annual financial statements - mintek

MINTEK ANNUAL REPORT – 2008

Annual Financial Statements for the year ended 31 March 2008

ContentS

Audit Committee Report.................................................52

Directors’ Report...........................................................54

Report of the Auditor-General .......................................56

Statements of Financial Position......................................60

Statements of Financial Performance................................61

Cash Flow Statements.....................................................62

Statements of Changes in Net Assets................................63

Notes to the Annual Financial Statements.........................64

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Audit Committee ReportThe Audit Committee was constituted in May 2007 following the appointment of the new Mintek Board by the Minister of Minerals and Energy that assumed its responsibilities on 1 March 2007. The Audit Committee subsequently adopted appropriate formal terms of reference, which were confirmed by the Mintek Board, and has performed its responsibilities as set out in the terms of reference.

In understanding its responsibilities, the Audit Committee has reviewed the following:

• The effectiveness of the internal control system;

• The effectiveness of the internal audit function;

• The risk areas of the entity to be covered in the scope of the internal and external audits;

• The adequacy, reliability and accuracy of the financial information provided to management and other users of such information;

• The accounting or auditing concerns identified as a result of the external and internal audits;

• Compliance with legal and regulatory provisions;

• The activities of the internal audit function;

• The independence and objectivity of the external auditors; and,

• The scope and results of the external audit function.

The Audit Committee is also responsible for:

• Reporting to the Mintek Board and the Auditor-General where the report implicates any members of the accounting authority in fraud, corruption or gross negligence.

• Communicating any concerns it deems necessary to the Mintek Board.

• Confirming the internal auditor’s charter and audit plan;

• Encouraging communication between members of the Mintek Board, senior executive management, the internal auditors and the external auditors;

• Conducting investigations within the terms of reference;

• Concurring with the appointment of the in-house internal audit function;

• Approving the internal audit work plan; and,

• Setting the principles for recommending the use of the external auditor for non-audit services.

The Audit Committee is satisfied that internal controls and systems have been put in place during the year under review and that these controls have functioned effectively during the period. The Audit Committee considers Mintek’s internal controls and systems to be appropriate in all material respects to:

• Reduce the entity’s risks to an acceptable level;

• Meet the business objectives of the entity;

• Ensure the entity’s assets are adequately safeguarded; and,

• Ensure that the transactions undertaken are recorded in the entity’s records.

During the current year fraud and theft amounting to R3.611 million, which was initially quantified and reported on the 31 March 2007 financial statement as R2.7 million, was detected as having occurred between February 2006 and June 2007. A forensic audit was performed to quantify the full extent of the loss. The employees in question are no longer in the employment of Mintek and criminal proceedings were initiated to recover any financial loss that Mintek suffered. Full disclosure of this was under note 34 in the Annual Financial Statements for the year ended March 2007. The matters are being pursued by the South African Police Services and the National

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Prosecuting Authority Asset Forfeiture Unit. Part of the loss was recovered as follows:

• Amount recovered from the bank account of fictitious suppliers R 534 063.17

• Insurance payout (inclusive of VAT):

• Insurance claim R3 216 936.16

• Less excess amount (R1 000 000.00) R2 216 936.16

• Total amount recovered R2 750 999.33

The Audit Committee has evaluated the group and the company financial statement for the year ended 31 March 2008 and concluded that they fully comply, in all material aspects, with the requirements of the Public Finance Management Act No.1 of 1999, as amended, and GAAP.

The Auditor-General had expressed a qualified audit opinion on Mintek’s annual financial statements for the year ended 31 March 2008 due to an inadequate system of control over the project management system. The audit opinion expressed stated that, except for the effect of the issue referred to, the financial statements fairly present the financial position of Mintek at balance sheet date.

In addressing the significant matters identified during 2008, the following actions were instituted by management and supported by the Auditor-General:

• The weakness in the project management system and monitoring of projects was highlighted to management by internal audit in their January/February 2008 internal audit report and management were immediately tasked to come up with an action plan to address the shortcomings;

• Management initiated a process whereby Mintek’s financial system and records were interrogated for further shortcomings and an exception report was generated and reviewed by management to detect and prevent any fraudulent incidents; and,

• Policies and procedures were reviewed.

The Audit Committee has requested management to review and evaluate Mintek’s internal controls to identify areas that can be improved upon.

The Audit Committee agrees that the adoption of the going concern premise is appropriate in preparing the annual financial statements. The Committee acknowledges that Mintek has made significant progress in addressing the control weakness identified previously and looks forward to the future control environment, which will provide a sound basis for Mintek to meet its obligation to its stakeholders.

The Audit Committee therefore recommends the adoption of the annual financial statements by the Board of Directors.

Mr M Mphomela Chairperson of the Audit CommitteeDated 31 July 2008

Audit Committee Members:Mr A MngomezuluMr B MbewuDr J BredellMs L MhlabeniMs N Lila

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Directors’ ReportThe directors take pleasure in submitting their report and the Annual Financial Statements for the year ended 31 March 2008.

PROFILEMintek was established by the Mineral Technology Act, and is incorporated as a public company in South Africa in terms of the Companies Act, 1973, as amended, and is listed as a national government business enterprise in schedule 3B of the Public Finance Management Act (PFMA), 1999, as amended.

The Board of Directors act as the accounting authority in terms of the PFMA.

FINANCIAL RESULTSThe financial statements represent the financial results of Mintek and the consolidated results of its subsidiary, Mindev (Pty) Ltd., for the year 31 March 2008.

REPORTING STANDARDSThe Mintek Group’s Annual Financial Statements comply with South African Statements of Generally Accepted Accounting Practice and the PFMA.

ORGANISATIONAL STRUCTUREMintek’s organisational structure is shown on page 7 of the annual report.

PRINCIPAL ACTIVITIESMintek, South Africa’s national mineral research organisation, is an autonomous statutory organisation established to ensure the sustainability and growth of the minerals industry through technology development and transfer. In terms of its mandate under the Mineral Technology Act 30 of 1989, Mintek’s major goals are:

• to foster the establishment and expansion of industries in the field of minerals and related products;

• to contribute to wealth creation and poverty alleviation; and,

• to develop the requisite human capital to sustain the mining and minerals sector.

Specific aims include:• developing efficient mineral processing technologies and sustainable value added products and services;

• second economy interventions;

• support regional interventions;

• learnership and growth, Human and organisational development; and,

• good governance.

FINANCIAL AFFAIRSReview of operations

The net profit for the Mintek Group for the year was R15.5 million (2007: R13.0 million as restated).

Revenue

• The revenue of R363.0 million (2007: R304.5 million) reflects an increase of 19.2% or R58.5 million compared to the previous year.

• The increase is due mainly to growth in commercial and earmarked income. This growth can be attributed to Mintek having adopted a strong commercial focus with an aggressive marketing effort and the commodities boom.

Profit before tax

The profit before tax of R16.5 million (2007: R19.5 million) reflects a decrease of 15.4% compared to 2007 and is attributable mainly to the extraordinary profit of R13.5 million resulting from the disposal of a 25% share in an associated company in 2007. On a normalised basis, profit before tax increased by R8.3 million due to the restatement of prior year results.

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ASSETSCapital Expenditure

Capital expenditure for the year amounted to R19.9 million (2007: R20.0 million). The Group disposed of assets with a net book value of R0.1 million during the year under review.

Property

The land and buildings were revalued by an independent valuator, Lyons Financial Solutions, during the year under review. The total revalued amount was R136.5 million.

JUDICIAL PROCEEDINGSThe directors are not aware of any judicial proceedings against Mintek.

POST BALANCE SHEET EVENTSNo significant event was identified subsequent to balance sheet date.

SUBSIDIARIESThe information relating to the entity’s financial interest in its subsidiary is disclosed in note 14 of the Annual Financial Statements.

THE DIRECTORS OF MINTEKExecutive Director Mr MA Mngomezulu

As at 1 March 2008, the directors of Mintek are:

Non-Executive Directors Mr H Motaung – Chairperson Ms FG Mthethwa Mr R Havenstein Mr M Ntilane Ms L Mhlabeni Dr J Bredell Mr M Mphomela

The Board secretary of Mintek is Ms S Bopape, and the business and postal addresses are as follows:

200 Malibongwe Drive Private Bag X3015Randburg Randburg2914 2125

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Report of the Auditor-General

REPORT OF THE AUDITOR-GENERAL TO PARLIAMENT ON THE COUNCIL FOR MINERAL TECHNOLOGY (MINTEK) FOR THE YEAR ENDED 31 MARCH 2008.

REPORT ON THE FINANCIAL STATEMENTS

Introduction

1. I have audited the accompanying group financial statements of the Council for Mineral Technology which comprise the consolidated and separate statement of financial position as at 31 March 2008, consolidated and separate statement of financial performance, consolidated and separate statement of changes in net assets, and consolidated and separate cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 60 to 84.

Responsibility of the accounting officer for the financial statements

2. The accounting officer is responsible for the preparation and fair presentation of these financial statements in accordance with South African Statements of Generally Accepted Accounting Practice (SA Statements of GAAP) as set out in note 1 to the financial statements and in the manner required by the Public Finance Management Act, 1999 (Act No. 1 of 1999) (PFMA) and the Minerals Technology Act, 1989 (Act No. 30 of 1989). This responsibility includes:

• designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error;

• selecting and applying appropriate accounting policies; and,

• making accounting estimates that are reasonable in the circumstances.

Responsibility of the Auditor-General

3. As required by section 188 of the Constitution of the Republic of South Africa, 1996 read with section 4 of the Public Audit Act, 2004 (Act No. 25 of 2004) (PAA) and section 12 (2) of the Minerals Technology Act, 1989 (Act No. 30 of 1989), my responsibility is to express an opinion on these financial statements based on my audit.

4. I conducted my audit in accordance with the International Standards on Auditing and General Notice 616 of 2008, issued in the Government Gazette No. 31057 of 15 May 2008. Those standards require that I comply with ethical requirements and plan and perform the audit to obtain reasonable assurance on whether the financial statements are free from material misstatement.

5. 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 controls 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.

6. An audit also includes evaluating the:

• appropriateness of accounting policies used;

• reasonableness of accounting estimates made by management; and,

• overall presentation of the financial statements.

