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Sierra Rutile Ltd (SRX)

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Thursday 02 June, 2011

Sierra Rutile Ltd

Preliminary Results

RNS Number : 7162H
Sierra Rutile Limited
02 June 2011
 

Sierra Rutile Limited

Preliminary Results

June 2, 2011: Sierra Rutile Limited ("Sierra Rutile" or "the Company") announces audited preliminary results for the year ended 31 December, 2010.

Highlights

·    Sales increased 11.7% to US$41.1 million in the year (2009: US$36.8 million).

·    US$9.2 million cash generated from operating activities (2009: US$1.8 million).

·    6.8% increase in rutile production to 68,198 tonnes (2009: 63,864 tonnes).

·    18,206 tonnes of ilmenite and 7,092 tonnes of zircon concentrate also produced in the year (2009: 15,161 tonnes of Ilmenite and 5,560 tonnes of zircon concentrate).

·    Production of rutile and ilmenite for 2011 to be in line with 2010, with significant increases expected in 2012.

·    Strategic review into expansion of production, and potential for rare earth production at Sierra Rutile progressing well, with conclusions expected in the fourth quarter of 2011.

·    Subsequent to the end of 2010, revised JORC-compliant resource statement released of over 600 million tonnes of rutile.

·    All forecast H1 2011 rutile production fully allocated, at on average a 20% increase over 2010 prices.

·    The strong mineral sands market is expected to continue for some time, as a result of supply constraints and increasing demand.

 

Commenting on the results, Sierra Rutile Chief Executive John Sisay said:

 

"2010 saw significant developments at the Company which have continued into 2011 and, despite significant challenges, much has been achieved.  We have expanded our management team, adding the necessary skills and experience to both turn around our existing operations and to undertake the expansion projects we expect to embark upon during 2012.  We are now well placed to complete the operational changes we require in the remainder of 2011, positioning us strongly for 2012."

Chairman's Statement

Sierra Rutile experienced a challenging 2010.  Historical underinvestment in Sierra Rutile's assets resulted in production being severely constrained, and the dispute with the Government of Sierra Leone during the year was a major distraction for management.  Despite this backdrop, during the latter part of 2010 many positive steps were made to put Sierra Rutile on the right track, including the initiation of a two-phase strategic review and initial capital expenditures to address much-needed maintenance requirements. 

Corporate Social Responsibility

The health and safety of our workforce is the Company's first and foremost consideration in all we do. In 2010, the Company outperformed its target of a 25% reduction in lost time injuries by reducing lost time injuries by 64% compared to 2009.

Sierra Rutile is also committed to being a positive force in its community.  Accordingly, the Company pursues a number of initiatives and partnerships, including the Sierra Rutile Foundation, which are designed to improve the lives and employment opportunities of the people living in the communities around our operation.  The enrolment of the first students in the Sierra Rutile Technical Institute during 2010 represents a significant step in improving the long-term employment prospects for the people living around the Sierra Rutile mine.

Corporate Developments

During 2010, the Board of Sierra Rutile was strengthened considerably to provide the necessary blend of experience, skill and enthusiasm to drive Sierra Rutile to achieve its goals.  Prior to my appointment as a Non-Executive Director, Walter Kansteiner stepped down as Non-Executive Chairman of the Company in June 2010 after spending over five years with the Company.  Wayne Malouf was appointed Executive Chairman in August 2010 and became Non-Executive Chairman in January 2011 before leaving the Company in February 2011.  I joined the Board in September 2010 as a Non-Executive Director, and was appointed Non-Executive Chairman in February 2011.

Additionally, during 2010, Rod Baker and Raju Jaddoo stepped down as Non-Executive Directors and Michael Brown, Charles Entrekin and Michael Barton joined the Board as Non-Executive Directors.  In February 2011 Jean Lindberg Charles stepped down as an Executive Director. 

In addition, during 2010 the dispute with the Government of Sierra Leone was settled and, subsequent to the year-end, Sierra Rutile's financial position was strengthened with a successful US$18 million capital raising, the proceeds of which were used to make an early repayment of Sierra Rutile's loan from the Government of Sierra Leone.  Sierra Rutile now has no capital or interest payments to make on its loan from the Government of Sierra Leone until 2013, allowing it to focus entirely on operations during this crucial time of development.

Finally, during early 2011, the Company changed its name to Sierra Rutile Limited, to mark the Company's rebirth and as a sign of its commitment to its stakeholders in Sierra Leone.  It was under the "Sierra Rutile" name that the Company operated as one of the world's largest producers of rutile for many years.

Operational Improvements

The most significant event for Sierra Rutile's operations during 2010 was the resumption of funding to the operations to allow essential capital investment, maintenance expenditure and re-stocking of critical spares.  As a result, during the second half of 2011 we expect to see reduced downtime and increased availability of Sierra Rutile's production assets.

Subsequent to the end of 2010, Sierra Rutile also released an updated, JORC-compliant resource of over 600 million tonnes, confirming Sierra Rutile's as one of the largest natural rutile deposits in the world.  Furthermore, Sierra Rutile also identified rare earth mineralization in its resources that are concentrated to an attractive grade during the rutile and production process.

Looking to the future

Sierra Rutile believes that the current strong mineral sands market will continue as the supply deficit increases, driven by continued global economic growth adding further demand for our products.  At the same time, supply side fundamentals remain constrained in the short to medium term and barriers to entry remain high.  As a result, the Company expects that rutile prices will continue to increase significantly as demand continues to outstrip supply in 2011 and 2012.

While 2011 will be a transition year for the Company, with production levels similar to 2010 as a whole, the Company expects to begin seeing the effects of the operational improvements and capital investments that commenced in the fourth quarter of 2010 during the second half of 2011.  Indeed, the effect of the ongoing strategic review and capital expenditures, continuing throughout 2011, should position Sierra Rutile well for 2012 and onwards against a very positive backdrop for rutile, ilmenite and zircon prices.

