IFL.L Regulatory News (IFL)

23 February 2015

International Ferro Metals Limited

("IFL" or the "Company")

Interim Financial Results for the half year to 31 December 2014

Highlights

Financial highlights

· Half-year ferrochrome ("FeCr") sales of 101,700 tonnes ("t"), down 7% on comparative period and down 10% on the previous half.

· Loss before tax of ZAR176 million, compared with a profit of ZAR31 million for the comparative period and a profit of ZAR10 million in the previous half, primarily due to production interruptions which resulted in higher production costs.

· Net borrowings of ZAR451 million, up from ZAR338 million at the end of June, due to the loss incurred during the period and capital expenditure. The Company continues to operate within the ZAR500 million working capital facility.

Operational highlights

· Half-year ferrochrome production of 98,016 tonnes, down 16% on the comparative period and down 12% on the previous half.

· Lesedi underground mining operations ramping up in line with the revised, accelerated schedule.

· Rooderand mine produced 8,400t RoM during the half, ahead of previous guidance.

· Co-generation plant scheduled to re-start in Q2 calendar 2015 following modifications to the gas supply circuit.

· Zero fatality track record maintained, with further improvement in overall safety performance during the period.

Post period

· European Benchmark Price for Q1 of calendar 2015 decreased 6.1% to 108¢/lb.

· South African Rand continued to depreciate against U.S. dollar, easing cost pressures.

· Board decision to not proceed with the proposed Pacific Carbon acquisition.

· Non-executive directors, including the Chairman and Deputy Chairman, have volunteered to take a 20% reduction in their remuneration, which is payable in or with reference to Australian dollars. When adjusted for recent foreign exchange movements, this is equivalent to 29% vis-à-vis Sterling, the currency of most of the companies listed on the London Stock Exchange.

Chris Jordaan, Chief Executive Officer of IFL commented:

"Production interruptions have impacted the Group's results, with lower volumes, higher production costs and one-off items such as impairment of PPE and the cost of alternative reductant trials, resulting in a loss for the first half of financial 2015. Market conditions further impacted results, with the benchmark price having fallen more than 6% during the period

Operations are already showing significantly improved operating rates in the beginning of the second half. The revised ore feed to the furnaces, augmented by improved quality supply of key reductants, are contributing to this improved performance. It is expected to continue into the current quarter as well as the second quarter of this calendar year. Added to this production costs should further decrease and management is confident that this will continue into the rest of the year. Further cost reduction initiatives are being implemented and are specifically focussed on reducing overheads and related fixed costs. Improved production and real fixed cost reduction will result in lower per unit fixed costs. We expect the second half to show a substantial improvement and be cash generative. So far the results are encouraging.

Securing supply of chrome ore is a growing challenge for the industry, as UG2 supply remains static, while global chrome ore demand is expected to rise by 1 million tonnes in 2015. A lack of adequate investment in new chrome ore mines and the high cost of developing these mines, should drive an upwards revision in market prices for chrome ore and subsequently ferrochrome prices. We remain confident in our strategy of ensuring an uninterrupted long-term competitive ore supply for ferrochrome production to meet future market demand."

There will be a presentation to analysts of the interim results today, Monday 23 February 2015 at 09.00am (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. The conference call dial-in to the results presentation is as follows:

Participant dial in: +44 (0) 1452 555566

Conference ID: 88852336

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

International Ferro Metals Limited Tel: +27 14 574 6302

Chris Jordaan, Chief Executive Officer

Brunswick Group Tel: +44 (0) 20 7404 5959

Carole Cable / Charles Pemberton

Numis Securities Limited Tel: +44 (0) 20 7260 1000

James Black / Stuart Skinner / John Prior

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.

Operational Review

Ferrochrome Market Review

Global stainless steel production has expanded at approximately 6.8% per annum over the past 5 years, mainly driven by China. FeCr production capacity in China has tracked this expanding demand, with China overtaking South Africa as the dominant supplier of FeCr in 2012. However, the rapid growth in stainless steel and its raw materials outpaced global demand and the slow-down in economic activity resulted in a market overhang with severe pressure on prices. In addition, further pressure has been exerted due to a squeeze on liquidity, which triggered destocking in the latter part of 2014.

