METMAR LIMITED INTEGRATED ANNUAL REPORT 2015 · deliver to customers on time and equip traders to...

Integrated Annual Report 2015

ME

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LIMIT

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2015

www.metmar.com Comments can be sent to Mr Sizwe Nkosi

at [email protected]

Welcome Welcome to Metmar Limited’s integrated annual report for 2015. This is our fourth integrated annual report and, we believe, represents continued progress in our reporting journey. Details regarding the basis of the report’s preparation and presentation are provided on page 42.

We trust that you will find this report valuable in enhancing your understanding and appraisal of Metmar and its prospects. We welcome all feedback and criticism that will enable us to improve our reporting in future periods.

IFC WelcomeIFC Directors’ statement of responsibilityIFC Forward looking statements

2 Our material issues for 20163 Corporate profile and structure4 About Traxys5 Key performance indicators6 Chairman’s message8 How we create value – our business model

16 Our strategy16 Our allocation of resources18 Chief executive officer’s report20 Operating and financial report23 Our leadership28 Corporate responsibility and ethical supply chains31 Corporate governance35 Summary of King III compliance39 Report of the remuneration and nominations committee41 Report of the social, ethics and transformation committee42 Basis for preparation and presentation43 Shareholder analysis44 Annual financial statements

IBC Administration

CONTENTS

Directors’ statement of responsibilityThe board of directors acknowledges its responsibility to ensure the

integrity of the integrated annual report.

This report was prepared in accordance with the IIRC International

Integrated Reporting Framework and the board believes that it presents

fairly the performance of the Group and its material matters. On the

recommendation of the audit and risk committee, the board of directors

approved the 2015 integrated annual report on 26 May 2015.

Forward looking statementsCertain statements in this document are forward looking. These relate to,

among other things, the plans, objectives, goals, strategies, future

operations and performance of Metmar Limited, its subsidiaries (the

Company, or Group) and its investments. Words such as “anticipates”,

“estimates”, “expects”, “projects”, “believes”, “intends”, “plans”, “may”,

“will” and “should” and similar expressions are typically indicative of a

forward looking statement. These statements are not guarantees of

Metmar’s future operating, financial or other results, and involve certain

risks, uncertainties and assumptions. Accordingly, actual results and

outcomes may differ materially from those expressed or implied by such

statements. Metmar makes no representations or warranty, express or

implied, that the operating, financial or other results anticipated by such

forward looking statements will be achieved, and such forward looking

statements represent, in each case, only one of many possible scenarios

and should not be viewed as the most likely or standard scenario.

Due to the point-in-time nature of this integrated annual report, Metmar

cannot undertake to continuously update the historical information or

forward looking statements in this document.

Metmar Limited Integrated Annual Report 20152

OUR

MATERIAL ISSUES FOR 2016

Returning to profitabilityDuring the 2014 financial year Metmar refocused on core trading activities and investments as its strategy for returning to profitability. Our efforts proved insufficient to return the Group to profitability in the period under review, primarily due to further declines in commodity prices and the onset of a liquidity crunch as South African banks and trade finance facility providers became more risk-averse. Some South African institutions were exposed to major commodities fraud in China and the insolvency of a local metals trader that occurred during the financial year under review.

These events were outside our control, while our manganese tolling operation at Kalagadi was severely hampered by inefficient transport logistics and the poor quality of the early batches of sinter produced. Combined with falling manganese prices, this key

project was unprofitable for most of the financial year.

The manganese tolling logistics and quality issues were resolved at the end of the 2015 financial year. Metmar and Kalagadi signed a 10-year offtake agreement to uptake 40% of all Kalagadi production, which means the Kalagadi investment will commence generating steady revenue two years behind schedule.

The Sefateng Chrome operation received its mining right in the second half of FY2015. Mining operations commenced in February 2015 and are ramping up to reach full production in the 2016 financial year. The first tonnages have already been delivered to the FPT terminal in Maputo port to be loaded into containers and shipped to the customer. For accounting purposes, only Sefateng’s and Kalagadi’s start-up costs can be reflected for this year, although these

operations should generate profitable revenue streams from 2016 onwards. The persisting difficult trading conditions and reducing trade finance facilities meant that Metmar needed a capital injection or investment from an international player with the institutional capacity and reach to remain sufficiently funded thus securing the capacity to keep trade flowing, pay suppliers on time, deliver to customers on time and equip traders to generate more trade flows until the commodities cycle inevitably turns upward.

In April 2015 Metmar signed a binding implementation agreement with Traxys, a highly reputed international commodities trader with global reach and financial capacity, to acquire 100% of issued share capital of the Company. The full implications of this corporate transaction are discussed further in this report.

• Implementing and integrating Traxys Africa (Traxys) take over deal• Financial performance, a return to profitability, and generating wealth

for shareholders• Ramp up delivery volumes in our manganese and chrome

off-take agreements• Risk and investment management• Governance, corporate responsibility and ethical behaviour.

Metmar Limited Integrated Annual Report 2015 3

CORPORATE

PROFILE AND STRUCTURE

We specialise in the international trade of ferrous and non-ferrous metals and minerals, coal/carbon, plastic raw material and chemical products, with strategic suppliers and customers. The search and identification of further trading opportunities to diversify our product range continues.

The board consists of three independent non-executive directors, two non-executive directors and three executive directors. Details of individual directors and their abbreviated résumés appear on pages 23 and 24.

Our operating structure consists of two closely integrated business units: • Metmar Trading • Metmar Investments.

With nearly three decades of experience behind it and built on the supply of commodities, Metmar Trading Proprietary Limited is the core of the Group’s business, generating nearly 98% of Group revenue. The Trading business unit employs 34 personnel from a Group total of 103. Responsibility for the day-to-day trading activities of Metmar Trading is distributed between two of the Group’s Trading

executive directors, based on their commodity and geographic experience.

Metmar Investments and Resources Proprietary Limited manages our longer-term approach to securing the supply of commodities. Investment and funding agreements are concluded with the specific intention of establishing long-term supply arrangements for commodities that can feed into our Trading business. Investments are not speculative in nature and are based on sound investment criteria and due diligence. Our portfolio of investments is managed by a senior executive.

Metmar is an established commodities trading business based in South Africa. Listed on the Johannesburg Stock Exchange (JSE), we operate on six continents and in 44 countries through a network of agents and associates. At 28 February 2015, our market capitalisation approximated R217 million.

Metmar Limited Group structure

Note: The above Group structure excludes investments held-for-sale and dormant companies

• Subsidiaries of the holding Company and fellow subsidiaries • Listed core financial assets • Unlisted core financial assets • Core investments in associate companies

Arengo 203 Proprietary

Limited

(66,7%)

Metmar TradingProprietary Limited

(100%)

Eastern Belt Chrome Mines

Proprietary Limited

(100%)

Metmar Mauritius Limited – Mauritius

(100%)

Other non-coreinvestments

Alphamin Resources Corporation

(5 million shares)


(5 million shares)

Ultimate holding company and JSE-listed entity

Metmar Investments

and Resources Proprietary Limited

(100%) (100%)

Bolepu Holdings Proprietary

Limited

(49,9%)

Sefateng Chrome Mine Proprietary

Limited

(40%)

Steelpoort Chrome Mines Proprietary

Limited

(51%)

FPT Mineral Terminal Limitada -

Mozambique

(26%)


(5 million shares)

Kalahari Resources

Proprietary Limited

(11,6%)

Kalagadi Manganese

Proprietary Limited

(40%)


CORPORATE

PROFILE AND STRUCTURE continued

Corporate developments after year endDuring the period under review, Metmar faced considerable difficulty in raising trade finance due to the growing scarcity of liquidity in the market for commodity transactions. As a result, we sought out an international partner with the resources that Metmar requires to continue trading profitably. On 30 April 2015, Metmar signed a scheme of arrangement for Traxys to acquire all Metmar Limited shares. Once all due processes are completed, Metmar’s corporate structure will inevitably be amended to merge with Traxys. The Traxys binding offer requires the approval of Metmar Limited’s shareholders; therefore, a special general meeting of shareholders is planned for early July 2015. The normal regulatory compliance process is running in parallel and expected to conclude in September 2015, after which the Metmar Group should be 100% owned by Traxys.

The benefits of a Traxys takeover of Metmar will be to: • increase the funding pool and reduce cost

of funding through economies of scale; • enhance Metmar’s trade financing through

access to committed and uncommitted facilities in several major currencies;

• improve diversification and access to international markets;

• facilitate access to private equity funding for developing and operating core investments;

• increase the pool of trading and management skills; and

• facilitate the consolidation of resources and synergistic benefits.

Milestones achieved to date in the Traxys transactionDeteriorating trading conditions and a clearly nervous banking fraternity raised the possibility of a liquidity crunch, which prompted management to proactively request the board to approve a decision to recapitalise Metmar through an equity injection, or by partnering with a reputable international player that has access to a reserve of trade finance facilities.The board decided that an equity injection would severely dilute shareholder interests, given the mediocre share price against previous levels. At the same time executive management commenced renegotiating existing facilities and seeking out new trade finance facilities, while also evaluating a shortlist of potential suitors to invest in

Metmar. By the end of September 2014, the list of potential investors had narrowed down to Traxys. Metmar issued the first of three cautionary notices and intense negotiations commenced late October 2014.

A due diligence exercise began in November 2014 and culminated in Traxys presenting a non-binding offer in early December 2015, subject to certain pre-conditions being met. Fulfilling these pre-conditions proved time-consuming and at the same time an independent expert was commissioned to evaluate whether the Traxys offer is fair and reasonable. The consultant’s report was positive, therefore the final binding offer was signed and a firm intention announced to the market on 30 April 2015. In essence, the agreement is for Traxys to acquire 100% of Metmar’s shares listed on the JSE through a scheme of arrangement in terms of section 114 of the Companies Act 71 of 2008, as amended, subject to approval by Metmar Limited shareholders and regulatory compliance. These processes are expected to conclude by September 2015.

About Traxys Servicing raw materials industriesFrom exploration to mining to marketing, Traxys offers financial and logistical solutions for the ferro alloy, metal, mineral, mining and energy industries.

Traxys is a privately owned corporation with Carlyle Group as a major shareholder. Its head office is in New York. The company employs over 300 people and generates an annual turnover of more than US$6 billion. It conducts business through 20 offices strategically located around the world. In South Africa the corporation operates through a wholly owned subsidiary, Traxys Africa Proprietary Limited, which is based in Rosebank, Johannesburg. Traxys has a clear mandate and the balance sheet to develop the corporation’s African interests.

Traxys focuses primarily on the marketing and sourcing of base metals and concentrates, metals, industrial minerals and chemicals, as well as materials for steel mills and foundries. In so doing, Traxys can manage all parts of the supply chain, from producer to consumer, anywhere in the world.By acquiring Metmar, Traxys will significantly grow its presence in the African commodity market.

Traxys managementThe executive management and traders of Traxys are internationally reputed for their

deep insight and experience in global commodities.

ServicesThe marketing and trading services offered by Traxys cover virtually every point along the supply chain: • Off-take agreements • Market support • Agencies • Logistics • Hedging • Credit risk coverage and insurance • Trade finance.

ProductsTraxys provides seamless solutions for supplying and accessing raw materials such as: • Base metals and concentrates • Materials for steel mills and foundries • Minor and alloying metals • Industrials minerals • Energy uranium • Rare earths.

InvestmentsTraxys Projects, L.P. offers a full range of financial and commercial solutions for mining and other production projects anywhere in the world. These include any combination of: • equity finance; • debt finance; • buyouts; and • marketing and trading.


KEY PERFORMANCE

INDICATORS

2015 2014 2013 2012 2011

Volumes Kt 841,4 731,4 696,4 898,9 594,0

Revenue Rm 1 951,3 2 097,4 1 522,2 2 644,5 2 326 8

EBITDA/(LBITDA) Rm (32,6) 40,4 (34,1) 165,2 112,2

(Loss)/earnings before taxation Rm (142,2) (165,7) (146,6) 108,1 70,1

Basic (loss)/earnings per share Cents (54,6) (60,9) (39,5) 34,5 22,2

Headline (loss)/earnings per share Cents (65,1) (17,6) (31,6) 34,1 23,1

Distribution per share Cents – – – 16,5 11,0

Net asset value per share Cents 109,9 165,5 241,1 277,5 261,8

Net tangible asset value per share Cents 91,8 147,4 184,9 210,8 235,2

Current ratio 0,9 1,0 1,2 1,2 1,5

Quick ratio 0,4 0,5 0,6 0,9 1,1

Debt:equity ratio % 76:24 72:28 61:39 65:35 55:45

Share price – opening Cents 155 180 249 420 360

Share price – closing Cents 81 155 180 249 420

Market capitalisation Rm 216,5 414,3 481,2 578,8 976,3

Number of shares in issue m 267,3 267,3 267,3 232,4 232,4

Volumes (kt)

11 12 13 14 15

594,

0

898,

9

696,

4

731,

4

841,

4

Revenue (Rm)

11 12 13 14 15

2 32

6,8

2 64

4,5

1 52

2,2

2 09

7,4

1 95

1,3

Distribution (cents per share)

11 12 13 14 15

11,0

16,5 0 0 0

Headline (loss)/earningsper share (cents)

23,1

34,1

(31,

6)

(17,

6)

(65,

1)

11Pro�t

12Pro�t

13Loss

14Loss

15Loss

Basic (loss)/earningsper share (cents)

11Pro�t

12Pro�t

13Loss

14Loss

15Loss

22,2

34,5

(39,

5)

(60,

9)

(54,

6)


Dear Metmar stakeholder

Perfect storm

For the last few years your Company has been in a “perfect storm” as a series of unrelated negative events and circumstances have converged upon it. This storm has worsened throughout the past year and the Company has reported a loss after tax of R147 million. While much of this storm relates to external factors beyond the immediate control of your Company, its ability to withstand the storm’s forces have been weakened by the impact that past strategic decisions have had on its balance sheet.

Curate’s egg – the good, bad and uglyIn many ways your Company is like the proverbial curate’s egg. The “good” core Trading component of Metmar has remained strong and, despite the impact of lower commodity prices and volumes, this division continues to generate positive earnings. The balance of the business, its strategic investments in the “bad” – have proved a costly departure from the Company’s core trading competence, and resultant losses and impairments have weakened Metmar at the very time in the commodities cycle when it can afford it least. Finally, Metmar support for the manganese tolling – the “ugly” – has been beset by a litany of costly delays, technical challenges and price weakness.

Core Trading contributed R74,5 million (2014: 145,5 million) towards the Group margin but incurred a small loss of R16,4 million (2014: profit of R50,3 million) after associated finance costs, overheads and taxation. The major factors leading to reduced earnings were lower commodity prices and margins, a deteriorating product mix, increased unrealised foreign exchange differences, and limits to available trade finance. New and prospective trading opportunities and relationships, however, were established during the year, especially in chrome, coal and consumer soft commodities, which augurs well for the future. In addition, the long-awaited manganese sinter trading should finally commence in FY2016.

By contrast, the strategic investments made by your Company in years past have generally failed to meet expectations. While the strategic objective of making selected investments to generate future locked-in trading rights is clear and self-evident, the skills required to execute this strategy successfully were foreign to Metmar’s core capability. This weakness was exacerbated by the strategy being pursued at the top of the super-cycle bull market, with attendant pricing pressures and irrational exuberance. For the last two years your Company has sought to tidy up and end this misadventure. The cost of these failed strategic investments in impairments and realised losses in the last three years alone amount to R232 million.

Finally, the Kalagadi Manganese project has stretched Metmar’s funding capacity to an extent neither envisaged nor planned. For myriad reasons the Kalagadi project, incorporating the mining operation, the sinter plant and associated logistical solutions, has been delayed, with production and rail of

sinter manganese scheduled to start in a meaningful manner only in mid-2015.

In 2012 Metmar procured manganese and coke fines on risk to facilitate the early commissioning of the Kalagadi sinter plant via a toll treatment arrangement. The inordinate period of project delays has regretfully seen significant declines in manganese ore and sinter prices, which have materially reduced the envisaged toll- treatment margins. Although it is still likely that the manganese and coal fines stocks will be profitably converted over the next 12 months, the R360 million trade finance supporting this project has critically weakened the Group’s remaining facilities. While direct finance holding costs of this support amount to R36 million for this financial year alone, total indirect costs have also been material.

Long-term benefits It must be clearly stated, however, that Metmar’s management, in securing long-term off-take trading arrangements for both Kalagadi and Sefateng Chrome, has delivered major shareholder value to Metmar. The future value that these contracts represent far exceeds the impairments and costs associated with the entire strategic investments programme and the costs of supporting the Kalagadi project commissioning.

Regrettably, our current accounting system conventions do not recognise the medium- term value thus created, while financiers and analysts are presently focused only on the associated short-term costs.

Trade financeAccess to trade finance is the very lifeblood of any commodity trading organisation. During the past year, the availability of trade finance tightened both locally and internationally.

In addition to R360 million being committed to financing manganese and coke fines for Kalagadi, Metmar faced the withdrawal by certain of its trade finance providers from the South African market, while other traditional providers lowered their trade finance facilities. This was mainly triggered by events unrelated to Metmar.

In essence, Metmar’s core commodity trading activities were curtailed by the restricted availability of trade finance and this situation is unlikely to improve in the near future.

CHAIRMAN’S

MESSAGE

7Metmar Limited Integrated Annual Report 2015

The Traxys offerOn 30 April 2015, Metmar announced that Traxys, an international trading organisation, had issued a firm but conditional intent to make an offer for all Metmar shares at R1,10 per share by scheme of arrangement. The offer of R1,10 represents a significant premium to the traded market price of your Company, both at the time of the announcement and relative to the time when cautionary announcements in this regard were first published.

A circular to shareholders explaining this offer will be mailed on or about 1 June 2015 and a general meeting of shareholders to vote thereon is scheduled for 2 July 2015.

This Metmar announcement also noted that the independent board convened under the Companies Act 71 of 2008 and comprising Rob Still, Dawn Earp and Luigi Matteucci, has considered the terms of the proposed transaction and the report of the independent expert and has concluded that the proposed transaction is fair and reasonable. The Metmar announcement also reported that shareholders holding over 52% of the total issued shares of the Company, which included all executive management, had irrevocably accepted the Traxys offer.

Given that the fundamental core trading business of Metmar remains solid and that the investment in the Kalagadi Manganese and Sefateng Chrome projects are poised to begin bearing fruit, one may be tempted to reject the Traxys offer as being inadequate. This would be understandable. Indeed, a materially higher consideration had been agreed with Traxys late in 2014, subject only to the signing of the Kalagadi off-take agreement. Regrettably, the inordinate five- month delay in finalising this agreement was characterised by a further significant deterioration in manganese prices and tightening of trade finance facilities.

This unavailability of adequate trade finance has tipped the balance decisively towards accepting the Traxys offer. It has been suggested that a recapitalisation of the Metmar balance sheet via a rights offer may have been preferable to the Traxys offer. Your board has concluded that even with a strengthened balance sheet and improving core trading, the ongoing appetite and requisite skills of the local banking system to supply trade finance have materially reduced, making viable commodity trading impossible. Finally, certain major Metmar shareholders are now deploying their considerable skills and capital in offshore ventures and may not have been prepared to back this rights issue.

AppreciationAs a consequence of his deteriorating health, Greg Lotis resigned as an executive director of Metmar with effect from 28 February 2015. A founding director and key executive, Greg is missed. We all wish Greg well in tackling and overcoming his health challenges.

As a new director of Metmar since May 2014 and, given the difficult circumstances that the company has endured, I am extremely appreciative of the advice, counsel and assistance offered by my fellow board members.

Finally, a word about your chief executive David Ellwood and all Metmar staff. I have learnt to appreciate their entrepreneurial flair and deep expertise in commodity trading. They have all gone the extra mile and more to overcome the “perfect storm” your Company has endured in the past three years. Now, they may well have succeeded.

Rob StillChairman29 May 2015

15%increase in traded volume.


HOW WE CREATE VALUE

– OUR BUSINESS MODEL

VISION To be a leading international commodity trading business, supported by finance, logistics and strategic investments to secure future marketing opportunities.

MISSION To create sustainable long-term stakeholder value through operational excellence and the efficient management of our comprehensive international trading business, while unlocking the value of strategic sources and investments.

INPUTS• Financial capital

• Human capital

• Social capital

• Intellectual capital

• Relationships

Other stakeholder

COMMODITIES

Insuranceproviders

Warehouse

Banks

Off-take agreements Legislation

Supply agreements

Commodityprices

Shareholderinvestors Customers

GovernmentHuman capital

Trade finance

providers

Logisticsproviders

Investments

Other stakeholders


VALUES

OUTCOMES• Wealth

• Inputs into industry economy

• Satisfied customers

• Shareholder returns

• Employee returns

• Governance

OUTPUTS• Relationships

• Tonnage sold

• Return on investment

• Compliance

Integrity

Metmar conducts business in a principled and truthful manner.

Relationships

Metmar is a relationship-driven business steered by a long standing, global network of contacts which is sustained by respect for diversity and trusted partnership.

Reliability

Metmar values reliable supplier relations and offers consistent supply chain solutions to clients, ensuring on-time delivery within cost parameters.

Efficiency

Metmar believes in the meticulous and efficient execution of work when dealing with customers, clients, suppliers, shareholders and all relevant stakeholders.

Adding value

Metmar does not simply buy and sell commodities, but adds value in the supply chain through administration excellence, risk mitigation, quality service delivery and business continuity.

Balance

Metmar follows an approachable leadership style.

COMPOSITION OF TRADING

COMMODITIES CONTRIBUTION

Trading As one of only two diversified trading companies listed in Africa, Metmar has built unrivalled continental expertise and has become a gateway for imports and exports, funding, and logistics solutions.

The Group is structured to enable our committed and experienced team of traders to focus on and deliver in the trading side of the business. Commodity trading is a cyclical business; therefore, positioning Metmar for the next global economic upswing is a strategic imperative.

HOW WE CREATE VALUE

– OUR BUSINESS MODEL continued


COMPOSITION OFREVENUE (%)

50%3%22%25%

2015

• Imports• Local sales• Exports •Merchanting

CONTRIBUTION TO REVENUE (%)

2015

• FMCG• Plastics and rubber• Non-ferrous alloys

• Ferroalloys• Chemicals • Carbons

0%1%7%7%

37%48%

COMPOSITION OF TRADING PROFIT (%)

49%0%14%37%

2015

• Exports• Local sales

• Imports • Merchanting

CONTRIBUTION TO PROFIT (%)

0%

1%7%7%37%48%

2015

• FMCG• Plastics and rubber• Non-ferrous alloys

• Ferroalloys• Chemicals • Carbons

0%1%7%27%

16%49%

Our core investments


Kalahari Resources

EBCM: Steelpoort

Chrome Mine

Alphamin Resources

FPT Mineral

Terminal EBCM: Sefateng

Chrome Mine

11,6% interest – holds 40% of the shares in a recently established manganese project in the Northern Cape province of South Africa

51% interest –

a brownfields

chrome project in

the Limpopo

province of

South Africa

3% effective interest – a greenfields tin project in the Democratic Republic of Congo

26% interest – a containerisation facility at the Maputo port in Mozambique

20% effective interest – a producing chrome mine in the Limpopo province of South Africa


Our business practices are based on the utmost transparency and we subscribe to ethical business conduct in all countries we do business in.

More information regarding our management of risk and our identified residual risks is provided in the governance section from page 31. The report of the audit and risk committee appears on pages 46 and 47. Details of our financial risk management are provided in note 47 to the annual financial statements.

and logistics providers enable us to exceed these expectations.

Metmar opened a dedicated office in Shanghai, China, in January 2014. Operating through our own office rather than agents has proven invaluable in getting closer to customers and monitoring deliveries into China.

Managing risk Central to our strategy and objectives is our ability to identify and manage risk. The nature of our business carries inherent risk. Our ability to manage diverse risks is founded on: • robust risk management practices that are

consistently applied and monitored, and regularly measured against global best practice; and

• a thorough understanding of different geographic and commodity markets.

Primary Group risks are commodity prices, foreign exchange, credit and liquidity risks. Each country and/or commodity presents its own specific risks.

Metmar manages country risks through continual environmental scanning to stay abreast of issues that may impact on countries in which we trade and invest. We invest only in conjunction with other reputable shareholders, and build strong relationships with the relevant government authorities.

HOW WE CREATE VALUE

– OUR BUSINESS MODEL continued

Investments Recognising that the security of the supply of underlying commodities is central to profitable trading, Metmar Investments and Resources was established to house investments and to secure marketing opportunities for key commodities.

As trading becomes ever more competitive, increasing our mining and metals investment portfolio will feed growth in our trading volumes.

Managing our supply chain and exceeding customer expectations We strive to build long-term relationships with all of our suppliers and continually look for opportunities to establish strategic partnerships with suppliers by providing trade finance and, where appropriate, equity funding. These partnerships are designed to provide the underlying project with access to funding and a marketing channel for its products.

The strategy will be stepped up once the implementation agreement with Traxys has been fully approved.

As important as supply is, customers are the reason for our existence. Customers expect us to continue to deliver unparalleled and cost-efficient service through logistics chains that can be lengthy and complex. Once again, sound relationships with customers


VALUE

ADDED STATEMENT

28 February2015

Rm

28 February2014

Rm

Revenue from all operations 1 951 2 097Paid to suppliers for material and services (1 947) (2 003)

Value added from Trading 4 94Income from investments* 8 1

Total value created 12 95

Value distributionEmployees 57 57Capital providers 75 64Finance costs 75 64Dividends to equity holders of the company – –Payments to minorities – –Central and local government 8 20Company taxation 7 19Secondary tax on companies – –Skills Development Levy 1 1Corporate social investment (CSI)** – –Reinvested in the Company to maintain and develop operations (128) (46)Depreciation and amortisation 22 161Loss attributable – Equity holders of the Company (146) (163)– Other outside shareholders (1) (20)Deferred taxation (3) (24)

Total value distributed 12 95

Value added statistics Number of employees*** 103 108Revenue per employee (Rand) 18,9 19,4Value created per employee (Rand) 0,1 0,8Corporate social investment – percentage of profit after tax – –

* Income from investments includes interest received and share of associate profit or loss** CSI includes social upliftment projects*** Average number of permanent Group employees throughout the year


CORPORATE




KEY PERFORMANCE

INDICATORS

15%increase in traded volumes

TRAXYS AFRICA – A CONDITIONAL OFFER TO ACQUIRE

100% SHARE CAPITAL OF METMAR LIMITED THROUGH A

SCHEME OF ARRANGEMENT SUBJECT TO SHAREHOLDER

APPROVAL AND REGULATORY COMPLIANCE APPROVALS.

CORPORATE

DEVELOPMENTS



Strategic priorities • To develop a strong international

resources trading business • To secure meaningful investments in

support of cost-effective long-term off-take agreements.

Business objectives:Metmar aims to create wealth for shareholders and other stakeholders through trading opportunities and investments.Our business objectives are to: • create value and wealth for shareholders,

employees and other stakeholders through profitable commodity trading;

• generate revenue through securing the supply and subsequent trading of ores, alloys, carbons, plastics, and chemicals;

• identify sound investments and projects within our risk parameters (these should preferably be long-term engagements);

• build a sustainable business based on strict risk management;

• continually identify new sources of supply; • invest wisely in commodity projects and

be a respected finance and logistics facilitator;

• secure flexible finance facilities to create competitive advantages;

• gain sustainable long-term off-takes through longstanding relationships and investments; and

• provide an efficient service to both consumers and producers of various commodities, at any point in the supply chain.

Our allocation of resources

Key inputs to our business model are the following four capitals or resources: financial, intellectual, human and relationship capital. The remaining two capitals identified by the IIRC are natural and manufactured, neither of which represents a significant input into our business model.

Financial capitalOur financial capital, represented by shareholder funds and trade finance facilities, is applied through both the Investment and Trading business units. Control of financial capital rests with the executive committee and the chief financial officer. The audit and risk committee, per its terms of reference, may also “seek any information regarding the financial affairs of the Company”. Financial capital is applied in the business model to facilitate profitable business through: • acquiring commodities and products for

resale; • raising debtors in the process of selling

commodities and products; • meeting day-to-day operating

expenditure; • facilitating and advancing trade finance

and/or credit to suppliers of commodities or products; and

• investing in strategic investments to secure profitable supplies of commodities and products.