Basis for qualified opinion

Deferred income

7. The system of internal controls over the project management system was inadequate to ensure accuracy of the

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planned costs and revenue amounts used in calculating earned revenue. I was unable to confirm or verify by alternative means the accuracy of unearned revenue totalling R8.7 million disclosed in note 20 to the financial statements. Accordingly, I was not able to determine whether any adjustments might have been necessary to the amounts shown in the financial statements for revenue and unearned revenue.

Qualified opinion

8. In my opinion, except for the effects of such adjustments, if any, as might have been determined to be necessary had I been able to satisfy myself as to the matter described in the basis for qualified opinion paragraph, the financial statements present fairly, in all material respects, the financial position of the Council for Mineral Technology and group as at 31 March 2008 and its financial performance and cash flows for the year then ended, in accordance with the South African Statements of Generally Accepted Accounting Practice and in the manner required by the PFMA and the Minerals Technology Act, 1989 (Act No. 30 of 1989).

Emphasis of matters

I draw attention to the following matters:

Highlighting critically important matters presented or disclosed in the financial statements.

Unauthorised, irregular or fruitless and wasteful expenditure as well as material losses through criminal conduct:

9. As disclosed in note 34 of the annual financial statements, the entity incurred fruitless and wasteful expenditure amounting to R3 611 588 as a result of fraudulent payments made by two former employees. Of this amount, R1 811 009 was incurred during the current financial year and R1 800 579 in the previous financial year.

10. As disclosed in note 34 of the annual financial statements, the entity incurred fruitless and wasteful expenditure amounting to R 6 719 802 resulting from additional taxes charged by the SARS on under-declaration of Value-added Tax (VAT) and penalties and interest levied for late payment of VAT and PAYE in the previuous financial year.

OTHER MATTERS

I draw attention to the following matters that relate to my responsibilities in the audit of the financial statements:

Internal controls

11. Section 51(1)(a)(i) of the PFMA states that the accounting officer must ensure that the public entity has and maintains effective, efficient and transparent systems of financial and risk management and internal control. The table below depicts the root causes that gave rise to the inefficiencies in the system of internal control, which led to the qualified opinion. The root causes are categorised according to the five components of an effective system of internal control. In some instances deficiencies exist in more than one internal control component.

Reporting item Control environment Risk assessment Control

activitiesInformation and communication Monitoring

Deferred income X X

Control environment: establishes the foundation for the internal control system by providing fundamental discipline and

structure for financial reporting.

Risk assessment: involves the identification and analysis by management of relevant financial reporting risks to achieve

predetermined financial reporting objectives.

Control activities: policies, procedures and practices that ensure that management’s financial reporting objectives are

achieved and financial reporting risk mitigation strategies are carried out.

Information and communication: supports all other control components by communicating control responsibilities for

financial reporting to employees and by providing financial reporting information in a form and time frame that allows

people to carry out their financial reporting duties.

Monitoring: covers external oversight of internal controls over financial reporting by management or other parties outside

the process; or the application of independent methodologies, like customised procedures or standard checklists, by

employees within a process.

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Matters of governance

12. The PFMA tasks the accounting officer with a number of responsibilities concerning financial and risk management and internal control. Fundamental to achieving this is the implementation of certain key governance responsibilities, which I have assessed as follows:

Matter of governance Yes No

Audit committee

• The public entity had an audit committee in operation throughout the financial year. • The audit committee operates in accordance with approved, written terms of reference. • The audit committee substantially fulfilled its responsibilities for the year, as set out in

section 77 of the PFMA and Treasury Regulation 27.1.8.

Internal audit

• The public entity had an internal audit function in operation throughout the financial year. • The internal audit function operates in terms of an approved internal audit plan. • The internal audit function substantially fulfilled its responsibilities for the year, as set out

in Treasury Regulation 27.

Other matters of governance

The annual financial statements were submitted for audit as per the legislated deadlines (section 55 of the PFMA).

The financial statements submitted for audit were not subject to any material amendments resulting from the audit.

No significant difficulties were experienced during the audit concerning delays or the unavailability of expected information and/or the unavailability of senior management.

The prior year’s external audit recommendations have been substantially implemented.

OTHER REPORTING RESPONSIBILITIESReport on Performance Information

13. I have reviewed the performance information as set out on pages 10 to 12.

Responsibility of the accounting officer for the performance information

14. The accounting authority has additional responsibilities as required by section 55(2)(a) of the PFMA to ensure that the annual report and audited financial statements fairly present the performance against predetermined objectives of the public entity.

Responsibility of the Auditor-General

15. I conducted my engagement in accordance with section 13 of the PAA read with General Notice 616 of 2008, issued in Government Gazette No. 31057 of 15 May 2008.

16. In terms of the foregoing my engagement included performing procedures of an audit nature to obtain sufficient appropriate evidence about the performance information and related systems, processes and procedures. The procedures selected depend on the auditor’s judgement.

17. I believe that the evidence I have obtained is sufficient and appropriate to provide a basis for the audit findings reported below.

Audit findings (performance information)

Performance information not received in time

18. The public entity submitted performance information for audit. However, revised performance information was received late without supporting information for the changes made.


OTHER REPORTSInvestigations

19. With reference to note 34 to the financial statements dealing with financial losses through fraudulent payments, an investigation was conducted on request of the entity by an independent audit firm. The investigation was initiated based on allegations of possible fraudulent payments made by employees. The investigation has resulted in criminal proceedings being instituted against two former employees. The employees are no longer in Mintek’s employ.

Special audits20. An agreed-upon engagement on the process of transferring the Mintek Post-retirement liability was conducted

by an independent audit firm on request of the entity. The main objective of the engagement was to verify the data used to calculate the value of the liability to be transfer and to review the process undertaken by the entity, in awarding the tender to the successful bidder.

APPRECIATION21. The assistance rendered by the staff of the Council of Mineral Technology during the audit is sincerely

appreciated.

Johannesburg

31 July 2008

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GROUP MINTEK

2008 2007 2008 2007

Notes R R R R

Assets

Non-current assets

Property, plant and equipment 11 192,315,728 139,730,338 192,315,728 139,730,338

Intangible assets 12 4,432,339 4,260,735 4,432,339 4,260,735

Investment property 13 13,357,057 11,776,682 13,357,057 11,776,682

Investment in subsidiary 14 - - 100 100

Long-term loans and advances 15 4,174,233 25,143,191 791,233 1,877,191

Total non-current assets 214,279,357 180,910,946 210,896,457 157,645,046

Current assets

Inventory 16 2,947,828 3,279,036 2,947,828 3,279,036

Loans and advances to subsidiary 14 - - - 7,385,486

Trade and other receivables 17 105,369,874 84,224,481 81,721,591 63,920,923

Short-term investments 18 96,621,434 89,491,480 96,621,434 89,491,480

Cash and cash equivalents 49,030,989 30,522,665 49,030,989 30,522,665

Total current assets 253,970,125 207,517,662 230,321,842 194,599,590

Total assets 468,249,482 388,428,608 441,218,299 352,244,636

Equity

Non-distributable reserves 111,153,884 62,794,971 111,153,884 62,794,971

Retained earnings 189,591,765 173,232,903 151,390,957 137,561,603

Total equity 300,745,649 236,027,874 262,544,841 200,356,574

Liabilities

Non-current liabilities

Long-term retirement benefit obligation 22 79,921,378 62,700,000 79,921,378 62,700,000

Long-term creditors 23 1,025,054 1,351,778 1,025,054 1,351,778

80,946,432 64,051,778 80,946,432 64,051,778

Current liabilities

Loans and advances from subsidiary 14 - - 11,169,625 -

Trade and other payables 19 51,664,961 66,553,540 51,664,961 66,040,868

Deferred income 20 34,482,834 21,312,321 34,482,834 21,312,321

Provisions 21 409,606 483,095 409,606 483,095

Current liabilities 86,557,401 88,348,956 97,727,026 87,836,284

Total equity and liabilities 468,249,482 388,428,608 441,218,299 352,244,636

Financial Statements and notes 2008STATEMENTS OF FINANCIAL POSITION AT 31 MARCH 2008

A Mngomezulu Sakhi SimelaneCEO, Mintek Chief Financial Officer, Mintek

Randburg, 31 July 2008

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STATEMENTS OF FINANCIAL PERFORMANCE FOR THE YEAR ENDED 31 MARCH 2008

Financial Statements and notes 2008

GROUP MINTEK

2008 2007 2008 2007

Notes R R R R

Continuing operations

Revenue 2 363,026,928 304,478,545 363,026,928 302,785,837

Cost of sales 3 (309,385,782) (280,393,579) (309,385,782) (280,390,459)

Gross profit 53,641,146 24,084,966 53,641,146 22,395,378

Other operating income 4 10,266,154 11,158,467 10,266,154 11,318,369

Profit on foreign currency translations 3,028,593 828,669 3,028,593 828,669

Investment income 5 18,379,297 12,463,899 14,793,626 12,043,342

Finance expenses 6 (168,588) (3,421,129) (145,603) (3,352,581)

Audit fees 7 (1,883,625) (1,518,847) (1,883,625) (1,414,527)

Fees for services 8 (29,581,436) (26,856,271) (29,581,436) (26,268,410)

Depreciation and amortisation 9 (15,332,325) (14,884,847) (15,332,325) (14,884,847)

Loss on disposal of property, plant and equipment

(720,916) (388,786) (720,916) (388,786)

Profit on disposal of shares in associate 28.2 - 13,483,971 - -

Post-retirement benefit obligation 10 (21,134,049) (4,889,645) (21,134,049) (4,889,645)

Share of profit from associates before tax - 9,400,750 - -

Profit/(loss) before taxation 16,494,251 19,461,197 12,931,565 (4,613,038)

Taxation 26 (1,033,178) (6,415,338) - -

Profit/(loss) for the year 15,461,073 13,045,859 12,931,565 (4,613,038)

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CASH FLOW STATEMENTS FOR THE YEAR ENDED 31 MARCH 2008


GROUP MINTEK 2008 2007 2008 2007

Notes R R R R

Cash flows from operating activities Cash receipts from customers 262,933,761 178,765,203 246,123,663 178,765,203

Parliamentary grant received 124,569,000 118,664,000 124,569,000 118,664,000

Cash paid to suppliers and employees (348,754,411) (291,615,583) (348,673,911) (279,751,280)