For longer-term growth, the second stage of the strategic review has now commenced and is aimed at identifying the potential for the long-term expansion of production at Sierra Rutile.  The Company has appointed a consortium of specialist consultants headed by Snowden Group, and including CPG Resources - Mineral Technologies and Titan Salvage, to conduct an extensive study into optimization and expansion options including:  the rehabilitation of Dredge 2, completion of Dredge D3 or construction of a new dredge, supplementing production through dry mining high-grade ore pockets, re-mining of high-grade historic tailings, on-stream processing of zircon to a finished or semi-finished product, recovery and separation of rare earth oxides and upgrading the mineral separation plant to match increased production. 

The studies are expected to be finalized in Q4 2011 and will provide a focus for prioritisation, development and engineering to the specific areas of the study.  The Company has identified a number of areas within the study scope that it believes have the potential to provide near-term value and could be fast-tracked within the overall scope of the project.

The Company is also currently developing life of mine plans and revised five-year financial forecasts, as well as formalising governance policies and upgrading monitoring systems.

In conclusion, while there remains much to do, the board and management of Sierra Rutile are dedicated to realizing the full potential of the Company's world class asset.  By combining our strong commitment to our workforce and local communities with a methodical approach to value creation, focused on sound planning and risk management, we believe we are laying the foundation for the delivery of long-term value for all our stakeholders.  



 

Chief Executive Officer's Review 2010

Overview

2010 saw significant developments at the Company which have continued into 2011 and, despite significant challenges, much has been achieved.  We have expanded our management team, adding the necessary skills and experience to both turn around our existing operations and to undertake the expansion projects we expect to embark upon during 2012.  We are now well placed to complete the operational changes we require in the remainder of 2011, positioning us strongly for 2012.

Production

In 2010, the Company produced 68,198 tonnes of rutile compared to production of 63,864 tonnes of rutile in 2009, which was towards the upper end of the Company's August 2010 revised annual production target.  The Company also produced 18,206 tonnes of ilmenite and 7,092 tonnes of zircon concentrate compared to 15,161 tonnes and 5,560 tonnes respectively in 2009.

The Company faced several operational problems during the first half of the year which had a significant negative impact on production levels.  Dredge availability was reduced in H1 2010, as a result of a fire on Dredge 1, longer than anticipated downtime following a planned move of the Dredge 1 wet plant and problems with slimes in the dredge pond. 

Additionally, a planned Dredge 1 move to a new part of the current ore body and associated pond lowering exercise will reduce the Company's ability to make up production in the remainder of 2011.  As a result, we expect production of rutile and ilmenite for 2011 to be in line with 2010.  Zircon production will also be lower in 2011 than 2010 due to the strategic decision to limit zircon production until the second stage of the strategic review is completed.

The Company has now addressed a significant number of the dredge availability and maintenance problems through a major capital expenditure programme following the recommendations of the first stage of the strategic review.  Due to equipment delivery times and the significant nature of these works, however, they will not be fully implemented until the end of 2011 and their full benefit will not be realized until 2012.  The Company expects production levels for rutile and Ilmenite in 2012 to be significantly above 2010 and anticipated production 2011 levels, as Sierra Rutile begins to realise the full benefit of the capital expenditure program on its existing operations.



 

Financials

Cash Position

The Company had a cash balance of US$28.3 million as at 31 December 2010 (US$25.9 million as at 31 December 2009).  The US$25 million gross proceeds raised during 2009 remained largely undrawn as at the Balance Sheet date. Following the end of the period, the Company has begun deploying these funds for essential capital investment, maintenance expenditure and re-stocking of critical spares. 

Turnover

Rutile and ilmenite sales of US$41.1 million in 2010 were above the US$36.8 million achieved in 2009, predominantly as a result of increased production and pricing levels.  2010 rutile and ilmenite sales were supplemented by the sale of US$2.7 million of zircon concentrate, which was not sold in significant quantities in 2009.

Cost of Sales

Cost of sales increased from US$38.4 million in 2009 to US$48.6 million in 2010 due to increased production levels, non-cash inventory adjustments and an increase in operating overheads.  The increase in operating overheads was largely a result of costs associated with the outsourcing of security and the implementation of the Government of Sierra Leone's Goods and Services Tax which came into effect on 1 January 2010.

Administrative and marketing expenses

Administrative expenses went up by US$2.1 million from US$4.3 million in 2009 to US$6.4 million in 2010 predominantly due to ongoing costs associated with the capsize of Dredge D2 and merger and acquisition costs incurred during early stage discussions with a third party.

Exceptional items

In 2010 the Company recorded a net exceptional loss of US$3.1 million comprising of a one off US$4.7 million exceptional net gain from the resolution of the insurance claim relating to the capsize of Dredge D2 and a US$7.8 million loss on the write-down of the partially constructed dredge - D3. 

The write down of the dredge comes as a result of the initial findings of the strategic review committee, which suggest that the original unified configuration of D3 is unlikely to present the economically or technically optimal solution for mining Sierra Rutile's near term reserves. Accordingly the capital spent on the dredge up until December 31, 2010 (US$9.9 million) has been written down to the amount which will likely be used going forwards (US$2.1 million) creating an exceptional loss of US$7.8 million.

As at June 1, 2011 the Company retains the majority of the $25 million of cash raised in November 2009, which was to be used to complete the construction of D3. The Company will now deploy this capital on projects that improve the performance of the existing dredge (D1) and to finance the outcome of the strategic review.

Finance Costs

The reduction in finance costs to US$0.3 million in 2010 from US$7.5 million in 2009 was as a result of the effect of favourable foreign exchange movements on the €35 million loan which created a US$4.5 million gain in 2010 compared to a US$3.8 million loss in 2009.

Marketing

In line with the rest of the industry, we have continued to see strong increased demand and increased prices for our products.   In addition to the previously announced contract price increases between 19% and 25% for 22,000 tonnes of 2011 rutile production, the Company has recently concluded negotiations for a further 16,000 tonnes of 2011 standard grade rutile production at a 40% premium to 2010 prices.  Sierra Rutile remains contracted to deliver in 2011 approximately 34,000 tonnes of standard grade rutile production against 2010 agreed delivery contracts.

