CIRCULAR TO SEPHAKU HOLDINGS SHAREHOLDERS

Transcription

1 THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in any doubt as to the action you should take, please consult your broker, Central Securities Depository Participant ( CSDP ), banker, accountant, attorney or other professional advisor immediately. If you have disposed of some or all of your shares in Sephaku Holdings Limited ( Sephaku Holdings shares ), or your interest in Sephaku Holdings shares, then a copy of this circular, together with the attached form of proxy (pink) should be forwarded to the purchaser to whom, or the stockbroker or agent through whom, you disposed of your Sephaku Holdings shares or your interest in Sephaku Holdings shares. Full details of the actions required by holders of Sephaku Holdings shares and holders of other documents of title in respect of Sephaku Holdings shares are set out on pages 6 and 7 of this circular. Sephaku Holdings Limited (Incorporated in the Republic of South Africa) (Registration number 2005/003306/06) Share code: SEP ISIN: ZAE ( Sephaku Holdings or the company ) CIRCULAR TO SEPHAKU HOLDINGS SHAREHOLDERS relating to: the distribution of shares in Sephaku Fluoride Limited ( Sephaku Fluoride ) to Sephaku Holdings shareholders as a dividend in specie in the ratio of 1 Sephaku Fluoride share for every 1 Sephaku Holdings share held; and an amendment to the company s share incentive scheme to include employees of associate companies; and incorporating: notice of a general meeting; and a form of proxy (pink) for certificated shareholders and own name dematerialised shareholders only. Reporting accountants Corporate advisor and auditors to and sponsor to Sephaku Holdings Independent Sephaku Holdings and Sephaku Fluoride competent person Date of issue: 7 February 2012 Copies of this circular are available in English only and may be obtained from the registered office of Sephaku Holdings, the address of which is set out on the inside front cover of this circular.

2 CORPORATE INFORMATION Company secretary and registered office Cross Company Management (Pty) Limited (previously Sephaku Management (Pty) Limited) (Registration number 1995/013798/07) 1st Floor, Hennops House Riverside Office Park 1303 Heuwel Avenue Centurion, 0157* (PO Box 7651, Centurion, 0157) (*Sephaku Holdings current registered office is: Southdowns Office Park, Block A, Ground Floor, Corner John Vorster and Karee Streets, Irene X54, 0062 but it will change to the address set out above in the near future.) Reporting accountants PKF (Jhb) Inc. (Registration number 1994/001166/21) 42 Wierda Road West, Wierda Valley Sandton, 2196 (Private Bag X10046, Sandton, 2146) Sponsor QuestCo (Pty) Limited (Registration number 2002/005616/07) The Pivot, Entrance D 2nd Floor, No. 1 Montecasino Boulevard Fourways, 2055 (PO Box 98956, Sloane Park, 2152) Corporate advisor to Sephaku Holdings QuestCo (Pty) Limited (Registration number 2002/005616/07) The Pivot, Entrance D 2nd Floor, No. 1 Montecasino Boulevard Fourways, 2055 (PO Box 98956, Sloane Park, 2152) Transfer secretaries Computershare Investor Services (Pty) Limited (Registration number 2004/003647/07) Ground Floor 70 Marshall Street Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) Auditors PKF (Gauteng) Inc. (formerly PKF (Pretoria) Inc.) (Registration number 2000/026635/21) Erasmus Forum A, 434 Rigel Avenue South Erasmusrand Pretoria, 0181 (PO Box 98060, Waterkloof Heights, 0065) Independent competent person Venmyn Rand (Pty) Limited (Registration number 1988/004918/07) 1st Floor, Block G Rochester Place 173 Rivonia Road Sandton, 2146 (PO Box , Sandton, 2146) Legal advisor to Sephaku Holdings Cliffe Dekker Hofmeyr Incorporated (Registration number 2008/018923/21) 1 Protea Place, Sandown Sandton, 2196 (Private Bag X7, Benmore, 2010) Company secretary, registered office and transfer secretaries of Sephaku Fluoride Cross Company Management (Pty) Limited (previously Sephaku Management (Pty) Limited) (Registration number 1995/013798/07) Southdowns Office Park Block A, Ground Floor Corner John Vorster and Karee Streets Irene X54, 0062 (PO Box 68149, Highveld, 0169) (*In the near future this address will change to: 1st Floor, Hennops House Riverside Office Park 1303 Heuwel Avenue Centurion, 0157)

3 table of contents Page CORPORATE INFORMATION Inside front cover SALIENT FEATURES 3 ACTIONS REQUIRED BY SEPHAKU HOLDINGS SHAREHOLDERS 6 IMPORTANT DATES AND TIMES 8 DEFINITIONS AND INTERPRETATION 9 BACKGROUND 1. Introduction and purpose of this circular History of and background to the Sephaku Group 17 THE TRANSACTION 3. Rationale for and benefits of the Sephaku Fluoride distribution Outlook for and prospects of the Group Detailed information on Sephaku Fluoride and the Sephaku Fluoride distribution Conditions precedent and effective dates of the Sephaku Fluoride distribution 23 THE DIRECTORS 7. Information on the directors 23 FINANCIAL INFORMATION 8. Financial information 24 MATTERS RELATING TO SHARE CAPITAL 9. Amendment to the Sephaku Holdings share scheme Share capital of Sephaku Holdings Major shareholders Change in controlling shareholders 26 OTHER INFORMATION 13. Material agreements Litigation statement Material changes Experts consents Directors opinion and recommendation Directors responsibility statement Expenses General meeting of shareholders Documents available for inspection 29 1

4 Page ANNEXURES TECHNICAL INFORMATION Annexure 1 Executive summary of the CPR on the Nokeng Fluorspar Project 31 FINANCIAL INFORMATION Annexure 2 Historical and pro forma financial information relating to Sephaku Fluoride 46 Annexure 3 Independent reporting accountants reports on the historical financial information and unaudited pro forma information of Sephaku Fluoride 77 Annexure 4 Pro forma financial information relating to Sephaku Holdings 81 Annexure 5 Independent reporting accountants limited assurance report on the unaudited pro forma financial information of Sephaku Holdings 85 DIRECTORS Annexure 6 Information relating to the directors 87 OTHER STATUTES Annexure 7 Exchange Control Regulations 91 NOTICE OF GENERAL MEETING 92 FORM OF PROXY (pink) Attached 2

5 salient features The salient features presented below are a summary of the contents of this circular. For a full appreciation, this circular should be read in its entirety. The definitions and interpretation set out on pages 9 to 15 of this circular apply mutatis mutandis to the salient features presented below: 1. INTRODUCTION AND PURPOSE OF THIS CIRCULAR The main purpose of this circular is to seek shareholder approval for the distribution of shares in Sephaku Fluoride to shareholders as a dividend in specie. 2. the Sephaku Fluoride distribution Background to Sephaku Fluoride Sephaku Fluoride holds rights over a number of fluorite-related assets located in several provinces in South Africa. Its principal asset is the Nokeng Fluorspar Project which will comprise a fluorspar mine, concentrator plant and associated infrastructure and services. A summary of the CPR on the Nokeng Fluorspar Project is set out in Annexure 1 to this circular. Rationale for the Sephaku Fluoride distribution The implementation of the Sephaku Fluoride distribution will result in the creation of two separate entities: Sephaku Fluoride which will focus on fluorspar assets and Sephaku Holdings which will focus on the acquisition, exploration and development of various mineral interests, with a particular current focus on the development of limestone-related assets. Holding shares in each of these companies is expected to realise greater long-term value for shareholders than if the fluorspar and limestone-related assets were retained in Sephaku Holdings. Mechanism to achieve the Sephaku Fluoride distribution Prior to the implementation of the Sephaku Fluoride distribution, and in terms of the Sephaku Fluoride subscription agreement, Sephaku Holdings will subscribe for an additional Sephaku Fluoride shares, of which Sephaku Fluoride shares will be transferred to a trust to be held for the benefit of the holders of certain vested options over Sephaku Holdings shares, which options were issued in terms of a share scheme prior to the listing. Subject to, inter alia, shareholder approval, all of the remaining Sephaku Fluoride shares held by the company will be distributed to Sephaku Holdings shareholders by way of a dividend in specie, as a pro rata payment to shareholders, in the ratio of 1 Sephaku Fluoride share, valued at R0.59 per share, for every 1 Sephaku Holdings share held on the Sephaku Fluoride distribution record date. Prospects of Sephaku Holdings The medium to long-term prospects of the company subsequent to the implementation of the Sephaku Fluoride distribution depend on the ability of the directors and management to identify commercially viable prospective mineral assets and to explore for and evaluate mineral projects in order to develop such assets up the value curve. The board is confident of its ability to realise value for its shareholders through the pursuit of this strategy. 3

6 3. financial effects A summary of the pro forma financial effects of the Sephaku Fluoride distribution on Sephaku Holdings is set out below. This pro forma information is the responsibility of the directors. actual Pro forma before the after the sephaku sephaku fluoride fluoride Percentage distribution distribution change (i) (ii) (iii) Earnings per ordinary share for the year ended 30 June 2011 (cents) (iv) Headline loss per ordinary share for the year ended 30 June 2011 (cents) (iv) (39.63) (30.49) Diluted earnings per ordinary share for the year ended 30 June 2011 (cents) (iv) Diluted headline loss per ordinary share for the year ended 30 June 2011 (cents) (iv) (vi) (36.16) (27.82) Net asset value per ordinary share at 30 June 2011 (cents) (v) (11.82) Net tangible asset value per ordinary share at 30 June 2011 (cents) (v) (4.22) Weighted average number of ordinary shares in issue for the period Diluted weighted average number of ordinary shares in issue for the period (vi) Number of ordinary shares in issue at the end of the period Notes: (i) The figures in this column are extracted from the published audited annual financial results of the Group for the 12 months ended 30 June (ii) The figures in this column are based on the figures set out in the previous column, having adjusted for the effects of the Sephaku Fluoride distribution and having taken account of the Sephaku Fluoride subscription agreement. (iii) The figures in this column reflect the percentage change from the audited results of the Group presented in the first column and the pro forma figures set out in the second column. (iv) For purposes of earnings, headline loss and diluted earnings and headline loss per Sephaku Holdings share, it was assumed that the Sephaku Fluoride subscription agreement and the Sephaku Fluoride distribution were implemented on 1 July (v) For purposes of net asset value and net tangible asset value per Sephaku Holdings share, it was assumed that the Sephaku Fluoride subscription agreement and the Sephaku Fluoride distribution were implemented on 30 June (vi) The diluted earnings and diluted headline loss per Sephaku Holdings share and the diluted weighted average number of Sephaku Holdings shares in issue reflect the issue of Sephaku Holdings shares in respect of all issued share options. 4. amendment to the sephaku holdings share scheme The Sephaku Holdings share scheme currently allows for participation in the scheme by service providers to the Sephaku Group as defined in the scheme, namely Sephaku Holdings and its subsidiaries. The board is proposing to extend participation in the scheme to service providers to associates of the Sephaku Group, the aim being to include service providers to Sephaku Cement. In terms of the JSE Listings Requirements, this amendment is subject to the approval of shareholders. 4

7 5. DETAILS OF the GENERAL MEETING A general meeting is being convened to be held at 10:00 on Wednesday, 7 March 2012 in the Ovals boardroom, Centurion Lake Hotel, 1001 Lenchen Avenue North, Centurion, Pretoria in order for shareholders to consider and vote upon the ordinary resolutions regarding the Sephaku Fluoride distribution and the amendment to the Sephaku Holdings share scheme. 6. Copies of this circular English copies of this circular are available on the company s website and, in hard copy, from the date of issue of this circular to the date of the general meeting, at the following locations: Sephaku Holdings, at its registered office as set out in the Corporate Information section; QuestCo, at its address as set out in the Corporate Information section; and Computershare, at its registered office as set out in the Corporate Information section. 5

8 ACTIONs REQUIRED BY SEPHAKU HOLDINGS SHAREHOLDERS The definitions and interpretations commencing on page 9 apply, mutatis mutandis, to the actions required by Sephaku Holdings shareholders as set out below. If you are in any doubt as to what action you should take, you should consult your broker, banker, accountant, attorney, CSDP or other professional advisor immediately. This circular contains information relating to the distribution of Sephaku Fluoride shares to shareholders as a dividend in specie as well as an amendment to the Sephaku Holdings share scheme. Sephaku Holdings shareholders should carefully read this circular and decide how they wish to vote on the ordinary resolutions relating to these matters, as described in this circular, which are all to be proposed at the general meeting which is to be held at 10:00 on Wednesday, 7 March 2012 in the Ovals boardroom, Centurion Lake Hotel, 1001 Lenchen Avenue North, Centurion, Pretoria. Sephaku Holdings shareholders who hold certificated shares (in their own name or a nominee name) or dematerialised shares in their own name Sephaku Holdings shareholders holding share certificates in their own name or a nominee name and Sephaku Holdings shareholders who have dematerialised their Sephaku Holdings shares and have elected own name registration in the sub-register through a CSDP are entitled to attend the general meeting in person. Alternatively, if they are unable to attend the general meeting but wish to be represented thereat, they or their nominee must complete and return the attached form of proxy (pink), in accordance with the instructions contained therein, either to: (a) the transfer secretaries, whose address is set out on the inside front cover of this circular, to be received by no later than 48 hours prior to the date of the general meeting (i.e. by 10:00 on Monday, 5 March 2012); or (b) the chairman of the general meeting so as to reach the chairman by no later than immediately prior to the commencement of voting on the ordinary resolutions at the general meeting. Sephaku Holdings shareholders who hold dematerialised shares, other than own name dematerialised shares Sephaku Holdings shareholders who have dematerialised their Sephaku Holdings shares through a CSDP or broker and who have not elected own name registration in the sub-register maintained by a CSDP who wish to attend the general meeting may do so as they are no longer required to be issued with a letter of representation in order to attend. If such shareholders do not wish to attend the general meeting but wish to be represented thereat, they must provide their CSDP or broker with their voting instructions in terms of the custody agreement entered into between them and their CSDP or broker. Sephaku Holdings shareholders who hold dematerialised shares (with own name registration) In respect of dematerialised Sephaku Holdings shares, it is important to ensure that the person or entity (such as a nominee) whose name has been entered into the relevant sub-register maintained by a CSDP completes the attached form of proxy (pink) and appoints a proxy to vote at the general meeting. Sephaku Holdings does not take responsibility and will not be held liable for any failure on the part of a CSDP, nominee or broker of a shareholder holding dematerialised Sephaku Holdings shares to notify such shareholder of the general meeting or any business to be conducted thereat, or to validly authorise a shareholder to attend or vote thereat. Electronic participation In terms of section 61(10) of the Companies Act, every shareholders meeting of a public company must be reasonably accessible within South Africa for electronic participation by shareholders. Shareholders wishing to participate electronically in the general meeting are required to deliver written notice to the company at 1st Floor, Hennops House, Riverside Office Park, 1303 Heuwel Avenue, Centurion, Pretoria (marked for the attention of Ms J Bennette) by no later than 72 hours, determined excluding week-ends, prior to the date of the general meeting (i.e. by 10:00 on Friday, 2 March 2012) that they wish to participate via 6

9 electronic communication at the general meeting (the electronic notice ). In order for the electronic notice to be valid, it must contain: (a) if the shareholder is an individual, a certified copy of his identity document and/or passport; (b) if the shareholder is not an individual, a certified copy of a resolution by the relevant entity and a certified copy of the identity documents and/or passports of the persons who passed the relevant resolution. The relevant resolution must set out who from the relevant entity is authorised to represent the relevant entity at the general meeting via electronic communication; (c) a valid address and/or facsimile number (the contact address/number ) and (d) if the shareholder wishes to vote via electronic communication, set out that the shareholder wishes to vote via electronic communication. By no later than 48 hours before the general meeting, the company shall use its reasonable endeavours to notify a shareholder at its contact address/ number who has delivered a valid electronic notice of the relevant details through which the shareholder can participate via electronic communication. Sephaku Holdings shareholders who are non-resident in and/or emigrants from the Common Monetary Area Sephaku Holdings shareholders who are non residents in and/or emigrants from the Common Monetary Area should take note of the Exchange Control Regulations set out in Annexure 7 to this circular. Such shareholders should also note that the Sephaku Fluoride distribution does not constitute an offer in any jurisdiction in which it is illegal to make such an offer and this circular should not be forwarded or transmitted by you to any person in any territory other than where it is lawful to make the Sephaku Fluoride distribution. Sephaku Fluoride shares have not been and will not be registered under the Securities Act of the United States of America and, accordingly, Sephaku Fluoride shares may not be offered, sold, resold, delivered or transferred, directly or indirectly, in or into the United States or to, or for the account or benefit of, United States persons, except pursuant to exemptions from the Securities Act. This circular is not being, and must not be, mailed or otherwise distributed or sent in, into or from the United States. This circular does not constitute an offer of any securities for sale in the United States or to United States persons. The Sephaku Fluoride distribution does not constitute an offer in the District of Colombia, the United States, the Dominion of Canada, the Commonwealth of Australia, Japan or in any other jurisdiction in which, or to any person to whom, it would not be lawful to undertake the Sephaku Fluoride distribution. Shareholders with registered addresses in such jurisdictions and all Sephaku Holdings shareholders who are non-residents in and/or emigrants from the Common Monetary Area should consult their professional advisors to determine whether any governmental or other consents are required or other formalities need to be observed to allow them to accept their entitlement to Sephaku Fluoride shares in terms of the Sephaku Fluoride distribution. 7

10 IMPORTANT DATES and TIMES Shareholders should take careful note of the following important dates and times: Activity 2012 Terms announcement containing declaration data for the Sephaku Fluoride distribution released on SENS on Terms announcement containing declaration data for the Sephaku Fluoride distribution published in the press on Last day to trade to be eligible for voting at the general meeting Record date for voting at the general meeting Last day to lodge an instruction requesting electronic participation in the general meeting by 10:00 on Friday, 3 February Monday, 6 February Friday, 24 February Friday, 2 March Friday, 2 March Last day and time to lodge forms of proxy in respect of the general meeting: with the transfer secretaries by 10:00 on Monday, 5 March with the chairman of the general meeting any time prior to the commencement of voting at the general meeting General meeting of Sephaku Holdings shareholders to be held at 10:00 on Results of the general meeting, including finalisation data for the Sephaku Fluoride distribution, released on SENS on Last day to trade (last day to trade in order to participate in the Sephaku Fluoride distribution) Ex date (Sephaku Holdings shares commence trade ex the Sephaku Fluoride distribution) Sephaku Fluoride distribution record date (shareholdings of Sephaku Holdings shareholders ascertained for purposes of the Sephaku Fluoride distribution) Pay date (share certificates in Sephaku Fluoride issued to all Sephaku Holdings shareholders who are entitled to participate in the Sephaku Fluoride distribution) on or about Wednesday, 7 March Wednesday, 7 March Thursday, 15 March Friday, 16 March Friday, 23 March Monday, 26 March Notes: 1. Unless otherwise indicated, all times are South African times. 2. Any changes to the above dates and times will be released on SENS. 3. In order to comply with the requirements of Strate, between Friday, 16 March 2012 and Friday, 23 March 2012, both days inclusive, no Sephaku Holdings shares may be dematerialised or rematerialised. 8

11 definitions and interpretation Throughout this circular, unless otherwise indicated or unless the context indicates a contrary intention, the words in the first column have the meanings stated opposite them in the second column, words in the singular include the plural and vice versa, words importing one gender include the other gender and references to a person include references to a body corporate and vice versa and technical and mining terms shall have the meanings assigned to them in any CPR or technical reports incorporated herein by reference: African Nickel African Nickel Limited (registration number ), a company registered and incorporated in accordance with the laws of the British Virgin Islands; African Nickel Holdings African Nickel Holdings (Pty) Limited (registration number 2006/022782/07), a private company registered and incorporated in accordance with the laws of South Africa, being a subsidiary of African Nickel and in which Sephaku Holdings holds a 26% interest; Aganang Project a component of the Cement Project, namely the limestone mine and cement manufacturing plant located near Lichtenburg in the North West Province of South Africa; Blue Waves Blue Waves Properties 198 (Pty) Limited (registration number 2008/010840/07), a private company registered and incorporated in accordance with the laws of South Africa and a wholly-owned subsidiary of Sephaku Holdings; the board or the directors the board of directors of Sephaku Holdings; business day any day other than a Saturday, Sunday or official public holiday in South Africa; the Cement Project the Sephaku Group s Cement Project which comprises the Aganang Project (a limestone mine and cement manufacturing plant located near Lichtenburg in the North West Province of South Africa) and the Delmas Milling Project (a cement milling plant located in Delmas, in the Mpumalanga Province of South Africa); the Cement Project debt financing the debt financing for the Cement Project comprising a senior debt facility in an amount of R1.845 billion, including project finance fees, and a standby facility in an amount of R265 million which will be utilised only if the total costs of the Cement Project exceed R3 billion and which will be provided by Dangote Cement as a fully subordinated shareholder loan; the Cement Project equity financing equity of R1.185 billion comprising the equity financing provided for the Cement Project in an amount of R779 million from the proceeds of the Dangote issue together with R406 million of equity financing raised by Sephaku Cement prior to the Dangote issue; cement rights the mineral rights of the Sephaku Group relating to cement, which are held either by Sephaku Holdings through Blue Waves or by Sephaku Cement s subsidiaries; cents South African cents; this circular this bound document including the annexures, the notice of general meeting and form of proxy (pink), dated 7 February 2012; the Common Monetary Area collectively, South Africa, the Republic of Namibia and the Kingdoms of Swaziland and Lesotho; 9

