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Notes to the financial statements

7. Special items and remeasurements

'Special items' are those items of financial performance that the Group believes should be separately disclosed on the face of the income statement to assist in the understanding of the underlying financial performance achieved by the Group. Such items are material by nature or amount to the year's results and require separate disclosure in accordance with IAS 1 (revised 2007) paragraph 97. Special items that relate to the operating performance of the Group are classified as operating special items and include impairment charges and reversals and other exceptional items, including significant legal provisions. Non-operating special items include profits and losses on disposals of investments and businesses.

'Remeasurements' comprise other items which the Group believes should be reported separately to aid an understanding of the underlying financial performance of the Group. This category includes:

(i)
unrealised gains and losses on 'non-hedge' derivative instruments open at year end (in respect of future transactions) and the reversal of the historical marked to market value of such instruments settled in the year. The full realised gains or losses are recorded in underlying earnings in the same year as the underlying transaction for which such instruments provide an economic, but not formally designated, hedge (if the underlying transaction is recorded in the balance sheet, e.g. capital expenditure, the realised amount remains in remeasurements on settlement of the derivative). Such amounts are classified in the income statement as financing when the underlying exposure is in respect of net debt and otherwise as operating.
(ii)
foreign exchange gains and losses arising on the retranslation of dollar denominated De Beers preference shares held by a rand functional currency subsidiary of the Group. This is classified as financing.
(iii)
foreign exchange impact arising in US dollar functional currency entities where tax calculations are generated based on local currency financial information (and hence deferred tax is susceptible to currency fluctuations). Such amounts are included within income tax expense.

Subsidiaries and joint ventures' special items and remeasurements

Operating special items

US$ million 2009 2008
Impairment of Amapá system (1,667) -
Costs associated with 'One Anglo' initiatives (148) (72)
Impairment of Loma de Níquel (114) -
Restructuring costs:    
Other Mining and Industrial (78) (20)
Corporate (47) -
Platinum (37) -
Metallurgical Coal and Thermal Coal (21) -
Platinum assets written off (51) -
Impairment of Tarmac assets (50) (71)
Bid defence costs (45) -
Impairment of Iron Ore Brazil transshipping vessel (27) -
Provisions for onerous contracts 15 (39)
Costs associated with proposed sale of Tarmac - (3)
Impairment of Lisheen - (78)
Impairment of Black Mountain - (62)
Impairment of Metallurgical Coal assets - (40)
Reversal of impairment of Silangan exploration asset - 45
Other (5) (12)
Total operating special items (2,275) (352)
Tax 107 42
Minority interests 107 1
Net total attributable to equity shareholders of the Company (2,061) (309)

The Amapá iron ore system (Amapá) was acquired in 2008 as an operating asset as part of the acquisition of the Minas Rio project. During 2009 Amapá has experienced significant operational challenges across its mine, plant and logistics chain, producing 2.7 million tonnes compared to the design capacity of 6.5 million tonnes per annum (Mtpa). Management's focus has been, and remains, on seeking to markedly improve performance from the existing operations, rather than investing to expand the operation. Amapá is currently believed to have capacity to increase production to 5 Mtpa without significant further capital expenditure. Due to the focus on improving operational performance and preserving cash, limited exploration drilling has been undertaken in 2009 and the anticipated growth potential of surrounding licence areas remains untested. Given these operational difficulties and delays in increasing production, the Group has recorded an impairment charge of $1,512 million (after tax and minority interest) against the carrying value of the asset. Of this charge, $342 million has been recorded against intangible assets (primarily goodwill), $1,325 million has been recorded against tangible assets (primarily mining properties) with associated deferred tax credit of $76 million and minority interest credit of $79 million. The impairment brings the carrying value of Amapá in line with fair value (less costs to sell), determined on a discounted cash flow basis.

