INCUBEX MINERALS LTD AND SUBSIDIARIES · 2016/06/30 · INCUBEX MINERALS LTD AND...

INCUBEX MINERALS LTD AND SUBSIDIARIES(Registration Number 2010/010251/06)

Consolidated and Separate Annual Financial Statementsfor the year ended 30 June 2016

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INCUBEX MINERALS LTD AND SUBSIDIARIES(Registration Number 2010/010251/06)Consolidated and Separate Annual Financial Statements for the year ended 30 June 2016

Index

The reports and statements set out below comprise the consolidated annual financial statements presented to theshareholders:

Index 1

General Information 2

Independent Auditor's Report 3

Directors' Responsibilities and Approval 4

Directors' Report 5 - 6

Statements of Financial Position 7

Statements of Comprehensive Income 8

Statements of Changes in Equity 9 - 10

Statements of Cash Flows 11

Accounting Policies 12 - 20

Notes to the Consolidated Annual Financial Statements 21 - 33

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General Information

Country Of Incorporation And Domicile South Africa

Nature Of Business And Principal Activities Exploration, mining and development

Directors L Mohuba (RSA)CRD de Bruin (RSA)D Twist (RSA)J Bhatia (IND)WB Hlangwane (RSA)AG Smith (RSA)E Beylefeld (RSA)

Registered office 206, 2nd Floor, Northwing Granger BayCourt, Beach RoadV&A Waterfront, Cape Town8001

Business address 1st Floor292 Surrey AvenueJohannesburg2194

Postal address PO Box 98924Sloane Park2052

Auditors Riekert Auditors and Consulting ServicesIncChartered Accountants (S.A.)Registered Auditors

Company registration number 2010/010251/06

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Directors' Report

The directors present their report for the year ended 30 June 2016.

1. Review of activities

Main business and operationsThe Group is engaged in exploration, mining and development and operates principally in South Africa.

The operating results and consolidated statement of financial position of the Group are fully set out in the attachedfinancial statements and do not in our opinion require any further comment.

2. Going concern

The consolidated and separate annual financial statements have been prepared on the basis of accounting policiesapplicable to a going concern. This basis presumes that funds will be available to finance future operations and thatthe realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in theordinary course of business.

The ability of the company to continue as a going concern is dependent on a number of factors. The mostsignificant of these is that the directors continue to procure funding for the ongoing operations for the company,that the agreement of support referred to in note 27 and the subordination agreement referred to in note 15 of theseannual financial statements will remain in force for so long as it takes to restore the solvency of the company.

3. Events after reporting date

The second tranche payment for warrants and rights issue will be paid early in the new financial year. The directorsare not aware of any other material event which occurred after the reporting date and up to the date of this reportthat would have a material effect on the current financial statements. Refer to note 28.

4. Authorised and issued share capital

The authorised share capital is 2,000,000,000 ordinary shares of no par value

During the current financial year funds were received to the value of R2,543,353 which included the first tranchepayment for 48,547,382 shares and 21,948,186 warrants taken up in terms of the rights issue as well as loan accountsthat were converted into shares. These shares were issued on 17 October 2016 after the reporting date. (Refer tonote 13)

5. Share incentive scheme

No share options have been granted during the current financial year (refer to note 13 for details on existing optionsoutstanding).

6. Dividends

No dividends were declared nor paid to the shareholders during the year.

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Directors' Report

7. Directors

The directors of the company during the year and to the date of this report are as follows:

NameL Mohuba (RSA)CRD de Bruin (RSA)D Twist (RSA)J Bhatia (IND)WB Hlangwane (RSA)AG Smith (RSA)E Beylefeld (RSA)

8. Secretary

The Group's designated secretary Karen Hendrikz resigned on 28 January 2016 and was replaced by Lyle Smith whowas appointed on 28 January 2016 in her stead.

9. Auditors

The financial statements are subject to an audit and have been audited by Riekert Auditors and ConsultingServices Inc.

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INCUBEX MINERALS LTD AND SUBSIDIARIES(Registration Number 2010/010251/06)Consolidated and Separate Annual Financial Statements as at 30 June 2016

Statements of Financial PositionFigures in R Notes Group

2016Group2015

Company2016

Company2015

1.AssetsNon-Current AssetsProperty, plant and equipment 2 12,183,804 12,432,460 21,623 61,407Intangible assets 3 7,519,851 7,446,983 - - Investment in subsidiaries 4 - - 23,050,667 23,050,667Investments in associates 6 206 206 - - Deposits for rehabilitation 9 1,026,136 1,019,153 - - Investments in jointly controlled entities 5 1,790,050 1,790,050 - -

22,520,047 22,688,852 23,072,290 23,112,074

Current AssetsInventories 10 900,036 996,752 - - Loans to group companies 7 7,415,326 7,415,326 37,963,012 34,148,520Other financial assets 8 - 120,233 - 120,233Trade and other receivables 11 2,174,557 2,463,467 202,179 276,090Cash and cash equivalents 12 992,554 712,678 522,919 315,642

11,482,473 11,708,456 38,688,110 34,860,485

Total Assets 34,002,520 34,397,308 61,760,400 57,972,559

1. Equity and LiabilitiesEquityIssued capital 13 94,002,008 91,468,674 94,002,008 91,468,674Accumulated loss (92,483,632) (88,696,853) (52,104,648) (52,786,751)

1,518,376 2,771,821 41,897,360 38,681,923Non-controlling interest (11,515,692) (10,525,529) - -

(9,997,316) (7,753,708) 41,897,360 38,681,923

Current LiabilitiesTrade and other payables 16 5,267,619 6,467,741 2,048,512 4,144,200Other financial liabilities 14 26,182,666 27,133,275 5,264,976 6,596,437Loan from shareholder 15 12,549,552 8,550,000 12,549,552 8,550,000

