Acquisition of the Mineral Sands Business

12 Months Ended

Dec. 31, 2013

Business Combinations [Abstract]

Acquisition of the Mineral Sands Business

26. Acquisition of the Mineral Sands Business

On September 25, 2011, Tronox Incorporated entered into the Transaction Agreement with Exxaro to acquire 74% of Exxaro’s mineral sands operations. We accounted for the Transaction under ASC 805, Business Combinations, (“ASC 805”), which requires recording assets and liabilities at fair value. Under the acquisition method of accounting, each tangible and separately identifiable intangible asset acquired and liability assumed was recorded based on their preliminary estimated fair values on the Transaction Date.

Because the total consideration transferred was less than the fair value of the net assets acquired, the excess of the fair value of the net assets acquired over the value of consideration was recorded as a bargain purchase gain. The valuations were derived from fair value assessments and assumptions used by management. The measurement period ended in June 2013. The bargain purchase gain was not taxable for income tax purposes. See Note 6 for a discussion of the tax impact of the Transaction.

	Valuation
Consideration:
Number of Class B Shares (1)		9,950,856
Fair value of Class B Shares on the Transaction Date		137.70
Fair value of equity issued (2)		1,370
Cash paid		1
Noncontrolling interest (3)		233
	$	1,604
Fair Value of Assets Acquired and Liabilities Assumed:
Current Assets:
Cash and cash equivalents	$	115
Accounts receivable, net of allowance for doubtful accounts		196
Inventories		553
Prepaid and other assets		20
Total Current Assets		884
Noncurrent Assets:
Property, plant and equipment, net (4)		880
Mineral leaseholds, net (5)		1,457
Intangibles, net (4)		12
Long-term deferred tax asset		30
Other long-term assets, net		19
Total Assets	$	3,282
Current Liabilities:
Accounts payable		110
Accrued liabilities		25
Unfavorable contracts (6)		85
Short-term debt		75
Deferred tax liabilities		14
Income taxes payable		2
Total Current Liabilities		311
Noncurrent Liabilities:
Long-term debt		19
Long-term deferred tax liability		209
Asset retirement obligations		57
Other long-term liabilities		27
Total Liabilities		623
Net Assets	$	2,659
Gain on Bargain Purchase	$	1,055

(1) The number of Class B Shares issued in connection with the Transaction has not been restated to affect for the 5-for-1 share split as discussed in Note 19.

(2) The fair value of the Class B shares issued was determined based the closing market price of Tronox Incorporated’s common shares on June 14^, 2012, less a 15% discount for marketability due to a restriction that the shares cannot be sold for a period of at least three years following the Transaction Date.

(3) The fair value of the noncontrolling interest is based upon a structured arrangement with Tronox Limited, which allows the ownership interest to be exchanged for approximately 1.45 million additional Class B shares on the earlier of the 10 year anniversary of the Transaction Date or the date when the South African Department of Mineral Resources determines that ownership is no longer required under the BEE legislation.

(4) The fair value of property, plant and equipment and internal use software was determined using the cost approach, which estimates the replacement cost of each asset using current prices and labor costs, less estimates for physical, functional and technological obsolescence.

(5) The fair value of mineral rights was determined using the Discounted Cash Flow (“DCF” ) method, which was based upon the present value of the estimated future cash flows for the expected life of the asset taking into account the relative risk of achieving those cash flows and the time value of money. Discount rates of 17% for South Africa and 15.5% for Australia were used taking into account the risks associated with such assets, as well as the economic and political environment where each asset is located.

(6) The fair value of unfavorable contracts was determined by multiplying the committed tonnage in each contract by the difference between the committed prices in the contract versus the estimated market price over the term of the contract.