12 the company or Sephaku Holdings Sephaku Holdings Limited (registration number 2005/003306/06), a public company listed on the JSE and registered and incorporated in accordance with the laws of South Africa, with its date and place of incorporation being 3 February 2005 in Pretoria; the Companies Act Computershare or the transfer secretaries CPR Cross Company Management CSDP Dangote Cement Dangote Industries the Dangote issue the Dangote loan agreement the South African Companies Act, 2008 (Act 71 of 2008) as amended; Computershare Investor Services (Proprietary) Limited (registration number 2004/003647/07), a private company incorporated under the laws of South Africa; Competent Person s Report; Cross Company Management (Pty) Limited (registration number 1995/013798/07), previously named Sephaku Management (Pty) Limited, a private company registered and incorporated in accordance with the laws of South Africa, which provides, inter alia, company secretarial services to the Sephaku Group and which was a wholly-owned subsidiary of Sephaku Holdings prior to 28 February 2009 and is currently wholly-owned by the Samet Trust; Central Securities Depository Participant accepted in terms of the Securities Services Act, appointed by an individual shareholder for purposes of, and in regard to, the dematerialisation of documents of title for purposes of incorporation into the Strate system; Dangote Cement plc (registration number RC ), a limited liability public company duly incorporated in Nigeria and listed on the Nigerian Stock Exchange and, as the entity to which Dangote Industries delegated and transferred all of its rights and obligations in relation to Sephaku Cement, a 64% shareholder in Sephaku Cement; Dangote Industries Limited (registration number RC 71242), a public company registered and incorporated in accordance with the laws of Nigeria and the parent company of Dangote Cement; the issue in October 2010 of Sephaku Cement shares to Dangote Industries at a price of R3.58 per share for the purpose of raising R779 million in terms of the Dangote loan agreement and the Dangote subscription agreement; the loan agreement between Dangote Industries and Sephaku Cement, dated 24 June 2010, in terms of which, inter alia, Dangote Industries lent and advanced to Sephaku Cement R75.6 million (the Rand equivalent of US$10 million), which loan amount was wholly applied to the subscription for a portion of the Sephaku Cement shares comprising the Dangote issue (namely Sephaku Cement shares) at a price of R3.58 per Sephaku Cement share; the Dangote subscription agreement the subscription agreement amongst Dangote Industries, Sephaku Holdings and Sephaku Cement, dated 20 August 2010, in respect of the subscription for a portion of the Sephaku Cement shares comprising the Dangote issue (namely Sephaku Cement shares) for an aggregate subscription price of R703.4 million; declaration date Delmas milling project the date on which the declaration data relating to the Sephaku Fluoride distribution (namely the last day to trade, the Sephaku Fluoride distribution record date, the pay date, the ex date and the conditions precedent) are released on SENS; a component of the Cement Project, namely the cement milling plant located in Delmas in the Mpumalanga Province of South Africa; 10

13 the directors or the board the DMR the board of directors of Sephaku Holdings; the Department of Mineral Resources, a department of the South African Government; Eskom Eskom Holdings Limited (registration number 2002/015527/06), a public State-owned company registered and incorporated in accordance with the laws of South Africa; ex date the first trading day after the last day to trade; all trades on and from this date will be ex the entitlement to the Sephaku Fluoride distribution; Exchange Control the Exchange Control Department of SARB; Exchange Control Regulations Exchange Control Regulations, 1961, as amended, promulgated in terms of section 9 of the Currency and Exchanges Act, 1933 (Act 9 of 1933), as amended; finalisation date the date on which the Sephaku Fluoride distribution becomes unconditional and irrevocable and the date from which the finalisation information relating to the Sephaku Fluoride distribution (namely the last day to trade, the Sephaku Fluoride distribution record date, the pay date, the ex date, the ratio and a statement that all conditions precedent have been met) cannot be changed and the Sephaku Fluoride distribution either has to be implemented or cancelled; fluorspar rights the mineral rights of the Sephaku Group relating to fluorspar, all of which are held by Sephaku Fluoride and/or its subsidiaries; the Fly Ash Classification Project the Sephaku Cement Fly Ash Classification Project which comprises the off-take by Sephaku Cement of fly ash from Eskom s Kendal Power Station, located near Delmas in the Mpumalanga Province of South Africa, and the beneficiation and sale of such fly ash; Golden Pond Golden Pond Trading 483 (Pty) Limited (registration number 2006/011966/07), a private company registered and incorporated in South Africa, which is unrelated to the Sephaku Group, Dangote Cement or any of their directors, and which holds four prospecting rights relating to limestone which are to be transferred to Sephaku Lime; the Group or the Sephaku Group Sephaku Holdings and its subsidiaries, joint ventures and associates; an HDSA a historically disadvantaged South African, which means any person, category of persons or community, disadvantaged by unfair discrimination before the Constitution of the Republic of South Africa, 1993 (Act 200 of 1993), as amended, came into operation; IFRS the International Financial Reporting Standards formulated by the International Accounting Standards Board; the Income Tax Act the Income Tax Act, 58 of 1962, as amended; Incubex Incubex Minerals Limited (registration number 2010/010251/07) (previously Saldopax Limited), a public company registered and incorporated in accordance with the laws of South Africa which was established to hold all of the mineral rights of the Sephaku Group, other than the nickel rights, cement rights and the fluorspar rights and the shares of which were distributed to Sephaku Holdings shareholders which were registered as such on the record date for the Incubex distribution and which is and, for the immediate future will remain, unlisted; the Incubex distribution the distribution to Sephaku Holdings shareholders on 2 November 2010 of one Incubex share for every ten Sephaku Holding shares held on the record date for the Incubex distribution; 11

14 the Incubex restructuring the Incubex sale agreement the JSE the JSE Listings Requirements km last day to trade last practicable date LIBOR the listing m memorandum of incorporation Mandra Materials mineral rights the MPRDA Mt Mtpa nacq new order mining right new order prospecting right the restructuring of the Sephaku Group such that all of the Group s interests in subsidiaries which held mineral rights, other than the nickel rights, cement rights and the fluorspar rights, were sold to Incubex in terms of the Incubex sale agreement and in respect of which the sale of the relevant claims took effect on 25 July 2010 and the sale of the shares of the relevant subsidiaries takes effect as the Minister of Mineral Resources grants approval for the transfer of such subsidiaries prospecting rights in terms of section 11 of the MPRDA; the agreement between Sephaku Holdings and Incubex (or its nominee), dated 23 July 2010 relating to, inter alia, the Incubex restructuring; JSE Limited (registration number 2005/022939/06), a public company registered and duly incorporated in accordance with the laws of South Africa, and licensed as an exchange under the Securities Services Act; the JSE Listings Requirements; kilometres; the last business day to trade in Sephaku Holdings shares in order to settle by the Sephaku Fluoride distribution record date; the last practicable date before finalisation of this circular, being Wednesday, 25 January 2012; The British Bankers Association Interest Settlement Rate for the periods of three months as displayed on the appropriate pages of the Reuters screen; the listing of Sephaku Holdings shares on the Main Board of the JSE in the General Mining sector on Friday, 21 August 2009; metres; as defined in the Companies Act, the memorandum of incorporation or the documents in terms of which companies which were in existence at the time the Companies Act came into effect have been governed and structured, which are typically the memorandum and articles of association of such companies; Mandra Materials Limited, a limited liability company incorporated under the laws of the British Virgin Islands with BVI Company Number , with its registered address at Portcullis TrustNet Chambers, PO Box 3444, Road Town Tortola, British Virgin Islands and which is ultimately controlled by Mr Song-Yi Zhang (10/F., Fung House, 19 to 20 Connaught Road Central, Hong Kong); new order mining rights and new order prospecting rights; the South African Mineral and Petroleum Resources Development Act, 2002 (Act 28 of 2002), as amended, which became effective legislation on 1 May 2004; million tonnes; million tonnes per annum; nominal annual compounded quarterly; right to mine granted in terms of section 23(1) of the MPRDA; right to prospect granted in terms of section 17 of the MPRDA; 12

15 Nokeng Fluorspar the Nokeng Fluorspar Project Nokeng Holdings the Nokeng Holdings loan ordinary shares or Sephaku Holdings shares pa pay date PGMs PPC QuestCo or sponsor Rand or R Nokeng Fluorspar Mine (Pty) Limited (registration number 2000/012202/07), previously named Caltlin Investments (Pty) Limited, a private company registered and incorporated in accordance with the laws of South Africa and a wholly-owned subsidiary of Sephaku Fluoride; Nokeng Fluorspar s proposed fluorspar project comprising a fluorspar mine, concentrator plant and associated infrastructure and services; Nokeng Holdings Limited (registration number ), a limited liability company duly incorporated in the Republic of Mauritius, which is 100% held by Inter Private Equity Limited, a company incorporated under the laws of the British Virgin Islands with registration number ; the US$10 million loan from Nokeng Holdings to Sephaku Fluoride which was advanced in August 2011; ordinary shares of no par value in the issued share capital of Sephaku Holdings; per annum; the date on which share certificates in respect of Sephaku Fluoride shares are to be issued to all Sephaku Holdings shareholders who are entitled to participate in the Sephaku Fluoride distribution; platinum group metals, being platinum, palladium, osmium, iridium, rhodium and ruthenium; Pretoria Portland Cement Company Limited (registration number 1892/000667/06), a public company registered and incorporated in accordance with the laws of South Africa and listed on the JSE; QuestCo (Pty) Limited (registration number 2002/005616/07), a private company registered and incorporated in accordance with the laws of South Africa and a sponsor as contemplated in the JSE Listings Requirements and the sponsor to Sephaku Holdings; South African Rand, the lawful currency of South Africa; Safika Safika Holdings (Pty) Limited (registration number 1996/001693/07), a private company registered and incorporated in accordance with the laws of South Africa and owned by Moss Ngoasheng (20%), Saki Macozoma (20%), Marc Ber (10%) and numerous other shareholders; Safika Resources Safika Resources (Pty) Limited (registration number 2002/017459/07), a private company registered and incorporated in accordance with the laws of South Africa, a subsidiary of Safika and a material shareholder in Sephaku Holdings; SAICA Samet Trust SARB The South African Institute of Chartered Accountants; Samet Trust, a trust duly registered with the Master of the High Court of South Africa with Master s Reference number IT152/09 and established in order to provide educational support to its beneficiaries, namely HDSAs identified by the trustees (who are individuals representing the entities to which Cross Company Management, a wholly-owned subsidiary of the Samet Trust, provides certain services including secretarial services) as recipients of bursaries for training in the field of geology; the South African Reserve Bank; 13

16 the Securities Services Act the Securities Services Act, 2004 (Act 36 of 2004), as amended; SENS the Securities Exchange News Service of the JSE; Sephaku Cement Sephaku Cement (Pty) Limited (registration number 2004/034277/07), a private company registered and incorporated in accordance with the laws of South Africa, the date and place of incorporation being 1 December 2004 in Pretoria, and in which Sephaku Holdings currently owns a 36% interest and Dangote Cement holds a 64% interest; the Sephaku Cement relationship the agreement, dated 20 August 2010, between Sephaku agreement Holdings, Dangote Industries and Sephaku Cement governing the relationships between Sephaku Holdings and Dangote Industries inter se and between Sephaku Holdings, Dangote Cement and Sephaku Cement; Sephaku Cement shares ordinary shares of par value R0.001 each in Sephaku Cement; Sephaku Development Sephaku Development (Pty) Limited (registration number 2005/006244/07), a private company incorporated and registered in South Africa and a wholly-owned subsidiary of Sephaku Cement; Sephaku Fluoride Sephaku Fluoride Limited (registration number 2004/001912/06), previously named Sephaku Exploration Holdings (Pty) Limited, a public company registered and incorporated in accordance with the laws of South Africa and a wholly-owned subsidiary of Sephaku Holdings with its date and place of incorporation being 26 January 2004 in Pretoria; the Sephaku Fluoride distribution the distribution by Sephaku Holdings as a dividend in specie of 1 Sephaku Fluoride share, valued at R0.59 per share, for every 1 Sephaku Holdings share held by Sephaku Holdings shareholders on the Sephaku Fluoride distribution record date; the Sephaku Fluoride distribution the date on which Sephaku Holdings shareholders are recorded as record date such in order to participate in the Sephaku Fluoride distribution; Sephaku Fluoride shares ordinary shares of par value R0.001 in the issued share capital of Sephaku Fluoride; the Sephaku Fluoride subscription the agreement between Sephaku Holdings and Sephaku Fluoride agreement relating to the subscription by Sephaku Holdings, immediately prior to the Sephaku Fluoride distribution, for Sephaku Fluoride shares in cash, the proceeds of which will be applied, inter alia, by Sephaku Fluoride to settle the loans owing to Sephaku Holdings; the Sephaku Group or the Group Sephaku Holdings and its subsidiaries, joint ventures and associates; Sephaku Holdings or the company Sephaku Holdings Limited (registration number 2005/003306/06), a public company listed on the JSE and registered and incorporated in accordance with the laws of South Africa, with its date and place of incorporation being 3 February 2005 in Pretoria and which is not a subsidiary company nor has it changed its name in the last three years; the Sephaku Holdings share scheme The Sephaku Holdings 2009 Share Incentive Scheme as approved or the scheme by the JSE prior to the listing; Sephaku Holdings shareholders or holders of Sephaku Holdings shares; shareholders Sephaku Holdings shares or ordinary shares of no par value in the issued share capital of ordinary shares Sephaku Holdings; 14

17 Sephaku Lime Sephaku Lime agreements Sephaku Tin Sinoma International South Africa Strate subsidiary tpa UK USA or United States US$ Sephaku Limestone and Exploration (Pty) Limited (registration number 2006/028736/07), a private company registered and incorporated in South Africa and an 80% held subsidiary of Sephaku Cement, the remaining 20% interest being held by Golden Pond; the various agreements entered into between Sephaku Holdings, Sephaku Cement, Golden Pond and Sephaku Lime, dated 20 February 2009, 22 May 2009, 23 November 2010 and 14 December 2010 which have resulted in the transfer, subject to the approval of the DMR, by Golden Pond of its four limestone prospecting rights to Sephaku Lime in order to acquire a 49% interest in Sephaku Lime (which was previously a wholly-owned subsidiary of Sephaku Holdings), the purchase by Sephaku Cement of Sephaku Holdings 51% interest in Sephaku Lime for R3 million in cash and the purchase by Sephaku Holdings of a further 29% interest in Sephaku Lime for R , which was settled through the issue of Sephaku Holdings shares and the subsequent disposal of this interest to Sephaku Cement for a cash settlement in an amount of R ; Sephaku Tin (Pty) Limited (registration number 2006/009298/07), a private company registered and incorporated in accordance with the laws of South Africa, the shares of which have been transferred to Incubex, subject to the approval of the DMR, in terms of the Incubex sale agreement; Sinoma International Engineering Co. Limited, a public company registered and incorporated in accordance with the laws of China and listed on the Shanghai Stock Exchange; the Republic of South Africa; the electronic settlement and clearing system used by the JSE, managed by Strate Limited (registration number 1998/022242/06), a public company registered and incorporated in accordance with the laws of South Africa; a subsidiary as defined in the Companies Act; tons per annum; United Kingdom; United States of America; USA Dollars, the lawful currency of the USA; and Venmyn Venmyn Rand (Pty) Limited (registration number 1988/004918/07), a private company registered and incorporated in accordance with the laws of South Africa, and the independent author of the CPRs on the Cement Project and the Nokeng Fluorspar Project. 15

18 Sephaku Holdings Limited (Incorporated in the Republic of South Africa) (Registration number 2005/003306/06) Share code: SEP ISIN: ZAE ( Sephaku Holdings or the company ) Directors L Mohuba (Executive Chairman) N Crafford-Lazarus (Chief Executive Officer) R de Bruin (Non-Executive Director) P Fourie (Non-Executive Director) G Mahlare ( Independent Non-Executive Director and Lead Director and Chairman of the Audit Committee) G Mahlati (Non-Executive Director) S Matjiu (Executive Director) M Ngoasheng (Non-Executive Director) D Twist* (Non-Executive Director) J Bennette (Alternate) J Wessels (Alternate) * British CIRCULAR TO Sephaku Holdings SHAREHOLDERS 1. INTRODUCTION AND PURPOSE OF THIS CIRCULAR In September 2010, a circular was sent to shareholders relating to the equity and debt financing of the Sephaku Group s Cement Project and the restructuring of the Sephaku Group through the disposal of all of its mineral rights, except those relating to cement and fluorspar, to Incubex, subject to the approval of the DMR, and the distribution of all the issued shares in Incubex to shareholders as a dividend in specie. As set out in that circular and in the terms announcement, dated 3 February 2012, in the interests of both existing shareholders and new investors, the board has resolved to further re-organise the assets of the Sephaku Group in order to present a more defined and focused investment opportunity to the market. The Group currently holds interests in fluorspar, cement, nickel and limestone-related assets, the fluorspar-related assets being held through a wholly-owned subsidiary, Sephaku Fluoride. The board is now proposing to distribute the shares held by Sephaku Holdings in Sephaku Fluoride to Sephaku Holdings shareholders. 1.1 The Sephaku Fluoride distribution Sephaku Fluoride s principal asset is the Nokeng Fluorspar Project held by its wholly-owned subsidiary, Nokeng Fluorspar, which is to comprise a fluorspar mine, concentrator plant and associated infrastructure and services. The board is proposing to distribute, as a dividend in specie, all of the issued shares in Sephaku Fluoride currently held by Sephaku Holdings, together with Sephaku Fluoride shares for which Sephaku Holdings will subscribe in terms of the Sephaku Fluoride subscription agreement, to shareholders registered as such on the Sephaku Fluoride distribution record date (Friday, 23 March 2012) in the ratio of 1 Sephaku Fluoride share, valued at R0.59 per share, for every 1 Sephaku Holdings share held. 16

19 Prior to the implementation of the Sephaku Fluoride distribution, and also in terms of the Sephaku Fluoride subscription agreement, Sephaku Holdings will subscribe for a further shares in Sephaku Fluoride. These shares will ultimately be transferred to the holders of certain vested options over Sephaku Holdings shares, which options were issued in terms of a share scheme prior to the listing, upon the exercise of such options. For every option exercised, one Sephaku Fluoride share will be issued together with every new Sephaku Holdings share issued to the relevant option holder. It is the intention of the Sephaku Fluoride board that, subject to securing the relevant approvals, Sephaku Fluoride will be listed on an appropriate exchange, within 12 months of the Sephaku Fluoride distribution. 1.2 Shareholder approvals required As the Sephaku Fluoride distribution comprises the distribution of shares which will be unlisted, in terms of the JSE Listings Requirements it is subject to approval by shareholders. 2. HISTORY OF AND BACKGROUND TO THE SEPHAKU GROUP When Sephaku Holdings was first listed on the JSE on 21 August 2009, its stated nature of business was that of an HDSA-controlled, mineral exploration, development and investment company, with a diverse range of mining and exploration projects including, inter alia, limestone, fluorspar, coal, tin, gold, and nickel. The Sephaku Group s business was primarily focused on the identification of economically viable mineral prospects, the acquisition of such assets and the development of such prospects into full-scale mining projects. Sephaku Holdings objectives at the time included: the enhancement of its portfolio of exploration assets; maximising the value of each underlying asset through exploring, developing and bringing mineral assets into production; and becoming the BEE partner of choice to compatible mining majors. The market s response to the listing and the historic capital raising efforts of the Sephaku Group for the various assets within its original corporate structure indicated that the market is not in support of such a holding company structure and would prefer a more focused approach towards single mineral companies. In late 2009, therefore, the board resolved to stream line the Sephaku Group and to focus on its core projects, the Cement Project and the Nokeng Fluorspar Project. The sale of the company s interest in Taung Gold Limited was accordingly implemented and all of the Group s mineral assets, other than those related to nickel, cement and fluorspar namely all of the company s coal, tin, copper, gold, tungsten and PGM mineral rights were transferred, subject to the approval of the DMR, to Incubex. The Incubex distribution was then implemented in November Whilst the company s nature of business remained that of a mineral exploration, development and investment company, its focus could then primarily be on the development of the Cement Project and the Nokeng Fluorspar Project and their related projects and exploration assets, rather than on a range of diversified mining and exploration projects. The company s key objectives relating to fluorspar included: the funding of the Nokeng Fluorspar Project in order to bring it into production; the development of other fluorspar exploration assets up the value curve; and the introduction of new downstream beneficiation opportunities into the Group. The company s key objectives relating to cement included: progressing the Cement Project to production; the development of other limestone exploration assets up the value curve; and the introduction of new vertical integration opportunities into the Group, and ultimately the establishment of a fully diversified building materials group. 17

