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Sentula Integrated

Annual R

epo

rt 2013

Integrated Annual Report 2013

About Sentula

Sentula Mining Limited has been listed on the Main Board of the JSE since 1993. The Group is actively involved in opencast mining, exploration drilling and rehabilitation and is one of the major suppliers of outsourced mining services in the South African coal mining industry. Sentula has grown to become a leading mining services provider currently with operations in eight African countries. The Group’s foothold in the coal and energy sector, coupled with its diversified service offering, client base, mineral exposure and geographical spread, has contributed to its ability to weather the prevailing challenging economic environment.

Sentula is in the process of disposing of its interests in its coal mining investments, with the intent to unlock the value inherent in these prospects and projects.

Sentula has a majority interest in the Nkomati Anthracite colliery, a mine close to Komatipoort in eastern Mpumalanga. The mine has the ability to produce anthracite, which is utilised as a coke blend for domestic and export consumption, from opencast and underground operations. The mine is fully licenced but remains on care and maintenance pending a disposal process.

A mining licence has been granted for the Bankfontein prospect in the Ermelo region and is in the process of being executed.

The Company has a 50% interest in the coal joint venture, Asenjo Energy, located in Botswana which encompasses three significant coal deposits, estimated to contain approximately 10 billion tonnes of in-situ coal. Sentula also has an interest in the Indongo mining project located in Zambia. These coal prospects have been earmarked for energy and power generation across the region and abroad.

Integrated reportingThis Integrated Annual Report covers the 2013 annual financial period and has been compiled and presented in accordance with the requirements and principles of the following:�the King Report on Governance for South Africa, and the King Code of Governance Principles (King III);� the International Integrated Reporting Committee’s prototype of the international Integrated Reporting (IR) framework;�the Companies Act 71 (2008);�the JSE Listings Requirements; �International Financial Reporting Standards (“IFRS”); and�the Global Reporting Initiative’s GR3.1 guidelines on reporting of non-financial information (GRI G3.1).

We recognise, in line with the principles of King III, that companies should not only report on financial performance, but also on their sustainability, by disclosing social, environmental and economic issues. This report provides stakeholders with relevant financial and non-financial information to enable them to obtain a more balanced view of the Group’s business.

Forward-looking statementsThis report contains forward-looking statements which are not historical facts. Forward-looking statements involve inherent risks, uncertainties and assumptions, including, without limitation, risks related to the timing or ultimate completion of any proposed transactions; and the possibility that benefits may not materialise or such assumptions prove incorrect, actual results could differ materially from those expressed or implied by such forward-looking statements and assumptions. The forward-looking statements in this report are made as of the date of this report and Sentula expressly disclaims any obligations to update or correct the statements due to events occurring after issuing this report.

Definitions“The Company” refers to Sentula Mining Proprietary Limited the holding company. “The Group” refers to Sentula Mining Limited and all their subsidiaries and associates. Also, “last year”, “previous year” and “previous corresponding period” refers to the prior financial year ended 31 March 2012, “the current year, “the year” or “this year” refers to the financial year ended 31 March 2013 and “next year” refers to the financial year ending 31 March 2014.

Sentula Mining Limited Integrated Annual Report 2013

Contents

Overview 2

Five-year review 3

Group at a glance 4

Strategic update 6

Group operational structure 7

Capital expenditure 8

Directorate 10

Chairman’s report 16

Chief Executive Officer’s report 20

Chief Financial Officer’s report 24

Governance reports

Corporate governance report 29

Risk management report 37

Information technology (“IT”) report 41

Remuneration report 41

King III checklist 44

Sustainability report 48

Financial statements

Consolidated annual financial statements 61

Company annual financial statements 120

Shareholders’ information 142

JSE performance 143

Shareholders’ diary 144

Notice of annual general meeting 145

Form of proxy 153

Administration 155

Abbreviations 156

For more detailed information about Sentula and its financial statements please refer to our website:www.sentula.co.za

01


Overview

Operating (loss)/profitFive-year history (R million)

1 000

500

0

(500)

(1 000) 2009

480

2010

129

2011

185

2012

(420)

2013

(871)

EBITDA*Five-year history (R million)

1 000

800

600

400

200

0 2009 2010 2011 2012 2013

803

428545

383

227

Net debt to equity gearingFive-year history (%)

80

60

40

20

0 2009

75

2010

43

2011

21

2012

22

2013

29

Cash generated from operating activitiesFive-year history (R million)

1 200

1 000

800

600

400

200

0 2009

967

2010

380

2011

415

2012

319

2013

194

Net asset value per share**Five-year history (cents)

1 000

800

600

400

200

0 2009 2010 2011 2012 2013

946

488 492408

275

* Adjusted for impairments, amortisation of intangible assets, share-based payments, loss on sale of held-for-sale assets and net realisable inventory adjustments

*** Per million man hours worked

Classified injury frequency rate***Five-year history

3,0

2,5

2,0

1,5

1,0

0,5

0 2009

2,51

1,78

1,17

1,65

0,292010 2011 2012 2013

RevenueFive-year history (R million)

4 000

3 000

2 000

1 000

0 2009

2 990

2010 2011 2012 2013

2 1792 402 2 512

2 085

Headline earnings per shareFive-year history (cents)

120

100

80

60

40

20

0

(20)

(40) 2009

109,1

0,616,1 21,7

(27,0)

2010 2011 2012 2013

** Net asset value was previously calculated on total equity and not on equity attributable to the ordinary shareholders


02

Five-year review

2013 2012 2011 2010 2009

Revenue (R’000) 2 085 026 2 512 415 2 402 375 2 178 601 2 989 835

Operating (loss)/profit (R’000) (871 223) (420 071) 184 903 128 986 479 669

Earnings before interest, tax, depreciation and amortisation (EBITDA) (R’000) 227 286 382 879 544 514 427 655 803 069

Cash generated from operations (R’000) 194 234 319 156 415 311 380 086 967 385

Attributable (loss)/earnings (R’000)* (875 017) (516 703) 35 127 239 138 278 531

(Loss)/Earnings per share (cents) (150,6) (88,9) 6,0 55,8** 121,1

Headline (loss)/earnings per share (cents) (27,0) 21,7 16,1 0,6 109,1

Tax rate (%) 3,4 (8,5) 57,9 16,0 17,7

Dividend per share (cents) – – – – –

Dividend cover (times) – – – – –

Net asset value per share (cents)*** 275 408 492 488 946

Net asset value per share (cents) – as previously disclosed n/a 418 505 502 984

Total assets employed (R’000) 2 852 664 3 855 635 4 412 021 5 051 291 4 950 431

Return on shareholders’ equity (%) (44,1) (19,8) 1,2 9,5 13,7

Gearing (%) 29 22 21 43 75

Liquidity

h Current ratio**** 0,92 2,48 1,55 1,18 0,72

h Current ratio**** excluding current portion of long-term borrowings 2,21 4,03 2,02 2,18 1,48

h Acid test ratio**** 0,72 1,84 0,96 0,93 0,47

Safety

h Classified injury frequency rate 0,29 1,65 1,17 1,78 2,51

* Post impairment of R511 341 (2012: R591 171; 2011: R71 476)** Weighted for December 2009 rights issue*** Net asset value was previously calculated on total equity and not on equity attributable to the ordinary shareholders**** Current assets include assets held-for-sale


03

Group at a glance

Business segments Our companies Acquired in Revenue Operating results (loss)/profit Operations and information Major clients

Continuing opencast mining

Benicon Opencast Mining (“Benicon”)

June 2006

R1 053 million (R80 million)

Benicon provides a full range of opencast mining services, covering the movement and management of all aspects of overburden removal and coal extraction to specified production budgets. This includes all drilling and blasting operations as well as the management of mine rehabilitation programmes to EMPR specifications.

Anglo American Thermal Coal, Anglo American Platinum, Xstrata Coal

Classic Challenge Trading (“CCT”)

October 2007 CCT is a hard rock opencast mining services company with core competencies in the ferrochrome industry. CCT’s operations are in the process of being consolidated into Benicon.

Samancor

Discontinuing opencast mining

Megacube R66 million (R288 million) The company is in the process of being wound down and all its assets were disposed of during the year.

–

Overburden drilling and blasting

JEF Drill and Blast (“JEF”) June 2007 R279 million R38 million JEF was established as a standalone entity in support of the opencast mining operations and to meet the shift towards outsourcing this function. The company is a specialised drilling and blasting entity, which uses 46 drilling rigs in the opencast mining sector, predominantly in coal.

Benicon, Exxaro, Liveiro, Optimum Coal, BHP Billiton, Moncada Energy

Exploration drilling

Geosearch October 2006 R750 million (R368 million) Geosearch is one of the largest African exploration drilling companies, owning 79 exploration drilling rigs.

Anglogold Ashanti, Anglo American Platinum, Billiton, Lonmin, Impala Platinum, Vale, Newcrest

Mobile crane hire

Ritchie Crane Hire (“Ritchie”) April 2007 R65 million R33 million Ritchie utilises 24 medium to heavy duty mobile cranes with capacities that range from 7 to 220 tonnes for the provision of craneage services.

Anglo American Thermal Coal, Eskom, Xstrata Coal, Highveld Steel, Samancor Ferrochrome

Equipment, spares and engineering

Benicon Sales June 2006R58 million (R18 million)

Benicon Sales focuses on the procurement of equipment and spares, for the refurbishment and maintenance of the opencast plant and equipment fleet.

Caston January 1999 Caston was an engine rebuild facility and its activities are being incorporated into Benicon.

Coal mining investments

Existing producer:Benicon Coal – Nkomati Anthracite

March 2008 R0,9 million (R13 million) h Anthracite resource base in excess of 80 million tonnes. h Robust market for anthracite from this region. h Mpumalanga Economic Growth Agency – 40% minority shareholder.

Development and exploration:Sentula Exploration (SA)Benicon Mining (SA)Sentula Coal (SA)

April 2008– (R0,5 million) h Holder of Schoongezicht prospecting right and Bankfontein mining right. These rights are in the process of

being disposed.

Exploration: Mabapa Mining (SA)

April 2007 – – h Holder of an equity investment in a potential coking coal prospect in the Limpopo province. h Currently a 15% equity investment which can be increased to a 75% interest for further capital investment. h Combined resources estimated to be 50 million tonnes.

Explorations:Jonah Coal/Aquila Resources (Botswana) – Asenjo Energy

September 2008 – – h Potential for high demand and growth in coal generated power and energy opportunities in the region. h Exploration drilling continues to be undertaken consistent with the work programmes. h Initiatives are being pursued to unlock the value of these prospects.

Jonah Coal Indongo (Zambia) April 2008 – – h Target project area of approximately 5 000 ha in southern Zambia. The initial mining licence has been awarded. h Initiatives are being pursued to unlock the value of these prospects.


04

Business segments Our companies Acquired in Revenue Operating results (loss)/profit Operations and information Major clients

Continuing opencast mining

Benicon Opencast Mining (“Benicon”)

June 2006

R1 053 million (R80 million)

Benicon provides a full range of opencast mining services, covering the movement and management of all aspects of overburden removal and coal extraction to specified production budgets. This includes all drilling and blasting operations as well as the management of mine rehabilitation programmes to EMPR specifications.

Anglo American Thermal Coal, Anglo American Platinum, Xstrata Coal

Classic Challenge Trading (“CCT”)

October 2007 CCT is a hard rock opencast mining services company with core competencies in the ferrochrome industry. CCT’s operations are in the process of being consolidated into Benicon.

Samancor

Discontinuing opencast mining

Megacube R66 million (R288 million) The company is in the process of being wound down and all its assets were disposed of during the year.

–

Overburden drilling and blasting

JEF Drill and Blast (“JEF”) June 2007 R279 million R38 million JEF was established as a standalone entity in support of the opencast mining operations and to meet the shift towards outsourcing this function. The company is a specialised drilling and blasting entity, which uses 46 drilling rigs in the opencast mining sector, predominantly in coal.

Benicon, Exxaro, Liveiro, Optimum Coal, BHP Billiton, Moncada Energy

Exploration drilling

Geosearch October 2006 R750 million (R368 million) Geosearch is one of the largest African exploration drilling companies, owning 79 exploration drilling rigs.

Anglogold Ashanti, Anglo American Platinum, Billiton, Lonmin, Impala Platinum, Vale, Newcrest

Mobile crane hire

Ritchie Crane Hire (“Ritchie”) April 2007 R65 million R33 million Ritchie utilises 24 medium to heavy duty mobile cranes with capacities that range from 7 to 220 tonnes for the provision of craneage services.

Anglo American Thermal Coal, Eskom, Xstrata Coal, Highveld Steel, Samancor Ferrochrome

Equipment, spares and engineering

Benicon Sales June 2006R58 million (R18 million)

Benicon Sales focuses on the procurement of equipment and spares, for the refurbishment and maintenance of the opencast plant and equipment fleet.

Caston January 1999 Caston was an engine rebuild facility and its activities are being incorporated into Benicon.

Coal mining investments

Existing producer:Benicon Coal – Nkomati Anthracite

March 2008 R0,9 million (R13 million) h Anthracite resource base in excess of 80 million tonnes. h Robust market for anthracite from this region. h Mpumalanga Economic Growth Agency – 40% minority shareholder.

Development and exploration:Sentula Exploration (SA)Benicon Mining (SA)Sentula Coal (SA)

April 2008– (R0,5 million) h Holder of Schoongezicht prospecting right and Bankfontein mining right. These rights are in the process of

being disposed.

Exploration: Mabapa Mining (SA)

April 2007 – – h Holder of an equity investment in a potential coking coal prospect in the Limpopo province. h Currently a 15% equity investment which can be increased to a 75% interest for further capital investment. h Combined resources estimated to be 50 million tonnes.

Explorations:Jonah Coal/Aquila Resources (Botswana) – Asenjo Energy

September 2008 – – h Potential for high demand and growth in coal generated power and energy opportunities in the region. h Exploration drilling continues to be undertaken consistent with the work programmes. h Initiatives are being pursued to unlock the value of these prospects.

Jonah Coal Indongo (Zambia) April 2008 – – h Target project area of approximately 5 000 ha in southern Zambia. The initial mining licence has been awarded. h Initiatives are being pursued to unlock the value of these prospects.


05

Strategic update

Through the Group’s African footprint, Sentula is well positioned to capitalise on opportunities across the continent.

Sustainable growth in the medium term off the back

of:

h recovery in global demand for resources is

expected to continue driving interest in Africa and

its potential as a new source of supply;

h established African asset, knowledge and resource

base; and

h existing business structures in key jurisdictions.

Sentula aspires to be recognised as a responsible and ethical organisation.

Safety and environment preservation through:

h adherence to ISO and OHSAS standards;

h minimising injuries and fatalities; and

h ensuring minimal environmental impact.Sentula remains committed to empowerment and transformation.

The strategic imperative is maintained through: h monitoring of the Group DTI scorecard; and

h utilising the Group’s BBBEE status to its benefit.

Sentula, with its suite of diversified service offerings, remains well positioned to take advantage of contract mining services opportunities across southern Africa.

Value preservation of the Group’s mining services

business in the short term through:

h investment in growth opportunities in its drilling

and blasting and mobile crane hire businesses;

h consolidations of its bulk earthmoving businesses

and the extraction of operational efficiencies;

h restructuring of its exploration business to take

advantage of a recovery in the exploration sector;

h monetisation of the Group’s stakes in the

remaining coal assets; and

h ensuring financial robustness in the prevailing

economic environment.


06

Shanike Investments No 171 Proprietary

Limited

Benicon Opencast Mining Proprietary Limited

Sentula Contracting Proprietary Limited

JEF Drill and Blast Proprietary Limited

Classic Challenge Trading Proprietary Limited

Sentula Mining Services Mauritius Limited

Sentula Mining Ventures Mauritius Limited

Ritchie Crane Hire Proprietary Limited

83% 17%

26%

100%

Anglo American Khula Mining Fund

20%

Employees Trust 20%

Community Trust 20%

Local shareholders85%

Caston Plant Sales Proprietary Limited

100%

Sentula Mining Mauritius Limited

100%

Mabapa Mining Proprietary Limited

15%

Benicon Coal Proprietary Limited

100%Nkomati Anthracite Proprietary Limited60%

100%

Sentula Mining Services Proprietary Limited

100%

Benicon Sales Proprietary Limited

100%

Buenti Drilling Proprietary Limited

74%

O.M. Tsehla Drilling Contractors Proprietary

Limited26%

Geosearch Non-South African Operating Entities

100%

Thebe Mining Resources

40%

Mpumalanga Economic Growth Agency40%

Benicon Mining Proprietary Limited

74%

Geosearch Division

Group operational structure


07

Capital expenditure

R196,5 million

net capital (“capex”) invested during the year

under review.

JEF:

Invested net capex to the value of

R23 million,

for the replacement of two new drilling rigs

and the acquisition of support equipment.

Geosearch:

R47,8 million

invested to increase the drilling capacity in

Mozambican exploration growth.

Benicon:

Invested net capex to the value of

R85,9 million,

predominantly on the replacement of existing

equipment with new equipment comprising three articulated dump trucks (“ADTs”) and an

excavator.

CCT:

Invested in the replacement of two

ADTs, an excavator, a wheel-loader and a

crusher amounting to net expenditure of

R25 million.


08

Budgeted capex of

R189,9 million for the 2014 financial year has been curtailed to R55 million due to the prevailing economic environment and growth expectations in the opencast mining subsidiaries.

Ritchie:

Invested

R15,6 million

for the expansion of its crane fleet and support

vehicles.

Coal mining:

R0,5 million

spent on improved security at Nkomati

Anthracite.

Corporate services:

The disposal of the NWN assets resulted in

a capex inflow of

(R1,3 million).


09

Directorate

Executive directors

Robin Berry Deon Louw Pat Modisane

Non-executive directors

Jonathan Best Cor van Zyl Kholeka Mzondeki

Rain Zihlangu Ralph Patmore


10

Allan Hepburn Johan Pieterse Alan Lynn

Executive Committee*

Grace Chemaly Ina Cross Catherine Wolmarans Philip van Vuuren

Khumo Mphake Lauren Flinders Gideon van Heerden Elsa Devenish

* Details of the Executive Committee members are disclosed on page 35.


11

Directorate continued

Executive Committee continued

Macy Sidu Mike Fitzgerald Johann Lemmer

Marthinus de Jager Danie Jacobs


12

Executive directorsRobin (RC) Berry (51)BSc (Mining) EngineeringExecutive director: Chief Executive Officer

Appointed: 2 January 2007

Board committee membershipMember of the Social and Ethics Committee and attends

various Board committee meetings ex officio.

Skills, expertise and experienceRobin joined the Company as Chief Operating Officer in

January 2007, and was promoted to Chief Executive

Officer with effect from 1 December 2007. Robin was

formerly Chief Executive Officer of Operations at Anglo

Coal SA, a division of Anglo American South Africa

Limited. He has over 20 years’ experience in the mining

industry at both managerial and operational levels.

Deon (GP) Louw (51)CA(SA), HDip Tax Law (Wits), AMCT (UK), CFA CharterholderExecutive director: Chief Financial Officer/Financial

Director

Appointed: 1 August 2007

Board committee membershipAttends various Board committee meetings ex officio.

Skills, expertise and experienceDeon is a chartered accountant and chartered financial

analyst with extensive experience in mining finance. He

joined Sentula in August 2007 from Shanduka Coal,

where he fulfilled the role of Chief Financial Officer. Prior

to joining Shanduka Coal, he was an independent adviser

to the mining sector and for a number of years headed

the mining finance team at Investec Bank.

Pat (PP) Modisane (52)BA (Hons)Executive director: Transformation and Human Resources

Appointed: 1 October 2008

Board committee membershipChairman of the Social and Ethics Committee and

attends various Board committee meetings ex officio.

Skills, expertise and experiencePat was appointed as an executive director and Head of

Transformation and Human Resources with effect from

1 October 2008 and Chairman of the Social and Ethics

Committee effective 8 March 2012.

Prior to joining Sentula, he was the regional manager

Employee Relations and Transformation at Anglo Coal

Proprietary Limited. From 2005, it was his core

responsibility to effectively manage employee relations,

strategies, practices and stakeholder management.

Previously, he was Human Resources Manager at

Kleinkopje, Greenside and New Vaal Collieries.


13

Directorate continued

Non-executive directorsJonathan (JG) Best (65)ACIMA, ACIS, MBAIndependent non-executive Chairman

Appointed: 1 July 2007 (Director)/28 February 2010

(Chairman)

Board committee membershipChairman of the Nomination Committee, Chairman of

the Investment Committee and member of the

Remuneration Committee.

Skills, expertise and experienceJonathan has over 40 years’ experience with companies

associated with the mining industry. He brings strong

financial expertise and experience from his previous role

as Chief Financial Officer of AngloGold Ashanti Limited.

He is currently a non-executive independent director,

Chairman of the Audit Committee and member of the

Remuneration Committee of Polymetal International PLC,

a Russian-based mining company listed on the London

Stock Exchange, a non-executive independent director

and chairman of the Audit Committee of Metair

Investments Limited, non-executive Chairman and

member of the Remuneration Committee of Bauba

Platinum Limited, non-executive chairman of Goldstone

Resources Limited (Jersey) and a member of its Audit

and Remuneration Committees. He is also a non-

executive director and Audit Committee member of

AngloGold Ashanti Holdings Limited (Isle of Man).

Cor (CJPG) van Zyl (66)CA(SA)Independent non-executive director

Appointed: 1 July 2010

Board committee membershipChairman of the Audit and Risk Committee and member

of the Investment Committee.

Skills, expertise and experienceCor is a chartered accountant with 22 years’ experience

in the auditing profession as a partner of Coopers &

Lybrand, before moving into commerce for a further

period of 14 years. This included five years as Financial

Director of Afrox Healthcare Limited and six years as

Financial Director of African Oxygen Limited until his

recent retirement.

Currently Cor also serves as a non-executive director on

the Board and Audit Committee of various companies.

Kholeka (KW) Mzondeki (46)ACCA (UK), BComm, Diploma in Investment Management (RAU)Independent non-executive director


Board committee membershipMember of the Audit and Risk Committee.

Skills, expertise and experienceKholeka is a chartered accountant and Council member

of ACCA, United Kingdom. She has a Bachelor of

Commerce degree and a Diploma in Investment

Management. Her experience includes being a risk

manager at Eskom, Director and General Manager of

Finance responsible for sub-Sahara Africa at 3M, Chief

Financial Officer and General Manager of Corporate

Services at Mintek and Financial Director at Masana

Petroleum Solutions.

In summary, Kholeka has over 20 years’ experience in

governance and financial management, holding

executive roles of Financial Director and Chief Financial

Officer in various organisations including a Fortune

500 company. She used to serve on the Board and Audit

Committee of Reunert, listed on the JSE, and currently

serves on the Telkom Board among other directorships.

In 2008 she was a finalist in the Nedbank/BWA Business

Women of the Year.

Rain (D) Zihlangu (46)BSc (Mining) Engineering, MBAIndependent non-executive director


Board committee membershipMember of the Audit and Risk Committee and member

of the Investment Committee.

Skills, expertise and experienceRain obtained his first degree in Mining Engineering

through the University of the Witwatersrand in 1989 to

become the second black mining engineer in South

Africa. He joined the Anglo American Corporation

graduate training programme at Vaal Reefs Exploration

and Mining Company and obtained his mine managers

government certificate of competence.

His professional membership includes South African

Institute of Mining and Metallurgy, Engineering Council

of South Africa and Association of Mine Managers of

South Africa.


14

Hugh (EHJ) Stoyell (68)PR Eng Bsc (Mining) Engineering MBL FSAIMMIndependent non-executive directorAppointed: 30 September 2005

Resigned: 17 September 2012

Board committee membershipChairman of the Remuneration Committee, member of

the Nomination Committee and member of the

Investment Committee.

Skills, expertise and experienceHugh is a professional engineer with over 50 years’

experience in the mining industry.

Prior to retiring, he was Chairman and Managing Director

of Duiker Mining Proprietary Limited, formerly one of

South Africa’s major coal exporters listed on the JSE. He

has held directorships for a number of mining and

related companies since 1976, including companies listed

on the Johannesburg and London Stock Exchanges, and

is currently non-executive Chairman of Katanga Mining,

listed on the Toronto Stock Exchange, a non-executive

director of KFL Limited (British Virgin Islands) and a

non-executive director of Global Enterprises Corporate

Limited (British Virgin Islands).

Along with completing his MBA at the Wits Business

School, Rain has worked in both government and the

private sector and is well known in the mining industry,

having most recently served as Chief Executive Officer

of Alexkor. He has extensive mining experience and has

been involved in major transactions including a leading

role in the implementation of Exxaro’s empowerment

transaction. He is also a Board and Committee member

of Exxaro Limited and Royale Energy Limited.

Ralph (RB) Patmore (61)BCom (Wits), MBL (SBL), Stanford Executive Programme (Stanford University USA) Accredited Associate of the Institute for Independent Business InternationalIndependent non-executive director

Appointed: 25 January 2012

Board committee membershipMember of the Remuneration Committee, member of

the Social and Ethics Committee and member of the

Nomination Committee.

Skills, expertise and experienceRalph obtained his BCom and MBL from the University of

the Witwatersrand and Unisa Graduate School of

Business Leadership respectively, and was the co-founder

of Iliad Africa Limited, a listed company focused on

building materials, where he served as Chief Executive

Officer for 10 years. He has also served as Managing

Director to various companies and held the position of

director on the Board of Group Five Limited, a listed

company operating in the integrated construction

services and materials sector.

Currently Ralph is also the lead independent non-

executive director, member of the Audit Committee, and

Chairman of the Remuneration Committee of Accéntuate

Limited; lead independent non-executive director,

member of the Audit Committee, member of the Risk

Committee, and Chairman of the Remuneration

Committee of ARB Holdings Limited; Chairman of the

Audit and Risk Committee and Chairman of the

Remuneration Committee of Mustek Limited; and lead

independent non-executive director, member

of the Audit Committee and Chairman of the

Remuneration Committee of Calgro M3 Limited.


15

Chairman’s report

Dear Shareholders,In many respects, the 2013 financial year has been challenging for Sentula. The reduction in exploration activity in the Platinum Group Metals (”PGM”) sector, followed shortly thereafter by cutbacks in the gold sector, have had a profound, adverse impact on the drilling activities of Geosearch’s business. Even though the demand for contracted bulk earthmoving services remains strong, pricing, input costs and productivity have continued to put pressure on operating margins, within Sentula’s opencast mining businesses.

In August 2012, the Board of Directors (“the Board”) took a decision to finalise the winding down of the Megacube business, with the termination of the Keaton Vangatfontein contract and the disposal of its remaining assets, on auction. Closure of this subsidiary will reduce the burden that it has had historically on the Group’s earnings.

Despite the challenging operating environment, JEF and Ritchie continued to perform in line with expectations.

Macroeconomic environmentNotwithstanding the ongoing global economic uncertainty and resultant adverse impact on the mining

sector, the Group’s extensive exposure to coal has continued to provide a high degree of defensiveness, with respect to its bulk earthmoving and related mining services businesses. Despite the impact of the depreciation in the US Dollar denominated price of seaborne traded thermal coal, declining demand for the commodity, both domestically and internationally, and the weakening Rand/US Dollar exchange rate, this sector has continued to enjoy moderate growth.

The local coal industry continues to be buoyed by Eskom’s demand and improving export logistics.

The platinum and gold sectors, however, remain under severe pressure, resulting in the curtailment of many exploration drilling programmes and a consequential adverse effect on Geosearch’s African operations.

During the fourth quarter of the 2013 financial year, the Rand/US Dollar exchange rate depreciated sharply, providing support for South African coal producers and earnings associated with Geosearch’s remaining foreign exploration drilling operations.

Group performanceAlthough all operating subsidiaries were operationally profitable, prior to impairments and inventory adjustments, the post-tax results for 2013 were disappointing given the substantial capital impairments and inventory adjustments. Revenue decreased to R2 085 million from R2 512 million, and the operating loss increased to R871 million compared to the prior year’s operating loss of R420 million. The 2013 operating loss resulted primarily from the impairment of certain assets in Benicon and Geosearch, the impairment of goodwill that arose on Geosearch’s acquisition, the write down of inventory in Geosearch and the loss incurred on the sale of assets in Megacube.

Headline earnings per share decreased from 21,7 cents to a headline loss per share of 27,0 cents.

Global economic conditions continue to affect demand for most of the services provided by Sentula as the visibility of new mining and exploration projects is reduced by investment uncertainty and fundability. While conditions within the mining services sector are expected to remain challenging for the short to medium term, opportunities, as a result of incremental production demands and limited capital funding, are expected to continue to favour the contractor model.

Given the current visibility of market conditions and the Group’s intent to preserve its cash resources, the Board has decided not to declare a dividend for the 2013 financial year.


16

The Board now comprises the following individuals:

Director Designation

Jonathan Best Independent non-executive Chairman

Robin Berry CEO executive director

Deon Louw CFO executive director

Patrick Modisane Executive director

Rain Zihlangu Independent non-executive director

Cor van Zyl Independent non-executive director

Kholeka Mzondeki Independent non-executive director

Ralph Patmore Independent non-executive director

SustainabilityTransformationSentula remains committed to empowerment and transformation as a strategic priority for the Group. We retained an independently audited Level 5 BBBEE Group rating in October 2012, with Sentula’s South African mining services subsidiaries now having an effective 25,04% BBBEE ownership and a Level 4 rating.

Subsequent phases of this BBBEE transaction, concluded during the last quarter of 2012, included the empowerment of the Group’s coal assets and the introduction of Thebe Mining as a strategic empowerment partner.

Corporate social investmentSentula views corporate social investment as a vital response to socio-economic development which is imperative in South Africa. Our intention is to empower previously disadvantaged individuals and uplift the communities in which we operate. In the 2013 financial reporting period, the Group contributed R1,2 million to socio-economic and enterprise development initiatives.

Safety, health and environmentSafety, health and the environment remains a top priority for the Board and Group as a whole. Continued efforts have delivered positive results in this area, with no fatalities in the 2013 financial year. We are all committed to enforcing compliance with the requirements of the South African Occupational Health and Safety Act 1993 (No 85 of 1993) and Mine Health and Safety Act 1996 (No 29 of 1996). Through renewed initiatives management remains dedicated to identifying potential hazards and reducing risks at all our operations.

StrategySentula, through its diversified mining services provision and the expertise and exposure gleaned from the experience gained through its African exploration business, remains committed to delivering on its focused continental growth strategy.

One of the Board’s objectives, for the year under review, was to ensure that the underlying South African subsidiaries were sustainably empowered to the requisite level, thus ensuring that current clients and contracts in the mining industry are retained and that new tenders can be secured. The Group’s empowerment structure was further strengthened, through the introduction of Thebe Mining, as its strategic partner.

We will continue to pursue initiatives to contain costs and strategically position the mining services businesses for organic growth in the medium term. To this end the business models of Benicon and Geosearch were reviewed and will be modified in order to generate sustainable returns in a difficult market. The Company continues with the disposal of the Group’s coal portfolio with the intent of unlocking value and enhancing the Group’s cash resources.

Board and corporate governanceRecent legislation changes such as the South African Companies Act (2008) and the strengthening of the Competition Act indicate a higher level of vigilance than ever before in South Africa.

The Board operates under the terms as stipulated by the Board Charter, which regulates the roles and responsibilities of the directors.

We, as the Board, will ensure compliance with best practice and the governance guidelines outlined in the King III Report. We will ensure that the Company remains transparent and adheres to high levels of disclosure.

At the commencement of the last financial year, the Board comprised executives Robin Berry (CEO), Deon Louw (CFO) and Pat Modisane (Head of Transformation and HR), while non-executive directors comprised Hugh Stoyell, Rain Zihlangu, Cor van Zyl, Kholeka Mzondeki, Ralph Patmore and myself.

Hugh Stoyell tendered his resignation from the Board, with effect from 17 September 2012, after serving as an independent non-executive director since 2005.

The Board is grateful to Hugh for the significant contribution he made during this period.


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anticipate future moderate growth from the Group’s operations, the rate of which will be determined by the recovery in the mining services sector as a whole.

AppreciationI am grateful to the Board for their collective and individual contributions and extend my appreciation to all for their hard work and continued commitment. In my appreciation, I wish to acknowledge our clients and suppliers for their support and our advisers for their guidance throughout the year.

My gratitude goes to the entire management team, led by CEO, Robin Berry and CFO, Deon Louw who together with Pat Modisane, have steered us through this challenging year.

Finally, I wish to express sincere appreciation to our shareholders and employees and to thank you for your continued support through difficult times.

Jonathan BestNon-executive Chairman

13 September 2013

Our efforts in addressing environmental issues are constantly developing and we are committed to protecting the environment. A baseline for emissions data was established across all the Group’s operations. Targets and initiatives to reduce the quantum and impact of emissions have been introduced across the Group.

In the year under review, the subsidiaries continued to meet their objectives, with respect to the maintenance and attainment of international certification of their safety, environmental and training systems.

OutlookLooking at the broader picture we see the southern African and worldwide demand for energy and coal remaining intact for the foreseeable future. With Geosearch having been adversely impacted by the curtailment of exploration drilling in the PGM and other sectors, its inherent flexible business model and responsiveness to the sector’s volatility will enable it to restructure its business, while maintaining its established African footprint. New mining projects in Africa, despite delays in the short to medium term, will continue to present opportunities for Sentula’s mining services businesses. Positive and sustainable demand for SA thermal coal comes from the significant local demand underpinned by Eskom’s expansion plans.

For the year ahead, we believe that, despite tough trading conditions, the Group will deliver modest earnings from four of its operating mining services subsidiaries, while sustaining its exploration business. While we anticipate materially lower gearing at the end of the 2014 financial year, the Board is cognisant that current debt levels are excessive in relation to the Group’s forecast cash generation. The Board has undertaken to pursue a number of initiatives to reduce the debt as disclosed in note 34 of the Group’s annual financial statements. In addition, our emphasis in the 2014 financial year will be to preserve the established mining services businesses and dispose of the Group’s interest in its coal portfolio to unlock shareholder value. Following the achievement of these objectives, we

Chairman’s report continued


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Chief Executive Officer’s report

IntroductionSubdued global economic activity continues to weigh heavily on commodity prices in the PGM, gold and seaborne traded metallurgical coal sectors, significantly reducing the visibility of exploration spend in these commodities across the continent. Sentula’s bulk earthmoving businesses, however, through their exposure to the local coal sector, have experienced a far more predictable demand profile albeit with margins being under pressure. Having disposed of the remaining assets in Megacube and initiated a process to monetise the Group’s interests in its various coal investments, Sentula is now well positioned to focus on its core mining services businesses.

The Group’s results for the financial year were adversely impacted by a number of factors, including impairments, inventory net realisable value adjustments, and losses incurred on the disposal of Megacube’s remaining plant and equipment as further alluded to in the Chief Financial Officer’s report on page 24.

Strategic reviewThe Group’s strategic vision remains one of sustainable growth by being a recognised and focused mining services provider across the African continent. Despite unprecedented volatility in the sector and the limited visibility of exploration work, in the short term, the Group’s firm intention remains to focus on the value drivers in its diversified service businesses. This will be achieved through the three-pronged approach of consolidating the operations of the bulk earthmoving businesses, driving operational efficiencies and investing in growth opportunities in the drilling and blasting and mobile crane hire businesses. In conjunction with this the exploration business will be maintained, through prudent restructuring, in order to take advantage of potential growth on the back of a recovery in the mineral exploration sector.

The strategy will be further enhanced through the finalisation of the disposal of the Group’s interests in various coal assets.

Sentula’s exposure to the coal and energy sector, coupled with its diversified service offering, client base, mineral exposure and geographical spread will continue to provide a solid platform for developing the business into the future.

Operational reviewMining servicesThe provision of mining services remains the core of Sentula’s business, with four operating divisions and five underlying businesses. Volatility in the sector continues to reduce the visibility of earnings, especially in the area of exploration.

Opencast mining servicesThe year under review has been characterised by stable demand, but exacting trading conditions, as margins remained under pressure across the opencast contracting sector and operating conditions deteriorated.

Key events

h A substantial decrease in gold and platinum prices along with labour related disruptions in the South African mining industry have resulted in a significant reduction in exploration expenditure and a consequent downscaling of Geosearch’s operations.

h The introduction of Thebe Mining as a strategic empowerment partner.

h The initiation of the disposal process of the coal assets the proceeds of which will be applied to a debt reduction.

h The disposal of the remaining Megacube equipment which, while resulting in a book loss, realised net cash of R103,3 million.

h Continuing stable demand in the contract mining sector although margins came under pressure.


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activity across its East, Central and West African operations. This necessitated a further restructuring of its international operations, which currently contribute approximately 90% of Geosearch’s earnings.

Mobile crane hireRitchie continued to perform well, supported by a balanced mix of contracted work and ad hoc craneage opportunities. This company continues to maintain its level of profitability, supported by its mix of cranes, strong competitive regional presence in the Emalahleni/Middelburg area, and diversity of clientèle in coal mining, steel and power generation sectors.

Coal mining investmentsIn line with Sentula’s strategy to extract the value inherent in its portfolio of diversified coal assets, the Group continued to actively assess opportunities to divest of its interests in these assets. Sentula is currently invested in five projects (three in South Africa, and one in Botswana and Zambia). These projects can be broadly described as mining operations, comprising an operating mine, near development properties (projects which could be operational within 18 to 24 months) and exploration areas.

Mining operationsOperations at Nkomati Anthracite were placed on care and maintenance, by management, at the end of May 2011, pending the resolution of regulatory and environmental issues. Following the approval by the DMR of the amended environmental management programme, for the Madadeni open pit operation, application to the Department of Environmental Affairs, the seeking of condonation for certain permitted activities and the issuing of the mine’s Integrated Water Use Licence, the dewatering of the opencast operation began in November 2012. In preparation for the resumption of mining operations, the open pit has been dewatered and the infrastructure refurbished.

Management continues to actively pursue opportunities to monetise the asset, through an outright disposal of the Sentula stake.

Near development propertiesSentula has been granted new order prospecting rights over portions of the farms Bankfontein and Schoongezicht, located in Mpumalanga. Exploration has been completed and mining right applications have been submitted for both of the aforementioned properties, with the Bankfontein mining right having been granted in April 2013. The disposal of the Schoongezicht property has been concluded and will become effective on Ministerial approval being granted for its transfer. Several potential acquirers have been identified for the Bankfontein property and management will work towards finalising a transaction during first half of the 2014 financial year.

Having taken the operational management and equipment associated with the Keaton Energy Vanggatfontein contract over from Megacube during the first quarter of the financial year, Benicon managed to replace the contract, following its termination in July 2012, with the Anglo Platinum Mogalakwena Slangsloot project. Margins have continued to remain under pressure, in this business, as a result of poor contract pricing responsiveness to cost increases and deteriorating trends in effective production time. Initiatives to address these issues have been implemented. Benicon’s capacity remains fully contracted for the 2014 financial year, with its exposure to the coal sector being a natural hedge to the volatility experienced in other commodities.

With the award of the Samancor Spitskop contract to CCT in July 2012, work on site, following regulatory delays, commenced in February 2013. Production from this site is in the process of being ramped-up, with full production being anticipated, during August 2013. Demand for chrome ore, for the production of ferrochrome, remains solid at the current time.

Management is in the process of consolidating the operations of CCT into Benicon, in order to leverage off the synergies that are expected to flow therefrom. It is envisaged that this consolidation will be completed during the first half of the 2014 financial year.

JEF experienced a drop in its revenue during the second half of the financial year, following the termination of completed contracts and a delay in the commencement of new replacement contracts. However, it is expected that capacity will be fully utilised during the 2014 financial year. This business is competitively positioned to deliver real growth for the foreseeable future.

Discontinuing opencast mining servicesMegacube’s contracting business ceased at the beginning of the 2013 financial year and the emphasis turned to the monetisation of the remaining assets. This culminated, following the redeployment of suitable assets across the broader Group and the utilisation of trade-in proceeds on new and replacement Group equipment, in an outright disposal of the remaining equipment at an unreserved auction on 27 March 2013.

Exploration drillingThe downturn in the PGM sector had a significantly negative impact on Geosearch’s South African operations and necessitated the downscaling and restructuring of these operations during the year. During the latter part of the period under review, negative sentiment and project delays concerning coal investments in Mozambique also resulted in a further reduction in earnings and a scaling back of AguaTerra’s operations. Recently, Geosearch has seen a reduction in the visibility of gold exploration


21

AppreciationI would like to extend my appreciation to management and their teams for their hard work, dedication and support during the year, resulting in the maintenance of the Group’s operational base during challenging times.

My thanks is also extended to our clients and suppliers for their continued and invaluable support and service, respectively.

Robin BerryChief Executive Officer

13 September 2013

The small-scale mining licence awarded to the Mulungwa project in southern Zambia continues to be maintained, while potential opportunities to extract value from this asset are assessed.

Exploration areasThe Asenjo joint venture with Jonah Capital and Aquilla Resources, situated in Botswana, has continued exploration activities on its tenements. The value of the large resource base is expected to be unlocked through the construction of rail infrastructure to port facilities in Namibia or Mozambique, the provision of which is enjoying renewed interest in the region. The joint venture partners agreed to dispose of the Lechana prospect for the sum of USD1,0 million during the 2013 financial year.

With its partners, Sentula has engaged the services of an independent adviser to pursue a process to dispose of the remaining assets in Asenjo.

SafetyThe Group’s CIFR of 0,29 per million man hours worked is an 82% improvement on the prior year, with only three classified injuries being recorded for the year. Sentula continues to work closely with its clients to ensure that investments in systems and structures, to support its efforts in the safety arena, results in a risk reduction. Sentula acknowledges the right of its employees to return home without harm and that safety performance must be regarded as a prerequisite and not only a competitive advantage.

Chief Executive Officer’s report continued


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Chief Financial Officer’s report

Performance overviewThe Group continues to experience volatile and challenging trading conditions, especially in the exploration drilling sector. Margin pressure is also being experienced in the opencast mining sector, following negative real contract rate increases and real cost increases. The Group’s drilling and blasting and craneage businesses do, however, continue to perform well, notwithstanding the challenges being experienced in the mining sector.

Group revenue declined by 17% to R2 085 million, relative to the prior financial year, largely as a result of the curtailment of Geosearch’s exploration drilling activity in the domestic PGM sector. The Group’s operating loss for the year increased from R420 million to R871 million and was impacted by both the sectorial-related operating challenges and the following impairments and adjustments to the carry value of assets:

h impairment of plant and equipment: R187 million; h impairment of assets held for sale: R15 million; h impairment of goodwill: R300 million; h impairment of intangible assets: R9 million; h a loss on the disposal of assets held-for-sale: R221 million; and

h inventory valuation adjustments: R158 million.