Approximately 57% of the world's high-carbon FeCr is consumed in China and local production caters for approximately 75% of the local consumption. The internal FeCr price in China is increasingly functioning as a gauge for competing external material and has a growing influence on global prices. European stainless steel producers are fully aware of the price differential and continuously apply pressure to narrow the price gap. The European benchmark price (BMP) has declined for three consecutive quarters from 122¢/lb in Q2 of calendar 2014 to 108¢/lb in Q1 of calendar 2015. In addition, the discount to the BMP has also increased to the extent that European prices on a CIF basis are now aligned with Chinese prices.

The profitability of Chinese FeCr production came under pressure during 2014 on the back of the increasing cost of ore and reduced alloy prices. This resulted in a slowdown in FeCr production in China during the second half of 2014, with imports not fully supplementing local demand, which lead to some destocking. A similar trend was evident in ore imports that softened significantly and as a result, port stocks reduced from approximately 3 million tonnes in 2013 to 1.7 million tonnes at the end of 2014.

Chinese smelters generally consume approximately 2.35 tonnes of ore per tonne of FeCr produced, with ore constituting approximately 55% of their cost of production. The cost of FeCr production is therefore highly sensitive to ore pricing. The current inventory level of chrome ore in China represents less than two months' consumption and any increase in demand will potentially have an inflationary effect on ore prices and ferrochrome costs.

Although a market balance analysis showed an overhang of FeCr in 2013, a good deal of this has been worked down during the latter part of 2014 on the back of a slowdown in Chinese production, which is anticipated to continue into the first half of 2015. However, a better balanced market is anticipated towards the latter part of 2015 with prices showing potential for improvement, which should continue into 2016 as demand picks up in line with global growth projections, supported by cost pressures.

Sales and inventory

FeCr sales for the half year to 31 December 2014 were down 7% to 101,700t, compared with 109,623t for the comparative period in 2013 and down 10% on the preceding six months. The decrease in sales was as a result of lower production volumes. A higher ratio of FeCr fines sales during the half decreased achieved realised prices. The sales mix represented a good fit to global consumption patterns on the back of IFL's diversification strategy.

FeCr inventory was 10,985t at 31 December 2014, down from 15,288t at 30 June 2014. This is in line with previous guidance of approximately 10,000t. Stocks are expected to remain at these levels over the next two quarters.

The Company is focussed on reducing working capital to optimal levels. As part of this strategy, ore sales increased during the last quarter to 84,000t

Smelting

FeCr production for the half was 98,016t compared with 116,469t in the comparative period and 111,791t in the previous period. The decrease was due to planned annual routine maintenance shutdowns in August, the impact of the DMR stoppage in November and the trials to assess the viability of using silicon carbide as an alternative reductant in the smelting process. Further to this, as part of a Company initiative to reduce working capital, low grade ore stock was consumed by the furnaces during the period. This had a negative impact on all efficiencies, resulting in lower production volumes.

The ore supply strategy, comprised of Lesedi MG1/MG2, complemented by the LG6 ore from Rooderand, and the maximising of UG2 concentrate through the pelletiser, finally came to fruition in December. This had positive results in terms of process efficiency and costs, which should continue through the first half of calendar 2015.

With the improved stability of electrodes during the prior financial year, furnace power was increased during the period in an effort to raise output, testing previous assumptions on electrode integrity vs. power input. However, some issues with electrode integrity recurred, although not as significant as in the past, which contributed to lower than planned production. Furnace power input has subsequently been decreased to the levels maintained in the prior financial year to ensure integrity of electrodes and process stability as we endeavour to maximise output on the back of our ore supply strategy.

With local supply of coke dwindling, inroads have been made to open channels for the import of coke from both Europe and China. This should result in greater stability in reductant supply, limiting the impact of inferior quality reductants on process stability.

