international ferro metals limited annual report...

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Annual Report

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Russell and Associates 2742/09

Directors

A J Grey

S J Turner

D C Kovarsky

X Yang

T V Willsteed

I W Watson

S D Oke

T Xia

Company Secretary

W J Kernaghan

Registered office

Level 11

151 Macquarie Street

Sydney, NSW

Australia, 2000

Telephone: + 612 8298 2090

Facsimile + 612 8298 2020

South African offices

Johannesburg3rd Floor, Suite 14b

3 Melrose Blvd

Melrose Arch

South Africa, 2076

Telephone: + 27 11 994 9600

Facsimile: + 27 11 994 9611

MooinooiBuffelsfontein JQ465

Private Bag 2223

Mooinooi

South Africa, 0325

Telephone: + 27 14 574 6300

Facsimile: + 27 14 574 6307

Share Register

AustraliaComputershare Investor Services Pty Ltd

Yarra Falls

452 Johnston Street

Abbotsford

Victoria

Australia, 3067

Australia contact centre:

+ 61 (3) 9415 4000

(1300 850 505 within Australia)

United KingdomComputershare Investor Services PLC

PO Box 82

The Pavillions

Bridgwater Road

Bristol, United Kingdom, BS99 7NH

UK contact centre:

+ 44 (0) 870 702 0000

Solicitors

Baker & McKenzie

Level 27, AMP Centre

50 Bridge Street

Sydney, NSW

Australia, 2000

Bankers

National Bank of Australia

Level 36, 100 Miller Street

North Sydney, NSW

Australia, 2060

Brokers

National Bank of Australia

Level 36, 100 Miller Street

North Sydney, NSW

Australia, 2060

Auditors

Ernst & Young

680 George Street

Sydney, NSW

Australia, 2000

Corporate information

ABN 31 099 355 790

This annual report covers International Ferro Metals Limited and the entities it controlled at the end of, or during, the year ended

30 June 2009.The functional currency of each entity in the Group and the presentation currency of the Group is South African Rand (“ZAR”).

A description of the Group’s operations and of its principal activities is included in the review of operations and activities in the directors’

report on pages 22 to 28. The directors’ report is not part of the financial report.

IFM Annual Report 2009 page 1

2 Corporate profile

4 Ferrochrome process

6 Chairman’s statement

7 Report from the CEO

10 Report from the CFO

13 Sustainable development and IFM

18 Corporate governance

21 Annual financial statements

22 Directors’ report

29 Remuneration report

45 Auditor’s independence declaration

46 Financial report

46 Consolidated income statements

47 Statement in change in equity

49 Consolidated balance sheets

50 Statement of cash flows

51 Reconciliation of operating loss/profit to cash

flows from operating activities

52 Notes to the financial report

103 Independent auditor’s report

105 Notice of the annual general meeting

109 Explanatory memorandum

111 Form of proxy

IBC Corporate information

Contents

Cape Town

Johannesburg

Bushveld Complex

SouthAfrica

B h ld C l

ha

Northern Limb

Western Limb

Eastern Limb

Corporate profile

page 2

Klipvoor Dam

VaalkopDam

RooikopplesDam

HartebeespoortDam

Pilanesberg AlkalineComplex

Pilanesberg National Park

Merafe

Bafokeng

Stellite Project

Rustenburg

Wonderkop

TownlandsPurity Minerals

Waterval Section

Bayer

Kroondal Section

Waterkloof Section

Millsell

Sunny Haven

Hernic

Samancor

MooinooiBen Botha

Elandsdrift

HernicHernic

InternationalFerro Metals

Cro

codil

eR

ive

r

Sun CityLedig

Bapong

Rustenburg

Brits

MogwaseRuighoek

Horizon

Chromeden

Batlhako

Saulspoort

Heystekrand

Skychrome

FeCr smelter

Chromite mine


Group structure

Bapo Ba Mogale Tribe Global Eagle Minerals

& Beneficiation (Pty) Ltd

International Ferro Metals Ltd (Aus)

Purity Metals Holdings Ltd (BVI)

Skychrome (Pty) Ltd (SA)

International Ferro Metals

(Pty) Ltd (SA)

Rehabilitation Trust (SA)

International Ferro Metals SA Holdings

(Pty) Ltd (SA)

International Ferro Chrome

(Pty) Ltd (SA)

100%

100%

100%

100%

0.625%

80%

20% 0.625%

98.75%

International Ferro Metals (IFM) is an integrated ferrochromeproducer listed on the London Stock Exchange (LSE: IFL).

The Company’s mission is to develop and operate sustainable,profitable and efficient mining and mineral processingoperations, with the emphasis being on the production ofmineral products for the international steel industry. In theprocess, the Company strives to utilise ethically, environmentallyand socially responsible methods.

IFM produces ferrochrome from chromite ore located in theBushveld Igneous Complex, one of the world’s richest mineralrepositories and largest ferrochrome producing regions in theworld. IFM’s Lesedi chromite mine and integrated beneficiationand processing operations are situated at Buffelsfontein, 100kmnorth-west of Johannesburg, South Africa.

IFM’s integrated chromite mining ferrochrome productionfacilities use the latest technology ensuring that its product is

of international quality and the Company aims to be a low

cost producer. The total operating capacity of IFM’s operation is

approximately 267,000 tonnes of ferrochrome (an essential

ingredient in stainless steel production) per annum.

In August 2009, the Company embarked on the construction of its

Clean Development Mechanism ("CDM") compliant electricity

co-generation plant. IFM aims to generate an average of about

13.7MW, being 11 percent of IFM’s overall electricity

requirements, which will reduce costs and allow the Company to

achieve 100 percent production capacity (up from the Eskom

constrained 90 percent).

In addition, the Directors intend to evaluate the various corporate

opportunities that exist to take advantage of the Company’s

position and commercial relationships in the ferro alloys industry.

These opportunities may include expansion beyond the

ferrochrome market.

Raw material handling,receiving and storage

Reduc-tants

Ore

BlendingLumpy

chip

Run-of-mine

Metal recovery plant

Multiple pre-heating(possible expansion)

Slag storage

Flux

Waste

Ore benefication plant

Screening and storage

Ferrochrome process

page 4

Beneficiation:

• Crushing, screening and gravity separating theore to produce concentrate suitable for pelletisingand sintering.

• The beneficiation process yields lumpy ore and‘fines’ concentrate.

• The lumpy ore is ready for the furnace and doesnot require additional processing.

• The fines are pelletised and sintered to producehard porous pellet, which can then be smelted.

Pelletising and sintering:

• This involves grinding the chromite concentrate in aball mill, pelletising a mixture of concentrate, coke,fines and bentonite which acts as a binder, thenheating the pellets in a steel belt sintering furnace.

• In sintering, the pellets are heated to form strongbonds between the chromite grains to yield andagglomerate material.

• The sintered material is sized and then used asfeed to the furnace.

• The world-renowned engineering and technologysupply company Outukumpu (Oututec) providedthe pelletising and sintering technology; theOutukumpu technology has been proven at anumber of sites, including other ferrochromeoperations in South Africa.

• An extremely energy-efficient process thatproduces strong, high quality pellets with lowbinder requirements and high chrome content.

• Sintering ensures that pre-oxidation takes place.• This modifies the crystal structure and makes the

pellets more readily reducible in the smelting furnace.

Ferrochrome product ion involves

three major process ing s teps ,

namely benef ic ia t ion , pe l le t is ing

and s inter ing and smel t ing .

Crush and screen

FeCr Ingots

FeCrproduct

Slag

CO2 gas

Electrical co-generation

Filtercake

Gas cleaning

Submerged arc furnaceclosed furnace

Storage Despatch

Pelletising and sintering

Carbon

Binder

fines


Smelting:

• The smelting plant comprises two submerged arc closed-topfurnaces, each rated at 66 MVA, a Venturi scrubber system for theoff gases, together with plant and equipment for handlingferrochrome alloy and slag.

• Ferrochrome producers need to ensure low sulphur andphosphorous content in their supply to stainless steel producers.

• This has a two-fold benefit of helping to reduce operating costs inthe oxidation stage and eliminating the damage and weakeningeffect that high phosphorous and sulphur content has on the all-important end product – stainless steel.

Having brought its Buffelsfontein ferrochrome facility on streamat a prosperous time in the industry’s history and achieved amaiden profit after tax of ZAR578 million, the Company founditself caught up in the financial storm that buffeted economicactivity throughout the world during 2008 to 2009. Theferrochrome industry did not escape. Indeed the effects of thecrisis and its consequential economic downturn were arguablyworse there than in many other instances.

In January 2008, Eskom, South Africa’s electricity supplier,announced a cutback in electricity allocations that crystallisedin a 10 percent reduction for the ferrochrome industry. Theuncertainty surrounding the initial announcement, togetherwith the eventual 10 percent cutback, propelled the stainlesssteel producers, who are the ferrochrome customers, to build upferrochrome inventories to unusual levels. While this activity ledto welcome ferrochrome price increases, when the downturnarrived, its adverse effects were exacerbated. Orders forferrochrome dried up overnight and the price collapsed.

The Company led the way in reacting to the emergency. It shutdown both furnaces in November 2008 and cut costs in all availableareas, including labour, regrettably laying off 113 employees.

The market fell into disarray, with some customers reviewingprevious commitments and calling on producers to share theburden of economic distress. The Company reacted withfirmness but also a sense of pragmatism. Inevitably pricereductions followed, in some cases even from previously agreedupon levels.

During April, in order to monetise raw material stocks, the costsof which were sunk, the Company restarted one furnace. Thisdecision added to the Company’s cash position. Throughout thesedifficult times, the Company’s priority was to preserve cash.

The cutback in production caused a slump in sales from 207,862 tonnes last year to 101,835 tonnes this year, with aconsequential deterioration in economies of scale. Combinedwith price falls in the product, it produced a loss before tax ofZAR456 million for this financial year, compared with a profitbefore tax of ZAR630 million in the prior year.

Towards the end of the financial year, the clouds bearing downon the industry began to lighten as the globally coordinatedstimulus strategy took effect, producing a response in thestainless steel industry. Ordering recommenced and the

ferrochrome price started to rise. China’s strong economicperformance, which outdid many of the forecasts, led the way.The Company responded to the improving conditions bydeciding to continue production from its first furnace andrestarting its second. Both furnaces are now in steadyproduction, the restarts occurring without difficulty. In addition,open-pit mining is ramping up and underground minedevelopment has resumed.

In August 2009, the Company raised GBP22.2 million from aplacing of approximately 51 million new ordinary shares whichwere subscribed by large financial institutions, most of whichwere existing shareholders.

The proceeds of the equity issue will be used largely to fund theconstruction of a co-generation plant that will utilise furnaceoff-gases to produce about 11 percent of the Company’selectricity requirements. The plant will be registered as a CleanDevelopment Mechanism project under the Kyoto Protocol andwill significantly reduce the Company’s overall carbon footprint.By using the subsidy available through the sale of CertifiedEmission Reduction certificates (Carbon Credits) it will reduceelectricity costs, which are rising in South Africa. In addition, itwill allow the reinstatement of the 10 percent productioncapacity lost as a result of Eskom’s electricity supply constraints.Early construction of the plant, consisting mainly of engineeringand ordering of long-lead items, was commenced last calendaryear but delayed because of the effects of the financial crisis.

While ferrochrome industry conditions are improving, it isnecessary to keep constant watch on costs, which, despitevigilance on the part of the Company, are rising in the areas ofcoke, mine labour, and electricity. Since year-end, electricityprices have risen in excess of 40 percent. Because these costpressures are common to all South African producers, whosupply most of the world’s ferrochrome, a case can be made forfurther price rises in the product.

As we move into the post financial crisis era, and hopefully intoa recovery phase, the Company is well placed to take advantageof improving conditions in the ferrochrome market. It hassubstantial cash resources, supplemented by a recently obtainedirrevocable three-year working capital facility of ZAR500 millionfrom the Bank of China, two state of the art furnaces,experienced management, and a strong connection with theChinese stainless steel market.

Chairman,s Statement

page 6

Tony Grey

Chairman


Market Review

The first quarter of the fiscal year (Q3 2008) reflected aEuropean benchmark ferrochrome price of US$2.05 per pound,which was the highest price ever recorded. This was againstprices of US$1.01 a year before and US$1.21 at the beginningof calendar 2008. The price for Q4 2008 was set at US$1.85 inlate September 2008, but the severe contraction in demandmeant that there was a marked difference between agreedprices and spot and contractual prices. The contract pricedeteriorated rapidly to US$0.79 and then US$0.69 in Q1 andQ2 2009 respectively.

However, since May 2009, the industry has experienced asignificant pick up in demand and the price firmed to US$0.89in Q3 2009. This was driven by the disciplined reaction offerrochrome producers that shut down production, which led toglobal destocking and ultimately restocking. Secondly, worldstainless steel production has seen a strong revival in China and,more recently, a more modest revival in Europe. The UnitedStates and Japan are lagging these economies in terms of theirrecoveries, but stainless steel production in these markets ispicking up.

The Company’s links into China have strengthened over the pastnine months through a concerted marketing drive, partneredwith JISCO, and IFM now sells approximately 50 percent of itsproduction into the Chinese market. JISCO itself consumes 8,000 tonnes per month of ferrochrome and the Company supplies5,000 tonnes of those requirements. JISCO’s requirements areexpected to double next year when it brings its new stainlesssteel plant into production.

The constrained supply coupled with the increase in demand,particularly from China, has led to an unanticipated shortage offerrochrome; market analysts CRU International have estimatedferrochrome stocks were at 10.4 weeks of demand at June 2009,compared to 25.4 weeks in December 2008.

Operational Review

Before the shutdown in November 2008, the plant achieved twomonths of record production. During the shutdown fromNovember 2008 to April 2009, major plant upgrade andmaintenance was undertaken, focussed on the furnaces and theore beneficiation plant at a total cost of ZAR71 million. Theexpenditure included modifications to the pressure rings, thefurnace roof and the material handling plant. Additionally thecapacity of the ore beneficiation plant was increased. All of thiswork was conducted to enhance plant availability and flexibility.The Company is pleased to report that since the restart of thetwo furnaces in April and August 2009 respectively, the firstfurnace’s output has increased to slightly above nameplatecapacity while the output of the second furnace, which was morerecently restarted, is in line with management’s expectations.

Subsequent to the end of the financial year, a total of ZAR85 million has been committed to ensure that undergroundmine production achieves targeted monthly output of 90,000 tonnes. This capital programme will be completed byDecember 2012. The open pit will produce 35,000 tonnes permonth for the next two and a half years, and this will providethe underground mine with flexibility and redundancy once theopen pit is mined out. The capital expenditure includes thecompletion of the MG2 decline and further development of theMG1 decline. The Company has had to acquire ore as feedstockdue to the earlier than anticipated furnace start up. Most of thepurchases have been finalised at pre-determined prices, andpurchases are less than what was earlier anticipated, due to theacceleration of the underground production schedule.

Reserves and Resources

The Mineral Reserves for Lesedi have increased marginally dueto the depletion for mining during the year. For the Sky ChromeProject, the Mineral Reserves have been included in thestatement as at 30 June 2009 in view of the September 2008Feasibility Study completed during the year to 30 June 2009.

Report from the CEO

David Kovarsky,

Chief Executive Officer

Production H1 2009 H2 2009 FY 2009 FY 2008 % Change

2008-2009

Ferrochrome production (tonnes) 90,759 19,605 110,364 205,607 -46%

Electricity Co-Generation Project Update

On 3 August 2009 it was announced that the Company wouldrecommence construction of the Clean DevelopmentMechanism ("CDM") compliant electricity co-generation plantat a total cost of ZAR254 million.

The plant was conceived in January 2007 as a CDM projectunder the framework provided by the Kyoto Protocol. The planthas four key benefits:

• Firstly, it will displace c.144,000 tonnes of carbon dioxideequivalent, reducing IFM's environmental impact.

• Secondly, it will allow the Company to monetise the displacedcarbon dioxide and earn Carbon Emission Reductions (“CERs”)for 10 years, which are expected to generate an income of c. EUR1.4 million in the first full year of operation (based oncurrent CER pricing) and contribute towards a reduction inIFM's electricity costs.

• Thirdly, by generating c.11 percent of overall electricityrequirements it is expected to reduce IFM’s electricity costs by10 percent. Eskom’s per unit electricity cost has increased by96 percent since April 2007 and further above-inflationincreases are expected.

• Finally, it will allow the Company to achieve 100 percentproduction capacity of 267,000 tonnes per annum byproviding the power currently limited by Eskom’s restrictions.

The plant will use a proven technology manufactured byGeneral Electric Jenbacher and is expected to be commissionedin September 2010; ramp-up is expected to take one month.Once completed, ferrochrome production capacity will berestored from the current electricity constrained level of240,000 tonnes per annum to full capacity of 267,000 tonnesper annum.

Management changes

During the year there were a number of management changes.In December 2008, Tony Grey, Executive Chairman and StephenTurner, Chief Executive Officer, moved from executive roles tonon executive positions. Tony Grey is now Non ExecutiveChairman and Stephen Turner is Non Executive DeputyChairman. David Kovarsky, previously Managing Director, is nowChief Executive Officer. Subsequent to year-end, Jannie Mullerreplaced Dion Cohen as Chief Financial Officer.

Safety, health, environment and quality

During the year under review the Company made excellentprogress in its safety and quality initiatives and its effortsresulted in it being certified by TÜV Rhineland, as meeting therequirements of OHSAS 18001:2007, ISO 14001:2004 and ISO 9001:2000.

Report from the CEO (continued)

page 8

A summary is presented in the table below:Lesedi Sky Chrome Total

Mineral Reserves kt kt kt

Proved

MG1 3,840 64 3,904MG2 6,808 130 6,938Probable

MG1 826 21,074 21,900MG2 2,129 20,488 22,617Total Reserves 13,603 41,756 55,359

Lesedi Sky Chrome Total

Mineral Resources kt kt kt

Measured

MG1 6,130 1,022 7,152MG2 7,615 1,325 8,940MG3 4,982 – 4,982Indicated

MG1 1,938 28,535 30,473MG2 2,060 47,719 49,779MG3 1,227 – 1,227Measured & Indicated Resources 23,952 78,601 102,553

Inferred

MG1 2,730 6,435 9,165MG2 2,848 9,622 12,470MG3 1,894 – 1,894Inferred Resources 7,472 16,057 23,529

Total Resources 31,424 94,658 126,082

The information in this report that relates to exploration results is based on information compiled by SRK Consulting under the supervision

of Mr HG Waldeck (Pr Eng), V Simposya (Pr Sci Nat) and M Wanless (Pr Sci Nat). All Competent Persons have sufficient experience which is

relevant to the style of mineralisation and types of deposits under consideration, and to the activity which has been undertaken, to qualify

as a Competent Person as defined by the 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and

Ore Reserves. SRK consents to the report being issued in the form and context in which it appears.


The statistics below reflect this commitment:

• The Company has a zero fatality rate with a total of 11 million

fatality-free man hours worked since 2005 which equates to

1.4 million fatality-free shifts.

• The frequency of total recordable injuries reduced by

76 percent compared to the previous year.

• The lost time injury frequency rate of 0.79 per million hours

worked was a reduction of 48 percent, compared to the

previous year; the mining industry average is 20.1.

• The disabling injury frequency rate of 0.17 per million hours

worked was a reduction of 11 percent compared to the

previous year and compares favourably to the mining industry

which has an average of 4.1.

The Company deeply regrets that one permanent employee and

one contractor sustained partial amputation injuries. Both

employees have been redeployed and have been given full

rehabilitation support.

The two major environmental issues facing the ferrochrome

industry are general particulate emissions and hexavalent

chrome generation. On both of these fronts, IFM’s emissions

were well within legal allowable limits. IFM’s daily average

particulate matter emission is 0.034mg/m3 compared with a

limit of 0.075mg/m3, and sampling results for hexavalent

chrome measured below detectable levels.

Black Economic Empowerment (BEE)

In April 2009 the Company lodged its intended BEE transactionwith the former South African Department of Minerals andEnergy (“DME”), now the Department of Mineral Resources(“DMR”), as the final element of its previously submittedapplication to convert its old order mining rights to new ordermining rights under the South African Minerals and PetroleumResources Development Act (MPRDA). The transaction envisagesthe sale of the business and assets of the Company’s SouthAfrican operating subsidiary, International Ferro Metals SA (Pty)Limited (“IFMSA”), to a new IFM subsidiary (“Newco”) at fairvalue with consideration for the purchase to be fully funded bythe issue of debentures and preference shares. The issue of theseinstruments results in Newco having a nominal net asset valueupon implementation, enabling it to issue 26 percent of itsequity to the BEE parties for a nominal amount. The BEE partiesare the surrounding communities, the staff and an entrepreneur.The effective date of the transaction is shortly after the DMRconverts the old order mining rights, which is expected to occurin 2010.

In anticipation of the BEE transaction, the Company boughtback half of Global Eagle’s (IFMSA’s existing BEE shareholder)1.25 percent shareholding for ZAR16.5 million, of which ZAR10 million was utilised to repay half of Global Eagle’s ZAR20 million loan account from IFM. The buy-back transactionenabled Global Eagle to enhance its BEE composition.

Report from the CFO

page 10

• Global economic fallout in late 2008

impacts worldwide stainless steel and

ferrochrome demand significantly

• Production down 46 percent

during FY2009 at 110,364 tonnes

of ferrochrome

(FY2008: 205,607 tonnes)

• Group reported loss before tax of

ZAR456 million for FY2009 as

opposed to profit of ZAR630 million

for FY2008

• Focus on capital management

• Drive to monetise inventory continues

• Cost cutting initiatives ongoing

• Maintenance and furnace upgrades

completed on time and on budget,

with first furnace restarted in

April 2009

Jannie Muller

Chief Financial Officer


Commentary on Financial Performance

IFM’s results have been prepared in accordance withInternational Financial Reporting Standards (“IFRS”). Thefinancial report is a general-purpose financial report, which hasbeen prepared in accordance with the requirements of theCorporations Act 2001 and Australian Accounting Standards. Thefinancial report has also been prepared on a historical cost basis,except for derivative financial instruments which have beenmeasured at fair value. There has been no change to accountingpolicies over the reporting period.

Income statement

The Company reported a loss before tax of ZAR456 million forthe year ended 30 June 2009, compared with a profit before taxof ZAR630 million for the prior year. The significant decline inprofitability was due to the unprecedented sharp decline inglobal ferrochrome demand from the fourth quarter of 2008,which was triggered by dramatic production cuts by stainlesssteel producers as a result of the global economic crisis.

After achieving record production in the first two months ofFY2009, the Company responded swiftly to deteriorating marketconditions to preserve its cash position by shutting down itsfurnaces in November 2008 and focusing on selling down itsinventory, reducing costs and deferring major capital expenditure.

The table below reflects the consolidated results for IFM forthe year ended 30 June 2009. Both the functional currencyand the presentation currency of the Company is South AfricanRand (“ZAR”).

Sales revenue decreased by ZAR1.1 billion from ZAR1.9 billion inFY2008 to ZAR782 million in FY2009. This is attributable to areduction in sales volumes from 207,862 tonnes in FY2008 to101,835 tonnes in FY2009 together with significantly lowerrealised ferrochrome prices.

Increases in the cost of reductants, electricity and freightcontributed to increased unit production costs. Eighty twopercent of the year's production occurred in the first half of thefinancial year where South African coke prices were on average 71 percent higher than the average for the previous financial year.Electricity prices were on average 29 percent higher in FY2009compared with FY2008. The Rand on average depreciated by 24 percent against the US Dollar, but this contribution to revenuewas offset by the severity of the decrease of realised ferrochromeprices. Cost of production per chrome unit increased fromUS65c/lb in FY2008 to US76c/lb in FY2009, excluding head officeoverheads and share-based payments.

An adjustment to the share-based payment was made duringthe year to reflect the cancellation of all share options andphantom options and the re-issue of 9,929,568 phantomoptions at 16 pence per option. The effect of this was a positiverevaluation of ZAR37 million.

Finance income of ZAR34 million was as a result of the largecash balances held over the financial year, and finance costdecreased by ZAR49 million between FY2008 and FY2009 dueto the repayment of project debt in the previous financial year.

Headline earnings decreased significantly from a profit ofZAR578 million in 2008 (headline profit of ZAR1.14 per share) toa loss of ZAR339 million achieved for the year ended 30 June 2009(headline loss of ZAR0.66 per share).

Costs

The Company took strong action to curtail costs during the yearunder review; during the second half of the financial year theCompany undertook a cost reduction programme whereby 113 employees were retrenched, the use of contractors was cutback and senior management and board members’ salaries werecut by 10 percent.

The per iod under rev iew has been overshadowed by extraordinary g lobal events , to which I FM has

responded quick ly and prudent ly. The company has cut product ion , i s contro l l ing costs and conserv ing

cash , whi le ensur ing that the operat ions are in good shape for an upturn in ferrochrome demand.

H1 2009 H2 2009 FY 2009 FY 2008

Summary of Income Statement ZAR’000 ZAR’000 ZAR’000 ZAR’000

Sales Revenue 526,057 255,517 781,574 1,919,396 Cost of goods sold (456,560) (412,417) (868,977) (1,190,926)Gross profit (loss) 69,497 (156,901) (87,403) 728,470 EBITDA (2,331) (393,637) (395,968) 726,727 PBT (26,809) (428,969) (455,778) 630,359 Taxation 30,060 87,139 117,199 (52,177)Net profit (loss) after tax 3,251 (341,830) (338,579) 578,182 Net operating cash flow (321,398) (26,776) (348,174) 251,257 EPS (cents per share) 1 (67) (66) 114Weighted average number of shares 504,757,374 502,590,229DPS (pence) – – – 1

Administration and other expenses increased by ZAR257 millionfrom ZAR135 million in FY2008 to ZAR392 million in FY2009,primarily due to:• the non-absorption of fixed production costs of ZAR134 million

as a result of the suspension of ferrochrome production inNovember 2008.

• the write-down of inventories of ZAR126 million to realisablevalue as at 30 June 2008.

• severance packages of ZAR37 million to the previousmanagement team and other employees.

Cash Flow

Operating activities utilised cash of ZAR348 million comparedto ZAR251 million generated in the prior year, mainly due tothe plant not recovering its fixed overheads while not in operation.

Investing activities utilised ZAR161 million which representsthe capital expenditure for maintenance and upgrading of thefurnaces and beneficiation plant, mine development and theco-generation project.

Financing activities utilised ZAR111 million which was mainlydue to the share buy-back of ZAR22 million and the paymentof the dividend of ZAR76 million.

The Company’s strategic focus over the financial year has beenthat of capital management; monetising inventory andreducing costs in a challenging environment to maximiseliquidity and to take full advantage of a market recovery.Ferrochrome inventory was sold down from 42,523 tonnes inDecember 2008 to 9,362 tonnes by fiscal year-end and certaintrade debtors were discounted over the period. During April2009 one of the furnaces was restarted to convert stockpile oreand approximately 13,000 tonnes of coke to ferrochrome,which was monetised at very depressed prices. The bulk of thecoke stockpile was purchased during the last two quarters of2008 when coke prices reached historical highs.

The Company continues to have a healthy net cash balance ofZAR340 million, after short term financing and excludingrestricted cash.

Balance Sheet

IFM has a strong balance sheet with ZAR2.3 billion inshareholders’ equity (30 June 2008: ZAR2.8 billion). Key featuresand movements from FY2008 to FY2009 were:• The increase in property, plant and equipment is attributable

to capital work in progress for mine development, plantexpansion capital and the co-generation plant.

• Net current assets, excluding cash and cash equivalentsdecreased by ZAR303 million due to a focused reduction in theworking capital cycle.

• Net movement of ZAR118 million in deferred tax from aliability of ZAR51 million to an asset of ZAR67 million,attributable to prior year profits being offset against currentyear losses and unredeemed capital expenditure. Theunredeemed capital expenditure balance is estimated atZAR1.3 billion at 30 June 2009.

Post year-end funding

During July 2009 the Company secured a ZAR500 million three-year irrevocable working capital facility with the Bank ofChina. On 3 August 2009 the Company raised GBP22.2 million (ZAR284 million) before expenses, through a placing of 50.4 million ordinary shares at 44 pence per share.

This additional funding, together with the cash balance ofZAR340 million as at 30 June 2009 provides the Company withadditional flexibility to manage its liquidity position and fundthe higher working capital requirements arising from theincreased production.

Share Buy-Back

During the year the Company repurchased and cancelled3,919,000 ordinary shares for a total consideration of ZAR22 million at an average price of 30 pence per share.

Dividends

During the year the Company paid its maiden dividend ofZAR76 million which was declared for the 2008 financial year.The Board of Directors has resolved not to declare a dividend forthis financial year.

Report from the CFO (continued)

page 12

H1 2009 H2 2009 FY 2009 FY 2008

Cash Flow ZAR’000 ZAR’000 ZAR’000 ZAR’000

Net cash flows from operating activities (321,398) ( 26,776) ( 348,174) 251,257 Net cash flows from investing activities (76,570) ( 84,525) ( 161,095) (39,701)Net cash flows from financing activities 97,726 (208,971) (111,245) 607,214 Net (decrease)/increase in cash held (300,242) ( 320,272) ( 620,514) 818,770 Cash at the beginning of the financial year 972,190 703,823 972,190 43,929 Effects of exchange rate changes on cash 31,875 ( 43,462) ( 11,587) 109,491 Cash and cash equivalents at the end of the year 703,823 340,089 340,089 972,190

Listing Rule 9.2.18

Listing Rule 9.2.18 requires the Company, inter alia, to reproduce any profit estimate that was made prior to this Annual Report. In the Company's announcement on23 July 2009, it made the following statement: "On turnover of approximately ZAR780 million, the Company expects to report a loss before tax not exceeding ZAR500 million." The Company's final results showed turnover of ZAR782 million and a loss before tax of ZAR456 million.


The company has made significant progress in the year underreview within the broader sustainable development context,namely safety and health management, quality, environmentalmanagement and community relations.

With the quality, health and safety and environmental policiesnow firmly entrenched in the IFM way of conducting business,the company has sought to take this a step further and hasdrafted a sustainable development policy. The company has alsopledged its compliance to both the Employment Equity Act andthe Broad Based Black Economic Empowerment (BBBEE) Act,which has been developed to provide a framework forprogressing the empowerment of historically disadvantagedSouth Africans in the Mining and Minerals Industry through theMining Charter. As part of this commitment, the companyplaces considerable emphasis on enterprise development,preferential procurement and social development.

The review period was characterised by commendable progressin safety, health, environment and quality (SHEQ) issues. IFMimproved on its record of fatality-free man-hours by achieving,since establishment in 2005, a total of 11,095,218 fatality-freeman-hours worked. This equates to 1,386,902 fatality-free shifts.