Cash generated from operations 28 38,748,350 5,813,620 22,018,752 17,677,923

Payment of taxation (1,305,000) (3,689,088) - -

Investment income 5 15,855,147 12,826,322 12,269,476 12,405,765

Finance costs 6 (168,588) (3,421,129) (145,603) (3,352,581)

Long-term creditor payments (717,188) (985,622) (285,015) (523,622)

Provisions utilised 21 (2,981,515) (894,508) (2,981,515) (894,508)

Net cash inflow from operating activities 49,431,206 9,649,595 30,876,095 25,312,977

Cash flows from investing activities

Additions to property, plant and equipment (19,880,257) (20,020,813) (19,880,257) (20,020,813)

(Increase)/decrease in investment deposits (7,129,954) 13,338,790 (7,129,954) 13,338,790

Receipts from/(cash advanced to) subsidiary - - 18,555,111 (15,663,382)

Proceeds on disposal of fixed assets - 41,880 - 41,880

Post-retirement health care payments 22 (3,912,671) (3,424,645) (3,912,671) (3,424,645)

Net cash flow from investing activities (30,922,882) (10,064,788) (12,367,771) (25,728,170)

Net increase/(decrease) in cash and cash equivalents 28.1 18,508,324 (415,193) 18,508,324 (415,193)

Cash and cash equivalents at beginning of year 30,522,665 30,937,858 30,522,665 30,937,858

Cash and cash equivalents at end of year 49,030,989 30,522,665 49,030,989 30,522,665

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STATEMENTS OF CHANGES IN NET ASSETS FOR THE YEAR ENDED 31 MARCH 2008

Financial Statements and notes 2008Financial Statements and notes 2008

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Retained Earnings Non Distributable Reserve

Total

Note R R R

GROUP

Restated Balance at 31 March 2006 159,935,184 63,046,831 222,982,015

Land and Buildings 251,860 (251,860) -

Net profit as previously reported 29 20,662,590 - 20,662,590

Fixed assets incorrectly scrapped 745,242 - 745,242

Reversal of warrantee provisions incorrectly raised 5,332,807 5,332,807

SARS penalties and interest not recognised (6,719,803) (6,719,803)

Water charges not previously accrued for (6,974,977) - (6,974,977)

Net profit for the year as restated 13,045,859 - 13,045,859

Balance as at 31 March 2007 173,232,903 62,794,971 236,027,874

Revaluation of Land and Buildings 11 - 49,256,702 49,256,702


Net profit for the year 15,461,073 - 15,461,072


MINTEK

Restated Balance at 31 March 2006 141,922,781 63,046,831 204,969,612


Net profit as previously reported 29 3,003,693 - 3,003,693

Fixed assets incorrectly scrapped 745,242 - 745,242

Reversal of warrantee provisions incorrectly raised 5,332,807 5,332,807

SARS penalties and interest not recognised (6,719,803) (6,719,803)

Water charges not previously accrued for (6,974,977) - (6,974,977)

Net loss for the year as restated (4,613,038) - (4,613,038)

Restated Balance as at 31 March 2007 137,561,603 62,794,971 200,356,574

Revaluation of Land and Buildings 11 - 49,256,702 49,256,702


Net profit for the year 12,931,565 - 12,931,565



NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2008


1. Significant accounting policies and basis of preparation

The annual financial statements are prepared in accordance with the historical cost convention as modified by the revaluation of

general purpose land and buildings and investment property and the restatement of certain financial instruments to fair value.

The financial statements incorporate the following principal accounting policies, which conform to South African Statements of

General Accepted Accounting Practice, and in the manner required by the Public Finance Management Act (PFMA). The annual

financial statements are expressed in its functional currency South African Rands (R). The accounting policies are consistent with

those applied in the previous year, except for certain restatements and changes in accounting policies.

The following adoption and interpretation of standards have been applied by the Group from 1 April 2007:

• IFRS 7 Financial Instruments: Disclosure.

The application of IFRS 7 in the year ended 31 March 2008 have not affected the amounts recognised in the balance sheet or

income statement as the standards are concerned with disclosure only. Certain comparative information has however been

restated in order to achieve compliances with the disclosure requirements set out in these standards.

1.1 Basis of consolidation

The Group annual financial statements comprise those of Mintek, its subsidiaries and jointly controlled operations, presented

as a single economic entity. The effects of intra-group transactions are eliminated in preparing the Group annual financial

statements. Subsidiaries, which are directly or indirectly controlled by the Group, are included in the consolidated financial

statements as from the date of acquisition and until the date of disposal where control is ceased. The identifiable assets and

liabilities of companies acquired are assessed and included in the balance sheet at their fair values as at the date of acquisition.

Equity and net profit attributable to minorities are shown separately in the balance sheet and income statement respectively.

1.2 Foreign currency transactions and balances

Foreign currency transactions are recorded at the exchange rate ruling at the date of the transaction.

At the balance sheet date, monetary assets and liabilities denominated in foreign currencies are translated into South African

Rand at exchange rates ruling at the balance sheet date. Exchange differences arising on the settlement of transactions at rates

different from those at the date of the transaction and unrealised foreign exchange differences on unsettled foreign currency

monetary assets and liabilities are recognised in the income statement and included in income from investments and financing

costs.

1.3 Investment in subsidiary

Subsidiary companies are enterprises in which the company holds a long-term equity interest and over which it has the power to

control the financial and operating activities of the entities so as to obtain benefits from its activities.

All investments in subsidiary companies are initially recognised at cost less impairment losses. The carrying amount of such

investments is reduced to recognise any decline, other than a temporary decline, in the value of individual investments. Any

carrying value adjustments are charged to the income statement in the period in which they are incurred.

1.4 Investment in associates

An associate is an entity in which the group has significant influence, through participation in the financial and operating policy

decisions of the investee, but not control over those policies. The results, assets and liabilities of associates are incorporated

in these consolidated annual financial statements by using the equity method of accounting, from the effective dates of their

acquisition until the effective dates of their disposal.

Investments in associates are carried in the balance sheet at cost as adjusted by post-acquisition changes in the group’s

share of the net assets of the associate, less any impairment in the value of individual investments. Losses of the associate in

excess of the group’s investments in those associates are not recognised. Any difference between the cost of acquisition and the

group’s share of the fair value of the identifiable net assets of the associate at the date of acquisition is recognised according to

the group’s accounting policies on goodwill. Where a group enterprise transacts with an associate company, unrealised profits

and losses are eliminated to the extent of the group’s interest in the relevant associate, except where unrealised losses provide

evidence of an impairment of the asset transferred.

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1.5 Goodwill

Goodwill represents the excess of the purchase consideration over the fair value of the Group’s share of the net identifiable assets of the acquired entity at the date of acquisition. Goodwill is capitalised as an asset reviewed annually for impairment. At each balance sheet date goodwill is reviewed for indications of impairment or changes in estimated future benefits. If such indication exists, an analysis is performed to assess whether the carrying amount of goodwill is fully recoverable. An impairment charge is recognised to the extent that the carrying amount exceeds the recoverable amount.

1.6 Intangible assets

All intangible assets are initially recognised at cost. Intangible assets with a finite useful life are amortised on a straight-line basis over their estimated useful lives. Intangible assets with an indefinite useful life are not amortised. The useful life of intangible assets not amortised is reviewed annually to determine whether events and circumstances continue to support an indefinite useful life assessment for those assets.

1.7 Research and development costs

Expenditure on research activities is recognised as an expense in the period in which it is incurred.An internally generated intangible asset arising from the group’s research and development is recognised only if all of the following conditions are met:- An asset is created that can be identified (such as software and new processes);- It is probable that the asset created will generate future economic benefits;- The development cost of the asset can be measured reliably;- It is technically feasible to complete the intangible asset so that it will be available for use or sale;- The ability to use or sell the intangible asset; and,- It is the intention to complete the intangible asset so that it will be available for use or sale.

Where no internally generated intangible asset can be recognised, development expenditure is recognised as an expense in the period in which it is incurred. Internally generated intangible assets are amortised on a straight-line basis over their useful lives.

1.8 Impairment

At each balance sheet date, an assessment is made of whether there is any objective evidence of impairment of financial assets. If there is evidence of, then the recoverable amount is estimated and an impairment loss is recognised. Where it is not possible to estimate the recoverable amount for an individual asset, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Intangible assets, with an indefinite useful life, and goodwill acquired in a business combination are tested for impairment annually, irrespective of whether there is any indication that the assets may be impaired.The recoverable amount is the higher of fair value less costs to sell and value in use. Value in use represents the present value of the future cash flows expected to be derived from an asset (cash-generating unit). The expected future cash flows are discounted to their present value using an appropriate discount rate that reflects current market assessments of the time value of money and the risk specific to the asset for which the future cash flow estimates have not been adjusted.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase. Impairment losses for goodwill are not reversed in subsequent periods.

1.9 Leases

Leases are classified as finance leases where substantially all the risks and rewards associated with ownership of an asset are transferred from the lessor to the lessee. All other leases are classified as operating leases.

The group as a lessor

Amounts due from lessees under finance leases are recorded as receivables at the amount of the group’s net investment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constant periodic rate of return to the group’s net investment outstanding in respect of the leases. Rental income from operating leases is recognised on a straight-line basis

over the term of the relevant lease.

65




The group as a lessee

Assets subject to finance leases are capitalised at their cash cost equivalent, with the related lease obligation recognised at the same value. Capitalised leased assets are depreciated to their estimated residual values over their estimated useful lives.

Finance lease payments are allocated using the effective interest rate method between the lease finance cost which is included in financing costs and the capital repayment, which reduces the liability to the lessor.

Operating leases are those leases, which fall outside the scope of the above definition. Operating lease rentals are charged to income on a straight-line basis over the term of the lease.

1.10 Property, plant and equipment

Property, plant and equipment, other than land and buildings, are stated at cost less any accumulated depreciation, any earmarked grant funding and any accumulated impairment losses. Costs includes all directly attributable expenditure incurred in the acquisition, construction and installation of such assets so as to bring them to the location and condition necessary for it to be capable of operating in the manner intended by management. Costs also include costs incurred subsequently to add to, replace part of, or service it to the extent it is probable that future economic benefits will flow to the Group and the cost can be measured reliably. Day-to-day servicing costs are expensed.