Going forward, it is anticipated that the combination of an improved ore supply strategy, stability in reductant feed to the furnaces, as well as improved electrode integrity leading to process stability, will deliver improved levels of output. This has been the case in the latter part of the first half of 2015.

Notwithstanding this, the Company reduces its production guidance for the year to between 200,000 and 205,000 tonnes of ferrochrome.

Mining

Lesedi underground mine was successfully re-commissioned and work is progressing in line with the accelerated ramp up schedule. The mine produced approximately 53,000 tonnes RoM for the half year and it is planned that Lesedi output will increase significantly over the next 6 months.

Lesedi mines both the MG1 and MG2 reef horizons. MG1 is mined via a conventional breast stoping method and MG2 utilises a room and pillar layout. A Face Drill Rig and Support Bolter were introduced into mining the MG2 seam during the first quarter of 2015. Hence, the MG2 horizon is currently in the process of being mechanised.

The accelerated mining ramp up plan is in line with the overall Company strategy of becoming self-sufficient in terms of ore supply. Significant infrastructure developments are currently taking place to support the accelerated ramp up with particular focus on ore reserve development to ensure sustainability of ore supply.

Lesedi is on track to produce cost effective high grade ore to be utilised in the smelters.

In line with expectations, and the Company's stated strategy to acquire higher-grade feed stock for the furnaces, mining at Chrometco's Rooderand LG6 open pit mine commenced in November 2014. The first run of mine ore was transported to the Lesedi beneficiation plant in January 2015. The drilling programme was initially targeting 200kt of LG6 ore. The Company will now commence drilling at the remainder of the Rooderand mine property in order to increase the available ore.

The lower overall recovery rate was due to low grade Sky Chrome material that was processed during the half.

DC furnace

A bankable feasibility study ("BFS") for a 60MW DC furnace was commissioned in April 2014 and was completed during the half. The feasibility study is now being evaluated. As previously announced the DC furnace is expected to increase total ferrochrome capacity by about 42%, and at an estimated incremental cost 12% below the current cost of production.

The Company is currently assessing appropriate and prudent financing options which will protect and enhance shareholder returns.

Pacific Carbon acquisition

On 1 October 2014, the Company made an offer to acquire the assets of Pacific Carbon and Modderriver Minerals subject to certain conditions. The offer was made in conjunction with Portnex International to acquire assets consisting of 6 retorts located on Kooragang Island in Newcastle, Australia. The retorts are used to produce intermediate or retort coke which is used in ferroalloy and steel production. The due diligence has been completed and a decision made to not proceed with the acquisition. This was due to technical difficulties as well as logistic constraints.

Co-generation plant

The plant remains shut down. A chiller unit, which should reduce the load on the engine components, is scheduled to be installed during March 2015. As previously announced, it is anticipated that the Cogen plant will be restarted in Q2 of calendar 2015. The expected cost for the chiller is ZAR18 million.

At full and stable furnace production, the Cogen plant should generate approximately 10% of the Company's total electricity requirements.

UG2 supply agreement

The Company has a supply agreement with Anglo Platinum to provide 15kt per month of UG2 chrome concentrate until 2020. This beneficial agreement delivers UG2 at a cost significantly below the Company's in-house cost of concentrate production.

The supply of UG2 accounted for 97kt during the period, compared with the contractual 90kt. Due to the protracted strike action at Anglo Platinum from February to June 2014, a backlog of UG2 ore was created, which at 31 December 2014 was approximately 91,000t. Anglo Platinum is obliged under the agreement to make up any shortfalls from future production. As Anglo Platinum makes up the shortfall, the Company will benefit from a higher supply of UG2 ore, which is a direct contributor to profitability.

The Company has increased the use to about 100% of the contractual allocation of UG2 chrome concentrate into its ore blend. This should have a positive impact on production costs.