Policies and standards to cover all operational aspects andactivities that could affect the safety and health of people,

quality and the environment are developed in consultation withrelevant stakeholders and mandatory for all IFM operations.

Safety and health

Safety

The company’s safety performance remained exemplaryduring the period under review, with no fatal accidents, andinjury frequency rates continuing to improve significantlyyear-on-year. Notably, the company was awarded both OHSAS18001:2007 and ISO 9001:2000 certification during the 2009financial year. Regrettably, there were two lost-time injury casesduring the financial year; one permanent employee and onecontractor employee sustained partial amputation injuries.The permanent employee has received a prosthetic arm andhas been redeployed in the SHEQ department as a safetyofficer-in-training.

The frequency of total recordable injuries reduced by 76 percentyear-on-year and the lost-time injury frequency rate (LTIFR) of0.79 per million man-hours worked represented a 48 percentreduction year-on-year. Industry averages for disabling injuriesof 4.10, were significantly higher than reported by IFM,illustrating that IFM’s systems and policies are workingeffectively to maintain its safety track record.

Sustainable development and I FM

Sustainable development and I FM (continued)

page 14

Health

IFM’s operations strive to eliminate, engineer out, control andmitigate workplace risks as far as is reasonably practicable. Inorder to monitor the control measures implemented toaddress workplace exposure to hazards such as noise, dust,thermal stress and others, IFM offers a comprehensive medicalsurveillance programme for its employees. Medical surveillanceas an occupational health service is required for all entry, exitand periodical examinations, including, but not limited to:medical history, X-rays, audiology, lung function tests and aphysical exam.

Occupational hygieneOccupational hygiene forms an integral part of IFM’soccupational health management programme. All mandatorycodes of practice in terms of the Mine Health and Safety Act(29 of 1996) are in place. To further integrate the currentapproach, IFM is assessing digital platforms such that hygienemeasurements can be more effectively linked to existingmedical surveillance programmes.

Occupational medicineAt IFM, the health and well-being of employees is addressed invarious ways by appropriately trained, skilled and equippedstaff employed in the occupational health centre. Our approachis three-fold. Firstly, initial medical examinations are performed

to ensure that new employees are appropriately placed inoccupations which they can perform with due regard for theirhealth status.

Secondly, risk-based medical evaluations are conducted inaccordance with workplace risk assessments, and periodicmedical examinations are thus performed on employees atfrequencies determined by their occupations, medical statusand workplace exposures.

Finally, when employees leave the operations, they undergo exitmedical examinations in order to assess their health status andprovide a report to them which may be carried forward to anyfuture employer.

During the year, the medical facility performed 5,632 occupationalhealth surveillance examinations. The medical team alsoaddressed 5,054 primary health care and medical treatmentcases and additional health education was given to 3,422 individualcases. No employee was found medically unfit due to occupationalinjury or disease sustained at IFM during the period under review.

Noise-induced hearing loss is not a problem at IFM, as stringentmeasures control the hearing conservation programme. Apartfrom the occupational health surveillance test, 3,486 additionalhearing tests were conducted during the year as part of thehearing conservation programme.

The company has made s igni f i cant progress in the year under rev iew wi th in the broader susta inable

deve lopment context .


The medical facility conducted 3,623 lung function tests andexamined 3,627 chest x-rays as part of the occupational lungdisease monitoring programme. No cases of occupational lungdisease were recorded.

STDs, HIV and Aids

In keeping with its philosophy of being a socially responsibleemployer, IFM cannot ignore the effects of the HIV/Aidspandemic in South Africa. To this end, the company hasintroduced anti-retroviral treatment (ART) free of charge foremployees who are HIV-positive. During the year under review,only two new ART cases were recorded while 26 sexuallytransmitted disease cases were reported and treated. Thecompany is continually increasing awareness of HIV/Aidsamong staff and actively encourages employees to get testedand know their HIV status.

With regard to Tuberculosis (TB), IFM has a very stringent pre-employment and medical surveillance evaluation process. Duringthe year under review, only one active TB case was reported.During pre-employment medical examinations, four TB caseswere diagnosed and referred to government institutions orprevious employers for diagnostic evaluation and treatment.

Environment

IFM recognises that the long-term sustainability of its businessis dependent on its operating within the carrying capacity of theenvironment and that the company must maintain a balancebetween economic development, the requirements of itsbusiness, the community and environmental conservation.Environmental management, which forms an integral part of theIFM Integrated Management System (IFMIMS), includes therequirements of ISO 14001. The company is proud to have beenawarded ISO 14001:2004 certification in 2008, just 18 monthsafter start-up. All operating business units have approvedenvironmental management plans and systems in place toevaluate environmental management risks.

With all necessary permits and licences in place, IFM hasoperated in compliance with all regulations and permits duringthe year under review. These include mining licences, theenvironmental management programme (EMP), change of landuse, integrated water use permits, and air pollution controlpermits, among others. As reported in the 2008 annual report,one of the ongoing material issues surrounding watermanagement is of an administrative nature, since water licencesfor the South African operations have not yet been received.Applications have been submitted and the company remainscommitted to working with the relevant regulatory authority inensuring that all requirements are met. The company has adirective from the Department of Water Affairs (DWAF) for thewater use until the water use licence is approved.

There were no significant reportable environmental incidentsduring the year.

The two major environmental issues facing the ferrochromeindustry are general particulate emissions and hexavalentchrome generation. In both instances, IFM’s emissions are lowerthan industry averages. Daily average particulate matteremissions for the company during the period under reviewmeasured 0.034mg/m3, well within the limit of 0.075mg/m3.Sampling results for hexavalent chrome measured are belowdetectable levels.

During the period under review, no prosecutions were broughtagainst the company for the contravention of any health; safetyand environment legislative requirements.

Energy consumption

IFM is committed to reducing its energy use on an annual basis.The company will proceed with development and construction ofthe electricity co-generation plant project, which is expected togenerate an average of about 13.7 MW, around 11 percent ofIFM’s overall electricity requirements. The plant will displace144,000 tonnes of carbon dioxide equivalent per annum, thusachieving a significant reduction in carbon dioxide emissions. Inaddition, the plant will allow IFM to achieve 100 percentproduction capacity (up from the Eskom constrained 90 percent)using proven technology.

Water management

During the year under review, in line with its stated objective ofpursuing a long-term water provision solution, IFM assisted withthe upgrade and refurbishment of the Losperfontein valvesystem, the Sonop booster station and the Madibeng pumpstation. At a cost of just over ZAR1 million, these projects havecontributed significantly to improved water flow and waterpressure to both the mine and the surrounding communities ofBapong, Modderspruit and Majakaneng. The improvements havealso translated into a water saving of around one Ml per day. Inaddition, IFM has employed a millwright and an artisanoperative to maintain the water pipeline on a continuous basison behalf of the Madibeng Local Municipality.

Waste management

Waste issues and the management thereof remain an integralcomponent of the ISO 14001 Environmental ManagementSystem. As a result, the company has put in place protocols togovern the proper disposal of all waste types as well as tominimise the production of waste products and to recycle wherepracticable. Waste is sorted, as far as possible, into recyclablefractions such as paper, cardboard, wood and metal. Hazardouswaste is also separated from general waste and stored in aformalised area before removal to a permitted waste facility.Waste volume baselines have been established for all categoriesof waste and a system to centralise and report all waste figures isnow in place. During the period under review, the companygenerated approximately 799 tonnes of domestic and industrialwaste. Approximately 569 tonnes of waste was recycled; around 230 tonnes were hazardous and medical wastes, which weredisposed of at appropriate, permitted waste disposal facilities.

“Overall the IFM operations have demonstratedexemplary compliance with general environmentallegal obligations. There are no non-complianceissues that could lead to a severe environmentallegal risk.”-- extract from a legal compliance audit conducted by an

independent environmental management consultancy firm.

The broad approach to closure of the site is detailed in the

environmental management programme.

Quality

IFM ensures quality management by using the best practices

within the core activities of the company. In adhering to this

philosophy, the company became ISO 9001:2000 certified

during the period under review. All procedures are formalised,

controlled and continually improved in line with acomprehensive quality management system based on the ISO 9001:2000 international standard.

Social and community programmes

As reported in the 2008 annual report, IFM has placed muchemphasis on social and community programmes aimed atuplifting local communities. Approximately 60 percent of the1,058 jobs created (direct and indirect) since commencement ofproduction, were filled by members of the local communities.Unfortunately, by November 2008, two furnaces were shutdown as a result of the global economic downturn. This resultedin a scaling down of 533 contractor positions, a reduction of48.75 percent in the workforce. Likewise, by year-end, IFM’slearnership programme was suspended owing to the globaleconomic situation, but plans are in place to resurrect thetraining once conditions stabilise.

Sustainable development and I FM (continued)

page 16

Employment equity

The following table gives the overall progress towards IFM’s employment targets to end June 2009:

Employment Employment to

Target end June 2009

Percentage of Historically Disadvantaged South Africans in total 60% 70%Percentage of Historically Disadvantaged South Africans on management 40% 36%Percentage of women on management 10% 12%Percentage of designated groups on management 40% 40%

Skills development

With reference to skills development, IFM is compliant with theSkills Development Act, the Skills Development Levies Act and theSouth African Qualifications Act (SAQA). During the period underreview, a total of 518 compliance related training sessions wereconducted, with priority being training for safety representatives,fork lift operators, overhead crane operators and CO gas rescue.Nearly 200 employees received general company inductiontraining, a vital component of employee socialisation. Since2007, scholarships have been provided to three chemicalengineering students and one metallurgical engineering student.IFM has furthermore provided study assistance to 17 employeesto pursue formal studies at FET Colleges and HET institutions.The company has also introduced engineering learnerships to 20 of its own employees and 17 people from the community.IFM is also assisting AIDC to place 13 engineering apprentices on-site to obtain the necessary practical training.

IFM recognises that the local community is one of its importantstakeholders and is committed to making continuouscontributions to community upliftment. During the periodunder review, IFM implemented a number of communityprojects, including a number of training initiatives aimed atequipping local community members with basic engineering,leadership, organisational and other skills. While there are alsoprojects underway to offer career guidance and improveinfrastructure at local schools, IFM has embarked on a“competitive learners” campaign to encourage learners toachieve. Another innovative project has been the training of40 unemployed people from the local community as accreditedsecurity officers able to seek employment once the trainingis completed. Total beneficiaries, given the fact that oneemployed person supports at least six people, amounts toapproximately 280.

Procurement

IFM has adopted a preferred procurement policy in line with therequirements of the Broad Based Black Economic Empowerment(BBBEE) Act’s Codes of Good Practice.

To date the company‘s total procurement of goods and servicesfrom SMME suppliers represent approximately 9 percent of thetotal spend. The majority of the company’s suppliers are BBBEE-rated and it is the company’s preferred procurement policy tocontract with BBBEE-rated suppliers. Where suppliers are notrated, the company actively engages with the supplier to obtaina BBBEE rating.


Below is a summary of the company’s vendor spending:

Top 100 vendors

BBBEE Contributor Level Compliant Non- Excluded Total

1 2 3 4 5 6 7 8 compliant

0% 1% 7% 17% 6% 6% 3% 8% 48% 37% 6% 91%

International Ferro Metals Limited is committed to maintaininghigh standards of corporate governance. With the Company’smove to the Main Board of the London Stock Exchange on 31 August 2007, the Directors have, so far as it is possible, giventhe Company’s size and the composition of the Board, compliedwith the Combined Code for the financial year ended 30 June2009. In addition, the Company has complied with theAustralian corporate governance requirements applicable to acompany which is not listed on the Australian SecuritiesExchange throughout the period.

The Board of Directors

As at 30 June 2009, the Board of Directors comprised eightdirectors. Currently there are two executive directors and six non-executive directors, of which three are considered to beindependent. It is the Board’s policy to maintain independence byhaving at least two independent non-executive directors on theBoard. The independent non-executive directors are Mr S Oke,Mr T Willsteed and Mr I Watson. Although Mr Watson formerlywas an executive of IFMSA, the board considers he exercisesindependent judgment when carrying out his responsibilities, andtherefore, should be considered as independent. Ms T Xia, anon–executive director and Mr X Yang are not consideredindependent as they are representatives of JISCO, a majorshareholder and customer of IFM, and Mr Yang also is anexecutive of IFMSA. The Board believes Ms Xia and Mr Yangprovide a valuable contribution to the Company through theirexperience in the ferrochrome and steel industries. Mr Grey andMr Turner are not considered to be independent non-executivedirectors as they held executive positions during the year. On 31 December 2008 Mr Grey and Mr Turner stepped down fromtheir positions as Executive Chairman and Chief ExecutiveOfficer (“CEO”) to non-executive Chairman and non-executiveDeputy Chairman respectively.

Mr Grey, as non-executive Chairman of the Company, isconsidered the lead director and utilises his experience, skills andleadership abilities to facilitate the governance process. Insidethe boardroom, Mr Grey is responsible for the chairing ofmeetings and providing guidance to Board members, whileoutside the boardroom he serves as the spokesperson for theCompany and as the major point of contact between the Boardand the CEO.As CEO, Mr D Kovarsky who is based in South Africa,is responsible for the attainment of the Company’s future goalsand visions, in accordance with the strategies, policies,programmes and performance requirements approved by theBoard. The CEO’s primary objective is to ensure the ongoingsuccess of the Company through the effective management anddevelopment of all aspects of the Company. The roles of theChairman and CEO are separate and their responsibilities areclearly set out in writing.

The Board of Directors is responsible for the corporate governanceof the Company. The Board guides and monitors the business andaffairs of the Company on behalf of the shareholders by whomthey are elected and to whom they are accountable. The primaryresponsibilities of the Board include:

• formulating and approving the strategic direction, objectives and

goals of the Company;

• monitoring the financial performance of the Company, including

the approval of the Company’s annual financial statements;

• ensuring that adequate internal control systems and procedures

are in place and that compliance with these is maintained;

• identifying significant business risks and ensuring that such risks

are adequately managed;

• reviewing the performance and remuneration of executive

directors; and

• establishing and maintaining appropriate ethical standards.

To enable the Board to perform its duties, each director has full

access to all relevant information and to the services of the

Company Secretary. If necessary, the non-executive directors may

take independent professional advice at the Company’s expense.

This service was not utilised during the course of the 2009

financial year.

Mr Willsteed has been appointed Senior Independent Director

and, as such, his main duties are to understand and address the

concerns of major shareholders if these concerns cannot be

resolved by the Chairman or the other executive directors and to

meet with other non-executive directors.

Areas of non-compliance

During the financial year, the Company continued to comply

with the applicable recommendations of the Combined Code,

save as noted below. The Chairman is not independent within

the terms of the Combined Code. The Board considers Mr Grey’s

continued involvement as non-executive Chairman (previously

executive Chairman until 31 December 2008) to be vitally

important to the Company at its present stage of development,

notwithstanding the fact that the Company is not compliant

with the Combined Code in this respect. However, the Board

believes that the role of the executive directors, who take

collective responsibility for the running of the Company, creates

a well-balanced structure capable of managing the Company in

an effective and successful manner.

The Chief Executive Officer is not required to offer himself for

re-election as suggested by the Combined Code. However, this

is in accordance with the Company's Constitution which is

consistent with Australian corporate governance requirements.

Terms of appointment as a director

The Constitution of the Company provides that a Director, other

than the Chief Executive Officer, may not retain office for more

than three calendar years or beyond the third Annual General

Meeting following his or her election, whichever is longer,

without submitting for re-election. One third of the Directors

must retire each year and are eligible for re-election. The

Directors who retire by rotation at each Annual General Meeting

are those with the longest length of time in office since their

appointment or last election.

Corporate governance


During the year, Mr Willsteed and Ms Xia retired and both werere-elected by shareholders at the Annual General Meeting of theCompany held on 12 November 2008.

The Executive Directors are entitled to serve on the boards ofother companies and retain any earnings received fromrendering these services. During the financial year, Mr Kovarskyacted as non-executive director of Randgold & ExplorationLimited and received a total remuneration of ZAR280,000 overthe financial year.

The Nomination Committee

The Nomination Committee is chaired by Mr Grey. Othermembers include Mr Willsteed and Mr Oke, who are consideredby the Board to be independent in character and judgement,thus ensuring the Nomination Committee complies with therecommendation of the Combined Code as to membership. Therole of the Nomination Committee is to identify and nominatecandidates for the approval of the Board to fill Board vacanciesand make recommendations to the Board on Board compositionand balance. The Nomination Committee also prepares theChairman’s job description and other significant commitmentsfor which he is responsible. The Committee did not meet duringthe financial year.

The Remuneration Committee

The Remuneration Committee, comprising Mr Willsteed(Chairman), Mr Oke and Mr Watson, all of whom are consideredby the Board to be independent, met eight times during thefinancial year. The Committee is responsible for reviewing theperformance of the Executive Directors and for setting the scaleand structure of their remuneration, having due regard for theinterests of shareholders as a whole and the performance of theGroup. The remuneration of the non-Executive Directors isreviewed by the Board. Where appropriate, the Committeeobtains advice from independent remuneration consultants.

The Audit Committee

The Audit Committee comprises Mr Oke (Chairman), Mr Willsteedand Mr Watson, all of whom are considered by the Board to beindependent, with Mr Cohen and Mr Russouw attending byinvitation. The committee met four times during the financialyear. The Committee reviews the Company’s half-year and annualfinancial statements before submission to the Board for approvalas well as any announcements relating to financial performance.Regular reports from management, the internal audit departmentand the external auditors are also managed by the Committee.

The Risk Committee

The Board determines the Company’s Risk Profile and isresponsible for overseeing and approving risk managementstrategies and policies, internal compliance and internal control.Management is required by the Board to assess risk managementand associated internal compliance and control procedures andreport back on the efficiency and effectiveness of riskmanagement. The Company’s process of risk management andinternal compliance and control includes:

• establishing the Company’s goals and objectives, and implementingand monitoring strategies and policies to achieve these;

• continuously identifying and measuring risks that might impacton the achievement of the Company’s goals and objectives;

• formulating risk management strategies to manage identifiedrisks and designing and implementing appropriate riskmanagement policies and internal controls;

• monitoring the performance of, and continuously improvingthe effectiveness of, risk management systems and internalcompliance and controls; and

• during the year, owing to the increased focus on risk, a sub-riskcommittee, comprising executive directors and seniormanagement, was established to assess the monthly risks.

Comprehensive practices which are in place are directed towardsachieving the following objectives:

• effectiveness and efficiency in the use of the Company’s resources;• compliance with applicable laws and regulations; and• preparation of reliable published financial information.

The Risk committee consists of Mr Grey (Chairman), Mr Turner, MrWillsteed, Mr Watson and Mr Cohen; the sub-risk committeeconsists of Mr Grey (Chairman), Mr Turner, Mr Kovarsky, MrCohen, Mr Muller, Mr Visser, Mr Van Dyk and Mr Russouw. The riskcommittee met once during the year, and the sub-risk committeemet four times during the year, with all members attending. On23 July 2009 Mr Cohen resigned as a member of the riskcommittee and Mr Muller was appointed on the same date.

The Treasury Committee

The Treasury Committee was chaired by Mr Cohen throughoutthe year. Other members include Mr Muller and Mr Russouw,both qualified chartered accountants and Mr Van Dyk, the ChiefFinancial Officer of IFMSA. On 23 July 2009, Mr Cohen resignedfrom the Committee and Mr Muller was appointed Chairman ofthe Committee. During the course of the financial year, thecommittee met five times. The purpose of the TreasuryCommittee is to monitor the Group’s financial concerns. Theoverall treasury objectives are to support the Group’sdevelopment by ensuring:

• sufficient liquidity, thereby guaranteeing that the Group is at alltimes in a position to meet its obligations as they fall due in atimely manner and in all reasonably foreseeable circumstances;

• the most competitive return on surplus cash balances (withinacceptable risk levels);

• availability of flexible and competitively-priced funding at all times;

• identification and management of the financial risks arisingfrom operational activities (this would include the hedging offoreign exchange and interest rates movements);

• professional interaction with financial markets; and• clear accountability within the treasury function.

The monthly treasury reports are included in the board meetingpapers.

Attendance at meetings

Attendance at Board meetings, nomination committee meetings,remuneration committee meetings and audit committeemeetings is set out on page 28.

Terms of reference

The terms of reference for the Nomination, Remuneration, Auditand Treasury Committees, explaining their role and theauthority delegated to them by the Board, can be viewed on theCompany’s website at www.ifml.com.

Model code

The Company has complied with a code of securities dealings inrelation to the ordinary shares which is consistent with the ModelCode, set out in the Listing Rules. The code adopted applies to theDirectors and other relevant employees of the Group.

Share trading

Dealings are not permitted at any time whilst in the possessionof price sensitive information not already available to themarket. In addition, the Corporations Act 2001 prohibits thepurchase or sale of securities whilst a person is in possession ofinside information.

Hedging

Directors and executives are not generally permitted to hedgetheir shareholdings except as prescribed in the SecuritiesDealing Policy.

“Hedging” includes entering into any transaction orarrangement in financial products which operates to limit theeconomic risk of a security holding in the Company, includingequity swaps and contracts for difference. Details of theCompany’s policy in relation to hedging is contained in theRemuneration Report on page 29 of the annual report.

Communication to market andshareholders

The Board of Directors aims to ensure that the shareholders, on

behalf of whom they act, are informed of all information

necessary to assess the performance of the Directors and the

Company. Information is communicated to shareholders and the

market through:

• the annual report which is distributed to all shareholders;

• other periodic reports which are lodged with the LSE and are

available for shareholder scrutiny;

• other announcements made in accordance with LSE Rules;

• special purpose information memoranda issued to shareholders

as appropriate; and

• the Annual General Meeting and other meetings called to

obtain approval for Board action as appropriate.

Independent professional advice

Directors have the right, in connection with their duties and

responsibilities as Directors, to seek independent professional

advice at the Company’s expense. Prior approval of the

Chairman is required (only above A$50,000), which will not be

unreasonably withheld.

Ethical standards

All Directors, Management and staff are expected to

consistently apply the highest ethical standards to their conduct

to ensure that the Company’s affairs and reputation are at all

times maintained at the uppermost level.

Going concern

A statement on the Directors’ position regarding the Company as

a going concern is contained in the Directors’ Report on page 22.

Corporate governance (continued)

page 20

Attendance at meetings for the Risk and Treasury committees is detailed below:

Risk Committee Sub-risk Committee Treasury Committee

Anthony Grey 1 4 n/aStephen Turner 1 4 n/aDavid Kovarsky 1 4 n/aIan Watson 1 n/a n/aTerence Willsteed 1 n/a n/aDion Cohen 1 4 5Hannes van Dyk n/a 4 4Jannie Muller n/a 4 5Pieter Russouw n/a 4 5Number of meetings held 1 4 5


Contents

22 Directors’ report

29 Remuneration report

45 Auditor’s independence declaration

46 Financial report

46 Consolidated income statements

47 Statement in change in equity

49 Consolidated balance sheets

50 Statement of cash flows

51 Reconciliation of operating loss/profit to

cash flows from operating activities

52 Notes to the financial report

103 Independent auditor’s report

105 Notice of the annual general meeting

109 Explanatory memorandum

111 Form of proxy

IBC Corporate information

The Directors present their report together with the financial report for the year ended 30 June 2009. Directors were in office for thisentire year unless otherwise stated.

International Ferro Metals is an integrated ferrochrome producer listed on the London Stock Exchange (LSE: IFL). Head office is in Sydney,Australia and the production facilities are located in the North West Province of South Africa.

The directors

Name Age Position Date of appointment

Anthony John Grey 72 Non-executive Chairman 9 December 2002Stephen John Turner 48 Non-executive Deputy Chairman 26 January 2002David Chaim Kovarsky 62 Chief Executive Officer 1 February 2008Ronald Henry Barnard 48 Chief Operating Officer Resigned 17 July 2008Xiaoping Yang 54 Executive director – IFMSA & 12 October 2005

Non-executive director - IFML Terence Vincent Coleman Willsteed 75 Non-executive Director 12 October 2005Ian Clyde Watson 66 Non-executive Director 2 April 2003Stephen Douglas Oke 55 Non-executive Director 16 November 2005Tian Xia 39 Non-executive Director 16 November 2005

Principal activities

IFM produces ferrochrome from chromite ore located in the Bushveld Igneous Complex, one of the world’s richest mineral repositoriesand the largest ferrochrome producing regions in the world. IFM’s Lesedi chromite mines and integrated ferrochrome processing andbeneficiation operations are situated at Buffelsfontein, 100km north-west of Johannesburg, South Africa. The Company is currentlydeveloping the nearby Sky Chrome deposit in which it has an 80 percent interest and which will allow the company to significantlyincrease production.

Review of operation

The Group reported a loss before tax of ZAR456 million for the year ended 30 June 2009, compared to profit before tax of ZAR630 millionfor the prior year comparable period. This significant decline in results is attributable to the unprecedented sharp reduction in globalferrochrome demand from the beginning of the fourth quarter of 2008, triggered by dramatic production cuts by stainless steel producersas a result of the global economic crisis.

The past year has been a challenging one for the Group. After achieving record production during the first quarter of FY2009, the Companyresponded swiftly to deteriorating market conditions to preserve its cash position by shutting down its furnaces in November 2008 andfocusing on selling down its inventory, reducing costs and deferring major capital expenditure.

The conventional industry-wide ferrochrome pricing mechanism collapsed, resulting in retrospective downward price revisions of salescontracts in the second quarter of FY2009. Prices and sales volumes remained subdued over the second half of the financial year beforepicking up again after year-end. During the shutdown period, IFM undertook maintenance of its plant and upgraded certain elementsaimed at enhancing operational performance once production resumed. All maintenance and furnace upgrades were completed on timeand on budget.

Directors,

report

page 22


Executive directors

Mr David Kovarsky – Chief Executive Officer (62)David Kovarsky joined the Company in February 2008 and has extensive experience in the ferrochrome industry, both in operations andconstruction. In his previous position as CEO of South Africa’s largest submerged arc furnace supplier, Pyromet, he assisted in thecompany’s initial feasibility studies, construction and commissioning of IFM’s two furnaces and beneficiation plant on a turnkey basis.David’s career at JCI Limited from 1983 to 1994 included him being an executive director of JCI Limited with direct managementresponsibility for Consolidated Metallurgical Industries (CMI) for two years - at that time the world’s second largest ferrochromeproducer. He was also a non-executive director of SAB and was CEO of Times Media Limited.

Mr Xiaoping Yang – Executive Director of IFMSA & Non-executive Director of IFML (54)Xiaoping Yang holds a Masters Degree from the Beijing University of Science and Technology. He joined Sinosteel Co as a Project Managerand became Branch General Manager in 1994. Xiaoping moved to South Africa in 1998 where he undertook the role of ManagingDirector and Chief Executive Officer of ASA Metals (Pty) Ltd, a South African chrome mining and smelter business. Xiaoping joined JISCOas Assistant President in July 2002.

Non-executive Directors

Mr Anthony (Tony) Grey – Non-executive Chairman (72) Tony Grey graduated with a BA (Hons) in History and a Juris Doctor from the University of Toronto. Thereafter, he practised law with amajor law firm in Toronto for seven years. He emigrated to Australia in 1972 and founded Pancontinental Mining, which he built into apublicly-listed major diversified mining house with interests in gold, base metals, coal, industrial minerals and uranium. He leftPancontinental Mining in 1992 and became a director of National Mutual Royal Bank for four years. Thereafter, Tony was appointedChairman of Kingsgate Consolidated, a gold mining company listed on the Australian Stock Exchange. In 1992, Tony became a majorshareholder and Executive Chairman of Polartechnics Ltd, an Australian Stock Exchange-listed biomedical company developing therevolutionary Australian invention of an optoelectronic means of diagnosing pre-cancer cells and cancer. Tony also serves on the boardof International Potash Limited, a Canadian potash producer, as a non-executive director and as a director of Mega Uranium Limited.Tony has written three books and numerous articles about the mining industry.

Mr Stephen Turner – Non-executive Deputy Chairman (48)Stephen Turner, founder of IFM, has over twenty years’ experience in financial markets and for the last fifteen years has specialised inthe natural resources sector. Stephen has delivered resource projects in Australia, Southern Africa, Fiji, New Caledonia and the SolomonIslands. He was a founding director of the Australian subsidiary of PSG Investment Group, then South Africa’s sixth largest investmentbank. He has an extensive network of business contacts and has raised equity capital in Australia, the UK, Hong Kong, Malaysia and theUSA. Stephen is an Australian Chartered Accountant.

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Mr Terence (Terry) Willsteed – Non-executive Director (75)Terry Willsteed holds a Bachelor of Engineering (Mining) Honours degree, is a Fellow of the Australasian Institute of Mining and Metallurgyand has, since 1973, been the Principal of consulting mining engineers, Terence Willsteed & Associates. His forty year career in the miningindustry has included senior line operational and engineering positions with Zinc Corporation, Mt Isa Mines Ltd and Consolidated GoldfieldsLtd. Other public directorships include European Gas Limited up to 1 September 2009, Citigold Corporation Limited and Goldsearch Limited.In his consulting experience, Terry has been involved in the assessment and development of a wide range of mineral, coal and oil shaleprojects, and has participated in the management of developing and operating mineral projects both in Australia and internationally.

Mr Ian Watson – Non-executive Director (66)Ian Watson is a Professional Engineer. He obtained a national Diploma of Mining from the Witwatersrand Technical College, South Africain 1968 before joining Gold Fields South Africa (GDFSA) as a trainee mining engineer. Ian progressed through the GDFSA Group and heldvarious senior positions at the East Driefontein, Vlakfontein and Doornfontein gold mines before becoming the mine manager of WestDriefontein gold mine in 1978. He became the manager of Kloof Gold Mining Company in 1982, and the Mine Manager of NorthamPlatinum Limited in 1986 where he led the start-up of the Northam Platinum mine, including underground mine design, pioneering theuse of hydropower, installing metallurgical plants (concentrator, smelter and base metal removal plant) and ultimately bringing the mineinto production in 1992. In 1992, Ian became a Consulting Engineer for GDFSA, where he was the technical and managerial advisor tovarious boards and management teams in the group’s gold, platinum and base metal companies. In 1998, Ian returned to NorthamPlatinum Limited as its Managing Director, where he was responsible for the performance and overall strategic direction of the companyas well as all aspects of new business initiatives and acquisitions. In April 2003, Ian joined the Group as Managing Director and becameNon-executive Director on 3 April 2005.

