Annual Report 2001

Accounting policies

Zimbabwe Platinum Mines Limited is a company domiciled in Guernsey, Channel Islands. The consolidated financial statements of the Company for the year ended 30 June 2001 comprise the Company and its subsidiaries (together referred to as the "Group"). The financial statements were authorised for issue by the Directors on 3 October 2001.

(a) Statement of compliance

The consolidated financial statements have been prepared in accordance with the accounting standards issued by the International Accounting Standards Committee (IASC), interpretations issued by the Standing Interpretations Committee of the IASC and the reporting requirements of the Australian Stock Exchange.

(b) Basis of preparation

The financial statements are presented in United States dollars, rounded to the nearest thousand. They are prepared on the historical cost basis with exception of Zimbabwean companies which have been restated as per note 26.

(c) Basis of consolidation

(i) Subsidiaries
Subsidiaries are those enterprises controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

(ii) Transactions eliminated on consolidation
Intra-group balances and transactions, and any unrealised gains arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

(d) Foreign currency

(i) Foreign currency transactions
Transactions in foreign currencies are translated to United States dollars at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to United States dollars at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the income statement. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated to United States dollars at the foreign exchange rate ruling at the date of the transaction.

(ii) Financial statements of foreign operations
The revenues and expenses of foreign operations are translated to United States dollars at rates ruling at the balance sheet date. Foreign exchange differences arising on translation are recognised directly in equity.

Prior to translating the financial statements of foreign operations in hyperinflationary economies, the financial statements, excluding comparatives, are restated to account for changes in the general purchasing power of the local currency. The restatement is based on relevant price indices at the balance sheet date.

(e) Property, plant and equipment

(i) Owned assets
Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses (refer accounting policy (k)). The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of production overheads.

Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as separate items of property, plant and equipment.

(ii) Subsequent expenditure
Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, including major inspection and overhaul costs, is capitalised. Other subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the item of property, plant and equipment. All other expenditure is recognised in the income statement as an expense when incurred.

(iii) Depreciation
Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives of items of property, plant and equipment. Land is not depreciated. The estimated useful lives are as follows:

(f) Intangible assets

(i) Goodwill
Goodwill arising on an acquisition represents the excess of the cost of the acquisition over the fair value of the net identifiable assets acquired. Goodwill is stated at cost less accumulated amortisation and impairment losses (refer accounting policy (k)). In respect of associates, the carrying amount of goodwill is included in the carrying amount of the investment in the associate.

(ii) Negative goodwill
Negative goodwill arising on an acquisition represents the excess of the fair value of the net identifiable assets acquired over the cost of acquisition.

To the extent that negative goodwill relates to an expectation of future losses and expenses that are identified in the plan of acquisition and can be measured reliably, but which have not yet been recognised, it is recognised in the income statement when the future losses and expenses are recognised. Any remaining negative goodwill, but not exceeding the fair values of the non-monetary assets acquired, is recognised in the income statement over the weighted average useful life of those assets that are depreciable/amortisable. Negative goodwill in excess of the fair values of the non-monetary assets acquired is recognised immediately in the income statement.

(iii) Amortisation
Amortisation is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets.

(g) Inventories

(i) Other inventories
Other inventories are stated at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

The cost of inventories is based on the first-in first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of overheads based on normal operating capacity.

(h) Mining interests

Exploration, evaluation and development expenditure, including related administrative expenditure, is accumulated for each separate area of interest. An area of interest comprises a project area which consists of one or more related mine tenements or claims on an individual geological area.

Costs accumulated comprise acquisition costs, direct exploration and evaluation costs and an appropriate portion of related overhead expenditure. They do not include general overheads or administrative expenditure not specifically connected with a particular area of interest.

Revenue received from the sale or disposal of product, materials or services during the exploration and evaluation phases of operations is offset against expenditure in respect of the area of interest or mineral resource concerned. Expenditure is carried forward in respect of those areas of interest in which the rights of tenure are current and:

(i) the exploration and evaluation procedures are not sufficiently progressed to permit reasonable assessment of the existence or otherwise of reserves, and active and significant operations in the area of interest are continuing;
or
(ii) such expenditure is expected to be recouped by successful development and exploration or by its sale. Such expenditure is capitalised up to commencement of operations at which time it is amortised in accordance with the policy stated in (i) below. Exploration and evaluation expenditure in respect of areas, which do not satisfy the above criteria, is written off as incurred or in the year in which such a decision is made.

Development expenditure incurred prior to the commencement of commercial levels of production, including borrowing costs, is carried forward to the extent to which recoupment out of revenue, following the commissioning of the mine, is reasonably assured.

No amortisation is provided in respect of development properties until they are commissioned. Thereafter, such amounts are amortised in accordance with the policy stated in (i) below.

Projects transferred to care and maintenance are carried forward to the extent to which recoupment out of revenue following the return to production or sale of the mine is reasonably assured. Amortisation is provided in respect of properties in accordance with the policy stated in (i) below.

(i) Amortisation of mining interests

Amortisation of mining interests in the production phase is provided on the production output basis so as to write off each area of interest over the assessed production life of that area. The Directors will regularly review the assessed production life of each area of interest and after considering the physical and economic factors relating to reserves, adjustments will be made to amortisation rates as necessary.

(j) Cash and cash equivalents

Cash and cash equivalents comprises cash balances and call deposits. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts.

(k) Impairment

The carrying amounts of the Group’s assets, other than inventories (refer accounting policy (g)) and deferred tax assets (refer accounting policy (q)), are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. For intangible assets that are not yet available for use, the recoverable amount is estimated at each balance sheet date. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement.

(i) Calculation of recoverable amount
The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

(ii) Reversals of impairment
An impairment loss in respect of goodwill is not reversed unless the loss was caused by a specific external event of an exceptional nature that is not expected to recur, and the increase in recoverable amount relates clearly to the reversal of the effect of that specific event.

In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount.

An impairment loss is only reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(l) Employee benefits

(i) Defined contribution plans
Contributions to defined contribution pension plans are recognised as an expense in the income statement as incurred.

(ii) Long term service benefits
The Group’s net obligation in respect of long term service leave is the present value of expected payments to be made in respect of services provided by employees up to the reporting date.

(iii) Equity and equity-related compensation benefits
The stock option programme allows Group directors and employees to acquire shares of the Company. The option exercise price equals the market price of the underlying shares at the date of the grant and no compensation cost or obligation is recognised. When the options are exercised, equity is increased by the amount of the proceeds received.

(m) Provisions

A provision is recognised in the balance sheet when the Group has a legal or constructive obligation as a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation.

(n) Site restoration

In accordance with the Group’s environmental policy and applicable legal requirements, a provision for site restoration in respect of contaminated land is recognised when the land is contaminated.

(o) Revenue

(i) Goods sold and services rendered
Revenue from the sale of product is recognised in the income statement when the significant risks and rewards of ownership have been transferred to the buyer. Revenue is determined at the gross invoiced price of the product.

(ii) Interest income is recognised in the income statement as it accrues, taking into account the effective yield on the asset. Dividend income is recognised in the income statement on the date that the dividend is declared.

(p) Expenses

(i) Net financing costs
Net financing costs comprise interest payable on borrowings, interest receivable on funds invested, dividend income.

All interest and other costs incurred in connection with borrowings are expensed when incurred as part of net financing costs.

(q) Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognised in the income statement except to the extent that it relates to items recognised directly to equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the unused tax losses and credits can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.