Determining materiality is a critical part of reporting in accordance with the guidelines of the Global Reporting Initiatives (GRI). Each year the Company undertakes a formal materiality assessment that is tabled at the board’s Audit Committee for discussion and input prior to being finalised.
The 2012 materiality analysis was conducted using the GRI’s G3 “self-test” methodology for materiality. In determining materiality a number of internal and external factors were evaluated as follows:
- Policies – Key Company principles and policies encompassing Company integrity and values, Company strategy, safety, health, the environment and labour.
- Risk – Significant risks to the Company as defined by the internal risk methodologies described on page 16.
- Opportunities – The Company’s core products and the manner in which these can, or could, contribute to sustainable development.
- Stakeholders – An internal review of the interests and expectations of stakeholders specifically invested in the success of the Company, e.g. employees, unions, shareholders and suppliers.
- Industry-wide issues – A review of the material issues reported by other businesses in the sector, including Anglo American plc, Impala Platinum, Lonmin Platinum, AngloGold Ashanti, Rio Tinto, BHP, Xstrata and Teck.
- Mineral policy, legislation and norms – A review of the requirements of key legislation and mineral policy including, inter alia, the Minerals Petroleum Resources Development Act; the National Environmental Management Act; and the National Water Act. Other key codes and norms are the requirements of the principles of the United Nations Global Compact, the Performance Standards of the International Finance Corporation and core issues relating to ISO 26000.
- Memberships, associations and panels – An analysis of issues raised through organisations such as the International Platinum Group Metals Association, the Chamber of Mines and the International Council on Mining and Metals.
Our most material issues
Following the completion of the materiality analysis and deliberation with the Company’s Audit Committee, it is the Company’s view that the six most material issues affecting the Company’s short-, medium- and long-term sustainability are as follows:
- Financial sustainability
- Safety and health performance
- Mineral policy and legislative compliance
- Labour expectations and aspects
- Community impacts and benefits
- Access to, and allocation of, resources such as energy, water and land
The tables that follow is a summary of what each material issue covers, why it is important, and what the Company is doing to address it.
|Material sustainability issues|
|Material issues||Financial sustainability||Safety and health||Regulation and minerals legislation|
|What does this cover?|
|Why is it important?|
|What do our stakeholders expect from us?|
|What are we doing?|
|Material issues||Labour expectations||Community engagement and development||Access to, and allocation of, resources|
|What does this cover?|
|Why is it important?|
|What do our stakeholders expect from us?|
|What are we doing?|
TO THE BUSINESS
Amplats operates a robust and dynamic risk-management process by deploying appropriate risk strategies to exploit opportunities and, conversely, manage downside risk to an acceptable level.
Risk management is part of the Group’s strategic and business processes, and is a key element in achieving our vision and strategic objectives, and protecting our core values.
It forms an integral part of the Company’s governance framework. The board recognises that an effective risk-management process and systems of internal control are fundamental in ensuring effective governance and sustainability of our business.
The Company has implemented an integrated risk management (IRM) methodology, which means that each key risk in every part of the business is included in a structured framework and systematic process of risk management. The methodology design takes cognisance of best-practice requirements and is aligned to the principles of the King III Code of Governance, which ensures that strategy, risk and performance are integrated. The Group’s risk-management process is detailed on page 167.
Risk management during 2012
The key aspects of Amplats’ risk performance during 2012 are:
- The inability to sustain improvements in safety performance. Although safety indicators continued to show improvement, Amplats operations experienced seven fatalities during 2012.
- The global economy. 2012 saw continued economic instability in Europe and fiscal uncertainty in the United States, both of which impacted the demand for platinum and hence the price of the metal.
- The inability to meet production targets and sustain cost control. From an operational perspective, both aims received focused management attention during the year. However, performance was negatively impacted by the industrial action during the third and fourth quarters. The Group’s cost structure and operating model were subject to review during 2012, and the results of this process were announced in January 2013.
- Social unrest. The disruptions caused by the unprotected industrial action during the second half of 2012 were not anticipated, occurring outside the two-year wage-agreement cycle and originating within the wider Rustenburg community after the Impala and Lonmin strikes, before spreading to the Amplats workforce.
The table below illustrates the alignment of risk and strategy within Amplats, and provides an indication of assessed performance during 2012:
|Strategy||Strategic objective||Key risks||Key risk indicators tracked||Performance|
|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
|Understanding and developing markets||Market leadership through research and development of the market||•|
|Sustaining and growing the business||Leveraging the resource footprint||•|
|Strong stakeholder relationships||x|
|Conduct business safely, cost-effectively and competitively||Safety – zero harm||•|
√ 2012 risk indicators positive.