43,999,836 42,151,016 19,863,040 19,290,637

Total Equity and Liabilities 34,002,520 34,397,308 61,760,400 57,972,559

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Statements of Comprehensive IncomeFigures in R Note(s) Group

2016Group2015

Company2016

Company2015

Revenue 17 12,464,583 8,639,670 - - Cost of sales (10,266,566) (10,058,962) - - Gross profit/ (loss) 2,198,017 (1,419,292) - -

Other income 654,502 881,290 647,018 647,349Operating costs (9,242,941) (10,585,613) (1,946,224) (6,456,395)Operating loss 18 (6,390,422) (11,123,615) (1,299,205) (5,809,046)

Finance income 10,072 11,080 2,997 3,049Finance costs 20 (396,592) (710,159) (21,688) (414,377)Profit on sale of investment 2,000,000 - 2,000,000 - Goodwill impairment - (16,236,705) - - Fair value adjustments - (9,203,572) - (9,203,572)

Total comprehensive loss for the year (4,776,942) (37,262,971) 682,103 (15,423,946)

Total comprehensive (loss) incomeattributable to the owners of the parent:Non-Controlling Interest 990,163 2,056,838 - - Total comprehensive (loss)/income forthe period (4,776,942) (37,262,972) 682,103 (15,423,946)

(3,786,779) (35,206,134) 682,103 (15,423,946)

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Statements of Changes in Equity / Group

Figures in R Note(s) Share capitalAccumulated

loss

Equityattributable to

company

Non-controlling

interest Total

Balance at 1 July 2014 75,929,700 (53,490,719) 22,438,981 (8,468,691) 13,970,290Total comprehensive income for the yearLoss for the year - (35,206,134) (35,206,134) (2,056,838) (37,262,972)Total comprehensive income for the year - (35,206,134) (35,206,134) (2,056,838) (37,262,972)

Issue of share capital 15,538,974 - 15,538,974 - 15,538,974 Balance as at 30 June 2015 91,468,674 (88,696,853) 2,771,821 (10,525,529) (7,753,708)

Balance at 1 July 2015 91,468,674 (88,696,853) 2,771,821 (10,525,529) (7,753,708)Adjustment to share capital (10,019) - (10,019) - (10,019)Total comprehensive income for the yearLoss for the year - (3,786,779) (3,786,779) (990,163) (4,776,942)Total comprehensive income for the year - (3,786,779) (3,786,779) (990,163) (4,776,942)

Shares to be issued 2,543,353 - 2,543,353 - 2,543,353Balance at 30 June 2016 13 94,002,008 (92,483,632) 1,518,377 (11,515,692) (9,997,316)

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Statements of Changes in Equity / Company

Figures in R Note(s) Share capitalAccumulated

loss Total

Balance at 1 July 2014 75,929,700 (37,362,805) 38,566,895Total comprehensive income for the yearLoss for the year - (15,423,946) (15,423,946)Total comprehensive income for the year - (15,423,946) (15,423,946)

Issue of share capital 15,538,974 - 15,538,974 Balance as at 30 June 2015 91,468,674 (52,786,751) 38,681,923

Balance at 1 July 2015 91,468,674 (52,786,751) 38,681,923Adjustment to share capital (10,019) - (10,019)Total comprehensive income for the yearLoss for the year - 682,103 682,103Total comprehensive income for the year - 682,103 682,103

Shares to be issued 2,543,353 2,543,353Balance at 30 June 2016 13 94,002,008 (52,104,648) 41,897,360

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Statements of Cash FlowsFigures in R Note(s) Group

2016Group2015

Company2016

Company2015

Operating flows from operatingactivitiesCash (used in)/generated fromoperations 23 (5,724,349) (8,412,981) (3,282,824) (4,959,008)

Investment income 10,072 11,080 2,997 3,049Finance costs 20 (396,592) (710,159) (21,688) (414,377)Adjustment to share capital 10,019 - 10,019 - Net cash from operating activities (6,100,850) (9,112,060) (3,291,496) (5,370,336)

Cash flows from investing activitiesProperty, plant and equipment acquired 2 (1,635,513) (1,687,889) (155,142) (21,214)Proceeds on disposals of property,plant and equipment 393,581 417,401 146,748 -

Proceeds from sale of investment 2,000,000 - 2,000,000 - Proceeds on disposals of intangibleassets (72,868) 866,334 - -

Movement in group loans - (1,106,676) (3,814,493) (2,914,100)Movement in other financial assets 120,233 (1,410,503) 120,233 (2,754,869)Prepayment for investment - (8,250,000) - (8,250,000)Deposits (6,983) 3,222 - - Net cash from investing activities 798,450 (11,168,111) (1,702,654) (13,940,183)

Cash flows from financing activitiesCapital issued 2,533,334 15,538,974 2,533,334 15,538,974Loans raised 246,581Movement in other financial liabilities (950,609) 1,432,421 (1,331,461) 3,329,239Movement in shareholder loan 3,999,552 3,329,239 3,999,552 - Net cash from financing activities 5,582,277 20,300,634 5,201,425 19,114,794

Total cash and cash equivalentsmovement for the period. 279,876 20,463 207,277 (195,725)

Cash and cash equivalents at beginningof the year 712,678 692,215 315,642 511,367

Cash and cash equivalents at end of theyear 12 992,554 712,678 522,919 315,642

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Accounting Policies

1. Presentation of Annual Financial Statements

The financial statements have been prepared in accordance with the International Financial Reporting Standard for Smalland Medium-sized Entities, and the South African Companies Act 71 of 2008. The financial statements have beenprepared on the historical cost basis, and incorporate the principal accounting policies set out below. They are presented inSouth African Rands.