The backgrounds to these non-cash flow adjustments, which total R890 million, are as follows:

h the impairment of plant and equipment of R187 million arose in Benicon and Geosearch, following the identification of a number of underperforming items of plant and equipment due to either mechanical failure or technological obsolescence;

h the impairment of held-for-sale assets of R15 million and the loss on sale of the disposal of held-for-sale assets of R221 million relate to sales of Megacube’s remaining plant and equipment. This loss arose from the disposal of plant and equipment held by Megacube at a public auction held on 27 March 2013;

h given the severe downturn in the exploration activity experienced in Africa during the second half of the financial year, Geosearch reviewed its forecast cash flows for the next five years and was compelled to impair its goodwill of R300 million which arose at the acquisition of the business in the 2007 and 2008 financial years;

h termination of an exploration drilling programme in Mozambique resulted in the impairment of capitalised exploration expenditure of R9 million; and

h associated with the impairment of Geosearch’s mechanical drill rigs, related inventory was also written down. This inventory adjustment and a further provision for obsolete and slow moving inventory resulted in a total adjustment to the inventory carry value of R158 million.

The equipment impairments and adjustments to the carry value of inventory resulted in a review of the expected equipment lives, residual values, refurbishment programme and the manner in which inventory is accounted for on exploration drilling sites. Concomitant changes have been made to policies to ensure their responsiveness and appropriateness in the prevailing economic environment.

Net finance charges declined by R6,4 million from R63,9 million to R57,5 million as the Group’s senior debt levels declined from R709 million in the corresponding period to R544 million at the reporting date.

The taxation charge declined from R42 million in the prior year to a credit of R31 million in the current year, as a result of the reversal of deferred tax on plant and equipment capital allowances. Cash taxes of R42 million were, however, paid relative to R27 million in the prior year.

Predominantly as a result of the impairments and adjustments referred to in the preceding paragraphs, the net loss after tax for the year increased from R532 million to R900 million.


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The overburden drilling and blasting segment also experienced a decline in turnover as certain of their contracts terminated prematurely and the commencements of substitute contracts were delayed. Turnover declined from R336 million to R279 million and results from operating activities declined by 53% from R80 million to R38 million.

The crane hire segment grew turnover from R57 million to R65 million and results from operating activities from R30 million to R33 million, despite the challenging economic environment.

Turnover in the equipment trading and spares segment fell by 8% to R58 million but external sales increased to R16 million relative to R12 million in the prior year. Segment results increased from a loss of R2 million to a loss of R17 million following the recognition of a loss on the sale of inventory of R19 million.

Turnover from the coal mining segment reduced substantially to R1 million from R13 million in the prior year as all sales of anthracite from the Nkomati Anthracite mine ceased. The pre-impairment loss of R17 million increased to a loss of R26 million following the impairment of capitalised exploration expenditure incurred on a Mozambique prospect that did not yield promising drill results.

The loss in the corporate and other services segment increased to R67 million from R36 million in the prior year primarily as a result of intercompany loan impairments of R620 million, recognition of a profit of R530 million that arose on the disposal of the designated subsidiaries and the recognition of a related preference share dividend of R35 million, following the implementation of the Group’s BBBEE transaction. The financial impact of both these transactions is eliminated on consolidation. External finance charges reduced by R5 million due to the Group’s senior debt reducing from R709 million to R544 million at year-end.

TaxationNormal taxation increased from R5 million in the 2012 financial year to R61 million in the current financial year but was offset by a deferred tax credit of R89 million relative to the R37 million charge recorded in the prior financial year. This resulted in the net tax charge being reduced from R42 million in the 2012 financial year to a credit of R31 million in the current financial year. The reversal of the deferred tax credit of R89 million arose on the substantial plant and equipment impairments and inventory net realisable value adjustments provided for in the 2013 financial year.

Earnings per shareAs a result of the decrease in headline earnings from R126 million in the previous corresponding period to a headline loss of R157 million in the current financial year, headline earnings per share declined from 21,7 cents to a headline loss per share of 27,0 cents. The net loss for the year increased by 69% to R900 million and resulted in the basic loss per share increasing from 89 cents to 151 cents per share.

No new shares were issued during the 2013 financial year and the issued share capital remained at 581 million shares.

Statement of comprehensive incomeThe comprehensive loss increased from R504 million to R833 million in the 2013 financial year. Foreign exchange translation differences of R67 million were recognised in the statement of comprehensive income, relative to R28 million in the prior financial year. The shift in Geosearch’s business, to a predominantly foreign-based business, and the depreciation in the Rand/US Dollar exchange rate, contributed to the increase in the foreign exchange translation difference in the current financial year.

Segment analysisThe opencast mining and earthmoving segment, comprising Benicon, CCT and Megacube, experienced a decline in turnover of 23% to R1 119 million, primarily as a result of the termination of Megacube’s operating activities. The segment results, pre-impairments, declined from R11 million to R7 million; however, the post-impairments results improved from a loss of R580 million in the prior year to a loss of R367 million in the current financial year. Megacube’s results were impacted by costs associated with the closure of its operations, whereas Benicon’s results were impacted by the termination of the Keaton Vangatfontein contract, operational problems at the Mogalakwena mine and margin pressures that resulted from cost increases. CCT’s results were adversely impacted by the delayed commencement of the Spitskop ferrochrome contract for Samancor.

The exploration and drilling segment, comprising Geosearch’s operations, experienced a 13% decline in turnover to R750 million, relative to the prior financial year. Curtailment of exploration drilling in the South African PGM sector contributed to the decline in turnover. The pre-impairment loss of R115 million includes an inventory net realisable value adjustment of R138 million. The post-impairment loss of R368 million for the current financial year includes a plant and equipment impairment loss of R49 million and a goodwill impairment loss of R204 million. Together with a further R96 million goodwill impairment in the corporate and other segment services segment, Geosearch’s entire goodwill of R300 million was impaired in the 2013 financial year.


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2013 instalment and prepaid approximately 50% of the September 2013 instalment of R69 million on 2 August 2013. The balance of this instalment amounting to R32 million is due and payable on 30 September 2013.

The relationship between cash generation from operating activities of R94 million and compulsory debt redemption of R234 million in the 2013 financial year has, however, deteriorated to such an extent that the Group’s existing senior debt redemption profile is unsustainable in the 2014 financial year. The Board acknowledges that, in the context of the prevailing economic environment and operating conditions, the Group‘s debt is excessive in relation to the Group’s forecast cash generation and the Board has undertaken to pursue a number of initiatives to reduce the SBC debt by approximately R150 million before 31 December 2013. The initiatives being considered by the Board include the following:

h disposal of the Group’s coal assets; h continued disposal of the surplus plant and equipment within the Group;

h the refinancing of the SBC facility by means of a debt capital market instrument;

h the refinancing of the SBC debt; h other appropriate means of reducing the debt; and h a combination of the above.

Given the existing excessive debt levels, further breaches in the DSCR and TDR are anticipated during the 2014 financial year and the Company’s viability as a going concern is accordingly dependent on ongoing condonation of these breaches by the SBC. This risk was emphasised by the Group’s auditors in their opinion at 31 March 2013 and is further discussed in note 34 to the Group’s annual financial statements.

Property, plant and equipmentThe Group’s capital expenditure declined by R77 million to R215 million relative to the previous corresponding period, with the bulk of the capital expenditure of R120 million being invested in the opencast and earthmoving segments.

Investments, goodwill and intangible assetsThe Group’s mineral right holdings of R410 million comprise R355 million and R55 million which are attributable to the Group’s interests in the Nkomati Anthracite mine and the Bankfontein prospecting right, respectively.

Intangible assets, which comprise capitalised exploration costs, declined by R2 million relative to the prior financial year as a consequence of the translation of foreign incurred expenditure.

Goodwill declined from R413 million in the prior year to R121 million in the financial year under review, as a result of the impairment of goodwill attributed to Geosearch’s

Statement of financial positionThe substantial impairments and losses on the sale of plant and equipment incurred in the 2013 financial year resulted in non-current assets reducing to R2 billion, relative to R2,4 billion at the end of the previous corresponding period. Current assets also reduced proportionally to R854 million from R1 billion at the end of the prior financial year.

Assets classified as held-for-sale declined to R2 million from R389 million in the prior year following the sale of Megacube’s remaining plant and equipment at an unreserved auction held on 27 March 2013.

Non-current liabilities declined by 66% to R292 million following the reclassification of the long-term portion of the Group’s senior debt to current liabilities. This reclassification was required as a result of certain covenant breaches not being condoned by the SBC prior to 31 March 2013 financial year-end. The SBC condoned the breaches subsequent to year end; however, the reclassification resulted in current liabilities increasing from R571 million to R931 million.

Capital structureThe Group’s total equity declined from R2,4 billion to R1,6 billion as a result of the post-tax losses incurred during the 2013 financial year. The loss of R900 million incurred in the 2013 financial year also resulted in retained earnings declining from a profit of R365 million in the prior reporting period to a loss of R505 million at the reporting date. While the Group’s debt declined from R709 million to R549 million, the Group’s net debt to equity ratio increased from 22% to 29% as a consequence of the lower 2013 equity base relative to the year-end debt levels.

The Group funds its capital expenditure by means of a SBC facility and a WesBank vehicle asset finance facility. The availability of these facilities is dependent on ongoing compliance with a number of covenants, including, inter alia, a debt service cover ratio (“DSCR”) and a total debt to EBITDA ratio (“TDR”). The Group’s future sustainability and financial stability is dependent upon the ongoing condonation of these covenant breaches, to the extent required during the course of the 2014 financial year.

At 31 March 2013, the Group breached the DSCR and TDR covenants and was not granted timeous condonation by the SBC, resulting in the SBC and WesBank debt being classified as a current liability at year-end. This reclassification explicates the increase in short-term loans and borrowings by R324 million, relative to the prior financial year. Subsequent to year-end, condonation was received for the March 2013 breaches and condonation has also been received from the SBC for the anticipated June and September 2013 DSCR and TDR covenant breaches. The Group has fully met its June

Chief Financial Officer’s report continued


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acquisition. The residual goodwill of R121 million is attributable to the acquisition of CCT, JEF, Ritchie and the Group’s 50% interest in Jonah Coal Mauritius, which holds an interest in the Botswana mining tenements.

Restricted investments of R8,1 million comprise cash deposits held by a financial intuition as security for environmental guarantees, issued to the DMR, for mining activities conducted at the Nkomati Anthracite mine.

Working capitalGroup liquidity, gearing levels and financial risk are managed centrally by means of a Group treasury function. As a consequence of the deterioration in operating results, the Group‘s net working capital position deteriorated from R498 million at the prior year-end to R446 million at the reporting date. The current ratio declined from 2,92 times to 2,21 times and the quick ratio declined from 2,99 times to 1,72 times, relative to the prior year. The net working capital cycle declined from 70 days to 57 days, primarily as a consequence of the substantial reduction in inventory holdings relative to the prior financial year.

Subsequent to year-end, Sentula received the full auction proceeds of R118 million. Furthermore, following the conclusion of a settlement with the Marinvia Trust, R35 million of the R40 million settlement was received.

The Group bridges any working capital deficits utilising its general banking facility from Standard Bank with a limit of R140 million. This limit has, in line with the reduction in the magnitude of the Group’s receivables, been reduced to R95 million with effect from the end of July 2013.

Cash flow and net cash positionThe Group’s cash generation deteriorated markedly during the 2013 financial year with cash flows from operations, before changes in working capital and provisions, declining from R398 million to R177 million and net cash from operating activities declining from R230 million to R94 million, relative to the prior financial year.

Debt of R234 million was repaid in the 2013 financial year relative to R143 million repaid in the prior year, whereas debt of only R74 million was raised in the 2013 financial year relative to the R147 million raised in the prior year. The net cash effect of debt repaid and advanced was a R160 million outflow in the financial year under review relative to a R5 000 outflow in the 2012 financial year only.

The relationship between cash generation from operating activities of R94 million and compulsory debt redemption of R234 million in the 2013 financial year deteriorated, resulting in the Group’s existing senior debt redemption profile not being sustainable in the 2014 financial year. The Board has accordingly embarked on a number of initiatives, alluded to in the preceding paragraphs and note 34 to the Group’s annual financial statements, to reduce the debt by approximately R150 million in the short term.

Cash and cash equivalents declined by R142 million in the 2013 financial year, relative to a R93 million increase in the prior year, resulting in cash and cash equivalents at 31 March 2013 of R53 million, relative to R180 million at the prior year-end.

Dividend declarationIn light of the Group’s existing debt and liquidity position, the Board has decided not to declare a dividend in the 2013 financial year.

Deon LouwChief Financial Officer

13 September 2013


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The governance report section includes the following: h Corporate governance report – page 29 h Risk management report – page 37 h IT report – page 41 h Remuneration report – page 41 h King III checklist – page 44

Corporate governance report

IntroductionThe Board of Directors (“the Board”) of Sentula and senior management are committed to the highest standards of corporate governance and take pride in their high moral and ethical business standards, accompanied by sound and transparent business practices.

As corporate governance is constantly evolving, Sentula continually focuses on seeking ways to improve on its corporate governance standards. The Board is committed to and applies the principles contained in King III as more fully disclosed on pages 44 to 46, and in doing so, continuously strives to achieve corporate governance best practice.

The Board, assisted by the Audit and Risk Committee, and the newly formed Social and Ethics Committee, is responsible for overall corporate governance and monitors compliance with all applicable laws, rules, codes, standards and the Listings Requirements, and ensures ongoing improvement in the Group’s adherence to the principles set out in King III. The Company Secretary is responsible for assisting the Board in monitoring compliance and the day-to-day management of corporate governance.

Board of DirectorsStructure and role of the BoardThe Board has a unitary structure and comprises eight members, the majority of whom are independent non-executive directors. The Board considers all of the non-executive directors to be independent. Determination of independence is guided by King III, the Companies Act, the JSE Listings Requirements and corporate best practice. The profiles of the members of the Board are set out on pages 13 to 15 of this Integrated Annual Report.

The roles of the non-executive Chairman and the Chief Executive Officer are separated in accordance with the Board’s policy of division of responsibilities. This ensures a balance of authority and precludes any one director from exercising unfettered powers of decision-making. In addition, the Board complies with the requirements of King III insofar as the composition of its sub-committees is concerned.

A Board Charter, which is reviewed annually, has been adopted to guide the Board in governance issues and sets a framework within which the Board functions. The Board Charter sets out the Board’s duties and obligations, which include, inter alia, to:

h act as the focal point for, and custodian of, corporate governance by arranging its relationship with management, shareholders and other stakeholders of the Company along sound corporate governance principles;

h appreciate that strategy, risk, performance and sustainability are inseparable and to give effect to this by:• contributing to and approving the strategy;• satisfying itself that the strategy and business plans

do not give rise to risks that have not been thoroughly assessed by management;

• identifying key performance and risk areas;• ensuring that the strategy will result in sustainable

outcomes; and• considering sustainability as a business opportunity

that guides strategy formulation; h provide effective leadership on an ethical foundation; h ensure that the Company is and is seen to be a responsible corporate citizen by having regard not only to the financial aspects of the business of the Company but also to the impact that business operations have on the environment and the society within which it operates;

h ensure that the Company’s ethics are managed effectively;

h ensure that the Company has an effective and independent Audit and Risk Committee;

h be responsible for the governance of risk; h be responsible for information technology (“IT”) governance;

h ensure that the Company complies with applicable laws and considers adherence to non-binding rules and standards;

h ensure that there is an effective risk-based internal audit;

h appreciate that stakeholders’ perceptions affect the Company’s reputation;

h ensure the integrity of the Company’s Integrated Annual Report;

h act in the best interests of the Company at all times by ensuring that individual directors:• exercise their fiduciary duties with the necessary

care, skill and diligence;• adhere to legal standards of conduct;• practice objective judgement with regard to the

affairs of the Company independently from management, but with sufficient information to enable a proper and objective assessment;

• are permitted to take independent advice in connection with their duties following an agreed procedure;

Governance reports 29


Governance reports continued

• immediately disclose real or perceived conflicts to the Board and deal with them accordingly; and

• deal in securities only in accordance with the policy adopted by the Board;

h commence business rescue proceedings as soon as the Company is financially distressed;

h elect a Chairman of the Board that is a non-executive director; and

h appoint and evaluate the performance of the Chief Executive Officer.

The Board Charter requires that non-executive directors have unfettered access to management at any time, and all directors are entitled, at the Company’s expense, to seek independent professional advice on any matters pertaining to the Group where they deem this to be necessary, and are obliged to seek such advice in matters where they lack sufficient expertise to make an informed decision. When seeking independent advice, the directors must inform the Company Secretary and if it is relevant to Sentula or its operations, the Company Secretary will disclose the information to the Chief Executive Officer and the Board.

Executive directors are appointed by the Board to oversee the day-to-day running of the Company.

Executive directors are held accountable through regular reporting to the Board, and their performance is measured against predetermined criteria.

Non-executive directors provide the Board with advice and experience that is independent of management and the executive. The presence of independent non-executive directors on the Board, and the critical role they play as Board representatives on key committees, ensures that the Company’s interests are served by impartial views that are separate from those of management and shareholders.

As required by King III, self-evaluations by the Board and by the Audit and Risk Committee were performed in August 2013. The results will be addressed by the Board in the coming year, specifically the matter of a detailed succession plan.

An evaluation of individual director performance by the Chairman and an evaluation of the Chairman by the rest of the Board will be performed in the fourth quarter of the 2013 calendar year:

For the financial year ended 31 March 2013 and subsequent thereto, the Board composition and resignation of directors are as follows:

Director Appointed Resignation

Hugh Stoyell (independent non-executive) 30/09/2005 17/09/2012

Robin Berry (executive CEO) 02/01/2007 n/a

Jonathan Best (independent non-executive Chairman) 01/07/2007 n/a

Deon Louw (executive CFO) 01/08/2007 n/a

Pat Modisane (Executive Director Transformation and HR) 01/10/2008 n/a

Kholeka Mzondeki (independent non-executive) 01/07/2010 n/a

Cor van Zyl (independent non-executive and Chairman of the Audit and Risk Committee) 01/07/2010 n/a

Rain Zihlangu (independent non-executive) 01/07/2010 n/a

Ralph Patmore (independent non-executive) 25/01/2012 n/a

Executive directors have contracts of employment with the Company. No contracts between the executive directors and the Company, or any of its subsidiaries, are terminable at periods of notice exceeding six months or require payment of compensation on termination.

Non-executive directors have service contracts with the Company, and retire annually by rotation in accordance with the Company’s MoI.

Details on the remuneration of executive and non-executive directors are provided on page 118 of the Integrated Annual Report.


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Each committee has a charter/terms of reference to guide the members in performing their duties and the members of the committees have access to management, Group records and external professional advice if and when required. The Chairperson of each committee, in line with the recommendations of King III, attends the annual general meeting.

Audit and Risk CommitteeThe Audit and Risk Committee is constituted as a statutory committee of Sentula and the Group in respect of its statutory duties in terms of section 94(7) of the Companies Act (2008), and a committee of the Board in respect of all other duties assigned to it by the Board. The duties and responsibilities of the committee members are in addition to those duties and responsibilities that they have as members of the Board.

The committee has an independent role with accountability to both the Board and shareholders; however, it does not assume the functions of management, which remain the responsibility of the executive directors, prescribed officers and other members of senior management.

The duties and responsibilities of the members of the Audit and Risk Committee are governed by a charter/terms of reference which is reviewed annually. The charter/terms of reference sets out the committee’s duties, which include, inter alia:

Overseeing integrated reportingThe committee oversees integrated reporting, including the integrity and content of the integrated reporting process, and in particular the committee must:(i) have regard to all factors and risks that may impact

the integrity of the Integrated Annual Report, including factors that may predispose management to present a misleading picture, significant judgements and reporting decisions made, monitoring or enforcement actions by a regulatory body, any evidence that brings into question previously published information, forward-looking statements or other information;

(ii) review the annual financial statements, interim reports, preliminary or provisional results announcements, summarised integrated information, any other intended release of price-sensitive information and prospectuses, trading statements and similar documents;

(iii) comment in the annual financial statements on the accounting practices and the effectiveness of the internal financial controls;

(iv) review the disclosure of sustainability issues in the Integrated Annual Report to ensure that it is reliable and does not conflict with the financial information;

(v) recommend to the Board whether or not to engage an external assurance provider on material sustainability issues;

Changes to the BoardHugh Stoyell resigned as non-executive director of the Board with effect from 17 September 2012.

The details of the directors are set out on pages 13 to 15 of the Integrated Annual Report.

Director appointment and retirement policiesThe non-executive directors and Chairman are subject to retirement by rotation and re-election in accordance with the Company’s MoI. At each annual general meeting, one-third of the non-executive directors, or if their number is not a multiple of three, then the number nearest to, but not less than, one-third shall retire from office.

New appointments to the Board are made through a formal process and the Nomination Committee assists with the process of identifying suitable candidates to be proposed to the Board and to shareholders.

Board appointments are made with a view to ensuring an appropriate blend of skills and experience is maintained. All Board appointments are ratified by Sentula shareholders.

Board meetingsThe Board meets at least four times a year with additional meetings held when necessary.

The attendance at Board meetings held during this period is set out below:

Number of Board meetings during the year – five

Director Attended

Hugh Stoyell (resigned 17/09/2012) 2Robin Berry 5Jonathan Best (Chairman) 5Deon Louw 5Pat Modisane 5Kholeka Mzondeki 5Cor van Zyl 5Rain Zihlangu 4Ralph Patmore 4

Board sub-committeesTo enable the Board to properly discharge its duties and responsibilities, the Board is assisted by an Audit and Risk Committee, a Remuneration Committee, an Investment Committee, a Nomination Committee and a Social and Ethics Committee.

Directors play a critical role as Board representatives on the various Board committees and ensure that the Company’s interests are served by impartial, objective and independent views that are separate from those of management and shareholders.


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(vi) recommend the Integrated Annual Report for approval by the Board;

(vii) consider the frequency for issuing interim results;(viii) consider whether the external auditor should

perform assurance procedures on the interim results;

(ix) review the content of the summarised information as to whether it provides a balanced view; and

(x) engage the external auditors to provide assurance on the summarised financial information.

Combined assurance modelThe committee must ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities, and in particular the committee should:(i) ensure that the combined assurance received is

appropriate to address all the significant risks facing the Company; and

(ii) monitor the relationship between the external assurance providers and the Company and take the appropriate action where necessary.

Finance function and Financial DirectorThe committee reviews the expertise, resources and experience of the Company’s finance function and discloses the results of the review in the Integrated Annual Report. The committee also considers and satisfies itself of the suitability of the expertise and experience of the Financial Director on an annual basis.

Internal audit processesThe committee is responsible for overseeing the internal audit, and in particular the committee must:(i) be responsible for the appointment, performance

assessment and/or dismissal of the outsourced internal audit service provider;

(ii) approve the internal audit plan and monitor performance against this plan; and

(iii) ensure that the internal audit function is subject to an independent quality review, as and when the committee determines it appropriate.

Risk managementThe committee is an integral component of the risk management process and specifically the committee must:(i) oversee the development and annual review of a

policy and plan for risk management to recommend for approval to the Board;

(ii) monitor implementation of the policy and plan for risk management taking place by means of risk management systems and processes;

(iii) monitor effectiveness of the Company’s internal controls and internal audit function;

(iv) make recommendations to the Board concerning the levels of risk tolerance and monitoring that risks are managed within the levels of tolerance as approved by the Board;

(v) ensure that the risk management plan is widely disseminated throughout the Company and integrated in the day-to-day activities of the Company;

(vi) oversee the integrity and efficiency of the risk management process through assurance of the system controls and policies in place;

(vii) ensure that risk management assessments are performed on a continuous basis;

(viii) ensure that frameworks and methodologies are implemented to increase the possibility of anticipating unpredictable risks;

(ix) ensure that management considers and implements appropriate risk responses;

(x) ensure that continuous risk monitoring by management takes place;

(xi) express the committee’s formal opinion to the Board on the effectiveness of the system and process of risk management;

(xii) review reporting concerning risk management that is to be included in the Integrated Annual Report for it being timely, comprehensive and relevant; and

(xiii) focus on financial risks such as financial reporting risks, internal financial controls, fraud risks as it relates to financial reporting and IT risks as it relates to financial reporting.

External audit processesThe committee is responsible for recommending the appointment of the external auditor and to oversee the external audit process and in this regard the committee must:(i) nominate the external auditor for appointment by

the shareholders;(ii) approve the scope and terms of engagement,

including also the remuneration for the external audit engagement;

(iii) monitor and report on the independence of the external auditor in the annual financial statements;

(iv) define a policy for non-audit services provided by the external auditor;

(v) pre-approve the contracts for non-audit services to be rendered by the external auditor;

(vi) ensure that there is a process for the committee to be informed of any reportable irregularities (as identified in the Auditing Profession Act, 2005) identified and reported by the external auditor;

(vii) review the quality and effectiveness of the external audit process;

(viii) evaluate the performance of the external auditor;(ix) have oversight of the qualification and

independence of the external auditor; and(x) perform any other oversight function determined by

the Board.


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ComplianceThe responsibility to facilitate compliance throughout the Company and the Group has been delegated by the Board to the Audit and Risk Committee, and in this regard the committee must:(i) ensure that the Company and the Group comply

with applicable laws and consider adherence to non-binding rules, codes and standards;

(ii) ensure that the Company and the Group establish and maintain a compliance framework and process that is appropriate taking into account the laws, rules, codes and standards that are applicable in light of the compliance risk profile of the Company;

(iii) ensure that the Company and the Group establish and implement a legal compliance policy;

(iv) ensure that the Company and the Group establish and implement a compliance manual;

(v) identify, assess, advise on, monitor and report on the regulatory compliance risk of the Company and the Group, which will form part of the overall risk management framework of the Company;

(vi) ensure that compliance monitoring and reporting be undertaken in a manner that is appropriate for the Company’s circumstances; and

(vii) ensure that a compliance culture is encouraged through leadership, establishing the appropriate structures, education and training, communication and measurement of key performance indicators relevant to compliance.

Information technology (“IT”) governanceThe responsibility for IT governance throughout the Company has been delegated by the Board through the Audit and Risk Committee, to an IT Steering Committee established for this purpose. The Audit and Risk Committee has oversight over the duties of the IT Steering Committee as more fully detailed in the approved Sentula IT Steering Committee Charter. The IT Steering Committee will, through its Chief Information Officer, submit minutes of all IT Steering Committee meetings to the Audit and Risk Committee. The Chief Information Officer of the IT Steering Committee will report on any matters of importance to the Audit and Risk Committee, who in turn will report on IT governance to the Board.

In terms of the charter/terms of reference, the Audit and Risk Committee comprises a minimum of three independent non-executive directors, and the Chairman of the committee may not be the Chairman of the Board.

The Audit and Risk Committee is compliant with the requirements of King III, and the constitution of the committee is in accord with these guidelines.

The committee is chaired by an independent non-executive director, Cor van Zyl.

The composition of this committee is as follows: Cor van Zyl (Chairman of the committee), Kholeka Mzondeki (member) and Rain Zihlangu (member).

The Chairman of the Board, Chief Executive Officer, Chief Financial Officer, other executives and the external and internal auditors attend Audit and Risk Committee meetings by invitation. The committee annually considers and recommends the annual financial statements of the Company and the Group for approval by the Board. Additionally, the committee approves the audit fees and all fees for non-audit services provided by the Group’s external auditors.

The Audit and Risk Committee confirms that it is satisfied with the independence of the external auditor and the appropriateness of the skills and expertise of Deon Louw, executive director and Chief Financial Officer of Sentula.

Audit and Risk Committee meetings held during the year – six.

Director Attended

Cor van Zyl (Chairman) 6Kholeka Mzondeki 6

Rain Zihlangu 6

Remuneration CommitteeThe Remuneration Committee has adopted a charter/terms of reference which is reviewed annually, setting out its duties and obligations. The committee is responsible for ensuring that the directors and executive management are appropriately remunerated. The committee is also responsible for the formulation of proposals of the fees paid to the non-executive directors for the Board’s consideration and shareholder approval.

During the year under review, the committee was chaired by independent non-executive director, Hugh Stoyell (resigned on 17 September 2012), and the committee further entirely comprised independent non-executive directors, being Jonathan Best and Ralph Patmore. Ralph Patmore has been acting as Chairman of this committee since the resignation of Hugh Stoyell on 17 September 2012.

The Chief Executive Officer and Executive Director Transformation and HR attend meetings by invitation, and are obliged to recuse themselves from discussions with regard to their own remuneration.


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Remuneration Committee meetings held during the year – three.

Director Attended

Hugh Stoyell (Chairman) (resigned 17 September 2012) 2

Ralph Patmore (acting Chairman as from 17 September 2012) 3

Jonathan Best 3

Nomination CommitteeThe Nomination Committee has adopted a charter which is reviewed annually, setting out its duties and obligations. The committee ensures a formal and transparent procedure for appointments to the Board.

Although the appointment of directors is a matter to be deliberated upon by the Board as a whole, the committee assists the Board by identifying and recommending suitable candidates for appointment as well as establishing a succession plan for Board members.

During the year under review, the committee was chaired by an independent non-executive Chairman, Jonathan Best, and the current members were Hugh Stoyell and Ralph Patmore. Rain Zihlangu was co-opted as a member of this committee with the resignation of Hugh Stoyell effective 17 September 2012.

An attendance table for Nomination Committee meetings is set out below:

Nomination Committee meetings held during the year – one.

Director Attended

Jonathan Best (Chairman) 1

Hugh Stoyell (resigned 17/09/2012) 0

Ralph Patmore 1

Rain Zihlangu (appointed 17/09/2012) 1

Investment CommitteeThe purpose of the Investment Committee is to consider and oversee Sentula’s strategic investment processes and to evaluate investment projects relating to the acquisition or disposal of Group assets.

There were no meetings during the year under review as strategic investment/disposals were discussed by the Board as a whole.

Social and Ethics CommitteeThe Social and Ethics Committee was established and constituted as a statutory committee of Sentula and the Group on 8 March 2012, in respect of its statutory duties in terms of section 72(4)(a) of the Companies Act (2008), and a committee of the Board in respect of all other duties assigned to it by the Board.

The committee has adopted a charter/terms of reference which is reviewed annually, setting out its duties and obligations.

The purpose of this committee is to recognise the responsibility for the Company’s actions and the encouragement of a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public. The ultimate objective of managing organisational integrity is to build an ethical corporate culture.

The committee’s members are appointed by the Board and it consists of not less than three members, at least one of whom must be an independent non-executive director. Members could also comprise senior management or persons with the relevant experience. The Board appoints the Chairman from the members of the committee and determines the period for which he/she shall hold office. In the absence of the Chairman of the committee, the remaining members present shall elect one of their numbers present to chair the meeting. The Board shall, from time to time, review and revise the composition of the committee, taking into account the need for an adequate combination of skills and knowledge.

Board members may attend committee meetings by invitation. Suitably qualified persons may be co-opted onto the committee when necessary to render such specialist services, as may be necessary, to assist the committee in its deliberations on any particular matter, but shall have no voting rights.

The committee has the following functions:(i) to provide guidance for the building and sustaining

of an ethical corporate culture in the Company;(ii) to monitor the Company’s activities, having regard

to any relevant legislation, other legal requirements or prevailing codes of best practice, with regard to Board Charter matters relating to social and economic development, including the Company’s standing in terms of goals and purposes of the 10 principles set out in the United Nations Global Compact Principles, the OECD (Organisation for Economic Cooperation and Development) recommendations regarding corruption, the Employment Equity Act, the Broad-Based Black


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Social and Ethics Committee meetings held during the year – three.

Director Attended

Pat Modisane (Chairman) 3

Ralph Patmore 3

Robin Berry 3

Chief Executive OfficerThe Board has delegated specific authorities to the CEO to ensure the effective day-to-day management of the Group. The CEO has established an Executive Committee to assist in this task. He is accountable to the Board for managing the Group and reports to the Board of Directors.

Executive CommitteeThe Executive Committee comprises the following members:

Robin Berry Chief Executive Officer, committee Chairman

Deon Louw Chief Financial OfficerPat Modisane Executive Director Transformation

and HRGrace Chemaly Group Legal and Compliance

Officer and Company Secretary (resigned as Company Secretary on 8 July 2013 and took over the role of Legal and Compliance Officer)

Ina Cross Group Company Secretary (appointed on 8 July 2013)

Catherine Wolmarans

Group Financial Manager and Treasurer

Philip van Vuuren Group Technical Executive (appointed on 15 July 2013)

Khumo Mphake Group Manager: Transformation and Human Resources

Lauren Flinders Group Sustainability CoordinatorGideon van Heerden Chief Executive Officer, BeniconElsa Devenish Chief Financial Officer, BeniconIan Els Chief Executive Officer, CCT

(resigned 30 June 2013)Allan Hepburn Chief Financial Officer and acting

as Chief Executive Officer, CCT (effective 1 July 2013)

Johan Pieterse Chief Executive Officer, JEFZander Potgieter Chief Financial Officer, JEFAlan Lynn Chief Executive Officer, RitchieMacy Sidu Chief Financial Officer, RitchieMike Fitzgerald Chief Executive Officer, GeosearchJohann Lemmer Chief Financial Officer, Geosearch

(appointed 1 October 2012)Gerda Louw Chief Financial Officer, Geosearch

(resigned on 1 October 2012)Mike van der Riet Executive Commercial Manager,

GeosearchMarthinus de Jager Chief Executive Officer, Benicon

SalesNicola Cillie Chief Financial Officer, Megacube

and Sentula Contracting (resigned on 31 August 2013)

Michael Minnaar Chief Executive Officer, Nkomati (resigned on 11 June 2013)

Danie Jacobs Business Executive – Coal Portfolio

Economic Empowerment Act and the Company’s legal compliance framework as applicable from time to time;

(iii) to promote good corporate citizenship, including the Company’s promotion of equality, prevention of unfair discrimination and reduction of corruption, contribution to development of the communities in which its activities are predominantly conducted or within which its products or services are predominantly marketed and record of sponsorship, donations and charitable giving;

(iv) to care for the environment, health and public safety, including the impact of the Company’s activities and of its products or services;

(v) to promote consumer relationships, including the Company’s advertising, public relations and compliance with consumer protection laws;

(vi) to monitor 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 relationship and its contribution towards the educational development of its employees;

(vii) to review any statements on ethical standards or requirements for the Company and the procedures or review system implemented to promote and enforce compliance;

(viii) to review significant cases of employee conflicts of interest, misconduct or fraud, or any other unethical activity by employees or the Company;

(ix) where requested, make recommendations on any material potential conflict of interest or questionable situations;

(x) ensure that the code of conduct and ethics-related policies are drafted and implemented;

(xi) reporting on and disclosing the Company’s ethics performance;

(xii) to draw matters within its mandate to the attention of the Board as the occasion requires; and

(xiii) to report, through one of its members, to the shareholders at the Company’s annual general meeting on the matters within its mandate.

The committee is chaired by Pat Modisane (Executive Director Transformation and HR), and the appointed members are Robin Berry (Chief Executive Officer) and Ralph Patmore (independent non-executive director). Senior members of Sentula management attend meetings by invitation.


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Reporting controlsThe Group has comprehensive monthly financial accounting, cash flow reporting, safety and compliance reporting routines for its subsidiaries. The Group manages cash, funding and banking relationships through a centralised Treasury function. The Board approves the Group capital expenditure during the annual budget process.

Formal monthly meetings are held with the executives of each of the subsidiaries to review performance, health and safety, commercial and strategic issues. These are in addition to the monthly meetings held between the Group and the subsidiaries CEOs and respective business management teams.

Code of Business Conduct (”the Code“)Sentula is committed to a policy of fair dealing and integrity in the conduct of its business. This commitment, which is actively endorsed by the Board, is based on a fundamental belief that business should be conducted honestly, fairly and legally. The Company expects all employees to share its commitment to high moral, ethical and legal standards.

The CEO and executive management are responsible to the Board for the development and maintenance of the ethical culture within the Group. Supervisors and managers have a responsibility to support the CEO and executive management in upholding a high standard of business conduct, and must take all reasonable steps to ensure that the people for whom they are responsible are aware of and uphold the behaviours outlined in the Code.

This includes: h consistently demonstrating exemplary behaviour; h undertaking activities to foster a culture in which employees understand their responsibilities, feel comfortable raising concerns without fear of victimisation, are encouraged to work according to acceptable standards and are rewarded for such behaviour;

h making certain that mandatory Company policies, standards and procedures are accessible and understood;

h embedding the requirements of the Code into existing systems, for example performance management processes, employment and supplier contracts, induction as well as industrial agreements;

h responding promptly and seriously to employees’ legitimate concerns and questions about business conduct issues and seeking further assistance if required;

h establishing internal processes that address risk areas in relation to business conduct and ensuring that actual or potential breaches are appropriately investigated and handled;

h ensuring all business conduct breaches are reported to the relevant human resources representative for recording in the breaches database; and

h taking or recommending appropriate actions to address business conduct issues.

The Company complies with the code of ethics requirements of King III in all material respects.

Stakeholder engagementGood corporate governance principles promote interactive communication processes to address the legitimate interests and expectations of stakeholders. As such, Sentula remains committed to providing all stakeholders with relevant, transparent and timely communication through the most appropriate medium and in the most appropriate manner. Due to the nature of the Group, interaction with employees, unions, suppliers and clients is primarily with management. The executive directors interact regularly with key shareholders on the performance and strategy of the Group. From time to time shareholders contact non-executive directors on specific issues. Communication channels include SENS, the press (local and national newspapers), corporate reports and publications, formal meetings and forums, internal newsletters, informal information sharing, marketing channels and the internet. The website (www.sentula.co.za), which was revamped during the year, provides relevant news and information about the Group. The Group’s formal business language is English but, where applicable, communication may be provided in other languages.

Company SecretaryAll directors have unrestricted access to the advice and services of the Company Secretary and to Company records, information, documents and premises. The Company Secretary minutes all Board and sub-committee meetings and maintains the registers required by statute. The Company Secretary is also responsible for keeping directors abreast of regulatory or legislative changes which may affect the Company.

During the year under review, and in compliance with paragraph 3.84(i) and (j) of the Listings Requirements, the Board evaluated Ms Grace Chemaly, the Company Secretary, and is satisfied that she is competent, suitably qualified and experienced. Ms Chemaly is a qualified attorney and has 15 years’ experience in the legal industry, seven of which were as Company Secretary in the listed environment. Furthermore, since she is not a director, nor is she related or connected to any of the directors, thereby negating a potential conflict of interest, it was agreed that she maintains an arm’s length relationship with the Board. The Board also undertook a general evaluation of her performance in order to identify possible steps for improvement, which were communicated to her by the Chairman.


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In support of this commitment, all material risks that impact the Group’s businesses are analysed by the Audit and Risk Committee and the Board using a formal risk rating matrix. The Board is ultimately responsible and accountable for ensuring that adequate procedures and processes are in place to identify, assess, manage and monitor key business risks. The Audit and Risk Committee and Board conduct regular reviews of the Group’s risks to ensure that major risks are identified, rated and documented in the Company’s risk register.

The risk management process is conducted with inputs from both the Group’s internal and external auditors and other independent service providers. Although the Board, assisted by the Audit and Risk Committee, assesses Group risk and ensures that a culture of risk awareness is instilled throughout the Group, day-to-day responsibility for risk identification, evaluation and management resides with the subsidiary management and Executive Committee of the Group.

These risks are reviewed on a monthly basis by the Executive Committee to ensure that the requisite responsibility is allocated and the appropriate mitigating mechanisms are implemented to reduce the identified risk to an acceptable level. Financial risk is governed by a formal financial risk management policy which is approved by the Board and sets limits for the magnitude and nature of financial risk that may be incurred by the Group.

The Group’s internal audit plan is reviewed on an annual basis by the Audit and Risk Committee and directed to ensure that the identified risk factors are being managed in a manner consistent with the guidelines determined by the Board.

The Group’s assets are insured against material loss with credible insurers at predetermined values to ensure that material asset losses are reduced to levels approved by the Board.

The Group endeavours to maintain constructive relationships with the tax authorities in the jurisdictions in which it operates and utilises the services of independent tax consultants to ensure tax compliance across the Group. These advisers conduct ongoing tax reviews and provide quarterly feedback to the Audit and Risk Committee on its findings. All material legal tax matters are dealt with by the Group’s legal advisers and are monitored by the Audit and Risk Committee.

Analysis of risks and controlsIn reviewing the Group’s risk profile, consideration is given to the following primary risk categories:

Business risk: h Customer concentration; h Broad-based black economic empowerment; and h Increasing business complexity.

Grace Chemaly resigned as Company Secretary on 8 July 2013, and took over the role of Legal and Compliance Officer.

Subsequent to year-end, Ina Cross was appointed as Company Secretary of Sentula and the Group effective 8 July 2013. Ms Cross is a qualified attorney and has approximately 18 years’ experience in the legal services industry. Prior to joining Sentula, she was a practicing attorney for seven years before assuming the position of legal manager at Anglo Platinum, where she remained for five years. Thereafter Ms Cross joined Barrick Gold as a director of legal services for a period of over six years.

Share dealing and conflicts of interestDirectors and management with access to financial results and/or price-sensitive information are prohibited from dealing in Sentula shares during closed or prohibited periods, and clearance and approval procedures and processes are in place throughout the Group. At the holding company level, directors are required to obtain prior approval from the Chairman and Chief Executive Officer and to report any share dealing (including transactions in terms of the Sentula Share Incentive Trust) to the Company Secretary who, together with the Chief Executive Officer and sponsor, ensures the publication of the information on SENS. At subsidiary level, dealings are cleared by the Chief Executive Officer.

Directors are required to separate their personal transactions from the Company’s transactions, and they are prohibited from accepting or soliciting gifts or benefits of any kind by virtue of their position on the Board. Annually, and thereafter at each Board meeting, directors are required to disclose to the Chairman any potential conflict of interest and any other directorships held by them. Directors who disclose a potential conflict of interest recuse themselves from discussion of the matter which may give rise to the conflict of interest.

SubsidiariesSentula’s major subsidiaries are listed on page 4 of this Integrated Annual Report.

SponsorIn compliance with the Listings Requirements, Merchantec Proprietary Limited acts as sponsor to Sentula.

Risk management report

Responsibility for risk managementSentula acknowledges that risk is an inherent and unavoidable aspect of contract mining and mining services. The Company fosters a corporate culture of risk awareness in all decision-making, and is committed to mitigating and managing risk in a proactive and effective manner through a thorough risk management framework.


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External risks: h Macroeconomic risk; and h Geopolitical risk.

Sustainability risk: h Regulatory and compliance risk; h Strategic risk; and h Skill retention and succession planning.

Financial risks: h Group capital structure and working capital adequacy; and

h Credit/counterparty risk.

Operational risks: h Safety, health and environmental risks; h Adverse weather conditions; h Operational cost increases and reliability of key consumables;

h Labour militancy; and h Capital allocation, equipment availability and utilisation risk.

The risk management process is conducted in the context of a formalised system to identify and assess the primary risks to which the Group is exposed.

The approach to the management of the risk incorporates the following key steps:

h identify the risks that could have a material impact on the Group’s ability to achieve its strategic objectives;

h analyse the risks and mitigating controls, distinguishing between controllable and uncontrollable risks and the potential financial impact of such risks;

h ensure that the appropriate controls are put in place to mitigate or reduce the residual risk to an acceptable level;

h monitor the effectiveness and implemented controls; and

h regularly report to the Audit and Risk Committee and Board.