Intellectual and human capitalMetmar’s intellectual capital is held within the organisation through its employees’ (human capital) extensive knowledge of commodities and geographies. This knowledge has been built up over three decades and represents a significant institutional resource.We obtain additional knowledge and experience through a defined recruitment process and by paying above market-related remuneration. Retaining, developing and growing intellectual capital is a priority, with training provided to continually develop employees in their roles at Metmar. The combination of fixed and variable pay is an important element in retaining employees. Details of the basis of remuneration are provided in the report of the remuneration and nominations committee on pages 39 and 40.

Human capital is applied in areas of the business where it is most suited and promotes value creation. This is not to say that employees are pigeonholed. Rather, employees often rotate between various positions to broaden their general knowledge of commodities and investments and ultimately increase their value to Metmar.

Relationship capitalWe value our relationships with all our stakeholders. Details of our approach to stakeholder engagement are provided in the section on corporate responsibility and ethical supply chains commencing on page 28. Our long-term relationships with suppliers and customers lead to value creation. Maintaining these relationships is the responsibility of everyone at Metmar – through exceeding expectations and engaging with suppliers and customers to identify and respond to their unique needs.

In many instances these relationships are formalised through various off-take, supply and marketing contracts.

The proposed scheme of arrangement with Traxys will vastly broaden Metmar’s relationships with stakeholders, albeit indirectly in many instances. Metmar will merge with the current Traxys to engage with the Group’s African stakeholders.

OUR STRATEGY


Chief executive

officer’s report

Dear Shareholders

This year was characterised by a sequence of events in the commodity trading market that placed most commodity traders under pressure and resulted in well-known competitors being liquidated.

Commodity prices continued to slide, with iron ore falling by more than 50% and manganese close to 50% in less than a year. Metmar did benefit to an extent from the Rand’s weakening against the US Dollar, but not nearly enough to compensate for the weaker prices. I personally believe that the commodity cycle is close to the bottom, but anticipate minimal improvement before Q4 2015. Nevertheless, general consumption is ticking up again in the USA and Europe, with commodities requiring real consumption to have an impact on the current oversupplied scenario.

Metmar’s biggest challenge this year was the availability of trade finance lines, as was experienced by many of the smaller trading operations. Some local and international financial institutions are re-evaluating commodity trade finance as an asset class, particularly after the massive aluminium fraud uncovered last year in China. It emerges that there are similar scandals emerging in other commodities linked to China. While the authorities are investigating, the banks are looking to distance themselves from increased exposure. The financing of our existing business has been a major challenge over the past eight months.

It became clear to management a year ago that if we were to compete on an international basis we would need to align ourselves with an international platform with access to international trade lines to provide the firepower we would need to compete with the majors. After extended months this has resulted in the firm intention offer from Traxys on 30 April 2015.

The Kalagadi Manganese projectAfter a delayed start, the Kalagadi sinter plant commenced production in February 2014 and during the period was able to produce 240 000 tonnes of manganese sinter. This material was predominantly exported to China and South East Asia. We experienced excessive fines upon discharge of the material and a decision was taken to stop production until the results of extensive tests were final. We have all the technical solutions and are ready to produce as soon as the rail has been commissioned. Unfortunately, the price of manganese has weakened over the period, as have iron ore prices. At the current price levels achieved, transporting the sinter with a road component no longer makes commercial sense, hence the requirement for the rail commissioning, which is almost complete.

Metmar has signed a 10-year off-take agreement with Kalagadi for a minimum of 40% of its annual production, which means that, after some technical challenges over the past two years, we should be able to rely on a consistent and profitable stream of manganese sinter for export.

Sefateng and FPT start moving chrome exportsMetmar had also invested into the Sefateng Chrome Mine near Steelpoort, which commenced production and delivered its first consignment of 15 000 tonnes in March 2015. We expect production to ramp up to 40 000 tonnes a month. FPT Minerals Terminal in Maputo, Mozambique, in which Metmar holds a 26% share, is now operational, with the first chrome exports sent through this facility. When the nearby Steelpoort Chrome Mine (51% owned by Metmar) has completed licensing requirements, its export tonnages will also be loaded via the Maputo facilities.

The delays in getting Sefateng through the regulatory processes required longer-than- anticipated funding commitments, without the revenue stream associated with production.

The Traxys agreementAfter 30 years as an independent commodity trader, we came to realise that without access to significantly increased trade lines it would be impossible for us to organically expand our business into a global player.

As a result, Metmar entered discussions with Traxys, a private equity owned trading house based in the USA with US$6 billion in annual sales. Through major shareholders such as the Carlyle Group and Moore Capital Management, Traxys has access to committed credit lines and trades through


20 offices around the world, focusing primarily on the sourcing and marketing of base metals and concentrates, minor and alloying metals, industrial minerals and chemicals. Our respective management teams are similarly conservative; Traxys operates through a dynamic group of individuals and the synergies between the two companies is potentially enormous.

The two companies are a natural fit, with Metmar able to provide additional, experienced African feet on the ground, with local trading experience. Traxys provides the leverage and support for Metmar to enter into opportunities that we have identified but lack the financial backing to exploit.

At the time of writing this report, the agreement between Metmar and Traxys is undergoing the process of being ratified by shareholders and regulators.

A last wordThe last three years have been difficult for Metmar and our loyal shareholders that backed us through the tough times. Close to three decades of consistent profits were curtailed by the sharpest commodity downturn of recent times and an unpredictable series of events that have impaired asset values or delayed the anticipated revenue streams from the same investments.

Nevertheless, we have worked with the hand we have been dealt and, by tying in with Traxys, have arrived at what I believe is the most equitable solution for all at this time.To all our shareholders, colleagues and employees, I thank you for many years spent in your company. Your contribution has been pivotal in Metmar’s long history, and in building our reputation for excellent customer service under the trying circumstances of the past few years.

David EllwoodChief executive officer29 May 2015

Metmar Limited Integrated Annual Report 201520 Metmar Limited Integrated Annual Report 2015

OPERATING AND

FINANCIAL REPORT

Key focus area results Nearly 98% of the Group’s revenue is generated by the Trading division. The following table provides an analysis of the Group’s profit or loss after tax by business unit for the current and prior year:

Divisional analysis2015

R million2014

R million%

change

Core Trading activities (18) 50 (132)Toll conversion (38) (16) (145)Discontinued operations – (22) 100Investments (81) (140) 42Intercompany and eliminations 12 (55) 122

Group loss after tax (147) (183) 20

Despite a 15% increase in sales volume, the Group’s gross revenue decreased by 7% due to declining commodity prices and changes in the product mix. The 9% weakening in the value of the Rand compared to the US Dollar was not significant enough to offset the general reduction in commodity prices.

The average Rand/tonne commodity price of our basket decreased 25% during the year. If the impact of the exchange rate rise was excluded, the price per tonne decreased by 34%. Gross margin declined from 6,4% in FY2014 to 4,3% in FY2015. This 33% decline in margin was mainly due to the fall of commodity prices quoted in US Dollars, while most of the Rand-based cost of sales remained constant. This is especially true for manganese sinter, for which the input costs were already incurred, yet inland logistics costs did not decline in line with the reducing manganese price index.

While cost control remained tight during the year, the 6,7% increase in operating expenses follows the unplanned and uncontrollable costs of care and maintenance in the FPT Minerals Terminal. These were due to delays in chrome deliveries and higher unrealised losses from

foreign exchange differences as a result of reduced US Dollar denominated debtors. Creditors remaining showed an insignificant decrease. Significant overheads such as staff costs remained constant, meaning that on a real cost basis these decreased year on year.

Financing costs increased significantly due to the lengthy delays in liquidating manganese sinter-related input materials. This resulted from the temporary shutdown of the sinter plant due to low manganese indexed prices and costly road-based inland logistics, meaning that sinter would be sold at a loss.

TradingThe Trading business unit performed below expectations in FY2015 due to lower volumes, combined with depressed commodity prices, negatively impacting both revenue and margins. While on the face of it total volumes are 15% higher than last year, this result includes the 186 811 tonnes of manganese sinter shipped in the early part of the year. When setting the marginally profitable sinter tonnage aside, volumes in FY2015 declined by 10,5% compared with FY2014.

This like-on-like decline in volumes resulted from reduced supply due to low commodity prices and decreased demand as Chinese growth slowed, all exacerbated by the banks reducing their trade finance facilities. As per the adjacent diagram, trading volumes fell in all product groups apart from carbon and manganese.

Internally, the intense focus on finalising the Traxys agreement prompted experienced traders to depart, which contributed to the lower performance. The fall of over 50% in the indexed iron ore price caused iron ore producers to temporarily halt their operations. The volume of manganese delivered reduced following supplier restrictions with regard to markets that we can participate in. On the other hand, the manganese sinter from the toll agreement is expected to fill this unplanned decrease and potentially more than double the manganese product group trades going forward. Carbon volumes increased on the back of the off-take agreements signed during the current year. These agreements are expected to more than double volumes in the 2016 financial year.

Overall, Metmar Trading increased its total traded volumes, despite the challenging resources cycle over the past five years, due to its ability to diversify into a variety of commodities, confirming its positive reputation in the market and its ability to exploit opportunities.

Trading

Non-ferrous

Carbon

Chrome

Manganese

Iron ore

Magnetite

Other

3%5%

41%13%

12%16%

24%23%

14%19%

2%5%

4%5%

PERCENTAGE CONTRIBUTION TO VOLUMES 2015 (OUTER) VS 2014 (INNER)

l Non-ferrousl Carbonl Chromel Manganesel Iron orel Magnetitel Other

3%

6%

15%

19%

27%

21%

6%6%

41%

12%

24%

14%

4%


• Kalahari Resources (11,66% interest)

Metmar signed a 10-year manganese take-or-pay off-take agreement with Kalagadi Manganese, an investment 40% owned by Kalahari Resources. The off-take tonnage signed for is 40% of Kalagadi’s production, although Metmar is in discussion with the other Kalagadi shareholders to increase off-take tonnage. Pricing is formula- based and driven by the manganese indexed price obtainable from the metal bulletin. Metmar will receive a commission calculated from the indexed price. The pricing formula will be reviewed and updated annually to ensure that it is practical and beneficial to both parties.

Mining is expected to commence in the second half of the 2015 calendar year, pending the second payment of a

US$100 million senior loan by the African Development Bank. The mine is expected to ramp up to full production of 2,4 million tonnes a year in 2018. The sinter plant commenced producing saleable product during FY2015 and produced 236 000 tonnes of sinter over a four-month period. Production was halted due to the poor quality of material produced, the rail siding not being completed, and falling manganese prices. These issues have been resolved to enable the sinter plant to start production in June 2015, although profit margins will remain low until manganese prices rise.

• Sefateng Chrome Mine (effective 20% interest)

The 30-year mining right was awarded to Sefateng Chrome Mine (Sefateng) in July 2015, followed by the signing of the off-take agreement with Metmar

Trading (a subsidiary of the Group) to purchase all opencast produced material. Up to 100 000 tonnes per annum can be produced without upgrading the current mining infrastructure. Opencast mining will continue between three and five years, after which the mine will go underground.

Sefateng is already working on various models to extend the mining plan for the underground operations. Discussions are underway with Sefateng to reach an agreement on its underground production.

Following the mining right award, Sefateng commenced mining activities in January 2015 and produced 10 000 tonnes in February 2015, followed by 15 000 tonnes in March 2015 and 20 000 tonnes in April 2015.

Overall the Trading division incurred a loss before tax of R66,0 million (2014: profit before tax of R50,5 million).

TollingDuring the year 237 000 tonnes of sinter were produced through the sinter toll agreement. Of this amount 198 000 tonnes were loaded out of plant to be transported to customers and 186 000 tonnes were sold to customers during the FY2015 period.

The majority of the product was exported to China, with the remainder sold locally and to Europe. Sinter sales generated R350,5 million turnover and 1% gross profit due to decreased manganese indexed prices and expensive inland logistics. The prices paid in China were further discounted due to the fines percentage being significantly higher than the customer’s specifications.

This excess fines problem was identified and resolved before the end of FY2015. The inland logistics model we used handled the material excessively, causing it to break up. The initial manganese ore being processed did produce a high-strength sinter, but would generate excessive fines within six weeks. Going forward, handling of the material will be reduced significantly due to a switch to rail inland transport from the completed rail siding at Kalagadi Manganese.

The manganese pot test conducted at three independent locations and completed in January 2015 provided conclusive proof that the existing manganese ore needs to be blended with material from other already identified sources to significantly improve material strength. Most importantly, the pot test proved that the Kalagadi Manganese mine ore is far superior to other sources,

which proves that once the Kalagadi mine starts producing we are unlikely to have sinter quality problems.

Overall, the toll agreement returned a loss of R38 million due to a low manganese indexed price and high finance charges. The sinter plant delays, resolution of fines generation issues and completion of the rail siding have resulted in sinter raw materials, which are financed through trade finance facilities, not liquidating as intended.

InvestmentsWhile the Group’s focus was on trading activities our investments provided some notable successes in the financial year. Following the aggressive write-down of investments in 2014, there were no further write-downs in FY2015. We were able to write up the Sefateng Chrome investment, as explained further in this commentary.

Investment nameValuation R million Description Basis

Write up/(down)R million

Alphamin Resources 20,63 Greenfields project in the DRC Mark to market (17,00)

FPT Minerals 5,41Containerisation facility, Maputo port,

Mozambique Cost (1,89)

Kalahari Resources 192,90Brownfield manganese project in the Northern

Cape province, RSA DCF –Sefateng Chrome Mine 56,20 Mining project in the Limpopo province, RSA DCF 27,40Sefateng Chrome Mine – intangibles 5,92 Mining project in the Limpopo province, RSA DCF –

Steelpoort Chrome Mine 32,97Greenfields chrome project in the Limpopo

province, RSA DCF –Pering Base Metals 1,00 Brownfield zinc and lead project in RSA Liquidation value –SA Metals Equity 8,00 Greenfields pig iron project in RSA Purchase cost –

323,03 8,51


The award of the mining right enabled Metmar to reverse the investment impairment recorded in the 2014 financial year.

• Steelpoort Chrome Mine (effective 51% interest)

The Group holds a 51% interest in the smaller Steelpoort Chrome Mine nearby. This opencast operation has not commenced operations as it has not yet received its water use licence, which is expected in nine to 12 months. The mine has all other regulatory approvals and appropriate infrastructure, therefore can start mining relatively quickly.

• FPT Minerals (effective 26% interest)

FPT Minerals (FPT) owns and operates a specialist minerals containerisation facility in the vicinity of Maputo. The terminal received its first chrome parcel in March 2015 following a year without operational demand. The terminal has a capacity of 30 000 tonnes, which can increase through infrastructure upgrades.

• Alphamin Resources (effective 3% interest)

The project owns the Bisie high-grade tin project in the Democratic Republic of the Congo (DRC). Exploration activities are returning encouraging results and the maiden resource estimate is being used to establish a preliminary economic assessment. This should be released during 2015.

• Non-core investments The list of non-core investments has

been reduced to Pering Base Metals

(Pering) and SA Metals Equity. The list of potential investors for Pering has been narrowed down to one candidate with the resources to fund a restart of production. SA Metals Equity has completed a bankable feasibility study and is now in final negotiations on where to locate the project and its feedstock.

The Afarak investment and the property, plant and equipment reported as non-core in FY2014 were disposed of in FY2015. The Tufflex Plastics (Tufflex) investment was restructured and new 50% shareholders were brought in to manage the business. Tufflex has returned to profits, therefore Metmar is retaining and supporting its investment.

Other non-core investments such Metmar Speciality Metals and Clay Fusion technologies will be made dormant once the inter-Group loans are cleared.

Metmar did not made any further investments in FY2015. In future, identified opportunities will be funded through Traxys once the deal is unconditional, or will be considered only if they are fully fundable on their own merits.

Balance sheetThe net asset value per share (NAV) reduced by 34% to 109,8 cents (2014: 165,5 cents) in FY2015. The attributable loss of R143 million significantly contributed to the decline in NAV per share,

as well as the 22% reduction in total assets to R1,22 billion (2014: R1,57 billion) and 18% reduction in total liabilities to R926 million (2014: R1,13 billion). Debt in the business further increased, as evidenced by the increase in the debt to equity ratio to 76:24 (2014: 72:28).

The net current liability position of R68 million was caused mainly by the delayed sale of the trade-financed sinter materials. These are expected to be consumed in FY2016 with the sinter plant back in production and the commencement of logistics via the new rail siding at Kalagadi Manganese. The reduction in current assets is indicative of the low commodity prices, given that the volumes for the year are 15% higher than last year, as well as the high stock volumes of non-performing sinter input materials.

The cash generated from operations remained positive at R19,3 million (2014: R41,9 million), while net cash from operating activities was negative, increasing to R48,7 million (2014: R13,6 million).

DividendsThe policy of the Company is to declare 50% of earnings after tax as a dividend. As the Company made a loss after tax in this period, the board has not declared a dividend for the 2015 financial year.

Sizwe NkosiChief financial officer29 May 2015

OPERATING AND

FINANCIAL REPORT continued


OUR

LEADERSHIP

Board of directors

1. Rob Still (60)

BCom (Hons), CTA, CA(SA)Independent non-executive directorAppointed 1 May 2014Rob has vast experience in mining, specialising in mining finance. He started his career as a chartered accountant, becoming a partner of Ernst & Whinney before leaving in 1986 to co-found Rhombus Exploration Limited. Since then, he has been involved in the mining industry worldwide and has held executive and non-executive directorships in companies listed in South Africa, Australia, Canada and the United Kingdom. He has participated in the evaluation and development of several new mining projects and companies including Rhovan, Ticor Titanium, Pangea GoldFields Limited, Southern Mining Corporation Limited (Corridor Sands), Metorex Limited and Zimbabwe Platinum Mines Limited. Rob is currently chairman of Pangea Exploration Proprietary Limited which company provides information and analysis to private equity finance within Africa and a partner in Denham Capital Partners, global leaders in private equity for energy, oil and gas and mining.

In addition to the chairmanship, Rob holds the following positions at Metmar: • Member of the audit and risk committee • Chairman of the nominations committee • A member of the remuneration committee

2. Luigi Matteucci (61)

BCom (Wits), CTA (Wits), CA (SA)Non-executive directorAppointed 2 April 2008Luigi served his articles with PricewaterhouseCoopers and qualified as a chartered accountant in 1980. In 1981 he joined Highveld Steel and Vanadium Corporation Limited becoming an executive director and general manager: finance before leaving them in October 2007.

Luigi holds the following positions at Metmar: • Chairman of the audit and risk committee • Chairman of the remuneration committee • Member of the nominations committee

4. Thomas Ignatius Borman (48)

BCom (Hons)Non-executive directorAppointed 12 March 2013Tom graduated with a BCom Honours degree from the University of Pretoria in 1989 and qualified as a practising chartered accountant in 1992, having served his articles with PriceWaterhouseCoopers. Since leaving the auditing profession, Tom has accumulated vast experience in the mining and minerals industry. He served in excess of 11 years in the employ of the BHP Billiton group in various senior managerial capacities including that of chief financial officer of an Australian listed mining company. Tom has also occupied leading positions in strategy and business development, and served as project manager for the merger integration transaction between BHP Limited and Billiton Limited. Tom has extensive global business experience, having worked in several countries including South Africa, Kenya, the Netherlands, the United Kingdom and Australia. Tom resigned his position at BHP Billiton Limited in March 2006 in order to join Warrior Coal Investments Proprietary Limited, in which capacity he was part of the executive team which established and consolidated the portfolio of assets now constituting the Optimum Group of companies. Optimum was listed on the JSE on March 2010 and was bought by Glencore in March 2012. Tom is still an active director of Beacon Rock Corporate Services, a company which provides advisory services to the mining industry, as well as in Albion Holdings, a property trading and investment company. Tom also holds directorships in Univeg South Africa and Mouton Citrus.

3. David John Ellwood (56)

Executive directorChief executive officerAppointed 8 May 2006After five years with the international trading group Asoma, David was one of the founding shareholders of Metmar Trading in 1985. David has been an active part of the Metmar management since inception. He has also been a part of the effective trading team handling a variety of bulk commodities. David has more than 30 years’ experience in the international trading arena and is committed to the future management of Metmar.


OUR

LEADERSHIP continued

Board of directors continued

8. Petrus (Piet) Philip Boshoff (55)

BCom (Stellenbosch), MBL (UNISA), Honours in International Marketing (UNISA) Executive directorAppointed 8 May 2006Piet started his career in banking with the Absa banking group in 1984 and joined the Samancor Group in 1985, handling the sales and marketing of the full range of Samancor’s chrome and manganese ores and alloys. In 1995 he joined Samtem, a joint venture marketing company between Samancor and Metmar Trading, marketing the full range of Samancor’s ores and alloys into the Middle East. During 2002 he joined the Metmar team and is trading in a variety of bulk ferro alloys and carbon products. He is also responsible for various projects in South Africa, Zimbabwe and abroad.

7. Dawn Earp (53)

BCom (Wits), BAcc (Wits), CA(SA)Independent non-executive directorAppointed 1 October 2011Dawn graduated from the University of the Witwatersrand in 1986 and completed her articles with BDO. She joined Anglo American in 1989 and moved through the ranks to the position of vice president of financial accounting and was transferred to AngloGold Ashanti in 2000 where she was later appointed executive officer: finance.

Dawn was appointed as the finance director of Impala Platinum Limited in March 2007. In February 2011 she was appointed as the finance director of Rand Refinery. She holds directorships of various companies in South Africa, Asia, Hong Kong and India and is a member of the Financial Reporting Standards Council.

Dawn is: • a member of the audit and risk committee • a member of the remuneration and nominations committee • chairperson of the social, ethics and transformation committee • chairperson of the remuneration committee

6. Sizwe Mfundo Sydney Nkosi (39)

BCom (Hons) (University of Natal), CA(SA), MBA (University of Cape Town)Executive directorChief financial officerAppointed 1 October 2011Sizwe’s beginnings are in Madadeni where he completed his matric in Bethamoya Secondary School. He secured his CTA in the University of Natal (Durban), completed his articles with Ernst & Young and qualified as a chartered accountant in 2001. Sizwe also completed an MBA at the University of Cape Town’s Graduate School of Business. His 12 years’ experience after completion of articles includes mining, investment banking and manufacturing. Having been a bursary student of Anglo American, he worked for De Beers, Foskor, Sekoko Resources (in joint venture with Firestone Energy Limited), Investec Bank Limited and Nampak Limited. He held both an executive and a non-executive director position at Firestone Energy Limited.

5. Daphne Mashile-Nkosi (56)

Small Business Management Diploma (Wits Business School)Non-executive director Appointed 8 May 2006Daphne is deeply committed to the development of women, the elderly and rural communities, and is a gender activist and proud patriot.

Daphne is the chairperson of Kalahari Resource Manganese Mining Company Proprietary Limited, executive chairperson of Kalagadi Manganese Proprietary Limited, a trustee and chairperson of the Women’s Development Bank Trust, chairperson of Women’s Development Bank Investment Holdings Proprietary Limited and was nominated by the Women’s Development Bank to study development economics in Nagoya, Japan in 1993. She is also a director of various Eyesiswe group companies. She is the chairperson of the Eyesiswe transformation committee and acts as an ongoing catalyst to the empowerment and transformation process within the mining sector.

Daphne represents shareholder interests as a director of various companies, including Kalahari Resources, Kalagadi Manganese and Metmar. She is the chairperson of Bakhazi-Banalima Proprietary Limited. She is also a trustee of the FirstRand Empowerment Trust and directly involved in the successful structuring of the Cell C third network operator in South Africa. She has a strong development background and activism in gender issues bringing focus to the activities of the business on issues that improve the quality of life of poor communities and the nurturing of women entrepreneurs and business leaders.

Daphne is a member of the remuneration and nominations committee.


Management Committee (MANCO)

Company secretary Metmar Limited

Anlia Swart

The management committee meets regularly and assists the Group chief executive officer in managing the Group’s businesses when the board is not in session. This assistance is subject to the statutory limits and the board’s limitation on delegation of authority to the executive directors. The management committee assists the chief executive officer to guide and control the overall direction of the business of the Group and acts as a medium of communication and coordination between business units, Group companies and the board.

Chairman of MANCO and chief financial officer

Sizwe Nkosi

Chief executive officer Metmar Limited

David Ellwood

Chief financial officer Metmar Trading Proprietary Limited

Molleen de Wet

Executive director

Piet Boshoff


CORPORATE


26 Metmar Limited Integrated Annual Report 2015


KEY PERFORMANCE

INDICATORS

SEFATENG MINING OPERATIONS COMMENCES FOLLOWING

AWARD OF 30 YEAR MINING RIGHT

10 YEAR MANGANESE OFF-TAKE AGREEMENT IS SIGNED LIKELY

TO DELIVER ABOUT 800 000 TONNES OF MANGANESE PER

YEAR ONCE MINE IS FULLY OPERATIONAL

CORE INVESTMENT Delivers growth



CORPORATE

RESPONSIBILITY AND ETHICAL SUPPLY CHAIN

Our sustainability context and commitmentWe acknowledge that we are part of a world where organisations must rethink their approach to operating and reporting.

Businesses are expected to be more and more aware of their impacts on society and the environment. Reporting on our use and application of various capitals is a key element of this integrated annual report.

We consider the measurement and management of key sustainability issues as a business principle. However, we also acknowledge that our shareholders and employees are critical stakeholders in our business and their wellbeing and security are our primary concern.

As we source materials from across the globe, the integrity of our supply chain is of obvious concern. Our objective is to be transparent in both the purchasing and sale of materials, while complying with strict international standards and regulations. We have prided ourselves in this aspect of our business for years, and continue to be committed to ethical supply chains.

We participate in both industry and specific resource organisations and their certification programmes designed to encourage supply-chain transparency.

We acknowledge that there is considerable potential for negative impacts on society and the environment within our supply chain.

We further acknowledge that climate change and resulting severe weather events could impact on supplies of commodities.

Increases in road logistics costs due to higher oil prices could impact our financial

We acknowledge that we are part of society and our business decisions have unavoidable social consequences. Our objective is to be transparent in both the purchase and sale of materials and strict adherence to regulations.

performance. However, a drive to improve rail infrastructure, which is not only more environmentally friendly but also cheaper and more efficient, could lead to greater volumes being traded. However, we also affirm that in the majority of cases we are unable to influence either the suppliers or customers in how they extract, manufacture or apply the commodities in which we trade. Our head office footprint both socially and environmentally is extremely small but is managed to the best of our ability.

Elements of Metmar’s current operations provide environmentally friendly services. For example, Tufflex processes industrial plastic by-products or waste from Sasol into plastic pellets. Traditionally Metmar Industrial has been involved in various projects – cleaning up dump and mill sites of industrial producers and Metmar Speciality Metals has focused on the recovery and rehabilitation of slag dumps.

We acknowledge that we are unable to control the management and activities of our investee companies and associates. We do, however, endeavour to influence and guide them in governance, social and environmental matters.

We take a keen interest in management’s approach to the sustainability issues, and reporting thereon, of our strategic investments. In particular, compliance with the laws of the land is non-negotiable. We have a strict anti-corruption policy and promote socially responsible and environmentally sound operations.

Having our roots in South Africa, we are also aware of past injustices and the need for every individual and organisation to address these inequalities of the past in order to grow a just and sustainable South African

society. As such, we voluntarily participate in obtaining B-BBEE accreditation. Also, in terms of South African legislation (Companies Act 71 of 2008), the Group established a social, ethics and transformation committee in FY2014.

Assessing our sustainability approachWhile we do not have significant direct environmental and social impacts, we assess our approach to sustainability and our performance using internationally accepted guidelines and principles. Information regarding our economic impacts appears throughout this report; in particular, a value added statement is provided on page 13.

The Group’s social, ethics and transformation committee conducted a review of the disclosures and sustainability aspects contained in the GRI’s G4 Sustainability Reporting Guidelines and the extent of our application of the 10 Principles of the UN Global Compact. These reviews have informed the content of this report.We also present the Group’s values and governance model.

Stakeholders – engagement and their issuesMetmar has clustered its most material stakeholders into six strategic stakeholder groups. During the 2014 financial year progress was made in establishing formal engagement forums for each stakeholder grouping. In the adjacent table, we describe how we engage with these stakeholders and record the issues raised or their potential concerns.


