bold spirit - ArcelorMittal South Africa

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160 ArcelorMittal South Africa Annual Report 2010 Group 2010 Rm 2009 Rm 2010 Rm Company 2009 Rm 15. INVESTMENTS IN SUBSIDIARIES Indebtedness – by subsidiaries 8 962 8 645 – to subsidiaries (94) (94) Total indebtedness 8 868 8 551 Less: Provision for attributable losses (80) (53) Net indebtedness after provision 8 788 8 498 Shares at cost (Annexure 2) 253 253 Total 9 041 8 751 Aggregate attributable after tax losses (155) (398) The majority of the carrying value of the company's investment in subsidiaries consists of its investment in Saldanha Steel (Proprietary) Limited being the cost of shares and indebtedness, at the initial and subsequent acquisition dates. Critical judgements and estimates Consolidation of special purpose entities Certain non-core services and corporate social development activities of the company are managed via two associations not for gain, namely the Vesco Group and Vesco Community Enterprises. While the company has de facto control over both entities, due to the materiality consideration, these entities are not consolidated within the group accounts. For reasons comparable to those described above, the results of the ArcelorMittal Foundation, a public benefit organisation, are not included in the consolidated results of the group. Iscor Management Share Trust is a special purpose entity that is consolidated into the group results, with the cost of open market share purchases being included as a debit to the group’s equity. Group Company Non-current Current Non-current Current 2010 Rm 2009 Rm 2010 Rm 2009 Rm 2010 Rm 2009 Rm 2010 Rm 2009 Rm 16. OTHER FINANCIAL ASSETS/(LIABILITIES) Derivatives designated as hedging instruments carried at fair value Base metal forward purchase contracts (3) (2) Financial assets carried at fair value through profit or loss (FVTPL) Embedded derivatives at FVTPL 139 150 112 83 139 150 112 83 Available-for-sale (AFS) investments carried at fair value Equity instruments 69 37 Total 208 187 112 80 139 150 112 81 Included in the financial statements as: Other financial assets 208 187 112 83 139 150 112 83 Other financial liabilities (3) (2) Total 208 187 112 80 139 150 112 81
161 ArcelorMittal South Africa Annual Report 2010 16. OTHER FINANCIAL ASSETS/(LIABILITIES) continued Critical judgements, estimates and sensitivities Valuation of financial instruments The principal valuation assumptions utilised in the valuation of the embedded derivative in the Sasol Gas contract at 31 December are as follows: Assumption 2010 2009 Market price for natural gas at valuation date (R/GJ) 90.92 82.98 Contracted base prices at valuation date (R/GJ) – Newcastle 32.29 34.95 – Vanderbijlpark 39.46 42.66 – Vereeniging 40.26 43.57 Capped oil price inflation (% p.a. 1 ) 9.0 0.6 SEIFSA inflation (% p.a. 1 ) 7.1 3.8 Market price inflation for natural gas (% p.a. 1 ) 12.6 8.4 Natural gas volumes purchased (million GJ) 1 12.1 16.3 Bulk-user price discount to normal market prices for industrial gas % 1 41.7 40.1 1 Over a three-year period, being the remaining tenure of the contract (2009: four-year period). The key discrete sensitivities pertaining to the fair valued carrying amount are as follows: 2010 Rm 2009 Rm 10% decrease in the market price of gas at 31 December (65) (86) 10% decrease in inflation applicable to gas (16) (15) 10% decrease in the gas volume off-take 1 (11) (23) 10% decrease in the bulk-user price discount to ordinary industrial gas price 53 57 1 Volume sensitivity for the current year is solely applied to the forecasted off-take volumes of 2011 as, due to the claw-out mechanism, volume downside in 2012 and 2013 are highly improbable. The comparative year’s sensitivity value, however, reflects a volume sensitivity applied on all forecasted volumes without regard to probability of the downside risk AFS investments The group holds 10% of the ordinary share capital of Hwange Colliery Company Limited, a coal, coke and by-products producer in Zimbabwe. The share is traded on the dollarised Zimbabwe Stock Exchange. The carrying amount of the investment represents its market value at the reporting date, namely R69 million (2009: R37 million), against a cost price of R9 million. Group 2010 Rm 2009 Rm 2010 Rm Company 2009 Rm 17. INVENTORIES Finished products 1 620 1 281 1 353 1 104 Work-in-progress 2 197 2 018 2 012 1 908 Raw materials 2 723 1 891 2 416 1 676 Plant spares and consumable stores 616 577 503 451 Total 7 156 5 767 6 284 5 139 Included in the above are finished products of R845 million (December 2009: R215 million), work-in-progress of R374 million (December 2009: R154 million) and raw materials of R1 709 million (December 2009: R639 million) carried at net realisable value.
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Annual Report 2010 bold spirit
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Brand values Our goal is to provide
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bold spirit - ArcelorMittal South Africa

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