Managing risk and risk factorsA summary of the major risks, in no order of priority, to which the Group is exposed, their impact and the mitigating strategies thereto, is presented hereunder:

Root cause Impact Mitigation

Business risksThe Group is exposed to a number of large mining clients.

Premature termination of a large contract may result in financial losses if it cannot be timeously replaced.

Diversification of the client base, strengthening of the executive level relationships and the rendering of competitive and value enhancing services.

Broad-based black economic empowerment legislation not being complied to.

The Group's empowerment rating may deteriorate, resulting in non-compliance to tender conditions.

Ongoing assessment of regulatory compliance by management.

Increased business complexity creates an environment that impacts adversely on the business.

Complexity stifles entrepreneurial spirit and distracts and frustrates management. Regulatory compliance may also be breached.

Ongoing training of executives and the outsourcing of compliance awareness initiatives. The elimination of bureaucracy and the simplification of business processes.

External risks Demand for the Group’s services is influenced by world economic growth, particularly in the Asian countries and the western European sub-continent.

A reduction in economic growth could have a negative impact on commodity prices and a concomitant impact on the Group’s revenues, profitability, cash flows, and asset values.

The Group manages this risk through constant monitoring of the markets in which it operates. The following strategies have also been introduced to further mitigate this risk:

h diversification of the Group’s earnings streams; h maintaining debt levels which are stress tested to different levels of cash flow volatility; and

h maintaining flexible business models with respect to fleet configurations, employee termination periods and employment conditions.

Should commodity prices deteriorate certain of the operations on which the Group renders mining services may become uneconomical resulting in a cessation or curtailment of operations.

Major economic upheaval in Asia or Europe may also exacerbate the financial crisis, resulting in capital equipment finance becoming more expensive and/or curtailed.


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External risksGeopolitical risk may impact adversely on the Group’s foreign mining services business.

Geopolitical volatility in the foreign countries in which the Group operates can result in a delay in the commencement of operations or a cessation of operations.

Geopolitical risk in foreign countries is managed by the following initiatives:

h independent political risk assessments and monitoring, where appropriate;

h contributing to the host country’s economy and culture with worthwhile public projects;

h cultivating connections with public officials outside the industry in which the Group operates;

h ongoing discussions and engagement with representatives of the national or local government and being a good corporate citizen;

h political risk insurance, where deemed necessary; and

h limiting the capital and currency exposure to a single country or region to within acceptable levels.

The ability to source and remit foreign exchange may also adversely impact the Group’s liquidity and its ability to meet its contractual obligations.

The manifestation of these risks can result in an adverse impact on the Group’s future earnings and cash flows.

Sustainability risksThe Group’s business may be affected by regulatory or fiscal developments in any of the jurisdictions in which it operates.

Adverse changes to legislation, regulations or standards could impact the Group’s licences and its ability to operate its mining assets.

The Group monitors regulatory developments with the assistance of an external service provider and ensures that the applicable policies and procedures are in place to ensure compliance.

Mining operations are subject to extensive legislation and regulations.

Failure to comply with existing regulations could result in the revocation of the Group’s licences, consents and other rights required conducting its business.

All appropriate actions are taken by management to protect the Group, its employees and shareholders from legal actions.

Adverse changes in legislation or regulations could affect the viability of the Group’s mining operations or prospects.

Legal disputes may affect the Group’s reputation, relationships with Government and key stakeholders as well as its future earnings and cash flows.

Mechanisms to ensure compliance include: h a legal compliance register being implemented; h compliance checklists and project monitoring software being implemented; and

h independent reviews and legal and tax opinions are sought on substantive regulatory matters.

Risk of the Group's strategy being unaligned to its vision.

Management actions are in conflict with the Group's vision.

The Group strategy process is formalised and reviewed by the Board.

The inability to recruit, develop and retain appropriate skills remains an ongoing risk for the Group’s operations.

Failure to retain skilled employees or to recruit appropriate new staff members may result in increased costs, interruptions to existing operations and lost opportunities.

The Group recognises that the mining industry is experiencing a skills deficit and has implemented a number of strategies to attract, retain and develop its best talent.

A high employee turnover could also result in the loss of critical skills and “corporate memory”.

These include: h regularly benchmarked market-related remuneration and long-term incentive schemes;

h comprehensive and in-house training programmes, job-based skills training and apprenticeships and learnerships;

h growth opportunities and multi-skilling for employees;

h succession planning programmes are in place which are reviewed bi-annually; and

h ongoing market research on availability of scarce category skills.


39



Financial risksThe Group’s growth and sustainability is dependent on the support of a number of financial institutions.

Group capital structure and working capital adequacy is unresponsive to changing market and operating conditions which may result in a breach of the facility covenants and a withdrawal of these facilities.

The Group’s financial risk is managed in terms of a financial risk management policy which endeavours to reduce financial risk to acceptable levels and ensure the Group’s solvency and liquidity.

This funding is utilised to invest in the Group’s ongoing capital and working capital requirements.

Should these facilities be withdrawn or reduced the Group’s sustainability will be severely impacted.

The Group also fosters good relationships with a number of banks and monitors its liquidity and covenants on an ongoing basis. To ensure that the Group’s working capital is adequate to bridge operational disruption, a general banking facility has been secured. Capital is only deployed into projects that are expected to generate a return equal or in excess of the Company’s cost of capital and generates the requisite cash for debt redemption. Operational and financial performance is monitored by means of monthly benchmarking to predetermined operational and financial criteria.

The Group is exposed to substantial credit risk when rendering services to counterparties that do not have the financial strength of larger companies.

The inability of a counterparty to meet its obligations to the Group can have a material severe financial impact on the Group’s ability to meet its financial objectives.

To reduce this risk to an acceptable level, the following initiatives are taken:

h ongoing credit assessments of counterparties; h credit enhancements, where available, such as payment guarantees, credit insurance and security deposits;

h contractual terms to enable the Company to limit its exposure;

h diversification of the client base; and h the strengthening of executive level relationships.

Operational risksMining is a hazardous activity and the Group operates in a sector that is subject to numerous safety and health regulations.

Failure to maintain high levels of safety can result in harm to employees or communities near the Group’s operations.

The Group places a very high priority on safety and invests considerable resources in maintaining and improving safety standards at its operations. In this context the following initiatives have been implemented:

h programmes to comply with ISO 9000, 14000 and OSHAS 18000;

h behaviour-based training and rigorous enforcement of standards;

h a SHE forum established at senior management (EXCO) level;

h incentives linked to the meeting of objectives; h monitor conditions from a safety and operational perspective, with regard to hazards identified and solutions implemented;

h risk elimination programmes and the mitigation of assessed risk; and

h engineered solutions (FRCP and AFRS).

Given the large fleets of plant and equipment being operated by the Group, exposure to mining accidents is the single most significant health and safety risk facing the Group.

Failure to meet safety objectives may breach the Group’s values, impact its reputation and affect the morale of employees, the achievement of production targets and the Group’s licence to operate.

Severe safety incidences can result in the Group’s reputation being damaged with adverse consequences for its stakeholders.

The Group’s operations are conducted in an open environment which is exposed to the natural elements.

Adverse weather conditions such as excessive rain, heat, fog and dust adversely impact the Group’s ability to meet its operational and financial targets.

Initiatives to limit the impact of adverse weather conditions include:

h the design and maintenance of effective drainage and pumping systems on operations;

h ensuring that haul roads and related infrastructure are constructed to ensure good drainage and durability;

h contracted flexibility in operational activities in conjunction with the scheduling of operational activities and flexible production targets; and

h maintaining high service delivery quality standards.


40


Operational risksThe Group is dependent on a number of input costs which are largely outside of its control.

The Group is often unable to pass these cost increases through to its clients, which may result in its financial objectives not being met and consequently affecting the value of its assets, earnings, cash flows and prospects.

A number of strategies have been implemented to mitigate this risk, which include:

h maintaining a database of price escalations on all major commodity items;

h contractually linking rate escalations to input cost escalations;

h developing and strengthening executive level relationships with key suppliers;

h maintaining flexible business models with respect to fleet configurations, termination periods and employment conditions;

h implementing strong relationship building processes with organised labour through a process of constructive dialogue and an effective working relationship; and

h establishing long-term agreements on collective bargaining.

These inputs costs typically include labour rates, steel prices, fuel and the cost of capital equipment.

A labour disruption could result in production and financial losses to the Group.

Capital deployed into underperforming projects.

Capital deployed into projects that render sub-optimal returns may result in cash flow deficits and the erosion of shareholder value.

Capital is only deployed into projects that are expected to generate a return equal or in excess of the Company’s cost of capital and generate the requisite cash for debt redemption. Operational and financial performance is monitored by means of monthly benchmarking to predetermined operational and financial criteria.

Information technology (“IT”) reportThe Board of Directors has, through delegated authority to the Audit and Risk Committee, identified the functions within the business that are dependent upon IT solutions. The business risk associated with these functions has been assessed by the Audit and Risk Committee and, taking cognisance of the nature of the Group’s current business offering and strategy, an IT governance framework has been established and policies formulated under the direction of the Group IT Steering Committee.

A charter for the IT Steering Committee was adopted during the year and the IT Steering Committee has been mandated to guide the Group’s IT strategy in line with business imperatives. The IT committee meets on a bi-annual basis to review the appropriateness of the Group’s IT function and related matters. The Group’s independent IT consultants and internal auditors also attend this meeting.

Given the nature of the Group’s current business mix, the physical safeguarding of IT assets, data security and disaster management and recovery, have been identified as the core of Sentula’s IT management emphasis. During the past year, a service provider was mandated to provide a back-up and recovery function for the Group, utilising secure offsite repositories. The IT Committee has also placed a renewed emphasis on the use of technology as a business enabler, as opposed to only a

processing function and a number of initiatives have already been embarked on in this regard to better manage the Group’s fleet of plant and equipment. The integration of the Group’s IT functions is also continuing with centralised IT nodes rendering services to a number of subsidiaries.

As a standing item on the Group’s Audit and Risk Committee agenda, the Group’s internal auditors and IT consultants have been appointed to provide assurance to the committee on the appropriateness, stability and sustainability of the Group’s IT function.

Remuneration report

Remuneration CommitteeRole of the Remuneration Committee and terms of referenceIn particular, the Remuneration Committee is responsible for:

h the determination and periodic review of the remuneration packages for executive directors and other members of the Executive Committee of the Company including, but not limited to, basic salary, performance-based short and long-term incentives, pensions, and other benefits;

h the design, operation and administration of the Company’s performance-based incentives and awards made under the share-based incentive schemes;


41


h the development of a succession plan that identifies suitably experienced individuals, within in the organisation, who can step into key roles, should the need arise; and

h assisting the Board with the determination of the remuneration to be paid to the non-executive directors.

Membership of the committeeHugh Stoyell – resigned 17 September 2012Jonathan BestRalph Patmore (acting Chairman)

Remuneration policy on executive director and senior executive remunerationThe Company’s objective remains to be the preferred contract mining and mining services company in Africa. In order to achieve this, the Company must be in a position to attract the right talent available in the industry and its remuneration package must therefore be comparable to those of its competitors, in the various sectors in which it operates.

The remuneration policy is to attract and retain high- calibre executives and to motivate them to develop and implement the Company’s business strategy and the optimisation of long-term shareholder value.

The following principles are applied to give effect to the remuneration policy and to determine executive remuneration:

h executive remuneration is benchmarked against a comparator group of South African small and mid-cap JSE listed entities, mining services and junior mining companies. The most recent benchmarking exercise conducted by the Company utilised the April 2013 Remchannel Report as a base, and indicated that the total remuneration of the executive directors was in line with the peer group median;

h to ensure the appropriate balance between short, medium and long-term incentives, with salary comprising about 35% to 45% of annual remuneration, if the bonus and share-based incentive targets are achieved in any given year; and

h to align the behaviour and performance of executives with the Company’s strategic goals, all incentive plans align performance targets with shareholder interests. The quantum of the short-term incentive and related bonus is determined with respect to performance in a given financial year, while the vesting of the share-based incentive awards is determined with respect to conditions related to Company performance over the five years following the date of grant.

At the annual general meeting of shareholders to be held on 24 October 2013, shareholders will be asked to approve the policy as outlined in this report and that the Board of Directors be authorised and carry out the necessary action to implement the remuneration policy for 2014 as summarised herein.

Elements of executive director and senior executive remunerationRemuneration mixEach executive’s total remuneration consists of a basic salary and benefits, defined as the employment cost to the Company, an annual performance-linked bonus, and a combination of the following share-based deferred bonus scheme, the share appreciation rights scheme and the long-term incentive plan. An appropriate balance is maintained between fixed and performance-related remuneration and elements linked to short-term performance and those related to longer-term growth in shareholder value.

The potential bonus achievable in a given year, expressed as a percentage of basic salary, is shown in the table below, if 100% of all the budgeted annual targets are met:

Chief Executive Officer 56%Executive directors 48%Executive management 40%Other management 40%

Basic salaryThis is the total guaranteed annual employment cost to the Company associated with the employment of an executive. It is structured, at the individual’s election, but in accordance with applicable legislation, to include a basic salary, a travelling allowance, a medical aid contribution and a pension fund contribution. A cost of living increase in the basic salary is considered by the Remuneration Committee on an annual basis, and implemented from 1 July in the applicable year. For the following year, increases ranged from 0% to 5%, with a maximum increase in an individual’s executive salary cost of 5%.

Performance bonusThis is a short-term incentive plan under which award levels are determined with reference to the achievement of a set of stretched Company and individual performance targets. For the 2013 financial year, 100% of the bonus would have been payable if 110% of all targets were achieved. The criteria comprised a matrix-based scorecard, comprising financial, safety, transformation and personal objectives.


42

Share-based incentivesDeferred bonus schemeSelected executives and employees of the Group will, in lieu of a discretionary bonus or a percentage thereof, be offered the right to receive a cash award equal to the sum of the market value of a number of notional Sentula issued ordinary shares as at the expiry of a specified employment period and a multiple thereof. The specified employment period and the applicable multiple is determined by the Board at the time of offer of the deferred bonus award. The aggregate of all dividends paid per Sentula ordinary shares over the employment period and the number of bonus shares comprise the deferred bonus award.

Notional shares awarded under this scheme are offered at a price determined by the 30-day Sentula volume weighted average share price (the “30-day VWAP”) on the day that the Remuneration Committee makes the award (the “offer date”). No awards were made during the year under review.

Share appreciation right schemeThis is a scheme whereby senior and middle management (the “employees”) of Sentula are incentivised by means of the award of options, of which the offer price is determined as the 30-day VWAP on the offer date and the employees can exercise the said options in five equal tranches annually from the first to the sixth anniversary of the offer date, subject to them remaining in the employment of Sentula. The award and allocation of options under the scheme is governed by Sentula’s Board. No new options were awarded during the financial year ended 31 March 2013.

The basis of settlement of the share appreciation rights scheme and the deferred bonus scheme is disclosed in note 6 of the consolidated financial statements.

Long-term incentive planSelected executives and employees of Sentula and its subsidiaries receive a conditional right to receive a cash award (the “LTIP”) equal to the market value of a number of notional Sentula issued ordinary shares on the date the award becomes unconditional. This is a cash-settled scheme. During the 2013 financial year 4 125 000 LTIP awards were made to new participants, being senior executives who joined the Group, subsequent to the last measurement date in July 2012. As the conditionality for the third 2012 tranche of the LTIP awards was met, 5 104 000 awards vested during the financial period under review.

The weighted resultant percentage for the Group objectives, achieved for the 2013 financial year, was 32,3%, as detailed in the table below:

SHE BBBEE Financial Total

18,9% 13,4% 0,0% 32,3%

This score, coupled with the achievement of personal objectives, would then be applied to the applicable level of basic salary resulting in a performance bonus equal to a percentage of the individual’s basic salary. The bonus is paid in cash at the end of the month following the month in which the presentation of the Group’s annual financial results is made.

Given the financial performance of the Group and in spite of the weighted score, detailed above, being achieved in other areas, the Remuneration Committee supported a proposal by the CEO to forego the bonuses due to the Executive Directors and executive management, where appropriate. Prior to ratification by the Board, an objection lodged by one of the Executive Directors, on contractual grounds, resulted in the Board supporting the approach that the Executive Directors and the affected executive management, on an individual basis, be offered and given the opportunity to accept or forego their resultant bonus payments, for this period.

Following a review by the CEO, the criteria and scorecard weighting for the financial year ending 31 March 2014 have been simplified and approved by the Remuneration Committee, as follows:

Financial%

Personal%

Chief Executive Officer 80,0 20,0Chief Financial Officer 70,0 30,0HR and Transformation Director 70,0 30,0Other executives 60,0 40,0

The weighted average percentage of targets achieved will continue to be applied to the following percentages of cost to Company salary:

Chief Executive Officer 70%Chief Financial Officer 60%Executive Director HR and Transformation 60%Other executives 50%

The executive directors’ remuneration is disclosed in note 36 of the Group’s annual financial statements.


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King III checklist

1. Ethical leadership and corporate citizenship

1.1 The Board should provide effective leadership based on an ethical foundation ✓

1.2 The Board should ensure that the Company is and is seen to be a responsible corporate citizen

✓

1.3 The Board should ensure that the Company’s ethics are managed effectively ✓

2. Board and directors

2.1 The Board should act as the focal point for the custodian of corporate governance ✓

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

✓

2.3 The Board should provide effective leadership based on an ethical foundation ✓

2.4 The Board should ensure that it is and is seen to be a responsible corporate 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

✓

2.7 The Board should be responsible for the governance of risk ✓

2.8 The Board should be responsible for IT ✓

2.9 The Board should ensure that the Company complies with applicable laws and considers adherence to non-binding rules, codes and standards

✓

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

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

✓

2.12 The Board should ensure the integrity of the Company’s Integrated Annual Report ✓

2.13 The Board should report on the effectiveness of the Company’s system of internal controls ✓

2.14 The Board and its directors should act in the best interest of the Company ✓

2.15 The Board should consider business rescue proceedings or other turnaround mechanisms as soon as the Company is financially distressed as defined by the Companies Act

✓

2.16 The Board should elect a Chairman of the Board who is an independent non-executive director. The Chief Executive Officer should not fulfil this role

✓

2.17 The Board should appoint the Chief Executive Officer and establish a framework for the delegation of authority

✓

2.18 The Board should comprise a balance of power, with a majority of non-executive directors. The majority of non-executive directors should be independent

✓

2.19 Directors should be appointed through a formal process ✓

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

✓

2.21 The Board should be assisted by a competent, suitably qualified Company Secretary ✓

2.22 The evaluation of the Board, its committees and the individual directors should be performed every year

✓

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

✓

2.24 A governance framework, including strategic objectives of the policy, should be agreed between the Group and its subsidiary boards/companies

✓

2.25 Companies should remunerate directors and executives fairly and responsibly ✓

2.26 Companies should disclose remuneration of each individual director and certain senior executives

✓

2.27 Shareholders should approve the Company’s remuneration policy ✓


44

3. Audit and Risk Committee

3.1 The Board should ensure that the Company has an effective and independent Audit Committee comprising at least three members

✓

3.2 Audit Committee members should be suitably skilled and experienced independent non-executive directors

✓

3.3 The Audit Committee should be chaired by an independent non-executive director ✓

3.4 The Audit Committee should oversee integrated reporting ✓

3.5 The Audit Committee should ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities

✓

3.6 The Audit Committee should satisfy itself of the expertise, resources and experience of the Company’s finance function

✓

3.7 The Audit Committee should be responsible for overseeing internal audit ✓

3.8 The Audit Committee should be an integral component of the risk management process ✓

3.9 The Audit Committee is responsible for recommending the appointment of the external auditor and overseeing the external audit process

✓

3.10 The Audit Committee should report to the Board and shareholders on how it has discharged its duties

✓

4. The governance of risk

4.1 The Board should be responsible for the governance of risk ✓

4.2 The Board should determine the levels of risk tolerance ✓

4.3 The Risk Committee or Audit Committee should assist the Board in carrying out its risk responsibilities

✓

4.4 The Board should delegate to management the responsibility to design, implement and monitor the risk management plan

✓

4.5 The Board should ensure that risk assessments are performed on a continual basis ✓

4.6 The Board should ensure that frameworks and methodologies are implemented to increase the probability of anticipating unpredicted risks

✓

4.7 The Board should ensure that management considers and implements appropriate risk responses

✓

4.8 The Board should ensure continuous risk monitoring by management ✓

4.9 The Board should receive assurance regarding the effectiveness of the risk management process

✓

4.10 The Board should ensure that there are processes in place enabling complete, timely, relevant, accurate and accessible risk disclosures to stakeholders

✓

5. The governance of information technology

5.1 The Board should be responsible for IT ✓

5.2 IT should be aligned with the performance and sustainability objectives of the Company ✓

5.3 The Board should delegate to management the responsibility for the implementation of an IT governance framework

✓

5.4 The Board should monitor and evaluate significant IT investments and expenditure ✓

5.5 IT should form an integral part of the Company’s risk management ✓

5.6 The Board should ensure that information assets are managed effectively ✓

5.7 A Risk Committee and Audit Committee should assist the Board in carrying out its IT responsibilities

✓

6. Compliance with laws, rules, codes and standards

6.1 The Board should ensure that the Company complies with applicable laws and considers adherence to non-binding rules, codes and standards

✓

6.2 The Board and each individual director should have a working understanding of the effect of the applicable laws, rules, codes and standards on the Company and its business

✓


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King III checklist continued

6.3 Compliance should form an integral part of the Company’s risk management process ✓

6.4 The Board should delegate to management the implementation of an effective compliance framework and processes

✓

7. Internal audit

7.1 The Board should ensure that there is an effective risk-based internal audit ✓

7.2 Internal audit should follow a risk-based approach to its plan ✓

7.3 Internal audit should provide a written assessment of the effectiveness of the Company’s system of internal controls and risk management

✓

7.4 The Audit Committee should be responsible for overseeing internal audit ✓

7.5 Internal audit should be strategically positioned to achieve its objectives ✓

8. Governing stakeholder relationships

8.1 The Board should appreciate that stakeholders’ perceptions affect the Company’s reputation

✓

8.2 The Board should delegate to management to proactively deal with stakeholder relationships

✓

8.3 The Board should strive to achieve the appropriate balance between its various stakeholders’ groupings, in the best interest of the Company

✓

8.4 Transparent and effective communications with stakeholders is essential for building and maintaining their trust and confidence

✓

8.5 The Board should ensure that disputes are resolved as effectively, efficiently and expeditiously as possible

✓

9. Integrated reporting disclosure

9.1 The Board should ensure the integrity of the Company’s Integrated Annual Report ✓

9.2 Sustainability reporting and disclosure should be integrated with the Company’s financial reporting

✓

9.3 Sustainability reporting and disclosure should be independently assured ✘ The Audit and Risk Committee reviews the need for external assurance annually.

The International Accounting and Auditing Standard Board’s international standard on assurance engagements (SAE 3000) and Accountability’s Assurance Standard (AA 1000 AS) are taken into account in deciding on where and when to use external assurance providers.


46


47

possible. In addition to the drive to improve safety and the acceptance of zero harm goals, it is now a business licence imperative to strive towards minimum environmental impact.

“In a few decades, the relationship between the environment, resources and conflict may seem almost as obvious as the connection we see today between human rights, democracy and peace” – Wangari Maathai – environmental activist, first African woman to receive the Nobel Peace Prize in 2004.

As the effects of climate change become more apparent, there is a need not only to quantify and report on carbon emissions, but also to find more innovative ways to reduce emissions without slowing development or growth. Although the industry is not yet required by legislation to reduce its emissions, incentives and disincentives, such as the proposed South African general carbon tax announced to take effect in 2015, will soon become a reality. In preparation for these measures, and as a responsible corporate citizen, Sentula has, over the last three years, improved its carbon emissions monitoring across the Group. The most effective way to reduce emissions is to first understand the origin of the organisation’s emissions and how they respond to business conditions, before mitigation measures are implemented.

Engaging with stakeholders

Our relationships with our stakeholders define the way we conduct our business. Our stakeholders give us our licence to operate and without them we would not be able to build a sustainable future.

Stakeholder engagement is important in minimising the Group’s reputational risk. As highlighted by recent unrest in the mining sector, failure to engage effectively with stakeholders can affect a business’ sustainability. Sentula’s primary stakeholder groups include shareholders, employees, trade unions or representatives of organised labour, local communities, clients and government authorities. Further stakeholders include, but are not limited to, suppliers, contractors, business partners, the media and non-governmental organisations (“NGOs”).

Sentula believes that open and transparent dialogue should form the basis of its interaction with various stakeholder groups. Stakeholder engagement takes place in all areas of the business, both at a functional level and at a higher strategic level. Sentula acknowledges that without constructive input from the Group’s stakeholders and commitment from them to uphold Sentula’s business principles and values, the building of a sustainable business cannot be achieved.

Sustainability report

OverviewSentula understands that the achievement of fully integrated reporting is a process. In 2010 Sentula produced its first Integrated Annual Report which included a review of the Group’s performance in the field of sustainable development. This, the Group’s fourth annual sustainability report, shows the progress that has been made and where the focus is intended to be placed for the year ahead.

The review process is focused primarily on activities in South Africa, where the majority of the Group’s operations is based, but includes limited coverage of operations outside South Africa’s borders. In addition to South Africa, the Group operates in Botswana, the Democratic Republic of Congo, Ethiopia, Malawi, Mozambique, Zambia, and Côte d’Ivoire. Despite the remoteness of many of the Group’s activities outside South Africa, where reporting remains a challenge, Sentula’s endeavours, to provide information on sustainable development performance in these areas, have started to yield results.

This review has been compiled using the principles for integrated sustainability reporting as outlined in King III, the Integrated Reporting Committee’s discussion document of April 2011 and the Global Reporting Initiative (“GRI”) G3.1 sustainability reporting guidelines. The focus at Sentula has, and continues to be, on providing material information which adds value to stakeholders. As such, Sentula makes use of the various guidelines and resources available, using them as a springboard to develop its own templates based on the unique challenges and opportunities of its business.

A selection of key performance indicators (“KPIs”) have been used to give a high-level overview of Sentula’s sustainable development performance. These KPIs as detailed on page 50, allow the Group to compare its performance and set targets in various areas to that of previous years and across the business.

Operating contextIssues and trendsSentula’s operational footprint extends throughout Africa; with the majority of operations based in South Africa. Sentula believes that today’s challenges are tomorrow’s norm. As the mining services sector, operating within the broader mining sector, finds itself under increasing pressure from rising costs, labour disputes and social pressures, the ability to respond effectively to challenges is vital to the ongoing sustainability of the Group.

Issues around the sustainability of resources and the environmental impact of mining are increasingly being highlighted, resulting in pressure on mining companies and contractors to ensure that the impacts of their operations are quantified and mitigated as far as


48

CommunityHistorically there have been a number of challenges with regard to stakeholder engagement at Nkomati Anthracite. In the last two years, through dedicated commitment to improving relationships with all stakeholders, Nkomati Anthracite has addressed these challenges. Nkomati Anthracite has invested significant time and resources in engaging with the local communities, governmental departments, NGOs, the tribal authorities and local municipal structures. A community mining forum has been established with representatives from local communities, mining committees, the mine itself and tribal authorities. The objective of this forum is to, once fully operational, meet regularly to assist with the implementation of the operations’ approved social and labour plan, the identification of community projects and to provide a platform for grievances to be discussed and resolved.

Sentula strives to establish good relationships with governments at national, regional and local levels in all the regions in which it operates. The Group remains committed to meeting all the legal requirements wherever it operates to ensure the sustainability of the Group. All subsidiaries continue to maintain good relationships with the DMR and the Department of Labour and comply with the provisions of the applicable occupational health, safety and environmental legislation.

Strategic objectivesOverviewSentula aspires to be recognised as a responsible and ethical organisation. Sustainable development goals are in line with this aspiration and through a continuous process of review Sentula aims to consistently improve its performance in the areas of sustainability and responsible mining. In line with mining industry objectives, Sentula aims to be a zero harm company.

Sentula identified the following focus areas for improvement in the previous year and remains focused in these areas:

h Safety, in line with mining industry objectives Sentula aims to be a zero harm company;• Complacency• Adherence to policies and procedures

h Quality of sustainable development reporting data and structures.

The focus on safety was driven by continued and ever increasing adherence to ISO and OHSAS standards and training. Improving the quality of sustainable development information was a major drive over the reporting period and to this end training on the monthly sustainability reports received from each subsidiary was introduced.


49

Sustainability report continued

Sentula’s performanceKey performance indicatorsTo monitor progress in the field of sustainable development, KPIs are used to highlight the achievement of annual performance. During the previous reporting period, targets were set for those KPIs identified and the following table reflects performance against these targets:

Key performance indicator Measure 2012

Target 2013 2013

Quick measure

Target 2014

Safety Classified injury frequency rate*

1,65 1 0,29 ✓ 0,25

Total injury frequency rate* 4,2 5 2,82 ✓ 2,5

Fatalities 1 0 0 ✓ 0

Health New cases of occupational disease

10 0 0 ✓ 0

Percentage of employees undergoing HCT

76% 80% 42% ✘ 80%

Environment Retention of ISO 14001 certification

Retention at Benicon, Geosearch

and JEF


and JEF


and JEF

✓ Retention at Benicon, Geosearch

and JEF

Obtaining ISO 14001 certification

n/a n/a n/a Ritchie

Number of monetary fines or sanctions related to non-compliance with environmental legislation

2 0 0 ✓ 0

Number of environmental incidents

9 0 1 ✘ 0

Black economic empowerment

Percentage procurement spend with dti

46,7% 50% 41% ✘ 62%

Employment Percentage of HDSAs in management

61% 62% 49% ✘ 50%

Percentage female employees in management

11% 13% 14% ✓ 15%

Percentage female employees in the Group

7% 8% 9% ✓ 10%

Training Number of training hours undergone by employees and contractors

42 840 hours 50 000 hours 96 330 hours ✓ 95 000 hours

Stakeholder complaints

Number of issues raised by stakeholders

6 5 1 ✓ 0

* Per million man hours worked


50

0

2

4

6

8

10

12

CIFR TIFR

2011 2012 2013

Geosearch safety performance*

0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

CIFR TIFR

2011 2012 2013

JEF safety performance*

During the past three years, the Group continued to invest in improving and upholding the Group’s safety standards. A set of best practices not only includes input from clients but also draws heavily on operational experience. These practices can only be developed and supported through the maintenance of a strict reporting discipline which records all incidents and near misses and which communicates these in a way that encompasses all levels of the Group. Through a process of dissemination and discussion, not just on each incident but also on how to eliminate the causes and implement the appropriate risk mitigation strategies, Sentula has gained valuable insights which are shared across the Group, with the subsidiary SHEQ managers assisting in training and auditing across other entities within the Group.

Sentula has accepted the OHSAS 18001 as a target standard to be achieved across the Group. Benicon, Geosearch and JEF have retained their OHSAS 18001 certifications during this year. The ISO certification process can be a lengthy one and the Group continues to work towards obtaining certification at each of its remaining subsidiaries.

Safety first

The safety of our people is non-negotiable and we have implemented a range of systems and standards to drive progress in this central aspect of our business.

The safety of Sentula’s people remains fundamental to its business. Sentula continues to strive for improvements and the achievement of the Group’s safety goals through collective responsibility, commitment and continued focus.

During the previous year, Sentula achieved a CIFR of 1,65 and a TIFR target of 4,2 (per million man hours worked). For the year under review, we achieved a CIFR of 0,29, a TIFR of 2,82 and zero fatalities. This represents a marked improvement in the field of safety performance year-on-year and is demonstrative that the strategy of reducing the minor incidents, which in turn results in a reduction in classified injuries, is producing results.

0

1

2

3

4

5

6

7

8

CIFR TIFR

2011 2012 2013

Group safety performance*

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

CIFR TIFR

2011 2012 2013

Benicon safety performance*

* Per million man hours worked


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Group include exposure to dust and noise as well as diseases such as malaria and access to clean drinking water on some of the more remote exploration sites. No new incidents of occupational diseases were reported during the year within the Group.

Working in remote areasWhile many of Sentula’s subsidiaries operate mainly within South Africa and have limited exposure to remote work sites, many of the drill crews within the Geosearch business operate in remote areas. In such cases all employees are provided with proper camp facilities, ranging from tented camps to pre-fabricated housing, which are managed by a sufficient number of support staff. Drinking water is sourced and tested as part of the camp establishment. Pre-medical and post-medical check-ups are conducted and inspections and audits are regularly undertaken to ensure camps and operating sites comply with Group policies and procedures.

Prevention of infections such as malaria in remote areas on the African continent remains a constant challenge. Employees operating in malaria risk areas receive training in the prevention of malaria. Campsites are routinely fogged and employees are provided with mosquito repellents, medication and medical treatment where required. Vaccinations are also provided to employees working in risk areas for yellow fever and typhoid fever.

WellnessSentula acknowledges its responsibility to provide a safe and healthy working environment and to nurture the wellness of its employees. Executives undergo an annual medical exam. Entrance and exit medical assessments are conducted on operators. Apart from ensuring fitness for work, these medical assessments assist with the early identification and treatment of chronic illnesses such as diabetes, hypertension and tuberculosis, and give employees an opportunity to undergo HIV counselling and testing. During these examinations, advice on healthy eating, fitness and weight management is provided.

Occupational diseases which are diagnosed in employees are reported for workman’s compensation and these employees are assisted where possible.

During the current year, Geosearch undertook an awareness campaign, “Movember”, focusing on male cancers.

HIV/AIDSSentula acknowledges the effects of HIV/AIDS on its employees, clients and the communities within which it operates. Sentula aims to minimise the social, economic and developmental consequences of the disease by taking considered measures to prevent the spread of the virus through education, the provision of condoms and HCT for all employees.

Ritchie achieved ISO 9001 certification during this reporting period. This quality standard ensures the high standard of systems work, not only within the Group, but also in those to which work is outsourced.

Safety improvement initiativesThe Group has implemented a number of safety improvement initiatives. Most of these safety initiatives take place at subsidiary levels which are specific to the type of activities undertaken in that subsidiary. Not only are subsidiaries effective in encouraging and improving safe working practices within their organisations, but the cross-pollination gained from their learnings can be added to the collective safety of the Group.

The focus of many of the initiatives involves training, both to increase the capacity of supervisors to manage safety through the use of risk assessments and standard operating procedures as well as by increasing the awareness of employees to safety procedures. A great deal of attention is given to improving occupational skills that will have a direct benefit on safety outcomes. These include courses on collision avoidance, working with hazardous substances, working at heights and building knowledge on mine standards and procedures.

Benicon and JEF make use of fatal risk standard equipment which is fitted to all their vehicles. A total vehicle management system, which uses GPS tracking of the entire fleet, was implemented in Benicon, JEF and CCT. Management is able to use and analyse the data received through this system to monitor the causes of accidents and develop a risk aversion strategy.

During the year, management implemented a psychomotor performance profiling programme for all its drivers and operators. This assessment details the employee’s ability to concentrate under monotonous conditions, judgement, decision-making, reaction speed, tolerance to stress, ability to judge speed and distance, etc. This will enable management to make better decision with regards to fleet management.

Health

The health of our employees has a direct bearing on their ability to perform safely and productively in the workplace.

The Group maintains strict adherence to the provisions of the Occupational Health and Safety and Compensation for Occupational Injuries and Diseases Acts. The prevention and monitoring of occupational illnesses is accomplished through continuous assessment of workplace risks, strict adherence to the use of personal protective equipment and regular medical surveillance. Risks identified within the


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including operating without a water use licence. The case was investigated by the DEA, who added charges relating to unlawful activities commenced under the NEMA. Nkomati was issued with a water use licence by the DWA in October 2012. In 2011 Nkomati applied for a section 24G application, for the rectification of the unlawful activities commenced under NEMA. After careful consideration of all relevant circumstances, including that it would be in the best interest of all stakeholders for mining operations to recommence, Nkomati decided to plead guilty to eight charges, including those charges in relation to historical alleged contraventions, which arose prior to 2007. Nkomati entered into a plea and sentence agreement with the State, in terms of section 105A of the Criminal Procedure Act, No 51 of 1977. As a result of this decision Nkomati was fined R5 million, of which R1 million was suspended.

The Group continues with its efforts to comply with all applicable environmental laws.

Carbon footprintSentula operates in a resource-challenged environment. The Group has committed itself to identifying initiatives to optimise its resource consumption and reduce its greenhouse gas emissions. During the year, a total of 5 550 kg of paper, representing 32% of all paper used within the Group, was recycled.

Sentula is committed to protecting, managing and conserving water resources through monitoring its municipal water use, as well as those boreholes upon which flow meters have been installed. Where possible, Sentula aims to install flow meters to facilitate reporting and resource conservation efforts. Current water usage stands at 20 070 kℓ, reduced by 28% from the previous year due to the curtailment of certain operations and borehole monitoring.

The Group’s carbon emissions continue to be monitored through the measurement of electricity and diesel consumption. The Group’s baseline currently stands at 768 507 tonnes. The marked increase in the amount of carbon emissions resulted from improved reporting and the inclusion of the flights within the international operations at Geosearch. With improved reporting structures and monitoring, Sentula seeks to gain a greater understanding of emissions going forward.

Sentula sees reducing elements of its carbon footprint as a responsible business imperative. Diesel remains the largest contributor to emissions within the Group. To a certain extent the nature of Sentula’s business means that these emissions are unavoidable but where possible ways to improve efficiencies are being investigated and implemented.

Sentula’s ongoing HCT campaign has reached 42% of all employees during this reporting period. Testing takes place bi-annually and is carried out on a site by site basis within the subsidiaries. Although this figure demonstrates a downturn in the number of employees participating as compared to the previous years’ 76%, it does not demonstrate a decline in focus. Participation of HCT testing has varied across the Group but in general the response has been well received. All HCT testing is confidential and carried out in a strategic partnership with either the Department of Health or NGOs that specialise in HCT programmes. Employees not only have access to HIV/AIDS programmes within the Group, but are also exposed to programmes facilitated by our clients at the host mines or through induction training.

Minimising our environmental footprint

We are committed to sound environmental practice and aim to minimise our impact in the areas in which we operate.

Sentula remains committed to responsible mining and constantly reviews all its environmental procedures to ensure it is compliant with environmental legislation. In addition, it is cognisant of technical innovations which may assist in reducing its environmental footprint. Sentula’s contracting mining businesses adhere to the environmental policies and standards which their host mines have in place, as well as to Sentula’s environmental framework.

ISO 14001 certification, a voluntary measure of environmental compliance and maintenance of industry standards for environmental management, remained a valuable tool within the business to ensure compliance with environmental best practice. During this reporting period Benicon, JEF and Geosearch retained their ISO 14001 certifications. Following on the successful ISO 9001 certification, Ritchie plans to begin preparations for the ISO 14001 certification process.

Environmental incidents and sanctionsOver the last three years Sentula has placed an increased focus on compliance to environmental legislation and best practice. In the current year only one environmental incident took place; a diesel spillage on one of Benicon’s host mining sites. The area was rehabilitated to best environmental practice and disciplinary action was taken against the operator responsible for the incident. Neither Sentula nor any of its subsidiaries received any sanctions for environmental non-compliance for the current reporting period.

Subsequent to the 2013 financial year-end, Nkomati received notice that the DWA had opened a case against Nkomati in 2011, for transgressions under the NWA,


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A continuing challenge across the Group is the theft of diesel from vehicles and storage tanks. This increase in the number of litres of diesel used by the Group, not only affects carbon emissions but also the bottom line of the business. Improved internal controls and monitoring continues to be implemented in certain areas in an attempt to curb the problem. Maintenance of vehicles is also a vital component of reducing carbon emissions. All subsidiaries have strict vehicle maintenance programmes in place, not only to increase the efficiency of these machines but also to maximise their availability.

The control of hydrocarbons and the safe disposal thereof can be a challenge. Within South Africa, Sentula subsidiaries routinely recycle used oil and lubricants and dispose of all other hazardous waste responsibly through accredited waste disposal sites. During the year, Sentula safely disposed of 219 tonnes of hazardous waste and recycled 224 kℓ of oil and lubricants, representing 25% of all oils and lubricants used within the business. Geosearch faces a unique challenge as it operates in remote areas far from rehabilitation sites. As a result, Geosearch makes use of biodegradable lubricants as well as chemicals which assist in the biodegradation of hydrocarbon waste to assist in soil rehabilitation.

Transformation

Sentula recognises the importance of BBBEE, not only for HDSAs, but for the development of sustainable growth in all countries of operation.

In South Africa, Sentula fully supports the principles of transformation and uses the dti scorecard as the main mechanism with which to measure progress. The Group adheres to various requirements of the Mining Charter both in its coal mining investments and through clients. Furthermore, it strives to uphold these standards in the way the Group is managed.

Through the empowerment of our mining services subsidiaries, which became effective during this reporting period, Sentula aims not only to empower its people, but also to maintain a competitive advantage in assisting clients to achieve their BBBEE procurement goals.

Empowerment transactionsSentula is an overall Level 5 BBBEE contributor with the mining services subsidiary, Sentula Contracting, being a Level 4 contributor. During this financial year, Sentula entered into a BBBEE transaction. In terms of this transaction, Shanike Investments No 171 was established to acquire a 17% direct equity interest in Sentula Contracting, which holds Sentula’s South African mining services businesses. Following implementation of the BBBEE transaction, the South African mining services

businesses achieved an effective black ownership of more than 25%, as measured in terms of the dti Codes of Good Practice.

A further empowerment transaction was undertaken with Shanike, to introduce Shanike as a 26% shareholder in Sentula’s wholly owned subsidiary Benicon Mining, which holds Sentula’s Bankfontein coal projects, and which resulted in Benicon Mining achieving a 26% HDSA ownership, as required in terms of the Mining Charter.

The results of these empowerment transactions are detailed on page 117 of this report.

ProcurementIn accordance with Sentula’s preferential procurement policy and strategy, the Group has implemented a preferential approach with particular emphasis on small and medium-sized enterprises and actively seeks out new black empowered businesses that can be linked into the Group’s supply chain. In addition, Sentula considers enterprise development and job creation opportunities for qualifying small enterprises (“QSE”) in the delivery of support services such as security, wash bays, accommodation, transport and catering.

During this reporting period, Sentula had a total discretionary procurement spend in excess of R1,79 billion of which 41% was spent on BEE compliant suppliers, 11,1% was spent on small and medium-sized suppliers, 4,2% was spent on 50% black-owned suppliers, and 0,6% was spent on 30% black woman-owned suppliers.

As the majority of the capital equipment and machinery utilised in the performance of the business is not manufactured in South Africa, preferential procurement presents a challenge. Wherever possible, a determined effort to source goods and services from accredited BBBEE suppliers and service providers is prioritised. At all operations, both in and outside South Africa, the Group makes every effort to uplift local communities by supporting surrounding businesses and hiring of local people.

Management control and employment equityEmployment equity is a strategic business imperative and Sentula believes that its implementation is central to good human resource management and excellent customer service to a broad and diverse stakeholder base.