Mr Stephen Oke – Non-executive Director (55)Stephen Oke holds a BSc Honours degree in Geology from the University of Southampton and an MBA from the University of theWitwatersrand Graduate School of Business. He has over thirty years’ experience in the mining and metals industry, of which sometwelve years was spent in various operational management positions for the National Coal Board, Anglovaal Ltd, BP Coal andJohannesburg Consolidated Investment Co Ltd. Subsequently he has held senior positions in the investment banking industry for SmithNew Court, Merrill Lynch, NM Rothschild and Sons and Standard Bank, specialising in the metals and mining sector where he advised ona number of transactions and equity capital fund raisings worldwide. He is a non-executive director of Kazakah Gold Limited.

Ms Tian Xia – Non-executive Director (39)Tian Xia received a Bachelor of Industrial Accounting degree in 1992 from the East China University of Metallurgy. In the same year shejoined JISCO as an accountant. Tian became a Certified Public Accountant of China in 1996 and received an EMBA degree in 2000 fromXi’an University of Science and Technology. She was appointed the Director of Financial Department of JISCO Group and was promotedto the position of Associate General Accountant in 2005. She was appointed Chief Financial Officer of the JISCO Group in 2008.

Management

The Management of the Group, excluding the executive directors mentioned above include:

Mr Jannie Muller – Chief Financial Officer (40)Jannie obtained his Bachelor in Accounting honours degree at the University of Stellenbosch in 1994. After completing his articles withDeloitte & Touche, and qualifying as a Chartered Accountant in 1997, he spent two years in London working for three internationalinvestment banks where he gained extensive experience in financial instruments and international financial markets. Upon returning toSouth Africa he worked as a treasury manager for the Old Mutual group for four years during which time he qualified as a CharteredFinancial Analyst. Thereafter he worked for ABSA Bank for two years as investment specialist. He joined IFM in 2007 as Group FinancialManager and was appointed CFO on 23 July 2009.

Mr Hannes Visser – General Manager, Operations (52)Hannes Visser has more than 20 years’ experience in the ferrochrome industry. He holds a degree in Chemical Engineering (Extr. Met.)from the University of Stellenbosch, South Africa. Prior to joining IFM in July 2008, he was employed by leading global ferrochromeproducers and has participated in the design, construction, commissioning, operation and management of a number of furnaces as wellas pelletising and sintering plants, ore beneficiation plants and other processes in the ferro-alloy industry. He is well experienced inmanaging production facilities according to best practice quality, safety and environmental standards.

Mr Hannes Van Dyk – Chief Financial Officer – IFMSA (42)After qualifying in financial management in 1990, Hannes was involved in operational finance in different corporate manufacturingenvironments in South Africa up until 1996 when he joined the mining and smelting industry at one of the leading ferrochromeproducers in South Africa. In 1999 he was awarded a Masters degree in Accounting after completion of his dissertation. His experiencehas ranged from cost and financial management, tax, accounting, governance and internal control as well as extensive managementexperience within the ferrochrome industry. Hannes also held various positions with extensive board exposure to multinational corporateshareholders. He joined IFM in December 2008.

Directors,

report (continued)

page 24


Company secretary

Mr Wayne Kernaghan

Wayne is a member of the Institute of Chartered Accountants in Australia with a number of years experience in various areas of themining industry. He is also a Fellow of the Australian Institute of Company Directors and a Chartered Secretary.

Interests in the shares and options of the company and related bodies corporate

As at the date of this report, the interests of the directors in the shares and options of International Ferro Metals Limited were:

Number of Ordinary Shares

D C Kovarsky –X Yang 166,667A J Grey 1,266,667S J Turner 6,916,667T V Willsteed 1,000,000I W Watson 333,334S D Oke 50,000T Xia 166,667

There were no options held over Ordinary Shares at the date of this report.

Reserve and resource statement

Table 1:

Mineral Resource and Mineral Reserve Statement attributable to International Ferro Metals Limited as at 30 June 2009.

Mineral Reserves Mineral Resources (Geological Losses Applied)

Tonnage Cr2O3 Cr:Fe Tonnage Cr2O3 Cr:Fe (kt) (%) ratio (kt) (%) ratio

Proved MeasuredLesedi Lesedi

MG3 4,982 34.93 1.25MG2T 2,171 37.27 1.36

MG2 (1) 6,808 28.05 1.36 MG2B 5,444 38.65 1.37MG1 3,840 35.61 1.49 MG1 6,130 40.49 1.49Sky Chrome Sky ChromeOpen Pit

MG2T 323 28.77 1.21MG2C 43 25.10 1.21 MG2B_2 152 28.73 1.18MG2A & B 87 31.40 1.34 MG2B 850 26.96 1.14MG1 64 23.80 1.43 MG1 1,022 27.18 1.20

Probable Indicated Lesedi Lesedi

MG3 1,227 34.46 1.19MG2T 583 37.31 1.36

MG2 (1) 2,129 28.03 1.37 MG2B 1,477 38.55 1.38MG1 826 35.80 1.49 MG1 1,938 40.66 1.49Sky Chrome Sky ChromeOpen Pit

MG2T 15,082 26.73 1.16MG2C 258 22.80 1.31 MG2B_2 3,227 30.04 1.22MG2A & B 970 27.80 1.35 MG2B 29,410 29.87 1.21MG1 574 28.90 1.45 MG1 28,535 34.20 1.40UndergroundMG2A & B 19,260 30.79 1.24MGI 20,500 34.49 1.35

Proved & Probable Measured & IndicatedReserves 55,359 32.00 1.33 Resources 102,553 32.49 1.29

Reserve and resources statement (continued)

Mineral Reserves Mineral Resources (Geological Losses Applied)

Tonnage Cr2O3 Cr:Fe Tonnage Cr2O3 Cr:Fe (kt) (%) ratio (kt) (%) ratio

InferredLesediMG3 1,894 34.38 1.18MG2T 832 37.23 1.36MG2B 2,016 38.51 1.38MG1 2,730 40.67 1.50Sky ChromeMG2T 2,996 29.31 1.22MG2B_2 739 28.89 1.20MG2B 5,887 33.49 1.29MG1 6,435 36.14 1.44

Inferred Resources 23,529 35.01 1.34

Total Reserves 55,359 32.00 1.33 Total Resources 126,082 32.96 1.30

1: Tonnages and grades for the MG2 include the parting between the MG2B and MG2T reefs.

The information in this report that relates to exploration results is based on information compiled by SRK Consulting under the

supervision of Mr HG Waldeck (Pr Eng), V Simposya (Pr Sci Nat) and M Wanless (Pr Sci Nat). All Competent Persons have sufficient

experience which is relevant to the style of mineralisation and types of deposits under consideration, and to the activity which has been

undertaken, to qualify as a Competent Person as defined by the 2004 edition of the Australasian Code for Reporting of Exploration

Results, Mineral Resources and Ore Reserves. SRK consents to the report being issued in the form and context in which it appears.

The Measured and Indicated Mineral Resources for Lesedi and Sky Chrome declared as at 30 June 2009 have marginally increased from

that declared in June 2008 due to re-interpretation of additional drillhole data and structural information as well as the depletion due

to mining at Lesedi. The Inferred Resources have also increased marginally after the re-interpretation.

The Mineral Reserves for Lesedi has decreased marginally due to the depletion for mining during the year. For the Sky Chrome Project,

the Mineral Reserves have been included in the statement as at 30 June 2009 in view of the September 2008 Feasibility Study completed

during the year to 30 June 2009.

The Mineral Resources and Reserves attributable to IFM for Lesedi have also increased during the year as the shareholding has increased

to 99.38% from the previous 98.75%.

Dividends

The Board of Directors resolved not to declare a divided for the year ending 30 June 2009.

Operating and financial review

Financial highlights

• Strong balance sheet with ZAR340 million (GBP26 million) of cash.

• Ferrochrome price US$0.69/lb in Q4 of FY2009, down 64 percent from Q4 of FY2008.

• Revenue ZAR782 million, down 59 percent.

• EBITDA loss of ZAR396 million.

• Net loss before tax of ZAR456 million, compared with net profit of ZAR630 million in FY2008.

• Loss per share of ZAR0.66 cents.

Directors,

report (continued)

page 26

The Company reported a loss before tax of ZAR456 million for the year ended 30 June 2009, compared to a profit before tax of ZAR630

million for the prior year. The significant decline in profitability was due to the unprecedented sharp decline in global ferrochrome

demand from the fourth quarter of 2008, which was triggered by dramatic production cuts by stainless steel producers as a result of the

global economic crisis.

After achieving record production in the first two months of FY2009, the Company responded swiftly to deteriorating market conditions

to preserve its cash position by shutting down its furnaces in November 2008 and focusing on selling down its inventory, reducing costs

and deferring its major capital expenditure.

Financial highlights for FY2009

H1 2009 H2 2009 FY 2009 FY 2008Tonnes '000 Tonnes '000 Tonnes '000 Tonnes '000

FeCr production (tonnes) 90,759 19,605 110,364 205,607

ZAR'000 ZAR'000 ZAR'000 ZAR'000

Sales Revenue 526,057 255,517 781,574 1,919,396

Cost of goods sold (456,560) (412,417) (868,977) (1,190,926)

EBITDA (2,331) (393,637) (395,968) 726,727

Net profit/(loss) after tax 3,251 (341,830) (338,579) 578,182

Net operating cash flow (321,398) (26,776) (348,174) 251,257

EPS (cents per share) 1 (67) (66) 114

DPS (pence) – – – 1p

Significant changes in the state of affairs

Other than the above there were no significant changes in the state of affairs of the Group for the year ended 30 June 2009.

Matters subsequent to balance date

Other than those outlined in note 31 to the Financial Statements, no matters or circumstances have arisen since 30 June 2009 that have

significantly affected or may significantly affect:

• the Company's operations in future financial years; or

• the result of those operations in future financial years; or

• the Company's state of affairs in future financial years.

Likely developments

Further information on likely developments in the operations of the entity and the expected results of operations have not been included

in this report because the Directors believe it would be likely to result in unreasonable prejudice to the entity.

Environmental regulation

The Group is compliant with all the environmental regulations which apply to it.

Insurance of officers

During the financial year, a premium was paid to insure the Directors and Secretary of International Ferro Metals Limited.

IFM Annual Report 2009

Directors’ meetings

The number of meetings of directors (including meetings of committees of directors) held during the year and the numbers of meetings

attended by each director were as follows:

Attendance at meetings up to and including the date of this annual report, namely 30 June 2009, is indicated below:

Board 21 Audit Remuneration NominationName Committee 4 Committee 8 Committee

David Kovarsky 21 N/A N/A N/A

Anthony Grey 21 N/A N/A –

Stephen Turner 21 N/A N/A N/A

Xiaoping Yang 21 N/A N/A N/A

Terence Willsteed 21 4 8 –

Ian Watson 17 4 8 N/A

Stephen Oke 19 4 8 –

Tian Xia 19 N/A N/A N/A

Going concern

After making enquiries, the directors have a reasonable expectation that the company has adequate resources to continue in operational

existence for the foreseeable future. For this reason, we continue to adopt the going concern basis in preparing the accounts.

Rounding

The amounts contained in the financial report for the year ended 30 June 2009 have been rounded to the nearest ZAR1,000

(where rounding is applicable) under the option available to the company under ASIC Class Order 98/0100. The company is an entity to

which the Class Order applies.

Auditor independence

The directors received a declaration from Ernst & Young, which is on page 45.

Non-audit services

The following non-audit services were provided by the entity's auditor, Ernst & Young. The directors are satisfied that the provision of

non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The

nature and scope of each type of non-audit service provided means that auditor independence was not compromised.

Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:

ZAR'000

Other assurance services 255

255

Directors,

report (continued)

page 28

Introduction

The Directors of International Ferro Metals Limited present the Remuneration Report for the Group for the year ended 30 June 2009.

This Remuneration Report forms part of the Directors' Report in accordance with the requirements of the Corporation Act 2001 and its

Regulations.

For the purposes of this report Key Management Personnel of the Group are defined as those persons having authority and responsibility

for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including any director

(whether executive or otherwise) of the Parent Company, and includes the five executives of the Parent and the Group receiving the

highest remuneration.

Table 1 – The details of the Key Management Personnel are:

Name Position

David Kovarsky Chief Executive Officer “CEO” (Appointed as CEO on 1 January 2009 previously Managing Director)

Anthony Grey* Non-executive Chairman (Stepped down as Executive Chairman and appointed

Non-executive Chairman on 1 January 2009)

Stephen Turner* Non-executive Deputy Chairman (Stepped down as CEO and appointed Non-executive

Deputy Chairman 1 January 2009)

Ronald Barnard Chief Operating Officer (Resigned 17 July 2008)

Xiaoping Yang Executive director – IFMSA & Non-executive director – IFML

Terry Willsteed* Chairman – Remuneration Committee

Ian Watson* Non-executive director – IFML

Stephen Oke* Chairman – Audit Committee

Tian Xia* Non-executive director – IFML

Dion Cohen Chief Financial Officer (Resigned 23 July 2009)

Jannie Muller Chief Financial Officer (Appointed 23 July 2009)

Hannes Visser General Manager of Operations – IFMSA (Appointed 14 July 2008)

Hannes van Dyk Chief Financial Officer – IFMSA (Appointed 1 December 2008)

* non executive director

Remuneration committee and principles

The Remuneration Committee of the Board of Directors of the Company is responsible for determining and reviewing compensation

arrangements for the directors and executive management. The Remuneration Committee will assess the appropriateness of the nature

and amount of emoluments of such officers on a periodic basis by reference to relevant employment market conditions with the overall

objective of ensuring maximum shareholder benefit from the retention of a high quality Board and executive management.

To this end, the Group embodies the following principles in its compensation framework:

• Provide competitive rewards to attract and retain high calibre executives;

• Link executive rewards to shareholder value; and

• Establish appropriate performance hurdles in relation to variable executive compensation.

Remuneration Structure

In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate

and distinct.

Non-executive director remuneration

ObjectiveTo enable the Company to attract and retain the services of suitable individuals to serve as directors, the Board seeks to remunerate at

a level that provides the Company with this objective, while incurring a cost that is acceptable to shareholders.

Structure The LSE Listing rules and Board Charter specify that the maximum aggregate cash fees of non-executive directors shall be approved by

shareholders. On 12 November 2008, the shareholders approved the maximum aggregate cash remuneration be increased from

A$500,000 per annum to GBP750,000 per annum with effect from the financial year commencing 1 July 2008.

Remuneration report (audited)


Each non-executive director receives a base fee, as detailed in table 2 per annum with additional fees for committee activities.

Non-executive director fees do not vary according to the performance of the Company nor do they receive retirement benefits other

than those required by legislation.

Non-executive directors are also incentivised through equity ownership. To this end, non-executive directors can be issued share options

and phantom share options in the Company. Currently non-executive directors do not have any equity share options outstanding.

The majority of Non-executive directors do not hold phantom options. Refer to short term incentive and long term incentive structure

discussion below for the details on share options and phantom share options.

The remuneration of non-executive directors for the years ending 30 June 2009 and 30 June 2008 is detailed in Tables 2 and 3 of this

report respectively.

Executive Remuneration

ObjectiveThe Group aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within

the Group so as to align the interests of executives with those of shareholders and ensure total remuneration is competitive by industry

standards.

StructureThe remuneration levels for executives are market-aligned by comparison against equivalent roles in similar operations.

The Remuneration Committee engages external consultants to provide independent advice on salary levels and incentives for

comparable executive positions in similar company structures.

The Group has entered into detailed contracts of employment with Key Management Personnel and standard contracts with other

executives. Details of these contracts are provided below.

Remuneration consists of the following key elements:

• Fixed remuneration (base salary, superannuation, consulting fees and non-monetary benefits);

• Variable remuneration, consisting of:

– short term incentive (STI); and

– long term incentive (LTI).

The proportion of fixed remuneration and variable remuneration (potential short term and long term incentives) for each executive is

set out in Table 2.

Fixed Remuneration

ObjectiveFixed remuneration is reviewed annually by the Remuneration Committee. The last review was performed on 29 December 2008. The

process consists of a review of relevant comparative remuneration externally and internally and, where appropriate, external advice on

policies and practices. As noted above, the committee has access to external advice independent of management.

StructureExecutives receive their fixed remuneration in cash. Details of the fixed remuneration component of executives are detailed in Table 2.

From 1 May 2009, all senior employees, including board members, took a ten percent reduction in salary until 31 August 2009.

Variable Remuneration – Short Term Incentive (STI)

ObjectiveThe objective of the STI is to link the achievements of the Group's production targets with the remuneration received by the executives

responsible to meet those targets. The total potential STI available is set at a level so as to provide sufficient incentive to the executives

to achieve the operational targets and such that the cost to the Group is reasonable in the circumstances.

STI bonus for 2009 financial yearNo STI bonuses were approved during the 2009 financial year.

StructureActual STI payments granted to each executive depend on the extent to which specific targets are met. Provisions are accrued in the

financial year in which the targets are set, with payments delivered as a cash bonus in the following reporting period.

Remuneration report (audited) (continued)

page 30

IFM share price (pence)

Sep 2005

180

160

140

120

100

80

60

40

20

0Dec 2005 Mar 2006 Jun 2006 Sep 2006 Dec 2006 Mar 2007 Jun 2007 Sep 2007 Dec 2007 Mar 2008 Jun 2008 Sep 2008 Dec 2008 Mar 2009 Jun 2009

page 31

Variable Remuneration – Long Term Incentive (LTI)

ObjectiveThe objective of the LTI plan is to reward executives in a manner that provides incentives aimed at increasing the market value of the

Group and as a retention mechanism. It is separate from the bonus schemes which are related to short term performances.

StructureA Phantom Option Scheme was introduced on 15 November 2006 as a long term incentive scheme. Options are offered to eligible

Key Management Personnel subject to the satisfaction of certain vesting and exercise conditions. A cash amount is determined by

reference to the excess of the market price of an ordinary share in the Company over the offer price at the time the options are exercised.

The options, in most cases, vest in equal tranches over three years subject to the recipients continued employment by the Company.

The options may also vest immediately. Vesting and exercise conditions are determined by the Board. Executives are able to exercise the

share options for up to five years from the grant of the options. On 30 December 2008, the Company cancelled all outstanding equity-

settled options and all phantom options outstanding. On the same day it was announced that the Company issued 17,083,000 phantom

options with an exercise price of 16p. On 19 February 2009, the Board resolved to decrease the number of phantom options granted to

directors and staff from 17,083,000 to 10,112,568. The number was further reduced to 9,929,568 options owing to resignations after

1 January 2009.

Each tranche of options is capped at GBP1.00 (i.e. the maximum strike price of the option), vesting in equal tranches over three years.

Refer to table 6 of this report for details of the phantom options granted.

For each phantom option issue, specific terms relating to vesting conditions, term and pricing are recommended by the Remuneration

Committee and, if deemed, appropriate, approved by the Board.

Equity settled share options are granted to directors usually at the time of joining the Board. There are no outstanding equity options

at year end.

Share Trading and Margin Loans by Directors and Executives

Directors and executives are not permitted to hedge their shareholdings or share options except where each of the following

requirements has been satisfied:

• permission has been obtained from the Chairman;

• the shares have fully vested and are not subject to any hurdles or transfer restriction;

• the hedge transaction is treated as a sale or purchase of shares by the director or executive and the relevant approvals, disclosures

(to the LSE, as appropriate) and notifications are made on this basis;

• the hedge transaction may not be entered into, renewed, altered or closed out when the director or executive is in possession of price

sensitive information; and

• all costs or expenses associated with any hedging arrangement are to the director's or executive's own account.

No such requests for hedging shareholdings or share options have been received.

Analysis of Company's performance against STI and LTI

Share based incentive constitutes approximately 11% of total Key Management Personnel total remuneration (2008: 37%).


Employment Contracts

The following should be read with reference to the “STI” structure, “LTI” structure (above) and tables 2 and 4 (below).

Mr Anthony Grey

Non-Executive Chairman (appointed 1 January 2009)

The current service agreement commenced 1 January 2009. Under the terms of the present contract:

• Mr Grey is paid a service fee, in his current role as Non-executive Chairman, of A$275,000 per annum, an additional fee of A$25,000 per

annum for all Board committees and an additional fee of A$12,500 per annum for each Board committee of which he is a Chairman.

• Mr Grey will provide his services as director for four days per month.

• Additional consulting work for the Company undertaken by Mr Grey for more than four days in any month is paid at the rate of

A$450 per hour.

• Mr Grey stepped down as Executive Chairman to Non-executive Chairman of the Company on 31 December 2008 and was paid a

termination payment of A$1,081,270 (ZAR7,201,258) according to his Executive employment contract.

• Mr Grey was not granted any equity settled share options during the year ended 30 June 2009.

• Mr Grey was granted 1,550,000 phantom options with an exercise price of 16p on 30 December 2008. For further details refer to “LTI”

structure and table 6.

• The service agreement may be terminated at any time by Mr Grey giving the Company not less than twelve months notice in writing.

The Company may terminate the agreement without cause by providing not less than twelve months written notice or by making a

lump sum payment in lieu of any such period of notice. Payment is also applicable if there is a 50% or more takeover bid and any

options outstanding will immediately vest and be exercisable, and only applies if employment is terminated. In the event of a material

breach of any of the terms of the agreement or serious misconduct, the Company can terminate Mr Grey's employment at any time

without any compensation payable.

Mr Stephen Turner

Non-Executive Deputy-Chairman (appointed 1 January 2009)

The current service agreement commenced 1 January 2009. Under the terms of the present contract:

• Mr Turner is paid a service fee, in his current role as Non-executive Deputy Chairman, of A$200,000 per annum, an additional fee of

A$25,000 per annum for all Board committees and an additional fee of A$12,500 per annum for each Board committee of which he

is a Chairman.

• Mr Turner will provide his services as director for four days per month.

• Additional consulting work for the Company undertaken by Mr Turner for more than four days in any month is paid at the rate of

A$450 per hour.

• Mr Turner stepped down as Chief Executive Officer to Non-executive Deputy Chairman of the Company on 31 December 2008 and

was paid a termination payment of A$1,175,177 (ZAR7,826,679) according to his Executive employment contract.

• Mr Turner was not granted any equity settled share options during the year ended 30 June 2009.

• Mr Turner was granted 1,550,000 phantom options with an exercise price of 16p on 30 December 2008. For further details refer to

“LTI” structure and table 6.

• The service agreement may be terminated at any time by Mr Turner giving the Company not less than twelve months notice in writing.



options outstanding will immediately vest and be exercisable and only applies if employment is terminated. In the event of a material

breach of any of the terms of the agreement or serious misconduct, the Company can terminate Mr Turner's employment at any time

without any compensation payable.

Mr Terence Willsteed

Non-executive Director

Mr Willsteed was appointed non-executive director on 12 October 2005. Under the terms of the present contract:

• Mr Willsteed is paid a service fee of A$125,000 per annum, an additional fee of A$25,000 per annum for all Board committees and an

additional fee of A$12,500 per annum for each Board committee of which he is a Chairman.

• Mr Willsteed will provide his services as director for two days per month.

• If he undertakes additional work for the Company he is paid an additional fee to be agreed at the time such work is undertaken.

• Mr Willsteed was not granted any share options during the year ended 30 June 2009.

• Mr Willsteed was not granted any phantom options after the cancellation of 123,125 phantom options on 30 December 2008. For

further details refer to “LTI” structure and table 6.

• The service agreement may be terminated at any time by Mr Willsteed giving the Company not less than twelve months notice in


page 32

writing. The Company may terminate the agreement without cause by providing not less than twelve months written notice or by

making a lump sum payment in lieu of any such period of notice. If a successful acquisition is accepted by holders of at least 50% of

shares, Mr Willsteed will receive a fee of GBP42,500 for an offer of 50 pence per share increasing by GBP1,250 for each 1 pence

variation per share above 50 pence, with any increase capped at an offer price of GBP1 per share. In the event of a material breach of

any of the terms of the agreement or serious misconduct, the Company can terminate Mr Willsteed's employment at any time without

any compensation payable.

Mr Ian Watson


Mr Watson was appointed non-executive director on 2 April 2003. Under the terms of the present contract:

• Mr Watson is paid a service fee of ZAR697,500 per annum, an additional fee of ZAR139,500 per annum for all Board committees and

an additional fee of ZAR69,750 per annum for each Board committee of which he is a Chairman.

• Mr Watson will provide his services as director for two days per month.


• Mr Watson was not granted any share options during the year ended 30 June 2009.

• Mr Watson was not granted any phantom options after the cancellation of 289,792 phantom options on 30 December 2008.

For further details refer to “LTI” structure and table 6.

• The service agreement may be terminated at any time by Mr Watson giving the Company not less than twelve months notice in

writing. The Company may terminate the agreement without cause by providing not less than twelve months written notice or by

making a lump sum payment in lieu of any such period of notice. If a successful acquisition is accepted by holders of at least 50% of

shares, Mr Watson will receive a fee of GBP42,500 for an offer of 50 pence per share increasing by GBP1,250 for each 1 pence variation

per share above 50 pence, with any increase capped at an offer price of GBP1 per share. In the event of a material breach of any of

the terms of the agreement or serious misconduct, the Company can terminate Mr Waton's employment at any time without any

compensation payable.

Mr Stephen Oke


Mr Oke was appointed a non-executive director on 16 November 2006. Under the terms of the present contract:

• Mr Oke is paid a service fee of GBP50,000 per annum, an additional fee of GBP10,000 per annum for all Board committees and an

additional fee of GBP5,000 per annum for each Board committee of which he is a Chairman.

• Mr Oke will provide his services as director for two days per month.


• Mr Oke was not granted any share options during the year ended 30 June 2009.

• Mr Oke was not granted any phantom options after the cancellation of 123,125 phantom options on 30 December 2008. For further

details refer to “LTI” structure and table 6.

• The service agreement may be terminated at any time by Mr Oke giving the Company not less than twelve months notice in writing. The

Company may terminate the agreement without cause by providing not less than twelve months written notice or by making a lump sum

payment in lieu of any such period of notice. If a successful acquisition is accepted by holders of at least 50% of shares, Mr Oke will receive

a fee of GBP42,500 for an offer of 50 pence per share increasing by GBP1,250 for each 1 pence variation per share above 50 pence, with

any increase capped at an offer price of GBP1 per share. In the event of a material breach of any of the terms of the agreement or serious

misconduct, the Company can terminate Mr Oke's employment at any time without any compensation payable.

Ms Tian Xia


Ms Xia was appointed a non-executive director on 16 November 2006. Under the terms of the present contract:

• Ms Xia is paid a service fee of GBP50,000 per annum, an additional fee of GBP10,000 per annum for all Board committees and an

additional fee of GBP5,000 per annum for each Board committee of which she is a Chairman.

• Ms Xia will provide her services as director for two days per month.

• If she undertakes additional work for the Company she is paid an additional fee to be agreed at the time such work is undertaken.

• Ms Xia was not granted any share options during the year ended 30 June 2009.

• Ms Xia was not granted any phantom options after the cancellation of 123,125 phantom options on 30 December 2008. For further

details refer to “LTI” structure and table 6.

• The service agreement may be terminated at any time by Ms Xia giving the Company not less than twelve months notice in writing. The

Company may terminate the agreement without cause by providing not less than twelve months written notice or by making a lump sum

payment in lieu of any such period of notice. If a successful acquisition is accepted by holders of at least 50% of shares,

Ms Xia will receive a fee of GBP42,500 for an offer of 50 pence per share increasing by GBP1,250 for each 1 pence variation per share

above 50 pence, with any increase capped at an offer price of GBP1 per share. In the event of a material breach of any of the terms of


the agreement or serious misconduct, the Company can terminate Ms Xia's employment at any time without any compensation payable.

Mr David Kovarsky

Chief Executive Officer

Mr Kovarsky is employed under a fixed contract commencing from 1 February 2008. The employment term is for four years, subject to

termination provisions. Under the terms of the present contract:

• Mr Kovarsky is paid an annual salary of ZAR3,262,500.

• A retention fee of ZAR8,997,492, was paid for the services that Mr Kovarsky will provide over the period of his employment contract.

The amortised value of this retention fee amounted to ZAR2,249,373 for the year ending 30 June 2009. Should Mr Kovarsky resign

prior to the end of his employment contract, he will repay the remaining unamortised value as at the date of his resignation.

On termination or death, the fee is not repayable.

• Mr Kovarsky was issued one million share options on 1 February 2008. On 30 December 2008, the Company cancelled all outstanding

equity-settled options. The fair value expensed of these options during the period amounted to ZAR1,618,428 with the total fair value

being ZAR3,269,597. Please refer to Table 4 for further details.

• Mr Kovarsky was granted 1,000,000 phantom options with an exercise price of 16p on 30 December 2008. For further details refer to


• The service agreement may be terminated at any time by Mr Kovarsky giving the Company not less than six months notice in writing.

The Company may terminate the agreement without cause by providing not less than twelve months written notice provided that

such notice cannot be given by IFM within the first six calendar months of Mr Kovarsky's employment or on expiry of the first six

calendar months of Mr Kovarsky's employment by paying his cost to company for the twelve months immediately prior to ceasing

employment, including bonuses, in lieu of such notice. In the event of a material breach of any of the terms of the agreement or serious

misconduct, the Company can terminate Mr Kovarsky's employment at any time. A termination payment will not be payable on

resignation or dismissal for serious misconduct.

• In the event of a takeover, IFM will pay the equivalent of Mr Kovarsky's cost to company (subject to any adjustments in the cost to

company that have occurred as a result of the annual review of Mr Kovarsky's remuneration), including any bonuses that Mr Kovarsky

would reasonably have been expected to have received within twelve months and only applies if employment is terminated .

Mr Ronald Barnard

Chief Operating Officer – IFMSA (resigned 17 July 2008)

Mr Barnard was employed under a rolling contract. His employment contract commenced on 15 January 2003. On 17 July 2008,

Mr Barnard resigned as Chief Operating Officer and from the Company's Board of Directors. Under the terms of the contract:

• Mr Barnard was paid a termination payment of ZAR4,714,576 according to his Executive employment contract.

• No equity settled share options were issued to Mr Barnard during the year ended 30 June 2009.

Mr Xiaoping Yang

Non-executive director of the Company and executive director of IFMSA

Mr Yang was appointed a non-executive director of the Company and as an executive director of IFMSA on 12 October 2005. Mr Yang

is not entitled to an additional annual director's fee for acting as a director of the Company.

IFMSA entered into a service contract on 20 March 2006 with Mr Yang. He is employed under a rolling contract. Under the terms of the

present contract:

• Mr Yang is paid an annual salary of ZAR2,025,000.

• Mr Yang was not granted any share options during the year ended 30 June 2009.