20 At the time of the Cement Project equity and debt-raising processes which were conducted during 2010 and were described in detail in the circular to shareholders, dated 30 September 2010, potential investors in the cement assets of the Group made it clear that they would prefer to participate in a uniquely focused cement/building materials investment. It was therefore agreed between Sephaku Holdings and Dangote Industries at the time of Dangote Industries investment into Sephaku Cement in mid-october 2010, that the Sephaku Holdings Group would ultimately be restructured to create a listed focused cement/building materials vehicle, in which Dangote Industries would also participate. With regards to the company s fluorspar assets, to date the company has been unable to raise the funding required to fully develop the Nokeng Fluorspar Project as potential investors similarly require exposure solely to fluorspar assets. The board is therefore of the view that, in order to achieve both sets of objectives as laid out above, whilst remaining true to its core business of mineral exploration, development and investment, it is necessary to first separate out the fluorspar assets of the company. 3. Rationale for and benefits of the Sephaku Fluoride distribution As set out above, it has become clear to the board since the listing that the structure of the Sephaku Group as a diversified minerals assets group had little appeal to the market and that investors were finding it difficult to place an aggregate value on the various sets of mineral assets within the Sephaku Group. Potential investors in the Group have indicated a strong preference to invest in entities which have a unique focus on assets which are related to a single mineral or group of related minerals. In order to make the Sephaku Group a more appealing investment for both existing and new investors alike, the board therefore restructured the Group to separate out all the mineral assets of the Group, other than limestone and fluoride, into a separate entity, Incubex, the shares of which were distributed to shareholders in November The board now wishes to continue this process by distributing the shares in Sephaku Fluoride to shareholders. The Sephaku Holdings share is also currently highly illiquid and the board of Sephaku Holdings believes that the implementation of the Sephaku Fluoride distribution will assist in the creation of a more liquid, focused, coherent and attractive investment opportunity in Sephaku Holdings for both current shareholders and future investors. 3.1 Rationale for and benefits of the Sephaku Fluoride distribution Sephaku Holdings has received extensive interest from potential investors in the Nokeng Fluorspar Project. As was the case with the Cement Project, it has been difficult to progress and conclude such discussions as such investors have expressed a specific interest to invest in the Nokeng Fluorspar Project rather than in a diversified minerals holding company. This has been further complicated by the difficulties associated with establishing a fair value for the Nokeng Fluorspar Project within the Sephaku Holdings group, given what the board considers to be the highly undervalued trading price of Sephaku Holdings shares on the JSE. The implementation of the Sephaku Fluoride distribution is expected to facilitate a capital raising by Sephaku Fluoride in order to progress the Nokeng Fluorspar Project. This is expected to yield significant value for Sephaku Holdings shareholders, the realisation of which has been frustrated while Sephaku Fluoride has been locked within a diversified listed structure. In addition, it is the intention of the board of Sephaku Fluoride, subject to the relevant regulatory approvals, that the Nokeng Fluorspar Project will be listed on an appropriate exchange within 12 months of the Sephaku Fluoride distribution, in order to take advantage of the tax relief provided for in the unbundling provisions set out in section 46 of the Income Tax Act. Upon such listing of the company s fluoride assets, Sephaku Holdings shareholders will therefore have the opportunity to participate in two separate listed entities, Sephaku Holdings and Sephaku Fluoride (or its nominee) which will focus on fluoride assets. Each of these companies is expected to realise greater value on a stand-alone basis than if the Nokeng Fluorspar Project was retained in Sephaku Holdings, particularly in light of their respective enhanced fund-raising prospects. 18

21 Shareholders are referred to paragraph 5 below which sets out further information on Sephaku Fluoride, including details relating to the members of the Sephaku Fluoride board, and to Annexure 1 to this circular which contains the executive summary of the CPR on the Nokeng Fluoride Project, dated 30 September OUTLOOK FOR AND PROSPECTS OF THE GROUP Subsequent to the implementation of the Sephaku Fluoride distribution, Sephaku Holdings assets will then comprise: its 36% interest in Sephaku Cement; a 100% interest in Blue Waves which holds 100% of certain limestone related mineral rights; and a 26% interest in African Nickel. Sephaku Holdings principal mineral interests will therefore all be related to limestone either as cement projects or as limestone exploration assets. As far as shareholders are concerned, the immediate outlook for and prospects of the Group therefore revolve around those assets. The board s view on the Group s prospects relative to those assets is accordingly set out below in some detail, together with the board s view on the more general prospects of the Group. 4.1 The cement assets The construction of the Cement Project s cement plant has already commenced and construction, erection and commissioning is anticipated to be complete by mid-2013 followed by an eight-month ramp-up period, bringing the plant to full production by early The board is confident that the Cement Project will generate significant value for shareholders. In the opinion of the directors, Sinoma International provides a globally competitive, reputable and highly efficient construction team which will be complemented by the in-house skills and experience of the Sephaku Cement management team and the extensive experience of Dangote Cement in the establishment of new cement plants. The board is convinced of the cementitious market potential in Southern Africa and is of the view that the expected timing for the Cement Project to come into production will tie in with a capacity shortfall in the market over the medium term. The directors are therefore of the view that the company s 36% holding in Sephaku Cement should deliver significant value to shareholders, given the track record of milestones achieved to date, including the commissioning of the Fly Ash Classification Project and the progress made on the Cement Project, its exceptional management team, its access to other cement and related opportunities and the timing of its entry into the South African cement market. In addition, Sephaku Cement has already announced its second major cement project, namely a tonnes per day clinker and cement production facility to be located near Dwaalboom in the Limpopo Province. A 12-month limestone prospecting programme has already been completed on the project area and construction is expected to commence in The limestone assets The Sephaku Group also holds limestone exploration assets in the northern part of the Western Cape and in the Mpumalanga Provinces. Sephaku Cement intends to apply the R35 million loan to be provided by Dangote Cement to conduct further exploration on these assets to determine their viability for further expansion of its cement business through South Africa, as well as considering expansion opportunities in Southern Africa. In addition, Sephaku Holdings holds a 100% interest in Blue Waves which holds the following mineral rights: Van Rhynsdorp project: prospecting right (WC) 30/5/1/1/2/348PR applied for over various farms (granting letter received from the DMR awaiting execution); prospecting right (WC) 30/5/1/1/2/382PR applied for over various farms (granting letter received from DMR awaiting execution); 19

22 Northern Cape Gypsum project: prospecting right (NC) 30/5/1/1/2/882PR applied for over remainder, portions 1 and 2 of the farm Verdoorst Kolk No. 342 (granting letter received from DMR awaiting execution); prospecting right (NC) 30/5/1/1/2/881PR applied for over remainder, portions 1 and 2 of the farm Aan De Karee Doorn Pan No. 213 (granting letter received from DMR awaiting execution); prospecting right (NC) 30/5/1/1/2/883PR applied for over farm Kanakies No. 332 (granting letter received from DMR awaiting execution). 4.3 General outlook Although immediately after the implementation of the Sephaku Fluoride distribution, the Group s mineral assets will have a largely limestone-related bias, the ultimate strategy of the board remains to realise value for its shareholders through the Group s investments in mineral projects in general, either by retaining a significant stake in such projects or by unbundling them to shareholders. To date, the Group has unbundled Incubex, which will continue to seek to realise value from the various mineral rights which it holds. The board is now proposing to unbundle Sephaku Fluoride, which will focus on developing the Nokeng Fluorspar Project outside the listed environment but plans to secure a listing on an appropriate exchange in the next 12 months. As set out above, the Group will retain its interest in Sephaku Cement which is expected to develop into a diversified building materials group and has already identified various vertical integration opportunities in aggregates, ready-mix concrete, cement blenders and fly ash which it will seek to pursue in due course. A listing of Sephaku Cement is also anticipated. The medium to long-term prospects of the company depend on the ability of the directors and management to identify prospective mineral assets and to explore for and evaluate mineral projects in order to develop such assets up the value curve. The board is confident of its ability to realise value for its shareholders through the pursuit of this strategy. 5. detailed information on SEPHAKU FLUORIDE AND THE SEPHAKU FLUORIDE DISTRIBUTION 5.1 Sephaku Fluoride Background Given that no aluminium fluoride is currently produced in South Africa, coupled with the existence of a domestic market to supply aluminium smelters and planned nuclear enrichment facilities, as well as a growing international market, the board decided that the best way to support the development of its fluorspar assets would be through the development of hydrogen fluorine and aluminium fluoride as a downstream derivative product. Accordingly, having commissioned a definitive feasibility study on the Nokeng Fluorspar Project, which will comprise a fluorspar mine, concentrator plant and associated infrastructure and services, the board then undertook a pre-feasibility study on a beneficiation production facility consisting of a sulphuric acid plant, a hydrogen fluoride plant and an aluminium fluoride plant. The completion of the pre-feasibility study was announced on 10 December 2009 and the results of the pre-feasibility study were released on 29 January Outlook and prospects The objective of Sephaku Fluoride is to be an HDSA-controlled, mining and exploration company, focusing on fluoride-related projects. The board and management of Sephaku Fluoride intend to concentrate first on the development and funding of the Nokeng Fluorspar Project and the enhancement of its portfolio of fluoride exploration assets. Sephaku Fluoride expects to be able to create and grow shareholder value as a result of the following characteristics: Sephaku Fluoride holds rights over a number of fluoride-related assets located in a number of provinces in South Africa; the directors and management of Sephaku Fluoride possess expert technical and entrepreneurial skills and are capable of capitalising on opportunities created by the market as well as developing the Sephaku Fluoride mineral prospects up the value curve; and as an empowered entity, Sephaku Fluoride is able to enter into relationships with South African and international mining companies as their Black Economic Empowerment ( BEE ) partner. 20

23 The Nokeng Fluorspar Project When the fluorspar concentrator comes into production in 2014, Sephaku Fluoride is expected to become a major supplier of fluorspar. A market assessment conducted by Venmyn in 2009 indicated that sufficient opportunity exists within both the local and international (Middle East) markets for the sale of the downstream aluminium fluoride which would be produced at the production facility. The combination of local aluminium fluoride production and economy of the supply should also result in Sephaku Fluoride being one of the lowest cost suppliers of aluminium fluoride in the market. In addition, the quality guarantees by the technology supplier of the beneficiation production facility should ensure that the aluminium fluoride product will be of the highest quality available in the market, representing a clearly differentiated value proposition to customers and Sephaku Fluoride alike. Sephaku Fluoride should therefore be well-placed to realise the benefits associated with local production of high quality fluorspar and the highest quality aluminium fluoride Description of the other assets held by Sephaku Fluoride A table setting out a list of the subsidiaries held by Sephaku Fluoride and their mineral rights is set out below: Full name of subsidiary held by nature of interest in prospecting and/or Sephaku Fluoride mining right(s) 1. Broad Market Trading 240 (Pty) Limited The Welgelegen area: ( Broad Market ) Sephaku Tin and Sephaku Fluoride have entered into a 50:50 joint venture agreement through Broad Market relating to a prospecting right (Welgelegen 246 KR) which is held by Broad Market and relates to PGMs, copper and gold and in respect of which an application has been lodged in terms of section 102 of the MPRDA to include fluorspar and tungsten. Sephaku Tin has the right to benefit from the possible future mining of tin, copper and any other mineral other than fluorspar and Sephaku Fluoride has the right to benefit from the possible future mining of fluorspar. 2. Nokeng Fluorspar Mine (Pty) Limited The Kromdraai and Naauwpoort area: Mining Right GP30/5/2/2/(293)MR over Kromdraai 209JR portions Re2 and portions 4 and 11 and over the Farm Naauwpoort 208 JR portion 11 has been granted and was executed on 14 June Ulipac (Pty) Limited The Walmansthal area: An application in terms of section 11 of the MPRDA was executed on 5 October 2011 for the transfer of prospecting right MPT No. 295/2006 held by BHP Billiton SA (Pty) Limited to Sephaku Fluoride in respect of holdings 146, 148, 150, 152, 161, 165 and 167 of Walmannsthal Agricultural Holdings 278JR, district Pretoria. 21

24 5.1.4 Management of Sephaku Fluoride The board of directors of Sephaku Fluoride comprises the following individuals: Name age Qualifications Role Dr Lelau Mohuba 55 MBChB Chairman Mr Alan Smith 56 BSc Mining Engineering Chief Executive Officer Lukas Adriaan Jacobus 51 National High Diploma in Chief Operating Officer van den Heever Mechanical Engineering, B Com Rose Raisibe Matjiu 52 BA (Social Work), MA Executive Director Johannes Wilhelm Wessels 60 BIuris, LLB Executive director Neil Robus Crafford-Lazarus 52 BCompt (Hons), CA(SA) Executive Director Dr David Twist 57 BSc (Hons), PhD Non-Executive Director Financial information In terms of the Sephaku Fluoride subscription agreement, prior to the Sephaku Fluoride distribution, Sephaku Holdings will subscribe for Sephaku Fluoride shares in cash. The cash required for such subscription will be procured in terms of an intra-day loan from Absa Bank Limited. Sephaku Fluoride will immediately apply the proceeds of this subscription to settle the following claims: the claim held by Sephaku Holdings against Sephaku Fluoride, which claim amounted to R at 30 June 2011; and the claim held by Sephaku Holdings against Nokeng Fluorspar which claim amounted to R at 30 June The funds received by Sephaku Holdings from such claim settlements will then immediately be applied to settle the intra-day loan referred to above. A report of historical financial information on Sephaku Fluoride is included in Annexure 2 to this circular and a reporting accountants report thereon has been included in Annexure 3. Pro forma financial information on Sephaku Fluoride, showing the effects of the implementation of the Sephaku Fluoride subscription agreement, is also set out in Annexure 2 to this circular. The reporting accountants report on such pro forma information is set out in Annexure The Sephaku Fluoride distribution The Sephaku Fluoride distribution entitles Sephaku Holdings shareholders to 1 Sephaku Fluoride share, valued at R0.59 per share, for every 1 Sephaku Holdings share held on the Sephaku Fluoride distribution record date. Sephaku Fluoride share certificates reflecting such entitlements will be posted to Sephaku Holdings shareholders, by registered post, on the payment date. Shareholders should note that Sephaku Fluoride is not and will not immediately be a listed entity and that shareholders will therefore only be able to trade in Sephaku Fluoride shares off-market. However, it is the intention of the board of Sephaku Fluoride to prepare the entity for listing and to apply for approval for a listing within 12 months in order to take advantage of the roll-over relief afforded by section 46 of the Income Tax Act. The Sephaku Fluoride distribution will be undertaken from the contributed tax capital of Sephaku Holdings as a dividend in specie. Shareholders are advised to seek professional tax advice as to how the receipt of the Sephaku Fluoride distribution might affect their individual tax status. The directors have passed resolutions in terms of section 46 of the Companies Act authorising the Sephaku Fluoride distribution and confirming that they have applied the solvency and liquidity tests as contemplated in the Companies Act and that they are of the reasonable opinion that Sephaku Holdings will satisfy the solvency and liquidity test immediately after completing the Sephaku Fluoride distribution. The directors resolutions have been passed on the basis that they are conditional upon shareholders approving the Sephaku Fluoride distribution in terms of this circular. 22

25 The directors also confirm that, since the test was done, there have been no material changes to the financial position of the Sephaku Group. The directors confirm that, subsequent to the implementation of the Sephaku Fluoride distribution: the company and the Sephaku Group will be able to pay their debts as they become due in the ordinary course of business for a period of 12 months after the date of issue of this circular; the consolidated assets of the company and the Sephaku Group, recognised and measured in accordance with the accounting policies used in the Group s latest audited annual financial statements, will be in excess of the consolidated liabilities of the company and the Sephaku Group, similarly recognised and measured, for a period of 12 months after the date of issue of this circular; the issued share capital and reserves of the company and the Sephaku Group will be adequate for ordinary business purposes for a period of 12 months after the date of issue of this circular; the working capital available to the company and its subsidiaries will be sufficient for the company s and its subsidiaries present requirements, i.e. for a period of 12 months after the date of issue of this circular. 6. conditions precedent and effective dates of the sephaku fluoride distribution The implementation of the Sephaku Fluoride distribution is conditional upon, inter alia, shareholder approval of the ordinary resolution relating to the Sephaku Fluoride distribution. The effective dates for the Sephaku Fluoride distribution are set out on page 8 of this circular. 7. information on the DIRECTORS 7.1 Directors details A summary of the Sephaku Holdings directors details is presented below. Further details, including their remuneration, interests in transactions, interests in securities and options and service contracts are provided in Annexure 6 to this circular. Name age Position in Sephaku Holdings Qualification *#L Mohuba 54 Executive Chairman MBChB #N Crafford-Lazarus 52 Chief Executive Officer BCompt (Hons), CA(SA) #S Matjiu 50 Executive Director BA (Social Work), M A R de Bruin 58 Non-Executive Director BComm, LLB *P Fourie 55 Non Executive Director BComm (Accounting) **G Mahlare 56 Independent Non-Executive Director, BComm (Accounting), Chairman of the Audit Committee BCompt (Hons) G Mahlati 53 Non-Executive Director MBChB M Ngoasheng 54 Non-Executive Director MPhil, BSocSci (Hons), BA (Economics and International Politics) #D Twist 57 Non-Executive Director BSc (Hons), PhD J Bennette 48 Alternate Director *#J Wessels 60 Alternate Director BIuris LLB Notes: * These directors are also directors of Sephaku Cement. # These directors are also directors of Sephaku Fluoride. ** None of the directors, other than Mr Mahlare, may be classified as independent. 23

26 8. financial information 8.1 Historical financial information and pro forma financial information on Sephaku Fluoride Historical financial information on Sephaku Fluoride and the independent reporting accountants report in regard thereto are set out in Annexures 2 and 3, respectively, to this circular. The historical financial information set out in this circular is the responsibility of the directors of Sephaku Holdings. Pro forma financial information on Sephaku Fluoride, showing the effects of the implementation of the Sephaku Fluoride subscription agreement and the Sephaku Fluoride distribution, is also set out in Annexure 2 to this circular. The reporting accountants report on such pro forma information is set out in Annexure Pro forma financial effects on Sephaku Holdings The unaudited pro forma financial effects of the Sephaku Fluoride distribution are presented below. Such pro forma financial effects are the responsibility of the directors and are presented for illustrative purposes only to provide information on how this transaction may have impacted on the reported financial information of the company if it had been implemented in the 12 months ended 30 June Because of their nature, the pro forma financial effects may not give a fair indication of the company s financial position at 30 June 2011 or its future earnings. PKF (Jhb) Inc. has issued a limited assurance report on this pro forma financial information which is set out in Annexure 5 to this circular. actual Pro forma before the Sephaku After the Sephaku Percentage fluoride distribution Fluoride distribution change (i) (ii) (iii) Earnings per ordinary share for the year ended 30 June 2011 (cents) (iv) Headline loss per ordinary share for the year ended 30 June 2011 (cents) (iv) (39.63) (30.49) Diluted earnings per ordinary share for the year ended 30 June 2011 (cents) (iv)(vi) Diluted headline loss per ordinary share for the year ended 30 June 2011 (cents) (iv)(vi) (36.16) (27.82) Net asset value per ordinary share at 30 June 2011 (cents) (v) (11.82) Net tangible asset value per ordinary share at 30 June 2011 (cents) (v) (4.22) Weighted average number of ordinary shares in issue for the period Diluted weighted average number of ordinary shares in issue for the period (vi) Number of ordinary shares in issue at the end of the period Notes: (i) The figures in this column are extracted from the published audited annual financial results of the Group for the 12 months ended 30 June (ii) The figures in this column are based on the figures set out in the previous column, having adjusted for the effects of the Sephaku Fluoride distribution and having taken into account the effects of the Sephaku Fluoride subscription agreement. 24