Sentula is an equal-opportunity employer and does not tolerate any form of discrimination. The Group seeks to instil a genuine culture of transformation within the organisation and is committed to increasing the number of HDSAs in management positions. Management control in the day-to-day running of the Group is


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Enterprise and socio-economic developmentThe Sentula Transformation Trust (”the Trust”) was set up to regulate and coordinate our approach to socio-economic and enterprise development and to allocate funding for approved projects in these areas. Investment is conducted in line with the dti’s Codes of Good Practice. The Trust supports local development projects in close proximity to the Group’s operations, preferably within communities where Sentula employees and their families reside. The Trust aims to support the development of projects that are complementary to existing institutions or initiatives pursued by government agencies, private investors, community-based organisations and NGOs. The Trust differentiates between community activities that are largely philanthropic in nature and those that have a more direct business benefit.

Case study – CCT tuck-shop

CCT assisted with the establishment of a tuck-shop at one of their host sites in the Steelpoort area. The tuck-shop provides permanent employment for one lady from the local community. Water and electricity costs are funded by CCT. The costs amount to approximately R3 000 per month to maintain this project and had an initial establishment cost of R40 000.

Benicon developed a number of small enterprises around its business and continues to support those projects, including the Enthembeni children’s home project in which a vending machine was placed at the Benicon offices and is serviced by the orphanage. All proceeds go to the home. In an ongoing paper recycling project in association with the Witbank Society for the Physically Disabled, shredded waste paper is donated to the organisation which benefits from the proceeds of recycling. A local enterprise which delivers parts to Benicon Sales premises has also been established. This enterprise makes use of a Benicon vehicle, at no cost, and invoices the Company for deliveries made. At CCT, transport services for employees are provided free of charge through taxi operators sourced from the local area. These taxi operators are given the opportunity to grow with the Company and have been trained with respect to correct administration, financial considerations and sustainability.

conducted by executive directors with a minimum of 30% black representation. Three of the Group’s eight Board members are HDSAs, one of whom is a woman.

Sentula’s management structure comprises 49% HDSAs in total and 14% women. The total percentage of HDSAs in management has reduced by 13% this year, predominantly as a result of the large reduction in the overall staff complement stemming from the recent restructuring and consolidations. To sustain and support a trend for increased representation, preference is given to women and HDSA candidates in Sentula’s recruitment process. Employment equity committees meet regularly to discuss employment equity policy, vacancies, promotions, training and skills development.

Management control

Non-HDSAWhite femaleBlack, Colouredor Indian malesBlack, Colouredor Indian female

4%

51%

35%

10%

Skills development and trainingLearning and development form an integral part of Sentula’s employment strategy assisting in the transformation of the business. Sentula retains the services of several training and skills development institutions to meet its succession planning objectives for the facilitation of the advancement of employees within the organisation. Formal training initiatives have been developed to provide for succession planning within the Group. Employees also participate in Company-specific induction training at all the operational sites.

A total of 96 330 hours of training took place across the Group during the review period, a 125% increase from the previous year. This increase in training hours is attributed both to the drive towards safety training and increased focus on reporting the recorded training hours.

The Benicon in-house training academy was launched in 2011. A range of training programmes are offered to Benicon employees including supervision, management, planning and organisation, safety management, mentorship and employment equity. Benicon employees are also included in some of the Anglo training programmes such as the Medium Voltage Switching certificates for electricians and safety leadership and risk management programmes.


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Our peopleSentula has an organisational culture that is built on the foundations of diversity, equality and dignity for all its employees.

Employee statistics* 2013 2012

Total employees 2 308 3 321Male employees 2 100 3 074Female employees 208 274Non-HDSA in management 234 282HDSA in management 229 443Females in management 65 81

* SA operations only and excludes Geosearch international employees of 569

The South African workforce is made up of 2 308 people.The majority work at the Group’s subsidiaries located primarily in the Mpumalanga and Limpopo provinces.

Sentula has been affected by the downturn within the mining industry. The nature of its business is such that employment is often project based where employees are hired on limited duration contracts. Where contracts expire, Sentula endeavours to redeploy employees to new projects where possible. During this reporting period the total number of employees reduced from 3 321 to 2 308 as a result of the winding down of Megacube and the restructuring of Geosearch.

Staff retentionTo maintain consistently high working and safety standards, the Group aims to attract and retain the best employees in the industry. In addition, Sentula strives to employ people from the communities that surround its operations. Training opportunities and study assistance are offered to facilitate the development of its people. Salaries are reviewed annually to ensure that they remain competitive.

Despite the Group’s efforts, staff retention in the organisation remains a challenge, particularly in technical positions such as crane operators, artisans and drill assistants, where skills are scarce. Skills shortages in these areas continue to lead to intense competition in the contract mining industry. To ensure staff retention, competitive, market-related salaries are offered and some of the subsidiaries provide bonuses for those employees in possession of scarce skills. Where possible, learnerships and training focus on scarce skill areas to develop people within the organisation for such roles. Retention of these new skills in the long run can also be a challenge.

Case study – JEF soccer team

The JEF soccer team was founded in 2012, when a JEF employee requested that the company sponsor a soccer ball. A week later a request was made for soccer boots. This request was made on the basis that the company pays for the items and then deducts it from the employees’ salaries. Management at JEF decided to work with the employees to create a JEF soccer team and now sponsors complete soccer kit and transport for the team. All players, coaches and caretakers are employees of JEF. The team plays against different local companies’ teams, for charity and to keep fit.

Women in miningOur workforce currently comprises 9% female employees (increased by 2% from 2012), and 14% of management positions are occupied by women (increased by 2,8% from 2012). Although the recruitment of women remains a challenge due to the nature of the business, by actively engaging with women in the recruitment processes and setting targets for the subsidiaries, the Group hopes to continuously improve on these figures going forward. The prioritisation of women in training initiatives and learnerships ensures that they gain the exposure they need to play an increasingly important role in the business.

Management by gender

Females inmanagementMales in management

14%

86%


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reporting period, 37 bursaries were offered for further studies and 61 employees were given management training.

Employee relationsIn South Africa, employees have the right to freedom of association in terms of the South African Constitution and the Labour Relations Act. Sentula engages in transparent and constructive consultation both with employees and their representatives. Through continuous consultation, Sentula enjoys a sound relationship with the unions and in 2013, the Group successfully concluded wage negotiations in most of the businesses.

Group employees are represented by a range of unions, including the National Union of Mineworkers, the Workers Equality Support Union of South Africa, the El Shadaai Workers Union of South Africa and the Association of Mineworkers and Construction Union.

Geosearch experienced three incidents of industrial action within its international operations, one at Zani in the Democratic Republic of Congo and two in Ivory Coast. The two-day strike at Zani, related to salary increases, was resolved with the HR Officer. In Ivory Coast, both strikes related to allowances and remuneration and were resolved.

HousingSentula’s policy is to encourage sustainable accommodation and home ownership for all employees in the areas in which it operates. Hostel accommodation continues to be phased out and replaced with a housing allowance or in some cases an interest-free loan for the purchase of building materials.

CommunityBEE, enterprise development and the creation of sustainable employment are the focus areas of Sentula’s community development programme, which seeks to uplift the people who reside in all its areas of operation.

Sentula’s social footprint in South Africa includes the communities of Emalahleni, Middelburg and Nkomazi in Mpumalanga as well as Steelpoort in the Limpopo province. In addition, through Geosearch, its footprint is extended across eight countries on the African continent.

Corporate social investment (“CSI”)Sentula believes business entities have a responsibility to give back to the communities in which they operate. Many of the communities that reside around the operations are faced with a multitude of socio-economic challenges, including poverty, unemployment and HIV/AIDS.

Workforce by gender

Male employeesFemale employees

9%

91%

To attract and retain female employees, it remains Sentula’s responsibility to provide a working culture that ensures women are treated with respect. A policy is in place to ensure that all the Group’s employees can work together in an atmosphere free of all forms of harassment and intimidation. There is also no discrimination or unequal treatment in matters of remuneration and benefits. Sentula’s female employees also benefit from the Women in Mining initiatives of host mines and at its operations. The Group continues to make considerable progress in the provision of a working environment that is suitable for women, such as mobile toilets in opencast mines and improved change house facilities.

Learning and developmentLearning and development is seen as an integral part of the business. It not only improves the skills of the workforce and empowers employees, but also provides an opportunity to plan for the future skills needed within the organisation.

The Group provides a range of formal learnerships, with particular emphasis on historically disadvantaged men and women, to ensure that as an organisation, the Group presents a true reflection of the diverse populations of the countries in which it operates. This year, 157 people were employed in formal learnerships. These learnerships were predominantly in the scarce skill areas of artisans and vehicle operators. As part of the evening classes offered at Benicon, ABET, an adult education programme designed to teach literacy and numeracy, is also offered. This year 57 students are involved in ABET.

Sentula focuses on developing staff internally, and only advertises posts externally if the necessary skills and expertise are not available within the organisation. Employees are encouraged to develop themselves and Sentula subsidises their attendance at courses that will improve their competencies at work. During this


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Aside from the Sentula Transformation Trust’s contribution to socio-economic development, the Group’s companies invest financial and human capital into various charitable causes as well as into awareness creation on HIV/AIDS. Benicon is involved in numerous CSI projects in the communities surrounding their operation (see “Case Study – Benicon gives back”).

Ritchie also assists where possible on an ad hoc basis in the local community, including golf days in support of child welfare and supporting local school sports teams. Ritchie provided pro bono crane services to erect the roof of a local church during the year. Geosearch has initiated an office recycling programme which runs in conjunction with a charity project. This project collects batches of reuseable office stationery which is

distributed to underprivileged students. CCT supports local businesses where possible, including a local taxi company contracted for transport of employees.

JEF is involved in a number of CSI activities including blood drives in which the SA Blood Donor Association visits JEF’s premises every second month and all employees are encouraged to participate in donating blood. JEF is also involved in supporting a number of local schools and sports development, through various school supporters clubs. These clubs’ main focus is to encourage sport participation for underprivileged children. Sports attire and sport tours are funded with JEF’s assistance. Monthly contributions are also made to the SAVF house for the elderly and Hospice.

Case study – Benicon gives back

Benicon has a strong tradition of community social investment projects. During the year, a number of projects were run aimed at both local communities and the employees of Benicon itself.

During the winter of 2012, Benicon donated bibles and blankets to each employee, which were handed out on site with the assistance of a local pastor. The slogan used in this campaign was “a blanket to warm the body and a bible to warm the heart.”

Benicon started a blood donation campaign in 2013. This project has been ongoing with blood donation clinic days taking place at regular intervals throughout the reporting period.

Benicon facilitated the collection of cans of food and blankets which were donated to various charities around Emalahleni, including Child Welfare. Benicon sponsored a trip to Gold Reef City Theme Park for the children from Ethembeni Children’s Home. For many of the children it was their first trip to a theme park. In addition, some of the Benicon employees volunteered to spend their 67 minutes on Mandela day at the home.


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Case study – Benicon gives back continued

In celebration of Arbor Day, a tree planting day was held at Benicon’s head office. Not only did the employees have fun but the resulting trees improve the head office environment and assist in the uptake of carbon emissions.

Environmental and social complaintsSentula takes any complaints received regarding its operations very seriously. Even when the source of the complaints occurs on its host mine’s sites, the incident is viewed in a very serious light and appropriate action is taken to mitigate these effects and engage with the complainants.

Community relocationsNo grave or community relocations took place in this review period.


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Consolidated annual financial statementsfor the year ended 31 March 2013

CONTENTS

Directors’ responsibility and approval 62

Certificate of the Company Secretary 62

Audit and Risk Committee report 63

Independent auditors’ report 65

Directors’ report 66

Consolidated statement of financial position 70

Consolidated income statement 71

Consolidated statement of comprehensive income 71

Consolidated statement of cash flows 72

Consolidated statement of changes in equity 73

Operational segment reporting 74

Notes to the consolidated financial statements 77

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Directors’ responsibility and approval

Certificate of the Company Secretary

The directors are responsible for the maintenance of proper accounting records and the preparation, integrity and fair presentation of the Group annual financial statements and annual financial statements of Sentula Mining Limited. These financial statements comprise the statements of financial position at 31 March 2013, the income statements, the statements of comprehensive income, changes in equity and the cash flows for the year ended 31 March 2013, and the notes to the financial statements, which include a summary of significant accounting policies and other explanatory notes and the directors’ report, in accordance with International Financial Reporting Standards and in the manner required by the Companies Act of South Africa. These financial statements include amounts based on judgements and estimates made by management.

The directors are also responsible for the Group’s system of internal control. This responsibility includes designing, implementing and maintaining internal controls as the directors determine it necessary to enable the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Sentula Mining Limited and its subsidiaries operate in a well-established control environment, which is well documented and regularly reviewed. This incorporates risk management and internal control procedures, which are designed to provide reasonable, but not absolute, assurance that assets are safeguarded and the risks facing the business are being controlled.

The Group’s outsourced internal audit function, which operates unimpeded and independently from operational management, and has unrestricted access to the Group Audit and Risk Committee, assesses and, where necessary, recommends improvements in the system of internal controls and accounting practice based on audit plans that take cognisance of the relative degrees of risk of each function or aspect of the business.

The directors have reviewed the Group’s cash flow forecasts for the year ended 31 March 2014, and although the forecast does not indicate the inability to redeem the Group’s debt obligations in the ordinary

I certify that the Company has filed with the Companies and Intellectual Property Commission all returns and notices required of a public company in terms of the Companies Act, No 71 of 2008, in respect of the financial year ended 31 March 2013 and that all such returns and notices are true, correct and up to date.

Grace ChemalyCompany Secretary

Johannesburg26 June 2013

course of business, certain financial covenants are expected to be breached during this period. The debt service cover ratio and total debt to EBITDA covenants were breached at 31 March 2013, and are expected to be breached during the course of the 2014 financial year. The Group’s future prospects and financial stability is dependent on the ongoing condonation of these covenant breaches, to the extent required during the course of the 2014 financial year. The directors acknowledge that, in the context of the prevailing economic environment, the Group’s debt levels are excessive, in relation to the Group’s cash generation. To reduce Group debt levels, the directors are pursuing a number of initiatives in the short term, which are alluded to in note 34 of these financial statements.

The annual financial statements of the Group and Company have been audited by the independent accounting firm, PricewaterhouseCoopers Inc. The external auditors were given unrestricted access to all financial records and related data, including minutes of all meetings of shareholders, the Board of Directors and committees of the Board. The directors believe that all representations made to the independent auditors during the audit are valid and appropriate. PricewaterhouseCoopers Inc.’s audit report is presented on page 65.

The financial statements were prepared under the supervision of the Group Financial Director, GP Louw CA(SA), and approved by the Board of Directors on 26 June 2013 and are signed on its behalf by:

JG Best RC BerryChairman Chief Executive Officer

GP LouwChief Financial Officer/Finance Director

26 June 2013


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The Audit and Risk Committee (“the committee”) is pleased to present this report as required by the Companies Act (2008), of South Africa (“the Companies Act”).

The committee is constituted as a statutory committee of Sentula (“the Company”) and the Group in respect of its statutory duties in terms of section 94(7) of the Companies Act, and a formal committee of the Board of Directors (“the Board”) in respect of all other duties assigned to it by the Board.

Role of the committeeThe committee has an independent role with accountability to both the Board and to shareholders. The committee’s responsibilities include the statutory duties prescribed by the Companies Act, activities recommended by King III and the responsibilities assigned by the Board.

The committee’s main responsibilities are as follows:

Integrated and financial reporting h review the annual financial statements, interim report, preliminary results announcement and summarised integrated financial information and ensure compliance with International Financial Reporting Standards and the Companies Act;

h review and approve the appropriateness of accounting policies, disclosure policies and the effectiveness of internal financial controls;

h perform a review of the Group’s integrated reporting function and progress and consider factors and risks that could impact the integrity of the Integrated Annual Report;

h review the sustainability disclosure in the Integrated Annual Report and ensure that it is consistent with financial information reported; and

h recommend the Integrated Annual Report to the Board for approval.

Combined assurance modelEnsures that a combined assurance model is applied to provide a coordinated approach to all assurance activities, and in particular the committee:

h ensures that the combined assurance received is appropriate to address all the significant risks facing the Company; and

h monitors the relationship between the external assurance providers and the Company, and takes the appropriate action where necessary.

Finance function and Financial DirectorReview the expertise, resources and experience of the Company’s finance function, and discloses the results of the review in the Integrated Annual Report. The committee also considers and satisfies itself of the suitability of the expertise and experience of the Financial Director on an annual basis.

Internal audit h review and approve the internal audit charter and audit plans;

h evaluate the independence, effectiveness and performance of the internal audit function and compliance with its charter;

h review the Group’s systems of internal control, including financial controls, ensuring that management is adhering to and continually improving these controls;

h review significant issues raised by the internal audit process; and

h review policies and procedures for preventing and detecting fraud.

External audit h act as a liaison between the external auditors and the Board;

h nominate the external auditor for appointment by shareholders;

h determine annually the scope of audit and non-audit services which the external auditors may provide to the Group;

h approve the remuneration of the external auditors and assess their performance; and

h assess annually the independence of the external auditors.

Risk management h ensure that management’s processes and procedures are adequate to identify, assess, manage and monitor enterprise-wide risks; and

h review tax and technology risks, in particular how they are managed.

Compliance h the responsibility to facilitate compliance throughout the Company and the Group has been delegated by the Board to the committee;

h the committee ensures that the Company and the Group comply with applicable laws and consider adherence to non-binding rules, codes and standards, and establish and maintain a compliance framework and process, legal compliance policy and compliance manual, that is appropriate taking into account the compliance risk profile of the Company.

General h receive and deal appropriately with any complaint relating to the accounting practices and internal audit of the Group or to the content or auditing of its financial statements, or to any related matter; and

h perform other functions as determined by the Board.

Audit and Risk Committee report


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Audit and Risk Committee report continued

Composition of the committeeThis committee is chaired by and comprises only independent non-executive directors. In accordance with the requirements of the Companies Act, members of the committee are appointed annually by the Board for the ensuing financial year and in compliance with King III are appointed by shareholders at the annual general meeting.

The executive directors attend all the committee meetings by invitation. The external and internal auditors are also invited to attend all committee meetings.

The committee functions within an approved charter which is reviewed annually, and complies with all relevant legislation, regulation and governance codes.

The composition of the committee and meeting attendance are as follows:

Committee member Attended

Cor van Zyl (Chairman) 6Kholeka Mzondeki 6

Rain Zihlangu 6

The committee discharges its responsibilities by: h meeting at least four times a year to review the Group’s financial results, to receive and review reports from both the internal and external auditors, and to meet with management to review their progress on identifying and addressing key risk areas within the business;

h reporting to the Board at the next meeting, which is always held within a week of the respective committee meeting; and

h meeting separately with the internal and external auditors to confirm they are receiving the full cooperation of management.

In conclusion, the committee confirms the following:

Independence of external auditorsThe Audit and Risk Committee is satisfied as to the independence of the Group’s external auditors, PricewaterhouseCoopers Inc., and its designated audit partner, Mr PC Hough. The committee nominates PricewaterhouseCoopers Inc. as external auditor for the reappointment by shareholders at the annual general meeting.

Chief Finance Officer and the finance functionThe committee is satisfied that Mr Deon Louw has the appropriate expertise and experience for his position of Chief Finance Officer of the Company and the Group. In addition, the committee is also satisfied that the composition, experience and skills of the finance function meet the Group’s requirements.

Annual financial statementsThe committee has evaluated the annual financial statements for the year ended 31 March 2013 and considers that they comply, in all material aspects, with the requirements of the Companies Act and International Financial Reporting Standards. The committee has therefore recommended the annual financial statements for approval to the Board. The Board has subsequently approved the annual financial statements, which will be open for discussion at the forthcoming annual general meeting.

Approval of the Audit Committee reportThe committee confirms that it has functioned in accordance with its charter for the 2013 financial year and that its report to shareholders has been approved by the Board.

Cor van ZylChairman: Audit and Risk Committee

26 June 2013


64

We have audited the consolidated and separate financial statements of Sentula Mining Limited set out on pages 70 to 141 which comprise the statements of financial position as at 31 March 2013, and the income statements, 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 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 auditor’s 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 auditor considers 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 Sentula Mining Limited as at 31 March 2013, and its consolidated and separate financial performance and its 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 matter Without qualifying our opinions, we draw attention to note 34 to the consolidated financial statements and note 19 to the separate financial statements which indicate that the Group and the Company incurred net losses for the year ended 31 March 2013 of R899 967 000 and R46 544 000, respectively. The notes indicate that the Group breached its debt covenants and received condonation of these subsequent to year-end. It also indicates that the Group’s future prospects and financial stability is dependent on the ongoing condonation of these covenant breaches, to the extent required during the course of the 2014 financial year. The notes further indicate that these conditions, along with other matters, indicate the existence of a material uncertainty which may cast significant doubt about the ability of the Group and the Company to continue as going concerns.

Other reports required by the Companies ActAs part of our audit of the consolidated and separate financial statements for the year ended 31 March 2013, 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.

PricewaterhouseCoopers Inc. Director: PC HoughRegistered Auditor

Johannesburg 26 June 2013

Independent auditors’ report


65

Directors’ reportfor the year ended 31 March 2013

The directors have pleasure in submitting their report for the 2013 financial year.

Nature of businessThe Group derives its income from mining services, comprising: opencast contract mining, rehabilitation, earthworks, drilling and blasting services, exploration drilling, crane hire and the mining of coal from its investments in the Nkomati Anthracite mine. The CEO’s report details the nature of each major subsidiary and the Group’s coal investments. Sentula Mining Limited (“the Company”) is the Group holding company.

Financial resultsTurnover decreased by 17% from R2,5 billion to R2,1 billion however, the operating loss increased by 107% from a loss of R420 million to a loss of R871 million, following equipment and goodwill impairments of R511 million, a loss of R221 million on the disposal of Megacube’s surplus equipment on auction and inventory adjustments of R158 million. The impairment charge of R187 million arose on the non-productive plant and equipment held by Geosearch and Benicon due to operational or technological obsolescence.

Finance charges reduced to R61 million from R67 million in the prior financial year, following a net debt reduction of R160 million. A net loss of R900 million was realised relative to a net loss of R532 million for the previous corresponding period, predominantly as a result of the non-cash flow impairments and value adjustments, referred to in the preceding paragraph.

The Group’s operations are vulnerable to volatility in the commodity cycle and its capital structure is constituted with a combination of debt and equity at a level that should ensure robust debt servicing in all but the most volatile of operating conditions. As a consequence of the collapse of exploration drilling in the domestic PGM sector, severe curtailment of exploration drilling in the rest of Africa and operational problems being experienced in the Group’s opencast businesses, the Group’s cash flow came under severe pressure during the past financial year, resulting in breaches in the debt service cover ratio (“DSCR”) and total debt to EBITDA ratio (“TDR”) at 31 March 2013. These ratios were subsequently condoned by the Group’s bankers in June 2013.

While the Group met all its obligations in the ordinary course of business during the 2013 financial year, and is expected to meet all its obligations during the 2014 financial year, the Board believes there is merit in reducing the Group’s debt by approximately R150 million, in the manner referred to in note 34 to the annual financial statements, to ensure that the Group remains financially robust in the prevailing volatile economic environment.

While the Group’s senior debt levels have reduced by R160 million, the Group’s net debt to equity ratio increased from 22% to 29%, as a consequence of the lower equity base given the losses incurred in the 2013 financial year.

The Group’s cash generation from operating activities deteriorated substantially from R230 million to R94 million which, in conjunction with a net outflow of R90 million from investing activities and a net outflow of R146 million from financing activities, resulted in a net decrease in cash and cash equivalents of R142 million for the 2013 financial year. The net decrease in cash and cash equivalents of R142 million contributed to a decline in the Group’s cash holding from R180 million in the prior year to R53 million at 31 March 2013.

The Group continued to invest in new and refurbished plant and equipment, albeit at a reduced rate, relative to the prior year, with R215 million invested during the 2013 financial year, relative to R292 million invested in the prior financial year.

The Nkomati mine’s operations are still suspended however, all approvals have been received to recommence mining and the final review processes are being conducted in anticipation of mining recommencing in the near future.

Basic earnings per share for the 2013 financial year were negatively impacted by the large net loss and decreased to a loss of 150,6 cents relative to the loss of 88,93 cents per share for the prior year. Headline earnings per share similarly decreased to a loss of 27,0 cents relative to earnings of 21,7 cents per share for the prior year.

Forensic investigation and litigationFollowing conclusion of a settlement agreement with the Marinvia Trust and CIMS Trust, an amount of R40 million was received in April 2013 by the liquidators of Scharrighuisen’s estate, in full and final settlement of all claims against these entities, of which R24,4 million was paid to Megacube and a further R10 million is expected to be received by Megacube, from the liquidators, by the end of July 2013.

Going concernThe Board has reviewed the going-concern assessment for the Group for the 12 months ending 30 June 2014 and reports on its finding and action plans in note 34 to the annual financial statements.

Share capitalFull details of the authorised and issued share capital of the Company are set out in note 20 to the annual financial statements. No new shares were issued during the year under review. Unissued shares are not under the control of the directors.


66

Director’s interests in contractsNo material contracts, in which directors have an interest, were entered into during the year, other than the transactions detailed in note 32 on page 116.

Company Secretary and registered officeMs GM Chemaly continued to fulfil the function as full-time Company Secretary for the year under review. At the date of this report, she was still the Company Secretary.

The Company’s registered addressGround Floor – Block 14The Woodlands Office ParkWoodmead, GautengSouth Africa

The Company’s postal addressPO Box 76, Woodmead, 2080, South Africa

AcquisitionsThere were no acquisitions during the 2013 financial year.

Employee share incentivesDetails of the Group’s share incentive schemes are detailed hereunder and in note 6 to the annual financial statements.

Dividends to shareholdersIn light of the prevailing global economic conditions and the Company’s cash requirements for debt redemption, the directors have considered it prudent not to declare any dividends for the 2013 financial year.

DirectorateThe following changes to the Board took place during the year under review:

ResignationsEHJ Stoyell resigned as independent non-executive director on 17 September 2012. There were no further resignations during the 2013 financial year.

AppointmentsThere were no appointments during the 2013 financial year.

The directors of the Company and abridged curriculum vitae for each director are set out on pages 13 to 15 of this report.

Directors’ remuneration and shareholdingDetails of the directors’ remuneration are set out in note 36 to the annual financial statements and details of directors’ shareholdings are set out under “Shareholders’ information” on page 142.


67

Directors’ report continuedfor the year ended 31 March 2013

The Group operates an employee share incentive scheme as disclosed in note 6 to the annual financial statements. The following changes took place during the year under review:

Directors Staff Total

Awards/options at the beginning of the year 19 581 000 35 828 780 55 409 780Options granted during the year – – – LTIPs granted during the year – 4 125 000 4 125 000Lapsed options – (3 817 000) (3 817 000)Options exercised and delivered (1 018 000) (4 343 000) (5 361 000)

Awards/options balance at the end of the year 18 563 000 31 793 780 50 356 780

Historical information regarding directors’ unexercised share options at 31 March 2013 is as follows:

Share options at 1 April 2012

Share options granted during the year

Share options exercised and taken delivery of

Share options at 31 March 2013

Director Number

Strike price

(R) Number

Strike price

(R) Number

Strike price

(R) Number

Strike price

(R)

RC Berry 1 600 000 10,00 – – – – 1 600 000 10,00 3 200 000 2,23 – – – – 3 200 000 2,23 1 400 000 2,77 – – – – 1 400 000 2,77

GP Louw 2 000 000 20,00 – – – – 2 000 000 20,00 4 000 000 2,23 – – – – 4 000 000 2,23 2 980 000 15,53 – – – – 2 980 000 15,53

PP Modisane 300 000 14,28 – – – – 300 000 14,28 600 000 2,23 – – – – 600 000 2,23 447 000 12,23 – – – – 447 000 12,23

16 527 000 – – 16 527 000

Historical information regarding directors’ unexercised LTIPs at 31 March 2013 is as follows:

LTIPs at 1 April

2012

LTIPs granted

during the year

LTIPs exercised

LTIPs lapsed

LTIPs at 31 March

2013Director Number Number Number Number Number

RC Berry 1 341 000 – (447 000) – 894 000GP Louw 1 155 000 – (385 000) – 770 000PP Modisane 558 000 – (186 000) – 372 000

3 054 000 – (1 018 000) – 2 036 000


68

The future growth of the Group is dependent on the continued availability of capital funding for investing in its productive capacity and the development of its coal assets. In this regard, the Company is pursuing a number of initiatives to source funding for its ongoing capital expenditure. Details of these initiatives are disclosed in note 34 to the annual financial statements. The Group is in the process of disposing of its coal portfolio and plans to invest further material cash flows, other than care and maintenance expenditure, in the portfolio during the 2014 financial year.

Subsequent eventsEvents subsequent to financial year-end, 31 March 2013, are disclosed in note 35 to the annual financial statements.

Robin Berry Deon LouwChief Executive Officer Financial Director

26 June 2013

Borrowing powersIn terms of clause 29 of the Memorandum of Incorporation, the Company has unlimited borrowing powers.

The Group’s senior debt facilities, comprise a R700 million facility from a Standard Bank-led consortium and a R100 million vehicle asset finance facility from WesBank. Advances under these facilities have been suspended as a consequence of breaches in the DSCR and the TDR (as disclosed in note 34 of the annual financial statements). The Board is considering a number of initiatives to reduce the Group’s senior debt and source funding for the Group’s capital investment programmes.

In light of the challenging economic environment, capital funding has been materially reduced and will be funded through internally generated cash flows. The Group’s full existing general banking facility of R95 million will be utilised to bridge working capital deficits during the 2014 financial year.


69

Consolidated statement of financial positionat 31 March 2013

Note 2013R’000

2012R’000

AssetsNon-current assets 1 997 037 2 440 186Property, plant and equipment 13 1 381 394 1 545 934Mineral rights 14 410 761 410 761Intangible assets 15 25 016 27 220Goodwill 15 120 648 412 709Restricted investment 23 8 693 8 693Deferred tax 26 50 525 34 869Current assets 853 820 1 026 134Inventories 16 189 792 364 521Trade and other receivables 17 535 192 468 870Cash and cash equivalents 18 110 709 180 236Current tax receivable 18 127 12 507

Assets classified as held-for-sale 19 1 807 389 315

TOTAl AssETs 2 852 664 3 855 635

EquityTotal equity attributable to equity holders of the Company 1 597 671 2 370 960Share capital 20 5 866 5 866Share premium 20 2 014 438 2 014 438Treasury shares 20 (25 898) (25 898)Reserves 108 127 11 166Retained (loss)/earnings (504 862) 365 388

Non-controlling interest 32 644 59 815

TOTAl EquITy 1 630 315 2 430 775

LiabilitiesNon-current liabilities 291 645 853 446Loans and borrowings 21 – 488 695Finance lease obligations 22 3 371 –Rehabilitation provision 23 66 899 66 899Deferred tax 26 221 375 297 852Current liabilities 930 704 571 414Trade and other payables 25 278 699 335 532Loans and borrowings 21 543 744 220 316Deferred revenue 24 – 1 100Finance lease obligations 22 2 129 –Other financial liabilities 27 7 506 7 506Bank overdraft 18 58 062 –Current tax payable 40 564 6 960

TOTAl lIAbIlITIEs 1 222 349 1 424 860

TOTAl EquITy AND lIAbIlITIEs 2 852 664 3 855 635


70

Consolidated income statementfor the year ended 31 March 2013

Note 2013R’000

2012R’000

Revenue 4 2 085 026 2 512 415Cost of sales (1 943 005) (2 092 662)

Gross profit 142 021 419 753Other income 8 377 104 334Impairment of plant and equipment 13 (186 902) (591 171)Impairment of assets held-for-sale 19 (15 149) –Impairment of goodwill 15 (300 127) –Impairment of intangible assets 15 (9 162) –Administrative expenses (510 281) (352 987)

Results from operating activities (871 223) (420 071)Finance expense 7 (60 720) (66 853)Finance income 7 3 249 3 032Fair value adjustment on interest rate cap 17 (2 486) (6 677)

loss before taxation (931 180) (490 569)Taxation 9 31 213 (41 625)

loss for the year (899 967) (532 194)

Attributable to:– Equity holders of the Company (875 017) (516 703)– Non-controlling interest (24 950) (15 491)

Cents Cents

Basic and diluted loss per share 10 (150,60) (88,93)

Consolidated statement of comprehensive incomefor the year ended 31 March 2013

2013R’000

2012R’000

loss for the year (899 967) (532 194)Other comprehensive incomeForeign currency translation differences for foreign operations 67 190 28 000

Other comprehensive income for the year, net of income tax 67 190 28 000

Total comprehensive loss for the year (832 777) (504 194)

Attributable to:– Equity holders of the Company (807 827) (488 703)– Non-controlling interest (24 950) (15 491)


71

Consolidated statement of cash flowsfor the year ended 31 March 2013

Note 2013R’000

2012R’000

Cash flows from operating activitiesLoss for the year (899 967) (532 194)Adjustments for:Depreciation 5 164 354 201 070Reversal of provision for third party liability 5 – (78 766)Amortisation of intangible assets 5 750 460Impairment of intangible assets 5 9 162 –Impairment of plant and equipment 5 186 902 591 171Impairment of assets held-for-sale 5 15 149 –Impairment of damaged assets 5 – 6 525Impairment of goodwill 5 300 127 –Impairment loss on trade debtor 5 874 11 312Impairment loss on other debtors 5 – 7 859Scrapping of assets 5 19 384 1 430Unrealised foreign exchange gain 5 (15 988) (18 593)Provision for penalties 5 6 108 –Finance income 7 (3 249) (3 032)Finance expense 7 60 720 66 853– Paid 60 720 64 958– Unwinding/accrued – 1 895Equity-settled share-based payment expense 5 406 2 134Long-term incentive plan provision movement – 8 115Share-based payment charge BBBEE transaction 5 17 632 –Write-down of inventory to net realisable value 5 133 783 –Loss on disposal of assets held-for-sale 5 221 028 –Loss on disposal of property, plant and equipment 5 1 392 54 621Profit on disposal of property, plant and equipment 5 (2 230) (2 464)Net movement in foreign currency translation reserve (183) 31 909(Utilisation of provision)/loss on onerous contract 5 (7 606) 7 606Income tax expense 9 (31 213) 41 625

Cash flows from operating activities before changes in working capital and provisions 177 335 397 641Change in inventories 108 123 (2 694)Reallocation from inventory to property, plant and equipment (1 875) (3 306)Change in trade and other receivables (26 926) (44 176)Change in trade and other payables (61 323) (29 409)Change in deferred revenue (1 100) 1 100

Cash generated from operating activities 194 234 319 156Income taxes paid 28 (41 968) (27 294)Interest paid 7 (58 139) (62 377)

Net cash from operating activities 94 127 229 485

Cash flows from investing activitiesInterest received 7 3 249 3 032Purchase of property, plant and equipment 13 (214 716) (291 600)Proceeds from disposal of property, plant and equipment 18 374 156 708Capitalised exploration expenditure 15 (309) (2 212)Additions to assets held-for-sale 19 (57 165) (6 833)Proceeds from disposal of assets held-for-sale 160 464 –

Net cash utilised in investing activities (90 103) (140 905)Cash flows from financing activitiesLoans repaid (234 242) (142 739)Loans raised 74 213 147 335Option premium on empowerment transaction received 16 500 –Dividends paid to non-controlling interest (2 221) –

Net cash (utilised in)/generated by financing activities (145 750) 4 596

Net (decrease)/increase in cash and cash equivalents (141 726) 93 176Cash and cash equivalents at the beginning of the year 180 236 88 232Exchange gains/(losses) on cash and cash equivalents 14 137 (1 172)

Cash and cash equivalents at the end of the year 18 52 647 180 236


72

Consolidated statement of changes in equityfor the year ended 31 March 2013

R’000Share

capitalShare

premium

Employee share

incentive reserve

Treasury shares

Foreign currency

trans-lation

reserveRetained earnings Total

Non- control-

ling interest

Total equity

balance at 31 March 2011 5 866 2 014 438 42 426 (25 898) (53 403) 874 105 2 857 534 75 301 2 932 835Loss for the year – – – – – (516 703) (516 703) (15 491) (532 194)Other comprehensive incomeForeign currency translation differences for foreign operations – – – – 27 995 – 27 995 5 28 000

Total other comprehensive income – – – – 27 995 – 27 995 5 28 000Total comprehensive (loss)/income for the year – – – – 27 995 (516 703) (488 708) (15 486) (504 194)

Transactions with owners, recorded directly in equityContributions by and distributions to ownersShare-based payments – – 2 134 – – – 2 134 – 2 134Share options forfeited – – (7 986) – – 7 986 – – –

Total contributions by and distributions to owners – – (5 852) – – 7 986 2 134 – 2 134balance at 31 March 2012 5 866 2 014 438 36 574 (25 898) (25 408) 365 388 2 370 960 59 815 2 430 775Loss for the year – – – – – (875 017) (875 017) (24 950) (899 967)Other comprehensive incomeForeign currency translation differences for foreign operations – – – – 67 190 – 67 190 – 67 190

Total other comprehensive income – – – – 67 190 – 67 190 – 67 190Total comprehensive (loss)/income for the year – – – – 67 190 (875 017) (807 827) (24 950) (832 777)

Transactions with owners, recorded directly in equityContributions by and distributions to ownersDividends paid to non-controlling interest – – – – – – – (2 221) (2 221)Share-based payments – – 406 – – – 406 – 406Share-based payment empowerment transaction – – 17 632 – – – 17 632 – 17 632Option premium on empowerment transaction – – 16 500 – – – 16 500 – 16 500Share options forfeited – – (4 767) – – 4 767 – – –Total contributions by and distributions to owners – – 29 771 – – 4 767 34 538 (2 221) 32 317

Total transactions with owners – – 29 771 – – 4 767 34 538 (2 221) 32 317

balance at 31 March 2013 5 866 2 014 438 66 345 (25 898) 41 782 (504 862) 1 597 671 32 644 1 630 315


73

Operational segment reportingfor the year ended 31 March 2013

Operating segmentsThe Group has seven reportable segments, as described below, five of which constitute the Group’s strategic business units. The strategic business units offer different services within the mining industry and are managed separately due to different equipment, technology and skills requirements. The following summary describes the operations in each of the Group’s reportable segments:

Opencast mining and earthmovingThis includes the movement and management of all aspects of overburden removal and coal extraction and chrome mining to specified production budgets. Megacube, Benicon and CCT are included in this segment.

Exploration drillingThis includes the exploration drilling operations across the African continent.

Overburden drilling and blastingThis includes drilling and blasting operation which uses specialised drilling rigs in the opencast mining sector, primarily in the coal industry.

Crane hireThis includes the hiring out of 20 medium to heavy duty mobile cranes with capacities that range from 25 to 220 tonnes.

Equipment trading and sparesThis includes the global procurement of used equipment and spares, for overhaul and deployment within the Group and includes the engine rebuild facility relocated to Middelburg. Benicon Sales and Caston are included in this segment.

Coal miningThis includes the mining operations within the Group of which the largest contributor is in the anthracite industry.

Other operations This is largely the head office operations.

The accounting policies of the reportable segments are described in notes 2 and 3.

Information regarding the results of each reportable segment is included on page 75. Performance is measured based on the segment results as included in the internal management reports that are reviewed by the Group’s CEO on a regular basis. Segment results are used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm’s length basis.

Revenues of R746 million (2012: R714 million) are derived from a single external client in the opencast mining segment. The other segments are diversified and not exposed to concentration risk.


74

Reportable segments

R’000

Opencast mining

and earthmoving

Explora-tion

drilling

Over-burden drilling

and blasting

Crane hire

Equipment trading

and spares

Coal mining

Corporate and other

services Total

2013Total segment revenue 1 119 495 749 854 279 427 65 258 57 613 908 – 2 272 555Inter-segment revenue (69 868) – (75 235) (931) (41 495) – – (187 529)

External revenue 1 049 627 749 854 204 192 64 327 16 118 908 – 2 085 026

Total segment results pre-impairment 6 625 (114 701) 37 570 32 663 (16 760) (16 879) (67 373) (138 855)Impairment of plant and equipment (137 551) (49 351) – – – – – (186 902)Impairment of goodwill – (203 959) – – – – (96 168) (300 127)Impairment of assets held-for-sale (15 149) – – – – – – (15 149)Impairment of intangible assets – – – – – (9 162) – (9 162)Loss on disposal of assets held-for-sale (221 028) – – – – – – (221 028)

Results from operating activities (367 103) (368 011) 37 570 32 663 (16 760) (26 041) (163 541) (871 223)

Total segment finance income 274 319 392 1 353 2 501 106 263 109 104Inter-segment finance income (5) – (392) (1 350) – – (104 108) (105 855)

External finance income 269 319 – 3 2 501 2 155 3 249

Total segment finance expense (54 758) (8 107) (9 258) (851) (486) (31 681) (61 434) (166 575)Inter-segment finance expense 53 874 7 760 9 237 825 471 31 669 2 019 105 855

External finance expense (884) (347) (21) (26) (15) (12) (59 415) (60 720)

Total segment assets 962 763 391 207 171 895 111 301 75 395 632 464 438 987 2 784 012Unallocated assets 68 652

Total assets 2 852 664

Total segment liabilities 138 684 88 398 35 112 3 805 10 426 70 192 613 793 960 410Unallocated liabilities 261 939

Total liabilities 1 222 349

Capital expenditure 120 476 53 204 23 363 17 211 61 283 118 214 716

Depreciation 101 617 28 268 29 381 3 113 209 331 1 435 164 354

Amortisation – 673 77 – – – – 750


75

Operational segment reporting continuedfor the year ended 31 March 2013

R’000

Opencast mining

and earthmoving

Explora-tion

drilling

Over-burden drilling

and blasting

Crane hire

Equipment trading

and spares

Coal mining

Corporate and other

services Total

2012Total segment revenue 1 457 470 861 311 336 497 57 418 63 288 13 383 – 2 789 367Inter-segment revenue (36 086) – (188 105) (1 267) (50 995) (499) – (276 952)

External revenue 1 421 384 861 311 148 392 56 151 12 293 12 884 – 2 512 415

Total segment results pre-impairment 10 800 102 805 80 377 30 335 (2 072) (15 498) (35 646) 171 101Impairment of property, plant and equipment (591 172) – – – – – – (591 172)

Results from operating activities (580 372) 102 805 80 377 30 335 (2 072) (15 498) (35 646) (420 071)

Total segment finance income 559 99 158 2 864 1 532 144 198 148 411Inter-segment finance income (497) – (157) (2 838) – – (141 887) (145 379)

External finance income 62 99 1 26 1 532 2 311 3 032

Total segment finance expense (38 339) (47 211) (14 415) (5 901) (5 507) (29 841) (71 018) (212 232)Inter-segment finance expense 37 588 46 835 14 402 5 882 5 494 27 936 7 242 145 379

External finance expense (751) (376) (13) (19) (13) (1 905) (63 776) (66 853)

Total segment assets 1 292 892 911 925 183 365 102 215 112 057 634 164 571 641 3 808 259Unallocated assets 47 376

3 855 635

Total segment liabilities 154 481 101 387 44 229 5 227 14 024 68 060 732 640 1 120 048Unallocated liabilities 304 812

Total liabilities 1 424 860

Capital expenditure 242 945 18 076 21 931 3 377 215 3 098 1 958 291 600

Depreciation 145 984 27 242 21 829 2 517 470 973 2 055 201 070

Amortisation – – 460 – – – – 460

Geographical segmentsIn presenting information on the basis of geographical segments, segment revenue is based on the geographical location of the customers. Segment assets are based on the geographical location of the assets.