The Company's forecast H1 2011 industrial grade rutile production has now been fully allocated, at on average a 20% increase over 2010 prices.

The Company has also achieved a 70% price increase over 2010 levels for a 6,000 tonne zircon concentrate shipment which was shipped in February. 

Management Changes

In addition to the board changes, the Company has significantly strengthened its senior management team during 2010 and since the year-end.

Joseph Connolly was appointed Chief Financial Officer in March 2011.  Joseph is a chartered accountant, having begun his career at Deloitte.  Prior to joining Sierra Rutile, Joseph was Director of Business Development at Clipper Windpower plc.  Jean Lindberg Charles, Sierra Rutile's former CFO has remained with the Company as Director Corporate Controls, a role charged with improving the financial and operational controls of Sierra Rutile's operations in Sierra Leone.

Andrew Taylor joins from DeBeers Consolidated Mines after a career of over 20 years with DeBeers and Anglo American in a variety of roles, notably in the areas of mining and processing.  He has significant experience of operating in Africa, including managing the construction and commissioning of the Voorspoed Mine in South Africa from 2005 to 2010. 

Mark Button, the Company's former Chief Operating Officer, has been appointed Director of Mineral Resource Development and will focus on strategic resource development as well as the optimal utilisation of the Company's reserves.

Sahr Wonday has been appointed the Director of Strategic Projects, charged with delivering the long-term production growth of Sierra Rutile through the second phase of the Strategic Review.  Sahr has an enormous experience at the Company, having worked for Sierra Rutile Ltd in its various forms for 25 years. 

The Company has also appointed Desmond Williams as Operations Manager.  Desmond is a Sierra Leonean national with over 20 years of international mining experience having previously worked with SNC Lavelin and Worley Parsons.  At SNC Lavelin Desmond held senior management positions on numerous international projects including the Bald Mountain Gold Project for Barrick Gold Corporation and the Kabanga Nickel Project.  Previously, Desmond spent 10 years with Sierra Rutile between 1988 and 1998.

As part of the strengthening of the management team, Sierra Rutile has amended remuneration policies in order to align them more closely with the performance of Sierra Rutile through the implementation of a Key Performance Indicator ("KPI") driven bonus programme and to reward long-term commitment to Sierra Rutile through a revised share option scheme.

Outlook

As a result of the funding, management changes and concluding financial arrangements with the Government, Sierra Rutile is a revitalized company.  The significant activity aimed at improving our current operating platform is matched by the aspiration inherent within the second phase of the Strategic Review.  Our optimism for a much enhanced operation for the future is however tempered by the need to meaningfully utilize our revised financial and operating base.

 


SIERRA RUTILE LTD AND ITS SUBSIDIARIES





(Formerly known as Titanium Resources Group Ltd and its subsidiaries)










CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - DECEMBER 31, 2010























Note


2010


2009

ASSETS





USD'000


USD'000

Non-current assets








Property, plant and equipment



5


109,940


123,933

Intangible assets



6


13,180


13,243

Non-current receivables



9


727


753







123,847


137,929










Current assets








Inventories



11


13,591


16,088

Trade and other receivables



12


13,661


16,806

Cash and cash equivalents



30(c)


28,373


25,902







55,625


58,796










Total assets





179,472


196,725










EQUITY AND LIABILITIES








Capital and reserves








Share capital



13(a)


251,963


251,963

Revenue deficit





(123,343)


(130,995)

Owners' interest





128,620


120,968

Non-controlling interests





(18,064)


-

Total equity





110,556


120,968










LIABILITIES








Non-current liabilities








Borrowings



15


43,398


51,638

Retirement benefit obligations



16


729


659

Provisions for liabilities and charges


17


3,261


3,261







47,388


55,558










Current liabilities








Trade and other payables



18


16,165


20,014

Current tax liabilities



19 (d)


275


175

Borrowings



15


5,088


10







21,528


20,199

Total liabilities





68,916


75,757










Total equity and liabilities





179,472


196,725























































The notes form an integral part of these financial statements.








                                          

SIERRA RUTILE LTD AND ITS SUBSIDIARIES





(Formerly known as Titanium Resources Group Ltd and its subsidiaries)










 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

FOR THE YEAR ENDED DECEMBER 31, 2010





 










 










 





Note


2010


2009

 







USD'000


USD'000

 










 

Sales



2 (o)/21


43,914


36,849

 










 

Cost of sales



22


(48,642)


(38,443)

 










 

Gross loss





(4,728)


(1,594)

 










 

Administrative and marketing expenses


22


(6,395)


(4,342)

 










 

Other income



24


171


2,187

 










 







(10,952)


(3,749)

 










 

Exceptional items



25


(3,075)


3,698

 










 

Finance income/(costs)



26


256


(7,514)

 










 

Loss before taxation



20


(13,771)


(7,565)

 










 

Taxation



19 (a)


(159)


(302)

 










 

Loss for the year





(13,930)


(7,867)

 










 

Other comprehensive income





-


-

 

Total comprehensive income for the year



(13,930)


(7,867)

 










 

Loss attributable to:








 

Owners of the parent





(12,357)


(7,867)

 

Non-controlling interests





(1,573)


-

 







(13,930)


(7,867)

 

Total comprehensive income attributable to:





 

Owners of the parent





(12,357)


(7,867)

 

Non-controlling interests





(1,573)


-

 







(13,930)


(7,867)

 










 

Loss per share (USD)








 

- basic



28 (a)


(0.032)


(0.031)

 

- diluted



28 (b)


(0.024)


(0.031)

 










 

The notes form an integral part of these financial statements.