27 (iii) The figures in this column reflect the percentage change from the audited results of the Group presented in the first column and the pro forma figures set out in the second column. (iv) For purposes of loss, headline loss and diluted earnings and headline loss per Sephaku Holdings share, it was assumed that the Sephaku Fluoride subscription agreement, and the Sephaku Fluoride distribution were implemented on 1 July (v) For purposes of net asset value and net tangible asset value per Sephaku Holdings share, it was assumed that the Sephaku Fluoride subscription agreement and the Sephaku Fluoride distribution were implemented on 30 June (vi) The diluted earnings and diluted headline earnings per Sephaku Holdings share and the diluted weighted average number of Sephaku Holdings shares in issue reflect the issue of Sephaku Holdings shares in respect of all issued share options. The details of the unaudited pro forma financial effects of the Sephaku Fluoride distribution on Sephaku Holdings consolidated earnings per share (basic and diluted), headline loss per share (basic and diluted), net asset value per share and net tangible asset value per share are set out in Annexure 4 to this circular. The independent reporting accountants report in regard thereto is set out in Annexure 5 to this circular. The independent reporting accountants have provided confirmation to the JSE that they have reviewed this circular and that the content hereof is not contradictory to any of the information contained in any of their reports. 8.3 Material loans The only material loan to the Sephaku Group is the Nokeng Holdings loan which was advanced to Sephaku Fluoride in August 2011 for purposes of developing the Nokeng Fluorspar Project as well as the downstream beneficiation production facilities comprising sulphuric acid, hydrogen fluoride and aluminium fluoride plants. This loan is in an amount of US$10 million, is unsecured and is repayable either in Sephaku Fluoride shares on 31 March 2012, subject to the Sephaku Fluoride distribution having been implemented (or become unconditional) by that date, or by 30 April 2012 in cash. The number of Sephaku Fluoride shares to be issued in settlement of the Nokeng Holdings loan is equal to between 10% and 15% of the issued share capital of Sephaku Fluoride, subject to certain investment criteria i.e. Nokeng Holdings will hold a 10% to 15% interest in Sephaku Fluoride subsequent to the implementation of the Sephaku Fluoride distribution. If the loan is settled in Sephaku Fluoride shares, no interest will be payable but, if it is settled in cash, it will bear interest at LIBOR plus 1% from the date it was advanced. Sephaku Fluoride does not currently have adequate cash resources to settle the Nokeng Holdings loan in cash. 9. amendment to the sephaku holdings share scheme The Sephaku Holdings share scheme currently allows for participation in the scheme by service providers to the Sephaku Group (where service providers are defined in the scheme as officers, directors, employees and consultants of, or to, the Group, present and future, provided that a consultant shall only be a service provider where such person provides services for an initial, renewable or extended period of twelve (12) months or more) and the Group is defined as the company and its subsidiary companies from time to time. The board wishes to extend participation in the scheme to service providers to the company s associates, with the specific aim of affording service providers to Sephaku Cement the opportunity to participate in the scheme. In terms of the JSE Listings Requirements, such an amendment requires the approval of shareholders. The relevant ordinary resolution relating to such an amendment is set out in the notice of meeting which accompanies this circular. 25

28 10. share capital of sephaku holdings The authorised and issued share capital of Sephaku Holdings at the last practicable date is set out below: Authorised ordinary shares with no par value Issued ordinary shares with no par value Stated capital R There are no shares held in treasury. 11. Major shareholders Insofar as is known to Sephaku Holdings, the major shareholders of the company, other than directors which, as at the last practicable date, were beneficially interested in, directly or indirectly, 5% or more of the issued share capital of the company, are set out below: Shareholder number of Sephaku Holdings shares Percentage beneficially held shareholding Safika Resources % Mandra Materials % % In addition, at the last practicable date, the following directors were beneficially interested in, directly or indirectly, 5% or more of the issued share capital of the company: Shareholder number of Sephaku Holdings shares Percentage beneficially held shareholding R de Bruin % D Twist % Lelau Mohuba Trust % % 12. Change in controlling shareholders Sephaku Holdings has never had a controlling shareholder. There has been no change in the controlling shareholder of the subsidiaries of the Sephaku Group after such subsidiaries became subsidiaries of either Sephaku Holdings itself or of another subsidiary of Sephaku Holdings. 13. Material agreements Details of the material agreements and contracts entered into by Sephaku Holdings and its subsidiaries during the two years prior to the date of this circular are set out below: (a) the loan agreement between Nokeng Holdings and Sephaku Fluoride, dated 30 August 2011, as amended on 11 December 2011, in terms of which Nokeng Holdings provided a loan of US$10 million to Sephaku Fluoride in August The loan may be settled through the issue of Sephaku Fluoride shares such that Nokeng Holdings will hold between 10% and 15% in Sephaku Fluoride after such settlement. The settlement of the Nokeng Holdings loan in shares may only take place after the 26

29 Sephaku Fluoride distribution has been implemented/become unconditional. The deadline for such settlement is 31 March Should the Sephaku Fluoride distribution fail to be implemented by 31 March 2012, Nokeng Holdings is entitled to call for the settlement of this loan in cash; (b) the Twist and De Bruin warrant and call option agreements, dated 30 August 2011 and amended on 27 September 2011, between Dr David Twist and Mr Rudolph De Bruin, respectively, and Sephaku Fluoride. In terms of these agreements, upon the raising of additional capital for the Nokeng Fluorspar Project s mine and concentrator, and subject to the approval of the shareholders of Sephaku Fluoride, Dr Twist and Mr De Bruin are each entitled to receive additional shares in Sephaku Fluoride, at a price of R0.01 per share, by way of the exercise of warrants. The warrants entitle Dr Twist and Mr De Bruin to Sephaku Fluoride shares for every additional US$1 million raised. In addition, should Nokeng Holdings fail to achieve an internal rate of return of 30% or higher by the earlier of 31 December 2015 or six months after Sephaku Fluoride s Nokeng operations reach full production, and again subject to shareholder approval, Dr Twist and Mr De Bruin are each entitled in terms of call options to receive additional shares in Sephaku Fluoride such that they are returned to their original effective shareholding in Sephaku Fluoride as at the original settlement of the Nokeng Holdings loan (such shareholding being secured as a result of the receipt of their entitlements to Sephaku Fluoride shares in terms of the Sephaku Fluoride distribution). The maximum aggregate number of shares receivable by each of Dr Twist and Mr De Bruin in terms of the exercise of both the warrants and the call options is limited to 5 million Sephaku Fluoride shares; (c) the Sephaku Fluoride subscription agreement as described in paragraph above; (d) the agreement between Sephaku Cement and Sinoma International, dated 27 March 2009, for the design and construction of the plants relating to the Aganang Project and the Delmas Project. The total contract price is fixed at US$ million, of which US$ million is still outstanding. Construction of the plants will be completed on a turnkey basis and is expected to be completed in the third quarter of The agreement comprises three components an onshore agreement, an offshore agreement and a bridging agreement. The onshore agreement pertains to all design and construction work to be performed in South Africa, whereas the offshore agreement relates to all work to be performed outside of South Africa. The bridging agreement is the overarching agreement which determines that the scope of services under each of the other agreements will be equivalent and shall together constitute a single, integrated scope of service; (e) the Incubex sale agreement; (f) the Dangote subscription agreement; (g) the Sephaku Cement relationship agreement; and (h) the Sephaku Lime agreements. The only contract referred to above which relates to the acquisition of securities in an unlisted subsidiary, where all the securities in such subsidiary were not acquired, is the Sephaku Lime agreement where Golden Pond has retained a 20% interest in Sephaku Lime. No-one associated with the Sephaku Holdings or its subsidiaries holds an interest in Golden Pond. Other than as set out above, the Sephaku Group has not entered into any material contracts, either verbally or in writing, otherwise than in the ordinary course of the business carried on by Sephaku Holdings or any of its subsidiaries, during the two years prior to the date of this circular or which contains an obligation or settlement that is material to Sephaku Holdings or its subsidiaries at the date of this circular. 14. Litigation statement There are no legal or arbitration proceedings, including any proceedings that are pending or threatened of which Sephaku Holdings and its subsidiaries is aware, that may have, or have had in the previous 12 months, a material effect on the financial position of Sephaku Holdings and its subsidiaries. 27

30 15. Material changes No material changes in either the financial or trading position of Sephaku Holdings or any of the Sephaku Group s subsidiaries has occurred since the end of the last financial period for which annual financial statements were released namely the year ended 30 June Experts consents The reporting accountants and auditors and the independent competent person have each consented in writing to act in the capacity stated, to their names being included in this circular and to the issue of this circular with the inclusion of their reports in the form and context in which they appear and have not withdrawn their consents prior to the publication of this circular. 17. directors opinion and recommendation The directors are of the opinion that the implementation of the Sephaku Fluoride distribution will be beneficial to shareholders and recommend that shareholders vote in favour of all of the ordinary resolutions relating to the Sephaku Fluoride distribution set out in the notice of general meeting which forms part of this circular. The directors are also of the view that it is appropriate to amend the Sephaku Holdings share scheme to allow participation in the scheme by service providers to associates of the Group. All of the directors who hold shares in Sephaku Holdings will be voting in favour of all such ordinary resolutions. 18. directors responsibility statement The directors of Sephaku Holdings, whose names are given in paragraph 7 on page 23 of this circular, accept, collectively and individually, full responsibility for the accuracy of the information given in this circular and certify that, to the best of their knowledge and belief, there are no facts that have been omitted which would make any statement false or misleading and that all reasonable enquiries to ascertain such facts have been made and that this circular contains all information required by the JSE Listings Requirements. 19. EXPENSES The estimated expenses relating to the Sephaku Fluoride distribution, exclusive of Value-Added Tax, are as follows: Rand JSE inspection fees Fees payable to QuestCo as corporate advisor Fees payable to QuestCo as sponsor Fees payable to Venmyn as the independent competent person Fees payable to PKF (Jhb) Inc. as the reporting accountants of Sephaku Holdings Fees payable to Computershare as the transfer secretaries Expenses related to the publication of announcements and the printing, publishing and distribution of this circular

31 The estimated preliminary expenses incurred in the previous three years as they relate to the listing and the Dangote issue, exclusive of Value-Added Tax, were as follows: Rand JSE inspection fees JSE listing fees Fees paid to QuestCo as corporate advisor Fees paid to Venmyn as the independent Competent Person Fees paid to Cliffe Dekker as attorneys Fees paid to PSG Capital and Minxcon as the independent expert Fees paid to PKF (Jhb) Inc. as the reporting accountants of Sephaku Holdings Fees paid to the transfer secretaries Expenses related to publication of announcements and the printing, publishing and distribution of the circular The abovementioned estimated expenses were written-off against the respective company s share premium to the extent permissible by the Companies Act, 61 of 1973 (and as amended at that date). 20. GENERAL MEETING OF SHAREHOLDERS A general meeting of Sephaku Holdings shareholders will be held at 10:00 on Wednesday, 7 March 2012 in the Ovals boardroom, Centurion Lake Hotel, 1001 Lenchen Avenue North, Centurion, Pretoria for the purpose of considering and if deemed fit, passing, with or without modification, the necessary ordinary resolutions to approve the Sephaku Fluoride distribution and the amendment to the Sephaku Holdings share scheme. A notice convening the general meeting is enclosed with, and forms part of, this circular. A form of proxy (pink) for use by certificated shareholders and own name registered dematerialised shareholders who are unable to attend the general meeting, but who wish to be represented thereat, is attached to and forms part of this circular. Dematerialised shareholders (other than own name registered dematerialised shareholders) who wish to attend the general meeting may do so and they are no longer required to secure a letter of representation. Alternatively, such shareholders must advise their CSDP or broker as to what action they wish to take in respect of voting at the general meeting. 21. documents available for inspection Copies of the following documents will be available for inspection at the registered office of Sephaku Holdings and at the office of QuestCo, at any time during normal business hours from 7 February 2012 to 7 March 2012: the memoranda of incorporation of Sephaku Holdings and its subsidiary companies; the signed reports of the reporting accountants, the texts of which are set out in Annexures 3 and 5 to this circular, with regard to the historical financial information and pro forma financial information of Sephaku Fluoride and the pro forma financial information of Sephaku Holdings relating to the Sephaku Fluoride distribution; the Sephaku Holdings share scheme; the service agreement with Mr Pieter Fourie referred to in Annexure 6; the agreements referred to under Material agreements and commitments as set out in paragraph 13 above; the audited financial history of Sephaku Holdings for the year ended 30 June 2011, the 16 months ended 30 June 2010 and the financial year ended on the last day of February 2009 and the audited financial history of Sephaku Fluoride for the year ended 30 June 2011 and the reviewed financial history for the 16 months ended 30 June 2010 and the financial year ended on 28 February 2009; and the CPR on the Nokeng Fluoride Project prepared by Venmyn. 29

32 Copies of this circular may be obtained, for information purposes, during business hours from 7 February 2012 to 7 March 2012 from the offices of: Sephaku Holdings, at its registered office as set out in the Corporate Information section; QuestCo, at its address as set out in the Corporate Information section; and Computershare, at its address as set out in the Corporate Information section. Signed on behalf of all of the directors of Sephaku Holdings in terms of powers of attorney granted to him. Lelau Mohuba who warrants that he is duly authorised thereto. Centurion 7 February

33 Annexure 1 executive summary of competent person s report on the nokeng project 31

34 32

35 33

36 34

37 35

38 36

39 37

40 38

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44 42

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46 44

47 45

48 Annexure 2 historical and pro forma FINANCIAL INFORMATION RELATING TO sephaku fluoride This annexure contains: a report on the historical financial information relating to Sephaku Fluoride; and pro forma financial information showing the effects of the implementation of the Sephaku Fluoride subscription agreement on Sephaku Fluoride. Report on the historical financial information relating to Sephaku Fluoride Basis of preparation The statements of comprehensive income, statements of financial position, statements of changes in equity, statements of cash flows and the related notes for the year ended 30 June 2011, 16 months ended 30 June 2010 and the year ended 28 February 2009 have been derived from the financial statements of Sephaku Fluoride and have been prepared in the manner required by the Companies Act and in accordance with IFRS. The financial statements for Sephaku Fluoride for the year ended 30 June 2011 have been audited and the financial statements for the periods ended 30 June 2010 and 28 February 2009 have been reviewed. The directors are responsible for the maintenance of adequate accounting records and the preparation and integrity of the financial statements and related information. There have been no changes in the nature of business of Sephaku Fluoride nor have there been any material facts or circumstances that have occurred between 30 June 2011 and the date of issue of this circular, other than as disclosed in the historical financial information. All references to the group in this annexure refer to the Sephaku Fluoride group and similarly references to the company refer to Sephaku Fluoride. EXTRACTS FROM DIRECTORS REPORT AND COMMENTARY 1. Review of activities Main business and operations The group is engaged in mining and development and operates principally in South Africa. The operating results and state of affairs of the company are fully set out in the attached financial statements and do not in our opinion require any further comment. Net loss of the group was R (2010: R loss) (2009: R loss) after taxation of R (2010: R ) (2009: R ). 2. Going concern We draw attention to the fact that, at 30 June 2011, the group had accumulated losses of R and that the group s total liabilities exceed its assets by R The financial statements have been prepared on the basis of accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will occur in the ordinary course of business. The ability of the group to continue as a going concern is dependent on a number of factors. The most significant of these is that the directors continue to procure funding for the ongoing operations for the group and that the subordination agreement referred to in note 8 of the financial statements will remain in force for so long as it takes to restore the solvency of the company. 46

49 3. Events after the reporting period On 12 October 2010, Ulipac (Pty) Limited ( Ulipac ) (a wholly-owned subsidiary of Sephaku Fluoride) and Umbono Fluorspar Wallmannsthal (Pty) Limited ( Umbono ) entered into an agreement whereby Ulipac acquired the prospecting right for the fluorspar deposit on the Wallmannsthal Agricultural Holdings and the associated property from Umbono. This agreement was subject to the consent of the Minister of Mineral Resources in terms of section 11 of the MPRDA, which was obtained and executed on 8 August The purchase price of R15 million for the prospecting right and property will be settled by Ulipac, as follows: R6 million cash payable in monthly instalments of R1 million from 1 September 2011 to 1 February The balance of the cash portion shall accrue interest at the prime lending rate, which will be repaid with the final instalment; and the issue of 2.5 million listed shares in Sephaku Holdings at R3.60 per share. One-third of the shares are subject to an 18-month restriction period and two-thirds of the shares are subject to a 24-month restriction period, in that Umbono will not be able to sell the restricted shares during the restriction period. Subsequent to year-end, Sephaku Fluoride received a loan of US$ which may be converted into an equity participation of between 10% and 15%, subject to certain investment criteria. The conversion will take place at the earlier of the distribution of Sephaku Fluoride shares to Sephaku Holdings shareholders as a dividend in specie and 31 March In the event that such distribution has not taken place by 31 March 2012, the loan will be settled in cash together with accrued interest. On 30 August 2011, and thereafter amended on 27 September 2011, an agreement was entered into between Dr David Twist and Mr Rudolph De Bruin, respectively, and Sephaku Fluoride. In terms of this agreement, upon the raising of additional capital for the Nokeng Fluorspar Project s mine and concentrator, and subject to shareholder approval, Dr Twist and Mr De Bruin are each entitled to receive additional shares in Sephaku Fluoride, at a price of R0.01 per share, by way of the exercise of warrants. The warrants entitle Dr Twist and Mr De Bruin to Sephaku Fluoride shares for every additional US$1 million raised. In addition, should Nokeng Holdings fail to achieve an internal rate of return of 30% or higher by the earlier of 31 December 2015 or six months after Sephaku Fluoride s Nokeng operations reach full production, and again subject to shareholder approval, Dr Twist and Mr De Bruin are each entitled in terms of call options to receive additional shares in Sephaku Fluoride such that they are returned to their original effective shareholding in Sephaku Fluoride as at the original settlement of the Nokeng Holdings loan (such shareholding being secured as a result of the receipt of their entitlements to Sephaku Fluoride shares in terms of the Sephaku Fluoride distribution). The maximum aggregate number of shares receivable by each of Dr Twist and Mr De Bruin in terms of the exercise of both the warrants and the call options is limited to 5 million Sephaku Fluoride shares. The directors are not aware of any other matter or circumstance arising since the end of the 2011 financial year that could materially affect the financial statements. 4. Accounting policies Refer to note 2 for new standards and interpretations adopted in the 2011 financial year. There were no changes to the accounting policies during the year ended 30 June 2011, the 16 months ended 30 June 2010 and the year ended 28 February Authorised and issued share capital There were no changes in the issued share capital of the group during the year ended 30 June 2011, 16 months ended 30 June 2010 and year ended 28 February In the 2010 financial year, authorised share capital of R1 000, divided into ordinary shares of R0.001 each was increased to R , divided into ordinary shares of R0.001 each. 47

50 6. Non current assets Details of major changes in the nature of the non current assets of the group during the period were as follows: Additions to intangible assets amounted to R (2010: R ) (2009: R ). Additions to property, plant and equipment amounted to R (2010: R ) (2009: R ). There were no changes in the nature of the non current assets of the group or in the policy relating to the use of the non current assets. 7. Dividends No dividends were declared or paid to shareholders during the year ended 30 June 2011, 16 months ended 30 June 2010 and year ended 28 February Directors The directors of the company at the end of the 2011 financial year were as follows: Name changes L Mohuba N R Crafford Lazarus Appointed 24 May 2010 R R Matjiu Appointed 24 May 2010 L A van den Heever Appointed 31 August 2009 D Twist Appointed 26 August 2010 J W Wessels Appointed 26 August 2010 Subsequent to 30 June 2011, Mr Alan Smith was appointed as a director of Sephaku Fluoride. 9. Secretary The full name of the secretary of the company is Cross Company Management (Pty) Ltd of: Business address* 1st Floor Hennops House Riverside Office Park 1303 Heuwel Avenue Centurion 0157 Postal address PO Box 7651 Centurion 0046 * The current registered address of Cross Company Management (Pty) Ltd is set out below. However, this is expected to change to the address set out above subsequent to the implementation of the Sephaku Fluoride distribution: Suite 4A Manhattan Office Park 16 Pieter Road Highveld Techno Park Centurion, 0169 (PO Box 68149, Highveld,0169) 10. Holding company The group s holding company is Sephaku Holdings. 48