If a replacement part is recognised in the carrying amount of an item of plant and equipment, the carrying amount of the replaced part is derecognised.

Land buildings held for use in the production or supply of goods and services or for administrative purposes are stated in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent impairment losses.

Land is not depreciated. Properties were initially valued at historical cost. Revaluations are performed every two years by an independent professional valuer, such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date.

Depreciation is calculated so as to write off the cost of property, plant and equipment less their estimated residual values on a straight-line basis, over the estimated useful lives. Useful lives and residual values are reviewed and adjusted if appropriate at each balance sheet date. Where significant parts (components) of an item have different useful lives or depreciation methods to the item itself, these parts are depreciated separately if they have a cost that is significant in relation to the cost of the remainder of the asset.

The carrying values of property, plant, and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets or cash generating units are written down to their recoverable amount.

Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant lease.

Increases in the carrying amount arising on revaluation are credited to non-distributable reserves in shareholders’ equity. Decreases that offset previous increases of the same asset are charged against the non-distributable reserve all other decreases are charged to the income statement. Each year the difference between depreciation based on the revalued carrying amount of the assets (the depreciation charged to the income statement) and the depreciation based on the asset’s original cost is transferred from non-distributable reserves to retained earnings.

The estimated useful lives of the major categories of property, plant, and equipment are:

Buildings 50 years

Plant 5-10 years

Equipment 5-10 years

Vehicles 5 years

Furniture and fittings 10 yearsThe gains and losses arising on the disposal or retirement of an item of property, plant, equipment and vehicles is determined

as the difference between the sales proceeds and the carrying amount of the asset and is recognised in profit and loss.

1.11 Investment PropertyInvestment property is recognised using the fair value model. All fixed property where rentals contracts are in excess of three (3) years and which is occupied by independent organisations are classified as investment property. The fair value is determined at balance sheet date by an independent professional valuer based on market evidence of the most recent prices achieved in arms

length transactions of similar properties in the same area.

66




1.12 Employee benefitsThe Group operates a number of retirement benefit plans for its employees. These plans include a defined contribution plan and

other retirement benefits such as medical aid benefit plans. Current contributions for the defined contribution plan are charged

against income when incurred.

1.13 Post-retirement health care costsThis Group has an obligation to fund the medical aid benefits of all its past employees and dependants of past employees who

retired or were in the employment of the Group prior to 31 December 1999. The plan liability is unfunded and fully provided for

in the financial statements.

If the Group uses the project unit credit actuarial method to determine the present value of its past service cost.

Actuarial gains and losses are recognised in full in the reporting period it relates to and is the excess over the greater of the

present value of the past service obligation at the end of the reporting period before deducting the present value of assumed

assets at the same date. Valuations of these obligations are carried out annually by independent actuaries using appropriate

mortality tables, long-term estimates of increases in medical costs and appropriate discount rates. General increases to medical

aid contributions were estimated taking into account the projected future changes in the cost of medical services resulting

from both inflation and specific changes to medical costs. The obligation calculated above assumes that the cross subsidy of

pensioner’s benefits by the active members will continue as at present. If this cross–subsidy were to be removed, it would result

in an increased estimated liability.

1.14 Inventories

Inventories are valued stated at the lower of cost or net realisable value. Costs comprise direct materials and, where applicable,

direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and

condition. Cost is calculated using the weighted average method. Net realisable value represents the estimated selling price in

the ordinary course of business less any costs of completion and costs to be incurred in marketing, selling and distribution.

1.15 Provisions

Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that this will result

in an outflow of economic benefits and the amount can be reasonably determined.

The Group recognises its obligation for guaranteeing its product and services for periods as stipulated in its contracts with

the Group’s customers.

The Group is exposed to certain environmental liabilities relating to its operations. Provision for the cost of environmental

and other remedial work such as reclamation costs, close down and restoration costs and pollution control is made when such

expenditure is probable and the cost can be reasonably estimated.

1.16 Financial instruments

Financial instruments recognised on the balance sheet include derivative instruments, investments, investments in debt

securities, accounts receivable, cash and cash equivalents, accounts payable and interest bearing debt. Financial instruments

are initially measured at cost including transaction costs when the Group becomes a party to their contractual arrangements.

The subsequent measurement of financial instruments is dealt with in the subsequent notes. When the Group can legally do

so and the Group intends to settle on a net basis, or simultaneously, related positive and negative values of financial instruments

are offset within the balance sheet amounts.

1.16.1 Derivative instruments

The Group does not use derivative financial instruments including forward rate agreements and forward exchange contracts

to hedge its exposure to interest rate and foreign fluctuations. It is the Group’s policy not to hedge its exposure from foreign

currency fluctuations, as it does not consider the impact to be significant. It is the policy of the Group not to trade in derivative

financial instruments for speculative purposes.

1.16.2 Investments

Investments consist of long-term money market instruments initially recorded at cost, which is the fair value of the cash placed

67




with the institution. Interest is accrued using the effective interest rate method and included in the income statement on an

accrual basis.

1.16.3 Trade and other receivablesTrade and other receivables are stated at cost less an allowance for doubtful debts. The allowance raised is the amount needed

to reduce the carrying value to the expected future cash flows. Irrecoverable amounts are written off during the year in which

they are identified.

1.16.4 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits and investment in short-term money market instruments.

The carrying amount of cash is measured at its fair value.

1.16.5 Financial liabilities

Financial liabilities other than derivative instruments are amortised at their original debt value less principal payments and

amortisation. Derivatives are subsequently measured at fair value and gains and losses are included in the income statement for

the period.

1.16.6 Impairment of financial liabilities

At each balance sheet date an assessment is made of whether there is any objective evidence of impairment of financial assets. If

there is evidence then the recoverable amount is estimated and an impairment loss is recognised in accordance with IAS 39

Financial Instruments and Recognition.

1.17 Government grants

Government grants, which are unconditional and are intended to compensate expenses and give immediate financial support to

the entity with no future related costs and are recognised as income in the period in which they are received. Government grants

are fully utilised to finance the operations of Mintek and any additions and expansions to fixed assets are financed through cash

flows generated from general business activities, with the exception of funds earmarked for the specific fixed asset acquisition.

In this case, the acquisition value of the fixed asset is reduced by the amount of the funds received.

1.18 Revenue recognition

Revenue is recognised when the sale transactions giving rise to such revenue is concluded and risks and rewards of ownership and

title pass to the buyer under the terms of the applicable contract and the pricing is fixed and determinable. Revenue arising from

the rendering of services is recognised based on the percentage of completion determined by reference to the physical amount

of work performed in relation to the total project.

Advance income arising as result of contracts undertaken in terms of commercial work in respect of invoices raised and paid

for in advance but for which no substantial work has been made to justify the recognition of any revenue, is deferred until the

income is earned based on the percentage work completed.

Revenue arising from licence fees is recognised on an accrual basis in accordance with the terms of the applicable contracts.

Revenue from royalties is accrued based on the nature of the applicable contracts.

Interest income is accrued on a time proportion basis recognising the effective yield on the underlying assets.

Dividend income from investments is recognised when the right to receive payment has been established.

Rental income is derived from rental of investments in fixed property and equipment and is recognised on an accrual basis in

accordance with the substance of the relevant agreements.

1.19 Contracts in progress

Where the outcome of a contract can be estimated reliably, revenue and costs are recognised by reference to the stage of

completion of the contract activity at the balance sheet date. The stage of completion is determined by the proportion of contract

costs incurred in relation to the estimated total contract costs. Variations in contract work, claims and incentive payments are

included to the extent that they have been agreed to the customer.

Where the outcome of the contract cannot be estimated reliably, contract revenue is recognised to the extent of contract

68




costs incurred and probably recoverable. Contract costs are recognised as expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is immediately recognised as

an expense to the income statement.

1.20 Taxation

Income tax represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit

for the financial year. Taxable profit differs from profit as reported in the income statement because it excludes items of income

or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The

company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance

sheet date.

Deferred tax is recognised on differences between the carrying amount of assets and liabilities in the financial statements

and the corresponding tax bases used in the computation of taxable profit, and are accounted for using the balance sheet

liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are

recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences

can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from the initial recognition

(other than a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the

accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and associates,

and interest in joint ventures, except where the company is not able to control the reversal of the temporary difference and it is

probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no

longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset

realised. Deferred tax is charged or credited to profit or loss, except when it relates to items charged or credited directly to equity,

in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are off-set when there is a legally enforceable right to set off current tax assets against

current tax liabilities and when they relate to income tax levied by the same taxation authority and the company intends to settle

its current tax assets and liabilities on a net basis.

The principal operating entity, Mintek, is exempt from normal company taxation as it is a state controlled and financed

entity.

1.21 Irregular, fruitless and wasteful expenditure

Irregular expenditure means expenditure incurred in contravention of, or not in accordance with, a requirement of any applicable

legislation, including:

- The PFMA, or,

- Any provincial legislation providing for procurement procedures in that provincial government.

Fruitless and wasteful expenditure means expenditure that was made in vain and could have been avoided had reasonable

care been exercised. All irregular, fruitless and wasteful expenditure is charged against income in the period in which it is

incurred.

1.22 Financing costs

Financing costs are recognised in the income statement in the period in which they are incurred.

1.23 Comparative figures

Where necessary, comparative figures have been restated to conform to changes in presentation in the current year. Where

comparative figures have been adjusted, the nature, amount of, and reason for, such restatement or reclassification have been

disclosed. Refer to note 29 for details in this regard.

