REPORT OF THE DIRECTORStechnical, operational, maintenance, purchasing and business assistanceto <strong>Foskor</strong>. The underlying principle of the BAA is to remunerate CFLfor its efforts to improve <strong>Foskor</strong>’s Earnings Before Interest and Tax(EBIT) over and above the ongoing initiatives of <strong>Foskor</strong>. CFL isalso a customer of <strong>Foskor</strong> and the majority shareholder of GodavariFertilisers and Chemicals (GFCL) of India, in which <strong>Foskor</strong> has a 5%shareholding.Remuneration in terms of the BAA agreement is based on theimprovement of the EBIT as calculated during the measurement periodof 1 April 2007 through to 31 March 2008 against that of the baseperiod of 1 January through to 31 March 2005, annualised. The EBITwill be adjusted for any improvement outside of CFL’s contribution.These adjustments include: exchange rate movements, selling pricemovements, raw material price movements, abnormal items such asinsurance claims, and <strong>Foskor</strong>’s own continuous improvement benefitsequivalent to 7.5% of the cost of production.The remuneration payable to CFL is limited to a maximum of R300mand will be utilised to purchase further equity in <strong>Foskor</strong> – a minimum of7.5% shareholding if sufficient remuneration were earned after taxes,thus giving CFL a 10% stake in <strong>Foskor</strong> (2.5% currently). CFL canincrease the shareholding to a maximum of 16.5%, based on earningsafter taxes.The liability cannot be measured with sufficient reliability at this stageand is therefore not recognised. The liability can only be measured afterthe 12 month period ending March 2008.INSURANCE AND RISK MANAGEMENTThe Group’s philosophy is to manage its risks in order to protect itsassets and earnings against unacceptable financial loss and to avoidlegal liabilities. In this regard, possible catastrophic type risks areinsured at a relatively advantageous cost with satisfactory cover whilenon-catastrophic type risks are self-insured. The management of riskis further supported by the Group’s health and safety programmes, andmaintenance of the ISO 9002 (quality) and ISO 14001 (environmental)standards. <strong>Foskor</strong> was the first mining company in South Africa toreceive the latter accreditation.Fixed assets are insured at current replacement value, which has beenestimated by an external valuator.Risk surveys and assessments are an integral part of the Group’srisk management policy and are performed on an integrated Grouprisk management system. Risks identified during these surveys areeliminated, reduced or transferred to the insurers.EMPLOYMENT EQUITYThe Group supports employment equity and the development andpromotion of previously disadvantaged employees and complies with therequirements of the promulgated Employment Equity Act. The Groupbelieves in developing and promoting people from within the company.Training and development programmes are in place to ensure that everyemployee will have the opportunity to enhance his or her potential. TheGroup also adheres to the requirements of the Skills Development Actand sees this as yet another opportunity to develop employees.EVENTS AFTER BALANCE SHEET DATEPost the financial year closure, on 7 May <strong>2006</strong>, a transformer at the oldphosphoric acid plant in Richards Bay caught fire, causing substantialdamage to electrical cables; Business Interruption is estimated to be asmuch as 50 days.The financial impact of Business Interruption for 47 days will be around56 000 tons of P 2O 5, of which the first 14 days will be excluded as perthe terms of the Business Interruption Insurance Policy.It is envisaged that production for the year to March 2007 will, despitethis incident, exceed the previous year’s production of 625k tons.The financial impact of repair of equipment is estimated to be betweenR20m and R25m, of which R5m is to be excluded as excess under theinsurance claim and the balance would be claimed under the MachineryBreakdown Policy.The anticipated net negative impact for the <strong>2006</strong>/7 year will be lessthan R20m.Refer commentary under the directorate paragraph below, regardingthe resignation of the chairman of the board of directors of the Groupsubsequent to year end.DIRECTORATEDuring the period under review, the following changes in the directorateoccurred:Resignations: 22 June 2005Mr HN GiyoseMr F VenterAppointments: 22 June 2005Mr PJ LedgerMs RK MorathiMr A VellayanMs M NhlanhlaMs Z MonnakgotlaMs LBR MthembuAppointments: 12 July 2005Dr DS PhahoSubsequent to year end on the 19 June <strong>2006</strong>, the Chairman Mr LL vanNiekerk, resigned as Chairman and Director of the Group.Mr MG Qhena, Chief Executive Officer of the Industrial DevelopmentCorporation, was appointed as the Chairman of the board of directorsof the Group effective from 19 June <strong>2006</strong>.Other than the employment contract of the Chief Executive Officer,there were no contracts during or at the end of the financial periodin which any directors of the company were materially interested. Noservice contracts exist between the company and any of its non-executivedirectors having notice period exceeding one month, or providing forcompensation and benefits in excess of one month’s salary.MINE, HEALTH AND SAFETY ACTThe Group’s statistical report on health and safety, prepared in termsof the Mine, Health and Safety Act, 1996, was submitted to the MineInspector and is available on request from the company.18
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