• 2012 risk indicators flat or trending towards positive, but further mitigation required.
x Negative 2012 risk indicators, further mitigation required.
* Note dsetailed risk-mitigation strategies for key risks are included in the table on pages 169 to 171.
MINING LICENCES AND BLACK ECONOMIC EMPOWERMENT
Amplats, having achieved execution on 14 out of 15 mining licences, remains committed to meeting the requirements of South Africa’s Mineral and Petroleum Resources Development Act and the Mining Charter.
The Group is proud of the contribution it has made to empowerment in South Africa through the numerous transactions it has facilitated since 2000. These have resulted in the significant and meaningful empowerment of historically disadvantaged South Africans (HDSAs) in various operations and projects. The table below contains a brief summary of these transactions completed over the years:
|Date||Summary of transactions|
|August 2000||Sale of a 17.5% (and facilitation of an additional 5%) in Northam to Mvelaphanda Resources.|
|August 2001||Formation of 50:50 Modikwa JV with ARM Mining Consortium, an empowerment company that includes the Mampudima and the Matimatjatji communities of approximately 60,000 rural residents as broad-based participants.|
|August 2002||The establishment in July 2002 of a 50:50 unincorporated joint venture with Royal Bafokeng Nation over the Bafokeng-Rasimone Platinum Mine (BRPM) and the Styldrift project area. Following the restructuring of the BRPM Joint Venture in December 2009, Royal Bafokeng Platinum Limited (RB Plat) acquired a 67% interest as well as operational control of the BRPM Joint Venture on 4 January 2010. RB Plat listed on the JSE Limited on 8 November 2010 and the Group currently holds a 12.6% equity interest in RB Plat, in addition to the 33% direct interest in BRPM.|
|February 2003||The formation, in August 2002, with Lonmin plc, of the Pandora Joint Venture, which includes the participation of the Bapo-Ba-Mogale Mining company and Mvelaphanda Resources (on behalf of Northam) as empowerment partners, each having a 7.5% interest in the joint venture.|
|December 2005||The disposal in October 2005 of the rights on the property Elandsfontein 440 JQ to Eland Platinum Mines (EPM), with the Ngazana Consortium holding a 26% interest in EPM.|
|July 2006||The development of a chromite recovery plant at the Group’s Union Mine with Siyanda Chrome Investments, an HDSA company.|
|November 2006||The transaction, in December 2006, with the Bakgatla-Ba-Kgafela (Bakgatla), who are the traditional community at Union Mine, giving the Bakgatla a 15% stake in Union Mine as well as a 26% stake in the Magazynskraal project and a 55% stake in the Rooderand project.|
|September 2007||The announcement of the Group’s sale to Anooraq Resources Corporation (Anooraq) of an effective 51% of Bokoni Platinum Mine (Bokoni) and an additional 1% of the Ga-Phasha, Boikgantsho and Kwanda Joint Venture projects. Anooraq now owns and controls an effective 51% of Bokoni, Ga-Phasha, Boikgantsho and Kwanda. This transaction gave Anooraq control over the third-largest PGM resource base in South Africa.|
|September 2007||The disposal of the Group’s 50% interest in the Booysendal project and of its 22.4% interest in Northam to Mvelaphanda Resources, for a total consideration of R3.7 billion. Mvelaphanda Resources injected the Booysendal project into Northam in return for Northam shares, resulting in Mvelaphanda Resources acquiring majority control of Northam. This transaction gave Mvelaphanda Resources control over the fifth-largest PGM resource base in South Africa.|
|September 2007||Announcement of the establishment of an employee share ownership plan (ESOP) that effectively owns 1.5% of Amplats to benefit all permanent employees not participating in any other company share scheme. More than 90% of the scheme’s beneficiaries are HDSAs.|
|December 2008||The Group swapped its 37% interest in the Western Bushveld Joint Venture for a 26.6% equity interest in Wesizwe Platinum Limited (Wesizwe), an HDSA company.|
|February 2011||Announcement of the Group’s R3.5 billion (circa 2.33% of market capitalisation) community economic empowerment transaction, Project Alchemy. See details on page 19.|
MINERAL RIGHTS UNDER CONTENTION
Amplats is geared for growth, with a total declared inclusive Mineral Resource estimate of 878,8 Moz 4E for the Company in South Africa and Zimbabwe. This number excludes any disputed rights such as Middellaagte 382 KQ, a portion of Tigerpoort 426 KS, Rooderand 46 JQ and the Modikwa deeps. Amplats is at the advanced stage of engagement with the regulator, the DMR, to amicably resolve the disputes.