• Mr Yang was granted 446,250 phantom options with an exercise price of 16p on 30 December 2008. For further details refer to “LTI”


• The service contract may be terminated without cause by either party giving not less than thirty days notice in writing, or by IFMSA

paying Mr Yang his remuneration for such period in lieu of notice. IFMSA may also terminate the service contract without notice if

Mr Yang is in breach of the service contract without making any termination payment.

Mr Dion Cohen

Chief Financial Officer (resigned 23 July 2009)

Mr Cohen was employed under a rolling contract. His employment contract started on 1 April 2007. On 23 July 2009, Mr Cohen resigned

as Chief Financial Officer. Under the terms of the contract:

• Mr Cohen was paid an annual salary of A$403,900.

• Mr Cohen was not granted any share options during the year ended 30 June 2009.

• Mr Cohen was granted 998,250 phantom options with an exercise price of 16p on 30 December 2008. For further details refer to “LTI”


page 34


• The service agreement was able to be terminated at any time by Mr Cohen giving the Company not less than twelve months notice

in writing. The Company was able to terminate the agreement without cause by providing written notice . In such an event, the

Company will pay the greater of either the total amount payable by the Company to Mr Cohen for the twelve months prior to the

Terminate date or the total amount payable by the Company to Mr Cohen in the previous two year period prior to the Termination

date divided by two.

• In the event of a material breach of any of the terms of the agreement or serious misconduct, the Company was able to terminate

Mr Cohen's employment at any time without any compensation payable.

• On termination if Mr Cohen holds any options in the Company then Mr Cohen will continue to be entitled to exercise any options in

respect of which any vesting or exercise conditions have been satisfied and to retain any options in respect of which any vesting or

exercise conditions are still to be satisfied.

Mr Jannie Muller

Chief Financial Officer (appointed 23 July 2009)

Mr Muller entered into a service agreement with IFML on 1 June 2007 as Group Financial Manager. On the 23 of July 2009, Mr Muller

was appointed Chief Financial Officer. Mr Muller is employed under a rolling contract. Under the terms of the present contract:

• Mr Muller is paid an annual salary of ZAR1,237,500.

• Mr Muller was not granted any share options during the year ended 30 June 2009.

• Mr Muller was granted 190,000 phantom options with an exercise price of 16p on 30 December 2008. For further details refer to “LTI”


• The service agreement may be terminated at any time by Mr Muller giving the Company not less than twelve months notice in writing.



options outstanding will immediately vest and be exercisable. In the event of a material breach of any of the terms of the agreement

or serious misconduct, the Company can terminate Mr Muller's employment at any time without any compensation payable.

Mr Hannes Van Dyk

Chief Financial Officer – IFMSA (1 December 2008)

Mr Van Dyk entered into a service agreement with IFMSA on 1 December 2008, as Chief Financial Officer of IFMSA.

Mr Van Dyk is employed under a rolling contract. Under the terms of the present contract:

• Mr Van Dyk is paid an annual salary of ZAR2,000,000.

• Mr Van Dyk was not granted any share options during the year ended 30 June 2009.

• Mr Van Dyk was granted 250,000 phantom options with an exercise price of 16p on 30 December 2008. For further details refer to


• The service contract may be terminated without cause by either party giving not less than thirty days notice in writing, or by IFMSA

paying Mr Van Dyk his remuneration for such period in lieu of notice. IFMSA may also terminate the service contract without notice

if Mr Van Dyk is in breach of the service contract without making any compensation payable.

Mr Hannes Visser

General Manager of Operations – IFMSA (14 July 2008)

Mr Visser is employed under a fixed contract from 14 July 2008. The employment term is for five years, subject to termination provisions.

After lapsing of the five year period the contract will automatically revert to a normal employment contract unless a further fixed term

contract is negotiated. Under the terms of the present contract:

• Mr Visser is paid an annual salary of ZAR1,815,000.

• Mr Visser was not granted any share options during the year ended 30 June 2009.

• Mr Visser was granted 250,000 phantom options with an exercise price of 16p on 30 December 2008. For further details refer to “LTI”


• The service contract may be terminated by IFMSA giving notice in writing equivalent to the unexpired balance of his five year contract,

or by IFMSA paying Mr Visser his remuneration for such period in lieu of notice. In the event that the initial five year contract rolls

over into a normal employment contract, a notice period of one month should be given by either party. IFMSA may also terminate

the service contract without notice if Mr Visser is in breach of the service contract without making any termination payment.

• In the event that Xstrata or any of its subsidiaries or affiliated companies become the company's major shareholder, six months

afterwards the employee is entitled to terminate this contract and be paid a severance package of the unexpired balance of this

contract plus bonuses calculated at 75% of his annual salary for the unexpired period or two years' salary plus a bonus calculated at

75% of his annual salary for the 2 year period, whichever is greater. If this event occurs during the last year of the contract, then the

employer will pay the unexpired portion of the contract plus the bonus calculated at 75% of annual salary of the unexpired salary.


Remuneration and pension entitlements of Key Management Personnel

Table 2: Remuneration for the year ended 30 June 2009

Fixed

Salary and Leave Other Terminationfees2 accrued3 fees4 payments5

ZAR ZAR ZAR ZAR

Non-executive directors

Anthony Grey1 1,005,938 – – –

Stephen Turner1 625,965 – – –

Terence Willsteed 1,064,219 – 93,240 –

Ian Watson 811,425 – – –

Stephen Oke 919,780 – – –

Tian Xia 707,565 – – –

Sub-total non-executive directors 5,134,892 – 93,240 –

Executive directors

David Kovarsky1 3,208,125 33,965 2,249,373 –

Anthony Grey1 832,500 – 958,378 7,201,258

Stephen Turner1 1,972,654 – – 7,826,679

Xiaoping Yang 1,991,250 3,141 – –

Ronald Barnard1 21,831 – – 4,714,576

Sub-total executive directors 8,026,360 37,106 3,207,751 19,742,513

Other “KMP”

Dion Cohen1 2,550,202 260,625 – –

Jannie Muller^1 1,216,893 – – –

Hannes Van Dyk1 1,133,333 52,490 – –

Hannes Visser1 1,725,565 87,942 – –

Sub-total other KMP 6,625,993 401,057 – –

Total Remuneration 19,787,245 438,163 3,300,991 19,742,513

^ Mr Muller did not meet the definition of a Key Management Person (“KMP”)for the 2008 financial year but is a key management person for 2009.

1 Refer to Table 1 for details of the KMP position.

2 Effective 1 May 2009 and until further notice, all KMP, including board members, took a 10 percent reduction in salary.

3 These amounts represent movement in leave accruals during the year.

4 These amounts represent additional work undertaken for the Company. Included in other fees is an amortised portion of Mr Kovarsky's retention fee which

represents ZAR2,249,373.

5 Termination payments have been made in accordance with individual employment contract. Refer to the above section relating to employment contracts.

6 Includes superannuation payments and any voluntary fee sacrifice to superannuation.

7 This figure represents the value of car parking provided.

8 No “STI” bonuses were approved during the 2009 financial year.

9 Options are granted with certain vesting and exercise conditions, with the fair value recorded at each reporting date until it is settled, by using an option-pricing model.

10 On 30 December 2008 the Company cancelled all outstanding phantom options.

11 Due to the cancellation of equity options on 30 December 2008, the Company has accelerated the amortisation of the remaining fair value of the equity options

issued to Mr Kovarsky.

12 Calculation of LTI percentages exclude cancelled phantom options.


page 36

STI LTI Total % breakdown

ShareNon- Phantom Phantom based

Post employment monetary Incentive options options payments superannuation6 benefits7 payments8 (cash settled)9 (cancelled)10 options11 Fixed STI LTI12

ZAR ZAR ZAR ZAR ZAR ZAR ZAR % % %

– 22,770 – 992,997 – – 2,021,705 51 – 49

– – – 992,997 – – 1,618,962 39 – 61

12,488 – – – (582,229) – 587,718 100 – –

– – – – (1,959,484) – (1,148,059) 100 – –

– – – – (582,229) – 337,551 100 – –

– – – – (582,229) – 125,336 100 – –

12,488 22,770 – 1,985,994 (3,706,171) – 3,543,213

– – – 640,643 – 1,618,428 7,750,534 71 – 29

74,925 31,881 – – (4,713,476) – 4,385,466 100 – –

177,539 – – – (4,713,476) – 5,263,396 100 – –

– – – 257,098 (2,608,617) – (357,128) 89 – 11

– – – – (4,941,493) – (205,086) 100 – –

252,464 31,881 – 897,741 (16,977,062) 1,618,428 16,837,182

333,000 27,326 – 639,522 (2,967,186) – 843,489 83 – 17

– – – 109,464 (200,588) – 1,125,769 92 – 8

– – – 144,032 – – 1,329,855 89 – 11

– – – 144,032 – – 1,957,539 93 – 7

333,000 27,326 – 1,037,050 (3,167,774) – 5,256,652

597,952 81,977 – 3,920,785 (23,851,007) 1,618,428 25,637,047


Remuneration and pension entitlements of Key Management Personnel

Table 3: Remuneration for the year ended 30 June 2008

Fixed

Post-employment

Salary and Leave Other super-fees accrued2 fees3 annuation4

ZAR ZAR ZAR ZAR


Terence Willsteed 820,000 – 571,287 73,800

Ian Watson 697,498 – – –

Stephen Oke 731,922 – 333,792 –

Tian Xia 731,922 – – –

Seth Phalatse* 250,000 – – –

Sub-total non-executive directors 3,231,342 – 905,079 73,800

Executive directors

Anthony Grey 1,640,000 – 1,702,210 147,600

Stephen Turner 3,454,273 284,689 – 310,885

David Kovarsky** 1,208,334 27,880 1,025,116 –

Xiaoping Yang 1,800,000 47,682 – –

Ronald Barnard*** 2,250,000 34,256 – –

Sub-total executive directors 10,352,607 394,507 2,727,326 458,485

Other “KMP”

Dion Cohen 2,239,151 181,727 – 328,002

Total Remuneration 15,823,100 576,234 3,632,405 860,287

* Mr Phalatse is not considered a KMP for the 2009 financial year.

* * Appointed 1 February 2008.

* * * Appointed 14 November 2007 and resigned 17 July 2008.

1 Bonus provision of GBP5,000 (ZAR73,200) at year end June 2007 which was subsequently reversed and cancelled due to the non-achievement of the ramp up targets.

2 These amounts represent movement in leave accruals during the year.

3 These amounts represent additional work undertaken for the Company. Included in other fees is an amortised portion of Mr Kovarsky's retention fee which represents

ZAR937,238. The full retention fee amounts to ZAR8.9 million, of which ZAR6.1 million was paid in May 2008.

Key Management Personnel: Share Options

30 June 2009

On 30 December 2008, the Board resolved to cancel all share options on issue. No new share options were issued during the year

ended 30 June 2009.

Table 4: The following table sets out the details of share options granted and vested (Consolidated) for 30 June 2008.

Granted number 30 June 2008 of options

David Kovarsky 1,000,000 (a)

(a) Mr Kovarsky was issued one million options to subscribe for shares in IFM within a three year period up until 31 December 2010.

These options vested in three equal tranches on 30 June 2008, 30 June 2009 and 30 June 2010 and were exercisable at any time

prior to 31 December 2010. The vesting of the options was conditional on continued employment throughout the vesting period.


page 38

STI LTI Total % breakdown

ShareNon- Phantom based

monetary Incentive options payments benefits5 payments (cash settled)6 options7 Fixed STI LTI

ZAR ZAR ZAR ZAR ZAR % % %

– (73,200)1 592,344 – 1,984,231 74 (4) 30

– – 1,412,108 – 2,109,606 33 – 67

– (73,200)1 592,344 – 1,584,858 67 (4) 37

– (73,200)1 592,344 – 1,251,066 59 (6) 47

– – – – 250,000 100 – –

– (219,600) 3,189,140 – 7,179,761

50,301 3,440,801 3,923,802 – 10,904,714 32 32 36

– 3,708,680 3,923,802 – 11,682,329 35 32 33

– 1,173,904 – 1,621,453 5,056,687 45 23 32

– 1,773,000 2,208,864 – 5,829,546 32 30 38

– 2,216,250 3,956,216 – 8,456,722 27 26 47

50,301 12,312,635 14,012,684 1,621,453 41,929,998

25,150 2,528,644 2,359,834 – 7,662,508 36 33 31

75,451 14,621,679 19,561,658 1,621,453 56,772,267

4 Includes superannuation payments and any voluntary fee sacrifice to superannuation.

5 This figure represents the value of car parking provided.

6 Options are granted with certain vesting and exercise conditions, with the fair value recorded at each reporting date until it is settled, by using an option-pricing model.

7 The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which they are granted using an option-pricing model.

In valuing these transactions, no account is taken of any performance conditions, other than conditions linked to the price of the shares in International Ferro Metals Limited.

The value of equity instruments which do not vest during the reporting period is determined as at the grant date and is progressively allocated over the vesting period.

Terms and Conditions for each Grant Vested

Fair value peroption at grant Exercise price First Last Number

Grant date date (Note 24) per option Expiry date exercise date exercise date of options %

1/2/2008 £0.22 – £0.23 £0.875 31/12/2010 30/6/2008 31/12/2010 333,333 33


30 June 2009

No share options were exercised during the year ended 30 June 2009 by Key Management Personnel.

Table 5: The following table sets out the details of share options exercised during the year ended 30 June 2008 by Key Management Personnel (Consolidated)

Number Amount Amountof shares paid per unpaid per

30 June 2008 issued share share

Non-executive directorsTerry Willsteed 250,000 £0.35 –Ian Watson 166,667 A$0.40 –Ian Watson 166,666 A$0.65 –Stephen Oke 250,000 £0.35 –Tian Xia 250,000 £0.35 –

Total 1,083,333

Key Management Personnel: Phantom Options

Table 6: The following table sets out the details of phantom options granted and vested during the year by Key Management Personnel (Consolidated)

Balance at beginning of Options Granted

period cancelled/ number30 June 2009 1 July 2008 forfeited1 of options 2

Non-executive directorsAnthony Grey 3 825,833 (825,833) 516,667

– – 516,667– – 516,666

Stephen Turner 3 825,833 (825,833) 516,667– – 516,667– – 516,666

Terry Willsteed 123,125 (123,125) – Ian Watson 289,792 (289,792) – Stephen Oke 123,125 (123,125) – Tian Xia 123,125 (123,125) –

2,310,833 (2,310,833) 3,100,000

Executive directorsDavid Kovarsky – – 333,333

– – 333,333 – – 333,334

Xiaoping Yang 446,250 (446,250) 148,750 – – 148,750 – – 148,750

Ronald Barnard 4 792,500 (792,500) –

1,238,750 (1,238,750) 1,446,250

Other “KMP”Dion Cohen 5 498,250 (498,250) 332,750

– – 332,750 – – 332,750

Jannie Muller 122,000 (122,000) 63,333 – – 63,333 – – 63,334

Hannes Van Dyk – – 83,333 – – 83,333 – – 83,334

Hannes Visser – – 83,333 – – 83,333 – – 83,334

620,250 (620,250) 1,688,250

Total 4,169,833 (4,169,833) 6,234,500

1 On 30 December 2008 the Company cancelled all outstanding phantom options, excluding Mr Barnard who forfeited his options upon his resignation.

2 These options were issued in accordance with the Phantom Option Plan (refer to “LTI” structure for further details).

3 Non-Executive roles taken up effective 1 January 2009.

4 Mr Barnard resigned 17 July 2008.

5 Mr Cohen resigned 23 July 2009..


page 40

Number Amount Amountof shares paid per unpaid per

30 June 2008 issued share share

Executive directorsAnthony Grey 500,000 A$0.40 –Anthony Grey 500,000 A$0.65Stephen Turner 200,000 A$0.40Stephen Turner 200,000 A$0.65 –Xiaoping Yang 250,000 £0.35 –Ronald Barnard 166,667 A$0.40 –Ronald Barnard 166,666 A$0.65 –

1,983,333


First LastFair value Exercise Price cap available available Number

per option price Expiry exercise exercise ofGrant date Note 29 per option per option date date date options %

30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2009 29/12/2013 – –30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2010 29/12/2013 – –30/12/2008 £0.14 £0.16 £1.00 29/12/2013 30/12/2011 29/12/2013 – –30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2009 29/12/2013 – –30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2010 29/12/2013 – –30/12/2008 £0.14 £0.16 £1.00 29/12/2013 30/12/2011 29/12/2013 – –

– – – – –– – – – –– – – – –– – – – –

–

30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2009 29/12/2013 – –30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2010 29/12/2013 – –30/12/2008 £0.14 £0.16 £1.00 29/12/2013 30/12/2011 29/12/2013 – –30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2009 29/12/2013 – –30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2010 29/12/2013 – –30/12/2008 £0.14 £0.16 £1.00 29/12/2013 30/12/2011 29/12/2013 – –

– – – – –

–

30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2009 29/12/2013 – –30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2010 29/12/2013 – –30/12/2008 £0.14 £0.16 £1.00 29/12/2013 30/12/2011 29/12/2013 – –30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2009 29/12/2013 – –30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2010 29/12/2013 – –30/12/2008 £0.14 £0.16 £1.00 29/12/2013 30/12/2011 29/12/2013 – –30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2009 29/12/2013 – –30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2010 29/12/2013 – –30/12/2008 £0.14 £0.16 £1.00 29/12/2013 30/12/2011 29/12/2013 – –30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2009 29/12/2013 – –30/12/2008 £0.15 £0.16 £1.00 29/12/2013 30/12/2010 29/12/2013 – –30/12/2008 £0.14 £0.16 £1.00 29/12/2013 30/12/2011 29/12/2013 – –

–

–


Key Management Personnel: Phantom Options

Balance at Fair value beginning of per

period Grant option30 June 2008 1 July 2008 date (Note 29)


Terry Willsteed 123,1251 6/2/2008 £0.33

Ian Watson 123,1251 6/2/2008 £0.33

83,3332 15/11/2006 £0.671

83,3332 15/11/2006 £0.73

83,3342 15/11/2006 £0.75

Stephen Oke 123,1251 6/2/2008 £0.33

Tian Xia 123,1251 6/2/2008 £0.33

742,500

Executive directors

Anthony Grey 492,5001 6/2/2008 £0.33

166,6672 15/11/2006 £0.671

166,6672 15/11/2006 £0.73

166,6662 15/11/2006 £0.75

Stephen Turner 492,5001 6/2/2008 £0.33

166,6672 15/11/2006 £0.671

166,6672 15/11/2006 £0.73

166,6662 15/11/2006 £0.75

Xiaoping Yang 246,2501 6/2/2008 £0.33

100,0002 15/11/2006 £0.671

100,0002 15/11/2006 £0.73

100,0002 15/11/2006 £0.75

Ronald Barnard 492,5001 6/2/2008 £0.33

150,0002 15/11/2006 £0.671

150,0002 15/11/2006 £0.73

150,0002 15/11/2006 £0.75

3,473,750

Other ”KMP”

Dion Cohen 246,2501 6/2/2008 £0.33

126,0002 15/11/2006 £0.671

126,0002 15/11/2006 £0.73

126,0002 15/11/2006 £0.75

624,250

Total 4,840,500

1 These options were issued based on certain production targets being met.

2 These options were issued in accordance with the Phantom Option Plan.


page 42


First LastExercise Price available available Number

price per cap per Expiry exercise exercise ofoption option date date date options %

£1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 123,125 100

£1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 123,125 100

£0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 83,333 100

£0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –

£0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –

£1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 123,125 100

£1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 123,125 100

575,833

£1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 492,500 100

£0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 166,667 100

£0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –

£0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –

£1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 492,500 100

£0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 166,667 100

£0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –

£0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –

£1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 246,250 100

£0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 100,000 100

£0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –

£0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –

£1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 492,500 100

£0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 150,000 100

£0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –

£0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –

2,307,084

£1.00 £2.50 5/2/2011 30/6/2008 5/2/2011 246,250 100

£0.35 £1.50 14/11/2011 1/8/2007 14/11/2011 126,000 100

£0.35 £2.50 14/11/2011 14/11/2008 14/11/2011 – –

£0.35 £3.50 14/11/2011 14/11/2009 14/11/2011 – –

372,250

3,255,167


Key Management Personnel options

Table 7: The following table sets out the details of Phantom options exercised by Key Management Personnel (Consolidated)

30 June 2009

No phantom options were exercised or forfeited during the financial year ending 30 June 2009.

30 June 2008 Number Exercise price


Ian Watson 83,333 £0.35

Executive directors

Anthony Grey 166,667 £0.35

Stephen Turner 166,667 £0.35

Xiaoping Yang 100,000 £0.35

Ronald Barnard 150,000 £0.35

Other Key Management Personnel

Dion Cohen 126,000 £0.35

Total 792,667

Shareholdings of Key Management Personnel are detailed on pages 29 and 36 of this report.

Signed in accordance with a resolution of the directors.

David KovarskyDirector

Sydney, 14 September 2009


page 44

Auditor's Independence Declaration to the Directors of International Ferro Metals Limited

In relation to our audit of the financial report of International Ferro Metals Limited for the year ended 30 June 2009, to the best of my

knowledge and belief, there have been no contraventions of the auditor independence requirements of the Corporations Act 2001 or any

applicable code of professional conduct.

Ernst & Young

Michael ElliottPartner

Sydney

14 September 2009


Consolidated Parent

2009 2008 2009 2008Note ZAR'000 ZAR'000 ZAR'000 ZAR'000

Sales revenue 5 (a) 781,574 1,919,396 – –

Management fees received 5 (a) – – 6,217 16,960

Cost of goods sold (868,977) (1,190,926) – –

Gross (loss)/profit (87,403) 728,470 6,217 16,960

Other (expenses)/income

Administrative and other expenses 5 (b) (130,825) (133,634) (325,014) (66,227)

Foreign exchange (losses)/gains (11,587) 109,491 (16,037) 87,432

Write down of inventory to net realisable value (125,775) – – –

Unabsorbed fixed costs (133,954) – – –

Gains on mark-to-market of derivatives 6 – 5,919 – 5,919

Share based payment income/(expense) 9 35,565 (38,203) 9,673 (15,220)

Net (loss)/profit before interest and tax (453,979) 672,043 (325,161) 28,864

Finance income 10 34,781 43,898 114,186 134,449

Finance costs 10 (36,580) (85,582) – (2)

Net (loss)/profit before tax (455,778) 630,359 (210,975) 163,311

Taxation credit/(expense) 11 117,199 (52,177) – –

Net (loss)/profit after tax (338,579) 578,182 (210,975) 163,311

Attributable to:

Minority interest 28 (4,804) 5,003 – –

Members of the parent (333,775) 573,179 (210,975) 163,311

(338,579) 578,182 (210,975) 163,311

Earnings per share (cents per share)

– basic (loss)/earnings per share 12 (66.13) 114.05 (41.80) 32.49

– diluted (loss)/earnings per share 12 (66.13) 114.01 (41.80) 32.48

The above Income Statements should be read in conjunction with the notes to the financial statements set out on pages 52 – 101.

Consolidated income statements

page 46

Share based Non-Contributed Accumulated payment distributable Minority Total

Consolidated equity losses reserve reserve Interest Equity ZAR'000 ZAR'000 ZAR'000 ZAR'000 ZAR'000 ZAR'000

At 1 July 2007 1,607,075 (651,215) 7,480 – 3,650 966,990

Profit for the period – 573,179 – – 5,003 578,182

Total income and expense for the period – 573,179 – – 5,003 578,182 Equity Transactions:Issue of ordinary shares 1,196,208 – – – – 1,196,208

Exercise of options 85,860 – (2,492) – – 83,368

Share placement costs (54,731) – – – – (54,731)

Share based payment – – 1,629 – – 1,629

At 30 June 2008 2,834,412 (78,036) 6,617 – 8,653 2,771,646

At 1 July 2008 2,834,412 (78,036) 6,617 – 8,653 2,771,646

Loss on fair value of investment – 64 – (7,621) – (7,557)

Total expense for the period recognised directly in equity – 64 – (7,621) – (7,557)

(Loss) for the period – (333,775) – – (4,804) (338,579)

Total income and expense for the period – (333,711) – (7,621) (4,804) (346,136)Equity Transactions:Cancellation of shares/

share buy-back (20,032) (1,418) – 1,577 (2,032) (21,905)

Dividends paid – (76,148) – – – (76,148)

Share based payment – – 1,655 – – 1,655

At 30 June 2009 2,814,380 (489,313) 8,272 (6,044) 1,817 2,329,112

The above Statement of Changes in Equity should be read in conjunction with the notes to the financial statements set out on pages

52 – 101.

Statement in change in equity


Share basedContributed Accumulated payment Total

Parent equity losses reserve equity ZAR'000 ZAR'000 ZAR'000 ZAR'000

At 1 July 2007 1,607,075 (369,728) 7,189 1,244,536

Profit for the period – 163,311 – 163,311

Total income and expense for the period – 163,311 – 163,311Equity Transactions:Issue of ordinary shares 1,196,208 – – 1,196,208

Exercise of options 85,860 – (2,201) 83,659

Share placement costs (54,731) – – (54,731)

Share based payment – – 1,629 1,629

At 30 June 2008 2,834,412 (206,417) 6,617 2,634,612

At 1 July 2008 2,834,412 (206,417) 6,617 2,634,612

Loss for the period – (210,975) – (210,975)

Total income and expense for the period – (210,975) – (210,975)Equity Transactions:Cancellation of shares/share buy-back (20,032) – – (20,032)

Dividends paid – (76,148) – (76,148)

Share based payment – – 1,655 1,655

At 30 June 2009 2,814,380 (493,540) 8,272 2,329,112

The above Statement of Changes in Equity should be read in conjunction with the notes to the financial statements set out on pages

52 – 101.

Statement in change in equity (continued)

page 48

Consolidated Parent


Assets

Current assetsCash and cash equivalents 14 340,089 972,190 266,702 815,396

Receivables – inter-company 15(a) – – 33,268 19,127

Trade and other receivables 15(b) 81,059 462,919 21,863 239,559

Prepayments 16 6,263 13,382 324 686

Inventories 17 195,820 109,752 – –

Total current assets 623,231 1,558,243 322,157 1,074,768

Non-current assetsDeferred tax asset 11 66,653 – – –

Financial assets 18 8,550 – 2,005,235 1,587,258

Property, plant & equipment 19(a) 1,798,151 1,672,281 8,714 8,976

Intangible assets 19(b) 10,062 – – –

Other non-current assets 20 18,234 25,625 707 516

Total non-current assets 1,901,650 1,697,906 2,014,656 1,596,750

Total assets 2,524,881 3,256,149 2,336,813 2,671,518

Equity and liabilities

Current liabilitiesTrade and other payables 21 105,998 213,149 3,663 6,169

Provisions 22 12,411 100,852 2,684 27,565

Total current liabilities 118,409 314,001 6,347 33,734

Non-current liabilitiesProvisions 22 13,307 27,184 1,354 3,172

Interest bearing loans and borrowings 23 64,053 92,716 – –

Deferred tax liability 11 – 50,602 – –

Total non current liabilities 77,360 170,502 1,354 3,172

Total liabilities 195,769 484,503 7,701 36,906

Net assets 2,329,112 2,771,646 2,329,112 2,634,612

Shareholders’ equityContributed equity 24 2,814,380 2,834,412 2,814,380 2,834,412

Share based payment reserve 25 8,272 6,617 8,272 6,617

Accumulated losses 26 (489,313) (78,036) (493,540) (206,417)

Non-distributable reserve 27 (6,044) – – –

Parent entity interests 2,327,295 2,762,993 2,329,112 2,634,612

Minority interests 28 1,817 8,653 – –

Total shareholders’ equity 2,329,112 2,771,646 2,329,112 2,634,612

The above Balance Sheets should be read in conjunction with the notes to the financial statements set out on pages 52 – 101.

Consolidated balance sheets


Consolidated Parent


Cash flows from operating activitiesReceipts from customers 1,146,317 1,509,613 – –

Receipts from subsidiary – – – 16,960

Payments and advances to suppliers and employees

(inclusive of goods and services tax) (1,462,141) (1,154,115) (81,122) (52,582)

Phantom options exercised and paid – (19,493) – (4,688)

Tax Paid (1,982) – – –

Interest Paid (30,368) (84,748) – –

Net cash flows (used in)/from operating activities (348,174) 251,257 (81,122) (40,310)

Cash flows from investing activitiesPayments for property, plant & equipment (183,881) (83,599) (114) –

Payments for intangible assets (10,837) – – –

Investment in subsidiary – – (687,000) (500,000)

Interest received 34,781 43,898 20,601 22,112

Restricted cash deposits (1,158) – – –

Proceeds from preference dividend interest – – 311,158 –

Net cash flows used in investing activities (161,095) (39,701) (355,355) (477,888)

Cash flows from financing activitiesProceeds from issues of shares – 1,196,208 – 1,196,208

Proceeds from issue of options – 38,251 – 38,251

Payment for share buyback (22,282) – (20,032) –

Receipts from release of restricted cash – 240,663 – –

Proceeds from borrowings – 800 – 800

Payment of share issue costs – (51,679) – (51,679)

Repayment of borrowings (12,815) (817,029) – –

Equity dividends paid (76,148) – (76,148) –

Net cash flows (used in)/from financing activities (111,245) 607,214 (96,180) 1,183,580

Net (decrease)/increase in cash held (620,514) 818,770 (532,657) 665,382

Cash at the beginning of the financial year 972,190 43,929 815,396 62,582

Effects of exchange rate changes on cash (11,587) 109,491 (16,037) 87,432

Cash and cash equivalents at the end of the year 14 340,089 972,190 266,702 815,396

The above Statements of Cash Flows should be read in conjunction with the notes to the financial statements set out on pages

52 – 101.

Statement of cash flows

page 50

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

(Loss)/profit from ordinary activities before income tax (455,778) 630,359 (210,975) 163,311

Adjustments to reconcile profit before tax to net cash flow:

Non Cash Items: 61,495 (61,610) 142,854 (203,188)

Amortisation of retention fee 2,249 – – –

Decommissioning asset expense (7,363) – – –

Depreciation 58,787 54,684 375 352

Foreign exchange loss/(gain) 11,587 (109,491) 16,037 (87,432)

Interest received/accrued (34,781) (43,898) (20,601) (22,112)

Inventory net realisable write down 125,775 – – –

Preference dividend accrued – – (93,585) (112,337)

Gain on mark-to-market of derivatives – (5,919) – (5,919)

Provision for diminution of investment – – 269,023 –

Share based payment expense (37,393) 38,211 (11,500) 13,935

Write back of loans (3,386) – (3,350) –

(Decrease)/increase in provisions (53,980) 4,805 (13,545) 10,325

Working Capital Adjustments: 48,091 (317,492) (13,001) (433)

Decrease/(increase) in receivables 381,860 (428,274) (10,857) 338

(Increase)/decrease in inventories (211,843) 31,069 – –

Decrease/(increase) in prepayments 4,870 (9,338) 362 3,358

(Decrease)/increase in payables and accruals (126,796) 89,051 (2,506) (4,129)

Taxation paid (1,982) – – –

Net cash flow from operating activities (348,174) 251,257 (81,122) (40,310)

Cash is represented by:

Cash at bank 36,186 66,434 6,794 17,465

Short term deposits 303,903 905,756 259,908 797,931

340,089 972,190 266,702 815,396

Reconcil iat ion of operating (loss) /Profit to cash

flows from operating activ it ies


1. Corporate information

International Ferro Metals Limited (“the Parent”) is a company limited by shares incorporated in Australia whose shares are

publicly traded on the London Stock Exchange, as of the 1st of September 2007. The Company previously traded on the Alternative

Investment Market of the London Stock Exchange.

