Sibanye Gold Ltd | CIK:0001561694 |

14.  GOODWILL

SIGNIFICANT ACCOUNTING JUDGEMENTS AND ESTIMATES

Goodwill is tested for impairment on an annual basis. Expected future cash flows used to determine the recoverable amount of property, plant and equipment and goodwill are inherently uncertain and could materially change over time. The recoverable amount is significantly affected by a number of factors including reserves and production estimates, together with economic factors such as the expected commodity price, foreign currency exchange rates, and estimates of production costs, future capital expenditure and discount rates.

An individual operating mine does not have an indefinite life because of the finite life of its reserves. The allocation of goodwill to an individual mine will result in an eventual goodwill impairment due to the wasting nature of the mine.

ACCOUNTING POLICY

Goodwill is stated at cost less accumulated impairment losses. In accordance with the provisions of IAS 36 Impairment of Assets, the Group performs its annual impairment review of goodwill at each financial year end or whenever there are impairment indicators to establish whether there is any indication of impairment to goodwill. A write-down is made if the carrying amount exceeds the recoverable amount. The recoverable amount is determined by reference to “fair value less costs to sell” being the higher of “value in use” and “fair value less cost to sell”, based on the cash flows over the life of the CGUs and discounted to present value at an appropriate discount rate. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill allocated to the entity sold.

Goodwill is allocated to CGUs for the purpose of impairment testing. The allocation is made to those CGUs or groups of CGUs that are expected to benefit from the business combination in which the goodwill arose.

The goodwill arose on the acquisition of Cooke, Aquarius and Stillwater. The goodwill on acquisition of Cooke was attributable to the synergies at the Group’s other operations, and the underlying assets of Cooke and WRTRP. At year end the remaining goodwill from the acquisition of Cooke is allocated to the Beatrix (R103.9 million), Driefontein (R166.9 million) and Kloof (R165.5 million) CGUs where it is tested for impairment.

The goodwill on acquisition of Aquarius is attributable to the synergies between the PGM assets in the Rustenburg area. At year end the goodwill on acquisition of Aquarius is allocated to the Kroondal (R133.5 million) and the Rustenburg operations (R267.1 million) CGUs, where it is tested for impairment. The goodwill on the acquisition of Stillwater is attributable to the premium paid, and the talent and skills of Stillwater’s workforce, and has been provisionally allocated to the Stillwater CGU.

None of the goodwill recognised is expected to be deducted for tax purposes.

The Group’s estimates and assumptions used in the 31 December 2017 impairment testing include:

1 Nominal discount rate for WRTRP of 14.7% (2016: 13.5%).

The annual life-of-mine plan that takes into account the following:

During the six months ended 31 December 2017, the goodwill allocated to the WRTRP was impaired by R99.1 million (see note 8). There were no other events or changes in circumstances that suggest that the carrying amount of a CGU may not be recoverable.

The recoverable amounts of the Driefontein, Kloof, Kroondal, Platinum Mile and Rustenburg operations CGUs are significantly higher than their carry values, therefore a reasonably possible adverse change in the abovementioned assumptions would not likely result in an adjustment to the carrying values.

The recoverable amounts of the Beatrix and Stillwater CGUs approximate their carrying values and, therefore, any reasonably possible adverse change in the abovementioned assumptions could result in further impairment.