In January 2008 the Venezuelan Ministry of Basic Industries and Mining (MIBAM) published a resolution cancelling 13 of Minera Loma de Níquel's (MLdN) 16 exploration and exploitation concessions due to MLdN's alleged failure to fulfil certain conditions of the concessions. The current mining and metallurgical facilities are located on the three concessions that have not been cancelled. MLdN believes that it has complied with the conditions of these concessions and has lodged administrative appeals against the notices of termination and is waiting for a response from MIBAM. MLdN may in the future undertake further appeals, including with Venezuela's Supreme Court, if the MIBAM's ruling does not adequately protect its interests.

An impairment and associated adjustments of $114 million has been recorded due to increased uncertainty over the renewal of the three concessions that have not been cancelled but that expire in 2012 and over the restoration of the 13 concessions that were cancelled. The charge is based on a value in use assessment of recoverable amount, includes the impact of recycling a related cash flow hedge reserve and an associated reduction in the related embedded derivative liability. Recoverable amount has been determined using discounted cash flows which use pre-tax discount rates equivalent to a real post tax discount rate of 6%.

Restructuring costs relate to retrenchment costs.

Costs associated with 'One Anglo' initiatives principally comprise advisory costs and include costs associated with the corporate review, procurement, shared services and information systems.

Operating remeasurements

US$ million 2009 2008
Net gain/(loss) on non-hedge derivatives 757 (696)
Realised loss on derivatives relating to capital expenditure (105) (120)
Other remeasurements (14) 37
Total operating remeasurements 638 (779)
Tax (207) 252
Minority interests 2 135
Net total attributable to equity shareholders of the Company 433 (392)

The net gain on non-hedge derivatives principally includes net unrealised gains on derivatives relating to capital expenditure held by Iron Ore Brazil and Los Bronces and an unrealised gain on an embedded derivative at Minera Loma de Níquel. A net loss of $105 million was realised in the year in respect of the Iron Ore Brazil and Los Bronces capital expenditure derivative portfolios.

Profits and losses on disposals

US$ million 2009 2008
Disposal of interest in AngloGold Ashanti 1,139 -
Disposal of interest in Booysendal joint venture(1) 247 -
Disposal of interest in Lebowa Platinum Mines Limited(1) 69 -
Disposal of financial asset investments 54 -
Disposal of interests in Tongaat Hulett and Hulamin 53 -
Disposal of Tarmac fixed assets 15 -
Disposal of Silangan exploration asset 10 -
Disposal of interest in China Shenhua Energy - 551
Disposal of interest in Minera Santa Rosa SCM - 142
Disposal of Northam Platinum Limited - 101
Copebrás property compensation - 96
Disposal of Tarmac Iberia - 65
Disposal of Namakwa Sands(1) - 49
Other 25 5
Net profit on disposals 1,612 1,009
Tax (76) (47)
Minority interests (66) (43)
Net total attributable to equity shareholders of the Company 1,470 919
(1)
See Disposals of subsidiaries and businesses note 33.

During 2009 the Group sold its remaining investment in AngloGold Ashanti for total proceeds of $1,770 million, generating a profit on disposal of $1,139 million.

Ministerial approval for the sale of Anglo Platinum's 50% interest in the Booysendal joint venture to Mvelaphanda Resources Limited (Mvela) was received in June 2009. Total consideration was $275 million (excluding transaction and deal facilitation costs), of which $270 million was received in advance in the prior year. At 31 December 2009 $72 million of this remains in an escrow account pending completion of documentation.

The sale of 51% of Anglo Platinum's holding in Lebowa Platinum Mines Limited (Lebowa) and 1% interest in the Ga Phasha, Boikgantsho and Kwanda joint ventures to Anooraq Resources Corporation (Anooraq) completed on 30 June 2009 for consideration of $363 million (excluding transaction and deal facilitation costs). The fair value of the consideration was $247 million (excluding transaction and deal facilitation costs). The profit on disposal of Lebowa has been revised since 30 June 2009 after finalisation of the valuations of financial instruments and loan commitments.