The financial report for the year ended 30 June 2009 was issued in accordance with a resolution of Directors on

14 September 2009.

The principle activities of the company are described on page 22.

2. Accounting policies

(a) Basis of preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of

the Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the Australian

Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for derivative

financial instruments which have been measured at fair value.

The financial report is presented in South African Rand and all values are rounded to the nearest thousand Rand (ZAR'000)

unless otherwise stated.

(b) Basis of consolidation

The Consolidated financial statements incorporate the assets and liabilities of all entities controlled by International Ferro

Metals Limited at the end of the reporting period. The Company and its controlled entities together are referred to as the

Group. The effects of all transactions between entities in the Group are eliminated in full.

Where control of an entity is obtained during a financial year, its results are included in the consolidated income statement

from the date on which control commences. Where control of an entity ceases during a financial year its results are

included for that part of the year during which control existed.

The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using

consistent accounting policies.

(c) Statement of compliance

The financial report complies with Australian Accounting Standards and International Financial Reporting Standards

(“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

International Accounting Standards and Interpretations that have recently been issued or amended but are not yet

effective have not been adopted by the Group for the annual reporting period ended 30 June 2009. These are outlined in

the table below.

Application Application Impact on Group date for

Reference Title Summary date of standard financial report Group

AASB Int. 16 Hedges of a Net This Interpretation requires that the 1 October 2008 The group has not 1 July 2009Investment in a hedged risk in a extent of the impact, yet determined theForeign Operation hedge of a net investment in a foreign extent of the impact,

operation is the foreign currency risk if any.arising between the functional currencyof the net investment and thefunctional currency of any parent entity.This also applies to foreign operationsin the form of joint ventures, associatesor branches.

Notes to the f inancial report

page 52

2. Accounting policies (continued)

(c) Statement of compliance (continued)



AASB Int. 18 Transfers of Assets This Interpretation provides guidance Applies prospectively The group has not 1 July 2009from Customers on the transfer of assets such as items to transfer of assets yet determined the

of property, plant and equipment or from customers extent of the impact,transfers of cash received from received on or after if any.customers. The Interpretation provides 1 July 2009guidance on when and how an entityshould recognise such assets anddiscusses the timing of revenuerecognition for such arrangements andrequires that once the asset meets thecondition to be recognised at fair value,it is accounted for as an 'exchangetransaction'.

Once an exchange transaction occursthe entity is considered to havedelivered a service in exchange forreceiving the asset.

Entities must identify each identifiableservice within the agreement andrecognise revenue as each serviceis delivered.

AASB 8 and Operating New Standard replacing AASB 114 1 January 2009 AASB 8 is a 1 July 2009AASB 2007-3 Segments Segment Reporting, which adopts a disclosure standard

and consequential management reporting approach to so will have noamendments to segment reporting. direct impact onother Australian amounts includedAccounting in the groupsStandards financial statements

although it may directly impact the level at which goodwill is tested for impairment.

AASB 1039 Concise Reporting AASB 1039 was revised in August 2008 1 January 2009 The group has not 1 July 2009(revised) to achieve consistency with AASB 8 yet determined the

Operating Segments. The revisions extent of the impact,include changes to terminology and if any.descriptions to ensure consistency with the revised AASB 101 Presentationof Financial Statements.

AASB 123 Borrowing Costs The amendments to AASB 123 require 1 January 2009 In future all qualifying 1 July 2009(revised) and and consequential that all borrowing costs associated borrowing costs willAASB 2007-6 amendments to with a qualifying asset be capitalised. be capitalised.

other Australian Accounting Standards






AASB 101 Presentation of Introduces a statement of 1 January 2009 These amendments 1 July 2009(revised), Financial comprehensive income. are only expectedAASB 2007-8 Statements and to affect theand consequential Other revisions include impacts on the presentation of theAASB 2007-10 amendments to presentation of items in the statement Group's financial

other Australian of changes in equity, new presentation report and will notAccounting requirements for restatements or have a direct impactStandards reclassifications of items in the on the measurement

financial statements, changes in the and recognition ofpresentation requirements for dividends amounts disclosed inand changes to the titles of the the financial report.financial statements. The Group has not

determined at this stage whether to present a single statement of comprehensive income or two separate statements.

AASB 2008-1 Amendments to The amendments clarify the definition 1 January 2009 The Group has 1 July 2009Australian of “vesting conditions”, introducing share-basedAccounting the term “non-vesting conditions” for paymentStandard – Share- conditions other than vesting arrangements thatbased Payments: conditions as specifically defined and may be affected byVesting Conditions prescribe the accounting treatment these amendments.and Cancellations of an award that is effectively However, the Group

cancelled because a non-vesting has not yetcondition is not satisfied. determined the

extent of the impact,if any.

AASB 3 Business The revised Standard introduces a 1 July 2009 The group has not 1 July 2009(revised) Combinations number of changes to the accounting yet determined the

for business combinations, the most extent of thesignificant of which includes the impact, if any.requirement to have to expense transaction costs and a choice (for each business combination entered into) to measure a non-controlling interest (formerly a minority interest) in the acquiree either at its fair value or at its proportionate interest in the acquiree's net assets. This choice will effectively result in recognising goodwill relating to 100% of thebusiness (applying the fair value option) or recognising goodwill relating to the percentage interest acquired. The changes apply prospectively.

Notes to the f inancial report (continued)

page 54





AASB 127 Consolidated There are a number of changes 1 July 2009 The group has not 1 July 2009

(revised) and Separate arising from the revision to yet determined the

Financial AASB 127 relating to changes in extent of the

Statements ownership interest in a subsidiary impact, if any.

without loss of control, allocation

of losses of a subsidiary and

accounting for the loss of control

of a subsidiary. Specifically in relation

to a change in the ownership interest

of a subsidiary (that does not result

in loss of control) – such a

transaction will be accounted for

as an equity transaction.

AASB 2008-3 Amendments to Amending Standard issued as a 1 July 2009 The group has not 1 July 2009

Australian consequence of revisions to yet determined the

Accounting AASB 3 and AASB 127. Refer above. extent of the impact,

Standards arising if any.

from AASB 3 and

AASB 127

AASB 2008-7 Amendments to The main amendments of relevance 1 January 2009 The group has not 1 July 2009

Australian to Australian entities are those yet determined the

Accounting made to AASB 127 deleting the extent of the impact,

Standards – Cost “cost method” and requiring all if any.

of an Investment dividends from a subsidiary, jointly

in a Subsidiary, controlled entity or associate to

Jointly Controlled be recognised in profit or loss in an

Entity or Associate entity's separate financial statements

(i.e., parent company accounts).

The distinction between pre- and

post-acquisition profits is no longer

required. However, the payment of

such dividends requires the entity

to consider whether there is an

indicator of impairment.

AASB 127 has also been amended

to effectively allow the cost of an

investment in a subsidiary, in limited

reorganisations, to be based on the

previous carrying amount of the

subsidiary (that is, share of equity)

rather than its fair value.






AASB 2009-2 Amendments to The main amendment to AASB 7 Annual reporting AASB 7 is a 1 July 2009Australian requires fair value measurements periods beginning disclosure standardAccounting to be disclosed by the source of on or after so this will have noStandards – inputs, using the following three- 1 January 2009 impact on amountsImproving level hierarchy: that end on included in theDisclosures about or after group financialFinancial • quoted prices (unadjusted) in 30 April 2009. statements.Instruments active markets for identical assets [AASB 4, AASB 7, or liabilities (Level 1);AASB 1023 & AASB 1038] • inputs other than quoted prices

included in Level 1 that areobservable for the asset or liability,either directly (as prices) or indirectly (derived from prices)(Level 2); and

• inputs for the asset or liabilitythat are not based on observablemarket data (unobservableinputs) (Level 3).

These amendments arise from theissuance of Improving Disclosures about Financial Instruments (Amendments to IFRS 7) by the IASB in March 2009.

The amendments to AASB 4,AASB 1023 and AASB 1038 compriseeditorial changes resulting from the amendments to AASB 7.

Amendments Amendments The amendments clarify theto to IFRS 2 accounting for group cash-settledInternational share-based payment transactions,Financial in particular:Reporting Standards • the scope of AASB 2; and

• the interaction between IFRS 2and other standards.

An entity that receives goods or services in a share-based payment arrangement must account for those goods or services no matter which entity in the group settles the transaction, and no matter whether the transaction is settled in shares or cash.

A “group” has the same meaning as in IAS 27 Consolidated and Separate Financial Statements, that is, it includes only a parent and its subsidiaries.


page 56





The amendments also incorporate 1 January 2010 The Group has share- 1 July 2010guidance previously included in based paymentIFRIC 8 Scope of IFRS 2 and arrangements thatIFRIC 11 IFRS 2-Group and may be affectedTreasury Share Transactions. As a by theseresult, IFRIC 8 and IFRIC 11 have been withdrawn. amendments.

However, the Group has not yet determined the extent of the impact,if any.

(d) Revenue recognition

Revenue from the sale of goods is recognised when significant risks and rewards of the saleable product has transferred tothe customer. Risks and rewards are considered passed to the customer upon delivery to the customer's control. Thisgenerally occurs when the product is physically transferred into a vessel, train, truck or other delivery mechanism.

Revenue is measured at the fair value of consideration received/receivable. Revenue is stated after deducting sales taxes,duties and levies.

Interest revenue is bought to account on an accrual basis using the effective interest rate method, which is the rate thatexactly discounts estimated future cash receipts through the expected life of the financial asset to the net carrying amountof the financial asset.

(e) Cash and cash equivalents

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an originalmaturity of three months or less.

For the purposes of the Cash Flow Statement, cash and cash equivalents consist of cash and cash equivalents as definedabove, net of outstanding bank overdrafts.

(f) Receivables

Trade receivables, which are due for settlement no more than 30 days from the date of the final invoice, are recognisedinitially at fair value and subsequently measured at amortised cost using the effective interest method, less an allowancefor uncollectible amounts. The final invoice is issued once the product is received and final specification agreed by thecustomer. Collectable of trade debtors are reviewed on an ongoing basis and a provision for non recovery is madeaccordingly. Debts which are known to be uncollectible are written off. The difference between the carrying value ofreceivables and present value of the expected future cash flows are accounted for against the carrying value of receivablesand as an interest charge.

(g) Inventories

Inventories including raw materials, work in progress, consumables and finished goods are valued at the lower of cost andnet realisable value.

Costs incurred in bringing each product to its present location and conditions are accounted for as follows:

Raw materials – purchase cost assigned on a weighted average cost basis. The cost of purchase comprises the purchase priceincluding import duties and other taxes (other than those subsequently recoverable by the entity from the taxingauthorities) transport, handling and other costs directly attributable to the acquisition of raw materials. Volume discountsand rebates are included in determining the cost of purchase.



(g) Inventories (continued)

Consumables and maintenance spares are valued at purchase cost on a first-in, first out basis.

Finished goods and work-in-progress – cost of direct materials and labour and a proportion of variable and fixed

manufacturing overheads based on normal operating capacity. Costs are assigned on the basis of weighted average costs.

Fixed cost attributable to non operating units is expensed in the income statement.

Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion

and the estimated costs necessary to make the sale.

(h) Property, plant and equipment

Property, plant and equipment are recorded at historical cost less accumulated depreciation and any impairment. The

carrying value of assets is reviewed for impairment at the balance sheet date. An asset is immediately written down to its

recoverable amount if the carrying value of the asset exceeds its estimated recoverable amount.

The depreciation rates per annum for each class of fixed asset are as follows:

• Property & buildings: between 3.33% and 5%

• Plant & equipment between 3.33% and 33.33%

• Motor vehicles: between 16.67% and 20%

• Furniture & fittings: 16.67%

• Computer equipment: 33.34%

Subsequent expenditure relating to an item of property, plant and equipment, that has already been recognised, is added

to the carrying amount of the asset if the recognition criteria are met.

All assets are depreciated over their anticipated useful lives up to their residual values using a straight-line depreciation

basis. These useful lives are determined on the day of capitalisation and are re-assessed annually by management.

Mineral rights that are being depleted are amortised over the estimated remaining life of mine, using the unit of

production method based on proven and probable ore reserves. Land is not depreciated.

Currently the maximum life applied to components which are expected to last for the life of the plant is 28 years and the

maximum residual value which has been applied to any component is 50% of the cost value.

Major maintenance and repairsExpenditure on major maintenance re-builds or repairs comprise the cost of replacement assets or parts of assets and

overhaul costs. Where an asset or part of an asset that was separately depreciated and is now written off is replaced and

it is probable that future economic benefits associated with the item will flow to the group through an extended life the

expenditure is capitalised. Where part of the asset was not separately considered as a component, the replacement value

is used to estimate the carrying amount of the replaced asset which is immediately written off. All other day to day

maintenance costs are part of production cost.

ImpairmentThe carrying values of plant and equipment are reviewed for impairment when events or changes in circumstances indicate

the carrying value may not be recoverable or at least on an annual basis.

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-

generating unit to which the asset belongs. If any such indication exists and where the carrying values exceed the

estimated recoverable amounts, the assets or cash-generating units are written down to their recoverable amount.

(i) Income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be

recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that

are enacted or substantively enacted by the balance sheet date.


page 58


(i) Income tax (continued)

Deferred income tax is provided on all temporary differences at the balance sheet date between the tax bases of assets

and liabilities and their carrying amounts for financial reporting purposes.

Deferred income tax assets and liabilities are recognised for all taxable temporary differences:

• except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction

that is not a business combination and at the time of the transaction affects neither the accounting profit nor taxable

profit or loss; and

• in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint

ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that

the temporary differences will not reverse in the foreseeable future.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that

it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset

to be utilised.

Unrecognised deferred income tax assets are re-assessed at each balance sheet date and are recognised to the extent that

it has become probable that future taxable profit will allow the deferred income tax to be recovered.

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the

asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted

at the balance sheet date.

Income taxes relating to items recognised directly in equity are recognised in equity and not in profit or loss.

Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets

against current tax liabilities and the deferred tax assets and liabilities relate to the same taxable entity and the same

taxation authority.

(j) Goods and services tax

Revenues, expenses and assets are recognised net of the amount of goods and services tax (GST) or value added tax (VAT),

except:

• where the amount of GST/VAT incurred is not recoverable from the taxation authority, it is recognised as part of the

cost of the asset or as part of an item of expense; or

• for receivables and payables which are recognised inclusive of GST/VAT.

The net amount of GST/VAT recoverable from, or payable to, the taxation authority is included as part of receivables

or payables.

(k) Trade and other creditors

Trade and other creditors amounts represent liabilities for goods and services provided to the entity prior to the end of the

financial year and which are unpaid. The amounts are unsecured and are usually paid within 30 days.

(l) Interest bearing loans and borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the consideration received net of issue costs

associated with the borrowing.

After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the

effective interest method. Amortised cost is calculated by taking into account any issue costs, and any discount or

premium on settlement.

Gains and losses are recognised in the income statement when the liabilities are derecognised, as well as through the

amortisation process.



(m) Leases

The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and

requires an assessment of whether the fulfillment of the arrangement is dependent on the use of a specific asset or assets

and the arrangement conveys a right to use the asset.

Finance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased

item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of

the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease

liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are recognised

as an expense in profit or loss.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term if

there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease

term. Lease incentives are recognised in the income statement as an integral part of the total lease expense.

(n) Borrowing costs

Borrowing costs are recognised as an expense when incurred.

(o) Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is

probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable

estimate can be made of the amount of the obligation.

If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the

risks specific to the liability.

When discounting is used, the increase in the provision due to the passage of time is recognised as a finance cost.

Environmental Rehabilitation provisions:The estimated cost of rehabilitation, comprising liabilities for decommissioning and restoration is based on current legal

requirements and existing technology and re-assessed annually by management. The costs of the provisions do not take

into account the potential proceeds from the sale of the assets at the end of their useful lives.

Decommissioning:The discounted value of the estimated obligation to decommission, being the cost to dismantle all structures and

rehabilitate the land that arose from establishing a mine or plant, is included in long term provisions. The unwinding of the

obligation is included in the income statement under finance costs. The initial related decommissioning asset is recognised

as part of property, plant and equipment.

Restoration:The discounted value of the estimated obligation of restoration, being the cost to correct damages from ongoing

operations, is included in long term provisions. Management reviews the estimations on an annual basis and charges any

movements directly in the income statement.

Environmental rehabilitation trust funds:Monthly payments are made to the trust in accordance with a financial policy agreement. The investment in the trusts is

carried as inter-company investments in each company. The trusts are fully consolidated as IFM is the only contributor to

these trusts and exercise full control via the board of trustees.

The estimated costs of rehabilitating a mine are generally included in the capital cost of the mine. Changes in estimates

of the liability are dealt with on a prospective basis.


page 60


(p) Share-based payment transactions

(i) Equity settled transactions:The Group provides benefits to employees (including directors) of the Group and other service providers or strategicequity partners in the form of share-based payment transactions, whereby employees or other parties renderservices or provide goods in exchange for shares or rights over shares ('equity-settled transactions').

The cost of these equity-settled transactions with employees is measured by reference to the fair value at the dateat which they are granted. The fair value is determined using an option pricing method.

In valuing equity-settled transactions, no account is taken of any vesting conditions, other than conditions linked tothe price of the shares of International Ferro Metals Limited ('market conditions').

The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over theperiod in which the performance and/or service conditions are fulfilled, ending on the date on which the relevantemployees become fully entitled to the award ('vesting date').

The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects(i). the extent to which the vesting period has expired; and (ii). the number of awards that, in the opinion of the directors of the Group, will ultimately vest. This opinion is

formed based on the best available information at balance sheet date. No adjustment is made for thelikelihood of market performance conditions being met as the effect of these conditions is included in thedetermination of fair value at grant date.

No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditionalupon a market condition.

Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the termshad not been modified. In addition, an expense is recognised for any increase in the value of the transaction as aresult of the modification, as measured at the date of modification.

Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and anyexpense not yet recognised for the award is recognised immediately. However, if a new award is substituted for thecancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awardare treated as if they were a modification of the original award, as described in the previous paragraph.

Where shares are issued at a discount to fair value either by reference to the current market price or by virtue ofthe Group providing financing for the share purchase on favourable terms, the value of the discount is considered ashare based payment.

The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation ofearnings per share.

(ii) Cash settled transactions:The Group also provides benefits to employees in the form of cash-settled share-based payments, wherebyemployees render services in exchange for cash, the amounts of which are determined by reference to movementsin the price of the shares of International Ferro Metals Limited.

The ultimate cost of these cash-settled transactions will be equal to the actual cash paid to the employees, whichwill be the fair value at settlement date.

The cumulative cost recognised until settlement is a liability and the periodic determination of this liability is as follows:(i). at each reporting date between grant and settlement, the fair value of the award is determined;(ii). during the vesting period, the liability recognised at each reporting date is the fair value of the award at that

date multiplied by the expired portion of the vesting period;(iii). from the end of the vesting period until settlement, the liability recognised is the full fair value of the liability

at the reporting date; and (iv). all changes in the liability are recognised in profit or loss for the period.

The fair value of the liability is determined, initially and at each reporting date until it is settled. For the currentfinancial year an option pricing model was applied, taking into account the terms and conditions on which the awardwas granted, and the extent to which employees have rendered service to date.



(q) Earnings per share

Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs

of servicing equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any

bonus element.

Diluted earnings per share is calculated as net profit attributable to members of the parent, adjusted for:

• costs of servicing equity (other than dividends) and preference share dividends;

• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised

as expenses; and

• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of

potential ordinary shares;

divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any

bonus element.

(r) Exploration and evaluation costs

Expenditure on exploration and evaluation is accounted for in accordance with the 'area of interest' method. Exploration

and evaluation expenditure is capitalised provided the rights to tenure of the area of interest is current and either:

• the exploration and evaluation activities are expected to be recouped through successful development and exploitation

of the area of interest or, alternatively, by its sale; or exploration and evaluation activities in the area of interest have

not at the reporting date reached a stage that permits a reasonable assessment of the existence or otherwise of

economically recoverable reserves, and active and significant operations in, or relating to, the area of interest are

continuing.

When the technical feasibility and commercial viability of extracting a mineral resource have been demonstrated then any

capitalised exploration and evaluation expenditure is reclassified as capitalised mine development. Prior to reclassification,

capitalised exploration and evaluation expenditure is assessed for impairment.

(s) Foreign currency transactions

The functional currency of International Ferro Metals Limited and its subsidiaries is the South African Rand (“ZAR”) as this

is the currency in which Group primarily generates and expends cash. The directors have chosen ZAR, being the group's

functional currency, as being the most appropriate currency in which to present the financial statements.

Transactions in foreign currencies are initially recorded in the functional currency at the exchange rates ruling at the date

of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of

exchange ruling at the balance sheet date.

All differences in the consolidated financial report are taken to the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange

rate as at the date of the initial transaction.

Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when

the fair value was determined.

(t) Feasibility expenditure

Costs incurred relating to a feasibility study are expensed as incurred until the period in which management considers that

a bankable feasibility study is complete and the Company decides to continue with the project. Following this time, costs

directly related to the feasibility study are deferred as a non-current asset and will be amortised over the life of the plant

or mine on a life of plant or units of production basis.


page 62


(u) Financial assets

Financial assets are categorised as either loans and receivables or held-to-maturity investments. The Group determines the

categorisation of its financial assets at initial recognition. Categorisation is re-evaluated at each financial year end. When

financial assets are recognised initially, they are measured at fair value, plus directly attributable transaction costs.

The Group classifies its financial assets in the following categories:

(i) Loans and receivablesLoans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted

in an active market. Such assets are carried at amortised cost using the effective interest method.

(ii) Held-to-maturity investmentsNon-derivative financial assets with fixed or determinable payments and fixed maturity are classified as held-to-

maturity when the Group has the positive intention and ability to hold to maturity. Investments intended to be held

for an undefined period are not included in this classification. Other long term investments that are intended to be

held-to-maturity, such as bonds, are measured at amortised cost. This cost is computed as the amount initially

recognised minus principal repayments, plus or minus the cumulative amortisation using the effective interest

method of any difference between the initially recognised amount and the maturity amount. This calculation

includes all fees paid or received between parties to the contract that are an integral part of the effective interest

rate, transaction costs and all other premiums and discounts. For investments carried at amortised cost, gains and

losses are recognised in income when the investments are derecognised or impaired, as well as through the

amortisation process.

(iii) Parent entity investmentsOn the acquisition of a subsidiary, the purchase method of accounting is applied whereby the purchase

consideration is allocated to the identifiable assets, liabilities and contingent liabilities (identifiable net assets) on

the basis of fair value at the date of acquisition. Those mineral reserves and resources that are able to be reliably

valued are recognised in the assessment of fair value on acquisition.

The cost of the business combination is the aggregate of: (a) the fair values at the date of exchange, of assets given,

liabilities incurred or assumed, and equity instruments issued by the acquirer in exchange for control of the acquire;

and (b) and cost directly attributable to the business combination.

Goodwill is initially measured at cost being the excess of the cost of the business combination over the Group's

interest in the net fair value of the acquiree's identifiable net assets.

If the fair value attributable to the Group's share of the identifiable net assets exceeds the fair value of

the consideration, the Group re-assessed whether it has correctly identified and measured the assets acquired

and liabilities assumed and recognised any additional assets or liabilities that are identified in that review. If the

excess remains after reassessment, the Group recognises the resulting gain in the income statement on the

acquisition date.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is not

amortised and is tested for impairment annually. For the purpose of impairment testing, goodwill acquired in a

business combination is, from the acquisition date, allocated to each of the Group's cash generating units that are

expected to benefit from the synergies of the combination, irrespective of whether other assets or liabilities of the

acquiree are assigned to those units.

(iv) Financial assets at fair value through profit or lossFinancial assets at fair value through profit or loss include financial assets held for trading and financial assets

designated upon initial recognition at fair value through profit or loss. Financial assets are classified as held for

trading if they are acquired for the purpose of selling in the near term. This category includes derivative financial

instruments entered into by the Group that do not meet the hedge accounting criteria as defined by IAS 39.

Derivatives, including separated embedded derivatives are also classified as held for trading unless they are

designated as effective hedging instruments. Financial assets at fair value through profit and loss are carried in the

balance sheet as fair value with gains or losses recognised in the income statement.

The Group has not designated any financial assets as at fair value through profit or loss.



(u) Financial assets (continued)

(iv) Financial assets at fair value through profit or loss (continued)Derivatives embedded in host contracts are accounted for as separate derivatives when their risks and

characteristics are not closely related to those of the host contracts and the host contracts are not carried at fair

value. These embedded derivatives are measured at fair value with gains or losses arising from changes in fair value

recognised in the income statement. Reassessment only occurs if there is a change in the terms of the contract that

significantly modifies the cash flows that would otherwise be required.

(v) Available-for-sale financial assetsAvailable-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or

are not classified in any of the three preceding categories. After initial measurement, available-for-sale financial

assets are measured at fair value with unrealized gains or losses recognised directly in equity until the investment

is derecognised, at which time the cumulative gain or loss recorded in equity is recognised in the income statement,

or determined to be impaired, at which time the cumulative loss recorded in equity is recognised in the

income statement.

(vi) Derecognition of financial instrumentsA financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is

derecognised when:

• the rights to receive cash flows from the asset have expired; or

• the Group has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the

received cash flows in full without material delay to a third party under a 'pass-through' arrangement; and either

(a) the Group has transferred substantially all the risks and rewards of the asset, or (b) the Group has neither

transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Group has transferred its rights to receive cash flows from an asset or has entered into a pass-through

arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset not

transferred control of the asset, a new asset is recognised to the extent of the Group's continuing involvement in

the asset.

Continuing involvement that takes the form of a guarantee over the transferred asset, is measured at the lower of

the original carrying amount of the asset and the maximum amount of consideration that the Group could be

required to repay.

When continuing involvement takes the form of a written and/or purchased option (including a cash settled option

or similar provision) on the transferred asset, the extent of the Group's continuing involvement is the amount of

the transferred asset that the Group may repurchase, except that in the case of a written put option (including a

cash settled option or similar provision) on an asset measured at fair value, the extent of the Group's continuing

involvement is limited to the lower of the fair value of the transferred asset and the option exercise price.

(v) Financial liabilities

Initial recognitionFinancial liabilities within the scope of IAS 39 are classified as financial liabilities at fair value through profit or loss, loans

and borrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate. The Group

determines the classification of its financial liabilities at initial recognition.

Financial liabilities are recognised initially at fair value and in the case of loans and borrowings, directly attributable

transaction costs.

The Group's financial liabilities include trade and other payables, bank overdraft, loans and borrowings and derivative

financial instruments.


page 64


(v) Financial liabilities (continued)

Initial recognition (continued)

(i) At fair value through profit & loss:Options granted that are not part of a continuing share based payment relationship (i.e. there is no ongoing

provision of goods and/or services – refer note 2(p) and are denominated in a currency other than the entity's

functional currency, are accounted for as derivative liabilities in accordance with AASB 139: “Financial Instruments:

Recognition and Measurement” and IFRIC guidelines. Such options are recorded on the balance sheet at fair value

with movements in fair value between being recorded in the income statement. In respect of the derivative liability,

the change in the fair value of the derivative liability, during the period and cumulatively, is not attributable to

changes in the credit risk of that liability.

In addition, contractual arrangements whereby the Company agrees to issue a variable number of shares are

accounted for as a liability. To the extent that these contractual arrangements meet the definition of a derivative,

the value of the contractual arrangement is recorded on the balance sheet at fair value with movements in fair value

being recorded in the income statement.

(ii) Loans and borrowingsAll loans and borrowings are initially recognised at the fair value of the considerations received less directly

attributable transaction cost. After initial recognition loans and borrowings are subsequently measured at amortised

cost using the effective interest rate method.

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.

When an existing financial liability is replaced by another from the same lender or substantially different terms, or

the terms of an existing liability are substantially modified, such an exchange or modification is treated as a

derecognition of the original liability and the recognition of a new liability, and the difference in the respective

carrying amounts is recognised in the income statement.

(w) Contributed equity

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are

shown in equity as a deduction, net of tax, from the proceeds.

Reserved sharesThe Group's own equity instruments, which are reacquired for later use in employee share based payment arrangements

(reserved shares), are deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or

cancellation of the Group's own equity instruments.

(x) Hedge accounting and derivative financial instruments

Initial recognition and subsequent measurementThe Group may use derivative financial instruments such as forward currency contracts to hedge its foreign market risks.

Such derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is

entered into and are subsequently remeasured at fair value. Derivatives are carried as financial assets when the fair value

is positive and as financial liabilities when the fair value is negative.

Any gains or losses arising from changes in fair value on derivatives during the year that do not quality for hedge

accounting and the ineffective portion of an effective hedge, are taken directly to the income statement.

The fair value of forward currency contracts is the difference between the forward exchange rate and the contract rate.

The forward exchange rate is referenced to current forward exchange rates for contracts with similar maturity profiles. The

fair value of interest rate swap contracts is determined by reference to market values for similar instruments.



(x) Hedge accounting and derivative financial instruments (continued)

Initial recognition and subsequent measurement (continued)For the purpose of hedge accounting, hedges are classified as:

• fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an

unrecognised firm commitment (except for foreign currency risk); or

• cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk

associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an

unrecognised firm commitment; or

• hedges of a net investment in a foreign operation.

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which

the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.

The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the

risk being hedged and how the entity will assess the hedging instrument's effectiveness in offsetting the exposure to

changes in the hedged item's fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly

effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that

they actually have been highly effective throughout the financial reporting periods for which they were designated.

Hedges which meet the strict criteria for hedge accounting are accounted for as follows:

Fair value hedgesThe change in the fair value of a hedging derivative is recognised in the income statement. The change in the fair value of

the hedged item attributed to the risk hedged is recorded as a part of the carrying value of the hedged item and is also

recognised in the income statement.

