Download Annual Report 2006 - Foskor

INCOME NOTES TO STATEMENTTHE FINANCIAL STATEMENTSfor the year ended 31 March 2006COMPANYGROUPR’000 2006 2005 2006 200520 CONTINGENT LIABILITIES ANDGUARANTEESContingent liabilitiesListed below are all the claims against theFoskor Group. Management are, however,of the opinion that these claims will besuccessfully defended.G Marais 26 000 26 000 26 000 26 000Insimbi Engineering 1 070 1 070 1 070 1 070Loesche (refer to Guarantees below) – 15 000 – 15 000PCL USD’000 USD 414 USD 414 USD 414 USD 414Stolt Infra USD’000 – USD 506 – USD 506ICEC Limited USD’000 – USD 312 – USD 312Guarantee in respect of Environmental LiabilityIn terms of Regulation 54(2) of the Regulationspromulgated in terms of the Minerals andPetroleum Resources Department Act 2003,Foskor is required to arrange certainguarantees in respect of the followingrehabilitation liability.– Recommended mine closure costs at this stage 223,410 – 223,410 –– Less assets held in the Trust (Note 25) 41,233 – 41,233 –– Deficit 182,177 – 182,177 –A verbal agreement has been reached with theDepartment of Mineral and Energy that theguarantees in respect of above deficit be putin place as follows:– R50 million on 31 July 2006,– R50 million on 31 July 2007; and– The remaining deficit on 31 July 2009(estimated to be circa R100m)Other GuaranteesGuarantees issued by Foskor Ltd and FoskorGroup to various beneficiaries amount toR26 million. See details below:DetailsBeneficiarySecurity against Loesch – settled Weber Wentzel Bowens Attorneys – 14,893Electricity Eskom 5,191 5,191Water and electricity supply Richards Bay T.L.C 11,924 6,604Rail transport of phosphate rock and granular Transnet 7,300 13,100Various ZAR-denominated guarantees Various 1,669 5,282Total 26,084 45,070The case relating to Loesche claim as stated above was settled on 13 May 2005 for an amount of R1 million plus legal costs.Contingent liabilitiesFoskor has entered into Business Assistance Agreement (BAA) with Coromandel Fertilizer Limited to provide technical, operational,maintenance, purchasing and business assistance to Foskor. The underlying principle of the BAA is to remunerate C F Lfor its efforts to improve Foskor’s EBIT over and above the continuous initiatives of Foskor. The potential liability can only bemeasured after the year ending March 2008 and is limited to R300 million. Refer to Directors Report.44