Stakeholder Engagement approach Issues/concerns

Investors Shareholders are communicated with directly through the preparation of integrated annual reports and annual financial statements. Shareholders are invited to attend the annual general meeting (AGM) and can access information regarding the Group directly from the company secretary.The website provides shareholders, analysts and the general public with a wealth of information, including SENS announcements, press releases and historical financial information and reports.

Financial performanceManagement and financial capacityLegislative and related regulatory complianceResponsible corporate citizenship

Providers of finance (banks) Relationships with our bankers are subject to formal written agreements, including repayment terms, interest rates and key covenants.Relationships are most often through the banks’ client service representatives.

Trade finance facilities

Employees We engage with employees through a variety of mechanisms: formally through the human resources function and performance appraisals; and informally through functional committee meetings, results feedback sessions, one on one meetings with supervisors and in-house updates via email.

Job securityRemunerationCareer progression

Customers Communication with customers is ongoing and constant. Formal sale agreements are entered into. More informal communication concerning planning, scheduling and logistics is generally performed telephonically. An annual supplier and customer event is held at our head office.

Product qualityProduct availabilityOn time deliveryPriceCommunication

Suppliers Communication with suppliers is ongoing and constant. Formal agreements both in terms of marketing future off-take and once off purchase transactions are entered into. More informal communication concerning planning, scheduling and logistics is generally performed telephonically. An annual supplier and customer event is held at our offices.

Timely paymentFuture off-takeCreditworthiness

Governments and regulators Primary engagement is through formal channels of communication. Generally such communication includes the submission of returns and responses to various departments.More informal engagement occurs with representatives of Metmar as and when deemed necessary.

Compliance with legislation and associated regulations

Communities (impacted by strategic investments)

We encourage the management of our investments to establish formal engagement channels to meet regularly and frequently throughout the year.Local community organisations and NGOs are able to participate.

Job creationSkills developmentEnvironmental impact

Metmar Limited Integrated Annual Report 201530 Metmar Limited Integrated Annual Report 2015

CORPORATE

RESPONSIBILITY AND ETHICAL SUPPLY CHAIN continued

TransformationPrior to 2014, Metmar was non-compliant with the B-BBEE Codes of Good Practice – a reflection of the challenges faced by the industry with regard to procurement, skills shortages and investment targets.

Striving to achieve a recognised B-BBEE contributor status is voluntary. The Employment Equity Act 55 of 1998 and the Skills Development Act 97 of 1998 are promulgated legislation that Metmar is fully compliant with. Employment equity is a priority for Metmar and this is reflected in our recruitment practices that have allowed for an improvement in employee demographics. These practices promote the recruitment of historically disadvantaged individuals, with women as a key priority.

We have undertaken a full analysis of our B-BBEE position in terms of the seven generic elements, and obtained ratings for Metmar Trading Proprietary Limited and four selected elements of the QSE codes for the holding company, Metmar Limited. The three measured entities achieved the following B-BBEE status levels: • Metmar Limited: Level 4, Scorecard Code

QSE. • Metmar Trading Proprietary Limited: Level

6, Scorecard Code – Generic. • Arengo 203 Proprietary Limited: Level 5,

Scorecard – Property Owners QSE.

Until 14 November 2014, Metmar Limited was a QSE Level 4 Contributor, Metmar Trading a Generic Level 6 contributor (potentially a Level 4 contributor) and Metmar Industrial Proprietary Limited (Metmar Industrial) a QSE Level 4 contributor.

Due to management’s decision to discontinue non-profitable companies in the Group, Metmar Industrial was not measured in the current year.

The lack of significant black ownership within the Group suppressed these ratings, although both entities scored well with regard to preferential procurement, enterprise development and socio-economic development.

Copies of these certificates are available on our website.

A rating was not obtained for the investment holding company, Metmar Investments and Resources Proprietary Limited, as there is

currently little trading activity in this entity, although we encourage historically disadvantaged South African (HDSA) ownership in our South African investments.

The promulgation of the revised codes, which became effective in March 2015, will have a significant impact on the B-BBEE status of both the holding company and Metmar Trading Proprietary Limited. Black equity ownership has a greater weighting in the revised codes and the number of elements have been reduced from seven to five. In addition to the direct impact of these revised codes, the indirect effect, through the anticipated lower contributor levels of our suppliers, will result in both Metmar Limited and Metmar Trading Proprietary Limited becoming non-compliant, as they were prior to 2014.

Although opportunities to attract HDSA investors are few and far between, we will continue to review our performance against other elements of the Codes of Good Practice in order to maximise our performance in contributing to the economic transformation of South Africa.

Employment equity (EE)Metmar’s annual EE plan was approved by Metmar’s equity consultative forum in October 2014.

Historically, Metmar has always had a low staff turnover, which contributes and creates a barrier to setting targets and goals to enable improvement in the overall demographic profile of the organisation.

Unless the Company experiences growth exceeding expectations, it is unlikely that new vacancies (other than traders) will become available. As traders are the main income-generators of the business, Metmar constantly approaches and considers potential candidates. As commodity trading is unique by its nature, suitable candidates matching the desired demographic criteria are rare.

The chairperson of the social, ethics and transformation committee has requested that the job description, reasons for resignations and the appointment of white males be included in future committee reports.

Enterprise development Due to the limitation of time and opportunity, the supply by MBD Trading of consumption- based items to property owning Group

company Arengo 203, has been deferred to the forthcoming year.

Ethical and transparent supply chainsBoth our trading and investment processes require that we consider aspects beyond the simple financial facets of a trade or investment. This approach is a key element in managing Metmar’s reputational risk. All potential investments undergo an extensive due diligence process, ensuring that the underlying business is compliant with South African legislation, including mining rights. The challenges faced by the Group over the past two years have seen us channel our efforts and funds into ensuring the business remains on a sound footing, rather than investing in socio-economic and enterprise development.

The chairperson of the social, ethics and transformation committee has required confirmation from Tufflex shareholders and FPT Mineral Terminal (FPT) that all relevant labour practices, labour relations and union interaction regulations and requirements are being complied with.

Metmar has no input and/or influence over the daily management and meeting of regulatory requirements pertaining to Kalagadi Manganese’s child labour policies, labour relations and union interaction. However, confirmation will be sought from the company that all relevant legislation is being complied with.

We strive to increase the representation of black people at all levels, including the board.

In the coming year the social, ethics and transformation committee will consider the implications of the revised codes and the Group’s inability to achieve a level of compliance. Factors such as lost opportunities (notably greater participation in the Eskom coal trading arena) and customer demands must be weighed against the costs associated with compliance in 2015.

The Group’s total expenditure on skills development and training during the year amounted to R82 157 (2014: R854 000). 23,9% of this expenditure in 2014 was applied to black employees. On average, each Metmar employee received five hours of training during the year. This includes on-the-job training.


CORPORATE

GOVERNANCE REPORT

• JSE Listings Requirements • King III • Companies Act 71 of 2008, as amended

(the Companies Act) • Global Reporting Initiative (GRI) G4

sustainability reporting guidelines • IIRC’s International Integrated Reporting

Framework.

The board of directors endorses and accepts full responsibility for the implementation of sound principles to ensure effective governance across the Group. To ensure sustainability and success, the Company strives to be stakeholder inclusive and its approach is based on good communication and the integration of governance into every aspect of our business.

The board regulates the Group in its commitment to a transparent and high-quality governance system and continuously re-examines compliance with all relevant legislation.

Environmental issues in the Group are not material, therefore, the board has not considered it necessary to obtain independent assurance on the sustainability report.

King III applicationMetmar has adopted the recommendations as contained in the King III and used the Institute of Directors of Southern Africa’s (IoDSA) governance assessment instrument (GAI) during the year to assess the application of King III and the levels of compliance of the Company to ensure that every principle and practice as recommended have been considered. The full King III application table is available on our website: www.metmar.co.za.

Metmar has reviewed and applied these principles and is satisfied that the Company complied with the recommendations set out in King III.

Composition of the boardMetmar has a unitary board and its role is fundamental in ensuring that management preserves the long-term interests of shareholders and other stakeholders.

As an accountable corporate citizen, Metmar continues to demonstrate professional conduct and integrity in their business dealings and is highly committed to corporate governance and takes guidance from the:

On 1 May 2014, Mr RG Still was appointed as an independent non-executive director and as chairman of the board. Adv KD Moroka resigned as an independent non-executive director on 22 October 2014 and Mr GP Lotis resigned as an executive director on 28 February 2015.

As at 29 May 2015, the board comprised three independent non-executive directors, two non-executive directors and three executive directors. A short curriculum vitae of each of the directors appears on pages 23 and 24 of this integrated annual report.

In accordance with the Company’s memorandum of incorporation, at least one third of the non-executive directors must retire at the Company’s annual general meeting (AGM) and may be re-elected, provided they are eligible. The board, through its remuneration and nominations committee, recommends eligibility of such directors at the AGM scheduled to take place on 2 July 2015. In accordance with the Company’s memorandum of incorporation, Messrs Still and Borman retire by rotation and, being eligible, offer themselves for re-election.

The current members of the board are: • Rob Still (chairman and independent

non-executive director) • Luigi Matteucci (independent

non-executive director) • Dawn Earp (independent non-executive

director) • Daphne Mashile-Nkosi (non-executive

director) • Tom Borman (non-executive director) • David Ellwood (executive director) • Piet Boshoff (executive director) • Sizwe Nkosi (executive director).

The board is satisfied that the balance of skills, knowledge and experience on the board, as well as its size and diversity renders it effective. The role of the board is regulated in a formal board charter and in addition to the charter a formal delegation of authority is in place which defines the powers and authority of management.

Chairman and chief executive officerThe chairman sets the ethical tone for the board and the Company and provides overall leadership to the board without limiting the principle of collective responsibility for board decisions, while at the same time being aware of the individual duties of board members.

The roles of the chairman and the chief executive officer are separate with a clear division of responsibilities at board level such that a balance of power and authority is ensured, and that no one individual has unfettered powers of decision-making.

Responsibilities of the board of directorsThe board of directors is ultimately responsible for creating value and monitoring the relationships between the board and management and between the company and its stakeholders. The board of directors is also responsible for approving Metmar’s financial objectives and long-term and short-terms strategies. Members of the board of directors are nominated and appointed by the Company’s shareholders at each AGM. The Company’s board of directors also has the power to appoint additional directors subject to confirmation of such an appointment at the AGM.

Directors who are members of the management committee (the committee) are involved in the day-to-day business activities of the Group and are responsible for ensuring that decisions taken by the management committee and, as approved by the board of directors, are implemented in accordance with the mandate given by the board and the management committee.

All directors are given access to the information needed to carry out their duties and responsibilities fully and effectively. Furthermore, all directors are entitled to seek independent professional advice regarding the affairs of the Group, at the Company’s expense.


Attendance at general meetingsBoard members are encouraged to attend shareholders’ meetings of the Company in order to have interaction with stakeholders. Attendance by the board committee chairmen is mandatory at all annual general meetings.

Statement of directors’ responsibilitiesA statement of the directors’ responsibilities is given on page IFC of this integrated annual report.

Board education and inductionBoard education is ongoing. The board as a whole is kept abreast of all applicable legislation and regulations, changes to rules, standards and codes and is regularly updated and informed of relevant developments which could have an impact on the Group and its operations. Induction includes a briefing on fiduciary and statutory duties and responsibilities in terms of the Companies Act and the JSE Listings Requirements. Board members may consult with independent professionals at the Company’s expense should they wish so.

Board meetingsBoard meetings are held quarterly with ad hoc meetings called to consider specific issues should the need arise. The quorum for board meetings is five directors, two of whom must be non-executive directors. Board members are required to declare any material interests involving the Group which may pose potential conflicts of interests and any other directorships regularly.

Attendance at board meetings during the year ended 28 February 2015

Name of director29 April

201412 August

201427 October

201424 February

2015

R Still (chairman)* ✓ ✓ ✓

L Matteucci** ✓ ✓ ✓ ✓

D Earp ✓ ✓ ✓ ✓

DJ Ellwood ✓ ✓ ✓ ✓

PP Boshoff ✓ ✓ ✓ ✓

GP Lotis ✓ ✓ ✓ ✓

D Mashile-Nkosi # ✓ ✓ x

SMS Nkosi ✓ ✓ ✓ ✓

TI Borman # # ✓ ✓

Adv KD Moroka*** ✓ x ✓ Present x Apologies # Attended via teleconference *** Appointed as chairman of the board on 1 May 2014 *** Acting chairman of the board from 7 August 2013 to 29 April 2014 *** Resigned on 22 October 2014

Board and committee evaluationsThe evaluation of the performance of the board of directors is an integral part of the Company’s commitment to adopt best corporate governance practices. Board members performed a comprehensive performance evaluation of the board and its sub-committees with no significant problems identified during the process.

Board committeesThe board has three committees to assist in the discharge of its responsibilities and obligations. The board has documented and approved formal terms of reference which delegate specific responsibilities to these committees. These terms of reference are reviewed and where necessary updated on a yearly basis. Members of these sub-committees are suitably qualified and experienced to meaningfully contribute to the workings of the sub-committees on which they serve.

Audit and risk committeeThe audit and risk committee (the committee) is chaired by Luigi Matteucci and other members include Dawn Earp and Rob Still. Adv Moroka resigned on 22 October 2014 and was replaced by Rob Still.

The committee meets quarterly and all three directors are independent non-executives. Executive directors and the independent external and internal auditors attend committee meetings by invitation.

Both the external and internal auditors have unrestricted access to the chairman, who is an independent non-executive director.

In terms of the new Companies Act, and the recommendations in King III, shareholders must elect the members of the audit and risk committee at each annual general meeting therefore, the appointment of Luigi Matteucci, Dawn Earp and Rob Still as members of the committee is subject to shareholder approval at the annual general meeting on 2 July 2015.

CORPORATE

GOVERNANCE continued


Remuneration and nominations committeeThe members of the combined remuneration and nominations committee (REMCO) are Luigi Matteucci, Rob Still, Daphne Mashile-Nkosi and Dawn Earp.

Following Rob Still’s appointment as the chairman of the board, Luigi Matteucci* reverted back to his role as chairman of the remuneration committee with effect from 21 October 2014. Dawn Earp stepped down from her role as acting chairperson of the remuneration committee and remained a member of the REMCO.

Metmar has a combined remuneration and nominations committee and in terms of the JSE Listings Requirements the chairman of the board must chair the nominations committee but may not chair the remunerations committee.

Consequently Rob Still** was appointed as the chairman of the nominations committee on 21 October 2014.

The revised terms of reference of the committee, to incorporate the requirements of the JSE in terms of the chairmanship of the committee, was approved by the board.

The committee meets twice a year and comprises three independent non-executive directors and one non-executive director. The chief executive officer and other executive directors attend the meetings by invitation but do not participate in discussions where it involves decisions regarding their own performance and remuneration.

The committee reviews and approves the remuneration and terms of employment of executive directors and senior Group management.

The committee also makes recommendations to the board for the nomination of additional directors, both executive and independent non-executive.

Directors’ fees are paid to non-executive directors and independent non-executive directors on a quarterly basis.

The fee structure is split by way of a 50% retainer and a 50% attendance fee as recommended by King III and supplementary fees are paid to committee members. These fees are approved by shareholders at the Company’s annual general meeting by way of a special resolution.

The REMCO in conjunction with the board agreed not to grant any bonuses or increases to the two founding members of the Group and non-executive directors for the year commencing 1 March 2015.

The remuneration paid to both executive and non-executive directors is given in the report on directors’ emoluments set out on page 95 of this integrated annual report.

Attendance at REMCO during the year ended 28 February 2015

Committee members21 October

2014

L Matteucci (chairman – remuneration committee)* ✓

R Still (chairperson – nominations committee)** ✓#

D Earp ✓

D Mashile-Nkosi ✓#

✓ Present x Apologies# Attended meeting via teleconference

Please refer to the committee’s report on pages 39 to 40.

Social, ethics and transformation committeeThe social, ethics and transformation committee comprises one independent non-executive director, one executive director and a director of Metmar Trading (a subsidiary of Metmar Limited).

The terms of reference of the committee corresponds substantially with those as provided for in the Companies Act and reports to the board and shareholders on matters within its mandate.

Please refer to the committee’s report on page 41 for details of members’ attendance at meetings during the year.

Management committeeThe management committee meets regularly and assists the Group chief executive officer in managing the Group’s businesses when the board is not in session. This assistance is subject to the statutory limits and the board’s limitation on delegation of authority to the executive directors. The management committee assists the chief executive officer to guide and control the overall direction of the business of the Group and acts as a medium of communication and coordination between business units, Group companies and the board.

Attendance at audit and risk committee meetings during the year ended 28 February 2015

Committee members1 April

201424 April

201428 April

201429 April

20145 August

201421 October

201417 February

2015

L Matteucci (chairperson) ✓ ✓ ✓ ✓ ✓ ✓ ✓

D Earp* ✓ ✓ ✓ ✓ ✓ ✓ ✓

Adv Moroka** ✓ ✓ ✓ ✓ x

R Still*** ✓

✓ Present x Apologies * Acting chairperson from 23 October 2013 to 29 April 2014 ** Resigned 22 October 2014*** Appointed as a member with effect from 17 February 2015


CORPORATE

GOVERNANCE continued

internal audit was appropriately dealt with for the period under review.

Legal proceedingsFrom time to time, the Company is involved in legal proceedings arising in the ordinary course of business, certain of which are also covered by insurance. These matters are subject to risks and uncertainties that cannot be reliably predicted. The Company believes that the current pending legal proceedings are not likely to have any material adverse effect.

Information technology governanceMetmar regards the integrity of its computer systems as critical to the success of its business and has therefore implemented an IT Policy across the Group to ensure all aspects of the systems are fully protected. Although the board is responsible for ensuring the integrity of data, adequate secure systems and business continuity, IT is overseen by the management and audit and risk committees. The board is of the opinion that the systems of internal control over information technology are adequate and effective and are not aware of any material breakdown in the functioning of the systems during the year.

Stakeholder relationsEffective and ongoing communication with stakeholders is a fundamental responsibility of Metmar to create shareholder value. Metmar communicates regularly with shareholders and other stakeholders regarding its financial and operational performance and strategy. Metmar meets with interested institutional and private investors on a regular basis, and participates in conferences and road shows throughout South Africa. Shareholders are encouraged to attend the annual general meeting where interaction is welcomed. All presentations and announcements are available on the website.

Code of EthicsThe directors, management and employees are required to observe the highest ethical standards ensuring that business practices are conducted in a manner which, in all reasonable circumstances, is beyond reproach. The aforementioned principles are embodied in a formal Code of Ethics to provide a clear guide as to the expected behaviour of all employees. The Company and Group are committed to providing equal opportunities for all its employees regardless of their origin or gender.

The members of the committee as at 28 February 2015 are:

• Mr SMS Nkosi Chairman, chief financial officer – Metmar Limited • Mr DJ Ellwood Chief executive officer – Metmar Limited • Mr PP Boshoff Chief executive officer – Metmar Investments and Resources

Proprietary Limited • Mrs MF de Wet Chief financial officer – Metmar Trading Proprietary Limited • Mrs A Swart Company secretary – Metmar Limited

subsidiaries have implemented recognised systems of internal control which are designed to detect and minimise the risk of error or loss and material misstatement. These systems provide reasonable assurance regarding compliance with statutory laws and regulations; the maintenance of proper accounting records; the preparation of the financial statements and the safeguarding of assets.

There are inherent limitations to the effectiveness of any systems of internal control and therefore they are designed to manage rather than eliminate all risks of failure.

Nothing has come to the attention of the board or to the internal and external auditors to indicate that there has been a material breakdown in the functioning of the internal systems of control during the year.

Risk managementThe board, assisted by the audit and risk committee, is responsible for risk management and ensuring that appropriate risk management processes are in place. This encompasses identifying, assessing, managing and monitoring all types of possible risk facing the Group. Executive management have identified and assessed the major risks facing the Group and have compiled a register of these risks which is regularly reviewed by the audit and risk committee and confirmed and adopted by the board. Independent risk assessments are conducted and rated on an annual basis.

Internal auditFormal reviews and evaluations of the design, adequacy and effectiveness of the internal controls and risk management systems of the Company are consistently conducted by internal audit, which is outsourced to BDO, in order to ensure that business objectives are met. These audits are conducted in accordance with the International Standards and are tabled at the audit and risk committee for discussion with management and the external auditor. Based on these reviews, the audit and risk committee is of the opinion that

Company secretaryThe company secretary is responsible for ensuring proper administration and sound corporate governance structures. All directors have unrestricted access to the advice and services of the company secretary who is a central source of guidance. The company secretary ensures compliance with applicable procedures, legislation, induction of new directors and ongoing education of directors. The company secretary is responsible for the duties as specified in section 88 of the new Companies Act 71 of 2008, as amended.

In terms of paragraph 3.84 (i) and (j) of the JSE Listings Requirements, the board has satisfied itself that: • Mrs A Swart possess the appropriate

expertise and experience required and considers her qualified to perform her duties in accordance with applicable legislation and fit and proper for the position;

• there is an arm’s-length relationship between itself and the company secretary; and

• she is not a director on the board.

Dealings in securitiesIn line with best practice and regulatory and statutory obligations, the Company has closed periods prior to the announcement of the interim or year-end results. This principle is also applied at other times whenever there is a corporate action or similar circumstances. During these periods directors, officers and employees who are likely to be in possession of price-sensitive information may not deal, either directly or indirectly, in the shares of the Company. In addition, the Group has adopted a policy requiring directors and the company secretary to obtain permission from designated individuals before trading in Metmar’s securities.

Internal control and risk managementInternal controlThe board, assisted by the audit and risk committee, is responsible for the systems of internal control. The Company and its


SUMMARY OF

KING III COMPLIANCE

2. BOARD AND DIRECTORS 2.1 The board should act as the focal point for and custodian of corporate governance

A board charter setting out the roles, responsibilities and key aspects of the board is in place. To ensure that governance

practices within the Group are monitored continually, governance reports are tabled at the board and the relevant committees.

2.2 The board should appreciate that strategy, risk, performance management and sustainability are inseparable

The board does appreciate that strategy, risk, performance management and sustainability are inseparable.

2.3 The board should provide effective leadership based on an ethical foundation

The board complies with principle 1.1.

2.4 The board should ensure that the Company is and is seen to be a responsible citizen


2.5 The board should ensure that the Company’s ethics are managed effectively


2.6 The board should ensure that the Company has an effective and independent audit committee

The board has an independent audit and risk committee and the effectiveness of the committee is assessed annually.

2.7 The board should be responsible for the governance of risk

The board is ultimately accountable for risk and, with the assistance of the risk committee, oversees and monitors risk within

the Group.

2.8 The board should be responsible for information technology governance

Refer to 5 below that deals with the governance of information technology.

2.9 The board should ensure that the Company complies with applicable laws and considers adherence to

non-binding rules, codes and standards

Refer to 6 below that deals with the compliance with laws, rules, codes and standards.

2.10 The board should ensure that there is an effective risk-based internal audit

Refer to 7 below that deals with internal audit.

2.11 The board should appreciate that stakeholders’ perceptions affect the Company’s reputation

The board prides itself on the Company’s reputation for meeting its commitments and obligations, which is the foundation of

many of its relationships with stakeholders, especially customers and suppliers.

2.12 The board should ensure the integrity of the Company’s integrated report

Refer to 9 below that deals with integrated reporting and disclosure.


SUMMARY OF

KING III COMPLIANCE continued

2.13 The board should report on the effectiveness of the Company’s system of internal control

Refer to 7 and 9 below.

2.14 The board and its directors should act in the best interests of the Company

Directors are encouraged to attend any board meeting within the Group’s divisions in an effort to better understand the

business, its leadership, and their skills and competence.

Directors are required to act in the best interests of the Company by ensuring adherence to legal standards of conduct and are

permitted to take independent advice in connection with their duties following the agreed procedures, disclose real or perceived

conflicts to the board and deal with them accordingly, and to deal in securities only as required in terms of the JSE rules and

regulations.

Directors are required to confirm, at each board meeting and in writing, any changes to their interests previously disclosed to

the board.

2.15 The board should consider business rescue proceedings or other turnaround mechanisms as soon as the

Company is financially distressed as defined in the Companies Act

To ensure early detection of financial distress, the board has developed various reporting metrics that are included in the

quarterly board meetings’ papers. Included in these metrics are liquidity and solvency tests, cash flow analysis, and reports on

working capital performance.

In addition, the audit and risk committee considers the “going concern” status of the Group at half and financial year end.

2.16 The board should elect a chairman of the board who is an independent non-executive director. The CEO of the

Company should not also fulfil the role of the chairman of the board

The roles of the Metmar chairman and the chief executive are separate. Mr RG Still, an independent non-executive director, was

appointed as a director and as chairman of the board on 1 May 2014.

2.17 The board should appoint the chief executive and establish a framework for the delegation of authority

The board is responsible for the appointment of the chief executive.

A framework for the delegation of authority has been approved by the board. This framework describes specific levels of

authority and required approvals for all major decisions at both Group and business level. It clarifies which executive position,

committee or board needs to be consulted prior to taking the decision, which body makes the decision and which bodies

should thereafter be informed of the decision. This framework is evaluated and updated annually, where necessary, by

the board.

2.18 The board should comprise a balance of power, with a majority of non-executives. The majority of

non-executive directors should be independent

The board comprises eight directors:

• Three independent non-executive directors

• Two non-executive directors

• Three executive directors.

A third of the non-executive directors retire by rotation annually. If eligible, their names are included for re-election in the notice of

annual general meeting, accompanied by an appropriate curriculum vitae.


2.19 Directors should be appointed through a formal process

The remuneration and nomination committee assists the board with the assessment, recruitment and nomination of new

directors. These appointments are approved by the board and board members are invited to interview potential appointees. The

committee thoroughly assesses potential new directors before appointment.

The appointment of non-executive directors is formalised through a letter of appointment.

2.20 The induction and ongoing training and development of directors should be conducted through a formal

process

The company secretary is tasked with assisting the board with the induction of new directors and director orientation,

development and education. This induction includes receiving copies of previous board and committee meeting documents,

other information relating to the Company and meetings with key executives. They also receive information about their duties

and responsibilities, and liability as a director of a listed entity.

Directors are encouraged to remain abreast of major governance and regulatory developments.

2.21 The board should be assisted by a competent, suitably qualified and experienced company secretary

Ms A Swart is the appointed company secretary of Metmar Limited and the board has satisfied itself at the board meeting held

on 26 May 2015 that Ms Swart possesses the competence, qualifications and experience to perform her duties in accordance

with applicable legislation and is fit and proper for the position. They concluded that there is an arm’s-length relationship

between the board members and the company secretary, as required by the JSE Listings Requirements, and that she is not a

director on the board.

2.22 The evaluation of the board, its committees and the individuals should be performed every year

Board and committee assessments are conducted annually in the form of written responses and tabled at the board for review.

2.23 The board should delegate certain functions to well-structured committees but without abdicating its own

responsibilities

A number of board-appointed committees have been established to assist the board in discharging its responsibilities. Specific

responsibilities have been delegated to the board committees and they operate under written terms of reference approved by

the board. Each committee’s terms of reference is reviewed annually by the board. Board committees are free to take

independent outside professional advice as and when deemed necessary.

The board has three committees, namely, the remuneration and nomination committee, the audit and risk committee, and the

social, ethics and transformation committee.

All three committees are chaired by independent non-executive directors and the remuneration and nomination, and audit and

risk committees comprise a majority of independent non-executive directors.


SUMMARY OF

KING III COMPLIANCE continued

2.24 A governance framework should be agreed between the Group and its subsidiary boards

This principle relates to listed subsidiaries and is thus not applicable to Metmar.

2.25 Companies should remunerate directors and executives fairly and responsibly

The remuneration and nominations committee’s task is to assist the board in ensuring that remuneration of directors is fair,

responsible and market-related; that the disclosure of director’s remuneration is accurate, complete and transparent; and

general remuneration increases in the Group are appropriate.

Annually the board recommends the fees payable to the chairman and non-executive directors for approval by the shareholders.

Proposals for fees are annually prepared by management, for consideration by the remuneration and nomination committee.

2.26 Companies should disclose the remuneration of each individual director and persons falling within the definition

of prescribed officers of the Company

Remuneration of each individual director and persons falling within the definition of prescribed officers of the Company is

disclosed in the integrated report and forms part of the notes to the annual financial statements.