For fair value hedges relating to items carried at amortised cost, the adjustment to carrying value is amortised through

the income statement over the remaining term to maturity. Amortisation may begin as soon as an adjustment exists and

shall begin no later than when the hedged item ceases to be adjusted for changes in its fair value attributable to the risk

being hedged.

If the hedge item is derecognised, the unamortised fair value is recognised immediately in the income statement.

When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in the fair

value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a corresponding

gain or loss recognised in the income statement.

Cash flow hedgesThe effective portion of the gain or loss in the hedging instrument is recognised directly in equity, while any ineffective

portion is recognised immediately in the income statement.

Amounts taken to equity are transferred to the income statement when the hedged transaction affects profit or loss, such

as when the hedged financial income or financial expense is recognised or when a forecast sale occurs. Where the hedged

item is the cost of a non-financial asset or non-financial liability, the amounts taken to equity are transferred to the initial

carrying amount of the non-financial asset or liability.

If the forecast transaction or firm commitment is no longer expected to occur, amounts previously recognised in equity

are transferred to the income statement. If the hedging instrument expires or is sold, terminated or exercised without

replacement or rollover, of if its designation as a hedge is revoked, amounts previously recognised in equity remain in

equity until the forecast transaction or firm commitment occurs.

Hedged of a net investmentHedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of

the net investment, are accounted for in a way similar to cash flow hedges. Gains or losses on the hedging instrument

relating to the effective portion of the hedge are recognised directly in equity while any gains or losses relating to the

ineffective portion are recognised in the income statement. On disposal of the foreign operation, the cumulative value of

any such gains or losses recognised directly in equity is transferred to the income statement.


page 66


(x) Hedge accounting and derivative financial instruments (continued)

Current versus non-current classificationDerivative instruments that are not a designated and effective hedging instrument are classified as current or non-currentor separated into a current and non-current portion based on an assessment of the facts and circumstances (i.e., theunderlying contracted cash flows).• Where the Group will hold a derivative as an economic hedge (and does not apply hedge accounting), for a period

beyond 12 months after the balance sheet date, the derivative is classified as non-current (or separated into current andnon-current portions) consistent with the classification of the underlying item.

• Embedded derivates that are not closely related to the host contract are classified consistent with the cash flows of thehost contract.

• Derivative instruments that are designated as, and are effective hedging instruments, are classified consistent with theclassification of the underlying hedged item. The derivative instrument is separated into a current portion and non-current portion only if a reliable allocation can be made.

(y) Deferred stripping costs

Stripping costs incurred in the development of a mine before production commences are capitalised as part of the cost ofconstructing the mine and subsequently amortised over the life of the mine on a units of production basis.

Where a mine operates several open pits that are regarded as separate operations for the purpose of mine planning,stripping costs are accounted for separately by reference to the ore from each separate pit. If, however, the pits are highlyintegrated for the purpose of the mine planning, the second and subsequent pits are regarded as extensions of the first pitin accounting for stripping costs. In such cases, the initial stripping (i.e., overburden and other waste removal) of the secondand subsequent pits is considered to be production phase stripping relating to the combined operation.

Stripping costs incurred subsequently during the production stage of its operation are treated as part of production costand carried in the value of the mined ore.

Deferred stripping costs are included as part of 'Mine development'. These form part of the total investment in the relevantcash generating units, which are reviewed for impairment if events or changes of circumstances indicate that the carryingvalue may not be recoverable.

(z) Treasury shares

Own equity instruments which are reacquired (treasury shares) are recognised at cost and deduced from equity. No gainor loss is recognised in the income statement on the purchase, sale, issue or cancellation of the Group's own equityinstruments. Any difference between the carrying amount and the consideration is recognised in other capital reserves.

(aa) Intangible assets

Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired ina business combination is fair value at the date of acquisition. Following initial recognition, intangible assets are carried atcost less any accumulated amortisation and any accumulated impairment losses. Internally generated intangible assets,excluding capitalised development costs, are not capitalised and expenditure is reflected in the income statement in theyear which the expenditure is incurred.

The useful lives of intangible assets are assessed as either finite or indefinite.

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever thereis an indication that the intangible asset may be impaired. The amortisation period and the amortisation method for anintangible asset with a finite useful life is reviewed at least at each financial year end. Changes in the expected useful lifeor the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changingthe amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisationexpense on intangible assets with finite lives is recognised in the income statement in the expense category consistentwith the function of the intangible asset.

Intangible assets with indefinite useful lives are not amortised, but are tested for impairment annually either individually orat the cash generating unit level. The assessment of indefinite life is reviewed annually to determine whether the indefinitelife continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposalproceeds and the carrying amount of the asset and are recognised in the income statement when the asset is derecognised.


3. Significant accounting judgements, estimates and assumptions

In the process of applying the Group's accounting policies, management has made the following judgements, apart from those

involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

(i) Significant accounting judgments

(a) Determination of mineral resources and ore reservesThe determination of reserves impacts the accounting for asset carrying values, depreciation and amortisation rates,

deferred stripping costs and provisions for decommissioning and restoration. International Ferro Metals Limited

estimates its mineral resources and ore reserves using the Australian Code for Reporting of Exploration Results,

Mineral Resources and Ore Reserves 2004 (the 'JORC code') as a minimum standard. The information on mineral

resources and ore reserves were prepared by or under the supervision of Competent Persons as defined in the JORC

code. The amounts presented are based on the mineral resources and ore reserves determined under the JORC code.

There are numerous uncertainties inherent in estimating mineral resources and ore reserves and assumptions that

are valid at the time of estimation may change significantly when new information becomes available.

Changes in the forecast prices of commodities, exchange rates, production costs or recovery rates may change the

economic status of reserves and may, ultimately, result in the reserves being restated.

(b) Impairment of capitalised exploration and evaluation expenditureThe future recoverability of capitalised exploration and evaluation expenditure is dependent on a number of factors,

including whether the Group decides to exploit the related lease itself or, if not, whether it successfully recovers the

related exploration and evaluation asset through sale.

Factors that could impact the future recoverability include the level of reserves and resources, future technological

changes, which could impact the cost of mining, future legal changes (including changes to environmental

restoration obligations) and changes to commodity prices.

To the extent that capitalised exploration and evaluation expenditure is determined not to be recoverable in the

future, profits and net assets will be reduced in the period in which this determination is made.

In addition, exploration and evaluation expenditure is capitalised if activities in the area of interest have not yet

reached a stage that permits a reasonable assessment of the existence or otherwise of economically recoverable

reserves. To the extent it is determined in the future that this capitalised expenditure should be written off, profits

and net assets will be reduced in the period in which this determination is made.

(c) Impairment of capitalised mine development expenditureThe future recoverability of capitalised mine development expenditure is dependent on a number of factors,

including the level of proved, probable and inferred mineral resources, future technological changes that could

impact the cost of mining, future legal changes (including changes to environmental restoration obligations) and

changes to commodity prices.

To the extent that capitalised mine development expenditure is determined not to be recoverable in the future,

profits and net assets will be reduced in the period in which this determination is made.

(d) Recoverability of potential deferred income tax assetsThe Group recognises deferred income tax assets in respect of tax losses to the extent that it is probable that the

future utilisation of these losses is considered probable. Assessing the future utilisation of these losses requires the

Group to make significant estimates related to expectations of future taxable income. Estimates of future taxable

income are based on forecasted profits from operations and the application of existing tax laws. Future changes in

profits resulting in estimated taxable income could impact on recognised or unrecognised deferred tax assets

or liabilities.


page 68

3. Significant accounting judgements, estimates and assumptions (continued)

(ii) Significant accounting estimates and assumptions

The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of futureevents. The key estimates and assumptions that have a significant risk of causing a material adjustment to the carryingamounts of certain assets and liabilities within the next annual reporting period are:

(a) Impairment of property, plant and equipmentProperty, plant and equipment is reviewed for impairment if there is any indication that the carrying amount maynot be recoverable.

Where a review for impairment is conducted, the recoverable amount is assessed by reference to the higher of 'valuein use' (being the net present value of expected future cash flows of the relevant cash generating unit) and 'fair valueless costs to sell'.

In determining value in use, future cash flows are based on:

Estimates of the quantities of ore reserves and mineral resources for which there is a high degree of confidence ofeconomic extraction;• future production levels;• future commodity prices; and• future cash costs of production and capital expenditure.

Variations to the expected future cash flows, and the timing thereof, could result in significant changes to anyimpairment losses recognised, if any, which could in turn impact future financial results.

(b) Provisions for decommissioning and restoration costsDecommissioning and restoration costs are a normal consequence of mining, and the majority of this expenditureis incurred at the end of a mine's life. In determining an appropriate level of provision consideration is given to theexpected future costs to be incurred, the timing of these expected future costs (largely dependent on the life of themine), and the estimated future level of inflation.

The ultimate cost of decommissioning and restoration is uncertain and costs can vary in response to many factorsincluding changes to the relevant legal requirements, the emergence of new restoration techniques or experience atother mine sites. The expected timing of expenditure can also change, for example in response to changes in reservesor to production rates.

Changes to any of the estimates could result in significant changes to the level of provisioning required, whichwould in turn impact future financial results.

(c) Valuation of share based paymentsThe key estimates and assumptions used in the valuation of share based payment plans are set out in note 2(p) andnote 29.

(d) ContingenciesBy their nature, contingencies will only be resolved when one or more future events occur or fail to occur. Theassessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcomeof future events.

(e) Production start dateThe Group assesses the stage of each mine development project to determine when a mine moves into theproduction stage. The criteria used to assess the start date of a mine are determines based on the unique nature ofeach mine development project. The group considers various relevant criteria to assess when the mine issubstantially complete, ready for its intended use and moves into the production phase. Some of the criteriaincludes, but are not limited to the following:• The level of capital expenditure compared to construction cost estimates;• Completion of a reasonable period of testing of the mine plant and equipment;• Ability to produce metal in saleable form, and• Ability to sustain ongoing production of metal.

When a mine development project moves into the production stage, the capitalisation of certain mine constructioncosts ceases and costs are either regarded as inventory or expensed, except for capitalisable costs related to miningasset additions or improvements, underground mine development or mineable reserve development. It is also at thispoint that depreciation / amortisation commences.



page 70

4. Turnover and segmental analysis

The Group operates predominantly in one business segment, being the processing of chromite in South Africa and sale of

ferrochrome in the international market.

5a. Sales revenue

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Sales Revenue

– Ferrochrome sales 756,684 1,917,993 – –

– Other sales (a) 24,890 1,403 – –

Intercompany Management Fees – – 6,217 16,960

781,574 1,919,396 6,217 16,960

(a) Other sales relate to chrome ore sales.

5b. Administrative and other expenses

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Accounting fees 1,990 815 1,991 815

Auditors remuneration 4,064 2,501 1,904 2,459

Consulting fees 8,811 2,672 273 1,111

Depreciation not in cost of goods sold 782 358 376 352

Impairment of PPE 13,493 – – –

Legal fees 7,424 5,716 3,552 4,105

Remuneration of Key Management Personnel (refer note 7) 43,949 35,589 28,016 24,486

Provision of diminution of investments – – 269,023 –

Staff costs (refer note 8) 21,896 26,578 1,146 3,334

Other administrative expenses 28,416 59,405 18,733 29,565

130,825 133,634 325,014 66,227

6. Gains on mark-to-market of derivatives

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Gain on foreign currency options (a) – 5,919 – 5,919

(a) This represents the movement in the mark-to-market value of derivative liabilities in accordance with the accounting policy described in note 2(v).

7. Remuneration of key management personnel

(a) Details of Key Management Personnel

Please refer to page 29 for details of Key Management Personnel.

(b) Remuneration of Key Management Personnel

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Basic salary and fees 20,225 16,400 11,256 10,724

Incentive payments – 14,622 – 10,132

Other fees * 3,301 3,632 1,052 2,695

Superannuation ** 598 860 598 860

Termination payments 19,743 – 15,028 –

Non-monetary benefits 82 75 82 75

43,949 35,589 28,016 24,486

Equity settled option expense 1,618 1,621 1,618 1,621

Less: Phantom option cancelled/(expense) (19,930) 19,562 (10,875) 11,985

25,637 56,772 18,759 38,092

* Other fees represent costs for any additional work undertaken for the Company and retention fees paid.

** Superannuation represents payments made in respect of a defined contribution pension scheme.

(c) Option holdings of key management personnel (consolidated)

Vested at 30 June 2009

Balance at Balance endbeginning Options of periodof period Options Options cancelled 30 June Not

30 June 2009 1 July 2008 granted exercised (note 29) 2009 Total Exercisable exercisable

Non-executive directorsAnthony Grey – – – – – – – –Stephen Turner – – – – – – – –Terence Willsteed – – – – – – – –Ian Watson – – – – – – – –Stephen Oke – – – – – – – –Tian Xia – – – – – – – –

Executive directorsDavid Kovarsky 1,000,000 – – (1,000,000) – – – –Xiaoping Yang – – – – – – – –Ronald Barnard – – – – – – – –

Other Key Management PersonnelDion Cohen – – – – – – – –Jannie Muller – – – – – – – –Hannes Van Dyk – – – – – – – –Hannes Visser – – – – – – – –

Total 1,000,000 – – (1,000,000) – – – –


7. Remuneration of key management personnel (continued)

(c) Option holdings of key management personnel (consolidated) (continued)


Balance at Balance endbeginning of periodof period Options Options 30 June Not

30 June 2008 1 July 2007 granted exercised 2008 Total Exercisable exercisable

Non-executive directorsTerence Willsteed 250,000 – (250,000) – 250,000 250,000 –

Ian Watson 333,333 – (333,333) – 333,333 333,333 –

Stephen Oke 250,000 – (250,000) – 250,000 250,000 –

Tian Xia 250,000 – (250,000) – 250,000 250,000 –

Executive directorsAnthony Grey 1,000,000 – (1,000,000) – 1,000,000 1,000,000 –

Stephen Turner 400,000 – (400,000) – 400,000 400,000 –

David Kovarsky – 1,000,000 – 1,000,000 1,000,000 333,333 666,667

Xiaoping Yang 250,000 – (250,000) – 250,000 250,000 –

Ronald Barnard 333,333 – (333,333) – 333,333 333,333 –

Other Key Management PersonnelDion Cohen – – – – – – –

Total 3,066,666 1,000,000 (3,066,666) 1,000,000 4,066,666 3,399,999 666,667


Balance at Phantom Balance endbeginning Phantom Phantom Options of periodof period options options cancelled 30 June Not


Non-executive directorsAnthony Grey 825,833 1,550,000 – (825,833) 1,550,000 1,550,000 – 1,550,000Stephen Turner 825,833 1,550,000 – (825,833) 1,550,000 1,550,000 – 1,550,000Terence Willsteed 123,125 – – (123,125) – – – –Ian Watson 289,792 – – (289,792) – – – –Stephen Oke 123,125 – – (123,125) – – – –Tian Xia 123,125 – – (123,125) – – – –

Executive directorsDavid Kovarsky 1,000,000 – – 1,000,000 1,000,000 – 1,000,000Xiaoping Yang 446,250 446,250 – (446,250) 446,250 446,250 – 446,250Ronald Barnard 792,500 – – (792,500) – – – –

Other Key Management PersonnelDion Cohen 498,250 998,250 – (498,250) 998,250 998,250 – 998,250Jannie Muller 122,000 190,000 – (122,000) 190,000 190,000 – 190,000Hannes Van Dyk – 250,000 – – 250,000 250,000 – 250,000Hannes Visser – 250,000 – – 250,000 250,000 – 250,000

Total 4,169,833 6,234,500 – (4,169,833) 6,234,500 6,234,500 – 6,234,500


page 72


(c) Option holdings of key management personnel (consolidated) (continued)


Balance at Phantom Balance endbeginning Phantom Phantom Options of periodof period options options cancelled 30 June Not


Non-executive directorsXiaoping Yang 300,000 246,250 (100,000) – 446,250 446,250 246,250 200,000

Ian Watson 250,000 123,125 (83,333) – 289,792 289,792 123,125 166,667

Terence Willsteed – 123,125 – – 123,125 123,125 123,125 –

Stephen Oke – 123,125 – – 123,125 123,125 123,125 –

Tian Xia – 123,125 – – 123,125 123,125 123,125 –

Executive directorsAnthony Grey 500,000 492,500 (166,667) – 825,833 825,833 492,500 333,333

Stephen Turner 500,000 492,500 (166,667) – 825,833 825,833 492,500 333,333

Ronald Barnard 450,000 492,500 (150,000) – 792,500 792,500 492,500 300,000

Other Key Management PersonnelDion Cohen 378,000 246,250 (126,000) – 498,250 498,250 246,250 252,000

Total 2,378,000 2,462,500 (792,667) – 4,047,833 4,047,833 2,462,500 1,585,333

(d) Shareholdings of key management personnel (consolidated)

Balance endGranted as On of period

Balance at remune– exercise Shares Shares 30 June 1 July 2008 ration of options sold purchased 2009

Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary30 June 2009 shares shares shares shares shares shares

Non-executive directorsAnthony Grey* 1,266,667 – – – – 1,266,667Stephen Turner** 6,916,667 – – – – 6,916,667Terence Willsteed*** 166,667 – – – 583,333 750,000Ian Watson 333,334 – – – – 333,334Stephen Oke 50,000 – – – – 50,000Tian Xia 166,667 – – – – 166,667

Executive directorsDavid Kovarsky – – – – – –Xiaoping Yang 166,667 – – – – 166,667Ronald Barnard(1) 333,334 – – (333,334) – –

Other Key Management PersonnelDion Cohen – – – – – –Jannie Muller – – – – – –Hannes Van Dyk – – – – – –Hannes Visser – – – – – –

Total 9,400,003 – – (333,334) 533,333 9,650,002

(1)Mr Barnard resigned on 17 July 2008.

* Mr Grey's shareholding is held by Dalvin Pty Limited, a company of which Anthony Grey is a beneficial owner.

** Mr Turner's shareholding are held as follows: 4,141,667 ordinary shares by Kin Yip International Limited and 2,775,000 Ordinary shares by Guarantee Group Limited,

both being companies of which Stephen Turner is a beneficial shareholder. Mr Turner only has a part interest in these shares.

*** Terence Willsteed's shareholding is held by Patermat Pty Limited as trustee for T.V.Willsteed & Associates Pty Limited Superannuation Fund through the association

with Mineral Associated SA.



(d) Shareholdings of key management personnel (consolidated) (continued)

Balance endBalance at Granted as On exercise Shares of period

1 July 2007 remuneration of options sold 30 June 2008Ordinary Ordinary Ordinary Ordinary Ordinary

30 June 2008 shares shares shares shares shares

Non-executive directorsTerence Willsteed * – – 250,000 (83,333) 166,667

Ian Watson 666,667 – 333,333 (666,666) 333,334

Stephen Oke – – 250,000 (200,000) 50,000

Tian Xia – – 250,000 (83,333) 166,667

Executive directorsAnthony Grey** 900,000 – 1,000,000 (633,333) 1,266,667

Stephen Turner*** 12,975,000 – 400,000 (6,458,333) 6,916,667

Xiaoping Yang – – 250,000 (83,333) 166,667

Ronald Barnard 666,667 – 333,333 (666,666) 333,334

Other Key Management PersonnelDion Cohen 12,500 – – (12,500) –

Total 15,220,834 – 3,066,666 (8,887,497) 9,400,003

* Terence Willsteed's shareholding is held by Patermat Pty Ltd as trustee for T.V.Willsteed &Associates Pty Limited Superannuation Fund.

** Mr Grey's shareholding is held by Dalvin Pty Limited, a company of which Anthony Grey is a beneficial owner.

*** Mr Turner's shareholding are held as follows: 1,000,000 Ordinary shares in his own name, 5,541,667. Ordinary shares by Kin Yip International Limited and

375,000 Ordinary shares by Elliot Rutledge Group Pty Ltd, both being companies of which Stephen Turner is a beneficial shareholder. Mr Turner only has a part interest

in these shares.

8. Staff costs (excluding remuneration of key management personnel)

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Basic salary and fees 99,504 72,218 1,029 3,251

Superannuation * 90 83 90 83

Termination costs 18,065 – – –

Other costs 27 – 27 –

117,686 72,301 1,146 3,334

Less amounts included in inventories/cost of goods sold (95,790) (45,723) – –

21,896 26,578 1,146 3,334

* Superannuation represents payments made in respect of a defined contribution pension scheme.


page 74


9. Share based payment income/(expense)

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Equity settled option (expense) (1,618) (1,621) (1,618) (1,621)

Phantom option income/(expense) 37,183 (36,582) 11,291 (13,599)

35,565 (38,203) 9,673 (15,220)

Refer to note 29 for further details of the option plan.

10. Financing income and costs

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Interest income 34,781 43,898 114,186 134,449

Interest expense (36,580) (85,582) – (2)

Finance cost (6,212) (9,910) – –

– Amortisation of debt establishment costs – (6,353) – –

– Early settlement fees – (2,723) – –

– Unwinding of discount on rehabilitation provision (6,212) (834) – –

Interest charges (30,368) (75,672) – (2)

– Interest on project debt – (30,879) – –

– Interest on financing (20,219) (20,048) – –

– Interest on leases (9,888) (23,410) – –

– Interest paid – other (261) (1,335) – (2)

Net finance income/(costs) 1,799 (41,684) 114,186 134,447

11. Income tax

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Income tax expenseCurrent Income tax charge: 56 1,575 – –

Adjustment in respect of deferred income tax of

previous year 22,448 – – –

Deferred income tax relating to origination and reversal

of temporary differences (139,703) 50,602 – –

Income tax (credit)/expense recorded in income statement (117,199) 52,177 – –

(Loss)/profit from ordinary activities before income

tax expense (455,798) 630,359 (210,975) 163,311

At parent entity statutory tax rate of 30%: (136,734) 189,108 (63,293) 48,993

Overseas tax rate differential 10,276 (9,341) – –

Expenses not deductible for tax purposes 39,115 41,577 119,822 8,948

Additional tax deductions (41,989) (75,487) (37,684) (67,418)

Utilisation of previously unrecognised tax losses (18,845) (11,670) (18,845) –

Utilisation of unredeemed capital expenditure – (92,984) – –

Permanent differences 8,530 1,436 – –

Adjustment in respect of deferred income tax of

previous year 22,448 – – –

Deferred tax asset not recognised – 9,538 – 9,476

Aggregate income tax (credit)/expense (117,199) 52,177 – –

Deferred income tax liabilityProperty plant and equipment, including unredeemed

capital expenditure 104,362 100,420 – –

Debtors and prepayments (304) 6,413 – –

Other payables 1,488 – – –

Total deferred tax liability 105,546 106,833 – –

Deferred income tax assetProvisions (2,751) (11,747) – –

Finance lease payments (25,119) (28,688) – –

Share option charges (687) (6,011) – –

Income received in advance (158) (4,716) – –

Inventory (12,644) – – –

Loss available for offset against future income (127,832) – – –

Rehabilitation provisions, claimable in future (3,008) (5,069) – –

Total deferred tax (asset) (172,199) (56,231) – –

Net deferred tax (asset)/liability (66,653) 50,602 – –

Calculated taxation losses The Group has recognised a net deferred tax asset of

ZAR 66.7 million as it is probable these will be fully

utilised going forward.

Unredeemed mining capital expenditureUnredeemed mining capital expenditure available for

offset against future mining taxable income 1,266,056 1,131,709 – –


page 76

12. Earnings per share

(a) Earnings used in calculating earning per shareConsolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Basic (loss)/earnings per share (cents per share) (66.13) 114.05 (41.80) 32.49

Diluted (loss)/earnings per share (cents per share) (66.13) 114.01 (41.80) 32.48

Earnings used in calculating basic earnings

per share (ZAR'000) (333,775) 573,179 (210,975) 163,311

Earnings used in calculating diluted earnings

per share (ZAR'000) (333,775) 573,179 (210,975) 163,311

Weighted average number of ordinary shares

on issue in calculation of basic earnings per share 504,757,375 502,590,229 504,757,375 502,590,229

(b) Weighted average number of sharesParent

2009 2008ZAR'000 ZAR'000

Weighted average number of ordinary shares (excluding reserved shares) for basic

earnings per share 504,757,375 502,590,229

Effect of dilution:

Share options – 144,634

Weighted average number of ordinary shares (excluding reserved shares) used

in the calculation of diluted earnings per share 504,757,375 502,734,863

13. Dividends paid and proposed

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Dividends declared and paid during the year on

ordinary shares:

Final unfranked dividend for the financial year ended

30 June 2008: 1 pence, paid 3 November 2008 76,148 – 76,148 –

The Board of Directors resolved not to declare a dividend for the year ending 30 June 2009.

14. Cash and cash equivalents

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Cash at bank and on hand 36,186 66,434 6,794 17,465

Short-term deposits 303,903 905,756 259,908 797,931

340,089 972,190 266,702 815,396

Restricted cash is disclosed as other non-current assets in note 20.


15. Receivables

(a) Receivable – inter-company

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Loan to subsidiary – – 33,268 19,127

(b) Trade and other receivables

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Trade debtors (a) 62,678 425,859 – –

Less: Advance debtor payments (566) – – –

Less: Effect of discount (997) – – –

Outstanding tax refunds (b) 18,319 35,484 242 366

Other debtors (c) 1,625 1,576 21,621 239,193

81,059 462,919 21,863 239,559

(a) Trade debtors relate to the sale of ferro chrome and chrome ore. Payment terms are thirty days from date of final invoice.

(b) Tax refunds relate to the relevant Goods and Services Tax and Value Added Tax refunds owing in Australia and South Africa.

(c) Other debtors in the parent entity relates to accrued preference share dividends (refer note 18(b)).

Details of the terms and conditions of receivables are discussed in detail under note 30.

The carrying value of trade and other receivables is assumed to approximate the fair value due to the short term nature of the

trade and other receivables. Sales are made on a cost, insurance and freight (CIF) basis.

16. Prepayments

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Prepaid retention fee 5,811 8,060 – –

Prepaid shipping costs 452 4,585 – –

Prepaid stewardship costs – 538 324 487

Prepaid insurance – 199 – 199

6,263 13,382 324 686


page 78

17. Inventories

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Consumable stores at net realisable value (2008: at cost) 17,019 6,895 – –

Ore stock at net realisable value (2008: at cost) 112,800 68,959 – –

Raw materials at net realisable value (2008: at cost) 23,113 22,114 – –

Finished goods at net realisable value (2008: at cost) 42,888 11,784 – –

195,820 109,752 – –

18. Financial assets

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Investment in subsidiaries at cost – – 1,578,601 891,601

Provision for diminution (a) – – (269,023) –

Net investment in subsidiaries – – 1,309,578 891,601

Receivable from Jefferson Investments Limited (b) – – 695,657 695,657

Investment in rehabilitation trust (c) 8,550 – – –

8,550 – 2,005,235 1,587,258

(a) This provision has arisen as a result of losses incurred by subsidiary companies during the current financial year.

(b) IFML purchased a preference share in Jefferson Investments, a UK financial institution, for ZAR695 million. Simultaneously, IFMSA issued a debenture to Morgan

Stanley for ZAR695 million. The debenture was secured against the preference shares. On 25 September 2008, the Board resolved to restructure IFMSA financing

arrangements to extinguish IFML's exposure to Morgan Stanley counterparty risk. The restructure was executed in the following manner:

• The put agreements between IFML and Jefferson Investments over the Jefferson Capital (“JC”) preference shares and IFMSA debentures were cancelled;

• Landsend Capital Limited (“LC”) acquired the IFMSA debentures;

• LC and IFML granted puts over the JC preference shares and debentures, similar to those that were in place between IFML and Morgan Stanley;

• LC then pledged the IFMSA debentures to IFML as security for the above put arrangement;

• The pledge was provided by LC to IFML over the listed IFMSA debentures. The pledge was registered by Standard Bank in South Africa.

In addition and prior to the above restructure, all outstanding debenture interest amounting to ZAR267,610,434 that was owing to Morgan Stanley on 30 September

2008 was paid and a preference dividend for the same amount was received by IFML. In addition on 31 March 2009 debenture interest of ZAR43,478,581 was paid

and a preference dividend for the same amount was received by IFML.

The coupon on both the preference shares and the debenture is 12.5% compounded semi-annually in arrears. The debenture term ends on 25 January 2016.

The Group is entitled to set off the preference share and the debenture, as such, these items have been set off in the consolidated balance sheet.

(c) The investment constitutes deposits at financial institutions in favour of a rehabilitation trust. These funds can only be applied to relevant rehabilitation expenditure.


