan re-measurement loss (refer note 16) – (490)
Total 1 007 927

20. TAXATION

  Reviewed
F2023
Rm
Audited
F2022
Rm
South African normal taxation    
– current year 1 692 2 384
– mining 1 262 2 003
– non-mining 430 381
– prior year (116) 25
Total deferred taxation 257 327
Deferred taxation 257 413
Deferred tax – rate change1 – (86)
Total tax 1 833 2 736
1 During the 2022 budget speech held on 23 February 2022, it was announced that the corporate income tax rate will be reduced from 28% to 27% for companies with years of assessment ending on or after 31 March 2023. This change has affected the effective tax rate at 30 June 2023 and the recorded deferred tax assets and liabilities at 30 June 2023 and 30 June 2022.

21. CASH GENERATED FROM OPERATIONS

  Reviewed
F2023
Rm
Audited
F2022
Rm
Cash generated from operations before working capital changes 6 878 10 148
Working capital inflow/(outflow) 1 212 (1 640)
Movement in inventories – (outflow)/inflow (518) 70
Movement in receivables – inflow/(outflow) 2 127 (737)
Movement in payables and provisions – outflow (397) (973)
Cash generated from operations 8 090 8 508

22. COMMITMENTS

  Reviewed
F2023
Rm
Audited
F2022
Rm
Commitments in respect of future capital expenditure, which will be funded from operating cash flows and by utilising available cash and/or borrowing resources, are summarised below:    
Commitments    
Commitments in respect of capital expenditure:    
Approved by directors    
– contracted for 3 141 1 684
– not contracted for 1 624 1 848
Total commitments 4 765 3 532

23. PROVISIONS

    Reviewed
F2023
Rm
Audited
F2022
Rm
23.1 Nkomati restoration and decommissioning provision1  
  Long-term provisions    
  Opening balance 645 567
  Provision for the period1 90 55
  Transfer to short-term provisions (3) (2)
  Unwinding of discount rate 45 25
  Closing balance 777 645
  Short-term provision    
  Opening balance 31 29
  Transfer from long-term provisions 3 2
  Settlement payments (9) –
  Closing balance 25 31
  Total Nkomati restoration and decommissioning provision 802 676
 

1The current year provision mainly relates to Nkomati providing for the short to medium-term water management costs (refer note 26).

    Reviewed
F2023
Rm
Audited
F2022
Rm
23.2 Silicosis and tuberculosis class action provision  
  Long-term provision    
  The provision movement is as follows:    
  Opening balance 159 146
  Interest unwinding 6 12
  Changes in assumptions1 (106) (13)
  Transfer from short-term provisions 8 14
  Closing balance 67 159
  Short-term provision    
  Opening balance 16 60
  Settlement payments (2) (30)
  Transfer to long-term provisions (8) (14)
  Closing balance 6 16
  Total silicosis and tuberculosis class action provision 73 175
  1

The main reason for the decrease in the silicosis settlement estimate is the lower severity of silicosis found in eligible Trust claimants with ARM service over the past three years than originally expected. The silicosis benefit increases with impairment and hence lower disease severity results in a lower benefit payment. Other reasons for the decrease in the estimate are that fewer claimants have confirmed ARM service than originally estimated and a change in the financial assumptions including changes in economic conditions.

 

ARM has a contingency policy in this regard which covers environmental site liability and silicosis liability with Guardrisk Insurance Company Limited (Guardrisk). In turn, Guardrisk has reinsured the specified risks with Mannequin Insurance PCC Limited – Cell AVL 18, Guernsey which cell captive is held by ARM.

Following the High Court judgment previously reported, the Tshiamiso Trust was registered in November 2019. As part of the settlement a guarantee of R304 million was issued by Guardrisk on behalf of ARM in favour of the Tshiamiso Trust on 13 December 2019.

Details of the provision were discussed in the 30 June 2022 financial results, which can be found on www.arm.co.za.

24. ACQUISITION OF BOKONI PLATINUM MINES 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, in turn owned by Rustenburg Platinum Mines Limited, a wholly owned subsidiary of Anglo American Platinum Limited, and Plateau Resources Proprietary Limited, a wholly owned subsidiary of Atlatsa Resources Corporation, through a newly formed entity ARM Bokoni Mining Consortium Proprietary 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 28 of 2002, as well as the approval of the acquisition by the Competition Commission.

The significant conditions precedent in the sale and purchase agreement had been fulfilled on 1 September 2022.

ARM BMC transferred the consideration of R3 500 million in cash, on 1 September 2022. This was funded by ARM through the subscription of an additional 99 000 shares in ARM Platinum. ARM Platinum thereafter subscribed for 254 900 ordinary shares and 175 000 preference shares in ARM BMC.

BPM is a PGM mining operation located in the Limpopo province of South Africa and forms part of the North-Eastern Limb of the Bushveld Complex.

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 28 of 2002 from the DMRE.

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.

ARM measured the identifiable assets and liabilities of BPM at acquisition-date fair values.

The values are presented below:

Assets acquired and liabilities assumed

  F2023
Rm
 
ASSETS 3 672  
Non-current assets 3 599  
Property plant and equipment 2 743  
Deferred tax asset1 856  
Current assets 73  
Cash and cash equivalents 59  
Trade and other receivables 14  
LIABILITIES 116  
Non-current liabilities 86  
Provision for rehabilitation 86  
Current liabilities 30  
Trade and other payables 30  
Total identifiable net assets at fair value 3 556  
Gain on bargain purchase (56)  
Purchase price 3 500  
Cash and cash equivalents acquired (59)  
Cash outflow on acquisition net of cash acquired 3 441  

1A deferred tax asset for unredeemed capital expenditure of R855 million was not recognised. There is no expiry date for unredeemed capital expenditure.