2.27 Shareholders should approve the Company’s remuneration policy

Metmar annually tables its remuneration policy to shareholders for a non-binding advisory vote at the annual general meeting.

This vote enables shareholders to express their views on the remuneration policies adopted and on their implementation.

This vote is of an advisory nature only and failure to pass this resolution does not have any legal consequences relating to

existing arrangements. However, the board will take the outcome of the vote into consideration when considering the

Company’s remuneration policy and when it determines the remuneration of executive directors.


REMUNERATION

AND NOMINATIONS REPORT

The main objective of the REMCO is to

ensure that all strategic remuneration

aspects of the Company are dealt with by

the committee.

The committee is confident that the key

principles of the remuneration policy, applied

during the year under review and which

will be applied in the next financial year

and beyond, continue to meet the

Company’s objectives.

The members of the committee are:

Luigi Matteucci (chairman – remuneration)

Independent non-executive director

Rob Still (chairman – nomination)

Independent non-executive director

Dawn Earp Independent non-executive director

Daphne Mashile Nkosi Non-executive director

Due to the relatively small size of the

Company, Metmar has a combined

remuneration and nominations committee.

Following the appointment of Rob Still as the

chairman of the board on 1 May 2014, he

was appointed as the chairman of the

nomination committee and Mr L Matteucci

was appointed as the chairman of

remuneration committee as required in terms

of section 3.84 of the JSE Listings

Requirements.

The combined committee meets twice a

year and comprises three independent

non-executive directors and one

The remuneration and nominations committee (REMCO/the committee) is governed by a formal terms of reference which is in line with the requirements of the Companies Act and King III and which has been approved by the board of directors. The committee has been authorised by the board of directors to investigate and undertake any activity within the terms of reference and is authorised to seek any information delegated to it under the authority of the board.

non-executive director. The chief executive

officer and other executive directors attend

the meetings by invitation but do not

participate in discussions which involve

decisions regarding their own performance

and remuneration.

Duties and responsibilities of REMCO:Members of the committee exercise their

duties and responsibilities as recommended

by King III and in accordance with the

responsibilities as contained within

its mandate.

During the period under review, the

committee considered, reviewed and

approved, inter alia, the following: • remuneration policies and procedures for

the Group; • Group benefits, annual increases and

performance incentive structures; • the remuneration and terms of

employment of executive directors and

senior Group management; • nominations, appointments and

resignations of non-executive directors; • compliance with corporate governance

and relevant legislation; and • the appropriateness of the number of

directors and the mix between executive

and non-executive directors; • the sufficiency and variety of skills and

expertise on the board in order to

successfully execute the Company’s

strategy; • the determination of prescribed officers of

the Company; and • the appropriateness of succession

planning.

Remuneration structures and processes are based on principles of: • fair, competitive and market related pay at

all levels and a mix of guaranteed pay,

short-term incentives and long-term

incentives to attract, motivate and retain

key talent; • the positive relationship between

exceptional performance and incentives; • discouraging unfair discrimination based

on race, gender, marital status, ethnic or

social origin, age, disability and religion; • in respect of founding shareholders who

are executives, alignment with

shareholders’ interests and achievement

of Group strategy; and • general inflation linked annual increases

for employees; for exceptional performers,

annual increases higher than inflation and

for below-par performers, below-inflation

increases.

Operating cultureMetmar’s operating culture is entrepreneurial

based and, as such, values and rewards

contributions by all employees from all

levels. Metmar usually attracts and recruits

staff who embrace the following values: • leadership; • interpersonal relationships; • ownership and responsibility; • can-do approach and initiative; and • integrity and honesty.

Basis of remunerationNon-executive directors and independent

non-executive directors are remunerated by

a base fee and attendance fee where they

are appointed a member of a sub-committee

of the board. Annually, the board


REMUNERATION

AND NOMINATIONS REPORT continued

recommends the fees payable to the

chairman and for approval by the

shareholders. Proposals for fees are annually

prepared by management, for consideration

by the remuneration and nomination

committee. Metmar remunerates its

executives and employees through cash and

shares (except for the two founding

shareholders). Guaranteed salaries and profit

share incentives are paid in cash except for

the portion used to purchase shares in terms

of the share incentive scheme.

REMCO, in conjunction with the board,

agreed not to grant any increases to the

non-executive directors and the two

founding members of the Group.

Metmar bonus incentive schemeAll employees and executives who qualify for

a profit share incentive as per the terms and

conditions of their employment may elect to

participate in the Metmar bonus incentive

scheme. The scheme was created as a

long-term incentive and retention reward.

Employee Profit Share Pool (EPSP)A new profit-based incentive for all

qualifying staff, based on overall company

performance, was approved by the

committee and the board on

11 February 2014. The profit share pool will

not replace Metmar’s discretionary 13th

cheque and will be based on audited

Metmar Group profit before tax (PBT). This

share pool excludes traders, and the

founding executives, chief financial officer

and chief operating officer of Metmar

Investments and Resources Proprietary

Limited, but includes all other employees

with at least one year’s service.

Nomination functionThe committee: • assists the board in ensuring that:

– the board has the appropriate

composition to execute its duties

effectively;

– directors are appointed through a

formal process;

– induction and ongoing training and

development of directors takes place;

– aspects that are considered with regard

to board composition include whether

the candidates would enable the

Company to maintain a mixture of

business skills and experience relevant

to the Company and balance the

requirements of transformation;

– continuity and succession planning are

in place; and

– there is compliance with corporate

governance requirements in respect of

matters such as the balance between

executive, non-executive and

independent non-executive directors

on the board; • provides assurance to the board that the

independent non-executive directors

offering themselves for election as

members of the Metmar audit and risk

committee, collectively:

– are independent non-executive

directors as contemplated in King III

and the JSE Listings Requirements;

– are suitably qualified and experienced

for audit committee membership; and

– have an understanding of integrated

reporting (including financial reporting),

internal financial controls, external and

internal audit; and • provides assurance that the company

possesses skills which are appropriate to

the Company’s size and circumstances,

as well as to the industry.

Board and committee assessments are

conducted annually in the form of written

responses. The chairman’s assessment is

conducted by the board.

Components of remuneration are: • directors' fees; paid to non-executive

directors on a quarterly basis; • monthly salary; paid to executives and

employees and includes guaranteed

monthly payment reviewable annually and

adjusted for inflationary increases; • 13th cheque; guaranteed annual payment

for all employees; • benefits (guaranteed monthly pay for all

employees), which include:

– provident fund; and

– annual, sick and discretionary leave.

Distribution of remuneration components

Non-executive directors Board fees and committee fees

Executives who are founding shareholders Monthly salary, 13th cheque and benefits

Executive director Monthly salary, 13th cheque, benefits, incentive reward and EPSP

Senior management Monthly salary, 13th cheque, benefits, incentive reward and EPSP

Professionally qualified, experienced

specialists and mid-management Monthly salary, 13th cheque, benefits, incentive reward and EPSP

Skilled technical and junior management Monthly salary, 13th cheque, benefits, incentive reward and EPSP

Semi-skilled Monthly salary, 13th cheque, benefits and EPSP

Unskilled Monthly salary, 13th cheque, benefits and EPSP

The remuneration paid to both executive and non-executive directors is set out in the full integrated annual report.


REPORT

OF THE SOCIAL, ETHICS AND TRANSFORMATION COMMITTEE

The committee is satisfied with the Company’s performance in each of the areas listed above.

Material sustainability issuesThe committee is responsible for annually revising or determining, in conjunction with senior management, the Group’s material sustainability issues.

Public reporting and assuranceThe committee is responsible for reviewing and approving the annual sustainability content included in the integrated annual report and/or published on the Company’s website, and determining and making recommendations on the need for external assurance of the Group’s public reporting in sustainable development performance.

The Company has consolidated both financial and non-financial reporting to present an integrated annual report for this financial year. The board has not considered it necessary to obtain independent assurance on the report. The committee considered and assessed the information as disclosed in the report and is satisfied that it is consistent and reliable.

The committee is also required to report through one of its members to the Company’s shareholders on the matters within its mandate at the Company’s annual general meeting. Shareholders will be referred to this report by the committee at the Company’s annual general meeting on 2 July 2015. Any specific questions to the committee may be sent to the company secretary prior to the meeting.

D EarpChairperson of the social, ethics and transformation committeeBryanston29 May 2015

Committee members

4 August 2014

21 October 2014

Dawn Earp (chairman) ✓ ✓

Sizwe Nkosi ✓ ✓

Molleen de Wet ✓ ✓

Adv KD Moroka* x x

✓ Present x Apologies * Appointed on 25 February 2014 and

resigned on 22 October 2014

The social, ethics and transformation committee (the committee) is a statutory committee in terms of the Companies Act 71 of 2008, as amended (the Companies Act) and consists of one independent non-executive director, one executive director and the financial director of Metmar Trading. Adv KD Moroka, who was appointed as a member of the committee on 25 February 2014 resigned from the committee on 22 October 2014. The chief executive officers of the Group’s operating companies are invited to attend all committee meetings.

During the year under review, the committee has once again reviewed and discharged its statutory duties in terms of the Companies Act as well as the additional duties assigned to it by the board in respect of the financial year ended 28 February 2015.

Role and function of the committeeThe responsibilities and functioning of the committee are governed by a formal board approved terms of reference which is reviewed by the board annually. The main objective of the committee is to assist the board in ensuring that the Group is and remains a good and responsible corporate citizen, which includes developing and reviewing the Group’s policies with regard to the commitment, governance and reporting of the Group’s sustainable development performance and making recommendations to management and/or the board in this regard.

During the financial year the committee performed the following functions: • Presented its report to the shareholders at

the August 2014 AGM • Reviewed the following policies:

– Conflicts Minerals Policy– Transformation Policy– Corporate Social Responsibility Policy

• Reviewed its terms of reference to include transformation matters and annual work plan

• Performed an evaluation of the performance of the committee. The evaluation raised no issues of concern

• Reviewed ITRY audit report.

Monitoring sustainable development performanceThe committee performs a monitoring role in respect of the sustainable development performance of the Group, having regard to relevant legislation, other legal requirements or prevailing codes of practice.

Specific areas of focus include but are not limited to the following: • Promotion of quality, prevention of unfair

discrimination, and reduction of corruption • Contribution to development of the

communities in which the company operates

• Health and public safety, including the impact the Company’s activities have on the environment

• Consumer relationships, including the Company’s advertising, public relations and compliance with consumer protection laws

• Labour and employment, including: – the Company’s standing in terms of the

International Labour Organisation Protocol on decent work and working conditions; and

– the Company’s employment relationships and its contribution toward the educational development of its employees;

• Social and economic development, including the Company’s standing in terms of the goals and purposes of:

– the ten principles set out in the United Nations Global Compact Principles (as set out in Annexure A);

– the OECD recommendations regarding corruption;

– the Employment Equity Act; – the Broad-based Black Economic

Empowerment Act; and – considered the Group’s progress in

terms of transformation; • Assist the board with the oversight of

transformation and discuss matters pertaining to transformation, social and ethics policies and practices within Metmar and its subsidiaries.


Primary audience In terms of the Framework, integrated reports are prepared primarily for the providers of financial capital to help inform their decision-making regarding financial capital allocations.

Matters not related to finance or governance also impact on the ability of Metmar to create value over the short, medium and long term. These matters, be they social or environmental, are of interest to other stakeholders and, where considered material, are addressed herein.

Preparation and presentation Metmar’s 2015 integrated annual report has been prepared for the period 1 March 2014 to 28 February 2015 and covers the activities of Metmar Limited, its subsidiaries and associate companies, its divisions and key strategic investments.

Material matters presented in this report represent those matters that the board and senior management believe are of sufficient relevance and importance that they could substantively influence the assessments of the report users with regard to the Company’s ability to create value over the short, medium and long term. Potential material matters were identified through our

risk management process, management workshops and our stakeholder engagement process, before being assessed by the board and management. Matters raised through our stakeholder engagement process are assessed in terms of the stakeholder’s influence, legitimacy and urgency.

The executive directors and senior management have been instrumental in the preparation of this report. The board has fulfilled its responsibilities in terms of the recommendations of the King Report on Governance for South Africa 2009 (King III).

Assurance Metmar obtains independent verification of its B-BBEE level. The majority of its sustainability indicators are not quantifiable and therefore cannot be assured.

The Group annual financial statements have been audited by Ernst & Young Inc.

BASIS

FOR PREPARATION AND PRESENTATION

Frameworks applied This integrated annual report has been prepared in accordance with the IIRC’s International Integrated Reporting Council’s Framework (the Framework).

The board of directors (the board) and management have considered the fundamental concepts, guiding principles and content elements recommended in the Framework and have endeavoured to apply these recommendations in the report.

This report also accords with the parameters of the Companies Act 71 of 2008, as amended, the JSE Listings Requirements and where possible, the recommendations of the King Report on Governance for South African 2009 (King III).

The Group annual financial statements were prepared in accordance with International Financial Reporting’s Standards (IFRS).

PurposeThe purpose of this report is to provide a wide range of stakeholders with a concise communication regarding our strategy, governance, performance and prospects, in the context of the external environment, and our creation of value over the short, medium and long term.


SHAREHOLDER

ANALYSIS AS AT 27 FEBRUARY 2015

Number ofshareholdings

% of total shareholdings

Shares held % held

Shareholder spread1 – 1 000 shares 474 30,48 120 860 0,051 001 – 10 000 shares 581 37,37 2 699 589 1,0110 001 – 100 000 shares 379 24,37 13 537 532 5,06100 001 – 1 000 000 shares 96 6,17 28 251 706 10,571 000 001 shares and over 25 1,61 222 696 865 83,31

Total 1 555 100,00 267 306 552 100,00

Distribution of shareholdersIndividuals 1 327 85,33 151 789 670 56,78Pension and mutual funds 53 3,41 57 409 374 21,48Companies and other corporate bodies 90 5,79 50 491 623 18,89Nominee companies and trusts 85 5,47 7 615 885 2,85

Total 1 555 100,00 267 306 552 100,00

Shareholder typeNon-public shareholders 15 0,96 95 716 635 35,81Directors of Metmar and associates 15 0,96 95 716 635 35,81Public shareholders 1 540 99,04 171 589 917 64,19

Total 1 555 100,00 267 306 552 100,00

Shares held % held

Beneficial shareholders holding 5% or moreMr Greg Lotis 28 940 057 10,83Mr Petrus Philip Boshoff 28 880 055 10,80Mr David John Ellwood 26 880 391 10,06Borman Consulting & Investments Proprietary Limited 18 438 540 6,90Zwarte Leeuw Investment Proprietary Limited 18 163 337 6,79Coronation Fund Managers 18 052 796 6,75Mr Peter Kennedy Gain 16 586 688 6,21Mr Glen Russell Forsdyke 14 769 519 5,53

Total 170 711 383 63,87

Total number of shareholdings 1 555

Total number of shares in issue 267 306 552

Share price performanceOpening price 3 March 2014 R1,55Closing price 27 February 2015 R0,81Closing high for the period R1,56Closing low for the period R0,60Number of shares in issue 267 306 552Volume traded during period 17 708 347Ratio of volume traded to shares issued (%) 6,62Rand value traded during the period R19 610 013


ANNUAL

FINANCIAL STATEMENTS


46 Report of the audit and risk committee

48 Directors’ responsibilities and approval

49 Independent auditors’ report

50 Directors’ report

54 Statements of financial position

55 Statements of comprehensive income

56 Statements of changes in equity

57 Statements of cash flows

58 Notes to the annual financial statements

Level of assuranceThese annual financial statements have been audited in compliance with the applicable requirements of the Companies Act of South Africa as amended.


REPORT

OF AUDIT AND RISK COMMITTEE

The audit and risk committee (the committee) is governed by a formal terms of reference and section 94(7)(f) of the Companies Act 71 of 2008,

as amended (the Act) and King III.

The committee is pleased to present its report for the financial year ended 28 February 2015 in line with the Companies Act.

Key duties and responsibilities of the committeeThe committee is satisfied that it has appropriately discharged its duties as set out in its terms of reference and has complied with its legal,

regulatory and other responsibilities.

During the period under review, the committee performed, inter alia, the following activities: • Examined and reviewed the interim and annual financial statements including the accompanying reports to shareholders and recommended

these to the board for final approval; • Examined and reviewed the preliminary announcement of results or any other announcements regarding the Group’s financial information to

be disclosed to the public; • Recommended to the board the appointment of the external auditors, approving their fees, terms of engagement, monitoring their

independence, objectivity and effectiveness, taking into consideration relevant professional and regulatory requirements and approving the

individual registered auditor who undertook the audit of the Group; • Reviewed the external auditor’s management letter and management’s response to issues raised by the auditors; • Set the principles for the use of external auditors for non-audit services; • Received and dealt appropriately with any concerns or complaints relating to accounting practices, internal audit, the content or auditing of

the Group’s financial statements, the internal financial controls of the Group or any related matter; • Appointed and directed the internal auditors and approved their audit plan; • Monitored management’s response to reported weaknesses identified by the internal auditor in controls and deficiencies in systems, and

monitored the effectiveness of corrective action taken; • Identified strategic risks, reviewing their impact, assessing the probability of occurrence and monitored the effectiveness of existing controls; • Performed other functions determined by the board, including the development and implementation of a policy and plan for a systematic,

disciplined approach to evaluate and improve the effectiveness of risk management, control and governance processes within the Group; • Reviewed the Group’s integrated annual report having regard to all factors that may impact on the integrity of the integrated annual report and

the disclosure of sustainability issues included therein, prior to submission and approval by the board; • Reviewed the Group’s insurance policies; • Assessed the performance of all committee members; • Monitored the risk management policy, risk tolerance levels and the effectiveness of the risk management process; • Considered the expertise and experience of the Company’s chief financial officer.

External auditThe committee has satisfied itself that the external auditor was independent as set out in section 94(8) of the Companies Act.

The independence of the external auditors is regularly reviewed as prescribed by the Independent Regulatory Board of Auditors (IRBA). The

requisite assurance was provided by the external auditor to support and demonstrate its claim to independence.

The committee, in consultation with the management committee, agreed to the budgeted audit fee, terms of engagement and the audit

approach for the 2015 financial year. All non-audit-related services are governed by an appropriate approval framework whereby the auditor is

considered for non-audit services.

Separate meetings took place with the external auditor without management being present and no matters of concern were raised.

At the annual general meeting held on 12 August 2014 Ernst & Young Inc. was appointed as the external auditors replacing Grant Thornton.

After consideration and review, the committee, in consultation with management, agreed to recommend to the board the re-appointment of

Ernst & Young Inc. as the external auditors for the 2016 financial year, for approval at the annual general meeting, with Mr IH Grobler as the

designated audit partner. The committee confirms that the external auditor and designated auditor are accredited by the JSE.


Internal auditMetmar’s internal audit function is outsourced to BDO who replaced KPMG during the 2015 financial year.

Formal reviews and evaluations of the design, adequacy and effectiveness of the internal controls and risk management systems of the Group, management processes and systems ensuring that business objectives are met are consistently conducted in accordance with the International Standards for the Professional Practice of Internal Auditing.

The internal auditor is responsible for reporting the findings of the internal audit work against the agreed internal audit plan and significant findings are tabled at the audit and risk committee and discussed with management and the external auditor and corrective action is taken to address identified internal controls deficiencies.

The internal auditor has unrestricted access to the chairman of the audit and risk committee.

Accountability and controlTo meet the Company’s responsibility to provide reliable financial information, the Company maintains financial and operational systems of internal control. These controls are designed to provide reasonable assurance that transactions are concluded in accordance with management’s authority, that the assets are adequately protected against material losses, unauthorised acquisition, use or disposal and those transactions are properly authorised and recorded.

In the first instance management monitors the operation of the internal control systems in order to determine if there are deficiencies. Corrective actions are taken to address control deficiencies as they are identified. The board of directors, operating through the audit and risk committee, oversees the financial reporting process and internal control systems.

There are inherent limitations on the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, an effective internal control system can provide only reasonable assurance with respect to financial statement preparation and the safeguarding of assets.

Based on process and assurances obtained, the committee believes that the internal financial controls were effective for the year under review.

Evaluation of the expertise and experience of chief financial officerIn terms of paragraph 3.84 (h) of the JSE Listings Requirements, the committee has satisfied itself that Mr SMS Nkosi possesses the appropriate expertise and experience required of a chief financial officer of a public listed company.

Sustainability reportingThe company has consolidated both financial and non-financial reporting to present an integrated annual report for this financial year. The board has not considered it necessary to obtain independent assurance on the report. The committee considered and assessed the information as disclosed in the report and is satisfied that it is consistent and reliable.

Going concernThe full details of conditions that could give rise to material uncertainties which may cast significant doubt about the Company’s ability to continue as a going concern are disclosed in note 49 of the annual financial statements. The committee is reasonably confident that it will successfully manage the material uncertainties that exist. As such the annual financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to fund future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

Financial statementsThe committee has reviewed the annual financial statements for the year ended 28 February 2015 and is satisfied that it complies in all material aspects with the requirements of the Act and International Financial Reporting Standards. The committee recommended approval of the annual financial statements to the board, who approved them on 26 May 2015.

On behalf of the audit and risk committee

Luigi MatteucciChairman of the audit and risk committee

28 May 2015


DIRECTORS’

RESPONSIBILITIES AND APPROVAL

CERTIFICATE

BY COMPANY SECRETARY

The directors are required by the South African Companies Act to maintain adequate accounting records and are responsible for the content and integrity of the annual financial statements and related financial information included in this report. It is their responsibility to ensure that the annual financial statements fairly present the state of affairs of the Group as at the end of the financial year and the results of its operations and cash flows for the period then ended, in conformity with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the annual financial statements.

The annual financial statements are prepared in accordance with International Financial Reporting Standards and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates.

The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Group and place considerable importance on maintaining a strong environment. To enable the directors to meet these responsibilities, the board sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring the Group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management in the Group is on identifying, assessing, managing and monitoring all known forms of risk across the Group. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints.

The directors are of the opinion, based on the information and explanations given by management, that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the annual financial statements. However, any system of internal financial control can provide only reasonable and not absolute assurance against material misstatement or loss.

The directors have reviewed the Group’s cash flow forecast for the year to 28 February 2015 and, in the light of this review and the current financial position, they are satisfied that the Group has access to adequate resources to continue in operational existence for the foreseeable future.

The board is responsible for the financial affairs of the Group.

The external auditors are responsible for reporting on whether the consolidated and separate annual financial statements are fairly presented in accordance with the applicable financial reporting framework. The annual financial statements have been audited by the Group’s external auditors and their report is presented on page 49 of the annual financial statements.

The annual financial statements set out on pages 49 to 101, which have been prepared on the going-concern basis and under the supervision of the chief financial officer, Mr SMS Nkosi CA(SA), were approved by the board on 26 May 2015 and were signed on its behalf by:

Rob Still David Ellwood Sizwe NkosiIndependent non-executive chairman Chief executive officer Chief financial officer

Bryanston28 May 2015

In terms of section 88(2)(e)(d) of the Companies Act 2008, as amended (the Act) I certify that to the best of my knowledge and belief, the Company has filed all such returns as are required of a public company in terms of the Act and that all such returns are true and correct and up to date.

Anlia SwartCompany secretary28 May 2015


INDEPENDENT AUDITORS’ REPORT

To the members of Metmar Limited and its subsidiaries

Report on the consolidated and separate financial statementsWe have audited the consolidated and separate financial statements of Metmar Limited set out on pages 54 to 101, which comprise the statements of financial position as at 28 February 2015, and the statements of comprehensive income, statements of changes in equity and statements of cash flows for the year then ended, and the notes, comprising a summary of significant accounting policies and other explanatory information.

Directors’ responsibility for the consolidated financial statementsThe company’s directors are responsible for the preparation and fair presentation of these consolidated and separate financial statements in accordance with International Financial Reporting Standards and the requirements of the Companies Act of South Africa, and for such internal control as the directors determine is necessary to enable the preparation of consolidated and separate financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ responsibilityOur responsibility is to express an opinion on these consolidated and separate financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated and separate financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

OpinionIn our opinion, the consolidated and separate financial statements present fairly, in all material respects, the consolidated and separate financial position of Metmar Limited as at 28 February 2015, and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards, and the requirements of the Companies Act of South Africa.

Emphasis of matterWithout qualifying our opinion, we draw your attention to note 49 of the financial statements which indicates that the Group has incurred losses after tax of R147 million (2014: R183 million), for the financial year and ended the year in a net current liability position of R67 million.

The Group needs to secure replacement funding to continue the financing of its working capital and to finance future trade deals as a result of certain trade financiers announcing their intention to reduce facilities and in some cases exit completely. The note also indicates that these conditions, along with other matters, indicate the existence of a material uncertainty which may cast significant doubt on the Company’s ability to continue as a going concern.

Other reports required by the Companies ActAs part of our audit of the consolidated and separate financial statements for the year ended 28 February 2015, we have read the directors’ report, the audit committee’s report and the company secretary’s certificate for the purpose of identifying whether there are material inconsistencies between these reports and the audited consolidated and separate financial statements. These reports are the responsibility of the respective preparers. Based on reading these reports we have not identified material inconsistencies between these reports and the audited consolidated and separate financial statements.

However, we have not audited these reports and accordingly do not express an opinion on these reports.

Ernst & Young Inc.Director Iwan Hermanus GroblerRegistered AuditorChartered Accountant (SA)

28 May 2015


DIRECTORS’

REPORT

The directors’ have pleasure in presenting their report for the financial year ended 28 February 2015.

Review of activitiesThe Group specialises in the international trade of bulk commodities including ferrous and non-ferrous metals, minerals, ferro alloys, carbon

products, plastics, rubber and chemical products with strategic suppliers and customers. To facilitate trade, the Company secures trade finance

facilities and logistical solutions. In support of its trading, Metmar acquires strategic investments to secure cost effective long-term off-take

agreements for global trading.

The operating results and state of affairs of the Company and of the Group are fully set out in the annual financial statements and accompanying

notes and do not in our opinion require any further comment.

Going concernThe full details of conditions that could give rise to material uncertainties which may cast significant doubt about the Company’s ability to

continue as a going concern are disclosed in note 49 of the annual financial statements. The board is reasonably confident that it will

successfully manage the material uncertainties that exist. As such, the financial statements have been prepared on the basis of accounting

policies applicable to a going concern. This basis presumes that funds will be available to fund future operations and that the realisation of

assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

Share capitalAuthorised share capital

There was no change in the authorised share capital of the Company during the year.

Issued share capital

The issued share capital of the Company at the beginning of the year was R13 365 328 comprising 267 306 552 ordinary shares of 5 cents each.

Unissued share capital

At the last annual general meeting held on 12 August 2014, shareholders approved that the unissued ordinary shares in the authorised share

capital of the Company be placed under the control of the directors for allotment and issue at their discretion. In addition, shareholders gave the

authority to the directors to allot and issue any securities of any class already in issue in the capital of the Company for cash when the directors

consider it appropriate in the circumstances to do so. As these general authorities remain valid only until the next annual general meeting, which

is to be held on 2 July 2015, members will be asked at that meeting to consider ordinary resolutions to renew these general authorities until the

2016 annual general meeting.

Share buyback

Shareholders will be requested to consider and approve a general authority for Metmar’s board of directors to buy back 20% of the issued share

capital of the Company in compliance with the Act and the JSE Listings Requirements.

Share incentive scheme

At 28 February 2015 the Company had a performance based share incentive scheme in place. The scheme involves purchasing of shares from

the JSE for cash in the name of an employee who has qualified under the scheme. No liability exists to the Company at year end as a result of

the share scheme.


Major shareholders

According to an analysis of the Company’s share register at 28 February 2015, the following shareholders beneficially held shares in excess of

5% of the ordinary share capital of the Company:

Number of shares

% of issued share capital

GP Lotis 28 940 057 10,83PP Boshoff 28 880 055 10,80DJ Ellwood 26 880 391 10,06Borman Consulting and Investments Proprietary Limited 18 438 540 6,90Swarte Leeuw Investments Proprietary Limited 18 163 337 6,79Coronation Fund Managers 18 052 796 6,75PK Gain 16 586 688 6,21GR Forsdyke 14 769 519 5,53

Total 170 711 383 63,87

Borrowing limitationsIn terms of the Company’s memorandum of incorporation, the Company’s borrowing powers are unlimited.

