IFL.L Regulatory News (IFL)

19 September 2011

International Ferro Metals Limited

("IFL" or the "Company")

Financial Results for the year to 30 June 2011

Highlights

Financial highlights

·; Sales revenue increased 10% to ZAR1.58bn

·; Higher benchmark prices impacted by lower realised prices and stronger Rand

·; Revenue increase achieved due to ore sales of ZAR179m, despite slightly lower FeCr sales volumes

·; Ore sales of 288kt due to furnace shutdowns and improved mining operations

·; Rand production costs for the year decreased by 0.5% from prior year

o H2 rand production costs 7.6% below H1

o Eskom prices increased 23.4% on average

·; Net borrowings at 30 June 2011 of ZAR248 million

·; No dividend to be paid for the year

Operational highlights

·; Production down 3% from 200kt to 195kt due to furnace roof leaks and planned shut downs during furnace roof upgrade projects

·; Sky Chrome open pit mining operations commenced

·; Ore beneficiation plant achieved record production in both volume and recovery for the year

·; Pelletising and sintering plant achieved record production of 379kt compared to 366kt in the prior year

·; UG2 chrome recovery plant construction on track to deliver 15ktpm from January 2012

Post period highlights

·; Furnace roof upgrade project now complete; Furnace 1 at full load and Furnace 2 expected to reach full load by mid-October

·; Cogen plant restarted and seven of 10 engines currently operating at 65% capacity

·; New Chief Executive Officer Chris Jordaan appointed from 1st August 2011

Chris Jordaan, Chief Executive Officer of IFL commented:

"Industry experts expect the stainless steel market to grow at an average 6.8% per annum to 2015, with a positive read across to the ferrochrome market. With the major engineering project of the furnace roof rebuild now complete and ramp up underway, the Company is focused on achieving full production from our furnaces by mid-October and to achieve nameplate capacity of 265kt per annum. Our international markets continue to expand, with sales recorded for the first time to Japan and Sweden, and we will continue to maximise sales in higher margin countries. Cost reduction continues to be a major focus for the Company and we have identified more than 10% of further controllable cost cuts which we believe are achievable in 2012, moving IFL further down the cost curve and ensuring we are competitive and well placed to benefit from the growth in stainless steel production."

There will be a presentation to analysts of the full year results today, Monday 19 September 2011 at 9am (UK time) at 16 Lincoln's Inn Fields, London WC2A 3ED. The presentation slides and a recording of the presentation will be available on the Company's website, www.ifml.com.

For further information please visit www.ifml.com or contact:

International Ferro Metals Limited

Chris Jordaan, Chief Executive Officer

Mob: +27 (0) 82 653 1463

Brunswick Group

Carole Cable / Fiona Micallef-Eynaud

Tel: +44 (0) 20 7404 5959

Numis Securities Limited

John Harrison / James Black

Tel: +44 (0) 20 7260 1000

About International Ferro Metals:

International Ferro Metals produces ferrochrome, the essential ingredient in stainless steel, from its integrated chromite mine and ferrochrome processing operations in South Africa. International Ferro Metals is listed on the London Stock Exchange under the symbol IFL.

Forward Looking Statements

This announcement contains certain forward looking statements which by their nature contain risk and uncertainty because they relate to future events and depend on circumstances that occur in the future. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by these forward looking statements.

CHAIRMAN'S REPORT

Overview

The difficult trading environment affecting the ferrochrome industry continued throughout the year under review. However, the Company vindicated its strategy outlined in last year's report, to concentrate on pushing costs to the lower end of the international curve.

Notwithstanding creditable progress on cost reduction, pre-tax loss increased from ZAR157 million to ZAR214 million. Principal causes for this deterioration were the strengthening exchange rate which averaged ZAR7.00 to the U.S. dollar, compared with ZAR7.54 in the previous year, and Eskom's average annual electricity increase of 23.4%.

The adversity faced in this period, however, is being mitigated by the factors discussed below.

