Platinum Group Metals Ltd. - Exhibit 99.2 - Filed by newsfilecorp.com
Platinum Group Metals Ltd.
(Exploration and Development Stage Company)
Supplementary Information
and MD&A
For the quarter ended February 29, 2012
This Management’s Discussion and
Analysis is prepared as of April 13, 2012
A copy of this report will be
provided to any shareholder who requests it.
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
MANAGEMENT DISCUSSION AND ANALYSIS
This management discussion and analysis (“MD&A”) of
Platinum Group Metals Ltd. (“Platinum Group”, the “Company” or “PTM”) is dated
as of April 13, 2012 and focuses on the Company’s financial condition and
results of operations for the six months ended February 29, 2012 and should be
read in conjunction with the Company’s unaudited condensed interim consolidated
financial statements for the six months ended February 29, 2012 together with
the notes thereto (the “Financial Statements”).
The Company prepares its financial statements in accordance
with International Financial Reporting Standards (“IFRS”). The Company adopted
IFRS on September 1, 2011 with a transition date of September 1, 2010. A
reconciliation of the previously disclosed comparative periods’ financial
statements prepared in accordance with Canadian generally accepted accounting
principles (“Canadian GAAP”) to IFRS is set out in note 14 in the condensed
interim consolidated financial statements. All dollar figures included therein
and in the following MD&A are quoted in Canadian Dollars unless otherwise
noted.
PRELIMINARY NOTES
NOTE REGARDING FORWARD-LOOKING STATEMENTS:
This MD&A and the documents incorporated by reference
herein contain “forward-looking information and “forward-looking statements”
within the meaning of applicable Canadian and US securities legislation
(collectively, “forward-looking statements”). All statements, other than
statements of historical fact that address activities, events or developments
that the Company believes, expects or anticipates will, may, could or might
occur in the future (including without limitation, statements regarding
estimates and/or assumptions in respect of production, revenue, cash flows and
costs, estimated project economics, mineral resource and mineral reserve
estimates, potential mineralization, potential mineral resources and mineral
reserves, projected timing of possible production, the Company’s exploration and
development plans and objectives with respect to its projects are
forward-looking statements.
These forward-looking statements reflect the current
expectations or beliefs of the Company based on information currently available
to the Company. Forward-looking statements in respect of capital costs,
operating costs, production rate, grade per tonne and smelter recovery are based
upon the estimates in the Updated Feasibility Study (defined below) and the
forward-looking statements in respect of metal prices and exchange rate are
based upon the three year trailing average prices and the assumptions contained
in the Updated Feasibility Study.
Forward-looking statements are subject to a number of risks and
uncertainties that may cause the actual events or results of the Company to
differ materially from those discussed in the forward-looking statements, and
even if such actual events or results were realized or substantially realized,
there can be no assurance that they will have the expected consequences to, or
effects on, the Company. Factors that could cause actual results or events of
the Company to differ materially from current expectations include, among other
things: metals price volatility; additional financing requirements; economic and
political instability; the ability to obtain and maintain necessary permits;
fluctuations in the relative values of the Canadian Dollar as compared to the
South African Rand and the United States Dollar; the ability of the Company to
purchase the necessary surface rights for its mineral properties; property title
risks including defective title to mineral claims or property; the mineral
exploration industry is extremely competitive; South African foreign exchange
controls may limit repatriation of profits; the Company’s designation as a
“passive foreign investment company”; discrepancies between actual and estimated
reserves and resources, between actual and estimated development and operating
costs, between actual and estimated metallurgical recoveries and between
estimated and actual production; changes in national and local government
legislation, taxation, controls, regulations and political or economic
developments in Canada, South Africa or other countries in which the Company
does or may carry out business in the future; success of exploration activities
and permitting timelines; the speculative nature of mineral exploration,
development and mining, including the risks of obtaining necessary licenses and
permits; exploration, development and mining risks and the inherently dangerous
nature of the mining industry, including environmental hazards, industrial
accidents, unusual or unexpected formations, pressures, mine collapses, cave-ins
or flooding and the risk of inadequate insurance or inability to obtain
insurance to cover these risks and other risks and uncertainties; the Company’s
limited experience with development-stage mining operations; the Company has a
history of losses; most of the Company’s properties contain no proven reserves;
the ability of the Company to retain its key management employees; conflicts of
interest; dilution through the exercise of outstanding options and warrants;
share price volatility and no expectation of paying dividends; any disputes or
disagreements with the Company’s joint venture partners; socio economic
instability in South Africa or regionally; the Company’s land in South Africa
could be subject to land restitution claims; any adverse decision in respect of
the Company’s prospecting or future mining rights and projects in South Africa;
the introduction of South African State royalties where the Company’s current
mineral reserves are located; and the other risks disclosed under the heading
“Risk Factors” in the Company’s annual information form (“AIF”) dated November
21, 2011 which is available electronically at www.sedar.com.
2
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
Any forward-looking statement speaks only as of the date on
which it is made and, except as may be required by applicable securities laws,
the Company disclaims any intent or obligation to update any forward-looking
statement, whether as a result of new information, future events or results or
otherwise. Although the Company believes that the assumptions inherent in the
forward-looking statements are reasonable, forward-looking statements are not
guarantees of future performance and accordingly undue reliance should not be
put on such statements due to the inherent uncertainty therein.
NOTE TO U.S. INVESTORS REGARDING RESOURCE ESTIMATES:
All resource estimates contained in this report have been
prepared in accordance with National Instrument 43-101 and the Canadian
Institute of Mining, Metallurgy and Petroleum Classification System in
compliance with Canadian securities laws, which differ from the requirements of
United States securities laws. Without limiting the foregoing, this report uses
the terms “measured resources”, “indicated resources” and “inferred resources”.
U.S. investors are advised that, while such terms are recognized and required by
Canadian securities laws, the U.S. Securities and Exchange Commission (“SEC”)
does not recognize them. Under U.S. standards, mineralization may not be
classified as a “reserve” unless the determination has been made that the
mineralization could be economically and legally produced or extracted at the
time the reserve determination is made. U.S. investors are cautioned not to
assume that all or any part of measured or indicated resources will ever be
converted into reserves. Further, inferred resources have a great amount of
uncertainty as to their existence and as to whether they can be mined legally or
economically. It cannot be assumed that all or any part of the inferred
resources will ever be upgraded to a higher category. U.S. investors are
cautioned not to assume that all or any part of the inferred resources exists,
or that they can be mined legally or economically. Information concerning
descriptions of mineralization and resources contained in this report may not be
comparable to information made public by U.S. companies subject to the reporting
and disclosure requirements of the SEC.
1. DESCRIPTION OF BUSINESS
Platinum Group Metals Ltd. is a British Columbia corporation
incorporated on February 18, 2002 by an order of the Supreme Court of British
Columbia approving an amalgamation between Platinum Group Metals Ltd. and New
Millennium Metals Corporation. The Company is an exploration and development
company conducting work primarily on mineral properties it has staked or
acquired by way of option agreement in the Republic of South Africa and
Canada.
The Company’s complement of staff, consultants and casual
workers in both Canada and South Africa currently consists of approximately 41
individuals, representing an increase of 11 South African persons in fiscal
2012. A further six people have been appointed as the owner’s team, providing
contract project management and oversight to the Company, for the Project 1
Platinum Mine (“Project 1”) in South Africa. Engineering, Procurement and
Construction Management (“EPCM”) provider, DRA Mining Pty Ltd. (“DRA”) has
assigned approximately 30 people to the project. Civil and underground mining
contractors currently have approximately 300 people working on site at Project 1,
approximately 30% of whom are from local communities. General office space and
support services in Canada and South Africa are unchanged in the six month
period. In addition to its general office space, the Company uses facilities at
the Company owned Sundown Ranch property for mine site administration, site
induction and staff services. An information technology and communication
upgrade is also underway in Canada and South Africa to enhance the efficiency of
data transmission within the Company. The upgrade is now in the testing stage.
3
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
2. PROPERTIES
The Company defers all acquisition, exploration and development
costs related to mineral properties. The recoverability of these amounts is
dependent upon the existence of economically recoverable reserves, the ability
of the Company to obtain the necessary financing to complete the development of
the property, and any future profitable production; or alternatively upon the
Company’s ability to dispose of its interests on an advantageous basis.
The Company evaluates the carrying value of its property
interests on a regular basis. Any properties management deems to be impaired are
written down to their estimated net recoverable amount or written off. During
the period, there were no write-offs in deferred costs. For more information on
mineral properties, see below and Notes 5 and 6 of the Company’s Financial
Statements.
SOUTH AFRICA PROPERTIES
The Company conducts all of its South African exploration work
through its 100% owned subsidiary, Platinum Group Metals RSA (Pty.) Ltd. (“PTM
RSA”). Development of Project 1 is conducted through Maseve Investments 11
(Pty.) Ltd. (“Maseve”), a company owned 74% by PTM RSA and 26% by Black Economic
Empowerment company, Africa Wide Mineral Prospecting and Exploration (Pty)
Limited (“Africa Wide”), which is in turn owned 100% by Johannesburg Stock
Exchange listed Wesizwe Platinum Limited (“Wesizwe”).
Project 1 and 3
Project 1 and 3 - Activities in the six months ended
February 29, 2012
During the six months ended February 29, 2012, the Company
incurred $17.99 million towards the exploration, engineering and development
costs of Project 1. In the prior year’s comparative period, total Project 1 and
3 expenditures amounted to $9.6 million. At February 29, 2012, the Company
carries total deferred development costs related to Project 1 of $134.4 million
and related to Project 3 of $4.1 million. During the six months ended February
29, 2012, the Company did not incur any costs on Project 3. Wesizwe’s
non-controlling 26% interest in Maseve is recorded at $33.55 million as of
February 29, 2012.