 








 

 


SIERRA RUTILE LTD AND ITS SUBSIDIARIES









(Formerly known as Titanium Resources Group Ltd and its subsidiaries)


















CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY







FOR THE YEAR ENDED DECEMBER 31, 2010













































Non







Share


Revenue




controlling


Total



Note


capital


deficit


Total


interests


equity





USD'000


USD'000


USD'000


USD'000


USD'000














Balance at January 1, 2010



251,963


(130,995)


120,968


-


120,968

Total comprehensive income for the year


-


(12,357)


(12,357)


(1,573)


(13,930)

Movements



-


18,837


18,837


(16,491)


2,346

Gain on disposal of shares in subsidiary


-


1,172


1,172


-


1,172

At December 31, 2010



251,963


(123,343)


128,620


(18,064)


110,556



























Balance at January 1, 2009



238,026


(123,128)


114,898


-


114,898

Total comprehensive income for the year


-


(7,867)


(7,867)


-


(7,867)

Adjustment for employee share options

13(a)


(11,282)


-


(11,282)


-


(11,282)

Issue of share capital

13(a)


25,219


-


25,219


-


25,219

At December 31, 2009



251,963


(130,995)


120,968


-


120,968

 

The notes form an integral part of these financial statements.













SIERRA RUTILE LTD AND ITS SUBSIDIARIES





(Formerly known as Titanium Resources Group Ltd and its subsidiaries)










 

CONSOLIDATED STATEMENTS OF CASH FLOW





 

FOR THE YEAR ENDED DECEMBER 31, 2010





 










 










 





Note


2010


2009

 







USD'000


USD'000

 

Cash flows from operating activities







 

Cash generated from operations



30(a)


9,264


1,814

 

Interest received





71


16

 

Interest paid





(2,455)


(12)

 

Tax paid





(59)


(57)

 

Net cash from operating activities




6,821


1,761

 










 

Cash flows from investing activities







 

Purchase of property, plant and equipment


5


(3,986)


(8,658)

 

Proceeds from disposal of plant





-


30

 

Net cash used in investing activities




(3,986)


(8,628)

 










 

Cash flows from financing activities







 

Issue of ordinary shares



13(a)


-


25,219

 

Net cash from financing activities




-


25,219

 










 

Net increase in cash and cash equivalents



2,835


18,352

 










 

Movement in cash and cash equivalents







 

At January 1,





25,892


7,354

 

Increase





2,835


18,352

 

Effect of foreign exchange rate change




(459)


186

 

At December 31,



30(c)


28,268


25,892

 










 










 

The notes form an integral part of these financial statements.

 








 

 



 

SIERRA RUTILE LTD AND ITS SUBSIDIARIES







(Formerly known as Titanium Resources Group Ltd and its subsidiaries)















NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





FOR THE YEAR ENDED  DECEMBER 31, 2010































1.

GENERAL INFORMATION






















Sierra Rutile Limited (formerly known as Titanium Resources Group Ltd) is a public limited liability

 


Company incorporated and domiciled in the British Virgin Islands.  The address of its registered

 


office is at P.O.Box 4301, Trinity Chambers, Road Town, Tortola, British Virgin Islands.  Throughout

 


the financial statements, SRX refers to Sierra Rutile Limited (formerly known as Titanium Resources

 


Group Ltd) and SRL refers to Sierra Rutile Limited (the Sierra Leone-based subsidiary).


 













 


These financial statements will be submitted for consideration and approval at the forthcoming Annual

 


Meeting of shareholders of the Company.





















2.

SIGNIFICANT ACCOUNTING POLICIES




















The principal accounting policies adopted in the preparation of these financial statements are set out


below.  These policies have been consistently applied to all the years presented, unless otherwise stated.













(a)

Basis of preparation























The financial statements of Sierra Rutile Limited have been prepared in accordance with



International Financial Reporting Standards (IFRS).  Where necessary, comparative figures have been


amended to conform with change in presentation in the current year.  The financial statements are


prepared under the historical cost convention, except that available-for-sale investments are stated at


their fair value.























Standards, Amendments to published Standards and Interpretations effective in the reporting


period























IAS 27, 'Consolidated and Separate Financial Statements' (Revised 2008), requires the effects of all


transactions with non-controlling interests to be recorded in equity if there is no change in control and


these transactions will no longer result in goodwill or gains and losses. The revised standard also


specifies the accounting when control is lost. Any remaining interest in the entity is remeasured to fair


value, and a gain or loss is recognised in profit or loss. This IAS will not have any impact on the


Group's financial statements.






















IFRS 3, 'Business Combinations' (Revised 2008), continues to apply the acquisition method to business


combinations, with some significant changes. For example, all payments to purchase a business are to


be recorded at fair value at the acquisition date, with contingent payments classified as debt



subsequently remeasured through the statement of comprehensive income. There is a choice on an




acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree at fair value or




at the non-controlling interest's proportionate share of the acquiree's net assets. All acquisition-related




costs should be expensed. This IFRS will not have any impact on the Group's financial statements.



 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





FOR THE YEAR ENDED  DECEMBER 31, 2010































2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

















(a)

Basis of preparation (cont'd)






















Amendments to IAS 39, 'Eligible hedged items', prohibit designating inflation as a hedgeable




component of a fixed rate debt.  In a hedge of one-sided risk with options, it prohibits including time




value in the hedged risk. The amendment is not expected to have any impact on the Group's




financial statements.























Amendments to IFRS 1 and IAS 27, 'Cost of an Investment in a Subsidiary', clarify that the cost of a




subsidiary, jointly controlled entity or associate in a parent's separate financial statements, on transition




to IFRS, is determined under IAS 27 or as a deemed cost. Dividends from a subsidiary, jointly




controlled entity or associate are recognised as income. There is no longer a distinction between pre-




acquisition and post-acquisition dividends.  The cost of the investment of a new parent in a group (in a




reorganisation meeting certain criteria) is measured at the carrying amount of its share of equity as




shown in the separate financial statements of the previous parent. The amendment is not expected to




have any impact on the Group's financial statements.




















IFRIC 17, 'Distributions of Non-cash Assets to Owners', clarifies that a dividend payable is recognised




when appropriately authorised and no longer at the entity's discretion. An entity measures distributions




of assets other than cash when it pays dividends to its owners, at the fair value of the net assets to be




distributed. The difference between fair value of the dividend paid and the carrying amount of the net




assets distributed is recognised in profit or loss. This IFRIC will not have any impact on the Group's




financial statements.