69


GROUP MINTEK

2008 2007 2008 2007

R R R R

2. REVENUE

Government grants 118,130,808 104,120,123 118,130,808 104,120,123

State Grant 118,130,808 104,120,123 118,130,808 104,120,123

Less:

Grants received for projects started before year end but not completed - - - -

Portion of grant utilised to acquire fixed assets - - - -

Add:

Grant received in prior year for projects completed this year - - - -

Portion of grant recognised as income from fixed assets purchased - - - -

Commercial income 244,896,120 200,358,422 244,896,120 198,665,714

Contract research 118,488,219 153,200,858 118,488,219 153,200,858

Manufactured products 79,889,032 6,281,941 79,889,032 6,281,941

Service income 35,135,551 27,627,810 35,135,551 27,627,810

Material sales 11,383,318 8,950,938 11,383,318 8,950,938

Royalty income - 4,296,875 - 2,604,167

363,026,928 304,478,545 363,026,928 302,785,837

3. COST OF SALES

Staff costs 210,093,474 180,063,646 210,093,474 180,063,646

Consumables 47,394,636 35,276,814 47,394,636 35,276,814

General running expenses 51,352,125 54,976,737 51,352,125 54,973,617

Theft and fraud costs 1,811,009 1,800,579 1,811,009 1,800,579

Repairs and maintenance (1,269,536) 8,273,802 (1,269,536) 8,273,802

Bad debts written off 505,906 6,066,250 505,906 6,066,250

Provision for bad debts (501,832) (6,064,249) (501,832) (6,064,249)

309,385,782 280,393,579 309,385,782 280,390,459

4. OTHER OPERATING INCOME

Operating Income 5,226,172 4,796,349 5,226,172 4,956,251

Library services 149,583 141,114 149,583 141,114

Breach of contract 56,967 58,772 56,967 58,772

Bursary learnerships 529,709 1,526,281 529,709 1,526,281

Commission - 467 - 467

Conferences - 3,500 - 3,500

Mintek cafeteria - 628,580 - 628,580

Sundry income 1,648,981 1,441,667 1,648,981 1,441,667

Bad debts recovered 66,108 6,000 66,108 6,000

Refund from Skills Development levies - 162,984 - 162,984

Other 2,774,824 826,984 2,774,824 986,886

Rental income - properties 1,912,335 1,959,640 1,912,335 1,959,640

Investment Property 3,127,647 4,402,478 3,127,647 4,402,478

Rental Income 1,547,272 1,461,212 1,547,272 1,461,212

Fair value adjustment 1,580,375 2,941,266 1,580,375 2,941,266

10,266,154 11,158,467 10,266,154 11,318,369



70




GROUP MINTEK

2008 2007 2008 2007

R R R R

5. INVESTMENT INCOME

Financial income

Interest earned: fixed deposits 12,171,376 9,684,028 12,171,376 9,684,028

Loans to subsidiary - - - 1,329,589

Loans to associates 3,585,671 1,329,589 - -

Interest earned: bank balances 225,236 333,281 225,236 333,281

Interest earned: staff debtors (186,176) 200,898 (186,176) 200,898

Fair value Interest on debtors 2,583,190 495,546 2,583,190 495,546

Long-term debtors - 420,557 - -

18,379,297 12,463,899 14,793,626 12,043,342

6. FINANCE EXPENSES

Interest paid guaranteed liability 22,985 68,548 - -

Interest other 1,001 148 1,001 148

South African Revenue Services - interest and penalties - 3,158,113 - 3,158,113

Fair value interest on debtors (59,040) - (59,040) -

Interest on finance lease 203,642 194,320 203,642 194,320

168,588 3,421,129 145,603 3,352,581

7. AUDIT FEES

Audit fees 1,883,625 1,375,659 1,883,625 1,325,659

Underprovided prior year - 143,188 - 88,868

1,883,625 1,518,847 1,883,625 1,414,527

8. FEES FOR SERVICES

Consultants 28,174,163 25,141,713 28,174,163 24,553,852

Legal 1,407,273 1,714,558 1,407,273 1,714,558

29,581,436 26,856,271 29,581,436 26,268,410

9. DEPRECIATION AND AMORTISATION

Property, plant and equipment

Buildings 1,225,906 577,199 1,225,906 577,199

Manufactured items 694,234 1,776,585 694,234 1,776,585

Plant 2,458,097 3,018,379 2,458,097 3,018,379

Equipment 9,261,424 8,426,722 9,261,424 8,426,722

Vehicles 107,643 167,604 107,643 167,604

Low value assets 45,565 6,163 45,565 6,163

Leased assets 512,671 332,636 512,671 332,636

Furniture and fittings 189,844 146,413 189,844 146,413

14,495,384 14,451,701 14,495,384 14,451,701

Intangible assets - Amortisation

Computer software 836,941 433,146 836,941 433,146

15,332,325 14,884,847 15,332,325 14,884,847

10. POST-RETIREMENT BENEFIT OBLIGATIONS

Actuarial loss - post-retirement medical obligation 14,947,589 3,645,790 14,947,589 3,645,790

Interest on post-retirement medical obligation 5,965,082 3,278,855 5,965,082 3,278,855

Actuarial /(loss)/gain pension fund 221,378 (2,035,000) 221,378 (2,035,000)

21,134,049 4,889,645 21,134,049 4,889,645

Number of employees 546 498 546 498

71




GROUP MINTEK

Opening Balance

Additions Revaluation/ Transfers

Disposals Closing Balance

Opening Balance

Additions Revaluation/ Transfers


R R R R R R R R R R

2008

11.1 PROPERTY, PLANT AND EQUIPMENT

Cost

Land 55,408,800 - 24,892,108 - 80,300,908 55,408,800 - 24,892,108 - 80,300,908

Buildings 28,926,107 1,463,059 25,767,794 - 56,156,960 28,926,107 1,463,059 25,767,794 - 56,156,960

Plant 31,840,341 842,236 9,114,344 (182,481) 41,614,440 31,840,341 842,236 9,114,344 (182,481) 41,614,440

Equipment 93,421,475 10,339,588 (8,635,938) (3,313,996) 91,811,129 93,421,475 10,339,588 (8,635,938) (3,313,996) 91,811,129

Vehicles 990,580 - . - 990,580 990,580 . - 990,580

Furniture and fittings

1,931,091 410,407 3,961 (67,550) 2,277,909 1,931,091 410,407 3,961 (67,550) 2,277,909

Finance -leased assets

2,312,644 - - - 2,312,644 2,312,644 - - 2,312,644

Capital work in progress

2,325,125 5,490,315 (1,886,680) - 5,928,760 2,325,125 5,490,315 (1,886,680) - 5,928,760

217,156,163 18,545,605 49,255,589 (3,564,027) 281,393,330 217,156,163 18,545,605 49,255,589 (3,564,027) 281,393,330

Accumulated Depreciation

Opening Current Year Depreciation

Transfers Disposals Closing Opening Current Year Depreciation

Transfers Disposals Closing

R R R R R R R R R R

Land - - - - - - - - - -

Buildings 10,337,375 1,225,906 19,312 - 11,582,593 10,337,375 1,225,906 19,312 - 11,582,593

Plant 17,072,635 2,458,097 4,891,685 (176,237) 24,246,180 17,072,635 2,458,097 4,891,685 (176,237) 24,246,180

Equipment 47,892,565 10,001,223 (4,941,434) (2,612,873) 50,339,481 47,892,565 10,001,223 (4,941,434) (2,612,873) 50,339,481

Vehicles 535,472 107,643 - - 643,115 535,472 107,643 - - 643,115


1,044,995 189,844 29,943 (54,003) 1,210,779 1,044,995 189,844 29,943 (54,003) 1,210,779

Finance -leased assets

542,783 512,671 - - 1,055,454 542,783 512,671 - - 1,055,454


- - - - - - - - - -

77,425,825 14,495,384 (494) (2,843,113) 89,077,602 77,425,825 14,495,384 (494) (2,843,113) 89,077,602

GROUP MINTEK

2008 2008

Net book value R R

Land 80 300 908 80 300 908

Buildings 44,574,367 44,574,367

Plant 17,368,260 17,368,260

Equipment 41,471,648 41,471,648

Vehicles 347,465 347,465

Furniture and fittings 1,069,130 1,069,130

Finance -leased assets 1,257,190 1,257,190

Capital work in progress 5,928,760 5,928,760

192,315,728 192,315,728

72


Financial Statements and notes 2008NOTES TO THE ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2008

GROUP MINTEK

Opening Balance

Additions Revaluation/Adjustments


Opening Balance

Additions Revaluation/Adjustments


R R R R R R R R R R

2007

11.2 PROPERTY, PLANT AND EQUIPMENT

Cost

Land 55, 408,800 - - - 55, 408,800 55, 408,800 - - - 55, 408,800

Buildings 28,859,940 66,167 - - 28,926,107 28,859,940 66,167 - - 28,926,107

Plant 32,578,228 2,107,171 (2,730,263) (114,795) 31,840,341 32,578,228 2,107,171 (2,730,263) (114,795) 31,840,341

Equipment 91,422,171 11,074,533 95,017 (9,170,246) 93,421,475 91,422,171 11,074,533 95,017 (9,170,246) 93,421,475

Vehicles 990,581 - - (1) 990,580 990,581 - - (1) 990,580


1,952,339 152,855 28,165 (202,268) 1,931,091 1,952,339 152,855 28,165 (202,268) 1,931,091

Finance-leased assets

1,995,394 317,250 - - 2,312,644 1,995,394 317,250 - - 2,312,644


1,462,886 862,239 - - 2,325,125 1,462,886 862,239 - - 2,325,125

214,670,339 14,580,215 (2,607,081) (9,487,310) 217,156,163 214,670,339 14,580,215 (2,607,081) (9,487,310) 217,156,163



Adjustments Disposals Closing Opening Current Year Depreciation

Adjustments Disposals Closing

R R R R R R R R R R

Land - - - - - - - - - -

Buildings 9,760,176 577,199 - - 10,337,375 9,760,176 577,199 - - 10,337,375

Plant 12,627,878 3,018,379 1,532,505 (106,127) 17,072,635 12,627,878 3,018,379 1,532,505 (106,127) 17,072,635

Equipment 48,519,880 10,209,470 (2,063,166) (8,773,619) 47,892,565 48,519,880 10,209,470 (2,063,166) (8,773,619) 47,892,565

Vehicles 592,517 167,604 (224,648) (1) 535,472 592,517 167,604 (224,648) (1) 535,472


331,599 146,413 743,963 (176,980) 1,044,995 331,599 146,413 743,963 (176,980) 1,044,995

Finance-leased assets

198,801 332,636 11,346 - 542,783 198,801 332,636 11,346 - 542,783


- - - - - - - - -

72,030,851 14,451,701 - (9,056,727) 77,425,825 72,030,851 14,451,701 - (9,056,727) 77,425,825

73


GROUP MINTEK

11.2 2007 (contiuned...) 2007 2007

Net book value R R

Land 55, 408,800 55, 408,800

Buildings 18,588,732 18,588,732

Plant 14,767,706 14,767,706

Equipment 45,528,910 45,528,910

Vehicles 455,108 455,108

Furniture and fittings 886,096 886,096

Finance-leased assets 1,769,861 1,769,861

Capital work in progress 2,325,125 2,325,125

139,730,338 139,730,338

Included in the adjustment column for the 2007 financial year are assets that were brought back onto the asset register that were incorrectly scrapped in prior years as detailed below and it also reflects the change in accounting policy referred to in note 29 of the Annual financial Statements:

Equipment 717,077

Furniture and fittings 28,165

745,242

Freehold land and buildings comprise: GROUP AND MINTEK

2008 2007

Acquired in the prior year - Land and Buildings

Land revalued 11,759,900 11,759,900

Buildings 75,373,132 50,481,024

Revaluation 49,324,836 12,565,807

Directors’ Valuation 136,457,868 74,806,731

Portion 175 and portion 226 of the farm Klipfontein, 203-IQ Johannesburg, with buildings thereon. The value of the building complex was estimated at R 136,457,868 by Lyons Financial Solutions (Proprietary) Limited, an independent valuer, during the financial year ending 31 March 2008. The latest valuation report was issued on 18 April 2008.

