Annual Report - 1 - 2010
Annual Report - 2 - 2010
INSTITUTIONAL REFERENCES
Name Industrial & Mining National Company (Société Nationale Industrielle & Minière) « SNIM» Main office Nouadhibou, Mauritania SNIM is a limited company under Mauritanian law, governed by the law of 01.18..2000 Legal Form bearing Commercial law and by the law N° 78-104 dated on 04/15/78 bearing creation of SNIM. SNIM was created by the law N°78-104 on 04/15/1978 under the name « Industrial & Constitution Date Mining National Company» (succeeding the former MIFERMA that was created in 1952). and Duration The duration of the company is 99 years from January 1st, 1978, except in case of continuation or early dissolution provided for in its statutes. Business Purpose The business purpose of the company is : Extraction and sale of iron ore as well as promotion of research and exploitation of mineral resources. Fiscal Year The fiscal year starts on January 1st and ends on December 31. Trade Register SNIM is regsitered in the Trade Register of the Commercial Court of Nouakchott under the N° 4579 of the analytical register.
SNIM’S SHAREHOLDING (in %)
Etat Mauritanien; 78,35 Mauritanian State IBK; 7,17
ARMICO; 5,66
Irak Fund; 4,59 ONHYM; 2,3
BID ; 1,79 MauritanianPrivé mauritanien; Privates 0,14
Contacts Main Office Paris Branch Nouakchott Representation Nouadhibou, Mauritanie 7, rue du 4 Septembre Nouakchott - Mauritanie P.O. Box 42 75002 Paris - France P.O.Box : 40259 Phone : +222 4574 10 21 Tel : +33 1 42 96 80 90 Phone: + 222 45 29 90 50 Fax : +222 4574 53 96 Fax : +33 1 42 96 12 26 Fax : +222 4525 36 89 Email : [email protected] Email : [email protected] Email : [email protected]
Annual Report Company’s Information - 3 - 2010
GOVERNANCE
General Assembly Audit committee The legally constituted General
Assembly of the Company represents all the shareholders. Every shareholder The Board of directors created has the right to attend General among its members, an Audit Assembly meetings or to be committee consisted of 5 represented. The General Assembly administrators. It approves the names administrators and appoints proposition of the name of statutory auditors. auditors and the annual program of
the internal audit. It examines audit Board of Directors reports and formulates the necessary The Company is administered by a recommendations. Board of directors that is consisted of 12 members, appointed by the Managing Committee Ordinary General Assembly. The Board of Directors meets at least three A managing committee, including (3) times during a same fiscal year. SNIM’s deputy directors, Railroad and The Board of Directors delegated to the Administrator Chief Executive Port managers and that of Officer (ACEO) extended and Exploitation Site, meets around necessary powers for General Administrator Chief Executive Officer. Management and current It examines questions relating to the administration of the Company with management of the company and to power of partial or total replacement. its orientations.
Executive Committee Committee of Coordination The Board of Directors created, among its members, an Executive A Committee of Coordination that Committee consisted of 4 gathers Administrator Chief Executive administrators. It prepares the sessions Officer, deputy directors, main of the Board of Directors and acts as advisers and sector-based managers a Markets Commission to approve of SNIM, is held every month to review any market that is superior or equal to the production program and the € 2 million. It meets at least three (3) execution of the budget. times a year.
Annual Report - 4 - 2010
BOARD OF DIRECTORS Full Name Position Institution Mohamed Cherif Chairman of BD Mauritanian State
Jewad Al-Qallaf Vice-Chairman Industrial Bank of Kuwait (IBK)
Mohamed Abdellahi Ould Administrator CEO- Mauritanian State Oudaâ SNIM
Brahim Ould Chadhli Administrator Mauritanian State
Brahim Ould Abdellahi Ould Administrator Mauritanian State Ravé
Yeslem Ould Hamdane Administrator Mauritanian State
Cheikh El Kébir O/ Chbih Administrator Mauritanian State
Ahmad Mashaqbah Administrator Arab Mining Company
Hussien Mohsen Obied Administrator Iraq Fund For External Development Hydrocarbons and Mines Abdellah Mouttaqi Administrator National Office (Morocco)
Ahmed Benali Administrator Islamic Bank of Development
Moulay Sidi Mohamed Abass Administrator BMCI (Mauritanian Privates)
Session of the Board of directors
Annual Report Company’s Information - 5 - 2010
MESSAGE OF THE CHAIMAN OF THE BOARD OF DIRECTORS
Dear shareholders , These exceptional financial results will The World strengthen the major role of our company in economy will have the national economic development by been marked, contributing more to the evolution of the GDP, during the last to the export earnings, to the Budget, to the three years, by a fight against unemployment and to the deep crisis which transfer of skills. was translated by a harder difficulty of The integration of SNIM in the State economy access to financial strengthened also in 2010 by the creation of resources, and by a shrinkage of the market of two new subsidiaries in the field of Insurances our business sector. (DAMANE INSURANCES) and in that of the Management of Oil Installations ( GIP). The resumption of growth, observed since the beginning of year 2010, and which was SNIM’s definitive commitment to place human translated by a very strong pressure on the iron resources in the heart of its policies and ore, as well in the developed countries which strategies of development materialized in 2010 constitute the main part of our traditional by the extension of social benefits, with, in customers, as in emerging countries, led to a particular, the approval of the program of neglecting, by mining producers, of the classic social modernization the most important mechanism of annual setting of prices for the sectors of which will have been the benefit of a system of quarterly prices setting, implementation of the supplementary based on spot average. pension, the modernization of medical infrastructures and the housing policy. It is in the context of this world industrial and steel-making renewal that SNIM was able to In the term of a year that was rich in happy obtain globally satisfactory operating profits events, and at the beginning of another other by selling 11,1 million tons of iron ore among full of promises, I make a commitment in the which 57 % in Europe and 43 % in Asia and to name of the Board of directors, to spare no get an exceptional financial balance carried efforts to allow our Company to realize its in particular by the rise in prices of iron ore. objectives of development thanks to a more steady mining research, a better knowledge The signature of PDM financing Agreements of its deposits, a substantial increase of its and the launch of its various constituents, production capacities, and a control of the further to levying all precedent conditions to costs. the first payments, a stronger control of the quality of our products and the effectiveness In the name of the Board, I insist on of a balanced presence on the world market congratulating all our employees for the work will have made of year 2010 one of our best carried out during the past year and to thank fiscal years. all customers, investors and suppliers for their renewed confidence. The increase of sales volume, the increase of the prices of the ton and the control of costs My thanks and my congratulations also go to were translated by a considerable progress of our shareholders and to Mauritanian State the our turnover which passes from 139 009 MUM continuous support of which to SNIM allowed it in 2009 to 303 522 MUM in 2010; our profit so to reach new records of performances in 2010. strongly progressed, passing from 32 684 MUM to 158 730 MUM in 2010. The Chaiman of the Board of Directors MOHAMED CHERIF
Annual Report - 6 - 2010
STRICKING FACTS
Reopening of T4/T5 sites. Historic Record of Crushed in the RHEIN Extension of the electrical air network 30KV and 5KV in Rhein and TO14.
Giving up of the annual mechanism of pricing (Benchmark) for the benefit of a quarterly system based on the average of the spot Strong increase of the turnover and the profit Creation of two new subsidiaries: DAMANE INSURANCES, Management of Oil Installations (GIP).
Effective Starting up of the majority of construction sites of PDM projects Temporary Reception of port installations rehabilitation Signature of the contract of 5MW Wind Power Plant Project in Nouadhibou
Setting a complementary system of pension
Annual Report - 7 - 2010
World Market Situation:
After particularly difficult years of 2008 World plan, the production of steel and 2009, World economy globally increased by 16,7 % with regard to got better in 2010. A real growth was 2009. The main increases were registered in the emerging countries registered in the USA (38,5 %), in and even in certain developed Japan (25,3 %) and in Europe (24,6 %). countries, as the United States and Most of the installations of production, Germany. In Europe, the economy stopped since 2009, restarted to slowly recovers, but it remains answer a more and more increasing threatened by financial instability and demand. the weight of national debt. Chinese production, which was already raised during the years of The steel-making sector took crisis, registered a growth rate of 9,3%. advantage of this resumption. On the
Attracted by steel consumption, the imported quantities of iron ore also followed the trend. The main demand results from the Chinese market which continues to attract half of the World trade of ores. This strong pressure on the product is at the origin of the deep changes registered by the market in 2010: - Substantial Increase of the prices: approximately 77 %. - Substitution of the classic mechanism of annual pricing (Benchmark) by a quarterly system based on the average of the spot.
Raw steel World production in 2010 Geographical distribution Oceania Other West Europe Middle East European Union
Africa
Asia North Africa
South America
Source : Association Mondiale d’Acier
Annual Report - 8 - 2010
PRODUCTION
I. Mine • The means initially planned for other Excavation Evolution sites were allocated to it. • Supplying RSA factory required 16KM 100 000 94352 90 000 haulage from TO14 and from 86578 80 000 76102 Azouazil. 70 000 70964 65552 65849 67152 63335 60 000 kT 50 000 44556 46438 The excavation was also handicapped 40 000 by: 30 000 20 000 • The delay of acquisition of 4 trucks 10 000 planned in the 2nd half-year. 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 • The abnormal volume of elevations, especially at the level of the north In spite of a decline of 9 % with regard to pits MH2 and Rhein. 2009, the excavation stayed on the upward trend that began in 2008. The We note that the opening of RSA allowed decision, in February, 2010, to reopen the to produce 646 additional KT of Rouessa factory heavily affected the marketable products. annual result of excavation:
II. Rhein Factory Evolution of Rhein Factory The production of RHEIN Factory knew an Production increase of 3 % with regard to 2009 and 5 000 4635 constitutes a historic record. 4430 4557 4502 4193 4245 4 000 3883 3860 3694 3440 3 000 The production of GMAB appreciably kT increased with regard to 2009 (138 KT) so 2 000 confirming the trend to the growth 1 000 observed for several years. 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 On the other hand, the production of product (only 2 boats in 2010) and to the "Spirals Unity" in GFM (309 KT did not evolve strong pressure on the GMAB. with regard to 2009. This level of production is due to poor sales of this
III. Railroad The program of stockpiling was realized at Stockpiling Evolution a rate of 101,2 %. It appreciably increased with regard to 2009 (+ 9.6 %), what 14 000 translates the good behavior of the 12 000 1 1 5 3 5 1 1 1 5 4 11233 11296 1 0 6 7 5 1 0 7 5 2 1 0 5 2 4 production line in 2010. 10 000 1 0 3 0 2 1 0 1 5 3 9 5 5 4 8 000 k T The performances of the railroad kept 6 000 good levels. 4 000
2 000
0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Annual Report - 9 - 2010
IV. Factory of Nouadhibou
The factory of Nouadhibou realized its Evolution of the Production of NDB program, in spite of its stop during two factory weeks in April for the replacement of the 8 0 0 0 7 5 4 1 crown of Stacker 3. 7 0 0 0 6 9 4 5 7 0 0 9 6 9 2 9 6 5 2 2 6 6 4 4 6 0 0 0 5 9 2 9 6 0 2 9 5 2 5 9 5 0 0 0 4 8 3 8 However, its efficiency remains kT 4 0 0 0 handicapped by the recycling of the 3 0 0 0 2 0 0 0 SORTING (calibrated rich). 1 0 0 0 0 To ease this problem, one of both quaternary crushers was replaced in 2010. It is also planned to replace the second in 2011.
V. Nouadhibou Port
The load of ships registered, with regard to Evolution of Ships Loading 2009, an increase of 814 KT.
1 4 0 0 0 However, the high demand on ore and 1 2 0 0 0 1 1 8 1 5 1 1 0 0 3 1 0 9 6 8 1 1 1 0 9 1 0 6 3 9 1 0 6 5 5 1 0 4 6 0 1 0 2 9 6 the execution of works of Port installations 1 0 0 0 0 1 0 0 9 3 9 6 2 7 modifications (RIMP project), caused an 8 0 0 0 kT extension of the boats stay time which 6 0 0 0 passes from 6,75 days in 2009 to 10,4 days 4 0 0 0 in 2010, so entailing an increase of 2 0 0 0 demurrages from 0,91 US$/t to 1,65 US$/t. 0
Annual Report - 10 - 2010
SALES
As most of the producers, SNIM opted for giving up the Benchmarking to take advantage of price levels which are offered by the new system of pricing. It also sold several cargoes on the market spot when the prices of this one are more advantageous. Besides, and to adapt itself to the changes of the market, SNIM launched an action at 2 levels: • Revising the structure of its offer of products which was essentially constituted of poor materials for which there are no significant customers anymore; • Setting a formula allowing to answer, in a stable way, the high demand of the Asian market. It is within this frame that the new product TZFC was launched in the double objective to value all resources and to propose, in spite of the handicap of nearness, a competitive product on Chinese market. In 2010, the sales of this product reached 3,9 million tons, representing 35 % of the total sales. Bulk sales were 11,1 million tons, which is an increase of 8% with regard to 2009. SNIM tried to balance its exports between Europe (traditional market) and Asia (emerging market). China represented 43 % of our sales in 2010, against 60 % in 2009.
Sales sharing out per quality 4000 3500 618 3000 2500 2000 2935 1500 3271 1000 198 1515 500 1147 951 474 0 0 0
TZFC GMAB TZF XCB Others
China Europe
Sales sharing out per country Spain; 3% Netherlands; 2%
France; 18%
China; 42%
Italy; 14%
Germany; 12%
Sweden; 1%
Belgium; 6% Romania; 1%
Japan; 1%
Annual Report - 11 - 2010
FINANCES : The stock of the debt passes from 57 705 This year, SNIM’s turnover became 303 MUM ($220,81 MUS) in 2009 to 79 195 522 MUM ($1 092,63 MUS) against 139 009 MUM ($281,53 MUS) in 2010 further to the MUM ($532,28 MUS) in 2009 and it got a first payments of the debt of PDM. profit of 158 730 MUM ($564,27 MUS). The volume of investments implemented This increase of the turnover results from in 2010 represented 66 823 MUM the increase of sales and from the $(238MUS). important increase in prices of the iron ore registered in 2010.
Summarized financial statements:
Social accounts 2010 2009 2010 INDICATORS in MUM in MUM in M$ 2009 in M$ Turnover 303 522 139 009 1 092,63 532,28 Net Result 158 730 32 684 564,27 125,06 Added value 243 152 83 048 864,39 317,78 Operational Result 192 549 45 053 684,50 172,39 Cash flow 179 952 53 708 639,71 205,51 Equity capital 393 100 235 344 1 397,44 900,53 Mlt Debts 79 195 57 705 281,53 220,81 Total assets 532 193 328 745 1 891,91 1 257,92 Investments 66 823 39 090 237,55 149,58 Ratios Dept Ratios LMTD/Own Capital 20% 25% 20% 25% Economic profitability NI/Total Assets 30% 10% 30% 10% Financial profitability NI/Own Capital 40% 14% 40% 14%
The share value is calculated on a mathematical base (Net situation / the number of shares).
