Director’s report

The directors have pleasure in submitting their report on the annual financial statements of the Group and the Company for the year ended 31 December 2012.

In the context of the financial statements, the term “Group” refers to the Company, its subsidiaries, associates and joint ventures.

The directors are of the opinion that stakeholder interests are best served by presenting the Group’s annual financial statements separately from those of the Company. The latter financial statements appear on pages 206 to 261.

FINANCIAL RESULTS AND NATURE OF BUSINESS

The financial statements fully set out the financial results of the Company and the Group. The Company is the holding company of the Group. The nature of the Group’s business is described in the scope of this report. The year under review is fully covered in this report with further information provided in the separate Sustainable Development Report.

COMPLIANCE WITH ACCOUNTING STANDARDS

The Group’s and the Company’s annual financial statements comply with International Financial Reporting Standards and the requirements of the South African Companies Act, 2008, and the JSE Listings Requirements.

LISTING

The Company’s shares are listed on the JSE. The Company is fully compliant with the Listings Requirements, as amended, and the annual compliance certificate for the year under review has been submitted to the JSE.

SHARE CAPITAL

The authorised and the issued share capital of the Company at 31 December were as follows:

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ORDINARY DIVIDENDS

The Company’s dividend policy is to consider an interim and a final dividend in respect of each financial year. At its discretion, the board may consider a special dividend, where appropriate. Depending on the perceived need to retain funds for expansion or operating purposes, the board may pass the payment of dividends.

The Company aims to maintain a dividend cover of between two and three times. The quantum of the dividend would ultimately be subject to expected future market and capital commitments at the time of consideration by the board.

Given the current state of the global economic environment, the board believes that it would be more appropriate for the Company to conserve its cash and maintain adequate debt headroom to ensure that the Company is best placed to withstand any prolonged adverse economic conditions. Therefore the board has resolved not to declare a dividend for the financial year ended 31 December 2012.

CORPORATE GOVERNANCE

The board reaffirms its commitment to sound governance. It ensures that the Group’s business is conducted in accordance with high standards of corporate governance, including risk management and control, and in accordance with local and internationally accepted corporate practice. Details of which are provided on pages 162 to171.

CORE COMPANY VALUES AND CORPORATE CODE OF CONDUCT

Amplats and its management are committed to sound business practices and principles. They endorse and uphold the following key values: safety; operating as one cohesive team driven by the same goals and objectives; delivering on promises made; valuing and caring about each other; and acting with honesty and integrity. These values are underpinned by passion for and pride in the work that we do.

Our objective

To be the premier company in finding, mining, processing and marketing platinum group metals for the maximum benefit of all our stakeholders.

Our strategy

Our strategy is to maximise value by understanding and developing the market for platinum group metals (PGMs), expanding our production into that opportunity when right to do so and conducting our business safely, responsibly, cost-effectively and competitively.

Directors’ responsibilities in respect of annual financial statements

It is the responsibility of the directors of the Company, in terms of section 30 of the Companies Act, 2008, to compile annual financial statements and to present them to the annual general meeting. These financial statements are drawn up in conformity with International Financial Reporting Standards and South African Statements of Generally Accepted Accounting Practice, and the directors have taken all reasonable steps to ensure compliance with the provisions of the Companies Act, 2008.

The Amplats shareholders appointed an audit committee at the previous annual general meeting. The Audit Committee has nominated Deloitte & Touche as the Group’s auditors for 2013 and nominated James Welch as the designated audit partner, subject to the approval of shareholders at the annual general meeting scheduled for 26 April 2013.

Particulars relating to the Group’s internal controls and audit approach, and to the role and function of the Audit Committee, are set out in the Audit Committee report. The audit approach ensures a thorough understanding of the Group’s financial and business objectives, and also provides an analysis of the underlying systems and procedures.

The focus of risk management in the Group entails identifying, assessing, managing and monitoring all known forms of risk. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by ensuring that the appropriate infrastructure, controls, systems and ethics are applied throughout the Group and managed within predetermined procedures and constraints.

