Annual Report and Accounts 2013
Petra Diamonds Limited 103
Overview
Performance Review
Strategic Review
Sustainability
Corporate Governance
Group Accounts
1. Accounting policies
continued
1.23 Critical accounting estimates and judgements
continued
Provision for rehabilitation
Significant estimates and assumptions are made in determining the amount attributable to rehabilitation provisions. These deal
with uncertainties such as the legal and regulatory framework, timing and future costs. In determining the amount attributable
to rehabilitation provisions, management used a discount rate range of 5.6%–7.9% (30 June 2012: 7.7%–8.9%), estimated rehabilitation
timing of 12 to 52 years (30 June 2012: 10 to 50 years) and an inflation rate range of 1.8%–5.9% (30 June 2012: 5.6%–6.9%). The Group
estimates the cost of rehabilitation with reference to approved environmental plans filed with the local authorities. Changes to
estimates are recognised when such plans are approved, given uncertainties which may exist until the point of approval.
The carrying value of rehabilitation provisions at the reporting date is US$56.3 million (30 June 2012: US$73.2 million).
Pension scheme
The Company operates a defined benefit scheme and a defined contribution scheme. The pension charge or income for the defined
benefit scheme is regularly assessed in accordance with the advice of a qualified actuary using the projected unit credit method
and was updated for 30 June 2013. The most important assumptions made in connection with the scheme valuation and charge
or income are the return on the funds, the average yield of South African Government long dated bonds, salary increases, withdrawal
rates, life expectancies and the current South African consumer price index. The details of these assumptions are set out in note 31.
Post-retirement medical fund
The Company operates a post-employment health care liability scheme. The benefit liability for the post-employment health care
liability scheme is regularly assessed in accordance with the advice of a qualified actuary using the projected unit credit method.
The most recent actuarial valuation was at 30 June 2012 and the Directors have reviewed the assumptions at 30 June 2013 and consider
them to remain materially appropriate. The most important assumptions made in connection with the scheme valuation and
charge or income are the health care cost of inflation, the average yield of South African Government long dated bonds and
salary increases, withdrawal rates and life expectancies. The details of these assumptions are set out in note 32.
Valuation of share options and share-based incentives
In determining the fair value of share-based payments made during the year to employees and Directors, a number of assumptions
have been made by management. Significant judgements include the determination of appropriate inputs to valuation models
and assessment of the likelihood of vesting. The details of these assumptions are set out in note 27.
Deferred tax
Judgement is applied in making assumptions about recognition of deferred tax assets. Judgement is required in respect of
recognition of such deferred tax assets including the timing and value of estimated future taxable income, as well as the timing
of rehabilitation costs and the availability of associated taxable income.
Inventory and inventory stockpile
Judgement is applied in making assumptions about the value of inventories and inventory stockpiles, including diamond prices,
production grade and expenditure to determine the extent to which the Group values inventory and inventory stockpiles.
Depreciation
Judgement is applied in making assumptions about the depreciation charge, including the estimated useful life of individual assets
and residual values and the appropriate units of production tonnes. The assumptions are reviewed at least annually by management.
Net investments in foreign operations
Management assess the extent to which intra-group loans to foreign operations that give rise to unrealised foreign exchange gains
and losses are considered to be permanent as equity or repayable in the foreseeable future. The foreign exchange on permanent
as equity loans are recorded in foreign currency translation reserve until such time as the operation is sold, whilst the foreign
exchange on loans repayable in the foreseeable future are recorded in the Consolidated Income Statement.
2. Segment information
Segment information is presented in respect of the Group’s operating and geographical segments:
Mining
– the extraction and sale of rough diamonds from mining operations in South Africa and Tanzania.
Exploration
– exploration activities in Botswana.
Segments are based on the Group’s management and internal reporting structure. Management reviews the Group’s performance by
reviewing the results of the mining activities in South Africa and Tanzania, reviewing the results of the exploration activities in Botswana
and reviewing the corporate administration expenses in Jersey. Each segment derives, or aims to derive, its revenue from diamond
mining and diamond sales, except for the corporate and administration cost centre.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a
reasonable basis. Segment results are calculated after charging direct mining costs and depreciation. Unallocated items comprise mainly
interest-earning assets and income, interest-bearing borrowings and expenses, and corporate assets and expenses. Segment capital
expenditure is the total cost incurred during the year to acquire or construct segment assets that are expected to be used for more
than one period. Eliminations comprise transactions between Group companies that are cancelled on consolidation. The results are
not materially affected by seasonal variations. Revenues are generated from tenders held in Johannesburg, South Africa and Antwerp,
Belgium for external customers from various countries, the ultimate customers of which are not known to the Group.
The Group’s non-current assets are located in South Africa US$730.0 million (30 June 2012: US$741.7 million), Tanzania US$96.5 million
(30 June 2012: US$95.6 million), Botswana US$0.4 million (30 June 2012: US$0.5 million) and Jersey US$0.1 million (30 June 2012: US$1.8 million).
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