DividendThe board considers dividends on an annual basis. After due consideration, the board deemed it advisable not to declare a dividend for the

financial year ended 28 February 2015.

DirectorateRob Still was appointed by the board as a director and as chairman of the Company on 29 April 2014 and his appointment was confirmed at the

annual general meeting held on 12 August 2014.

Adv KD Moroka resigned as an independent non-executive director on 22 October 2014 and Mr GP Lotis resigned as an executive director

on 28 February 2015.

The full list of directors’ names in office at the date of this report are set out on pages 23 and 24 of the integrated annual report.

In terms of paragraph 37.4 of the Company’s memorandum of incorporation, Messrs TI Borman and RG Still will retire by rotation at the

forthcoming annual general meeting. Being eligible, Messrs Borman and Still offer themselves for re-election.


DIRECTORS’

REPORT continued

Shareholdings

The interests of the directors in the ordinary share capital of the Company at 28 February 2015 were as follows:

Number of shares

2015 2014

BeneficialMr PP Boshoff 28 880 055 28 880 055Mrs D Earp – –Mr RG Still – –Adv KD Moroka – –Mr DJ Ellwood 26 880 391 26 880 391Mr GP Lotis 28 940 057 28 940 057Mrs D Mashile-Nkosi 9 268 103 9 268 103Mr L Matteucci 14 100 14 100Mr SMS Nkosi 109 983 109 983

Non-beneficialMrs D Mashile-Nkosi 250 000 250 000Mr PP Boshoff 192 912 218 662

Indirect beneficialMr TI Borman 18 438 540 18 438 540

No changes in the foregoing interests have taken place between 28 February 2015 and the date of this report.


Investment in subsidiariesThe following special resolution was passed:

Norcape Logistics Proprietary Limited filed an amendment of its memorandum of incorporation in terms of section 16 of the Companies Act 71 of 2008,

as amended, to change its name to Oleum Energy Proprietary Limited. The change of the company name took effect on 26 November 2014.

% shares heldAttributable net income/

(loss) after taxation

Name of subsidiary (incorporated in the Republic of South Africa unless otherwise indicated) 2015 2014

2015R’000

2014R’000

Subsidiaries of Metmar LimitedMetmar Trading Proprietary Limited 100 100 (49 884) 13 213Metmar Investments and Resources Proprietary Limited 100 100 (21) (63)Metmar Global Limited (United Kingdom) 100 100 – (564)Metmar Finance Proprietary Limited 100 100 – –Arengo 203 Proprietary Limited 66,7 66,7 6 140 1 171

Subsidiaries of Metmar Investments and ResourcesMetmar Industrial Proprietary Limited 100 100 (53 942) (25 323)Oleum Energy Proprietary Limited 100 100 – 3Clay Fusion Technologies Proprietary Limited 50 50 – (3 000)Metmar Mauritius Limited (Mauritius) 100 100 (15 978) (35 476)Metmar Speciality Metals Proprietary Limited 100 100 (16 049) (4 202)Metmar Logistics Proprietary Limited 100 100 – –Eastern Belt Chrome Mines Proprietary Limited 100 100 2 348 (2 838)Phillip Le Roux Proprietary Limited 100 100 – –Tufflex Plastic Products Proprietary Limited 50 50 107 (4 855)

Subsidiaries of Eastern Belt Chrome MinesSteelpoort Chrome Mines Proprietary Limited 51 51 (994) (291)Bolepu Holdings Proprietary Limited 49,9 49,9 171 (1 840)

Subsidiaries of Metmar MauritiusMetmar Africa 53,4 53,4 518 79Metmar Zimbabwe 49 49 (5 797) (793)

Details of the Company’s investment in subsidiaries are set out in note 6.

King III applicationMetmar has adopted the recommendations as contained in King III and used the Institute of Directors of Southern Africa’s (IoDSA) governance

assessment instrument (GAI) during the year to assess the application of King III and levels of compliance of the Company to ensure that every

principle and practice as recommended have been considered. The full King III application table is available on our website: www.metmar.co.za.

Metmar has reviewed and applied these principles and is satisfied that the company complied with the recommendations set out in the King III.

Company secretaryThe business and postal addresses of the company secretary are:

Business address Postal address

25 Culross Street, PO Box 98549

Cnr Main Road Sloane Park, 2152

Bryanston

Sandton, 2191

AuditorsAt the forthcoming annual general meeting shareholders will be requested to reappoint Ernst & Young Inc. as the independent external auditors

of the Company.


STATEMENTS

OF FINANCIAL POSITIONAS AT 28 FEBRUARY 2015

Group Company

Notes 2015R’000

2014R’000

2015R’000

2014R’000

AssetsNon-current assetsProperty, plant and equipment 3 83 887 82 463 – –Goodwill 4 9 330 9 330 – –Intangible assets 5 38 892 38 892 – –Investments in subsidiaries 6 – – 76 017 76 017Investments in associates 7 61 578 32 316 – –Financial assets 9 213 526 230 521 – –Deferred tax 11 26 306 23 238 2 259 908

433 519 416 760 78 276 76 925

Current assetsInventories 14 429 662 547 832 – –Loans to Group companies 8 – – 809 745 716 495Financial assets 9 – 28 436 – 28 436Current tax receivable 3 484 2 314 – –Trade and other receivables 15 318 288 507 973 1 131 4 426Derivative financial instruments 13 1 899 4 568 – –Cash and cash equivalents 16 23 408 53 275 284 515

776 741 1 144 398 811 160 749 872

Non-current assets and disposal groups held-for-sale 17 9 080 9 180 – –

Total assets 1 219 340 1 570 338 889 436 826 797

Equity and liabilitiesEquityEquity attributable to owners of the parentShare capital 18 160 005 160 005 258 155 258 155Reserves 126 135 126 888 – –Retained income 82 985 222 786 89 052 134 047

369 125 509 679 347 207 392 202Non-controlling interests (75 413) (67 330) – –

293 712 442 349 347 207 392 202

LiabilitiesNon-current liabilitiesFinancial liabilities 20 47 143 2 759 – –Instalment sale agreements 21 226 – – –Deferred tax 11 27 798 26 206 – –

75 167 28 965 – –

Current liabilitiesLoans from Group companies 8 – – 464 717 416 474Financial liabilities 20 2 625 55 645 – –Current tax payable 11 334 5 947 11 147 4 120Instalment sale agreements 21 103 – – –Trade and other payables 23 232 162 176 310 66 365 14 001Trade finance facilities 22 577 215 854 717 – –Bank overdraft 16 20 623 6 – –

844 062 1 092 625 542 229 434 595

Non-current liabilities and disposal groups held-for-sale 17 6 399 6 399 – –

Total liabilities 925 628 1 127 989 542 229 434 595

Total equity and liabilities 1 219 340 1 570 338 889 436 826 797


STATEMENTS

OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOMEFOR THE YEAR ENDED 28 FEBRUARY 2015

Group Company

Notes 2015R’000

2014R’000

2015R’000

2014R’000

Continuing operationsRevenue 25 1 951 260 2 097 435 – –Cost of sales 26 (1 866 433) (1 962 293) – –

Gross profit 84 827 135 142 – – Other income 27 9 584 20 748 2 137 9 408 Operating expenses (134 815) (126 241) (36 820) (26 074)Fair value gains on forward exchange contracts held-for-trading 1 899 4 568 – – Fair value loss on forward exchange contracts held-for-trading – – – –

Operating (loss)/profit 28 (38 505) 34 217 (34 683) (16 666)Finance income 29 10 873 13 417 – 10 Impairments and write-downs 39 (16 220) (155 372) – – Fair value adjustments 30 (20 995) 18 606 – 841 Loss from equity accounted investment 7 (2 384) (12 245) – – Finance costs 31 (74 924) (64 337) (4 946) (2 140)

Loss before taxation (142 155) (165 714) (39 629) (17 955)Taxation 32 (4 904) 4 936 (5 366) (2 315)

Loss from continuing operations (147 059) (160 778) (44 995) (20 270)

Discontinued operationsLoss from discontinued operations 17 – (21 999) – –

Loss for the year (147 059) (182 777) (44 995) (20 270)

Other comprehensive (loss)/profit:Items that will not be subsequently reclassified to profit or loss: 35 (1 650) (25 423) – –Revaluations in investments and deferred tax on financial assets – (31 932) – –Movement in foreign currency reserves (1 650) 6 509 – –

Total comprehensive (loss)/income 35 (148 709) (208 200) (44 995) (20 270)

Loss attributable to:Owners of the parent: (145 853) (162 729) (44 995) (20 270)Non-controlling interests (1 206) (20 048) – –

(147 059) (182 777) (44 995) (20 270)

Loss attributable to:Owners of the parent:Loss for the year from continuing operations (145 853) (140 730) (44 995) (20 270)Loss for the year from discontinued operations – (21 999) – –

Loss for the year attributable to owners of the parent (145 853) (162 729) (44 995) (20 270)

Total comprehensive loss attributable to:Equity holders of the parent (146 679) (182 777) (44 995) (20 270)Non-controlling interests (2 030) (25 423) – –

(148 709) (208 200) (44 995) (20 270)

Loss per shareBasic and diluted (cents) 34 (54.6) (60.9) – –Basic and diluted from continuing operations (cents) (54.6) (52.7) – –Basic and diluted from discontinued operations (cents) – (8.2) – –


STATEMENTS

OF CHANGES IN EQUITYFOR THE YEAR ENDED 28 FEBRUARY 2015

Share capitalR’000

Share premium

R’000

Total share

capitalR’000

Foreign currency

translation reserve

R’000

Revaluation reserveR’000

Acquisition of

additional shares in

subsidiaryR’000

Share–holder loans

R’000

Total reserves

R’000

Retained earnings

R’000

Total attributable

of owners to the parent

R’000

Non-controlling interests

R’000

Total equityR’000

Group Balance at 1 March 2013 5 319 154 686 160 005 1 191 22 055 (27 547) 72 885 68 584 463 911 692 500 (48 098) 644 402 Loss for the year – – – – – – – – (162 729) (162 729) (20 048) (182 777)Comprehensive loss for the year – – – 4 012 (24 059) – – (20 047) – (20 047) (5 376) (25 423)

Total comprehensive loss for the period – – – 4 012 (24 059) – – (20 047) (162 729) (182 776) (25 424) (208 200)Transfer of reserves into equity – – – – 78 396 – – 78 396 (78 396) – – – Movement in shareholder loans – – – – – – 6 147 6 147 – 6 147 – 6 147 Purchase of additional non-controlling interest in subsidiary – – – – – (6 192) – (6 192) – (6 192) 6 192 –

Total changes – – – 4 012 54 337 (6 192) 6 147 58 304 (241 125) (182 821) (19 232) (202 053)

Balance at 1 March 2014 5 319 154 686 160 005 5 203 76 392 (33 739) 79 032 126 888 222 786 509 679 (67 330) 442 349 Loss for the year – – – – – – – – (145 853) (145 853) (1 206) (147 059)Comprehensive loss for the year – – – (826) – – – (826) – (826) (824) (1 650)

Total comprehensive loss for the period – – – (826) – – – (826) (145 853) (146 679) (2 030) (148 709)Movement in shareholder loans – – – – – – 72 72 – 72 – 72 Transfer of reserves – – – – – – – – 6 052 6 052 (6 052) – Purchase of additional non-controlling interest in subsidiary – – – – – – – – – – – –

Total changes – – – (826) – – 72 (754) (139 801) (140 555) (8 082) (148 637)

Balance at 28 February 2015 5 319 154 686 160 005 4 377 76 392 (33 739) 79 104 126 134 82 985 369 124 (75 412) 293 712

Note(s) 18 18 18 35 19&35

Company Balance at 1 March 2013 13 365 244 790 258 155 – – – – – 154 317 412 472 – 412 472 Total comprehensive loss for the year – – – – – – – – (20 270) (20 270) – (20 270)

Total changes – – – – – – – – (20 270) (20 270) – (20 270)

Balance at 1 March 2014 13 365 244 790 258 155 – – – – – 134 047 392 202 – 392 202 Total comprehensive loss for the year – – – – – – – – (44 995) (44 995) – (44 995)

Total changes – – – – – – – – (44 995) (44 995) – (44 995)

Balance at 28 February 2015 13 365 244 790 258 155 – – – – – 89 052 347 207 – 347 207

Note(s) 18 18 18 35 19&35


STATEMENTS

OF CASH FLOWSFOR THE YEAR ENDED 28 FEBRUARY 2015

Group Company

Notes 2015R’000

2014R’000

2015R’000

2014R’000

Cash flows (used in)/generated from operating activitiesCash generated from/(used in) operations 36 18 700 41 883 25 193 (29 807)Finance income 10 873 13 417 – 10Finance costs (74 924) (64 337) (4 946) (2 140)Tax (paid)/received 37 (3 392) (10 373) 310 (605)Cash flows of held-for-sale/discontinued operations 38 – 5 763 – –

Net cash (used in)/from operating activities (48 743) (13 647) 20 557 (32 542)

Cash flows from investing activitiesPurchase of property, plant and equipment 3 (12 026) (477) – –Sale of property, plant and equipment 3&17 2 919 7 298 – 14Business combinations 40 – (1 327) – (1 327)Sale of businesses 42 – 66 537 – 12 790Net sale of financial assets 14 943 – – –Purchase of derivative financial instruments – (6 078) – –Realisation of derivative financial instruments 2 669 – – –Loans advanced to associates 7 (2 010) (19 581) – –

Net cash generated from investing activities 6 495 46 372 – 11 477

Cash flows (used in)/from financing activitiesProceeds from financial liabilities 37 350 – – –Repayment from financial liabilities (45 986) (48 839) – –Increase in instalment sale agreements 329 – – –Proceeds from/(repayment of) shareholder loans 71 (5 937) – –Increase in loans to Group companies – – (69 031) (149 817)Proceeds of loans from Group companies – – 48 243 170 971

Net cash (used in)/generated from financing activities (8 236) (54 776) (20 788) 21 154

Total cash (outflow)/inflow for the year (50 484) (22 051) (231) 89Cash/(net overdraft) at the beginning of the year 53 269 (19 742) 515 426Overdraft cancelled following discontinued operation – 94 606 – –Cash from business combinations – 456 – –

Total cash at the end of the year 16 2 785 53 269 284 515


NOTES

TO THE ANNUAL FINANCIAL STATEMENTSFOR THE YEAR ENDED 28 FEBRUARY 2015

1. Presentation of annual financial statements The consolidated annual financial statements have been prepared in accordance with International Financial Reporting Standards, the

Companies Act of South Africa, as amended, JSE Listings Requirements and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements (FRPs) as issued by the Financial Reporting Standards Council (FRSC). The annual financial statements have been prepared on the historical cost basis, except for the measurement of certain financial instruments at fair value, and incorporate the principal accounting policies set out below. The annual financial statements have been presented in South African Rand.

These accounting policies are consistent with the previous financial year.

1.1 Consolidation Basis of consolidation The consolidated annual financial statements incorporate the annual financial statements of the Company and all entities which

are controlled by the Company.

Control exists when the Company is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its ability to direct the relevant activities over the entity.

The results of subsidiaries are included in the consolidated annual financial statements from the effective date of acquisition to the effective date of disposal.

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 the Group’s interest therein, and are recognised within equity. Losses of subsidiaries attributable to non-controlling interests are allocated 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 and after 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 for such 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 business

combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued. Costs directly attributable to the business combination are expensed as incurred.

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

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

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

On acquisition, the Group assesses the classification of the acquiree’s assets and liabilities and reclassifies them where the classification is inappropriate for Group purposes.

In cases where the Group held a non-controlling shareholding in the acquiree prior to obtaining control, that interest is measured to fair value as at acquisition date. The measurement to fair value is included in profit or loss for the year. Where the existing shareholding was classified as an available-for-sale financial asset, the cumulative fair value adjustments recognised previously to other comprehensive income and accumulated in equity are recognised in profit or loss as a reclassification adjustment.

Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plus

non-controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree. Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be impaired, that

impairment is not subsequently reversed.


1.2 Significant judgements and sources of estimation uncertainty In preparing the annual financial statements, management is required to make estimates and assumptions that affect the

amounts represented in the annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the annual financial statements. Significant judgements include:

Financial assets at amortised cost Financial assets at amortised cost which consist of trade receivables and loan receivables are assessed for impairment at each

reporting date. In determining whether an impairment loss should be recorded in profit or loss, judgements are made as to whether there is observable data indicating a measurable decrease in the estimated future cash flows for the financial asset. The impairment for these financial assets is calculated on an item by item basis, based on historical experience, adjusted for other indicators present at the reporting date.

Financial assets at fair value Financial assets, which consist of all equity instruments and derivative financial instruments, are measured at fair value which is

determined by reference to active market transactions or using a valuation technique where no active market exists.

Allowance for slow moving, damaged and obsolete inventory An allowance for inventory is raised based on management’s knowledge of a particular inventory item.

Items are compared to their net realisable value to determine whether inventory must be written down. Any inventory that is physically identified as damaged is written off when so detected.

Property, plant and equipment The residual value, useful life and depreciation method of each asset is reviewed at the end of each reporting period. If the

expectations differ from previous estimates, the change is accounted for as a change in accounting estimate. Goodwill and impairment of non-financial assets The carrying amounts of assets are reviewed at each period end to determine whether there is any indication of impairment.

If any such indication exists, the recoverable amount is estimated as the higher of the fair value less cost to sell and the value- in-use.

In assessing value-in-use, the expected 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. An impairment loss is recognised whenever the carrying amount exceeds the recoverable amount.

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. An impairment loss is recognised whenever the carrying amount of the cash-generating unit exceeds its recoverable amount.

With the exception of goodwill, a previously recognised impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount, however not to an amount higher than the carrying amount that would have been determined (net of depreciation) had no impairment loss been recognised in prior years. For goodwill, recognised impairment loss is not reversed.

1.3 Property, plant and equipment The cost of an item of property, plant and equipment is recognised as an asset when:

• it is probable that future economic benefits associated with the item will flow to the Group; and • the cost of the item can be measured reliably.

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

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


NOTES

TO THE ANNUAL FINANCIAL STATEMENTS continuedFOR THE YEAR ENDED 28 FEBRUARY 2015

1. Presentation of annual financial statements continued 1.3 Property, plant and equipment continued Depreciation is provided on all property, plant and equipment, to write down the cost, less residual value, on a straight-line basis

over their useful lives as follows:

Item Average useful life Land Unlimited Buildings 25 years Plant and machinery 10 years Furniture and fixtures 10 years Motor vehicles 5 years Office equipment 10 years Computer equipment and software 3 years

The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period.

Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately.

The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset.

The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item.

1.4 Goodwill Goodwill is initially measured at cost, being the excess of the cost of the business combination over Metmar Limited’s interest in

the net fair value of the identifiable assets, liabilities and contingent liabilities.

Subsequently, goodwill acquired in a business combination, is carried at cost less any accumulated impairment.

Goodwill is assessed at each reporting date for impairment. Internally generated goodwill is not recognised as an asset.

1.5 Intangible assets Intangible assets are carried at cost less any accumulated amortisation and impairments.

Intangible assets are identifiable non-monetary assets without physical substance that an entity holds for its own use or for rental to others and include technology-based items like patents, copyrights and databases; customer-based items, research and development and contract-based items.

An intangible asset is recognised when: • it is identifiable; • the entity has control over the asset; • 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.

Internally generated intangibles are not recognised as intangible assets and intangible assets are tested at each reporting period for signs of impairment.

Intangible assets are amortised using the straight-line method over their useful lives, which generally do not exceed ten years. Intangible assets which do not meet the criteria listed above are recognised as an expense in the period in which they are incurred.

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

Item Useful life Marketing and management contracts Tonnage sold over the period of the off-take agreement when production begins.

1.6 Investments in subsidiaries Group financial statements Metmar Limited Group’s annual financial statements include those of the holding company and its subsidiaries. The results of

the subsidiaries are included from the effective date of acquisition up to the effective date of disposal.

On acquisition Metmar recognises the subsidiary’s identifiable assets, liabilities and contingent liabilities at fair value, except for assets classified as held-for-sale, which are recognised at fair value less costs to sell.


Company annual financial statements In the Company’s separate annual financial statements, investments in subsidiaries are carried at cost less any

accumulated impairment.

The cost of an investment in a subsidiary is the aggregate of: • the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the

Company; plus • any costs directly attributable to the purchase of the subsidiary.

An adjustment to the cost of a business combination contingent on future events, is included in the cost of the combination if the adjustment is probable and can be measured reliably.

1.7 Investment in associates Group financial statements Associates are all entities over which Metmar Limited has significant influence but not control, generally accompanying a

shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. Metmar Limited’s investment in associates includes goodwill identified on acquisition, net any accumulated impairment loss.

Unrealised gains on transactions between Metmar Limited and its associates are eliminated to the extent of Metmar Limited’s interest in the associate. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to be consistent with the policies adopted by Metmar Limited.

Dilution gains and losses arising in investments in associates are recognised in profit or loss.

1.8 Financial instruments Initial recognition and measurement All financial instruments are initially measured at fair value plus or minus transaction costs, in the case of a financial asset or

financial liability not at fair value, through profit or loss.

Subsequent measurement of financial assets Financial assets that are debt instruments are classified at amortised cost on the basis of both:

• the entity’s business model for managing the financial asset; and • the contractual cash flow characteristics of the financial asset.

Debt instruments are subsequently measured at amortised cost if: • the asset is held within a business model whose objective is to collect the contractual cash flows; and • the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and

interest on the principal outstanding.

Equity instruments All equity investments in the scope of IFRS 9 are measured at fair value in the statements of financial position, with value

changes recognised in profit or loss, except for those equity investments for which the entity has elected to report value changes in “other comprehensive income”.

The Group measures equity instruments at initial recognition at fair value on an investment by investment basis through either other comprehensive income or profit or loss. Dividend income is recognised through profit or loss.

For all new equity investments, the Group will either make the election to recognise the instrument at fair value through other comprehensive income or measure at fair value through profit or loss.

Trade and other receivables Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the

effective interest rate method. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation and default or delinquency in payments (more than 30 days overdue) are considered indicators that the trade receivable is impaired. The allowance recognised is measured as the difference between the asset’s carrying amount and the estimated probable receipt of future cash flows.

The carrying amount of the asset is reduced through the impairment account and the amount of the loss is recognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is impaired through profit and loss. Subsequent recoveries of amounts previously written off are credited against operating expenses in profit or loss.

Trade and other receivables are classified as financial assets at amortised cost.


NOTES


1. Presentation of annual financial statements continued 1.8 Financial instruments continued Financial liabilities The Group’s financial liabilities include borrowings, trade and other payables and instalment sale agreements, which are

measured at amortised cost using the effective interest rate method.

Financial liabilities are recognised when Metmar becomes a party to the contractual agreements of the instrument. All interest related charges and, if applicable, changes in an instrument’s fair value that are reported in profit or loss are reflected in line items “finance costs”.

Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits and other short-term highly liquid investments that

are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially recorded at fair value plus transactions costs and subsequently measured at amortised cost.

Bank overdrafts and borrowings are initially measured at fair value and subsequently measured at amortised cost, using the

effective interest rate method. Loan to/(from) Group companies These include loans to/(from) fellow subsidiaries and are recognised initially at fair value plus direct transaction costs.

Subsequently, these loans are measured at amortised cost using the effective interest rate method, less any impairment loss recognised to reflect irrecoverable amounts.

In the case of loans not recoverable, an impairment loss is recognised in profit and loss when there is objective evidence that it is impaired. The impairment is measured as the difference between the investment’s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed on initial recognition.

Impairment losses are reversed in subsequent periods when an increase in the investment’s recoverable amount can be related

objectively to an event occurring after the impairment was recognised, subject to the restriction that if the carrying amount of the investment is reversed, it shall not exceed what the amortised cost would have been had the impairment not been recognised.

Derivative financial instruments Derivative financial instruments, consisting of foreign exchange contracts, are initially recognised at fair value on the contract

date, and are remeasured to fair value at subsequent reporting dates.

Changes in the fair value of derivative financial instruments are recognised in profit and loss as they arise.

Foreign operations Items included in the results of each entity are measured using the functional currency of that entity. The consolidated financial

results are presented in Rand, which is Metmar Limited’s functional and presentation currency.

Foreign operations which have a functional currency different from the presentation currency of Metmar Limited are translated into the presentation currency. Income and expenditure transactions of foreign operations are translated at the average rate of exchange for the year except for significant individual transactions which are translated at the exchange rate ruling at that date. All assets and liabilities, including fair value adjustments and goodwill arising on acquisition, are translated at the rate of exchange ruling at the reporting date. Differences arising on translation are recognised as other comprehensive income and are included in the foreign currency translation reserve.

On disposal of part or all of the operation, the proportionate share of the related cumulative gains and losses previously recognised in the foreign currency translation reserve through other comprehensive income are included in determining the profit or loss on disposal of that operation recognised in profit or loss.

For accounting policy on translation of foreign currency refer to note 1.18.

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 in respect 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 by the 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 liability arises

from: • the initial recognition of goodwill; or • the initial recognition of an asset or liability in a transaction which:

– is not a business combination; and– at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).


A deferred tax liability is recognised for all taxable temporary differences associated with investments in subsidiaries and associates except to the extent that both of the following conditions are satisfied: • the parent or investor is able to control the timing of the reversal of the temporary difference; and • it is probable that the temporary difference will not reverse in the foreseeable future.

A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised, unless the deferred tax asset arises from the initial recognition of an asset or liability in a transaction that: • is not a business combination; and • at the time of the transaction, affects neither accounting profit nor taxable profit (tax loss).

A deferred tax asset is recognised for all deductible temporary differences arising from investments in subsidiaries and associate to the extent that it is probable that: • the temporary difference will reverse in the foreseeable future; and • taxable profit will be available against which the temporary difference can be utilised.

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

Taxation expenses Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the

extent that the tax arises from: • a transaction or event which is recognised, in the same or a different period, to other comprehensive income; or • a business combination.

Current tax and deferred taxes are charged or credited to other comprehensive income if the tax relates to items that are credited or charged, in the same or a different period, to other comprehensive income.

1.10 Leases A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is

classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership.

Finance leases – lessor The Group recognises finance lease receivables in the statement of financial position.

Finance income is recognised based on a pattern reflecting a constant periodic rate of return on the Group’s net investment in the finance lease.

Finance leases – lessee Finance leases are recognised as assets and liabilities in the statements of financial position at amounts equal to the fair value of

the leased property or, if lower, the present value of the minimum lease payments. The corresponding liability to the lessor is included in the statements of financial position as a finance lease obligation.

The lease payments are apportioned between the finance charge and reduction of the outstanding liability. The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of on the remaining balance of the liability.

Operating leases – lessor Operating lease income is recognised as an income on a straight-line basis over the lease term.

Initial direct costs incurred in negotiating and arranging operating leases are added to the carrying amount of the leased asset and recognised as an expense over the lease term on the same basis as the lease income.

Income for leases is disclosed under other income in profit or loss.

Operating leases – lessee Operating lease payments are recognised as an expense on a straight-line basis over the lease term. The difference between

the amounts recognised as an expense and the contractual payments are recognised as an operating lease asset. This liability is not discounted.

1.11 Inventories Inventories are measured at the lower of cost and net realisable value. Inventories consist of commodities, raw materials,

components and finished goods.

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

The cost of inventories is assigned using the first-in, first-out (FIFO) formula. The same cost formula is used for all inventories having a similar nature and use to the entity, with the exception of Tufflex Plastic Products Proprietary Limited and the Kalagadi Tolling Project. These activities utilise the weighted average method.


NOTES


1. Presentation of annual financial statements continued 1.11 Inventories continued Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and

the estimated costs necessary to make the sale.

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

such indication exists, the Group estimates the recoverable amount of the asset. Irrespective of whether there is any indication of impairment, the Group also:

• tests intangible assets not yet available for use for impairment annually by comparing their carrying amount with their recoverable amount. This impairment test is performed during the annual period and at the same time every period; and

• 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 is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash-generating unit to 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-in-use.

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

An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss.

Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units or groups of units.

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

The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods.

A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately in profit or loss.

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 its liabilities.

1.14 Employee benefits Short-term employee benefits The cost of short-term employee benefits, (those expected to be settled within 12 months after the service is rendered, such as

paid vacation leave and sick leave, bonuses, and non-monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted.

The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non-accumulating absences, when the absence occurs.

The expected cost of profit sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance.