Amplats remains committed to the transformation of the South African mining industry and welcomed the release of the revised Mining Charter in September 2010. The charter retained the requirement, set in 2002, of a historically disadvantaged South African (HDSA) ownership of 26% by 2014. The revised charter provided clarity in a number of areas, for instance in its definition of the term “beneficiation”. This is the second year in which we are reporting against the new Mining Charter scorecard.
In advancement of black economic empowerment, the Company has entered into a number of disposal transactions and joint ventures and it has established an employee share ownership scheme as well as various community trusts as part of the community economic empowerment transaction. The result of these transactions was a transfer of more than 26% of the Company’s forecast attributable production, as it would have been in 2014 had it not entered into these transactions, to historically disadvantaged South Africans.
The Company continues to meet all its Mining Charter obligations. The table on page 21 provides a summary of performance against the charter.
It also shows where to obtain more information regarding particular sections of the new scorecard.
Alchemy is a R3.5 billion transaction, concluded in 2011, and is aimed at ensuring the long-term sustainable development of four of our host communities and major labour-sending areas. The transaction is notionally vendor-financed over 10 years at a fixed 9.5% notional interest rate and includes an upfront discount of 5%. Amplats has issued a total of 6,290,365 ordinary shares of 10 cents each to the Lefa La Rona (“Our Inheritance”) Trust. The Alchemy shares issued represented 2.33% of Amplats ordinary shares in issue at the time.
The Lefa La Rona Trust has been established and received public benefit status from the South African Revenue Service in 2012. The four development trusts (Development Trusts) are in the process of being set up to benefit the host communities within an approximate radius of 15 kilometres from the Amandelbult, Rustenburg, Twickenham and Mogalakwena mines and a non-profit company incorporated for the benefit of the labour-sending areas. The Development Trusts and the non-profit company will benefit from the following cash flows: annual dividend receipts; a guaranteed minimum dividend flow of R20 million per annum to provide an annual cash amount to the Development Trusts and the non-profit company, after taking into consideration the annual dividends received; rechannelled CSI spend of R30 million to the extent that the development trusts secure approval for development projects within the host communities; health and safety cash-flow benefits for the Development Trusts if key performance indicators relating to on-and-off-mine health and safety targets are achieved; proceeds from the potential increase in the Amplats share price after settling of the notional vendor funding, to the extent that the shares are disposed of by the Development Trusts and the non-profit company at the expiry of the term of the transaction.
The Company’s ultimate ambition in this transaction is to make a meaningful and sustainable contribution to the ability of those communities to thrive well beyond the life of our mining operations.
MINERAL POLICY – SOUTH AFRICA
It is imperative for business in South Africa to be able to operate in the context of a stable regulatory framework and a clear and fair fiscal regime. The South African Government’s plans to attract and promote the significant private-sector investment required to ensure a thriving mining sector that contributes meaningfully to society at large rests on three critical components: ensuring policy predictability and certainty; enforcing the rule of law; and investing in the enabling infrastructure required.
The resolution taken by the African National Congress (ANC), South Africa’s ruling political party, at its recent policy conference, that wholesale mine nationalisation is not a reasonable or sustainable option for South Africa is welcomed. Nationalisation has now been firmly ruled out by the current ruling party as an option for the mining industry. Nationalisation would not have solved the economic or transformational challenges South Africa faces, but would instead have had a negative impact on the country’s economy and ability to create jobs. The ANC’s decision will create greater certainty among investors and will once again encourage investment in the country’s mining sector.
The ANC did, however, endorse the proposals in the Sims Report for a new resource rent tax. It has argued that the proposed new tax is necessary to ensure that the state benefits appropriately from the profits the mining industry earns. It is Amplat’s view that the existing royalty regime was introduced for exactly this purpose and that, combined with the existing system of taxation, it already ensures a fair distribution of the benefits of mining. Further changes to the tax and royalty regime may well make South Africa uncompetitive internationally. The Company will continue to engage the ruling party and the Government on the proposals for a resource rent tax.
