Overview
Auditing and risk

Implats is committed to independent third-party reviews of mineral resource and mineral reserve estimates. Such reviews not only provide assurance but also assist with the principle of continuous improvement and are undertaken on a two-year cycle. The next Group-wide review is due in 2017. The following work was undertaken during the 2015 financial year:

An independent mineral resource management process audit was undertaken at Impala, Afplats and Marula by The Mineral Corporation. In addition a detailed technical review was completed for Marula during 2015 by The Mineral Corporation. The outcome of the audits showed compliance to the Implats code of practice (COP). Minor inconsistencies were noted but these were not material. The independent review by The Mineral Corporation at Marula concluded that they did not identify any fatal flaws in geological data collection and processing as well as mineral resources estimation. Likewise, no fatal flaws have been identified in the approaches and processes adopted for the conversion of mineral resources to mineral reserves and in the modifying factors utilised for the conversion.

A material change in the ore reserves at Bimha occurred as a result of the low angle shearing reported in the previous period. A completely new pillar design resulted in a lower extraction rate. The updated mineral resource and ore reserve estimates were compiled and signed-off by the Competent Persons from Zimplats and independently reviewed by The Mineral Corporation. They completed an independent audit of the mineral resource and ore reserve estimates in December 2014 and concluded that there were no material issues identified with respect to the mineral resources or ore reserve estimates and assisted with the compilation of a JORC compliant Table 1 report.

At Mimosa SRK conducted an independent audit of the mineral resource estimates. They concluded that the estimates derived by Mimosa are representative of the orebody. SRK did not identify any material issues.

The Group’s reported mineral reserves represent its estimate of quantities of PGMs that have the ability, and its reported mineral resources represent its estimate of quantities of PGMs that have the potential, to be economically mined and refined under anticipated geological and economic conditions. There are numerous uncertainties inherent in estimating quantities of mineral resources and mineral reserves and in projecting potential future rates of mineral production, including many factors beyond the Group’s control. The accuracy of any mineral resources and mineral reserves estimate is a function of a number of factors, including the quality of the methodologies employed, the quality and quantity of available data and geological interpretation and judgement, and is also dependent on economic conditions and market prices being generally in line with estimates.

Furthermore, estimates of different geologists and mining engineers may vary, and results of the Group’s mining and production subsequent to the date of an estimate may lead to revision of estimates due to, for example, fluctuations in the market price of ores and metals, reduced recovery rates or increased production costs due to inflation or other factors which may render mineral resources and mineral reserves containing lower grades of mineralisation uneconomic to exploit and may ultimately result in a restatement of mineral resources and/or mineral reserves and may adversely impact future cash flows. Further, mineral estimates are based on limited sampling and, consequently, are uncertain as the samples may not be representative of the entire ore body and mineral resource. As a better understanding of the ore body is obtained, the estimates may change significantly. In addition, the reserves the Group ultimately exploits may not conform to geological, metallurgical or other expectations and the volume and grade of ore recovered may be below the estimated levels. Mineral resources and mineral reserves data is not indicative of future production. To mitigate this risk, the Group appoints independent third parties to review the Group mineral resources and reserves at least on a two-year cycle. Similarly all mining project feasibility studies are subject to independent reviews prior to applying for capital approval by the board.

Substantial capital expenditure is required to identify and delineate mineral resources and mineral reserves through geological mapping and drilling, to identify geological features that may prevent or restrict the extraction of ore, to determine the metallurgical processes to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities.

There can be no assurance that the Group will be able to identify additional mineral resources and mineral reserves or continue to extend the mine life of its existing operations. Without such additional sources, any increase in the level of annual production would therefore shorten the life of the Group’s existing operations. Any failure by the Group to identify, delineate and realise mineral resources and mineral reserves in the future could have a material adverse effect on the Group’s business, financial condition and results of operations.

The mineral resources department subscribes to a formal risk management system and endeavours to systematically reduce all risks relevant to the mineral resources and reserves. Presently no area of risk is considered significant post the current controls. It is recognised by Implats that mineral resource and mineral reserve estimations are based on projections which may vary as new information becomes available or specifically if assumptions, modifying factors and market conditions change materially. This approach is consistent with Group definitions of risk as per ISO 31000:2009, “The effect of uncertainty on objectives”. The assumptions, modifying factors and market conditions therefore represent areas of potential risk. In addition, security of mineral right tenure or corporate activity could have a material impact on the future mineral asset inventory.