In September 2011, civil contracting and construction firm
Wilson Bailey Holmes (“WBHO”) completed the central box cut excavation,
consisting of a concrete ramp, an 18 metre high wall and collars. They also
constructed substantial surface infrastructure. In October, WBHO executed the
first undercut blasts to commence underground development. Including some change
in scope of work, as of February 29, 2012, the Company has incurred R40.0
million (approximately $5.30 million) for civil construction work against an
original commitment of R35.6 million (approximately $4.70 million). During the
first quarter WBHO demobilized and handed over site control to underground
mining contractor JIC Mining Services (“JIC”) of South Africa. JIC mobilized to
site in August 2011 and first constructed maintenance buildings and facilities,
then commenced work into the underground on the planned twin barrel decline
system. At the time of writing, the larger conveyor belt decline has advanced
approximately 185 linear metres while the equipment decline has advanced
approximately 166 linear metres. Two cross cuts 10 metres in length have also
been completed between the declines, and a third is in progress. One re-muck bay
has been installed and sumps, ground support and steel sets have been installed
at the collars. Phase 1 is currently 55% to 60% complete, is on budget and
approximately within 10 to 12 weeks of being on schedule.
4
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
Ancillary servicing for the site at the central decline site,
including buildings, piping, cabling, fencing and security, has been completed
at the time of writing. A temporary power supply of 1.5MVa has been installed on
site and has been energized. A 10 MVa supply line is slated for completion and
connection in 2012. Permanent power service for the remaining 30 MVa is being
designed and engineered by South African electricity public utility Eskom, to be
supplied in late 2013. The Company has paid Eskom R 51.71 million ($6.83 million
at February 29, 2012) of an R 142.22 million (approximately $18.79 million at
February 29, 2012) commitment for delivery of power.
During the six month period geo-technical drilling and survey
work was completed at the planned site of the twin southern declines. A tender
process has been completed and the Company is now planning to let a contract for
earthworks and civil construction at the south decline site. Such work is
planned to commence shortly as the mining right has been granted at the time of
writing. The south decline box cut is being added to the Phase 1 approved scope
for construction and will be paid out of anticipated capital savings and/or
deferrals from the Phase 1 budget. The approximate R 30.0 million cost of the
south box cut will be offset by the deferral to Phase 2 of a similar sized,
Phase 1 budgeted, connection fee deposit to Eskom. The connection fee is not
actually due until well into Phase 2. During the period the Company has also
been working on design work and preparations for the Phase 2 construction of
milling, concentrating and tailings facilities.
During the second quarter the Company added 3 pieces of mobile
equipment to the fleet on site, utilizing savings recognized to date out of the
Phase 1 budget to make the purchase. An underground dump truck and a
load-haul-dump machine were delivered to site in February, 2012. A double boom
jumbo drill rig is en route to site at the time of writing. This equipment was
acquired to provide back up for existing fleet currently deployed on the
development of the central declines, and to ensure equipment is on site ready to
commence with the development of the southern declines upon grant of a formal
mining right for Project 1. In addition to the above, a 2.2 MVa stand by
generator was purchased and delivered to site in March 2012.
Subsequent to the end of the period, the Company was issued a
formal mining right by the DMR on April 4, 2012.
Project 1 – Activities in the year ending August 31, 2011
In December 2010, the Company approved a $100 million Phase 1
budget for the development of twin central declines into the Project 1 deposit,
which is now underway as described above. The Company committed $74 million
against its 74% share of this budget. Phase 1 included the purchase of surface
rights and facilities at a cost of R 130.0 million (approximately $17.17 million
at February 29, 2012). The remainder of the Phase 1 budget is being applied for
surface and earth works, including pads, lay down areas, a box cut, twin decline
access and limited level development. Work completed under the $100 million
Phase 1 budget is a component of the estimated total peak funding to build
Project 1.
In December 2010, the Company appointed DRA as EPCM contractor
for surface infrastructure and underground development. DRA assigned
approximately 30 full time professionals to oversee and plan the execution of
the development of surface infrastructure, power delivery, water delivery, civil
works and excavations and the development of underground tunnels to access ore
during Phase 1 construction. DRA’s scope of work included engineering, design,
construction management, administration and cost and schedule control.
In March 2011, the Company received a positive record of
decision from the Department of Mineral Resources of South Africa (“DMR”) for
its detailed underground development plans and environmental management program,
including the taking of a bulk sample. The consent of the DMR required
compliance with underlying regulations related to health, safety and
environment. A mining right application and draft social and labour program for
Project 1 was filed in April 2011 and was later accepted for processing by the
DMR. Application in terms of the National Environmental Management Act (NEMA)
was also accepted by the DMR.
5
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
During February, March and April 2011, the Company conducted
approximately 16,850 metres of infill drilling on the near surface portions of
the Project 1 platinum deposit in order to gain more detailed information for
metallurgical, geotechnical, mine planning and scheduling purposes. As a result
of this work, refinements to the scheduled mining during the first three or four
years of the planned Project 1 mine life was undertaken, modeled and
implemented. New geo-statistical information resulting from the latest borehole
data, combined with the modified modeling, mine planning and scheduling, has
resulted in immaterial changes to the reported reserves and resources. During
the execution of the development plan, changes to the estimated capital cost for
the development of the Project 1 may occur.
In May 2011, civil construction for Phase 1 of Project 1 began,
with the mobilization of WBHO, whom was responsible for major surface
infrastructure excavation and construction.
In July 2011, JIC was awarded the contract to develop twin
1,200 meter underground decline tunnels into the center of the Project 1
platinum deposit. JIC is operating as one of the underground mining contractors
at the producing Bafokeng Rasimone Platinum Mine immediately adjacent to the
Project 1 and currently operates as underground mining contractor on another six
platinum mines and one chrome mine in South Africa, employing approximately
7,200 people. JIC has a good safety record and has invested in an accredited
training facility near Project 1. Total primary underground development cost for
Phase 1 based on the JIC contract is estimated at R 206.85 million
(approximately $27.32 million on February 29, 2012), resulting in an estimated
cost per unit for underground development below the estimate in our 2009 Updated
Feasibility Study. In the period ended August 31, 2011, an initial pre-payment
of R 25.0 million (approximately $3.30 million on February 29, 2012) was
released to JIC after JIC provided an appropriate form of performance guarantee.
A further retention amount of R 20.69 million ($2.73 million on February 29,
2012) was released to JIC approximately ten days later. JIC is paid according to
progress invoicing as work is completed.
In midyear 2011, the Company entered into an agreement with the
State owned regional water supplier, Magalies Water, for a temporary 0.5 ML/day
water supply. The construction and connection of a production scale supply
pipeline to the existing, nearby Magalies service was completed in 2011. A water
off-take agreement for permanent water supply of 6 mega litres per day is being
finalized and that water supply is slated to be provided by late 2013. To
February 29, 2012 the Company has paid approximately R 2.0 million
(approximately $0.26 million on February 29, 2012) to Magalies for the temporary
water supply and the engineering of a permanent supply. To supply 6 mega litres
a day to Project 1, and to supply other users as part of a regional expansion,
Magalies will need to construct a series of new supply pipelines. The Company
will be required to make further payments to Magalies in return for the
production scale water supply of 6 mega litres per day.
In June 2011, the Company committed to an industry standard
form of “Wrap-around Liability” insurance. In March and September 2011, the
Company committed to Course of Construction insurance for Project 1. Three year
estimated cost of insurance is approximately $440,000. Additional insurance will
be required for Phase 2 construction and mine operation. During fiscal 2011, the
Company completed a comprehensive risk assessment for Project 1 with the
assistance of an international insurance broking firm.
Project 1- Financial Overview
The Company completed a definitive feasibility study (“FS”) in
July 2008 and an updated feasibility study entitled “Updated Technical Report
(Updated Feasibility Study) Western Bushveld Joint Venture (Elandsfontein and
Frischgewaagd”) (“UFS”) in October 2009 for Project 1, which was at that time a
portion of the Western Bushveld Joint Venture (“WBJV”) in South Africa. Included
in each study is a declaration of four element or “4E” reserve ounces of
combined platinum, palladium, rhodium and gold at the time of publication.
The Base Case for the UFS was modeled using 3 year trailing
metal prices at September 2009, including US$1,343 per ounce platinum, an
exchange rate of 8 Rand to the US Dollar and a 10% discount rate, resulting in a
pre-tax net present value of US $475 million for the project on a 100% of
project basis.
6
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
Applying a 5% discount rate resulted in a pre-tax net present
value of US $981 million on a 100% of project basis. The UFS model does not
include escalation of costs or metal prices due to inflation. The Base Case also
calculated a strong Internal Rate of Return “IRR” (pretax) of 23.54% . At April
6, 2012 the USD was at 7.86 to the Rand and three year trailing basket prices
are higher than at the time of the UFS.
The UFS estimated average life-of-mine cash operating costs to
produce concentrate at R525 (approximately US$65.63) per tonne of ore or R4,208
(approximately US$526) per 4E ounce. The Merensky Reef layer represents the
first 15 years of production and the Merensky basket price per 4E ounce is
modeled at US$1,185 (3 year trailing prices to September 2009) and US$1,025
(prices recent to September 2009). The UG2 layer represents the balance of
modeled production. The UG2 basket price per 4E ounce was modeled at US$1,433 (3
year trailing prices to September 2009) and US$1,068 (prices recent to September
2009). The model includes a subsequent average 15.16% discount from the metal
price to estimate the smelter pay discount.