The directors are of the opinion, based on the information and explanations given by management, that the internal controls are adequate for ensuring:

  • the reliability and integrity of financial and operating information
  • the compliance of established systems with policies, plans, procedures, laws and regulations
  • the safeguarding of the Group’s assets against unauthorised use or disposition
  • the economic, effective and efficient utilisation of resources
  • the achievement of established objectives and goals for operations or programmes

Nothing has come to the attention of the directors to indicate that any material breakdown in the functioning of these controls, procedures or systems occurred during the year under review.

The internal auditors concur with these statements by the directors. While the external audit is not designed to provide internal control assurance, the external auditors did not identify any material internal control weaknesses during the course of their audit.

 Accordingly, the financial records may be relied upon for preparing the financial statements and maintaining accountability for assets and liabilities.

In preparing the financial statements, the Group complied with International Financial Reporting Standards and used appropriate accounting policies, supported by reasonable and prudent judgements and estimates. The directors are of the opinion that the financial statements fairly present the financial position of the Company and of the Group at 31 December 2012, and the results of the operations and cash flow information for the year then ended. The directors have reviewed the Group’s cash flow forecast for the year ending 31 December 2013. The Group’s forecasts and projections, taking account of reasonable possible changes in trading performance, show that the Group should be able to operate within the level of its current facilities. The board is satisfied that the Group will have adequate resources and access to committed credit facilities to continue in operational existence for the next financial year. For this reason, the Group continues to adopt the going-concern approach as the basis in preparing its financial statements.

The directors believe, as a result of the comprehensive structures and controls in place and the ongoing monitoring of the activities of executive and operational management, that the board maintains effective control over the Group’s affairs.

Details of the Group’s corporate governance structures and practices are set out in the governance section of this report as well as in the governance section of the Sustainable Development Report.

DIRECTORATE

Tom Wixley retired from the board as an independent non-executive director from the conclusion of the annual meeting on 30 March 2012. Neville Nicolau left as an executive director and chief executive on 19 July 2012. Chris Griffith was appointed as an executive director and chief executive with effect from 1 September 2012. Albertinah Kekana resigned as an independent non-executive director on 25 September 2012. Godfrey Gomwe resigned as a non-executive director on 15 October 2012 and Khanyisile Kweyama was appointed as a non-executive director on the same date. John Vice was appointed as an independent non-executive director on 30 November 2012.

In terms of the memorandum of incorporation, Mrs C B Carroll,  
Mrs WE Lucas-Bull and Messrs BR Beamish and V M Moosa retire by rotation. Ms KT Kweyama, and Messrs CI Griffith and JM Vice were appointed as directors during the year and, in terms of the memorandum of incorporation, are required to retire as directors at the forthcoming annual general meeting. All retiring directors, being eligible, are available for re-election with the exception of CB Carroll who is not standing for re-election.

The board has assessed the performance of all candidates and recommends to shareholders the re-election of those directors who have made themselves available for re-election.

The board as it is currently constituted is set out on pages 156 to 157.

INTERESTS OF DIRECTORS

The shareholdings of the directors and alternate directors in the ordinary shares of the Company at 31 December 2012, which did not individually exceed 1% of the Company’s issued share capital, were:

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In terms of the Long-term Incentive Plan, the executive directors held 17,605 awards to acquire shares in the Company and 14,900 Bonus Share Plan awards. (Refer to page 174 for additional detail on these schemes.)

No changes in the interests set out above have occurred between 31 December 2012 and the date of this report.

Save for the interests set out above, no arrangements to which the Company was a party existed at the end of the financial year, or at any time during the year, that would have enabled the directors or their families to acquire benefits by means of the acquisition of shares in the Company.

There were no contracts of any significance during or at the end of the financial year in which any directors or alternate directors of the Company were materially interested.

INTERNAL AUDIT

Amplats’ internal audit function is performed by Anglo Business Assurance Services Department of Anglo Operations Limited, a wholly owned subsidiary of Anglo American plc, which reports to the Audit Committee.

SHARES REPURCHASED

Except for the purchase of shares in the market, to satisfy the requirements for the Bonus Share Plan and other equity-settled share incentive schemes, no share repurchases took place during the year under review.