The estimated useful lives of depreciable property, plant, equipment and vehicles are as follows:

Buildings and investment property 50 yearsPlant 5-10 yearsEquipment 5-10 yearsVehicles 5 yearsFurniture and fittings 10 years


74


GROUP AND MINTEK

2008

GROUP AND MINTEK

2007

Opening Balance

Additions Transfer Disposals Closing Balance

Opening Balance

Additions Revaluation Disposals Closing Balance

R R R R R R R R R R

12. INTANGIBLE ASSETS

Cost

Computer software

4,693,881 1,004,475 1,112 - 5,699,468 - 4,693,881 - - 4,693,881

4,693,881 1,004,475 1,112 - 5,699,468 - 4,693,881 - - 4,693,881



Transfer Disposals Closing Opening Current Year Depreciation

Transfers Disposals Closing

R R R R R R R R R R

Computer software

433,146 836,941 (2,958) - 1,267,129 - 433,146 - - 433,146

433,146 836,941 (2,958) - 1,267,129 - 433,146 - - 433,146

Value as at 31 March 2008 4,432,339 Value as at 31 March 2007 4,260,735

The estimated useful lives of depreciable intangible assets are as follows:

Computer software 3 years

GROUP AND MINTEK

2008

GROUP AND MINTEK

2007

Opening Balance

Reversal Revaluation Disposals Closing Balance

Opening Balance

Reversal Revaluation Disposals Closing Balance

R R R R R R R R R R

13. INVESTMENT PROPERTY

Buildings -Billiton

11,776,682 - 1,580,375 - 13,357,057 8,835,416 - 2,941,266 - 11,776,682

11,776,682 - 1,580,375 - 13,357,057 8,835,416 - 2,941,266 - 11,776,682

Fair Value as at 31 March 2008 13,357,057 Fair Value as at 31 March 2007 11,776,682

Portion of portion 175 of the farm Klipfontein, 203-IQ Johannesburg, with buildings thereon. The value of the building complex was estimated at R 13,357,057 by Lyons Financial Solutions (Proprietary) Limited, an independent valuer for the year ended 31 March 2008. The latest valuation report was issued on 18 April 2008.

14. INVESTMENT IN SUBSIDIARY

Details of subsidiary are as follows:

Name of subsidiary Place of incorporation

Portion of ownership

Financial year end

Shares at cost 31

March 2008

Shares at cost 31

March 2007

Indebtness 31 March

2008

Indebtness 31 March

2007

R R R R

Mindev (Proprietary) Limited South Africa 100% 31 March 2008

100 100 (11,169,625) 7,385,486

100 100 (11,169,625) 7,385,486

Mindev is engaged in the commercialisation of Mintek’s patents and technology through the identification of suitable partners to advance such interests by way of direct investments in equity and through joint ventures.

Mintek holds 100% of the issued share capital of Mindev (Proprietary) Limited. The loans granted are unsecured and do not have fixed repayments terms.

DISCONTINUED OPERATIONS: TOLLSORT (PROPRIETARY) LIMITED

Tollsort (Proprietary) Limited ceased its operations at the end of September 2004. Mindev has included the operating losses from Tollsort (Proprietary) Limited to an amount of R1 193 043. This represents twenty-five percent of Mindev’s portion of the loan guarantee made to Standard Bank on behalf of Tollsort (Proprietary) Limited. This loan was settled during the year under review.


75



GROUP MINTEK

2008 2007 2008 2007

Notes R R R R

15. LONG-TERM LOANS AND ADVANCES

LONG-TERM DEBTOR - 16,500,000 - -

PGR 17 investments (Proprietary ) Limited 18,710,003 33,000,000 - -

Less: Short-term portion 17 (18,710,003) (16,500,000) -

LONG-TERM DEBTOR 3,383,000 6,766,000 - -

Mogale Alloys (Proprietary) Limited 8,049,457 10,569,558 - -

Less: Short-term portion 17 (4,666,457) (3,803,558) - -

STAFF LOANS 791,233 1,877,191 791,233 1,877,191

Advances to staff 1,525,168 3,070,751 1,525,168 3,070,751

Less: Short-term portion of staff loans 17 (733,935) (1,193,560) (733,935) (1,193,560)

4,174,233 25,143,191 791,233 1,877,191

The two long-term debtors’ loans related to the disposal of the associate company within the group and a related technology group. These loans bear interest at prime overdraft rates with fixed terms of repayment. The amounts disclosed represent the fair value of the loan.

The staff loans were advanced to qualifying staff to finance purchases of motor vehicles. The monthly instalments are being deducted from the employees’ salaries. These loans bear interest at prime overdraft rates less 3% and are repayable within 36 months. The amounts disclosed represent the fair value of the loan.

16. INVENTORY

Consumables 1,112,795 1,626,776 1,112,795 1,626,776

Contracts in progress 1,835,033 1,949,902 1,835,033 1,949,902

Inventories written off during the year - (297,642) - (297,642)

2,947,828 3,279,036 2,947,828 3,279,036

17. TRADE AND OTHER RECEIVABLES

Trade debtors 80,281,220 61,872,651 80,281,220 61,872,651

Short-term portion of long-term debtors 15 23,376,460 20,303,558 - -

Short-term portion of staff loans 15 733,935 1,193,560 733,935 1,193,560

Other receivables 1,924,400 2,810,839 1,924,400 2,810,839

South African Revenue Services 271,823 - - -

Less: Provision for bad debts (1,217,964) (1,956,127) (1,217,964) (1,956,127)

105,369,874 84,224,481 81,721,591 63,920,923

Age analysis of trade receivables that are past due but not impaired

Amounts due in 30 to 60 days 26,595,191 3,626,885 26,595,191 3,626,885

Amounts due in 60 to 90 days 5,483,982 7,390,191 5,483,982 7,390,191

Amounts due in 90 days + and not impaired. 9,766,691 16,104,876 9,766,691 16,104,876

41,845,864 27,121,952 41,845,864 27,121,952

Provision for doubtful debts

The entity’s trade receivables are stated after allowance for doubtful debts based on managements assessments of the credit worthiness. An analysis of the allowance is as follows:

Balance at the beginning of the year 1,956,127 8,020,376 1,956,127 8,020,376

Charged to profits - 1,956,127 - 1,956,127

Reversed from profits (738,163) (8,020,376) (738,163) (8,020,376)

Balance at the end of the year 1,217,964 1,956,127 1,217,964 1,956,127

When managment determines if a debtor is impaired, management considers if there has been any change in the credit quality of the debtor; changes in the payment history and any other evidence that the debtor is impaired.

76


GROUP MINTEK

2008 2007 2008 2007

Notes R R R R

18. SHORT-TERM INVESTMENTS

Short-term investments 96,621,434 89,491,480 96,621,434 89,491,480

Investments in short-term fixed deposits are held with various reputable financial institutions at market value, and interest has been earned at effective interest rates.

Fixed investments held with various public financial institutions is partly earmarked as financing for the post-retirement medical aid liability.

19. TRADE AND OTHER PAYABLES

Trade creditors 27,568,399 32,283,410 27,568,399 32,283,410

Other payables 3,226,018 2,963,834 3,226,018 2,883,334

Current portion of lease creditor 324,835 283,126 324,835 283,126

Current portion of guaranteed liability - 432,172 - -

South African Revenue Services (VAT) 1,659,908 745,574 1,659,908 745,574

South African Revenue Services (Interest and penalties) - 6,719,803 - 6,719,803

Provision in leave pay 11,240,775 11,753,515 11,240,775 11,753,515

Other creditors and accruals 7,645,026 11,372,106 7,645,026 11,372,106

51,664,961 66,553,540 51,664,961 66,040,868

Maturity analysis

1 to 3 months 38,439,443 46,538,850 38,439,443 46,538,850

4 to 6 months - - - -

7 to 9 months - - - -

10 to 12 months - - - -

38,439,443 46,538,850 38,439,443 46,538,850

20. DEFERRED INCOME

Deferred income 25,781,743 17,109,597 25,781,743 17,109,597

Advanced client billing (Unearned income) 8,701,091 4,202,724 8,701,091 4,202,724

34,482,834 21,312,321 34,482,834 21,312,321

Deferred income arises as a result of contracts undertaken in terms of the Lead Fund and Innovation funds administered by the Department of Science and Technology in respects of amounts received in cash not yet accounted for as revenue.Advance client billing income arise as a result of contracts undertaken in terms of commercial work where invoices are raised based on work that has been done The quantum of cost incurred provides the basis for the level of revenue recognised in the period

Opening Balance Additional provisions

Utilised and reversed

Closing Balance

R R R R

21. PROVISIONS

GROUP AND MINTEK

31 March 2008

Product warranties 483,095 2,908,026 (2,981,515) 409,606

483,095 2,908,026 (2,981,515) 409,606

GROUP AND MINTEK

31 March 2007

Product warranties 894,508 483,095 (894,508) 483,095

894,508 483,095 (894,508) 483,095

The provision for product warranties is the entity recognising its probable liability for meeting its obligations in terms of products and services as stipulated in its contracts with its customers.