The project, as described in the 2009 UFS, has an estimated
life of 22 years with 9 years at steady state production of 234,000 to 300,000
4E ounces per year. Capital costs for the mine and concentrator were estimated
at R3.55 billion or US$443.13 million for peak funding and R4.76 billion or
US$595.04 million for life of mine funding, both at an exchange rate of 8 Rand
to the USD.
Following the completion of the 2009 UFS, the Company completed
further drilling, metallurgical work, mine design and cost estimation work. The
Company has also gained construction and procurement experience under the Phase
1 development program currently underway. Major contracts, project costing and
final scheduling for Phase 2 development are in process of final determination.
A revised cost budget estimate for inclusion in the final financial model for
the lending banks is currently a work in progress.
Some aspects of the project are currently being costed at or
below UFS level, while escalation is being seen in other cost areas, such as
consumable inputs, labour, construction and capital equipment. Total peak
funding required for Project 1 will likely see escalation of approximately 14%
since the 2009 UFS. Operating costs per tonne will likely see an approximate 24%
escalation since the 2009 UFS. The current Rand exchange rate is at or near the
UFS long term assumption of 8R to the USD. Basket 4E metal prices (platinum,
palladium rhodium and gold) are currently approximately 11% higher on the
Merensky Reef than at the UFS level assumptions, mostly offsetting the effects
of cost escalation. The escalation estimated above is in keeping with inflation
rates and industry experience in South Africa since 2009.
On April 1, 2012 the 10% Secondary Tax on Corporations in South
Africa was replaced with a new Dividend Tax. Under existing tax treaties with
Canada this change had the effect of reducing the Company’s effective tax burden
at the parent company level by 5%.
In conjunction with ongoing cost estimation work and banking
preparations, an updated project schedule for Phase 2 is being completed by the
Company. First ore production is currently expected to commence in late 2013,
with concentrate sales commencing in mid-2014. The Company is considering
several current opportunities for sale of early ore production. The Merensky
Reef is scheduled to be mined in the first approximately 10 years of the mine
life and current estimates of steady state production are unchanged or slightly
higher than estimated in the UFS.
On August 2, 2011 the Company announced the appointment of four
international commercial banks to the role of mandated lead arrangers for the
placement of a USD $260 million project finance loan, representing approximately
60% of the estimated Project 1 capital cost requirements. The banks have all
received preliminary credit committee approval for the loan and are currently in
process of completing loan documentation, legal and technical due diligence. In
addition to the loan facility, the project financing is planned to include a USD
$25.0 million working capital facility. Completion of the project financing will
be subject to certain items, including the completion of an off take agreement
and the issue of a formal mining right from the Government of South Africa
(which was issued on April 4, 2012). The Company anticipates the need for the
Company to seek additional equity funding in 2012. The Company and Wesizwe will
also be required to provide a cost overrun facility for the project, the amount
and nature of which is still to be determined.
7
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
Phase 2 development for Project 1 will commence upon the grant
of a final mining authorization, the completion of a concentrate off-take
agreement and the arrangement of a commercial debt facility or other funding for
the project. A mining authorization was issued to the Company on April 4, 2012
and the remaining two of these requirements are currently being advanced by the
Company.
Project 1 - Mineral Resources and Reserves
The Company provided a statement of reserves for Project 1 in
the Updated Feasibility Study and an updated statement of resources for Project
1 in a NI 43 101 technical report dated November 20, 2009 entitled “An
Independent Technical Report on Project Areas 1 and 1A of the Western Bushveld
Joint Venture (WBJV) Located on the Western Limb of the Bushveld Igneous
Complex, South Africa” (the “Project 1 Report”). An updated NI 43 101 technical
report dated August 31, 2010 entitled “Technical Report on Project 3 Resource
Cut Estimation of the Western Bushveld Joint Venture (WBJV) Located on the
Western Limb of the Bushveld Igneous Complex, South Africa” (the “Project 3
Report”) was filed with respect to Project 3. Project 1 hosts an estimated 2.801
million measured four element or “4E” ounces of platinum, palladium, rhodium and
gold (14.067 million tonnes @ 6.19 g/t), 5.361 million indicated 4E ounces
(30.392 million tonnes @ 5.49 g/t) and 0.047 million inferred 4E ounces (0.176
million tonnes @ 8.33 g/t). Project 3 hosts an estimated 1.939 million indicated
4E ounces (11.104 million tonnes @ 5.43 g/t) and 0.076 million inferred 4E
ounces (0.443 million tonnes @ 1.47 g/t). Of the resources stated above for
Project 1, there are 1.756 million 4E ounces (11.764 million tonnes @ 4.64)
categorized as proven reserves and 2.91 million 4E ounces (90.464 million tonnes
@ 4.57 g/t) categorized as probable reserves. Reserves and resources reported
above are from combined Merensky and UG2 reef tonnes. The Company holds a 74%
interest in the 4E ounces attributable to Project 1 and Project 3 as described
above. New geo statistical information and ongoing mine design parameters
resulting from recent infill borehole data, combined with modified modeling,
mine construction steps and scheduling being completed at the time of writing of
this MD&A, could result in changes to the reported reserves and resources
for Project 1. The Company will report any material change to the published
estimates of reserves and resources for Project 1.
Additional information regarding grades, prill splits, sampling
and reserve and resource calculations can be found in the technical reports
described above as filed on SEDAR at www.sedar.com and on EDGAR at www.sec.gov.
Reserves are a sub-set of measured and indicated
resources included in the UFS and take into account mining factors and are not
in addition to the resources.
Project 1 - Infrastructure and Metal Recovery
The UFS design for metallurgical extraction utilizes a standard
plant design similar to other nearby plants in the Bushveld complex operating on
the same reefs. The plant is designed with circuits that can process Merensky
Reef, UG2 Reef or a blended feed. The Merensky Reef is the target of initial
mining because of its higher grade and low chrome content. The concentrator has
been designed and costed in the UFS based on a treatment rate of 160,000 tonnes
per month, rather than on 140,000 tonnes per month as in the FS. For the
concentrator to treat this increased quantity of reef, the recovery has been
reduced with a discount of up to 2.5% for treatment in excess of nominal “name
plate” capacity.
Metallurgical testing completed by the Company and the
published experience of the adjacent operating mines support a “name plate”
capacity plant recovery rate estimate of 87.5% of platinum, palladium, rhodium
and gold on the Merensky Reef and 82.5% on the UG2 Reef. Recoveries of 45% for
nickel and 70% for copper are also modeled for the Merensky Reef. Ruthenium and
Iridium are also included as minor contributors.
8
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
The mine infrastructure in the UFS estimates includes the
entire required surface infrastructure for a standalone mine including milling,
concentrating and tailings facilities, as well as water, power, underground
access and ventilation to establish full production.
Project 1 - History of Acquisition
On October 26, 2004, the Company entered into the WBJV with a
subsidiary of Anglo Platinum Limited (“Anglo”) and Africa Wide to pursue
platinum exploration and development on combined mineral rights that would
eventually cover approximately 72 square kilometres on the Western Bushveld
Complex of South Africa. The Company and Anglo Platinum each held a 37% working
interest in the WBJV, while Africa Wide held a 26% working interest. The area of
the WBJV was comprised of three functional areas described as Project 1 (100%
WBJV), Project 2 (50% WBJV: 50% Wesizwe Platinum Ltd.) and Project 3 (100%
WBJV). In April 2007, the shareholders of Africa Wide sold 100% of their company
to Wesizwe.
Also, in 2004, the Company acquired the surface rights to the
365.64 hectares Elandsfontein farm and its underlying mineral rights. The
Elandsfontein mineral titles were transferred to project operating company,
Maseve on April 22, 2010 while the surface rights, valued at half of the
original acquisition cost, remain under title to the Company.
During 2008, the Company purchased surface rights adjacent to
the Project 1 deposit area measuring 216.27 hectares for R 8.0 million
(approximately $1.09 million) and the Company also acquired surface rights
directly over a portion of the Project 1 deposit area measuring 358.79 hectares
for a total of R 15.69 (approximately $2.14 million). The rights and title to
the above two properties remain with the Company.
Based on the WBJV resource estimate contained in the FS, and
under the terms of the original WBJV agreement, on April 22, 2010 the Company
paid an equalization amount due to Anglo in the amount of $24.83 million (R
186.26 million).
Also on April 22, 2010, the partners of the WBJV completed the
restructuring, a transaction dissolving the WBJV and reorganizing its underlying
assets. Wesizwe acquired all of Anglo’s mineral interests underlying the WBJV,
retained Anglo’s interests to Project 2, and then transferred all of Anglo’s
interests underlying Projects 1 and 3 into project operating company Maseve. The
Company transferred its interests in the mineral rights underlying Projects 1
and 3 into Maseve, and rescinded its interests in Project 2 to Wesizwe. Post
transaction Wesizwe retained 100% of Project 2 and Maseve obtained 100% of
Projects 1 and 3. Anglo received an approximate 26% interest in the equity, at
that time, of Wesizwe.
In exchange for its 18.5% interest in Project 2 the Company
effectively received a 17.75% interest in Maseve. The Company also received a
37% interest in exchange for its share of Projects 1 and 3, bringing its
holdings at April 22, 2010 in Maseve to 54.75% . Wesizwe received a 45.25 %
initial interest in Maseve. The sale of the Company’s 18.5% interest in Project
2 was accounted at an estimated fair value of $65.42 million on April 22, 2010,
versus an historic cost of $19.80 million, for a gain of $45.62 million. The
transfer of the Company’s 37% interest in Projects 1 and 3 into Maseve was
accounted for as a reorganization of existing business and was transferred into
Maseve at book cost.