Defined contribution plans Payments to defined contribution retirement benefit plans are charged as an expense as they fall due.

Payments made to industry-managed retirement benefit schemes are dealt with as defined contribution plans where the Group’s obligation under the schemes is equivalent to those arising in a defined contribution retirement benefit plan.


1.15 Revenue Revenue comprises goods and services provided in the ordinary course of business, net of value added tax and is measured at

the fair value of consideration received or receivable of goods and services provided in the normal course of business.

Revenue from the sale of goods is recognised when all the following conditions have been satisfied: • the significant risks and rewards of ownership of the goods have been transferred to the buyer; • Metmar’s continuing managerial involvement to the degree usually associated with ownership or effective control over the

goods sold is not retained; • the amount of revenue can be measured reliably; • the costs incurred or to be incurred in respect of the transaction can be measured reliably; and • it is probable that the economic benefits associated with the transaction will flow to the entity.

Revenue from the rendering of services is recognised with reference to the stage of completion at the reporting date, based on costs incurred to date in relation to the total estimated costs.

Interest income is recognised, in the statement of comprehensive income, using the effective interest rate method. 1.16 Cost of sales When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the

related revenue is recognised. The amount of any write down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write down or loss occurs. The amount of any reversal of any write down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

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

The related cost of providing services recognised as revenue in the current period is included in cost of sales.

1.17 Borrowing costs Borrowing costs are recognised as an expense in the period in which they are incurred.

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

1.18 Translation of foreign currencies Foreign currency transactions A foreign currency transaction is recorded, on initial recognition in Rand, by applying to the foreign currency amount the spot

exchange rate between the functional currency and the foreign currency at the date of the transaction.

At the end of the reporting period: • foreign currency monetary items are translated using the closing rate; • non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate

at the date of the transaction; and • non-monetary items that are measured at fair value in a foreign currency are translated using the exchange rates at the date

when the fair value was determined.

Exchange differences arising on the settlement of monetary items or on translating monetary items at rates different from those at which they were translated on initial recognition during the period or in previous annual financial statements are recognised in profit or loss in the period in which they arise.

When a gain or loss on a non-monetary item is recognised to other comprehensive income and accumulated in equity, any exchange component of that gain or loss is recognised to other comprehensive income and accumulated in equity. When a gain or loss on a non-monetary item is recognised in profit or loss, any exchange component of that gain or loss is recognised in profit or loss.

Cash flows arising from transactions in a foreign currency are recorded in Rand by applying to the foreign currency amount the exchange rate between the Rand and the foreign currency at the date of the cash flow.

1.19 Non-current assets held-for-sale and discontinued operations Non-current assets are classified as held-for-sale if their carrying amount will be recovered principally through a sale transaction

rather than through continued use. This condition is regarded as to be met only when the sale is highly probable and the asset is available for immediate sale in its present condition subject only to terms that are usual and customary.

On initial classification as held-for-sale, non-current assets (other than investment properties, deferred tax assets, financial assets and inventories) are measured at the lower of carrying amount and fair value less costs to sell. Any differences are included in profit or loss.

A component of the Group is classified as a discontinued operation when the criteria to be classified as held-for-sale have been met or it has been disposed of and such a component represents a separate major line of business or geographical area of operations, is part of a single coordinated major line of business or geographical area of operations or is a subsidiary acquired exclusively with a view to resale.


NOTES


2. New standards and interpretations continued Amendment to IAS 36 Recoverable Amount Disclosures for Non-Financial Assets The amendment to IAS 36 Impairment of Assets now require:

• disclosures to be made of all assets which have been impaired, as opposed to only material impairments; • the disclosure of each impaired asset’s recoverable amount; and • certain disclosures for impaired assets whose recoverable amount is fair value less costs to sell in line with the requirements of

IFRS 13 Fair Value Measurement.

The effective date of the amendment is for years beginning on or after 1 January 2014.

The Group has adopted the amendment for the first time in the 2015 annual financial statements.

The impact of the amendment is not material.

Amendment to IAS 32 Offsetting Financial Assets and Financial Liabilities Clarification of certain aspects concerning the requirements for offsetting financial assets and financial liabilities.




Amendment to IAS 39 Novation of Derivatives and Continuation of Hedge Accounting The amendment provides guidance on whether an entity is required to discontinue hedging when the derivatives which are designated

hedging instruments are novated to a central counterparty.




Amendments to IFRS 10, IFRS 12 and IAS 27 Investment Entities The amendments define an investment entity and introduce an exception to consolidating particular subsidiaries for investment entities.

These amendments require an investment entity to measure those subsidiaries at fair value through profit or loss in accordance with IFRS 9 Financial Instruments in its consolidated and separate annual financial statements. The amendments also introduce new disclosure requirements for investment entities in IFRS 12 and IAS 27.

The effective date of the amendments is for years beginning on or after 1 January 2014.

The Group has adopted the amendments for the first time in the 2015 annual financial statements.


2.1 Standards and interpretations not yet effective The Group has chosen not to early adopt the following standards and interpretations, which have been published and are

mandatory for the Group’s accounting periods beginning on or after 1 March 2015 or later periods:

Amendment to IAS 19 Defined Benefit Plans: Employee Contributions The amendment relates to contributions received from employees or third parties for defined benefit plans. These contributions

could either be discretionary or set out in the formal terms of the plan. If they are discretionary then they reduce the service cost. Those which are set out in the formal terms of the plan are either linked to service or not. When they are not linked to service then the contributions affect the remeasurement. When they are linked to service and to the number of years of service, they reduce the service cost by being attributed to the periods of service. If they are linked to service but not to the number of years’ service then they either reduce the service cost by being attributed to the periods of service or they reduce the service cost in the period in which the related service is rendered.

The effective date of the amendment is for years beginning on or after 1 July 2014.

The Group expects to adopt the amendment for the first time in the 2016 annual financial statements.

It is unlikely that the amendment will have a material impact on the Group’s annual financial statements.

Amendment to IFRS 3 Business Combinations: Annual improvements project The amendment to the scope exclusions removes reference to the formation of joint ventures. It now excludes from the scope,

the formation of a joint arrangement in the annual financial statements of the joint arrangement itself.





Amendment to IFRS 13 Fair Value Measurement: Annual Improvements Project The amendment clarifies that references to financial assets and financial liabilities in paragraphs 48 – 51 and 53 – 56 should be

read as applying to all contracts within the scope of, and accounted for in accordance with, IAS 39 or IFRS 9, regardless of whether they meet the definitions of financial assets or financial liabilities in IAS 32 Financial Instruments: Presentation.

The effective date of the amendment is for years beginning on or after 1 July 2014. The Group expects to adopt the amendment for the first time in the 2016 annual financial statements.


Amendment to IFRS 5 Non-current Assets Held-for-Sale and Discontinued Operations: Annual Improvements Project The amendment clarifies that non-current assets held-for-distribution to owners should be treated consistently with non-current

assets held-for-sale. It further specifies that if a non-current asset held-for-sale is reclassified as a non-current asset held-for- distribution to owners or visa versa, that the change is considered a continuation of the original plan of disposal.




Amendment to IAS 19 Employee Benefits: Annual Improvements Project The amendment clarifies that when a discount rate is determined for currencies where there is no deep market in high quality

corporate bonds, then market yields on government bonds in that currency should be used.



It is unlikely that the amendment will have a material impact on the Group’s annual financial statements. Disclosure initiative: Amendment to IAS 1 Presentation of Financial Statements The amendment provides new requirements when an entity presents subtotals in addition to those required by IAS 1 in its

annual financial statements. It also provides amended guidance concerning the order of presentation of the notes in the annual financial statements, as well as guidance for identifying which accounting policies should be included. It further clarifies that an entity’s share of comprehensive income of an associate or joint venture under the equity method shall be presented separately into its share of items that a) will not be reclassified subsequently to profit or loss and b) that will be reclassified subsequently to profit or loss.




Amendment to IFRS 8 Operating Segments: Annual Improvements Project Management are now required to disclose the judgements made in applying the aggregation criteria. This includes a brief

description of the operating segments that have been aggregated in this way and the economic indicators that have been assessed in determining that the aggregated operating segments share similar economic characteristics.




Amendment to IAS 24 Related Party Disclosures: Annual Improvements Project The definition of a related party has been amended to include an entity, or any member of a group of which it is a part, which

provides key management personnel services to the reporting entity or to the parent of the reporting entity (“management entity”). Disclosure is required of payments made to the management entity for these services but not of payments made by the management entity to its directors or employees.





NOTES


2. New standards and interpretations continued 2.1 Standards and interpretations not yet effective continued Amendment to IAS 16 Property, Plant and Equipment: Annual Improvements Project The amendment adjusts the option to proportionately restate accumulated depreciation when an item of property, plant and

equipment is revalued. Instead, the gross carrying amount is to be adjusted in a manner consistent with the revaluation of the carrying amount. The accumulated depreciation is then adjusted as the difference between the gross and net carrying amount.




IFRS 9 Financial Instruments The Group has early adopted IFRS 9 (2009) in the previous periods, however IFRS 9 (2010) has not been early adopted, and

the Group will adopt IFRS 9 (2010) for the first time in the 2018 financial statements.

Key requirements of IFRS 9: • Financial assets will be categorised as those subsequently measured at fair value or at amortised cost. • Financial assets at amortised cost are those financial assets where the business model for managing the assets is to hold the

assets to collect contractual cash flows (where the contractual cash flows represent payments of principal and interest only). All financial assets are to be subsequently measured at fair value.

• For hybrid contracts, where the host contract is an asset within the scope of IFRS 9, then the whole instrument is classified in accordance with IFRS 9, without separation of the embedded derivative. In other circumstances, the provisions of IAS 39 still apply.

• Voluntary reclassification of financial assets is prohibited. Financial assets shall be reclassified if the entity changes its business model for the management of financial assets. In such circumstances, reclassification takes place prospectively from the beginning of the first reporting period after the date of change of the business model.

The effective date of the standard is for years beginning on or after 1 January 2018.

The effective date has not yet been established as the project is currently incomplete. The IASB has communicated that the effective date will not be before years beginning on or after 1 January 2018. IFRS 9 may be early adopted. If IFRS 9 is early adopted, the new hedging requirements may be excluded until the effective date.

The Group expects to adopt the standard for the first time in the 1 January 2018 annual financial statements.

IFRS 15 Revenue from Contracts with Customers IFRS 15 supersedes IAS 11 Construction contracts; IAS 18 Revenue; IFRIC 13 Customer Loyalty Programmes; IFRIC 15

Agreements for the Construction of Real Estate; IFRIC 18 Transfers of Assets from Customers and SIC 31 Revenue Barter Transactions Involving Advertising Services.

The core principle of IFRS 15 is that an entity recognises revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity recognises revenue in accordance with that core principle by applying the following steps: • Identify the contract(s) with a customer • Identify the performance obligations in the contract • Determine the transaction price • Allocate the transaction price to the performance obligations in the contract • Recognise revenue when (or as) the entity satisfies a performance obligation.

IFRS 15 also includes extensive new disclosure requirements.


The Group expects to adopt the standard for the first time in the 2018 annual financial statements. It is unlikely that the standard will have a material impact on the Group’s annual financial statements.

Amendment to IFRS 11 Accounting for Acquisitions of Interests in Joint Operations This amendment applies to the acquisitions of interest in joint operations. When an entity acquires an interest in a joint operation

in which the activity of the joint operation constitutes a business, as defined in IFRS 3, it shall apply, to the extent of its share, all of the principles on business combinations accounting in IFRS 3, and other IFRS, that do not conflict with the guidance in this IFRS and disclose the information that is required in those IFRS in relation to business combinations. This applies to the acquisition of both the initial interest and additional interests in a joint operation in which the activity of the joint operation constitutes a business.

The effective date of the amendments is for years beginning on or after 1 January 2016.

The Group expects to adopt the amendments for the first time in the 2017 annual financial statements. It is unlikely that the amendments will have a material impact on the Group’s annual financial statements.


Amendments to IAS 16 and IAS 38 Clarification of Acceptable Methods of Depreciation and Amortisation The amendment clarifies that a depreciation or amortisation method that is based on revenue that is generated by an activity

that includes the use of the asset is not an appropriate method. This requirement can be rebutted for intangible assets in very specific circumstances as set out in the amendments to IAS 38.




Amendments to IFRS 10 and IAS 28 Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

If a parent loses control of a subsidiary which does not contain a business, as a result of a transaction with an associate or joint venture, then the gain or loss on the loss of control is recognised in the parents profit or loss only to the extent of the unrelated investors interest in the associate or joint venture. The remaining gain or loss is eliminated against the carrying amount of the investment in the associate or joint venture. The same treatment is followed for the measurement to fair value of any remaining investment which is itself an associate or joint venture. If the remaining investment is accounted for in terms of IFRS 9, then the measurement to fair value of that interest is recognised in full in the parents profit or loss.

The effective date of the Group is for years beginning on or after 1 July 2014.



Amendment to IAS 27 Equity Method in Separate Financial Statements The amendment adds the equity method to the methods of accounting for investments in subsidiaries, associates and joint

ventures in the separate annual financial statements of an entity.




IFRS 14 Regulatory Deferral Accounts The new standard is an interim standard applicable to entities subject to rate regulation. The standard is only applicable to

entities adopting IFRS for the first time. It permits entities to recognise regulatory deferral account balances in the statement of financial position. When the account has a debit balance, it is recognised after total assets. Similarly, when it has a credit balance, it is recognised after total liabilities. Movements in these accounts, either in profit or loss or other comprehensive income are allowed only as single line items.


The Group expects to adopt the standard for the first time in the 2017 annual financial statements.

It is unlikely that the standard will have a material impact on the Group’s annual financial statements.

Amendments to IFRS 10, 12 and IAS 28 Investment Entities. Applying the consolidation exemption The amendment clarifies the consolidation exemption for investment entities. It further specifies that an investment entity which

measures all of its subsidiaries at fair value is required to comply with the “investment entity” disclosures provided in IFRS 12. The amendment also specifies that if an entity is itself not an investment entity and it has an investment in an associate or joint venture which is an investment entity, then the entity may retain the fair value measurement applied by such associate or joint venture to any of their subsidiaries.

The effective date of the Group is for years beginning on or after 1 July 2014. The Group expects to adopt the amendment for the first time in the 2016.


The aggregate impact of the initial application of the statements and interpretations on the Group’s annual financial statements is expected to be as follows:


NOTES


3. Property, plant and equipment

2015 2014

CostR’000

Accumulated depreciation

and impairments

R’000Carrying value

R’000Cost

R’000

Accumulated depreciation

and impairments

R’000Carrying value

R’000

GroupBuildings 58 281 (4 994) 53 287 58 186 (2 704) 55 482Computer equipment and software 7 266 (6 131) 1 135 6 994 (5 272) 1 722Furniture and fixtures 4 683 (2 464) 2 219 4 235 (1 983) 2 252Land 12 209 – 12 209 12 209 – 12 209Motor vehicles 2 404 (1 652) 752 2 302 (1 575) 727Office equipment 1 483 (1 119) 364 1 441 (958) 483Plant and machinery 23 514 (9 593) 13 921 20 326 (10 738) 9 588

Total 109 840 (25 953) 83 887 105 693 (23 230) 82 463

Company

Computer equipment and software 85 (85) – 85 (85) –

Reconciliation of property, plant and equipment – Group – 2015

Opening balance

R’000Additions

R’000Disposals

R’000

Depreciationcontinuingoperations

R’000

Impairment loss

R’000Total

R’000

Buildings 55 482 94 – (2 289) – 53 287Computer equipment and software 1 722 395 (18) (964) – 1 135Furniture and fixtures 2 252 449 – (482) – 2 219Land 12 209 – – – – 12 209Motor vehicles 727 371 – (346) – 752Office equipment 483 79 – (198) – 364Plant and machinery 9 588 10 638 (3 909) (1 644) (752) 13 921

82 463 12 026 (3 927) (5 923) (752) 83 887

Reconciliation of property, plant and equipment – Group – 2014

Openingbalance

R’000Additions

R’000

Additions through

business combinations

R’000Disposals

R’000

Transfers of PPE to

debtorsR’000

Depreciation from

discontinued operation

R’000

Depreciation from

continuing operations

R’000

Impairment loss

R’000Total

R’000

Buildings 2 804 – 54 965 – – – (2 287) – 55 482Computer equipment and software 1 296 256 1 645 (286) – (59) (1 130) – 1 722Furniture and fixtures 1 795 108 753 – – – (404) – 2 252Land 1 009 – 11 200 – – – – – 12 209Motor vehicles 1 361 – – (285) – (14) (335) – 727Office equipment 14 – (14) (282) – (20) (162) – 483Plant and machinery 30 429 38 – (1 274) (13 860) (272) (1 899) (3 574) 9 588

39 253 477 68 876 (2 127) (13 860) (365) (6 217) (3 574) 82 463


3. Property, plant and equipment continued

Reconciliation of property, plant and equipment – Company – 2014

Opening balance Additions Disposals Depreciation Impairment loss Total

Office equipment 14 – (14) – – –

Group Company

2015R’000

2014 R’000

2015R’000

2014 R’000

Pledged as securityCarrying value of assets pledged as security:

Land and buildings 3 953 3 813 –

Land and buildings owned by Metmar Trading Proprietary Limited and Tufflex Plastic Products Proprietary Limited are encumbered by mortgage bonds as stated in note 20.

Impairments and transfer of assetsDuring the year management decided to impair some of the investment segment plant and machinery located in Zimbabwe due to reduced production and uncertainty of improvement in trading conditions. Amounts were R0,752 million for the current year (2014: R3,574 million). Refer to notes 39 and 41.

The transfer to trade and other receivables in the prior year relates to an asset sold for which cash will be paid in instalments.

Details of propertiesMetmar Trading Proprietary LimitedErf 881 Township of Dullstroom Extension 3

– Purchase price: 1 December 2005 1 009 1 009 – –

Arengo 203 Proprietary LimitedErf 846 Township of Bryanston, Registration division IR, Gauteng province – Purchase price: 1 December 2005 56 000 56 000 – –– Additions since purchase or valuation 10 198 10 198 – –

66 198 66 198 – –

Tufflex Plastics Products Proprietary LimitedPortion 3 of Erf 1322 South Germiston Township Extension 2 Registration division IR, Gauteng province – Purchase price: 1 December 2005 1 916 1 916 – –– Additions since purchase or valuation 1 028 888 – –

2 944 2 804 – –


NOTES


4. Goodwill

2015 2014

CostR’000

Accumulated impairment

R’000

Carrying valueR’000

CostR’000


R’000

Carrying value

R’000

Group

Goodwill 9 330 – 9 330 9 330 – 9 330

In accordance with accounting standards, the Group annually tests the carrying value of goodwill for impairment. At 28 February 2015, the review was undertaken on a value-in-use basis, assessing whether the carrying value of goodwill was supported by the net present value of future cash flows derived from the relevant assets relating to SNF International (a division of Metmar Trading) and Arengo 203 Proprietary Limited.

Goodwill relating to the acquisition of Arengo 203 Proprietary Limited amounted to R1 193 235 (refer to note 40). Goodwill disposed through discontinued operations can be referred to in note 17.

The key assumptions for SNF International and Arengo regarding the value-in-use calculations were budgeted growth in revenues, budgeted gross profit margins, operating costs and the discount rate applied. Budgeted revenue growth and budgeted gross margins were estimated based on actual performance over the past six years and expected changes. The discount rate used is a pre-tax rate and reflects the risk specific to the relevant business segment.

Opening balance

R’000

Additions through


R’000

Disposals through

business divestiture

R’000Total

R’000

Reconciliation of goodwill – Group – 2015

Goodwill 9 330 – – 9 330

Opening balance

R’000

Additions through


R’000

Disposals through

business divestiture

R’000Total

R’000

Reconciliation of goodwill – Group – 2014

Goodwill 45 042 1 194 (36 906) 9 330

5. Intangible assets

2015 2014

CostR’000


R’000

Carrying valueR’000

CostR’000


R’000

Carrying value

R’000

Group

Marketing and management contracts 96 099 (57 207) 38 892 96 099 (57 207) 38 892

Opening balance

R’000

Impairmentfollowing

discontinuedoperation

R’000Amortisation

R’000

Impairmentloss

R’000Total

R’000

Reconciliation of intangible assets – Group – 2015

Marketing and management contracts 38 892 – – – 38 892


5. Intangible assets continued

Opening balance

R’000

Impairmentfollowing

discontinuedoperations

R’000Amortisation

R’000

Impairment loss

R’000Total

R’000

Reconciliation of intangible assets – Group – 2014Customer related 2 336 (1 919) (417) – –Trade name 8 780 (8 238) (542) – –Marketing and management contracts 93 992 – – (55 100) 38 892

105 108 (10 157) (959) (55 100) 38 892

Details of impairment testingThe effective date of the impairment testing of the marketing and management contract intangible assets was 28 February 2015. Impairment testing was performed by an independent valuer, Anoop Ninan of Mazars are not connected to the Group and have been assigned to give an independent reasonable opinion of the value in use.

The impairment testing was based on IAS 36 Impairment of Assets and used the income approach. This is based on net present value derived using a discounted cash flow technique applied to the post-tax pre-finance cash flows. The computed real discount rate of 14,67% (2014: 11%) was calculated after considering the cost of capital, industry-specific matters, development risk, political risk, commodity risk and operational risk.

Commodity prices used to calculate cash flows are long-term index prices obtained from the independent research companies. Operating costs and capital expenditure have been adjusted for inflation.

There were no impairments for the current financial year. For prior year refer to note 17.

No amortisation was recognised for the current year as the Group had not received the mining right for the operations to commence and therefore not available for use.

6. Investments in subsidiaries – Company

% holding 2015

% holding 2014

Carrying amount

2015

Carrying amount

2014

Name of companyMetmar Trading Proprietary Limited 100,00 100,00 74 674 74 674Arengo 203 Proprietary limited 66,67 66,67 1 327 1 327Metmar Global Limited 100,00 100,00 15 15Metmar Logistics Proprietary Limited* 100,00 100,00 – –Metmar Investments and Resources Proprietary Limited 100,00 100,00 1 1Metmar FInance Proprietary Limited* 100,00 100,00 – –

Total 76 017 76 017

*Less than R1 000.

These investments are reviewed annually for any signs of impairment. The fair value of the largest investment, Metmar Trading Proprietary Limited, was assessed by taking the profit after tax for the past five years and multiplying it by a price earnings ratio of five. The fair value calculated was R250 million and it is not the Company’s policy to revalue its investments.

The remaining subsidiaries’ carrying value approximates their fair value.


NOTES


7. Investments in associates

% holding

2015% holding

2014

Carrying amount

2015R’000

Carrying amount

2014R’000

Fair value 2015

R’000

Fair value 2014

R’000

Name of companySefateng Chrome Mine Proprietary Limited 40,00 40,00 26 535 63 573 56 171 28 799Kivu Resources Limited (Registered in Mauritius) 32,43 32,43 – 30 041 – –FPT Mineral Terminal Limitada (Registered in Mozambique) 26,00 26,00 5 407 3 517 5 407 3 517

31 942 97 131 61 578 32 316Impairment reversal/(loss) of investments in associates – – 29 636 (64 815) – –

61 578 32 316 61 578 32 316

The investment held in FPT Mineral Terminal Limitada (FPT) is a storage and loading facility based in Maputo, Mozambique. Construction was completed in the previous financial year and operations are anticipated to begin in the next financial year and the investment is held at cost, net of any equity-accounted profit or loss. Once the investment is operational the Group will be able to provide a more substantive fair value measurement. This investment is in line with Metmar’s strategic objectives of providing a full spectrum of services to its clients.

The impairment reversal of the investment in Sefateng Chrome Mine Proprietary Limited (Sefateng) is due to the awarding of the mining right and the finalisation of the off-take agreement. In the prior year the impairment was due to the awarding of the mining right being delayed which resulted in material uncertainty regarding the future cash flows of the investment.

Sefateng was valued using a financial model based on the establishment of the mine and detailing the timing and extent of cash flows to be generated from the project. The model used was consistent with the expected life of the mine being 34 years and the valuation contained was on the income approach which is based on net present value (NPV) derived using the discounted cash flows (DCF) technique applied to the pre-tax pre-finance cash flows, using a discount rate of 15,49% after taking into account an inflation rate of 6,6%. A 10% increase in inflation rate to 7,26% will result in a 1,2% increase in the value of the investment while a 10% decrease to 5,94% will result in a 1% decline in the value of the investment. A 10% increase in the discount rate applied to 26% will result in a 1,6% decline in the value of the investment while a 10% decrease to 21,46% will result in an 1,5% increase in the value of the investment. The most important driver to the DCF is the Rand-equivalent commodity price assumption while other assumptions included production rates and the estimated life of mine, chrome recoveries and operating costs requirements.

Kivu Resources Limited was fully impaired in the 2014 financial year.

All Metmar’s associates are unlisted investments.

Summarised financial information of material associates2015

ExpenditureR’000

TotalR’000

Income and expenditureFPT Mineral Terminal Limitada 414 414Sefateng Chrome Mine Proprietary Limited 2 264 2 264

2 678 2 678

Total assetsR’000

Total liabilities

R’000

Total net assets

R’000

Assets and liabilitiesFPT Mineral Terminal Limitada 32 690 (27 920) 4 770Sefateng Chrome Mine Proprietary Limited 91 581 (90 015) 1 566

124 271 (117 935) 6 336


7. Investments in associates continued

Summarised financial information of material associates continued2015

Investment at beginning

of 2015R’000

Share of lossR’000

Loans to associates

R’000

Reversal of impairments

R’000

Investment in associate

R’000

Reconciliation of net assets to equity accounted investments in associatesFPT Mineral Terminal Limitada 3 517 (120) 2 010 – 5 407Sefateng Chrome Mine Proprietary Limited 28 799 (2 264) – 29 636 56 171

32 316 (2 384) 2 010 29 636 61 578

Summarised financial information of material associates2014

IncomeR’000

ExpenditureR’000

LossR’000

Income and expenditureFPT Mineral Terminal Limitada – 2 149 2 149Sefateng Chrome Mine Proprietary Limited – 3 801 3 801Kivu Resources Limited 8 295 34 504 26 209

8 295 40 454 32 159

Total assetsR’000

Total liabilities

R’000

Total net liabilities

R’000

Assets and liabilitiesFPT Mineral Terminal Limitada 89 892 (75 265) 14 627Sefateng Chrome Mine Proprietary Limited 82 466 (59 235) 23 231Kivu Resources Limited 104 397 (188 351) (83 954)

276 755 (322 851) (46 096)

Investment at beginning

of 2014R’000

Share of loss

R’000

Loans to associates

R’000Impairments

R’000

Investment atend of 2014

R’000

Reconciliation of net assets to equity- accounted investments in associatesFPT Mineral Terminal Limitada 1 468 (2 758) 4 807 – 3 517Sefateng Chrome Mine Proprietary Limited 61 851 (1 435) 3 157 (34 774) 28 799Kivu Resources Limited 26 476 (8 052) 11 617 (30 041) –

89 795 (12 245) 19 581 (64 815) 32 316

Sefateng Chrome Mine Proprietary Limited is incorporated and operates in South Africa. Its principal business is the exploration and mining of chrome assets. Metmar holds 40% interest in the issued share capital. The loan is interest free and payable on demand.

FPT Mineral Terminal Limitada (FPT) is incorporated and operates in Mozambique. Its principal business is the storage, containerisation and loading of bulk commodities. Metmar holds 26% interest in the issued share capital. The loan advanced to FPT is a shareholder’s loan. The loan is interest free and payable on demand.


NOTES


Group Company

2015R’000

2014R’000

2015R’000

2014R’000

8. Loans to/(from) Group companiesLoans advanced to subsidiariesMetmar Investments and Resources Proprietary LimitedThe above loan is current in nature as a result of trading activities between the companies and is interest free. – – 795 641 702 630Metmar Finance Proprietary LimitedThe above loan is current in nature as a result of trading activities between the companies and is interest free. – – 882 882Arengo 203 Proprietary Limited – – 13 222 12 983The above loan is unsecured, bears interest at prime rate plus 1% and is repayable on demand.

– – 809 745 716 495

Loans owing to subsidiariesMetmar Trading Proprietary LimitedThe above loan is current in nature as a result of trading activities between the companies and is interest free. – – (464 192) (416 211)Metmar Global Limited – – (525) (263)The above loan is current in nature as a result of trading activities between the companies and is interest free.