Strategy

The year under review saw the Company further implement its objective of cost reduction. Adjusted for the exchange rate and electricity charges, production costs declined 4%. This was accomplished through a combination of efficiencies in the Lesedi mine and the partial substitution of anthracite for coke as a reductant, as well as a general tightening of cost control. In addition, the cogeneration plant, which was operating but not yet at full capacity, contributed electricity at a cost lower than grid power.

It is expected that further progress will be made as the cogen plant is ramped up to full production, accounting for its forecast 11% of electricity requirements. This will offset to a useful extent the rising costs of South African power.

The UG2 chrome re-treatment plant which is being constructed at the Company's cost is scheduled for completion in October this year. It will produce chrome concentrate from the concentrator tailings of Rustenburg Platinum Mines Ltd. Access to this low cost material, which will represent approximately 30% of beneficiated ore requirements, is expected to reduce average ore costs considerably. Ore is a major factor in the Company's overall costs.

In November 2010, the South African Department of Mineral Resources granted the necessary mining licences for the Sky Chrome property, which lies adjacent to the existing Lesedi mine. Pursuant to the licence, the Company negotiated arrangements with the local community to commence mining with their support. The mine is currently producing 20,000 tonnes run-of-mine ore per month and planned to ramp up to 50,000 tonnes per month by March 2012. The development of Sky Chrome will ensure that the Company will remain self-sufficient in ore for over forty years. Its open pit contribution will lower ore costs further and add to the amount of product that can be sold as ore - an alternative revenue stream.

Furnace Roof Replacements

During the period under review, it became apparent that something was causing the performance of the furnaces to fall below a satisfactory level of output, notwithstanding operational improvement in the previous year. Too many shutdowns were required and availability was less than optimal. After an operational management change, it was decided to engage Metix, a well-respected South African smelter engineering firm, to conduct a root and branch examination of both furnaces. The review disclosed that the basis of the problem lay in the design of the ore feed chutes, a feature that resulted in excessive temperatures which degraded the roof. This turned out to be the main cause of the water leaks that were occurring from time to time.

The Company immediately acted on the advice, engaging Metix to conduct a refit of both furnaces accordingly. The work was completed at the end of July for the first furnace and at the end of August for the second furnace. It was done on time and within budget. While it is necessary to allow both furnaces to operate for approximately three months to be confident that the replacements have been successful, the Company is pleased with their performance so far. Success here will be of great benefit and drive unit costs even lower, as higher production will ensue.

Health and Safety

Once again the Company had a successful year from the perspective of the health and safety of our employees. Our goal is to achieve the highest standards in these areas.

Expansion

The Company continued to work on a feasibility study to increase production through adding two more furnaces. After a thorough review of alternatives, it was decided to use DC Arc technology for the new furnaces, a feature that has distinct cost advantages. With its strong ore position and its marketing entrée into China by virtue of its major shareholder, Jisco, the Company is well placed to expand into the recovery of the ferrochrome market if and when it occurs. These plans are at an early stage and ongoing decisions concerning the project will be determined by the Company's view of the market at the time.

Corporate Governance

During the year, Chris Jordaan took on the role of CEO, replacing David Kovarsky. The Board expresses its appreciation to David for his service to the Company, and welcomes Chris. The experience in the ferrochrome industry and proven management skills Chris possesses will contribute significantly to the turnaround in fortunes the Company is beginning to enjoy.

The Board is committed to ensuring that all our employees act professionally, fairly and with integrity in all matters wherever we operate and takes a zero-tolerance approach to bribery and corruption. We are reviewing our current procedures in order to ensure that we implement and enforce effective systems so that all of our business dealings and those of our agents and partners are conducted in an honest and ethical manner and in accordance with relevant legislation.

The Company is conscious of the corporate governance recommendations regarding board composition. To that end I am pleased to state that the Board has three non-executive independent directors, sufficient to ensure that all committees have at least one independent.

Conclusion

While the Company has been through an arduous time, with unfavourable industry conditions taking their toll, the actions it has taken to gear its operations to cope with lower prices and adverse exchange rates are beginning to bear fruit. It is repositioning itself in a more competitive mode.

Despite uncertain growth prospects facing the global economy, the rise of stainless steel production, especially in China, is inevitable. Consequently demand for ferrochrome should resume a favourable upward trajectory eventually. The Company is well placed to take advantage of that.