19a. Property, plant and equipment

Consolidated

Accumulated Net bookCost depreciation value

2009 ZAR'000 ZAR'000 ZAR'000

Mineral rights and reserves (a) 157,287 (8,166) 149,121Land and buildings 33,198 (1,668) 31,530Decommissioning asset 2,040 (420) 1,620Plant & equipment 1,293,173 (96,575) 1,196,598Leased plant & equipment 88,555 (5,555) 83,000Mine development 163,206 (13,001) 150,205Computer equipment 7,212 (3,053) 4,159Leased computer equipment 1,651 (999) 652Furniture & fittings 3,778 (2,250) 1,528Exploration costs 15,802 – 15,802Capital work in progress (b) 152,403 – 152,403Vehicles 8,648 (2,551) 6,097Leased vehicles 7,347 (1,911) 5,436

Total 1,934,300 (136,149) 1,798,151

Consolidated

Carrying Carryingvalue at value at

beginning Impair- end ofof year ments (d) Adjustments Additions Depreciation year

2009 ZAR'000 ZAR'000 ZAR'000 ZAR'000 ZAR'000 ZAR'000

Mineral rights and reserves (a) 151,492 – 63 – (2,434) 149,121Land and buildings 28,794 – 3,490 – (754) 31,530Decommissioning asset 5,631 – (3,813) – (198) 1,620Plant & equipment 1,177,789 (10,182) 69,308 – (40,317) 1,196,598Leased plant & equipment (c) 85,256 – 67 – (2,323) 83,000Mine development 132,870 – 22,802 618 (6,085) 150,205Computer equipment 2,262 – – 3,368 (1,471) 4,159Leased computer equipment 1,176 (23) – – (501) 652Furniture & fittings 1,643 – 856 (971) 1,528Exploration costs 12,856 – – 2,946 – 15,802Capital work in progress (b) 60,522 (3,288) (91,917) 187,086 – 152,403Vehicles 4,638 – 511 2,500 (1,552) 6,097Leased vehicles 7,352 – (511) – (1,405) 5,436

Total 1,672,281 (13,493) – 197,374 (58,011) 1,798,151

Parent

Accumulated CarryingCost depreciation value

2009 ZAR'000 ZAR'000 ZAR'000

Land & buildings 3,451 (287) 3,164Plant & equipment 4,922 (410) 4,512Mine development 992 (83) 909Computer equipment 223 (119) 104Furniture & fittings 51 (26) 25

Total 9,639 (925) 8,714


page 80

19a. Property, plant and equipment (continued)

Parent


beginning end ofof year Adjustments Additions Depreciation year

2009 ZAR'000 ZAR'000 ZAR'000 ZAR'000 ZAR'000

Land & buildings 3,278 – – (114) 3,164Plant & equipment 4,676 – – (164) 4,512Mine development 942 – – (33) 909Computer equipment 46 – 113 (55) 104Furniture & fittings 34 – – (9) 25

Total 8,976 – 113 (375) 8,714

Consolidated

Accumulated Net bookCost depreciation value

2008 ZAR'000 ZAR'000 ZAR'000

Mineral rights and reserves (a) 157,223 (5,731) 151,492

Land and buildings 30,726 (1,932) 28,794

Decommissioning asset 5,837 (206) 5,631

Plant & equipment 1,234,006 (56,217) 1,177,789

Leased plant & equipment 88,488 (3,232) 85,256

Mine development 137,576 (4,706) 132,870

Computer equipment 3,902 (1,640) 2,262

Leased computer equipment 1,651 (475) 1,176

Furniture & fittings 2,881 (1,238) 1,643

Exploration costs 12,856 – 12,856

Capital work in progress (b) 60,522 – 60,522

Vehicles 5,636 (998) 4,638

Leased vehicles 7,858 (506) 7,352

Total 1,749,162 (76,811) 1,672,281

Consolidated


beginning end ofof year Adjustments Additions Depreciation year


Mineral rights and reserves (a) 155,257 (28) – (3,737) 151,492

Land and buildings 29,353 – 42 (601) 28,794

Decommissioning asset 5,801 50 – (220) 5,631

Plant & equipment 1,184,741 21,220 10,525 (38,697) 1,177,789

Leased plant & equipment (c) 108,350 (20,559) – (2,535) 85,256

Mine development 117,736 – 20,339 (5,205) 132,870

Computer equipment 2,622 – 736 (1,096) 2,262

Leased computer equipment 1,616 – – (440) 1,176

Furniture & fittings 2,392 – 144 (893) 1,643

Exploration costs – – 12,856 – 12,856

Capital work in progress (b) 22,547 (21,220) 59,195 – 60,522

Vehicles 357 (47) 5,117 (789) 4,638

Leased vehicles 1,616 47 6,160 (471) 7,352

Total 1,632,388 (20,537) 115,114 (54,684) 1,672,281


19a. Property, plant and equipment (continued)

Parent

Accumulated CarryingCost depreciation value

2008 ZAR'000 ZAR'000 ZAR'000

Land & buildings 3,450 (172) 3,278

Plant & equipment 4,922 (246) 4,676

Mine development 992 (50) 942

Computer equipment 109 (63) 46

Furniture & fittings 51 (17) 34

Total 9,524 (548) 8,976

Parent


beginning Impairments/ end ofof year Adjustments Additions Depreciation year


Land & buildings 3,394 – – (115) 3,279

Plant & equipment 4,840 – – (164) 4,676

Mine development 975 – – (33) 942

Computer equipment 35 – 43 (32) 46

Furniture & fittings 41 – – (8) 33

Total 9,285 – 43 (352) 8,976

(a) Mineral rights and reserves of ZAR61million relating to the Sky Chrome deposit is held in Purity Metals Holdings Limited (“Purity”), a wholly owned subsidiary of the

Group. IFM acquired the shares in Purity for US$9 million on 16 December 2005. For accounting purposes Purity is treated as a subsidiary of the Company. Purity

owns 80% of the Sky Chrome project, a ferrochrome resource located adjacent to the Buffelsfontein plant. The purchase price has been allocated to the value of the

Sky Chrome Mineral Resource. There has been no impact on the income statement subsequent to acquisition. The Parent investment in Purity is disclosed under

“Other Financial Assets” per note 18 as “Investment in Subsidiaries at cost”. On 30 April 2009, Sky Chrome submitted an application to the Department of Minerals

and Energy (“DME”) for a new order mining license. Sky Chrome's prospecting right expired in July 2009. The new order mining license is expected to be approved

between 6 and 9 months and no mining is allowed in the meantime. Management believe that the new order mining license will be approved.

(b) Capital work in progress relates to capital costs incurred for the expansion of the Group's associated infrastructure.

(c) The adjustment to plant & equipment is a result of the reassessment of the minimum lease payments to be made on the finance lease of the power sub-station and

feeder bays supporting the Buffelsfontein facility and mine.

(d) Impairments relate to plant & equipment written off as part of the plant upgrade programme.

Property, mineral rights, plant and equipment of IFMSA have been pledged as security for the working capital facility provided by Bank of China. (Refer to note 23

for further details).

19b. Intangible assets

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Licence:

Cost – opening balance – – – –

Addition 10,837 – – –

Cost – closing balance 10,837 – – –


page 82

19b. Intangible assets (continued)

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Amortisation:

Amortisation – opening balance – – – –

Charge for the year (775) – – –

Amortisation – closing balance (775) – – –

Net book value 10,062 – – –

(a) Intangible assets consist of licence fees for the use of patented technology.

20. Other non-current assets

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Restricted cash (a) 17,100 22,942 – –

Deposits 1,134 2,683 707 516

18,234 25,625 707 516

(a) Restricted cash represents cash set aside for bank guarantees provided by Standard Bank to the Department of Trade and Industry for the financial year ending 2009.

Restricted cash for 2008 represents cash set aside for bank guarantees provided by Standard Bank to the Department of Trade and Industry and other contractors.

21. Trade and other payables

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Sundry creditors and accruals 45,433 61,310 3,663 6,169

Trade creditors 35,577 131,389 – –

Finance lease liability (a) 24,988 9,140 – –

Other creditors and accruals (b) – 11,310 – –

105,998 213,149 3,663 6,169

(a) Refer to note 32.

(b) Other creditors and accruals represent advance debtor payments.

Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.


22. Provisions

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Current provisionsEmployee entitlements (a) 9,608 63,589 1,020 14,565

Share based payment liability (b) 3,154 35,688 1,664 13,000

Taxation (351) 1,575 – –

12,411 100,852 2,684 27,565

Employee entitlementsOpening balance 63,589 23,118 14,565 13,151

Provision recognised during the year 9,545 41,857 2,062 1,794

Provision utilised during the year (63,526) (1,386) (15,607) (380)

Closing balance 9,608 63,589 1,020 14,565

Phantom optionsOpening balance 35,688 – 13,000 –

Transferred from non-current provision – 18,599 – 4,089

Cash settled share based payment expense 3,154 36,582 1,664 13,599

Cancellation of phantom options (34,662) – (11,974) –

Effect of foreign exchange (1,026) – (1,026)Phantom options exercised and paid during the year – (19,493) – (4,688)

Closing balance 3,154 35,688 1,664 13,000

TaxationOpening balance 1,575 – – –

Provision recognised during the year 56 1,575 – –

Taxation paid during the year (1,982) – – –

Closing balance (351) 1,575 – –


page 84

22. Provisions (continued)

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Non current provisionsDecommissioning and restoration (c) 10,741 18,104 – –

Share based payment liability (b) 2,566 9,080 1,354 3,172

13,307 27,184 1,354 3,172

Decommissioning and restorationOpening balance 18,104 6,292 – –

Additional provision recognised during the year:

– Recorded in property, plant and equipment (3,797) – – –

– Unwinding of discount 6,212 834 – –

– Adjustment in provision assumptions (9,778) 10,978 – –

Closing balance 10,741 18,104 – –

Phantom optionsOpening balance 9,080 27,679 3,172 7,261

Transfer to current provision – (18,599) – (4,089)

Cash settled share based payment expense 2,566 – 1,354 –

Cancellation of phantom options (8,241) – (2,335) –

Effect of foreign exchange (839) (837)

Closing balance 2,566 9,080 1,354 3,172

(a) The provision for employee entitlements represents accrued annual leave liabilities and other employee provisions. It is expected that these costs will be incurred in

the next financial year.

(b) The Phantom Share Option scheme options are treated as “cash settled” share based payments in accordance with the accounting policy described in note 2(p).

(c) The provision for decommissioning and restoration represents management's estimate of the restoration and exit costs associated with the integrated ferrochrome

mining and processing facility at Buffelsfontein and Sky Chrome. It is expected that these costs will be incurred at the end of the operations/mine life. Due to the

long-term nature of the liability the greatest uncertainty in estimating the provision is the costs that will be ultimately incurred. The provision has been calculated

using a pre-tax discount rate of 9%.

23. Interest bearing loans and borrowings

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Long term portion of finance lease liability (a) 64,722 90,601 – –

Debt Establishment costs (b) (5,313) – – –

Other loans (c) 4,644 2,115 – –

64,053 92,716 – –

(a) Finance leases

The weighted average effective interest rate on finance leases is 11.93%.

(b) Working capital facility

On 29 June 2009 the company entered into a working capital facility agreement with the Bank of China for an amount of ZAR500 million. The initial drawdowncurrency split will be 60% in USD and 40% in ZAR. The facility interest is charged at USD:LIBOR plus 1.5% on the USD portion of the loan while the ZAR portion ofthe loan is charged at the South African Prime rates plus 1.9%. The term of the facility is for 36 months. The parent company, IFML, guarantees the facility on behalfof IFMSA. The entire balance sheet of IFMSA is pledged as collateral for the loan facility.

(c) Other loans

The loan constitutes the 20% tribal participation of funding provided to Sky Chrome by IFM. The loan is interest free and payable before earning distributions are made.

Undrawn loan facilities at 30 June 2009, excluding debtors discounting facilities, amounted to ZAR500 million (2008: ZAR50 million).

Fair value

The carrying values of each class of interest bearing loans and borrowings approximates their fair value.


24. Contributed equity

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Movement in ordinary shares on issueOpening balance 2,834,412 1,607,075 2,834,412 1,607,075

Issue of Ordinary Shares – 1,196,208 – 1,196,208

Exercise of options – 85,860 – 85,860

Share placement costs – (54,731) – (54,731)

Share buy-back (a) (19,853) – (19,853) –

Transaction costs (a) (179) – (179) –

Closing balance 2,814,380 2,834,412 2,814,380 2,834,412

Shares Shares Shares Shares

Opening balance 507,562,680 428,161,896 507,562,680 428,161,896

Issue of Ordinary Shares – 71,000,000 – 71,000,000

Exercise of options – 8,400,784 – 8,400,784

Share buy-back (a) (3,919,000) – (3,919,000) –

Closing balance 503,643,680 507,562,680 503,643,680 507,562,680

No Ordinary Shares were issued during the year ending 30 June 2009.

The details of Ordinary Shares issued during the year ending 30 June 2008 are as follows:

Description Number Share price/ Proceedsof share of shares exercise (local Proceeds

Period issue issued/(sold) price currency) (ZAR'000)

Year ended 30 June 2008 LSE Listing 71,000,000 £1.20 £85,200,000 1,196,208

Exercise of options 8,400,784 £0.22 & 0.4375 – 85,860

(a) On 30 September 2008, the Company announced an on-market share buy-back programme. As at the date of this report,

International Ferro Metals Limited has purchased 3,919,000 Ordinary Shares through this programme, at a weighted

average price of GBP0.32 per share, all of which had voting rights and have been duly cancelled. As a result, the Company's

issued share capital has been reduced to 503,643,680. Transaction costs relate to commissions paid on the Ordinary Shares

re-purchased. There is no current on market buy-back.

Ordinary SharesOrdinary Shares have the right to receive dividends as declared and, in the event of the winding up of the Company, to participate

in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.

Ordinary Shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.


page 86

24. Contributed equity (continued)

Options

The following table sets out the Options granted and exercised during each year:

As at 30 June

2009 2008Number Number

Opening balance 1,000,000 11,395,045

Options granted (Table 1) – 1,000,000

Options exercised (Table 2) – (8,400,786)

Options cancelled (Table 2) (1,000,000) (2,994,259)

Closing balance – 1,000,000

In addition, JISCO has certain non-dilution rights under the Subscription Agreement, which apply if an Option is exercised, to

require JISCO to be offered and issued Ordinary Shares at the same exercise price at which such Options are exercised to enable

JISCO to maintain its guaranteed holding of 26.1% of the issued Ordinary Shares of the Company. These non-dilution rights are

accounted for as a derivative liability. Since JISCO's shareholding is above 26.1%, under the Subscription Agreement, IFM is not

obliged to offer JISCO shares in terms of the anti-dilution clause, unless the issue would dilute JISCO's ownership below 26.1%.

The following table sets out the details of Options issued during the relevant period:

Table 1

Fair value Fair valueVesting Expiry of options of options

Number Exercise date/ at grant at grantDescription of option holder granted Price conditions date date date

ZAR'000

Year ended 30 June 2009

Directors – – – – – –


Directors 1,000,000 £0.875 (a) (a) £223,222 3,283,600

For further details refer to Audited Remuneration report (table 4) included as part of the directors report.


24. Contributed equity (continued)

The following table sets out the details of options exercised during the relevant period:

Table 2

Weighted average

share price Number Number Exercise at time of

Description of option holder Exercised Cancelled Price exercise


Directors – (1,000,000) – –


Directors 4,400,000 – £0.22-£0.35 £1.27

Service Providers 2,735,224 – £0.4025-£0.4375 £1.44

Finance Providers* – 1,285,714 – –

JISCO* – 1,708,545 – –

JISCO 300,203 – £0.35 £1.27

JISCO 965,359 – A$0.40-A$0.65 £1.77 – £1.44

8,400,786 2,994,259

** On 28 September 2007, as part of the Group's final settlement with the finance providers, IFM cancelled these options. JISCO's anti-dilution right relating to these

options was also cancelled.

Capital Management

When managing capital, management's objective is to ensure the Group continues as a going concern as well as to maintain

optimal returns to shareholders and benefits for other stakeholders. Management also aims to maintain a capital structure that

ensures the lowest cost of capital available to the Group.

Capital is defined as total shareholders' equity which represented ZAR2.8 billion at 30 June 2009 (2008: ZAR2.8 billion).

The Board of Directors and management often review the company's capital structure using a detailed cash flow model. They

assess the adequacy of the capital structure against the major variables impacting the Group's profitability.

For expansion plan feasibility studies or evaluations of potential acquisitions, management reviews its capital to ensure optimal

structuring. As the market is constantly changing, management may change the amount of dividends to be paid to shareholders,

return capital to shareholders or issue new shares to reduce debt. Should a strategic acquisition be assessed, management may

issue further shares on the market.

The Company has complied with all externally imposed capital requirements.


page 88

25. Share based payment reserve

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Opening balance 6,617 7,480 6,617 7,189

Options exercised and transferred to share capital – (2,492) – (2,201)

Share based payment expense 1,618 1,621 1,618 1,621

Effect of foreign exchange 37 8 37 8

Closing balance at the end of the year 8,272 6,617 8,272 6,617

The share based payment reserve records the value of equity benefits provided to employees and directors as part of their

remuneration.

26. Accumulated losses

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Opening balance at the start of the year (78,036) (651,215) (206,417) (369,728)

Dividend payments (76,148) – (76,148)Loss on fair value of investment 64 – – –

Cancellation of shares (1,418) – – –

After tax (loss)/profit attributable to the equity holders

of the parent during the year (333,775) 573,179 (210,975) 163,311

Closing balance at the end of the year (489,313) (78,036) (493,540) (206,417)

27. Non-distributable reserve

Consolidated Parent

2009 2008 2009 2008ZAR'000 ZAR'000 ZAR'000 ZAR'000

Opening balance – – – –

Acquisition of minority interest (6,044) – – –

Closing balance of the end of the year (6,044) – – –

The non-distributable reserve relates to the transaction that took place to reduce the minority interest shareholding.


28. Minority interest

As at 30 June

2009 2008ZAR'000 ZAR'000

Opening balance at the start of the year 8,653 3,650

Reduction in share holding (2,032) –

(Loss)/profit attributable to the minority interest during the year (4,804) 5,003

Closing balance at the end of the year 1,817 8,653

29. Share-based payment plans

The fair value of the share options granted is estimated as at the date of grant using a Binomial model taking into account the

terms and conditions upon which the options were granted.

2009 2008

Expected volatility (a) (%) 77.25% 45%

Risk-free interest rate range (%) 0.57% – 3.28% 5.06% – 5.20%

Option exercise price (GBP) £0.16 £0.35 – £1.4250

Expected dividend yield range 0% – 6.05% 1.6% – 6.6%

Option cap £1.00 £1.50 – £3.50

Exercise multiple 4 4

(a) The expected volatility reflects assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. Share

price volatility is re-assessed at each reporting period based on historical share prices. The current volatility is based on actual volatility since the listing of the

company in September 2005.

Equity Settled Options

As at 30 June 2008, 1,000,000 options were on issue to Mr Kovarsky to subscribe for shares in IFM within a three-year period up

until 31 December 2010. These options were cancelled by the Board on 30 December 2008. As a result of the accelerated

amortisation of the fair value of the options, ZAR1.62 million has been recorded in the income statement.

Phantom Share Option Plan

As at 30 June 2008 the total number of phantom share options (“Options”) issued was 8,076,735, with an amortised liability value

of ZAR44.8 million. On 30 December 2008 the Board decided to cancel all existing Options held by current officers and employees

amounting to 6,028,401 Options, and issue a new tranche of Options. Under the new issue 17,083,000 Options had been granted

at an exercise price of GBP0.16 being the 30 trading day weighted average share price on the London Stock Exchange prior to the

grant date. On 19 February 2009, the Board resolved to decrease the number of phantom options from 17,083,000 to 10,200,568.

The number was further reduced to 9,929,568 Options owing to resignations after 1 January 2009. These Options have an

amortised liability of ZAR5.7 million resulting in a net reversal to the income statement of ZAR37.1 million. The Options have a

term of five years vesting in three equal and annual tranches, commencing 30 December 2009, and the maximum benefit will be

capped by a reference share price of GBP1.00.


page 90

29. Share-based payment plans (continued)

The estimated fair value of each phantom option at reporting date is:

Fair value Fair value Fair valueat reporting at reporting at reporting

date date dateExercise price Tranche 1 Tranche 2 Tranche 3

£0.16 £0.15 £0.15 £0.14

Weighted Number of average

Phantom options options exercise price

Opening balance at 1 July 2007 5,363,000 £0.36

Granted during the period 4,829,000 £1.04

Forfeited/Cancelled during the year (272,000) £0.64

Exercised during the period (1,843,265) £0.38

Expired during the period – –

Closing balance at 30 June 2008 8,076,735 £0.76



Forfeited/Cancelled during the year (8,347,735) £0.76

Exercised during the period – –



The weighted average share price for the year ending 30 June 2009 was £0.47.

The weighted average remaining contractual life of the above outstanding options is 4.5 years.

WeightedNumber of average

Equity share options options exercise price

Opening balance at 1 July 2007 11,395,045 A$0.53

& £0.39



Exercised during the period (8,400,786) A$0.53

& £0.34




Granted during the period – –


Exercised during the period – –


Closing balance at 30 June 2009 – –

The weighted average share price for the year ending 30 June 2009 was GBP0.47.


30. Financial risk management and objectives

The Group's overall financial risk management strategy is to seek to ensure that the Group is able to fund its business operations

and expansion plans.

Exposure to foreign currency risk, interest rate risk, commodity price risk, credit risk, liquidity risk and share price risk arises in the

normal course of the Group's business. Derivative financial instruments may be used to hedge exposure to fluctuations in foreign

exchange rates, interest rates, and commodity prices. During the period under review the Group entered into certain forward

exchange contracts (“FEC') in order to hedge against fluctuating exchange rates.

The following table displays the financial instruments held at the end of the year:

Financial Assets and Liabilities by categories At 30 June 2009

At fair Financial Othervalue liabilities financial

Held to through measured assetsLoans and maturity profit at amortised and

receivables investments & loss cost liabilities TotalConsolidated ZAR'000 ZAR'000 ZAR'000 ZAR'000 ZAR'000 ZAR'000

Recognised Financial AssetsCash & Cash equivalents

(note 14) 36,186 303,903 – – – 340,089Trade and other receivables

(note 15) 61,115 – – – – 61,115Deposits (note 20) 1,134 – – – – 1,134Restricted cash (note 20) – 17,100 – – – 17,100Other financial assets 8,550 – – – – 8,550

Total recognised financial

assets 106,985 321,003 – – – 427,988

Recognised Financial LiabilitiesTrade and other payables

(note 21) – – – (24,988) (81,010) (105,998)Interest bearing liabilities

(note 23) – – – (64,722) 669 (64,053)

Total recognised financial

liabilities – – – (89,710) (80,341) (170,051)

Unrecognised Financial LiabilitiesUn–drawn loan facilities

(note 23) – – – (500,000) – (500,000)

Total unrecognised financial

liabilities – – – (500,000) – (500,000)


page 92

30. Financial risk management and objectives (continued)

Financial Assets and Liabilities by categories At 30 June 2008

At fair Financial Othervalue liabilities financial

Held to through measured assetsLoans and maturity profit at amortised and

receivables investments & loss cost liabilities TotalConsolidated ZAR'000 ZAR'000 ZAR'000 ZAR'000 ZAR'000 ZAR'000

Recognised Financial AssetsCash & Cash equivalents

(note 14) 66,434 905,756 – – – 972,190

Trade and other receivables

(note 15) 427,434 – – – – 427,434

Deposits (note 20) 2,683 – – – – 2,683

Restricted cash (note 20) – 22,942 – – – 22,942

Total recognised financial assets 496,551 928,698 – – – 1,425,249

Recognised Financial LiabilitiesTrade and other payables (note 21) – – – (9,140) (204,009) (213,149)

Interest bearing liabilities (note 23) – – – (90,601) (2,115) (92,716)

Total recognised financial liabilities – – – (99,741) (206,124) (305,865)

Unrecognised Financial LiabilitiesUn-drawn loan facilities (note 23) – – – – (50,000) (50,000)

Total unrecognised financial liabilities – – – – (50,000) (50,000)

For all feasibility assessments including expansion planning, raising of debt funding, evaluation of acquisition opportunities and

corporate strategy, the Group uses various methods to measure the types of risk to which it is exposed. These methods include

cash flow forecasting, sensitivity and breakeven analysis. The Group performs an ageing analysis for credit risk.

Treasury risk management is carried out by a central treasury department (“Treasury”) under policies approved by the Board of

Directors. The Board provides written principles for overall risk management, as well as policies covering specific areas, such as

foreign exchange risk, interest rate risk and credit risk, use of derivative financial instruments and non-derivative financial

instruments, and investment of excess liquidity.

(i) Foreign currency risk

Foreign exchange risk arises from commercial transactions and recognised assets and liabilities that are denominated in

currencies other than the functional currency of each entity in the Group, which is South African Rand (ZAR). In order to

hedge this foreign currency risk, the Group may enter into forward foreign exchange, foreign currency swaps and foreign

currency option contracts. During the year the group entered into FEC contracts in order to hedge against the fluctuations

of the ZAR against the USD. The details of the FEC's are as follows:

FEC Value – USD FEC RATE Profit on FEC

4,000,000 ZAR/USD8.153 ZAR686,800

The above forward exchange contracts were used to manage transactional exposure and was not classified as cash flow,

fair value or net investment hedges and are entered into for periods consistent with the currency transaction exposure.

These derivatives do not qualify for hedge accounting and therefore profits and or losses resulting from the transactions

where accounted for in the income statement.



The following tables represent the financial assets and liabilities denominated in foreign currencies:

Consolidated Foreign currency amount Amount in ZAR Rate of exchange

2009 2008 2009 2008 2009 2008Financial Assets '000 '000 ZAR'000 ZAR'000

Cash and Cash equivalents– US$ 4,696 13,699 36,346 109,044 ZAR/US$7.74 ZAR/US$7.96

– Euro 17,652 59,091 192,973 738,638 ZAR/a10.93 ZAR/a12.50

– UK pound sterling 1,879 3,097 24,322 49,211 ZAR/£12.94 ZAR/£15.89

– AUS Dollar 6,518 105 41,260 804 ZAR/A$6.33 ZAR/A$7.66

Trade and other receivables– US$ 7,272 53,410 56,285 425,144 ZAR/US$7.74 ZAR/US$7.96

– AUS Dollar 38 57 243 437 ZAR/A$6.33 ZAR/A$7.66

Financial LiabilitiesTrade and other payables

– UK pound sterling 21 55 271 874 ZAR/£12.94 ZAR/£15.89

– AUS Dollar 261 522 1,649 3,999 ZAR/A$6.33 ZAR/A$7.66

The Group had no foreign currency borrowings at year end (2008: nil).

Parent Foreign currency amount Amount in ZAR Rate of exchange

2009 2008 2009 2008 2009 2008Financial Assets ZAR'000 ZAR'000

Cash and Cash equivalents– Euro 17,652 59,091 192,936 738,638 ZAR/a10.93 ZAR/a12.50

– UK pound sterling 1,879 3,097 24,314 49,211 ZAR/£12.94 ZAR/£15.89

– AUS Dollar 6,518 105 41,638 804 ZAR/A$6.33 ZAR/A$7.66

Trade and other receivables – AUS Dollar 38 57 241 435 ZAR/$6.33 ZAR/A$7.66

Financial LiabilitiesTrade and other payables

– UK pound sterling 21 55 271 874 ZAR/£12.94 ZAR/£15.89

– AUS Dollar 261 522 1,652 3,999 ZAR/A$6.33 ZAR/A$7.66

Derivative liabilityThe Parent had no foreign currency borrowings at year end (2008: nil).


page 94



The following table demonstrates the estimated sensitivity to a 10% increase and decrease in the different exchange rates the

Group is exposed to, with all other variables held constant, on pre-tax profit. Equity is not affected by changes in foreign currency

exchange rates.

Pre Tax Profit

Higher/(Lower)

2009 2008ZAR'000 ZAR'000

ConsolidatedZAR/USD +10% 9,263 53,419

ZAR/USD – 10% (9,263) (53,419)

ZAR/Euro +10% 19,297 73,864

ZAR/Euro – 10% (19,297) (73,864)

ZAR/GBP + 10% 2,405 4,834

ZAR/GBP – 10% (2,405) (4,834)

ZAR/A$ + 10% 3,961 (284)

ZAR/A$ – 10% (3,961) 284

ParentZAR/USD +10% – –

ZAR/USD – 10% – –

ZAR/Euro +10% 19,297 73,864

ZAR/Euro – 10% (19,297) (73,864)

ZAR/GBP + 10% 2,405 4,834

ZAR/GBP – 10% (2,405) (4,834)

ZAR/A$ + 10% 3,961 (284)

ZAR/A$ + 10% (3,961) 284

ii) Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in

market interest rate. The Group is exposed to interest rate movement through variable rate debt and interest bearing investment

of surplus funds. Other than for finance leases, the Group has undrawn borrowing facilities of ZAR500 million at year end

(2008: ZAR50 million).


The following table sets out the variable interest bearing and fixed interest bearing financial instruments of the Group:

Consolidated Parent

2009 Variable Fixed Variable FixedInterest Interest Interest Interest

ZAR'000 ZAR'000 ZAR'000 ZAR'000

Financial AssetsCash equivalents 340,089 – 266,702 –Restricted cash 1,134 17,100 707 – Financial LiabilitiesInterest bearing liabilities (note 21 & 23) (30,582) (59,158) – –

Total 310,641 (42,058) 267,409 –

2008 Variable Fixed Variable FixedInterest Interest Interest Interest

ZAR'000 ZAR'000 ZAR'000 ZAR'000

Financial AssetsCash equivalents 972,190 – 815,396 –

Restricted cash – 22,942 – –

Financial LiabilitiesInterest bearing liabilities (note 21 & 23) (37,752) (61,990) – –

Total 934,438 (39,048) 815,396 –

On 29 June 2009, the Company entered into a working capital facility with Bank of China for an amount of ZAR500 million. Once

draw down of the funds commence, the Group will maintain an interest rate structure which reduces the impact of rapidly

increasing interest rates on projects.

Based upon the balance of gross debt as at 30 June 2009, if interest rates increase or decreased by 1%, with all other variables

held constant, the estimated impact on pre-tax profit would be as shown in the following table. Equity is not directly affected by

changes in interest rates.

Pre Tax Profit

Higher/(Lower)

2009 2008ZAR'000 ZAR'000

ConsolidatedInterest rates +1% (3,106) 9,344

Interest rates – 1% 3,106 (9,344)

ParentInterest rates +1% (2,674) 8,154

Interest rates – 1% 2,674 (8,154)

iii) Commodity price risk exposure

The group is exposed to the risk of fluctuations in prevailing market commodity prices of ferrochrome. The price offerrochrome has fluctuated widely, particularly in recent years, and is affected by numerous factors beyond the Group'scontrol including international, economic and political trends, expectations of inflation, currency exchange fluctuations,interest rates, global or regional consumptive patterns, speculative activities and increased production due to newextraction developments and improved extraction and production methods. The effect of these factors on the price offerrochrome, and therefore the financial performance of the Group cannot accurately be predicted. However, the Groupmay enter into ferrochrome option contracts to manage its commodity price risk. To date these contracts have not beeneasily accessible and the Group has not entered into any of these agreements, thus there are no financial instrumentsexposed to ferrochrome price fluctuations at year end.


page 96


iv) Credit risk

Credit risk arises from the financial assets of the Group, which comprise cash and cash equivalents (note 14) and trade and

other receivables (note 15). The Group's exposure to credit risk arises from potential default of the counter party, with a

maximum exposure equal to the carrying amount of these instruments. It is the Group's policy that all customers who

wish to trade on credit terms are subject to credit verification procedures. The Group trades only with recognised,

creditworthy third parties and as such collateral is not requested nor is it the Group's policy to securitise its trade and

other receivables. Due to the global demise in large reputable companies the group has, since the restart of its operations

in April, made use of bank issued Letter of Credits and has discounted certain of its debtors. The Group is also in the process

of obtaining insurance cover for its future sales done on a cost, insurance and freight (CIF) basis. In addition, receivable

balances are monitored on an ongoing basis with the result that the Group's exposure to bad debts is not significant.

A provision for doubtful debts is made when there is objective evidence that the company will not be able to collect the

debts. Doubtful debts are written off to the income statement. To date the Group has not been required to write of any

significant debts.

Trade ReceivablesIFMSA has an off-take agreement with JISCO, the largest steel maker in Northwest China. Under the terms of the

agreement entered into in June 2005, JISCO agreed to purchase at least 120,000 tpa of ferrochrome on a take-or-pay basis

at a market related price dependant on IFM's sales to Europe. JISCO also agreed to act as agent for IFMSA to market

ferrochrome in China, Taiwan, Japan and Korea.