IFRIC 18, 'Transfers of Assets from Customers', addresses the treatment for assets transferred from a




customer in return for connection to a network or ongoing access to goods or services, or both.  It




requires the transferred assets to be recognised initially at fair value and the related revenue to be




recognised immediately; or, if there is a future service obligation, revenue is deferred and recognised




over the relevant service period. This IFRIC will not have any impact on the Group's financial




statements.























Amendments to IFRS 1, 'Additional Exemptions for First-time Adopters' exempt entities that use the




full cost method for oil and gas properties from retrospective application of IFRSs. It also exempts




entities with existing leasing contracts from reassessing the classification of those contracts in




accordance with IFRIC 4, 'Determining whether an arrangement contains a lease'. The amendment












is not expected to have any impact on the Group's financial statements. 
















Amendments to IFRS 2, 'Group Cash-settled Share-based Payment Transactions'. In addition to




incorporating IFRIC 8, 'Scope of IFRS 2', and IFRIC 11, 'IFRS 2 - Group and treasury share




transactions', the amendments expand on the guidance in IFRIC 11 to address the classification of




group arrangements that were not covered by that interpretation. This amendment is not expected




to have any impact on the Group's financial statements. 






 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





FOR THE YEAR ENDED  DECEMBER 31, 2010































2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

















(a)

Basis of preparation (cont'd)






















Improvements to IFRSs (issued May 22, 2008)




















IFRS 5 (Amendment), 'Non-current Assets Held for Sale and Discontinued Operations', clarifies that




all of a subsidiary's assets and liabilities are classified as held for sale if a partial disposal sale plan




results in loss of control. Relevant disclosure should be made for this subsidiary if the definition of a




discontinued operation is met. The amendment will not have an impact on the Group's operations.
















Improvements to IFRSs (issued April 16, 2009)




















IAS 1 (Amendment), 'Presentation of Financial Statements'. The amendment clarifies that the potential


settlement of a liability by the issue of equity is not relevant to its classification as current or non-


current.  By amending the definition of current liability, the amendment permits a liability to be



classified as non-current (provided that the entity has an unconditional right to defer settlement by


transfer of cash or other assets for at least 12 months after the accounting period) notwithstanding the


fact that the entity could be required by the counterparty to settle in shares at any time. This



amendment is not expected to have any impact on the Group's financial statements.
















IAS 7 (Amendment), 'Statement of Cash Flows', clarifies that only expenditure that results in a


recognised asset in the statement of financial position can be classified as a cash flow from investing


activities.  This amendment is unlikely to have an impact on the Group's financial statements.















IAS 17 (Amendment) 'Leases', clarifies that when a lease includes both land and buildings,



classification as a finance or operating lease is performed separately in accordance with IAS 17's


general principles. Prior to the amendment, IAS 17 generally required a lease of land with an indefinite


useful life to be classified as an operating lease, unless title passed at the end of the lease term. A lease


newly classified as a finance lease should be recognised retrospectively. The amendment will not have


an impact on the Group's operations.






















IAS 18 (Amendment), 'Revenue'. An additional paragraph has been added to the appendix to IAS 18,


providing guidance on whether an entity is acting as principal or agent.

















IAS 36 (Amendment), 'Impairment of Assets', clarifies that for the purpose of impairment testing, the




cash-generating unit or groups of cash-generating units to which goodwill is allocated should not be




larger than an operating segment (as defined by IFRS 8, 'Operating segments') before aggregation.




The amendment will not have an impact on the Group's operations.





 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





FOR THE YEAR ENDED  DECEMBER 31, 2010































2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

















(a)

Basis of preparation (cont'd)






















IAS 38 (Amendment), 'Intangible Assets', clarifies guidance in measuring the fair value of an




intangible asset acquired in a business combination and it permits the grouping of intangible assets as a












single asset if each asset has similar useful economic lives. The amendment removes the exceptions




from recognising intangible assets on the basis that their fair values cannot be reliably measured.




Intangible assets acquired in a business combination that are separable or arise from contractual or




other legal rights should be recognised. The amendment specifies different valuation techniques that




may be used to value intangible assets where there is no active market. The amendment is unlikely to




have an impact on the Group's financial statements.




















IAS 39 (Amendment), 'Financial Instruments: Recognition and Measurement' clarifies that the scope




exemption within IAS 39 only applies to forward contracts that will result in a business combination at




a future date, as long as the term of the forward contract does 'not exceed a reasonable period




normally necessary to obtain any required approvals and to complete the transaction'. The amendment




removes reference to transactions between segments as being hedgeable transactions in individual or




separate financial statements and clarifies that amounts deferred in equity are only reclassified to profit




or loss when the underlying hedged cash flows affect profit or loss. The amendment is not expected to


have an impact on the Group's statement of comprehensive income.


















IFRS 2 (Amendment), 'Share-based Payment', confirms that, transactions in which the entity acquires


goods as part of the net assets acquired in a business combination as defined by IFRS 3 (2008)



Business Combinations, contribution of a business on formation of a joint venture and common control




transactions are excluded from the scope of IFRS 2 Share-based Payment. The amendment will not




have an impact on the Group's operations.





















IFRS 5 (Amendment), 'Non-current Assets Held for Sale and Discontinued Operations'. The




amendment clarifies that IFRS 5 specifies the disclosures required in respect of non-current assets












(or disposal groups) classified as held for sale or discontinued operations. It also clarifies that the












general requirement of IAS 1 still apply, in particular paragraph 15 (to achieve a fair presentation) and












paragraph 125 (sources of estimation uncertainty) of IAS 1. The amendment will not have an impact












on the Group's operations.
























IFRS 8 (Amendment), 'Operating Segments', clarifies that the requirement for disclosing a measure of




segment assets is only required when the Chief Operating Decision Maker reviews that information.




This amendment is unlikely to have an impact on the Group's financial statements.
















IFRIC 9 (Amendment), 'Reassessment of Embedded Derivatives', clarifies that embedded derivatives




in contracts acquired in a combination between entities or businesses under common control or the




formation of a joint venture are outside the scope of IFRIC 9. This amendment is unlikely to have an




impact on the Group's financial statements.