CHIEF EXECUTIVE'S REVIEW

Overview

The past financial year brought many challenges with it, both globally and within the organisation. At the same time, however, significant operational achievements were attained including a major engineering project in the form of the furnace roof upgrades and the successful commencement of mining at Sky Chrome.

Strategy

The Company's strategy remains to be a low cost producer of chrome ore and alloy related products for the global stainless steel industry. To this end a portfolio of capital and operational improvement projects were commissioned with very pleasing progress made to date. These projects will contribute to the overall repositioning of the Company towards the lower end of the cost curve as well as increasing its revenue base. This in turn will afford the Company the right to grow in current and related markets in line with its long-term strategy to invest and grow in a diversified portfolio of long-life, low cost assets.

Operations

Mining, ore beneficiation and agglomeration performed at record levels in the year. Improved levels of ore hoisted, beneficiation efficiency and pelletising throughput all contributed to this achievement. Roof failures on the furnaces negatively influenced smelting performance. Excellent progress was however made in changing reductant mixes to the furnaces resulting in lower cost of production. Some efficiency improvements were achieved especially power consumption. To augment the low cost strategy a number of projects (outlined below) were commissioned.

The furnace roof rebuild has been completed according to plan. Performance will be closely monitored for the next three months to ensure the redesign has achieved its objective.

Cost reduction projects

IFL has embarked on a number of strategic projects to reduce input costs and improve efficiencies to reposition the Company lower down on the cost curve. The projects include the furnace roof rebuilds, the co-generation plant, the development of the Sky Chrome mine, and the UG2 project.

At the beginning of 2011 the Company decided to make major modifications to the furnace roofs, feed chutes and gas off-take arrangements. Subsequently, the furnaces were shut down on a staggered basis, in June 2011 and July 2011 respectively. The shut downs coincided with the high electricity tariff months. Furnace 1 was switched in at the beginning of August and has ramped up to full load in early September 2011. Furnace efficiencies achieved in the ensuing period were and remain at expected levels, which compare favourably with previous best performance. Furnace 2 was switched in early September 2011 and is expected to ramp up to full load by mid-October 2011.

The co-generation plant was commissioned in November 2010. Due to elevated hydrogen levels and the lack of stable gas supply from the furnaces, the plant operated at minimal levels until the furnaces were switched out for roof replacements. Following the start-up of the furnaces in August and September 2011, the cogen plant was restarted and 7 of the 10 engines are currently operational, and are operating at 65% of capacity. Output from the plant is proportional to furnace gas supply and as such the plant is not yet running at full capacity. At full production the cogen plant should provide IFL with approximately 11% of its energy requirements.

Sky Chrome's open pit mining operations commenced in June 2011 and should ramp up to 50ktpm run of mine by the first quarter of calendar 2012 and full production of 100ktpm is expected in 2013.

Construction of the UG2 plant is on track to start commissioning during October and to deliver 15ktpm of concentrate from January 2012. The UG2 feed will represent about 30% of IFL's beneficiated ore requirements and contribute to a more stable feed to the furnaces.

The successful implementation and integration of these projects will deliver a lower cost, competitive ferroalloy operation and will enable the Company to achieve its strategic goal to become a low cost producer of chrome ore and ferrochrome related products for the stainless steel industry. Rand production costs improved significantly, reducing by 0.5% from the previous year, despite Eskom's average 23.4% price increase and general inflationary pressures.

Other operations

Lesedi mine continued with its ramp-up and recorded total run of mine production of 823kt compared to 511kt in the previous year. Especially pleasing was the Lesedi underground run of mine production of 275kt compared to 101kt in the previous year. It is expected that Lesedi will produce in excess of 630kt underground run of mine in FY2012 as underground development continues.

The ore beneficiation plant achieved record production both in terms of volume and ore recovery. The plant produced 638kt for the year with a 64% recovery yield compared to 503kt at a 53% recovery in FY2010. Beneficiated ore cost reduced by 14% year-on-year. Although the recovery is expected to be negatively influenced by the initial lower quality shallow ore from Sky Chrome mining, it is expected that these levels will be sustainable as Sky Chrome ramps up to full production.