51 11. Interest in subsidiaries Full name of subsidiary net loss after tax Nokeng Fluorspar Mine (Pty) Ltd R Ulipac (Pty) Ltd R Details of the company s investment in subsidiaries are set out in note Auditors PKF (Gauteng) Inc. (formerly PKF (Pta) Inc.) was in office as the auditors of the Sephaku Holdings group in accordance with the Companies Act for the current reporting period. 13. Change in financial year-end At a shareholders meeting held on 29 January 2009, it was decided to change the financial year-end of the group from 28 February to 30 June. This decision was implemented for the 2010 financial year. The financial year-end of the group was changed to coincide with the financial year-end of the holding company, Sephaku Holdings. 49

52 Statements of financial position 30 June 30 June 28 February notes R R R Assets Non current assets Property, plant and equipment Goodwill Intangible assets Investments in associates Deposits for rehabilitation Current assets Trade and other receivables Cash and cash equivalents Total assets Equity and Liabilities Equity Share capital Accumulated loss ( ) ( ) ( ) ( ) ( ) ( ) Liabilities Current liabilities Loans from group companies Loans from shareholders Trade and other payables Total equity and liabilities Net asset value per share (cents) 25 ( ) ( ) (490.26) Tangible net asset value per share (cents) 25 ( ) ( ) ( ) 50

53 Statements of comprehensive income Year 16 months Year ended ended ended 30 June 30 June 28 February notes R R R Operating expenses ( ) ( ) ( ) Operating loss 16 ( ) ( ) ( ) Investment revenue Income from equity accounted investments Finance costs 20 ( ) ( ) Loss for the period ( ) ( ) ( ) Other comprehensive income Total comprehensive loss ( ) ( ) ( ) Total comprehensive loss attributable to: Equity holders of the parent ( ) ( ) ( ) Non-controlling interest ( ) ( ) ( ) Basic loss per share (cents) 25 ( ) ( ) (144.54) Diluted loss per share (cents) 25 ( ) ( ) (144.54) Headline loss per share (cents) 25 ( ) ( ) (144.54) Diluted headline loss per share (cents) 25 ( ) ( ) (144.54) Statements of changes in equity share capital Accumulated Total equity loss R R R Balance at 1 March ( ) ( ) Changes in equity Total comprehensive loss for the period ( ) ( ) Total changes ( ) ( ) Balance at 30 June ( ) ( ) Changes in equity Total comprehensive loss for the period ( ) ( ) Total changes ( ) ( ) Balance at 30 June ( ) ( ) 51

54 Statements of cash flows Year 16 months Year ended ended ended 30 June 30 June 28 February notes R R R Cash flows from operating activities Cash (used in)/generated from operations 21 ( ) Interest income Finance costs ( ) ( ) Net cash from operating activities ( ) Cash flows from investing activities Purchase of property, plant and equipment 3 ( ) ( ) Purchase of other intangible assets 5 ( ) ( ) ( ) Business combinations (52) Purchase of deposits for rehabilitation ( ) (8 888) Net cash from investing activities ( ) ( ) ( ) Cash flows from financing activities Proceeds from other financial liabilities Repayment of other financial liabilities (26 663) Movements in shareholders loan Net movements in loans with group companies Net cash from financing activities Total cash and cash equivalents movements for the period Cash and cash equivalents at the beginning of the period Total cash and cash equivalents at end of the period Notes to the financial statements 1. Accounting Policies The audited annual financial statements have been prepared in accordance with International Financial Reporting Standards, the AC 500 statements and interpretations and the Companies Act of South Africa. The financial statements have been prepared on the historical cost basis, except for the measurement of property at revalued amounts, and incorporate the principal accounting policies set out below. They are presented in South African Rand. These accounting policies are consistent with the previous period. 1.1 Consolidation Basis of consolidation The consolidated audited annual financial statements incorporate the audited annual financial statements of the company and all entities, including special purpose entities, which are controlled by the company. Control exists when the company has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. 52

55 The results of subsidiaries are included in the consolidated audited annual financial statements from the effective date of acquisition to the effective date of disposal. Adjustments are made when necessary to the audited annual financial statements of subsidiaries to bring their accounting policies in line with those of the group. All intra group transactions, balances, income and expenses are eliminated in full on consolidation. Non controlling interests in the net assets of consolidated subsidiaries are identified and recognised separately from the group s interest therein, and are recognised within equity. Losses of subsidiaries attributable to non controlling interests are allocated to the non controlling interest even if this results in a debit balance being recognised for non controlling interest. Transactions which result in changes in ownership levels, where the group has control of the subsidiary both before and after the transaction are regarded as equity transactions and are recognised directly in the statement of changes in equity. The difference between the fair value of consideration paid or received and the movement in non controlling interest for such transactions is recognised in equity attributable to the owners of the parent. Business combinations The group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets given, liabilities incurred or assumed and equity instruments issued. Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt which are amortised as part of the effective interest and costs to issue equity which are included in equity. The acquiree s identifiable assets, liabilities and contingent liabilities which meet the recognition conditions of IFRS 3: Business Combinations, are recognised at their fair values at acquisition date, except for non current assets (or disposal group) that are classified as held for sale in accordance with IFRS 5: Non current Assets Held For Sale, and discontinued operations, which are recognised at fair value less costs to sell. Non controlling interest arising from a business combination is measured either at their share of the fair value of the assets and liabilities of the acquiree or at fair value. The treatment is not an accounting policy choice but is selected for each individual business combination, and disclosed in the note for business combinations. In cases where the group held a non controlling shareholding in the acquiree prior to obtaining control, that interest is measured to fair value as at acquisition date. The measurement to fair value is included in profit or loss for the period. Where the existing shareholding was classified as an available for sale financial asset, the cumulative fair value adjustments recognised previously in other comprehensive income and accumulated in equity are recognised in profit or loss as a reclassification adjustment. Goodwill is determined as the consideration paid, plus the carrying value of any shareholding held prior to obtaining control, plus non controlling interest and less the fair value of the identifiable assets and liabilities of the acquiree. Goodwill is not amortised but is tested at least annually for impairment. If goodwill is assessed to be impaired, that impairment is not subsequently reversed. Investment in associates An associate is an entity over which the group has significant influence and which is neither a subsidiary nor a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies. An investment in associate is accounted for using the equity method, except when the investment is classified as held-for-sale in accordance with IFRS 5: Non-current Assets Held-For-Sale, and discontinued operations. Under the equity method, investments in associates are carried in the consolidated statement of financial position at cost adjusted for post-acquisition changes in the group s share of net assets of the associate, less any impairment losses. 53

56 The group recognises its share of losses of the associate to the extent of the group s net investment in the associate. The group s share of unrealised intra-company gains are eliminated upon consolidation and the group s share of intra-company losses are eliminated, provided they do not provide evidence that the asset transferred is impaired. The group s share of post-acquisition profits or losses, other comprehensive income and movements in equity of the associate are included in the group s profit or loss, other comprehensive income and equity reserves, respectively. 1.2 Significant judgements and sources of estimation uncertainty In preparing the audited annual financial statements, management is required to make estimates and assumptions that affect the amounts represented in the audited annual financial statements and related disclosures. Use of available information and the application of judgement is inherent in the formation of estimates. Actual results in the future could differ from these estimates which may be material to the audited annual financial statements. Significant judgements include: Trade receivables and other receivables The group assesses its trade receivables and other receivables for impairment at the end of each reporting period. In determining whether an impairment loss should be recorded in profit or loss, the group makes judgements as to whether there is observable data indicating a measurable decrease in the estimated future cash flows from a financial asset. The impairment for trade receivables and other receivables is calculated on a portfolio basis, based on historical loss ratios, adjusted for national and industry specific economic conditions and other indicators present at the reporting date that correlate with defaults on the portfolio. These annual loss ratios are applied to loan balances in the portfolio and scaled to the estimated loss emergence period. Revaluation of property Revaluations of property are performed when there is an indication that the fair value of the property is materially different from the carrying amount. Impairment testing of non financial assets The recoverable amounts of cash generating units and individual assets have been determined based on the higher of value in use calculations and fair values less costs to sell. These calculations require the use of estimates and assumptions. It is reasonably possible that the assumption may change which may then impact our estimations and may then require a material adjustment to the carrying value of goodwill, intangible and tangible assets. The group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. In addition, goodwill is tested at each reporting date for impairment. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of cash flows of other assets and liabilities. If there are indications that impairment may have occurred, estimates are prepared of expected future cash flows for each group of assets. Expected future cash flows used to determine the value in use of non-financial assets are inherently uncertain and could materially change over time. They are significantly affected by a number of factors together with economic factors. Taxation Judgement is required in determining the provision for income taxes due to the complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. 54

57 The group recognises the net future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in the foreseeable future. Assessing the recoverability of deferred income tax assets requires the group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the group to realise the net deferred tax assets recorded at the end of the reporting period could be impacted. Exploration expenses capitalised Exploration and evaluation expenses are those expenses incurred in connection with acquisition of rights to explore, investigate, examine and evaluate an area of mineralisation including related overhead costs. The directors exercise judgement to determine if the costs associated with a specific project must be capitalised against the specific project or written off. Exploration assets are reviewed at reporting date and where the directors consider there to be indicators of impairment, impairment tests will be performed on the capitalised costs and any impairments will be recognised through the statement of comprehensive income. Site restoration cost Provision for future site restoration costs are based on the estimate made of the expenditure needed to settle the present obligation arising. When site restoration occurs on an on going basis during prospecting, the cost of this restoration is included in prospecting expenses and no provision for future restoration costs are required. Estimation of useful life and residual values The charge in respect of periodic depreciation is derived after determining an estimate of an asset s expected useful life and the expected residual value at the end of its life. Increasing an asset s expected life or its residual value would result in a reduced depreciation charge in the consolidated statement of comprehensive income. The useful lives and residual values of group assets are determined by management at the time the asset is acquired and reviewed annually for appropriateness. The lives are based on historical experience with similar assets as well as anticipation of future events which may impact their life. Historically, changes in useful lives and residual values have not resulted in material changes to the group s depreciation charge. 1.3 Property, plant and equipment The cost of an item of property, plant and equipment is recognised as an asset when: it is probable that future economic benefits associated with the item will flow to the company; the cost of the item can be measured reliably. Property, plant and equipment is initially measured at cost. Costs include costs incurred initially to acquire or construct an item of property, plant and equipment and costs incurred subsequently to add to, replace part of, or service it. If a replacement cost is recognised in the carrying amount of an item of property, plant and equipment, the carrying amount of the replaced part is derecognised. The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is located is also included in the cost of property, plant and equipment, where the entity is obligated to incur such expenditure, and where the obligation arises as a result of acquiring the asset or using it for purposes other than the production of inventories. Property, plant and equipment is carried at cost less accumulated depreciation and any impairment losses, except for land, which is carried at revalued amount, being the fair value at the date of revaluation. Revaluations are made with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair value at the end of the reporting period. 55

58 Any increase in an asset s carrying amount, as a result of a revaluation, is recognised to other comprehensive income and accumulated in the revaluation surplus in equity. The increase is recognised in profit or loss to the extent that it reverses a revaluation decrease of the same asset previously recognised in profit or loss. Any decrease in an asset s carrying amount, as a result of impairment, is recognised in profit or loss in the current period. The decrease is recognised in other comprehensive income to the extent of any credit balance existing in the revaluation surplus in respect of that asset. The decrease recognised in other comprehensive income reduces the amount accumulated in the revaluation surplus in equity. The revaluation surplus in equity related to a specific item of property, plant and equipment is transferred directly to retained earnings when the asset is derecognised. Property, plant and equipment are depreciated on the straight-line basis over their expected useful lives to their estimated residual value. The useful lives of items of property, plant and equipment has been assessed as follows: Item Buildings average useful life 20 years The residual value, useful life and depreciation method of each asset are reviewed at the end of each reporting period. If the expectations differ from previous estimates, the change is accounted for as a change in accounting estimate. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item is depreciated separately. The depreciation charge for each period is recognised in profit or loss unless it is included in the carrying amount of another asset. Land is not depreciated. The gain or loss arising from the derecognition of an item of property, plant and equipment is included in profit or loss when the item is derecognised. The gain or loss arising from the derecognition of an item of property, plant and equipment is determined as the difference between the net disposal proceeds, if any, and the carrying amount of the item. 1.4 Intangible assets An intangible asset is recognised when: it is probable that the expected future economic benefits that are attributable to the asset will flow to the entity; the cost of the asset can be measured reliably. Intangible assets are initially recognised at cost. Intangible assets are carried at cost less any accumulated amortisation and any impairment losses. Exploration assets are carried at cost less any impairment losses. All costs, including administration and other general overhead costs directly associated with the specific project are capitalised. The directors evaluate each project at each period-end to determine if the carrying value should be written off. In determining whether expenditure meet the criteria to be capitalised, the directors use information from several sources, depending on the level of exploration. Purchased exploration and evaluation assets are recognised at the cost of acquisition or at the fair value if purchased as part of a business combination. Exploration assets are not amortised as it will only be available for use once transferred to the development cost of the project. An intangible asset is regarded as having an indefinite useful life when, based on all relevant factors, there is no foreseeable limit to the period over which the asset is expected to generate net cash inflows. Amortisation is not provided for these intangible assets, but they are tested for impairment annually and whenever there is an indication that the asset may be impaired. For all other intangible assets amortisation is provided on a straight-line basis over their useful life. 56

59 When the technical and commercial feasibility of a project has been established, the relevant exploration assets are transferred to development costs. No further exploration costs for the project will be capitalised. The costs transferred to development costs will be amortised over the life of the project based on the expected flow of economic resources associated with the project. The amortisation period and the amortisation method for intangible assets are reviewed every period end. Amortisation is provided to write down the intangible assets, on a straight-line basis, to their residual values, is as follows: Item Exploration assets Useful life Not amortised 1.5 Investments in subsidiaries Company audited annual financial statements In the company s separate audited annual financial statements, investments in subsidiaries are carried at cost less any accumulated impairment. The cost of an investment in a subsidiary is the aggregate of the fair value, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the company. An adjustment to the cost of a business combination contingent on future events is included in the cost of the combination if the adjustment is probable and can be measured reliably. 1.6 Investment in joint ventures Company audited annual financial statements An investment in a joint venture is carried at cost less any accumulated impairment. In respect of its interests in jointly controlled operations, the company recognises in its audited annual financial statements: the assets that it controls and the liabilities that it incurs; and the expenses that it incurs and its share of the income that it earns from the sale of goods or services by the joint venture. In respect of its interest in jointly controlled assets, the company recognises in its audited annual financial statements: its share of the jointly controlled assets, classified according to the nature of the assets; any liabilities that it has incurred; its share of any liabilities incurred jointly with the other venturers in relation to the joint venture; any income from the sale or use of its share of the output of the joint venture, together with its share of any expenses incurred by the joint venture; and any expenses that it has incurred in respect of its interest in the joint venture. 1.7 Financial instruments Classification The group classifies financial assets and financial liabilities into the following categories: Loans and receivables. Financial liabilities measured at amortised cost. Initial recognition and measurement Financial instruments are recognised initially when the group becomes a party to the contractual provisions of the instruments. The group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability or an equity instrument in accordance with the substance of the contractual arrangement. 57

60 Financial instruments are measured initially at fair value and deposits for restoration are carried at amortised cost. For financial instruments which are not at fair value through profit or loss, transaction costs are included in the initial measurement of the instrument. Transaction costs on financial instruments at fair value through profit or loss are recognised in profit or loss. Subsequent measurement Loans and receivables are subsequently measured at amortised cost, using the effective interest method, less accumulated impairment losses. Gains and losses arising from changes in fair value are recognised in other comprehensive income and accumulated in equity until the asset is disposed of or determined to be impaired. Financial liabilities (loans payable, trade and other payables and bank overdrafts) at amortised cost are subsequently measured at amortised cost, using the effective interest method. No discounting is applied for instruments at amortised cost where the effects of the time value of money are not considered to be material. Fair value determination The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active (and for unlisted securities), the group establishes fair value by using valuation techniques. These include the use of recent arm s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models making maximum use of market inputs and relying as little as possible on entity specific inputs. Impairment of financial assets At each reporting date the group assesses all financial assets to determine whether there is objective evidence that a financial asset or group of financial assets has been impaired. Impairment losses are recognised in profit or loss. Derecognition Financial assets are derecognised if the group s contractual rights to the cash flows from the financial assets expire or if the group transfers the financial assets to another party without retaining control or substantially all risks and rewards of the asset. Financial liabilities are derecognised if the group s obligations specified in the contract expire or are discharged or cancelled. Loans to/(from) group companies These include loans to and from fellow subsidiaries and subsidiaries and are recognised initially at fair value plus direct transaction costs. Loans to group companies are classified as loans and receivables. Loans from group companies are classified as financial liabilities measured at amortised cost. Loans to shareholders, directors, managers and employees These financial assets are classified as loans and receivables and are subsequently measured at amortised cost. Trade and other receivables Trade receivables are measured at initial recognition at fair value, and are subsequently measured at amortised cost using the effective interest rate method. Transaction costs are included in the initial value recognised. Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 180 days overdue) are considered indicators that 58

61 the trade receivable is impaired. The allowance recognised is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows discounted at the effective interest rate computed at initial recognition. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in profit or loss within operating expenses. When a trade receivable is uncollectable, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against operating expenses in profit or loss. Trade and other receivables are classified as loans and receivables. Trade and other payables Trade payables are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest rate method. Transaction costs are included in the initial value recognised. Cash and cash equivalents Cash and cash equivalents comprise cash on hand and demand deposits, and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. These are initially and subsequently recorded at fair value. 1.8 Tax Current tax assets and liabilities Current tax for current and prior periods is, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset. Current tax liabilities/(assets) for the current and prior periods are measured at the amount expected to be paid to/(recovered from) the tax authorities, using the tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets and liabilities A deferred tax liability is recognised for all taxable temporary differences, except to the extent that the deferred tax liability arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction, affects neither accounting profit/(loss) nor taxable profit/(tax loss). A deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. A deferred tax asset is not recognised when it arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction, affects neither accounting profit/(loss) nor taxable profit/(tax loss). Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Tax expenses Current and deferred taxes are recognised as income or an expense and included in profit or loss for the period, except to the extent that the tax arises from: a transaction or event which is recognised, in the same or a different period, to other comprehensive income; a transaction or event which is recognised, in the same or a different period, directly in equity; or business combination. Current tax and deferred taxes are charged or credited in other comprehensive income if the tax relates to items that are credited or charged, in the same or a different period, in other comprehensive income. Current tax and deferred taxes are charged or credited directly to equity if the tax relates to items that are credited or charged, in the same or a different period, directly in equity. 59

62 1.9 Impairment of assets The group assesses at each end of the reporting period whether there is any indication that an asset may be impaired. If any such indication exists, the group estimates the recoverable amount of the asset. Irrespective of whether there is any indication of impairment, the group also: tests intangible assets with an indefinite useful life or intangible assets not yet available for use for impairment at least annually by comparing its carrying amount with its recoverable amount. This impairment test is performed during the annual period and at the same time every period; tests goodwill acquired in a business combination for impairment at least annually. If there is any indication that an asset may be impaired, the recoverable amount is estimated for the individual asset. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable amount of the cash generating unit to which the asset belongs is determined. The recoverable amount of an asset or a cash generating unit is the higher of its fair value less costs to sell and its value in use. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. That reduction is an impairment loss. An impairment loss of assets carried at cost less any accumulated depreciation or amortisation is recognised immediately in profit or loss. Any impairment loss of a revalued asset is treated as a revaluation decrease. Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash generating units, or groups of cash generating units, that are expected to benefit from the synergies of the combination. An impairment loss is recognised for cash generating units if the recoverable amount of the unit is less than the carrying amount of the units. The impairment loss is allocated to reduce the carrying amount of the assets of the unit in the following order: first, to reduce the carrying amount of any goodwill allocated to the cash generating unit; and then, to the other assets of the unit, pro rata on the basis of the carrying amount of each asset in the unit. An entity assesses at each reporting date whether there is any indication that an impairment loss recognised in prior periods for assets other than goodwill may no longer exist or may have decreased. If any such indication exists, the recoverable amounts of those assets are estimated. The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset in prior periods. A reversal of an impairment loss of assets carried at cost less accumulated depreciation or amortisation other than goodwill is recognised immediately in profit or loss. Any reversal of an impairment loss of a revalued asset is treated as a revaluation increase Share capital and equity An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. 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 Employee benefits Short term employee benefits The cost of short term employee benefits (those payable within 12 months after the service is rendered, such as paid vacation leave and sick leave, bonuses, and non monetary benefits such as medical care), are recognised in the period in which the service is rendered and are not discounted. 60

