Included in cost of sales, other operating expenses, operating special items and corporate administration and other expenses
4,488
4,127
Actuarial defined benefit plan expense analysis
Defined benefit post-retirement medical
– current service cost
6
7
– interest cost
86
88
92
95
Defined benefit pension plan
– current service cost
47
50
– interest cost
124
108
– expected return on plan assets
(191)
(146)
(20)
12
Actual return on plan assets
– South Africa defined benefit pension plan
185
417
Refer to the Remuneration report for details of directors' emoluments
(1)
Details of the equity-settled share-based payment arrangements of the group have been disclosed in group note 11. These arrangements consist of awards by the company to employees of various group companies. The income statement expense of R216m (2006: R200m) for the company is only in respect of awards made to employees of the company.
A reconciliation of the effective tax rate charged in the income statement to the prevailing mining and non-mining tax rate is set out in the following table:
Non-mining %
Mining %
Non-mining %
Mining %
2007
2006
Effective tax rate
47
45
43
70
Disallowable items
(2)
(4)
6
(5)
Dividends received
(17)
–
(2)
–
Taxable items not forming part of the income statement
2
–
(20)
–
Impact of prior year under provisions
5
–
6
–
Change in estimated deferred tax rate (3)
–
(4)
–
(28)
Other
2
–
4
–
Estimated corporate tax rate (2)
37
37
37
37
(1)
Included in mining tax is taxation on the disposal of tangible assets of R21m and included in temporary differences is taxation of R6m.
(2)
Mining tax on mining income is determined according to a formula based on profit and revenue from mining operations. The company has elected to be exempt from STC and is taxed at a higher rate of tax for mining and non-mining income tax purposes.
All mining capital expenditure is deducted to the extent that it does not result in an assessed loss and depreciation is ignored when calculating mining income. Capital expenditure not deducted from mining income is carried forward as unredeemed capital to be deducted from future mining income. The company operates under two tax paying entities, Vaal River Operations and West Wits Operations. Under ring fencing legislation each entity is treated separately and deductions can only be utilised against income generated by the relevant tax entity.
The formula for determining the South African mining tax is: Y = 45 – 225/X where Y is the percentage rate of tax payable and X is the ratio of mining profit net of any redeemable capital expenditure to mining revenue expressed as a percentage.
The maximum statutory mining tax rate is 45%, non-mining statutory tax rate 37% and statutory company tax rate 29%, all unchanged from prior year.
(3)
The mining operations are taxed on a variable rate that increases as profitability increases. The tax rate used to calculate deferred tax is based on the company's current estimate of future profitability when temporary differences will reverse. Depending on the profitability of the operations, the tax rate can consequently be significantly different from year to year. The change in the estimated deferred tax rate at which the temporary differences will reverse amounts to R57m (2006: R412m).
The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 10.65% (2006: 10.65%).
Included in land and buildings are assets held under finance leases with a net book value of R235m (2006: nil).
A register containing details of properties is available for inspection by shareholders or their duly authorised agents during business hours at the registered office of the company.
(1)
Transfers and other movements comprise amounts from changes in estimates of decommissioning assets and asset reclassifications.
(2)
Impairments include the following:
SA Rands
Figures in million
2007
2006
Write off of various minor tangible assets and equipment.
–
10
–
10
The impairment calculation methodology is included in group note 16.
10
Investment in associates
The company has a 25% (2006: 25%) interest in Oro Group (Pty) Ltd which is involved in the manufacture and wholesale of jewellery. The year-end of Oro Group (Pty) Ltd is 31 March.
The carrying value of the associate consists of:
Unlisted shares at cost less impairments
15
15
Investment acquired in Margaret Water Company Limited
3
–
Impairment (1)
(3)
–
Loans advanced (2)
15
15
30
30
Directors' valuation of the unlisted associate
30
30
(1)
In 2007, the Margaret Water Company Limited's investment was impaired. The impairment test considered the investment's fair value and anticipated future cash flows. An impairment of R3m was recorded.
(2)
The Oro loan bears interest at a rate determined by the Oro Group (Pty) Ltd's board of directors and is repayable at their discretion.
The company's effective share of certain balance sheet items of its associate at 30 September 2007, is as follows:
Non-current assets
14
14
Current assets
69
63
Total assets
83
77
Non-current liabilities
23
24
Current liabilities
34
29
Total liabilities
57
53
Net assets
26
24
11
Other investments
Unlisted investments
Available-for-sale
Balance at beginning of year (1)
2
2
Balance at end of year
2
2
Available-for-sale unlisted investments consist primarily of the Chamber of Mines Building Company Limited.
Investments held to maturity are primarily the Gold of Africa Museum.
(1)
There is no active market for the unlisted equity investment and fair value cannot be reliably measured. The unlisted equity investment is carried at cost. The company does not intend to sell the investment in the foreseeable future.
12
Inventories
Work in progress
– gold in process
240
219
Finished goods
– gold doré / bullion
15
45
– by-products
68
27
Total metal inventories
323
291
Mine operating supplies
153
114
476
405
The amount of the write-down of by-products, gold in process and gold on hand to net realisable value, and recognised as an expense is R139m (2006: R13m). This expense is included in cost of sales which is disclosed in note 2.
13
Investment in Environmental Rehabilitation Trust Fund
Balance at beginning of year
309
284
Contributions
5
25
Rehabilitation expenditure reclaimed
(20)
–
Balance at end of year
294
309
The fund is managed by Rand Merchant Bank and mainly invested in government long bonds