The operations had mixed success. The pelletising and sintering plant achieved record production of 379kt compared to 366kt in the previous year. The smelting process remained challenged until the furnace roof replacements were complete; 195kt produced compared to 200kt in the previous year.

The combination of the furnace shutdowns and improved mining operations resulted in a build-up of beneficiated ore stocks which enabled the Company to increase its revenue from low grade ore sales.

Sales & Marketing

IFL continues to expand its markets and during the year sales to Japan and Sweden were recorded for the first time. The Company also entered the chrome ore market and 288kt of low grade ore was sold during the year. Ferrochrome sales for the year were 186kt, down 3kt from the prior year.

Sustainability

IFL will only be successful if no-one is injured and if the Company operates in an environmentally acceptable manner. Zero fatalities and an ever declining total recordable injury rate are key goals in this approach. In order to achieve this IFL strives to operate in a disciplined and professionally led manner.

IFL's integrated sustainable development management system has earned the it re-certification in terms of ISO 14001:2004, ISO 9001:2008 and OHSAS 18001:2007 in May 2011 and June 2011 respectively; the certifications are valid until December 2013.

Health & Safety 

The Company has a zero fatality rate and is focused on the continuing improvement of our health and safety standards.

IFL improved its record of fatality free man hours by achieving, since establishment in 2005, 17,955,111 fatality-free man-hours which equates to 2,244,388 fatality free shifts. During the year, management was concerned by the rise in lost time injury frequency (LTIF) from 4.44 in FY10 to 5.94 in FY11 and took prompt action. The corrective steps taken mean that LTIF has improved over the last few months and the 12 month moving average has subsequently reduced to 4.48 by mid-September 2011. The FY2012 YTD LTIF is currently at a pleasing 0.94.

This improvement was achieved through a relentless focus on safety. Safety management structures with clearly articulated roles and responsibilities, simple processes and systems of risk assessment and incident reporting and investigation are implemented and diligent implementation of corrective actions are introduced. This allows the operations to focus on leading practices so as to pro-actively influence safety performance in a positive manner.

Environmental impact

The Company continues to focus on environmentally sustainable operations and two of our key projects both improve our sustainability and reduce costs.

The co-generation plant is a Clean Development Mechanism project as defined by the Kyoto Protocol, and harnesses furnace off-gases to generate electricity. It is expected to provide 11% of our electricity needs at full production.

Under the agreement with Rustenburg Platinum Mines signed in the prior financial year, the Company will pay for a chrome retreatment plant to produce UG2 chrome concentrate from Rustenburg's UG2 concentrator tailings. The plant is on track to start commissioning during the beginning of October and to deliver 15ktpm of concentrate from January 2012 to IFL. The UG2 feed will represent about 30% of IFL's beneficiated ore requirements and contribute to a more stable feed to the furnaces.

The furnace roof replacement programme also included improving gas quenching and cleaning processes. Although current indications are positive in that a reduction in emissions may be expected, annual emission analysis will be used to confirm this initial view.

Sustainability will remain a fundamental principle on which the Company will move forward. The ability to operate in a sustainable manner will be strengthened by means of solid leadership and inclusive management of personal safety.

Black Economic Empowerment (BEE) transaction

In April 2009 the Company lodged its proposed BEE transaction with the former South African Department of Minerals and Energy, now the Department of Mineral Resources ("DMR"), as the final element of its previously submitted application to convert its old order mining rights to new order mining rights under the South African Minerals and Petroleum Resources Development Act. The Company is actively engaging the relevant stakeholders and the DMR to finalise the BEE transaction which is expected to be concluded in the near future.

Ferrochrome Market Update

During the year alloy prices improved but this was overshadowed by a downward trend in Q2 2011. Discount structures remained under pressure over this period allowing little room for improvement.