63 Payments to defined contribution plans, medical and pension funds are recognised as an expense when employees have rendered service entitling them to the contributions. The expected cost of compensated absences is recognised as an expense as the employees render services that increase their entitlement or, in the case of non accumulating absences, when the absence occurs. The expected cost of profit-sharing and bonus payments is recognised as an expense when there is a legal or constructive obligation to make such payments as a result of past performance Provisions and contingencies Provisions are recognised when: the group has a present obligation 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; a reliable estimate can be made of the obligation. The amount of a provision is the present value of the expenditure expected to be required to settle the obligation. Where some or all of the expenditure required to settle a provision is expected to be reimbursed by another party, the reimbursement shall be recognised when, and only when, it is virtually certain that reimbursement will be received if the entity settles the obligation. The reimbursement shall be treated as a separate asset. The amount recognised for the reimbursement shall not exceed the amount of the provision. Provisions are not recognised for future operating losses. If an entity has a contract that is onerous, the present obligation under the contract shall be recognised and measured as a provision. A constructive obligation to restructure arises only when an entity: has a detailed formal plan for the restructuring, identifying at least: the business or part of a business concerned; the principal locations affected; the location, function, and approximate number of employees who will be compensated for terminating their services; the expenditures that will be undertaken; and when the plan will be implemented; has raised a valid expectation in those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it. 2. New Standards and Interpretations May 2008 Annual Improvements to IFRS s: Amendments to IFRS 5: Non current Assets Held for Sale and Discontinued Operations The amendment clarifies that assets and liabilities of a subsidiary should be classified as held for sale if the parent is committed to a plan involving loss of control of the subsidiary, regardless of whether the entity will retain a non controlling interest after the sale. The effective date of the amendment is for years beginning on or after 1 July The group has adopted the amendment for the first time in the 2011 audited annual financial statements. The impact of the amendment is not material. IFRIC 17: Distribution of non-cash Assets to Owners The interpretation provides guidance on accounting for non reciprocal distributions of non cash assets to owners, or distributions where owners have a choice between a cash or non cash distribution. The distribution is to be recognised as a dividend on the date that the dividend has been appropriately authorised and is no longer subject to the discretion of the entity, and measured at the fair value of the assets to be distributed. The carrying amount of the dividend payable shall be reviewed at each reporting 61

64 date and on settlement date to ensure it reflects fair value. Changes in measurement are recognised in equity as adjustments to the amount of the distribution. Additional disclosures are required. The effective date of the interpretation is for years beginning on or after 1 July The group has adopted the interpretation for the first time in the 2011 audited annual financial statements. The impact of the interpretation is not material Annual Improvements Project: Amendments to IFRS 2: Share based Payment The amendment excludes common control transactions and the formation of joint ventures from the scope of IFRS 2 (AC 139): Share based Payment. The effective date of the amendment is for years beginning on or after 1 July The group has adopted the amendment for the first time in the 2011 audited annual financial statements. The impact of the amendment is not material Annual Improvements Project: Amendments to IFRS 5: Non current Assets Held for Sale and Discontinued Operations The amendment specifies that disclosures of other Standards do not apply to non current assets (or disposal groups) held for sale or discontinued operations, unless specifically required by other Standards or for measurement disclosures of assets and liabilities in a disposal group which are outside the measurement requirements of IFRS 5 (AC 142): Non current Assets Held for Sale and Discontinued Operations. The effective date of the amendment is for years beginning on or after 1 January The group has adopted the amendment for the first time in the 2011 audited annual financial statements. The impact of the amendment is not material Annual Improvements Project: Amendments to IFRS 8: Operating Segments Entities are only required to report segment assets if they are regularly reported to the chief operating decision-maker. The effective date of the amendment is for years beginning on or after 1 January The group has adopted the amendment for the first time in the 2011 audited annual financial statements. The impact of the amendment is not material Annual Improvements Project: Amendments to IAS 1: Presentation of Financial Statements The amendment clarifies that a liability which could, at the option of the counterparty, result in its settlement by the issue equity instruments, does not affect its classification as current or non current. The effective date of the amendment is for years beginning on or after 1 January The group has adopted the amendment for the first time in the 2011 audited annual financial statements. The impact of the amendment is not material Annual Improvements Project: Amendments to IAS 7: Statement of Cash Flows The amendment provides that expenditure may only be classified as cash flows from investing activities if it resulted in the recognition of an asset on the statement of financial position. The effective date of the amendment is for years beginning on or after 1 January The group has adopted the amendment for the first time in the 2011 audited annual financial statements. The impact of the amendment is not material Annual Improvements Project: Amendments to IAS 38 Intangible Assets The amendment provides guidance on the measurement of intangible assets acquired in a business combination. The effective date of the amendment is for years beginning on or after 1 July The group has adopted the amendment for the first time in the 2011 audited annual financial statements. The impact of the amendment is not material. 62

65 Amendment to IFRS 2: Group Cash settled Share based Payment Transactions The amendment incorporates the principles of IFRIC 8 (AC 441) Scope of IFRS 2 and IFRIC 11 (AC 444) IFRS 2: Group and Treasury Share Transactions, which have consequentially been removed. In addition, the amendment provides that for share-based payment transactions among group entities, the entity receiving the goods or services shall recognise the transaction as an equity-settled share-based payment transaction if either the awards granted are its own equity instruments or the entity has no obligation to settle the transaction. In all other circumstances, such transactions shall be accounted for as cashsettled share-based payment transactions. The effective date of the amendment is for years beginning on or after 1 January The group has adopted the amendment for the first time in the 2011 audited annual financial statements. The impact of the amendment is not material. IFRIC 19: Extinguishing Financial Liabilities with Equity Instruments IFRIC 19 applies to debt for equity swaps in circumstances where a debtor and creditor renegotiate the terms of a financial liability such that the debtor extinguishes part or all of the financial liability by issuing equity instruments to the creditor. Where the debt for equity swap is within the scope of IFRIC 19, the issue of equity instruments by the debtor shall be consideration paid to extinguish the liability and shall be measured at the fair value of the equity instrument, unless fair value cannot be determined. If the fair value of the equity instruments cannot be measured reliably, the issue shall be measured at the fair value of the financial liability extinguished. If the issue also relates to a modification of any remaining liability, then the issue shall be allocated to the liability which was extinguished and which remains. The difference between the carrying amount of the liability which was extinguished and the consideration paid shall be recognised in profit or loss. The effective date of the amendment is for years beginning on or after 1 July The group has adopted the amendment for the first time in the 2011 audited annual financial statements. The impact of the amendment is not material Annual Improvements Project: Amendments to IFRS 3: Business Combinations The amendment clarifies the initial measurement of non controlling interests. Only those interests which represent a present ownership interest shall be measured at either fair value or the present ownership s proportionate share in the recognised amounts of the acquiree s identifiable net assets. All other components of non controlling interest shall be measured at their acquisition date fair values, unless otherwise required by IFRS. It further provides transitional provisions for dealing with contingent consideration arrangements in a business combination that occurred before the effective date of the revised IFRS 3. For equity-settled share-based payment transactions of the acquiree that the acquirer does not exchange for its share-based payment transactions, vested transactions shall be measured as part of non controlling interest at market-based measure. Unvested transactions shall be measured at market-based measure as if acquisition date were grant date. This measure is then allocated to non controlling interest based on the ratio of vesting period completed to greater of total vesting period or original vesting period. The effective date of the amendment is for years beginning on or after 1 July The group has adopted the amendment for the first time in the 2011 audited annual financial statements. The impact of the amendment is not material. 2.1 Standards and interpretations not yet effective The group has chosen not to early adopt the following standards and interpretations, which have been published and are mandatory for the group s accounting periods beginning on or after 1 July 2011 or later periods: IFRS 9: Financial Instruments This new standard is the first phase of a three-phase project to replace IAS 39: Financial Instruments: Recognition and Measurement. Phase one deals with the classification and measurement of financial assets. The following are changes from the classification and measurement rules of IAS 39: 63

66 Financial assets will be categorised as those subsequently measured at fair value or at amortised cost. Financial assets at amortised cost are those financial assets where the business model for managing the assets is to hold the assets to collect contractual cash flows (where the contractual cash flows represent payments of principal and interest only). All other financial assets are to be subsequently measured at fair value. Under certain circumstances, financial assets may be designated as at fair value. For hybrid contracts, where the host contract is within the scope of IFRS 9, then the whole instrument is classified in accordance with IFRS 9, without separation of the embedded derivative. In other circumstances, the provisions of IAS 39 still apply. Voluntary reclassification of financial assets is prohibited. Financial assets shall be reclassified if the entity changes its business model for the management of financial assets. In such circumstances, reclassification takes place prospectively from the beginning of the first reporting period after the date of change of the business model. Investments in equity instruments may be measured at fair value through profit or loss. When such an election is made, it may not subsequently be revoked, and gains or losses accumulated in equity are not recycled to profit or loss on derecognition of the investment. The election may be made per individual investment. IFRS 9 does not allow for investments in equity instruments to be measured at cost under any circumstances. The effective date of the standard is for years beginning on or after 1 January The group expects to adopt the standard for the first time in the 2014 audited annual financial statements. It is unlikely that the standard will have a material impact on the company s audited annual financial statements. IAS 24: Related Party Disclosures (Revised) The revisions to IAS 24 include a clarification of the definition of a related party as well as providing a partial exemption for related party disclosures between government related entities. In terms of the definition, the revision clarifies that joint ventures or associates of the same third party are related parties of each other. To this end, an associate includes its subsidiaries and a joint venture includes its subsidiaries. The partial exemption applies to related party transactions and outstanding balances with a government which controls, jointly controls or significantly influences the reporting entity as well as to transactions or outstanding balances with another entity which is controlled, jointly controlled or significantly influenced by the same government. In such circumstances, the entity is exempt from the disclosure requirements of paragraph 18 of IAS 24 and is required only to disclose: the name of the government and nature of the relationship; and information about the nature and amount of each individually significant transaction and a quantitative or qualitative indication of the extent of collectively significant transactions. Such information is required in sufficient detail to allow users to understand the effect. The effective date of the amendment is for years beginning on or after 1 January The group does not envisage the adoption of the amendment until such time as it becomes applicable to the group s operations. It is unlikely that the amendment will have a material impact on the company s audited annual financial statements Annual Improvements Project: Amendments to IFRS 7: Financial Instruments: Disclosures Additional clarification is provided on the requirements for risk disclosures. The effective date of the amendment is for years beginning on or after 1 January The group does not envisage the adoption of the amendment until such time as it becomes applicable to the group s operations. It is unlikely that the amendment will have a material impact on the company s audited annual financial statements. 64

67 3. Property, plant and equipment Group cost/ Accumulated Carrying Cost/ Accumulated Carrying Cost/ Accumulated Carrying valuation depreciation value Valuation depreciation value Valuation depreciation value R R R R R R R R R Land Buildings (8 137) Chemical plant (8 137) Reconciliation of property, plant and equipment 2011 opening balance Additions Depreciation Total R R R R Land Buildings (8 137) Chemical plant (8 137) Reconciliation of property, plant and equipment 2010 opening balance Additions Total R R R Chemical plant Reconciliation of property, plant and equipment 2009 opening balance Additions Total R R R Chemical plant Details of properties Portion 11 of the farm Kromdraai 209 JR (100,0006 HA) Purchase price: 17 March Goodwill Group accumulated Carrying accumulated Carrying accumulated Carrying cost impairment value Cost impairment value Cost impairment value R R R R R R R R R Goodwill on acquisition of subsidiaries Reconciliation of goodwill Group 2011 opening Impairment balance loss Total R R R Goodwill ( ) 65

68 opening balance R Total R Reconciliation of goodwill Group 2010 Goodwill Reconciliation of goodwill Group 2009 Goodwill Intangible assets Group cost/ Accumulated Carrying Cost/ Accumulated Carrying Cost/ Accumulated Carrying valuation depreciation value Valuation depreciation value Valuation depreciation value R R R R R R R R R Exploration assets Reconciliation of intangible assets 2011 opening Impairment balance Additions loss Total R R R R Exploration assets ( ) Reconciliation of intangible assets 2010 opening balance Additions Total R R R Exploration assets Reconciliation of intangible assets 2009 opening balance Additions Total R R R Exploration assets Investments in associates, subsidiaries and joint ventures Associates carrying Carrying Carrying Holding Holding Holding amount amount amount Name of company % % % R R R Defacto Investments 275 (Pty) Ltd Finishing Touch Trading 121 (Pty) Ltd All the associates are unlisted

69 Joint ventures Holding Holding Holding Name of company % % % Broadmarket Trading 240 (Pty) Ltd Subsidiaries Holding Holding Holding Name of company % % % Nokeng Fluorspar Mine (Pty) Ltd Ulipac (Pty) Ltd All the subsidiaries are registered and operate within South Africa. 7. Deposits for rehabilitation In terms of section 41 of the MPRDA, an applicant for a prospecting right, mining right or mining permit must make the prescribed financial provision for the rehabilitation or management of negative environmental impacts. The group made deposits with the Department of Mineral Resources in compliance herewith. 8. Loans to/(from) group companies Holding company 30 June 30 June 28 February R R R Sephaku Holdings Ltd ( ) ( ) ( ) ( ) ( ) ( ) Fellow subsidiaries Sephaku Cement (Pty) Ltd (11 598) Sephaku Gold Holdings (Pty) Ltd (2 160) Cross Company Management (Pty) Ltd ( ) The loans are unsecured, bear no interest and are repayable on mutual agreement. The amounts are subordinated in favour of other creditors until such time when the assets fairly valued exceed the liabilities. 9. Loans from shareholders R R R Sephaku Tin (Pty) Ltd (1 062) The loan is unsecured, bears no interest and is repayable on mutual agreement. 10. Financial assets by category The accounting policies for financial instruments have been applied to the line items below: loans and 2011 receivables Total R R Cash and cash equivalents Deposits for rehabilitation

70 loans and 2010 receivables Total R R Deposits for rehabilitation loans and 2009 receivables Total R R Deposits for rehabilitation Trade and other receivables R R R Pre-payments VAT Of the Pre-payments, R5.5 million relates to payments made for the option to purchase Portion 1 of the Farm Naauwpoort 208 JR for R30 million. An agreement was entered into on 23 June 2011 extending the option to purchase until 16 January 2012 for which option fees are payable of R per month. These monthly payments are deductible from the purchase price once the option is exercised. 12. Cash and cash equivalents Cash and cash equivalents consists of: R R R Bank balances Share capital R R R Authorised ordinary shares of R0.001 each ordinary shares of R1.00 each unissued ordinary shares are under the control of the directors. Issued ordinary shares of R0.001 each ordinary shares of R1.00 each Trade and other payables R R R Trade payables Accrual for cash-settled share based payment

71 15. Financial liabilities by category The accounting policies for financial instruments have been applied to the line items below: financial liabilities at 2011 amortised cost Total R R Loans from group companies Loans from shareholders Trade and other payables financial liabilities at 2010 amortised cost Total R R Loans from group companies Trade and other payables financial liabilities at 2009 amortised cost Total R R Loans from group companies Trade and other payables Operating profit Operating loss for the period is stated after accounting for the following: R R R Depreciation on property, plant and equipment Employee costs Auditors remuneration: Fees for audit services Impairment of intangible assets Investment revenue R R R Other interest Finance costs R R R Bank Other interest paid

72 19. Taxation Reconciliation of the tax expense Reconciliation between accounting profit and tax expense: R R R Accounting loss ( ) ( ) ( ) Tax at the applicable tax rate of 28% ( ) ( ) (40 471) Tax effect of adjustments on taxable income Unprovided tax loss No provision has been made for 2011 tax as the group has no taxable income. The estimated tax loss available for set-off against future taxable income for the group is R (2010: R ) (2009: R ). 20. Auditors remuneration R R R Fees for audit services Cash generated from operations R R R Loss before taxation ( ) ( ) ( ) Adjustments for: Depreciation and amortisation Profit on sale of assets Interest received (74 168) Loss from equity accounted investments (53 994) Finance costs Impairments Deferred exploration costs impaired Changes in working capital: Trade and other receivables ( ) ( ) (61 979) Trade and other payables ( ) ( )

73 22. Related parties Relationships Holding company Sephaku Holdings Ltd Subsidiaries Refer to note 6 Joint ventures Refer to note 6 Associates Refer to note 6 Companies with common directors Cross Company Management (Pty) Ltd Members of key management L Mohuba N R Crafford Lazarus L A van den Heever R R Matjiu D Twist J W Wessels Related party balances R R R Loan accounts Owing (to) by related parties Sephaku Holdings Ltd ( ) ( ) ( ) Sephaku Management (Pty) Ltd ( ) Sephaku Gold Holdings (Pty) Ltd (13 758) Related party transactions Administration fees paid to related parties Cross Company Management (Pty) Ltd Directors emoluments Executive Performance 2011 Remuneration bonuses Total R R R L A J van den Heever J W Wessels No emoluments were paid to directors during the 2010 or 2009 reporting periods. 24. Risk management Capital risk management The group s objective when managing capital is to safeguard the group s ability to continue as a going concern in order to provide returns for shareholder and benefits for other stakeholders. The further exploration and development of the exploration assets will require additional capital. The continuing development of the group s mineral resources and reserves will depend on the ability of directors to raise additional funds. There are no externally imposed capital requirements. There have been no changes to what the entity manages as capital, the strategy for capital maintenance or externally imposed capital requirements from the previous year. 71

74 Financial risk management The group s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk and cash flow interest rate risk), credit risk and liquidity risk. The group does not have significant interest-bearing liabilities and interest rate risk is not considered material. Liquidity risk The group s risk to liquidity is a result of the funds available to cover future commitments. The group manages liquidity risk through an ongoing review of future commitments and credit facilities. Liquidity risk is not considered material. Cash flow forecasts are prepared and adequate utilised borrowing facilities are monitored. The table below analyses the group s financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of discounting is not significant. less than Between 1 Between 2 Over As at 30 June year and 2 years and 5 years 5 years R R R R Loans from group companies Trade and other payables Loans from shareholders less than Between 1 Between 2 Over As at 30 June year and 2 years and 5 years 5 years R R R R Loans from group companies Trade and other payables less than Between 1 Between 2 Over As at 28 February year and 2 years and 5 years 5 years R R R R Loans from group companies Trade and other payables Interest rate risk As the group has no significant interest bearing assets, the group s income and operating cash flows are substantially independent of changes in market interest rates. Cash funds are deposited with reputable financial institutions until such time as the funds are required. No other assets or liabilities are exposed to any interest rate risks. Credit risk Credit risk is managed on a group basis. Credit risk consists mainly of cash deposits, cash equivalents, loans receivable and trade debtors. The group only deposits cash with major banks with high quality credit standing and limits exposure to any one counter party. The carrying amount of financial assets represents the maximum exposure to credit risk. Financial instrument R R R Loans to group companies Trade and other receivable

75 25. Net asset value per share and (loss)/earnings per share R R R Net asset value and tangible net asset value per share Total assets Total liabilities Net asset value attributable to equity holders of parent ( ) ( ) ( ) Intangible assets ( ) ( ) Tangible net asset value ( ) ( ) ( ) Ordinary and preference shares in issue Net asset value per share (cents) ( ) ( ) (490.26) Tangible net asset value per share (cents) ( ) ( ) ( ) Loss and headline loss per ordinary share Reconciliation of basic loss to diluted loss and headline loss: Basic loss and diluted loss attributable to equity holders of parent ( ) ( ) ( ) Adjustments to basic loss: Impairment of intangible assets ( ) Headline loss and diluted headline loss attributable to ordinary shareholders ( ) ( ) ( ) Basic weighted average number of ordinary shares Basic loss per share (cents) ( ) ( ) (144.54) Diluted loss per share (cents) ( ) ( ) (144.54) Headline loss per share (cents) ( ) ( ) (144.54) Diluted headline loss per share (cents) ( ) ( ) (144.54) Basic loss per ordinary share The calculation of loss per share of ( ) cents (2010: ( ) cents) (2009: (144.54) cents) is based on the loss attributable to equity holders of the parent of (R ) (2010: (R ) (2009: (R )) and the weighted average of (2010: ) (2009: ) ordinary shares in issue during the year. Diluted loss per ordinary share There are no instruments in issue at each reporting date that would have a dilutionary effect. Headline loss per ordinary share The calculation of headline loss per ordinary share of ( ) cents (2010: ( ) cents) (2009: (144.54) cents) is based on the headline loss attributable to equity holders of the parent of (R ) (2010: (R ) (2009: (R )) and the weighted average of (2010: ) (2009: ) ordinary shares in issue during the year. Diluted headline loss per ordinary share There are no instruments in issue at each reporting date that would have a dilutionary effect. 73