350000 SHARE PRICE 300000
250000
200000 150000 100000 50000 2002 2003 2004 2005 2006 2007 2008 2009 2010 0
Annual Report - 12 - 2010
RESEARCH
• Research for Ore
In 2010, the research works of hematite iron ore concerned essentially Kédia Idjil and M'Haoudat.
Important reserves were confirmed stating the existence of more than 25 million tons at Tazadit 4 and 5, which were integrated into SNIM’s program of long-term production. Drillings of pre-exploitation were also implemented in Rhein (6182 m).
• Research for Water
In the south border of Kédia, a total of 9 drillings were implemented, among which 7 were for recognition and 2 were for exploitation. Besides, 4 drillings of mine drainage were made in the pits of TO14 (3) and MHDT (1).
• Geophysics • Diversification Projects
Geophysical measures were made on The research works for Gold and basic the ground along more than 350 km metals were located on the permit of of profiles, in order to: El Medah in Amsaga. These works - Verify the abnormalities of gold and consisted of the execution of 4163 m basic metals located by geophysics of drilling (among which 1172m in transported by helicopter in Amsaga, core drilling and 2991m in reverse - Guide the hydrogeological research circulation). Samples taken from these in the zone of Zouerate drillings are being analyzed.
Annual Report - 13 - 2010
DEVELOPMENT AND MODERNIZATION PROGRAM
Guelb II
Presentation The objective of Guelb II Project is to produce annually additional 4MT of enriched concentrated. GUELB II project covers: - The extension of the existing mine - A new Factory of enrichment of an annual capacity of 4MT of high quality concentrated - The extension of the power plant - The modernization and extension of the existing secondary installations (workshops, offices) - The beginning of the exploitation of a new field of water harnessing, and an adduction network of 55 km.
Progress Upon the signature of PDM Financing Agreement, Guelb II project was launched. Over the considered period, the following actions were realized: - Finalization of details engineering - Awarding by auction of the main lots deliverables - End of the preliminary documents of the site for the construction phase - Preparation of the tender submissions for the lot covering all Civil Engineering works and Assembly. - Recruitment of more than third of the required operating staff - Elaboration of the associated training and integration plan.
The New Ore Port Presentation The new ore port will allow SNIM to meet the needs of its current and potential customers by adapting its port facilities to their expectations and by reducing in particular the waiting time of ships before and after loading. Capable of receiving, eventually, 250 000 ton ore carriers, the new port is designed in the viewpoint of the control of maintenance costs. The civil engineering constituent of the project includes the construction of a quay in reinforced concrete of a length of 403m and of a footbridge of 800 m. The equipment sector contains supply and assembly of a line of ships loading (conveyors, hopper and charger of ships of a 10 000 ton/hour capacity).
Progress - Signature of contract for 2 lots : civil engineering and Supply Equipments - Starting up of the project.
Annual Report - 14 - 2010
New training center
Presentation
The new training center (NCF) meets SNIM’s needs in recruitments resulting from retirements of qualified staff, from the implementation of new development projects and from the passage to 40 hours week.
While allowing to satisfy the company’s needs in intensification of capacities of the existing staff, the center will offer, on the national market, a quality training and an adequacy with the specific needs of SNIM.
The first part of the project includes the construction of a new training center in Zouerate and the rehabilitation of the center of Nouadhibou. As for the second constituent, it will allow to realize the educational programs, to assure the training of trainers and administrative personnel and to acquire the necessary equipments.
Progress
- Start up of civil engineering works - Provisional Acceptance is expected during the 2e quarter of 2011.
Modernization of the Railroad maintenance
Presentation
The project contains in particular the construction, in Nouadhibou, of a factory of manufacturing crossbars in monoblock concrete; as it allows acquiring equipments intended for the mechanization of the maintenance of renewal of the railroad: grader, roadbed regulating sweeper, a train for handling rails, two degreasing machines to replace crossbars.
SNIM has already made the first essays on crossbars in monoblock concrete on 360 meters.
Progress
- Signature of the contract for the 2 lots (Construction of the factory for manufacturing in monoblock concrete crossbars and acquisition of mechanization equipments for the works of the way) - Starting up of the project
Modernization of telecommunications system Presentation
This Project will allow assuring, in particular, the safety of the railroad between Nouadhibou and Zouerate, to improve the performance and the regularity of trains
Annual Report - 15 - 2010
Electric Grids of Zouerate Presentation
This project will allow answering the growing demand in electricity generated by the development of Zouerate city. While assuring the quality and continuity of the service for SNIM’s installations, the project will, in particular, allow supplying electricity to the suburbs of the city.
Progress This project has three parts: - An industrial electric Line of 30 KV between PG11 and ZRT, which was officially delivered. - A Post of distribution - The electrification of Zouerate city suburbs the works of which were achieved.
Modification of Handling TO14
Presentation SNIM intends to modify the current installation of TO14 to create a buffer stock of the order of 150 KT. This realization will give to the mining operations a sufficient autonomy with regard to trains. The DPS received the feasibility study of the project on 12/22/2010 and the elaboration of the CAD is in progress (choice of the strategy of the market). The new installations will in particular allow increasing the production capacity of sinter fine and to decrease the pressure on the factory of Nouadhibou.
Progress - Realization of the Feasibility study - Elaboration of current CAD
Rehabilitation of the Port handling installations
Presentation This Project allowed SNIM to acquire a set of equipments (conveyor belts, a bucket-wheel and two Stackers) that must replace equipments being in service for several years. The replacement of the bucket-wheel on caterpillars by a bucket-wheel on rails will contribute to enhance reliability and to increase the cadence of loading ships, consequently the reduction of demurrages. By making the operation of the factory independent from East storage of finished products coming from Zouerate by the stacker 4, the starting of the new equipments is also going to assure the security of the operation of West storage by the replacement of Stacker 2, in service since 1967.
Annual Report - 16 - 2010
Progress
This project contains the acquisition of a bucket-wheel, two Stackers and conveyor belts the provisional receptions of which were pronounced in November, 2010.
Ores Analysis laboratory in Zouerate
Presentation
The control of products quality and the satisfaction of customers are the main motivations of the project of construction of a new analysis laboratory of ores in Zouerate. Designed according to the international standards, this project has two constituents: study and supply of the furniture; construction of the lab (civil engineering)
Progress - Launch of CAD - Finalization of the contract
5MW Wind power plant in Nouadhibou
Presentation
This project has the following main objectives: • To contribute to satisfy the increasing needs in electrical energy of the new projects • To reduce the energy cost prices of SNIM • To reduce the consumption of oil products • To develop a skill in the field of renewable energies. Progress
- Signature of the contract in December, 2010
Brackish water treatment
Presentation
The brackish water treatment aims at increasing the offer of drinking water for the benefit of Zouerate city populations. At present, the city is undersupplied because of the lack in reserves of water that fits to human consumption and if water exists it is mixed with brackish water. DPS received the feasibility study of the project on 12/26/2010. A preliminary study, previously realized, brought to light the process of reverse osmosis as a desalination alternative. The recruitment of an engineering consulting agency for the follow-up of the project is being in progress. The project will end in the installation of a brackish water treatment factory that will be capable of filling the deficits in drinking water in Zouerate city.
Progress The feasibility study of the project was already achieved.
Annual Report - 17 - 2010
HUMAN RESOURCES
Program of Social Modernization: The board of directors of SNIM approved a social modernization program including: the implementation of an additional pension plan, a plan of improvement of health coverage, a new policy of housing and measures for the improvement of the purchasing power.
Motivation of the staff: The motivation of staff, being in the center of the policy of human resources management, has led to granting an annual year bonus to the workers within the framework of the tradition of sharing fruits of the company. Also, it was decided to grant an increase of salaries according to merit. Several bonuses and allowances were also heightened.
Training of the staff: The development of the staff skills keeps being a major concern. It is in this framework that numerous training courses were organized inside the company and outside..
The company also pursues its policy of granting superior scholarships for programs abroad.
The building works of the new Technical Training center of Zouerate is in progress since December, 2009 and they should end in 2011.
In the meantime, the implementation of the educational constituents of the new plan of vocational training continues with the official starting up, in 2010, of the initial training in two sectors.
Living environment : Conscious of the necessity of offering to its workers a decent living environment, the company strengthened the regular supply of Staff stores in staple commodities. In the same order of ideas, roads and green spaces were created in Zouerate and Cansado.
As for health policy, a reflection on the significant improvement of Health services was launched with as priority objectives: the creation of reference health structures and the availability of multidisciplinary care.
Annual Report - 18 - 2010
PURCHASES AND LOGISTICS:
In 2010, the efforts of optimization the tension on the market undertaken at the level of the relating to certain products as Purchases and Logistics process, articles of shootings, rubbers, allowed: steels and copper further to the • To secure the supply of the world economy upturn. strategic needs; • To contain the total inflation on families except fuels in spite of
Distribution of Purchases by class of products The mining machines occupied the first place of purchases, excluded fuels, (29 %) followed by tires (15 %) and by articles of shootings (13 %).
Mining Machines Explosives Handling Tires Engines Railroad Material
Oils and Greases
Inflation Rate at the level of the main families of articles
Families of articles Inflation 2010/2009 Metals and common articles 0,75% Industrial products 8,78% Equipment & Materiel of weld - 7,60% Electricity - 0,67% Motor vehicles Spare Parts(PDR) -3,27% Mining machines - 5,32% Railroad materials - 5,27% Fixed installations and buildings - 0,05% Miscellaneous - 19,26% Total inflation, Fuels and Lubricants - 0,46 % excluded Fuels 26,22% Lubricants 1,65%
Annual Report - 19 - 2010
ENVIRONMENTAL MANAGEMENT SYSTEM:
Year 2010 was especially marked by:
- A consolidation of the EMS at the level of all the company and the continuation of the environmental programs, - The realization of several studies of environmental impact (Port, Guelb2, Wind power plant, SNIM Quarries, Tazadit1 Mine, etc.) - The starting up of Certification Phase according to the international Standard ISO 14001.
GENERAL INTERNAL AUDIT:
Year 2010 was marked by a supported activity at the level of audit missions. So, the GIA realized 15 missions touching certain processes, certain subsidiaries and some specific themes. GIA also assured the follow-up of audits realized in 2007, 2008 and 2009;
The activity of inspection was launched and touched risky processes and strong stakes. At the level of the internal control, a new project directed to the prevention and detection of frauds was conceived and will be finalized in 2011
Annual Report - 20 - 2010
AUDITED STATUTORY ACCOUNTS STATEMENT OF FINANCIAL SITUATION ASSETS In millions Ouguiyas Mark 31/12/2010 31/12/2009
Non-current Assets 280 069 215 888 Tangible assets 4.1 251 674 201 388 Prospection assets 4.1 1 200 1 404 Intangible assets 4.2 370 335 Other financial assets 4.3 1 269 880 Participations in associated companies 4.3 25 555 11 881 Current Assets 252 124 112 857 Stocks and outstanding 4.4 48 733 42 088 Customers and Accounts payable 4.5 47 344 15 340 Other debtors 4.6 14 599 6 094 Futures 4.7 2 909 476 Funds and equivalents of funds 4.8 138 539 48 859 ASSETS TOTAL 532 193 328 745
LIABILITIES In millions Ouguiyas 31/12/2010 31/12/2009
Capital and reserves 393 100 235 344 Issued capital 4.9 12 180 12 180 Share premiums 6 464 6 464 Latent net gains on futures 4.7 969 (88) Retained earnings 373 487 216 788 Non-current liabilities 93 252 64 445 Interest-bearing loans 4.10 79 195 57 705 Pensions liabilities 4.11 13 561 6 517 Reserves 4.12 495 222 Current liabilities 45 842 28 957 Suppliers and Accounts payable 4.13 23 798 18 532 Taxes 4.14 13 150 5 838 Other taxes 4.15 100 632 Other creditors 4.16 6 822 3 205 Futures 4.7 1 970 749 LIABILITIES TOTAL 532 193 328 745
Annual Report - 21 - 2010
AUDITED STATUTORY ACCOUNTS
INCOME STATEMENT
In millions Ouguiyas Mark 31/12/2010 31/12/2009
Turnover 5.1 303 522 139 009 Products of secondary activities 5.2 2 612 2 012 Other operational products 5.3 1 920 1 084 Product of ordinary activities 308 054 142 105
Variation of finished products stocks &
outstanding works 3 992 3 465 Capitalized Production 4 306 3 975 Goods and consumed materials 5.4 (61 731) (54 704) Staff expenses 5.5 (25 902) (16 608) Allocation to depreciation and provisions 5.6 (21 221) (21 832) Taxes 5.7 (129) (177) Other Operational charges 5.8 (14 820) (11 172)
Operation Result 192 549 45 053 Financial Products 5.9 15 943 13 379 Financial Expenses 5.10 (22 024) (12 992) Pre-tax Result 186 468 45 440 Single tax on turnover (27 738) (12 756) Net income of the financial year 158 730 32 684 Income per share - 1 218 000 shares in Ouguiya 130 321 26 834
STATEMENT OF THE GLOBAL RESULT
In millions Ouguiyas Mark 31/12/2010 31/12/2009
Net income of the financial year 158 730 32 684 Impact of financial instruments 1 057 637
Global Result 159 787 33 320
Annual Report - 22 - 2010
AUDITED STATUTORY ACCOUNTS
STATEMENT OF CASH FLOW In million Ouguiyas Mark 31/12/2010 31/12/2009
OPERATIONAL ACTIVITIES Pre-tax net profit 186 468 45 440 Allocations to depreciations and provisions 6.1 24 517 15 478 Deductions on depreciations and provisions 6.4 (4 809) (4 932) Gains/losses on acquisitions /disposal of fixed assets 1 Gains/losses of exchanges 6.5 2 592 (490) Investment products (1 391) (2 106) Financial expenses 2 218 2 052 Variation of the needs in working capitals 6.2 (39 981) 1 852 Gross cash flow resulting from operational activities 169 613 57 294 Paid out interests (2 199) (2 128) Money paid over the single tax (20 468) (17 173) Net cash flow resulting from operational activities 146 946 37 993
INVESTISSEMENT ACTIVITIES Acquisition of fixed assets 6.3 (69 230) (34 157) Collection resulting from material disposal 0 0 Collected interests 1 299 2 007 Received dividends 92 99 Cash flow resulting from investments activities (67 840) (32 051)
FINANCING ACTIVITIES Collections resulting from loans 26 742 6 916 Loans payment (7 999) (7 820) Paid out dividends (8 169) (20 724) Cash flow resulting from financing operations 10 574 (21 628)
Funds cash flow 89 680 (15 686) Funds at the opening 48 859 64 543 Funds at the closing 6.6 138 539 48 859
Annual Report - 23 - 2010
AUDITED STATUTORY ACCOUNTS
STATEMENT OF VARIATIONS OF SHAREHOLDERS EQUITY Latent Issued Share Accumulated In million Ouguiyas net gains Total Capital premiums results on futures
Shareholders equity on 01/01/2009 12 180 6 464 204 836 (724) 222 755
Reassessment of fixed assets 0 Reassessment of financial 637 637 instruments Result 32 684 32 684 Dividends (20 732) (20 732) Other 0
Shareholders equity on 12/31/2009 12 180 6 464 216 788 (88) 235 344
Reassessment of fixed assets Reassessment of financial 1 057 1 057 instruments Result 158 730 158 730 Dividends (8 171) (8 171) Other 6 140 6 140
Shareholders equity on 12/31/2010 12 180 6 464 373 487 969 393 100
Annual Report - 24 - 2010
DIVERSIFICATION :
While continuing to strengthen its basic business, SNIM chose to pursue its policy of diversification for a wider integration in the State economy.