– – (464 717) (416 474)

Metmar Limited has provided a suretyship in respect of the obligations and indebtedness of Metmar Trading Proprietary Limited to the Banks.

The fair value approximates the carrying amount due to short-term maturity of the loans.

Current assets – – 809 745 716 495Current liabilities – – (464 717) (416 474)

– – 345 028 300 021


Group Company

2015 R’000

2014 R’000

2015 R’000

2014 R’000

9. Financial assetsAt fair value through other comprehensive incomeKalahari Resources Proprietary Limited14 unlisted shares of R1 each 192 900 192 900 – –

At fair value through profit or lossAlphamin Resources Corp (Canada) 9 894 830 listed shares of CAD$0,24 each (2014: CAD$0,39) 20 626 37 621 – –Afarak Group Plc (Finland) 5 211 916 listed shares disposed of during the year at EUR0,20 each (2014: EUR0,37) – 28 436 – 28 436

20 626 66 057 – 28 436

Total other financial assets 213 526 258 957 – 28 436

Non-current assetsAt fair value through other comprehensive income 213 526 230 521 – –

Current assetsAt fair value through profit or loss – 28 436 – 28 436

213 526 258 957 – 28 436

Reconciliation of financial assets at fair value through other comprehensive income measured at level 3 – Group – 2015

Closing balance

R’000

Opening balance

R’000

Kalahari Resources Proprietary Limited 192 900 192 900

Reconciliation of financial assets at fair value through other comprehensive income measure at level 3 – Group – 2014

Opening balance

R’000

Gain/(loss) through other

comprehensive incomeR’000

Increase in investment

R’000

Transfer to non-current

assets held-for-sale

(refer to note 17)R’000

Closing balance

R’000

Kalahari Resources Proprietary Limited 166 000 26 900 – – 192 900SA Metals Equity Proprietary Limited 28 500 (20 500) – (8 000) –Zimbabwe Alloys Chrome Private Limited 13 100 (16 910) 3 810 – –

207 600 (10 510) 3 810 (8 000) 192 900

Investment in Alphamin Resources Corp. shares as well as Afarak Group Plc shares are level 1 fair value measurements since their fair value is determined from quoted prices in the active Toronto Stock Exchange and Finland Stock Exchange markets respectively.

Other financial assets are classified as level 3 fair value measurement since its fair value determination is not based on observable market data. Discounted cash flow valuation methods were used to determine fair value. An independent valuation has been performed at year end for level 3 fair value measurements.

During the financial year 2013 the investment in Pering Base Metals Proprietary Limited was transferred to non-current assets held-for-sale. Investment in SA Metals Equity Proprietary Limited was transferred in the 2014 financial year. These investments are held at the expected disposal consideration at year end.

The investment in Zimbabwe Alloys Chrome Private Limited was written down to R nil in the previous financial year. The entity was put under final judicial management at the end of 2013. Metmar is an unsecured creditor and with there being in excess of US$20 million secured against the entity it was considered highly unlikely that there would be any distribution available for Metmar to recover.

Kalahari Resources Proprietary Limited was valued using a financial model based on the establishment of the mine and sinter plant detailing the timing and extent of cash flows to be generated from the project. The model used was consistent with the expected life of the mine being 22 years and the valuation contained was on the income approach which is based on net present value (NPV) derived using the discounted cash flows (DCF) technique applied to the pre-tax pre-finance cash flows, using a discount rate of 18,3% after taking into account an inflation rate of 6,6%. A 10% increase in inflation rate to 7,26% will result in a 4% increase in the value of the investment while a 10% decrease to 5,94% will result in a 3% decline in the value of the investment. A 10% increase in the discount rate applied to 20,13% will result in a 9% decline in the value of the investment while a 10% decrease to 16,47% will result in an 11% increase in the value of the investment. The most important driver to the DCF is the Rand-equivalent commodity price assumption while other assumptions included production rates and the estimated life of mine, metallurgical recoveries, operating costs and capital expenditure requirements. The NPV of the Kalagadi manganese project based on the Kalagadi model was calculated and due to this valuation it was subsequently revalued to its fair value as at 28 February 2015.


NOTES


10. Financial assets by categoryThe carrying amounts presented in the statements of financial position relate to the following categories of assets:

At amortised cost

R’000

Fair value through

profit or loss R’000

Fair value through other

comprehensive income

R’000Total

R’000

Group – 2015Cash and cash equivalents 23 408 – – 23 408Derivative financial instruments – 1 899 – 1 899Financial assets – 20 626 192 900 213 526Trade and other receivables (less prepayments and VAT receivable) 300 368 – – 300 368

323 776 22 525 192 900 539 201

Group – 2014Cash and cash equivalents 53 275 – – 53 275Derivative financial instruments – 4 568 – 4 568Financial assets – 66 057 192 900 258 957Trade and other receivables (less prepayments and VAT receivable) 432 520 – – 432 520

485 795 70 625 192 900 749 320

At amortised cost

R’000Total

R’000

Company – 2015Cash and cash equivalents 284 284Loans to Group companies 809 745 809 745Trade and other receivables (less prepayments and VAT receivable) 803 803

810 832 810 832

At amortised cost

R’000

Fair value through profit

or lossR’000

TotalR’000

Company – 2014Cash and cash equivalents 515 – 515Financial assets – 28 436 28 436Loans to Group companies 716 495 – 716 495Trade and other receivables (less prepayments) 1 025 – 1 025

718 035 28 436 746 471


Group Company

2015 R’000

2014 R’000

2015 R’000

2014 R’000

11. Deferred taxDeferred tax liabilityIntangible assets (10 898) (10 898) – –Revaluation, net of related depreciation (16 900) (15 308) – –

(27 798) (26 206) – –

Deferred tax assetLeave and bonus pay accruals 41 2 410 30 46Property, plant and equipment 1 859 1 516 – –Fair value of financial assets through profit and loss – – 8 478Income received in advance 139 380 – –Other 32 37 2 221 384Unrealised/unutilised tax losses 24 235 8 118 – –Adjustment for unrealised profit inter-company profit – 10 777 – –

26 306 23 238 2 259 908

Reconciliation of deferred tax (liability)/assetAt the beginning of the year (2 968) (33 105) 908 685Originating temporary difference intangible assets – 18 532 – –Increase in tax losses available for set off against future taxable income 16 117 (5 289) – –Originating/(reversing) temporary difference on revaluation of investments (1 592) 2 473 (470) (157)(Originating)/reversing temporary difference on leave and bonus pay accruals (2 369) 1 026 (16) 44Reversing temporary difference on property, plant and equipment 343 (683) – (48)Prior year underprovision – 4 441 – –Reversing temporary difference on income received in advance (241) (759) – –(Reversing)/originating temporary difference on other assets and liabilities (5) (381) 1 837 384Adjustment for unrealised inter-company profit (10 777) 10 777 – –

(1 492) (2 968) 2 259 908

Unrecognised deferred tax assetUnused tax losses not recognised as deferred tax assets, these losses relate to subsidiaries. These losses do not expire and may not be used to offset taxable income elsewhere in the Group. 46 816 29 108 8 206 6 806

12. Retirement benefitsDefined contribution planIt is the policy of the Group to provide retirement benefits to all its employees. A number of defined contribution provident funds, all of which are subject to the Pension Funds Act exist for this purpose.

The Group is under no obligation to cover any unfunded benefits. These amounts are included in employee costs in the operating expenses on the face of the statement of comprehensive income.

The total Group contribution to such schemes 4 105 4 045 568 533


NOTES


Group Company

2015 R’000

2014 R’000

2015 R’000

2014 R’000

13. Derivative financial instrumentsMetmar Trading Proprietary Limited uses forward foreign exchange contracts to mitigate exchange rate exposure arising from forecast sales in US Dollar and other currencies. Derivative financial instruments, consisting of forward foreign exchange contracts are initially measured at fair value on the contract date, and are remeasured to fair value at subsequent reporting dates.

Changes in the fair value of derivative financial instruments are recognised in profit and loss when they arise.

Derivative financial assetForward exchange contracts 1 899 4 568 – –The fair values for these contracts have been estimated using relevant market exchange rates based on the market-to-market exchange at 28 February 2015.Metmar Trading Proprietary Limited’s US Dollar forward contracts relate to cash flows that have been forecast based on future orders from March to February 2016.

14. InventoriesCommodities 430 670 562 958 – –Finished goods 426 426 – –Raw materials, components 1 292 2 545 –

432 388 565 929 – –Inventory write downs (2 726) (18 097) – –

429 662 547 832 – –

Inventory pledged as security

Inventories of R389 145 882 (2014: R507 597 074) were pledged as security for trade finance facilities of the Group. Refer to note 22.

15. Trade and other receivablesSundry debtors and deposits 9 839 3 531 – –Prepayments 4 626 16 262 – 1 630Trade receivables 290 529 428 989 803 1 025VAT recoverable 13 294 59 191 328 1 771

318 288 507 973 1 131 4 426

Trade and other receivables pledged as securityTrade and other receivables of R248 610 373 (2014: R391 339 848) were pledged as security for trade finance facilities of the Group. At year end the facility amounted to R577 215 240 (2014: R854 716 553). Refer to note 22.

The carrying amount of trade and other receivables approximates its fair value largely due to the short-term maturities of these instruments.

Trade receivables are non-interest-bearing and are generally on terms between 30 and 180 days, depending on the underlying commodity.

Fair value of trade and other receivablesAll of the Group’s trade and other receivables have been reviewed for indications of impairment. Impaired receivables amounted to R42 377 782 (2014: R9 886 473), and has been accounted for in other operating expenses. These trade and other receivables were impaired because they were long outstanding and management assessed that there was a high probability that they would not be paid.

Trade and other receivables past due date but not impairedSome of the unimpaired trade receivables are past due date as at the reporting date. The total amount of trade receivables more than three months outstanding that are past due but unimpaired is R9 235 943 (2014: R7 820 356). These trade and other receivables are considered recoverable.


Group Company

2015 R’000

2014 R’000

2015 R’000

2014 R’000

16. Cash and cash equivalentsCash and cash equivalents consist of:Bank balances 16 502 46 067 284 515Bank overdraft (20 623) (6) – –Short-term deposits 6 906 7 208 – –

2 785 53 269 284 515

Current assets 23 408 53 275 284 515Current liabilities (20 623) (6) – –

2 785 53 269 284 515

Bank overdrafts are secured by cessions of unlimited suretyships (incorporating cessions of claims) including cession of loan funds owing by subsidiary companies and a cession of all present and future debtors.

Cash and cash equivalents approximates its fair value due to the short-term maturities of these instruments.

17. Discontinued operations and non-current assets and liabilities held-for-sale

Non-current assets held-for-saleThe decision was made by the board in the previous year to dispose of 24 Sloane Street Properties Proprietary Limited due to the relocation of the Company’s offices to a new building owned by Arengo 203 Proprietary Limited (see note 40). Proceeds from disposal amounted to R12,8 million (see note 42.2).

Discontinued operationsThe decision was made by the board in the previous year to discontinue and dispose of the operations of West African Group division due to a management buy-out of the division and was disposed of for R53,7 million (refer below and see note 42.1).The decision was made by the board in the previous year to discontinue the operations in Clay Fusion Technologies Proprietary Limited due to the lack of a reasonable return on the investment as well as it being a non-core asset. All assets were written down to R nil and are available for sale. Refer below.

Group Company

2015 R’000

2014 R’000

2015 R’000

2014 R’000

(Loss)/profit from discontinued operations of the West African GroupRevenue – 182 268 – –Expenses – (176 877) – –

Net profit before tax 5 391Tax – (1 651) – –Net profit after tax 3 740Profit on sale of discontinued operation – 19 170 – –Goodwill and intangibles written off (net of tax of R3 112 275) – (44 909) – –

– (21 999) – –

Openingbalance

R’000Disposals

R’000Impairments

R’000

Loss throughother

comprehensiveincome

R’000Total

R’000

Reconciliation of non-current assets held-for-sale – 2015Property, plant and equipment 100 (100) – – –Pering Base Metals Proprietary Limited 1 000 – – – 1 000SA Metals Equity Proprietary Limited 8 000 – – – 8 000Intangible assets 80 – – – 80

9 180 (100) – – 9 080

Reconciliation of non-current assets held-for-sale – 2014Property, plant and equipment 10 692 (6 692) (3 900) – 100Pering Base Metals Proprietary Limited 25 870 – – (24 870) 1 000SA Metals Equity Proprietary Limited 8 000 – – – 8 000Intangible assets 80 – – – 80

44 642 (6 692) (3 900) (24 870) 9 180


NOTES


17. Discontinued operations and non-current assets and liabilities held-for-sale continued

Group Company

2015 R’000

2014 R’000

2015 R’000

2014 R’000

Non-current assets held-for-saleProperty, plant and equipment – 100 – –Pering Base Metals Proprietary Limited 1 000 1 000 – –SA Metals Equity Proprietary Limited 8 000 8 000 – –Intangible assets 80 80 – –

9 080 9 180 – –

Non-current liabilities held-for-sale for Clay Fusion Technologies Proprietary LimitedFinancial liabilities 2 707 2 707 – –Trade and other payables 3 692 3 692 – –

6 399 6 399 – –

These investments are available for immediate sale in its present condition and management remains committed in finding an active buyer for these investments.

18. Share capitalAuthorised

500 000 000 ordinary shares of R0,05 each 25 000 25 000 25 000 25 000

Reconciliation of number of shares issued

Reported as at 28 February 2015/28 February 2014 267 306 552 267 306 552 267 306 552 267 306 552

The unissued ordinary shares are under the control of the directors in terms of a resolution of shareholders passed at the last annual general meeting. Issued share capital of the Group comprises R721 525 of Metmar Trading Proprietary Limited’s shares and all shares issued subsequently to the business combination.

IssuedOrdinary 5 319 5 319 13 365 13 365Share premium 154 686 154 686 244 790 244 790

160 005 160 005 258 155 258 155

19. Revaluation reserveIn terms of the memorandum of incorporation the revaluation reserve is distributable.Revaluation of investments 172 900 172 900 – –Impairment of investments (79 000) (79 000) – –Deferred tax on revaluation of investments (17 508) (17 508) – –

76 392 76 392 – –

20. Financial liabilitiesHeld at amortised costMortgage bondsTufflex Plastic Products Proprietary Limited 1 051 1 223 – –> Mortgage bond secured by land and buildings described

in note 3, for a period of 10 years at prime lending rate less 1%

Metmar Trading Proprietary Limited 652 718 – –> Mortgage bond secured by land described in note 3, for a

period of 20 years at prime lending rate less 1%.

Bank loan – 6 923

The purpose of the loan facility was for utilisation towards partial payment of the purchase price pertaining to the acquisition by Metmar Investments and Resources Proprietary Limited of an additional 60% of Eastern Belt Chrome Mines Proprietary Limited (EBCM).


Group Company

2015 R’000

2014 R’000

2015 R’000

2014 R’000

20. Financial liabilities continuedHeld at amortised cost continuedMortgage bonds continuedThe rate of interest is the percentage rate per annum which is the aggregate of the applicable margin (350 basis points) and the base rate (three-month JIBAR).

Final maturity of the loan is three years from draw-down date being 28 September 2011.

The interest calculation date and the repayment date are the last day of February, May, August and November in each year until the maturity dates.

Asset finance agreement covering the purchase of a recycling plant for Tufflex Plastics Products Proprietary Limited, for a period of 60 months at 0,75% per annum below the prime lending rate.

912 1 269 – –

Deferred purchase considerations 431 – – –Payment made to Harry Rombouts for the purchase of his 50% shareholding in Tufflex Plastic Products Proprietary Limited (Tufflex). According to the restructuring of Tufflex the 50% was sold directly to a consortium of investors at the same time. The consortium paid in cash and Mr Rombouts opted to receive his payment in instalments of R83 621 per month with the final payment of R23 749 due and payable on the last day of August.

Standard Bank mortgage bond 37 350 – – –The mortgage bond is secured by land and buildings (refer note 3). Repayable over 60 months and the interest rate is prime less 0,25%.

Other liabilities 9 372 48 271 – –This loan funded the purchase of the building owned by Arengo 203 Proprietary Limited. This loan is unsecured, repayable over 60 months and interest is charged at prime rate.

49 768 58 404 – –

Non-current liabilitiesAt amortised cost 47 143 2 759 – –

Current liabilitiesAt amortised cost 2 625 55 645 – –

49 768 58 404 – –

The carrying values of these financial liabilities approximate their fair value.

All these financial liabilities are market related and are at an arm’s length with reputable counter parties.

21. Instalment sale agreementsMinimum lease payments due– within one year 103 – – –– in second to fifth year inclusive 291 – – –

394Less: Future finance charges (65) – – –

Present value of minimum lease payments 329 – – –

Present value of minimum lease payments due– within one year 103 – – –– in second to fifth year inclusive 226 – – –

329 – – –


NOTES


Group Company

2015 R’000

2014 R’000

2015 R’000

2014 R’000

21. Instalment sale agreements continued

This agreement is in relation to motor vehicles that were purchased over a four-year period.The average terms were between one and five years and the average effective borrowing rate was 10%.Interest rates are variable and linked to prime. All instalment sale agreements were on a fixed repayment basis and no arrangements were entered into for contingent rental payments.The Group’s obligations under instalment sale agreements were secured by lessor’s charges over the leased assets.

22. Trade finance facilitiesAbsa Bank Limited 17 098 19 106 – –China Construction Bank Corporation 439 995 754 956 – –Nedbank Limited 34 266 20 510 – –Standard Bank of South Africa Limited 42 256 60 145 – –Standard Chartered Bank Limited 43 600 – – –

577 215 854 717 – –

The facilities comprise transactional trade and commodity finance facilities and are secured as follows: • Certain inventories of the Group (refer to note 14) • Trade and other receivables owing to the Group

(refer to note 15) • Letters of credit received in favour of Metmar Trading

Proprietary Limited

Current interest rates are variable and averaged 8,28% per annum (2014: 7,78% per annum).

These facilities are uncommitted and payable on demand.

The banks continue to support the Group despite the breach of certain covenants at financial year end. The covenants breached relate to profit or loss measurements and have been breached due to current year losses. For further information please refer to note 49, which details the going concern for the Group.

Fair value of trade finance facilitiesThe carrying amount of trade finance facilities approximates their fair value.

23. Trade and other payablesOther payables and accruals 45 666 32 314 8 069 2 058Trade payables 184 898 137 445 58 296 11 943VAT payable to SARS 1 598 6 551 – –

232 162 176 310 66 365 14 001

Fair value of trade and other payablesTerms and conditions of the above financial liabilities: • Trade payables are non-interest-bearing and are normally

settled on 30-day terms with suppliers • Other payables and accruals are non-interest-bearing and

have an average term of three to six months

The carrying amounts of trade and other payables approximate their fair value due to short-term maturities of these instruments.


Financial liabilities at

amortised cost

R’000Total

R’000

24. Financial liabilities by categoryThe carrying amounts presented in the statement of financial position relate to the following categories of liabilities:Group – 2015Instalment sale agreements 329 329Financial liabilities 49 768 49 768Trade and other payables (excluding VAT payable) 230 564 230 564Bank overdraft 20 623 20 623Trade finance facilities 577 215 577 215

878 499 878 499

Company – 2015Loans from Group companies 464 717 464 717Trade and other payables (excluding VAT payable) 66 365 66 365

531 082 531 082

Group – 2014Financial liabilities 58 404 58 404Trade and other payables (excluding VAT payable) 169 759 169 759Bank overdraft 6 6Trade finance facilities 854 717 854 717

1 082 886 1 082 886

Company – 2014Loans from Group companies 416 474 416 474Trade and other payables (excluding VAT payable) 14 001 14 001

430 475 430 475

Group Company

2015R’000

2014R’000

2015R’000

2014R’000

25. RevenueSale of goods 1 951 260 2 097 435 – –

26. Cost of salesSale of goodsCost of goods sold 1 458 710 1 576 867 – –Transport costs 378 871 337 505 – –Commissions paid 28 852 47 921 – –

1 866 433 1 962 293 – –

27. Other incomeAdministration and management fee 1 530 – 73 259Profit on foreign exchange – 5 375 – –Rental income 5 059 – 2 064 2 660Gain on disposal of 24 Sloane Street Properties Limited – 9 124 – 6 489Operating cost recoveries* 2 995 6 249 – –

9 584 20 748 2 137 9 408

*Operating cost recoveries as set out above are charged to tenants in the Group’s property management company Arengo 203 Proprieties Limited.


NOTES


Group Company

2015R’000

2014R’000

2015R’000

2014R’000

28. Operating (loss)/profitOperating (loss)/profit for the year is stated after accounting for the following:Operating lease chargesPremises • Straight-line amounts 279 5 643 13 081 7 628

Motor vehicles • Contractual amounts 309 250 – –

Equipment • Contractual amounts 60 588 – –

Lease rentals on office equipment • Contractual amounts 463 308 – –

Lease rentals on operating lease – other • Contractual amounts 12 1 031 2 454 2 490

Loss on sale of property, plant and equipment 1 003 1 521 – 14Loss on sale of Afarak Group Plc shares 9 492 – 4 218 –Impairment on property, plant and equipment (refer note 3) 752 3 574 – –Impairment on non-current assets held-for-sale (refer note 17) – 3 900 – –Impairment on intangible assets (refer note 5) – 55 100 – –Inventory written down (refer note 14) 2 726 18 097 – –Impairment on trade and other receivables (refer note 15) 42 378 9 886 – –Loss)/(profit) on exchange differences 7 064 (5 375) – –Amortisation of intangible assets (refer note 5) – 959 – –Depreciation on property, plant and equipment (refer note 3) 5 923 6 217 – –Employee costs 56 740 56 638 10 742 11 306

29. Finance incomeInterest incomeBank balances 6 346 1 657 – 10Financing effect on sales and trade receivables 2 952 10 083 – –Interest on loan account 1 575 1 677 – –

10 873 13 417 – 10

Trade receivables are discounted to present value using the Group’s bank deposit rate of 5,75%.

30. Fair value adjustments(Loss)/gain on revaluation of investment in Alphamin Resources Corp shares (20 995) 17 765 – –Gain on revaluation of investment in Afarak Group Plc shares – 841 – 841

(20 995) 18 606 – 841

31. Finance costsBank overdrafts and contracts 11 084 7 457 – –Financing effect on purchases and trade payables 50 284 33 500 4 946 2 140(Reversal)/late payment of tax (145) 402 – –Contract interest 13 751 22 978 – –

74 924 64 337 4 946 2 140

Trade payables are discounted to present value using the current repo rate of 9,25%.

Contract interest relates to the financing costs of the Group’s contract financing facilities set out in note 22.


Group Company

2015R’000

2014R’000

2015R’000

2014R’000

32. TaxationMajor components of the tax expense/(income)CurrentSouth African normal taxation – current 7 445 15 371 6 717 1 269South African normal taxation – prior period 164 2 763 – –Capital gains taxation – profit on sale of subsidiary – 1 269 – 1 269

7 609 19 403 6 717 2 538

DeferredOverstatement for prior period – (3 464) – –Originating and reversing temporary differences (2 705) (20 875) (1 351) (223)

(2 705) (24 339) (1 351) (223)

4 904 (4 936) 5 366 2 315

Reconciliation of the tax expenseReconciliation between applicable tax rate and average effective tax rate.

Group Company

2015%

2014%

2015%

2014%

Applicable tax rate 28,00 28,00 28,00 28,00

Capital gains tax (7,06) (0,25) (16,30) (6,80)Other non-deductible expenditure (11,96) (22,99) (4,50) 9,80Prior year adjustment (0,12) (0,49) – (5,80)Tax losses not recognised (12,85) (17,78) (20,70) (38,00)Unutilised tax losses – 6,51 – –Impairment of intangibles – 10,99 – –Adjustment for unrealised profit – 7,40 – –

(3,99) 11,39 (13,50) (12,80)After tax (loss)/income from associate 0,48 (8,41) –

(3,51) 2,98 (13,50) (12,80)

33. Auditors’ remunerationFees 1 718 1 611 506 611Consulting and fees for foreign operations 525 457 10 –

Tax and secretarial services 251 22 71 181

2 494 2 090 587 792


NOTES


Group Company

2015R’000

2014R’000

2015R’000

2014R’000

34. Loss per shareBasicLoss for the year after taxation attributable to owners of the Group (145 853) (162 729) – –– from continuing operations (145 853) (140 730) – –– from discontinued operations – (21 999) – –Weighted average number of Metmar Limited shares in issue 267 306 552 267 306 552 – –

Basic and diluted (loss)/earnings per share (54,6) (60,9) –– from continuing operations (54,6) (52,7) – –– from discontinued operations – (8,2) – –

HeadlineReconciliation between basic loss and headline lossLoss for the year after taxation (145 853) (162 729) – –Adjustments for:Gain on disposal of 24 Sloane StreetProprietary Limited (net of taxation) – (9 106) – –Taxation effect on gain on disposal of 24 Sloane StreetProprietary Limited – 1 214Gain on disposal of West African Group division (refer note 42.1) – (19 170) – –Write off of goodwill following discontinued operations (refer note 4) – 36 906 – –Write off of intangible assets – 42 336 – –Taxation effect on write off of intangibles (9 832) – –(Reversal of)/impairment of associates (refer note 7) (29 636) 64 815Impairment of property, plant and equipment (refer note 3) 752 3 574 – –Impairment of non-current assets held-for-sale – 3 900 – –Loss on sale of property, plant and equipment 1 003 1 521 – –Taxation effect on loss on sale of property, plant andequipment (281) (415)

Headline loss (174 015) (46 986) – –Weighted average number of shares in issue 267 306 552 267 306 552 – –

Headline and diluted headline loss per share in cents (65,1) (17,6) – –


GrossR’000

TaxR’000

Net before non-

controlling interest

R’000

Non-controlling

interestR’000

NetR’000

35. Other comprehensive incomeComponents of other comprehensive income – Group – 2015Exchange differences on translating foreign operations

Exchange differences arising during the year (1 650) – (1 650) 824 (826)

Components of other comprehensive income – Group – 2014Exchange differences on translating foreign operations Exchange differences arising during the year 6 509 – 6 509 (2 497) 4 012

Movements on revaluation Gain on revaluation of investments (refer note 9) 6 400 (1 195) 5 205 – 5 205Loss on revaluation of investment (refer note 17) (24 870) 4 643 (20 227) – (20 227)Loss on revaluation of investments (foreign operations) (refer to note 9) (16 910) – (16 910) 7 873 (9 037)

(35 380) 3 448 (31 932) 7 873 (24 059)

Total (28 871) 3 448 (25 423) 5 376 (20 047)

Group Company

2015R’000

2014R’000

2015R’000

2014R’000

36. Cash generated from/(used in) operationsLoss before taxation (142 155) (165 714) (39 629) (17 955)Adjustments for:Depreciation 5 923 6 217 – –Loss on sale of property, plant and equipment 1 003 1 521 – 14Loss from equity-accounted investments 2 384 12 245 – –Interest received (10 873) (13 417) – (10)Finance costs 74 924 64 337 4 946 2 140Fair value adjustments 20 995 (18 606) – (841)Impairment loss excluding discontinued operations (refer note 39) 16 220 155 372 – –Gain on sale of 24 Sloane Street Properties (refer note 42.2) – (9 124) – (6 489)Realised loss on sale of Afarak Group Plc shares 9 492 – 4 218 –Changes in working capital:Inventories 115 404 (233 395) – –Trade and other receivables 147 033 (144 758) 3 294 4 735Trade and other payables 55 852 1 947 52 364 (11 401)Trade finance facilities (277 502) 385 258 – –

18 700 41 883 25 193 (29 807)


NOTES


Group Company

2015R’000

2014R’000

2015R’000

2014R’000

37. Tax (paid)/refundedBalance at the beginning of the year (3 633) 1 683 (4 120) (2 187)Current tax for the year recognised in statements of comprehensive income (7 609) (19 403) (6 717) (2 538)Adjustment in respect of businesses sold and acquired during the year – 3 714 – –Balance at the end of the year 7 850 3 633 11 147 4 120

(3 392) (10 373) 310 (605)

38. Cash flows of held-for-sale/discontinued operationsLoss from discontinued operations – (23 036) – –Add back non-cash items – 28 799 – –

– 5 763 – –

39. Impairments and write-downsImpairment of property, plant and equipment (refer note 3) 752 3 574 – –Impairment on non-current assets held-for-sale (refer note 17) – 3 900 – –Impairment of intangible assets (refer note 5) – 55 100 – –(Reversal of)/impairment of associates (refer note 7) (29 636) 64 815 – –Write down of inventories (refer note 14) 2 726 18 097 – –Impairment of trade and other receivables (refer note 15) 42 378 9 886 – –

16 220 155 372 – –

The above impairments and write-downs are considered material by the Group’s management and have been disclosed separately.