The year under review saw the European contract price set within a tight band between US$1.25/lb and US$1.35/lb. Subsequent to financial year-end, the price was settled at US$1.20/lb for Q3 2011. These prices do not however paint the full picture. The Rand strengthened from levels of ZAR7.50/US$ in July 2010 to ZAR6.80/US$ by 30 June 2011 and electricity tariffs increased by 26.7% in April 2011. The low subsequent ferrochrome contract price is mainly attributable to declining nickel prices, which resulted in the destocking of stainless steel and ferrochrome inventories. The destocking in stainless steel in turn led to an unusual overcapacity of ferrochrome production and as a result thereof, the past six months have seen production cutbacks in ferrochrome production.

Outlook

Costs have been reduced significantly over the last six months and this is expected to continue in the first half of the new financial year as the cogen plant moves to full capacity and the furnaces ramp up to full production. Additional cost reductions are also expected after the introduction of low cost UG2 concentrate and further decreases in reductant costs.

Demand for FeCr is directly proportional to stainless steel production. The long-term outlook for stainless steel production remains strong and record production of 33Mt is expected in 2011 (2010: 31.7Mt) with a further increase at an average rate of 6.8% p.a. to 2015, according to CRU. The lower scrap ratio trend seen in China leads to a higher primary chrome demand. More than 50% of stainless steel growth is expected to emanate from China, with China therefore to lead demand growth of ferrochrome in the coming years. It is not expected that ferrochrome supply in China will grow commensurate to the growth in demand. The Company remains confident that the ferrochrome market is sustainable and attractive, and that IFL is increasingly well-positioned to benefit from market growth.

As the macro ferrochrome market improves the Company remains confident that the long term ferrochrome growth story remains intact. The combination of a sustainable long term market for stainless steel and ferrochrome, and measures being taken within the Company to ensure it is a low-cost producer with robust operations, mean the Company is confident that it is better positioned than it has been for some time.

FINANCIAL REVIEW

Income statement

The Company reported a loss before tax of ZAR214 million for the year ended 30 June 2011, compared to a loss of ZAR157 million for the prior year.

The table below reflects the consolidated results for IFL for the year ended 30 June 2011. Both the functional currency and the presentation currency of the Company is South African Rand ("ZAR") unless otherwise stated.

Ferrochrome production of 195kt was 3% below that of the previous year and 26% below nameplate capacity of 265kt, due to water leaks on the furnace roofs which resulted in reduced efficiencies and availabilities on the furnaces. Both furnaces were switched out for maintenance in November 2010 and furnace 1 was switched out in June 2011 for roof replacement.

Sales revenue increased by 10% to ZAR1.58 billion as a result of ore sales of ZAR179 million during the year. The average European benchmark price increased by 21% year on year, however this was negatively impacted by lower achieved prices and an average 8% strengthening of the Rand against the Dollar. At 30 June 2011, ferrochrome sales of 29,674 tonnes have ongoing pricing exposure with pricing expected to be settled by the end of September 2011.

Other expenses/income include

·; Other income comprised ZAR77 million received from Phoenix Platinum for the sale of net profit interest in PGM recovery from tailings.

·; Administration and other expenses increased by ZAR24 million to ZAR113 million

·; Net realiseable value adjustments of ZAR43 million (FY2010: ZAR22 million) on stock held at 30 June 2010 and unabsorbed fixed costs of ZAR25 million (FY2010: ZAR3 million) for furnace standing time during maintenance were charged directly to the income statement.

The improvement in EBITDA in the second half of the year is due to ore sales and lower production costs. EBITDA increased to ZAR27 million, from a loss of ZAR99 million in the first half resulting in a full-year loss of ZAR72 million, up ZAR13 million from the prior year.

Net finance cost increased from ZAR33 million to ZAR54 million due to the draw downs on the working capital facility.

The positive tax charge of ZAR79 million (FY2010: ZAR71 million) to the income statement is a deferred tax credit resulting from the Company's unclaimed calculated tax losses available for offset against future profits.

Headline earnings increased from a loss of ZAR86 million (ZAR0.15 per share) in FY2010 to a loss of ZAR135 million (ZAR0.24 per share) for FY2011.

Production costs

The Company was highly successful in reducing controllable costs and exceeded budget expectations in the second half of the year. In Rand terms ferrochrome production cost for the year decreased by 0.5% from prior year and by 7.6% from H1 to H2.