 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





FOR THE YEAR ENDED  DECEMBER 31, 2010































2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

















(a)

Basis of preparation (cont'd)






















IFRIC 16 (Amendment), 'Hedges of a Net Investment in a Foreign Operation', clarifies that hedging




instruments may be held by any entity or entities within the group. This includes a foreign operation




that itself is being hedged. This amendment is unlikely to have an impact on the Group's financial




statements.























Standards, Amendments to published Standards and Interpretations issued but not yet effective
















Certain standards, amendments to published standards and interpretations have been issued that are




mandatory for accounting periods beginning on or after January 1, 2011 or later periods, but which the




Group has not early adopted.  






















At the reporting date of these financial statements, the following were in issue but not yet effective:
















Classification of Rights Issues (Amendment to IAS 32) (Effective February 1, 2010)




IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (Effective July 1, 2010)




Amendments to IFRIC 14 Prepayments of a Minimum Funding Requirement




IAS 24 Related Party Disclosures (Revised 2009)








Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters (Amendments to IFRS1)




Deferred Tax: Recovery of Underlying Assets (Amendments to IAS 12)




IFRS 9 Financial Instruments










Disclosures - Transfers of Financial Assets (Amendments to IFRS 7)





Amendment to IFRS 1 Limited Exemption from Comparatives IFRS 7 Disclosures for First-time




Adopters (Effective July 1, 2010)






















Improvements to IFRSs (issued May 6, 2010)




















IFRS 1 First-time Adoption of International Financial Reporting Standards




IFRS 3 Business Combinations (Effective July 1, 2010)








IFRS 7 Financial Instruments: Disclosures










IAS 1 Presentation of Financial Statements









IAS 27 Consolidated and Separate Financial Statements (Effective July 1, 2010)




IAS 34 Interim Financial Reporting










IFRIC 13 Customer Loyalty Programmes





















The Group is still evaluating the effect that these amendments to published Standards, Standards


and Interpretations issued but not yet effective, on the presentation of its financial statements.























The preparation of financial statements in conformity with IFRS requires the use of certain critical


accounting estimates.  It also requires management to exercise its judgement in the process of applying


the Group's accounting policies.  The areas involving a higher degree of judgement or complexity, or


areas where assumptions and estimates are significant to the financial statements, are disclosed in


Note 4.










 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





FOR THE YEAR ENDED  DECEMBER 31, 2010































2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

















(b)

Investment in subsidiaries






















Consolidated financial statements










Subsidiaries are all entities (including special purpose entities) over which the Group has the power


to govern the financial and operating policies generally accompanying a shareholding of more than


one half of the voting rights. The existence and effect of potential voting rights that are currently


exercisable or convertible are considered when assessing whether the Group controls another entity.


Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They


are de-consolidated from the date that control ceases.




















The acquisition method of accounting is used to account for business combinations by the Group. 


The consideration transferred for the acquisition of a subsidiary is the fair values of the assets



transferred, the liabilities incurred and the equity interests issued by the Group.  The consideration


transferred includes the fair value of any asset or liability resulting from a contingent consideration


arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and


liabilities and contingent liabilities assumed in a business combination are measured initially at their


fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any


non-controlling interests in the acquiree either at fair value or at the non-controlling interests'



proportionate share of the acquiree's net assets. Subsequent to acquisition, the carrying amount


of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling


interests' share of subsequent changes in equity. Total comprehensive income is attributed to



non-controlling interests even if this results in the non-controlling interests having a deficit balance.














The excess of the consideration transferred, the amount of any non-controlling interests in the acquiree


and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value


of the Group's share of the identifiable net assets acquired is recorded as goodwill. If this is less than


the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the



difference is recognised directly in the statement of comprehensive income. 
















Inter-company transactions, balances and unrealised gains on transactions between Group



companies are eliminated. Unrealised losses are also eliminated.  Accounting policies of subsidiaries


have been changed where necessary to ensure consistency with the policies adopted by the Group.














Transactions and non-controlling interests





The Group treats transactions with non-controlling interests as transactions with equity owners of


the Group. For purchases from non-controlling interests, the difference between any consideration


paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded


in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity.














(c)

Property, plant and equipment






















Property, plant and equipment are stated at historical cost less accumulated depreciation and



impairment losses.  The cost of self-constructed assets includes the cost of materials, direct labour


and an appropriate proportion of production overheads and costs directly attributable to bringing the


assets to a working condition for its intended use.  Cost also includes environmental decommissioning


costs and the cost of dismantling and removing the items and restoring the site on which they are


located.  These costs are recognised as a liability.







 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





FOR THE YEAR ENDED  DECEMBER 31, 2010































2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

















(c)

Property, plant and equipment (cont'd)





















Depreciation is provided on a straight line basis over the estimated useful lives of the assets.















Where an item of property, plant and equipment comprises major components with different useful


lives, the components are accounted for as separate items of property, plant and equipment.















Subsequent expenditure relating to an item of property, plant or equipment is capitalised when it is


probable that the future economic benefits from the use of the asset will increase by more than the


expenditure incurred.  All other subsequent expenditure is recognised as an expense in the period


in which it is incurred.























Deposit, exploration, evaluation, mine development expenditure and deferred project expenditure














In respect of deposit, minerals, exploration, evaluation, and deferred project, expenditure is charged


to the statement of comprehensive income as incurred except where:






-

it is expected that the expenditure will be recouped by future exploitation or sale; or



-

substantial exploration and evaluation activities have identified a mineral resource but these




activities have not reached a stage which permits a reasonable assessment of the existence of



commercially recoverable reserves in which case the expenditure is capitalised.
















Expenditure relating to both deposit and dam development and mine development are accumulated


separately for each identifiable area of interest.  Such expenditure comprises net direct costs and an


appropriate portion of related overhead expenditure.




















Expenditure is carried forward when incurred in areas where economic mineralisation is indicated, but


activities have not yet reached a stage which permits reasonable assessment of the existence of


economically recoverable reserves, and active and significant operations in relation to the area are


continuing.  Each such project is regularly reviewed.  If the project is abandoned or it is considered


unlikely that the project will proceed to development, accumulated costs to that point are written off


immediately.























