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.

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.

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.

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.

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

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

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.

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.

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.

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).

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

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

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.

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

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.

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.

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.

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).

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.