76 26. Pro forma financial information on Sephaku Fluoride The unaudited pro forma statements of financial position and of comprehensive income of Sephaku Fluoride, showing the effects of the settlement of the loans owing by the Sephaku Fluoride group to Sephaku Holdings with the cash received from the subscription by Sephaku Holdings for Sephaku Fluoride shares in terms of the Sephaku Fluoride subscription agreement, are set out below. Such pro forma financial information is the responsibility of the directors and is presented for illustrative purposes only to provide information on the effects of the Sephaku Fluoride subscription agreement on Sephaku Fluoride if it had been implemented on 1 July 2010 for the purposes of the statement of comprehensive income and on 30 June 2011 for the purposes of the statement of financial position. The pro forma financial information is the responsibility of the directors and has been presented for illustrative purposes only and, because of its nature, may not provide a fair reflection of Sephaku Fluoride s financial position, results from operations, changes in equity or cash flows on 30 June PKF (Jhb) Inc. has issued a limited assurance report on this pro forma financial information which is set out in Annexure 3 to this circular. 74

77 Pro forma Statement of Financial Position for Sephaku Fluoride actual Pro forma Pro forma Before the Adjustments After the implementation relating implementation of the to the of the sephaku Sephaku Sephaku fluoride Fluoride Fluoride subscription subscription subscription agreement agreement agreement R R R (i) (ii) (iii) Assets Non-current assets Property, plant and equipment Intangible assets Investments in associates Deposits for rehabilitation Current assets Other financial assets Trade and other receivables Cash and cash equivalents Total assets Equity and Liabilities Equity Share capital and reserves ( ) ( ) Liabilities Current liabilities Loans from group companies ( ) Other financial liabilities Trade and other payables ( ) Total equity and liabilities Net asset value per share (cents) ( ) Tangible net asset value per share (cents) ( ) Number of shares in issue Explanatory notes: (i) The Sephaku Fluoride financial information reflected in this column has been extracted from the audited results of Sephaku Fluoride for the year ended 30 June (ii) The figures in this column represent the effect of the immediate settlement of the loans owing by the Sephaku Fluoride group to Sephaku Holdings with the cash received from the subscription by Sephaku Holdings for Sephaku Fluoride shares in terms of the Sephaku Fluoride subscription agreement, had the subscription occurred on 30 June (iii) The figures in this column are after adjusting for the effects of the Sephaku Fluoride subscription agreement. Basis of preparation and assumptions: 1. The pro forma adjustments to the statement of financial position have been calculated on the assumption that the Sephaku Fluoride subscription agreement was implemented on 30 June The pro forma financial information has been prepared in terms of IFRS and the SAICA guide on pro forma financial reporting. 75

78 Pro forma Statement of Comprehensive Income for Sephaku Fluoride actual Pro forma Pro forma Before the Adjustments After the implementation relating implementation of the to the of the sephaku Sephaku Sephaku fluoride Fluoride Fluoride subscription subscription subscription agreement agreement agreement R R R (i) (ii) (iii) Operating expenses ( ) ( ) Operating loss ( ) ( ) Investment revenue Finance costs ( ) ( ) Loss for the period ( ) ( ) Other comprehensive income Total comprehensive loss for the period ( ) ( ) Loss attributable to: Equity holders of the parent ( ) ( ) Non-controlling interests ( ) ( ) Reconciliation of basic loss to diluted loss and headline loss: Basic loss and diluted loss attributable to the equity holders of the parent ( ) ( ) Impairments Headline loss attributable to the equity holders of the parent ( ) ( ) Basic loss per ordinary share (cents) ( ) (10.80) Diluted loss per ordinary share (cents) ( ) (10.80) Headline loss per ordinary share (cents) ( ) (9.96) Diluted headline loss per ordinary share (cents) ( ) (9.96) Weighted average number of shares in issue Diluted weighted average number of shares in issue Explanatory notes: (i) The Sephaku Fluoride financial information reflected in this column has been extracted from the audited results of Sephaku Fluoride for the year ended 30 June (ii) The figures in this column represent the effects of the immediate settlement of the loans owing by the Sephaku Fluoride group to Sephaku Holdings with the cash received from the subscription by Sephaku Holdings for Sephaku Fluoride shares in terms of the Sephaku Fluoride subscription agreement. (iii) The figures in this column are after adjusting for the effects of the Sephaku Fluoride subscription agreement. Basis of preparation and assumptions: 1. The pro forma adjustments to the statement of comprehensive income have been calculated on the assumption that the Sephaku Fluoride subscription agreement was implemented on 1 July The pro forma financial information has been prepared in terms of IFRS and the SAICA guide on pro forma financial reporting. 76

79 Annexure 3 INDEPENDENT REPORTING ACCOUNTANTS reports on the historical financial information and UNAUDITED PRO FORMA information OF sephaku fluoride The text of the report by the reporting accountants on the historical financial information of Sephaku Fluoride, set out in Annexure 2 to this circular, is set out below: The Directors Sephaku Holdings Limited Riverside Office Park Hennops House, 1st Floor 1303 Heuwel Avenue Centurion 30 January 2012 INDEPENDENT REPORTING ACCOUNTANTS REPORT ON THE HISTORICAL FINANCIAL INFORMATION OF SEPHAKU FLUORIDE (PTY) LIMITED ( SEPHAKU FLUORIDE ) FOR THE YEAR ENDED 30 JUNE 2011, 16 MONTHS ENDED 30 JUNE 2010 AND YEAR ENDED 28 FEBRUARY 2009 Introduction At your request and for the purposes of the circular to be dated on or about 7 February 2012 ( the circular ), we present our report on the historical financial information of Sephaku Fluoride for the year ended 30 June 2011, 16 months ended 30 June 2010 and year ended 28 February 2009 in compliance with the JSE Limited Listings Requirements. Responsibilities Management s responsibility for the financial statements Management is responsible for the preparation, contents and presentation of the circular and the fair presentation of the historical financial information in accordance International Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Reporting accountants responsibility Our responsibility is to express an opinion on the historical financial information of Sephaku Fluoride for the year ended 30 June 2011 included in the circular, based on our audit of the financial information for the year ended 30 June 2011 and a review conclusion on the historical financial information for the 16 months ended 30 June 2010 and the year ended 28 February 2009, included in the circular, based on our review of the financial information for the 16 months ended 30 June 2010 and the year ended 28 February Scope of the audit We conducted our audit of the historical financial information for the year ended 30 June 2011 in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial information. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the financial information, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity s 77

80 preparation and fair presentation of the financial information in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial information. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Audit opinion In our opinion, the historical financial information of Sephaku Fluoride for the year ended 30 June 2011 presents fairly, in all material respects, for the purposes of the circular, the financial position of Sephaku Fluoride at that date and the results of its operations and cash flows for the period then ended in accordance with International Financial Reporting Standards and in the manner required by the Companies Act and the JSE Limited Listings Requirements. Emphasis of matter Without qualifying our opinion, we draw attention to the Directors report which indicates that the group incurred a net loss of R for the period ended 30 June 2011 and, at that date, the group s total liabilities exceeded its total assets by R Scope of the review We conducted our review of the historical financial information for the 16 months ended 30 June 2010 and the year ended 28 February 2009 in accordance with the International Standards on Review Engagements 2400: Engagements to review financial statements. This standard requires that we plan and perform the review to obtain moderate assurance as to whether the historical financial information is free of material misstatement. A review is limited primarily to enquiries of company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit in respect of the 16 months ended 30 June 2010 or the year ended 28 February 2009 and, accordingly, we do not express an audit opinion in respect of these periods. Review conclusion Based on our review, nothing has come to our attention that causes us to believe that the historical financial information of Sephaku Fluoride for the 16 months ended 30 June 2010 and the year ended 28 February 2009 is not fairly prepared, in all material respects, for the purposes of the circular, in accordance with International Financial Reporting Standards and in the manner required by the Companies Act and the JSE Limited Listings Requirements. Consent We consent to the inclusion of this report and the reference to our opinion in the circular in the form and context in which it appears. Yours faithfully PKF (Jhb) Inc. Duncan Church Registration number 1994/001166/21 Registered Auditors Chartered Accountants (SA) 42 Wierda Road West Wierda Valley Sandton

81 The text of the limited assurance report prepared by the reporting accountants on the pro forma information of Sephaku Fluoride showing the effects of the implementation of the Sephaku Fluoride subscription agreement, as set out in Annexure 2 to this circular, is set out below: The Directors Sephaku Holdings Limited Riverside Office Park Hennops House, 1st Floor 1303 Heuwel Avenue Centurion Dear Sirs 30 January 2012 INDEPENDENT REPORTING ACCOUNTANTS LIMITED ASSURANCE REPORT ON THE PRO FORMA FINANCIAL INFORMATION OF SEPHAKU FLUORIDE LIMITED ( SEPHAKU FLUORIDE ) We have performed our limited assurance engagement in respect of the pro forma financial information of Sephaku Fluoride set out in Annexure 2 to the circular to shareholders of Sephaku Holdings to be dated on or about 7 February 2012 ( the circular ). Terms used herein and defined in the circular have the meaning assigned to them in the circular unless otherwise indicated. The pro forma financial information of Sephaku Fluoride has been prepared in accordance with the requirements of the JSE Listings Requirements, for illustrative purposes only, to provide information about how the Sephaku Fluoride distribution and the Sephaku Fluoride subscription agreement might have affected the reported historical financial information presented, had the corporate action been undertaken at the commencement of the period or at the date of the pro forma statement of financial position being reported on. Directors responsibility The directors of Sephaku Holdings are responsible for the compilation, contents and presentation of the pro forma financial information of Sephaku Fluoride contained in the circular and for the financial information from which it has been prepared. Their responsibility includes determining that: the pro forma financial information of Sephaku Fluoride has been properly compiled on the basis stated; the basis is consistent with the accounting policies of Sephaku Fluoride; the pro forma adjustments are appropriate for the purposes of the pro forma financial information of Sephaku Fluoride disclosed in terms of the JSE Listings Requirements. Reporting accountants responsibility Our responsibility is to express our limited assurance conclusion on the pro forma financial information of Sephaku Fluoride included in the circular to the Sephaku Holdings shareholders. We conducted our assurance engagement in accordance with the International Standard on Assurance Engagements applicable to Assurance Engagements Other Than Audits or Reviews of Historical Financial Information and the Guide on Pro Forma Financial Information issued by The South African Institute of Chartered Accountants. This standard requires us to obtain sufficient appropriate evidence on which to base our conclusion. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro forma financial information of Sephaku Fluoride, beyond that owed to those to whom those reports were addressed by us at the dates of their issue. Sources of information and work performed Our procedures consisted primarily of comparing the unadjusted financial information with the source documents, considering the pro forma adjustments in light of the accounting policies of Sephaku Fluoride, considering the evidence supporting the pro forma adjustments, and discussing the adjusted pro forma financial information of Sephaku Fluoride with the directors and management of the company in respect of the corporate actions that are the subject of the circular. 79

82 In arriving at our conclusion, we have relied upon financial information prepared by the directors and management of Sephaku Holdings and other information from various public, financial and industry sources. While the work we performed has involved an analysis of the historical published audited financial information on Sephaku Fluoride, and other information provided to us, our assurance engagement does not constitute an audit or review of any of the underlying financial information conducted in accordance with International Standards on Auditing and, accordingly, we do not express an audit or review opinion. In a limited assurance engagement, the evidence-gathering procedures are more limited than for a reasonable assurance engagement and therefore less assurance is obtained than in a reasonable assurance engagement. We believe the evidence obtained is sufficient and appropriate to provide a basis for our conclusion. Conclusion Based on our examination of the evidence obtained, nothing has come to our attention which causes us to believe that, in terms of Sections 8.17 and 8.30 of the JSE Listings Requirements: the pro forma financial information of Sephaku Fluoride has not been properly compiled on the basis stated; such basis is inconsistent with the accounting policies of Sephaku Fluoride; the adjustments are not appropriate for the purposes of the pro forma financial information of Sephaku Fluoride as disclosed. Consent This report on the pro forma financial information of Sephaku Fluoride is included solely for the information of Sephaku Holdings shareholders. We consent to the inclusion of our report on the pro forma financial information of Sephaku Fluoride and the references thereto, in the form and context in which they appear. Yours faithfully PKF (Jhb) Inc. Duncan Church Registration number 1994/001166/21 Registered Auditors Chartered Accountants (SA) 42 Wierda Road West Wierda Valley Sandton

83 Annexure 4 pro forma FINANCIAL INFORMATION RELATING TO sephaku HOLDINGS The unaudited pro forma statements of financial position and of comprehensive income of Sephaku Holdings, showing the pro forma effects of the Sephaku Fluoride distribution, together with explanatory notes and assumptions, are set out in this annexure. The unaudited pro forma financial information, which is the responsibility of the directors of Sephaku Holdings, has been prepared for illustrative purposes only and, because of its nature, may not present a fair reflection of Sephaku Holding s financial position, results from operations, changes in equity or cash flows on 30 June PKF (Jhb) Inc. has issued a limited assurance report on this pro forma financial information which is set out in Annexure 5 to this circular. 81

84 Pro Forma Statement of Financial Position Adjustments Pro forma relating to the after the sephaku Fluoride implemendistribution tation actual based on the of the Before the the Sephaku Sephaku sephaku Fluoride Fluoride Transaction Fluoride distribution pro formas costs distribution R R R R (i) (ii) (iv) (v) Assets Non-current assets ( ) Property, plant and equipment ( ) Intangible assets ( ) Investments in associates (54 222) Deposits for rehabilitation ( ) Current assets ( ) Loans to group companies Other financial assets Trade and other receivables ( ) Cash and cash equivalents (3 906) Non-current assets held for sale Total assets ( ) Equity and Liabilities Equity Equity attributable to owners of the parent ( ) ( ) Share capital and reserves (iii) ( ) ( ) Non-controlling interests Liabilities Current liabilities ( ) Other financial liabilities (1 062) Trade and other payables ( ) Total equity and liabilities ( ) Net asset value per ordinary share (cents) Tangible net asset value per ordinary share (cents) Explanatory notes: (i) The Sephaku Holdings financial information reflected in this column has been extracted from the audited results of Sephaku Holdings for the year ended 30 June (ii) The figures in this column represent the effects of implementing the Sephaku Fluoride subscription agreement and the Sephaku Fluoride distribution, had such subscription and distribution occurred on 30 June (iii) The pro forma dividend in specie of R is calculated on the assumption that the net asset value of Sephaku Fluoride, after the implementation of the Sephaku Fluoride subscription agreement, represents fair value thereof, being the cost of net assets. (iv) The figures in this column represent the transaction costs incurred by Sephaku Holdings. (v) The figures in this column are after adjusting for the effects of the Sephaku Fluoride distribution. Basis of preparation and assumptions: 1. The pro forma adjustments to the Statement of Financial Position have been calculated on the assumption that the Sephaku Fluoride distribution was implemented on 30 June All adjustments have a continuing effect. 3. The pro forma financial information has been prepared in terms of IFRS and the SAICA Guide on Pro Forma Financial Information. 82

85 Pro forma Statement of comprehensive income Adjustments Pro forma relating to the after the sephaku Fluoride implemendistribution tation Actual based on the of the before the the Sephaku sephaku sephaku Fluoride Fluoride Transaction Fluoride distribution pro formas costs distribution R R R R (i) (ii) (iii) (iv) Other income Operating expenses ( ) ( ) ( ) Profit on disposal of companies Profit on dilution of interest in companies Operating profit ( ) Investment income (74 168) Loss from equity accounted investments ( ) ( ) Finance costs ( ) (108) Profit before taxation ( ) Taxation ( ) ( ) Profit from continuing operations ( ) Discontinued operations Loss for the period from discontinued operations ( ) ( ) Profit for the period ( ) Other comprehensive loss Effects of cash flow hedges net of tax Losses on property revaluation ( ) ( ) Share of comprehensive loss from associates ( ) ( ) Taxation relates to components of other comprehensive income Other comprehensive loss for the period net of taxation ( ) ( ) Total comprehensive income for the period ( ) Profit/(Loss) attributable to: Equity holders of the parent ( ) Non-controlling interests ( ) Total comprehensive income/(loss) attributable to: Equity holders of the parent ( ) Non-controlling interests ( ) ( ) ( )

86 Adjustments Pro forma relating to the after the sephaku Fluoride implemendistribution tation Actual based on the of the before the the Sephaku Sephaku sephaku Fluoride Fluoride Transaction Fluoride distribution pro formas costs distributions R R R R (i) (ii) (iii) (iv) Weighted average number of shares in issue Diluted weighted average number of share in issue Reconciliation of basic earnings/(loss) to diluted earnings/(loss) and headline earnings/(loss): Basic earnings and diluted earnings attributable to the equity holders of the parent Profit on sale of non-current assets ( ) ( ) Impairments Headline loss attributable to the equity holders of the parent ( ) ( ) Earnings per ordinary share (cents) Headline loss per ordinary share (cents) (39.63) (30.49) Diluted earnings per ordinary share (cents) Diluted headline loss per ordinary share (cents) (36.16) (27.82) Explanatory notes: (i) The Sephaku Holdings financial information reflected in this column has been extracted from the audited results of Sephaku Holdings for the year ended 30 June (ii) The figures in this column represent the effects of the settlement of the applicable loan accounts in terms of the Sephaku Fluoride subscription agreement and the effects of the Sephaku Fluoride distribution, had the settlement and distribution occurred on 1 July 2010, the effects of the settlement being as reflected in the Sephaku Fluoride pro forma statement of comprehensive income, set out in Annexure 2 to this circular. (iii) The figures in this column represent the transaction costs incurred by Sephaku Holdings. (iv) The figures in this column are after adjusting for the effects of the Sephaku Fluoride distribution. Basis of preparation and assumptions: 1. The pro forma adjustments to the Statement of Comprehensive Income have been calculated on the assumption that the Sephaku Fluoride distribution was implemented on 1 July The pro forma financial information has been prepared in terms of IFRS and the SAICA Guide on Pro Forma Financial Information. 84

87 Annexure 5 INDEPENDENT REPORTING ACCOUNTANTS LIMITED ASSURANCE REPORT ON THE UNAUDITED PRO FORMA FINANCIAL INFORMATION of sephaku holdings The text of the limited assurance report prepared by the reporting accountants on the unaudited pro forma financial information on Sephaku Holdings showing the effects of the Sephaku Fluoride distribution, as set out in Annexure 4 to this circular, is set out below: The Directors Sephaku Holdings Limited Riverside Office Park Hennops House, 1st Floor 1303 Heuwel Avenue Centurion Dear Sirs 30 January 2012 INDEPENDENT REPORTING ACCOUNTANTS LIMITED ASSURANCE REPORT ON THE PRO FORMA FINANCIAL INFORMATION OF SEPHAKU HOLDINGS LIMITED ( SEPHAKU HOLDINGS ) We have performed our limited assurance engagement in respect of the pro forma financial information set out in Annexure 4 to the circular to shareholders of Sephaku Holdings to be dated on or about 7 February 2012 ( the circular ). Terms used herein and defined in the circular have the meaning assigned to them in the circular unless otherwise indicated. The pro forma financial information has been prepared in accordance with the requirements of the JSE Limited ( the JSE ) Listings Requirements, for illustrative purposes only, to provide information about how the Sephaku Fluoride distribution might have affected the reported historical financial information presented, had the corporate action been undertaken at the commencement of the period or at the date of the pro forma statement of financial position being reported on. Directors responsibility The directors are responsible for the compilation, contents and presentation of the pro forma financial information contained in the circular and for the financial information from which it has been prepared. Their responsibility includes determining that: the pro forma financial information has been properly compiled on the basis stated; the basis is consistent with the accounting policies of Sephaku Holdings; the pro forma adjustments are appropriate for the purposes of the pro forma financial information disclosed in terms of the JSE Listings Requirements. Reporting accountants responsibility Our responsibility is to express our limited assurance conclusion on the pro forma financial information relating to Sephaku Holdings included in the circular to the Sephaku Holdings shareholders. We conducted our assurance engagement in accordance with the International Standard on Assurance Engagements applicable to Assurance Engagements Other Than Audits or Reviews of Historical Financial Information and the Guide on Pro Forma Financial Information issued by The South African Institute of Chartered Accountants. This standard requires us to obtain sufficient appropriate evidence on which to base our conclusion. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the pro forma financial information, beyond that owed to those to whom those reports were addressed by us at the dates of their issue. 85