In addition, IFMSA has a further off-take agreement with CMC Cometals, a division of Commercial Metals Company

(“CMC”) to purchase 30,000 tpa of ferrochrome, as well as 20,000 tpa of ferrochrome fines, on a take-or-pay basis at a

market related price. In addition, CMC acts as an exclusive agent selling the remainder of the Group's ferrochrome

production outside JISCO's territories as identified above.

The effect of the global economic crisis has forced the Group to transact with various other parties in order to secure

better prices and volumes.

As a result of the off-take agreements most the Group's Trade Receivables relate to sales made to JISCO and Co-Metals,

presenting a counterparty concentration of risk. JISCO is a Chinese state owned company and CMC is a New York Stock

Exchange listed Metals trader with a market capitalisation of US$1.9 billion. IFMSA has the option of receiving a

provisional payment from its offtake partners of up to 90% of the value of each shipment within 15 working days of any

shipment occurring. This provisional payment accrues interest by IFMSA. The balance due, which is payable up to six

months later, is jointly determined by the Offtake partners and IFMSA, based on actual prices, costs and factors that affect

the landed price of each shipment. The Group does not hold any credit derivatives to offset its credit exposure, other than

Letter of Credits. No impairment was recognised as IFM considers the Offtake partners to be in a sound financial position.

There are no receivables past due and considered impaired.

Cash and InvestmentsThe credit risk policy aims to ensure that the organisation is adequately protected against settlement risk for cash,

investments and derivatives by transacting with reputable financial institutions with a minimum Fitch Ratings International

long term credit rating of A (or equivalent S&P or Moody's rating) and where applicable, within stated limits. It is noted that

the group is not envisaged to hold large cash balances for extended periods of time. At the balance sheet date, cash deposits

were spread amongst a number of financial institutions to minimise the risk of default by counterparties.

Other receivablesOther balances within trade and other receivables do not contain impaired assets and are not past due. It is expected that

these other balances will be received when due.



The following table sets out the financial assets that are exposed to credit risk:

Consolidated Consolidated

2009 2008ZAR'000 ZAR'000

Financial AssetsCash & Cash equivalents 340,089 972,190

Trade Receivables 81,059 462,919

Restricted cash 26,784 22,942

Total 447,932 1,458,051

Set out below is an aging analysis on the Group's Trade Receivables:

31-60 days 61-90 days 91-120 days 120-150 daysTotal 0-30 days PDNI* PDNI PDNI PDNI

ZAR'000 ZAR'000 ZAR'000 ZAR'000 ZAR'000 ZAR'000

2009Consolidated 62,678 37,860 13,723 2,925 132 8,038

Parent – – – – – –

2008Consolidated 423,876 334,857 38,825 21,266 28,928 –

Parent – – – – – –

* Past due not impaired ('PDNI')

None of the consolidated or Parent trade and other receivables are considered past due or impaired.

vi) Credit risk

Credit terms for customers and agents are 30 days from the date of the final invoice. The final invoice is issued once the product

is received (average time between product being delivered FOB and to time received by customer is between 3-4 months) and

final specification agreed by the customer. Debtors sales are recognised, in accordance with IAS18 “Revenue”, when risks and

rewards transfer. The long shipment lead time between BOL date and final invoice date may move certain debtors into the PDNI

category. Sales are recognised on “Free On Board” or “at-port”.

v) Liquidity Risk

Liquidity risk is the risk that there will be inadequate funds available to meet financial commitments as they fall due. The Group

recognises the ongoing requirement to have committed funds in place to cover both existing business cash flows and reasonable

headroom for cyclical debt fluctuations, and capital expenditure programs. The key funding objective is to ensure the availability

of flexible and competitively priced funding from alternative sources to meet the Group's current and future requirements. The

Group utilises a detailed cash flow model to manage its liquidity risk.

The Group attempts to accurately project the sources and uses of funds, whereby a framework for decision making is established

which increases the effectiveness and efficiency with which the treasury function operates.

The Group's approach is to develop long term relationships with a core group of quality banks. The benefit of this approach is to

establish a high degree of confidence and commitment between the parties so that banks are prepared to meet funding

requirements at crucial times and at short notice.

The table below summarises the maturity profile of the Company's contractual cash flow financial liabilities at 30 June 2009 based

on contractual undiscounted repayment obligations. Repayments which are subject to notice are treated as if notice were to be

given immediately.


page 98


Consolidated

On Less than 3 to 12 OverLiabilities demand 3 months months 1 to 5 years 5 years TotalAs at 30 June 2009 ZAR '000 ZAR '000 ZAR '000 ZAR '000 ZAR '000 ZAR '000

Trade and other payables – 81,007 – – – 81,007Finance Leases – 21,456 11,643 44,616 122,560 200,275Loans – – – – – –

Total liabilities 2009 – 102,463 11,643 44,616 122,560 281,282

LiabilitiesAs at 30 June 2008

Trade and other payables – 204,009 – – – 204,009

Finance Leases – 5,211 15,632 74,191 129,551 224,585

Loans – – – 2,115 – 2,115

Total liabilities 2008 – 209,220 15,632 76,306 129,551 430,709

Parent

On Less than 3 to 12 OverLiabilities demand 3 months months 1 to 5 years 5 years TotalAs at 30 June 2009 ZAR '000 ZAR '000 ZAR '000 ZAR '000 ZAR '000 ZAR '000


Total liabilities 2009 – 3,663 – – – 3,663

LiabilitiesAs at 30 June 2008


Total liabilities 2008 – 6,169 – – – 6,169

31. Post balance sheet events

The following events occurred after the year ended 30 June 2009:

• The second furnace was restarted on 17 August 2009 with full ramp-up expected by mid-September 2009.

• Open pit mining to return to full production, underground mining at Lesedi to restart and MG2 decline to be developed.

• Mr Dion Cohen resigned as Chief Financial Officer on 23 July 2009 and Mr Jannie Muller was appointed as Chief Financial Officer

with immediate effect.

• On 3 August 2009 IFM announced that it has raised GBP22.2 million (ZAR284 million) (before expenses) through the placing

by Numis Securities Limited of 50,364,367 new ordinary shares with certain existing shareholders including Jiuquan Iron & Steel

Group Company Ltd and new institutional investors at 44 pence per share. Proceeds will be used principally to fund investment

in the Clean Development Mechanism compliant electricity co-generation plant.



page 100

32. Commitments and contingencies

Capital commitments

2009 2008

ZAR'000 ZAR'000

Contracted for 89,181 159,920

Authorised but not contracted for – 8,222

89,181 168,142

Contractual obligations relate mainly to the Clean Development Mechanism compliant electricity co-generation plant project

(ZAR80 million).

Finance lease commitments

The minimum lease payments under finance lease arrangements are set out in the following table:

Consolidated Parent

2009 2008 2009 2008

ZAR'000 ZAR'000 ZAR'000 ZAR'000

Within 1 year 33,099 20,843 – –

Between 1 and 5 years 44,616 74,191 – –

Greater than 5 years 122,560 129,551 – –

Total future lease payments 200,275 224,585 – –

Less: future finance charges (110,565) (124,844) – –

Lease liability 89,710 99,741 – –

Represented by:

Current Lease liability 24,988 9,140 – –

Non–current Lease liability 64,722 90,601 –


The present values of lease payments under finance lease

arrangements are set out in the following table:

Within 1 year 24,988 9,140 – –

Between 1 and 5 years 10,306 33,323 – –

Greater than 5 years 54,416 57,278 – –


Contingent liabilities

There are no contingent liabilities outstanding at 30 June 2009.

33. Related party transactions

Loans to Directors and Director-related entities

No loans have been granted to Directors and/or Director-related entities.

Refer to audited Remuneration Report for details of remuneration and arrangements with Key Management Personnel.

The Parent company received management fees from its subsidiary company International Ferro Metals SA (Pty) Limited. Related

party transactions exist between the groups. Outstanding amounts at year-end relate to inter-company loans of which the details

can be obtained in note 14 (a).

Management fees due to the parent company totalled ZAR6.2 million.

Jiuquan Iron and Steel Group Company (JISCO) owns 28.89% (2008: 28.89%)of the Parent company's shares. Sales made to JISCO

totalled 59,113 tonnes and were made in terms of an off take agreement which is set up at arm's length. Value of sales made to

JISCO during the year amounted to ZAR466 million.

34. Interest in subsidiaries

The Company has the following direct/indirect material interest in subsidiaries:

Country of

Name Incorporation Ownership interest Investment

2009 2008

International Ferro Metals SA (Pty) Limited South Africa 99.375% 98.75% ZAR338 million

Purity Metals Holdings Limited

(refer note 23 and 26) British Virgin Islands 100% 100% US$9 million

SkyChrome Mining (Proprietary) Limited South Africa 80% 80% ZAR800

International Ferro Metals SA Holdings

(Pty) Limited South Africa 100% 100% ZAR1.2 billion

35. Auditor,s remuneration

Consolidated Parent

2009 2008 2009 2008

ZAR'000 ZAR'000 ZAR'000 ZAR'000

Amounts received or due and receivable by Ernst &

Young for:

(i) an audit or review of the financial report of the entity

and any other entity in the consolidated entity 2,156 1,309 900 1,309

(ii) equity raising and due diligence services – 1,769 – 1,769

2,156 3,078 900 3,078

Amounts received or due by related practices of Ernst &

Young for:

(i) an audit or review of the financial report of any other

entity in the consolidated entity 1,653 986 852 –

(ii) other assurance services 255 42 152 –

1,908 1,028 1,004 –

4,064 4,106 1,904 3,078


In accordance with a resolution of the directors of International Ferro Metals Limited, I state that:

1. In the opinion of the directors:

(a) the financial statements, notes and the additional disclosures included in the directors' report designated as audited,

of the company and of the consolidated entity are in accordance with the Corporations Act 2001, including:

(i) giving a true and fair view of the Company's and consolidated entity's financial position as at 30 June 2009 and

of their performance for the year ended on that date; and

(ii) complying with Accounting Standards and Corporations Regulations 2001; and

(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due

and payable.

2. This declaration has been made after receiving the declarations required to be made to the directors in accordance with

section 295A of the Corporations Act 2001 for the financial year ending 30 June 2009.

On behalf of the Board

David Kovarsky

Director

Sydney

14 September 2009

Directors,

declaration

page 102

Independent auditor's report to the members of International Ferro Metals Limited

Report on the Financial Report

We have audited the accompanying financial report of International Ferro Metals Limited, which comprises the balance sheets as at

30 June 2009, and the income statements, statements of changes in equity and cash flow statements for the year ended on that date,

a summary of significant accounting policies, other explanatory notes and the directors' declaration of the consolidated entity

comprising the company and the entities it controlled at the year's end or from time to time during the financial year.

Directors' Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with the

Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001. This responsibility

includes establishing and maintaining internal controls relevant to the preparation and fair presentation of the financial report that is

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. In Note 2c, the directors also state that the financial report, comprising

the financial statements and notes, complies with International Financial Reporting Standards as issued by the International Accounting

Standards Board.

Auditor's Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with

Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit

engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report.

The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the financial report,

whether due to fraud or error. In making those risk assessments, we consider internal controls relevant to the entity's preparation and

fair presentation of the financial report 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 controls. An audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating

the overall presentation of the financial report.

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

Independence

In conducting our audit we have met the independence requirements of the Corporations Act 2001. We have given to the directors of

the company a written Auditor's Independence Declaration, a copy of which is included in the directors' report. In addition to our audit

of the financial report, we were engaged to undertake the services disclosed in the notes to the financial statements. The provision of

these services has not impaired our independence.


Auditor's Opinion

In our opinion:

1. the financial report of International Ferro Metals Limited is in accordance with the Corporations Act 2001, including:

i giving a true and fair view of the financial position of International Ferro Metals Limited and the consolidated entity at

30 June 2009 and of their performance for the year ended on that date; and

ii complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations

Regulations 2001.

2. the financial report also complies with International Financial Reporting Standards as issued by the International Accounting

Standards Board.

Report on the Remuneration Report

We have audited the Remuneration Report included in pages 29 to 44 of the directors' report for the year ended 30 June 2009. The

directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section

300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit

conducted in accordance with Australian Auditing Standards.

Auditor's Opinion

In our opinion the Remuneration Report of International Ferro Metals Limited for the year ended 30 June 2009, complies with section

300A of the Corporations Act 2001.

Ernst & Young

Michael ElliottPartner

Sydney

14 September 2009

page 104

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to what action you should

take, you are recommended to seek your own financial advice from your stockbroker or other independent adviser duly authorised under

the Financial Services and Markets Act 2000 if you are resident in the United Kingdom or, if you reside elsewhere, another appropriately

authorised financial adviser. If you have sold or transferred all of your shares in International Ferro Metals Limited ("the Company"),

please forward this document, together with the accompanying documents, as soon as possible to the purchaser or transferee or to the

stockbroker, bank or other agent through whom the sale or transfer was effected for transmission to the purchaser or transferee.

INTERNATIONAL FERRO METALS LIMITED

(ACN 099 355 790)

(“the Company”)

Notice of Annual General Meeting of Shareholders

To be held at:

Level 27, AMP Centre, 50 Bridge Street, Sydney, NSW, 2000

On:

Thursday, 12 November 2009 at 10:00am (Sydney time)

Notice is hereby given to International Ferro Metals Limited shareholders of the Company's annual general meeting (the "Meeting") to

be held on Thursday, 12 November 2009 at 10:00 am (Sydney time) at Level 27, AMP Centre, 50 Bridge Street, Sydney, NSW, 2000.

The purpose of the Meeting is to consider, and if thought fit, to pass with or without modification the following resolutions. Resolutions

1 to 4 will be proposed as ordinary resolutions and resolution 5 and 6 will be proposed as special resolutions.

The Explanatory Memorandum to this Notice provides additional information on matters to be considered at the Meeting. The

Explanatory Memorandum and proxy form part of this Notice.

Recommendation

The Directors of the Company consider that all the proposals to be considered at the Meeting are in the best interests of the Company

and its members as a whole and are most likely to promote the success of the Company for the benefit of its members as a whole. Save

where certain Directors have abstained from making a recommendation, as noted in the Explanatory Memorandum, as a result of their

interest in particular resolutions, the Directors unanimously recommend that you vote in favour of all the proposed resolutions as they

intend to do in respect of their own beneficial holdings to the extent they are permitted to vote on such resolutions by the Corporations

Act 2001 (Cth).

Ordinary business

1. Reports and accounts

To receive the Financial Statements and the Reports of the Directors and Independent Auditor for the financial year ended

30 June 2009.

2. Ordinary resolution 1

Remuneration Report

"That Remuneration Report contained in the Financial Statements for the financial year ended 30 June 2009 is adopted."

Note – the vote on this resolution is advisory only and does not bind the Directors or the Company.


Re-election of Director

"That, in accordance with clause 21.3 of the Constitution of the Company, Mr Stephen Turner retires by rotation, and being eligible,

is re-elected as a Director of the Company.”

Notice of annual general meet ing




“That, in accordance with clause 21.3 of the Constitution of the Company, Mr Stephen Oke retires by rotation, and being eligible,




“That, in accordance with clause 21.3 of the Constitution of the Company, Mr Ian Watson retires by rotation, and being eligible,


6. Special resolution 5

Amendment to Constitution

"That clause 3.7 of the Company's Constitution be amended by reducing the period in which a pre-emption offer may be accepted

by Shareholders from 21 days to 14 days."

7. Special resolution 6

Disapplication of pre-emption rights

"That the Directors be and are hereby authorised to allot equity securities for cash in accordance with new clause 3 of the

Company's Constitution provided that such powers shall be limited to the allotment of up to 55,400,805 equity securities (such

authority to expire at the conclusion of the next Annual General Meeting of the Company or, if earlier, 30 November 2010). The

foregoing power shall allow and enable the Directors to make an offer or agreement before the expiry of that power which would

or might require securities to be allotted after such expiry as if the power conferred hereby had not expired."

Explanatory memorandum

The Company's shareholders (Shareholders) should read the Explanatory Memorandum accompanying, and forming part of, this Notice

of Annual General Meeting for more details on the resolutions to be considered at the Annual General Meeting.

Entitlement to attend and vote

In accordance with Reg 7.11.37 of the Corporations Regulations 2001, the Board has determined that persons who are registered holders

of shares of the Company as at 7.00pm (Sydney time) on 10 November 2009 will be entitled to attend and vote at the Meeting as a

shareholder. This means that if you are not the registered holder of a relevant share in the Company at that time, you will not be entitled

to vote in respect of that share.

Voting exclusions

The entitlement to vote at the Meeting will be subject to any voting exclusions applicable under the Corporations Act 2001 (Cth).

How to exercise your right to vote

You may vote in person, by proxy or by attorney. For example, you may vote:

• by attending the Annual General Meeting and voting in person, or if you are a corporate shareholder, by having a corporate

representative attend and vote for you; or

• by appointing a proxy to vote for you, by completing the proxy form provided with this Notice of Annual General Meeting; or

• for those persons who hold Depository Interests representing ordinary shares in the capital of the Company by either: (a) appointing

Computershare Clearing Pty Ltd A/C CCNL DI (Depository) as proxy to vote for you, by completing the Form of Instruction provided

with this Notice of Annual General Meeting; or (b) through CREST, by utilising the CREST electronic proxy appointment service.

Notice of annual general meet ing (continued)

page 106


Voting by proxy

Each shareholder entitled to attend and vote at the annual general meeting, may appoint one or more proxies to attend, speak and vote

in his/her stead. A proxy need not be a shareholder. A shareholder who is entitled to cast 2 or more votes may appoint 2 proxies and

may specify the proportion or number of votes each proxy is appointed to exercise. If the shareholder does not specify the proportion

or number of votes to be exercised, each proxy may exercise half of the shareholder's votes.

A proxy form is attached for the convenience of any shareholder who cannot attend the annual general meeting. It should be properly

completed and in order to be effective must be lodged, together with the authority (if any) under which it is signed, at the Company's

registered office at Level 11, 151 Macquarie Street, Sydney, NSW, 2000 by no later than 10:00 am on Tuesday, 10 November 2009

(Sydney time). The proxy can also be lodged by fax on +61 2 8298 2060. A shareholder who completes and lodges a form of proxy will

nevertheless be entitled to attend and vote in person at the general meeting should he/she subsequently decide to do so.

Notes to the notice of annual general meeting

Appointment of proxies through CREST

By completing the enclosed form of instruction, a person who holds Depository Interests representing ordinary shares in the capital of

the Company will appoint Computershare Clearing Pty Ltd A/C CCNL DI, the Depository to vote on their behalf at the Meeting and the

completed form of instruction should be lodged with the Depository not later than 10 am on Friday 6 November 2009 (London Time)

(or in the case of an adjourned meeting, 72 hours before the time appointed for the Meeting).

Alternatively, CREST members can utilise the CREST electronic proxy appointment service in accordance with the procesure set out

below. This facility is only open to Depository Interest holders who hold their shares through CREST.

CREST members who wish to appoint a proxy or proxies by utilising the CREST electronic proxy appointment service may do so for the

Meeting and any adjournment(s) thereof by using the procedures described in the CREST Manual. CREST personal members or other

CREST sponsored members, and those CREST members who have appointed a voting service provider(s), should refer to their CREST

sponsor or voting service provider(s), who will be able to take appropriate action on their behalf.

In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a "CREST

Proxy Instruction") must be properly authenticated in accordance with Euroclear UK & Ireland Limited's specifications and must contain

the information required for such instructions, as described in the CREST Manual. The CREST message, regardless of whether it

constitutes the appointment of a proxy or an amendment to the instruction given to a previously appointed proxy must, in order to be

valid, be transmitted so as to be received by the issuer's agent (3RA50) no later than 10 am on Friday 6 November (London time) or

72 hours before the time appointed for the holding of the adjourned meeting (as applicable). For this purpose, the time of receipt will

be taken to be the time (as determined by the timestamp applied to the CREST message by the CREST Applications Host) from which

the issuer's agent is able to retrieve the CREST message by enquiry to CREST in the manner prescribed by CREST. After this time any

change of instructions to proxies appointed through CREST should be communicated to the appointee through other means.

CREST members and, where applicable, their CREST sponsors or voting service provider(s), should note that Euroclear UK & Ireland

Limited does not make available special procedures in CREST for any particular messages. Normal system timings and limitations will

therefore apply in relation to the input of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take

(or, if the CREST member is a CREST personal member or sponsored member or has appointed a voting service provider(s), to procure

that the CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to ensure that a CREST message is

transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable, their

CREST sponsors or voting service provider(s) is/are referred, in particular, to those sections of the CREST Manual concerning practical

limitations of the CREST system and timings.

The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated

Securities Regulations 2001.

Corporate representatives

A body corporate which is a shareholder, or which has been appointed as a proxy, is entitled to appoint any person to act as its

representative at the Meeting. The appointment of the representative must comply with the requirements under section 250D of the

Corporations Act. The representative should bring to the Meeting a properly executed letter or other document confirming its authority

to act as the company's representative.

By order of the Board

Wayne Kernaghan

Company Secretary

International Ferro Metals Limited

Level 11, 151 Macquarie Street

Sydney, NSW 2000 Australia

1 October 2009

Notice of annual general meet ing (continued)

page 108

Explanatory memorandum


INTERNATIONAL FERRO METALS LIMITED(ACN 099 355 790)

(the Company)

This Explanatory Memorandum is to be read together with, and forms part of, the Notice of Annual General Meeting (AGM or Meeting).

Business of the meeting

Item 1: Financial statements and reports

The Financial Statements, Director's Report and the Independent Auditor's Report for the financial year ended 30 June 2009 will be laid

before the Meeting.

Following the consideration of the Reports, the Chairman will give shareholders a reasonable opportunity to ask questions about or

comment on the management of the Company.

The Chairman will also give shareholders a reasonable opportunity to ask the Auditor questions relevant to:

(a) the conduct of the audit;

(b) the preparation and content of the Auditor's Report;

(c) the accounting policies adopted by the Company in relation to the preparation of the financial statements; and

(d) the independence of the Auditor in relation to the conduct of the audit.

The Chairman will also give the Auditor a reasonable opportunity to answer written questions submitted by shareholders that are

relevant to the content of the Independent Audit Report or the conduct of the audit. A list of written questions, if any, submitted by

shareholders will be made available at the start of the AGM and any written answer tabled by the Auditor at the AGM will be made

available as soon as practicable after the AGM.

Item 2: Remuneration report

Ordinary resolution 1Although a resolution for adoption of the Remuneration Report is not required to be considered and voted on under the Corporations

Act, the Board considers it appropriate that Shareholders be given an opportunity to do so.

The Remuneration Report details the Company's policy on the remuneration of the CEO and senior executives and non-executive

directors and is set out on pages 29 to 44 of the Company's Annual Report, which is available on the Company's website at

www.ifml.com. The vote on the adoption of the Remuneration Report resolution is advisory only and does not bind the Directors or the

Company. However, the Board will take the outcome of the vote into consideration when reviewing the remuneration practices and

policies of the Company.

Shareholders will be given the opportunity to ask questions and to make comments on the Remuneration Report.

Items 3 and 4: Election of directors

Ordinary resolutions 2, 3 and 4 Re-Election of DirectorsIn accordance with the Company's Constitution, Mr Stephen Turner, Mr Stephen Oke and Mr Ian Watson retire by rotation and, being eligible,

offer themselves for re-election as Directors of the Company.

Information about the background and experience of each of the Directors to be elected is set out on page 23 to 24 of the Company's

2009 Annual Report.

The Directors, with Mr Turner, Mr Oke and Mr Watson abstaining with respect to Ordinary Resolution 2, 3 and 4 respectively,

unanimously recommend that you vote in favour of these Resolutions.

Items 6 and 7: Disapplication of pre-emption rights

Special resolutions 5 and 6Disapplication of pre-emption rightsClause 3 of the Company's Constitution adopted at the Company's 2007 AGM provides that new shares must first be offered to existing

shareholder in proportion to their existing holdings. There are exceptions to this requirement for issues of bonus shares, issues of equity

securities for non-cash consideration, issues under employee share schemes and rights and issues or other pro-rata issues.

The Constitution also allows for the disapplication of such pre-emption rights by special resolution.

The pre-emption rights provisions adopted by the Company were equivalent to those applicable to UK incorporated companies under

the Companies Act 1985. Recent amendments to the Companies Act mean that these provisions will change so that the period in which

a pre-emption offer can be accepted by Shareholders will be reduced from 21 days to 14 days. This will facilitate companies being able

to raise capital more quickly. Resolution 5 will amend the Company's Constitution to make equivalent changes to the pre-emption rights

provisions those implemented under the Companies Act.

Shareholders previously have approved the disapplication of the pre-emption rights. In certain circumstances, it may be in the interests

of the Company to allot new shares (or grant rights over shares) for cash without first offering them to existing shareholders.

For example, the Directors may need to modify the pre-emption rights in its Constitution to the extent necessary to deal with any legal,

regulatory or practical problems arising from a rights issue. Accordingly, Resolution 6 grants the Directors authority to allot shares for

cash without first offering them to shareholders on a pro-rata basis, until the conclusion of the Company's annual general meeting in

2010 or 30 November 2010, whichever is the earlier. The authority sought is limited to the issue of up to 55,400,805 equity securities,

representing ten per cent of the issued ordinary share capital as at 30 September 2009 (the latest practicable date prior to the date of

this Notice).

The Directors do not have any present intention of exercising the authorities in Resolution 6 other than in relation to issuing share to

satisfy exercises of share options, but will keep this matter under review.

The Directors unanimously recommend that you vote in favour of these Resolutions.

Explanatory memorandum (continued)

page 110

International Ferro Metals Limited (ACN 099 355 790)

Appointment of proxy

I/We . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

being a member/members of International Ferro Metals Limited (Company) hereby appoint

The Chairman of the meeting (mark with an 'X') or

write the name of the person you are appointing if this person is someone other than the Chairman of the meeting.

Or failing the person named attending the meeting, or if no person is named, the Chairman of the meeting as my/our proxy to act

generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given,

as the proxy sees fit) at the annual general meeting of the Company to be held on 12 November 2009 at 10am (Sydney time) and at

any adjournment of that meeting.

IMPORTANT:

If the Chairman of the meeting is appointed as your proxy or may be appointed by default and you do not wish to direct your

proxy how to vote as your proxy on each item, please place a mark in this box. By marking this box, you acknowledge that the

Chairman of the Meeting may exercise your proxy even if he has an interest in the outcome of these resolutions and that votes

cast by the Chairman of the meeting for these resolutions, other than as a proxy holder, would be disregarded because of that

interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chairman will not cast your votes

on these resolutions and your votes will not be counted in computing the required majority if a poll is called on these

resolutions. The Chairman intends to vote undirected proxies in favour of each resolution.

Voting directions to your proxy – please mark an 'X' to indicate your directions.

Resolution For Against Abstain

1. Adoption of the remuneration report

2. Re-election of Mr S Turner

3. Re-election of Mr S Oke

4. Re-election of Mr I Watson

5. Amendment of constitution

6. Disapplication of pre-emption rights

Signed this ..................................................................................................day of ...................................................................................................................................2009.

Individual shareholder 1 Shareholder 2 Shareholder 3

Individual/sole director Director Director/company secretary

This form must be signed by the shareholder. If a joint holding, either shareholder may sign. If signed by the shareholder's attorney, the

power of attorney must have been previously noted by the registry or a certified copy attached to this form. If executed by a company,

the form must be executed in accordance with the shareholder's constitution and the Corporations Act 2001 (Cth).

Form of proxy


Instructions for complet ion of proxy form

1. A member entitled to attend and vote is entitled to appoint not more than two proxies.

2. Where more than one proxy is appointed, each proxy must be appointed to represent a specified proportion of the member's

voting rights.

3. Appointment of a proxy by a member who is a corporation must be given in accordance with the Corporations Act 2001 (Cth)

or signed on its behalf by an authorised attorney.

4. If this proxy is executed under a power of attorney, the instrument appointing the attorney must accompany the form of proxy.

5. Any instrument of proxy in which the name of the appointee is not filled in shall be deemed to be given in favour of the Chairman

of the Meeting.

6. A proxy need not be a member of the Company.

7. To be effective, the Proxy Form must be received by the Company at its registered office, Level 11, 151 Macquarie Street, Sydney

New South Wales 2000, or received by facsimile on (02) 8298 2060 not less than forty-eight (48) hours before the time for holding

the meeting.

8. For the purposes of Section 1109N of the Corporations Act 2001 (Cth), the directors have set a snapshot date to determine the

identity of those entitled to attend and vote at the meeting. The snapshot date and time has been set at 7pm (Sydney time) on

10 November 2009.

Russell and Associates 2742/09

Directors

A J GreyS J TurnerD C KovarskyX YangT V WillsteedI W WatsonS D OkeT Xia

Company Secretary

W J Kernaghan

Registered office

Level 11151 Macquarie StreetSydney, NSWAustralia, 2000Telephone: + 612 8298 2090Facsimile + 612 8298 2020

South African offices

Johannesburg

3rd Floor, Suite 14b 3 Melrose BlvdMelrose Arch South Africa, 2076 Telephone: + 27 11 994 9600Facsimile: + 27 11 994 9611

Mooinooi

Buffelsfontein JQ465Private Bag 2223MooinooiSouth Africa, 0325Telephone: + 27 14 574 6300Facsimile: + 27 14 574 6307

Share Register

Australia

Computershare Investor Services Pty LtdYarra Falls452 Johnston StreetAbbotsfordVictoriaAustralia, 3067

Australia contact centre:+ 61 (3) 9415 4000(1300 850 505 within Australia)

United Kingdom

Computershare Investor Services PLCPO Box 82The PavillionsBridgwater RoadBristol, United Kingdom, BS99 7NH

UK contact centre:+ 44 (0) 870 702 0000

Solicitors

Baker & McKenzie Level 27, AMP Centre50 Bridge StreetSydney, NSWAustralia, 2000

Bankers

National Bank of AustraliaLevel 36, 100 Miller StreetNorth Sydney, NSWAustralia, 2060

Brokers

Numis Securities LimitedThe London Stock Exchange Building10 Paternoster SquareLondon EC4M 7LTUnited Kingdom

Auditors

Ernst & Young680 George StreetSydney, NSW Australia, 2000

Corporate information

ABN 31 099 355 790

This annual report covers International Ferro Metals Limited and the entities it controlled at the end of, or during, the year ended 30 June 2009.The functional currency of each entity in the Group and the presentation currency of the Group is South African Rand (“ZAR”).

A description of the Group’s operations and of its principal activities is included in the review of operations and activities in the directors’report on pages 22 to 28. The directors’ report is not part of the financial report.

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international ferro metals limited annual report...

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