According to the terms of the April 22, 2010 reorganization,
the Company acquired a further 19.25% interest in Maseve in exchange for
subscriptions totalling R 408.81 million (approximately $59 million at January
14, 2011), thereby increasing its shareholding to 74%. The subscription funds
are held by Maseve in escrow and are being applied towards Wesizwe’s 26% share
of expenditures for Projects 1 and 3.
In August 2010 the Company acquired surface rights covering
1,713 hectares overlaying portions of Project 1, including accommodation
facilities, for approximately $18.8 million (R 130.0 million). The Company has
assigned these rights to Maseve. The purchase price was part of the Phase 1
development budget for Project 1 as described above. The Company is in process
of transferring additional surface rights over the project area, at cost, into
Maseve in order to facilitate the development of Project 1.
9
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
Other South Africa Properties
Exploration expenditures during the six months ended February
29, 2012 on projects in South Africa other than Project 1 and Project 3 totaled
$1.73 million (February 29, 2011 - $0.96 million). Cost recoveries during the
period in the amount of $1.77 million (February 29, 2011 - $0.96 million) were
received from joint venture partners.
Northern Limb, Bushveld - War Springs
and Tweespalk Properties
In March 2008, the Company reported an inferred resource on a
100% basis of 1.676 million ounces 3E (platinum, palladium and gold) at a grade
of 1.11 g/t with a minor credit for copper and nickel. Additional information
regarding grade, prill splits, sampling and resource calculations can be found
in NI 43-101 technical report dated June 18, 2009 entitled “Revised Inferred
Mineral Resource Declaration War Springs (Oorlogsfontein 45K2), Northern Limb
Platinum Property, Limpopo Province, Republic of South Africa” (the “War Springs
Report”) filed on SEDAR and on EDGAR at www.sec.gov.
The War Springs mineral resource is characterised by two
distinct reef layers, termed the "B" and "C" reefs. Both reefs are typically
greater than 6 metres thick. The reefs outcrop on surface and extend down dip in
parallel sheets at a 65 degree angle to a depth of 400 metres, remaining open at
depth. Of the 22 boreholes drilled to February 2006, and which were used in the
resource calculation, 15 boreholes intersected the “B” Reef and 8 boreholes
intersected the “C” Reef. A total of 9,926 samples were taken for analysis.
Drilling results from Phase 1 and 2 covering approximately 2,200 metres of
strike length on 250 metre spacing, combined with a review of economic cut-off,
form the basis of the updated Inferred Mineral Resource estimate reported in the
War Springs Report. Since March 2009 a total of 17,222 metres of drilling in 20
boreholes have been completed on the War Springs project with JOGMEC funding.
Total expenditures incurred by JOGMEC to February 29, 2012 on War Springs
amounted to approximately $2.7 million. During the first quarter, the 2011
drilling program was completed and JOGMEC indicated that they do not plan to
fund further work on this project.
Black Economic Empowerment groups Africa Wide, a subsidiary of
Wesizwe, and Taung Minerals (Pty) Ltd., a subsidiary of Platmin Limited, have
each acquired a 15% interest in the Company’s rights to the War Springs project
carried to bankable feasibility. Africa Wide also holds a 30% participating
interest in the Tweespalk property. The Company retains a net 70% project
interest in both the War Springs and the Tweespalk properties.
Sable Joint Venture, South
Africa
During 2009, the Company acquired by staking various
prospecting permits west of Pretoria along the trend of the south eastern part
of the Western Limb. The territory, named the Sable Joint Venture project area,
is under agreement to a black economic empowerment group for a 26% interest and
Sable Platinum Mining (Pty) Limited (“Sable”) as to a 51% interest in exchange
for Sable funding approximately $6.0 million (R 42.0 million) in work on the
project. To date, exploration work consisting of mapping, soil sampling,
geophysical surveys and drilling has been undertaken. Drilling was completed in
the fiscal first quarter and will continue in calendar 2012. Results will be
released in the months ahead. To January 2012 a total of 6,085 metres had been
drilled in 7 boreholes on the project area. The Company served as operator of
the project until mid-march 2011, at which time operatorship was transitioned to
Sable. The Company wished to step down as operator so that it could focus on its
exploration resources on the Waterberg project located on the North Limb. Total
cumulative expenditures incurred by Sable Platinum to February 29, 2012 amounted
to approximately $ 1.1 million.
Waterberg Venture, South
Africa
In September 2009 and into 2011, the Company was granted
several adjacent prospecting rights for a 137 square kilometre area named the
Waterberg Project, north of the known North Limb of the Bushveld Complex. The Company held an initial 74% interest in the
project and private South African Black Economic Empowerment firm, Mnombo Wethu
Consultants CC (“Mnombo”), holds a 26% interest.
10
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
In October 2009, the Company entered an agreement with JOGMEC
and Mnombo whereby JOGMEC may earn up to a 37% interest in the project for an
optional work commitment of US$3.2 million over 4 years, while at the same time
Mnombo is required to match JOGMEC’s expenditures on a 26/74 basis.
On November 7, 2011 the Company entered into an agreement with
the existing shareholders of Mnombo whereby the Company will acquire 49.9% of
the issued and outstanding shares of Mnombo in exchange for cash payments
totalling R 1.2 million (one half paid to date) and paying for Mnombo’s 26%
share of project costs to feasibility. When combined with the Company’s 37%
direct interest in the Waterberg Project (after JOGMEC earn-in), the 12.974%
indirect interest to be acquired through Mnombo will bring the Company’s
effective project interest to 49.974% . Mnombo remains over 50% held and
controlled by historically disadvantaged South Africans. All of the shareholders
of Mnombo have entered into a formal agreement governing the administration of
the company.
Total cumulative project expenditures incurred to February 29,
2012 amounted to approximately $2.24 million, of which JOGMEC has funded
approximately $2.22 million. At February 29, 2012 the Company has accrued a
liability in the amount of $719,221 against its commitment to fund Mnombo’s
share of expenditures to feasibility.
Magnetic, gravity, and general trends all indicated that the
North Limb extends under shallow cover in the Waterberg area. In early 2011,
drilling confirmed the presence of BIC sequences and results announced on
November 9, 2011 confirmed the presence of two PGE bearing zones or reefs (named
T1 and T2) with significant values. Initial drill intercepts returned 3.47 g/t
platinum, palladium and gold (2 PGE+Au) over 3.5 meters and 7.00 g/t 2PGE+Au
over 5.0 meters at vertical depth of approximately 660 meters.
On February 6, 2012 the Company announced new drill intercepts
for the T2 reef in hole WB005 at a depth of 605 metres of 4.75 metres grading at
4.77 g/t 3E (platinum, palladium and gold) and in hole WB008 at a depth of 474
metres of 5.25 metres grading 7.28 g/t. These intercepts are located 250 and 500
metres up the apparent dip from Hole WB003 that intersected 3.50 metres grading
3.47 g/t 3E in the T1 reef and 5.00 metres grading 7.00 g/t 3E in the T2 reef as
announced November 09, 2011. These reef layers have clearly identifiable rock
types that can be correlated from hole to hole. Hole WB005 has sulphide
mineralization immediately below the reported intercept for which assays
returned anomalous grades over a significant thickness. In hole WB008 the T1 and
T2 reefs have only a 25cm middling which is mineralized and therefore the
reported interval is from a rock type point of view a combined T1.2 Reef.
In February of 2012 the Company and Mnombo staked (by filing
applications on the South African computerized application system) additional
claims for prospecting permits covering approximately 800 square kilometres
adjacent to the Waterberg project area. The new applications are based on the
potential for a significant area of new Bushveld Complex modelled from
geophysics and the Waterburg drill holes to date in the southern end of the
project area. Several of these new claims immediately adjacent to the Waterberg
project have been added to the joint venture with JOGMEC, while the majority of
the new claims are held exclusively by the Company and Mnombo on a 74/26 basis.
The filing of these new prospecting permits has been acknowledged by the DMR,
but currently remains subject to formal issuance. Directly and indirectly
through its holdings in Mnombo, the Company would hold an 86.9% interest in the
new permit areas.
At the time of writing 8 drill rigs have been mobilized to the
Waterberg project area and additional reef intercepts have been drilled and are
awaiting assay results before publication. Geological correlation has been good
in the new intercepts.
11
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
Drilling through the Waterberg sediments by the joint venture
has discovered a previously unrecognized portion of the Bushveld Complex North
of the North Limb. Based on the drilling to date and detailed geophysics by
Platinum Group and the Joint Venture partners the new area of Bushveld is
estimated to cover at least 100 square kilometres.
The current early interpretation of the geology is that in this
area the Bushveld intruded into the bottom of the Waterberg sedimentary sequence
based on cross cutting relationships. This is thought to be a new geological
setting. The T1 reef is a Harzburgite changing to a Troctolite with coarse
interstitial copper nickel sulphides. The T2 reef is within a distinctive
elongated wispy feldspar norite unit with course to very fine grained
interstitial sulphides. Hanging wall, middling and footwall units can be
correlated in the holes reported above. The intercepts are interpreted to be on
an apparent dip of about 20 degrees. Drilling is continuing up the apparent dip
along a section following holes 3, 5 and 8 at 250 metre spacing.
The overall orientation and scale of the layered sequence and
the Bushveld Complex is not yet known. Holes WB002 and WB004 did not have
significant mineralization although the layered and mineralized horizons could
be identified in WB002. These holes are located in areas from 1.5 to 2.9
kilometres of the reported closer spaced intercepts in holes 3, 5 and 8. The
geological understanding of the Waterburg project is in its early stages.