88 Sources of information and work performed Our procedures consisted primarily of comparing the unadjusted financial information with the source documents, considering the pro forma adjustments in light of the accounting policies of Sephaku Holdings, considering the evidence supporting the pro forma adjustments, and discussing the adjusted pro forma financial information with the directors and management of the company in respect of the corporate actions that are the subject of the circular. In arriving at our conclusion, we have relied upon financial information prepared by the directors and management of Sephaku Holdings and other information from various public, financial and industry sources. While the work we performed has involved an analysis of the historical published audited financial information, and other information provided to us, our assurance engagement does not constitute an audit or review of any of the underlying financial information conducted in accordance with International Standards on Auditing and, accordingly, we do not express an audit or review opinion. In a limited assurance engagement, the evidence-gathering procedures are more limited than for a reasonable assurance engagement and therefore less assurance is obtained than in a reasonable assurance engagement. We believe the evidence obtained is sufficient and appropriate to provide a basis for our conclusion. Conclusion Based on our examination of the evidence obtained, nothing has come to our attention which causes us to believe that, in terms of Sections 8.17 and 8.30 of the JSE Listings Requirements: the pro forma financial information has not been properly compiled on the basis stated; such basis is inconsistent with the accounting policies of Sephaku Holdings; the adjustments are not appropriate for the purposes of the pro forma financial information as disclosed. Consent This report on the pro forma financial information is included solely for the information of the Sephaku Holdings shareholders. We consent to the inclusion of our report on the pro forma financial information and the references thereto, in the form and context in which they appear. Yours faithfully PKF (Jhb) Inc. Duncan Church Registration number 1994/001166/21 Registered Auditors Chartered Accountants (SA) 42 Wierda Road West Wierda Valley Sandton

89 Annexure 6 Information relating to Sephaku Holdings Directors 1. Directors remuneration For the financial year ended 30 June 2011, the emoluments paid to the directors of Sephaku Holdings and its material subsidiaries were as follows: Perform- Directors ance Pension Medical Allow- Total salaries fees bonuses Fund Aid ances 2011 R 000 R 000 R 000 R 000 R 000 R 000 R 000 Sephaku Holdings Executive directors L Mohuba N Crafford-Lazarus M Smit** S Matjiu Non-executive directors R de Bruin P Fourie* G Mahlare G Mahlati M Ngoasheng D Twist Alternate directors J Bennette J Wessels* Sub-total Subsidiaries Executive directors P Fourie*** L van den Heever Sub-total Total * Mr Alan Smith, the Chief Executive Officer of Sephaku Fluoride, was appointed to the Sephaku Fluoride board in August 2011 and, accordingly, his emoluments are not shown above. ** Mr Morrison Smit resigned on 28 February *** Sephaku Holdings investment in Sephaku Cement changed from that of a material subsidiary to an associate during the financial year ended 30 June Directors emoluments paid by Sephaku Cement are therefore only included until October 2010, the date of the dilution of the interest. Directors emoluments paid by Incubex were also included up until October 2010, the date of the Incubex distribution. The remuneration of the directors will be determined by the Remuneration Committee. Save as indicated above, no fees have been paid or have accrued to a third party in lieu of directors fees. Other than as set out above, no other fees for services as a director or for other services, or payments to management companies (a part of which is then paid to any of the directors listed above), or salaries or bonuses or performance-related payments or sums paid by way of expense allowances or any other material benefits or contributions under any pension scheme, or commissions, or profit share arrangements have been or are proposed to be made by Sephaku Holdings or any associates of or joint 87

90 ventures with any member of Sephaku Holdings or by any entities that provide management or advisory services to the company or to any associates of or joint ventures with any member of the company. No fees have been paid or accrued as payable to the directors in respect of sums paid by way of expense allowance or any commission, gain or profit-sharing arrangement. 2. Directors service contracts The company has not entered into nor is proposing to enter into any service contracts of employment with any of the directors or managers of the company. Sephaku Cement has entered into a five-year employment contact with Mr Pieter Fourie which commenced in May Directors interests in securities At the last practicable date, the directors of Sephaku Holdings and of its major subsidiaries beneficially held, directly or indirectly, ordinary shares in Sephaku Holdings, representing 34.5% of the issued capital of the company. total Percenttotal Percent- number age of number of age of of ordinary ordinary Direct Indirect ordinary ordinary shares shares holdings holdings shares shares held by held by of ordinary of ordinary held by held by directors directors shares at shares at directors directors associates associates the last the last at the last at the last at the last at the last practicable practicable practicable practicable practicable practicable date date date date date date Executive directors L Mohuba N Crafford-Lazarus S Matjiu Sub-total Non-executive R de Bruin P Fourie G Mahlare G Mahlati M Ngoasheng D Twist Sub-total Alternate directors J Bennette J Wessels Sub-total Subsidiaries Executive directors A Smith L van der Heever Sub-total Total M Smit* * Resigned on 28 February

91 During November 2011, Mr Mohuba disposed of shares in the company. There have been no further changes between the interests of the directors as at 30 June 2011 and the interests reflected above. The quantum of the directors shareholdings in Sephaku Holdings will not be affected by the implementation of the Sephaku Fluoride distribution. 4. Directors interests in share options Details with regard to share options granted to directors are indicated below: number of outstanding options Number of outstanding options on 1 March 2011@ R2.50 on 1 March R3.50 Executive directors L Mohuba N Crafford Lazarus S Matjiu Sub-total Non-executive directors R de Bruin P Fourie G Mahlare G Mahlati M Ngoasheng D Twist Sub-total Alternate directors J Bennette J Wessels Sub-total Subsidiaries Executive directors A Smith L van der Heever Sub-total Total No options were granted to or exercised by directors in the year ended 30 June 2011 nor subsequent to 30 June 2011 and prior to the last practicable date. All of the options are American style options. The options with a strike price of R2.50 were originally granted on 31 March 2008, prior to the listing and not in terms of the Sephaku share scheme, and vest over a three-year period on the anniversary of their grant. Accordingly, a third vested on 31 March 2009, a third on 31 March 2010 and a third on 31 March These options expire on 31 March The options with a strike price of R3.50 were originally granted on 15 October 2010 in terms of the Sephaku share scheme. These options will vest over a five-year period at the end of the 3rd, 4th and 5th years of anniversary of grant (i.e. on 15 October 2013, 2014 and 2015, respectively), and will expire on 15 October No option premium was paid on the date of grant. 89

92 5. Directors interest in transactions Other than in respect of: the receipt of Incubex shares in terms of the Incubex distribution; and the interests of Dr Twist and Mr De Bruin in the Twist and De Bruin warrants and calls as set out in this circular in paragraph 13, no directors have any material beneficial interests, direct or indirect, in the Sephaku Fluoride distribution or in any other transactions that were effected by Sephaku Holdings: (a) during the current or immediately preceding financial year; or (b) during an earlier financial year which remain in any respect outstanding or unperformed. 6. Secretarial and technical fees On 1 March 2009, Cross Company Management, which provides the Sephaku Group with infrastructure, staff and secretarial services, was disposed of to the Samet Trust. This disposal was not a material disposal. Sephaku Holdings has entered into a contractual arrangement with Cross Company Management in terms of which Cross Company Management will continue providing the said services on an arm s length cost-recovery basis. Cross Company Management will not provide managerial or technical services to the Sephaku Group but will act as a labour broker, providing staff to the Sephaku Group. This agreement is also not considered a material agreement. The company does not have any agreements with any party to pay managerial or technical fees. 90

93 Annexure 7 exchange control regulations The following summary is intended for reference and as a guide and is therefore not comprehensive. It applies to all Sephaku Holdings shareholders entitled to participate in the Sephaku Fluoride distribution. If you are in any doubt in regard hereto, please consult your professional advisor. Emigrants The Sephaku Fluoride share certificates issued pursuant to the Sephaku Fluoride distribution to a former resident of the Common Monetary Area who has emigrated will be endorsed non-resident and will be held in trust by the authorised dealer in foreign exchange as nominated by the emigrant shareholder concerned, at the risk of such shareholder. If an authorised dealer has not been nominated, the share certificates will be held in trust by the transfer secretaries in accordance with the Exchange Control Regulations. All such shares are not freely transferable and may only be dealt with in terms of the Exchange Control Regulations. Non-residents The Sephaku Fluoride share certificates issued pursuant to the Sephaku Fluoride distribution to a non resident of the Common Monetary Area, other than an emigrant, will be endorsed non-resident and will be forwarded directly to the address specified by such non-resident with the transfer secretaries. 91

94 Sephaku Holdings Limited (Incorporated in the Republic of South Africa) (Registration number 2005/003306/06) Share code: SEP ISIN: ZAE ( Sephaku Holdings or the company ) NOTICE OF GENERAL MEETING All the definitions and interpretation in the circular to which this notice of general meeting is attached shall, where relevant, bear the same meanings in this notice of general meeting. Notice is hereby given that a general meeting of the holders of ordinary shares in Sephaku Holdings ( ordinary shareholders ) will be held at 10:00 on Wednesday, 7 March 2012 in the Ovals boardroom, Centurion Lake Hotel, 1001 Lenchen Avenue North, Centurion, Pretoria under the chairmanship of Dr Lelau Mohuba, in his capacity as chairman of the board of directors of Sephaku Holdings, or, in his absence, any other director chosen by the members present in person or by representative or agent or proxy, for the purposes of considering and, if deemed fit, passing, with or without modification, the ordinary resolutions set out below. The record date in terms of section 59 of the Companies Act for shareholders to be recorded on the shareholders register of the company in order to be able to attend, participate and vote at the general meeting is Friday, 2 March ORDINARY RESOLUTION NUMBER 1 RESOLVED THAT, pursuant to the resolution passed by the board of directors in terms of section 46 of the Companies Act on 27 January 2012, authorising the Sephaku Fluoride distribution and confirming that the directors have applied the solvency and liquidity tests as contemplated in the Companies Act and are of the reasonable opinion that the company will satisfy the solvency and liquidity test immediately after completing the Sephaku Fluoride distribution, the distribution to shareholders as a dividend in specie of 1 (one) ordinary share in Sephaku Fluoride Limited for every 1 (one) ordinary share held in the company on the record date for such distribution, be and is hereby approved as a specific approval pursuant to article 38.2 of the company s articles of association. In terms of the Companies Act, an ordinary resolution must be approved by more than 50% of the voting rights exercised on such resolution, provided that such voting rights are entitled to be exercised on such resolution. ORDINARY RESOLUTION NUMBER 2 RESOLVED THAT the definition of service provider in The Sephaku Holdings 2009 Share Scheme be amended to include service providers to associates of the Sephaku Holdings Limited group of companies by the inclusion of the phrase in bold type face in such definition as follows: service providers officers, directors, employees and consultants of, or to, the Group and its associate companies, present and future, provided that a consultant shall only be a service provider where such person provides services for an initial, renewable or extended period of twelve (12) months or more. In terms of the Companies Act, an ordinary resolution must be adopted by more than 50% of the voting rights exercised on such resolution, provided that such voting rights are entitled to be exercised on such resolution. ORDINARY RESOLUTION NUMBER 3 RESOLVED THAT any director of the company for the time being, be and is hereby authorised to do all such things and sign all such documents and take all such actions as he/she considers necessary to give effect to and implement ordinary resolutions numbers 1 and 2 as set out in the notice of general meeting convened for the purposes of considering, inter alia, such resolutions. 92

95 In terms of the Companies Act, an ordinary resolution must be adopted by more than 50% of the voting rights exercised on such resolution, provided that such voting rights are entitled to be exercised on such resolution. VOTING AND PROXIES Shareholders are reminded that: a shareholder entitled to attend and vote at the shareholders meeting is entitled to appoint a proxy (or concurrent proxies) to attend, participate in and vote at the shareholders meeting in the place of the shareholder, and shareholder are referred to the attached form of proxy (pink); a proxy need not also be a shareholder; in terms of section 63(1) of the Companies Act, before any person may attend or participate in a shareholders meeting such as the meeting convened in terms of this notice of general meeting, that person must present reasonably satisfactory identification and the person presiding at the general meeting must be reasonably satisfied that the right of that person to participate and vote, either as a shareholder, or as a proxy for a shareholder, has been reasonably verified. Such persons should therefore carry with them their passport, driver s licence or identity document. Ordinary shareholders holding certificated ordinary shares in their own name and ordinary shareholders who have dematerialised their Sephaku Holdings ordinary shares and have elected own name registration in the sub-register through a CSDP may attend, speak and vote in person at the general meeting, or may appoint one or more proxies (who need not be shareholders of Sephaku Holdings) to attend, speak and vote at the general meeting in the place of such Sephaku Holdings shareholder. Every person present and entitled to vote at the general meeting as a member or as a proxy or as a representative of a body corporate shall, on a show of hands, have one vote only, irrespective of the number of shares such person holds or represents but, in the event of a poll, such persons will be entitled to one vote per share held or represented. On a poll taken at any such meeting a shareholder entitled to more than one vote need not, if he/she votes, use all of his/hers votes, or cast all the votes he/she uses in the same way. A member which is a company may, in terms of section 58(5) of the Companies Act, authorise any person to act as its representative at the general meeting. A form of proxy (pink) is attached to the circular to Sephaku Holdings shareholders, dated 7 February 2012, in which a copy of this notice of general meeting has been included. Duly completed forms of proxy should be lodged with Computershare Investor Services (Pty) Limited, Ground Floor, 70 Marshall Street, Johannesburg, 2001 (PO Box 61051, Marshalltown, 2107) by no later than 10:00 (South African time) on Monday, 5 March If shareholders who have not dematerialised their shares or who have dematerialised their shares with own name registration, and who are entitled to attend and vote at the general meeting do not deliver forms of proxy to the transfer secretaries by this date and time, such shareholders will nevertheless, at any time prior to the commencement of the voting on the ordinary resolutions at the general meeting, be entitled to lodge the form of proxy (pink) in respect of the general meeting, in accordance with the instructions therein, with the chairman of the general meeting. Forms of proxy must only be completed by shareholders who have not dematerialised their shares or who have dematerialised their shares with own name registration. Ordinary shareholders who have already dematerialised their Sephaku Holdings ordinary shares through a CSDP or broker and who have not selected own name registration in the sub-register through a CSDP and ordinary shareholders who hold certificated ordinary shares through a nominee who wish to attend the general meeting of shareholders may do so and they are no longer required to be issued with a letter of representation. If they do not wish to attend the general meeting of shareholders, but wish to be represented thereat, they must provide their CSDP or nominee with their voting instructions in terms of the custody agreement entered into between them and their CSDP, broker or nominee. In respect of dematerialised shares, it is important to ensure that the person or entity (such as a nominee) whose name has been entered into the relevant sub-register maintained by a CSDP completes the form of proxy in terms of which he/she appoints a proxy to vote at the general meeting of shareholders. 93

96 Electronic participation Shareholders wishing to participate electronically in the general meeting are required to deliver written notice to the company at Suite 4A, Manhattan Office Park, 16 Pieter Road, Highveld Techno Park, Centurion, 0067 (PO Box 68149, Highveld, 0169) (marked for the attention of Ms J Bennette) by no later than 10:00 on Friday, 2 March 2012 that they wish to participate via electronic communication at the general meeting (the electronic notice ). In order for the electronic notice to be valid it must contain: (a) if the shareholder is an individual, a certified copy of his/her identity document and/or passport; (b) if the shareholder is not an individual, a certified copy of a resolution by the relevant entity and a certified copy of the identity documents and/or passports of the persons who passed the relevant resolution. The relevant resolution must set out who from the relevant entity is authorised to represent the relevant entity at the general meeting via electronic communication; (c) a valid address and/or facsimile number (the contact address/ number ) and (d) if the shareholder wishes to vote via electronic communication, set out that the shareholder wishes to vote via electronic communication. By no later than 48 hours before the general meeting, the company shall use its reasonable endeavours to notify a shareholder at its contract address/number who has delivered a valid electronic notice of the relevant details through which the shareholder can participate via electronic communication. By order of the board Sephaku Holdings Limited Lelau Mohuba 7 February 2012 Registered office Transfer secretaries Southdowns Office Park Computershare Investor Services (Pty) Limited Block A, Ground Floor Ground Floor Corner John Vorster and Karee Streets 70 Marshall Street Irene X54, 0062 Johannesburg, 2001 (PO Box 7651, Centurion, 0157) (PO Box 61051, Marshalltown, 2107) 94 PRINTED BY INCE (PTY) LTD Ref. No. W2CF13785

97 Sephaku Holdings Limited (Incorporated in the Republic of South Africa) (Registration number 2005/003306/06) Share code: SEP ISIN: ZAE ( Sephaku Holdings or the company ) FORM OF PROXY FOR SEPHAKU HOLDINGS ORDINARY SHAREHOLDERS This form of proxy is to be used only by Sephaku Holdings ordinary shareholders on the South African register (this includes registered holders of certificated shares, Central Securities Depository Participants ( CSDPs ), nominee companies, and shareholders who have dematerialised their ordinary shares and who have elected own name registration through a CSDP) at the general meeting of shareholders of Sephaku Holdings convened to be held at 10:00 on Wednesday, 7 March 2012 in the Ovals boardroom, Centurion Lake Hotel, 1001 Lenchen Avenue North, Centurion, Pretoria ( the general meeting of shareholders ). Sephaku Holdings shareholders on the register who have already dematerialised their ordinary shares through a CSDP or broker and who have not selected own name registration and Sephaku Holdings shareholders who hold certificated ordinary shares through a nominee may attend the general meeting. It is no longer necessary for such shareholders to instruct their CSDP, broker or nominee to issue them with a letter of representation but such shareholders must provide reasonable proof of their identity and should therefore carry with them their passport, driver s licence or identity document. If such shareholders do not wish to attend the general meeting of shareholders, they may provide their CSDP, broker or nominee with their voting instructions in terms of the custody agreement entered into between them and their CSDP or nominee. I/We (please print names in full) of (please print your address in full) being the beneficial holder/s of Sephaku Holdings ordinary shares (please write the number of shares held in numerals) (or being the registered holder of Sephaku Holdings ordinary shares held on behalf of the following (please write the number of shares held in numerals) beneficial holder/s: ) (please print names in full) hereby appoint (see note 1 overleaf): 1. or failing him/her, 2. or failing him/her, 3. the chairman of the general meeting, as my/our proxy to attend and speak and vote on a show of hands or on a poll for me/us and on my/our behalf at the general meeting of shareholders to be held on Wednesday, 7 March 2012, for the purposes of considering and, if deemed fit, passing, with or without modification, the ordinary resolutions to be proposed thereat and at each adjournment or postponement thereof, and to vote for and/or against such resolutions and/or abstain from voting in respect of the Sephaku Holdings shares registered in my/our name as follows (see note 2 overleaf) and generally to act as my/our proxy at the said general meeting of shareholders. This appointment is irrevocable/revocable (please delete whichever option is not applicable).if no directions are given, the proxy holder will be entitled to vote or to abstain from voting, as that proxy holder deems fit (see notes 2 and 3 overleaf). Unless otherwise instructed, my proxy may vote as he/she thinks fit. TO BE COMPLETED BY SEPHAKU HOLDINGS ORDINARY SHAREHOLDERS for Against Abstain Ordinary resolution number 1 approval of the Sephaku Fluoride distribution Ordinary resolution number 2 amendment to Sephaku Holdings share scheme Ordinary resolution number 3 authorisation for any director to implement the resolutions Signed at on 2012 Signature Assisted by me (where applicable) Each shareholder is entitled to appoint one or more proxies (who need not be a shareholder/s of Sephaku Holdings) to attend, speak and vote in place of that shareholder at the general meeting of shareholders. Please read the notes on the reverse side hereof.