Health and Safety, and the Environment ("HSE")

The Company had no fatalities during the half and remains fatality free since inception, representing 28.6 million fatality free man-hours which equate to 3.6 million fatality free shifts as at 31 December 2014. During the period, 8 lost time injuries occurred and the 12 month moving average lost time injury frequency increased from 1.35 at 31 December 2013 to 3.12 at 31 December 2014. The Company continues to focus on improving safety performance which is evident in the total recordable injury rate. The 12 month moving average total recordable injury rate improved further from 28.75 at 31 December 2013 to 24.95 at 31 December 2014. Added to this focus will be set on the introduction of Behavioural Based Care as a key initiative to improve personal and colleague to colleague safe operations.

Financial Review

The interim financial statements are prepared in accordance with International Financial Reporting Standards (IFRS). An abridged version of the financial statements follows; the full set for the period is available on the Company web site www.ifml.com.

The Company reported a loss before tax of ZAR176 million for the six months ended 31 December 2014 ("the period") against a profit of ZAR10 million in the previous six months and a profit of ZAR31 million for the comparative period. The loss was mainly as a result of higher production costs and lower production volumes during the period. The loss was further increased by an impairment of ZAR26 million recognised on property, plant and equipment, a net realisable value adjustment of ZAR9 million on obsolete consumable stocks, a price adjustment of ZAR26 million on price-sensitive sales as at 31 December 2014, and an estimated ZAR30 million on the silicon carbide trials. The loss attributable to the DMR stoppage in November is still being assessed.

* The loss from normal operations includes the loss attributable to the DMR stoppage which is still being assessed

FeCr production for the half was 98,016t compared with 116,469t in the comparative period and 111,791t in the previous period. Production volumes were negatively impacted by the planned annual routine maintenance shutdowns, the DMR stoppage during November and a series of trials to assess the viability of using silicon carbide as an alternative reductant in the smelting process.

Sales volumes were 101,700t against 112,697t for the previous six months and 109,623t for the comparative half. Sales revenue increased to ZAR1.02 billion, up 2% on the comparative period's ZAR1 billion. The increase was a result of ZAR66 million generated from ore sales during the period compared to ZAR14 million in the comparative period. FeCr inventories decreased by 4,303t between 30 June 2014 (15,288t) and 31 December 2014 (10,985t).

The European benchmark ferrochrome price for the first quarter was 119¢/lb, and decreased to 115¢/lb for the second quarter of the half. The average ferrochrome price for the half was 117¢/lb, which was 3¢/lb below the average price of the previous six months. The weakening of the South African Rand ('Rand') against the U.S. Dollar resulted in a 1% higher Rand FeCr price.

During the period a gross loss of ZAR52 million was realised compared to a gross profit of ZAR110 million during the previous half. The operating margin deteriorated from 10% in the previous half to an operating loss of 5%.

Administration and other expenses increased from ZAR65 million in the comparative period to ZAR98 million. This was primarily due to the impairment of ZAR26 million recognised on property plant and equipment, and a net realisable value adjustment on obsolete consumable stocks of ZAR9 million.

During the period the Company realised an EBITDA loss of ZAR93 million compared to a profit of ZAR112 million for the comparative period and a profit of ZAR91 million for the previous six months. The headline loss per share for the period was ZAR0.32 compared to a headline profit per share of ZAR0.06 in the comparative period.

Net borrowings increased by ZAR113 million to ZAR451 million at 31 December 2014, from ZAR338 million at 30 June 2014. The Company continues to operate within the ZAR500 million working capital facility, which was fully drawn at 31 December 2014. Operations (before working capital changes) utilised ZAR60 million, working capital generated ZAR47 million, investing activities utilised ZAR69 million and financing activities utilised ZAR31 million. Forecast capital expenditure for the second half of the year is ZAR20 million. Net borrowings are expected to range between ZAR450 million to ZAR490 million until June 2015 before reducing, as a result of the lower Benchmark price for Q1 of calendar 2015 and the expected annual Eskom increase of approximately 13% on 1 April 2015.