At the time of writing, assay values for most of the above
intercepts for rhodium, copper and nickel remain outstanding. A total of 11,974
metres have been drilled in 3 completed boreholes, while 8 boreholes remain
underway on the project area. The Company is the operator of the project.
CANADIAN PROPERTIES
Mineral property acquisition and capital costs deferred during
the six months ended on projects in Canada totaled $5,576 (February 29, 2011- $
nil). Exploration costs incurred in the period for Canadian properties totaled
$0.81 million (February 29, 2011- $41,812).
Lac des Iles - Thunder Bay North Properties,
Ontario
The Company maintains a large mineral rights position in the
Lac des Iles – Thunder Bay North area, Ontario as a strategic holding against
increasing prices for palladium and platinum. Included in these holdings are
claims staked in early 2011 as well as a continued 100% interest in claim that
make up the Lac Des Iles River, Shelby Lake and South Legris properties, 11
claims of which are subject to 2.0% NSR royalties, which the Company may buy
back.
The Company’s Ontario exploration program was active in the
period. During the period the Company held 100% interest in a total of 612.32
square kilometers, within the Lac des Iles – Thunder Bay North region. The
majority of the holdings are made up of new properties acquired by staking early
in 2011, which were identified utilizing in-house compilation and modeling of
geophysics, geochemistry and work completed by the company in the area over the
past 10 years. Since the end of period and to date a number of claims totaling
69.44 square kilometres in and around the Lac des Gras area have been dropped.
The core 11 claims (with NSR) of the Shelby Lake and South Legris properties
have been maintained. Land holdings within the Thunder Bay District presently
total 542.88 square kilometres. In addition, the Company retains a majority
interest in the 67.04 square kilometre Agnew Lake property, within the Sudbury
Mining District.
In the six months ended February 29, 2012, the company
terminated the option agreement on Benton Resources Corp’s ("Benton") Bark Lake
platinum-palladium project. An initial cash payment of $35,000 was made to
Benton and $283,501 has spent on exploration on the property. Work consisted of
a reconnaissance VTEM airborne geophysical survey and the drilling of 1383
metres in 8 diamond drill holes. The Company reviewed the results of the
exploration work and made the decision not to proceed with further work on this
property.
12
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
All of the properties acquired in 2011 within the Thunder Bay
District are targeted on a new mineralization type in younger intrusive rocks
where contained platinum is equal or greater than palladium. Platinum Group’s
pre-existing projects are targeted on older intrusive rock types like that at
North American Palladium’s Lac des Iles Mine where palladium is the dominant
platinum group metal, or “PGM”. Historically, North American deposits have been
dominated by palladium rather than rarer and more valuable platinum. Some new
exploration in the Thunder Bay area has demonstrated previously unexplored
potential for platinum in pipe like intrusions or conduits.
To date, five of the 100% owned properties and the Bark Lake
Option have been drill tested based on airborne geophysics survey results,
geological ground work, geochemistry and compilation of historic data. To date,
a total of 4,274 metres have been drilled in 17 holes, of which 2,891 metres in
9 holes have been drilled on 100% owned properties.
Two diamond drill holes totaling 753 metres and assays were
completed within the Q2 period on the Triangle Property. One diamond drill hole
with a total depth of 501 metres tested a chargeability high from the VTEM
survey.
To date none of the drilling by the Company has intersected the
new type of platinum mineralization found in the district. The Company is
considering its potential programs for 2012 in Thunder Bay in context of its
other global exploration opportunities.
Northwest Territories Property
The Company’s Northwest Territories exploration program was
active in the period. During the six month period ending February 29, 2012,
$176,532 in exploration costs were incurred. Costs include; research and
compilation, camp maintenance, contractor retainer fees and fuel purchase and
supply.
In September 2011, the Company purchased the Providence
Copper-Nickel-Cobalt-Platinum Group Metals (“Cu-Ni-Co-PGM”) Property from Arctic
Star Exploration (Arctic Star) for a payment of $50,000 and a 1.0% NSR royalty.
The claims comprising the Providence property will be brought to lease once a
crown survey has been completed. To date, the first year lease payment and
application fees have been paid. Total acquisition costs to date are $78,216.
The camp and associated Land Use Permit have been purchased for
an additional $20,000 from Arctic Star. The Company has an active land use
permit to conduct exploration on the property and maintain a camp. An extension
granted by the Northwest Territories Mining Recorder for the completion of the
survey of the claims to lease until September 28, 2012 still stands.
The property is comprised of 13 mineral claims totaling 133.66
square kilometres and is located approximately 70 km west of the Diavik Diamond
Mine, NWT. The property covers approximately 20 kilometers of a recently
recognized belt of mafic to ultramafic rocks that is host to the first discovery
of magmatic Cu-Ni-Co-PGM massive sulphide mineralization in the Slave Craton.
The ultra-mafic suite of rocks, known as the Providence Lake Belt, are
interpreted to be Komatiitic to ultramafic lavas or intrusive sills. Drilling by
Arctic Star has shown that the Cu-Ni-Co-PGM mineralization is hosted within, and
at the base of the ultramafic flow/intrusive sill sequence. The ultramafic host
to the mineralization is stratiform to a basaltic hanging wall and a
metasediment footwall. The hanging wall basaltic flows contain intercalated
sulphide-rich units. The dimensions of the massive sulphide mineralization
defined to date ranges in thickness from 0.3m to 5.0m and exceeds 450 m strike
length and 150 m (vertical) depth. The mineralized horizons remain open along
strike in either direction and to depth.
The Company continues to compile and re-interpret the large
amount of data supplied by Arctic Star and has secured contractors for the
Spring-Summer work programs. The Phase 1, Spring program is currently under way,
consisting of camp supply and geophysics to define and test targets derived from
compilation and re-interpretation work. A step out drill program to further
define the extents of known Cu-Ni-Co-PGM mineralized zone is planned. The
Company has established a new $1.5 million forward budget for this work. Work on the property commenced in mid-March, 2012. After
the end of period a geophysical survey over the known mineralization zone was
completed and is currently being extended along strike to test for similar
responses. Drilling is planned for after ice break up in June-July, 2012.
13
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
3. DISCUSSION OF OPERATIONS AND FINANCIAL CONDITION
A) Results of Operations
Three Months Ended February 29, 2012
For the three months ended February 29, 2012, the Company
incurred income after taxes of $0.50 million (February 28, 2011 – loss of $2.28
million). General and administrative expenses totaled $2.13 million (February
28, 2011 - $2.38 million). The current period’s costs aren’t materially
different than the comparative period. The Company has seen a modest increase in
South African field staffing and maintained a similar level of corporate
staffing and consulting services as compared to the same period last year. Stock
based compensation expenses totaled $0.03 million (February 28, 2011 - $0.15
million). Stock options were granted to employees and consultants in the current
and comparative periods. The difference in expense resulted from changes in the
number of stock options granted, share price volatility and interest rates.
Foreign exchange gain during the period was $1.73 million (February 28, 2011–
loss $0.33 million). The gain in the current period resulted from the effect of
the Rand’s increased value on cash balances held in Rand. Interest earned in the
quarter totaled $1.08 million as compared to $0.73 million in the comparative
three month period in 2011. The increase in interest earned is due to higher
average cash holdings, including higher Rand balances, which earn at a higher
interest rate as compared to dollar balances.
Six Months Ended February 29, 2012
For the six months ended February 29, 2012, the Company
incurred a net loss after taxes of $4.82 million (February 28, 2011 – loss of $
6.62 million.) General and administrative expenses totaled $3.44 million
(February 28, 2011 - $3.62 million). Costs in the current period aren’t
materially different than the comparative period. The Company has seen a modest
increase in South African field staffing and maintained a similar level of
corporate staffing and consulting services as compared to the same period last
year. Stock based compensation expenses totaled $1.94 million (February 28, 2011
- $3.67 million). Stock options were granted to employees and consultants in the
current and comparative periods. The difference in expense resulted from changes
in the number of stock options granted, share price volatility and interest
rates. Foreign exchange loss during the period was $1.45 million (February 28,
2011– loss $0.14 million). The loss in the current period resulted from a weaker
Rand, decreasing the value of cash balances held in Rand. Interest earned in the
period totaled $2.16 million as compared to $0.90 million in the comparative
period. The higher interest earned is due to higher cash holdings, including
higher Rand balances, which earn a higher interest rate as compared to dollar
balances.
14
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
Quarterly Financial Information
The following table sets forth selected quarterly financial
information for each of the last eight quarters.
Quarter Ending
(3)
|
Interest & Other
Income(1)
|
Net (Loss)
Income
(2)
|
Basic (Loss)
Earnings
per Share |
| February 29, 2012 |
$1,078,128 |
$498,107 |
0.00 |
| November 30, 2011 |
$1,083,092 |
($5,313,129) |
($0.03) |
| August 31, 2011 |
$1,805,073 |
$352,450 |
$0.00 |
| May 31, 2011 |
$1,084,648 |
($2,619,602) |
($0.01) |
| February 28, 2011 |
$730,640 |
($2,289,890) |
($0.02) |
| November 30, 2010 |
$164,937 |
($4,335,209) |
($0.03) |
| August 31, 2010 |
$9,352 |
($4,140,280) |
($0.04) |
| May 31, 2010 |
$220,145 |
$31,183,948 |
$0.33 |
Explanatory Notes:
| |
(1) |
The Company earned interest income from interest bearing
accounts held by the Company. The amount of interest income earned
correlates directly to the amount of cash on hand during the period
referenced. Quarterly interest income was higher in 2011 and 2012 than in
past years due to higher cash balances on hand. The balance of funds held
in Rand can also affect the amount of interest earned, as Rand balances
earn significantly higher rates of interest than can be earned at present
in Canadian dollars. |
| |
|
|
| |
(2) |
Net income (loss) by quarter is often materially affected
by the timing and recognition of large non-cash income, expense or
write-off charges. The quarter ended November 30, 2011 included a foreign
exchange loss of $3.2 million which as noted above was due to the
weakening of the Rand against the Canadian dollar. However, the Rand
recovered in the quarter ending February 29, 2012 resulting in a gain on
foreign exchange of $1.73 million. The quarter end November 30, 2011 also
included a non-cash expense for stock based compensation of $1.91 million.