These accounting policies are consistent with the previous period.

1.1 Consolidation

Basis of consolidation

The consolidated annual financial statements incorporate the annual financial statements of the company and all entities,including special purpose entities, which are controlled by the company. Control exists when the company has the power togovern the financial and operating policies of an entity so as to obtain benefits from its activities. The results ofsubsidiaries are included in the consolidated annual financial statements from the effective date of acquisition to theeffective date of disposal.

Adjustments are made when necessary to the annual financial statements of subsidiaries to bring their accounting policiesin line with those of the group.

All intra-group transactions, balances, income and expenses are eliminated in full on consolidation.

Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from thegroup's interest therein, and are recognised within equity. Loss of subsidiaries attributable to non-controlling interests areallocated to the non-controlling interest even if this results in a debit balance being recognised for non-controlling interest.

Transactions which result in changes in ownership levels, where the group has control of the subsidiary both before andafter the transaction are regarded as equity transactions and are recognised directly in the statement of changes in equity.

The difference between the fair value of consideration paid or received and the movement in non-controlling interest forsuch transactions is recognised in equity attributable to the owners of the parent.

Business combinations

The group accounts for business combinations using the acquisition method of accounting. The cost of the businesscombination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equityinstruments issued. Costs directly attributable to the business combination are expensed as incurred, except the costs toissue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity.

Contingent consideration is included in the cost of the combination at fair value as at the date of acquisition. Subsequentchanges to the assets, liabilities or equity which arise as a result of the contingent consideration are not affected againstgoodwill, unless they are valid measurement period adjustments.

The acquired identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of IFRS 3Business Combinations are recognised at their fair values at acquisition date, except for non-current assets (or disposalgroup) that are classified as held-for-sale in accordance with IFRS 5 Non-current Assets Held-For-Sale and discontinuedoperations, which are recognised at fair value less costs to sell.

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Accounting Policies

Contingent liabilities are only included in the identifiable assets and liabilities of the acquisition where there is apresent obligation at acquisition date.

On acquisition, the group assesses the classification of the acquired assets and liabilities and reclassifies them where theclassification is inappropriate for group purposes. This excludes lease agreements and insurance contracts, whoseclassification remains as per their inception date.

Non-controlling interest arising from a business combination is measured either at their share of the fair value of the assetsand liabilities of the acquisition or at fair value. The treatment is not an accounting policy choice but is selected foreach individual business combination, and disclosed in the note for business combinations.

In cases where the group held a non-controlling shareholding in the acquisition prior to obtaining control, thatinterest is measured to fair value as at acquisition date. The measurement to fair value is included in profit or loss. Wherethe existing shareholding was classified as an available-for-sale financial asset, the cumulative fair value adjustmentsrecognised previously to other comprehensive income and accumulated in equity are recognised in profit or loss as areclassification adjustment.

Goodwill is determined as the consideration paid, plus the carrying value of any shareholding held prior to obtainingcontrol, plus non-controlling interest and less the fair value of the identifiable assets and liabilities of the acquistion.

Goodwill is not amortised but is tested at least annually for impairment. If goodwill is assessed to be impaired, thatimpairment is not subsequently reversed.

1.2 Property, plant and equipment

Property, plant and equipment are tangible items that: • are held for use in the production or supply of goods or services, for rental to others or for administrative purposes; and • are expected to be used during more than one period

Property, plant and equipment is carried at cost less accumulated depreciation and accumulated impairment losses.

Cost includes all costs incurred to bring the assets to the location and condition necessary for it to be capable of operatingin the manner intended by management.

Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurredsubsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item ofproperty, plant and equipment, the carrying amount of the replaced part is derecognised.

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Accounting Policies

Depreciation is provided using the straight-line method to write down the cost, less estimated residual value over the usefullife of the property, plant and equipment, which is as follows:

Item Average useful lifeBuildings 10 yearsCrushing and screening plant 1-20 yearsPlant and machinery 7 yearsFurniture and fixtures 6 yearsMotor vehicles 5 yearsOffice equipment 6 yearsIT equipment 3 yearsComputer software 2 yearsLoose tools 5 years

The residual value, depreciation method and useful life of each asset are reviewed at each annual reporting period if thereare indicators present that there has been a significant change from the previous estimate.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised inprofit or loss in the period.

1.3 Goodwill

Goodwill is initially measured at cost, being the excess of the cost of the business combination over the company's interestin the net fair value of the identifiable assets, liabilities and contingent liabilities.

Subsequently goodwill is carried at cost less accumulated impairment.

1.4 Intangible assets

An intangible asset is recognised when: • it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; and • the cost of the asset can be measured reliably.

Intangible assets are initially recognised at cost.

Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred.

An intangible asset arising from development (or from the development phase of an internal project) is recognised when: • it is technically feasible to complete the asset so that it will be available for use or sale. • there is an intention to complete and use or sell it. • there is an ability to use or sell it. • it will generate probable future economic benefits. • there are available technical, financial and other resources to complete the development and to use or sell the asset. • the expenditure attributable to the asset during its development can be measured reliably.

Intangible assets are carried at cost less any accumulated amortisation and any impairment losses.

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Accounting Policies

Exploration assets:

The capitalisation of exploration and evaluation expenditure as exploration assets are not addressed in IFRS for SME's. Thegrouped applied section 10.4 - 10.6 of IFRS for SME's and developed an accounting policy based on IFRS 6 - Exploration forand evaluation of mineral resources. IFRS 6 allows companies to capitalise exploration expenses, carry the asset at cost lessimpairment losses and to classify these assets as intangible assets.