Production cost

FeCr production cost for the first half was ZAR8.15 per pound, in line with previous guidance. Production cost was negatively impacted by higher electricity consumption, lower production volumes and more expensive ores due to the ramp-up of mining operations at Lesedi and Rooderand. FeCr production cost is expected to decrease as operations stabilise and production volumes rise, and ore from the Company's own resources is balanced with Anglo Platinum UG2 supply. The Company expects to improve self-sufficiency of ore supply by June 2015 and both Rooderand and Lesedi are expected to produce at a cost below that of buy-in ore. Cost performance improved significantly towards the latter part of the half and this trend is expected to extend into the second half as input costs are reduced on a comparative basis.

Broad-Based Black Economic Empowerment ("BBBEE")

In April 2009, the Company lodged its proposed black economic empowerment ("BEE") transaction with the Department of Mineral Resources ("DMR"), as the final element of its previously submitted application to convert its Old Order Mining Right into a New Order Mining Right under the South African Mineral and Petroleum Resources Development Act ("MPRDA").

In July 2012, the DMR granted the conversion of the Old Order Mining Right to a New Order Mining Right. However, since the submission of the proposed BEE transaction to the DMR in 2009, there have been legislative changes, and developments within IFL which have presented an opportunity for the Company to implement a more simplified BEE transaction. The Company has therefore not executed the conversion and in February 2014 resubmitted its proposal, which aims to simplify the funding of the BEE transaction. Management is confident that the DMR will receive the application favourably and convert the mining right, whereafter the BEE transaction will be implemented without delay.

Dividends

The Board of Directors resolved not to declare an interim dividend for the six months ended 31 December 2014.

Outlook

Global economic growth is projected to be between 3.5% and 3.7% according to the latest World Economic Outlook forecast. This represents a 0.3% downward revision relative to the previous forecast on the back of a reassessment of prospects in China and the euro area. Growth prospects for the United States remain positive.

The growth numbers, translated via stainless steel to chrome demand, show that more than 1 million tonnes additional chrome ore would be required in 2015 and approximately 4.8 million tonnes by 2018. In the medium to longer term this will present a great challenge on a relatively stationary UG2 supply pool and currently mined ore, due to the lack of adequate investment in new chrome ore mining developments. The cost of investing in new mining projects will require much improved market prices. It is therefore anticipated that ferrochrome prices will be pushed up on the back of ore cost pressures to meet the required demand.

Operationally it is expected that production will increase significantly in the second half as well as a marked reduction in costs. The diversified market into which IFL sells its alloy will allow the Company to optimise the sales distribution. FeCr prices are low and parity exists between China and especially Europe. Cost pressures on producers in both China and South Africa and buoyant stainless steel growth augmented by low ore and alloy stocks bodes well for a relief in prices in the short term. Marginal producers' latent capacity will however subdue significant price increases in the short term.

IFL's strategy to ensure an uninterrupted long-term competitive ore supply for ferrochrome production, supported by an expanding regional market presence is tailored to meet the demand of the market going forward.

FOR THE HALF-YEAR ENDED 31 DECEMBER 2014

1. CORPORATE INFORMATION 

The financial statements of International Ferro Metals Limited (the Company) for the half year ended 31 December 2014 were authorised for issue in accordance with a resolution of the Directors on 23 February 2015.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The financial report is a general-purpose financial report, which has been prepared in accordance with AASB 134 "Interim Financial Reporting" and the Corporations Act 2001.  The financial report has also been prepared on an historical cost basis, except for certain financial instruments which have been measured at fair value. The principal accounting policies used by the Company comply with International Financial Reporting Standards (IFRS).

These half-year financial statements do not include all notes of the type normally included within the annual financial report and therefore cannot be expected to provide as full an understanding of the financial performance, financial position and financing and investing activities of the consolidated entity as the full financial report. These half-year financial statements should be read in conjunction with the Annual Report of International Ferro Metals Limited as at 30 June 2014.

It is also recommended that the half-year financial statements be considered together with any public announcements made by International Ferro Metals Limited and its controlled entities during the half-year ended 31 December 2014 and up to the issue date of this report, in accordance with the continuous disclosure obligations arising under the Corporations Act 2001.