During 2009 the Group sold its remaining investments in Tongaat Hulett and Hulamin for total proceeds of $671 million (excluding transaction costs) generating a net profit on disposal of $53 million.

Financing remeasurements

US$ million 2009 2008
Unrealised net (loss)/gain on non-hedge derivatives related to net debt (100) 23
Foreign exchange (loss)/gain on De Beers preference shares (21) 28
Other remeasurements (13) -
Total financing remeasurements (134) 51
Tax 2 -
Minority interests (2) -
Net total attributable to equity shareholders of the Company (134) 51

The unrealised net loss on non-hedge derivatives related to net debt principally comprises an unrealised loss on an embedded interest rate derivative.

Tax special item

US$ million 2009 2008
Write off of deferred tax asset related to Amapá (107) -
Minority interest 32 -
Net total attributable to equity shareholders of the Company (75) -

Tax remeasurements

US$ million 2009 2008
Foreign currency translation of deferred tax balances 469 (153)
Minority interests (12) 52
Net total attributable to equity shareholders of the Company 457 (101)

Total special items and remeasurements

US$ million 2009 2008
Total special items and remeasurements before tax and minority interests (159) (71)
Tax special item (107) -
Tax remeasurements 469 (153)
Tax on special items and remeasurements (174) 247
Minority interests 61 145
Net total special items and remeasurements attributable to equity shareholders of the Company 90 168

Associates' special items and remeasurements

Associates' operating special items and remeasurements

US$ million 2009 2008
Impairment of De Beers' Canadian assets (267) -
Impairment of De Beers' businesses - (79)
Share of De Beers' restructuring costs (27) (37)
Unrealised net gain/(loss) on non-hedge derivatives 96 (101)
Share of De Beers' class action payment and related costs - (3)
Other impairments (5) (6)
Total associates' operating special items and remeasurements (203) (226)
Tax (6) 17
Minority interests 1 16
Net total associates' operating special items and remeasurements (208) (193)

Due to the nature of the assets, the effects of the strengthening Canadian dollar and the impact of the global recession on pricing and production levels, De Beers has recorded an impairment of $595 million (attributable share $267 million) in respect of its Canadian asset portfolio. The impairment brings the carrying value of the Canadian asset portfolio in line with fair value (less costs to sell), determined using discounted cash flow techniques.

Associates' profits and losses on disposals

US$ million 2009 2008
Disposal of AK06 diamond deposit 22 -
Disposal of interests in Williamson, Cullinan and Koffiefontein - 15
Other (2) 3
Associates' net profit on disposals 20 18

Associates' financing special items

US$ million 2009 2008
Costs associated with refinancing (7) -

Associates' financing remeasurements

US$ million 2009 2008
Unrealised net gain/(loss) on non-hedge derivatives related to net debt 6 (15)

Associate's tax special item

US$ million 2009 2008
Write off of deferred tax asset related to De Beers' Canadian assets (45) -

Total associates' special items and remeasurements

US$ million 2009 2008
Total associates' special items and remeasurements before tax and minority interests (184) (223)
Tax special item (45) -
Tax on special items and remeasurements (6) 17
Minority interests 1 16
Net total associates' special items and remeasurements (234) (190)

Operating special items and remeasurements

US$ million 2009 2008
Operating special items (2,275) (352)
Operating remeasurements 638 (779)
Total operating special items and remeasurements (excluding associates) (1,637) (1,131)
     
Associates' operating special items (299) (125)
Associates' operating remeasurements 96 (101)
Total associates' operating special items and remeasurements (203) (226)
Total operating special items and remeasurements (including associates) (1,840) (1,357)
     
Operating special items (including associates) (2,574) (477)
Operating remeasurements (including associates) 734 (880)
Total operating special items and remeasurements (including associates) (1,840) (1,357)

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Annual Report 2009