11. Investment accounted for using the equity method
 

The Group acquired 26.8% of the issued share capital of Karo Mining Holdings Limited (‘Karo Holdings’), a company incorporated in Cyprus, for a total cash consideration of US$4.5 million from the Leto Settlement, a related party.

Karo Holdings entered into an Investment Project Framework Agreement with the Republic of Zimbabwe in terms of which Karo Holdings, through any of its subsidiaries, has undertaken to establish a platinum group metals mine, concentrators, smelters, a base metal and precious metals refinery as well as power generation capacity for the operations with surplus energy capacity made available to the Zimbabwe power grid (collectively referred to as ‘the project’).

Karo Holdings’ principal place of business is in Cyprus. The table below details Karo Holdings’ interest in subsidiaries as at 30 September 2018:

Company name Effective interest Country of
incorporation
and principal
place of
business		   Principal activity  
Karo Zimbabwe Holdings (Private) Limited 100% Zimbabwe   Investment holding  
Karo Platinum (Private) Limited* 100% Zimbabwe   Platinum mining  
Karo Coal Mines (Private) Limited** 100% Zimbabwe   Coal  
Karo Power Generation (Private) Limited** 100% Zimbabwe   Power generation  
Karo Refinery (Private) Limited** 100% Zimbabwe   PGM smelting and refining  

*   In terms of the Investment Project Framework Agreement, 50% of the shareholding in this company will transfer to an investment entity wholly owned by the Republic of Zimbabwe.

** In terms of the Investment Project Framework Agreement, 25% of the shareholding in these companies will transfer to an investment entity wholly owned by the Republic of Zimbabwe.

The Group entered into a shareholders’ agreement with Leto Settlement whereby management of the project will exclusively vest in the Company or any of its subsidiaries. Any decisions about the relevant activities require unanimous consent of the shareholders. The Group has determined that a joint arrangement exists and consequently has classified its investment in Karo Holdings as a joint venture. The Group accounts for joint ventures using the equity method in the consolidated financial statements.

  2018 
US$’000 		   2017
US$’000		  
Investment in Karo Holdings        
Opening balance –    –  
Shares acquired 4 500    –  
Share of total comprehensive loss (62)   –  
  4 438    –  
Total share of comprehensive loss from joint venture (62)   –  
Summarised consolidated financial information of Karo Holdings        
Summarised statement of financial position        
Non-current assets 122    –  
Current assets 3    –  
Non-current liabilities (264)   –  
Current liabilities (91)   –  
Net deficit (100%) (230)   –  
Summarised statement of comprehensive income        
Operating expenses (290)   –  
Tax 60    –  
Total comprehensive loss (230)   –  
Carrying amount of investment in joint venture        
Group’s share of net deficit (26.8%) (62)   –  
Purchase consideration 4 500    –  
Carrying amount 4 438    –  

Contingencies and commitments

The Group has undertaken to provide funding up to US$8.0 million to Karo Holdings as a repayable debt facility. This will be utilised to undertake initial geological exploration and sampling work to determine a compliant mineral resource which will enhance the value of the investment in Karo Holdings.

Unrecognised losses

The Group has not recognised any cumulative losses in relation to its interest in Karo Holdings.