77


GROUP MINTEK

2008 2007 2008 2007

R R R R


22. LONG-TERM RETIREMENT BENEFIT

Post-retirement medical aid 78,800,000 61,800,000 78,800,000 61,800,000

Pension benefit liability 1,121,378 900,000 1,121,378 900,000

Long-term retirement benefit obligation 79,921,378 62,700,000 79,921,378 62,700,000

Post-retirement medical benefits

The amounts included in the balance sheet arising from Mintek’s obligation in respect of post-retirement medical benefits is as follows:

Present value of obligations as at 31 March 2008 78,800,000 61,800,000 78,800,000 61,800,000

Fair value of plan assets as at 31 March 2008 - - - -

Post-retirement benefit obligation 78,800,000 61,800,000 78,800,000 61,800,000

Fixed investments held with various public financial institutions is partly earmarked as financing for the post-retirement medical aid liability. Mintek has not assigned a specific fund to hedge against the post-retirement medical aid liability.

Movement in the net-liability recognised in the balance sheet

Net past service benefit liability: Beginning of the year 61,800,000 58,300,000 61,800,000 58,300,000

Interest cost 5,965,082 3,278,855 5,965,082 3,278,855

Contributions paid to service providers (3,912,671) (3,424,645) (3,912,671) (3,424,645)

Net Actuarial loss/(gains recognised) 14,947,589 3,645,790 14,947,589 3,645,790

Net past service benefit liability: End of year 78,800,000 61,800,000 78,800,000 61,800,000

Key assumptions - -

Expected long-term rate of return on plan assets 9.5% 8.0% 9.5% 8.0%

Expected increase in health care costs 7.5% 6.5% 7.5% 6.5%

Amounts recognised in income in respect of the scheme are as follows:

Current cost 20,912,671 6,924,645 20,912,671 6,924,645

Contributions paid 3,912,671 3,424,645 3,912,671 3,424,645

Expected average remaining life of employees (years) 16 16 16 16

Sensitivity analysis

Discount rate increased by 1% p.a 70,800,000 55,600,000 70,800,000 55,600,000

Discount rate decreased by 1% p.a 88,500,000 69,700,000 88,500,000 69,700,000

Subsidy inflation increase by 1% p.a 88,600,000 69,900,000 88,600,000 69,900,000

Subsidy inflation increase by 1% p.a 70,600,000 55,200,000 70,600,000 55,200,000

Retirement age 58 83,000,000 64,400,000 83,000,000 64,400,000

Medical cover is provided through a number of different schemes. Post-retirement medical cover in respect of qualifying employees is recognised as an expense over the expected remaining service lives of the relevant employees. The group has an obligation to provide medical benefits to certain pensioners and dependants of ex-employees. These liabilities have been provided in full, calculated on an actuarial basis. The liabilities are unfunded. Periodic valuation of these obligations is carried out by independent actuaries every year, the latest one being 31 March 2008.

Pension benefits are provided by membership of the Mintek Retirement Fund (MRF) and the Mintek Employees Retirement Fund (MERF).

Movement in the net-liability recognised in the balance sheet

Employer liability 900,000 2,935,000 900,000 2,935,000

Movement in guaranteed liability - - -

Actuarial loss/(gain) 221,378 (2,035,000) 221,378 (2,035,000)

Net-employer liability at end of year 1,121,378 900,000 1,121,378 900,000

Current cost 221,378 (2,035,000) 221,378 (2,035,000)

At inception of the Fund a retirement Rreserve was allocated to certain members, which will become payable at the time of the members death or withdrawal. The employer also funds a minimum guaranteed pension for members who entered the fund as at 1 January 1995. For the purpose of calculating the valuation investment returns are expected to exceed salary increases by 3 %.Employer contributions are charged against income in the period in which they are incurred. Contributions so charged were as follows :

MRF and MERF 9,172,657 8,267,727 9,172,657 8,267,727

Employee contributions to the funds were as follows:

MRF and MERF 4,882,450 4,400,771 4,882,450 4,400,771

78



1,686,560 336,670 1,349,890

23.2 GUARANTEED LIABILITY

Associate company liability - 432,171 - -

Less: Current portion included in accounts payable - (432,171) - -

- - - -

The Group has assumed its share of the guaranteed liability of an associate company which will be repaid by 15 March 2008.

24. FUTURE LEASE LIABILITY

Future operating lease charges for vehicles

- Payable within one year 413,022 195,353 413,022 195,353

- Payable between two and five years 689,459 - 689,459 -

1,102,481 195,353 1,102,481 195,353

Future operating lease charges for office equipment

- Payable within one year 34,123 102,370 34,123 102,370

- Payable between two and five years - 294,237 - 294,237

34,123 396,607 34,123 396,607

25. CONTINGENT LIABILITIES

Legal liabilities

Guarantees

Cessions in favour of ABSA Bank for R 7 382 809 to meet requirements for credit card and other banking facilities have been registered.

23. LONG-TERM CREDITORS

Finance lease obligation 1,025,054 1,351,778 1,025,054 1,351,778

Amount due for finance lease obligation 1,349,889 1,634,904 1,349,889 1,634,904

Less: Current portion of finance lease obligation (324,835) (283,126) (324,835) (283,126)

Guarantee liability - - - -

Long-term liability - 432,171 - -

Less current portion of long-term liability - (432,171) - -

1,025,054 1,351,778 1,025,054 1,351,778

23.1 FINANCE LEASE OBLIGATION

Capitalised leased assets

Payable within one year 324,835 283,126 324,835 283,126

Payable within 2-5 years 1,025,054 1,351,778 1,025,054 1,351,778

Net-lease liability 1,349,889 1,634,904 1,349,889 1,634,904

It is the group’s policy to lease certain of its equipment under leases. The group has an equipment finance lease agreement with an average lease term of four to six years. All leases are on a fixed repayment basis and no arrangement has been entered into for contingent rental repayments.

As of 31 March 2008 the aggregate amounts of minimum lease payments and the related imputed interest under capitalised lease contracts payable in each of the next five fiscal years and thereafter are as follows:

Minimum lease payments

Interest Present value of minimum

lease payments

Payable in the years ended 31 March:

2009 487,013 172,084 314,929

2010 466,769 122,946 343,823

2011 673,174 41,057 632,117

2012 59,604 583 59,021

GROUP MINTEK

2008 2007 2008 2007

R R R R

79


27. COMMITMENTS

Contracted for:

Capital expenditure 145,570 1,640,173 145,570 1,640,173

Authorised and not contracted for 145,570 1,640,173 145,570 1,640,173

Internal funds will be provided to meet the expenditure in respect of these commitments, which have been approved and contracted for.

28. CASH GENERATED FROM OPERATIONS

Notes

Profit from operations 15,461,073 13,045,859 12,931,565 (4,613,038)

Adjusted for:

Prior year adjustments 29 (7,616,731) 7,616,731 (7,616,731) 7,616,731

Investment income (18,379,297) (12,826,322) (14,793,626) (12,405,765)

Finance expenses 168,588 3,421,129 145,603 3,352,581

Investment property fair value adjustment 4 (1,580,375) (2,941,266) (1,580,375) (2,941,266)

Depreciation 9 15,332,325 14,884,847 15,332,325 14,884,847

Fair value adjustment - debtors 2,524,150 362,423 2,524,150 362,423

Fixed asset correction - - - -

Loss/(profit) on disposal of fixed assets 720,916 388,786 720,916 388,786

(Profit)/loss on disposal of associates - (13,483,971) - -

Provisions raised/(utilised) 20 2,908,026 483,095 2,908,026 483,095

Increase in post-retirement obligations 21 21,134,049 4,889,645 21,134,049 4,889,645

Share of associates income - (9,400,750) - -

Taxation 1,033,178 6,415,338 - -

Increase in loan to associate - (11,125,147) - -

Unrealised profit from associate - (1,692,709) - -

Long term liability raised 326,724 262,868 326,724 194,320

Cash flow from operations before working capital changes 32,032,626 300,556 32,032,626 12,212,359

Working capital changes: 6,715,724 5,513,064 (10,013,874) 5,465,564

(Increase)/decrease in loans 20,968,958 (725,580) 1,085,958 (725,580)

Decrease/(increase) in inventories 331,208 (534,663) 331,208 (534,663)

Decrease/(increase) in accounts receivables (20,873,570) (16,000,223) (17,800,668) (16,000,223)

Increase in payables (6,881,385) 19,781,465 (6,800,885) 19,733,965

Increase/(decrease) in deferred income 13,170,513 2,992,065 13,170,513 2,992,065

38,748,350 5,813,620 22,018,752 17,677,923


GROUP MINTEK

2008 2007 2008 2007

R R R R

26. TAXATION

Taxation on entity share in associate post acquisition reserves - 2,726,250 - -

South African normal taxation 1,033,178 - - -

Capital gains taxation on disposal of shares in associate - 3,689,088 - -

1,033,178 6,415,338 - -

No provision for income tax was made as Mintek is exempted in terms of section 10(1)(CA)(i) of the Income Tax Act, No. 58 of 1962. Tax provisions liabilities are with respect to Mindev and its associated companies and are payable through those entities.

80


GROUP MINTEK

2008 2007 2008 2007

R R R R


Balance previously reported

R

Reclassification and error

R

Balance as restated

R

29. RESTATEMENTS AND RECLASSIFICATIONS

The tables below reflect the changes that were made to the 2007 year as a result of certain restatements and balance sheet reclassifications.