The quarter ended August 31, 2011 included a foreign exchange loss of
$3.37 million due to the movement of the Rand against the Canadian dollar
and an accrual for a future income tax recovery of $2.07 million related
to mineral property expenditures. The quarter ended May 31, 2011 included
a non-cash charge for stock based compensation in the amount of $2.9
million. The quarter ended November 30, 2010 included a non-cash charge
for stock based compensation in the amount of $3.5 million. The quarter
ended May 31, 2010 included a non-cash realized gain on the deemed sale of
the Company’s 18.5% interest in Project 2 of the WBJV. After adjusting out
these non-cash charges, the results for the quarters listed show a more
consistent trend, with general growth in expenses over time in accordance
with the Company’s increased exploration, development and corporate
activities. |
| |
|
|
| |
(3) |
Quarters ending in fiscal year 2011 have been restated in
accordance with IFRS. Stated quarters prior to the transitional date of
September 1, 2010 are based on Canadian Generally Accepted Accounting
Principles. |
B) Dividends
The Company has neither declared nor paid dividends on its
common shares. The Company has no present intention of paying dividends on its
common shares, as it anticipates that all available funds will be invested to
finance the growth of its business.
C) Trend Information
Other than the financial obligations as set out in the table
provided at Item f) below, there are no demands or commitments that will result
in, or that are reasonably likely to result in, the Company’s liquidity either
increasing or decreasing at present or in the foreseeable future. The Company
will require additional capital in the future to meet both its contractual and
non-contractual project related expenditures. It is unlikely that the Company
will generate sufficient operating cash flow to meet all of these expenditures
in the foreseeable future. Accordingly, the Company will need to
raise additional capital through debt financing, by issuance of securities, or
by a sale or partnering of project interests in order to meet its ongoing cash
requirements. See discussions at item 3. a) "Results of Operations" above and at
item f). "Liquidity and Capital Resources" below.
15
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
D) Related Party Transactions
During the period, $358,198 (February 28, 2011 - $607,374) was
paid to non-independent directors for salary, consulting and bonus. At February
29, 2012, $27,261 was included in accounts payable (February 28, 2011 - $Nil)
and $7,995 was included in accounts receivable (February 28, 2011 - $Nil).
During the period, $98,000 (February 28, 2011 - $6,000) was
paid to independent directors for directors fees and services. At February 29,
2012, $Nil was included in accounts payable (February 28, 2011 - $Nil).
During the period, the Company provided accounting, secretarial
and reception services at market rates for day-to-day administration and
accounting to Nextraction Energy Corp. (“Nextraction”), a company with three
directors in common (R. Michael Jones, Frank Hallam and Eric Carlson). Fees
received have been credited by the Company against its own administrative costs.
The Company received service fees of $81,300 (2011 - $51,000) during the period
from Nextraction.
During the period, the Company provided accounting, secretarial
and reception services at market rates for day-to-day administration and
accounting to West Kirkland Mining (“WKM”), a company with three directors in
common (R. Michael Jones, Frank Hallam and Eric Carlson) and two common officers
(R. Michael Jones and Frank Hallam). Fees received have been credited by the
Company against its own administrative costs. The Company received service fees
of $51,000 (2011 - $51,000) during the period from WKM.
During the year ended August 31, 2005, the Company entered into
an office lease agreement with Anthem Works Ltd. (“Anthem”), a company with a
director in common (Eric Carlson). During the period, the Company accrued or
paid Anthem $44,145 under the office lease agreement (2011 - $43,202).
All of the above transactions are in the normal course of
business and were completed and measured at estimated market rates.
E) Off-Balance Sheet Arrangements
The Company does not have any special purpose entities nor is
it party to any arrangements that are excluded from the balance sheet.
F) Liquidity and Capital Resources
Accounts receivable at period end totaled $3.82 million (2011 -
$1.84 million) being comprised mainly of value added taxes refundable in South
Africa. Accounts payable at period end totaled $6.90 million (2011 - $5.98
million).
Apart from net interest earned on cash deposits during the six
months ended February 29, 2012 of $2.16 million (2011 - $0.90 million), the
Company had no sources of income. The Company’s primary source of capital has
been from the issuance of equity. At February 29, 2012 the Company had cash and
cash equivalents on hand of $47.70 million compared to $75.56 million at
February 28, 2011. The decrease in cash since the comparative period is
primarily due to the Company’s expenditures on Project 1 and to ongoing overhead
and administration costs. At February 29, 2012 exchange rates, and including
interest earned, an additional cash balance of $42.91 million (August 31, 2011 -
$47.72) remained in escrow in a restricted cash account on behalf of Wesizwe. To
February 29, 2012, a total of $13.79 million (August 31, 2011 – $11 million) has
been withdrawn from escrow against Wesizwe’s 26% share of project
expenditures.
16
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
During the six months ended February 29, 2012, the Company
issued a total of Nil (February 28, 2011 – 83,499,750) common shares, therefore
cash proceeds during the period were Nil (February 28, 2011 - $158.58 million).
The proceeds in the period ended February 28, 2011 resulted primarily from a
bought deal financing, including an over-allotment, for gross proceeds of
$143.81 million on the issue of 70.15 million shares. Issue costs, including a
5.5% commission to the Agents and their legal costs, totaled $8.44 million. Cash
proceeds from equity issuances are primarily spent on mineral property and
surface right acquisitions, exploration and development as well as for general
working capital purposes. The balance of cash outflows is made up of management
and consulting fees and salaries, and other general and administrative expenses.
Proceeds from the 2010 financing were also used to acquire a further 19.25%
interest in Maseve for subscriptions in the amount of R 408.8 million
(approximately $59 million as of January 14, 2011), thereby increasing the
Company’s shareholding in Maseve to 74%. According to the terms of the April 22,
2010 re-organization of the WBJV, as noted above, this subscription amount was
placed into escrow in Maseve in order to fund Wesizwe’s 26% ongoing share of
project costs. The Company is also funding its 74% share of a Phase 1
development budget for Project 1 of $100 million into Maseve.
The Company receives lump sum cash advances at various times as
laid out in agreed budgets from its partners to cover the costs of joint venture
projects.
The following table discloses the Company’s continual
obligations for optional mineral property acquisition payments and contracted
office and equipment lease obligations. Apart from a possible buy-out of the War
Springs and Tweespalk projects, which optional acquisition payments are included
in explanatory notes to the following table, the Company has no other property
acquisition payments due to vendors under mineral property option agreements.
The Company has no long term debt or loan obligations.
| Payments
by period in Canadian Dollars |
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
< 1 |
|
|
1 – 3 |
|
|
3 – 5 |
|
|
> 5 |
|
| |
|
Total |
|
|
Year |
|
|
Years |
|
|
Years |
|
|
Years |
|
| Payments (War Springs & Tweespalk)(1)
|
$ |
76,020 |
|
$ |
15,204 |
|
$ |
30,408 |
|
$ |
30,408 |
|
$ |
- |
|
| Lease Obligations |
|
332,743 |
|
|
72,279 |
|
|
204,546 |
|
|
55,918 |
|
|
- |
|
| Eskom–Power (2) |
|
11,956,240 |
|
|
7,994,642 |
|
|
3,961,598 |
|
|
- |
|
|
- |
|
| Insurance contracts |
|
205,889 |
|
|
72,666 |
|
|
133,223 |
|
|
- |
|
|
- |
|
| Other miscellaneous |
|
110,338 |
|
|
110,338 |
|
|
- |
|
|
- |
|
|
|
|
| Totals |
$ |
12,681,230 |
|
$ |
8,265,129 |
|
$ |
4,329,775 |
|
$ |
86,326 |
|
$ |
- |
|
Explanatory Notes:
(1) The Company pays annual prospecting fees to the vendors of
US$3.25 per hectare. The Company has the option to settle the vendors’ residual
interests in these mineral rights at any time for US$690 per hectare.
(2) The Company’s project operating subsidiary Maseve has
entered into a long term electricity supply agreement with South African power
utility Eskom. Under the agreement the Company is scheduled to receive
connection and service for a 10 MVa construction power supply in 2012 and a
total 40 MVa production power supply in later calendar 2013 in exchange for
remaining connection fees and guarantees totaling Rand 90,508,735 ($11,956,240
at February 29, 2012). An amount of R 51.71 million (approximately $6.83 million
at February 29, 2012) has already been paid to Eskom.
Cash at February 29, 2012 is sufficient to fund the estimated
general and development operations of the Company for calendar 2012 and into the
first calendar quarter of 2013, but will be insufficient to complete
construction of the mine at Project 1. On August 2, 2011 the Company announced
the appointment of four international commercial banks to the role of mandated
lead arrangers for the placement of a USD $260 million project finance loan, representing approximately 60% of
the estimated Project 1 capital cost requirements. In addition to the loan
facility, the project financing is planned to include a USD $25.0 million
working capital facility. Depending on USD to Rand exchange rates and the actual
costs to complete Phase 1 of Project 1, the Company anticipates the need for the
Company to seek additional equity funding sometime in mid to late 2012. The
Company and Wesizwe will also be required to provide a cost overrun facility for
the project, the amount and nature of which is still to be determined.