The purchase price allocation was based on 100% ownership. A 15% shareholding in ARM BMC will be allocated to qualifying employees, local communities and black industrialists who will each hold 5%. ARM BMC is busy with the necessary processes to implement the allocation of this 15% shareholding. At the reporting date no agreements in this regard had been finalised.

Since the acquisition date, no revenue and a net loss of R350 million was included in the consolidated statement of profit or loss for the reporting period. If the acquisition had been at the beginning of the reporting period, no revenue and a net loss of R397 million would have been included in the consolidated statement of profit or loss for the reporting period.

The gain on bargain purchase is as a result of the fair value of net assets acquired differing from the initial estimates.

The gain on bargain purchase is included in capital items on the statement of profit or loss.

Trade and other receivables at acquisition is current and receivable within 30 days.

The carrying amount of trade and other receivables approximates their fair value due to the short-term nature of the receivables.

25. RELATED PARTIES

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.

  Reviewed
F2023
Rm
Audited
F2022
Rm
Amounts accounted in the statement of profit or loss relating to transactions with related parties    
Subsidiaries    
Impala Platinum – sales 7 896 9 416
Joint operations    
Rustenburg Platinum Mines – sales1 3 961 4 522
Modikwa non-controlling interest – dividend declared1 102 255
Glencore International AG – sales 2 409 2 627
Glencore Operations SA – management fees 103 78
Joint venture    
Assmang Proprietary Limited    
– Management fees 1 433 1 478
– Dividends received 5 000 5 500
Amounts outstanding at year end (owing to)/receivable by ARM on current account    
Joint venture    
Assmang – trade and other receivables 812 985
Joint operations    
Rustenburg Platinum Mines – trade and other receivables1 997 1 526
Modikwa-related non-controlling interest – dividend payable1 – 143
Norilsk Nickel – trade and other payables – 2
Glencore Operations SA – short-term borrowings – (139)
Glencore Operations SA – trade and other receivables 533 887
Glencore International AG – trade and other receivables 185 376
Subsidiary    
Impala Platinum – trade and other receivables 2 266 3 646
Impala Platinum – dividend paid 414 1 060

1These 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.

26. CONTINGENT LIABILITIES AND DISPUTES

Contingent liabilities

Nkomati

Nkomati has provided for the short to medium-term water management costs, however, there remain 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 a long-term 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 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 2023 is the best independent estimate and is based on the most reliable information currently available. It will be re-assessed 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.

Modikwa

In August 2020, the International Council on Mining and Metals (ICMM) published a Global Industry Standard for Tailings Management (GISTM) that sets a new global benchmark to achieve strong social, environmental and technical outcomes in tailings management, with an emphasis on accountability and disclosure.

ICMM members have committed that all tailings storage facilities (TSFs) with 'extreme' or 'very high' potential consequences will be in conformance with the GISTM by August 2023, and all other facilities by August 2025.

ARM, as a member of ICMM, published its progress towards conformance with GISTM on 5 August 2023.

Modikwa Platinum Mine is proactively investigating gaps between its TSF and the GISTM requirements. The mine commenced with sampling and laboratory testing work during F2022.

As at 30 June 2023, a reliable estimate of the impact cannot be made as the sampling and laboratory testing work is still underway. The results thereof are expected to be available in the third quarter of F2024.

Disputes

Modikwa

ARM Mining Consortium Limited (ARMMC) made an application against the DMRE and third-party respondents requesting the court to order the DMRE to reassess applications for certain prospecting rights of Rustenburg Platinum Mines Limited, ARMMC's joint venture partner, that had been earlier rejected. Judgment on the matter was granted on 10 July 2020. The court found against ARMMC. ARMMC applied for leave to appeal the judgment to the Supreme Court of Appeal (SCA), which application was granted. The SCA delivered judgment on the matter on 28 November 2022. It found against ARMMC. ARMMC filed an application for leave to appeal to the Constitutional Court. On 18 July 2023, the Constitutional Court issued an order dismissing the application for leave to appeal. The resources under dispute have no impact on the existing life-of-mine plan.

ARM

Pula Group LLC and Pula Graphite Partners Tanzania Limited claimed damages in the amount of US$195 000 000 against ARM and other defendants, allegedly arising out of a breach of a confidentiality agreement. The summons was served on ARM on 13 January 2023. The matter appeared before the High Court of the United Republic of Tanzania (Commercial Division) on 9 May 2023. The court dismissed the plaintiffs' action and ordered that each party must pay its own legal costs.

There have been no other significant changes in the contingent liabilities and disputes of the group as disclosed since 30 June 2022 annual financial statements.

For a detailed disclosure on contingent liabilities and disputes, refer to ARM's annual financial statements for the year ended 30 June 2022 available on the group's website (www.arm.co.za).

27. EVENTS AFTER REPORTING DATE

Subsequent to year end Assmang declared a dividend of R3 000 million attributable to ARM.

Harmony declared a final dividend of 75 cents per share. At 30 June 2023 and at the date of this report, ARM owned 74 665 545 Harmony shares.

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