Each area of interest is limited to a size related to a known or probable mineral resource capable of


supporting a mining operation.  Projects are advanced to development status when it is expected that


accumulated and future expenditure can be recouped through project development or sale.















Expenditure relating to other expenses consists primarily of costs which provides benefit to the



development of the mine in general and is not specifically identifiable to a particular project.















Mining leases



































Payments made under operating leases are recognised in the profit or loss on a straight line basis


over the term of the lease.  Lease incentives received are recognised as an integral part of the total


lease expense, over the term of lease.






















The Group's mining leases are of sufficient duration (or convey a legal right to renew for sufficient


duration) to enable all reserves on the leased properties to be mined in accordance with current



production schedules.










 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





FOR THE YEAR ENDED  DECEMBER 31, 2010































2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

















(d)

Amortisation and depreciation






















Amortisation of deferred project expenditure is based on the estimated useful life of the asset to


which the expenditure relates.






















Depreciation is provided at rates calculated to write off the cost of fixed assets to their residual value


over their estimated useful lives as follows:





















Buildings and infrastructure


- 20 to 40 years






Plant, machinery & equipment

- 3 to 20 years







Vehicles


- 3 to 5 years








Mineral rights


- Based on the estimated life of reserves




Exploration, evaluation and mine development

- Based on the estimated life on proven and



expenditure, and expenditure on mineral rights

   probable reserves


















Changes in estimates are accounted for over the estimated remaining economic life of the remaining


commercial reserves of each project as applicable.



















(e)

Intangible assets























(i)

Goodwill












Goodwill represents the excess of cost of acquisition over the Group's interest in the fair value



of the net identifiable assets of the acquired subsidiaries at the date of acquisition.
















Goodwill on acquisitions of subsidiaries is included in intangible assets.  Any net excess of the



Group's interest in the net fair value of acquiree's net identifiable assets over cost is recognised



in the statement of comprehensive income.





















Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. 



On disposal of a subsidiary, the attributable amount of goodwill is included in the determination



of the gains and losses on disposal. 























Goodwill is allocated to cash-generating units for the purpose of impairment testing. 















(ii)

Computer software












Acquired computer software licences are capitalised on the basis of costs incurred to acquire



and bring to use the specific software and are amortised over their estimated useful lives estimated



to be five years.










 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





FOR THE YEAR ENDED  DECEMBER 31, 2010































2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

















(f)

Impairment of assets























Assets that have an indefinite useful life are not subject to amortisation and are tested annually for


impairment.  Assets that are subject to amortisation are reviewed for impairment whenever events or


changes in circumstances indicate that the carrying amount may not be recoverable.  An impairment


loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable


amount.   The recoverable amount is the higher of an asset's fair value less costs to sell and value in


use.  For the purposes of assessing impairment, assets are grouped at the lowest levels for which there


are separately identifiable cash flows (cash-generating units).

















(g)

Foreign currencies























(i)

Functional and presentation currency









Items included in the financial statements of each of the Group's entities are measured using United



States Dollars, the currency of the primary economic environment in which the entity operates



("functional currency").  The consolidated financial statements are presented in United States



Dollars, which is the Group's functional and presentation currency.  All financial information



presented in United States Dollars have been rounded up to the nearest thousand.















(ii)

Transactions and balances











Foreign currency transactions are translated into the functional currency using the exchange rates



prevailing on the dates of the transactions.  Foreign exchange gains and losses resulting from the



settlement of such transactions and from the translation at year-end exchange rates of monetary



assets and liabilities denominated in foreign currencies are recognised in the statement of




comprehensive income.
























Non-monetary items that are measured at historical cost in a foreign currency are translated using



the exchange rate at the date of the transaction. 





















Non-monetary items that are measured at fair value in a foreign currency are translated using the



exchange rates at the date the fair value was determined. 

















(h)

Financial instruments






















(i)

Financial assets











Categories of financial assets










The Group classifies its financial assets as available-for-sale financial assets.
















The classification depends on the purpose for which the investments were acquired.  Management


determines the classification of its financial assets at initial recognition.




 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





FOR THE YEAR ENDED  DECEMBER 31, 2010































2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

















(h)

Financial instruments (cont'd)





















(i)

Financial assets (cont'd)











(a)

Available-for-sale financial assets











Available for sale financial assets are non-derivatives that are either designated in this category



or not classified in any of the other categories.  They are included in non-current assets unless



management intends to dispose of the investment within twelve months of the end of the reporting



period.
























Initial measurement












Purchases and sales of financial assets are recognised on trade date, the date on which the




Group commits to purchase or sell the asset.  Investments are initially measured at fair value



plus transaction costs for all financial assets except those that are carried at fair value through



profit or loss.
























Subsequent measurement











Available-for-sale financial assets are subsequently carried at their fair values.

















Investments in equity instruments that do not have a quoted market price in an active market and



whose fair value cannot be reliably measured are measured at cost.


















Unrealised gains and losses arising from changes in the fair value of financial assets classified as



available-for-sale are recognised in equity.  When financial assets classified as available-for-sale



are sold or impaired, the accumulated fair value adjustments are included in the statement of



comprehensive income as gains and losses on financial assets.



















The fair values of quoted investments are based on current bid prices.  If the market for a financial



asset is not active, the Group establishes fair value by using valuation techniques.  These include



the use of recent arm's length transactions and reference to other instruments that are substantially



the same.
























Impairment of financial assets











The Group assesses at the end of each reporting period whether there is objective evidence that a



financial asset or a group of financial assets is impaired.  In the case of financial assets classified



as available-for-sale, a significant or prolonged decline in the fair value of the security below its



cost is considered in determining whether the securities are impaired.  If any such evidence exists



for available-for-sale financial assets, the cumulative loss -  measured as the difference between



acquisition cost and the current fair value, less any impairment loss on that financial asset




previously recognised in equity - is removed from equity and recognised in the statement of




comprehensive income.