Exploration assets are classified as intangible assets and are initially carried at cost less any impairment losses.

All costs, including administration and other general overhead costs directly associated with the specific project arecapitalised. The directors evaluate each project at each period end to determine if the carrying value should be written off.In determining whether expenditure meets the criteria to be capitalised, the directors use information from several sources,depending on the level of exploration. Purchased exploration and evaluation assets are recognised at the cost of acquisitionor at the fair value if purchased as part of a business combination. Exploration assets are not amortised as it will only beavailable for use once transferred to the development cost of the project.

When the technical and commercial feasibility of a project has been established, the relevant exploration assets aretransferred to development costs. No further exploration costs for the project will be capitalised subsequent to thistransfer. The cost transferred to development costs will be amortised over the life of the project based on theexpected flow of economic resources associated with the project.

The amortisation period and the amortisation method for intangible assets are reviewed every period end.

Amortisation is provided to write down the intangible assets, on a straight line basis, to their residual values when theyexist, as follows:

Exploration costs Not amortised

1.5 Investments in subsidiaries

Group annual financial statements

The group annual financial statements include those of the holding company and its subsidiaries. The results of thesubsidiaries are included from the effective date of acquisition, and where applicable to effective date of disposal.

Company annual financial statements

Investments in subsidiaries are carried at cost less any accumulated impairment.

1.6 Investment in jointly controlled entities

Group annual financial statements

Jointly controlled entities

Investments in jointly controlled entities are accounted for using the cost model whereby the investments are carried at costless accumulated impairment losses. This excludes investments in jointly controlled entities for which there is a publishedprice quotation, which are measured at fair value with changes to fair value recognised in profit or loss.

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Accounting Policies

1.7 Investments in associates

An associate is an entity over which the group has significant influence and which is neither a subsidiary nor a jointventure. Significant influence is the power to participate in the financial and operating policy decisions of the investee butis not control or joint control over those policies.

An investment in an associate is accounted for using the equity method, except for when the investment is classified asheld-for-sale in accordance with IFRS 5 Non-current Assets Held-For-Sale and discontinued operations. Under theequity method, investments in associates are carried in the consolidated statement of financial position at cost adjusted forpost acquisition changes in the group's share of net assets of the associate, less any impairment loss.

The group recognises its share of losses of the associate to the extent of the group's net investment in the associate. Thegroup's share of unrealised intra company gains are eliminated upon consolidation and the groups share of intra companylosses are eliminated provided they do not provide evidence that the asset transferred is impaired.

The group's share of post acquisition profits or losses, other comprehensive income and movements in equity of theassociate are included in the group's profit or loss, other comprehensive income and equity reserves respectively.

Company annual financial statements

Investments in associates are accounted for at fair value through profit or loss.

1.8 Financial instruments

Initial measurement

Financial instruments are initially measured at the transaction price. This includes transaction costs, except for financialinstruments which are measured at fair value through profit loss.

Financial instruments at amortised cost

Debt instruments, as defined in the standard, are subsequently measured at cost using the effective interest method. Debtinstruments which are classified as current assets or current liabilities are measured at the undiscounted amount of the cashexpected to be received or paid, unless the arrangement effectively constitutes a financing transaction.

At the end of each reporting date, the carrying amounts of assets held in this category are reviewed to determine whetherthere is any objective evidence of impairment. If so, an impairment loss is recognised

Financial instruments at fair value

All other financial instruments are measured at fair value through profit and loss.

The fair values of listed or quoted investments are based on the quoted market price at reporting period date.

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Accounting Policies

1.9 Tax

Current tax assets and liabilities

Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid inrespect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset.

Current tax liabilities (assets) for the current and prior periods are measured at the amount expected to be paid to(recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted bythe end of the reporting period.

Deferred tax assets and liabilities

A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liabilityarises from the initial recognition of an asset or liability in a transaction which at the time of the transaction, affects neitheraccounting profit nor taxable profit (tax loss).

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profitwill be available against which the deductible temporary difference can be utilised. A deferred tax asset is not recognisedwhen it arises from the initial recognition of an asset or liability in a transaction at the time of the transaction, affects neitheraccounting profit nor taxable profit (tax loss).

A deferred tax asset is recognised for the carry forward of unused tax losses and unused STC credits to the extent that it isprobable that future taxable profit will be available against which the unused tax losses and unused STC credits can beutilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset isrealised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by theend of the reporting period.

1.10 Leases

A lease is classified as a finance lease if it substantially transfers all the risks and rewards incidental to ownership to thelessee. A lease is classified as an operating lease if it does not substantially transfer all the risks and rewards incidental toownership.

Operating leases – lessee

Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The differencebetween the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset.This liability is not discounted.

Any contingent rents are expensed in the period they are incurred.

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Accounting Policies

1.11 Inventories

Inventories are measured 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 completionand the estimated costs necessary to make the sale.

The cost of inventories comprises of all costs of purchase, costs of conversion and other costs incurred in bringing theinventories to their present location and condition.

The cost of inventories of items that are not ordinarily interchangeable and goods or services produced and segregated forspecific projects is assigned using specific identification of the individual costs.

The cost of inventories is assigned using the first-in, first-out (FIFO) formula. The same cost formula is used for allinventories having a similar nature and use to the entity.

When inventories are sold, the carrying amount of those inventories are recognised as an expense in the period in whichthe related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses ofinventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of anywrite-down of inventories, arising from an increased net realisable value, are recognised as a reduction in the amount ofinventories recognised as an expense in the period in which the reversal occurs.