In Dollar terms, production cost for the year was 89.4¢/lb at an average exchange rate of ZAR7.00/US$ compared with 83.4¢/lb for the prior year at an average exchange rate of ZAR7.54/US$. The table below provides the breakdown of production cost and restates FY2010 costs at an exchange rate of ZAR7.00/US$ to remove the effects of exchange rate for comparison purposes in US¢/lb.

·; Ore: The continued ramping up of underground mining operations, together with improving beneficiation yields have significantly contributed to lowering the cost of ore. Open pit mining at Sky Chrome has started during June 2011 which will substitute the open pit operation at Lesedi (which is nearing its end of mine life) at a lower cost. The supply of 15ktpm of low cost UG2 concentrate from Anglo Platinum from January 2012 should further reduce the cash cost of ore by about 3.0¢/lb.

·; Reductants: Coke prices on average increased by 8.5% from the prior financial year, however with the introduction of lower cost anthracite, at levels far exceeding original expectations, overall reductant costs were reduced by 11%. The Company's objective is to further decrease reductant costs by about 1.3¢/lb (6%) in FY2012.

·; Electricity: Eskom unit prices on average increased by 23.4% from the prior financial year but due to the water leaks on the furnace roofs electricity consumption efficiencies were negatively affected resulting in an overall 28% increase in electricity cost. After the furnace roof replacements, electricity consumption is expected to normalize which should reduce the impact of future Eskom tariff increases by 1.6¢/lb (8%).

·; Co-generation: The electricity co-generation plant is expected to generate about 11% of the operation's overall electricity requirements at significantly lower cost than Eskom. Once operating at full capacity, electricity cost should reduce by a further 2.0¢/lb.

·; Fixed costs: Overall costs were well contained during the year with per unit fixed cost expected to decrease by 3.0¢/lb at full production capacity which is expected from November 2011.

Cash flow

Operating activities utilised cash of ZAR59 million, resulting from the cash loss ZAR97 million offset by a net decrease in working capital of ZAR38 million

Investing activities utilised ZAR214 million which includes ZAR196 million for capital expenditure and ZAR115 million for UG2 pre-payments, offset by ZAR77 million of proceeds on disposal of PGM net profit interest to Phoenix Platinum and ZAR14 million from the release of DMR guarantees. Capital expenditure mainly comprised of underground mine development of ZAR38 million, co-generation plant of ZAR86 million, and furnace roof replacements of ZAR34 million.

Financing activities utilised ZAR42 million comprising ZAR35 million for working capital facility repayments and other repayments of ZAR7 million.

The Company had net borrowings at 30 June 2011 of ZAR248 million (ZAR67 million cash on balance sheet less ZAR315 million drawn on the working capital facility).

Balance Sheet

Working capital decreased by ZAR85 million (including non-cash items), of which ZAR69 million is as a result of a decrease in inventories (ZAR25 million increase for ferrochrome and ZAR94 million decrease for raw materials, ore and consumables), a decrease of ZAR121 million in receivables and a decrease of ZAR105 million in payables.

The increase in the deferred tax asset of ZAR79 million is due to the increase in the calculated tax loss. The unredeemed capital expenditure balance is estimated at ZAR1.7 billion at 30 June 2011.

Capex

Capital expenditure for the year was ZAR307 million which includes ZAR86 million for the co-generation plant, ZAR38 million for underground mine development, ZAR115 million for UG2 CRP project and ZAR24 million for the furnace roof replacements.

The budgeted capital expenditure for FY2012 is ZAR216 million which includes ZAR58 million for the furnace roof upgrades, ZAR48 million for underground mining development, ZAR46 million for the UG2 project and ZAR23 million for Sky Chrome infrastructure.

Funding

The Company has a three year ZAR500 irrevocable working capital facility with Bank of China which expires 25 June 2012. At 30 June 2011, ZAR315 million had been drawn on the facility. The Company is confident that this facility will be renewed in the current financial year.

The Company is in the final stages of securing a term loan facility to fund the UG2 project and expects to conclude an agreement by the end of November 2011.