Since its creation, SNIM Group got bigger and counts, today, nine operational subsidiaries: 1) SAMMA (lighterage, handling and transit) 2) SAFA (foundry, manufacturing wearing parts) 3) SOMASERT (distribution, hotel business, tourism and transport) 4) ATTM (construction roads, civil engineering, building and public works, real estate management) 5) COMECA (manufacturing, preparation and repair of mechanical parts and sets) 6) SAMIA (extraction and sale of gypsum, production and sale of plaster) 7) GMM (exploitation of granite and marble stones)
And, in 2010: 8) GIP (exploitation of reception installations, storage and distribution of refined or unrefined hydrocarbons) 9) DAMANE INSURANCE (activity of insurance and reinsurance for fire, accidents and diverse risks).
Globally these subsidiaries registered a strong growth in turnover passing from about 12,3 Billion UM in 2009 to 18,6 Billion UM in 2010 as well as a very positive improvement of the net situation from 8,4 Billion UM to 17,4 Billion for the same period.
The subsidiaries’ strengthened net profit was 687 Million Ouguiya, in spite of an economic situation of crisis at the level of tourism and the starting up of activities (GMM, GIP).
Besides, SNIM made a commitment in air transport; it participates in the capital of Mauritanian Airlines (at 25 %) and assures the presidency of its Board of directors.
Annual Report - 25 - 2010
STATEMENT OF SUBSIDIARIES’ RESULTS
SAMMA -s.a (lighterage and handling company in Mauritania) SNIM’s share: 52,50% Activity: Consignment, Transit and handling at Nouadhibou and Nouakchott ports Designation \ (in million Ouguiyas) 2010 2009 2008 Total balance 1626 1449 1469 Net Situation 1391 1252 1183 Turnover 955 930 1031 Net income 209 148 234 STAFF 74 82 82
SAFA -s.a (Arab Company for Iron and Steel) – SNIM’s share: 100% Activity : Exploitation of a foundry with a capacity of 2000 T. Designation \ (in million Ouguiyas) 2010 2009 2008 Total balance 1251 1057 1242 Net Situation 900 731 677 Turnover 1383 991 1405 Net income 169 54 171 STAFF 101 106 106
SOMASERT-s.a (Mauritanian Company for Services and Tourisme)- SNIM’s share: 100% Activity: Management of hotel infrastructures and promotion of tourist potential of the country. Designation \ (in million Ouguiyas) 2010 2009 2008 Total balance 508 279 361 Net Situation 374 152 145 Turnover 547 400 403 Net income -240 7 35 STAFF 33 38 38
ATTM - s.a ( Company of purification, works, Transport and Maintenance) SNIM’s Share : 100% Activity: Roads and Civil Engineering Works Designation \ (in million Ouguiyas) 2010 2009 2008 Total balance 20653 15894 10318 Net Situation 4717 4742 4422 Turnover 12799 8163 6422 Net income 283 320 246 STAFF 349 318 259
Annual Report - 26 - 2010
COMECA- s.a (Atlantic Mechanical Construction) – SNIM’s share: 92 ,84% Activity: Manufacturing, preparation and repair of mechanical parts, skeletons and sets.
Designation \ (in million Ouguiyas) 2010 2009 2008 Total balance 1325 1086 941 Net Situation 901 800 666 Turnover 843 934 1061 Net income 129 168 231 STAFF 69 64 58
SAMIA - s.a (Arab Company for Metallurgy Industries) – SNIM’s Share 50% Activity: Extraction and sale of Gypsum, production of plaster. Designation \ (in million Ouguiyas) 2010 2009 2008 Total balance 1310 1237 1038 Net Situation 1185 1082 930 Turnover 798 867 677 Net income 167 201 122 STAFF 42 42 43
GMM - sa (Granite and marble of Mauritania) SNIM’s Share : 21% Activity : Exploitation and marketing of decorative stones Designation \ (in million Ouguiyas) 2010 2009 2008 Total balance 1164 459 464 Net Situation 618 39 80 Turnover 893 4 30 Net income -62 -40 -71 STAFF 17 18 18
GIP S.A (Management of Oil Installations) SNIM’s Share : 68% Activity : Storage, transport and distribution of refined hydrocarbons Designation \ (in million Ouguiyas) 2010 2009 2008 Total balance 7731 Net Situation 7315 Turnover 371 Net income 35 STAFF 61
Annual Report - 27 - 2010
SNIM Foundation …. the Foundation in partnership with the Agency for the Promotion of Universal
Access to Services, was started up. It is in Many realizations to improve, in a long- the same spirit that a brand new water lasting way, the living conditions of the tanker, costing more than 38 MUM was populations. acquired for the benefit of Birmogrheïn city.
Within the framework of the collective infrastructures, the Foundation built 3 mosques in Inal, Tmeimichatt and F’derick according to an original architectural plan, as it built a modern slaughterhouse in Choum.
With the slogan "every pupil on a table with sufficient exercise books and pens for Year 2010 was marked by the setting of its classes", the Foundation distributed, in 7 the road map 2010-2011 of the villages of the zone, approximately 3,5 Foundation the execution of which MUM of school stationeries for the benefit allowed to build several social, school, of 2.000 pupils and it supplied more than 8 sanitary infrastructures and/or religious MUM of school equipments, consisted along the railroad and in Birmogrhein. The mainly of tables benches. At the same foundation also distributed important time, it worked on the extension and quantities of stationery and school rehabilitation of schools in Tmeimichatt, equipments in the zone. Choum, Touajil and Fdérik. The decision of outsourcing and Besides, year 2010 was also marked by the restructuring the small projects financial organization and management by the system of the Foundation, through Foundation, of the subscription of SNIM extending it to the other population retired people and their families to categories besides SNIM retired people, membership of the National health was one of the landmarks of the insurance fund with coverage of the achievements of 2010. totality of the related contributions. At the On Health plan, the extension of the end of the year, 668 care cards of CNAM regional Hospital of Zouerate (161 MUM on (National Medical Benefits Fund) were stockholders' equity) was inaugurated on delivered to the retired people and to November 25th, 2010. As for equipment, their families. four new ambulances were acquired for Recognized as being the social arm of the benefit of the villages of Boulenoir, SNIM, in 2010, the Foundation strongly got Tmeimichatt, Choum and Birmogrheïn. involved in the supervision, control or About 9 MUM in essential medicines and realization of works of national interest health equipments were paid out for the under the mandate of the parent benefit of 08 Health posts situated along company (coordination of the the railroad besides the village of contribution of SNIM to the Birmogheïn. The Foundation also financed implementation of Mining School of the annual children vaccination Mauritania, supervision of the pavement campaign in the wilaya of Tiris Zemmour. works of roads and sidewalks in Nouakchott, etc.) On December 3 rd , 2010, the Power plant of Choum, cofinanced, up to the third, by
Annual Report - 28 - 2010
STATEMENT OF FINANCIAL POSITION ASSETS
In million Ouguiyas Note Dec.31,2010 Dec.31,2009
Non current Assets 279,343 215,769 Property, plant and equipment 5.1 259,040 206,664 Exploration Assets 5.1 1,200 1,404 Intangibles assets 5.2 2,863 370 Other financial fixed assets 5.3 1,513 1,101 Investment in associates 5.3 14,649 6,161 Deferred taxes 79 70 Current assets 273,955 127,270 Inventories 5.4 50,234 43,484 Trade receivables 5.5 56,793 24,000 Other receivables 5.6 19,798 9,141 Derivatives 5.7 2,909 476 Cash and cash equivalents 5.8 144,220 50,119 Assets held for sale 51 TOTAL ASSETS 553,298 343,039
EQUITY AND LIABILITIES
In million Ouguiyas Dec.31,2010 Dec.31,2009
Capital and reserve 397,736 238,535 Issued capital 5.9 12,180 12,180 Share Premium 6,464 6,477 Underlying net earnings on forward contracts 5.7 969 (88) Accumulated profits 378,123 219,966 Legal reserve 1,218 1,218 Retained profit brought forward 169,740 138,457 Profit for the year 159,672 32,797 Revaluation reserve 47,494 47,494 Minority shareholding interests 3,662 1,203
Non current liabilities 98,279 65,348 Interest-bearing loans and borrowings 5.10 83,767 58,103 Retirement benefits obligation 5.11 13,983 6,968 Other provisions 5.12 529 276 Current liabilities 53,620 37,954 Trade payables 5.13 26,972 19,604 State and other public taxes 5.14 13,150 5,839 Other taxes 5.15 1,290 1,264 Other payables 5.16 9,668 7,023 Bank overdraft 5.8 569 3,389 Derivatives 1,970 749 Liabilities held for sale - 85 TOTAL LIABILITIES 553,298 343,039
Annual Report Independent auditors and statutory auditors’ report on the - 29 - 2010 consolidated financial statements
INCOME STATEMENT In million Ouguiyas Note Dec.31,2010 Dec.31,2009
Sales 6.1 319,444 149,937 Revenue from ancillary business activities 2,915 2,147 Other operating income 901 418 Operating income 323,260 152,503
Changes in inventory of finished goods and work-in- 4,255 3,640 progress In-house production 4,306 3,975 Reversal of depreciation and provisions Raw materials and consumables used (65,833) (57,830) Personnel expenses 6.2 (27,630) (18,059) Depreciation, amortization and provision expenses 6.3 (20,656) (22,519) Taxes and duties (544) (328) Other operating expenses 6.4 (22,570) (15,127) Profit from operation 194,588 46,255
Financial income 6.5 16,462 13,739 Financial expenses 6.6 (22,990) (13,817) Assets held for sale 0 (71) Share of profits (losses) of equity-accounted affiliates (13) Profit before tax 188,047 46,107 Income Tax (28,172) (13,133) Net profit 159,875 32,974
Earnings per share (1,218,000 shares) in Ouguiyas 203 176
STATEMENT OF COMPREHENSIVE INCOME
In million Ouguiyas Note Dec.31,2010 Dec.31,2009
Net profit 159,875 32,974 Impact of financial instruments 1,057 637
Comprehensive income 160,932 33,611
Annual Report - 30 - 2010
STATEMENT OF CASH FLOWS Not Dec.31,201 Dec.31,200 In million Ouguiyas e 0 9
OPERATING ACTIVITIES Income before tax 188,047 46,107 Amortization, depreciation and provision 7.1 25,076 16,957 Reversal of amortization, depreciation and provisions 7.4 (4,339) (4,214) Gains/losses on sale of assets (1) 1 Foreign exchange gains/losses 7.5 2,592 (492) Investment income (1,299) (2,007) Interest expenses 2,218 2,052 13 Working capital needs 7.2 (40,157) 1,059
Cash generated by operating activities 172,150 59,462 Interest paid (2,199) (2,128) Income tax paid (20,901) (17,551) Net cash flow from operating activities 149,050 39,783
INVESTING ACTIVITIES Acquisitions of fixed assets 7.3 (70,035) (36,287) Proceeds from sale of equipment 35 1 Interests received 1,299 2,007 Dividends received 0 0 Net cash flow from investing activities (68,701) (34,279)
FINANCING ACTIVITIES Proceed from long-term borrowings 30,538 6,916 Payments on long-term borrowings (8,070) (8,364) Dividends paid (8,236) (20,789) Capital increase 2,340 Net cash flow from financing activities 16,572 (22,237)
Net cash flow 96,921 (16,733)
Cash and cash equivalents at the beginning of the period 46,730 63,472
Cash and cash equivalents at the end of the period 7.6 143,651 46,739
Annual Report Independent auditors and statutory auditors’ report on the - 31 - consolidated financial statements 2010
STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
Underlying net Share Share Accumulated earnings Minority In million Ouguiyas Total capital premiums profit on interests forward contracts
Shareholders’ equity as of 12,180 6,477 207,220 (724) 225,153 1,092 January 01, 2009
Revaluation of fixed assets 637 637 Net profit of the period 32,797 32,797 111 Dividends (20,731) (20,731) Other 679 679
Shareholders’ equity as of 12,180 6,477 219,965 (87) 238,535 1,203 December 31, 2009
Revaluation of fixed assets 1,057 1,057 Net profit of the period 159,672 159,672 2,458 Dividends (8,171) (8,171) Other 6,643 6,643 Shareholders’ equity as of 12,180 6,477 378,109 970 397,736 3,661 December 31, 2010
Annual Report - 32 - 2010
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The statutory financial statements of SNIM for the year ended December 31, 2010 were authorized for issuance in accordance with a resolution of the board of directors on April 25, 2011. 1 KEY EVENTS The key events for the 2010 fiscal year mainly relate to the change from an annual reference to a quarterly reference for the fixing of the iron ore prices. The negotiations to fix the prices were long, which delayed the signing of the iron ore sales agreements. This did not have any impact on the business, but only resulted in an increase in trade receivables at year-end. - An increase in orders in 2010, notably in the traditional market (Europe). This situation resulted in an increase in loads and by a significant rise in prices compared to 2009.
- Laying of the foundation stone of the new ore-handling port.
- Launch of notification of the invitation to tender for the modernisation of the trackside telecommunications networks.
- Take-over of the management of the oil facilities at Nouadhibou by SNIM through Société Installations Pétrolières (GIP).
- Entry of SNIM into the capital of the new airline: Mauritania Airlines International (MAI).
- Loss of control of GMM by SNIM following the entry into the capital of this subsidiary of Tino-Horizonte Sahel, a consortium of Spanish companies involved in toll manufacturing and the marketing of stone.
- The Modernisation project started up during the year; the costs incurred as of 31 December 2010 amount to MUM 40,207. The impacts of the project are detailed in the additional information relating to the statement of financial position.
- Appointment of a new Chairman of the Board of Directors: Mr Mohamed Cherif, replacing Mr Mohamed Sidiya Ould Mohamed Khaled.
2 COMPANY PURPOSE AND BUSINESS ACTIVITIES The Société Nationale Industrielle et Minière (SNIM) is a company registered in the Islamic Republic of Mauritania to carry out the exploration, production, marketing and sale of iron ore. The company headquarters are based in Nouadhibou, PO. 42. The company extracts iron ore from the mines of M’haoudat, Guelbs and Kédia, while carrying on its own mineral exploration activities.
3 SIGNIFICANT ACCOUNTING POLICIES
3.1 Guidelines for the preparation of the Financial Statement
Applicable standards
The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The publication of the financial statements in IFRS is justified by:
The wish for harmonization expressed by investors and sponsors, who are the main users of our financial statements;
Annual Report Independent auditors and statutory auditors’ report on the 33 consolidated financial statements 2010
The use of these standards by SNIM’s partners;
Our concern to give comparable financial information
None of the IFRS standards, interpretations or application guidelines that came into force in 2010 have had an impact on the presentation of the accounts as of 31 December 2010.