40. Business combinationAggregated business combinationsProperty, plant and equipment – 68 306 – –Investments in subsidiaries – – – 1 327Trade and other receivables – 1 404 – –Cash and cash equivalents – 456 – –Financial liabilities – (65 348) – –Trade and other payables – (4 618) – –

Total identifiable net assets – 200 – 1327Non-controlling interest – (67) – –Goodwill – 1 194 – –

– 1 327 – 1 327

Consideration paidCash – (1 327) – (1 327)

Net cash outflow on acquisitionCash consideration paid – (1 327) – (1 327)Cash acquired – 456 – –

– (871) – (1 327)

Arengo 203 Proprietary Limited

On 1 September 2013 Metmar exercised its option to acquire 66,7% of the voting equity interest of Arengo 203 Proprietary Limited which resulted in the Group obtaining control over Arengo 203 Proprietary Limited. The purchase enabled Metmar to acquire the property in which it currently resides. Goodwill arose due to the fact that the purchase price was agreed a year prior and this price was increasing monthly at an interest rate of 18% until the option was exercised.


41. Segment reportingIn identifying its operating segments, management follows the procedure of distinguishing investment in resource-basedoperations from the trading activities of the Group.

The Group has accordingly used the following factors to identify reportable segments worldwide which are Investments and Tradingand their activities are: • Investments segment invests through taking equity and providing project loan funding in mining and logistics projects in order to

secure product off-take and logistics infrastructure. Investments earns interest and dividends but also does limited trading especially in Zimbabwe through a company registered there for trading purposes.

• trading segment to include commodities trading activities of the Group through spot deals and off-take agreements signed from Investments’ investee companies and any other off-takes.

As a commodities trader and financial and logistics facilitator, Metmar is focused on developing assets and revenue related to the trading and production of a diverse range of bulk commodities.

There have been no aggregation of the two segments identified as: • investments; and • trading.

The Chief Operating Decision Maker (CODM) evaluates the performance of the Group’s segments based on earnings before interest,taxation, depreciation and amortisation.

Included in the management reports reviewed by the CODM are summaries of depreciation and amortisation expense related toeach of the segments, even though these amounts are not allocated within the segment results reported.

No allocations of interest or taxation are made and only entity-wide amounts for these items are reported to the CODM.

Each of these operating segments is managed separately as each of these service lines requires different processes and otherresources as well as marketing approaches. All inter-segment transfers are carried out at arm’s length prices.

The measurement policies the Group uses for the segment reporting under IFRS 8 are the same as those used in its annual financialstatements, except that: • post-employment benefit expenses; • expenses relating to share-based payments; • research costs relating to new business activities; and • revenue and sales,

are not included in arriving at the operating profit of the operating segments in prior periods. The measurement methods used todetermine reported segment profit or loss included allocations of the amounts described above.

Management currently identifies the Group’s two activities as operating segments. These operating segments are monitored asstrategic decisions are made on the basis of segment operating results.

Tradingactivities

R’000

Investmentactivities

R’000

Adjustmentsand

eliminationsR’000

TotalR’000

Segment report – Group28 February 2015Revenues – external customersSegment revenues 1 931 442 42 597 (22 779) 1 951 260 Net finance costs (43 200) (12 038) (8 813) (64 051)Depreciation and amortisation of non-financial assets (692) (2 505) (2 726) (5 923)

1 887 550 28 054 (34 318) 1 881 286

Segment revenuesTotal segment revenues 1 931 442 42 597 (22 779) 1 951 260 Other income 1 900 5 615 2 069 9 584

1 933 342 48 212 (20 710) 1 960 844

Earnings before interest, tax, depreciation and amortisation (“EBITDA”)

Operating profit/(loss) 8 521 (62 043) 15 017 (38 505)Depreciation 692 2 505 2 726 5 923

9 213 (59 538) 17 743 (32 582)


NOTES


41. Segment reporting continued

Tradingactivities

R’000

Investmentactivities

R’000

Adjustmentsand

eliminationsR’000

TotalR’000

Segment report – Group continued28 February 2015 continuedSegment profit or lossSegment operating profit/(loss) 8 521 (62 043) 15 017 (38 505)Impairments (31 311) 15 651 (560) (16 220)Fair value adjustments – (20 995) – (20 995)Net finance costs (43 200) (12 038) (8 813) (64 051)Loss from equity accounted investment – (2 384) – (2 384)

Profit/(loss) before taxation (65 990) (81 809) 5 644 (142 155)Taxation 12 208 715 (17 827) (4 904)

(53 782) (81 094) (12 183) (147 059)Discontinued operations – – – –

Profit/(loss) for the year (53 782) (81 094) (12 183) (147 059)

Segment assets 1 060 947 496 449 (338 256) 1 219 140

1 060 947 496 449 (338 256) 1 219 140

Segment liabilities 747 737 782 602 (604 711) 925 628

747 737 782 602 (604 711) 925 628

Segment report – Group28 February 2014Revenues – external customersSegment revenues 2 059 801 234 001 (196 367) 2 097 435 Net finance costs (31 114) (15 025) (4 781) (50 920)Depreciation and amortisation of non-financial assets (1 303) (3 468) (1 446) (6 217)

2 027 384 215 508 (202 594) 2 040 298

Segment revenuesTotal segment revenues 2 059 801 234 001 (196 367) 2 097 435 Other income 8 212 14 318 (1 782) 20 748

2 068 013 248 319 (198 149) 2 118 183

Earnings before interest, tax, depreciation and amortisation (“EBITDA”)

Operating profit/(loss) 80 737 46 172 (92 692) 34 127Depreciation 1 303 3 468 1 446 6 217

82 040 49 640 (91 246) 40 434

Segment profit or lossSegment operating profit/(loss) 80 737 46 172 (92 692) 34 217 Impairments (7 944) (145 486) (1 942) (155 372)Fair value adjustments 8 792 (28 918) 38 732 18 606 Net finance costs (31 114) (15 025) (4 781) (50 920)Loss from equity accounted investment – (12 245) – (12 245)

Profit/(loss) before taxation 50 471 (155 502) (60 683) (165 714)Taxation (15 682) 15 346 5 272 4 936

34 789 (140 156) (55 411) (160 778)Discontinued operations (21 575) – (424) (21 999)

Profit/(loss) for the year 13 214 (140 156) (55 835) (182 777)

Segment assets 1 346 655 488 251 (264 568) 1 570 338

1 346 655 488 251 (264 568) 1 570 338

Segment liabilities 979 661 685 520 (537 192) 1 127 989

979 661 685 520 (537 192) 1 127 989


Group Company

2015R’000

2014R’000

2015R’000

2014R’000

42. Sale of businesses42.1 Sale of West African Group division

Carrying value of assets soldProperty, plant and equipment – (1 498) – –Deferred tax assets/liabilities – (1 228) – –Inventories – (91 004) – –Trade and other receivables – (187 356) – –Trade and other payables – 146 002 – –Tax assets/liabilities – 5 787 – –Finance lease obligation – 931 – –Bank overdrafts – 96 335 – –Cash – (1 728) – –Derivative financial instruments – (818) – –

Total net assets sold – (34 577) – –Gain on disposal of division – (19 170) – –

Net assets sold – (53 747) – –Cash and cash equivalents disposed of – (94 606) – –

– (148 353) – –

Consideration receivedCash – 53 747 – –Cash and cash equivalents disposed of – 94 606 – –

– 148 353 – –

During the previous financial year, a decision was taken to dispose of the West African Group (WAG) to its management in a transaction valued at R53,7 million. The disposal of WAG resulted in an operating profit before tax of R5,4 million in 2014 excluding a before tax goodwill and intangibles write down of R36,9 million and R10,2 million respectively. In addition the Group realised a capital profit on the sale of WAG’s assets of R19,2 million.

Details of the transaction are set out above and reference can be made to notes 4, 5 and 17.

Group Company

2015R’000

2014R’000

2015R’000

2014R’000

42.2 Sale of 24 Sloane Street Properties Proprietary LimitedCarrying value of assets soldProperty, plant and equipment – (3 642) – –Investment in 24 Sloane Street Properties Proprietary Limited – – – (3 830)Loan – 24 Sloane Street Properties Proprietary Limited – – – (2 471)Deferred tax assets/liabilities – 20 – –Trade and other receivables – (1) – –Trade and other payables – 8 – –Tax assets/liabilities – (51) – –

Total net assets sold – (3 666) – (6 301)Gain on disposal – (9 124) – (6 489)

– (12 790) – (12 790)

Consideration receivedCash – 12 790 – 12 790

The sale of 24 Sloane Street Properties Proprietary Limited was due to the relocation of the offices of the Group.

Net cash outflow on acquisitionCash consideration received – 66 537 – 12 790Cash sold – 94 606 – –

– 161 143 – 12 790


NOTES


Group Company

2015R’000

2014R’000

2015R’000

2014R’000

43. CommitmentsOperating leases – as lessee (expense)Minimum lease payments due– within one year 103 – 9 916 2 543– in second to fifth year inclusive 226 – 49 580 6 992– later than five years – – 16 527 –

329 – 76 023 9 535

Operating lease payments represent rentals payable by the Company for its office property and for the Group certain motor vehicles. Leases have a remaining term of seven years for property and four years for motor vehicles. Rentals are increased by 10% per annum for the duration of the lease. No contingent rent is payable.

44. Related partiesSubsidiary relationships Arengo 203 Proprietary Limited Metmar Industrial Proprietary Limited Bolepu Holdings Proprietary Limited Metmar Mauritius Limited Clay Fusion Technologies Proprietary Limited Metmar Investments and Resources Proprietary Limited Eastern Belt Chrome Mines Proprietary Limited Metmar Specialty Metals Proprietary Limited Norcape Logistics Proprietary Limited Metmar Trading Proprietary Limited Metmar Logistics Proprietary Limited Metmar Zimbabwe Private Limited Metmar Africa Limited Phillip Le Roux Proprietary Limited Metmar Finance Proprietary Limited Steelpoort Chrome Mines Proprietary Limited Metmar Global Limited Tufflex Plastic Products Proprietary Limited Associate relationships FPT Mineral Terminal Limitada (registered in

Mozambique) Sefateng Chrome Mine Proprietary Limited

Members of key management PP BoshoffMF de WetDJ EllwoodSMS NkosiA Swart

Related party balances

Group Company

2015R’000

2014R’000

2015R’000

2014R’000

Loan accounts – owing (to)/by related parties (refer to note 8)Arengo 203 Proprietary Limited 13 222 12 983Metmar Finance Proprietary Limited 882 882Metmar Global Limited (525) (263)Metmar Investments and Resources Proprietary Limited 795 641 702 630Metmar Trading Proprietary Limited (464 192) (416 211)PB Boshoff (4 115) –GP Lotis (4 000) –

336 913 300 021

Related party transactionsRent paid to related partiesArengo 203 Proprietary Limited 13 406 3 759

13 406 3 759

Cost recoveries paid to related partiesArengo 203 Proprietary Limited 2 443 1 459

Administration fees received from related partiesSefateng Chrome Mine Proprietary Limited 1 530 – – –

African Dragon Shipping Brokers Proprietary LimitedAfrican Dragon Brokers Proprietary Limited (ADSB) is a company owned by the spouse of a member of key management. The three-year ship broking agreement entitles ADSB to a commission of between 1,25% and 2,5%. The commission is paid by the ship owner on a transparent basis. The member of key management is neither a shareholder nor a director and does not receive any income from ADSB. The spouse has the skills, expertise and qualifications of a ship broker.

45. Remuneration of key management personnelKey management of the Group are members of the board of directors whose emoluments are disclosed in note 46.


SalaryR’000

BonusesR’000

Retirement benefitR’000

TotalR’000

46. Directors’ and prescribed officers’ emolumentsExecutive2015PP Boshoff 4 258 365 120 4 743GP Lotis 4 225 365 153 4 743DJ Ellwood 4 138 365 240 4 743SMS Nkosi 2 007 170 60 2 237

14 628 1 265 573 16 466

2014PP Boshoff 4 258 – 120 4 378DJ Ellwood 4 138 – 240 4 378GP Lotis 4 225 – 153 4 378SMS Nkosi 1 815 220 60 2 095

14 436 220 573 15 229

Directors’ fees

R’000Total

R’000

Non-executive2015TI Borman 189 189D Earp 483 483D Mashile-Nkosi* 215 215L Matteucci* 502 502K Moroka* 130 130R Still 454 454

1 973 1 973

2014TI Borman 185 185CB Brayshaw 334 334D Earp 431 431D Mashile-Nkosi 241 241L Matteucci 560 560K Moroka 227 227

1 978 1 978

SalaryR’000

BonusesR’000


TotalR’000

Prescribed officers2015MF de Wet 1 875 154 262 2 291

SalaryR’000

BonusesR’000


Compensation for loss of office

R’000

Travel allowance

R’000Total

R’000

2014BB Hean 684 – 107 399 80 1 270MF de Wet 1 850 195 258 – – 2 303

2 534 195 365 399 80 3 573


NOTES


47. Risk managementCapital risk managementThe Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio.

This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including “current and non-current borrowings” as shown in the statements of financial position) less cash and cash equivalents. Total capital is calculated as “equity” as shown in the statements of financial position plus net debt.

The Group’s strategy is to maintain a gearing ratio of between 60% to 80%.

The gearing ratio at 2015 and 2014 respectively was as follows:

Group Group

Note

2015R’000

2014R’000

2015R’000

2014R’000

Total borrowingsLoans to/(from) Group companies 8 – – 464 717 416 474Instalment sale agreement 21 329 – – –Other financial liabilities 20 49 768 58 404 – –

50 097 58 404 464 717 416 474Less: Cash and cash equivalents 16 2 785 53 269 284 515

Net debt 47 312 5 135 464 433 415 959Total equity 293 712 442 349 347 207 392 202

Total capital 341 024 447 484 811 640 808 161

Gearing ratio 13,87% 1,15% 57,22% 51,47%

Liquidity risk analysisMetmar manages its liquidity needs by carefully monitoring scheduled debt servicing payments for long-term liabilities as well as cash outflows due in day-to-day business. Liquidity needs are monitored in various time bands, on a day-to-day and week-to-week basis, as well as on the basis of a rolling 30-day projection. The Group manages liquidity risk through an ongoing review of future commitments and credit facilities.

As at 28 February 2015, Metmar’s liabilities have contractual maturities which are summarised below:

Less than 1 yearR’000

Between 1 and 2 years

R’000

Between 2 and 5 years

R’000

Over 5 years

R’000

GroupAt 28 February 2015Financial liabilities at amortised cost 2 625 47 143 – –Bank overdraft 20 623 – – –Trade and other payables 230 564 – – –Trade finance facilities 577 215 – – –

At 28 February 2014Financial liabilities at amortised cost 55 645 2 759 – –Bank overdraft 6 – – –Trade and other payables 169 759 – –Trade finance facilities 854 717 – – –

CompanyAt 28 February 2015Loans from Group companies 464 717 – – –Trade and other payables 66 365 – – –

At 28 February 2014Loans from Group companies 416 474 – – –Trade and other payables 14 001 – – –


47. Risk management continued

The above contractual maturities reflect the undiscounted future contractual cash flows, which may differ to the carrying values of the liabilities at the statement of financial position date.

The amounts presented for financial assets or financial liabilities at fair value through profit or loss include interest income and expenses as well as dividends where applicable.

Foreign exchange risk

The Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US Dollar. Foreign exchange risk arises from future commercial transactions, recognised assets and liabilities and net investments in foreign operations.

Management has set up a policy to require Group companies to manage their foreign exchange risk against their functional currency. The Group companies are required to hedge their entire foreign exchange risk exposure with the Group treasury. To manage their foreign exchange risk arising from future commercial transactions and recognised assets and liabilities, entities in the Group use forward contracts, transacted with Group treasury. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency that is not the entity’s functional currency.

The Group treasury’s risk management policy is to hedge 100% of anticipated cash flows (mainly export sales and purchase of inventory) in each major foreign currency for the duration of the sales contract.

For segment reporting purposes, each subsidiary designates contracts with Group treasury as fair value hedges or cash flow hedges, as appropriate. External foreign exchange contracts are designated at Group level as hedges of foreign exchange risk on specific assets, liabilities or future transactions on a gross basis.

All trade receivables and payables shown in the table below are the balances exposed to US Dollar exchange rate.

Group Group

2015R’000

2014R’000

2015R’000

2014R’000

Current assets

Trade receivables 171 198 280 178 – –

Current liabilities – – – –Trade payables 31 707 46 599 – –Exchange rates used for conversion of foreign items were:

USD 11,67 10,73 11,67 10,73

97


NOTES


47. Risk management continuedInterest rate sensitivityAll cash deposits earn interest varying with prime. The Group’s objective is to manage interest rate risk so that fluctuations in variable rates do not have a material impact on profit.

At 28 February 2015, Metmar was exposed to changes in market interest rates through its bank borrowings, which are subject to variable interest rates.

Metmar relies extensively on the usage of trade finance facilities to conduct its trade. The finance costs are included in the calculation of contractual costing. Variations in interest rates are largely accounted for in contract costing and are therefore mainly borne by the customer.

The impact of fluctuations in interest rates on other bank borrowings is not considered material.

At 28 February 2015, if interest rates on Rand-denominated borrowings had been 10% higher/lower with all other variables held constant, post-tax profit for the year would have been R2 963 192 (2014: R3 857 849) lower/higher, mainly as a result of higher/lower interest expense on floating rate borrowings; other components of equity would have been R2 963 192 (2014: R3 857 849) lower/higher mainly as a result of decrease/increase in the fair value of fixed rate financial assets classified as available-for-sale.

Credit risk analysisMetmar’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the reporting date, summarised below:

Group Group

2015R’000

2014R’000

2015R’000

2014R’000

Financial instrumentCash and cash equivalents 23 408 53 275 284 515Derivative financial instruments 1 899 4 568 – –Financial assets 213 526 258 957 – 28 436Trade and other receivables (net of repayment and VAT receivable) 300 368 432 520 803 1 025Loans to Group companies – – 809 745 716 495


Financial instrument continuedMetmar continuously monitors defaults of customers and other counterparties, identified either individually or by group, and incorporates this information into its credit risk controls. Where available at reasonable cost, external credit ratings and/or reports on customers and other counterparties are obtained and used. The Group’s policy is to deal only with creditworthy counterparties.

Credit risk consists mainly of cash deposits, cash equivalents and trade debtors. The Group only deposits cash with major banks with high-quality credit standing and limits exposure to any one counterparty.

Trade receivables comprise a widespread customer base. Management evaluates credit risk relating to customers on an ongoing basis.

Metmar’s management considers that all of the above financial assets that are not impaired for each of the reporting dates under review are of good credit quality, including those that are past due.

Foreign exchange sensitivityMost of the Metmar’s transactions are carried out in South African Rand. Exposures to currency exchange rates arise from Metmar’s overseas sales and purchases, which are primarily denominated in US Dollar.

To mitigate Metmar’s exposure to foreign currency risk, non-South African Rand cash flows are monitored and forward exchange contracts are entered into in accordance with the Group’s risk management policies. Generally, Metmar’s risk management procedures distinguish short-term foreign currency cash flows (due within six months) from longer-term cash flows. Where the amounts to be paid and received in a specific currency are expected to largely offset one another, no further hedging activity is undertaken. Foreign currency denominated financial assets and liabilities, translated into South African Rand at the closing rate, are as follows.

Group Company

2015R’000

2014R’000

2015R’000

2014R’000

Nominal amounts

US DollarFinancial assets 438 893 501 194 – –Financial liabilities (394 646) (271 602) – –

Short-term exposure in US Dollar 44 247 229 592 – –

The following table illustrates the sensitivity of the net result for the year-end equity with regard to Metmar’s financial assets and financial liabilities and the US Dollar/Rand exchange rate.

It assumes a +/- 5% change of the US Dollar/Rand exchange rate for the year ended 28 February 2015 (2014: 5%). These percentages have been based on the average market volatility in exchange rates in the previous 12 months. The sensitivity analysis is based on Metmar’s foreign currency financial instruments held at each balance sheet date and also takes into account forward exchange contracts that offset effects from changes in currency rates.

Group Company

2015R’000

2014R’000

2015R’000

2014R’000

If the Rand had strengthened against the US Dollar by 5% (2014: 5%) then this would have had the following impact:Equity in US Dollar (1 454) (11 532) – –

If the Rand had weakened against the US Dollar by 5% (2014: 5%) then this would have had the following impact:Equity in US Dollar (3 049) 11 532 – –

Net result for the year in US Dollar – – – –

Exposures to foreign exchange rate vary during the year depending on the volume of overseas transactions. Nonetheless, the analysis above is considered to be representative of Metmar’s exposure to currency risk.

99


NOTES


48. Fair value hierarchyThe table below analyses assets and liabilities carried at fair value. The different levels are defined as follows:

Level 1: Quoted unadjusted prices in active markets for identical assets or liabilities that the Group can access at measurement date.

Level 2: Inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly or indirectly.

Level 3: Unobservable inputs for the asset or liability.

There has been no transfers between the fair value levels during the reporting period.

Group Company

Note 2015R’000

2014R’000

2015R’000

2014R’000

Categories and levels of financial instruments in the Group

Level 1

Recurring fair value measurements

AssetsFinancial assets designated at fair value through profit or loss 9 and 13

Derivative financial instruments 1 899 4 568 – –

Listed shares 20 626 66 057 – 28 436

Total financial assets designated at fair value through profit or loss 22 525 70 625 – 28 436

Level 2

Liabilities

Financial liabilities at amortised cost 20

Mortgage bonds 47 143 2 759 – –

The fair values of these loans have been estimated using discounted cash flows and relevant interest rates. The carrying value of these financial liabilities approximates its fair value. All these financial liabilities are market related and are at an arm’s length with reputable counter parties.

Total 69 668 – – –

Level 3

Recurring fair value measurements

Assets

Investments in subsidiaries at fair value 6

Investments in unlisted subsidiaries – – 76 017 76 017

Investments in foreign subsidiaries – – 15 15

Total investments in subsidiaries at fair value 76 032 76 032

Investments in associates at fair value 7

Investments in unlisted associates – – 61 578 32 316

Financial assets through other comprehensive income 9Investment in Kalahari Resources Proprietary Limited 192 900 192 900 – –For the valuation techniques, significant unobservable inputs and the sensitivity analysis please refer back to the relevant noteas stated above.


49. Going concernThe Company continues to face tough industry and economic conditions characterised by the following: reduced commodity prices, dwindling demand for commodities and, as a result, insolvency events and fraud by industry peers in the past few months.

As a result, trade financiers have responded with risk aversion towards financing new or maintaining existing structured trade finance and further have reduced facilities, communicated the intention of terminating finance in an orderly manner and have made drawdown terms more onerous. While their response is not unexpected, given the commodities fraud at the port of discharge in China as well as the liquidation of some of Metmar’s competitors in South Africa, it has left Metmar with liquidity challenges that contributed to the operational losses of the 2015 financial year. In the last three financial years the Group has made the following losses and total cash outflows:

28 February 2015

R’000

28 February 2014

R’000

28 February 2013

R’000

Loss for the year per the statements of profit or loss and other comprehensive income 147 059 182 777 111 549Headline loss 174 015 46 986 80 634Total cash outflow per the statements of cash flows 50 484 22 051 59 290

Further, the Group has a net current liability position of R67 million.

On the trade finance front, China Construction Bank (CCB) withdrew the $30 million facility it provided, while Nedbank Capital is in the process of restructuring its $30 million facility into a bilateral loan. CCB is expecting either full repayment of outstanding balances by 30 September or conversion of the outstanding balance to a corporate loan repayable through the sinter tolling cash flow proceeds within 12 months. CCB’s curtailment of the facility is not the result of Metmar’s financial position. It is understood that CCB is exiting structured trade finance market globally following its losses resulting from the fraud in China. Further it is understood that it is exiting its operations from the South African financial services space as a result of its corporate strategy.

The following factors are considered in potential mitigation of the above risks:

Internal forecasts which form the basis of the Company’s budget, as prepared and approved by management for the 2016 financial year, indicate that the Company will return to profitability and that the net current liability position will be resolved. The major contributions to profits are expected to be from the consummation of the Kalagadi tolling agreement, exploitation of the Sefateng Chrome off-take agreement and coal off-take agreements. These are in addition to the existing trading businesses that continue to contribute positive margins. It is, however, difficult to determine with certainty the exact consummation date of the tolling activity, timing of cash flows, future demand and commodity prices which may cause trading losses that currently cannot be predicted.

Management has partially replaced the CCB facility by signing a facility with Standard Chartered Bank amounting to $15 million which is fully operational. Further, the Metmar Group received final approval of a $15 million trade finance facility from First Bank of Nigeria (UK) (FBN) to fund the Sefateng Chrome off-take, subject documents being accepted for the purpose of its financial intelligence compliance review. Management is positive that the CCB facility will be replaced by these and other potential sources of finance and is proactively managing this process, but cannot with certainty determine the successful outcome of the refinancing.

The conditional offer made by Traxys Africa on 30 April 2015 to acquire the entire issued share capital of Metmar Limited is expected to increase the level of confidence by trade financiers to maintain and extend funding to the Metmar Group for trading and financing facilities. Management is positive that the takeover transaction has a high likelihood to be completed successfully. The offer, however, is subject to conditions such as shareholder and regulatory approvals, the non-occurrence of material adverse change events and fulfilling certain conditions within certain deadlines. The completion of the transaction is expected at latest 30 September 2015 after which management expects that Metmar will have access to financial support and facilities that are available to the Traxys Group. This potential source of financial support is highly likely, but its success cannot at this time be determined with certainty.

The above conditions give rise to material uncertainties which may cast significant doubt about the Company’s ability to continue as a going concern and therefore that it may be unable to realise its assets and discharge its liabilities in the normal course of business. The board remains reasonably confident that it will successfully manage the material uncertainties that exist. As such, the financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to fund future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

50. Post-balance sheet eventsOn 30 April 2015 the Company announced a conditional offer by Traxys Africa to acquire 100% of Metmar shares listed on the JSE.

This deal is subject to shareholder and regulatory approval expected to conclude before 30 September 2015.

101

ADMINISTRATION

BASTION GRAPHICS

SHAREHOLDERS’ DIARY

Financial year end 28 February 2015

Annual general meeting 2 July 2015

ReportsNotice of annual general meeting 2015 Posted 1 June 2015Integrated annual report 12 June 2015Interim for the half-year to 31 August October 2015

Name and company registration numberMetmar Limited1998/007269/06

DirectorateRG Still# (chairman)L Matteucci# DJ Ellwood (chief executive officer)PP BoshoffD Earp#

D Mashile-Nkosi*SMS Nkosi (chief financial officer)TI Borman*# Independent non-executive* Non-executive

Company secretary and registered officeAnlia Swart25 Culross Road, Cnr Main RoadBryanstonSandton, 2191

PO Box 98549Sloane Park, 2152

Contact detailsTelephone: +27 11 591 0500Facsimile: +27 11 591 0622Web address: http://www.metmar.co.za

Share transfer secretariesComputershare Investor Services Proprietary LimitedGround Floor70 Marshall StreetJohannesburg, 2001PO Box 61051Marshalltown, 2107

JSE informationShare code: MML ISIN code: ZAE000078747

AuditorsErnst & Young Inc.Registered auditors102 Rivonia RoadSandton, 2146

SponsorNedbank Capital135 Rivonia CampusRivonia RoadSandownSandton, 2196

PO Box 1144Johannesburg, 2000

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Metmar LimitedRegistration number: 1998/007269/06

25 Culross RoadCnr Main and CulrossBryanston2191

PO Box 98549Sloane ParkBryanston2152

Tel: +27 (0)11 591 0500Fax: +27 (0)11 591 0623

www.metmar.com

METMAR LIMITED INTEGRATED ANNUAL REPORT 2015 · deliver to customers on time and equip traders to...

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