Dividends

The Board of Directors has resolved not to declare a dividend for this financial year.

The above income statement should be read in conjunction with the notes to the financial statements.

The above statement of comprehensive income should be read in conjunction with the notes to the financial statements.

The above statement of changes in equity should be read in conjunction with the notes to the financial statements.

The above statement of financial position should be read in conjunction with the notes to the financial statements.

1. CORPORATE INFORMATION

International Ferro Metals Limited ("the Parent") is a company limited by shares incorporated in Australia whose shares are publicly traded on the London Stock Exchange, as of 1 September 2007. The Company previously traded on the Alternative Investment Market of the London Stock Exchange.

The financial report for the year ended 30 June 2011 was issued in accordance with a resolution of Directors on 19 September 2011.

2. ACCOUNTING POLICIES

Basis of preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the Corporations Act 2001 and Australian Accounting Standards and other authoritative pronouncements of the Australian Accounting Standards Board. The financial report has also been prepared on a historical cost basis, except for certain financial instruments which have been measured at fair value.

The financial report is presented in South African Rand and all values are rounded to the nearest thousand Rand (ZAR'000) unless otherwise stated.

Comparative information is reclassified where appropriate to enhance comparability.

As at the date of this report, the Company has drawn down ZAR400 million on the Bank of China (BOC) working capital facility which is due to be repaid on 25 June 2012. The Board of Directors are progressing plans to renew the BOC facility before it expires. In addition, the Board is confident that the Company has additional avenues of funding available to it which could be used with forecast operating cash flows, to repay this facility should it not be renewed. For this reason, after making enquiries, the directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future, and hence, we continue to adopt the going concern basis in preparing the accounts.

3. SIGNIFICANT ACCOUNTING JUDGEMENTS, ESTIMATES AND ASSUMPTIONS

In the process of applying the Group's accounting policies, management has made the following judgements, apart from those involving estimations, which have the most significant effect on the amounts recognised in the financial statements:

4. SEGMENT INFORMATION

Identification of reportable segments.

The group has determined operating segments based on the information provided to the Board of Directors (Chief Operating Decision Maker).

The group operates predominately in one business segment, being the mining and processing of chromite in South Africa and sale of ferrochrome. There is no material difference between the financial information presented to the Chief Operating Decision Maker and the financial information presented in this report.

Sales revenue by geographic location

Revenue obtained from external customers is attributed to individual countries based on the location of the customer.

Major customers

The group received 70% (2010: 74%) of its external revenue from its China and European customers. During 2011 the group received 49% (2010:67%) of its external revenue from CMC Cometals and 39% (2010:25%) from Jisco.

There are no additional customers which account for more than 10% of the group's external revenues.

5. SALES REVENUE

(a) Fair value adjustments represent re-valuations performed on ferrochrome sales contracts for which the price is linked to future fluctuations in the published ferrochrome price until the day of consumption by the end customer.

(b) Other sales relate to chrome ore sales.

6. OTHER INCOME

(a) Other income of ZAR77,288 relates to the sale of IFM's 25% net profit interest in the retreatment of the tailings dams and current arisings from IFM's existing chrome operations to Phoenix Platinum Mining (Pty) Ltd. The balance of other income of ZAR1,065 relates to profit on sale of assets and rental income received.

7. ADMINISTRATIVE AND OTHER EXPENSES

(a) Loss on disposal of assets relates to impairment of the furnace roofs that were replaced.

8. REMUNERATION OF KEY MANAGEMENT PERSONNEL

(a) Remuneration of Key Management Personnel

* Other fees represent costs for any additional work undertaken for the Company and retention fees paid.

** Superannuation represents payments made in respect of a defined contribution pension scheme.

(b) Option holdings of key management personnel (consolidated)

30 June 2011

No share options were issued during the year ended 30 June 2011.

30 June 2010

No share options were issued during the year ended 30 June 2010.

9. STAFF COSTS (EXCLUDING REMUNERATION OF KEY MANAGEMENT PERSONNEL)

* Superannuation represents payments made in respect of a defined contribution pension scheme.

