14.   MINING ASSETS VALUATION

14.4  

Enterprise Value – Basis of Valuation

The Enterprise Values are based on the application of Discounted Cash Flow (“DCF”) techniques to the post-tax pre-finance cashflows represented by the FMs as developed for each Material Property. The FMs are based on the various LoM Plans, including the TEPs (Section 12).

In generating the FMs and deriving the Enterprise Values, SRK specifically have:

• Incorporated the macro-economic forecasts as reflected in Table 1.2 and Table 1.3;
• Incorporated the commodity price forecasts as reflected Section 13;
• Determined WACCs which reflect the countries in which the Material Properties are located and the currency of the FMs (Table 14.1);
• The discount rate used for projects is 16.2% (nominal), which includes a risk premium of 3.95% to reflect the higher risk associated with these projects;
• Relied upon Kumba and Eyesizwe for all accounting inputs as required for the generation of the FMs in respect of Taxation: Table 14.2 provides details of taxation input parameters used in the FMs;
• Relied upon Kumba and Eyesizwe to the extent that for all accounting inputs as required for the generation of the FMs in respect of the Net Movement in Working Capital. The opening balances used in the FMs are reflected in Table 14.3 and Table 14.4;
• Incorporated the royalty calculations as indicated in Table 12.1;
• Relied upon Kumba and Eyesizwe that the calculation of nominal cash flows is in accordance with the fiscal regime within which the Material Properties operate;
• Reported Enterprise Values for the Material Properties as at 1 January 2006 which are based on a DCF valuation of the post-tax pre-finance cash flows resulting form the FMs;
• Performed sensitivity analyses to ascertain the impact of discount factors, commodity prices, total working costs and capital expenditures;
• Excluded the impact of salvage value on cessation of mining operations;
• Excluded the impact of Secondary Taxation on Companies for the Assets.