1.12 Impairment of assets

The group assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If anysuch indication exists, the group estimates the recoverable amount of the asset. Irrespective of whether there is anyindication of impairment, the group also: • tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment annually by comparing its carrying amount with its receivable amount. This impairment test is performed during the annual period and at the same time every period. • tests goodwill acquired in a business combination for impairment annually.

If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it isnot possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unitto which the asset belongs is determined.

The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its value inuse.

If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to itsrecoverable amount. That reduction is an impairment loss.

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately inprofit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease.

Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating units, orgroups of cash-generating units, that are expected to benefit from the synergies of the combination.

An impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the carryingamount of the units. The impairment loss is allocated to reduce the carrying amount of the assets of the unit in the followingorder:

19


Accounting Policies

• first, to reduce the carrying amount of any goodwill allocated to the cash-generating unit and • then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit.

An entity assesses at each reporting date whether there is any indication that an impairment loss recognised inprior periods for assets other than goodwill may no longer exist or may have decreased. If any such indicationexists, the recoverable amounts of those assets are estimated.

The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does notexceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in priorperiods.

A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwillis recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluationincrease.

1.13 Share capital and equity

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of itsliabilities.

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax,from the proceeds.

1.14 Share based payments

Goods or services received or acquired in a share-based payment transaction are recognised when the goods or theservices are received. A corresponding increase in equity is recognised if the goods or services were received in an equitysettled share-based payment transaction, or a liability, if the goods or services were acquired in a cash-settled share-basedpayment transaction.

When the goods or services received or acquired in a share-based payment transaction do not qualify for recognition asassets, they are recognised as expenses.

For equity-settled share-based payment transactions, the goods or services received, and the corresponding increase inequity, are measured directly, at the fair value of the goods or services received, unless that fair value cannot be estimatedreliably, in which case they are measured at the fair value of the equity instrument granted.

If the share based payments granted do not vest until the counterparty completes a specified period of service, the groupaccounts for those services as they are rendered by the counterparty during the vesting period, (or on a straight line basisover the vesting period).

If the share based payments vest immediately the services received are recognised in full.

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Accounting Policies

1.15 Employee benefits

Short-term employee benefits

The cost of short-term employee benefits, (those payable within 12 months after the service is rendered, such aspaid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical aid), are recognised in the periodin which the service is rendered and are not discounted.

1.16 Site restoration cost

Provision for future site restoration costs are based on the estimate made of the expenditure needed to settle the presentobligation arising. When site restoration occurs on an on-going basis during prospecting, the cost of thisrestoration is included in prospecting expenses and no provision for future restoration costs are required

1.17 Revenue

Revenue from the sale of goods is recognised when all the following conditions have been satisfied: • the group has transferred to the buyer the significant risks and rewards of ownership of the goods; • the group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold: • the amount of revenue can be measured reliably; • it is probable that the economic benefits associated with the transaction will flow to the group; and • the costs incurred or to be incurred in respect of the transaction can be measured reliably.

Revenue is measured at the fair value of the consideration received or receivable and represents the amounts receivable forgoods and services provided in the normal course of business, net of trade discounts and volume rebates, and value addedtax.

Interest is recognised, in profit or loss, using the effective interest rate method.

1.18 Cost of sales

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which therelated revenue is recognised. The amount of any write-down of inventories to net realisable value and all loss ofinventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of anywrite-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount ofinventories recognised as an expense in the period in which the reversal occurs.

21


Consolidated and Separate Annual Financial Statements for the year ended 30 June 2016

Notes to the Consolidated and Separate Annual Financial StatementsFigures in R Group

2016Group2015

Company2016

Company2015

2. Property, plant and equipment

Group CostAccumulateddepreciation

2016 Carryingvalue Cost

Accumulateddepreciation

2015 Carryingvalue

Owned assets Land and buildings 4,005,758 (713,986) 3,291,772 4,005,758 (357,763) 3,647,995Plant and equipment 21,374,491 (15,354,021) 6,020,470 19,900,487 (14,126,434) 5,774,053Motor vehicles 965,784 (763,783) 202,001 846,865 (676,307) 170,558Furniture and fittings 139,785 (108,326) 31,459 144,584 (95,445) 49,139Electrical works 68,914 (17,959) 50,955 32,206 (3,957) 28,249Office equipment 48,687 (43,852) 4,835 48,687 (39,410) 9,277IT equipment 244,014 (214,185) 29,829 330,755 (275,142) 55,613Computer software 18,424 (18,424) - 58,694 (58,694) - Loose tools 97,551 (43,902) 53,649 83,707 (22,199) 61,508Other assets and equipment 1,035,945 (348,616) 687,329 1,035,945 (281,279) 754,666Crushing and screeningplant

2,305,353 (493,847) 1,811,506 2,235,931 (354,530) 1,881,401

30,304,705 (18,120,901) 12,183,804 28,723,619 (16,291,160) 12,432,460

Company CostAccumulateddepreciation


Accumulateddepreciation

2015 Carryingvalue

Owned assets Furniture and fittings 67,221 (57,252) 9,969 73,940 (50,847) 23,093Office equipment 15,797 (11,320) 4,477 15,797 (7,104) 8,693IT equipment 74,347 (67,170) 7,177 173,926 (144,305) 29,621Computer software 18,244 (18,244) - 58,694 (58,694) - Other fixed asset 4 - - - - - -

175,609 (153,986) 21,623 322,357 (260,950) 61,407

22




2016Group2015

Company2016

Company2015

Reconciliation of property, plant and equipment - Group 2016

Group

Carryingvalue at

beginning ofyear Additions Disposals Depreciation

2016 Carryingvalue at end of

yearOwned assetsLand and buildings 3,647,995 - (311,874) (44,351) 3,291,770Plant and equipment 5,774,053 1,307,987 - (1,061,569) 6,020,471Motor vehicles 170,558 197,873 (78,947) (87,484) 202,001Furniture and fittings 49,139 1,350 (2,760) (16,270) 31,459Crushing and screeningplant