The IFRS standards, interpretations and application guidelines that came into force in 2010 and that did not have any impact on the presentation of the accounts as of 31 December 2010 are as follows:
• Standards amended following the amendments to IFRS3R – Business combinations: IAS 27 Amendments – Consolidated and separate financial statements IFRS 5 2008 Improvements 2009 Improvements - Amendments to IFRS 2, IAS 38 and IFRIC 9 IFRIC 17 – Distributions of non-cash assets to owners • IAS 39 - Amendments – Eligible hedged items • IFRS 2 - Amendment - Group cash-settled share-based payment transactions • IFRIC 12 – Service concession arrangements • IFRIC 15 – Agreements for the construction of real estate • IFRIC 16 – Hedges of a net investment in a foreign operation • IFRIC 18 – Transfers of assets from customers
The IFRS standards, interpretations and application guides which have been published but are not yet obligatory are as follows:
• IAS 24 – Related party disclosures • IFRS 9 – Financial instruments • IAS 32 - Amendment – Classification of rights issues • IFRIC 14 - Amendment - Prepayments for minimum funding contributions • IFRIC 19 - Extinguishing Financial Liabilities with Equity Instruments
SNIM is now analyzing the potential impact of these standards and interpretations on its financial statements.
General principles
The principles used are based on the historical cost method and the accrual basis accounting method, except for derivative financial instruments and categories of revalued fixed assets that have been measured at fair value. The carrying values of assets and liabilities that are hedged at fair value are adjusted to record changes in the fair value attributable to the risks that are being hedged. The financial statements are presented and valued in Ouguiya (MRO). All of the tables and the notes to the financial statements are presented in million Ouguiyas.
The income statement is presented by category. Asset and liability accounts are presented according to the distinction between current and non- current assets and liabilities.
Assets held for sale or intended for consumption during the Group’s normal business cycle, as well as cash and cash equivalents, are accounted for as current assets. Other assets represent non- current assets. Debts due during the Group’s normal business cycle or during the twelve months following the end of the reporting period are accounted for as current liabilities. Other liabilities represent non-current liabilities.
Annual Report 34 2010
Within the framework of the preparation of the statutory financial statements, and according to international accounting standards, the assessment of certain accounts in the statement of financial position and income statement requires the company’s Management to take into account assumptions, estimations and judgments which have an impact on assets, liabilities, revenue and costs. These assumptions, estimations and judgments are based on information and situations that existed as of the drawing-up of the financial statements. However, the actual results in the future may be different.
3.2 Consolidation basis
Companies controlled exclusively by the group are consolidated through global integration. Thus accounts are all integrated at 100%, with deduction of minority interests. Companies controlled jointly by the group and other companies are consolidated through proportional integration. Accounts are integrated according to the group percentage of possession. Companies which are not subject to exclusive control from the group but on which the group has significant influence are consolidated through equity method if the percentage of control exceeds 20 %.
The group owes shares in a joint-venture. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control. SNIM recognizes its interest in the jointly controlled entity using the equity method.
Under the equity method, the investment in an associate is initially recognized at cost and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the date of acquisition. The investor’s share of the profit or loss of the investee is recognized in the investor’s profit or loss.
3.2.1 Operations eliminated through consolidation
Intercompany receivables and payables balances at Dec.31,2010, as intercompany revenues and charges, so as intercompany operations such as dividends payments, amortization of consolidated shares, or loans to intercompanies are eliminated.
Margins realized between companies of the group are eliminated.
3.2.2 Goodwill
Acquisition cost Acquisition method is used in order to account acquisition of shares in subsidiaries. Acquisition cost equals to fair value of assets, liabilities and equity issued by the buyer at acquisition date.
Goodwill Goodwill corresponding to the amount of acquisition cost exceeding amount of share in fair values of assets and liabilities of the purchased entity are accounted is heading “goodwill”. Negative goodwill is posted directly in the income statement.
Goodwill is not amortized in compliance with IFRS 3R but is subject to impairment test once indication of loss of value appears and at minimum once a year. In case of loss of value, depreciation is posted in the income statement. It is non reversible.
3.2.3 Foreign currency translations – unrealized exchange gains and losses
Due to the nature of SNIM’s business, numerous transactions are denominated in foreign currencies. Transactions in foreign currencies are recorded as follows:
Tangible and intangible fixed assets, as well as raw materials and other consumables, are translated at current exchange rates applicable at the date of the transaction, except for revalued categories of fixed assets, Annual Report Independent auditors and statutory auditors’ report on the 35 2010 consolidated financial statements
Non-monetary items accounted for at fair value denominated in foreign currency are translated using the exchange rates applicable when the fair value was determined,
Other assets and liabilities are translated at the functional currency rate at the end of the reporting period. Profits and losses resulting from exchange operations are recognized in the income statement,
Profits and losses are converted using the exchange rates applicable at the transaction date.
3.3 Property, plant and equipment
Property, plant and equipment are stated at acquisition cost less accumulated depreciation, workforce cost and any impairment in value. The revaluation method is applied.
Buildings Acquisition cost Specialized complex installations Fair value Railway rolling stock and railroad track equipment Fair value Operating equipment Acquisition cost Transport equipment Acquisition cost Other tangible assets Acquisition cost
Depreciation is calculated on a straight-line basis over the estimated useful life of the asset as follows:
- Buildings 14 to 30 years - Specialized complex installations 15 to 30 years - Railway rolling stock and railroad equipment 10 to 30 years - Operating equipment 5 to 30 years - Transport equipment 5 years - Other tangible assets 5 years
As from financial year 2009 assets held under finance lease are initially recorded in the statement of financial position at the lower of their fair value and the discounted value of the minimum payments under the lease. The corresponding commitment is recognized in financial liabilities. The financial expenses which represent the difference between the total lease commitments and the fair value of the assets are recognized in profit or loss over the term of the lease. Arrangements that do not take the legal form of a lease are analyzed on the basis of IFRIC 4 to determine whether they contain a lease to be recognized according to IAS 17.
The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
If any such indication exists and where the carrying values exceed the estimated recoverable amount, the asset or cash-generating units are written down to their recoverable amount.
The recoverable amount of property, plant and equipment is the greater of the fair value of the depreciated replacement cost or the value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. Impairment losses are recognized in the income statement.
Annual Report 36 2010
Within the context of the Guelbs 2 project and the mineral port, implicit commitments could lead SNIM to recognize assets with a view to the dismantling and/or rehabilitation of the facilities. SNIM also remains attentive to any changes in legislation and decisions taken in such matters by the Mauritian authorities. (cf 3.14 Site rehabilitation).
3.4 Intangible assets
Intangible assets are recognized at their acquisition cost.
They are depreciated on a straight-line basis over their estimated useful life, between 3 and 5 years.
The carrying value of intangible assets is reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
The Group’s intangible assets do not include any goodwill.
3.5 Exploration for and Evaluation of Mineral Resources
IFRS 6, which specifies the financial information to be disclosed relative to the exploration and evaluation of mineral resources, has been compulsory since January 1, 2006 and has been applied since then in the SNIM financial statements.
Intangible assets: recognized expenditures are as specified in §9 and only concern the research and development costs provided for by IFRS 6, including:
o Acquisition of rights to explore o Topographical, geological, geochemical and geophysical studies o Exploratory drilling o Trenching o Sampling
Tangible assets: these are the tangible assets used by the entity dedicated to research.
The impact estimated as of December 31, 2010 is as follows: Exploration tangible assets: MUM 2,278 Research costs: MUM 425.
The depreciation of these assets as of 31 December 2010 amounts to: Exploration tangible asset MUM 1,078 Research costs: MUM 75
3.6 Other financial assets
The company grants interest-free loans to employees. Deposits and guarantees, requested by the Mauritanian electricity, water and telecommunications companies, are intended to cover the risk of credit and potential equipment damage. As the impact of discounting is deemed insignificant, loans and guarantees are accounted for at their historical cost.
3.7 Inventories
Inventories are mainly composed of raw materials, iron ore and other supplies. Raw materials and other supplies, including spare parts, are valued at the lower of cost and net realizable value.
Annual Report Independent auditors and statutory auditors’ report on the 37 2010 consolidated financial statements
Inventories of iron ore, including ore stockpiles, are valued at their weighted average price or at their net realizable value if such value proves to be lower. The cost includes the direct costs of the mines, the production sites, the railway and the port, as well as a portion of amortization and depreciation and general expenses.
This valuation does not take into account financial expenses, the fixed and variable general administrative expenses incurred to transform the raw materials into finished products and the costs related to sales and marketing.
Net realizable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and the estimated costs necessary to make the sale.
3.8 Impairment Tests
In accordance with IAS 36, impairment tests are performed on tangible and intangible assets when any indication of potential loss of value is identified. Such tests are performed at least once a year on intangible assets with an indefined useful life and on goodwill.
When the net book value of assets grouped together in a cash-generating unit exceeds their recoverable value, depreciation is recorded for an amount corresponding to the difference between the net book value and the recoverable value. Recoverable value is defined as the highest value between the asset’s fair value less costs to sell and its useful value. Useful value is determined according to the discounted cash-flow method. Goodwill on consolidation is apportioned by cash-generating unit for the purposes of the impairment tests.
Depreciation is charges against goodwill. It is recognized under a specific caption of the income statement when amounts are deemed significant. Depreciation accounted for on goodwill cannot be subsequently reversed.
3.9 Definition of a cash-generating unit
According to IAS 36, goodwill, tangible asset and intangible asset values are subject to impairment tests whenever there is an indication of loss of value. These indications are reviewed at year-end. This test must be performed at least once a year for assets with an undefined life, a category which does not exist at SNIM.
In order to perform such a test, assets are gathered into cash-generating units (CGUs). These CGUs are composed of homogeneous assets which generate cash-flows that are largely independent of cash-flows generated by other groups of assets.
The criterion for defining CGUs has led SNIM to make the following grouping:
Company SNIM: this is a homogeneous, integrated unit which groups the three mines operated at Zouerate, the private railway siding and the port facilities in Nouadhibou. These items cannot generate cash-flows that are largely independent of cash-flows generated by the other components of SNIM.
Company GMM: this company is considered as an independent UGT owing to its specific business, its exposure to risk and its profitability.
Company SAFA: this company is dedicated to smelting works for the group.
Company COMECA: this company is considered as an independent UGT due to its specific business, its exposure to risk and its profitability.
Annual Report 38 2010
Company ATTM: this company is dedicated to construction, transport and maintenance of the group
Company SOMASERT: business of this company is tourism and hotel business
Company SAMIA: this company is considered as an independent UGT due to its specific business, its exposure to risk and its profitability.
Company SAMMA: this company is dedicated to handling for the group
GIP: this company is involved in the storage, transport and distribution of refined hydrocarbons.
The useful value of these units is determined according to net discounted cash-flows. When the net value of assets grouped into a cash-generating unit exceeds its useful value, depreciation is recorded for an amount corresponding to the difference between net value and useful value. Depreciation is allocated first to reduce the carrying amount of any goodwill.
3.10 Trade receivables
Trade receivables are recognized and carried at original invoice amount less an allowance for any uncollectible amounts. An estimate for doubtful debt is made when collection of the full amount is no longer probable. Bad debts are written off when identified.
There is no discounting of receivables as the customer payment time calculated for 2010 is 26 days.
3.11 Borrowing costs
In accordance with IAS 23, borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset are recorded as part of the cost of that asset.
3.12 Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.
3.13 Interest bearing borrowings
SNIM’s financial debt is mainly contracted with international financial sponsors at preferred rates.
According to IAS 39 principles, loans at preferred rates are accounted for as “other financial liabilities”. Thus they should initially be registered at fair value, i.e. a discounted value based on the current market rate for a loan with similar conditions or for a similar borrower.
In order to determine the market value of a favorable-rate loan, a reliable future cash-flows discount rate must be calculated. This rate is determined according to the market and takes several factors into account: - the loan currency, - the credit spread When no information is directly available on the market, IAS 39 allows the recording of a favorable- rate loan by comparison with fixed-rate loans of equal maturity taken out by the company or with rates applied under normal market conditions in a company of similar size and business.
Independent auditors and statutory auditors’ report on the Annual Report 39 consolidated financial statements 2010
In view of SNIM’s specific environment, the market information that is necessary for determining a rate trend, in order to calculate the market value of favorable-rate loans, is not available because of the following: - No market for long-term financing of private business in foreign currencies exists in Mauritania, - It is difficult to evaluate SNIM’s credit spread, - No comparable ore extracting company exists in Western Africa. It is consequently impossible to reliably determine a market value for the favorable-rate loans taken out by SNIM. In such a case IAS 39 allows the accounting of financial assets and liabilities at historical cost, which equals the amounts received. Interest is recorded on a nominal rate basis. Within the context of the Development and Modernization Project, SNIM signed financing agreements with commercial financial institutions and institutional sponsors for a total of 710 million dollars in financial year 2009 and 28 million dollars in financial year 2010,
Under these new agreements, SNIM must comply with the following ratios until expiry of the agreements: - Debt/equity ratio less than or equal to 3.5 - Liquidity ratio greater than or equal to 1.5 - Debt service cover ratio greater than or equal to 1.3 - Consolidated debt structure ratio less than or equal to 2 - Safe receivables/debt ratio
3.14 Provisions for liabilities and charges
Provisions are booked when the company has a present obligation (legal or constructive) which has arisen as a result of a past event, when it is probable that an outflow of resources representing economic benefits will be necessary to extinguish the obligation and when the amount can be estimated reliably.
The obligations resulting from restructuring operations are recognized at the time of their announcement to the people concerned.
Site rehabilitation :
Legal obligations relating to the clean-up of mineral extraction sites are governed by the following regulatory framework as of 31 December 2010:
o Mining Code: The obligation to rehabilitate sites is mentioned in the 1979 Mining Code. This code, as updated in 2009 following the publication of law no. 2009-26 of 7 April 2009, states that the abandonment of the operation of any mining extraction zone must be the subject of a ministerial order defining the action taken in terms of “public health and safety and essential features of the environment”. As of today, the Council of Ministers has not adopted any implementing decree instituting the practical obligations.
o Law on the environment: Law no. 2000-45 relating to the environment confirms the existence of this legal obligation to rehabilitate extraction sites in Mauritania. Article 44 of this text, enacted on 26 July 2000, states that:
"The operation of quarries and mines, as well as mineral exploration work, must be designed and performed in such a way that: Annual Report 40 2010
- it does not damage the environment surrounding the sites, or create or aggravate erosion phenomena - the sites operated can be returned to their initial state. The rehabilitation of the sites is the responsibility of the operator of the quarry or mine. The methods and deadlines for carrying out the work will be fixed by decree adopted on the basis of a joint report of the Minister for the Environment and the Minister for Mines." (Title III : Protection of resources and the natural environment / Chapter III : Protection of the soil and subsoil / Article 44)
This law has been the subject of the adopting of the following decrees: • Decree no. 2004-94 requires that an environmental impact assessment must be carried out before any mine with a capacity exceeding 100 tons/day is opened for operation. • Decree no. 2007-107 confirms this obligation and its article 7.8 requires that the measures taken in connection with this obligation to clean up the sites be accompanied by a bank guarantee, but it does not give any guidelines as to the interpretation of the term “rehabilitation”. • On 4 February 2009, decree no. 2009-051 was adopted within the framework of the law on the environment without modifying article 14 of decree no. 2008-159 ruling on the following obligation: “ Two months before expiry of the operating license, the mining cadastre must inform the Mines and Geology Cadastre of such expiry so that it makes sure that the license-holder carries out the clean-up work in compliance with the provisions of the decree relating to the Mines Police and of the decree relating to the mining environment.” As of April 25 2010 these two decrees have not been published.