2013 2012

R’000South Africa

Rest of Africa Total

South Africa

Rest of Africa Total

Revenue from external customers 1 442 477 642 549 2 085 026 1 862 796 649 619 2 512 415

Non-current assets 1 815 858 130 654 1 946 512 2 308 581 96 736 2 405 317

Current assets 589 199 248 301 837 500 986 164 416 778 1 402 942

Total assets 2 405 057 378 955 2 784 012 3 294 745 513 514 3 808 259

Capital expenditure 175 901 38 815 214 716 276 435 15 165 291 600


76

Notes to the consolidated financial statementsfor the year ended 31 March 2013

1 Reporting entity Sentula Mining Limited (“the Company”) is a company domiciled in the Republic of South Africa. The address of the

Company’s registered office is Ground Floor, Building 14, Woodlands Office Park, Woodmead. The consolidated financial statements of the Company as at and for the year ended 31 March 2013 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”) and the Group’s interest in associates and jointly controlled entities.

2 Basis of preparation a) statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards

(“IFRS”) and in a manner required by the Companies Act of South Africa, the JSE Listings Requirements and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by Financial Reporting Standards Council.

The Group and Company annual financial statements were authorised for issue by the Board of Directors (“the Board”) on 26 June 2013.

b) basis of measurement The Group’s financial statements are prepared on the historical cost basis except for the revaluation of certain

financial instruments which are measured at fair value, as appropriate, and incorporate the following principal accounting policies which have been consistently applied.

c) Functional and presentation currency Transactions included in the financial statements of each of the Group’s entities are measured using the currency

of the primary economic environment in which they operate (the functional currency). The consolidated financial statements are presented in South African Rand, which is the presentation currency and functional currency of the majority of the operations within the Group.

All amounts in the financial statements are stated to the nearest thousand (R’000) except where otherwise indicated.

d) use of estimates and judgements The preparation of financial statements in conformity with IFRS required management to make judgements,

estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. The use of estimates and judgements are further disclosed in 3.19.

e) Change in accounting policies There were no changes in accounting policies during the 2013 financial year.

3 Significant accounting policies The accounting policies set out below have been consistently applied to all periods presented in these financial

statements and have been consistently applied by the Group.

3.1 basis of consolidation 3.1.1 Subsidiaries Where the Group has the power, either directly or indirectly, to govern the financial and operating policies of another

entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the Company and its subsidiaries (“the Group”) as if they formed a single entity. The results and cash flows of subsidiaries are included from the date that control commences until the date that control ceases. Intergroup transactions and balances between Group companies are eliminated in full. The accounting policies of the subsidiaries have been changed where necessary to align them with the policies adopted by the Group.


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Notes to the consolidated financial statements continued for the year ended 31 March 2013

3 Significant accounting policies (continued)3.1 basis of consolidation (continued) 3.1.1 Subsidiaries (continued) Where the Group ceases to have control, any retained interest in the entity is remeasured to its fair value at the date

when control is lost, with the change in the carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets and liabilities. This may mean that the amounts previously recognised in other comprehensive income are reclassified to profit or loss.

With the acquisition of a non-controlling interest the transactions are accounted for with the owners in their capacity and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interest are based on a proportionate amount of the net assets of the subsidiary.

Transactions with non-controlling interest that do not result in loss of control are accounted for as equity transactions, that is, as transactions with the owners in their capacity as owners. The difference between fair value of any consideration paid and the relevant share acquired of the carrying value of net asset of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

In the financial statements of the Company, investments in subsidiaries are measured at cost less accumulated impairment losses.

3.1.2 Special purpose entities A special purpose entity is consolidated if, based on an evaluation of the substance of its relationship with the Group

and the entity’s risks and rewards, the Group concludes that it controls the special purpose entity. Special purpose entities controlled by the Group are established under terms that impose strict limitations on the decision-making powers of the special purpose entity’s management and that result in the Group receiving the majority of the benefits relating to the special purpose entity’s operations and net assets, are exposed to risk incident to the special purpose entity’s activities, and retain the majority of the residual or ownership risks relating to the special purpose entity or its assets.

3.1.3 Associates Where the Group has the power to participate in (but not control) the financial and operating policy decisions of

another entity, it is classified as an associate. Associates are accounted for using the equity method and are initially recognised in the consolidated statement of financial position at cost. The Group’s share of post-acquisition profits and losses is recognised in the consolidated income statement, from the date significant influence commences until the date significant influence ceases, except that losses in excess of the Group’s investment in the associate are not recognised unless there is an obligation to make good those losses. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity.

Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors’ interests in the associate. The investor’s share in the associate’s profits and losses resulting from these transactions is eliminated against the carrying value of the associate.

Any premium paid for an associate above the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the associate. The carrying amount of the investment in associate is subject to impairment assessment at each reporting date.

In the financial statements of the Company, the investment in associate is measured at cost, less accumulated impairment losses.

3.1.4 Jointly controlled operations Joint ventures are contractual agreements whereby the Group and other parties undertake an economic activity that

is subject to joint control, that is when the strategic financial and operating policy decisions relating to the activities require the unanimous consent of the parties sharing control. These joint ventures may take the form of jointly controlled operations such as exploration and mining activities or companies.


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3 Significant accounting policies (continued)3.1 basis of consolidation (continued) 3.1.4 Jointly controlled operations (continued) Joint ventures are accounted for by means of the proportionate consolidation method whereby the Group’s share

of the assets, liabilities, income, expenses and cash flows of joint ventures are included on a line by line basis in the consolidated financial statements.

The results of joint ventures are included for the period during which the Group exercises joint control over the joint venture.

If a joint venture uses accounting policies other than those adopted in these consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made to its financial statements in preparing the consolidated financial statements.

Where the Group transacts with its jointly controlled operations, unrealised profits and losses are eliminated to the extent of the Group interest in the joint venture, except where unrealised losses provide evidence of an impairment of the assets.

3.1.5 Business combinations Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date

on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

The Group measures goodwill at the acquisition date as: h the fair value of the consideration transferred; plus h the recognised amount of any non-controlling interests in the acquiree; plus h if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less h the net recognised amount of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in the income statement. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in the income statement.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in the income statement.

When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past service, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. The determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service.

Accounting for acquisitions of non-controlling interest Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity and therefore

no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the net assets of the subsidiary.

Previously, goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represents the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction.


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3 Significant accounting policies (continued)3.2 Foreign currency 3.2.1 Foreign currency transactions Foreign currency transactions are translated into the functional currency of the respective entity using the exchange

rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. Foreign currency differences resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in the foreign currency that are measured in terms of historical costs are translated using the exchange rate at the transaction date. Foreign currency differences arising on retranslation of available-for-sale equity investments, a financial liability designated as a hedge of the net investment in a foreign currency operation that is effective, or qualifying cash flow hedges, are recognised in other comprehensive income.

3.2.2 Foreign operations The results and the financial position of all the Group entities that have a functional currency different from the

presentation currency are translated into the presentation currency as follows: h Assets and liabilities for each statement of financial position are translated at the closing rate at the reporting date; h Income and expenses for each income statement account are translated at exchange rates at the dates of the transactions; and

h All resulting exchange differences are recognised in other comprehensive income and presented as a separate component of equity (in the foreign currency translation reserve).

Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of the net investment in a foreign operation and are recognised in other comprehensive income and presented in the foreign currency translation reserve.

3.3 Intangible assets 3.3.1 Goodwill Goodwill that arises upon the acquisition of subsidiaries is included in the notes with intangible assets.

The measurement of the initial recognition of goodwill has been disclosed in note 3.1.5 under “Business combinations”.

Subsequent measurement Goodwill is measured at cost less accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the cash-generating units, or groups of cash-generating units that is expected to benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level. Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of value in use and fair value to less costs to sell. Any impairment is recognised immediately as an expense and is not subsequently reversed.

In respect of equity-accounted investees, the carrying amount of the goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity-accounted investee.

3.3.2 Other intangible assets Other intangible assets relate to customer contracts and relationships acquired in subsidiaries. The intangible asset

relating to these contracts and relationships is expected to be amortised over two to five years from the date of acquisition. Other intangible assets are measured at cost less accumulated amortisation and accumulated impairment losses. Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. The carrying amounts of other intangible assets with a definite useful life are reviewed at each reporting date to determine whether there is any indication of impairment. If such indication exists, then the recoverable amount is estimated.


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3 Significant accounting policies (continued)3.3 Intangible assets (continued) 3.3.3 Exploration for and the evaluation of mineral resources Exploration assets include expenditure incurred after the award of the legal licence, to explore a specific area for

mineral resources. Pre-licence costs are recognised as an expense in profit or loss as incurred. Exploration and evaluation costs are capitalised as exploration assets on a project-by-project basis pending determination of the technical feasibility and commercial viability of the project. Exploration assets include costs of acquisition of rights to explore, topographical, geological, geochemical and geophysical studies, exploratory drilling, trenching, sampling and activities to evaluate the technical feasibility and commercial viability of extracting a mineral resource.

Administration and other general overhead costs, which are not directly attributable to the specific exploration assets, are expensed as incurred. When a licence is relinquished or a project is abandoned, the capitalised expenditure is recognised in profit or loss immediately.

Exploration assets are measured at cost less impairment losses.

3.4 Property, plant and equipment 3.4.1 Recognition and measurement Property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment

losses. Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, and any costs directly attributable to bringing the asset to a working condition for its intended use, and the costs of dismantling and removing the items and restoring the site on which they are located.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment and depreciated separately.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within “other income” in profit or loss.

3.4.2 Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item

if it is probable that future economic benefits within the part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised. The costs of day-to-day servicing of the property, plant and equipment are recognised in profit or loss as incurred.

3.4.3 Depreciation All mining assets are depreciated using the units-of-production method where the mine operating plan calls for

production from well-defined mineral reserves over proved and probable reserves. The calculation of the units-of-production rate of depreciation could be impacted to the extent that actual production in the future is different from current forecast production based on proved and probable mineral reserves. This would generally arise when there are significant changes in any of the assumptions used in estimating the mineral reserves.

These factors could include changes in proved and probable mineral reserves and differences between actual commodity prices and commodity price assumptions.

Depreciation is recognised in profit or loss on a systematic basis over the estimated useful lives of each part of an item of property, plant and equipment (except for mining assets), since this most clearly reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term and their useful lives, unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.

Residual value is the amount that the entity could recover for the asset at the reporting date if the asset was already of the age and in the condition that it will be in when the entity expects to dispose of it. The estimated residual value is based on similar assets that have reached the end of their useful lives at the date that the estimate has been made. If the residual value of an asset increases to an amount equal to or in excess of the asset’s carry value, then the asset’s depreciation charge will be zero. Depreciation will resume when the asset’s residual value falls below the asset’s carrying value.


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3 Significant accounting policies (continued)3.4 Property, plant and equipment (continued) 3.4.3 Depreciation (continued) Where the unit-of-production methodology is used, the estimate of future production is reviewed and revised, if

necessary, at each reporting date in accordance with the requirement to review the asset’s expected useful life. Units of production are determined by the metres drilled or hours utilised for the specific item of plant and equipment.

A change in the useful life, in the unit-of-production method or in the residual value of an asset will result in a change in estimate.

The estimated useful lives for the current and comparative periods are as follows: h Buildings 50 years h Mining assets Over the anticipated life of mine h Plant and equipment 5 to 10 years h Motor vehicles 5 years h Furniture, fittings and equipment 10 years

Depreciation methods, useful lives and residual values are reviewed annually and adjusted if appropriate.

3.5 Impairment of non-financial assets The carrying amount of the Group’s assets, other than inventories and deferred tax assets, is reviewed at each

reporting date to determine whether there is an indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Assets with an indefinite useful life for example, goodwill or intangible assets not ready for use, are not subject to amortisation and are tested annually for impairment.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less the cost to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. When the carrying value of an asset exceeds its recoverable amount, the asset is written down accordingly. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset’s cash-generating unit.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit, and then to reduce the carrying amounts of the other assets in the cash-generating unit on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment had been recognised.

Impairment charges are disclosed separately on the consolidated income statement, except to the extent that they reverse gains previously recognised in the consolidated statement of changes in equity.

3.6 Non-current assets held-for-sale Non-current assets that are expected to be recovered primarily through sale or distribution rather than through

continuing use, are assets classified as held-for-sale or distribution. Immediately before classification as held-for-sale or distribution, the assets are remeasured in accordance with the Group’s accounting policies. Thereafter the assets are measured at the lower of their carrying amount and fair value less costs to sell. Impairment losses on initial classification as held-for-sale or distribution and subsequent gains and losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

Intangible assets and property, plant and equipment once classified as held-for-sale or distribution are not amortised or depreciated.


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3 Significant accounting policies (continued)3.7 Inventories Inventories are consumables and spares held in the ordinary course of business consumed in the production process or

in the rendering of services in the mining operations. Finished goods are assets held-for-sale in the coal operations. Inventories are measured at the lower of cost and net realisable value using the first-in first-out method. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and costs necessary to make the sale.

3.8 Provisions Provisions are recognised when the Group has a present obligation, whether legal or constructive, for liabilities of

uncertain timing or amount that have arisen as a result of past events and are discounted at a pre-tax rate reflecting current market assessments of the time value of money and the risks specific to the liability. In accordance with the applicable legal requirements, a provision for rehabilitation of land and the related expense is recognised when the damage occurs, it is probable that a restoration expense will be incurred and a reasonable estimate of the costs can be made. The increase in the provision due to passage of time is recognised as an interest expense.

3.9 Financial instruments Financial assets and financial liabilities are recognised in the statement of financial position when the Group has

become a party to the contractual provisions of the instruments.

Financial assets and financial liabilities are set off and the net amount presented in the statement of financial position, when the Group has a legal right to set off the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

Financial assets The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for

which the asset was acquired. The Group has not classified any of its financial assets as held-to-maturity or designated any instruments at fair value through profit or loss.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial assets in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

The Group has not classified any of its financial assets as available-for-sale.

Loans and receivables These assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active

market. They arise principally through the provision of goods and services to customers (e.g. trade receivables), but also incorporate other types of contractual monetary assets. They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition or issue of the instruments, and are subsequently carried at amortised cost using the effective interest method, less impairment losses.

Impairment losses are recognised when there is objective evidence that the Group will be unable to collect all of the amounts due under the terms receivable, the amount of such a loss being the difference between the net carrying amount and the present value of the future expected cash flows associated with the impaired receivable discounted at the original effective interest rate. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For trade receivables, which are reported net, such losses are recorded in a separate account with the loss being recognised within administrative expenses in the income statement. On confirmation that the trade receivable will not be collectible, the gross carrying value of the asset is written off against the allowance account. From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts owed and, in consequence, the new expected cash flows are discounted at the original effective interest rate.


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3 Significant accounting policies (continued)3.9 Financial instruments (continued) Cash and cash equivalents form part of loans and receivables and include cash on hand, deposits held on call with

banks, other short-term highly liquid investments with original maturities immediately available, and bank overdrafts. Bank overdrafts held at the same financial institution are set off against favourable bank balances reflected in current assets. It is the Group’s policy not to allow overdraft facilities at subsidiary companies. Such facilities are provided to the subsidiaries by the central treasury.

These balances are initially recognised at fair value plus transaction costs and subsequently measured at amortised cost.

All short-term cash investments are invested with a major financial institution to manage credit and liquidity risk.

Derivative financial instruments Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently

remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged.

The fair values of various derivative instruments are disclosed in the notes.

Financial liabilities Financial liabilities are classified according to the substance of the contractual arrangement entered into and the

purpose for which the asset was acquired, and include the following:

Bank borrowings are initially recognised at fair value net of any transaction costs directly attributable to the issue of the instrument. Such interest-bearing liabilities are subsequently measured at amortised cost using the effective interest method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the statement of financial position. Interest expense in this context includes initial transaction costs and premiums payable on redemption, as well as any interest while the liability is outstanding.

Trade payables and other short-term monetary financial liabilities are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.

3.10 Taxation Income tax comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss

except to the extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.

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

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes.

The following temporary differences are not provided for: h The initial recognition of goodwill; h The initial recognition of assets and liabilities that affect neither accounting nor taxable profit; and h Differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future.

A deferred tax asset is recognised only to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the temporary differences when they reverse based on the laws that have been enacted or substantively been enacted by the reporting date.


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3 Significant accounting policies (continued)3.10 Taxation (continued) Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets

and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either: h the same taxable entity; or h different Group entities which intend either to settle current tax assets and liabilities on a net basis; or h to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered.

Additional income taxes that arise from the distribution of dividends are recognised at the same time that the liability to pay the related dividend is recognised.

3.11 share capital The Group’s ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary

shares and share options are recognised as a deduction from equity, net of tax effects.

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of tax effects, is recognised as a deduction from total equity as a treasury share reserve. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, the resulting surplus or deficit on the transaction is transferred to/from retained earnings.

3.12 Revenue Revenue is measured at the fair value of the consideration received or receivable. The Group recognises revenue when

the amount of revenue can be reliably measured; when it is probable that future economic benefits will flow to the entity; and when specific criteria have been met for each of the Group activities. The invoiced values of goods sold and services rendered, excluding value added tax, discounts and other non-operating income, in respect of manufacturing, trading and contracts, are recognised at the date when the significant risks and rewards of ownership are transferred to the buyer.

In the case of service revenue from contracts, revenue is recognised with reference to the stage of completion. The stage of completion is assessed to surveys of work performed.

3.13 Finance income and finance expense Finance income comprises interest income received on funds invested that are recognised in profit or loss. Interest

income is recognised as it accrues in profit or loss, using the effective interest method.

Finance expenses comprise interest expense on borrowings that are recognised in profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

3.14 Dividends Dividends to equity holders are only recognised as a liability when declared and are included in the statement of

changes in equity.

3.15 leased assets Where substantially all of the risks and rewards incidental to ownership of a leased asset have been transferred to the

Group (a finance lease), the asset is treated as if it had been purchased outright. The amount initially recognised as an asset is the lower of the fair value of the leased asset and the present value of the minimum lease payments payable over the term of the lease. The corresponding lease commitment is shown as a liability. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Lease payments are analysed between capital and interest.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease.


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3 Significant accounting policies (continued)3.16 segment reporting An operating segment is a component of the Group that engages in business activities from which it may earn

revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All segments’ operating results are reviewed regularly by the Group’s CEO for capital allocation and performance assessment.

Inter-segment pricing is determined on an arm’s length basis.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly current and deferred tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill.

3.17 Employee benefits 3.17.1 Defined contribution plans Provision is made for retirement benefits for eligible employees by way of a provident fund. The fund is a defined

contribution plan under which amounts to be paid as retirement benefits are determined by contributions to the fund together with investment earnings thereon. Contributions are charged against income as incurred.

Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments are available.

3.17.2 Short-term employee benefits The cost of all short-term employee benefits is recognised during the year in which the employee renders the related

service. The accruals for employee entitlements to remuneration and annual leave represent the amount which the Group has a present obligation to pay as a result of the employee’s services provided to the reporting date. The accruals have been calculated at undiscounted amounts based on current remuneration rates.

3.17.3 Share-based payment transactions Where equity-settled share options are awarded to employees, the fair value of the options at the date of grant is

recognised in profit or loss over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, an expense is raised irrespective of whether the market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition.

Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period. Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Group.

The fair value of the amount payable to employees in respect of the long-term incentive plans which are settled in cash, is recognised as an expense with an increase in liabilities, over the period that the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognised in profit or loss.

3.18 Contingent assets and liabilities A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the

occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group. Contingent assets are not recognised as assets.

A contingent liability is a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group, or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability. Contingent liabilities are not recognised as liabilities.


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3 Significant accounting policies (continued)3.19 Critical accounting estimates and judgements The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually

evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

h Useful lives of intangible assets and property, plant and equipment As described in 3.4 above, the estimated useful lives of property, plant and equipment are reassessed at the end of

each annual reporting period. The Group depreciates/amortises its assets over their estimated useful lives, as more fully described in the accounting policies for property, plant and equipment, and intangible assets. The actual lives of these assets can vary depending on a variety of factors, including technological innovation and maintenance programmes. Changes in estimates can result in significant variations in the carrying value and amounts charged to profit or loss in specific periods.

h Rehabilitation provision Long-term environmental obligations are based on the Group’s environmental plans, in compliance with current

environmental and regulatory requirements.

Full provision is made based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the reporting date. Increases due to additional environmental disturbances are capitalised and amortised over the remaining lives of the mines. Annual increases in the provisions relating to the change in the net present value of the provision and inflationary increases are included in administration expenses in the income statement.

The estimated cost of rehabilitation is reviewed annually and adjusted as appropriate for changes in legislation or technology. Cost estimates are not reduced by the potential proceeds from the sale of assets or from plant clean-up at closure, in view of the uncertainty of estimating the potential future proceeds.

h Estimated impairment of goodwill The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy.

The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require an estimation of the future cash flows expected to arise from the cash-generating unit and a suitable risk-adjusted discount rate in order to calculate present value.

h Inventories The Group reviews the net realisable value of, and demand for, its inventory on a quarterly basis to provide assurance

that recorded inventory is stated at the lower of cost or net realisable value. Factors that could impact estimated demand and selling prices include the timing and success of future technological innovations, competitor actions, supplier prices and economic trends. The valuation of the inventory is further impacted by the location of the inventory and the cost of redeployment.

h Income taxes The Group is subject to income tax in several jurisdictions and significant judgement is required in determining the

provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Group recognises tax liabilities based on estimates of whether additional taxes and interest will be due. The Group believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgements about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the income tax expense in the period in which such determination is made.

h Share-based payments The fair value of share options and share appreciation rights is measured by using the binomial valuation models, on

the date of grant based on certain assumptions. Measurement inputs include the share price on the measurement date, the exercise price of the instrument, expected volatility, expected term of the instruments, expected dividends and the risk-free interest rate. Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.


87


3 Significant accounting policies (continued)3.19 Critical accounting estimates and judgements (continued) The fair value of share options under the broad-based black economic empowerment (“BBBEE”) transaction is

measured by using the Monte Carlo models, on the date of grant based on certain assumptions. Measurement inputs include the share price on the measurement date, the exercise price of the instrument, expected volatility, expected term of the instruments, expected dividends and the risk-free interest rate. Service and non-market performance conditions attached to the transactions are not taken into account in determining fair value.

3.20 Adoption of new and revised statements Standards, amendments and interpretations that are not effective and have not been early adopted by the Group The following standards, amendments and interpretations have been published but are not effective and the Group

has not early adopted them:

h Amendment to IAS 1: Presentation of Financial Statements – This amendment requires entities to separate items presented in other comprehensive income into two groups based on whether or not they may be recycled to profit or loss in the future. The amendment became effective on 1 July 2012.

h Amendment to IAS 19: Employee Benefits – The amendment eliminates the option to defer the recognition of actuarial gains and losses, streamlines the presentation of changes in assets and liabilities arising from defined benefit plans including the requirement that remeasurements be presented in other comprehensive income, and enhances the disclosure requirements for defined benefit plans to provide better information about the characteristics of defined benefit plans and the risks that entities are exposed to through participation in those plans. The amendment became effective on 1 January 2013.

h Revised IAS 27: Separate Financial Statements – IFRS 27 contains accounting and disclosure requirements for investments in subsidiaries, joint ventures and associates when an entity elects or is required by local regulations to present separate financial statements. The standard requires an entity preparing separate financial statements to account for those investments at cost or in accordance with IFRS 9: Financial Instruments. The standard became effective on 1 January 2013.

h Revised IAS 28: Investments in Associates and Joint Ventures – The new IAS 28 prescribes the accounting for investments in associates and sets out the requirements for the application of the equity method when accounting for investments in associates and joint ventures. The statement became effective on 1 January 2013.

h Amendment to IAS 32: Offsetting of Financial Assets and Financial Liabilities – The application guidance of IAS 32 has been amended to clarify some of the requirements for offsetting financial assets and financial liabilities on the statement of financial position. The amendments do not change the current offsetting model in IAS 32, but clarify that the right of set-off must be available today – that is, it is not contingent on a future event. It also must be legally enforceable for all counterparties in the normal course of business, as well as in the event of default, insolvency or bankruptcy. The amendments also clarify that gross settlement mechanisms (such as through a clearing house) with features that both (i) eliminate credit and liquidity risk and (ii) process receivables and payables in a single settlement process, are effectively equivalent to net settlement; they would therefore satisfy the IAS 32 criterion in these instances. Master netting agreements where the legal right of set-off is only enforceable on the occurrence of some future event, such as default of the counterparty, continue not to meet the offsetting requirements. This statement becomes effective on 1 January 2014.

h Amendment to IFRS 1: First-time Adoption of International Financial Reporting Standards – guidance on Government loans – The amendment provides guidance on how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRS. The amendment became effective on 1 January 2013.

h Amendment to IFRS 7: Financial Instruments: Disclosures – Offsetting of financial assets and financial liabilities – The amendment will require more extensive disclosure than is currently required under IFRS. The disclosures focus on quantitive information about recognised financial instruments that are offset in the statement of financial position, as well as those recognised financial instruments that are subject to master netting or similar arrangements irrespective of whether they are offset or not. The amendment became effective on 1 January 2013.


88

3 Significant accounting policies (continued)3.20 Adoption of new and revised statements (continued)

h IFRS 9: Financial Instruments – This standard addresses classification and measurement of financial assets. It uses a single approach to determine whether a financial asset is measured at amortised cost or at fair value. The approach in IFRS 9 is based on how an entity manages its financial instruments and the contractual cash flow characteristics of the financial assets. The standard requires a single impairment method to be used, replacing the numerous impairment methods in IAS 39 that arose from the different classification categories. The standard also removes the requirement to separate embedded derivatives from financial asset hosts. The effective date of this statement has been delayed to 1 January 2015.

h Amendment to IFRS 9: Financial Instruments – The accounting and presentation for financial liabilities and for derecognising financial instruments has been relocated from IAS 39: Financial Instruments: Recognition and Measurement, without change, except for financial liabilities that are designated at fair value through profit or loss. The amendment introduces new requirements that address the problem of volatility in profit or loss arising from an issuer choosing to measure its own debt at fair value. With the new requirements, an entity choosing to measure a liability at fair value will present the portion of the change in its fair value due to changes in the entity’s own credit risk in the other comprehensive income section of the income statement, rather than within profit and loss. The effective date of this amendment has been delayed to 1 January 2015.

h New – IFRS 10: Consolidated Financial Statements – establishes principles for the presentation and preparation of consolidated financial statements when an entity controls one or more other entities and supersedes IAS 27: Consolidated and Separate Financial Statements. This standard changes the definition of control so that the same criteria are applied to all entities to determine control. The revised definition of control focuses on the need to have both power and variable returns before control is present. The standard provides additional guidance to assist in determination of control where this is difficult to assess. The amendment became effective from 1 January 2013.

h New – IFRS 11: Joint Arrangements – establishes principles for financial reporting by parties to a joint arrangement and supersedes IAS 31: Interests in Joint Venture. This standard classifies joint arrangements into joint operations and joint ventures. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. The standard requires a party to a joint arrangement to determine the type of joint arrangement in which it is involved by assessing its rights and obligations arising from the arrangement. The focus is no longer on the legal structure. The existing policy choice of proportionate consolidation for jointly controlled entities has been eliminated. Equity accounting is mandatory for participants in joint ventures. The amendment became effective on 1 January 2013.

h New – IFRS 12: Disclosure of Interest in Other Entities – This is a comprehensive standard on disclosure requirements for all forms of interest in other entities, including joint arrangements, associates, special purpose vehicles and other off-balance sheet vehicles. This new standard requires entities to disclose information that helps financial statement readers to evaluate the nature, risk and financial effects associated with the entity’s interest in subsidiaries, associates, joint arrangements and unconsolidated structured entities. The amendment became effective on 1 January 2013.

h New – IFRS 13: Fair Value Measurement – This standard defines fair value, sets out in a single IFRS a framework for measuring fair value, and sets out disclosure requirements on fair value measurements. The amendment became effective on 1 January 2013.

h IFRIC 20: Stripping Costs in the Production Phase of a Surface Mine – The interpretation clarifies when production stripping should lead to the recognition of an asset and how that asset should be measured, both initially and in subsequent periods. The amendment became effective on 1 January 2013.

h Annual improvement 2009 – 2011 cycle: Improvement to IFRS is a collection of amendments to IFRS – These amendments are the result of the conclusions the Board reached on proposals made in its annual improvements project.


89


3 Significant accounting policies (continued)3.20 Adoption of new and revised statements (continued)

h Amendment to IFRS 10: Consolidated Financial Statements, IFRS 11: Joint Arrangements and IFRS 12: Disclosure of Interests in Other Entities – The amendment clarifies that the date of initial application is the first day of the annual period in which IFRS 10 is adopted. Entities adopting IFRS 10 should assess control at the date of initial application; the treatment of comparative figures depends on this assessment. The amendment also requires certain comparative disclosures under IFRS 12 upon transition.

The key changes in the amendment are: h If the consolidation conclusion under IFRS 10 differs from IAS 27/SIC 12 as at the date of initial application, the immediately preceding comparative period (that is, 2012 for a calendar-year entity that adopts IFRS 10 in 2013) is restated to be consistent with the accounting conclusion under IFRS 10, unless impracticable.

h Any difference between IFRS 10 carrying amounts and previous carrying amounts at the beginning of the immediately preceding annual period is adjusted to equity.

h Adjustments to previous accounting are not required for investees that will be consolidated under both IFRS 10 and the previous guidance in IAS 27/SIC 12 as at the date of initial application, or investees that will be unconsolidated under both sets of guidance as at the date of initial application.

h Comparative disclosures will be required for IFRS 12 disclosures in relation to subsidiaries, associates and joint arrangements. However, this is limited only to the period that immediately precedes the first annual period of IFRS 12 application. Comparative disclosures are not required for interests in unconsolidated structured entities. The amendment became effective on 1 January 2013.

The directors anticipate that all of the above interpretations, to the extent relevant, will be adopted in the Group’s consolidated financial statements for the year in which they become effective and that the adoption of those interpretations will have no material impact on the financial statements of the Group in the initial application.

2013 R’000

2012 R’000

4 Revenue 2 085 026 2 512 415

Revenue is derived from opencast contract mining, rehabilitation, earthworks, mining services, exploration drilling, overburden drilling and blasting, crane hire and sale of equipment and spares. Opencast contract mining revenue is based on the bulk volume extracted or moved, whereas drilling and blasting revenue is based on volume of material blasted. Exploration drilling revenue is based on metres drilled and crane hire revenue is derived from craneage services. The Nkomati Anthracite mine was under care and maintenance during the year under review and no revenue was generated in this period. The coal mining revenue generated in 2013 was derived from the lease of processing equipment. The revenue from coal mining generated in 2012 was derived from the selling of processed anthracite.

2013 R’000

2012 R’000

Opencast mining and earthmoving 1 049 627 1 421 383Exploration drilling 749 854 861 311Overburden drilling and blasting 204 192 148 392Crane hire 64 327 56 151Equipment trading and repairs 16 118 12 293Coal mining 908 12 885

2 085 026 2 512 415


90

2013 R’000

2012 R’000

5 Results from operating activitiesAfter allowing for the following:IncomeProfit on disposal of property, plant and equipment 2 230 2 464 Grants received 1 400 1 401 Bad debt recovery – 110 Reversal of provision for third party liability – 78 766

ExpensesBad debts written off 6 036 855 Auditors’ remuneration 5 867 10 863 – Audit fees – current year 5 614 8 902 – Forensic investigations – 1 892 – Other accounting services 253 69 Realised foreign exchange loss 4 019 2 559 Unrealised foreign exchange gain (15 988) (18 593)Provision for penalties 6 108 305 Contribution to socio-economic and enterprise development 1 224 1 292 Share-based payment expense – BBBEE transaction 34 132 –BBBEE transaction option premium received (16 500) –Loss on disposal of property, plant and equipment 1 392 54 621 Loss on disposal of assets held-for-sale 221 028 –Amortisation of intangible assets 750 460 Write-down of inventory to net realisable value 133 783 –Depreciation 164 354 201 070 – Mining assets – 633 – Plant and equipment 136 791 166 765 – Motor vehicles 22 228 27 616 – Furniture, fittings and equipment 3 569 4 445 – Buildings 1 766 1 611 Scrapping of assets 19 384 1 430 Impairments 512 214 616 867 – Impairment of plant and equipment 186 902 591 171 – Impairment of assets held-for-sale 15 149 –– Impairment of damaged assets – 6 525 – Impairment loss on trade debtor 874 11 312 – Impairment of other debtors – 7 859 – Impairment of intangibles 9 162 –– Impairment of goodwill 300 127 –(Utilisation of provision)/loss on onerous contract (7 606) 7 606 Increase in provision for unaccounted funds – 4 939


91


2013 R’000

2012 R’000

5 Results from operating activities (continued)Personnel expenses– Salaries and wages 678 580 743 936 – Provident fund 12 796 16 913 – Equity-settled share-based payment expense 406 2 134 – Cash-settled share-based payment expense (1 942) –– Long-term incentive plan 2 114 12 982

Operating lease chargesPremises– Contractual amount 8 137 4 888 Motor vehicles and equipment– Contractual amount 11 414 3 679 Property rental– Invoiced amount 1 163 1 282

Number of shares

2013 ’000

2012 ’000

6 Share-based paymentsEquity-settled share appreciation rights scheme 6 575 7 500 Cash-settled share appreciation rights scheme 27 955 29 597 Long-term incentive plan 14 227 16 713 Schamin Trust 1 600 1 600

50 357 55 410

Equity-settled share appreciation rights schemeThe Share Appreciation Rights Scheme (“SARS”) is a scheme whereby senior and middle management (the “employees”) of Sentula (the “Company”) are incentivised by means of the award of options, of which the offer price is determined as the 30-day value weighted average price (“VWAP”) of Sentula’s share price on the date of presentation of Sentula’s annual results (the “offer date”) and the employees can exercise the said options in five equal tranches annually from the first to the sixth anniversary of the offer date, subject to employment. The award and allocation of options under the scheme is governed by Sentula’s Board. There were no options awarded during the year ended 31 March 2013 (2012: Nil). This is an equity-settled scheme.

Number of shares

2013 ’000

2012 ’000

Outstanding at the beginning of the year 7 500 9 025 Forfeited options (925) (1 525)

Outstanding at the end of the year 6 575 7 500

Exercisable at the end of the year 6 575 6 000

Weighted average exercise price of outstanding options (cents) 1 795 1 814 Weighted average exercise price of forfeited options (cents) 2 206 2 206 Weighted average exercise price of exercisable options (cents) 1 795 1 816 Average remaining life (months) 8 20


92

6 Share-based payments (continued)Cash-settled share appreciation rights schemeThe Share Appreciation Rights Scheme (“SARS”) is a scheme whereby senior and middle management (the “employees”) of Sentula (the “Company”) are incentivised by means of the award of options, of which the offer price is determined as the 30-day VWAP of Sentula’s share price on the date of presentation of Sentula’s annual results (the “offer date”) and the employees can exercise the said options in five equal tranches annually from the first to the sixth anniversary of the offer date, subject to employment. The award and allocation of options under the scheme is governed by Sentula’s Board. There were no rights awarded or exercised during the year ended 31 March 2013 (2012: Nil). This is a cash-settled scheme.

Number of shares

2013 ’000

2012 ’000

Outstanding at the beginning of the year 29 597 32 757 Forfeited options (1 642) (3 160)



Weighted average exercise price of issued options (cents) 781 781Weighted average exercise price of outstanding options (cents) 780 780Weighted average exercise price of forfeited options (cents) 999 1 268Weighted average exercise price of exercisable options (cents) 1 597 1 597 Fair value of options granted (R’000) 7 640 10 240

Average remaining life (months) 25 38

The fair value of such share programme was determined by using the binomial option valuation method. The following inputs were used:– Issued price ranging from 223 cents to 1 679 cents;– Expected volatility of 50%;– A staff turnover of 5,45% per annum;– A forecast dividend growth rate of 4%; and– A risk-free interest rate of 8,97%.

Expected volatility was based on a filtered history of volatility of the Sentula Group from a period dating back to 2005 and has been adjusted to give recent history a higher weighting in determining the average expected volatility.

Deferred bonus schemeSelected executives and employees of the Group will in lieu of a discretionary bonus, or a percentage thereof, be offered the right to receive a cash award equal to the sum of the market value of a number of notional Sentula issued ordinary shares as at the expiry of a specified employment period and a multiple thereof to be determined by the Board at the time of offer of the deferred bonus award and the aggregate of all dividends paid per Sentula ordinary share over the employment period and the number of bonus shares comprising the deferred bonus award. The deferred bonus scheme is settled in cash.

All shares are awarded at the 30-day VWAP of Sentula’s share price on the date of presentation of Sentula’s annual results (the “offer date”) on the day of issue. No nominal Sentula shares were issued during the current year (2012: Nil).

long-term incentive planSelected executives and employees of Sentula and its subsidiaries will receive a conditional right to receive a cash award (“LTIP award”) equal to the market value of a number of notional Sentula issued ordinary shares on the date that the award becomes unconditional. The LTIP award is to be applied towards the obligatory subscription and/or purchase of Sentula ordinary shares. This LTIP award is settled in cash.

Number of shares

2013 ’000

2012 ’000

Outstanding at the beginning of the year 16 713 25 017 Granted during the year 4 125 1 575 Forfeited options (1 507) (3 770)Number of options exercised (5 104) (6 109)


Exercisable at the end of the year Nil Nil


93


6 Share-based payments (continued)The awards made during the 2013 and 2012 financial years relate to new staff members qualifying for the scheme. LTIPs are settled at vesting date based on the market value of the Company’s share price determined by reference to 30-day VWAP. Conditions for vesting are established by the Board. In order for the July 2013 tranche to vest a 10% compounded improvement in year-on-year economic value add (EVA) on the Group’s productive capital base, utilising the March 2011 base, needs to be achieved. The July 2012 tranche vested, based on a 10% improvement in year-on-year EVA on the Group’s productive capital base being achieved. Vesting conditions also require employment at the maturity of the respective tranche.

schamin TrustNo changes took place during the year under review:

Number of shares

2013 ’000

2012 ’000

Outstanding at the beginning of the year 1 600 1 600



Weighted average price of outstanding options (cents) 1 000 1 000 Weighted average price of exercisable options (cents) 1 000 1 000 Average remaining life (months) 45 57

The maximum number of shares that may be issued in terms of the scheme may not in aggregate exceed 23 556 594 shares in Sentula’s issued capital. Shares vest in the option holder on the date the option was granted. Thereafter the option holder may exercise the options in individual tranches of 20% on each subsequent anniversary. The Schamin Trust scheme is being replaced by the three schemes mentioned above. This is an equity-settled scheme.

broad-based black economic empowerment transaction 2013

R’000 2012

R’000

Share-based payment expense – BBBEE transaction 34 132 –

The cost of implementing the BBBEE transaction is calculated in accordance with the statement of share-based payments in terms of International Financial Reporting Standards (IFRS 2).

This IFRS 2 cost is a once-off cost charged to the income statement and does not represent a cash cost.

The BBBEE transaction is an equity-settled share-based payment. IFRS 2 requires that all equity-settled share-based payments be measured at fair value at grant date and the corresponding increase recognised in equity.

The value of the IFRS 2 charge is equal to the difference between the fair value of the assets granted by Sentula to Shanike Investments No 171 Proprietary Limited less the fair value of the consideration received by Sentula.

The following assumptions were used when calculating the IFRS 2 expense:– The fixed strike is based on the assumption that the preference share funding owed by Sentula Contracting

Proprietary Limited to Sentula is paid over a 5,5-year period (by June 2017) by R452 million from R600 million at inception;

– The fixed strike is based on a Monte Carlo simulation on the anticipated balance of the preference shares over the 5,5-year period;

– The volatility of the option value is 23,75% (being the average volatility in the building and material sector as measured over five years and three years respectively;

– The risk-free rate of return used was 7,20% which is based on a 5,5-year zero coupon return curve swap.


94

2013 R’000

2012 R’000

7 Finance chargesFinance income – received 3 249 3 032 – Financial institutions 2 964 2 656 – Debtors 2 45 – South African Revenue Service 265 29 – Other 18 302 Finance expense – paid 58 139 62 377 – Non-current borrowings 56 648 61 416 – Bank overdraft 207 55 – Suppliers 125 197 – Interest on tax 756 509 – Other 403 200 Finance expense – non-cash 2 581 4 476 – Facility fees recognised 2 581 2 581 – Unwinding charges of rehabilitation liability – 1 895

Total finance expense 60 720 66 853

Net finance expense 57 471 63 821

No borrowing costs have been capitalised during the year (2012: Nil).

8 Investment in significant joint ventureDuring October 2008 the Group entered into a joint venture agreement with Jonah Capital BVI which led to the establishment of a joint venture company, incorporated in Mauritius and known as Jonah Coal Botswana Limited. Sentula owns 50% of the share capital of Jonah Coal Botswana Limited. Jonah Coal Botswana Limited’s principal business activity is investing in coal exploration companies.

The Group’s share of assets and liabilities consolidated on a line-by-line basis is as follows:

R’000Current

assets

Non-current assets

Total assets

Current liabilities

Non-current

liabilitiesTotal

liabilities

2013Jonah Coal Botswana Limited 735 50 551 51 286 (3 428) (15) (3 443)

Revenues (Loss)

2013Jonah Coal Botswana Limited – (4 290)

R’000Current

assets

Non-current assets

Total assets

Current liabilities

Non-current

liabilitiesTotal

liabilities

2012Jonah Coal Botswana Limited 2 448 43 565 46 013 (2 279) (14) (2 293)

Revenues (Loss)

2012Jonah Coal Botswana Limited – (5 729)

There are no fixed asset commitments or contingent liabilities relating to the joint venture.


95


2013 R’000

2012 R’000

9 TaxationNormal taxation 60 920 5 169 – Current year 36 005 3 999 – Prior year 22 882 (14 332)– Foreign 2 033 15 502 Deferred taxation (89 209) 36 552 – Current year (70 346) 32 802 – Prior year (18 863) 3 750 Effect of movement in foreign exchange rates (2 924) (96)

Taxation (31 213) 41 625

Reconciliation of effective tax rateLoss for the year (931 180) (490 569)Taxation 31 213 (41 625)

Loss for the year after tax (899 967) (532 194)

Income tax at statutory rate of 28% (260 730) (137 359)– Non-deductible expenses 21 271 21 801 – Non-taxable gains (694) (409)– Assessed loss utilised (5 274) (10 627)– Unredeemed capex utilised – (5 503)– Tax effect of non-taxable income – (22 368)– Goodwill impairment 84 036 – – Prior year adjustment 10 946 (10 582)– Foreign tax 2 163 (1 474)– Foreign deferred tax asset not recognised 17 550 – – Foreign tax rate difference (4 244) (5 080)– Current year losses and temporary differences for which

no deferred tax asset was recognised 103 730 214 435 – Other 33 (1 209)

Income tax expense recognised in profit (31 213) 41 625

Effective tax rate (%) 3,4 (8,5)

The tax rate used for the 2013 reconciliation above is the corporate tax rate of 28% (2012: 28%) payable by corporate entities in South Africa on taxable profits under tax law in that jurisdiction.