 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





FOR THE YEAR ENDED  DECEMBER 31, 2010































2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

















(h)

Financial instruments (cont'd)





















(i)

Financial assets (cont'd)











(a)

Available-for-sale financial assets























Impairment of financial assets (cont'd)









If the fair value of a previously impaired debt security increases and the increase can be objectively



related to an event occuring after the impairment loss was recognised, the impairment loss is



reversed and the reversal recognised in the statement of comprehensive income.  Impairment



losses for an investment in an equity instrument are not reversed through the statement of




comprehensive income.






















(ii)

Long term receivables











Long term receivables with fixed maturity terms are measured at amortised cost using the effective


interest rate method, less provision for impairment.  The carrying amount of the asset is reduced by the


difference between the asset's carrying amount and the present value of estimated cash flows discounted


using the effective interest rate.  The amount of loss is recognised in the statement of comprehensive


income.  Long term receivables without fixed maturity terms are measured at cost.  If there is objective


evidence that an impairment loss has been incurred, the amount of impairment loss is measured as the


difference between the carrying amount of the asset and the present value (PV) of estimated cash flows


discounted at the current market rate of return of similar financial assets.















(iii)

Trade receivables











Trade receivables are recognised initially at fair value and subsequently measured at amortised cost


using the effective interest method, less provision for impairment.  A provision for impairment of trade


receivables is established when there is objective evidence that the Group will not be able to collect


all amounts due according to the original terms of receivables.  The amount of the provision is the


difference between the asset's carrying amount and the present value of estimated future cash flows,


discounted at the effective interest rate.  The amount of provision is recognised in the statement of


comprehensive income.






















(iv)

Trade payables











Trade payables are stated at fair value and subsequently measured at amortised cost using the effective


interest method.










 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





FOR THE YEAR ENDED  DECEMBER 31, 2010































2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

















(h)

Financial instruments (cont'd)





















(v)

Borrowings











Borrowings are recognised initially at fair value being their issue proceeds net of transaction costs


incurred.























Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of


transaction costs) and the redemption value is recognised in the statement of comprehensive income


over the period of the borrowings using the effective interest method.


















Preference shares, which are mandatorily redeemable on a specific date, are classified as liabilities. 


The dividends on these preference shares are recognised in the statement of comprehensive income


as interest expense.























Borrowings are classified as current liabilities unless the Group has an unconditional right to defer


settlement of the liability for at least twelve months after the end of the reporting period.














(vi)

Cash and cash equivalents










Cash and cash equivalents include cash in hand, deposits held at call with banks, other short-term


highly liquid investments with original maturities of three months or less, and bank overdrafts.  Bank


overdrafts are shown within borrowings in current liabilities on the statement of financial position.













(vii)

Share capital











Ordinary shares are classified as equity.  Incremental costs directly attributable to the issue of



new shares or options are shown in equity as deduction, net of tax, from proceeds.















(i)

Inventories























Inventories comprise of stock piles of rutile, ilmenite and zircon and other consumables and are



measured at the lower of cost and net realisable value.  Net realisable value is the estimated selling


price in the ordinary course of business, less the estimated cost of completion and selling expenses.














The cost of inventories is based on the weighted average method and comprises of all cost of



purchase and other production overheads attributable to the production of the rutile and ilmenite


based on normal operating capacity and other costs incurred in bringing the inventories to their



present location and condition.  Obsolete, redundant and slow moving consumable stocks are



identified on a regular basis and are written down to their estimated net realisable values.


 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





FOR THE YEAR ENDED  DECEMBER 31, 2010































2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

















(i)

Inventories (cont'd)























Stock piles comprise of rutile, zircon and ilmenite sand that have been extracted from the mine and


which have been processed, and the measurement thereof is subject to significant estimate and



judgement.  Stock piles are measured by using tonnage estimation procedures as follows:















(i)

Tonnage in Silos
























Each 750 mt capacity silo is dipped using a string with weight attached to it and the tonnage




corresponding to the length of the string which goes down the silo before it touches the ore




in it is read off the attached Silo/Dome Conversion Charts.  This gives the tonnage of product



held in silo.























(ii)

Tonnage in Barges
























At present there are 5 operational coastal type barges at the Sierra Leone based company viz Olga G,



Marion L, Beatrice B, Sue S, and Iris W. Olga G can be loaded up to a maximum of 1,800 MT



whilst the rest are loaded up to a 1,100 MT maximum.  After loading each barge, the draft is



taken at six different positions (three positions along each longitudinal side of the barge) and the



average calculated.  The tonnage corresponding to the calculated draft is read off the Barge



Displacement Charts taking into consideration the specific gravity of the water in which the barge



is immersed.  Tonnage of product in the barge is then obtained by subtracting the empty barge



weight from the loaded barge weight (the empty barge weight is obtained by taking its draft weight



when it is empty).























(iii)

Tonnage in Product Warehouse and Dome





















Tonnage of  product in warehouse and dome are obtained by volumetric survey which is carried



out by the Sierra Leone based company's surveyors.  The volume of each product in these areas is



multiplied by its corresponding density to ontain  its tonnage.


















(iv)

Tonnage of Industrial Grade Rutile and Zircon Product Bags


















1 MT and 2 MT capacity bags are loaded with industrial grade rutile and zircon products.




The total tonnage of product in these bags is obtained by physical bag count.



 



 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS





FOR THE YEAR ENDED  DECEMBER 31, 2010































2.

SIGNIFICANT ACCOUNTING POLICIES (CONT'D)

















(i)

Inventories (cont'd)























(v)

Tonnage in Product Haulage Trucks






















The tonnage loaded in the product haulage trucks is measured as the difference between the



reading of weight before and after loading obtained from the weighbridge.
















Consumable stock comprises fuel stock and spare parts.  Fuel stock is measured using the volume dip


reading method whilst spare parts are measured using physical unit count and average price per unit.














Inventories are stated at the lower of cost or net realisable value where cost is defined as follows:














Titanium bearing minerals and zircon

- Production cost and attributable overheads



Concentrates


- Production cost






Stockpiles


- Production cost






Materials


- Average cost







Fuel and sundry expenses


- Purchase cost






Goods-in-transit


- Invoice cost excluding freight















(j)