The accounting policies and methods of computation are the same as those adopted in the most recent annual financial report except for the adoption of new and revised Accounting Standards listed under (c).

(b) Basis of accounting

For the purpose of preparing the half-year financial statements, the half-year has been treated as a discrete reporting period.

These financial statements are presented in South African Rand and all values are rounded to the nearest thousand Rand (ZAR'000) unless otherwise stated under the option available to the Company under ASIC Class Order 98/0100. The Company is an entity to which the class order applies.

In the application of IFRS, management is required to make judgements, estimates, and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements. Actual results may differ from estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

Judgements made by management in the application of IFRS that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the next year are disclosed, where applicable in the relevant notes to the financial statements.

(c) Significant accounting policies

Except as described below, the accounting policies applied by the Group in this consolidated condensed interim financial report are the same as those applied by the Group in its consolidated financial report as at and for the year ended 30 June 2014.

Changes in accounting policy and disclosures 

The Group has adopted the following new and amended Australian Accounting Standards and AASB Interpretations as of 1 January 2014:

· AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements [AASB 124]

· AASB 2012-3 Amendments to Australian Accounting Standards - Offsetting Financial Assets and Financial Liabilities

· AASB 2013-3 Amendments to AASB 136 - Recoverable Amount Disclosures for Non-Financial Assets

The adoption of these amendments did not have any impact on the financial position or the performance of the Group.

(d) Basis of consolidation

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by International Ferro Metals Limited (IFM) at the end of the reporting period. The Company and its controlled entities together are referred to as the Group. The effects of all transactions between entities in the Group are eliminated in full. Outside equity interest in the results and equity of controlled entities are shown separately in the Consolidated Income Statement, Statement of Comprehensive Income, Statement of Changes in Equity and Statement of Financial Position respectively.

Where control of an entity is obtained during a financial period, its results are included in the consolidated Income Statement from the date on which control commences. Where control of an entity ceases during a financial period, its results are included for that part of the period during which control existed.

The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

(e) Going Concern

As at 31 December 2014, the Group had net current liabilities of ZAR254 million (30 June 2014: ZAR114 million) including the Bank of China working capital facility. As at the date of this report, the Group has drawn down ZAR500 million (30 June 2014: ZAR500 million) on the Bank of China working capital facility which is due to be repaid on 16 September 2015. It is expected that the Bank of China facility will be renewed before it expires. In addition the Group made a loss of ZAR176 million for the half year primarily due to depressed ferrochrome prices and operational issues as previously disclosed. The Directors are confident that the Group can secure additional avenues of funding which could be used together with forecast operating cash flows, to repay this facility should it not be renewed. For this reason and 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, continues to adopt the going concern basis in preparing the accounts.

3. 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 57% of its external revenue from China and Europe (2013: 73%). During the half year ended 31 December 2014 the Group received 61% (2013: 52%) of its external revenue from CMC Cometals and 15% (2013: 32%) from Jiuquan Iron & Steel Group Company Ltd (JISCO). During the current period sales to Jindal increased to 13% (2013: 2%) of external revenue, as a result of market diversification.

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

4. ADMINISTRATIVE AND OTHER EXPENSES

a) The unabsorbed fixed costs relate to Sky Chrome mining costs as no ore was produced during the period, furnace standing charges during the maintenance performed during August, Cogeneration plant costs as the plant was shut during the period and fixed costs relating to the shut-down of the pelletiser and sinter plant during the steel belt replacement.

b) The impairment on assets relate to the Cogeneration plant engines (ZAR13,773), furnace annual shut-down (ZAR5,117) and capital work in progress items (ZAR6,902).

c) The net realisable value adjustment relates to consumable store items that were adjusted to their net realisable value.

5. SHARE-BASED PAYMENT EXPENSE

(a) Share-based payment expense relates to the performance rights and share options issued to Mr Chris Jordaan, as well as the Performance share scheme introduced and implemented to replace the existing phantom option scheme where employees are issued with fully paid-up physical shares in the Company. Please refer to the Company's Annual Report at 30 June 2014 for further details.