96

2013 2012

10 Earnings per shareBasic and diluted loss per share (cents) (150,60) (88,93)

Headline and diluted (loss)/earnings per share (cents) (26,98) 21,71

Weighted average number of shares (’000) 581 005 581 005

Diluted weighted average number of shares (’000) 581 005 581 005

Headline earnings per share has been calculated in accordance with the SAICA Circular 3/2009 entitled “Headline Earnings” which forms part of the Listings Requirements of the JSE Limited.

The adjustments made to arrive at headline (loss)/earnings are as follows: R’000 R’000

Net loss for the year attributable to equity holders of the parent (875 017) (516 703)Adjusted for:Profit on disposal of plant and equipment (2 230) (2 464)Loss on disposal of plant and equipment 1 392 54 621 Loss on disposal of assets held-for-sale 221 028 – Impairment of plant and equipment 186 902 591 171 Impairment of assets held-for-sale 15 149 –Impairment of goodwill 300 127 – Impairment of intangible asset 9 162 – Tax effect of above adjustments (13 265) (508)

Headline earnings attributable to ordinary shareholders (156 752) 126 117

11 DividendThe Board of Directors has not declared an interim or final dividend for the years ended 31 March 2013 or 31 March 2012.

During the year ended 31 March 2013, Buenti Drilling Proprietary Limited, a subsidiary of the Group, declared and paid a dividend. As Buenti is not a wholly owned subsidiary of the Sentula Group of companies an amount of R2,2 million was paid to its non-controlling entity.

2013 2012

12 Net asset value per shareNet asset value per share (cents)* 274,98 408,08 Tangible net asset value per share (cents)* 249,91 332,36 Net asset value per share as previously disclosed (cents) – 418,37 Tangible net asset value per share as previously disclosed (cents) – 342,66 Shares in issue at the end of the year – excluding treasury shares (‘000) 581 005 581 005 Shares in issue at the end of the year (‘000) 586 559 586 559

The calculation of net asset value and tangible net asset value per share excludes the treasury shares.

Tangible net asset value excludes goodwill and intangible assets.

* Previously net asset value per share and tangible net asset value per share was calculated on total equity and not on equity attributable to ordinary shareholders.


97

Notes to the consolidated financial statements continuedfor the year ended 31 March 2013

13 Property, plant and equipment

R’000

Land and

buildings Mining assets

Plant and

equipment Motor

vehicles

Furniture,fittings andequipment Total

2013CostAt 31 March 2012 77 293 180 089 1 844 822 164 871 24 594 2 291 669 Additions 15 660 223 177 714 16 604 4 515 214 716 Transfer (to)/from inventory – – 1 875 – – 1 875 Disposals – – (35 979) (12 419) (46) (48 444)Scrapping of assets – – (38 948) (2 902) (2 674) (44 524)Reclassification – work in progress – – 115 (115) – – Reclassification – intangibles – – – – (4 040) (4 040)Foreign currency translation 910 – 23 996 3 440 147 28 493 Transfer to held-for-sale assets 515 – (27 610) 20 156 390 (6 549)

At 31 March 2013 94 378 180 312 1 945 985 189 635 22 886 2 433 196

Accumulated depreciation and impairment lossesAt 31 March 2012 2 070 22 964 623 361 82 760 14 580 745 735 Depreciation 1 766 – 136 791 22 228 3 569 164 354 Disposals – – (22 327) (8 540) (41) (30 908)Impairment of assets – – 185 916 986 – 186 902 Foreign currency translation 31 – 9 212 1 495 121 10 859 Scrapping of assets – – (21 264) (1 496) (2 380) (25 140)

At 31 March 2013 3 867 22 964 911 689 97 433 15 849 1 051 802

Net book value at 31 March 2013 90 511 157 348 1 034 296 92 202 7 037 1 381 394

2012CostAt 31 March 2011 81 154 177 493 3 569 399 209 861 28 228 4 066 135 Additions 2 760 2 596 258 302 25 705 2 237 291 600 Transfer (to)/from inventory – – 1 298 – 50 1 348 Reclassification to accumulated depreciation 103 – 5 665 793 70 6 631 Disposals (1 650) – (388 763) (37 181) (389) (427 983)Scrapping of assets – – (4 320) (1 330) (412) (6 062)Scrapping of damaged assets – – (3 400) – – (3 400)Reclassification – work-in-progress 211 – – – 1 747 1 958 Foreign currency translation (230) – 592 274 – 636 Transfer to held-for-sale assets (5 055) – (1 593 951) (33 251) (6 937) (1 639 194)

At 31 March 2012 77 293 180 089 1 844 822 164 871 24 594 2 291 669

Accumulated depreciation and impairment lossesAt 31 March 2011 1 068 22 331 1 330 086 100 574 16 650 1 470 709 Depreciation 1 611 633 166 765 27 616 4 445 201 070 Reclassification from cost 103 – 5 665 793 70 6 631 Transfer to held-for-sale assets (652) – (1 264 222) (23 774) (5 845) (1 294 493)Disposals – – (195 444) (23 352) (322) (219 118)Impairment of assets 350 – 588 393 2 428 – 591 171 Impairment of damaged assets – – 3 125 – – 3 125 Foreign currency translation (410) – (7 671) (637) (10) (8 728)Scrapping of assets – – (3 336) (888) (408) (4 632)

At 31 March 2012 2 070 22 964 623 361 82 760 14 580 745 735

Net book value at 31 March 2012 75 223 157 125 1 221 461 82 111 10 014 1 545 934


98

13 Property, plant and equipment (continued)Assets pledged as securityThe Group’s obligations under the merged term facility are secured by registered notarial bonds over plant and equipment and motor vehicles, which have a carrying amount of R1 079 million (2012: R1 467 million).

The Group’s obligations under the WesBank instalment sale agreement are secured by the lessors’ title to the financial assets, which have a carrying amount of R70,2 million (2012: R69 million).

The Group’s obligations under the finance lease in favour of Atlas Copco Customer Finance AB are secured by the Company’s title to the financial assets, which have a carrying amount of R10,2 million (2012: Nil).

Impairment lossIn the exploration drilling sector, Geosearch’s exploration drilling equipment with a carry value of R54,9 million was impaired by R49,3 million during the year. This impairment was raised due to certain machines being operationally uneconomical and as a result of the decrease in exploration drilling activities in the platinum group metals (“PGM”)industry. These machines were written down to scrap value.

During the current year, plant with a carry value of R218,6 million (2012: R5,3 million) was impaired by R137,5 million (2012: R3 million) in Benicon Opencast Mining Proprietary Limited within the opencast mining sector. This impairment was raised due to certain machines being operationally uneconomical and technologically obsolete for redeployment. These machines were written down to a deemed open market value. The recoverable amounts of these assets were determined by using the fair value less cost to sell of each asset. These values were based on recent market-related prices and in some instances on the scrap value of the equipment.

During the previous year, plant and equipment to the value of R1,101 million was impaired by R591 million within the opencast mining sector, predominately within Megacube Mining Proprietary Limited. This impairment was raised due to certain machines being operationally uneconomical. These machines were written down to a deemed open market value. The recoverable amounts of these assets were determined by using fair value less cost to sell of each asset. These values were determined by a third party assessor and from recent related prices and in some instances on the scrap value of the equipment.

Megacube assets were impaired and transferred to assets held-for-sale as disclosed in note 19.

A register containing the information required by regulation 25(3) of the Companies Regulations 2011, is available for inspection at the registered office of the Company.

2013 R’000

2012 R’000

14 Mineral rightsCarrying value at the beginning of the year 410 761 410 761 Gross carrying value 419 635 419 635 Accumulated amortisation (8 874) (8 874)Amortisation for the year – – Carrying value at the end of the year 410 761 410 761 Gross carrying value 419 635 419 635 Accumulated amortisation (8 874) (8 874)

During 2009, the Group acquired the entire issued share capital of Benicon Mining which holds the prospecting rights on the remaining extent of Portion 7 (a Portion of Portion 1) of the farm Bankfontein 215IS situated in the magisterial/ administrative district of Ermelo and comprising 513.9190 hectares in extent. A prospecting right renewal, for a further three-year extension, was granted in June 2012 by the DMR. On 20 April 2013, a new order mining right was approved by the DMR.

During 2008, the Group acquired the entire issued share capital of the Benicon Coal Group which holds the mining licence number 4198 in the magisterial district of Kamhlushwa in Mpumalanga consisting of the following farms: Grobler 479JU, Guillaume 480JU, Wildebeest 494JU, Rusplek 495JU, Sweet home 495JU, Bonnie vale 497JU, Excelsior 498JU, Murray 502JU, Fig tree 503JU, Beginsel 504JU and a portion of unsurveyed state land. The licence entitles the Benicon Coal Group to mine until 19 September 2020.

There is no amortisation of the mineral right as Nkomati Anthracite mine was under care and maintenance during the March 2013 and March 2012 financial years.


99


15 Intangible assets and goodwillIntangible assetsIntangible assets comprise exploration and evaluation assets and software.

R’000Exploration

costs Software Other

Total intangible

assets Goodwill

Total intangible assets and

goodwill

2013CostAt 31 March 2012 27 143 – 19 599 46 742 412 709 459 451 Reclassification from property, plant and equipment – 4 040 – 4 040 – 4 040 Exploration and evaluation 309 – – 309 – 309 Foreign currency translation 3 359 – – 3 359 8 066 11 425

At 31 March 2013 30 811 4 040 19 599 54 450 420 775 475 225

Accumulated amortisation and impairment lossesAt 31 March 2012 – – 19 522 19 522 – 19 522 Impairment of intangible asset 9 162 – – 9 162 300 127 309 289 Amortisation – 673 77 750 – 750

At 31 March 2013 9 162 673 19 599 29 434 300 127 329 561

Net book value at 31 March 2013 21 649 3 367 – 25 016 120 648 145 664

2012CostAt 31 March 2011 22 810 – 19 599 42 409 408 338 450 747 Exploration and evaluation 2 212 – – 2 212 – 2 212 Foreign currency translation 2 121 – – 2 121 4 371 6 492

At 31 March 2012 27 143 – 19 599 46 742 412 709 459 451

Accumulated amortisation and impairment lossesAt 31 March 2011 – – 19 062 19 062 – 19 062 Amortisation 460 460 460

At 31 March 2012 – – 19 522 19 522 – 19 522

Net book value at 31 March 2012 27 143 – 77 27 220 412 709 439 929

The exploration and evaluation asset relates to prospecting rights held by Benicon Mining, Asenjo Energy and Indongo Mining projects. All exploration and evaluation expenditure incurred has been capitalised as the economic viability of these assets is still being assessed, and until this has been ascertained, development will not commence. These assets are therefore also not amortised.

A decision was taken to impair the exploration and evaluation asset held in Mozambique due to discontinued exploration and evaluation because of the absence of commercial reserves. Sufficient data exists to indicate that the book value will not be recovered from future development and production.


100

2013 R’000

2012 R’000

15 Intangible assets and goodwill (continued)GoodwillCarrying value at the beginning of the year 412 709 408 338 – Geosearch 300 127 300 127 – Mauritius 40 017 35 646 – CCT 35 138 35 138 – JEF 19 687 19 687 – Ritchie 17 740 17 740 Foreign currency translation – Mauritius 8 066 4 371 Impairment (300 127) – Carrying value at the end of the year 120 648 412 709 – Geosearch – 300 127 – Mauritius 48 083 40 017 – CCT 35 138 35 138 – JEF 19 687 19 687 – Ritchie 17 740 17 740

Goodwill arose from the business acquisitions during the 2007 and 2008 financial years.

Goodwill is not amortised but subject to an annual impairment test.

The recoverable amounts of the cash-generating units (“CGUs”) are determined from value-in-use calculations. The key assumptions for the value-in-use calculations are those regarding the discount rates, growth rates and expected revenue and cost projections during the period. These calculations are based on financial budgets approved by management covering a five-year period. Management estimates discount rates using real post-tax rates that reflect current market assessments of the time value of money and the risks specific to the CGUs. The growth rates are based on growth prospects within the specific industry. Changes in revenue and cost projections are based on long-term inflation expectations.

During the year, exploration drilling services in the South African platinum industry declined significantly. This, together with low visibility of a recovery in the mining and exploration sector in Mozambique, had an adverse impact on the projected value-in-use of Geosearch, resulting in an impairment charge of R300 million.

The post-tax real discount rate used to measure Geosearch’s value-in-use was 8,66% and the expected growth rate used over a five-year period was 10%.

The growth rate applies only to the formal budgeted period with the value-in-use calculation based on the extrapolation of the budgeted cash flows for year five.

Operating margins have been based on past experience and future expectations in light of anticipated economic and market conditions. Discount rates are based on the Group’s beta adjusted to reflect management’s assessment of the specific and sovereign risks related to Geosearch.

Key assumptions used in the calculation of recoverable amounts are discount rates and growth rates. These assumptions are as follows:

2013 2012

Nominal pre-tax discount rate (%) n/a 17,08Real post-tax discount rate (%) 8,66 n/aGrowth rate over the five-year period (%) 10,00 4,80

A 1% increase in the real post-tax discount rate or a 1% increase in the growth rate will result in the following decrease in the impairment value:Real post-tax discount rate lowered by an additional 1% (R’000) 12 276 –EBITDA (growth) increased by 1% (R’000) 6 621 –


101


2013 R’000

2012 R’000

16 InventoriesFinished goods 58 761 15 130 Work-in-progress 2 648 9 831

Consumables and spares 128 383 339 560

189 792 364 521

Inventories expensed during the year 635 636 403 336

Inventory write-off 2 702 30 478

Write-down of inventory to net realisable value 133 783 –

The Bucyrus-Erie 1260-W Walking Dragline, including all parts, components and spares constituting such 1260 Dragline held in Benicon Sales Proprietary Limited, has been transferred to inventory as the option agreement that was previously in place expired and there has been no further offers to purchase the dragline. The dragline is measured at the lower of its carrying amount and fair value less cost to sell.

The inventory write-down within the exploration drilling sector, relates to inventory associated with certain drill rigs which are operationally uneconomical and technologically obsolete. These drill rigs became obsolete following a substantial decrease in exploration drilling activities within the PGM industry and the new SHE requirements for drill rigs within this sector. Where contracts have been terminated or near termination in rural operations, inventory was written down to net realisable value as it is uneconomical to redeploy this inventory to other operations.

2013 R’000

2012 R’000

17 Trade and other receivablesTrade receivables* 484 262 408 245 Other receivables** 39 840 39 119

524 102 447 364 Unaccounted funds 182 917 181 917 Value added taxation 11 090 21 506

718 109 650 787 Provision for unaccounted funds write-off (182 917) (181 917)

535 192 468 870

Impairment loss included in the above 12 428 24 517

* The proceeds amounting to R127 million (including VAT and administration fees) from the Megacube auction held on 27 March 2013, are recorded in trade and other receivables. As at the date of this report an amount of R80 million has been received to date. The non-payment of USD4,924 million by the cut-off payment date of 31 May 2013, for 73 items purchased at the Ritchie Brothers Megacube auction, by the South African-based JOWN Group, acting on behalf of GECAMINES-Sarl of the Democratic Republic of Congo, has resulted in Sentula/Megacube initiating a process with Ritchie Brothers Auctioneers to dispose of these assets to interested alternative buyers. Indications are that this process, due to the nature of the assets, could be concluded by the end of July 2013.

** Included in other receivables is the fair value of the interest rate hedge as disclosed below:

Opening balance 2 858 –Purchase price of interest rate hedge – 9 535

Change in fair value recognised through profit and loss (2 486) (6 677)

Amount included in other receivables 372 2 858


102

17 Trade and other receivables (continued)The interest rate hedge was not designated as a hedging instrument and therefore hedge accounting was not applied.

The interest rate hedge facility was entered into on 1 April 2011 with Standard Bank, on the following terms and conditions:

Notional amount: R350 millionTrade date: 1 April 2011Effective date: 1 April 2012Termination date: 31 March 2015Cap rate: 8,57%Floating rate option: ZAR – JIBAR SAFEXReset dates: Calendar quarters

A cession is held over the trade receivables of Sentula in favour of the general short-term banking facility held at Standard Bank as disclosed in note 18.

The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed in note 31.

18 Cash and cash equivalents 2013

R’000 2012

R’000

Bank balances 109 526 104 177 Call deposits 33 74 713 Cash on hand 1 150 1 346

110 709 180 236

Bank overdraft (58 062) –

Cash and cash equivalents 52 647 180 236

The Group’s exposure to interest rate risk and sensitivity analysis for financial assets and liabilities are disclosed in note 31.

2013 R’000

2012 R’000

19 Assets classified as held-for-saleDragline held for sale – 44 612 Plant and equipment held-for-sale – Megacube 1 807 342 447 Plant and equipment held-for-sale – Cameroon – 2 256

1 807 389 315

Dragline – Equipment, trading and spares segmentThe Bucyrus-Erie 1260-W Walking Dragline including all parts, components and spares constituting such 1260 Dragline has been transferred to inventory as the option agreement to purchase this dragline that was previously in place expired on 28 February 2012 and there were no further offers to purchase the dragline. Previously the dragline was held-for-sale as Benicon Sales Proprietary Limited had entered into an option agreement to sell the Bucyrus-Erie 1260-W Walking Dragline, including all parts, components and spares constituting such 1260 Dragline. The option expiring on 30 June 2011 was further extended to 30 September 2011 for an option fee of R2 million, and further extended to 28 February 2012 for an option fee of R4 million, whereafter it expired. The dragline is measured at the lower of its carrying amount and fair value less cost to sell.

Plant and equipment held-for-sale – Opencast mining and earthmoving segmentThe majority of the assets held-for-sale in Megacube Mining Proprietary Limited (“Megacube”) were sold on auction on 27 March 2013 for R118,7 million, and the remaining assets of R41,8 million were sold prior to the auction. This was in line with management’s intention to wind down Megacube. During the previous year, assets with a book value of R342 million were classified as assets held-for-sale. These assets were impaired to their current market value before being classified as held-for-sale. As part of the winding down of Megacube, it is management’s intention that these assets be sold during the next 12 months.


103


19 Assets classified as held-for-sale (continued)Plant and equipment held-for-sale – Exploration drilling segmentSentula Mining Services Mauritius Limited concluded an agreement on 15 March 2012 to sell inventory and plant in its Cameroon operation.

Movement in the assets held-for-sale

R’000 Megacube Dragline Cameroon Total

At 31 March 2012 342 447 44 612 2 256 389 315 Additions 57 165 – – 57 165 Transfer (to)/from inventory 908 (44 612) – (43 704)Impairment of assets held-for-sale (15 149) – – (15 149)Disposals (379 236) – (2 256) (381 492)Transfer to property, plant and equipment 6 549 – – 6 549 Transfer to other receivables (10 877) – – (10 877)

At 31 March 2013 1 807 – – 1 807

2013 R’000

2012 R’000

20 Share capital and premiumAuthorised share capital1 000 000 000 (2012: 1 000 000 000) ordinary shares of 1 cent each 10 000 10 000

Issued share capital586 599 181 (2012: 586 559 181) ordinary shares of 1 cent eachBalance at the beginning of the year 5 866 5 866

Balance at the end of the year 5 866 5 866

Share premiumBalance at the beginning of the year 2 014 438 2 014 438

Balance at the end of the year 2 014 438 2 014 438

Treasury sharesBalance at the beginning of the year (25 898) (25 898)

Balance at the end of the year (25 898) (25 898)

Total share capital, premium and treasury shares 1 994 406 1 994 406

The authorised but unissued share capital is under the control and authority of the directors subject to the Companies Act and JSE Limited Listings Requirements, until the next annual general meeting. The directors have not been granted the approval to issue ordinary shares, or sell treasury shares for cash, without the consent of the shareholders. Note 6 sets out the details in respect of the share option scheme.

All shares issued by the Company were fully paid.


104

2013 R’000

2012 R’000

21 Loans and borrowingsInterest-bearing borrowingsSecured at amortised costStandard Bank merged facility 473 782 646 080 WesBank instalment sale facility 69 962 62 931

543 744 709 011

Balance at the end of the year 543 744 709 011 Current portion of loans and borrowings (543 744) (220 316)

Non-current portion of loans and borrowings – 488 695

The Standard Bank merged term facility and the WesBank facility have been classified as current liabilities at 31 March 2013. The disclosure was required following a breach of the Debt Service Cover Ratio (“DSCR”) and Total Debt to EBITDA Ratio (“TDR”) at 31 March 2013. All debt instalments were made timeously during the 2013 financial year. Subsequent to year-end the Standard Bank consortium (“SBC”) agreed to condone the March 2013 covenant breach. As a condition for condonation of the 31 March 2013 covenant breaches, the SBC also requires that the SBC facility be reduced by an amount of R150 million within a six-month period ending 31 December 2013.

This condonation is conditional on Sentula providing SBC with an undertaking to reduce the senior debt in the manner disclosed in note 34.

The outstanding proceeds from the auction, as disclosed in note 17, will be utilised as a part settlement of the September instalment.

2013 R’000

2012 R’000

Standard Bank merged term facility 473 782 646 080

The effective average interest rate applicable to these liabilities is 8,7% (2012: 8,7%) and is based on a margin of 325 basis points above the three-month JIBAR rate and is reset quarterly. As a condition for the condonation of the 31 March 2013 covenant breaches, the SBC has increased its facility rate by 200 basis points and imposed a condonation fee of R750 000.

The repayment terms of these loans, had they not been classified as current, would have been as follows:

Aggregate repayments due as follows:

2013 R’000

2012 R’000

Year ended 31 March– 2013 – 206 526– 2014 234 901 223 274 – 2015 238 881 216 280

473 782 646 080

Total facility 700 000 700 000

Undrawn facility 226 218 53 920

The Group’s obligations under the merged term facility are secured by registered notarial bonds over plant and equipment and motor vehicles, which have a carrying amount of R1 079 million (2012: R1 493 million). Sentula provided a cession and pledge of all the shares it holds in the Group subsidiaries, for the due and punctual fulfilment of all obligations by the Company. The subsidiaries have subordinated all claims which they may respectively have against one another to the claims which the lenders may have against Sentula and such other subsidiaries of Sentula.


105


2013 R’000

2012 R’000

21 Loans and borrowings (continued)WesBank instalment sale agreement 69 962 62 931



During the year ended 31 March 2012, Sentula entered into a R100 million instalment sale facility with WesBank, which became effective on 27 October 2011.

The Group’s obligations under the WesBank instalment sale liabilities were secured by the lessors’ title of the financial assets, which had a carrying amount of R70,2 million (2012: R69,3 million).

The effective average interest rate applicable to these liabilities is 6,4% (2012: 6,2%) and is a prime linked facility.

The repayment terms of these loans, had they not been classified as current, are as follows:


2013 2012

R’000 Principal Interest Total Principal Interest Total

Year ended 31 March– 2013 – – – 13 790 4 046 17 836 – 2014 21 747 3 792 25 539 15 667 2 786 18 453– 2015 23 202 2 337 25 539 16 771 1 682 18 453 – 2016 and later 25 013 811 25 824 16 703 521 17 224

69 962 6 940 76 902 62 931 9 035 71 966

The Company’s borrowing powers are unlimited in terms of the Memorandum of Incorporation.

The Company’s exposure to interest rate risk and sensitivity analysis for loans and borrowings are disclosed in note 31.

2013 R’000

2012 R’000

22 Finance lease obligationsMinimum lease payments due– within one year 2 468 – – in second to fifth year inclusive 3 581 –

6 049 – Less: Future finance charges (549) –

Present value of minimum lease payments 5 500 –

Present value of minimum lease payments due– within one year 2 129 – – in second to fifth year inclusive 3 371 –

5 500 –

Non-current liabilities 3 371 – Current liabilities 2 129 –

5 500 –

The average lease term is three years and the effective borrowing rate is a fixed USD rate of 7,5%.

Interest rates are linked to a fixed rate at the contract date. All leases have fixed repayment terms.

The Group’s obligations under the finance leases in favour of Atlas Copco Customer Finance AB are secured by the Group’s title to the plant and equipment, which have a carrying amount of R10,2 million (2012: Nil).


106

2013 R’000

2012 R’000

23 Rehabilitation provisionCarrying value at the beginning of the year 66 899 65 004 Unwinding charge to the income statement – 1 895

Carrying value at the end of the year 66 899 66 899

The Group is exposed to environmental liabilities pertaining to its mining operations at Nkomati Anthracite. Estimates of the cost of environmental and other remedial work, such as reclamation costs, close-down, and restoration and pollution control, are made on an annual basis, by an independent environmental consultancy, based on the estimated useful life of the mine.

The mine was under care and maintenance during the year and no unwinding charge was recognised. There has also been no change in the estimates relating to the provision.

2013 R’000

2012 R’000

Restricted investmentsFirst National Bank 8 693 8 693

Restricted investments are 12-month deposits held by First National Bank and available to be utilised only to discharge the Company’s environmental rehabilitation obligations pertaining to the Nkomati Anthracite mine. This amount has been ceded to First National Bank for a guarantee issued in favour of the DMR.

The gross value of the environmental rehabilitation obligation of the Company is R119 million (2012: R119 million).

2013 R’000

2012 R’000

24 Deferred revenueIncome received in advance – 1 100

Non-current liabilities – – Current liabilities – 1 100

– 1 100

There is no deferred revenue for 2013.

2013 R’000

2012 R’000

25 Trade and other payablesTrade payables 168 925 204 343 Other payables 71 650 76 930

240 575 281 273 Provision for leave pay and employee incentives 21 008 34 178 Value added taxation 17 116 20 081

278 699 335 532

The Group’s exposure to interest rate risk and sensitivity analysis for financial liabilities are disclosed in note 31.


107


2013 R’000

2012 R’000

26 Deferred taxBalance at the beginning of the year 262 983 226 623 Originating temporary differences (73 270) 36 360 Prior year adjustments (18 863) –


The balance comprises:Accelerated wear and tear for tax purposes on property, plant and equipment 339 916 380 931 Unredeemed capital expenditure (226 910) (222 170)Fair value adjustment on business combinations 123 102 123 090 Provisions (21 686) (25 095)Foreign exchange effect 8 700 7 940 Assessed losses utilised (53 512) (3 520)Prepayments 181 175 Other 1 059 1 632

Net deferred tax liabilities 170 850 262 983

Deferred tax asset 50 525 34 869– Deferred tax asset to be recovered after more than 12 months 40 926 27 522– Deferred tax asset to be recovered within 12 months 9 599 7 347

Deferred tax liability 221 375 297 852 – Deferred tax liability to be recovered after more than 12 months 184 602 215 932 – Deferred tax liability to be recovered within 12 months 36 773 81 920

Movement in temporary differences during the year

R’000

Opening balance

31 March 2012

Recognised in income

statement

Closing balance

31 March 2013

Accelerated wear and tear 380 931 (41 015) 339 916 Fair value adjustment on business combinations 123 090 12 123 102 Assessed losses utilised (3 520) (49 992) (53 512)Provisions (25 095) 3 409 (21 686)Prepayments 175 6 181 Unredeemed capital expenditure (222 170) (4 740) (226 910)Foreign exchange effect 7 940 760 8 700 Other 1 632 (573) 1 059

262 983 (92 133) 170 850


108

Opening balance

31 March 2011


statement

Closing balance

31 March 2012

26 Deferred tax (continued)Accelerated wear and tear 548 752 (167 821) 380 931 Fair value adjustment on business combinations 123 078 12 123 090 Assessed losses utilised (27 303) 23 783 (3 520)Lease liability (1 236) 1 236 – Provisions (8 201) (16 894) (25 095)Prepayments 590 (415) 175 Unredeemed capital expenditure (413 084) 190 914 (222 170)Foreign exchange effect – 7 940 7 940 Other 4 027 (2 395) 1 632

226 623 36 360 262 983

Unrecognised deferred taxDeferred tax assets have not been recognised in respect of tax losses amounting to R367 million (2012: R236 million) as it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom in the foreseeable future.

2013 R’000

2012 R’000

27 Other financial liabilitiesBalance at the beginning of the year 7 506 7 506


These liabilities relate to amounts payable to the original vendors of the Nkomati mine and Bankfontein prospect and are payable based on units of production from the mines in the form of a royalty. As Nkomati Anthracite mine was on care and maintenance during the 2012 and 2013 financial years, no production took place during these years.

Fair value is determined by discounting the future royalty liability at the time of acquisition. The royalty liability is the product of the royalty rate and the run-of-mine tonnes, derived from the resource base, and estimated to be produced or sold over the current life of mine.

Changes to the aforementioned valuation inputs will determine the range of the liability payable.

The royalty will only become payable on mining recommencing at Nkomati Anthracite mine and mining commencing at Bankfontein.


109


2013 R’000

2012 R’000

28 Taxation paidBalance at the beginning of the year (5 547) 16 482 Amounts recognised in profit or loss 60 920 5 169 Effect of movement in exchange rates 2 924 96 Provision for penalties 6 108 – Balance at the end of the year (22 437) 5 547

Taxation paid 41 968 27 294

2013 R’000

2012 R’000

29 Capital commitmentsCapital expenditure contracted for in respect of property, plant and equipment – 22 920 Capital expenditure authorised by the directors not contracted for in respect of property, plant and equipment– New replacement equipment 148 874 204 786 – Refurbishments 41 000 59 900

The capital expenditure will be financed through vehicle asset finance, vendor finance and working capital.

Operating lease commitmentsFuture minimum lease payments– up to 1 year 11 272 2 952 – 1 to 5 years 10 461 3 147

The lease agreements are entered into on market-related terms and conditions and are subject to annual market-related escalation in the lease rates. Property lease agreements are subject to a lease extension option.

30 Contingent liabilitiesKeatonDuring the 2013 financial year, Megacube Mining Proprietary Limited (“MM”) instituted legal action proceedings against Keaton Mining Proprietary Limited for the recovery of R41,5 million owing to MM for work performed on its Vanggatfontein operation.

Subsequent to the above claim, a demand for payment of R119,9 million was brought against MM in respect of an alleged breach of contract and substandard mining practices adopted by MM, which allegedly resulted in coal losses. In accordance with the contract, the matters will be independently arbitrated upon. A date for the arbitration has yet to be finalised, but is expected to be set down for the second half of the 2014 financial year. The Company and its attorneys believe that there is a strong case in support of the initial claim, and that there is a good defence against the alleged counterclaim, but are not able to estimate the probable loss or possible loss.

To the best of our knowledge and belief there are no other contingent liabilities to third parties and/or contingent assets not set out or referred to in this report which may materially affect the financial position of the Group.


110

31 Financial instruments31.1 Risk management activities

In the normal course of its operations, the Group is exposed to currency, interest rate, liquidity and credit risk. This note describes the Group’s objectives, policies and processes for managing those risks and methods used to measure them. In order to manage these risks, the Group has developed a comprehensive risk management process to facilitate control and monitoring. The Board has overall responsibility for the determination of the Group’s risk management objectives and polices and, while retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group’s finance function. The Group’s treasury function provides services to the subsidiaries, co-ordinates access to domestic financial markets and monitors and manages the financial risks relating to the operations of the Group. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, and liquidity risk. Operational and business risks are reviewed and addressed on a monthly basis.

The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

31.2 Credit riskCredit risk is the risk of financial loss to the Group if a customer or a counterparty fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales and this risk is mitigated by dealing with creditworthy counterparties and a few major clients or, where deemed necessary, sourcing credit insurance. It is Group policy to assess the credit risk of new customers before entering into a contract and this is monitored on an ongoing basis.

The Group procures financing from a consortium (comprising Standard Bank, HSBC and Sanlam) and WesBank. These institutions are deemed to be credible financial institutions, the financial stability of which does not pose a threat to the Group.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Carrying amount

2013 R’000

2012 R’000

Trade receivables 484 262 408 245 Other receivables 39 840 39 119

Trade and other receivables 524 102 447 364 Cash and cash equivalents 110 709 180 236 Restricted investments 8 693 8 693

643 504 636 293

The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was:South Africa 338 071 308 529 Botswana 15 906 15 219 Mozambique 18 458 42 477 Tanzania – 7 884 Other African countries 131 518 73 255 UK and Europe 6 878 – USA and Canada 966 – Russia 340 – Jordan 1 331 – Australia 8 101 – Aland Islands 2 533 –

524 102 447 364


111


31 Financial instruments (continued)31.2 Credit risk (continued)

The maximum exposure to credit risk for trade and other receivables at the reporting date by category was:

Carrying amount

2013 R’000

2012 R’000

Mining houses 331 567 357 787 Exploration companies 94 101 Mining subcontractors 37 977 34 002 Deferred fees 4 732 7 314 Auction proceeds 122 175 – Other 27 557 48 160

524 102 447 364

The ageing of trade receivables at the reporting date was:Not past due 333 340 269 075 Past due 0 – 30 days 62 080 79 542 Past due 31 – 120 days 14 673 20 205 Past due 121 – 180 days 33 922 13 147 Past due 181 days and over 40 247 26 276

Trade receivables not impaired 484 262 408 245

The movement in the allowance for impairment in respect of trade and other receivables during the year was as follows:Balance at 1 April 24 517 5 346 (Reversal of)/increase in impairment provision (12 089) 19 171

Balance at 31 March 12 428 24 517

Balance at 31 March comprising: 12 428 24 517Impairment provision on trade receivables 4 569 16 658 Impairment provision on other receivables 7 859 7 859

At 31 March 2013, an impairment provision of R12,4 million (2012: R24,5 million) relates to customers that have indicated they are not able to meet their outstanding balances, mainly due to prevailing economic conditions. The Group believes that the unimpaired amounts that are past due by more than 30 days are still collectible, based on historic payment behaviour and extensive analyses of the underlying customers’ credit rating.

Based on historic default rates, the Group believes that, apart from the above, no impairment allowance is necessary in respect of the trade receivables not past due or past due by up to 30 days.

31.3 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 new investments in foreign operations.

Foreign exchange risk also arises when individual Group entities enter into transactions denominated in a currency other than the functional currency.

The Group is exposed to currency risk on purchases made on plant and equipment globally. Purchases from these suppliers are made on a central basis and the risk is hedged using forward exchange contracts. The forward exchange contracts entered into from time to time are economic hedges and therefore the Group does not apply hedge accounting.

The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk. Currency exposure arising from the net assets of the Group’s foreign operations is managed primarily through these operations holding cash denominated in the relevant foreign currency.


112

31 Financial instruments (continued)31.3 Foreign exchange risk (continued)

The Group’s exposure to foreign currency risk was as follows:

2013 2012

R’000

ZAR equivalent of USD

exposure1

ZAR equivalent of BWP

exposure2

ZAR equivalent of USD

exposure1

ZAR equivalent of BWP

exposure2

Trade receivables 94 608 15 906 113 635 15 049Cash and cash equivalents 84 917 8 380 87 199 9 285 Trade payables (7 685) – (13 771) (6 541)

Gross balance sheet recognised 171 840 24 286 187 063 17 793

1. This column discloses the USD exposure of foreign operations translated to ZAR. 2. This column discloses the BWP exposure of foreign operations translated to ZAR.

The following significant exchange rates applied during the year:

2013 2012

ZAR Average

rate Reporting date

spot rate Average

rate Reporting date

spot rate

USD 8,430 9,240 7,620 7,690 BWP 1,110 1,120 1,070 1,070

Sensitivity analysisA 10% strengthening of the Rand against the following currencies at 31 March 2013 would have increased/(decreased) equity and profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

The analysis is performed on the same basis for 2012.

Equity’000

Profit or loss’000

31 March 2013 USD (31 007) 5 923 BWP (5 706) 464

31 March 2012 USD (20 837) (5 802)BWP (6 562) (560)

A 10% weakening of the Rand against the above currencies at 31 March 2013 would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

31.4 Interest rate risk At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments was:

2013 R’000

2012 R’000

Variable rate instruments– Financial assets 109 559 178 890 – Financial liabilities (607 306) (709 011)

(497 747) (530 121)

The Group is exposed to interest rate risk from long-term borrowings at variable rates. Fluctuations in interest rates impact the value of the short-term investments and financing activities giving rise to interest rate risk. In the ordinary course of business the entities within the Group receive cash proceeds from its operations and are required to fund working capital and capital expenditure requirements. All entities within the Group are not permitted to borrow long-term from external sources. Cash is managed in a manner to ensure that all surplus funds held within the Group are invested with the centralised treasury. The surplus funds are invested to maximise returns while ensuring that the capital is safeguarded to the maximum extent possible by investing only with highly rated financial institutions.

Contractual arrangement for committed borrowing facilities are maintained with two banking counterparts to meet the Company’s funding requirements.


113


31 Financial instruments (continued)31.4 Interest rate risk (continued)

Cash flow sensitivity analysis for variable rate instruments A sensitivity analysis is performed by assuming that the amount of the assets and liabilities outstanding at the reporting date was outstanding for the whole year. A 200 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of a reasonable and possible change in interest rates.

If interest rates had been 200 basis points higher/lower and all the other variables were held constant, the Group’s profit after tax for the year ended 31 March 2013 would decrease/increase by R12,6 million (2012: R13,4 million). This is attributable to the Group’s exposure to interest rates on its variable borrowings. The analysis is performed on the same basis for 2012.

31.5 Liquidity risk management Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The Group manages liquidity risk via a centralised treasury, by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows.

The following tables detail the Group’s remaining contractual maturity for its non-derivative financial liabilities. These tables have been drawn up based on the undiscounted cash flows of financial liabilities and based on the earliest date on which the Group can be required to pay.

Weighted average

effective interest

rate

Less than one month

R’000

One to three

months R’000

Three months to one year

R’000

One tofive

years R’000

Total R’000

2013Secured bank loans – Standard Bank merged term facility 8,70% – 57 299 416 483 – 473 782 – WesBank instalment sale facility 6,37% 1 764 3 545 64 653 – 69 962 Bank overdraft 8,50% 58 062 – – – 58 062 Financial leases 7,5% (USD) 177 532 1 419 3 372 5 500 Trade and other payables 0,00% 240 575 – – – 240 575

2012 Secured bank loans – Standard Bank merged term facility 8,86% – 50 085 156 441 439 554 646 080 – WesBank instalment sale facility 6,20% 552 3 578 9 871 48 930 62 931 Trade and other payables 0,00% 281 273 – – – 281 273

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.


114

31 Financial instruments (continued)31.6 Fair value of financial instruments

The fair value of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position, are as follows:

2013 2012

Carrying value

R’000

Fair value

R’000

Carrying value

R’000

Fair value

R’000

Assets measured at amortised cost Trade and other receivables 523 730 523 730 444 506 444 506 Cash and cash equivalents 110 709 110 709 180 236 180 236 Restricted investments 8 693 8 693 8 693 8 693 Assets carried at fair value Interest rate cap 372 372 2 858 2 858 Liabilities measured at amortised cost Loans and borrowings – non-current – – (488 695) (488 695)Finance lease obligations – non-current (3 371) (3 371) – – Trade and other payables (240 575) (240 575) (281 273) (281 273)Loans and borrowings – current (543 744) (543 744) (220 316) (220 316)Finance lease obligations – current (2 129) (2 129) – – Bank overdraft (58 062) (58 062) – – Liabilities carried at fair value Other financial liabilities (7 506) (7 506) (7 506) (7 506)

The fair value of the interest rate hedge is disclosed in note 17.

Fair value hierarchyAll financial instruments measured at fair value by valuation method are measured at a level 3, except for the interest rate cap which is measured at a level 2.

The different levels have been defined as follows: h Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. h Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (i.e derived from prices).

h Level 3: Inputs for the assets or liabilities that are not based on observable market data.

The only financial instruments measured at fair value by valuation method is disclosed in note 27.

Fair value is determined by discounting the future liability, which is calculated by multiplying the royalty rate by the run-of-mine tonnes estimated to be produced over the anticipated life of the mine.

Although the Group believes that its estimate of fair value is appropriate, the use of the different methodologies or assumptions could lead to different measures of fair value.

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values.

31.7 Capital management 2013 2012

Gearing ratio 29% 22%

The Group manages its capital structure to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and the equity capital.

The capital structure of the Group consists of debt, which includes loans to subsidiaries, cash and cash equivalents, liabilities and equity, comprising issued share capital, reserves and retained earnings as disclosed.

There are no external capital requirements imposed on the Group.

There were no changes to the manner in which the Group manages its capital.


115


32 Related party transactions and balancesDuring the year, the Group and its related parties, in the ordinary course of business, entered into various intergroup sale and purchase transactions.

R’000Capital

expenditure Revenue Expenses

Amounts owed by

related parties

Amounts owed to

related parties

2013C&K Boilermaking Proprietary Limited – 5 1 6 – Jonah Coal Botswana Limited – – – 675 – JPK Bits & Rods CC – 7 1 460 – – Laduma Metals CC 8 13 75 – – Mabapa Mining Limited – – – 2 875 – Martiq 406 CC – – 593 – – Merafe Coal Proprietary Limited – – – 3 444 – O.M. Tsehla Drilling Contractor Proprietary Limited – – 1 240 – – Witbank Steel Agencies CC – – 3 – –

8 25 3 372 7 000 –

2012C&K Boilermaking Proprietary Limited – – 18 – – Jonah Coal Botswana Limited – – – 675 – JPK Bits & Rods CC – – 3 749 – 315 L&L Trust – – 90 – – Laduma Metals CC – 19 54 – 8 Mabapa Mining Limited – – – 2 861 – Martiq 406 CC – – 731 – – Merafe Coal Proprietary Limited – – – 3 298 – O.M. Tsehla Drilling Contractor Proprietary Limited – – 1 664 801 671 Witbank Steel Agencies CC – – 14 2 –

– 19 6 320 7 637 994

All outstanding balances with these related parties are priced on an arm’s length basis and are to be settled in cash within 12 months of the reporting date. None of the balances are secured.

Key management personnel compensation

2013 R’000

2012 R’000

Key management personnel compensation comprised:Short-term employee benefits 33 970 25 557 Share-based payments 578 15 116

34 548 40 673


116

33 Sentula Mining trustsThe Sentula Mining Empowerment TrustThe Company established The Sentula Mining Empowerment Trust, registration number IT 607/2012, during 2012, as part of the BBBEE transaction which was announced on SENS on 2 March 2012, and which became effective on 9 May 2012.

The trust is administered by the trustees for the benefit of the beneficiaries, being learner beneficiaries (black persons that are, or intend to be, involved in a form of education or studies in the mining and engineering arena) and stated beneficiaries (charities from the community which comprises black people residing in and around the mining operations of the Company), on the terms and conditions and as more fully detailed in the trust deed.