INDIGENISATION ACT – ZIMBABWE
On 1 November 2012, a Heads of Agreement relating to the proposed Unki Mine indigenisation implementation plan was signed with the Government of Zimbabwe. The Heads of Agreement is subject to the fulfilment of certain conditions precedent and sets out the key terms for transfer of 51% equity ownership of Unki Mines (Private) Limited to selected indigenous Zimbabwean entities as required by the Indigenisation and Economic Empowerment Act. The proposed transaction will be facilitated through a notional vendor financing structure provided to the following indigenous entities:
- 10% equity ownership transaction to a trust established for the benefit of the community surrounding Unki Mine’s operations.
- 10% equity ownership transaction to a trust to be established for the benefit of all full-time employees of Unki Mine.
- 10% equity ownership transaction to a consortium of strategic equity partners.
- 21% equity ownership transaction to the National Indigenisation and Economic Empowerment Fund.
The notional vendor financing will be repaid by the indigenous entities from a share of their future dividends. Subject to fulfilment of all the conditions precedent, Amplats intends to implement the indigenisation plan by 30 June 2013.
WATER USE LICENCE
Our operations with approved water use licences (WUL) are Twickenham Platinum Mine, Polokwane Metallurgical Complex, Mogalakwena Mining area, Rustenburg mines, Union Mines and the Mototolo Concentrator and Der Brochen Project (whose integrated WUL was approved in April 2011). Engagement around the issuing of Amandelbult’s water-use licence with Government continues. Amandelbult has a valid water permit under the old Act.
|Mining Charter scorecard summary|
|Description||Measure||against target||target by 2014|
|Has the Company reported the level of compliance with the charter for the calendar year?||Documentary proof of receipt from the department||Reports submitted on a quarterly basis||Annually|
|Minimum target for effective HDSA ownership||Meaningful economic participation||In advancement of black economic empowerment, the Company has entered into a number of disposal transactions and joint ventures and it has established an employee share ownership scheme as well as various community trusts as part of the community economic empowerment transaction. The result of these transactions was a transfer of more than 26% of the Company’s forecast attributable production, as it would have been in 2014 had it not entered into these transactions, to historically disadvantaged South Africans.||26%|
|Full shareholder rights||Good progress to achieving 2014 target||26%|
|Housing and living conditions|
|Conversion and upgrading of hostels to attain the occupancy rate of one person per room||Percentage reduction of occupancy rate towards 2014 target||50% of employees in single room accommodation||Occupancy rate of one person per room|
|Conversion and upgrading of hostels into family units||Percentage conversion of hostels into family units||All hostels converted into family units||Family units established|
|Procurement and enterprise development|
|Procurement spent from BEE entity||Capital goods||51.7%||40%|
|Multinational suppliers’ contribution to the social fund||Annual spend on procurement from multinational suppliers||This programme is currently being addressed and work is under way. The identification of suppliers is complete. The strategy for the management of the funds is being developed.||0.5% of procurement value|
|Diversification of the workplace to reflect the country’s demographics to attain competitiveness||Top management (board) level||38%||40%|
|Senior management (Exco)||39.8%||40%|
|Sustainable development and growth|
|Improvement of the industry’s environmental management||Implementation of approved EMPs||Regulation 55 performance reviews are done by the environmental managers and are submitted to the DMR by the operations. The schedules are aligned with the EMPR commitments.||100%|
|Improvement of the industry’s mine health and safety performance||Implementation of the tripartite action plan on health and safety||Implementation of action plans aligned||100%|
|Utilisation of South African-based research facilities for analysis of samples across the mining value chain||Percentage of samples in South African facilities||100%||100%|
|Contribution of a mining company towards beneficiation (this measure is effective from 2012)||Additional production volume contributory to local value addition beyond the baseline||The Company continues with implementation of its beneficiation strategy. The offset guidelines have not been finalised by the DMR and therefore the Group cannot calculate what offsets it qualifies for. Furthermore, the DMR released its beneficiation strategy. There is no reference to baseline levels and targets.||Section 26 of the MPRDA (percentage above baseline)|
|Human resource development|
|Development of requisite skills, including support for South African-based research and development initiatives intended to develop solutions in exploration, mining, processing, technology efficiency (energy and water use in mining), beneficiation as well as environmental conservation and rehabilitation||HRD expenditure as percentage of total annual payroll (excluding mandatory skills development levy)||5.4% achieved||5%|
|Mine community development|
|Conduct ethnographic community consultative and collaborative processes to delineate community needs analysis||Implement approved community projects||Projects in communities surrounding our operations implemented to the value of R276 million||Up-to-date project implementation|