1,881,401 62,506 - (132,401) 1,811,506

Office equipment 9,277 15,932 - (20,374) 4,835IT equipment 55,613 6,272 - (32,057) 29,829Computer software - 525 - (525) - Loose tools 61,508 13,844 - (21,703) 53,649Other assets and equipment 754,666 - - (67,338) 687,328Electrical works 28,249 36,708 - (14,002) 50,955Siyaghopa Trading 147 assets - -

12,432,460 1,642,997 (393,581) (1,498,072) 12,183,804

23




2016Group2015

Company2016

Company2015

Reconciliation of property, plant and equipment - Group 2015

2.1 Carryingvalue at

beginning ofyear Additions Disposals Depreciation

2015 Carryingvalue at end of

yearOwned assetsLand and buildings 779,400 2,912,691 - (44,096) 3,647,995Plant and equipment 4,136,547 2,994,913 (343,671) (1,013,736) 5,774,053Furniture and fittings 51,843 8,995 2,239 (13,938) 49,139Motor vehicles 126,085 274,708 (78,947) (151,288) 170,558Office Equipment 5,155 6,699 - (2,577) 9,277IT equipment 79,190 34,712 - (58,289) 55,613Computer software 525 - - (525) - Other assets and equipment 822,004 - - (67,337) 754,666Crushing and screeningplant

1,861,327 125,790 2,978 (108,694) 1,881,401

Loose tools 44,400 27,964 - (10,856) 61,508Electrical works - 32,200 (3,951) 28,249

7,906,476 6,418,673 (417,401) (1,475,287) 12,432,460

A register containing the information by Regulation 25(3) of the Companies Regulations, 2011 is available for inspection at theregistered office of the company.

3. Intangible assets

Group CostAccumulatedamortisation


Accumulatedamortisation

2015 Carryingvalue

Exploration assets 7,519,851 - 7,519,851 7,446,983 - 7,446,983 7,519,851 - 7,519,851 7,446,983 - 7,446,983

3.1 Reconciliation of intangible assets - Group 2016Openingbalance Additions Total

Exploration assets 7,446,983 72,868 7,519,851

Reconciliation of intangible assets - Group 20153.2 Opening

balance Disposals TotalExploration assets 8,313,317 866,334 7,446,983

24




2016Group2015

Company2016

Company2015

4. Investment in subsidiaries% holding % holding Carrying Carrying

Name of subsidiary 2016 2015 amount 2016 amount 2015

Sephaku PGM Holdings (Pty) Ltd 100 % 100 % 100 100Sephaku Vanadium (Pty) Ltd 100 % 100 % 100 100Sephaku Coal Holdings (Pty) Ltd 100 % 100 % 70 70Sephaku Tin (Pty) Ltd 100 % 100 % 4,000,095 4,000,095Sephaku Uranium (Pty) Ltd 100 % 100 % 100 100Ergomark (Pty) Ltd 100 % 100 % 100 100Maxima Holdings (Pty) Ltd 51 % 51 % 2,550,102 2,550,102Siyaghopa Trading 147 (Pty) Ltd 100 % 100 % 16,500,000 16,500,000

23,050,667 23,050,667

All of the entities are incorporated in South Africa and share the same year end of thecompany.

5. Investment in jointly controlled entities - Group

% holding % holding Carrying CarryingName of entity 2016 2015 amount 2016 amount 2015

INSA Coal Holdings (Pty) Ltd 50 % 50 % 1,790,050 1,790,050

The carrying amounts of investments in jointly controlled entities are measured at cost.

6. Investment in associates% holding % holding Carrying Carrying

Name of company 2016 2015 amount 2016 amount 2015

Synchrophor (Pty) Ltd 30 % 30 % 30 30Indelum Properties (Pty) Ltd 30 % 30 % 30 30Empivert (Pty) Ltd 30 % 30 % 30 30Synchrotrix (Pty) Ltd 30 % 30 % 30 30Vigacron (Pty) Ltd 30 % 30 % 30 30Egonox (Pty) Ltd 30 % 30 % 30 30Private Preview Investments 39 (Pty) Ltd 26 % 26 % 26 26

206 206

25




2016Group2015

Company2016

Company2015

7. Loans to (from) group companies

Sephaku Coal Holdings Ltd - - 3,955,687 3,842,253Ergomark (Pty) Ltd - - 8,359,036 8,359,036Sephaku PGM Holdings (Pty) Ltd - - 280,583 280,583Sephaku Tin (Pty) Ltd - - 1,589,539 1,572,853Sephaku Uranium (Pty) Ltd - - 61,385 61,385Maxima Holdings (Pty) Ltd - - 15,891,432 13,997,059Siyaghopa Trading 147 (Pty) Ltd - - 7,825,350 6,035,350

- - 37,963,012 34,148,520

Joint ventures

Insa Coal Holdings (Pty) Ltd 7,135,000 7,135,000 - - 7,135,000 7,135,000 - -

Associates

Golden Dividend 524 (Pty) Ltd 3,005 3,005 - - Empivert (Pty) Ltd 94,199 94,199 - - Indelum Properties (Pty) Ltd 16,684 16,684 - - Zodibyte Properties (Pty) Ltd 450 450 - - Gigadox Investments (Pty) Ltd 450 450 - - Hocine Properties (Pty) Ltd 450 450 - - Synchrophor (Pty) Ltd 450 450 - - Egonox (Pty) Ltd 164,638 164,638 - -

280,326 280,326 - -

7,415,326 7,415,326 37,963,012 34,148,520

The above loans are unsecured, bear no interest and are repayable on mutual agreement.