** Other costs relate to retention bonus provisions.

10. SHARE BASED PAYMENT (EXPENSE)/INCOME

Refer to note 31 for further details of the option plan.

11. FINANCING INCOME AND COSTS

12. INCOME TAX

Calculated taxation losses

The Group has recognised a net deferred tax asset of ZAR217 million as it is probable this will be fully utilised in future, as the Group expects to generate future taxable profits based on current forecasts. IFM has unrecognized tax losses of ZAR164 million (2010:ZAR94 million) in relation to the parent entity.

Unredeemed mining capital expenditure

13. EARNINGS PER SHARE

14. DIVIDENDS PAID AND PROPOSED

The Board of Directors resolved not to declare a dividend for the year ended 30 June 2011 (2010: nil).

15. CASH AND CASH EQUIVALENTS

16. TRADE AND OTHER RECEIVABLES

(a) Trade debtors relate to the sale of ferrochrome and chrome ore. Payment terms are thirty days from date of final invoice.

(b) Tax refunds relate to the relevant Goods and Services Tax and Value Added Tax refunds owing in Australia and South Africa.

The carrying value of trade and other receivables is assumed to approximate the fair value due to the short term nature of the trade and other receivables.

17. PREPAYMENTS

18. INVENTORIES

19. FINANCIAL INVESTMENTS

(a) These financial assets consist of investment portfolios which are managed by various financial institutions in favour of a rehabilitation trust. The funds can only be applied to relevant rehabilitation expenditure.

The fair value of these financial instruments has been estimated by the financial institutions using a variety of valuation techniques. These financial instruments are classified as a level 2 in the fair value hierarchy as their fair values have been estimated using inputs other than quoted prices that are observable for the assets, either directly or indirectly.

20. PROPERTY, PLANT & EQUIPMENT

(a) Mineral rights and reserves of ZAR61million relating to the Sky Chrome deposit is held in Purity Metals Holdings Limited ("Purity"), a wholly owned subsidiary of the Group. IFM acquired the shares in Purity for US$9 million on 16 December 2005. For accounting purposes Purity is treated as a subsidiary of the Company. Purity owns 80% of the Sky Chrome project, a ferrochrome resource located adjacent to the Buffelsfontein plant. The purchase price has been allocated to the value of the Sky Chrome Mineral Resource. There has been no impact on the income statement subsequent to acquisition.

On 23 November 2010, Sky Chrome's new order mining license was approved by the Department of Minerals and Resources ("DMR"). Open pit mining operations commenced at Sky Chrome during June 2011.

(b) Capital work in progress relates to capital costs incurred for the expansion of the Group's associated infrastructure.

(c) The adjustment to plant & equipment relate to reallocation of capital work in progress to the various assets.

Property, mineral rights and plant and equipment of IFMSA have been pledged as security for the working capital facility provided by Bank of China. (Refer to note 25 for further details).

21. INTANGIBLE ASSETS

(a) Licence fees relate to the fees paid for the use of patented technology.

(b) In February 2010 the Company concluded and announced a UG2 ore supply agreement with Rustenburg Platinum Mines Limited ("RPM"), a subsidiary of Anglo Platinum Limited. Under the agreement IFM will fund the construction of a chrome re-treatment plant ("CRP") to extract chrome concentrate from RPM's UG2 concentrator tailings. The CRP will be owned, maintained and operated by RPM. The contract has a 10 year life commencing on the construction start date and entitles IFM to 15,000 tonnes of concentrate per month from the commissioning date, at no additional cost other than the cost of transporting the concentrate to its facilities at Buffelsfontein and any government royalties that may be payable. The asset constitutes progress payments for the right to receive UG2 ore in the future.

22. OTHER NON-CURRENT ASSETS

(a) Restricted cash represents cash set aside for bank guarantees provided by Standard Bank to the Department of Minerals and Resources for environmental rehabilitation.

23. TRADE AND OTHER PAYABLES

(a) Refer to note 35.

(b) Other creditors and accruals represent advance debtor payments.

Due to the short term nature of these payables, their carrying value is assumed to approximate their fair value.

24. PROVISIONS