In conclusion, although the legal obligation exists, it is not accompanied by an implementing decree specifying its interpretation. As the obligation cannot be assessed reliably, no provision has been booked in the financial statements of SNIM as of year-end.
In addition, since the end of February 2011, SNIM has been certified ISO 14001. Within this context, the objectives set are: the environmental analysis of the sites, the launch of the environmental management plan and the definition of the environmental programme targets
SNIM’s legal department is monitoring any changes in the legislation relating to these obligations.
The technical department is currently working on the valuation assumptions on the basis of an interpretation of the laws in force and the implicit obligations resulting from ISO 14001 certification.
A provision will therefore be booked when the obligation can be assessed reliably. Any changes in the valuation of this liability will be recognized in accordance with the IFRIC1 interpretation.
3.15 Employee benefits
Defined service plan
The company has a benefit pension plan which is qualified as a defined-benefit pension plan. Note that there are no separately administered funds financing the pension plan.
The method applied for evaluating the plan is that of the projected unit credit actuarial valuation method. This method consists in measuring the benefit according to the projected wage at the end of the employee’s career and to the eligible amount at valuation date. Annual Report Independent auditors and statutory auditors’ report on the 41 consolidated financial statements 2010
Actuarial differences have been booked according to the corridor method. Actuarial gains and losses are recognized as income or expense when the net cumulative unrecognized actuarial gains or losses for each individual plan at the end of the previous reporting year exceeded 10 % of the higher of the defined-benefit obligation and the fair value of the plan assets at that date. These gains or losses are recognized over the expected average remaining working lives of the employees participating in the plan.
Supervising executives are offered additional benefits such as tax sharing, healthcare, company cars and fuel and allocated housing.
The costs related to these benefits are insignificant. Consequently they are accounted for as expenses. SNIM has not applied the new option offered by IAS 19 to integrate the full amount of actuarial gains and losses in equity.
Defined contribution plan
SNIM has decided to set up, as from January 2011, a defined contribution supplementary pension plan with the following main characteristics:
A 10% employer contribution and a 7% employee contribution based on the 2010 reference salary The prior service cost is borne by SNIM The reference salary is the base salary plus the seniority bonus (cf. 5.11 Actuarial assumptions)
Increases and reversals of the lump-sum pension indemnities are booked to personnel charges.
3.16 Leases
As of December 31, 2010, there exists significant finance lease (CF. 3.3 Property, Plant and Equipment)
3.17 Profits from continuing operations
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the group and the revenue can be reliably measured.
Sales of goods Revenue is recognized when the significant risks and rewards of ownership of the goods have passed to the buyer and can be reliably measured.
Construction contracts The contact revenues are measured at the fair value of the consideration received or receivable. Contract revenues and contract costs are recognized by reference to the stage of completion of the contract activity at the balance sheet date. An expected loss on the construction contract is recognized as an expense immediately. On those contracts, the stage of completion is based on the costs incurred at the closing date compared to the total budgeted costs.
Interests Revenue is recognized as the interest accrues to the net carrying amount of the financial asset.
Annual Report 42 2010
3.18 Government grants
Government grants are recognized at their fair value when there is reasonable assurance that the grant will be received and all attached conditions will be complied with.
When the grant relates to an expense item, it is recognized, on a systematic basis, as income over the years necessary to match the grant to the costs that it is intended to offset. Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to the income statement over the expected useful life of the relevant asset by equal annual installments.
3.19 Income taxes
Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of the assets and liabilities and their carrying amounts for financial reporting purposes.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is non longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be used.
Deferred income tax is recorded on margin realized between company of the group elimination.
3.20 Functional and presentation currency
SNIM presents its financial statements in local currency, the Ouguiya. However, according to IAS 21, the economic analysis of SNIM’s activities shows that the Ouguiya is not SNIM’s functional currency.
If SNIM opts for USD as functional currency, the company will have to obtain authorization from the Mauritanian authorities to present its financial statements on that basis.
The information system is currently set for the Ouguiya as functional currency, with the Dollar being used as parallel currency. However, the system allows the editing of financial statements presented in USD. Shareholders’ equity based on USD as a functional currency and presented in MRO (converted at yearly average rate) can be estimated at MUM 405,628 compared to MUM 401,398 in the financial statements presented. Likewise income based on USD as a functional currency and presented in MRO can be estimated at MUM 155,886 compared to MUM 159,875 in the financial statements presented.
3.21 Derivative financial instruments and Hedging transactions
SNIM uses derivative financial instruments to hedge against the risks relating to its business (exchange risk related to its operating, investing and financing activities). Derivative financial instruments negotiated for hedging the company’s exposure to risks linked to its business and financing operations are qualified as cash-flow hedges where the company hedges exposure to variability in cash-flows and qualify for hedge accounting. No instrument is used to cover the exposure to variations in the fair value of assets or liabilities, except for the exchange risk, or to cover investment in foreign activity.
3.21.1 Cash flow hedging
Gains or losses on hedging instruments are recognized in equity for the portion that is determined to be effective and in the income statement for the ineffective portion. At the time the asset or the liability is recognized, the associated gains or losses that had previously been recognized in equity are transferred to the income statement for the same period as the hedged transaction and to the same account.
Annual Report Independent auditors and statutory auditors’ report on the 43 consolidated financial statements 2010
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies for hedge accounting. At that point, any cumulative gain or loss on the hedging instrument recognized in equity is kept in equity until the forecasted transaction occurs.
If a hedged transaction is no longer expected to occur, the net cumulative gain or loss recognized in equity is transferred to net profit or loss for the year.
3.21.2 Derivative financial instrument operations not qualifying for hedge accounting
For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly to net profit or loss for the year. All derivative financial instruments are stated in assets or liabilities at their fair value and revalued at fair value at year-end.
The market value of forward contracts and interest rate swaps, during their lifetime and at maturity, is determined by an independent expert on the basis of immediate and at term data at the time when the different underlying items and risk-free interest rate trends are valued for discounting.
The market value of option contracts, when paid up, is bound to the amount of the paid or received initial premium.
During the option lifetime and at maturity, the market value is determined by FOREX according to the Black and Scholes model, on the basis of the following elements:
Market value of the underlying item Option exercise price Sensitivity “to the forward currency” Risk-free interest rate Maturity of the option.
3.22 Interest and dividends
Dividend revenue is recognized when the shareholders’ right to receive the payment is established.
The company’s accounting policy is to classify dividends and interest received as investing activities, dividends paid as financing activities and interest paid as operating activities.
3.23 Sector-based investment
SNIM is dedicated to extraction of iron ore. Indeed SNIM’s exposure to risk so as expectations for profitability objectives are considered as homogeneous. Analysis of SNIM business is thus made through geographical zones which constitute the primary level of sector-based information according to standard IAS 14. Geographical zones are the following:
France, Germany, Belgium, Italy, Other countries member of the European Union, China, Others.
Annual Report 44 2010
3.24 Investments in associates
Presentation note of the Guelb el Aouj project (a) Joint Venture Project SNIM and the Australian company Sphere Investments signed a joint-venture agreement on October 22, 2001 regarding the performance of the research and studies necessary for a project concerning the production of pellets for the direct reduction of iron ore from the El Aouj Guelbs.
This partnership agreement defines the obligations of the parties as follows: SNIM contributes a research permit (right of exploration) for the El Aouj zone, which comprises 5 guelbs. Sphere carries out a full bankable feasibility study (BFS), the costs of which are borne by Sphere At the end of this feasibility study, Sphere gets 50% of the rights for the El Aouj zone. The two parties will then create a new common company in which both will hold a 50% stake. This company will assume the financing, realization and exploitation of the project.
The Guelb el Aouj project will include: A large scale open cut mine, An enrichment factory (both dry enrichment and water based enrichment), A 7MT/year capacity pelletizing factory, A power station of 125 MHertz Additional systems and services. These facilities will produce 7MT/year of high-quality pellets for direct reduction (DR). The product will be transported by the existing iron ore railway infrastructure and loaded onto ore carriers by the existing SNIM port infrastructure, in exchange for an acceptable remuneration that will be determined by an agreement to be concluded between SNIM and the future company. The necessary financing should be around USD 2.5 billion, of which one third should be provided by the shareholders. (b) Chronology SNIM and Sphere Investment decided in 2006 to open the capital of the future Newco to two major Arab steel producers: the Saudi Basic Industries Corporation (SABIC) and the Qatar Steel Company (QASCO).These two partners are consumers of pellets made for direct reduction.
The Pre-Feasibility study was published on February 7, 2007.
In May 2007, SNIM and Sphere Investment offered to sell 49.9% of the El Aouj project to the steelmaker partners, SABIC and Qatar Steel, for an amount of USD 375 million.
On July 31, 2007, an agreement was signed according to which SNIM and Sphere Investment would transfer 49.9% of the El Aouj project to its partners for USD 375 million.
It should be noted that the amount of the transaction should serve as financing for the participation of SNIM and Sphere in the capital increase of the "Future Company". The capital should be increased to 30% of the total amount of capital expenditures In October 2007, SABIC withdrew. Therefore Qatar Steel confirmed its decision to buy 49.9% of the project. The project was to continue with three partners, but in 2008, Qasco first informed SNIM of its decision to limit its participation to 15%, before withdrawing entirely from the project.
The final feasibility study was published in April 2008.
In August 2008, Sphere, a 100% shareholder of the company El Aouj SA, cancelled from the latter’s accounts all costs not related to the exploration and evaluation of the iron ore deposit, and SNIM acquired 50% of the capital of the company, renamed El Aouj Mining Company (EMC), for MUM 5.
Annual Report Independent auditors and statutory auditors’ report on the 45 2010 consolidated financial statements
SNIM and Sphere have decided to seek a third partner and a call for tender has been prepared.
SNIM and Sphere have decided to look for a third industrial partner and an invitation to tender has been prepared.
The takeover of Sphère by Xstrata became effective in November 2010.
An exploration programme in the Tintekrate and Bouderga guelbs was decided for 2011 in order to estimate the mineral reserves of these guelbs according to the JORC standard, with a view to better use of the licence.
No significant expenditure was incurred in 2010.
(c) Accounting policy As of December 31, 2009, the stake of SNIM in the joint venture has been valued according to the equity method.
As of December 31,2010, the fair value of SNIM’s participation in the El Aouj joint-venture was determined on the basis of the costs incurred by Sphere on the feasibility study as of December 31, 2009 (MUM 12,280) (cf. 4.3.1 Investments in associates).
Within the framework of this project, SNIM receives assets that correspond to the outlays borne by Sphere in return for an exploration right that was partially valued in the financial statements of SNIM.
Annual Report 46 2010
4 CONSOLIDATION SCOPE The consolidated financial statements comprise the financial statements of SNIM with its Parisian branch, its subsidiaries (all from Mauritania) and investments in associates where SNIM has a significant influence. Consolidated entities comprise 7 companies globally consolidated and two companies consolidated using the equity method. The financial statements of subsidiaries are prepared as of December 31 st , each year.
Legal % right to % of Conso
Form vote interest Method. (1)
SNIM S.A MOTHER
SUBSIDIARIES MAURITANIE SOMASERT S.A 100% 100% IG SAFA S.A 100% 100% IG SAMMA S.A 53% 53% IG ATTM S.A 100% 100% IG COMECA S.A 94% 94% IG SAMIA S.A 50% 50% IG GMM S.A 21% 21% MEE GIP S.A 68% 68% IG EL AOUJ S.A 50% 50% MEE
(1) IG: Global integration MEE: Equity method
Assets held for sale and discontinued operations
The Tino Horizonte Sahel group (THS) entered the capital of GMM on 29 January 2009, resulting in a loss of control by SNIM by 0.1%. SNIM and the THS group entered into a shareholders’ agreement on January 27, 2010 deciding on an increase in the capital of GMM for a total of 1,800,000 American dollars, subscribed solely by the THS group. This operation will result in the Group losing the control of this subsidiary.
Annual Report Independent auditors and statutory auditors’ report on the 47 consolidated financial statements 2010
5 ADDITIONAL INFORMATION RELATING TO THE STATEMENT OF FINANCIAL POSITION
5.1 Property, plant and equipment
Dec.31,200 Additions Disposals Dec.31,201 Assets valued at fair value 9 0
Gross value 187,113 11,301 (1,044) 197,370 Amortization 110,910 6,896 (930) 116,876
NET VALUE 76,203 4,405 (114) 80,495
Dec.31,200 Dec.31,201 Assets valued at cost Acquisitions Cessions 9 0
Gross value 167,678 16,344 (3,542) 180,480 Amortization 81,673 9,872 (3,142) 88,403
NET VALUE 86,005 6,472 (400) 92,077
TOTAL GROSS VALUE 354,791 27,645 (4,586) 377,850
TOTAL AMORTIZATION 192,583 16,768 (4,072) 205,279
FIXED ASSETS IN PROGRESS 44,441 67,905 (25,877) 86,469
TOTAL NET VALUE 206,649 78,781 (26,391) 259,040
During the year, SNIM purchased a total of MUM 67,905 of tangible assets.
Investments mainly concern:
Project Guelbs II 20 965 MUM New mineral seaport 13 828 MUM The railway 7,448 MUM, Mining equipment 5 105 MUM, Modernisation of the Zouerate electricity networks for MUM 2,884 Modernisation of track maintenance MUM 805 New Training Center for MUM 757
We did not identify any losses in fair value during the year.
There is no pledging of SNIM’s tangible assets.
Annual Report 48 2010
Incorporated loan costs
The loan costs incorporated into the cost of assets for the year are as follows:
In million Ouguiyas Guelb2 Mineral Seaport Total Incorporated loan costs 588 324 912
Finance leases
The gross book value of finance leases included in assets under construction (see 5.1 Property, plant and equipment) can be presented as follows:
In million Ouguiyas Dec.31,2009 Additions Transfer Dec.31,2010 Renewal of port facilities (part BID) 7,484 201 (7,686) 0 Other Materials Guelbs II (part BID) 4,539 4,539 Railway Materials (part BID) 1,090 1,090 GROSS VALUE 7,484 5,830 (7,686) 5,629
Among these assets under construction regarding Guelbs 2 and railway, MUM 245 have not yet been paid by the BID.