These loans have been subordinated for the benefit of other creditors to ensure solvency of the underlying company. Thesubordination agreements will be in place until such time as the assets of the company exceeds its liabilities.

26




2016Group2015

Company2016

Company2015

8. Other financial assets

At fair valueMiranda Mineral Holdings Ltd - - - -

On 23 September 2014 the share trade of Miranda MineralHoldings Ltd was suspended on the JSE. The quotedmarket price was 4c each. To date the suspension has notbeen lifted. The company hold 42,035,720 shares inMiranda Mineral Holdings Ltd

At amortised cost

Miranda Mineral Holdings Ltd 1,686,655 1,686,655 1,686,655 1,686,655Cross Company Management (Pty) Ltd - 67,031 - 67,031African Nickel Holdings (Pty) Ltd - 53,202 - 53,202

The above loans are unsecured, bear no interest and arerepayable on mutual agreement.

1,686,655 1,806,888 1,686,655 1,806,888Impairment (1,686,655) (1,686,655) (1,686,655) (1,686,655)

- 120,233 - 120,233

A provision of impairment of R1,686,655 was recognised for the Miranda Mineral Holdings Ltd due to the uncertainty relatingto the recovery of this loan.

Current Assets

At fair value - - - - At amortised cost - 120,233 - 120,233

- 120,233 - 120,233Total other financial assets - 120,233 - 120,233

9. Deposits for rehabilitation

Deposits 1,026,136 1,019,153 - -

In terms of section 41 of the Minerals and Petroleum Resources Development Act 28 of 2002, an applicant for a prospectingright, mining right or mining permit must make prescribed financial provision for the rehabilitation or management of negativeenvironmental impacts. The Group made deposits with the Department of Mineral Resources in compliance herewith.

10. Inventories

Raw materials 900,036 996,752 - -

27




2016Group2015

Company2016

Company2015

11. Trade and other receivables

Trade debtors 1,921,148 2,143,237 101,214 274,294Sundry debtors 37,639 28,433 - - Deposits 93,076 166,503 37,639 - Value Added Tax 122,695 125,294 63,326 1,796

2,174,557 2,463,467 202,179 276,090

12. Cash and cash equivalents

Cash on hand 992,554 712,678 522,919 315,642 992,554 712,678 522,919 315,642

28




2016Group2015

Company2016

Company2015

13. Share capital

Authorised2 000 000 000 Ordinary shares of no par value 2,000,000,000 2,000,000,000 2,000,000,000 2,000,000,000

Issued458,915,906 Ordinary shares of no par value 91,468,674 91,468,674 91,468,674 91,468,674Adjustment to share capital (10,019) - (10,019) - 48,547,382 Shares and 21,948,186 warrants issued after theend of the reporting period on 17 October 2016.

2,543,353 - 2,543,353 -

94,002,008 91,468,674 94,002,008 91,468,674

Reconciliation of number of shares issued:

Reported as at 01 July 2015 458,915,906 383,070,139 458,915,906 383,070,139Issue of shares - 75,845,767 - 75,845,767

Share based payments excercised 5 years from date of issueOpening Granted Closing

Share option company balance (Exercised) balance

during the year20 April 2011 @ 0.099 expired 20 April 2016 10,648,893 - - 10 May 2011 @ 0.490 expired 10 May 2016 1,788,000 - - 29 January 2013 @ 0.120 15,173,000 - 15,173,000

These options vest immediately and can be excercised within 5 years of their date of issue.

The options on 20 April 2011 @ 0.099 and 10 May 2011 @ 0.490 have expired.

No options were excercised during the period.

Share based payments with no set date Opening Granted Closing

Share option company balance (Exercised) balance

20 April 2011 @ 0.010 4,000,000 - 4,000,000These options vest immediately and can be excercised with no set date.

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2016Group2015

Company2016

Company2015

14. Other financial liabilities

Non-interest bearing loan

Taung Gold Ltd 1,530,764 1,530,764 1,530,764 1,530,764SepFluor Ltd 634,517 634,377 - - African Nickel Holdings (Pty) Ltd 3,734,212 - 3,734,212 -

5,899,493 2,165,141 5,264,976 1,530,764

These unsecured loans bear no interest and no fixed terms of repayment have been agreed upon.

Interest bearing loan

African Nickel Holdings (Pty) Ltd - 5,065,674 - 5,065,673Loan to subsidiary by outside shareholder in subsidiary 20,283,173 19,902,460 - -

20,283,173 24,968,134 - 5,065,673These unsecured loans bear interest and no fixed terms ofrepayment have been agreed upon.

26,182,666 27,133,275 5,264,976 6,596,437

15. Loan from shareholder

Main shareholder 12,549,552 8,550,000 12,549,552 8,550,000

The loan from the shareholder is an unsecured loan, bears no interest and no fixed terms of repayment have been agreed upon.This loan has been formally subordinated for the benefit of other creditors to ensure solvency of the underlying company.The subordination agreement will be in place until such time as the assets of the company exceeds its liabilities.