GROUP Note

Reconciliation 2007

Income statement

Fixed assets incorrectly scrapped a - 745,242 745,242

Warrantee provisions b (4,921,394) 5,332,807 411,413

SARS penalties and interest c (263,019) (2,895,094) (3,158,113)

General running expenses c (44,177,053) (3,824,709) (48,001,762)

Municipal charges d (8,643,670) (6,974,977) (15,618,647)

Balance sheet

Capital and reserves

Retained earnings at beginning of the year 180,849,632 (7,616,731) 173,232,901

Non-current assets

Property, plant and equipment 142,338,891 (2,608,555) 139,730,336

Trade and other payables 41,105,245 13,694,780 54,800,025

Deferred income e 24,666,118 (3,353,797) 21,312,321

Cash Flow

Cash generated from operations

Profit from operations 20,662,588 (7,615,258) 13,047,330

28.1 INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS

Cash on hand 10,515,256 (11,222,531) 10,515,256 (11,222,531)

Cash on deposit (9,827,707) 10,662,244 (9,827,707) 10,662,244

Foreign currency 17,820,775 145,094 17,820,775 145,094

18,508,324 (415,193) 18,508,324 (415,193)

28.2 DISPOSAL OF SHARE IN ASSOCIATE

Cost of investment - 250 - -

Fair value at acquisition - - - -

Post-acquisition reserves - 12,390,331 - -

Loans and advances - 7,125,448 - -

Carrying value at disposal date - 19,516,029 - -

Proceeds - (33,000,000) - -

Profit/(loss) on disposal - (13,483,971) - -

81



29. RESTATEMENTS AND RECLASSIFICATIONS (continued...)

MINTEK Note

Income statement

Fixed assets incorrectly scrapped a - 745,242 745,242

Warrantee provisions b (4,921,394) 5,332,807 411,413

SARS penalties and interest c (263,019) (2,895,094) (3,158,113)

General running expenses c (44,177,933) (3,824,709) (47,988,642)

Municipal charges d (8,643,670) (6,974,977) (15,618,647)

Balance sheet

Capital and reserves

Retained earnings at beginning of the year 145,178,332 (7,616,731) 137,561,601

Non-current asstes

Property, plants and equipment 142,338,891 (2,608,555) 139,730,353

Trade and other payables 40,592,573 13,694,780 54,287,353

Deferred income e 24,666,118 (3,353,797) 21,312,321

Cash Flow

Cash generated from operations

Profit for the year 3,003,691 (7,616,731) (4,613,040)

a Property, plant and equipment and retained earnings increased by R 745 242 as a result of a write back of assets that were incorrectly scrapped in previous years.

b Provisions decreased and retained, earning increased by R 5 332 807 due to a reversal of a provision for performance guarantees raised in the previous year which did not meet the recognition criteria per IAS 37: Provisions, contingent liabilities and contingent assets.

c Mintek incurred fruitless and wasteful expenditure amounting to R 6 719 802 in penalties and interest levied by SARS as a result of the under-declaration and payment of VAT for the period April 2006 to September 2006, and late payment of PAYE liability in the previous financial year.

d Municipal charges relating to previous financial year amounting to R 6 974 977 as a result of inaccurate meter readings by the City Council of Johannesburg.

e The deferred income and fixed assets were restated in the prior as a result of a change in accounting policy with regards to the treatment of grants received for fixed asset funding beng set-off directly against the cost of the fixed asset.

30. INSURANCE AND RISK MANAGEMENT

The insurance and risk management policies adopted by Mintek are aimed at obtaining sufficient cover at the minimum cost to protect its asset base, earning capacity and legal obligations against acceptable losses. All property, plant and equipment are insured at current replacement value. Risks of a possible catastrophic nature are identified and insured.

31. FINANCIAL INSTRUMENTS

Credit risk

Financial assets that could subject the group to credit risk consist principally of bank balances and cash, deposits, trade and other receivables and loans to associates. The group bank balances are placed with high credit quality financial institutions. Trade and other receivables and loans to associates are presented net of the allowance for doubtful receivables or loan write-offs. Credit risk with respect to trade receivables is limited due to the large number of customers comprising the group’s customer base and their dispersion across different industries and geographic areas. Accordingly the group does not have significant concentration of credit risk.The carrying amounts of financial assets included in the balance sheet represent the group’s exposure to credit risk in relation to these assets.The Group does not have any significant exposure to any customer or counter party.

Interest risk

The valuation of interest rate exposure and investment strategies is done by management on a regular basis. Interest-bearing investments are held with reputable banks to minimise exposure.

Fair value

As at 31 March 2008 the carrying amount of bank balances and cash, deposits, trade and other receivables, trade and other payables, contracts in progress, advances received and short-term borrowing approximated their fair values due to the short term natures of these assets and liabilities.

Long-term loans to associates and subsidiaries are interest free with no fixed repayment terms and therefore the fair value of these loans can not be calculated.

The fair value of the loans to outside shareholders cannot be determined as the loans are interest free with no fixed terms of repayment.

Foreign currency risk

The Group undertakes certain risk in certain denominated foreign currencies, hence exposures to rate fluctuations arise. The Group does not currently enter into forward foreign exchange contracts to buy and sell amounts of various currencies at predetermined exchange rates, as the foreign currency amounts are not significant in relation to the entity’s income. Forward exchange contracts are entered into with large commercial contracts denominated in foreign currency. As a matter of principle, the Group does not enter into foreign currency exchange contracts for speculative reasons.The estimated fair value gain/(loss) per income statement was determined by comparing the contracted value rate to an equivalent spot rate on the settlement or at year-end rate for outstanding foreign currency .

82

Balance previously reported

R

Reclassification and error

R

Balance as restated

R


GROUP AND MINTEK

2008

R

2007

R

Entity Basic Salary Fees for services as

director

Performance bonus

and other expenses

TOTAL TOTAL

32. BOARD MEMBERS AND EXECUTIVE MANANGEMENT REMUNERATION

Executive Management - MINTEK

Mr. M.A. Mngomezulu Mintek (Appointed 01/09/2007) 787,500 - - 787,500 -

Dr. P.P. Jourdan Mintek (Resigned 31/08/2007) 560,181 - - 560,181 1,271,597

Dr. R.L. Paul Mintek 1,155,000 - - 1,155,000 1,252,345

Dr. M. Motuku Mintek 938,950 - - 938,950 847,717

Mr. P. Fusi Mintek 945,000 - - 945,000 860,227

Mr. V. Govender Mintek 930,050 - - 930,050 845,632

Total Executive Management 5,316,681 - - 5,316,681 5,077,518

Non-executive Management Board members - MINTEK

Mr. M. Khumalo (Chairman)

Metallon Corporation (31 March 2007) - - - - 7,000

Dr. F. Crundwell CM Solutions - - - - 10,545

Mr. H. Motaung (Chairman)

Anooraq Resources Corporation (Appointed 1 April 2007)

- 39,540 - 39,540 -

Ms. L. Mhlabeni Bali Engineering Consultants (Appointed 1 April 2007)

- 29,475 - 29,475 -

Mr. M.A. Ntilane Kwane Minerals Processing (Appointed 1 April 2007)

- 21,615 - 21,615 -

Dr. J. Bredell Minerals Development Consultant (Appointed 1 April 2007)

- 44,592 - 44,592 -

Mr. M. Mphomela Rand Merchant Bank (Appointed 1 April 2007) - 88,098 - 88,098 -

Dr. N.P. Mjoli Hlathi Development - - - - 2,976

Mr. R. Havenstein Anglo American Platinum (up to 30 August 2007)

- 35,466 - 35,466 5,198

Ms. G. Mthethwa Standard Bank - 25,545 - 25,545 11,759

Mr. V. Pillay CSIR - - - 5,621

Mr. P. Taljaard - - - 6,889

Prof. P.E. Ngoepe University of North - - - - 1,268

Mr. T.Y. Dube - - - 5,621

MINDEV

Mr. G. Mosinyi Mindev - 1,691 - 1,691 1,691

Mr. N. Morrison Mindev - 1,691 - 1,691 1,691

5,316,681 287,713 - 5,604,394 5,137,777


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33. RELATED PARTY

Controlling entity

The group comprises of Mintek and its wholly owned subsidiary Mindev (Proprietary) Limited. Mindev is engaged in the commercialisation of Mintek patents and technology through the identification of suitable partners and investments in equity associate, namely Tollsort ( Proprietary) Limited . The Group, in the ordinary course of business, enters into various sale and purchase transactions with related parties.

None of the directors, officers or major shareholders of the Mintek group or, to the knowledge of Mintek, their families, had any interest, direct or indirect, in any transactions which has affected or will materially affect Mintek or its investment interest or subsidiaries.

Tollsort (Proprietary) Limited ceased its operations at the end of September 2004. Mindev has included the operating losses from Tollsort (Proprietary) Limited to an amount of R1 193 043 which represents twenty-five percent of Mindev’s portion of the loan guarantee made to Standard Bank on behalf of Tollsort (Proprietary) Limited.

Related party transactions

Related party transactions exist within the Group. During the year all selling transactions were concluded at arm’s length. Details of material transactions with related parties not disclosed elsewhere in the financial statements are as follows:

GROUP MINTEK

2008 2007 2008 2007

R R R R

Mintek sales to:

Department of Minerals and Energy 7,421,902 7,425,132 7,421,902 7,425,132

Department of Science and Technology 10,514,459 10,481,138 10,514,459 10,481,138

Mogale Alloys (Proprietary ) Limited - 2,604,167 - 2,604,167

Mindev (Proprietary) Limited - - - 1,519,662

17,936,361 20,510,437 17,936,361 22,030,099

34. IRREGULAR, FRUITLESS AND WASTEFUL EXPENDITURE

Theft and fraudulent costs Irregular 1,811,009 1,800,579 1,811,009 1,800,579

Penalties and fines on late payment of VAT/PAYE/SDL/UIF Fruitless and wasteful

- 6,719,803 - 6,719,803

1,811,009 8,520,382 1,811,009 8,520,382

Less: insurance claim received from Fidelity Guarantee Insurance policy (2,478,744) - (2,478,744) -

(667,735) 8,520,382 (667,735) 8,520,382

The theft and fraud related to various incidents:

A staff member of Mintek produced fraudulent documentation on which payments to various suppliers were based. A total of R 3,425,118 was paid fraudulently of which R 1,181,009 relates to the 2007/2008 financial year. The employee’s services were terminated and criminal proceedings were initiated. Payment has been from fidelity insurance claimed reflected under the Other Operating Income note 4.

An official made payments into a fraudulent bank account. The total payments made were R 186,470. This official is no longer employed by Mintek any more and criminal proceedings were initiated.

Penalties and fines on late payment of VAT/PAYE/SDL/UIF

The wasteful and fruitless expenditure was in respect of interest and penalties paid to SARS for the late payment of VAT, PAYE, SDL and UIF. The responsible official had been dismissed for non-performance of his duties, including attending to regular payments to SARS.


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annual financial statements - mintek

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