6. EARNINGS/(LOSS) PER SHARE

a. Due to the reported loss per share, the additional rights issued are anti-dilutive and hence have not been incorporated in the calculation of diluted earnings per share and the calculation of weighted average number of ordinary shares.

7. 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) Other debtors mainly relate to income receivable from Eskom due for demand management participation.

8. INVENTORIES

Cost of sales reflects the amount of inventory expensed for the year.

(a) A net realisable value adjustment of ZAR9,060 was recognised on consumable stores during the period.

9. DEFERRED TAX ASSET

The Group has recognised a deferred tax asset as it is considered probable that it will be recovered through future taxable profits based on the current forecasts. Refer to the 30 June 2014 Annual Report for more detail on the deferred tax asset.

10. PROPERTY, PLANT & EQUIPMENT

(a) Mineral rights and reserves of ZAR61 million relating to the Sky Chrome deposit is held in Purity Metals Holdings Limited ("Purity"), a wholly owned subsidiary of the Group.

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

(c) The disposals relate to items previously capitalised that were reclassified to consumable stores stock.

(d) The adjustment on plant and equipment relates to the impairment recognised on the cogeneration plant engines (ZAR13,773), furnace annual shut-down (ZAR5,117) and on capital work in progress items (ZAR6,902).

Property, mineral rights and plant and equipment of IFMSA have been pledged as security for the working capital facility provided by Bank of China. The carrying value of this property, mineral rights and plant and equipment at 31 December 2014 is ZAR1.86 billion (30 June 2014: ZAR1.89 billion).

10. PROPERTY, PLANT & EQUIPMENT (continued)

11. INTANGIBLE ASSETS

11. INTANGIBLE ASSETS (continued)

a) Licence fees relate to the fees paid for the use of patented technology and is amortised over the life of the plant.

b) The UG2 Chrome Retreatment Plant (CRP) at RPM's Waterval operation in Rustenburg. The supply agreement entitles IFM to receive 15,000 tonnes per month of chrome concentrate until November 2020. This intangible is amortised to inventory with the quantities received.

12. OTHER NON-CURRENT ASSETS

a) Restricted cash represents cash set aside for bank guarantees provided by Standard Bank to the Department of Minerals Resources for environmental rehabilitation and cash set aside for foreign exchange contracts by Bank of China. During the period the restricted cash at Bank of China was released.

13. INTEREST-BEARING LOANS AND BORROWINGS

(a) Working capital facility

International Ferro Metals SA (Pty) Ltd (IFMSA) rolled forward the working capital facility agreement with Bank of China for an amount of R500 million on 16 September 2014. The term of the facility is 12 months and expires on 16 September 2015. The facility interest is charged at JIBAR rate plus 3.85%. The parent company, IFML, guarantees the facility on behalf of IFMSA. The entire statement of financial position of IFMSA is pledged as collateral for the loan facility. Bank of China has the option to cancel the loan facility and call upon any balance outstanding in the event of a material deterioration in the financial position of IFMSA.

(b) Other loans constitute the 20% community participation of funding provided to Sky Chrome (Pty) Ltd by the group. The loan is interest free and payable on demand before earning distributions are made.

(c) The weighted average effective interest rate on finance leases is 10.78%.

14. CONTRIBUTED EQUITY

15. ACCUMULATED LOSSES

(a) During the period under review International Ferro Metals SA (Pty) Ltd (IFMSA) repurchased the 0.0625% shareholding that Global Eagle Minerals and Beneficiation Pty Ltd held in IFMSA. These shares were cancelled.

16. DIVIDENDS

The Board of Directors resolved not to declare an interim dividend for the half year ended 31 December 2014 (30 June 2014: nil).

17. CAPITAL COMMITMENTS

Capital commitments outstanding as at 31 December 2014 amounts to ZAR24 million.

18. CONTINGENT ASSETS AND LIABILITIES

There are no contingent assets or liabilities outstanding or recorded at 31 December 2014.