17
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
G) Outstanding Share Data
The Company has an unlimited number of common shares authorized
for issuance without par value. At February 29, 2012, there were 177,584,542
common shares outstanding, 14,469,500 incentive stock options outstanding at
exercise prices of $1.30 to $4.40. At April 13, 2012, there were 177,584,542
common shares outstanding and 14,469,500 incentive stock options outstanding.
Subsequent to February 29, 2012, nil common share purchase options were
exercised. During the period ending February 29, 2012, the Company made no
changes to the exercise price of outstanding options through cancellation and
reissuance or otherwise.
4. RISK FACTORS
The Company’s securities should be considered a highly
speculative investment and investors should carefully consider all of the
information disclosed in the Company’s Canadian and U.S. regulatory filings
prior to making an investment in the Company. For a discussion of risk factors
applicable to the Company, see the section entitled “Risk Factors” in the
Company’s most recent annual information form filed with Canadian provincial
securities regulators, which was also filed as part of the Company’s most recent
annual report on Form 40-F with the U.S. Securities & Exchange
Commission.
Without limiting the foregoing, the most significant risks and
uncertainties faced by the Company are: the inherent risk associated with
mineral exploration and development activities; the uncertainty of mineral
resources and their development into mineable reserves; uncertainty as to
potential project delays from circumstances beyond the Company’s control; and
the timing of production; as well as title risks; political risks; risks
associated with fluctuations in foreign exchange rates; risks associated with
fluctuations in metal prices; risks associated with joint venture agreements and
the possible failure to obtain mining licenses and/or to obtain the capital
required for project and mine development.
5. OUTLOOK
At April 13, 2012, the Company’s cash position was
approximately $75 million.
Preparation of detailed banking documents for the senior loan
facility with the mandated syndicate of banks is ongoing. The completion of this
documentation, due diligence, hedging establishment and off take negotiations
are expected to be completed in Q2 of calendar 2012.
In September 2011, a joint engineering study on potential
synergies with the Jinchuan-Wesizwe platinum mine adjacent to the Project 1 mine
site was commenced. The preliminary findings of this work are now known to the
Company and Jinchuan-Wesizwe. Technical analysis from the independent engineers
highlights the complementary production profiles of the Company’s Project 1 and
the Frischgewaagd-Ledig Project of Jinchuan-Wesizwe. The production profile of
the Company’s shallow Project 1 mine is scheduled to ramp up in 2014, while the
Jinchuan-Wesizwe mine is scheduled to ramp-up from vertical shafts in 2018-2020.
The synergy study specifically examined the sequencing and optimal plant
utilization of both Merensky and UG2 ore types from both mine areas at one
location and found potential savings in terms of capital and operating costs.
Several scenarios were examined, including one large plant for both operations,
and an installation of three plants in sequence. Other areas of examination for
a combined operation included the efficient use of surface rights, tailings
areas and production infrastructure and bulk services. The findings of the
synergy engineering study are under consideration by the Company and
Jinchuan-Wesizwe.
18
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
Commencement of Phase 2 development at Project 1 will begin
after complete project financing is in place and off take agreements are
executed. Phase 2 will include a second decline access south of the current twin
decline development, underground lateral development, a milling and
concentrating facility and tailings impoundment area.
Metallurgical studies have been completed and negotiations with
several parties regarding concentrate off-take arrangements are underway. Anglo
Platinum retains a 60 day right of first refusal to match the terms of any off
take agreement which the Company intends to execute. The Company estimates that
the completion of off take arrangements, including Anglo’s 60 day right of first
refusal, will be completed by the end of Q2 of calendar 2012.
Following the completion of the 2009 UFS, the Company completed
further drilling, metallurgical work, mine design and cost estimation work. The
Company has also gained construction and procurement experience under the Phase
1 development program currently underway. Major contracts, project costing and
final scheduling for Phase 2 development are in process of final determination.
A revised cost budget estimate for inclusion in the final financial model for
the lending banks is currently a work in progress.
Some aspects of the project are currently being costed at or
below UFS level, while escalation is being seen in other cost areas, such as
consumable inputs, labour, construction and capital equipment. Total peak
funding required for Project 1 will likely see escalation of approximately 14%
since the 2009 UFS. Operating costs per tonne will likely see an approximate 24%
escalation since the 2009 UFS. The current Rand exchange rate is at or near the
UFS long term assumption of 8R to the USD. Basket 4E metal prices (platinum,
palladium rhodium and gold) are currently approximately 11% higher on the
Merensky Reef than at the UFS level assumptions, mostly offsetting the effects
of cost escalation. The escalation estimated above is in keeping with inflation
rates and industry experience in South Africa since 2009.
On April 1, 2012 the 10% Secondary Tax on Corporations in South
Africa was replaced with a new Dividend Tax. Under existing tax treaties with
Canada this change had the effect of reducing the Company’s effective tax burden
at the parent company level by 5%.
In conjunction with ongoing cost estimation work and banking
preparations, an updated project schedule for Phase 2 is being completed by the
Company. First ore production is currently expected to commence in late 2013,
with concentrate sales commencing in mid-2014. The Company is considering
several current opportunities for sale of early ore production. The Merensky
Reef is scheduled to be mined in the first approximately 10 years of the mine
life and current estimates of steady state production are unchanged or slightly
higher than estimated in the UFS.
The Company plans to continue working with joint venture
partner funding to conduct exploration on the Waterberg and Sable projects. On
November 9, 2011, the Company announced the discovery of new PGE bearing reefs
at Waterberg. Exploration has since been accelerated by the Company and joint
venture partner JOGMEC with 8 drilling rigs now active on the project.
In April the Company established a new $1.5 million forward
budget for 2012 exploration on the newly acquired Providence nickel, copper, and
platinum group metals property in the Northwest Territories. Compilation work,
modeling, budgeting and exploration planning is underway. Supply and logistics
work for the field camp at Providence were undertaken in March of 2012. A
gravity survey was also undertaken at that time over areas of interest. Further
work on the ground at Providence, including drilling, will commence in the
Northwest Territories as soon as weather conditions allow and drilling crews and
equipment can be mobilized.
19
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
6. CRITICAL ACCOUNTING ESTIMATES
The preparation of our consolidated financial statements in
conformity with IFRS requires management to use estimates and assumptions that
affect the reported amounts of assets and liabilities, as well as income and
expenses. Our accounting policies are described in note 3 of our February 29,
2012 unaudited quarterly condensed consolidated financial statements.
Review of asset carrying values and impairment
In accordance with the Company’s accounting policy, each asset
or cash generating unit is evaluated every reporting period to determine whether
there are any indications of impairment. If any such indication exists, a formal
estimate of recoverable amount is performed and an impairment loss is recognised
to the extent that the carrying amount exceeds the recoverable amount. The
recoverable amount of an asset or cash generating group of assets is measured at
the higher of fair value less costs to sell and value in use.
The determination of fair value and value in use requires
management to make estimates and assumptions about expected production,
commodity prices, reserves, operating costs, closure and rehabilitation costs
and future capital expenditures. The estimates and assumptions are subject to
risk and uncertainty; hence there is the possibility that changes in
circumstances will alter these projections, which may impact the recoverable
amount of the assets. In such circumstances some or all of the carrying value of
the assets may be further impaired or the impairment charge reduced with the
impact recorded in the income statement.
Stock-based compensation
We provide compensation benefits to our employees, directors,
officers and consultants through a stock option plan. The fair value of each
option award is estimated on the date of the grant using the Black- Scholes
option pricing model. Expected volatility is based on historical volatility of
our share price. The risk-free rate for the expected term of the option is based
on the Government of Canada yield curve in effect at the time of the grant.
Asset Retirement Obligations
The amounts recorded for asset retirement costs are based on
estimates included in closure and remediation plans. These estimates are based
on engineering studies of the work that is required by environmental laws. These
estimates include an assumption on the rate at which costs may inflate in future
periods. Actual costs and the timing of expenditures could differ from these
estimates.
Income and Resource Taxes
The determination of our future tax liabilities and assets
involves significant management estimation and judgment involving a number of
assumptions. In determining these amounts we interpret tax legislation in a
variety of jurisdictions and make estimates of the expected timing of the
reversal of future tax assets and liabilities. We also make estimates of our
future earnings which affect the extent to which potential future tax benefits
may be used. We are subject to assessment by various taxation authorities, which
may interpret tax legislation in a manner different from our view. These
differences may affect the final amount or the timing of the payment of taxes.
When such differences arise we make provision for such items based on our best
estimate of the final outcome of these matters.
Determination of ore reserve and mineral resource estimates
The Company estimates its ore reserves and mineral resources
based on information compiled by Competent Persons as defined by NI 43-101.
Reserves determined in this way are used in the calculation of depreciation,
amortization and impairment charges, and for forecasting the timing of the
payment of close down and restoration costs. In assessing the life of a mine for
accounting purposes, mineral resources are only taken into account where there
is a high degree of confidence of economic extraction.
20
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
There are numerous uncertainties inherent in estimating ore
reserves, and assumptions that are valid at the time of estimation may change
significantly when new information becomes available. Changes in the forecast
prices of commodities, exchange rates, production costs or recovery rates may
change the economic status of reserves and may, ultimately, result in reserves
being restated. Such changes in reserves could impact on depreciation and
amortization rates, asset carrying values and provisions for close down and
restoration costs.
Determination of useful lives of property, plant and
equipment
The Company uses the straight line method to depreciate
property, plant and equipment, whereby depreciation is calculated using expected
life of the asset or the life of mine. As noted above there are numerous
uncertainties inherent in estimating ore reserves which is fundamental to the
calculation of the life of mine.
7. INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)
Transition to IFRS from GAAP
In February 2008, the Canadian Accounting Standards Board
confirmed that Canadian publicly accountable enterprises will be required to
adopt International Financial Reporting Standards (“IFRS”) for financial periods
beginning on and after January 1, 2011. The Company has adopted IFRS with an
adoption date of September 1, 2011 and a transition date of September 1,
2010.
The Company has now completed its IFRS changeover plan. The
following discussion outlines the Company’s transition project and IFRS
transitional impacts. Notes 2 and 16 to the consolidated interim financial
statements provide more detail on key Canadian GAAP to IFRS differences and
accounting policy decisions.
IFRS Conversion Plan Completion
The Company’s IFRS conversion plan addressed matters including
changes in accounting policies, IT and data systems, restatement of comparative
periods, organizational and internal controls and any required changes to
business processes. To facilitate this process and ensure the full impact of the
conversion is understood and managed reasonably, the accounting staff attended
several training courses on the adoption and implementation of IFRS. Through
in-depth training and detailed analysis of IFRS standards, the Company’s
accounting personnel obtained a thorough understanding of IFRS and possesses
sufficient financial reporting expertise to support the Company’s needs. The
Company has also reviewed its internal and disclosure control processes and they
did not need significant modification as a result of the conversion to IFRS.
Further, the Company assessed the impact on IT and data systems and concluded
there were no significant impact to applications arising from the transition to
IFRS.
IFRS 1 First-Time Adoption of International Financial Reporting
Standards
Under IFRS 1 First-time Adoption of International Financial
Reporting Standards, the IFRS are applied retrospectively at the transition date
with all adjustments to assets and liabilities as stated under Canadian GAAP
taken to deficit unless certain exemptions are applied. IFRS provides for
certain optional exemptions and certain mandatory exceptions for first time IFRS
adopters. Set forth below are the applicable IFRS 1 optional exemptions the
Company applied in the conversion from Canadian GAAP to IFRS.
a) Business Combinations
IFRS 1 permits the Company to apply
IFRS 3 Business Combinations on a prospective basis only from the transition
date. Therefore, the Company has not restated past business combinations to
comply with IFRS 3, where control was obtained before the transition date.
21
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
b) Currency translation
differences
Retrospective application of IFRS would
require the Company to determine cumulative currency translation differences in
accordance with IAS 21, The Effects of Changes in Foreign Exchange Rates, from
the date a subsidiary or equity method investee was formed or acquired. IFRS 1
permits cumulative currency translation gains and losses to be reset to zero at
the Transition Date. The Company elected to reset all cumulative currency
translation gains and losses to zero in opening retained earnings at its
Transition Date. This election has resulted in a reversal of historical
cumulative translation adjustment of $2.2 million on transition.
Significant Accounting Policy Changes on Transition to
IFRS
IFRS employs a conceptual framework that is similar to Canadian
GAAP; however significant differences exist in certain matters of recognition,
measurement and disclosure. While the adoption of IFRS has not changed the cash
flows of the Company, the adoption resulted in changes to the reported financial
position and results of operations of the Company. A summary of the significant
accounting policy changes on transition to IFRS is provided below.
a) Foreign currency translation
The Company’s South African subsidiaries have the South African
Rand as their functional currency. Under Canadian GAAP for integrated foreign
operations, only monetary items were translated to Canadian dollars at the end
of each reporting period at the period end exchange rate. However under IFRS,
all assets and liabilities of a foreign subsidiary with a functional currency
different from the parent’s presentation currency are converted to the parent’s
presentation currency at the period end rate with the resulting foreign exchange
differences recorded in other comprehensive income.
Under Canadian GAAP, the South African subsidiaries were
considered to be integrated operations, which effectively meant the entities had
Canadian functional currencies. Under IFRS, these South African subsidiaries are
considered to have the Rand as their functional currency. As a result, the
foreign exchange gain or loss on the intercompany loan to the foreign
subsidiaries which is considered the parent company’s net investment in a
foreign operation is recognized initially in other comprehensive income and
reclassified from equity to profit or loss on disposal of the net investment.
Under Canadian GAAP, the gain or loss was recognized in the profit or loss.
b) Deferred Income Taxes
Under Canadian GAAP, deferred income taxes were recognized
following the acquisition of various assets. Under IFRS, deferred income taxes
are not recognized on temporary differences that arise from transactions other
than a business combination that at the time of the transaction affected neither
the taxable nor accounting profit or loss. As a result of this difference a
decrease to the deferred income tax liability and a corresponding decrease to
the carrying value of property plant and equipment for 56 million Rand has been
made on transition and is applied to all periods.
c) Pre-exploration costs
Under IFRS, expenditures that are capitalized before the
company has the legal right to explore the specific property must be expensed.
CGAAP does not have the same restriction; therefore an adjustment is required on
transition to expense pre-exploration costs which were capitalized under CGAAP.
This accounting policy change resulted in an increase to deficit and a
corresponding decrease in the carrying value of resource properties on
transition.
22
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
e) Reclassification of Project 1 asset
Under Canadian GAAP, all capitalized and deferred costs were
classified as mineral properties. Under IFRS, the Project 1 deferred costs have
been reclassified as Property, Plant and Equipment.
f) Non-controlling interest
At the date of transition, the accounting requirement for
non-controlling interests differed under IFRS. Under IFRS changes in ownership
interest where control is maintained are recorded through equity.
Post-Implementation
The post-implementation phase will involve continuous
monitoring of changes in IFRS in future periods. It has been noted that the
standard-setting bodies that determine IFRS have significant ongoing projects
that could impact the IFRS accounting policies that the Company has selected.
The International Accounting Standards Board is currently working on an
extractive industries project, which could significantly impact the financial
statements of the Company primarily in the areas of capitalization of
exploration costs and disclosures. Processes are in place to ensure that
potential changes are monitored and evaluated. The impact of any new IFRSs and
IFRIC Interpretations will be evaluated as they are drafted and published.
8. DISCLOSURE CONTROLS AND INTERNAL CONTROL OVER FINANCIAL
REPORTING
Changes in Internal Controls over Financial Reporting
During the six months ended February 29, 2012, management
assessed internal controls over financial reporting as a step in their IFRS
Transition Plan, however no changes were required.
9. NYSE AMEX LLC CORPORATE GOVERNANCE
The Company’s common shares are listed on the NYSE Amex LLC
(formerly the American Stock Exchange) (“NYSE- Amex”). Section 110 of the NYSE-
Amex company guide permits NYSE- Amex to consider the laws, customs and
practices of foreign issuers in relaxing certain NYSE- Amex listing criteria,
and to grant exemptions from NYSE- Amex listing criteria based on these
considerations. A company seeking relief under these provisions is required to
provide written certification from independent local counsel that the
non-complying practice is not prohibited by home country law. A description of
the significant ways in which the Company’s governance practices differ from
those followed by domestic companies pursuant to NYSE- Amex standards is posted
on the Company’s website at www.platinumgroupmetals.net and a copy of such
description is available by written request made to the Company.
10. OTHER INFORMATION
Additional information relating to the Company for the period
ending August 31, 2011 may be found on SEDAR at www.sedar.com and on EDGAR at www.sec.gov. Readers are encouraged to review the
Company’s audited annual consolidated financial statements for the year ended
August 31, 2011 together with the notes thereto as well as the Annual
Information Form for the Company’s financial year ended August 31, 2011.
11. SUBSEQUENT EVENTS
The following events occurred subsequent to quarter end. These
events and other non-material subsequent events may be mentioned elsewhere in
this MD&A:
- On March 27, 2012 the Company posted a financial guarantee in the amount
of R 58.5 million ($7.66 million) with Standard Bank of South Africa Limited
for the rehabilitation of land to be
disturbed by mining in relation to Project 1 of the WBJV. The guarantee is posted
with the Department of Mineral Resources in South Africa as beneficiary in accordance
with the Mineral and Petroleum Resources Development Act (2002) and the Company’s
environmental management programme. This financial guarantee is required prior
to the formal grant of a mining right for Project 1 of the WBJV. In the months
ahead the Company expects to place a commercial policy with a third party insurer
as an allowable form of financial guarantee for the mining right, thereby allowing
the Company to bring approximately 80% of the R 58.5 million posted guarantee
back into working capital in fiscal 2012. In the months ahead the Company also
expects to recover an amount of approximately $1.95 million which was posted
in fiscal 2011 as a financial guarantee for development work being conducted
on Project 1 under a Bulk Sample Permit, which permit is superseded upon the
grant of a formal mining right.
23
Platinum Group Metals Ltd.
(Exploration and Development
Stage Company)
Supplementary Information and MD&A
For the six
months
ended February 29, 2012
- On April 4, 2012 the Department of Mineral Resources of South Africa confirmed
in writing that a mining right for the WBJV Project 1 Platinum Mine had been
issued in terms of section 23(1) of the Mineral and Petroleum Resources Development
Act (2002). A formal documentation and registration process will follow. With
the issue of the formal mining right the Company will be able to advance its
finance and construction objectives and is now in a legal position to produce
and sell minerals from the WBJV project area.
12. LIST OF
DIRECTORS AND OFFICERS
| |
a) |
Directors: |
b) |
Officers: |
| |
|
R. Michael Jones |
|
R. Michael Jones (Chief Executive Officer) |
| |
|
Frank R. Hallam (Secretary) |
|
Frank R. Hallam (Chief Financial Officer) |
| |
|
Iain McLean |
|
Peter C. Busse (Chief Operating Officer) |
| |
|
Eric Carlson |
|
Kris Begic (VP, Corporate Development) |
| |
|
Barry W. Smee |
|
|
| |
|
Timothy Marlow |
|
|
24