The Sentula Mining Employee TrustThe Company established The Sentula Mining Employee Trust, registration number IT 608/2012, during 2012, as part of the BBBEE transaction which was announced on SENS on 2 March 2012, and which became effective on 9 May 2012.

The purpose of the trust is to enable the employer companies (the subsidiaries of Sentula Contracting being JEF Drill and Blast Proprietary Limited, Classic Challenge Trading Proprietary Limited, Ritchie Crane Hire Proprietary Limited and Benicon Opencast Mining Proprietary Limited) with an opportunity to provide their employees with an incentive to jointly grow the profitability of the employer companies and share in this growth and prosperity, and promoting an identity of interests between the employees and shareholders, on the terms and conditions and as more fully detailed in the trust deed.

The Sentula Mining Transformation TrustThe Company established The Sentula Mining Transformation Trust – IT542/09 in 2009 as a BBBEE scorecard investment delivery vehicle in which the Company and its branches execute the two elements of the scorecard, namely enterprise development and socio-economic development. The beneficiaries of the trust are black South Africans, black-owned enterprises or black employees of the Company.

The Sentula Share Incentive TrustThe Company established the Schamin Share Incentive Trust, registration number IT11059/97, in 1997, which trust name was subsequently changed to The Sentula Share Incentive Trust.

The purpose of the trust is to provide an incentive to employees of the Company to remain in the service of the Company and to encourage them to acquire a shareholding in the Company in order to create or to increase their proprietary interest in the Company’s success.

There is currently only one employee who still participates in this scheme, and no further options will be offered to employees in terms of this scheme. The trust will be terminated once all of the options of the last remaining participant have been exercised or lapsed.

The trusts are controlled by the Company and, in accordance with the requirements of SIC-12, it constitutes a special purpose entity. In accordance with SIC-12, which requires the consolidation of special purpose entities under certain conditions, the trusts have been included as a special purpose entity in the consolidated financial statements of the Group.

34 Going concernThe 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 finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business.

The Group has met all its debt obligations during the past financial year and, based on the Group’s cash flow forecasts for the 2014 financial year, is expected to meet all its obligations during this period.

The Group funds its operations by means of a Standard Bank-led consortium facility and a WesBank vehicle asset finance facility. The availability of these facilities is subject to ongoing compliance with a number of financial covenants, including, inter alia, a debt service cover ratio (“DSCR”) and a total debt to EBITDA ratio (“TDR”). The Group’s future prospects and financial stability is dependent on the ongoing condonation of these covenant breaches, to the extent required during the course of the 2014 financial year.

At 31 March 2013, the Group breached the DSCR and TDR and was not timeously granted condonation by the Standard Bank Consortium (“SBC”) resulting in the SBC and WesBank debt being classified as a short-term liability at year-end. Subsequent to year-end, condonation was received for these breaches from the SBC. The directors acknowledge that, in the context of the prevailing economic environment, the Group’s debt levels are excessive in relation to the Group’s forecast cash generation and the Board has undertaken to pursue a number of initiatives to reduce the debt by approximately R150 million within a six-month period.


117


34 Going concern (continued)The initiatives being pursued by the Board include the following:

h The disposal of certain of the Group’s coal assets; h The continued disposal of surplus plant and equipment within the Group; h The refinancing of the SBC debt by means of a debt capital market instrument; h A refinancing of the SBC debt; h Other appropriate means of reducing the debt; or h A combination of the above.

As a consequence of the impairments of R511 million (2012: R617 million), an inventory write-off of R134 million (2012: Nil) and a net loss on sale of assets of R220 million (2012: R52 million), as disclosed in note 5, the Group incurred a net loss of R900 million for the financial year ended 31 March 2013 and at that date the Group’s statement of financial position disclosed an accumulated loss of R505 million. At 31 March 2012, the Group incurred a net loss of R532 million and had retained earnings of R365 million.

The impairments, losses on sale of assets and inventory write-off do not impact the Group’s cash generation and its operational capacity remains intact. If the non-operational items are excluded from the 2013 results the Group continues to be operationally profitable and cash flow positive in all its major subsidiaries however, the aforementioned conditions, along with other matters, indicate the existence of a material uncertainty that may cast significant doubt on the ability of the Group and the Company to continue as going concerns and, therefore, the Group and Company may be unable to realise their assets and discharge their liabilities in the normal course of business.

35 Subsequent eventsSusequent to year-end, the SBC condoned the March 2013 covenant breaches, subject to the payment of a waiver and consent fee of R750 000 and an increase in the SBC facility margin by 2%.

Sentula entered into an agreement with Miniandante Proprietary Limited (the purchaser) to dispose of the Schoongezicht prospecting right and the prospecting right documents described below, to the purchaser for a total consideration of R22 million, to be settled by the purchaser in cash, subject to the fulfilment or waiver, as the case may be, of certain conditions precedent, typical for a transaction of this nature.

The effective date of the disposal of the Schoongezicht prospecting right is the fifth business day after the date on which the last of the conditions precedent is fulfilled or waived, as the case may be.

The conditions precedent include the granting by the Minister of Mineral Resources of:

h the application for the renewal of the Schoongezicht prospecting right for a minimum of two years from the date of expiry of the initial term of the Schoongezicht prospecting right; and

h the transfer of the Schoongezicht prospecting right to the purchaser.

36 Directors’ remuneration

R’000 Basic

Motor vehicle allow-

anceLTIPs

vestedProvi-dent# Bonus## Total

2013Executive directorsRC Berry 3 589 364 955 441 934 6 283 GP Louw 3 416 160 824 – 805 5 205 PP Modisane 1 329 507 417 – 389 2 642

8 334 1 031 2 196 441 2 128 14 130 # Including Company contribution## Bonus paid in 2013 relating to 2012 financial year-end


118

36 Directors’ remuneration (continued)

R’000

Chair-man’s

fees Directors’

fees

Audit and Risk

Govern-ance,

Remu-neration

and Nomina-

tion Invest-

ment Trustees’

fees Other

services Total

Non-executive directorsJG Best 122 133 – 94 – – – 349 EHJ Stoyell (resigned 17 September 2012) – 62 – 55 – – – 117 D Zihlangu – 130 125 23 – – 23 301 CJPG van Zyl – 148 156 – – – 45 349 KW Mzondeki – 148 125 – – – – 273 RB Patmore – 131 – 89 – – 87 307

122 752 406 261 – – 155 1 696

R’000 Basic

Motor vehicle allow-

anceLTIPs

vestedProvi-dent# Bonus Total

2012Executive directorsRC Berry 3 284 240 1 182 279 1 573 6 558 GP Louw 3 172 120 1 018 – 1 196 5 506 PP Modisane 1 205 460 492 – 605 2 762

7 661 820 2 692 279 3 374 14 826 # Including Company contribution

R’000

Chair-man’s

fees Directors’

fees

Audit and Risk

Govern-ance,

Remu-neration

and Nomina-

tion Invest-

ment Trustees’

fees Other

services Total

Non-executive directorsJG Best 83 251 – 52 26 – – 412 EHJ Stoyell – 167 – 49 21 26 – 263 D Zihlangu – 224 124 11 – – 26 385 CJPG van Zyl – 193 155 – 21 – – 369 KW Mzondeki – 193 99 11 – – – 303 A Kawa (resigned 2 June 2011) – 24 18 20 – – – 62 RB Patmore (appointed 25 January 2012) – 43 – – – – – 43

83 1 095 396 143 68 26 26 1 837

The remuneration of directors is determined by the Remuneration Committee having regard to the performance of individuals and market trends.

Executive directors do not receive directors’ fees and the directors have service contracts with the Company.

Executive directors are subject to the Company’s standard conditions of employment.


119

Company annual financial statementsfor the year ended 31 March 2013

CONTENTS

Company statement of financial position 121

Company income statement 122

Company statement of comprehensive income

122

Company statement of changes in equity 123

Company statement of cash flows 124

Notes to the Company financial statements 125


120

Company statement of financial positionat 31 March 2013

Note2013

R’0002012

R’000

AssetsNon-current assets 1 927 969 2 100 085 Property, plant and equipment 8 744 1 675 Loans to subsidiaries 22 1 023 420 1 813 010 Investment in subsidiaries 22 298 465 276 474 Investment in preference shares 22 600 000 – Share incentive trust loan 7 3 494 6 129 Deferred tax 14 1 846 2 797 Current assets 283 084 279 452 Trade and other receivables 9 46 492 31 484 Loans to subsidiaries 22 228 485 165 434 Cash and cash equivalents 10 134 74 831 Other financial assets 18 6 994 6 834 Taxation receivable 979 869

TOTAL ASSETS 2 211 053 2 379 537

EquityTotal equity attributable to equity holders of the Company 1 590 534 1 641 441 Share capital 11 5 866 5 866 Share premium 11 2 014 438 2 014 438 Reserves 32 213 36 575 Retained earnings (461 983) (415 438)

TOTAL EQUITY 1 590 534 1 641 441

LiabilitiesNon-current liabilities – 488 695 Loans and borrowings 12 – 488 695 Current liabilities 620 519 249 401 Trade and other payables 13 18 714 29 085 Loans and borrowings 12 543 744 220 316 Bank overdraft 10 58 061 –

TOTAL LIABILITIES 620 519 738 096

TOTAL EQUITY AND LIABILITIES 2 211 053 2 379 537


121

Company income statementfor the year ended 31 March 2013

Company statement of comprehensive incomefor the year ended 31 March 2013

Note2013

R’0002012

R’000

Other income 569 397 6 673 Administrative expenses 2 (657 059) (859 815)

Results from operating activities (87 662) (853 142)Finance expense 4 (61 429) (67 761)Finance income 4 105 983 144 196 Fair value adjustment on interest rate cap (2 486) (6 677)

Loss before taxation (45 594) (783 384)Taxation 5 (951) 1 509

Loss for the year (46 545) (781 875)

2013

R’0002012

R’000

Loss for the year (46 545) (781 875)Other comprehensive income – –

Other comprehensive loss for the year, net of income tax (46 545) (781 875)

Total comprehensive loss for the year (46 545) (781 875)


122

Company statement of changes in equityfor the year ended 31 March 2013

R’000Share

capitalShare

premium

Employee share

incentive reserve

Retained earnings

Totalequity

Balance at 31 March 2011 5 866 2 014 438 42 426 363 817 2 426 547 Loss for the year – – – (781 875) (781 875)Other comprehensive incomeNone – – – – –

Total other comprehensive income – – – – Total comprehensive loss for the year – – – (781 875) (781 875)

Transactions with owners, recorded directly in equityContributions by and distributions to ownersShare-based payments – – 2 134 – 2 134 Share options forfeited – – (7 985) 2 620 (5 365)

Total contributions by and distributions to owners – – (5 851) 2 620 (3 231)

Balance at 31 March 2012 5 866 2 014 438 36 575 (415 438) 1 641 441 Loss for the year – (46 545) (46 545)Other comprehensive incomeNone – – – – –

Total other comprehensive income – – – – – Total comprehensive loss for the year – – – (46 545) (46 545)

Transactions with owners, recorded directly in equityContributions by and distributions to ownersShare-based payments – – 406 – 406 Share options forfeited – – (4 768) (4 768)

Total contributions by and distributions to owners – – (4 362) – (4 362)

Balance at 31 March 2013 5 866 2 014 438 32 213 (461 983) 1 590 534


123

Company statement of cash flowsfor the year ended 31 March 2013

Note2013

R’0002012

R’000

Cash flows from operating activitiesLoss for the year (46 545) (781 875)Adjustments for:Depreciation 2 1 049 1 045 Profit from disposal of subsidiaries 2 (530 685) – Preference dividend accrual from subsidiaries 2 (34 940) – Impairment of intercompany loans 2 620 969 811 299 Unrealised foreign exchange gain 2 (16 097) (8 723)Fair value on interest rate cap 9 2 486 6 677 Finance income 4 (105 983) (144 196)Finance expense 4 61 429 67 761 – Paid 58 848 65 180 – Accrued 2 581 2 581 Equity-settled share-based payment expense 2 406 1 212 Cash-settled share-based payment expense 2 (844) – Long-term incentive plan – 2 717 Income tax expense 5 951 (1 509)

Cash flows from operating activities before changes in working capital and provisions (47 804) (45 592)Change in trade and other receivables 14 702 (25 408)Change in trade and other payables (9 525) 12 072

Cash utilised in operating activities (42 627) (58 928)Income taxes paid 16 (98) – Interest paid 4 (58 848) (65 180)

Net cash utilised in operating activities (101 573) (124 108)

Cash flows from investing activitiesInterest received 4 105 972 144 167 Purchase of property, plant and equipment 8 (118) (86)Proceeds from disposal of property, plant and equipment – 1 Repayment from subsidiaries 28 228 24 893

Net cash generated by investing activities 134 082 168 975 Cash flows from financing activitiesLoans raised 68 300 147 335 Loans repaid (233 567) (138 324)

Net cash (utilised in)/generated by financing activities (165 267) 9 011

Net (decrease)/increase in cash and cash equivalents (132 758) 53 878 Cash and cash equivalents at the beginning of the year 74 831 20 953

Cash and cash equivalents at the end of the year 10 (57 927) 74 831


124

Notes to the Company financial statementsfor the year ended 31 March 2013

2013R’000

2012R’000

1 Accounting policiesThe accounting policies are the same as the Group’s accounting policies as set out on pages 77 to 90.

2 Results from operating activitiesAfter allowing for the following:IncomeProfit on sale of subsidiaries 530 685 – Preference dividend accrual from subsidiaries 34 940 –

ExpensesAuditors’ remuneration 1 633 2 176 – Audit fees – current year 1 483 2 107 – Other accounting services 150 69 SARS penalties 517 – Unrealised foreign exchange gains (16 097) (8 723)Contribution to socio-economic and enterprise development – 757 Depreciation 1 049 1 045 Impairment of intercompany loans 620 969 811 299

Personnel expenses– Salaries and wages 26 306 24 291 – Provident fund 863 943 – Equity-settled share-based payment expense 406 1 212 – Cash-settled share-based payment expense (844) – – Long-term incentive plan 1 143 4 761

Number of shares

2013’000

2012’000

3 Share-based paymentsEquity-settled share appreciation rights scheme 6 575 7 500 Cash-settled share appreciation rights scheme 15 245 15 245 Long-term incentive plan 5 201 5 538 Schamin Trust 1 600 1 600

28 621 29 883

Equity-settled share appreciation rights schemeThe Share Appreciation Rights Scheme (“SARS”) is a scheme whereby senior and middle management (the “employees”) of Sentula (the “Company”) are incentivised by means of the award of options, of which the offer price is determined as the 30-day VWAP of Sentula’s share price on the date of presentation of Sentula’s annual results (the “offer date”) and the employees can exercise the said options in five equal tranches annually from the first to the sixth anniversary of the offer date, subject to employment. The award and allocation of options under the scheme is governed by Sentula’s Board. There were no options awarded during the year ended 31 March 2013 (2012: Nil). This is an equity-settled scheme.

Number of shares

2013’000

2012’000

Outstanding at the beginning of the year 7 500 9 025 Forfeited options (925) (1 525)


Weighted average exercise price of outstanding options (cents) 1 795 1 816 Weighted average exercise price of forfeited options (cents) 2 206 2 206 Weighted average exercise price of exercisable options (cents) 1 795 1 816 Average remaining life (months) 8 20


125

Notes to the Company financial statements continuedfor the year ended 31 March 2013

3 Share-based payments (continued)Cash-settled share appreciation rights schemeThe Share Appreciation Rights Scheme (“SARS”) is a scheme whereby senior and middle management (the “employees”) of Sentula (the “Company”) are incentivised by means of the award of options, of which the offer price is determined as the 30-day VWAP of Sentula’s share price on the date of presentation of Sentula’s annual results (the “offer date”) and the employees can exercise the said options in five equal tranches annually from the first to the sixth anniversary of the offer date, subject to employment. The award and allocation of options under the scheme is governed by Sentula’s Board. There were no options awarded during the year ended 31 March 2013 (2012: Nil). This is a cash-settled scheme.

Number of shares

2013’000

2012’000

Outstanding at the beginning of the year 15 245 15 990 Forfeited options – (745)


Number of exercisable options at year-end 8 735 5 686

Weighted average exercise price of issued options (cents) 616 664 Weighted average exercise price of outstanding options (cents) 616 616 Weighted average exercise price of exercisable options (cents) 1 042 1 042 Fair value of options granted (R’000) 4 554 5 860 Average remaining life (months) 30 42

The fair value of such share programme was determined by using the binomial option valuation method. The following inputs were used:– Issued price ranging from 223 cents to 1 679 cents;– Expected volatility of 50%;– A staff turnover of 5,45% per annum;– A forecast dividend growth rate of 4%; and– A risk-free interest rate of 8,97%.

Expected volatility was based on a filtered history of volatility of the Sentula Group from a period dating back to 2005 and has been adjusted to give recent history a higher weighting in determining the average expected volatility.

Deferred bonus schemeSelected executives and employees of the Group will in lieu of a discretionary bonus, or a percentage thereof, be offered the right to receive a cash award equal to the sum of the market value of a number of notional Sentula issued ordinary shares as at the expiry of a specified employment period and a multiple thereof to be determined by the Board at the time of offer of the deferred bonus award and the aggregate of all dividends paid per Sentula ordinary shares over the employment period and the number of bonus shares comprising the deferred bonus award. The deferred bonus scheme is settled in cash.

All shares are awarded at the 30-day VWAP of Sentula’s share price on the date of presentation of Sentula’s annual results (the “offer date”) on the day of issue. No nominal Sentula shares were issued during the current year (2012: Nil).


126

3 Share-based payments (continued)Long-term incentive planSelected executives and employees of Sentula and its subsidiaries will receive a conditional right to receive a cash award (“LTIP award”) equal to the market value of a number of notional Sentula issued ordinary shares on the date that the award becomes unconditional. The LTIP award is to be applied towards the obligatory subscription and/or purchase of Sentula ordinary shares. This LTIP award is settled in cash.

Number of shares

2013’000

2012’000

Outstanding at the beginning of the year 5 538 7 980 Granted during the year 1 375 325 Forfeited options – (853)Number of options exercised (1 712) (1 914)


Average remaining life (months) 15 27

The awards made during 31 March 2013 and 31 March 2012 financial year relate to new staff members who qualify under this scheme. LTIPs are settled at vesting date based on the market value of the Company’s share price determined by reference to 30-day VWAP. Conditions for vestings are established by the Board. In order for the July 2013 tranche to vest, a 10% compound improvement in year-on-year EVA on the Group’s productive capital base, utilising the March 2011 base, needs to be achieved. The July 2012 tranche vested, based on a 10% improvement in year-on-year EVA on the Group’s productive capital base being achieved. Vesting conditions require employment at the maturity of the respective tranche.

Schamin TrustNo changes took place during the year under review:

Number of shares

2013’000

2012’000

Outstanding at the beginning of the year 1 600 1 600



Weighted average price of outstanding options (cents) 1 000 1 000 Weighted average price of options lapsed (cents) 1 000 – Weighted average price of exercisable options (cents) 1 000 1 000 Average remaining life (months) 45 57

The maximum number of shares that may be issued in terms of the scheme may not in aggregate exceed 23 556 594 shares in Sentula’s issued capital. Shares vest in the option holder on the date the option was granted. Thereafter the option holder may exercise the options in individual tranches of 20% on each subsequent anniversary. The Schamin Trust scheme is being replaced by the three schemes mentioned above. This is an equity-settled scheme.


127


2013R’000

2012R’000

4 Finance chargesFinance income 105 983 144 196 – Financial institutions 2 131 2 005 – South African Revenue Service 7 29 – Intercompany transactions 103 836 141 887 – Other 9 275 Finance expense 58 848 65 180 – Non-current borrowings 56 648 61 147 – Bank overdraft 180 42 – Intercompany transactions 2 019 3 990 – Suppliers 1 1 Finance expense – non-cash 2 581 2 581– Facility fees recognised 2 581 2 581

Total finance expense 61 429 67 761

Net finance income 44 554 76 435

5 TaxationDeferred taxation 951 (1 509)– Current year 951 (1 286)– Prior year – (223)

Taxation 951 (1 509)

Reconciliation of effective tax rateLoss for the year (45 594) (783 384)Taxation (951) 1 509

Loss for the year after tax (46 545) (781 875)

Income tax expense at statutory rate of 28% (12 766) (219 348)– Non-deductible expenses 3 018 3 427 – Assessed loss utilised (1 941) (12 027)– Tax effect of non-taxable income (9 783) – – Capital gain not recognised (148 592) – – Prior year adjustment – 223 – Current year losses for which no deferred tax asset was recognised 1 562 – – Capital loss not recognised 173 871 227 164 – Other (4 418) (948)

Income tax expense recognised in profit 951 (1 509)

Effective tax rate (%) (2,1) 0,2

The tax rate used for the 2013 reconciliation above is the corporate tax rate of 28% (2012: 28%) payable by corporate entities in South Africa on taxable profits under tax law in that jurisdiction.

6 DividendThe Board of Directors has not declared an interim or final dividend for the years ended 31 March 2012 or 31 March 2013.


128

2013

R’0002012

R’000

7 Share incentive trust loanAn analysis of the Scharrig Share Incentive Trust loan is as follows:Balance at the beginning of the year 6 129 4 159 Expenses incurred during the year 230 1 970 Impairment of loan (2 865) –


The unallocated shares are under the control of the trustees of the trust.

The loan is interest free and has no fixed repayment terms.

The loan has been impaired down to the current prevailing market value of the shares held in the trust.

Furniture, fittings and equipment

R’000 Total R’000

8 Property, plant and equipment2013CostAt 31 March 2012 3 521 3 521 Additions 118 118

At 31 March 2013 3 639 3 639

Accumulated depreciation At 31 March 2012 1 846 1 846 Depreciation 1 049 1 049

At 31 March 2013 2 895 2 895

Net book value at 31 March 2013 744 744

2012CostAt 31 March 2011 3 436 3 436 Additions 86 86 Disposals (1) (1)

At 31 March 2012 3 521 3 521

Accumulated depreciationAt 31 March 2011 801 801 Depreciation 1 045 1 045

At 31 March 2012 1 846 1 846

Net book value at 31 March 2012 1 675 1 675

A register containing the information required by regulation 25(3) of the Companies Regulations 2011 is available for inspection at the registered office of the Company.


129


2013

R’0002012

R’000

9 Trade and other receivablesIntercompany trade receivables 4 752 20 949 Staff debtors 65 130 Other receivables 35 589 2 589 Deposits 178 189 Deferred fees paid 4 732 7 314

45 316 31 171 Value added taxation 1 176 313

46 492 31 484

The Company’s exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed in note 17.

* Included in other receivables is the fair value of the interest rate hedge as disclosed below:

Opening balance 2 858 –Purchase price of interest rate hedge – 9 535 Change in fair value recognised through profit and loss (2 486) (6 677)

Amount included in other receivables 372 2 858

The interest rate hedge facility was entered into on 1 April 2011 with Standard Bank, on the following terms and conditions:Notional amount: R350 millionTrade date: 1 April 2011Effective date: 1 April 2012Termination date: 31 March 2015Cap rate: 8,57%Floating rate option: ZAR – JIBAR SAFEXReset dates: Calendar quarters

The Group’s exposure to credit and currency risks and impairment losses related to trade and other receivables are disclosed in note 17.

2013

R’0002012

R’000

10 Cash and cash equivalentsBank balances 100 119 Call deposits 34 74 713

134 74 832 Bank overdraft (58 061) (1)

Cash and cash equivalents (57 927) 74 831

The Company’s exposure to interest rate risk and sensitivity analysis for financial assets and liabilities are disclosed in note 17.


130

2013

R’0002012

R’000

11 Share capital and premiumAuthorised share capital1 000 000 000 (2012: 1 000 000 000) ordinary shares of 1 cent each 10 000 10 000

Issued share capital586 559 181 (2012: 586 559 181) ordinary shares of 1 cent eachBalance at the beginning of the year 5 866 5 866


Share premiumBalance at the beginning of the year 2 014 438 2 014 438

Balance at the end of the year 2 014 438 2 014 438

Total share capital and share premium 2 020 304 2 020 304

The authorised but unissued share capital is under the control and authority of the directors subject to the Companies Act and JSE Limited Listings Requirements, until the next annual general meeting. The directors have not been granted the approval to issue ordinary shares, or sell treasury shares for cash, without the consent of the shareholders. Note 3 sets out the details in respect of the share option scheme.

All shares issued by the Company were fully paid.

2013R’000

2012R’000

12 Loans and borrowingsInterest-bearing borrowingsSecured at amortised costStandard Bank merged facility 473 782 646 080 WesBank instalment sale facility 69 962 62 931

543 744 709 011

Balance at the end of the year 543 744 709 011 Current portion of loans and borrowings (543 744) (220 316)

Non-current portion of loans and borrowings – 488 695

Standard Bank merged term facility 473 782 646 080

The Standard Bank merged term facility and the WesBank facility have been classified as current liabilities in the 2013 financial year. The Debt Service Cover Ratio (“DSCR”) and Total Debt to EBITDA Ratio (“TDR”) was breached at 31 March 2013. The March 2013 instalment of R69 million was settled on 29 March 2013. Subsequent to year-end the Standard Bank consortium (“SBC”) has agreed to condone the March 2013 covenant breach. SBC also requires that the SBC facility be reduced by an amount of R150 million, within a six-month period ending 31 December 2013.

This condonation was achieved through Sentula providing SBC with an undertaking to reduce the senior debt as disclosed in note 19.

The outstanding proceeds from the auction will be utilised as a part settlement of the September instalment.

The effective average interest rate applicable to these liabilities is 8,7% (2012: 8,7%) and is based on a margin of 325 basis points above the three-month JIBAR rate and is reset quarterly.


131


12 Loans and borrowings (continued)The repayment terms of these loans, had they not been classified as current, are as follows:

2013

R’0002012

R’000

Aggregate repayments due as follows:Year ended 31 March– 2013 – 206 526 – 2014 234 901 223 274 – 2015 238 881 216 280

473 782 646 080



The Group’s obligations under the merged term facility are secured by registered notarial bonds over plant and equipment and motor vehicles, which have a carrying amount of R1 079 million (2012: R1 493 million). Sentula provided a cession and pledge of all the shares it holds in the Group subsidiaries, for the due and punctual fulfilment of all obligations by the Company. The subsidiaries have subordinated all claims which they may respectively have against one another to the claims which the lenders may have against Sentula and such other subsidiaries of Sentula.

2013

R’0002012

R’000

WesBank instalment sale agreement 69 962 62 931



During the year ended 31 March 2012, Sentula entered into a R100 million instalment sale facility with WesBank, which became effective on 27 October 2011.

The Group’s obligations under the WesBank instalment sale liabilities was secured by the lessors’ title of the financial assets, which had a carrying amount of R70,2 million (2012: R69,3 million).

The effective average interest rate applicable to these liabilities is 6,4% (2012: 6,2%) and is a prime linked facility.


2013 2012

R’000 Principal Interest Total Principal Interest Total

Year ended 31 March– 2013 – – – 13 790 4 046 17 836 – 2014 21 747 3 792 25 539 15 667 2 786 18 453 – 2015 23 202 2 337 25 539 16 771 1 682 18 453 – 2016 and later 25 013 811 25 824 16 703 521 17 224

69 962 6 940 76 902 62 931 9 035 71 966

The Company’s borrowing powers are unlimited in terms of the Memorandum of Incorporation.

The Company’s exposure to interest rate risk and sensitivity analysis for loans and borrowings are disclosed in note 17.


132

2013

R’0002012

R’000

13 Trade and other payablesTrade payables 5 959 6 662 Intercompany trade payables 39 64 Other payables 10 496 16 666

16 494 23 392 Provision for leave pay and employee incentives 2 220 5 693

18 714 29 085

The Company’s exposure to interest rate risk and sensitivity analysis for financial liabilities are disclosed in note 17.

2013

R’0002012

R’000

14 Deferred taxBalance at the beginning of the year 2 797 1 288Originating temporary differences (951) 1 509


The balance comprises:Fair value on interest rate cap 1 231 1 202Provisions 137 112Cash-settled share-based payments 485 722Prepayments (7) – Long-term incentive plan – 761

Net tax assets 1 846 2 797

Deferred tax asset 1 846 2 797 – Deferred tax asset to be recovered after more than 12 months – – – Deferred tax asset to be recovered within 12 months 1 846 2 797

Movement in temporary differences during the year

R’000

Opening balance

31 March 2012


statement

Closing balance

31 March 2013

Cash-settled share-based payment expense 722 (237) 485Fair value on interest rate cap 1 202 29 1 231Provision for long-term incentive plan 761 (761) – Leave pay provision 112 25 137Prepayments – (7) (7)

2 797 (951) 1 846

Opening balance

31 March 2011


statement

Closing balance

31 March 2012

Cash-settled share-based payment expense 722 – 722Fair value on interest rate cap – 1 202 1 202Provision for long-term incentive plan 566 195 761Leave pay provision – 112 112

1 288 1 509 2 797

Unrecognised tax losses are recognised when management considers it probable that future taxable profits will be available against which they can be utilised.


133


2013

R’0002012

R’000

15 Capital commitmentsOperating lease chargesPremises– Contractual amount 945 922

Future minimum lease payments– Up to one year 967 461 – One to five years 1 934 –

The lease agreements are entered into on market-related terms and conditions and are subject to annual market-related escalation in the lease rates. Property lease agreements are subject to a lease extension option.

2013

R’0002012

R’000

16 Taxation paidBalance at the beginning of the year (869) (840)Interest received on tax (11) (29)Balance at the end of the year 979 869

Taxation paid 98 –

17 Financial instruments17.1 Risk management activities

In the normal course of its operations, the Company is exposed to currency, interest rate, liquidity and credit risk. This note describes the Company’s objectives, policies and processes for managing those risks and methods used to measure them. In order to manage these risks, the Group has developed a comprehensive risk management process to facilitate control and monitoring. The Board has overall responsibility for the determination of the Company’s risk management objectives and polices and, while retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group’s finance function. The Group’s treasury function provides services to the subsidiaries, coordinates access to domestic financial markets and monitors and manages the financial risks relating to the operations of the Company. Operational and business risks are reviewed and addressed on a monthly basis. These risks include market risk (including currency risk, fair value interest rate risk and price risk), credit risk, liquidity risk and cash flow interest rate risk.

The Company does not enter into/or trade financial instruments, including derivative financial instruments, for speculative purposes.

17.2 Credit riskThe Company does not have any credit risk as it has no debtors pertaining to the selling of goods and services. The Company is the holding company of the Group and fulfils a centralised treasury function.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was:

Carrying amount

2013R’000

2012R’000

Trade receivables 4 752 20 949

Other receivables 40 564 10 222

Trade and other receivables 45 316 31 171 Cash and cash equivalents 134 74 831

45 450 106 002

The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was:

South Africa 45 316 31 171

45 316 31 171


134

17 Financial instruments (continued)17.2 Credit risk (continued)

The maximum exposure to credit risk for trade and other receivables at the reporting date by category was:

Carrying amount

2013R’000

2012R’000

Related party receivables 4 752 20 949 Deferred fees 4 732 7 314 Preference dividends accrued 34 940 – Other 892 2 908

45 316 31 171

Gross amount

2013R’000

2012R’000

The ageing of trade receivables at the reporting date was: Not past due 4 752 20 949

4 752 20 949

Impairment loss – –

There were no impairment losses recognised in other receivables.

17.3 Foreign exchange risk The Company 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 new investments in foreign operations.

Foreign exchange risk also arises when individual company entities enter into transactions denominated in a currency other than the functional currency. It is the Company’s policy that all such transactions should be hedged through Company treasury entering into a forward contract with a reputable bank.

The Company is exposed to currency risk on purchases made on plant and equipment globally. Purchases from these suppliers are made on a central basis and the risk is hedged using forward exchange contracts. The forward exchange contracts entered into from time to time are economic hedges and therefore the Company does not apply hedge accounting.

17.4 Interest rate risk At the reporting date the interest rate profile of the Company’s interest-bearing financial instruments was:

2013

R’0002012

R’000

Variable rate instruments– Financial assets 1 463 268 1 441 015 – Financial liabilities (666 730) (744 385)

796 538 696 630

The Company is exposed to interest rate risk from long-term borrowings at variable rates. Fluctuations in interest rates impact the value of the short-term investments and financing activities giving rise to interest rate risk. In the ordinary course of business the entities within the Group receive cash proceeds from its operations and are required to fund working capital and capital expenditure requirements. All entities within the Group are not permitted to borrow long term from external sources. The cash is managed to ensure that all surplus funds held within the Group are invested with the centralised treasury. The surplus funds are invested to maximise returns while ensuring that the capital is safeguarded for the maximum extent possible by investing only with highly rated financial institutions.

Contractual arrangements for committed borrowing facilities are maintained with two banking counterparts to meet the Company’s funding requirements.


135


17 Financial instruments (continued)17.4 Interest rate risk (continued)

Cash flow sensitivity analysis for variable rate instruments A sensitivity analysis is performed by assuming that the amount of the assets and liabilities outstanding at the reporting date was outstanding for the whole year. A 200 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of a reasonable and possible change in interest rates in the short term.

If interest rates had been 200 basis points higher/lower and all the other variables were held constant, the Company’s profit after tax for the year ended 31 March 2013 would decrease/increase by R16,9 million (2012: R13,6 million). This is attributable to the Company’s exposure to interest rates on its variable borrowings. The analysis is performed on the same basis for 2012.

17.5 Liquidity risk management Liquidity risk arises from the Company’s management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Company will encounter difficulty in meeting its financial obligations as they fall due. The Company’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when they become due. The Company manages liquidity risk via a centralised treasury, by maintaining adequate reserves, banking facilities and reserve borrowing facilities by continuously monitoring forecast and actual cash flows.

The following tables detail the Company’s remaining contractual maturity for its non-derivative financial liabilities. These tables have been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table includes both interest and principal cash flows.

Weighted average

effective interest

rate

Less than one month

R’000

One to three

monthsR’000

Three months to

one year R’000

One tofive

years R’000 Total

2013Secured bank loans – Standard Bank merged

term facility 8,70% 326 56 973 416 483 – 473 782 – WesBank instalment

sale facility 6,37% 1 764 3 545 64 653 – 69 962 Bank overdraft 8,50% 58 061 – – – 58 061 Trade and other payables 0,00% – 18 714 – – 18 714

2012 Secured bank loans – Standard Bank merged

term facility 8,86% – 50 084 156 441 439 555 646 080 – WesBank instalment

sale facility 6,20% 552 3 578 9 871 48 930 62 931 Trade and other payables 0,00% 29 085 – – – 29 085

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.


136

17 Financial instruments (continued)17.6 Fair value of financial instruments

The fair value of financial assets and liabilities, together with the carrying amounts shown in the statement of financial position, is as follows:

2013 2012

Carrying value

R’000

Fair value

R’000

Carrying value

R’000

Fair value

R’000

Assets carried at amortised cost Trade and other receivables 45 316 45 316 31 171 31 171 Other financial assets 6 994 6 994 6 834 6 834 Cash and cash equivalents 134 134 74 831 74 831 Loans and borrowings – current 228 485 228 485 165 434 165 434

Liabilities carried at amortised cost Loans and borrowings – – (488 695) (488 695)Trade and other payables (11 208) (11 208) (21 579) (21 579)Short-term portion of loans and borrowings (543 744) (543 744) (220 316) (220 316)Bank overdraft (58 061) (58 061) – –

Liabilities carried at fair value Other payables (7 506) (7 506) (7 506) (7 506)

Fair value hierarchyAll financial instruments carried at fair value by valuation method are carried at a level 3.

The different levels have been defined as follows: h Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. h Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (i.e. derived from prices).

h Level 3: Inputs for the assets or liabilities that are not based on observable market data.

Fair value is determined by discounting the future liability, which is calculated by multiplying the royalty rate by the run-of-mine tonnes estimated to be produced over the anticipated life of the mine.

Although the Company believes that its estimate of fair value is appropriate, the use of different methodologies or assumptions could lead to different measurements of fair value.

The directors consider that the carrying amounts of financial assets and financial liabilities recorded at amortised cost in the financial statements approximate their fair values.

17.7 Capital managementThe Company manages its capital structure to ensure that it will be able to continue as a going concern while maximising the return to shareholders through the optimisation of the debt and the equity balance.

The capital structure of the Company consists of debt, which includes loans to subsidiaries, cash and cash equivalents, liabilities and equity, comprising issued share capital, reserves and retained earnings as disclosed.

Long-term borrowings pertain to the Standard Bank-led consortium and the WesBank facility for the funding of subsidiary capital expenditure.

There are no external capital requirements imposed on the Company.

There were no changes to the manner in which the Company manages its capital.


137


18 Related partiesRelated party transactions and balancesDuring the year, the Company and its related parties, in the ordinary course of business, entered into various intergroup sale and purchase transactions.

Amounts owed by related parties

2013

R’0002012

R’000

Jonah Coal Botswana Limited 675 675 Mabapa Mining Limited 2 875 2 861 Merafe Coal Proprietary Limited 3 444 3 298

6 994 6 834

All outstanding balances with these related parties are priced on an arm’s length basis and are to be settled in cash within 12 months of the reporting date. None of the loans are interest-bearing or secured.

19 Going concernThe 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 finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. The Company has met all its debt obligations during the past financial year and, based on the Group’s cash flow forecasts for the 2014 financial year, is expected to meet all its obligations during this period.

The Group funds its operations by means of a Standard Bank-led consortium facility and a WesBank VAF facility. These facilities are managed through a centralised treasury function within the Company. The availability of these facilities is subject to ongoing compliance with a number of financial covenants, including, inter-alia, a Debt Service Cover Ratio (“DSCR”) and a Total Debt to EBITDA Ratio (“TDR”). The Group’s future prospects and financial stability is dependent on the ongoing condonation of these covenant breaches, to the extent required during the course of the 2014 financial year.

At 31 March 2013, the Group breached the DSCR and TDR and was not timeously granted condonation by the Standard Bank Consortium (“SBC”) resulting in the SBC and WesBank debt being classified as a short-term liability at year-end. Subsequent to year-end, condonation was received for these breaches from the SBC. The directors acknowledge that, in the context of the prevailing economic environment, the Group’s debt levels are excessive in relation to the Group’s forecast cash generation and the Board has undertaken to pursue a number of initiatives to reduce the debt by approximately R150 million within a six-month period.

The initiatives being pursued by the Board include the following: h The disposal of certain of the Group’s coal assets; h The continued disposal of surplus plant and equipment within the Group; h The refinancing of the SBC debt by means of a debt capital market instrument; h A refinancing of the SBC debt; h Other appropriate means of reducing the debt; or h A combination of the above.

The Company incurred a net loss of R46,5 million for the financial year ended 31 March 2013, and at that date the Company’s statement of financial position disclosed an accumulated loss of R462 million. At 31 March 2012, the Company incurred a net loss of R782 million and had an accumulated loss of R415 million. These losses were primarily incurred as a result of impairments of intercompany loans amounting to R621 million (2012: R811 million).The loss incurred in 2013 was eliminated by the profit on sale of the subsidiaries relating to the BBBEE transaction amounting to R530 million.

The aforementioned conditions, along with other matters, indicate the existence of a material uncertainty that may cast significant doubt on the ability of the Group and the Company to continue as going concerns and, therefore, the Group and Company may be unable to realise their assets and discharge their liabilities in the normal course of business.


138

20 Contingent liabilitiesTo the best of our knowledge and belief there are no other contingent liabilities to third parties and/or contingent assets not set out or referred to in this report which may materially affect the financial position of the Company.

21 Subsequent eventsThe directors are not aware of any subsequent events other than those disclosed in the directors’ report that occurred between the date of authorisation of the annual financial statements and the year-end that require any adjustments or additional disclosure to the annual financial statements.


139


22 Information on subsidiary companies

Percentage held by Sentula

Investment at cost Preference shares

Non-interest-bearing loans to subsidiaries

Interest-bearing loans to/(from) subsidiaries Share options issued

Main business

Issued share

capital2013

%2012

%2013

R’0002012

R’0002013

R’0002012

R’0002013

R’0002012

R’0002013

R’0002012

R’0002013

R’0002012

R’000

Megacube Mining Proprietary Limited 100 100 100 21 005 21 005 – – 106 806 459 041 – 27 447 140 4 767 ASentula Contracting Proprietary Limited* 4 000 83 0 3 – 600 000 – – – (13 407) – – – – Benicon Opencast Mining Proprietary Limited 120 83 100 – – – – 8 000 8 000 511 482 370 947 6 005 6 083 A– Classic Challenge Trading Proprietary Limited 120 83 100 – 69 315 – – – – 54 312 28 421 – – A– JEF Drill and Blast Proprietary Limited 100 83 100 – – – – – – 69 355 87 424 814 807 C– Ritchie Crane Hire Proprietary Limited 100 83 100 – – – – – – (32 225) (19 710) 1 397 1 383 DSentula Mining Services Proprietary Limited 100 100 100 – – – – – – 37 177 34 600 – – AGeosearch Holdings Proprietary Limited 100 100 100 104 558 104 558 – – – – 65 787 477 864 3 072 3 042 BBenicon Sales Proprietary Limited 100 000 100 100 – – – – 35 517 35 517 67 858 86 492 – – EBenicon Coal Proprietary Limited 100 100 100 45 252 45 252 – – 8 410 8 410 320 635 276 515 – – FBenicon Mining Proprietary Limited 100 100 100 20 262 20 262 – – 2 403 4 903 – – – – FSentula Coal Proprietary Limited 100 100 100 – – – – 9 786 8 840 – – – – FCaston Plant Sales Proprietary Limited 100 100 100 – – – – – 3 750 – 122 – – ESentula Mining Mauritius Limited** 100 100 100 95 957 – – – – 79 860 – – – – GShanike Investments No 171 Proprietary Limited – – – – – – – – 10 – – –

Total investment at cost 287 037 260 392 600 000 – 170 921 608 321 1 080 984 1 370 124 11 428 16 082

Reflected as non-current assets 287 037 260 392 600 000 – 135 404 572 804 888 016 1 240 206 11 428 16 082 Reflected as current assets – – – – 35 517 35 517 192 968 129 917 – –

The Company has subordinated its claims against the following subsidiaries in favour of all other creditors on the following: Megacube Mining Proprietary Limited; Sentula Coal Proprietary Limited; Benicon Coal Proprietary Limited; Caston Plant Sales Proprietary Limited and Sentula Mining Mauritius Limited.

During the year, Sentula Mining Proprietary Limited (“Sentula”) entered into a broad-based black economic empowerment transaction whereby 100% of Benicon Opencast Mining Proprietary Limited, Classic Challenge Trading Proprietary Limited, JEF Drill and Blast Proprietary Limited and Ritchie Crane Hire Proprietary Limited were sold to Sentula Contracting Proprietary Limited. Subsequently Sentula Contracting Proprietary Limited sold 16,675% to Shanike Investments No 171 (RF) Proprietary Limited (“Shanike”). Shanike is owned by the Anglo American Khula Mining Fund Proprietary Limited, The Sentula Mining Employee Trust, The Sentula Mining Empowerment Trust and Thebe Mining Resources Proprietary Limited.