The gross book value of the finance leases included in final assets (see 5.1 Property, plant and equipment) can be presented as follows:
Dec.31,200 In million Ouguiyas Transfer Disposals Dec.31,2010 9 Renouvellement. Equipement. Port (part BID) 0 7,686 7,686 Valeurs brutes 0 7,686 0 7,686
Finance lease obligations :
Minimum lease payments in thousands of USD Dec.31,2010
Due within one year 4,011 From 2 nd to 5th year inclusive 47,303 More than five years 121,128 Less future financial charges (39,720)
Finance leases debt as at end of 2010 132,723
Annual Report Independent auditors and statutory auditors’ report on the 49 2010 consolidated financial statements
5.1.1 Property, plant and equipment at fair value
Tangible assets are valued at their acquisition cost except for the categories of fixed assets that were revalued during financial year 2000. The revalued amounts were confirmed during financial year 2001 by an independent expert, the firm Met-Chem.
Certain classes of assets have been regularly revalued since then, notably during financial year 2006.
The fair value has been determined according to the replacement cost method less accumulated depreciation, as there was no market-based evidence. The replacement cost has been estimated taking the following criteria into consideration:
Value at purchase The technical condition of the equipment The useful life and the age of the equipment.
GROSS VALUE Dec.31,2009 Additions Disposals Dec.31,2010 In million Ouguiyas
Specialized complex installations 117,396 10,948 (1,044) 127,300 Railway rolling stock and railroad track 69,717 353 - 70,070 equipment
TOTAL 187,113 11,301 (1,044) 197,370
DEPRECIATION Dec.31,2009 Increase Reversal Dec.31,2010
Specialized complex installations 78,088 4,492 (930) 81,649 Railway rolling stock and railroad track 32,822 2,404 35,226 equipment
TOTAL 110,910 6,896 (930) 116,876
NET BOOK VALUE Dec.31,2009 Increase Reduction Dec.31,2010
Specialized complex installations 39,308 6,457 (114) 45,651 Railway rolling stock and railroad track 36,895 (2,052) - 34,844 equipment
TOTAL 76,203 4,405 (114) 80,495
Annual Report 50 2010
5.1.2 Property, plant and equipment at historical cost
GROSS VALUE Dec.31,2009 Additions Disposals Dec.31,2010 In million Ouguiyas
Land 234 399 (6) 627 Land improvements 217 8 (22) 203 Buildings 57,899 7,166 (675) 64,390 Operating equipment 97,147 7,960 (2,064) 103,042 Transport equipment 7,836 327 (734) 7,428 Office and IT equipment 2,999 80 (16) 3,063 Office furniture 1,346 405 (24) 1,727
TOTAL 167,678 16,344 (3,542) 180,480
AMORTIZATION Dec.31,2009 Increase Reversal Dec.31,2010
Land 6 - (6) - Land improvements 175 1 (3) 173 Buildings 20,464 2,705 (591) 22,578 Operating equipment 51,631 6,010 (1,831) 55,810 Transport equipment 6,020 809 (641) 6,188 Office and IT equipment 2,596 155 (32) 2,720 Office furniture 764 192 (21) 935
TOTAL 81,658 9,872 (3,126) 88,403
NET VALUE Dec.31,2009 Increase Reduction Dec.31,2010
Land 228 399 (12) 627 Land improvements 41 8 (26) 30 Buildings 37,435 4,461 (84) 41,812 Operating equipment 45,516 1,949 (233) 47,232 Transport equipment 1,816 (482) (93) 1,241 Office and IT equipment 403 (76) 16 343 Office furniture 581 213 (3) 792
TOTAL 86,020 6,472 (435) 92,077
The gross values of the fully depreciated tangible assets, which are still in use as of Dec.31,2010, are given in the board below:
Designation Gross Value In million Ouguiyas 2010 2009 Buildings 9,934 9,769 Railway rolling stock and railroad track equipment 8,691 8,555 Specialized complex installations 49,942 48,343 Operating equipment 24,659 23,588 Transport equipment 2,810 2,914 Other tangible assets 2,361 323 Total 98,398 93,491
Annual Report Independent auditors and statutory auditors’ report on the 51 consolidated financial statements 2010
5.2 Intangible assets
Variation in Intangible gross fixed Dec.31,2009 Additions Disposals Dec.31,2010 assets
Intangible fixed assets value 1,680 2,634 (117) 4,196
TOTAL 1,680 2,634 (117) 4,196
Change in amortization Dec.31,2009 Increase Reversal Dec.31,2010
Intangible fixed assets value 1,309 133 (110) 1,332
TOTAL 1,309 133 (110) 1,332
Net Value of intangible fixed assets 370 2,501 (7) 2,864
Intangible assets relate to patents and software.
5.3 Other financial assets
In million Ouguiyas Dec.31,2010 Dec.31,2009
Loans to employees 1,475 1,066 Deposits and guarantee 38 34 Equity security 10 10 Investment in associates 14,511 6,151
TOTAL 16,033 7,261
Investment in associates concerns: SNIM’s 50% holding in El Aouj for MUM 12,283 The holding in Mauritania Air Lines for MUM 1,500 The holding in Damane Assurance for MUM 720.
Loans granted to employees do not bear interest. The impact of discounting is deemed insignificant, so loans and guarantees are accounted for at their historical amount.
Deposits and guarantees are valued on the basis of the amount of outgoing cash, which does not result in a significant gap compared to their faire value.
Annual Report 52 2010
5.4 Inventories
Inventories are valued at the lower of cost and net realizable value.
In million Ouguiyas Dec.31,2010 Dec.31,2009
Raw materials at cost 47,375 41,764 Raw materials at net realizable value 24,588 21,652 Iron ore at cost 24,886 20,894 Iron ore at net realizable value 25,646 21,832 Total inventories at the lower of cost and net realizable value 50,234 43,484
The increase in raw materials inventories is mainly due to the increase in spare parts inventories for MUM 3,331 directly related to the purchase of new machinery, the increase in explosive inventories for MUM 1,707 linked to unachieved earthworks targets (91% of earthworks budget) and diesel inventories for MUM 890 (essentially a price effect).
The company does not pledge inventories.
5.5 Trade receivables
In million Ouguiyas Dec.31,2010 Dec.31,2009
Iron ore trade receivables 45,426 14,483 Other trade receivables 11,367 9,516
Total 56,793 24,000
There is no credit risk on iron ore customers. An analysis of this risk is regularly performed on other customers in order to identify potential provisions. Provisions amount to MUM 462 as of December 31, 2010 (MUM 180 as of December 31, 2009).
The statement of changes in loans and receivables is presented below:
In million Ouguiyas Dec.31,2010 Dec.31,2009
Depreciation as of January 1st 180 167 Revaluation of foreign exchange Additional depreciation 282 13 Utilizations 0 0 Reversals 0 0 Depreciation as of December 31st 462 180 Debt collection on depreciated receivables 0 0 Gross value of depreciated receivables 462 180
Annual Report Independent auditors and statutory auditors’ report on the 53 consolidated financial statements 2010
5.6 Other receivables
In million Ouguiyas Dec.31,2010 Dec.31,2009
Trade payables – debit balances 2,688, 811, Trustee 2,581, 2,411, Tax receivables 11,803, 3,479, Deferred expenses 1,828, 1,724, Sundry debtors 899, 715,
TOTAL 19,798, 9,141,
Trade payable –debit balances relate to advance. Trustee fund is directly powered by the bank when clients' payment occurred. This account is automatically generated through collection of customer receivables. These amounts are dedicated to the repayment of loans within the scope of the trustee agreement. Tax receivables relate to the VAT receivable. Deferred expenses consist of prepayments. Sundry debtors are mainly composite of staff advance, social credits and other debtors.
5.7 Financial instruments: disclosure
5.7.1 Financial instruments presented in the statement of financial position
As of December 31, 2010, financial instruments recorded in the statement of financial position are presented as follows:
Breakdown by classes of instruments Financial Value in Fair Available- liabilities statement value Held-to- Fair for-sale Loans and measured In million Ouguiyas of through maturity value financial receivables at financial profit investments assets amortized position and loss costs Other financial fixed 1,269 1,269 50 1219 assets Trade receivables and 47,344 47,344 47,344 related accounts Other receivables and 14,599 14,599 14,599 related accounts Cash and cash 138,539 138,539 75,423 63,116 equivalents Assets 201,752 201,752 75,423 0 63,166 63,162 0 Interest bearing loans 79,195 79,195 and borrowings Trade payables 23,798 23,798 Other payables 6,822 6,822 Liabilities 109,816 0 0 0 0 30,621 79,195
The fair value of other financial instruments (loans and deposits), trade receivables and other receivables was not deemed significant and these items are therefore valued at amortized cost.
Annual Report 54 2010
The fair value of the trade receivables, other receivables, trade payables and other payables was not deemed significant and these items are therefore valued at amortized cost discounted at closing market price in the transaction currency. Taking into account SNIM’s economic environment (lack of market data required to determine a yield curve in order to estimate the market value of loans and borrowings at preferential rates), borrowings and loans are valued at amortized cost.
5.7.2 Derivative financial instruments
Foreign currency risk As of December 31, 2010, financial instruments on exchange rates available at closing date are detailed below:
Hedging accounting 2010 2009 Fair Fair Fair Fair value value value value in in Nominal in in Nominal MUM KUSD MUM KUSD
Acquisition Acquisition Selling Selling price price price price Foreign currency risk a) Cash flow hedging Forward contracts in foreign currency Euro 819 2,911 105,283 (46) (178) 24,298 JPY (4) (15) 60,000 CHF - - - - CAD 13 47 3,750 Options on foreign currency - - 0 Euro 286 1,017 112,950 102,950 (28) (107) 18,000 22,000 JPY - - - - CHF - - - - CAD 20 70 4,750 4,750 b) Fair value hedging - - - - Forward contracts in foreign - - - - currency Euro 98 347 11,500 (105) (401) 8,600 Options on foreign currency - - Euro 67 240 5,000 27 102 4,000 c) Other operations - - Options on foreign currency - - Euro (535) (1,902) 5,000 54,700 (162) (620) 9,000 22,700 JPY - - - - CHF - - - - CAD (4) (13) 2,250 Total foreign currency 764 2,717 (319) (1,219)
Annual Report Independent auditors and statutory auditors’ report on the 55 consolidated financial statements 2010
Commodity price risk As of December 31, 2010, financial instruments on commodity price risk at closing date are detailed here below:
Hedging accounting 2010 2009 Fair Fair Fair Fair value value value value Nominal Nominal in in in in MUM KUSD MUM KUSD Acquisitions Selling Acquisitions Selling
price price price price , , , , Commodity price risk , , , , a) Cash Flow Hedging , , , , Swaps on commodities Fuel 32 113 1,450 (0) (2) 1,500 - Diesel oil 175 623 1,750 25 96 1,200 - Others - - Options on commodities - - Fuel 32 115 1,050 1,050 58 221 1,100 1,100 Diesel oil 130 461 1,100 1,100 57 218 1,300 1,300 Others - - b) Other operations - - Options on commodities - - Fuel (5) (16) 550 (56) (215) - 1,150 Diesel oil (13) (45) 650 (38) (146) - 950 Others - - Total commodities 352 1,250 45 173
Annual Report 56 2010
Interest rate risk As of December 31, 2010, interest rate risks at closing date are detailed below:
Hedging accounting 2010 2009 Fair Nominal in Nominal in Fair Fair value foreign Fair foreign value value in in currencies value in currencies in MUM KUSD (thousands) KUSD (thousands) MUM Bought Sold Interest rate risk , , , , a) Cash flow hedging Interest rate swaps EUR (140) (499) 61,000 - - JPY ------CHF ------Interest rate options Euro 106 375 40,000 20,000 - - JPY ------CHF ------b) Other transactions EUR (143) (507)- - - - - JPY ------CHF ------Total interest rate (177) (630) 101,000 20,000 - - - - Total 939 3,337 (274) (1,046)
As of December 31st 2010, financial instruments on interest rate risk are presented here below:
Transfer from equity of Inefficiency booked in Cash Flow Hedging gains and losses profit
Foreign currency hedging (473,156) USD (1,131,428) USD Interest rate hedging 145,936 USD Commodities hedging 104,674 USD 190,183 USD
Gains and losses on Gains and losses on Inefficiency Fair Value Hedging hedging instruments hedged items booked in profit
Foreign currency hedging 491,985 USD 421,500 USD (70,485) USD
Interest rate hedging
Commodities hedging
Annual Report Independent auditors and statutory auditors’ report on the 57 consolidated financial statements 2010
Hedging policy The iron ore market is denominated in dollars. Consequently SNIM’s entire sales are realized in dollars.
The Mauritanian regulation for exchange transactions forbids hedging the exposure of foreign currency risk on local currency.
Thus SNIM is exposed to foreign currency risk on the dollar for operating expenses denominated in a third currency (imports of Euros, CAD versus dollars for instance). In order to finance its development, SNIM contracted loans denominated in dollars, in Euros and in yen toward international sponsors.
According the evolution of the dollar versus these currencies, part of the cash collection will be allocated to financial debt. Consequently SNIM is exposed to foreign currency risk in dollars for its entire debt denominated in a third currency.
The company set its policy for risk exposure and in particular its level of tolerance toward these risks. Procedures to evaluate the company’s exposure to foreign currency risks were implemented. These procedures were approved by the head office and are reviewed annually.
The company binds itself to manage hedges with first-rate banks (Société Générale, BNP Paribas, Natixis…).
Foreign currency risk SNIM’s policy for managing its exposure to foreign currency risk consists in hedging foreign currency risk on firm and estimated purchasing commitments denominated in foreign currencies. Financial instruments that have been negotiated have a lifetime corresponding to that of firm or estimated operations. Usually financial instruments’ maturities do not exceed one year.
To reach its hedging objectives, the company resorts to forward purchasing contracts or option sales on currency contracts. Usually option sales contracts are part of an overall hedging strategy (tunnel). Derivative financial instruments are negotiated by mutual agreement with first-rated financial institutions.
The analysis of sensitivity of profit before tax (due to variation of monetary assets and liabilities' faire value) and equity (linked to variation in forward contracts' fair value) is based on two assumptions: that the euro exchange rate is changing within reason and that all other variables remain stable. The conclusion of our analysis appears below:
Variatio Impact on Impact on In USD n in Euro profit equity before tax 2010 10% 1,775,753 27,998,201 (24,405,82 -10% (5,708,280) 2)
Dollar = 281,3 Ouguiya
Annual Report 58 2010
Commodity price risk The company is exposed to the commodity price risk on firm and estimated operational transactions.
SNIM’s policy is to hedge against exposure to these risks. In order to reach its hedging objectives, the company resorts to purchase and selling contracts on commodity options or on swap contracts. Some selling contracts are part of a global hedging strategy.
Management of this risk is spread over less than a year.
The analysis of the sensitivity of SNIM’s profit before tax (due to variations in the fair value of the monetary assets and liabilities) and equity (linked to variations in the fair value of the swaps) is based on two assumptions: that the raw material prices change within reason and that all other variables remain stable.
In USD Variation Impact on on profit Impact on commoditi before equity es tax 2010 10% 212,118, 2,365,830, (476,414) (2,001,649) -10% , ,
Interest rate risk Under various agreements signed with third parties, the company is obliged to retain collateral as a guarantee for certain financial operations. This collateral is invested in banks at variable rates (Libor). The company is thus exposed to the risk of lowering interest rates on these investments.
