Untitled - PRIME Gold

1822005NORILSK NICKEL • ANNUAL REPORT •NORILSK NICKEL • ANNUAL REPORT •2005183GOLD MINING COMPANY POLUSNOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2005(US dollars thousand)GOLD MINING COMPANY POLUSNOTES TO THE CONSOLIDATED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2005(US dollars thousand)25. DEFERREDTAX LIABILITIESThe movement in the Group's deferred taxationposition for the year was as follows:2005 2004Net liability at beginning of the year 88,754 31,813Recognised in the income statementfor the year (refer to note 13) (8,701) 9,540Change in deferred tax liabilityarising on revaluation ofavailable-for-sale investments 551 –Change in deferred tax liabilitydue to acquisition of subsidiaries(refer to note 33) 86,363 44,046Change in deferred tax liabilitydue to disposal of a subsidiary(refer to note 34) (1,193) –Effect of translation topresentation currency for the year (4,006) 3,355Net liability at end of the year 161,768 88,754Deferred taxation is attributable to the temporarydifferences that exist between the carryingamounts of assets and liabilities for financialreporting purposes and the amounts used fortax purposes. The tax effects of temporary differencesthat give rise to deferred taxation are presentedbelow:Property, plant and equipment 165,006 87,528Investments valuation 551 –Inventory valuation 122 (291)Accrued operating expenses (2,301) 3,121Provision for impairment of advancesto suppliers and other receivables (1,610) (1,604)Total 161,768 88,75426. ENVIRONMENTALOBLIGATIONSDecommissioning obligations2005 2004Balance at beginning of the year 7,851 6,978Acquired on acquisition of subsidiaries 18,232 –Obligations raised during the period(refer to note 15) 26,633 –Unwinding of discount ondecommissioning obligation(refer to note 10) 842 427Effect of translation topresentation currency for the year (486) 446Balance at end of the year 53,072 7,851Provision for land restorationBalance at beginning of the year 2,629 –Acquired on acquisition of subsidiaries 3,170 –Obligations raised during the period 1,855 –Charge to income statement 233 2,532Effect of translation topresentation currency for the year (131) 97Balance at end of the year‡ 7,756 2,629During 2004 the Group performed an estimateof land restoration costs. The provision, discountedto net present value, relates exclusivelyto mining operations.Total environmental obligations 60,828 10,48027. OBLIGATIONS UNDER FINANCE LEASEMinimumPresent value oflease paymentsminimum lease payments2005 2004 2005 2004Amounts payable under finance leases: 7,930 5,826 6,869 4,828Within one year (shown under current liabilities) 3,279 1,383 2,844 1,045In the second to fifth years inclusive(shown under non-current liabilities) 4,651 4,443 4,025 3,783Less: future finance charges (1,061) (998) – –Present value of lease obligations 6,869 4,828 6,869 4,828The fair value of lease obligations is estimated by discounting the future contractual cash flows using the market interest ratesavailable to the Group for other borrowings. Assets subject to finance leases are included in property, plant and equipmentand in construction-in-progress.The average lease term is 3.5 years. For the year ended 31 December 2005, the average effective borrowing rate was 12.0%(2004: 9.5%). All leases are on a fixed repayment basis. All lease obligations are denominated in USD.The Group's obligations under finance leases are secured by the lessors' title to the leased assets.28. OTHER LONG-TERMLIABILITIES2005 2004Long-term taxes payable 774 819Long-term loans and borrowings – 3,538Other payables 472 916Total 1,246 5,273Long-term taxes payable represent a restructured liability tothe State budget accumulated by subsidiaries of the Group overseveral years.Included in long-term borrowings at 31 December 2004 wasa USD-denominated loan from Gasprombank at 6.0% perannum.29. SHORT-TERM LOANSAND BORROWINGS2005 2004RUR-denominated promissory notes 11,644 –USD-denominated short-termloans and borrowings 9,457 4,860RUR-denominated short-termloans and borrowings 2,142 30,252Total 23,243 35,112The interest rates on short-term loans and borrowingsvary as follows:RUR-denominated promissory notes 14% –USD-denominated short-termloans and borrowings 8%–16.5% 6%–10%RUR-denominated short-termloans and borrowings 14%–15.5%10%–20%CONSOLIDATED ANNUAL FINANCIAL STATEMENTS OFCJSC POLUS FOR THE YEAR ENDED 31 DECEMBER 200514Short-term loans and borrowings are secured by:Property, plant and equipment – 4,142