Furthermore, as part of the Group’s strategy to empower Sentula’s South African coal assets, Sentula disposed of a 26% shareholding in the Bankfontein Project held by Sentula’s wholly owned subsidiary, Benicon Mining Proprietary Limited, to Shanike.

* During the year, Cintacure Proprietary Limited changed its name to Sentula Contracting Proprietary Limited.** The company is incorporated in Mauritius and during the year the loan was converted to equity.

The directors’ valuation of the above subsidiaries approximates the cost as disclosed in this note.

The loans to subsidiaries bear variable interest rates and the terms of the loans range from demand to 48 months.

Main businessA – Opencast mining and mining servicesB – Exploration drillingC – Drilling and blastingD – Crane hireE – Equipment trading and sparesF – MiningG – Foreign operations


140

22 Information on subsidiary companies

Percentage held by Sentula

Investment at cost Preference shares

Non-interest-bearing loans to subsidiaries

Interest-bearing loans to/(from) subsidiaries Share options issued

Main business

Issued share

capital2013

%2012

%2013

R’0002012

R’0002013

R’0002012

R’0002013

R’0002012

R’0002013

R’0002012

R’0002013

R’0002012

R’000

Megacube Mining Proprietary Limited 100 100 100 21 005 21 005 – – 106 806 459 041 – 27 447 140 4 767 ASentula Contracting Proprietary Limited* 4 000 83 0 3 – 600 000 – – – (13 407) – – – – Benicon Opencast Mining Proprietary Limited 120 83 100 – – – – 8 000 8 000 511 482 370 947 6 005 6 083 A– Classic Challenge Trading Proprietary Limited 120 83 100 – 69 315 – – – – 54 312 28 421 – – A– JEF Drill and Blast Proprietary Limited 100 83 100 – – – – – – 69 355 87 424 814 807 C– Ritchie Crane Hire Proprietary Limited 100 83 100 – – – – – – (32 225) (19 710) 1 397 1 383 DSentula Mining Services Proprietary Limited 100 100 100 – – – – – – 37 177 34 600 – – AGeosearch Holdings Proprietary Limited 100 100 100 104 558 104 558 – – – – 65 787 477 864 3 072 3 042 BBenicon Sales Proprietary Limited 100 000 100 100 – – – – 35 517 35 517 67 858 86 492 – – EBenicon Coal Proprietary Limited 100 100 100 45 252 45 252 – – 8 410 8 410 320 635 276 515 – – FBenicon Mining Proprietary Limited 100 100 100 20 262 20 262 – – 2 403 4 903 – – – – FSentula Coal Proprietary Limited 100 100 100 – – – – 9 786 8 840 – – – – FCaston Plant Sales Proprietary Limited 100 100 100 – – – – – 3 750 – 122 – – ESentula Mining Mauritius Limited** 100 100 100 95 957 – – – – 79 860 – – – – GShanike Investments No 171 Proprietary Limited – – – – – – – – 10 – – –

Total investment at cost 287 037 260 392 600 000 – 170 921 608 321 1 080 984 1 370 124 11 428 16 082

Reflected as non-current assets 287 037 260 392 600 000 – 135 404 572 804 888 016 1 240 206 11 428 16 082 Reflected as current assets – – – – 35 517 35 517 192 968 129 917 – –

The Company has subordinated its claims against the following subsidiaries in favour of all other creditors on the following: Megacube Mining Proprietary Limited; Sentula Coal Proprietary Limited; Benicon Coal Proprietary Limited; Caston Plant Sales Proprietary Limited and Sentula Mining Mauritius Limited.

During the year, Sentula Mining Proprietary Limited (“Sentula”) entered into a broad-based black economic empowerment transaction whereby 100% of Benicon Opencast Mining Proprietary Limited, Classic Challenge Trading Proprietary Limited, JEF Drill and Blast Proprietary Limited and Ritchie Crane Hire Proprietary Limited were sold to Sentula Contracting Proprietary Limited. Subsequently Sentula Contracting Proprietary Limited sold 16,675% to Shanike Investments No 171 (RF) Proprietary Limited (“Shanike”). Shanike is owned by the Anglo American Khula Mining Fund Proprietary Limited, The Sentula Mining Employee Trust, The Sentula Mining Empowerment Trust and Thebe Mining Resources Proprietary Limited.

Furthermore, as part of the Group’s strategy to empower Sentula’s South African coal assets, Sentula disposed of a 26% shareholding in the Bankfontein Project held by Sentula’s wholly owned subsidiary, Benicon Mining Proprietary Limited, to Shanike.

* During the year, Cintacure Proprietary Limited changed its name to Sentula Contracting Proprietary Limited.** The company is incorporated in Mauritius and during the year the loan was converted to equity.

The directors’ valuation of the above subsidiaries approximates the cost as disclosed in this note.

The loans to subsidiaries bear variable interest rates and the terms of the loans range from demand to 48 months.

Main businessA – Opencast mining and mining servicesB – Exploration drillingC – Drilling and blastingD – Crane hireE – Equipment trading and sparesF – MiningG – Foreign operations


141

Shareholders’ informationfor the year ended 31 March 2013

Number of shareholders

% of shareholders

Number of shares

% of shareholders

Analysis of shareholdersRange1 – 1 000 554 22,95 244 106 0,041 001 – 5 000 739 30,61 2 103 050 0,365 001 – 10 000 282 11,68 2 137 229 0,3610 001 – 50 000 447 18,52 10 770 705 1,8450 001 – 100 000 79 3,27 5 901 664 1,01100 001 and more 313 12,97 565 402 427 96,39

Total 2 414 100,00 586 559 181 100,00

Major shareholders (directly owning 5% or more of shares in issue)GEPF Equity 53 206 737 9,07SBSA ITF NGI Managed Fund 29 326 102 5,00

Shareholder spreadPublic 2 409 99,79 579 560 170 98,81Non-public 5 0,21 6 999 011 1,19Share scheme 1 0,04 233 0,00Associates 1 0,04 5 553 871 0,95Directors 3 0,12 1 444 907 0,24

Total 2 414 100,00 586 559 181 100,00

Directors’ shareholdings2013 Shares held % of total

shareholdingDirector Direct Indirect Total

RC Berry 1 304 907 – 1 304 907 0,223GP Louw 130 000 – 130 000 0,022KW Mzondeki 10 000 – 10 000 0,001

1 444 907 – 1 444 907 0,246

2012DirectorRC Berry 1 084 907 – 1 084 907 0,185GP Louw 110 000 – 110 000 0,019

1 194 907 – 1 194 907 0,204

Subsequent to 31 March 2013 and the date of this report, no directors’ dealings took place.


142

JSE performance

2013 2012 2011 2010 2009

Number of shares traded (‘000) 160 088 137 778 240 947 274 744 182 667

% of total issued shares 27,29 23,49 41,08 46,84 77,20

Value of shares trades (R’000) 288 726 322 220 629 074 871 125 1 813 004

Prices quoted (cents per share)

– highest 235 300 359 550 1 920

– lowest 151 151 206 202 180

– closing 165 220 275 294 282

Market capitalisation at year-end (R’000) 967 823 1 290 430 1 613 038 1 724 484 664 296

Price-earnings ratio (1,10) (2,47) 45,45 5,26 2,33

Earnings yield (91,27) (40,41) 2,22 18,98 42,94

Dividend yield – – – – –

Number of shares traded (’000)Five-year history

300

250

200

150

100

50

0 2009 2010 2011 2012 2013

Market capitalisation at year-end (’000)Five-year history

2 000

1 500

1 000

500

0 2009 2010 2011 2012 2013


143

Shareholders’ diary

Financial year-end 31 March 2013

Audited results announced 27 June 2013

Reports and profit statement

Half-year interim review 14 November 2013

No change statement and notice of annual general meeting announcement 30 September 2013

Integrated Annual Report published 30 September 2013

Annual general meeting 24 October 2013


144

h in terms of section 63(1) of the Companies Act, any

person attending or participating in an annual general

meeting of shareholders must present reasonably

satisfactory identification and the person presiding at

the annual general meeting must be reasonably

satisfied that the right of any person to participate in

and vote (whether as shareholder or as proxy for a

shareholder) has been reasonably verified. A green

bar-coded identification document issued by the South

African Department of Home Affairs, a driver’s licence

or a valid passport will be accepted as sufficient

identification.

1. Ordinary resolution number 1 Approval of annual financial statements

Resolved as an ordinary resolution that the

consolidated audited annual financial statements

of the Company and the Group for the year ended

31 March 2013, including the directors’ report,

the report of the auditors and the report of the

Company’s Audit and Risk Committee therein,

be and are hereby received and adopted.

The minimum percentage of voting rights that is

required for this ordinary resolution to be adopted

is more than 50% (fifty percent) of the voting rights

exercised on the resolution by shareholders

present or represented by proxy at the annual

general meeting and further subject to the

provisions of the Companies Act, the MoI of the

Company and the Listings Requirements.

2. Ordinary resolution number 2 Reappointment of auditors

Resolved as an ordinary resolution that

PricewaterhouseCoopers Inc. be and is hereby

reappointed as independent auditors of the

Company and the Group, with Mr PC Hough

being the individual registered auditor who has

undertaken the audit of the Company and Group

for the ensuing financial year until conclusion of

the next annual general meeting, as nominated

by the Company’s Audit and Risk Committee, and

the Board is hereby being authorised to

determine the auditors’ remuneration.

SENTULA MINING LIMITEDIncorporated in the Republic of South Africa

(Registration number 1992/001973/06)

Share code: SNU ISIN: ZAE000107223

(“Sentula” or “the Company” or “the Group”)

If you are in any doubt as to what action you should

take in respect of the following resolutions, please

consult your Central Securities Depository Participant

(“CSDP”), broker, banker, attorney, accountant or

other professional adviser immediately.

Notice is hereby given in terms of section 62(1) of the

Companies Act, that an annual general meeting (“annual

general meeting”) of shareholders of the Company will

be held at Ground Floor, Building 14, The Woodlands

Office Park, Woodlands Drive, Woodmead, at 10:00 on

Thursday, 24 October 2013, to consider and, if deemed

fit, to approve the resolutions referred to below, with or

without modification:

The Board of Directors of the Company (“the Board”)

determined that, in terms of section 62(3)(a), as read with

section 59 of the Companies Act, the record date for the

purposes of determining which shareholders of the

Company are entitled to participate in and vote at the

annual general meeting is Friday, 18 October 2013.

Accordingly, the last day to trade Sentula shares in order

to be recorded in the register to be entitled to vote will

be Friday, 11 October 2013.

GeneralShareholders are reminded that:

h a shareholder entitled to attend and vote at the annual

general meeting is entitled to appoint a proxy (or more

than one proxy) to attend, participate in and vote at

the annual general meeting in the place of the

shareholder, and shareholders are referred to the form

of proxy attached to this notice in this regard;

h a proxy need not also be a shareholder of the

Company; and

Notice of annual general meeting


145

Notice of annual general meeting continued









3. Ordinary resolution number 3 Re-election of director retiring by rotation

Resolved as an ordinary resolution that Ralph

Patmore retires by rotation at this annual general

meeting in accordance with the Company’s MoI,

and being eligible, offers himself for re-election as

a director of the Company.

An abbreviated curriculum vitae in respect of Ralph

Patmore appears on page 15 of the Integrated

Annual Report to which this notice is attached.









4. Ordinary resolution number 4 Re-election of director retiring by rotation

Resolved as an ordinary resolution that Jonathan

Best retires by rotation at this annual general

meeting in accordance with the Company’s MoI,

and being eligible, offers himself for re-election as

a director of the Company.

An abbreviated curriculum vitae in respect of

Jonathan Best appears on page 14 of the

Integrated Annual Report to which this notice is

attached.









5. Ordinary resolution number 5 Re-election of Audit and Risk Committee

member for the year ending 31 March 2014

Resolved as an ordinary resolution that Cor van Zyl

be and is hereby re-elected as a member of the

Audit and Risk Committee of the Company and

the Group for the year ending 31 March 2014, with

effect from the end of this meeting in terms of

section 94(2) of the Companies Act.

An abbreviated curriculum vitae in respect of Cor

van Zyl appears on page 14 of the Integrated












Resolved as an ordinary resolution that Kholeka

Mzondeki be and is hereby re-elected as a

member of the Audit and Risk Committee of the

Company and the Group for the year ending

31 March 2014, with effect from the end of this

meeting in terms of section 94(2) of the

Companies Act.

An abbreviated curriculum vitae in respect of

Kholeka Mzondeki appears on page 14 of the

Integrated Annual Report to which this notice

is attached.





146

9. Special resolution number 1 Non-executive directors’ remuneration for the

year ended 31 March 2014 Resolved as a special resolution that, in terms of

section 66(9) of the Companies Act, the Company be and is hereby authorised to pay remuneration to non-executive directors for the year ending 31 March 2014 in respect of their positions as Board and Committee members as follows:

FY2013 FY2014

Retainer fees Annual AnnualBoard Chairman 135 000 141 750 Board member 60 000 63 000 Audit and Risk Committee Chairman 56 400 59 220 Audit and Risk Committee member 45 100 47 355

Meeting fees Per meeting Board fee – Chairman 27 000 28 350 Board fee – member 18 000 18 900 Board fee 5+ – Chairman 54 000 56 700

Board fee 5+ – member 30 000 31 500 Audit and Risk Committee fee – Chairman 21 150 22 207 Audit and Risk Committee fee – member 16 925 17 771Audit and Risk Committee fee 4+ – Chairman 35 250 37 013 Audit and Risk Committee fee 4+ – member 28 200 29 610 Remuneration Committee fee – Chairman 28 200 29 610 Remuneration Committee fee – member 22 560 23 688 Nomination Committee fee – Chairman 28 200 29 610 Nomination Committee fee – member 22 560 23 688 Investment Committee fee – Chairman 28 200 29 610 Investment Committee fee – member 22 560 23 688 Other fees – member 22 560 23 688

In terms of section 66(9) of the Companies Act, a company is required to pre-approve the payment of remuneration to directors for their services as directors by means of a special resolution passed by the shareholders of the Company within the previous two years.








Resolved as an ordinary resolution that Rain

Zihlangu be and is hereby re-elected as a member

of the Audit and Risk Committee of the Company

and the Group for the year ending 31 March 2014,

with effect from the end of this meeting in terms of

section 94(2) of the Companies Act.

An abbreviated curriculum vitae in respect of Rain

Zihlangu appears on page 14 of the Integrated










8. Ordinary resolution number 8 Endorsement of the Company remuneration

policy

Resolved as an ordinary resolution that the

remuneration policy as tabled by the Board, as

more fully detailed on page 118 of the Integrated

Annual Report to which this notice is attached, be

and is hereby approved by way of a non-binding

advisory vote of shareholders of the Company, as

recommended in King III.

For record purposes, the minimum percentage of

voting rights that is required for this resolution to

be adopted as a non-binding advisory vote is more

than 50% (fifty percent) of the voting rights



general meeting.


147



required for this special resolution to be adopted

is at least 75% (seventy-five percent) of the votes

exercised on the resolutions by shareholders


general meeting, and further subject to the



10. Special resolution number 2 Financial assistance in terms of section 44 of

the Companies Act (2008)

Resolved as a special resolution that, in terms of

section 44 of the Companies Act, the shareholders

of the Company hereby approve of the Company

providing, at any time and from time to time

during the period of 2 (two) years commencing on

the date of this special resolution, any direct or

indirect financial assistance as contemplated in

section 44 of the Companies Act to any person for

the purpose of, or in connection with, the

subscription for any option, or any securities,

issued or to be issued by the Company or a

related or inter-related company, or for the

purchase of any option or securities of the

Company or a related or inter-related company,

provided that:

(i) the recipient or recipients of such financial

assistance;

(ii) the form, nature and extent of such financial

assistance;

(iii) the terms and conditions under which such

financial assistance is provided, are

determined by the Board from time to time;

and

(iv) the Board may not authorise the Company to

provide any financial assistance pursuant to

this special resolution unless the Board meets

all those requirements of section 44 of the

Companies Act which it is required to meet in

order to authorise the Company to provide

such financial assistance.

In terms of section 44 of the Companies Act, a

company is required to approve the provision of

financial assistance to a person for the subscription

of securities in the company or a related or

inter-related company by means of passing a

special resolution in terms of section 44 of the

Companies Act.









11. Special resolution number 3 Financial assistance in terms of section 45 of

the Companies Act (2008)

Resolved as a special resolution that, in terms of

section 45 of the Companies Act, the shareholders

of the Company hereby approve of the Company

providing, at any time and from time to time

during the period of 2 (two) years commencing on

the date of this special resolution, any direct or

indirect financial assistance as contemplated in

section 45 of the Companies Act to any 1 (one) or

more related or inter-related companies or

corporations of the Company and/or to any 1 (one)

or more members of any such related or inter-

related company or corporation and/or to any

1 (one) or more persons related to any such

company or corporation, provided that:

(i) the recipient or recipients of such financial

assistance;

(ii) the form, nature and extent of such financial

assistance;

(iii) the terms and conditions under which such

financial assistance is provided, are

determined by the Board from time to time;

(iv) the Board may not authorise the Company to

provide any financial assistance pursuant to

this special resolution unless the Board meets

all those requirements of section 45 of the

Companies Act which it is required to meet in

order to authorise the Company to provide

such financial assistance; and


148

resolution (“Section 45 Board Resolution”)

authorising the Company to provide, at any

time and from time to time during the period

of 2 (two) years commencing on the date on

which the special resolution is adopted, any

direct or indirect financial assistance as

contemplated in section 45 of the Companies

Act to any one or more related or inter-related

companies or corporations of the Company

and/or to any one or more members of any

such related or inter-related company or

corporation and/or to any one or more

persons related to any such company or

corporation;

(b) the Section 45 Board Resolution will be

effective only if and to the extent that the

special resolution under the heading “special

resolution number 3” is adopted by the

shareholders of the Company, and the

provision of any such direct or indirect

financial assistance by the Company, pursuant

to such resolution, will always be subject to

the Board being satisfied that:

(i) immediately after providing such financial

assistance, the Company will satisfy the

solvency and liquidity test as referred to in

section 45 (3)(b)(i) of the Companies Act;

and that

(ii) the terms under which such financial

assistance is to be given are fair and

reasonable to the Company as referred to

in section 45(3)(b)(ii) of the Companies

Act; and

(c) in as much as the Section 45 Board Resolution

contemplates that such financial assistance

will in the aggregate exceed one-tenth of 1%

(one percent) of the Company’s net worth at

the date of adoption of such resolution, the

Company hereby provides notice of the

Section 45 Board Resolution to shareholders

of the Company. Such notice will also be

provided to any trade union representing any

employees of the Company.

(v) such financial assistance to a recipient thereof

is, in the opinion of the Board, required for

the purpose of:

(a) meeting all or any of such recipient’s

operating expenses (including capital

expenditure); and/or

(b) funding the growth, expansion,

reorganisation or restructuring of the

businesses or operations of such recipient;

and/or

(c) funding such recipient for any other

purpose which in the opinion of the Board

is directly or indirectly in the interests of

the Company.

In terms of section 45 of the Companies Act, a

company is required to approve the provision of

financial assistance to a company within its group

by means of passing a special resolution in terms

of section 45 of the Companies Act. As part of the

Company’s current Group operations, it provides

financial assistance to subsidiaries and other

related companies in its Group.









Notice in terms of section 45(5) of the

Companies Act in respect of special resolution

number 3

Notice is hereby given to shareholders of the

Company in terms of section 45(5) of the

Companies Act of a resolution adopted by the

Board authorising the Company to provide such

direct or indirect financial assistance as specified in

the special resolution above:

(a) by the time that this notice of annual general

meeting is delivered to shareholders of the

Company, the Board will have adopted a


149


12. Special resolution number 4 General approval to reacquire shares

Resolved as a special resolution that the Board is

hereby authorised, by way of a general approval in

terms of the provisions of the Listings

Requirements and the Companies Act and as

permitted in the Company’s MoI, to approve the

purchase of its own ordinary shares by the

Company, and the purchase of ordinary shares in

the Company by any of its subsidiaries, upon such

terms and conditions and in such amounts as the

Board may from time to time determine, subject to

the Companies Act, MoI of the Company and each

of its subsidiaries and the Listings Requirements,

provided that:

(i) the acquisition of the ordinary shares must be

effected through the order book operated by

the JSE trading system and done without any

prior understanding or arrangement between

the Company and the counterparty;

(ii) this general authority shall only be valid until

the earlier of the Company’s next annual

general meeting or the expiry of a period of

15 (fifteen) months from the date of passing

of this special resolution;

(iii) in determining the price at which the

Company’s ordinary shares are acquired in

terms of this general authority, the maximum

premium at which such ordinary shares may

be acquired will be 10% (ten percent) of the

weighted average of the market value at

which such ordinary shares are traded on the

JSE, as determined over the 5 (five) business

days immediately preceding the date on

which the transaction is effected;

(iv) the acquisitions of ordinary shares in the

aggregate in any one financial year may not

exceed 20% (twenty percent) of the

Company’s issued ordinary share capital;

(v) the Company may only effect the repurchase

once a resolution has been passed by the

Board confirming that the Board has

authorised the repurchase, that the Company

has passed the solvency and liquidity test

(”test“) and that since this was done there

have been no material changes to the

financial position of the Group;

(vi) the Company or its subsidiaries may not

acquire ordinary shares during a prohibited

period as defined in paragraph 3.67 of the

Listings Requirements, unless a repurchase

programme is in place where dates and

quantities of shares to be traded during the

prohibited period are fixed and full details of

the programme have been disclosed in an

announcement over SENS prior to the

commencement of the prohibited period;

(vii) an announcement will be published once the

Company has cumulatively repurchased 3%

(three percent) of the number of the ordinary

shares in issue at the time this general

authority is granted (“initial number”), and for

each 3% (three percent) in aggregate of the

initial number acquired thereafter; and

(viii) at any point in time, the Company may only

appoint one agent to effect any acquisition/s

on its behalf.

The purpose of the special resolution is to grant

the Company’s Board a general authority, up to

and including the date of the following annual

general meeting of the Company, to approve the

Company’s purchase of shares in itself, or to permit

a subsidiary of the Company to purchase shares in

the Company.









Other disclosure in terms of section 11.26 of

the JSE Listings Requirements

Further to special resolution number 4, the Listings

Requirements require the following disclosures,

which are contained in the Integrated Annual

Report of which this notice forms part:

(i) directors and management – page 10;

(ii) major shareholders of Sentula – page 142;

(iii) directors’ interests in securities – page 142;

(iv) share capital of the Company – page 104; and

(v) litigation statement – page 66.


150

The Company may not enter the market to

proceed with the repurchase until its sponsor,

Merchantec Proprietary Limited, has discharged all

of its responsibilities in terms of the Listings

Requirements insofar as they apply to working

capital statements for the purposes of undertaking

an acquisition of its issued ordinary shares.

13. Ordinary resolution number 9 Directors’ authority to take all such actions

necessary to implement the resolutions

contained in this notice

Resolved as an ordinary resolution that any director

of the Company be and is hereby authorised to do

all such things, sign all such documents and take

all such actions as may be necessary for or

incidental to the implementation of the ordinary

and special resolutions approved in accordance

with the provisions of this notice of annual

general meeting.









Other businessTo transact such other business as may be required at

this annual general meeting.

Voting and proxiesA shareholder entitled to attend and vote at the annual

general meeting is entitled to appoint a proxy or proxies

to attend and act in his/her stead. A proxy need not be a

member of the Company. For the convenience of

registered members of the Company, a form of proxy is

attached hereto.

The attached form of proxy is only to be completed by

those ordinary shareholders who:

(i) hold ordinary shares in certificated form; or

(ii) are recorded on the sub-register in “own-name”

dematerialised form.

Material change

There have been no material changes in the affairs

or financial position of the Company and its

subsidiaries since the Company’s financial year-end

and the date of this notice.

Directors’ responsibility statement

The directors, whose names are given on page 13

of the Integrated Annual Report of which this

notice forms part, collectively and individually

accept full responsibility for the accuracy of the

information pertaining to special resolution

number 4 and certify that to the best of their

knowledge and belief there are no facts in relation

to special resolution number 4 that have been

omitted which would make any statement in

relation to special resolution number 4 false or

misleading, and that all reasonable enquiries to

ascertain such facts have been made and that

special resolution number 4 together with this

notice contains all information required by law and

the Listings Requirements in relation to special

resolution number 4.

Adequacy of working capital

At the time that the repurchase contemplated in

special resolution number 4 is to take place, the

Board will ensure that, after considering the effect

of the maximum repurchase and for a period of

12 (twelve) months thereafter:

h the Company and its subsidiaries will be able to

pay their debts as they become due in the

ordinary course of business;

h the consolidated assets of the Company and its

subsidiaries, fairly valued in accordance with

International Financial Reporting Standards, will

be in excess of the consolidated liabilities of the

Company and its subsidiaries;

h the issued share capital and reserves of the

Company and its subsidiaries will be adequate

for the purpose of the ordinary business of the

Company and its subsidiaries; and

h the working capital available to the Company

and its subsidiaries will be sufficient for the

Company and its subsidiaries’ requirements.


151


Ordinary shareholders who have dematerialised their

ordinary shares through a CSDP or broker without

“own-name” registration and who wish to attend the

annual general meeting, must instruct their CSDP or

broker to provide them with the relevant letter of

representation to attend the annual general meeting in

person or proxy and vote. If they do not wish to attend

the annual general meeting in person or by proxy and

vote, they must provide the CSDP or broker with their

voting instructions in terms of the relevant custody

agreement entered into between them and the CSDP

or broker.

Forms of proxy should be forwarded to reach the transfer

secretaries, Computershare Investor Services Proprietary

Limited, at least 48 (forty-eight) hours excluding

Saturdays, Sundays and public holidays, before the time

of the annual general meeting.

Forms of proxy may also be obtained from the

Company’s registered office.

By order of the Board

Ina Cross

Company Secretary

13 September 2013

Johannesburg


152

Form of proxy

SENTULA MINING LIMITEDIncorporated in the Republic of South Africa(Registration number 1992/001973/06) Share code: SNU ISIN: ZAE000107223(“Sentula” or “the Company” or “the Group”)

For use only by ordinary shareholders who: h hold ordinary shares in certificated form (“certificated ordinary shareholders”); or h have dematerialised their ordinary shares (“dematerialised ordinary shareholders”) and are registered with “own-name” registration, at the annual general meeting of ordinary shareholders of the Company to be held at Ground Floor, Building 14, The Woodlands Office Park, Woodlands Drive, Woodmead at 10:00 on Thursday, 24 October 2013 and any adjournment thereof.

Dematerialised ordinary shareholders holding ordinary shares other than with “own-name” registration who wish to attend the annual general meeting must inform their Central Securities Depository Participant (“CSDP”) or broker of their intention to attend the annual general meeting and request their CSDP or broker to issue them with the relevant Letter of Representation to attend the annual general meeting in person or by proxy and vote. If they do not wish to attend the annual general meeting in person or by proxy, they must provide their CSDP or broker with their voting instructions in terms of the relevant custody agreement entered into between them and the CSDP or broker. These ordinary shareholders must not use this form of proxy.

I/We (BLOCK LETTERS please)

of (address)

Telephone work Telephone home

being the holder/custodian of ordinary shares in the Company, hereby appoint (see note):

1. or failing him/her,

2. or failing him/her,

3. the Chairperson of the meeting,as my/our proxy to attend and act for me/us on my/our behalf at the annual general meeting of the Company convened for the purpose of considering and, if deemed fit, passing, with or without modification, the special and ordinary resolutions to be proposed thereat (“resolutions”) and at each postponement or adjournment thereof and to vote for and/or against such resolutions, and/or abstain from voting, in respect of the ordinary shares in the issued share capital of the Company registered in my/our name/s in accordance with the following instructions:

Number of ordinary sharesFor Against Abstain

1. Ordinary resolution number 1To receive, consider and adopt the annual financial statements of the Company and the Group for the financial year ended 31 March 2013

2. Ordinary resolution number 2To confirm the reappointment of PricewaterhouseCoopers Inc. as independent auditors of the Company and the Group, with Mr PC Hough being the individual registered auditor

3. Ordinary resolution number 3To approve the re-election as director of Ralph Patmore who retires by rotation and, being eligible, offers himself for re-election

4. Ordinary resolution number 4To approve the re-election as director of Jonathan Best who retires by rotation and, being eligible, offers himself for re-election

5. Ordinary resolution number 5To approve the re-election of Cor van Zyl as member of the Audit and Risk Committee for the year ending 31 March 2014

6. Ordinary resolution number 6To approve the re-election of Kholeka Mzondeki as member of the Audit and Risk Committee for the year ending 31 March 2014

7. Ordinary resolution number 7To approve the re-election of Rain Zihlangu as member of the Audit and Risk Committee for the year ending 31 March 2014

8. Ordinary resolution number 8To endorse the Company remuneration policy

9. Special resolution number 1To approve the non-executive directors’ remuneration for the year ending 31 March 2014

10. Special resolution number 2Financial assistance in terms of section 44 of the Companies Act (2008)

11. Special resolution number 3Financial assistance in terms of section 45 of the Companies Act (2008)

12. Special resolution number 4General approval to reacquire shares

13. Ordinary resolution number 9Directors’ authority

Please indicate instructions to proxy in the space provided above by the insertion therein of the relevant number of votes exercisable.

A member entitled to attend and vote at the annual general meeting may appoint one or more proxies to attend and act in his/her stead.

A proxy so appointed need not be a member of the Company.

Signed at on 2013

Signature

Assisted by (where applicable)

Each ordinary shareholder is entitled to appoint one or more proxies (who need not be a shareholder of the Company) to attend, speak and vote in place of that shareholder at the annual general meeting.


153

Form of proxy continued

Notes to proxy1. The form of proxy must only be used by shareholders

who hold shares in certificated form or who are recorded on the sub-register in electronic form in “own name”.

2. All other beneficial owners who have dematerialised their shares through a CSDP or broker and wish to attend the annual general meeting must provide the CSDP or broker with their voting instructions in terms of the relevant agreement entered into between them and the CSDP or broker.

3. A shareholder entitled to attend and vote at the annual general meeting may insert the name of a proxy or the names of two alternate proxies of the shareholder’s choice in the space provided, with or without deleting “the Chairperson of the meeting”. The person whose name stands first on the form of proxy and who is present at the annual general meeting will be entitled to act as proxy to the exclusion of such proxy(ies) whose names follow.

4. A shareholder is entitled to one vote on a show of hands and, on a poll, one vote in respect of each ordinary share held. A shareholder’s instructions to the proxy must be indicated by the insertion of the relevant number of votes exercisable by that shareholder in the appropriate space provided. If an “X” has been inserted in one of the blocks to a particular resolution, it will indicate the voting of all the shares held by the shareholder concerned. Failure to comply with this will be deemed to authorise the proxy to vote or to abstain from voting at the annual general meeting as he/she deems fit in respect of all of the shareholder’s votes exercisable thereat. A shareholder or the proxy is not obliged to use all the votes exercisable by the shareholder or by the proxy, but the total of the votes cast and in respect of which abstention is recorded may not exceed the total of the votes exercisable by the shareholder or the proxy.

5. A vote given in terms of an instrument of proxy shall be valid in relation to the annual general meeting notwithstanding the death, insanity or other legal disability of the person granting it, or the revocation of the proxy, or the transfer of the shares in respect of which the proxy is given, unless notice as to any of the aforementioned matters shall have been received by the transfer secretaries not less than 48 hours before the commencement of the annual general meeting.

6. If a shareholder does not indicate on this form that his/her proxy is to vote in favour of or against any resolution or to abstain from voting, or gives contradictory instructions, or should any further resolution(s) or any amendment(s) which may properly be put before the annual general meeting be proposed, such proxy shall be entitled to vote as he/she thinks fit.

7. The Chairperson of the annual general meeting may reject or accept any form of proxy which is completed and/or received other than in compliance with these notes.

8. A shareholder’s authorisation to the proxy including the Chairperson of the annual general meeting, to vote on such shareholder’s behalf, shall be deemed to include the authority to vote on procedural matters at the annual general meeting.

9. The completion and lodging of this form of proxy will not preclude the relevant shareholder from attending the annual general meeting and speaking and voting in person thereat to the exclusion of any proxy appointed in terms hereof.

10. Documentary evidence establishing the authority of a person signing the form of proxy in a representative capacity must be attached to this form of proxy, unless previously recorded by the Company’s transfer secretaries or is waived by the Chairperson of the annual general meeting.

11. A minor or any other person under legal incapacity must be assisted by his/her parent or guardian, as applicable, unless the relevant documents establishing his/her capacity are produced or have been registered by the transfer secretaries of the Company.

12. Where there are joint holders of shares: h any one holder may sign the form of proxy; h the vote(s) of the senior shareholders (for that purpose seniority will be determined by the order in which the names of shareholders appear in the Company’s register of shareholders) who tenders a vote (whether in person or by proxy) will be accepted to the exclusion of the vote(s) of the other joint shareholder(s).

13. Forms of proxy should be lodged with or mailed to transfer secretaries, Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107), to be received by no later than 10:00 (SA time) on Tuesday, 22 October 2013 (or 48 (forty-eight) hours before any adjournment of the annual general meeting which date, if necessary, will be notified on SENS).

14. A deletion of any printed matter and the completion of any blank space need not be signed or initialled. Any alteration or correction must be signed and not merely initialled.

Summary of the rights of a shareholder to be represented by proxy, as set out in section 58 of the Companies ActA proxy appointment must be in writing, dated and signed by the shareholder appointing a proxy and, subject to the rights of a shareholder to revoke such appointment (as set out below), remains valid only until the end of the relevant shareholders’ meeting.

A proxy may delegate the proxy’s authority to act on behalf of a shareholder to another person, subject to any restrictions set out in the instrument appointing the proxy.

The appointment of a proxy is suspended at any time and to the extent that the shareholder who appointed such proxy chooses to act directly and in person in the exercise of any rights as a shareholder.

The appointment of a proxy is revocable by the shareholder in question cancelling it in writing, or making a later inconsistent appointment of a proxy, and delivering a copy of the revocation instrument to the proxy and to the Company. The revocation of a proxy appointment constitutes a complete and final cancellation of the proxy’s authority to act on behalf of the shareholder as of the later of:(a) the date stated in the revocation instrument, if any; and (b) the date on which the revocation instrument is delivered

to the Company as required in the first sentence of this paragraph.

If the instrument appointing the proxy or proxies has been delivered to the Company, as long as that appointment remains in effect, any notice that is required by the Act or the Company’s Memorandum of Incorporation to be delivered by the Company to the shareholder, must be delivered by the Company to:(a) the shareholder, or (b) the proxy or proxies, if the shareholder has (i) directed the Company to do so in writing; and (ii) paid any reasonable fee charged by the Company

for doing so.

Attention is also drawn to the “Notes to proxy”.

The completion of a form of proxy does not preclude any shareholder from attending the annual general meeting.


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BankersStandard BankCorporate and Investment Banking3 Simmonds Street, Johannesburg, 2001(PO Box 61344, Marshalltown, 2107)Tel: 011 636 9155

Sanlam Capital MarketsDebt Structuring Unit 3A Summit Road, Dunkeld West, Johannesburg, 2196(PO Box 411420, Craighall, 2024)Tel: 011 778 6000

The Hongkong and Shanghai Banking Corporation Limited2 Exchange Square, 85 Maude Street, Sandown, 2196(Private Bag X785434, Sandton, 2146)Tel: 011 676 4200

WesBankHome of WesBankEnterprise Road, Fairlands, 2170(PO Box 1066, Fairlands, 2000)Tel: 011 632 6000

AuditorsExternalPricewaterhouseCoopers Inc.2 Eglin Road, Sunninghill, 2157(Private Bag X36, Sunninghill, 2157)Tel: 011 797 4000

InternalBDO22 Wellington Road, Parktown, 2193(Private bag X60500, Houghton, 2041)Tel: 010 060 5000

Tax adviserGrant Thornton137 Daisy Street, Sandown, 2196(Private Bag X28, Benmore, 2010)Tel: 011 322 4500

Public relations/communicationsCollege HillFountain Grove, 5 Second Road, Hyde Park, Sandton, 2196(PO Box 413187, Craighall, 2024)Tel: 011 447 3030

WebsiteThis report is available on our website at www.sentula.co.za.

Sentula Mining Limited(Registration number 1992/001973/06)

Registered officeGround Floor, Building 14, The Woodlands Office ParkWoodlands Drive, Woodmead, 2080(PO Box 76, Woodlands Office Park, Woodmead, 2080)Tel: 011 656 1303

Company SecretaryI Cross (appointed 8 July 2013)GM Chemaly (resigned 8 July 2013)Ground Floor, Building 14, The Woodlands Office ParkWoodlands Drive, Woodmead, 2080(PO Box 76, Woodlands Office Park, Woodmead, 2080)Tel: 011 656 1303

Transfer secretariesComputershare Investor Services Proprietary Limited70 Marshall Street, Johannesburg, 2001(PO Box 61051, Marshalltown, 2107)Tel: 011 370 5757

SponsorMerchantec Proprietary Limited2nd Floor, North Block, Hyde Park Office TowersCorner 6th Road and Jan Smuts AvenueHyde Park, 2196(PO Box 41480, Craighall, 2024)Tel: 011 325 6363

AttorneysCliffe Dekker Hofmeyr6 Sandown Valley Crescent, Sandown, Sandton, 2196(Private Bag X40, Benmore, 2010)Tel: 011 286 1100

Edward Nathan, Sonnenbergs150 West street, Sandton, Johannesburg, 2146 (PO Box 783347, Sandton, 2146)Tel: 011 269 7600

Corporate advisersStandard BankCorporate and Investment Banking3 Simmonds Street, Johannesburg, 2001(PO Box 61344, Marshalltown, 2107)Tel: 011 636 9155

Administration


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Abbreviations

“ABET” Adult basic education and training“ADT” Articulated dump truck“AFRS” Anglo fatal risk standard“AIDS” Acquired immune deficiency syndrome“AMMSA” Association of Mine Managers of South Africa“BBBEE” Broad-based black economic empowerment“BEE” Black economic empowerment“Benicon” Benicon Opencast Mining Proprietary Limited“Benicon Sales” Benicon Sales Proprietary Limited“BWP” Botswana Pula“Caston” Caston Plant Sales Proprietary Limited“CCT” Classic Challenge Trading Proprietary Limited“CEO” Chief Executive Officer“CIFR” Classified Injury Frequency Rate – per million

man-hours worked“CIPC” Companies and Intellectual Property

Commission“CFO” Chief Financial Officer“Companies Act (2008)”

Companies Act 71 of 2008 (as amended)

“COMSOC” Chamber of Mines Safety Organisation Certificate

“CPR” Competent person report“DEA” Department of Environmental Affairs“DMR” Department of Mineral Resources“dti” Department of Trade and Industry“DWA”“DSCR”

Department of Water AffairsDebt service cover ratio

“ECSA” Engineering Council of South Africa“ED” Enterprise development“EE” Employment equity“EME” Exempted micro enterprise“EMPR” Environmental Management Programme

Report“EVA” Economic value add“FRCP” Fatal Risk Compliance Protocol“Geosearch” Geosearch Holdings Proprietary Limited“ha” Hectares“HCT” Health, counselling and testing“HDSA” Historically disadvantaged South Africans“HIV” “HSBC”

Human Immunodeficiency VirusThe Hongkong and Shanghai Banking Corporation Limited

“IFRS” International Financial Reporting Standards“ISO” International Organisation for Standardisation“IWULA” Integrated Water Use Licence Application“JEF” JEF Drill and Blast Proprietary Limited

(previously Scharrighuisen Drilling and Blasting Proprietary Limited)

“JSE” JSE Limited“King III” or “King Reports”

King Report on Governance for South Africa – 2009 (the “Report”) and the King Code of Governance Principles – 2009 (the “Code”)

“kl” Kilolitre

“km” Kilometre“KPIs” Key performance indicators“kWh” Kilowatt-hour“ Listings Requirements”

Listings Requirements of the JSE Limited

“LTIP” Long-term incentive plan“MDEDET” Mpumalanga Department of Economic

Development, Environment and Tourism“Megacube” Megacube Mining Proprietary Limited

(previously Scharrighuisen Opencast Mining Proprietary Limited)

“MEGA” Mpumalanga Economic Growth Agency“MHSA” Mine Health and Safety Act 1996 (Act 29 of

1996)“MoI” Memorandum of Incorporation of the

Company“NEMA” National Environmental Management Act“NGOs” Non-governmental organisations“ Nkomati Anthracite”

Nkomati Anthracite Proprietary Limited

“NWN” A division of Caston“OHSA” Occupational Health and Safety Act 1993 (Act

85 of 1993)“PGM” Platinum Group Metals“QSE” Qualifying small enterprise“Ritchie” Ritchie Crane Hire Proprietary Limited“SA” the Republic of South Africa“SAIMM” South African Institute of Mining and

Metallurgy“SAVF” Suid-Afrikaanse Vroue Federasie“SED” Socio-economic development“SENS” Securities Exchange News Service“SHE” Safety, Health and Environment“SHEQ” Safety, Health, Environment and Quality“SBC” Standard bank-led consortium, comprising

Standard Bank, Sanlam Capital Markets and HSBC

“TDR” Total debt to equity ratio“TIFR” Total Injury Frequency Rate“the Board” the Board of Directors of Sentula Mining

Limited“the Company” Sentula Mining Limited“the current year” the financial year ended 31 March 2013“the Group” Sentula Mining Limited, its subsidiaries,

associates and affiliates“ the previous year” or “the prior year”

the financial year ended 31 March 2012

“the year” or “ the year under review”

the financial year ended 31 March 2013

“USD” US Dollar“VWAP” Volume weighted average price“ZAR” South African Rand

Subsidiaries – 31 March 2013 Registration numberBenicon Coal Proprietary Limited 1993/003007/07Benicon Mining Proprietary Limited 1982/009206/07Benicon Opencast Mining Proprietary Limited 1993/007616/07Benicon Sales Proprietary Limited 1970/005781/07Buenti Drilling Proprietary Limited 2007/001551/07Caston Plant Sales Proprietary Limited 1991/003355/07Sentula Contracting Proprietary Limited 2009/023760/07Classic Challenge Trading Proprietary Limited 2001/025633/07Geosearch Holdings Proprietary Limited 2006/027773/07Geosearch International Proprietary Limited 1986/003933/07Geosearch South Africa Proprietary Limited 2005/042886/07JEF Drill and Blast Proprietary Limited 1996/017991/07Megacube Mining Proprietary Limited 1989/000748/07Nkomati Anthracite Proprietary Limited 1980/008581/07Ritchie Crane Hire Proprietary Limited 2007/006831/07Robust Opencast Resources Proprietary Limited 1994/004620/07Sentula Coal Proprietary Limited 2007/032919/07Sentula Exploration Proprietary Limited 2006/019584/07Sentula Mining Mauritius Limited 77609 C1/GBLSentula Mining Services Mauritius Limited 77730 C1/GBLSentula Mining Services Proprietary Limited 2007/023898/07Sentula Mining Ventures Mauritius Limited 77898 C1/GBL

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