The company’s policy is to hedge against risks related to variations in interest rates subject to review, on financial investments.
In order to reach its hedging objectives, the company resorts to interest-rate derivative instruments, signs interest swaps and conditional financial instruments such as caps, floors and collars.
In order to limit the effect of the dollar rate on its financial instruments, SNIM decided to implement a hedging policy, aimed at guaranteeing a minimum income rate.
The analysis of the sensitivity of SNIM’s profit before tax (due to variations in the fair value of the monetary assets and liabilities) and equity (linked to variations in the fair value of the swaps) is based on two assumptions: that the interest rates change within reason and that all other variables remain stable.
Impact on Variation profit Impact on In USD on rate before tax equity 5% (8 049) 2 150 567 2010 -5% (312 155) (1 076 366)
Credit risk SNIM maintains commercial relations exclusively with reliable third parties. Most of the client portfolio is constituted by iron ore customers whose terms of payments require a 90% advance at order and the remaining 10% within 24 days after delivery. Thus, for those clients, there exists no risk of credit.
Annual Report Independent auditors and statutory auditors’ report on the 59 2010 consolidated financial statements
For the other customer, trade receivables are not material and a credit risk analysis is performed regularly. The maximum exposure is mentioned in Note 5.5 .
Regarding the credit risk on other financial assets of the Group, i.e., cash and cash equivalents, financial assets available for sale, loans and certain derivative instruments, the Group' exposure is due to a potential failure of the third party. The maximum exposure does not exceed the accounting value of those instruments
Liquidity risk SNIM controls its liquidity risk based on a projected financial investment maturity and an estimated cash flow generated by operational activities. 76% of borrowings have been placed within the scope of the trustee in order to decrease the liquidity risk. This system consists in withholding a part of the monthly sales, until the six months maturity has been reached. The amount withheld cannot be used for anything other than debt redemption.
As of December 31, 2010, 8% of the debt will mature within one year, as compared to 12% in 2009.
Maturity The table below shows the maturity of the financial liabilities as of December 31, 2010, based on contractual payments not discounted.
The principal considers only the debt actually drawn by the Group SNIM as of December 31, 2010.
Similarly, interest expenses reflect the interests of the Group's debt SNIM totally drawn as of December 31, 2010.
Therefore, future withdrawals of the debt of PDM and corresponding interest expenses are not taken into account in the preparation of this table of maturity.
Less than three months 3 to 12 months In million Ouguiyas cash flow cash flow Principal Interest Principal Interest total total Interest-bearing borrowings 806 91 897 7,953 1,532 9,485 1 to 5 years More than 5 years cash flow cash flow Principal Interest Principal Interest total total Interest-bearing borrowings 55,038 8,008 63,046 19,971 1,527 21,498
Annual Report 60 2010
5.8 Cash and cash equivalents
In million Ouguiyas Dec.31,2010 Dec.31,2009
Cash 144,220 50,119 Cash equivalents (569) (3,389)
TOTAL 143,651 46,730
Cash and cash equivalents comprise cash at bank and cash in hand.
Cash equivalents are short-term deposits with an original maturity of less than three months, liquid and immediately convertible.
Bank loans and overdrafts include loans with an original maturity of less than three months.
5.9 Issued Capital
The company’s issued capital as of December 31, 2010 amounts to 12,180,000,000, i e. 1,218,000 shares, each with a nominal value of 10,000 Ouguiyas. The capital is called up and paid up in full.
Capital does not comprise any share with favorable voting right. Share capital can be broken down as follows: (Ouguiya) (%) Mauritanian government: 9,543,030,000 78,35% Industrial Bank of Kuwait: 873,200,000 7,17% Arab Mining Company: 689,790,000 5,66% Iraq Fund for External Development: 558,820,000 4,59% "Office National des Hydrocarbures et des Mines 279,500,000 2,30% (ONHYM - Maroc) Banque Islamique de Développement: 218,300,000 1,79% Private Mauritanian Individuals 17,360,000 0,14% Total: 12,180,000,000 100,00%
Premiums arising from shares issuance relate to previous capital increases and amount to MUM 6,477.
The legal reserve is valued with a 5% rate of annual benefits until it reaches 10% of issued capital.
As of December 31, 2010, the legal reserve amounts to MUM 1,218.
5.10 Interests bearing borrowings
5.10.1 Loans within the scope of the trustee agreement
These loans are covered by a trust agreement signed on July 7, 1980 between the company, sponsors, the government of the Islamic Republic of Mauritania, the Société Générale bank (to encourage the development of trade and industry in France) and the Law Debenture Trust Corporation. According to this agreement the latter was appointed as “Trustee”, and regular credit transfers to the trust account would serve to make the half-yearly repayments to the sponsors.
Furthermore, another agreement was concluded on July 7, 1980 between the company, sponsors, Mauritania Central bank and the Society General bank. Under this agreement, through which a debit account would be opened with the Society General to receive all cash from sales of ore, the
Annual Report Independent auditors and statutory auditors’ report on the 61 consolidated financial statements 2010
Society General would make the necessary transfers to the "Trustee" to enable the latter to meet the provisions stipulated in the Trust Agreement referred to above.
The balance of the trust account as of December 31, 2010 amounts to MUM 2,581 (MUM 2,411 as of December 31, 2009). It is classified as sundry receivables.
Interest In million Ouguiyas Currency Maturity Dec.31,2010 Dec.31,2009 rate Loans within the scope of the trustee agreement Agence Française de Développement Emprunt n°. 70X EUR 5,00% 2019 163 184 Emprunt n°. 90U EUR 2,00% 2020 600 671 Banque Européenne d'Investissement EUR 3,00% 2010 - 469 (TO14) BEI 6 EUR 3,07% 2015 4,992 5,485 BAD 2002 USD Var. 2016 4,624 5,077 AFD (Centrale) EUR Var. 2019 7,352 7,590 AFD (Centre de formation) EUR Var. 2021 1,293 1,307 BEI VII (Centrale) EUR 6,90% 2019 7,252 7,263 BID PORT USD Var. 2023 6,954 6,917 PDM VOIE BID USD Var. 2024 871 GUELBES II BEI USD 6,03% 2024 3,736 BAD USD Var. 2024 6,582 AFD USD Var. 2024 3,700 BID USD Var. 2024 4,513 PORT KFW NP1 USD Var. 2022 6,664 KFW NP2 USD Var. 2022 600 Sub-total 59,897 34,963
Annual Report 62 2010
5.10.2 Loans outside the scope of the trustee agreement
These loans are related to mining projects that are not included in the trustee agreement. Repayments are made directly to lenders.
Curre Interest In million Ouguiyas Maturity Dec.31,2010 Dec.31,2009 ncy rate Loans outside the scope of the trustee European Investment bank Loan (SAFA) EUR 3,00% 2013 141,4 188 Loan (ATTM) EUR 6,68% 2011 0 211 Islamic development bank USD 0,00% 2009 228 215 African development bank USD Var. 2011 1 346 Banque Marocaine pour le Commerce Extérieur (ATTM) EUR 4,30% 2012 3 431 Société Générale de Mauritanie (ATTM) MRO 10,40% 2015 1000 Premium payable USD 2 015 78 Total 4 878 1 960
Statement of Financing Agreements for the PDM (Development and Modernization Program)
Total Drawn Not drawn Curre Interest Project Lender Maturity Millions Millions Millions ncy rate MRO MRO MRO Guelbs II AFD EUR Var 2024 27,707 3,694 24,012 BEI EUR Fixe 2024 27,707 3,694 24,012 BAD USD Var 2024 49,228 6,582 42,645 BID USD Var 2023 22,504 4,513 17,991 Banques commerciales (tranche 1) EUR Var 2022 20,688 - 20,688 Banques commerciales (tranche 2) EUR Var 2022 14,777 - 14,777 Banques commerciales Port (tranche 1) EUR Var 2022 12,930 595 12,335 Banques commerciales (tranche 2) EUR Var 2022 14,777 6,650 8,127 Voie BID USD Var 2025 7,876 871 7,005 Total 198,192 26,599 171,592
5.10.3 Rescheduled debts
In the context of the 8th club of Paris gathered on July 8, 2002, and following the bilateral agreement between the government of the French Republic and the government of Islamic Republic of Mauritania signed on May 26, 2003, the French debt that was rescheduled during agreement III, IV, V and VI, was cancelled to the benefit of the Mauritanian Islamic Republic. A treaty signed on August 21, 2003 adjusted the rescheduled debt between SNIM and Ministry of Finance and defined methods of payments initially due by SNIM to the Banque de France and the Coface.
Total amount of this treaty (Agreement 8) is EUR 15,235,989.75, which represents interests accumulated from 06/30/2002 to 06/30/2019 for agreement III, IV, V and VI, EUR 12,763,021.30 representing the principal amount and EUR 2,472,968.44 of interests. The outstanding balance of this agreement amounts to MUM 3,016 as of December 31, 2010 compared to MUM 3,289 as of December 31, 2009. Annual Report Independent auditors and statutory auditors’ report on the 63 2010 consolidated financial statements
Interes In million Ouguiyas Currency Maturity Dec.31,2010 Dec.31,2009 t rate Rescheduled debts
Abu Dhabi Fund for Arab Economic 1989 - 104 Development OECF rescheduling French debt due dates rescheduled Agreement 8 EUR 3,00% 2019 3,016 3,289
Sub-total 3,016 3,394
5.10.4 Reassigned debt
In the context of SYSMIN, the European Union granted the Mauritanian Islamic Republic 58 million Euros under Agreement No 5546/MAU signed on October 23, 1995. The agreement provides for the reassignment of the grant as a loan for the rehabilitation of some of its industrial facilities. Consequently a three-party agreement was signed between SNIM, the Mauritanian Government and the European Union in order to define the terms of the reassignment as a non-repayable grant (equal to the amount allocated to technical assistance – 0.8 million Euros) and a repayable loan of 57,2 million Euros. The total amount of drawings increased to MUM 7,259 as of December 31, 2010 compared to MUM 8,984 as of December 31, 2009.
In most of the above-mentioned loan agreements, the Company had undertaken to comply with certain conditions, such as the repayment of the amounts due at maturity, the distribution of dividends being subject to certain conditions, and the maintaining of the debt and debt service ratios.
In the event of failure to comply with any of these conditions, lenders could stop fund drawings and demand immediate repayment of the loans.
Interest Currency Maturity Dec.31,2010 Dec.31,2009 rate Reassigned debt Saudi Fund for Development SAR 1,00% 2039 653 627 European Economic Community ( Sysmin 1) EUR 0,50% 2028 4,000 4,265 African fund for Development UCB 0,75% 2038 4,065 3,911 European Economic Community EUR 3,00% 2015 7,259 8,984 (Sysmin II)- (N° 5546) Sub-total 15,977 17,787
TOTAL LOANS 83,769 58,104
Loans maturing in less than one year 6,223 7,045 Long and mid terms loans 75,010 51,012
Loans maturing in less than one year comprise the part of loans that will be paid within the twelve coming months.
Annual Report 64 2010
5.11 Retirement benefit obligation
In million Ouguiyas Dec.31,2009 Increase Reversal Dec.31,2010
Provisions for retirement indemnities 6,969 753 490 7,232 Provisions for additional retirement 6,751 6,751 TOTAL 6,969 7,504 490 13,983
Description of the plan A benefit is being provided to employees as they retire, which depends on:
The wage amount at the age of retirement The employee length of service in the company
Note that this benefit is provided without any condition of presence of the employee at retirement date.
Actuarial assumptions The benefit obligation amount is determined according to the projected unit credit actuarial valuation method. This method consists in valuing the benefit according to the projected salary at the end of the employee’s career and to the eligible amount at valuation date. The following assumptions were used:
Assumptions
Age of retirement 60 ans Future salary increase 4,16% Actual rate of return 8,43% Death rate TM 60-64 – 20% Employee rotation rate 3,87%
The accrual basis held to recognize actuarial gains and losses is the “corridor rule”. Dec.31,2010 Dec.31,2011
Beginning of the period 01-janv-10 01-janv-11 End of the period 31-déc-10 31-déc-11 Actual rate of return 8,43% 8,43% Future pension increase 8,43% 8,43% Actual rate of return on assets NA NA Expected average remaining working lives 6 ans 6 ans
Annual Report Independent auditors and statutory auditors’ report on the 65 2010 consolidated financial statements
Variation in benefit obligation
In million Ouguiyas Dec.31,2010 Dec.31,2011
Benefit obligation at January 01, 2009 4,613 7,409 Current service cost 276 (57) Interest cost 506 625 Employee contribution 0 0 Plan modification 0 0 Acquisition /Sale 0 0 Reductions / Cessations 0 0 Actuarial gains / losses 2,474 0 Past service cost (460) (268) Other 0 0
Benefit obligation 7,409 7,708
Variations in investments
The benefits defined by SNIM are not covered by investments.
Financial cover In million Ouguiyas Dec.31,2010 Dec.31,2011
Financial cover (7,409) (7,708) Corridor 741 771 Actuarial loss (170) (171) Amount of actuarial loss to be amortized 599 628 Amortization of actuarial loss on the period (28) (29)
Provision 6,809 7,080
Actuarial cost for year 2010 In million Ouguiyas Dec.31,2010 Dec.31,2011
Current service cost 276 (57) Financial cost 506 625 Actual rate of assets 0 0 Amortization of actuarial loss in the period (28) (29) Amortization of actuarial loss on the period 0 0 Impact of reduction / cessation 0 0
Total Cost 753 539
Benefits paid (460) (268)
Total Cost 293 271
Annual Report 66 2010
Description of the defined benefit regime
SNIM agents of Mauritanian nationality on permanent contracts in force after 2010 receive an indemnity upon retirement, death or redundancy at the initiative of the company, which is equal to one hundred twentieths: The10% employer contribution and the 7% employee contribution based on the reference salary The income from the investment of the employer and employee contributions The prior service cost borne by SNIM (10% of the 2010 reference salary) The reference salary is the base salary plus the seniority bonus
In other cases, only the employee contributions and the income from the investment of the employee contributions are paid to the employee.
Actuarial assumptions The charge has been determined according to the following assumptions: Subscription of all the employees No social charge due in respect of the supplementary pension Convergence of the rates over 20 years to 5% is taken into account, i.e. a risk premium of 3% compared to inflation No guaranteed rate of return The revaluation rate corresponds to the financial rate of return which is equal to 9%.
5.12 Other Provisions
These provisions cover risks of litigation with former employees and any other contentious matter. These provisions are not discounted as the impact is insignificant.
In million Ouguiyas Dec.31,2009 Increase Reversal Dec.31,2010
Contingency provision 275 757 504 528
TOTAL 275 757 504 528
5.13 Trade payables
Trade payables can be broken down as follows:
In million Ouguiyas Dec.31,2010 Dec.31,2009
Trade payables 25,498 19,351 Accrued payables 1,474 253 Notes payable
TOTAL 26,972 19,604
There is no discounted payable as of December 31, 2010.