16. Trade and other payables

Trade creditors 4,389,685 5,151,823 2,013,512 4,109,200Accrued expense - 89,809 - - Accrued audit fee 75,000 75,000 35,000 35,000Accrued payroll expense 434,594 996,010 - Value Added Tax 368,340 155,099 - -

5,267,619 6,467,741 2,048,512 4,144,20017. Revenue

An analysis of revenue is as follows:Sale of wollastonite products 2,906,258 516,611 - - Sale of silica products 9,558,325 8,123,059 - -

12,464,583 8,639,670 - -

30




2016Group2015

Company2016

Company2015

18. Operating loss

Operating loss for the year is stated after accounting for the following:

Operating lease charges• Premises 724,377 705,806 724,377 706,921• Equipment 132,763 423,200 47,784 131,135

857,140 1,129,006 772,161 838,056

Exploration costs written off - 1,208,511 - - Profit on sale of investment (2,000,000) - (2,000,000) - Impairments on other financial assets 1,686,655 1,686,655 1,686,655 1,686,655Depreciation on property, plant and equipment 1,498,072 1,475,287 48,177 260,950Employee costs 4,454,801 3,170,205 52,317 1,927,513

19. Acquisition of Siyaghopa Trading 147 (Pty) Ltd

During the 2015 financial year Incubex Minerals Ltd acquired 100% of the shares in Siyaghopa Trading 147 (Pty) Ltd. Theshares were transferred on 1 March 2015 resulting in the balances included in the consolidation.

Property, plant and equipment - 4,488,621 - - Trade and other receivables - 571,855 - - Cash and cash equivalents - 113,381 - - Trade and other payables - (455,480) - - Accumulated loss - (2,947,484) - - Deposits for rehabilitation - 363,307 - - Issued capital - (2,134,200) - -

- - - - 20. Finance costs

Interest on other financial laibilities 396,592 710,159 21,688 414,377

31




2016Group2015

Company2016

Company2015

21. Taxation

Reconciliation of the tax expense

Reconciliation between accounting profit and tax expense.

Accounting loss (4,776,942) (37,262,972) 682,103 (15,423,946)

Tax at the applicable tax rate of 28% (2015: 28%) (1,337,544) (10,433,632) 190,989 (4,318,705)

Tax effect of adjustments on taxable income(Non-taxable)/non-deductible differences (280,000) 7,123,278 (280,000) 2,577,000Tax losses carried forward 1,617,544 3,310,355 89,011 1,741,705

- - - -

No provision has been made for 2016 tax as the group has no taxableincome.

22. Auditors remuneration

Fees for audit services 75,000 75,000 35,000 35,000

23. Cash used in operations

Profit /(loss) before taxation (4,776,942) (37,262,972) 682,103 (15,423,946)Adjustments for:Depreciation and amortisation 1,498,072 1,233,126 48,178 46,210Profit /(loss) on sale of investment (2,000,000) - (2,000,000) - Goodwill - 16,236,705 - - Sale of assets (7,484) - - - Interest received (10,072) (11,080) (2,997) (3,049)Finance costs 396,592 710,159 21,688 414,377Fair value adjustments - 9,203,572 - 9,203,572Adjustment to share capital (10,019) - (10,019) - Changes in working capital:Inventories 96,716 1,422,262 - - Trade and other receivables 288,910 (672,426) 73,911 96,146Trade and other payables (1,200,122) 727,673 (2,095,688) 707,682

(5,724,349) (8,412,981) (3,282,824) (4,959,008)

32




2016Group2015

Company2016

Company2015

24. Commitments

Operating leases - as lessee (expense)

Minimum lease payments due- within one year 171,000 845,994 171,000 678,213 in second to fifth year inclusive - - - 1,523,532

171,000 845,994 171,000 2,201,745

25. Loans to/(from) related parties

RelationshipsSubsidiaries Refer to note 4Jointly controlled entities Refer to note 5Associates Refer to note 6Members of key management CRD de Bruin

Related party balances and transactions with entities over which the company has control, joint control or significantinfluence

Loans to/(from) related parties

Golden Dividend 524 (Pty) Ltd 3,005 3,005Empivert (Pty) Ltd 94,199 94,199Indelum Properties (Pty) Ltd 16,684 16,684Zodibyte Properties (Pty) Ltd 450 450Gigadox Investments (Pty) Ltd 450 450Hocine Properties (Pty) Ltd 450 450Synchrophor (Pty) Ltd 450 450Egonox (Pty) Ltd 164,638 164,638INSA Coal Holdings (Pty) Ltd 7,135,000 7,135,000Loan to subsidiary by outside shareholder in subsidiary (20,283,173) (19,902,460)Loan from shareholder (12,549,552) (8,550,000)

(25,417,399) (21,037,134)

33




2016Group2015

Company2016

Company2015

26. Directors' remuneration

Executive

Group 2016 Emoluments Total 795,939 795,939

In connection with the affairs of the company or its subsidiaries

Group 2015Emoluments Total

In connection with the affairs of the company or its subsidiaries 2,263,465 2,263,465

27. Going concern

The annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. Thisbasis presumes that funds will be available to finance future operations and that the realisation of assets and settlement ofliabilities, contingent obligations and commitments will occur in the ordinary course of business. The ability of the company tocontinue as a going concern is dependent on a number of factors. The most significant of these is that the directors continueto procure funding for the ongoing operations for the company, that the agreement of support and the subordinationagreements referred to in note 15 of these annual financial statements will remain in force for so long as it takes to restore thesolvency of the company.

In order to assist the company and its subsidiaries, a major shareholder signed an agreement of support on 6 March 2017agreeing that he will provide financial support for a period of 12 months from the date of signing the financial statements up toa maximum of R5m to enable the company and subsidiaries to meet their obligations of completing fixed assetcommitments, operational cash requirements and to pay its debts as they fall due. Any planned capital expenditure shall firstbe discussed with and approved by the major shareholders concerned.

28. Events after the reporting date

The second tranche payments for rights issue and warrants will be made early in the new financial year.

INCUBEX MINERALS LTD AND SUBSIDIARIES · 2016/06/30 · INCUBEX MINERALS LTD AND...

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