GENERAL AUTHORITY PLACING THE UNISSUED SHARES UNDER THE CONTROL OF THE DIRECTORS

At the annual general meeting, which is to be held on Friday, 26 April 2013, members will be requested to consider an ordinary resolution placing 5% of the authorised but unissued ordinary shares of the Company under the control of the directors until the 2014 annual general meeting.

DEMATERIALISATION OF SHARES (STRATE)

Shareholders are again requested to note that, as a result of clearing and settlement of trades through the STRATE system, the Company’s share certificates are no longer good for delivery for trading. Dematerialisation of the Company’s share certificates is now a prerequisite when dealing in its shares.

PROPERTY

The register of land and buildings is available for inspection at the registered office of the Company during normal business hours.

AUDITORS

Deloitte & Touche continued in office as auditors of the Company and its subsidiaries for 2012.

At the annual general meeting shareholders will be requested to reappoint Deloitte & Touche as auditors of Amplats and to confirm that James Welch will be the designated audit partner for the 2013 financial year.

SPONSOR

Rand Merchant Bank (RMB), a division of FirstRand Bank Limited, acts as sponsor to the Company in terms of the requirement of the JSE Limited.

TRANSFER SECRETARIES

Computershare Investor Services Proprietary Limited serves as the South African registrar of the Company.

ADMINISTRATION AND SERVICES

Sarita Martin was appointed as Company Secretary on 10 January 2012 and acted as the duly appointed company secretary of Amplats until her resignation on 30 June 2012. Kevin Lester was appointed as acting company secretary with effect from 17 September 2012.

Anglo American Platinum Management Services Proprietary Limited acts as the administrative, financial and technical adviser to the Company. With the objective of providing more efficient services at a lower cost, the Group has outsourced a number of its non-core activities to fellow subsidiary companies within the Anglo American plc Group. Service level agreements have been finalised to ensure that the services provided are of an appropriate quality. The services provided include accounting, human resources, internal audit, company secretarial, treasury, corporate finance, insurance, legal, IT, tax and certain risk management services. The Governance Framework governing the relationship between the Company and its holding company, Anglo American plc, was approved.

SUBSIDIARY COMPANIES

Details of major subsidiary companies in which the Company has a direct or indirect interest are set out on page 205.

The aggregate after-tax losses attributable to the Company from its subsidiaries were R6.7 billion (2011: earnings of R3.7 billion).

HOLDING COMPANY AND ULTIMATE HOLDING COMPANY

The Company’s holding company is Anglo South Africa Capital Proprietary Limited (ASAC) which holds 79.86% (2011: 79.83%) of the Company’s equity. ASAC is indirectly wholly owned by Anglo American plc, which is incorporated in the United Kingdom.

CAPITAL EXPENDITURE

During the year, the board approved capital expenditure projects totalling R9 billion.

During the same period, the Group incurred R6.8 billion of capital expenditure excluding interest capitalised.

EVENTS SUBSEQUENT TO 31 DECEMBER 2012

On 15 January 2013, the Group announced the outcome of the Platinum Portfolio Review. The key proposals from the review were as follows:

  • Placement of Khuseleka mine (shafts 1 and 2) and Khomanani mine (shafts 1 and 2) on long-term care and maintenance.
  • Consolidation of the Rustenburg operations into three operating mines.
  • Closure of the Union North Mine declines.
  • Placement of the Waterval UG2 Concentrator, Mortimer Merensky Concentrator and the one furnace (FCE2) at Waterval Smelter on long-term care and maintenance.

As a result, if the Group is not expected to receive future economic benefits from these mines, the property, plant and equipment with a carrying value of approximately R4.1 billion (after tax: R3.0 billion) could be written off in 2013. These write-offs will be excluded from headline earnings.

The gross cash costs associated with implementation of the Platinum Portfolio Review and overhead review which is expected to be approximately R3.2 billion (after tax: R2.3 billion) will be expensed as incurred during the course of 2013 and will be included in headline earnings for the year.

Reallocation of declared Mineral Reserves to exclusive Mineral Resources will occur at the affected operations (Khomanani, Khuseleka, Union mines), with the amount being dependent on the final scale of implementation of the Platinum Portfolio Review. Currently, reliable, reasonable estimation of the scale of impact is not possible because of uncertainty in the implementation.