Annual Report Independent auditors and statutory auditors’ report on the 67 consolidated financial statements 2010
5.14 State and other public taxes
In million Ouguiyas Dec.31,2010 Dec.31,2009
Income tax payment 12,922 5,652 Taxes on wages and salaries 228 186
TOTAL 13,150 5,839
An agreement was signed on December 23, 1998 between the Mauritanian Government – represented by the Ministry of Finance and the Ministry of Industry and Mines - and the company, for a period of 20 years starting on January 1, 1999. This agreement ensures SNIM’s autonomy for management and importation.
The single tax on income comprises all taxes payable on the fiscal-year net income. In accordance with the agreement signed with the Mauritanian Republic, SNIM is liable for the single tax on income and pays an annual amount corresponding to 9% of total iron ore exports.
An amendment to the agreement was signed in December 2008 concerning the basis of assessment of the single tax on income.
Under this amendment, the single tax is 9% of FOB iron ore export sales, plus demurrage.
The single tax has significantly increased due to the augmentation of sales
There is no need to book any deferred taxes as there is no difference between the accounting values and fiscal values of assets and liabilities in the statement of financial position.
SNIM also pays a fixed annual amount of MUM 80 representing the total tax for compensation of taxes and benefits in kind granted by SNIM to its personnel.
Given that the settlement dates for the single tax on income tax and VAT receivables are close, that these amounts are paid and received by the same administration and that offsetting is legally authorized, only the net amount is presented.
5.15 Other taxes
In million Ouguiyas Dec.31,2010 Dec.31,2009
VAT payable 792 632 Other taxes 498 631
TOTAL 1,290 1,264
SNIM is exempted from all customs duty and assimilates taxes of all kind related to goods, equipment, services, and exploration of sources of ore and water by the convention signed with Mauritanian government. SNIM is also exempted from all customs and assimilated taxes on materials, consumables and goods imported by companies and subcontractors, which are dedicated to SNIM.
Clause N°1 was added to this convention on June 19, 2001 concerning VAT and subjugation of SNIM to this tax. Consequently SNIM is subject to VAT on goods and services that are not in correlation with industrial and mining exploitation.
Annual Report 68 2010
5.16 Other payables
In million Ouguiyas Dec.31,2010 Dec.31,2009
Trade creditors 5,027 3,989 Payroll expenses and related costs 2,086 1,792 Dividends payable 24 22 Sundry creditors and pre-payments 2,530 1,220
TOTAL 9,668 7,023
Other creditors mainly include accrued amounts payable, with accrued interest.
6
Annual Report Independent auditors and statutory auditors’ report on the 69 consolidated financial statements 2010
ADDITIONAL INFORMATION RELATING TO THE INCOME STATEMENT
6.1 Sales
Production sales represent sales of iron ore in the amount of MUM 303,522 (1,092,632.586 American dollars) for financial year 2010 (net of demurrage). Almost all sales of iron ore are to Western European countries and China. 58% of total sales for financial year are generated by three customers.
6.1.1 Sector-based information
Geographical zones are the following:
In million Ouguiyas Dec.31,2010 Dec.31,2009
China 130,028 68,841 France 48,769 19,534 Germany 39,883 19,466 Others 39,191 12,904 Italy 38,949 26,915 Belgium 18,226 1,213 Spain 4,397 667 England 397
TOTAL 319,443 149,937
6.2 Other income
In million Ouguiyas Dec.31,2010 Dec.31,2009
Rents, material disposal, telecom 148 95 Rentals of buildings and equipment 99 127 Other services 2,015 1,266 Supply of personnel 23 Disposals 630 660
TOTAL 2,915 2,147 The increase of other services is related to the sales of iron.
6.3 Other operating income
In million Ouguiyas Dec.31,2010 Dec.31,2009
Discount obtained 109 52 Profit and gains 1,038 351 Reversal of provisions (294) 15 Profit on disposals 49 1
TOTAL 901 419 The increase in sundry income corresponds to the penalty for late delivery received from Sandvik Mining & Construction.
Annual Report 70 2010
6.4 Consumables
In million Ouguiyas Dec.31,2010 Dec.31,2009
Consumables used (64,448) (56,538) Maintenance products (725) (586) Supplies (552) (600) Water and electricity (101) (97) Material (8) (8)
TOTAL (65,833) (57,830)
The increase in consumables mainly applies to diesel (MUM 3,168), fuel (MUM2,268), machinery spare parts (MUM 819) and wheels (MUM 518) in line with the increase in business (loading 7%, crushing 5%) and the increase in the price of hydrocarbons.
6.5 Staff Costs
In million Ouguiyas Dec.31,2010 Dec.31,2009
Wages (18,568) (16,475) Social charges (2,047) (1,761) Provision for retirement indemnities (263) 177 (6,751) - TOTAL (27,629) (18,059)
The increase in personnel costs is related to the booking of supplementary pension in respect of past services in the amount of MUM 6,751 and to the increase in salaries in the amount of MUM 1,933 including MUM 1,619 corresponding to a bonus of 2.5 months of salary per employee at SNIM.
Changes in the average workforce are as follows:
Dec.31,2010 Dec.31,2009
Executives 363 335 Supervisory staff 2 710 2 592 Workers 2 193 2 285
TOTAL 5 266 5 212
The average workforce is calculated on the basis of the number of employees working for the company at the end of each month.
6.6 Depreciation, amortization and provision expenses
In million Ouguiyas Dec.31,2010 Dec.31,2009
Depreciation of property, plant and equipment (16,286) (15,794) Amortization of intangible assets (49) (129) Allocation to provision for contingency and retirement (273) (1) Other depreciation (4,049) (6,595)
TOTAL (20,656) (22,519)
Annual Report Independent auditors and statutory auditors’ report on the 71 consolidated financial statements 2010
6.7 Taxes
In million Ouguiyas Dec.31,2010 Dec.31,2009
Tax on benefit (80) 144 Taxes (464) (471)
TOTAL (544) (328)
6.8 Other operating expenses
Other operating expenses can be broken down as follows:
In million Ouguiyas Dec.31,2010 Dec.31,2009
Expenses related to investment (13,352) (10,155) Expenses related to operations (3,450) (3,254) Other (5,768) (1,717)
TOTAL (22,570) (15,127)
Expenses related to investment mainly concern travel, insurance and expenses for research and services. Expenses related to activity mainly concern travel, commissions and fees.
The increase in other expenses corresponds to the subsidies granted to the SNIM Foundation (income from sales of scrap metal and its operating budget).
6.9 Financial income
Financial income can be broken down as follows:
In million Ouguiyas Dec.31,2010 Dec.31,2009
Interest and related income 1,302 2,145 Income on financial instrument 1,072 1,996 Foreign exchange gain 12,545 8,682 Other financial income 1,542 917
TOTAL 16,462 13,739
Financial income has been mainly generated by foreign exchange gains. The latter is broken down as follows:
In million Ouguiyas Dec.31,2010 Dec.31,2009
Unrealized exchange gains 313 22 Other exchange gains 12,232 8,660
TOTAL 12,545 8,682
The increase in other exchange gains mainly corresponds to the revaluation of foreign currency cash accounts at the 2010 financial year closing rate.
Annual Report 72 2010
6.10 Financial expenses
Finance costs can be broken down as follows:
In million Ouguiyas Dec.31,2010 Dec.31,2009
Interest and related charges (2,223) (2,091) Foreign exchange losses (18,353) (10,003) Charges on financial instruments (1,309) (761) Other financial charges (1,105) (962)
TOTAL (22,990) (13,817)
The increase in financial charges is mainly due to the exchange loss related to the revaluation of the cash accounts and debt stock at the closing rate.
These exchange losses can be broken down as follows:
In million Ouguiyas Dec.31,2010 Dec.31,2009
Unrealized exchange losses (3,077) (306) Other exchange losses (15,276) (9,697)
TOTAL (18,353) (10,003)
Annual Report Independent auditors and statutory auditors’ report on the 73 consolidated financial statements 2010
7 ADDITIONAL INFORMATION RELATED TO THE STATEMENT OF CASH FLOWS
7.1 Amortization and depreciation restatement
In million Ouguiyas Dec.31,2010 Dec.31,2009
Property, plant and equipment amortization 17,229 15,960 Intangible assets amortization 133 162 Allocation to provision for contingency and retirement 7,318 742 Loss of tangible assets 396 93 TOTAL 25,076 16,957
7.2 Working capital needs
In million Ouguiyas Dec.31,2010 Dec.31,2009
Decrease (Increase) in inventories (6,750) 3,921 Decrease (Increase) in trade receivables (32,793) (3,510) Decrease (Increase ) in other receivables (9,653) 1,264 Increase (Decrease) in trade payables 6,383 (2,357) Increase (Decrease) in tax payables 67 (1,363) Increase (Decrease) in other payables 2,623 3,104 Variation des actifs destinés à la vente (34) CHANGES IN WORKING CAPITAL NEEDS (40,157) 1,059
7.3 Disbursements related to fixed asset acquisitions
In million Ouguiyas Dec.31,2010 Dec.31,2009
Acquisition d'immobilisations corporelles (64,917) (35,683) Acquisition d'actifs incorporels (2,634) (195) Acquisition d'actifs financiers nets (2,504) (408)
TOTAL ACQUISITIONS (70,055) (36,287)
7.4 Reversal of depreciation and provisions
In million Ouguiyas Dec.31,2010 Dec.31,2009
Capitalized production (4,306) (3,975) Reversal of depreciation and provision (2) (239) TOTAL (4,308) (4,214)
Annual Report 74 2010
7.5 Foreign exchange gains/losses
In million Ouguiyas Dec.31,2010 Dec.31,2009
Foreign exchange gains/losses on loans 2,747 301 Nets deferred profits on financial instruments (155) (793)
TOTAL 2,592 (492)
7.6 Cash and cash equivalents
In million Ouguiyas Dec.31,2010 Dec.31,2009
Cash 144,220 50,119 Cash equivalents (569) (3,389)
TOTAL 143,651 46,730
8 OTHER COMMITMENTS AND LIABILITIES
Off balance sheet commitments are broken down as follows:
En millions d'ouguiya Dec.31,2010 Dec.31,2009
Documentary credits in-progress 12,333 5,968 Guarantees received from contractors 4,551 2,527 Run released portion of long-term loans 189,509 204,676
Annual Report Independent auditors and statutory auditors’ report on the 75 2010 consolidated financial statements
9 RELATED PARTY DISCLOSURES
Transactions with related parties are not significant.
They mainly concern disposal of materials and fuel and workshop services.
The following table summarizes the main intragroup services invoiced in 2010 in million Ouguiyas
ATTM COMECA SAMMA SAMIA SOMASERT GMM SAFA GIP SNIM TOTAL
ATTM 4 175 4 175
COMECA 0 1 0 731 732
SAMMA 10 6 10 5 333 364
SAMIA -
SOMASERT 3 5 2 0 3 475 488
GMM -
SAFA 2 9 1 334 1 345
GIP 64 64
SNIM 164 55 22 7 74 94 6 424
TOTAL 180 75 25 8 74 11 103 6 7 111 7 592
Information relating to remuneration of subsidiaries directors are not disclosed for purposes of confidentiality.
10 EVENTS AFTER THE REPORTING PERIOD
Appointment of a new Chairman of the Board of Directors:
Mr Mohamed Abdellahi Ould Oudaâ was appointed on February 28, 2011 to replace Mr. Taleb Ould Abdival.
SNIM and THS have agreed on March 23, 2011 to terminate their participation. THS withdrew permanently from the capital of the GMM for the benefit of SNIM and irrevocably waives any claim related to its shareholding in return for financial compensation of which shall be determined later.
No events that have occurred after the reporting period are liable to have a material impact on the financial statements.
Annual Report 76 2010
A.G.O. Resolution (Ordinary General Assembly) N° 1/41 The Ordinary General Assembly appoints as Administrators: - Mr. Mohamed Abdellahi OULD OUDAA, representing Mauritanian State, in place of Mr. Taleb OULD ABDIVALL. - Mr. Brahim Ould Chadhli , representing Mauritanian State, in place of Mr. Amedi Camara - M. Yeslem Ould Hamdane, representing Mauritanian State, in place of Mr. Sidi Mohamed ould Bakha These appointments are valid for a duration of 6 (six) years and will come to end with at the Ordinary General Sssembly ruling on annual accounts 2016.
A.G.O. Resolution N° 2/41 The Ordinary General Assembly, considering departure of Mr. Taleb Ould Abdivall as the Executive Administrator of the Company, ratifies the cooptation by the Board of Directors of the Company, on February 28th, 2011 of Mr. Mohamed Abdellahi OULD OUDAA , as the Executive Administrator of the Company, in place of Mr. Taleb Ould Abdivall . Mr. Mohamed Abdellahi OULD OUDAA already declared to accept the functions which are conferred on him and that he is struck by no incapacity, incompatibility or ban which can hinder this appointment.
A.G.O. Resolution N° 3/41 The Ordinary General Assembly, considering the Report of the Board of Directors and that one of the Statutory Auditor, relating to the consolidated accounts and operations of SNIM Group for the fiscal year 2010, approves these consolidated accounts indicating a net profit of 159 875 millions MRO .
A.G.O. Resolution N° 4/41 The Ordinary General Assembly, considering the Report of the Board of Directors and that one of the Statutory Auditor, relating to the accounts and operations of SNIM for the fiscal year 2010, approves these accounts indicating a net profit of 158 730 millions MRO .
A.G.O. Resolution N° 5/41 The Ordinary General Assembly approves the proposition of the Board of Directors and decides to proceed to the affectation of the profit of the exercise as follows:
• Net profit of the fiscal year 158 730 MUM • Previous balance brought forward 153 765 MUM • Distributable profit 312 495 MUM • Profit to be distributed 55 555 MUM • Balance brought forward 256 940 MUM
The profit to be distributed is divided as follows : - Dividends between shareholders : 39 682 MUM - Contribution of SNIM in national solidarity plan: 15 873 MUM
A.G.O. Resolution N° 6/41 The Ordinary General Assembly decides to allocate to the members of the board of directors, as attendance fees for the fiscal year 2011, the lump sum of 291 million MRO . The Board of Directors will distribute this amount between its members in the proportions which it considers suitable.
A.G.O. Resolution N° 7/41 The Ordinary General Assembly gives whole and definitive discharge of its management to the Board of directors for the fiscal year of its mission during period from January 1st till December 31st, 2010.
Annual Report Resolutions Ordinary General Assembly for 77 2010 the Year 2010
Contents Page Company’s Information − Institutional references 3 − SNIM’s shareholding 3 − Governance of the Company 4 − Board of Directors 5
Message of Board of Directors’ Chairman 6
Stricking facts in 2010 7
Annual Report − World market situation 8 − Production 9 − Sales 11 − Finance 12 − Research 13 − Development and modernization program 14 − Human resources 18 − Purchases and logistics 19 − Environmental management system 20 − General internal audit 20 − Audited statutory accounts 21
Diversification 25
SNIM Foundation 28
Independent auditors and statutory auditors’ report on the consolidated financial statements 29
Resolutions Ordinary General Assembly for the Year 2010 77
Annual Report 78 2010
Annual Report 79 2010
Annual Report 80 2010